Technical Assistance Report

Project Number: 41122 January 2008

Georgia: Preparing the Ajara Bypass Roads Development Project

The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature.

CURRENCY EQUIVALENTS (as of 19 January 2008)

Currency Unit – lari (GEL) GEL1.00 = $0.6273 $1.00 = GEL1.5941

ABBREVIATIONS

ADB – Asian Development Bank EIA – environmental impact assessment PPTA – project preparatory technical assistance

TECHNICAL ASSISTANCE CLASSIFICATION

Targeting Classification – General intervention Sector – Transport and communications Subsector – Roads and highways Themes – Sustainable economic growth, regional cooperation, capacity development Subthemes – Fostering physical infrastructure development, cross-border infrastructure, institutional development

NOTE

In this report, "$" refers to US dollars.

Vice President L. Jin, Operations Group 1 Director General J. Miranda, Central and West Asia Department (CWRD) Director S. O'Sullivan, Infrastructure Division, CWRD

Team leader H. Wang, Principal Transport Economist, CWRD

o 41 o 00'E 45 00'E

GEORGIA AJARA BYPASS ROADS DEVELOPMENT PROJECT

R U S S I A N F E D E R A T I O N

Bzyb R. N ABKHAZETI Omarishara 0 20 40 60 80 Lata R. o Otap o 43 00'N Inguri R. Kilometers 43 00'N Gulripsh Khaishi Tqvarcheli Ochamchira Khvanchkara Pichori R. Mleta Kvaisi Tqibuli Pasanauri Tskhaitubo B l a c k S e a . Rioni R. R la ri vi Q R. Ala Mtkvar zan Gori i R. i ( ) R. A J A R A Atskuri T'BILISI Io ri Sarpi Keda Vale Lake Tabatskuri R. Dedoplis Tsqaro Lake Paravani T U R K E Y o 41 o 00'N National Capital 41 00'N Oblast Capital A R M E N I A City/Town A Z E R B A I J A N Project Road National Road Other Road Railway River Oblast Boundary International Boundary 0

7 Boundaries are not necessarily authoritative. - 4 1 8 5

H o o

R 41 00'E 45 00'E

I. INTRODUCTION

1. In August 2007, the Government of Georgia requested assistance from the Asian Development Bank (ADB) to prepare the Ajara Bypass Roads Development Project. The ADB Fact-Finding Mission visited Georgia from 17 to 21 October 2007 to process the project preparatory technical assistance (PPTA) proposal. The Mission held discussions with concerned government officials; visited the project area; and carried out an initial poverty and social analysis and a rapid environmental assessment. This report is based on (i) the agreement reached with the Government on the impact, outcome, outputs, cost, financing and implementation arrangements, and consultants’ terms of reference for the PPTA; and (ii) the Mission’s findings. The PPTA design and monitoring framework is in Appendix 1.1

II. ISSUES

2. Georgia is a small, strategically located country in the south . Transport plays a pivotal role in supporting the national economy and serving as the shortest transit link between Central Asia and Europe, as well as between the Russian Federation and Turkey. Georgia’s road network comprises 1,495 kilometers (km) of international, 3,354 km of state, and 15,480 km of local roads. The county has five major highways, including the east–west highway running from the port of Poti to the Azerbaijan border, which is the extension of Corridor 2 identified in the recently developed Transport and Trade Facility Strategy under the Central Asia Regional Economic Cooperation (CAREC) Program. The system is linked to the railway systems of Armenia, Azerbaijan, and the Russian Federation. The rail lines from Batumi and Poti, Georgia’s two major ports, connect other southern Caucasian countries (Armenia and Azerbaijan) and Central Asia (Kazakhstan and Turkmenistan). Recently, the governments of Georgia, Azerbaijan, and Turkey agreed to construct the Kars–Aklhalkalaki– –Baku railway line.

