Poland - Second Road Maintenance and Rehabilitation Project

Document of The World Bank Report No: ICR0000541 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-72820) ON A LOAN IN THE AMOUNT OF EURO 100 MILLION (US$130.5 MILLION EQUIVALENT) TO THE REPUBLIC OF POLAND FOR A SECOND ROAD MAINTENANCE AND REHABILITATION PROJECT June 26, 2009 Sustainable Development Department Central Europe and the Baltic States Europe and Central Asia Region  CURRENCY EQUIVALENTS (Exchange Rate Effective May 1, 2009) Currency Unit = Zloty (PLN) 1.00 = US$ 0.34 US$ 1.00 = 2.93 FISCAL YEAR ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CPS Country Partnership Strategy EIB European Investment Bank EU European Union FMR Financial Management Report GDDKiA General Directorate for National Roads and Motorways GDP Gross Domestic Product ICR Implementation Completion Report IBRD International Bank for Reconstruction and Development ISPA Instrument for Structural Policies for Pre-Accession ISR Implementation Status Report MAP Management Action Plan for GDDKiA MIS Management Information System MoI Ministry of Infrastructure MoT Ministry of Transport PAD Project Appraisal Document PCU Project Coordination Unit PDO Project Development Objective PLN Zloty PPP Public-Private Partnership PSAL Private Sector Adjustment Loan RMR1 First Road Maintenance and Rehabilitation Project RMR2 Second Road Maintenance and Rehabilitation Project SECAL Sector Adjustment Loan SIL Sector Investment Loan SWAp Sector-Wide Approach TA Technical Assistance Vice President: Shigeo Katsu, ECAVP Country Director (Acting): Theodore O. Ahlers, ECCU7 Sector Manager: Henry G. R. Kerali, ECSSD Project Team Leader: Radek Czapski, ECSSD ICR Team Leader: Ross Pavis, ECSSD  The main text of this ICR evaluates two projects: Poland Road Maintenance and Rehabilitation 1 and 2. These two projects constituted the first two projects in a series of loans aimed at supporting the Government's 6-year development program of the national road network. The Program was designed to improve the effectiveness of Poland's national road rehabilitation and maintenance systems, particularly in the areas of quality, efficiency, road safety, financial viability, and road-user satisfaction. As the components and objectives of each project were closely aligned, and as the closing dates were only six months apart, it was decided that the assessment of the two projects would be more comprehensive and could shed more light on the Program if they were evaluated together. Therefore, there are two ICRs, each with its own datasheet, but the main text in each volume, which assesses both projects, is the same. Ratings apply to the Program. Where there is a deviation between the two projects, it is noted in the text. Each datasheet from the twin project is included as an Annex. A third project in the series is scheduled to close in September 2011.  POLAND Second Road Maintenance and Rehabilitation Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design.............................................. 1 2. Key Factors Affecting Implementation and Outcomes ............................................. 4 3. Assessment of Outcomes........................................................................................... 7 4. Assessment of Risk to Development Outcomes....................................................... 12 5. Assessment of Bank and Borrower........................................................................... 13 6. Lessons Learned ...................................................................................................... 14 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ......... 15 Annex 1. Project Costs and Financing.......................................................................... 17 Annex 2. Outputs by Component ................................................................................. 19 Annex 3. Economic and Financial Analysis................................................................. 22 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 23 Annex 5. Beneficiary Survey Results........................................................................... 25 Annex 6. Stakeholder Workshop Report and Results................................................... 26 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR..................... 27 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders....................... 30 Annex 9. List of Supporting Documents ...................................................................... 31 Annex 10. Datasheet for Road Maintenance and Rehabilitation Project (1)................ 32 Map IBRD No. 33843................................................................................................... 36  A. Basic Information Road Maintenance & Country: Poland Project Name: Rehabilitation 2 Project Project ID: P088824 L/C/TF Number(s): IBRD-72820 ICR Date: 06/26/2009 ICR Type: Core ICR MINISTRY OF Lending Instrument: SIL Borrower: FINANCE Original Total USD 130.5M Disbursed Amount: USD 121.3M Commitment: Environmental Category: F Implementing Agencies: General Directorate for National Roads and Motorways (GDDKiA) Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 10/28/2004 Effectiveness: 06/16/2005 Appraisal: 02/17/2005 Restructuring(s): Approval: 03/29/2005 Mid-term Review: Closing: 12/31/2007 06/30/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Performance: Moderately SatisfactoryPerformance: Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Performance Indicators (if any) Rating Potential Problem Project No Quality at Entry None i  at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 4 4 Roads and highways 96 96 Theme Code (as % of total Bank financing) Infrastructure services for private sector development 40 40 Injuries and non-communicable diseases 20 20 Regional integration 40 40 E. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Shigeo Katsu Country Director: Theodore O. Ahlers Roger W. Grawe Sector Manager: Henry G. R. Kerali Motoo Konishi Project Team Leader: Radoslaw Czapski Michel Audige ICR Team Leader: Ross S. Pavis ICR Primary Author: Graham Smith Ross S. Pavis F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the Second Road Maintenance and Rehabilitation Project is to continue improving the effectiveness of Poland's national road rehabilitation and maintenance systems by: (i) further increasing the percentage of national roads in good condition; (ii) establishing reliable and stable funding for the national road maintenance and rehabilitation network; and (iii) improving the capacity within the Road Administration to operate efficiently and effectively. Revised Project Development Objectives (as approved by original approving authority) ii  (a) PDO Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Revised Achieved at approval Target Completion or documents) Values Target Years Indicator 1 : GDDKiA Modernization Action Plan (MAP) Value Modernization Action MAP shows MAP -- satisfactory quantitative or Plan (MAP) adopted, additional, progress but slower Qualitative) implementation started substantial progress than expected. Date achieved 02/29/2004 12/31/2007 03/31/2009 Comments (incl. % See section 3.2 for a fuller discussion of this indicator. achievement) (b) Intermediate Outcome Indicator(s) Original Target Formally Actual Value Indicator Baseline Value Values (from Achieved at approval Revised Completion or documents) Target Values Target Years Effective use of HDM-4 System by GDDKiA (HDM-4 is a software tool for the Indicator 1 : analysis, planning, management and appraisal of road maintenance, improvements and investment decisions.) Value Usage in at least Yes, but only some (quantitative Use at branch and 50% of branches, branches are able to or Qualitative) national level started based on 2005 or fully utilize HDM- later database. 4's full potential. Date achieved 05/31/2004 12/31/2007 03/31/2009 Comments (incl. % Partly achieved since in spite of extensive training program and dedicated staff achievement) only a few branch offices use HDM system in their planning processes. Indicator 2 : Percentage of roads in good condition Value (quantitative 46% 52% 53% or Qualitative) Date achieved 12/31/2004 12/29/2006 12/01/2008 Comments (incl. % achievement) iii  G. Ratings of Project Performance in ISRs Actual No. Date ISR Archived DO IP Disbursements (USD millions) 1 06/02/2005 Satisfactory Satisfactory 0.00 2 04/01/2006 Satisfactory Satisfactory 115.59 3 01/08/2007 Satisfactory Satisfactory 116.52 4 01/11/2008 Satisfactory Satisfactory 117.34 5 02/06/2008 Moderately Satisfactory Satisfactory 117.34 6 07/10/2008 Moderately Satisfactory Satisfactory 117.34 7 04/29/2009 Moderately Satisfactory Satisfactory 121.28 H. Restructuring (if any) Not Applicable I. Disbursement Profile iv  1. Project Context, Development Objectives and Design 1.1 Context at Appraisal In 2003, Poland's imminent EU membership offered a unique window of opportunity for the World Bank to support the Polish Government, especially as it was initiating an overdue fiscal adjustment. One area where World Bank support was considered essential was in the development of the required institutional and financial capacity for a road improvement program. Time was a critical factor since, beginning in January 1, 2004, Poland was eligible to receive European Union (EU) structural and cohesion funds, and in order to qualify, it was necessary to have a well-conceived and economically justified road improvement program. Furthermore, if the eligible funds were not fully committed by the end of 2006, they would be lost. The lack of institutional capacity within the General Directorate for National Roads and Motorways (GDDKiA) had already affected the use of EU funds1 which had been offered in 2002 and 2003 but never utilized. Now this lack of capacity was threatening to affect use of the larger Structural and Cohesion Funds in the absence of strong World Bank support. Poland joined the EU in May 2004, which led to closer economic integration and access to structural funds and which constituted a unique opportunity for further development. In that context, the Bank outlined a new framework for cooperation with Poland, which became part of the new Country Partnership Strategy (CPS). The World Bank and the Government agreed to maintain a significant operational program over the next few years in those sectors where the Bank could add value, leverage, and promote and endorse needed reforms. Although Poland's per capita income was approaching the threshold which could initiate the process leading to eventual graduation from World Bank borrower status, there was still an agenda of important reforms in areas in which the Bank had been a key technical partner. During this time, inadequate, unsafe and congested roads were increasingly recognized as severe bottlenecks to economic growth. High transport costs curtailed opportunities to exploit economies of scale and also exacerbated regional disparities, since in Poland regional income and unemployment levels were strongly correlated with road density. Access to a reliable transportation network is a precondition to a competitive economy, on both regional and national levels. With the lowest ratio of roads in good condition in Central Europe, Poland was already losing a fair amount of foreign direct investments to its more developed neighbors. The poor quality of the road network was identified in the CAS of November 2002 as a key factor that increased the cost of doing business in Poland. GDP growth reached 5.4 percent in 2004, up from 1 percent in 2001, 1.4 percent in 2002, and 3.8 percent in 2003. This rise marked the end of the first serious economic cycle in Poland since the beginning of the transition. Growth originated in a rapid expansion of exports (linked partly to EU accession, but also to efficiency gains), and growing private consumption, while fixed investment only began recovering in 2004. Inflation remained low and relatively stable; it declined to less than 1 percent in 2003, but increased in 2004 on the back of EU-accession effects (adjustments of indirect taxes etc.) and the surge in oil and other commodity prices. However, second-round effects appeared to be contained, as monetary conditions were tightened through both a hike in interest rates and appreciation of the zloty. Further, wage pressures were held in check by the persisting slack in the labor market. The current account deficit stayed at a very 1Funds available through the Instrument for Structural Policies for Pre-Accession (ISPA). 1  low and safe level, helped by a healthy increase in exports and muted investment demand. External debt at 47 percent of GDP posed limited risks. Poland's development agenda had as its overriding objective to put the economy on a path of high and sustainable growth through improved competitiveness of firms and regions, to contribute to the recovery of employment and promote strong social cohesion in order to reach two-thirds of the EU average income per capita by 2013. This strategy recognized the need to manage the economy prudently in order to increase employment and reduce poverty, converge (in the medium-to-long term) to average European income levels, and meet the requirements for the adoption of the Euro. While it was clear that other institutions