REPORT NO.: RES39276 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF EASTERN AFRICA REGIONAL TRANSPORT, TRADE AND DEVELOPMENT FACILITATION PROJECT (SECOND PHASE OF PROGRAM) APPROVED ON JUNE 11, 2015 TO THE REPUBLIC OF KENYA Transport Global Practice Eastern and Southern Africa Region Regional Vice President: Hafez M. H. Ghanem Country Directors: Boutheina Guermazi/Keith E. Hansen Regional Director: Ashish Khanna Practice Manager/Manager: Almud Weitz Task Team Leaders: Susan A. Owuor, Akiko Kishiue, Josphat O. Sasia The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) ABBREVIATIONS AND ACRONYMS AADT Annual Average Daily Traffic DDO Deferred Drawdown Option DOSHS Directorate of Occupational Safety and Health Services EA (Category) Environmental Assessment EARTTDFP Eastern Africa Regional Transport, Trade and Development Facilitation Project EBK Engineers Board of Kenya EHS Environmental, Health and Safety EIRR Economic Internal Rate of Return ESHS Environmental, Social, Health, and Safety FA Financing Agreement FOC Fiber Optic Cable GBV Gender Based Violence GDP Gross Domestic Product GoK Government of Kenya GPN Good Practice Note HDM-4 Highway Development and Management Model HGVs Heavy Goods Vehicles HIV/AIDS Human Immunodeficiency Virus Infection/Acquired Immune Deficiency Syndrome ICT Information, Communication and Technology ICTA ICT Authority IDA International Development Association IFR Interim Financial Report IP Implementation Progress IRI International Roughness Index KRA Kenya Revenue Authority KeNHA Kenya National Highways Authority KES Kenya Shillings Km Kilometer KRA Kenya Revenue Authority KRB Kenya Roads Board LGV Light Goods Vehicles M&E Monitoring and Evaluation MGV Medium Goods Vehicles MoU Memorandum of Understanding MS Moderately Satisfactory NEMA National Environmental Management Authority NPV Net Present Value NTSA National Transport and Safety Authority OHS Occupational Health and Safety OSBP One Stop Border Post PAD Project Appraisal Document PBC Performance Based Contracting PDO Project Development Objectives -2-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RAP Resettlement Action Plan RRU Rapid Response Unit SCAP Safeguards Corrective Action Plans SDoI State Department of Infrastructure SDR Special Drawing Rights SEA Sexual Exploitation and Abuse SH Sexual Harassment SLO State Law Office SOPs Series of Projects TA Technical Assistance TIMS Transport Integrated Information System US$ United States Dollars VOC Vehicle Operating Costs -3-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) BASIC DATA Product Information Project ID Financing Instrument P148853 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 11-Jun-2015 31-Dec-2021 Organizations Borrower Responsible Agency Kenya National Highways Authority ( KenHA),State THE REPUBLIC OF KENYA Department of Infrastructure (SDoI),Kenya Revenue Authority ( KRA),ICT Authority (ICTA) Project Development Objective (PDO) Original PDO The objective of the Project is to improve the movement of goods and people along the Lokichar – Nadapal/Nakodok part of the Eldoret-Nadapal/Nakodok road in the north western part of Kenya, in particular, and to enhance connectivity between Kenya and South Sudan,in general. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-56380 11-Jun-2015 20-Jul-2015 16-Nov-2015 31-Dec-2021 500.00 325.54 179.88 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No -4-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) -5-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Background 1. The Kenya, Eastern Africa Regional Transport, Trade and Development Facilitation Project (EARTTDFP) was approved on June 11, 2015, for an amount of SDR 362.5 million (US$500 million equivalent) and became effective on November 16, 2015. The project constituted the Second Phase of a Series of Projects (SOPs) which were to be implemented in three phases aimed at enhancing connectivity of South Sudan with its Eastern Africa neighboring countries and access to seaports. The first project focused on South Sudan and was approved in May 2014. The second project focused on Kenya and the third project was expected to include activities in both Kenya and South Sudan to support trade facilitation. The first project was cancelled in September 2018 and preparation of the third project could not commence due to the challenging political environment that made it difficult to conduct development actions in South Sudan. B. Overall Progress 2. The ratings for progress towards achieving the PDO and Implementation Progress (IP) are Moderately Satisfactory (MS). The audits and/or Interim Financial Reports (IFRs) are current and there is no major outstanding procurement activity. The completed activities have contributed towards achieving the following outcomes: (i) travel time between Kitale and Lodwar, a distance of 300km, has reduced from forty-eight hours during dry spell to eight hours, or by 80 percent; (ii) fares one way by public mini-buses/matatus have reduced from KES3,000 (US$30) to KES1,500 (US$15) or by 50 percent between Kitale and Lodwar; (iii) reliability of internet services has improved and at competitive rates; and (iv) security, stability, and reliability of the driver licensing and vehicle registration system (Transport Integrated Information System [TIMS]) has been enhanced. 3. Approximately 93 percent of the credit proceeds have been committed as of November 20, 2021. The remainder of the credit amount is expected to be fully committed by end of May 2022 once the contract for construction supervision of priority socio-economic infrastructure to support the communities in the project area is signed in January 2022 and for the related works signed in May 2022. The procurement process for both the contractors and supervision consultant has been concluded and the contract documents are under preparation for signature. 4. At the output level, major achievements have been recorded as shown in Table 1 below. Table 2 shows activities which will not be completed by December 31, 2021, the original project closing date. A summary of the implementation status by component is as follows: 5. Component 1 Upgrading Selected Critical Road Infrastructure: There are seven major road upgrading contracts covering a length of 338km and one major bridge, as well as two civil works contracts related to installation of a new fiber optic cable (FOC) covering a total length of 600km. Average implementation of the road contracts is at 85 percent and of FCO related civil works at 44 percent. Specifically, two major road upgrading works contracts have been completed and taken over by the Client as well as one major bridge. Significant progress has been recorded on two more major road works contracts with average completion rates of 90 percent and expected to be completed by the end of May 2022. The remaining two road upgrading contracts are at various rates of implementation with the Lokichar- Loichanagamatak section (40km) at 44 percent completion rate. The Nadapal-Nakodok section (11km) that borders South Sudan, to be financed by GoK, slowed down due inability to provide full possession of access to the contractor and is at 1 percent completion rate. -6-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) 6. Component 2 Facilitation of Regional Transport, Trade and Development: Installation of an ICT based system to enhance revenue collection by Kenya Revenue Authority (KRA) at Kilindini, Mombasa Port and Nairobi and connecting to 30 stations is substantially complete. This facility also offers an opportunity for the Authority to generate income from the installed fiber optic cable. Procurement process for assorted enforcement equipment for use by the Authority is ongoing. An activity on designing of a One Stop Border Post (OSBP) at Nadapal/Nakodok has been dropped and a new activity on design, construction and supervision of the construction of offices at selected locations along the Eldoret- Nadapal/Nakodok road corridor to house Rapid Response Unit (RRU) of the KRA to monitor international trade introduced. 7. Identification of basic socio-economic infrastructure sub-projects for the local community has been completed and a priority list comprising of facilities to be constructed at 24 locations agreed upon by the local communities. An implementation and procurement strategy for carrying out the works and supervision of the same has been agreed with the World Bank. Implementation of these sub-projects is expected to commence in January 2022. 