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Docment of The World Bank Public Disclosure Authorized ReportNo. 13804-ALB STAFF APPRAISAL REPORT Public Disclosure Authorized ALBANIA RURAL ROADS PROJECT Public Disclosure Authorized MAY 1, 1995 Public Disclosure Authorized Energy, Environment, Transport and Telecommunications Division Central Europe Department Europe and Central Asia Region CURRENCY EQUIVALENT Currency Unit = Lek (Average Commercial Rates) Avg. Avg. Avg. December March 1991 1992 1993 1994 1995 US$1.00 = 15.0 98.9 101.0 94.7 92.3 Leks WEIGHTS AND MEASURES Metric System ALBANIA: FISCAL YEAR January 1 - December 31 ABBREVIATIONS CAS - Country Assistance Strategy CEE - Central-Eastern Europe DC - direct contracting DRD - District Road Directorate ERR - economic rate of return EU/G24 - European Union/Group 24 G - gravel GDP - gross domestic product GNP - gross national product GOA - Government of Albania GRD - General Roads Directorate HDM - Highway Design and Maintenance Standards Model ICB - international competitive bidding IDA - International Development Association IFAD - International Fund for Agricultural Development IFIs - international financing institutions IMF - International Monetary Fund IRI - international roughness index IRP - Irrigation Rehabilitation Project LCB - local competitive bidding LS - local shopping MOF - Ministry of Finance m/m - man/month MOC - Ministry of Construction and Tourism MOT - Ministry of Industry, Transport and Trade N.I.F. - non-IDA financed N.P.V. - net present value p.a. - per annum PIU - Project Implementation Unit p-km - passenger-km PM - penetration macadam RPAP - Rural Poverty Alleviation Project SA - Special Account SOEs - statements of expenditure TA - technical assistance t-km - ton-km TOR - terms of reference voc - vehicle operating costs vpd - vehicles per day ALBANIA RURAL ROADS PROJECT Table of Contents Chapter Pge No. Credit and Project Summary ................................... (i)-(iii) I. ECONOMY AND SECTOR A. Economy . ......................................... 1 B. The Transport Sector .................................. 2 C. Previous IDA Involvement in the Transport Sector ................ 5 D. Future Planning in the Transport Sector ....................... 6 II. ROADS A. Network and Traffic .................................. 6 B. Administration and Organization ........................... 7 C. Construction and Maintenance ............................. 8 D. Planning and Supervision ................................ 10 E. Expenditures and Financing .............................. 10 F. Road Transport ...................................... 12 G. Environmental Aspects ................................. 12 III. THE PROJECT A. Project Objectives .................................... 13 B. Project Description ................................... 13 C. Relation to Other Projects in the Sector ....................... 18 D. Cost Estimates ...................................... 19 E. Project Financing .................................... 20 F. Project Design, Organization and Implementation ................. 21 G. Procurement ....................................... 24 H. Disbursement ....................................... 27 I. Accounting and Auditing ................................ 28 J. Environment ....................................... 29 IV. ECONOMIC EVALUATION A. Methodology ....................................... 29 B. Project Area ....................................... 30 C. Calculation and Results ................................. 31 D. Risks ............................................ 31 V. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ... ...... 32 TABLES 1.1 Transport Investments (US$000 equivalent), 1992-94 ................... 3 1.2 Rail and Waterborne Traffic, 1990-1993 .......................... 4 1.3 Road Vehicle Fleet ....................................... 5 3.1 Project Components and Cost Estimate ........................... 19 3.2 Financing Plan . ......................................... 21 3.3 Procurement Arrangement ................................... 25 2.1 National Road Network ................................... 35 3.1 Road Improvement Program ................................ 36 3.2 Road Improvement Measures ................................ 39 3.3 Equipment to be procured .................................. 42 3.4 Incremental Operational Costs ............................... 44 3.5 Consultants for Construction Supervision, and TA and Training - T.O.R. ... 45 3.6 Technical Assistance and Training ............................ 50 3.7 Project Coordinator - Terms of Reference ....................... 51 3.8 Organization and Management Study - Terms of Reference ............. 54 3.9 GRD and Project Organization .............................. 