ASIAN DEVELOPMENT BANK PCR: BAN 22321

PROJECT COMPLETION REPORT

ON THE

ROAD OVERLAY AND IMPROVEMENT PROJECT

(Loan 1287-BAN[SF])

IN

BANGLADESH

July 2002

CURRENCY EQUIVALENTS (as of 31 October 1993)

Currency Unit – taka (Tk)

At Appraisal At Project Completion (June 1993) (August 2000)

Tk1.00 = $0.02509 $0.0185 $1.00 = Tk39.85 Tk54.00

Calculations in the report have been made using a rate of $1.00=Tk39.80, the rate prevailing during Project appraisal.

ABBREVIATIONS

AADT - annual average daily traffic ADB - Asian Development Bank BRTA - Road Transport Authority CPI - consumer price index EA - Executing Agency EIRR - economic internal rate of return GDP - gross domestic product HDM - Highway Design and Maintenance Standards Model IDC - Institutional Development Component IRI - International Roughness Index MOC - Ministry of Communications NPV - net present value NR - national road OECF - Overseas Economic Cooperation Fund (Japan) PAM - Project Administration Memorandum PCR - Project Completion Report PD - Project Director RHD - Roads and Highways Department RMP - road master plan RRMP - road rehabilitation and maintenance program RRTD - Roads and Road Transport Division SDR - special drawing rights TA - technical assistance UNDP - United Nations Development Programme VIC - vehicle inspection center VOC - vehicle operating cost VPD - vehicles per day

NOTES (i) The fiscal year (FY) of the Government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends. (ii) In this report, “$” refers to US dollars. CONTENTS Page

BASIC DATA ii

MAP(S) viii

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 4 D. Disbursements 5 E. Project Schedule 5 F. Implementation Arrangements 6 G. Conditions and Covenants 6 H. Environmental and Social Impacts 7 I. Consultants Recruitment and Procurement 7 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 9 L. Performance of ADB 10

III. EVALUATION OF PERFORAMNCE 10

A. Relevance 10 B. Efficacy in Achievement of Purpose 10 C. Efficiency in Achievements of Outputs and Purpose 11 D. Preliminary Assessment of Sustainability 11 E. Environmental, Socio-cultural and Other Impacts 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12

A. Overall Assessment 12 B. Lessons Learned 13 C. Recommendations 14

APPENDIXES

1. Scope of Project at Appraisal and Completion 16 2. Project Implementation Schedule 18 3. Compliance with Loan Covenants 20 4. Traffic Volumes and Road Surface Conditions on Selected Project Roads 23 5. Economic Reevaluation of the Project 25 6. Assessment of Overall Project Performance 29 ii

BASIC DATA

A. Loan Identification

1. Country Bangladesh 2. Loan Number 1287-BAN(SF) 3. Project Title Road Overlay and Improvement Project 4. Borrower Government of Bangladesh 5. Executing Agency Roads and Highways Department Bangladesh Road Transport Authority 6. Amount of Loan SDR47,903,000 ($68,000,000 equivalent) 7. PCR Number PCR:BAN 701

B. Loan Data

1. Appraisal – Date Started 9 June 1993 – Date Completed 24 June 1993

2. Loan Negotiations – Date Started 27 October 1993 – Date Completed 29 October 1993

3. Date of Board Approval 9 December 1993

4. Date of Loan Agreement 17 December 1993

5. Date of Loan Effectiveness – In Loan Agreement 10 March 1994 – Actual 16 March 1994 – Number of Extensions 0

6. Closing Date – In Loan Agreement 30 September 1998 – Actual 29 August 2000 – Number of Extensions 3

7. Terms of Loan – Interest Rate 1% per annum – Maturity 40 years – Grace Period 10 years

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8. Disbursements a. Dates

Initial Disbursement Final Disbursement Time Interval 13 February 1995 28 August 2000 66 months

Effective Date Original Closing Date Time Interval 16 March 1994 30 September 1998 54 months

b. Amount in $

Category Latest Net Original Revised Amount Amount Amount Undisbursed Allocation Allocation Cancelled Available Disbursed Balance

Civil Works 20,749,348 23,346,260 0 23,346,260 23,346,260 0 (Overlay and Sealcoat)

Civil Works 25,780,181 33,951,035 0 33,951,035 33,951,035 0 (Road Improvement)

Civil Works 1,649,500 1,518,448 0 1,518,448 1,518,448 0 (Vehicle Inspection Center)

Equipment 1,500,449 65,950 0 65,950 65,950 0 (Overlay and Seal Coat)

Equipment 999,353 1,191,315 0 1,191,315 1,191,315 0 (Vehicle Inspection Center)

Consulting Services 6,999,728 6,159,664 0 6,159,664 6,159,664 0 (Overlay and Sealcoat)

Consulting Services 489,740 291,793 0 291,793 291,793 0 (Vehicle Inspection Center)

Service Charges 1,599,816 1,559,618 0 1,559,618 1,559,618 0 During Construction

Unallocated 8,231,885 0 0 0 0 0

Total 68,000,000 68,084,083a 0 68,084,083 68,084,083 0

a An amount of $84,083 increased under the loan proceeds for currency fluctuation.

9. Local Costs Financed by ADB - Amount $7,936,786 - Percent of Local Costs 19.80 - Percent of Total Cost 7.33

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual Foreign Exchange Cost 56.50 60.15 Local Currency Cost 49.00 47.98 Total 105.50 108.13

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2. Financing Plan ($ million) Source Appraisal Estimate Actual Foreign Local Total Foreign Local Total

Borrower-Financed 0 37.50 37.50 0 40.05 40.05a

ADB-Financed 56.50 11.50 68.00 60.15 7.93 68.08 b

Total 56.50 49.00 105.50 60.15 47.98 108.13 ADB = Asian Development Bank.

a An amount of $2.63 million was incurred as cost overrun (2.49 percent of the total actual project cost) which was borne/shouldered by the Government of Bangladesh. Cost overrun includes an amount of Tk48,194,384.47 equivalent to approximately $1.0 million was incurred in civil works and the balance $1.63 million was incurred in taxes and duties and cost of land ($1.00 = Tk.42.15 to 48.00). b Of the total cost overrun, an amount of $0.08 million (about 3% of cost overrun) was met from the loan proceeds, i.e. appreciation of SDR against the dollar.

3. Cost Breakdown by Project Components ($ million) Component Appraisal Estimate Actual

I. Overlay and Sealcoat Component A. Base Coat 1. Civil Works (Overlay) 36.00 44.15 2. Civil Works (Sealcoat) 5.50 2.54 3. Equipment 1.50 0.07 4. Consulting Services 4.75 4.08 5. Incremental Cost of Government Establishment 0.75 0 Subtotal (1. A) 48.50 50.84

B. Contingencies 1. Physical 4.85 0 2. Price 3.65 0 Subtotal (I.B) 8.50 0 Subtotal (1.A + 1.B) 57.00 50.84

II. Road Improvement Component A. Base Coat 1. Civil Works 33.10 45.67a 2. Consulting Services 2.14 2.09 3. Incremental Cost of Government Establishment 4. Land Acquisition, Taxes and Duties 0.70 0.33 Subtotal (II.A) 35.94 48.09

B. Contingencies 1. Physical 3.59 0 2. Price 2.87 0 Subtotal (II.B) 6.46 0 Subtotal (II.A + II.B) 42.40 48.09

a Includes an amount of $1 million met from the Government, which could not be accommodated from loan proceeds.

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III. Road Transport Component A. Base Coat 1. Building Construction 2.30 2.17 2. Procurement and Installation of Equip. 1.00 1.19 3. Consulting Services and Training 0.46 0.29 4. Incremental Cost of Government Establishment 5. Land Acquisition, Taxes and Duties 0.10 3.99 Subtotal (III.A) 3.86 7.64

B. Contingencies 1. Physical 0.39 0 2. Price 0.26 0 Subtotal (III.B) 0.64 0 Subtotal (III.A + III.B) 4.50 7.64

IV. Service Charges During Construction 1.60 1.56 Total (I-IV) 105.50 108.13

4. Project Schedule a

Appraisal Estimate Actual Date of Contract with Consultants (i) Overlay and Sealcoat Component - Date of Contract 1-4-1994 27-11-1994 - Completion of Work 30-6-1997 31-7-1997

(ii) Road Improvement Component - Date of Contract 1- 4-1994 24-1-1996 - Completion of Work 31-3-1998 30-9-1999

(iii) Vehicle Inspection Centers Component - Date of Contract 31-4-1994 2-10-1995 - Completion of Work 30-6-1996 30-11-1998

Completion of Engineering Designs 31-1-1988 31-3-1993 Civil Works Contract

- Date of Award 30-4-94 to 23-11-94 to 31-5-95 21-5-95

- Completion of Work 30-6-96 to 30-6-2000 31-3-98 Equipment and Supplies Dates - First Procurement 30-9-1994 15-6-1998 - Last Procurement 31-12-1995 1-5-1998 - Completion of Equip. Installation 30-4-1996 31-3-1999

Start of Operations Completion of Tests and Commissioning 30-6-1996 15-11-2001

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Beginning of Start-Up 1-8-1996 24-11-2001 a The Project was substantially completed before the introduction of project performance review ratings. D. Data on Asian Development Bank Missions

No. of No. of Specialization Name of Mission Date Persons Person of Days Membersa

Fact-Finding Mission 22 Nov–7 Dec 1992 5 75 a, b, c, d, h Appraisal Mission 9–24 Jun 1993 7 112 a, d, e, g, h Inception Mission 27Apr–2 May 1994 1 6 a Special Review Mission 15–16 Oct 1994 1 1 h Review Mission 7–8 Feb 1995 1 2 a Review Mission 14–30 May 1995 1 16 h Review Mission 7–14 Oct 1995 2 16 a, d Midterm Review Mission 22 Apr–3 Jun 1996 2 12 a, h Review Mission 3–30 Apr 1997 1 7 a Review Mission 7 Jun–9 Jul 1997 1 3 a Review Mission 10 Mar–22 Jun 1998 1 10 a Review Mission 9 Mar–9 May 1999 2 22 a, h Review Mission 8–9 May 1999 3 3 a, h Project Completion Review b 2-5- Dec 2001 3 12 a, e, h a a-engineer, b-financial analyst, c-counsel, d-economist, e-procurement or consultant specialist, f-control officer, g-programs officer, h-other categories. b R. Cahoon, Senior Project Implementation Officer, Bangladesh Resident Mission; C. S. Chandrasekhar, Staff Consultant; Md. Liaquat Ali Khan, Project Analyst, Bangladesh Resident Mission.

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I. PROJECT DESCRIPTION

1. The objectives of the Road Overlay and Improvement Project1 are to (i) reduce transport costs through simple, cost-effective periodic maintenance techniques and priority road improvements; (ii) improve institutional capabilities to carry out such operations; and (iii) improve vehicle inspection capabilities and thereby contribute to enhanced vehicle operational safety and reduction in hazardous vehicle emissions.

