Completion Report
Project Number: 46145-001 Loan Number: 2916 August 2018
Kazakhstan: CAREC Corridor 3 (Shymkent–Tashkent Section) Road Improvement Project
This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.
CURRENCY EQUIVALENTS
Currency unit – tenge (T)
At Appraisal At Project Completion (3 September 2012) (30 June 2016) T1.00 = $0.00666 $0.00295 $1.00 = T150.00 T338.25
ABBREVIATIONS
AADT – annual average daily traffic ADB – Asian Development Bank CAREC – Central Asia Regional Economic Cooperation COR – Committee of Roads CSC – construction supervision consultant EBRD – European Bank for Reconstruction and Development EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan EMR – environmental monitoring report GDP – gross domestic product ICB – international competitive bidding IEE – initial environmental examination IRI – international roughness index JSC – Joint Stock Company km – kilometer LARF – land acquisition and resettlement framework MID – Ministry of Investments and Development MFF – multitranche financing facility MOF – Ministry of Finance MOTC – Ministry of Transport and Communications O&M – operation and maintenance OCR – ordinary capital resources PPMS – project performance management system SMA – stone mastic asphalt TA – technical assistance VAT – value added tax VOC – vehicle operating cost
GLOSSARY
CAREC Transport – Western Europe–Western China International Transit Corridor running Corridor 1 from Khorgos at the border with the People’s Republic of China, through Almaty and Shymkent, to the western border with the Russian Federation. CAREC Transport – International Transit Corridor connecting the Russian Federation with the Corridor 3 Middle East and South Asia.
NOTES
(i) The fiscal year (FY) of the Government of Kazakhstan and its agencies ends on 31 December. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018.
(ii) In this report, “$” refers to United States dollars, T refers to Kazakhstan tenge.
Vice-President Wencai Zhang, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Director Dong-Soo Pyo, Transport and Communications Division, CWRD Giovanni Capannelli, Kazakhstan Resident Mission (KARM), CWRD
Team leader Oleg Samukhin, Transport Specialist, CWRD Team members Asem Chakenova, Project Officer, KARM, CWRD Glenda Jurado, Associate Project Analyst, CWTC, CWRD
In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
CONTENTS
Page BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Consultant Recruitment and Procurement 6 H. Safeguards 7 I. Monitoring and Reporting 8 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness 9 C. Efficiency 10 D. Sustainability 10 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 12 G. Performance of the Asian Development Bank 13 H. Overall Assessment 13 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14 A. Issues and Lessons 14 B. Recommendations 15
APPENDIXES 1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 17 3. Project Cost by Financier 18 4. Project Contract Packages 19 5. Disbursement of ADB Loan Proceeds 20 6. Contract Awards of ADB Loan Proceeds 21 7. Chronology of Main Events 22 8. Status of Compliance with Loan Covenants 23 9. Project Implementation Schedule 30 10. Economic Reevaluation 31 11. List of Parameter Values/Assumptions 38
BASIC DATA
A. Loan Identification 1. Country Republic of Kazakhstan 2. Loan number and financing source 2916-KAZ (Regular Ordinary Capital Resources) 3. Project title CAREC Corridor 3 (Shymkent–Tashkent Section) Road Improvement Project 4. Borrower Republic of Kazakhstan 5. Executing agency Ministry of Transport and Communications (changed to Ministry of Investments and Development) 6. Amount of loan Original: $125.00 million 7. Project completion report number 1695 8. Financing modality Project Loan
B. Loan Data 1. Fact-Finding – Date started 24 April 2012 – Date completed 4 May 2012 2. Loan negotiations – Date started 16 August 2012 – Date completed 22 August 2012 3. Date of Board approval 5 October 2012 4. Date of loan agreement 28 May 2013 5. Date of loan effectiveness – In loan agreement 26 August 2013 – Actual 27 November 2013 – Number of extensions 1 6. Project completion date – Appraisal 31 December 2015 – Actual 26 September 2016 7. Loan closing date – In loan agreement 30 June 2016 – Actual 30 June 2016 – Number of extensions 0 8. Financial closing date – Actual 31 October 2016 9. Terms of loan – Interest rate London interbank offered rate (LIBOR) +0.60% per annum as provided by Section 3.02 of the Loan Regulations, less a credit of 0.20% as provided in Section 3.03 of the Loan Regulations 0.15% per annum – Commitment charge 0 – Maturity (number of years) 20 – Grace period (number of years) 4 10. Terms of relending (if any) Not applicable
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11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 18 December 2013 31 October 2016 34.4
Effective Date Actual Closing Date Time Interval 27 November 2013 30 June 2016 31
b. Amount ($ million) Increased Canceled Last Original during during Revised Amount Undisburseda Allocation Implementation Implementation Allocation Disbursed Balance Category (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) Works 111.00 0.00 33.02 77.98 77.96 0.02 Consulting 3.00 0.00 0.28 2.72 2.72 0.00 Services Contingencies 11.00 0.00 11.00 0.00 0.00 0.00 Total 125.00 0.00 44.30 80.70 80.68 0.02 a The undisbursed balance was canceled at loan financial closing on 31 October 2016. C. Project Data 1. Project cost ($ million) Cost Appraisal Estimatea Actual Foreign exchange cost 371.20 218.61 Total 371.20 218.61 a The project was not split into foreign exchange cost and local currency cost categories at appraisal. 2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation cost Government of Kazakhstan-financed 45.40 15.93 ADB-financed (km 705–742, 37 km) 114.00 80.68 EBRD-financed (km 742–804, 62 km) 179.10 122.00 Total implementation cost 338.50 218.61 Contingencies Government of Kazakhstan-financed 4.30 0.00 ADB-financed 11.00 0.00 EBRD-financed 17.40 0.00 Total interest during construction cost 32.70 0.00 ADB = Asian Development Bank, EBRD = European Bank for Reconstruction and Development, km = kilometer.
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3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual A. Base Costa 1. Civil Works a. km 705–742, 37 km (ADB) 111.00 77.96 b. km 742–804, 62 km (EBRD) 173.30 120.20 2. Consultants a. Construction supervision and external 3.00 2.72 safeguards monitoring (ADB) – b. Construction supervision (EBRD) 4.70 1.80 c. Institutional development (EBRD) 1.10 0.00 3. Taxes and duties 45.40 15.93 Subtotal Base Cost (A) 338.50 218.61 B. Contingenciesb 1. ADB 11.00 0.00 2. EBRD 17.40 0.00 3. Government 4.30 0.00 Subtotal Contingencies (B) 32.70 0.00 Total Project Cost (A+B) 371.20 218.61 ADB = Asian Development Bank, EBRD = European Bank for Reconstruction and Development, km = kilometer a In mid-2012 prices. b Contingencies for price escalation include a reserve for possible changes in the exchange rate from the current rate $1=T150. Physical contingencies are computed at 7% for civil works. Sources: Ministry of Transport and Communications, Ministry of Investments and Development, ADB estimates and loan financial information system.
4. Project schedule Item Appraisal Estimate Actual Date of contract with consultants (ADB financed) – Construction Supervision, Contract CSP 1 Q2/2013 18 June 2014 – Safeguards Monitor, Contract CSP 2 Q3/2015 28 October 2015 Completion of engineering designsa Civil works contract Date of award Q2/2013 28 November 2013 Completion of work Q4/2015 30 June 2016 a The Ministry of Transport and Communications (MOTC) conducted the feasibility study and design preparation in 2008. Under ADB TA 8068, the consultant studied the existing designs and reviewed the preliminary design for the feasibility study in 2012.
5. Project performance report ratings Implementation Period Rating From Q4 2013 to Q4 2013 On track From Q1 2014 to Q4 2014 On track From Q1 2015 to Q4 2015 On track From Q1 2016 to Q4 2016 On track Q = quarter.
D. Data on Asian Development Bank Missions No. of No. of Specialization of Name of Missiona Date Persons Person-Days Membersb Fact-finding 24 April–4 May 2012 6 66 a, c, e, f, j Consultation 1 3–12 April 2013 3 33 a, h, j Consultation 2 3–11 June 2013 3 27 a, h, j Country safeguards review 5–15 September 2013 2 22 e, d Inception 21–30 October 2013 5 50 a, d, h Review 1 19–24 May 2014 3 18 a, j Safeguards monitoring 8–11 July 2014 4 16 d, e, j Review 2 29 September– 5 30 a, b, c, h, j 4 October 2014 Review 3 25 February–11 March 2015 5 75 a, h, j, k
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Review 4 25–30 May 2015 8 48 a, e, f, h, I, k Review 5 12–23 October 2015 1 12 b Consultation 3 14–25 January 2016 1 12 b Pre-project completion review 27–28 May 2017 4 8 a(2), h, l Project completion review 21–25 May 2018
a Missions were combined with other Kazakhstan projects. b a = transport specialist, b = director, c = senior advisor, d = principal social development specialist (safeguards), e = environment specialist, f = social development specialist (safeguards), g = lead portfolio specialist, h = project officer, i = associate project officer, j = operations analyst, k = safeguards consultants, l = CWTC Regional Technical Assistance consultant
I. PROJECT DESCRIPTION
1. The Central Asia Regional Economic Cooperation (CAREC) Corridor 3 is one of six priority transport corridors being developed under the CAREC Transport and Trade Facilitation Strategy (2007). It comprises 6,900 kilometers (km) of roads and 4,800 km of railways, running from the West and South Siberian regions of the Russian Federation through Kazakhstan, the Kyrgyz Republic, Tajikistan, Uzbekistan, Turkmenistan, and Afghanistan to the Middle East and South Asia. The Shymkent–Tashkent road section is part of the CAREC Corridor 3, commencing from Shymkent City bypass and extending towards the Uzbekistan border. It connects with the CAREC Corridor 1, linking Western Europe with the People’s Republic of China. Therefore, the Shymkent (Kazakhstan)–Tashkent (Uzbekistan) Section Road is an important conduit for regional and international traffic.
2. The Shymkent–Tashkent Section Road Improvement Project aimed to rehabilitate a 37 km road section of the CAREC Corridor 3, which is a main transport artery in South Kazakhstan.1 The rationale for the project originated from (i) the below average economic and social performance of South Kazakhstan; (ii) the regional significance of the project road at the junction of two CAREC corridors; and (iii) the dilapidated physical condition of the project road, which impeded economic development of South Kazakhstan economy and regional economic cooperation with Uzbekistan and other Central Asian countries. In parallel with Asian Development Bank (ADB) financing, the European Bank for Reconstruction and Development (EBRD) funded the rehabilitation of the remaining 62 km of the Shymkent–Tashkent road section and provided institutional development assistance.
3. ADB approved a $125 million loan to finance the rehabilitation of the project road on 5 October 2012. The overall impact and outcome expected under the project was the development of a more efficient transport network in the South Kazakhstan section of the CAREC Corridor 3 and, subsequently, the enhancement of closer regional cooperation and increased trade along the CAREC Corridor 3. The output was the rehabilitation of a 37 km (from km 705 to km 742) four-lane category 1 bitumen road section connecting Shymkent to Tashkent to a cement- concrete road of the same category without a major change in alignment. The design and monitoring framework for the ADB-financed project is in Appendix 1.
II. DESIGN AND IMPLEMENTATION
A. Project Design and Formulation
4. The project’s original design was relevant at appraisal. It was consistent with the government’s priority road investment program, which was defined in the medium-term Road Development Program, 2006–2012.2 The road development program was part of the National Transport Strategy, 2006–2015 to address the core problems of the transport sector.3 The project was also aligned with the CAREC program, which emphasizes regional cooperation in the areas of transport, energy, and trade facilitation. The project road was along CAREC Corridor 3,
1 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of Kazakhstan for the Central Asia Regional Economic Corridor 3 (Shymkent–Tashkent Section). Manila (Loan 2916- KAZ, approved on 5 October 2012, for $125 million). 2 Government of Kazakhstan, Ministry of Transport and Communications. 2006. Road Development Program for 2006–2012. Astana. 3 Government of Kazakhstan, Decree of the President of the Republic of Kazakhstan. 2006. Transport Sector Strategy of the Republic of Kazakhstan up to 2015. Astana.
