Completion Report

Project Number: 32058-02 Loan Number: 1892-PAK, 1893-PAK(SF) September 2010

Pakistan: Road Sector Development Program

CURRENCY EQUIVALENTS

Currency Unit – Pakistan rupee/s (PRe/PRs)

At Appraisal At Project Completion (20 November 2001) (30 June 2009) PRe1.00 = $0.0164 $0.0123 $1.00 = PRs61.10 PRs81.40

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund EIRR – economic internal rate of return FAP – foreign aided projects FIDIC – Fédération Internationale des Ingénieurs-Conseil (International Federation of Consulting Engineers) GOP – Government of Pakistan GOS – Government of Sindh ICB – international competitive bidding IRI – international roughness index km – kilometers LIBOR – London interbank offered rate m – meter NCB – national competitive bidding OCR – ordinary capital resources OFID – OPEC Fund for International Development PCR – project completion report PSDP – provincial sector development project RAR – rural access road RSDD – Road Sector Development Directorate RSDP – Road Sector Development Program SDR – special drawing rights WSD – Works and Services Department

NOTES

(i) The fiscal year (FY) of the Government of Pakistan and the provincial government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2010 ends on 30 June 2010.

(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General J. Miranda, Central and West Asia Region Department (CWRD) Director H. Wang, Transport and Communications Division, CWRD

Team leader A. Ahmad, Project Officer (Transport), Pakistan Resident Mission (PRM), CWRD Team members L. Ali, Associate Project Analyst, PRM, CWRD K. Butt, Senior Project Assistant, PRM, CWRD

In preparing any county program or strategy, financing any project, or by making any designation of or to a particularly territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

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BASIC DATA i I. PROJECT DESCRIPTION 1 A. Objective of the Project 1 B. Project Components and Scope 1 C. Implementation Arrangements 2 D. Project Cost and Financing Plan 2 E. Loan Amount, Terms, and Utilization Period 2 F. Loan Fund Utilization 2 G. Results of Program 3 II. EVALUATION OF DESIGN AND IMPLEMENTATION 3 A. Relevance of Design and Formulation 3 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 10 C. Efficiency in Achieving Outputs and Outcome 11 D. Preliminary Assessment of Sustainability 11 E. Impact 11 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12 A. Overall Assessment 12 B. Lessons 13 C. Recommendations 14 APPENDIXES 1. Projected Outputs and Actual Results 2. Project Cost 3. Projected and Actual Contract Awards and Disbursement 4. Contract Awards and Disbursement Performance 5. Implementation Schedule 6. Chronology of Events 7. Loan Covenants Compliance Status 8. Consulting Services 9. Procurement of Civil Works 10. Economic Reevaluation

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BASIC DATA

A. Loan Identification

1. Country Pakistan 2. Loan Number 1892-PAK and 1893-PAK(SF) 3. Project Title Road Sector Development Program Provincial Sector Development Project (Sindh) 4. Borrower Islamic Republic of Pakistan 5. Executing Agency Communication and Works Department, Sindh 6. Amount of Loan $150 million 1892-PAK: ¥9,118,900,000 (equivalent to $75 million) 1893-PAK(SF) SDR59,279,000 (equivalent to $75 million) 7. Project Completion Report PCR:PAK 1174 Number

B. Loan Data

1. Appraisal – Date Started 10 September 2001 – Date Completed 10 November 2001

2. Loan Negotiations – Date Started 21 November 2001 – Date Completed 22 November 2001

3. Date of Board Approval 19 December 2001

4. Date of Loan Agreement 1 February 2002

5. Date of Loan Effectiveness – In Loan Agreement 1 May 2002 – Actual 25 September 2002 – Number of Extensions 1

6. Closing Date – In Loan Agreement 30 June 2007 – Actual 30 June 2009 – Number of Extensions 1

7. Terms of Loan

Ordinary Capital Resources – Interest Rate London interbank offered rate – Maturity (number of years) 15 – Grace Period (number of years) 3

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Special Fund Resources – Interest Rate 1% during the grace period and 1.5% thereafter – Maturity (number of years) 32 – Grace Period (number of years) 8

8. Terms of Relending (if any)

Ordinary Capital Resources – Interest Rate London interbank offered rate – Maturity (number of years) 15 – Grace Period (number of years) 3 – Second-Step Borrower Not Applicable

Special Fund Resources – Interest Rate 1.0% during the grace period and 1.5% thereafter – Maturity (number of years) 32 – Grace Period (number of years) 8 – Second-Step Borrower Not Applicable

9. Disbursements

a. Dates Initial Disbursement Final Disbursement Time Interval 25 September 2002 16 July 2010 93 months, 21 days

Effective Date Original Closing Date Time Interval 25 September 2002 30 June 2007 57 months, 8 days

b. Amount Loan 1892-PAK (¥ '000) Category or Subloan Original Net Amount Undisbursed Allocation Amount Disbursed Balance Available Civil Works -Provincial Highways 2,347,200 2,347,200 1,317,207 1,029,994 -Rural Access Roads 4,743,600 4,743,600 4,491,325 252,275 Equipment -Vehicles 14,600 14,600 14,600 -Office Equipment 8,500 8,500 6,162 2,337 Incremental Administration 53,500 53,500 41,751 11,749 Consulting Services 564,200 564,200 507,558 56,642 Interest Charge 444,400 353,211 353,211 Front End Fee 91,189 91,189 Unallocated 942,900 942,900 942,900 Total 9,118,900 9,118,900 6,808,403 2,310,497 A final cancellation of ¥2,310,497,066 was effected on 16 July 2010.

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Loan 1893-PAK(SF), (SDR '000) Category or Subloan Original Net Amount Amount Undisbursed Allocation Available Disbursed Balance Civil Works -Provincial Highways 15,258 15,258 7,772 7,485 -Rural Access Roads 30,837 30,837 27,502 3,335 Equipment -Vehicles 95 95 177 (81) -Office Equipment 55 55 36 19 Incremental Administration 348 348 289 59 Consulting Services 3,667 3,667 3,110 557 Interest Charge 2,889 2,889 632 2,257 Unallocated 6,130 6,130 6,130 Total 59,279 59,279 39,518 19,761 A final cancellation of SDR19,761,422.01 was effected on 16 July 2010.

10. Local Costs (Financed) - Amount ($) million 51.8 - Percent of Local Costs 39.3 - Percent of Total Cost 22.0

C. Project Data 1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 104.12 95.96 Local Currency Cost 131.88 99.37 Total 236.00 195.33

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 71.00 58.75 ADB Financed 142.70 117.66 Other External Financing (OFID) 15.00 14.72 Total 228.70 119.13 IDC Costs Borrower Financed ADB Financed 7.30 4.20 Other External Financing Total 236.00 195.33 ADB = Asian Development Bank, IDC = interest during construction, OFID = OPEC Fund for International Development.

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3. Cost Breakdown by Project Component ($ million) Component Appraisal Actual Estimate 1. Land Acquisition and Resettlement 1.50 1.70 2. Civil Works A. Provincial Highways 66.97 38.93 B. Rural Access Roads 129.17 140.39 3. Poverty Reduction Pilot Project 0.25 0.09 4. Consulting Services A. Civil Works 6.22 6.69 B. Road Sector and Institutional Reforms 2.81 2.45 5. Program Administration 0.88 0.38 6. Provincial Sector Reforms (RSDD) 5.00 0.17 7. Equipment and Vehicles 0.38 0.33 8. Physical and Price Contingency 15.51 9. Interest Charges During Construction 7.31 4.19 Total 236.00 195.33 RSDD = Road Sector Development Directorate.

4. Project Schedule Item Appraisal EstimateActual Advance Procurement Actions Design Updates and Preparation of Bid Jul 01–Dec 01 Aug 01–Jan 04 Documents for PHs and Core RARs Prequalification of Contractors Jan 02–Mar 02 Aug 01–Sep 04 Bidding for PHs and Core RARs Apr 02–Jun 02 Dec 04–Aug 06

Solicitation and Evaluation of Supervision Jan 02–Mar 02 Jan 02–July 04

Consultants' Proposals

Consulting Services

Appointment and mobilization Apr 02–Jun 02 Aug 04–Oct 04 Construction Supervision of PHs and Core RARs Oct 02–Sep 04 May 05–Jun 09 Selection and Design of RARs Jul 02–Dec 04 Jan 05–Dec 06 Construction Supervision of RARs Jul 03–Dec 06 Jun 05–Jun 09 Appointment of Consultants for Sector and Institutional Reforms Jul 02–Sep 02 Oct 04 Sector/Institutional Reforms Implementation Oct 02–Mar 06 Jan 05–Jun 09 Civil Works Implementation Tender Evaluation and Award of PHs and Core RARs Jul 02–Sep 02 Dec 04–Aug 06 Construction of PHs and Core RARs Oct 02–Sep 04 May 05–Dec 09 Bid Evaluation and Award of RARs Apr 03–Sep 05 Apr 05–Mar 08 Construction of RARs Jul 03–Dec 06 Jun 05–Jun 09

PH = provincial highway, RAR = rural access road.

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5. Project Performance Report Ratings Implementation Period Ratings Development Objectives Implementation Progress 30 Dec 2001 to 29 Aug 2002 Satisfactory Satisfactory 30 Aug 2002 to 28 Sep 2002 Satisfactory Unsatisfactory 29 Sep 2002 to 30 Jun 2009 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions Name of Mission Date No. of No. of Specialization Persons Person- of Members Days Inception 19 November 2002 2 18 a, b Review 1 12 January 2004 2 8 a, b Review 2 17 May 2004 2 8 a, b Review 3 7 February 2005 2 6 a, b Review 4 26 April 2005 2 10 a, b Review 5 21 November 2005 1 6 a Mid-Term Review 20 September 2006 4 52 a, b, c, d Review 6 12 September 2006 1 2 a Review 7 5 November 2007 1 6 e Review 8 18 August 2008 3 15 b, e, f Review 9 6 April 2009 2 18 b, e Pre-Project Completion 14 January 2010 2 14 b, e Review Project Completion 1 March 2010 2 26 b, e Review a = senior project specialist, b = project analyst, , c = senior environmental specialist, d = transport economist (consultant), e = project implementation officer, f = social safeguard officer, no. = number.

I. PROJECT DESCRIPTION

1. The Government of Pakistan (GOP) borrowed the equivalent of $150 million from the Asian Development Bank (ADB) and the equivalent of $15 million from the OPEC Fund for International Development (OFID) to implement the Provincial Sector Development Project (PSDP) in the province of Sindh. The ADB loans were part of the Road Sector Development Program (RSDP). The loans were classified as interventions targeting “economic growth.” The project was classified as environmental category B as it mainly focused on the rehabilitation of roads and highways.

A. The Objectives of the Project

2. The PSDP aimed to increase access of the rural population to markets and social services by (i) improving and rehabilitating the rural access roads (RAR) network; (ii) preserving key road assets by rationalizing the road maintenance process—including creating a provincial road maintenance fund; (iii) improving important provincial highways to facilitate trade and create better income and employment opportunities; (iv) improving the efficiency and effectiveness of the Sindh Communication and Works Department—now restructured and renamed the Works and Services Department (WSD)—in planning, managing, and maintaining the provincial road network; (v) supporting reforms in the road sector; and (vi) promoting private sector participation in road infrastructure development and maintenance.

3. The policy and institutional reform component initiated a process of change in the province intended to transform WSD into an efficient institution that, in partnership with district governments and the private sector, can provide a safe, cost-effective, and well-maintained provincial road and RAR network.

B. Project Components and Scope

4. The PSDP comprised a policy and institutional reform component, and an investment component. The scope of each component is briefly presented below.

5. Policy and institutional reform component. The policy framework supported actions to (i) rationalize staffing; (ii) develop standard operating procedures; (iii) enhance staff accountability in project management; (iv) prioritize investment based on economic principles; (v) promote self-financed maintenance; and (vii) adopt a comprehensive approach to road safety, including public awareness and stakeholder consultation.

6. The RSDP focused on (i) management and preservation of road assets; (ii) governance and institutional development; (iii) improvement of operational and technical efficiencies; (iv) road safety; (v) private sector participation including involvement of knowledge-based industries; and (vi) poverty reduction through community participation. The core reforms on institutional efficiency included (i) focus on nonconstruction activities, (ii) less dependency on public sector resources, (iii) greater accountability and institutional responsiveness, and (iv) increased participation of road users and other stakeholders. Provision of consulting services was part of the project scope.

7. Investment component. This component targeted improvement of 164 kilometers (km) selected provincial highways: Thatta–Sujawal (31 km) and Nawabshah–Kotlalu–Ranipur (133 km); and rehabilitation of about 1,200 km of RARs following existing roads. The necessary consulting services were also included as part of the project scope.