The Project, as designed at appraisal, comprised four components:

(i) Component A: Overlay and Sealcoat

• Mechanical asphalt overlays on about 350 kilometers (Km) • Sealcoat treatment of about 500 km • Rehabilitating (including widening) of about 100 km • Procuring supplementary road maintenance equipment for use in executing the sealcoat works

(ii) Component B: Road Improvement

• Improving to two-lane standards about 70 km of road between Lohagara and Ramu on National Road 1 (NR1), including reconstruction of bridges

(iii) Component C: Vehicle Inspection Centers

• Establishing five vehicle inspection centers (VICs),2 - two at and one each at , Rajshahi, and Khulna

(iv) Component D: Consulting Services

• Assisting the Executing Agency (EA) in managing the construction of the overlay and sealcoat program • Supervising construction of improvements to the Lohagara-Ramu road section • Managing the establishment of the VICs and providing training in the operation and maintenance of the centers

2. The total project cost was estimated at $105.5 million, of which $56.5 million was the foreign exchange cost and $49.0 million the local currency cost. The Project was appraised in June 1993, and the loan was approved by the Asian Development Bank (ADB) in December 1993. The loan became effective on 16 March 1994. The loan closing date was originally 30 September 1998, but the actual loan account closing was on 29 August 2000 after three extensions.

3. The project facilities were all completed and operational at the time of the Project Completion Review (PCR) Mission, although the VICs are not being fully utilized.

1 Asian Development Bank (ADB) 1992. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Bangladesh for the Road Overlay and Improvement Project, Manila. 2 The work includes construction of an office building and all ancillary works associated with the supply, installation, and commissioning of equipment necessary for modernized inspection centers. 2

4. The EAs for the project components were the Roads and Highways Department (RHD) for components A and B and the Bangladesh Road Transport Authority (BRTA) for component C. Both agencies are under the Roads and Railways Division of the Ministry of Communications.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The Project as designed and implemented is in keeping with the recommendations of the Government’s road master plan (RMP)3 and ADB’s country strategy. Since finalization in 1994, the RMP has been used as the general basis for selecting road sector support by external financing agencies. The consensus among donors is that the overall road network in Bangladesh is adequate in extent, but many stretches are in generally poor condition, and in some sections pavement widths are too narrow to accommodate present and forecast traffic. The design of the Project therefore addresses these deficiencies through prioritizing road sections for pavement strengthening and capacity enhancement.

6. The RMP envisages a periodic road maintenance program of overlays and resealing as a more efficient and cost-effective strategy than large-scale rehabilitation and reconstruction. This represents a major shift in the investment priorities from costly road reconstruction and rehabilitation to regular maintenance of existing assets. ADB, along with other funding agencies, has endorsed this approach of early and intensive periodic preventive maintenance, which, while preserving the existing road pavement and improving the riding quality and reducing vehicle operating costs (VOC)s, will also help defer the need for costly reconstruction in the near future. Those elements of the RMP that were concerned with periodic road maintenance have largely been superseded by the Government’s annual road maintenance plan.

7. ADB’s operational strategy for Bangladesh focuses on poverty reduction as well as regionally balanced growth acceleration. Inclusion of regional and feeder road links in addition to national roads was intended to facilitate year-round accessibility to markets and growth centers for the rural agricultural communities in the project-impacted regions. This approach is consistent with the Government’s strategy of ensuring an adequate supply of basic needs, and appears to have been quite successful.

8. ADB has previously4 provided assistance for upgrading the Dhaka-Chittagong section of NR1, which is the country’s principal transport artery. The Lohagara-Ramu stretch of the Chittagong-Cox’s Bazar section of NR1 is also heavily trafficked as it passes through major industrial and agricultural areas. Its improvement, including revised alignment and pavement widening to national road standards, was also a priority in the Government’s efforts to integrate the southeast corner of the country to the economic mainstream, including provision of easier access to Cox’s Bazar, a major tourist destination in the country.

9. In emphasizing repair and maintenance as the optimal strategy compared with capital- intensive reconstruction of deteriorated road infrastructure, the design of the Project is

3 ADB. 1988. Technical Assistance to Bangladesh for Preparation of a Road Master Plan; and ADB. 1994. Technical Assistance to Bangladesh for Preparation of a Road Master Plan (Supplementary). Manila.

4 ADB. 1987. Report and Recommendation of the president to the Board of Directors on a Proposed Loan to Bangladesh for the Road Improvement Project. Manila. 3

considered relevant and appropriate for the Bangladesh cash-strapped economy. Furthermore, the project design is technically straightforward and construction does not demand a high degree of specialized skills.

10. Vehicle population in Bangladesh has been growing rapidly in the past decade with many urban centers, particularly Dhaka and Chittagong, experiencing phenomenal increases in air pollution due in large part to vehicle emissions. The problem is compounded by an aging vehicle fleet, substandard vehicle maintenance, and lack of proper vehicle inspection facilities. The provision of modern VICs in the main urban centers (component C) should significantly improve the capacity of regulatory institutions to keep polluting and mechanically deficient vehicles off the roads. The provision of such facilities was recommended under TA No. 896- BAN: Institutional Support for Road and Road Transport Development,5 when a semiautomatic system was envisaged. Problems arose however, following the installation of fully automatic testing lanes, and the realization that the Project had underestimated the training and costs associated with the efficient operation of such centers.

B. Project Outputs

11. Project output after completion substantially conformed to the project design at appraisal, with only minor differences (see Appendix 1) caused by the changed road conditions between the time of appraisal and actual execution of works. As appraised, the Project envisaged mechanized asphaltic overlays on 350 km and sealcoat treatment on about 500 km, and improvement of about 67.6 km of road including widening the roadway to two lanes. At completion, the overlay component had been increased to 516.9 km and the sealcoat component had been reduced to 224.6 km (see Maps 1 and 2). Thus, the total length of roads covered under component A was 741.5 km as against the 850 km envisaged at appraisal. The change in scope was necessitated by the new Jamuna Bridge Access Roads Project6 under which some of the road sections envisaged at appraisal became redundant, and by adjustments made between projects funded by ADB and other donors. The changes were accommodated without any major cost overruns, nor were there any adverse impacts on the expected benefits from the project. The Government undertook to provide funds to cover the cost overrun.

12. Delays were experienced in the procurement of resealing equipment due to uncertainties in the specifications and suitability of the units on offer. Apparently, RHD opted to procure spare parts for the repair of existing units, which subsequently led to the cancellation of all six mini- asphalt plants on offer. The resulting loan savings were used to improve other immediate priority road sections. The road improvement works under component B were completed as appraised (see Map 3).

13. In addition, the Project provided for establishment of five VICs and related training of operators. Under the VIC component some additional equipment was procured through a variation order. The additional equipment included five diesel electric generators and five computer printers. All five VICs have been housed in appropriately designed buildings, and state-of-the-art equipment and diagnostic software has been installed and successfully tested. However, the equipment cannot become fully operational until proof testing of installed software and calibration of the equipment to local conditions have been accomplished. The training

5 ADB. 1987. Technical Assistance to Bangladesh for Institutional Support for Road and Road Transport Development. Manila. 6 ADB. 1996. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Bangladesh for the Jamuna Bridge Access Roads Project. Manila. 4

provided to BRTA personnel included a 1-week familiarization visit of eight BRTA senior officials to a similar facility in Singapore, and 2 weeks of on-the-job training for 20 motor vehicle inspectors after the equipment was installed. That proved insufficient given the sophistication of the equipment and advanced computerized software installed (para. 20).

C. Project Costs

14. The total project cost at appraisal was $105.5 million including contingencies and service charges during construction. The actual cost of the completed Project was $108.13 million, following minor revisions to the scope of civil works and some additional equipment procured for the VICs. A summary of project costs as appraised and actual is shown in Table 1. The slight overrun of about $2.63 million in the project cost was not significant (about 2.5%) and was financed entirely by the Government from its own funds.

Table 1: Summary of Project Costs as Appraised and Actual ($ million)

Component Appraisal Actual Base Cost A. Overlay and Sealcoat 48.50 50.84 B. Road Improvement 35.94 48.09 C. Vehicle Inspection Centers 3.86 7.64 Contingencies A. Physical 8.82 0 B. Financial 6.78 0 Subtotal 103.90 0 Service Charges 1.60 1.56 Total 105.50 108.13 Sources: Report and Recommendation of the President (RRP); Roads and Highways Department (RHD).

15. Actual ADB financing of the project costs at completion amounted to $68.08 million (the equivalent of SDR47.9 million), similar to appraisal. The small difference ($0.08 million) being the result of exchange rate fluctuations involved in the disbursements. A summary of project financing as appraised and actual is shown in Table 2.

Table 2: Summary of Project Financing as Appraised and Actual ($ million)

Appraisal Actual Financing Foreign Local Total Foreign Local Total Borrower-Financed 0.00 37.50 37.50 0.00 40.05 40.05 ADB-Financed 56.50 11.50 68.00 60.15 7.93 68.08 Total 56.50 49.00 105.50 60.15 47.98 108.13 Sources: RRP and RHD

16. The main reason for the overrun in foreign currency costs was the higher than estimated cost escalation in civil works.7 The amount of $6.78 million or 7.7% of the base cost provided for under price contingency in the appraisal estimate was not realistic, considering the high rate

7 In four of the five overlay/sealcoat contracts and two of the three road improvement contracts, international contractors were involved who made claims for cost escalation based on price indices of 35% for expatriate labor and 42% for plant construction. Eventually, the agreed upon price escalation was much smaller at 9%. 5

of inflation in Bangladesh (around 9% in FY1995 and 7% in FY1996 during project implementation) and the delay in project implementation itself.

D. Disbursements

17. Total disbursements under the loan amounted to $68.08 million, 100% of the approved loan amount. Of this, the foreign and local currency amounts disbursed were $60.15 million (88%) and $7.93 million (12%), respectively. The proportion of foreign and local currency disbursements was unchanged from the provision under the Loan Agreement. The service charges during construction also remained unchanged from the loan provision. Due to the changes in the scope of the project works encountered during execution (see para. 11), the loan proceeds were required to be reallocated twice during implementation.

18. The initial and final disbursements under the loan were made in February 1995 and August 2000, respectively. This was equivalent to a period of 5 years and 6 months as against a disbursement period of 4 years envisaged under the Loan Agreement. A disbursement schedule was not made at appraisal. The original loan closing date of 30 September 1998 was extended three times until 31 March 2000, and the loan account was kept open until 29 August 2000 when the final payment was made. The submission of withdrawal applications by the EA and the Government was generally prompt and up to date except on a few occasions. The Borrower, opting for reimbursement procedures only, did not take advantage of the provision for establishment of an Imprest account.

