Document of The World Bank

Public Disclosure Authorized Report No: ICR0000503

IMPLEMENTATION COMPLETION AND RESULTS REPORT

ON A LOAN IN THE AMOUNT OF US$60 MILLION EQUIVALENT Public Disclosure Authorized

TO THE

RUSSIAN FEDERATION

FOR THE

MOSCOW URBAN TRANSPORT PROJECT Public Disclosure Authorized

October 30, 2009

Sustainable Development Department Russia Country Unit Europe and Central Asia Region

Public Disclosure Authorized

CURRENCY EQUIVALENTS

(Exchange Rate Effective January 31, 2009) Currency Unit = Ruble Ruble 1.00 = US$0.03 US$1.00 = Ruble 32.6

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance Strategy CCTV Closed Circuit Television ERR Economic Rate of Return GDP Gross Domestic Product GIBDD State Traffic Police IBRD International Bank for Reconstruction and Development ICR Implementation Completion and Results Report INT Department of Institutional Integrity IRIS Integrated Records and Information Services MCG Moscow City Government M&E Monitoring and Evaluation MKAD Moscow Ring Road MPIU Moscow Project Implementation Unit MUTP Moscow Urban Transport Project NGO Non-Governmental Organization OPRC Operations Procurement Review Committee PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementation Unit SEC US Securities and Exchange Commission SIL Specific Investment Loan TCS Traffic Control System TMC Traffic Management Center TM Traffic Management UNDP United Nations Development Program VP Vice-President

Vice President: Philippe H. Le Houerou Country Director: Klaus Rohland Sector Manager: Henry Kerali Project Team Leader: Vickram Cuttaree ICR Team Leader: Elena Chesheva ICR Primary Author: Slobodan Mitric

THE RUSSIAN FEDERATION Moscow Urban Transport Project

CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes ...... 5 3. Assessment of Outcomes ...... 11 4. Assessment of Risk to Development Outcome ...... 17 5. Assessment of Bank and Borrower Performance ...... 17 6. Lessons Learned ...... 20 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ...... 22 Annex 1. Project Costs and Financing ...... 23 Annex 2. Outputs by Component ...... 25 Annex 3. Economic and Financial Analysis ...... 29 Annex 4. Bank Lending and Implementation Support/Supervision Processes ...... 33 Annex 5. Beneficiary Survey Results ...... 35 Annex 6. Stakeholder Workshop Report and Results ...... 36 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 37 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ...... 50 Annex 9. List of Supporting Documents ...... 51 Annex 10. Monitoring indicators ...... 52 MAPS IBRD No. 31064 and No.31064R ...... 59

A. Basic Information Moscow Urban Country: Russian Federation Project Name: Transport Project Project ID: P046061 L/C/TF Number(s): IBRD-45950 ICR Date: 10/31/2009 ICR Type: Core ICR RUSSIAN Lending Instrument: SIL Borrower: FEDERATION Original Total USD 60.0M Disbursed Amount: USD 55.5M Commitment: Revised Amount: USD 55.5M Environmental Category: B Implementing Agencies: Moscow Implementation Unit Foundation Cofinanciers and Other External Partners:

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/06/1998 Effectiveness: 09/24/2001 Appraisal: 12/01/1999 Restructuring(s): 11/15/2006 Approval: 02/06/2001 Mid-term Review: 09/01/2004 Closing: 12/31/2005 12/31/2008

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Low or Negligible Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance:

i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status:

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Roads and highways 26 80 Sub-national government administration 74 20

Theme Code (as % of total Bank financing) Municipal governance and institution building 50 50 Other urban development 50 50

E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Johannes F. Linn Country Director: Klaus Rohland Julian F. Schweitzer Sector Manager: Henry G. R. Kerali Ricardo A. Halperin Project Team Leader: Vickram Cuttaree Richard C. Podolske ICR Team Leader: Elena Y. Chesheva ICR Primary Author: Slobodan Mitric

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The objective of the Project (as stated in the Loan Agreement) was to improve the institutional capacity of the Moscow Government to plan, design, implement, operate and enforce traffic management measures.

The specific objectives (as stated in the Project Appraisal Document) were to (a) build up traffic management in the city by creating and strengthening a Traffic Management Center (TMC), (b) invest in selected high priority physical works which demonstrate the value of improved traffic management, (c) strengthen traffic enforcement through

ii training and equipment and (d) enhance the planning of surface public transport operations.

Revised Project Development Objectives (as approved by original approving authority) PDOs were not revised.

(a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Traffic Management Center (TMC) created and fully staffed with adequate Indicator 1 : numbers and quality of staff. Value No centralized city wide quantitative or traffic management 20 staff minimum n.a. 500 staf Qualitative) structure in place. Date achieved 09/24/2001 09/24/2001 09/24/2001 12/31/2008 TMC was set up well before negotiations. Minimum staff complement of 20 Comments reached before effectiveness, but not fully qualified. At loan closing, staff were (incl. % 600 of which 50 are traffic management professionals. The TMC is fully achievement) operational. Achieved 100% TMC officially granted adequate authority to plan, design, and implement traffic Indicator 2 : management measures. Transfer of TMC given Value authority over jurisdiction over TMC initially granted quantitative or signals to TMC; signals and cooperating role Qualitative) TMC appointed as appointed as lead lead TM agency. TM agency. Date achieved 09/24/2001 09/24/2001 06/23/2005 Comments Two mayoral decrees in 2005 gave full authority to TMC. It is now the lead (incl. % traffic management agency in Moscow designing and implementing traffic achievement) management schemes. Achieved 100%.

(b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Improved traffic enforcement. Transfer signal functions to TMC, Value Police manage traffic focus on moving Achieved in (quantitative signals, no focus on law patrols and substance or Qualitative) enforcement. incident management. Date achieved 09/24/2001 09/24/2001 01/31/2007

iii Comments Operationsl plan for dynamic law enforcement agreed and implemented; (incl. % equipment supplied; TMC and Police functions redistributed. Achieved 100%. achievement)

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/28/2001 Satisfactory Satisfactory 0.00 2 12/21/2001 Satisfactory Satisfactory 1.51 3 06/28/2002 Satisfactory Satisfactory 3.40 4 12/24/2002 Satisfactory Satisfactory 5.67 5 05/30/2003 Satisfactory Satisfactory 10.38 6 10/31/2003 Satisfactory Satisfactory 14.23 7 03/05/2004 Satisfactory Satisfactory 18.71 8 04/05/2004 Satisfactory Satisfactory 20.22 9 09/10/2004 Satisfactory Satisfactory 24.25 10 10/29/2004 Satisfactory Satisfactory 25.42 11 05/27/2005 Satisfactory Satisfactory 27.28 12 01/04/2006 Highly Satisfactory Highly Satisfactory 32.19 13 03/22/2006 Highly Satisfactory Highly Satisfactory 33.76 14 12/23/2006 Satisfactory Satisfactory 50.42 15 12/28/2006 Satisfactory Satisfactory 50.42 16 12/26/2007 Satisfactory Moderately Satisfactory 53.07 17 03/22/2008 Satisfactory Moderately Satisfactory 53.36 18 07/17/2008 Satisfactory Moderately Satisfactory 53.70 19 11/14/2008 Satisfactory Moderately Satisfactory 55.01

H. Restructuring (if any)

ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions reallocation, cancellation of a 11/15/2006 N HS HS 48.24 project component

iv I. Disbursement Profile

v

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal As Russia started the transformation of its political and economic system in the late 1980s, public transport modes still dominated the transport system of Moscow. Moscow was served by an extensive metro system, among the best in the world, and a dense, street-based network of bus, trolley-bus and tram lines. Together, these modes carried about 85% of all motorized trips, permitting a high level of mobility, above 3 daily trips per person. Car ownership was low at about 70 vehicles per 1,000 people; and cars carried less than 12% of the passenger market.1 The urban road network was extensive but underdeveloped in structural terms, reflecting low reliance on transport by car. Most notably, it lacked limited-access roads, suitable for longer trips, in both ring and radial corridors.

In the space of a few years, and in spite of a severe, historically unique recession in the Russian economy, major changes occurred on the transport demand side in the capital city. Car ownership and use rose at unprecedented rates. Starting from merely 800,000 vehicles in 1990, the fleet exceeded 2 million by 1996.2 By 1998, there were more than 200 cars per 1,000 people in Moscow and the car share of motorized travel increased to more than 22%. This modal shift resulted in unprecedented traffic congestion on city streets, accompanied by conflicts, accidents and air pollution. Stop-and-go operation became common during peak periods, and peaks lengthened. An especially disturbing development was that pedestrians, especially children, accounted for about two-thirds of traffic fatalities. On-street public transport operations, having no protection from congestion, saw their operating costs rising and levels of service plummeting, with downstream losses of passengers and an unsustainable demand for operating and capital subsidies.

The early response of the Moscow City Government (MCG) to rising traffic problems was essentially pro-automobile, but with a narrow focus, consisting mainly of investing in major arterial roads, notably ring roads. The sub-arterial street network and on-street public transport operations received much less attention. The potential of traffic and demand management – a set of engineering and regulative instruments aiming to optimize the performance of a given transport network in line with social priorities – was neglected. The traffic control system of Moscow was largely out of date. The majority of traffic signals were of the “isolated” type, precluding the use of traffic-sensitive control methods with a network-wide scope. The most visible use of traffic management tools included one-way circulation schemes and left-turn prohibitions at major intersections, measures useful to maximize flow but known (in worldwide experience) to reduce access. On-street parking management by time controls and charges was not practiced, and the subject of charging motor vehicles for the use of urban roads was not on any professional agenda, much less official ones. No attempts were being made to improve operating

1 Car ownership data are from World Bank (2002), Europe and Central Asia Urban Transport Strategy. 2 These numbers are from a reconnaissance mission’s back-to-office report dated October 29, 1996.

1

conditions for street-based transport modes, used by two-thirds of all public transport passengers, e.g. by provision of reserved lanes and priority at signals. 3 On the supply side, the regulation of on-street public transport services, provided by the state-owned Mosgortrans and its private complements, was not seen as a subject of critical importance.

Underlying weak traffic management was the failure of the MCG to develop an appropriate institutional structure to deal with motorization. Traffic management functions, such as were pursued, were divided among several agencies, with none in the lead. There, they either languished as secondary activities, with a low budget-attraction potential, or got in the way of that agency’s primary activities. Traffic police, for example, were managing the city’s traffic control systems, while failing to provide effective, on- street law enforcement, incident management, and other safety-related functions.

Eventually, some key officials in the MCG realized that large road construction alone could not do the job. In the late-1990s, the City of Moscow commissioned a transport strategy study, funded in part by the United Nations Development Program (UNDP). The study identified many soft spots in the way that the Moscow urban transport system was managed and planned. These included a patchy legislative framework; outdated planning standards; low availability of data on both transport demand and supply sides; regulatory policy for public transport services that placed an unsustainable subsidy load on public budgets and led to inefficient supply; inadequate analyses for investment decision making; divorce between plans and sources of funds; and others. The study took a comprehensive and long-term view, recommending a set of institutional, legal, policy and investment activities addressing the identified shortcomings. The Bank-funded project (hereafter the Project) was conceived as a vehicle to implement some key, short-to- medium-term proposals of this study, and to support further development of other, medium-to-long term elements.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

The objective of the Project, as stated in the Loan Agreement, is to “improve the institutional capacity of the city of Moscow to plan, design, implement, operate and enforce traffic management measures.”

More operational sub-objectives can be inferred from the statement of instruments cited in the Project Appraisal Document (PAD) in the order of importance: (a) strengthening traffic management in the city by creating a Traffic Management Center (TMC) within the city government, and building up its capacity; (b) investing in selected high priority physical works which demonstrate the value of improved traffic management; (c)

3 Modal shares in 1994 were as follows: 34% metro; 40.4% buses; 16% trolley-buses; 9.6% trams. Source: Vladimir Stortchevus, “Sustainable Development of Transportation Systems in Largest Cities of Russia” presented at Habitat II – United Nations Conference on Human Settlements, Istanbul, Turkey, June 1996.

2

strengthening traffic law enforcement through training and equipment; and (d) enhancing the planning of surface public transport operations”.

The original list of monitoring indicators, reproduced in full from Supplemental Letter No. 2 in Annex 10 to this Report, is even wider. It has four distinct groups of indicators, each associated with one or more objectives.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

There were no formal revisions of either project objectives or key performance indicators. In practice, the original large set of indicators mentioned above was never used. A smaller, simpler set of indicators was developed, in a joint endeavor by the Moscow City Government (MCG) and the Bank team. This set evolved as the Project went on, in line with cancellations and other changes in various project components. The final set, used in the last three years, was drawn from the final Implementation Status and Results Report:

Objective Indicator

Strengthen traffic management TMC created and fully staffed TMC granted primary authority for TM

Improve traffic enforcement Completion of police training for mobile law enforcement Operational plan for equipment prepared and implemented Police equipment bought and placed into service

The absence of indicators related to the sub-objectives (b) and (d) cited under Section 1.2 above, i.e. to measure benefits from traffic management improvements and from a regulatory reform in public transport services, stems from the fact that the corresponding components had been cancelled. The latest set of indicators does not include an indicator on the results of the infrastructure investments under the project, which might be explained by the fact that the team made a focus of the revised set of indicators on the project objective of institutional strengthening.

1.4 Main Beneficiaries.

With two exceptions, the project was designed to benefit the general traffic, rather than any specific target population. The first exception involved pedestrians, whose plight in Moscow included many killed or injured in traffic accidents, as well as risky and time- consuming walks across exceptionally wide arterial roads in Moscow. The Project focused on the provision of pedestrian underpasses, with direct, immediate and sizeable benefits to pedestrians, in addition to more diffuse and downstream benefits expected from better traffic management and law enforcement. The second exception involved benefits to passengers of street-based public transport services, some direct and others diffuse and downstream. Direct benefits were expected from road improvements,

3

especially those involving the tram overpass at Donbassky bridge complex, and at pedestrian underpasses on radial roads. More diffuse ones were expected from traffic management improvements, such as exclusive lanes and priority of passage at intersections. The inclusion of a Project objective aiming to develop a reform strategy for the provision of street-based public transport services also indicates that this group of travelers were targeted as beneficiaries, albeit well downstream and outside the life of the Project.

1.5 Original Components (as approved)

The Project consisted of the following 8 components, some supporting institutional development, others being direct investments in road infrastructure and associated management systems, and yet others involving the preparation of future plans, strategies and investments:4

(a) Traffic Management Center (total US$11.60 million): equipment, library materials and technical assistance for the establishment of TMC. (b) Corridor Improvement Program (total US$47.60 million): (B-1) Construction of three pedestrian underpasses on the Varshovskoye corridor. (B-2) Non-specific traffic and safety enhancing improvements along Schelkovskoye and Varshavskoye corridors, and other corridors to be agreed during implementation. (c) Central Area Traffic Improvement Program (total US$6.20 million): (1) feasibility studies and detailed engineering for improvements to be done in the Central Area of the city. (2) The construction of one pedestrian underpass along the Garden Ring (at Krasnie Vorota metro station). (d) Reconstruction of Donbassky Bridge complex (total US$39.00 million): reconstruction and widening of the Donbassky Bridge (in the Varshovskoye corridor) and the construction of a tram track bridge at the same location. (e) Traffic Enforcement Program (total US$10.30 million): Equipment, training and technical assistance to the Traffic Police. (f) Surface public transport study (total US$2.00 million): Carrying out of a study to: (a) present a comprehensive picture of the current public transport situation; (b) present strategic options for restructuring the sector; and (c) draw up detailed development plans for key sector organizations. (g) Strategic Advice (total US$0.90 million): Carrying out further transportation related studies, as agreed with the Bank.

