Public Disclosure Authorized
Document of
The World Bank
Public Disclosure Authorized
Report No. 17225-ET
PROJECT APPRAISAL DOCUMENT
ONA
IN THE AMOUNT OF US$309.2 MILLION EQUIVALENT
TO THE
FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
FOR A
ROAD SECTOR DEVELOPMENT PROGRAM SUPPORT PROJECT
Public Disclosure Authorized
Public Disclosure Authorized
PROPOSED CREDIT
December 18, 1997
Transport 1
Africa Region
CURRENCY EQUIVALENTS
Currency Unit
US$1.00
=
=
Ethiopian Birr (ETB)
Birr 6.832
SDR 1.0
=
US$1.3784 as of November 1997
FISCAL YEAR
July 1 - June 30
WEIGHTS AND MEASURES
I kilometer
=
I square kilometer (km2)
=
Vice President.
Country Director:
Sector Manager:
Task Manager:
0.621 miles
0.386 square miles
Callisto Madavo
Oey Astra Meesook
Yusupha B. Crookes
John Riverson
ABBREVIATIONSAND ACRONYMS
ADF
CAS
DFID
EA
EPA
ERA
EU
FIDIC
GOE
GTZ
ILO
JICA
KfW
MIS
NDF
PAO
PER
PIP
RMI
RRO
RSDP
RSDPSP
SIDA
SIP
TA
TOR
Afiican DevelopmentFund
Country Assistance Strategy
Department for International Development (U.K.)
EnvironmentalAssessment
EnvironmentalProtection Authority (Ethiopia)
Ethiopian Roads Authority
European Union
InternationalFederation of Consulting Engineers
Government of Ethiopia
DeutscheGesellschaftfur TechnischeZusammenarbeit
InternationalLabor Organization
Japanese International Cooperation Agency
Kreditanstalt fur Wiederaufbau
ManagementInformation Systems
Nordic Development Fund
Program AdvisoryOffice
Public Expenditure Review
Project ImplementationPlan
Road Maintenance Initiative
Regional State Rural Roads Organization
Road Sector DevelopmentProgram
Road Sector DevelopmentProgram Support Project
SwedishIntemational Development Agency
Sector Investment Program
Technical Assistance
Terms of Reference
ETHIOPIA
ROAD SECTOR DEVELOPMENT PROGRAM SUPPORT PROJECT
PROJECT APPRAISAL DOCUMENT
CONTENTS
Page No.
Project Financing Data .
A.
B.
C.
...................................................
I
Project Description ....................................................
2
1.
2.
3.
4.
2
2
2
3
Project Development Objectives .....................................................
Project Components ...................
..................................
Benefits and Target Population .....................................................
Institutional and Implementation Arrangements ................. ...............
Project Rationale ...........
4...................................
4
1.
2.
3.
4.
5.
4
4
5
6
CAS Objective(s) Supported by the Project ......................... .............
Main Sector Issues and Government Strategy .................... ...............
Sector Issues to be Addressed by the Project and Strategic Choices ..
Project Altematives Considered and Reasons for Rejection ......... .....
Major Related Projects Financed by the Bank and/or
Development Agencies ..........................
6. Lessons Learned and Reflected in the Project Design ............ ............
7. Indications of Borrower Commitment and Ownership ............ ...........
8. Value Added of Bank Support ....................................................
7.........................
7
7
8
8
Summary Project Assessments .
9
1.
2.
3.
4.
5.
6.
7.
...................................................
Economic Assessment .................
..................................
Financial Assessment .................
..................................
Technical Assessment .................
..................................
Institutional Assessment .....................
..............................
Social Assessment ...................................................
Environmental Assessment ..............................
Participatory Approach ......................
.............................
9
10
10
11
11
11.....................
12
l
z
\~~~~~~~~~~~~~~~~~~~~~~~
- ii -
D.
E.
Sustainability and Risks ......................
..............................
12
1. Sustainability....................................................
2. Critical Risks ....................................................
3. Possible Controversial Aspects ....................................................
12
12
14
Main Loan Conditions ...................
14
1. Effectiveness Conditions ...........................
2. Assurances ......................
F.
.................................
.........................
Compliance with Bank Policies ....................................................
Annexes
1.
1-A.
2.
2-A.
3.
3-A.
4.
4-A.
5.
6.
7.
8.
9.
10.
Project Design Summary
Letter of Road Sector Policy
Detailed Project Description
Program Management Structure
Estimated Project Costs
RSDP Components by Financiers
Cost-Benefit Analysis Summary
Fiscal Impact of the Ethiopia Road Sector Development Program
Financial Summary
Procurement and Disbursement Arrangements
Project Processing Budget and Schedule
Documents in the Project File
Statement of Bank Loans and IDA Credits
Ethiopia at a Glance
Maps:
IBRD 29211
IBRD 29268
14
14
14
INTERNATIONAL
BANK FOR RECONSTRUCTION
AND DEVELOPMENT
INTERNATIONAL
DEVELOPMENTASSOCIATION
Afiica Regional Office
AFC06
Project Appraisal Document
Ethiopia
Road Sector Development Program Support Project
Date: December 18, 1997
Task Manager: John Riverson
Project ID: ET-PA-755
Lending Instrument: Sector Investment Program (SIP)
Project FinancingData
[ ] Draft
[X] Final
Country Manager: Oey Astra Meesook
Sector: Transportation
PTI:
[ ] Yes
[X] No
[] Loan X Credit
[]
Guarantee
[]
Other [Specify]
For Loans/Credits/Others:
Amount (US$m/SDRm):US$309.2 million/SDR 224.5 million
Proposed Terms:
[
Multicurrency [
Single currency
Grace period (years): 10
[
Standard
[X] Fixed
[
LIBOR-based
Variable
Years to maturity: 40
Commitment fee: 0.50% on undisbursed credit balances, beginning 60 days after signing, less any waiver.
Service charge: 0.75%
Financingplan for the Road Sector Development Program, Phase 1(US$2757.0 m):
Source
Local
Government
of which Reimbursable Taxes
Road User Revenue
Cofinanciers: EU
)
DflD
)
NDF
)
GTZ, KfW )
Japan
)
ADF
)
Italy
)
Netherlands )
Unidentified )
IDA (Ongoing Road Rehabilitation Project)
IDA (RSDPSP)
TOTAL
938.6
(413.5)
184.4
69.5
0.0
0.6
11.2
21.8
17.4
9.8
4.9
40.9
3.0
20.5
1322.6
Foreign
Total
56.7
995.3
-0230.7
0.3
7.0
49.0
71.2
87.0
39.7
21.2
542.9
40.0
288.7
1434.4
184.4
300.2
0.3
7.6
60.2
93.0
104.4
49.5
26.1
583.8
43.0
309.2
2757.0
Borrower: Federal Democratic Republic of Ethiopia
Guarantor:
Responsible agencies: Ethiopian Roads Authority (ERA) and Regional State Rural Roads Organizations(RROs)
Estimated disbursements (Bank FY/US$M):
Annual
Cumulative
1998
0.0
0.0
1999
42.0
42.0
2000
92.3
134.3
2001
108.3
242.6
2002
62.0
304.6
2003
4.6
309.2
Page 2
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
[
For Guarantees:
Proposed coverage:
Project sponsor:
Nature of underlying financing:
Terms of
financing:
Principal amount (US$)
Final maturity
Amortization profile
Financing available without guarantee?:
If yes, estimated cost or maturity:
Estimated financing cost or maturity with guarantee:
Expected effectiveness date: May 30, 1998
[
[] Partial risk
Partial
Credit
[
Yes
No
Closing date: May 30, 2003
Block 1: Project Description
1. Project development objectives (see Annex I for key performance indicators):
The primary aim of the proposed Road Sector Development Program Support Project (RSDPSP) is to contribute to Ethiopia's
economic development by (1) improving trunk and regional rural road access and utilization to meet the agricultural and other
economic development needs; (2) building up the institutionalcapacity in both the public and private sectors for sustainable road
development and maintenance; and (3) providing economic opportunity for the rural poor both through increased employment in rural
road works and development of appropriate and affordable means of transport and services. The key performance indicators include:
Traffic Flow, Joumey Times, Pavement Roughness, Maintenance Expenditure, Pavement Loading, and Road Freight Prices.
2. Project components (see Annex 2 for a detailed descriptionand Annex 3 and 3A for a detailed cost breakdown including
other donor financed components of RSDP I.):
Component
Category
Rehabilitateand Strengthen Trunk Roads
Upgrade Trunk Roads from Gravel to Asphalt Pvt.
Construction Supervision
Inst. Strengthening& Capacity Bldg. for ERA
Inst. Strengthening & Capacity Bldg. for RROs
Environmental Guidelines & Sector EA Cap. Bldg.
Preparatory Studies for Rural Roads
Civil Works
Civil Works
Consultant Services
Consultant Services
Consultant Services
Consultant Services & Equipment
Consultant Services
Total
Cost Incl.Contingencies %of Total
(S$M)
154.8
309.6
32.5
29.8
7.3
1.4
2.6
538.0
28.7
57.5
6.0
5.6
1.4
0.3
0.5
100
3. Benefits and target population:
The road investments to be undertaken under the proposed Project are expected to improve access to markets and the quality of
transport services available to the rural population. Direct benefits will be achieved through reductions in vehicle operating costs that
would result from improved road conditions. Since the roads which have been selected for rehabilitation are located in zones of good
agricultural potential or serve as major import-export corridors, most of the vehicle operating cost savings would accrue directly to
truck operators providing trade and/or agricultural-relatedtransport services. With the deregulation of the trucking industry,
competition is expected to result in these savings being passed on to producers and consumers. They will therefore contribute to
fostering economic growth and poverty alleviation countrywide through improvements in market integration and accessibility,and
reduction in food marketing costs, especially for remote communities which have hitherto been cut off from market linkages and even
relief services. Furthermore, the investments identified for IDA financing forn part of a network-wide investment program to be
undertaken under the Road Sector Development Program (RSDP). The institutional strengthening components of the Project are
targeted at improving managerial capability in implementing road expenditure programs. As such, they are expected to lead to a more
cost-effectiveand timely execution of road programs to the ultimate benefit of road users, the national economy and the population at
large.
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 3
4. Institutional and implementation arrangements:
Implementationperiod: Five years (1998-2003)
Executingagenckes:ERAandthe RROs(sharingresponsibilitywithERA forthe CapacityBuildingComponentfinancedby the
NordicDevelopmentFund(NDF)).
Project coordination: The RSDP is managed by ERA, which is responsible for implementationof all projects within the Program.
ERA is the legally autonomous agency responsible for management of the country's roads. In order to facilitate implementationof
the RSDP,ERAhas recentlybeenreorganizedinto threemaindepartmentsas follows:(A)Regulatory and Engineering Services
Department, which is to discharge its responsibilities through three Divisions: Planning and Programming, Contracts Administration,
and Design, Research and Network Management;(B) Operations Department, whichhas responsibilityfor forceaccount
maintenance,emergencyroad constructionand maintenance,andassociatedlogisticssupport;and (C) Human Resource and
Financial Management Department (SeeAnnex2-A). Underthe Planningand ProgrammingDivision,ERAhas establishedsix
Branches responsible for Planning and Program Management,Prograrnming and Budgeting, Monitoring and Evaluation, Management
Infonnation Systems (MIS), Environmental Management,and Rural Roads Technical Support. As part of this broad organizational
setup for implementingthe RSDP, ERA will also set up a Program Advisory Office (PAO) under the General Manager. Staff of the
PAO will be supported by technical assistance (TA), comprising an RSDP Advisor (a senior highway engineer/civilworks contract
administrationspecialist) funded by the EU, who is expected to start work by January 1998;and a Financial Management (MIS)
expert, who will advise the General Manager on matters related to program coordination, including the coordination of TA and the
related multi-donor support and interests. Specific arrangements for the administrationof the Road Fund have been finalized with the
appointment of the Road Fund Board comprising representatives of the Federal Government, Regional States, ERA and local
stakeholders. Civil works will be awardedto prequalified contractors through international and/or local competitive bidding as
appropriate in accordance with IDA Guidelinesfor Procurement under IBRD Loans and IDA Credits publishedby the Bankin
January1995,updatedin JanuaryandAugust1996andrevisedin September1997. All associatedsupervision,as wellas TA
consultantservices,willbe awardedto qualifyingconsultingfirms(internationaland localreputableandqualifiedfirns) in
accordancewith IDA Guidelinesfor Selection and Employment of Consultants by WorldBank Borrowers datedJanuary1997.
Maintenancewillbe carriedout both by the DistrictOfficesof ERAandincreasinglyby privatecontractors,in accordancewith the
agreedMaintenanceActionPlan.
AnnualProjectImplementation Plan: ERAhas prepareda ProjectImplementation
Planwhichdetailsthe implementation
arrangementsand procurement schedules.
Project oversight (policy guidance, etc.): ERA's Board of Directors will provide general policy direction and have primary
oversight responsibility for project performance monitoring. Sector policy will be coordinated as appropriate with the Ministries of
Works and Urban Development, Transport and Communication,and Finance. ERA's management will provide guidance on project
performance monitoring and recommended actions from data obtained through the MIS and information collected by the Monitoring
andEvaluationUnit. The informationandresultsof anyanalysiswillbe madeavailableto IDA and othersupportingdonorsand
discussed in donor meetings to be organized by ERA every quarter.
Accounting,flnancial reporting and auditing arrangements: (i) ERAwillmaintainaccountsandrecordsin accordancewith
EthiopianandInternationalAccountingStandards;(ii) its accountingrecordswill includeseparateaccountsandrecordsto enableall
project resources and expendituresto be clearly identified and reconciled with its financial statements; (iii) ERA's financial statements
will be audited in accordance with International Standards on Auditing by the Audit Services Corporation or other independent
auditor acceptable to IDA; the audits will include the Special Account and Statementsof Expenditure which have been used as the
basis for preparing withdrawal applications against the IDA Credit; (iv) the audit report and the audited financial statements,together
with a managementlettercoveringthe auditor'sreviewof ERA'sinternalcontrolstructure,willbe submittedto IDAwithinsix
monthsof the end of the periodto whichtheyrelate.
Monitoring and evaluation arrangements: A Monitoring and Evaluation Unit to be established in ERA's Planning and
Programming Division will collect informationand provide data from its MIS. The Roads Inspectorate Unit will validate the data and
performance and provide internal technical and financial audits to ERA's Board of Directors.
Page 4
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Block 2: Project Rationale
5. CAS objective(s) supported by the project
Document number and date of latest CAS discussion: Report No. 17009 dated
August 19,1997,discussed by the Executive Directors on September 9, 1997.
Ethiopia's major development objective is sustained poverty reduction. The Bank's assistance strategy aims to help to reduce
poverty both directly and by promoting sustained economic growth, notably by creating an environment conducive to rapid private
sector and export development. This will be achieved through four clusters of activities: (i) policy and capacity; (ii) infrastructure;
(iii) sources of growth; and (iv) poverty and human development. To sustain the Government's GDP growth target of 7-8% per
year, as well as to alleviate poverty more directly, a major effort is needed to ease the severe infrastructural constraints faced by the
country. In the roads sector, this means support for the Govermment'sambitious and vital sector investment program (SIP) to
expand the road network, and to improve the proportion of the network in good condition from 20% to 68% in ten years. This will
serve to ameliorate the fragmentation of markets and isolation that work so much to the disadvantage of the poor, and will improve
their access to social services and to food distribution in times of drought. The proposed project, which will involve close donor
coordination and capacity building, will support the SIP with a sector-wide expenditure program based on a coherent sector policy
framework. It will support reforms already under way, such as strengthening ERA and the RROs, increasing the involvement of the
private sector, establishing a Road Fund, liberalizing transport charges and continuing reforms in the transport industry. It will also
provide assistanceto privatize parastatal freight transport enterprises and the remaining fleets for relief operations, and to amnendthe
legal frameworkto clarify the role of transport associations and facilitate the activities of private entrepreneurs.
6. Main sector issues and Government strategy:
IDA's Transport Sector Memorandum (December 19, 1996) which complementedGOE's preparation of the RSDP, has confirmed
the following main sector issues, to which are added GOE's strategy for addressing them.
1. Ethiopia has one of the lowest road densities in Africa whether measured in km of roads per sq. kn or km of roads per capita.
GOE's 10-year RSDP is intended to reestablish fair to good operating conditions over a majority of the 23,812 km of existing roads,
while also expanding the road network by construction of 18,344 km of new feeder roads. These investments would increasethe
road density by 80 percent from the current lows of 21 km/1000 km2 and 0.43 kmtlO00 population.
2. Inadequate management capacity resulting partly from lack of complete autonomy of ERA. GOE has taken steps to strengthen
the autonomy of ERA. The Council of People's Representatives has approved the proclamation which establishes ERA as an
autonomous organ of Governmenthaving its own legal identity. The autonomy of ERA is further confmned in GOE's Letter of
Sector Policy. In addition, a Roads Board comprising representatives of the Government, Regional States, Road Users and the City
of Addis Ababa has been constitutedand established to administer the operation of the Road Fund.
3. Manpower Shortages - professional and skilled labor availability. IDA's Transport Sector Memorandum estimates that countrywide human resource requirements for the implementationof the first 5-year phase of RSDP (Phase 1)will amount to a total of over
700 senior professionals, in addition to some 1,700 or more junior professionalstaff and 4,000 or more skilled workers (mechanics
and plant operators etc.). As a result, ERA and the RROs are expected to have to compete with contractors and consultants in the
private sector for the scarce local resources through competitive employment packages. They may also have to fill the gap by
employing expatriates or contracting out responsibilities.To withstand such competition, ERA and the RROs will need to be fully
established ahead of the competition and thereafter match the employmentpackages to those of the private sector for both their
professionaland skilled labor employees. In addressing ERA's staffing needs, Government strategy has been to recruit more
engineers to ERA and give them on-the-job training through attachments to different road works activities and contracts. In
addition, Government has already received donor assistance in providing consultancy services for professional technical assistance
and training to ERA management and staff in critical areas of general program management, legal and technical aspects of contract
administration(FIDIC-based contracts), planning and programming,maintenance management, and environmentaland road safety
guidelines. GOE has also indicated in its Letter of Sector Policy a further commitment to adoption of the ERA and RRO reform
study findings; recruitment to fill vacant positions; further training; and payment of competitive salaries and conditions. This is
consistent with Government's overall policy to train manpower and improve the pool of skilled labor.
4. Poverty and need to increase local employment opportunities. Under its CAS, IDA will support GOE's development strategy
which is based on Agricultural Development-LedIndustrialization and export-led growth through agriculture as the primary
stimulus to generate employment and income for the poor, and as a springboard for development of the other sectors. GOE will also
increase local resource use through the development and employment of local consultants and contractors in joint ventures with
international contractors. GOE is also financing design and build contracts for rural roads improvements involving international and
local design consultants and local contractors; and increaseduse of labor-based technology for road construction and maintenance
Page 5
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
by contracting out manual routine maintenance on the lengthperson principle. Under the domestic construction industry study (see
Section 9 below), capacity building recommendations and an implementationplan are to be developed.
5. Need for effective road maintenance planning and budgeting. The RSDP will result in a substanial extension to the classified
road network, with the length of paved roads (3,656 kIn) more than doubling and the total network increasing by 80% over 10 years.
Maintenance needs will similarly expand. GOE has already prepared a multi-annual maintenance plan for the sector which was
reviewed with IDA during negotiations. Given existing resources and available funding, the plan was found to be consistent with
the RSDP objectives and the Public Expenditure Review (PER). The plan reflects commitment to the progressive contracting out of
mechanized and manual routine maintenance works, as well as indicative budgets showing clearly identified resources and sources
of funds for project implementation. Local maintenance funding will be substantially improved through the Road Fund. By endOctober 1997, the Road Fund had realized about Birr 110 million from road user charges which is to be augmented from GOE
budget resources, as described in the Table and paragraph 6 below.
Maintenance Needs and Financing Sources
(US $ Million Equivalent) *
Maintenance Need
Federal
Regional
Municipalities
Total
Road Fund Financing
User Charges
Government Budget
*
1997/98
1998/99
1999/2000
2000/01
2001/02
Total
33.90
3.35
4.16
41.41
42.67
3.82
4.25
50.74
44.09
4.13
4.34
52.56
45.60
4.49
4.44
54.53
48.87
4.92
4.53
58.32
215.13
20.71
21.72
257.56
29.63
11.78
19.63
31.11
28.99
23.57
42.79
11.74
63.35
-
184.39
78.20
NOTE: (At June 1997prices: US$1.00 = 6.75 Birr)
6. Need to increase funding for RSDP. and donor coordination The RSDP has generated major funding demands for both capital
costs of new or inproved roads and their subsequent maintenance. Government strategy has been to seek donor support for major
works and technical assistanceto strengthen ERA and the RROs, and to introduce a Road Fund to cover the financing needs for road
maintenance. The Proclamation for the Establishment of the Road Fund was approved by the Council of Ministers in December
1996, and duly issued. Transport operators have already shown their willingness to pay for increased road maintenance
expendituresduring the discussions between ERA and the Transporters Associations on the establishmentof the Road Tariff and
Road Fund (Conclusionsof the Ethiopia Road Maintenance Initiative (RMI) Seminar - June 1996, and Road Freight Transporters
Seminar - October 1996). Road users are also represented on the Roads Board, which is to manage the Road Fund, and is also
vested with powers for regularly recommending adjustmentsto the Road Tariff level.
