PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB4962 Regional Roads Improvement Project Project Name

Public Disclosure Authorized Region EUROPE AND CENTRAL ASIA Sector Roads and Highways (95%); General Transportation Sector (5%) Project ID P117152 Borrower(s) Implementing Agency Roads Department of the Ministry of Regional Development and Infrastructure (RDMRDI) 12 Kazbegi Avenue Georgia Tel: (+995 32) 2762 86 Fax: (+995 32) 31 30 52 Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared September 14, 2009 Date of Appraisal September 22 Authorization Public Disclosure Authorized Date of Board Approval October 22, 2009

A. Country and Sector Background

1. Strong reforms following the Rose Revolution in 2003 led to rapid annual economic growth in excess of nine percent from 2004 through mid-2008. In these few years Georgia implemented far reaching strategic reforms and development initiatives that led to impressive results. These reforms included tackling wide spread corruption. Improvements in revenue collection have also enabled the Government to address decades of neglect of basic infrastructure.

2. The conflict of August 2008 in Georgia and the global economic crisis resulted in a number of major shocks to growth and stability. The Government has responded swiftly to address their impacts Public Disclosure Authorized by implementing countercyclical fiscal and monetary measures, safeguarding the stability of the banking sector, addressing the needs of Internally Displaced Persons (IDPs) and others affected by the conflict, quickly repairing and rehabilitating damaged infrastructure, as well as seeking and obtaining international support.

3. Georgia’s transport system historically was a key link in the historic “Silk Road”,which the current Transport Corridor Europe-Caucasus-Asia (TRACECA) initiative seeks to emulate. Both in terms of geographical location and existing infrastructure, Georgia is well placed to absorb growing transport demands. It is located on the shortest route between Europe and Azerbaijan, Armenia and the Central Asian Republics through its Black Sea ports. The TRACECA corridor includes roads, railways, pipeline infrastructure and shipping routes. In Georgia, further investment in physical and, more importantly, institutional infrastructure is needed to ensure that the potential of the location is realized. The Government recognizes that in order to materialize this potential, significant

Public Disclosure Authorized investments are required to rehabilitate and modernize an aging infrastructure with years of maintenance neglect, including rail, road and port infrastructure.

4. Reducing rural poverty is a key Government priority and improvements to the ruralroad network are one of the important instruments Government has chosen to reduce rural poverty. B. Objectives

5. The project development objectives are to:

(i) Reduce transport costs and improve access between Vaziani, Gombori and ; and

(ii) Improve traffic safety along the Vaziani-Gombori-Telavi (VGT) road and along the Vaziani-Sagarejo-Bakhurtsikhe-Bakhurtsikhe--Telavi road.

C. Rationale for Bank Involvement

6. Since 1995, the Bank has made substantial contributions to the transport sector of Georgia, especially in road infrastructure development. Most of this assistance (seven operations in total) has been focused on improving the highway network. Implementation of these projects is providing opportunities for the Bank to assist the RD adopt modern road management practices. Recently, the Bank has started paying attention to the lower end of the road network through the Secondary and Local Roads Project (SLRP) (FY 2004-2011), with US$20 million IDA financing and US$70 million IBRD additional financing which aim at improving lifeline road network in the regions and to lay the ground work for increased productivity in the future.

7. The secondary and local networks are generally in bad condition because of the lack of proper maintenance. Roads are the lifeline of the economic activities of most Georgians, and even in the main foreign trade road corridors, local movements represent up to 90 percent of the traffic.1 An inclusive growth strategy as represented by the ‘Georgia without Poverty’ policy requires that the Government continue to develop and upgrade its infrastructure, particularly those that serve to integrate regions of high economic potential thus helping realize this potential.

8. Improvements in access for rural areas, where many of Georgia’s poor reside, is particularly suited to the Bank’s involvement. The proposed loan will continue the assistance the Bank is providing to the Government under the SLRP. It is to be noted that of other IFIs active in the transport sector in Georgia, only the Millennium Challenge Corporation is supporting investments in secondary and local roads.

COMPONENT 1: IMPROVEMENT OF VAZIANI-GOMBORI-TELAVI ROAD – US$32.65 million excluding contingencies (US$26.12 million Bank financing)

9. The Vaziani-Gombori-Telavi (VGT) road will be improved along its existing alignment with small sections (in total about 3.80 km) of minor realignment to straighten curves. Planned improvement activities include: (i) full depth reconstruction of the pavement including access connections along the road; (ii) minor realignment to the existing road; (iii) repairing the bridge over river Iori; (iv) protection works to prevent and/or mitigate landslides; (v) surface drainage, culverts and three small bridges including a 53 m bridge over river Ujarmula; (vi) retaining walls; (vii) safety

1 In the Kakheti region, the principal activities are the wine industry and tourism. After the collapse of the Russian market to which most of the wine went, the Government has actively sought new markets for this strategic industry in several countries, including Turkey and the USA. A reliable transportation network is needed in order to stimulate both the wine industry and tourism thereby reducing poverty in this rural area. 2 barriers, road signs and markings; and (viii) relocation of utilities. This component also includes the cost of consultants’ supervision of the above works. COMPONENT 2: ROAD SAFETY AND INSTITUTIONAL STRENGTHENING – US$2.00 million excluding contingencies (US$1.60 million Bank financing).

