Completion Report
Project Number: 30311 Loan Number: 1853 October 2008
Kyrgyz Republic: Third Road Rehabilitation Project
CURRENCY EQUIVALENTS
Currency Unit – Kyrgyz som (Som)
At Appraisal At Project Completion (17 August 2001) (30 July 2007) Som1.00 = $0.02 $0.03 $1.00 = Som48.00 Som37.82
ABBREVIATIONS
ADB – Asian Development Bank ADBBO – Asian Development Bank Business Opportunities EA – executing agency EIRR – economic internal rate of return FY – fiscal year HDM – highway design and management model IEE – initial environmental examination JBIC – Japanese Bank for International Cooperation MOTC – Ministry of Transport and Communications PIU – project implementation unit PPMS – project performance management system PSC – project steering committee RRP – report and recommendations of the President RSS – Road Safety Secretariat TA – technical assistance VO – variation order VOC – vehicle operating cost
NOTES
(i) The fiscal year (FY) of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 31 December 2000.
(ii) In this report, "$" refers to US dollars.
Vice X. Zhao, Operations Group 1 President Director J. Miranda, Central and West Asia Department (CWRD) General Director L. Wu, Country Director, Kyrgyz Resident Mission, CWRD
Team leader V. Tian, Senior Project Implementation Officer, CWRD Team B. Omurzakova, Assistant Project Analyst, CWRD members
CONTENTS
Page BASIC DATA i MAP
I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 3 E. Project Schedule 3 F. Implementation Arrangements 4 G. Conditions and Covenants 4 H. Related Technical Assistance 5 I. Consultant Recruitment 5 J. Procurement 6 K. Performance of Consultants, Contractors, and Suppliers 6 L. Performance of the Borrower and the Executing Agency 7 M. Performance of the Asian Development Bank 8 III. EVALUATION OF PERFORMANCE 8 A. Relevance 8 B. Effectiveness in Achieving Outcome 8 C. Efficiency in Achieving Outcome and Outputs 9 D. Preliminary Assessment of Sustainability 9 E. Impacts 9 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 11 A. Overall Assessment 11 B. Lessons 11 C. Recommendations 11
APPENDIXES
1. Three Phases of Bishkek–Osh Road Rehabilitation 14 2. Project Framework 15 3. Chronology of Major Events 21 4. Description of Contracts and Procurement 23 5. List of Procured Road Maintenance Equipment 25 6. Project Costs and Financing Plan 26 7. Disbursements 27 8. Implementation Schedule 28 9. Status of Compliance with Loan Covenants 29 10. Traffic Forecast 36 11. Economic Analysis 42 12. Ministry of Transport and Communications Organizational Structure 53
SUPPLEMENTARY APPENDIXES A. Technical Assistance Completion Report B. Quantitative Assessment of Project Performance
BASIC DATA
A. Loan Identification
1. Country Kyrgyz Republic 2. Loan Number 1853-KGZ 3. Project Title Third Road Rehabilitation Project 4. Borrower Kyrgyz Republic 5. Executing Agency Ministry of Transport and Communications 6. Amount of Loan SDR31,778,000 ($40.0 million equivalent) 7. Project Completion Report Number PCR:KGZ 1067
B. Loan Data 1. Appraisal – Date Started 24 May 2001 – Date Completed 6 June 2001
2. Loan Negotiations – Date Started 13 August 2001 – Date Completed 15 August 2001
3. Date of Board Approval 31 October 2001
4. Date of Loan Agreement 29 April 2002
5. Date of Loan Effectiveness – In Loan Agreement 29 July 2002 (January 2002 as per RRP) – Actual 12 September 2002 – Number of Extensions 2
6. Closing Date – In Loan Agreement 30 April 2005 – Actual 30 July 2007 – Number of Extensions 2
7. Terms of Loan – Interest Rate 1% per annum during grace period; 1.5% thereafter – Maturity (number of years) 32 – Grace Period (number of years) 8
The first extension of the loan closing date by 12 months to 30 April 2006 was approved on 8 February 2005. On 19 December 2005, the Asian Development Bank (ADB) approved the second extension of loan closing date by 15 months, from 30 April 2006 to 30 July 2007.
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9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval
16 July 2003 3 December 2007 53 months
Effective Date Original Closing Date Time Interval
12 September 2002 30 April 2005 31 months
b. Amount (SDR million) Original Last Revised Amount Undisbursed Category Allocation Allocation Disbursed Balance
Civil Works 24.07 26.83 26.53 0.30 Equipment 1.03 1.58 1.55 0.02 Consulting Services 1.91 2.71 2.44 0.28 Interest Charge 0.64 0.64 0.42 0.22 Unallocated 4.13 0.03 0.00 0.03 Total 31.78 31.78 30.94 0.84a
10. Local Costs (Financed) Appraisal Actual - Amount ($ million) 9.4 12.3 - Percent of Local Costs 48.5 52.2 - Percent of Total Cost 18.8 21.5
C. Project Data
1. Project Cost ($ million})
Cost Appraisal Estimate Actual
Foreign Exchange Cost 30.6 33.6 Local Currency Cost 19.4 23.5 Total 50.0 57.1
2. Financing Plan ($ million)
Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 10.0 11.2 ADB Financed 40.0 45.9 Total 50.0 57.1 IDC Costs Borrower Financed 0.0 0.0 ADB Financed 0.8 0.6 Total 0.8 0.6 ADB = Asian Development Bank, IDC = interest during construction. a ADB cancelled the undisbursed loan balance of SDR843,095.52 at the close of the loan account.
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3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual Foreign Local Total Foreign Local Total Civil Works 23.4 15.8 39.2 27.5 23.2 50.7 Equipment 1.3 0.0 1.3 2.3 0.0 2.3 Consulting Services 1.3 1.1 2.4 3.3 0.3 3.6 Contingencies 3.8 2.5 6.3 0.0 0.0 0.0 Interest During 0.8 0.0 0.8 0.6 0.0 0.6 construction Total 30.6 19.4 50.0 33.7 23.5 57.1
4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants: Original Supervising Engineer April 2002 23 May 2003 Completion Date 31 December 2005 31 August 2006 Individual International Consultant/ na 7 September 2006 Supervising Engineer Representative/ Resident Engineer Completion Date na 30 July 2007
Completion of Engineering Designs na na Civil Works Contracts Contract 1 Date of Award May 2002 1 November 2003 Completion of Work 5 December 2005 Terminated on 20 January 2006 Contract 2 Date of Award May 2002 1 November 2003 Completion of Work 11 December 2005 19 December 2005 Contract 3 Date of Award May 2002 1 November 2003 Completion of Work 10 December 2005 30 July 2007 Contract 6 Date of Award na 4 February 2006 Completion of Work na 30 July 2007
Equipment and Supplies Dates First Procurement August 2003 March 2005 Last Procurement February 2004 September 2005 Completion of Equipment Installation June 2004 July 2007
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5. Project Performance Report Ratings Ratings
Development Implementation Implementation Period Objectives Progress From 1 January 2007 to 30 July 2007 S S From 1 January 2006 to 31 December 2006 S S From 1 January 2005 to 31 December 2005 S S From 1 January 2004 to 31 December 2004 S S From 1 January 2003 to 31 December 2003 S S From 1 January 2002 to 31 December 2002 S S na = not available, S = satisfactory.
D. Data on Asian Development Bank Missions Number of Number of Specialization Name of Mission Date Persons Person-Days of Membersa
Fact-Finding 27 February–16 March 2001 3 48 a, b, c Appraisal 24 May–6 June 2001 3 27 a, b, d Inception 3–6 December 2002 2 8 a, e Review 1 15–16 & 22–26 July 2003 2 14 b, f Review 2 14–20 July 2004 2 14 a, b Review 3 02–10 December 2004 4 36 b, b, f, g Review 4 and Handover 20–23 May 2005 2 8 b, f Review 5 16–28 July 2005 2 10 g Review 6 21–27 May, 19–23 June 2006 1 12 g Review 7 24–31 October 2006 1 8 g Review 8 2–5 July 2007 1 4 g Project Completion Review 1–7 July 2008 1 8 g
a a – project economist, b – transport specialist, c – poverty reduction specialist, d – counsel, e – associate project analyst, f – project officer, g- resident mission project implementation officer, h – resident mission project analyst.
I. PROJECT DESCRIPTION
1. The Third Road Rehabilitation Project (the Project)1 was approved on 31 October 2001 and completed on 30 July 2007. The rationale for the Project was to reduce poverty by lowering transport costs for road users and by improving access to markets, employment opportunities, and more comprehensive health facilities. The Project comprised (i) rehabilitating 120 kilometers the Bishkek–Osh highway, (ii) improving 125 km of secondary roads in Jalal-Abad feeding the Bishkek–Osh road, (iii) providing consulting services for construction supervision, monitoring and evaluation, and implementing reformed road maintenance practices, and (iv) procuring routine maintenance equipment. The Project included advisory technical assistance (TA) to assist the Government of the Kyrgyz Republic (the Government) in developing (i) the capacity to maintain secondary roads using community maintenance techniques and (ii) specific regulatory reforms to improve the competitiveness of markets for transport services.
2. The Project was a continuation of Asian Development Bank (ADB) assistance to the Government for the road sector in the Kyrgyz Republic. The Project was the third and final phase of rehabilitating the Bishkek–Osh road, which followed from the Road Rehabilitation Project2 and Second Road Rehabilitation Project.3 Details of each phase, including scope of cofinancing, are given in Appendix 1.
3. The 672 kilometer (km) Bishkek–Osh road is the only direct surface link between the southern and northern parts of the country and is crucial for maintaining it’s social, political, and economic integrity. It crosses four of the seven provinces of the country and serves about 2 million people, almost half of the total population. Approximately three quarters of residents in the project area were extremely poor at the start of the Project. As mountains cover most of the Kyrgyz Republic, over 95% of passenger and cargo traffic is by road. The road represents about one third of the total core international road corridor network in the Kyrgyz Republic, and links it to Kazakhstan in the north, Uzbekistan and Tajikistan in the south, and the People’s Republic of China in the southeast. 4 The cumulative length of the three phases of Bishkek–Osh road rehabilitation is 463 km, or 70% of its total length. The remaining 30% of the road is maintained in acceptable condition.
II. EVALUATION OF DESIGN AND IMPLEMENTATION
A. Relevance of Design and Formulation
4. Project formulation was consistent with (i) the Government strategy of improving transport as one of the critical ways to alleviate poverty and (ii) ADB’s 2000–2002 country strategy and program for the Kyrgyz Republic,5 which focused on rehabilitating and improving the road network and its maintenance and safety standards.
5. The Project was designed and appraised in 2001. The project framework in Appendix 2 defines the Project’s goal, purpose, outputs and inputs. The Project became a logical
1 ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Third Road Rehabilitation Project. Manila. 2 ADB. 1996. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Road Rehabilitation Project. Manila. 3 ADB. 1998. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Second Road Rehabilitation Project. Manila. 4 The Bishkek–Osh Road is part of regional transport corridor 1 in the Transport and Trade Facilitation Strategy adopted in November 2007 under the Central Asian Republic Economic Cooperation Program supported by ADB. 5 ADB. 1999. Country Assistance Plan (2000–2002): the Kyrgyz Republic. Manila.
2 continuation of the earlier ADB engagement in the sector and incorporated the lessons of previous operations. The performance targets set for the Project were generally sufficient to monitor the achievement of its intended development impact. However, the monitoring of impact and outcome was constrained by the lack of existing statistics and dependency on special surveys.
B. Project Outputs
6. Overall, the Project achieved its required outputs as follows: (i) the remaining deteriorated 120 km of the Bishkek–Osh highway rehabilitated, (ii) 125 km of secondary roads in Jalal-Abad Oblast that feed the Bishkek–Osh road improved, (iii) a system for secondary road maintenance developed, and (iv) equipment for routine road maintenance procured and installed. The completion of civil works was substantially delayed by the poor performance of contractors (paras. 14,15 and 33) and reduced the project benefits and savings to road users. The chronology of the Project’s main events is in Appendix 3. A description of contracts and procurement is in Appendix 4.
1. Bishkek–Osh Road Rehabilitation
7. Road rehabilitation works were substantially completed by the revised loan closing date, with some minor finishing works at the Tash-Kumyr section remaining. Road design standards adopted for Bishkek–Osh highway sections rehabilitated were consistent with those used under earlier phases and included double-layer pavement for most rehabilitated sections. The existing width and category of the road were retained with some improvement of horizontal and vertical profiles in the Osh–Uzgen section to improve riding quality and traffic safety. The requirements for works quality, road safety, and environment protection were incorporated into the civil contracts and implemented. The design standards for the road were adequate for (i) forecast traffic levels, (ii) existing road and structure conditions, and (iii) selected design speeds. The rehabilitation cost of about $350,000 per km appeared to be efficient given the topographical and climatic features of the Project.
2. Feeder Roads Rehabilitation
8. The scope of secondary road section rehabilitation included (i) patching and surface dressing with limited new single-layer asphalt pavement in the Bazar-Korgon–Arslanbob section and (ii) a new single-layer asphalt pavement in the Tash-Kumyr–Karajigach section. At the Borrower’s request, the scope of rehabilitation of feeder roads increased by constructing an additional bridge immediately adjacent to the Tash-Kumyr–Karajigach road section, which had been damaged by flooding during the project period. About half of bridges in both sections were fully reconstructed. The design standards for feeder roads were modest but adequate for the desired improvements.
3. Secondary Road Maintenance System Development
9. The secondary road maintenance system using community maintenance techniques was developed under advisory technical assistance.6 The details are discussed in section H on Related Technical Assistance.
6 ADB. 2005. Institutional Support in the Transport Sector. Final Report (TA 3757-KGZ). Manila.
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4. Road Maintenance Equipment
10. In the course of Project implementation, the scope of road maintenance equipment procurement was amended toward procuring graders, front loaders, crushers, and chip sealers as a more cost-effective solution than the lightweight and hand-operated equipment envisaged at appraisal. Three contracts for equipment supply were awarded on 29 and 30 June and 23 September 2005. The equipment was delivered and put into operation at various locations around the country. The list of procured equipment is in Appendix 5. The procured equipment, particularly the chip sealers, substantially strengthened the capacity of the Ministry of Transport and Communications (MOTC) to maintain the national road network. In 2007, for the first time in the past 2 decades, MOTC launched a large pavement-preservation program aiming to provide annually surface dressing for 1,000 km, or 18% of the core national road network.
C. Project Costs
11. The total appraised cost of the Project was $50.0 million equivalent, including physical contingencies, price escalation, and interest during construction, but excluding value added tax and other taxes. Of the total cost, $30.6 million (61.2%) was to finance foreign exchange costs and $19.4 million equivalent (38.8%) was to finance local currency costs. The ADB loan at appraisal was SDR31.8 million, or $40 million equivalent, to finance 80% of total project costs including $30.6 million (100%) of total foreign exchange costs and $9.4 million (48.5%) of local costs.
