Nepal - Road Maintenance and Development Project

Report No. PID5867 Project Name Nepal-Road Maintenance And Development (@#) Region South Asia Regional Office Sector Other Transportation Project NPPE45052 Borrower(s) Kingdom Of Nepal Implementing Agency Department Of Roads Environment Category A Date PID Prepared Updated October 6, 1999 Projected Appraisal Date May 1999 Projected Board Date November 23, 1999 1. Country and Sector Background General. Road sector priorities for Government and donors during the last decade have targeted the completion of the east-west highway, rehabilitating and maintaining the strategic network, building farm-to-market roads in the Terai, and building the institutional capacity to manage an expanding network. A sector investment strategy for the road sector has been developed during the preparation of the PIP which calls for a balanced investment in rehabilitation and maintenance of existing assets complemented with cost- effective and environmentally sound construction and maintenance approaches for feeder roads. Prioritization of Public Expenditures and Sector Revenues. The PIP for the road sector completed in February 1997 with IDA's assistance identified priority projects for sustainable development of the strategic and rural road network for the period of 1997-2006. The PIP assessed resource constraints and funding requirements, sustainability of investment projects in Nepal, and the environmental impact and policy considerations of road investments and maintenance. Following the completion of the PIP, it has gained acceptance from Government, the Bank and other donor agencies, and it has now been adopted as the guide or plan for road development activities during the next decade. The completion of the PIP supports effective utilization of scarce public resources. DOR has improved its capacities to prioritize and execute maintenance, in an effort towards rationalizing public expenditures in the sector. With respect to sector revenues, road user charges in Nepal go directly to the Treasury but in general cover sector requirements. Currently, the main road user revenues are fuel tax and vehicle licenisng, taxes and duties. A modest complement to the road user revenues has been established by a toll road fund enacted by Law in 1995. The current toll revenues only amount to about 2-3w of maintenance requirements and HMG/N is currently considering expanding toll collection. A more substantial approach to capture additional revenues for the sector is being developed by the Implementation Committee to develop a Roads Board and Fund Act, which will be supported by the project and increase the efficiency of road sector revenues and expenditures. Private Sector Involvement. The Government is trying to encourage private  sector investment to develop commercial infrastructure projects. However, it is still not envisaged that with the low level of traffic private sector investments become a viable alternative for road construction or maintenance. Under the RMRP private sector contractors have been encouraged to enhance their capabilities and carry out the civil works financed by the Bank through competitive processes. Moreover, project management assistance has been made available to contractors through the project's internationally experienced supervision consultants. Coordination with Other Institutions. Substantial efforts have been required to coordinate donor inputs into the sector and an effective donor group has been in operation during the last 8 years. During the on-going RMRP and the preparation of the PIP, participation and consultation were obtained from the key financing institutions, including the Asian Development Bank (ADB), SDC, DfID & the UNDP. The on-going RMRP is the first multi-donor co-financed road sector project in the country and the coordination with DfID and SDC is expected to continue. While IDA's focus would be on sectoral policies, the civil works financed under the proposed project will affect primarily the road network west of Kathmandu. Other New Issues. IDA should continue to pursue the agenda of civil service reform in the road sector as a key element of policy dialogue with HMG/N. Good governance and combating issues of corruption need to be addressed and promoted in Nepal. In view of the frequent changes in counterparts, HMG/N commitments have been sought early during project preparation to ensure a certain level of institutional strengthening and sustainability, staff continuity for preparation and project management policies across departments in DOR. 2. Objectives (a) Achieve sustainable maintenance, rehabilitation and construction of economically justifiable roads in the strategic road network within the Priority Investment Plan framework; (b) Improve the access to district headquarters not currently served by road, and reduce vehicle transport costs and delays in project areas; (c) Promote more sustainable funding and more efficient public sector management of road maintenance; (d) Adopt and disseminate environmentally sustainable road construction and maintenance practices; and (e) Generate rural-employment through adoption of labor-based technologies and long-term employment for the additional generated economic activity. 