Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No.:. 19402

IMPLEMENTATION COMPLETION REPORT Public Disclosure Authorized

PAKISTAN

TRANSPORT SECTOR PROJECT (Ln. 3241 - PK)

June 25, 1999 Public Disclosure Authorized

Infrastructure Unit South Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwisebe disclosed without World Bank authorization. ii

CURRENCY EQUIVALENTS

Currency Unit - Pakistan Rupee (Rs)

Appraisal year, 1990 US$ 1.00 Rs 21.5 (at appraisal) Original closing year, 1996 US$ 1.00 Rs 36.1 (annual average) Completionyear, 1998 US$ 1.00 Rs 45.8 (annual average)

WEIGHTS AND MEASURES Metric System

FISCAL YEAR OF BORROWER July I -June 30

ABBREVIATIONS AND ACRONYMS CIMP Core Investment and MaintenanceProgram FDRP = Flood Damage RestorationProject FHP = Fourth HighwayProject FHWA = Federal HighwayAdministration (USA) FIDIC = FederationIntemationale des Ingenieurs-Conseils GDP = Gross DomesticProduct GOP = Governmentof Pakistan ICB = InternationalCompetitive Bidding ICR = ImplementationCompletion Report LCB = Local CompetitiveBidding MBRP = MaintenanceBacklog Reduction Program MIL = MaintenanceIntervention Level MIS ManagementInformation System MMS = MaintenanceManagement System MOC = Ministry of Communications MOF Ministry of Finance MOR = Ministry of Railways NHA National Highway Authority NHB = National Highway Board NLC = National LogisticsCell NTRC = National TransportResearch Centre PC = Planning Commission PC-i = Planning Commission,document #1 PPIB = Private Power and InfrastructureBoard PR = Pakistan Railways PSO Public Service Obligation RECO Rail EquipmentCompany RSP Resurfacingand StrengtheningProgram SAR Staff Appraisal Report tkm = tonne-kilometre VOC = Vehicle Operating Cost

Vice President Mieko Nishimizu Country Director Sadiq Ahmed Sector Director Frannie Humplick Team Leader John Tillman Task Team Leader Navaid Qureshi FOR OFFICLAL USE ONLY Table of Contents

Preface...... iv

Evaluation Summary...... v Introduction. v Project Objectives...... v Implementation Experience and Results...... v Summary of Findings, Future Operations,and Key Lessons Learned...... vii

Part I Project ImplementationAssessment A - Background ...... 1l B - Project Objectives ...... I C - Achievement of Objectives ...... 2 D - Major Factors Affecting the Project...... 6 E - Project Sustainability ...... 7 F - Bank Performance ...... 8 G - Borrower Performance ...... 9 H - Assessment of Outcome ...... , 10 I - Future Operation ...... 12 J - Key Lessons Learned ...... 13

Part II Statistical Tables Table 1: Summary of Assessments...... 14 Table 2: Related Bank Loans/Credits...... 17 Table 3: Project Timetable...... 18 Table 4: Loan/Credit Disbursements:Cumulative Estimated and Actual...... 19 Table 5: Key Indicators for Project Implementation...... 20 Table 6: Key Indicators for Project Operation...... 22 Table 7: Studies Included in Project ...... 24 Table 8A: Project Costs...... 26 Table 8B: Project Financing...... 27 Table 9: Economic Costs and Benefits...... 28 Table 10: Status of Legal Covenants...... 30 Table 11: Compliancewith Operational Manual Statements...... 33 Table 12: Bank Resources: Staff Inputs...... 34 Table 13: Bank Resources: Missions ...... 35

Annexes A. Highway mission aide-memoire B. Railway mission aide-memoire C. National Highway Authority's contribution to the ICR D. Revised Economic and Financial Evaluation of Pakistan Railway E. Map

This document has a restricted distributionand may be used by recipients only in the performanceof their official duties. Its contents may not otherwisebe disclosedwithout World Bank authorization. iv

IMPLEMENTATION COMPLETION REPORT

PAKISTAN TRANSPORT SECTOR PROJECT (Ln. 3241- PK)

PREFACE

This is the ImplementationCompletion Report (ICR) for the Transport Sector Project in Pakistan, for which Loan 3241-PK in the amount of US$ 184.0 million was approved on June 28, 1990 and made effective on February 26, 1991. The project included three components:railways (US$ 105 million), highways (US$ 77.5 million) and transport sector reform (US$ 1.5 million). The initial project identification,preparation, appraisal, earliest supervision, and final drafting of the ICR were undertaken as a unified project. However most of the supervision of the loan including the fieldwork for two draft ICRs was undertaken separately for each component.

The project closed on June 30, 1998, after two 12 month extensions granted beyond the original closing date of June 30, 1996. An amount of US$ 22,657,602.62had been cancelled on October 31, 1996. A further amount of US$ 11,097,674.94had been cancelled on November 16, 1998. The final disbursement transaction took place on January 12, 1999, when the special account balance was refunded and the remaining undisbursedbalance of US$ 9,171.92 was cancelled. A total of US$ 150,235,550.52 (82%) was disbursed from the Loan.

The project was restructured in June 1996 and loan amounts were reallocated. The railway component was revised down to US$ 93,500,000,of which ultimately US$ 63,095,592.21 (67%) was disbursed. The highway component of the loan was increased to US$ 89,000,000,of which US$ 87,101,053.80(98%) was disbursed. Only US$ 38,904.51 (3%) of the Sector Reform Component was disbursed.

The ICR was prepared by William Denning (TWUTD) from January to June, 1999, with help from Lilian MacArthur (SASIN) and Dr. Khalid Rashid (Consultant), and was reviewed by Navaid Qureshi (SASIN), John Tillman (SASIN) and peer reviewers Chris Hoban (SASIN), and Yash Pal Kedia (AIFTT1).It is based on the draft ICRs prepared for each component, discussions with Bank staff, and material from the project and correspondencefiles and consultants in the field.

Material for the highway component was taken from a draft ICR prepared by Hasan Masood, Consultant, in March 1997 and April 1998. Preparation for this component of the ICR was begun during the Bank's final highway component supervision/completionmission, in June 1997. It is based on material on the project file, periodic managementreports prepared by the borrower and several technical and end-of- assignment reports prepared by the consultants who worked on this project. The Borrower contributedto preparation of the ICR by preparing its own evaluation of the project implementation (included as Annex C of the ICR), and reviewing and commenting on the draft ICR.

Material for the railway component was taken from a draft ICR prepared by Jerry Pinkepank and Khalid Rashid, Consultants, in May 1997 and June 1998. The railway component draft was prepared during and after a supervision/completionmission in May, 1997. Presentation of the draft ICR to the Borrower took place March 8, 1999. The Borrower was not able to contribute to preparation of the railway component by commenting on the draft ICR. The Borrower has not prepared an evaluation report v

PAKISTAN TRANSPORT SECTORPROJECT (Ln. 3241- PK)

EVALUATIONSUMMARY

Introduction 1. The Transport Sector Project was an evolution of previous Bank lending operations in the sector. The project funded sector and institutional reforms and priority maintenance work for the highway network and railway operation. It was not simply a traditional project loan as it focussed on both physical and institutional development objectives. There were three components to the project: highway, railway, and sector reform.

Proiect Obiectives 2. The objectives of the highway component were to assist in: (a) bringing the National Highway Authority (NHA) to a size, structure and level of professional competence reflecting its responsibilities; (b) instituting a sustainable core investmentand maintenance program (CIMP) for national highways; and (c) removing a substantialportion of the backlog of maintenance,rehabilitation, and resurfacing so that a sustainable maintenance program could be established. These objectives were to be pursued through: (a) technical assistance and training for the reorganizationof NHB, (b) a Maintenance Backlog Reduction Program (MBRP), and (c) a pavement Resurfacing and Strengthening Program (RSP).

3. The objectives of the railway component were to assist Pakistan Railways (PR) in: (a) implementingrailway restructuring and establishment of a strong business department in order to develop commercial orientation of railway management,(b) implementing an operational improvement program and supporting it with selective investmentsto enhance its effectiveness, and (c) ensuring adequate locomotive utilization by removing the maintenance backlog. The objectives were to be achieved by: (a) institutional development, (b) an Operational Improvement Program, and (c) a Locomotive Maintenance Backlog ReductionProgram. 4. The objective of the sector reform component was to assist GOP effectively to implement and monitor a sector reform program. The project componentswere well linked to the project objectives, relevant to the country's needs and consistent with the Bank's strategy in the transport sector.

ImplementationExperience and Results 5. The highway component achieved its objectives, reduced transport costs, and strengthenedthe domestic contracting industry. The NHA was transformed to an autonomous highway authority and restructured. As part of the institutional strengthening effort, the NHA staff were provided with training, the financial system was improved, and standardized policies and procedures were adopted on trial basis. These improvements in NHA experienced significant delays. Compared to the ambitious appraisal estimate of 31 March 1991, NHA reorganizationand staffing was only substantially completed in December 1994. 6. The GOP's Core Investment and Maintenance Program (CIMP) was regularly reviewed and commented upon by the Bank. To address inadequate annual GOP funding for road maintenance, studies were conducted to develop detailed off-budget arrangementsfor road maintenance through road user charges and a Road Maintenance Fund managed by a public/privateboard. Inadequate engineering on large rehabilitation works and in one case poor ICB contractor pre-qualificationled to construction delays and cost overruns. Unusual floods resulted in localized damages which required additional costs, as well as a one year extension of the project. Security considerations affected the implementationof project activities in Sindh and Balochistan. RSP contracts in Sindh could not be adequately supervised/monitoredby the consultants following an attempted kidnapping in which one of the vi expatriate engineers was killed. Local gangs in Balochistan interfered with the work during early stages of contract MBRP 7005 and may have been linked to the murder of the consultant's Resident Engineer.

7. The Bank's role in identification and preparation of the project was satisfactory. The project focused on the GOP need to reform and strengthen the prime highway development institution and reduce the backlog of maintenance. The project was in line with the Bank's sub-sector strategy at the time of developing a sustainable national highway system and lowering transport costs. The Bank's role during implementationwas effective and led to successful conclusion of the project. Bank missions closely monitored the project activities and took a firm stand on various occasions to ensure transparency in staffing, institutional reforms, selection of MBRP/RSPsections and quality of the road improvement works. The Bank continued its advisory role during the project which NHA and MOC greatly valued.

8. The NHA's performance was generally satisfactory as they worked jointly with the Bank during identification and preparation. During preparation, NHA worked closely with the consultant in putting together the program. However, inadequate engineering for major rehabilitation contracts affected the road improvementprogram and resulted in delays and cost overruns. Preference of MBRP works over RSP due to higher Bank financing some time led to expensive solutions for relatively simple overlay works. During implementation, GOP's performancewas largely effective except for inadequate pre- qualification on earlier rounds of RSP which led to quality issues, and non-professional administration of ICB contracts which was in part the result of regional management of construction works. NHA's performance in terms of complying with the covenants was generally satisfactory.

9. The railway component of the project was directly influential in GOP's 1996 and 1997 decisions to reform PR (Open Access Policy and Privatization, respectively) , and in beginning to implementthose decisions. Training programs in modem business and management were delivered by local and international consultants in cooperation with the railway. International consultants assisted the Private Power and Infrastructure Board (PPIB), in preparing Open Access Policy bidding documents,and in providing bid evaluation advisory services. Internationalconsultants assisted PR and the Privatization Commission in providing privatization advisory services.

10. The physical objectives were not achieved, because GOP did not provide the complementary budget support and because the unreformed PR prior to early 1997 was not focussed on efficient operation. Under the Operations ImprovementProgram the Roller Bearings sub-componentto speed up equipment turnaround was only half complete by June 1998. To date there has been little or no overall improvement in equipment turnaround times. The Telecommunicationssub-component was dropped when the proposal to increase capacity by rerouting trains was discarded as unneeded. The Management Information System (MIS) sub-componentwas not disbursed in the expectation that freight moves would soon be primarily unit trains and not require specialized tracking. Under the Locomotive Maintenance Backlog Reduction Program the Recommission46 Locomotives sub-componentcompleted 42 units through 1996/97. The Unit Exchange Spares sub-componentprocured the necessary initial inventory of unit exchange kits. However, in contravention of a loan covenant GOP did not keep up its funding of regular maintenance recurring spares. The Traction Motor sub-componentdecreased the number of locomotives running with less than their full complementof traction motors from 154 in 1990 to 81 as of March 31, 1997. However the overall trend of improvementconceals that the problem has been transferred from one model of traction motor to another, more important, model. The result is that despite 18 new locomotives, the recommissioningof 42 locomotives,reducing the number of units needing traction motors, and discontinuing some passenger trains, the available freight locomotives declined from 131 in 1992/93to 104 in 1996/97.

11. The railway component was mainly affected by GOP's failure to provide its agreed support in: (a) locomotive spares funding, (b) tariff increases, and (c) funding through a Public Service Obligation (PSO) to pay for uneconomic passenger trains operated at GOP request. Bank performance was satisfactory in project identification and preparation. Appraisal was deficient. The economic analysis of the railway sub-componentsused simple calculations based on very broad averages and assumptions. vii

Analysis of the sensitivity of the financial projections or economic evaluations to changes in traffic levels was not performed. In supervision Bank performancewas deficient. With the major failure to satisfy project covenants over a prolonged period of time, supervisionmissions recommended suspensionof the loan. This did not occur and the Bank did not effectivelychallenge PR or GOP to live up to their commitments. Risk assessment and managementby the Bank was not satisfactory. Key risks of achieving policy reforms were not appropriately identified and managed. A degree of optimism permeated the project design.

12. In preparation PR' s performance was satisfactory. The project was premised on strong support from PR and GOP for the major changes required. In light of the subsequent history of the loan, PR overstated its capacity to support the required changes. Implementation was deficient. The physical objectives of the locomotive maintenance backlog reduction assistance were not achieved because GOP failed to provide PR with an adequate budget for locomotive spares, the implementation of the roller bearings component was delayed, and the accounting study and modernization of the accounts was not completed. For much of the loan GOP was in default of two major covenants, (1) recurrent maintenance budget for locomotive spares, and (2) tariff increases.

13. The GOP has preferred to use grant financing for many of the initiatives for which the sector reform component was to provide assistance. Trucking industry studies were completed by NTRC. USAID assisted GOP with extensive work on bulk commodity logistics. UNCTAD undertook a Transport and Trade facilitation program with the Pakistan Shippers Council and Ministry of Planning. Resource mobilization from road users was extensively studied by NHA with consultant assistance under the Highway component of the project. GOP's environmentalefforts were focussed on establishing overall policies and agencies, and on toxic industrial effluents. In sector planning GOP decided to use JICA funds for the preparation of a Transport Master Plan to assist in preparation of the Eighth Plan.

Summary of Findines, Future Operations, and Key Lessons Learned 14. Despite the achievements of highway and railway institutional components, the project overall is rated unsatisfactory. The GOP remained in default of loan covenants and the physical investment component of the Railway loan (the largest single original component) did not achieve its objectives. This is summarized in the following table: Overall Railway Highway Sector Reform Overall assessment Unsatisfactory Unsatisfactory Satisfactory Satisfactory Overall sustainability Uncertain Uncertain Uncertain Uncertain

15. The overall assessment of the highway component is satisfactory. The objectives of the project were substantially achieved. Institutional improvementswere successfullycarried out in NBA and are likely to be sustainable. The backlog of maintenancewas substantiallyreduced and the remaining service life of the network and highway safety were significantly improved. The domestic construction industry benefited from the road improvementworks under the project. All road sections and structures have been taken over by NHA. An Operations Plan has been prepared and is included in Annex C. Its implementationis dependent on the effectivenessof the NHA's maintenance division and the availability of adequate recurrent resources to carry out the maintenance works. To improve quality assurance of maintenance operations, the NBA is now considering use of local consultants to monitor the maintenance undertaken through contracts. Current budget arrangementsare inadequate and uncertain and so sustainability is rated uncertain. An economic evaluation using the HDM model was completed and gives, for all LCB contracts, an average ERR of 81 % for the RSP and 76% for the minor MBRP works. This compares well with the ERR of 51% calculated for a sample road in the Staff Appraisal Report (SAR, now known as the Project Appraisal Document - PAD). For the two major MBRP contracts awarded under ICB procedures, the revised ERR for MBRP 7004 is 54%, and for the two sections of MBRP 7005 it is 31% and 23% respectively. viii

16. The overall assessment of the railway component is unsatisfactory. While the institutional reform achieved by the end of the project in 1998 was significant, the physical objectives were not met. The project was successful in providing enough locomotives to keep PR operational but this success is not sustainable as GOP failed to fund spares for locomotives. GOP has announced its strategy to privatize PR. The railway has been unbundled into three core businesses (infrastructure, passenger, and freight), plus a residual entity, the Railway Resettlement Agency. The core businesses will be corporatized and are expected to be privatized. A revised ERR has been calculated for the roller bearings program as 7%, compared with the SAR calculation of 24%. A revised ERR has been calculated for the locomotive maintenance component as 48%, compared to the SAR calculation of 27%. However the figure by itself is misleading because the availability of the fleet decreased during the project period.

17. The overall assessment of the sector reform component is satisfactory. Sustainability is uncertain. In both the highway and railway sub-sectors changes are under discussion but have yet to take on the convincing shape of true reform.

18. The key lessons learned from the project are as follows (the paragraph numbers below refer to Part I - Project Implementation Assessment): • A permanently reliable source of maintenance funding is the single most important factor in determining the success of highway or railway operations (paragraphs 11, 21, 28, 34, 35). * Fundamental institutional reforms in the implementing agency have to be required up-front as a pre- condition for project approval. For example, in NHA, these reforms include: effective financial controls, streamlined processes, a defined maximum period for approving payments to consultants and contractors, a defined maximum period for issuing completion or defect liability certificates, and agreement to use supervisory consultants as the Engineer. Consultants acting as Engineer must have clearly stated responsibilities, including those related to satisfying reasonable governmental audit requirements (paragraphs 9, 17, 24, 26). * Highway contract administration, particularly of major ICB contracts, needs to be significantly improved to avoid costly claims against the employer (paragraph 26). Simplified construction administration procedures should be adopted. There is a need for a rigorous assessment of the implementing agency's technical and contract administration capacity at the time of appraisal and if necessary technical assistance to train the Borrower's audit staff on Bank procurement guidelines, procedures and standard bidding documents. Local auditing procedures need to be updated to avoid conflict with modern contract documents (paragraphs 26, 39). * Vehicle overloading must be effectively addressed to minimize damage to the network. The recently specified legal axle load limits should be effectively enforced. There should be Bank involvement here, perhaps by enforcing these limits through partnership with the trucking industry once axle load charges are included in a road fund, along with road safety initiatives (paragraph 56). • Preparation of railway projects with an operational component must consider freight traffic issues within the context of an overall logistics chain. Shipper's facilities, activities, and requirements must be integrated with the line haul or common carrier operation (paragraph 19). * There is a need to take effective action against defaults on loan covenants. Stronger leverage, applied earlier could have salvaged more of the railway operations component, or may have allowed more of the loan to be reallocated into productive uses (paragraphs 19, 20, 28). * In this project, application of the Bank policy of no railway assistance (other than TA) until railway reforms have been implemented, may not have been appropriate since the Bank would not have been able to maintain a dialogue with MOF and reform minded parties in GOP and the private sector. As it was, Bank was able to be a catalyst to assist GOP adopt an open access policy for private rail freight development and on overall railway privatization policy. However this is a high risk approach and requires a long run view of sector reform process (paragraph 57). I

PAKISTAN TRANSPORT SECTOR PROJECT (Ln. 3241- PK)

PART I - PROJECT IMPLEMENTATION ASSESSMENT

A - Back2round 1. The transport sector accounts for about 8% of Pakistan's GDP and is growing at 5% annually. Bottlenecks have developed in the transport system and the level of service, which hinders the development of a modem integrated supply chain economy. Road transport dominates the transport sector and presently carries over 85% of the inland passenger and freight traffic over a 200,000 km of road network. The National Highway Authority (previouslyNational Highway Board) is responsible for about 7,000 km of national highways. A 1989 condition survey indicated that only 50% of the network was in maintainable condition while the other half required major rehabilitation and reconstruction.

2. This project was the fifth intervention by the Bank in the highway sub-sector since 1964. During the Third Highway Project (Credit 974-PAK, US$ 50 million, 1980-1986)efforts were initiated for maintenance of the national highways. The Fourth Highway Project (FHP) (Ln. 2814-PAK,US$ 152 million, 1987-1995)went further and included a major component for development of a road mnaintenancesystem and institutionalizing maintenancein NHA.

3. Pakistan Railways is responsible for an 8,800 km railway, where 95% of the traffic is carried on 50% of the system. Shipments of petroleum, wheat, and fertilizer are the only freight traffic with a consistent degree of profitability. The railway is a department of the GOP and is dependent on GOP appropriations for its capital and operating expenses. This project is the twelfth railway project in Pakistan (the ninth in the former West Pakistan). The Railway XI Project (Ln. 1278-PAK)was completed in 1986.

B - Proiect Obiectives 4. Highway Component. The objectives were to assist in: (a) implementingan institutional Reform Program by bringing the National Highway Board to a size, structure and level of professional competence reflecting its responsibilities; (b) instituting a Core Investment and Maintenance Program (CIMP) for national highways that was both appropriate to the nation's needs and sustainable; and (c) removing a substantial portion of the backlog of highway and bridge maintenance, rehabilitation and resurfacing so that a normal and sustainable level of periodic and routine maintenance would be sufficient to keep the national highway network at an adequate standard. These objectives were to be pursued through: (a) technical assistance and training for the reorganization of NHB, (b) a Maintenance Backlog Reduction Program (MBRP), and (c) a pavement Resurfacing and Strengthening Program (RSP) each with a target of 400 km of road. The objectives were relevant, in line with the country's needs, and supported the Bank strategy in the highway sub-sector.

5. Railway Component. The objectives were to assist PR in: (a) implementing a railway restructuring and establishment of a strong business department in order to develop commercial orientation of railway management, (b) implementingan operational improvementprogram and supporting it with selective investments to enhance its effectiveness, and (c) ensuring adequate locomotive utilization by removing the maintenance backlog. The objectives were to be achieved by: (a) InstitutionalDevelopment, consisting of: technical assistance, training, office technology, and commercial orientation of PR, (b) an Operational ImprovementProgram, consisting of: equipping freight wagons with roller bearings, providing additional telecommunicationslinks, and adoption of managementinformation systems (As a result of these operational improvements PR were expected to: make increased use of blocked and, where possible, unit trains on closed cycles, reduce en-route wagon inspections,avoid crowded single track segments by use of alternate lines, and plan freight operations 2

more efficiently), and (c) Locomotive Maintenance Backlog Reduction by the provision of spare parts to recommission 46 locomotives, provision of locomotive unit exchange spares, and the rebuilding of traction motors. The objectives for the railway component were clearly laid out. For PR the project was complex and risky, because it required radical cultural and institutional change, in a mature organization, in a tradition-bound, public sector industry.

6. Sector Reform Component. The principal objective of this component was to assist GOP effectively to implement and monitor a sector reform program. The objective was to be achieved by, (a) providing office technology to monitor implementation of the sector programs, and (b) technical assistance for undertaking studies in the Sector Action Plan and a National Transport Policy study.

C - Achievement of Obiectives 7. Highway Component. In summary and following the format of Table 1, the achievement of objectives (explicit or implicit) of this component was: (a) institutional development objectives were substantially achieved, (b) physical objectives were substantially achieved, (c) public sector management objectives were partiallv achieved, and (d) private sector development objectives were partially achieved.

8. The objective to implement an institutional reform program was addressed by institutional components of the project and was substantially achieved. The NHA was created by the National Highway Act 1991, as an independent agency mandated to develop policies, initiate legislation and mobilize resources for developing and sustaining the national highway network. The reorganization of the NHA was carried out in January 1992 and included the creation of regional offices. It is autonomous regarding decisions on engaging and paying contractors and consultants. The National Highway Council under the chairmanship of the Prime Minister was established to provide policy guidance and oversight. NHA remains dependent on (inadequate and unreliable) budgetary allocations to finance its development and maintenance programs (see paragraph 11).

9. Key positions were filled with capable and qualified staff after delays. Detailed job descriptions were developed along with a transparent selection procedure. NHA staff benefited from training programs funded under the project. These were effective in introducing modem highway engineering concepts and practices to the organization. The project assisted NHA in developing an agency-wide accounting system to replace the fragmented accounting system of the former NHB, which only had individual project accounts, but no consolidated agency level accounts. Based on a review of the NHA's financial systems and internal controls, a program of Financial System Strengthening was implemented including improved accounting policies and computer based standard general accounting system. The Policies and Procedures developed during the project preparation stage were revised and improved subsequently to conform with the NHA reorganization, local regulations and practices so as to make it easier to introduce and implement, These were adopted on a trial basis in 1996, and are being reviewed.

10. The objective to institute a Core Investment and Maintenance Program (CIMP) for national highways was addressed by institutional and operational components of the project and was substantially achieved. Under the project a three-year CIMP (FY90/91 to 92/93), was implemented to maintain a balance between maintenance, rehabilitation and improvements/capacity expansion on the national highways. The Bank reviewed the CIMP annually with the GOP and provided comments as necessary. The core program covering priority expenditures on the national highway system continues to be prepared and implemented annually. and is reviewed and commented upon by the Bank. A Maintenance Intervention Level (MEL) system developed under the FlIP was upgraded into a more comprehensive Maintenance Management System (MMS). The MMS is described further in the NHA Operational Plan in Annex C

11. Funding for maintenance remains an issue. As a short-term measure, NHA agreed to divert its annual toll revenues from a NHA general revenue account into a maintenance account. These are estimated to be about Rs 100 million or US$ 2.7 rnillion (at Rs36.1/$1, the 1996 annual exchange rate). 3

A Road User Charges and Road Fund Study was completed by NHA using international consultants and recommendedestablishment of a commerciallymanaged Road Maintenance Fund, financed from road user charges, which are currently being reviewed by GOP. As part of an effort to identify future investmentneeds in the highway sub-sectorand investigate possible sources of fund, a study (entitled Arterial Highway Network of Pakistan to the Year 2015) identified a number of areas for resource generation to fund future improvementsand expansion of the national highway network. Details for maintenance funding are provided Table 5a.

12. The objective to remove a substantial portion of the backlog of highway and bridge maintenance, rehabilitation and resurfacing was addressedby physical components of the project and was substantially achieved. The Maintenance Backlog Reduction Program (MBRP) and Resurfacing and Strengthening Program (RSP) were based on the Maintenance InterventionLevel (MEL)system for implementinga structured and systematic program of works. The backlog of highway and bridge maintenance, rehabilitation and resurfacing has been reduced under the project. A total of 397 km of roads have been re-paved and strengthenedunder RSP, compared with 400 km estimated at appraisal. A further 301 km of roads, 14 bridges and 16 drainage structures were reconstructedunder MBRP, compared with 400 km estimated at appraisal. The reduction of 100 km from the appraised level of work resulted from NHA's decision to consolidate investments to upgrade 158 km of the strategic N-25 Highway (which provides access from Central Asia to Karachi). The scope of work for this section was expanded after appraisal to include major reconstruction and improvementsto bring it to international standards.

13. In response to severe 1992 floods, and in addition to the stand alone Flood Damage Restoration Project (FDRP, Credit 2468-PAK),Bank managementagreed to let ongoing projects in various sectors (roads, irrigation, education, and health) with broadly similar infrastructure rehabilitation objectives be used for reconstruction of damages caused by the floods. Project funds were used to provide some assistance for the repair of national highways damaged by these floods. In addition to the economic re- evaluation (see paragraph 53) a technical study carried out in 1996 showed a general improvementin road roughness and some capacity expansion under the project, which confirms the achievement of the objective of lowering transport costs.

14. The domestic contracting industry also benefited from the project. Except for two major ICB contracts (7004 & 7005), all works under MBRP and RSP were awarded to intermediate and small national contractors following LCB procedures,significantly developing the domestic contracting industry. The decision to use LCB was made during appraisal because of the small size, wide geographic spread, and annual nature of the programs, which meant that the composition of the later year's programs would not be known in advance.

15. Railway Component. In summary and following the format of Table 1, the achievementof objectives (explicit or implicit) of this component was: (a) institutional development objectives were substantially achieved, (b) physical objectives were not achieved, and (c) public sector management objectives were partially achieved.

16. The objective to implementrailway restructuring and the establishment of a strong business department in order to develop the commercial orientation of railway managementwas addressed by institutional componentsof the project and was ultimately substantially achieved. The project funded a large TA component up to project closure in June 1998 which was directly influential in GOP's 1996 and 1997 decisions to reform PR (Open Access Policy and Privatization, respectively), and to begin to implementthose decisions. The organization chart was changed on January 1, 1991 to create an Additional General Manager-Business,which was an effectiveness condition of the loan. Training programs in modern business and managementwere delivered by local and international consultants in cooperation with the railway. In addition the international consultants prepared a draft reorganization plan for PR to operate on a commercial basis. Internationalconsultants assisted the Private Power and Infrastructure Board (PPIB), in preparing Open Access Policy bidding documents, and in providing bid 4 evaluation advisory services. Internationalconsultants assisted PR and the Privatization Commissionin providing privatization advisory services. Finally, international consultants provided the planning and documentation necessary for PR's unbundlingin fall 1998. The Corporate Planning Division was created to replace an existing ad hoc corporate planning group which had created Pakistan Railways' first Corporate Plan for Fiscal Year 1990/91. It took considerable time to establish the mandate, staffing and resource commitmentto this Division. In addition, as part of the project initiatives, the GOP mnanagementservices division studied the extent of railway surplus labor, which provoked a useful debate and controversy between MOR, PR and the Ministry of Finance, and justified the PR hiring freeze and staff attrition policy.

17. Only partly successful was an accounting study which was to include: (1) a separation of accounts of the manufacturingunits from the operational units, (2) development of a modern accruals based accounting system, and (3) creation of a Public Service Obligation (PSO). The manufacturing facilities and Property Board were established as separate units in July, 1990. Separate accounting for these functions was to be established in conjunction with item (2), but PR decided not to proceed with (2). On item (3) the railway, with assistance from international consultants, did its own PSO calculation and made a claim for PSO every year. From FY 90/91 to Y 94/95 GOP made a payment for PSO, although always less than that claimed by the railway. PR submittedclaims for 95/96 and 96/97 but has not been paid. The goal of having GOP curtail cross-subsidized services once their cost was highlighted has been partially achieved.

18. The objective to implement an Operational ImprovementProgram and supporting it with selective investments to enhance its effectiveness, was addressed by operational and physical components of the project. This objective was not achieved, in part because GOP did not provide the complementarybudget support and because the unreformed PR prior to early 1997 was not focussed on efficient operation. The institutional culture did not encouragemost PR staff to be innovative and seek ways to improve operations.

19. The Roller Bearings sub-component was to speed up equipment turnaround by reducing the number of inspections between terminals. By June 1998 the number of wagons which have been converted to roller bearings is 4,090 or 53% of the program of 7,785 wagons. There was discussion of re-allocating funds intended for roller bearings to the purchase of high capacity wagons. Ultimately this was not pursued because by the time the PR had decided that they wanted to go ahead, the loan covenants were in serious default (so amending the loan agreement was not possible) and the expected Open Access Policy would result in private wagons coming into service. Nevertheless a number of positive accomplishmentsaccompanied the process of evaluating high capacity wagons, which are likely to carry through to a privatized operation. First, business-led thinking in two branches led a reluctant civil engineering group to accept higher (20 tonne) axle loads. Secondly, bid specifications were developed which liberalized what would be accepted from a Rail Equipment Operating Company (RECO, a private operator of trains on PR lines). As roller bearing equipped wagons were to come into service, PR was to make greater use of block and, where possible, unit trains. Apart from the slow introduction of this equipment,there are not receivers of sufficient volume to make closed-cycle unit trains practical (aside from five inland locations at electric power plants or bulk oil terminals). To date there has been little or no overall improvement in equipment turnaroundtimes.

20. The Telecommunicationssub-component was to provide telecommunicationsto selected sections of existing track, in conjunction with a proposal to re-route additional goods trains on these lines for capacity reasons, and in lieu of PR's desire to construct double track. Bank missions expressed skepticismabout PR's continued desire for double tracking. Computer simulations indicated no need for double tracking or for any other line capacity improvements. When the proposal to reroute trains was discarded, the rationale for including expanded teleconmmunicationsin the project was removed and this sub-componentwas dropped. The ManagementInformation System (MIS) sub-component was to enable information on train and wagon movements,a passenger reservation system, and an administrative 5 information system. However,the operating data base necessary for the tracking of train and wagon movements was deleted under the expectation that freight moves would soon be primarily unit trains and not require specialized tracking. Ultimately, the loan closed with the MIS portion undisbursed.

21. The objective to ensure adequatelocomotive utilization by removing the maintenance backlog was addressed by physical components of the project. This objective was not achieved, because GOP did not provide the agreed maintenance funds. Under the LocomotiveMaintenance Backlog Reduction Program the sub-componentto Recommission46 Locomotives completed 42 units of the 46 planned (91 %). The Unit Exchange Spares sub-componentprocured the necessary initial inventory of unit exchange kits. However,in contraventionof a loan covenant GOP did not keep up its funding of regular maintenance recurring spares (which includes, among others, keeping up the inventory for unit exchange kits). There was a shortfall of the covenant in each year of the loan. The Traction Motors sub- component was to replace missing traction motors. The SAR had identified 154 locomotives in 1990 running with less than their full complementof traction motors. The project had reduced the count to 81 locomotives as of March 31, 1997. However the overall trend of improvement conceals a problem. The loan focused on the four types of motors in short supply in 1990. PR also has locomotives using other motors, comprising a total of 153 units (28% of fleet), which are heavier duty and used for profitable freight moves such as unit oil trains. With insufficient funding for regular maintenance on these motors the problem has been transferred from one model of traction motor to another. The result is that despite 18 new locomotives,the recommissioningof 42 locomotives, reducing the number of units needing traction motors, and discontinuing some passenger trains, the available freight locomotives declined from 131 in 1992/93to 104 in 1996/97.

