PROJECT ADMINISTRATION MEMORANDUM
FOR THE
RURAL ROAD SECTOR PROJECT
Loan No. 2351 (ADF)
First Edition: 3 July 2007 Second Edition: 16 August 2007 Third Edition: 27 October 2007 ii
CURRENCY EQUIVALENTS (as of 24 August 2007)
Currency Unit – dram (AMD)
AMD1.00 = $0.0030 $1.00 = AMD337.75
ABBREVIATIONS
ADB – Asian Development Bank ARD – Armenian Roads Directorate Non-Commercial State Organization ASIF – Armenia Social Investment Fund EA – executing agency EARF – environmental assessment and review framework EIRR – economic internal rate of return EMP – environmental management plan GDP – gross domestic product HDM4 – Highway Development and Management Model 4 IA – implementing agency ICB – international competitive bidding IDPR – internally displaced persons and refugees IDPRDF – internally displaced persons and refugees development framework IDPRDP – internally displaced persons and refugees development plan IEE – initial environmental examination iRAP – international Road Assessment Programme IRI – international roughness index JBIC – Japan Bank for International Cooperation JICA – Japan International Cooperation Agency LRNP – Lifeline Road Network Program MCC – Millennium Challenge Corporation MOTC – Ministry of Transport and Communications NCB – national competitive bidding NPV – net present value PAM – project administration memorandum PBC – performance-based contract PGC – project governing council PMU – project management unit PPMS – project performance monitoring system PRSP – Poverty Reduction Strategy Paper RF – resettlement framework RP – resettlement plan SIEE – summary initial environmental examination TA – technical assistance UNESCAP – United Nations Economic and Social Commission for Asia and the Pacific UNAIDS – Joint United Nations Programme on HIV/AIDS UNDP – United Nations Development Programme USAID – United States Agency for International Development
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NOTES
(i) The fiscal year (FY) of the Government of Armenia and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars.
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CONTENTS Page
LOAN PROCESSING HISTRY i MAP vi I. THE PROJECT 1 A. Impact and Outcome 1 B. Outputs and Components 1 C. Special Features 2 D. Project Investment Plan 2 E. Financing Plan 3 F. Implementation Arrangements 3
II. TECHNICAL ASSISTANCE 8
III. PROJECT BENEFITS AND IMPACTS 8
A. Economic Benefits 9 B. Environmental Impacts 9 C. Social and Poverty Impacts 10 D. Indigenous People 10 E. Internally Displaced Persons and Refugees 10 F. Land Acquisition and Resettlement 10
IV. ASSURANCES 11 A. Implementation Arrangements 11 B. Conditions for Disbursement 14
V. SUBPROJECT LOCATIONS AND KEY PERSONS INVOLED IN PROJECT IMPLEMENTATION 15
APPENDIXES 1. Design and Monitoring Framework 2. Selection Criteria and Approval Process for Subprojects 3. List of Subprojects Identified for the Project 4. Detailed Cost Estimates and Financing Plan 5. Project Organization and Implementation Arrangements 6. Indicative Implementation Schedule 7. Procurement Plan 8. Outline Terms of Reference for Consultants for Construction Supervision and Subproject Preparation 9. Financial Management Assessment 10. Outline Terms of Reference for Transport Sector Development Strategy 11. Economic Analysis 12. Summary Poverty Reduction and Social Strategy 13. Internally Displaced Persons and Refugees Development Framework 14. Resettlement Framework 15. Subproject Maps 16. Key Persons Involved in the Project Implementation Supplementary Appendix A. Disbursement Supplementary Appendix B. Summary Initial Environmental Examination LOAN PROCESSING HISTORY
a. Approval of project preparatory technical assistance 13 December 2006 b. Fielding of Consultant 25 March-26 May 2007 c. Fact-finding 7-25 May 2007 d. Management Review Meeting (MRM) 28 June 2007 e. Appraisal Mission 9-13 July 2007 f. Staff Review Committee (SRC) 8 August 2007 g. Loan Negotiations 22-24 August 2007 h. Board Circulation 7 September 2007 i. Board Consideration and Approval 28 September 2007 j. Loan Agreement Signing ______k. Loan Effectiveness, including conditions ______
MAP
I. THE PROJECT A. Impact and Outcome
1. The Rural Road Sector Project (the Project)1 will have an additional, positive, long-term impact on the four project regions and income and non-income dimensions of poverty in rural areas, serving about 10% of the total rural population in the country. The outcome will be increased mobility and improved accessibility to basic social service delivery institutions, employment opportunities, and to domestic and international markets for the communities and enterprises in rural and urban areas of the four regions. The feeder roads improved under the Project will lead to (i) higher and more frequent quality transport services available for road users; (ii) increased business opportunities for private sectors in general, particularly agriculture (including agro-processing), industrial, and service sectors; and (iii) more synergetic benefits from close partnerships in the road and other sectors relevant to the Project. The Project will improve transport sector management through TA that will be attached to the Project.
B. Outputs and Components
2. The main outputs of the Project will be (i) about 220 km of improved rural roads;2 (ii) development of an improved transport sector management system, including a new transport sector strategy to strengthen the capability of MOTC; and (iii) establishment of an improved road asset management system to enhance the institutional capacity of ARD.
3. The physical improvements envisaged under the Project will increase the percentage of roads in good condition from 12% to 15% at the national level. 3 Road roughness will be significantly improved from the average international roughness index of 10.9 m/km (poor) to a range of 3.0–4.0 m/km (fair/good). Road transport costs and travel time will be reduced by more than 40%.
1. Road Connectivity Improvement Component
4. This component focuses on rehabilitation of high priority rural roads totaling about 220 km. The subprojects for the Project have been selected and prioritized by using the HDM4; and taking technical, economic, environmental, and social concerns into consideration. Special attention has been given to the integrity of the overall road rehabilitation activities supported by MCC, the Government, and the Project. Selection criteria and approval process of subprojects are in Appendix 2. The list of prioritized subprojects identified for the Project is in Appendix 3.
2. Road Infrastructure Management Component
5. The component consists of (i) overall project management by ARD’s Project Management Unit (PMU), and (ii) subproject preparation and construction supervision support to the PMU. The main objectives of this component are to ensure (i) high quality of preconstruction work, including all necessary due diligence and detailed design for the subprojects; (ii) timely and high quality implementation of the subprojects; (iii) monitoring and evaluation of the subprojects (covering technical, road safety, economic, environmental, and
1 The design and monitoring framework is in Appendix 1. 2 Includes two road subprojects totaling 24.9 km along the main highways. These subprojects were included to maximize the benefits of rural road improvement in the Vardanis district of Gegharkunik region. 3 The Project, together with MCC and the Government, will improve the share of good road condition from 12% to 29% in 2011. With JBIC financing, the overall share of good roads will be further increased to about 35% during the same period. 2 social aspects); and (iv) annual auditing of project expenditures. On-the-job training by international consultants will also be conducted to improve ARD’s skills in road rehabilitation.
C. Special Features 6. The major value added of the Project includes (i) flexible financing and enhanced resource mobilization for the LRNP using ADB’s sector lending modality and (ii) maximized impacts on rural poverty reduction through strong partnerships.
7. Sector Lending Modality. The Project has been conceptualized to help the Government achieve its poverty reduction and economic development goals by financing part of the LRNP, which targets 784 high priority rural feeder roads (secondary and local roads) totaling about 2,700 km. The Government has a well-developed overall road sector plan (2006–2015) to meet the priority development needs of the road subsector and the Government’s PRSP. ARD has sufficient institutional capacity, developed through the implementation of two World Bank- financed projects, to implement the LRNP in selecting and implementing subprojects. The Government’s road subsector policies, developed with World Bank assistance, are appropriate. Thus, ADB’s sector lending modality is best suited to meet the financing need. In addition, ADB’s sector lending modality, the subproject criteria, and the environmental and social frameworks will allow the Government to mobilize additional financing from JBIC and others for the LRNP.
8. Enhanced Partnerships. The Project has been designed to maximize benefits by actively maintaining operational partnerships with ASIF, JBIC, JICA, iRAP, Lincy Foundation, MCC, UNAIDS, UNDP, UNESCAP, USAID, and World Bank. The aim has been to achieve maximum synergy to impact rural poverty. Although HIV/AIDS and human trafficking incidence is relatively low in Armenia at this moment, the PMU and ADB will continue to have proactive partnerships with UNAIDS and UNDP in these fields during project implementation. Further, the PMU and ADB will continue to pursue regular coordination with the World Bank and iRAP, regarding road safety.
D. Project Investment Plan
9. The project cost is estimated at $41.4 million, including taxes and duties of $5.8 million, and interest and other charges on the loans from ADB during construction (Table 1). Detailed cost estimates by expenditure category and financier are in Appendix 4.
Table 1: Project Investment Plan ($ million) Item Amounts A. Base Costa 1. Road Connectivity Improvement Componentb 29.2 2. Road Infrastructure Management Componentc 2.5 3. Taxes and Dutiesd 5.8 Subtotal (A) 37.5
B. Contingenciese 3.4
C. Financing Charges During Implementationf 0.5
Total (A+B+C) 41.4
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a May 2007 prices. b Includes $0.4 million–$2.9 million for environmental management plans required by the standard contracts. c Includes consulting services for (i) design, subproject preparation, and project supervision; and (ii) auditing. d Twenty percent value-added tax on civil works and taxes on consulting services for construction supervision. e Physical contingencies computed at 10% for civil works and consulting services. Price contingencies computed at 0.8% on foreign exchange costs (2007–2011), 4% for local currency costs (2007–2008), and 3% for local currency costs (2009–2011). f Interest during construction. Source: Asian Development Bank estimates.
E. Financing Plan 10. The Government has requested a loan of $30.6 million equivalent from ADB’s Special Funds resources to help finance the Project, while the Government will provide $10.8 million equivalent in counterpart funds (Table 2). The loan will have a 32-year term, including a grace period of 8 years, an interest charge of 1.0% per annum during the grace period, and 1.5% per annum thereafter. Table 2: Financing Plan ($ million) Source Total Percentage Asian Development Bank 30.6 73.9 Government 10.8 26.1 Total 41.4 100.0 Source: Asian Development Bank estimates.
11. The Government, MCC, and ADB will be able to finance about half of the total investment requirements for the LRNP (Table 3), serving nearly 44% of the total rural population in Armenia.
Table 3: Overall Financing Plan for the Lifeline Road Network Program ($ million) Source Total Percentage Millennium Challenge Corporation 67.0 22.3 Asian Development Bank 30.6 10.2 Government 50.0 16.7 Othersa 152.4 50.8 Total 300.0 100.0 a Includes financing from the Japan Bank for International Cooperation (JBIC) in the amount of about $50 million equivalent in parallel with the Project. JBIC’s loan processing is underway. Source: Asian Development Bank estimates.
F. Implementation Arrangements
1. Project Management
12. MOTC will be the Executing Agency (EA). Responsibility for planning, implementation, and supervision of the Project will be delegated to ARD, a noncommercial state organization responsible for planning and management of road construction and maintenance work for the road assets under MOTC’s purview. ARD will be responsible for recruiting consultants for subproject preparation and construction supervision, and auditing; preparation of bidding documents; and monitoring, evaluation, and awarding of contracts. Within ARD, a PMU4 will be
4 It is estimated that 15 staff members are required for the PMU. ARD has so far identified 9 members comprising (i) head (deputy director general level), (ii) a procurement officer, (iii) an environmental officer, (iv) a financial officer, (v) a construction officer, (vi) two construction specialists, (vii) an administrative assistant/interpreter/translator, and (viii) a driver. Some of them have operational experience with the World Bank road projects. 4 established to manage day-to-day coordination, implementation, and administration of the Project, while PMU’s team responsible for civil works contract management at the regional level will supervise day-to-day civil works contracts. ADB and PMU will maintain close coordination with JBIC, while they will also maintain partnership with other partners related to the Project. Project organization and implementation arrangements are in Appendix 5.
13. In accordance with the Government’s requirements for externally funded projects,5 a project governing council (PGC), comprising representatives from key stakeholders within and external to MOTC, will provide overall oversight and supervision for the Project. The PGC will comprise 11 members: (i) minister of MOTC, (ii) first deputy minister of MOTC, (iii) first deputy minister of finance and economy, (iv) first deputy minister of justice, (v) deputy minister of territorial administration, (v) five representatives from civil society, and (vi) head of the PMU. The PGC meetings will be held at least quarterly, and the PMU will report and seek guidance from the PGC on major procurement issues and policy decisions. The PGC will also provide a forum for coordinating activities among project beneficiaries.
2. Implementation Period
14. The Project will be implemented over 3 years, taking the construction season (May– November) in Armenia into consideration. Necessary preparatory work has been programmed for completion before the construction season. Twenty-four road links preliminarily identified for ADB financing will be improved through five international competitive bidding (ICB) packages, which will be completed in 2008 and 2009, by commissioning them simultaneously. Advance action on the engagement of consultants for subproject preparation and project supervision is ongoing. Surveys and detailed designs are expected to be completed by the end of 2007 and subsequent bid documentation will start in parallel with the detailed design preparation. Bidding and award of civil works contracts has been scheduled for completion by April 2008. The Project will be completed when the contractors’ liability for the repair of defects and maintenance ends in 2010. An indicative implementation schedule is in Appendix 6.
3. Procurement
15. Procurement under the Project will be carried out in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Civil works contracts will be carried out by using ICB procedures with post-qualification and as described in the procurement plan for the Project (Appendix 7). The procurement plan may be reviewed regularly and amended at least annually covering the next 18 months of procurement activity during project implementation. The minimum amount of a civil works contract procured through ICB is initially set at more than $1 million and will be reviewed during implementation. Procurement through national competitive bidding (NCB) will be conducted under the Borrower’s legislation on procurement, subject to modification and clarifications set forth in the Loan Agreement. The NCB thresholds are presently set at less than or equivalent to $1 million for civil works and less than or equivalent to $500,000 for goods. International shopping will be carried out for goods less than or equivalent to $100,000.
16. The country presently imports bitumen required for road improvement from non-ADB member countries. Restricting bitumen procurement to ADB member countries may preclude civil works contractors under the Project from obtaining the best economic terms, and may seriously erode economic efficiency. It is proposed that civil work contractors under the Project
5 Republic of Armenia. 1999. On the Activities of Project Implementation with the Proceeds of Loans and Grants Provided to the Republic of Armenia by Foreign States and International Lending Organizations. Yerevan. (Resolution No. 765, dated 22 December 1999). 5 be allowed to procure bitumen for road improvement from all countries, including from countries that are not ADB members.
4. Consulting Services
17. About 30 person-months of international consultants and about 162 person-months of national consultants will be required to work with the PMU for subproject preparation (including detailed design and technical, environmental, economic, social/resettlement due diligence); preparation of contracts; and project supervision, monitoring, and evaluation (including technical, environmental, economic, social/resettlement monitoring, and evaluation). ARD will engage one consulting firm for the services. The consultants will be recruited through the quality and cost-based selection method, using full technical proposal procedures in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Outline terms of reference for the consulting services are in Appendix 8. The Government requested ADB to carry out the selection of the consultants, as it is not familiar with ADB procedures. Once selected by ADB, the Government will negotiate with the selected consultants to finalize the consulting contracts and will retain the responsibility to supervise the consultants.
5. Advance Contracting and Retroactive Financing
18. ADB has approved advance contracting and retroactive financing for the consulting services for subproject preparation and project supervision, monitoring, and evaluation. Up to 20% of the loan amount may be used to finance eligible expenditures retroactively for consulting services that have been engaged in accordance with ADB’s Guidelines on the Use of Consultants and incurred prior to the loan effectiveness but not earlier than 12 months prior to loan signing.
6. Anticorruption Measures
19. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government including the EA and the Implementing Agency (IA). Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the Loan Agreement and bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the IA and all contractors, suppliers, consultants, and other service providers as they relate to the Project.
20. ADB’s Procurement Guidelines requires the Borrower to publish within 2 weeks of receiving ADB’s “no objection” in an English language newspaper or well-known and freely accessible website the results identifying the bid and lot numbers, and the following information: (i) name of each bidder who submitted a bid; (ii) bid prices as read out at bid opening; (iii) name and evaluated prices of each bid that was evaluated; (iv) name of bidders whose bids were rejected and the reasons for their rejection; and (v) name of the winning bidder, and the price it offered, as well as the duration and summary scope of the contract awarded. For contracts subject to post-review, the Borrower shall publish the results no later than the date of contract award. 6
7. Financial Management
21. ARD—the IA responsible for the flow of funds, accounting, reporting, and auditing—will handle the financial management functions of the Project. An assessment of the financial arrangements for the Project was undertaken in May 2007. Based on the financial management assessment, it was established that ARD has acceptable financial management arrangements: (i) accounting and reporting is performed with the use of appropriate software, which was assessed to be a reliable and flexible system to record and report with the required details and formats; (ii) the bookkeeping system allows the storing of all supporting financial documentation relating to the Project in a systematic manner; (iii) the internal control system is adequate; and (iv) ARD accounting staff have extensive experience with World Bank procedures for disbursement and financial management under the two road project financed by the World Bank, including financial management reports. According to the World Bank, financial management supervisions and annual audits conducted in conjunction with the World Bank- financed road projects, implemented by ARD, confirmed the satisfactory financial management arrangement. In addition, ARD accounting staff was given training sessions on ADB’s loan disbursement procedures during the financial management assessment (Appendix 9).
8. Disbursement Arrangements 22. The ADB loan proceeds for the Project will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). To facilitate project implementation and reduce cash flow difficulties in pre-financing project expenditures, advance disbursement through the imprest fund procedure is requested by MOTC, the EA. An imprest account will be set up at a bank acceptable to ADB upon loan effectiveness and will be exclusively used to finance ADB’s share of eligible expenditures. The imprest account will be managed by ARD, the IA. The total advances to be financed through the imprest account will not exceed either 6 months of estimated expenditures or 10% of the loan amount, whichever is lower. For large civil works contracts under the Project, direct payment procedures will apply. If the Government initially funds eligible expenditures from its own resources, reimbursement procedures will be used. To expedite funds flow and simplify the documentation process, the statement of expenditures procedure will be used for liquidation and replenishment of the imprest account and reimbursement of eligible expenditures not exceeding $100,000 per individual contract. Payments in excess of the statement of expenditures ceiling will be reimbursed, liquidated, or replenished, based on the full supporting documentation process. Information on disbursement arrangements are detailed in Supplementary Appendix A.
9. Accounting, Auditing, and Reporting
23. ARD, through MOTC, will submit quarterly and annual progress reports to ADB, indicating progress made and problems encountered during the review periods, steps taken to remedy the problems or proposed countermeasures, the proposed activities, and expected progress during the following periods. Within 3 months of physical completion of the Project, the EA will submit to ADB a project completion report providing details about implementation, costs, benefits, and other information that ADB may request.
24. ARD will maintain separate accounts and financial statements for the Project, which will be audited annually by international independent auditors acceptable to ADB. Auditors will be selected and engaged by quality and cost-based selection or the consultants’ qualifications selection method, in accordance with ADB’s Guidelines on the Use of Consultants. Annual audit reports will include an opinion on the use of the loan proceeds and compliance with the financial covenants included in the loan agreements, if any, including the use of imprest accounts and 7 statement of expenditures procedures. ARD will provide ADB with audit reports in English, together with audited accounts and financial statements, no later than 6 months after the end of each fiscal year.
25. The Government was informed of ADB’s policy on submission of audited accounts, which covers failure to submit audited accounts and financial statements by due dates. If submission of a financial statement is delayed more than 6 months (i) no commitment letter will be issued, if applicable; and (ii) ADB might not approve new contact awards. If the delay is more than 12 months, loan disbursements may be suspended or the loans may be canceled.
10. Project Performance Monitoring and Evaluation
26. The PMU, assisted by the consultants for subproject preparation and construction supervision, will establish a systematic project performance monitoring system (PPMS) to monitor and evaluate the impacts, outcomes, outputs, and activities in relation to the targets and benchmarks set for each subproject and the Project.
27. During the preparation of a group of subprojects for implementation, ARD and ADB will agree on a set of baseline values of economic, social, environmental, and poverty reduction impact indicators for each subproject. With the assistance of the subproject preparation and project supervision consultants, ARD will conduct participatory consultations and necessary surveys, and collect and assess data at intervals agreed with ADB. Findings of the assessments, together with ARD’s views, will be submitted as part of quarterly reports of ARD to ADB. A complete analysis of impacts and outcomes will be performed at project completion and 3 years after.