E. Project Schedule

19. A delay of about 24 months in project completion occurred despite taking advanced action on procurement of civil works and recruitment of consultants. The RHD’s failure to procure mini-asphalt plants for use by the resealing contractors caused delays to this work. Significant delay in the execution of the road improvement component (Lohagara-Ramu section of NR1) was caused by contractual difficulties between international and domestic contractors in the joint-venture awarded contracts 5 and 6. Problems arose following awarding of the contracts in November 1994 when the international contractor withdrew leaving his domestic partner with serious resource constraints.

20. Additional delays to project completion relate to the testing and commissioning of the VICs. In this case, the problems were both technical and contractual. Initially, the recruitment of consultants for this component was delayed by over 20 months. At the same time, the procured equipment could not be delivered because the buildings to house the equipment were not ready, and the supplier had to make temporary storage arrangements. There was also an instance of the building at one center being flooded and the equipment being damaged. All these added to the delays and contractual disputes with the equipment supplier. Later, the diagnostic (testing) equipment and software procured for the VICs proved overly sophisticated, requiring higher levels of technical competence than envisaged at project appraisal. There were also some problems associated with debugging of the software. Consequently, despite the scheduled training provided by the equipment supplier, additional inputs are required to render the centers fully operational.

21. In addition, the usual power outages, floods and storms, and general strikes, which are endemic to Bangladesh, also contributed their share to the delays in project implementation.

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22. Implementation schedules as envisaged at appraisal and as realized are shown in Appendix 2.

F. Implementation Arrangements

23. RHD has executed several ADB-financed road projects and is quite familiar with ADB's procedures. The day-to-day project administration of the road components was handled through the Project Management Office in Dhaka and a Field Project Office in Chittagong established under a previous ADB-financed project. The day-to-day project administration of the VIC component was handled through the Office of the Director (Engineering) of BRTA. Consulting services were procured to assist RHD and BRTA in construction supervision and project management. The Midterm Review Mission noted that under most contracts insufficient numbers of RHD staff were assigned for construction supervision. This may have affected the quality control on the job and overstretched the consultant’s resources on site, although there is no clear evidence of this. The most likely impact would have been the lost opportunity for RHD staff to acquire meaningful on-the-job training.

24. Although adequate proactive measures such as advance action on procurement had been initiated before loan approval, and a significant number of preconstruction activities had been set in motion, there were still delays in the awarding of contracts. These were mainly caused by the lengthy and hierarchical procedures inherent in the public sector, and were particularly damaging to components B and C, which experienced delays of 27 months and 33 months, respectively.

25. A deficiency in project control mechanisms and unclear lines of communication are also reported as contributing to the indifferent implementation progress. The implementation arrangements were intended to be similar to those of previous ADB-financed road projects, despite their equally unimpressive record. It would appear that none of the loan review missions thought this problem worthy of special attention.

G. Conditions and Covenants

26. The status of compliance of major loan covenants is shown in Appendix 3. The last submission of audited project accounts and financial statements was received by ADB on 3 April 2002. This covered the period 1 July 2000 to 30 June 2001, and incorporated observations yet to be resolved. Although compliance with submission dates has always been met, the normal practice is to resolve the auditor’s queries in the fullness of time. Another opinion highlighted by the auditor was the failure to maintain a separate project cash book and fund allotment register as per standard accounting practices. This deficiency and the auditor’s other opinions are being addressed by the Project Director and concerned RHD staff for earliest resolution. The covenant concerning making available adequate budgets for annual road maintenance is not fully complied with as, in the opinion of ADB, the allocated amounts are inadequate. This state of affairs, however, is expected to improve with the widespread adoption of the Highway Design and Maintenance Standards Model, enabling RHD to prioritize road maintenance functions and to program interventions to obtain optimum benefits from available resources. Despite the current situation, and in response to a recent call from ADB,8 the Government is reviewing various mechanisms for local funding of road maintenance, including establishment of an independently managed road fund.

8 ADB. 2002. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Bangladesh for the Road Maintenance and Improvement Project: Loan Agreement, Schedule 6. Manila. 7

27. The covenant concerning revision of existing legislation related to vehicle inspection proved unnecessary as the existing legislation (under the motor vehicle ordinance) was reviewed by the VIC consultants and declared adequate. Vehicle emission standards, which are a part of the existing legislation, are currently under revision by the Ministry of the Environment, and the motor vehicle ordinance is to be replaced by a road transport and traffic act. Until the VICs are fully operational, the periodic testing of vehicles continues using current standards. Compliance of a covenant relating to the adoption of administration and accounts manuals prepared under an earlier ADB-financed TA (footnote 5, para. 10) has only recently been enforced. In view of the lengthy delay in meeting this obligation, compliance with this covenant is considered only partial. The effects of the non- and partial compliance of loan covenants is not seen as serious, but ADB should closely monitor progress toward achieving a secure fund for road maintenance, and the timely resolution of auditor’s queries on audited project accounts and financial statements. Similarly, the issuance of and enforcement in the use of administration and accounts manuals by relevant RHD staff is also needed. The latter is expected to address the auditor’s concern on the need for project-specific cashbooks for recording small expenditures and disbursement amounts.

H. Environmental and Social Impacts

28. There were no adverse environmental or social impacts from the completed Project. The road improvements carried out under the Project were essentially on existing road alignments with occasional minor deviations; new land acquisition for right-of-way was minimal. The land acquired for the new VICs was a combination of privately owned and Government owned and in commercial areas of the cities concerned. As the completed Project significantly improved riding conditions, the pollution from vehicles is likely to be less as they can now move at engine- efficient speeds. The installation of modern VICs and mandating of periodic vehicle testing is expected to further reduce vehicle emissions and accidents related to mechanically unsound vehicles. There is evidence, however, that the improved pavement surface has resulted in increased speeds on project roads, which could partly explain the increased incidence of traffic accidents on these roads. A contributing factor is drivers behavior, particularly their disregard for traffic rules and regulations.

I. Consultant Recruitment and Procurement

29. A team of international consultants, each in association with a domestic consultant, was engaged for each of the project components A, B, and C. The EAs carried out the short-listing and evaluation of consultants’ proposals following ADB Guidelines on the Use of Consultants. ADB had approved advanced recruitment action, and the consultant’s contracts were signed in November 1994 for the overlay and sealcoat component (component A), in January 1996 for the road improvement component (component B), and in October 1995 for the VIC component (component C). Both the foreign and local currency expenditures related to the consulting services were financed by ADB. There were no major issues during consultant contract negotiations or later. While there were no claims or complaints from any of the consultants, some minor adjustments had to be made to accommodate the extended period of implementation of components B and C. However, the amounts included under consulting services (loan categories 02C and 03C) in the Loan Agreement were not fully expended and the resulting savings were reallocated to other categories.

30. Procurement of civil works contracts was through both international competitive bidding and local competitive bidding procedures. Five overlay contracts, three road improvement 8

contracts, and one VIC equipment supply and installation contract were procured through international competitive bidding procedures. Six sealcoat contracts and five contracts for construction of buildings to house the VICs were procured through local competitive bidding procedures. In each instance the EA followed the Guidelines for Procurement Under Asian Development Bank Loans. There were no disputes or complaints related to the procurement process from the bidders.

J. Performance of Consultants Contractors, and Suppliers

31. The performance of all three teams of consultants was generally satisfactory despite implementation constraints, particularly in the VIC component. Each consultant team deployed a competent team leader and a group of qualified professionals who were able to address and resolve both the technical and project administration problems on the site in a timely manner. They provided the EAs with adequate assistance on technical and contractual aspects. The consultants on the overlay and sealcoat component ably assisted RHD in the revision of the Project Proforma following the changes in project scope, and in the resolution of contractor claims resulting from delays due to general strikes and public disorder campaigns in 1995/96. There were no claims or disputes in the consultancy contracts.

32. The performance of the civil works contractors was mixed. The international contractors on the overlay component performed satisfactorily. However, one international contractor on the road improvement component withdrew from a joint-venture agreement with a domestic contractor leaving the latter with severe resource constraints. Following extensive discussions between RHD, ADB, and consultant and contractor representatives, it was decided to complete the contract with the domestic contractor only. While the Project invariably suffered delays, the works were completed satisfactorily and the exercise helped to strengthen the claim by domestic contractors to be allowed to compete for major works in their own right. The performance of the domestic contractors on the overlay and sealcoat works was generally satisfactory, but their quality of work was not uniformly consistent. On some sections there was evidence of bleeding of bitumen and improper patching of potholes. A few sections of overlay works also needed subsequent repairs. The risk of inconsistencies is always present when dealing with different contractors on the same road corridor, but these can be mitigated by awarding larger, hence fewer, contract packages. All visible defects were repaired by the contractors at their own cost during the 1-year defects liability period.

33. The international contractor for the supply, installation, and commissioning of equipment for the VICs encountered repeated problems in making the diagnostic software operational. This was largely attributed to the sensitivity of the equipment and the unfavorable conditions during installation. There were many glitches in carrying out test runs of the software and the contractor was often indifferent to BRTA's concerns. Despite these setbacks, equipment installation was completed in all five stations and the test lanes are now being operated to provide feedback for operational improvements.

K. Performance of the Borrower and the Executing Agencies

34. Despite the delays in project implementation, the Borrower played a key role in ensuring the timely release of counterpart funds, and in the effective resolution of contractual disputes involving the joint-venture partnership (para. 32), and VIC equipment supplier (para. 33). The Borrower should also be commended for the prompt provision of additional funds to meet the cost overrun on the Project. Additionally, there were no undue delays in approving payments to 9

the consultants and contractors. As a result, there were no disputes nor claims by either during execution of the Project.

35. The Borrower promptly established a Project Management Office within RHD in Dhaka and a Field Project Office in Chittagong to oversee the implementation of the road components of the Project, and strengthened the office of the Director (Engineering), BRTA, to oversee the implementation of VICs. Implementation of VICs, however, was delayed due to the late recruitment of consultants and prolonged period of equipment installation and commissioning.

36. The Project did not include specific institutional or policy reforms. Rather, it relied on increasing institutional capabilities through the application of improved pavement treatment works and the attempted introduction of modern vehicle inspection processes. While both RHD and BRTA have appropriate organizational structures, they function essentially as divisions of the government bureaucracy. For the levels of responsibility entrusted to these agencies, a more progressive organization with the ability to recruit and retain highly qualified and motivated professionals with engineering and management skills is essential. Such reforms will be possible only when these organizations are commercialized with powers to collect road user charges. Currently ADB is collaborating with the ongoing Institutional Development Component (IDC) program, phase III9 that is studying some of these aspects.

37. One of the specific assurances given by the Borrower during loan processing was that it would provide adequate funds for road maintenance consistent with the RMP. The budgetary provisions made by the Government for road maintenance in recent years show an annual increase of 10% in real terms but this does not seem adequate. The annual maintenance budget for RHD in recent years has been around Tk2,200 million against an estimated requirement of Tk5,000 million to maintain the Bangladesh road assets in good condition.