22. Sector Reform Component. Sector policy objectives were partially achieved. The objective to assist GOP to implement and monitor a sector reform program was addressed by six technical assistance componentsof the project and were partially achieved. After effectiveness, GOP preferred to use grant financing for these initiatives. (1) Trucking Industry Development. Trucking industry studies completed by NTRC indicated that the deregulated private sector trucking industry was responsive to market demands and was evolving towards a more diversified fleet to meet the growing needs of Pakistan's industry and commnerce.Accordingly GOP decided to include trucking issues in overall transport and trade facilitation matters rather than in a separate workshop. (2) Resource Mobilization From Road Users. This was extensively studied by NHA with consultant assistance under the Highway component of the project and has contributed to the development of the road fund proposals awaiting GOP approval. (3) Trade Logistics. USAID assisted GOP with extensive work on bulk commodity logistics, and Port Qasim determined that bulk foodgrain facilities were feasible and is seeking private sector participation to establish them. PAKPRO was established by Karachi Port but it proved ineffective and GOP invited UNCTAD to undertake a Transport and Trade facilitation program with the Pakistan Shippers Council and Ministry of Planning (1992-94). This developed a consensus on an extensive agenda of procedural and documentationreforms. The Bank expects shortly to negotiate a TA credit to assist in the implementationof these reforms. (4) EnvironmentalAspects. GOP's environmental efforts were preoccupied in establishing overall environmentalpolicies and agencies, and addressing the problem of untreated toxic industrial effluent was decided to be a higher priority than the accident risks from the transport of hazardous cargoes. The Bank is working with GOP to improve the quality of refinery products which would lessen the extent of automotive pollution. (5) Sector Planning. GOP decided to use JICA funds for the preparation of a Transport Master Plan to assist in preparation of the Eighth Plan. (6) National Transport Policy Study. The MOC following discussionswith Bank missions in 1992 prepared a Transport Policy Paper which recommendedthat the private sector should play a much larger role in railways, ports, national registered shipping and aviation, thus beginning the continuing process of adoption and implementationof the privatization policy. 6

D - Maior Factors Affecting the Proiect 23. The original loan closing date of June 30, 1996 was extended twice. The first extension to June 30, 1997 was given to allow, (1) Railway: technical assistance for implementingthe GOP's 1996 policy for the development of modem rail freight services, (2) Highway: restoration of unprecedentedflood damage (June 1995) to a 160 km section of N-25 being rehabilitated under the project, and for technical assistance for supervision and for institutional strengtheningof the NHA. The second extension to June 30, 1998 was given, on the GOP's request, to continue technical assistance for implementingrailway restructuring and privatization and to enable additional studies critical to the preparation and appraisal of the proposed HighwayRehabilitation Project.

24. HighwayComponent. Although NHB was transformedinto NRA in 1991, significant delays were encountered in the reorganization and recruitment of staff, due to the political situation which led to a change in Government in 1993. A set of "Policies and Procedures" were developed during project preparation and were to be adopted as part of the NHA institutionalreforms. This was adopted on trial basis in 1996, but was not fully implemented. The lack of implementationadversely affected institutional strengthening of the NHA. An NHA Code (covering basic policies) was subsequently adopted in early 1999. The provision for training and technical assistance under the project for reorganization was not fully utilized owing to delays in NHA reorganization and recruitment as well as NRA's inability to bring on board four long term senior advisors through the FHWA, due to changing Pakistan-USA political relations. The implementationof improvements in financial managementsystems and financial controls through the AccountingAssistance Study in 1994 was only partly completed during project period. Not until late 1998 did NHA make staff changes in key positions in the Finance Wing. A new Financial Manual was adopted in early 1999 to guide operations.

25. A major problem affecting the MBRP works was inadequate initial engineering of the two large ICB contracts, which had been added after appraisal. Bids were invited based on standardized cross- sections (appropriate for the smaller MBRP/RSP contracts) without detailed survey and analysis of these specific roads. Bank supervision had advised NHA to do detailed engineering before seeking bids but this was not done. The Bank gave its "no objection" to the bidding documents. During implementation these deficiencies became apparent and the projects had to be re-engineered. Revisions resulted in delays and cost over runs.

26. Weak contract administration on the large ICB contracts resulted in unnecessary delays, claims, and cost overruns. This was due to NHA staff not being able to apply well established FIDIC (Federation Intemationale des Ingenieurs-Conseils)contracting principles. Local audit procedures do not allow an FIDIC-type payment process and instead require the manual filling in and signing of a "measurementbook" by departmental staff before a contractor can be paid. This delays the payment process and introduces another layer in the clearance. Inadequateprequalification led to the award of contracts to inexperienced contractors, during the first two rounds of bidding for RSP works. (there were five rounds of bids). This led to inadequate quality of works and delays in contract completion. The contracts awarded during these early rounds of RSP did not include a provision for field testing facilities which resulted in quality control problems. This was addressed in subsequent contracts. Only one bid was received for each of the two ICB contracts (MBRP 7004 & 7005). This lack of response resulted in indecision and delays in awarding the contracts. This was exacerbated by land acquisition issues and major changes in the scope of work. The poor financial condition of the contractor for MBRP 7004 required the operation of an Escrow Account by NRA to complete the works, which delayed the project.

27. Security considerations affected the implementationof project activities in Sindh and Balochistan. RSP contracts in Sindh could not be adequately supervised/monitoredby the consultants following an attempted kidnapping in which one of the expatriate engineers was killed. Local gangs in Balochistan interfered with the work during early stages of MBRP 7005 and may have been linked to the murder of the consultant's Resident Engineer. 7

28. Railway Component. The single greatest factor affecting this component was the complete lack of support for PR from GOP. As made formal through effectiveness conditions and loan covenants, the GOP undertook to provide several types of continuing support for the railway. The three major elements were: (a) locomotive spares funding, (b) tariff increases, and (c) funding through PSO to pay for uneconomictrains operated at GOP request. Although some PSO payments were made during the 1990/91to 1994/95period they have not been maintained. Locomotivespares funding has been far too low. An initial estimate of this requirement at US$30 million per year was subsequently revised to US$ 25 million per year. On average over the 1990/91to 1996/97period only US$15 million per year or 60% of the US$25 million required has been made available.

29. The SAR over-estimatedthe freight tonne-kmbase from which its projections were made. This was the result of a catastrophic (32%) drop in freight traffic in two years, from the actual level of 8.4 billion tkm in 1988/89(and a projected 9.1 billion tkm in 1990/91) to an actual level of 5.7 billion tkm in 1990/91. It is not clear how much of this represents a lack of available locomotives as opposed to a lack of traffic to be moved. Over the same period the number of trains operated fell by 25% and the payload per train by 8%. The radical decline in freight was attributed in supervision to three factors, (a) loss of export rice traffic, down 0.5 billion tkm, (b) loss of import wheat traffic, down 0.4 billion tkm, and (c) the deteriorating locomotive situation. There were 161 locomotives available for freight in 1988-89 and 138 in 1990/91, which further declined to 124 in 1991/92. It has since declined to 104 in 1996/97.

30. The one-third loss of rail traffic in two years was very damaging because of the cost/density taper in railroad costs. PR was faced with very serious cost control problems and, given the severe limnitations on what could be done (staff reductions only by attrition; political restrictions on service reductions), handled it very well. Staffing has been reduced from 133,300 in 1989/90to 96,100 in 1997/98. Inevitably, however, a major avenue for cost control was deferral of maintenance,for both track and equipment. In retrospect this loss of a third of the goods traffic added to the overall failure of the maintenance-relatedelements of the loan.

E - Proiect Sustainability 31. Overall sustainability is summarized in the following table:

Overall Railway Highway Sector Policy Reform Overall sustainability Uncertain Uncertain Uncertain Uncertain

32. Highway Component. Sustainability is uncertain. There has been tremendousprogress made in the NHA and its sustainability as a productive institution is likely. However, sustainability of results and quality in the road sub-sector is dependent on GOP for either large increases in funding or carrying out further substantialreform to allow for new sources of funds. While there are indications that GOP is moving in this direction, this is incomplete and remains uncertain.

33. Sustainabilityhas been increased through major institutional improvements in NHA. The agency was upgraded to an autonomous authority through legislation. Improvements in policies and procedures, accounting, and uniform construction administrationprocedures has made the organization more effective and professional. Sustainability was also increased through recruitment of qualified and experienced staff, staff training, and staff interactionwith international consultants and experts. The creation of the Private Sector Cell to attract private sector financing for construction, maintenance and operations of the highways is positive. However, the rapid turnover of senior NHA managementand staff over the past year, if continued, could dilute some of the institutional gains achieved through the project. 8

34. The CIMP and annual reviews by the Bank and GOP has allowed setting priorities for investments in an appropriate mix of new construction, rehabilitation, and maintenance. The physical works completed under the project have been handed over to the maintenance wing for inclusion under the annual maintenance program. However, the current institutional arrangements for financing maintenance, relying exclusively on budgetary transfers from GOP, are inadequate and unreliable. GOP allocations are consistently short of NHA's estimnatedneeds (see Tables 5a, 6a). Actual expenditures in constant value averaged over the last three years of available data (1994/95 to 1996/97) are Rs 264 million per year compared to the preceding three year period (1991/92 to 1993/94) of Rs 334 million per year (Table 5a), a decline of 21%. To overcome this, the NHA has submitted to GOP detailed proposals to ensure adequate financing of priority road maintenance expenditures, independent of the budget (establishment of a road maintenance fund financed by road user charges and managed by a public/private representative board). These reforms will be supported under the proposed (Bank assisted) Highway Rehabilitation and Maintenance Project.

35. Railway Component. Sustainability overall is uncertain. By its final years, the project contributed substartially to institutional reform in PR. The development of the Open Access Policy (1996) with the possibility of private operation through RECOs and the unbundling of PR business units (1998) are permanent changes in PR's approach. GOP adopted a Privatization policy in April 1997 and preparations are proceeding. hisufficient tariff increases have kept revenues low. Operational improvements have not been made (see Table 6b). With the failure of the GOP to fund locomotive spares, the number of usable locomotives will continue to decline. The progress made in the one area of substantial disbursement, for locomotive availability, is not sustainable. There is a need for private capital to develop modem rail services which, could achieve traffic levels well beyond those currently experienced.

36. Sector Reform Component. Sustainability is uncertain. In both the highway and railway sub- sectors changes are under discussion but have yet to take on the convincing shape of true reform.

F - Bank Performance 37. Project Identification. For the Highway component project identification was satisfactory. The initial Bank mnissionsensured that the focus of policy dialogue with the GOP remained in conformity with the Bank's strategy for sustainable development in the highway sub-sector. The project design included major reorganization of NHA, to ensure efficient management and effective implementation of the policy reforms. In addition the CIMIP, with periodic intervention by the Bank, had put in place a framework for the sustainable development of the national highways. For the Railway component project identification was satisfactory. During preparation of the project in 1987-89, various Bank mnissionshad worked with PR and GOP to identify a medium-term investment program for the modernization of Pakistan Railways through institutional and managerial reform.

38. Project Preparation. For the Highway component project preparation was satisfactory. The Bank effectively used available resources during project preparation. The reorganization of NHA was based on a study carried out by the US Federal Highway Administration (FHWA) under funding provided by USAID. The road construction and maintenance program carried out under the Fourth Highway Project (FHP) going on at that time, was fully utilized for preparation of this project. For the Railway component project preparation was satisfactory. As the loan was originally not focused on investment projects, there was no requirement to subject the medium-term investment program of PR to detailed feasibility studies and the program was not appraised for possible bank lending. The focus of project preparations was on institutional, managerial, and financial restructuring of the railway in order to develop a cormnercial approach and on improving operational efficiency. For the latter task Bank rnissions included a railway operations specialist. 9

39. Appraisal. For the Highway component appraisal was satisfactory. The SAR documents the full details of the investment program and its analysis. Conservativeassumptions for vehicle operating costs and value of time savings were used in estimating project benefits. The technical review of the project was sufficiently detailed. On the negative side, the Bank appears to have overlooked the fragmented accounting system the NHA inherited from the former NHB. This prevented the NHA from fulfilling its covenant obligation to provide annual audited financial statements until a program for strengtheningfinancial systems and controls could be implemented (FY 1993-95). For the Railway component appraisal was deficient. The SAR provides considerable detail on the action plans that PR was expected to undertake. On the negative side, the economic analysis of the railway sub-components used simple calculations based on very broad averages and assumptions. Analysis of the sensitivity of the financial projections or economic evaluationsto changes in traffic levels was not performed. Limited sensitivityanalysis was done only for the productivity assumption in the roller bearings evaluation.

40. Supervision. The SAR estimated that 25 staff weeks per year would be needed for supervision, resulting in 150 staff weeks over the six years of the project. The actual time spent on supervision was 292 staff weeks. After the October 1992 highway mission was delayed due to flood conditions, the highway and railway components of the loan were, in effect, treated as two projects. Supervision missions were no longer combined. There was a reduction in visits per year per component in the later period of the loan. However supervision discussionsdid take place during other Bank missions for both the highway and railway components. For the Highway component supervision was satisfactory. Through regular supervision missions the Bank played a proactive role in overseeing project implementation. With the on-going FBP, missions could review both projects simultaneously. This was appropriateas the project area and the executing agency were the same for both projects. However, this affected the level of supervision needed by the project to a certain extent, as the large construction contracts under the FHP required more attention for their complex contractual and technical problems. Due to reallocation of Bank resources to appraise the Flood Damage Restoration Project (FDRP) on an emergencybasis during 1993, the mid-termnreview of the project scheduled 1993 was delayed. This also delayed the implementationof the Policies and Procedures and Financial System strengthening. The Bank showed flexibility by agreeing to the extension of the closing date to allow NHA to undertake rehabilitation of the 1995 flood damages on contract MBRP 7005. On the negative side, Bank supervision had advised NHA to do detailed engineering before seeking bids for the two large ICB contracts which had been added after appraisal, but this was not done. Despite this the Bank gave its "no objection" to the bidding documents. For the Railway component Bank supervision was deficient. With the major failure to satisfy project covenants over a prolonged period of time, supervision missions recommendedsuspension of the loan. This did not occur and the Bank did not effectively challenge GOP to live up to their commitments. Documentation of supervisiondetails from 1995 onwards was complicated by having much of the supervisiondiscussions taking place in conjunction with other missions and thus not being fully documentedin the project file.

G - Borrower Performance 41. Highway Component. Project Identification and Preparation Overall, NHB's performance was satisfactory. Project identification and preparationwas carried out jointly with the Bank. The Maintenance Directorate worked closely with consultants and the Bank in identifying program needs. On the negative side, the organizationalplan was not adequately reviewed and analyzed by NHB during preparation, leading to repeated changes and revisions during implementation. In addition, the design standards for MBRP and RSP were not developed in significant detail to cater for the large variety of conditions encountered on the national highway network.

42. Implementation Although satisfactorvoverall, NHB/NHAperformance during the early period of implementationwas not too effective as it went through a major restructuring. As the reorganization was completed the NHA' s performance significantly improved. In particular, the NHA' s efforts were outstandingin successfully completing (to high quality) the two fairly difficult major MBRP contracts that were initially poorly prepared. In one case (7004 - N5 Sahiwal-Okara)NHA had to set up an escrow 10

account to ensure contract completion, in view of serious financial problems faced by the contractor. In the second case, (7005 - N25 Wadh-Surab)the work was a in an inaccessible and inhospitable area with major logistical challenges. It also sufferedmajor damage by unprecedentedflooding just as the work was approaching completion.

43. The contractors' performance on MBRP/RSPLCB contracts improved significantly over project duration and was satisfactory. Aside from the two major ICB contracts, 40% of RSP and 17% of MBRP works faced completion delays. Major cost overruns were experiencedon 17% of RSP and 7% of MBRP contracts. Project consultants (prime as well as local associates) made significant contributionsto the success of the project. Though there were initial deficiencies in preparation of standard designs for the RSP and MBRP works, particularly for the large ICB contracts, these were overcome during the implementationphase as the improvementneeds were more clearly identified. Performance of consultants was satisfactory.

44. Project Covenants NRA's performance in complyingwith the project covenants was satisfactory. Operation NHA's performance was satisfactory, see Section I, Future Operation.

45. Railway Component. Preparation. PR's overall performance was satisfactory. During the late 1980's the Bank had extensive discussions with PR and GOP regarding the need for comprehensive institutional, financial, and managementrestructuring of the railway to permit it to operate effectively in a competitive transport environment and to realize its potential. The resulting project was premised on strong support from PR and GOP for the major institutional and managementchanges required. However it turned out that the institutional set up, as of 1990, meant that the support was not there. Only in the later part of the loan period, did the needed support materialize. In light of the subsequent history of the loan, PR overstated its capacity to support the required changes.

46. Implementation. Deficient. The physical improvementsenvisioned under the locomotive maintenance backlog reduction assistance were not achieved because GOP failed to provide PR with an adequate recurrent budget for locomotive spares, and because GOP spread out the 3 year program to 6-7 years, thus lowering its net benefit in the initial years. Late PC approval also delayed the operational improvementitems (wagons,teleconmnunications, and MIS), but changing circumstances, including GOP's strongersupport for private sector development of rail freight services, reduced the priorities for these items. Implementationof the roller bearings component was delayed. The accounting study and modernization of the accounts was not completed although preliminary work on this, funded under the project, was underway in 1997/98. Tables 5b and 6b provide details on project implementation and operation indicators.

47. Covenant Compliance. Deficient For much of the loan GOP was in default of two major covenants, (1) recurrent maintenancebudget for locomotive spares, and (2) tariff increases. Another important covenant, regarding PSOs comnmitmentsfor operating uneconomic services was also generally not met. Operation. PR's performance was deficient. By the end of the project institutional reform was beginning, however overall PR's performance on operations over the life of the project was inadequate. See Section I, Future Operation.

H - Assessment of Outcome 48. Despite the achievements of highway and railway institutional components, the project overall is rated marginally unsatisfactory. The MOR/GOP remained in default of legal/financial covenants and the physical investment component of the Railway loan (the largest single original component) did not achieve its objectives.

49. The most recent supervision ratings show the project as satisfactory despite the lack of compliance with the loan covenants (Table 13). Once the Bank had decided not to suspend the loan due I1 to covenant non-compliance (since 1993) the covenant indicator automatically showed unsatisfactory. Despite this covenant rating the project achievementsin the highway components and the railway institutional component were satisfactory,particularly in the last few years of the project when start-up problems at NHA had been resolved and railway institutional reform had begun to progress.

50. Highway Component. The overall assessment of the highway component can be rated as satisfactory. The objectives of this component were substantially achieved. Institutional improvements were successfully carried out and the NHA's role as an autonomousinstitution was established. The NHA is now able to attract qualified and experienced staff. A modem accrual based agency-wide accounting system has been developed and is under implementation. An NHA (Policy) Code, a Financial Manual and a policy framework for private sector investments has been prepared and adopted. It has embarked upon major policy initiatives to sustain the existing network through user based road maintenanceprograms, it has enhanced its institutional and technical capacity to implementa major motorway program, and it is exploring private sector financing options to meet investmentneeds.

51. The maintenance backlog reduction and resurfacing and strengthening programs were successful in improving the condition of the network and reducing transport costs. Construction quality has been satisfactory and pavement strengths have been significantly improved. The recurrent part of the CIMP was not sufficient, and increased maintenance funding levels are needed to arrest further deteriorationof the network. As proposed and developed by NHA staff, the MIL was improved through the project into a comprehensivemaintenance managementsystem (MMS), which is more responsive to maintenance needs. Maintenance program managementand implementationneeds to be improved. Proposals are under considerationfor more effective central programming and quality control through the use of local consultants to monitor the maintenance undertaken through contracts.

52. The project was completed within the original period, except for an initial one year extension to complete the major damages due to flooding (a 1 in 380 year flood) on contract MBRP 7005. A second one year extension was allowed to continue institutional strengthening and sector work related to the preparation of the proposed Highway Rehabilitation and Maintenance Project. All highway component project funds were disbursed and US$ 11.5 million was transferred from the railway component to pay for flood damages on contract MBRP 7005.

53. Recalculation of EconomicRate of Retur (ERR. An economic evaluation using the HDM model was completed based on: 1996 VOCs, NHA traffic counts, and using 25% of construction cost as salvage value. This gives, for all LCB contracts, an average ERR of 81% for the RSP and 76% for the minor MBRP works. This compares well with the ERR of 51% calculated for a sample road in the SAR. The high return on completion is attributed to the significantbenefits in VOC savings with relatively smaller investment under the RSP and MBRP in comparison with major improvement or reconstruction. For the major MBRP contracts awardedunder ICB procedures, the revised ERR for the 30 km Sahiwal- Okara road section under N-5 (MBRP #7004) is 54%. For the 60 km Wadh - Khuzdar section and the 98 km Khuzdar - Surab sections on N-25 (MBRP#7005) it is 31% and 23% respectively. The lower ERR values compared to the average for minor MBRP works is due to a much larger scope of construction, with unit costs averaging Rs 12.42 million/km or US$ 340 thousand/km (at Rs36.1/$1, the 1996 annual exchange rate). Table 9 and Annex C provide additional detail.

54. Railway Component. The overall assessment of the railway component of the project is unsatisfactory. In the broad perspective of the Pakistan transport sector and its future prospects, it may be argued that the disbursements made under the TSP supported and preserved an operating railway in Pakistan through a time, when for lack of government support, it might have effectively ceased operation. The institutional reform achieved by the end of the project in 1998 was significant. In building up a climate of change it left PR ready for the move towards a private railway which now has significant government support. In the Operations ImprovementProgram the Roller Bearings sub-componentwas only half achieved, although the remaining installation is going on. The MIS and Telecomnmunications 12 subcomponentswere not disbursed. The LocomotiveMaintenance Backlog Reduction program was successful in providing enough motive power to keep PR operational but this success was neutralized by the failure of GOP locomotive spares funding and the resulting unsustainable situation for locomotive maintenance.

55. Recalculation of Economic Rate of Return (ERR). Details of the ERR calculations are provided in Annex D. A revised ERR for the MIS and Telecommunicationssub-components cannot be calculated as the funds were not used. A revised ERR has been calculated for the roller bearings program as 7% compared with the SAR calculation of 24%. The main reason for the lower return is the early purchase of the new bearings, incurring the cost, but their very slow installation, and hence their delayed ability to earn benefit. The locomotiverelated sub-components:recommission 46 locomotives, inventory of unit exchange of spares, and traction motor repair have been put together into one figure of total additional locomotives attributable to the project. The SAR calculation of the ERR was 27%. A revised ERR has been calculated for this component as 48%. However the figure by itself is misleading because the overall availability of the fleet decreased during the project period.

56. Sector Reform Component. The overall assessment of the sector reform component can be rated as satisfactory. The objectives of this component were substantially achieved. Studies, reviews, and policy discussions were successfully carried out.

I - Future ODeration 57. Highway Component. NHA has developed an Operation Plan for the assets created under the project (Annex C). As described in SectionE above, the current institutional arrangementsfor financing maintenance,relying exclusively on budgetary transfers from GOP, are inadequate and unreliable. Substantiallyincreased maintenance funding levels are required to preserve the overall network. NHA proposes to achieve this through the establishmentof a Road Maintenance Fund financed from road user charges. The matter is currently under GOP consideration. All RSP and MBRP works were taken over by the NHA maintenance sections after contract completion. However, there were some delays in taking over the Wadh-Surab section of N25 due to some outstanding contractual issues on MBRP 7005. The road has now been open to traffic for over two years, but has started showing some signs of lack of maintenance and pavement settlement in localized areas. This requires careful attention. The monitoring indicators (see Tables 5a and 6a) identified for the operation plan are adequate to evaluate its performance and are sustainable as they rely on information routinely collected. NHA is now proposing to move towards privatization of maintenance management with a related quality assurance program involving private highway engineering consultant services and the transport industry. On a more permanent and long-term basis, a commerciallymanaged Road Maintenance Fund from enhanced road user charges and mnanagedby an independent Road Fund Board has been proposed.

58. Railway Component. The GOP has announced its strategy to privatize PR. The railway has been unbundled into three core businesses (infrastructure, passenger, and freight), plus a residual entity, the Railway Resettlement Agency (RRA). The core businesses will be corporatized and are expected to be privatized. A Railway Regulatory Authority will be established under a new regulatory frameworkfor the restructured private rail industry. The Taskforce on Railway Restructuring and Privatization, comprising key members from the MOR, PR, and the PC is overseeing this process. The success of this proposal is still uncertain as several steps remain before the privatization can go ahead. These include: corporatizationunder the Company's Act; approval of a railway industry regulatory framework;labour redundancyissues, formulation of a PSO policy for passenger services, and approval of amendmentsto the Railway Act to provide for the establishment of a new regulatory framework and to permit the transfer of PR assets to corporatized entities.

59. Sector Reform Component. The project supervision discussions led to a consensus emerging in Pakistan concerning the need for greater private sector participation in the transport sector. The Bank 13 is assisting in the preparation of a railway privatization project, in a project to transform Karachi Port into a landlord port, and a user managed road fund is a key aspect of a planned future highway project. In addition the transport focus of the project enabled the Bank to maintain a dialogue about overall transport logistics and facilitation matters with the Pakistan Shippers Council (representatives of the private users of the transport system) and not be limited to sub-sectortransport suppliers such as PR and NHA. This has led to preparation of a TA credit to assist the implementationof the transport and trade facilitation reform agenda and to strengthen the concerned public/privatepartnership in this area.

J - Key Lessons Learned 60. The key lessons learned from the project are as follows: * A permanently reliable source of maintenancefunding is the single most important factor in determiningthe success of highway or railway operations (paragraphs 11, 21, 28, 34, 35). * Fundamental institutional reforms in the implementingagency have to be required up-front as a pre- condition for project approval. For example, in NHA, these reforms include: effective financial controls, streamlinedprocesses, a defined maximumperiod for approving payments to consultants and contractors, a defined maximum period for issuing completion or defect liability certificates, and agreement to use supervisory consultants as the Engineer. Consultants acting as Engineer must have clearly stated responsibilities, including those related to satisfying reasonable governmentalaudit requirements (paragraphs 9, 17, 24, 26). * Highway contract administration,particularly of major ICB contracts, needs to be significantly improved to avoid costly claims against the employer (paragraph 26). Simplified construction administration procedures should be adopted. There is a need for a rigorous assessment of the implementingagency's technical and contract administrationcapacity at the time of appraisal and if necessary technical assistance to train the Borrower's audit staff on Bank procurement guidelines, procedures and standard bidding documents. Local auditingprocedures need to be updated to avoid conflict with modern contract documents (paragraphs 26, 39). - Vehicle overloading must be effectivelyaddressed to minimize damage to the network. The recently specified legal axle load limits should be effectivelyenforced. There should be Bank involvement here, perhaps by enforcing these limits through partnership with the trucking industry once axle load charges are included in a road fund, along with road safety initiatives (paragraph 56). * Preparation of railway projects with an operational component must consider freight traffic issues within the context of an overall logistics chain. Shipper's facilities, activities, and requirementsmust be integrated with the line haul or common carrier operation (paragraph 19). * There is a need to take effective action against defaults on loan covenants. Stronger leverage, applied earlier could have salvaged more of the railway operations component, or may have allowed more of the loan to be reallocated into productive uses (paragraphs 19, 20, 28). * In this project, application of the Bank policy of no railway assistance (other than TA) until railway reforms have been implemented,may not have been appropriatesince the Bank would not have been able to maintain a dialogue with MOF and reform minded parties in GOP and the private sector. As it was, Bank was able to be a catalyst to assist GOP adopt an open access policy for private rail freight development and on overall railway privatization policy. However this is a high risk approach and requires a long run view of sector reform process (paragraph 57). 14

PART II - STATISTICALTABLES

Table la: Summaryof Assessments (Overall Loan)

A. Achievementof Objectives Substantial Partial Negligible Not applicable

Macro Policies E E i:i SectorPolicies E E El

FinancialObjectives a V E E

InstitutionalDevelopment I E E E

Physical Objectives I a E PovertyReduction l l El Gender Issues EEl El Other Social Objectives E E El EnvironmentalObjectives E ] ,

Public Sector Management E E [] Private Sector Development E E El

B. Project Sustainability Likely Unlikely Uncertain

Highly C. Bank Performance Satisfactory Satisfactory Deficient Identification El [] PreparationAssistance E E/ Appraisal E El Supervision E El Highly D. BorrowerPerformance Satisfactory Satisfactory Deficient Preparation Implementation Each ImplementingAgency is rated individuallyon the following CovenantCompliance componentspecific tables. Operation(if applicable) Highly Highly E. Assessmentof Outcome Satisfactory Satisfactory Unsatisfactory unsatisfactory a El E/ 15

Table lb: Summary of Assessments (Highway Component only)

A. Achievementof Objectives Substantial Partial Negligible Not applicable Macro Policies U U U

Sector Policies U U , FinancialObjectives U U U

Institutional Development V U U U

Physical Objectives / U U PovertyReduction U U U

Gender Issues U U U Other Social Objectives U U U EnvironmentalObjectives U U Public Sector Management U U U

Private Sector Development U U El

B. Project Sustainability Likely Unlikely Uncertain

rIighly C. BankPerformance Satisfactory Satisfactory Deficient Identification U U PreparationAssistance U , Appraisal El Supervision U V U HighlY D. BorrowerPerformance: Highway Satisfactory Satisfactory Deficient Preparation U U Implementation i: U

CovenantCompliance U V l Operation (if applicable) U U Highly.. Highly E. Assessmentof Outcome Satisfactory Satisfactory Unsatisfactory unsatisfactory U1VI U- U 16

Table Ic: Summary of Assessments (Railway Component only)

A. Achievementof Objectives Substantial Partial Negligible Not applicable Macro Policies E Ea Sector Policies E E El

Financial Objectives ] E El

Institutional Development I U El Physical Objectives E E , E

Poverty Reduction E E E Gender Issues Cl E El Other Social Objectives E El El EnvironmentalObjectives El E E Public Sector Management E E El

Private Sector Development I E El

B. Project Sustainability Likely Unlikelv Uncertain E] El Hlighly C. Bank Performance Satisfactory Satisfactory Deficient Identification E Ea Preparation Assistance El

Appraisal E El

Supervision El l V

D. BorrowerPerformance: Railway Satisfactorv Satisfactory Deficient Preparation E E

Implementation E E CovenantCompliance E El Operation (if applicable) E E Highly Highly E. Assessmentof Outcome Satisfactory Satisfactory Unsatisfactory unsatisfactory El El El 17

Table 2: Related Bank Loans/Credits

Loan/CreditTitle Purpose Year of Status l . ~~~~~~~~~~~Approval Preceding Operations 1. First Highway Construction of new 142 km 1964 Completed Project (Cr. 54-PAK) Karachi-Hyderabadsection of N-5 highway. ll 2. Second Highway Reconstruction of Sahiwal- 1968 Canceled due to Project (Ln. 578-PAK) Lahore and Lahore-Sargodha- very high bids Mianwali sections (270 kin) of N-5. 3. Third Highway Rehabilitation of three major 1980 Completed Project (Cr. 974-PAK) sections (269 km) of N-5, and improvementof a provincial road (29 km) in NWFP. 4. Fourth Highway Rehabilitation and 1987 Completed Project (Ln. 2814-PAK) reconstruction of 650 km of N- 5, develop NHA capacity for maintenance, improve traffic safety, and mobilize revenues for road maintenance. ll 5. Flood Damage Repairs, restoration and 1993 Completed Restoration Project (Cr. reconstruction of roads, cross 2468-PAK)- Road drainage structures and Component bridges damaged by 1992 flood. l 6. Karachi Port IV 1974 Completed Project (Cr. 492-PAK) l 7. Karachi Port 1991 Completed Modernization Project (Ln. 3335-PAK) 8. Railway IX Project 1969 Completed (Ln. 621-PAK) 9. Railway X Project 1977 Completed (Ln. 1372-PAK,Cr. 684-PAK) X 10. Railway XI Project 1982 Completed (Ln. 1278-PAK) _ l Following Operations l 1. Highway Proposed Rehabilitationand Maintenance Project (PK-PE-10556) l 2. Karachi Port Proposed Privatization & DevelopmentProject (JPN-2929-PAK) I 3. Pakistan Railways Proposed Restructuring and Privatization Program (PK-PE-60053) l 18

Table 3: Project Timetable

Steps in Project Cycle | Date Planned Date Actual/ l______l [ Latest Estimate Identification (Executive Project Summary) February 9, 1990

Preparation

Appraisal February 21, 1990 February 21, 1990

Negotiations May 25, 1990 May 29, 1990

Board Presentation June 28, 1990 June 28, 1990

Signing July 27, 1990 Effectiveness February 26, 1991 Mid-term review - railway component October 1992 October 1992

Mid-term review - highway component October 1992 February 1993 Project Completion June 30, 1996 June 30, 1998

Loan Closing June 30, 1996 June 30, 1998 19

Table 4: Loan Disbursements: Cumulative Estimated and Actual (US$ million)

Bank Fiscal Appraisal Formally Actual Actual as % Actual as % fYear Estimate Revised of Estimate of Revised FY91 (1990/91) 7.40 0.00 0 l FY92 (1991/92) 33.10 31.86 96 l FY93 (1992/93) 71.80 47.25 66 FY94 (1993/94) 106.70 76.88 72 FY95 (1994/95) 149.00 -- 108.73 73 -- FY96 (1995/96) 184.00 126.47 126.45 69 100 FY97 (1996/97) -- 141.48 140.65 76 99 FY98 (1997/98) 161.34 148.72 81 92 FY99 (1998/99) 150.24 82 93 Date of final disbursement: November 16, 1998 20

Table 5a: Key Indicators for Project Implementation(Highway Component only)

SAR Estimated Actual 1. Priority ImprovementPrograms a) Maintenance Backlog 400 km 301 km Reduction MBRP (km) l b) Resurfacing & Strengthening 400 km 397 km RSP (km) c) Total Expenditure (Rs million) 2,968 n/a

2. Recurrent Maintenance a) GOP Funding (Rs million) SAR estimated NHA demand Actual Actual Need, based on Rs based on Expenditures Expenditures 300 million constant estimated (Current Rs) (Constant Rs) expenditure needs 1989/90 474 269 1990/91 300 600 281 281 1991/92 323 795 378 346 1992/93 345 930 410 345 1993/94 1,097 430 310 1994/95 1,317 452 279 1995/96 457 253 1996/97 522 260

b) Network Conditionbased on 1989 1994 MIL Score l % Routine Maintenance 48 % 51 % % Periodic Maintenance 31 % 30%% % Reconstruction 21 % 19 %

c) Number of qualified 1988 1992 contractors 81 1,310

3. Recurrent Maintenance (GOP (US$ million) (US$ million) (US$ million) (US$ million) funding) shown as US$ million Period Exchange rate 1989/90 21.44 22.1 12.5 1990/91 22.41 13.4 26.8 12.5 12.5 1991/92 24.84 13.0 32.0 15.2 14.0 1992/93 25.94 13.3 35.9 15.8 13.3 1993/94 30.12 36.4 14.3 10.3 1994/95 30.85 42.7 14.7 9.0 1995/96 33.53 13.6 7.5 1996/97 38.96 13.4 6.7 21

