tjitE COriY RESTRICTED Report No. PTR-74a Public Disclosure Authorized Thisreport isfor officialuse only by tho BankGroup and spedficallyauthorzed arpnizations or perons. It maynot be published,quoted or cited without BankGroup authorization. The DankGroup does not acceptresponibty for theaccurcy or completenu of thereport. INTERNATIONAL BANK FOR RECONSTRUCTlONAND DEVELOPMENT INTERNATIONALDEVELOPMENT ASSOCIATION Public Disclosure Authorized APPRAISAL OF A SECOND HIGHWAY CONSTRUCTION PROJECT ISRAEL Public Disclosure Authorized June 21, 1971 Public Disclosure Authorized Transportation Projects Department Currency Equivalents Currency Unit - Israeli Pound (It) US$1.00 = It 3.5 Iz 1.0 a US 28.6¢ It 1 million - US$286,000 Fiscal Year April 1 - March 31 Units of Weights and Measures Metric Metric: British/ITS-Equivalent 1 kilometer (km) = 0.62 miles (mi) 1 meter (a) 2 - 3.28 feet (ft) 1 squarekilometer (km') - 0.386 squaremiles (sq mi) 1 metricton (m ton) = 0.98 lg ton 1 metricton (m ton) - 1.1 US shortton Abbreviations. ADT - Average Daily Traffic BCEO( - BureauCentral d'Etudes pour les Equipements d'Outre-Mer (Consultants - France) FYB - First Year Benefit GNP - Gross National Product IER - Internal Economic Return IPA - Israel Ports Authority PW:D - Public Works Department SETEC - Societe de Etudes Techniques et Economiques (Consultants - France) I S R A E L APPRAISAL OF A SECOND HIGHWAY CONSTRUCTIONPROJECT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS ....................... i I. INTRODUCTION ............................................... 1 II. BACKGROUND ................................................. 2 A. General ................................................. 2 B. The Transport Sector .................................... 2 C. Transport Policy and Coordination ....................... 4 III. HIGHWAY SECTOR ................................... 5 A. The Highway Network ..................................... 5 B. Characteristics and Growth of Road Traffic .... .......... 6 C. Highway Administration .................................. 6 D. Highway Financing and Planning .......................... 7 E. Highway Engineering ..................................... 8 F. Highway Construction and Maintenance .................... 9 IV. THE PROJECT ................................................ 10 A. General Description ..................................... 10 B. Highways to be Constructed or Improved .................. 10 C. Consulting Services for Construction Supervision .... .... 11 D. Testing and Laboratory Equipment ........................ 11 E. Cost Estimates and Financing ............................ 12 F. Disbursements ........................................... 13 G. Execution of the Project ................................ 13 V. ECONOMIC EVALUATION ........................................ 14 VI. RECOMMENDATIONS ............................................ 17 This report was written by Messrs. P. C. de Man (Engineer) and B. Shields (Economist), with the cooperation of Mr. G. McBride (Economist) of the Special Projects Department. The project was appraised in December 1970. TABLE OF CONTENTS (Continued) ANNEX Highways to be Constructedor Improved TABLES 1. ConsultantsEmployed for FeasibilityStudies and Detailed Engineering 2. Distributionof Traffic between Road and Rail 3. Revenues from Motor Vehicle Taxation 4. Highway System by Jurisdiction 5. Length of Paved Primary System Roads, by Width 6. Motor Vehicle Fleet 7. Truck Fleet by Load Capacity and Fleet Type 8. Civil Motor Fuel Consumption 9. Expenditureson Public Highways 10. Standards for Geometric Design of National Highways 11. Roads to be Constructedand Cost Estimates 12. Estimated Schedule of Disbursements 13. Traffic on Project Roads and Economic Rates of Return 14. Vehicle Operating Costs CHARTS 1. Organizationof Ministry of Transport 2. Organizationof Ministry of Labor and Public Works Department MAPS 1. General Location Map 2. Project Roads 3. Tel Aviv - Ayalon Expressway I S R A E L APPRAISAL OF THE SECOND HIGHWAY PROJECT SUMMARY AND CONCLUSIONS i. The very high rate of economic growth achieved by Israel over the past decade has been accompaniedby high rates of growth in vehicular traffic. Israel is a small, densely populated country and depends much more on high- ways than on other modes of transport. The motor vehicle fleet has grown from 51,000 in 1960 to about 219,000 in 1970. From 1948 to 1962 the basic structure of the national highway network was developed. From 1963 to 1970 the major emphasis was on completing the main inter-urbanroad network. Between 1971 and 1975 efforts will be concentratedon ensuring that the addi- tion of capacity keeps pace with rapidly increasing traffic and that major bottlenecksare eliminated or avoided. ii. This