11. Stakeholder Participation and Consultations
28. ARD will ensure that the Project is implemented with the active participation of relevant stakeholders, using participatory practices. As part of the project preparation, more than 16 consultations covering both environmental and social issues were held with stakeholders, including directly affected people, representatives of local governments, and the Council of Elderly (key persons in the communities). Issues and activities related to project implementation were discussed and concerns expressed (especially road safety and increased exposure to communicable diseases and human trafficking) have been integrated in the project design. Stakeholder consultation and participation will continue throughout project implementation. Regular PGC meetings will systematically give opportunities to stakeholders to express their views and participate in the decision-making process during project implementation.
12. Project Reviews 29. In addition to regular reviews by ADB, a midterm review of the project implementation will be carried out during the first quarter of 2009. Representatives of ADB and the Government will take part in the review, which will focus on impacts—particularly those relating to institutional, administrative, organizational, technical, environmental, and social aspects—and poverty reduction. Other parameters that might negatively affect the economic viability and other relevant aspects will be assessed during the review, which will allow for any necessary midcourse adjustments.
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IV. TECHNICAL ASSISTANCE 30. The Government’s transport sector strategy was prepared in 1997 with assistance from the World Bank.6 In the last decade, international economic integration has increasingly gained speed. New technologies and expertise have emerged, and there has been growing concern over risks associated with mobility improvement. Considering these, the Government finds a great need for the development of a new strategy in order to respond to transport demands effectively and address both positive and negative aspects of transport improvement— particularly the road subsector, which is the predominant transport mode in Armenia. Since the road subsector has strong interlinkage with other transport modes, the development of a new overall transport sector strategy will support the road subsector effectively. The Project will be ADB’s first intervention in the transport sector in Armenia, so such a transport sector strategy will assist ADB in developing its partnership with the Government to implement necessary reforms, prioritize investment, and strengthen much needed capacity for the transport sector, including institutional capacity development of the Project’s EA and IA.
31. TA will be provided to improve transport sector performance so that it can make a sustainable contribution to economic development and poverty reduction in Armenia, which is facing ongoing globalization, technological advancement, and risks associated with increasing mobility. The main purposes of the TA are to support both the development of a new transport sector strategy and enhancement of the institutional capacity of MOTC and ARD. The TA will assess in detail all modes of transport, and identify strategic uses of resources for priority areas for sector development and operational needs for a 10-year horizon. The TA will equip MOTC with a new transport sector strategy comprising a new vision and road map, which will be the Government’s key document guiding policies and investments in the transport sector, including transport facilitation for 2009–2019. Specifically, the TA will (i) develop a reform action plan, (ii) develop a management information system for MOTC and ARD, (iii) define a long-term transport sector investment plan, (iv) support international transport facilitation and logistics sector development, (v) provide a capacity building development plan in all aspects of the transport sector, and (vi) support systematic resource mobilization for transport sector investments. The total TA amount is estimated at $800,000. ADB will finance $600,000 while the Government will finance $200,000. The TA will be financed on a grant basis by ADB’s TA funding program. The consultants will be recruited through the quality and cost-based selection method, using simplified technical proposal procedures in accordance with ADB’s Guidelines on the Use of the Consultants. Outline terms of reference are in Appendix 10.
V. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 32. The main immediate benefits of the Project include long-term sustainable savings in vehicle operating costs and travel time, stemming from physical improvements including the development of an improved road management system. The overall investments will increase mobility and accessibility to basic social service delivery institutions, employment opportunities, and domestic and international markets for communities and enterprises in rural and urban areas of the four regions. Indirect benefits expected from the Project include (i) increased local contractors’ capability, (ii) enhanced transport sector management capability of MOTC, (iii) improved road infrastructure management capability of ARD, (iv) reduced road accidents, (v) improved awareness of risks associated with increased mobility and countermeasures, and (vi) increased awareness of vehicular air pollution and countermeasures.
6 World Bank. 1997. Republic of Armenia Transport Sector Review. Washington, DC. 9
A. Economic Benefits 33. Economic assessment of each of the subprojects included in the Project has been performed based on the expected benefits from the physical improvement. The benefits considered are (i) vehicle operating cost savings for passenger and freight traffic resulting from the improvements to riding quality, (ii) generated traffic from the irrigated agriculture project financed by MCC,7 (iii) induced traffic, and (iv) time savings.
34. The overall project economic internal rate of return (EIRR) is estimated at 43.2%, while net present value (NPV) is $83.0 million. The impact of a cost increase of 20%, a benefits decrease of 20%, and a combined cost increase and benefit decrease of 20% on the EIRR and the NPV are shown in Table 4. The economics of the Project are highly robust, as illustrated by the switching values which would reduce NPV to zero (an EIRR of 12%): an increase of 332% in economic cost, a decrease of 77% in project benefits, or a simultaneous increase/decrease of 62%. Economic analysis is detailed in Appendix 11.
Table 4: Sensitivity Analysis and Switching Values Item EIRR NPV (%) ($ million) Base Case 43.2 83.0 Cost +20% 37.3 78.0 Benefits –20% 36.2 61.4 Cost/Benefits +/–20% 31.2 56.4 Cost Benefits Costs/Benefits Switching Valuesa 332% -77% +/-62% EIRR = economic internal rate of return, NPV = net present value. a To reduce NPV to zero. Source: Asian Development Bank estimates.
B. Environmental Impacts 35. Rehabilitation work under the Project will generally follow the existing carriageway width, which is about half of the right-of-way. The Project is categorized B and is expected to have insignificant environmental impacts during both construction and operation stages. The nearest distance from any of the subprojects to the protected areas (national park or state reserve) is more than 1 km. No ecological or biodiversity impacts are expected. Ten public consultations involving a total of 72 local stakeholders have been held and general feedback has been positive about the Project, with little environmental concern. The environmental assessment and review procedures included in an initial environmental examination (IEE) have covered the future subproject screening and selection process and criteria, and will be followed according to ADB’s Environment Policy 8 and Environmental Assessment Guidelines. 9 The environmental management plan (EMP) prepared under the IEE has included mitigation measures, monitoring programs, and capacity-building programs. Environmental impact will be assessed during subproject preparation, and will be monitored and evaluated during project implementation. EMPs and IEEs will be prepared for the subprojects based on the detailed design and will be included in the standard contract documents, which require 1.5–10.0% of the contract values for EMPs. This process will be supported and monitored by the consulting firm for subproject
7 The Project is located within the MCC project areas of 5 irrigation schemes (out of 21), with incremental increase in the irrigated areas totaling 12,600 hectares. 8 ADB. 2002. Environment Policy of the Asian Development Bank. Manila. 9 ADB. 2003. Environmental Assessment Guidelines. Manila. 10 preparation and construction supervision. A summary IEE (SIEE), including the environmental assessment and review framework (EARF), is in Supplementary Appendix B.
C. Social and Poverty Impacts
36. The Project will also improve income and non-income dimensions of poverty in rural areas. The Project’s impact on poverty has been quantified by examining the share of total project net benefits that would accrue to the poor and the very poor. About 32% of road users within the project areas are poor and 6% are classified very poor. Project benefits will accrue to about 40,500 poor beneficiaries, of whom roughly 7,000 are very poor. A distribution analysis indicates that the Project will yield a poverty impact ratio of 0.28. Total net benefits accruing to the poor in the project areas are estimated to amount to about $24 million, of which the very poor will receive about $4 million. Improved road infrastructure will provide rural communities with enhanced access to social service delivery institutions including hospitals, clinics, and schools. This will support improvement of the non income-related causes of poverty. The summary poverty reduction and social strategy is in Appendix 12.
D. Indigenous People 37. An initial social assessment was carried out during project processing, covering all potential subprojects. Detailed socioeconomic evaluation of 15 communities 10 has been conducted and more than six consultation meetings were held in these communities. Extensive research on the remaining project areas has also been conducted. The assessment has concluded that there are no indigenous people living in the project areas. Thus, there is no indigenous peoples’ issue.
E. Internally Displaced Persons and Refugees
38. A total of nearly 19,000 internally displaced persons and refugees (IDPRs) live in the project areas, which constitute about 15% of the total community population. Of 19,000 IDPRs, about 18,000 persons are refugees, while the remainder is internally displaced persons. The Project will provide the IDPRs with improved access to markets, job opportunities, and basic social services. The IDPRs do not live near the road alignments, so there will be no negative impact on the IDPRs during construction. Surveys carried out during project preparation have concluded that negative impacts on IDPRs are very limited. As ADB’s sector lending modality is adopted for the Project, the internally displaced persons and refugees development framework (IDPRDF) has been prepared for these people (Appendix 13). The consulting services for subproject preparation and project supervision will review potential negative impacts on these people, and prepare specific actions and development plans for IDPRs, if necessary.
F. Land Acquisition and Resettlement
39. Rehabilitation work under the Project will generally follow the existing carriageway widths, which are about half of the right-of-way widths. Thus, no resettlement is expected. It has been assessed during surveys and consultations that there is no encroachment to the subprojects. However, since ADB’s sector lending modality has been used for the Project, a resettlement framework (RF) was prepared to establish the policies and procedures for compensation, rehabilitation, and resettlement of people affected by the Project. The provisions of the RF will be applicable in all cases where land acquisition and/or resettlement are/is required as part of the implementation of a subproject. The RF builds on the laws of the
10 With a total population of about 25,820 persons (about 20% of the total people living within the project areas) along four subprojects in Gegharkunik (road link no. 2), Ararat (road link no. 17), and Kotayk (road link nos. 14 and 27). 11
Government of the Republic of Armenia—principally the Constitution, 1995; the Land Code, 2001; and the Civil Code, 1998—and ADB’s Involuntary Resettlement Policy. 11 Since government legislation is not fully consistent with ADB policy, the provisions of the RF will take precedence over relevant decrees currently in force in Armenia wherever a gap exists between the ADB policy and Armenian laws. The RF is in Appendix 14.
VI. ASSURANCES AND CONDITIONS 40. In addition to the standard assurances, the Government and MOTC have given the following assurances, which are incorporated in the legal documents.
A. Implementation Arrangements
41. MOTC, shall be the EA and, as such, shall have overall responsibility for project implementation. ARD shall be the IA and, as such, shall overall responsibility for the day-to-day operations of the subprojects. Within ARD, a PMU shall be established to manage the day-to- day coordination, implementation, and administration of the Project, including, without limitation, (i) selection and assessment of candidate subprojects, (ii) maintenance of project accounts, (iii) support for the procurement of equipment and materials, (iv) monitoring and reporting on subproject implementation, (v) facilitation of environmental and social protection measures, (vi) support for the selection of consultants, (vii) detailed design supervision, and (viii) construction supervision. The PMU shall be maintained until project completion.
42. MOTC shall be assisted by a PGC. The PGC shall be an interministerial and interdepartmental body consisting of representatives from the Ministry of Finance and Economy, Ministry of Justice, MOTC, Ministry of Territorial Administration, and civil society representatives of the Project beneficiaries. The PGC shall be chaired by minister of MOTC. The PGC shall operate in accordance with the Government’s requirements12 and shall be responsible for (i) guiding the overall policy and strategic direction of the Project, (ii) reviewing and evaluating project/subproject performance, and (iii) assisting with the coordination among other donor- funded projects relating to the project roads. The PGC shall be maintained until project completion.
43. The PMU shall, on a quarterly basis or more often as required, meet with each organization,13 which it considers appropriate, to discuss and coordinate the implementation of the Project. The PMU shall further discuss all issues required to be addressed with such other entities in accordance with the terms of the PAM agreed to between the Borrower and ADB.
1. Counterpart Financing and Financial Support
44. The Borrower shall make available all counterpart funds required for the Project on a timely basis, and on an annual basis for each fiscal year, make adequate budgetary allocations as required to (i) support timely and effective project implementation; (ii) rehabilitate the project roads within three years; (iii) undertake routine operation and maintenance activities on the project roads; (iv) implement the provisions of the EARF and the mitigation measures and monitoring requirements of the IEE and EMP for each subproject; (v) adhere to the RF and implement the RP for each subproject where an RP is required; and (vi) adhere to the IDPRDF and implement the IDPRDP for each subproject where an IDPRDP is required.
11 ADB. 1995. Involuntary Resettlement. Manila. 12 Republic of Armenia. 1999. On the Activities of Project Implementation with the Proceeds of Loans and Grants Provided to the Republic of Armenia by Foreign States and International Lending Organizations. Yerevan. (Resolution No. 765, dated 22 December 1999). 13 Such as JBIC, MCC, Lincy Foundation, ASIF (financed by the World Bank), JICA, UNAIDS, USAID, and UNDP. 12
2. Authority and Control over the Project Road 45. The Borrower shall ensure that MOTC has the authority and control over the project roads necessary to implement the subprojects.
3. Financing of Maintenance of Road Network
46. The Borrower shall allocate and make available, on a timely basis, sufficient funds for the operation and maintenance of the project roads, and shall ensure that the project roads are adequately maintained in accordance with applicable standards and best international practices.
47. Without limiting the generality of the foregoing, in each fiscal year hereafter, the Borrower shall increase its annual road rehabilitation and maintenance budgets for the whole road network by no less than annual inflation rates from the amount allocated for the same purpose in fiscal year 2007 (AMD16.16 billion), as long as sound fiscal balance is maintained.
48. The Borrower shall ensure that actual annual expenditures for maintenance of the roads that falls under MOTC’s scope of responsibility are increased at least at the same rate as increases in the overall national budget in each year during project implementation.
49. The Borrower shall (i) ensure that details of actual road maintenance expenditures are included in every other quarterly progress report to be submitted by MOTC to ADB, (ii) have such expenditures audited annually in accordance with appropriate auditing standards by independent auditors acceptable to ADB, and (iii) furnish such audited statements of expenditures to ADB within 9 months from the end of the fiscal year.
4. Subproject Selection
50. All subprojects require the prior approval of ADB. The Borrower, through MOTC, shall annually submit for ADB’s approval a list of roads it wishes to propose for subprojects in the succeeding year. The list shall be accompanied by a feasibility study for each proposed subproject. The Borrower, through MOTC, shall ensure that the subproject feasibility studies are prepared with sufficient detail and quality for ADB to assess whether the proposed subprojects meet the agreed criteria, and are otherwise suitable and viable.
51. The Borrower, through MOTC, shall ensure that all relevant documents forming the basis for screening, selection, and processing of subprojects are made available to ADB upon request and are kept available for such purposes for a minimum period of 5 years from the date of the project completion report for the Project.
5. Road Safety
52. The Borrower shall ensure appropriate safety enforcement measures on the project roads and shall cause ARD to monitor the accident rate and traffic volume after commencement of the operation of the project roads.
53. The Borrower shall further ensure that relevant government agencies provide strict road patrol to prevent trafficking of humans, wildlife, endangered species, and illegal substances on the project roads.
6. Environmental Management
54. The Borrower, through MOTC, shall ensure that the Project is carried out in accordance with, and that all subprojects are designed, carried out, maintained, and monitored in 13 compliance with (i) all applicable environmental laws and regulations, including the Borrower’s Law on Environmental Assessment, 1995; (ii) ADB’s Environment Policy; and (iii) the EARF and each EMP, as applicable, including the mitigation measures and monitoring requirements arising from the implementation of the environmental assessment and review procedures outlined in the relevant IEE. The Borrower shall ensure that the EMP prepared for any subproject is (i) incorporated into the design of the subproject; (ii) implemented in accordance with its terms during the construction, operation, and maintenance of the subproject; and (iii) updated at such time when the detailed engineering design becomes available.
55. The Borrower, through MOTC, shall ensure that (i) civil works contractors’ specifications include requirements to comply with the environmental mitigation measures contained in each IEE and EMP, as applicable; and (ii) civil works contractors are supervised to ensure compliance with the requirements of each IEE and EMP.
7. Land Acquisition and Resettlement
56. The Borrower (i) shall ensure that all land and rights-of-way required by the subprojects are acquired or otherwise made available in a timely manner; and (ii) through MOTC, shall ensure that the Project is implemented in accordance with (a) the RF and each RP, as applicable; (b) the IDPRDF and each IDPRDP, as applicable; and (c) all applicable domestic laws and regulations and ADB’s Involuntary Resettlement Policy (1995).
57. The Borrower, through MOTC, shall ensure that (i) in the event there is any significant change in the design of subproject covered by a RP and/or IDPRDP, or any substantial changes in resettlement impacts, the relevant RP and/or IDPRDP, as the case may be, will be (a) updated based on a detailed measurement survey, (b) disclosed to the affected persons, and (c) subsequently provided to ADB for its concurrence prior to commencement of any civil works for the subprojects; and (ii) that civil works contractors’ specifications include requirements to comply with each RP and/or IDPRDP, as applicable.
58. The Borrower, through MOTC, shall ensure that no civil works contract is awarded for any subproject requiring land acquisition until such time as the land and/or right-of-way required for the execution of any civil works for the subproject has been obtained by MOTC, and subsequently provided to the contractor, in each case, free from any encumbrances and in compliance with the provisions of the RF and the IDPRDF.
59. The Borrower shall ensure that contractors are mobilized for civil works on specific subprojects only after (i) the provisions of the RF and any RP required for such subprojects and (ii) the provisions of the IDPRDF and any IDPRDP required for such subprojects, have been complied with.
8. Labor, Gender, and Health
60. The Borrower, through MOTC, shall ensure that (i) all civil works contracts require contractors employed under a subproject to incorporate applicable workplace occupational safety norms; (ii) that civil works contractors (a) comply with all applicable labor laws; (b) do not employ child labor for construction and maintenance activities; (c) do not differentiate wages between men and women for work of equal value; and (d) disseminate information to their employees on the risks of socially and sexually transmitted infections, including HIV/AIDS; and (iii) that the appropriate entities disseminate information on the risks of socially and sexually transmitted diseases to members of the local community, particularly females, living in the communities surrounding the subproject area.
14
9. Anticorruption
61. The Borrower shall comply with, and shall ensure MOTC complies with, ADB’s Anticorruption Policy. The Borrower, consistent with its commitment to good governance, accountability, and transparency, agrees (i) that ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project; and (ii) to cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. In particular, the Borrower shall (i) conduct periodic inspections on the contractors’ activities related to fund withdrawals and settlements; (ii) ensure that all contracts financed by ADB, in connection with the Project, include provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants, and other service providers as they relate to the Project; and (iii) the construction supervision consultant shall verify the contractors’ invoices in accordance with working drawings and contract specifications.
10. Project Monitoring, Review, and Reporting
62. The Borrower, through MOTC, shall, within 6 months of the loan effective date, finalize and adopt a comprehensive PPMS, acceptable to ADB, based upon the PPMS indicators agreed upon between the Borrower and ADB. The Borrower, through MOTC, shall (i) monitor the PPMS indicators on a quarterly basis to determine the efficiency and effectiveness of the Project and its impacts; and (ii) provide to ADB quarterly PPMS monitoring reports, in form and substance satisfactory to ADB, from the commencement of project implementation until project completion and on the third anniversary of project completion.
63. The Borrower, MOTC, ARD, and ADB shall, during the second year of project implementation, jointly undertake a comprehensive midterm review of the Project. The midterm review will assess the Project’s achievements and progress in implementing the Project against the PPMS indicators and the project implementation schedule in order to identify any difficulties or constraints being encountered in implementing the Project and to make adjustments, if necessary, for the remaining project implementation period. In particular, the midterm review will, among others, evaluate the project scope, costs, overall implementation progress, and status of compliance with loan covenants.
64. The Borrower shall submit to ADB project progress reports, in form and substance satisfactory to ADB, on a quarterly basis. The quarterly reports shall include, without limitation, a description of (i) the physical progress of the Project; (ii) reasons for any delays or difficulties in implementing the Project, together with recommendations for future actions, as appropriate; (iii) the progress in implementing the EMPs; (iv) the progress in implementing the RPs, if required, for subprojects (v) the progress in implementing any IDPRDP, if required, for subprojects; and (vi) a summary of the financial accounts for the Project, including the total project expenditures on a quarterly basis to the date of the relevant report. Within 3 months of project completion, the Borrower shall submit to ADB a project completion report, in form and substance satisfactory to ADB. The project completion report shall include, without limitation, (i) an assessment of the execution and operation of the Project, (ii) status of compliance with loan covenants, and (iii) the results of project outcomes and performance.
B. Conditions for Disbursement
65. Notwithstanding any other provision of the Loan Agreement, no withdrawals shall be made from the loan account for the purposes of the Project until ADB has received Borrower’s certification, in form and substance satisfactory to ADB, that: 15
(i) MOTC has the authority and control over the project roads necessary to implement the subprojects;
(ii) a project implementation agreement between MOTC and ARD has been duly executed and delivered on behalf of ARD and has become fully effective and binding upon the parties in accordance with its terms;
(iii) the Borrower had deposited into ARD’s bank account the required counterpart funds, in the amount of lesser of (a) estimated expenditures required for 6 months of project implementation, or (b) 10% of the total estimated counterpart funding requirements for the Project; and
(iv) the PMU has been established, has been adequately staffed as agreed with ADB, and has become fully operational to implement the Project.