3. Given the country’s geographic location, development of the transport sector is vital to reducing transport costs, increasing transit revenues, and connecting to markets in the region and beyond. However, around 10% of the main roads, 30% of secondary roads, and 50% of local roads in Georgia are in poor condition, leading to higher transport costs, long transit times, and traffic accidents. In response, the Government gives high priority to road transport infrastructure development, and plans to reconstruct and rehabilitate major roads and highways during 2008–2011 to strengthen access to markets and realize Georgia’s full potential as a transit economy.

4. The road between Poti and Sarpi at the border with Turkey along the Black Sea coast is one of Georgia’s main highways. It connects the western part of the country to its capital, Tbilisi, and provides an important transit route for international traffic. However, the road section in the Ajara Autonomous Republic passes through a number of Black Sea resorts such as Batumi and Kobuleti, which has caused severe traffic congestion and accidents, particularly during the tourist seasons. To address this problem, the Government plans to construct two bypass roads near Batumi and Kobuleti to promote transit traffic and improve road safety, and has asked ADB to help prepare and finance the project.

5. The Government has made important progress on reforms in the transport sector. Administrative structures have been streamlined resulting in more effective management. The Road Department of the Ministry of Economic Development has oversight for the construction

1 The PPTA first appeared in ADB Business Opportunities on 19 November 2007.

2 and maintenance of main and secondary roads, while local roads are under the joint responsibility of the Road Department and local governments. With the adoption of the National Anticorruption Strategy in 2004 and subsequently the Implementation Plan in 2006, the incidence of corruption across all sectors including transport has dropped significantly, as reported in the latest European Bank for Reconstruction and Development–World Bank Business Environment and Enterprise Performance Survey. Nevertheless, the institutional capacity of the Government needs strengthening to meet the challenges of moving to a market economy.

6. Georgia joined ADB in February 2007. An ADB interim operational strategy for Georgia (2008–2009)2 currently under preparation identifies the reduction of road transport constraints on economic activity as a priority area for ADB assistance. The PPTA, which will be the first ADB assistance for Georgia, is consistent with the proposed interim operational strategy.

7. Georgia’s road subsector has been receiving assistance from the World Bank, European Bank for Reconstruction and Development, Millennium Challenge Corporation, and other external aid agencies. The World Bank approved a $28.3 million loan for the First East–West Highway Improvement Project in 2006 to improve the Natakhari–Agaiani section (16 km) of the country’s major east–west highway, and is processing phase II of the project for reconstruction of the Igoeti–Sveneti section (25 km) of the same highway. It also approved a $27.4 million loan for the Secondary and Local Roads Project in 2004. The European Bank for Reconstruction and Development helped construct the new Tbilisi international airport and improved commercialization of Georgian railways. The Millennium Challenge Corporation provided a $102.2 million grant to finance rehabilitation of the Samtskhe–Javakheti road. At the request of the Government, the Japan Bank for International Cooperation began preparing financial assistance for improving part of the east–west highway during September–October 2007. The PPTA was designed and will be implemented in collaboration with other external aid agencies.

III. THE TECHNICAL ASSISTANCE

A. Impact and Outcome

8. The impact of the PPTA is to develop an efficient and safe road transport system in the project areas between Poti and Sarpi in the Ajara Autonomous Republic. This will be achieved through the preparation of an investment project design agreed to by the Government and ADB. The ensuing project will construct two bypass roads (i.e., the Batumi bypass road and the –Makhinjauri road, or the Kobuleti bypass road) to increase transit traffic, reduce transport costs and travel time, and improve road safety. This will contribute to sustainable economic and social development in Georgia, as well as facilitate regional cooperation.

B. Methodology and Key Activities

9. International consultants, with support from national consultants, will be engaged to implement the PPTA. Specifically, the consultants will undertake a feasibility study, which will include a road subsector analysis (including an institutional and financial analysis), preliminary engineering design, economic analysis, poverty and social analysis, environmental impact assessment, and resettlement plan. They will help develop a results-based project framework, including monitoring indicators for development impacts and baseline data. The consultants will

2 ADB. 2008. Interim Operational Strategy (2008–2009): Georgia. Manila (Draft).

3 utilize the results of the prefeasibility study completed by the Design and Survey Institute of Georgia in 2006.