Table 5b: Key Indicators for Project Implementation(Railway Component only)

1. Key implementationindicators in SAR SAR Estimate Actual

1990/91 1996/97 1990/91 1996/97 PR Financial Performance (all in Rs billion) Total Operating Revenue 7.61 14.78 6.77 9.80 Including Public Service Obligation of 1.28 1.60 1.00 0.00 Total Working Expense 6.61 9.93 6.76 11.79 Depreciation Reserve Fund 1.03 1.92 0.99 0.99 Net Revenue -0.03 2.92 -0.98 -2.98 Interest Expense 0.53 1.12 0.63 2.31 ImprovementReserve Fund 0.12 0.25 0.13 0.06 Net Income -0.69 1.55 -1.74 -5.35 PR Operating Performance l Passenger km (million) 21.1 25.5 20.0 19.1 Freight (billion tkm) 9.1 10.8 5.7 4.6 22

Table 6a: Key Indicators for Project Operation (Highway Component only)

I. Key operation indicators in SAR SAR Actual (1998)

1. Average Road Conditionfor overall Avg ADT all Cracks Rutting Roughness NHA network (%) (mm) (IRI)

Highway N-5 (existing) N/A 6,642 37 8.3 6.0 Iighway N-5 (Additional carrigeway) _ 8,374 19 8.2 3.3 Highway N-25 3,387 28 1.9 6.4 IHighwayN-35 2,336 27 3.2 8.5 l HighwayN-40 758 20 1.0 6.7 IEgway N-50 _ 681 21 2.3 6.6 Highway N-55 2,777 20 1.8 4.8 _ _HighwayN-65 3,188 31 2.0 6.8 _ _HighwayN-70 3,290 38 4.6 8.6 2. Annual Recurrent Maintenance NHA Demand GOP Allocation Funding (Rs million) (Rs million)

1995/96 1,554 457 1996/97 1,760 522 1997/98 2,010 600 1998/99 . 2,200 605 23

Table 6b: Key Indicators for Project Operation (Railway Component only)

I. Key operation indicators in SAR SAR Current status Estimate Cretsau Railway Action Plan (SAR, Annex 2.3) All Karachi-Lahore freights use only 3000 hp Yes Only partial locomotives Cancel 90 poorly used passenger trains Yes Yes Block loading and unloading of oil trains Yes Expected to start in April 1999 at Pipri. Original plan for Dec 96, got delayed due to PSO. Lengthen wheat terminal sidings Yes No Unit trains for cement, fertilizer, wheat & Yes Only for fertilizer, cement has dropped containers due to problems with Zealpak cement factory. Operate 72 car freight trains Yes Only 60 - 65 being used. Scrap over aged wagons 5,000 Ban on scrap by GOP. About 3000 scrapped and about 2000 stand condemned but not scrapped. Close redundant marshalling yards, incl. Yes No. Chaklala Operating Improvement Program (SAR, Annex 2.8) Wagon turnaround time (days) 13 16.8 days in 1997-98.(max 18.6 in 1990-91,min 15.1 in 1993-94) Freight Locomotiveutilization (kmnloco/day) 400 276 based on locos online in 96-97 337 based on locos in use in 96-97 Separate freight and passenger corridors I Yes No Average speed of freight trains (kn/hr) 26 19.9 in 1996-97 Freight traffic capacity, annual growth rate 2% pa 91-92 4.4% 92-93 3.7% 93-94 -3.9% 94-95 -4.7% 95-96 -10.3% 96-97 -9.2% (Based on annual tonne-km) Passenger capacity, annual growth rate 2% pa 91-92 -9.0% 92-93 -5.9% 93-94 -4.1% 94-95 7.1% 95-96 7.7% 96-97 1.1% 97-98 -1.8% (Based on annual passenger-km) 24

Table 7a: Studies Included in Project (Highway Component only)

Study Purpose as defined at Status Impact of Study Appraisal/redefined 1. Arterial To provide a vision of Completed Provides a long term (20 Highway Network the highway network through M/S Haas year) highway investment Study requirements through Consult strategy and plan ____ vyear2015 2. Accounting (1) To upgrade NHA Phase- 1 Unified Chart of Accounts Assistance Study accounting practices Completed and Modem Computer based based on modem through Local Accounting System computerized accrual Chartered developed and implemented based accounting Accountant Firm. in Islamabad and Lahore. procedures and prepare Phase - 2 Deferred Commercially audited agency-wide financial financial statements statements; (2) to prepared for 1995/96. improve financial controls, budgeting and management information systems 3. N-5 To study the technical Completed (June Results of Study indicated Privatization and and financial feasibility 1998) through M/s that at present traffic levels Engineering pre- of rehabilitating/ LBI N-5 rehabilitation and feasibility Study upgrading and upgrading cannot be carried maintaining sections of out through PS concessions the Highway N-5 though without significant Govt. Private Sector financial support. Concessions, based on tolls. 4. Road User To establish the structure Completed (June A rationalized structure of Charge Study and level of road user 1998) through road user charges proposed charges needed to MIS WSA (based primarily on a fuel finance national and levy plus axle load charges). provincial level road Endorsed by NHA. sector investments and Currently under review by maintenance on a GOP. sustainable basis. I 5. Road Fund To propose the legal and Completed (June Detailed structure and draft Study institutional framework 1998) through legislation proposed. for establishing and MIS WSA Endorsed by NHA. operating a dedicated Currently under review by Road Maintenance Fund GOP. managed by a Representative Public/Private Board 6. HDM based To identify a prioritized Completed (May A six year Rs. 36 billion NHA network medium term 1998) with Bank prioritized maintenance level maintenance maintenance plan to Staff assistance improvement plan identified. prioritization improve the condition of The first phase to be taken Study the NHA network. up under the proposed Highway Rehab Project. 25

Table 7b: StudiesIncluded in Project (RailwayComponent only)

Study Purpose as Defined at Status Impact of Study AppraisallRedefined 1. Institutional Instill a business-led Completed "A sizeable majority of Development/ attitude among officers of Railway officers now feel that Management all departments they have to work as Training Phase I businessmen and not just as & II railway officers". Corporate Plan 1995,/96p. 47 2. Institutional Prepare an organization Completed Not itself adopted but it Development/ plan for a business provided a starting point for the Management oriented railway Unbundling Study (#8 below) Training Phase Im 3. Locomotive Improve shop practices Completed Despite the finding that Rebuild Study and stores management, rebuilding was not the evaluate relative merit of preferred approach, bilateral heavy rebuild versus new funding permitted PR to purchase undertake a rebuild program. 4. Container Improve Dry Port Completed Recommendations disregarded Study methods and utilization of due to ineffective management container equipment of Dry Ports and of equipment turns by railway 5. Accounting Align accounts with Not carried out. Lack This work was later begun in a Study business-led organization of interest by railway. preliminary way by the of accounts branch Unbundling Study (#8 below). 6. Railway Produce more business Not carried out. Lack Manufacturing like "make or buy" of interest by railway. Study choices by railway 7. Property Realize value of Railway Not carnied out due to Development real estate land title issues Study 8. Unbundling Assist Pakistan Railways Completed June 1998 Used to guide PR's and unbundling. Resulted in a set Corporatisation of very detailed analytic Study reports (45 volumes). 9. Privatization Assist Privatization Completed January Used by PC to guide Business Plans: Commission (PC) 1998 privatization discussion. Freight Unit, Passenger Unit, and Infrastructure Services Unit 26

Table 8a: Project Costs (US$ million)

Item Appraisal Estimate Actual/Latest Estimate Local Foreign Total Local Foreign Total Cost Costi Cost Cost I I. Highway Component 1. MBRP 34.8 34.8 69.5 28.6 71.9 100.5 2. RSP 16.7 25.1 41.9 14.4 7.3 21.7 3. TA, Training & 5.3 2.9 8.2 0.0 } I Supervision }7.9 17.9 4. Advisers & Equipment 0.0 2.5 2.5 0.0 } } 5. Price Contingencies 8.2 7.8 16.0 Sub-Total Highway 65.0 73.1 138.1 43.0 87.1 130.1 II. Railway Component 1. Institutional 2.8 4.5 7.3 0.7* 4.9 5.6 Developmentand Studies 2. RollerBearings 14.3 21.5 35.8 11.6 10.0 21.6 3. Signal and 3.0 4.0 7.0 not disbursed Communication 4. MIS 1.4 5.6 7.0 not disbursed 5. Locomotive Spares 28.9 53.5 82.4 25.4 48.2 73.6 Recommission46 locomotives 5.3 10.9 16.3 l unit exchange 10.3 23.2 33.5 l traction motors 10.8 15.4 26.2 l Maintenance equip. 2.4 4.0 6.4 l 6. Physical 2.5 4.5 7.0 Contingencies 7. Price Contingencies 6.3 8.3 14.6 l Sub-Total Railway 59.2 101.9 161.1 37.7 63.1 100.8 III. Sector Reforms 0.2 1.3 1.5 0.0 0.04 0.04 Program l TOTAL [ 124.41 176.3] 300.7 80.7 150.2 | 230.9]

Notes: Exchange rate at Appraisal: US$ 1.00 = Pak Rs 21.5 (March 1990) Sources for local costs in actual/latest estimate are: (a) TSP Final Report, June 1997, NHA. Annex VII, (exchangerate used: US$ 1.00 = Pak Rs 45.2, 30 June, 1997), and (b) *provides partial data only, other data from consultants in field (Dr. Rashid) using exchange rate of each year of expenditure. 27

Table 8b: Project Financing (US$ million)

Source Appraisal Estimate Actual/Latest Estimate Local CForeign[ Total Local Cost Foreign Total Cost i Cost l Cost IIBRD 7.7 176.3 184.0 0.0 150.2 150.2 GOP Contribution 116.7 0.0 116.7 80.7 0.0 80.71

TOTAL [ 124.4 176.3 300.7 80.7 150.2 230.9

N.B. See notes to previous table. 28

Table 9a: Economic Costs and Benefits (Highway Component only)

Contract Number Highway Segment SAR EIRR Re-estimated Re-estimated ERR with Benefits EIRR B/C Ratio Reduced 20% LCB Contracts MBRP 51 % 76.4 % 4.36 RSP 51 % 81.2 % 4.19 -

ICB Contracts l MBRP 7004 & Sahiwal - Okara * 54.1 % 17.21 49.3 % 7004A ll MBRP 7005-I Wadh - Khuzdar 31.1 % 4.12 27.4 % MBRP 7005-11 Khuzdar - Surab * 23.4 % 2.45 20.2 %

NOTES: * - not evaluated at appraisal 1. Economic analysis of LCB contracts was carried out by the Borrower. These were selectivelytested using HDMII and found to be on the conservative side. 2. EDMIIIhas been used for economic analysis of ICB contracts. All traffic figures are drawn from data published by NTRC. 3. Construction costs are based on the Borrower's Final Report 4. Sensitivity of the re-estimated EIRR is tested by reducing benefits by 20% to account for traffic uncertainty. 29

Table 9b: Economic Costs And Benefits (Railway Component only)

Item SAR EIRR Re-estimated EIRR Roller Bearings 24 % 7 % Locomotive Spares 27 % 48 % Telecommunications 23 % Not required MIS 18 % Not required

NOTES: 1. The Telecommunications,MIS, and AdditionalWagons sub-componentswere not disbursed, so a recalculation of ERR is not possible or required. 2. Although the Locomotive Spares sub-componentshows a higher ERR than at appraisal, it should be noted that data availability has limited the calculation to a system-wideaverage revenue per locomotive basis. Overall locomotive availabilityhas declined during the course of the project. 3. See Annex D for detailed calculations. 30

Table 10a: Status of Legal Covenants (Highway Component)

Agreement Section Covenant Status Original Revised Description of Covenant Comments type Fulfillment Fulfillment Date Date l LA 3.01(a) 4, 10 C Provide promptlyas needed the funds and other The level of ADP funding provided has 32410 resourcesrequired for the project. generally been adequate for the project implementation. 3.01(b) 10 CD Carry out the project in accordance with the Generally complied with. ImplementationProgram set forth in Schedule 5. 4.01 01 CD 12/31/95 Provide the Bank annually NHA's audited 95/96 ProjectVSOEand special account audits accounts, not later then six months after the end received in June 97 after a 6 month delay. of the fiscal year (end June). 95/96 consolidated agency accounts prepared. Commercial audit completed. 6.01 03 C Effectivenessconditions. Conditions met and loan made effective in February 1991. Schedule 04 C 06/30/96 For civil works contracts awarded by NHB after The level of PSDP funding has generally been 1, Para. 3 June 30, 1991, a condition of disbursement is that adequate to ensure uninterrupted GOP has provided satisfactory funds required to implementation carry out program during such fiscal year. l Schedule 1 C 03/31/96 GOP and Bank to review annually by March 31, NHA's draft ADP reviewed annually as part of 5, A-2 beginning in 1991 the implementationof the the PSDP review. Recommendations provided Project, the CIMP and the funding requirements on core investment plan. Annual maintenance for the followingfiscal year. funding continues to fall short of needs, on account of overall resource constraints. Schedule 02 C (a) GOP to continue practice of transferring to GOP now has an agreement with IMF which 5, A-3 consumersall increases in prices of petroleum links domestic fuel prices to international products. market prices. Schedule 02 CD NHB to prepare annually for Ministry of NHA has levied tolls on several bridges and the 5,. A-3 Finance/Govemmentproposals to enhance Lahore-Islamabadmotorway. The April 97 mobilizationof resourcesfor road users. NHA country workshop on Road Maintenance, co-sponsored by MOF, recommended establishment of a Road Maintenance Fund financed from road user charges and managed by a joint pubhc/private Road Fund Board. NHA has completed a Road User Charge and Road Fund Study that developed detailed proposals.Currently under review by GOP. LA, 05 CD 09/30/90 NHB to be reorganized in accordance with NHB turned into an autonomous NHA in early Section 8 principles agreed at negotiations, and principals to 1991. Revised organization structure, service be formally approved by GOP by September 30, rules and delegation of financial powers 1990. approved by NH Council in early 1995. Staff now regularized. New Policies and Procedures adopted in Februamy 1996 on pilot basis. Further work in progress. LA 10 C NHA to select the road sections to be rehabilitated Rehabilitation and strengthening done as Section or strengthened annually in accordance with agreed. NHA's annual maintenance program, D-l technical and economic criteria satisfactory to the based on the MtL system up to 1995, now Bank, and to carry out its maintenance programs upgraded into a more advanced MMS. in accordance with the MIL system. Hlowever, annual maintenance funding remains far short of the network requirements. 31

KEY:

Covenant Type: I= Accounts/audits complied with 2 = Financial performance/revenue generated from beneficiaries 3 Flow and utility of project funds 4 Counterpart funding 5 = Management aspects of project/executing agency 6 Environmental covenants 7 Involuntary resettlement 8 Indigenous people 9 Monitoring, review and reporting 10 - Project implementation not otherwise covered by 1-9 1l= Sectorallcross-sectoral budget/allocations 12 = Sectoral/cross-sectoral policy regulatory/institutional action 13 = Other

Status: C = Covenant complied with CD = Compliance after delay CP = Complied with partially NC = Not complied with 32

Table 10b: Status of Legal Covenants (Railway Component)

Agreement Section Covenant Status Original Revised Description of Covenant Comments Type Fulfillment Fulfillment l______Date Date 3.03 4 NC Recurrent Budget for Locomotive This covenant was in default throughout the Maintenance Spares The Borrower shall enable project with amounts ranging from 47.64 PR to acquire, in a timely manner, the foreign percent to 75.17 percent of the $25 million exchange required for the procurement of spare determined to be needed being actually parts needed for the proper operation and fumished. In addition, the intent of the covenant maintenance of its locomotives.. was further frustrated by the failure to allocate rupee funds to move the material off the docks in Karachi after the foreign exchange was spent 4.01 1 CD Audited Accounts PR annually to provide Although the accounts were eventually audited accounts 6 months after the end of the furnished each year, they were generally months Fiscal Year (June 30). late. 4.03 2 NC Financial Performance The Borrower, the Bank The tariffs of Railway have not been raised and PR shall review, during the month of March equal to inflation and deficits have increased each year, the levels of PR's tariffs with a view to over the term of the loan. The Railway agreeing on the annual adjustments required to contended it could not raise its tariffs more than such tariffs so as to ensure: (a) that the rate of such it did for competitive reasons, due to incursions adjustments shall be above the inflation rate in of road transport into its market share Pakistan; (b) so that the operating deficits of PR shall be progressivelyreduced; and (c) that PR shall be able, not later than FY 1994-95, to finance L______.a reasonableportion of its capital expenditures. 5.02 4 C Material changes in project Until the Changes were substantial but all affirmative completionof the Project, the Borrower shall changes were made in consultation with the ensure that (a) any material changes in the Bank. Negative changes (decisions not to spend components of the Program, or (b) increases in money, or delay spending, were made over expenditures under the Program by more than the Bank objection). equivalent of $5,000,000 abovecurrent expenditures estimates for any given fiscal year, shall be made only after consultationwith the Bank. 33

Table 11: Compliance with Operational Manual Statements

Not applicable in this project 34

Table 12: Bank Resources: Staff

Stage of Project Cycle Planned Revised Actual Weeks US$ (000's) Weeks US$ (000's) Weeks US$ (000's) Preparation to Appraisal 247.3 462.9 Appraisal - Board 47.4 111.5 Negotiationsthrough Board Approval 8.2 19.6 Supervision 150* 292.4 598.4 Completion 22.3 56.4 TOTAL 617.6 1248.8

* - Based on SAR estimate (paragraph 3.42, page 28) of 25 staff weeks per year, times the projected six year life of the project. 35

Table 13: Bank Resources: Missions (All Components, Highway plus Railway)

PerformanceRating Stage of Component Month/ Number Days in SpecializedSkills Implementation Development Covenants Types of Remarks ProjectCycle Addressed Year of Persons Field Represented Status Objectives Problers ThroughAppraisal A February1985 2 15 EC A March 1986 4 18 EC A August 1986 2 3 FA,PE A January 1987 1 14 RE A April 1988 3 18 EC, RS A July 1988 2 5 EC, RS A December 7 20 EC, RS, LOC, 1988 WCS,TS, MIS A May 1989 6 18 EC, RS, PA, HE, . _ PE, PO A March 1989 1 3 EC A October 1989 6 15 EC, RS, HE, PE Appraisalthrough A February-March 9 16 EC, RS, HS, PE, HE Board Approval 1990 Board Approval A September- 4 30 EC (tm), RS, HE, I I I I AM #1 throughEffectiveness October 1990 PA Supervision A April-May1991 6 40 EC (tin), RS (2), 2 2 2 I AM #2 PA, FA,HE A November- 6 20 EC (tm), PA, FA, 2 2 3 1,F, C AM #3 December 1991 HA,HE, PO A April-May1992 5 30 EC (tm), RS, PS, 2 2 3 1, P, F, T, AM #4 HE (2) C TS June-July1992 5 11 EC, RS, TS, A not not not AM #5 ______available available available Not in OIS R October- 6 EC(ml),RS (2), not not not 1, F Mid-TermReview November 1992 FA,TS,PS available available available Railway Component,AM #6, 590 with AM# 7 H January- 4 10 EC, PA, HE (2) 2 1 2 1, P, T Mid-Tern Review Febnuary1993 _Highway Component, AM #7 R October 1993 1 13 RS 2 2 3 1,F, C AM #8 A December 5 3 RE, PA, HE, RS 1, F 1993 1 H February 1994 3 18 PA, EC, HS 2 1, P, F No BTO R May-June 1994 3 13 EC, RS, FA S S 3 C AM#10 Told in default on two covenants H December 3 9 ENG, HE (2) S S 3 1,T Labelledas AM #10, really is 1994 AM#1I R March-April 3 12 FA, EC, RS S 3 1I,F Labelledas AM #11, really is 1995 __AM #12 36

H October- 2 8 HE (2) S S 3 F, 1, P Labelled as AM #11, really is November AM #13

1995 ______R March-April 3 20 EC, RS, FA S S 3 L F No label given, AM #14 ______~~~~1996_ _ H July1996 4 11 EC, HE (2), PS S S 3 1,F Labelledas AM #12, really is

Completion R May 1997 2 14 ICR, FA L,F Labelledas AM #13 draft; really is AM #16. No BTO Completion H June 1997 6 6 HE (2), DISB, EC, S S U I,F labelled as AM #13, really is PROC, ICR AM #17 Supervisionof H May 1998 4 HE,PS,FA extension _ Supervisionof R June 1998 2 extension

KEY Staff Skills (column six): Tyves of Problems (column ten) A = Aviation Specialist PA = Project Adviser C = Covenant EC = Economist PE =Port Engineer F =Financial ENG = Engineer PO = Project Officer I = Institutional RS = RailwaySpecialist PROC = ProcurementSpecialist P = Physical RE = RailwayEngineer PS = PrivatizationSpecialist T = Technical RM RailwayMarketing Specialist TS = Trucking Specialist HE = HighwayEngineer FA = Financial Analyst HA = HighwayAdviser DISB = Disbursement Specialist HS = HighwaySpecialist MIS = MIS Expert WCS = Wagon and Coach Specialist ICR = ICR Consultant LOC = LocomotiveExpert ANNEX A

Highway Mission Aide-Memoire June.20, 1997

PAKISTAN

TRANSPORT SECTOR PROJECT- (LOAN 3241-PAK) (HighwayComponent Only)

SupervisionMission, June 1997

PROPOSED HIGHWAY REHABILITATION& MAINTENANCE PROJECT (PK-PE-10556)

Preparation Mission,June 1997

Aide Memoire (TSP No. 13)

1. Duringthe period from June 2 to 14, 1997, a World Bank mission comprisingMessrs. Navaid A. Qureshi (MissionLeader), A. Ali, A. Bhatti, H. Mukhtar, (SA1PK) and H. Masood and B. P. Kennedy (Consultants)carried out a final supervisionof the highway componentof the Transport SectorProject to assess the project's overall implementationperformance, discuss the lessons learned, reviewthe steps neededto ensure an orderly completionof the project, initiate the preparation of the Implementation CompletionReport (ICR) and agree on the project's OperationalPlan. Loan 324 1-PAKcloses on June 30, 1997. The missionalso reviewedthe progress in the preparationof the proposed Highway Rehabilitation and MaintenanceProject and held discussionswith governmenton the proposed Road MaintenanceFund. The Aide Memoirerecords the findingsand recommendationsof the mission and the agreementsand understandingsreached with officialsof the relevantgovernment departments and National Highway Authority (NHA). It is subject to confirmationby Bank management.

2. The World Bank Mission memberswish to recordtheir appreciationfor the courtesiesand cooperationextended to them by the Federal and Provincialgovemments and by the officialsof the NHA in headquartersand in the regions and for the excellentfield trip arrangements(the field trip itinerary appears as Annex. 1).

3. This combinedAide-Memoire is arranged as follows:

I. Transport Sector Project (TSP) II Proposed HighwayRehabilitation and MaintenanceProject (HR&MP) Annexes I. TRANSPORT SECTORPROJECT (Ln. 3241-PAK) (Aide MemoireNo. 13)

Project Objectivesand Desciption

1. The over-allobjectives of t;hehighway component of the Transport Sector Project were to assist in:

a) bringing the National HighwayAuthority, (formerly the National HighwayBoard), to a size, structure and level of professionalcompetence reflecting its responsibilities;

b) instituting a sustainable core investmentand maintenanceprogram for national highways; and

c) remomAnga substantial portion of the backlog of highwayand bridge rehabilitationand resurfacing.

2. The objectiveswere to be achievedby i) providingTechnical Assistance and training of NHA's staff in the preparation and implementationof a road maintenanceprogram and to improveNHA through the adoptionand the implementationof thePolicy and Proceduresand ii) implementinga Maintenance Backlog ReductionProgramn (BRP) coveringthe reconstruction,rehabilitation or major improvement works on about 400 km of roads and a Resurfacingand StrengtheningProgram (RSP) to prevent the fuirterdeterioration of anGther400 km of road pavements.The originalClosing Date of June 30, 1996 was oostponedto June 30, 1997 on a selectivebasis, to allow the completionof flood damage repair work on one of the major roads in the prciect.

Overall ImplemenLtaionPerformance

3. The overall project objectives of the highway component have been substantially achieved and the main project componentshave been completedwithin the extendedproject period. Despite NHA'spre- occcupation-with GOP's ambitious highway expansion program since 1991, it has made progress towards bec*minga professional agency. It was reorganizedalong functionallines in early 1992. In early 1995 the National Highway Council approved the revisedNHA organizationalstructure, service rules, staff strength and job descriptionsfor senior staff. However,implementation of the Policies and Procedures remains outstanding.T-he institutional strength and capacity of NHA has been adverselyaffected in recentyears by frequent changes a-'the "Member" leveland more recent changesat General Manager level.Modem accountingpolicies and a uniform chart of accountshave been introducedand consolidatedfinancial statermentsand agencyvwide accounts have been preparedfor 1995-96using the new computerized accountingsystem installed at headquartersand project officesat Islamabadand Lahore. NHA is currently in the process of undertaking a commercial audit of these financial statements through a private sector chartered accountant i=m.

4. Tae MIvLsysterr for identifyingroad maintenanceneeds under the Fourth Highway Project (FHP) has been upgraded and incorporatei into a new Maintenance ManagementSystem (MMS). NHA is now proposing to move towards privatizationof maitenance planningand managementwith a related quality assuIrance program. A core investent and maintenanceprogram (CMP) for priority expenditureson the National Highway System is being preparedand implementedannually and reviewedand comnmentedon by the Bank. However,annual maintenanceallocations still remain significantlyshort of system needs. A comrnercially managed Road Maintenance Fund financed from enhanced road user charges is now proposed to overcomethis problem. TSP Aide memoire No. 13 2

5. The backlog of highway and bridge maintenance,rehabilitation and resurfacinghas been reduced under the project. A total of 301 kanof roads, 14 bridges and 16 drainage structures have been reconstructedunder the MBRP program.A further 397 km of roads have been repaved and strengthened under the RSP program. These two programs have helped developthe domesticcontracting industry. The project has also assisted NHA in organizingits road maintenanceprograms.

6. The completed MBRP and RSP programs have contributedsignificantly to the project's overall developmentalobjective of reducing road transport costs. The shortfall of about 100 km in the total length completedunder the MBRP program resulted from the NHA's decisionto reallocate funds to improve a 158 km lengthof the strategicN25 highway connectingKarachi port to the CIS countries and to provide an additional new carriagewayover 30 km of the main north-southhighway N5, where the existing road was disintegrating.

7. The NHA staff, consultantsand contractors deservecommendation for the preparation and completionof the MBRP and RSP programs. In particular, the missionwishes to recognizeand acknowledgethe achievementin completingthe major MBRP 7005 contractdespite the remote location and resulting logistic problems,the very difficult and sometimeshostile environment and the technical problems arising from the severemonsoon floods.The contractor,the consultant'sChief ResidentEngineer and the NHA staff involvedare to be highly commended.

Lessons Learned

8. The main lessons learned from the project are:

a) Major rehabilitationworks need to be meticulously investigatedand prepared,to miniimize costly variations during implementation. b) Contract administration,particularly of major ICB contracts,needs to be much imnproved to avoid costly claims against the Employer. c) The local auditing proceduresneed to be updatedto avoid conflict with modem contract documents. d) Highwaysector investmnentsshould be carefullyprioritized to ensure timely availability of counterpartfunds. e) Alternativeoff-budget arrangements are neededto provide an adequateand reliable source of highway maintenancefunding. f) Vehicleoverloading must be effectivelyaddressed to minimizedamage to the network. g) Fundamentalinstitutional changes and effectivefinancial controls shouldbe required up- front as a conditionfor project approval. h) To ensure continuity,key permanentsenior staff shouldbe directlyinvolved with consultantsthroughout the developmentand implementationof improvementprograms.

Progress on Agreed Actions.

9. Most of the actions agreed during the July 1996 missionhave been taken. These relate to the provisionof additional counterpartfunds for completion,investigation of pavement settlementson contract 7005, submission of TSP project audit for 95-96, preparationof NHA financial statementsfor 95-96, providingdetails of the 96-97 road conditionsurvey and road maintenancequality assurance program and TSP Aide memoire No. 13 3 the preparation of a draft completionreport. However, there has been littleprogress on the implementaton of the new Policies and Procedures.Also, full implementationof the computerizedaccounting system and the finalizationof the NHA agency-wideaudit for 1993-95 has moved slowly.

CompletionStatus and Project Costs

10 . The project physical works are now substantially complete,with the exceptionof 2 RSP and 5 minor MBRP bridge contracts which are being completedusing GOP's own resources.The overall project financial positionestimated as of June 14, 1997 is given in Annex3. Detailsare containedin NHA's June 15, 1997 Progress Report. Actual expendituresare Rs 3,836 millionwhich represent 92% of the project completioncost. Disbursementshave reachedUS$ 79.5 million (89% of the revised Loan allocations for the highway component).

Issues, Agreements and Recommendations

Counterpart Funds

11. GOP has allocatedRs 250 million in counterpartfunds for the TSP during 97-98. NHA confirmed that the project, being part of the core program,will be given priority in the provision of additional resources if required, to completethe remainingworks and to clear all liabilities.

Contract Administration

12. The contractor on MBRP 7005 is on record about delaysin certifiedpayments. A review of the contractor's claims duringthe site visit revealedthat approximatelyRs 85 millionare being claimed because of lack of timelyaction underthe contract. The missionemphasized that all outstandingcertified amounts should be promptly paid and clarifiedthat claimnsrelated to delayed paymentsetc. would not be financed under the loan and that such costs must be borne by NHA/GOP. This highlightsthe importance of improvedcontract administration. NHA agreed to streamline and speed-up its payment procedures with immediate effect.

Closing of Contract MBRP7005.

13. Althoughthe civil works on the major MBRP 7005 contracthave been completed,certain actions are neededby NHA to bring the contractto an orderly conclusionbefore the Chief ResidentEngineer leaves the site. There may therefore be a need to extend the CRE's servicesfor some short period. Financing of his servicescould comefrom the loan if extended,or otherwisefrom NHA's resources.The following actions were agreed:

a) completionof final measurementjointly with the contractor by June 30, 1997; b) detailedreview of contractor'sclaims and Engineer's decisionthereon by Aug. 31, 1997; (Reviewmeeting held at NHA, Islamabad on June 12 to initiatethe resolutionof these issues) c) completionof final account for the contract by Aug. 31, 1997; and d) submissionby NHA of all reimbursementapplications in respectof expendituresfor work done prior to June 30, 1997 by Sept. 30, 1997. TSP Aide memoire No. 13 4

AccountingAssistance Study

14. Consultants commencedwork in mid 1995,and have helped NHA in the preparationof accounting policies, a uniform chart of accounts, formats for financialstatements and implementationof a computerizedgeneral accountingsystem at NHA headquarters,project offices in Islamabad, regionaloffice Lahore and the Lahore-IslamabadMotorway office for 1995-96 accounts. Draft agency-widefinancial statementsfor 1993-95were prepared earlier. The draft financialstatements for 1995-96have now been prepared using the new computerizedaccounting system installed at headquarters and project offices at Islamabad and Lahore.

15. The new systemhas not been installedso far in the remainingregional offices, partly for lack of appropriate hardware. There are also some concernsabout the lack of competentand trained personnelto operate the new systemafter the completionof the consultants' assignrmenton June 30. Since July 1996, entry of data under the new computerizedsystem has been largely discontinued.These matters were discussedwith the MemberFinance, who providedthe missionan implementation plan to addressthese issues shortly before the wrap-up meeting.It was agreedthat the plan will be reviewedby the Bank and commentsprovided to NHA followingthe mission.

Audits

16. Audited financialstatements for Ln. 3241 (TSP) and Ln. 2814 (FourthHighway Project) for the year 1995-96 which were due on Dec. 31, 1996 were providedto the mission.

17. The DG Audit (Works) carried out a CertificationAudit of the NHA agencywide financial statements for 1993-95and raised a number of issues which are currently being attendedto by NHA. The auditor has indicatedthat since the financial statementsprovided by NHA are not approved by the Board or any competentauthority, this may give rise to a qualifiedreport. Followingthe conclusionof this mission the Task Manager and the Bank's financial consultant(Mr. Morshed)plan to meet the DeputyAuditor General, along with NHA MemberFinance, to discuss problems faced by the project relatedto the audit, delays in finalizationof audit reports,the precedenceof World Bank's procedures and NHA's proposals for strengtheningits financial systems.

18. NHA is currently in the process of contractinga private sector chartered accountantfirm for undertakinga commercialaudit of NHA financialstatements for 1995-96. The audit is expected to be completedby end October 1997. The missionemphasized that the Bank considers the satisfactory completionof this commercialaudit as a major milestonein NHA's transition towards a professionally managed entity.

Institutional Strengtheningof NHA.

19. It was agreed that the institutionalstrengthening of NHA will need continuedattention, particularly in view of recent staff changes.The shared goal is to make NHA a center of technical excellencefor the highway subsector of Pakistan.NHA/GOP must ensure that high quality staff are placed in key positions. The delay in implementingthe Policies and Procedures,adopted in February 1996, has hinderedthe further developmentof the institution.NHA indicatedthat they are contractingan independentconsultant to TSP Aide memoireNo. 13 5 undertake a one month review of the Policies and Procedures Manual, in order to identify shortcomings and recommendimprovements by Aug. 1997. This will be followedby implementation by Dec. 1997.

20. The contractual problems faced on contract MBRP 7005 highlightthe need having NHA staff fully trained in the managementof internationalcontracts based on the FIDIC Conditionsof Contract.

21. The missionwas informedthat of the approximately700 staff inducted into NHA on contract since 1995, about 500 have been retrenchedrecently. The concernedstaff are contestingthis decisionin court and a final decisionis expectedshortly.

Road MaintenanceFunding

22. Of the Rs 522 millionallocated during 96-97 t againsta demandof Rs 1.7 billion) only Rs 184 million has been releasedby GOP (includingRs 106 millionreleased in May) for NHA's annual maintenanceprogram. As a result, the agencynow has accumulatedarrears amountingto approx. Rs 180 million.No routineor periodicmaintenance contracts couldbe awardedin someregions (e.g .NWFP) during 96-97. For 97-98 NHA has been allocatedRs 600 millionfor maintenance,against a request for Rs 2.01 billion.