Efficient donor coordination and effective communicationbetween donors will be essential for the successful implementationof the
RSDP. GOE ownership of the RSDP and commitment to donor coordination have been demonstratedthrough the donors
conference in February 1996, the December 1996 Consultative Group meeting, the donor coordination meetings of March and June
1997, and the RSDP formal launch conference in September 1997. Donor coordination has already been initiated and effectively
implementedthrough IDA and EU joint support and GTZ inputs in assisting ERA in the preparation of the RSDP; and through
dovetailing of the individual donor projects and institutionalsupport provisions of EU, DflD, SIDA, IDA and NDF, with EU
inviting IDA participation in the selection of the key experts to be provided under EU financing. IDA also informed potential
donors of its proposed operations, and agreements were reached with GOE and interested donors; and arrangements for maintaining
the current high level of donor coordination were confirmed during appraisal and the donor coordination meetings.
7. Sector issues to be addressed by the project and strategic choices:
IDA, in collaborationwith the European Commission and GTZ, supported the GOE in preparing its RSDP. IDA's involvement in
the groundwork for the RSDP also included the preparation of a Transport Sector Memorandum and further support to a program of
road sector policy and institutionalreform under Ethiopia's RMI program. The proposed project will firther support this strategy
through: (a) improvement and expansion of essential priority road infrastructure, while assuring continued road maintenance;
Page 6
Project Appraisal Document
Ethiopia: Road Sector DevelopmentProgram Support Project
(b) promotion of efficient road sector management through institutionalstrengthening for: (i) planning, programming and technical
and fnancial management and monitoring; (ii) effective contracts administration; and (iii) GOE's agricultural development policy
includingenvironmental rehabilitation and conservation;and (c) contribute to private sector development and poverty reduction by
(i) promoting development of the private domestic construction and consulting industry; (ii) promoting the increased use of laborbased technology, as appropriate, and (iii) implementing an action plan for improving rural transport infrastructure and low-cost
servicesto benefit the poor in rural communities. The key sector issues addressed were:
(1) The need to strengthen ERA's and RROs' program management and contract administration capacity and to facilitate the
increased use of private contractors and consultants in both construction and maintenance of the road network;
(2) The need to facilitate the increased use of domestic contractors and consultants in both construction and maintenance of the
road network;
(3) The need to facilitate the increased application of labor based technology;
(4) The need to ensure that policy reform measures undertaken under the RSDP include sufficient budgetary provisions and
fnancial capacity for (a) maintenance of the roads and sustainability of the investments made; and (b) sufficientcounterpart funding
for the capital expenditure with prospects for cost recovery in the long term;
(5) Appropriate speed of investments in the light of implementationconstraints balanced against the need for rapid development
of the economy and poverty alleviation.
The strategic choices included:
(1) supporting the provision of more TA to ERA and the RROs, or maintaining the current levels of TA support;
(2) increasing the use of private contractors and contracting out program management services as against more public provision of
such services;
(3) ensuring that all necessary resources are available for the expanded network and to maintain it in a fair or better condition, or
to reduce the program of investmentsto a level that can be sustained within the available domestic managerial and financial
capacity;
(4) continuing Bank institutional and financial support and development, or establishing local capacity for such development
through the Road Fund, etc; and
(5) continuing to monitor program performance and review annual road programs and budgets in the context of the Annual
IDA/GOE PER, or strengthening ERA capacity for such technical and financial audits and to report to donors.
8. Project alternatives considered and reasons for rejection:
Selecting Components from the RSDP This Project is IDA's share of multi-donor support for the RSDP, in which each component
is generally of a magnitude which requires multi-donor support. Each donor pledged support for participating in the various
components of the RSDP and IDA, as the lender of last resort, has proposed to respond to GOE's request for support in the form of a
number of diverse contributory inputs to a number of otherwise inadequately funded components. The alternatives considered were
essentiallybased on individual donors funding distinct components alone (e.g., a program implementationadvisory office, all
technical assistance, or all aspects of establishing an environmental agency and the environmentalcontrols needed in respect of the
RSDP), or other donors contributing to multi-donor inputs to each component and thereby retaining a degree of control of the
various aspects which affect their other components. The donor coordination and project management to be set up under the
General Manager, with advice through the Program Advisory Office, is therefore considered essential for effective program
implementation. The primary IDA project alternatives considered therefore centered around the size of the project, and thereafter
the option of supporting a series of projects/phased operations as opposed to that of a single Project to address all identified sector
policy issues. The phased approach is preferred to match the build-up of the required institutional and financial capacity for
implementing the RSDP. The alternatives also include the option of maintainingthe cross-sectional character of the RSDP through
a SIP or investing in selected priority main roads or regional rural roads. The latter was rejected because it provided little impact on
overall road sector strategy and institutional and policy reforms.
Institutional Reform Options. Options also existed in project management arrangements, and particularly that of outsourcing
program management to international firms, and providing direct technical assistanceto ERA in the form of professional advice and
supportto ERA line staff directly responsible for program implementationin carrying out their responsibilities,as opposed to
strengtheningERA's management of the RSDP. However, outright outsourcing of program management to private international
frms would be unacceptable to GOE and would pose the danger of not transferring know-how and building needed capacity for
ERA's professional staff to perform their management and professionaltasks within the RSDP. Thus, this option was rejected in
favor of providing support for effectively coordinating the implementationof the program.
Project Appraisal Document
Ethiopia: Road Sector DevelopmentProgram Support Project
Page 7
In addition, although ERA is already an established road agency charged with the management of the road network, it had lacked the
full institutionalautonomy from Government deemed necessary for managing the RSDP. Greater independence will also facilitate
the strengthening and sustainability of ERA's management. The institutionalreforms were discussed with Government during
project preparation and focused on identifying a clear autonomous legal identity for ERA, culminating in GOE's approval of a new
proclamation which substantially addressed the issues. The required provisions for ensuring greater managerial autonomy for ERA
have been further reaffrmed in Government's Letter of Sector Policy (LSP), which also indicates that Government will include
agreement to a "managementby objectives" policy linking ERA's Government subvention to agreed performance targets.
The Size of IDA-financed RSDPSP. Government presented IDA with the request for substantial support to the RSDP I as opposed
to a small operation aimed at capacity building alone. IDA indicated at the 1996 donors' conference its willingness to consider
support amounting to about US750 million in successive but overlappingphases subject to satisfactory performance during each
phase. To ensure the build up of sustainable capacity, IDA opted for an initial size of a first phase investment under the proposed
RSDPSP of US$309 million which has been justified economically in accordancewith the analysis in Annex 4. ERA will also
ensure that all investments under the RSDP I are justified at EIRRs higher than the opportunity cost of capital of 12%.The fiscal
impact analysis also demonstratesthat the impact on the public sector budget is kept within the base case scenario of the annual
public expenditure reviews. Capacity building support to ERA provided under the recently completed IDA-financed ERRP Roads
component and the ongoing Road Rehabilitation Project, as well as other donor support and govermmentinstitutional and policy
reform elaborated elsewhere, confirms the readiness of ERA to take on increasedresponsibility for a program of this size. In
addition, systems have been established for program implementationperformance monitoring and evaluation to provide early signals
of potential problems for corrective action to be taken.
9. Major related projects fianced by the Bank and/or other development agencies:
There are two ongoing Bank-financedprojects in the road sector: (i) Emergency Recovery and Reconstruction Project (Cr. 2351-ET)
which closed on September 30, 1997, has a road component covering rehabilitation, contract administrationcapacity building and
force account equipment procurement; despite some delays, the component has been largely satisfactorywith important lessons for
future operations (outlined in Section 10); and (ii) the Road Rehabilitation Project (Cr. 2438-ET) which includes paved road
rehabilitation of the Mille-Assab road, establishmentof road classification and pavement management systems, and development of
a standard design manual and specifications; implementationis also satisfactory. In addition, the European Union is supporting the
RSDP with technical assistance and institutional support, as well as a project to rehabilitate and strengthen the Addis-Awassa road
for which a contract between ERA and the Contractors, Dragados-Zeus was signed on September 12, 1997 at the RSDP launching
conference. In addition, the Addis-Jimma road design contract is under preparation, and consultant services to ERA for a Rural
Roads Coordinator is being processed. The African DevelopmentBank is currently financingthe strengthening of the SemeraElidar road, construction of the Chida-Sodo road and, in addition, has been requested to consider financing the rehabilitationof the
Alemgena-Sodo road after review of the proposed design and economic analysis.
DflD, UK is already providing RSDP technical assistance support to ERA, in contract preparation and legal aspects of contracts,
design, and maintenance management;and is prepared to offer similar support to the ERA District offices and the RROs after the
ongoing GTZ reform study identifies the needs. SIDA is already providing TA support to the Amhara Region RRO, and will
continue to do so under the RSDP with the rehabilitation of selected rural roads. The Italian Government is financing 550 km of
regional roads under the Bale/Arsi Integrated Development Program, and the preparation of a labor-based rural road works
improvement programs in Tigray and Amhara regions with the support of ILO.
Under this Credit, NDF is to co-fnance with IDA capacity building for four RROs in the Afar, Benshangul-Gumuz,Gambella, and
Somali regions; and a Japanese PHRD Grant is being used for financing the village travel and transport and domestic construction
industrystudies from which pilot projects will be defined for IDA financing. In addition, the current RSDP financing plan shows
the rehabilitation of the Addis Ababa-DebreMarkos trunk road under Japanese aid (JICA) funding, with KfW funding the Addis
Ababa - Gedo road. Other donors (Italy (through the ILO) and the Netherlands) are providing support for Regional rural roads
improvement under ongoing assistance for rural development.
10. Lessons learned and reflected in the project design:
The following lessons have emerged from recently completed and ongoing Bank operations.
(1) From the Completed Second Road Sector Project (PCR of December 1995).
Lessons include: (a) the importance of taking a careful and realistic view of the financial capacity of the Borrower, especially when
the availability of cofinancing of a sector program is not confirmed; (b) construction of new roads to previously inaccessible rural
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Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
areas, although having a positive agricultural development impact, can also have an adverse environmental impact as more area is
cultivated. The PCR highlighted the need to provide for environmentalprotection and enhancements during road planning, design
and construction, and to closely monitor and address overall effects thereafter; (c) the modest TA provided to develop BNCE, a
parastatal construction agency, showed that Govermnent commitment and willingness to grant financial and managerial autonomy is
required to ensure success in their strengthening; and (d) better monitoring mechanisms need to be built into project design by
defning performance indicators for major sub-projectswith joint annual reviews of the program with the Borrower and other
donors.
(2) From the ongoing projects.
All the civil works contracts experienced implementation delays, primarily due to GOE's limited exposure to international
contracting and, in particular: (i) its late recognition of the need to re-establish contract administrationcapacity; (ii) a reluctance to
grant the construction supervision consultant full authority to fulfill the role of Engineer; (iii) insufficient and untimely
responsivenessof ERA in support of the construction supervisor in exercising his contractual authority in connection with his role as
Engineer;(iv) over-generous construction periods (and inadequate provision for liquidated damages), aimed at encouraging local
contractor participation, which allowed the eventual international contractor to delay mobilization by 12 months or more while still
remaining within the terms of the contract; (v) a need for GOE to refine government regulations and procedures to accommodate
development project inputs - such that all the civil works contracts experienced major delays due to excessive bureaucratic customs
clearance procedures which many times led to a minimum of two months to clear anything and often far longer; and protracted
licensing procedures for issuing site radio frequencies or explosives licenses or licensingto import fax machines, global positioning
systems and other communication equipment. In addition, (vi) rehabilitatedroads have not always been promptly maintained by
ERA after handing over; and (vii) previous capacity building TA has also been handicapped by ERA's lack of provision of full-time
counterparts.
(3) Lessons from SIPs in other countries.
Several lessons have been learned from the two road SIPs which have been implemented in other East African countries: (i) the
importance of proper institutional arrangementsto avoid implementationproblems later; (ii) ensuring that road designs are updated
before bidding, particularly if there have been long delays between design and actual construction (which should in any case be
avoided);(iii) the importance of close scrutiny and expediting of the bid process to ensure selection of the best contractors and to
avoid cost increases from price escalation;(iv) the need for adequate supervision and monitoring by the implementing agency of
contractors and consultants representing the client on site (supervising Engineer) to avoid their making unilateral changes to their
own advantage; (v) the need for ownership and accountability and avoidance of overlappingresponsibility (for example, the owner
by-passing the Engineer and dealing directly with the contractor); and (vi) the need for effective donor coordination to avoid
problems in implementation. These important lessons were recognized by the Borrower and action has been taken or provisions
made, as outlined in the LSP and PIP, to improve on the areas of poor performance identified in other road SIPs.
11. Indications of borrower commitment and ownership:
GOE commitment has been demonstrated from the highest level of Government (Prime Minister, and other Ministers) to the extent
that GOE has accorded the Road Sector the highest priority in its economic development. Government has also taken substantial
steps towards preparing the groundwork for successful imnplementationof the program, including:
(i) preparation of a 10-year Road Sector Development Program which was endorsed at a donors' conference in February 1996; (ii)
adoption of the IDA ERRP Contract Administration Organization Study findings; (iii) training of 36 professionals from four regions
in photogrammetry,road design, hydrology, bridge design and material testing, as well as training of two trainers in labor-based
road works at Kisii Labor-Based Training School, Kenya, to teach later at Ginchi Training Center; (iv) approval by the Council of
Peoples' Representativesof the proclamations regarding the establishment of a dedicated Road Fund and commencing collection of
the associated fuel levy after increasing fuel prices. In addition, GOE's Letter of Sector Policy, attached as Annex 1-A, together
with the related reports, elaborate Government's policy actions and implementationmodalities relating, inter alia, to: (i)
streamlining customs and other contract administrationprocedures; (ii) confirming ERA management's autonomy; (iii) continuing
recruitment and training of staff; (iv) strategies for retaining staff, including increasing salaries; (v) identifying resources and
preparing annual timetables for implementing routine and periodic road maintenance; (vi) establishingthe PAO; and (vii) provision
of local counterpart funding.
12. Value added of Bank support:
The poor state of Ethiopia's road network is such that huge public resources are required to restore it to a condition and size that
would better serve its role in the supporting the country's economic development and growth. The Bank's contributionto the road
sector in Ethiopia amounts to some US$360 million to date, about 30% of which is being disbursed through ongoing operations.
Ethiopia had previously benefited from two sector lending operations with important lessons for the proposed sector operation
ProjectAppraisalDocument
Ethiopia:RoadSectorDevelopmentProgramSupportProject
Page 9
whichwillfurthercontributeto GOE'smacroeconomic
reformandin developingthe roadsector. TheBankhas alsoaccumulated
lessonsandexperiencefrom bothsuccessesandfailuresin implementingroadprojectselsewherewhichprovideda goodbasisfor
developingits supportto the RSDP,includingpolicyreform(drawingfromthe RMIexperience).In addition,the Bankhas playeda
leadingrole in donorcoordinationto ensurea coherentstrategyin the road sector. In this connection,Ethiopiais one of three
AfricancountrieswhereintensivecollaborationeffortsbetweenEU andthe Bankare beingimplemented.TheRSDPSPprovidesa
goodexampleof thiscooperation,whichis beingfollowedin othersectors,andprovidesan interestingcasefor followup underthis
pilotprocess.
Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8)
13.Economic
Assessment(Annex4):
[X] Cost-BenefitAnalysis:NPV=US$329.1million;
EIRR=19.0%(weightedby investment)
[I
CostEffectiveness
Analysis:
[]
Other
[Specify]
TheroadsevaluatedforIDA financing,wereidentifiedin the contextof a network-widetechno-economic
studycarriedout by
consultantantsfinancedby the EU. This RoadTransportSectorStudyassessedandprioritizedalternativeexpenditurestrategiesfor
some 10,000km of roads. This assessmentalsoprovidedthe basisfor the preparationof the RSDP,in whichonly investments
yieldingan estimatedEIRRabove 12%are to be considered.
The cost-benefitanalysisforthe IDA-financedroadswas developedbasedon a subsequentpre-feasibilitystudypreparedby
consultants,as reviewedandcommentedby IDA at variousstages. Trafficprojections,for eachcategoryof vehicle,were prepared
basedon an assessmentof futurevehicleownershipandusagerates. Theyfurtherreflectprospectsfor GDPand populationgrowth
whichare in line with Governmentmacroeconomicand demographicprojections.The interactionbetweenthe evolutionof road
conditionandvehicleoperatingcoststhroughtime wasthenmodeledthroughthe Bank-developedHighwayDesignandMaintenance
Model-Release
III (HDM-III).For purposesof analysis,the identifiedroadsweredisaggregatedinto22 linksto reflectvaryingroad
conditionandother physicalcharacteristics,
as wellas differenttrafficlevelsandcomposition.A total of seveninvestmentand
maintenancealternativeswere thenevaluatedfor eachsectionof road,andthe oneyieldingthe highestNPVselected.During
appraisal,the analysiswasextensivelyreviewedforconsistencywith costsestimatesindependentlypreparedby engineeringdesign
consultants.As a result,the investmentsproposedunderthe projectwouldyieldan EIRRof 19%(weightedby investment),withno
investmentin any sectionof road yieldingan EIRRbelow12%.
In orderto reflectuncertaintyintothe economicevaluation,a stochasticrisk analysiswas carriedout on a pilotbasisby Bankstaff.
This analysiswas conductedusinga simplifiedversionof the HDMmodelspecificallydevelopedunderthe RoadManagement
Initiative(RMI),whichwas combinedto that endwith a commercially-available
probabilisticmodel(@RISK).Probability
distributionswere exogenouslyassumedfor threevariablesconsideredto mostlyinfluencethe projectnet benefits,i.e. construction
costs,existingtraffic,andtrafficgrowthrates. A total of some400 "what-if' scenarios,combiningthe possiblevaluesforthe three
selectedvariables,werethengeneratedforeach road eachleadingto an estimatefor the EIRR. As a result,the expectedEIRRfor
investmentsunderthe project(deterministically
weightedby investment)reducesto 16.2%,reflectingthe quantificationof risk into
the evaluation.In any case,the stochasticEIRRestimatesfor eachroad stillrange from I 1.9%-21.9%(withstandarddeviationsof
about2%). The stochasticrisk analysisalsoleadsto the conclusionthat the probabilitythat the estimatedvalueforthe EIRRis
below12%,the valueassumedfor the opportunitycostof capital,is very low exceptin the caseof the DebreMarkos-Gondar
road in
whichit is calculatedat about50%.
In orderto assistsubprojectmonitoringduringimplementationswitchingvaluesanalysiswas alsocarriedout. Themultipliers
obtainedforconstructioncostsandbase-yeartrafficindicateconsiderableheadroomfor the economicfeasibilityof the proposed
investments,exceptin the caseof the DebreMarkos-Gondar
road subproject.Theanalysisleadsto the conclusionthat the investment
proposedforthis road wouldnotbe economicallyfeasibleif costsare 17%abovetheirbase value,or if trafficin the openingyearis
less than85%of the projectedvalue. Costsandbenefitsassociatedwiththe DebreMarkos-Gondar
roadwill be subjectto close
monitoringduringprojectimplementation.
Fiscal impact(for all projectsincludingthe total RSDPI and the proposedEducationandHealthSIPs):
Datafromthe 1997PublicExpenditureReviewwereusedto assessthe possiblefiscalimpactof the proposedroadexpenditurefor
the RSDPI (seealsoAnnex4A). Totalexpenditurefor the firstfiveyearphaseof the 10-yearRSDPis estimatedat 18,609.6million
Birr. Theproposedfinancingwill comprisea total Government(local)contributionof 7,963millionBirr(5,888millionBirrfor
capitalexpenditure;andrecurrentexpenditurefor road maintenanceto be paidout of the RoadFund establishedas partof the RSDP,
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Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
to include an estimated total of 782 million Birr from Government budget allocations,and 1,245 million Birr from road user levies,
etc.). Additional estimated contributions from donors would amount to 10,647 million Birr (of which about 1220.6 million Birr are
from unidentified sources).