38. A further covenant required the Government to revise existing legislation related to vehicle inspection. Although the consensus during project implementation was that the existing legislation was adequate, this matter should be further reviewed by BRTA in the context of the vehicle standards that are presently being drafted under the World Bank-assisted Dhaka Urban Transport Project. The equipment in the VICs will need to be calibrated according to these standards.

39. The performance of RHD was tempered by the delays resulting from the failed procurement of the mini-asphalt plants and the reduced numbers of site supervision personnel available for deployment. While the former was a major cause of slippage in the implementation schedule, the latter failed to take advantage of the opportunity for practical on-the-job-training conducted by the international consultant. It was also noted that RHD was overdependent on the consultant for project administration and quality control. Routine project control and procedures may have been more systematic had a project administration memorandum (PAM) been designed for the Project. Moreover, there is no evidence of project benefit monitoring surveys having been conducted, nor was an EA project completion review conducted. Despite these shortfalls, and considering resource constraints of the EAs, the performance of the Borrower and both EAs can be considered as satisfactory.

9 Institutional Development Component, Phase III, approved in 1999 with grant assistance of £4.34 million from the Department for International Development, United Kingdom. 10

L. Performance of ADB

40. The performance of ADB is considered satisfactory in the timely approval of contract awards and disbursements, and in monitoring overall progress of the Project. The Project was administered initially from headquarters but transferred to the Bangladesh Resident Mission in October 1995. The decision to transfer the Project to the Bangladesh Resident Mission appears to have improved the level of project implementation and effective monitoring. ADB fielded 12 regular review missions, and a midterm review was carried out in mid-July 1996. It appears, however, that none of the missions raised the issue of benefit monitoring and evaluation with the EAs or the Government, and as a result nothing has been recorded in this regard. To address this oversight, RHD should conduct a sample survey on selected project roads using key indicators and assumptions established at appraisal. The results would then be fed into their existing management information system to give an indication of project performance in the interim.

III. EVALUATION OF PERFORMANCE

A. Relevance

41. The vehicle population in Bangladesh has grown phenomenally over the past decade at a compounded annual growth rate of almost 8%. The intensive use of the road network causes excessive wear and tear resulting in poor riding quality, low vehicle speeds, high VOCs, and reduced road safety,10 all of which have adverse impact on the economy. At appraisal, the annual average daily traffic (AADT)11 on the major road links included in the Project ranged from 150 to more than 6,000 vehicles per day. At present, the same road links are experiencing traffic volumes more than double the appraisal figures. Sample traffic data for selected project roads are given in Appendix 4. Investments made under the Project ensured that the road sections in question were brought to a fully serviceable condition while preserving the original investment (in their construction) for another 5–10 years. When the Government first presented the RMP to donors in August 1992, it was seen as an appropriate vehicle for identifying and planning investments in the roads sector. It was also seen as a suitable tool to promote the Government’s strategy of improving critical road links to enhance quality of service, provide increased personal mobility, and facilitate economic growth. In meeting these challenges, the Project also addresses (i) capacity building within RHD through enhanced skills in contract award and administration; (ii) promotion of private sector development (i.e. small- and medium contractors); and (iii) road safety.

B. Efficacy in Achievement of Purpose

42. The improvements carried out on the project road sections have vastly enhanced the riding quality, and have helped in reducing the travel time between many important centers on the network covered by these roads. The inclusion of feeder roads in the Project has improved year-round market accessibility for the rural communities served by them. The Project has helped the Government to focus on low-cost alternatives to reconstruction of deteriorated roads and establish road maintenance as a priority policy. Institutional capabilities were also enhanced in pavement testing, design of surface treatment options, and in project management. Some of

10 While this is true in situations where the roads are maintained in a fairly good condition, traffic accidents will decrease as the road surface deteriorates and traffic slows down significantly. 11 AADT is also expressed as vehicles per day. AADT represents an estimated figure based on analysis of the traffic data. 11

the project road sections link rural areas in the more remote parts of the country. In particular, the road linking Chittagong with Cox’s Bazar has greatly improved market access for agricultural produce from this region, including border areas with Myanmar. The Project has also served to highlight the inadequacies in vehicle inspection in Bangladesh, and has created infrastructure capable of meeting the highest standards in this domain. Moreover, the related skills development in RHD is expected to serve the Government well in the future. In the case of BRTA, however, further assistance is urgently needed if vehicle inspection and testing are to be successfully institutionalized in Bangladesh.

C. Efficiency in Achievement of Outputs and Purpose

43. The efficiency of the investment is highly visible as evidenced by the very high traffic growth rates of 10–12% on the project roads over the past 3 years while the Bangladesh GDP grew at an average annual rate of over 5% during the same period. There is some evidence to indicate that the savings in VOCs and travel times are also being passed on to the consumer by way of improved quality of service (air-conditioned buses in place of rickety old vehicles, quicker and assured delivery of goods, etc.) without corresponding increases in fares or freight charges.

44. The economic performance, as measured by the economic internal rate of return (EIRR), was assessed for project components A and B for which sufficient relevant data were obtained. The general assumptions in carrying out the economic analysis were the same as those at appraisal, i.e. on the basis of the streams of project costs and benefits. As the traffic volumes on the roads under consideration are already up to five times those at appraisal, the reestimated EIRR values for the investments under component A were generally higher (between 28 and 85) than at appraisal (42 to 46). The corresponding values for component B were significantly higher at 42 and 22, respectively. A summary of the economic reevaluation of components A and B is shown in Appendix 5.

45. The VIC component (component C) is intended to improve the quality of vehicle inspection through improved regulatory capabilities and thus indirectly help in reducing air pollution and improve road safety. Until the facilities become fully operational, however, the investment for this component cannot be considered efficient.

D. Preliminary Assessment of Sustainability

46. Project sustainability is predicated on the ability to preserve the assets in good condition and ensure responsible road use. It was evident that the enormous growth in traffic on several road sections improved under the Project has also meant that the road surface is being subjected to far greater stresses than intended earlier. This situation is particularly aggravated by the rampant overloading of trucks that is prevalent in Bangladesh.12 Equally disturbing is the fact that average speeds on these roads have also significantly increased as a result of the better road surface, which in turn causes an increase in accidents. Traffic accident data on Bangladesh roads are sketchy at best, but records for the past 3 years show that the incidents of serious accidents increased by around 10% per annum while the vehicle population increased by only a little more than 8%. The inability to discipline road users may jeopardize project sustainability.

12 BRTA conducted impromptu axle load checks at a location on NR1 in the presence of the Mission using weigh pads procured under Loan No. 1478-BAN (SF) (footnote 6). Of six trucks checked, two were overloaded by more than 50%. 12

47. Responsible use of road assets also means that the vehicles should be maintained in good working condition in the interests of road safety and a clean environment. Project investments in VICs are intended to ensure that vehicles are checked properly and periodically. This assumes that adequate budgets and trained personnel, besides proper enforcement mechanisms, are available for sustaining project benefits. The VICs provided under the Project are state-of-the-art facilities, hence there is an urgent need for additional training for BRTA personnel to ensure effective use. BRTA plans to privatize the VIC operations at the earliest opportunity, but this may require further assistance. In addition, the Government also needs to demonstrate ensured continuing donor assistance. However, the Government must demonstrate it’s commitment to operationalizing the VICs with adequate provision of the required staff and operational budget.

48. Sustainability of the physical assets created under the Project is reasonably assured, subject to continued quality maintenance. Adequate budgets for road maintenance and for the operation of VICs should therefore be closely pursued. The Government’s resources, however, are likely to be strained in maintaining the road network if there is no conscious policy to balance costs with user charges, which at present seem to be woefully inadequate. The sustainability of the VICs operational capacity is also uncertain inasmuch as existing staff are inadequately trained and poorly motivated. It is important, therefore, that the Government act quickly to first demonstrate the capabilities of the VICs, and second to solicit private sector participation in their future operation.

E. Environmental, Sociocultural, and Other Impacts

49. There are no adverse environmental or sociocultural impacts from the Project. The project roads have generally improved the quality of life in the communities they serve by providing better and more reliable access to markets, hospitals, and schools. At the same time, the increased traffic volumes have brought congestion, higher incidence of traffic accidents, and, in some urban areas, encroachment on the right-of-way as a result of unchecked ribbon development.13 This is a serious matter for local governments to address, otherwise the situation will become intractable.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

50. Overall project completion was delayed by some 2 years despite efforts by ADB and the EAs to contain the delays, and the fact that a lot of precontract award work had been carried out through advanced procurement and recruitment actions. The causes of delay were often beyond the control of the EAs such as failure of the joint-venture agreement between international and domestic contractors engaged under contracts 4 and 5 of component B. The Project was relevant in the context of optimizing investments and keeping the technical aspects simple. Timely actions were initiated to revise the scope of works when necessary. Considering the piecemeal nature of the works (component A) a sector loan approach may have worked better. It is doubtful, however, that RHD had the institutional capacity to implement a sector development plan. In the past decade, the Institutional Development Component program

13 In one instance the Mission observed that the EA, with the help of the consultant, had implemented an innovative solution to the problem of preventing local traffic and market activities from causing serious traffic congestion (Chittagong-Cox’s Bazar Road). 13

(footnote 9, para. 36) has been addressing many of the deficiencies in RHD. And the pending release of the Government’s land transport policy, including road sector development strategy, means that such an approach can be given more serious consideration in the future. Similarly, the Government appears committed to tightening the regulations surrounding vehicle registration and road worthiness, hence the new VIC facilities will help to strengthen BRTA’s capacity in this regard. Despite earlier limitations, the Project can be rated as successful in relevance of design and implementation. Apart from the VIC test lanes, all of the project facilities are in use including VIC offices, which are used for the issuance of driver and vehicle licenses, permits, vehicle registration certificates, etc. Project administration capacity and benefit monitoring mechanisms within the EAs require further strengthening. There is an urgent need for follow-up action to ensure that these capabilities are institutionalized for the benefit of future projects. A Proforma Project Performance Assessment14 is included in Appendix 6.

B. Lessons Learned

51. An important lesson to be learned is that projects involving multiple contracts packages in diverse locations need additional resources for implementation. A PAM and project supervision procedures should be designed and implemented to address both the technical and administrative needs, as well as the reporting requirements of ADB and the higher authorities in the Government. Even with these aids, however, if such projects continue to be designed using the piecemeal approach, contract packages will remain small and difficult to supervise. As is the tradition in Bangladesh, both EAs relied heavily on consultants for basic contract administration and construction supervision assistance. This meant that the opportunity for optimizing skills transfer was missed. Procurement by the EA is obviously still a problem as demonstrated by RHD’s lack of success in acquiring some simple road maintenance equipment. Delegation of responsibility between consultants for producing the Borrower’s PCR is another inherent weakness in multicomponent projects. In this case, the requirement for the preparation of a PCR was overlooked.