23. Duringthe July 1996 mission NHA had agreedto divertits owntoll revenue (approx.Rs 46 million during 95-96)to supplementrecurrent budget allocations for maintenance.However, this wasnot done.The missionraised this issue, and at the wrap-upmeeting Chainnan NHA confirmedthat all toll revenuescollected by NRA during 97-98 (estimated to exceedRs 100 million)would be used for maintenance.The mission regardsthis as an importantinterim measure, until the RoadMaintenance Fund arrangements come into effect.

Road Maintenance.

24. The NHA's PavementManagement Cell (PMC) completedthe road condition survey of the entire networkduring Feb./Mar. 1997. The roughnesssurvey is plannedto be completedby July 97. However, the results of these surveys have apparently not been used to develop and prioritize NHA's 97-98 annual maintenance program. NHA confirmedthat this omissionwill be immediately rectified.

25. The missionalso observed certain implementationproblems during.its discussions and the field trip. The maintenancesystems and controls set up in NHA appearto have weakened. An examplewas the failure to attend to the routine maintenanceof the mediandrainage systemon the important Karachi- Hyderabadhighway, where dualization was financedunder the Bank assisted Fourth Highway Project. This is endangeringthe structural integrityof the pavementwhich is already showingsigns of distress. Early implementation of the new maintenance quality assurance program is expected to prevent such lapses.

Disbursementand Special Accounts

26. The mission's review indicatedthat no applicationswere submittedon the basis of Statement of Expenditure(SOE) during the current FY. Recoveryof the initial depositis underway,and an amount of US$159,903 is presently outstanding.TheNHA SpecialAccount has a credit balance of US$51,121. NHA TSP Aide memoire No. 13 6

has been advised to refund the difference of US$108,781,or to provide equivalent eligible documentation from its own resources. NHA indicatedthat this will be done by July 15, 1997.

Deadline for filingWithdrawal Applications

27. The currentLoan ClosingDate is June 30, 1997. The missionstressed that in accordance with the Bank's current practice, further disbursements from the loan will only be made for withdrawal applications received at the Bank's headquarters by October 31, 1997, in respectof eligible expendituresmade beforethe ClosingDate. Proceedsof the Loan remainingunwithdrawn after disbursementshave been made in respect of these withdrawalapplications will be canceled. It was agreed that to ease cash flow, NHA will file withdrawal applicationsfor direct paymentof the Bank's share, as far as possible.

ImplementationCompletion Report

28. Transfer of Completed Works: The schedulefor substantialcompletion and transfer of completed assets created underthe project is shown in Annex 4. Most of the completedMBRP/RSP contracts have been taken over by NHA and are reported to be part of their maintainablenetwork. The improved road sections under MBRP-7004 & 7005 will be transferred to the NHA maintenance division by June 30, 1997.

2 9. Preparation of Operationand MaintenancePlan: As part of the ImplementationCompletion Report preparation, NHA is to develop and present an acceptable OperationPlan for the maintenanceand operation of the assets created under the project. The plan shouldinclude:

a) The required institutionalarrangements and additionalstaffing needs, compliancestatus, or the target dates by which these will be in place;

b) Estimatesof the additional operationand maintenance(O&M) costs resultingfrom the operation of such works/assets,the agency's proposedstrategy and the manner in which fundingwill be phased into the maintenanceschedule, and the source of such funding; and

c) The key physical, operationaland financial indicatorsfor monitoringthe performance of these assets and assessingtheir developmentimpact.

30. Based upon the guidelinesprovided by the Mission,NHA agreedto submit a draft Operation Plan by June 30, 1997 for the Bank's review. NHA will finalize the Plan after incorporating the Bank's comments by Aug. 1, 1997.

31. ImplementationComRletion Report (ICR): The Mission explainedto NHA the format and guidelinesfor the preparationof the ICR and identifiedthe data/informationto be providedby NHA which will include current traffic data on project roads, econormicanalysis of the MBRP/RSPcompleted contracts, financial and other tables attached to the ICR etc. As part of the ICR procedures,the borrower is also required to submit its own evaluation report.NHA submitteda draft report on TSP to the Bank in April 1997. The Missionexplained the additional areas that need to be coveredin the borrower's report. TSP Aide memoireNo. 13 7

32. The following timetable has been agreed:

a) NHA to provide input/datafor the ICR Aug. 1, 1997

b) Borrowercompletes its evaluationreport and transmitsit to the Bank, Aug. 1, 1997

c) Bank sends draft ICR to borrower for comments: Sept. 15, 1997

d) Borrowerprovides commentson Bank's draft Oct. 15, 1997

e) Task Manager reviewscomments and preparesgrey cover ICR: Nov. 15, 1997

Request for extensionof TechnicalAssistance Component

33. The mission receiveda request from NHA/MOC for a one year extensionof the Technical Assistance componentof the TSP. This has been passed on to Bankmanagement. A formal request from EAD is awaited.

NASHARED\QURESHITSPAM697.DOC

7 ANNEX B

Railway Mission Aide-Memoire PAKISTAN

RAILWAYRESTRUCTURING AND PRIVATIZATIONPROGRAM and TRANSPORTSECTOR LOAN, RAILWAYCOMPONENT (LN. 3241-PAK)

June 15-27, 1998

AIDE MEMOIRE

1. A World Bank rnission' visited Pakistan to continue the dialogue with the Government of Pakistan (GOP) on the railway restructuring and privatization program and to review its status. At the request of GOP, the Bank provided technical assistance under the Transport Sector Loan (Ln. 3241- PAK) to support this program. During its visit, the mission met with officials of the Privatization Commission (PC), Pakistan Railways (PR), and Ministry of Railways (MOR). The mission would like to thank the above for their courtesies. This aide memoire was revised following the wrap-up meeting to reflect the agreed position of the mission and PC, PR and MOR. This is subject to confirmation by Bank management.

I. Status of Railway Restructuring and Privatization

2. The GOP' s announced strategy for restructuring and privatizing PR is to unbundle the railway into three core businesses (freight, passenger and infrastructure),plus a residual entity -- the Railway ResettlementAgency. The core businesseswill be corporatizedand privatized;and the Resettlement Agency, residing in the public sector, will retain all surplus assets and liabilities, includingsurplus and scrappedequipment, redundant labor, debt and enviromnentalcleanup obligations. It will manageand dispose of all residual assets and settle outstandingliabilities. A Railway Regulatory Authoritywill be establishedunder a new regulatoryframework for the restructured,private sector rail industry. The Taskforce on Railway Restructuringand Privatization,comprising key membersfrom the MOR, PR, and the PC, is overseeingthis process.

3. Over the last year, much of the unbundlinginto separatebusiness units has been completed: assets have been identified and assigned to each business,managing directors for the four entities have been nominated and in generalthe top three layers of staff have been identified,and the basis for separate commercial accountshas been established. The unbundledbusinesses are targeted to begin operatingas separatebusiness units on July 15, 1998 with corporatizationtargeted for October 31, 1998,but not later than January 1, 1999. The mission held in-depth interviewswith each of the four managingdirectors and was impressedwith the progress made to date and the enthusiasmfor beginningcommercial operationson July 15 as separatebusiness units, despite certain decisions that need to be made and despite tight railway budget constraints. The mission stronglysupports the start-up of operationsas separatebusiness units on July 15 and the achievementof corporatizationby the target date.

4. Critical Next Steps: Despite significant progress made on restructuring the railways, many decisions need to be taken to enable the core businesses to operate on a commercial basis and to prepare for corporatization. The mission discussed the key next steps with PR, PC and MOR and the following target dates were agreed:

I The mission comprised:J. Fraser (Task Leader), R. Kopicki and J. Tillman (Bank) and J. Broadley (consultant). K. Rashid (consultant)provided the financial analysis of PR. (a) Notification of the managing directors for each of the four business units and transfer of authority to the MDs for operating their business units which may involve finance, administration,operational authority and accountability. Issuance of an Executive Order to allow PR to be divided into three separate business units during the interim period before corporatization. The mission would like to stress the critical nature of these initiatives and to recommend that they receive absolute priority. (June 30, 1998).

(b) Appointmentof financial support teams (consistingof chartered and cost accountants, MBA and lawyer) for each business unit by the Railway Board/MOR. (July 15, 1998)

(c) Implementationof a new accounting system and preparation of commercial accounts for each core business which will be done in parallel with the current accounts system until corporatization. (begin immediately and continue through corporatization)

(d) MOR to request the Auditor General to engage consultants to value assets for each core business unit. (completed,June 24, 1998)

(e) Re-notificationof the lapsed Ordinance No. I of 1998 which allowed for the separation of the Railway Board from the Ministry. (complete as soon as possible).

5. Proposed Bank Assistance: As noted earlier, the Bank has been engaged in a policy dialogue with MOR/PRIPCon railway reform for several years. These agencies have expressed interest in receiving Bank support for the Govemment's railway privatizationprogram, approvedin April 1997, through a loan which would (i) help finance severancepayments and emergencyrehabilitation and (ii) provide technical assistance for the privatizationof the core businessesand the newly created Railway Resettlementand RailwayRegulatory Authorities. The project would support the implementationof GOP' s policy for railway reform and privatization. (Annex 1 provides a project summaryand Annex 2 provides the agreed Borrower Action Plan for project preparation.)

6. In response to issues raised by the SecretaryRailways regardinguse of funds under the emergency rehabilitationcomponent, the missionwould like to clarify the following. The investmentcomponent for emergencyrehabilitation could include items to remedy safetycritical deficiencies,including infrastructure and passengerand freight equipment,and to remedy immediateoperational deficiencies to allow the businessunits to meet their contractualobligations. The missionpointed out that any investmentsunder this componentshould be limited to correct short term safety and operationalshortfalls prior to privatizationand is not a wide ranging rehabilitationcomponent. We suggest that the content for investmentsunder this component be furnishedby the individualbusiness units and shouldbe justified on grounds of safety and removal of critical short term operationaldeficiencies.

7. The missionconcurs with the Secretary's suggestionto support each of the MD' s with a core group of experiencedbusiness professionals (e.g. chartered and cost accountants,MBA and corporatelawyer) as the most effective way to transfer businessmanagement skills into the new organizations. In addition, the mission agreesthat investmentin managementcapability and further skills developmentis desirable for the business success of the new enterprises. To this end, we agree with the recommendationsmade to use some portion of a project preparationfacility for short-termtraining for the new managingdirectors and their key staff to fill any gap in fundamentalcommercial skills. The mission pointed out that a longer-termtraining requirementexists for the managementand staff of the new Railway ResettlementAuthority and the Railway RegulatoryAuthority that will remain in the public sector.It was agreed that this need can be financed through technical assistance under a Bank-supportedproject/loan. 8. The mission appreciatesthe difficultyin implementingwide-scale reform in the sector and is prepared to move in tandem with the pace of the Government'sprogram. The mission has shared a draft Project Concept Document with the Governmentand has receivedbroad agreementon the project concept. In the mission's view,project preparationcould begin as early as October/November1998 if the following steps in the GOP' s Action Plan are completed:

* Corporatizationof three core business units (passenger, freight and infrastructure) under the Company's Act. * Cabinet approval of Railway Policy and Regulatory Framework (subject to incorporationof commentsprovided by the mission). * Mobilization of consultants for the labor redundancy study which would recommend a framework for severance pay and the estimatedcost. * Formulation of a public service obligation (PSO) policy by the Passenger Business Unit and the Ministry of Railways for passenger services that are non-remunerativeand recommendation on the PSO policy sent to the Ministry of Finance. * Cabinet approval of amendment to the Railway Act to provide for the establishment of a new regulatory framework and to permit the transfer of PR assets to corporatized entities.

During the wrap-up meeting, MOR noted that when corporatizing the three core business units under the Company's Act, they would seek a provision that the existing fiscal and taxation concession available at this time (PR does not pay income taxes, etc.) shall continue for five years as in the case of PTC.

II. Key Railway Reforms and GovernmentPolicy

9. Private Sector Rail Opportunities(Annex 3). The mission concurs with GOP's decision to introduce private train service on the lines of Pakistan Railways prior to privatization. Technical bids for an oil transportationcontract with PSO are due on July 15, 1998, and financial proposals are expected by September 21, 1998. The PC expects this Oil RECO, which is the first implementation of the Open Access Policy announced in January 1996, to reach financial closure by December 31, 1998. Other private train service proposals are under consideration. One involvingthe operation of air-conditioned passenger express trains will be based on a negotiated track access agreement and contemplates the sale by PR of equipment to the new entity for rehabilitation. MOR noted that each business unit of PR will endeavor to better utilize their assets and to seek investment from the private sector. While the mission supports the concept of introducing additional private train operations on PR lines, such support is predicated upon any contractual arrangementsbetween PR and the private train operating company being negotiated on an arms length basis and being fully compensatoryto PR. (Annex 3, Attachment A provides a checklist for the development,licensing and approval of new RECO operations).

10. Track Access Regime Issues (Annex 4). A workable track access regime should be implemented as quickly as possible. Much of the underlying analysis has been completed and PR's work on a track access regime will be finalized by the time of corporatizationthrough negotiations among the core business units. The track access regime is the core commercial interface between the infrastructure company and the train operating companiesand also a critical component of the Public Service Obligation("PSO") process. Because the infrastructure company will have to recover its fixed and common costs (including cost of capital and administrationcosts), as well as the variable costs of the traffic, through the track access agreement,the design of track access charges presents a significant challenge. This challenge is further complicated by the infrastructurecompany's need to catch up on deferred maintenance. The mission believes that in designing the track access regime the infrastructure company should recognize that, as a general matter: (i) long run variable costs should always be recovered, (ii) users should pay only for the infrastructure they use, (iii) different traffic segments have different capabilities to contribute to fixed and common costs, and (iv) the pricing regime should be both transparent and workable. The mission recognizes that any track access regime will be a compromise between strict economic rationality and commercial practicability. The principal responsibility for reaching this compromise lies with the infrastructurecompany, on the one hand, and the train operating companies on the other. Regulatory intervention should be limited to the case where parties cannot reach an agreement and affirmativelyseek regulatory intervention.

11. Railway Policy and Regulatory Issues (Annexes 5 and 6). The mission stronglyrecommends that the MOR/PC refine the new Railway Policy and the Scope and Framework for the Railway Regulatory Authority in order to eliminate discrepancieswithin and between the two documents prior to Cabinet approval. This is necessary in order to reflect the "minimalist" approach to regulation which takes into account the pervasive competition that exists in the transportationmarket in Pakistan. A successful privatization of Pakistan Railways is dependent on the establishment and implementationof a regulatory framework for the privatized railway industry that is consistent with successful commercial operation of the railway and that does not convey to potential investors the perception of significant regulatory risk. Specific comments on the two documents have been provided to the PC and are included in Annexes 5 and 6.

12. Because the freight transportationmarket in Pakistan is intensely competitive, there is no need for economic regulation to protect shippers. In the case of passenger transportation, with the exception of certain narrowly defined markets, alternate mode transportation is available and, as in the case of freight, there is no need for economic regulation to protect passengers. Economic regulation of passenger fares may be necessary in limited cases where the only access to a remote area is provided by the railway, or in certain socially desirable cases where part of the costs of the transportation service are being met by the government through a Public Service Obligation ("PSO") payment.

13. Economic regulation of access charges and access conditions may be necessary and appropriate. Imposition of appropriateeconomic regulation on railways operating in an intensely competitive environment neverthelesspresents a serious risk of adverselyaffecting their ability to compete by adjusting rates or changing service levels or quality with the same speed as their competitors. Thus, economic regulation should be structured to minimize this interference. As a general matter, reactive economic regulation that responds to complaintsand disputes is to be preferred over economic regulation that requires regulatory pre-approval of business decisions that reduces the railway's competitive flexibility. Annex 6 addresses these issues in greater detail.

14. The safety regulatory arrangementshave been developed separatefrom the economic regulatory regime. The mission concurs that the establishmentof a modern and appropriate railroad safety regulatoryregime. The strengthening of the Federal Inspector General of Railway (FGIR) Office should proceed in parallel with the establishment of the Railway Regulatory Authority. FGIR should be strengthenedin terms of technical expertise, discipline and necessary logistical resources. The newly fashioned FGIR should be charged with the establishment and enforcement of safety standards and rules for the operation of railways in Pakistan and with responsibility for resolving disputes relating to safety issues, such as those that might arise between the owner and operator of the infrastructure and the various train operating companies using or wishing to use the infrastructure.

15. Arrangementsfor a Public Service Obligation(PSO) Payment. If the Government wishes to preserve passenger or freight services that are not economicallyviable, it will be necessary to enter into a public service obligation agreement with one or more of the corporatized entities (or a private company) to provide the service. The agreement will specify the service to be provided and the corresponding financial arrangements. The Govermmentwill have several tasks to accomplish in the next several months: (i) to identify those services that the railway operating companiescan run in an economically viable manner and those which they plan to discontinue, (ii) to determine the subsidy cost of preservation for uneconomic services, (iii) to determine which of the services (if any) the government wishes to continue, and (iv) to negotiate acceptable public service obligation agreementsto provide for continuation of the selected services. Some of the work required under (i) and (ii) already has been completed by the Passenger Unit and their consultants. MOR noted that additional work is required to evaluate the passenger services on a commerciallyviable manner.

16. The mission confirmed that MOR will identify non-economic services to be subsidizedthrough a PSO agreement and will formulate the PSO policy for review and approval by the Ministry of Finance by the date of corporatization. It will be important to the success of the privatization program that these PSO agreementsbe reached at arms length with the independent business units and/or the corporatized business units. In the mission's view, long-term PSO agreementsthat do not fully compensate the train operator for the cost of service could seriously impair the marketability of the business unit, and will raise serious concerns in the mind of potential investors regarding the government's future commitment to pay for non-economic services it wishes the private railway to provide.

17. Labor Redundancy Scheme. Developmentof a coherent framework for managing the surplus labor which is both affordable by the government and acceptable to the employees is a critical item for successfulprivatization. The mission expressed its concern about the lack of progress on the development of a labor redundancy scheme given that the initial study which was due to be completed by June 30, 1998 has yet to be started. MOR/PR has agreed to mobilize consultants to undertake this study by July 15, 1998. Given the potential number of surplus workers (30,000 to 40,000) and the desire to provide "comfort" to employees that their needs and rights will be respected, the mission strongly reconmmendsa process of involving employeesand labor unions in designing the redundancy scheme. This early consultativeprocess should help align the government's need to keep a firm grip on the overall affordability of the scheme with realistic expectations by the employees. In addition, the mission recommendedto the designated managingdirectors that they communicate with their staff at all levels concerning the change process and their vision for their business's futures to address the uncertaintiesin the minds of their staff.

18. Although the Bank could help finance severance pay and retrainingloutplacementunder a possible Bank project, it is anticipated that this component will require significant counterpartfunding. MORIPC shall explore the possibilities of such counterpart funding or other resources, in consultation with the Planning Commission and MOF, and communicateto the Bank by the time of project preparation.

19. The Resettlement Authority will have many complex tasks to accomplish, including the liquidation of surplus assets, the pay-down of outstanding liabilities, the provision of severancebenefits, and the retraining, regrouping and redeploymentof surplus labor. The accomplishmentof these tasks in a systematic and business-like fashion is essential to the overall success of the privatization program. Steps for early establishment of the Railway Resettlement Authority have already been initiated with the nomination of the MD. MOR noted that funding for the necessary preparation for the establishmentof process, procedures, and functions will be included in the Project Preparation Facility being sought from the Bank.

20. Need for Financial Advisers/Market Soundings. The PC has received both financial and technical proposals from three qualified groups to provide financial advisory services in support of the privatization of PR's three core business units. Technical bids have been opened but not evaluated and financial bids remain sealed. Bid validity expires on July 10, 1998. The PC sought the mission's advice on how to proceed on the engagementof a financial adviser given the changed investment climate, the lack of current financing, and the status of preparatory work. The timing for the engagementof a financial advisor was originally designed to interconnect with key supporting work which has not been accomplished. This includes completion of a study on the railway's environmental clean up liability and a study of its liability for employee pensions, early retirements, separations and social benefits. In addition, the necessary work on drafting the new legal and regulatory framework, including economic, environmental and safety regulation, is likewise lacking. Without these complementaryefforts, financial advisors would be significantly handicapped in their efforts to prepare and sell the core businesses of PR.

21. The mission discussed with the PC various options regarding how to proceed with the engagement of a financial advisor given the current circumstancesand the potential changes in the timing and scope of work. Based on these discussions, the mission requested the PC to provide the Bank with its specific recommendation on how to proceed, i.e. proceeding with evaluation or cancellation and re- tendering, etc. for Bank review and no objection. The PC agreed to provide this to the Bank by July 1, 1998.

22. The mission recommends that the PC undertake market soundings to assess potential interest in investing in the core business units of an unbundled PR. This work is typically done by financial advisors. Market soundings provided before corporatization can materially assist with determining whether three separate enterprises are more valuable than a vertically integrated rail enterprise. Much of these soundings can be done informally by the PC's staff through interaction with the managementof railway enterprises who are involved in global diversification of their holdings and through the presentation of "road shows" in several regional markets, including North America and Britain. The upcoming Asian Privatization Conference in Singaporepresents a unique and valuable opportunityfor the PC to "showcase" the PR offering. The hiring of the financial adviser will be congruent with the corporatization of the three business units.

23. Adequacy of PC staffing and MOR/PR arrangement to complete preparation for privatization. The mission recognizes the complexity of restructuring, corporatizing and privatizing the railway. The Taskforce set up last year provides a good vehicle to coordinate the many activities to reach corporatization and privatization. The PC has taken the lead on managing the day-to-day coordination efforts which will intensify in scale over the next several months. In order to meet the demand, the mission supports the PC's desire to include on their railway privatization team a member with relevant railway experience. It is our understanding that a suitable candidate has been identified, and the mission recommends early action on this matter. The mission strongly supports the Railway Chairman's initiative to provide financial and legal support teams to each business unit and understands that mobilizing funding of these teams is underway.

24. Funding of Preparation Activities (Annex 7). Previous commitments from Japanese donor agencies to fund preparation activities and provide technical assistance have now been frozen as a result of the recent sanctions. (A PHRD grant for $920,000 was sought to fund preparation activities, including the labor redundancy study and JICA had committed to providing technical assistance to the Railway Resettlement Authority.) The PC should follow up with DFID to assess whether they are still willing to provide technical assistance for the Railway Regulatory Authority. The Bank's Project Preparation Facility (PPF) could be used to fund preparation activities of up to US$2 million which could then be refinanced under the proposed loan. A formal request from EAD would be required for such an advance. MOR agreed to prepare the necessary documentation for "concept clearance" by GOP by August 10, 1998. Annex 7 provides a recommended set of activities to be funded through the PPF.

25. Railway Cultural Heritage (Annex 8). Pakistan's railway cultural heritage needs protection during the modernization and privatization process, and PR is commissioning a review so that the new railway legislation could establish procedures for classifying critical cultural heritage items and for ensuring preservation or reuse. Critical steps include: (i) protect heritage equipment from premature scrapping; (ii) PR complete the heritage policy review; (iii) establish railway museums at Peshawar and Bostan; (iv) develop business plans for autonomousheritage railway operations at both locations; and (v) hold workshop to develop civil society awarenessand support. MOR noted that this study would be undertaken in the latter half of 1999, but agreed to advancethis date if resources become available.

III. Transport Sector Loan

26. The Transport Sector Loan, which was twice extended from its original closing date of June 30, 1996, will close on June 30, 1998. The remaining railway component provided technical assistance for preparing PR for privatization, including consultants to the PC (Hickling Transcom) and to assist PR (CIE Consult) with the organization and operation aspects of the restructuring needed for privatization. CIE Consult has worked closely with concerned PR staff to bring PR to a point where the new unbundled core businesses are ready to become operational on July 15, 1998. It was agreed by PC/MORIPRthat the target date for corporatization of the core businesses would be targeted for October 31, 1998, but not later than January 1, 1999 -- beyond the period where GOP would be reimbursed under the Loan for CIE Consult services.

27. Although the systems for re-orienting the financial accounting system were developed and considerable training of PR staff undertaken by CIE Consult, the new parallel accounts for each of the core businesses could not be implemented because new accountingcodes were not applied by PR. Similarly, it should be noted that GOP's 1990 decision to develop parallel conmmercialaccounts for PR was not implemented,and the project's original TA component for such work was not undertaken.

28. The mission reviewed PR's financial performance. A detailed report is given in Annex 9. Since 1992-93,PR losses have been increasing and reached a record high of Rs. 6.6 billion in 1995-96. Operational inefficiencies and declining traffic levels contributed to increased losses and these problems were exacerbated by the following:

(a) PR has been unable to increase its tariffs in line with inflation. Cumulative tariff increase during 1990-98 has been only 43% against 127% cumulative inflation for this period.

(b) PR is forced to operate its inherently loss making PSO services under GOP instructions, and GOP has stopped providing PSO payments to PR which are estimated around Rs. 2 billion;

(c) PR is incurring heavy interest payments on its overdraft with the State Bank. (Rs. 1.5 billion in 1996-97)

(d) PR has not been receiving adequategrants to meet incidence of post budgetary taxation. The cost of high speed diesel was increased six times during the period July 1996 and December 1996 resulting in additional expense of Rs 732 million.

(e) Heavy pension liabilities were incurred during the year 1995-96resulting in Rs 1.4 billion of additional expenditure with no supplementarygrant provided.

29. A key objective of the project was railway restructuring and establishment of a business department to develop the commercial orientation of PR. During 1990-1996,it became clear that despite the efforts of concerned business department staff, and the useful institutional strengthening work undertaken during this period, the objective of commercial orientation was not achievable as long as PR remained a government department. However during 1997-1998,the institutional reorganization of PR was initiated and when unbundling is implementedon July 15 and later corporatized this project objective will be achieved. The financial objective of financial profitability was not met for the reasons discussed in para 25 above. The investment component was intended to enable PR to improve its operational performance. However this could not be achieved because: (a) GOP did not comply with the covenant to provide adequate revenue budget spares, thus nullifying the project assistance for building up a stock of unit exchange spares; (b) inadequate implementation of the core investment program; (c) late completion of the roller bearing program which has slowed the improvement of wagon performance; and (d) slow PC-I clearance and inadequate Annual Development Program allocations which resulted in about US$40 million of the railway component being unused when the equipment category closed in June 30, 1998.

30. With the closure of the project, an Implementation Completion Report (ICR) needs to be written. Bank guidelines on preparing the ICR have been provided to PR. Part of the requirements of the ICR is the preparation by the Borrower of a Project Completion Operation Plan. The following schedule was agreed:

* Draft the Post Completion Operation Plan by July 30, 1998 * Project completion cost data to Bank by July 30,1998 * Borrower contribution to ICR (Part II) including the final Operation Plan incorporating the Bank's comments by September 15, 1998

e Bank provide draft ICR for Borrower's comments by September 15, 1998;

e Borrower's comments received by Bank by October 15, 1998 - ICR finalized and distributed by November, 30 1998

List of Annexes

Annex 1: Project Summary Annex 2: Project Preparation Plan Annex 3: Private Sector Rail Opportunities and Checklist for RECOs Annex 4: Track Access Regime Annex 5: Comments on the Railway Policy Annex 6: Comments on Railway Regulatory Framework Annex 7: Recommended Activities to Be Funded Under the PPF Annex 8: Railway Cultural Heritage Annex 9: PR Financial Performance

NOTE: For the purpose of the Transport Sector Project Implementation Completion Report (ICR), Annex 9 of this aide-memoire (PR Financial Performance) is presented in an updated form in Annex D of the ICR. ANNEX C

Borrower's Contribution

National Highway Authority

I NATIONALHIGHWAY AUTHORITY MINISTRYOF COMMUNICATIONS Governmentof Pakistan

yxGHWA/-

4

1SLAMAT-\AD

TSP FINALREPORT

Transport Sector Project Loan No. 3241 PAK

MBRP/RSP CELL June, 1997 TSP Loan Final Report

TABLE OF CONTENTS

1.1 History of the Project. 1.2 Introduction.

CHAPTER ~2 2.1 Project Identification and Implementation. 2.2 Maintenance Intervention Level System (MIL). 2.3 Project Identification for MBRPIRSP Projects 2.4 Design Features. 2.5 Construction Sequence. 2.6 Pre-qualification and Tendering 2.7 Composite Schedule of Rates and Material Studies Report. 2.8 Quality Assurance Program.

CHAPTER3 3.1 Technical Assistance as Management Consultant. 3.2 Management Consultant's Works Program.

CHAPTER4 4.1 Justification of Projects. 4.2 Projects Details with Financial Status. 4.3 Impact & Achievement of M9BRP/RSPProjects.

LISTOF ANNEXURES

AVNEXURE I Details of RSP Projects (UproJune 30, 1997) ANNEXURE 11 Details of MBRP Projects (Upto June 30, 1997) ANNEXURE III Details of 1992-FDRP Projects (Upto June 30, 1997) ANVEXURE IV : NHA Organization Chartfor MBRPIRSP Projects ANNEXURE V KamnpsarOrganization Chartfor MBRP/RSP Projects A.ANEXURE 17: Financial Statusfor TSP Loan (Pak Rupees) AMNEXURE VII Financial Statusfor TSP Loan (Pak Rs. & US Dollars) AiVNEXURE VIII Physical Achievement of .SP Projects A.NNEXUREIX Physical Achievement of .'BRP Projects ANVEXUREX Typical Cross-Section - A ;ohal Works ANNEXUREXI Typical Cross-Section - k'BMand TST ANVVEXUREXII Typical Cross-Section - 4IBRP 7004 ANVAEXUREXIH : Typical Cross-Section - AJBRP 7005 TSP Loan Final Report

. :;-:E-7'-:-i:'5tE "i5:'CHAPTERi.-- i1 '' ':'' ' " i

1.1 HISTORY

In 1986,the National High wa,v Authority NHA. (at that timeNational High say Board NHB), as part of the \orld Bank fundedThird HighwvayProject (1982-85), undertooka study to identifv the scope and rLquirementsfor maintenanceon the nationalhigh way networkin Pakistan.The 3rd Hgway Projectwas one of theoperations assisted bv theWorld Bank for highwayinfiastructure development in Pakistan.As part of this study,a ten-yearmaintenance progrnam under fiscal constraintsand an organizationalstructure was developedto meetthe maintenancerequirements of the nationalhighway netwvork.

Inearls 1987.and againin 1988.as part of the ongoingMaintenance by Contractprogram, an analvsisof the nationalhighway network was carriedout using a siunplfiedmanual methodology to predict thosesegments of the networkwhich were in needof pnroritvmaintenance, rehabilitation or reconstruction.This methodology N3asbased on assessment of network due to pavement condition, traffic volumes and environmental factors and wascalled Mlaintenance Intervention Level (MIL) system.

The analysissuggested that a significantpercentage of the netvork is in need of prioritvmaintenance, the levelof whichis beyondthe scopeof routineand periodicmaintenance programs.

Therepresentatives of the WorldBank duringa TransportSector Adjustment loan visit, reviewedthe results of the preliminan,analysis undertaken in 1987and 1988 and after discussionNwith INHB determined that it %souldbe of significantbenefit to re-adjustthe loan in orderto utilizesome of the loan fundsfor the roadway segnents requiringan extraordinarylevel of maintenance.It was believedthat a program to reduce the backlogof maintenanceivould rehabilitate the poor sectionsof the hi2hwavnetwork to a levelwvhere thev couldbe maintained via routineand periodic maintenance contracts which were withinthe fiscal limitatons of theNHB.

InJuly 1989.the PMU cell (PavementMonitoring Unit) of the MaintenanceDirectorate of the NTHBwsith the assistanceof its consultants,commenced a study to evaluateand update the preliminarvanalysis done in 1987and 1988.The major objectives of thestudy wvere

* Identificationand Prioritizationof roadsegments requiring immediate extraordinar maintenance: * Evaluationof the economicbenefits of undertakingthe requiredextraordinary maintenance; and * Recornmendationof a programof maintenancecontract packages to reducethe outstandingbacklog in maintenanceworks.

In the contextof the study, Extra ordinarsMaintenance was definedas the reconstnrctionrehabilitation or majorimProvement of a segmentof roadway,required to strengthena pavementstructure and/or to attai a road,,av conditionthat can be adequatelvmaintained through routineand periodicmaintenance. TSP Loan Final Report

Id[t&ficationand appraisal by the World Bank for the Transport Sector loan was commencedin early 1990. Lcannegotiations for US S 77.5 millionwere concludedon 27th July, 1990. The loan amount was split into two types of improvementprograms, MBRP and RSP:

;) M.\aintenanceBacklog Reduction Programr(iMBRP) This program covered those road sections which had deteriorated to a point where they required reconstruction, rehabilitation or major improvementto return them to maintainablecondition. ii) Resurfacina and Stren-thening Programs (RSP). This programn covered those road sections whose strength w-as irproved bv surface treatments and overlays, thus reducing further deterioration.

For this purpose, services of expatriate Danish consultants Mv/sKampsax InternationalA/S were acquired to prepare. manageand monitor the progrars under the guidelines of the World Bank. The principal consultants ".ere assistedby the counterpart NaHBstff and local associate consultants on various projects.

1.2 INTRODUCTION

The Transport Sector Loan. TSP Loan No. 3241 PAK *-as signed bet-een the Government of Pakistan and the World Bank on 27th July. 1990. The total amount of the loan is US S 184 million. The loan is primarily dividedbetween Munistrvof Railways and National Highway Authority. The National Highway Authonrv portionof the loan amounting to US S 77.5 nillion is to be utilized wvithmatching Government of Pakistan (GOP) funds. Later on. in 1996 an additional amount of US $ 11.5 million has been transferred from Railway component to NL-IAunder re-appropriation to cover the force majure Flood Damages works on MIBRP7005 (WVadh-Surabsection on N-25). Thus. the total loan value for highwav component is LS S 89 million.