10. The initial poverty and social analysis (Appendix 2) and rapid environmental assessment carried out during the Fact-Finding Mission (i) examined poverty status, ethnic minority and gender issues, resettlement effects, and environmental conditions in the project areas; and (ii) identified social and environmental issues that need to be further examined and addressed during PPTA implementation.

11. Key activities will include field surveys; document reviews; data analysis; desk studies; and consultation with various stakeholders, including government officials, local communities, civil society, road users, affected people, and external aid agencies.

12. Two risks have been identified. First, the project is anticipated to have impacts on the environment and resettlement. The PPTA will undertake due diligence by assessing possible impacts and proposing appropriate mitigation measures. Second, Georgia recently experienced political turbulence. The Government’s commitment to the PPTA and ensuing investment project may change. ADB will closely monitor the situation in the country during PPTA implementation.

C. Cost and Financing

13. The total cost of the PPTA is estimated at $750,000. ADB will provide $600,000 financed on a grant basis by ADB’s technical assistance funding program. The Government will finance the remainder of the TA cost in kind by providing counterpart staff, furnished office space, and logistical support services. The detailed cost estimates and financing plan are in Appendix 3. The Government has been informed that approval of the PPTA does not commit ADB to finance any ensuing project.

D. Implementation Arrangements

14. The Road Department of the Ministry of Economic Development will be the Executing Agency. It will appoint a coordinator to (i) supervise PPTA activities; (ii) resolve any issues that may arise during implementation; and (iii) facilitate coordination among the consultants, government agencies, and other stakeholders. The Road Department will provide the consultants with the available documents, data, maps, and other information needed to implement the PPTA.

15. The PPTA will require about 45.5 person-months of consultant inputs (17 international and 28.5 national). The international consultant team will comprise a (i) road engineer and team leader, (ii) transport economist, (iii) institutional/financial specialist, (iv) environment specialist, and (v) social development specialist. They will be supported by national consultants with similar expertise and experience. The outline terms of reference for consultants are in Appendix 4. ADB will engage an international consulting firm in association with national consultants in accordance with the ADB's Guidelines on the Use of Consultants (2007, as amended from time to time) using the quality- and cost-based selection method (80 weighting for quality and 20 weighting for cost) and simplified technical proposal procedures. The consultants will purchase office equipment in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). The consultants are expected to start services in April 2008 and complete them in September 2008. The PPTA is expected to be completed by 31 December 2008. Stakeholder

4 workshops will be held to review the consultant’s reports. The consultant’s final reports will be disseminated to the public through ADB’s website upon PPTA completion.

IV. THE PRESIDENT'S DECISION

16. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of $600,000 on a grant basis to the Government of Georgia for preparing the Ajara Bypass Roads Development Project, and hereby reports this action to the Board.

Appendix 2 5

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Data Sources/Reporting Assumptions and Risks Targets/Indicators Mechanisms Impact Assumption Development of an Traffic volume and transit Traffic counts, vehicle Continued rapid economic efficient and safe road traffic increased by 10% operating cost and travel time growth in Georgia transport system in the on the project roads after surveys by the Road project areas between project completion Department of the Ministry of Risk Sarpi and Poti in Economic Development The political situation in Georgia Georgia’s Ajara Transport costs reduced may become unstable Autonomous Republic by 15% on the project Asian Development Bank roads after project (ADB) project completion completion report

Traffic accidents reduced Georgian road accident by 15% on the project statistics roads after project completion Outcome Assumption Design of an investment A memorandum of ADB PPTA review mission Timely allocation of counterpart project, which will understanding on the reports funding from the Government’s construct two bypass preliminary design of the budget and cofinancing roads (i.e., the Batumi investment project signed commitment, if needed, for the bypass road and the upon completion of the project Choloki–Makhinjauri road project preparatory or the Kobuleti bypass technical assistance road) prepared and (PPTA) agreed to by the Government of Georgia and ADB Outputs Assumptions The feasibility study for Feasibility study submitted Consultant’s final report Close coordination among the investment project, by the consultants in relevant government agencies which includes a road September 2008 ADB PPTA review mission during PPTA implementation subsector analysis, reports preliminary engineering Local communities and civil design, economic society strongly support the analysis, poverty and PPTA and actively participate social analysis, during PPTA implementation environmental impact assessment, and Risk resettlement plan Possible delays in finalizing the project’s resettlement plan because of the Government’s unfamiliarity with ADB’s Involuntary Resettlement Policy (1995)