V. SUBPROJECT LOCATIONS AND KEY PERSONS INVOLVED IN PROJECT IMPLEMENTATION
66. Maps indicating all subproject locations are in Appendix 15. Key persons who are involved in the project implementation are in Appendix 16.
16 Appendix 1
DESIGN AND MONITORING FRAMEWORK
Design Performance Targets/Indicators Data Sources/Reporting Assumptions Summary Mechanisms and Risks Impact Assumption Poverty reduction in the Reduced average poverty level in National statistics • The Government project area the project area from 33.3% in 2005 continues to accord high to less than 20.0% after 10 years Asian Development priority to the Poverty from project completion, using a Bank’s (ADB)’s project Reduction Strategy Paper national poverty line based on performance audit report and the Lifeline Road annual household surveys prepared Network Program by the National Statistics Services
Outcome Assumptions Improved access of rural Level of motorized traffic on Direct measures of traffic • Continued political populations in the project improved roads increased by volume, road roughness, stability and economic area to jobs, markets, average of 40% from 2007 within and travel time through growth in the Republic of and social services, and 2 years of project completion periodic surveys Armenia and the region the major trunk road conducted by the • Effective networks through Reduction in travel time more than Armenian Roads implementation of the reduction in road 40% on average for the whole Directorate Non- Poverty Reduction and transport costs Project after project completion Commercial State Strategy Paper Organization • Adequate government
funding for the road sector Periodic household surveys in the project area • Sufficient capacity of domestic road construction Project progress reports and maintenance companies
Risk ADB review missions • Inadequate maintenance of the project ADB’s project completion road after completion report because of insufficient funding
Outputs Assumptions
1. Improvement of high Complete rehabilitation of rural Consultant’s contract • Continued high priority priority roads roads totaling about 220 kilometers milestones given by the Government to
(km) after project completion the Project • The Government’s Project progress reports continued cooperation during Average surface roughness for the project implementation subprojects reduced from an ADB review missions • Availability of key international roughness index of statistics and information ADB’s project completion 10.9 m/km in 2007 to no more than relating to the Project 4.0 m/km after project completion report • High-quality consulting
services for subproject Reduction in vehicle operating costs preparation and construction by more than 40% on average for supervision. the whole Project after the project Risks completion • Project implementation
2. Improvement of Introduction of a transport sector delay transport management management program • Poor quality of civil works capability of the Ministry recommended by the TA attached to • Delay in the of Transport and the Project Communication engagement of the TA
Consultants 3. Improvement of road Introduction of a road sector asset management management program capability of the recommended by the TA attached to Armenian Roads the Project Directorate
Appendix 1 17
Activities with Milestones Inputs
1. Consulting Services for Subproject Preparation and Project Supervision Project Target: Begin in December 2007 and complete in November 2010 • ADB: $30,600,000
2. Civil Works (including consulting services Targets: Subprojects for 2008 implementation (May 2008 and complete in November 2008) for (i) subproject preparation Subprojects for 2009 implementation (Q2 2009 and complete in November 2009) and project supervision, and 3. Consulting Services for Transport Sector Development Strategy (ii) auditing, amounting to Target: Begin in April 2008 and complete in September 2008 $1.5 million) • Government: $10,800,000
Transport Sector Development Support TA (Consulting Services) • ADB: $600,000 • Government: $200,000
Source: Asian Development Bank.
18 Appendix 2
SELECTION CRITERIA AND APPROVAL PROCESS FOR SUBPROJECTS
A. Subproject Selection Criteria
1. Each subproject must meet the following criteria:
(i) the subproject falls within the scope of the Lifeline Roads Network Program (LRNP), and is considered of high priority under LRNP, or is part of the main highway system (interstate), rehabilitation of which will support the objectives of the LRNP;
(ii) the subproject connects rural communities with a total of more than 500 people per road and significant economic activities to the primary road network and/or to regional commercial centers (including those areas containing schools, hospitals, and other social service delivery institutions);
(iii) the subproject is technically feasible and demonstrates, at a worst case scenario, a minimum rate of economic return of 12%;
(iv) the subproject focuses on rehabilitation along the existing road and rehabilitation work will be conducted mainly within the current right-of-way;
(v) the subproject is not a category A project1 under ADB’s Environmental Policy and/or Involuntary Resettlement Policy;
(vi) an environmental screening has been conducted for the subproject and an initial environmental examination (IEE) and environmental management plan (EMP) have been prepared for the subproject in accordance with the Environmental Assessment and Review Framework;
(vii) a Resettlement Plan (RP), if required, has been prepared for the subproject in accordance with the Resettlement Framework;
(viii) an Internally Displaced Persons and Refugees Development Plan (IDPRDP), if required, has been prepared in accordance with the Internally Displaced Persons and Refugees Development Framework (IDPRDF);
(ix) an Initial Poverty and Social Assessment has been prepared;
(x) a road safety audit has been prepared and necessary road safety mitigation measures have been incorporated into the proposed subproject design; and
(xi) all required governmental approvals have been obtained.
1 Projects with potential for significant adverse environmental impacts. An environmental impact assessment is required to address significant impacts. Appendix 2 19
B. Project Approval Procedure
2. All subprojects must comply with Asian Development Bank (ADB) policies and guidance, and satisfy ADB’s procedures for subproject preparation, including the technical, operational, environmental, social, and resettlement dimensions. In respect to the sample subprojects reviewed under the small-scale technical assistance, these requirements were met during project preparation. For additional subprojects, the requirement will be met during project implementation.
3. Before starting procurement actions for the additional subprojects for inclusion in the second annual batch, the Armenian Roads Directorate Non-Commercial State Organization (ARD), the Implementing Agency, will submit to ADB for approval, a report providing details of compliance with the selection criteria (para. 1) of each newly proposed subproject in the batch. The approval process for each batch of additional subprojects will be as follows:
(i) with the assistance of subproject preparation and project supervision consultants, ARD prepares a consolidated report indicating the compliance of each proposed subproject with the selection criteria, including an overall IEE for all subprojects, which will focus on any environmental problems identified and mitigation required, an initial poverty and social assessment, RP (if necessary), and IDPRDP (if necessary) for each subproject;
(ii) ARD screens the subprojects included in the report and refines the report, as necessary, to meet ADB requirements; and prepares a summary checklist describing the eligibility, preparation status, and safeguard compliance of each subproject;
(iii) ARD submits the report and checklist to ADB for approval;
(iv) ADB approves the proposed subprojects, subject to any further modifications required, if ADB considers such modifications are necessary; and
(v) subject to addressing any modifications, as required, ARD proceeds with procurement for subprojects approved by ADB.
C. Monitoring During Implementation
4. ARD will adhere to ADB’s guidelines, policies, and other requirements during pre- construction through reviews of supporting documentation, and during project implementation; and monitor project impacts and contractor performance through specialists engaged to support the project management unit (PMU) and the subproject preparation and project supervision consultants.
5. Technical, economic, environmental, and social auditing will be conducted during subproject preparation and project implementation.
20 Appendix 3
LIST OF SUBPROJECTS IDENTIFIED FOR THE PROJECT Link Communities Length Roughness Cost a No. No. Link Name Region District Connected (km) (IRI) ($’000) Bid Vardenis-Shatvan Vardenis–Shatvan 1 L1 Gegharkunik Vardenis 7.0 9.4 920 junction junction Vardenis–Mets Masrik– Vardenis– 2 L2 Gegharkunik Vardenis Pokr Masrik– 17.9 9.2 2,689 Ghehamakar Geghamasar M-11–Khachaghbiur– 3 L3 M-11–Geghakar Gegharkunik Vardenis 8.7 18.1 1,879 Geghakar 1 M-11–Shatjrek– 4 L6 M-11–Geghamakar Gegharkunik Vardenis 4.8 15.5 900 Geghamabak M-11–Shatvan– 5 L7 M-11–Jaghacadzor Gegharkunik Vardenis Geghamabak– 5.8 18.8 1,253 Jaghacadzor Mets Masrik–Tretuk– 6 L9 M-14–Kutakan Gegharkunik Vardenis 9.3 17.8 2,009 Kutakan M-14–Tsovagiuh- 7 L10 M-14–Semenovka Gegharkunik Vardenis 12.1 10.7 1,591 Semenovka
8 L11 M-11–Astkhadzor Gegharkunik Vardenis M-11–Astkhadzor 3.0 12.3 446 2 M-10–Tsakkar- 9 L12 M-10–Tazagiugh Gegharkunik Vardenis 5.3 14.1 947 Tazagiugh
10 L13 M-10–Vardadzor Gegharkunik Vardenis M-10–Vardadzor 2.6 20.2 562
Abovyan–Arzni – 11 L14 Abovyan–Nurnus Kotayk Kotayk 10.2 10.1 1,150 Biurehava–Nurnus Piunik–Artavaz– 12 L15 Piunik–Hankavan Kotayk Hrazdan 13.0 14.2 2,322 Hankavan
13 L16 Zoravzn–Aragiugh Kotayk Nairi Zoravzn–Aragiugh 5.3 11.6 947
14 L24 Yerevan–Yeghvard Kotayk Nairi Zovuni 8.0 11.1 1,232 3
Bujakan–Aragyugh– 15 L25 Bujakan–Saralandj Kotayk Nairi 8.0 10.7 901 Saralandj Zovuni–Kanakeravan– 16 L26 Zovuni–Mrgashen Kotayk Nairi 8.5 14.6 1,518 Mrgashen Mayakovski– Mayakovski– 17 L27 republican Kotayk Kotayk 9.1 10.6 1,196 Dzoraghbyur (secondary) road H-3 Bardzrashen–Landjazat– Bardzrashen– Abovyan–Arevshat– 18 L17 republican Ararat Artashat 12.4 11.4 1,397 Nshavan–Byuravan– (secondary) road H-8 Burastan Aygezard–interstate Aygezard–Aygepat– 19 L18 Ararat Artashat 4.2 14.8 750 (main) road M-2 Shahumyan 4 Kaghtsrashen– 20 L19 Ararat Artashat Kaghtsrashen–Vostan 8.5 10.9 958 Artashat Getazat–republican 21 L20 Ararat Artashat Getazat–Mrganush 2.9 10.4 326 (secondary) road H-9 Appendix 3 21
Link Communities Length Roughness Cost a No. No Link name Region District connected (km) (IRI) ($,000) Bid Geghanist–Ghukasavan– 22 L21 Geghanist–Nizami Ararat Masis Darakert–Dashtavan– 9.2 10.6 1,037 4 Zorak–Nizami Urtsadzor–Shahap– Urtsadzor– interstate 23 L23 Ararat Ararat Lusashogh–Landjar– 26.8 17.4 5,789 5 (main) road M-2 Urtsalandj Margara–Arazap– Argavand–Tandzut– 24 L30 Margara–Armavir Armavir Armavir Aygeshat–Armavir 20.2 11.1 2,285 4 village–Haykavan– Norapat–Armavir Ararat 64.0 13.9 10,257 Armavir 20.2 11.1 2,285 Gegharkunik 76.5 13.5 13,196 Kotayk 62.1 12.0 9,266 Total 222.8 10.9 35,004 H = Highway (Secondary Road), IRI = international roughness index, km = kilometers, L = link, M = Magisterial Road (Main Highway). a Include 20% value added tax. Source: Asian Development Bank.
22 Appendix 4
DETAILED COST ESTIMATE AND FINANCING PLAN
Table A4.1: Detailed Cost Estimate by Expenditure Category a
% of Total ARM million $ million Base Cost A. Investment Costs 1. Civil Works b 10,148.7 29.2 78% 2. Taxes and Duties c 2,015.8 5.8 15% Subtotal A 12,164.5 35.0 93%
B. Project Management and Administration 1. Project Management Unit 347.6 1.0 3% 2. Consulting Services for Subproject Preparation and Construction Supervision d 521.3 1.5 4% Subtotal B 868.9 2.5 7% Total Base Cost (A) + (B) 13,033.4 37.5 100% C. Contingencies e 1,181.7 3.4 9%
D. Interest During Construction 173.8 0.5 1%
Total Project Cost (A+B+C+D) 14,388.9 41.4 110% a May 2007 prices. b Includes $0.4–2.9 million for environmental management plans required by the standard contracts. c 20% value added tax on civil work. d Includes consulting services for (i) subproject preparation and project supervision (covering technical, economic, road safety, environmental, and social aspects), and (ii) auditing. e Physical contingencies computed at 10% for civil works and consulting services. Price contingencies computed at 0.8% on foreign exchange costs for 2007–2011 and 4% and 3% on local currency costs for 2007–2008 and 2009–2011, respectively.
Source: Asian Development Bank.
Appendix 4 23
Table A4.2: Detailed Cost Estimate by Financier a
ADB Government Total ($ million) (%) ($ million) (%) ($ million) (%) A. Investment Costs
1. Civil Works b 25.2 86.3% 4.0 13.7% 29.2 100.0%
2. Taxes and Duties c - 0.0% 5.8 100.0% 5.8 100.0%
Subtotal A 25.2 72.0% 9.8 28.0% 35.0 100.0%
Project Management and B. Administration
1. Project Management Unit - 0.0% 1.0 100.0% 1.0 100.0% Consulting Services for 2. Subproject Preparation and Construction
Supervision d 1.5 100.0% - 0.0% 1.5 100.0%
Subtotal B 1.5 60.0% 1.0 40.0% 2.5 100.0%
C. Contingencies e 3.4 100.0% - 0.0% 3.4 100.0%
Total Project Cost (A+B+C+D) 30.6 73.9% 10.8 26.1% 41.4 100.0% a May 2007 prices. Includes $0.4–2.9 million for environmental management plans required by the standard b contracts. c 20% value added tax on civil work. d Includes consulting services for (i) subproject preparation and project supervision (covering technical, economic, road safety, environmental, and social aspects), and (ii) auditing.
e Physical contingencies computed at 10% for civil works and consulting services. Price contingencies computed at 0.8% on foreign exchange costs for 2007–2011 and 4% and 3% on local currency costs for 2007–2008 and 2009–2011, respectively. Source: Asian Development Bank. 24 Appendix 5
PROJECT ORGANIZATION AND IMPLEMENTATION ARRANGEMENTS
Project Governing Council (PGC)a
Quarterly Executing Agency Asian Project Ministry of Development Partnership Transport and Communications Bank Meetings (MOTC) (ADB)
JBIC, MCA, Lincy Foundation, ASIF, USAID, UNAIDS, UNDP,USAID, etc.
Implementing Agency Subproject Preparation Armenian Roads Directorate and Non-Commercial State Organization (ARD) Project Supervision Project Management Unit (PMU) b Consultant Employer-Contractor Relation
ARD Ararat Contractors
ARD Armavir Contractors
ARD Gegharkunik Contractors Engineer-Contractor Relation
ARD Kotayk Contractors Engineer's Representative-Contractor Relation
JBIC = Japan Bank for International Cooperation, MCA = Millennium Challenge Account- Armenia of Millennium Challenge Corporation, ASIF = Armenia Social Investment Fund, USAID = United States Agency for International Development, UNAIDS = Joint United Nations Programme on HIV/AIDS, and UNDP = United Nations Development Programme (anti-human trafficking project).
a Comprises 11 members: (i) minister of MOTC, (ii) first deputy minister of MOTC, (iii) first deputy minister of finance and economy, (iv) first deputy minister of justice, (v) deputy minister of the territorial administration, (v) five representatives from the civil society, and (vi) head of the project management unit (PMU). PGC meetings will be held at least quarterly and PMU will report and seek guidance from PGC on major procurement issues and policy decisions. Furthermore, the PGC will provide a forum for coordinating activities among the project beneficiaries. b It is estimated that 15 staff members are required for the PMU. ARD has so far identified 9 members comprising (i) head (deputy director general level), (ii) a procurement officer, (iii) an environmental officer, (iv) a financial officer, (v) a construction officer, (vi) two construction specialists, (vii) an administrative assistant/interpreter/translator, and (viii) a driver. Some of them have operational experience with the World Bank road projects. Source: Asian Development Bank. Appendix 6 25
INDICATIVE IMPLEMENTATION SCHEDULE
2007 2008 2009 2010 2011 89101112123456789101112123456789101112123456789101112123 Construction Season Loan Effectivity PIA PPMS Imprest Account Midterm Review PCR Submission to ADB a
A. SSTA i
Subproject Screening er it r
Surveys (2008 Program) C P EEES Auditing S D Preliminary Design B. Consultant for Subproject Preparation and Project Supervision Recruitment (Advance Action) Services Subproject Preparation EEES Auditing Project Supervision EEES Auditing PCR C. Auditing a D Civil Works # (km) 2008 Program 2 23.0 Gegharkunik D 4 57.4 Ararat and Armavir DD B Construction Contractor's Liability Period D 5 26.8 Ararat 107.2 # (km) 2009 Program 1 53.5 Gegharkunik D 3 62.1 Kotayk S D B Construction Contractor's Liability Period D Criteria 115.6 E. Transport Sector Development Support TA Recruitment Services F. Disbursement ($ million) 30 25 20 15 10 5
B = bidding; D = bidding document preparation; DD = detailed design; EEES Auditing = auditing of engineering, environmental, and economic aspects, and social safeguards; PD = preliminary design; PIA = project implementation agreement between MOTC and ARD to be agreed within 3 months of the effective date, but not in any event not later than the commencement of the civil work; PPMS = project performance monitoring system to be adopted within 6 months of the effective date; PCR = project completionreporttobesubmitted to the Asian Development Bank within 3 months of the project completion; S = survey; SSTA = small-scale technical assistance; TA = technical assistance. a Four times (2009, 2010, 2011, and 2012). Source: Asian Development Bank.
26 Appendix 7
PROCUREMENT PLAN A. Project Information
Country Republic of Armenia Name of Borrower Republic of Armenia Project Name Rural Road Sector Project (the Project) Loan or TA Reference Date of Effectiveness of Procurement Plan 25 May 2007 (on approval of advance action and contacting at the management review meeting) Amount Total estimates cost of the Project is $41.4 million, of which $30.6 million is financed from the Asian Development Bank (ADB). Of Which Committed $0 Executing Agency Ministry of Transport and Communications (MOTC) Approval Date of Original Procurement Plan This is the first procurement plan Approval of Most Recent Procurement Plan Publication for Local Advertisements15 State and national newspapers Period Covered by This Plan Period up to November 2010, including the contractors’ liability for the repair of defects and maintenance. TA = technical assistance.
B. Process Thresholds, Review, and 18-Month Procurement Plan
1. Project Procurement Thresholds
1. The following process thresholds shall apply to procurement of goods and works:
Procurement of Goods and Works Procurement Method Threshold International Competitive Bidding for Works Above $1,000,000 International Competitive Bidding for Goods Above $500,000 National Competitive Bidding for Works Less than or equivalent to $1,000,000 National Competitive Bidding for Goods Less than or equivalent to $500,000 Shopping for Works Less than or equivalent to $100,000 Shopping for Goods Less than or equivalent to $100,000 Other methods of procurement approved for None envisaged use
2. ADB Prior or Post Review
2. The following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the Project.
15 General procurement notice, invitations to bid, and calls for expression of interest. Appendix 7 27
Procurement of Goods and Works Procurement Method Prior or Post Comments International Competitive Bidding (ICB) Works Prior All bidding documents ICB Goods Prior All bidding documents Limited International Bidding Prior (if any) National Competitive Bidding (NCB) Works Prior All bidding documents NCB Goods Prior All bidding documents Shopping for Works Post All bidding documents Shopping for Goods Post All bidding documents Direct Contracting (if any)
Recruitment of Consulting Firms Quality and Cost-Based Selection (QCBS) Prior Quality-Based Selection Prior Based on full technical proposals for supervision and design consultancy services Other selection methods: Consultants’ Prior Qualifications Selection (CQS), Least Cost Selection (LCS), Fixed Budget Selection (FBS), and Single Source Selection (SSS) Recruitment of Individual Consultants Individual Consultants Prior Based on curriculum vitae
3. Eighteen-Month Procurement Plan
3. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months. a. Goods and Works Contracts Estimated to Cost More Than $1 million General Contract Procurement Prequalification Advertisement Comments Description Value a Method Of Bidders Date ($ million) (yes or no) (quarter/year) Gegharkunik ICB No January 2009 One bid Link 1: 7.0 km 0.920 document: Link 2: 17.9 km 2.689 6 packages Link 3: 8.7 km 1.879 (Bid 1) Link 6: 4.9 km 0.900 Link 7: 5.8 km 1.253 Link 9: 9.3 km 2.009 Total: 53.5 km Total: 9.650 Gegharkunik ICB No January 2008 One bid Link 10: 12.1 km 1.591 document: Link 11: 3.0 km 0.446 4 packages Link 12: 5.3 km 0.947 (Bid 2) Link 13: 2.6 km 0.562 Total: 23.0 km Total: 3.546 28 Appendix 7
General Contract Procurement Prequalification Advertisement Comments Description Value a Method Of Bidders Date ($ million) (yes or no) (quarter/year) Kotayk ICB No January 2009 One bid Link 14: 10.2 km 1.150 document: Link 15: 13.0 km 2.322 7 packages Link 16: 5.3 km 0.947 (Bid 3) Link 24: 8.0 km 1.232 Link 25: 8.0 km 0.901 Link 26: 8.5 km 1.518 Link 27: 9.1 km 1.196 Total: 62.1 km Total: 9.266 Ararat ICB No January 2008 One bid Link 17: 12.4 km 1.397 document: Link 20: 2.9 km 0.750 6 packages Link 19: 8.5 km 0.958 (Bid 4) Link 18: 4.2 km 0.326 Link 21: 9.2 km 1.037
Armavir Link 30: 20.2km 2.285 Total: 57.4 km Total: 6.753 Ararat ICB No January 2008 One bid Link 23: 26.8 km 5.789 document: 1 package (Bid 5) a Include 20% value added tax. ICB = international competitive bidding, km = kilometer. b. Consulting Services Contracts Estimated to Cost More Than $100,000 4. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.