8. Component 3: Institutional Development and Program Management: This component has been restructured significantly with the dropping of some activities including consultancy services for carrying out studies on establishment of export processing zones scaling down the scope of services of Monitoring and Evaluation (M&E) consultant (a public university) due to the delays witnessed in procuring this consultant amidst significant implementation progress of the project. Nevertheless, advisory services for project management and coordination as well as enhancement of National Transport and Safety Authority (NTSA’s) Transport Integrated Management System (TIMS), a national driver licensing, vehicle registration and inspection stem, have progressed well. Completion of TIMS has enhanced the security, stability, and reliability of the system by reducing downtimes. In addition, the ICT infrastructure installed is scalable as well as an open-source platform and provides an environment for the development for further innovations in the future. 9. Component 4 Enhancing Internet Connectivity: Rehabilitation of the existing 24-core 600km fiber optic cable from Eldoret to Nadapal/Nakodok has been completed and was commissioned on October 23, 2020 and is now in use. This has improved internet connectivity in the region. Meanwhile, installation of a new main build backbone fiber optic cable from Eldoret to Nadapal/Nakodok covering approximately 630km and 45km spur links is at 44 percent with completion expected by May 2022. Background on Gender Based Violence (GBV) and Occupational Health and Safety (OHS) in the Project Area and Mitigation Measures Implemented Under the Project 10. The road works began at various dates in 2017 at which point the enhanced Environmental, Social, Health, and Safety (ESHS) requirements had not been introduced. In 2018, the Good Practice Note (GPN) for Addressing Sexual Exploitation and Abuse and Sexual Harassment (SEA/SH) in Investment Project Financing involving Major Civil Works was issued to guide the World Bank and Borrower staff on management of SEA and SH/GBV in projects. In late 2018, the Borrower began the process of retrofitting projects and amendment of the relevant contracts to meet this new requirement. The Borrower also agreed to initiate the process of engaging a GBV Service Provider, in accordance with the GPN, to provide GBV services (health, psychosocial, legal) and, enhance its capacity in response to GBV related cases including for EARTTDFP. As part of the portfolio retrofitting exercise, the World Bank in 2018 spearheaded the preparation of an SEA action plan for EARTTDFP. The action plan included measures on signing of codes of conduct prohibiting SEA/SH by project workers, sensitizing project workers and communities, managing GBV and related cases such as engaging a GBV Service Provider, training of KeNHA staff and recruiting additional safeguards staff. This plan has been under implementation since July 2019 and constitutes some continuous activities whose implementation will -7-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) continue under the proposed restructuring of the project. Since the commencement of works, the project has recorded several Gender Based Violence (GBV) cases and incidents relating to Occupational Health and Safety (OHS), including fatalities. All the survivors of GBV have received the care and support that they require, and perpetrators held accountable as per the Client’s code of conduct and national labor laws. The Client has also implemented the safeguards corrective action plans (SCAP) agreed with the task team, and the related statutory compensation for OHS incidents. 11. To improve the environmental, health and safety (EHS) performance for the Project, the following measures have been carried out or are ongoing: (i) KeNHA carrying out bi-annual environmental, health and safety audits for ongoing works and implementing of the corrective actions; (ii) in the last two years, KeNHA senior management has taken drastic actions on non-compliance with OHS aspects, which has included stopping works where there have been recurrence of OHS incidents until the respective contractor implemented the agreed corrective actions; (iii) terminating /removal from site of the resident engineers and the project managers of contractors that have been negligent to implement or enforce OHS measures; (iv) with the support of the World Bank, training of contractors, supervision consultants, and KeNHA staff on the EHS requirements, with the latest training carried out on September 7, 2021 (Lot 4 (Lokichar-Loichang’Amatak road section); (v) KeNHA recruited additional full time Environmental Specialist and Health and Safety Specialist, RAP specialist and GBV expert to support the project to complement the existing staff at KeNHA assigned to the Project; (vii) the KeNHA environmental staff undertaking NEBOSH International Construction Certificate course to enhance their capacity to manage EHS risks; (v) collaboration with the National Environmental Management Authority (NEMA) and Directorate of Occupational Safety and Health Services (DOSHS) to undertake EHS trainings and monitoring for the ongoing works; and (vi) the World Bank commissioning an independent environmental and social audit in November 2021 to enhance supervision since the task team has not been able to travel to the field regularly due to COVID 19 travel restrictions. The findings of this environmental and social audit report will form part of the World Bank’s environmental and social monitoring. 12. During the proposed two-year extension period, additional time-bound measures to build the safeguards capacity within KeNHA have been added to complement the ongoing activities. These include providing livelihood support to the SEA/SH survivors under the project, reinforcing the reporting protocol system recently adopted by KeNHA as part of the restructuring of the project and stopping of works in contracts where SEA/SH incidents are not timely reported. The task team will meet with KeNHA senior management to reinforce the message on commitment towards the prevention of GBV and OHS measures. Additional training of KeNHA staff, consultants, and contractors will also be carried out on OHS, GBV and contract management. 13. Looking forward, and to deepen and enhance the capacity of KeNHA and the country to manage environmental and social risks, additional measures are included in the recently approved Horn of Africa Gateway Development. These measures include: (i) capacity building activities to develop KeNHA’s environment, social, health and safety management system (ESHS management system) which will apply to GoK programs and those supported by development partners; (ii) enhancing the capacity of institutions associated with the management of safeguards issues in projects in the country notably the Directorate of Occupational Safety and Health Services (DOSH) which is under the Ministry of Labor and the National Land Commission (NLC), and (iii) review of KeNHA’s GBV policy to reflect international good practices;(v) establishment of training center at the University of Nairobi, Center for Land Acquisition and Resettlement Studies, on management of social risks in projects; (vi) recruitment of additional full time environmental specialist and health and safety specialist, social specialist, RAP specialist and GBV specialist to support the World Bank financed portfolio. 