12. The actual project cost was $57.1 million equivalent. Actual ADB financing was SDR30.9 million, or $45.9 million equivalent, including $33.6 million equivalent (100%) of total foreign costs and $12.3 million equivalent (52.2%) of total local currency costs. The actual project cost in dollar terms was higher than the appraisal estimate by $7.1 million. This increase of 14.2% resulted mostly from dollar exchange rate depreciation against special drawing rights (SDR). This factor was complemented by (i) higher price escalation under civil works contracts, (ii) additional bridge constructed under contract 2, (iii) equipment cost increases, and (iv) additional consulting services during the extended implementation period. These cost increases, however, were fully accommodated by contingencies, leaving an unutilized loan balance of $1.3 million equivalent, which was cancelled at loan closing. The comparison of actual project cost and financing plan with appraisal estimates is shown in Appendix 6.
D. Disbursements
13. Implementation delays, discussed in paras. 14–15 below, required loan disbursements to deviate from the appraisal schedule. The original disbursement method was the direct payment procedure only. On 13 September 2006, ADB approved using the imprest account procedure to finance (i) contract 3 and (ii) project implementation unit (PIU) staff and operating costs. Disbursements from the loan account started on 16 July 2003 and were completed on 3 December 2007. Following this, ADB cancelled the remaining balance of SDR843,095.52 ($1,337,604.77 equivalent), thus reducing the loan amount to $45.9 million equivalent, and closed the loan account on 10 December 2007. Annual disbursements are shown in Appendix 7.
E. Project Schedule
14. Project implementation met substantial delays from start-up delays and the poor performance of two contractors. Overall, project implementation took 6 years, or double the
4 estimated 3 years. The actual project implementation schedule compared with the appraisal estimates is in Appendix 8.
15. Physical completion was originally set on 31 October 2004 and the loan closing date on 30 April 2005. While the loan was approved as scheduled, it became effective 9 months later than envisaged at appraisal. The appraisal schedule was overly optimistic, allowing only 3 months from loan approval to effectiveness. The pre-qualification of contractors was completed on 28 March 2003, or 11 months later than envisaged at appraisal. The bidding for civil works was completed in November 2003, or 18 months behind the appraisal schedule. Pre- qualification took 11 months, and bidding 8 months, compared with 3 months envisaged at appraisal for each of these actions. These initial delays resulted mainly from difficulties in evaluating the multiple combinations of civil works contract packages and in receiving additional verification of the credentials of the lowest bidders, who submitted bids 30% lower than the engineer’s estimate. The accumulated 18-month delay in implementation was exacerbated by poor work progress under contracts 1 and 3. Therefore, on 8 February 2005, ADB approved the first extension of loan closing date by 12 months, to 30 April 2006. The continuing poor performance of the contractor under contract 1 finally resulted in the contract’s termination and the second extension of the loan closing date, to 30 July 2007, which was approved on 19 December 2005.
F. Implementation Arrangements
16. MOTC was the Executing Agency (EA) of the Project. The project steering committee (PSC) established under the earlier two phases oversaw project implementation. The PSC was chaired by the minister of MOTC. Its members included representatives from the Prime Minister's Office, Ministry of Finance, and MOTC. The PSC’s work was constrained by frequent turnover of its members early in project implementation and political instability in 2005–2006. Following the change of government in March 2005, the Government established a committee for managing investment projects for road construction, reconstruction, and rehabilitation. The committee was chaired by the minister of MOTC and filled the role of PSC for all donor-funded projects.
17. The PIU, comprising the local consultants engaged under earlier road projects, was responsible for implementing the Project. The PIU, assisted by the international and domestic consultants recruited for construction supervision, carried out (i) the day-to-day supervision of project implementation; (ii) the procurement of works, goods, and services; (iii) consultant recruitment; (iv) disbursements; (v) reporting; and (vi) liaison among MOTC, contractors, suppliers, government agencies, and ADB. The PIU comprised nine staff, including the PIU head and deputy head, two financial specialists, three engineers, and two support staff. PIU staff and operating expenses were originally financed through the supervising engineer’s contract, which expired on 1 September 2006. On 7 September 2006, the PIU staff was hired through direct contracts with MOTC and financed through the imprest account.
G. Conditions and Covenants
18. The loan covenants were mostly complied with. However, the Borrower faced difficulties in complying with loan covenants for (i) loan effectiveness, (ii) agreed minimum funding for road maintenance in the national budget, and (iii) community participation in road maintenance. The status of compliance is shown in Appendix 9.
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19. The loan effectiveness was subject to establishing a special account for the road fund in the Treasury. While meeting this covenant delayed loan effectiveness, it contributed to ensuring improvements in the sector funding system.
20. The Government faced difficulties in providing the budgetary allocations for road maintenance at agreed levels during 2001–2006. However, the situation had radically changed by the end of the Project in 2007, with the Government’s adoption of its road sector strategy for 2007–2010, developed under ADB-funded technical assistance in 2006.7 The budget allocation for road maintenance doubled the agreed funding levels in 2007 and trebled them in 2008. These levels remain insufficient, however, to fully eliminate the backlog of maintenance for the entire road network accumulated over past decade.
21. The Project helped the Government to develop a system of secondary road maintenance with community participation. The system was piloted under the Project but remains unused for the rest of national road network, and this loan covenant was not complied with.
22. The loan covenant to increase the competitiveness of markets for transportation services was not complied with for reasons explained in following para.
H. Related Technical Assistance
23. The Project included advisory TA for $650,000,8 financed as a grant from the Japan Special Fund, which is funded by the Government of Japan. The consultant developed the system of secondary road maintenance with community participation. However, the system remains unimplemented. The scope of TA was amended to cancel activities for improving the competitiveness of markets for transport services, as TA funded by the European Union through its Technical Aid to the Commonwealth of Independent States, implemented in 2003–2005, had confirmed that transport services were already highly competitive, freight services were deregulated, and passenger services were lightly regulated. Overall, the TA was rated as successful. The TA completion report is in Supplementary Appendix A.
I. Consultant Recruitment
24. Consultant recruitment was undertaken in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Although advance action for recruiting consultants was approved on 18 May 2001, the EA failed to utilize it because of substantial delays in preparing a shortlist of consultants and evaluating the submitted proposals. Therefore, to expedite the Project’s start up, the review of detailed design and assistance for pre-qualifying contractors, preparing bidding documents, and bidding was carried out by the supervising consultant hired under the second phase of the Project. The supervising engineer’s contract for $2,398,891 under the Project was awarded through international competitive recruitment using the two-envelope system on 23 May 2003, which was 13 months later than envisaged at appraisal. ADB approved five contract variations for a total of $852,849.92, including (i) additional construction supervision inputs resulting from delay in civil works contracts, (ii) preparing the detailed design for the upcoming Southern Transport Corridor Road Rehabilitation Project,9 and (iii) procurement services for the same project. On 29 April 2006, ADB imposed
7 ADB. 2007. Support to the Development and Implementation of National Poverty Reduction Strategy II. Manila. 8 ADB. 2005. Institutional Support in the Transport Sector. Final Report (TA 3757-KGZ). Manila. 9 ADB. 2004. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant for the Proposed Southern Transport Corridor Road Rehabilitation Project. Manila.
6 worldwide sanctions on the firm. As a result, its contract under the Project was discontinued from 1 September 2006. The final contract value was $3,251,740.92.
25. To allow the Borrower to smoothly complete the Project, ADB approved on 15 August 2006 (i) additional scope of supervising engineer services for about $475,000 and (ii) a change of selection method for these services from quality- and cost-based selection to single-source selection and direct selection of individual consultants. The approved arrangements included hiring (i) the current team leader directly as an individual international consultant for the position of supervising engineer representative and resident engineer; (ii) a local design institute, formerly the consultant’s subcontractor, by single-source selection; and (iii) all current PIU staff directly as individual national consultants. By 7 September 2006, all contracts had been signed, and the Project was completed smoothly.
26. Auditing consultants were recruited in accordance with ADB’s Guidelines on Use of Consultants. The total costs of consulting services increased by half from $2.4 million estimated at appraisal to $3.6 million.
J. Procurement
27. Procurement of civil works was undertaken in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time) through international competitive bidding with pre-qualification.
28. Pre-qualification documents were issued on 20 April 2002, and the pre-qualification evaluation report was approved on 28 March 2003, after extensive comments. Of the 22 pre- qualified bidders, 18 purchased the bidding documents on 4 April 2003. Of these, 10 bidders submitted their bids by the closing date of 9 July 2003. The bid-evaluation report was submitted on 8 September 2003 and approved by ADB on 30 September 2003. Multiple combinations of several packages complicated and delayed the pre-qualification and bid-evaluation process. Notably, at this early stage, the PIU expressed its serious concerns over the contract 1 award to Emek Insaat, which submitted bids 30–35% lower than the engineer’s estimate. Project implementation later confirmed that these concerns were valid, as poor performance under this contract required its termination and caused project implementation delay and additional costs.
29. Upon the termination of contract 1, the procurement of the remaining civil works under this contract was undertaken in accordance with ADB’s Procurement Guidelines, through the direct contract negotiation procedure, as approved by ADB on 19 December 2005.
30. Road maintenance equipment was procured through international shopping following the single-stage, one-envelope procedure. As the bid prices exceeded the budget, the Borrower requested reallocation of $800,000 from the unallocated category into the equipment category on 15 September 2005. ADB approved the proposed contract awards and the associated reallocation of loan proceeds on 23 September 2005.
K. Performance of Consultants, Contractors, and Suppliers
1. Consultants
31. MOTC reported that the performance of the consultant was fully satisfactory and that the tasks were performed professionally and in accordance with the terms of reference. The consultants supervised the civil works, assisted in procuring civil works and goods, prepared
7 regular progress reports, and undertook project monitoring and evaluation. The services included surveying project road conditions, developing modified designs for improving road safety, establishing a system for benefit monitoring and evaluation, and preparing the baseline for benefit monitoring and evaluation and two follow up reports. The contract with the original supervising consultant expired on 1 September 2006 and could not be extended due to ADB’s sanctions imposed on the firm worldwide.
32. MOTC replaced the supervising consultant with a new team as recounted in para. 25. Retaining the international resident engineer and the local consultant team contributed to effectively protecting the EA’s interests in its legal dispute with the terminated contractor and ensured consistency in supervising civil works contracts. However, these arrangements constrained the preparation of the EA’s project completion report, as the individual international consultant lacked the necessary skills mix for analyzing the social, economic, and environmental impacts of the Project. This necessitated additional efforts from project review missions and the completion report (PCR) mission. The performance of all these consultants was rated as satisfactory.
2. Contractors
33. The performance of contractors under contracts 1 and 3 was poor for lack of sufficient financial and technical capacity. Both contractors failed to follow the construction schedule and were rated by MOTC as unsatisfactory. Contract 1 was terminated. Contract 3 also faced serious delays because of the contractor’s poor financial and technical capacity. However, as the contract was small, the EA chose to extend it. All civil works were substantially completed by 30 July 2007, with minor finishing works completed under Government financing thereafter.
34. The performance of the contractor under contract 2 (the Osh–Uzgen section) was rated as highly satisfactory. The contractor completed the works under contract 2 in December 2005, as scheduled. The same contractor took over completing the works that remained after the termination of contract 1 in January 2006. The works started in April 2006, and monthly work progress quickly reached 13.5% on average, as compared with the highest completion rate of 2% per month achieved by the previous contractor. This contract was completed on time and with satisfactory quality.
L. Performance of the Borrower and the Executing Agency
1. The Borrower
35. The Borrower’s performance is rated as satisfactory. At the initial stage of the Project, the Borrower delayed the payment of counterpart funds to the contractors. However, there were no delays in payments to contractors from 2004 onward. Initially, the Borrower failed to comply with loan covenants related to funding road maintenance expenditure during 2002–2005. However, road maintenance funding doubled in 2006, doubled the agreed funding in 2007, and trebled it in 2008.
2. MOTC
36. The EA’s performance is rated as satisfactory. The project objectives were achieved, though there were delays in implementing contracts 1 and 3 and the procurement of road maintenance equipment. The performance of the PIU responsible for implementing the Project was rated as satisfactory. The performance of its financial management team was particularly
8 notable. This enabled the PIU to properly plan disbursements, execute them in a timely way, and effectively control price escalation under the civil works contracts.
M. Performance of the Asian Development Bank
37. ADB’s performance was rated as satisfactory. ADB undertook one inception mission and nine review missions for the Project. The midterm review mission was waived, as all issues were resolved during regular review missions. Four ADB project officers were assigned over the course of the Project. This resulted in some lapses in project supervision during each changeover. MOTC expressed concern over ADB’s long response time for processing various procurement-related requests at the project start-up stage.
38. ADB proactively helped MOTC and the Borrower to resolve the issue of the poorly performing contractor under contract 1 and efficiently complete the Project. The solution involved (i) terminating the contract of the faulty contractor, (ii) processing a major change in implementation arrangements, and (iii) directly awarding the contract for the remaining works to a contractor performing well under the same Project. ADB was effective in resolving in a timely way the unexpected problem of replacing the supervising consultant in 2006. The role performed by ADB review missions in providing advice on technical, procurement, and administrative matters was recognized by MOTC.
III. EVALUATION OF PERFORMANCE
A. Relevance
39. The Project is rated as highly relevant. It is in line with the Government objectives to (i) maintain transport infrastructure to support economic growth, (ii) improve transport services by promoting competition among operators while addressing safety and environmental concerns, and (iii) increasing cost recovery from the users of transport infrastructure. It supported the transition to a market economy by helping to develop an efficient policy and regulatory framework and by promoting competition and private sector participation in the provision and operation of transport facilities and services. The rehabilitated road facilitates year-round travel between the north and south of the country.
40. The Project was appraised in line with ADB’s operational strategy, which focused on (i) improvements in public services, (ii) enhancements to agriculture, (iii) human resource development, and (iv) road infrastructure. ADB’s transport sector strategy supported the Government’s transition to a market-driven economy by helping to develop an efficient policy and regulatory framework and promoting competition and private sector participation in transport facilities and services.
B. Effectiveness in Achieving Outcome
41. Overall, the Project is rated as effective. The Project has contributed to per capita income growth and a reduction in the number of poor in the project area. At the same time, household market orientation did not change significantly. The Project created more frequent use of freight and passenger services by residents of the project area and improved their access to social services. Traffic steadily grew by approximately 45% per year. The updated traffic forecast, including phases 1 and 2, is in Appendix 10. Travel times have been reduced by between 25% and 30% for cars and trucks, and vehicle operating speeds increased by 12%.
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42. The Project has reduced transport costs. The economic reevaluation calculated that the vehicle operating cost (VOC) was reduced by 18% to 31% on the project road.10 However, the number of accidents has increased since the road improvements. In 1998, the total number of accidents on the Bishkek–Osh road was 513, causing 97 fatalities. In 2004, the number of accidents increased by about 70%, reaching 862 incidents and 203 fatalities (a twofold increase). A traffic accident survey showed that 18% of accidents were caused by excessive speed, 49% were caused by otherwise improper or impaired driving, and 14% were caused by pedestrian behavior, including ignoring traffic regulations. The increase in accidents was therefore due mainly to factors other than the improved road condition.
