Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 67866-NP PROGRAM APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT Public Disclosure Authorized SDR 38.7 MILLION (US$60.0 MILLION) TO NEPAL FOR A Public Disclosure Authorized BRIDGES IMPROVEMENT AND MAINTENANCE PROGRAM June 1, 2012 Sustainable Development Department Bangladesh and Nepal Country Management Unit South Asia Regional Office This document has a 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 31, 2012) Currency Unit = Nepalese Rupee (NPR) NPR 81.29 = US$1 US$0.645 = SDR1 GOVERNMENT OF NEPAL FISCAL YEAR July 15 – July 14 ABBREVIATIONS AND ACRONYMS ACG Anti-Corruption Guidelines M&E Monitoring and Evaluation ADB Asian Development Bank MDGs Millennium Development Goals ARMP Annual Road Maintenance Plan MoF Ministry of Finance BMS Bridge Management System MoLD Ministry of Local Development CIAA Commission for the Investigation of MoPPWTM Ministry of Physical Planning, Works Abuse of Authority and Transport Management CMS Contract Management System MTEF Medium Term Expenditure Framework DDG Deputy Director General NA Not Applicable DFID Department for International NPC National Planning Commission Development (UK) DiD difference-in-difference NPV Net Present Value DLI Disbursement-linked Indicator NVC National Vigilance Center DoLIDAR Department of Local Infrastructure OAG Office of the Auditor General Development and Agricultural Roads DOR Department of Roads PAD Program Appraisal Document DTCO District Treasury Comptroller Office PBMC Performance Based Maintenance Contract EIA Environmental Impact Assessment PDO Program Development Objective EIRR Economic Internal Rate of Return PEFA Public Expenditure and Financial Accountability ESMF Environmental Social Management PFM Public Financial Management Framework ESSA Environment and Social Systems PforR Program-for-Results Assessment F&C Fraud and Corruption PIP Priority Investment Plan FA Financiing Agreement PPA Public Procurement Act FCGO Financial Comptroller General Office PPMO Public Procurement Monitoring Office FMS Financial Management System PPR Public Procurement Regulations FY Financial Year PWD Public Works Directives GDP Gross Domestic Product RAIDP Rural Access Improvement and Decentralization Project GESU Geo-Environmental and Social Unit RBN Roads Board Nepal GIZ German Society for International RMRP Roads Maintenance and Rehabilitation Cooperation Project GON Government of Nepal RNDP Road Network Development Project GPSA Global Partnership for Social RSDP Road Sector Development Project Accountability GRM Grievance Redressal Mechanism SBD Standard Bidding Document IDA International Development SDC Swiss Agency for Development and Association Cooperation IMF International Monetary Fund SIL Specific Investment Lending IRC Indian Roads Congress SRN Strategic Road Network ISN Interim Strategy Note UNCAC United Nations Convention against Corruption JICA Japan International Cooperation UNDP United Nations Development Program Agency LRN Local Road Network VOC Vehicle Operating Costs Vice President: Isabel M. Guerrero Country Director: Ellen Goldstein Sector Director: John Henry Stein Acting Sector Manager: Binyam Reja Task Team Leader: A.K. Farhad Ahmed NEPAL Bridges Improvement and Maintenance Program TABLE OF CONTENTS Page I. Strategic Context 1 A. Country Context 1 B. Macroeconomic and Fiscal Context of the Program 1 C. Sectoral and Institutional Context of the Program 2 D. Relationship to the CAS/CPS and Rationale for Use of Instrument 3 II. Program Description 4 A. SRN Bridge Program Scope and Activities 5 B. Program Development Objectives 7 C. Program Key Results and Disbursement Linked Indicators 7 III. Program Implementation 9 A. Institutional and Implementation Arrangements 10 B. Results Monitoring and Evaluation 11 C. Disbursement Arrangements, Disbursement-linked Indicators, and Verification Protocols 12 IV. Assessment Summary 13 A. Technical 13 B. Fiduciary 15 C. Environmental and Social Effects 17 D. Integrated Risk Assessment Summary 18 E. Program Action Plan 19 Annex 1: Detailed Program Description 20 Annex 2: Results Framework Matrix 28 Annex 3: Disbursement Linked Indicators Matrix and Verification Protocols 32 Annex 4: Program Action Plan 42 Annex 5: Technical Assessment 44 Annex 6: Fiduciary Systems Assessment 52 Annex 7: Environmental and Social Systems Assessment 61 Annex 8: Integrated Risk Assessment 65 Annex 9: Implementation Support Plan 69 Annex 10: Impact Evaluation Concept Note 73 Map – IBRD 39229 NEPAL BRIDGES IMPROVEMENT AND MAINTENANCE