The financial sharing portion of the World Bank and Government of Pakistan (GOP). as decided in the loan agreement, is as under:-

WorldBank | GOP MBRP Program 70 % 30 % RSP Program L991-92 60 % 40 % RSP Program 1992-93 40 % 60 % RSP Program 1993-94 20 % 80 %

The particulars of the loan are:- Loan effective date February, 1991 Original Completion date 30th June, 1996 Revised Completion date 30th June, 1997 1TSPLoan Final Repore

The break up of the loan is as under:

||OriginalIBRD | ProjectedActual

Finan__ng IBRI) Financinga

i) Maintenance Backlog Reduction US $ 52 Million US S 72.4 Million Program (MBRP) _ ._ ii) Resurfacing & Strengthening US S 15 Million US $ 8.1 Million Program (RSP)

iii) Technical Assistance (TA) US $ 10.5 Million US S 8.5 Nfillion iv) Funds transferredfrom Rail-av IS.s 9Ilio Component to NHA by Re- appropriation. l TOTAL US S 89 Mfillion US S 89 Million

The cost of GOP component. as on June 30. 1997 is Rs. 1604 million for MBRP and Rs. 665 million for RSP.

Ever since the sanction of loan from the World Bank in US dollars, Pakistani currencv has undergone various fluctuations. %viththe resulting devaluation of Rupee in each instance. Consequendt, the Pak Rupee equivalentof this foreign loan increased in nunerical value, as compared to the initial estimates prepared for TSP loan projects.

In order to utilize the increased amounts due to devaluation. inclusion of more projects became necessary thereby requiring that additional portion as matching funds for the projects should be provided. GOP/NHA agreed to provide the necessary counter-part funding to complete the additional projects and fully utilize the loan amoumt.

Loan Completion The original Loan closing date was June 30, 1996. Howvever.the World Bank has agreed to a one vear postponementof the loan closing date up to June30, 1997. to enable NHA to complete the additional work on contract MIBRP-7005(N-25 Wadh-Surab Section) arising from the damages caused bv the unprecedented 1995 floods and rains in and around Khuzdar.

Re-.Allocation As part of the seiective extension of Loan 3241-PAK, the Bank has reallocated US S 11.5 million from the savings on the Railway Component of the TSP to finance the additional works related to the 1995 flood damages on contract MBRP-7005 (N-25. Wadh-Surab section). TSP Loan Final ReDort

- -: :: --CHAPTER -2 .--- -

2.1 PROJECTIDENTIFICATION AND IMPLEMENTATION For the whole national highway network, a detailed technical study was done to prioritize the road sections which were beyond the scope of normal maintenance and required major rehabilitationlreconstr-uction.Each project under MBRP and RSP category was identified based on the pavementcondition survey. This conditionsurvey data along with the data from the pavement roughness and the strengthsurveys. topographicalplans. traffic counts and clirmaticdata was used as input in the NMaintenanceIntervention System (MIL).

2.2 MAINTENANCEINTERVENTION LEVEL (MIL) SYSTEM. MIL systemis a rating system used to determine the maintenancerequirements of a road segment based on the evaluation of road characteristics. MIL is used to develop accurate maintenance budgets enabling a highwayauthority to make best use of limitedfunding.

For a roadwaysegment of five kilometers.a comprehensiveset of data is gathered for eighteen different faciors. These data are broadly divided into two categories; a) conditionswhich may be improved by maintenance;and b) factors which influence how much maintenanceis needed e.g. climate, terrain, traffic etc.

Each data is given.a certain score for each one kilometersection based on severity, all the scores are added togetherto obtain a final interventionscore, which indicatesthe level of maintenanceneeded by each roadsegment. These scores, called Interventionscores, are then categorizedinto followingranges.

MIL Score Recommendation < 40 : Routine Maintenanceneeded. 40 - 49 : Preferential Status of Periodic Maintenance. 50 - 59 : Localized Periodic Maintenance. 60 - 69 : Major Improvement, Periodic Overlays. > 70 : Reconstruction/Rehabilitation.

The above ranges of NIIL score or Pavement Condition Index (PCI) , as defined in the PC-I , were also used to define the projects to be included in MBRP and RSP package. Basedon the different ranges of PCI, followingroad serviceabilitycategories were adopted

Cate,,orv 1 Any segrnentof road with a surface roughnessvalue exceeding5000 mm/Kmand with potholes/patches< 15%.but othenvise in g,oodcondition. Pavement condition Index (PCI) = 40 to 49.

Cate-orv2 Any segment of road meeting the requirements of category 1, but with potholes and/or patches exceeding 15%and belowv60% (15 - 60 %) of the roadway surface area. Pavement condition Index PCI = 50 to 59.

at-ry 3 An segmentof road where the roadway surface area is morethan 60%Xo cracked and the surface is beginning to disintegrate.Pavement condition Index PCI = 60 to 69.

Cate-orv 4 AnY segp-nlt of the road Nsherea paved roadway surface is nonexistent or is in an advanced state of

dlsTlttyrr;o /.7lvmut} osSi<>nSnerP(- r71) TSP Loan Final Renort

2.3 PROJECTIDENTIFICATION FOR MBRP & RSP PROJECTS

The PavementCondition Index (PCI) surveyof 1989-90projected the followingclasses of nationalhighway network:

Route - Length Category1 Category2 1Category 3 Category 4

N-5 1762 22.65 % 19.93 % 15.40 % 25.07 % N-25 J 817 15.07% 22.22 % 12.69 % 28.57 % N-35 806 8.10 % 18.91 % 16.21 % 35.13 % N -40 625 18.39 % 16.09 % 13.79 % 26.43 % N-50 531 29.50 % 13.11 % 11.47 % 29.50 % N -55 1265 23.88 % 13.36 % 7.69 % 17.00% N -65 385 19.71% 9.85 % 9.85 % 14.08% N-70 430 11.90 % 11.90 % 16.66% 32.14 %

The purpose of TSP loan was to address the critical parts of network and put the netvworkin easily maintainable condition.The loan vsas subdivided into three components:

* MBRP - To address those pavement sections with PCI of Category 3 and 4. * RSP - To address those pavement sections wlith PCI of Category 2 and 3. X TA - Technical Advisory and trainring.

(NVote TIhe category 3 is common both in .MBRPand RSP. as if was envisaged that a pavement f category 3. if required only strengthening or overlav will be RSP project: but a section of category 3 requiring major reconstrucnton will be placed as MBRP project.)

RSP Proiects

The RSP program covers those road sections which fall under the Category 2 and 3 of the pavement condition survey. The objective was to improve the structural stability and strength of pavement by means of overlay or surface treaturientalong vith shoulder rehabilitation. This program was done in five phases i.e. Rounds 1. IL. Il. IILA and IV. As a result, a total of 59 projects covering 400 kms on different routes and provinces were prepared as is showvnin Annexure VIII. The details of RSP contracts in the three rounds is attached in Annexure 1.

MBE,RPProiects

For IMIBRPprojects, in addition to pavement condition survey, the existing condition of bridges, culverts and protectionldrainageworks were also assessed. For all the defined sections and structures, economic analvsis was also carried out.

MBRP project were consequently divided into three phases I, [I and III for which No Objection Certificate (NOC) from the World Bank was obtained prior to floating of the tenders. Under MBRP contract packages, a component was also reserved to address the reconstruction of structures and repair of drainage systems, amountingto 15 % of loan amount. During the course of implementation, 14 nu-nber of bridges were constructed along with 16 number of structure repair schemes i.e. culverts. causeways, drains etc. to fulfill the requirementof loan agreement. In total, 32 LCB and 2 ICBcontracts were awarded the impact of which can be seen in Annexure IX. The details of MlBRP contracts in the three rounds is attached in Annexure 11. TSP Loan Final Report

2.4 DESIGNFEATURES

As mentioned-earlier,the initial roundsof hBRP and RSP schemeswere defined on the basis of surveys and studiescarried out in 1989-90and prelirninarydesign was done by managementconsultants based on NHA recommendeddesign codes and practices. The later stages of contracts were designed through local consultants.In the initial rounds, a numberof studies on Transport sector in Pakistan were used as referenceand backgroundmaterial which includethe following:

* A National TransportPlan, The IslarnicRepublic of Pakistan. by the Japan International CooperationAgency (JICA), May 1983.

* VehicleOperating Costs, NTRC- 79, January 1986. The relationshipsused in the study are based on Transport RoadResearch Laboratory (TRRL),Kenya study.

• The Data ReferenceBook, NationalHighway Board. March 1987.

• The Study of NationalTransport Plan. JICA, March 1988.

Desisn featurefor MIBRPPackages

In additionto pavementcondition survey. DCP test (DynamicCone Penetrometer)and IRI (International RoughnessIndex) surveys were also carried out. The DCP tests were done @ 5 kilometer, whereas IRI survey was done on each I kilometer. Based on these surveys, different sections of highways were defined in MBRPschemes. For selectedsections. tests survey of BenklemanBeam were also carried out. The result from the tests were used to asses the existing structural strengthof pavement and sub-grade strength.

Trafficstudies from NTRC (NationalTransport Research Center) were neededfor traffic projections and analysis. The Vehicle Operating Costs (VOC) were based on VOC sub-routineof the World Bank Highway Maintenance& Design Model (HDM-III). The design of pavementwas based on AASHTO Guide for Design of PavementStructures (1972 & 1986). The pavementdesign is based on 10 year design life. A number of reports were published by PMU & NHB which were also used as basis for engineeringjudgment. These reports were based on field experienceof pavement behavior of already constructedsections.

Designfeatures for RSP Packaaes

The RSP packageincluded:-

a) Periodicoverlays of asphalticconcrete; b) Pavementstrengthening consisting of aggregatebase courseplus TST; and c) Resurfacingconsisting of double and triple surface treatments.

RSP is continuationof periodicmaintenance projects and also includesuch sectionswhich need asphaltic overlay, with base course alreadylaid. For overlay design, 10 year designlife has been adopted. Traffic studies from NTRC were used for traffic projectionsand analysis. The designof pavementwas based on AASHTO guide for design of Pavement Structures (1972 & 1986). All the asphaltic overlays were preceded by regulatingcourse in those sectionswhere the existing pavementroughness exceeded 5000 mm/krn. TSP Loan Final Report

Design Featureof iVIBRP7004

The MNIBRP7004 projectcovers construcion of 30 Kms of additionalcarriageway on N-5 betweenSahiwval and Okara, from Km 1113to 1143.The alignmentof the additionalcarriageway is suchthat it is northbound carriagewayfor 1st 6 kmis,then covers the existingcarriageway and is southboundfor 12 kilometers,after which it switchesback to southbounddirection. The project also includesconstruction of two bridges on distributories.which were sub-letin a separatecontract MBRP 7004A.

The project site consists of water logged area in which special treatnent was done by laving a granular materialplatform of 300 mm thicknessbelow the embankmnentlavers. The actual pavementconstruction consistedof 100mm granularsub base. 200 mmaggregate base course, 190 mm asphalticbase course and 90 mm asphalticmeasuring course. 2.0 meter%vide shoulder was providedon one side, and a medianwas placedon the side of existingcarriagevay. In the other case, 1.0 metershoulder was providedin frontof the medianand barrier.The shoulderare coveredby DST in each instance.

T%picalcrosssection of the constructionis attachedin the annexure,.

Desi2nFeatures of MtBRP7005

Thc contractINIBRP 7005 is one of the two contractof MBRP progranmnefor whichInternational Contracts Bidding(ICB) vas carriedout. For theseprojects. the WorldBank financing portion is 70% and that of GOP is 30%. The originalproject of cost Rs. 588 mnillion,consisted of 160kms of individualroad lengthsbetween Wadh(320)and Kalat(550)on N-25.The roadw%as to be 6.1 meterswvide with 1.5 m. shoulderon both sides. No particulardetail was given to structures.

The adjacentproject of road fromSurab(478) to kalat(550)was awardedto Iraniancontractors which mainly consistedof rehabilitationof existingroad to intemationalstandard of 7.3 m wide pavementand 2 m. shoulderson both sides.It wasdecide in a reviewby GOP and the World Bankthat the contractMBRP 7005 will be a rehabilitationproject of 160 kms continuosstretch betweenWadh and Surab. For this purpose,a major variationXwas carried out throughV.0. No. 2 amountingto Rs. 1265 million.Other variationorders coveredsoil investigations.X ideningof structuresand reconstructionof about 200 culvertsw ith new bridges at somelocations after hydrologicalstudies were carried out. Thus the revisedcontract value to date is Rs. 1847 million.

The initialdesign of overlayw,as replaced by newvasphalt pavement wvith wide surfaceand shoulders.An axle load surveyand traffic count wiascarried out in April, 1993. Pavementwas designedfor 10 year design life basedon AnalMticalEmpirical Method. The 5 year design traffic was 2.9 milLionESAL. The top bound laverswere designedfor 5 year designlife and lowerunbound layers wveredesigned for 10 year period. The actualconstruction consists of tvpicallv150 mm natural subbaselayer, 150 mmof aggregatebase laver, 70 mmof asphalticbase courseand 40 mmof asphalticwearing course. The typical cross sectionis attachedin annexureXIII.

2.5 CONSTRUCTIONSEQUENCE

The concept of stage construction(planned rehabilitation) was adopted for rehabilitationof pavement structureson nationalnetwork where applicable.This concept is most suitable in minimizingthe severe damagingeffects of:-

* Un-regularizedheavy truck traffic. * Climaticconditions of southemregions of Punjaband Sin&h.and * Enhancingthe lifecycle and economicreturns. TSP Loan Final Report

Further.the stage constructionis also adopted to avoid the prematurefailures of pavementscommon in Pakistan.The plannedrehabilitation comprises of followingtvo stages:-

STAGEI This consistsof placementof crushedaggregate base course or water bound macadamwith applicationof triple surface treatments and shoulder rehabilitationand strengtheningOR placementof Asphaltic Base courseafter pavement shaping.

STAGEII Constructionwill be carriedout afterthe pavementhas been subjectedto truck n-afficloading in all climatic conditionsfor 3-5 years w%ithrectification of localizedfailures like settlements,damaged structure failures, erosionsetc. This constructionconsists of asphalticlayer and shoulderstrengthening with sub-baseclass B material.

Triple surface treatment(TST) was also recommendedin pavementconstruction wherever aggregatelbase course*was laid on existingpavements. This resultedin enhancementof the performanceperiod of pavement, due to the fact that aggregate basefWBM in combinationwith TST makes strong laver of bitumen penetrationmacadam. Further,the placementof asphalticlaser in stabilizedroads, after 3-5 vears of initial construction.vill producethe desiredresults of ridingqualitv.

A few projectswere aimed at stage constructionwith stage II constructionto be executedin later vears. Ho\%ever.on some of these projects,the increasingtraffic load and high axle loading caused increasein pavementin pavcmentdeterioration. Consequently, these projects were revised and scope of works xxas extendedto proVideadequate pavement by overlaysetc.

2.6 PRE-QUALIFICATIONAND TENDERING

Oneof the objectivesof the MBRP and RSP works was to imnproveand upgradethe constructioncapabilities of localcontracting industrv. Most of the contractorshad experiencewith provincialdepartments and relied mainlyon labor intensiveconstruction. Since the NIBRPand RSP works requiredconstruction standards conformingto internationalspecifications and materialsuitabilitv requirements, Qualitv Assurancesvstems "xereestablished and it wvasintended to bring the workingcapabilit of contractors in tune wvithstringent qualitystandards of construction.

It was consideredessential that differentcontractors be prequalifiedand shortlistedin such a manner that, dependingon their capabilitvand experience,are able to performcontracts of differentmonetarv values i.e. prequalificationbased on ability to take up contractsof the value of Rs. 10. 15. 20, 25. 30 and above 40 million.For assessmentand evaluationof contractors,folloring. informration was required:

* Overallexperience as Contractor. * Machineryavailable. * FinancialCapabilitv. * Classificationwith PakistanEngineering Council. * Experiencewkith NHA as contractor. * Engineersand othertechnical staff. * Maximumarnount of works executedin firmn'shistorv. TSP Loan Final Report

Each of the above informationwas receivedand scoring was done to categorizethe contractors. In the follovingtables is the summarv of prequalifiedcontractors in each provinceand financialcapability in the sear 1990-91and 1995-96,which highlights the improvementsin localcontracting industry.

Pre-Qualified Contractorsin 1990-91 Upto Upto Upto Upto > Sub Province Rs. 10 Rs. 20 Rs. 25 Rs. 30 Rs. 30 Total million miUion million million million Punjab 6 6 5 5 Is 37 Sindh 7 6 6 0 3 22 NNFP 10 2 1 0 6 19 Balochistan 13 4 4 3 4 28 GranadTotal 36 I& X Et61 J77s.',; C,2 -7t- Q

Pre-Qualified Contractors in 1995-96 Upto Upto Upto Upto > Sub Province Rs. 10 Rs. 20 Rs. 25 Rs. 30 Rs. 30 Total

million million million million I miUion l_ __ Punjab 32 22 9 10 27 100 Sindh 6 8 5 4 3 26 .NVFP | 27 4 5 0 11 47 Balochistan 31 16 10 6 10 73 Gr!andTotl | 96 ' T 2- 20 t'; 246

2.7 COMPOSITE SCHEDULE OF RATES AND MATERIALSTUDIES REPORT

One of the majorcomponents for contract preparationis engineeringestimates for civil works. In order to presenta realisticestinmte based on local rates for material,manpower and machinerv,it was envisagedto establishguide line rates for works.

For this purpose, the local consultantfirm Mls SAMPAK Intemational(Pvt.) were engagredto prepare Composite Schedule of Rates (CSR) for all types of highway works i-e maintenanceand construction and/or rehabilitation.These rates were preparedfor the four provincesand for each district in provinceand presentedin fourvolumes. The first four volumesof CSR wereprepared in 1990 and revised in 1991. After elapseof aboutthree years, due to major changesin marketprices of labor,materials and other construction relatedcommodities, it was decidedto revisethe CSR. Consequently,the contractfor revisionwas awarded to M/s SANMPAKin August. 1994and the CSR was publishedin 1995under the title "CompositeSchedule of Rates - 1995".

For the main road constructionbuilding materialsi.e. sand and aggregate,a materials survey was also conductedby Mls SAMPAK. The purposeof the this surveywas to investigatethe availabilityof suitable materialsin all regionsof Pakistanand highlightthe locationof main quarries in each province.For this purposeall regionswvere investigated and data regardingeach materialand loggingwas collected.These reportswere prepared in nine volumesand werepublished in 1990,covering all four provinces.These reports %verenot reVisedafterwvards as the revisedCSR also incorporatedthe availabilityof materialsin each district and this wasillustrated by the varningrates. TSP Loan Final Report

2.8 QUALITYASSURANCE PROGRAM

As per the World Bank requirements.NHA appointed local consultantsin each region for the quality assurance of executedprojects under TSP Loan. The main services as requiredfrom these consultants included:_ a) To provide independenttesting services for qualitv assurance during pre-constructionand constructionphase according to the specifications. b) To providetechnical advice and supportto NHA fieldstaff and contractorsin approvingthe rnaterial quarriesand sourcesof materialmanufacture. c) To providetechnical advice and support to NHA fieldstaff in conductingroutine qualitv tests at projectsite.

M4aterialsTesting Laboratories: In orderto monitorthe qualitvof works and for providingindependent testing facilities to both the contractor and the consultants,field materials testing laboratories were initiatedin December,1991 for a period of one Xear initiallv.Aftenvards, an extensionof two vears was also awardedfor servicesupto December.1994. For this period.the staff serviceswere charged to TSP loan and the actual laboratoryfees werechargeable to the contractorsthrough the runningbills.

The consultantswere instructedto base the equipmentat such locations,from where it wvasconvenient to exercisethe qualitycontrol program for all MBRP and RSP projectsscattered all overthe nationalhighwvay net\ork. Initiallv.Iaboratories at followsingstations were established.

* Quetta(Balochistan) * D.G.Khan(Punjab) * Hderabad(Sindh) Ravalpindi(Punjab) Lahore(Punjab) * Bahawalpur(Punjab)

The executionof MBRP/RSPprojects was strengthenedby frequentcheck testing of constructionmaterials, thcrcbvupgrading the constructionsklls of the contractorsand valuedworks. In addition,these laboratories also aided in irmprovementof the know-howand technicalcapabilities of staff. whetherit be from client. consultantor contractor.

LocalResident Engineers In the four provinces.four (04) ResidentEngineers(R.E) were engagedto supervisethe works in each province.Their servicesengaged in May. 1991and after the completionof a rrmajorportion of projects i.e. first three roundsof MBRP and RSP projects.were terminatedin December,1994. After that pericd, the NHA fieldstaff consisting of DeputyDirectors, Assistant Directors and Inspectorssupervised the works. For someof structuralcontracts, consisting of piled foundationsand prestressedgirders, local consultantswvere engagedon case to case basis, in orderto assistthe NHA fieldstaff. The servicesof all theseconsultants were chargedto TechnicalAssistance component of the loan. TSP Loan Final Repor

CHAPTR 3 - .

3.1 TECHNICALASSISTANCE AS MANAGEMENTCONSULTANT

Duringthe implementationof the HighwayMaintenance Improvement Program, it becamevery apparent that the deferredmaintenance on sectionsof the nationalhighway networkhad to be the subjectof an extensive reconstruction.re-strengthening and rehabilitationworks program.

The maintenance improvementconsultants had identified each and every section that was beyond maintenancethrough the applicationof the MaintenanceIntervention level system (MIL). This identification process had becomevery necessarywhen it was apparent that insufficientmaintenance allocations were renderedfar less effectiveby being utilizedmore and more for necessary, new or reconstruction works. Consequently,the quantum of deferredmaintenance increased manifold w,ith increasing kilometers of such sectionswhich were bevondmaintenance scope of works.

The managementof the programwas undera separatecombined team of consultants(both foreignand local) withNI-A key projectstaff. The teamand programnwas coordinatedunder the nominatedincharge of NHA

Thestaff organizationchart of NHA managementteam. responsiblefor executionof MfBRP/RSPprojects is placedat AnncxurcIV. The staff organizationchart of primaryconsultant Ni/s Karmpsax Intemational A/S is placedat AnnexureV.

Obiectives TIheobjectives of the ManagementConsultants was to give effectto the NHA desireto carrv out a one-time program of reconstruction.rehabilitation. resurfacing and strengtheningof those sections of national himhwaavs.that are deterioratedbeyond ordinary or periodicmaintenance by:

a) Utilizingthe currentlypre-qualified indigenous NHA contractorsto carry out all * orks of reconstructionand rehabilitationidentified as part of the MBRP and RSP package. b) Ensuringthat the local contractorsperform satisfactorilvand increasetheir capabilitiesby placingall the smnallerlocalized works in an overallcontract package under the controland responsibilityof principalconsultant. M/S KarnpsaxInternational A/S. c) Identif.ing all the sections for the program on a yearly basis using the MBRP/RSP prioritizationstudy recommendationsas a guidelineto selectlinks for detailedanalysis and then using acceptedpavement evaluation techniques, including the NMILsvsterm, to identify specificworks and calculatingthe Benefit/Costratio of these.works. d) Ensuringthat the necessarvfield organization is in place at the end of the reconstruction phase to carrv out the normalroutine and periodicnaintenance program which willenable NHA to maintainthe rehabilitatedsections in the newre-built condition.

3.2 MANAGEMENTCONSULTANTS WORKS PROGRAM

Consultantsservices were confined to the followingactivities.

PhaseI -ConstructionContract'Startup. * Reviewthe Contractor'swork schedule and plannedactivities for conformancewith the NHA'sobjectives and proposerevisions as required. TSP Loan Final Report

* Reviewcontractor's prepared lists of proposedplant sites, disposal sites, storage sites, site offices, facilitiesto be providedfor the local contractor,Adminisaion Consultants'staff and the narnes and contractorinformation of the localSub-Contractor staff responsiblefor each site. Propose revisionsas necessary.

* Review the Contractor supplied laboratoryfacilities to determiinetheir capability to carry out the specifiedmnaterials testing requiremnents.Propose revisions as necessary.

* Preparean overatlconstruction supervision program outlining staff designations,lines of responsibility. reportingprocedures and dutiesof all NTHAlocal Consultant and ManagementConsultant staff involved in the program.

Phase11 - ConstructionSupervision * Assist the local Contractor AdministrationConsultants in developingprocedures for checking the contractors'setting out of the wvorks

* Reviewand evaluate the local Contract AdministrationConsultants' procedures and performancein terms of the requirementsof the contract specificationsand accepted engineering practices for constructionsupervision. quality control testing and contract administrationof civil and highway engineeringcworks.

Providesufficient financial and phvsicalprogress monitoring and controlsthrough reporting procedures whichfollow accepted practices for civiland highw-ayengineering Nvorks.

Phase III - Planningof SucceedingYears Proeram * Assist NHA in selectingnetwork links of detailed review based on the priorities establishedin the MBRPIRSPPrioritization Study. distribution of work withinthe country.viable contract packagesand otherongoing road and structurerehabilitation program.

* Assistthe PMU cell of the NHA in planningand executinga pavementevaluation study of all linksto be includedin the subsequentsear's priorities.

* Assist NI-HAin the preparationand evaluationof a plannedprogram of works for the subsequentyears. basedon the pavementevaluation study data and acceptedpavement evaluation and analvsistechniques includingthe MIL system. TSP Loan Final Report

r. ;i --- i-i. -...... --;-:-:...... -.---;i-i.i-i----.;i .. . .. ~~_- .. NV4.. CHPTER. .--. 4`-

4.1 JUSTIFICATION OF PROJECTS

For the RSP and MBRP projects, the econornic analysis focused mnainlyon the benefits accrued to the road user in terms of reduction in vehicle operatng costs (VOC) and travel timne For thiis purpose, in the initial studv. a number of documents were used as reference which includedthe JICA Study (Japanese Intemational Cooperation Agency) of 1983, VOC Tables published by NTRC(National Transport Research Center) from 1979 to 1986: and JICA Studc of 1988.

For calculation of VOC. the subroutine from the third version of World Bank Highway Design and MNlaintenancemodel (HDM-III) was used. For the purpose of conformity of various features of I)ID-III model. the composition of traffic -was armendedto conform to the existing traffic patterns in Pakistan. The vehicles were divided into Light. Medium and Heavy categories. For the other components i.e. vehicle load, utilization, interest rate and value of passenger time were based on the JICA study of 1988.

For development of road maintenance costs, the findings of Kampsax were used to define the four categories to calculate the cost of upgrading each category. These categories have been explained in section 2.2 earlier. Tiheseare again described delow.

C;ite<-orN Any seg,nentof road vith a surface roughnessvalue exceeding 5000 mm/Krnand vith potholes/patches< 15%. but othernise in good condition. Pavement condition Index (PCI) = 40 to 49. CatC'_9o 2 .Am segmentof road meeting the requirementsof category 1. but ixith potholesand/or patches exceeding 15% and below60% (15 - 60 %) of Lheroadway surface area. Palveent condition Index PCI = 50 to 59. Ctezonr3 Any segmentof road where the roadwaysurface area is more than 60% cracked and the surface is beginning to disintcgrate. Pmaement condlition InldexPCI = 60 to 69. Citc,_ory 4 Ain segment of the road wNherea paved road-'ay surfaceis nonexistentor is in an advanced state of disintegration. Pmvemient condition IndleexPCI 70.

Thle analvsis investment period was set at ten years and salvage values calculated for this period. For prnoritizationof roadway links, a two step process was followed.

First step: Economnicanalysis of each segment was done to calculate the reduction in VOC resulting due to the upgrading of that segmnent.The primary criterion used to prioritize the segment wvasthat of Beneftt/Cost ratio. In addition, Internal Rate of Return alRR) w-as also calculated but ,was given the secondary criteria status. For calculation of B/C ratio and IRR, 10 vear analyvsis period and 14% interest rate wNasused.

Second Step: Non-economic factors were used to indicate the importance of highway links. These factors mainly reflect the relative importance of a road segment and are given below.

* Travel desire lines and trends: * lntemational links for trade: * Access to major communities: * Benefits by improving the geometry and safety of roads e.g. vvidershoulders. TSP Loan Final Repon

Both of these steps were used for ranking of highNwayswithout breaking the highways into links. Table 4.1 (below) shows the links on national highways determiinedto be most economicalfor consideration in MBRP and RSP projects with B/C ratios exceeding 1.5 or more.

RecommendedRanlirie of Hi2hwavLinks

Combined Highway Link Economic Other Ranking Ranldng Factors I ______Ranking I N-5 Km 0 to 1698 2 I 2 N-25 Km 0 to 740 1.8 2 3 N-55 Krn to 178 3 5 4 N-70 Km 0 to 115 4 8 5 N-55 Km 936 co 1253 5 5 6 N-65 Km 0 to 380 6 5 7 N-50 Km 0 to 161 7 5 8 N-40 Km O to 78 10 4 9 N-55 Km 717 to 795 9 5 to N-SO Km 463 to 528 11 5 11 N-55 Km 178 to 445 12 5 12 N-70 Km 360 to 430 13 8 Table 4.1

4.2 PROJECTS DETAILS WITH FINANCIAL STATUS

The activitiesin the 59 Resurfacing and StrengtheningProgram (RSP) contracts - 34 NlaintenanceBacklog ReductionProgram (iMfBRP)contracts - and 17 contracts for 1992 Flood Restoration Project are detailed as per Annexures 1. 11& III.

Summary (cison June 30. 1997)

All RSP Contracts Rs. 890.762 Million

All MfBRP Contracts R:s 2,839.-83 MVillion

All 1992 - FDRP Contracts PRs. 148.234 iAlfllion

Total Rs. 3,878.234 ?r'illion TSP Loan Final Report

RSP Proiects

A total of 59 projects were awarded under RSP package initially and were prepared in three phases. Later, due to availabilitvof Pakistan Rupee component resulting from devaluation of Rupee against US dollar, two further rounds of contracts were awarded. as per following details

Round Total Cost Remarks Contracts (Rs. Million) Round1 17 297.554 14 contractscompleted. 3 contractsterminated. RoundII 18 284.600 17 contractscompleted. I contractterminated. RoundIII 10 167.461 10 contractscompleted. Round111-A 9 41.231 9 contractscompleted. RoundIV 5 99.916 5 contractsawarded and workis ongoing. Total 59 890.762

The details are all rounds of RSP are placed at Annexure I.

NIBRP Proiects

A total of 32 projects were awarded under MBRP package and were prepared in three phases. Of these, two contracts \were tendered internationally and wNereunderaken by international contractors. The details are attached belo.-

Round Total Cost Remarks I______LContracts (Rs. Million) L RoundI 1 83.901 9 contractscompleted. I contractterminated. [ourld 11 _ 200.189 9 contractscompleted. | RoundIII I1l 214.555 3 contractscompleted and workis ongoingon 8 l l l l ~~~~~~~~~~~contracts._ ICB Contracts 2 2.340.838 Bothcontracts completed. Total 32 2,839.483

The details are all rounds of 19LBRPare placed at Annexure II.

1992 - Flood Damaaes Restoration Proiects - TSP Loan Utilisation

During the seasonal monsoon rains of 1992. Pakistan experienced exceptionally heavv rains resulting in w\idespreadfloods all over the countrv. Tnis flood peak resulted in considerable loss to crops, life, road infrastructure and public property. National Highway Authority immediatelvlaunched highway restoration programmes to repair the damaged sections of national network.

After the floods. the Govemment of Pakistan was also assisted by donor agencies for financing of rehabilitationschemes, under separate loan agreements from IDA and Asian development bank (ADB). The retroactive period for these loan financed projects was fixed as September 10, 1992. Some of the expenditureson the national highways were incurred iumediately after the 1992 rains and fell out of the loan effectiveperiod. It wmas,thus. agreed by the World Bank that these expenditurescan be financed through on- going loan agreement TSP LN-324 1.

For this purpose. 17 projects wvereincluded in RSP and 2 projects(comprisingof 3 bridges) were included in iNIBRPscheme. The summnarvof these projects is given below and details are placed in Annexure Ill. TSP Loan FLnalReporf

Description No. of Cost Contracts (Rs NMillion) 1992- FDRPSchernes financed underRSP 17 39.045 1992 - FDRP Schernesfinanced under MBRP 2 109.189 Total 19 148.234

PROJECT STATUS

The funancialstatus of civilworks for MBRP.RSP and 1992- FDRPcontracts is attachedat AnnexureVI.

FINANCIALSTATUS

The financial status of MBRP and RSP contracts including the civil works, claims submitted, reimbursementsin US dollars along with allocation for technical assistance and committed funds is attached at AnnexureVII.

LOAN UTILIZATION

a) Original loan amount : US $ 77.5 Million

Additionalfrom Railway Component US $ 11.5 Million

Total . US S 89.0 Miflion i

b) Loan Utilizedupto 30.06.1997 US5 79.53 Million

c) Perccntage Utilized : 89.4 %

d) Allocationfor 5th Highw%ayProject US S 2.10 Million

c) Allocationfor Equipment : US S 1.13 Million

4.3 IMPACT & ACHIEVEMENT OF MBRP/RSP PROJECTS

The main essence of formulatinga project of road rehabilitationwas to bring the national highway network to the as-built condition, so that the recurrent maintenance are rendered effective and wvithinthe financial capability of INHA.On the other hand, the road user benefits will occur, which include savings in VOCs, increase in cargo. passenger and traffic safet and saving in travel time of the road user.

Another main impact of NMBRP/RSPproject has been employment generation. Except for two major International ICB contracts, all contracts under MBRP and RSP schemes were implemented through local contractors of medium to high repute and capability.

As the contracts were both machinery operated as well as labor intensive, this resulted in direct impact on creation of job opportunities. The overall impact of raising the standards of contracting industrv is appreciable. as can be seen from the development of contracting industr, in far flung areas of Pakistan as N- 40. N-O0 etc. TSP Loan Final Report

The physicalachievements under the RSP and MBRP programshave been substantial. Of the 392.5 kilometersof the national highwaysin the four provincesincluded in the RSP program, about 384.5 kilometershave been repaired and strengthened.A total of 59 RSP contracts have been awvardedand completed.The costlkmof the RSP programis estimatedat about Rs. 2.01 million.The detailsof lengdhof road improvedin RSP contracts is attachedin AnnexureVm, includingthe route-wiseand province-wise breakdown.

30 minor MBRP (LCB) contracts for about I1 kilometer pavernentplus several bridges with an estimated completioncost of about Rs. 498.6 million have been awarded and are now 82% complete. All II1 km of roads in the minor MBRP program have been rehabilitated by June 30, 1996 at a cost/lan estimated to be about Rs. 2.15 million. Rehabilitation of 16 drainaae related structures . mostly bridges of medium size has been completed.

2 maior NIvBRP(ICB) contracts for reconstruction and nexvconstruction of about 190 kilometer pavement ith an estimated completion cost of about Rs. 23 40 million have been awarded and are now 100% complete. All 190 km of roads in the major ICB MBRP program have been rehabilitatedby June 30, 1996 at a costlan estimated to be about Rs. 12.30 million. The details of length of road improved and structures improved or rehabilitated in MIBRP contracts is attached in Annexure [X. including the route-wise and province-wise breakdown.