4 There being some variation in the description of the project in various documents, this description follows the text cited in the Loan Agreement. The costs given in parentheses are from the PAD, Section C. They include physical and price contingencies.

4

(h) Assistance to the Project Implementation Unit (total US$2.50 million): provision of operating costs, equipment, training, audits, and technical assistance.

1.6 Revised Components

There were major changes in three components:

(b) Corridor Improvement Program: (i) The pedestrian underpass sub-component (b-1) was expanded substantially, by adding 2 more underpasses in the Schelkovskoye corridor: at Cherkizovskaya metro station and at Preobrazhensky street. This was a complex of 2 underpasses, involving a large-scale investment (just under US$20 million); (ii) Traffic and safety improvements in Schelkovskoye and Varshavskoye corridors (b-2), undefined at the outset of the Project, were cancelled at the request of the MCG. Instead, it was agreed to include a traffic control system for the Third Ring Road, (US$39.9 million), involving vehicle/incidence detection, access control and motorist advisory information. Changes in b-1 and b-2 were all within the description of Component (b) (as stated in the Loan Agreement) and contributed to the same primary development objective, hence no legal amendments were necessary.

(c) Central Area Traffic Improvements Program: The sub-component (c-1), consisting of feasibility and engineering studies for Central Area traffic improvements, was cancelled at the request of MCG, and loan funds were re-allocated to component (b).

(d) Surface Transport Study was cancelled at the request of the MCG.

A summary table of components as originally envisaged and as implemented, with corresponding costs, is in Annex 1. A description of components as implemented is in Annex 2. A more detailed description is in the Borrower’s Completion Report. All the above cited cancellations and additions are discussed together in Section 2.2 below.

1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) There were no other significant changes.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their mitigations identified, and adequacy of participatory processes, as applicable)

The project had a long gestation period, the process having started with MCG approaching the Bank in 1996 with a proposal to participate in the funding of the then- proposed Third Ring Road, estimated to cost several billion dollars. This was in line with MCG’s approach to deal with motorization through investments in large-scale urban roads, with scant attention to managing the use of the existing network. The Bank’s

5

counter proposal was to finance smaller-scale traffic improvements while doing in parallel an urban transport strategy study, which would produce a comprehensive and consistent framework, and action programs, going well beyond road investments. This response reflected one of the unchanging pillars of the Bank’s global urban transport strategy, the situation being unusual only with regard to the size of the client city, its high rate of motorization and relatively strong financial standing. At this stage, MCG went ahead with the Third Ring Road, financed from the budget. They did not support the idea of small-scale traffic improvements, but did accept to have a new strategy made – by the UNDP-funded study cited above. The study confirmed the importance of the management approach, and underlined the imperative of focusing on the street-based public transport services. It took time for the authorities to absorb this advice and take initial steps to develop a program of traffic improvements. In addition to the time taken to reach an understanding of a strategic importance of traffic management, the preparation of the Project was also hampered by the fragmentation and generally weak level of traffic and transport planning expertise within the MCG, and a dearth of local consultants with a combination of the requisite technical and political skills.

The design of the Bank-funded project that ultimately emerged from this process, in year 2000, was unusual in that it combined institution-building in traffic management and law enforcement with some large-scale and high-visibility infrastructure investments (Donbassky Bridge complex and pedestrian underpasses). In other words, the main specific investments included in the Project at the outset were not of the traffic management type, such as signals, signs channelization, etc. For these, the Project included a US$47 million envelope (more than 40% of the loan) for unspecified small- scale traffic management investments and funds to prepare these and similar interventions. The intent was to define and implement these in line with the rise in capacity of the newly created Traffic Management Center. In a move consistent with the size of specific investments, the project implementation unit was not placed inside the TMC, but set up within an already existing unit (Moscow Foundation). The Foundation had a superior track record in implementing the Moscow component of the Russia Bridge Rehabilitation Project, involving large-scale civil works.

The length of the preparation period reflected the difficulty of widening the perspective of MCG to complement their investment-dominated strategy with other instruments, as well as the time spent on trying to prepare traffic management investments in an environment lacking the requisite organization and skills, before adopting the innovative tactic cited above. Internally, the inclusion of the traffic police component met with considerable opposition, there being strong reservations against working with an institution with a difficult history.

The preparation process was led by urban transport Bank staff, assisted by expert consultants. The team members were well aware of 30 years of often difficult experience with Bank-funded traffic management projects in developing countries. Consultants brought in expertise from countries like the US, UK and Finland, with long experience with the rise of motorization in cities. The team took steps to expose MCG officials to appropriate international knowledge, including a tour of senior MCG officials to Finland and the US, to see traffic management in action and the kind of organization this required.

6

This led to the decree establishing the TMC in 1999, months before the Project appraisal. Grant-funded Finnish advisors, specializing in institution development for traffic management, stayed over a 16 month period in Moscow prior to the start of the Project. Direct technical assistance to the TMC for the early phase of Project implementation was financed from the loan. While the Project included an envelope for investments yet to be identified and prepared, those specific investments already in the Project were carefully selected from a much larger list put forward by the MCG. The team anticipated and provided for problems with police equipment specifications and other procurement matters. All this notwithstanding, the team understood and made explicit the remaining risks, especially the risk that the evolution of the TMC might be hampered by the resistance of organizations that stood to lose jurisdiction, staff and budgets. This risk was rated substantial, in spite of measures taken during Project preparation to reduce it, and left to be handled through careful supervision and demonstration of the fledgling TMC’s good performance. In sum, though the Project at entry involved a compromise, the good project preparation resulted in well thought out project design and selection of activities to be funded under the project to achieve the agreed DO.

However, the project quality at entry can be criticized for the weaknesses in the development of the results framework and monitoring indicators, and for the over- optimistic project time frame, not carefully assessing the time it takes to make institutional changes and establish functioning new structures. These points are elaborated further in the ICR. Consequently, the overall rating for quality at entry is rated moderately satisfactory in the Section 5.1 (a).

2.2 Implementation

Investment components specified at appraisal moved essentially without difficulties and were implemented on time. The largest single investment, Donbassky Bridge complex, was completed early and under cost (relative to the contract terms), while reaching a high quality finished product. All but one pedestrian underpass were constructed with good adherence to time and cost estimates. The single exception involved the complex of two underpasses at Preobrazhensky Ploshad, which doubled in cost between the feasibility study stage estimate and the detailed design. The Bank agreed to include this unusually high-cost structure because of the high vehicular and pedestrian volumes, and also because this sub-project was a part of high-density urban redevelopment around the neighborhood metro station.

A longer-than-expected delay was encountered in the procurement of equipment for the traffic police, because of its linkage to institutional development objectives. The procurement was scheduled in two batches, requiring an Operational Plan for the use of the equipment acquired in the first batch, and a positive evaluation of its results street- side before the clearance to tender the second batch was given.

The delay in project implementation that required several loan extensions was due mainly to the part of the Project that had not been fully specified at negotiations. It turned out that developing a program of traffic improvements on corridors and in the central area of Moscow could not be done within the time frame of the Project. At that time the TMC

7

was not yet strong enough. It was created well before appraisal (in December 1999), and its initial complement of 20 staff was hired relatively quickly, but it took too long to get the relevant jurisdiction from the required agencies (the Roads Department, the Traffic Police), and the corresponding extra staff and budgets. The relevant mayoral decree appointing the TMC as lead agency for traffic management did not come until June 2005, half a year before the original loan closing date, reflecting the difficulty of balancing gains and losses for various municipal agencies. Yet this marked a key step in achievement of the DOs and consensus between the MCG and Bank on the importance of institutional strengthening.

The Bank team worked with technical counterparts to develop an investment program to substitute for the originally intended traffic improvements. This included an expansion of the successful program of constructing pedestrian underpasses, always a highly-valued item in Bank-funded urban transport projects, and adding the traffic control system for the Third Ring Road. The latter had the advantage of being an effective traffic management instrument, with both flow efficiency and safety impacts, permitting a full involvement of TMC in its concept and implementation. It was also sufficiently large- scale to appeal to MCG’s traditional leanings. Unfortunately, this traffic control system was a complex undertaking, first in the system design and its procurement, and later, getting work approvals and anything else that required cooperation between multiple municipal agencies and multiple contractors. The alternative was to terminate the Project at the end of its originally scheduled life, but that would have involved depriving TMC of the support just as it was empowered to take on most tasks for which it was created. Given that the establishment and strengthening of TMC were the primary focus of the Project, the decisions on investments to include and for how long to extend the loan were appropriate. Some of the small scale investments were later implemented outside the Project and were financed by the MCG.

This said, one must recognize that MCG faced some internal and external opposition to implementing low-cost and policy-laden traffic management measures during much of the Project life. This was probably due to strong political resistance by motorists, a politically potent segment in all societies, to measures such as parking charges and reserved lanes for public transport vehicles. Similarly, the resistance of Mosgortrans, the public-owned public transport operator, was the likely reason for the MCG to cancel the study expected to develop a new strategy for organization and regulation of public transport services. The terms of reference of the study made it clear that its focus would be to bring private operators and competition into the sector, certainly a threat to Mosgortrans management This cancellation of the study undermined the prospect of the Project becoming the catalyst for broadening and deepening the urban transport reforms in Moscow. The Project team responded by supporting other, less threatening but important initiatives, such as street priority for public transport vehicles, and parking regulation.

There was a delay with the completion of the last big contract under the project, the Third Ring Road Traffic Control System (TCS). While by the end of the project December 31, 2008, all physical works on installation of the system had been completed, the system was not yet operational. The delay was caused by the complexity of needed integration

8

with the existing Closed Circuit Television (CCTV) systems and the traffic control systems for the four tunnels on the ring road. During the period of ICR preparation, January-September 2009, all but one remaining works had been completed; the TCS was integrated with the existing CCTV systems and the traffic control systems for Kutuzovsky, Gagarinsky and Suschevsky vehicle tunnels in the Third Ring Road. The works for integration of the TCS with the Lefortovsky tunnel system were ongoing in September 2009, at the time of the ICR mission, and were expected to be completed by the end of October 2009. Overall, the ICR mission confirmed that the system was operational except for this one tunnel. The system was successfully tested by the traffic police for more than a month, on average about 12 hours per day, which confirmed that all elements of the system are now functioning well, including reversible lane traffic signals, turnpikes, dynamic message boards, variable speed limit signs, variable graphical warning signs, as well as traffic sensors and controllers. At the end of September 2009 the acceptance committee of the Moscow City government approved the Third Ring Road TCS for operation. At the time of ICR submission, the Borrower confirmed that the integration of the Lefortovsky tunnel has been completed.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

As evident from the preceding section on indicators, the M&E design was the weakest aspect of the Project at entry. The primary development objective was stated very clearly in the key Project documents (the PAD and the Loan Agreement). This objective, however, was not elaborated on with sufficient care into a set of operationally specific and realistic sub-objectives, linked to individual project components, and thence linked carefully to a small, stable and robust set of measurable performance indicators. Base values for indicators needed to be given and explicit arrangements for data collection made with the Borrower. Instead, the legally binding collection of indicators, essentially the Project Design Summary attached to a Supplemental Letter, had too few relevant and measurable indicators lost in a confusing plethora of other objectives and indicators (see Annex 10). The whole set gives little sense of the relative importance of project activities, and some (especially those related to the public transport strategy study) imply unrealistic claims regarding delivery and impacts, e.g. promising an increase in passengers of street- based public transport modes when the only relevant instrument included in the Project was a strategic study. Little wonder, then, that this initial set of indicators was jettisoned as soon as the implementation started. A more workable table of indicators was developed jointly between the Bank team and MCG. These new indicators in turn went through several changes as the Project took shape, and were reduced to just a few, but they remained stable in the last three years. It should be noted that, overall, despite the weakly designed set of monitoring indicators the Bank team remained committed to institutional development as the primary development objective they were pursuing, and sustained it throughout the implementation period. However, the indicator changes were not formalized in a subsequent agreement with the Borrower.

2.4 Safeguard and Fiduciary Compliance

For a project with several very large works contracts (two approaching US$40 million), and a large program of studies, its history regarding fiduciary and safeguard dimensions

9

was relatively uneventful. The success is due to an experienced PIU, as well to a general progress in Russia in domains of tender document and process quality, and mitigation of environmental impacts of civil engineering works.

The financial management by the PIU was satisfactory throughout the Project, with both project monitoring reports and audit reports submitted on time and with acceptable quality. Only one audit required a re-submission, and there were some accountability issues flagged by auditors early in the Project. Both were handled adequately by the PIU, and audits in later years did not identify any significant shortcomings.

In the realm of procurement, the PIU performed well on civil engineering works, for which they had gained considerable and successful experience under the Russia Bridge Rehabilitation Project, completed in 2003. In the tender for the Donbassky Bridge, a complaint was lodged by an Italian contractor for being unfairly rejected at the prequalification stage, but the OPRC accepted the PIU’s position. Eventually, the Donbassky civil works was declared by the MCG to be the best in its category for 2007, finishing on time and under cost.

The contract No. MUTP/Third Ring/Key (US$32.5 million equivalent) was signed on November 17, 2005 between the PIU and Siemens A.G and Siemens OOO (the Russian subsidiary) to design, manufacture/procure, test, deliver, install, complete and commission the Traffic Control System for the Third Ring road and provide technical assistance and training of personnel. At the end of 2008, an investigation by German and US prosecutors into Siemens alleged corrupt practices in its global business was being carried out. On the basis of publicly available allegations5 that fraudulent practices have taken place under the Project, including that Siemens has committed bribery and that Siemens had colluded with another bidder, the Department of Institutional Integrity (INT) of the World Bank started an investigation into the case. The Bank Project team was informed about such allegations two weeks before the Loan closing date, and with approval of Bank management, informed the Borrower that, in accordance with the Bank’s policy on eligibility of expenditures and the then present circumstances, further payments on the contract (about US$4.5 million) out of the proceeds of the Loan would be put on hold until the conclusion of an independent investigation of the matter. As explained in Annex 2, the disbursement period lapsed and the remaining amount of the loan was cancelled.

At the time of ICR finalization, the final INT report was not yet released. However, in July 2009 the Bank reached a settlement with Siemens, by which Siemens agreed that Siemens AG and its consolidated subsidiaries and affiliates would voluntarily refrain from bidding on Bank business for a period of two years beginning as of January 1, 2009, its Russian subsidiary Siemens OOO would not contest sanctions proceedings resulting in

5 Contained in the federal action filed on December 12, 2008, by the U.S. Securities and Exchange Commission (SEC) against Siemens Aktiengesellschaft in the United States District Court for the District for the of Columbia, Case No. 1:08-cv-02167.