General Contract Recruitment Advertisement International Comments Description Value Method a Date or National (quarter/year) Assignment Subproject $1.4 million QCBS Q2 2007 International Surveys and Preparation detailed design and (2007 and 2008) Construction are included. Supervision ADB approved advance contracting and retroactive financing.b Auditing $100,000 QCBS or Q4 2008 International or CQS Q4 2009 national Q4 2010 Q4 2011 ADB = Asian Development Bank, a CQS = consultants’ qualifications selection, Q = quarter, QCBS = quality and cost-based selection. b The Government asked ADB to carry out selection of the consultants. Once selected by ADB, the Government will negotiate with the selected consultants to finalize the consulting contracts and will retain the responsibility to supervise the consultants. Appendix 7 29
c. Goods and Works Contracts Estimated to Cost Less than $1 million and Consulting Services Contracts Less than $100,000
5. The following table lists smaller value goods, works, and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.
General Value of Number of Procurement/ Comments Description Contracts Contracts Recruitment (cumulative) Method Software and $100,000 1 Shopping, Hardware Goods
C. Indicative List of Packages Required Under the Project
6. The following table provides an indicative list of all procurement (goods, works, and consulting services) over the project implementation period.
General Estimated Estimated Procurement Domestic Comments Description Value Number of Method Preference (cumulative) Contracts Applicable Goods $100,000 1 Shopping Not Applicable Works $35.00 million 5 ICB Applicable
General Estimated Estimated Recruitment Type of Comments Description Value Number of Method Proposal (cumulative) Contracts Consulting $1.40 million 1 QCBS Full International Services and national (Subproject consultants Preparation and Construction Supervision)
Consulting $0.10 million 1 QCBS or Biodata International Services CQS and/or (Auditing) national consultants ICB = international competitive bidding, QCBS = quality and cost-based selection. 30 Appendix 8
OUTLINE TERMS OF REFERENCE FOR CONSULTANTS FOR CONSTRUCTION SUPERVISION AND SUBPROJECT PREPARATION
A. Introduction
1. Facing ongoing globalization, Armenia has progressively made efforts to strengthen the interlinkage between its economy and other economies. The transport sector, particularly the road subsector, has increasingly played an important role in this process. As the predominant transport mode, road transport has supported the national economy and population by serving 98% of passenger traffic and 66% of freight traffic.1
2. To address the issue of inefficient infrastructure as one of the main causes of poverty, the Government of Armenia (the Government) has set rural infrastructure development as the cornerstone of Poverty Reduction Strategy Paper. Thus, the Government has developed rural infrastructure development programs with the main purpose of reducing rural poverty. In the road sector, the Government developed, with assistance from the World Bank (2004), a Lifeline Road Network Program (LRNP) which will improve access of rural communities to the national highway system in the most optimal manner. LRNP targets 784 high priority rural roads (secondary and local roads) totaling about 2,700 kilometers (km).
3. Under the small-scale technical assistance (SSTA) for preparing the Project,2 the overall cost of the LRNP has been preliminarily updated and has been estimated at $300 million. MCC has committed to provide $67 million for the rehabilitation of rural roads totaling about 940 km, while the Government is expected to budget nearly $50 million equivalent for the improvement of rural roads totaling 532 km. Under SSTA, social, poverty, resettlement, and environmental assessments were completed for 24 subprojects identified for Asian Development Bank (ADB) financing, based on the selection criteria and approval process for subprojects developed for the Project, which is attached to this Appendix.
4. The Government has requested the ADB to provide $30.6 million to upgrade rural roads adding to about 220 km. These interventions will complete the improvement of about 60% of the LRNP by 2011. In response to ADB’s resource mobilization consultations, Japan Bank for International Cooperation (JBIC) is processing a loan of about $50 million equivalent by using
1 The major part of the road network traverses mountainous terrain and altitudes frequently exceed 1,500 meters (m) above sea level. Steep gradients, deep cuttings, and high embankments are common in the mountainous areas, and landslides occur frequently. Furthermore, the severe winter weather requires extensive efforts to maintain access. In many areas of the road network, high intensity rainfall and poor road drainage cause traffic problems and road infrastructure damage. In addition, the extreme climate causes negative impact on the behavior of road pavements, particularly as a result of the action of freezing and thawing in the spring. In Armenia, 1.2 million people (about 38% of the total population) lives in rural areas, of which more than 45% are poor. Poverty has been reduced from 50.0% in 2000 to 29.8% in 2005. However, there has been a slower pace of poverty reduction in rural areas, mainly because of constrained economic activities, which are primarily attributable to mountainous topography and poor transport infrastructure. To respond to the challenges created by the road infrastructure deficiency, the Government’s main road subsector policy until 2015 mainly focuses on the rehabilitation and maintenance of the existing roads in line with the Poverty Reduction Strategy Paper (PRSP). The Government adopted three strategic goals for its road infrastructure development for the period of 2006-2015: (i) maintenance and improvement of the main road network to enhance the country’s business competitiveness and support the economy, (ii) improvement of the socio-economic condition of rural population through the rehabilitation of rural roads in support of the PRSP, and (iii) improvement of traffic safety. 2 The small-scale technical assistance was financed on a grant basis by ADB’s TA funding program. ADB. 2006.Technical Assistance to Armenia for Preparing the Rural Roads Rehabilitation Project I. Manila [TA 4895- ARM]. Appendix 8 31 the sector lending approach developed by ADB for the Project. If JBIC financing materializes, nearly 90% of the LRNP would be improved by 2011.
B. Objectives
5. The objectives of the consulting services is to ensure that (i) the Project is implemented in accordance with technical specifications of the design, quality requirements, and the implementation schedule; and (ii) feasibility studies on and detailed design of subprojects are undertaken in accordance with the requirements of the Government and ADB.
6. The Ministry of Transport and Communication (MOTC) is the Executing Agency (EA) and the Armenian Roads Directorate Non-Commercial State Organization (ARD) is the Implementing Agency (IA). The consultants will be recruited through the quality-and cost-based selection method by using the full technical proposal procedures in according to ADB’s Guidelines on the Use of the Consultants.3
C. Scope of Consulting Services
7. The consulting services will be provided by an international firm in association with a national firm(s) (the Consultant). The Consultant will be responsible for two parts– Part A: due diligence support to the preparation of subprojects, and Part B: construction supervision, monitoring and evaluation of the Project, totaling about 192 person months (international: 30 person months and national: 162 person months). For Part A, the consultant will conduct due diligence support to the preparation of subprojects including detailed design; bidding documents; and road safety, social, environmental and resettlement assessments. Part A will be undertaken over a period of 3 months in total (1.5 months for 2 times) and will require 4 person- months of international and 27 person-months of national inputs. For Part B, the consulting services will include: (i) preparation of the bid documents, bid evaluation, and contract award; (ii) construction supervision; (iii) monitoring and evaluation, focusing on social, environmental and poverty impacts; and (iv) assist in implementation of resettlement plan (if any). Under each service, the Consultant will provide on-the-job training to their counterpart staff. Part B will be carried out over about 2 years and will require 26 person-months of international and 135 person-months of national inputs. The consultants engaged under Part A will also conduct work under Part B. The person-months are tentative and may be adjusted by ARD on no-objection basis from ADB, as per the requirements of the Project.
8. The consultant’s detailed tasks include the following:
PART A: Preparation of Subprojects
(i) Review subprojects proposed by the Government for construction as against the selection criteria and approval process for subprojects. If subprojects are already included in the list of the subprojects identified or ADB financing, update the feasibility study completed under SSTA, based on the most recent information especially costs. If new subprojects, which are not included in the list of subprojects identified for ADB financing, are proposed, undertake the feasibility studies and prepare the feasibility reports;
3 ADB. 2007. Guidelines on the Use of Consultants by ADB and Its Borrowers. Manila 32 Appendix 8
(ii) Prepare detailed design and bidding documents;4 and (iii) If subprojects are included in the list of subprojects identified for ADB financing, prepare an initial environmental examination (IEE) and environmental management plan (EMP) for each subproject, based on the summary initial environmental examination (SIEE). If new subprojects, which are not included in the list of subprojects identified for ADB financing, are proposed, undertake social, poverty, resettlement, and environmental assessments and prepare assessment reports. Prepare an IEE and EMP for each subproject; and a resettlement plan (RP) and an internally displace persons and refugees development plan (IDPRP), if necessary.
PART B: Construction Supervision (including Monitoring and Evaluation)
(i) Preparation of the bid documents, bid evaluation, and contract award; (ii) Assist ARD in reviewing and approving contractors’ design documents and any variations from the original design documents during implementation, and instruct the contractors to ensure that all data are provided for setting out the works; (iii) Identify areas where expansive soil conditions exist and propose mitigation measures; (iv) Prepare a manual for project implementation; (v) Assist ARD with all procurement processes under the Project, as necessary; (vi) Assist ARD in processing contractors’ applications for subcontracting parts of the works, adjusting ambiguities and discrepancies in contract documents, and settling disputes with contractors; (vii) Assist ARD in reviewing and approving the contractors, key personnel, construction programs, supply of materials, and sources of materials; (viii) Monitor the progress of the works against the program targets and advise ARD on measures to be taken to improve progress and quality; and help ARD review contractors’ proposals for contract variations, evaluate such variations, determine rates of works, order day-works and quality, and decide on alternatives; (ix) Assist ARD in preparing and issuing payment certificates and certify completion of works in part or as a whole upon completion of the rehabilitation works; (x) Assist ARD in day–to–day supervising the execution and quality of the rehabilitation works with regard to workmanship and compliance with specifications; supervise and perform tests on materials and/or works, and advise on approval or disapproval of the contractors’ plant and equipment; and propose, if required, the uncovering of completed rehabilitation or maintenance works, and the removal and substitution of inferior materials and/or works; (xi) Help ARD examine the contractors’ accounts, invoices, claims, and other statements for errors and compliance with the contract, and if required, suggest and make corrections; (xii) Carry out international roughness index measurements on the rehabilitated road sections; (xiii) Carry out environmental management, monitoring and training activities, in accordance with the Initial Environmental Examination (IEE) of the Project; and
4 As for the subprojects identified for implementation in 2008, surveys, preliminary design, and bid document preparation will be completed under the SSTA in 2007. Appendix 8 33
(xiv) Help ARD in developing a project performance monitoring system (PPMS) that focuses on assessing the socioeconomic and environmental impacts of the Project. Specifically, assist and advise ARD in (a) developing project performance indicators and targets; (b) establishing a set of baseline data, against which the project impacts will be reassessed at project completion, and after 3 years after project completion; (c) assessing the socioeconomic impacts of the Project on potential beneficiaries through selective household surveys and participatory research methods; (d) assessing environmental sustainability of the Project; and; (e) conducting training in operational social research methods and building ARD capacity on performing management and impact assessment. The national consultants will assist the international consultants in household surveys and participatory research. Three surveys will be carried out (baseline survey at the start of the Project, and two follow-up surveys around the midterm review and at the end of the Project). The final survey will be carried out after project completion. Survey results will be documented in quarterly progress reports.
9. The Team Leader, Civil Engineer, must have more than 15 years of experience in construction supervision and administration of major road construction and contract administration according to internationally recognized contract management practices (FIDIC Conditions of Contract or equivalent). The pavement/materials engineer must have experience in dealing with pavements in the extreme cold climate, especially the action of freezing and thawing in the spring. The geotechnical engineer must have experience in dealing with expansive and unstable soil conditions in road construction, while the structural/bridge engineer (civil engineer) must have experience in construction of bridges and related structures. Quality control specialists must be experienced in quality assurance for the road construction projects according to internationally recognized technical specifications (American Association of State Highway and Transport Officials [AASHTO] or equivalent). The road safety specialist must have experience in road safety facility planning, safety audits, and addressing vehicle overloading problems. The national consultants should be experienced and qualified in road design and construction, geotechnical surveys, bridge and drainage design and construction, materials engineering management and plant management, and road safety.
10. The consultant’s team under Part A and Part B will include the following experts:
(i) International (30 person-months), comprising: (a) Team Leader (civil engineer) (Part A: 3 person-months and Part B: 14 person-months, totaling 17 person-months) (b) Pavement/materials engineer (Part B: 12 person-months) (c) Road safety (Part A: 1 person-month)
(ii) National (162 person-months), comprising: (a) Deputy team leader/road engineer 1 (Part A: 3 person–months and Part B: 35 person–months, totaling 38 person–months) (b) Road engineer 2 (Part B: 14 person-months) (c) Structural/bridge engineer (civil engineer) (Part A: 3 person–months and Part B: 12 person-months, totaling 15 person–months) (d) Pavement/materials engineer 1 (Part A: 3 person–months and Part B: 12 person-months, totaling 15 person–months) (e) Pavement/materials engineer 2 (Part B: 15 person-months) (f) Soil/geotechnical engineer (Part B: 15 person-months) 34 Appendix 8
(g) Hydraulics and drainage engineer (Part A: 3 person–months and Part B: 12 person-months, totaling 15 person–months) (h) Road safety (Part A: 2 person–months and Part B: 2 person-months, totaling 4 person–months) (i) Quality control specialist 1 (Part B: 7 person-months) (j) Quality control specialist 2 (Part B: 7 person-months) (k) Transport economist (Part A: 2 person–months and Part B: 1 person- months, totaling 3 person–months) (l) Environmental specialist (Part A: 3 person–months and Part B: 2 person- months, totaling 5 person–months) (m) Social/resettlement specialist (Part A: 3 person–months and Part B: 2 person-months, totaling 5 person–months) (n) Laboratory and field technicians (Part A: 2 person–months and Part B: 2 person-months, totaling 4 person–months)
D. Implementation Arrangements
11. ARD will be the Implementing Agency (IA) responsible for implementing the work, while MOTC will be the Executing Agency (EA) responsible for the overall management. The project implementation unit in ARD will serve as the liaison between MOTC and the contractor, and will be responsible for overall project management with assistance from the construction supervision consultant.
12. ARD will select and engage the consultant in accordance with ADB’s Guidelines on the Use of Consultants,5 2007 amended from time to time, and using the quality- and cost-based selection (QCBS) method by using the full technical proposals procedures. The Government requested ADB to carry out the selection of the consultants, as it is not familiar with ADB procedures. Once selected by ADB, the Government will negotiate with the selected consultants to finalize the consulting contracts and will retain the responsibility to supervise the consultants.
13. ARD will provide the following counterpart facilities to the consultant: (i) administrative assistance in obtaining visas, customs clearances, and other administrative formalities and permits required by the international consultants to perform their duties; (ii) all relevant reports and studies relating to the assignment; (iii) appropriate and qualified counterpart staff; and (iv) suitable office accommodation on sites and in Yerevan.
E. Reporting Requirements
14. The consultant will provide all required services to enable MOTC to comply with obligations under the Loan Agreement, including
For Part A: Preparation of Subprojects (i) Preparing the detailed engineering designs; and (ii) If subprojects are already included in the list of the subprojects identified or ADB financing, update the feasibility study completed under SSTA, based on the most recent information especially costs. If new subprojects, which are not included in the list of subprojects identified for ADB financing, are proposed, prepare (a) feasibility study reports, (b) the IEEs and EMPs for the subprojects, and (c) the RP and IDRDP, if necessary.
5 ADB. 2007. Guidelines on the Use of Consultants by ADB and Its Borrowers. Manila. Appendix 8 35
16. All reports under Part A will be submitted to ADB in 3 copies in English and MOTC/ARD in 3 copies in English and 3 copies in Armenian language, including 3 CD ROMs in English for ADB and 3 sets of CDs for ARD (3 each in English and Armenian language).
For Part B: Construction Supervision (including Monitoring and Evaluation)
(i) Helping prepare (a) quarterly progress reports and financial status reports, and (b) a project completion report (final report) on the project performance, economic, socioeconomic and environmental impacts on the Project; (ii) Preparing interim and final payment certificates; (iii) Providing ARD with technical and engineering assistance required; (iv) Keeping accurate and detailed records of all works done in the construction phase of the Project and reporting such in the required progress reports; (v) Keeping records of all payments approved and reporting such in the regular progress reports; (vi) Ensuring that progress reports contain complete information on (a) description of implementation activities, (b) progress charts, and (c) expenditure records; and (vii) Assisting ARD to prepare reports on the monitoring of project performance and socioeconomic and environmental impacts as required.
15. The progress reports and the project completion report (final report) will be submitted to ADB in 3 copies in English and ARD in 3 copies in English and 3 copies in Armenian language, including 3 CD ROMs in English for ADB and 3 sets of CD ROMs for ARD (3 each in English and Armenian language).
COST ESTIMATES AND FINANCING PLAN ($'000)
Total Item Cost
1. Consultants a. Remuneration and Per Diem i. International Consultants 600.0 ii. National Consultants 239.0 b. International and Local Travel 50.0 c. Reports and Communications 15.0 2. Surveys 350.0 3. Miscellaneous Administration and Support Costs a 50.0 4. Contingencies 96.0 Total 1,400.0 Source: Asian Development Bank estimates. a Includes training. 36 Appendix 8
Attachment to Appendix 8
SELECTION CRITERIA AND APPROVAL PROCESS FOR SUBPROJECTS
I. Subproject Selection Criteria
6. Each subproject must meet the following criteria:
(i) the subproject falls within the scope of the Lifeline Roads Network Program (LRNP), and is considered of high priority under LRNP, or is part of the main highway system (interstate), rehabilitation of which will support the objectives of the LRNP;
(ii) the subproject connects rural communities with a total of more than 500 people per road and significant economic activities to the primary road network and/or to regional commercial centers (including those areas containing schools, hospitals, and other social service delivery institutions);
(iii) the subproject is technically feasible and demonstrates, at a worst case scenario, a minimum rate of economic return of 12%;
(iv) the subproject focuses on rehabilitation along the existing road and rehabilitation work will be conducted mainly within the current right-of-way;
(v) the subproject is not a category A project6 under ADB’s Environmental Policy and/or Involuntary Resettlement Policy;
(vi) an environmental screening has been conducted for the subproject and an initial environmental examination (IEE) and environmental management plan (EMP) have been prepared for the subproject in accordance with the Environmental Assessment and Review Framework;
(vii) a Resettlement Plan (RP), if required, has been prepared for the subproject in accordance with the Resettlement Framework;
(viii) an Internally Displaced Persons and Refugees Development Plan (IDPRDP), if required, has been prepared in accordance with the Internally Displaced Persons and Refugees Development Framework (IDPRDF);
(ix) an Initial Poverty and Social Assessment has been prepared;
(x) a road safety audit has been prepared and necessary road safety mitigation measures have been incorporated into the proposed subproject design; and
(xi) all required governmental approvals have been obtained.
6 Projects with potential for significant adverse environmental impacts. An environmental impact assessment is required to address significant impacts. Appendix 8 37
II. Project Approval Procedure
7. All subprojects must comply with Asian Development Bank (ADB) policies and guidance, and satisfy ADB’s procedures for subproject preparation, including the technical, operational, environmental, social, and resettlement dimensions. In respect to the sample subprojects reviewed under the small-scale technical assistance, these requirements were met during project preparation. For additional subprojects, the requirement will be met during project implementation.