Activities with Milestones Inputs 1.1 PPTA approval (January 2008) ADB: $600,000 (grant) 1.2 Short-listing of consultants (January 2008) • Consultants: $494,000 (17 1.3 Invitation for technical proposals from short-listed consultants (February 2008) person-months international 1.4 Evaluation of technical proposals from short-listed consultants (March 2008) and 28.5 person-months 1.5 Contract negotiations with the first-ranked consultant (March 2008) national) 1.6 Contract award (March 2008) • Surveys: $30,000 • Equipment: $10,000 2.1 Commencement of consultant services (April 2008) • Miscellaneous support: 2.2 Submission of the inception report by the consultant (April–May 2008) $6,000 2.3 Fielding of ADB’s PPTA inception mission (April–May 2008) • Government representatives 2.4 Submission of the interim report by the consultant (June 2008)

6 Appendix 2

Design Summary Performance Data Sources/Reporting Assumptions and Risks Targets/Indicators Mechanisms 2.5 Fielding of ADB’s PPTA review mission (June 2008) for contract negotiations: 2.6 Submission of the draft final report by the consultant (August 2008) $10,000 2.7 Fielding of ADB’s final PPTA review mission and holding of the tripartite • Contingencies: $50,000 meeting to review the consultant’s draft final report (August–September 2008) 2.8 Submission of the final report by the consultant (September 2008) Government: $150,000 (in kind), 2.9 Closing of the PPTA account (December 2008) covering office accommodation, remuneration and per diem of counterpart staff, and miscellaneous support services.

Hong Wang Juan Miranda Officer-in-Charge Director General CWID CWRD

Appendix 2 7

INITIAL POVERTY AND SOCIAL ANALYSIS

Country/Project Title: Georgia: Preparing the Ajara Bypass Roads Development Project

Lending/Financing Project loan Department/ Central and West Asia Modality: Division: Department, Infrastructure Division

I. POVERTY ISSUES A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy 1. The transport sector helps reduce poverty directly by improving access to markets, creating jobs, and easing delivery of social services; and indirectly by facilitating economic development. The road between Poti and Sarpi, located along the Black Sea coast, is an integral part of Georgia’s major road transport corridor. It connects the western part of the country to its capital, Tbilisi; and provides an important transit route for international traffic. In addition, it passes through a number of Black Sea tourist resorts such as Batumi and Kobuleti, causing severe traffic congestion and accidents, particularly during the tourist seasons. The Ajara Bypass Roads Development Project will reduce transport costs, travel time, and road accidents, and thereby help (i) facilitate economic development (i.e., transit traffic and tourism), (ii) create jobs, and (iii) improve access to social services.

B. Targeting Classification 1. Select the targeting classification of the project:

General Intervention Individual or Household (TI-H); Geographic (TI-G); Non-Income MDGs (TI-M1, M2, etc.)

2. Explain the basis for the targeting classification: The project will contribute to sustainable economic and social development in Georgia, as well as regional cooperation through development of two bypass roads in the Ajara Autonomous Republic to increase transit traffic, reduce transport costs and travel time, and improve road safety.

C. Poverty Analysis 1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed? Not applicable.

2. What resources are allocated in the PPTA/due diligence? The Asian Development Bank (ADB)’s technical assistance funding program.

3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor governance, and pro-poor growth)? The opportunities for pro-poor design will be explored during PPTA implementation.

II. SOCIAL DEVELOPMENT ISSUES A. Initial Social Analysis

Based on existing information: 1. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from the project?