14. These measures are expected to help with the management of OHS and GBV issues including timely reporting and implementation of actions outlined in various contracts. The close collaboration between KeNHA and DOSHS and NLC which was not there before is showing positive results manifested in the acceleration of compensation of project -8-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) affected persons and settlement of compensation for OHS incidents, and exchange of ideas and information on safeguards. Table 1: Major Activities Completed No. Activity Component 1 (Restructured): Upgrading of Selected Critical Road Infrastructure and Fibre Optic Cable along the Eldoret Nadapal/Nakodok corridor 1 Construction of a major bridge over a river at Kainuk 2 Upgrading of Loichangamatak – Lodwar road section (50km) 3 Upgrading of Lodwar – Lokitaung Junction road section (80km) 4 Repairs of Lesseru-Lokichar road section (260km) Component 2 (Restructured): Facilitation of Regional Transport, Trade and Development 5 Installation of ICT infrastructure at Kilindini, Port of Mombasa, and at Kenya Revenue Authority (KRA) Headquarter Offices Component 3 (Restructured): Institutional Development and Program Management 6 Installation of a disaster recovery site and enhancement of information security solutions for the driver licensing and vehicle registration system (TIMS) Component 4: Enhancing Internet Connectivity 7 Rehabilitation of the existing 600km 24-core fiber optic cable (FOC) from Eldoret to Nadapal/Nakodok Table 2: Major Activities which will not be Completed by December 31, 2021 (Original Closing Date) No. Activity Component 1: Upgrading of Selected Critical Road Infrastructure and Fibre Optic Cable along the Eldoret Nadapal/Nakodok corridor 1 Upgrading of Lokitaung’ Junction – Kalobeiyei River road section (80km) at 90 percent completion rate 2 Upgrading of Nadapal-Nakodok road section (11km) (GoK financing – under procurement) 4 Upgrading of Lokichar – Loichangamatak road section (40km) at 42 percent completion rate - financed from the savings realized due to competitive bids received though it was originally anticipated to be funded using GoK counterpart funds 5 Upgrading of Nadapal-Nakodok road section (11km) – GoK counterpart funding 6 Design and construction of priority socio-economic infrastructure facilities 1 7 Civil works associated with laying of the new main build fiber optic cable, 600km (trenching, ducting and construction of manholes) at 44 percent completion rate Component 2 (Restructured): Facilitation of Regional Transport, Trade and Development 5 Design and construction of offices for Rapid Response Unit (RRU) of KRA at selected locations along the Lokichar – Nadapal/Nakodok road corridor to monitor international trade 1 Involves 24 sub-projects in education infrastructure, water supplies, health facilities and markets. -9-|Page The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) No. Activity 6 Signing of a Memorandum of Understanding (MoU) between Kenya Customs and South Sudan Customs Services on information exchange and use of common border procedures Component 4: Enhancing Internet Connectivity 7 Supply and installation of a new main built fiber optic cable (600km) at 44 percent completion rate C. Rationale for Restructuring 15. The reasons for the proposed amendments are to: (a) realign the project to changes associated with the unexpected cancellation of Phase 1 of the Program in the SOPs and failure to realize Phase 3. Phase 1 of the SOPs involved upgrading of critical road infrastructure, installation of fiber optic cable, and conducting priority trade and development facilitation studies in South Sudan whereas Phase 3 was intended to complete upgrading of the Juba – Eldoret road corridor, establish the Ones Stop Border Post (OSBP) and provide internet connection to Export Processing Zones (EPZ), rest stops, community centers and service centers along the corridor; (b) allow for more time for completion of activities whose progress was affected by challenges associated with COVID-19 such as reduced working hours and number of staff engaged at a particular time at the site consistent with the GoK protocols; (c) better reflect the impact of the social risks on project design, scope and implementation which were underestimated at appraisal, including in particular, engagement of a Gender Based Violence (GBV) Service Provider consistent with the Good Practice Note for Addressing Sexual Exploitation and Abuse and Sexual Harassment (SEA/SH) in Investment Project Financing involving Major Civil Works issued by the World Bank in 2018; and (d) realign the project design, scope and results indicators to changes that were unforeseen. The project area is fragile with numerous community armed conflicts driven by competition over access to resources. These conflicts not only delayed the commencement of works but also slowed down the execution of the road works. Furthermore, given that the area is underserved, the communities demanded contractors to supply basic services such as water and schools, and workers demand higher wages beyond the national average. The county government of Turkana further introduced charges/levies on construction materials which were not factored in the project costs at the time of appraisal. II. DESCRIPTION OF PROPOSED CHANGES 16. This is the first restructuring of the EARTTDFP and involves a modification of the Project Development Objective (PDO) and indicators to better reflect the components under the Project; introduction of new, scaling up and dropping of some activities to enhance the achievement of the PDO; reallocation and alignment of funds among the categories to correspond to the changes; and extension of the closing date by two years to allow the completion of the outstanding activities. The Government of Kenya (GoK) in a letter dated August 25, 2021, has requested for: (i) modification of the Project Objectives; (ii) extension of the Project duration by 24 months; and (iii) reallocation of funds among categories to align the available financing and expenditure requirements. Project Development Objectives 17. Original Project Development Objectives: To improve the movement of goods and people along Lokichar – Nadapal/Nakodok part of the Eldoret-Nadapal/Nakodok road in the north western part of Kenya, in particular, and to enhance connectivity between Kenya and South Sudan, in general. - 10 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) 18. Revised Project Development Objectives: To improve the movement of people and goods, digital connectivity and access to social services to communities at designated locations along selected sections of the Eldoret- Nadapal/Nakodok road corridor. 19. The summary of the revised outcome targets is summarized in Table 4. Table 4: Summary of Original and Revised PDOs, and Outcome Targets and Indicators Original PDO and Outcome Targets Revised PDOs and Outcome Targets Original PDO Original Outcome Targets Revised PDO Revised Outcome Indicators To improve the movement of (i) Reduction in travel time To improve the movement (i) Average travel time between goods and people along between Nadapal/Nakodok and of people and goods, digital Lokichar and Lodwar disaggregated Lokichar – Nadapal/Nakodok Lokichar connectivity and access to by passengers and freight part of the Eldoret- (ii) Reduction in transport cost to social services to (ii) Average travel time between Nadapal/Nakodok road in the users communities at designated Lodwar and Nadapal disaggregated north western part of Kenya (iv) Road in good and fair condition locations along selected by passengers and freight as a share of the Juba – Mombasa sections of the Eldoret- (iii) Number of public transport Corridor Nadapal/Nakodok road service providers along Lokichar – (v) Survey reports on citizen corridor Nadapal/Nakodok engagement available (iv) Average number of online public To enhance connectivity (i) Reduction in cost of ICT access services used by communities along between Kenya and South in area served the corridor per month Sudan, in general (v) Number of women and children utilizing the improved social services Provision of basic services None Table 5: Original and Revised Project Components Original Components/Sub-components Restructured Components/Sub-components Component 1 (Original): Upgrading of Selected Critical Road Component 1 (Restructured): Upgrading of Selected Critical Road Infrastructure and Fibre Optic Cable along the Eldoret Infrastructure and Fibre Optic Cable along the Eldoret Nadapal/Nakodok corridor Nadapal/Nakodok corridor (US$ 594 million of which IDA US$ 426 million IDA equivalent) (US$ 534.20 million of which IDA US$ 421.04 million IDA equivalent) (a) Upgrading of approximately 88 km of the Kalobeiyei River – Nadapal/ Nakodok section of the Eldoret-Nadapal/Nakodok road; The original scope was expanded and restructured to include new and related supervision costs. activities. (b) Upgrading of approximately 80 km of the Lokitaung junction - Kalobeiyei River section of the Eldoret-Nadapal/Nakodok road and The changes introduced to this component include: related supervision costs. (c) Upgrading of approximately 80 km of the Lokitaung junction - (a) Financing of the upgrading works of Lokichar-Loichangamatak Lodwar section of the Eldoret-Nadapal/Nakodok road; and related road section (40km) from the Credit instead of counterpart supervision