10

a debarment of up to four years and establishment by Siemens of a US$100 million fund, to be disbursed to agreed entities over the next 15 years, to support anti-corruption work globally. The details of the case are provided in the box in Annex 2. It should be noted that the works under the contract were completed satisfactorily, albeit with some delays with integration of the TCS. The system was fully operational by the time the ICR was completed at the end of October 2009.

2.5 Post-completion Operation/Next Phase

The total outlay for improvements financed by the Project represented only a tiny fraction of Moscow’s annual transport budget (more than US$3 billion in 1998), and even though the facilities in question were large, they are small parts of an enormous network. No special arrangement for their future operation is necessary as Moscow roads are generally well-maintained. The investment in the traffic control system went in parallel with a re- allocation of all authority for traffic signal planning, operations and maintenance to TMC, and improving procedures for each of these activities. Notably, the Project financed the Control Room, enabling comprehensive insight into operations and maintenance of the existing area traffic control network and the new control system for the Third Ring (also financed by the Project). Arrangements are underway to switch signal maintenance from a force account approach to contracting out.

The situation is different regarding the future of institutional components, notably TMC. This is still a young organization, trying to find its niche among the existing institutions and getting to a stage where it can exercise the full authority finally given to it in 2005 by a Mayoral decree. Apart from its routine duties, e.g. traffic monitoring and traffic signals operations and maintenance, TMC has yet to go through one complete project cycle, from problem diagnosis, to development of alternative schemes, decision making, implementation and results monitoring. Aside from implementing small scale traffic improvement measures, the MCG is considering developing a traffic control system for the major ring road in Moscow, MKAD, implementing pilots for bus priority lanes on three corridors, implementation of the single parking program in the center of the city and development of park-and-ride facilities among other initiatives and programs.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

The project objective - building a mega city’s institutional capacity for traffic management - was quite relevant 10 years ago and has only increased in relevance : (a) locally, since motorization accelerated in Moscow and traffic congestion is even more detrimental to the city’s life and economy in spite of massive road construction; (b) nationally, because other Russian cities look to Moscow as a model to emulate; and (c) globally, because causal links between cumulative emissions from motor vehicles and the climate change are now better established. The “stretch” aspect of the Project – getting the MCG to focus on the regulation of street-based public transport services through a strategy study- was also highly relevant and has also increased in relevance.

11

The design in which investments very much wanted by the Borrower (while also being cost effective) were used to leverage institutional change was quite appropriate. The same holds for the implementation strategy, whereby a highly competent PIU carried most of the burden of work on implementing investments, giving the Bank’s team an opportunity to focus on institution building.

3.2 Achievement of Project Development Objectives

The primary development objective of the Project was met in that the MCG now includes an agency, TMC, which has a formal and comprehensive jurisdiction over traffic management in the city with an appropriate staff complement, with already a good record in carrying out routine functions such as traffic monitoring and analysis, traffic signal system operation and maintenance, and provision of inputs into making and implementing traffic improvement schemes together with the MCG’s road and transport departments.

At the outset, the TMC was created with only 22 staff and virtually no authority. At project closing the staff of the TMC was about 500, of which 50 were working directly on traffic management operations and designs while the rest were mostly handling traffic signal maintenance. This transformation was accompanied principally with a shift of responsibility from the traffic police to the TMC with respect to ownership and maintenance of the traffic signal system and other traffic management devices such as the Motorist Information System on the Third Ring. The TMC is now recognized as the lead agency in traffic management in Moscow, and the Project leaves TMC poised to lead the traffic improvement agenda for the city.

The secondary institution-development initiative of the Project - moving the Traffic Police from its focus on traffic signals and static law enforcement to a new focus on mobile law enforcement and incidence management - has also succeeded in full. This is reflected in the client’s satisfaction and demonstrated on-street by better law enforcement and incidence response. The new skills acquired during the training offered under the project and supplemented by modern equipment raised qualifications of traffic police staff relatively quickly. It is also significant that the Federal Traffic Police have moved to adopt the same approach as Moscow, and have acquired the equipment needed to support it.

The Project investments produced high-quality and high-visibility additions to Moscow’s road infrastructure, some (the Third Ring Control System) benefiting the general traffic, but others (Donbassky bridge complex and the underpasses) also providing much needed amenities for thousands of pedestrians and public transport passengers. The Donbasky bridge complex was the large physical investment under the project. This combination of road and tram bridges over an active railway line removed a major traffic bottleneck in the city (which won a top award for infrastructure in the city in 2004). The other "major" investments under the project were 5 pedestrian underpasses located at metro stations. In summary, all physical investments under the project were traffic management oriented aimed at demonstrating the value of key interventions to get the most out of physical investments in the road network.

12

While the Project did not meet its “stretched” sub-objective of energizing a chain of reforms in the organization and regulation of street-based public transport system through a strategy study for street-based public transport services (3% of the Loan), the team managed to move the subject forward through other studies, that include parking studies, a bus priority study, a business plan for establishing passenger service on the small ring railway, and subsequent discussions and resolutions of MCG.

In addition, the MCG continued to act on the recommendations of the studies done under the project and further developed the concepts and programs for the park-and-ride facilities, piloting bus priority lanes on three corridors, the single parking program in the city center and is planning for their implementation (See Annex 7 with the Borrower’s report). The city has moved forward on converting the small ring railway project to passenger services. This line would connect with commuter rail, metro, and bus lines, and would have park and ride facilities at several locations along the line. The Traffic Control System for the Third Ring Road is another important contribution of the project to the improved traffic management in the city. This is a sophisticated investment to improve traffic flow on the 3rd ring as well as detecting accidents and other incidents quickly. So besides being a physical investment owned by the TMC, the 3rd ring project is very much oriented to the goal of institutional strengthening of the traffic management function. Both the police and TMC will be monitoring traffic flows on this facility. The test piloting of the TCS has demonstrated its reliability and efficiency in terms of traffic management and control in the Third Ring Road. For instance, immediate response to road accidents by the traffic police allowed a significant (more than twice) reduction of time required for traffic police mobile units and rescue service vehicles to get to the accident site, resulting in a shorter congestion period caused by road accidents, which, in turn, increased throughput on the Third Ring Road. The successful completion of the Third Ring TCS prompted the City to express its desire to extend the system to the main beltway in Moscow, MKAD. By the time of the ICR finalization the City also indicated its plans to move forward with the small ring railway project (subject to securing external financing).

The ICR team used the relevant indicators from the Results Framework in the PAD to assess the results of the project (see table below). For more details please refer to Annex 10 of the ICR.

Objectives Key Performance Indicators Outcomes

1. Improved traffic 1.1. TMC fully staffed with a  The staffing target met in 2002 management complement of at least 20  Staff increased to about 500 in 2006 arrangements professionals upon TMC’s takeover of Moscow’s traffic signal system; of these, 50 work in traffic management proper

13

1.2. Positive assessment of traffic  MCG approval of TMC’s performance management decision making and potential expressed to missions and practices and traffic management demonstrated in a major increase of quality by professional stakeholders TMC authority in June 2005 and nongovernmental organizations  Qualified approval by professional stakeholders (GenPlan) 1.3 TMC traffic monitoring system  TMC carries out both routine and providing adequate data and analysis special purpose traffic surveys, in to permit rational project design and addition to monitoring traffic signals evaluation performance 2. Improved 2.1 Minimization of costs and strict  All project investments except Third implementation compliance with implementation Ring Road TC system carried out in efficiency of transport schedules and established quality time and cost; post-evaluation positive; network development standards Third Ring TC works were completed investment projects on time, but system integration was (comprehensive corridor 2.2 ERR for selected investments at finalized during ICR preparation. and spot improvements) least 20%  For project investments weighted average post construction ERR estimated from “before” and “after” traffic studies, and actual costs, is 55%. Individual ERRs range from 17% to 107%. 3. Improved traffic 3.1. Completion of approved plans  Parking and other traffic management management efficiency and feasibility studies for optimizing studies completed, and accepted for in the Central Area traffic management into and within implementation by MCG. The concept the central area, including, inter-alia: “Development of a system of the single (a) a parking plan for the Central Area urban parking space for 2008-2010” including, on-street parking, parking approved by the MCG in 2007, and lots, and interceptive parking. program for park-and ride facilities (b) a plan for restricting vehicular developed traffic into and through the central  Starting from December 2004 the area MCG imposed restrictions on entry to (c) a plan for optimizing public the central area of heavy (over 1 ton) transport operations into and within vehicles and trailers. the Central Area including the metro  Proposals on priority movement of system. public transport along selected corridors finalized by the MCG and suggested for implementation by the Department of Transport 4. Cost effective 4.1. Works completed on time, budget  Donbassky Bridge works completed construction of and quality successfully, early and beneath cost Donbassky Bridge  Received 2004 award for the best project in its category in Moscow 4.2. ERR for selected investments at  ERR 47% least 20%

14

5. Police better trained 5.1.End of training course evaluation  Evaluation of training courses carried and equipped to enforce reports out and was positive. traffic rules  Operations Plan, including an 5.2. Completion of operations plan for evaluation of experience with first improved mobile enforcement of batch equipment prepared driver behavior  Accident statistics collected by the Police indicate effectiveness of mobile 5.3. Improved traffic enforcement law enforcement: (a) at least 15% practices increase in successful interventions; (b) at least 10% reduction in response time to incidence; and (c) at least 15% increase in recovery of stolen cars. 6. Improved planning for 6.1.Time bound and monitorable  Objective not reached: surface public surface public transport action plan to improve quality of transport study cancelled by MCG just service and improve financial before issuing the request for sustainability proposals. However, following study on bus priority proposals on priority movement of public transport along selected corridors finalized by the MCG and suggested for implementation by the Department of Transport 7. Implementation of 8.1 PIU fully staffed with adequate  PIU was well performing, especially in effective project budget from the date of loan the areas of FM and disbursement management effectiveness 8.2 Sub-borrower and borrower satisfaction with project management

3.3 Efficiency Before-and-after traffic studies were commissioned by the PIU for the Donbassky Bridge area and the pedestrian underpasses. Based on these studies and actual construction costs, the PIU carried out efficiency studies for each of these large sub-projects. Study reports are on file; the results are summarized in the Borrower’s Implementation Completion Report. The PIU arrived at the following economic rates-of-return, relative to do-nothing or minimal-investment options:  Donbassky Bridge complex: 47% (compared to 31% at appraisal)  Underpass at Krasnie Vorota metro station: 45%  Underpass at Varshavskoye Schosse near Gazoprovod Street: 50%  Underpass at Varshavskoye Schosse near Chongarsky Boulevard: 52%  Underpass at Varshavskoye Schosse near Nagatinskaya metro station: 102%  Underpass under Schelkovskoye Schosse: 107%  Underpass complex at Preobrazhensky Square: 17%

Only this last rate falls under the 20% threshold, but it is well above commonly accepted levels (10-12%). The cost-weighted average rate-of-return is 55%.

A review of the PIU’s work on post-construction economic evaluation is in Annex 3 and additional comments are on file. Though the PIU’s analyses could not be fully replicated on the basis of data provided in their reports, the results are robust to any reasonable level

15

of uncertainty within the evaluation framework used. Overall, the PIU experts followed a standard approach to economic evaluation of road investments, just as it was done in pre- investment studies. The results should not be understood in any absolute sense, since the standard approach for evaluating road investments, when used for works in highly congested urban areas, tends to give excessively high rates-of-return. The main underlying cause is that do-something options are compared against poor, even untenable do-nothing alternatives where neither traffic levels nor operating conditions can be forecast easily. The PIU team tried to adjust for this difficulty by assuming conservative traffic growth rates to ensure that without-project options could handle it. A better, albeit much costlier, approach would have involved a sophisticated modeling effort on both the urban network and travel demand side, and the use of multiple options. This was out of the question for a completion report.

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory The overall outcome is rated satisfactory since the main development objective retained, even increased its relevance, and has been met by the Project. The institutional capacity of Moscow City Government in traffic management has been strengthened with the establishment of the Traffic Management Center, which is now responsible for the design, planning and implementation of traffic improvement measures in the city. The Project is also considered successful because Project investments resulted in high-quality and cost- effective additions to Moscow’s transport infrastructure. The project would have had greater impact on institutional strengthening were it not that the shift from small scale corridor improvements to larger infrastructure improvements under the project resulted in lesser synergy between project investments and the institution building, and did not have desired demonstration effects for the TMC in the design of such small scale traffic improvement investments. At the same time, as noted in the Borrower’s report some of the small scale corridor improvement measures were implemented outside the project with the financing from the MCG.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development Not applicable.

(b) Institutional Change/Strengthening Institutional capacity for traffic management refers to staff, skills, budgets, authority and influence in decision making, but it does not refer to policies which any given traffic management institution will follow. A strong institution can choose to expend its resources and support policies that would favor car traffic exclusively, or, using street space allocation and traffic signal settings, would restrain car and truck traffic in favor of public transport and pedestrians. The project focused mainly on creating an institutional structure, the TMC, and ensuring it has the necessary capacity and authority to design and implement traffic management improvement schemes. At the project design stage it was envisioned that once established, the TMC would play an active role in development of small-scale corridor improvements under the project, which were not defined at appraisal. However, in the course of project implementation the MCG opted to choose larger

16

investments that were the priority at the time thus limiting the TMC involvement. However, as mentioned in the Borrower’s ICR, the TMC performs a number of important functions that relate to the traffic management and there are plans to expand the areas of TMC activity. In addition the Bank team made an effort to lay the foundation for various relevant policies through Project-funded studies, and push for pilots in parking and bus priority. Studies were done and led to formal discussions, deliberations and even resolutions by MCG, but the process did not go as far as specific actions being ordered, e.g. the pilots or Third Ring traffic improvements, complementary to the traffic control system. It was reported that the proposals for priority movement of public transport along three selected corridors have been finalized and endorsed by the MCG Department of Transport, as well as some progress achieved towards parking program for the city center. This is not to say that TMC could or should become the primary urban transport institution in Moscow. Policies that matter, e.g. exclusive lanes for public transport vehicles, service levels and price/subsidy relations for public transport services, parking charges, and congestion charges require at least a more inclusive set of institutions of which TMC would be one.