T'he impact of the RSP and MBRP projects has been significant in saving and extending the life of badlv deteriorated sections of national highway pavements and in reducing road transport costs. In Punjab-South, %%herethe existing single carriage-waywvith daily traffic of some 9.000 vehicles were on the point of total failure. under the RSP the existing pavement was strengthenedand can be overlaid and further strengthened with Asphaltic Concrete when the bearing capacity and strength of the pavement has been much improved. The completed MERP bridges on the N-5 in Punjab North have increased road capacity and improved road safety.

Since the RSP and minor NIBRP contracts were done by local contractor. the project has given a considerableboost to the development of the domestic contracting industry. It has also helped in raising the construction standards. and familiarization wsithinternationally accepted contracts conditions and material specifications. Annexure I

Details of RSP Contracts RSP Round I Contracts *______June, 1 Contract No. Route Reaches Contractor Contract Completion Payment Date of Original Revised No. Km/Km Amount Cost Todate Award Date of Date of RemarO (Rs) (Rs) (Rs) Completion Completion RSP 7101 N-5 1291/1298 M/s Moderate Builders 11.208,544,00 43.916,498.78 43,916.498.78 04-07-91 25-07-92 31-12-93 Complet RSP 7102 N-5 1307/1320 M/s Khalid Rauf & Co. 18,196,600.00 67,598,158.35 67.598.158.35 15-05-91 05-06-92 20-07-93 Complet RSP 7103 N-5 1550/1565 M/s Sadduilah Khan & Bros. 17,698,950.00 20.482,470.34 20,482.470.34 15-05-91 30-04-92 30-04-93 Complet, RSP 7104 N-5 982/1006 M/s Sarwar & Co. 11,537,000.00 3,054,298.66 3,054.298.66 11-04-91 30-04-92 Terminati 1045/1063 _ RSP 7105 N-5 205/215 M/s Sachal Engg. 11,405,892.00 18.445,617.22 18,445,617.22 15-05-91 05-06-92 30-06-92 Complelt RSP 7106 N-5 215/220 M/s Altaf Hussain Bhughio 5.385,200.00 6,390,233.00 6,390,233.00 07-05-91 27-05-92 27-05-92 Complet RSP 7107 N-5 240/245 M/s Nek Mohd. & Co. 5,782,740.00 6,304,204.50 6.304,204.50 15-05-91 04-06-92 04-06-92 CompletE RSP 7109 N-55 4/19 M/s Al-Hussainy 9,954.428.00 7,074.760.35 7,074,760.35 20-05-91 10-06-92 . Terminat8 RSP 7109T N-55 4/19 M/s Niaz Mohd, & Co. 12,768,677.00 10,642,246.40 10,642,246.40 17-02-92 06-06-92 30-06-93 Completr RSP 7110 N-65 10/25 M/s Qalandri Const. 8,013,540.00 2,576,308.60 2,576.308.60 07-05-91 28-05-92 Terminate RSP 7111 N-25 690/708 M/s Qasim Khan 11.004,750.00 12,325,935.45 12,325.935.45 27-04-91 16-04-92 30-06-93 Complete RSP 7112 N-65 350/380 M/s Liaqat Ali Kurd 12,966,440.00 8,118,553,60 8,118,553.60 19-05-91 10-06-92 31-12-93 Complelt RSP 7113 N-40 190/200 M/s Bashir Ahmed 4,835,100.00 10,879,524.51 10,879,524.51 11-04-91 01-05-92 30-10-92 Completr RSP 7114 N-40 200/230 M/s Rakshani Builders 7,129,800.00 18,868,829.01 18,868,829.01 09-05-91 30-05-92 30-04-93 Complete RSP 7115 N-40 230/240 M/s Haii Wadera Yaqoob 4,966.400.00 4,644,944.09 4,644.944.09 05-05-91 26-05-92 25-07-92 Complete RSP 7116 N-50 485/531 M/s Gul Const. Co. 14,732,080.00 21,494,390.48 21,494,390.48 15-05-91 06-06-92 04-09-92 Complele RSP 7117 N-55 914/926 M/s Mian Nisar Gul 16,819,660.00 34,737,154.11 34,737,154.11 15-05-91 06-06-92 04-09-92 Complete TOTAL (Rs) 184 405,801.00 297,554,127.45 297,554,127.45

RSPROUND.wqI RSP Round 11Contracts June, 19' Contract No. Route Reaches Contractor Contract Complet on Payment Date of Original Revised No. Km/Km Amount Cost Todate Award Date of Date of Remarks (RAs) (Rs) (Rs) Completion Completion RSP 7108 N-5 457-483 M/S IMAM BUX AND CO 24.698,129.00 28,183,927.80 28,183,927.80 22-6-92 13-07-93 10-05-94 Completec RSP 7119 N-5 1670-1690 M/S NASRULLAHJAN & INAMUL 12,381,528.00 13.372,283.00 13,372,283.00 23-05-92 22-05-93 30-04-94 Completed RSP 7123A N-5 563-585 M/S ANWAR & CO. 15.925,370.00 14,013.260.90 14,013.260.90 02-12-93 23-06-94 23-06-94 Completed RSP 7123B N-5 585-606 M/S ABDUL HAFEEZ AND CO 34,083,178.00 38.201,318.57 38,201.318.57 22-09-93 13-04-94 30-06-94 Completed RSP 7124 N-5 608-940 M/S ZAKRIACONST, 12,577,407.00 1,189,540.00 1,189,540.00 26-04-92 30-05-93 30-05-93 Terminated RSP 7124T N-5 608-940 M/S RAZA AND CO. 13,298.855.00 13,751.238.13 13,751,238.13 28-04-93 31-12-93 31-12-93 Completed RSP 7125 N-5 735-745 M/S FARAN ENTERPRISES 12.146,830.00 11,240,330.39 11,240,330.39 18-10-92 31-12-93 11-04-94 Completed RSP 7126A N-50 28-46 M/S HAJI NOOR MOHD. 8,886,169.00 8.165,831.66 8,165,831.66 28-06-93 09-04-94 20-08-94 Completed RSP 7126B N-50 59-93 M/S HAJI ASMATULLAH 14,796,285.00 14.536,322.00 14,536,322.00 25-04-93 09-04-94 31-10-94 Completed RSP 7126C N-50 132-162 M/S GULLA KHAN 15,096,159.00 17,008,407.80 17,008,407.80 17-04-93 09-04-94 30-08-94 Completed RSP 7127 N-55 1101 M/S SAJJAD AND CO. 5,243,098.00 7.527,081.00 7,527,081.00 30-08-92 29-08-93 29-11-93 Completed RSP7128 N-55 1121 M/SSAJJADANDCO. 17.043,530.00 18,959,618.20 18,959,618.20 11-10-93 31-07-94 31-12-94 Completec RSP 7129 N-65 270-350 M/S AHMED JAN BANGELZAI 8,758,502.00 7,824,199.08 7,824,199.08 18-10-92 18-10-93 18-10-93 Completec RSP 7130 N-65 72 M/S SH.HAJI ALI MOHD. 2.920.500.00 3,504,637.50 3,504,637.50 29-11-93 20-09-93 15-12-93 Complelec RSP 7133 N 70 89-92 M/S NAWAZ AND CO. 15,175,966.00 13,463,630.09 13.463,630.09 04-08-91 31-10-92 30-10-92 Completec RSP 7136 N-5 708-725 M/S ITTEHAD ENTERPRISES 37,257,056.00 41.137,955.35 41.137,955.35 02-11-92 01-11-93 31-12-94 Completec RSP 7137 N-5 580-603 M/S ABDUL SATTAR BAHIO 28,223.334.00 23,620,233 10 23,620,233.10 26-04-93 24-04-94 15-07-94 Completec RSP 7139 N-50 28-160 M/S MUNAWAR KHAN JOGEZAI 9.996.288.00 8,900,528,10 8,900,528.10 03-10-92 31-12-93 31-12-93 Completec

TOTAL (Rs) 288,508,184.00 284,600,342.67 284,600,342.67 ___

RSPROUND.wql RSP Round III Contracts June, 19! Contract No. Route Reaches Contract Completion Payment Date of Original Revised No. Km/Km Contractor Amount Cost Todale Award Date of Date of Remarks (Rs) (Rs) (Rs) Completion Completion RSP 7111A N-25 712-724 M/S QASIM KHAN 19,694.449,00 19,653,392.00 19,653,392.90 11-11-93 15-06-94 15-06-94 Complew RSP 7130A N-65 72 M/S SH. HAJI ALI MOHAMMAD. 3,100,523.00 5,334,249.89 5,334,249.89 23-11-94 14-04-94 14-07-94 Complewe RSP 7131A N-65 355-360 M/S ABDUL KARIM MENGAL 9,644.542.00 9,602,223.00 9,602,223.00 29-01-94 16-01-95 16-01-95 Complete( RSP 7131B N-65 360-365 M/S ABDUL HAMEED BANGELZA 12,553,842.00 12,553,811.00 12,553,811.00 29-01-94 28-12-94 28-12-94 Complete( RSP 7131C N-65 365-370 M/S LIAQAT ALI KURD 12,108,772.00 13,537,186.50 13,537,186.50 27-06-94 18-01-95 18-01-95 Complete( RSP 7140 N-5 768-778 M/S HUSSANI CONSTRUCTION 33,884.280.00 27,165.101.69 27,165,101.69 02-02-94 22-10-94 30-09-96 Complete( RSP 7141 N-5 725-735 M/S NADEEM & CO. 28,550.957.22 28,550,957.22 28,550,957.22 21-02-94 12-12-94 30-06-96 Completec RSP 7142 N-5 639-643 M/S NASEER AHMED 11,822,947.00 11,822.947.00 11.822,947.00 02-02-94 23-08-94 31-12-94 Complete( RSP 7143A N-70 121-130 M/S HABIB CONSTRUCTIONCO. 18.939,147.43 19,106,943.43 19,106.943.43 20-02-94 12-09-94 30-06-96 Completec RSP 7143B N-70 130-138 M/S MOHAMMAD NAWAZ 20,133,716.45 20,133,716.45 20,133,716.45 02-02-94 23-10-94 30-06-96 Completec TOTAL (Rs) 170,433,176.10 167,460,528.18 167,460,529.08

RSPROUND.wql RSP Round lll-A Contracts June, 11 Contract No. Route Reaches Contract Completion Payment Date of Original Revised No. Km/Km Contractor Amount Cost Todate Award Date of Date of Remark (Rs) (Rs) (Rs) Complelion Completion RSP 7148 N-55 1108-1117 M/S MOHD. SULEMAN_ BROS. 9,405,680.00 8,755,09 85 8,755,099.85 25-12-94 24-06-95 . Complete RSP 7151A N-5 1540-1565 M/S J & F CONST. CO. 3.045.230.00 3.045,230.00 3,278,237.90 28-12-94 28-05-95 30-06-96 Complelt RSP 71518 N-5 1570-1578 M/S HIGHWAY CONSTRUCTION 3.037.530.00 3,317,566.30 3,317,566.30 28-12-94 28-05-95 30-06-96 Complete RSP 7151C N-5 1578-1580 M/S TAMOOR SHAH CONST. CO. 4,524.110 00 4,588.333.00 4,588.333.00 28-12-94 28-05-95 30-06-96 Complete RSP 7151D N-5 1581-1590 M/S MALIK MOHD. IOBAL & CO. 3,955,362.80 3,955,362.80 3,955,362.80 28-12-94 28-05-95 30-06-96 Complete RSP 7151E N-35 80-104 M/S SAJJAD & CO. 4.183,978.00 4,805,667.72 4,805,667.72 17-01-95 16-07-95 Complete RSP 7151F N-35 104-115 MS/ OALANDARKHAN LODIll 3.350,600.00 3,723.047.59 3,723,047.59 17-01-95 16-07-95 Complete RSP 7166 N-5 1585-1588 M/S FARAI-i TRADERS 5,462,099.89 6,110,893 00 6.110,893.00 18-07-95 17-01-96 30-06-96 Complete ARSP7167 N-5 1599-1630 M/s CONST. PROFESSIONALS 2,929,545.27 2,929,545.27 2,351,069.45 18-07-95 17-12-95 30-06-96 Complele TOTAL (Rs) 39,894,135.96 41,230745.53 40,885,277.61

RSPROUND.wq1 RSP Round IV Contracts

Contract No. Route Reaches June, 1' Contract Completion Payment Date of Original Revised No. Km/Km Contractor Amount Cost Todate Award Date of Date of Remarki (Rs) (Rs) (Rs) Completion Completlon Progrest RSP 7161 N-65 370-378.9 M/s AL-SARWARJAN ENT. 25,837,647.55 25,837.647.55 8.749,780.00 28-09-95 27-05-96 01-10-96 65 RSP 7162A N-65 248-250 M/s HAJI NOORULLAH BALOCH 15.788,274.24 15.788,274.24 14,118,409.00 28-09-95 27-05-96 01-10-96 Complete RSP 7162B N-65 237-241.5 M/s ABDUL HAKIM BROHI 13.832,607.21 13.832,607.21 11.004,154.00 28-09-95 27-05-96 Q1-10-96 Complete RSP 7165A N-65 188-194 M/s A.K.B CONST. CO. 26,805.813.03 26.805,813.03 11,307,794.00 08-11-95 07-08-96 01-10-96 60 ASP 7165B N-65 194-200 M/s HAJI HASSAN KHAN 17,651,963.87 17,651,963.87 8,769,993.00 28-09-95 27-05-96 01-10-96 60 TOTAL(Rs) . 99S916. 305.90 -- 99,916,30590 53,950,130.00

RSPROUND.wq1 Annexure II

Details of MBRP Contracts MBRP ROUND I CONTRACTS

Ju Contract Route Reaches Contract Completion Payment Date of Original Revisod No. No. Km-Km Contractor Amount Cost Todate Award Date of Date of R (Rs) (Rs) (RA) Completion Completion

MBRP 7002A N-25 0-320 M/s AL-SARWAR JAN 17,571,858.00 16,259.239,64 , 16,259.239,64 05-08-91 26-08-92 30-03-93 Co

MBRP 70028 N-25 320-550 M/s FATEH MOHAMMAD 7,570,632.00 3.263,934.00 3,263.934.64 06-10-91 27-10-92 . Ter

MBRP 7003A N-35 78-142 M/s HAKAS 33.472,034.00 27,879,869.59 27,879.869.59 22-09-91 12-10-92 15-03.93 Co. MBRP 7003B N-35 80-180 M/s HAKIM SONS 7,728,340.00 8,859.78000 8,855,970.68 15-11-91 09-11-92 14-11-92 Co

MBRP 7035A N-25 117-165 M/s SHAM LAL 6,383,900.00 6,986.827 75 6,986.827.75 15-08-91 22-07-92 24-07-92 Coi

MBRP 70358 N-25 234-335 M/s KORA KHAN 6,205,465.00 1,603.426.50 1,603,426.50 15-08-91 22-07-92 24-07-92 Cor

MBRP 70350 N-25 385-467 M/s SADATZEHRI 5,761,750.00 4,656,312.55 4,656,312.55 15-08-91 22-07-92 24-07-92 Cor

MBRP 7035E N-25 467-552 M/s TAJ BROTHERS 5.949,000.00 6,365,807.20 6,365,807.20 15-08-91 22-07-92 24-07-92 Cor MBRP 703SF N-25 552-610 M/s HAMEED BANGALZAI 5,877,800.00 3,473,762.72 3,473,762,72 15-08-91 22-07-92 24-07-92 Cor MBRP7035G N-25 610-675 M/s RAKHSHANI BUILDERS 5,768,000.00 4,552,128.22 4 552,128,22 .15-08-91 22-07-92 01-08-92 Cor

TOTAL (Rs) 102,2888779.00 83,901,088,17 83,897.279.49

MBRROUND.WQI MBRP ROUND II CONTRACTS (LCB) Jul Contract Route Reaches Contract Completion Payment Date of Original Revised No. No. Km-Km Contractor Amount Cost Todate Award Date of Date of Re (Rs) (Rs) (Rs) Completion Completion

MBRP 7004A N-5 1100-1130 M/s STRONG BUILT ENT 6,021.630.00 6,28840874 6,288,408.74 07-08-93 28-02-94 28-01-94 Cor

MBRP 7006 N-35 93-160 M/s HUSNAIN CONST. CO. 53,223,864 00 57,785.319 19 57.785,319 19 21-05-93 11-06-94 30-04-95 Cor

MBRP 7006A N-35 84-160 M/s MALIK IOBAL 8,750,140.00 10.169.462 63 10.169,462 63 18-05-93 08-06-94 07-06-94 Cor

MBRP 7011 N-5(SB) 1555-1565 M/s GHULAM RASOOL 30,615,854.00 23,962 425 50 23.962.425 50 23-11-92 31-12-93 30-06-93 Cor

MBRP 7011A N-5(SB) 1562 M/s HAKIM SONS Pvt. Ltd. 1,923,407.00 1.808.11032 1.80811032 23-11-91 13-01-92 28-02-92 Cor

MBRP 7011B N-5(SB) 1555-1565 M/s NAZIR & CO. 630,000 00 634.671.00 634.671 00 24-08-92 14-09.92 31-10-92 Con

MBRP7012 N-5(NB) 1570-1585 M/s KHOKHAR BORS. 48.607.03400 55.876.20300 58711 66900 09-11-92 08-07-93 31-03-96 Con

MBRP 7013 N-5(NB) 1585-1590 M/s HAIDERCONST. CO 16.349,007 00 16,349.007 00 12,757,725 85 18-10-92 07-05-93 29-02-96 Con

MBRP 7014 N-5 275-292 M/s NAIK MOHAMMAD 28,903,430.00 27,315.342 09 27,315.342 09 05-06-93 26-12-93 03-01-94 Con TOTAL (Rs) [ 195,024,366.00 200,188,949.47 199,433,134.32

MBRP ROUNDII CONTRACTS (ICB) Jur fContract Route Reaches Contract Completion Payment Date of Original Revised No. No. Km-Km Contractor Amount Cost Todate Award Datr. of Date of Rai (Rs) (Rs) ___s) Completion Completion

MBRP 7004 N-5 1100-1130 M/sE.C.LC 469,662,436.00 493,837,85700 493,837,857.00 19-07-92 19-07-94 01-10-96 Con

MBRP 7005 N 25 325-485 M/sJ& P (0) Ltd. 588,906,546.00 1,847,000 000 00 1,720,551.410.00 16-10-92 07-11-94 30-03-97 Con i ______,__ _ .______._ TOTAL (Ra) 1,058,568,982.00 2,340,837,857.00 2,214.369,267.00

MBRROUND.W01 MBRP ROUND III CONTRACTS Jun rContract Route Reaches Contract Completion Payment Date of Original Revised No. No. Km-Km Contractor Amount Cost Todate Award Date of Date of Rer

______(Rs) (Rs) (Rs) Completion Completion MBRP 7016 N-5 1282/2 M/s SHIABDUR RAZZAQ & CO. 19,998,230.00 19,998,230.00 19,014,466.00 18-07-95 17-07-96 01-09-96 On- MBRP 7017 N-55 115611 Mls MIAN NISAR & CO. 2.991,870.00 2.991,870.00 2,991,870.00 28-12-94 27-06-95 01-09-96 Con MBRP 7018 N-5 1192/2 M/s GUL2AR CONST. CO 22,851,560 00 22,851.560 00 12,400,164.00 19-09-95 18-06-96 01-10-96 6 MBRP 7019 N-5 1273/2 M/s DHANI BUILDERS 13,446,360.00 13,446,360.00 12,362,756.00 26-09-95 25-06-96 01-10-96 7 MBRP 7020 N-5 1291/3 Mis GHULAM HABIB CONST.C 7.338,034.00 7,338,034.00 3.691,559.85 21-06-95 20-03-96 30-06-96 9 MBRP 7021 N-5 1611/2 M/s MIAN NISAR & CO. 2,259,760.00 2,259,760 00 2,979,681.00 07-12-95 07-05-96 30-06-96 Con MBRP 7022 N-5 1667 M/s NAJEEB ULLAH KHAN 2,020,350.00 2.020.350.00 310,000 00 28-09-95 27-03-96 30-06-96 Con MBRP 7025 N-70 92 M/s ASIF CONST. CO. 27,406,386.00 27,406,386.00 6,496.572.00 16-10-95 15-10-96 15-10-96 e MBRP 7026 N-40 88 Mis AGHA MOHD. & BROTHER 11,244,299.56 11,244,299.56 5.595,308.00 16-02-96 15-09-96 15-09-96 e | MBRP7052 N-65 325 M/s HIGHWAY BRIDGES & CO 37,064,262.00 34,138.000 00 47,789,520.00 14-06-95 05-07-96 01-10-96 9 MBRP 7144 N-25 675-681.2 Mls QASIM KHAN 70.860.350.42 70.860,350 42 33,9068732.00 15-05-95 15-06-96 01-10-6 On

______(Rs) TOTAL 217,481,461.98 . 214,555,199.98 149,538, 628.85

MBRROUND.WQ1 List of 1992 Flood Damages Projects

a) RSP Schemes

S., Contract Route Location Contractor Contract Completion Remarks No: No. No. Km - Km Cost Cost Million Rs. Million Rs. I EMS-1 11 N - 5 325-333 M/S NAIK MUHAMMAD 4.780 4.458 Completed

2 EMS-1 12 N - 5 333.3-334 M/S KHAIR MUHAMMAD 2.681 2.520 Completed 3 EMS-1 13 N - 5 340.6-343 M/S MUNIR SHAIKH 8.440 8.419 Completed 4 EMS-1 14 N - 5 347.4-348 M/S JAGIRANI 3.335 3.153 Completed 5 EMS-1 15 N - 5 348.5-352 M/S ATTA MUHAMMAD 3.148 3.144 Completed 6 EMS-1 16 N - 5 356.9-357 M/S MUNIR SHAIKH 0.826 0.692 Completed 7 EMS-1 17 N - 55 20-133 M/S MUNIR SHAIKH 3.187 2.922 Completed 8 EMS-1 18 N - 55 26 2-54 M/S OAMIR-UL-DIN 0.651 0 614 Completed

9 EMS-1 19 N - 55 49 M/S QAMIR-UL-DIN 0.239 0.107 Completed 10 EMS-120 N - 55 155-182 8 M/S QAMIR-UL-DIN 0.504 0.464 Completed

11 FD-102 N - 25 15-220 MIS SHAMLAL 5.460 5.520 Completed 12 FD-103 N - 25 73-74/145-155 M/S S,M.C CONST.CO 4.220 4.216 Completed 13 FD-104 N - 25 334-340 MIS SADAT AKHTER 0 310 0.307 Completed 14 FD-105 N - 25 363-372 M/S M.YAQOOB 0.460 0.454 Completed 15 FD-106 N -65 281-282 M/S QURBAN ENGR. 1.170 1.175 Completed 16 FD-107 N - 25 226-500 MiS M.YAQOOB 0 310 0 278 Completed 17 FD-108 N - 25 318-331 M/S HAJi ABDUL HAMEED 0.600 0.602 Completed

Total (Million Rs) 40.321 39.045

b) MBRP Schemes

S Contract Route Location Contractor Contract Completion Remarks No. No. No. Km - Km Cost Cost Million Rs. Million Rs.

1 FD-150 N - 65 Nari Bridge M/S S.K.B 59.246 53.849 Completed (Km -240) Kumbri Bridge (Km-248) 2 FD-151 N-25 Koshak Bridge M/S SHAIKH ALI MOHD 55.717 55.340 Completed I I I (Km-382) Total (Million Rs) 114.963 109.189

TSPFLOOD.WQ I Annexure - IV NHA Project Management (MBRP/RSP)

(Op ,t,.#er,a:lt,.ns)..

.. v....p .%...... %:. ...:., Dd...... -M: '...... --' -- .... - ---. .Manag...er -

,.:.- Direcor-'-.'g-- :-E i;: :EManage ,-: - -: ~~~~~~~~...... _,:_.:..:: .... ;..a.;.;.;.:.;..;......

(-N:: ...W- : ..'..fPt@/RSP)'. -.-....-.-...:.3'.:-$in)...... ( P ) ...... ,...... ,. .;...... -

...... t~ t )I~ ~tr:...... -7 1 ......

Qt=efl M uaiI D < lgh I~hW, Bss < Surkur Mu 0 (t.Kb Re¢1d #Lhr

Maintenanceunits Maintenancefield field units Maintenacefield units MaIntenancettf field units Maintenancefield uni

. .,-...... -.': ..-. 4 .0 Uo $0 ' ~ ~ ~~~. ::3flUO 's'~iu~l--' ~~ ~ ~ ~ .. -. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... qPU!S i-_' :-..i - . . i____ S -r--- - ;;;' T .~.~;-. 'i---i>B

X e U~SO~~W,_ , :,~ 0OO._91 _VOL

leuoi euJ,-i I .-JO6eueVl.j1.3efo.J.d:.'-

S/V 4Uj xesduwm- S/P 1uoUwc23u-1W su4iW4IsuoD

A, ;)inx;)uLuV FINANCIAL STATUS UPTO 30th June, 1997

______Page I of I

S. Contract Award Original . Revised Value of Value of Financial No. . Nos. Period Contract Contract Work Remaining Status/ Amount Amount done Works Progress (Mill. Rs) (Mill. Rs) (Mill. Rs) (Mill. Rs)

RSP Projects

I Round 1 17 1991-92 184.406 297.554 297.554 0.00 100%

2 Round il 18 1992-93 288.508 284.600 284-600 0.00 100%

3 Rouind Iti 10 1993-94 770,433 167.461 167.461 0.00 700%

4 Round III A 9 1993.94 39,894 41 231 40.885 0.35 100%

5 Rournd IV 5 1995-96 99.916 99.916 53.950 45.97 54%

6 RSP 1992-Flood 17 1992-93 40.321 39.045 39.045 0.00 100%

Total RSP (Rs. Million) 823.478 929.807 883.495 46.31 95%

MBRP (LCB) Projects

I . ARoundI 10 1991-92 102.289 83.901 83.897 0.00 100%

2 Rousnd11 9 1992-93 & 94 195.024 200.189 199.433 0.76 100%

3 Round III 11 1995-96 217.481 214.555 149.539 65.02 70%

4 flood Damages 2 1994-95 714.963 109.189 109.189 0.00 100%

Total LCB MBRP (Rs. Million) 629.757 607.834 542.058 65.7 8 89%

MBRP (ICB) Projects

t Sahiwal - Okara, N-5 (Mls ECLC) 1991-92 469.662 493.838 493.838 0.00 100%

2 Wadh - Surab, N-25 (Mls J&P) 1991-92 588.906 1847.000 1720.551 126.45 93%

Total ICB (Rs. in million) 1058.568 2340.838 22t4.389 126.45 95% TOTALMBRP (ICB+LCB) 1688.325 2948.672 2756.447 192.22 93% GRAND TOTAL (MBRP & RSP) 2511.803 3878.479 3639.942 238.54 94% (Rs. in million) _ _ _ _ _

The World Bank is assisting the two programmes by Financing with a sharing portion of 6 40% and 20% respectively for RSP three year programme and 70% for MBRP.

PROJSTAT.WQ1 TRANSPORT SECTOR PROJECT Annexure VIl FINANCIALSTATUS UPTO 30th JUNE, 1997 A: Works Awarded

DESCRIPTION SAR BUDGET COMPLETION PAYMENTS COMMITTED Plojected ALLOCATED IBRD Finance Table 3.1 PC-I COST (Actual) (but not yet paid) Utilisation (IBRD Loan Funds) Total payments Rs U.S $ Possible Total amount Rs U.S $ U S $ U S $ made on all cont- Millions Escalation committed Millions racts upto 30-06-97 G.O P IBRD as of 30-06-97 G.O.P IBRD IBRD IBAD Rs (Millions) Rs (Millions) Rs. (Millions) Rs Million Claimed Rs (Millions)

(1) (2) (2a) (2b) (3) (4) (5) (5A) (6) (7) (8) (9) (10)

MBRP 1694 00 1489 00 2,948.672 2.756.447 885 78 65.77 311.26 503 49 407 04 6 87 72.64 72.40 ($52)

a) 7004 493.838 493.838 0.00 0.00 0,00 0 b) 7005 1,847.000 1,720.551 300.00 426.45 330.00 6.87 c) Minor 607.834 542.058 11.26 77.04 77.04

RSP 1023.00 853 00 929.807 883 495 58643 7 28 15.00 61 31 61 31 7.28 8.10 ($15)

Tech Assist 252 00 110 00 272.810 202.200 648 8.36 78.97 1.60 8 08 8.30 ($5.50)

Equipment 4 00 7.600 7.60 1.00 1 00 0.20 ($0.20)

Unailocated 96.00 0.00 0 00 | ($4 80) _

TOTALS 2969.00 2552.00 4,15e.889 3,842.142 1,474.21 79.53 334.62 651.37 468.35 9.47 89.00 89.00 ($77 50) 1

The sum of U.S $ 7.341 million has been recovered on account of special account Outstanding intial deposit as of 14-06-97 U.S. $ 0.159 million

tsplil wql TSP LOAN PROJECT (LN 3241 PAK)

Length of Roads Improved (Kilometers)

Round I Province N-5 N-25 |N-35 N-40 N-50 N-55 j N-65 N-70 ,Total

Punjab 25 - = 1 _ 25 Sindh 20 - 20 7 - 47 NWFP - - 4 30 10 6- 40 Balochistan X 40() _ 6 54

Total 45 8 = 40 3 30 ____|

Round 11 Province N-S N-25 N-35 N-40 N-5O N-55 N65 N-70 Ti Punjab 20 2.5 22.5

Sindh 50 - 50 NWFP 6 - 6 Balochiistan - 6)0 Total 76 60 .25 =.

Rotiiid Il1 _ . Province N-S N-25 N-35 N-40 N-50 N-55 N-65 N-70 Total Punijab 29 16 45 Sindh - | |

NWFP - -- Balociiistan -15 15

Totail 29 | - - 15

Rounid Ill-A PProvince N-5 N-25 N-35 N-40 {N-50 N-55 N-65 N-70 DTotal 1 1INWFP I I I I I I9 I |9 , Total - ' I - -.- I

Round IV Province N-5 N-25 N-35 N-40 N-SO N-55 N-65 N-70 Total Balochlistan 19 1 119 !Total - - (-1--I-I',i 1Ig

N-5 N-25 [ N-35 N-40 | N-50 | N-55 N-65 | N-70 | Total Tot;{.al1j 1501 8 j ;-: -t0 4-0 j 0 3 7 1.5 325

Total Cost Rs. 791 Million (Pavement Contracts only) Cost/Km Rs. 2.01 Mlillion/km

PHYRSP. DOC Physical Achievement of NIBRP Proiects

A: Roads Improved

Round I

Province N-S N-25 N-35 N-40 N-50 N-55 N-65 N-70 Total Punjab 13) 1 30 NWFP - IX 18 Balochistai - I 99() 190

Total 30 190 18 - i______1- __

Round 11

Province lN-5 N-25 N-35 N-40 N-50 N-55 N-65 N-70 Total Punjab 3o - 30 Sindh 15:i 6I NWFP I X 1 Balochistail I

Total 45 18. -- - - _ - 6:I - |

Grand Total 301 Kilomiieters

Total Cost (LCB,) Rs. 239 Million (PavementsContracts only) Total Cost (IC,) : Rs. 2,341 Million (Pavements Contracts only)

Cost/Km (LCB) Rs. 2.15 Million/Knm (111 Kms) Cost/Km (ICB) Rs. 12.30 Millioni/Km (190 Kn7m)

[B: Structur es Improved (Round T,11 and H1I)

Province Bridges Others* Ptinjab 7 7 Sindh - NWFP 5 5 Balochis.ial 2 4 Total 14 16

* RehabilitationoJ 'Culverts('ause,Iav s, retaining structures andidIraining structures

Total Cost for Structtires Rs. 189 Million

PI'IYMBRI'DO)C CROSS SECTION N-S KM 170+00(1 TO KM !85-(s00 CONTRACT NO-M0. 7Rf012

SH.UD E PALVEW71

i ErA.______

1.Item114 dressing ai,d compacto of berjs.

2.litem106a removal o existing AsphalL approx. 1 cn. _

_Item 106a existino wate bound macadam approx. 12 cm to be shfiftd to th s shoulder area fo, efficient drainaje.

4. Item 106a subgrade preparation.

Item 201 Granular subbase material r-ofor carra2ewav 30 cmnthick,etss shioulders cm thick-ness com)acted in 2 cm, lavers 9-% NIDD.

6. Item 202a Cr-ushed Ag-revate base- course Class A 25. cm thickness compacted iitwo lavers to l00%c MIDID.

7. Item 3)0a Bitumious Prime Coat.

8 Item 203c, Ashaltc basel i ocourse Class A kb/m

6 Item 305a Asphaltic concrete weanne course CiassA 90k/rn 2 (cFciLdiremPfiivl TYPICAL CROSS SECTION An .SL. RSP 7140 - 7141 and 7142

SHOU -DEF PAVEM NEZ- SHDU_ DE P

: ., ~~~~2_, 2 - :

i I~~~~~~~~~~~~~~~~EX'S-HNC-RO-' S SJRrACE I EXISTINS-'ShOU -DE;7

0 0 0 0 0 0 10 !iSE E7D E I A!' Ok KC :-.L

1. Item 114b Dressing and compaction of berms

2. Item 10Bc Formation of embankment

3. Item 201 Granular subbase material for shoulders 15cm thickness compacted to 98% MDD.

4. Item 202a Crushed aggregate base course Class-A 37 cm thickness compacted in two layers to 100%MDD

5. item 302a Bituminous prime coat (non pay item)

6. Item 304c Triple surface treatment

7. Widening up to 7.7 width (2 x 75 cm) by providing granular subbase material in the extended pot pavement (thickness = 30 cm). _ -S. '-=- ~~~2o5'.- - -5 S E--

. _- 7 A,, -: S. /______,_...