The Government, road users, road construction companies, local residents, and resort tourists are the potential project beneficiaries. The poor and the socially excluded will benefit from the project through (i) the construction and maintenance of the project roads, and (ii) development of business activities along the project roads after project completion.

2. What are the potential needs of beneficiaries in relation to the proposed project?

The early opening of efficient, safe, and sustainable bypass roads in the project areas, with minimum negative social and environmental impacts.

3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them?

8 Appendix 2

The project entails substantial land acquisition. The preparation and smooth implementation of a resettlement plan may constitute a constraint, because this is ADB’s first assistance to the transport sector and therefore the government officials and local communities in Georgia are not familiar with ADB’s Involuntary Resettlement Policy (1995). The PPTA includes the preparation of the resettlement plan in the terms of reference for consultants, and allocates adequate resources to enable the consultants to undertake proper surveys and hold consultations with the Government and affected people. Adequate consulting services will be provided to support implementation of the resettlement plan under the ensuing investment project.

B. Consultation and Participation 1. Indicate the potential initial stakeholders.6 The central and local governments, road users, road construction companies, local business communities, the people to be affected by the project due to land acquisition and resettlement. 2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops, community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)? Workshops, interviews, and social surveys. 3. What level of participation is envisaged for project design? Information sharing Consultation Collaborative decision making Empowerment7

4. Will a C&P plan be prepared? Yes No The consultation and participation plan will be developed by the PPTA consultants.

C. Gender and Development 1. What are the key gender issues in the sector/subsector8 that are likely to be relevant to this project/program? Equal opportunity between men and women (i) for employment for the construction of project roads, and (ii) for stakeholder consultation and participation.

2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by improving women’s access to and use of opportunities, services, resources, assets, and participation in decision making? Yes No Please explain.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality? Yes No The project roads are anticipated to provide equal benefits for women and men.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS11

Issue Nature of Social Issue Significant/Limited/ Plan or Other Action No Impact/Not Known12 Required13 Involuntary Resettlement Construction of the two new Significant Full Plan bypass roads entails Short Plan substantive land acquisition. Resettlement Framework A resettlement plan will be No Action prepared in accordance with Uncertain relevant laws and government regulations in Georgia and ADB’s Involuntary Resettlement Policy and Operations Manual F2 on Involuntary Resettlement. Indigenous Peoples The PPTA will assess the Not known Plan impact of the project on Other Action16 indigenous peoples and Indigenous Peoples propose appropriate Framework mitigation measures for any No Action impact. Uncertain

Appendix 2 9

Labor Employment Opportunities The project will create jobs for No impact Plan Labor Retrenchment road construction, and will not Other Action Core Labor Standards have any adverse impact on No Action labor. Civil works contractors Uncertain will be required to meet core labor standards, in terms of conditions of employment, work safety, pay, and insurance according to national laws; and equal opportunities and payment for national and international laborers.

Affordability No tolls will be collected on the No impact Action project roads. The project will No Action lead to savings on vehicle Uncertain operating costs, which will reduce bus fares and freight charges. Other Risks and/or Vulnerabilities The risks of HIV/AIDS and Limited Plan HIV/AIDS human trafficking are Other Action Human Trafficking considered low but will be No Action Others (conflict, political assessed during PPTA Uncertain instability, etc.), please implementation. specify

IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the TOR for the PPTA (or other due diligence) include poverty, social and gender analysis and the relevant specialist/s? Yes No If no, please explain why.

2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender analysis, and C&P during the PPTA/due diligence? Yes No If no, please explain why.

