Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 39696-ET PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDCREDIT INTHEAMOUNT OF SDR 148.7MILLION (US$225 MILLIONEQUIVALENT) TO THE THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA FOR A ROAD SECTORDEVELOPMENT STAGE I11PROJECT (APL3) INSUPPORTOFTHEGOVERNMENT'S ROADSECTORDEVELOPMENTPROGRAM May 3,2007 Transport Sector Country Department6 Africa This document has restricteddistribution and may be usedby recipients only inthe performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS (ExchangeRateEffectiveMarch31,2007) CurrencyUnit = EthiopianBirr (ETB) ETB8.8873 = USSl US$1 = SDR1.51326 FISCALYEAR July 8 - July7 ABBREVIATIONSAND ACRONYMS ACCPAC Vendor o f Accounting, CompensatingResource Manager and Business Management Software ADLI Agricultural Development LedIndustrialization AfDB African Development Bank APL Adaptable Program Lending including Stages 1-4 (APL1, APL2, APL3, APL4) BADEA Arab Bank for Economic Development inAfrica CAS Country Assistance Strategy CBFs Community-BasedFacilitators CPCB Central ProgramCoordinatingBoard DA Designated Account D C I Domestic ConstructionIndustry DCOI Development Cooperation o f Ireland-Former IrelandAid DED District EngineeringDivision DFWC District RoadMaintenance Contractor DFID Department for International Development, UK DMOs District Maintenance Organizations DO Development Objective EA Environmental Assessment EC Delegationof the European Commission inEthiopia EL4 Environmental Impact Assessment EIRR Economic Internal Rate o fReturn EMB Environmental Monitoring Branch EMCP Expenditure Management and Control Program EMPs Environmental Monitoring Plans EMSB Environmental Monitoring and Safety Branch ERA Ethiopian Roads Authority ERTTP Ethiopia Rural Travel and Transport Program EU EuropeanUnion FMS Financial Management System FTA Federal Transport Authority FYRR FirstYear Rate o fReturn GOE Government o f Federal Democratic Republic o f Ethiopia FOROFFICIAL USE ONLY GTZ Deutsche Gesellschaft fir Technische Zusammenarbeit HDM Highway Design Model HIV/AIDS Human Immuno Deficiency VirudAcquired Immuno Deficiency Syndrome LBRD International Bank for Reconstruction and Development ICAS Interim Country Assistance Strategy I C B International Competitive Bidding ICR ImplementationCompletionReport IDA International Development Association or Association IFRs InterimUnauditedFinancial Reports JBAR Joint Budget and Aid Review JICA Japan International Cooperation Agency KfW Kreditanstalt f~Wiederaufbau (German Bilateral Aid) LIG Local Infrastructure Grant M A P MultiAgency Aids Program MARD Ministryof Agriculture andRuralDevelopment MDGs MillenniumDevelopment Goals M&E Monitoring and Evaluation MEB Monitoring and EvaluationBranch o f ERA MOI MinistryofInfrastructure M O T C Ministryof Transport andCommunications M O W Ministryof Works andUrban Development N C B National Competitive Bidding NDF Nordic Development Fund NGO Nongovernmental Organization NPV Net Present Value OFID Organization o f Petroleum Exporting Countries Fundfor International Development ORF Office of the RoadFund P A 0 ProgramAdvisory Office PAPS Project Affected Persons PASDEP Plan for Accelerated and Sustained Development to EndPoverty PBS Protection o f Basic Services PEFA Public Expenditure and Financial Accountability PFM Public FinancialManagement PHRD Policy and HumanResources Development Fund(Japan) PIP Project Implementation Plan PMS Pavement Management System PRSP Poverty Reduction Strategy Paper PSCAP Public Service Delivery Capacity BuildingProgram PSD Private Sector Development QCBS Quality and Cost Based Selection R A P S Resettlement Action Plans RF Road Fund RPF Resettlement Policy Framework RRA(s) Regional Roads Authority(ies) RSDP GOE's Road Sector Development Program(1997-2007 coveringPhasesIand II) RSDP I GOE's Road Sector Development Program Phase I(l997-2002) RSDP I1 GOE's Road Sector Development Program Phase I1(2002-2007) RSDP 111 GOE's Road Sector Development Program Phase I11(2007-2012) RSDPSP IDA-financed Road Sector Development Program Support Project (Cr. 3032-ET) RTTP Rural Travel and Transport Program This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SBD Standard BiddingDocument SDPRP Sustainable Developmentand Poverty ReductionProgram SDR Special DrawingRights SIL4 Social Impact Assessment SNNPR Southern Nations, Nationalities & Peoples Region o f Ethiopia SOE Statement o f Expenditure TA Technical Assistance TPO(s) Transport Poverty Observatory(ies) TOR Terms o f Reference WDCS Wereda DevelopmentCommittees WIDPS Wereda IntegratedDevelopmentPlans Vice President: Obiageli K.Ezekwesili Country Director: Ishac Diwan Sector Manager: C. SanjiviRajasingham Task Team Leader: Yoshimichi Kawasumi ETHIOPIA RoadSector DevelopmentStageI11Project(APL3) CONTENTS Page Cover Sheet A STRATEGIC CONTEXT AND RATIONALE . ................................................................... 1 1. Country and sector issues.................................................................................................... 1 2. Rationale for Bankinvolvement ......................................................................................... 4 3. Higher-level objectives to which the project contributes ................................................... 5 B PROJECTDESCRIPTION . ................................................................................................... 5 1. Lending instrument............................................................................................................. 5 2. Program Objective and Stages ............................................................................................ 6 3. Project development objective andkey indicators.............................................................. 6 4. Project Components (APLStage 3) .................................................................................... 7 5. Lessons learned and reflected inthe project design ............................................................ 9 . objectives .................................................................................................................................. 6 Alternatives considered andreasons for rejection for APL3, within the overall APL 10 C IMPLEMENTATION . .......................................................................................................... 12 1. Partnership arrangements (ifapplicable) .......................................................................... 12 2. Institutional and implementationarrangements ................................................................ 12 3. Monitoring and evaluation o f outcomes/results................................................................ 15 4. Sustainability..................................................................................................................... . . . 15 5. Critical risks and possible controversialaspects ............................................................... 17 6. Loadcredit conditions andcovenants ............................................................................... 18 D APPRAISAL SUMMARY . ................................................................................................... 19 1. Economic andfinancial analyses...................................................................................... 19 2. Technical........................................................................................................................... 20 3. Fiduciary ........................................................................................................................... 20 4. Social................................................................................................................................. 21 5. Environment ...................................................................................................................... 23 6. SafeguardPolicies ............................................................................................................. 24 7. PolicyExceptions and Readiness ...................................................................................... 24 Annex 1:CountryandSector or ProgramBackground ......................................................... 25 Annex 2: Major RelatedProjectsFinancedby the Associationand/or other Agencies .......35 Annex 3: ResultsFrameworkandMonitoring ........................................................................ 37 Annex 4: DetailedProjectDescription ...................................................................................... 42 Annex 5: ProjectCosts ............................................................................................................... 47 Annex 6: ImplementationArrangements ................................................................................. 48 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 54 Annex 8: ProcurementArrangements ...................................................................................... 62 Annex 9: EconomicandFinancialAnalysis ............................................................................. 70 Annex 10: Socialand SafeguardPolicyIssues ......................................................................... 82 Annex 11:ProjectProcessing .................................................................................................... 