43. VOCs, both without the Project and with the Project, are higher than foreseen in the report and recommendation of the President (RRP). This is because of the rise in fuel prices in particular but also because of increases in other vehicle-operating costs, including tires, vehicle depreciation, and crew costs. Traffic growth has generally been somewhat below projections. A number of factors may have contributed to this, including economic growth in the Kyrgyz Republic being much lower than expected in the period 2005–2006, traffic delays caused by ongoing rehabilitation works, and delays and difficulties encountered by traffic crossing the Uzbek-Kyrgyz border near Osh.
C. Efficiency in Achieving Outcome and Outputs
44. The Project is rated as efficient in achieving its purpose and outputs despite implementation delays. The PCR Mission reevaluated the economic internal rate of return (EIRR) of the Project. Its economic viability was assessed by computing all incremental costs and benefits resulting from project implementation. The recalculated EIRR is 22.4%, which is higher than the original EIRR of 19.3% and well above the 12% cutoff for economic efficiency. The primary differences between reevaluation and appraisal arise from (i) the revised economic costs derived from actual costs including rising fuel costs, (ii) longer construction periods caused by delays in implementation, and (iii) differences in traffic growth and composition at appraisal and reevaluation. Appendix 11 shows the recalculated EIRRs and their supporting assumptions. It includes the economic reappraisals of phases 1 and 2 and of the whole Project. The Project’s overall EIRR, combining phases 1 to 3, is 12.2%.
D. Preliminary Assessment of Sustainability
45. The Project’s benefits are likely to be sustained. Proper road maintenance practices and sector funding are crucial to their sustainability. Actual road maintenance expenditure in 2007 was a fourfold increase over that of 2001. The new road sector strategy prioritizes maintaining the core national road network, particularly recently rehabilitated roads.
E. Impacts
46. An initial environmental examination (IEE) was prepared in accordance with ADB’s Environmental Assessment Requirements 11 and Environmental Guidelines, 12 and mitigation measures were clearly outlined for each step of design, construction, and operation. The supervising consultants monitored the implementation of mitigation measures incorporated into the detailed design and civil work contract. These provisions referred to selecting and restoring
10 At appraisal, it was estimated that the VOC would be reduced by 21% to 30%, depending on vehicle type, upon the completion of the Project. 11 ADB. 1998. Environmental Assessment Requirements of the Asian Development Bank. Manila 12 ADB. 1993. Environmental Guidelines for Selected Infrastructure Development Projects. Manila
10 borrow pits, extracting water for construction, controlling hazardous and toxic materials, and managing wastes in construction camps. The Ministry of Environment has conducted regular site inspections to monitor environmental impacts. ADB’s review missions periodically monitored the status of potential environmental and social impacts to complement and confirm the EA’s reports. No adverse environmental impacts were identified.
47. As the Project was to rehabilitate an existing road, appraisal envisaged no issues regarding relocation, resettlement, or other adverse social impacts. A social impact assessment indicated that no resettlement would be needed and that there would be no impact on vulnerable groups. Consequently, no resettlement plan was prepared.
48. The Project nevertheless had certain disadvantages for residents. In 2005, the EA received multiple complaints from villagers residing along the Uzgen–Osh section (contract 2). The complaints alleged damage to houses caused by vibrations from the use of heavy equipment during March–September 2005. The contractor conducted a dilapidation survey of 410 houses in settlements located along this section in April–August 2004. This allowed for a grounded discussion on the alleged damage. In May 2005, MOTC established a working commission comprising representatives of MOTC, architectural authorities, and local administration to review the complaints. The commission prepared a list of damages, and the State Agency on Architecture and Construction estimated compensation for each house. The root cause of damage was that most houses did not comply with construction standards and anti-seismic requirements. In many cases, the complaints were found unjustified, having been submitted by households residing several hundred meters away from the rehabilitated road section. However, reflecting social and political considerations, the Government commission established in February 2006 endorsed a substantial portion of the complaints and recommended compensation for them. In August 2006, the Government issued a decree to compensate damage to 91 houses in 5 villages. Compensation ranged from SOM5,500 to SOM203,000, depending on the extent of the damage, and totaled SOM4,084,434 ($112,000). The compensation was paid in full during 2006–2007, with all compensation costs paid by the Government. Beneficiaries confirmed in writing their full satisfaction with their compensation.
49. In 2006, the EA received another complaint from three households living close to a rehabilitated road section in Tegene, a village on the Tash-Kumyr–Karajigach feeder road (contract 6). Construction had not affected these houses directly, but their proximity to the elevated road surface above them was hazardous and not compliant with road safety standards. In July 2007, a special Government commission reviewed the situation and recommended relocating the houses to safe places, allocating to affected households new land plots in the same settlement, and paying associated compensation, which the Government instructed the State Agency on Architecture and Construction to estimate. The compensations were not yet finalized as this PCR was prepared.
50. No indigenous peoples, ethnic minorities, vulnerable groups, or non-titled people (e.g., people living in informal settlements) along the right of way were affected by the Project.
51. The Project has generated considerable local employment. From its commencement in 2003, the Project generated about 8,960 person-months of local employment in the civil works contracts: 1,780 under contract 1, 3,900 under contract 2, 580 under contract 3, and 2,700 under contract 6.
11
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS
A. Overall Assessment
52. The Project is considered successful, based on a review of its relevance, efficacy, efficiency, sustainability, and impact on institutional development. The quantitative assessment of project performance to determine the project rating is in Supplementary Appendix B.
B. Lessons
53. Completion of civil works was delayed by almost 3 years. The major reason for the delay was insufficient financial and technical capacity in two contractors. A more rigorous review by ADB of pre-qualification and bid-evaluation reports is needed, particularly with regard to bids substantially below the engineer’s estimates.
54. Overall, Bishkek–Osh road rehabilitation took 10 years. Each phase was separately prepared under ADB project preparatory TA, followed by detailed engineering designs and tendering. The benefits accruing to the Kyrgyz economy could have been greater if the Project had been implemented more expeditiously. A more holistic approach to such a large road- rehabilitation project, complemented with longer-term resource allocation, could have shortened the implementation period and ensured more effective delivery of the desired benefits.
55. The concept of secondary road maintenance with community participation was new to the country and has not yet been implemented. Closer consultations with the Borrower and project beneficiaries are required to ensure that the proposed innovation is driven by demand and that its implementation in the specific social and economic environment is feasible.
56. Project reports lacked structure, were excessively long and inconsistent with ADB’s internal project performance monitoring system, and did not allow for quality monitoring of the social and environmental impacts of the Project.
57. The Project affected 94 households residing along the rehabilitated sections. As road designs and construction plans were approved well in advance, the potential adverse impact could have been foreseen. Proper review of detailed designs and feasibility study reports is essential to prevent damage to residents of the project area and, if damage is unavoidable, to properly plan the necessary mitigation and/or compensation measures. Using heavy, vibration- causing equipment for works in densely populated areas needs to be avoided.
C. Recommendations
1. Project Related
58. Future Monitoring. Although the Borrower and the EA gained substantial experience in implementing road rehabilitation projects since the first ADB operation started in 1996, project supervision by ADB needs to be further strengthened. Delegating project administration to the resident mission proved effective in intensifying project supervision, shortening ADB’s response time, and quickly resolving constraints on project implementation. At the same time, the resident mission has inadequate resources for monitoring the complex engineering, social, and environmental aspects of the Project. This could be addressed through the participation of appropriate divisions from headquarters in review missions.
12
59. Covenants. The covenant for improving competitiveness in the market for transportation services is no longer relevant and needs to be waived. The loan covenants related to further commercializing road maintenance or outsourcing it to the private sector remain valid and need to be maintained in future projects. The loan covenant for maintenance of secondary roads with community participation needs to be reconsidered in close consultation with the Government. If Government support for implementing this method is not granted, it needs to be removed.
60. Further Action or Follow-Up. ADB needs to follow up with the Government on (i) the damage compensation to households affected under the Project to ensure that they are fully settled and (ii) implementing the system of secondary road maintenance with community participation developed under the Project.
61. Additional Assistance. The completed rehabilitation of the Bishkek–Osh road improved a major transportation link in the Kyrgyz Republic, accounting for 30% of its international road transport corridors. All remaining major international road transport corridors are being rehabilitated except for the Bishkek–Naryn–Torugart road, for which rehabilitation will commence by end-2008. The importance of these investments is hard to overestimate, as roads carry 95% of passenger and cargo transportation in the Kyrgyz Republic. Completing all these operations will improve the Kyrgyz economy’s access to regional markets. To complement these investments and make them more efficient, ADB may focus future operations on helping the Government to engage the private sector in road construction, operation, and maintenance. Road safety is becoming an increasingly important issue and needs to be adequately addressed under future assistance.
62. The Government’s road sector strategy for 2007–2010 contains serious reforms to the system of road maintenance. However, the strategy period is very short and does not include other transport subsectors. ADB may consider supporting the development of a comprehensive long-term transport sector strategy to ensure further progress in sector reforms and their effective contribution to the country’s development.
63. While the EA has acquired substantial experience in implementing road rehabilitation projects over the last decade, its capacity to supervise and manage large construction contracts remains weak. This task, along with regular reporting on project progress, is almost entirely left to international supervising consultants. The EA’s capacity to monitor the environmental and social impacts of the Project also remains insufficient or lacks institutionalized mechanisms for coordinating with environmental and statistical agencies. This may prevent the early identification of, or timely response to, environmental and social issues that arise in the course of future road construction or rehabilitation projects. ADB may consider additional technical assistance to address these institutional deficiencies. The updated MOTC structure is shown in Appendix 12.
64. Timing of the Project Performance Evaluation Report. The recommended timing for project performance evaluation is by end-2010, when project facilities will have been in operation for 3 years, which will allow in-depth analysis of project benefits and impacts. By that time, the EA will have updated the project monitoring data mandated by the Loan Agreement.
2. General
65. In preparing future road rehabilitation projects, the following points should be taken into account:
13
(i) Maintaining a holistic approach toward large road corridor rehabilitation projects and longer-term resource allocation minimize the implementation period and ensure the efficient delivery of the desired benefits. (ii) Performance targets in the design and monitoring framework must be easily measurable and quantifiable and be based on existing reporting sources, rather than on special surveys. (iii) A project’s impact and outcome indicators need to be aligned with the respective indicators of the Government’s road sector strategy to allow for easy analysis of the project’s contribution to sector development. (iv) Effective measures are needed to address road safety. (v) Developing and sustaining the EA’s own capacity in construction supervision and contract management are necessary under International Federation of Consulting Engineers contracts. (vi) The EA’s capacity for monitoring a project’s impacts in coordination with statistical and environmental authorities requires strengthening.
66. The administration of the project and review by ADB need to focus on
(i) the rigorous review of pre-qualification and bid-evaluation reports, particularly with regard to bids substantially below the engineer’s estimates; (ii) strengthening project supervision and reducing ADB’s response time through further delegation of project administration to the resident mission; (iii) strengthening the resident mission’s capacity for monitoring the quality of the technical, environmental, and social aspects of road projects, or providing the necessary support from the appropriate sector division; and (iv) improving the format of project progress reports to make them more consistent with ADB’s internal project performance report system requirements and ensure that social and environmental aspects are monitored closely.
14 Appendix 1
THREE PHASES OF BISHKEK–OSH ROAD REHABILITATION
1. The rehabilitation of this transport corridor was funded by the Asian Development Bank (ADB), Japanese Bank for International Cooperation (JBIC), and Islamic Development Bank in three phases, as shown in Table A1. Under the first phase, approved on 13 June 1996, ADB provided assistance for rehabilitating 135 kilometers (km) of key mountainous sections of the road. This phase was cofinanced by JBIC. The works were completed on 4 May 2001, and the loan account was closed on 1 October 2001. This project was rated as successful.1
2. On 10 September 1998, ADB approved a loan for the second phase of road rehabilitation, which included (i) rehabilitating 208 km, including the 2.5-km Tyu Ashuu Tunnel; (ii) consulting services for construction supervision, road maintenance and safety, and benefit monitoring and evaluation; and (iii) policy and institutional reforms in the road sector. The second phase was cofinanced by JBIC and the Islamic Development Bank. The works were completed, and the loan account closed on 18 February 2005. The project was rated as successful. 2
3. The Third Road Rehabilitation Project (the Project) was approved in October 2001 and completed on 30 July 2007. The rationale for the Project was to “reduce poverty by lowering transport costs for road users and by improving access to markets and employment opportunities. Improving the secondary roads will also improve access to more comprehensive health facilities.”3 The Project comprised the (i) rehabilitation of 120 kilometers of the Bishkek– Osh highway; (ii) improvement of 125 km of secondary roads in Jalal-Abad that feed the Bishkek–Osh road; (iii) consulting services for construction supervision, monitoring and evaluation, and the implementation of reformed road maintenance practices; and (iv) procurement of routine maintenance equipment.
Table A1: Rehabilitation of Bishkek–Osh Road ($ million)
Appraisal ADB Loans JBIC IDB Phase/ Government’s Cost Co- Co- Loan No. Contribution Estimate Amount Approval Closing financing financing Date Date Phase I 13 June 1 October Loan 1444-KGZ: 93.8 50.0 28.0 — 15.8 1996 2001 Road Rehabilitation Phase II 10 Loan 1630-KGZ: 18 February 121.8 50.0 September 40.8 10.0 21.0 Second Road 2005 1998 Rehabilitation Phase III 31 October 30 July Loan 1853-KGZ: Third 50.0 40.0 — — 10.0 2001 2007 Road Rehabilitation 30 July Total 265.6 140.0 68.8 10.0 46.8 2007 ADB = Asian Development Bank, IDB = Islamic Development Bank, JBIC = Japanese Bank for International Cooperation Source: Ministry of Transport and Communications.
1 ADB. 2002. Project Completion Report on the Road Rehabilitation Project (Loan 1444-kGZ [SF]). Manila 2 ADB. 2005. Project Completion Report: Second Road Rehabilitation Project (Kyrgyz Republic) (Loan 14630-kGZ [SF]). Manila 3 ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Proposed Third Road Rehabilitation Project. Manila.
Appendix 2 15
PROJECT FRAMEWORK
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions
Goal • Changes in the Partly Achieved • Annual economic • Continued Reduce poverty and economic structure reports for provinces, economic and promote sustainable Household market orientation did districts, and policy reforms and economic growth in not change decisively. The townships through improvement of the Kyrgyz Republic number of households reporting national and local governance greater market orientation statistics bureaus and dropped from 66% at project start- national and local • Continued up to 54% at its completion, while statistical yearbooks liberalization of the number of households Government influence reporting less market orientation • Social and in markets for also dropped from 34% to 10%. household transport surveys using Services • Per capita income Achieved participatory rapid of provinces Increased by 11% to 30% appraisal methods • Adequate counterpart funds for Per capita gross domestic • Project performance the Project product in Jalal-Abad Oblast management system grew from Som11,307 in 2004 to (PPMS) evaluation • Complementary Som13,977 in 2006, and in Osh investments for Oblast from Som8,567 to a agricultural inputs and Som11,261. credits and social development • Rural incomes Achieved for rural incomes but and unemployment not achieved for rate in districts, unemployment rates townships, and households • Pecuniary incomes (proxy for household incomes) of rural household grew from Som710.3, in 2004 to Som1,063.4 in 2006 (National Statistics Committee data).
