Technical Assistance Report Project Number: 39176 November 2005 Technical Assistance Republic of Azerbaijan: Preparing the Southern Road Corridor Improvement Project (Alyat-Astara Road) (Financed by the Japan Special Fund) The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. CURRENCY EQUIVALENTS (as of 30 September 2005) Currency Unit – Azerbaijan manat/s (AZM) AZM1.00 = $0.00022 $1.00 = AZM4,601.50 ABBREVIATIONS ADB – Asian Development Bank EIA – environmental impact assessment EW – east–west (highway) GDP – gross domestic product IFI – international financial institution MDB – multilateral development bank MOT – Ministry of Transport NS – north–south (highway) PPTA – project preparatory technical assistance RP – resettlement plan RTSD – Road Transport Services Department TA – technical assistance TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification – General intervention Sector – Transportation and communication Subsector – Roads and highways Theme – Sustainable economic growth Subtheme – Fostering physical infrastructure development NOTE In this report, "$" refers to US dollars. Vice President: J. Eichenberger, Operations Group 2 Director General: H. Satish Rao, East and Central Asia Department Director: N. Rayner, Transport and Communications Division, East and Central Asia Department Team leader: H. Masood, Senior Transport Specialist, Transport and Communications Division Team member: S. Ferguson, Senior Resettlement Specialist, Transport and Communications Division o o 46 00’E 50 00’E REPUBLIC OF AZERBAIJAN Balaken R U S S I A N F E D E R A T I O N er SOUTHERN ROAD CORRIDOR G E O R G I A iv Zagatala R ur IMPROVEMENT PROJECT m Sa (ALYAT-ASTARA ROAD) Gusar Khachmaz Gakh Guba Sheki C A S P I A N S E A Devechi Agstafa Shamkir Gazakh Siazan o Reservoir Oghuz o 41 00’N Tovuz Gabala 41 00’N M in gec hev ir R Khyzy es Nabiagaly erv Shamkir oir Ismailly Mingechevir Shamakhy Sumgayit Ganja Yevlakh Geranboy Agdash Goychay Maraza Khanlar Gadabey K Agshu u r Dashkesan R Ujar iv Khyrdalan e r Kyurdamir Terter Barda BAKU Sangachal Zardab A R M E N I A Kelbajar Hajiqabul Agjabedi Sabirabad Alyat Agdam Sarisu Lake Ali-Bayramli Khojaly Imishli Saatly K u r Khankendi R Beilagan i v Khojavend e Shusha r Heidarabad Lachin A Sharur r National Capital a Salyan z r Fuzuli e R iv Bilasuvar i R City/Town v Hadrut z e ra r A Airport Shahbuz Gubadly Neftchala Jebrail Port NAKHCHIVAN Project Road AUTONOMOUS Jalilabad Araz Reservoir National Road REPUBLIC Nakhchivan Zangilan Masally Other Road o o 39 00’N Julfa Railway 39 00’N Ordubad Baku-Tbilisi-Ceyhan Pipeline Ara Yardymly z River River N Lenkaran Provincial Boundary Lerik International Boundary 0 25 50 75 Boundaries are not necessarily authoritative. I R A N 0 5 - Astara 4 Kilometers 1 0 0 H o o R 46 00’E 50 00’E I. INTRODUCTION 1. The Government of Azerbaijan (the Government) has requested technical assistance (TA) from the Asian Development Bank (ADB) for preparing the Southern Road Corridor Improvement Project (Alyat–Astara Road) (the Project). The TA1 was not included in ADB’s country strategy and program update 2005–2006 for Azerbaijan,2 as it was only identified during the country programming mission in April 2005. It is now part of the revised 2005 loan and TA program, and Management has approved the concept paper for the TA. A fact-finding mission was undertaken during 13–16 June 2005 to formulate the TA. The fact-finding mission reached agreement with the Government on the objectives, scope, cost estimates, financing plan, implementation arrangements, and terms of reference for the TA consultants. The design and monitoring framework is in Appendix 1. II. ISSUES 2. Transport sector plays an important role in Azerbaijan’s rapidly expanding economy. Over the last five years, the gross domestic product (GDP) has been growing at a rate of over 10% per year, and that is projected to increase to 22% by 2007. The transport sector accounts for 7% of Azerbaijan’s GDP.3 Road transport is the preferred mode, as it carries 78% of the passenger and 28% of the goods traffic. It is critical for the domestic economy, because it links the local population with urban and international markets. The improvement of road infrastructure is part of the Government’s poverty reduction strategy, as articulated in the State Program on Poverty Reduction and Economic Development that was initiated in 2001. Improved roads will help to reduce poverty by providing the rural poor better access to markets and social services while ensuring more balanced development. An improved road network will also enhance regional cooperation and facilitate international and transit trade. 