Completion Report Project Number: 39176-043 Loan Number: 2831 August 2020 Azerbaijan: Road Network Development Program (Tranche 3) This document is being disclosed to the public in accordance with ADB’s Access to Information Policy. CURRENCY EQUIVALENTS Currency unit – Azerbaijani manat (AZN) At Appraisal At Project Completion 20 June 2011 28 September 2017 AZN1.00 = $1.27 $0.59 $1.00 = AZN0. 78 AZN1.70 ABBREVIATIONS AAY – Azeravtoyol State Agency ADB – Asian Development Bank ADT – average daily traffic ARS – Azer Road Service BCP – border -crossing point DED – detailed engineering design DSC – design and supervision consultant EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan GAP – gender action plan GDP – gross domestic product IRI – international roughness index km – kilometer LAR P – land acquisition and resettlement plan MFF – multitranche financing facility MOT – Ministry of Transport PFR – periodic financing request PIU – project implementation unit PPMS – project performance management system PSC – project steering committee RNDP – Road Network Development Program RRP – report and recommendation of the President VOC – vehicle operating cost NOTES (i) The fiscal year (FY) of the Government of Azerbaijan and its agencies ends on 31 December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018. (ii) In this report, “$” refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Country Director Nariman Mannapbekov, Azerbaijan Resident Mission (AZRM), CWRD Team leader Yagut Ertenliche, Senior Project Officer, AZRM, CWRD Team members Aziz Haydarov, Senior Portfolio Management Specialist, AZRM, CWRD Faraj Huseynbeyov, Senior Project Officer, AZRM, CWRD Afag Javadova, Project Analyst, AZRM, CWRD Jurgen Sluijter, Senior Transport Specialist, Transport and Communications Division (CWT C), CWRD Carmina Luna, Senior Project Officer, CWTC, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 2 B. Project Output 4 C. Project Costs and Financing 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Consultant Recruitment and Procurement 6 H. Gender Equity 7 I. Safeguards 7 J. Monitoring and Reporting 8 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness 10 C. Efficiency 10 D. Sustainability 11 E. Development Impact 11 F. Performance of the Borrower and the Executing Agency 12 G. Performance of the Asian Development Bank 12 H. Overall Assessment 12 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 13 A. Issues and Lessons 13 B. Recommendations 14 APPENDIXES 1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 17 3. Project Cost by Financier 18 4. Disbursement of ADB Loan and Grant Proceeds 20 5. Contract Awards of ADB Loan and Grant Proceeds 21 6. Chronology of Main Events 22 7. Status of Compliance with Loan Covenants 23 8. Environmental Safeguard Audit Summary 29 9. Gender Action Plan Implementation Matrix 32 10. Economic Revaluation 35 BASIC DATA A. Loan Identification 1. Country Azerbaijan 2. Loan number and financing source 2831 ( ordinary capital resources ) 3. Project title Road Network Development Program (Tranche 3) 4. Borrower Republic of Azerbaijan 5. Executing agency State Agency for Azerbaijan Automobile Roads 6. Amount of loan $200.00 million 7. Financing modality Multitranche financing facility B. Loan Data 1. Appraisal – Date started 20 June 2011 – Date completed 25 June 2011 2. Loan negotiations – Date started 13 October 2011 – Date completed 17 October 2011 3. Date of Board approval 14 December 2011 4. Date of loan agreement 27 July 2012 5. Date of loan effectiveness – In loan agreement 26 August 2012 – Actual 23 October 2012 – Number of extensions 6. Project completion date – Appraisal 30 June 2014 – Actual 28 September 2017 7. Loan closing date – In loan agreement 31 December 2014 – Actual 28 September 2017 – Number of extensions 2 8. Financial closing date – Actual 12 January 2018 9. Terms of loan – Interest rate LIBOR + 0.60% less credit of 0.20% – Maturity (number of years) 24 – Grace period (number of years) 4 10. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 12 June 2013 12 December 2017 54.05 months Effective Date Actual Closing Date Time Interval 23 October 2012 12 January 2018 62.7 months ii b. Amount ($ million) Increased (Decreased) Cancelled Last Original during during Revised Amount Undisbursed Allocation Implementation Implementation Allocation Disbursed Balance Category (1) (2) (3) (4=1+2 –3) (5) (6=4 –5) Civil works 164.50 17.86 0.00 182.36 182.36 0.00 Consulting 1.00 3.21 0.00 4.21 4.21 0.00 services Contingencies 34.50 (21.08) 13.42 0.00 0.00 0.00 Total 200.00 13.42 186.57 186.57 0.00 B. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost 200.00 186.57 Local currency cost 50.00 33.27 Total 250.00 219. 84 2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation cost Borrower financed 38.00 33.27 ADB financed 200.00 186.57 Total implementation cost 238.00 219.8 4 Interest during construction costs Borrower financed 12.00 0.00 ADB financed Total interest during construction cost 12.00 0.00 3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual A. Base Cost 1. Civil works 164.50 182.36 2. Land acquisition 8.00 0.70 3. Consulting services 1.00 4.21 4. Taxes and duties 30.00 32.57 Subtotal (A) 203.50 219. 84 B. Contingencies 34.50 0.00 C. Financing Charges during Implementation 12.00 0.00 Total Project Cost (A+B+C) 250.00 219.8 4 Note: Numbers may not sum precisely because of rounding. 4. Project schedule Item Appraisal Estimate Actual Date of contracts with consultants Q4 2014 24 December 2014 Civil works contracts Construction of Masalli–Astara Motorway: Section B Date of award Q3 2012 15 March 2013 Completion of work Q4 2014 27 March 2017 Completion of tests and commissioning 27 September 2017 iii Start of operations 18 September 2018 Construction of Masalli–Astara Motorway: Section C Date of award Q1 2013 18 October 2013 Completion of work Q4 2014 27 March 2017 Completion of tests and commissioning 20 October 2017 Start of operations 18 September 2018 5. Project performance report ratings Implementation Period Single Project Rating From 15 December 2012 to 7 April 2013 Actual problem From 12 April 2013 to 31 December 2013 On track From 1 January 2014 to 31 December 2014 On track From 1 January 2015 to 31 December 2015 On track From 1 January 2016 to 31 December 2016 On track From 1 January 2017 to 28 September 2017 On track D. Data on Asian Development Bank Missions No. of No. of Person- Specialization Name of Mission Date Persons Days of Members a Consultation mission 1 13–15 May 2012 4 12 a,b,c,d Loan inception mission 25–29 Jan 2013 4 20 e,b,d,c Consultation mission 2 19–21 Apr 2013 2 6 b,c Loan review mission 1 5–10 Jul 2013 2 12 b,c Loan review mission 2 17–21 Sept 2013 3 15 b,c,d Loan review mission 3 4–6 Feb 2014 3 9 b,c,d Loan review mission 4 30 Aug–2 Sept 2014 4 20 b,c,e,a Midterm project review mission 30 Nov–9 Dec 2014 5 42 d, b,b,c,c Loan review mission 5 29–30 Jan 2015 4 8 b,d,c,c Loan review mission 6 13 May 2015 3 3 b,c,c Loan review mission 7 6–7 Oct 2015 2 4 b,c Loan review mission 8 22–27 Jun 2016 2 2 b,c Loan review mission 9 13–21 Oct 2016 4 1 b,c,d,d Loan review mission 10 1–9 Mar 2017 7 56 b,c,a,b,c,c,c, Loan review mission 11 28–30 Aug 2017 5 15 c,c,c,d,f Project completion mission July 1–2 2019 2 4 c,d a a= environment specialist, b = transport specialist, c = project officer, d = project analyst, e = social development specialist, f = portfolio management specialist. I. PROJECT DESCRIPTION 1. After the collapse of the Soviet Union, most roads in Azerbaijan were in unsatisfactory condition because of inadequate funding for road maintenance and poor management of weight control on the roads. As a result, a large part of the road network needed reconstruction or rehabilitation. The poor road conditions resulted in high transport costs, long travel time, and danger to safety. Transport plays an important role in the national economy, and the country’s vehicle fleet was expected to rapidly increase over the medium term, which dictated road network expansion. To help the Government of Azerbaijan meet these challenges, on 28 September 2007, the Asian Development Bank (ADB) approved a multitranche financing facility (MFF) for the government’s Road Network Development Program (RNDP) for an aggregate amount of $500 million. On 11 December 2011, ADB approved a $200 million loan for RNDP Tranche 3.1 2. Complementing tranches 1 and 2 under the MFF, the project aimed to contribute to sustained economic and social development in Azerbaijan by improving the Masalli–Astara section of the Alat–Astara highway connecting Baku, the capital, to Azerbaijan’s southern border.2 The project outcome was the development of an efficient, safe, and sustainable transport corridor, linking the country domestically and internationally.