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connecting to the CAREC Corridor 1, two of the six corridors included in the CAREC Transport and Trade Facilitation Strategy, endorsed by the CAREC members in 2007.4
5. In 2010, the Government of Kazakhstan adopted the 2020 Strategy for Economic Development and the State Program for Accelerated Industrial-Innovative Development to diversify the economy and promote balanced regional development.5 Shymkent, South Kazakhstan’s capital, with a population of about 0.6 million in 2011, was designated a national growth center. Improving the Shymkent–Tashkent road complemented the national development activities at the regional level and contributed to achieving the objective of the state program for accelerated development in Kazakhstan.
6. The government conducted a feasibility study on the road section of Shymkent – Tashkent in 2008. Following that study, the Ministry of Transport and Communications (MOTC), then the executing agency, carried out preparatory work for the project. However, extra work was needed to undertake the economic analysis, safeguards’ due diligence, and advance procurement. As a result, ADB approved a small-scale project preparation technical assistance (TA) financed on a grant basis, which commenced in April 2012, to prepare the project.6 Due diligence work by ADB’s TA consultants covered technical, economic and financial, governance, poverty and social, and safeguards aspects, the preparation of project implementation and financing plan, and procurement documents for civil works and construction supervision consultant (CSC). The South Kazakhstan Road Department supported the TA consultants with all the documents of the studies undertaken by the government.
7. At completion, the project design is substantially the same. It remains relevant as the project continues to be consistent with the (i) Kazakhstan Infrastructure Development Plan, 2014– 2020, which aims to develop the transport infrastructure and to integrate it into the global transport system;7 (ii) the ADB country partnership strategy, 2018–2021, which supports modernizing the transport and logistics systems of Kazakhstan;8 and (iii) the CAREC Transport and Trade Facilitation Strategy 2020, which emphasizes a more integrated approach to improving transport and logistics infrastructure, and facilitating trade and transport.9
B. Project Outputs
8. During the project appraisal, the project output envisaged was the rehabilitation of a 37 km four-lane asphalt-paved category 1 road section commencing from km 705 at the end point of the Shymkent City bypass up to km 742 connecting to Tashkent, the capital of Uzbekistan. The designed width of the road was 27.5 meters. The proposed pavement design was cement- concrete. The project road section was to be rehabilitated to an International Roughness Index (IRI) of less than 3 m/km down from an IRI of 5 m/km before rehabilitation.
9. At completion, the contractor achieved the key project output—the 37.5 km four-lane road section was rehabilitated to a category 1 road standard with a 27-centimeter thick unreinforced
4 CAREC. 2007. CAREC Transport and Trade Facilitation Strategy. Manila. 5 Government of Kazakhstan. 2010. State Program on Accelerated Industrial-Innovative Development. Astana. 6 Under the TA, six consultants were engaged: transport economist, highway engineer, procurement consultant, social safeguard and poverty/gender consultant (international), and environmental consultant (national). 7 In 2013, Kazakhstan approved a large-scale infrastructure development plan for 2014–2020, which was partially developed with World Bank’s assistance. 8 ADB. 2017. Country Partnership Strategy: Kazakhstan, 2018–2021. Manila. 9 ADB. 2014. CAREC Transport and Trade Facilitation Strategy 2020. Manila. CAREC countries (including Kazakhstan) endorsed this strategy at the 12th CAREC Ministerial Conference, held in Astana, Kazakhstan, in October 2013.
3 cement-concrete wearing/riding course placed over a 20-cm thick cement treated base-course layer and subsequent sublayers of pavement, with improved vertical gradients, and improved horizontal alignment and road safety. The contractor engaged the technical specialist company Kazakh Road Academy to carry out IRI evaluation of the road. The results gave an IRI value of between 1.99–2.46 m/km for the project road, which complied with the technical requirement of an IRI value of less than 3 m/km.
10. The road alignment followed the existing alignment with minor changes in horizontal and vertical gradients to improve road safety. The most significant change in the scope of the project work was between km 732 and km 734 at the Kazygurt Pass. The original design maintained the road gradient at 6%–7% and utilized retaining walls through the cutting for slopes protection. This was changed through an approved variation order to reduce the vertical gradient to a maximum of 5.5%. Retaining walls were deleted and slope protection with geogrid was implemented. This significantly increased the safety and accessibility of this road section, especially for commercial heavy goods vehicles. The contractor also completed the construction of seven animal and/or pedestrian underpasses for the project. Three of these were additional underpasses installed at the request of residents and authorities.
11. The original design included the use of a stone mastic asphalt (SMA) pavement for the Kazygurt Pass from km 731 to km 733.6, to ensure better road traction during the winter period. As a result of the lowering of the vertical gradient, the SMA was changed to a cement-concrete pavement to match the remainder of the road.
C. Project Costs and Financing
12. At appraisal, the total project cost was approximately $371.2 million equivalent, inclusive of taxes and duties (Appendix 2). The government requested a loan of $196.5 million from EBRD and $125 million from ADB to help finance the project. The government contributed the remaining $49.7 million.
13. ADB financing of $125 million, included $111.0 million (or 85% of the total amount for the civil works category); $3.0 million (or 100% of the total amount for the consulting services category, net of taxes); and $11.0 million for physical contingencies of the civil works category. EBRD financing of $196.5 million included $173.3 million (100% of the total amount for the civil works category, net of taxes); $4.7 million (100% of the total amount for the consulting services category, net of taxes); $1.1 million for institutional development; and $17.4 million for physical contingencies of the civil works category. The government counterpart financing was $49.7 million—$19.6 million for civil works at the ADB-financed section (which included $15.6 million of taxes and duties for civil works), $25.8 million for taxes and duties at the EBRD section, and $4.3 million for contingencies, including a reserve for possible changes in the exchange rate between the dollar and the tenge. Project cost by financier is in Appendix 3.
14. At completion, the total project cost was $218.61 million. ADB financing amounted to $80.68 million—$77.96 million for civil works and $2.72 million for consulting services. EBRD financing amounted to $122.00 million—$120.20 for civil works and $1.80 million for the construction supervision consultant. Government financing amounted to $15.93 million for taxes and duties.
15. During the implementation of the ADB-financed project, the Government of Kazakhstan proposed a partial loan cancellation of $40 million effective 23 July 2014. This amount was considered loan savings after taking into account the contract awards and potential contract
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variations. The government requested a second partial cancellation of loan proceeds amounting to $4.3 million effective 19 July 2016 to save on commitment charges as this amount was also considered loan savings after taking into account the final adjustments in the bills of quantities and final payments, including the release of retention money. This reduced the loan amount to $80.7 million.
16. The civil works contract was priced in Kazakhstan tenge (T). The accepted contract amount was T12.59 billion ($82.26 million equivalent), including provisional sum and value added tax (VAT). ADB financing (85% of the category) was T10.69 billion ($69.84 million equivalent). During implementation, contract variations were approved totaling T1.52 billion, or 12% of the accepted contract amount. Variations in the works contract under the ADB-financed project resulted from changes in scope and design and from ancillary facilities to adjust to the actual conditions and needs of the local population, including installing additional animal and pedestrian underpasses, culverts, and accessibility and road safety facilities. The revised contract amount was T14.10 billion ($92.16 million equivalent) including VAT. ADB financing (85% of the category) was T11.98 billion ($78.26 million equivalent).
17. The key factor contributing to the significant savings in the civil works contract was the strong market competition among the contractors, who had been engaged in road construction activities in Kazakhstan along the CAREC Corridor 1. Several companies established local operational bases and had available equipment and personnel in Kazakhstan to compete for new road infrastructure development projects through significant price discounts.
18. The accepted contract amount awarded to the CSC was $3.48 million including taxes, with the amount of ADB financing of $3.11 million. Three variation orders were issued during the implementation period. At completion, the final contract amount disbursed for consulting services was $2.72 million. Appendix 4 shows the project contract packages, approved variations, and revised contract amounts.
D. Disbursements
19. Disbursement of ADB loan proceeds followed ADB Loan Disbursement Handbook (2012, as amended from time to time) and detailed arrangements agreed upon between the Government of Kazakhstan and ADB. The direct payment procedure was used for civil works and consulting services contracts. No imprest account was required. A financial unit established within the Committee of Roads (COR) by the Ministry of Investments and Development (MID) in coordination with the Ministry of Finance (MOF), was assigned to facilitate prompt disbursements.
20. The project experienced start-up delays of 14 months mainly caused by the delayed signing of the loan agreement and late declaration of loan effectiveness due to the government’s internal procedures. Advance action for procurement of civil works and recruitment of consulting services was approved under the project. The civil works and construction supervision consultant contracts were signed after loan effectiveness was declared. A delay in the progress of works was experienced in the first half of 2014 due to the slow mobilization by the contractor of its equipment and personnel, but the contractor made considerable progress with the execution of works once it mobilized. The contractor was active in submitting notices of claims under the contract. The civil works contract was awarded in Kazakhstan tenge, but all payments to the contractor were in United States dollars, at the fixed rate of T153.03=$1; hence, the contractor was not affected by the devaluation of tenge.
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21. No major problem on disbursement was experienced under the project. All withdrawal applications to be paid in 2014 up to 2016 were received by ADB Controller’s Department, with complete documents and endorsements required for processing, on or before the cut-off date set for each year. At project completion, ADB had disbursed a total of $80.68 million—$77.96 million for civil works and $2.72 million for consulting services. The amount of $44.30 million was canceled from the original loan amount due to savings, and an undisbursed/unutilized balance of $0.02 million was canceled at loan financial closing.
22. MID, through the Committee of Roads (COR), submitted the annual disbursement projections and contract awards projections to ADB. To reflect the delays in loan signing and declaration of effectiveness and procurement, ADB advised COR to revise the contract award and disbursement projections for 2014 and to closely monitor the disbursement targets and revise contract awards and disbursement projections for 2015 up to the closing date of the project. The disbursement and contract awards of ADB loan proceeds are in Appendixes 5 and 6.
23. COR set up and maintained a separate project financial account for the financial management of disbursements. MOF financed the engagement of an independent auditor to audit the financial accounts annually. All audited project financial statements from FY2013 to FY2016 were submitted on time and were acceptable to ADB.
E. Project Schedule
24. The loan was approved on 5 October 2012. The loan agreement was signed on 28 May 2013, and the project was declared effective on 27 November 2013. The project experienced start-up delays due to the delayed signing of the loan agreement and late declaration of effectiveness of 14 months mainly caused by the government’s internal procedures. The civil works contract was signed on 28 November 2013 with a notice to commence issued on 18 February 2014 but works only commenced in May 2014, after the contractor had resolved its equipment, materials, and personnel issues.
25. The civil works contract was expected to be completed within 510 days, with an estimated completion on 13 June 2015. However, the works were prolonged due to a limited working season, change in the scope of works at the Kazygurt Pass (km 732–km 734), delay in mobilizing two paving machines for the cement-treated base, and other factors. Furthermore, the contractor also encountered a harder layer of cement treated base-course under the existing asphalt layer. The contract was extended until 22 June 2016. The works for the ADB-financed project were substantially completed on 30 June 2016, which was also the loan closing date. The ADB project was financially closed on 30 October 2016, following the winding-up period of four months.
26. To allow for the completion of the remaining tasks to be implemented, the contractor was granted a further extension of the completion time until 26 September 2016. The government financed the cost of works and consulting services during this time extension. The taking-over certificate was issued on 20 September 2016 and the statement of completion was forwarded to the executing agency on 22 October 2016. The 24-month defects liability period (DLP) commenced on 20 September 2016. The project implementation schedule is in Appendix 9.