3. Rationale for Bank's Involvement The implementation of the RMRP, which includes an important institutional development component and a pilot labor-based component, provides the basis on which IDA can design a natural follow-up operation in Nepal. Based on this and other relevant project experience, the Bank will be able to assist HMG/N in finding a balanced approach regarding investment, management and financing which is reflected in the project design and implementation. IDA would also provide support to Government and private sector for the road finance reform initiative based on experience in Nepal and elsewhere. Furthermore, IDA can provide HMG/N with valuable experience from the preparation of similar projects in the sub-continent. Also, the Bank will emphasize 'best practice' in road construction and management by supporting the employment of consultants to carry out (i) appropriate supervision of construction and maintenance works; (ii) procurement, and (iii) dispute resolution. -2-  4. Description 1. Policy Reform including support to setup a Roads Board, amend regulatory framework and develop the Road Fund 2. Dry-weather feeder road construction (197 km) and upgrading to gravel standard (253 km) including resettlement assistance, environmental monitoring, technical assistance for design, project coordination & construction supervision, and land acquisition 3. Rehabilitation of 160 km of strategic highway and feeder road network 4. Periodic maintenance of strategic roads (470 km) 5. Institutional strengthening and training of DOR/MOWT, third party audit of works by CTES, pre- investment studies, socio-economic studies, office improvements modernization and equipment 6. Project Preparation Facility 5. Financing Total ( US$m) Government 11.4 IBRD IDA 54.5 Total Project Cost 65.9 6. Implementation The Department of Roads (DOR) will be the implementing agency. The implementation of the project components will be programmed, coordinated and monitored by the Foreign Cooperation Branch, Deputy Director General (DDG), Department of Roads, as Program Coordinator fully responsible for all project components, including, but not limited to, planning, supervising, monitoring and evaluation, financial management reporting, procurement, and implementation of civil works and institutional strengthening and training. The Program Coordinator will be assisted by the Project Coordination and Implementation Unit (PCU), including two Senior Divisional Engineers (one of which will be designated as Procurement Engineer). DOR has already established the PCU. During negotiations DOR agreed to appoint in the PCU an Environmental Engineer, an Accounts Officer, an Accountant and a Social Planner. During implementation, the PCU will be responsible for coordinating the implementation of the various project components, and would ensure that the institutional and training components are developed in complete coordination with the needs of the policy and physical aspects of the project. The physical components would be implemented as follows: (i) one Senior Divisional Engineer at the PCU will be responsible for the implementation of the New Road Development and Upgrading Component (NRDUC), (ii) one Senior Divisional Engineer will be responsible for procurement and the Rehabilitation Component, (iii) the Regional Directors under the DDG Maintenance, will be responsible for the implementation of the periodic maintenance component in each Region through the Divisions, and (iv) the DDG Planning will be responsible for coordinating, implementing and monitoring along with the Road Sector Skills Development Unit (RSSDU), Geo-environmental Unit (GEU), MRCU and the Mechanical Training Center (MTC) the institutional strengthening and training component of the project. Until the Nepal Roads Board is established, DOR will finance consultant services to assist the Road Management and Finance Reform Implementation Committee in carrying out the activities under the policy component of the project. Afterwards, the Nepal Roads Board will carry out the policy reform component. The DDGs for Planning, Design and Maintenance will prepare and submit timely reporting to - 3 -  the PCU for consolidation of periodic reports to IDA. The Project Managers of the NRDUC and Rehabilitation Components shall coordinate with the respective Regional Directors for the implementation of the program. The institutional strengthening activities will be coordinated with DfID and SDC as a follow-up of the efforts already undertaken in the completed RMRP (including MRCU, TESU and SMD). The PCU will have responsibility for the project's management including engineering and procurement, maintenance, land acquisition, implementation of resettlement and environmental action plans, institutional development plan, financial management, planning and accounting, etc..The PCU will carry out all procurement related decisions in accordance with the Development Credit Agreement, and will oversee the timely and adequate implementation of procurement activities with the assistance of the supervision consultants and the institutional development consultants. The Procurement Engineer in the PCU will be the focal point to assist with developing procurement capacities of the various implementation units, supporting the training and capacity building of the project managers on procurement matters and setting up a Procurement Unit in DOR during the project life. 7. Sustainability The most important factor to ensure the project's sustainability will be the continued commitment from HMG/N to substantially increase in real terms maintenance funding to close the gap with the networks requirements. Furthermore, the road fund must be strengthened and made very prominent as a tool to improve sector expenditures. Emphasis will also be made on continuing to improve maintenance management. 