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C. Implementation Arrangements

8. The Road Sector Development Directorate (RSDD) within WSD managed the overall implementation of the PSDP. The director general headed RSDD, which administered implementation of the policy and institutional reform component. The chief engineer, foreign aided projects (FAP) supervised the investment component. The design and supervision consultants provided support to WSD.

9. All project activities were implemented under the overall guidance and supervision of the secretary, WSD. The chief engineer, foreign aided projects (FAP) acted as the employer’s representative and the construction supervision consultants were the engineers for all civil works contracts.

10. A steering committee, comprising representatives of agencies and ministries, headed by the chief secretary and additional chief secretary (Sindh) was mandated to review the project's progress regularly. The steering committee was assisted by a citizens’ advisory group, nominated by the chief secretary and additional chief secretary, to provide feedback from civil society. The Association of Road Users of Pakistan acted as secretariat of the advisory group.

D. Project Cost and Financing Plan

11. At appraisal, the total project cost was estimated at $236 million equivalent. The foreign exchange cost was $104.1 million and the local currency cost was $131.9 million. ADB offered $150 million (64% of total project cost), OFID provided $15 million (6% of total project cost), while the Government of Sindh (GOS) provided $71 million (30% of total project cost).

E. Loan Amount, Terms, and Utilization Period

12. ADB lent SDR59,279,000 ($75 million equivalent) from its Special Funds resources and ¥9,118,900,000 ($75 million equivalent) from ordinary capital resources (OCR). The repayment period for the ADF loan was 32 years, including a grace period of 8 years, with an interest charge of 1.0% during the grace period and 1.5% thereafter. The repayment of the OCR loan was based on ADB’s London interbank offered rate (LIBOR) loan instrument described for the policy loan.

13. Cofinancing of $15 million through OFID was arranged. The OFID loan had a maturity of 20 years, including a grace period of 5 years, an interest rate of 1.5% per annum, and a service charge of 1.0% per annum on amounts withdrawn and outstanding.

14. The borrower provided the loan proceeds to the GOS through budgetary allocation, on the same terms as available to them. The borrower assumed the foreign exchange risk.

F. Loan Fund Utilization

15. At project completion, loan funds accounted for $121.86 million (63.4% of total project cost), versus $150 million at appraisal (64% of total project cost estimated at appraisal). The sizable difference was mainly due to variations in the foreign currency exchange rate. At appraisal, the value of the ADB loan was $150.0 million, and became $179.4 million on 6 July 2010 due to fluctuation in currency exchange rate. At appraisal, ADB financing covered the foreign exchange cost of $98.12 million (94.2% of total foreign currency cost), plus $51.88 million (39.3% of total local currency cost). At loan closing, ADB contributed to the foreign

3 exchange cost of $81.23 million (84.7% of total foreign currency cost) and $40.70 million (40.9% of total local currency cost).

G. Results of the Rehabilitation Program

16. Appendix 1 compares the anticipated project outputs with the actual results.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

17. The project design and outputs, envisaged at appraisal, were consistent with the GOP's transport sector policy framework and its strategic objectives of sustainable economic growth and poverty reduction in poor and remote areas of the country. ADB's assistance was closely aligned with Pakistan's transport sector development policy and GOS's 10-year development program. 1 It was also consistent with ADB's country partnership strategy, country strategy program update of 2004–2006, 2 and transport sector operational policy. The selected roads and highways were important links in the Sindh road network.

18. The project design was based on an analysis of road sector challenges, such as ever increasing transport demands; high vehicle operating costs; low sustainability of sector investments; poor maintenance and management practices; inefficient and ineffective asset management; outdated planning and operational processes; financial constraints on public budgets; an outdated policy framework; limited institutional capacity; appropriateness of sector investments; suitability of development opportunities; and prioritization of poverty reduction.

19. The project design assumed that the GOS had sufficient experience and adequate resources to successfully implement the entire scope of the project. Slow progress under the investment component, and low achievements under the policy and reform components suggest that GOS was unsuccessful in implementing the required actions. GOS did not pursue the policy and institutional reform agenda with sufficient enthusiasm and decision making took more time than expected. Lack of GOS commitment was evident during the entire implementation period. Material and human resources were not made fully available for timely implementation of policy and institutional reform recommendations.

B. Project Outputs

20. Policy and institutional reform component. This component was envisaged as a three-phase process including (i) initiation, (ii) implementation, and (iii) consolidation. The initiation phase (2005–2008) was completed, including 82 activities comprising technical studies, preparation of manuals, public awareness campaigns, staff training, and upgrading of the road asset management system. However, the implementation and consolidation phases did not happen, as the required human and material resources were not made available due to a delay in decision making on the outcome of the first phase. GOS lacked commitment to initiate the implementation and consolidation phases.

21. RSDD, on the basis of consultant findings, recommended measures on (i) adoption of policies, governance improvement, institutional development, and reforms; (ii) development of design and performance standards; (iii) resource mobilization and financial management;

1 Government of Sindh 2001. 10-Year Perspective Development Plan 2001–2011. Karachi. 2 ADB. 2002. Pakistan: Country Strategy and Program 2002–2004. Manila.

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(iv) road safety and traffic engineering; (v) environmental and resettlement management; (vi) private and community participation; (vii) poverty reduction and community development; and (viii) human resource development. RSDD was unable to make progress on legislation, implementation and consolidation aspects, as the GOS did not complete necessary approval processes.

22. Investment component. At loan closing, the overall progress on provincial highways was 72%. One out of three international competitive bidding (ICB) civil work contracts (30.1 km) was 100% complete. Out of 105 RAR civil work contracts (1,050 km), 89 contracts (903.0 km) were complete, 2 contracts (12.9 km) had over 93% progress, 6 contracts (49.6 km) were cancelled due to poor law and order conditions and slow progress, and 7 contractors (76.5 km) were involved in legal disputes over contractual issues. The overall achieved progress at project completion was 80%.

23. Project benefits. The quantifiable direct benefits achieved include vehicle operating cost savings and passenger time savings. The project contributed to economic growth and poverty reduction by (i) improving road connectivity and access of poor communities to social services and amenities, (ii) enhancing participation of the poor in economic activities, and (iii) creating additional income and employment opportunities by stimulating economic growth.

24. Project results. A comparison of planned and actual outputs under the investment component revealed: out of 164 km of planned provincial highways, 112 km were completed; and of 1,200 km of planned RARs, 905 km were completed. Limited progress was made under the policy and institutional reform component. RSDD recommended legislative and administrative initiatives to improve (i) institutional setup, (ii) capacity building, (iii) policy, (iv) road development, (v) maintenance, (vi) management, and (vii) operational procedures. The GOS was unable to decide on most of these recommendations before loan closing.

25. Important developments. After some start-up delays, limited progress was made in the first 3 years. Key factors contributing to initial delays included (i) late mobilization of the project staff; (ii) delay in procurement of civil works and consultancy contracts; (iii) insufficient staffing at FAP, and consultant and contractor offices; and (iv) the GOS's lack of commitment to implementing the project. The consultants were mobilized in October 2004 and conducted the planning and design activities during January 2005–December 2006.

26. Procurement of three ICB civil work contracts for provincial highways was completed in April 2005. The procurement of the first phase of the 48 RAR civil work contracts continued during April 2005–February 2008. Another 57 RAR civil work contracts were procured during May 2006–February 2008. By loan closing, the executing agency was able to accomplish only 72% of provincial highway subcomponents and 93% of RAR subcomponents.

27. The FAP team faced the challenges of insufficient staffing and quick staff-turnover. The project suffered a 3–4 month delay during June–October 2007, due to the processing of a 2- year loan extension. Even with the 2-year extension the executing agency achieved only 80% overall progress.

28. The constraints on progress under the policy and institutional reform component included (i) lack of consistency and continuity in project leadership; (ii) inadequate planning, programming, and implementation efforts; (iii) limited GOS interest in legislation and implementation processes; and (iv) lack of capacity at WSD to develop a meaningful policy and reform program.

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29. The project outputs were relevant and consistent with the sector's strategic objectives. The GOS continues to consider road development as its top priority. The GOP's VISION 2030 sees road improvement as a key strategy for accelerating trade and economic growth. 3 ADB's country partnership strategy for 2009–2013 continues to emphasize the importance of road infrastructure to improve the pace of development in the country. 4

C. Project Costs

30. At appraisal, the project cost was estimated at $236 million, with a foreign exchange cost of $104.1 million (44.1%) and a local currency cost of $131.9 million equivalent (55.9%). The actual project cost at loan closing was $195.3 million, with a foreign exchange cost of $85.3 million (43.7%) and a local currency cost of $109.9 million equivalent (56.3%). The project costs at appraisal and loan closing are compared in Appendix 2.

D. Disbursements

31. Detailed estimates for loan disbursements were not prepared at appraisal. However, the implementation schedule provides a timeline for expenditures during October 2004–June 2009. Appendix 3 provides a comparison of projected contract awards and disbursements with actual contract awards and disbursements.

32. The disbursement delays were mainly attributed to (i) procurement delays; (ii) late deployment of project staff, contractors, and consultants; (iii) long delays during construction; (iv) extra time consumed in processing withdrawal applications; (v) overdue disbursement of OFID funds; (vi) a 3–4-month delay in processing the loan extension; (vii) a 9-month delay in the OFID loan extension—the loan extension request was submitted late; and (viii) other unaccounted-for delays such as approval of variation orders and extension of the loan period.

33. The imprest account facility helped in improving the disbursement rate. Increasing the imprest account ceiling helped (i) reduce the payment processing time, (ii) ensure timely release of payments, and (iii) quickly implements small works. Disbursement progress improved sharply during last 3 years. The imprest account also helped timely disburse incremental and other petty expenses. Appendix 4 provides a chart of actual contract awards and disbursements.

E. Project Schedule

34. At appraisal, the project implementation period, including preconstruction, was over 6 years. Project implementation was planned for about 5 years (June 2002–June 2007). The award of provincial and core RAR contracts was planned through September 2004. The completion of major activities was targeted at December 2006. Loan closure was scheduled for 30 June 2007. At loan closing, with a 2-year loan extension, the investment component had achieved 80% progress. The policy and institutional reform component had achieved 40–50% progress. Appendix 5 provides a comparison of planned and actual implementation schedules.

35. Major factors contributing to delays included (i) lack of interest from GOS; (ii) inadequate planning and implementation; (iii) poor preparation and late initiation of most critical activities; (iv) late mobilization of consultants; (v) delayed procurement of civil work contracts—mainly

3 Government of Pakistan, Planning Commission. 2006. Strategic Directions to Achieve VISION 2030. Islamabad. 4 ADB. 2009. Pakistan: Country Partnership Strategy 2009–2013. Manila.

6 because of poor preparation and long review processes; (vi) lack of interest among prequalified contractors in the bidding process; (vii) late mobilization, poor performance, and delayed implementation of civil work contracts; (viii) long processes and slow decision making at critical stages; (ix) inadequate staffing and poor performance of the consultants; (x) safety, security, and law and order issues (in some areas); (xi) delay in disbursement of the OFID funds; (xii) contractual and legal issues raised by some of the contractors; and (xiii) impractical unit rates resulting from long implementation delays and high inflation.

36. Because of the above constraints, the project schedule proved to be overly optimistic. The capacities of FAP, RSDD, contractors, and consultants were more limited than expected. Therefore, the completion periods for major milestones in the project plan proved to be inadequate. Activities did not adequately support the advance procurement actions due to poor readiness and unavailability of inputs or resources. Lack of commitment, poor readiness, and inadequate capacities in the project team were the dominant issues. The WSD was rated partly successful in implementing the project's scope.

F. Implementation Arrangements

37. The implementation of the project was planned through (i) a high-level project steering committee, (ii) the FAP chief engineer, (iii) the RSDD director general, (iv) FAP staff, and (v) highly structured consulting support. The scope, role, and responsibilities of each implementation tier are briefly described below:

(i) WSD, the FAP chief engineer, and the RSDD director general had overall responsibility for implementing the project. The WSD secretary provided overall guidance and supervision for policy and institutional reform, and investment components. (ii) The FAP chief engineer was responsible for project management, contract administration, and consultant supervision. The tasks included (i) overall project planning and implementation of civil works; (ii) timely recruitment of consultants; (iii) supervising contracts, contract management, and loan administration; (iv) supervising project monitoring, evaluation, and reporting processes; (v) supporting policy reform and capacity building subcomponents; (vi) ensuring compliance with ADB's policies, procedures, and guidelines; and (vii) ensuring compliance with loan covenants. (iii) The RSDD director general was responsible for completion of various studies, project documentation, and implementation manuals. The institutional capacity and policy reform consultants were mandated to help the RSDD and the WSD in planning, programming, capacity-gap assessment, developing and imparting capacity building programs, ensuring effective management of subcomponents, developing training and awareness on resettlement and environmental mitigation planning, and ensuring timely preparation and implementation of pilot community-participation subprojects. (iv) Construction supervision consultants were responsible for detailed engineering designs, supervising civil works contracts, implementing planned activities in a timely manner, ensuring high quality, confirming specifications, and administering contracts in accordance with International Federation of Consulting Engineers (FIDIC) conditions.