52. The Project was intended to prolong the life of existing assets in the road sector by investing in periodic maintenance works, which had been deferred by the Government due to the paucity of funds. To this end the Project was successful despite the difficulty of supervising a large number of road sections scattered over a wide area, each with different initial conditions and traffic volumes. Notwithstanding the need to prioritize, it would be prudent in the future to cluster subprojects within clearly defined geographic or administrative areas. This would afford more meaningful impact on local road networks while easing construction supervision demands. Project implementation would also have been aided had the design called for a minimum size of contract packages.

53. Despite the absence of a PAM, all three teams of consultants complied with the periodic reporting requirements. But these dealt primarily with the physical and financial aspects of the works. There was little reporting on benefit monitoring and environmental aspects, which have been significantly strengthened in subsequent ADB-assisted projects. Increased emphasis still needs to be given to the advantages of such activities, particularly benefit monitoring following project completion. In the case of this Project, such a requirement (Schedule 6, para. 11 of the Loan Agreement) was not enforced.

14 This PCR is part of a sample of about 50% of all PCRs prepared this year that have been independently reviewed by the Operations Evaluation Division. The review validated the method used and the rating given. 14

54. A major cause of delay encountered during implementation of the road improvement component was the breach of contract in the joint-venture agreement between an international and a domestic contractor. This serves once again to highlight the importance of screening such participants during the prequalification phase. Accepting that this exercise was undertaken by the host Government, closer collaboration between RHD and ADB may have prevented such dispute. Similarly, delays encountered in the recruitment of consultants for the VICs may have been minimized by the timely intervention of ADB.

55. Technical skills training for BRTA operators in vehicle inspection and testing was insufficient, and in view of the lengthy delays in this component it was not possible to supplement the earlier training given. The training initially programmed may have been sufficient had a semiautomatic testing system been chosen as envisaged. The decision to install fully automatic diagnostic equipment meant, however, that the time needed for installation and operating skills development was totally inadequate. Clearly, the choice of equipment for the project’s VICs was incompatible with the operating environment.

C. Recommendations

1. Project related

56. ADB has recently been active in promoting sustainable road maintenance financing through a user-pay concept, and in related organizational reforms within RHD and MOC. RHD, under a recently approved ADB loan, (footnote 8, para. 26) has agreed to convene an expert working group to review mechanisms for domestic funding of the annual road maintenance program. Various strategies will be investigated and recommendations submitted to ADB by 30 September 2003. This important initiative is in keeping with ADB’s desired shift in emphasis from network development to asset preservation and management. Progress should be closely monitored by ADB in the interim.

57. Before the test lanes can be opened to the public, performance standards calibrated for Bangladesh need to be developed and pilot tested. Moreover, it is widely expected that when they are fully functional a concession will be awarded to the private sector for their operation and maintenance. In the interim, however, it is recommended that the Government revise and update national vehicle road-worthiness standards and associated enforcement legislation. Additionally, revised procedures for vehicle testing, including charges per vehicle category, should be promulgated to alert vehicle owners to the Government's renewed intentions in this regard. Assuming that level of commitment from the Government is forthcoming, ADB should seriously consider providing further institutional support, including training, under subsequent ADB-assisted projects. It is widely accepted that failure to enforce standards will result in faster deterioration of the assets created by the Project, leading to further investments earlier than scheduled.

58. Strengthening the regulatory role of BRTA and traffic police by creating a dedicated highway patrol force empowered to apprehend and penalize violators is strongly recommended. ADB should consider including appropriate institutional strengthening measures in future road projects, which may involve raising road sector revenues through increased user charges, and greater private sector participation in activities such as vehicle inspection and testing. Such initiative would be a logical follow-on from the road safety components included under ongoing 15

Loans 1478-BAN (SF) (footnote 6, para. 11) and 1708-BAN (SF).15 In the same context, ADB should assist the Government in addressing driver education starting with the testing of drivers of heavy goods vehicles and buses.

59. The Lohagara-Ramu road section improved under the Project is a very important link on the country’s NR1 connecting Cox’s Bazar with Dhaka. However, the 37 km link from Chittagong to Lohagara (also on NR1) is in substandard condition so the full benefits from the project road cannot be fully realized. Accordingly, the Government should give serious consideration to the improvement of the Chittagong-Lohagara section, following verification of traffic demands and prioritization of road sector investments.

60. Encroachment within the project’s road right-of-way has reached serious proportions, and countermeasures are urgently needed. An innovative approach was pilot-tested on contract 6 of the road improvement component. There a combination of bus lanes and grade-separation was used at Chiringa Market to keep traders off the road and prevent buses from stopping on the carriageway. This appears to be working very well, and is recommended for adoption in similar circumstances on future ADB-assisted projects.

61. A project performance audit report (PPAR) may be prepared within the next 2 years to assess the long-term impacts of the Project. But before the PPAR mission is fielded, ADB should require the Government to continue monitoring performance of project roads and reporting project benefits.

2. General

62. More attention needs to be paid during project appraisal to project performance monitoring. It is necessary to set, as a priority, a list of indices that are not only appropriate for measuring project performance but are also easily measurable given the resources available in the borrower’s organizations. ADB missions should constantly monitor the actions being taken by the EAs in this regard and provide them with any needed assistance.

63. Ideally, project loans should be sufficiently focused in their impacts so that both project controls during implementation and performance monitoring can be done more effectively. The Project, as designed, entailed improvements on numerous road sections of various lengths and in widely dispersed locations. This resulted in arduous supervision and irregular performance monitoring.

64. Policy matters and institutional issues pertaining to road sector revenues, costs of operating and maintaining assets, adequacy of user charges to meet these costs, the role of the private sector, and the need for new mechanisms to enhance cost recovery, etc. should be addressed more effectively.

65. Much of the country’s road network has been developed with external assistance through projects such as this. To ensure future serviceability of the network, it is essential that the emphasis shifts from construction and rehabilitation to maintenance. Although further external assistance can be expected, the Government must increasingly assume ownership of this task if current assets are to be preserved and diminishing aid optimized.

15 ADB. 1999. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to Bangladesh for the Southwest Road Network Development Project. Manila. 16 Appendix 1 SCOPE OF PROJECT APPRAISAL AND COMPLETION I. Road Overlay Program As per appraisal Actual Done Road Chainage Length Contract Zone From To From To Km No. Start End (km) Number Overlay (1994-95) Chittagong FENI CHITTAGONG 24.0 26.0 2.0 FENI CHITTAGONG 6.0 0-3 Chittagong N1 FENI CHITTAGONG 32.0 47.0 15.0 Chittagong N1 FENI CHITTAGONG 64.5 67.0 2.5 FENI CHITTAGONG 49.3 0-4 Chittagong N1 FENI CHITTAGONG 76.0 77.5 1.5 Chittagong N1 KERANIRHAT COXS BAZAR 80.0 84.0 4.0 Chittagong N1 COXS BAZAR TEKNAF 0.0 7.5 7.5 Chittagong N1 COXS BAZAR TEKNAF 10.0 16.0 6.0 COXS BAZAR TEKNAF 78.8 0-5 Chittagong N1 COXS BAZAR TEKNAF 17.5 51.0 33.5 Chittagong N14 FENI NOAKHALI 0.0 0.5 0.5 FENI NOAKHALI 30.1 0-3 Chittagong N14 FENI NOAKHALI 14.5 15.5 1.0 Chittagong N14 FENI NOAKHALI 33.5 36.0 2.5 Chittagong N14 FENI NOAKHALI 38.0 39.5 1.5 FENI NOAKHALI 14.5 0-4 Chittagong N14 FENI NOAKHALI 40.0 40.5 0.5 Chittagong N14 FENI NOAKHALI 44.0 44.5 0.5 R140 LALMAI CHANDPUR 2.5 4.5 2.0 Comilla R140 LALMAI CHANDPUR 14.5 22.5 8.0 LALMAI CHANDPUR 37.4 0-3 Comilla R140 LALMAI CHANDPUR 24.5 28.0 3.5 Comilla R140 LALMAI CHANDPUR 35.5 58.5 23.0 Dhaka JOYDEBPUR KALIAKOIR 0.0 20.0 20.0 Dhaka N4 KALIAKOIR TANGAIL 4.5 44.0 39.5 Dhaka R810 POSTOGOLA CHASHARA 0.0 11.0 11.0 POSTOGOLA CHASARA 10.5 0-1 JOYDEBPURTANGAIL 30.1 0-1 COMILLA LALMAI 10.0 0-3 FENI BYPASS 10.0 0-3 FENI BYPASS 18.4 0-4 Overlay (1995-96) Chittagong N1 COX'S BAZAR TEKNAF 54.0 79.0 25.0 Chittagong N16 HATHAZARI RANGAMATI 0.0 7.0 7.0 Chittagong N16 HATHAZARI RANGAMATI 8.0 13.5 5.5 Chittagong N16 HATHAZARI RANGAMATI 18.5 28.0 9.5 HATHAZARI RANGAMATI 38.0 0-5 Chittagong N16 HATHAZARI RANGAMATI 38.0 54.5 16.5 Chittagong N18 KERANIHAT BANDARBAN 14.5 22.5 8.0 Comilla N1 COMILLA FENI 53.5 63.5 10.0 Comilla R140 RAIPUR LAKSHMIPUR 0.0 4.5 4.5 RAIPUR LAKSHMIPUR 3.9 0-3 Dhaka N41 MYMENSINGH MADHUPUR 0.0 22.0 22.0 Dhaka N41 MYMENSINGH MADHUPUR 28.0 33.0 5.0 MYMENSINGH MODHUPUR 46.9 0-2 Dhaka N41 MYMENSINGH MADHPUPUR 33.0 46.5 13.5 Dhaka R310 JOYDEBPUT GAZIPUR 0.0 5.0 5.0 JOYDEBPUR GAZIPUR 5.1 0-1 Dhaka R480 ELENGA BHUAPUR 0.0 22.5 22.5 ELENGA BHUAPUR 22.5 0-2 Dhaka R110 DHAKA-DEMRA NARAYANGANJ 1.0 3.0 2.0 DHAKA-DEMRA NARAYANGANJ 16.4 0-1 Dhaka R110 DHAKA-DEMRA NARAYANGANJ 4.0 14.0 10.0 DHAKA-DEMRA DEMRA(POLDER) 8.5 0-1 TANGAIL MODHUPUR 2.0 0-1 JATRABARI BURIGANGA BRIC2.1 0-1 LAKSHMIPUR EBGUMGANJ 29.5 0-3 COMILLABYPASS 19.9 0-3 CHANDINA BYPASS 3.0 0-3 HATHZARI FATIKCHARI 24.0 0-4 Total 351.5 516.9

Rehabilitation (1994-95) a Chittagong N14 FENI NOAKHALI 0.5 14.5 14.0 CHittagong N14 FENI NOAKHALI 15.5 33.5 18.0 Chittagong N14 FENI NOAKHALI 36.0 38.0 2.0 Chittagong N14 FENI NOAKHALI 39.5 40.0 0.5 Chittagong N14 FENI NOAKHALI 40.5 44.0 3.5 Comilla R140 COMILLA LALMAI 0.0 10.0 10.0 Subtotal 48.0