8. Before starting procurement actions for the additional subprojects for inclusion in the second annual batch, the Armenian Roads Directorate Non-Commercial State Organization (ARD), the Implementing Agency, will submit to ADB for approval, a report providing details of compliance with the selection criteria (para. 6) of each newly proposed subproject in the batch. The approval process for each batch of additional subprojects will be as follows:
(i) with the assistance of subproject preparation and project supervision consultants, ARD prepares a consolidated report indicating the compliance of each proposed subproject with the selection criteria, including an overall IEE for all subprojects, which will focus on any environmental problems identified and mitigation required, an initial poverty and social assessment, RP (if necessary), and IDPRDP (if necessary) for each subproject;
(ii) ARD screens the subprojects included in the report and refines the report, as necessary, to meet ADB requirements; and prepares a summary checklist describing the eligibility, preparation status, and safeguard compliance of each subproject;
(iii) ARD submits the report and checklist to ADB for approval;
(iv) ADB approves the proposed subprojects, subject to any further modifications required, if ADB considers such modifications are necessary; and
(v) subject to addressing any modifications, as required, ARD proceeds with procurement for subprojects approved by ADB.
III. Monitoring During Implementation
9. ARD will adhere to ADB’s guidelines, policies, and other requirements during pre- construction through reviews of supporting documentation, and during project implementation; and monitor project impacts and contractor performance through specialists engaged to support the project management unit (PMU) and the subproject preparation and project supervision consultants.
10. Technical, economic, environmental, and social auditing will be conducted during subproject preparation and project implementation.
38 Appendix 9
FINANCIAL MANAGEMENT ASSESSMENT
1. Financial Management Assessment (FMA) has been conducted during the project processing in May 2007 to assess (i) the institutional capacity of the Armenia Roads Directorate Non–Commercial State Organization (ARD), which is the Implementing Agency (IA) for the Rural Road Sector Project (the Project); (ii) funds flow arrangements, staffing, accounting policies, and procedures; (iii) internal and external auditing arrangements; (iv) reporting and monitoring aspects; and (v) information systems.
2. ARD was given an independent legal entity status in January 2003. This provided ARD with an autonomy and more managerial discretion in allocating resources. ARD is under the Government’s monitoring and supervision procedures and the Ministry of Finance and Economy (MOFE) oversees financial performance and maintains fiduciary control of ARD. The Privatization Policy and Dividends Department (PPDD) of the MOFE oversees more than 60 of the largest state-owned enterprises and Non–Commercial State Organizations (NCSOs) including ARD in a decentralized environment.
3. ARD adopts quasi-accruals based accounting standards for salaries, business, and field travel allowances, while other small items are cash based. It follows the Armenia accounting system for NCSOs, which is assessed sufficient for the purpose of project accounting. For ARD cash expenses, a cash box is maintained in the accounting office with limited amounts as defined by the Armenian treasury law (maximum of Armenian Dram (AMD) 300,000, about $ 857 equivalent. The ARD accounting is managed using “1c: accounting 7.7” software that was installed in 2003 to automate its accounting system. “1c: accounting” is a very popular Russian accounting software that allows automating of all accounting components and widely used in Armenia.
4. It was assessed during the project processing that the audited financial statements for fiscal years 2003, 2004, and 2005 are generally of good quality and demonstrate good fiduciary management capability of the ARD. ARD’s financial activities are subject to mandatory audit by the Control Chamber of National Assembly. In addition, there are (i) an internal audit conducted by the Ministry of Transport and Communications (MOTC) for the use of budgetary appropriations from MOTC to ARD; and (ii) annual audit of the budget expenditures conducted by the Budget Expenditures Review Department of the MOFE. The current ARD audit arrangements, including external government audit and Control Chamber auditing, demonstrate an adequate internal control system and generally meet the Asian Development Bank (ADB) audit requirements. A few seminars on the ADB financial due diligence requirements, especially the audit requirement, were given to the IA during the project preparation.
5. ARD has sufficient financial management capability under the Project because of: (i) extensive experience of ARD in implementing two World Bank-financed projects; and (ii) good quality of audit reports issued by project auditors during the last few years.
6. Although there are no significant weaknesses identified for the Project at present, a potential weakness may exist because it has not implemented any ADB projects. To minimize this risk, ADB provided ARD with a special session on procurement and consulting services in March 2007 in conjunction with the Seminar on ADB operations held in Yerevan. Furthermore, ARD accounting team has been given training sessions on ADB’s loan disbursement procedures during project processing. Additional training sessions/seminars to further strengthen financial management under ADB-financed projects will be given to the ARD Appendix 9 39 accounting staff during project implementation. Furthermore, to ensure sound financial management, international independent auditors will be recruited during project implementation.
7. The proceeds of the loan would be disbursed in accordance with ADB’s Loan Disbursement Handbook, 1 as amended from time to time. To facilitate the project implementation and reduce cash flow difficulties in pre-financing project expenditures, the disbursement procedures under the Project envisages advance disbursement through imprest fund procedures. The imprest account will be set up at a commercial bank, acceptable to ADB, upon loan effectiveness and will be exclusively used to finance ADB’s share of eligible expenditures. The imprest account will be managed by ARD, the IA. The total advances to be financed through the imprest account will not exceed either 6 months of estimated expenditures or 10% of the loan amount, whichever is lower. For the large civil works contracts under the Project, direct payment procedures will apply. When the Government will initially fund eligible expenditure from its own resources, the reimbursement procedure will be used. To expedite funds flow and simplified documentation process, the statement of expenditure (SOE) procedure will be used for liquidation and replenishment of the imprest account and reimbursement of eligible expenditures not exceeding US$100,000 per individual contract. The payments in excess of SOE ceiling will be reimbursed, liquidated, or replenished based on full- supporting documentation process. Taking into account adequate financial management capacity of the ARD the use of Imprest Fund and SOE procedures are acceptable.
8. The Project funds will flow from: (i) the ADB Loan Account, either through the imprest account, which will be replenished, based on SOEs or full-supporting documents or by direct payment based on direct payment withdrawal applications, or reimbursement payments; and (ii) the Government, via the Special Account to be opened for the counterpart share, to be deposited by the Treasury Department, the MOFE, based on payment requests of ARD. A diagram showing fund flows is attached to this appendix.
1 ADB. 2007. Loan Disbursement Handbook. Manila 40 Appendix 9
ARM: Rural Road Sector Peoject Funds Flowchart
Submission of Withdrawal Applications after MOFE approval ADB
Reimbursement procedure
US$ Imprest Account (ARD) Ministry of Finance and Economy (MOFE) Armenia Roads Directorate (ARD)
Treasury, MOFE
ARD Special Account for counterpart funds in local currency
Imprest account Direct payment procedure procedure
Foreign contractor/ PMU staff Local contractor Consultants supplier/ consultant
Funds flow Documents flow Source: Asian Development Bank.
Appendix 10 41
OUTLINE TERMS OF REFERENCE FOR CONSULTANTS FOR TRANSPORT SECTOR DEVELOPMENT STRATEGY
A. Introduction
1. The Government of Armenia’s (the Government) transport sector strategy was prepared in 1997 with assistance from the World Bank. 1 In the last decade, international economic integration has gained speed increasingly. New technologies and expertise have emerged, and there has been a growing concern on risks associated with mobility improvement. Considering these, the Government finds a great need for the development of a new strategy in order to respond to transport demands effectively and address both positive and negative aspects of transport improvement, particularly the road subsector, which is the predominant transport mode in Armenia. Furthermore, since the road subsector has strong interlinkage with other transport modes, the development of a new overall transport sector strategy will support the road subsector effectively. Moreover, since the Project will be the Asian Development Bank (ADB’s) first intervention in the transport sector in Armenia, such a transport sector strategy will assist ADB in developing its partnership with the Government to implement necessary reforms, prioritized investment, and much needed capacity development for the transport sector, including institutional capacity development of the Executing Agency and the Implementing Agency of the Project.
2. Technical assistance (TA) will be provided to further improve transport sector performance so that it can make a sustainable contribution to the economic development and poverty reduction in Armenia, being faced with ongoing globalization, technological advancement, and risks associated with increasing mobility. The main purposes of the TA are to support both the development of a new transport sector strategy and enhancement of the institutional capacity of Ministry of Transport and Communications (MOTC) and Armenia Roads Directorate State Non-Commercial Organization (ARD). The TA will assess, in detail, all modes of transport, and identify strategic uses of resources for priority areas for sector development and operational needs for the next 10 years. The TA will equip the MOTC with a new transport sector strategy with a new vision and road map, which will be the Government’s key document guiding the policies and investments in the transport sector including transport facilitation for 2009–2019. Specifically, the TA will (i) develop a reform action plan, (ii) develop management information systems for MOTC and ARD, (iii) define a long-term transport sector investment plan, (iv) support international transport facilitation and logistic sector development, (v) provide a capacity building development plan in all aspects of the transport sector, and (vi) systematic resource mobilization for transport sector investments.
3. Under the TA, 54 person-months of consulting services (19 international and 35 national) will be provided through a consulting firm to help the Government in preparing a transport sector development strategy for 2009–2019. The consultants will be recruited through the quality-and cost-based selection method by using the simplified technical proposal procedures in accordance with ADB’s Guidelines on the Use of the Consultants (2007, as amended from time to time).2
1 World Bank. 1997. Republic of Armenia Transport Sector Review. Washington, DC. 2 ADB. 2007. Guidelines on the Use of Consultants by ADB and Its Borrowers. Manila. 42 Appendix 10
4. The international and national consultants will work closely with the MOTC, the Executing Agency for the TA, during the assignment. The international transport planner will be the team leader, and will be responsible for coordinating the work of the other consultants. An outline of the terms of reference for the consultants is given below.
B. Terms of Reference
5. The consultants will, but will not be limited to:
(i) Prepare a comprehensive and analytical review of the status of the transport sector3 in Armenia. The review will cover (a) the role of the transport sector in economic and social development of the country and in the region; (b) transport infrastructure and services; (c) transport demand (including freight and passenger traffic and domestic and regional transit traffic); (d) modal shares; (e) transport policies, legislation, and regulations; (f) transport financing and financial management capacity; (g) private sector development opportunities including public-private partnerships; (f) institutional structure and human resource capacity in the transport sector including the domestic construction industry and consulting services; (i) progress made for non-commercial state enterprises (NCSEs); (j) the cross-cross border transit agreements and international conventions; (k) the current use of information technology (IT) for the transport sector; (l) the transport construction industry including opportunities for leasing of transport construction equipment; (m) logistics sector; (n) the available sector reports and studies; (o) Government’s existing plans for development of roads, railways, airports, and urban transport (particularly road maintenance practices and plans); and (p) transport safety (especially road safety). Based on the assessment, the consultants will prepare a transport sector update;
(ii) Identify the long-term challenges and opportunities for the transport sector, taking into consideration the global and regional context, the geographic and demographic features of the country, the medium-term economic development prospects, the Government’s medium-term fiscal framework, the Poverty Reduction Strategy Paper, 4 the Transport Sector Review, 5 Government’s strategic goals for the road development and 2006–2008 3-year development and 2006 rehabilitation and maintenance work plan for the roads;6 and other development initiatives. 7 The consultants will assess the Government’s responses to the transport sector challenges and opportunities;
(iii) Review the Government’s initiatives and prepare recommendations for (a) improving the performance of NCSEs including an action plan, (b) separating regularity functions from commercial operations, (c) developing regulatory frameworks for private sector participation in the transport sector, (d) providing an enabling environment for private sector financing of transport infrastructure
3 Covers roads and road transport, railways and railway transport, airports and civil aviation, and urban transport. 4 The Republic of Armenia. 2003. Poverty Reduction Strategy Paper. Yerevan. 5 World Bank. 1997. Republic of Armenia Transport Sector Review. Washington, DC. 6 Republic of Armenia. 2005. Decision On Endorsement of the 2006-2008 Three-year Development and 2006 Rehabilitation and Maintenance Annual Work Plan of the Commonly Used State Roads of the Republic of Armenia. Yerevan. (No. 2412-N Dated 29 December 2005). 7 Such as World Bank. 2006. Armenian Railway Restructuring Project: Final Consultant Report. Washington, DC. Appendix 10 43
projects and services, (e) enhancing cross- border transport, (f) the domestic construction industry, and (g) the logistics sector;
(iv) Review the impact of sectoral and thematic issues affecting the transport sector, including, among others, operations and maintenance, design standards (particularly road design standards), overloading, safety and security, governance, environment, social aspects, HIV/AIDS, and anti-human trafficking. The consultants will review the ongoing activities in these areas and prepare recommendations for addressing these issues for the long-term horizon;
(v) Review regional transport links, and intermodal transport and trade facilitation opportunities and constraints, including the logistics sector. The consultants will prepare a priority investment plan and policy framework to maximize the opportunities of regional transport cooperation with Armenia’s neighboring countries and beyond.
(vi) Review transport financing and financial management capacity of MOTC and the management capacity of the ARD. Based on the review, recommend appropriate measures to improve human-resource capacity in the transport sector, including the development of management information and operation management systems for MOTC and ARD. The consultants will identify the capacity building needs of MOTC and ARD, and undertake and/or arrange necessary training as appropriate. They will also assist MOTC and ARD in developing the capacity for preparing transport sector development plans and road sector plans, respectively. The recommendations will include the development of the domestic consulting and construction industry including opportunities for equipment leasing and IT to meet future development needs of the transport sector effectively;
(vii) Conduct consultations on the development of the transport strategy including road maps for the transport sector as a whole and each subsector. The consultants will organize at least two consultation workshops, which will be attended by Government officials, transport operators, users, nongovernmental organizations, private sectors, and international development partners. The first workshop will be held in the initial stage of the consultants’ services to seek stakeholders’ views and suggestions. The second workshop will be held to discuss the draft transport sector strategy prepared by the consultants;
(viii) Prepare a long-term (2009–2019) transport sector development strategy for Armenia, based on the reviews and consultations. The transport sector strategy will, but will not to be limited to, (a) recommend the best ways to respond to the future sector challenges and opportunities including among others the development of the logistics sector and the domestic construction industry sector; (b) set the sector’s strategic agenda and development priorities; (c) recommend necessary reforms in transport policies, regulations, organizational structures, and procedures and standards (particularly road design standards); (d) recommend future plans for NCSEs and procedures for private sector participation; (e) develop appropriate criteria for selecting public investment projects in the sector; (f) propose a time-bound long-term program of action comprising a reform plan, an investment plan, a maintenance plan (particularly a 44 Appendix 10
long-term strategic road maintenance plan8), and a management and institutional development plan including management information systems for MOTC and ARD; and (g) specify the resources required for implementing the strategy including a prioritized investment program. The strategy should also address negative impacts of increased mobility such as HIV/AIDS and anti-human trafficking, vehicular emissions, and safety and security. The consultants will present the draft transport strategy at the second workshop. Based on comments received from workshop participants and the tripartite meeting, the consultants will finalize the transport sector development strategy for Armenia (2009–2019). A website will be developed for the strategy in such a way as to let development partners indicate interest in providing financial support to the action plans through the website.
C. Composition of Consultants
6. A team of consultants will comprise 7 international and 9 national consultants. The international consultants will consist of (i) transport planner (6 person-months), (ii) road engineer (3 person-months), (iii) urban transport specialist (3 person-moths), (iv) financial management and/or institutional specialist (3 person-months), (v) railway specialist (2 person-months), (vi) civil aviation specialist (1 person-months), and (vii) border control and logistic specialist (1 person-months). The international transport planner will serve as the team leader responsible for coordinating with other consultants and preparing the transport sector development strategy. The 11 national consultants will comprise (i) transport planner (6 person-months), (ii) road engineer (5 person-months), (iii) urban transport specialist (5 person-months), (iv) railway specialist (5 person-months), (v) civil aviation specialist (5 person-months), (vi) logistics specialist (2 person-months), (vii) communication/IT specialist (2 person-months), (viii) financial management specialist (2 person-months), (ix) social specialist (1 person-month), (x) environmental specialist (1 person-month), and (xi) website development specialist (1 person- months). Under the supervision of the international consultants, the national consultants will assist in (i) collecting data and reviewing documents and reports; (ii) analyzing information and data obtained in their respective areas; (iii) conducting consultations, including stakeholder workshops; (iv) providing inputs for the transport strategy; and (v) performing others tasks as needed including English translation of information.
D. Reporting Requirements
7. The consultants will be required to submit to the Government and ADB (i) an inception report within 4 weeks after the start of services; (ii) the draft transport strategy (2009–2019), including appendixes, within 22 weeks after the start of the services; and (iii) the final draft transport sector development strategy within 2 weeks after the receipt of comments on the draft document. The consultants will also be required to submit brief project progress reports to the Government and ADB each month during the services.
8. All reports and the transport strategy will be delivered in a format and substance satisfactory to the Government and ADB. The consultants will provide the Government with 10 copies (five sets each in English and Armenian) and three copies (English) to ADB. The main text of the strategy should not exceed 70 pages (A4 size, single-spaced). An electronic copy of the final transport strategy (in Word or Excel formats, and in compact disc) and the executive
8 The development of this plan needs close coordinate with the Millennium Challenge Corporation (MCC). The findings will be shared with MCC and others as appropriate. Appendix 10 45 summary (in PowerPoint) will be submitted to MOTC (in English and Armenia) and ADB (in English) at the end of the services.
COST ESTIMATES AND FINANCING PLAN ($'000)
Total Item Cost A. Asian Development Bank Financinga 1. Consultants a. Remuneration and Per Diem i. International Consultants 380.0 ii. National Consultants 53.0 b. International and Local Travel 42.0 c. Reports and Communications 5.0 2. Equipment b 30.0 3. Workshops 10.0 4. Training 5.0 5. Miscellaneous Administration and Support Costs c 10.0 6. Representative for Contract Negotiations 5.0 7. Contingencies 60.0 Subtotal (A) 600.0
B. Government Financing 1. Office Accommodation 100.0 2. Remuneration and Per Diem of Counterpart Staff 50.0 3. Administrative Support and Others 50.0 Subtotal (B) 200.0 Total 800.0 a Financed by the Asian Development Bank’s technical assistance funding program. b Equipment required for management information systems for MOTC and ARD, including photocopiers, fax machines, printers, plotters, and computers. c Include translation of high-priority international conventions to be selected by the consultants. Source: Asian Development Bank estimates. 46 Appendix 11
ECONOMIC ANALYSIS
1. Economic assessment of each of subprojects included in the Project has been performed based on expected benefits from the physical improvement. The benefits considered are (i) vehicle operating cost savings for passenger and freight traffic resulting from improvements to riding quality; (ii) generated traffic from the irrigated agriculture project financed by the Millennium Challenge Corporation (MCC), as the Project is located within the impact areas of the MCC’s irrigated agriculture project; 1 (iii) induced traffic; and (iv) time savings.
A. Basic Parameters
2. The parameter values for the HDM4 analysis are in Table A10.1.
Table A11.1: Typical Vehicle Base Data Item Passenger Car Pickup/Minibus Medium Truck Economic cost ($) 5,940 14,117 17,647 Fuel ($/liter) 0.98 0.98 0.59 Oil ($/liter) 3.92 3.92 3.92 Tire replacement ($ 56 71 112 Maintenance labor ($/hour) 4.20 4.20 5.60 Crew wages ($/hour) – 1.26 2.80 No. of passengers 2 10 – Passenger working time ($/hour) 1.00 1.00 – Passenger nonworking time ($/hour) 0.30 0.30 – Work-related trips (%) 40 40 – Annual km (’000 km) 23 30 40 Vehicle life years 15 8 12 km = kilometers. Source: Asian Development Bank estimates.
3. Generated and Induced Traffic. Combined generated and induced traffic have been assumed conservatively to be 20% of normal traffic. Generated and induced benefits are typically evaluated at 50% of normal traffic benefits—equivalent to a normal traffic increase of 10%.
4. International Roughness Index. Most of the subprojects are in very poor condition, with international roughness index (IRI) ranging from 9.2 meters per kilometer (m/km) to 20.2 m/km. Road rehabilitation work envisaged under the Rural Road Sector Project (the Project) will improve the IRIs to less than 4 m/km.
5. Construction Cost. Financial construction costs estimated for each subproject range from $6.0 million to $0.3 million and are shown in Appendix 5. Unit costs have been updated to current prices by the Armenian Roads Directorate Non-Commercial State Organization (ARD), based on the Government’s monthly price list for materials and on the most recent bid data in 2007. Economic costs have been estimated by excluding the value-added tax (20%) from the financial costs.