PROGRAM PROJECT APPRAISAL DOCUMENT SOUTH ASIA REGION Basic Information Date: June 1, 2012 Team Leader: A.K. Farhad Ahmed Country Director: Ellen Goldstein Sectors: Rural/Inter Urban Roads – 100 percent Sector Director: John Henry Stein Themes: Infrastructure Services for private sector development (90 percent); Governance & Institution Building (10 percent) Program ID: P125495 Lending instrument: Program-for- Results (PforR) Program Implementation Period: Start Date: July 15, 2012 End Date: July 15, 2017 Expected Financing September 30, Effectiveness Date: 2012 Expected Financing Closing January 15, 2017 Date: Program Financing Data [ ] Loan [ ] Grant [ ] Other [X] Credit For Loans/Credits/Others (US$M): Total Program Cost : 147.9 Total Co financing: Financing Gap: Financing Source Amount BORROWER/RECIPIENT 87.9 IBRD IDA: New 60.0 IDA: Recommitted Others Financing Gap Total 147.9 Borrower: Nepal Responsible Agency: Department of Roads, Ministry of Physical Planning, Works and Transport Management (MoPPWTM) Contact: Mr. Krityanand Thakur Title: Project Chief, Bridge Project Telephone No.: +977-1-426-8580 Email: [email protected] Expected Disbursements (in US$ Million) Fiscal Year 2013 2014 2015 2016 2017 Annual 12 12 12 12 12 Cumulative 12 24 36 48 60 i Program Development Objective(s) The Program Development Objective is to provide safe, reliable and cost effective bridges on Nepal’s Strategic Roads Network. Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] Does the project require any waivers of Bank policies applicable to Program-for-Results operations? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ X ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] Overall Risk Rating: Substantial Legal Covenants Name Recurrent Due Date The Recipient shall carry out the Program, or cause the Program to be carried out, in accordance with financial management, procurement and environmental and social Yes Ongoing management systems acceptable to IDA The Recipient shall carry out the Program, or cause the Program to be carried out, in Yes Ongoing accordance with the provisions of the Anti-Corruption Guidelines The Recipient shall carry out the Action Plan in accordance with the schedule set out in the As specified in Yes Action Plan in a manner satisfactory to IDA Annex 4 Team Composition Bank Staff Name Title Specialization Unit UPI Farhad Ahmed Sr. Transport Specialist Task Team Leader SASDT 377258 Chaohua Zhang Lead Social Development Specialist Social System SASDS 86742 Simon Ellis Sr. Transport Economist Transport SASDT 171418 Deepak Shrestha Sr. Transport Specialist Transport SASDT 384874 Dominic Patella Transport Specialist Transport/Finance SASDT 321027 Drona Raj Ghimire Environmental Specialist Environment SASDI 251759 Hiramani Ghimire Sr. Governance Specialist Governance SASGP 255081 Kiran Baral Sr. Procurement Officer Procurement SARPS 182335 Shambhu Uprety Procurement Specialist Procurement SARPS 359093 Silva Shrestha Research Analyst Risk management SASDU 296902 Bigyan Pradhan Sr. Financial Management Specialist Financial Management SARFM 20092 Rama Krishnan Venkateswaran Sr. Financial Management Specialist Financial Management SARFM 228270 Richard Holloway Governance Specialist Governance SASDS 106965 Rajesh B Dongol Program Assistant Administrative SASDO 145740 Shubu Thapa Team Assistant Administrative SASDT 316990 Non Bank Staff Name Title Office Phone City Ishwor Neupane Social Development Specialist Kathmandu Narayan Datt Sharma Procurement Consultant Kathmandu ii Toran Sharma Environmental Specialist Kathmandu Duncan Hamilton Transport Economist London Pradeep Kumar Shrestha Financial Management Consultant Kathmandu Rod Stickland Engineering Consultant Kathmandu iii I. STRATEGIC CONTEXT 1. This introductory chapter puts into perspective the political, economic, and institutional background that impacts the need for the Bridges Improvement and Maintenance Program in Nepal and rationale for using the Program-for-Results (PforR) financing instrument. A. Country Context 2. Nepal is still emerging from a 10-year armed conflict that ended in 2006 and is currently passing through a momentous and prolonged political transition which is still in a fragile and incomplete state. This transition entails two interrelated processes: promulgation of a new Constitution and the completion of the ongoing peace process. The Constitution is expected to lead to a major restructuring of Nepal into a federal state while the completion of the peace process is expected to resolve the integration/rehabilitation