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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 27281-PAK PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF Y5,605.5 MILLION (USrS50 MILLION EQUIVALENT) AND A PROPOSED CREDIT IN THE AMOUNT OF Public Disclosure Authorized SDR 105.9 MILLION (US$l50.0 MILLLION EQUIVALENT) TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR THE HIGHWAYS REHABILITATION PROJECT Public Disclosure Authorized November 10,2003 Energy and Infrastructure Sector Unit Pakistan Country Management Unit South Asia Region This document has a restricted distribution and may be used by recipients only in the performance of Public Disclosure Authorized their official duties. Its contents mav not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective May 3 1,2003) Currency Unit = Pak Rupees (Rs) Rs 57.595 = US$l.OO USS0.017 = Rs. 1.00 FISCAL YEAR July 1 -- June 30 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank NHMP National Highway and Motorway Police BPR Business Process Re-engineering NPV Net Present Value CDWP Central Development Working Party O&M Operation & Maintenance COI Corridor of Impact PAP Project Affected Person EA Environmental Assessment PIP Project Implementation Plan ECC Economic Coordination Committee PSDP Public Sector Development Plan ECNEC Executive Committee of the National PSP Private Sector Participation Economic Council PSR Project Status Report EMP Environmental Management Plan QBS Quality-Based Selection FY Fiscal Year QCBS Quality and Cost-Based Selection GOP Government of Pakistan RAMD Road Asset Management Directorate IBRD International Bank for Reconstruction RAMS Road Asset Management System and Development RMA Road Maintenance Account IDA International Development Association ROW Right-of-way IDB Islamic Development Bank RPF Resettlement Policy Framework IFC International Finance Corporation RUC Road User Charges IRI International Roughness Index SA Social Assessment LCS Least-Cost Selection SEA Sectoral Environmental Assessment MIS Management Information System SIL Specific Investment Loan MOC Ministry of Communications SOE Statement of Expenditures MOF Ministry of Finance SOP Standard Operating Procedures MTBF Medium Term Budgetary Framework TOR Terms ofReference NHA National Highway Authority TSP Transport Sector Project NHIP National Highway Improvement Program Note: References in this document to the Bank include both IBRD and IDA. Vice President: Praful C. Pate1 Country Director: John W. Wall Sector Manager: Guang Z. Chen Task Team Leader: Navaid A. Oureshi FOR OFFICIAL USE ONLY PAKISTAN HIGHWAYS REHABILITATION CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 3 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 8 C. Project Description Summary 1. Project components 9 2. Key policy and institutional reforms supported by the project 10 3. Benefits and target population 11 4. Institutional and implementation arrangements 11 D. Project Rationale 1. Project alternatives considered and reasons for rejection 13 2. Major related projects financed by the Bank andor other development agencies 14 3. Lessons learned and reflected in the project design 15 4. Indications ofborrower commitment and ownership 15 5. Value added ofBank support in this project 16 E. Summary Project Analysis 1. Economic 16 2. Financial 17 3. Technical 18 4. Institutional 19 5. Environmental 21 6. Social 24 7. Safeguard Policies 27 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed lwithout World Bank authorization. F. Sustainability and Risks 1. Sustainability 28 2. Critical risks 28 3. Possible controversial aspects 30 G. Main CreditILoan Conditions 1. Effectiveness Condition 30 2. Other 30 H. Readiness for Implementation 32 I.Compliance with Bank Policies 32 Annexes Annex 1: Project Design Summary 33 Annex 2: Detailed Project Description 38 Annex 3: Estimated Project Costs 43 Annex 4: Cost Benefit Analysis Summary 44 Annex 5: Financial Summary 52 Annex 6: Procurement and Disbursement Arrangements and Financial Management 53 Annex 7: Project Processing Schedule 67 Annex 8: Documents in the Project File 68 Annex 9: Statement of Loans and Credits 71 Annex 10: Country at a Glance 74 Annex 1 1: SocialiResettlement Issues and Environmental Aspects 76 Annex 12: NHA Medium Term Budgetary Framework (MTBF) 82 Annex 13: NHA Institutional Reform & Corporate Strengthening Action Plan Matrix 83 MAP(S) Project Map BORROWER 61.40 0.00 6 1.40 [BRD 24.75 25.25 50.00 [DA 44.67 105.33 150.00 Total: 130.82 130.58 26 1.40 Borrower: GOP Responsible agency: MOC/NHA National Highway Authority