costs. funding. (d) Upgrading of approximately 50 km of the Lodwar – Loichangamatak (b) The length of the Kalobeiyei River - Nadapal /Nakodok road section of the Eldoret-Nadapal/Nakodok road; and related section reduced from 88km to 77km covering Kalobeiyei supervision costs. River-Nadapal and introducing a new activity on upgrading of (e) Construction of a bridge at Kainuk on Muruni River; and related Nadapal-Nakodok (11km) to be financed by GoK. supervision costs. (c) Introduction of a new activity on maintenance of the (f) Upgrading of approximately 40 km of the Loichangamatak - Lokichar upgraded road sections in the entire Eldoret – section of the Eldoret-Nadapal/Nakodok road; and related Nadapal/Nakodok road section through performance-based supervision costs. contracting and funded by Government as part of counterpart (g) Implementing the Resettlement Action Plans (RAPs) along the funding. Eldoret – Nadapal/Nakodok road. (d) Introduction of a new activity on carrying out of civil works associated with installation of a fiber optic cable along the - 11 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Original Components/Sub-components Restructured Components/Sub-components Eldoret-Nadapal/Nakodok road corridor. (e) Introduction of a new activity on provision of consultancy services for management of social risks associated with works contracts through engagement of the services of selected civil society organizations. Component 2 (Original): Facilitation of Regional Transport, Trade and Component 2 (Restructured): Facilitation of Regional Transport, Development Trade and Development (US$ 42.50 million of which US$ 38.50 million IDA equivalent) (US$ 46.14 million of which IDA US$ 41.28 million IDA equivalent) (a) Carry out a program of activities designed to support Kenya Revenue Authority (KRA) to implement transport, trade and development This component has been split into Sub-component 2(a) for facilitation measures, such a program to include such activities as: activities to be implemented by Kenya Revenue Authority (KRA) (i) harmonization of customs and other border management, risk and Sub-component 2(b) for activities to be implemented by management and control procedures; (ii) designing of a One Stop KeNHA as follows: Border Post (OSBP) at Nadapal/Nakodok; (iii) strengthening of the cross-border management unit of KRA including enhancing its Sub-component 2 (a): Support to KRA to carry out a program of coordination with other border agencies; (iv) support the activities designed to implement transport, trade and implementation of an integrated border management system; (v) development facilitation measures support to the implementation of the Memorandum of (US$ 10.90 million of which IDA US$ 10.18 million IDA Understanding (MoU) between Kenya Customs and South Sudan equivalent) Customs Services relative to information exchange and use of common procedures; (vi) support the use of information and Changes introduced to this subcomponent include: communication technology (ICT) for revenue collection and for facilitating clearance and release of goods to help Kenya Customs (a) Designing of a One Stop Border Post (OSBP) at comply with new transparency requirement of e-citizen registration, Nadapal/Nakodok has been dropped. electronic collection of revenue and e- reporting of clearances and (b) Introduction of a new activity on design, construction and release of goods. supervision of the construction of offices at selected locations (b) Carry out a program of activities designed to support KeNHA to along the Eldoret-Nadapal/Nakodok road corridor to house implement transport, trade and development facilitation measures, Rapid Response Unit of the Kenya Revenue Authority to such a program to include such activities as: (i) carrying out a study monitor international trade; Support the implementation of to enhance social infrastructure and social services delivery, the Regional Cargo monitoring for goods under customs including HIV/AIDS prevention, along the corridor, while control; Training of KRA staff implementing the recommendations as part of the road upgrading contracts; (ii) designing the facilities and marketing system for pilot Subcomponent 2 (b): Support to KeNHA to carry out a program pastoralist road side markets; and (iii) establishing the facilities of of activities designed to implement transport, trade and pilot pastoralist road side markets, through provision of sites and development facilitation measures services, clean water, extending electrification to selected centers, (US$ 35.24 million of which IDA US$ 31.10 million IDA provision of market shades, milk cooler, slaughter houses, equivalent) veterinary posts, livestock holding area in selected locations, connecting community information centers with fiber optic Activities to be implemented by KeNHA have been retained. connection and advisory services in the management of these facilities and services. This subpart will also involve activities Sub-component 2 (c): Support to State Department of designed to support engagement with Project stakeholders such as Infrastructure county governments, communities and households (in particular female-headed households) on management and operational Activities originally under Sub-component 2(c) and which were to modalities of these facilities. be implemented by State Department of Infrastructure (SDoI) have (c) Carry out a program of activities designed to support Ministry of been dropped and the new activities introduced for SDoI have Transport and Infrastructure in conjunction with the Recipient’s been included under Component 3. ministry responsible for commerce, to implement transport, trade and development facilitation measures, such a program to include The activities dropped are: (i) identifying and designing potential such activities as: (i) identifying and designing potential sites for sites and providing services to facilitate the development of export providing services to facilitate the development of export processing zones, storage facilities and rest stops; (ii) certifying processing zones, storage facilities and rest stops; (ii) certifying export products; and (iii) simplifying the process for import-export. export products; and (iii) simplifying the process for import-export. These activities are funded under other Government programs. - 12 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Original Components/Sub-components Restructured Components/Sub-components Component 3 (Original): Institutional Development and Program Component 3 (Restructured): Institutional Development and Management Program Management (US$ 10.5 million of which IDA US$ 10.50 million IDA equivalent) (US$ 16.70 million of which IDA US$ 16.50 million IDA equivalent) (a) Carrying out a program of activities designed to strengthen the institutional capacities of entities involved in Project implementation including: (i) strengthening the capacity of KeNHA The component has been split into sub-component 3(a) and in road design review as well as contract management, value sub-component 3(b). engineering, road maintenance, safeguards and procurement management; (ii) enhancing project management capacity, Subcomponent 3 (a): Institutional Strengthening of Kenya maintenance management and engineering capabilities in the National Highways Authority (KeNHA) (US$ 2.60 million of which transport sector through supporting the Kenyan Roads Board; IDA US$ 2.60 million equivalent) Engineers Board of Kenya; Ministry of Transport and Infrastructure; Resource Mobilization Department (RMD) under the National Subcomponent 3(b): Strengthen the institutional capacity of State Treasury; and State Law Office; (iii) supporting the Ministry of Department of Infrastructure and associated institutions. (US$ Transport and Infrastructure in the monitoring and evaluation of the 14.10 million of which IDA US$ 13.90 million equivalent) projects; and (iv) strengthening project management capacity of ICTA. The changes introduced to the component include: (b) Carrying out a program of activities designed to strengthen the capacity of National Transport and Safety Authority to implement (a) The activity on strengthening of the National Transport and the “Safe System”, such a program to include such activities as: (i) Safety Authority to implement the “Safe System”, program conducting needs assessment, vehicle safety inspection and safety has been dropped and has been replaced with enhancing