F. Implementation Arrangements
27. At the project start, the Ministry of Transport and Communications (MOTC) was the executing agency, with the Committee of Roads (COR), as the implementing agency. With the reorganization of the Government of Kazakhstan on 6 August 2014, the executing agency was
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changed to the Ministry of Investments and Development (MID), a newly-established ministry, which absorbed the functions of the abolished MOTC. Under the revised set-up, the COR remained the implementing agency under the MID. The MOTC established the project management unit (PMU) within COR to manage the project. The PMU was composed of technical, financial, and administrative staff. While the PMU had a few experienced staff members, the project’s construction supervision consultant (CSC) assisted the PMU in managing daily project implementation activities. The COR appointed its South Kazakhstan Oblast branch Ontustykzhollaboratory (South Kazakhstan Road Laboratory) as the local representative to manage the project on a day-to-day basis. SMEC International Pty. Ltd. in association with Zhol Sapa LLP was the CSC and worked closely with the South Kazakhstan COR in implementing the project and monitoring project activities. The KazAvtoZhol Joint Stock Company (through its Shymkent Branch) also represented COR in handling safeguards issues and in monitoring safeguards compliance and the progress of works.10
G. Consultant Recruitment and Procurement
28. On 26 July 2012, prior to the loan approval, ADB approved advance contracting for the recruitment of consultants and procurement of civil works. The advance contracting notice was posted on the ADB website on 20 August 2012. This was followed by advertising invitation for bids and the consulting services recruitment notice. Recruitment of the consultant followed ADB Guidelines on the Use of Consultants (2010, as amended from time to time). A consulting firm for construction supervision was engaged using the quality- and cost-based selection procedure with a standard quality-cost ratio of 90:10 and with a full technical proposal. During appraisal, the CSC contract was estimated to be awarded in Q2 2013, but due to the delay with the loan effectiveness, the CSC contract was signed on 18 June 2014. The contract was awarded to SMEC International Pty. Ltd. (Australia) in association with Zhol Sapa LLP. Consultancy services under the ADB- financed project were completed on 30 June 2016 but were extended until the end of the defects liability period (19 September 2018) under the government financing.
29. The procurement of civil works followed the ADB Procurement Guidelines (2010, as amended from time to time). The civil works contract was procured through international competitive bidding without pre-qualification of bidders, with a single-stage one-envelope procurement procedure. The safeguards requirements under the ADB Safeguards Policy Statement (SPS; 2009) and relevant sections of the ADB Anticorruption Policy (1998, as amended to date) were included in the bidding document and in the contract. The contract was awarded to the Joint Venture of Todini (Italy), Impregilo (Italy), and Akkord Industry Construction Investment Corporation (Azerbaijan). The contractor completed the project with a 14-month delay, partially due to the additional works at the Kazygurt Pass and other additional works, and partially due to the contractor’s own operational issues.
30. The most significant change in the scope of the project works was between km 732 and km 734 at the Kazygurt Pass. The original design maintained the road gradient at 6%–7% and utilized retaining walls through the cutting for slopes protection. During construction, the contractor encountered a layer of underground waters at the level of the realigned road. Accordingly, the vertical alignment was changed through an approved variation order to reduce the vertical gradient to a maximum of 5.5%. Retaining walls were deleted and slope protection using geogrid was implemented. This change in design increased the volume of earthworks; slope
10 KazAvtoZhol Joint Stock Company (JSC) was established in February 2013 as the national road operator. On 27 October 2015, the law on the national road operator was amended, declaring KazAvtoZhol JSC the sole operator for the (i) repair and maintenance of national highways, as well as project management and (ii) development of road infrastructure.
7 protection was altered by deleting the planned concrete retaining walls and providing slopes with batters through the Kazygurt Pass. The original design included the use of stone mastic asphalt (SMA) pavement for the Kazygurt Pass road section (km 731–km 733.6). However, as a result of the change in the vertical gradient, the design was changed to a cement-concrete pavement to match the remainder of the road.
31. The take-over certificate for the road was issued on 20 September 2016, 3 months after the closing of the ADB loan. The Government of Kazakhstan financed minor outstanding civil works after the closing of the ADB loan on 30 June 2016. The road is under the 2-year defects liability period (DLP) until 19 September 2018. Several project sites require rectification works. Until the end of the DLP period, the contractor shall rectify minor spalling defects of the cement- concrete pavement surface, which chips or peels away. The main cause of spalling (or scaling) is the variability of the concrete pouring process, the temperature conditions during the concrete pouring process, and the variability of the cement used. Aggressive snow-removal agents used during winter maintenance operations and a constant freeze–thaw winter cycle could have also contributed to these defects.
H. Safeguards
32. Environment. At appraisal, the project was classified B for the environment. An initial environmental examination was prepared and disclosed in July 2012, in accordance with the SPS, 2009 to foresee any potential environmental impacts and recommend mitigation measures for implementation during project design, construction, and operation. The major environmental impacts of the project took place during construction and included air and water pollution, noise, soil erosion, construction and domestic waste, occupational health and safety, cutting of trees, and disruptions and utilities relocation, occurring mainly during construction. The initial environmental examination also provided adequate mitigation measures through an environmental management plan (EMP) developed by the contractor. The contractor carried out environmental monitoring on a monthly basis for noise, air quality, water quality, soil quality, and radiation levels at key construction locations. The contractor conducted investigations and assessment of compliance using an expanded or updated EMP and reported results in environmental monitoring reports. These reports included monitoring data and laboratory analysis of the selected parameters, field inspections, and work by the specialist consultant of the CSC in coordination with the contractor, to maintain compliance with environmental and social safeguards. Four half-yearly environmental monitoring reports were disclosed on the ADB website.
33. The contractor employed a full-time environmental officer and regularly submitted the following reports: a monthly environmental monitoring report beginning May 2014 to August 2016; half-yearly environmental monitoring reports, the first up to December 2014 and the last for January–June 2016; and a final monitoring report in September 2016, which documented the completion of the environmental management and monitoring activities and the final two months of site rehabilitation and clean-up works during July–August 2016. The contractor’s environmental performance was considered satisfactory. All air, soils, water, radiation, and noise emissions monitoring results throughout the project period were consistently within the acceptable range in accordance with Kazakhstan legal standards.
34. Involuntary resettlement. At appraisal, the ADB project was initially classified category C for involuntary resettlement, while the EBRD-financed section was category A. MOTC reported that the ADB project would not involve land acquisition or involuntary resettlement. Land acquisition was reportedly limited to the section financed by EBRD. Due diligence conducted on
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the ADB-financed project (km 705–km 742) confirmed that civil works would not cause any land acquisition or resettlement impacts, as all works would be undertaken within the existing right-of- way and no structures were located within the corridor of impact. In accordance with the ADB SPS, 2009, a land acquisition and resettlement framework (LARF) was prepared. The South Kazakhstan branch of COR was responsible for addressing all LAR-related issues and grievances from the project. Its capacity for land acquisition and resettlement (LAR) has been strengthened through the implementation of the multitranche financing facility for CAREC Transport Corridor 1 (Zhambyl Oblast section; Western Europe–Western People’s Republic of China International Transit Corridor) Investment Program11.
35. In May 2014, at the beginning of the construction period, there were times when access to businesses along the project road could have been impacted; thus, temporary access points were installed to these businesses. Following ADB recommendations, the project was temporarily reclassified as category B for involuntary resettlement. Interviews and discussions with all potentially impacted businesses along the project road showed that, although there were inconveniences caused by temporary access roads during construction, there were no claims for compensation provided that roadside businesses were given good, safe, and permanent access to the new road. This was reported in the due diligence report dated June 2016 and, on the basis of this report, ADB was requested to reclassify the project back to the category C. ADB safeguards review mission of 17 August 2016 confirmed that all businesses were provided with good and safe access to the rehabilitated road and local owners confirmed that they were fully satisfied.
I. Monitoring and Reporting
36. The project complied with all the major covenants required by the loan agreement and the project administration manual (PAM). The government ensured that (i) counterpart funds were provided in a timely manner; (ii) all stakeholders complied with the environmental and social safeguards covered under the laws of the Government of Kazakhstan and ADB’s SPS, 2009; and (iii) the civil works contractor complied with social safeguards requirements (i.e., labor, health and safety, land acquisition and resettlement, complaints and grievances, gender, and benefits to poor people) during construction and operations. The status of compliance with major loan covenants is in Appendix 8.
37. COR established a project performance monitoring system (PPMS). The PMU was responsible for the daily monitoring, reporting, and evaluation of the progress and, with assistance from the CSC, developed the PPMS. The loan covenants on policy, legal, financial, economic, environmental, and labor standards were regularly monitored, and progress and compliance reported through monthly progress reports, quarterly progress reports, and annual reports. The monitoring of gender issues actions and progress in addressing the gender-related aspects of the project were integrated into the project performance monitoring indicators.
38. The CSC prepared monthly and quarterly progress reports, six monthly environmental monitoring reports, four half-yearly environmental monitoring reports, due diligence reports on social and resettlement issues, and the final PPMS report. ADB fielded regular review missions to discuss implementation progress and assess project implementation, including procurement,
11 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility and Administration of Loan to the Republic of Kazakhstan for the CAREC Transport Corridor 1 (Zhambyl Oblast Section) Investment Program. [Western Europe–Western People’s Republic of China International Transit Corridor]. Manila.
9 civil works, financing status, and environmental and social safeguards, based on the quarterly progress reports.
39. MOF maintained separate accounts and records for the project, which were subjected to an annual audit by an independent auditor engaged with the agreement of ADB. The audited project accounts and financial statements were submitted to ADB within six months after the end of each fiscal year. The annual audit reports for FY2013, FY2015 and FY2016 were acceptable to ADB. For the audit report for FY2014, ADB requested MOF for additional auditor’s opinion on the use of loan proceeds, which MOF promptly submitted.
III. EVALUATION OF PERFORMANCE
A. Relevance
40. The project is rated highly relevant at both appraisal and completion. At appraisal and at completion the intended project outcome of building an efficient transport network in southern Kazakhstan in close partnership with ADB and other development partners, was strategically aligned with the national development strategies; ADB country partnership strategies (2012–2016 and 2017–2021), and CAREC Transport and Trade Facilitation Strategy 2020. The project was well aligned with other road infrastructure development projects along CAREC Corridors 1 and 3 implemented by the Government of Kazakhstan in cooperation with several development partners. Accordingly, the project helped establish much better regional connectivity within southern and south-eastern Kazakhstan and regional connectivity with the People’s Republic of China on the east, Russia on the north-west, and other Central Asian countries on the south. The project design was appropriate in achieving the intended outcomes, and the development monitoring framework (DMF) indicators and targets were relevant, measurable and achievable.
41. In 2016 the Government of Uzbekistan started profound economic and social reforms and, in 2017, significantly improved its political, economic, and social ties with all its neighboring countries. Kazakhstan and Uzbekistan amended their bilateral cross-border transport agreement, to boost direct private and commercial passenger transportation between the two countries. Uzbekistan amended its customs regulation, allowing its residents to import commercial goods purchased in Kazakhstan up to a value not exceeding $300 without customs clearance. Furthermore, Kazakhstan and Uzbekistan agreed to create favorable conditions for bilateral trade, with plans to increase the bilateral trade from $2 billion in 2017 to $3 billion in 2018 and $5 billion by 2020.12 Approximately one-third of this trade is registered in Southern Kazakhstan, with cargo following the CAREC Corridor 3. The completed road will play an important role in achieving those ambitious targets. Accordingly, the project is rated highly relevant.
B. Effectiveness
42. The project is rated effective as the outcomes and outputs originally set had been achieved at completion. The project outcome is an efficient transport network in the South Kazakhstan section of the CAREC Corridor 3 and, subsequently, the enhancement of closer regional cooperation and increased trade along the CAREC Corridor 3. Upon completion, a 37.5 km four-lane road section from Tashkent to Shymkent, together with the 62 km of road financed
12 Government of Kazakhstan. 2018. Kazakhstan–Uzbekistan: Strong trade and economic cooperation. Decisions of 17th Meeting of the Joint Intergovernmental Commission on Bilateral Cooperation between Kazakhstan and Uzbekistan. Astana. 14 March 2018.
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by EBRD, had been rehabilitated to a category 1 standard, with technical requirement of an IRI value of less than 3 m/km from the original IRI of 5 m/km.
43. The expectation was that an improved road with a dual divided carriageway should create the conditions for road users to reach their destinations faster. It was expected that the average speed along the project road would increase from 60 km/hour to 80 km/hour. The speed recorded along the project road in December 2014 varied between 36.8 km/hour and 95.5 km/hour. Along the whole road from Shymkent to Tashkent, the average speed was 57.5 km/hour. In March 2016, speed recorded along the same stretch of road varied between 75.8 km/hour and 94.1 km/hour. The average speed was calculated at 80.6 km/hour, or 0.6 km/hour above the baseline forecast figure. Therefore, the goal of increasing travel speed 20 km/hour from 60 km/hour to 80 km/hour was achieved.