87 Annex 12: Documentsinthe ProjectFile ................................................................................. 89 Annex 13: Statementof Loansand Credits .............................................................................. 90 Annex 14: Countryat a Glance ................................................................................................. 92 Annex 15: UpdatedLetter ofRoadSector Policy .................................................................... 94 Annex 16: Maps ......................................................................................................................... 105 ETHIOPIA ROAD SECTOR DEVELOPMENT STAGE I11PROJECT (APL3) INSUPPORTOFGOVERNMENT'S RSDP PROJECT APPRAISAL DOCUMENT AFRICA AFTTR Date: May 3, 2007 Team Leader: Yoshimichi Kawasumi Country Director: Ishac Diwan Sectors: Roads andhighways (90%); Central Sector ManagerLDirector: C. Sanjivi government administration (9%); Subnational Rajasingham government administration (1%) Themes: Infrastructure services for private sector development (P); Rural services and infrastructure (S); Other financial andprivate sector development (S) Project ID: PO91077 Environmental screening category: Full Assessment Lending Instrument: Adaptable Program Loan [ ]Loan [XI Credit [ ]Grant [ 3 Guarantee [ ]Other: For Loans/Credits/Others: Total Association financing (US$m.): 225.00 (IDA) Total: 157.39 229.29 386.68 Indicative FinancingPlan EstimatedImplementation Period(Bank FY) APL IDA Total Recipient US$ YO Others US$m Commitment Closing m US$ m Date Date Federal APL 1Grant 126.80 57.8% 92.47 219.27 06/17/2003 06/30/2009 Democratic Republic of I Ethiotia Federal APL 2 Credit 160.90 58.7% 113.29 274.19 09/22/2004 06/30/2010 Democratic Republicof Ethiopia APL 2* Federal Additional 87.30 100.0% 87.30 06/22/2006 06/30/2012 Democratic Financing Republicof Ethiopia Federal APL 3 Credit 225.00 58.2% 161.68 386.68 05/31/2007 06/30/2015 Democratic Republicof Ethiopia Federal APL4 Democratic Loadcredit 119.77 75.3% 39.39 159.16 05/31/2009 06/30/2016 Republicof I I Ethiopia I ~ Total 719.77 63.9% 406.83 1,126.60 *Supplementto the original APL2 Credit. Recipient: FEDERALDEMOCRATIC REPUBLIC OF ETHIOPIA ResponsibleAgencies: EthiopianRoads Authority P. 0.Box 1770 Addis Ababa Ethiopia Tel: 251-1-525392 Fax:251-1-514866 era1@telecom.net.et Ministry of Works andUrbanDevelopment P.O. Box 24134/1000 Addis Ababa Ethiopia Tel: 251-11-5541271 Fax: 251 115541214 MinistryofTransportandCommunications P.O.Box 1238 Addis Ababa Ethiopia Tel: 251-11-5518292 Fax:251 115515665 Ministry ofCapacityBuilding P.O. Box 1082 Ethiopia Tel: 251-1-564778 Fax: 251-1-553388 mocb@,telecom.net.et Regional RoadsAuthorities - Selectedas perproject proposal C/o P. 0.Box 1770 Addis Ababa Ethiopia TY 2008 2009 2010 2011 2012 2013 2014 2015 h u a l 20.00 40.00 40.00 60.00 40.00 15.00 5.00 5.00 hnulative 20.00 60.00 100.00 160.00 200.00 215.00 220.00 225.00 a Does the project meet the Regional criteria for readinessfor implementation? Ref:PAD D.7 [XIYes [ ]No a Project development objective and key indicators Re$ PAD B.3 & Annex 3 The objectives ofthe Stage 3 o fAdaptable Program Lending(APL3, or the project) are to assist the Recipient in(i) strengtheningand increasing its road transport infrastructure andimproving the reliabilitythereof; and (ii) strengtheningthe institutional capacity inqualityand efficiency of road construction, management and maintenance; and creating conditions conducive for the domestic construction industryto develop inthe road transport sector. Project description Re$ PAD B.4 & Annex 4 Component 1-Upgrading of FederalTrunk and Link Roads: (a) upgrading of the Gonder- DebarkRoadProject (107km); (b) rehabilitation ofthe Gedo-NekempteRoad(134 km); and(c) upgrading of the Aposto-Wendo-Negele Road (268km), including supervision. Component2- Construction o fRegional RuralRoad: construction o fthe Yalo-Nehile Road (70km), including design review and supervision. Component3-Institutional Strengtheningof ERAtoward Modernization. Component &Preparation of Sector andEngineering Studies andProvision o f Technical Sumort. Which safeguardpolicies are triggered, ifany? Re$ PAD D.6 & Annex 10 SafeguardPolicies Triggeredbythe Project Yes No Environmental Assessment (OPBP/GP4.0 1) [XI [ 1 Natural Habitats (OPBP 4.04) [ 1 [XI PestManagement(OP 4.09) [ 1 [XI Cultural Property (OP 4.11) [ 1 [XI Involuntary Resettlement (OPBP 4.12) [XI [ 1 Indigenous Peoples [XI [ 1 [ 1 Forests(OPBP 4.36) [XI Safety o f Dams (OPBP 4.37) [ 1 [XI Projects inDisputedAreas (OP/BP/GP 7.60)* [ 1 [XI Projects on International Waterways (OPBP/GP7.50) [ ] [XI Significant, non-standard conditions, if any, for: Re$ PAD C.6 Loadcredit effectiveness: - The Subsidiary Credit Agreement has been executed onbehalfo fthe Recipient andERA, satisfactory inform and substanceto the Association, and has become effective. Covenants applicable to project implementation: - ERA shall implement the Project inaccordance with the guidelines, timetables, planso f action, rules andprocedures defined inthe EnvironmentalMonitoring Plans (EMPs) and Resettlement Action Plans (RAPS). Triggers for APL3 and for APL4 (the next stape) 1 1 Overallaveragedisbursementof 30% ofthe on-goingcivil works under APLl and2. Ii COMPLETED 1 60% disbursement of Grantproceeds fromAPLl I A. STRATEGICCONTEXTAND RATIONALE 1. Country andsector issues 1. In2002, the Governmentofthe FederalDemocratic Republic ofEthiopia(GOE) launched the Sustainable Development and Poverty ReductionProgramme (SDPRP), its first Poverty Reduction Strategy Paper (PRSP), to reduce poverty by enhancing economic growth while improving service delivery. Ethiopia's strategy duringthe SDPRP period consists, among other things, o ftransforming subsistence agriculture into small-scale commercialized farmingas a key element o fthe strategy focusing on the agricultural development-led industrialization and food security. The SDPRP was launched after the GOE's 10-year Roads Sector Development Program (RSDP) (1997-2007) hadbegunimplementation and the Phase I(RSDP I) period had nearly ended. The roads sector hadbeen given a highpriority, considering the roadnetwork's initial limited extent andpoor state. Improvementsinrural infrastructure, and links to and along major import-export routes, were therefore identified to be crucial inthis endeavor. 2. The SDPRP objectives have further been extended inthe recently completed second PRSP, the Plan for Accelerated and Sustained Development to EndPoverty (PASDEP -2005/06 -2009/10datedSeptember2006). Thestrategyofagriculturaldevelopment-led industrialization (ADLI)ismaintained, butwithimportantenhancementsto capture the private initiativeof farmers and support the shifts to diversification and commercialization o f agriculture. There i s also now a consensus that growth is o f the essence, andan accelerated growth strategy i s at the core o fthe PASDEP.Ethiopia's strategy for the next five years will therefore consist of eight pillars: (i) buildingall-inclusive implementation capacity; (ii)massive pushto accelerate a growth; (iii) creating the balance betweeneconomic development andpopulation growth; (iv) unleashing the potential o f Ethiopia's women; (v) strengthening the infrastructure backbone of the country; (vi) strengthening humanresource development; (vii) managing risk and volatility; and(viii) creating employment opportunities. 3. Inthe context ofthese eightpillars, theprogramaims to involve amajor expansion ofthe roadnetwork, with the target o f constructing almost 11,000 kmo f federal and 5,500 kmo f regionalnew roads, rehabilitatinghpgrading 4,900 kmo f federal roads, andperiodic maintenance o f 3,500 kmo f federal and600 kmo f regionalroads. The emphasis will be on facilitating growth, inboth the agriculture and industrial sectors, by opening up corridors, port linkages, tourism areas, as well as linkingemergingregions better to the rest o fthe country. 4. The Bank's current Interim Country Assistance Strategy (ICAS), dated May 1,2006, supports Ethiopia's PASDEP. To support PASDEP, ICAS addresses: (i) core governance in public administration, decentralization, andpublic financial management; (ii) provision o fbasic services ina fair and accountable way; (iii) promotion o f free enterprise; (iv) improved agricultural productivity; and (v) development o f infrastructureto nurture the growth o f small towns and growth corridors. Support to the road sector i s considered a catalyst to these focal areas, and various activities included inthe program for promoting sector reform are also inline with the ICAS strategic objective. 