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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 7303 PROJECT PERFORMANCE AUDIT REPORT MALAYSIA Public Disclosure Authorized THIRD HIGHWAY PROJECT (LOAN 1376-MA) June 22, 1988 Public Disclosure Authorized Operations Evaluation Department Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. LIST OF ABBREVIATIONS AND ACRONYMS DBST - Double bituminous surface treatment EPU - Economic Planning Unit ERR - Economic Rate of Return GOM - Government of Malaysia JKR - Ministry of Public Works MAS - Malaysian Airline System MHA - Malaysian Highway Authority MR - Malayan Railway OED - Operations Evaluation Department (World Bank) PCR - Project Completion Report PPAM - Project Performance Audit Memorandum PPAR - Project Performance Audit Report PWD - Public Works Department RMS - Road Maintenance Section SPWD - Sabah Public Works Department TST - Technical Support Team UNDP - United Nations Development Programme Vpd - Vehicles per day VOC - Vehicle operating cost FOR OFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 USA. Office of oiector-Cetwal Operatim Evaluation June 23, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Performance Audit Report - Malaysia Third Highway Proiect (Loan 1376-MA) Attached, for information, is a copy of a report entitled "Project Performance Audit Report - Malaysia Third Highway Project (Loan 1376-MA)" prepared by the Operations Evaluation Department. Yves Rovani by Ram K. Chopra Attachment This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Sank authorization. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT MALAYSIA THIRD HIGHWAY PROJECT (LOAN 1376-MA) TABLE OF CONTENTS Pate No. Preface................... ....... ....... ... ............ * .* ...... Basic Data Sheet ..........40............. .......................1 Evaluation Summary ...0...... ......... .............. .... ....... iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. BACKGROUND. ......... .................. *.o.*......... 1 Transport and the Economy..... ........................ .... ...... 1 Emphasis on Road Transport...................... .......... .1 Third Highway Project ...... 0 ............ .0.. ........... .1 II. IMPLEMENTATION .......................................... 2 Road Construction - 5abah................................2 Road Maintenance Program - Sabah.......................3 Pilot Pavement Strengthening Program in West Malaysia........4 Studies.A.l ................. ................ o o.........4... *4 III. RESULTS .... ........................ .......... o .. 5 IV. CONCLUSIONS ..................... ....... ...... ..... ...... .7 Overall Assessment ............oo......o........o.............7 The Ax1e Load Limit Issue ...*...*......... ............. 7 Environmental Aspects ............... o......................7 Sustainability .........**......o.......... ..... ............ 7 Prequalificatiou of Contractors.....t.... ............... t....8 Attachment 1: Comments from the Borrower.....................9 PROJECT COMPLETION REPORT I. Project Background and Sectoral Setting ................... 13 II. Project Formulation .......... .................... 16 III. Project Implementation ...................................... 18 IV. Project Cost and Bank Loan.................................. 25 V. Institutional Development....................................26 VI. Economic Reevaluation....................................... 27 VII. The Role of the Bank........................................28 VIII. Conclusions.......... .... o....... ... .. ...... ... ... 28 1Thit doc" ient has a restricted distribution and MAY be used by reciplents only la the performance TABLE OF CONTENTS (Cont'd) Page No. Tables 1. Actual and Expected Project Implementation...... ...........29 2. Actual and Forecast Estimates of Project Cost*..... *.......30 3. Estimated and Actual Dsbursements............ ............ 31 4. Compliance with Major Loan Conditions.....................32 5. Actual and Forecast Traffic (1981-99).......................34 6. Vehicle Operating Costs............................. ..... 