8. Lessons learned from past operations in the country/sector Given the long standing assistance of the World Bank for the road sector in Nepal, there are important lessons learned in particular in the areas of public and private sector management capabilities, environmental and social assessment, and the construction industry. Sector Management Capabilities. Project implementation and preparation in the past was often delayed as a result of slow government decision making under an environment of political instability. Substantial efforts are underway, in partnership with the SDC and DfID, as part of the ongoing RMRP to assist the DOR to improve its road maintenance management capacity, planning and monitoring capability, and environmental and traffic safety practices. These efforts have been made through a series of specialized training and studies, services of in-house technical and policy advisors, and technical reviews and audits as part of project monitoring and evaluation. As a result, DOR has been able to develop and improve its basic capabilities to better manage the road capital and resources allocated to the sector. Among others, the RMRP has supported (i) a Road Sector Skills Development Unit (RSSDU) to address human resource constraints, (ii) a labor-based pilot project with community-participation which was introduced for the rehabilitation and maintenance of district roads, and has shown good results in the development of institutional and planning capability at the district level, and (iii) a Strengthened Maintenance Division project to improve the capacity to plan, program and execute maintenance at the division level. Through the preparation and adoption of the PIP, IDA also has supported the introduction and dissemination of planning tools for government agencies responsible for road transport. These initiatives should be further - 4 -  supported. Environmental Assessment. During the past 5 years substantial progress has been made in bolstering local capacities for environmental assessment, geo- technical and bio-engineering with the establishment of the GEU in the DOR. This unit has generated interest among the engineers of DOR and is now an example in the region. The unit has been successful starting to train and deliver the message to DOR staff of the relevance and importance of addressing environmental aspects of road sector activities early on and throughout the project cycle. More recently DOR has prepared Environmental Assessment Guidelines which includes an excellent presentation of simple and practical information on environmental processes, mitigation measures and sensitive areas. The interest of the Department in involving all of its engineers in bio-engineering is now expanding to environmental assessment which will certainly give the DOR a leadership role on this matters. The checklists are now models being used in other countries. Private Sector Involvement in Road Construction and Consulting. There are positive achievements in the road construction and maintenance industry and consultant services sector over the past five years: (i) local private sector is taking a much stronger role, (ii) DOR has improved its construction management of privately implemented works, (iii) commercialization of government construction equipment has encouraged contractors to buy their own equipment and improve equipment maintenance, (iv) divisions are taking stronger decentralized role in managing minor works and contracting out even routine maintenance, (v) roadside environmental practices have improved, and (vi) districts have begun to develop capacity for road planning and labor- based contracting of works. At the same time, there are some problem areas in the road construction industry, including: (i) contractors need to manage their work better, (ii) contractors need to treat workers fairly and equitably, (iii) consultants need to bring more efficiency to their design and supervision of works, (iv) HMG procurement decision-making is slow, (v) Government delays in payments and release of funds for works lead to inefficiencies, (vi) contractors with a unsatisfactory track record should not be eligible for IDA financed works, and (vii) privatization of government equipment and mechanical training programs should be accelerated. Finally, the Bank has also introduced changes to help encourage efficiency in the implementation of works which will be supported under the project including: (i) an increasing proportion of oversight for project supervision, including procurement support and quality inspections, is being carried out from the Field Office, (ii) the Bank is generally not accepting extensions of bid validity beyond 60 days, and is declaring misprocurement when bids are not awarded in this period, (iii) the Bank has encouraged Borrowers to make careful scrutiny of the track record of firms during pre-qualification and post-qualification. In cases where the Borrower has documented evidence of firms having non-performance or poor performance on past contracts, the Bank has accepted the position taken by Borrowers to disqualify firms based on that past performance. HMG would undertake to have an annual summary of non- performing contractors. Moreover, and based on the experience gained from implementing road projects in Nepal, the preparation and implementation of the proposed operation will incorporate the following lessons: (a) environmental, social and institutional aspects of the project will require to be comprehensively prepared with substantial participatory approaches; (b) strengthening of - 5 -  basic institutional capacities for effective project management need to be prepared and implemented early in the life of the project; (c) procurement capabilities need to be bolstered from project design, with initial contracts based on completed designs, strict qualification criteria and awards planned before project effectiveness; and (d) encourage efforts to have timely availability of project sites. Furthermore, the project will continue adopting international standards for preparation of feasibility, design, procurement planning, environmental planning and social impact studies. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues : a. Justification of EA Category: The project involves the construction of five new roads and three roads for upgrading. Road construction in the Middle Mountains and High Mountains of Nepal is a high impact activity, particularly during construction and the following initial few years. The cumulative impact of steep topography, often unstable geology, high rainfall intensities and intensive land use leads to road construction resulting in the destabilization of terrain, of production land and other related significant impacts. Given these major natural limitations to road construction, all construction impacts cannot be avoided. Therefore the construction of new roads is dealt as EA category "A" and the upgrading is dealt as "B". b. Construction of new roads: involves a total of approximately 200 km i.e., Chameliya - Darchula, Sanfebagar - Martadi, Sanfebagar - Mangalsen, Kalikot - Jumla, Chedagad - Jajarkot. c. Impacts: The priority bio-physical impacts include land stability (slope stability hazards, erosion, drainage); land loss (agriculture, forest and other resources); ecological degradation (direct impact of alignment clearing on forests, indirect impacts of road operation on forests, wildlife, protected areas and other significant features). Secondary impacts include archaeological, cultural and religious sites, air / water quality, noise / vibration, drinking water catchments, and refuse pollution. (Detailed impacts in EIA, IEE and EMAPs) d. Mitigation and management measures: cover - (i) road design /formation with a focus on minimizing excavation by equalizing cut and fill where possible, minimizing slope disturbance, installing retaining walls on the low side of the road where embankment crosses cultivation, exploring construction of dry stone walls to save cost etc.; drainage, with a focus on cross road drainage to reduce the concentration of water on the road surface, provisions of outfall and infall cross drainage, drive-over crossbanks and excavated causeways, lined side drains etc. (ii) road construction with a focus on construction programs; methodologies using local labor based road construction and maintenance; fill disposal; re-vegetation and construction management (iii) improvement proposals for degraded land and environmental enhancements including hill-slope reforestation, enrichment planting / protection e.g., in Sajanigajal Forest, community forest programs e.g., in Salanidhar and Sakar; market center planning and cash crop development programs, stabilization / improvement of walking trails and bridges, landslide stabilization etc. Impacts will be avoided or mitigated through the selection of the most stable - 6 -  alignment, sympathetic road design incorporating environmental mitigation measures and the strict construction of the road in accordance with the prescribed road design and environmental mitigation measures. In this regard, a detailed Environmental Impact Assessment (EIA) has been carried out following Bank guidelines for EA Category A and HMG/Ns EIA guidelines. A screening and scoping exercise was undertaken to inform stakeholders about the proposed project, receive their comments and identify priority environmental issues for assessment. (Scoping is required by HMGNs Environment Protection Regulations 2054 and constitutes good practice in EIAs to help focus on priority environmental issues). The output of the EIA includes an Environment Management Action Plan (EMAP). e. Upgrading of roads: involves a total of approximately 250 km of roads i.e., Surkhet - Kalikot, Dharapani - Chhedagadi, Gorusinge - Sandhikharka. f. Impacts: The potential impacts are related to the proposed road upgrading works which include standard works i.e., road surface reformation, gravelling, side drain construction, as well as site specific works to stabilize embankments, adequately drain the road and bring the existing formation up to the required design standards. Other significant upgrading works are likely to include road widening at places, slope stabilization i.e., excavation and filling, retaining wall and breast wall construction and re-vegetation, the installation of additional cross drainage structures, and improvements to road geometry. These works will have site-specific environmental impacts and will be mitigated on the same principles as the EIA. An EMAP has been prepared as part of the IEE detailing the implementation of mitigation measures. g. Initial Environment Examination / Environmental Analysis: An IEE has been prepared by HMGN for upgrading and rehabilitation of selected national highways and feeder roads. The 3 roads proposed (Surkhet - Kalikot, Dharapani - Chhedagad, Gorusinge - Sandhikharka, a total of approximately 250 km) for upgrading, already exist at a very low earth standard. The proposal is to upgrade, these to fair weather gravel standards, which would prevent further environment degradation and help reduce the need for frequent emergency maintenance and better accessibility (roads located in the poorest regions of the country). The IEE and EMAP prepared address these impacts in terms of mitigating adverse and enhancing positive impacts. This is essentially a limited EA and follows HMGNs guidelines which require an IEE for "upgrading rehabilitation and reconstruction of national highways and feeder roads". As per the Bank, these are categorized as EA Category B and require a limited Environmental Analysis. The IEE prepared satisfies both requirements. Similar to EIA, IEE Scoping was also undertaken and a workshop was held in Kathmandu to provide a forum for interested groups to identify environmental issues. The EMAP as part of the IEE will follow the same format as that in the EIA. The IEE assesses the potential impacts that are likely to result from the construction activities of the selected upgrading roads. The proposed road upgrading works include standard works i.e., road surface reformation, gravelling, side drain construction, as well as site specific works to stabilize embankments, adequately drain the road and bring the existing formation up to the required design standards. 11. Contact Point: The InfoShop -7-  The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone: (202)458 5454 Fax: (202) 522 1500 Task Team Leader Juan Gaviria The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 202-458-5796 Fax: 202-522-2418 Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project. Processed by the InfoShop week ending October 8, 1999. - 8 -