of audits; (ii) strengthening enforcement capability of the Authority; information security solutions for road safety and compliance and (iii) assessing road safety on Lokichar-Eldoret section of the systems including driver licensing and vehicle registration Eldoret-Nadapal/Nakodok Corridor as well as developing and system [Transport Integrated Management System (TIMS)]. carrying out of a pilot road safety action plan along the corridor. (b) A new activity introduced on the development of policy (c) (i) Provision of advisory services, Training and Operating Costs to guidelines on accommodating the provision of utilities in road Ministry of Transport and Infrastructure as required to sustain the reserves. management and coordination of Project implementation activities, (c) A new activity introduced on carrying out studies on the including audits, and the monitoring and evaluation of progress financial sustainability of the Engineers Board of Kenya and achieved in the execution of the Project. National Transport and Safety Authority. (d) Provision of technical assistance to carryout preparatory studies to (d) The activity on provision of technical assistance (TA) to carry support the preparation of the next phase of the Program and out preparatory studies to support the preparation of the develop follow-on regional transport and trade facilitations projects next phase of the Program and develop follow-on regional as well as bidding documents for long term performance-based road transport and trade facilitations projects as well as bidding maintenance contracting. documents for long term performance-based road maintenance contracting has been dropped and the funds reallocated to TIMS. (e) A new activity introduced on institutional strengthening of the Engineers Board of Kenya. (f) A new activity introduced on institutional strengthening of the Kenya Engineering Technology Registration Board. (g) Support to the Ministry of Transport, Infrastructure, Housing, Urban Development and Public Works on enhancing monitoring and oversight capacity. (h) Activity on monitoring and evaluation of the projects has been moved to Sub-component 3(a) Component 4: Enhancing Internet Connectivity (US$ 29 million of Component 4: Enhancing Internet Connectivity which IDA US$ 25.0 million IDA equivalent) (US$ 21.48 million of which IDA US$ 21.18 million IDA equivalent) Construction of a fiber optic cable network, alongside the part of the Eldoret-Nadapal/Nakodok Corridor located in the Recipient’s territory, The changes introduced to the component include: from Nadapal/Nakodok to Eldoret. (a) Modification of activity that relates to undertaking civil works associated with installation of a fiber optic cable along the - 13 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Original Components/Sub-components Restructured Components/Sub-components Eldoret-Nadapal/Nakodok road corridor and supervision of the same. This activity has been moved to Component 1. (b) Modification of the activity that relates to laying of new fiber optic cable to read Carrying out feasibility and detailed engineering design studies for - and supervision of the supply and installation of a fiber optic cable alongside the Eldoret- Nadapal/Nakodok road corridor. (c) Introduced an activity on rehabilitation of the existing fiber optic cable alongside the Eldoret-Nadapal/Nakodok road (d) Supply and installation of a new fiber optic cable along the Eldoret – Nadapal/Nakodok road corridor (e) Construction of fiber spurs and rings to selected strategic public facilities along the Eldoret-Nadapal/Nakodok road corridor (f) Introduction of a new activity on Development of a business model in the utilization and management of the national backbone fiber optic cable [network] and associated business opportunities and services. (g) Introduction of a new activity on Last mile internet connectivity (h) Institutional strengthening of the ICTA through provision of advisory services and Training Revised Financing Plan 20. Table 6 and 7 below show the revised financing plan and allocation by implementing agency respectively. The reduction in GoK contribution is majorly due to overestimation of the Resettlement Action Plan (RAP) implementation cost at the time of appraisal. The cost at appraisal covered the entire Eldoret – Nakodok road corridor while the scope of the project is Lokichar-Nadapal/Nakodok. Table 6: Revised Financing Plan Item Description Revised Allocation Under No. Restructuring (US$ million) IDA contribution 500.00 GoK contribution 118.52 Works 47.00 Of which (a) RAP implementation 4.00 (b) VAT (16 percent of the costs) 64.82 (c) Incremental Operating cost 2.70 Total Project Cost 618.52 - 14 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Table 7: Allocation by Implementing Agency Total IDA GoK Agency (US$ million) (US$ million) (US$ million) %IDA KeNHA 572.04 454.74 117.30 91% KRA 10.90 10.18 0.72 2% SDoI 14.10 13.90 0.20 3% ICTA 21.48 21.18 0.30 4% Total 618.52 500.00 118.52 100% Economic Analysis 21. The upgrading of the Eldoret/Lesseru-Nadapal/Nakodok road sections. A revised economic analysis was done for the upgrading of the Eldoret/Lesseru-Nadapal/Nakodok using the latest increased prices obtained from the actual bids, the expanded scope of works and the latest traffic data (Annex 2). The project's main benefits are the savings to be made by road users on vehicle operating costs and passenger time costs. Since appraisal of the project in 2015, not only have the construction costs and scope of works increased but also the traffic levels and expected growth rates. The road corridor considered under this project measures 338km and was divided into five sections for purposes of design and construction. The name of the road sections and the corresponding lengths are presented in Table 8. Table 8: Road Sections along Lokichar – Nadapal/Nakodok Road Corridor Section Road Section Name Section Length No. (km) 1 Lokichar - Loichangamatak 40 2 Loichangamatak - Lodwar 50 3 Lodwar – Lokitaung’ Junction 80 4 Lokitaung’ Junction – Kalobeiyei River 80 5 Kalobeiyei River – Nadpal/Nakodok 88 Total 338 22. The revised Net Present Value (NPV) of the upgrading of the entire Eldoret/Lesseru-Nadapal/Nakodok in 2021 is US$516.1 million, with an overall Economic Internal Rate of Return (EIRR) of 25.7 percent. This varies across individual road sections under the project (some of which are completed) from 15.1 percent to 36.5 percent. The results show that all the road sections are still economically viable given the positive NPVs and EIRRs greater than the 12 percent planning discount rate. Table 9 and Annex 2 give the details of the economic re-evaluation. - 15 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Table 9: HDM-4 Analysis Results at Appraisal (2015) and Restructuring (2021) Road Section Length Cost Estimate Contract Sum Appraisal Stage (2015) Project Restructuring (km) at Appraisal (includes any (2021) (US$) revisions) NPV (USD$ EIRR (%) NPV (USD$ EIRR (%) (US$) million) million) Lokichar -– 40 57,600,000 68,265,480 196 24.7 56.7 29.6 Loichangamatak Loichangamatak -– 50 72,000,000 83,880,487 195.5 36.5 Lodwar Lodwar – Lokitaung’ 80 81,600,000 120,432,060 38.48 26.5 128.6 27.4 Junction Lokitaung’ Junction 80 92,800,000 114,874,090 30.16 21.0 41.7 19.1 – Kalobeiyei River Kalobeiyei River – 88 80,850,000 93,211,608 23.43 28.1 14.3 15.1 Nadapal/Nakodok Lokichar – 338 384,850,000 - 288.1 - 436.7 26.1 Nadapal/Nakodok Eldoret/Lesseru- 608 761,542,000 - 504.5 - 516.1 25.7 Nadapal/Nakodok Source of contract amounts data: August 2021 Monthly Progress Reports Exchange Rate: US$ 1.0 = KES 92.75 (Rate used at Appraisal in 2015) Initial contract sum is slightly different from the cost estimates at Appraisal stage - 16 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) III. SUMMARY OF CHANGES Changed Not Changed Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Legal Covenants ✔ Implementation Schedule ✔ Economic and Financial Analysis ✔ Implementing Agency ✔ DDO Status ✔ PBCs ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Other Change(s) ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ - 17 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_PDO_TABLE PROJECT DEVELOPMENT OBJECTIVE Current PDO The objective of the Project is to improve the movement of goods and people along the Lokichar – Nadapal/Nakodok part of the Eldoret-Nadapal/Nakodok road in the north western part of Kenya, in particular, and to enhance