44. Different types of vehicles pass through the project road each day, including motor cars, minibuses, motorcycles, trucks, trailers, and tractors. Based on several manual traffic counts over 24-hour periods at the start of the project road (Shymkent to Tashkent and Tashkent to Shymkent), COR estimated that average daily traffic had increased from 8,000 to 16,000 vehicles in 2016, including 13,000 passenger cars and minibuses, 400 buses and 2800 small, medium and large freight trucks.13
C. Efficiency
45. The project is rated efficient in achieving its intended outcome and output and remained economically viable at completion. The procedure of loan signing and effectiveness took 14 months, which delayed the procurement of civil works. Upon loan effectiveness, the civil works contract was immediately awarded. Despite the start-up delays, the project was adjusted for the actual start of implementation and operation, and the project was completed within the loan closing period and with significant savings.
46. The economic internal rate of return (EIRR) of the project was reevaluated using the updated date and the same methodology used at appraisal to assess the efficiency of the project. The economic benefits were calculated by comparing the with-project and without-project cases, including savings in vehicle operating costs and savings in passenger travel time costs. The EIRR was calculated at 16.8% at completion. The recalculated EIRR is higher than that estimated at appraisal (15.9%), which was mainly caused by higher predicted traffic growth rates in future years following recent increases in regional trade volumes. The EIRR is above the ADB recommended discount rate of 12% at appraisal. The project is therefore considered to be economically viable. The EIRR was subjected to a sensitivity analysis to test different scenarios of maintenance costs and benefits. The results of the sensitivity analysis indicated that the project continued to be economically viable for all tested scenarios. Details of the economic reevaluation are in Appendix 9.
D. Sustainability
47. The project is rated likely sustainable. The sustainability of the road rehabilitation depends on (i) the quality of the design and construction; (ii) the enforcement of vehicle and axle load regulations; and (iii) appropriate financial, organizational, and operational arrangements for road maintenance. All three components were sufficiently well addressed at the national road
13 Government of Kazakhstan, Committee of Roads. 2016. Project Completion Final Report. Loan 2916-KAZ. CAREC Corridor 3 (Shymkent–Tashkent Section) Road Improvement Project. Astana.
11 management and project level. The project road was designed to meet the maximum transport engineering requirements of the road users. The road is designed for an axle load of 13 tons, while most heavy cargo vehicles carry loads of up to 10 tons per axle.14 MID’s Committee of Transport implemented an efficient enforcement mechanism to prevent the operation of overloaded vehicles on the Kazakhstan roads. In exceptional cases, oversized and overweight indivisible cargo is allowed, but the axle loads of the vehicles for transport of special cargo are not expected to exceed the axle load design specifications of the road. Accordingly, potential destruction of the road surface by overweight vehicles is minimized, which should allow for a long defect-free service life of the road.
48. Road maintenance. In October 2015, the Joint Stock Company (JSC) KazAvtoZhol was designated as the national road operator, responsible for the construction and maintenance of the national highway network. JSC KazAvtoZhol will take over the operations and maintenance (O&M) of the completed road section from Shymkent to Tashkent after the defects liability period. By 2022, JSC KazAvtoZhol is expected to become fully self-financing and capable of developing and maintaining the national highway network of 24,000 km. This will be achieved through tolling of 5,000 km of the national highways by 2020 and 10,000 km of the national highways by 2022. Toll revenue collected on those sections is expected to be sufficient to cover at least their own O&M costs. According to the government plans, the road section from Shymkent to Tashkent is going to be converted into a toll road. In 2018, JSC KazAvtoZhol was expected to complete the conversion of three national highways with a total length of 630 km into toll roads and prepare feasibility studies for the conversion of other priority roads, including the project road, into toll roads.
49. While toll revenue is expected to be sufficient to maintain tolled sections, the government has increased the overall allocation for road infrastructure development, and maintenance. Within the project implementation period from 2013 till 2018, the total financial allocation for road development and maintenance of the national road network increased from 0.64% to 0.72% of the gross domestic product (GDP), reaching its maximum of 0.84% of GDP in 2015, due to intensive construction works at key national highways. Since 2015, more attention was given to maintenance of the existing road assets than to new construction. The state budget for 2018 has T195.4 billion (0.34% of GDP) for road maintenance of the national and local networks and T216.3 (0.38%) for road construction and rehabilitation.
50. In addition to the nomination of JSC KazAvtoZhol as the national road operator and tolling of national highways, MID is restructuring road O&M through introducing other institutional reforms to establish robust market competition in road maintenance. As of August 2018, MID is preparing a pilot performance-based maintenance project planned for implementation with ADB financial and institutional support. Furthermore, there is a firm plan to privatize the national road maintenance company, KazAvtoDor, and establish strong market competition in this sector within the next 3–5 years.
51. Road safety. Several road incidents were recorded on the road during construction and in the initial period after full commissioning into operation. It took time for road users to adjust to faster driving on the concrete-cement surface, while COR, road police, and the contractor were completing road furniture, signs, and markings. Once those works were completed, no major accidents were recorded in 2018. The Government of Kazakhstan will convert this road into a toll
14 Decree of the Government of Kazakhstan #23 on effectiveness of the Agreement on weights and dimensions of vehicles performing international transportation on the CIS roads, Minsk, 4 June 1999. Government of Kazakhstan, 17 January 2003.
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road, which provides a good opportunity to implement road safety measures, such as the installation of average speed cameras.
E. Development Impact
52. The project road connects the Shymkent agglomeration—with a total population of over 1 million—with the densely populated districts along the border with Uzbekistan (Kyzygurt Maktaaral, Saryagash, and Tolebi). The road further connects across the border to Tashkent with its 2.5 million residents and Tashkent Oblast (4.5 million). Around 7 million residents of the Turkestan Region of Kazakhstan and the Tashkent Region of Uzbekistan directly benefit from opportunities to travel fast and safely along the newly rehabilitated road. The recent opening up of Uzbekistan to deeper regional economic cooperation and simplification of cross-border procedures for passengers and vehicles further reduced the economic distance between Shymkent and Tashkent. Since 2017, a direct cross-border trip between Shymkent and Tashkent in a comfortable bus takes 3–3.5 hours and costs under $10 one way.
53. The trade between Kazakhstan and Uzbekistan is growing fast. In 2017, the total volume of trade between Kazakhstan and Uzbekistan reached $2 billion, with $1.3 billion of export from Kazakhstan and $0.74 billion of export from Uzbekistan into Kazakhstan. In 2018 the governments of Kazakhstan and Uzbekistan set ambitious goals to create favorable conditions for the bilateral trade and investment and reach $3 billion of annual trade volume in 2018, increasing to $5 billion by 2020. The trade from Turkestan Oblast (Kazakhstan) with Uzbekistan along the CAREC Corridor 3 accounts for approximately one-third of the total bilateral trade between Kazakhstan and Uzbekistan. In 2017 it reached $714 million, with $273 million of export from the Turkestan Region to Uzbekistan and $441 million of export to the Turkestan region from Uzbekistan. A large share of trade from Uzbekistan is the importation of fruits and vegetables, which in 2017 reached 460,000 tons with a total value of $310 million.
54. The project delivered benefits to all users, including women. Although the project did not include gender design elements, reduced travel time and significantly increased traffic safety contributed to increasing female mobility. The new road with divided dual carriageway, safety barriers, and the high-quality surface can attract more female drivers, who used to avoid potentially risky intercity travel, to travel more and benefit from the new economic and social opportunities. During the project implementation, project consultants and contractors employed female managers and specialists under strict compliance with the nondiscriminatory treatment of female workers.
F. Performance of the Borrower and the Executing Agency
55. The overall performance of the borrower and the executing agency is rated satisfactory. The borrower was the Republic of Kazakhstan, represented by the MOF, and the executing agency was the MOTC, later changed to MID following a reorganization. MOF/MID allocated government counterpart funds and timely released payments for withdrawal applications. MOF/MID also provided the necessary budgetary and human resources to implement the EMP and the LARP. A project organization structure was established for efficient and timely project management. Under the overall guidance of the MID, COR as the implementing agency closely coordinated and monitored construction progress, as well as the quality control of physical works. The project director of the PMU and the South Kazakhstan Road Department, with assistance from the CSC, had overall responsibility for implementing and managing all on-site project activities, including project preparation, monitoring, and reporting, on behalf of COR. The project director was assisted by PMU staff with engineering, finance, legal, and procurement experience.
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The CSC assisted in supervising civil works construction to ensure compliance with approved designs and technical specifications, works schedule and budget, and ADB safeguards policy, ensuring the quality and timely completion of the construction works. The CSC also administered the civil works contract with regards to variations and progress claims.
56. COR established a project performance and monitoring system (PPMS) to examine the extent to which a project is achieving its intended purpose and objectives. A PPMS implementation plan was developed for the methodology to monitor performance and social safeguards during implementation. COR submitted to ADB a PPMS baseline data report and subsequent reports with updated data sets and analyses. The final PPMS report was submitted in September 2016. An environmental monitoring report (EMR) was prepared to report on environmental safeguards’ requirements and compliance with the loan agreement, project administration manual (PAM), Safeguards Policy Statement (SPS, 2009), and associated documents, as agreed between ADB and the Government of the Republic of Kazakhstan. The fourth (and final) half-yearly environmental report was submitted and disclosed in June 2016.
57. The MOF and MID effectively facilitated and fully supported ADB review missions during implementation and completion.
G. Performance of the Asian Development Bank
58. The overall performance of ADB was satisfactory. ADB assisted the government and executing agency in carrying out preparatory work. While the government and MOTC carried out the feasibility study, preliminary design, and other preparatory work, extra work was needed to undertake an economic and financial analysis, technical assessment, safeguards due diligence, poverty and social analysis, governance, and advance procurement. ADB provided and financed a small-scale project preparation technical assistance (TA) on a grant basis to prepare the project. During project implementation, ADB provided substantial and timely support to MOTC/MID and COR by (i) giving guidance in resolving implementation issues; (ii) expeditiously reviewing and approving contract variations so as not to delay works’ progress; (iii) promptly uploading withdrawal applications through eStar for faster disbursements;15 (iv) approving revised completion dates at the executing agency request; and (v) coaching the PMU staff on ADB guidelines on procurement, consultant recruitment, project administration, contract administration, disclosures, and disbursements, as requested.
59. ADB monitored the implementation progress and resolution of issues through project missions, progress reports, safeguards reports, and video and teleconferencing. ADB project review missions carried out site visits with COR and South Kazakhstan Road Department officials. In general, the communication and coordination between ADB, MID, and COR were smooth and effective.
H. Overall Assessment
60. The overall assessment of the project is successful, based on its assessment as highly relevant, effective, efficient, and likely to be sustainable
15 eStar is an electronic document repository for ADB documents.
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Preliminary Overall Ratings Criteria Rating Relevance Highly relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.
IV. ISSUES, LESSONS, AND RECOMMENDATIONS
A. Issues and Lessons
61. Operation and maintenance of the newly built cement-concrete road. The road is located in a climatic zone prone to regular freezing–thawing cycles in winter. The overall annual temperature ranges from –30° to +40°, with frequent sudden increases or drops in temperature within a short period of time. Under such conditions, concrete slabs experience intensive expansion and compression cycles, which negatively impact their service life and maintenance cost. COR expressed interest in a knowledge product, which would summarize the technical and financial implications of building and maintaining concrete roads in the climatic zone of South and South-East Kazakhstan. As the way forward to improve the service life of the newly built concrete road, COR is considering covering the concrete road sections of the Western Europe–Western China corridor with stone mastic asphalt (SMA) and the proposed analytical study would evaluate the options and timing for building an additional layer on top of the concrete. This study will be implemented within the CAREC Program framework.
62. Different understanding of price adjustment by the government. Under ADB procurement guidelines, civil works contracts exceeding 18 months shall include a price adjustment. National regulation is not harmonized with the standard conditions of contract established by the International Federation of Consulting Engineers (FIDIC), and the concept of price adjustment is not understood well by the authorities. Accordingly, the executing agencies of large-scale infrastructure projects in Kazakhstan decided on contracts’ duration not exceeding 18 months to avoid the price adjustment. The Shymkent–Tashkent road project was designed to be completed within 18 calendar months; however, even disregarding the long winter breaks, construction would require much longer than 18 months. Compression of the works program to fit the 18-month contractual period could have potentially contributed to a lower quality of works.
