Sector Assistance The Asian Development Bank’s Program Evaluation Support for the Transport Sector in Sri Lanka Independent Evaluation Sector Assistance Program Evaluation April 2012 The Asian Development Bank’s Support for the Transport Sector in Sri Lanka Reference Number: SAP: SRI 2012-06 Independent Evaluation: SE-26 NOTES (i) In this report, "$" refers to US dollars. (ii) For an explanation of rating descriptions used in evaluation reports of the Asian Development Bank, see ADB. 2010. Revised Guidelines for the Preparation of Country Assistance Program Evaluations. Manila. Director General V. Thomas, Independent Evaluation Department (IED) Director W. A.M. Kolkma, Independent Evaluation Division 1, IED Team leader T. Yokota, Senior Evaluation Specialist, IED Team members B. Palacios, Senior Evaluation Officer, IED E. Li-Mancenido, Associate Evaluation Analyst, IED B. Cafirma, Evaluation Assistant, IED The guidelines formally adopted by the Independent Evaluation Department on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of the management of Independent Evaluation Department, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the Independent Evaluation Department does not intend to make any judgments as to the legal or other status of any territory or area. Abbreviations AASL – Airport and Aviation Services Sri Lanka ADB – Asian Development Bank ADF – Asian Development Fund BOT – build-operate-transfer CAPE – country assistance program evaluation COS – country operational strategy CPDP – Colombo Port Development Project CPEEP – Colombo Port Efficiency and Expansion Project CPEP – Colombo Port Expansion Project CPS – country partnership strategy CRP – compliance review panel CSP – country strategy and program DBST – double bituminous surface treatment EIA – environmental impact assessment EIRR – economic internal rate of return ENCPRP – Eastern and North Central Provincial Road Project GDP – gross domestic product IED – Independent Evaluation Department IRI – international roughness index JBIC – Japan Bank for International Cooperation JCT – Jaya Container Terminal JICA – Japan International Cooperation Agency km – kilometer m – meter MOH – Ministry of Highways MPA – Ministry of Ports and Aviation MPDH – Ministry of Port Development and Highways NHSP – National Highways Sector Project NRCP – Northern Road Connectivity Project O&M – operation and maintenance PCR – project completion report PPER – project performance evaluation report PPP – public-private partnership PPTA – project preparatory technical assistance PRA – provincial road administration RDA – Road Development Authority RDD – Road Development Department RFP – request for proposal RMTF – road maintenance trust fund RPPF – road project preparatory facility RRP – report and recommendation of the President RSDP – Road Sector Development Project SAGT – South Asia Gateway Terminal SAPE – sector assistance program evaluation SLPA – Sri Lanka Ports Authority STDP – Southern Transport Development Project TA – technical assistance TEU – twenty-foot equivalent WSA – Wilbur Smith Associates Contents ACKNOWLEDGMENTS iii EXECUTIVE SUMMARY v I. INTRODUCTION 1 A. Background 1 B. Objectives and Scope 1 C. Evaluation Framework and Methodology 2 D. Findings of Earlier Evaluation 3 E. Organization of the Report 4 II. SECTOR CONTEXT 5 A. Sector Profile 5 B. Institutional Arrangements 6 C. Development Challenges 7 D. Government Strategy 8 III. ADB STRATEGY AND PROGRAM 11 A. Sector Strategy 11 B. Sector Program 12 C. Program Implementation 13 IV. EVALUATION OF ADB SUPPORT 17 A. Strategic Positioning 17 B. Relevance 18 C. Efficiency 20 D. Effectiveness 23 E. Sustainability 26 F. Impact 28 G. ADB Performance 29 H. Government Performance 31 I. Overall Assessment 32 V. CONCLUSIONS, LESSONS, AND RECOMMENDATIONS 33 A. Lessons for Future Support 33 B. Recommendations 34 APPENDIXES 1. ADB Loans and Technical Assistance for the Transport Sector 37 2. Evaluation Framework for the Transport Sector Assessment 39 3. Profile of the Transport Sector in the Democratic Socialist Republic of 42 Sri Lanka 4. Previous ADB Country Strategies 58 5. Southern Transport Development Project 64 6. Strategic Positioning in the Transport Sector 74 7. Selection Methodology 78 8. Implementation Performance 80 9. Sustainability of ADB-Assisted Projects 84 10. Projects for the Colombo Port 91 Acknowledgments This report was prepared by a team led by Toshiyuki Yokota, Senior Evaluation Specialist, from Independent Evaluation Department (IED). Team members included Barbara Palacios (former IED staff), Elizabeth Li-Mancenido, and Brian Cafirma. Alan Bevis, Amal