connectivity between Kenya and South Sudan,in general. Proposed New PDO The objective of the Project is to improve the movement of people and goods, digital connectivity and access to social services to communities at designated locations along selected sections of the Eldoret-Nadapal/Nakodok road corridor. OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Upgrading Component 1: Upgrading of Selected Critical Road 594.00 Revised Selected Critical Road 534.20 Infrastructure Infrastructure Component 2: Facilitation of Component 2: Facilitation of Regional Transport, Trade and 42.50 Revised Regional Transport, Trade and 46.14 Development Development Component 3: Institutional Component 3: Institutional Development and Program 10.50 Revised Development and Program 16.70 Management Management Component 4: Enhancing Component 4: Enhancing 29.00 Revised 21.48 Internet Connectivity Internet Connectivity TOTAL 676.00 618.52 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-56380 Effective 31-Dec-2021 29-Dec-2023 29-Apr-2024 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES 18 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-56380-001 | Currency: XDR iLap Category Sequence No: 1 Current Expenditure Category: Gd,Wk,NCS,CS,Trg&OC - SDoI 7,200,000.00 5,759,071.40 5,759,072.00 100.00 100.00 iLap Category Sequence No: 2A Current Expenditure Category: Gd,Wk,NCS,CS,Trg - KeNHA 305,200,000.00 195,969,529.17 189,278,629.00 84.00 84.00 iLap Category Sequence No: 2B Current Expenditure Category: Gd,Wk,NCS,CS,Trg&OC - KeNHA 25,000,000.00 24,168,630.15 23,695,114.00 100.00 100.00 iLap Category Sequence No: 3 Current Expenditure Category: Gd,Wk,NCS,CS,Trg&OC Pt 2a KRA 5,800,000.00 1,715,530.99 1,715,531.00 100.00 100.00 iLap Category Sequence No: 4 Current Expenditure Category: Gd,Wk,NCS,CS,Trg &OC Pt4 3aiv -ICTA 18,500,000.00 4,795,913.19 4,415,860.00 100.00 100.00 iLap Category Sequence No: 5 Current Expenditure Category: PPF REFINANCING 800,000.00 0.00 800,000.00 iLap Category Sequence No: 6 Current Expenditure Category: Gd,Wk,NCS,CS,Trg&OC - SDoI 0.00 0.00 4,353,080.00 100 iLap Category Sequence No: 7 Current Expenditure Category: Gd,Wk,NCS,CS,Trg - KeNHA 0.00 0.00 114,222,260.00 iLap Category Sequence No: 8 Current Expenditure Category: Gd,Wk,NCS,CS,Trg&OC - KRA 19 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) 0.00 0.00 5,553,250.00 100 iLap Category Sequence No: 9 Current Expenditure Category: Gd,Wk,NCS,CS,Trg &OC - ICTA 0.00 0.00 12,707,204.00 100 Total 362,500,000.00 232,408,674.90 362,500,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2015 0.00 0.00 2016 70,000,000.00 700,000.00 2017 120,000,000.00 40,000,000.00 2018 120,000,000.00 12,000,000.00 2019 110,000,000.00 55,000,000.00 2020 50,000,000.00 95,000,000.00 2021 30,000,000.00 50,000,000.00 2022 0.00 50,000,000.00 2023 0.00 100,000,000.00 2024 0.00 97,300,000.00 OPS_DETAILEDCHANGES_LEGCOV_TABLE LEGAL COVENANTS Loan/Credit/TF Description Status Action Finance Agreement :Other Undertaking (Schedule 2 of the FA, Section V) | Description :The Recipient shall IDA-56380 provide/cause to be provided - the funds, facilities Not yet due Revised services and other resources required to ensure proper maintenance of the upgraded road sections under the 20 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Project. The Recipient shall - no later than 10/15/2020 - open a dedicated account in a commercial bank acceptable to the Association and deposit an initial deposit of not less than USD 3 million. | Due Date :15- Oct-2020 Finance Agreement: Other Undertaking (Schedule 2 of the FA, Section V) | Description: The Recipient shall provide/cause to be provided - the funds, facilities services and other resources required to ensure proper Proposed NYD maintenance of the upgraded road sections under the Project. The Recipient shall no later than June 30, 2023 sign Performance Based Contracts for maintenance of . completed road sections 21 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) . Results framework COUNTRY: Eastern Africa EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) Project Development Objectives(s) The objective of the Project is to improve the movement of goods and people along the Lokichar – Nadapal/Nakodok part of the Eldoret-Nadapal/Nakodok road in the north western part of Kenya, in particular, and to enhance connectivity between Kenya and South Sudan,in general. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target To improve movement of people and goods (Action: This Objective has been Revised) Average travel time between Lokichar and Lodwar disaggregated 12.00 3.00 by passengers and freight (Hours) Rationale: Action: This indicator has been Revised PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. Public passenger bus (Hours) 8.00 2.00 Action: This indicator is New Heavy commercial truck (Hours) 12.00 3.00 Action: This indicator is New Average travel time between Lodwar - Nadapal disaggregated by 36.00 6.00 passengers and freight (Hours) Rationale: Action: This indicator has been Revised PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. 22 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Public passenger bus (Hours) 36.00 4.00 Rationale: Action: This indicator is New PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. Heavy commercial truck (Hours) 36.00 6.00 Rationale: Action: This indicator is New PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. To improve movement of people and goods (Action: This Objective has been Revised) Number of public transport service providers along Lokichar - 2.00 10.00 Nadapal/Nakodok road section (Number) Rationale: Action: This indicator has been Revised PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. Number of public transport service provides along Lokichar - 2.00 10.00 Lodwar road section (Number) Action: This indicator is New Number of public transport service providers along Lodwar - 2.00 6.00 Nadapal/Nakodok road section (Number) Action: This indicator is New To improve internet connectivity (Action: This Objective is New) Average number of online public services used by communities 1.00 5.00 along the corridor per month (Number) 23 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target Rationale: Action: This indicator is New PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. Average number of online public services used by 1.00 5.00 communities along Eldoret - Lodwar road corridor (Number) Action: This indicator is New Average number of online public services used by communities along Lodwar - Nadapal/Nakodok road corridor 1.00 5.00 (Number) Action: This indicator is New Improve access to social services to communities at designated locations along LokicharNakodok road (Action: This Objective has been Revised) Number of women and children utilizing the improved social 0.00 500.00 services (Social/Gender disaggregated) (Number) Rationale: Action: This indicator has been Revised PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Component 1: Upgrading Selected Critical Road Infrastructure (Action: This Component has been Revised) 24 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Roads constructed 0.00 327.00 (Kilometers) Action: This indicator has been Revised Roads constructed - 0.00 322.00 rural (Kilometers) Rationale: Action: This indicator PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. is New Roads constructed - 0.00 5.00 non rural (Kilometers) Rationale: Action: This indicator PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. is New Number of vehicles crossing 5.00 5.00 5.00 5.00 36.00 36.00 36.00 36.00 Nadapal/Nakodok border post (Number) Action: This indicator has been Marked for Deletion Reduction in the number of road accidents along the Lokichar- 0.00 0.00 Nadapal/Nakodok road (Number) 25 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Action: This indicator has been Marked for Deletion Component 2: Facilitation of Regional Transport, Trade and Development Number of socio- economic infrastructure 0.00 24.00 facilities constructed (Number) Rationale: Action: This indicator has PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. been Revised Increase in trade volume between Kenya and 0.00 0.00 0.00 0.00 20.00 20.00 20.00 South Sudan (Percentage) Action: This indicator has been Marked for Deletion Number of offices for the KRA’s Rapid Response 0.00 3.00 Unit constructed (Number) Rationale: Action: This indicator is PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. New 