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38. Generally, the implementation arrangements envisaged at appraisal were adequately designed, but did not fully materialize the intended benefits. The project team generally utilized the available resources and the government’s instructions during project implementation.

39. The difficulties in implementation mainly arose from (i) insufficient attention given to implementation details; (ii) inadequate project planning; (iii) lack of coordination among the team members; (iv) limited guidance from top management; (v) infrequent meetings of the project steering committee; (vi) staffing issues, including discontinuity, inconsistency, and lack of proficiency; (vii) poor commitment from project team; (viii) insufficient institutional reforms and capacity building initiatives; (ix) the GOS’s inability to complete legislation and implement reforms on time; (x) high turnover of managerial and technical staff; and (xi) late resolution of consulting, technical, legal, and contractual issues. Appendix 6 provides a chronology of important events relating to project implementation.

40. For these reasons, the project schedule proved too optimistic. The completion period for major milestones proved to be inadequate even with the 2-year loan extension. The basic assumption of advance procurement proved to be impractical. The overall implementation arrangements were rated partly successful.

G. Conditions and Covenants

41. GOS and the executing agency partly complied with the loan covenants of (i) hiring the consultants and the contractors, (ii) ensuring availability of land, (iii) timely provision of counterpart funds, (iv) submission of audit reports, and (v) submission of the government's project completion report. The covenants related to the FAP office, consultant staffing, and reporting were partly complied with. All other covenants (environmental, social, financial, and economic) were satisfactory. Appendix 7 provides details on compliance with the covenants.

H. Related Technical Assistance

42. No technical assistance was associated with the loan.

I. Consultant Recruitment and Procurement

1. Consultant Recruitment

43. The consultant selection process was in accordance with ADB's Guidelines on the Use of Consultants (2002, as amended from time to time) using quality- and cost-based selection procedures. It complied with the provisions of the Loan Agreement and the conditions stated in the Report and Recommendation of the President. 5 WSD included relevant sections of ADB's Anticorruption Policy (1998, as amended to date) in all invitations, bidding documents, and contracts. Appendix 8 provides details of the consultant procurement process and comparison of consultancy resource utilization with the plan at appraisal.

5 ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loans to the Islamic Republic of Pakistan for the Road Sector Development Program. Manila.

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2. Procurement

44. As planned at appraisal, goods, services, and civil work contracts were procured in accordance with ADB's Procurement Guidelines (1999, as amended from time to time). Three civil work contracts for provincial highways were awarded following ICB procedures among prequalified bidders. The RAR contracts were awarded using national competitive bidding (NCB) among prequalified bidders. The goods contracts were procured through shopping procedures.

45. WSD included relevant sections of ADB's Anticorruption Policy (1998, as amended to date) in all invitations, bidding documents and contracts. It invited expressions of interest for prequalification of ICB and NCB contracts on 31 May 2004 and 6 May 2004. The prequalification process for ICB was completed on 20 September 2004 and for NCB was completed on 8 July 2004. The response to the prequalification request was poor: ADB approved 9 firms for ICB packages and 48 firms for NCB packages. In the second phase of prequalification for NCB contracts, ADB approved 22 more firms on 10 August 2006. A comparison of appraised costs with actual costs of civil works contracts is presented in Appendix 9, Table A9.1.

J. Performance of Consultants, Contractors, and Suppliers

1. The Consultants

46. The performance of both national and international consultancy firms is partly satisfactory. Consultancy inputs produced limited benefits. WSD noted the following deficiencies in the consultant services: (i) insufficient staff support in subprojects; (ii) poor staff performance, inferior project management, and low standard of service; (iii) poor quality and qualifications of replacements; (iv) delays in decision making and approval; and (v) minimal feedback to the client. The consultants faced difficulties in retaining experienced and well qualified staff as the contract conditions did not allow for wage increases to account for inflation.

47. WSD identified some serious engineering design issues. Some pavement and bridge structures were over-designed. Insufficient staffing for geographically widespread contracts resulted in weak project administration. WSD rated the performance of consultants poor and substandard.

2. The Contractors

48. GOS faced difficulties in attracting international and national contractors at prequalification. Out of 15 international contractors, 9 were prequalified, and of 125 national contractors, 70 were prequalified. Participation of prequalified contractors in the bidding process was poor. During three ICB bidding processes, only four bids were received. All bids, except one, were higher than the estimated amount. National contractors initially showed interest in bidding, but their interest ebbed because more attractive opportunities arose elsewhere. The contractors' participation during the last phases of bidding process remained poor.

49. The overall performance of the civil work contractors is rated partly satisfactory. Generally, the contractors had limited skills in (i) planning and execution of works, (ii) managing working capital, (iii) retaining efficient human resources, (iv) managing a consistent supply of construction materials, (iv) maintaining equipment and machinery, and (v) dealing with security issues (in some areas). Most contractors relied heavily on future loan extensions, which add inordinate construction delays to transport sector projects. After realizing that a further loan

9 extension would not be forthcoming, generally the contractors extended their efforts to make up for lost time, and accelerated the rate of progress. Appendix 9, Table A9.2 presents an analysis of additional time and cost incurred at completion.

50. Road traffic and people living in the vicinity of civil works were negatively affected by the construction activities and associated environmental impacts. Initially, measures relating to road signage, traffic, and environmental management were insufficient, but these improved later. Overall, project site management is rated satisfactory.

51. ICB contractors. Two out of three ICB contractors failed to complete their contracts within the revised contract period. The executing agency allowed contract variations and multiple contract completion periods. The overall performance of the contractor on Package-1 was satisfactory, mainly due to better planning, allocation of adequate resources, availability of working capital, and commitment to complete the job. The overall performance of contractors on Package-2 and Package-3 was unsatisfactory because progress was behind schedule. Problems such as financial and materials shortage, poor safety, security and law and order, heavy rainfall, flooding, and lack of interest added to the inordinate delays and incomplete works.

52. National contractors. The overall performance of the national contractors, with a few exceptions, is rated satisfactory. The contractors were committed to their work programs and rose to challenges such as interference with local people, financial constraints, high inflation, and shortages of materials and labor. However, they had limited capacity in project planning, resource allocation, financial management, and project management.

53. Suppliers. The executing agency procured office supplies, equipment, and vehicles through qualified suppliers. The overall performance of suppliers is rated satisfactory. Procured items were delivered on time and conformed to the approved specifications. The performance of suppliers of construction material to the contractors is rated partly satisfactory. Problems encountered included (i) delayed payment by contractors, (ii) material shortages in the market, (iii) high inflation and excessive increases in the unit prices of materials, (iv) unprecedented increases in the prices of diesel and labor, and (v) high demand and short periods for delivery.

K. Performance of the Borrower and the Executing Agency

54. The Borrower vested the responsibility for project implementation in the GOS. WSD had considerable experience in construction, rehabilitation, and maintenance of provincial and district roads, bridges, road side facilities, and other physical infrastructure. They worked with national and international contractors and the consultants.

55. After an initial delay, appropriate procedures were established and understood by the project implementation team. The difficulties encountered included poor planning, prolonged decision making, and noncompliance with ADB’s procedural requirements. Some sector-specific implementation issues, such as environmental mitigation measures, also contributed to delays due to inadequate coordination among the executing agency, consultants, contractors, and other relevant government agencies.

56. In summary, the performance of GOS and WSD is rated partly satisfactory. Important factors impeding their performance included (i) limited supervision and commitment; (ii) limited guidance, reviews, or inputs by the steering committee; (iii) late realization of project implementation efforts; (iv) delayed activities, failure to make up for lost time, and failure to

10 achieve targets; (v) inconsistency and discontinuity of project team members; (vi) delays in resolution of issues; and (vii) considerable processing delays by GOS.

L. Performance of the Asian Development Bank

57. Initially, ADB provided little assistance; however this improved later. ADB fielded nine review missions, a pre-project completion mission, and a project completion mission. ADB also shared critical analyses, made recommendations for improvement, and advised on project planning, procurement, construction management, contract administration, resolution of issues, compliance with covenants, social safeguards, environmental mitigation measures, the road asset management system, training, and public–private partnerships. However, earlier intervention by ADB on project implementation may have had a more positive impact.

58. ADB staff regularly reviewed progress and recommended actions. ADB tried to help WSD to address institutional weaknesses and resolve implementation issues. WSD experienced some delays by ADB, mainly during procurement, disbursement, and issuing of OFID funds. Changes in ADB project administration staff affected processing. ADB allowed a 2- year loan extension, two minor changes in scope, and an increased imprest account ceiling. OFID also provided two loan extensions of 3.5 years. These helped WSD enhance efficiency, accelerate progress, and improve results. WSD rated ADB's performance partly successful. Considering ADB’s role, responsibilities, and implementation progress, ADB's performance is rated partly satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

59. The project was highly relevant and in line with the GOP's strategy for economic growth and poverty reduction through developing highways and rural access roads. The objectives were consistent with national road transport needs and the country's infrastructure development priorities. The transport sector is recognized as the backbone of economic development, especially for remote rural areas. During last 7 years, the road transport demand grew by 7–8% per annum; a considerable portion of this has been in Sindh province.

60. A large portion of the Sindh road network—20,640 km of paved roads and 1,660 km national highways—had deteriorated due to inadequate pavement thickness, poor regulation of vehicle loads, inadequate maintenance, and lack of investment. This hampered the effectiveness of transport services. Immediate investment is essential to fill financing gaps, restore and improve access of poor communities to social amenities, improve livelihoods, and enhance economic growth. ADB helped improve this situation through prioritized investments.

B.B Effectiveness in Achieving Outcome

61. The project is rated less effective. Most of the outcomes, envisioned at appraisal, achieved substantial progress. The benefits of investment were less than envisioned at appraisal and accrued late in the project cycle. Few of the actions under the institutional reform and capacity building component were completed and many still require legislative process. The consultants provided substantial planning, programming, and implementation services; however, the overall effectiveness of consultancy inputs was less than envisioned.

11

62. The main weaknesses of the project arose from insufficient ownership and lack of commitment from GOS. Policy, reform, institutional development and capacity building initiatives required stronger commitment, dedicated resources, continuing encouragement, and long- lasting incentives to effect institutional and behavioral change. The project design assumed a strong implementation focus, continuity in preexisting synergy, a sense of ownership of key ideas, knowledge sharing, and higher professionalism in transforming WSD into a modern road agency, little of which materialized.

C.B Efficiency in Achieving Outcome and Outputs

63. The project is rated less efficient as its key objectives were partly achieved. The overall achievement at loan closure was estimated at 75%, with a 2-year loan extension. Generally, the actual costs of completion were much higher than appraisal estimates. Many milestones, such as technical studies, policy papers, and action plans, were successfully completed. However, overall performance of consultants was not as envisioned. Project monitoring, evaluation, and reporting were successful. Coordination among various elements of the project team was inefficient and ineffective.

64. A reevaluation of economic parameters for conditions before and after the project suggested higher economic internal rate of return (EIRR) values compared with a 12% benchmark. The EIRR suggests that (i) highly feasible subprojects were selected, except for a few RAR subprojects; (ii) completion costs of subprojects were reasonable; and (iii) the economic benefits of investment were reasonable. The overall EIRR value of 15.3% confirms the economic viability of the investment. The implemented project scope is rated efficient.

65. Economic benefits were expected to accrue through enhanced connectivity of poor communities to the road network, resulting in reduced travel distance and travel time. Higher inflation and late completion of remaining facilities may reduce the expected economic benefits during the project’s life cycle. An economic reevaluation detailing methodology and results of the economic analysis is in Appendix 10.

66. The improved transport facilities are expected to directly benefit 6–7 million inhabitants living in thousands of villages along the project roads and in the vicinity. The facilities will benefit the road users of the entire province and neighboring provinces, who will have improved connectivity, better access and more reliable transport facilities to remote areas.

D. Preliminary Assessment of Sustainability

67. The sustainability of the project is rated less likely. Reduced efforts to complete the remaining works and the poor socioeconomic situation reduce the likelihood of financial sustainability. The institutional development and capacity building reforms were not fully realized. Therefore, decision making and sustainability may not have been adequately improved. The physical infrastructure is likely to be more sustainable than the policy reform and institutional development initiatives. GOS developed a clear understanding of required measures and committed to provide sufficient funds to ensure the sustainability of investments. However, the allocation of financial resources will depend heavily on the GOP's financial situation. The present financial and political situation suggests that sustainability may be difficult to achieve.