1 The Project is located within the MCC project areas of 5 (out of 21) irrigation schemes, with incremental increase in the irrigated areas totaling 12,600 hectares. Appendix 11 47
B. Traffic Analysis
6. Base Year Traffic Volume. Traffic counts were taken in November/December 2006 (Table A10.2). Table A11.2: Traffic Counts Subproject Length Traffic Count Location (km) Car Truck Bus Total Gegharkunik 1 Vardenis–Shatvan J. 7.0 1,041 123 45 1,209 2 Vardenis–Ghehamasar 17.9 1,223 200 141 1,564 3 M11–Geghakar 8.7 177 45 27 249 6 M11–Geghamakar 4.8 214 45 27 286 7 M11–Jaghacadzor 5.8 195 36 14 245 9 M14–Kutakan 9.3 209 95 59 363 10 M14–Semenovka 12.1 391 55 18 464 11 M11–Astkhadzor 3.0 182 36 18 236 12 M10–Tazagiugh 5.3 218 41 27 286 13 M10–Vardadzor 2.6 177 50 18 245 Kotayk 14 Abovyan–Nurnus 10.2 2,041 145 109 2,295 15 Piunik–Hankavan 13.0 227 45 18 290 16 Zoravzn–Aragiugh 5.3 436 86 18 540 Ararat 17 Bardzrashen–H8 12.4 192 48 36 276 18 Aygezard–M2 4.2 300 30 30 360 19 Kaghtsrashen–Artashat 8.5 370 20 20 410 20 Getazat–H9 2.9 144 36 24 204 21 Geghanist–Nizami 9.2 1,200 80 100 1,380 23 Urtsadzor–M2 26.8 640 32 80 752 Kotayk 24 Yerevan–Yeghvard 8.0 550 125 50 725 25 Bujakan–Saralandj 8.0 480 95 20 595 26 Zovuni–Mrgashen 8.5 450 75 10 535 27 Mayakovski–H3 9.1 310 50 60 420 Armavir 30 Margara–Armavir 20.2 750 55 35 840 Total 222.8 Source: Asian Development Bank estimates.
7. Real gross domestic product (GDP) growth rates for 2008–2009 are estimated at 6%.2 Traffic growth rate is conservatively assumed to be 6% throughout the evaluation period.
2 International Monetary Fund. 2006. Republic of Armenia: Second Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility and Request for Waiver of Performance Criterion. Washington, DC (Staff Report and Press Release on the Executive Board Consideration). 48 Appendix 11
C. Economic Analysis
8. Economic Internal Rate of Return and Net Present Value. The economic internal rate of return (EIRR) and the economic net present value (NPV) (at a discount rate of 12%) were calculated by comparing the with- and without-project scenarios for a 20-year period of operation. For the without-project case, a continued worsening of surface condition is calculated within the Highway Development and Management Model 4 (HDM4) down to the standard maximum IRI values by pavement type. Without the Project, the deteriorated state of the roads will result in continued high transport costs for the towns/villages and rural areas they serve, providing a disincentive to marketing of local produce, communication with other areas, and use of newer vehicles. With the Project and other associated rural road projects, the accessibility of rural areas will be transformed, providing all-weather access, much faster travel, and lower operating costs. Economic benefits accrue in the form of lower vehicle operating costs and road user time savings. Appropriate seasonal adjustments were made to the traffic counts, based on an assessment of the local situations. 9. The economic cost of the Project comprises the resource cost of physical construction and of an overlay, where required, during the analysis period. There is no land acquisition cost, as all work will be within the existing right-of-way. The total economic cost for 222.8 km is estimated at $29.2 million by excluding the value-added tax. The combined EIRR is 43.2%, while the NPV for the Project is estimated at $83.0 million. Table A11.3: Construction Cost and Economic Analysis Results Economic Length Cost 2006 Subproject Location (km) ($'000) IRI AADT EIRR Gegharkunik 1 Vardenis–Shatvan J. 7.0 767 9.4 1,511 46.3 2 Vardenis–Ghehamasar 17.9 2,241 9.2 520 22.6 3 M11–Geghakar 8.7 1,566 18.1 311 25.1 6 M11–Geghamakar 4.8 750 15.5 358 20.9 7 M11–Jaghacadzor 5.8 1,044 18.8 306 19.2 9 M14–Kutakan 9.3 1,674 17.8 454 29.3 10 M14–Semenovka 12.1 1,326 10.7 580 23.2 11 M11–Astkhadzor 3.0 372 12.3 295 14.5 12 M10–Tazagiugh 5.3 789 14.1 358 16.5 13 M10–Vardadzor 2.6 468 20.2 306 21.7 Kotayk 14 Abovyan–Nurnus 10.2 958 10.1 2,869 106.1 15 Piunik–Hankavan 13.0 1,935 14.2 363 15.9 16 Zoravzn–Aragiugh 5.3 789 11.6 675 22.5 Ararat 17 Bardzrashen–H8 12.4 1,164 11.4 345 29.9 18 Aygezard–M2 4.2 625 14.8 450 26.5 19 Kaghtsrashen–Artashat 8.5 798 10.8 513 28.7 20 Getazat–H9 2.9 272 10.4 255 19.7 21 Geghanist–Nizami 9.2 864 10.6 1,725 82.2 23 Urtsadzor–M2 26.8 4,824 17.4 940 73.2 Appendix 11 49
Economic Length Cost 2006 Subproject Location (km) ($'000) IRI AADT EIRR Kotayk 24 Yerevan–Yeghvard 8.0 1,027 11.1 906 41.9 25 Bujakan–Saralandj 8.0 751 10.7 744 38.5 26 Zovuni–Mrgashen 8.5 1,265 14.6 669 32.0 27 Mayakovski–H3 9.1 997 10.6 525 32.3 Armavir 30 Margara–Armavir 20.2 1,904 11.1 1,049 57.0 Overall Project 222.8 29,170 43.2 AADT=annual average daily traffic, H = Highway (Secondary Road), IRI = International Roughness Index, km = kilometers, L = Link, M = Magisterial Road (Main Highway). Source: Asian Development Bank estimates.
10. The cash flows of the overall Project are shown in Table A10.4.
Table A11.4: Cash Flow Analysis of the Overall Project Year Capital Cost VOC Time Net Benefits 2008 13.41 0.00 0.00 (13.94) 2009 15.75 4.10 1.27 (11.23) 2010 0.00 8.04 2.02 10.06 2011 0.00 9.50 2.41 11.92 2012 0.00 11.24 2.87 14.11 2013 0.00 12.70 3.28 15.98 2014 0.00 13.80 3.61 17.41 2015 0.00 14.86 3.92 18.78 2016 0.00 15.88 4.23 20.12 2017 0.00 16.85 4.53 21.38 2018 0.00 17.78 4.81 22.60 2019 1.33 18.71 5.10 22.49 2020 0.13 19.70 5.41 24.98 2021 3.41 20.69 5.73 22.98 2022 5.87 22.01 6.07 22.19 2023 1.41 23.69 6.44 28.71 2024 0.57 25.03 6.83 31.29 2025 1.29 26.36 7.23 32.30 2026 1.33 27.75 7.66 34.07 2027 1.29 29.52 8.14 36.32 2028 2.25 31.31 8.63 37.69 2029 2.90 16.29 3.51 16.90 Total: 50.94 385.81 103.70 437.11 ( ) = negative, VOC = vehicle operating cost. Source: Asian Development Bank estimates.
11. Sensitivity Analysis/Switching Values. The impact of a cost increase of 20%, a benefits decrease of 20%, and a combined cost increase and benefit decrease of 20% on the project EIRR and NPV are shown in Table A10.5. The economics of the Project are highly robust, as illustrated by the switching values which would reduce the NPV to zero (an EIRR of 50 Appendix 11
12%): an increase of 332% in economic cost, a decrease of 77% in project benefits, or a simultaneous increase/decrease of 62%.
Table A11.5: Sensitivity Analysis and Switching Values
Item EIRR NPV (%) ($ million) Base Case 43.2 83.0 Cost +20% 37.3 78.0 Benefits –20% 36.2 61.4 Cost/Benefits +/–20% 31.2 56.4 Cost/ Cost Benefits Benefits Switching Valuesa 332% -77% +/-62% EIRR = economic internal rate of return, NPV = net present value. a To reduce ENPV to zero. Source: Asian Development Bank.
D. Impact on Poverty
12. Poverty incidence in the project regions averaged 33.3% in 2005. Table A10.6 shows the distribution analysis of project costs and benefits. The average traffic composition on the project roads is 81.1% cars, 11.8% buses, and 7.1% trucks. Vehicle owners will be the largest beneficiary group, but passenger and freight users are expected to gain considerable benefits, given the existing poor quality of the roads and the increase in speed and avoidance of damage to cargo (especially agriculture produce) after improvement. The proportion of the poor in passengers is assumed to be the average for the regions. In rural areas, many poor owners of old vehicles will benefit and 20% are estimated to be very poor. There are also many poor farmers amongst freight users—25% are assumed to be poor, based on the results of poverty assessments conducted during project processing. The poverty impact ratio of improving all the project roads is calculated at 0.28.
Table A10.6: Poverty Impact Analysis Financial Economic Economic Passenger Freight Vehicle Item PV PV Financial Users Users Owners Economy Net Benefits Road user benefits 0.0 107.6 107.6 26.9 16.1 64.5 0.0 0.0 Cost Capital (29.5) (24.6) 4.9 4.9 0.0 NPV (29.5) 83.0 112.5 26.9 16.1 64.5 4.9 0.0 Gains and losses 26.9 16.1 64.5 (24.6) 83.0 Proportion poor (%) 34.0 25.0 20.0 10.0 Net benefit of the poor 9.1 4.0 12.9 (2.5) 23.6 Poverty impact ratio 0.28 ( ) = negative, NPV = net present value, PV = present value. Source: Asian Development Bank estimates. Appendix 12 51
SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY
A. Linkages to the Country Poverty Analysis
Is the sector identified as a national Yes Is the sector identified as a national Yes priority in country poverty analysis? priority in country poverty partnership No agreement? No
Contribution of the sector or subsector to reduce poverty in Armenia: In Armenia, 1.2 million people (about 38% of the total population) live in rural areas, of which more than 45% are poor. Poverty has been reduced from 50.0% in 2000 to 29.8% in 2005. However, there has been a slower pace of poverty reduction in rural areas. This is mainly because of constrained economic activities—primarily attributable to mountainous topography and poor transport infrastructure—imposing high direct and indirect transport costs on the rural population.
Rural infrastructure development is the cornerstone of the Government’s Poverty Reduction Strategy Paper (PRSP). It has prepared rural infrastructure investment programs with the main purpose of reducing rural poverty. In the road sector, it developed a Lifeline Road Network Program (LRNP) with assistance from the World Bank in 2004 that will improve the access of rural communities to the national highway system in an optimal manner. The LRNP targets 784 high priority rural roads (secondary and local roads) totaling about 2,700 kilometers (km). Under the small-scale technical assistance for preparing the Rural Road Sector Project (the Project), the overall cost of the LRNP was preliminarily estimated at $300 million.
In 2006, the Millennium Challenge Corporation (MCC) of the United States signed an agreement with the Government to finance the rehabilitation of rural roads totaling about 943 km of the LLNP, with grant financing of about $67 million, while the Government has planned to rehabilitate rural roads adding up to about 532 km. In parallel, the Government has requested the Asian Development Bank (ADB) to consider financing the rehabilitation of high priority rural roads totaling about 220 km in Ararat, Armavir, Kotayk, and Gegharkunik regions. The Project is in line with the PRSP.
B. Poverty Analysis Targeting Classification: Targeted intervention (geographic poverty)
What type of poverty analysis is needed?
The Project is located in Ararat, Armavir, Kotayk, and Gegharkunik regions with a total population of nearly 1 million. Roughly 54% of the total rural population in Armenia lives in these four regions and about 61% (about 650,000) of the total population in the four regions live in rural areas. The incidence of poverty ranges from 30.9% to 34.5%, against the national average of 29.8% in 2005.
Poor road infrastructure has also led to economic losses and limited access to basic services. According to the World Bank,a about 40% of total survey participants replied that significant volumes of agriculture produce were lost during transportation, 18% responded that 40% was lost, and 24% stated that 30% was lost.
Poor road conditions in rural areas have constrained timely access to health and other social services, and access to schools and time spent on education. Bus services and/or road freight services in some rural areas have been reduced or stopped because operators try to avoid damages to their vehicles or perceive high costs of driving on very poor/poor roads.
The Project will rehabilitate high priority rural roads totaling about 220 km in Ararat, Armavir, Kotayk, and Gegharkunik regions, serving 71 communities with a total population of 127,000 (about 10% of the total rural population). It will improve the access of these communities to (i) the capital city and regional center through the main road network; and (ii) social service delivery institutions, markets, collection points for agriculture produce and diary products, agro- processing centers, and industrial processing areas. As a result, the Project will be able to offer communities new opportunities for industrial, agricultural (including small- and medium-sized agro–processing industries), and service sectors. The Project has been developed in close partnerships with the road program and agriculture programs being 52 Appendix 12 financed by MCC, Armenian Social Investment Fund (ASIF),b Armenian Small- and Medium-sized Enterprise Market Development Project financed by the United States Agency for International Development (USAID), National Program on the Response to HIV Epidemic (2007–2011) being implemented by the Government with assistance from the Joint United Nations Programme on HIV/AIDS (UNAIDS), and UNDP’s programs on anti-human trafficking.
The Project’s impact on poverty has been quantified by examining the share of total project net benefits that would accrue to the poor and the very poor. A distribution analysis conducted during project preparation indicates that the Project will yield a poverty impact ratio of 0.28. The high poverty impact ratio reflects a high incidence of poverty among direct beneficiaries and a substantial net transfer of resources from the economy as a whole to the project areas. Total net benefits accruing to the poor amount to about $24 million, of which the very poor will receive about $4 million. Some 32% of road users within the project areas are poor and 6% are classified very poor. Project benefits will accrue to about 40,500 poor beneficiaries, of whom roughly 7,000 are very poor.
The Project will target four regions where poverty incidence is worse than the national average. Thus, the Project is classified a geographically targeted intervention.
C. Participation Process
Is there a stakeholder analysis? Yes No
Is there a participation strategy? Yes No
As part of the project preparation, more than 15 consultations (covering both social and environmental aspects) were held with stakeholders, including directly affected people, representatives of local governments and the Council of Elderly, key persons in the communities. Issues and activities related to project implementation were discussed and concerns (especially road safety and increased exposure to communicable diseases and human trafficking) have been integrated in the project design. Stakeholder consultation and participation will continue throughout project implementation. Armenian Roads Directorate Non-Commercial State Organization (ARD), the Implementing Agency, will ensure that the Project is implemented with the active participation of all stakeholders, using participatory practices.
Consultations (social aspects) with key players in the country and road sector development as well as communities within the project areas were conducted during project preparation. Literature reviews on social and poverty analysis of the poverty situation in the project regions were also conducted. The key players involved in the consultations were the World Bank, MCC, Lincy Foundation, ASIF, PRSP secretariat, UNAIDS, and UNDP.
Six consultations (social aspects) were held with representatives of local government and the Council of Elderly (Avagani); key persons in the communities (school principals, teachers, and agronomists); and community members in the project areas (Varnenis in the Gegharkunik region; Barzdrashen and Arevshat in the Ararat region; and Numus, Dzoraghbiur, and Mayakovsky in the Kotayk region).
All stakeholders and project beneficiaries welcomed the initiatives and considered that the Project will have a significant positive impact on rural development. First, they consider that the roads are extremely important for agricultural activities, agro-processing business, and any other business in the communities. People also mentioned that the delivery of agricultural produce to domestic and international markets and the procurement of inputs for agricultural activities and agro-processing business will be more efficient with good roads. Improved rural road infrastructure will also reduce the transportation costs and damages to agriculture produce. As a result, prices of goods are expected to reduce and volumes of agriculture produce for sales will increase. The consultations have concluded that the Project will support improvement of the income-related Millennium Development Goals. Secondly, improved road infrastructure is an important component of social development and of the quality of rural life because it provides rural communities with enhanced access to social service delivery institutions including hospitals, clinics, and schools. The consultations have concluded that the Project will support improvement of the non income-related Millennium Development Goals.
In accordance with the Government’s requirements for externally funded projects,c a project governing council (PGC) will be established. The PGC will provide overall oversight and supervision for the Project. It comprises 11 members: (i) minister of the Ministry of Transport and Communications (MOTC), (ii) first deputy minister of MOTC, (iii) first deputy minister of finance and economy, (iv) first deputy minister of justice, (v) deputy minister of territorial administration, (v) five representatives from civil society, and (vi) head of the project management unit (PMU). Appendix 12 53
PGC meetings will be held at least quarterly, and the PMU will report and seek guidance from the PGC on major procurement issues and policy decisions. The PGC will provide a forum for coordinating activities among project beneficiaries.
D. Gender Development
Strategy to maximize impacts on women:
Women accounted for 53.8% of the total project survey respondents. The overall poverty rate for the project regions was 33.3%; 29.7% of women are poor. The extreme poverty rate for the project regions was 5.8%; 4.6% of the women are very poor. Therefore, women are slightly better off than the overall population in the project regions. The majority of women in the project areas are engaged in agriculture activities or small- and medium-sized agro-industries (including cottage agro-industries). Reduced travel time and more available transport services will help improve the lives of women and children, as improved road transport under the Project will enhance their access to the nearest markets and social service delivery institutions (such as schools, hospitals, and clinics) and increased employment opportunities. It is anticipated that greater road connectivity may have a direct and positive impact on less educated girls and women by promoting their access to more education and training opportunities.
During the project surveys, women considered that the roads are extremely important for agricultural activities, agro- processing business, and any other business in the communities. Secondly, they considered that improved road infrastructure is an important component of social development and of the quality of rural life because it provides rural communities with enhanced access to social service delivery institutions including hospitals, clinics, and schools.
Other concerns are that the Project will increase the potential of the spread of HIV/AIDS and other sexually transmitted infections because of the influx of construction workers and increased transport facilitation caused by the road improvements. Human trafficking of teenage girls and women is an additional risk related to increased road connectivity. These risks will be minimized and mitigated by maintaining close coordination and regular consultations with the National Program on the Response to HIV Epidemic (2007–2011) being implemented by the Government with assistance from UNAIDS and UNDP’s programs on anti-human trafficking to raise awareness and provide preventive measures for local communities (with a special focus on women), construction workers, and mobile population. Appropriate actions will be taken, if necessary.
In general, women as well as the remaining community members within the project areas will benefit from the Project. Thus, a specific gender strategy has not been prepared.
Has an output been prepared? Yes No a World Bank. 2004. Rural Infrastructure in Armenia: Addressing Gaps in Service Delivery. Washington, DC. b The Armenia Social Investment Fund (ASIF) supports community-driven development in Armenia to reduce non- income poverty in rural areas. The World Bank has so far completed ASIF I and II to finance 619 microprojects. Road improvement under the Project will improve rural communities’ access to major economic activities in the capital city and regional centers as well as local social service delivery institutions supported by the Government and ASIF activities. c Republic of Armenia. 1999. On the Activities of Project Implementation with the Proceeds of Loans and Grants Provided to the Republic of Armenia by Foreign States and International Lending Organizations. Yerevan. (Resolution No. 765)
54 Appendix 12
E. Social Safeguards and Other Social Risks
Item Significant/ Plan Required Not Significant/ Strategy to Address Issues None Full Significant The Project focuses on existing roads, so no resettlement Resettlement is expected. Yet, a resettlement framework has been Short Not significant developed as the Project’s approach is sector lending. None None
Significant The Project will reduce road transport costs for road Yes Affordability users, including the poor and the very poor, through Not significant savings in vehicle operating costs. These savings will be No passed on to the poor and the very poor through lower None freight rates and lower passenger fares and time savings, making road transport more affordable. Both passenger and freight transport services in the project areas will become more competitive as more passenger and freight transport service providers are expected to operate. As a result, more passenger and freight transport services will become cheaper.
Significant There are no significant labor issues. One of the Yes Labor objectives under the Project is to maximize benefit Not significant generation for the people of communities within the No project areas—especially the poor and the very poor, None women, and internally displaced persons and refugees (IDPRs)—by ensuring that all applicable labor laws and regulations are adhered to by all road contractors, and that local employment is promoted to the fullest. This does not require a specific plan but the following provision will be built into relevant documents and will be monitored under the project performance monitoring program.
Contracts will specifically refer to maximizing the use of local labor, require that legal wages be paid to workers, prohibit use of child labor for construction and maintenance, and ensure that wages paid to men and women are commensurate with the nature of work. A specific provision will be placed in bidding documents to note that compliance will be strictly monitored during project implementation.
Indigenous Significant There are no indigenous people living in the project areas, Yes Peoples so there is no indigenous peoples’ issue. Not significant No
None
Appendix 12 55
Item Significant/ Plan Required Not Significant/ Strategy to Address Issues None Other Risks Yes and/or Significant Road Safety Vulnerabilities No Not significant Project beneficiaries are concerned about an increase in road accidents because of increased vehicle speeds None induced by improved road infrastructure. Concern was expressed by both women and men about the risk to their children commuting to school along the roads. Pedestrian strips and other necessary road safety measures have been incorporated in the basic design of the roads. A road safety specialist to be engaged under the subproject preparation and project supervision will conduct roads safety audit of all the roads and will recommend all necessary road safety measures along all the roads.