1 GovernanceIssues 5. InlinewiththeBank's countryassistancestrategies (CASs), andinparticular the ICAS, throughout the Association's support to the GOE's RSDP andthe Association-financed projects under the APL stages 1,2, andthe proposed APL3, GOEhas givenimportance to addressing a number o f key governance issues inthe transport sector. These are further elaborated inAnnex 1 o f this PAD. The areas cover: (i) robust institutional arrangements set up with built-in the accountabilities and responsibilitiesfor planning,management, procurement and financial management, and constructionand roadmaintenance financing andits works execution; (ii) promoting social accountability by assuring that the roadplanning andprogrammingprocess leads to an equitable distribution o fpriorities among the various regions o f the country; (iii) implementing a system of service delivery report curds introduced underthe Protection o fBasic Services (PBS) project, and implemented inthe context of the PASDEP, to obtain feedback from the communities on the perfomance o f development projects and their effectiveness in contributing to the livelihoods o fthe people; (iv) implementing transparentprocurement and contract administration procedures set up inERA to ensure that award o f contracts i s in accordance with the Bank's Procurement and Operational Guidelines, and eliminate opportunities for collusion and corruptive practices; (v) taking steps (ERA with ministerial support o f GOE and the Bank)to address the recent occurrence o f low competition on APL 2 andother contracts bidunder internationalcompetitivebidding(ICB) andto identifyand eliminate any possible collusive practices bybidders, the aim being to increase the levels of competition on contractsprocessed under the roads sector developmentprogram, including the APLs; (vi) and enhancing the capacity o fERA'S Public Relationshformation Office to effectively report and share information on various aspects of the roadsprogram, from planningand designto the roadconstructionandmaintenance stages, andincluding anERA Web site announcing upcoming events and seeking public opinion, and reporting onproject and specific contract implementation progress and contractors' performance and costs. The TransportSystem 6. Ethiopia's transport system as measuredby density and quality o fthe roadnetwork, as well as its transport services, needs to be further developed to support an efficient production and distribution system that will meet the strategic objectives described above (end 2006 at 0.0359km/km2 -vs. average o fAfrica: 0.06km/km2). The transport infrastructureinEthiopia comprises a road network estimated (end 2006) at 39,477 km, o fwhich about 19,3 13 kmare federal roads and 20,164 kmregional roads; a 781 kmrailway line from Addis Ababa to Djibouti (about 709 kmwithin Ethiopia); a national merchant marine, and air transport facilities, including 2 international airports, 7 major domestic airports, andmore than 30 other domestic runways and airstrips. Ethiopia i s a land-locked country, and almost 98 percent o fthe country's export andimport needs are presently served through the Djiboutiport. 7. The GOE's Road Sector Development ProgramPhases Iand I1(RSDP I& 11) (1997- 2007) identified a number o fkey issues that have been adopted and will be addressedunder PASDEP: (i) limitedquality andquantity o f the roadnetwork andunequal distribution o f the access; (ii) continued needto strengthen institutional reform and complete the the commercialization o fERA operations; (iii) the limitedcapacity at the regionallevel andthe need to strengthen Regional RoadAuthorities (RR4s) to more effectively plan, program, mobilize, 2 andadminister financial and other resources; (iv) the needto maintainthe adequacy o froad maintenance and financing arrangements; (v) the weak domestic construction industry (DCI) and the need to strengthen it and increase its participation inroaddevelopment andmaintenance works; (vi) the importance o fthe Rural Travel and Transport Program inimproving household livelihoods andpromoting development o fWeredas (local level governments); (vii) the factors contributing to highinlandtransport costs andthe impact o ftransport cost on the overall socioeconomic development efforts; as well as (viii) the needto develop a more comprehensive roadnetwork planwhile addressing the needs o f all modes o ftransport ina national transport master plan. 8. The GOE completed RSDP Iat the end o f June 2002 andthen started RSDP 11inJuly 2002. The program aimed at fbrther developing a strong managerial andtechnical capacity to manage the roadnetwork inorder to address the key outstanding sectoral issues. The main strategies for strengthening the reform program andinvestment allocationpriorities identifiedin RSDP I1include: a) setting up a more commercially orientedERA organization; b) commercializingand decentralizingDistrict MaintenanceOrganizations (DMOs); c) strengthening the capacity o fthe R R 4 s and Weredas for improving the decentralized delivery o frural travel andtransport services; d) strengthening the DCIs and increasingtheir participationinroadcontracts; e) strengthening resource mobilization by widening the financial base o fthe Road Fundand enhancing community participation inroad construction andmaintenance; f) implementingroad safety measures andaxle loadregulations and compliance; and g) enhancing the focus on social andother development impact o f transport investments. 9. With less thana year left to complete PhaseI1(nine years since the launch o fRSDP I), GOE has made remarkable achievements inphysical, organizational, social, and financial terms. Upto the endo fJune 2006, a total o f 18,026 kmo froads hadbeen constructed, upgraded, rehabilitated, andmaintained (with a likely increase to 51,437 kmwhen construction o f community roads byregions i s added). Ofthese, 8,495 kmare federal roads and 9,53 1kmare regionalroads that have been newly constructed or maintainedsince July 1997. The total cost o f projects planned for execution duringthe same period amounted to Birr 18.7 billion (US$2.105 billion), while the total amount o fmoney disbursed inthe same periodwas Birr 18.4 billion ( ~ $ 2 . 0 71billion). The total disbursement, including expenditure on community roads, i s about Birr 19.1billion(US$2.150 billion), which is 98.4 percent o fthe plannedtarget. 10. Inparallelwithphysicalworks, achievements onpolicy issuesand capacity buildinghave also been recorded. Activities fbnded byvarious donors, such as training o f ERA personnel, D M O capacity building(fbndedby the UK Department for International Development [DFID]) andthe overall institutionalbuildingo fERA, andvarious institutional studies andtechnical assistance, havebeeneffectively undertaken. The DMOs are becoming fblly autonomous and commercial entities. Involvement o f domestic contractors inroadworks was also enhanced. UnderGOE's RSDPPhasesIand11,the Association financed contracts undernational competitive bidding(NCB), and these will be extended under APL3. Inaddition, technical advisory (TA) services fundedbythe Association andthe African Development Bank (AfDB) are currently providing support to strengthen ERA'Scontract administration and design review units. These essential policy andinstitutional reform activities will be further enhanced and continued duringthe RSDP Phase I11andAPL3. 3 11. The table belowsummarizes the impactofworks undertakenbetweenthe years 1997 and2006 measuredinterms of selected access andimpactindicators. Table 1: Changeinselectedindicators Indicators 1997 2002 2006 2006 Acc. Plan Proportion of asphalt roads ingood 17% 35% 60% 60% condition Proportion of gravel roads ingood 25% 30% 45% 44% condition Proportion ofrural roads ingood 21% 28% 46% 29% condition Roaddensity/ 1,000 km2 24.1km 30.3km 35.9km 34.9km Roaddensity/ 1,000 population 0.49km 0.50km 0.53km 0.51km Roaddensity/ 1,000 km(including n.a n.a 66.3km n.a. Roaddensity/ 1,000 population n.a n.a. I 0.98km I n.a. (includingcommuni6roads) Proportion of area more than 5km 79% 75% 71% 73% from all-weather road Proportion of rural populationmore 91% 89% 87% 82% than 2 kmfrom all-weather road Average distance to the roadnetwork 21.4km 17km 14km 15km Source: ERA'SNine-YearAssessment Report, November2006. 2. Rationalefor Bank involvement 12. An important source o fvalue addedbyBanksupport is its comparative worldwide experience inthe preparation and implementation o f major road development programs. The donor community active inEthiopia has acknowledged andrecognizedthe Bank's leadership role duringpreparationo f the GOE's RSDP. The Bankbenefits from the experience gained in implementing comprehensive road sector development programs with institutional reforms in other African countries as well as its experience inroad sector reform inthe Africa region gained over the last 10 years through the steering o fthe RoadManagement Initiative (RMI) andthe Rural Travel andTransport Program (RTTP) botho f the Sub-Saharan Africa Transport Policy Program. This has afforded the Bank the goodwill o fbeneficiaries and donors increating a cooperative framework where sector reform has gradually been shaped, implemented, and monitored. 13. The APL instrumenthas been confirmed to provide greater flexibility inadapting project design and infinancing client needs as they evolve. For this, the Bankteam has already gained experience indeveloping transport projects usingthe APL instrument through the different stages inTanzania andUganda. The Ethiopia team i s also already providing support for implementation o f Stages 1and2 o fthe APL, andis ready for Stage 3. The Bank's participation 4 thusprovides for better continuity inthe implementationofthe long-termnationalprogram, nearly 10years ofwhichwill havebeen accomplished bythe Boarddate. 