(c) Other Unintended Outcomes and Impacts (positive or negative) Not applicable.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable

4. Assessment of Risk to Development Outcome Rating: Negligible to Low Judging from the steady growth of TMC’s authority and work program, and the unreserved positive views of its performance from the leadership of MCG, the risk that this new institution could decline is judged low. Likewise, the Traffic Police appear to be satisfied with the build-up of their capacities in mobile law enforcement and incidence management, with numbers in hand to demonstrate their new effectiveness in handling traffic violations.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase) Rating: Moderately Satisfactory The preparation process was thorough, utilizing a combination of a Bank team experienced both in traffic management and in the Russian setting, supported by expert consultants. This was complemented by grant-funded technical assistance to the Borrower, in terms of hands-on work and studies. The result was a project design representing a fair compromise between the Borrower’s focus on investments and Bank’s focus on strategy, institutions and policies. The Concept Document, memoranda from the field and the PAD are of high quality. The quality of entry could have been rated “satisfactory” had it not had weaknesses in setting realistic sub-objectives and linking these with outcomes and performance indicators. There was a tendency in Project

17

documents to overpromise on the subject of public transport reform and its downstream impacts, given that the Project had such a modest instrument in this respect: strategy studies, without any other commitment by the Borrower. The project envisioned the changes in the institutional arrangements, which usually take time to be fully implemented. The Bank could have been more realistic in time setting and designing the components that would need a functioning new structure for their implementation. Given the overall high quality of technical preparation of the project, but weak Results Framework and somewhat unrealistic time planning for the project, the ICR rated the Quality at Entry as moderately satisfactory.

(b) Quality of Supervision

Rating: Satisfactory The Bank committed all the requisite resources to help move diverse components in line with agreements made during project preparation and to ensure good value for the Borrower as well as the desired outcomes. This included a consistent, hands-on approach by supervision missions, with frequent visits at times of critical decisions. In addition to ensuring that TMC and the Traffic Police had qualified technical assistance throughout the Project, missions brought in additional expertise with traffic management in general and traffic control systems in particular, and readiness to use loan funds to finance direct technical assistance to the Borrower. The team maintained the focus on institution building and during the missions conveyed the message to the Moscow City Government, until MCG acted to give TMC staff and authority at levels sufficient for this stage of its development. Even in matters where the Borrower went against Bank advice, e.g. giving up on the radial corridor improvements component and cancelling the public transport strategy study, the team continued arguing the case for an activist role of TMC in matters like bus priority and parking charges, and taking a constructive approach to substitute investments proposed by the MCG. With the overall very satisfactory supervision of the project, the team should have formally revised the monitoring indicators. It should be noted that the Project experienced the change of four Task Team Leaders during Project implementation, but continuity was ensured by keeping in the team the original Task manager (now a consultant).

In handling the Siemens case the Bank team reacted quickly to halt disbursements once the allegations of the U.S. Securities and Exchange Commission (SEC) were made publicly available in its federal Complaint filed on December 12, 2008. In the period from December 2008 through October 2009, the time of the ICR submission, the team was actively involved in dialogue with the INT, sector and country unit colleagues and the Borrower. Overall, it was difficult for the Bank to reach a clear position internally due to the complexity of the case and the still ongoing INT investigation. It would have been useful if there were guidelines on how to respond and interact with a Borrower when there is an internal INT investigation on-going. The case was referred to Operational Procurement Review Committee who concluded that there was no case for mis-procurement as such. However, on the Bank’s side, disbursing under a contract suspected of being tainted represented a reputational risk. In April 2009, the Bank extended the grace period for disbursements for six weeks, and shared with the Borrower some of the findings of the ongoing INT investigation. The Bank also informed the

18

Borrower that after the completion of INT investigation actions may have been taken by the Bank, possibly including cancellation of the outstanding portion of Siemens contract. The disbursement period lapsed on June 15, 2009, and the undisbursed amount was cancelled from the Loan. The Bank’s settlement with Siemens was announced on July 2, 2009, after the disbursement period had lapsed.

(c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory The combined rating for the Bank’s performance is moderately satisfactory.

5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory This rating refers to the main client of the Project, the Moscow City Government. The rating reflects the judgment that the MCG met its main commitment, i.e. regarding the establishment and empowering of TMC, albeit taking a very long time to do this (2002- 2006). It is recognized that institutional change is complex, especially when it involves transferring authority (and budget) from one group of actors (traffic police and the municipal road department) to another. Had the pivotal decree by the Mayor been issued in 2003 or 2004, TMC would have become stronger to push successfully for the within- project implementation of pilots for bus priority and/or parking charges, and traffic management improvements on Third Ring, for which all the requisite studies were done. This critical regulatory framework has been established only in 2005, the last year of the originally envisioned implementation period. There was a 3 year delay in project implementation, and it can be mostly attributed to the somewhat unrealistic time envisioned for institutional building6 and the complexity of coordinating a diverse set of public agencies and private contractors for the Third Ring civil works. At the same time it should be noted that the Project objectives of institutional building for traffic management in Moscow were fully achieved by the project revised closing date.

(b) Implementing Agency or Agencies Performance Rating: Satisfactory The rating refers to the Project Implementation Unit, whose performance was satisfactory in the majority of tasks they carried out. This refers primarily to managing large-scale civil works financed by the Project, involving complex works in a built-up urban setting. The PIU also performed highly satisfactory in financial management and reporting. Their performance was somewhat weaker when it came to study supervision and follow-up, which were somewhat beyond their knowledge and experience. With the information available at the time of the ICR finalization it is difficult to access the PIU performance in the Siemens case, and whether it could have been more vigilant in detecting the conflict of interest and monitoring the individual consultant, who allegedly assisted Siemens in getting the contract. Given this consideration and the fact that overall PIU

6 See section on the 5.1.a. Quality of Entry.

19

performance during Project implementation was to high standards, the satisfactory rating seems appropriate.

(c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory The overall borrower performance is rated as moderately satisfactory. The ICR recognizes the overall success of the institution building under the project, high quality infrastructure improvements made, and the MCG commitment to the reform. However, the project required three extensions of the closing date and experienced some delays in the implementation, mainly attributed to the complexity of coordinating various public and private entities and the time needed to effect institutional change.

6. Lessons Learned

Choice of the Implementation Arrangements: External or Internal PIU. Experience under this Project is a worthwhile contribution to the long-standing debate on whether PIUs should be set as separate units, to maximize implementation efficiency, or within partner institutions, to contribute to institution building. This Project opted for the former.. The rationale for using the Moscow Foundation as a PIU was based on their excellent performance under the Bridge Rehabilitation Project (then in the final phase), and on the fact that the major agreed investment under the new project was a large-scale bridge complex. It would have been both risky and counter-productive to give the inexperienced TMC, which had just been set up, the responsibility to manage the implementation of a large-scale investment, especially since this type of investment was not going to be within their future purview. Had small-scale traffic management investments been agreed from the outset, this decision might have been different. The way the Project unfolded confirmed the advantages of having an experienced PIU, but revealed also its shortcomings. Had the PIU been an integral part of TMC, it would have had much stronger incentives to lobby for the Component B (Corridor Improvements) to be implemented as anticipated at appraisal. The actual PIU did not have such incentives, and it cannot be by chance that the actual investments under the Project all turned out to be large-scale. The conclusion is to recommend a very careful consideration of the choice of internal or external PIUs, weighting in as explicit a manner as possible the pros and cons of either approach.

The Source of Qualified Staff for New Institutions. The Project’s main concern was to have TMC with sufficient and properly qualified staff, the right premises and equipment, authority and organization to carry out a set of essential traffic management functions, and entry into decision making processes of MCG. Early missions noted that the agreed staffing quotas were met by TMC, but not proper qualifications and experience. Later missions focused on the transfer of staff versed in traffic signal control from the Police to TMC, and much less on the matter of exact qualifications for other traffic management activities. The question is where would these qualified people come from? The fact that all direct technical assistance (and most studies) in traffic management matters came from abroad suggests that the relevant skills were in short supply in Russia. In sharp contrast, all civil engineering skills and some IT skills came from the domestic market. The use of project-funded training went a long way to mitigate but not resolve this

20

problem. The project certainly did well in this respect, especially regarding the Traffic Police component, where the new skills supplemented by modern equipment raised qualifications relatively quickly. Still, much more intensive training and of longer duration is needed to re-educate civil engineers for careers in traffic management. For future projects that focus on institution building of this type, it is recommended to take the education and career aspects as seriously as engineering, financial and economic aspects. This would require enlarging the scope of preparation to include national universities and technical colleges, possibly resulting in project-funded support for an expansion of the relevant course programs, within the same or under a separate project.

Using Envelopes Instead of Specific Investments in Project Design. This Project at the approval stage had a feature unusual in traffic management lending by the Bank in that its largest component (Comprehensive Corridor Improvements, about 39% of total cost) was left largely unspecified. The idea was to firm up this program once TMC acquired sufficient expertise to take a major role, with a double intent of easing TMC into its future main activity and of demonstrating on-street results of the low-cost traffic management approach. Neither materialized for reasons stated above. The component ultimately took the shape of a major program to construct pedestrian underpasses, in which TMC had little participation, and a program to install a traffic control system (TCS) for the Third Ring. The TCS is indeed a traffic management activity, though not of a low-cost, small intervention variety that is a hallmark of the TM approach. It did involve TMC to a considerable degree, but the time it took to define this component and its slow implementation meant that it was too late to show the corresponding on-street results during the project’s life. Is the lesson of this experience not to leave major portions of future projects without a detailed definition? Even though the Project was not able to achieve fully synergy between the institution building and planned investments due to the reformulation of the investment component towards larger scale investments, the argument for using envelopes remains strong, as long as they are counter-balanced by some fully specified investments, to lend stability to the project in question. A key advantage of envelopes is flexibility, an important feature in rapidly changing economic and political environments, exemplified by Moscow Communication and Decision-making Process during the INT Investigation. The experience with the INT investigation into fraudulent and corrupt practices by Siemens in the contract for TCS for the Third Ring Road raised a number of questions about the way that the Bank responds to such allegations. There are no clear guidelines on communication with the Borrower, and on how disbursements should be treated during INT investigations, especially during investigations of fraud under a contract that was still being implemented. Should the Bank's project team wait until INT has completed its investigation and continue to act on the assumption of innocence if guilt has not been proven and continue with implementation of the project? How should a potentially serious reputational risk for the Bank be mitigated in such circumstances? What should be done if the investigation continues after the loan closing date during the grace period for the disbursements? For this project, the fraudulent procurement was referred to Operational Procurement Review Committee (OPRC) who concluded that there was no case for declaring misprocurement and the VP finally recommended withholding disbursement. While there was good dialogue with INT during the course of the

21

investigation, the absence of any disclosed INT reports during this period made it difficult to make decisions on the above issues.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower reviewed the draft ICR and provided comments that focused broadly on two areas: (i) delays in implementation, assessment of the Borrower’s performance and the corresponding ratings, and (ii) some revisions to the costs for different investments under the project. The latter revisions were incorporated in the final version of the ICR. As for the counterpart’s performance, the Borrower suggested that the ratings both for the Government and for the Implementing Agency be given as satisfactory as opposed to moderately satisfactory. One argument was that the delays with moving forward with a number of project investments were due to the high complexity of the projects and the need for technical reviews and approvals by all the parties including the Bank, whose lengthy procurement processes added to the delays. The Borrower highlighted the significant achievements under the project that were due to a large extent to MCG commitment. The ICR team reviewed the comments and considered that some were valid and subsequently revised the text to recognize that the delays were not entirely resulting from Government performance, but that also some delays could be attributed to the complicated procurement processes required by the Bank and due to the technically complex project investments. The ICR rates the performance of the implementing agency as satisfactory, however, the Government performance remains moderately satisfactory. While the ICR team recognized the commitment of the city government and its overall success in modernizing the traffic management in the city, overall, looking at the entire length of project implementation since 2001, the team felt that the initial long delays with establishment of fully functioning institutional structure and its regulatory framework warranted a moderately satisfactory rating. The summary of the Borrower's ICR is in Annex 7.

(b) Cofinanciers Not applicable.

(c) Other partners and stakeholders Not applicable.

22

Annex 1. Project Costs and Financing Project Cost by Component (in USD million equivalent)

MOSCOW URBAN TRANSPORT PROJECT - ORIGINAL AND FINAL COMPONENTS AND COSTS 21-Jan-09 9/1/2009

Cost Loan Cost Loan Original components ($M) ($m) Final components ($m) ($m)

A. Traffic Management Center 11.6 7.2 A. Traffic Management Center 3.5 2.9 Equipment 0.8 0.6 TA & training & studies 2.7 2.3 B. Corridor Improvements 47.6 18.7 B. Corridor improvements 66.7 24.9 1. Traffic & safety Improvements on corrid 22.6 Cancelled 0 0 2. Pedestrian underpasses 24.17 27.7 11.1 7.87 Varshavsky underpasses 5.9 2.4 16.3 Schelkovsky underpasses 21.1 8.7 Underpass design & spn 0.7 0 3. Traffic Control for 3rd Ring n.a. n.a. 39 13.8 3rd Ring TCS – works 16 4 3rd Ring TCS - equipment 19.6 9.7 3rd Ring TCS - design & spn 3.4 0.1 C. Central Area Improvements 6.2 3.3 1 0.4 Feasibility studies & engineering 4.3 Cancelled 0 0 Krasnie Vorota Ped. Underpass 1.9 1 0.4 D. Donbassky Bridge complex 39 14.7 D. Donbassky Bridge complex 45.1 18.2 Works 43.2 18.2 design & supervision 1.9 0 E. Traffic Enforcement Program 10.3 8.2 E. Traffic Enforcement Program 5.5 4.5 equipment 5.1 4.1 training 0.4 0.4 works 0 0 F. Surface Transit Study 2 1.6 cancelled G. Strategic advice 0.9 0.7 G. Strategic advice 0.6 0.4 H. Assistance to PIU 2.5 2.5 H. Assistance to PIU 5.6 3.6 TA & training & audits 0.3 0.2 operating costs 5.2 3.4 equipment 0.1 0 I. Unallocated 2.5 2.5 Front-end fee 0.6 0.6 Front end fee 0.6 0.6 TOTAL 123.2 60 128.6 55.5

Notes : - Component names and sequencing taken from Schedule 2 of the Loan Agreement - All costs are in US$ equivalents and include taxes. - Costs for original components taken from the PAD, page 8. - Final costs for implemented components taken from PIU procurement and payment tables.

23

(b) Financing

Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 63.20 73.1 115.6 International Bank for Reconstruction 60.00 55.5 92.5 and Development

24

Annex 2. Outputs by Component7

A. Traffic Management Center (US$3.5 million)

This component financed office furniture and equipment for the TMC; training in traffic management for the staff of TMC, with participation from other related agencies (US$0.03 million); technical assistance provided by external consultants (US$1.19 million) and studies commissioned by the TMC (US$1.52 million). Studies included the following:

Scoping study for paid parking in Central Moscow: the study explored the feasibility of on-street parking charges, developed a conceptual plan, together with key actions and a schedule for implementation; Park-and-Ride Pilot Study: the study established the potential for and the feasibility of park-and-ride concept in outlying areas and public transport terminals, identified promising locations, and developed an implementation strategy; Traffic and parking legislation study: the study identified lacunae in the existing road, traffic and motor vehicles legislation that stand in the way of place- specific traffic and parking management problems, and made recommendations on how to close these; Concept study for bus priority: the study identified corridors with potential for bus priority; developed design concepts and institutional arrangements; organized a workshop on international experience in public transport priority; and synthesized these tasks into a series of practical propositions for the Moscow Government; “Before” and “after” traffic and pedestrian study at the Donbassky Bridge complex and at 6 pedestrian overpasses: traffic data were collected and used to evaluate the success of investments under this Project; Studies related to the Third Ring Road traffic control system: these studies ranged from the conceptual designs and feasibility all the way to engineering designs and equipment specifications and bid documents; in addition, a separate study looked at traffic management measures that would complement the new traffic control system.