Significant Internally Displaced Persons and Refugees Yes
Not significant The surveys conducted during project preparation found No that nearly 19,000 IDPRs live in the project areas, which None constitute about 15% of the total community population. Of the 19,000 IDPRs, about 18,000 persons are refugees, while the remainder is internally displaced persons. The Project will provide the IDPRs with improved access to markets, job opportunities, and basic social services. The IDPRs do not live near the road alignments, so there will be no negative impact on them during construction. Thus, the surveys have concluded that negative impacts on the IDPRs are found to be very limited. The IDPR development framework has been prepared, as ADB’s sector lending modality is adopted for the Project. Consulting services for subproject preparation and project supervision will review potential negative impacts on IDPRs, and prepare specific actions and development plans for them, if necessary.
Significant Increased Exposure to Communicable Diseases and Human Trafficking Yes Not significant There is a risk of increasing the infection rate of HIV/AIDS No None during the construction stage, when increases in construction trucks and equipment are expected. There is also a risk that lack of awareness of HIV/AIDS among construction workers and communities may make people living in the project areas (especially the poor, very poor, and IDPRs) vulnerable. Human trafficking of teenage girls and women is another related to increased road connectivity. These risks will be minimized and mitigated by maintaining close coordination and regular consultations with the National Program on the Response to HIV Epidemic (2007–2011) being implemented by the Government with assistance from UNAIDS (including the four project regions), and UNDP’s programs on anti- human trafficking to raise awareness and provide preventive measures for local communities (with a special focus on women), construction workers, and mobile populations. UNAIDS and UNDP’s programs have been assessed appropriate and comprehensive for the Armenian situation. Appropriate actions specific to the Project will be taken, if necessary. 56 Appendix 13
INTERNALLY DISPLACED PERSONS AND REFUGEES DEVELOPMENT FRAMEWORK
A. Internally Displaced Persons and Refugees Development Framework
1. The internally displaced persons and refugees development framework (IDPRDF) was prepared in line with the Asian Development Bank (ADB)’s Policy on Indigenous People1 and Operations Manual Section F3, May 2004, and policies and programs of the Government of Armenia (the Government), and will guide the preparation of internally displaced persons and refugees development plans (IDPRDPs), if necessary. The overall objectives of the IDPRDF are to ensure that (i) the Rural Road Sector Project (the Project) does not cause adverse social and cultural impacts on internally displaced persons and refugees (IDPRs); and (ii) it will provide IDPRs in the project area with additional opportunities to gain project benefits that are equal to, or greater than, that to the local people in the project area by ensuring that IDPRs participate fully in project planning and implementation.
B. Analysis of Internally Displaced Persons and Refugees in the Project Area
2. An initial social assessment of four sample subprojects was carried out during the small- scale technical assistance (SSTA).2 This included detailed socioeconomic evaluation of fifteen communities with a total population of about 25,820 persons (about 20% of the total people living within the project area) along four subprojects in Gegharknik (road link no. 2), Ararat (road link no. 17), and Kotayk (road link nos. 14 and 27). Six consultation meetings were held in these communities. An extensive research on the remaining project area was also conducted.
3. It was found during the initial social assessment that a total of about 19,000 IDPRs live in the project area, who constitute about 15% of the total community population. Of 19,000 persons, about 18,000 persons are refugees, while the remainder is internally displaced persons. The Project will have a range of social benefits, mostly associated with improvements in living standards of living and enhancement of general well-being of individual households and communities including IDPRs through improved access to job opportunities and social service delivery institutions by rehabilitating rural roads. In addition, there are no IDPRs living near the project roads. Thus, negative impacts on IDPRs are found to be very limited. However, since all communities in the project area were not surveyed during the project preparation and ADB’s sector lending modality was selected for the Project, it was concluded that a framework for IDPRs be prepared for the Project.
C. Mitigation and Development Strategy
4. The following are mitigation measures and development interventions found relevant to IDPRs, based on the results of the six community consultations:
(i) Resettlement plans have been and will be prepared to address the land acquisition and resettlement impact, if necessary. Socio-cultural background of IDPRs has been and will be taken into account to ensure that they are aware of
1 ADB. 1998. The Bank’s Policy on Indigenous Peoples. Manila. 2 The small-scale technical assistance was financed on a grant basis by ADB’s TA funding program. ADB. 2006. Technical Assistance to Armenia for Preparing the Rural Roads Rehabilitation Project I. Manila [TA 4895-ARM]. Appendix 13 57
project impacts and benefits, their rights, and entitlements as affected IDPRs, in a form and language and approach that they can understand.
(ii) Road safety designs will be covered under the Project.
(iii) The Project Management Unit (PMU) to be established under the Project will maintain regular consultations with the National Program on the Response to HIV Epidemic (2007–2011) being implemented by the Government with assistance from the Joint United Nations Programme on HIV/AIDS, and the United Nations Development Programme’s programs on anti-human trafficking. IDPRs are encouraged to join relevant programs.
(iv) Sustainable agriculture production programs have been financed by the Millennium Challenge Corporation, United States Agency for International Development, and other organizations in the project area. Such projects will improve agricultural production capability of IDPRs.
(v) Under the Project, there will be regular coordination between the PMU and the Armenia Social Investment Fund (ASIF) which is implementing community-driven development in Armenia to reduce non-income poverty in rural areas. Road improvement under the Project will improve rural communities’ access to major economic activities in the capital city and regional centers, as well as local social service delivery institutions supported by the ASIF initiatives. IDPRs are encouraged to use the local social service delivery institutions supported by ASIF.
D. Preparation of Internally Displaced Persons and Refugees Development Plans
5. Screening to establish basic characteristics and issues of IDPRs in the project area within the zone of influence of the project roads is the first step categorizing the impact and identifying approaches to address IDPRs issues.
6. An IDPRDP will be prepared for a subproject, when the impacts on IDPRs are found to be significant and such impacts negatively: (i) affect their rights of use and access to land and natural resources; (ii) change their socio-economic status; (iii) affect their cultural and communal integrity; (iv) affect their health, education, and livelihood and social security status; or (v) alter or undermine the recognition of their knowledge. The IDPRDP is an integral part of the project design which includes provisions for project implementation, monitoring, and evaluation.
7. If negative impacts are insignificant, specific actions for IDPRs can be incorporated within the Resettlement Plan (RP). This would ensure appropriate mitigation and benefits for IDPRs.
8. The Project will avoid any unnecessary distinction or inequalities between IDPRs and local population who live in the same locality. The IDPRDP is time-bound, with adequate budget for implementation. The IDPRDP is needed (i) to ensure that IDPRs are included in the development process; and (ii) to provide specific mechanisms for the concerns of IDPRs’ women to be identified and addressed through the subproject process. Activities include:
(i) Social and cultural analysis, including: (a) identification of significant negative and positive impacts on the IDPRs; (b) identification of the measures required to 58 Appendix 13
mitigate the negative impact; (c) identification of the types and levels of vulnerability that might limit the IDPRs’ ability to benefit from the Project; and (d) recommendation of measures to enhance benefits to IDPRs.
(ii) Preparation of IDPRDPs including specific strategies and activities, based on participatory community consultations.
(iii) Coordination with the Government, local organizations, and donor community (such as bilateral agencies or international nongovernment organizations) working on poverty reduction programs in the project area to allow possible integration of the project activities with existing social interventions.
(iv) Disclosure of IDPRDPs to affected communities and general public prior to submission to ADB for review and approval.
(v) Submission to ADB for review and approval prior to implementation.
9. The IDPRDPs will include: (i) Baseline data, (ii) Land tenure information, (iii) Local participation, (iv) Development or mitigation activities, (v) Institutional arrangement, (vi) Implementation schedule, (vii) Monitoring and evaluation, and (viii) Cost estimate and financing plan.
E. Institutional Arrangements
10. The Ministry of Transport and Communications (MOTC) is the Executing Agency for the Project, with reasonability for planning and implementation delegated to the Armenian Roads Directorate Non-Commercial State Organization (ARD). Under the Project, national social sector specialists will be engaged (together with engineers, economists, and environmental specialists) as part of the consulting services for subproject preparation and project supervision. Such national social sector specialists together with the relevant PMU staff will review the needs for IDPRDPs and will ensure the implementation of IDPRDPs, if necessary.
F. Budget
11. A budget of $9,200, including contingencies, has been allocated from the overall project cost for the engagements of national social sector specialists. This has been included in the costs of the consulting services for subproject preparation and project supervision, monitoring, and evaluation.
12. All IDPRDP preparation and implementation costs will be considered an integral part of Project cost and will be contributed by the Government. ARD is responsible for the timely allocation of the funds needed to implement the IDPRDPs.
Appendix 13 59
G. Implementation Schedule
13. Detailed design of the roads included in the first year rehabilitation program will be completed by the end of 2007. It is anticipated that construction contracts will start in May 2008. Thus, it is essential that IDPRDPs, if necessary, be prepared before the civil works so that appropriate actions and mitigating measures will put in place.
H. Monitoring and Supervision
14. The design and implementation of IDPRDPs will be monitored by the PMU regularly. A set of monitoring indicators will be finalized during the early stage of project implementation, if such IDPRDPs are necessary. Monitoring will involve the relevant PMU staff, relevant regional and local governments, and representatives from IDPRs within the project area. Representatives from IDPRs within the project area are encouraged to join the project governing council (PGC), comprising representatives from key stakeholders within and external to MOTC, which will provide overall oversight and supervision for the Project. PMU’s regular reports to ADB will include IDPRDPs, if such plans are necessary. An external monitoring team will also be engaged, if required. 60 Appendix 14
RESETTLEMENT FRAMEWORK
A. Introduction
1. To address the issue of inefficient infrastructure as one of the main causes of poverty, the Armenian Government (the Government) has set rural infrastructure development as the cornerstone of the Government’s Poverty Reduction Strategy Paper (PRSP). The Government has, thus, prepared rural infrastructure investment programs with the main purpose of reducing rural poverty. In the road sector, the Government developed, with assistance from the World Bank (2004), a Lifeline Road Network Program (LRNP) which will improve access of rural communities to the national highway system in the most optimal manner. LRNP targets 784 high priority rural roads (secondary and local roads) totaling about 2,700 kilometers (km).
2. Under the small-scale technical assistance (SSTA) for preparing the Project,1 the overall cost of the LRNP has been preliminarily updated and has been estimated at $300 million. Millennium Challenge Corporation has committed to provide $67 million for the rehabilitation of rural roads totaling about 940 km, while the Government is expected to budget nearly $50 million equivalent for improvement of rural roads totaling 532 km. The Government has requested the Asian Development Bank (ADB) to provide $30.6 million to the Rural Road Sector Project (the Project), comprising rural roads adding to about 220 km. These interventions will complete the improvement of about 60% of the LRNP by 2011.
3. During the project preparation, 24 subprojects have been selected for ADB financing. List of subprojects identified for ADB financing is attached. Final selection of subprojects will be completed during the project implementation and Resettlement Plans (RPs), if necessary, will be prepared when all technical parameters will be defined based on detailed design of subprojects to be prepared during project implementation.
4. The Resettlement Framework (RF) has been formulated to guide the preparation of RPs, if necessary, for subprojects. The RF defines the broad scope of the Project and outlines the policies, procedures and institutional requirements for parathion and implementation of subproject RPs, if necessary. The Project Management Unit (PMU) of the Armenian Roads Directorate Non-Commercial State Organization (ARD) will be responsible for conducting the social assessment and formulating RPs as per procedure outlined in this RF. The draft RPs will be disclosed to the affected people (APs) in local language and submitted to ADB for review and approval prior to awarding of civil works contracts for relevant subprojects. Compensation and other assistance will have to be paid to APs prior to commencement of construction activities.
B. Project Affected People
5. In accordance with ADB policy, APs include any person, household, firm, or private institution who, on account of changes resulted from the Project, or any of its subprojects, will have its: (i) standards of living adversely affected; (ii) right, title, or interest in any house, land (including residential, agricultural, nonagricultural, forest, salt-making, and/or grazing land), water resources or any other moveable or fixed assets acquired, possessed, restricted, or otherwise adversely affected, in full or in part, permanently or temporarily; and/or (iii) business,
1 The small-scale technical assistance was financed on a grant basis by ADB’s TA funding program. ADB. 2006. Technical Assistance to Armenia for Preparing the Rural Roads Rehabilitation Project I. Manila [TA 4895-ARM]. Appendix 14 61 occupation, place of work, residence, or habitat adversely affected, with or without displacement.
C. Resettlement Objectives and Principals
6. The overall objective of the Project, with respect to land acquisition and resettlement, is to ensure that all people affected by the Project and its subprojects are able to maintain and, preferably, improve their pre-project living standards and income-earning capacity through compensation for the loss of physical and nonphysical assets and, as required, other assistance and rehabilitation measures, if land acquisition and resettlement is assessed necessary. The following principles have been adopted for the Project to guide the compensation and entitlement policy.
(i) Acquisition of land and other assets and the relocation of the APs will be minimized as much as possible by exploring all possible options.
(ii) All APs are entitled to compensation at replacement cost for their lost assets, incomes, businesses, including temporary losses or impacts.
(iii) Rehabilitation assistance will be provided to severely affected people and other vulnerable groups to assist them to improve or at least restore their pre-project living standards, incomes, and productivity capacity.
(iv) Particular attention must be paid to the needs of the poorest people and vulnerable groups (such as refugees, elderly, households with many children, female headed households, disabled, and others). Appropriate assistance must be provided to them to help improve their socioeconomic status.
(v) APs that lose only part of their physical assets will not be left with a portion that will be inadequate to sustain their current standard of living. The minimum size of remaining land and structures will be agreed during the resettlement planning process.
(vi) Lack of legal title to affected assets will not bar the APs from entitlement to compensation and assistance to achieve the stated objectives of this RF.
(vii) As a priority, loss of agricultural land will be compensated with alternative land of equal size and productive capacity. If suitable replacement land is not available and/or at the “informed request” of the APs, compensation will be paid in cash at replacement value base on current market prices for agricultural land of the same category (or productive capacity) as the affected land.
(viii) Replacement land for agriculture, residential purposes, and businesses will be provided with secure tenure status. All fees, sales taxes, or other sub charges associated with transfer of land title will be waived.
(ix) Compensation for houses and other structures will be determined according to the replacement value for materials and labor to rebuild similar structures, at current market prices in the locality. In determining replacement costs, depreciation of assets and salvage value of materials will not be taken into account. 62 Appendix 14
(x) In case of the relocation of the APs, replacement houses and/or agricultural land will be located as close as possible to the assets that were lost, and at locations acceptable to the APs. Relocated APs will receive relocation and transition subsistence allowances.
(xi) Efforts shall be made to maintain, to the extent possible, the existing social and cultural institutions of the resettled people and host communities.
(xii) APs will be fully consulted and will participate in the preparation and implementation of RPs for each project. The comments and suggestions of the APs and communities will be taken into account during the design and implementation phases of resettlement activities.
(xiii) Adequate resources will be identified and committed during resettlement planning for the Project, including adequate budgetary support fully committed for the Project and made available to cover the costs of land acquisition, compensation, resettlement, and rehabilitation within the agreed implementation period for the Project; and adequate human resources for supervision, liaison, and monitoring of land acquisition, resettlement, and rehabilitation activities.
(xiv) Appropriate reporting, and monitoring and evaluation (M&E) mechanisms will be identified and set in place as part of resettlement management system. The M&E will be conducted by an independent monitoring agency.
(xv) Detailed RPs will be translated into Armenian language and placed in the local government offices and community billboards for the reference of the APs as well as other interested groups.
(xvi) ADB shall not approve the hand–over for commencement of civil works of any specific part of the Project to be financed from the loan proceeds, unless the Government of Armenia has satisfactorily completed payment of compensation for affected assets and relocation to new sites, in accordance with the approved RP for the Project. Rehabilitation measures must also be in place, but not necessarily completed, as these may be ongoing activities.
D. Project Scope and Potential Resettlement Effects
7. The Project will have an additional, positive, long-term impact on four regions (Ararat, Armavir, Kotayk, and Gegharkunik regions)2 and income and non-income dimensions of poverty in the rural areas, serving about 10% of the total rural population in the country. The main outputs of the Project would be (i) about 220 km of improved rural roads;3 (ii) the development of an improved transport sector management system including a new transport sector strategy to further strengthen the capability of the Ministry of Transport and Communications; and (iii) the establishment of an improved road asset management system to further enhance the institutional capacity of ARD. Rehabilitation work under the Project will generally follow the existing carriageway width, which is about half of the right-of-way (ROW).
2 Ararat, Armavir, Kotayk, and Gegharkunik regions have a total population of nearly 1 million. Roughly 54% of the total rural population in Armenia lives in these four regions and about 61% (about 650,000) of the total population in the four regions live in rural areas. The incidence of poverty ranges from 30.9% to 34.5%, against a national average of 29.8% 3 Includes two road subprojects totaling 24.9 kilometers (km) along the main highways. These subprojects were included to maximize the benefits of rural road improvement in the Vardanis district in the Gegharkunik region. Appendix 14 63
8. An initial social and environmental assessment and surveys of four sample subprojects were carried out during the SSTA, 4 including more than 16 consultations covering both environmental and social issues and involving directly affected people, representatives of local governments, and the Council of Elderly (key persons in the communities). An extensive research on the remaining project roads was also conducted. The assessments conducted during project preparation did not identify any land acquisition and resettlement issues. The assessments have concluded that the magnitude of the resettlement effects would be negligible. Although the reviews did not identify encroachers along the ROW of the subprojects proposed for ADB financing, potential resettlement issues might be encroachers to the ROW in order to take advantage of enhanced business opportunities arising from improved transport services.
E. Screening Procedures for Subprojects
9. The following are selection criteria and approval process for subprojects for ADB financing under the Project:
I. Subproject Selection Criteria
10. Each subproject must meet the following criteria:
(i) the subproject falls within the scope of the LRNP, and is considered of high priority under LRNP, or is part of the main highway system (interstate), rehabilitation of which will support the objectives of the LRNP;
(ii) the subproject connects rural communities with a total of more than 500 people per road and significant economic activities to the primary road network and/or to regional commercial centers (including those areas containing schools, hospitals, and other social service delivery institutions);
(iii) the subproject is technically feasible and demonstrates, at a worst case scenario, a minimum rate of economic return of 12%;
(iv) the subproject focuses on rehabilitation along the existing road and rehabilitation work will be conducted mainly within the current right-of-way;
(v) the subproject is not a category A project5 under ADB’s Environmental Policy and/or Involuntary Resettlement Policy;
(vi) an environmental screening has been conducted for the subproject and an initial environmental examination (IEE) and environmental management plan (EMP) have been prepared for the subproject in accordance with the Environmental Assessment and Review Framework;
(vii) an RP, if required, has been prepared for the subproject in accordance with the Resettlement Framework;
4 The small-scale technical assistance was financed on a grant basis by ADB’s TA funding program. ADB. 2006. Technical Assistance to Armenia for Preparing the Rural Roads Rehabilitation Project I. Manila [TA 4895-ARM]. 5 Projects with potential for significant adverse environmental impacts. An environmental impact assessment is required to address significant impacts. 64 Appendix 14
(viii) an internally displaced persons and refugees development plan (IDPRDP), if required, has been prepared in accordance with the internally displaced persons and refugees development framework (IDPRDF);
(ix) an Initial Poverty and Social Assessment has been prepared;
(x) a road safety audit has been prepared and necessary road safety mitigation measures have been incorporated into the proposed subproject design; and
(xi) all required governmental approvals have been obtained.
II. Project Approval Procedure
11. All subprojects must comply with ADB policies and guidance, and satisfy ADB’s procedures for subproject preparation, including the technical, operational, environmental, social, and resettlement dimensions. In respect to the sample subprojects reviewed under the SSTA, these requirements were met during project preparation. For additional subprojects, the requirement will be met during project implementation.
12. Before starting procurement actions for the additional subprojects for inclusion in the second annual batch, the ARD, the Implementing Agency, will submit to ADB for approval, a report providing details of compliance with the selection criteria (para. 10) of each newly proposed subproject in the batch. The approval process for each batch of additional subprojects will be as follows:
(i) with the assistance of subproject preparation and project supervision consultants, ARD prepares a consolidated report indicating the compliance of each proposed subproject with the selection criteria, including an overall IEE for all subprojects, which will focus on any environmental problems identified and mitigation required, an initial poverty and social assessment, RP (if necessary), and IDPRDP (if necessary) for each subproject;
(ii) ARD screens the subprojects included in the report and refines the report, as necessary, to meet ADB requirements; and prepares a summary checklist describing the eligibility, preparation status, and safeguard compliance of each subproject;
(iii) ARD submits the report and checklist to ADB for approval;
(iv) ADB approves the proposed subprojects, subject to any further modifications required, if ADB considers such modifications are necessary; and
(v) subject to addressing any modifications, as required, ARD proceeds with procurement for subprojects approved by ADB.