10 Appendix 3

COST ESTIMATES AND FINANCING PLAN ($'000)

Item Cost A. Asian Development Bank Financinga 1. Consultants a. Remuneration and Per Diem i. International Consultants 374.0 ii. National Consultants 72.0 b. International and Local Travel 35.0 c. Reports and Communications 8.0 2. Equipmentb 10.0 3. Workshops 5.0 4. Surveys 30.0 5. Miscellaneous Administration and Support Costs 6.0 6. Representative for Contract Negotiations 10.0 7. Contingencies 50.0 Subtotal (A) 600.0

B. Government Financing (in kind) 1. Office Accommodationc 70.0 2. Remuneration and Per Diem of Counterpart Staff 50.0 3. Miscellaneous Support Services 30.0 Subtotal (B) 150.0 Total 750.0 a Financed by the Asian Development Bank technical assistance funding program. b Including computer hardware and software, photocopier, fax machine, and other office equipment to be procured under the consultant’s contract in accordance with the Asian Development Bank's Procurement Guidelines (2007, as amended from time to time). Ownership of office equipment will be transferred to the Government upon completion of the project preparatory technical assistance. c In Tbilisi. Source: Asian Development Bank estimates.

Appendix 4 11

OUTLINE TERMS OF REFERENCE FOR CONSULTANTS

1. Under the project preparatory technical assistance (PPTA), the consultants will undertake a feasibility study and prepare a preliminary design for the proposed Ajara Bypass Roads Development Project in a manner compatible with Asian Development Bank (ADB) financing requirements. The project will comprise two bypass roads in the Ajara Autonomous Republic: (i) the Batumi bypass road, and (ii) the Choloki–Makhinjauri road (or the Kobuleti bypass road). International consultants, with support from national consultants, will be engaged to undertake the tasks.

2. The consultants' tasks will include, but will not be limited to, the following:

A. Road Engineering

(i) Carry out topographic surveys, including (a) longitudinal sections and cross- sections, (b) subsurface investigation, (c) availability and quality of local construction materials, (d) location of quarries and borrow pits, (e) drainage facilities, (f) siting and configuration of interchanges and service areas, and (g) road safety features. Review geological and hydrological conditions.

(ii) Review the prefeasibility study prepared by the Design and Survey Institute of Georgia in 2006 and particularly its proposed alignment options. Explore the new alignment options. Based on the topographic surveys and review of the prefeasibility study, recommend (a) the most feasible alignment option(s), and (b) whether the project roads should be two or four lanes.

(iii) Prepare (a) horizontal and vertical alignments, (b) drainage and flood protection structures, and (c) pavement design. Identify locations of bridges, culverts, grade-crossing, and underpasses. Recommend appropriate soil treatment and slope protection measures.

(iv) Prepare bill of quantities, unit prices, overall project cost estimates, and cost estimates for (a) civil works for road construction (taking into account the actual costs of recently awarded contracts of a similar nature), (b) equipment and other facilities to be procured under the project, and (c) routine and periodic maintenance for the project roads during its economic life.

(v) Assess road safety issues in the project area, and propose mitigation measures for the project roads.

(vi) Prepare the contract packages for procurement under the project, and an indicative project implementation schedule.

(vii) Prepare the draft terms of reference for consultants for detailed design and construction supervision for the project.

B. Economic Analysis

(i) Review the status and plan for road development in Georgia and the project area. Identify the project’s impact on the country’s economic and social development, and regional cooperation.

12 Appendix 4

(ii) Conduct traffic counts and origin–destination surveys on the project roads, and collect information on the present pattern of freight and passengers by vehicle type and mode in the project area. Assess the capacity of current road conditions and the effects of capacity constraints on vehicle operating costs; travel time; accidents; and accessibility to markets, jobs, and social services. Forecast normal, generated, and diverted traffic for the project roads by vehicle type and by type of domestic, cross-border, and international transit traffic.

(iii) Undertake economic evaluation of the project in accordance with ADB’s Guidelines for Economic Analysis of Projects (1997). Quantify construction, operation, and maintenance costs; vehicle operating costs; travel time savings; accident savings; and other quantifiable project benefits. Use a standard conversion factor or a shadow exchange rate factor. Calculate the economic internal rate of return and net present value for the project. Undertake alternative analysis to assess whether the proposed project is the least-cost option.

(iv) Undertake sensitivity analysis by varying project benefits, costs, traffic, transit fees, implementation period, and a combination of these factors, and calculate switching values. Present the results of the sensitivity analysis graphically.