3. Higher-levelobjectivesto which the projectcontributes 14. The project contributes to higher-level objectives intwo ways: (i) the key pillars o f Ethiopia's PASDEP described in Section A.1; GOE PASDEP and (ii) main objectives ofthe Bank's Ethiopia's Planfor Acceleratedand SustainedDevelopmentto EndPoverty the ICAS. ICAS addresses: (i) core governance in Bank's ICAS GOERSDP public administration, decentralization, and InterimCounpyAssistanceStrategy RoadSectorDNciopmsntProgram public financial management; (ii) provision o f VariousSector Donor Supported ProJecU basic services ina fair and accountable way; Programs and Projects mmm (iii) promotion o f free enterprise; (iv) improved agricultural productivity; and (v) development o f infrastructureto nurture the APLl (Ongoing) growth o f small towns and growth corridors. APLZ (Ongoing) GOE's RSDP objective i s to restore and APW expand Ethiopia's roadnetwork andto reduce poverty andincrease employment by APL Progra Bank'b APL4 (Future) promoting growth and mobility ina socially andenvironmentally sustainable manner.The Bank's APL is expected to contribute at the sectoral level to the GOE's RSDP through: (i) enhanced regionalmobility; (ii) creating o ftrade andjob opportunities; (iii) enhanced private sector participation; and(iv) strengthened sector capacity ineffective anddecentralized service delivery (Annex 1Table 1DOs o f ProgramsFrojects). B. PROJECTDESCRIPTION 1. Lendinginstrument 15. The GOE's RSDP Phase I(which ended June 30,2002) andthe Phase I1(ongoing) have made a significant achievement instrengthening andrehabilitating the road network, expanding the currently insufficient andpoor road system, and strengthening ERA's capacity inmanaging and executing these roadprojects. The GOE now has prepared the RSDP Phase111,with the annual procurement anddisbursement amount for federal roads to be more than doubled. The anticipated management load on ERA will therefore be substantially expandedandwill require continued capacity building.The GOE, to obtain donors' support to sustain uninterrupted progress, requested IDA from the outset for the follow-on projects on the basis o f an Adaptable ProgramLending(APL)instrument implementedinfour stages. 16. The APL allows for staged implementationo fthe overall program adopted by the GOE in view of: (i) experience inmanagingthe roads sector program to date; and (ii) need to ERA's the ensure step-by-step achievement o fkeypolicy and institutional reforms critical for the success o f the program. The phasing also allows a systematic buildup o f institutional capacity, andthe monitoring and evaluationthereof, which will be needed especially at the regional and Wereda levels, with the associated procurement processing through an APL instrument. Inaddition, it has 5 enabled unforeseen'problems experienced during ongoing APL stages to be identified and addressedinsubsequent stages to benefit previous overlapping ones. Examples include' constructioncost increases resulting from inflation causedby increasedprices o f fuel on the world market and lack o f competition inthe bids for roadcontracts as the APL has progressed. 2. Program Objective and Stages 17. The primaryobjective o f the Association's APL is to support GOE's RSDP inrestoring and expanding Ethiopia's roadnetwork to reduce poverty andincrease employment by promoting growth and mobility ina socially andenvironmentally sustainable manner. The APL also supports GOEinincreasingthe efficiency o fthe road sector through sector reform, especially by capacity buildingand institutionalreform o f ERA as a commercially oriented entity. The APL i s beingimplemented infour stages (APL1-4). The startup o f each next stage i s based on the measuredprogress o f implementation o f components o f each preceding stage and the associated policy and institutional reforms, including the readiness o fthe programs and contract awards for plannedphysical investments. 18. The specific actions ineach stage include: (i) constructionandrehabilitation o fkey links to remove constraints to growth and access and expedite exploitation o f the vast natural resources; (ii)integrating the country andproviding access to marginal and drought-prone areas andreducing transportation cost; (iii) strengthening roadmanagement and financing to ensure sustainability; (iv) developing the capacity and increasingthe participation o f domestic consultants andcontractors inthe implementation o froad contracts; and (v) developing and implementinganetwork-based approach inplanningandprogramming sectoral investment, and addressing social, environmental, anddevelopment issues down to Wereda and community levels. Improvedaccess to rural communities is buildinguponthe benefit o f the expanded trunk andregionalroadnetwork. The key results-oriented indicators o fAPL are outlined inAnnex 3. 3. Project development objective and key indicators 19. The objectives o f APL3 are to assist the GOEin(i) strengthening andincreasing its road transport infrastructure and improving the reliability thereof; and (ii) strengthening the institutional capacity inquality and efficiency o froad construction, management and maintenance; and creating conditions conducive for the domestic construction industryto develop inthe road transport sector. These objectives should leadto improving road conditions bystrengtheningexistingroadpavement structures and expanding roadaccess to regionalrural areas, with value for money, so as to enhance the efficiency o f the existing main roadnetwork andimprove access for the ruralpoor, supported by strengthened mechanisms to monitor and evaluate performance o f contractors/consultants,constructioncosts, and unit rates. 20. Inthis context, bycombiningthe proposed investmentsandcapacitybuildinginAPL3 with the overlappingactivities o fAPLl and APL2 as well as the continuing policyreforms, it is expected to contribute to: (i)sustaining APL's momentum to achieve the road condition targets through construction, rehabilitation, upgrading, andpreservation o f the priority federal and regional roadnetwork; (ii) providing a sustainable level o f essential road infrastructureto people inruralareasandimproverural access andmobilitythroughthe ERTTP; (iii) strengthening the ERAreformprogramto improve the capacity and the ability to monitor implementation 6 performance and costs to ensure highstandards o fperformance; (iv) completing the ERA modernizationprocess; (v) establishing efficient andself-sustaining construction industryby offering projects under NCB; (vi) establishing a system to monitor constructioncosts/unit rates and contractors'/consultants' performance - to ensure that ERA maintainsnecessary performance andcost data as abasis o fevaluating their performance, consultants' cost estimates, andbid price; (vii) supporting improvementsinurbantransport management; and (viii) identifying future road andtransport projects. Through this process, management o f the sector will be strengthened andcommercially oriented, and anefficient andself-sustaining constructionindustrywillbe developed that is competent andcapable of meeting the diverse needs o fthe sector. The physical targets are to have improved road conditions andto installregular maintenance mechanisms on most o fthe Ethiopian road network. Inaddition, overall roadnetwork density (kmper 1,000 km2andkmper 1,000 people) would increase with the construction o fadditional roads under APL3 where limitedor no access has existed. Key results-oriented indicators o fAPL3 are outlined inAnnex 3. 4. ProjectComponents(APL Stage 3) 21. As the basis for RSDP, GOE/ERA carried out a road network needs study that led to the development o f a coherent network-based approach to federal roadplanning andmanagement in the country, based on three objective criteria: (i)need to be responsive to food security and a poverty alleviation objectives; (ii)needto improve internal connectivity withinthe country; a and(iii)needto strengthen key export-import corridors. The regions also prepared aroad a network planthat together with the federal planwas integrated into the national roadnetwork plan-the planRSDP was basedon. Duringproject preparation, the Bank and GOE/ERA worked closely and identifiedpriority road sections, including federal trunk and linkroads, as well as regionalrural roads to be developed at each stage o fAPL. 22. The Yalo-Dalol regional road, a part o fwhich was selected for inclusionunderthe APL3, was identified ina road feasibility study financed by the Nordic Development Fund(NDF). The priority was based on a need to strengthen road sector development inthe less developed and low-road-density Afar region (along with other three low-road-density regions, namely, Beneshangul-Gumuz, Gambella, and Somali) considering also social equity inproviding access to this remote and isolated area. The selection also recognizes the time lag that exists inmost areasbetween the completion o froad construction and achieving the full developmental potential o f areas accessed. Applying the principles o fprioritization based on equitable distribution o f infrastructure allows an increase intransport's contribution to poverty reductionobjectives in less developed regions o f the country. This i s being done by constructingrural road access in areas otherwise marginalizedor isolated, allowing them to be integrated into the national road network, which facilitates overall socioeconomic development. 23. The components are: i.Theupgradingandrehabilitationoffederaltrunkandlinkroads,including:(i) upgrading o fthe Gonder-Debark gravel road (107 km) from gravel to hot asphalt mix surfacepavement; (ii) upgrading o fthe Aposto-Wendo-Negele federal link road (268 km) from gravel to hot asphaltic mix surface pavement; (iii) rehabilitation o fthe Gedo-Nekempte section o fthe Addis-Nekempte asphalt- paved federal link road (134 km); and (iv) technical advisory services for the 7 construction supervision o fthe three roads, including implementationo fthe associated environmental, safety, andresettlement plans andadverse social impact mitigation. .. 