Document of The World Bank Public Disclosure Authorized Report No: 35396 IMPLEMENTATION COMPLETION REPORT (PPFI-Q0780 IDA-33570) ON A CREDIT Public Disclosure Authorized IN THE AMOUNT OF SDR 29.8 MILLION (US$40 MILLION EQUIVALENT) TO THE GOVERNMENT OF GEORGIA FOR A ROADS PROJECT Public Disclosure Authorized June1, 2006 Infrastructure Department South Caucasus Country Unit Europe and Central Asia Region Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective March, 2006) Currency Unit = Georgian Lari (GEL) 1 GEL = US$ 0.5472 US$ 1.0 = 1.8275 GEL US$1.44 = SDR 1 1 GEL = SDR 0.38 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS = Country Assistance Strategy GDRMED = General Directorate of Roads under the Ministry of Economic Development ERR = Economic Rate of Return ICR = Implementation Completion Report IDA = International Development Association IMF = International Monetary Fund NPV = Net Present Value PAD = Project Appraisal Document PIU = Project Implementation Unit PMS = Pavement Management System RDMID = Road Department of the Ministry of Infrastructure and Development RF = Road Fund SDRG = State Department of Roads of Georgia TA = Technical Assistance TORs = Terms of Reference TRRC = Transport Reform and Rehabilitation Center Vice President: Shigeo Katsu, ECAVP Country Director D-M Dowsett-Coirolo, ECCU3 Sector Manager/Director Motoo Konishi/Peter Thomson, ECSIE Task Team Leader/Task Manager: Olivier Le Ber, ECSIE GEORGIA Roads Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Performance 9 8. Lessons Learned 11 9. Partner Comments 12 10. Additional Information 13 Annex 1. Key Performance Indicators/Log Frame Matrix 15 Annex 2. Project Costs and Financing 16 Annex 3. Economic Costs and Benefits 18 Annex 4. Bank Inputs 19 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 20 Annex 6. Ratings of Bank and Borrower Performance 21 Annex 7. List of Supporting Documents 22 Annex 8. Letter from SDRG 23 Map IBRD No. 34805 Project ID: P040556 Project Name: Roads Project Team Leader: Olivier Le Ber TL Unit: ECSIE ICR Type: Core ICR Report Date: June 1, 2006 1. Project Data Name: Roads Project L/C/TF Number: PPFI-Q0780; IDA-33570 Country/Department: GEORGIA Region: Europe and Central Asia Region Sector/subsector: Roads and highways (99%); Central government administration (1%) Theme: Infrastructure services for private sector development (P); Rural services and infrastructure (S); Public expenditure, financial management and procurement (S) KEY DATES Original Revised/Actual PCD: 08/06/1997 Effective: 01/31/2001 01/31/2001 Appraisal: 02/03/2000 MTR: 09/30/2003 12/14/2002 Approval: 05/25/2000 Closing: 12/31/2004 12/31/2005 Borrower/Implementing Agency: GOVERNMENT OF GEORGIA/STATE DEPARTMENT OF ROADS OF GEORGIA (SDRG) Other Partners: STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes F. Linn Country Director: D-M Dowsett-Coirolo Judy M. O'Connor Sector Manager: Peter D. Thomson Ricardo A. Halperin Team Leader at ICR: Olivier Le Ber Antti P. Talvitie ICR Primary Author: Mirtha Pokorny 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: M Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No Quality at Entry would be rated Marginnaly Satisfactory under the new 6-notch scale. 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The original development objectives of the Roads Project, as described in the PAD, were: (i) to reduce road transport costs and improve access in Georgia’s major corridors; (ii) to provide a steady and adequate level of funding for road maintenance (including routine and periodic maintenance, rehabilitation and reconstruction) based on charges related to road use and road access; and (iii) to improve management and effectiveness of the entire road network, including local roads, through the institutional strengthening of the State Department of Roads of Georgia (SDRG) and the development of the private road construction industry. The project supported the October 21, 1997 Country Assistance Strategy (CAS) objectives that rested on four main themes: (i) strengthening public finance; (ii) deepening and diversifying sources of growth; (iii) protecting the environment; and (iv) reducing poverty. The project’s main contribution to these objectives, as stated in the PAD, was to reduce road infrastructure bottlenecks through increased focus on (i) promoting state-level policy reforms and improving delivery effectiveness of road sector spending, (ii) improving strategic planning and maintenance effectiveness; and (iii) facilitating private sector involvement in road engineering construction and maintenance. Project objectives were clear and thought to be realistic at the time of project preparation, particularly considering that the project built upon previous IDA involvement in the transport sector, which supported major structural transformations in the sector. The Georgian road agency (called SDRG at project appraisal), was the recipient of IDA’s first transport project in Georgia, the Transport Rehabilitation Project, and by the time of the appraisal of the Roads Project SDRG had taken a number of important steps to improve the efficiency and financial health of the sector: (i) a Road Fund dedicated to preserving the road infrastructure was introduced in 1995; (ii) state enterprises in road construction and maintenance, road design institutes, and road transport carriers were privatized; and (iii) the staff and activities of the remaining State entities were streamlined. Also, with IDA support the Ministry of Transport was created in 1996 by the Georgian Government to formulate and manage policy and regulation of the transport mode. The Roads Project was conceived to reduce the road rehabilitation and maintenance backlog of a network that was suffering from decades of neglect and, on the institutional front, to move from the structural reorganization of the sector to the modernization and capacity building phase. The politically difficult measures to dismantle the Soviet style road agency were by then behind but much remained to be done to have in place an adequately working institution. The stage was thought to be set to cement those changes, bring technical and managerial standards up to Western accepted practices, fine tune revenue collection to ensure funding closely aligned with road access and user charges, improve the governance and accountability of the Road Fund and start-up the creation of the institutional framework to incorporate road safety in road management. The underlying paradigm was a move (even if only the first steps) towards a commercial orientation of roads, with the sector financed by user fees channeled through the Fund, a governance structure that included public and private stakeholders, modern western road standards, and decisions based on sound technical and economic criteria supported by state of the art management systems. IDA’s preparation team acknowledged that the Government planned to move gradually in those areas in which politically sensitive decisions were required (e.g. revision of user charges and functional reclassification of roads). In other areas, such as traffic safety or design standards clearly the team’s intention was to place the issues in the government’s agenda, starting a process that is known to be long - 2 - term and requires substantial work to raise awareness and achieve meaningful actions. Based on IDA’s experience in the previous projects in Georgia, project objectives and project design followed the logical continuation of a work already in progress. In retrospect, however, it is clear that the initial previous project involved mainly difficult but very definite political decisions at the very beginning of the country’s independence, when the old Soviet system had to be taken apart and IDA was instrumental in supporting the development of a basic framework for a modern public sector. The Roads Project, subject of this report, aimed at making inroads in developing a different culture, going from the purely legal and organizational structure to the institutionalization and mainstreaming of principles of efficiency and accountability. As it turned out the latter proved to be a more difficult task in a sector already showing signs of “reform fatigue”, hard to die cultural traits and the effects of a hurried dismantling of existing structures without sound provisions for its replacement. The accomplishments of the project were substantial, but mostly limited to (i) the physical improvement of the network, (ii) the increased competence of the construction industry to adopt new technologies, and (iii) a significant improvement in the capability of the consulting industry to carry out civil works supervision. It is clear in retrospect that the government was keener to consider advice on engineering principles than on policy issues related to governance and sound public sector management. In particular, achievements