The result of the analysis in the table below provides an indication of the fiscal impact of the first phase of the RSDP. The analysis
did not include any expenditures for RSDP Phase II which may start during the later years of the analysis period. The average
overall fiscal balance without grants will be -10.5 % of GDP for the five year period, which is consistent with the results of the base
case scenario of the 1997 PER. If road projects with unidentified financing sources are excluded, the average fiscal deficit will
decrease by 0.4 points. As agreed, Government will analyze projected expenditure implications annually and ascertain whether they
are realistic in the context of the PER exercise, and also possibly find non-priority projects within the RSDP where planned
expenditures can be cut and/or spread out beyond the 5 year period, given constraints of their fiscal impact on the macroeconomic
budget.
Fiscal Impact of the Roads and Other SIPs - Revised Estimate Excluding Grants for Base Case Scenario (as % of GDP)
Fiscal Year
Average
1997/98
1998/99
1999/00
2000/01
2001/02
97 - 02
RSDP and other SIPs fully implemented
Total Revenue*
19.0
19.8
20.4
20.5
20.1
Total Expenditure
27.6
31.3
33.1
32.4
27.7
Recurrent Expenditure
16.7
16.4
16.4
16.4
16.4
CapitalExpenditure
11.0
14.9
16.8
15.9
11.4
Overall Fiscal Balance
-8.7
-11.5
-12.7
-11.9
-7.6
-10.5
As above without road projects with unidentif edfinancing sources
Total Revenue*
18.9
19.7
20.3
20.4
20.1
Total Expenditure
27.2
30.8
32.5
31.9
27.3
Recurrent Expenditure
16.7
16.4
16.4
16.4
16.4
Capital Expenditure
10.5
14.4
16.1
15.4
11.0
Overall Fiscal Balance
-8.3
-11.1
-12.2
-11.5
-7.3
-10.1
Note: * Revenue includes additional contributionfrom road users
14. Financial Assessment (see Annex 4-A and 5):
Accountability for all project resources will be vested in the Ethiopian Roads Authority (ERA). Compliance with the accounting
requirements and the timely production of reliable financial information on project implementationand on ERA's overall operations
will require a major reform of ERA's present financial management and reporting systems. The proposed project will include
provision for support to ERA to build its financial management capacity and introduce new systems. It provides the opportunity and
the justification for a complete reform of the existing systems; the underlying necessity is the decentralization of management to the
district offices, and the resulting need for consolidationof information by ERA headquarters. Studies will be carried out under the
existing project to identify the financial, physical and human resources necessary. Extensive training will be provided to staff to
ensure the successful introductionof the new systems. The outcome of these initiatives and assistance, necessary to allow ERA to
efficiently implementthe proposed project, will be a transformation of ERA's management information systems.
15. Technical Assessment:
The main project component comprises civil works and services in respect of rehabilitation and pavement strengthening or upgrading
of existing gravel roads to asphalt paved road standard. Such works and services are not technically complex and have been proven
practicable under the ongoing Road Rehabilitation Project (RRP), which is a working example of what is envisaged.
The economicjustification of the proposed works and services has been and will continue to be carried out by ERA with the
assistance of consultants selected in consultation with IDA. The environmental impact assessment and mitigation plans for the initial
works have been carried out by consultants;and the same study has developed EA sector guidelines which will be adopted as the
basis for establishing EPA's and ERA's EA capability and ensure the guidelines are respected in all further project works. The
detailed design and preparation of contract documents for the initial works have been undertaken by consultants, and three of the five
design review consultancy contracts have been awarded to consultants approved by IDA, as will all further design of works for
possible IDA funding. Construction supervision is to be entirely carried out by consultants. It is anticipatedthat ten civil works
contracts will be awarded, as well as eight construction supervision consultancies. Project costs have been assessed in general by
adoption of the independent design review consultants costing, modified to reflect the design changes subsequently agreed.
Construction supervision costs have been estimated at 7% of construction costs. Simultaneousscheduling of civil works has been
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 11
planned and is detailed in the PIP.
Under the RRP, the national road design standardsand the road and bridge works specificationsfor use in the RSDP road designs and
civil works contracts are being updated. In addition, pavement management and road classification systems are being established as
a basis for refining the road maintenance and other improvement priorities and planning, together with the associated MIS.
Preparatory studies are also being undertaken for defining design and other preparations and project components for possible future
IDA financing.
The executing agencies are being assisted by consultants in all aspects of contract procurement and administration, as described
below under the institutionalassessment.
16. Institutional Assessment:
a. Executing agencies: There are to be two executing agencies, namely, the Ethiopian Roads Authority (ERA) and the Regional
State Rural Roads Organizations (RROs) - the latter being previously known as the Regional Government Rural Roads
Organizations.
From 1993, GOE through ERA substantially increased its contracting-out of road works and supervision services, funded both by
GOE directly and also with donor assistance. Under the ERRP, consultants assisted ERA in the establishment of ERA's contract
administrationorganization together with the associatedprocedures and systems to administer its enhanced contracts management
role. Following this, ERA's contracts administration capacity has been progressively developed through implementationof the
ERRP regravelling contracts, the RRP civil works and construction supervision services, Government-financedcombined
international consultant and local contractor executed design and build (civil works and supervision) contracts, and the ADBfinanced civil works and supervision services contracts for the Chida-Sodo road construction. This has been augmented by GOE's
commitment to contract administrationcapacity building in the form of recruitment of contract administrationstaff and Bank funded
formal training and training-through-doing (see Section 11) and through GOE's adoption and commencementof implementationof
the ERA Reform Study findings. Given GOE's proven commitment through the actions taken to date and GOE's commitment to
resolve the identified remaining constraints through the LSP and the mutually agreed levels of support needed (see Annex 2(iii)),
ERA should have adequate institutional capacity to successfullyimplement the highway elements of the project (which is all that is
planned for the first phase of the project).
The RROs are newly formed and have variable organization and resource capacities which need to be assessed. GTZ, as part of their
on-going institutional reform study, have produced a preliminary evaluation of two selected RROs, and an NDF consultant has
completed a study of the four RROs (in Afar, Benshangul-Gumuz,Gambella and Somali) which they propose to support, as a basis
for identifying general institutionalrecommendations and support needs. The findings of the GTZ and the NDF studies are expected
to form the basis for the RRO institutionalsupport which is to be provided by DfID, EU, NDF and, if necessary, IDA.
b. Project management: Project management within ERA's organizational structure (Annex 2-A) is to be coordinated in-house
by ERA senior core staff, together with rural road inputs from the RROs. ERA and the RROs are to be technically supported by TA.
The level of donor support and the modalities of the management are described in Section 4 of this Project Appraisal Document.
17. Social Assessment:
The Social Assessmentfor the project was conducted in conjunction with the Environmental Assessment (EA). The EA team
included social scientists and environmentalscientists, which provided a multidisciplinary approach to preparing the EA.
Socioeconomic data were collected and analyzed from each of the five areas where roads are to be rehabilitated. The social
assessment also included analysis of the temporary and localized microeconomic impacts resulting from construction activities. The
potential for involuntary resettlement was also examined and it was determinedthat in semi-urban areas along two roads, a small
number of dwellings would have to be removed and the households relocated. Until the final engineering designs are complete, the
exact number of affected households cannot be known, but the number is considered to be less than 20 households. The existing
ERA procedures to handle resettlement and compensation have been successfullyemployed elsewhere in Ethiopia, as approved by
overnment, and the procedures include clear elements of public participation in the process. The public consultations indicate that
the local populations are greatly in favor of implementing the project.
18. Environmental Assessment:
Environmental Category
X
A
[]
B
[]
C
EA studies with public participation were completed by the Governmentprior to appraisal. Five separate reports (one for each of the
roads proposed for rehabilitation) were made available to the public and submitted to the Bank. In addition, a separate Road Sector
EA report was prepared for ERA. The reports indicate that no major environmental impacts are expected and that the project has
high social acceptability. Minor impacts include issues of involuntary resettlement, erosion, water quality, construction camp
location, temporary microeconomic disruptions during construction and effects on protected areas. The reports outline mitigation
measures which have been accepted by the Government.
The number of households to be involuntarily resettled is low and restricted to semi-urban areas for only two roads. Existing
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Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
resettlement and compensation procedures are satisfactoryto handle the small number of affected people and government has agreed
to resettle all affected households equitably. In regards to road work in or near protected areas, ERA has agreed to work with
protected areas officialsto design the most desirable detour routes to be used during construction. In regards to other impacts, the
EA reports recommended that ERA establish and train an environmentalmanagement unit within ERA to handle inter alia the
temporary social and environmentalproblems such as erosion, pollution and environmentalhealth associated with road construction
activities. A budget and schedule for establishing,equipping and training the unit have been prepared by ERA.
19. Participatory Approach:
Identification/Preparation
Beneficiaries/communitygroups
IS/CON/COL
Intermediary non-governmental organizations
IS/CON/COL
Academic institutions (Univ. of Addis Ababa)
IS/CON
Local government
IS/CONICOL
Other donors
IS/CON/COL
Other (Central Agencies/Ministries)
IS/CON/COL
NOTE: IS=lnformation Sharing; CON=Consultation; COL=Collaboration.
Implementation
Operation
IS/CON/COL
IS/CON/COL
IS/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
IS/CON/COL
20. Sustainability:
There are two complementary dimensions of Project sustainability. The first relates to investment sustainability and the second to
policy reforms; the latter includes institutionalreforms and capacity building initiatedjointly with other donors during project
preparation and to be supported throughout the Project. To ensure sustainability of investmentsunder the Project, it is critical that the
already agreed Road Fund (to be implementedunder the RSDP) operates effectively, mobilizing and allocating the resources at the
time required, to ensure proper maintenance of the road network and particularly maintenance of roads rehabilitated or upgraded
under the RSDP. To the extent that road maintenance works are to be progressively contracted out to the private sector, timely
payments for works will also be a key element in fostering the development of, and sustaining, a competitive and viable domestic
construction industry. The other dimension of sustainability is associated with the involvement of beneficiaries and other
stakeholders in sector reform. By ensuring their participation in strategy formulation during project preparation, and by allowing for
their appropriate representation on the Road Fund Board during project implementation,the Project would have built-in mechanisms
for a systematic involvement of private stakeholders, which would contribute to sustaining Government commitment to reforms. In
addition, the Project includes TA to all key planning and implementation entities, to support Project implementation and capacity
building for sustainability.
21. Critical Risks (see fourth column of Annex 1):
Project outputs to development objectives
Risk
1.I. I GOE may not remedy identified nonERA/RRO institutional constraints
Risk Rating
Medium
1.1.2 GOE may not remedy identified ERA + Medium
RRO institutionalconstraints
1.1.3 GOE may not provide suitable
counterparts & trainees for training
Medium
1.1.4 Trained staff will be lost to private
sector
Medium
1.1.5 TA coordination /cooperation may not
be maintained in face of multi-donor support
and interests
Low
Risk Minimization Measure
Firm arrangements are in place or identified in the LSP and PIP for
development project fast track customs clearance and licensing of
radios, etc.
For ERA, firm arrangements are in place or identified in the LSP
and PIP to implement agreed reform study findings; a commitment
to resolution of the RRO constraints is in the LSP.
Firm arrangements are in place or identified in the LSP and PIP
detailing provision of TA counterparts from ERA and RROs; and
training program and staff assignment will be included in the final
ERA reform study report.
Finn arrangements are in place or identified in the LSP and PIP for
annual salary reviews of ERA (and RROs) to maintain
competitiveness with the private sector.
Maintain existing close collaborationwith other donors through the
already established regular donor coordination meetings, circulation
of aide memoires and transparency of individual sector inputs
(specific road programs, institutional reform & support/capacity
building/TA)and jointly monitor agreed performance indicators.
Project Appraisal Document
Ethiopia: Road Sector DevelopmentProgram Support Project
1.1.6 (i) Overall commitments will
overwhelm ERA institutionalcapacity
Low
(ii) Overall commitmentswill overwhelm
Medium
RRO institutionalcapacity
(iii) Overall commitments will overwhehn
Medium
non-ERA and non-RRO institutional capacity
1.1.7 Overall commitments will overwhelm
High
ERA Financial management capacity
1.2 GOE may not fully support private
sector development
Low
1.3 GOE may not fully respect dedicated
Very Low
road funding or application of a fuel levy, etc.
1.4 EPA and ERA may not have the capacity Low
to adopt/enforce EA findings/guidelines
2.2 GOE local counterpart funding may not
be forthcoming
Low
2.3 GOE road maintenance commitment may Medium
not be honored in toto
2.4 GOE may not accept Feasibility &
Design Review Study fndings
Low
Page 13
Firm arrangementsare in place or identified in the LSP and PIP for
full implementationof the reform study findings (including all TA
support and ERA facilities).
Institutionalcapacity constraints identified by GTZ and NDF reform
studies will be remedied by implementing their findings.
Firm arrangements are in place or identified in the LSP and PIP to
address constraints already formally identified.
Consultants are being recruited to provide TA and to assist ERA in
bringing its accounts up-to-date and improving financial
management. The LSP contains a clear timetable for completing
ERA's outstanding accounts by August 1998.
The LSP details GOE commitment; and steps taken to facilitate
private sector development through the construction industry study
and a possible follow-up development program.
Firm arrangements are in place for the management and operation
of the road fund including annual reviews.
An Environmental Unit is being established in ERA which will
complete environmentalguidelines by September 30, 1998. EU
has agreed to provide technical support to the Unit.
Project-fiscal impact analysis has confirmed RSDP funding to be
consistent with PER 1997 estimates. Annual review to be
undertaken in the context of the PER will provide further
confirmation of counterpart funding.
GOE, ERA & RROs have finalized an agreed detailed 5-year
national road maintenance program with associatedbudget and
resource analysis which will be reviewed annually with donors prior
to budget approval.
Government has accepted the findings of the report, and will reevaluate sections which are not economicallyjustified after design
review.
Project components to outputs
1.1 Ditto all institutionalassumptions/risks
shown above as items 1.1.1 - 1.4
2.2 GOE may not grant ERA the autonomy
to act as the Employer
See above
items 1.1.1 1.4
Medium
2.3 (i) ERA and RRO's contract admin.
Medium
capacities may not be suitably strengthened to
administer contracts or to act as the
Employer; or
(ii) ERA may not effectively exercise its
Medium
delegated authority due to concerns about
accountability
2.4 Competition related pressure on bidders
Medium
(contractors& consultants) may negatively
affect the quality/level of services rendered
and/or increase likelihood of litigation
Overall project risk rating
RAk
RiskRating
Medium
See above items 1.1.1 - 1.4
In its LSP, Government has granted ERA management and Board
full authority in the administration and management of all contracts.
A separate Project Agreement will be signed between IDA and ERA
outlining its management responsibilitiesunder the project.
See item 1.1.6 above and monitor during project implementation
supervision.
Monitor during project implementationsupervision.
Existing ERRP and RRP contract management shortcomingshave
been addressed by providing support to strengthen ERA in its
contract administration. ERA will also pre-qualify bidders and postqualify as necessary.
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 14
22. Possible ControversialAspects:
There are no serious negative factors or potential controversies expected to affect the Project.
Block 4: Main Loan Conditions
23. Effectiveness Conditions
The following is a condition of Credit effectiveness: that the SubsidiaryAgreement has been authorized by the Borrower and ERA.
24. Assurances
During negotiations, Government and ERA gave assurances on the following:
Project Coordination and Implementation
1. ERA shall establish and maintain until completion of the Project, an advisory unit with sufficient suitably qualified staff to
assist the General Manager in coordination and implementation of the Program.
Environmental Management
1. ERA shall, until completion of the Project, maintain with sufficient suitably qualified staff its unit responsible for the
assessment and mitigation of the environmental and social impact of the Project and Program.
2. By September30, 1998, ERA will submit to EPA, for its approval, guidelines for assessment and mitigation of the
environmentaland social impact of road works to be carried out under the Program.
Annual Review
1. Not later than October 31 of each year, commencing on October 31, 1998, the Government shall undertake with IDA, ERA
and other collaboratingdonors, a joint annual review on all matters relating to the progress of the Project, including progress in the
implementationof ERA's five-year road maintenance program.
Mid-term Review
1. On or about 24 months from the date of project effectiveness, Government and ERA shall carry out jointly with IDA and
other interested donors, a mid-term review of the progress made in carrying out the Project and the Program.
Block 5: Compliance
[X]
with Bank Policies
This project complies with all applicable Bank policies.
Ud
Task Manager:
p:\padl297.doc
Country Director:
ProjectAppraisalDocument
Ethiopia: RoadSectorDevelopmentProgramSupportProject
Page 15
Annex 1
Ethiopia: Road Sector Development Program Support Project
Project Design Summary
NarrativeSummary
KeyPerformance
Indicators
Monitoringand Supervision
CAS Objectives
Povertyalleviationthrough:
1. Privatesectorgrowth.
2. Improvement& expansion
of essentialinfrastructure.
CriticalAssumptionsand
Risks
[CAS Objective to Bank
Mission]
1.1 Numberof Domestic
Contractors+ Consultants
participatingin: (a) project
training/TAsupport;(b)RSDP
works& services.
1.2 Commercialvehicle
ownershiplevels
1. ReviewKeyPerformance 1.1 GOEsupportfor private
Indicatorsthrough:Base-line sectordevelopmentmaynot be
study,ProjectAdvisoryOffice fullyeffective.
MIS reports+ TA reports,
RoadInspectoratereviews,
quarterlydonorcoordinated
supervisionmissionsor
meetings.
2.1 km roadconstructed/
upgraded/strengthened.
2.2 % roadsin good/fair
2. - Ditto-
2.1 Ditto ProjectDevelopment
ObjectivesRisks items2.1 2.4 below.
condition.
2.3 % reductioncommercial
freightrates.
3. Environmentrehabilitation 3.1 % civil workscontracts
& conservation.
subjectto EA.
3. - Ditto -
Project Development
Objectives
1. Institutionalcapacitybldg to 1.1 Numberof ERA, Regional 1.- Ditto supportall 3 aboveCAS
Administration&
objectives.
EnvironmentAgencystaff
fullyor partiallytrainedfor
selectedpermanentpositions.
Sustainedderegulationof the
freightmarketand improved
road condition
3.1 Ditto ProjectDevelopment
ObjectivesRisk item 1.4
below.
[Development Objectives to
CAS Objective]
1.1.1 GOEdo/donot remedy
identifiednon-ERA/ RRO
institutionalconstraints.
1.1.2 GOEdo/donot remedy
identifiedERA & RRO
institutionalconstraints.
1.1.3 GOEdo/donot provide
suitableCounterparts&
traineesfor training.
1.1.4 Trainedstaffwill be lost
to privatesector.
1.1.5 TA coordination/
cooperationwill/willnot be
maintainedin face of multi
donor supportand interests;
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 16
Narrative Summary
Monitoring and Supervision
Key Performance
Indicators
_
Critical Assumptions and
Risks
1.1.6 Overall commitments
will overwhelm ERA, RRO &
non-ERA/RRO institutional
capacity; and
1.1.7 Overall commitments
will overwhelm ERA Financial
Management capacity
1.2 Number of contracts with
local contractors +
consultants/ERA + Regional
Administrations; & respective
value of works / services.
1.3 Implement Road Fund to
support road maintenance
programs.
2. Improvement & expansion
of essential road infrastructure.
3. Environment rehabilitation
& conservation.
1.2 Review Key Performance
Indicators through: Base-line
study, Project Advisory Office
MIS reports + TA reports,
Road Inspectorate reviews,
quarterly donor coordinated
supervision missions or
meetings.
- Ditto -
1.4 Establish Environmental
Management Unit within ERA
(EMU) for road sector EA.
- Ditto -
2.1 km of new road.
2.2 km of road improvement /
upgrading.
- Ditto - Ditto -
2.3 km of road in good & fair
condition at the end of each yr.
Ditto -
See 1.4 above
-
Ditto -
Project Outputs
1. Improved ride quality,
capacity and reduced journey
times on project roads.
1.1. Averagejourney times
reduced by 20%; and
1.2. finished road roughness
less than 3.5 IRI on project
roads.
1. Review Key Performance
Indicators through: Base-line
study, Project Advisory Office
MIS reports + TA reports,
Road Inspectorate reviews,
quarterly donor coordinated
supervision missions or
meetings.
1.2 GOE support for private
sector development may not be
fully effective.
1.3 GOE will / will not fully
respect dedicated road funding
or application of increased fuel
levy etc.
1.4 EPA or ERA will/will not
have the capacity to
adopt/enforceEA findingsl
guidelines.
2.1 GOE+ERA+RRO
institutional constraints
will/will not be suitably
remedied.
2.2 GOE local counterpart
funding will/will not be
forthcoming.