Rehabilitation (1995-96) a Chittagong HATHAZARI FATIKCHARI 0.0 21.0 21 Comilla R140 LAKSHMIPUR BEGUMGANJ 0.0 28.5 28.5 Subtotal 49.5 a/ Proposed Rehabilitation works were incorporated in Overlay above

II. Sealcoat Program Sealcoat (1994-95) Chittagong N1 FENI CHITTAGONG 21.0 24.0 3.0 Chittagong N1 FENI CHITTAGONG 47.0 55.0 8.0 Chittagong N1 FENI CHITTAGONG 67.0 76.0 9.0 Chittagong N1 FENI CHITTAGONG 85.5 89.0 3.5 Chittagong F1033 FENI PARSHURAM 0.0 13.5 13.5 Chittagong F1033 FENI PARSHURAM 14.0 16.5 2.5 FENI PARSHURAM 21.0 S-9 Chittagong F1033 FENI PARSHURAM 17.0 22.0 5.0 Chittagong F1034 FENI SONAGAZI 0.0 20.0 20.0 FENI SONAGAZI 20.0 S-9 Appendix 1 17

SCOPE OF PROJECT APPRAISAL AND COMPLETION

As per appraisal Actual Done Road Chainage Length Contract Zone From To From To Km No. Start End (km) Number

Comilla R140 LALMAI CHANDPUR 0.0 2.5 2.5 Comilla R140 LALMAI CHANDPUR 4.5 14.5 10.0 LALMAI CHANDPUR 22.0 S-6 Comilla R140 LALMAI CHANDPUR 22.5 24.5 2.0 Comilla R140 LALMAI CHANDPUR 28.0 35.5 7.5 Comilla F1422 BEGUMGANJ RAMGANJ 0.0 37.0 37.0 Comilla F2013 SYLHET SULTANPUR 0.0 13.0 13.0 Comilla F2801 SYLHET COMPANIGANJ 1.5 4.0 2.5 Comilla F2801 SYLHET COMPANIGANJ 4.5 5.0 0.5 Comilla F2801 SYLHET COMPANIGANJ 6.0 7.0 1.0 Comilla F2801 SYLHET COMPANIGANJ 7.5 14.0 6.5 Comilla F2801 SYLHET COMPANIGANJ 14.5 17.0 2.5 Comilla F2016 RASHIDPUR LAMAGAZI 0.0 11.0 11.0 Comilla F1406 LALMAI SONAIMORI 0.0 12.0 12.0 LALMAI SONAIMURI 4.3 S-6 Dhaka N4 KALIAKOIR TANGAIL 0.0 4.5 4.5 Dhaka N41 MYMENSINGH MADHUPUR 22.0 28.0 6.0 Dhaka MIRPUR NABINAGAR 0.0 2.0 2.0 Dhaka N5 MIRPUR NABINAGAR 4.5 11.5 7.0 Dhaka N5 NABINAGAR MANIKGANJ 0.0 5.5 5.5 Dhaka N5 NABINAGAR MANIKGANJ 7.5 29.5 22.0 Dhaka N5 MANIKGANJ ARICHA 4.0 24.5 20.5 Dhaka DHAKA KUCHIAMORA 0.0 14.0 14.0 DHAKA KUCHIAMARA 9.6 S-3 Dhaka N8 KUCHIAMARA MAWA 0.0 21.5 21.5 KUCHIAMARA MAWA 21.5 S-3 Dhaka R505 NABINAGAR KALIAKOIR 0.0 16.0 16.0 NABINAGR KALIAKOIR 16.0 S-1 JOYDEBPURTANGAIL 4.5 S-1 MIRPUR SAVAR 9.7 S-1 MIRPUR SAVAR 4.1 S-2 JOYDEBPUR TANGAIL 26.7 S-2

Sealcoat (1995-96) Chittagong N1 COX'S BAZAR TEKNAF 7.5 10.0 2.5 Chittagong N1 COX'S BAZAR TEKNAF 16.0 17.5 1.5 Chittagong N1 COX'S BAZAR TEKNAF 51.0 54.0 3.0 Chittagong N16 HATHAZARI RANGAMATI 7.0 8.0 1.0 Chittagong N16 HATHAZARI RANGAMATI 13.5 18.5 5.0 Chittagong N16 HATHAZARI RANGAMATI 28.0 38.0 10.0 Chittagong N18 KERANIRHAT BANDARBAN 0.0 14.5 14.5 Chittagong F1602 BARAIHAT RAKGARH 0.0 1.0 1.0 Chittagong F1602 BARAIHAT RAMGARH 3.0 4.0 1.0 Chittagong F1602 BARAIHAT RAMGARH 5.0 10.0 5.0 Chittagong F1602 BARAIHAT RAMGARH 13.0 14.0 1.0 Chittagong F1602 BARAIHAT RAMGARH 21.5 23.0 1.5 BARAIHAT RAMGARH 22.0 S-9 Chittagong F1602 BARAIHAT RAMGARH 25.0 26.0 1.0 Chittagong F1602 BARAIHAT RAMGARH 27.0 30.0 3.0 Chittagong F1602 BARAIHAT RAMGARH 32.0 37.0 5.0 Comilla F1405 LAKSHMIPUR RAMGARH 0.0 16.5 16.5 Comilla F2014 GOLAPGANJ CHARKHAI 0.0 15.0 15.0 Comilla F2821 RAJNAGAR KULAURA 10.5 11.5 1.0 Comilla F2821 RAJNAGAR KULAURA 14.5 21.5 7.0 RAJNAGAR KULAURA 16.2 S-7 Comilla F2402 NIBAGANJ SHERPUR 0.0 19.0 19.0 NABIGANJ SHERPUR 12.0 S-7 Comilla F2826 BAROLEKHA SHEOLABAZAR 0.0 8.0 8.0 Comilla F2826 BAROLEKHA SHEOLABAZAR 9.0 28.0 19.0 Comilla F2831 GOLABGANJ BHADESWAR 0.0 14.0 14.0 Dhaka R110 DHAKA-DEMRA NARAYANGANJ 0.0 1.0 1.0 Dhaka R110 DHAKA-DEMRA NARAYANGANJ 3.0 4.0 1.0 Dhaka R110 DHAKA-DEMRA NARAYANGANJ 14.0 18.5 4.5 Dhaka F2044 PANCHDONA POLASH 0.0 14.0 14.0 Dhaka F2046 PANCHDONA GHOSASAL 0.0 11.5 11.5 Dhaka F4014 TANGAIL ELASIN 0.0 15.0 15.0 TANGAIL EALSIN 15.0 S-1 Total 494.0 224.6

III. Road Improvement Program

Chittagong N1 LOHAGARA CHIRINGA 20.90 47.90 27.00 LOHAGARA CHIRINGA 27.23 RIP-05 Chittagong N1 LOHAGARA EIDGAH 47.90 74.00 26.10 CHIRINGA EIDGAH 25.84 RIP-06 Chittagong N1 EIDGAH RAMU 74.00 88.50 14.50 EIDGAH RAMU 14.50 RIP-07 Total 67.60 67.57

Sources: RRP and RHD. 18 Appendix 2 PROJECT IMPLEMENTATION SCHEDULE

ITEM OF WORK 1993 1994 1995 1996 1997 1998 1999 2000 I II III IVI II III IV III IIIIV I II III IV I II III IV III III IV I II III IV I II III Overlay and Sealcoat Component Consulting Services

Preparation of Shortlist Invitation Documents

Invitation of Proposal

Evaluation of Proposal and Award

Consulting Services Procurement of Equipment Preparation of Bid Documents

Invitation of Bids

Bid Evaluation and Contract Awards

Delivery Reconstruction Activities Preparation of Work Program

Preparation of Bid Documents

Prequalification of Contractors

Invitations of Bids

Bid Evaluation and Contract Awards Civil Works Mobilization

Construction

Road Improvement Component Construction Supervision

Reconstruction Activities Preparation of Bid Documents

Prequalification of Contractors

Invitation of Bids

Bid Evaluation and Contract Award Civil Works Mobilization

Construction

Vehicle Inspection Centers Component Consulting Services Engagement of Consultants

Consulting Services

Building Construction Preparation of Bid Documents

Prequalification of Contractors

Invitation of Bids Appendix 2 19 PROJECT IMPLEMENTATION SCHEDULE

ITEM OF WORK 1993 1994 1995 1996 1997 1998 1999 2000 I II III IV I II III IV I II III IV I II III IV I IIIII IV I IIIII IV I II III IV I II III Bid Evaluation and Contract Award

Mobilization

Construction Vehicle Inspection Equipment Preparation of Bid Documents

Invitation of Bids (Technical)

Bid Evaluation (Technical)

Invitation of Bids (Financial)

Bid Evaluation (Financial)

Contract Award

Manufacturing

Installation Commissioning

Training

Appraisal

Actual 20 Appendix 3

STATUS OF COMPLIANCE WITH LOAN COVENANTS

The following are the major covenants included in the Loan Agreement to be monitored during project implementation.

Reference in Status of Loan Covenant Compliance Agreement The Borrower shall make available, promptly as needed, the funds, facilities, services, land and other resources that are required, in Complied Section 4.02 addition to the proceeds of the loan, for the carrying out of the with Project and for the operation and maintenance of the project facilities. The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and ADB. The Complied Section 4.03 Borrower shall furnish, or cause to be furnished, to ADB, promptly with after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request. Without limiting the generality of the foregoing, the Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of Complied Section 4.05 the loan against hazards incident to the acquisition, transportation with and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely useable to replace or repair such goods. The borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with sound auditing standards, by auditors acceptable to ADB, (iii) furnish to ADB, as soon as available but in any event not later than 9 months after the end of each related fiscal year, unaudited copies of such accounts Complied Section 4.06 and financial statements, and not later than 12 months after the end with of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. Summarized monthly and quarterly progress reports are to be Complied Section 4.10 furnished to ADB. with The Borrower shall ensure that all land and rights in land, including rights of way, required for the Project shall have been acquired in a timely manner to warrant project implementation in accordance with Schedule 6, the implementation schedule agreed upon between the Borrower Complied Para 4 and ADB. In particular, contracts will not be awarded for the with construction of vehicle inspection centers and for the procurement of vehicle inspection equipment when the sites for such centers have not been acquired and made available. Appendix 3 21