(v) Analyze risks in accordance with ADB’s Handbook for Integrating Risk Analysis in the Economic Analysis of Projects (2002). Recommend ways to reduce project risks.

C. Institutional and Financial Analysis

(i) Undertake an institutional and financial analysis of the Executing Agency, the Road Department of the Ministry of Economic Development. Assess its financial management capacity. In accordance with the Guidelines for the Financial Governance and Management of Investment Projects Financed by ADB (2002), review, and update if necessary, the earlier assessments by other multilateral institutions of financial management capabilities of the Road Department, using ADB’s financial management assessment questionnaire. The assessment should include (a) budgetary planning and control, (b) financial management, and (c) accounting and audit systems. Recommend ways to strengthen its financial management, if necessary, with a time-bound implementation plan.

(ii) Recommend a specific fund flow and/or disbursement mechanism, to be applied to the ensuing investment project. Assess the capacity of the executing and implementing agencies to manage the fund based on such a fund flow and/or disbursement mechanism.

(iii) Prepare an overall project cost estimate, including physical and price contingencies, taxes and duties, interest during construction, and other charges. Prepare a financing plan for the project, including proposed ADB lending, prospective cofinancing, and appropriate counterpart funds.

(iv) In coordination with the road engineers and transport economists, review the need to collect tolls or transit fees on project roads and, if needed, propose appropriate toll rates or transit fees by vehicle type, taking into account the costs

Appendix 4 13

of road maintenance and services. Propose a system for toll or transit fee collection.

(v) Assess the financial sustainability of the project by (a) projecting the incremental recurrent costs required to maintain the project roads, together with Georgia’s debt service obligation; and (b) comparing this with the Road Department’s budget.

D. Social and Poverty Analysis

(i) Undertake a social and poverty analysis for the project, including socioeconomic and poverty profiles for the project area. Survey households and villages to (a) assess social impacts and mitigation requirements, (b) develop a profile of transport services and costs available in the project area, and (c) assess ability of low-income groups to pay. Review the Government’s policy, strategy, and programs for poverty reduction, and analyze how the project will complement the Government’s development programs. Consult local governments to identify development initiatives that could complement the project, particularly those targeted at poor and ethnic minorities.

(ii) Assess how the project roads will improve people’s incomes and livelihoods. Estimate the project impacts on the poor, women, and ethnic minorities. Examine how the project will help develop small businesses in the area. Include these results in the economic benefits of the project.

(iii) Assess the resettlement impact of the project. Prepare a resettlement plan in accordance with ADB’s Involuntary Resettlement Policy (1995) and relevant policies of the Government.

(iv) Assess the possible impact of the project on ethnic indigenous peoples. If an impact is identified, prepare an ethnic minority development plan in accordance with ADB’s Policy on Indigenous Peoples (1998).

(v) Assess the potential degree of adverse social impacts caused by construction and operation of the project roads, including socially transmitted infections, and human and drug trafficking. Propose mitigation measures.

(vi) Help the Government establish consultation and participatory processes during project preparation that will continue throughout project design, construction, and operation. Hold consultations with various stakeholders in Georgia, including government officials, civil society, local communities, project beneficiaries, affected people, and external aid agencies. Incorporate their views and suggestions into the project design. Prepare a stakeholder consultation and participation plan.

(vii) Prepare a gender action plan including (a) assess key gender issues related to the project, (b) undertake due diligence on the project’s potential to promote gender equality by improving women’s access to benefits and services, and use of opportunities; and (c) propose actions that will strengthen gender equality.

14 Appendix 4

E. Environmental Assessment

(i) Undertake an environmental impact assessment (EIA) for the Project in accordance with ADB’s Environment Policy (2002) and Environmental Assessment Guidelines (2003). Finalize the EIA by incorporating comments from ADB. Prepare a summary EIA. Ensure that the EIA includes (a) description of the project; (b) description of the environment, including physical resources, ecological resources, economical development, and social and cultural resources; (c) assessment of project alternatives; (d) anticipated environmental impacts and mitigation measures; (e) economic assessment; (f) environmental management plan, including mitigation measures for identified environmental impacts; (g) environmental monitoring plan; and (h) public consultation and information disclosure.