• The percentage of households interviewed that were looking for work grew from 15% in 2004 to 36% in 2006. The percentage of households unemployed and not looking for work decreased from 54% to 20%, and the percentage of underemployed seeking more work dropped from 14% to 4%.
• Number of poor Number of poor decreased people in the project area and •The total number of poor their expenditures households dropped from 58 to 25, out of 125 households interviewed in 2004 and 2006.
16 Appendix 2
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions • Freight and Achieved passenger flows and access to The consistent use of freight social services in services increased almost the project area at fivefold, and access to social the district level services improved.
• The number of interviewees using freight transportation services consistently throughout the year grew from 9% in 2004 to 45% in 2006. The number of interviewees using freight transportation services more than 6 times per year dropped from 26% to 13%. The number of interviewees using freight transportation services only occasionally also dropped from 59% to 28%.
• Access to services improved as the number of interviewees reporting that the condition of roads impede access to schools dropped from 26% in 2004 to 5% in 2006.
• Purchase of local Achieved materials All construction materials available locally were purchased locally. Purpose Improve efficiency in Partly achieved • Continued market- the transport sector • Reduced vehicle • Survey and oriented reforms through the following: operating costs and Vehicle operating costs rose with investigation reduced freight and inflation, but vehicle operating by the Government of • Improved • Reduced transport passenger service cost savings on rehabilitated the costs and service governance and costs on the Bishkek– charges in real sections also increased (see charges regulatory Osh road and terms in the project Table 11A.1). management of secondary roads area • Traffic counts and transport services Average passenger fee grew origin and destination and markets from Som28 in 2004 to SOM34 surveys in 2007, and the average freight • Continued fee was sustained at • Survey of time used economic growth Som0.55/kilogram during the by small trucks review period. traversing the main • Proper maintenance • improved access to • Increased Achieved and secondary roads of main and markets, employment average secondary roads opportunities, and annual daily traffic Traffic on project roads • Market survey of and condition of social services from the current increased by approximately 4% farm gate and market transport fleet level to forecast per year. volumes and prices; traffic levels monitoring of agricultural • Reduced delivery Achieved production time for agricultural Vehicle operating speeds produce to markets increased by approximately 12%, within and beyond according to highway design and
Appendix 2 17
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions the project area management model 4 (HDM4) simulation on achieved road roughness. • Increased volume Achieved in 2004 and then • Survey and trade • Government’s of marketed stagnated statistics complementary agricultural investments in products In 2004, 30% of interviewed agriculture sector households reported increased volumes of agricultural and/or livestock products sold commercially compared with the previous 12 months, 16% reported a decline, 24% reported the same volume, and 30% reported that they did not sell any products.
In 2006, 7% of interviewed households reported increased volume of agricultural and/or livestock products sold commercially compared with the previous 12 months, 4% reported a decline, 13% reported the same volume, and 72% reported that they did not sell any products.
• Increased use of Achieved • Vehicle registration • Continued motor vehicles by and traffic counts in economic growth poor and rural The number of household the project area communities members using motor vehicles doubled from 17% in 2004 to 33% in 2006
• Improved physical Achieved • Participatory rapid • Continued access to health appraisal social and Government services • In 2004, 77% of interviewed household survey, efforts to improve households reported that the project administration health services travel time necessary to reach missions, and PPMS the nearest hospital stayed about monitoring and the same, 5% reported evaluation improvement, 18% reported deterioration.
• In 2006, 54% of interviewees reported that the travel time necessary to reach the nearest hospital stayed about the same, 42% reported improvement, and 2% reported deterioration.
• In 2006, 12% of interviewed households said road conditions impede access to hospitals or other health facilities, compared with 73% in 2004.
• Generated No data available employment in the
18 Appendix 2
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions service sector
• Increased labor Partly achieved • Local statistics mobility bureaus The percentage of households with members commuting to a workplace and those looking for work in places requiring commuting grew from 39% in 2004 to 59% in 2006
• Strengthened • Liberalization of Partly achieved • Review of the • Government’s institutional capacity market for transport regulatory commitment to for road sector services to No activities were undertaken for policies and market adopt international management increase liberalizing the market for and tariff structure standards and competitiveness transport services, as these were practices found already highly competitive. • Review of organizational • Implementation of Technical assistance structure and financial recommendations recommendation to activate the practices for improving road fund was not implemented, financial but maintenance funding has organization increased. structure of MOTC
Outputs • Rehabilitation Accomplished late • Project completion • ADB approves a completed by report (PCR) loan of $40 million 1. Civil Works and October 2004 Rehabilitation and structural equivalent by the Equipment repairs completed, with delay, in • Supervision of end of October • Rehabilitation of • Structural repairs July 2007. rehabilitation of 2001. 120 kilometers (km) completed in structures • Timely and of the Bishkek–Osh accordance with adequate provision road technical • Project of Government specifications administration counterpart funds and requirements missions • Due diligence of the engineering performance of design by October MOTC, contractors, 2004 and consultants
• Implementation of Accomplished • HDM screening • Effective routine rehabilitation sample test and maintenance strategies in In 2007, the Government future maintenance meeting the accordance with increased maintenance planning minimum the minimum HDM expenditures by fourfold requirements screening compared with 2001 levels to a • Post-evaluation of requirements by level commensurate with HDM the actual intervals the end of October strategies. The MOTC has between periodic 2004 commenced a strategy of maintenance maintenance by surface treatment.
• Improvement of • Improvement Accomplished late • Project • Proper use of funds about 125 km of completed by administration for secondary road secondary roads October 2004 Completed by July 2007 missions improvement and • Structural active participation improvement and • Engineering survey of project improved surfacing beneficiaries based on actual • Social survey needs
Appendix 2 19
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions
• Procurement and • Technical Accomplished • Progress reports, • Government’s installation of light specifications for project administration procedures and equipment for road various equipment The maintenance equipment missions, and PCR policies on equipment maintenance • Procurement and procured and put into operation importation installation in 2006. Its intensive use during • Inspection reports • Coordination with • Performance 2007 confirmed its efficiency for and certification of the other countries for evaluation of the road maintenance. supervision timely transshipment equipment consultants of equipment procured 2. Institutional • Performance of Partly accomplished • Progress reports of • Perform due Strengthening supervision consulting services diligence on • Improvement of activities Most activities were implemented and withdrawal consultants capability for • On-the-job by supervising consultant, while applications supervision, training of domestic the EA’s capacity for contract monitoring, and consultants management, supervision, social • Reports on PPMS evaluation • Outline design of a and environmental monitoring monitoring and social survey and remains low. evaluation PPMS implementation • Progress reports, • Assessment of project administration social and missions, and PCR environmental impact of the Project • Development and • Redefined terms Partly accomplished • Progress reports, • Government’s implementation of a of reference for project administration willingness to system for secondary planning and A pilot project was prepared missions, and PCR accept international road maintenance managing under advisory technical standards and b based on maintenance for assistance for the maintenance • Policy dialogue practices collaboration secondary roads of secondary roads with between communities community participation. • Tripartite review and and local • Increased budget final technical maintenance allocation for road Road maintenance budgets assistance report units maintenance increased
• Implementation of The maintenance of secondary maintenance roads with community system for participation remain secondary roads unimplemented. • Development of • Implementation of Not accomplished • Progress reports, • Continued efforts of recommendations for recommendations project administration the Government improving the for improving the No activities were undertaken for missions, and PCR to improve governance competitiveness of competitiveness of liberalizing markets for transport • Policy dialogue and public markets for transport markets for services, as they were found • Tripartite review and administration services transport services already highly competitive. final technical • Consistency of the assistance report Government’s policy reform initiatives Activities • Adequate fund Accomplished 1. Provide adequate allocation from the • Government’s • Improved counterpart funds for Government public investment performance of project implementation budget for the program, budget economy improved in a timely manner Project allocation, project Government fiscal progress reports, situation and project administration missions
20 Appendix 2
Design Performance Project Achievements Monitoring Risks and Summary Indicators/Targets Mechanisms Assumptions economy and 2. Recruit consultants • Consultants to be Accomplished late • Contract documents improved for construction recruited by Government fiscal supervision and February 2002 situation; priority training • Terms of given to road reference for rehabilitation consulting services • Timely signing and effectiveness of the Loan Agreement 3. Carry out survey • Survey and Accomplished late • Completed design • No major risks and design detailed design documents foreseen completed by November 2001 4. Tender civil works • Civil works Accomplished late • Progress reports • Effective contracts awarded and project coordination and by February 2002 administration phasing of project missions activities 5. Implement the • Rehabilitation Accomplished late • Progress reports, • Effective Project completed by project administration coordination and October 2004 and missions, and PCR phasing of project PCR scheduled for activities October 2005 6. Train staff • Staff trained in Accomplished • Progress reports, • Perform due secondary road project administration diligence on maintenance based MOTC staff were trained in missions, midterm contractors and on collaboration planning of secondary road review, PCR, training consultants with local maintenance with community reports communities participation under advisory technical assistance.
7. Provide technical • Consultants to be Accomplished late • The consultant's • Continued assistance for recruited by May inception, interim, and Government capacity building and 2002 Consultants were mobilized in draft final reports commitment to policy reform for the • Technical May 2004 and the final report • Review and road sector reform road system assistance to be issued in June 2005. The report approval of and improvement of completed by contained a detailed strategy, training reports public administration March 2003 workshops were held, discussion • Cooperation and • Submission of papers were issued, and a study coordination capacity-building tour to Canada was conducted. between MOTC strategy and and the consultant related training program 8. Incorporate • Recommen- Accomplished • Environmental • Adequate appropriate dations of monitoring reports, institutional capacity environmental mitigation The identified mitigation project administration for environmental mitigation measures measures by the measures were incorporated in missions, and PCR monitoring in project design initial civil works contracts and environmental implemented. examination report MOTC = Ministry of Transport and Communications, PPMS = project performance management system. a Project Completion Report Mission estimates based on data from the National Statistics Committee. b TA3757-KGZ: Institutional Support in the Transport Sector. Source: ADB.
Appendix 3 21
CHRONOLOGY OF MAJOR EVENTS
Date Event 2001 18 May 2001 Management review meeting approved advance action on procurement and recruitment of consultants 13–14 August 2001 Loan negotiations conducted 31 October 2001 Loan approved 9 November 2001 Draft pre-qualification documents received December 2001 General procurement notice published in Asian Development Bank Business Opportunities (ADBBO)
2002 January 2002 Specific notice for invitation for pre-qualification advertised in ADBBO 15 February 2002 Revised pre-qualification documents received 20 April 2002 Pre-qualification documents issued 29 April 2002 Loan Agreement signed 13 May 2002 Shortlist of consultants for construction supervision approved 24 June 2002 Draft request for proposals approved 3 July 2002 Draft bidding documents for civil works received 15 August 2002 Draft pre-qualification evaluation report received 9 September 2002 Revised bidding documents received 12 September 2002 Loan declared effective 21 October 2002 Draft bidding documents approved
2003 14 February 2003 Technical evaluation report for selection of supervising engineer approved 24 March 2003 Contract negotiation with supervising engineer conducted 27 March 2003 Revised pre-qualification evaluation report for civil works received 28 March 2003 Pre-qualification evaluation report for civil works approved 4 April 2003 Invitation to bid issued to potential bidders 23 May 2003 Supervising engineer’s contract signed 10 July 2003 Variation order (VO) 1 ($49,905) under the supervising engineer contract for providing assistance in the bid evaluation approved 30 September 2003 Bid evaluation report for civil works approved 1 November 2003 Contract 1 for packages 1, 2, 4, and 5; contract 2 for package 3; and contract 3 for package 6 signed
2004 5 February 2004 VO2 under the supervising engineer’s contract for replacement of international staff and increase of domestic consultants inputs approved 5 July 2004 VO3 ($444,583.44) under supervising engineer’s contract and associated reallocation of loan proceeds to finance the cost of the detailed design of Osh–Sarytash–Irkeshtam road approved 16 September 2004 Addendum to VO3 ($10,266) under the supervising engineer’s contract for procuring computers and alarm system for PIU approved
22 Appendix 3
Date Event
2005 4 January 2005 Invitation to bid for procurement of road maintenance equipment published in ADBBO 7 February 2005 First extension of loan closing date by 12 months, from 30 April 2005 to 30 April 2006, approved 25 February 2005 VO5 for $466,507.48 under contract 2 for constructing additional bridge in Kara-Jigach approved 24 May 2005 Meeting of ADB, MOTC, and Turkish Embassy on poor performance under contract 1 13 June 2005 Bid evaluation report for road maintenance equipment procurement approved 29 June 2005 Contract 5A for road maintenance equipment supply awarded 30 June 2005 Contract 5B for road maintenance equipment supply awarded 23 September 2005 Reallocation of $2,255,594 from unallocated to equipment category approved 23 September 2005 Contract 5C for road maintenance equipment supply awarded 19 December 2005 ADB approved (i) change of procurement mode for remaining works under contract 1 (packages 1, 2, 4, and 5) from international competitive bidding to direct negotiations with China Road and Bridge Corporation; second extension of loan closing date to 30 July 2007 22 December 2005 Contract 2 substantially completed
2006 5 January 2006 Notice on termination of contract 1 issued 20 January 2006 Contract 1 terminated 4 February 2006 Contract 6 for the remaining works under contract 1 on packages 1, 2, 4, and 5 approved 15 August 2006 Change of selection method for additional works of consulting service for about $475,000 from quality- and cost-based selection to single-source selection 1 September 2006 Supervising engineer’s contract discontinued because sanctions are imposed on the firm by ADB worldwide, effective from 29 April 2006 7 September 2006 Individual international consultant for position of supervising engineer representative and resident engineer, local design institute, and all PIU staff hired directly 13 September 2006 Use of imprest account procedure to finance contract 3 and PIU staff and operating costs approved
2007 30 July 2007 Project completed 10 December 2007 Loan account closed and the undisbursed loan balance of SDR843,095.52, or $1,337,604.77, cancelled
ADB = Asian Development Bank, MOTC = Ministry of Transport and Communications. Note: For project processing and administration missions refer to Table D of the Basic Data, page iv. Source: Asian Development Bank
Appendix 4 23
DESCRIPTION OF CONTRACTS AND PROCUREMENT
1. Three civil work contracts comprising contract 1 for $16.8 million, contract 2 for $10.0 million, and contract 3 for $2.3 million were awarded through international competitive bidding in November 2003. ADB received the first draft pre-qualification documents for civil works on 9 November 2001 and approved them on 9 April 2002 after extensive communications on evaluation criteria and a scoring system. The Ministry of Transport and Communications (MOTC) issued the pre-qualification documents to prospective applicants from 20 April 2002 and submitted a draft pre-qualification evaluation report on 15 August 2002. After extensive comments and revisions, ADB approved it on 28 March 2003. Of 40 applicants, 22 were pre- qualified, of which 18 purchased the bidding documents on 4 April 2003. Of these, 10 bidders submitted their bids by the closing date of 9 July 2003. The bid-evaluation report was submitted on 8 September 2003, approved by ADB on 30 September 2003, and contracts awarded in November 2003.