Reference in Status of Loan Covenant Compliance Agreement Without limiting the generality of Sector 4.09 of the Loan Agreement, the Borrower shall carry out proper road maintenance following the annual road maintenance program to be prepared on the basis of Substantially Schedule 6, the annual updated road master plan reflecting the latest road and complied Para 6 traffic conditions. For this purpose, appropriate organizational with adjustments shall be made in the Roads and Highways Department (RHD) to meet the needs of the program. The Borrower shall also provide adequate funds on a timely basis for the program. The Borrower shall provide adequate staff and funds for the operation and maintenance of the vehicle inspection centers provided under the Project. In addition, the Borrower shall revise the Partially Schedule 6, existing legislation related to vehicle inspection including complied Para 7 enforcement and vehicle standards prior to the award of contracts for with construction of vehicle inspection centers. The Bank shall be provided with copies of the proposed revision for comments. The Borrower shall enforce within RHD by 30 June 1994, the Schedule 6, administration and accounts manuals prepared under TA No.896- Complied Para 8 BANa following their approval by the relevant authorities of the with Borrowers. The Borrower, through the Executing Agencies (EAs), shall ensure that such problems as drainage, landslides, erosion and the related prevention of damage to the natural environment will receive due attention in the course of construction, operation and maintenance of project facilities. In the selection of road alignment and local sources Schedule 6, Complied for excavation of construction materials, the EAs through their Para. 9 with consultants and contractors will take necessary steps to avoid adverse consequences to agricultural land and the natural environment. The EAs shall adhere to ADB’s Environmental Guidelines for Selected Infrastructure Project (Highways and Roads). The project EAs shall continuously monitor, assess and report on physical and financial aspects of project implementation and ADB Schedule 6, Complied will review these activities. Systems for recording data and statistics Para 10 with for such monitoring will be established as part of implementation management of the Project. RHD and the Bangladesh Road Transport Authority (BRTA) shall Being Schedule 6, evaluate the benefits of the Project after it has been completed in complied Para 11 accordance with a schedule and terms of reference to be mutually with agreed upon by ADB. By mid-1995, ADB, RHD and BRTA, and other concerned departments and agencies of the Borrower shall jointly carry out a comprehensive midterm review of project implementation and its Schedule 6, benefits including its environmental and social impacts. The Complied Para 12 objectives of the review area: with (i) to critically evaluate the actual project progress, project implementation procedures, procurement methodology, benefit monitoring and evaluation activities, project management 22 Appendix 3

Reference in Status of Loan Covenant Compliance Agreement structure and the performance of the consultants; and

(ii) to formulate corrective measures as appropriate to remedy identified weaknesses to ensure successful project implementation and achievement of the project objectives. The Borrower shall keep ADB informed of the progress of the various sector studies, particularly relating to road user charges, by providing ADB with any related documents including consultant’s reports and seek ADB’s comments on the outcome of these studies. Schedule 6, Complied The Borrower and ADB will from time to time exchange views on the Para 13 with Borrower’s progress in carrying out the policies and actions recommended by the studies. The Borrower shall maintain policy dialogue with ADB on problems and constraints affecting the further growth and development of the road and road transport sector. aADB. 1987. Technical Assistance to Bangladesh for Institutional Support for Road and Road Transport Development. Manila. Appendix 4 23

TRAFFIC VOLUMES AND ROAD SURFACE CONDITIONS ON SELECTED SECTIONS OF PROJECT ROADS AT COMPLETION

1. The Project includes periodic maintenance works on a number of road sections dispersed over a wide area of the road network east of Jamuna Bridge. These road sections form part of the national, regional, and feeder road networks. The composition of traffic and the volumes are widely divergent on many of these road sections. The road pavement is used by both motorized and nonmotorized vehicles, but road usage by the latter is limited to only short stretches. The nonmotorized traffic often forms a significant proportion of the total volume of traffic on regional and feeder road links. For purposes of pavement design and maintenance, however, the volume of motorized traffic is the governing parameter for economic evaluation of road projects. The main reason for this being that the road surface damage caused by the nonmotorized traffic is not significant and no correlation between vehicle operating costs and road surface conditions can be established for the nonmotorized vehicles.

2. At appraisal in 1993, traffic volumes on the road links were based on average values over the entire Roads and Highways Department (RHD) network and related to typical link conditions characterized by traffic levels, width of road, and surface condition of road as measured by degrees of roughness. Traffic was assumed to grow until 2000 at annual rates of 9% for cars and pickups, 6–7% for buses and trucks, and marginally lower growth rates (less by 0.5%) thereafter. The actual growth of traffic in the past 5 years has been much higher, in the range of 10–12%, and on some stretches even higher. Bus and truck traffic have shown especially high growth rates.

3. A sample of motorized traffic volumes (annual average daily traffic [AADT]) in 1998 or 1999, as per RHD’s traffic count on selected road links included under the Project, is shown in Table A4. In comparison, AADT figures at appraisal on the road links included under the overlay and sealcoat component ranged from 300–4,000 on national roads, 100–1,000 on regional roads, and 50–500 on feeder roads.

4. Traffic growth rates observed over the past 5 years in Bangladesh may not be sustainable over the longer term. It is possible that suppressed demand over several years was suddenly released when the road conditions were improved and was also complemented by a shift of traffic from the railways due to the poor quality of service, especially in freight traffic where rail was in direct competition with road. In the past 5 years, however, a number of initiatives1 have been taken to improve the rail services, including an ADB-financed project that will provide a dual gauge link between the western and eastern parts of the country via the Jamuna bridge. With improved rail services in the near future, some significant shift in favor of rail may be expected in the pattern of traffic shared between rail and road modes in Bangladesh. Also, the considerable investments made in the road sector in the past decade have likely catered to a large portion of the suppressed demand. Therefore, future growth in traffic may not be as high as witnessed in the recent past. In any case the historic relationship between traffic growth and growth in the country’s gross domestic product indicates a transport demand elasticity of about 1.6, which may not be exceeded in the future as well. This translated into annual growth rates of about 8% for passenger traffic and 6% for freight in the past, of which the road sector share was about 70% of passenger and 60% of freight traffic. The growth

1 ADB. 1996. Technical Assistance to Bangladesh for Organizational Reforms in Bangladesh Railways in Phase II. Manila.

24 Appendix 4 in the number of registered motorized vehicles in the country also has grown at an average rate of 7.7% over the past couple of years.

5. For the purposes of economic reevaluation of the Project, the AADT figures for motorized traffic in 1999, (latest available figures of RHD’s annual traffic counts), are assumed to be base figures that already account for the recent nonlinear surge in traffic growth of recent years. Future growth in traffic is conservatively assumed to increase at an annual rate of 10% for the next 5 years and to flatten to about 7% thereafter, in keeping with the historic rates of growth in transport demand. It is obvious that before the assumed project life of 20 years (until 2020) has expired, the capacity of many of the links will be far exceeded and new investments will be necessary.

Table A4: Motorized Traffic Volumes on Selected Road Links

Length Zone Road/Linka From To AADTc IRId (km)b Chittagong N1/7 Feni Chittagong 89 12194 2.0–3.6 Chittagong N1/5 Ramu Lohagara 68 6051 2.6 Chittagong N1/8 Cox’s Bazar Teknaf 79 3380 2.9–5.2 Chittagong N16/13 Hathazari Rangamati 37.5 8951 5.1–7.4 Chittagong F1602/1515 Baraihat Ramgarh 15 1362 8.0–9.0 Chittagong N14/11 Feni Noakhali 38 4496 2.0–2.6 Chittagong R140/405 Lakshmipur Begumganj 29 2181 2.0–3.2 Comilla F2801/526 Sylhet Companiganj 36 445 2.5–4.7 Comilla N1/4 Comilla Feni 64 5822 1.9–3.8 Comilla R140/203 Lalmai Chandpur 55 2084 3.4–5.2 Dhaka N5/33 Nabinagar Manikganj 29.3 14794 2.0–2.2 Dhaka N41 Mymensingh Madhupur 48.0 6494 2.5–3.3 Dhaka N4/27 Kaliakoir Tangail 43 6260 3.9–7.6 AADT = annual average daily traffic, IRI = International Roughness Index. a The letter N refers to national roads, R to regional roads, and F to feeder roads. The numbers after road designation refer to the road number and the link number of the particular road section in the Roads and Highways Department (RHD) data bank. b The length indicated is the actual length of the road link but the actual length of road section included in the Project is less in many cases. c AADT is based on RHD traffic count. d IRI indicates road surface quality; 0.0 indicates a perfectly flat surface. Source: Bangladesh Road Transport Authority and Roads and Highways Department.

Appendix 5 25

ECONOMIC REEVALUATION OF THE PROJECT

A. Project Components

1. At appraisal, the economic evaluation of the three project components was carried out independently. Component A of the Project, the overlay and sealcoat works, was basically in the nature of periodic maintenance works over several sections of national, regional, and feeder road links of various lengths from less than 2 km to over 20 km, and spread over a large area of the road network east of Jamuna bridge for a total length of about 850 km. Component B, the road improvement works, included widening and reconstruction works on a continuous stretch of National Road No. 1 over a length of 67 km. Component C, the establishment of vehicle inspection centers, comprised procurement and installation of modern equipment and diagnostic software at five sites across the country with the sole purpose of strengthening the regulatory mechanisms.

B. Economic Evaluation of Overlay and Sealcoat Component

2. The economic internal rate of return (EIRR) figures of component A mentioned in the Report and Recommendation of the President were taken from the recommendations of the road master plan (RMP), which employed the Highway Design and Maintenance Standards Model (HDM) III. This model attempts to optimize maintenance expenditure over the whole road network taking into account all the various factors and requirements including the effects of nonmotorized traffic. It establishes the optimum strategy for road maintenance based on a search for a combination of maintenance policies that results in the minimum life-cycle costs of different road design and maintenance options. The model includes different time-staging strategies for a given road project or for groups or links of the road network. Traffic volume, which changes during project life, is just one of the input parameters into the model. Several other input parameters such as road design and maintenance standards, annual and periodic maintenance costs, vehicle operating costs (VOCs), costs of rehabilitation, partial or total reconstruction costs, road roughness indices, etc. are entered as input to the model. The model evaluates alternative maintenance programs on the basis of net present value (NPV) at specified discount rates or can calculate EIRRs. The model can analyze the entire network, or a group of roads, or individual links and provide as output the optimum maintenance strategy to be followed and the related costs. In reality, the model provides estimates for maintenance budgets needed for all the roads under a particular roads division and not for individual road links.

3. The effectiveness of the model is dependent on the quality of inputs and RHD has collected voluminous data for use in the model, which is regularly updated. Typical EIRR values calculated by the model at the time of appraisal were, 46% for overlays, 42% for sealcoats, and 22% for rehabilitation work. There has been no significant change in the basic parameters affecting the results of the HDM model as far as the Bangladesh road network is concerned since the time of appraisal. The steeper growth in traffic volumes experienced on some roads over the past 5 years makes these EIRR figures even higher.