Address: Plot No. 27, Mauve Area, G-911, Islamabad Contact Person: Raja Nowshenvan, Member (Planning) Tel: 92-5 1-9260409 Fax: 92-5 1-9260418 Email: [email protected] Other Agency(ies): Ministry of Communications Address: Block D, Pakistan Secretariat, Islamabad. Contact Person: Iftikhar Rashid, Secretary Tel: 92-51-9201252 Fax: 92-5 1-922 1300 Email: Estimated Disbursement in US$m Equivalent (Bank FYISemesters): Project implementation period: 60 months Expected effectiveness date: 0212812004 Expected closing date: 06/3012009 cs Pk3 F" Re" UIM *e4 -2- A. Project Development Objective 1. Project development objective: (see Annex 1) The project development objective is the sustainable delivery of a productive and eficient national highway network, contributing to lower transportation costs. The Government ofPakistan (GOP) is implementing a National Highway Improvement Program (NHIP) to increase the efficiency of the national highway network, through phased improvement of approximately 2700 km ofhighways. The program was initiated during FY02 using GOP's own resources. The proposed Project will finance a segment of NHIP works (about 856 km of highway improvements along the national highways N-5 and M-9) over a five year implementation period, while also supporting essential reforms in the sector and the strengthening ofthe National Highway Authority (NHA). 2. Key performance indicators: (see Annex 1) Project implementation and development impact will be judged on the basis of the following performance indicators: a) Impact Indicators: Improved traffic flow on the network, measured by: (i) reduction in average Vehicle Operating Costs by 5%; [average network roughness reduced from 5.4 IRI to 4.4 IRI; NHA network in poor condition reduced from 49% to 35%;]; (ii) reduction in travel time (growth adjusted) on N-5 by 10%; (iii) improvement in the road safety situation along the N-5 corridor [growth adjusted reduction in road fatalities by 10%]. b) Output Indicators: (i) About 550 km of highways rehabilitated; 306 km of highways resurfaced; safety improvement works implemented at 15-20 locations along the N-5; trees planted in about 2,500 avenue km in ROW land; (ii) NHA Medium Term Budgetary Framework (MTBF) in place; [annual 'throw-forward' of the Public Sector Development Program (PSDP) reduced from 4.2 years to 2.0 years; share of total NHA expenditure on highway network conservation increased from 38% to 55%]; (iii) Road Maintenance Account (RMA) operational and financing Annual Maintenance Programs; [routine and periodic maintenance funding increased from 25% to 100% of stable network needs; allocation based on Road Asset Management System (RAMS); regular consultation with Road Users; publication of RMA Annual Reports in public domain]; (iv) Satisfactory progress on implementation of the agreed NHA Institutional Reform and Corporate Strengthening Program. (Note: 'throw-forward refers to total value of ongoing program commitments carried forward from one financial year into the next.) B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: CAS document number: 24399-PAK Date of latest CAS discussion: June 11,2002 The present CAS covers the period July 2003-June 2005. Bank Group's program priorities focus on -3- reforms to (i)strengthen macroeconomic stability and government effectiveness, (ii)improve the business environment for growth, and (iii)improve equity through support of pro-poor and pro-gender equity policies. The Project supports items (i)and (ii)of this strategy. The reforms supported by the Project aim to improve governance, enhance resource mobilization and improve targeting of NHA’s considerable share of the overall public sector expenditures. The physical works financed by the Project will help lower transportation costs and improve traffic safety on the national highway network. Improvements in transport are essential to achieving Pakistan’s economic growth and poverty reduction objectives. Recent consultations undertaken in Pakistan confirm that improved infrastructure services (including transport) remain an essential component ofany comprehensive effort towards improving the investment climate. At the time of June 2002 CAS discussion, it was anticipated that the proposed project would go to the Board in FY03. However, the important upfront reform action pursued under the project, including, the creation of a road maintenance hnd, agreement on a medium term budget framework for NHA, and agreement on a debt management plan ofNHA, required extensive policy discussions
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