12

E. Impact

68. The project mainly focused on rehabilitation of existing road infrastructure. The construction activities and procurement of equipment and materials had negligible environmental impact. No major construction took place in populated areas. No realignment of existing roads was undertaken. All roads, bridges, and associated facilities had established right of way on already acquired land. Therefore, the impacts of land acquisition, resettlement, and changes in land-use were minimal, as envisaged at appraisal.

69. The initial environmental impact assessment conducted at appraisal covered all environmental parameters and found no significant impacts. However, some soil erosion during construction and temporary minor silting of waterways at bridge sites were visible. Some trees were cleared for road widening, but this had a negligible impact on the environment. Poor dust control and traffic management had some localized impact on people, crops, and vegetation in the beginning; however this improved later. Environmental mitigation measures, included in bidding and contract documents, addressed minor issues during project execution. No protected forests or wildlife sanctuaries were affected. The environmental assessment for all RAR subprojects was conducted before implementation and all subprojects were rated category B.

70. The selected RAR subproject included 15 roads, which pass through a protected forest. Consultants conducted an environmental impact assessment on the wildlife sanctuary and its biodiversity, and this was monitored through the environmental management plan. Construction was generally within the existing right of way, so no significant impact was observed on the graveyards located beside the roadway.

71. The construction improved the local environment. Less traction power will now be used to traverse the smoother surfaces, which will result in less fuel consumption, and reduced air and noise pollution. The improved roads reduced noise levels, dust, uncontrolled flow of surface water, and erosion.

72. Road signage, marking, and geometric upgrading will improve travel conditions. It will also reduce the risk of road accidents, reducing social costs and economic losses. Improved road maintenance and management will ensure greater mobility, convenience, safety, and efficiency through road travel. Improved road surface and pavement serviceability 6 will lead to direct and indirect social benefits in the short and long term.

73. The road and highway improvements will have positive socioeconomic and sociocultural impacts. Improved roads and bridges will ensure better access for poor communities to markets, economic centers, social services, and amenities. Culturally accepted trading patterns will be maintained. Enhanced trade, social, and cultural activities will promote deeper interaction among various cultures, communities and ethnic groups, promoting harmony.

IV. OVERALL ASSESSMENT AND RECOMENDATIONS

A. Overall Assessment

74. The project is rated partly successful. The project was highly relevant and aligned with national economic growth needs, the GOP's infrastructure development strategy, and ADB's country partnership strategy. ADB made sincere efforts to embark on road rehabilitation and policy and institutional development initiatives, in the face of significant challenges. The project's

6 Serviceability is a measure of the riding quality of the road surface.

13 baseline assumptions of strong government commitment, consistency, and continuity were realistic and essential for successful implementation of the project.

75. Some objectives of the project proved to be overly optimistic. The project relied heavily on consulting services. GOS, WSD, RSDD, project staff, contractors, and consultants performed below expectations, undermining some of the project’s objectives. The performance, technical ability, and operational support of the consultants are rated partly satisfactory. Coordination and synchronization between elements of the project team was inadequate. Lack of guidance, coordination, supervision, and poor communication were key issues during implementation. Long decision making and implementation delays were caused by complicated and cumbersome processes and procedures at GOS, which resulted in unaccomplished legislation and incomplete institutional reforms. The performance monitoring team did not track project activities diligently or accurately.

76. The project design was appropriate. Its performance indicators, and outputs were realistic. ADB provided timely approval of prequalification, procurement documents, short-lists, requests for proposals, bid evaluations, concurrences to award, and contract signings. Most of the implementation delays were procedural and were caused by decision making holdups caused by inconsistency of project staff and lack of interest or commitment.

77. The monitoring and evaluation framework provided adequate support for the project. Progress should have been assessed through a monitoring and evaluation framework; however this was not developed by GOS and ADB. WSD produced the progress reports on the consultants’ suggested format. The reporting was regular but monitoring and evaluation are rated partly successful.

B. Lessons

78. The major lessons from the project are summarized below:

(i) The project timeframe did not allow adequate time for developing knowledge and understanding, processes, procedures, and the project implementation framework. (ii) More attention should have been paid to the executing agency's ability to implement the project. Inadequate capacity resulted in complex problems and incomplete outputs. (iii) GOS should have had greater ownership and commitment to the completion of activities. A project-based, decision making forum may have been an option to reduce processing delays. (iv) Pre-project capacity building is essential in the following areas: procurement; loan and contract administration; disbursement processes; monitoring and evaluation mechanisms; periodic reporting needs; and social and environmental safeguards. (v) A well-qualified and experienced project team leader and consultants' familiarity with ADB processes are essential to implement an ADB-financed project. (vi) Extensive and regular coordination of ADB staff is important in developing adequate skills, capacities, and experience, and eliminating common implementation bottlenecks. (vii) A stepwise, flexible approach should have been adopted with adequate supervision support for sector specialists in the policy and reform program and capacity building activities.

14

(viii) Overly optimistic objectives and implementation scheduling should haven been avoided. A gradual, step-by-step approach consistent with local realities should have been adopted. (ix) The local communities and government should have been considered as part of the project team as they could have played an important role in planning and implementation. (x) ADB should have insisted on dedicated professionals with a demonstrated track record to ensure consistency, continuity and competence in the project team. (xi) Achieving the investment and reform program in a limited timeframe was difficult within a highly bureaucratic environment. (xii) The government’s commitment to implement the institutional development, capacity building, and reforms program should have been carefully reviewed, discussed, and tied to funds release. A detailed implementation review and evaluation process must be conducted. (xiii) An inappropriate and poorly performing consulting firm should have been replaced as soon as possible. Heavy reliance on a single group of consultants' for both components does not work. (xiv) In the case of unrecoverable delays, ADB should have considered reducing the project scope, closing the loan early, or suspending the loan until all conditions were met. (xv) Late completion of pre-project activities and advance actions caused inordinate delays and ultimately incompletion. Resources should have been mobilized more quickly. (xvi) Project readiness in the areas such as land acquisition, detailed design, procurement, establishment of the project management unit and project implementation units should have been in place prior to loan approval. (xvii) Unrealistic work schedules, poor procurement planning, insufficient implementation details, and loose monitoring targets prolonged implementation. Over optimistic implementation plans should have been avoided. (xviii) Inappropriate monitoring and reporting risks noncompliance, suspension, or early closure. ADB should enforce regular monitoring of land acquisition, resettlement, and environmental impacts. (xix) Previous performance of consultants should have been a major evaluation and selection criteria. Penalties for poor performance and failure should have been introduced in the consultancy contracts. A stricter approach should be adopted for replacing specialists. (xx) The project had difficulty in attracting international contractors; those who were contracted performed poorly. Suitable packages for local competitive bidding may yield better results. (xxi) The prequalification activity should ensure participation of capable and resourceful contractors. The postqualification procedures should have been adopted for procuring civil work contracts allowing more participation and wider competition.

15

C. Recommendations

1. Project Related

(i) ADB should adopt realistic project implementation schedules and ensure a high level of government commitment. (ii) Future monitoring. Future project monitoring should confirm that (i) the works are completed and performing, (ii) GOS manages the facilities efficiently, (iii) allocated funds ensure the sustainability of investments, and (iv) institutional reforms and capacity building continue to achieve the envisaged targets. ADB should field periodic follow-up missions and use future fact-finding missions to monitor developments. (iii) Covenants. Covenants relating to policy, institutional development, capacity building, and organizational reforms should call for a more gradual, step-by-step process. Covenants related to independent monitoring should be strengthened. Covenants related to strategic planning, management, and public–private partnerships should be stronger. Covenants ensuring continuity and consistency of the project team, and government support and commitment should be further strengthened. The monitoring and reporting framework should be improved. (iv) Future actions or follow-up. ADB should field periodic review missions and develop closer interaction with GOS to ensure effectiveness and sustainability of investments. (v) Additional assistance. GOS is planning to launch another road development program for poor and undeveloped communities in Sindh. ADB may consider providing project preparatory technical assistance and a multitranche financing facility for rural road development. (vi) Timing of the project performance evaluation report. GOS needs 18 months to complete the remaining works and achieve progress in institutional development. A suitable year to undertake a project performance evaluation would be 2013.

2. General

(i) GOS should (i) ensure adequate road maintenance; (ii) adopt key policy and institutional reforms; (iii) allow reorganization of institutional setup and provide sufficient staffing; (iv) ensure sustainability of funds; (v) adopt best practices and revenue collecting measures; and (vi) encourage public–private partnerships, proper corridor management, and concessions for off-budget financing of road rehabilitation, maintenance, and reconstruction. (ii) The executing agency’s capacity and organizational structure should be carefully examined to ensure successful implementation of ADB-assisted projects. The executing agency should hire the services of dedicated cross-sectoral experts for project implementation. (iii) The subproject selection criteria should be strictly followed. The executing agency should submit a subproject evaluation report for ADB’s concurrence before allowing the implementation process. (iv) ADB should make stronger efforts to ensure continuity, consistency, and stability of the project team during the project period. (v) ADB should field review mission more frequently to ensure that the government offers adequate capacity building opportunities and assists in timely resolution of implementation issues.

16

(vi) Likely barriers to success posed by bureaucracy, inadequate capacity, insufficient resources, and lack of commitment should be recognized. (vii) The project design should properly assess the existing capacity of the consulting industry, their capability, efficiency, effectiveness, and expected quality of outputs. (viii) Measures preventing unanticipated policy deviation and government disinterest and lack of commitment should be included in the project design and project risks. (ix) The GOP suggested that the loan conditions should allow more flexibility for utilizing ADB’s financial assistance in ensuring improved project’s cash flow. (x) ADB should seek financial control over disbursement through cofinancing. ADB should negotiate conditions where the cofinancing part of the project is paid through ADB loan proceeds and later recouped by the cofinancier in a timely manner.

Appendix 1 17

PROJECTED OUTPUTS AND ACTUAL RESULTS

Appraised Versus Implemented Project Scope

Appraisal Loan Closing Package Length Cost Length Cost No. Road Section (km) ($ million) (km) ($ million)

Provincial Highways Package-1 Thatta - Sujawal Road 30.1 8.7 30.1 12.5 Package-2 Nawabshah - Padedan Road 67.5 15.4 54.0 17.2 Package-3 Padedan - Ranipur Road 66.4 15.2 28.0 9.3 Rural Access Roads Package-1 Badin District (1 Road) 9.8 0.7 9.8 1.3 Package-2 Dadu District (7 Roads) 52.2 7.9 48.0 7.0 Package-3 Ghotki District (7 Roads) 58.2 5.5 50.0 7.6 Package-4 Hyderabad District (1 Road) 10.2 0.9 9.5 0.9 Package-5 Jacobabad District (7 Roads) 61.8 7.7 63.3 8.8 Package-6 Khairpur District (14 Roads) 185.2 22.0 167.7 21.1 Package-7 Larkana District (12 Roads) 136.9 23.0 144.5 22.5 Package-8 Mirpur Khas District (7 Roads) 55.7 6.9 48.7 6.5 Package-9 Nawab Shah District (1 Road) 5.7 0.8 5.7 0.7 Package-10 Sanghar District (10 Roads) 119.1 15.6 39.5 8.9 Package-11 Shikarpur District (5 Roads) 41.4 4.8 13.0 1.7 Package-12 Sukkur District (7 Roads) 68.3 6.0 72.2 8.1 Package-13 Tharparkar District (11 Roads) 121.0 34.4 117.9 31.6 Package-14 Thatta District (2 Roads) 11.9 1.3 5.3 0.5 Package-15 Umar Kot District (11 Roads) 90.6 11.9 88.7 11.3 Package-16 Naushehro Feroz District (2 Roads) 17.0 2.3 6.6 0.8 Total 1,209.1 190.8 1,002.4 178.2 Source: Report and Recommendation of the President, and data provided by the Office of the Foreign Aided Projects, Hyderabad.