C. Economic Evaluation of the Road Improvement Component

1. The Without Project Scenario

4. The road section between Lohagara and Ramu, a distance of 67 km on National Road 1 was improved under component B. The road was previously a single-lane section, and at the time of appraisal was in a highly deteriorated condition resulting in high transport costs and unreliable transportation services. The consultant who carried out the feasibility study for this component in 1986 had estimated traffic volumes of about 600 vehicles per day (VPD) and a road surface International Roughness Index (IRI) of 10, implying that major reconstruction was due. By the time of appraisal the road had further deteriorated and travel times on the road had increased considerably. The traffic volume had increased to 700 VPD, and travel time from Chittagong to Cox’s Bazar, a distance of 120 km, was nearly 8 hours. VOCs and costs of travel time were already very high. Without the Project, assuming that only annual routine maintenance of the road would be carried out, the disbenefits in this scenario would eventually include increased transport costs by alternate routes, and even higher VOCs and costs of additional 26 Appendix 5 travel time. In the without project scenario, only annual maintenance is assumed and no capital- intensive periodic preventive maintenance works (sealcoats or overlays) are considered.

2. The With Project Scenario

5. The base year for the Project in operation is taken as the beginning of 2000. The traffic volumes in 2000 on the road section were estimated at 6,000 VPD from RHD traffic counts. The roughness survey carried out in 2000 on the completed road in operation indicated an estimated average IRI number of 2.6. From past experience, it is estimated that this surface roughness will gradually deteriorate over time at a rate of 0.45 in the IRI value. Annual maintenance is assumed at the same level as in the without project scenario although it is likely to be much less in the initial years in the with project scenario. Periodic maintenance is assumed as overlays every 7 years. The benefits to the Project are calculated as the savings in VOCs and road maintenance costs compared to those without project.

3. Vehicle Operating Costs

6. VOCs for different categories of motorized vehicles are calculated routinely by RHD for updating the country’s Road Rehabilitation and Maintenance Program (RRMP) on a regular basis. The VOC calculations take into account the field data on material and labor inputs for operation and maintenance of vehicles, cost of capital outlay, vehicle operating speeds, and road surface roughness. These values are updated by RHD every year. A sample of VOC values for the year 2000, which is used in the analysis, is shown in Table A5.1.

Table A5.1: Vehicle Operating Costs In Bangladesh by Vehicle Category (January 2000, Tk/km)

Medium Small Large Mini- Micro- Utility Jeep IRI Car Truck Truck Bus Bus bus 2 8.69 7.14 12.05 6.97 4.08 7.98 6.36 3 9.21 7.42 12.26 7.08 4.24 8.39 6.66 4 9.73 7.7 12.48 7.2 4.44 8.82 7.01 10 13.05 9.65 12.73 8.25 7.46 11.46 10.93 IRI = International Roughness Index. Source: Bangladesh Road Transport Authority and Roads and Highways Department

4. Road Maintenance Costs

7. Regular annual maintenance and periodic maintenance works are triggered by the road surface roughness as indicated by the IRI value or surface damage evidenced by cracks and potholes reaching a predetermined IRI number. For the purposes of the economic reevaluation, annual maintenance costs of Tk-50,000 per km are assumed in both with project and without project scenarios. In the with project scenario, additional periodic maintenance at a cost of Tk.90-million (Tk.1.3 million per km at 2000 prices) is assumed to be every 7 years, but spread over 3 consecutive years.

5. Construction Costs

8. Actual construction costs paid to the contractors are used in the analysis and the stream of the construction costs is based on the payment schedule realized during execution. The financial costs are converted to economic costs by excluding taxes and duties and a standard conversion factor of 0.80 for the portion of the costs that could be considered as traded.

9. All costs have been discounted to the year 2000 using the rate of inflation as measured by the consumer price indices (CPIs) or the dollar exchange rate for taka over the period. Table A5.2 shows real gross domestic product (GDP) growth rates, the CPI inflation indices, and dollar exchange rates over the period 1993-2001.

Appendix 5 27

Table A5.2: Bangladesh Economic Indicators (FY1993 – FY2000)

Item 1993 1994 1995 1996 1997 1998 1999 2000 2001 Real GDP Growth % 4.6 4.1 4.9 4.6 5.4 5.2 4.9 5.9 6.0 Rate of Inflation (CPI) 2.7 3.3 8.9 6.6 2.6 7.0 9.0 3.4 1.5 Exchange Rate (Tk/$) 39.1 40.0 40.2 40.9 42.7 45.4 47.8 50.3 54.0 CPI = consumer price index, GDP = gross domestic product. Sources: Bangladesh Bureau of Statistics, Bangladesh Bank.

6. Economic Reevaluation

10. The EIRR for the road improvement component was estimated over a 15-year benefit-stream period shown in Table A5.3. The resulting EIRR is 42.5%, and with a 10% reduction in benefits the EIRR is 37.5%. It is concluded that the economic performance of this component is extremely robust.

Table A5.3: Economic Cost-Benefit Stream (Tk million)

Benefits

VOC Net Decrease Year Capital Maintenance Total Savings Benefits 10%

0.90 2000 1949.66 1949.66 529.32 1420.34 (1473.27) 2001 2.64 2.64 552.99 550.36 495.06 2002 2.64 2.64 575.64 573.01 515.44 2003 2.64 2.64 596.66 594.02 534.36 2004 2.64 2.64 607.21 604.58 543.85 2005 2.64 2.64 614.69 612.05 550.58 2006 2.64 2.64 618.39 615.75 553.91 2007 23.40 2.64 26.04 617.84 591.81 530.02 2008 23.40 2.64 26.04 612.14 586.10 524.88 2009 23.40 2.64 26.04 592.19 566.16 506.94 2010 2.64 2.64 1213.39 1210.75 1089.42 2011 2.64 2.64 1233.19 1230.55 1107.23 2012 2.64 2.64 1248.53 1245.89 1121.04 2013 2.64 2.64 1258.88 1256.24 1130.35 2014 2.64 2.64 1263.35 1260.71 1134.38 2015 2.64 2.64 1261.09 1258.45 1132.34 2016 2.64 2.64 1251.20 1248.56 1123.44 2017 23.40 2.64 26.04 1232.81 1206.77 1083.49 2018 23.40 2.64 26.04 1204.49 1178.45 1058.00 2019 23.40 2.64 26.04 1165.15 1139.11 1022.60 EIRR 42.53% 37.48% EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: Bangladesh Road Transport Authority and Roads and Highways Department

11. The overlay and sealcoat component, on the other hand, was carried out under 11 civil works contracts, with various numbers of road sections and lengths under each contract. The sections included in each contract are parts of different routes, including national, regional, and feeder roads with different traffic volumes and vehicle composition. For the purposes of this exercise, however, eight contiguous links, four of overlay and four of sealcoat, were reevaluated with updated traffic and completion costs. The same norms as observed for reevaluation of the road improvement component were adopted. The results show EIRRs varying from 28 to 85%, depending on traffic and cost of maintenance intervention 28 Appendix 5 carried out (Table A5.4). It may be concluded therefore that the economic performance of this project component is also generally satisfactory.

Table A5.4: Economic Cost-Benefit Stream (Tk million)

Sl. Type of Contract Name of Road Road Length Completion EIRR No. Work No. No.a Under cost/km % Contract (km) 1 Overlay 01 1. Joydebpur-Tangail N 4 30.13 3.82 64.67 2 Overlay 03 2. Lalmai-Chandpur R 140 36.50 3.71 32.91 3 Overlay 03 3. Comilla-Bypass N 1 19.90 3.71 58.55 4 Overlay 05 4. Cox's Bazar-Teknaf N 1 78.76 2.51 30.38 5 Sealcoat S1 1. Tangail-Elasin F 4014 15.00 0.5 27.72 6 Sealcoat S3 2. Kuchiamora-Mawa N 8 21.50 0.66 85.60 7 Sealcoat S9 3. Feni-Parshuram F 1033 21.00 0.32 42.35 8 Sealcoat S9 4. Feni-Sonagazi F 1034 20.00 0.32 33.84 EIRR = economic internal rate of return, Sl. = serial aThe letter N refers to national roads, R to regional roads, and F to feeder roads. Source: Bangladesh Road Transport Authority and Roads and Highways Department.

Appendix 6 29

ASSESSMENT OF OVERALL PROJECT PERFORMANCE (Loan 1287–BAN [SF]: Road Overlay and Improvement Project)

Subcriterion

A. Relevance

• Relevance of project preparation to project output at the time of approval Yes, Relevant • Relevance of project output to achieve project goals and purposes at approval Yes, Relevant • Priority in the context of the country’s development strategy at appraisal High • Priority in the context of the Asian Development Bank's (ADB's) development strategy for the country at appraisal Supportive • Priority in the context of the country development strategy at time of the Project Completion Review (PCR) Mission Yes • Priority in the context of one or more of ADB’s strategic objectives at time of PCR mission Yes • Appropriate changes made at midterm review and/or regular review missions Yes to make the Project more relevant • Percentage of subcriteria that met assessment 100 • Equivalent rating 2

B. Efficacy

• Achievement of most project physical outcomes Yes • Achievement of most project intangible outcomes Partial • The likelihood of project outcomes leading to project goals Partial • Percentage of subcriteria met Mostly • Equivalent rating 1.5

C. Efficiency

1. Efficiency of Investments

• Economic internal rate of return (EIRR) > 12% (where recalculated at evaluation) Yes • EIRR > weighted average cost of capital • Cost-effectiveness in generating the project outputs Yes

2. Efficiency of Process

• Manner of ADB’s internal processing of the Project Satisfactory • Organization and management of executing and implementing agencies Satisfactory • Effectiveness of project management Average • Efficiency in recruiting consultants and procurement Average • Timely and adequate availability of counterpart funding Highly satisfactory • Percentage of subcriteria met 75 • Equivalent rating 2

30 Appendix 6

D. Sustainability

• Availability of adequate and effective demand for project services High • Probable operating and financial performance of the operating entity and the ability to recover costs Not high • Probability of the existence of appropriate maintenance policy/procedures Good • Probability of funds availability for continued operations and maintenance Average • Probable availability of skills to continue the project Average • Probable availability of appropriate technology and equipment to operate the project Average • Probable availability of enabling environment in which the project is operating at the time of PCR mission Good • Government ownership and commitment to the project Yes • The extent to which the project affects the environment and renewable or nonrenewable resources Positive • The extent to which community participation and beneficiary incentives are adequate to maintain the project benefits • Percentage of subcriteria met 60 • Equivalent rating 2

E. Institutional Developments and Other Impacts

• Formal laws, regulations and procedures Negligible • Institutional or organizational strengthening Moderate • Institutional skill levels and capabilities Moderate • Participatory attitudes of the society Little • Macroeconomic or sector policy framework Negligible • Other developmental impacts Moderate • Percentage of the subcriteria that met assessment 75 • Equivalent rating 2

Criteria Assessment Rating Weight (%) Weighted ( 0-3) rating

Relevance Relevant 2 20 0.40 Efficacy Efficacious 1.5 25 0.37 Efficiency Efficient 2 20 0.40 Sustainability Likely 2 20 0.40 Institutional Average 2 15 0.30 development and other impacts

Overall rating Successful 100 1.87