report appraises a project for building or upgrading eight road sections totalling 121 km and for the provision of four interchanges on existing roads. The location of these roads and interchanges,mainly concentratedin the heavily populated part of the country in and around Tel Aviv, is shown on Maps 1-3. None of the project roads is in the occupied territories. The project has been based on feasibilitystudies and detailed engineering undertaken by the Public Works Department (PWD) of the Government and by Israeli and foreign consultants. Detailed engineeringfor the project is virtually complete. The cost estimates, including contingencies,are con- sidered reliable. iii. The Bank made a first highway loan (US$22 million equivalent) to Israel in 1q62. This project, comprising the constructionof main and dis- trict roads and a transnort survey, was satisfactorilycompleted in 1966. It also led to improvementsin highway planning and constructionpractices which provided a basis for preparing the project now under construction. iv. The cost of the proposed Second Highway Project, including con- sulting services for constructionsupervision and the procurementof some materials testing equipment, is estimated at US$91.3 million equivalentwith an estimated foreign exchange component of US$37.5 million equivalent or 41%. The proposed loan of US$30 million would finance about 80% of the foreign exchange cost. v. The project is technicallyand economicallysound. The internal economic return of the differentworks ranges from 14% to 33%. The combined yield is 22%. vl. Constructioncontracts will be awarded on the basis of interna- tional competitivebidding. A first round of prequalificationof contractors - ii - has already been carried out in an atceptable manner. E-xecutionof the pro- ject woild be the respt1insibilityof the PWD, except for the Ayalon express- way in Tel AViv, fot the planning and construction of which a special author- ity, the Netivey Ayalon Ltd., has been created. vii. The ptoject is suitable for a Rank loan of US$30 million equival- ent. An a'pproytpiate term would be 20 yegrs, includinga five-yeargrace period. I S R A E L APPRAISAL OF -IE SECONDHIGHTWAY PROJECT I. INTRODUCTION 1.01 The Government of Israel has asked the Bank to help finance its 1971-75 highway developmentprogram. 'rhisprogram has been designed to improve and upgrade the main highway network so that it may handle rapidly growing transportdemands in the country. It comprises the construction of expresswaysand four-lane divided highways, the constructionof grade- separated interchangeson existing roads and the reconstruction,improve- ment or new constructionof two-lane highways. 1.02 Bank missions visited Israel in 1969 to examine the Government's approaclhto highway planning. They concluded that the Bank could usefully assist in financing the 1971-75highway plan (then being prepared), and a group of projects was identifiedas suitable for further study for inclu- sion in a Bank project. After the Government refined the cost estimates and undertook an economic analysis of the proposed investments,a shorter list of projects was selected and presented to the Bank for consideration. 1.03 The proposal for Bank financing comprises 12 high priority proj- ects, consulting services for supervisionof constructionof these projects and procurementof some materials testing equipment. The estimated cost is about US$91.3 million equivalent or about 63% of the estimated capital ex- pendlitureson highways in the 1971-75plan period. Most of the proposed projects are located in the densely populated area in and around Tel Aviv, the largest single project item being the first stage of the Ayalon express- way in that city. 1.04 This would be the third Bank loan for the transport sector. The first was a loan (265-IS) of US$27.5 million equivalent made in 1960 to help finance the constructionof the port of Ashdod. The second (323-IS)of US$22 million equivalentwas made in 1962 for the constructionand improve- ment of 611 km of main and district roads and 460 km of feeder roads. It also included the transportsurvey carried out in 1964 and 1965 by the French consultants,Bureau Central d'Etudes pour les Equipementsd'Outre-Mer (BCEOM) andlSociete de Etudes Teclniques et Economiques (SETEC),which served as a starting point for national transportationplanning in Israel and provided the basis for the proposed Second Highway Project. The First Highway Project was carried otutsatisfactorily within the original constructiontime and cost estimates. 1.05 This report was prepared by Messrs. P.C. de Man (engineer)and B. Shields (economist)with the cooperationof Mr. C. McBride (economist) of the Special Projects Department on the basis of feasibilityand final - 2 - engineeringstudies