11. Construction o fregional rural road, including constructiono f (i) the Yalo-Nehile Road (70 krn, part o f Yalo-Dalol road) as a gravel roadby stages; and(ii) design review and construction supervisiono fthe road, including implementation o fthe associated environmental, safety, andresettlement plans and adverse social ... impact mitigation. This roadis intendedto be floated as NCB. 111. Institutional strengthening o fERA through provision o f TA services to assure quality inprocurement and safeguards aspects o fprogram implementationand improve efficiency and effectiveness o froads program activities execution, through establishing and implementing systems for: (i) monitoring performance o f contractors and consultants andtaking steps to improve the same; (ii) periodically assessingconstruction costs andunitrates and updating for benefit o f managing ongoing andplanningfuture contracts; and (iii) providing support to ERA'Smodernizationprocess. iv. TA services to support accomplishment o fprogram objectives, including: (i) feasibility and environmental impact assessment (EIA) studies as well as design or design review for roadprojects to be included under follow-on operations; (ii) designing o f a pilot project o f an output- andperformance-based roadcontract as a follow on component o f ongoing term maintenance contracts; (iii) support to ERTTP coordination andimplementation; and (iv) technical andmanagement study and support incapacity buildingto improve urbantransport management. 24. Because o fthe recent substantial price hike incivil works as a result o fthe global oil price increase, the total indicativeproject cost is now estimated at US$386.68. The Association's financing i s increased by US$74.74 million from the Board approved allocation o fUS$150.26 million to US$225.00 million as shown inthe following table andinAnnex 4. Priceescalation 39.29 10.1% 17.67 7.9% Total financing required 386.68 100.0% 225.00 100.0% 8 5. Lessonslearnedandreflectedinthe projectdesign 25. Implementation capacity and donor support. The importance o frealistic planningand programming with achievable goals i s one o fthe key lessons drawn from implementationo fthe GOE's RSDP I. targets set for RSDP Iwere not fully realizedpartlybecause o finadequate The funding andlack o fcapacity, especially inthe initial stage. InRSDP 11,this appearsto havebeen improved as the project progressed, and thanks to GOE's anddonors' continued andconcerted efforts, andthe overall programtargets for RSDP I1havebeen exceeded. To draw lessons, the RSDP program targets andthe performance were reviewed and reassessed, taking into account the actual and projected progress inimplementation, inorder to ensure the realism o fthe planned targets o f RSDP 111, interms not only o f fundinghudgetaryrequirements, but also implementation capacity. 26. The reported total (not only ERA) disbursed amount duringthe RSDP I(the first five years) was US$O.81 billion, that is, US$0.16 billiodyear, whereas inRSDP I1(over the past four years) it was US$1.34 billion, that is, US$0.34 billiodyear- a 113 percent increase infour-five years. The disbursed amount in2005/06 was US$0.46 billiodyear, or three times more thanthe average annual amount duringPhase I. The capacity growth result i s noteworthy. However, RSDPI11is aUS$5.87 billionprogram, that is, US$1.17 billiodyear, which anticipates another 154percent increase (uS$1.17/118$0.46=2.54) compared with the disbursement amount in 2005/06. To achieve RSDP 111, continued scaling up o fthe procurement andproject management capacity o f ERA andRRAs i s further required under APL3 and EU-fhded capacity building activities, as well as GOE's commitment insector reform. 27. Focusing on ERA, the early capacity-building support provided to ERA incontract administration, financial management andplanningserved as the bedrock for effective procurement processing andcontract management under the program, as well as for the reconciliation andupdating o fthe ERA entity accounts. Experience gained inRSDP Iand RSDP I1has shownthe importanceo fmaintaining support to ERAto assurecontinued effective implementation o fprocurement and contract administration, financial management, planningand programming, andreview and approval o froad designs identified for RSDP 11.ERA'Sproactive consultation andcoordination o f support from all agencies o f GOE, including customs and regulatory agencies inassisting contractors, has also greatly facilitated implementationo fthe civil works program as compared to works executed before the start o fRSDP. 28. Quality assurance. Assurance o f finished designs andfinished contract processing, as well as thorough prescreening o f contractors at prequalificationstage, has also beenproved from past experience to be an essential prerequisite for successful implementationo fthe ongoing road improvement contracts. Inaddition, associating localprofessionals and technicians with international firms has been found to provide the ingredients for essential capacity buildingo f firms inthe domestic consulting industry.This inturn has contributed to establishing a local consulting capability providing independent civil engineeringservices otherwise dominated by international firms. However, delays are still often experienced at various stages o fthe procurement process. This i s not necessarily the result o f lack o f the procurement capacity in general, but often results from weak quality control o fprocurement and engineering documentation. Similar weakness i s observed inthe area o f environment and social safeguard issues. To minimize the no-compliance risk andto ensure the quality o f environment and safeguard-related activities, and social aspects o f transport services ingeneral, further quality 9 assuranceinthis area i s necessary through provision o f enhanced project site visits andclose monitoring and documentationo f actions to mitigate adverse impacts caused bythe projects. 29. Poorperformance of contractors/consultants. Poorly performing international contractors andconsultants posed a challenge to ERA and also to donors, including the Bank. Although these contractors andconsultants were prequalified or short-listed, satisfyingvarious requirements regarding past performance, areas o f expertise, financial capacity, andso forth, contractors and consultants often turned out to be malperformers, causing substantial delay and poor quality work. There are contractual measures to rectify weak-performing contractors and consultants; however, such measures often cause delays inprogress and increases incost before final settlement, and inextreme cases result incontract termination. Altogether, these factors impede the timely achievement o fthe development objectives o f the program. The lesson learned from these experiences is the needto establish a system to monitor contractors' andconsultants' performance, to ensure that ERA maintains necessary, objective, and "real-time" performance data, and discloses the monitoring results to the public androadusers. 30. Project costs monitoring. Recent road construction cost increases resulting from global oil price hikes have become a great concern to GOE andits financing partners. The conventional cost estimationpractice o f superimposing cost data (for example, applying unit rates of recent works o f similar type ina similar environment, andupdatingthose applying inflation factors) appears not filly to capture the rapid change inprices or is not useful enough inanalyzingthe reasonability and appropriateness o f assumptions made inestimating unit rates andevaluating estimated costs. As a result, not only the GOE, but also the funding agencies have encountered fundingproblems. The lesson learned from these experiences is the needto establish a system o f monitoring construction costs, along with contractors' andconsultants' performance monitoring. This would ensure that ERAmaintains in-house the necessary and independently measured and surveyed cost data as a basis for evaluating consultant engineers' cost estimates and, ultimately, bidprices. Monitoring systems for costs and contractors' andconsultants' performance are expected to function as a governance tool to identify unreasonably highor low cost estimates and bidprices and to deter or correct wrong practices andmistakes. 31. Other lessons. Lessons drawn from RSDP IandRSDP I1project designs and implementationinclude the need to: i.Increaseresourcesforroaddesignandstrengthencontractroaddesignreviewcapacity inERAandother implementingagencies; ii.Implementmeasurestoattractmoreinternationalfirmstoincreasecompetitionand control artificial increases incontract prices; and iii.Continuetostrengthendomesticconstructioncapacitytotakeupmorejobsinthe expanding roads program inthe face o f limitedparticipation and lack o f competition from the world market. 