B. Corridor Improvements Program (US$47.6 million) This component had two sub-components:

7 Further details are in the Borrower’s Implementation Completion report (long version) available in the Project file in the Integrated Records and Information Services (IRIS).

25

B-1 5 Pedestrian underpasses (US$27.7 million): all involve crossing major, high- volume arterial roads, near metro stations and large housing and commercial developments. Three underpasses were constructed in the Varshavsky corridor, and two in the Schelkovsky Corridor. The Preobrazhensky Ploschad underpass in the Schelkovsky corridor, costing US$18.4 million, is a complex of 2 underpasses.

B-2 Traffic Control System for Third Ring Road (US$39.0 million): The main contract financed under the Project includes a fiber-optic cable system, power supply, detectors and counting devises; video cameras; weather measurement equipment; and signs and signals for a major and highly congested ring corridor in Moscow, about 34 km long, with 40 entry/exit points, 16 of which are intersections with major radial roads. The control system combines traffic data collection, passenger information, access control through ramp metering, and traffic incident management system linked to the Traffic Police component. It also includes a linkage of the Third Ring control system with Moscow’s area traffic control system START, through a common control room, located at the Traffic Management Center. Numerous complementary activities, belonging to this phase or later on, are carried out by local agencies and/or local contractors financed from the Borrower’s budget. At the closing date of the Loan, software development was completed, and all equipment was delivered and installed, however, the integration of the TCS with the existing traffic control systems for tunnels, power supply, fiber-optic cable network and fine-tuning of the system took longer. These activities continued during the ICR preparation and the system became fully operational in October 2009. The TCS for the Third Ring Road allows to monitor traffic conditions on the road from the TCS Central Control Board located in the Moscow City traffic police headquarters and to control and coordinate operation of all equipment on the ring road: 181 CCTV cameras in four tunnels, reversible lane traffic signals, turnpikes, dynamic message boards, variable speed limit signs, variable graphical warning signs, as well as traffic sensors and controllers. While the TCS is operated by the traffic police, the TMC is the owner of the Third Ring TCS and all assets are on this entity’s balance sheet. The TMC is therefore responsible for system maintenance and for any upgrading or expansion that might be required including software development and refinement.

Contract for the TCS for the Third Ring Road – INT investigation

Contract No. MUTP/Third Ring/Key under the project was signed on November 17, 2005 between the Foundation 'Moscow Project Implementation Unit' and Siemens A.G and Siemens OOO (the Russian subsidiary). The contractor was to design, manufacture/procure, test, deliver, install, complete and commission the Traffic Control System for the Third Ring road and provide technical assistance and training of personnel. The contract price is an aggregate of EUR 8,917,426.41 and RUR 622,622,958.32 (an equivalent of US$32,502,924. 64 total). The IBRD loan financed 42% of the contract. The contract remained the last activity to be completed under the project.

The contract in question was a complex procurement from a technical point of view. No supplier had previous experience in performing a contract of this magnitude including Siemens. Procurement steps were cleared by the Operational Procurement Review Committee (OPRC) at each stage as per rules. Any bias in specifications was neither obvious nor detected/spotted by the task team and their technical expert at any stage although specifications were reviewed by them extensively. Moreover, this was also not reflected in the result of the two stage bidding process since, at least at the first stage bids, no firms were rejected on technical grounds and, at the second stage, three firms submitted bids, of which two were declared technically compliant. No firm complained at any stage about bias in the Borrower’s specifications. An individual international consultant has

26

been procured by the PIU under the project to prepare a feasibility study, develop bidding documents, evaluate proposals and supervise the contract for the Traffic Control System for the Third Ring Road.

SEC Report. According to the report of the U.S. Securities and Exchange Commission (SEC) that was released in December 2008, Siemens is said to have engaged in fraudulent and corrupt practices and collusion in order to obtain the contract for the Traffic Control System for the Third Ring Road under the project. According to the SEC report, there were two sets of fraudulent actions:

“First, Siemens paid money to its business consultant who simultaneously worked as a technical consultant for the Moscow Project Implementation Unit (“MPIU”), a quasi-governmental unit that ran the Moscow Third Ring project. The MPIU hired the technical consultant at Siemens’ suggestion. From 2004 to 2006, Siemens paid approximately US$313,000 to three entities associated with the technical consultant, with at least US$141,419 of the payment in exchange for favorable treatment in the tendering process. The technical consultant used his position at the MPIU to create tender specifications favorable to Siemens, to provide tender documents to Siemens before their official publication, to evaluate project bids in a way that ensured Siemens would win the contract, and to assist during the implementation phase of the contract.”

Second, Siemens colluded with a competitor who agreed to inflate his project bid to ensure Siemens won the project. In return Siemens hired the competitor at an inflated rate of approximately US$800,000. Siemens also hired two of the competitor’s former consortium members to become subcontractors to Siemens on the project (“Subcontractor A” and “Subcontractor B”). Siemens paid Subcontractor A approximately $1.3 million for a sham traffic study and approximately US$1.4 million to Subcontractor B for other alleged services. In fact, both subcontractors were used to funnel at least US$600,000 of the US$741,419 described in paragraph 60 to senior officials of the MPIU.”

Following publication of the SEC report the Bank made the decision on December 17, 2008 to hold the disbursements under the contract pending the outcome of INT investigation. In a letter dated December 22, 2008, the Bank informed the Borrower about the decision to hold payments requested to be made to Siemens. In a number of subsequent communications the Bank informed the Borrower of continued investigation and shared some of the findings. At the request of the Moscow Government Controlling Committee the INT briefed them of the findings of the INT investigation.

Given the INT investigation was still ongoing, and having preliminary findings confirming the misrepresentation by Siemens that it had no conflict of interest, the Bank continued to hold disbursements (about US$4.5 million, of which most would finance payments to Siemens A.G). A grace period for disbursements initially established at end April 2009, has been extended till June 15, 2009. By end of the disbursements period the final INT report had not yet been released, and no closure was reached. The disbursements period lapsed and the remaining amount of the loan of $4.546 million was cancelled.

In early July 2009 the Bank reached a comprehensive settlement with Siemens AG in the wake of the company’s acknowledged past misconduct in its global business and a World Bank investigation into corruption in a project in Russia involving a Siemens subsidiary. The settlement includes a commitment by Siemens to pay US$100 million over the next 15 years to support anti-corruption work, an agreement of up to a four-year debarment for Siemens’ Russian subsidiary, and a voluntary two-year shut-out from bidding on Bank business for Siemens AG and all of its consolidated subsidiaries and affiliates . As part of the settlement, Siemens has also agreed to co-operate to change industry practices, clean up procurement practices and engage in collective action with the World Bank Group to fight fraud and corruption. Siemens will also provide information on any additional cases of wrongdoing to the Bank’s Institutional Integrity Vice Presidency (INT), which investigates fraud and corruption in Bank Group-financed activities.

While the fraudulent practice may have impacted the efficiency of this procurement process, it is very difficult to estimate the impact of the fraudulent practice on the efficiency of the contract implementation in this case in monetary terms. An exercise like this would have to be based on a theoretical replication of the procurement process free of fraud. Because in this case this exercise would have to assume possible action by unknown competitors that cannot be retroactively created, such a replication would be purely speculative and would not result in an accurate and defensible monetary value.

27

C. Central Area Traffic Improvements Program C-2 Pedestrian underpass at Krasnie Vorota metro station (US$1 million)

D. Donbassky Bridge Complex (US$45.1 million) This component included a complete reconstruction of a complex multi-grade intersection of Varshavskye Shosse (major north/south radial road in the Moscow just outside the Third Ring Road) with Paveletskoe Railway Line and a tram line, expected to benefit both motor vehicles and public transport passengers. Old bridges were narrow and in structurally dangerous state. The old 4-lane road viaduct was replaced by an 8-lane viaduct; the old 1-way tram bridge was replaced by a 2-way bridge; and a separate communication bridge was constructed. The construction won the Moscow City Government award for the best facility in its category in 2004, based on the results, and early and under-cost completion.

E. Traffic Law Enforcement (US$5.5 million)

This component included:

Police Equipment (US$5.1 million): radars and video cameras for stationary and mobile law enforcement; vans for handling road accidents; alcohol measurement instruments; laser radar guns; fixed and portable radios; scales for measuring axle loads; instruments for identification of license plates; and information processing equipment. Training (US$0.4 million): Study tours for senior officers in Germany and Netherlands; refresher courses in traffic control for staff of Traffic Police and TMC; certification- oriented courses to train the trainers for law enforcement, and technical assistance for selecting and specifying equipment and making operational plans to implement mobile law enforcement and incidence management. In total, more than 100 staff from the TMC, Traffic Police, Department of Transport, MPIU, GenPlan and Center for Traffic Infrastructure Studies participated in various training events.

G. Feasibility Study & Business Plan for the Small Ring Railway (US$0.6 million) This study explored the feasibility of reconstructing the Small Ring Railway and prepared the requisite engineering and organization plans. The Moscow City Government accepted the results and scheduled the works for the section between Presnya and Kanatchikovo stations for the period 2007-2009.

28

Annex 3. Economic and Financial Analysis

The major civil works were expected to generate economic benefits that could be quantified, most notably the remodeling of the Donbassky Bridge complex, the purpose of which was to reduce vehicle and passenger trip times, lower vehicle operating costs, and reduce the frequency of accidents. The pedestrian underpasses, by eliminating or at least reducing the need for stop lights on arterial highways carrying large traffic volumes, were expected to yield the same types of benefit. The PIU conducted a detailed economic feasibility study for the Donbassky Bridge. However, it did no economic analysis for the underpasses at the feasibility study stage, only at completion. By their nature, none of the project components generated revenue directly, so no financial analysis was necessary.

The following table shows the Economic Rate of Return (ERR) for Donbassky Bridge calculated during project preparation and those calculated by the PIU’s consultant for all the civil works after they were completed. The latter used actual final construction costs and traffic counted in the year or two after completion. Both cases used the same forecast rate of traffic growth over the first 20 years of operation.

Economic Rates of Return at Appraisal and Completion (%)8

Size (actual, $m) Appraisal Completion Donbassky Bridge 51.7 31 47 Pedestrian Underpasses: 1. Garden Ring, Krasnye Vorota Metro 1.1 45 2. Varshavskoye Ave, Chongarsky Blvd 2.2 52 3. Varshavskoye Ave, Gazoprovod Str 1.9 50 4. Varshavskoye Ave, Nagatinskaya Metro 2.4 102 5. Shchelkovskoye Avenue (House #1) 2.8 107 6. Preobrazhenskaya Square 19.2 17 Whole project (weighted average) n.a. 55

Source: Moscow Project Implementation Unit Foundation, October 2008 Ruble costs are converted at RUR 26 = $1

As the table shows, all works show high economic returns in the ‘completion’ case. It follows that the weighted average return is also high, 55%. For the Donbassky Bridge, the ERR calculated after the new infrastructure was put into operation is substantially higher than the appraisal estimate, mainly because traffic after completion was some 20% more than before.

8 After the Bank had completed its analysis, the borrower revised the construction costs downward by a small margin, implying an even higher economic return on each component.

29

The main elements of the calculation were:  Construction cost (shown in table above)  Initial traffic volume upon completion of the works  Forecast rate of traffic growth through Year 20  Unit savings in vehicle operating costs: The average was US$0.30 per vehicle km.  Unit savings in time: Car occupants’ time was valued at US$2 per hour  Reduction in accidents: damage accidents valued at US$1,200, injuries at US$30,000 and deaths at US$80,000. A value was also put on the reduced vehicle emissions as a result of less stop-go driving. However, at present values for such emissions the benefits were insignificant relative to other categories.

Growth forecast: The feasibility study proposed an optimistic and a pessimistic growth rate of traffic, uniform over twenty years. While the concept of a range, reflecting uncertainty, is commendable as an approach, the optimistic rate was only 3% per year and the pessimistic rate was 1.5%. These values may turn out overly cautious, since the Russian economy has been growing substantially faster since the turn of the decade: 6- 8% per year since 2000, and urban passenger traffic normally grows somewhat faster than Gross Domestic Product (GDP). 2009 sees a sudden contraction in response to the global financial crisis and related drop in the price of oil. But as a 20-year average, a rate closer to 5-7% would seem more probable. On this count the ERRs are likely to be understated9.

A. Donbassky Bridge

Varshavskoye Shosse (Warsaw Avenue), a major arterial between the city center and the southern suburbs, was 8 lanes wide throughout its length, except over the Donbassky Bridge. The bridge, which crosses a major railway line, had only 4 narrow lanes and was judged to be in dangerously poor condition before the project was launched, to the point that immediate replacement was mandatory. Therefore the ‘without project’ alternative assumed reconstruction of essentially the existing structure with the same capacity as before; only the incremental cost of doubling the number of lanes and otherwise enhancing the structure (including the separate tram bridge) were counted against the ‘With Project’ alternative – about half of the total cost.

9 The consultant also seems to have preferred a slow growth forecast for Donbassky Bridge to avoid the methodological complication of projecting traffic in the “without project” case into the future at a faster rate, which would soon have reached and exceeded 100% of road capacity. This conceptual problem has solutions but none is fully satisfactory.

30

Traffic Volumes using Donbassky Bridge Before and After

Traffic (veh) Traffic*, Avg speed, Date of Traffic Counts Lanes per day Peak hr peak hour Before: Dec 1999 (peak month) 4 74,000 - 78,000 4,750 14 km/h During: Oct 2003 (peak month) 5 89,000 - 91,000 5,800 After: Jan 2005 (low season) 8 76,000 - 79,000 5,200 27-29 km/h * in direction of peak flow

Alternatives considered: The feasibility study considered alternatives involving rerouting of traffic away from the Bridge onto other local streets, but none offered adequate capacity or was amenable to widening at reasonable cost. The alternative of rerouting traffic around the Moscow Ring Road was rejected because of the substantial extra distance involved and congestion already common on that route.

Mix of quantified benefits: Savings in vehicle operating costs make up 96% of all quantified benefits, and the value of time saved 4%.

Encouragement to public transport: The complex also involved replacing a decrepit single-track tram bridge over the railway line by a new two-track bridge. The new alignment eliminated a level crossing between the tram line and the highway. Doing away with traffic lights at the tram crossing had the effect of increasing the highway’s capacity by a third during rush hour, when trams are frequent, and eliminating waiting time not only for the cars but also for the trams. The doubling of the tram track at this bottleneck also expanded the tram line’s capacity. Furthermore, as the first major improvement to tram infrastructure in the Moscow suburbs for the last 20-30 years, it signaled the City’s renewed support for trams and stimulated a substantial increase in ridership.