18 Appendix 2

PROJECT COST ($ million)

Appraisal Actual Foreign Local Total Foreign Local Total Description Exchange Currency Cost Exchange Currency Cost 1. Land Acquisition and Resettlement - 1.5 1.5 - 1.7 1.7 2. Civil Works A. Provincial Highways 30.1 36.8 67.0 17.5 21.4 38.9 B. Rural Access Roads 51.7 77.5 129.2 68.6 71.8 140.4 3. Poverty Reduction Pilot Project - 0.3 0.3 - 0.1 0.1 4. Consulting Services A. Civil Works 3.1 3.2 6.2 3.3 3.3 6.6 B. Road Sector and Institutional Reforms 2.3 0.6 2.8 2.0 0.5 2.5 5. Program Administration - 0.9 0.9 - 0.4 0.4 6. Provincial Sector Reforms - 5.0 5.0 - 0.2 0.2 7. Equipment and Vehicles 0.4 - 0.4 0.3 - 0.3 8. Physical and Price Contingencies 9.3 6.2 15.5 - - - 9. Interest Charges During Construction 7.3 - 7.3 4.2 - 4.2 Total 104.1 131.9 236.0 95.9 99.3 195.3 Source: Loan financial information system and the implementing agency.

Appendix 3 19

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENT ($ million) Contract Award Disbursement Year Quarter Projected Actual Projected Actual 2002 I 0.000 0.000 0.631 0.000 II 0.000 0.000 0.631 0.000 III 0.000 0.000 0.631 0.761 IV 0.000 0.000 0.631 0.059 Subtotal 0.000 0.000 2.524 0.820 2003 I 0.000 0.000 0.000 0.000 II 0.000 0.000 0.000 0.077 III 0.000 0.000 0.000 0.000 IV 0.000 0.000 0.000 0.183 Subtotal 0.000 0.000 0.000 0.260

2004 I 0.040 0.000 0.000 0.000 II 9.560 0.000 1.900 0.187 III 20.000 0.043 3.500 0.143 IV 0.000 8.373 1.300 1.623 Subtotal 29.600 8.416 6.700 1.953 2005 I 22.000 3.744 2.000 0.135 II 2.000 32.481 4.000 0.283 III 4.000 6.304 2.000 4.200 IV 2.000 5.529 6.000 3.985 Subtotal 30.000 48.355 14.000 8.603 2006 I 6.000 3.727 6.000 1.404 II 6.000 0.398 4.000 6.508 III 4.000 10.083 6.000 5.937 IV 3.000 4.332 4.000 4.606 Subtotal 19.000 18.540 20.000 18.455 2007 I 14.000 13.251 5.000 4.850 II 16.000 1.330 10.000 4.658 III 0.000 17.431 5.000 11.155 IV 0.000 7.774 0.000 7.403 Subtotal 30.000 39.786 20.000 28.066 2008 I 17.000 6.388 15.000 9.515 II 18.000 4.790 10.000 14.257 III 0.000 11.244 8.000 13.698 IV 0.000 0.000 7.000 10.691 Subtotal 35.000 22.422 40.000 48.161 2009 I 0.000 0.000 4.000 3.513 II 0.000 1.916 8.000 10.067 III 0.000 0.057 6.000 0.522 IV 0.000 0.000 0.000 2.710 Subtotal 0.000 1.973 18.000 16.812 2010 I 0.000 0.000 0.000 0.000 II 0.000 0.000 0.000 (0.433) III 0.000 0.000 0.000 1.171 Subtotal 0.000 0.000 0.000 0.738 Source: Loan financial information System.

20 Appendix 4 Appendix CONTRACT AWARDS AND DISBURSEMENT PERFORMANCE

160

150 139.2 140.1 140.8 140 125.0 130 123.1 119.9 120 109.7 106.3 110 100 85.2 90 81.9

80 69.5

(Million - $) 70 58.2 60 55.5 50.3 50 39.6 38.6 40 30.1 30 19.5 20 11.6 pproval: Dec 2001 0.8 1.1 1.3 5.0

0.9 Closing: Jun 2009 Effective: Sep 2002 Signing: Feb 2002 10 A 3.5 0.0 0.0 0.0 0.0 3.0 - -- -

Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- Dec- Jun- 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 Contract Awards Disbursements

IMPLEMENTATION SCHEDULE 2001 2002 2003 2004 2005 2006 2007 2008 2009 Item Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 A. Advance Procurement Actions - Design updates & preparation of Bid Documents for PHs and Core RARs. - Prequalification of Contractors

- Bidding for PH and Core RARs

- Solicitation and evaluation of supervision consultants' proposals B. Consulting Services - Appointment and Mobilisation of supervision consultants - Construction Supervision of Provincial Highways and Core RARs - Selection and design of RARs

- Construction Supervision of RARs

- Appointment and Mobilisation of Sector Reform Consultants - Sector Reforms Implementation

C. Civil Works Implementation - Tender Evaluation and awards of Provincial Highways and Core RARs

- Construction of PH and Core RARs 5 Appendix

- Bid evaluation and awards of RARs 21 - Construction of RARs

Legend: PH = Provincial Highways, RAR = Rural Access Roads At Appraisal Actual

22 Appendix 6

CHRONOLOGY OF EVENTS

2001 15 Feb–14 Mar Fact-finding completed 10–20 Sep & Appraisal mission completed 15 Feb–14 Mar 21–22 Nov Loan negotiations completed 19 Dec Board approval

2002 01 Feb Loan agreement signed 25 Sep Loan declared effective 19–27 Nov Inception mission fielded

2003 15 Oct Executing agency proposed shortlist of six firms and draft request for proposal documents approved

2004 12–16 Jan First loan review mission fielded 17–22 May Second loan review mission fielded 9 Jun Consultant selection committee endorsed the executing agency's evaluation of technical proposals for five consulting firms 30 Jul Consultant selection committee endorsed the executing agency's evaluation of financial proposals and final ranking of five consulting firms 13 Sep ADB approved the draft negotiated contract and advised the executing agency to proceed with signing the contract agreement 20 Sep Nine prequalified contractors approved for international competitive bidding (ICB) packages P1, P2 and P3 28 Oct Bid evaluation report (BER) for the procurement of vehicles approved for PRs9,310,934 3 Nov Contract agreement for consultancy services received 9 Dec Quantity enhancement request for the procurement of vehicles approved for PRs18,401,506 2005 10 Mar BERs for ICB packages P1 (PRs739,286,575), P2 (PRs1,352,845,987) and P3 (PRs1,200,219,549) approved by procurement committee 11 Apr Design report for phase I priority road packages commented on 25–30 Apr Third loan review mission fielded

Appendix 6 23

19 May BERs for road packages 84305 (PRs87,727,723), 85202 (PRs86,439,192), 85507 (PRs83,048,250), and 84101 (PRs52,485,392) approved 13 Jun BERs for road packages 83203 (PRs87,606,6781), 855511 (PRs66,852,491), 85502-I (PRs109,473,741), and 84102-I (PRs54,258,991) approved 13 Jun BERs for road packages 83207, 83205(R1), 84102-II, 81201-I, 85203, and 85204 reviewed and rebidding approved 8 Jul BERs for road packages 85502-II (PRs63,872,082), 84514 (PRs65,660,904), 85502-III (PRs73,270,458), 83111-I (PRs122,332,983), and 84302 (PRs117,955,433) approved 8 Jul BER for road package 84510 reviewed and rebidding approved 16 Aug BERs for road packages 85102 (PRs36,659,426), 83111-II (PRs117,157,900), and 84505 (PRs85,795,644) approved 16 Aug BERs for road packages 84102-II, 85105, 83207, 81201-II, and 84103 reviewed and rebidding approved 23 Sep Road safety plan commented on 14 Oct BERs for road packages 81201-II (PRs156,670,923), 84102 (PRs75,577,725), 83207 (PRs105,606,082), 84301 (PRs73,419,709), and 84307 (PRs84,441,632) approved 14 Oct BERs for road packages 84103, 81201-II, 84303, 84510, 84304, 85204, 85105-I, and 85105-II reviewed and rebidding approved 21–26 Nov Special loan administration mission fielded 16 Dec Poverty reduction plan commented on

2006 16 Jan Study on the organization of Works and Services Department, management principles, operational system, and resource mobilization commented on 24 Jan BERs for road packages 84304 (PRs83,716,760), 83110 (PRs55,261,767), and 84510 (PRs92,086,749) approved 24 Feb Documents on second round of prequalification of contractors commented on 8 Mar Revised poverty reduction pilot plan for implementation approved 13 Mar Minor change approved to increase National Competitive Bidding (NCB) threshold from $2.2 million to $5.0 million 17 Mar Road safety education plan approved 17 Mar Human resource management and development plan approved 17 Mar Human resource management and development road safety training plan commented on 17 Mar Training and resource center plan approved for implementation

24 Appendix 6

21 Mar BERs for road packages 83208-I (PRs189,992,360) and 83202 (PRs155,922,315) approved 4 Apr Road maintenance planning and contracting for sector reforms component commented on 5 Apr BERs for road packages 84102-II (PRs72,809,315), 84103 (PRs43,988,324), and 84303 (PRs122,614,539) approved 17 Apr BER for road package 83109 (PRs84,528,651) approved 20 Apr Endorsed executing agency's request for appointment of deputy technical advisor under consultancy contract 28 Apr Program for manual traffic counts of Sindh provincial roads and highway commented on 1 May BERs for road packages 81203 (PRs41,912,926), 83308 (PRs42,722,849), and 85203 (PRs35,303,407) approved 11 May Report on axle load control plan approved 16 May Human resource management and development road safety training plan approved for implementation 17 May Report on private sector participation commented on 29 May Report and review of the road maintenance plans for 2005–2008 approved 7 Jun Complaint received and forwarded to the executing agency from Shahid Khanzada of Daur, Nawabshah District on land compensation acquired for bypass construction for the Nawabshah–Padedan–Ranipur road 27 Jun Requested borrower to amend the loan agreements to increase NCB threshold from $1.0 million to $5.0 million 7 Jul BERs for road packages 41215 (PRs61,904,266) and 40707 (PRs45,281,715) approved 7 Jul Executing agency advised to hold negotiations for road package 83205- R1 25 Jul Prequalification of contractors for phase II road commented on 27 Jul BERs for road packages 85209 (PRs56,787,604), 40902 (PRs39,777,057), and 40501 (PRs50,406,302) approved 10 Aug Prequalification of contractors (22) for phase II roads approved 23 Aug BER for road package 83205-R1 (PRs142,690,370) approved 1 Sep Executing agency's request for the recruitment of nongovernment organization (NGO) for poverty reduction pilot project approved 7 Sep BERs for road packages 40703 (PRs127,059,682), 40708 (PRs42,626,447), 41203-P1 (PRs17,970,744), 41203-P2 (PRs164,050,229), 41706 (PRs79,821,343), and 41711 (PRs59,043,657) approved 7 Sep Executing agency advised to hold negotiations for road package 40705 and endorsed rejection of road package 83208-P2 20 Sep–3 Oct Midterm review mission fielded

Appendix 6 25

16 Oct Executing agency's proposed shortlist of three NGOs and draft request for proposal documents approved 18 Oct BERs for road packages 40402 (PRs56,997,311), 40803 (PRs194,115,942), 40804 (PRs120,009,642), 40805 (PRs66,740,328), 41104 (PRs81,562,244), 41219 (PRs72,984,199), 41718 (PRs42,968,134), and 83204 (PRs121,946,627) approved 11 Dec BER for road package 40705 (PRs92,314,031) approved 13 Dec BER for road package 41601 (PRs111,386,760) approved 13 Dec BERs for road packages 40802, 41505-I, and 41505-II reviewed and rebidding approved 20 Dec ADB endorses the executing agency's evaluation of financial proposals and final ranking of one NGO 2007 6 Jan ADB endorses the executing agency's evaluation of financial proposals and final ranking of the sole NGO 19 Jan Draft expression of interest for the recruitment of NGO for implementation of land acquisition resettlement actions approved 8 Feb ADB approved the draft negotiated contract for NGO for poverty reduction pilot project and advised the executing agency to proceed with contract signing 21 Mar Forwarded complaint received from Sardar Muhammad Yaqub Khan on contract P1 (Thatta–Sujawal road) to the executing agency for resolution 15 May Variation order 1 to consultancy contract approved 5 Jul Two-year extension of the loan closing date from 30 June 2007 to 30 June 2009 approved 24 Jul BERs for road packages 41717 (PRs39,119,878), 41716 (PRs56,533,865), 41712 (PRs67,771,171), 41713 (PRs69,180,822), 41705 (PRs105,009,100), 41501 (PRs178,218,357), 41518 (PRs179,740,976), 40702 (PRs140,586,025), 40503 (PRs65,648,900), 83208-II (PRs122,334,502), 40801 (PRs88,659,507), 41602 (PRs35,852,671), 40711 (PRs146,400,031), 40714 (PRs142,531,363), 40713 (PRs196,209,400), and 40712 (PRs152,005,805) approved 24 Jul BER for road package 41504 above the NCB threshold of $5 million rejected 22 Aug Cancellation of road package 83308 approved 26 Sep Increased width as well as cost of road packages 41505-II (PRs183,941,477), 41505-I (PRs236,337,210), and 83208 (PRs111,332,760) in the desert approved 28 Sep OPEC Fund for International Development approved 2.5-year extension of the loan closing date from 31 December 2006 to 30 June 2009 for its loan 5 Oct BERs for road packages 40302 (PRs50,012,765) and 41511 (PRs213,585,417) approved