2. Contract 1 was awarded to Emek Insaat of Turkey. The contract covered packages 1, 2 (sections of national highway from kilometer [km] 426 to km 456 and from km 456 to km 498, respectively), 4, and 5 (Tash-Kumyr to Kara-Jigach feeder road sections from km 0 to km 28 and from km 28 to km 53, respectively). Due to poor contractor performance, the EA terminated contract 1 on 20 January 2006. Contract 6 for the remaining works was awarded to China Road and Bridge Corporation of the People’s Republic of China on 4 February 2006 through a single- source procurement procedure approved by ADB on 19 December 2005.
3. Contract 2 was awarded to China Road and Bridge Corporation. The contract covered package 3 (a section of the national highway from km 614 to km 664) and was substantially completed on 22 December 2005. A defects liability certificate was issued on 5 February 2007.
4. Contract 3 was awarded to a joint venture comprising Alke Insaat of Turkey and NarynGES of the Kyrgyz Republic. The contract covered package 6, comprising the Bazar- Korgon–Arslanbob feeder road sections from km 0 to km 52. Due to poor performance of the contractor, EA arranged that subcontractor DEP-22 complete the works by the loan closing date.
5. The consulting services contract for construction supervision and project performance monitoring and evaluation for $2,398,891 was awarded through international competitive recruitment using the two-envelope system on 23 May 2003. ADB approved five contract variations for a total of $852,849.92. The final contract value was $3,251,740.92. ADB imposed sanctions on the firm effective from 29 April 2006. As a result, its contract was discontinued from 1 September 2006. On 15 August 2006, ADB approved (i) additional scope of supervising engineer services for about $475,000 and (ii) a change of selection method for these services from quality- and cost-based selection to single-source selection and direct selection of individual consultants as follows: (i) the current team leader directly as an individual international consultant for the position of supervising engineer representative and resident engineer (with the contract covering eight local support staff); (ii) a local design institute, the former subcontractor of the original supervising engineer, through the single source selection procedure; and (iii) all current PIU staff directly as individual national consultants. By 7 September 2006, all these contracts were signed.
6. Contract 4 for consulting services for the annual audit of project accounts and the road fund was awarded to Idice-Audit, Ltd., through international competitive bidding in October 2004. The contract for a total $120,372 was signed on 12 October 2004.
24 Appendix 4
7. Three contracts for road maintenance equipment supply—5A for $532,294, 5B for $600,000, and 5C for $1,123,000—were awarded through international competitive bidding on 29 and 30 June and 23 September 2005. Equipment procurement was advertised on the ADB website on 4 January 2005. Draft bidding documents were approved by ADB on 15 February 2005 and issued to the prospective bidders on 21 February 2005. Of the nine companies that purchased the bidding documents, four submitted their bids by the closing date of 22 April 2005. MOTC submitted its bid-evaluation report on 30 May 2005. As the bid prices exceeded the budget, the Borrower requested the reallocation of $800,000 from the unallocated category into the equipment category on 15 September 2005. ADB approved the proposed contract awards and the associated reallocation of loan proceeds on 23 September 2005.The equipment was delivered and put into operation around the country by early 2006.
Table A4: Contracts
Loan Month/Year Description Category 1A,B 11/03 Contract 1 Road construction packages 1, 2, 4, and 5; Emek Insaat, Turkey 1A 11/03 Contract 2 Road construction package 3; China Road and Bridge, People’s Republic of China 1B 11/03 Contract 3 Road construction package 6; Alke Insaat, Turkey, and NarynGES Kyrgyz Republic, joint venture 1A,B 2/06 Contract 6 Road construction, remaining works packages 1, 2, 4, and 5; China Road and Bridge 2 9/05 Contract 5A Supply of road maintenance equipment; Secmair, France 2 9/05 Contract 5B Supply of road maintenance equipment; Borusan Makina, Turkey 2 9/05 Contract 5C Supply of road maintenance equipment; China Road and Bridge, China 3 5/03 Contract for consulting services for construction supervision and project monitoring; Louis Berger Group, United States 3 12/04 Contract 4 Audit services, IDIS Audit, Kyrgyz Republic 3 9/06 Contract 7 Individual consulting services construction supervision and project monitoring; Roger Finn, United Kingdom 3 9/06 Contract 8 Consulting services for construction supervision and project monitoring; Kyrgyzdortransproject, Kyrgyz Republic 3 9/06 Contracts for individual consultancy services and project implementation unit staff Source: Asian Development Bank
Appendix 5 25
LIST OF PROCURED ROAD MAINTENANCE EQUIPMENT
Contract No Equipment Item Date of Delivery Delivery Location
5A Chip sealer 1 6 January 2006 Sosnovka Chip sealer 2 6 January 2006 Novopokrovka 5B Motor grader 1 23 November 2005 Sosnovka Motor grader 2 3 February 2006 Sosnovka Wheel loader 1 15 January 2006 Sosnovka Wheel loader 2 15 January 2006 Sosnovka 5C 30 T/hr crusher 1 8 December 2005 Tokmok 30 T/hr crusher 2 9 December 2005 Bazar Korgon T/hr = ton per hour Source: Ministry of Transport and Communications.
26 Appendix 6
PROJECT COSTS AND FINANCING PLAN ($ million)
Appraisal Estimate Actual Foreign Local Total Foreign Local Total Item Exchange Currency Cost Exchange Currency Cost
A. Base Cost 1. Civil Works a. Bishkek-Osh Road 22.1 10.7 32.8 24.5 12.1 36.6 Rehabilitation b. Rural Road 1.3 5.1 6.4 3.0 11.1 14.0 Improvement 2. Maintenance Equipment 1.3 0.0 1.3 2.3 0.0 2.3 3. Consulting Services 1.3 1.1 2.4 3.3 0.3 3.6 Subtotal (A) 26.0 16.9 42.9 33.1 23.5 56.5
B. Contingencies 1. Physical Contingency 2.6 1.7 4.3 0.0 0.0 0.0 2. Price Contingency 1.2 0.8 2.0 0.0 0.0 0.0 Subtotal (B) 3.8 2.5 6.3 0.0 0.0 0.0
C. Interest During Construction 0.8 0.0 0.8 0.6 0.0 0.6
Total 30.6 19.4 50.0 33.7 23.5 57.1 Source: Asian Development Bank
Appendix 7 27
DISBURSEMENTS
Table A7.1: Annual Disbursements ($ million)
Year Disbursement % of Total Cumulative % 2003 3.599 7.84 3.599 7.84 2004 3.198 6.97 6.796 14.81 2005 9.013 19.64 15.809 34.45 2006 20.051 43.69 35.860 78.15 2007 10.026 21.85 45.887 100.00 Total 45.886 Source: Asian Development Bank
Table A7.2: Cumulative Disbursement (projected and actual–$ million)
Projected Actual Year Annual Cumulative Annual Cumulative 2003 1.000 1.000 3.599 3.599 2004 8.000 9.000 3.198 6.797 2005 6.000 15.000 9.013 15.809 2006 10.920 25.920 20.051 35.860 2007 10.650 36.570 10.026 45.886 Source: Asian Development Bank
Figure A7: Disbursement Graph
Disbursement Details
50.00
45.00
40.00
35.00 30.00
25.00
20.00 15.00 10.00
5.00 - 2003 2004 2005 2006 2007
Projected Actual
28 Appendix 8
Date g Closin
ctual ctual A 2007 New Supervising Consultant Supervising New
2006
Extension First First
2005
Closing Date Closing Origiinal Origiinal 2004 Original Supervising Consultant Supervising Original 2003 IMPLEMENTATION SCHEDULE Actual 2002 2001 Appraisal Estimate FAJAODFAJJASONDJFMAMJJFMAMJJASONDJFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASONDJFMAMJ JASOND J FMAM J J A S OND ces i ng i erv S s t k ng or rocess lti
P rd Approval ondary Roads W ortlisting rvices andTraining pply pmen
su praisal i ct Finding obilization n n election idding il ishkek-Osh Road ishkek-Osh . Prequalification . Bidding . Construction oan Effectiveness . . Mobilization ity v Delivery andDelivery Installation on qu oa Ci E C L Source: Asian Development Bank. . . . . Activ 1. Fa 2. Ap 3. Boa 4. L a b c d 2. Sec B 1. 2. Su 3. 1. Sh 2. S 3. M 4. Se 1. B 1. A B C D
Appendix 9 29
STATUS OF COMPLIANCE WITH LOAN COVENANTS
Covenant Reference to Loan Status of Compliance Document Project Implementation Unit 1. (a) The Borrower shall ensure that the Project Loan Agreement Complied with. Implementation Unit (PIU) shall be responsible for the (LA), Schedule 6, The PIU was established in April day-to-day Project supervision and implementation of para. 1 (a) 2003 and PIU Head started work in 21 the Project and provide the necessary liaison among May, 2003 under MOTC Decree No. MOTC, contractors, suppliers, and the Bank. The PIU 120. The PIU staff was financed under shall be headed by a Project Manager appointed by the Supervising Engineer Contract MOTC and acceptable to the Bank. expired on 1 September 2006. All PIU staff and operating costs are funded through Imprest Account thereafter. (b) The Borrower shall ensure that the PIU remains LA, Schedule 6, adequately staffed at all times throughout the Project para. 1 (b) (b) Complied with. implementation period by civil engineers with expertise See comment above. in materials and soil engineering, roads and bridges, as well as by financial and clerical staff made available from MOTC.
Project Steering Committee 2. (a) The Project Steering Committee (PSC) shall LA, Schedule 6, Complied with. oversee the implementation of the Project. In particular, para. 2(a) PSC was established and the PSC the PSC shall: (i) oversee and coordinate all Project members were approved by the activities, including liaison among the agencies involved Decrees of the Kyrgyz Government in in Project implementation and sector reforms, as April 2001 and January 2002. Since 18 agreed upon during policy dialogue with the Bank; (ii) August 2006, the newly established review the status of Project implementation; (iii) monitor Committee on administration of road the progress achieved and resolve difficulties construction, reconstruction and encountered; and (iv) serve as a forum for discussions rehabilitation fulfills the role of PSC for on, and review of, the Project’s impact on poverty all donor-funded projects. reduction and economic development.
(b) The PSC shall continue to be chaired by the LA, Schedule 6, Complied with. Minister of MOTC, and its members shall be the Project para. 2(b) See the comment above Manager and representatives from the Office of the Prime Minister, Ministry of Finance and MOTC. The PSC shall meet at least four times per year, and more often is required.
Counterpart Funding 3. Without limiting the generality of Section 4.02 LA, Schedule 6, Complied with. of the LA, the Borrower shall undertake to provide all para. 3 funds and resources necessary for rehabilitation, operation and maintenance, and management of the Project roads. The Borrower, prior to 31 December of each year of the Project implementation period, shall submit to the Bank the Public Investment Program (PIP) for the succeeding year demonstrating availability of necessary funds and resources for rehabilitation, operation and maintenance, and management of the Project roads. The Borrower shall cause MOTC to take all necessary measures to ensure successful rehabilitation of the Project roads, and operation and
30 Appendix 9
Covenant Reference to Loan Status of Compliance Document maintenance thereof after the Project completion.
Road Maintenance and Safety Issues 4. (a) The Borrower shall establish, not later than the LA, Schedule 6, Complied with. Effective Date, a special account within the Treasury for para. 4 (a) The special account was established on 14 revenues specified in the Road Fund Act. August 2002 by MOEF Order No. 239P. MOTC letter of 15 April 2002, ref. 14-5/245 was received by ADB.
(b) The Borrower shall establish a separate budget item LA, Schedule 6, Complied with. for maintenance of the Bishkek-Osh road and shall para. 4 (b) 2002 complied with allocate funds as follows: actual budget allocation was Som57,3M Som35 million in the year 2001, 2003 complied with Som40 million in the year 2002, budget allocation was Som108,8M Som60 million in the year 2003, 2004 complied with Som80 million in the year 2004, and budget allocation was Som135M 2005 not complied with Som100 million in the year 2005. budget allocation was Som85.6 M 2006 complied with budget allocation is Som239.8M 2007 complied with Budget allocation was 126.5M
(c) The Borrower shall allocate funds for maintenance LA, Schedule 6, Complied with of other MOTC-administered roads as follows: para. 4 (c) Som162 million in the year 2001; 2002 not complied with the allocation shall increase by 10% per year, reaching actual budget allocation was Som162,2M 2003 not complied with Som237 million in 2005 budget allocation was Som189,2M 2004 not complied with budget allocation was Som207.6M 2005 not complied with budget allocation was Som178.8M 2006 not complied with budget allocation was Som151.3M 2007 complied with budget allocation was Som887.4
Table A9: Summary of actual allocation for road maintenance against the loan covenants
2001 2002 2003 2004 2005 2006 2007 2008 (planned)
Bishkek-Osh Road Covenanta 35.0 40.0 60.0 80.0 100.0 100.0 100.0 100.0 Allocated budget 57.3 108.8 135.0 85.6 239.8 126.5 106.5
All MOTC Roads Covenanta 162.0 178.2 196.0 215.6 237.2 237.2 260.9 287.0 Allocated budget 162.2 189.2 207.6 178.8 151.3 887.4 730.9
(d) The Borrower shall adjust the amounts of LA, Schedule 6, Partly complied with. budgetary allocations indicated in paragraphs (b) and para. 4 (d) (c) above for the effect of annual inflation and depreciation of the Som against dollars.
(e) The Borrower shall (i) include the details of LA, Schedule 6, (i) Not complied with actual road maintenance expenditures in every para. 4 (e) The quarterly progress reports did not
Appendix 9 31
Covenant Reference to Loan Status of Compliance Document quarterly progress report to be furnished to the Bank; contain the details of actual road maintenance expenditures. (ii) have the road maintenance expenditures and the Road Fund special account audited annually in (ii) Complied with accordance with appropriate auditing standards The audit of the Road Fund proceeds consistently applied by independent auditors whose was carried out annually. qualifications, experience and terms of reference are acceptable to the Bank; and (iii) furnish such audited (iii) Complied with. expenditures and account to the Bank within nine Audit reports are submitted timely. months from the end of the fiscal year.