B. Pedestrian Underpasses

The number of vehicles and pedestrians at each crossing site are shown below.

Pedestrian Underpass Vehicles per day Pedestrians per day Pedestrians, peak hr Krasnye Vorota 128,000 10,900-11,500 900-1,000 Varshavskoye Chongarskiy 74,000 13,900-14,900 1,300-1,400 Varshavskoye/Gazoprovod 51,000 3,000-3,400 300 Varshavskoye/Nagatinskaya 108,000 35,350 3,100 Shchelkovskoye Ave 92,500 12,900 1,100 Preobrazhenskaya Square 82,500 26,250 2,400 Preobrazhenskiy Val Street 26,000 7,300 700

The very large numbers of pedestrians are striking –as many as 2,000-3,000 per peak hour. All sites but one is at the entrance to a busy metro station. The streets were also

31

full of a large number of cars, occupying eight lanes or more, and congested for much of the working day.

Before construction of the underpasses, traffic typically waited 35-40 seconds during the pedestrian phase of the traffic lights. After the underpasses were opened the stop lights were retained but with a shorter phase for pedestrians. Average travel speeds for cars rose from about 20 km/hr to about 30 km/hr, and the number of accidents declined. The mix of benefits was typically: vehicle operating costs 74%; the value of travel time saved 20%; fewer accidents 5%; and reduced pollution (emissions caused by stop-go driving) 1%.

The Preobrazhenskaya Square crossings were exceptionally costly, for various reasons: (i) tunnels were excavated under two streets where they intersected (elsewhere there was only one); (ii) the pedestrian traffic was exceptionally heavy (this is a major metro station with high-rise buildings nearby); and (iii) by the time these crossings came to be built (the last), the City had mandated installation of elevators at major metro stations for people in wheelchairs. The ERR is the lowest of the six underpass sites, but at 17% is still well above the acceptable threshold.

32

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Richard Podolske Senior Transport Specialist ECSIE Task Manager John Cracknell Consultant ECSIE Traffic Engineer Jack Kay Consultant ECSIE Traffic Engineer Maurice Dickerson Consultant ECSIE Proc & Proj Mngt Sven-Olof Hasssel Consultant ECSIE Traffiic Police Bernard Baratz Principal Environmental Specialist Environment Irina Kichigina Counsel LEGEC Legal Coral Bird Program Assistant ECSIE Project Support

Supervision/ICR Richard C. Podolske Consultant ECSSD Urban Trans Spl Ben Eijbergen Senior Transport Specialist ECSIE Team Leader Michel Audige Lead Transport Specialist ECSSD Team Leader Vickram Cuttaree Senior Infrastructure Economist ECSSD Team Leader Tatyana Shadrunova Urban Specialist ECSSD Urban Specialist Yuri Myroshnichenko Country Sector Coordinator ECSSD CSC Elena Chesheva Operations Officer ECSSD ICR Team Leader Slobodan Mitric Consultant ECSSD ICR Writer Claudia Pardinas Ocana Sr. Counsel LEGEM Counsel Coral Bird Program Assistant ECSSD Project Support

33

(b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY97 231.52 FY98 247.70 FY99 203.41 FY00 41 215.49 FY01 21 68.51 FY02 0.04 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00

Total: 62 966.67 Supervision/ICR FY97 0.00 FY98 0.00 FY99 0.71 FY00 0.50 FY01 6 28.18 FY02 26 158.71 FY03 20 135.85 FY04 12 110.50 FY05 14 132.80 FY06 19 145.34 FY07 10 114.48 FY08 9 68.98 FY09 19 93.82 FY10 2 6

Total: 137 995.87

34

Annex 5. Beneficiary Survey Results (if any) Not applicable

35

Annex 6. Stakeholder Workshop Report and Results (if any) Not applicable

36

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

Below is the extract from the Borrower’s ICR. The full report is filed in project files in IRIS. 4. Achievement of Objectives and Outputs 4.1. Achievement of Objectives As of the date of this Report the Project goal, i.e. expansion of institutional opportunities of Moscow in planning, design, management and implementation of road traffic management measures has been attained in general. The following facilitated expansion of institutional opportunities of Moscow City in the said sphere: - establishment in 2000 and successful functioning of the TMC under the Moscow City Government. Transfer of function on determination and implementation of technical policy in maintenance, operation and repair of technical facilities for the road traffic organization to Public Enterprise (GU) CODD in 2005, implementation of new traffic regulation systems, which earlier were within competence of the Moscow Traffic Police (GIBDD). Establishment and equipment of the Main traffic control station for the road traffic control, monitoring and organization in Moscow under TMC; - appointment of new chief executives of the Department of Transport and Communications and TMC having the necessary qualification and experience in the field of road traffic organization; - transformation in 2004 of Moscow Directorate for Transport and Communications into the Moscow Department of Transport and Communications (DT&C) - a departmental executive authority in the city of Moscow implementing the governmental policy and exercising management in the field of transport and communications. Status of this establishment was raised in order to promote efficiency of its activities, to improve management of transport and communication spheres in Moscow; - concentration in one place of all major Moscow departments and organizations responsible for planning, organization and management of the road traffic in Moscow (TMC, Moscow GIBDD and DT&C), this would consolidate interdepartmental relations and raise efficiency of cooperation with Moscow GIBDD; - expansion for the account of use of efficient modern equipment, training of personnel of the GIBDD emergency-action teams in advanced methods of the Traffic Rules control, opportunities of Moscow GIBDD in control over adherence to laws in order to increase the road traffic safety; - organization in the Project framework of studies on amendment of legislation concerning parking and road traffic, introduction of a paid street parking regime in the Moscow center, in organization of park-and-ride lots, on provision of priority to busses over other road traffic participants, on improvement of the road

37

traffic organization at the Third Ring Road, which formed a basis for preparation and implementation of the city priority ad-hoc programs for creation of a system of a single city parking space, development of surface city passenger transport in Moscow for the period of 2007 to 2009, creation of a Third Ring Traffic Control System and more; - development of a Business plan for reconstruction of the Minor Ring of the Moscow Railroad in the Project framework in order to organize passenger movement at the prime section in the period of 2007 to 2009.

4.4. The results reached in development of a road and transport infrastructure and the organization of traffic. 4.4.1. Traffic Management Center Establishment. TMC under Moscow City Government was established in compliance with resolution No. 1129 of the Moscow City Government dated December 7, 1999 and Direction of the Moscow Mayor No. 491-PM dated May 6, 2000. TMC establishment was a condition for validation of loan No. 4595- RU. Regulations on the TMC defined the following TMC functions as the customer and coordinator of all design, research and a number of construction works in the road traffic organization in Moscow. As of the Project implementation beginning there were 22 employees on the TMC staff.

Resolution of the Moscow City Government No. 438-ПП dated June 14 "On measures for improvement of operation and maintenance of technical facilities for road traffic organization in Moscow. TMC was assigned the following additional function, which earlier were discharged by Moscow GIBDD: definition and pursuit of technical policy concerning maintenance, operation and repair of technical facilities for the road traffic organization, introduction of mew systems of the road traffic regulation. TMC included a newly established department for operation, maintenance, repair, reconstruction and installation of technical facilities for the road traffic organization. CODD is provided with additional personnel and material resources for fulfillment of these functions. Currently TMC personnel makes about 500 employees, 50 of them engage in issues concerning road traffic organization.

To raise efficiency of TMC operation and to better coordinate its work with GIBDD in 2007 TMC received new premises located in the building of Directorate of the Moscow GIBDD. In the framework of the project these premises have been equipped with a video wall, computer and peripheral facilities. Chief dispatching point for control, monitoring and organization of road traffic in Moscow.

Placement of governmental orders for design, research and construction in the field of the road traffic organization is exercised by TMC according to tender procedures defined by the Russian and Moscow legislation. Road traffic monitoring system established in TMC is permanently updated providing data sufficient for rational planning and assessment of measures for the road traffic organization suggested by the Moscow City Government.

38

TMC important role in the Moscow road transport complex is emphasized by the fact that former TMC chief (2000-2006) L.M. Lipsits, was appointed the Head of the Moscow Department for Transport and Communication.

In the framework of the Project implementation TMC is discharging function of a technical coordinator of a number of research works on the road traffic organization, monitoring of transport flows and issues of automotive transport parking. Results of research on amendment of legislation concerning parking and road traffic, introduction of paid street parking in the center of Moscow city, organization of park-and-ride lots, giving priority to buses over other traffic participants, better road traffic organization at the Third Ring Road formed a basis for drafting and implementation of the following city ad-hoc programs:

- creation of a system of the city single parking space for the period of 2008- 2010 in compliance with Resolution No. 99-ПП of the Moscow City Government dated February 20, 2007; - development of the city surface passenger transport in the city of Moscow for the period of 2007-2009 in compliance with Resolution No. 840-ПП of the Moscow City Government dated October 24, 2006;

- creation of TCS at the third Transport Ring in compliance with Resolution No. 1134-PП of the Moscow City Government dated June 23, 2005.

In the framework of the Creation of the City Single Parking Space Program it is planned to complete solution of issues related to improvement of the normative legal base in the field of the parking space organization, to create a system of payments for parking services on a clearance basis, to wok out a unified tariff policy and registration of all objects of the parking space. At the initial stage it is planned to establish a complex of objects referred to the city property and including 60,000 car places at the parking lots (at UDS) and 100,000 places at the park-and-ride lots. Department of the City Planning Policy, Moscow Reconstruction and Development accepted for future implementation the suggestion concerning organization of a network of park-and-ride lots in the area of important passenger junctions in Moscow (metro station Tushinskaya, Planernaya) developed in the course of the project implementation. Suggestion on amendment of legislation concerning the road traffic organization, vehicles location in Moscow and greater administrative responsibility for the traffic rules violation were drafted in the framework of the project and submitted to the Moscow City Duma for introduction of corrections in appropriate legislative accts.

In the framework of the Program for Development of the City Surface Passenger Transport in Moscow and proceeding from suggestions prepared in the course of the Project implementation Moscomarkhitectura started (in 2007) to work out documents for provision of priority movement of public transport (buses, trolleybuses, trams and shuttle city taxi) at Volokolamskoye shosse, Leningradsky and Leninsky prospect. According to results of experiment at the said main roads the Moscow Department of Transport and Communications made suggestions to the Moscow City Government about expediency of organization of special lanes at the rest of the Moscow road network.

39

In the framework of creation of a TCS at the Third Ring Road a wide-profile computer-aided system for the road traffic control was implemented, which was designated for the road traffic control and management, road traffic optimization, increasing its safety and informing drivers. The 3rd Ring Road TCS provided for centralized control of all traffic control equipment in the 3rd Ring Road and the receipt of online video picture of traffic conditions along the entire length of the 3rd Ring Road directly from the TCS Central Control Board located in the Moscow City traffic police headquarters.

The TCS has demonstrated its reliability and efficiency in terms of traffic management and control in the 3rd Ring Road. For instance, immediate response to road accidents by the traffic police allowed a significant (more than 2 times) reduction of time required for traffic police mobile units and rescue service vehicles to get to the accident site, resulting in a shorter congestion period caused by road accidents, which, in its, turn, increased throughput on the 3rd Ring Road.

TCS at the Third Ring Road controlled from the Traffic Control Center is integrated with the operating Moscow system START, this creates optimal conditions for coordination of the road traffic control in Moscow. TMC is the balance holder of the TCS at the Third Ring Road and supports its operation and maintenance.

At present TMC is the key organization responsible for organization of road traffic in Moscow as it was planned at the stage of the Project preparation.

Project component "Institutional development in the field of the road traffic organization" is efficient and its implementation goals have been attained in full.

4.4.2. Secondary, but not less important, institutional task of the project is consolidation of the functions of control over the traffic rules observation. Main goal of the component concerning control over the traffic rules observation was to expand opportunities of the Moscow GIBDD in control over adherence to the laws in order to make road traffic more safe. Central element of this component became the program for control over the traffic rules observation with emphasis on practical training of employees and supplies of equipment in support of these functions discharged by Moscow GIBDD.

According to requirements of paragraph 3, Attachement1 to Loan Agreement No. 4595-RU and in order to provide for efficient equipment purchases in the Project framework, its use, as well as efficient implementation of the training program, Moscow City Government drafted and approved on August 22, 2003 a Procedure for Implementation of Component Technical Assistance, Training and Equipment for the Moscow GIBDD in the framework of the Moscow Urban Transport Project (Operative Plan).

The Performance Evaluation of Applying the First Consignment Procurement was carried out according to paragraph 8 of the Operational Plan by MPIU Foundation in cooperation with Traffic Police Management Department UGIBDD and Moscow Traffic Police Training Centre, as well as in collaboration with Mr. Peter ter Meulen, the

40

consultant monitoring the execution of the Operational Plan under the Moscow Urban Transport Project.

The Performance Evaluation was done basing on the outcomes of the regular inspections carried out by executives of the MPIU and UGIBDD, as well as by Mr. Peter ter Meulen in the operational units of the Traffic Police, which obtained the first consignment equipment, and basing on the statistical data analysis, provided by UGIBDD. The statistical data was prepared basing on the regular reports from the heads of the Traffic Patrol Service units and the data of the subsystem within the UGIBDD Central database concerning accidents. In the course of the inspections, a survey was carried out among those employees of the operational units who are directly involved in operating the equipment. Start of the supplied equipment operation in emergency teams of the Moscow GIBDD is scheduled for July 2004.

In the framework of implementation of the program for control over adherence to the traffic rules, including training of personnel of the Moscow GIBDD, supplies of equipment and special technical facilities for Moscow GIBDD, level of GIBDD training and technical equipment was raised in order to fulfill the road traffic rules.

Project component Program for Control over Adherence to the Road Traffic Rules is efficient and goals of its implementation have been attained in full.

4.4.3. Development of a TCS at the Third Ring Road Basic results of developing the TCS of 3rd ring are: - Optimization of utilized capacity to increase passage capacity; - Improvement of traffic safety; - Informing drivers on the road traffic condition and improvement of traffic conditions on the 3rd ring; - Positive effect on environment.

Optimization of utilized capacity to increase passage capacity is ensured by fulfillment of the following tasks: reduction of a number of jams and their duration; control of transport junctions; optimization of speed modes; control of transport distribution on lanes; separation of traffic lanes into car high-speed, priority vehicle lanes, as well as distribution lanes of outgoing and incoming traffic flows at junction systems; control of Variable Text Message Signs, graphic information displays and controlled traffic signs; so called network control with the help of Variable Text Message Signs, for timely withdrawal of the traffic flow through exits of the 3rd ring in case of hold-ups, as well as warning of hold-ups at important highways crossing the 3rd ring; reduction of transport jamming on the 3rd ring by proportioning the traffic by the ramp-metering method at selected sections, as well as control and temporary blocking off traffic flows at certain entrances of the ring; timely operational advising the motorists on the transport situation. Improving the traffic safety will be ensured by the following tasks:

- arranging optimal control of traffic flows; - reduction of a number of traffic accidents resulting from hold-ups by:

41

o automatic determination of traffic accidents, hold-ups and stopped cars; o automatic warning motorists of hold-ups and accumulations;. o automatic warning them of traffic accidents and failures; o timely advising the motorists of dangerous road and weather situations.