'-0'' ROW-= N

A . . _ - z. _- -, _ , - F . S f . ~~~~~~~~~~~~~~E-3 _.' -

Z ______- I ==_ _ _~~~~~~~~~ ,' .- . -= _i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~:

__._ £A._~_%S- _, _ _ _._ _ _sv .. ' ,-r- __ _ _ . _ __.__.____._.__

f-E .' -.i~~f * Z ~~~~~~~~~~I * ~~~~~~~~~~ ' S~~~~~~:L. . - OR'rES A_- -SE 2 _. ~

A- - -'~ ~~~~ T-T `Z

f tvs -~ ~~~ ~ ~ ~ ~ ~

- . b-71r-a>t s!;)V ______H _Cw 'i_ E ~~XN-27N_

;R-- <'s 1'- tE _w__ DEWIiL~ ~ Z-~ ~ ~ ~ ~ ' ' t ; *^-:

. ICAL ,a.L AE_ 2000 3650 3650 2000 A kLl

150

5% 2~5% 2.5% j 5%

, _ 4 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 , ,

93%/ MOID t MrSUB L BASE (CLASSB) Nt= 90e_ ~~~~~~BENCHING 1 4 cm A C Wearing Couse - 97% Marsha\/ NATURALGROUND 7 cm Asphaltc Base (Class B) 500 15 cm Crushed Agg. Base (Class A) -100% MOD. AASHTO y 15cm SUBBASE (Class A) -98% Existng Pavement 30 cm SUB GRADE -95%

Notes PAVEMENT STRUCTURE_(STAGE-1) 1 EMBANKMENT TO BE WIDENEDACCORDING TO SPECIFICATIONS. TOTAL DESIGN SUB AC. WEARING A.C BASE CRUSHED SUB EXISTING EMBANKMENT MATERIAL IS CONSIDERED SUITABLE AS PAY GRRADE CBR COURSE COURSE AGG. BASE BASE FILL MATERIAL FILL MATERIAL TO BE USED FOR WDENING OR AT 95% MDD STAGE 1 RISING OF EMBANKMENT SHALL COMPLY WtTH RELEVANT SPECIFICATIONS. BrEcm 10-15 4 cm 7cm 15 cm 40 cm 2 EXISTING BITUMEN PAVEMENT TO BE SCARIFIED AND SUITABLE SCARIFIED 46 cm 15-25 4 cm 7cm 15 cm 20cm MATERIAL TO BE SPREAD AS FILL OR SUB GRADE AND COMPACTED BY 41 cm > 25 4cm 7cm 15cm 15cm HEAVY VIBRATOR EQUIPMENT TO SPECIFIED DENSITY 3 FOR PAYMENT OF ASPHALT BASE ALLOW ROLLING WIDTH AS PER CLAUSE 203A4 1 OF THE NHA SPECIFICATION

Note: Wadh Surab Road N-25, Contrract MBRP - 7005 DESIGN C B R: (2 x CBR SOAKED + 10 * CBR UNSOAKED) /12 TYPICAL PAVEMENT DETAILS FIGURE FIGURE 9.1 ISLAMICREPUBLIC OF PAKISTAN MINISTRYOF COMMUNICATlIONS NATIONALHIGHWAY AUTHORITY

fSLANWAaA

OPERATIONALPLAN

TRANSPORT SECTOR PROJECT (HIGHWAY SECTOR)

TSP LOAN NO. 3241 - PAK NATIONAL HIGHWAY AUTHORITY

Operational Plan

Transport Sector Proiect (Loan No. 3241-Pak) (Highwav Component Onlv)

.0- INTRODUCTION"--

During the Period from 2nd to 14th June, 1997, a World Bank Mission Carried out a final Supervision of the Highway component of the Transport Sector Project to assess the over all Project's performance. As a part of the Implementation Completion Report preparation World Bank mission asked NE-ALto develop and present an acceptable Operational Plan for the maintenance and operation of the assets created under the project.

The Operation Plan as enclosed describes in detail Operational Activities which will be carried out in fu-ture to take care of the assets as developed under the TSP loan. It includes the institutional arrangements made to maintain the assets, the detail of maintenance Operational methodology, the financial impiication of the Project and the level of Mlaintenance required. The plan can best be described as an indicator for monitoring & evaluating the performance for the project. The maintenance program proposed has already been discussed in detail by the iBRD M'Vfissionwith the key personnel's of NHA and it was decided that a Draft proposal for the new Mfaintenance Management System which will involve private sector for the implementation of Maintenance Management Programme. The Maintenance Programme intends to facilitate and help NHA in achieving best performance during the design life of the asserts developed under the MBRP/RSP Programme.

......

The Transport Sector Loan, TSP Loan No.3241-PAK was signed between Government of Pakistan and the World Bank on 27th July, 1990. The total amount of Loan was US $ 184 Million. The loan was primarily divided between Ministry of Railways and National HighwayAuthority, Ministry of Comrmnunications.The highway component was about US $ 77.5 Million and latter on an amount of US S 11.5 MAillionwas transferred from Railway component to Highway component, thus making the total loan value for i-ghway Component UfS S 39 Mvillion.The original loan closing date was June 30th 1996 which was however extended for one year duration till 30th June 1997 so as to enable NHA to compiete the additionalwork arising due to damages caused by unprecedentedfloods and rains.

For the whole National Highway Network a detailed technical srudy was carried out to privatize the road sections which were beyond the scope of normal maintenance and because of non availability of maintenance funds which created huge maintenance backlog. Each project taken up under the MBRP/RSP Programme was identified on the basis of Pavement Condition Survey, Pavement Roughness Survey, DCP Test, Traffic Count and Climatic Data which were used as inputs in the MIL System.

The RSP Package included Periodic Overlay of Asphaltic Concrete, Pavement Strengthening by Aggregate Basecourse and TST, while for MvBRP/RSPProject the design consisted cf %sphaltic Wearing Course, Asphaltic Base Course, Aggregate Base Course with Granular Sub-base and also improvement of Pavement Structures, Bridges and Culvt:rts. The design of pavement was based on AASHTO Guide for design of pavement structures (1986 ) with a pavement design life of 10 years.

The Project selected under the MBRP/RSP Programme were prioritized on the base of -%llLScoring. The main objective of RSP was to improve the structural stability and strength of pavement, while MBRP Projects were total rehabilitation/re-construction projects for which detail PavementCondition Survey, Economic analysis focus mainly on the benefit cost ratio occurring to the road users in terms of reduction in vehicle operating cost VOC and travel time. In addition to benefit cost ratio, internal rate of return for Projects were also calculated.

1.2 NEED FORF EE I O---,,,X

Regardless of a size and type of project, all highway assets which are developed under the Maintenance Backlog Reduction Programnmeand Resurfacing & Strengthening Programme (MBRP/RSP) are national assets and requires detail maintenance plan to ensure that these assets are utilizedin the best possible manner. For maintenance of all projects a comprehensive plan is required which should include Planning, Surveying, Data Collection, Finances, professional expertise, manpower, equipment's, materials etc. for its maintenance. Further maintenance protects the investment and utilize it to the expected design life extent with minimum operating cost. The comprehensive operation and maintenance plan adopted by the National Highway Authority has already been enlisted above. W---.t3 -.. '.:.LST,. OR S. TS..';:.CRE. AT.- -- H PROJECT .'.." t-:J.M- .' -

A total no of 76 Projects were awarded as LCB (Local Contractor Bidding) under the RSP Package. The detail is given as below

Round Total Cost Remarks Contracts (Rs. Million) RouLnd-I 17 297.55 14 Completed, 3 terrninated Round-l 18 284. 67 17 Completed One Terminated Round-IllI 0 174.01 10 completed Round-Ill A 9 41.23 9 Completed Rounld-IV 5 99.92 5 Completed Flood 17 39. 10 All completed Package Total 76 936.48

4 The detail of each contract executed under all RSP/NIBRP projkect is in the Final report. A totai no of 34 Projects were awarded as LCB (Local Contractor Bidding) under the .MBRPPackage. The detail is given as below:-

Round Total Cost Remarks Contracts (Rs. Million) Round-I 10 83.90 9 Completed, I terminated Round-II 9 200.18 All completed Round-IE 13 241.37 3 Completed 2 terminated Flood 2 103.19 All completed Package Total 34 628.64

Two Numrrberof MyBRPContracts were awarded on ICB (InternrationalContractual Bidding) which are as follows:-

Contract Route Reach Contractor Contract Physical No No Km - Km Amount Progress

MBRP N-5 1100-1130 M/s 533,109,244.00 100 % 7004 E.C.L.C MBRP N-25 325485 M/s 1,977,170,000.00 100 % 7005 J& P Total 2,510,279,244.00 LUAN TSP ;3:41

LIST OF COMPLETEDPROJECTS

Sr. PROJECTS AWARD COMPLETIO SCHEDULE OF No PERIOD N TRANSFER OF PERIOD COMPLETED I______.______PROJECTS LCB Transfered to Regional I RSP ROIND-I 1991-92 1992-93 Maintenance Units 2 RSP ROUND-ll 1992-93 1993-94 -do- 3 RSP ROUND-Ill 1993-94 1994-96 -do- 4 RSP ROUND-llA 1993-94 1995-96 -do 5 RSP ROUND-lV 1995-96 1997-98 30.12.97 6 MBRP ROUND-1 1991-92 1992-93 Transfered to Regional I______M aintenance Units 7 MBRP ROUND-II 1992-93-94 1994-96 -do- 8 IBR P ROUND-Ill 1995-96 1996-97 | 30.6.98 lCB MBRP 7004 1991-92 30.6.96 31.12.97 g \ !4BRP 7004 l 10 MBRP 7005 1991-92 30.3.97 J 04.7.97

The Maintenance Division of National Highway Authority is responsible for carrying out all maintenance activities on the National IHighway Network since March, 1987. The National Highway Network comprises of Eight National Highways with a length of 6600 Krns which include bridges and structures. lThe National Highway Authority works as a centralized organization with Five (05) Regional offices headed bv General For example: filling of potholes, patches using surface treatment/asphalt, bringing shoulders to required level, clearing of drains/culverts,painting of parapets, etc.

Those ordinary maintenanceactivities which are required once every second or more years only to reinstate the pavements,structures, shoulders, drains and verges to the conditionsthey were in at the time of construction or subsequentreconstruction.

For example: minor overlays in surface dressing, major overlays in asphaltic concrete on those sections not requiring the base structure to be repaired, shoulder leveling, minor bridge/culvert/drainrepairs etc.

2..3 Li EMERGE.N.CYM4AINTEN...N.....

These are the activities carried out to deal with emergenciesand problems calling for immediate attention, when any delay may cause blockage of road i.e. land slide, structure failure, very severe road erosion. Emergency Maintenance can also be defined as " When safe and smooth flow of traffic is not possible due to certain unforeseen problem".

2.LL4 REHAB1TATION1J~

Rehabilitationis the term covering extraordinary maintenanceactivities which may be required intermittentlyto catch up with any backlog of 'scheduledroutine and periodic maintenanceactivities.

For example: major pavement and structural works, like complete strengthening of bases, sub-bases and overlaying. Rebuilding of very badly damaged or collapsed structures.

Improvements are those extraordinary maintenance (minor improvement), or development (major improvement) activities, which may be required intermittently to strengthen or widen those roads and structures which have been rendered under designed due to increases in traffic or axle loads. This can also involve modifying the geometric layout of the road to suit the modern conditions.

The Pavement MaintenanceManagement System has been defined as the effective and efficient directing of various activities involved in providing and sustaining pavements in a condition acceptableto the traveling public at the least life-cycle cost. Pavement decisions are frequentlybased on the judgment and experience of engineers and administrators in different organizational units . Furthermore, there is marked absence of factual inforrnationon the consequences of previous pavement management decisions, and the need to assess network trends and needs and demonstrate the impact of altemative funding programmes.

To determiinethe Remaining Service Life of the pavement we have to carry out Pavement condition survey and Pavement structural evaluation survey. These surveys are carried out on Regular as well as on Periodic basis and include information's such as evennessand skid resistance.

Pavement deterioration factors such as Potholes Depressions, Rutting. Cracking, Bleeding, Crazing, Raveling, Edge step, Edze Erosion, Poor drainaze etc. are assessedby conductingPavement conditionor distress survey.

In order to develop an comprehensive Pavement Maintenance Management System we carry out followingtype of surveys

* Pavement Condition Survey

* Pavement Roughness Survey

* Dynamic Cone Penetrometer Survey

* Benklemen Beam Survey * Traffic Count * Annual Rainfall Survey National Highway Authority with the help of IMaintenanceConsultants MJs Kampsax Internationaldeveloped a PavementManagement System (PMS) commonly known as Maintenance Intervention Level (MW). The Maintenance Intervention Levels are numerical rating assigned to each pavement deterioration factor and give certain severity levels. The severity levels identifiesthe extend of damage/deteriorationto the pavement life cycle and helps us in estimating the remaining service life of the pavement. The range of levels whichidentify different severity levels are as below:-

> 70 Rehabilitation/Re-construction

60-69 Major periodic overlay/re-strengthening.

50-59 Periodic Maintenance.

40-49 Routir e Maintenance.

The Pavement Maintenance Management Model "MJ L" uses the recommended surveys. The type and the methodologyadopted by the Model is described as below with two basis Inventories, which are

1. Pavement Condition Survey 2. Prevailing Environmental Conditions

order to analyse the pavement defects and deterioration facts certains intervention gels are assigned to each pavement distress. Under the Pavement Condition Survey, followingcriterias are taken into consideration.

EtSEg!_RMB540aL _e

The Maintenance Intervention Level model specially aimed at measuring the condition of the road by recording its defects, where they are located, and the extent and severity of deterioration. strengthen or widen those roads and structures which have been rendered under designed due to increases in traffic or axle loads. This can also involve modifyingthe geometric layout of the road to suit the modern conditions.

2d.2tZ~ VA"~AVMN-T ~ ~~~~~~~~. MANEANE ...... NAGEP.T

The Pavement Maintenance ManagementSystem has been defined as the effective and efficient directing of various activities involved in providing and sustaining pavementsin a condition acceptableto the traveling public at the least life-cycle cost. Pavementdecisions are frequentlybased on the judgment and experience of engineers and administrators in different organizationalunits . Furthermore , there is marked absence of factual informationon the consequencesof previous pavement management decisions,and the need to assess network trends and needs and demonstrate the impact of alternativefunding programmes.

To determine the Remaining Service Life of the pavement we have to carry out Pavement condition survey and Pavement structural evaluation survey. These surveys are carried out on Regular as well as on Periodic basis and include informnation'ssuch as evennessand skid resistance.

Pavement deterioration factors such as Potholes Depressions, Rutting, Crackin2, Bleeding, Crazing, Raveling, Edge step, Edge Erosion, Poor drainage etc. are assessed by conductingPavement condition or distress survey.

In order to develop an comprehensivePavement Maintenance Management System we carry out followingtype of surveys

* Pavement Condition Survey

* Pavement Roughness Survey

* Dynamic Cone Penetrometer Survey

* Benklemen Beam Survey * Traffic Count * Annual Rainfall Survey National Highway Authofity with the help of Maintenance ConsultantsM/s Kampsax International developeda Pavement Management System (PMS) commonly known as Maintenance InterventionLevel (MIL). The NMaintenanceIntervention Levels are numerical rating assigned to each pavement deterioration factor and give certain severity levels. The severitylevels identifiesthe extend of damageldeteriorationto the pavement life cycle and helps us in estimating the remaining service life of the pavement.The rangeo£levels which identifydifferent severity levels are as below:-

> 70 Rehab&ation/Re-construction

60-69 Majorperiodic overlay/re-strengthening.

50-59 Perodio Maintenance.

40-49 RoutineMaintenance.

The Pavement Maintenance Management Model "MTh" uses the reconmmended surveys. The type and the methodologyadopted by the Model is described as below with two basis Inventoies, which are

1. PavementCondition Survey 2. PrevailingEnvironmental Conditions

In order to analyse the pavement defects and deterioration facts certains intervention levels are assigned to each pavement distress. Under the Pavement Condition Survey, followingcriterias are takeninto consideration.

,v.M E..

The Maintenance Intervention Level model specially aimed at measunrng the condition of the road by recording its defects, where they are located , and the extent and severity of deterioration. The Pavement ConMem Survey identifieslocations where deteriorationis occuring, measure the problemmdthe MIL model defines the action needed.

1. Carriageway CMifcation. 2. Wheel track rutuig depth mm. 3. Wheel track rut&g length 1 km. 4. Wheel track craking. 5. Centre line craeRg 6. Wheel track crack:length I Km. 7. Erosion from edge 8. Edge step 9. Pot Holes.

2.1.2.2- PRMLLG ENVIRONMENTA

The Prevailing Enviroomental conditions taken into considerationin NIL model are as follows

1. Category of Road 2. Road Width avenge meter 3. Roughness mmlk 4. A.A.D.T (Traffic Volume) 5. Equivalent Axle Load( Daily) 6. Sub-grade C.B.R 7. Pavement Structurenumber. 8. Rainfall Average mm 9. Drainage 2.1.3 PRo NCE m 7o /

' ESTLNIATIO

The pavement deterioation factor or Mlg. score assigned to each pavement is the combination of above and reflects the total deterioration of the pavement with reference to its life cyle.

Under the current nmutenance management setup the Deputy Director Maintenance Field Units is responsible for certain National Highway Sections prepares engineer estimates for all types of maintenance required on that road section. Tk.ePMS Cell of National Highway Azahority (Previously a part of Maintenance Division and now working under Design Section) is responsible for carrying out all types of Field Surveys which include Pavement Condition Survey, Road Roughness Survey, Falling Wei-ht Detlecto Meter Survey (to know the structural condition of the pavement). All these surveys are uisedto estimate the need of each pavement and what sort of Mlaintenance Level andhow much quantityis required to keep the pavement in a state whichhelp the road user to move safelyand smoothly. The field estimates prepared and submitted the Deputy Director Ntaintenance Field L'nit are compared vviththe %MILData so as to evaluate the level of.NMaintenance and its extent for that particular road section.

2.1.4 AWARDOF CONTRACTS

The budgetary demand for the maintenanceof National Highway Network is obtained after evaluating both the Engineer Field Estimates as well as MIL Scores assi-ned to each road section.

Based upon the budget received by the Maintenance Directorate from Mtinistryof Financeonce againprionty is assignedfor each type of maintenanceactivity. Different type of maintenancecontracts are awarded in all the regional offices. During the execution of Maintenance Management Programme it was observed that MIL System as well as the Maintenance Management Programme has certain deficienciesand needs a new Maintenance Management Systerm The NHA plans to develop a new model for operating MaintenanceManagement which will assure quality control as well as optimizationof MaintenanceFunds. The proposal envisages :- 1. Placing a simple in-line managementstructure under the direct control of a high level committeeto run the NHA annual maintenanceProgramme; 2. Contracting the private highway engineering services industry as consultants for qualityassurance and technicaldetailing . 3. Ensuring that all institutional objectives and guiding principals of NHA are addressed.

The proposed Operational Plan operates as follows:-

_Step I ConditionSurveys MlL Ranking

Step 2

System Oranization p 3 Prepare Annual Checks Estimates

Step 4

Prioritizing and SOr 5 a Recommendationbased Operations Organization on analysis of conditions places contractsin plus availablebudgets. prioritised order

Step6

MaintenanceCommittee approves maintenance contractpackage. The Maintenance Directorate with its central head office in Islamabad and 23 field offices perform the all maintenance activities on the National highway network. The central office is the core of planning, budgeting nad overall management of the maintenanceactivites.

NAINTENANCEORGANIZATION CHART

1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

A ; <~~~~~~~~~~A

------.------t- -- -

.~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~------2.2.2 EA..-NE RATIOv.N,

The NMaintenanceDivision of National Highway Authority working n the Headquarters at Islarnabad is headed by General Manager Maintenance. The Maintenance Division works under the supervision of Chairma, National Highway Authonrtyand Member (Operations),NHA

2.23 - I AL......

The Regional Organizationof Maintenanceconsist of General Manager Maintenance, Director Maintenance, Deputy Director Maintenance incharge of Maintenance Field Unit under which Assistant Director and Inspectors perform their respective jobs as define in the job descnription-

2.2.4-- -JOBDESCRIPTIONSTAFFREOUIREMEN

The organization chart of maintenancestaff is enclosed. This organizationchart which will look after the assets develop under the MBRP/RSP Projects are the same as that of NHA MaintenanceDivision and no separate additional staff is required.

DIRECTOR (MAlNTENANCE) * To inform G.M (Region) with all maintenanceproblems. * To supervise maintenanceworks withinjurisdiction. * To maintainfull record of maintenanceworks and payments thereon. * To ensure that all NationalHighways are in proper conditionsand there is no hindrancefor traffic. * To prepare and submit progress reports on maintenance works as directed by the Seniors. * To ensure quality control at site. * To ensureproper attendance of Consultants/Contractorsand NHA staffat site. * To ensure completion of maintenance works within the scheduled time and approved estimates. * To ensure proper utilizationof machineryat site as per contract conditions. * To ensure supply of material at site in due course of time, so that work may not suffer. * To ensure payment of bills to consultants/contractors as early as possible after its submission. * To check the completion of MfB'sfor claims by Contractors/Consuitants. * To prepare replies on audit observations pertaining to respective area of maintenancework.

DEPUTY DIRECTOR (MAINTENANCE) * To supervise maintenance works within the allocated jurisdiction. * To prepare annual maintenance works program, regarding routine and periodic maintenancecontracts. * To maintain full record of maintenanceworks and payments thereon. * To ensure that all National Highways are in proper conditions and there is no hindrancefor traffic. * To prepare and subrnit progress reports on maintenance works as directed by the Seniors. * To ensure quality control at site. TTo ensure proper atterdance of Consultants/Contractors and NRA staff at site. = To ensure completion of maintenance works within the scheduled time and approved estimates. - To ensure proper utilization of machinery at site as per contract conditions.

3 To ensure supply of material at site in due course of time, so that work may not suffer. * To ensure payment of bills to consultants/contractors as early as possible after its submission. * To check the completion of OfMB'sfor claims by Contractors/Consultants. * To prepare replies on audit observations pertaining to respective area of maintenancework.

ASSISTANT DIRECTOR (MAINTENANCE) * To be physically present/supervise the maintenance works of the area allocated to them. * To ensure quality and completion of work in due course of time. * To check/certify the claims of consultants and contractors. * To ensure punctuality of NHA/Contractors staff at site. * To ensure proper functioning of National Highway under his supervision. * To ensure that no one is trying for illegal encroachments in the right of way of National Highway. * To ensure proposals for maintenance works and road condition reports to the MsaintenanceEngineer. a To coilect progress report ,construction works and submit to seniors. * To ensure smooth Ti;dEc on National Highways.f e To maintain recora of and construction works of the region.

INSPECTOR MAiETENANCE-) * To watch the o&s of maintenance at site. * To ensure quality of works at maintenance sites. * To ensure that the contractors are using required equipment's properly. -

* To ensure timely completion of works. - * To ensure deployment of qualified personnel by contractors at site, as perEtidract conditions. * To watch the condition of roads within particular jurisdiction and submit rep6rWto senior for necessaxy action. * To ensure proper attendance of NHA staff at site. * To ensure smooth running of traffic on the highways.

2.2JT...TG- PROURA EEDS

The regular future of INHApolicies towards staff development training is provided to all NHA officials, consultants and contractor's Representative (Engineers). Some of the major subjects which are covered under the trainining sessions/seminars are as follows:-

* Pavement Management System. * Maintenance Management System * Design of bridges * Pavement design * Standard Specification & Contract Documents * Construction Matenrals * Highway Safety * Traffic Analysis & Management * Axle Load Study * Maintenance Funds * Involvement of Private Sector in Highway Lnfrastructure.

As a regular future the above mentioned training/seminars are held in NHA, therefore no special training is required for MBRP/RSP Project, however a special training package is included in the Highway Rehabilitation Project i.e. 5th Highway Project under which detail invesation as well as training will be given to NHA Officials under the Pak Pave Proymnme.

The budgetary demand fi the maintenanceof National Highway Network is obtained after evaluating both the Egineer Field Estimates as well as MIL Scores assigned to each road section. The MILmodel pays the most vital part in the whole system as it provides the us with tir priority list of all the sections of the road which need immediate attention. Wii MIL model applying the same parameters and input criteria throughout the network, we get a accurate prediction of the maintenanceprogram..

In order to distribute thecurtailed budgetNHA Maintenance Divisionhas to prioritize the maintenance needs i each road section by taking into consideration the benefit cast ratio, traffic level, irnal rate of return and MIL Score.

13.0'KEYOEAONLADINNILNDATSI ,0,',,.,.,,,,.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~., 1

...... ~ ~~ ~~...... ,.. ~ ~ ......

The MIL system or the.hbintenance Management System adopted by NNHAis a rating system used to determinethe maintenancerequirement of a road sigmentbased on the evaluation of road charactsistics. MIL is used to develp accurate maintenance budgets enabling a highway auth&ity to make best use of limited funding. For all National Highway Network a comprehensivedetail surveys are carried out and set of different pavement deterioration ftors are gathered from these surveys for each Kilometer of National Highway Netwxk. The MIL score defines the severity of deterioration and the level of maintenancefequired to bring back the road to a smooth flow condition. 4 The different suveys and working of MIL system is already described above at 2.1.2 Since 1986 the NationalHighway Network has been expended and significant changes in traffic volume has occured. The National Transport Research Centre has carried out detailed traffic surveys on National Highway Network and has also established number of permanent traffic count stations which enables us to know the traffic flow on National Highway Network. The average traffic growth projection taken from 1994 NTRC study carried out on the whole National Highway Network reveals that an annual growth of traffic is about 7%, -but in certain area unprecedented traffic growth has been witnessed duringthe last few years.

The Ministry of Communications places the NHZAdemand before the Ministr of Finance for their consideration.T he Ministry of Finance aRterdetailed review allocates _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~...... certain budget on yearly basis. It has beenRS.MILLION~~~~~~~..... observed that duning....the RS. last SevenMILLION to Eight Years NHA receives about 35 to 50% of its actual demand. ..._~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~..... A comparison of demand verses allocation made during the last 10 years is enclosed for informnation. YEAR DEMAN@D ALLOCATION

......

.~ ~~~~~~~~~~~~~~~...... 1988-89 1997-98~~~~~~~~~~~~~~~~~~~~~~...... 423 ...... 201 1989-90 475 269 1990-91 600 282 1991-92 796 378 1992-93 930 -410 1993-94 1097 431 1994-95 1317 452 1995-96 1554 475 1996-97 1760 522_ - 8 . .. ANNEX D

Revised Economic and Financial Evaluation of Pakistan Railway 1

PAKISTAN TRANSPORT SECTOR PROJECT LOAN3241 - PK ANNEX D - Revised Economic and Financial Evaluation of PR

PART I. REVISED ECONOMIC EVALUATION

General comment. The SAR analysis was based on broad averages and assumptions about productivity. These assumptionscannot be tested nor calculated from currently available data. In their absence the analysis used here will take the productivity assumptions from the SAR as given, in order to re-calculate the ERRs as best possible, based on the most recent actual cost and operational data. The data gathering which has been done in March and April 1999 has not been able to resolve these gaps. The analysis here remains questionable without significant additional fieldwork.

MIS and Telecommunications A revised ERR for the MIS and Telecommunicationssub- components cannot be calculated as the funds were not used.

Roller Bearings A revised ERR has been calculated for the roller bearings program as 7%. The main reasons for the lower return are (1) traffic volumes substantiallyreduced from what was expected and (2) the early purchase of the new bearings but their slow installation. The SAR calculation of the ERR at 24%, was estimated using broad averages for the source of the benefits and an assumptionof a 15% productivity increase. Using the same methodologyand recalculating the ERR based on actual expenditures, SAR projected benefits, but with the reduced traffic volumes which did transpire, yields an ERR of 17%. Recalculating based on the actual expenditures, actual (slow to be implemented)benefits, and with the reduced traffic volumes yields the ERR of 7%. Table D-1 shows the details of this calculation.

The preceding analysis is based on using the same foreign exchange rate as was used at the time of the SAR (25.1 Rs/$). As such it allows an examination of the accuracy of the SAR estimate unclouded by movements in the exchange rate, for which a forecast was not attempted in the SAR. If the exchange rate at the time of actual purchase is used (Rs 29.0/$), the two ERRs as shown above decline to 14% and 6% respectively. This is a measure of the value of the investment to the country. Table D-2 shows the details of this calculation.

The roller bearing calculation is highly dependent on the improvedproductivity assumed. Referring again to Table D-1, if productivityincreased only by 10% instead of the 15% assumed then the ERR is 3%. The switch value at which the ERR is zero is 8%. Any productivity increases below this level result in a negative ERR. The productivity increases also depend on all the wagons in a train being fitted with roller bearings. It is early to quantify any benefits because, only because a very small proportion of the wagon fleet have been fitted with the roller bearings and it is only quite recently (1998/99) that PR has segregated about six rakes where all wagons are fitted with roller bearings.

Locomotives The locomotive related project sub-components;to reconmmission46 locomotives, build up unit exchange spares, and traction motor repair have been lumped together in one figure of total additional locomotives due to the project. The SAR calculation of the ERR was 27%. A revised ERR has been calculated for this component as 48%. 2

The SAR treated locomotives used for freight traffic and locomotives used for passenger traffic separately. The productivity assumptionsfor freight locomotives were 45 million tonne- kilometres per year per locomotive and an economic benefit of using rail compared to hauling by truck of Rs 0.20 per tonne-kilometre. The equivalent figures for passenger traffic were 150 million passenger kilometres per locomotive per year and Rs 0.06 per passenger kilometre. If the two figures are multiplied then the result is the Rs value of a locomotive per year. In both cases this value per year figure is the same, Rs 9 million. So the SAR, although treating both types of locomotive separately, was in effect using one figure of locomotivevalue per year. The benefits figure is equal to the total number of freight and passenger locomotives times Rs 9 million. Table D-3, attached, replicates the SAR calculations.