2.3 GOE maintenance
commitment will/will not be
honored in toto.
2.4 ERA/GOE will/vill not
accept Feasibility & Design
Review Study findings
See 1.4 above
[Outputs to Development
Objectives]
1. Adequate design and
construction supervision of
project roads.
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Narrative Summary
2. Reduced transport costs on
project roads.
3. Increased traffic on project
roads.
4. Reduced recurrent
maintenance expenditure on
project roads.
Key Performance
Indicators
2.1. Reduced vehicle operating
costs and trucking rates on
project roads.
3.1. Commercial traffic on
project roads increases at 10%
to year 2000 and 5%
thereafter.
4.1. Full routine maintenance
established on project roads in
accordancewith maintenance
action plan and costs.
Page 17
Monitoring and Supervision
1. Review Key Performance
Indicators through: Base-line
study, Project Advisory Office
MIS reports + TA reports,
Road Inspectorate reviews,
quarterly donor coordinated
supervision missions or
meetings.
- Ditto -
- Ditto -
Project Components
I.Institutional Strengthening
& Capacity Bldg.
a) ERA - Planning & Contract
Admin.TA/training
b) ERA - road sector EA unit
TA/training (follow-upto
PHRD EA guidelines + project
civil works study).
c) Regional Administration Planning & Contract Admin.
TA/training
d) Local construction industry
& Customs Clearance study +
TA/training
e) Village Transport &
Infrastructure Study &
implementation TA/training
2. Civil Works:
Rehabilitation, strengthen/
upgrade four (1300 km)
selected tunk & major link
roads.
Critical Assumptions and
Risks
2.1 Appropriate level of
competition will be maintained
3.1. Vehicle availability is
sufficientto meet demand.
4.1. Timely maintenance of
rehabilitated roads in
accordance with maintenance
action plan;
4.2. Axle load controls
strengthened and enforced.
[Componentsto Outputsl
1.1 ERA finalize TOR +
consultant services contract
docs. 6 mth. prior to projected
start date;
1.2 ERA shortlisting/LOI 6
mth. prior to projected start
date;
1.3 ERA recommend award 6
mth. after receipt of proposals;
1.4 Consultant's production v-program of TOR hard
outputs
1.5 GOE, ERA & RRO
adoption of Consultant's
recommendations
1.6 Number of ERA, RRO &
Environment Unit stafffully or
partially trained for selected
permanent positions.
1.7 ERA and Consultant's
evaluation of future TA needs.
1.1 - Ditto - and
1.2 review consultant's
planned staffing-vs-proposal;
1.3 review consultant's
planned mobilization-vprogram;
1.4 review consultant's staff
turnover;
1.5 review consultant's HQ
technical support +
supervision inputs;
1.6 review coordination of TA
inputs with ERA and other
TA;
1.7 review ERA/RROsand
consultant's monitoring &
projection -v-program of skill
transfer;
1.8 review ERA/RROs' and
consultant's monitoring &
projection of consultant
services costs.
1.1 Ditto all institutional
assumptions/risks shown above
as items 1.1.1 - 1.4;
2.1 ERA promptly (within 1
mth.) respond to
recommendations of feasibility
study & design review study;
2.2 ERA complete draft final
contract docs by Oct. 97;
2.1 Review Key Performance
Indicators through: Base-line
study, Project Advisory Office
MIS reports + TA reports,
Road Inspectorate reviews,
quarterly donor coordinated
2.1 Ditto the institutional
assumptions/risks shown above
as items 1.1.1 - 4;
2.2 GOE do/do not grant
ERA the autonomy to act as
the Employer;
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 18
Narrative Summary
3. Construction Supervision of
civil works.
p:\pad\annexle.doc
Key Performance
Indicators
2.3 ERA complete
prequalification by Mar. 98;
2.4 ERA complete contract
award within 6 mth. of LOI;
2.5 Contractor mobilization -vprogram;
2.6 km / % completed of
rehabilitation/ strengthening/
upgrading -v- program
3.1 ERA shortlisting/LOI 6
mth. prior to projected
construction start date;
3.2 ERA recommend award 6
mth. after LOI;
3.3 Consultant's staffing-vproposal;
3.4 Consultant's planned
mobilization-vs-program;
3.5 Consultant's staff turnover;
3.6 Consultant's HQ technical
support + supervision inputs;
3.7 No. of Consultant's
disputes with Contractor or
ERA/RROs;
3.8 Consultant's monitoring &
projection of construction costs
+ rate of progress (inc.
consultant services costs);
3.9 Consultant's success/
failure to achieve construction
within budget and time .
Monitoring and Supervision
supervisioRkmissions or
meetings; and
2.2 review status of payments
to Contractor, delays in
settlement incurring interest
charges, potential GOE default
of contract; and
2.3 review status of: variation
orders, claims, extensions of
time, resolution of disputes,
additional costs and time.
3.1 Review Key Performance
Indicators through: Base-line
study, Project AdvisoryOffice
MIS reports + TA reports,
Road Inspectorate reviews,
quarterly donor coordinated
supervision missions or
meetings; and
3.2 review sound approval/
rejection in time allowed in the
works contract of Contractor's
submissions;
3.3 Ditto fulfillment of the
Engineer's other contractual
responsibilities;
3.4 Ditto responsivenessto
ERA+RRO + Contractors'
requests;
3.5 Monitor level of
communication/ understanding
of Consultant with ERA/RRO
& IDA
3.6 Verify progress reports as
spec and within I wk of report
period end.
3.7 Check consultant services
disbursement & local payment
delays, status & projected
costs.
Critical Assumptions and
Risks
2.3(i) ERA+RROs contract
admin. capacity is/is not
suitably strengthened to
administer the contract or to
act as the Employer; or
(ii) ERA+RROs do not
effectivelyexercise their
delegated authority due to
concerns re accountability
2.4 ICB pressure on bidders
(contractors & consultants)
limits the quality/level of
services rendered and or
increases likelihood of
litigation.
3.1 -Ditto - above Project
Components Critical
Assumptions and Risks items
2.1 - 2.4.
Project AppraisalDocument
Ethiopia: Road Sector DevelopmentProgram Support Project
Page 19
Annex 1-A
Vhmn
os0s
+i*1c
I1C
R if.No.
tjt
The Federal Democratic Republic Of Ethiopia
Ministry Of Economic Development And Cooperation
16 DEC1991
_l
Dite
o
Ms. Oey Astra Meesook
Country Director, Ethiopia
Africa Region
The World Bank
Fax: 202 473 5453
Re: Ethiopia- Letterof RoadSectorPolicy
Dear Ms. Meesook,
As youarewellawarethesuccess
of theGovernment
of theFederal
Democratic
Republic
of Ethiopia's
Agricultural
Development
- LedIndustrialization
Strategycriticallydepends
on the efficiencyof the country'sroadtransport
system.Thebulkof theagricultural
production
inthecountryis accounted
for by smallscalefarmersscattered
in
tiny ruralcommunities.
Ontheotherhand,themajormarkets,
the processing
andcollection
centersfor crops,and
thedistribution
pointsfor agricultural
inputsincluding
fuelareconcentrated
in urbancenterslocatedat considerable
distances
fromeachotherandfromtheports.Nearly75 percent
of thefarmsaremorethana halfdaywalkfrom
anall-weather
road.Giventhis ruralsettlement
pattern,growthin agricultural
outputdepends
ontheabilityof the
country'stransport
systemto integrate
thesedifferentpointsin a costeffectivemanner.
In viewof the foregoing,
the Government
hasfinalized
the preparation
of the RoadSectorDevelopment
Program
(RSDP)
with the goalto improvetransportoperating
efficiency,provideaccessto isolatedruralandfooddeficit
areasanddevelop
institutional
capacityof thesector.TheRSDPwasofficiallylaunched
onSeptember
12, 1997
whenall donorscommended
theGovernment
for thegoodprogress
madein addressing
a number
of institutional
and
policyreformissuesraisedat the DonorsConference
of January1996. Thewidelyacknowledged
satisfactory
progress
to date,sincethe formulation
of RSDPin implementing
the agreed
policyobjectives,
confirmsthepriority
givenby theGovernment
to theroadsector.I believe
that implementation
of thesepolicy reformsis a continuing
process,
andtheGovernment
is activelyfocusing
ontheirimplementation.
I am,therefore,writingthis letterto drawyourattentionto theon-going
effortsin designing
andimplementing
instruments
to promote
therequired
institutional,
procedural
andpolicychanges
as partof theprocess
of facilitating
anenabling
environment
for theProgram.
03t1=4
B
iT
Minister;
P.O*.Bnn07
P.O. Box 1037
TL5200TLX25$TLEA-h
t3hh
TEL. 552800
TELEX 215l1
TELEFAX 2 ; I-1 -SS-3844
Page 20
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
roadnetwork,which
of theRSDP
isto restoreEthiopia's
Objectives
of theRSDP-Theobjective
1.
program,
andto develop
of the economic
development
an obstacle
to the sustainability
hasbecome
of theroadagencies
to properly
manage
thenetworks.Thephysical
targetin the
institutional
capacity
full
routineand
condition
and
to
have
installed
to
have,
60%
of
the
roads
in
good
first fiveyearsis
periodic
maintenance
onmorethan25,000kmof roads
bytheendof RSDP
I.
of theProgram:Thefirst phaseof theprogram,
RSDP
I, estimated
to costBirr
2.
Description
including
rehabilitation
of
will consistof: (a)civilworksprogram
18607.3million(US$2736.4million),
of about3895km graveltrunkroadsto asphalt,
about2382km of pavedtrunkroads,upgrading
upgrading
of about1248kmof majorlinkroadsto asphaltandconstruction
of about1077kmof major
maintenance
roadsandperiodic
of about11900kmof regional
andconstruction
linkroads,rehabilitation
supportto strengthen
Federaland
on about2400km of trunkandmajorlinkroads;(b)institutional
Regional
roadsmanagement
capacity,
including
support
to domestic
contractors,
anda roadsafetyand
program;
(c)roadmaintenance
supportprogram
environmental
mitigation
andguidelines
implementation
of Ethiopian
RoadsAuthority(ERA)
includingestablishment
of plant - poolsand decentralization
maintenance
districts.
of theProgram.
to achievetheObjectives
andActionsDesigned
Policies,Measures
of success
of theRSDP
will bethe extentof majorpolicyandinstitutional
3.
Onekeymeasure
reformsthatwill maketheinvestments
in theroadsectorsustainable
in thelong-term.
Thesereforms
havebeendirectedtowardsensuring
adequate
funding
for maintenance,
increasing
thecapacityof ERA
in areasof contractadministration,
planning,
designandregulatory
activitiesandtheincreased
useof
domestic
privatecontractors.
Manyof thesepolicyactions
havesuccessfully
beenimplemented
overthe
lastfiveyearsandaccelerating
in 1996and1997.Further
actionswillbetakento effectively
implement
theRSDP
in accordance
withtheconclusions
reached
withtheGovernment
at theDonors
Conference
of
January,
1996.
4.
Autonomy
of ERA:Theautonomy
of ERAhasbeenconfirmed
in theproclamation
for it's reestablishment
and full responsibility
has beengivento ERAto take final decisions
and make
recommendations
on mattersrelatedto the RoadSectorin exercising
it's responsibilities
andduties.
ERA'smanagement
is accountable
to it's Board;andtheperformance
of ERAandit's Boardwill be
evaluated
on the basisof the accomplishment
of it's annualwork programin accordance
with
management
controlled
performance
indicators.In thisregard,ERAhasbeenunequivocally
giventhe
authorityandautonomy
for day-to-day
contractmanagement
(e.g.contractual
progress
payments
to
contractorsfollowingcertification
by the Engineers),
as well as for promptdecisions
on problems
identifiedonsiteincluding
readilyendorsing
andapproving
variation
ordersasrequired.Moreover,
the
Government
has empowered
ERAand it's Boardto givefinal decisions
on awardof contracts,
andworksof anysize.
of goods,
services
procurement
5.
Institutional
andCapacityStrengthening
of RoadDepartments:
Theprovision
of adequate
program
management
capacity
hasbeenrecognized
asa criticalissuewhichtheGovernment
is taking
stepsto address
priorto, andduringimplementation
of the RSDP.In thisregard,ERA'sreformand
strengthening
needsstudyhasbeensubstantially
completed.
Theneworganizational
structurehasbeen
adopted
andERAmanagement
iscurrently
in theprocess
of staffingseniorstaffpositions.In addition,
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 21
Government
approved
a newsalaryscalein June1997for ERAstaff whichincreases
currentsalary
levelsfor keyprofessional
staff byupto 100percent
together
withotherstaffbenefit'sandincentives.
As with thereformof ERA,thereis anon-going
process
to restructure
theRegional
StateRuralRoads
Organizations
(RROs)
andat thesametimea RuralRoads
Advisory
UnitwithinERAisbeingstrengthened
to provide
needed
technical
assistance
andtrainingto RROs.ERAhasidentified
theneedfor technical
assistance
in areasof donorscoordination,
contractadministration,
planning,
maintenance,
ruralroads,
financialmanagement,
andmonitoring
of the program.Thesepositions
havebeenprogressively
filled
sinceMarch1997andit is planned
to complete
theplacement
bytheendof 1998.
6.
Increasing
Capacity
of LocalprivateContractors:The Government
believes
that the
sustainability
of measures
to be undertaken
underthe RSDPwill depend,
to a greatextent,on the
performance
of thedomestic
construction
industry,
whichisnowre-emerging
underRSDP,
afteryearsof
stagnation
andalmostnon-existence
in roadsub-sector
activities.TheGovernment
hasas oneof it's
statedobjectives,
the encouragement
of privatesectorparticipation
in the roadmaintenance
and
construction
program.Since1991,variousmeasures
weretakento encourage
there-establishment
of
privatesectorroadconstruction
industry.Themostsignificant
weretheselling-off
of government-owned
equipment
ona long-term
interest-free
creditbasis,securing
a sourceof creditbylicensing
construction
andmaintenance
equipment
asbankcollateral,
theawardof 14 regional
ruralroadsprojects,
totaling
some2217kmto privatecontractors
andconsultants
ona turn-key
basistheprovision
of 20%advances
to contractors
withoutbankguarantees,
andthe waivingof performance
bondto coverdefaultsby
contractors
andthereduction
of capitalrequirement
fortheregistration
of contractors.
7.
UndertheRSDP,
furthermeasures
will betakento strengthen
the privatecontracting
sector.
Theseinclude
enhancing
thedevelopment
of localcontractors
andconsultants
by offeringtraining,and
involving
themin roadworkscontracts.Asindicated
in theMaintenance
ActionPlan,of the2400kmof
mainroadswhichare programmed
for periodic
maintenance,
theshareof contractor
executed
works,as
contrasted
to forceaccount
works,will increase
progressively
from11 percent
in theyear1998199,
to
41 percent
in 2001.TheMaintenance
ActionPlanprovides
for theinvolvement
of theprivatesectorin
mechanized
andmanual
routinemaintenance.
Lengthperson
maintenance
workwill alsobe established
over10,500kmof roadsbytheendof theRSDP
I. Mechanized
routinemaintenance
willbecontracted
out followingrecommendations
to be developed
underthe Domestic
Construction
IndustryCapacity
Building
NeedsStudy.Thisstudy,focusing
onidentification
of theexistingcapacity
andconstraints
to
privatesectordevelopment,
aswellaspreparation
of a comprehensive
strategyfor thedevelopment
of
the sub-sector,
will be carriedout for completion
by September
1998.Government
is committed
to
furtherfacilitatethedevelopment
of theindustrybasedon thefindings
andrecommendation
fromthe
study.
8.
Resource
Mobilization
andRoadFinancing:A RoadFundestablishment
Proclamation
was
approved
in March1997(Proclamation
No.6611997).Following
this,Government
established
a Road
FundBoardcomprising
representatives
of theFederal
Government
(5),Regional
States(6),andprivate
sector(4)to administer
theFund.Asof October,
1997aboutBirr110.0millionhasbeencollected.The
specificmodalities
for the allocation
of fundsbetween
Federal,
Regional
andUrbanroadshasbeen
determined
by the Boardwith an initial distribution
of 70 percent,20 percentand 10 percent
respectively.
Thegoalisthatat theendof RSDP
I allmaintenance
expenditure
willbefinanced
fromthe
Page 22
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgram SupportProject
Fundon a "fee for service"basis. Thisis thefirst steptowardsprogressively
achieving
longterm
mar.ginal
costrecovery
fortheroadsector,initiallyfocusing
onfullroadmaintenance
costrecovery.
Maintenance
Needs
andFinancing
Sources
(InMillionBirr)
|19971981 1998199
|1199912000
[ 2000101| 2001102 Total
Maintenance
Need
Federal
Regional
Municipalities
Total
228.8
22.6
28.1
279.5
288.0
25.8
28.7
342.5
297.6
27.9
29.3
354.8
307.8
30.3
30.0
368.1
329.9
33.2
30.6
393.7
1452.1
139.8
146.7
1738.6
200.0
79.5
132.5
210.0
195.7
159.1
288.8
79.3
427.6
1244.6
527.9
Road
Fund
Financingl
* UserCharges
* Government
Budget
-
9.
Ontheaspectof BudgetFeasibility
andFiscalImpact a regularannualassessment
of the
budget
feasibility
of theRSDP
is carriedouttakingintoaccount
theoverallmacroeconomic
environment.
Thiswork will continue
to be conducted
as partof the annualPublicExpenditure
Reviewwherethe
Ministryof Finance
andtheWorldBanktakealeading
role,andinwhichtheEUregularly
participates.
In
orderto maintain
fiscalsustainability
of increased
publicexpenditures,
theimplementation
rateof RSDP
willbegeared
to thepaceof macro-economic
growthandamedium-term
publicexpenditure
framework.
10. Economic
Evaluation
andPrioritization
Criteria:
Trunkandmajorlinkroadprojects
to beimplemented
by ERAare oneswhichare shownto be economically
viablewith at leasta 12%EIRR.Project
prioritization
alsoreflectsthecontribution
of theinvestments
towardsthe integration
of thecountryand
othersocio-economic
objectives.
ForRegional
RuralRoads,
suitable
criteriaarebeingdeveloped
which
will takeinto account
agricultural
activities,
access
to markets
andfooddeficitareas,andothersocioeconomic
factors.Thisis to be achieved
in the contextof finalizing
the RuralRoadsandTransport
Strategy
(RRTS)
whichisexpected
to becompleted
byAugust1998.
11. Environmental
Impactof theRoadSector Initialwork on environmental
issuesanddraft
Guidelines
hasbeencompleted,
withanoverallassessment
of theenvironmental
implications
of theRSDP
sothatenvironmental
effectscanbeassessed
in conformity
withenvironmental
protection
requirements.
Thereportshavebeenmadeavailable
to thepublicasof midSeptember
1997.TheGovernment
is also
committed
to implement
the findingsandrecommendations
madeby the studyin orderto mitigate
adverse
effectsof theProgram
onthephysical,
natural,humanandsocialenvironment.
Towards
this
end,an Environmental
Management
Branchof ERAis beingstrengthened
to assessenvironmental
impactsandto carryout auditsto determine
whethertheproposed
mitigating
measures
areeffected
duringtheimplementation
of roadprojects.Workin thisareahasbeenundertaken
withthesupportof
theWorldBank;andfurthersupport
willbeprovided
bytheEU.
12.
RoadSafetyandAxleLoadEnforcement.
A reviewof existingpolicy,legal,andregulatory
framework
astheyaffecttransport
safetywillbecarried
outin 1998withthesupport
of theEU.Onthe
basisof this review,practicalstepswill be takento incorporate
transportsafetymeasures
into the
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
implementation
of the RSDP.It is alsotheintentionof the Government
to introduce
newaxleload
legislationandstrengthen
the enforcement
of axleloadcontrol. Government
hastransferred
the
responsibility
of axleloadcontrolfromRoadTransport
Authority
to ERAto improve
theenforcement.
13.
RuralRoadsandTransport
StrategyERAwill provide
theleadership
for furtherdevelopment
andfinalization
of theRRTS.Thestrategyprocess
will beparticipatory,
andwill involvetheregions,
roadusers,transporters
andotherconcerned
stakeholders.
Thefirst stepwill beto re-visitthe draft
Strategywhichwas prepared
by fourmulti-sectoral
workinggroupsin 1994andsummarized
by the
WorldBankin 1996,to befollowed
bydialogue
withtheregions
andotherstakeholders.