26 Appendix 6

1 Nov Variations orders for contract packages 83204, 40708, 40707, 83203, 85102, 40402, 84103, and 40804 reviewed and commented on 5–10 Nov Fourth loan review mission fielded 11 Dec BERs for road packages 40301 (PRs89,947,189), 40502 (PRs76,456,332), 40717 (PRs107,349,486), 41401 (PRs51,170,503), 41402 (PRs35,721,926), 81207 (PRs69,017,100), 83302 (PRs55,786,253), and 85204 (PRs78,052,990) approved 11 Dec Clarification sought on six BERs where desert factor of 13.5% over and above the compounded inflation (7–10%) on NHA CSR 2000 was applied 2008 8 Jan Minor change in project scope to increase the width of 13 rural access roads in the two desert districts (Tharparkar = 10, and Umerkot = 3) approved 14 Jan BERs for road packages 40201 (PRs66,847,134), 40202 (PRs59,754,755), 40901 (PRs85,869,973), 41001 (PRs49,091,610), 41709 (PRs103,091,769), 41710 (PRs79,048,063), 81201-I (PRs100,261,650), 81201-II (PRs101,060,660), and 81201-III (PRs74,562,636) approved 24 Jan BERs for civil works packages 41503-I (PRs202,737,786), 41503-II (PRs122,365,108), 41504-I (PRs168,157,941), 41504-II (PRs198,072,907), 41506-I (PRs208,136,939), and 41506-II (PRs137,510,720) in the desert area approved 26 Feb Executing agency's request endorsed for the termination and reinvitation of NCB contract No. 41104 25 Mar BERs for road packages 40104 (PRs79,085,761), 83306-I (PRs116,346,56), 83306-II (PRs44,486,907), 83309 (PRs67,300,970), 85105-I (PRs89,990,062), 85105-II (PRs74,758,080), 85105-III (PRs76,153,688), and 85105-IV (PRs82,825,548) approved 2 Apr Variation orders for contract packages 40804, 83109, 83207, 84302, 83204, 40503-I and 40503-II reviewed and commented on 23 Apr Variation orders 1 and 2 for contract package 83203 reviewed and declared ineligible for additional works for ADB financing 12 May Executing agency advised that OFID loan funding is fully committed and arrange required financing for the 16 contract packages submitted and any other future contracts to be awarded 4 Jun On receipt of complaint, advised executing agency to send ADB the original bid documents submitted by Haji Atta Mohammad for package 85209 14 Jun Legal notice served by the contractor of road package 41601 to the client 23 Jun Declined executing agency's request for termination of contract for road 41601 and advised to submit additional documentation 26 Jun Executing agency advised that SKB, the partner of SMC-SKB Joint Venture for package P3 is under sanction by ADB and is ineligible for any additional work(s) or extension of time

Appendix 6 27

31 Jul Informed executing agency that Sachal Engineering Works (Pvt) Ltd., the contractor for road 83203 was under sanction by ADB and reaffirmed that it cannot finance any portion of variation orders 1 and 2 proposed for or issued to it 1 Aug Government of Sindh posted Muhammad Sharif Nizamani as Chief Engineer Foreign Aided and Special Projects and vice Syed Akbar H. Rashdi transferred and posted to the Works and Services Department 18–23 Aug Fifth loan review mission fielded 19 Sep Legal notice served by the contractor of road package 41601 and forwarded to the client seeking clarification on the allegations and statements 13 Oct Change in the procurement method from prequalification to postqualification approved for civil works terminated under NCB contracts 16 Oct Additional information sought for the termination of contracts 84303, 84304, 41219 and 41215 11 Nov Variation orders 1 and 2 (PRs139.656 million) to ICB contract P3 approved 17 Dec PRM wrote to OCO about the delay in the processing of the withdrawal application for the OFID share of financing (the delay was noted throughout the life of the project, which the executing agency complained about repeatedly) 23 Dec Variation order 2 to consultancy contract (person months impact = 100.29% and cost impact = 41.4%) approved 26 Dec Declined borrower's request for further 1-year loan extension and affirmed that the project will close on 30 June 2009 as extended 2009 22 Jan In response to borrower's further request for loan extension, ADB reaffirmed that the loan will close on 30 June 2009 as agreed per the conditions of the earlier 2-year extension 6–14 Apr Sixth loan review mission fielded 15 May Approved executing agency's reappropriation in the consultancy contract and time extension up to 30 June 2009 4 Jun Minor changes to the signed civil works contracts approved allowing post facto approval of variation orders including escalation payments 4 Jun BER approval for road packages 41516 and 41601declined due to loan closing on 30 June 2009 17 Dec OFID approved second extension of the loan closing date from 30 June 2009 to 30 June 2010 2010 15–21 Jan Preproject completion review mission fielded 17 Feb Variation orders for road packages 41506-I, 41506-II, 40717, 40711, 40803, 40702 and 83109 approved 1–13 Mar Project completion review mission fielded

28 Appendix 7

LOAN COVENANTS COMPLIANCE STATUS

CovenantsB ReferenceB Status

The Borrower shall furnish, or LAB Section Complied with cause to be furnished, to the 4.04, Bank all such reports and Article VI The executing agency regularly submitted information as the Bank shall reports to ADB as required, including: monthly reasonably request concerning progress reports; quarterly progress reports; (i) the Loan, and the expenditure feasibility studies; inception, design, and of the proceeds and complete bid documents; evaluations of bids; maintenance of the service project implementation documents; BME; thereof; (ii) the goods and resettlement reports; EIA; and EMP reports. services and other items of expenditure financed out of the proceeds of the Loan; (iii) the project; (iv) the administration, operations and financial condition of WSD and any other agencies of the Borrower responsible for the carrying out of the project and operation of the project facilities, or any part thereof; (v) financial and economic conditions in the territory of the Borrower and the international balance-of- payments position of the Borrower; and (vi) any other matters relating to the purposes of the Loan.

The SPG will establish the LAB Section Complied with RSDD within Sindh. The director 6.01(a), general, and the section heads Article VI RSDD headed by the director general and will be appointed prior to loan supporting staff has been established under effectiveness. the Head of Account 6-31100 Administration Works by Government of Sindh effective 29 April 2002. International and domestic LA Complied with consultants should be recruited Schedule 5 in accordance with ADB's para. 2 International consultants Kampsax (Denmark) Guidelines on the use of were recruited with a consortium of five local consultants consultants namely ECIL, REC, OCL, ACC and ABM in November 2002 in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).

Appendix 7 29

CovenantsB ReferenceB Status

WSD shall be the executing LA Complied with agency of the project. Schedule 5 para. 1 Chief engineer/project director as a representative of WSD the executing agency, was appointed for the project by Services General Administration and Coordination Department, Government of Sindh on 29 September 2004. POS shall establish RSDD in LA Complied with WSD, headed by a Director Schedule 6 General and comprising sections para. 2 On 29 April 2002, RSDD headed by the that will lead the road sector director general and supporting staff was reform process envisaged under established under the Head of Account 6- the project. 31100 Administration Works, Government of Sindh. Within six months of loan LA effectiveness, SPG will form a Schedule 6 Late complied steering committee headed by para. 3 The high level steering committee headed by the additional chief secretary. the additional chief secretary (Dev) P&D Department was constituted by the Government of Sindh on 27 August 2004. Within six months of its LA Late complied establishment, the SPG will form Schedule 6 a citizen's advisory group, with para. 4 Citizen Advisor Group was formed by the the Association of Road Users of Government of Sindh on 08 March 2005. Pakistan as the secretariat, to provide a forum for feedback on the progress and direction of the provincial road sector reforms WSD shall continuously monitor LA Complied with and evaluate project benefits by Schedule 6 compiling and analyzing para. 5 BME report submitted to ADB in September socioeconomic data and traffic 2005. on the project financed provincial highways and rural access roads.

The SPG shall ensure that LA Complied with people displaced by the PSDP Schedule 6 do not incur any losses in para. 6 The cost of land acquisition and resettlement income, employment has been borne by the Government of Sindh opportunities, or social and and, as such an amount of PRs.71,145,696 cultural well-being. All those have been paid to the land acquisition officer displaced will be compensated for acquiring land for construction of provincial for loss of lands, housing and highways. livelihood according to the framework set out in the RP and in conformity with existing laws,

30 Appendix 7

CovenantsB ReferenceB Status regulations, and procedures relating to both legal and acquired rights in Pakistan WSD shall ensure that all LA Complied with environmental mitigation Schedule 6 measures identified in the IEE para. 7 As per agreement with consultants, all are incorporated into the project environmental mitigation measures during design and implemented during project construction, operation and project construction and O&M, in maintenance will be carried out in accordance accordance with the Bank’s with ADB guidelines. Fifteen project roads environmental guidelines and crossed environmentally sensitive areas; EIAs the Environmental Management were carried out and approved by SEPA and Monitoring Plan agreed with the mitigation measures were included in Bank. contracts. Environmental monitoring reports were regularly furnished. WSD shall be responsible for the LA Will be complied with O&M of the project roads Schedule 6 through proper technical para. 8 supervision and adequate allocation of funds.

WSD shall (i) ensure the LA Complied with continued application of a Schedule 6 uniform and effective financial para. 9 Office of chief engineer/project director was and accounting system that established with all required staff for continued meets internationally recognized application of uniform and effective financial standards, and (ii) introduce and and accounting systems. standardize procurement processes on the basis of transparency, simplicity, and client responsiveness. The SPG shall ensure that LA Complied with people displaced by the PSDP Schedule 6 do not incur any losses in para. 10 The cost of land acquisition and resettlement income, employment shall be borne by the Government of Sindh opportunities, or social and and, as such an amount of PRs.71,145,696 cultural well-being. All those have been paid to the land acquisition officer displaced will be compensated for acquiring land for construction of provincial for loss of lands, housing and highways. livelihood according to the framework set out in the RP and in conformity with existing laws, regulations, and procedures relating to both legal and acquired rights in Pakistan Sindh WSD will ensure that the LA Complied with civil works contractors comply Schedule 6 with all applicable labor laws, para .11 The necessary clause was put in the

Appendix 7 31

CovenantsB ReferenceB Status including elimination of gender- conditions of contract. (Clause 34.2 Condition differentiated wages, and do not of Contract Part-II). Monitoring was carried out employ child labor in by the consultants. construction activities Within twelve months of the LA Pertains to RSDD Effective Date, POS shall submit Schedule 6 to the Bank for concurrence, the para. 12 terms of reference for the poverty reduction pilot project.

Except as ADB may otherwise LAB Complied with agree, subprojects for the rural Schedule access roads under the 6, para. 13 1200 km of rural access roads, out of 1600 km Investment subcomponent shall selected by GOS, and 164 km of provincial be identified and selected by highway were considered feasible by the WSD and endorsed by the consultants as per the criteria of the loan Steering Committee on the basis agreement, which were duly approved by of the criteria detailed in the WSD and endorsed by the steering committee. Loan Agreement.

32 Appendix 8

CONSULTING SERVICES

Table A8.1: Consultant Procurement Process

Expression of Submission of Responsive Consultancy Service Interest Received Proposal Proposals Design and construction supervision of PH and RAR civil works 10 firms/JVs 5 firms/JVs 5 firms/JVs

Sector and institutional reforms JVs = Joint Ventures, PH = provincial highways, RAR = rural access roads. Source: Office of the Foreign Aided Projects, Hyderabad.

Table A8.2: Comparison of Consultant Input Planned vs. Actual

Planned Consulting Employed Consulting Employed Inputs Inputs Consultancy Component Firm International Local International Local Design and construction supervision of PH and RAR M/s KAMSAX 170.0 3,852.7 158.8 7,146.3

Sector Reform Component PH = provincial highways, RAR = rural access roads. Source: Office of the Foreign Aided Projects, Hyderabad.