- improving traffic safety at junctions by timely distribution of vehicles on traffic lanes; - improvement of traffic safety at «tunnel» sections by:

o timely limiting the number of traffic lanes in front of the tunnel portal in case of changing the number of lanes in it; o timely blocking off traffic on the 3rd ring to get free space in front of the tunnel portals ensuring quick access for emergency rescue services, including rescue helicopters.

- by facilitating the access of the traffic police and emergency rescue services;

- video observation system with a multi-level control for automatic scanning of the area of highways and transport junctions.

- timely indication of changes in the direction of vehicles on traffic lanes during road works on the 3rd ring, as well as in case of accidents.

Better informing the drivers on a road traffic condition and improvement of traffic condition on the 3rd ring are obtained by fulfillment of the following tasks:

- informing the drivers with the help of dynamic, graphic displays and controlled traffic signs (prescribed speed, warning of hold-ups, accidents, works of the servicing personnel, danger on the road, weather situations etc.). The given information covers the 3rd transport ring, junction systems and the most important highways crossing it;

- informing the traffic police and emergency rescue services, as well as cooperating organizations of failures, accidents and technical problems to facilitate traffic flow on the 3rd transport ring.

- timely informing the road services for maintaining the condition of the 3rd transport ring in hard weather conditions;.

- providing more even traffic flow by informing the motorists, proportioning the incoming cars by the ramp-metering method at selected sections and temporary limitation at certain entrances of the ring;

- by controlling the junctions and proportioning the incoming cars by the «ramp metering» method at selected sections for the drivers to maintain the direction according to the change on traffic lanes. Positive effect on environment is reached by:

- by reducing a frequency, length and duration of hold-ups on the 3rd transport ring, which will result in lower emission of harmful substances, as well as lower background noise;

42

- increase of average speed by reducing braking maneuvers and acceleration maneuvers, which will result in lower fuel consumption and thus lower environmental pollution.

Project component «Implementation of the Traffic Control System on the Third Ring Road in Moscow». Goals of its implementation have been attained in full.

6. Sustainability

6.1. The project most important tasks is provision of stability of the obtained results, i.e., ability of the city of Moscow to not only maintain results attained in the course of the Project implementation, but also to develop and improve: (1) institutional opportunities in planning, design, management and implementation of measures for the road traffic organization and, (2) city road transport infrastructure. Actions aimed at achievement of stable results obtained in the course of the Project implementation may be divided into the following lines: (i) development of the implemented institutional amendments in the road traffic organization and control; (ii) use of the unique experience accumulated by specialists of the MPIU Foundation for implementation of other projects related to the development of the Moscow road traffic infrastructure and purchases of works, goods and services for the governmental needs on the basis of tenders; (iii) use of the experience of the project implementation and World Bank procedures for improvement of procedures for purchases of works, goods and services for the Moscow City Government and its structural divisions.

6.2. From the view point of Project long-term stability its most important component became creation of a Traffic Management Center under the Moscow City Government (TMC). Currently, TMC established as a condition for the start of the Project implementation , is the main organization of the Moscow City Government having all the necessary powers, personnel resources and facilities for planning, design, implementation and operation of schemes and systems for the road traffic organization in Moscow. Successful implementation of the TMC personnel training program, as well as participation of the TMC specialists in the Project implementation at all stages, starting for the feasibility study and tenders through the contract implementation allowed them to upgrade qualification and obtain experience necessary to fulfill complicated tasks of the road traffic organization in Moscow.

6.2.1. Existing Structure of TMC At present TMC comprises the following divisions: Administrative Division; Law Division; Planning and Economic Division; Road Traffic Organization Division; State Order Placement Division; Dispatch Center; Division for Development and Introduction of the Road Traffic Automated Control System (RTACS); Information and Analytical Division; Linear Control Division; Capital Construction Service; Service for Operation of Technical Facilities of Road Traffic Organization.

43

6.2.2. TMC Activity 6.2.2.1. Actions on Improvement of the Road Traffic Capacity in the City of Moscow and Improvement of the Road Traffic Safety: - TMC acts as a customer to development and approval of the road traffic organization projects. - The experiment carried out by the Department of Transport and Communications of Moscow together with TMC on organization of priority movement of the public transport means along the Volokolamsk highway, Leninsky and Leningradsky avenues in accordance with para 2.1.1 of Resolution of the Moscow City Government No. 840-ПП of 24.10.2006. - Actions are taken to relieve the road network in the city from unauthorized or transit passage of trucks.

Pursuant to Resolution of the Moscow City Government No. 717-ПП of 19.10.2004 “On Alterations in Resolution of the Moscow City Government No. 604-ПП of August 6, 2002”, in the city of Moscow a ban was imposed beginning from December 01, 2004 from 7:00 to 22:00 on entrance and movement of all transport means with the carrying capacity over one ton belonging to private persons and legal entities in the central part of the city limited by the Third Ring Road as well as movement of all transport means with trailers and semi-trailers belonging to private persons and to legal entities along the Sadovoye Ring.

In pursuance of Direction of the Moscow City Government No. 240-PП of 30.10.2004, the Commission on prompt consideration of the issues related to ensuring the road traffic regimes in the city of Moscow was established. With a view to impose tougher administrative punishment on those drivers that violate the rules on truck movement in some city territories there was elaborated the Draft Federal Law “On making alterations in the Federal Law “On Safe Road Traffic” and in the Code of the Russian Federation on Administrative Offences”.

The law stipulates a possibility of creation by executive authorities of the zones with specific road traffic in some territories of settlements. Here a possibility of restricted entrance of certain transport means into such zones is envisaged. At the same time it provides for administrative responsibility in the form of penalties for violations of the imposed restrictions.

In pursuance of Order of Moscow Mayor Yu.M. Luzhkov No. 4-19-19610/5 of 07.09.2006, the experiment is carried out on introduction of automatic control of truck entrance within the confines of the Third Ring Road applying the hardware-software complex “Potok” installed in two control zones: in the Suschevsky Val Street and on the Rizhsky overpass.

This system operated in an autonomous mode records state registration plates of trucks, screens them with the help of the database of the Moscow Traffic Police and creates an electronic card that is archived and simultaneously transferred to the automatic

44

workplace of a notebook operator located in the patrol car of the Road Patrol Service (RPS) crew.  Developed is the concept of the purposeful program of the city of Moscow “Development of a system of the single urban parking space” that is approved by Resolution of the Moscow City Government No. 99-ПП of 20.02.2007.  Projects on organization of parking space submitted for approval of GUP GSIN are subject to expertise.  TMC takes part in planned checks of operation of paid parkings.  In order to improve road traffic safety, information support and guidance of the road traffic participants the Moscow City Government issued Direction No. 408-PП of 15.03.2006 “On further development of the general city information system for road traffic participants”.  For compensation of the damage incurred by vehicles carrying heavy cargo along the roads of Moscow and in pursuance of Resolution of the Government of the Russian Federation No. 962 of 26.09.1995, the Moscow City Government issued Direction No. 1330-PП of 12.07.2006 “On charging payments from owners or users of vehicles carrying heavy cargo along the roads in the city of Moscow”.  Within the framework of the federal purposeful program “Improvement of road traffic safety in 2006-2012” approved by Resolution of the Government of the Russian Federation No. 100 of 20.02.2006, the federal purposeful program “Improvement of road traffic safety in 2006-2012” is implemented in cooperation with the RF Ministry of Internal Affairs. The respective agreement is signed by Mayor of Moscow Yu.M. Luzhkov and the RF Ministry of Internal Affairs.  The proposals are prepared on making amendments in the Code of the Russian Federation on Administrative Offences” as concerns tougher responsibility for offences involving reduction of the traffic capacity and disturbances in the traffic, including as a result of misuse of special sound and light signals.  Organization of interaction with the Ministry of Transport of the Moscow Region. In particular, together with the Ministry of Transport of the Moscow Region there were prepared proposals on normalizing the road traffic situation in the area of 65th-67th km of the Moscow Ring Road and also proposals on development of the road network in the mentioned area on the territory of the Moscow Region.  On a permanent basis developed are proposals on traffic organization during mass public, political, festive, sport and recreational events.  Elaborated are proposals on traffic organization in the roads nearby works on construction and rehabilitation of large city objects.  In order to improve the road traffic conditions and road traffic safety TMC together with the Department of Transport and Communications of Moscow

45

issued Resolution of the Moscow City Government No. 257-ПП of April 18, 2006 “On actions to improve conditions and safety of the road traffic of vehicles on the Sadovoye Ring”.

 Participation in the work of city commissions: (i) commission on orderly installation of indicative sign posts on the roads in the city; (ii) commission on organization of the public overground transport; (iii) joint commission of Moscow and Moscow Region on organization of road traffic of transport means carrying hazardous cargo.

6.2.2.2. Automatic Road Traffic Control Systems

 In 2006 within the framework of the general city automatic system for road traffic control – system “START” (Resolution of the Moscow City Government No. 1030-PП of 14.06.2006) the works on installation of the automatic road traffic control system on the Volokolamsky highway were carried out.  To ensure the uniform approach to development and operation of the “START” system the draft document “On transfer of the general city automatic system for road traffic control – “START” system to the TMC balance” is under preparation now.  A system of video control of the road traffic situation applying aerial facilities is being created. Pursuant to Resolution of the Moscow City Government No. 678-ПП of 27.08.2002, in accordance with Direction of the Moscow City Government No. 2384-PП of 26.11.2004 and Resolution of the Moscow City Government No. 72-ПП of 07.02.2006 CD RTOC carries out works on creation of a system of video control of the road traffic situation with three balloons and two dirigible.

 Pursuant to Direction of the Moscow City Government No. 1134-PП of 23.06.2005 “On creation of the Traffic Control System at the Third Ring Road in Moscow (TCS at the Third Ring Road)” TMC undertakes coordination of works on creation of TCS at the Third Ring Road.

6.2.2.3. Construction and Updating of the Traffic Light Objects

 The Service for operation of technical facilities of road traffic organization (TFRTO) TMC conducts works on technical operation, repair and maintenance of TFRTO being on the balance of TMC and also takes actions on introduction of modern technical facilities. Every year up to 55,000 applications are submitted on repair of the traffic light facilities and about 1000 orders from the Moscow Traffic Police on installation and change in the operation mode of the traffic light facilities and up to 15,000 applications on replacement and retrofitting of the road signs.

46

Beginning from 2007 the actions on replacement of lamp traffic lights for emitting diodes traffic lights with the service life at least 7 years are carried out.  The capital construction service of TMC performs the functions of a customer on design and construction of the traffic light facilities, both new and to be rehabilitated.

 The dispatch center of TMC concentrates and transfers the information about any violations in the works of TFRTO (traffic lights and signs).

6.2.2.4. Collection of Data and Analysis of the Road Traffic Situation

 Works on updating the information provided by the system for monitoring of transport flows are conducted.  Developed is a system for automatic control of transport flows in the Moscow Ring Road that makes it possible to use the information provided by the transport detectors in managerial decision-making.  Annual study of the traffic conditions in the road network of the city of Moscow is carried out.

6.2.2.5. Development of the Transport System in Moscow for 2010-2015.

The Concept of the integrated program of the transport system development in the city of Moscow for 2010-2015 is elaborated. This concept is discussed and approved at the meeting of the Moscow City Government on June 03, 2008.

6.2.3. Promising Areas of TMC Activity

In the future TMC is planning to take part in addressing the following issues: (i) approval of projects on road marking; (ii) approval of the projects on construction of roads, buildings and structures; (iii) carrying out of actions aimed at improvement of road traffic safety. In addition, in connection with the additional functions imposed on TMC (transfer of the “START” system, construction and maintenance of intellectual transport systems and others) the proposals are elaborated on increase of the TMC staff.

6.2.4. Development of the Transport Infrastructure of the City of Moscow – World Bank Mission

6.2.4.1. Study of the possibility to ensure priority for buses compared to other traffic participants. Study results were used in elaboration of the proposals on ensuring priority for the public transport means along the Volokolamsk highway, Leninsky and Leningradsky avenues. For the experiment carried out by the Department of Transport and Communications of Moscow together with TMC on organization of priority movement of the public transport means along the Volokolamsk highway, Leninsky and Leningradsky avenues, the Moscow Committee for Architecture “Moskomarkhitektura” have

47

concluded an agreement with institute “GENPLAN of Moscow” on elaboration of preproject proposals.

At present the works are completed on elaboration and approval in a customary manner of the project proposals on priority movement of the public transport means along the Volokolamsk highway, Leninsky and Leningradsky avenues that were submitted to the Housing, Utility and Land Improvement Department of the city of Moscow for their further implementation.

By the results of implementation of the mentioned works the Housing, Utility and Land Improvement Department of the city of Moscow will conduct the experiment on priority movement of the public transport means.

6.2.4.2. Preliminary study of the possibility to introduce the paid parking regime in the center of Moscow. The conducted studies made it possible to formulate the basic provisions of the Concept “Development of a system of the single urban parking space” that is approved by Resolution of the Moscow City Government No. 99-ПП of 20.02.2007.

6.2.4.3. Preparation of recommendations on improved organization of the road traffic within the Third Road Ring of Moscow. Pursuant to these recommendations a decision was taken on construction of the road traffic automated control system (RTACS). Pursuant to Direction of the Moscow City Government No. 1134-PП of 23.06.2005 the project was developed in 2006 and at present RTACS is under construction. Now the RTACS is already completed.

6.3. An important factor of the project long-term stability was the secondary institutional reform of the Moscow GIBDD, including: (i) delegation of a part of function on engineering support of the road traffic organization to TMC; (ii) switch to mobile methods of control over observation of the road traffic rules; (iii) greater safety of road traffic for the account of use of effective advanced equipment, training of the personnel of GIBDD emergency teams in modern methods of control over observation of the road traffic rules. In 2005 the following functions have been delegated to TMC, which earlier were discharged by GIBDD: definition and implementation of technical policy in maintenance, operation and repair of technical facilities for the road traffic organization, introduction of new system for the road traffic regulation. In the course of improvement of the federal laws concerning road traffic safety the process of delegation of some GIBDD functions to civil organizations will be continued. Experience of operation of cars and motorcycles supplied in the course of the project implementation to the Road Patrol Service for mobile control equipped with speed-metering devices combined with systems for video fixation of violations of the Road Traffic Rules and identification of plate numbers allowed GIBDD to appraise advantages of the method for mobile control of the speed regime violation and violations of the Road Traffic Rules. Currently, funds not related to the Project are use to supply GIBDD with more advanced equipment and technical facilities for speed metering, video fixation of violations of the Road Traffic Rules and identification of the vehicle plate

48

numbers. Computer-aided systems for photo and video fixation of the Road Traffic Rules have been worked out and put into operation testing within the TCS at the Third Transport Ring. Improvement federal legislation will stipulate computer-aided preparation, print- out and send-out of penalty-tickets to violators of the Road Traffic Rules.