Tothisend,the
Government
hasrequested
theRuralTravelandTransport
Program
(RTTP)
of theWorldBankfor the
support
to beextended
through
thesharing
of experience
fromothercountries
andtheprovision
of funds
for studies,workshops
andstudytours. ERAhasnominated
a national
coordinator
for RTTPwhois
authorized
to taketheleadin thestrategydevelopment
effortandserveasa coordinator
for theregions
andall donors
interested
in thesupport
for ruralroadsandtransport.ERAhaspresented
a firmplanof
actionandtimeschedule
whichwillbeagreed
withDonors.
14.
RoadTransport
Services:Roadtransport
hasalready
seentheabolition
of statecontrolover
privateowners,
theremoval
oftariff controls
fromthesector,andtheprovision
of incentives
through
tax
exemptions
to expandthe capacityof both freightandpassenger
transport.TheGovernment
has
declared
it's intentionto furtherrefinepolicyandit's implementation,
so that competition
between
transportoperators
canbefurtherintensified.
Stepshavebeentakeninthisareawiththedisbanding
of
bulkfuel transportassociations
whichwerebelieved
to be operating
in a way that hampered
the
widespread
distribution
of fuelthrough-out
thecountry.Further
refinements
of thelegalandregulatory
framework
will becarried-out
bytheRoadTransport
Authority
in implementing
thefindings
of theRoad
Transport
Regulations
Studyfor whichconsultancy
services
willbeawarded
shortly.
15.
Customs
Clearance:Theclearance
andcontrolsystemaimsat reinforcing
the overall
objectives
of customs
in termsof facilitationof tradeandinvestment,
protection
of domestic
infant
industries,
andmaximization
of revenue.
TheCustoms
Authorityhasprepared
a Manual
whichprovides
a
clearstep-by-step
instruction
pertaining
to eachprocess
of improving
theclearance
procedure
andthis
will be madeavailable
to contractors.TheGovernment
hasapproved
the establishment
of bonded
warehouses
andaspecial
clearing
deskfor projects
of theroadsector.Stepsrequired
to facilitatefast
trackdevelopment
projectclearance
havebeenclarifiedintheProjectImplementation
Plan.
16.
Communication
Equipment
: To solvethe problem
of communication
constraints
on road
construction
projects,the Telecommunication
Corporation
has madeprovisions
for expediting
the
allocationof radiofrequency
to contractors
andconsultants.
Theseincludepriorreservation
and
assignment
of radiofrequencies
andissuance
of importlicenses
required
for construction
operations.
Appropriate
specifications
for communication
equipment
together
with therequirements
for importswill
alsobemadeavailable
to prospective
contractors
during
thebidding
process.
17.
Program
Monitoring
andCoordination:
TheGovernment
has alreadyrecognized
the needto
improvetheidentification
andmonitoring
of projectsandtheevaluation
of theirdevelopment
impact,
particularly
with respectto RSDPobjectives,
institutionalrequirements
and implementation
risks
mitigation.Towards
this end,16 keysectoralperformance
indicators
including
roaddensity,traffic
Page 23
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 24
freight&
cost andsavings,
vehicleoperating
androadcondition,
flows,journeytime,roughness
asset
budget
and
expenditures,
km
maintained,
fatalities
and
accidents,
maintenance
passenger
tariffs,
and contractors,
time for contract
to consultants
valueof roadnetwork,time for payments
administration,
privatelpublic
sectorratio,labour-basedlequipment-based
ratio,actualaxleloadllegal
limit
purposes.
for monitoring
andmaintenance
costshavebeenidentified
rehabilitation
ratio,construction,
of theroadsectorin termsof
theRSDP
benefits
andthesustainability
These
indicators
takeaccount
monitoring
aspects.Theperformance
operational
andregulatory
financial,
institutional,
environmental,
financial
corresponding
to theEthiopian
andreported
overa monitoring
period
willbecarried-out
regularly
investments
undertheRoadSector
theperformance
of theproposed
year.Likewise,
inorderto monitor
studyandestablished
the
(RSDPSP),
ERAcarried-out
thebaseline
Program
Support
Project
Development
Times,Pavement
indicators
suchasTrafficFlow,Journey
concentrating
onselected
initialbenchmarks
Baselinevalues
for allof the
Pavement
Loading
andTruckRates.
Roughness,
Maintenance
Expenditure,
indicators
willbeestablished
byJanuary,
1998.
withruralroadinputsfromthe
andimplemented
by ERA(together
18. TheRSDP
willbemanaged
anddistrictoffices
roadmanagement
agency,
andit's linedepartments
Regions),
thelegally
autonomous
asfollows:
undertheGeneral
Manager.
ERAhasrecently
beenreorganized
intothreemaindepartments
(A)Regulatory
andEngineering
Services
Department,
whichis to discharge
theresponsibilities
through
research
and
(iii)design,
(ii)contracts
administration,
andprogramming,
of: (i)planning
threeDivisions
network
management;
(B)Operations
Department,
whichisto discharge
responsibilities
forforceaccount
and(C)Human
maintenance,
emergency
roadconstruction
andmaintenance,
associated
logistics
support;
underit's Planning
and
Department.ERAhas established
and Financial
Management
Resource
responsible
for
Planning
and
Program
Management,
Division
of
Department
A,
six
Branches
Programming
and Budgeting,
Monitoring
and Evaluation,
Management
Information
System(MIS)
Programming
Environmental
Management,
andRuralRoads
Technical
Support.As partof thisbroadorganizational
undertheGeneral
theRSDP,
ERAwillsetupa program
advisoryoffice (PAO)
setupfor implementing
Highway
Engineer
anda Management
supported
byTAcomprising:
anRSDP
Advisor,
a Senior
Manager
Information
Systems
expert,will beresponsible
to theGeneral
Manager
andERABoardfor program
support
andinterests.To
of roadrelatedmulti-donor
thecoordination
coordination
advice,
including
facilitatethemonitoring
functions,
anInspectorate
Unitwillalsoperform
technical
andfinancial
audits,
of theERA
of directives
of policies,
ensure
thetimelyimplementation
proper
implementation
andmonitor
Board
andreportallit's findings
to theBoard.It willalsoprovide
suitable
advice
to ERAmanagement
for
action.
19.
RisksInvolved
in theImplementation
of theprogram:Thepoliticalandeconomic
risksarelow.
The Government
is totally committed
to this program
and henceproblems
that couldarisein
implementation
will bedealtwith in anefficientandflexiblemanner.Institutional
andpolicyreforms
havebeentakento enhance
theexisting
capacity
of ERAcoupled
with theestablishment
of theRoad
road
andlay thebasisfor a sustainable
fundsfor maintenance
expenditures
Fundthat will provide
maintenance
program.
If revenues
fromusercharges
accruing
to theRoadFundfall belowprojections,
whichisto bereviewed
annually,
theshortfall
willbemetbyincreasing
Government
contributions
to the
expenditure
level.Should
overallbudgetary
constraints
Fundsoasto obtaintherequired
maintenance
overnewinvestments.
prioritywillbegivento maintenance
occurto limitthesecontributions,
of formulation
of the
in thecourse
havebeenidentified
Asyouarewellawaremostof thepolicyissues
andDonors
staff
authorities
in theGovernment
discussions
between
therelevant
RSDP.Thesubsequent
in
establishing
policy
overall
commitment
of theexpected
goodopportunity
foranunderstanding
provided
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
goals.It is with thisbackground
thatthecontextof thepoficyreform
wasdeterni
ned,designed
and
implemented.
Indeed,
theadministrative
complexities
of policychanges
areobviotsandit wouldbe
necessary
to monitor
andre-design
theappropriate
instruments
in thecourse
of imlj,smenlation
of the
RSDP.
I wouldliketo takethisoppDrtunity
to assure
youof myGovemment's
commitment
to *:ieed
uptheneeded
changes
insupporting
thepoic
ess
Sincerely,
Dfri~~~q
~o/~~.-
Page 25
RSDP- POLICY
ANDSTRATEGY
ACTIONS
]
Proposed
Action
Present
Status
PolicyObjective
Enhance
the road construction
and maintenance
Variousmeasures
to facilitatecontractawardsincludingThe Government
will continue
thepromotion
anduse sellingof Government
ownedequipment,
etc. havebeen encouragingcontractors and
capacity
inthecountry
through
ofprivate
contractors.
undertaken.For furtherassistance,
the TORfor the implement
recommendations
of the
Construction
Industry
needs
Studyisfinalized
andconsultantsstudyto facilitate
thedevelopment
of
have
been
invited
to submit
proposals.
the industryto meet anticipated
l_______________________________________________________
demand.
March
The RoadFundOfficewill be
Fund
and
its
Board
was
established
on
6
and
allocation
through
1.The
Road
Financing
Improve
resource
mobilization
Resource
Mobilization
andRoad
have established
byendof 1997.
No.6611997.
TheBoardMembers
in orderto provide
anadequate1997byProclamation
equitable
roadpricing
budget
forthemaintenance
ofroads
been
appointed
andhave
started
theirassignment.
The Government
will honor its
commitment
under
the medium
term
public expenditure budgeting
framework
to address
thefinancing
constraints.
Issue
Capacity
of Local
Private Contractors
tT1
A regular
annual
assessment
of the J
budget
feasibility
of theRSDP
willbe
carried-out.
covered
bythecomponent: Finalizethe Full reportand the o
of Currently
therearefiveareas
andmanagement
of theRoad Strengthening
theadministration
andManagement
Administration
Executive
Summary
of the Reform and i. Reform
of ERA;
that Federal
the roadsectorin sucha manner
Sector
of RROs;
Study including detailed job C
Regional
RoadsOrganizations
havethe institutionalii. Reform
staffingplanand the R
for bothERAand descriptions,
of Technical
Assistance
to ensure
thatthecurrentroadassetsand iii. Recruitment
capacity
futureinvestments
intheroadsector
areprotected.
RROs;
and
trainingproposal
andsubmitto all t
iv. Updating
Design
Manual
andotherworking
systems.
donors
byendApril,1998.
Advisor
hasbeen
appointed.
v. TheRSDP
'.
CD2
t3l
.'2.
ACTIONS
ANDSTRATEGY
RSDP-POLICY
Issue
PolicyObjective
Action
Proposed
Status
Present
to Auditorsreportfor FY95will be
for FY95 hasbeensubmitted
statement
vi. Financial
to g
byFeb.98andbesubmitted
1997. ready
inNovember
to IDAbyNegotiation
witha copy
Auditors
for FY96
statements
of IDA.Financial
andclosing
reporting
statements
to financial
Withrespect
to auditorsR
in orderto bringthe and97will besubmitted
thebacklog
ERAiseliminating
thebooks,
for with copiesto IDA beforemid ;
required
withinthetimeframe
closure
year'saccounting
98andMay98respectively.
January
auditcompliance.
willbecompletedu
reports
Theaudited
98 0
by May98 for FY96andAugust
to IDA.
forFY97andsubmitted
|
will continue
onthreeareas:(i) It hasallocatedThe Government
is focusing
Government
the trainingcenters .
and Ginchi strengthening
to Alemgena
resources
budgetary
increased
training.
overseas
salaryincreasesandfacilitate
(ii) Asfor staffincentives,
Centers,
Training
100
around
to
be
are
planned
staffs
for key professional
outby
carried
studyis being
needs
and(iii)A training
percent;
scale.
a newsalary
by end of 1997. VariousImplement
ERAandGTZfor finalization
havealso received
from ERAand Regions
professionals
undergoing
andtwelvestaffarecurrently
training
overseas
l
from3 to 12months.
ranging
overperiods
training
the
thestudyandexecute
for thevillageleveltraveland Carry-out
Theshortlistedconsultants
pilotproject.
submission.
for proposal
studyareinvited
transport
Development
Resource
Human
trainthe
theexistingtrainingcenters,
Strengthening
and createa
of roadsectorinstitutions,
personnel
requiredfor high
workingenvironment
conducive
productivity.
worker
Services
Transport
Rural
meansof
of the use of intermediate
Promotion
and
infrastructure,
of appropriate
provision
transport,
on
in timeandeffortspentby household
reduction
transport.
policy,legaland Onthe basisof this reviewstudy,
for thereviewof existing
strictdirectivesTheconsultants
anactionplanandsetting
Formulating
roadsafetywill
to improve
measures
proposals.
to submit
invited
have
been
issues
regulatory
ofsafetyregulations.
for theenforcement
Safety
Transport
beimplementedunderthe RSDP.
Technology
based
Labor
theroadsector
encouraging
ERAandRGRROContinue
willbeused Aspartof theworkof thetrainingcenters,
andmaintenance
construction
based
Labor
Proposed
to usethis technnology.
techniques.
inlaborbased
trained
as staffarebeing
identified
inareas
program
roads
withintheregional
&
contractors
training
include
actions
andan
laboravailability
topography,
conducive
having
using
for
woks
contracts
awarding
capacity.
institutional
thistechnology.
x
RSDP-POLICY
ANDSTRATEGY
ACTIONS
Issue
Environmental
Impact
Network
Planning
AxleLoad
Enforcement
|
PolicyObjective
PresentStatus
|
ProposedAction
Environmental
effectsof roadconstruction
will be Initialworkonenvironmental
issues
hasbeencompleted
with The recommendations
will be
addressed
bytakingmeasures
to ensure
conformity
of anoverall
assessment
of theenvironmental
implications
of the implemented
in orderto mitigate
designstandardswith environmental
protectionRSDP.
Workinthisareais being
undertaken
withthesupport adverse
effectsof theproposed
road
requirements.
of theWorldBank,andfurthersupport
is expected
fromthe projects
onphysical,
natural,human
EC.
and social environment. The
Environmental
Management
Branch
of ERAis to bestrengthened.
A coordinated
roadnetwork
planning
approach
with Thiscomponent
of workwill focusontheestablishment
of a Proceed
withtheimplementation
of
firm guidelines
for allocation
of investment
for functional
Classification
System
anda Pavement
Management
Consultant's
studyresults.
rehabilitation,
maintenance
andconstruction
among System.Theworkis currently
beingcarriedout and is
different
standards
ofroadwillbepromoted.
expected
tobecompleted
byend1997.
Existing
axleloadenforcement
capacity
willbefurther Theresponsibility
in thisareais transferred
fromtheRoad Introduce
andenforce
newaxleload
developed
and new axle load legislation
will be Transport
Authority
to ERAto improve
enforcement
as ERA legislation.
introduced
in orderto protectpavement
deterioration
hasgreater
sense
ofstewardship
oftheroadnetwork.
dueto excessive
loading.
tt
TheConsultants
areshortlistedfor theassignment
andthe
p
studywill startin 1998.
Road
Transport
Service
e
TheGovernment
willfurtherrefinepolicysetalong
this Steps
havebeen
takeninthisareawiththedisbanding
of bulk Developindicatorsto enablethe a
line,so thatcompetition
between
transport
operatorsfuel transportassociations
which were believed
to be monitoringof the Government's
W
arefurtherintensified.
operating
in a waythathampered
thewidespread
distributionliberalization
andprivatization
policy
offuelthroughout
Ethiopia.
following
thestudy.
TheTORfor the studyto furtherrefinethe legaland
regulatory
framework
is finalized
by ERAandEU.
RuralRoad
Transport
Strategy
(RRTS)
__
TheRRTS
should
befinalized
to ensure
theforeseenThedraftstrategy
isunder
review.
donor
support
to ruralroads.
Action
planforthepreparation
oftheRRTS
agreed.
_________________________________________________
*
i. Bank's
RTTP
roassistin finalizingi'
theStrategy.
CD.
ii. Appoint
national
coordinator
for
RTTP.
2
iii. Implement
ActionPlan& Time
>
Schedule
fortheStrategy
Process.
i
______________________________Scedlefo
te trtey roes.
i';~~~
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Page 29
Annex 2
Ethiopia
Road Sector DevelopmentProgram Support Project
Detailed Project Description
Introduction
1.
The proposedRoad SectorDevelopmentProgramSupportProject(RSDPSP)is plannedas the
first of a phasedparticipationby IDA in a SectorInvestmentProgram(SIP) designedto implementthe
EthiopianGovernment's10-YearRoad SectorDevelopmentProgram(RSDP)(July 1997- June 2006).
The RSDP was discussedand agreedwith donors(includingIDA) at a donors' conferencein January
1996in whichDonorshad expressed indicativesupportto the first phaseof the program.The cost of
the first fiveyears of theprogram(RSDPI), 1997-2002,is estimatedto be US$2,757million. IDA's
overallsupportto the RSDP I is envisagedto be US$756.1millionand is planned to be providedin
three successivebut overlappingroad sectorprojects. IDA's supportunderthis RSDPSP,amountingto
US309.2million,represents11percentof the RSDPI. Tentativeindicativefinancingof Phase 1 by
otherdonorsamountsto US$821millionequivalent,subjectto additionaldonorcommitments.
The Government's Road Sector Development Program
2.1 Objectives:The objectiveof the RSDPis to restoreEthiopia's road network,whichhas become
an obstacleto the sustainabilityof the economicdevelopmentprogram,and to developinstitutional
capacityof the road agenciesto properlymanagethe networks.The physicaltarget in the first five
years is to have60% of the roads in goodcondition,and to installregularmaintenanceonthe
maintainableroad network.
2.2 The RSDP will,therefore,contributeto Ethiopia'seconomicrecoveryby (a) improvingmainroads
and rural road accessto meetthe agriculturaland othereconomicdevelopmentneeds,(b) buildingup
the institutionalcapacityin both the publicsector(federaland regionalstate agencies)and private
sectorfor sustainableroad developmentand maintenance;and (c) providingeconomicopportunityfor
the rural poor throughboth increasedemploymentin rural road worksand developmentof appropriate
and affordablemeansof transportand services.
3. Scope of the Program: The RSDPI consistsof: (a) rehabilitationand upgradingof about 6300km
of trunk roads,upgradingand constructionof about2300 km of majorlinkroads,rehabilitationand
constructionof about 11900km of regionalroadsand periodicmaintenanceon about2389 kmnof trunk
and major linkroads; (b) institutionalsupportto strengthenFederaland Regionalroad management
capacity,includingsupportto domesticcontractors,road safetyand environmentalprograms; (c) road
maintenancesupportprogramincludingestablishmentof plant - poolsand decentralizationof
maintenancedistricts.Themainmeasuresof successof the programn
wouldbe the extentof majorpolicy
and institutionalreformsthat willmakethe investmentsin the road sectorsustainablein the longterm.
RoadsSectorDevelopmentProgramSupportProject(RSDPSP)
4. The RSDPSPwill focuson the rehabilitationand strengtheningof the highestprioritytrunk roads,
and help developthe programmingand contractadministrationcapacityof ERA and RROs while
preparingthe componentsto be financedunderthe nexttwo phases. Satisfactoryprogressin the
Page30
ProjectAppraisalDocument
Ethiopia:RoadSectorDevelopment
ProgramSupportProject
developmentof ERA's contractmanagementand administrationcapacityhas beenan essential
requirementfor the start of the RSDPSP. Activationof a followup phase or its componentswill be
subjectto various achievementsin theprecedingpreparationand implementation
processes.These
achievementthresholds,whichwilltake into accountexistingimplementation
scenarios,willbe used as
triggersfor determiningthetimingand scopeof followup operationsand serveas incentivesfor good
perfornance in implementation
of the programmedactivities. The successiveoperations,tied to
achievementthresholds,willensurethat desiredpolicyreformsbeingimplementedare achievedtogether
with effectiveimplementation.The overallSIP has beenformulatedin collaborationwith the European
Commissionand GTZ whojoinedthe Bankin supportingthe GOEin preparingits RSDP. DflDhas
also contributedto the institutionalstrengtheningrequiredfor effectivelystartingthe implementationof
the program. TheBank followedup the RSDPformulationwith preparationof a TransportSector
Memorandumand providedfiirthersupportthrougha programof road sectorpolicyand institutional
reformunderEthiopia's Road MaintenanceInitiative(RMI)program.
ProjectComponent1 - US$132.7million (Basecost)
5. Rehabilitation/stren-theninsof DavedTrunk Roads This componentwill comprisethe
Rehabilitation/strengtheningof the followingpavedtrunk roads:(a) Modjo-AwashArba-Gewane(372
kIn); (b) Kulubi-Dengego-DireDawa-Harar
(79 km). The roadswere evaluatedin respectof
rehabilitation,strengthening
to asphaltconcretesurfaceto differentthicknessdependingon the outcome
of the feasibilitystudy. GOEfinancedinternationalconsultantscarriedout the finalengineeringdesigns
and preparedbiddingdocumentsfor the roads. IDA is financing,under Cr. 2438-ET,consultant
servicesfor the reviewof the designsfor these roads,as wellas finalizingthe biddingdocumentsand
assistingERA in theprequalificationof contractorsout.