3. Inherited from the former Soviet Union, the 18,800 kilometer (km) road network of Azerbaijan (excluding Nakhchivan) was developed for traffic volumes and patterns significantly different from those emerging since independence in the early 1990s. Approximately 52% of the roads are paved, 47% are gravel, and the remaining are earth tracks. There are two primary road transport corridors. The east–west (EW) highway connects the capital city of Baku with the Georgian border and passes through the country’s main population centers. It is part of the famed “Silk Route” linking Central Asia and China with Europe. The north–south (NS) highway runs parallel to the Caspian Sea and connects Baku with the Middle East and South Asia to the south and with the Russian Federation and Europe to the north. Both road corridors are part of the Asian Highway Network.4 Conflict during the early years of independence and lack of resources have prevented regular maintenance. As a result, about 75% of the network is in poor condition. Based on the road condition data available, 61% of the EW and NS highways, 76% of other republic roads, 66% of secondary roads, and 76% of rural roads require rehabilitation. In addition, projections of increased traffic indicate that the current capacity of the NS highway will be insufficient and that widening and upgrading is needed. 4. The road sector is regulated by a presidential decree5 that defines the general basis for design, construction, operations, maintenance, and development of roads and associated structures, as well as the legal, technical, economic, and institutional principles for road sector 1 The TA first appeared in ADB Business Opportunities (internet edition) on 19 July 2005. 2 ADB. 2004. Country Strategy and Program Update (2005–2006): Azerbaijan. Manila. 3 Based on 2004 figures in the Azerbaijan Monthly Statistical Review 2005. 4 Sponsored by the UN Economic and Social Commission for Asia and Pacific, the 140,000 km Asian Highway Network was adopted by an intergovernmental agreement in November 2003. 5 Presidential Decree No. 299 issued in March 2000 on the application of the Law of Roads of December 1999. 2 management. Until 2003, the road sector was managed by Azeravtoyol, a state-owned joint-stock company established in 1993. It was modeled on the centralized decision-making system of the former Soviet Union. Because of its poor performance, and as part of the Government’s initiative to restructure key agencies, the Government dissolved Azeravtoyol and established the Ministry of Transport (MOT) in April 2003 to assume overall responsibility for policy, regulations, and administration of the transport sector. The road sector is the responsibility of two MOT departments: the Road Transport Services Department (RTSD), which looks after planning, managing, and maintaining the road network infrastructure, and the Auto Transport Services Department, which is responsible for regulating the road transportation. 5. The Government has embarked upon an extensive road improvement program that begins with the high-priority EW and NS road corridors. The Government also plans to develop other priority highways, along with secondary and tertiary roads, that provide in-country links, as well as access and opportunities to the large rural population.6 With assistance from multilateral development banks (MDBs) and other international financial institutions (IFIs), improvement of the entire EW corridor is now fully funded and fieldwork has begun on most sections. Negotiations with MDBs and other IFIs for improving the northern section (Baku–Russian border) of the NS corridor are in their final stages. For the southern section (Baku–Iranian border)7, the Government is seeking assistance from MDBs and other IFIs, including ADB. Under a bilateral agreement, the Government of Iran is providing grant assistance for a feasibility study and detailed design of the 243 km Alyat–Astara road. An Iranian consulting firm began work in January 2005. The draft feasibility report is being prepared and the consultants are scheduled to complete their work by mid-2006. 6. The proposed Project will construct a part of the road from Alyat to Astara, develop the cross-border facility at Astara, improve local roads to provide accessibility to poor areas in the South, and enhance the road network’s sustainability by supporting policy and institutional reforms in the RTSD. In view of the projected high traffic volumes on the NS corridor, the RTSD intends to upgrade this road to category I with dual carriageway and four lanes. Based on the initial feasibility work, the proposed road will be constructed on over 80% new and improved alignment in order to avoid major resettlement along the original corridor and