6. Alternatives considered and reasonsfor rejection for APL3, within the overall APL objectives 32. Institutional reform optionsfor ERA.Developingpublic-private partnership versus continued reliance onpublic sector-based institutionsfor the deliveiy,financing, and implementation of project components. The alternatives considered included: (i) increasing ERA capacity through staff recruitment andtraining to the level required for the expandedprogram 10 under RSDP Phase I11versus (ii) contracting out some procurement and contract administration hnctions by ERA to private firms for processing andmanaging the implementationo f selected groups o f contracts under the program, or (iii) implementing a mixture o fthe two options, while at the same time taking steps to attract firms from manycountries andimproving the ERA capacity for monitoring the quality o fperformance o f contractors and consultants andthe construction andmaintenance works unit rate changes over time. Option (iii) is favoredbecause it allows the benefits gained from strengthening ERA'Scapacity incontract administration, sector planning, andprogram coordination to be sustained. 33. Focus only on engineering and works aspects of network expansion and upgrading versus social and broader development impact related issues. The alternatives considered included: (i) limitingsupport to improvingthe quality andquantityo fthe roadnetwork as measured through engineering performance-based parameters, such as length o fnetwork, roughness index, measurable benefits (reduced vehicle operating cost) versus (ii) combining achievements inengineering standards o fnetwork improvementswith ensuring the positive impact o f investments inthe sector on overall economic development as well as the social, environmental, institutional, andoperational aspects. Option (ii) was favored because, under APLl and2, it became possible to establish links with the MillenniumDevelopment Goals (MDGs)to enhance the contribution to poverty alleviation. Accordingly, ERAhas developed additional monitoring and evaluation parameters to measure improved access, employment opportunities, gender impact, capacity o f domestic contractors, institutional capacity to manage the network, financing for roadmaintenance, improved safety standards, mitigating HIVIAIDS impact, etc. Under APL1, a poverty impact study has provided baseline data to serve as the platform for comparing future poverty reductionimpacts inaddition to establishing transport poverty observatories (TPOs) for continued measurement of impacts at the local level. 34. Maintainingproject and sector reform support through APL. The alternatives considered were: (i) switching to budget support versus (ii) maintainingproject support through APLwithBank fiduciary management support. TheBank's APL facility is designedto support long-term sectorwide development. It includes sector reform andcapacity-building components, not only o fthe public, but also o f the private sector, inthe form o fprovision o fvarious sector studies andTAs, along with physicalroad infrastructuredevelopment. APL3 alone will not provide these aspects sufficiently, but with the APLl,APL2 (APLA),and all the agreed-upon support (of various components) by other donors the overall sector objectives can be achieved, as they are reviewedperiodically. The District Maintenance Organizations Capacity Building Project and the ERA Head Office Services Project financed by DFID, for instance, constitute one o f the most important components o f the full commercialization and eventual modernizationo f ERA as stipulated inthe Letter o fRoad Sector Policy (June 2004), handinhandwith various support activities fimded by EU, AfDB, NDF, the Bank, and others. This concerted effort, through thorough reviews o fthe targeted achievements o fthe specific and individual components and activities (by GOE as well as by donors), sends a strong message to the ERA o f the concern o fthe donor community as awhole andestablishes strong leverage inreminding GOE o f the relevant sector and governance issues, highlightingspecific activities and components and achievements, andnotjust the funding andbudgeting issues alone. Option (ii)s i favored because o fthat strong leverage, which i s the most important benefit o fmaintaining the current APL approach as opposed to providing budgetarysupport. 11 35. Support optionsfor the implementation of ERTTP. The alternatives considered were to: (i) continue support to preparationo f Wereda studies versus (ii)consolidate lessons learned, by ensuring the readiness o f Wereda capacity and resource allocation to implement the planning recommendations. It is worthy o fnote that implementation o fERTTP, with up to 130 Wereda IntegratedDevelopment Plans (WIDPs) being prepared, i s likely to be completed soon with support from the Bank, AfDB, andNDF, and this i s imposing significant stress on ERA's administration capacity. DuringAPL3, therefore, focus will be on monitoring andtechnical assistanceto promote Wereda development and funding arrangements for WIDP implementation andfollowup, so as to foster effective coordinationand linkages with other Wereda-level interventionsinorder to take advantage o fresources to bemade available under the DFID's transport sector budgetary support and local infrastructure grant (LIG) schemes proposed under the second phase o f the Association-financed Protection o fBasic Services (PBS) project. C. IMPLEMENTATION 1. Partnershiparrangements(ifapplicable) 36. Since launch o fthe RSDP in 1997, donor coordination for GOERSDP PhaseIand Phase I1has been implemented mainly under the leadership o f ERA. Inthe preparation process o f the GOE's RSDP Phase111,ERA has worked with the Bank andother development partners- EC, AfDB,the Japan International Cooperation Agency (JICA), Germany (Kreditanstalt fiir Wiederaufbau [KfW] andDeutsche Gesellshaft fk Technische Zusammenarbeit [GTZ]), Arab Bank for Economic Development inAfrica (BADEA), NDF, Saudi Fund, Organizationo f PetroleumExporting Countries Fundfor InternationalDevelopment (OFID), China, UK, and Ireland, each supportingprogram components as described inAnnex 2, to ensure harmonization rather than duplication ina number o f areas, including: (i)the development o fits Transport Master PlanandRoads Sector Strategy andinfinancing various sector policy studies; (ii) institutional support to ERA, RRAs, and domestic contractors for capacity building; (iii) uniform progress reporting for contracts under execution; (iv) ERTTPstudies andpilot program review andimplementation; and (v) environmental and social impact assessment andmonitoringusing the ERA Environmental Procedures Manual and Resettlement Policy Framework (RPF), HIV- AIDS strategy, andpolicy document as basic guidelines. Informulating the components o fAPL3 to support the GOE's RSDP, the Bank, inclose cooperation with the GOE ministries, agencies, andentities, hasplayed a leadingrole infine-tuningandclarifying the contributions byvarious donors to efficiently supplement and complement the individual support to best achieve the targets. The level and extent o fpartnership with other donors andERA will be further strengthened and enhanced through regular consultations on the ground, andpossible biannual meetingsor as mutually agreed under ERA's leadership. This collaborationwill be sought as the Bank appraises the APL3 andjoins other donor partners insupporting ERA and GOE inthe overall implementation o fthe RSDP. 2. Institutionalandimplementationarrangements 37. Administrative. Overall program coordination will be the responsibility o fthe Ethiopian Roads Authority (ERA), the legally autonomous Federal Government Road Agency, with its ownBoard. The Board comprises ministers or senior representatives o fkey sector ministries. 12 ERA also manages and administers the Trunk andMajor LinkRoads Programand, upto now, also the ERTTP. ERA is organized into three main departments-Regulatory andEngineering Services Department, Operations Department,andHumanResource andFinancial Management Department. Deputy Directors are responsible for managingthese departments andreport to the Director General, who is responsible for program coordination andwho reports to the ERA Board as a member. Inaddition, a RoadInspectorate Unit,which i s accountable to the ERA Board, provides independent inspection and monitoring reports on the performance ofthe road sector operations. The existing arrangements have provento be effective duringimplementation o fthe ongoing donor-supported RSDP I- 11, including Association-financed projects. In addition, some improvements inthe areas ofupdatingthe Pavement and Financial Management Systems were included inthe APL2. The Pavement Management System (PMS) implementation and the performance o fthe Inspectorate will need to be further reviewed and strengthened in APL3. 38. Maintenanceo f the federal trunk and link roads will be planned andimplementedby the reformed ERADMOs, whose functions are now separated into "client" and "service provider" in line with the commercialization process. The maintenance works will be plannedby the newly established District EngineeringDivision(DED) o fthe DMO, andimplemented by the District RoadMaintenance Contractors (DRMC), also established inthe DMO. DuringAPL3, as the first step o f the ERA modernizationprocess, the commercialization o fDMOs i s expected to occur; that is, 100percent o fDMOs function as commercial units, delivering cost-effective maintenance services within a framework o f internalperformance agreements. DFIDhas financed the TA for the DMO commercializing process inthe last five years, which was completed inMarch2007, leavingthe required implementation decisions to the ERA-which the Association has agreedto support under APLl,and ERA modernizationsupport under APL3. 