5.1.1 TheModjo-AwashArba-GewaneRoad is locatedin the Rift Valleyand is characterizedby long
straightsoftenendingwith shortbends;gradientsare gentlethroughout. The372 km sectionbetween
Modjoand Gewaneformspart of the southernimport-exportcorridorbetweenAddisAbaba and the
port of Assab in Eritrea. Governmenthas requestedthat about 70 km (fromMilletowardsGewane)of
the overallroad lengthof 442 km from Modjoto Millebe financedby IDA underthe ongoingRoad
RehabilitationProject(Cr. 2438-ET). This road carriessome 85%of Ethiopia's importsand exports.
Sincethetraffic alongthe corridoris mainlyport traffic with importsbeingthe predominantflow,the
changesin the volumeof traffic willbe determinedby the developmentof importtonnage.
5.1.2 Theroad is in relativelygoodconditionfrom Modjoto Nazarethand for at leastthe next 30 km
towardsAwash. Theremainderof the roadto Awashis muchworsewith signsof extensivecracking
and visiblewheeltrack rutting. BetweenAwash and Milletherehas beenextensiverecentmaintenance
by ERA includingpotholepatchingand resurfacingof heavilydamagedpavementsections. The
conditionis generallyfair with lightcrackingand the shapeof the road is still relativelygoodeven
wherethe surfacinghas beenbadlydamaged.
5.1.3 Apart fromminoradjustmentsof straightsand curveeasementthe Strengtheningof the road will
not includerealignment.OnebridgebetweenAwashand Mille requiresreplacement.The improvements
do not causeany demolishingof housesor resettlementof people.
5.2 Kulubi-Dengego-DireDawa-HararRoad: This is the 79 km pavedsectionof the Awash-KulubiDengego-DireDawa-Harar
road, whichis a key trunk routeconnectingAddisAbabato the easternand
south-easternparts of the country(para. 6.1.1). The workson this sectionof the road will involve
rehabilitationand strengtheningthe existingpavedroad with an asphaltoverlay.
ProjectAppraisalDocument
Ethiopia:RoadSectorDevelopment
ProgramSupportProject
Page31
Project Component 2 - US$264.8 million (Base cost)
6. Uperadineof Trunk Routes (from Gravel to Asphalt Paved Standard). This componentwill
comprisethe upgradingof the followingroads from gravelto asphaltpavement:(a) Awash-Kulubi(
233 kIn) (b) DebreMarkos-Gonder
(439km) and (c) two sectionsof theWoldiya-Zalambessa
(Woldiya-Alamataand BeteMariam-Wukro).The roadswere evaluatedin respectof rehabilitation,
strengtheningor upgradingfrom gravelsurfaceto asphaltpavementstandard.'GOEfinanced
internationalconsultantscarriedout the finalengineeringdesignsand preparedbiddingdocumentsfor
the roads. IDA is financing,underCr. 2438-ET,consultantservicesfor the reviewof the designsfor
theseroads, as wellas finalizingthe biddingdocumentsand assistingERA in the prequalificationof
contractors.
6.1.1 Awash-Kulubi Road This 233 km trunk road sectionconnectingAddisAbaba to the eastem and
south-easternparts of the country,also servesas an internationalroad throughDireDawato Djibouti
and after Harar throughJijigato Somalia. The road is thereforeimportantfor import/export
transportation.
6.1.2 Preliminarydesignsassumedthat the upgradingcouldbe carriedout withoutchangingthe
verticalor horizontalalignmentof the road. However,designproposalsare to modifythe standards
throughthe mountainoussectionto avoidexcessiveconstructioncosts. Thefuturerehabilitationand
upgradingconsistsof strengtheningthe subbaseand base coursesand pavingwith asphalticconcrete.
6.1.3 Thereare 27 bridgeson this section,all wide enoughfor the proposedrehabilitation. Many
requirenewparapets and minormaintenanceworkbut theyall appearto be structurallysound.
Approximately120houseswillbe demolishedandthere willbe a needfor resettlementof displaced
people.
6.2.1 Debre Markos-Gondar Road. Theprojectroad starts in DebreMarkostown, 305 km from
AddisAbaba. The442 km road from DebreMarkosto Gondarlies in the NorthWesternCorridorand
servesa fertilearea with reportedarableand livestocksurpluses. Theroad is traffickedwith about 60%
of mediumto heavy(mainlyrigid)commercialvehiclesor largebuses.
6.2.2 The road was widenedto full widthgravelstandardapproximately20 years ago. The last 13 km
of road from AzezointoGondarwereupgradedto bitumenstandardabout 10years ago. Although
someof the road traverseshillyand mountainousterrainit is mainlyon flat to rollingplateau. From
Debre Markosto Azezo,the road is surfacedwitha thingravellayerand in manyplacesthe original
hand packedstone foundations(Telfordbase) is the only pavementlayerremaining.The ridingquality
of the road is oftenpooreventhoughthe road appearsto havea soundfoundation.Thereare a number
of locationsnearBahirDar wherethe embankmentrequiresraisingto avoidinundation.In places,there
are expansivematerialsin the road subgradewhichcombineto createseriousproblems.Rock debris
from landslideshavefrequentlybeendepositedon the edgeof the carriageway hinderingdrainage.
FromAzezoto Gondarthe road has beenpreviouslypavedwithasphalt surfacedressingand the
conditionis poor and, in places,heavilypatchedor with numerouspotholesand crackedareas.
1 A revisedassessmentof the envisagedengineeringdesign standardand/or investmenttiming will be
carried
out for the Wukro-Adigratand Adigrat-Zalambessa
sectionsof the Woldiya-Zalambessa
road to determine
if they can meetthe criteriafor economicviability.
Page32
ProjectAppraisalDocument
ProgramSupportProject
Ethiopia:RoadSectorDevelopment
6.2.3 Apart from minorworkto ease curvesand realignstraightsections,the upgradingdoes not
includeany improvementsto the existingalignment.Thefuturerehabilitationand upgradingconsistsof
strengtheningthe subbaseand base coursesand pavingwith asphaltconcrete.
6.2.4 Thereare 46 bridges, 13 of whichhavespansin excessof 30 meters. It is anticipatedthat eight
of thesebridges,all locatedbetweenDebreMarkosand BahirDar, will requirereplacementas part of
an upgradedroad. Thereare 747 culverts,almosttwo per kilometer,and 12majorretainingwalls.
Thereis no needfor resettlementdue to theproject.
Road Two sections(Woldiya-Alamataand BeteMariam-Wukro,
6.3.1 Woldiya-Adigrat-Zalambessa
road (421kIn),whichis locatedin the northernpart of
Woldiya-Zalambessa
totaling197kIn)of the
road is part of the road linkingAddisAbaba to Asmara,the capital
Ethiopia.The Woldiya-Zalambessa
of Eritrea. FromAsmarathe roadgoes to the port of Massawa. It is an importantimportlexportroad
usedby heavytrucks and trailerswhencarryinggoodsand fuelfrom Massawaport to the inlandof
Ethiopia. Althoughnowalmosttotallyunpavedover the southernthree quartersof its length,this road
oncehad a bitumensurface. The 110km sectionof road fromWukro northto Zalambessahas a
recentlysealedbitumensurface. Theroad fromWoldiyato just southof Maychew(160 kIn)has been
graveledunderthe ERRP regravellingprogramfundedby the WorldBank. Thegovernmenthas elected
to financethe sectionfromAlamatato BeteMariam(114 kin) fromits ownresources.
6.3.2 The existingalignmentwillbe improvedby limitedadjustmentof straightsand curveradii. It is
estimatedthat there are four bridgesrequiringreplacement,all betweenWoldiyaand Mekele. Also,
thereis a needfor one newmajorbridgein this sectionnorthof the Robittown. Somehouseswillbe
demolisheddueto the projectand thereforesomeresettlementneeded.
ProjectComponent3 - US$27.8million(basecost)
7. ConsultantServicesfor the Supervisionof the CivilWorks. This componentwillcomprise
consultantservicesfor the supervisionof the abovecivilworks. Theterms of referencefor these
serviceshavealreadybeenagreedbetweenthe Bankand ERA, and the processingof procurementof the
consultantservicesfor eventualfinancingunderthe proposedprojecthas begun.
ProjectComponent4 - US$25.7million(basecost)
8.1 InstitutionalStrengtheningand CapacityBuildingSupportfor ERA. IDA financinghas been
requestedfor consultantservicesfor threeyearsof technicalassistancein FinancialManagement
(includingmanagementand cost accounting- MIS) to the ProgramCoordinationOffice,as wellas
supportto ERA for the establishmentof a RoadsInspectorateand to carryout annualtechnicaland
financialaudits. The IDA supportwillcomplementotherdonorsupportand ensurethat effective
and capacitybuilding.
supportto ERA is in placefor projectimplementation
8.2 IDA, in collaborationwith the EuropeanUnion(EU),the BritishDepartmentfor Intemational
Development(DffD)and GTZ, has assistedGOEto preparea policyand institutionalreformproject
which,interalia, will provideTechnicalAssistanceto ERA andthe RROs. In connectionwith policy
and institutionalreform,the GermanGovernmenthas a projectof about 1.9m ECU (US$2.37m) which
is beingusedto provideconsultantsupportand equipmentfor carryingout a reformstudyof ERA and
the RROs, as wellas adviceon the establishmentof a road fund and assistancein implementing
of the studies. The EU is also providing,undera Grant of about2 m ECU(US$ 2.5
recommendations
m): (a) additionalsupportto ERA of one RSDP Advisorfor threeyears to workin ERA's Program
Coordinationoffice;(b) up to 60 man-monthsof consultantservicesand a limitedamountof equipment
ProjectAppraisalDocument
Ethiopia:RoadSectorDevelopment
ProgramSupportProject
Page33
aimedat assistingin the preparationof the RSDPrelatedstudiescovering,but not limitedto, road
safety,environmentalissues,axle loadcontrol,roadtransportregulationand privatesector
development,the road fundand institutionalissues(e.g., Socialaspectsof ERA Reformand
institutionalquestionsrelatedto the Regions),as wellas studytours, seminarsand workshops(RMI,
etc.). DFIDis also providingparallelcofinancingfor a team of four to assist and train ERAstaff over
a periodof up to 30 monthson the legalaspectsof contracts,contractpreparation,highwaydesign,and
maintenancemanagement.IDA, throughits ongoingproject,is providingsupportto ERAand the
RegionalGovernmentsto train professionaland technicalstaff, as wellas for the establishmentof
systemsfor functionalclassificationof roads,pavementmanagementand revisionof road design
manualsand technicalspecifications.
Project Component5 - US$6.4million(base cost)
9. InstitutionalStren thenin2and CapacityBuildingSupportfor FourRROs. TheNordic
DevelopmentFund(NDF)has agreedto providecofinancingfor the provisionof technicalassistance
and capacitybuildingof RROsin the four regionsof Afar,Benshangul-Gumuz,
Gambellaand Somali,
to assist the regionsto implementsimplesystemsfor networkinventory,conditionsurveys,planningof
maintenance,rehabilitation,construction,and contractand financialmanagement.Trainingwillbe
providedto RRO staff and smallscalecontractors. Technicalassistancewillalso be providedto the
ERAtrainingcentersto developtheircurriculumwith regardsto trainingin maintenanceplanning,
contractand financialmanagement,and smallscalecontractordevelopment.Thetrainingspecialistwill
workcloselywith ERA staff, theEU-financedrural roadscoordinatorunderrecruitnent,and the RROs
to supportthe developmentof local capacityin theseareas.
Project Component6 - US$1.3million(base cost)
10. EnvironmentalGuidelinesand SectorEnvironmentalAssessment(EA)CapacitvBuilding:The
scopeof the RSDPhas necessitatedan environmentalimpactassessmentstudyfor the fiveindividual
roadsbeingconsideredfor rehabilitationand/orupgradingunderIDA initialfinancing,as wellas
definingEA road sectorguidelineswiththe EthiopianEnvironmentalProtectionAgency(EPA)and the
requirementsfor strengtheningthe institutionalcapacityin ERAfor overallroad sectorenvironmental
analysisand mitigationof adverseeffectsonthe environment,includingestablishmentof an
EnvironmentalManagementUnit. TheEU has agreedto financethe activitiesof the Environmental
ManagementUnit, includingthe developmentand finalizationof Road SectorEnvironmental
Guidelines.The abovecost estimatesare subjectto confirmationby the EU.
Project Component7 - US$2.3million(base cost)
11. TechnicalPreparationof RuralRoadsImprovements.NDF has agreedto providecofinancingfor
feasibilitystudies,environmentalimpactassessmentsand designsfor 550 km of rural roadsto be
includedunder a possibleFourthRoads SectorProject.
p:/pad/annex2d. doc
Page34
ProjectAppraisalDocument
Ethiopia:RoadSectorDevelopment
ProgramSupportProject
Annex 2-A
4
it.
,A
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Page 35
Annex 3
Ethiopia
Road Sector Development Program Support Project
Estimated Project Costs
IDA Financed Components
ProjectComponent
Rehabilitationand strengtheningof trunkroads
Upgradingof trunk roadsfrom gravel to asphaltpavement
ConsultantServicesfor civil workssupervision
InstitutionalStrentheningand capacitybuildingfor ERA
InstitutionalStrengtheningandcapacitybuildingfor RROs
EnvironmentalGuidelinesand SectorEA capacitybuilding
Preparatorystudiesfor rural roads
Total BaselineCost
PhysicalContingencies
Price Contingencies
TotalProjectCost
Local
Foreign
Total
----------------------US $ million-------------------46.4
86.2
132.7
92.6
172.0
264.6
6.4
21.4
27.8
5.2
20.9
26.2
1.3
5.1
6.4
0.7
0.6
1.3
0.5
1.9
2.3
153.1
308.2
461.3
15.3
10.0
30.8
19.9
46.1
29.8
178.4
358.9
537.3
*0
RSDP Componentsby Financiers (Totals Including Contingencies)
Govt* IDA** EU
ADF Germany Italy Japan
Rehabilitation ofFederal Roads
130.9 152.4 233.9 12.7 55.7
0.0
86.7
UpgradcngofFederalRoads
342.4 174.7 0.0
73.3 0.0
0.0
0.0
Major link Roads Upgrading
60.3
0.0
41.8 0.0
0.0
0.0
0.0
Construction of NewMajor Link Roads
55.5 0.0
0.0
11.5 0.0
46.2
0.0
Regional Roads Program
204.8 0.0
Maintenance Program
257.6
ERRP
0.9
Bridges
1.6
Salary
42.7
Equipment & Workshop
1.1
Consultant Services for Civil Works
58.5
22.3
18.5 6.8
3.9
3.2
6.1
Supervision
Inst. Strengthening & Capacity Bldg. for ERA 21.7
2.8
4.2
0.6
0.3
Inst. Strengthening & Capacity Bldg. for
1.1
1.4
RGRROs
Environmental Gudelines & Sector EA Cap. 0.2
0.5
Bldg.
Additional Preparatory Studies
0.5
Total
1179.7 352.2 300.2 104.4 60.2
49.5
93.0
Notes: *includes contributions from road users
*"includes proposed Gewane - Mille Rehabilitation
***unidentifiedfinancing source includes possible future IDA follow-on RSDP support projects
NDF
DfID
Netherlands
0.0
0.0
24.4
0.0
Unident***
12.8
222.3
77.9
45.6
187.7
0.0
0.0
1.7
37.4
0.3
Total
685.1
812.7
204.4
158.9
392.5
257.6
0.9
1.6
42.7
1.1
158.5
4.8
29.9
7.3
0.7
1.4
rri
2.1
7.6
0.3
26.1
583.8
2.6
2757.0
d
,
En
0
CD
2t
CfD,
0f
RSDPSPComponentsby Financiers(TotalsIncludingContingencies)
Govt* IDA EU
ADF
46.4 108.4
Rehabilitationof FederalRoads
131.6 178.0
Upgradingof FederalRoads
Majorlink RoadsUpgrading
Constructionof NewMajorLinkRoads
RegionalRoadsProgram
MaintenanceProgram
ERRP
Bridges
Germany Italy
Japan NDF DfID Netherlands Unident** Total
154.8
309.6
0.0
0.0
0.0
0.0
0.0
0.0
Salary
Equipment& Workshop
ConsultantServicesfor Civil Works
0.0
12.5
20.0
21.7
1.1
2.8
0.0
32.5
Supervision
Inst. Strengthening& CapacityBldg.for ERA
Inst. Strengthening& CapacityBldg.for
RGRROs
EnvironmentalGudelines& SectorEA Cap.
Bldg.
AdditionalPreparatoryStudies
Total
C
4
0.2
4.2
1.4
0.6
0.3
0.5
0.5
214.0 309.2 6.1
0.0
0.6
0.0
0.3
Notes: *includes contributions from road users
**unidentifledfinancing source includes possible future IDA follow-on RSDP support projects
4.8
0.3
29.9
7.3
0.7
1.4
2.1
7.6
0.3
0.0
0.0
2.6
538.1
-
Page 38
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportproject
Annex4
Ethiopia
Road SectorDevelopmentProgramSupportProject
Cost-BenefitAnalysisSummary
The cost-benefit analysis was based on a pre-feasibility study developed by Consultants.
Results of pre-feasibility study were extensively reviewed during appraisal for consistency with cost
estimates independently prepared by engineering design consultants. Uncertainty and risk were
further quantified through a probabilistic assessment carried out on a pilot basis by Bank staff.
Details of the economic analysis are described in the "Consulting Services for the Five Roads
Feasibility Study", Final Report July 1997, a copy of which is available in the Project Files together
with the Appraisal Mission Aide-Memoire and computer diskettes with the revisions carried out
during appraisal. Main assumptions of the analysis conducted for the selected roads are indicated in
the following.
(i)
Traffic Projections
Traffic projections, for each category of vehicle, are carried out based on a detailed
assessment of future vehicle ownership and usage rates. This exercise is based on models calibrated
for Ethiopian conditions. The traffic projections further reflect growth prospects for GDP and
population which are in line with Government macroeconomic and demographic projections. Baseyear (1998) traffic levels are estimated based on available ERA time-series, as adjusted to reflect the
location of counting stations; on manual classified and moving observer counts; and on O-D surveys
specifically carried out under the study. Long-term traffic projections also attempt to reflect the
foreseeable impact on market structure and vehicle usage of the ongoing deregulation and
liberalization policy. The resulting growth rates for commercial vehicles are 10% to 2000, 5% to
2010 and 2.1% thereafter. For light vehicles, these growth rates are 6%, 4% and 2.8%, respectively.
Diverted traffic has been estimated and factored into the analysis; no generated traffic was
considered.
(ii)
Road Costs
The unit construction and maintenance costs are based on engineering design estimates
prepared by Consultants and were reviewed during appraisal. Construction costs considered in the
analysis include a 10% allowance for physical contingencies and a 7% allowance for supervision
costs. The vehicle operating costs are estimated based on cost inputs generated for the Ethiopian
fleet. The analysis was conducted in economic terms, using a discount rate of 12% for the
opportunity cost of capital. Economic costs are estimated from financial costs, through the use of a
foreign exchange adjustment factor (estimated at 1.06); of a standard conversion factor for nontraded goods (estimated at 0.86); and of a shadow wage rate (estimated at 0.82, 0.55, and 1.06 for
skilled, unskilled, and expatriate labour, respectively). Prices were assumed at their July 1997 level.
ProjectApppraisalDocument
Ethiopia: RoadSectorDevelopmentProgramSupportProject
(iii)
Page 39
Modeling Framework
The interaction between the evolution of road condition and vehicle operating costs through
time is modeled through the Bank-developed Highway Design and Maintenance Model, Release III
(HDM-III). Basically, and for an exogenous projection of traffic flows using each road, the model
estimates the streams of vehicle operating costs, as a function of the deterioration in road condition.
This deterioration is, in turn, a function, inter-alia, of initial road condition, of the volume and
composition of traffic, and of the exogenously assumed investment and maintenance strategies. A
total of seven alternatives were generated and simulated for each section of road as deemed
applicable by engineering judgment. For the purpose of analysis, each road was divided into a
number of homogeneous links to reflect different traffic levels and physical characteristics. A total of
22 links were considered.
(iv)
Selection of Alternatives
Various homogeneous links within each of the five candidate roads were analyzed, of which
some extensive stretches were shown to have base-case EIRR as low as 4%, and with some
contiguous stretches showing returns varying from 16% to 4%. Such an analysis shows that the
investments proposed for the entire length of the Modjo-Mille, of the Awash-Harar-Dire Dawa and of
the Debre Markos-Gondar roads are economically feasible. The analysis also showed the economic
feasibility of the road stretches Woldiya-Alamata, Alamata-Beta Mariam, and Beta Mariam-Wukro in
the Woldiya-Zalambessa Road; and Alemgena - Butajira in the Alemgena - Sodo road. These roads
and/or stretches of roads are readily eligible for adoption under phase I of the RSDP. Financing
would be provided under the proposed Project for the majority of the above feasible subprojects, as
indicated below. The remaining feasible sub-projects will be financed by other sources. The
respective sensitivity analysis and summary of results aggregated at the road level follow. Cashflows and results of a more detailed analysis at the level of each link are available in the Project File.