Road Maintenance Practices 5. The Borrower shall ensure that MOTC: (a) by the LA, Schedule 6, Partly complied with time of Project completion, shall invite bids from para. 5 (a – c) contractors, regardless of ownership, to undertake (a) Complied with routine maintenance of all sections of the Bishkek-Osh By end-2006, MOTC finalized the road sector strategy, which included a component road, including sections rehabilitated under other of gradual transfer of road maintenance to projects, for which the warranty periods have expired; private sector. In 2007 several contracts (b) within three months of submission of the final report were awarded to private contractors through an opened bidding procedure for maintaining of the Advisory TA, shall prepare and furnish to the a total of 247 km of national road network, Bank a detailed action plan for implementing the including Bishkek-Osh road sections.. secondary roads maintenance system (SRMS), to be based on collaboration between the local maintenance (b) Complied with The EA submitted to ADB a detailed action units (LMUs) and local communities, developed under plan to implement the TA recommendations the Advisory TA; and (c) by the time of completion of on 8 November 2006. civil works for the secondary roads, shall make SRMS fully prepared for operation, upon the expiration of the (c) Not complied with. Implementation of secondary roads warranty periods, in the LMUs assigned to the maintenance system with community secondary roads rehabilitated under the Project. participation is pending. See comment on Schedule 6, para. 6, below
6. The Borrower shall ensure active participation of the LA, Schedule 6, Not complied with Project beneficiaries in the maintenance of secondary para. 6 Advisory TA developed a system of secondary roads maintenance with roads after the expiration of the warranty periods by community participation. The supervising enacting and/or modifying necessary regulations, consultant developed a set of documents for providing resources and procuring equipment for this maintenance system, including a pilot SOM4 million worth maintenance program maintenance of the Project roads in accordance with undertaken in 2007 However, the system the list of equipment to be prepared by the Project remains to be fully implemented. supervision consultant and furnished for approval to the Bank by June 2003.
Construction Quality 7. MOTC shall ensure that (i) the roads are LA, Schedule 6, Complied with Has been implemented by the Supervising rehabilitated in accordance with the technical para. 7 Consultants. specifications of the design; and (ii) construction supervision, quality control and contract management are performed in accordance with internationally acceptable standards.
Road Safety 8. To ensure a safe road network in the Project area LA, Schedule 6, Complied with during Project implementation and after Project Has been implemented by the Supervising para. 8 Consultants. completion, MOTC shall install appropriate road safety
32 Appendix 9
Covenant Reference to Loan Status of Compliance Document
facilities, such as pavement marking, warning signs and signals, communication facilities, hazard barriers, and traffic management and monitoring facilities. The Borrower shall cause MOTC and the State Automobile, Inspection (GosAvtolnspectsia) of the Ministry of Internal Affairs to take all necessary measures, including implementation of proper traffic management procedures, during the Project implementation to ensure safety of Project workers and road users. The Borrower shall ensure that recommendations for maintaining road safety made by contractors, the Project supervision consultant or the Bank, agreed upon by the Borrower and the Bank, shall be implemented in accordance with the agreed timeframe.
Competitiveness of Market for Transport Services 9. The Borrower undertakes to implement the regulatory LA, Schedule 6, Not complied with (irrelevant) changes recommended under the Advisory TA and para. 9 agreed upon with the Bank in order to improve the Due to delay in effectiveness of the loan competitiveness of the markets for transport services so and delay in recruitment of consultants, that the benefits of the Project are passed on to the the proposed inputs on competitiveness poor. The Borrower, within three months from the of markets for transport services and submission of the final Advisory TA report, shall prepare became irrelevant and were dropped and submit to the Bank a detailed action plan for from the scope of work. The EU TACIS- implementing the Advisory TA recommendations to funded TA implemented in 2003-2005 ensure that a substantial part of the recommendations already confirmed that (i) transport services is implemented by June 2004, and the implementation are already highly competitive, (ii) freight of the recommendations is entirely completed by the services are deregulated and (iii) passenger end of 2004. services are lightly regulated. The scope was revised to include (i) estimation of financing needs of the road sector; and (ii) review the operation of Road Fund and recommend required changes to the financing mechanism of road maintenance including workshops to present the recommendations. The agreed scope of services was (i) institutional and policy support in road sector; (ii) financing of the road sector; (iii) maintenance of secondary roads; and (iv) training of road maintenance personnel.
MOTC Financial Organization Reforms 10. According to the recommendations specified in the LA, Schedule 6, Complied with final report for TA 3065-KGZ: Policy Support in the para. 10 (i) The Chief Financial Officer was appointed Transport Sector, MOTC shall (i) by 1 January 2002, in July 2003. (Financial and Economic integrate the financial planning and management Analysis and Control Department of MOTC). functions of MOTC and its regional road maintenance (ii) Implementation of International agencies (RRMAs) and appoint a Chief Financial accounting standards in MOTC, its branches Officer to head these functions; and (ii) by 1 January and entities commenced in 2006 after
Appendix 9 33
Covenant Reference to Loan Status of Compliance Document
2004, commence implementation of international procurement computer hardware and accounting standards (of the International Accounting software. Development of specialized Standards Committee or other equivalent accounting application based on 1C accounting program standards acceptable to the Bank) in MOTC, its for MOTC and associated training of staff branches and entities involved in the Project was completed in 2007. implementation.
Covenant Environmental Considerations 11. The Borrower shall ensure that (a) road LA, Schedule 6, Complied with. rehabilitation and maintenance works under the Project (a) has been implemented by the para. 11 Supervising Consultant. are carried out in accordance with the environmental (b) has been implemented by the laws and regulations of the Borrower and the Bank’s Supervising Consultant. environmental procedures and guidelines, in particular, (c) Partly covered by PPMS. Joint inspections by MOTC and MEES have been the Bank’s Environmental Guidelines for Selected reported. Infrastructure Project; (b) all contracts related to (d) Contained in the Contract Documents, rehabilitation of the Project roads require that the has been enforced by the Supervising Consultants contractors (i) take appropriate erosion control measures; (ii) minimize and adverse impact due to altered embankments, borrow pits, and other activities as set out in the SIEE; (iii) take appropriate safety measures to minimize risks of landslides, soil subsidence, and related occurrences; and (iv) keep construction materials and facilities, such as asphalt and hot-mix plants, at least 500 meters away from schools, hospitals, and other sensitive facilities; (c) MOTC and MEES regularly undertake joint inspections of the environmental aspects of the Project, including erosion control, and include the results of such inspections in the Project quarterly reports submitted to the Bank; and (d) the contractor under the Project implements environmental mitigation measures recommended under the SIEE.
Poverty Reduction 12. The Borrower shall take necessary actions to LA, Schedule 6, Complied with ensure that local labor is engaged in Project works and Contractors engaged local labor by July para. 12 2007 as follows: procurement of local materials, and wages paid to local Contract 1 Total121_ (Foreign-32; Local- 89 labor employed under the Project are above the poverty including 13 female) line Contract 2: Total-151 (Foreign-42; Local- 109, including 7 female) Contract 3: Total-80 (Foreign-2; Local- 78, including 12 female). Contract 6: Total–390 (Foreign-153; Local- 237, including 32 female)
Monitoring and Evaluation 13. To ensure that the Project facilities are managed LA, Schedule 6, Partly complied with effectively, and Project benefits are maximized, MOTC, para. 13 The baseline data has been collected in with the assistance of the Project implementation 2004 and updated at project completion. consultants, shall undertake monitoring and evaluation Partly not yet due. The data needs to be updated one and three of Project impact. Project impact shall be monitored and years after project completion, means by evaluated based on the data, agreed upon with the end-2008 and by end-2010 respectively. Bank, collected at the commencement of the
34 Appendix 9
Covenant Reference to Loan Status of Compliance Document
Project, at Project completion, one year from’ Project completion, and three years from Project completion. These activities shall be reviewed by the Bank through the quarterly progress reports and review missions that will monitor the progress of the Project, its impact, and sector reforms.
Mid-term Review 14. In the year 2003, the Borrower and the Bank shall LA, Schedule 6, Partly complied with carry out a midterm review of the Project. The para. 14 Midterm review mission scheduled in objectives of the review will be to: (i) evaluate the 2004 was waived. All issues were Borrower’s progress in implementing policy reforms; (ii) addressed during regular review examine the Project implementation and determine missions. whether any adjustments to the scope and implementation and determine whether any adjustments to the Project scope and implementation arrangements are warranted; (iii) determine the compliance with relevant standards; (iv) address any potential procurement, financing, and scheduling issues; and (v) examine compliance with the provisions of this Loan Agreement.
Gender and Development 15. The Borrower shall ensure compliance with Bank’s LA, Schedule 6, Complied with. Policy on Gender and Development during the Project A provision for equal opportunity for women para. 15 was included in the Contract Documents and implementation and shall take necessary measures to women have been employed on the Project. encourage women to participate in Project implementation activities. MOTC shall monitor effects Contractors engaged women by July 2006 as follows: on women during Project implementation through the Contract 1: 13 of total 121 monitoring and evaluation system, in consultation with Contract 2: 7 of total-151 local governments and local women’s associations. Contract 3: 13 of total 78 Contract 6: 32 of total 390
Health Risks 16. The Borrower shall ensure that information in the LA, Schedule 6, Complied with. Russian language on the risk of socially transmitted Posters have been issued to the Contractors, para. 16 a contract was made with Ministry of Health diseases is disseminated to those employed during for distribution of contraceptives to high risk Project implementation and to transport operators when groups on site using the Project facilities.
Audit of Accounts 17. For the purpose of complying with the requirements LA, Schedule 6, Complied with. of this Loan Agreement regarding annual submittal of para. 17 Idice-Audit Ltd, (Kyrgyz Republic) auditing audited financial statements, proceeds of the Loan may company was selected through international be used to finance expenditure for private sector competitive bidding. auditors and translation of auditors’ reports into English, provided that (i) such auditors have qualification, expertise and terms of reference acceptable to the
Bank; and (ii) the recruitment process is acceptable to the Bank.
18. The Borrower shall maintain, or cause to be LA, Section 4.06 Complied with.
Appendix 9 35
Covenant Reference to Loan Status of Compliance Document maintained, records and accounts adequate to identify (a) Accounting and other records were maintained in line with ADB standards. the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project and to reflect, in accordance with consistently maintained sound accounting principle MOTC and other agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof.
19. The Borrower shall (i) maintain, or cause to be La, Section 4.06 (b) Complied with maintained, separate accounts for the Project; (ii) have Foy FY 2006 – complied with such accounts and related financial statements audited For FY 2005 –complied with annually, in accordance with appropriate auditing for FY 2004 – complied with standards consistently applied, by independent auditors for FY 2003 – complied late whose qualifications, experience and terms of reference Due to the delay in the recruitment of auditing company, the submission of audited are acceptable to the Bank; (iii) furnish to the Bank, as project accounts for fiscal year (FY) 2003 soon as available but in any event not later than nine was delayed by 2 months (submitted on 03 (9) months after the end of each related fiscal year, Dec 2004). certified copes of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement), all in the English language; and (iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.
20. The Borrower shall furnish, or cause to be LA, Section 4.07 Complied with. furnished, to the Bank quarterly reports on the carrying (b) out of the Project and on the operation and management of Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.
21. Promptly after physical completion of the Project, LA, Section 4.07 (c) Complied with late but in any event not later than three (3) months EA delayed PCR submission by 3 thereafter, or such later date as may be agreed for this months purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan.
36 Appendix 10
TRAFFIC FORECAST
I. Introduction
1. This appendix considers the traffic, past and future, for phase 3, which is the final phase of the Bishkek–Osh road rehabilitation project. It then considers traffic for the project including phases 1 and 2.
II. Phase 3
2. Traffic forecasts for this project completion report (PCR) and the equivalent forecasts from the report and recommendation of the President (RRP)1 at the time of appraisal are shown in Table A10.2. Traffic levels are based on the original traffic counts at appraisal, data from a World Bank road network study 2 and traffic counts by the Ministry of Transport and Communications in January 2008. In the latter report, average annual daily traffic was counted at 1,840 vehicles per day on the km 427–498 section and 5,784 vehicles per day on the Uzgen– Osh section. Traffic was categorized into eight vehicle types: car, minibus, bus, heavy bus, and four types of trucks. Cars are the majority, accounting for 60% on the km 427–498 section and 69% on the Uzgen–Osh section.
3. Traffic estimates by vehicle type were interpolated from count data for the years up until 2008. Between 2001 and 2005, traffic on the km 427–498 section grew by 5.5% per year and on the Uzgen-Osh section by 2.5% per year. Thereafter, until 2008, traffic on both sections grew at about 4% per year. By comparison, the traffic forecasts in the RRP were based on assumptions of annual traffic growth of 6–7% and approximately 10% generated traffic. The rehabilitated Uzgen–Osh road section was opened to traffic in 2006, and the km 427–498 section was opened in 2007. In fact, there has been no significant traffic generated, and until 2008 traffic growth has been lower than forecast.
4. The appraisal forecasts were based on expected growth in the gross domestic product (GDP) and population and on income elasticities of demand for freight and passenger traffic. The population was expected to increase at an average annual rate of 1.7% per year during the project period. The GDP was forecast to grow at an annual rate of 4.5% through 2005 and at 5.0% thereafter. The values of income elasticity of demand used for passenger traffic were 1.5 during 2001–2005, 1.4 during 2006–2010, and 1.3 for the remaining project period. For freight traffic, the values used were 1.5 during 2001–2005, 1.3 during 2006–2010, and 1.2 during the remaining project period.
5. Actual population growth in the period 2000–2005 was between 1.2% and 1.5%. Real GDP data are shown in Table A10.1:
Table A10.1: Gross Domestic Product Real Growth Rate (%)
Item 2003 2004 2005 2006 2007 Gross domestic product growth 7.0 7.0 -0.2 3.1 8.2 Source: National Statistics Committee
1 ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Third Road Rehabilitation Project. Manila. 2 Kyrgyz Republic Core Road Network Condition Survey and Strategic Economic Analysis, 2005.
Appendix 10 37
6. Economic growth during the tabulated period was much lower than was expected at the time of appraisal, and this dampened real traffic growth. However, economic growth has now resumed, and traffic growth from current, 2008 levels is derived from the same growth assumptions that were made at the time of appraisal.
7. The expected average annual growth rates for passenger traffic are 7.0% during 2008– 2010, and 6.5% for the remaining project period. For freight traffic, the average annual growth rates are 6.5% during 2008–2010 and 6.0% for the remaining project period. International transit traffic was forecast to comprise approximately 5% of total traffic. The counts do not distinguish vehicles of foreign origin, and in fact little or no transit traffic uses the project roads. This is due at least in part to difficulties at the Uzbek-Kyrgyz border crossings. No generated traffic is included in the forecast.
8. The overall effect of these different project circumstances leaves the forecast traffic volumes at levels lower those foreseen at the time of appraisal.