63. In 2016, the Internal State Auditing Committee of the Ministry of Finance initiated a review of all projects under Kazakhstan’s Western Europe–Western China Corridor investment program and determined that the application of price adjustment and contract variations were incorrect and led to an increase of the total cost of the investment program. The committee initiated legal action against the contractors. Following a court decision, in 2017, the Internal State Auditing Committee seized the project documents of all contractors employed under the investment program, including the contractors for the Shymkent–Tashkent road sections, even though their contracts did not include a price adjustment. Such interpretation of the FIDIC contracts and treatment of the international contractors can damage the reputation of Kazakhstan as an employer for large-scale civil works contracts. The issue may require attention from the involved international financial institutions.
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64. Projects financed by international financial institutions follow FIDIC conditions of contract As those contracts are normally not used for national construction projects, the borrowers do not understand them. Thus, additional due diligence and monitoring from the international financial institutions are required to ensure that the borrower and its executing agencies are familiar with and understand FIDIC contracts. During the project and loan preparation, international financial institutions could require preeminence of international legal practices over national legal practices in relation to the works and consultancy contracts and require that borrowers train and appoint senior legal advisors who can help resolve any concerns of the national legal and control authorities about international works and consultancy contracts.
B. Recommendations
65. Corridor management and safety. As part of operational maintenance reform, the completed road—along with other national highways—is being considered for conversion into a toll road. Along with tolling, MID can consider implementing integrated road management based on intelligent transport system solutions to enable better traffic planning and control and improve road safety and road asset management.
66. Future monitoring. Continuous monitoring of the number of accidents along the project road, their types, and reasons is required, which will help the government implement preventive road safety policy instruments, such as road safety blackspot programs, road safety awareness campaigns, average speed cameras and other methods of speed control.
67. Covenants. During the project implementation period, the road experienced a temporary increase in road accidents, including several fatal cases. Within the CAREC program framework, ADB and other development partners strongly recommend the application of modern road safety engineering practices, such as road safety audit of the detailed engineering designs and implementation of internationally acceptable road safety practices during the roadworks. Implementation of robust and modern road safety engineering practices during road works would have a long-lasting development impact after completion of the projects financed by international financial institutions, as borrowers can apply the same road safety engineering practices in maintenance works or national road development projects. Given the importance of road users’ and construction workers’ lives, road safety engineering practices deserve to be integrated into the project covenants. The covenants need to be specific in respect to the road safety engineering practices during civil works, which include requirements in the traffic management plan, the establishment of early warning and working zones, temporary signs and markings, and correct usage of user-friendly temporary barriers.
68. Timing of the project performance evaluation report. The project impact and outcome indicators have been essentially achieved. Accordingly, the project performance evaluation report can be prepared as early as in 2019.
16 Appendix 1
DESIGN AND MONITORING FRAMEWORK
Design Summary Performance Indicators and Targets Project Achievements Impact By 2018 Achieved. Closer regional cooperation and Volume of regional trade along CAREC Regional trade between South increased trade along CAREC Corridor 3 increased to $350 million Kazakhstan region and Uzbekistan Corridor 3 from $150 million in 2012 along CAREC Corridor 3 in 2017 was recorded at $714 million (export – $273 million, import – $441 million) Overall trade volume between Kazakhstan and Uzbekistan in 2017 reached $2 billion (export – $1.3 billion, import – $0.73 billion) Outcome By 2015 Achieved Efficient transport networks in the Average traffic volume from Shymkent Total number of vehicles per day – South Kazakhstan section of to Tashkent increased to 2,000 vpd 16,000 CAREC Corridor 3 from 1,000 vpd in 2011 Number of commercial vehicles per day – 3,200, including 400 buses, 2,800 trucks Travel speed improved by 20 km/hour from 60 km/hour in 2011 Achieved The average speed of traveling on the project road was calculated at 80.57 km per hour, or 0.57 km per hour above the forecasted figure of 80 km per hour, which reduces travel time along the section by 9 min with improved road safety conditions.
Outputs By 2015 Achieved A 37-kilometer road section from The project road section rehabilitated The IRI measured at the completion Shymkent toward Tashkent with IRI of less than 3 m/km from of pavement construction works, current IRI of 5 m/km based on a per-km measurement, was recorded as between 1.99 to 2.46
New road is designed for axle load of 13 ton/axle, new road safety medium barriers were installed. 11.9 km of roadside lighting and 7 underpasses were constructed.
Seven million people will benefit from Achieved the project Direct beneficiaries: Southern Kazakhstan (2.5 million), Tashkent oblast (4.5 million).
Source: Asian Development Bank, CAREC = Central Asia Regional Economic Cooperation; IRI = International Roughness Index; Km, km = kilometer; m = meter; T = tenge; vpd = vehicles per day
Appendix 2 17
PROJECT COST AT APPRAISAL AND ACTUAL ($ million) Appraisal Estimatea Actual Foreign Local Foreign Local Item Exchange Currency Total Cost Exchange Currency Total Cost A. Base Costs 1. Civil Works 284.30 303.90 198.16 0.00 198.16 a. Shymkent–Tashkent Section (km 705–742, 37 km) (ADB) 111.00 0.00 130.60 77.96 0.00 77.96 b. Shymkent–Tashkent Section 0.00 0.00 0.00 0.00 0.00 (km 742–804, 62 km) (EBRD) 173.30 0.00 173.30 120.20 0.00 120.20 2. Consulting Services 8.80 0.00 8.80 4.52 0.00 4.52 a. Construction Supervision and External Safeguards Monitor (ADB) 3.00 0.00 3.00 2.72 0.00 2.72 b. Construction Supervision (EBRD) 4.70 0.00 4.70 1.80 0.00 1.80 c. Institutional Development (EBRD) 1.10 0.00 1.10 0.00 0.00 0.00 Subtotal (A) 293.10 312.70 202.68 0.00 202.68 B. Taxes and Duties 1. ADB 0.00 0.00 0.00 0.00 0.00 0.00 2. EBRD 0.00 0.00 3. Government 45.40 0.00 45.40 15.93 0.00 15.93 Subtotal (B) 45.40 0.00 25.80 15.93 0.00 15.93 C. Contingencies 1. ADB 11.00 0.00 11.00 0.00 0.00 0.00 2. EBRD 17.40 0.00 17.40 0.00 0.00 0.00 3. Government 4.30 0.00 4.30 0.00 0.00 0.00 Subtotal (C) 32.70 0.00 32.70 0.00 0.00 0.00 Total (A)+(B)+(C) 371.20 0.00 371.20 218.61 0.00 218.61 ADB = Asian Development Bank; EBRD = European Bank for Reconstruction and Development; km = kilometer a Local cost financing is not applicable to the loan. Source: {Asian Development Bank estimates.}
18 Appendix 3
PROJECT COST BY FINANCIER
Table A3: Project Cost at Appraisal by Financier ($ million) ADB EBRD Government % of Cost % of Cost % of Cost Total Amount Category Amount Category Amount Category Cost Item A. Investment Costsa 1. Civil works (Shymkent–Tashkent) . a. km 705–km 742, 37 km 111.00 100.00% 0 0.00% 19.60b 100.00% 130.60 (ADB/Gov) . b. km 742–km 804, 62 km (EBRD) 0 0.00% 173.30 100.00% 0.00 0.00% 173.30 2. Consulting Services a. Construction supervision and 3.00 100.00% 0.00 0.00% 0.00 0.00% 3.00 safeguards monitor (ADB) b. Construction supervision (EBRD) 0.00 0.00% 4.70 100.00% 0.00 0.00% 4.70 c. Institutional development (EBRD) 0.00 0.00% 1.10 100.00% 0.00 0.00% 1.10 Subtotal (A) 114.00 36.45% 179.10 57.25% 19.60 6.30% 312.70 B. Taxes and Duties 1 ADB section 0.00 0.00% 0.00 0% 0.50c 100.00% 0.50 2 EBRD section 0.00 0.00% 0.00 0% 25.30 100.00% 25.30 Subtotal (B) 0.00 0.00% 0.00 0% 25.80 100.00% 25.80 Total (A+B) 114.00 33.70% 179.10 52.90% 45.40 13.40% 338.50 C. Contingenciesd 1. ADB 11.00 100.00% 0.00 0% 1.90 100.00% 12.90 2. EBRD 0.00 0.00% 17.40 100.00% 2.40 100.00% 19.80 Subtotal (C) 11.00 100.00% 17.40 100.00% 4.30 100.00% 32.70 Total Project Cost (A+B+C) 125.00 196.50 49.70 371.20 % Total Project Cost 33.70% 52.90% 13.40% ADB = Asian Development Bank, EBRD = European Bank of Reconstruction and Development, km = kilometer a In mid-2012 prices. b The amount includes taxes and duties of $15.6 million for civil works (ADB section). c The amount is only for taxes and duties for consulting services (ADB). d Contingencies for prices escalation include a reserve for possible changes in exchange rate from appraisal rate of $1=T150. Physical contingencies are computed at 7% for civil works. Note: 1. Numbers may not sum precisely because of rounding.
Appendix 4 19
PROJECT CONTRACT PACKAGES
Table A4: Project Cost at Completion by Financier ($ million) ADB EBRD Government % of Cost % of Cost % of Cost Amount Category Amount Category Amount Category Total Cost Item A. Investment Costs 1. Civil Works a. km 705–km 742, 37 km 77.96 100.00% 0.00 0.00% 0.00 0.00% 77.96 (ADB/Gov’t) b. km 742–km 804, 62 km (EBRD) 0.00 0.00% 120.20 100.00% 0.00 0.00% 120.20 2. Consulting Services a. Construction supervision and 2.72 100.00% 0.00 0.00% 0.00 0.00% 2.72 safeguards monitor (ADB) b. Construction supervision (EBRD) 0.00 0.00% 1.80 100.00% 0.00 0.00% 1.80 c. Institutional development (EBRD) 0.00 0.00% 0.00 0.00% 0.00 0.00% 0.00 Subtotal (A) 80.68 39.80% 122.00 60.20% 0.00 0.00% 202.68 B. Taxes and Duties 15.93 100.00% 1. ADB section 0.00 0.00% 0.00 0.00% 0.00 0.00% 0
2. EBRD section 0.00 0.00% 0.00 0.00% 0.00 0.00% 0
Subtotal (B) 0.00 0.00% 0.00 0.00% 15.93 100.00% 15.93 Total Base Cost (A+B) 80.68 36.90% 122.00 55.80% 15.93 7.30% 218.61
C. Contingencies 1. ADB section 0.00 0.00 0.00 2. EBRD section 0.00 0.00 0.00 Subtotal (C) Total Project Cost (A+B+C) 80.68 122.00 15.93 218.61 % Total Project Cost 36.90% 55.80% 7.30% Note: 1. Numbers may not sum precisely because of rounding.
20 Appendix 5
DISBURSEMENT OF ADB LOAN PROCEEDS
Table A5: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million) Annual Disbursement Cumulative Disbursement Amount Amount Year ($ million) % of Total ($ million) % of Total 2013 5.239 6.50% 5.239 6.50% 2014 26.212 32.50% 31.450 38.95% 2015 25.215 31.25% 56.665 70.20% 2016 24.015 29.75% 80.681 100% Total 80.681 100.0% 80.681 100% ADB = Asian Development Bank. Source: Asian Development Bank.
Figure A5: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million) 120
100
80
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40
20
0 0 1 2 3 4 5 6
Cummulative Disbursements (Projection at Appraisal) Amount Cumulative Disbursement Amount
Source: Asian Development Bank.
Appendix 6 21
CONTRACT AWARDS OF ADB LOAN PROCEEDS
Table A6: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million) Annual Contract Awards Cumulative Contract Awards Amount Amount Yeara ($ million) % of Total ($ million) % of Total 2013 73.782 91.45% 73.782 91.45% 2014 3.111 3.85% 76.893 95.30% 2015 0.000 0.00% 76.893 95.30% 2016 3.787 4.70% 80.681 100.00% Total 80.681 100.00% 80.681 100.00% ADB = Asian Development Bank. a Classified by contract signing dates. Source: Asian Development Bank.
Figure A6: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million) 120
100
80
60
40
20
0 2013 2014 2015 2016
Cummulative Contract Award (Projection at Appraisal) Amount Cummulative Contract Award (Actual) Amount
Source: Asian Development Bank.