(vi)
DeterministicSensitivityAnalysis
The economic performance of the selected investment alternatives was tested to determine
the sensitivity of the investment efficiency indicators to increased construction costs and to traffic
growth rates lower than expected. To this extent construction costs were increased by 20% and
traffic growth rates independently decreased by two percentage points until 2003 and by 1%
thereafter until 2008. The results of these sensitivity tests, as indicated below, suggest that in both
cases the corresponding EIRRs are unlikely to deviate more than some three percentage points below
the base case scenario. The results from the sensitivity tests also suggest that, even under the extreme
scenarios assumed, the average EIRR for the projects roads (weighted by investment) would still be
estimated at about 17%. However, in the case of the Debre Markos-Gondar road special attention
will be given during project implementation to the monitoring of costs and benefits, since investments
in the links Debre Markos-Bure, Bure-Bahir Dar and Azezo-Gondar only yield an estimated EIRR of
some 10-11% under the sensitivity tests (details available in the Project File).
Page 40
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Road
NPV(at 12%)
(in MillionUS$)
EIRR
(in %)
Modjo-Mjlle (371.7 km)
Base Case
Cost Increasedby 20%
Traffic GrowthRates
Decreasedby 1-2%Points
Woldiya-Zalambessa(197.0Km)
Base Case
Cost Increasedby 20%
Traffic GrowthRates
Decreasedby 1-2%Points
Awash-Harar-DireDawa(313.1 Knm)
Base Case
Cost Increasedby 20%
Traffic GrowthRates
Decreasedby 1-2%Points
DebreMarkos-Gondar(441.9 Km)
Base Case
Cost Increasedby 20%
Traffic GrowthRates
Decreasedby 1-2%Points
Total/Average(1,323.7Kni)
Base Case
Cost Increasedby 20%
TrafficGrowth Rates
Decreasedby 1-2%Points
(vii)
135.2
112.7
20.3
18.2
98.1
18.5
30.2
16.1
16.1
13.8
20.8
14.2
139.3
123.4
25.2
22.4
109.4
23.0
23.9
4.6
14.3
12.3
5.7
12.5
319.1
265.8
19.0
16.7
234.0
17.1
StochasticRisk Analysis
In order to factor in uncertainty into the economic evaluation, risk analysis was conducted
using a simplified EXCEL-version of the HDM-III, specifically developed under the Road
Management Initiative (RMI). For purposes of analysis, this model was combined with a
commercially-available model (the @RISK software). Triangular distributions were assumed for the
following variables considered to mostly influence the project net benefits: (a) construction costs; (b)
existing traffic; and (c) traffic growth rate. For the construction costs, the lowest and highest possible
values were assumed at 90% and 130% of the estimated investment costs (including physical
contingencies and supervision costs), respectively. This triangular distribution implies that the most
likely value (the mode) for the construction cost is 107% of the estimated investment value, and that
there is a 75% probability that the construction cost will be above such value. For the existing traffic,
the lowest and highest possible values were assumed at 74% and 108% of the base traffic level (as
projected to the opening year), respectively. The associated triangular distribution implies that the
most likely value for the base traffic level is 94% of its opening-year value, and that there is a 77%
probability that the opening-year traffic level will be below such value. As to the traffic growth rate,
the lowest and highest possible values were assumed at 70% and 105% of the estimated value,
respectively. The corresponding triangular distribution implies that the most likely value for the
traffic growth rate is 92% of the estimated value, and that there is a 86% probability that the growth
ProjectApppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Page41
rate will be below such value. Some 400 "what-if" scenarios, combining the possible values for the
three selected variables, were then generated for each project road through the @RISK model. This
allowed for the values of the EIRR to be determined for each road/scenario, using the simplified
EXCEL version of HDM-Ill. The subsequent analysis of the frequency histograms for the EIRRs
produce the following results (detailed computer printouts are available in the Project File):
Road
Mean
EIRR
(%/0)
Standard
Deviation
EIRR(%)
Probability
EIRRbelow
12%(%)
Modjo-Mille
17.5
2.0
0.3
Woldia-Zalambessa
13.6
1.7
18.4
Awash-Harar-DireDawa
21.9
2.2
0.0
DebreMarkos-Gondar
11.9
1.8
51.8
Overall, the estimated expected value for the EIRR for each project road are somewhat below
the values obtained under the deterministic analysis (base case), as shown in the table presented in
section (vi) above. This reflects the skewed nature of the assumed probability distributions for the
key project variables. In any case, the stochastic EIRR estimates still range from 11.9% - 21.9%
(with standard deviations of about 2%) thus satisfying economic screening criteria, and yielding a
combined EIRR for the project of 16.2% (deterministically weighted by investment). The probability
that the estimated value for the EIRR is below 12%, the value assumed for the opportunity cost of
capital, is very low except in the case of the Debre Markos-Gondarroad in which it is calculatedat
51.8%. This findingis consistentwith, and gives robustnessto, the deterministicsensitivityanalysis
carried out in Section(vi) above. It furtherstrengthensthe recommendationsgiven in section (vi) as
to the need for a detailedmonitoringof projectscosts and benefitsfor the Debre Markos-Gondarroad
during project implementation.
(viii) Switching ValuesAnalysis
In order to assist project monitoringduring implementation,switchingvalues analysis for
the project roads was also carried out. The correspondingmultipliers,for constructioncosts and
basictraffic, to yield an EIRR of 12%are indicatedbelow.
Multipliers
to Yieldan EIRRof 12%
Road
Construction
Cost
BaseTraffic
Modjo-Mille
1.68
0.60
Woldia-Zalambessa
1.31
0.76
Awash-Harar-Dire
Dawa
2.15
0.47
DebreMarkos-Gondar
1.17
0.85
Page42
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
The above results are in line with the findings presented in section (vi) above as to the
relative sensitivity of investment efficiency indicators to variations in costs and benefits. In the case
of the Debre Markos-Gondar road, the switching values analysis further leads to the conclusion that
this road would not be economically feasible if costs are 17% above their base value (including 10%
of physical contingencies and supervision costs), or if traffic in the opening year is less than 85% of
the projected value.
(ix)
Distribution of Benefits
The proposed road investments are expected to yield substantial benefits, mainly in terms of
vehicle operating costs savings resulting from improved road condition. since the selected roads are
located in zones of good agricultural potential and/or serve major trade corridors, most of the vehicle
operating costs savings would directly accrue to truck operators involved in export-import traffic and
in agricultural-related transport services. with the abolition of state management of private truckers
and the removal of price controls for the sector, these savings are expected to be competitively and
progressively passed on to consumers and producers on the form of reduced transport fares. To this
extent, the proposed investments are expected to contribute to improved access to market and
improved delivery of services to the affected population.
(x)
Monitoring Indicators
In order to monitor the performance of the proposed investments, the following indicators
will be used: Traffic Flow, Journey Times, Pavement Roughness, Maintenance Expenditure,
Pavement Loading, and Truck Rates. The value of these performance indicators will depend on a
regular program of data collection. This program will be developed during project implementation
by ERA and MOT with the assistance of consultants to be financed by the EU.
(xi)
Summary of Deterministic Cost Benefit Analysis for the Roads Eligible for IDA
Funding
Net PresentValue(at 12%)
(in MillionUS$)
Road
EconomicAnalysis
Cost
NPV
EIRR
Modjo-Mille
120.5
135.2
20.3
Woldiya-Zalambessa
66.3
30.6
16.1
Awash-Harar-DireDawa
84.1
139.3
25.2
Debre Markos-Gondar
104.3
23.9
14.3
Total
375.2
329.1
n.a.
Average 1/
1/ Weightedby costs
19.0
Page 43
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Annex 4-A
Ethiopia
Road Sector DevelopmentProgram Support Project
Fical Impact Assessment
Data from the 1997public expenditurereviewwere usedto assesspossiblefiscalimpactof the
proposedroad expenditurefor the next 5 years. The annual expenditureprojectionsfor the road sectorwere
taken from the detailedcost estimatesof the Road SectorDevelopmentProgram(RSDP),whichwas agreed
during the negotiationsin November1997. The total expenditurefor the first 5 year phase of the 10-year
RSDPis estimatedat 18,609.6millionBirr. The proposedfinancingwili comprisea total Government(Local)
contributionof 7,963millionBirr with additionalestimatedcontributionsfrom donorsamountingto 10,647
millionBirr. The Governmentcontributioncomprise5,888millionBirrfor capitalexpenditure,while
recurrentexpenditurefor road maintenancewillbe financedfrom the RoadFund, establishedunder the RSDP,
to be made up of a total of 782 millionBiff of Governmentannualbudgetallocations,and an estimated1,245
millionBinrto be financedfrom road user levies,etc.. The donor contnbutionsinclude an estimatedamountof
1220.6millionBiff from sourcesstill unidentified.
The result of the analysisshownin the table belowprovidesan indicationof the fiscalimpactof the
first phase of the RSDP togetherwith the proposedEducationand Health SIPs. The expenditureprojectionsfor
all other sectorsas well as the GDPgrowthrate (5 - 6 % real per annumplus 1.9 - 2.3 % inflation)are taken
from the original PER estimates. Also, since price escalationis includedin the costestimatesfor the road
projects,nominalprices are used for the analysis. The analysisdid not includeany expendituresfor RSDP
Phase II whichmay start duringthe later years of the analysisperiod. For this reason,the resultsshow large
annual expendituresduringthe first 3 yearscomparedto the other sectorswherethe expendituregrowssteadily
over the 5 year period. The averageoverallfiscalbalance withoutgrantswill be -10.5 % of GDPfor the five
year periodwhich is consistentwith the resultsof the base case scenarioof the PER 1997. Excludingall road
projectswith unidentifiedfinancingsourceswill decreasethe averagefiscaldeficitby 0.4 points. The analysis
assumesthat all annual expenditurewill be madepromptlyas proposed. However,with the continuing
discussionand appraisalof donor supportedprograms,it is agreedthat the Governnent reviewsprojected
expenditureimplicationsannuallyand ascertainwhethertheyare realisticin the contextof PER exerciseand
also possiblyfind non-priorityprojectswhereplannedexpenditurescan be cut and/or spreadout beyondthe 5
year period,given constraintsof their fiscal impacton the macroeconomicbudget.
Fiscal Impactof the Roads andOtherSIPs - EstimateExcludingGrantsfor Base Case Scenario(as % of
GDP)
Fiscal Year
1999/00
2000/01
2001/02
1997/98
RSDP and other SIPs fully implemented
1998/99
TotalRevenue*
TotalExpenditure
RecurrentExpenditure
CapitalExpenditure
Overall Fiscal Balance
19.0
27.6
16.7
11.0
19.8
31.3
16.4
14.9
-8.7
-11.5
-12.7
-11.9
As above without road projects with current unidentifiedfinancing sources
-7.6
TotalRevenue*
Total Expenditure
RecurrentExpenditure
18.9
27.2
16.7
20.1
27.3
16.4
20.4
33.1
16.4
16.8
20.5
32.4
16.4
15.9
19.7
30.8
16.4
20.3
32.5
16.4
20.4
31.9
16.4
20.1
27.7
16.4
11.4
Capital Expenditure
10.5
14.4
16.1
15.4
11.0
OverallFiscalBalance
-8.3
-11.1
-12.2
-11.5
-7.3
Note: *Revenue includes additional contribution from road users
Average
97-02
-10.5
-10.1
- ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Page 44
Fiscal Projections (%of GDP)with SIPsfully implemented
Unit
Total RevenueandGrants
Revenue
Adjustmentfor RoadSector
AdjustedRevenue
Grants
AdditionalGrants*
Total Expenditure
RecurrentExpenditure
CapitalExpenditure
Overall Fiscal Balance(incl.Gr.)
Overall Fiscal Balance(excl.Gr.)
GDPin MillionBirr
RealGDP Growth
%
Inflation
%
NominalGDPGrowth
%
RecurrentExpenditure
BirrM
Education
Health
BirrM
BirrM
Roads
BirrM
of whichRUT
Others
BirrM
BirrM
TotalRecurrent
CapitalExpenditure
Education
Birr M
BirrM
Heaith
Roads
BirrM
of whichdonors
BinrM
Others
Bin'M
TotalCapital
BirrM
RevenueAdjustment for Road Sector
Recunrent***
Bin'M
Capital*
BirrM
TotalTaxRevenue
Bin'M
%of GDP
%
RevisedRecurr.*
RevisedCapital****
TotalTaxRevenue
RUT
TotalRevisedRevenue
% of GDP
RevenueIncrease*****
Notes:
BirrM
Bin' M
BirrM
BirrM
BinfM
%
Reference 1997/98 1998/99 19991002000/01 2001/02 Average
97-02*
27.6
30.4
32.3
31.9
29A
PERp15
18.2
18.8
19.3
19.7
20.1
1.0
1.1
0.8
0.0
b/ffromE
0.8
19.0
19.8
20.4
20.5
20.1
5.0
4.7
4.3
PERp15
5.9
5.4
6.7
5.0
2.8
5.2
6.9
PERplO
32A
27.7
27.6
31.3
33.1
16.4
16.4
16.7
16.4
16.4
b/f fromA
16.8
15.9
11.4
11.0
14.9
b/ffromB
1.7
-0.1
0.0
-0.9
-0.8
-0.5
Rev- Exp
-7.6
-10.5
-8.7
-11.6
-12.7
-11.9
Rev- Exp
43410.0 47013.0 50680.0 54177.0 57915.2
5.0
5.0
PERp15
6.0
6.0
5.0
PERp15
2.3
1.8
1.9
1.9
1.9
PERp15
8.3
7.8
6.9
6.9
6.9
0204hs.xds
0204hs.xls
RSDPest.
RSDPest.
0204hs.xis
A
1102.8 1196.7 1298.7 1409.3 1529.4 6536.9
418.9 483.4 557.7 643.5 742.5 2846.0
334.8 398.9 412.5 427.0 453.9 2027.1
200.0
132.5 195.7 288.8 427.6 1244.6
5379.1 5636.6 6022.8 6428.5 6749.9 30216.9
7235.6 7715.6 8291.7 8908.3 9475.7 41626.9
0204hs.xds
0204hs.xds
RSDPest.
RSDPest.
0204hs.xis
B
443.3 611.7 844.1
241.7 312.0 402.8
1759.6 3578.1 4653.7
945.1 2149.9 3000.3
2315.0 2483.8 2592.4
4759.6 6985.6 8493.0
15%Taxis assumed
185.4 257.2 356.7
1052.5 1534.6 2237.4
185.7 268.8 389.1
0.4
0.6
0.8
334.8 398.9 412.5
1759.6 3578.1 4653.7
314.2 596.6 759.9
200.0 132.5 195.7
514.2 729.0 955.7
1.2
1.6
1.9
0.8
1.0
1.1
0204hs.xIs
0204hsxis
C
RSDPest.
RSDPest.
D
E=D-C
1164.9
520.0
4217.6
2847.5
2719.8
8622.3
1607.6
671.3
2325.5
1703.7
1986.7
6591.1
494.8 686.3
3262.2 4756.2
563.6 816.4
1.0
1.4
4671.6
2147.8
16534.5
10646.6
12097.7
35451.6
2223.5
427.0 453.9
4217.6 2325.5
696.7 416.9
288.8 427.6
985.5 844.5
1.8
1.5
0.0
0.8
*Average for fiscal balance; totals elsewhere
"Additionalgrants expectedto cover 50% of incrementalcapital costs in educationand health sector, for road sector all
expected donor finding are also included in the grant
***PER estimates
****RSDPprojections
*****Expectedrevenue increasein the road sector comparedto original PER estimate
Source: PER; June 1997
Page 45
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Fiscal Projections(%of GDP)with SIPsfully implernented(excludingunidentified
fundingprojectsotherthan
possiblefutureIDA RSDPsupportprojects)
Unit
Total Revenueand Grants
Revenue
Adjustmentfor RoadSector
AdjustedRevenue
Grants
AdditionalGrants*
Total Expenditure
RecurrentExpendture
CapitalExpenditure
OverallFiscalBalance(incl. Gr.)
OverallFiscalBalance(excl.Gr.)
GDP in MillionBirr
RealGDP Growth
%
Inflation
%
NominalGDPGrowth
%
RecurrentExpenditure
Education
BirrM
Health
BirrM
Roads
BirrM
of whichRUT
BirrM
Others
BirrM
TotalRecurrent
BirrM
CapitalExpenditure
Education
BirrM
Health
BirrM
Roads
BirrM
BirrM
of whichdonors
Others
BirrM
TotalCapital
BirrM
RevenueAdjustrnentfor Road Sector
Recurrent'*
Birr M
Capital***
Birr M
TotalTaxRevenue
BirrM
%of GDP
%
RevisedRecurr.****
Birr M
RevisedCapital**
Birr M
TotalTaxRevenue
Birr M
RUT
BirrM
TotalRevisedRevenue
BirrM
% of GDP
%
Revenue
lncrease***"
Notes:
Reference 1997/98 1998/99 1999/00 2000/01 2001/02 Average
97-02*
27.0
29.9
29A
29A
27A
PERp15
18.2
18.8
19.3
19.7
20.1
0.7
0.5
-0.2
b/ffromE
0.7
0.9
18.9
19.7
20.0
20.2
19.9
PERp15
5.9
5.4
5.0
4.7
4.3
PERplO
2.3
4.8
4.4
4.5
3.2
25.9
27.1
30.8
30.6
30.2
b/f fromA
16.7
16.4
16.4
16.4
16.4
b/ffromB
10.4
14.4
14.3
13.7
9.6
Rev- Exp
-0.1
-0.9
-1.2
-0.8
IA
-0.3
-9.2
Rev- Exp
-8.2
-11.1
-10.6
-10.0
-6.1
43410.0 47013.0 50680.0 54177.0 57915.2
PERp15
6.0
6.0
5.0
5.0
5.0
PERp15
2.3
1.8
1.9
1.9
1.9
8.3
7.8
6.9
6.9
6.9
PERp15
0204hs.xls
0204hs.xls
RSDPest.
RSDPest.
0204hs.xis
A
1102.8 1196.7 1298.7 1409.3 1529.4 6536.9
418.9 483.4 557.7 643.5 742.5 2846.0
334.8 398.9 412.5 427.0 453.9 2027.1
200.0 132.5 195.7 288.8 427.6 1244.6
5379.1 5636.6 6022.8 6428.5 6749.9 30216.9
7235.6 7715.6 8291.7 8908.3 9475.7 41626.9
0204hs.xds
0204hs.xds
RSDPest.
RSDPest.
0204hs.xis
B
443.3 611.7 844.1
241.7 312.0 402.8
1532.9 3359.2 3384.9
718.4 1931.1 1731.5
2315.0 2483.8 2592.4
4532.9 6766.7 7224.2
15%Taxis assumed
185.4 257.2 356.7
1052.5 1534.6 2237.4
185.7 268.8 389.1
0.4
0.6
0.8
334.8 398.9 412.5
1532.9 3359.2 3384.9
280.2 563.7 569.6
200.0 132.5 195.7
480.2 696.2 765.4
1.1
1.5
1.5
0.7
0.9
0.7
0204hs.xIs
0204hs.xIs
C
RSDPest.
RSDPest.
D
E= D-C
1164.9
520.0
3036.3
1666.2
2719.8
7441.0
1607.6 4671.6
671.3 2147.8
1274.8 12588.2
653.0 6700.2
1986.7 12097.7
5540.4 31505.3
494.8 686.3
3262.2 4756.2
563.6 816.4
1.0
1.4
427.0 453.9
3036.3 1274.8
519.5 259.3
288.8 427.6
808.3 686.9
1.5
1.2
0.5
-0.2
2223.5
*Averagefor fiscal balance, totals elsewhere
**Additionalgrants expectedto cover 50% of incrementalcapital costs in education and healthsector, for road sector all
expected donor fimndig are also included in the grant
***PER estimates
****RSDPprojections
*****Expectedrevenue increasein the road sector comparedto original PER estimate
Source: PER; June 1997
ProjectAppraisalDocument
ProgramSupportProject
Ethiopia:RoadSectorDevelopment
Page46
Annex 5
Ethiopia
Road Sector Development Program Support Project
Financial Summary _
FinancialManagementand Reporting
I.
Accountabilityfor all project resourceswill be vested in the EthiopianRoads Authority (ERA).