7. Performance during Implementation of the Project 7.1. The World bank Performance In the period of 1996 through 2000 specialists of the World Bank together with representatives of departments and organizations of the Moscow City Government and MPIU Foundation conducted analysis of possible alternatives of the Project to the extent of its goals, components and cost. Under supervision of the World Bank on funds of the guarantor PROON and on order of the MPIU Foundation studies were conducted of the transport development strategy in Moscow, this resulted in the development of the current and medium-term program for development in the field of the transport policy, as well as measures for consolidation of the Moscow City Government structure and more rational management of the city road transport infrastructure...... Contribution of the World Bank specialists into the project implementation may be assessed quite positively. At the same time it seems expedient to draw attention of the World Bank to the necessity to further expand powers of the Moscow representative office of the World Bank in issues concerning consideration and control of purchase procedures and financial accounting and reporting. 7.2. The Moscow City Government Performance In compliance with Loan Agreement 4595-RU and Loan Contract between Ministry of Finance of Russia and Moscow City Government the latter assumed complete responsibility for the Project implementation and redemption of the loan principal and interest payment. All commitments assigned to the Moscow City Government according to the terms and conditions of Loan Agreement 4595-RU and Loan Contract, including all commitments for the project co-funding, VAT and customs duties payment, have been fulfilled in due time and in full. Moscow City Government is redeeming the principal amount and paying interest in strict accordance with the schedule. 7.3. Performance of the ««Moscow Project Implementation Unit» Foundation According to Loan Agreement 4595-RU and Loan Contract between Ministry of Finance of Russia and Moscow City Government, as well as Direction No. 727-PM of the Moscow Mayor dated July 23, 2001 the MPIU Foundation was assigned general responsibility for the project management and fulfillment of the project Customer functions. In the opinion confirmed by both official documents of the World Bank and documents of the Project Russian participants, and in statements by independent auditors and controlling departments (Control and Counting Chamber of Moscow, Rosfinhadzor and more) MPIU Foundation fulfilled the tasks on the project implementation listed in the Loan Agreement and Loan Contract satisfactorily.

49

Annex 8. Comments of Co-financiers and Other Partners/Stakeholders

Not applicable

50

Annex 9. List of Supporting Documents

1. Moscow Foundation - Project Implementation Unit: Implementation Completion Report, Loan 4595-RU: Russian Federation –Moscow Urban Transport Project. Dated October 2008, annex on TCS September 2009. 2. Traffic Management Center. Information about activity of Traffic Management Center. Moscow. October 2008 3. Project Implementation Unit, Explanatory Paper for Project Management Report #26 for the period ending March 31, 2008 4. Project Implementation Unit, Implementation Completion Report. Revised draft dated June 2008 5. Project Implementation Unit, Main principles and calculation conditions of the efficiency of implementing the reconstruction of the Donbassky Bridge and constructing the pedestrian underpasses at Varshavskoye Shosse near Nagatinskaya underground station, Schelkovskoye Shosse (at house 1), and Preobrazhenskaya Square (across Preobrazhenskaya Street and preobrazhenskiy Val Street). June 2008 6. Transport Infrastructure Research Center, Survey of traffic and pedestrian flows in the area of Donbassky overpass and in the area of construction of seven underpasses on the Garden Ring, Varshavsky and Shelkovsky corridors. December 5, 2003 7. Centre for Transport Infrastructure Studies. Gathering and processing the data on traffic and pedestrian flows near the Donbassky Bridge and seven pedestrian underpasses across the Garden Ring, Varshavskoye and Shelkovskoye Avenues and Construction Efficiency Evaluation. Report on assignments Nos.1 and 2. Moscow 2005 8. Centre of Transport Infrastructure Surveys. Collection and processing of the information on parameters of traffic and pedestrian flows in the area of Donbassky Bridge and at seven underground pedestrian crossings at Sadovoye Ring, Varshavskoye and Shelkovskoye Shosse and efficiency estimation reached as a result of the construction. Report on Assignments Nos. 3, 4, and 6. 2007. 9. Obermeyer Planen + Beraten GmbH and Centre Consult, Concept study for a Bus Priority Corridor. Final report submitted to Project Implementation Unit. March 2006 10. Academic Legal University, Traffic and Parking Legislation Study Final Report, 2004 (digital format) 11. SNC-Lavalin, KORS and UEZ-Parking, Park-and-Ride for Central Moscow Study, Final Report, 2004 (digital format) 12. SETEC, Moscow Small Railway Ring Study, Final Report, 2004 (digital format) 13. SNC-Lavalin, KORS and Road Engineering center, On-street Paid Parking in Central Moscow, Final Report, 2005 (digital format)

51

Annex 10. Monitoring indicators

The original list of monitoring indicators, reproduced in full in the table below from Supplemental Letter No. 2, is even wider. It has four distinct groups of indicators, each associated with one or more objectives, as follows:

Group 1: Objective: facilitate sustainable economic growth in Moscow city Indicators: costs of congestion reduced; passengers satisfied with surface transport situation. Group 2: Objective: improved surface mobility and safety in Moscow Indicators: multiple, ranging from increased vehicular and person-trip throughput on major selected corridors to reduced accidents and reduced concentrations of hazardous emissions. Group 3: Objective 3.1: Improve traffic management arrangements Indicators: (i) TMC fully staffed (20 professionals minimum); (ii) positive assessment of traffic management practices by professional stakeholders and Non-Governmental Organizations (NGOs); (iii) TMC traffic monitoring/analysis system adequate in project design and evaluation. Objective 3.2: Improve implementation efficiency of transport investment projects Indicators: (i) cost minimization and compliance with schedules and quality; (ii) economic rate-of-return for selected investments at least 20%. Objective 3.3: Improved traffic management efficiency in the Central Area Indicators: (i) Completion of approved plans and feasibility studies including a parking plan; plan for vehicle entry restrictions; and plan for optimizing public transport operations. Objective 3.4: Cost-effective construction of Donbassky Bridge Indicators: (i) works completed on time, budget and quality; (ii) economic rate-of-return at least 20%. Objective 3.5: Police better trained and equipped to enforce rules Indicators: (i) Training courses done; (ii) completion of an operational plan for improved mobile enforcement; and (iii) improved enforcement practices. Objective 3.6: Improved public transport planning for surface public transport Indicator: Time bound and monitorable action plan to improve quality of service and financial sustainability. Objective 5.7: Effective project management Indicators: (i) Project Implementation Unit (PIU) fully staffed and with adequate budget from the date of loan effectiveness; (ii) Borrower and sub-borrower satisfaction with project management. Group 4: Objective (implicit): Each component to remain within its agreed budget envelopes

52

Indicators: Budget envelopes (cost estimates) for each component.

I. Indicators agreed at negotiations, as recorded in the Supplemental Letter #2

I.1: Macro outcomes

Hierarchy of Objectives Key Performance Indicators Monitoring & Evaluation

Sector-related CAS Goal: Sector Indicators: Sector / country Reports: Facilitate sustainable economic  Cost of congestion reduced  TMC reports growth in Moscow city  Passengers satisfied with surface  Independent polls transport situation

I.2: On-street outcomes

Hierarchy of Objectives Key Performance Indicators Monitoring & Evaluation Project Development Outcome / Impact Indicators: (Project Reports): Objective: Improved surface mobility and  Increased vehicular and person-trip  TMC annual reports safety in Moscow throughput on major selected corridors (before the Project and in the course of its implementation)

 Reduced number of total accidents,  Traffic Police and TMC and reduced accidents that involve annual reports personal injury and deaths, on selected corridors

 Reduced number of pedestrian injuries  Traffic Police and TMC and deaths on selected corridors annual reports

 Increased passenger trips by surface  T& C annual reports transit  Reduced concentrations of hazardous  Annual reports of emissions on selected corridors environmental authorities

53

I.3: Outcomes related to specific sub-objectives

Hierarchy of Objectives Key Performance Indicators Monitoring & Evaluation Project Development Objective: Outcome / Impact Indicators: Project Reports: 1. Improved traffic management 1.1. TMC fully staffed with a complement of at least  Quarterly reports arrangements 20 professionals  Supervision missions  Consultants' services

1.2. Positive assessment of traffic management  Annual stakeholder workshops decision making practices and traffic management  TMC annual reports quality by professional stakeholders and nongovernmental organizations

1.3 TMC traffic monitoring system providing  TMC annual reports adequate data and analysis to permit rational project design and evaluation  Quarterly reports  Supervision missions 2. Improved implementation efficiency of 2.1 Minimization of costs and strict compliance with  TMC Annual Reports transport network development implementation schedules and established quality  Quarterly Reports investment projects (comprehensive standards  Supervision missions corridor and spot improvements) 2.2 ERR for selected investments at least 25% 3. Improved traffic management 3.1. Completion of approved plans and feasibility  TMC annual reports efficiency in the Central Area studies for optimizing traffic management into and  Quarterly reports within the central area, including, inter-alia:  Supervision missions (a) a parking plan for the Central Area including, on- street parking, parking lots, and interceptive parking. (b) a plan for restricting vehicular traffic into and through the central area (c) a plan for optimizing public transport operations into and within the Central Area including the metro system.

4. Cost effective construction of 4.1. Works completed on time, budget and quality  Quarterly reports Donbassky Bridge  Supervision missions 4.2. ERR for selected investments at least 20%  Post construction ERR calculations

5. Police better trained and equipped to 5.1.End-of-training course evaluation reports  Supervision missions enforce traffic rules  Traffic Police annual reports 5.2. Completion of monitorable operations plan for improved mobile enforcement of driver behavior

5.3. Improved traffic enforcement practices

6. Improved planning for surface public 6.1.Time bound and monitorable action plan to  Final Plan Review transport improve quality of service and improve financial sustainability

7. Implementation of effective project 8.1 PIU fully staffed with adequate budget from the  Quarterly reports management date of loan effectiveness  Supervision missions 8.2 Sub-borrower and borrower satisfaction with  Mid-Term Review project management

54

I.4: Investment “outputs”

Hierarchy of Objectives Key Performance Indicators Monitoring & Evaluations

Project Components/ Sub- Inputs: (budget for each component) Project reports: Components 1. Traffic Management Center  $11.6 million  Quarterly reports  Supervision reports  Disbursement reports 2. Comprehensive Corridor  $47.6 million  Quarterly reports Improvement Program  Supervision reports  Disbursement reports 3. Comprehensive Central Area  $6.2 million  Quarterly reports Traffic Improvement Program  Supervision reports  Disbursement reports 4. Construction of Donbassky  $39.0 million  Quarterly reports Bridge  Supervision reports  Disbursement reports 5. Traffic Enforcement Program  $10.3 million  Quarterly reports  Supervision reports  Disbursement reports 6. Surface Transit Study  $2.0 million  Quarterly reports  Supervision reports  Disbursement reports 7. Special Project Feasibility  $1.6 million  Quarterly reports Studies  Supervision reports  Disbursement reports 8. Project Management (Project  $2.5 million  Quarterly reports Implementation Unit)  Supervision reports  Disbursement reports

55

II. Results

II.1 No results for are given for indicators grouped under I.1 heading above, there being no calculable correlation between project investments and congestion levels in Moscow and/or the satisfaction of passengers with on-street public transport services.

II.2. No results are given for indicators grouped under I.2 above, which refer to on-street consequences of project investments. For several large investments (Donbassky Bridge complex and some pedestrian underpasses), before-and-after traffic studies were done, permitting a post-investment recalculation of economic rates-of-return. Reports detailing these studies are listed in Annex 9, and are on file. The results are summarized in Section 3.3 above, with further details in Annex 3. No other surveys were done and none was planned or agreed with the Borrower.

II.3 Results for indicators grouped under I.3 above are as follows:

56

Objectives Key Performance Indicators Outcomes

1. Improved traffic 1.1. TMC fully staffed with a  The staffing target met in 2002 management complement of at least 20  Staff increased to about 500 in 2006 arrangements professionals upon TMC’s takeover of Moscow’s traffic signal system; of these, 50 work in traffic management proper 1.2. Positive assessment of traffic  MCG approval of TMC’s management decision making performance and potential expressed practices and traffic management to missions and demonstrated in a quality by professional stakeholders major increase of TMC authority in and nongovernmental organizations June 2005  Qualified approval by professional stakeholders (GenPlan) 1.3 TMC traffic monitoring system  TMC carries out both routine and providing adequate data and analysis special purpose traffic surveys, in to permit rational project design and addition to monitoring traffic signals evaluation performance 2. Improved 2.1 Minimization of costs and strict  All project investments except Third implementation efficiency compliance with implementation Ring Road TC system carried out in of transport network schedules and established quality time and cost; post-evaluation development investment standards positive; Third Ring TC works were projects (comprehensive completed on time, but system corridor and spot 2.2 ERR for selected investments at integration was finalized during ICR improvements) least 20% preparation.  For project investments weighted average post construction ERR estimated from “before” and “after” traffic studies, and actual costs, is 55%. Individual ERRs range from 17% to 107%. 3. Improved traffic 3.1. Completion of approved plans  Parking and other traffic management management efficiency in and feasibility studies for optimizing studies completed, and accepted for the Central Area traffic management into and within implementation by MCG. The concept the central area, including, inter-alia: “Development of a system of the (a) a parking plan for the Central Area single urban parking space for 2008- including, on-street parking, parking 2010” approved by the MCG in 2007. lots, and interceptive parking.  Starting from December 2004 the (b) a plan for restricting vehicular MCG imposed restrictions on entry to traffic into and through the central the central area of heavy (over 1 ton) area vehicles and trailers. (c) a plan for optimizing public  Proposals on priority movement of transport operations into and within public transport along selected the Central Area including the metro corridors finalized by the MCG and system. suggested for implementation by the Department of Transport 4. Cost effective 4.1. Works completed on time, budget  Donbassky Bridge works completed construction of and quality successfully, early and beneath cost Donbassky Bridge  Received 2004 award for the best project in its category in Moscow 4.2. ERR for selected investments at  ERR 47% least 20%

57

5. Police better trained 5.1.End of training course evaluation  Evaluation of training courses carried and equipped to enforce reports out and was positive. traffic rules  Operations Plan, including an 5.2. Completion of operations plan for evaluation of experience with first improved mobile enforcement of batch equipment prepared driver behavior  Accident statistics collected by the Police indicate effectiveness of 5.3. Improved traffic enforcement mobile law enforcement: (a) at least practices 15% increase in successful interventions; (b) at least 10% reduction in response time to incidence; and (c) at least 15% increase in recovery of stolen cars. 6. Improved planning for 6.1.Time bound and monitorable  Objective not reached: surface public surface public transport action plan to improve quality of transport study cancelled by MCG just service and improve financial before issuing the request for sustainability proposals 7. Implementation of 8.1 PIU fully staffed with adequate  PIU was well performing, especially effective project budget from the date of loan in the areas of FM and disbursement management effectiveness 8.2 Sub-borrower and borrower satisfaction with project management

II.4 This group of indicators are before and after cost estimates already shown in Annex 1.

58

MAPS IBRD No. 31064 and No.31064R

59