58 3.10 Road Improvement Program - Year 1 Defined Roads .60 3.11 Project Implementation Schedule .61 3.12 Project Monitoring Matrix .63 3.13 Schedule of Disbursements .65 3.14 Environmental Assessment .66 4.1 Factors for Selecting Project .68 4.2 Details of the Economic Evaluation .69 5.1 Documentation in Project File .73 CHARTS 1 Organization Chart of the MOC and GRD .74 2 Organization of District Road Directorate .75 MAPS IBRD 26231 - Project Districts IBRD 26232 - Tirana and Northern Districts Roads IBRD 26233 - Durres and Southern Districts Roads IBRD 26234 - Southeastern Districts Roads IBRD 26725 - Additional Five Roads Ml&report wa prepad on the basis of an appraisa missionto Albania in Jhe 1994. The missionwa led by Luis Revuelta (Tranport Engineer;EC2ET). Mision memben were Meur. PeterParlker (Trnport Economist; EC2ET),and P. Cher;yan (FTancialand Managenat Analyst; Consultat). Mr. Floreat del Plchia (Reearch Assstat) cofaborated on the completionof the appraial documentation at negotiations. The Peer Reviwe are Messrs. Jose Carbajo and Antti Talvitie (TWUTD). The Division Chief is Mr. Hans J. Apitz (EC2ET), and the Deprtment Director Mr. Kemal DerY4 (EC2DR). ALBANIA RURALROADS PROJECT STAFF APPRAISALREPORT Credit and Project Summary BORROWER: Republic of Albania. Beneficiary: General Roads Directorate, Ministry of Construction and Tourism. Credit Amount: SDR 10.1 Million (US$15.00 million equivalent). Terms: Standard IDA terms, with 40 years maturity. Poverty Category: Program of Targeted Intervention (para. 3.01) Project Objectives and Description: The main objectivesof the project are: (a) to promote agricultural development by rehabilitating and maintainingrural roads serving agricultural areas and to improve access, economic and social services for rural population centers; (b) to establish the institutional and financial arrangements for administering and maintaining rural roads on a sustainablebasis; (c) to reduce poverty and increase employmentby carrying out project works with labor intensive methods; and (d) to encourage the development of the domestic contracting and consultingindustries. The project includes: (a) improvementof 975 km of rural roads by contractors using labor intensive methods(US$24.40 million, excludingcontingencies); (b) provision of office and transport equipment (US$0.85 million); (c) operational costs (US$0.33 million); (d) supervisionof works (US$1.00million); (e) technical assistance (TA) (US$0.30 million), a project coordinator (US$0.40 million), and training (US$0.20 million) to implement the project; and (f) an Organization and Management Study (US$0.30 million), includingan inventoryof the 9,500-km rural road network and an analysis and definition of the best institutional, managerial, and financial arrangementsfor its administration. -ii- Benefits and Risks: The GOA has expressed strong interest in the project, which is expected to play an important role in the consolidationof a free-market based rural transport sector. The main project benefits include savings in vehicle operating costs and road maintenancecosts. Unquantifiablebenefits include increased development of agriculture where lack of access has choked agricultural output, generation of employment, promotion of domestic contracting, institutional improvements in road maintenance, better rural services, and environmentalimprovement consisting mainly, but not only, of the reductionof soil erosion. The project is estimated to have an ERR of about 33 percent. The main project risks are: (a) GOAdoes not provide sufficient funds to maintain the project roads; (b) GOA fails to implement the necessary institutional reforms to administer and maintain the rural road network; and (c) labor intensive road works are complex. However, GOA has set its budget for maintainingthe main road network above the levels agreed under the ongoing Transport Project, and will be asked to agree at negotiationsto provide sufficient funds to maintainthe project roads; this would reduce risk under (a). GOA's recent adoption of legislation on local governmentreform, and the establishmentof a task force to address remaining issues would significantly reduce risk (b). Risk (c) would be minimized by employing consultants experienced in labor intensive works. Project risks are consideredto be acceptable with these arrangements. There is a country risk, the threat of a Balkan war, which cannot be assessed. Project II) Number: 8267 EstimatedProject Cost Local Foreign Total and FinancingPlan -US$ Million - A. Road Works Improvement of 975km. of rural roads Oabor 20.74 3.66 24.40 intensive) B. Office and Transport Eguipment Equipment, vehicles, spare parts, tools, and 0.85 0.85 materials C. Operational Costs 0.07 0.26 0.33 D. Supervision of Works under (A) above 0.20 0.80 1.00 E. Technical