ERAwill maintainrecordsand accountsand underlyinginternalcontrolsin accordancewith International
AccountingStandards(IAS);annual FinancialStatementsproducedtherefrom (projectaccounts),as well
as ERA's overall Financial Statements (institutional accounts) will be audited in accordance with
InternationalStandardsfor Auditing(ISA) by independentauditorsacceptableto the Association. These
accountswill include separateaccountsand records in respectof the proposedproject which will enable
all project expendituresand resourcesto be clearly identifiedand verified. ERA's financial statements
will includestatementsidentifyingdisbursementsfor the year and cumulativefor each source of funding
under the project. Notes accompanyingthe audited FinancialStatementswill providesufficientanalysis
of these amountsby categoryof expenditure(both types of expenditureand disbursementcategory).
2.
Compliance with the above requirements and the timely production of reliable financial
informationon project implementationand on ERA's overall operationswill require a major reform of
ERA's presentfinancialmanagementand reportingsystems. The proposedproject will include provision
for support to ERA to build its financial managementcapacity and introduce new systems. It provides
the opportunity and the justification for a complete reform of the existing systems; the underlying
necessity is the decentralizationof management to the district offices, and the resulting need for
consolidationof informationby ERA headquarters. ERA's financial management services should be
equippedwith a dedicatedLAN of desktop computersto allow the use of a PC-basedaccountingsystem,
properlydesignedand geared to the needs of sound managementof both ERA and the proposedproject.
An integratedsystem would be used throughoutERA, includingthe regionaloffices, in order to facilitate
consolidation. Accounting procedureswould include measures to ensure the regular transmissionof
informationto ERA's headquartersand its consolidation. Studies will be carried out under the existing
project to identify the financial, physical and human resources necessary. Extensive training will be
provided to staff to ensure the successful introductionof the new systems. The outcome of these
initiativesand assistance,necessaryto allow ERAto efficientlyimplementthe proposedproject,will be a
transformationof ERA's managementinformationsystems.
3.
Project accounts maintainedby ERA for the existing Road RehabilitationProjecthave generally
compliedwith the financialcovenantsof the Credit Agreement,but ERA's own accountingrecords and
internalcontrolsare in needof updatingand reshaping:financialstatementshave not been producedsince
the year ended June 30, 1995 (the latest year for which audited statementsare available is 1992/93),and
management accounting information is incomplete and incompatible with the needs of efficient
management. Cost accountsare maintainedby cost center ratherthan by activity and standardcosts are
not available. Existingsystems and proceduresare based on the Fiscal InformationSystem Accounting
Manual, which was produced in 1984. Basic accountingproceduresare generally thorough (although
there are one or two notable deviations from conventional accounting practice, for example, the
ProjectAppraisalDocument
Ethiopia:RoadSectorDeveiopment
ProgramSupportProject
Page47
capitalizationof roads constructed). Staff seems conscientiousand generallycapableof carryingout the
duties for which they have been assigned. However,the sheer volume of transactions (900 checks
payable per month, 20,000 fixed asset records, 13,000 staff records) leads to monotonousprocessing,
stifling initiatives for development. The rigidity of proceduresimpliedby respect for the accounting
manual impedesthe introductionof new procedures. Staff is unfamiliarwith modem office technology
and management techniques and consequently not aware of scope for improvement. Accounts are
maintainedon a mini-computerby the ElectronicDataProcessing(EPD)Department,outsidethe control
of the AccountingDepartment;batch processingbreaks the audit trail and complicatesthe reconciliation
of bank statementswith accountingrecords.
Page 48
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Annex 6
Ethiopia
Road Sector Development Program Support Project
Procurement and Disbursement Arrangements
Procurement
Procurement methods (see Table A)
Procurementof goods andworkswill be in accordancewith the WorldBank Guidelinesfor Procurement
underIBRD Loansand IDA Credits,publishedin January 1995,updatedin January 1996and August 1996and
revisedin September1997. The Borrowerwill use the Bank's StandardBiddingDocumentsand standardcontracts,
as mandatedin the Guidelines.
Civilworks for rehabilitation,strengtheningand upgradingof trunk andmajor link roadswill be procured
by InternationalCompetitiveBidding(ICB) followingprequalificationof contractingfirmnsin accordancewith the
BankGuidelinesfor Procurement.Individualroadswill be dividedinto a numberof contractsof appropriatesize,
to be.tenderedon a 'slice and package' basis.
Goodswill be procuredby ICB,but wherethe goodsare of limitedvalueprocurementmay be by
InternationalShopping(IS) or from IAPSO,LocalShopping(LS) or sole sourceforproprietaryparts - subjectto the
prior reviewrequirementsand thresholdsshownin Table B.
Consulting services will be procured in accordance with World Bank Guidelinesfor Selection and
Employment of Consultants by World Bank Borrowers, published in January 1997, and will be provided for:
(i)
constructionsupervisionof road rehabilitation,strengtheningand upgradingworks
(ii)
institutionalstrengtheningand capacitybuildingsupportfor ERA
(iii)
institutionalstrengtheningandcapacitybuildingsupportfor RROs
(iv)
technicalassistancefor capacitybuildingof ERAfor the applicationof EPAenvironmental
guidelinesfor roads
(v)
road feasibilityand detailedengineeringstudies
(vi)
trainingof ERA andRRO staff, and smallsize domesticcontractorsand consultants.
Withthe exceptionof item (vi), selectionwill be by the Qualityand Cost BasedSelection(QCBS)method.
The training servicesfrom specializedinstitutionswillbe selectedon the basis of theirqualifications.
Extensionsof existingcontracts(wherea continuationof the provisionof servicesis appropriate),maybe
required on a single sourcebasis; in such case,the terms and conditionsof the originalcontractwill apply, subject
to the priceadjustmentallowedunderthe contract.
Procurementof ConsultingServicesunderNordic DevelopmentFund (NDF)financingwill be in
accordancewith NDF guidelines.
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 49
Procurement information will be collected and recorded as follows:
(a)
prompt reporting of contract award information by the Borrower;
(b)
comprehensive quarterly reports to the Bank by the Borrower (assisted by consultants), indicating
(i)
(ii)
(iii)
(c)
revised cost estimates for individual contracts and the total project, including best
estimates of allowances for physical and price contingencies;
revised timing of procurement actions, including advertising, bidding, contract award and
completion time for individual contracts;
compliance with aggregate limits on specific methods of procurement; and
a completion report by the Borrower within three months of the credit closing date.
Prior review thresholds (see Table B)
Disbursement
Allocation of credit proceeds (see Table C)
The allocation of credit proceeds is given in the Table C, which also indicates the different financing
arrangements for the different categories of expenditures. Disbursements against civil works contracts will cover 80
percent of the certified expenditures, with the balance to be financed from counterpart funds. Disbursements against
consultancy service contracts will cover 100 percent of the certified expenditures.
Use of statements of expenses (SOEs)
Withdrawals from the Loan Account may be made on the basis of Statements of Expenses under contracts
costing less than the equivalent amounts to be agreed with the borrower for:
(a)
(b)
the services of individual consultants under terms and conditions to be specified; and
training and/or studies.
Special Account
A Special Account of $5 million will be established at the National Bank of Ethiopia. The Special Account
will be replenished on the basis of reimbursement claims for eligible expenditures received by the Bank.
Estimated IDA Disbursements (US$m)
Annual
Cumulative
FY98
0.0
0.0
FY99
42.0
42.0
FYOO
92.3
134.3
FYO
108.3
242.6
FY02
62.0
304.6
FY03
4.6
309.2
Project Appraisal Document
Ethiopia: Road Sector Development Program Support Project
Page 50
Table A: Project Costs by Procurement Arrangements
(in US$million equivalent)
Expenditure Category
ICB
1. Works
Civil Works
Procurement Method
Consulting
Other
Services
409.1
(286.4)
N.B.F
55.3
2. Goods
Equipment
464.4
(286.4)
0.1
(0.1)
3. Services
Consultant Services
34.0
(22.7)
4. Studies
Total
Note:
409.1
(286.4)
34.0
(22.7)
0.1
(0.1)
0.1
(0.1)
36.9
70.9
(22.7)
2.6
2.6
94.8
538.0
(309.2)
N.B.F. = Not Bank-financed.
Other = International Shopping
Figures in parenthesis are the amounts to be financed by the Bank loan/IDA
credit
ProjectAppraisalDocument
Ethiopia: Road SectorDevwopmentProgramSupportProject
Page 51
Table B: Thresholds for Procurement Methods and Prior Review
Expenditure
Category
ContractValue
(Threshold)
Procurement
Method
ContractsSubjectto
PriorReview
1. Works
$500,000andabove
ICB
All
$200,000and above
ICB
$200,000and above
Below$50,000
IS or IAPSO
None
$100,000and above
QCBS
Below$100,000
Below$50,000
SingleSource
Individual
$100,000
(for firms)
All
$50,000
2. Goods
3. Services
$200,000and abovefor
applicationof sub-para. two
of para.2(a) of Appendix I of
the Guidelines
*Termsof Referencefor all consultantcontracts,as well as all singlesourceappointments,irrespectiveof dollar
amounts,are subjectto prior review.
ICB
= InternationalCompetitiveBidding
IS
= International Shopping
QCBS = Qualityand Cost BasedSelection
TableC: Allocationof LoanProceeds
ExpenditureCategory
Amountin US$million
FinancingPercentage
1. Civil Works
260.4
100%of foreign
expendituresand 15%
of localexpenditures
2. ConsultantServices
20.6
100%
3. Goods
0.1
100%of foreign
expendituresand 80%
of localexpenditures
Unallocated
28.1
Total
309.2
Page 52
ProjectAppraisalDocument
Ethiopia: Road SectorDevelopmentProgramSupportProject
Annex 7
Ethiopia
Road Sector Development Program Support Project
Project Processing Budget and Schedule
A. ProjectBudget(US$000)
B. ProjectSchedule
Time taken to preparethe project(months)
First Bank mission(identification)
Appraisalmissiondeparture
Negotiations
PlannedDateof Effectiveness
Planned
(At final PCDstage)
269,769
Actual
291,900
Planned
(At final PCDstage)
Actual
10/21/96
06/16/97
07/08/97
01/15/98
10/21/96
09/05/97
11/19/97
05/30/98 (expected)
Preparedby: EthiopianRoadsAuthority(ERA)
Preparationassistance:PHRDGrant of JPY 80.3 million;EuropeanUnion;BritishDFID;Gernany
Bankstaff who workedon the project include:John Riverson(TeamLeaderand SeniorHighway
Engineer);DavidRudge(HighwayEngineer);Pedro Geraldes(PrincipalTransportEconomist);Toshiyuki
[wama(TransportPlanner/SystemsSpecialist);ChristinaMalmbergCalvo(RuralTransportEconomist);
Sidi Boubacar(SeniorCounsel);Paul Vandenheede(DisbursementOfficer);Negede Lewi (Infrastructure
Specialist);Gus Tillman(SeniorEnvironmentalSpecialist);Colin Lyle (SeniorFinance/Accounting
Specialist);lraj Talai (SeniorFinancialAnalyst);CharlotteJones (OperationsAnalyst)
ProjectApppraisal
Document
Ethiopia:RoadSectorDevelopment
ProgramSupportProject
Page53
Annex 8
Ethiopia
Road Sector Development Program Support Project
Documents in the Project File*
A. ProjectImplementationPlan
ProjectImplementationPlan datedDecember1997
B. BankStaffAssessments
TransportSectorMemorandum,December19, 1996
EthiopiaPublicExpenditureReviewReport(ReportNo. 16593-ET),June
20, 1997.
CountryAssistanceStrategyof the WorldBank Groupfor the Federal
DemocraticRepublicof Ethiopia(ReportNo. 17009-ET),August 19, 1997
EconomicAnalysisand StochasticRisk AnalysisReportdated December16,
1997
C. Other
ConsultingServicesfor the Five RoadsFeasibilityStudy,FinalReport,July
1997
EnvironmentalImpactAnalysisfor the Five RoadsSelectedfor Rehabilitation
and/orUpgrading,Final SummaryReport,October1997
ERAInstitutionalReformStudyReport,September1997
ERA StaffingPlan, September1997
ERARoad MaintenanceActionPlan (draft),September1997
ProclamationNo. 66/1997establishingthe Road Fund
InternalRules of Proceduresof the Road Fund (first draft),June 17, 1997
Road FundImplementationProcedures(thirddraft), September1997
*Includingelectronicfiles.
Page 54
Project Apppraisal Document
Ethiopia: Road Sector Development Program Support Proje,
ANNEX9
STATUS OF BANK GROUP OPERATIONS IN ETHIOPIA
STATEMENT OF BANK LOANS AND IDA CREDITS
As of September 30, 1997
(US$ millions)
(Less Cancellations)
Loan or
Credit No.
Fiscal
Year
Borrower
Purpose
Twelve (12) Loans and forty-eight (48) Credits closed.
of which SAL, SECAL or Program Loan/Credit:
Cr. 18730
Cr. 19130
Cr.21030
Cr.21610
Cr.24380
Cr.25880
Cr.27400
Cr.27410
Cr.28410
Cr,28420
1988
1988
1990
1990
1993
1994
1995
1995
1996
1996
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
Ethiopia
IDA
108.60
1334.88
(250.67)
12.96
64.06
33.00
40.20
35.00
96.00
74.31
120.00
22.00
120.00
35.73
14.58
8.42
16.43
20.66
60.24
67.53
85.85
19.17
103.11
31.73
108.60
108.60
1975.18
93.71
427.72
000
1881.47
Education VII
Family Health
Market Towns Dev.
Second Addis Urban Dev.
Road Rehabilitation
Calub Energy Dev. Pr.
Nat. Fertilizer Project
National Seeds Project
ESRF I
Water Supply Dev. & Rehab.
Total
**
of which repaid
Total held by Bank & IDA
Undisbursed
Bank
Amount sold
6.04
of which repaid 6.04
Total Undisbursed
**
Total approved, repayments, and outstanding balance represent both active and inactive Loans and Credits.
440.68
Project ApppraisalDocument
Ethiopia: Road Sector DevelopmentProgranmSupport Project
Page 55
Annex 10
Ethiopia at a glance
POVERTYand SOCIAL
Ethiopia
Populationmid-1996 (millions)
GNP per capta 1996 (US$)
GNP 1996 (billions US$)
SubSaharan
Afdca
Lowincome
S8.1
110
8.4
800
490
294
3,229
500
1,601
2.1
2.3
2.7
2.6
1.7
1.7
8128197
_________
_
Developmentdlamond'
Life expectancy
Average annual growth, 1990-96
Populabon(%)
Laborforce (%)
Most recent estimate (latestyear avaibablesince 198g)
Gross
GNP
enrollment
capita
Poverty:headcount index (% of population)
Urbanpopulation (% of total population)
Life expectancyat.birth (year)
Infant mortality (per 1,000 five births)
Childmalnutrition(% of children uncder5)
Access to safe water (% of pophlation)
Illiteracy (% of populationage f54)
Gross primary enrollment(% ofsehool-agepopulation)
Male
Female
13
49
112
47
27
65
27
33
21
31
52
92
47
43
72
78
85
29
63
69
,,
53
34
10
112
98
1976
1985
1995
1996
..
..
..
..
9.0
8.2
1.0
3.4
16.3
14.4
8.8
14.0
20.5
12.8
7.6
14.2
..
..
..
7.3
-5.6
0.6
30.3
28.4
-7.5
1.4
82.6
33.7
..
..
.
..
-1.6
1.1
95.9
19.1
683.1
425.0
19754-5 198646
1996
1996- 1997401
.5A
3.1
10.2
12.4
9.5
2.9
8.9
8.8
1985
199loss 1
Acess to safe water
Ae
-Elhiopia
Low-incomegroup
KEY ECONOMICRATIOS and LONG-TERMTRENDS
GDP (billions US$)
Gross domesticinvestmenVGDP
Exportsof goods and services/GDP
Gross domesticsavings/GDP
Gross national savingsfGDP
Currentaccount balance/GDP
Interest paymentstGDP
Total debtGDP
Total debt servicelexports
Presentvalue of debtlGDP
Presentvalue of debt/exports
(averageannval growth-)
GDP
GNP per capita
Exportsof goods and services
Economic r8.o8
Opennessof economy
Savings
F-
Investment
Indebtedness
Ethiopia
..
..
..
2.3
-0.3
-2.2
5.9
.
Low-incomegroup
STRUCTUREof the ECONOMY
1975
(% of GDP)
Agriculture
Industry
Manufacturing
Services
..
..
..
..
53.2
..
..
12.7
7.2
34.1
..
..
.
Private consumption
Generalgovemment consumption
Importsof goods and services
..
..
..
84.6
14.4
16.2
82.4
10.8
23.9
81.1
11.3
25.7
1975-85 19164-6
1995
1996
(average annualgrowth)
Agriculture
Industry
Manufacturing
Servir;es
Services
Private consumpbon
Generalgovemrmentconsumption
Gross domesticinvestment
Importsof goods and services
Gross natonal product
..
..
..
..
2.5
-2.6
-3.1
5.4
3.4
8.1
9.0
7.2
17.5
8.5
9.2
7.1
..
..
..
..
.
2.9
4.9
6.0
0.5
2.2
3.9
2.7
13.8
6.9
6.0
9.0
17.9
41.2
29.0
12.9
.
Growth rates of output and Investment(%)
100
*50
2
-GDI
3s
GOP
._
-________
_____
Growth rates of exports and Imports (%)
100
so
/
20
~~~~~~~~~~~~~~~~~~~~~~~40
-4
?
*0
40
Exrs
import
Note: 1998data are preliminaryestimates.
The diamondsshow four key indicatorsin the country(in bold) comparedwith its Income-groupaverage. If data are missing, the diamondwill
be incomplete.
Project Apppraisal Document
Ethiopia: Road Sector DevelopmentProgram SupportProject
Page 56
Ethiopia
PRICESand GOVERNMENT
FINANCE
1975
1985
1915
1996
6,6
19.1
29.5
13.4
14.0
0.9
1.3
___
Infltion (%)
.oesUcprices
,f change)
Consumer
prices
ImplicitGDPmpdeflator
__
__
w
2
Govemmentfinance
(X of GDP)
10
el-,2
Current revenue
Currentbudgetbalance
OverallwrplusideWt
16.8
-2.7
17.1
1.6
1.0
-11.3
-8.1
-8.3
17.6
.-.
91
92
,5
94
93
94
-GDPdef
_
go
95
_
99
CPI
,,
TRADE
(millionsUISS)
Totalexports(fob)
Commodity:Coffee
Commodity
2: Leatherand eatherproducts
Manufactures1,0
Totalimpors
(CM
Food
Fuelandenergy
Capitalgoods
Exportpriceindex(1987=100)
Importpriceindex(1987=100)
1975
19&8
230
359
225
46
199
1996
sEport
andImportlevels(mill.US$1
276
975
..
283
.
..
Tems of trade (1987=100)
454
288
60
410
273
49
1500
1.064 1,413
249
181
19
334
215
4618
1
46
96
101
116
105
96
109
95
110
88
60
9
el
92
93
94
95
go
ElExports 13Imports
r
BALANCE of PAYMENTS
1795
1985
1995
t998
330
409
-79
549
1,082
-533
784
1,273
-488
783
1,646
-863
Net income
Net current transfers
-17
45
-33
193
-60
459
-43
446
Current accountbalance,
beforeofficial capital transfers
-52
-373
-90
-460
Financing items(net)
Changes in net reserves
45
7
420
-48
148
-56
515
-65
315
..
216
2.1
550
6.3
878
6.3
1978
198i5
1995
1996
AMtO:
Reserves induding gold (mill. US$)
Conversion rate (bcalyS$)
EXTERNAL DEBT and RESOURCE FLOWS
(millions US$)
Totaldebtoutstandingand disbursed
IBRD
_
093
94
8
344
89
2,027
49
73
159
7
6
155
4
23
278
0
25
35
85
'3
19
0
514
276
59
0
0
475
194
-49
7
0
165
-70
0
0
Principalrepayments
71
26
4
32
50
7
142
84
12
156
142
14
A-lORD
B -IDA
C- IMF
Netfows
22
43
72
127
___
Interest payments
Noettranse
6
16
7
36
11
61
11
116
Compositon of net resourceflats
Oflicial grants
Offial creditors
Prvatecreditors
Foreign direct investment
Portfolo equity
Wodd Bankprogram
Commitments
Diabursernent5
--
ComposlMonof total debt 1S99(mill. US)$)
25
9
1
IDA
~~-
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437
IBRD
95
4
5,059
0
1,555
TotaldebtserAle
_
-2 -
5,221
0
1,470
IDA
_
Current account balanceto GDPratio r%)
(milions US$)
Exports of goocs and services
importsof goodsand services
Resourcebalance
Development Economics
Not The debt data excludes a wubstantialamount of ruble-denonated military debt
F
330
89|
1555
..
2021
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