Table A10.2: Updated Traffic Forecasts for the Project Phase 3 (average annual daily traffic)
A. Current (PCR)
Road Section Mini Heavy Light Medium Heavy Articulated and Year Car Bus Bus Bus Truck Truck Truck Truck Total
Km 427–498 2005 964 90 21 54 43 43 154 271 1,640 2010 1242 116 28 70 54 54 196 345 2,105 2015 1703 160 38 97 72 72 262 462 2,866 2020 2334 219 52 133 96 96 352 618 3,900 2025 3198 299 71 182 128 128 471 827 5,304 2027 3627 339 81 207 144 144 529 930 6,001
Uzgen–Osh 2005 3524 376 153 102 107 203 514 107 5,086 2010 4538 485 197 131 136 260 656 136 6,539 2015 6217 666 272 180 182 350 878 182 8,927 2020 8517 912 373 246 244 469 1176 244 12,181 2025 11670 1249 510 337 329 629 1574 329 16,627 2027 13237 1416 578 382 370 707 1768 370 18,828 km = kilometer, PCR=project completion report Source: Asian Development Bank
38 Appendix 10
B. At Appraisal
Road Section and Light Medium Heavy Year Car Pickup Bus Truck Truck Truck Articulated Total Km 427–498 2001 663 146 47 20 60 312 80 1,328 2005 644 201 85 30 80 414 103 1,557 2010 926 288 123 30 111 579 145 2,202 2015 1,290 400 170 40 150 785 197 3,032 2020 1,788 554 233 54 203 1,062 266 4,160 2024 2,316 716 301 68 258 1,348 338 5,345 Uzgen–Osh
2001 3,169 509 277 46 139 333 153 4,626 2005 3,968 649 380 76 188 447 195 5,903 2010 5,692 931 544 76 263 626 272 8,404 2015 7,917 1,294 756 103 357 848 368 11,643 2020 10,964 1,793 1,046 139 482 1,146 498 16,068 2024 14,195 2,321 1,353 177 612 1,455 634 20,747 Source: ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Third Road Rehabilitation Project. Manila
III. Phases 1 and 2
9. Traffic forecasts for phases 1 and 2 are shown in Tables A10.3 and A10.4 respectively. The forecasts from the phase 1 and phase 2 RRPs at the time of appraisal are shown where they are comparable with current data and forecasts.
10. Estimates of current traffic are based on sources to those used for phase 3. Also taken into account are the traffic counts performed at the time of the PCRs for phases 1 and 2.
11. Traffic count data from these various sources adopted different vehicle descriptions and categories. These different vehicle classes have been assimilated into the categorization of the current, 2008 count data provided by the Ministry of Transport and Communications for phase 3. There has been a marked trend in the traffic spectrum away from trucks towards cars. Cars typically comprised 40% of total traffic in the period 1995–1997, when the RRPs for phases 1 and 2 were prepared, but comprise 60–70% of total traffic in 2008.
12. For this present reevaluation, all credible data available was used to the extent possible. The data is inconsistent for several reasons, including poor survey techniques and the fact that works were continuing on the various phases throughout the whole period. The closures of the Tyu Ashuu Tunnel during phase 2 would have been particularly disruptive.
13. Traffic growth for phase 1, between 1995 and 2008, was about 8.5% throughout. This resulted in an overall traffic forecast very similar to that foreseen at appraisal. Traffic growth for phase 2, between 1997 and 2008, varied from about 3.2% to 6.0%, by section. This resulted in
Appendix 10 39 overall traffic forecasts somewhat lower than foreseen at appraisal. Traffic levels on phase 1 and phase 2 road sections have now converged to quite similar levels, from apparently higher variability from section to section, than in previous years.
14. The traffic data allows no distinction between normal traffic growth and any traffic generated by road improvements. By observation, vehicle ownership and usage has been growing strongly in the Kyrgyz Republic throughout the period, independently of road conditions. Under these circumstances, the assumptions made in the RRP that lower vehicle operating costs would generate traffic, based on a cost elasticity, are not necessarily dominant. Other motives to travel by motor vehicle, or not to do so, may be stronger.
15. Traffic diverted from a detour (Ferghana Valley–Tashkent–Bishkek, projected in the RRP to be 80% longer and have 50% vehicle operating costs but still likely to attract significant traffic) was considered in the RRP for phase 1 but not in the RRPs for phases 2 and 3. The Uzbek-Kyrgyz border has been restricted for vehicle transport throughout most of the relevant period, and this may have suppressed traffic, particularly freight traffic, from the Uzbek side of the Ferghana Valley toward Bishkek. There is no road transport agreement allowing Chinese vehicles from Kashgar to continue beyond Osh. No classification of traffic into generated, diverted, or international transit traffic is considered in this PCR.
40 Appendix 10
Table A10.3: Updated Traffic Forecast for the Project Phase 1 (average annual daily traffic)
Road section Mini Heavy Light Medium Heavy Articulated and year Car Bus Bus Bus Truck Truck Truck Truck Total
Km 161-248 2000 520 9 4 3 210 202 24 37 1,009 2005 886 82 16 33 213 197 115 98 1,640 2008 1,148 178 18 64 88 76 240 141 1,953 2008 2,071 2010 1,314 203 20 73 100 86 273 160 2,229 2015 1,800 278 26 100 134 114 364 214 3,030 2018 2,175 335 32 121 160 136 434 255 3,648 2018 3,710 2020 2,467 380 36 137 180 153 488 286 4,127 2025 3,380 521 49 187 241 205 653 382 5,618 2027 3,834 591 55 212 270 230 734 429 6,355
Km 327-361 2000 393 15 6 4 222 251 22 46 959 2005 886 82 16 33 213 197 115 98 1,640 2008 1,188 102 15 38 86 41 196 183 1,849 2008 1,918 2010 1,360 117 17 44 98 47 223 208 2,114 2015 1,863 161 22 60 131 63 298 278 2,876 2018 2,250 194 26 72 156 75 355 332 3,460 2018 3,436 2020 2,552 220 30 82 175 85 399 373 3,916 2025 3,496 300 40 112 235 113 534 499 5,329 2027 3,965 341 46 127 264 127 600 561 6,031
Km 412-426 2000 397 26 11 7 227 246 18 35 967 2005 886 82 16 33 213 197 115 98 1,640 2008 1,188 102 15 38 86 41 196 183 1,849 2008 1,908 2010 1,360 117 17 44 98 47 223 208 2,114 2015 1,863 161 22 60 131 63 298 278 2,876 2018 2,250 194 26 72 156 75 355 332 3,460 2018 3,414 2020 2,552 220 30 82 175 85 399 373 3,916 2025 3,496 300 40 112 235 113 534 499 5,329 2027 3,965 341 46 127 264 127 600 561 6,031
AADT=average annual daily traffic, km=kilometer Note: Equivalent AADT from the RRP, as available, are shown italicized. Source: Asian Development Bank
Appendix 10 41
Table A10.4: Updated Traffic Forecast for the Project Phase 2 (average annual daily traffic)
Road section Mini Heavy Light Medium Heavy Articulated and year Car Bus Bus Bus Truck Truck Truck Truck Total
Km 81–161 2000 647 35 9 21 66 31 296 86 1,191 2005 1,057 85 14 56 56 16 236 66 1,586 2010 1,495 131 20 88 63 7 227 63 2,094 2011 1,592 140 21 94 67 7 241 67 2,229 2011 2,033 2015 2,047 180 26 121 85 7 303 85 2,854 2020 2,805 246 36 165 113 7 405 113 3,890 2021 2,987 262 38 176 120 7 429 120 4,139 2021 3,461 2025 3,843 337 49 226 152 7 542 152 5,308 2027 4,359 382 55 257 171 7 610 171 6,012
Km 248–325 2000 669 35 9 6 85 47 374 151 1,376 2005 1,054 80 9 16 110 37 274 96 1,676 2010 1,477 117 6 19 141 37 247 69 2,113 2011 1,573 125 6 20 149 39 262 73 2,247 2011 2,583 2015 2,024 161 6 24 188 49 332 92 2,876 2020 2,773 220 6 34 251 65 444 124 3,917 2021 2,953 234 6 36 266 69 471 131 4,166 2021 4,434 2025 3,799 300 6 46 336 87 595 165 5,334 2027 4,309 341 6 52 377 98 669 186 6,038
Km 361–412 2000 632 33 13 24 66 68 448 171 1,455 2005 917 78 23 49 56 53 278 256 1,710 2010 1,180 110 31 67 59 53 239 329 2,068 2011 1,257 117 33 71 63 56 253 349 2,199 2011 2,817 2015 1,618 151 42 92 80 71 319 441 2,814 2020 2,216 207 58 126 107 95 426 590 3,825 2021 2,360 220 62 134 113 101 452 625 4,067 2021 4,848 2025 3,035 282 80 173 143 127 570 790 5,200 2027 3,442 320 91 196 161 143 640 887 5,880
AADT= average annual daily traffic, km=kilometer Note: Equivalent AADT from the RRP, as available, are shown italicized. Source: Asian Development Bank
42 Appendix 11
ECONOMIC ANALYSIS
I. Introduction
1. This appendix presents an economic analysis of phase 3, which is the final phase of the Bishkek-Osh road rehabilitation project. It then considers the economics of the overall project, including phases 1, 2, and 3.
II. Phase 3
A. General
2. The economic analysis was carried out by comparing with- and without-project scenarios. The Third Road Rehabilitation Project (the Project) rehabilitated 120 kilometers (km) of the Bishkek-Osh road and improved 125 km of secondary roads. In the without-project scenario, the road would have received only minimal maintenance and continue to deteriorate. The with-project scenario includes routine and periodic maintenance to high standards. The economic analysis covers the 24 years from 2004 to 2027, including about 4 years for project implementation and 20 years of full usage of the rehabilitated road. All benefits and costs are in constant 2008 prices.
B. Costs
3. Project economic costs include the cost of resources for road improvement and maintenance, as well as rural road improvement, equipment, and consulting services. Costs were divided into tradable and untradeable portions. A standard conversion factor of 0.9 was then applied to the untradeable portion.
C. Benefits
4. The principal sources of economic benefits from the Project are savings in vehicle operating costs (VOCs) and passenger and freight time savings. The improved secondary roads improve the access of the rural poor to markets and health services, facilitating their opportunities for commerce. The report and recommendation of the President (RRP) allowed an economic value- added benefit for this effect.
5. Savings in VOCs (Table A11.1) comprise the largest category of benefits, accounting for about 88% of total benefits, and arise from the improved road conditions resulting from the civil works carried out under the Project. The VOCs are calculated for each vehicle type. Unit economic VOCs for passenger and freight vehicles were estimated and aggregated using the highway development and management model (HDM 4). VOC savings will accrue primarily from improvements to the road surface. Generated traffic was expected to arise from the reduced VOCs, but, probably because of economic recession in the Kyrgyz Republic during project implementation, no generated traffic can be identified from traffic counts. Very little international transit traffic, or possibly none, uses the road, so the benefits accrue only to the Kyrgyz Republic.
6. The rehabilitation of the Bishkek-Osh road resulted in time savings from the improved road conditions. The value of time for passengers is calculated at $0.69 per working hour and $0.20 per nonworking hour. The value of time for freight traffic was estimated based on the composition of commodities transported by vehicle type and the value of the commodities. The values range from $0.065 per hour for light trucks to $0.290 per hour for articulated trucks.
Appendix 11 43
Table A11.1: Representative Vehicle Operating Costs by Vehicle Type a ($ per ‘000 vehicle-km) A. Current (PCR)
Medium- Medium Heavy Light Heavy Articulated Scenario Cars Minibus Size Bus Bus Trucks Trucks Trucks Trucks Without Project 200 130 270 560 180 270 560 810 With Project 160 90 220 460 150 220 460 640 VOC Savings 40 40 50 100 30 50 100 170 PCR=project completion report, VOC = vehicle operating costs, as calculated using Highway Development and Management Model HDM 4. Source: Asian Development Bank
B. At Appraisal (RRP)
Light Medium-Sized Heavy Articulated Scenario Cars Pickups Buses Trucks Trucks Trucks Trucks Without Project 80 70 215 140 170 400 475 With Project 60 50 150 100 130 290 375 VOC Savings 20 20 65 40 40 110 100 VOC = vehicle operating costs, as calculated using Highway Development and Management HDM 4 a For Uzgen-Osh road section in 2010. Source: ADB. 2001. Report and Recommendation of the President to the Board of Directors on Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Third Road Rehabilitation Project. Manila
7. Both without-project and with-project values of VOC are higher than foreseen in the appraisal because of higher current, 2008 fuel, tire, and vehicle costs. VOC savings are accordingly higher than those foreseen in the appraisal. Crew working times, freight value, and passenger times are also higher than foreseen in the appraisal. Wage rates have quadrupled in the period 2001–2008,1 and the Kyrgyz producer price index has risen by 30%.
8. Economic value added arises from improved market access with the improvement of secondary roads. In the loan appraisal, some economic value added was allowed for agricultural production generated by the improved secondary roads. Recent household surveys2 do not show a conclusive net improvement in commercial value added for agricultural production sold to markets. However, prices of agricultural products have risen steeply in recent months, providing much increased incentive to supply markets. Economic value added has been included for this PCR from 2008 onward on the same basis as in the loan appraisal.3 Sensitivity tests show the case without economic value added. Just as in the loan appraisal, the benefits of improved access to health services, or of improved safety conditions on the Bishkek-Osh road, were not included in the analysis, as data to quantify them was insufficient.
1 As published in World Bank. 2008. The Kyrgyz Republic: Recent Economic Developments 2007. Bishkek. The report was based on National Statistics Committee information. 2 Contradictory conclusions can be drawn from respondents’ answers to the baseline 2004 household survey and the 2007 second follow-up household survey. 3 The Kyrgyz producer price index for agricultural products shows a small increase of 6% over the period 2005 to mid- 2007 but strong growth of 57% from then until the present. This indicates stronger demand, with supply lagging. Agricultural production has risen only modestly. The economic value added in the RRP has been increased for current values for this PCR, from $2.05 million per year to $3.22 million per year.
44 Appendix 11
9. Maintenance costs have been provided by the Ministry of Transport and Communications. They have grown considerably in recent year 4 and now allow for good road conditions (international roughness index ≤3) to be sustained indefinitely. The maintenance cost estimates at the time of loan appraisal were very low.5
D. Results of Economic Analysis
10. The economic internal rate of return (EIRR, see Table A11.2) for the Project is 22.4% (19.3% at loan appraisal), and the net present value is $55.8 million ($28.2 million at loan appraisal). Sensitivity analysis was carried out to test the effects of negative changes in the key parameters that determine the benefits and costs of the Project. The sensitivity analysis (Table A11.3) indicates that costs would have to increase by 115%, or benefits decrease by 54%, for the EIRR to drop below the cutoff of 12%.
11. Several input factors have significantly varied since loan appraisal, including (i) the project cost being higher in US dollars terms due to exchange rate fluctuations, (ii) higher maintenance expenditures, (iii) the absence of generated traffic, (iv) longer completion time for contract 1, and (v) increased fuel prices with consequently higher VOC savings. Higher fuel prices have been particularly marked and beneficial for the car and articulated truck categories, which together comprise over 70% of the traffic. The net result is that the EIRR has increased from that calculated at loan appraisal.
4 As recommended in TA 3757-KGZ: Institutional Support in the Transport Sector (2005) and TA-4705 (KGZ): Support to the Development and Implementation of the National Poverty Reduction Strategy II – Roads Sub-Sector (2006). 5 $14,000 per year for routine maintenance on the whole project.