(ii) Assess the environmental conditions in the project area through site investigations. Estimate the costs of the proposed environmental mitigation measures and of implementing the environmental monitoring plan. Appraise the cost against expected environmental benefits, where possible, in a quantifiable manner. Help the road engineers incorporate appropriate mitigating measures into the project design. Prepare terms of reference and a budget for independent environment monitoring and evaluation.

(iii) Help the Road Department consult the public (including government officials, civil society, local communities, project beneficiaries, people affected, and external aid agencies) in accordance with ADB’s Environment Policy and guidelines. Public consultation and disclosure for this project (category A) require public consultation on environmental issues during the early stages of EIA fieldwork; and when the draft EIA report is available and before loan appraisal by ADB.

F. Road Sector Analysis

(i) Undertake a road subsector analysis, covering (a) the role of road transport in economic and social development in Georgia as well as regional cooperation, (b) road infrastructure network, (c) vehicle fleet, (d) sector policy and institutional reform, (e) sector governance assessment, (f) road transport services, (g) the Government’s road transport development strategy, (h) capacity development of the Road Department, (i) vehicle weight control, (j) cross-border facilitation in Sarpi (near Turkey), and (k) external assistance to roads. Identify the key sector issues and challenges, and propose measures to address these challenges.

(ii) Review road revenues and expenditures in Georgia during the past 5 years and Government projections for the next 5 years. Analyze the expenses for road maintenance (against road construction and rehabilitation) during the past 5 years and financing plans for maintenance for the next 5 years. Identify constraints and recommend ways to improve road development and maintenance.

(iii) Hold consultations with various stakeholders in Georgia, including government officials, civil society, local communities, project beneficiaries, people affected, and external aid agencies. Take into account their views and suggestions during preparation of the analysis.

Appendix 4 15

3. Composition of the Consultant Team. The PPTA will require about 45.5 person- months of consultant inputs (17 international and 28.5 national). The international consultant’s team will comprise a (i) road engineer and team leader (5 person-months), (ii) transport economist (2.5 person-months), (iii) institutional/financial specialist (2.5 person-months), (iv) environment specialist (3 person-months), and (v) social development specialist (4 person- months). The national consultants will comprise two road engineers (5 person-months each), two transport economists (2.5 person-months each), an institutional and financial specialist (2.5 person-months), an environment specialist (3 person-months), and two social development specialists (4 person-months each).

4. The international road engineer will serve as team leader. He/she will work closely with the PPTA coordinator in the Road Department of the Ministry of Economic Development (the Executing Agency) and coordinate with all consultants to complete the consulting services in accordance with the terms of reference.

5. Stakeholder Workshops. The consultants will hold stakeholder workshops to review the draft final report. The participants to the workshops will include officials from relevant government agencies and representatives of local communities, civil society, road users, private sector, and external aid agencies. The consultants will incorporate the comments and suggestions of the workshop participants into the final report.

6. Reporting Requirements. The consultants will submit, in a format satisfactory to the Road Department and ADB, (i) an inception report within 4 weeks after services start; (ii) an interim report within 10 weeks after services start; and (iii) a draft final report within 16 weeks after services starts. They will submit a final report 4 weeks after receiving comments from the Government and ADB. The interim report needs to include the analysis of the alignment options proposed by the prefeasibility study, and the consultants’ recommended alignment. A tripartite meeting will be held 3 weeks after the submission of the English version of the interim report, and will decide on the project alignment.

7. Five copies of each report will be submitted to the Road Department in English and Georgian languages, and three copies to ADB in English. An electronic copy of the draft final report and the final report (in Microsoft Word and on compact disc) and the executive summary (in Microsoft Word and Microsoft PowerPoint) will be submitted to the Road Department in English and Georgian languages, and to ADB in English. The consultants are required to first submit the English version of each report to the Road Department and then submit the Georgian version to the Road Department within 10 days after submission of the English version.