39. The Office o f the RoadFund(OW) administers the RoadFundunder the RoadFund Board, which comprises representatives o fthe federal government, regional states, ERA, and private transporters. Inthe past, the Association has provided funds under APLl for ORF to carry out technical and financial audits o froadmaintenance, as well as a road financing study, the results o fwhich have been considered inimproving the quality o fworks andservices by ERAandthe various agencies at theregionallevel, androad financing andmaintenance funds allocation ingeneral. 40. Regionalroads are managed and administered by RRAs, which are legally autonomous regional government road agencies servingwith their own boards. They maintainthe regional roads directly, or by contract, inline with their capacity. Communities and Weredas will be responsible for managing and administeringthe ERTTPwithin their jurisdictions. 41, The Ministryo fWorks andUrbanDevelopment (MOWUD), which was re-established in 2005 by transfer o f some o fthe functions that had beenplaced under a Ministry o f Infrastructure, has the role o f setting overall infrastructure works policy and coordinating the agencies responsible for transport infrastructure inthe country andfacilitating the efficient resolution o f cross-sectoral issues. The MOWUD i s charged with ensuringth.at the roadnetwork o fthe nation i s developed and efficiently maintained. The Ministryo f Transport and Communications (MOTC), inaddition to overseeing postal andtelecommunications services, is responsible for seeing that services o f all transport modes are planned, developed, maintained, and regulated and function efficiently. ERA andthe ORF are accountable to the MOWUD, while the CivilAviation Authority andthe FederalTransport Authority (FTA) are accountable to the MOTC. 13 42. The other aspect o f the Sector Program is the Ethiopian Rural Travel andTransport sub- Program. The Central Program Coordinating Boardwas officially inaugurated on January 31, 2002, assuming the leadingrole inpolicy formulation, legal disposition, coordination, regulation, awareness creation, and provision o ftechnical guidance and support for the development o frural travel andtransport infrastructureand services throughout the country. The central coordination responsibility for the ERTTPat the federal level has beenwith the Ministry o fAgriculture and Rural Development (MARD),which chairs the ERTTPBoard at the federal level. ERA is the lead agency for the implementation o fthe ERTTP and Secretariat o fthe Central Program CoordinatingBoard. This arrangement has facilitated preparationofthe Wereda integrated development studies andtheir subsequent implementation, and it i s expected to bringtogether all the key agencies responsible for addressing rural development issues. It is expected that, intime, the secretariat function presentlywith ERA may move to MARD.MARDi s charged with the responsibility, inter alia, of cooperating with concerned organizations to create conducive conditions for the expansion o frural development infrastructure. These institutional arrangements are being finalized inthe context o fAPL2 implementation, with the aim o f harmonizing them with activities carried out under the mandate ofthe M O W to cooperate with regional states to undertake studiesfor the integration ofurbanandrural development activities and to assist andfollow up on the implementation. 43. Procurement (Annex8). The Engineering andRegulatory Department of ERAi s responsible for overall management o fthe procurement process inaddition to contracts implementation. Institutional support to ERA i s being providedunderthe APLl andAPL2 for planningandprocurement o fprojects, design review and approval, contract administration, claims avoidance andmanagement, and pavement management. With the initiation o fthe GOE RSDP Phase 111,however, the annual procurement anddisbursement amount for federal roads will be more than doubledcompared with the previous two phases. The anticipated scale o fthe procurement workload on ERAwill therefore be substantially expanded and will require further capacity building, includingrecruitment o f competent additional staff as well as outsourcing o f services. As described inAnnex 8, ERA is undertaking a restructuring o fthis department to deal with the increasing workload. To this end, the APL3 intends to include a strongcapacity- building, quality assurance andmonitoring component that is expected to be further complemented with financing and support by other donor partners-AfDB, DFID,EC, etc. The augmentation o f capacity will equip ERA to implement the full scope o fprocurement, contract administration, and management required inRSDP Phase I11andinAPL3. The Bank team and ERA assessed the immediatepast andpresent procurement workload (2003/04-2006/07) and actions taken to administer procurement. The results are presented inAnnex 8. Continuous staff training, outsourcing o f some procurement packages for process, andincreasedrecruitment o f new staff to fill gaps left by some departing staffhave enabled ERA to handleits increased workload. 44. For each contract financed by the credit, the different procurement or consultant selection methods, the need for prequalificationor postqualification, estimated costs, prior review requirements, andtimeframe are agreed uponbetweenthe GOE/ERA and the Association inthe Procurement Plan. This Procurement Planwill be updatedat least annually, or as required, duringimplementation. 45. Financial Management and Auditing (Annex7). Inthe active and completedprojects, funds management and administrationare done at the central levelo fERA, andnoproblem in 14 disbursements andaccountingo f funds has been identified.For the purpose o fAPL3, ERA will open a Designated Account (DA) inthe National Bank o f Ethiopia. The Association will transfer the initial advance and subsequent deposits to the DA from which ERA will pay contractors and suppliers. The Audit Services Corporation i s the current external auditor o f ERA, andthis arrangement i s to continue for the future unless ERA wants to change the current external auditors inconsultationwith the Office o fthe Federal Auditor General. The annual audited financial statements, along with the management letter, will be submitted to the Association not later than six months after the end o fthe fiscal year. 46. Disbursement ofIDA Funds (Annex 7). There are two ways o f disbursing funds from the Association. The first, the traditional method, uses Special Account (SA) or Designated Account (DA), statement o fexpenditures (SOE), and direct payment procedures. The second is the report- based method, inwhich Interim UnauditedFinancialReports (IFRs) plus additional statements will bethe basis for disbursement. ERAhas selected the traditional method. 3. Monitoring and evaluation of outcomes/results 47. Monitoring and Evaluation (M&E)will be the overall responsibility o f the Monitoring andEvaluationBranch (MEB) o fthe PlanningandProgrammingDivision. Under the RSDP Phase IandPhase 11, a local consultant was recruited under EC financing who annually collected data and prepared reports on the monitoring indicators over a four-year period (1997/98 to 2001/02). Three more indicators (employment opportunity for local labor, income generation, and improvements inskills throughtraining) were added, for whichbaseline data were collected for 2001/02. The ERA continued updating the RSDP Performance Indicators for two years (2002/03 and 2003/04), and this provided an opportunity for institutionalizing within ERA the tasks o f data collection and analysis, including indicatorsrelating to the MDGs. 48. ERA selected a consultant inDecember 2006, through a competitive process, to provide the services described above over five years (2006- 10) to update the RSDP Performance and MDGsTransport Indicators. The list ofMDGindicators andtargets andthe related transport indicators are to be reported annually to ERA and to be distributed to donor community, including IDA. These indicators will provide the basis for measuringthe extent o fthe role o f transport inthe achievement o f the MDGsand reporting as part o f general indicators adopted by the African Ministers o f Transport/Infiastructure, similar to the Africa Action PlanIndictors. 49. The arrangements above will be used or extended to serve the performance monitoring needs o fthe APL3. Output and outcome indicators and the results-based M&E data collection underRSDPare outlined inAnnex 3. ERAwill continue reporting on these indicators as part o f the annual reviews o fprojectperformance. 4. Sustainability 50. The critical factors requiredfor sustainability o fthe program and project benefits are: (i) the continued GOE commitment at the highest levelto the sector policy, institutional reforms, andfimding; (ii) strengthening the institutional and organizational capacity o froad agencies so as to ensure sustainable implementationo f the RSDP andthe upkeep o fthe roadnetwork; and (iii)fostering local contracting industry capacity to carry out maintenance andrehabilitation 15 works so that the country will not continue to face capacity constraints inexecuting road programs. 