Appendix 11 45
Table A11.2: Economic Internal Rate of Return Phase 3 ($ million)
Costs Benefits Net VOC Time Economic Year Capital Maintenance Total Total Benefits Savings Savings Value
2002 0.00 2003 0.00 2004 9.59 9.59 0.00 0.00 0.00 (9.59) 2005 11.86 0.07 11.93 0.00 0.00 (11.93) 2006 27.00 0.21 27.21 3.34 0.47 3.81 (23.40) 2007 13.18 0.35 13.53 5.88 0.66 6.54 (6.99) 2008 0.35 0.35 6.91 0.82 3.22 10.95 10.60 2009 0.35 0.35 7.72 0.95 3.22 11.89 11.54 2010 0.35 0.35 8.60 1.10 3.22 12.92 12.57 2011 0.35 0.35 9.54 1.25 3.22 14.01 13.66 2012 0.35 0.35 10.55 1.42 3.22 15.19 14.84 2013 0.35 0.35 11.64 1.60 3.22 16.46 16.11 2014 0.35 0.35 12.82 1.80 3.22 17.84 17.49 2015 0.35 0.35 14.11 2.02 3.22 19.35 19.00 2016 0.35 0.35 15.54 2.27 3.22 21.03 20.68 2017 0.35 0.35 17.11 2.55 3.22 22.88 22.53 2018 0.35 0.35 18.84 2.86 3.22 24.92 24.57 2019 0.35 0.35 20.72 3.22 3.22 27.16 26.81 2020 0.35 0.35 23.18 3.63 3.22 30.03 29.68 2021 0.35 0.35 25.85 4.11 3.22 33.18 32.83 2022 0.35 0.35 28.84 4.64 3.22 36.70 36.35 2023 0.35 0.35 32.11 5.24 3.22 40.57 40.22 2024 0.35 0.35 35.74 5.93 3.22 44.89 44.54 2025 0.35 0.35 39.81 6.71 3.22 49.74 49.39 2026 0.35 0.35 44.38 7.61 3.22 55.21 54.86 2027 0.35 0.35 49.43 8.64 3.22 61.29 60.94
Economic Internal Rate of Return = 22.4% Net Present Value (12%) = $55.8 million ()=negative, VOC= vehicle operating costs Source: Asian Development Bank
Table A11.3: Sensitivity Analysis (%)
Scenario EIRR Switching Values Base case 22.4 Increase in total costs (10%) 20.9 115 Decrease in total benefits (10%) 20.7 54 Decrease in VOC savings (10%) 21.2 72 Exclusion of time savings 20.7 Exclusion of economic value added 19.6 EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
46 Appendix 11
III. Overall Project Including Phases 1 And 2
12. The overall approach to the economic analysis for this section is similar to that of the preceding section dealing only with phase 3. Results for phases 1 and 2, and for the whole project combined, are found in Tables A11.5 to A11.10. For each phase, the results of the preceding PCR and RRP are also tabulated.
13. The differences in EIRR calculated now and at appraisal are due to (i) revised economic costs derived from actual costs, (ii) longer construction periods, and (iii) differences in traffic volumes and traffic composition.
14. As noted in the traffic forecast appendix, the spectrum of traffic categories has shifted markedly from trucks toward cars. Table A11.1 shows that, vehicle for vehicle, cars generate a much lower VOC saving than trucks. This remains true on all road sections. It drags down the economic characteristics of the earlier phases 1 and 2 more than it does the final phase 3.
15. Overall, present traffic levels and forecasts for phase 1 in terms of annual average daily traffic6 correspond well with the RRP forecasts. However the VOC benefits have been significantly diminished by the transformation in the type of traffic. The EIRR for phase 1 has diminished from 13.1% at appraisal to 9.7% at the time of the phase 1 PCR in 2002 and to 8.9% for the present reappraisal. This may be attributed in significant part to the change in traffic composition.
16. Overall economic costs in 2008 per project phase and per kilometer of main road constructed and typical 2008 annual average daily traffic levels are shown in Table A11.4.
Table A11.4: Cost/kilometer and Typical Traffic by Phase
Cost/kilometer Phase ($ million, in 2008 prices) AADT 1 0.901 1,852 2 0.599 1,852 3 0.346 3,817 AADT=average annual daily traffic Source: Asian Development Bank
17. This highlights the elevated capital cost of phase 1 relative to its traffic levels, compared with the other two sections. Neither the phase 1 cost nor its traffic differed largely from RRP expectations. It was from the outset the marginally feasible section of the program. However, the three phases can be considered as an indivisible road corridor investment for which the combined economic rate of return for phases 1, 2, and 3 remains acceptable at 12.2%.
6 In the RRP, the preceding PCR, and the present PCR, this has been calculated as the arithmetic sum of all vehicles without adjustment for type of vehicle (e.g., without adjustment to passenger car equivalents).
Appendix 11 47
Table A11.5: Economic Internal Rate of Return ($ million) Phase 1 Costs Benefits Net VOC Year Capital Maintenance Total Time Savings Total Benefits Savings
1995 1996 14.58 14.58 0.00 (14.58) 1997 24.30 0.00 24.30 0.00 (24.30) 1998 38.90 0.00 38.90 1.42 0.15 1.57 (37.33) 1999 20.26 0.29 20.55 2.43 0.21 2.64 (17.91) 2000 16.28 0.29 16.57 2.73 0.25 2.98 (13.59) 2001 7.00 0.29 7.29 3.08 0.30 3.38 (3.91) 2002 0.37 0.29 0.66 3.49 0.35 3.84 3.18 2003 0.29 0.29 3.98 0.41 4.39 4.10 2004 0.39 0.39 4.56 0.49 5.05 4.66 2005 0.39 0.39 5.26 0.57 5.83 5.44 2006 0.39 0.39 6.09 0.68 6.77 6.38 2007 0.39 0.39 7.11 0.81 7.92 7.53 2008 0.39 0.39 8.34 0.97 9.31 8.92 2009 0.39 0.39 9.24 1.09 10.33 9.94 2010 0.39 0.39 10.21 1.22 11.43 11.04 2011 0.39 0.39 11.26 1.37 12.63 12.24 2012 0.39 0.39 12.43 1.54 13.97 13.58 2013 0.39 0.39 13.74 1.72 15.46 15.07 2014 0.39 0.39 15.19 1.94 17.13 16.74 2015 0.39 0.39 16.79 2.18 18.97 18.58 2016 0.39 0.39 18.76 2.46 21.22 20.83 2017 0.39 0.39 20.95 2.78 23.73 23.34 2018 0.39 0.39 23.32 3.14 26.46 26.07 2019 0.39 0.39 25.97 3.55 29.52 29.13 2020 0.39 0.39 28.95 4.01 32.96 32.57 2021 0.39 0.39 32.30 4.55 36.85 36.46 2022 0.39 0.39 36.07 5.16 41.23 40.84 2023 0.39 0.39 40.31 5.85 46.16 45.77 2024 0.39 0.39 45.21 6.65 51.86 51.47 2025 0.39 0.39 50.65 7.57 58.22 57.83 2026 0.39 0.39 56.81 8.62 65.43 65.04
To year 2019 At Phase 1 To year 2027 At RRP (20 years operation) PCR EIRR 5.2% 9% 9.7% 13.1% Net Present Value ($ million) (30.7) (46.1) Not available Not available ()=negative, EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
48 Appendix 11
Table A11.6: Sensitivity Analysis (%)
Scenario EIRR Switching Values Base case 9.0 Increase in total costs (10%) 8.3 (36) Decrease in total benefits (10%) 8.3 (57) Decrease in VOC savings (10%) 8.4 (60) Exclusion of time savings 8.2 ()=negative, EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
Appendix 11 49
Table A11.7: Economic Internal Rate of Return ($ million) Phase 2 Costs Benefits Net VOC Year Capital Maintenance Total Time Savings Total Benefits Savings 1996 1997 1998 1999 25.09 2000 26.48 0.00 26.48 2.55 0.05 2.60 (23.88) 2001 30.53 0.16 30.69 5.18 0.12 5.30 (25.39) 2002 28.33 0.33 28.66 7.46 0.24 7.70 (20.96) 2003 12.30 0.50 12.80 7.81 0.30 8.11 (4.69) 2004 9.68 0.65 10.33 8.19 0.36 8.55 (1.78) 2005 4.17 0.65 4.82 8.61 0.44 9.05 4.23 2006 0.65 0.65 9.12 0.53 9.65 9.00 2007 0.65 0.65 9.71 0.64 10.35 9.70 2008 0.65 0.65 10.42 0.78 11.20 10.55 2009 0.65 0.65 11.44 0.88 12.32 11.67 2010 0.65 0.65 12.57 1.00 13.57 12.92 2011 0.65 0.65 13.83 1.14 14.97 14.32 2012 0.65 0.65 15.23 1.29 16.52 15.87 2013 0.65 0.65 16.78 1.46 18.24 17.59 2014 0.65 0.65 18.51 1.66 20.17 19.52 2015 0.65 0.65 20.42 1.89 22.31 21.66 2016 0.65 0.65 22.55 2.15 24.70 24.05 2017 0.65 0.65 25.02 2.46 27.48 26.83 2018 0.65 0.65 27.74 2.80 30.54 29.89 2019 0.65 0.65 30.88 3.20 34.08 33.43 2020 0.65 0.65 34.31 3.65 37.96 37.31 2021 0.65 0.65 38.29 4.17 42.46 41.81 2022 0.65 0.65 42.65 4.77 47.42 46.77 2023 0.65 0.65 47.51 5.42 52.93 52.28 2024 0.65 0.65 52.94 6.11 59.05 58.40 2025 0.65 0.65 58.99 6.81 65.80 65.15 2026 0.65 0.65 66.05 7.60 73.65 73.00 2027 0.65 0.65 73.85 8.50 82.35 81.70
To year 2024 At Phase 1 To year 2027 At Phase 1 RRP (20 years operation) PCR EIRR 13.3% 14.3% 17.4% 16.0% 24.9 Net Present Value ($ million) 10.1 20.4 Not available
()=negative, EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
50 Appendix 11 Table A11.8: Sensitivity Analysis (%)
Scenario EIRR Switching values Base case 14.3 Increase in total costs (10%) 13.2 25 Decrease in total benefits (10%) 13.1 19 Decrease in VOC savings (10%) 13.2 20 Exclusion of time savings 12.2 EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
Appendix 11 51
Table A11.9: Economic Internal Rate of Return ($ million) Phases 1, 2, and 3 Combined
Costs Benefits Net VOC Time Economic Benefits Year Capital Maintenance Total Total Savings Savings Value 1996 14.58 0.00 14.58 0.00 0.00 0.00 0.00 (14.58) 1997 24.30 0.00 24.30 0.00 0.00 0.00 0.00 (24.3) 1998 38.90 0.00 38.90 1.42 0.15 0.00 1.57 (37.33) 1999 45.35 0.29 20.55 2.43 0.21 0.00 2.64 (17.91) 2000 42.76 0.29 43.05 5.28 0.30 0.00 5.58 (37.47) 2001 37.53 0.45 37.98 8.26 0.42 0.00 8.68 (29.3) 0.00 2002 28.70 0.62 29.32 10.95 0.59 11.54 (17.78) 0.00 2003 12.30 0.79 13.09 11.79 0.71 12.50 (0.59) 0.00 2004 19.27 1.04 20.31 12.75 0.85 13.60 (6.71) 2005 16.03 1.11 17.14 13.87 1.01 0.00 14.88 (2.26) 2006 27.00 1.25 28.25 18.55 1.68 0.00 20.23 (8.02) 2007 13.18 1.39 14.57 22.7 2.11 0.00 24.81 10.24 2008 0.00 1.39 1.39 25.67 2.57 3.22 31.46 30.07 2009 0.00 1.39 1.39 28.4 2.92 3.22 34.54 33.15 2010 0.00 1.39 1.39 31.38 3.32 3.22 37.92 36.53 2011 0.00 1.39 1.39 34.63 3.76 3.22 41.61 40.22 2012 0.00 1.39 1.39 38.21 4.25 3.22 45.68 44.29 2013 0.00 1.39 1.39 42.16 4.78 3.22 50.16 48.77 2014 0.00 1.39 1.39 46.52 5.40 3.22 55.14 53.75 2015 0.00 1.39 1.39 51.32 6.09 3.22 60.63 59.24 2016 0.00 1.39 1.39 56.85 6.88 3.22 66.95 65.56 2017 0.00 1.39 1.39 63.08 7.79 3.22 74.09 72.70 2018 0.00 1.39 1.39 69.9 8.80 3.22 81.92 80.53 2019 0.00 1.39 1.39 77.57 9.97 3.22 90.76 89.37 2020 0.00 1.39 1.39 86.44 11.29 3.22 100.95 99.56 2021 0.00 1.39 1.39 96.44 12.83 3.22 112.49 111.10 2022 0.00 1.39 1.39 107.56 14.57 3.22 125.35 123.96 2023 0.00 1.39 1.39 119.93 16.51 3.22 139.66 138.27 2024 0.00 1.39 1.39 133.89 18.69 3.22 155.8 154.41 2025 0.00 1.39 1.39 149.45 21.09 3.22 173.76 172.37 2026 0.00 1.39 1.39 167.24 23.83 3.22 194.29 192.90 2027 0.00 1.39 1.39 187.42 26.98 3.22 217.62 216.23
Economic Internal Rate of Return = 12.2% Net Present Value (12%) = $4.8 million ()=negative, EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
52 Appendix 11
Table A11.10: Sensitivity Analysis (%)
Scenario EIRR Switching Values Base case 12.0 Increase in total costs (10%) 11.5 3 Decrease in total benefits (10%) 11.4 3 Decrease in VOC savings (10%) 11.5 3 Exclusion of time savings 11.4 EIRR=economic internal rate of return, VOC=vehicle operating costs Source: Asian Development Bank
Appendix 12 53
control control Accounts department department Economical Economical and financial development development Control Control Financial, r Department e g Economical, and Economical, Mana System System HR, legal Administrative department department department department administrator Administrative
External
economic economic investment investment relations and and relations IT Department Department Communications Deputy Minister Minister Deputy Communications Communications
ORT AND COMMUNICATIONS Minister Minister ment ment p p elo v transport transport Transport Transport Department develo de Development Development Auto and water water Auto and Deputy Minister Minister Deputy railway transport transport railway Civil aviation and aviation Civil unit, PLUADS - regional roadregional operation PLUADS - and maintenanceunit, divisions. MINISTRYTRANSPORT OF AND COMMUNICATIONS
ment p
Analysis, Analysis, Directorate PLUADS (8) development development develo Stats-Secretary regulations, and regulations, Road Department Road planning and Road planning Bishkek–Osh Road Engineering services
(SF) PIUs Including ADB Loan 1853-KGZ
IT – information technology, PIU – project implementation IT – information technology, PIU – project implementation Source: Ministry of Transport and Communications.