Data on the detailed operational effect of the various locomotiveprograms has been particularly difficult to obtain. The specific use of the incrementallocomotives provided by the project cannot be identified. In other words, it is not possible to say whether the availability of project locomotives has been used to enhance the freight or the passenger services and thus separate calculations based on the different values of these two services are not possible. Table D-4 uses average figures for the value of a locomotive to recalculate the ERR as 48%

The horizon year for the SAR's ERR calculation was quite short, only six years of benefits were evaluated. A short time horizon may have been used because of the overall age of the PR locomotive fleet, which was not addressedby this loan, forces so many locomotives to be retired that as you push the horizon year out, the total fleet starts to diminish. With the age of the fleet this may be the case even when the GOP fulfills its obligation to keep foreign exchange of spares constant. The SAR provides an analysis that focuses only on the immediate, short-term benefit of the specific locomotive investment. It did not consider the question of a longer term, sustainable railway operation, if much of the rest of the fleet becomes unusable. RE-EVALUATIONOFERR FOR ROLLER BEARINGS INVESTMENT

EXAMPLE:SAR EXAMPLE:IRC #1 - lowertraffic than expected EXAMPLE:IRC #2 - lowertraffic AND slower adoption Traffic& Savings Traflic& Savings Traflic& Savings Wagonsin service 30,600 Wagonsin service 25,815 WagonsIn service 25,815 Freightmoved (tonne/km), 1989/90 8,364,000,000 Freightmoved (tonnelkm), 1995/96 5,077,000,000 Freightmoved (tonne/km), 1995/96 5,077,000,000 Freightmoved per wagon 273,333 Freightmoved per wagon 196,669 Freightmoved per wagon 196,669 Numberof W withbeanings (ultimate) 15,000 Numberof W withbeanngs (ultimate) 7,785 Numberof W withbeanngs (ultimate) 7,785 tkmmoved with bearings (calc) 4,100,000,000 tkmmoved with bearngs (calc) 1,531,065,078 tkmmoved with bearings (calc) 1,531,065,078

Reconcilliafionfactor 0.0999 0.1000 0.1000

tkmmoved with bearings (input) 409,500,000 tkmmoved with bearings (input) 153,106,508 tkmmoved with bearings (inout) 153,106,508 savingper tkm (RsAtkm,10% inc) 0.20 savingper tkm (Rs/tkm,10% inc) 020 savingper tkm (Rstkm, 10% inc) 0.20 annualsaving 81,900,000 annualsaving 30,621,302 annualsaving 30,621,302 savingper tkm (Rs/tkm, 15% inc) 0.30 savingper tkm (Rsttkm, 15% inc) 0.30 savingper tkm (Rs/tkm, 15% inc) 0.30 annualsaving 122,350,000 annualsaving 45,931,952 annualsaving 45,931,952

Costs Costs Costs f S Bearngs Bearings 151,302,800 Bearings 151,302,800 25.1 6,023,000 Axles Axles 62,750,000 Axles 62,750,000 25.1 2,500,000 Machinery Machinery 27,610,000 Marhinery 27,610,000 25.1 1,100,000 Total 500,000,000 Total 241,662,800 Total 241,662,800 25.1 9,628,000

ERR: 24% ERR: 17P ERR: 7-^b

Year-byer detail Yerby-yeardei Yearbyyealr detait # wagons chgin Year Csts Bennefls e ear ts Benefits NeL a Costs B e.^,entfs NeL insernv wagons FY 500.0 % 122.9 % 241.7 % 45.9 % 241.7 % 45.9 %

0 250.0 50 0.0 0 -250.0 0 120.8 50 0.0 0 -120.8 0 0.0 0 0.0 0 0.0 0 90t91 1 250.0 50 61.4 50 -188.6 1 120.8 50 23.0 50 -97.9 1 0.0 0 0.0 0 0.0 0 0 91/92 2 0.0 0 122.9 100 122.9 2 0.0 0 45.9 100 45.9 2 241.7 100 0.0 0 -241.6 6 6 92193 3 122.9 100 122.9 3 45.9 100 45.9 3 0.0 0 2.4 5 2.4 407 401 93/94 4 122.9 100 122.9 4 45.9 100 45.9 4 0.0 0 7.6 17 7.6 1294 887 94/95 5 122.9 100 122.9 5 45.9 100 45.9 5 0.0 0 11.6 25 11.6 1973 679 95/96 6 122.9 100 122.9 6 45.9 100 45.9 6 0.0 0 15.7 34 15.7 266S 695 96/97 7 122.9 100 122.9 7 45.9 100 45.9 7 0.0 0 24.1 53 24.1 4090 1422 97/98 8 122.9 100 122.9 8 45.9 100 45.9 8 0.0 0 33.0 72 33.0 5600 1510 98/99 9 122.9 100 122.9 9 45.9 100 45.9 9 0.0 0 42.5 92 42.5 7200 1600 99/OO 10 122.9 100 122.9 10 45.9 100 45.9 10 0.0 0 45.9 100 45.9 7785 585 OW01 11 122.9 100 122.9 11 45.9 100 45.9 11 45.9 100 45.9 7785 0 01/02 12 1229 100 122.9 12 45.9 100 45.9 12 45.9 100 45.9 7785 0 0203 W 13 122.9 100 122.9 13 45.9 100 45.9 13 45.9 100 45.9 7785 0 03/04 m 14 122.9 100 122.9 14 45.9 100 45.9 14 45.9 100 45.9 7785 0 04/05 M 15 122.9 100 122.9 15 45.9 100 45.9 15 45.9 100 45.9 7785 0 05/06 16 122.9 100 122.9 16 45.9 100 45.9 16 45.9 100 45.9 7785 0 06/07

NOTES: Sources:Staff Appaisat Report (SAR), 11 June, 1990. boldfigures indicate key source data RE-EVALUATIONOF ERRFOR ROLLER BEARINGS INVESTMENT

EXAMPLE:SAR EXAMPLE:IRC #1 - lowertraffic than expected EXAMPLE:IRC #2 - lowertraffic AND slower adoption Traffic& Savings Traffic& Savings Traffic& Savings Wagonsin service 30,600 Wagonsin service 25,815 Wagonsin service 25,815 Freightmoved (tonnelkm), 1989/90 8,364,000,000 Freightmoved (tonne/km), 1995/96 5,077,000,000 Freightmoved (tonne/km), 1995/96 5,077,000,000 Freightmoved per wagon 273,333 Freightmoved per wagon 196,669 Freightmoved per wagon 196,669 NumberotWwith bearings (ultimate) 15,000 Numberof Wwith beanngs (ultimate) 7,785 Numberof Wwith bearings (ultimate) 7,785 tkmmoved with bearngs (calc) 4,100,000,000 tkmmoved with bearings (calc) 1,531,065,078 tkmmoved with bearings (calc) 1,531,065,078

Reconcilliationfactor 0.0999 0.1000 0.1000

tkmmoved with beanngs (input) 409,500,000 tkmmoved with bearings (input) 153,106,508 tkmmoved with beanngs (input) 153,106,508 savingper tkm (Rs/tkm, 10% inc) 0.20 savingper tkm (Rs/tkm, 10% inc) 0.20 savingper tkm (Rs/tkm, 10% inc) 0.20 annualsaving 81,900,000 annualsaving 30,621,302 annualsaving 30,621,302 savingper tkm (Rsltkm,15% inc) 0.30 savingper tkm (Rs/tkm, 15%inc) 0.30 savingper tkm (Rs/tkm,15% inc) 0.30 annualsaving 122,850,000 annualsaving 45,931,952 annualsaving 45,931,952

Costs Costs Costs a a Bearings Bearings 174,812,000 Bearngs 174,812,000 29.0 6,028,000 Axles Axles 72,500,000 Axles 72,500,000 29.0 2,500,000 Machinery Machinery 31,900,000 Machinery 31,900,000 29.0 1,100,000 Total 500,000,000 Total 279,212,000 Total 279,212,000 29.0 9,628,000

ERR: 24% ERR: 14% ERR: 6%

Yeaerbytearaderl Year-bymyeardetai Year-"ar detail # wagons chgin YeaL Costs Benefits NeL Year Costs _Beneftts .sL -Year Costs Benefits .NeL inservice wagons FY 500.0 % 122.9 % 279.2 % 45.9 % 279.2 % 45.9 %

0 250.0 50 0.0 0 -250.0 0 139.6 50 0.0 0 -139.6 0 0.0 0 0.0 0 0.0 0 90/91 1 250.0 50 61.4 50 -188.6 1 139.6 50 23.0 50 -116.6 1 0.0 0 0.0 0 0.0 0 0 91/92 2 0.0 0 122.9 100 122.9 2 0.0 0 45.9 100 45.9 2 279.2 100 0.0 0 -279.2 6 6 92/93 3 122.9 100 122.9 3 45.9 100 45.9 3 0.0 0 2.4 5 2.4 407 401 93/94 4 122.9 100 122.9 4 45.9 100 45.9 4 0.0 0 7.6 17 7.6 1294 887 94/95 5 122.9 100 122.9 5 45.9 100 45.9 5 0.0 0 11.6 25 11.6 1973 679 95/96 6 122.9 100 122.9 6 45.9 100 45.9 6 0.0 0 15.7 34 15.7 2668 695 96/97 7 122.9 100 122.9 7 45.9 100 45.9 7 0.0 0 24.1 53 24.1 4090 1422 97/98 8 122.9 100 122.9 8 45.9 100 45.9 8 0.0 0 33.0 72 33.0 5600 1510 98/99 9 122.9 100 122.9 9 45.9 100 45.9 9 0.0 0 42.5 92 42.5 7200 1600 99/00 10 122.9 100 122.9 10 45.9 100 45.9 10 0.0 0 45.9 100 45.9 7785 585 00101 11 122.9 100 122.9 11 45.9 100 45.9 11 45.9 100 45.9 7785 0 01/02 12 122.9 100 122.9 12 45.9 100 45.9 12 45.9 100 45.9 7785 0 02/03 m 13 122.9 100 122.9 13 45.9 100 45.9 13 45.9 100 45.9 7785 0 03/04 14 122.9 100 122.9 14 45.9 100 45.9 14 45.9 100 45.9 7785 0 04/05 15 122.9 100 122.9 15 45.9 100 45.9 15 45.9 100 45.9 7785 0 05/06 16 122.9 100 122.9 16 45.9 100 45.9 16 45.9 100 45.9 7785 0 06/07 1

NOTES: Sources:Staff Appaisal Report (SAR), 11 June, 1990. boldfigures indicate key source data RE-EVALUATIONOFERR FOR LOCOMOTIVE INVESTMENTS TABLED-3

EXAMPLE:repeat SAR 89/90 90/91 91/92 92/93 93/94 94/95 95/96 96/97

LocoFleet Without Project AvailableLocos Freight 156 42.5% Passenger- long dist 119 32.4% Passenger- other 80 excluded Shunting 92 25.1% Totalavailable 447 429 409 389 369 349 329 Locomotivesin fleet 564 564 564 564 564 564 564 % availability 79% 76% 73% 69% 65% 62% 58%

LocoFleet With Project availableby recurrentexp 447 447 447 427 407 387 367 recommissioned 17 33 28 23 19 16 Totalavailable 447 464 480 455 430 406 383 %availability 79% 82% 85% 81% 76% 72% 68%

NetLocomotive Gain 0 35 71 66 61 57 54 Freight 15 30 28 26 24 23 Passengers 11 23 21 20 18 18 Shunting 9 18 17 15 14 14

LocoProductivity (tkm and pkm, million) Freight 45 669 1,358 1,262 1,167 1,090 1,033 Passengers 150 1,702 3,453 3,210 2,967 2,772 2,626

CostSavings from Road Transport (Rs/tkm or pkm) Freight 0.20 134 272 252 233 218 207 Passengers 0.06 102 207 193 178 166 158 Total 236 479 445 411 384 364

Rateof Return Calculation Costs 750 347 52 Benefits 236 479 445 411 384 364 Net -750 -111 427 445 411 384 364

IRR: 27.3%

NOTES: Sources:Staff Appaisal Report (SAR), 11 June, 1990. RE-EVALUATIONOFERR FOR LOCOMOTIVE INVESTMENTS TABLED-4

EXAMPLE:ACTUAL RESULT 89/90 90/91 91/92 92/93 93/94 94/95 95196 96/97 97/98

NetLocomotive Gain 0 0 12 20 44 53 59 75

Rateof RetumCalculation Costs 3 545 249 349 323 352 332 38 Beneffts 0 0 204 348 780 992 1,327 1,763 Net -3 -545 -44 -1 457 640 995 1,726

IRR: 48.0%

April1999 data (Khalil Rashid) CumulativeProject Locomotives 0 0 12 20 44 53 59 75 ProjectCosts 2.66 544.98 248.51 348.90 323.49 351.67 332.15 37.85

TotalEarnings Freight + Passenger 5,236 5,316 6,502 7,070 7,092 7,163 7,559 8,931 9,099 Eamingsper loco (current dollars) 11.90 12.60 15.63 17.04 17.38 17.73 18.71 22.50 23.51 Locosfrom project 12 20 44 53 59 75 Earningsfrom project (current dollars) 204.43 347.65 780.13 991.65 1,327.281,763.37

Actualtraffic Freight(tkm million) 5,708 5,962 6,180 5,939 5,661 5,077 4,607 4,447 Passengers(pkm million) 20,400 19,900 18,200 17,100 16,400 17,600 18,900 19,100 18,800

FreightEarnings (Rs million) 3,275 2,962 3,823 4,287 4,270 4,059 3,957 4,414 4,519 AnnualInflation 12.7% 9.6% 9.3% 11.2% 12.9% 10.9% 11.8% 7.8% InflationAdjustment 1 0.87 0.79 0.72 0.64 0.55 0.49 0.44 0.40 FreightEamings, constant price 3,275 2,586 3,017 3,068 2,714 2,247 1,952 1,920 1,813

PassengerEamings (Rs million) 1,961 2,354 2,679 2,783 2,822 3,104 3,602 4,517 4,580 AnnualInflation 12.7% 9.6% 9.3% 11.2% 12.9% 10.9% 11.8% 7.8% InflationAdjustment 1 0.87 0.79 0.72 0.64 0.55 0.49 0.44 0.40 PassengerEamings, constant price 1,961 2,055 2,114 1,992 1,794 1,718 1,777 1,965 1,837

NOTES: Sources:Staff Appaisal Report (SAR), 11 June, 1990 AdditionalPR data collected by Dr.Khalid Rashid in April1999 7

PART II. ANALYSIS OF FINANCIAL PERFORMANCE OF PAKISTAN RAILWAYS

1. FinancialAnalysis Since beginningof the Project

1.1 The physical and institutional componentsplanned in the Project, envisaged that PR would be able to improve its financial performance based on efficient operations and increased productivity and could be transformed into a profitable venture. The financial projections made at the stage of the Project appraisal indicated that by the end of 1994-95, i.e. after five years of the commencement of the Project, PR would start showing profits. Analysis of the past financial performance indicates that PR did show a sign of improvement in the first three years of the Project and its losses dropped from Rs. 2.8 billion in 1988-89 to Rs. 0.9 billion in 1992-93. However, since 1992-93 PR is incurring continually increasing losses every year and reached an ever high figure of 6.6 billion in 1995-96. The Profit & Loss statement has been summarized in table 1. The figure below shows the trends of deterioration of PR financial performance since 1988-89.

PR financial losses

7.0

6.0

5.0

4.0

3.0

.42.0

1.0

88-89 89-90 90-91 91-92 92-93 93-94 94-95 95-96 96-97 97-98

Financial Year

Figure 1: PR financiallosses during 1988-89to 1997-98 8 1.2 The reasons for PR losses can be attributed to the following factors:

(a) Reductionin earnings due to reduced traffic volume, partly due to non availabilityof locomotives; (b) Non adjustmentof tariffs accordingto the annual inflationrate; and (c) Increasedfinancial charges due to additional overdraft.

1.3 PR losses would have been much higher, had PR not been able to restrain these losses as due to successful implementationof the following steps: (i) Reduction in staff due to attrition program; and (ii) Introductionof the PSO concept Cash Generation 1.4 The analysis of PR finances (Table 1) shows that although cash generation in 1992-93 was positive, however PR has not been able to achieve positive cash generation since then. Article IV Section 4.03 of the Loan Agreement requires that from 1994-95 PR should be able to generate enough cash to finance a reasonableportion of its capital expenditure.Financial position for FY97- 98 indicatesthat PR will be in default of this covenant of the agreement for the consecutive fourth year.

2. Traffic Analysis Freight Traffic 2.1 The commoditywise analysis of goodstraffic in terms of Thousands of Tons and Millions of TKm carried since 1989-90is given in the table below.

Cernent - Tons 533 415 297 388 283 230 95 43 - TKn 459 385 294 282 165 167 80 22

Coal -Tons 235 211 161 189 169 115 96 70 -TKm 270 244 194 217 192 130 105 76

Fertilizer Tons 917 814 825 665 572 777 630 384 TKm 754 729 748 568 411 572 408 197

Rice Tons 392 294 331 659 257 200 3 2 TKm 290 199 165 796 307 139 2 1

Wheat Tons 824 888 1,046 962 990 509 567 686 TKm 819 1,033 1,299 974 1,162 525 661 806

P.O.L Tons 1,595 1,648 2,225 2,452 2,319 2,375 2,125 2,216 TKm 853 1,192 1,624 1,750 1,770 1,838 1,582 1,685

Departmental Tons 1,000 1,072 840 807 1,028 820 926 658 TKm 186 371 268 257 321 284 280 215

Others Tons 2,221 2,218 2,044 1,914 1,738 1,828 1,971 1,941 TKm 2,077 1,809 1,588 1,095 1,333 1,422 1,502 1,445

Total Tons 7,717 7,560 7,769 8,036 7,356 6,854 6,380 5,977 TKm 5,708 5,962 6,180 5,939 5,661 5,077 4,607 4,447 Table 2: Comparison of freighttraffic (Tons in Thousandsand TKm in Millions) 9

2.2 Table2 showsthat apart from POL and wheat,both of whichare governmentsponsored businesses,PR has been losingits freighttraffic for all othercommodities. Apart from this loss in freightvolume, the profitabilityof variouscommodities has droppedas well.During 1995-96only POL whiteoil businessregistered profits and all othercommodities made overall losses.Analysis of PR freightservices profitability shows that the numberof profitablecommodities has dropped fromseven in 1990-91to five commoditiesmaking profit in 1997-98.The table 3 belowgives such comparison.

Profi keMdgcmedte 1988-89 1: POL - white oil 2: POL - furnaceoil 3: Wheat 1989-90 1: POL- white oil 2: POL- funace oil 3: Wheat 1990-91 1: POL- white oil 2: POL - furnaceoil 3: Wheat 4: Fertilizer 5: Phosphate 6: Iron scrap 7: Cotton 1991-92 1: POL- white oil 2: POL- funace oil 3:. Wheat 4: Rice 5: Fertilizer 6: Phosphate 7: Iron scrap 1992-93 1: POL - white oil 2: POL - furnaceoil 3: Wheat 4: Rice 5: Fertilizer 6: Phosphate 7: Iron scrap 1993-94 1: POL - white oil 2: POL-furnace oil 3: Wheat 4: Fertilizer 5: Phosphate 6: Iron scrap 1994-95 1: POL - white oil 2: POL - furnaceoil 1995-96 1: POL - white oil 10

1_96.97 1: POL - white oil 2: POL - furnace oil 3: Wheat 4: Fertilizer 5: Sugar 1997-98 1: POL - white oil 2: POL - fumace oil 3: Wheat 4: Fertilizer 5: Sugar Table 3: Year wise profit making commodities 2.3 Earnings from goods traffic since 1989-90 is summarized in table 4 below and adjusted for inflation to analyze the real trends over the Project period. When converted into 1989-90 values, the real earnings in the freight sector shows a drop of 44.6% during 1989-90 to 1997-98 period.

1989-90 3,275 Base year 1.00 3,275 1990-91 2,962 12.7% 0.87 2,586 1991-92 3,823 9.6% 0.79 3,017 1992-93 4,287 9.3% 0.72 3,068 1993-94 4,270 11.2% 0.64 2,714 1994-95 4,059 12.9% 0.55 2,247 1995-96 3,957 10.9% 0.49 1,952 1996-97 4,414 11.8% 0.44 1,920 1997-98 4,519 7.8% 0.40 1,813

Table 4: Inflation adjusted freight earnings 11 Passenger Traffic

2.4 The analysis of the passenger traffic since 1989-90 is given in the table below and compared with the assumptions made in the Staff Appraisal Report (SAR) prepared in July 1990.

Yar . rs Pag.rm Atalper SAR 1 (Million) (Billio> ,PK ,R,,) - r-f-(ji 'AR) 1989-90 84.6 20.4 0.10 N.A. 1990-91 84.9 19.9 0.12 0.10 1991-92 73.3 18.2 0.15 0.11 1992-93 59.0 17.1 0.16 0.12 1993-94 61.7 16.4 0.17 0.14 1994-95 66.5 17.6 0.18 0.15 1995-96 73.6 18.9 0.19 0.17 1996-97 68.8 19.1 0.23 0.18 1997-98 64.9 18.8 0.24 N.A.

Table 5: Passenger traffic since 1989-90

2.5 Passenger earnings, since 1989-90 are summarized in table below and adjusted for inflation to analyze the real trends over the project period. When converted into 1989-90 values, the real earnings in the passenger sector shows a drop of 6.3% during 1989-90 to 1997-98 period.

-Year -- -tiiuaIl-fl~tii_M= - u in-a ~aAl 9 .- . ; .. ,~Eanl V--..U ;;;::.-----.M...... -s

1989-90 1,961 Base year 1.00 1,961 1990-91 2,354 12.7% 0.87 2,055 1991-92 2,679 9.6% 0.79 2,114 1992-93 2,783 9.3% 0.72 1,992 1993-94 2,822 11.2% 0.64 1,794 1994-95 3,104 12.9% 0.55 1,718 1995-96 3,602 10.9% 0.49 1,777 1996-97 4,517 11.8% 0.44 1,965 1997-98 4,580 7.8% 0.40 1,837

Table 6: Inflation adjusted passenger earnings 12

3. SAR AssumptionsVs Actual Trends

3.1 Various assumptionsmade at the start of the Projectand the actual trends for the period 1990 - 1996 are given in table 7 below:

Inflation - SAR 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 60% -Actual 12.7% 9.6% 9.3% 11.2% 12.9% 10.9% 11.8% 101%

TariffIncrease - SAR 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 95% - Actual 12.0% 5.0% 5.0% 0.0% 0.0% 5.0% 10.0% 43%

StaffReduction SAR 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 19% - Actual 1.8% 4.9% 3.4% 3.5% 2.4% 7.9% 7.2% 35%

SalaryIncrease- SAR 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% 60% - Actual 6.4% 20.0% 17.0% 3.3% 17.5% 6.6% -3% 87%

Table 7: SAR assumptionsVs actual trends

3.2 One of the major assumptionsto effect PR profitabilitywas that PR would be ableto increase its tariffs by 10% annually which will give a real increase of 3% based on the 7% annual inflation assumed in the SAR. Howeverthe actual figures showthat not only that PR was not able to increase its tariffs, but the annual inflationwas also about 3% - 4% higher than that assumed in the SAR. The cumulative net effect of increase in inflation after adjusting various tariff increases has been 58% during the Projectperiod, which is the main contributingfactor for PR ever increasinglosses.

4. Tariff Analysis

4.1 Pakistan Railways has been operating under continual loss for almost quarter of a century now. There are many factors which can be attributed to PR losses, however the basic fact is PR has not been able to increase its revenues in line with the associated increase in expenses. Apart from poor and inefficient service levels which resulted in loss of traffic to its road competitors, PR has not been able to increase its tariffs in line with the prevailing inflation in the country. There was no tariff increase between July 1985 to April 1991, a period of about six years having annual inflation rate around 10%. Similarly, there was no tariff increase between September 1992 and October 1995,a period of three years. 13

4.2 The tariff increases implementedsince 1990-91 along with the inflation are given in -table8 below for comparison:

Year PR TariffIncrease AnnualInflation Passenger G~oos 1990-91 12% 15% 12.7% 1991-92 5% 5% 9.6% 1992-93 5% 5% 9.3% 1993-94 - - 11.2% 1994-95 - - 12.9% 1995-96 5% 10% 10.9% 1996-97 10% 10% 11.8% 1997-98 - - 7.8% Cumulative1990-98 43% 53% 127% Table 8: Comparisonof PR tariff increasewith the prevailinginflation.

4.3 The above table shows that the compound effect of inflation since 1990-91 to 1997-98 is about 127% whereas the cumulative tariff increase during this period has been only 43% for passengers and 53% for freight traffic. Had PR been able to increase its revenues to cover the annual inflation,PR would have been in a much better financialposition.

4.4 However, this would have been only possible if the competitive road transport industryhad also increased its fares regularly with inflation. Since over the past ten to fifteen years, road transport has become more efficient in terms of bigger lorries and cheaper spare parts coming through smuggling channels via Afghanistan transit trade facilities. This has resulted in efficiency gains to the truck operators and even if they do not increasetheir fare to cover for full inflation,they could still operate profitably.

4.5 PR has been comparing tariffs of road transport and some selected rates are reproduced below in table 9 and table 10 for comparisonpurposes. The analysis of the data collected by PR, in terms of tariff comparativefor two differentperiods reveals that the tariff increasein bus fare for the period 1994 - 1998 has been more than the corresponding tariff increase by PR for the Economy class fare. PR fares were higher than the road fares in 1994, whereas in 1998 PR fares were lower than the correspondingroad fares.

Passengersecor Ordinarybusib re PR enomycais fare. 1994 - 1998 Incrase 1994 1998 Icrease Rs. - 'v)' . _ .-. (Rs) (Rs.) Lahore- Faisalabad 21 40 90% 28 35 25%

Rawalpindi- Karachi 230 425 85% 245 315 28% Lahore- Karachi 180 300 67% 200 255 27% Karachi- Hyderabad 21 35 67% 32 40 25% Table 9: Comparisonof ordinary bus fare with PR economyclass fare 14

1994 1998~ 1-994 198 Iree

Fertilizer(Karachi - Lahore) 550 975 77% 638 840 31% Wheat(Karachi - Peshawar) 725 1225 69% 872 1036 18% FurnaceOil (Karachi -Lahore 880 1325 50% 9;16 1176 28%/7 Table 10: Comparisonof PR freight rates with road transport

5. FinancialCharges 5.1 One of the major impacts of PR financial losses is increase in its borrowings (over draft) from the State Bank of Pakistan. Most of the overdraft is utilized in covering the shortfall in earnings for the previous years and excess expenditure during the current year. Mostly GoP funds releases are not received in time and PR has to resort to overdraft facility from the State Bank to make its urgent payments, which results in heavy financial charges. The table 11Iand the figure 2 below show overdraftposition on 30 June of each year and the financial charges for that period.

1989-90 103 8 1990-91 284 25 1991-92 300 48 1992-93 613 64 1993-94 1,453 289 1994-95 2,014 547 1995-96 6,553 796 1996-97 9,322 1,506 1997-98 11,740 2,069 Table 11: PR overdraftposition since 1989-90 15

PR overdraftposition

14.00

12.00

10.00

:i 800

600

4.00

200

1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 Year

Figure 2: PR overdraftposition since 1989-90

6. PR ProfitabilityAnalysis

6.1 PR profitability of passenger and freight services is summarized in the table 12 below. PR profitability of passenger sector has deterioratedover the past nine years. PR has not been able to attract much passengertraffic duringthis period as the PKm has droppedfrom 20,373 in 1989-90to 18,774in 1997-98.Although earning per PKni increasedby about 154% but the correspondingcost per PKm increased by 158%. The train wise profitability statement produced by PR for the year 1994-95 shows that all the Intercity and Passenger trains are operating at loss based on both the variable cost recovery as well as full cost recovery.Only two Mail and Express trains are operating at profit based on full cost recovery and six trains are operating at profit based on variable cost recovery.

PassengerSector Total Earnings 1,961 2,354 2,678 2,783 2,822 3,104 3,602 4,517 4,580 Total PKm 20,373 19,964 18,158 17,082 16,385 17,555 18,905 19,114 18,774 Earnings Rs/PKm 0.096 0.118 0.147 0.163 0.172 0.177 0.190 0.236 0.244 Costs Rs./PKm 0.199 0.268 0.310 0.348 0.393 0.427 0.470 0.495 0.513 Contribution/PKm -0.103 -0.150 -0.163 -0.185 -0.221 -0.250 -0.280 -0.259 -0.269 Pofit /(Loss) % (107%) (127%) (I I I) (113%) (128%) (14 1%) (147%) ( I 0%) (1 I 0%) 16

FreightSector Total Earnings 3,275 2,962 3,823 4,287 4,270 4,059 3,957 4,414 4,519 Total TKm 7,226 5,708 5,962 6,180 5,939 5,661 5,077 4,607 4,447 Earnings Rs/TKm 0.453 0.519 0.641 0.694 0.719 0.717 0.779 0.958 1.016 Costs RsAfKrn 0.441 0.553 0.551 0.541 0.624 0.767 0.880 1.015 1.058 Contribution/PKm 0.012 -0.034 0.090 0.153 0.095 -0.050 -0.101 -0.057 -0.042 profit/(Loss) % (3%/6) (6%) 14% 22% 13% (7%) (13%) (6%) (4%/o)

Table 12: Profitabilityof passengerand freight services

6.2 The freight sector however had been operatingunder profit for three years i.e from 1991-92 to 1993-94,but the profit margins are too low to compensate for the losses in the passenger sector. The profitabilityanalysis show that during the period 1989-97the freight carried in terms of TKm dropped by 38%. PR did show some improvementin its operationsfrom 1990-91up to 1992-93and the TKm carried increasedfrom 5,708 million to 6,180 million, an increase of about 8%. This is also clear from the PR annual Revenue Statementwhere PR losses dropped from 2,754 million in 1989- 90 to 897 million in 1992-93.However since 1992-93,PR losses has been increasing as is clear from the above table as the freight carried in 1997-98dropped to 4,447 TKm which is an 28% drop from 1992-93.

6.3 The reduction in TKm and PKm resulted in PR fixed costs being borne by a smaller traffic base. This resulted from the GOP decision to (a) inadequately fund recurrent budget of locomotive spares and (b) delay the Project's locomotive backlog reduction program from being a three year scheme to more than six years which has also reduced the size of the program due to lone closure in June 1996. The Project had intended to enable PR to quickly recover its locomotive capacity and hence traffic potential, but the above decisions nullified the Project's impact.

7. Staff Strength

7.1 One of the success of the Project is control of staff costs. In 1989-90, PR employed 133,261 employees which were reduced to 104,888 in 1997-98. The reduction in staff strength has been achieved by natural attrition and PR is likely to continue this policy in future as well. 17

Year NofSt£f

1989-90 133,261

1990-91 130,884

1991-92 124,436

1992-93 120,209

1993-94 116,026

1994-95 113,186

1995-96 104,281

1996-97 96,768

1997-98 96,111

Table 13: Staff strength of PR

7.2 However,one of the factors for success of the attrition program was the fact that during this periodGoP has banned any new recruitmentfor all departmentsunless neededfor technical reasons. There is a risk that once the GoP lifts the ban, most of these vacant post may be filled due to political pressures. It is important that PR deletes most of these surplus posts and reduce the sanctionedstrength of its personnel as well.

8. Public ServiceObligations

8.1 One of the major successeshas been to introducethe business approach in PR. Although not purely commercialized as yet, but still a significant shift in management's approach towards handling its operations on business lines is clearly visible. One of the concepts introducedby the Project was to separate PR commercially viable services and those services which are inherently loss making due to low tariffs and relatively higher fixed costs, but PR is obliged under GoP instructionsto operate these services to serve Public Service Obligations(PSO). In order to operate PR on purely commercialbasis, the cost recoveryhas been split into two major streams:

(a) Loss making serviceswhich PR has to operateto servePublic Service Obligations (PSO) (b) Other services

8.2 One of the major contribution of the Project was to make GoP recognize the fact that PR should be financially compensatedby GOP for rendering those loss making services and facilities which are being maintained under PSO due to GoP instructions.

8.3 GoP has been contributing annually about Rs.1.3 billion to Rs. 1.7 billion towards PR finances under PSO since 1990-91.PR however feels that the compensationunder PSO is very low. PR consultants (CIE Consult) carried out a detailed study in 1996 to work out the actual losses incurred by PR under PSO services.CIE Consult recommendedRs. 6 billion under PSO to be paid to PR by GoP. Howeverduring 1995-96GoP did not remit any amount to PR underPSO which 18 resulted in higher overdraft from State Bank of Pakistan an incurred heavy financial charges and increase in the overall loss for the year 1995-96. Similarly for the years 1996-97 and 1997-98,PR has not receivedany funds from GoP under PSO.

8.4 In order to make PR a commercially viable entity, PR should not be operating any loss making service. In a competitivetransport market, it is no longer possible for financially viable railwaysto cross subsidize its annex servicesout of economic services. The profitabilityanalysis for ordinary passengertrains for the period 1995-96is given in the table 14 below:

1995.9@s6\ Perce(t_n o tota

PassengerKm generated 1.4billion 7.3% Revenueearned Rs. 0.2billion 5.7% Fullcost Rs.2.7 billion 30% Contributionto loss Rs. 2.5billion 45%

Table 14: Profitabilityanalysis of ordinary passengertrains during 1995-96.

8.5 The above analysis shows that ordinary passenger trains contribute 30% to cost, recover only 5.7% revenues and account for almost half of passenger losses. Inspite of such a low profitability, PR is obliged to operate these services due to GOP instructions. Ordinary passenger trains cost Rs. 1.96 per PKm and earns only Rs. 0.15 per PKm. GOP needs to examine whether there really is a valid case for operating such services at a loss when financial resources available to the country are scarce. Many of these ordinary passenger services could easily be replaced by the parallel bus services. 8.6 PSO was a pre-condition for the World Bank loan, but GoP has withdrawn PSO payments to PR since 1995-96 and PR is still not allowed to close down its loss making services. 19 9. Loan Disbursements

1. Recommissioningof 46 D.E. Locos. 14.000 11.370 2.630

2. Traction motors 19.542 17.106 2.436

3. Roller bearings 10.544 10.013 0.531

4. Unit Exchange 21.000 16.144 4.856

5. MIS 3.000 3.000

6. UHF and VHF 6.600 6.600

7. WorkshopMachinery 5.800 1.821 3.979

8. High capacitywagons 13.300 13.300

9. Wagon movers 2.000 0.947 1.053

10. Air brake equipment 0.442 0.442

11. Recommissioningof 2 GMUs 0.500 0.500

12. Supervisory control of Lahore - 2.000 2.000 Khanewal

13. TechnicalAssistance, Studies 6.180 2.719 3.461

14. Miscellaneousunidentified 0.092 0.092 Total (MillionUS$) 105.000 60.562 44.438 OW 65~~~~~~~~~~~~~ f ~~~~~TAJIKISTAN 715 (

PAKISTAN ->2~

0 SELECTEDCITIES *) NATIONAL CAPITAL N

-MAIN ROADS RAILROADS ...... 35~~~~~~~~ ~~RIVERS

-.-- PROVINCE BOUNDARIESAprnroe 3

--- INTERNATIONALBOUNDARIES

p~~nd e~~ndKASHMIR

100 200 300KILOMETERS

0 To Too 150 2OGOMILES ~ei

/ ~~AFGHANISTAN " K)

30- Ott. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~30--

ISLAMIC~ REP.~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ AGANSA

OF IRAN L-~~~~~~~~~~~eodkogo Rh,i 0S.

**'*~~~~**~~~*~~*___ ~~~~~INJKSAD~-IA0 000 TUR0ENI&TA Theko Mopcop oc~gn ooIn,t prodcodof he Worl BonEby i

25lekodrc, lr,dnmeEnocdeydr,foefo ieon

I -- - I 00 70 70'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~IN IRED30316

60' 65' 70' f TAJIKISTAN 75 CLK-704 j 00 CIA'- ck PAKISTAN C HI NA fI NATIONAL HIGHWAYS MBRP/RSPPROJECTS V-~ Nu 8 !I MBRP ROUND I §1 NATIONAL HIGHWAYS4 '-" ',0 AFANTN 1 ~' MBRP ROUND II 0 SELECTEDCITIESI- it MBRP ROUND III * NATIONAL CAPITAL K OGil9

9R, 7WS~~~~~~~~~~~~~~~~~~~~8,3 31 RSP ROUND II -'' PROVINEBONARE 78142108( P76A708) I / '~' '00137[80 710'B1EI1 (5 751F RSPROUND III INTERNATIONAL BOUNDARIES 8-158 887782' 1110 71 A00li0 . ' I a8 RSPROUND IIIA 17-58I07

I80fl12 I CONTRACT NUMBERS 18018 JAPMMUr11]'

(TI TERMINATED PROJECT 115618MBRP70171ordudol Keha g (33I8l.- oelid 1'7' 8 1121 8R0I772616,d,s ' 1W 7'0170188) and KASHMIR 67

AFGHANISTAN * Ennv ' M800010 Jhlu 0

- Sie1kot ", > 0 U ~~~~~~~~~~~~~~~~13071320 1R0P7102) 0 59-85[8871286)31 -'1, 485 5281Rene 7i1e1loo , 2846)888712040~ ~ ~~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~14'P71 - kV 291128/ 9. D. (RSP112)78870871u ' Cbnesenp88077848431~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 70 '~8'

12 610-RS4782Q 87-780 11-300871407

Nodoki0- -Sibi---~~~~~2378 2871.807 ,71828)BR 71 1 ,,~

30, 871-*0304065712I fl lR81n18071089 6 -K 708748 1577129031SP 124 (T

-~~ S2t DeIbn,sdie 1~~~~~8-68(BP788258 -R 89705 735[5 7141 'e.> -58-86878081 1'I8R ''''0~~~~~~~~~~~~~~~~~~~~~~~I

31103851877p2r OFIRAN N~~~~~~~~~~~~~~~~~~~XIR 1 Kh 1dr/ 2 0suku 'RS

* - .4~ ~~~~~~' 61N RP 1dA ~

-- '5 -,- { -, 6~~~~~~~~~~~~~~~~~7R~p07872 RS 1 6 / '072 08018-887 7014 25' / - Il7-888~ ' - - 0 Nen~bsheh - - - 1-8R07041y2r 0481603967 71P71227) DI

4 410Uo)-'.I'019 I- - 218-0201807 7108)~~/Ml ) - 39 -6wedu2'- *~~~~' ------80%)081~~~~~Y6'udo, '~Nd - k - (-9 200218 1687P 71081 OF IRAN rr, N 563-585~~1 701200R5 8 KLOETR 231,33~~£5M_R_7__35____ 0-208-87028I).~-Q______L______k____n____ 0 Karachi Tbe~~~~~~~~~~~~~~~~~~~~~~~~-N414~ ~P16 liDokr t 0 '2 80 200,8

25- 275-7~~~~~~~~~~~~~~~~~~~1IM.R_,''' I1888wn rouedbyls o 0s418-InI725-rdBab 7035AI~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~ 8 O ono;e,clr.dro)eIo~ e rolc ,101015600 88-''' 15WOdROnP7oup0os 8 811$'107do oli-plyor b2pu2,l 02157220dorsP 40' 60' - ' ' ~' 70' 7en6o iodn~ren8oc the )ege)lulu' of ocy oerrilory 2052 ~1 5 (PSP71~05) ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~JUE 77