Appendix 14 65
III. Monitoring During Implementation
13. ARD will adhere to ADB’s guidelines, policies, and other requirements during pre- construction through reviews of supporting documentation, and during project implementation; and monitor project impacts and contractor performance through specialists engaged to support the PMU and the subproject preparation and project supervision consultants.
14. Technical, economic, environmental, and social auditing will be conducted during subproject preparation and project implementation. i. Assessment of Government Policies
15. The Government has resettlement regulations in place. The notion of giving up land for the benefit of community infrastructure improvements is well established. Resettlement issues are discussed in the Land Code (2001) and the Civil Code (1998). The Article 8 of the Constitution (1995) generally acknowledges that the right to property is recognized and protected in the country.
16. Article 50 of the Land Code specifies that all rights of land ownership are limited by Servitude. Servitude, according to Armenian definitions, is the right of the Government to acquire land for the use of public projects that benefit the community including for the passing of water mains or the use of water sources. Also according to the Land Code, the landowner has a right to ask for compensation and a right to claim in Court compensation adjustments or the right to stop the Servitude.
17. Articles 210 through 221 of the Civil Code are more specific with their legislation on resettlement and discuss compensation rights for titled landowners and owners of buildings/structures. The Code defines servitude as a grant of the right of limited use of a parcel. It also discusses the method to conduct voluntary and involuntary resettlement, including bringing resettlement issues to Court and what parties can decide the payment. It describes that buyout of a parcel can only be made by a state authority or commune. Also, notice of buyout must be given to the landowner in advance. Furthermore, in terms of the price of the buyout, the market value of the land parcel and of the immovable property on the parcel must be considered as well as the losses accrued by the owner due to the taking of the land parcel.
18. Cadastre agencies, a branch of the Government, set the initial price of private land. The cadastre agencies do not give more value to the land with any subsequent improvements to the land. However, under the Civil Code, compensation rates are set by market price values which can account for land improvements (such as the existing of productive agriculture). Specific compensation information is not provided by any body of Armenian legislation. However, in the event of resettlement, the Government, ARD or commune must negotiate personally with the landowner. If they can not come to a common agreement, the resettlement issues are brought to the Court system.
19. Differences between Armenian laws and regulations and ADB policy are outlined in Table F.1 below.
66 Appendix 14
Table 14.1: Comparison of Resettlement Laws and Regulations
Armenian Land Laws and ADB Involuntary Resettlement ADB Regulation Regulations Policy Land compensation only for titled Lack of title should not be a bar to OM F2/ BP D paragraph 4 landowners compensation and/or rehabilitation. (vii) Non-titled landowners receive rehabilitation. Only registered houses/buildings All affected houses/buildings are OM F2/OP C paragraph 12 are compensated for compensated for buildings damages/demolition caused by a damages/demolition caused by a project project Crop losses compensation Crop losses compensation provided to OM F2/ OP C paragraph 12 provided only to registered landowners and sharecrop/lease landowners. tenants whether registered or not Land valuation based on current Land valuation based on current OM F2/BP footnote 6 and market value. market rate/replacement value. OM F2/OP C paragraph 11 The decisions regarding land Information related to quantification OM F2/OP F2 F. 2. a. acquisition are discussed only and costing of land, structures and paragraph 38 between the landowners and the other assets, entitlements, and Land Acquisition Committee. amounts of compensation and financial assistance are to be disclosed to the affected persons prior to appraisal. No provision for income/livelihood The Asian Development Bank (ADB) OM F2/OP A paragraph 4 rehabilitation measure, allowances policy requires rehabilitation for and footnote 6 for severely affected affected income/livelihood, for severe losses, people (APs) and vulnerable and for expenses incurred by the APs groups, or resettlement expenses. during the relocation process. OM = Operations Manual, BP =Bank Policies, OP = Operational Procedures. Source: Asian Development Bank.
20. In principle, Armenian laws and regulations relevant to land acquisition and resettlement (LAR) and ADB Policy adhere not only to the objective of compensation for affected families, but also to the objective of rehabilitation. However, Armenian laws are unclear on how rehabilitation is to be achieved and in practice the provision of rehabilitation is left to ad hoc arrangements taken by the local governments and the specific project proponents. To clarify these issues and reconcile gaps between the Armenian laws and regulations, and ADB Policy, this RF mandates compensation at replacement cost of all items, the rehabilitation of informal settlers, and the provision of subsidies or allowances for RFs that may be relocated, suffer business losses, or may be severely affected.
G. Entitlements and Eligibility
I. Entitlements
21. The project compensation and entitlement policy is designed to cover compensation for loss of assets and assistance to restore or enhance livelihoods of all APs. The APs will not only receive replacement land or cash for land and other assets at replacement value based on market prices at the time of compensation, but also various rehabilitation measures will be available to severely affected, very poor, and otherwise vulnerable APs.
22. LAR under the Project will be implemented according to a compensation eligibility and entitlements framework in line with both the Government’s laws and regulations and ADB Policy. An Entitlement Matrix (Table F.2) has been developed, which recognizes and list various Appendix 14 67 types of losses resulting out of the Project and provides for compensation and resettlement packages. During compensation identification during subproject preparation, this entitlement matrix and description of compensation entitlements will be updated.
Table F.2: Compensation Matrix
Asset Specification Affected People Compensation Entitlements All land losses Farmers/Titleholders • Land for land compensation with plots of equal value and independently productivity to the plots lost; or from impact • Cash compensation for affected land at replacement cost, severity free of taxes, transaction, registration, and transfer costs. • When more than 10% of an affected people (AP) income Permanent or agricultural land is affected, AP will get an additional impact on allowance for severe impacts equal to the market value of Arable Land a year’s gross yield of the land lost (both winter and summer harvests) and the waiving of taxes and fees • Residual portions of plots affected by the required right-of- way (ROW) which are reduced to less than 400 m2 or rendered unusable by alterations in access, irrigation, or workability will be included in the affected land and compensated as above indicated. Leaseholders • Renewal of lease in other plots of equal value/productivity (registered or not) of plots lost, or Cash equivalent to market value of gross yield of affected land for the remaining lease years (up to a maximum of 10 years). Sharecroppers • Cash compensation equal to the market value of the lost (registered or not) harvest share once (temporary impact) or twice (permanent impact) Agricultural workers • Cash indemnity corresponding to their salary in cash and losing their contracts kind for the remaining part of the agricultural year. Non-titled land • 1 rehabilitation allowance equal to market value of 1 net owners harvest (in addition to crop compensation) for land use loss. Additional Farmers/Titleholders • 1 severe impact allowance equal to market value of 1 net provisions for /Leaseholders harvest of the affected land for 1 year (inclusive of winter severe impacts and summer crop and additional to standard crop (More than 10% compensation) of land loss) Sharecroppers • 1 severe impact allowance equal to market value of share (registered or not) of harvest lost (additional to standard crop compensation) Non-titled land • 1 severe impact allowance equal to market value of net owners harvest of the affected land for 1 year ( additional to standard crop compensation) Temporary All APs (including • Affected land and commercial infrastructure will be Land non-titled land restored to pre-project conditions. Acquisition owners) • Rent will be agreed between land owner and contractor equal to the revenue lost based on market value (example: compensation for harvest lost at average yield/hectare) • Cash compensation for assets lost (example: structures, trees, etc.) Residential/ Titleholders • Land for land compensation through provision of a plot Commercial comparable in value/location to plot lost or Land • Cash compensation for affected land at full replacement cost free of taxes, registration, and transfer costs Renters/ • 1–3 months allowance Leaseholders Non-titled land • Provision of a free or leased plot in a Government owners resettlement area or a self-relocation allowance. Houses All relevant APs • Cash compensation at replacement rates for affected Buildings and (with/without house or structure & other fixed assets, free of salvageable Structures building registration) materials, depreciation, and transaction costs. In case of partial impacts, full cash assistance will be provided to restore remaining structure. The cost of lost water and 68 Appendix 14
Asset Specification Affected People Compensation Entitlements electricity connections will be included in the compensation. Crops Crops affected All APs (including • Crop compensation in cash at full market rate for 1 year non-titled land gross harvest by default to be paid both to landowners owners) and tenants based on their specific sharecropping agreements Trees Trees affected All APs (including • Cash compensation shall reflect income replacement. Fruit non-titled land trees will be valued based on age category and valued at owners) gross market value of 1 yr income X number of yrs needed to grow tree of same productivity. Business Temporary or All APs (including • Business owner: (i) Cash compensation equal to one year Employment permanent loss non-titled land income, if loss is permanent; (ii) cash compensation for of business or owners) the period of business interruption, if loss is temporary. employment Compensations based on tax declaration or official minimum salary • Worker/employees: Indemnitya for lost wages for the period of business interruption up to a maximum of 3 months. Livelihoods Loss of social All APs (including • Restoration of livelihoods must be to levels at least support non-titled land equivalent to those maintained at the time of systems owners) dispossession, displacement, or restricted access. • If replacements to losses are unavailable, strategies can include skill development, wage employment, or self- employment including access to credit. Relocation Transport and All APs affected by • Provision of sufficient allowance to cover transport transitional relocation expenses and livelihood expenses for one month due to livelihood costs relocation. House House renters who • Provision of a cash grant of 3 months’ rent at the renters have leased house prevailing market rate in the area and will be assisted in identifying alternative accommodation Community • Rehabilitation/substitution of the affected structures/utilities assets (i.e. mosques, footbridges, roads, schools, health centers, etc..) to pre-project functions Vulnerable AP below poverty • Priority for employment in project-related jobs, training people line opportunities, self-employment, and wage-employment livelihood assistance Source: Asian Development Bank. a Indemnity: An expressed or implied contract to compensate an individual for loss or damage (for example, an insurance policy).
II. Eligibility
24. APs entitled for compensation or at least rehabilitation provisions under the Project are:
(i) All APs losing land either covered by legal title/traditional land rights or without legal status; (ii) Tenants and sharecroppers whether registered or not; (iii) Owners of buildings, crops, plants, or other objects attached to the land; and (iv) APs losing business, income, and salaries.
25. Compensation eligibility will be limited by a cut-off date to be set for each subproject on the day of the beginning of the AP Census and detailed measurement survey (DMS). APs who settle in the affected areas after the cut-off date will not be eligible for compensation. They, however, will be given sufficient advance notice, requested to vacate premises and dismantle affected structures prior to project implementation. Forced eviction will only be considered after all other efforts are exhausted.
Appendix 14 69
III. Gender Impact and Mitigation Measures
26. About 53.8% of the population living in the project area are women. Women have important economic roles in the project area and engage in a very wide range of income-making activities in the agricultural and marketing sector. The Project will pay particular attention to ensure that women are the recipients of the compensation pertaining to their activities and to ensure that women, who are de-facto household heads, are clearly listed as beneficiaries of compensation and rehabilitation proceedings under the Project. In order to ensure the above, the following actions will be considered:
(i) Include women in the impact enumerators; (ii) Impact assessment of APs indicating the total number of families and people must be gender-disaggregated to pinpoint how many women are likely to be affected by the Project and establish their pre-Project conditions; (iii) Women will be major participants in the consultation processes to determine and negotiate for compensation entitlements and implement the RP; (iv) Special attention will be given to the impact of resettlement on women and other vulnerable groups during monitoring and evaluation of the RP; and (v) If asset replacement/relocation is needed, land/house titles will be in name of both spouses.
IV. Public Participation and Documents Disclosure
27. According to ADB policy, the APs must be fully consulted and provided with opportunities to participate in the planning and implementation of land acquisition and resettlement. They must also be informed, in an appropriate and timely manner, of the outcomes of the planning process, as well as the schedules and procedures for implementation of the RP. Public information and consultation campaign must be carried out by ARD during all stages of the land acquisition and resettlement process. In addition, ARD must also organize public information meetings, participation of the APs in the DMS, full disclosure of the RP and informing the APs about the procedures for payments of compensation and relocation.
28. The RF has been translated into Armenian and distributed to the project regions for review and endorsement. The RF will be uploaded on the ADB resettlement website immediately upon Board approval.
29. During the different stages of the Project (planning, implementation, and monitoring) the following actions are in place: (i) distribution of public information brochure or booklets in Armenian, (ii) placement of copies of the RP in Armenian in regional and community offices, and (iii) uploading of the RPs on the ADB resettlement website.
30. Town and community heads will be informed about the Project, and their assistance will be solicited in the conduct of the inventory of affected assets, the Census of APs and DMS. In addition, prior to the finalization of the RP and its submission to ARD, the APs will be thoroughly informed on the results of the Census and DMS, and their preferences on compensation or other resettlement assistance will be given due consideration. The processes and mechanisms ensuring the active involvement of APs and other stakeholders will be detailed in the RPs including the date, list of participants, and minutes of consultation meetings. 70 Appendix 14
V. Grievance Process
31. The Project will ensure that APs have clear and accessible mechanisms and procedures to address complaints and grievances about any aspect of land acquisition, compensation, and resettlement.
32. A grievance mechanism will be available to allow an AP appealing any disagreeable decision, practice, or activity arising from land or other assets compensation. APs will be fully informed of their rights and of the procedures for addressing complaints, whether verbally or in writing, during consultation, survey, and time of compensation. Care will always be taken to prevent grievances rather than going through a redress process. This can be obtained through careful LAR design and implementation, by ensuring full participation and consultation with the APs, and by establishing extensive communication and coordination among the affected communities, the PMU to be established within ARD, and town or community heads.
33. Complaints and grievances will be addressed through the process described in Table F.3 below.
Table F. 3: Grievance Resolution Process
Land / Crops Compensation Issues 1. First, complaints resolution will be attempted at community level with the involvement of the community authorities and informal mediators. 2. If still unsettled, a grievance can then be lodged to the ARD. Within 15 days, the ARD will dismiss the case or recommend its settlements to the Armenian Roads Directorate Non-Commercial State Organization (ARD) on the affected people’s (AP’s) terms. o If after the local intervention and assistance with the Project Management Unit (PMU), no solution has been reached, a grievance can be directly lodged to the ARD. The ARD must consult the Project Governing Council (PGC) for their decision on whether to settle or go to Court. The AP must lodge the complaint within 1 month after receiving response on the original complaint from the ARD and must produce documents supporting his/her claim. The PGC will provide a response within 15 days of registering the complaint. The PGC decision must be in compliance with these RF provisions. o Should the grievance redress system fail to satisfy the AP, they can pursue further action by submitting their case to the appropriate court of law. Source: Asian Development Bank.
H. Institutional Arrangements
34. The Ministry of Transport and Communications (MOTC) is the Executing Agency for the Project, with responsibility for planning and implementation delegated to the ARD as the Implementing Agency. A PMU will be established within ARD.
35. Institutional assessment of ARD has concluded that ARD is capable of dealing with land acquisition and resettlement issues, since it has accumulated LAR experience through the actual road improvement works throughout the country, especially road improvement of interstate and republican roads, which usually are higher standards than that of the rural roads identified for the Project.
36. The ARD will establish compensation rates for the Project, based on the findings of a replacement cost survey to be conducted by the independent monitoring agency. Compensation rates will be continuously updated to ensure that the APs will receive compensation based on full resettlement value at the time of compensation payments.
Appendix 14 71
I. Monitoring and Evaluation
37. LAR tasks under the Project will be subjected to internal monitoring. Internal monitoring will be conducted by an independent M&E agency every month. This information will be collected directly from the field and reported monthly to the PMU to assess the progress and results of RP implementation, and to adjust the work program, if necessary. The results will be communicated in standard supervision report format to ADB through quarterly project implementation reports. Specific monitoring benchmarks or indicators include:
(i) Information campaign and consultation with APs; (ii) Status of land acquisition and payments on land compensation; (iii) Compensation for affected structures and other assets; (iv) Relocation of APs; (v) Payments for loss of income; (vi) Selection and distribution of replacement land areas; and (vii) Income restoration activities.
38. The PMU will collect the above information to monitor resettlement activities of the Project through:
(i) Review of census information for all APs; (ii) Consultation and informal interviews with APs; (iii) In-depth case studies; (iv) Sample survey and public consultation with APs; (v) Key informant interviews; and (vi) Community public meetings.
J. Budget
39. All RP preparation and implementation costs, including cost of compensation and LAR administration, will be considered an integral part of Project cost and will be contributed by the Government. Each RP will include a budget section indicating (i) unit compensation rates for all affected items and allowances, (ii) methodology followed for the computation of unit compensation rates, and (iii) a cost table for all compensation expenses including administrative costs and contingencies.
40. ARD is responsible for the timely allocation of the funds needed to implement the RPs. Allocations will be reviewed twice a year based on the budget requirements indicated by the RPs. The budget for land and crop compensation will be disbursed by the Ministry of Finance and Economy to the ARD PMU. The ARD PMU will disburse the funds to the local governments which in turn will disburse the compensation to the APs.
72 Appendix 14
LIST OF SUBPROJECTS IDENTIFIED FOR THE PROJECT No. Link Link Name Region District Communities Connected Length No. (km) Vardenis-Shatvan 1 L1 Gegharkunik Vardenis Vardenis–Shatvan junction 7.0 junction Vardenis– Vardenis–Mets Masrik–Pokr Masrik– 2 L2 Gegharkunik Vardenis 17.9 Ghehamakar Geghamasar
3 L3 M-11–Geghakar Gegharkunik Vardenis M-11–Khachaghbiur–Geghakar 8.7
4 L6 M-11–Geghamakar Gegharkunik Vardenis M-11–Shatjrek–Geghamabak 4.8
M-11–Shatvan–Geghamabak– 5 L7 M-11–Jaghacadzor Gegharkunik Vardenis 5.8 Jaghacadzor
6 L9 M-14–Kutakan Gegharkunik Vardenis Mets Masrik–Tretuk–Kutakan 9.3
7 L10 M-14–Semenovka Gegharkunik Vardenis M-14–Tsovagiuh-Semenovka 12.1
8 L11 M-11–Astkhadzor Gegharkunik Vardenis M-11–Astkhadzor 3.0
9 L12 M-10–Tazagiugh Gegharkunik Vardenis M-10–Tsakkar-Tazagiugh 5.3
10 L13 M-10–Vardadzor Gegharkunik Vardenis M-10–Vardadzor 2.6
11 L14 Abovyan–Nurnus Kotayk Kotayk Abovyan–Arzni – Biurehava–Nurnus 10.2
12 L15 Piunik–Hankavan Kotayk Hrazdan Piunik–Artavaz–Hankavan 13.0
13 L16 Zoravzn–Aragiugh Kotayk Nairi Zoravzn–Aragiugh 5.3
14 L24 Yerevan–Yeghvard Kotayk Nairi Zovuni 8.0
15 L25 Bujakan–Saralandj Kotayk Nairi Bujakan–Aragyugh–Saralandj 8.0
16 L26 Zovuni–Mrgashen Kotayk Nairi Zovuni–Kanakeravan–Mrgashen 8.5
Mayakovski– 17 L27 republican Kotayk Kotayk Mayakovski–Dzoraghbyur 9.1 (secondary) road H-3 Bardzrashen– Bardzrashen–Landjazat–Abovyan– 18 L17 republican Ararat Artashat Arevshat–Nshavan–Byuravan– 12.4 (secondary) road H-8 Burastan Aygezard–interstate 19 L18 Ararat Artashat Aygezard–Aygepat–Shahumyan 4.2 (main) road M-2 Kaghtsrashen– 20 L19 Ararat Artashat Kaghtsrashen–Vostan 8.5 Artashat Getazat–republican 21 L20 Ararat Artashat Getazat–Mrganush 2.9 (secondary) road H-9 Appendix 14 73
No. Link Link name Region District Communities connected Length No (km)
Geghanist–Ghukasavan–Darakert– 22 L21 Geghanist–Nizami Ararat Masis 9.2 Dashtavan–Zorak–Nizami
Urtsadzor– interstate Urtsadzor–Shahap–Lusashogh– 23 L23 Ararat Ararat 26.8 (main) road M-2 Landjar–Urtsalandj
Margara–Arazap–Argavand–Tandzut– 24 L30 Margara–Armavir Armavir Armavir Aygeshat–Armavir village–Haykavan– 20.2 Norapat–Armavir
Ararat 64.0 Armavir 20.2 Gegharkunik 76.5 Kotayk 62.1 Total 222.8 H = Highway (Secondary Road), km = kilometers, L = Link, M = Magisterial Road (Main Highway). Source: Asian Development Bank.