26 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Memorandum of Understanding (MoU) between Kenya Customs and South Sudan Customs Services relative No Yes to information exchange and use of common procedures signed (Yes/No) Rationale: Action: This indicator is PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. New Average processing time at border crossing for freight trucks and 24.00 6.00 passenger vehicles (Hours) Rationale: Action: This indicator is PDO indicators and objective outcomes have been revised to better reflect the changes in the PDO. New Component 3: Institutional Development and Program Management (Action: This Component is New) Number of staff trained under the Project 0.00 30.00 (Number) Action: This indicator is New 27 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 6 Component 4: Enhancing Internet Connectivity (Action: This Component has been Revised) Fibre Optic Cable (new) 0.00 600.00 (Kilometers) Fibre Optic Cable (rehabilitated) 0.00 400.00 (Kilometers) Action: This indicator is New IO Table SPACE 28 | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Annex 1 Economic Analysis of the Road Related Component (Revised 2021) Background 1. A revised economic analysis was done for the Eldoret/Lesseru-Nadapal/Nakodok road corridor. The main benefits are the savings to be made by road users on vehicle operating costs, maintenance costs, and passenger travel time costs. The Net Present Value (NPV) of the upgrading works is US$436.7 million, at a 12 percent discount rate, and the overall Economic Internal Rate of Return (EIRR) is 15.1 percent. Table 1.1 presents the economic evaluation summary. Table 1.1 Economic Evaluation Summary Lesseru/Eldoret – Nadapal/Nakodok Benefits (US$M) 787.2 Base Costs (US$M) 808.5 NPV (US$M) 516.1 EIRR (%) 25.7 2. The update of the Economic analysis has been undertaken based on a Cost Benefit Analysis using the Highway Development and Management Model (HDM-4). The HDM-4 allows for modelling of costs and benefits over the whole life cycle of a project, which in this case has been taken as 20 years after opening of the road to traffic. The start of construction has been taken as year 2017 for all road sections. This methodology is similar to that adopted at Appraisal stage. The objective of the re-evaluation is to reconfirm the viability of the road component of the project by comparing the economic analysis results obtained at this stage with those at the appraisal stage of the project using the latest cost and project implementation information. The analysis has been necessitated by the changes observed during implementation of the Project in the last five years including increase in the cost of works, time and traffic across various contracts. Project Route 3. The Lokichar – Nadapal/Nakodok Road is approximately 338 km long and lies predominantly in Turkana County. As summarized in the below, the upgraded project road sections have been subdivided into five (5) lots (Table 1.2). Also being reconstructed through a separate contract was the Kainuk Bridge which lies between Marich Pass and Lokichar. Table 1.2: Road Sections along Lokichar – Nadapal/Nakodok Road Corridor Section Road Section Name Section Length No. (km) 1 Lokichar -– Loichangamatak 40 2 Loichangamatak -– Lodwar 50 3 Lodwar – Lokitaung’ Junction 80 4 Lokitaung’ Junction – Kalobeiyei River 80 5 Kalobeiyei River – Nadpal/Nakodok 88 Total 338 Lesseru/Eldoret – Nadapal/Nakodok 606 - 29 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Study Methodology 4. The approach used to achieve the study aims is presented in Table 1.3 5. Assumptions: The analysis has been undertaken at 12 percent discount rate, and a residual project value of 20 percent of the initial capital investment assumed and credited as a benefit to the whole project in the final year of evaluation. The calibrated and configured HDM-4 workspace for Kenya has been used to compute the economic benefits for the “with” and “without” project scenarios. Accident cost savings, which are benefits resulting from the road improvement, have not been taken into account as the profile and frequency of accidents could not be determined from the available data. Table 1.3: Summary of the Study Approach Task Description Methodology Outputs 1 Compiling information Review of Final Design Physical attributes of the road sections, about road conditions Reports and the PAD including inventory and condition data, before the upgrade geometric features, etc. 2 Collecting data on the Review of the latest Monthly Project implementation progress, actual latest project status Progress Reports project costs, pavement design, road condition, etc. 3 Reviewing the latest traffic Review of traffic data Traffic volumes in terms of AADT by vehicle studies data collected by KeNHA in 2021 type, composition, traffic growth rates, etc. 4 Performing economic HDM-4 analysis, including Traffic projections, trends of road analysis sensitivity analysis deterioration, road works and costs, project benefits, economic indicators, etc. 5 Documenting the findings Report outline and write-up Economic Analysis Report in an Economic Analysis Report Data Requirements 6. The primary data sets required as inputs for HDM-4 analyses are categorized as follows: (a) Road Network Data: include inventory, geometry, pavement type, pavement strength, road condition, etc. (b) Climate Data: include details of moisture index, duration of the dry season (months), mean monthly precipitation (mm), mean temperature (°C), average temperature range (°C), no. of days with temperature exceeding T> 32° C, freeze index, etc. (c) Traffic Data: include traffic composition, volumes and growth rates, speed-flow types, and traffic flow patterns. (d) Vehicle Fleet Data: include physical vehicle characteristics, tires, utilization, loading, and performance. (e) Road Works Data: include a range of construction and maintenance work items together with their unit costs. (f) Economic Analysis components and parameters 7. The sources of data used in this study includes the following: (a) KeNHA Economic Re-Evaluation Report (dated May 2021) (b) Monthly Progress Reports for August 2021 (c) Project Appraisal Document, PAD (dated May 2015) (d) KRB customized and calibrated HDM-4 workspace for Kenya - 30 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) (e) Feasibility and design reports for the project road sections Traffic Data 8. To re-evaluate the viability of the Lokichar – Nadapal/Nakodok Road Corridor, updated traffic counts, were carried out by KeNHA in 2021. The computed annual average daily traffic (AADT) is as shown in Table 1.4 below. Table 1.4: 2021 Annual Average Daily Traffic Heavy Truck Motorcycle Articulated Light Truck 4 W/Drive Small Bus Large Bus Pick - Up Medium Lot Minibus Truck Truck Total Cars Lot 0-Loichangamak - Lodwar 3,540 536 436 412 69 8 1 20 144 121 29 5,316 Lot 1-Lodwar - Loukitaung 1,398 109 92 98 32 9 15 30 43 58 23 1,907 Lot 2-Loukitaung - Kalobeyei River 1,138 139 173 86 32 7 15 39 59 327 40 2,055 Lot 3a-Kalobeyei River - Lokichoggio 851 122 56 70 6 1 2 27 6 20 7 1,168 Lot 3b-Lokichoggio - Sudan 262 71 23 36 4 1 0 9 6 44 2 458 Lot 4-Lokichar - Loichangamatak 977 133 91 203 68 11 5 33 50 23 21 1,615 Source: KeNHA (2021)2 9. In comparison, the 2012 traffic surveys carried out during the feasibility study and detailed design of the various lots are presented in Table 1.5 below. Table 1.5: 2012 Annual Average Daily Traffic Heavy Truck Motorcycle Articulated Light Truck 4W/Drive Small Bus Large Bus Pick - Up Medium Minibus Section Truck Truck Total Cars Lot 0-Loichangamak - Lodwar 0 4 141 2 3 0 6 12 29 37 15 249 Lot 1-Lodwar - Loukitaung 276 58 175 0 35 0 5 19 29 35 10 642 Lot 2-Loukitaung - Kalobeyei 276 58 175 0 35 0 5 19 29 35 10 642 Lot 3a-Kalobeyei - Lokichoggio 276 58 175 0 35 0 5 19 29 35 10 642 Lot 3b-Lokichoggio - Sudan 163 131 151 0 10 0 0 17 11 24 12 519 Lot 4-Lokichar - Loichangamatak 0 4 141 2 3 0 6 12 29 37 15 249 Source: The World Bank (2015). PAD EARTTDFP3 10. The projected 2023 AADTs incorporating normal, diverted, and generated traffic are as shown in Table 1.6 below. 