35 7. Ex-Post and Original Rates of Return......................36 Maps - IBRD 10050 R3 (PPA) IBRD 12223 Ri (PCR) d PROJECT PERFORMANCE AUDIT REPORT MALAYSIA THIRD HIGHWAY PROJECT (LOAN 1376-MA) PREFACE This is a performance audit of the Third Highway Project in Malaysia, involving a Bank loan of US$35 million to the Government, with as main objective to support the Government's poverty alleviation strategy by providing improved transportation in previwusly underemphasized areas. Hence the project focus on road construction and maintenance in Sabah. The loan was approved in March 1977 and became effective in May 1977. In early 1986 the last disbursement took place, four years behind schedule, and US$4.6 million was cancelled. The PPAR consists of the Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED) and the Project Completion Report (PCR) prepared by the Asia Regional Office of the Bank. The PPAM is based on the attached PCR, the Staff Appraisal and the President's Reports, secror and economic reports, special studies, the loan documents, the summary of uhe Board discussion, study of the project files and discussions with Bank staff. An OED mission visited Malaysia in March 1988 and discussed the effectiveness of the Bank's assistance with Government officials. Their kind cooperation and valuable assistance in the preparation of this report is gratefully Acknowledged. Tha PCR provides an excellent account and a thoughtful and candid assessment of the project experience and the results achieved in particular in terms of longer term institution :)uilding. The PPAM summarizes the PCR's major findings; moreover, it supplements the PCR by providing some additional information and conclusions, and highlights, inter alia, the issue of enforcement of axle load limits of trucks, the importance of carefully screening contractors before prequalification, and the sustainability of the project. As is customary in the preparation of audit reports, copies of the draft audit report were sent to the Borrower for comment on April 6, 1988. In response, the Federal Treasury, also on behalf of the Ministry of Public Works and the Sabah Public Works Department, has indicated that it had no comments on the report (Attachment 1). MALAYSIA THIRD HIGHWAY PROJECT (LOAN 1876-MA) BASIC DATA SHEET KEY PROJECT DATA Item Approtleal Expectation Actual or Current Estimate Total Project Cost (US1m) 168.0 116.0 - Overrun (X) - 6.5 Loan Amount (USIm) 86.0 85.6 - Amount Disbursed - 86.4 - Amount Cancelled - 4.6 - Amount Repaid as of August 31, 1987 - 16.5 - Amount Outstanding as of August 81, 1987 - 18.9 Date Physical Components Completed 66/86/81 12/81/84 Proportion of Tim Overrun (X) - 87 Economic Rate of Return (1) 18 28 Institutional Performance Good Good CUMULATIVE DISBURSEMENTS FY77 FY78 FY79 FY86 FY81 FY82 FY88 FY84 FY85 FY86 Appraisal (US$ million) 2.0 18,7 28.1 82.8 84.8 85.0 Actual (USS million) - 1.8 16.9 14.6 17.7 21.8 28.1 26.8 86.6 86.4 Actual as X of Estimate 0 9.0 42.0 48.6 51.6 66.6 86.6 75.6 86.6 87.0 Date of Final Disbursement: April 9, 1986 STAFF INPUT (staffweeks) FY74 FY75 FY76 FY77 FY78 FY79 FYPO FY81 FY82 FY88 FY84 FY85/8 TOTAL Preparation 89.6 4.9 24.8 9.1 - - - - - - - - 68.9 Appraisal - - 21.4 8.6 - - - - - - - - 29.8 Negotiation - - - 18.8 - - - - - - - - 16.8 Supervision - - - 8.5 5.2 7.0 8.6 6.2 2.4 8.9 4.6 10.7 49.8 Other - 6.1 - - - - - 9.8 - - - 6.4 TOTAL 89.6 4.9 46.8 81.9 5.2 7.0 8.5 8.2 2.7 8.9 4.5 10.7 186.8 OTHER PROJECT DATA Original Actual or Item Plan Revisions Est. Actual First Mention in Files 8/09/72 - - Negotiations 01/12/77 - 01/12/77 Board Approval 8/15/77 - 08/15/77 Loan Agreement Date 64/04/77 - 04/84/77 Effectiveness Date 05/64/77 - 06/04/77 Closing Date 06/86/82 08/81/84 10/28/86 Borrower Government of Malaysia Executing Agency Public Works Department (PWD) Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name Sabah/Sarawak Roads - Loan Number 2291-MA - Amount (US$u) 8.2 - Loan Agreement Date 08/27/68 MISSIUN DATA Date No. of Specializations Performance Types of Date of (Mo/Yr) persons Represented L _Ra#* Ab Trend &c Problem L Report Identification 11/73 2 EN,EC - - - 12/27/78 Preparation 8/74 2 EN,EC - - - 08/27/74 Preappralsal 09/76 8 EN(2),EC - - - 11/08/75 Appraisal 62/76 2 EN,EC - - - 02/22/77 Supervision I 65/77 1 EN 2 2 M 07/06/77 Supervision II 11/77 4 EN 2 2 M 01/28/78 Supervision III 10/78 1 EN 2 2 M 11/29/78 Supervision IV 09/79 1 EN 2 2 M,F 12/10/79 Supervision V 11/89 1 EN 2 1 M,F 06/09/81 Supervision VI 10/82 1 EC 2 1 F,O 11/16/82 Supervision VII 04/88 2 EC,EN 2 1 F 85/15/88 Supervision VIII 62/84 2 EC,EN 2 1 F 68/068/4 Supervision IX 11/84 2 EC,EN 2 1 F 12/26/84 Completion 1 EC n/a n/a n/a - 06/15/68 COUNTRY EXCHANCE RATES Name of Currency (Abbreviation) Malaysian Dollar (MI) Exchange Rate Appraisal Year Average 1976 US81 = M82.60 Exchange Rate Intervening Years Average 1977-84 US1 = M82.48 Exchange Rate Completion Year 1985 US81 = M82.46 Exchange Rate Average 1976-85 US1 a MS2.47 L EN=Engineer/EC=EconomIst A 1=Problem Free or Minor Problems/2=Moderate Problems/8=Major Proleme /c 1=Improving/2Statlonary/8=De*riorating
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