Appendix 9 33

PROCUREMENT OF CIVIL WORKS

Table A9.1: Comparison of Contract Packages – Appraised vs. Actual

Actual Appraisal Bid Contract Difference Package No Road Section Estimate Received Value (%) Provincial Highways Package-1 Thatta - Sujawal Road 8.7 12.4 12.5 42.8 Package-2 Nawabshah - Padedan Road 15.4 22.7 28.0 82.6 Package-3 Padedan - Ranipur Road 15.2 20.5 24.7 62.5 Rural Access Roads Package-1 Badin District (1 Road) 0.7 1.3 1.3 78.9 Package-2 Dadu District (7 Roads) 7.2 7.7 7.0 -2.6 Package-3 Ghotki District (7 Roads) 5.5 8.1 7.8 42.2 Package-4 Hyderabad District (1 Road) 0.9 0.9 0.9 2.0 Package-5 Jacobabad District (7 Roads) 7.7 9.5 10.1 30.8 Package-6 Khairpur District (14 Roads) 22.0 23.9 22.1 0.5 Package-7 Larkana District (12 Roads) 23.0 25.0 23.0 0.0 Package-8 Mirpur Khas District (7 Roads) 6.9 7.5 6.8 -0.6 Package-9 Nawab Shah District (1 Road) 0.8 0.8 0.7 -13.3 Package-10 Sanghar District (10 Roads) 15.6 17.0 18.1 16.6 Package-11 Shikarpur District (5 Roads) 1.5 2.0 1.7 15.1 Package-12 Sukkur District (7 Roads) 6.0 8.1 8.1 36.3 Package-13 Tharparkar District (11 Roads) 34.4 33.4 31.6 -8.2 Package-14 Thatta District (2 Roads) 0.6 0.6 0.5 -11.0 Package-15 Umar Kot District (11 Roads) 10.6 11.7 10.0 -5.4 Package-16 Naushehro Feroz District (2 Roads) 2.2 2.3 2.3 2.2 No. = number, ICB = international competitive bidding, NCB = national competitive bidding. Source: Office of the Foreign Aided Projects, Hyderabad.

34 Appendix 9

Table A9.2: Contract Time Extensions and Additional Costs

Completion of Subproject Time Cost Package Difference Difference No. Road Section Contractor (months) ($ million) Provincial Highways Package-1 Thatta - Sujawal Road M/s Lily Shahrukh JV 26.0 3.73 Package-2 Nawabshah - Padedan Road M/s Sardar M. Ashraf 18 12.68 Package-3 Padedan - Ranipur Road M/s SMC & SKB JV 18 9.50 Rural Access Roads Package-1 Badin District (1 Contract) M/s Izhar Constructors 4.0 0.57 Package-2 Dadu District (7 Contracts, 3 Contractors 6.3 (0.03) 1 Cancel) Package-3 Ghotki District (7 Contracts) 4 Contractors 4.9 0.33 Package-4 Hyderabad District (1 Contract) M/s Izhar Constructors 13.0 0.02 Package-5 Jacobabad District (7 Contracts) 3 Contractors 14.3 0.34 Package-6 Khairpur District (14 Contracts, 6 Contractors 4.8 (0.01) 1 WIP, 1 Cancel) Package-7 Larkana District (12 Contracts) 6 Contractors 12.5 (0.00) Package-8 Mirpur Khas District (7 Contracts, 3 Contractors 15.7 (0.02) 1 WIP) Package-9 Nawab Shah District (1 Contract) M/s Umar Jan and Co. 9.0 (0.10) Package-10 Sanghar District (10 Contracts, 3 Contractors 18.7 0.41 7 court cases) Package-11 Shikarpur District (5 Contracts, 3 Contractors 12.5 0.11 3 cancel) Package-12 Sukkur District (7 Contracts) 4 Contractors 10.9 0.31 Package-13 Tharparkar District (11 Contracts) 2 Contractors 5.3 (0.26) Package-14 Thatta District (2 Contracts, 2 Contractors 8.0 (0.06) 1 cancel) Package-15 Umar Kot District (11 Contracts) 4 Contractors 10.6 (0.03) Package-16 Naushehro Feroz District 2 Contractors 14.0 (0.17) (2 Contracts, 1 terminate) Co. = Company, No. = number, WIP: incomplete, subproject finalization works in progress. Source: Office of the Foreign Aided Projects, Hyderabad.

Appendix 10 35

ECONOMIC REEVALUATION

1. The economic reevaluation of road rehabilitation works under the project was carried out by calculating its profitability in terms of accrued economic benefits over the economic costs using the discounted cash flow technique. The benefits to road users were estimated from the difference between the costs and the benefits of “without project" and "with project" scenarios. This was used to determine the economic viability of investments. The assumptions were:

(i) "Without project" scenario. It is assumed that the existing roads are maintained at the present levels without major capital investments. Routine or low-cost maintenance is carried for 7 years to keep the roads operational. The minor works prevent the pavement from excessive deterioration or destruction. The road roughness is allowed to advance under traffic loads. The assumptions related to road roughness progression 7 are: (a) Provincial highways. The international roughness index (IRI) 8 is allowed to deteriorate to a value of 10 meters (m) per kilometer (km). At that level some low-cost periodic maintenance is carried out to reduce the IRI to 6 m per km. (b) Rural access roads (RARs). It is assumed that IRI is allowed to deteriorate to 10 m per km. At that level, some low-cost periodic maintenance is carried out to reduce the IRI to 8 m per km. (c) Maintenance strategy. The above strategy will remain enforced for the next 20 years without major investments, rehabilitation, or improvement works. The pavement is allowed to deteriorate and only routine maintenance is undertaken.

(ii) "With project" scenario. It is assumed that some capital investments in the form of rehabilitation works are introduced to improve pavement serviceability 9 to achieve higher performance. The pavement is then allowed to deteriorate until periodic maintenance is initiated. The routine maintenance activities would restore the pavement serviceability to an acceptable limit. The periodic overlay or resealing of pavement surface is done every 7 years. The assumptions for road roughness progression are: (a) Provincial Highways. The IRI is restored to 3 m per km or below. Regular routine maintenance is carried out for the period of analysis. A periodic overlay or rehabilitation is provided every 7 years to bring the IRI down to 3 m per km or less. (b) RARs. The IRI is restored to 5 m per km or below. Regular routine maintenance is employed. At 7 years interval, some resealing, rehabilitation, and periodic maintenance activities are carried out to bring the IRI down 4 m per km or below. (c) Maintenance strategy. The above strategy is enforced for the next 20 years. Periodic investments for rehabilitation keep the pavement at an acceptable standard throughout the analysis period.

7 Road roughness progression refers to the increase in the unevenness of the road surface with aging and use. 8 The international roughness index (IRI) is a measuring unit for road surface unevenness in meters per kilometer. 9 Serviceability is a measure of the riding quality of the road surface.

36 Appendix 10

A. Scope

2. The reevaluation includes 112 km of provincial highways and 893 km of RARs. The rehabilitated surface meets the minimum acceptable standard of 3 IRI. It is assumed that in the "with project" scenario, a smoother and more efficient road is available after rehabilitation. The road is maintained over the designed life. Only tangible direct benefits of the road improvement have been included, by calculating the benefits accruing from investments. The actual long-term benefits would be more than has been estimated through this reevaluation.

B. Methodology

3. Discounted cash flow technique is used for the economic reevaluation. The provincial highway subprojects are evaluated as standalone subprojects. Whereas, the RAR in one region (district) have been combined together as one subproject for calculation purposes.

4. The economic viability of subprojects has been established by their profitability measured through excess economic benefits over economic costs. The period of analysis is 20 years. The same vehicle classification and traffic growth factors are applied to all subprojects in a region. The projected stream of economic benefits, over the economic life of the project, has been compared with the estimated stream of economic costs.

5. An economic pricing factor of 0.85 has been used to covert the financial costs and benefits to economic costs and benefits. The future cost and benefits have been brought to a uniform basis through a discounting technique. A discount rate of 12% has been used. The economic indicators, such as net present value, benefit to cost ratio, and economic internal rate of return (EIRR) have been computed. The economic viability of intervention is evaluated against the threshold figure of 12% EIRR for the project.

C. Project Benefits

6. Tangible direct benefits accruing from the project include vehicle operating cost (VOC) and travel time savings. However, most of the benefits accrued from VOC savings. The intangible and indirect benefits are not been assessed in this reevaluation. The benefits arising from two parameters have been estimated to determine the quantifiable benefits accruing from the interventions.

D. Existing and Projected Traffic Streams

7. The executing agency carried out the traffic assessment, through consultants and the Road Sector Development Directorate (RSDD). The data and the traffic growth rates were analyzed and reevaluated for validity. Fitness of data for estimating the future traffic regime over the investigation period was assessed and realistic values were ensured. The traffic levels were estimated by considering the future trends of road sector development, corridor development plans, transport demand, economic growth, and other economic parameters. Table A7.1 provides the traffic data used for reevaluation.

Appendix 10 37

Table A10.1: 2009 Traffic Streams in Subprojects Package Road Section/District Motor Car Wagon Buses Truck 2- Truck 3- Truck >3- Total Motorized Cycle Axles Axles Axles Traffic Provincial Higways P-1 Thatta - Sujawal Road 444 1,348 1,187 344 1,429 470 49 5,271 P-2 Nawabshah - Padedan Road 987 2,335 824 194 739 33 36 5,148 P-3 Padedan - Ranipur Road 987 2,335 824 194 739 33 36 5,148 Rural Access Roads Package-1 Badin District (1 Road) 38 14 2 1 8 1 6 70 Package-2 Dadu District (7 Roads) 231 154 58 9 5 9 47 513 Package-3 Ghotki District (7 Roads) 126 45 29 6 14 14 63 297 Package-4 Hyderabad District (1 Road) 32 27 9 5 6 1 6 86 Package-5 Jacobabad District (7 Roads) 457 74 113 21 12 14 168 859 Package-6 Khairpur District (14 Roads) 321 113 85 24 16 12 184 755 Package-7 Larkana District (12 Roads) 156 121 25 8 3 2 234 549 Package-8 Mirpur Khas District (7 Roads) 241 172 112 42 52 9 75 703 Package-9 Nawab Shah District (1 Road) 38 56 2 4 5 5 2 112 Package-10 Sanghar District (10 Roads) 198 48 28 4 8 8 12 306 Package-11 Shikarpur District (5 Roads) 105 25 31 4 16 8 185 374 Package-12 Sukkur District (7 Roads) 674 178 101 28 41 6 105 1,133 Package-13 Tharparkar District (11 Roads) 36 58 7 39 45 37 22 244 Package-14 Thatta District (2 Roads) 27 8 4 3 7 6 7 62 Package-15 Umar Kot District (11 Roads) 425 189 32 18 45 12 65 786 Package-16 Naushehro Feroz District (2 Roads) 49 35 9 1 5 1 13 113 Source: Office of the Foreign Aided Projects, Hyderabad.

E. Comparison of Traffic Growth

8. The traffic growth factors reported at appraisal ranged from 3.6% to 8.3%. The type, characteristics, socioeconomic factors, geographical location, and role of the road network were taken into consideration. The traffic growth rates used in the reevaluation are conservative. Appropriate traffic growth rates for provincial highways and RARs have been used. It is assumed that the traffic growth rate will be applicable for 5 years. Future traffic projections have been calculated to determine the level of traffic on the roads. This allowed a realistic assessment of future traffic streams. Table A7.2 provides the traffic growth factors adopted for estimating future traffic.

Table A10.2: Traffic Growth Factors Adopted Multi- Period Motorcycles Cars Wagons Buses 2-Axle 3-Axle Axles a. Provincial Highways Growth Rate up to 2013 5.00% 6.50% 6.00% 5.50% 4.00% 5.00% 8.00% Growth Rate after 2018 4.50% 6.00% 5.50% 5.00% 3.50% 4.00% 7.00% Growth Rate after 2023 4.00% 6.00% 5.00% 4.50% 3.50% 4.00% 7.00% Growth Rate after 2028 4.00% 5.50% 5.00% 4.50% 3.25% 4.00% 7.00% Growth Rate after 2028+ 2.80% 2.50% 2.50% 2.10% 2.50% 2.80% 2.50% b. Rural Access Roads Growth Rate up to 2013 3.50% 4.00% 4.00% 3.75% 3.00% 5.00% 5.00% Growth Rate after 2018 3.00% 3.50% 3.75% 3.50% 2.75% 5.00% 4.00% Growth Rate after 2023 2.75% 3.00% 3.50% 3.25% 2.50% 4.00% 4.00% Growth Rate after 2028 2.00% 3.00% 3.00% 3.00% 2.50% 3.00% 3.00% Growth Rate after 2028+ 2.80% 2.50% 2.50% 2.10% 2.50% 2.80% 2.80% Source: Office of the Foreign Aided Projects, Hyderabad.

38 Appendix 10

F. Improvement of Road Condition

9. The road roughness represents the road condition before and after the project. It broadly expresses the impact of all road defects, deficiencies, and performance. Therefore, it is considered as the most critical criteria influencing the performance of road structure. Generally, the estimation of road improvement or accrued benefits is done through the change in the road roughness values. The changes to road roughness conditions under the "without project" and "with project" scenarios have been used to estimate the benefits of improvement. The strategy assumed for controlling the road conditions during the period of analysis were:

(i) For improving the provincial highways a periodic overlay 10 is provided every 7 years. At each such intervention, the road pavement will achieve the serviceability standard of 3 IRI. (ii) For RARs it is assumed that a thin overlay or resealing will be provided every 7 years and this will improve the serviceability to 4 IRI.