22 Appendix 7
CHRONOLOGY OF MAIN EVENTS Date Event 2012 21 February First entry in eOperations approved. 3 April Concept Paper for Small-Scale PPTA approved. 9 April Advertisement for construction supervision consultant posted. 24 April–4 May Fact-finding mission fielded. 15 June–30 July Safeguards documents received from consultant/borrower. 26 July Management review meeting held. 26 July Advance action approved. 30 July Due diligence/safeguards reports submitted by small-scale project preparatory consultant. 16–22 August Loan negotiations conducted. 20 August Advance contracting notice uploaded on ADBBO. 21 September Project documents circulated to the Board. 5 October ADB loan approved. 5 October EBRD cofinancing loan approved. 28 December EBRD cofinancing loan signed. 2013 28 February EBRD cofinancing loan declared effective. 10 April Consultation mission 1 fielded. 28 May ADB loan agreement signed. 3–12 June Consultation mission 2 fielded. 9 July Invitation for bids posted. 5–15 September Country safeguards review mission fielded. 29 October Financial bid evaluation report and award of civil works contract approved. 29 October Inception mission fielded. 27 November ADB loan effectiveness declared. 28 November Civil works contract signed. 2014 18 February Civil works contractor notice to proceed issued. 23 May Review mission 1 fielded. 27 May Request for reallocation of savings under ADB loans approved. 18 June Construction supervision consultant contract signed. 8–11 July Safeguards monitoring mission fielded. 23 July First partial loan cancellation approved. 6 August Government reorganized, and Ministry of Transport and Communications changed to Ministry of Investment and Development. 31 August Construction supervision consultant mobilized to site. 2 October Review mission 2 fielded. 2015 6 March Review mission 3 fielded. 13 April Request for reallocation of loan proceeds between categories approved. 29 May Review mission 4 fielded. 21 October Review mission 5 fielded. 31 December Construction supervision consultant mobilized local staff to project site. 2016 18 January Consultation mission 3 fielded. 28 April Completion date extension to 22 June 2016 of civil works contract approved. 30 June Civil works contract substantially completed for ADB-financed project. 30 June Construction supervision consultant contract completed for ADB project. 19 July Request for second partial loan cancellation approved. 20 September Taking-over certificate issued by the Engineer. 26 September Government portion of the civil works substantially completed. 10 October Request for reallocation of loan proceeds between categories approved. 22 October Statement of completion forwarded to executing agency 31 October Undisbursed balance cancelled and loan account financially closed. 2017 27–28 May Pre-PCR mission/site visit fielded. 2018 22–25 May PCR mission fielded. Source: Asian Development Bank.
Appendix 8 23
STATUS OF COMPLIANCE WITH LOAN COVENANTS
Reference in Loan Covenant Agreement Status of Compliance Implementation Arrangements Complied with. The Borrower and MOTC shall ensure that the Project is Schedule 5, The MOF and MID followed the PAM implemented in accordance with the detailed arrangements Para. 1 and the Loan Agreement during set forth in the PAM. Any subsequent change to the PAM project implementation. The PAM shall become effective only after approval of such change was not changed. by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail. Environment Complied with. The Borrower shall cause MOTC to ensure that the Schedule 5, According to IEE, the major potential preparation, design, construction, implementation and Para. 2 impacts were (i) air and water operation of the Project comply with: (a) all applicable laws pollution; (ii) noise impacts; (iii) soil and regulations of the Borrower relating to environment, erosion; (iv) generation of health and safety; (b) the Environmental Safeguards; and construction and domestic waste; (v) (c) all measures and requirements set forth in the IEE, the occupational health and safety; (vi) EMP, and any corrective or preventative actions set forth in cutting of trees; and (vii) disruptions a Safeguards Monitoring Report. and utilities relocation, occurring during construction. An Environmental Management Plan (EMP) and Environmental Monitoring Plan were produced during the PPTA, in accordance with ADB’s SPS 2009. After the detailed design was prepared by the contractor, they produced a site-specific EMP and a site-specific Environmental Monitoring Plan in accordance with Kazakhstan’s environmental-related laws and ADB’s Environmental Involuntary Resettlement and Indigenous Peoples SPS 2009. The contractor prepared and submitted monthly environmental monitoring reports from May 2014 to August 2016, and the CSC prepared semi-annual environmental monitoring reports from December 2014 to June 2016, and a final report in September 2016. All air, soils, water, radiation and noise emissions monitoring results were within the accepted range in accordance with Kazakhstan legal standards throughout the project period. On reforestation along the road, COR wrote to ADB on 4 April 2018, that replanting of trees is being carried out along all newly rehabilitated roads with allocation of funds from the state budget. The contractor pro-actively took action to implement the EMP requirements of the project and
24 Appendix 8
Reference in Loan Covenant Agreement Status of Compliance acted on any issues reported to them for mitigation by the CSC and/or employer. The contractor has performed all the environmental measures in accordance with management plans, instructions of the employer and CSC and the civil works contract. Land Acquisition and Involuntary Resettlement Complied with. The Borrower shall cause MOTC to ensure that all land and All works were done within the all rights-of-way required for the Project are made available Schedule 5, existing right-of-way. A LARF to the Works contractor in accordance with the schedule Para. 3 acceptable to the government and agreed under the related Works contract and all land ADB was prepared and disclosed in acquisition and resettlement activities are implemented in 2012 to provide guidance and an compliance with (a) all applicable laws and regulations of approach to take if land acquisition the Borrower relating to land acquisition and involuntary and resettlement impacts were resettlement; (b) the Involuntary Resettlement Safeguards identified during project (if required); (c) the LARF; and (d) all measures and implementation, although none were requirements set forth in the LARP (if required), and any identified during project design and corrective or preventative actions set forth in the loan processing. If there are LAR Safeguards Monitoring Report. impacts, a LARP acceptable to ADB and government needs to be prepared and disclosed. These conditions were included in the civil works contract. Without limiting the application of the Involuntary Complied with. Resettlement Safeguards, the LARF or, if required, the During project design, the project LARP, the Borrower shall cause MOTC to ensure that no was categorized Involuntary physical or economic displacement takes place in Resettlement (IR) Category “C” connection with the Project until the LARP (if required) has because no resettlement impacts been fully implemented. were expected to occur. However, during start of construction in 2014, there were various businesses along the project road identified to have been impacted, their accesses to potential clients blocked or limited due to construction activities. Therefore, the project was re- categorized from IR Category C to B and a LARP outlining compensation and mitigation measures was prepared. Consultations with affected businesses were carried out on several occasions during the course of the project from 2014 to December 2015 to discuss compensation on business losses, complaints and grievance redress procedure. In March 2015, Resettlement Mitigation Plans were also prepared, which outlined the types of impacts caused by the project on the affected businesses and recommended mitigation measures to ensure compliance with Kazakhstan laws and ADB safeguards policies,
Appendix 8 25
Reference in Loan Covenant Agreement Status of Compliance including LARP, compensation, and/or other measures as required. In addition to previous consultations with affected businesses, Impact Measurement Surveys were also conducted by the CSC and the government’s local representative (Laboratory) to obtain further data that were missing from previous responses to earlier surveys. As envisaged by the LARF during PPTA, there had been no physical displacements along the project road. Indigenous Peoples The Borrower shall cause MOTC to ensure that the Project Schedule 5, The project had no impact on does not cause any impact on indigenous people within the Para. 5 indigenous peoples within the meaning of the SPS. If there is such an impact, the meaning of ADB’s SPS. Borrower shall cause MOTC to prepare, disclose and implement an indigenous peoples plan in accordance with all applicable laws and regulations of the Borrower relating to indigenous peoples and the SPS. Human and Financial Resources to Implement Complied with. Safeguards Requirements The Borrower shall cause MOTC to make available Schedule 5, MOTC/later MID, being the necessary budgetary and human resources to fully Para. 6 executing agency, had the overall implement the EMP and, if required, the LARP. responsibility for the project. COR under the MOTC/MID, was responsible for management and coordination of project activities during implementation. COR had designated representatives responsible for general management of the planning and implementation of all EMP and LAR tasks.
Safeguards-Related Provisions in Bidding Documents Complied with. and Works Contracts Bidding documents and civil works The Borrower shall cause MOTC to ensure that all bidding Schedule 5, contract incorporated all these documents and contracts for Works contain provisions that Para. 7 provisions. require contractors to: (a) comply with the measures relevant to the contractor set forth in the IEE, the EMP, if required, the LARP, and any corrective or preventative actions set forth in a Safeguards Monitoring Report; (b) make available a budget for all such environmental and social measures; (c) provide MOTC with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP and, if required, the LARP; (d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and
26 Appendix 8
Reference in Loan Covenant Agreement Status of Compliance (e) reinstate pathways, other local infrastructure, and agricultural land to at least pre-project condition upon completion of construction. Safeguard Monitoring and Reporting The Borrower shall cause MOTC to do the following: Schedule 5, Para. 8 Safeguard Monitoring and Reporting Complied with. The Borrower shall cause MOTC to do the following: As part of their contracts, the CSC (a) submit to ADB Safeguards Monitoring Reports (i) and civil works contractor prepared semi-annually during construction, and (ii) annually during and submitted the required reports. operation, and disclose relevant information from such Other reports submitted were Due reports to affected persons promptly upon submission; Diligence Report (DDR) and Final (b) if any unanticipated environmental and/or social Monitoring Report. In addition, the risks and impacts arise during construction, implementation MID/COR with assistance from the or operation of the Project that were not considered in the CSC prepared a Project IEE, the EMP and, if required, the LARP, promptly inform Performance Monitoring Systems ADB of the occurrence of such risks or impacts, with Report to determine whether the detailed description of the event and propose corrective project achieved its intended action plan; purpose and objectives. (c) no later than the date of award of Works contract, engage qualified and experienced external experts or qualified NGOs (which, for the avoidance of doubt, shall comprise Consulting Services to be financed out of the proceeds of the Loan pursuant to paragraph 2(b) of Schedule 1 to this Loan Agreement and Item No. 2 of the table attached to Schedule 3 of this Loan Agreement under a selection process and terms of reference acceptable to ADB, to verify information produced through the Project monitoring process, and facilitate the carrying out of any verification activities by such external experts; and (d) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the LARP promptly after becoming aware of the breach. Prohibited List of Investments Complied with. The Borrower shall ensure that no proceeds of the Loan Schedule 5, The APFS confirmed that the are used to finance any activity included in the list of Para. 9 proceeds of the loan were utilized prohibited investment activities provided in Appendix 5 of solely to finance project activities. the SPS. Labor Standards Complied with. The Borrower shall cause MOTC to ensure that the Works Schedule 5, These provisions were incorporated contracts incorporate provisions to the effect that Para. 10 in the bidding document and civil contractors: (a) shall comply with the applicable labor laws works contract and duly complied and regulations of the Borrower, and incorporate applicable with. workplace occupational safety norms; (b) shall not differentiate payment between men and women for work of No child labor or forced labor was equal value; (c) shall not employ child labor in the employed under the project. construction and maintenance activities; (d) to the extent possible, shall maximize employment of local poor and The contractor provided health, disadvantaged persons for project construction purposes, safety and sanitation facilities for provided that the requirements for job and efficiency are their staff, all subcontractors’ staff, adequately met; and (c) shall encourage employment of and temporary workers, as well as skilled and unskilled women laborers. health and safety of the Engineer and visitors to all project sites/office/workshops. The contractor made every effort to provide and maintain quality safety standards in accordance with the
Appendix 8 27
Reference in Loan Covenant Agreement Status of Compliance requirements of the contract. All traffic management plans were approved by the road police.