10. This component will finance the implementation of the following activities:

(i) Improving road safety along the VGT road and the Vaziani-Sagarejo-Bakhurtsikhe- Gurjaani-Telavi road through the identification, design and implementation of required traffic safety improvement measures and the implementation of these improvement measures;

(ii) Strengthening the capacity of the RD regional office in Sagarejo to improve its operational effectiveness through: (i) the identification and detailed design of capacity improvement measures; and (ii) the implementation of such measures; and

(iii) Strengthening the capacity of the RD regional office in Sagarejo to provide road management training and advisory support to the local governments within its jurisdiction.

11. Implementation of the above activities will involve provision of goods, consultant services and training and include (i) consultancy for the identification and design of required traffic safety improvement measures; (ii) consultancy for the supervision of identified traffic safety improvement activities; (iii) implementation of the traffic safety improvement measures; (iv) identification and detailed design of measures to improve the capacity of the Regional Office of the RD at Sagarejo; (v) implementation of the capacity improvement measures; and (vi) activities in support of the provision of road management training and advisory support by the Sagarejo Regional Office to local governments within its jurisdiction.

COMPONENT 3: PROJECT IMPLEMENTATION – US$0.21 million (US$0.17 million Bank financing)

12. This component provides for institutional support to the RD and the TRRC in relation to Project implementation, audits, and monitoring and evaluation.

D. Financing ($m.) Source: Borrower 7.50 International Bank for Reconstruction and Development 30.00 Total 37.50

E. Implementation

13. The Project will be implemented by the Roads Department of the Ministry of Regional Development and Infrastructure (RD), which has been an implementing organization for all previous Bank financed transport projects. For financial management the RD will be supported by the Transport Reform and Rehabilitation Center (TRRC). The TRRC was established in 1995 to assist in 3 the implementation of the Bank-financed transport projects, handling financial management, procurement and other support functions. The newly created “Foreign Projects Unit” (FPU) in the RD will be responsible for procurement, monitoring and reporting, technical and other implementation matters for all IFI financed projects. The FPU will use the same procurement staff who worked on previous projects as members of TRRC. There will be a Project Implementation Agreement signed between RD and TRRC clearly defining roles and responsibilities, as well as a Project Operations Manual.

F. Sustainability

14. Three factors will influence Project sustainability: (i) adequate winter maintenance arrangements and timely response to any occurrence of landslides along the VGT road; (ii) Government commitment and action for addressing traffic safety issues; and (iii) the continued availability of funds for road maintenance. On the first, the RD normally enters into yearly maintenance contracts for roads under its jurisdiction in the Kakheti region and these contracts include winter maintenance and provide for dealing with landslides if and when they occur. The VGT road will upon its completion be included in these contracts. Regarding the second, Government has increased its commitment to improving road safety with the high level inter- ministerial Transport Commission chaired by the PM assuming new functions to also coordinate and lead road safety related matters. Its charter has been amended to reflect this new function. The National Road Safety Strategy was prepared by the Government and endorsed by the Commission in 2008. The Bank financed FEWHIP and SEWHIP Projects include activities related to improving the capacity of the RD to address road safety issues. The road safety interventions under this project and those agreed by other IFIs to include in their projects should help intensify focus on road safety. Finally, with regard to maintenance funding, the Government has significantly increased maintenance expenditure reflecting its recognition of the need to invest in maintenance. The challenge is to ensure that a sufficient amount is allocated for the maintenance of secondary roads. The RD has however awarded and successfully executed road maintenance contracts for the Kakheti region over several years and there is no reason to believe this will not continue.

G. Lessons Learned from Past Operations in the Country/Sector

15. The main lessons learned from previous projects considered in the design of this project include: (i) need for effective technical supervision of projects. As a result, the project design provides for the use of the internal ‘Technical Auditing’ team being put in place by the RD who will bring the requisite technical skills to enable the RD to properly manage the project; (ii) actions to improve traffic safety to be holistic in approach but incremental and measurable in implementation. The key lessons from previous road safety activities are that reform efforts need to have consensus and high political commitment and be measurable and incremental. As a result, the focus under this Project is to assist the Government in implementing the key elements of their national road safety strategy as recently approved by the Cabinet of Ministers. The approach is similar to the pilot being implemented under the TEWHIP and will be applied along the VGT road as well as the Vaziani- Sagarejo-Bakhurtsikhe-Gurjaani-Telavi road to create a ‘ring road’ of safe roads; and (iii) alignment of roles and responsibilities between sector organizations. TRRC has traditionally provided support to the RD in financial management, procurement and reporting, with the RD having final responsibility for all activities. More recently however, the RD has competently been discharging the procurement activities. This, and problems with ensuring quality of reporting, has led to agreement to clearly delineate the responsibilities between the two agencies. TRRC will be responsible for FM

4 issues, while all other issues are the responsibility of the RD. Moreover, the RD will assume full responsibility for procurement, monitoring and reporting.

H. Safeguard Policies (including public consultation)

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [ X] [ ] Natural Habitats (OP/BP 4.04) [ ] [X] Pest Management (OP 4.09) [ ] [X] Physical Cultural Resources (OP/BP 4.11) [ X] [ ] Involuntary Resettlement (OP/BP 4.12) [ X] [X] Indigenous Peoples (OP/BP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [X]

I. List of Factual Technical Documents

Feasibility study for the Vaziani to Gombori to Telavi road (VGT) Draft Environmental Impact Assessment for the VGT road Resettlement Policy Framework for the VGT road Resettlement Action Plan for VGT road (section km 0 to km 27)

J. Contact Point

Contact: George A. Banjo Title: Sr Transport. Spec. Tel: (202) 473-6070 Fax: (202) 614-6070 Email: [email protected]

K. For more information contact:

The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties’ claims on the disputed areas. 5 6