G. Average Operating Speeds

10. Average operating speeds under the "with project" and "without project" scenarios, for various vehicles categories, have been worked out to calculate travel time cost savings. The assumed operating conditions for each traffic category before and after the improvement are presented in Table A7.3.

Table A10.3: Vehicle Operating Speeds (kilometers per hour) 2-Axle 3-Axle Multi-axle Description Motorcycle Car Wagon Bus Truck Truck Truck Provincial Highways Without project 35 50 45 40 35 35 35 With project 50 70 65 60 60 50 50 Rural Access Roads Without project 30 50 45 40 40 35 35 With project 40 70 60 50 50 50 50 Source: Office of the Foreign Aided Project, Hyderabad.

H. Vehicle Operating Costs

11. Fuel consumption, engine oil consumption, tire wear and tear, maintenance cost, depreciation, interest, vehicle age, and other indicators are used to calculate VOC per km at various speeds under the "with project" and "without project" scenarios. It is difficult to measure these indicators precisely, so the results of this analysis are rough estimates. The VOC values for each traffic category have been calculated through HDM-4 11 at 2009 prices. Table A7.4 outlines VOC values at various IRI levels.

10 Periodic overlay: The pavement's top surface is replaced with better material to improve serviceability and pavement strength. 11 HDM-4: Computer software Highway Design and Management Version 4.

Appendix 10 39

Table A10.4: Vehicle Operating Cost for Various Roughness Levels (Pre/km) IRI IRI (mm/km) (m/km) Car Wagon Bus 2-Axle 3-Axle Multi-Axle

1500 2.2H 6.123 13.319 15.213 16.010 17.590 25.269

2000 2.9H 6.299 13.750 15.805 16.589 18.143 26.061

2500 3.6H 6.398 14.000 16.143 16.887 18.428 26.480

3000 4.4H 6.497 14.249 16.481 17.184 18.714 26.899

3500 5.1H 6.722 14.832 17.272 17.810 19.313 27.815

4000 5.8H 6.982 15.515 18.213 18.478 19.945 28.825

4500 6.6H 7.132 15.917 18.773 18.837 20.280 29.377

5000 7.3H 7.282 16.318 19.334 19.196 20.615 29.929

5500 8.0H 7.631 17.262 20.660 19.970 21.320 31.114

6000 8.8H 8.038 18.367 22.203 20.801 22.060 32.370

6500 9.5H 8.266 18.989 23.084 21.245 22.445 33.027

7000 10.2H 8.494 19.611 23.964 21.688 22.831 33.685

7500 10.9H 8.964 20.894 25.933 22.628 23.629 35.054

8000 11.68H 9.444 22.209 28.094 23.615 24.453 36.471 IRI = international roughness index, km = kilometer, m/km = meter per kilometer, mm/km = millimeter per kilometer, PRe = Pakistan Rupees, Source: Results of HDM-4 analysis, Maintenance Study 2009, National Highway Authority.

I. Travel Time Cost

12. The parameters considered for calculating the passenger's travel time cost for each vehicle category were (i) average annual income per passenger, (ii) annual working hours, and (iii) number of occupants per vehicle. Using these parameters, the economic value of time expressed as travel time per hour has been calculated for the occupants of motorcycles, cars, wagons, buses, two-axle trucks, three-axle trucks, and multi-axle trucks. In several studies, the value of passenger travel time has been estimated at 25%–33% of a person's wage rate. Due to lack of information on the split of work and nonwork travel among passengers and the proportion of nonwage earners among passengers, 33% of total value of working time (in PRs per hour) is used, which is conservative. Per-kilometer value of travel time for passengers of various vehicles has been estimated for 2009 and is given in Table A7.5.

Table A10.5: Travel Time Cost of Passengers Using Various Transport Modes Vehicle Category PRs/hours Motorcycle 6.51 Car 19.53 Wagon 13.02 Bus 11.07 2-Axle truck 11.72 3-Axle truck 11.72 Multi-axle truck 12.37 Source: Results of analysis.

40 Appendix 10

J. Quantification of Project Benefits

13. The overall tangible benefits of the project comprised VOC savings and travel time cost savings. The methodology adopted for calculating these benefits is described below.

14. Vehicle operating cost savings. A reliable estimate of VOC per km, in both "without project" and "with project" scenarios, is important for estimating the road user benefits. Based on the VOC values for corresponding road roughness index and economic prices, VOC per km have calculated using the HDM-4 model. To arrive at total annual VOC, both under "without project" and "with project" scenarios, VOC per km values have been multiplied by annual average daily traffic and distance traveled in a year. Annual VOC savings corresponding to the road improvement have been calculated by subtracting the results of the "with project" case from the "without project" case. Table A7.6 summarized the roughness improvement.

Table A10.6: Measured IRI Values in Subprojects Package Road Section or District Before Project After Project Provincial Higways Package-1 Thatta–Sujawal road 8.5 2.8 Package-2 Nawabshah–Padedan road 7.5 2.7 Package-3 Padedan–Ranipur road 7.5 2.7 Rural Access Roads Package-1 Badin district (1 road) 10.2 4.4 Package-2 Dadu district (7 roads) 10.5 4.3 Package-3 Ghotki district (7 roads) 10.9 4.1 Package-4 Hyderabad district (1 road) 11.1 3.7 Package-5 Jacobabad district (7 roads) 10.7 4.5 Package-6 Khairpur district (14 roads) 10.2 4.6 Package-7 Larkana district (12 roads) 9.5 4.4 Package-8 Mirpur Khas district (7 roads) 11.9 3.9 Package-9 Nawab Shah district (1 road) 10.8 3.4 Package-10 Sanghar district (10 roads) 12.4 3.8 Package-11 Shikarpur district (5 roads) 9.7 4.3 Package-12 Sukkur district (7 roads) 10.0 4.2 Package-13 Tharparkar district (11 roads) 10.4 4.0 Package-14 Thatta district (2 roads) 12.9 3.2 Package-15 Umar Kot district (11 roads) 9.5 4.0 Package-16 Naushehro Feroz district (2 roads) 12.8 3.2 Source: Estimates from the Office of the Foreign Aided Project, Hyderabad.

15. Annual savings in value of travel time. Basic parameters for calculating travel time savings for motorcycles, cars, wagons, buses, two-axle trucks, three-axle trucks, and multi-axle trucks were calculated separately. The value of travel time, in both "without project" and "with project" scenarios has been calculated by dividing the value of passenger time per hour by the respective speeds. The annual average time value of passengers using the various vehicle types is presented in Table A7.5.

K. Project Completion Costs

16. Economic analysis was undertaken on constant price levels for estimating benefits and costs. These have been expressed in economic terms as PRs and calculated by multiplying by a standard economic conversion factor of 0.85. The construction period was applied in assessing the project completion time. Table A7.7 presents the subproject costs.

Appendix 10 41

Table A10.7: The Subproject Cost and Economic Cost Economic Cost of Economic Local Subproject Cost Currency Cost Package Road Section or District ($ million) ($ million) (PRe million) Provincial Higways Package-1 Thatta–Sujawal road 12.5 10.6 794.1 Package-2 Nawabshah–Padedan road 17.2 14.6 1,097.7 Package-3 Padedan–Ranipur road 9.3 7.9 589.8 Rural Access Roads Package-1 Badin district (1 road) 1.3 1.1 82.7 Package-2 Dadu district (7 roads) 7.0 6.0 447.3 Package-3 Ghotki district (7 roads) 7.6 6.5 484.3 Package-4 Hyderabad district (1 road) 0.9 0.8 60.1 Package-5 Jacobabad district (7 roads) 8.8 7.5 559.4 Package-6 Khairpur district (14 roads) 21.1 18.0 1,346.6 Package-7 Larkana district (12 roads) 22.5 19.1 1,431.7 Package-8 Mirpur Khas district (7 roads) 6.5 5.5 415.0 Package-9 Nawab Shah district (1 road) 0.7 0.6 42.4 Package-10 Sanghar district (10 roads) 8.9 7.6 566.5 Package-11 Shikarpur district (5 roads) 1.7 1.4 108.2 Package-12 Sukkur district (7 roads) 8.1 6.9 517.1 Package-13 Tharparkar district (11 roads) 31.6 26.8 2,011.8 Package-14 Thatta district (2 roads) 0.5 0.4 32.9 Package-15 Umar Kot district (11 roads) 11.3 9.6 721.9 Package-16 Naushehro Feroz district (2 roads) 0.8 0.6 48.5 Source: Results of analysis.

L. Cost Components

17. The project was not fully complete by the loan closing date. A few subprojects were still incomplete at the time of the project completion report mission. The evaluation incorporates the estimated cost of incomplete subprojects. The project life cycle cost components used in the analysis include capital costs, recurring costs, and overlay costs. Operating and maintenance costs are PRs100,000 per km for provincial highways and PRs75,000 per km for RARs. By applying a standard conversion factor of 0.85, the economic costs are estimated as PRs63,750 for RAR and PRs85,000 for provincial highways. Overlay costs are estimated as PRs15 million every 7 years after project implementation for provincial highways and PRs7.5 million every 7 years for RARs. The project's annual costs stream has been calculated by adding the annual capital, recurrent, and periodic overlay costs.

M. Evaluation

18. The average cost of rehabilitation of provincial highways remained $0.35 million per km, whereas the cost for RARs was $0.16 million per km. The VOC and travel time cost savings have been considered together; therefore, economic returns for direct benefits are higher than the previous estimates. While evaluating the benefits under "with project" and "without project" scenarios through comparison of incremental costs over the lifecycle costs of the road, using discounted cash flow techniques, the EIRR was the criteria for reevaluation. Table A7.8 shows the EIRRs for each subproject ranging from 2% to 30.5%.

42 Appendix 10

Table A10.8: Results of Economic Analysis Length Cost EIRR B/C NPV Package Road Section (km) ($ million) (%) (PRe million) Provincial Highways Package-1 Thatta–Sujawal road 30.1 12.5 30.5 4.7 6,607.0 Package-2 Nawabshah–Padedan road 54.0 17.2 30.4 4.9 6,762.0 Package-3 Padedan–Ranipur road 28.0 9.3 21.2 2.5 3,518.0 Rural Access Roads Package-1 Badin district (1 road) 9.8 1.3 2.0 0.0 7.0 Package-2 Dadu district (7 roads) 48.0 7.0 14.7 1.0 593.2 Package-3 Ghotki district (7 roads) 50.0 7.6 12.0 1.0 485.1 Package-4 Hyderabad district (1 road) 9.5 0.9 3.4 0.0 16.7 Package-5 Jacobabad district (7 roads) 63.3 8.8 24.0 3.0 1,635.0 Package-6 Khairpur district (14 roads) 167.7 21.1 23.7 3.0 3,864.0 Package-7 Larkana district (12 roads) 144.5 22.5 19.4 2.0 2,953.0 Package-8 Mirpur Khas district (7 roads) 48.7 6.5 22.9 3.0 1,109.0 Package-9 Nawab Shah district (1 road) 5.7 0.7 2.3 0.0 11.1 Package-10 Sanghar district (10 roads) 39.5 8.9 5.9 0.0 266.4 Package-11 Shikarpur district (5 roads) 13.0 1.7 19.0 2.0 217.5 Package-12 Sukkur district (7 roads) 72.2 8.1 27.3 4.0 1,839.0 Package-13 Tharparkar district (11 roads) 117.9 31.6 7.5 1.0 1,167.0 Package-14 Thatta district (2 roads) 5.3 0.5 3.2 0.0 9.0 Package-15 Umar Kot district (11 roads) 88.7 11.3 18.9 2.0 1,470.0 Package-16 Naushehro Feroz district (2 roads) 6.6 0.8 4.9 0.0 19.9 Overall Result 1,002.4 178.2 15.3 1.8 1,713.1 Source: Results of the economic analyses conducted during reevaluation.

N. Results

19. The results of the economic analysis shown in Table A7.8, indicate that the overall project EIRR is 15.3%. The calculated EIRR in all cases is well above 12%.

M. Conclusion

20. The road links completed under the project will contribute to economic growth and provide benefits to road users and society. The EIRR figures suggest that the expected overall economic benefits against the investments are higher than the limiting criteria of 12%. Few subprojects have low economic return.

The overall project EIRR values suggest that ADB financing will result in a sustainable economic growth over the useful life of the facilities and will help in increasing economic growth in the province and beyond.