S. Kumarage, and J.M.S.J. Bandara (consultants) contributed to the assessment of the case study projects in Sri Lanka, data analysis, and background research. Narendra Singru is the peer reviewer. The report also benefited from a consultation workshop held in Colombo, Sri Lanka with senior officials from different ministries and offices. The earlier versions of the draft reports were reviewed by all relevant department and offices of the Asian Development Bank. Executive Summary The Asian Development Bank’s (ADB) lending assistance to the transport sector in Sri Lanka started in 1970 with a loan to the port subsector, followed by a loan to the road subsector in 1980. As of December 2010, cumulative ADB lending to the transport sector in Sri Lanka amounted to at least $1.24 billion for 16 sovereign and 1 nonsovereign project and 17 advisory technical assistance (TA) operations. Although this includes four port subsector projects, ADB assistance has focused mainly on the road subsector. This sector assistance program evaluation (SAPE) was undertaken to (i) provide an independent assessment of ADB projects and TA in the sector approved during the 12-year period 1999–2010, in total 10 projects and 14 advisory TA operations for a total cost of $986.0 million; (ii) identify areas for improving the effectiveness of ADB interventions; and (iii) provide evaluation lessons and recommendations. Transport Sector Context Sri Lanka relies heavily on road transport. The current demand for passenger travel is around 80 billion passenger-kilometers (km) per year, of which road transport accounts for 93%. About 97% of freight traffic, measured in ton-km, is conveyed by road. The 113,000-km road network in the country includes about 11,900 km of national highways. The condition and the standards of these roads are inadequate to accommodate rapidly growing freight and passenger traffic. Sri Lanka has three deep seaports—Colombo, Trincomalee, and Galle—but only Colombo Port has gained commercial significance. After economic liberalization, a port expansion program, and the onset of containerization and transshipment cargo, port traffic grew at an average rate of 6.5% per year and reached the equivalent of 4 million containers of twenty-foot equivalent units in 2010. The Government of Sri Lanka has prioritized the improvement of the road network in the country. It has invested about $3.7 billion for the improvement and rehabilitation of national, provincial, and rural roads. Approximately 2,900 km of national roads were improved or rehabilitated during 2000–2010, and approximately 2,300 km of national roads were widened to multiple lane standards. Around 380 bridges were constructed or reconstructed. As a result of this large program, 60% of the national road network reached acceptable standards during the last 6 years. This was in spite of a legacy of civil strife in the country, which was a drain on the available public resources. Program Implementation Two ADB-supported investment projects and a TA loan project approved during the 1999–2010 evaluation period were completed, and five other investment projects and a TA loan project were still ongoing at the time of the evaluation missions (early 2011). Of the three completed projects, the Colombo Port Development Project (CPDP) was completed first (2006). ADB provided a private sector loan of $35.0 million and an equity investment of $7.4 million in the first privately operated container terminal in the port. Completed second (2009) was the Colombo Port Efficiency and Expansion Project (CPEEP), based on a TA loan of $10.0 million. Completed third was the Road vi The ADB’s Support for the Transport Sector in Sri Lanka Sector Development Project (RSDP), supported by a $56.5 million ADB loan and leading to improvement of 780 km of roads and construction of 74 bridges. Four road projects (supported by a total of $554.4 million in ADB loans) that were still ongoing at the time of the evaluation mission planned to complete 580 km of national highways and 510 km of provincial roads: (i) the Southern Transport Development Project (a public highway supported by a loan of $180.0 million), completed end- 2011 as toll road; (ii) the National Highways Sector Project (supported by a loan of $150.0 million), approved in 2005; (iii) the Eastern and North Central Provincial Road Project (supported by a loan of $70.0 million), approved in 2009; and (iv) the Northern Road Connectivity Project (supported by a loan of $154.4 million), approved in 2010. Lastly, one large port project, the Colombo Port Expansion Project (CPEP), supported by a nonsovereign loan of $300.0 million,