The use of local employment was maximized throughout the project, both skilled and unskilled; about 82%–93% of the contractor’s workers being local from the project area or from within Kazakhstan, and 7% maximum international. An estimated 7%–18% of staffing were female, and up to 0.9% maximum were female sourced internationally. Data were collected to ensure the legal core labor standards of Kazakhstan and those set in the loan agreement were fully complied with. Health Complied with. The Borrower shall cause MOTC to ensure that information Schedule 5, The contractor provided sessions on on the risks of sexually transmitted diseases, including Para. 11 awareness of the risks and human immunodeficiency virus/acquired immunodeficiency prevention of STDs, with emphasis syndrome, is disseminated to the employees of the Works on HIV/AIDS. Sessions were contractors under the Project and to members of the local conducted mostly by health communities surrounding the Project. professionals from the local hospital or nurse that was employed by the contractor on 24-hour call. The contractor’s, subcontractors’ workers and consultants were invited to attend the sessions. Counterpart Support Complied with. Without limiting the generality of Section 4.02 of this Loan Schedule 5, MOF made available all counterpart Agreement, the Borrower shall make available all Para. 12 funds required for timely and counterpart funds required for timely and effective effective implementation of the implementation of the Project through annual budget project through annual budgetary allocations to MOTC and ensure that such funds are allocations to MOTC/MID and released to MOTC in a timely manner. The Borrower shall released these funds on a timely cause MOTC to ensure that it includes the updated funding manner. requirements for implementation of the Project in its annual development programs. Construction Quality Complied with. The Borrower shall cause MOT to ensure that the Project is Schedule 5, Progress reports were submitted to carried out in accordance with applicable technical Para. 13 MID/COR on a monthly and specifications and design, and that the construction quarterly basis, and semi-annual supervision, quality control and project management are basis by both contractor and the performed in accordance with applicable standards and CSC as required under their best international practices. contracts.
ADB, together with MID/COR, also conducted consultation, review and midterm review missions to assess the progress and quality of project activities, performance of the contractor, and project management are performed based on applicable standards and practices.
28 Appendix 8
Reference in Loan Covenant Agreement Status of Compliance
Prevention of Illegal Trafficking Complied with. The Borrower shall ensure that concrete and rigorous Schedule 5, No incident of illegal trafficking and measures to detect and prevent illegal trafficking of Para. 14 related matter was reported under humans, wildlife, endangered species, and controlled the project. substances on the Project Road are fully implemented. Operation and Maintenance (O&M) Complied with. Without limiting the generality of Sections 4.02 and 4.07 Schedule 5, The government has consistently hereof and paragraph 12 of this Schedule 5, the Borrower Para. 15 increased the budgetary allocations shall allocate from its budget and make promptly available for road maintenance so that the to MOTC sufficient funds for adequate O&M of the Project service quality of the entire road Road as maybe necessary after Project completion and in network has improved. each fiscal year thereafter and shall ensure that the Project Road is operated and maintained in accordance with sound practices. Governance and Anticorruption Complied with. The Borrower and MOTC shall (a) comply with ADB’s Schedule 5, These provisions were included in anticorruption Policy (1998, as amended to date), or Para. 16 the bidding document and contractor through its agents, any alleged corrupt, fraudulent, and CSC contracts. No incident of collusive or coercive practice relating to the Project, and (b) corruption was reported under the cooperate with any such investigation and extend all project. necessary assistance for satisfactory completion of such investigation.
The Borrower shall cause MOTC to ensure that anticorruption provisions acceptable to ADB are included in Schedule 5, all bidding documents and contracts, including provisions Para. 17 specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants, and other service providers as they relate to the Project. Others (a) The Borrower shall cause the Project to be carried Article IV, Complied with. out with due diligence and efficiency and in conformity with Particular sound applicable technical, financial, business and Covenants, development practices. Section 4.01 (b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement. The Borrower shall make available, promptly as needed, Article IV, Complied with. the funds, facilities, services, land and other resources, as Particular required, in addition to the proceeds of the Loan, for the Covenants, carrying out of the Project and for the operation and Section 4.02 maintenance of the Project facilities. (a) Whenever applicable, in carrying out the Project, the Article IV, Complied with Borrower shall cause competent and qualified consultants Particular and contractors, acceptable to ADB to be employed to an Covenants, extent and upon terms and conditions satisfactory to the Section 4.03 Borrower and ADB. (b) 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, as applicable. The Borrower shall furnish, or cause to be furnished to ADB,
Appendix 8 29
Reference in Loan Covenant Agreement Status of Compliance promptly 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. The Borrower shall ensure that the activities of its Article IV, Complied with. departments and agencies with respect to the carrying out Particular of the Project and operations of the Project facilities are Covenants, conducted and coordinated in accordance with sound Section 4.04 administrative policies and procedures. The Borrower shall (i) maintain separate accounts and Article IV, Complied with. records for the Project; (ii) prepare annual financial Particular statements for the Project in accordance with accounting Covenants, principles acceptable to ADB; (iii) have such financial Section 4.05 statements audited annually by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB, in accordance with international standards for auditing or the national equivalent acceptable to ADB; (iv) as part of each such audit, have the auditors prepare a report (which includes the auditors’ opinion on the use of the Loan proceeds) and a management letter (which sets out the deficiencies in the internal control of the Project that were identified in the course of the audit, if any; and (v) furnish to ADB, no later than 6 months after the end of each related fiscal year, copies of such audited financial statements, audit report and management letter, all in English language, and such other information concerning these documents and the audit thereof as ADB shall from time to time reasonably request.
(a) ADB shall disclose the annual audited financial statements for the Project and the opinion of the auditors on the financial statements within 30 days of the date of their receipt by posting on ADB website. (c) The Borrower shall enable ADB, upon ADB’s request, to discuss the financial statements for the Project and the Borrower’s financial affairs where they relate to the Project with the auditors appointed pursuant to subsection (a) (iii) hereinabove and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB. This is provided that such discussions shall be conducted only in the presence of an authorized officer of the Borrower, unless the Borrower shall otherwise agree. The Borrower shall enable ADB’s representatives to Article IV, Complied with. inspect the Project and Works, and any relevant records Particular and documents. Covenants, Section 4.06 The Borrower shall ensure that any facilities relevant to the Article IV, Complied with. Project are operated, maintained and repaired in Particular accordance with sound applicable technical, financial, Covenants, business, development, operational and maintenance Section 4.07 practices.
30 Appendix 9
PROJECT IMPLEMENTATION SCHEDULE
Appendix 10 31
ECONOMIC REEVALUATION
CAREC CORRIDOR 3 (SHYMKENT-TASHKENT SECTION) ROAD IMPROVEMENT PROJECT: ECONOMC REEVALUATION
A. Scope
1. This appendix contains the economic reevaluation of L2916 approved by the Asian Development Bank in 2012.
2. The project road is a 36.7km section of the A2 Shymkent-Tashkent road, a main transport artery in south Kazakhstan that serves a section of Central Asia Regional Economic Cooperation (CAREC) Corridor 3. The project road also connects with CAREC Corridor 1 linking eastern Europe with the western People’s Republic of China. In parallel with Asian Development Bank (ADB) financing, the European Bank of Reconstruction and Development (EBRD) funded the rehabilitation of the remaining 62km of the Shymkent–Tashkent road, which was completed in 2017.
3. The northern point of the improvement works is at km705.62, at the junction with the Shymkent bypass; the southern point is at km742.36. Civil works started in February 2014 and were effectively complete in September 2016. Prior to improvement the project road was a four- lane road constructed in the 1970s, with an asphaltic pavement in poor condition. The improved road is a category I four lane road with a 270mm unreinforced concrete pavement. As part of the improvement the vertical gradient of the Kazygurt pass (Km731–Km734) was reduced from 7 to 5.5 percent. There is one interchange, 28km from the northern starting point.
B. Economic Analysis at Appraisal
4. The calculated EIRR at appraisal in 2012 was 15.9%.
5. The benefits quantified at appraisal were (i) vehicle operating cost (VOC) savings (77% of total benefits discounted at 12%), (ii) passenger time savings (3%), (iii) goods time savings (8%) and (iii) generated traffic benefits (12%). It was considered that there was no scope for diverted traffic. The project road was analyzed as a single section using HDM-4.
C. Economic Reevaluation
6. This reevaluation compares “with-“ and “without project” scenarios, and calculates incremental changes to costs and benefits. As at appraisal, the project road is analyzed as a single section using HDM-4. In the absence of local calibration factors, default factors are used throughout.
7. Post-construction IRI roughness was an average of 2.3 (range: 1.99 to 2.46). The winter vehicle speed in December 2014 was 51km/h (PPMS baseline, March 2015). In March 2016 the average observed speed was 81km/h (PPMS final project completion report, September 2016), representing a journey time saving of 16 minutes. The December 2014 speed is likely to be unrepresentative of average annual conditions; assuming a without project speed of 60km/h implies a journey time saving of 9 minutes.
8. No pavement condition survey was available at the time of appraisal. Based on a visual assessment, the appraisal assumed an initial IRI of around 8.5. For the reevaluation the same IRI
32 Appendix 10
was adopted, with other condition indicators were taken from the HDM-4 default characteristics for a bituminous pavement in “poor” condition (e.g. 15% structural cracking and five potholes per km, amongst others). In the without-project scenario it was assumed that the existing bituminous pavement was given a 40mm overlay in 2015, followed by subsequent overlays as well as pothole patching and crack sealing, as described below.
9. The appraisal period is construction followed by 20 years’ operation, i.e. 2014–2036. Economic costs and benefits are based on world prices. Using World Bank data for 2010–2015, the standard conversion factor (SCF) is estimated at 0.94. A shadow wage rate factor (SWRF) of 0.9 is applied to unskilled and semi-skilled labor (TA8414). The price date is 2016.
D. Demand Estimation
10. The demand analysis at appraisal was based on estimates of annual average daily traffic (AADT) derived from classified traffic counts from 2009 to 2011 at the Shymkent end of the project road. Classified counts were supplemented by moving observer counts. The actual traffic data used in the appraisal are no longer available, although counts between 2009 and 2011 made available to the reevaluation team suggest an AADT of approximately 8,000 veh/day (associated DMF performance target, which was for an increase from 1,000 to 2,000 veh/day for commercial traffic).
11. Available traffic data for 2009-16 are shown below. Between 2009 and 2011 there was no discernible change in overall traffic volumes, possibly as a result of the very low growth of GDP in 2008-9. AADT doubled from 2009 to 2011 and 2014, however, led by an annual 15% growth in passenger traffic. From 2014 to 2016 total traffic remained sensibly constant at 16,000 veh/day, although these masks an annual drop of 3% in passenger traffic and a 27% growth in goods traffic. The variability of AADT estimates is probably attributable to sampling errors (the 2014 counts were 2x24h while the 2016 counts were 1x24h) and to seasonality (according to the CPMM annual report for 2015 corridor 3 is an agricultural corridor).
12. For the reevaluation, traffic from 2014 to 2016 was interpolated between observed traffic in those years.
Table A10.1: Motorized traffic demand
Motor- Car & Medium Large Light Medium Heavy Truck- AADT Date cycle small bus bus bus goods goods goods trailer veh/daya 2009 (Q4) 4 6,521 72 326 241 109 459 238 7,966 2010 4 6,371 68 394 218 154 482 246 7,933 2011 0 6,275 7 231 235 83 406 225 7,462 2011 (Q3) 4 6,652 86 295 369 192 393 499 8,486 2014 (29–31 Octb) 2 13,621 73 309 458 399 504 593 15,955 2016 (5 Marc) 2 9,657 54 268 473 359 719 713 12,243 2016 (24 Augd) 7 14,228 16 399 895 670 513 950 17,671 2016 (wtd ave) 6 12,922 27 362 774 581 572 882 16,120 Sources: Asian Development Bank estimates, construction supervision consultant (2014-16 data) and CoR (2009–2011 data) a Excluding motor-cycles b Wednesday-Thursday c Saturday d Wednesday e Weighted as follows: 2xSaturday count + 5xWednesday count
Appendix 10 33
13. Historic GDP growth from 2012 to 2016 has averaged 3.4%; forecast GDP for 2017 and 2018 is 2.4 and 2.2% respectively (ADO 2017). The International Monetary Fund (IMF) forecasts 4.6% for 2022 (WEO 2017). National traffic growth is therefore likely to be approximately 3–4% per year, similar to the 3% assumed at appraisal. Whether project road traffic growth can reasonably be expected to exceed this is an open question: while Shymkent has been earmarked as an economic growth center, many impediments to increased transit trade in corridor 3 remain. At appraisal it was assumed that goods and bus traffic would grow faster than small passenger vehicles. More recent traffic data provide no compelling evidence to support this, however, and in the reevaluation a single growth rate of 3.5% has been applied to all vehicle classes for 2017– 2026 (implying an income elasticity of approximately 1.0), thereafter dropping to 2% in order to avoid spuriously high levels of congestion.