2 KeNHA (2021). Economic Re-Evaluation Report for Marich Pass – Lodwar and Lodwar – Lokichogio – Nadapal/Nakodok Road (A1) 3The World Bank (2015). Project Appraisal Document (PAD) for EARTTDFP. Report No.: PAD1226 - 31 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Table 1.6: 2023 Annual Average Daily Traffic Heavy Truck Motorcycle Articulated Light Truck 4 W/Drive Small Bus Large Bus Pick - Up Medium Lot Minibus Truck Truck Total Cars Lot 0-Loichangamak - Lodwar 1,880 755 297 770 75 10 5 26 299 232 87 4,437 Lot 1-Lodwar - Loukitaung 1,898 486 84 230 58 10 17 40 206 184 82 3,295 Lot 2-Loukitaung - Kalobeyei River 1,385 523 81 308 45 16 20 49 209 403 91 3,129 Lot 3a-Kalobeyei River - Lokichoggio 1,304 524 94 133 21 13 3 42 146 132 59 2,470 Lot 3b-Lokichoggio - Sudan 707 480 77 90 18 13 1 24 133 155 54 1,751 Lot 4-Lokichar - Loichangamatak 1,402 492 141 359 67 14 11 56 215 148 74 2,978 11. A forecast of the normal, generated and diverted traffic for 20-years after opening all the road sections has been done at the growth rates shown in Table 1.7 below. Table 1.7: Annual Traffic Growth Rates (%) Vehicle Category Traffic Growth Rate Motorcycles/ Tuktuks 6.0% Saloon Cars 6.5% Pick-up/ Vans 5.0% Matatus/ Minibuses 3.5% Buses 3.5% Light Trucks 3.5% Medium Trucks 4.0% Heavy Trucks 5.0% Articulated Trucks 5.0% Source: KeNHA (2021 Road Works and Unit Costs 12. Work Standards comprise of one or more work items (e.g., reseal, patching, overlay), defined intervention criteria to determine the timing, design characteristics, the unit costs, and the after works effects. The road works standards defined in this study are of two categories, including maintenance standards and improvement standards. - 32 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Tables 1.8 summarizes the adopted maintenance work standards and costs. Table 1.8: Unit Costs for Various Maintenance Work Standards Work Type Economic Costs (US$) Units 50mm Overlay 13.7 per m2 Resealing 3.7 per m2 Drainage cleaning 458.2 per km (Sealed) Edge Break Repair 29.3 per m2 Patching Potholes 27.5 per m2 Routine Miscellaneous 293.3 per km per year (Sealed) Light Grading 366.6 per km Spot Re-gravelling 18.3 per m3 Re-gravelling 18.3 per m3 Routine Miscellaneous 210.8 per km per year (Unsealed) Source: Calibrated and Configured HDM-4 Workspace for Kenya 13. Tables 1.9 summarizes the improvement costs, including both the works and supervision costs based on the 2015 US$ exchange rate. Table 1.9: Unit Costs for Improvement Work Standards Total Revised Contract Financial Costs per Economic Costs Lot Amount (US$) km (US$) per km (US$) Lot 0 - Loichangamatak - Lodwar 83,880,487 1,677,610 1,425,968 Lot 1 - Lodwar - Lokitaung' 120,432,060 1,505,401 1,279,591 Lot 2 - Lokitaung' - Kalobeyei 114,874,090 1,435,926 1,220,537 Lot 3a - Kalobeyei - Lokichogio 93,211,608 1,210,540 1,028,959 Lot 3b - Lokichogio - Nakodok Lot 4 - Lokichar – Loichangamatak 68,265,480 1,706,637 1,450,641 Source: August 2021 Monthly Progress Reports Findings of Economic Analysis Road Condition Trends 14. The predicted average road condition trends for the “without project” and “with project” are shown in Figure 1.1 below. These condition trends represent the engineering performance of the road over the entire life cycle and are premised on the assumption that the work standards listed in this report shall be adhered to. - 33 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Figure 1.1: Average Roughness for Lokichar – Nadapal/Nakodok Corridor Average Vehicle Operating Speeds 15. Improvement in road condition is projected to translate to increased travel speeds across the entire road corridor hence reduced journey times. 16. For the entire corridor, the average vehicle operating speed is projected to top 75km/hour for the “with project” case and about 30km/hour for the “without project” case (Figure 1.2). Figure 1.2: Average Vehicle Operating Speed for Lokichar – Nadapal/Nakodok Corridor Base Case Scenario With Project Scenario 100 Speed (km/h) 80 60 40 20 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Year - 34 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Economic Indicators 17. The analysis is based on actual costs since most road sections have either been completed or are nearing completion, and on actual traffic counts carried out in April/May 2021. Table 1.10 shows the results of the Economic Analysis including Net Present Value (NPV) and Economic Internal Rate of Return (EIRR) at Appraisal Stage (in 2015) and at Restructuring (in 2021). Table 1.10: HDM-4 Analysis Results at Appraisal (2015) and Restructuring (2021) Road Section Length Initial Contract Revised Appraisal Stage (2015) Project Restructuring (km) Sum (US$) Contract Sum (2021) (US$) NPV (USD$ EIRR (%) NPV (USD$ EIRR (%) million) million) Lokichar - 40 68,265,480 68,265,480 196 24.7 56.7 29.6 Loichangamatak Loichanagamatak - 50 83,880,487 83,880,487 195.5 36.5 Lodwar Lodwar – Lokitaung’ 80 97,926,328 120,432,060 38.48 26.5 128.6 27.4 Junction Lokitaung’ Junction 80 100,379,747 114,874,090 30.16 21.0 41.7 19.1 – Kalobeiyei River Kalobeiyei River – 77 93,211,608 93,211,608 23.43 28.1 14.3 15.1 Nadapal/Nakodok Lokichar – 327 288.1 - 436.7 26.1 Nadapal/Nakodok Source of contract amounts data: August 2021 Monthly Progress Reports Exchange Rate: US$ 1.0 = KES 92.75 (Rate used at Appraisal in 2015) Initial contract sum is slightly different from the cost estimates at Appraisal stage 18. The results show that all the road sections are still economically viable given the positive NPVs and EIRRs greater than the 12 percent planning discount rate. Loichangamatak - Lodwar road section has the best returns while Kalobeyei - Lokichogio- Nakodok road section has the lowest returns, albeit with positive NPV. The overall benefits of improving the entire corridor are approximately US$ 436.7 million at an economic rate of return of 26.1 percent. Sensitivity Analysis 19. A sensitivity analysis has been undertaken to determine the effects of variations in the values of critical input data on NPV and EIRR. The input parameters tested are a 20 percent decrease in traffic growth rates and a 20 percent increase in capital and recurrent costs. Sensitivity analysis results are as presented in Table 1.11 below. - 35 - | P a g e The World Bank EA Regional Transport , Trade and Development Facilitation Project (Second Phase of Program) (P148853) Table 1.11: Sensitivity Analysis Results for Various Sections NPV EIRR Benefit/Cost Lot Scenario (US$ Million) (%) Ratio (B/C) Lot 0: Loichangamatak - Decrease in Traffic Growth 99.0 28.6 3.9 Lodwar Increase in Capital Cost 188.8 33.3 5.7 Decrease in Traffic Growth 78.3 23.4 2.6 Lot 1: Lodwar - Lokitaung' Increase in Capital Cost 119.0 24.7 3.1 Decrease in Traffic Growth 20.5 16.0 1.4 Lot 2: Lokitaung' - Kalobeyei Increase in Capital Cost 32.2 16.9 1.6 Lot 3: Kalobeyei - Lokichogio- Decrease in Traffic Growth 3.0 12.8 1.1 Nakodok Increase in Capital Cost 6.5 13.3 1.1 Lot 4: Lokichar – Decrease in Traffic Growth 31.9 24.0 2.4 Loichangamatak Increase in Capital Cost 52.2 26.3 2.9 All Lots: Lokichar – Decrease in Traffic Growth 232.7 21.3 2.2 Nadapal/Nakodok Corridor Increase in Capital Cost 398.7 23.5 2.8 20. The sensitivity analysis has shown that the project is still viable even if the costs are increased by 20 percent or the traffic growth rates are reduced by 20 percent. Intangible Benefits 21. Intangible benefits are often excluded from appraisal studies due to the difficulty in quantifying these impacts and valuing them in monetary terms using the current techniques and tools. The anticipated additional benefits likely to be realized upon the improvement of the project road are as summarized below. 22. Growth of the local economy: This is linked to income from local purchases of sand, gravel, hardstones, etc., during the construction phases. 23. Creation of employment opportunities: Creation of employment opportunities for the local populace during the construction period for both semi-skilled and unskilled labor (e.g., messengers, secretaries, drivers, cleaners, security guards, laborers, etc.). This has injected money into the local economy and, in the process, has improved the living standards. There has also been training and technology transfer to the local communities. 24. Increase in value of land: Improved access is expected to increase the value of land within the vicinity of the project road. 25. Reduction in cost of living: This is likely to be deduced from the reduced cost of transportation of goods and services for essential commodities, including fresh produce. 26. Improved access to social services and amenities: This includes ease of access to hospitals, schools, government services, extension services, etc., leading to improved living standards. - 36 - | P a g e