Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No: 39696-ET PROJECT APPRAISAL DOCUMENT ONA PROPOSED CREDIT IN THE AMOUNT OF SDR 148.7 MILLION Public Disclosure Authorized (US$225 MILLION EQUIVALENT) TO THE THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR A ROAD SECTOR DEVELOPMENT STAGE I11 PROJECT (APL3) IN SUPPORT OF THE GOVERNMENT’S ROAD SECTOR DEVELOPMENT PROGRAM Public Disclosure Authorized May 3,2007 Transport Sector Country Department 6 Africa This document has restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective March 3 1,2007) Currency Unit = Ethiopian Birr (ETB) ETB8.8873 = USSl US$1 = SDR1.51326 FISCAL YEAR July 8 - July7 ABBREVIATIONS AND ACRONYMS ACCPAC Vendor ofAccounting, Compensating Resource Manager and Business Management Software ADLI Agricultural Development Led Industrialization AfDB African Development Bank APL Adaptable Program Lending including Stages 1-4 (APL1, APL2, APL3, APL4) BADEA Arab Bank for Economic Development in Africa CAS Country Assistance Strategy CBFs Community-Based Facilitators CPCB Central Program Coordinating Board DA Designated Account DCI Domestic Construction Industry DCOI Development Cooperation ofIreland - Former Ireland Aid DED District Engineering Division DFWC District Road Maintenance Contractor DFID Department for International Development, UK DMOs District Maintenance Organizations DO Development Objective EA Environmental Assessment EC Delegation of the European Commission in Ethiopia EL4 Environmental Impact Assessment EIRR Economic Internal Rate ofReturn EMB Environmental Monitoring Branch EMCP Expenditure Management and Control Program EMPs Environmental Monitoring Plans EMSB Environmental Monitoring and Safety Branch ERA Ethiopian Roads Authority ERTTP Ethiopia Rural Travel and Transport Program EU European Union FMS Financial Management System FTA Federal Transport Authority FYRR First Year Rate ofReturn GOE Government ofFederal Democratic Republic ofEthiopia FOR OFFICIAL USE ONLY GTZ Deutsche Gesellschaft fir Technische Zusammenarbeit HDM Highway Design Model HIV/AIDS Human Immuno Deficiency VirudAcquired Immuno Deficiency Syndrome LBRD International Bank for Reconstruction and Development ICAS Interim Country Assistance Strategy ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association or Association IFRs InterimUnaudited Financial Reports JBAR Joint Budget and Aid Review JICA Japan International Cooperation Agency KfW Kreditanstalt f~Wiederaufbau (German Bilateral Aid) LIG Local Infrastructure Grant MAP Multi Agency Aids Program MARD Ministry of Agriculture and Rural Development MDGs MillenniumDevelopment Goals M&E Monitoring and Evaluation MEB Monitoring and Evaluation Branch ofERA MOI Ministry ofInfrastructure MOTC Ministry of Transport and Communications MOW Ministry of Works and Urban Development NCB National Competitive Bidding NDF Nordic Development Fund NGO Nongovernmental Organization NPV Net Present Value OFID Organization ofPetroleum Exporting Countries Fund for International Development ORF Office of the Road Fund PA0 Program Advisory Office PAPS Project Affected Persons PASDEP Plan for Accelerated and Sustained Development to End Poverty PBS Protection of Basic Services PEFA Public Expenditure and Financial Accountability PFM Public Financial Management PHRD Policy and Human Resources Development Fund (Japan) PIP Project Implementation Plan PMS Pavement Management System PRSP Poverty Reduction Strategy Paper PSCAP Public Service Delivery Capacity Building Program PSD Private Sector Development QCBS Quality and Cost Based Selection RAPS Resettlement Action Plans RF Road Fund RPF Resettlement Policy Framework RRA(s) Regional Roads Authority(ies) RSDP GOE’s Road Sector Development Program (1997-2007 covering Phases Iand II) RSDP I GOE’s Road Sector Development Program Phase I(l997-2002) RSDP I1 GOE’s Road Sector Development Program Phase I1(2002-2007) RSDP 111 GOE’s Road Sector Development Program Phase I11 (2007-20 12) RSDPSP IDA-financed Road Sector Development Program Support Project (Cr. 3032-ET) RTTP Rural Travel and Transport Program This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SBD Standard Bidding Document SDPRP Sustainable Development and Poverty Reduction Program SDR Special Drawing Rights SIL4 Social Impact Assessment SNNPR Southern Nations, Nationalities & Peoples Region ofEthiopia SOE Statement ofExpenditure TA Technical Assistance TPO(s) Transport Poverty Observatory(ies) TOR Terms ofReference WDCS Wereda Development Committees WIDPS Wereda Integrated Development Plans Vice President: Obiageli K. Ezekwesili Country Director: Ishac Diwan Sector Manager: C. Sanjivi Rajasingham Task Team Leader: Yoshimichi Kawasumi ETHIOPIA Road Sector Development Stage I11 Project (APL3) CONTENTS Page Cover Sheet A . STRATEGIC CONTEXT AND RATIONALE ................................................................... 1 1. Country and sector issues .................................................................................................... 1 2 . Rationale for Bank involvement ......................................................................................... 4 3 . Higher-level objectives to which the project contributes ................................................... 5 B. PROJECT DESCRIPTION ................................................................................................... 5 1. Lending instrument ............................................................................................................. 5 2 . Program Objective and Stages ............................................................................................ 6 3 . Project development objective and key indicators.............................................................. 6 4 . Project Components (APL Stage 3) .................................................................................... 7 5 . Lessons learned and reflected in the project design............................................................ 9 6 . Alternatives considered and reasons for rejection for APL3, within the overall APL objectives .................................................................................................................................. 10 C. IMPLEMENTATION .......................................................................................................... 12 1. Partnership arrangements (if applicable) .......................................................................... 12 2 . Institutional and implementation arrangements ................................................................ 12 3 . Monitoring and evaluation ofoutcomes/results ................................................................ 15 ... 4 . Sustainability..................................................................................................................... 15 5 . Critical risks and possible controversial aspects ............................................................... 17 6 . Loadcredit conditions and covenants ............................................................................... 18 D. APPRAISAL SUMMARY ................................................................................................... 19 1. Economic and financial analyses ...................................................................................... 19 2 . Technical ........................................................................................................................... 20 3 . Fiduciary ........................................................................................................................... 20 4 . Social................................................................................................................................. 21 5 . Environment...................................................................................................................... 23 6 . Safeguard Policies ............................................................................................................. 24 7 . Policy Exceptions and Readiness...................................................................................... 24 Annex 1: Country and Sector or Program Background......................................................... 25 Annex 2: Major Related Projects Financed by the Association and/or other Agencies ....... 35 Annex 3: Results Framework and Monitoring ........................................................................ 37 Annex 4: Detailed Project Description...................................................................................... 42 Annex 5: Project Costs ............................................................................................................... 47 Annex 6: Implementation Arrangements ................................................................................. 48 Annex 7: Financial Management and Disbursement Arrangements..................................... 54 Annex 8: Procurement Arrangements ...................................................................................... 62 Annex 9: Economic and Financial Analysis ............................................................................