E. Economic Costs
14. Investment costs. A comparison of actual investment costs with those forecast at appraisal is in Error! Reference source not found.. At constant 2016 prices, actual investment costs are estimated to be 61% of those estimated at appraisal.
Table A10.2: Actual and forecast investment costs ($ million, excluding VAT)
Stage and price basis Works CS LAR Total
Appraisal, 2012 prices 139.7a 3.50 0.0 143.2 At contract, current pricesb 73.44 (T11.239bn) 3.11 0.0 68.7 Outturn, current prices 83.20 (T12.732bn) 3.10c 0.0 86.3 Outturn, 2016 prices 84.17 3.12 0.0 87.3 CS = consulting services, LAR = land acquisition and resettlement Source: Asian Development Bank estimates a Including 7% physical contingencies b Works contracts denominated in T. Fixed contract exchange rate T153.03=$1 c Supervision consultants’ estimate, based on $2.73m from loan 2916 up to 30 June 2016, $0.31m from Republic of Kazakhstan budget plus an estimated $0.06m from ROK budget during the defects liability period (all amounts exclude VAT)
15. For the economic reevaluation, works costs are distributed across the construction period in accordance with table 4 of the supervision consultant’s PCR. Adjusting by the SCF and for the shadow wages of unskilled and semi-skilled labor (assumed to represent 7% of works costs and with a shadow wage rate factor of 0.9) brings works costs at constant 2016 financial prices to economic prices. The implied conversion factor is 0.94. A conservatively-estimated residual value equal to 30% of initial investment cost is inserted as a negative cost in the final year of the evaluation period. Consulting services costs are assumed to have a conversion factor of unity and are distributed pro rata to works costs over the construction period.
Table A10.3: Project investment costs
Financial cost excl VAT Economic cost 2014 2015 2016 Works CS LAR $m $m/km $m $m $m 84.17 3.12 0.0 82.0 2.23 22.4% 53.4% 24.2% Source: Asian Development Bank estimates
34 Appendix 10
16. Maintenance costs. The without project maintenance regime is shown below. The regime is chosen such that the road would just be kept in a reasonable condition; the alternative would be an asphaltic concrete reconstruction, but this would be very similar to the project scenario. Unit costs are updated from KazDorNII’s 2015 estimates.
Table A10.4: Without project maintenance regime
Intervention Intervention criteria Financial $a Economic $ Effect Year = 2015, then at 6 yr 40mm overlay 13/m2 12/m2 Derived in HDM-4 intervals 85% patched, 3 mon elapsed Pothole patching Annual 11/m2 10/m2 before patching Crack sealing Two-year intervals 4.6/m2 4.1/m2 85% effective Winter & non- Annual 1,100/km 1,000/km winter routine Source: Asian Development Bank estimates Note: (a) excluding VAT
17. A well-constructed concrete pavement should deteriorate very slowly, and indeed HDM-4 predicted an IRI of 3.5 in the final evaluation year. Accordingly, project case maintenance was limited to the winter and non-winter routine maintenance tabulated above.
F. Economic Benefits
18. Using standard HDM-4 software, as at appraisal, the economic benefits considered at reevaluation were (i) VOC savings and (ii) time savings.
19. Vehicle fleet characteristics are taken from TA-84141. Values of journey time, crew and maintenance labor costs are also taken from TA-8414 but are adjusted to reflect wages during Q4 2016 and the fact that wages in South Kazakhstan oblast are approximately 70% of national averages. The resulting values of time are somewhat lower than those assumed at appraisal (e.g. $3.50 per working hour for car passengers compared with $4 at appraisal). At appraisal, freight time savings were a significant source of benefits, based on an assumed payload value of $550/t. However, journey time savings of 9–16 minutes are insufficient to have a significant impact on logistics and it was decided to neglect this source of benefits in the reevaluation.
20. HDM-4 predicted operating speeds for the car and micro-bus vehicle class were 62km/h before the project and 82km/h after project completion, i.e. close to observed speeds.
1 ADB. 2016. TA8414-KAZ Preparation of Initial Economic Analysis for Performance-Based Road Maintenance Project. Manila
Appendix 10 35
+ Item Unit Car & Medium Bus Light 2-axle 3-axle Truck- micro- bus goods truck truck trailer bus HDM-4 base type Car large Bus med Bus Light Medium Heavy Art truck heavy truck truck truck Axles No 2 2 3 2 2 3 5 Km/year km 10,000 100,000 100,000 100,000 100,000 100,000 100,000 Service life Years 15 10 10 8 8 8 8 No of passengers No 3 25 40 1 0 0 0 Operating weight tons 1.4 8 13 3.5 10 25 35 Vehicle cost (econ) $ 23,000 30,000 43,000 21,000 40,000 40,000 90,000 Tire cost (econ) $ 125 170 330 170 330 330 330 Maintenance labor $/h 2.00 2.00 2.00 2.00 2.00 2.00 2.00 Crew $/h 0 2.00 2.00 2.00 2.00 2.00 2.00 Passenger working time $/h 3.50 2.00 2.00 2.00 0 0 0 Passenger non-working time $/h 1.10 0.60 0.60 0.60 0 0 0 % of work related trips % 50 22 22 0 0 0 0 Source: Asian Development Bank estimates
21. The shadow price of gasoline and diesel is estimated at $0.62 per liter. This estimate is based on a World Bank price forecast for crude oil at $60/barrel for the period 2017-30 (source: World Bank Commodity Markets Outlook, April 2017, converted to constant 2016 prices), an estimated refining cost of 15¢ per liter and of transport and distribution costs at 10¢/liter.
22. Road user costs, extracted from HDM-4 output, are shown in the table below.
Table A10.6: Road user costs in $/veh-km Car & Medium Bus Light 2-axle 3-axle Truck- IRI Costa micro- bus goods truck truck trailer bus 3 VOC 0.25 0.24 0.40 0.21 0.35 0.55 0.85 VOT 0.08 0.29 0.44 0.01 0.01 0.0 0.0 RUC 0.33 0.53 0.84 0.22 0.36 0.55 0.85 6 VOC 0.28 0.28 0.45 0.25 0.41 0.62 0.98 VOT 0.10 0.33 0.50 0.01 0.01 0.0 0.0 RUC 0.38 0.61 0.95 0.26 0.42 0.62 0.98 8 VOC 0.32 0.30 0.48 0.26 0.44 0.65 1.05 VOT 0.10 0.36 0.56 0.01 0.01 0.0 0.0 RUC 0.42 0.66 1.04 0.27 0.45 0.65 1.05 10 VOC 0.35 0.32 0.52 0.28 0.47 0.69 1.14 VOT 0.12 0.40 0.67 0.01 0.01 0.0 0.0 RUC 0.47 0.72 1.19 0.29 0.48 0.69 1.14 VOC=vehicle operating cost; VOT=travel time cost; RUC = road user cost = vehicle operating cost +travel time cost Source: ADB estimates
36 Appendix 10
F. DMF performance targets
23. Performance against DMF targets is summarized in the table below.
Table A10.7: Performance against DMF targets Assumptions and Performance against Performance targets Data sources risks target By 2018 Regional freight traffic Assumption Regional trade Volume of regional data from MOTC Government’s between South trade along CAREC continued commitment Kazakhstan region Corridor 3 increased to increase regional and Uzbekistan along to $350 million from trade CAREC Corridor 3 in $150 million in 2012 2017 was recorded at $714 million (export – $273 million, import – $441 million)
By 2015 MOTC traffic statistics EBRD-financed Target met: traffic Average traffic volume project completed on increased from from Shymkent to time and with good approximately 8,000 Tashkent increased to quality veh/day in 2012 to 2,000 veh/day from 16,000 veh/day in 1,000 veh/day in 2011. 2016.
Target met: travel Travel speed speed has increased improved by 20 km/h from approximately from 60 km/h in 2011 50-60 km/h in 2014 to approximately 80 km/h in 2016. By 2015 MOTC project Target met: post- The project road completion report completion IRI is 2.3 section rehabilitated m/km. with IRI of less than 3 m/km from current IRI of 5 m/km
G. Results of Economic Reevaluation
24. The results of the economic reevaluation are in Table , with detailed resource flows shown in Table A10.2. The economic indicators provided are: EIRR, NPV and BCR. The results show that the project remains economically viable. Reevaluation traffic flows are higher than those at appraisal, while project costs are lower. As expected, therefore, all economic indicators are better than those estimated at appraisal. Results are highly sensitive to choice of without project scenario. At appraisal, the without project scenario included no periodic maintenance, whereas at reevaluation it is assumed that an overlay is applied to the existing pavement. (Removing overlays from the reevaluation without project scenario brings the re-evaluated EIRR to 44%).
Appendix 10 37
Table A10.8: Project economic indicators Stage NPV BCR EIRR ($m) (ratio) (%) At appraisal a 32.1 1.37 15.9 At completion 43.1 1.72 16.8 BCR = benefit-cost ratio; EIRR = economic internal rate of return; NPV = net present value Source: Asian Development Bank estimates a Resource flows taken from appendix C1 of the RRP economic analysis, but discounted at 9%
25. The table below shows the effects of applying sensitivity tests. The economic performance is sound and remains so throughout the range of sensitivity tests.
Table A10.1: Sensitivity analysis results Scenario NPV (2016 $m) EIRR (%) Switching value (%)a Base case 43.1 16.8 Costs+20% 31.1 15.1 169 Benefits-20% 22.5 14.8 (58) Costs+20% & benefits-20% 10.6 13.2 Source: Asian Development Bank estimates a The percentage by which costs or benefits need to change to give an EIRR of 12%
Table A10.2: Detailed results of the economic analysis ($ million, 2016 prices, undiscounted) VOC Time Year Capital costs Maintenance savingsa savings Net benefits 2014 18.33 (0.04) 0.00 0.00 (18.30) 2015 37.10 (0.08) (9.21)a (5.16)a (51.39) 2016 19.81 (0.04) (30.78)a (15.40)a (65.95) 2017 0.00 0.00 15.34 3.72 19.06 2018 0.00 0.00 18.04 4.55 22.59 2019 0.00 0.00 21.03 5.62 26.66 2020 0.00 0.00 24.37 6.97 31.34 2021 (6.61) 0.00 28.18 8.64 43.43 2022 0.00 0.00 14.94 3.65 18.59 2023 0.00 0.00 17.52 4.24 21.76 2024 0.00 0.00 20.31 5.02 25.33 2025 0.00 0.00 23.31 5.99 29.31 2026 0.00 0.00 26.65 7.20 33.84 2027 (6.61) 0.00 29.97 8.58 45.15 2028 0.00 0.00 14.21 3.80 18.01 2029 0.00 0.00 16.54 4.20 20.74 2030 0.00 0.00 18.94 4.70 23.64 2031 0.00 0.00 21.37 5.32 26.70 2032 0.00 0.00 23.99 6.12 30.11 2033 (6.61) 0.00 26.91 7.14 40.66 2034 0.00 0.00 10.37 3.81 14.18 2035 0.00 0.00 12.39 4.05 16.44 2036 (24.55) 0.00 14.45 4.33 43.33 EIRR (%) 16.8% NPV (discount rate: 12%) 43.1 BCR 1.72 EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. Source: Asian Development Bank estimates. a negative benefits during 2015-16 as without project overlay is assumed for 2016
38 Appendix 11
LIST OF PARAMETER VALUES/ASSUMPTIONS
Price base year: 2016 Discount year: 2014 Currency of analysis: $ Construction start year: 2014 Construction end year: 2016 First year of benefits: 2017 Appraisal period: 20 years (operation) plus implementation period Numeraire used: World price numeraire Income elasticity of demand: 1.0 for all vehicle classes to 2026 Value of time (in work, 2016): $3.50/hour (car passengers) - $0.39/hour (bus passengers) Value of time (non-work, 2015): $0.23/hour (car) - $2.00/hour (bus passengers) GDP growth assumption: ADO and IMF World Economic Outlook: 2.4% (2017) to 4.6% (2022) Shadow price of labor: 0.9 (unskilled) Standard conversion factor: 0.94 Conversion factor applied to works, LAR and physical contingencies: 0.94 Conversion factor applied to supervision and consulting services: 1.0 Conversion factor applied to taxes, duties, profits, transfers: 0.0