51. Under the proposed GOE RSDP PhaseI11(2007-12), ERA plans to carry out periodic maintenance on 3,037 kmo f federal roads at a cost o fBirr 899.5 million or US$101.3 million equivalent. This includes resealing or overlays on 764 kmo fbituminous pavedroads (estimated at Birr 374.3 million or US$42.1 million) andregravelingo f 2,273 kmo funpaved (gravel) roads (estimated at Birr 525.2 million or US$59.1 million). The total routine maintenance expenditure i s also projected to be Birr 950.0 million or US$106.9 million equivalent. For regionalroads periodic maintenance i s planned for 1,403 km at an estimated Birr 280.6 million or US$31.6 million equivalent along with routine maintenance expenditure at Birr 640.0 million or US$72.0 million equivalent. The RSDP PhaseI11proposal has emphasized that, without greater resource mobilization, GOEmay face budgetaryconstraints infundingthe requiredlevel o fmaintenance. These expenditure proposals were firther confirmed inthe updated letter o froad sector policy at appraisal and inthe Maintenance Action Plan submittedby EWORF. Actions to be undertaken duringRSDPPhaseI11to address these issues are: Continued GOE commitment at the highest level. Actions include: a) Involvingkey stakeholders, including direct beneficiaries andother people affected, lawmakers, andcivil society, local leaders, and citizens, inproject preparationand design, in setting the framework for sustained mobilization o f GOE andgarnering of local support essential for successful implementation. These actions include a communicationsprogram effort to maintain stakeholder andpublic support. (See Governance Aspects inAnnex 1). b) Continuing to improve and diversify resource mobilization and allocation for maintenance o fthe roadnetwork. The private sector representation on the RoadFund Board ensures transparency and accountability inthe use o f funds, with newlyestablished technical and financial auditing systems to assurethe value for money inmaintenance works. c) Financing bythe participatingregions andcommunities inprinciple o fup to 40 percent o fthe cost o f local low-volume rural travel andtransport infrastructureand services development to ensure ownership o fthe proposed program. Institutional and organizational capacity of road agencies. Actions include: d) Further strengthening o fERA'sandRRA's capacityto plan, procure, and administer civil works, associated goods and services contracts, contract management, engineering design review, and financial management, supported by donors (Association and EU). e) Enhancing major road works execution capacity through promotion and use o f domestic contractors supported by capacity-building schemes provided through ERA and supported by and coordinated with Ministries o f Works and UrbanDevelopment and Capacity Building. 0 Continuing focus on addressing social andenvironmental aspects o f transport and broader development issues. Local contracting industry capacity. 16 g) Enhancingpublic-private partnerships inthe delivery andmanagement o ftransport services. Term maintenance contracts to lead to performance-based maintenance program are also being developed as part o f the commercialization o f EM'SDMO operations, while local contractor participation i s beingpromoted to improve the efficiency inthe use o fresources; as well as aspects o f2) (e) above. 5. Criticalrisks andpossible controversial aspects 52. Specific risks andmitigation measures relating to financial management and social and environmental safeguards are outlined inAnnex 7 and Annex 10,respectively. RiskRating RiskMitigationMeasure A new contractors'/consultants' performance Country risko f corruption and M monitoring system; and cost and unit rate monitoring system for construction and maintenance works, as well as services monitoring will be established under the APL3 project. This i s to ensure transparency and to enable prompt contractual actions during implementation. FromOutputsto Objective OW'Sperformance audit system is intended to Annual road maintenance program M safeguard effective implementationby may not be implementedas monitoring o f ERA and regional and urbanroad scheduled. authorities' performance o f maintenance. Maintenance Action PlanTargets would be set and reviewed quarterly and annually. And the next program stage (APL4) would need to ensure satisfactory performance for the realizationo f triggers. Sufficient numbers o f domestic Slice and package method will be used for contractors may not be available or M major works contracts to facilitate domestic qualified to bid for available work contractors' involvement, while contract provisions also facilitate access and guarantees by GOE to financialresources. A new labor- based manual has been prepared, and small emerging contractors will be provided training on labor-based maintenance contracting, especially for maintenance. FromComponentsto Outputs ERA staffhave receivedprocurement training, Delays may occur inprocurement, M and its capacity i s being enhanced under APLl contract processing, and and 2 through technical support and training. implementation. Specific capacity enhancement to cover the work overload ifany will be provided following assessment o f ERA'Sworkload. A new transparent contractors'/consultants' performance monitoring system will also be established inAPL3 project to informprompt action to improve poor performance. 17 ERAmay experience an increase ERABoardhas approved higher salary scales instafftransfersto the private M for ERAmanagement staff. Salary review sector. ongoing for ERA staff as part o f overall national staff salary review process i s to be expedited. Close monitoring o f staff movements will be carriedout along with review o f salary and incentive schemes to ensure retention o f quality professional staff. Delays may occur infinalizing the M DFID-financed TA project completion DMO commercializationand assessmentyielded firm decisions from ERA on increasedprivate sector ways forward. Additional support will be participation inroadmaintenance provided to strengthen commercialized DMOs, works. and the modernization o f ERA. Contractor performance may not S Prequalificationrequirements include be satisfactory as per contract information on past poor performance o f contractors. ERA i s also to promptly implement contractual provisions which provide a basis for early warning and termination o fpoorly performing contractors. A new transparent contractors'/consultants' performance monitoring system will also be established. Lack o f competition, experienced M Efforts are underway by ERA/GOEto promote inthe past, as well as cost overruns the construction business under the program so may hamper the biddingand as to attract more interested firms and increase implementationo f intended works. competition. Consultant has beenrecruited to review the unitcosts o f completed designs. A new unit rate monitoring system for construction and maintenance works will be establishedunder the ApL3. OverallRiskRating M Moderate H=High S = Substantial M=Moderate L=Low Possible Controversial Aspects: None 6. Loadcredit conditions and covenants 53. .Effectiveness. The following conditions have to be met before Effectiveness ofthe IDA Credit: The SubsidiaryCredit Agreement hasbeen executed onbehalf ofthe Recipient and ERA, satisfactory inform andsubstanceto the Association, andhasbecome effective. 54. . Covenants. ERA shall carry out the Project inaccordance with the guidelines, timetables, plans o f action, rules and procedures defined inthe EMPs andRAPS. 18 D. APPRAISAL SUMMARY 1. Economic andfinancial analyses 55. Based on forecast traffic volumes, a cost-benefit analysis o fthe three mainroads was undertaken usingthe road investment planningmodel HDM4. The benefit stream consists o f changes invehicle operatingcosts and travel time savings to forecast normal traffic, diverted traffic, andtraffic generated by the investment. The cost stream comprises constructioncosts and net incrementalroad maintenance costs. Economic prices were used for the analysis. A 20-year planningtime horizonwas assumed. 56. Inorderto undertakethe analysis, the proposedinvestments were comparedwiththe option where the existing road is subject to routine and limitedperiodic maintenance. Discounted benefits were then compared to discounted costs to provide net present values discounted at 10 percent. 57. The cost-benefit analysis indicates that proposed investment for the three mainroads will be economically viable. a) Gonder-Debark (107 km) asphaltic concrete (weighted average traffic in2006: 284 ADT) Revised Financial Construction Costs: US$51.8 m RevisedEconomic NPV: US$50.6 m Revised EIRR: 20.8 percent b) Gedo-Nekempte (134 km) asphaltic concrete (weighted average traffic in2006: 614 ADT) RevisedFinancial Construction Costs: US$77.0 m RevisedEconomic NPV: US$52.5 m RevisedEIRR: 18.2 percent c) Aposto-Negele (268 km) asphaltic concrete (weighted average traffic in2006: 210 ADT) RevisedFinancial ConstructionCosts: US$139.7 m RevisedEconomic NPV: US$47.4 m RevisedEIRR: 13.9 percent d) Yalo-Dalol Regionalroad link: The proposed road stretches from the towns o fYalo to Nehile (70 km), which i s the southern section o f Yalo-Dalol road. This roadwas selected ina road study financedbyNDF as one o fthe high-priority roads as part o f a program aimed at strengthening the road sector development inthe less developed and low-road-density Afar region, considering the social equity aspects of this remote and isolatedarea that nonetheless has development potential, to ensure an equitable distribution o fpriorities among less developed regions o fthe country to increase transport contribution to poverty reductionobjectives, especially by constructingrural road access into areas otherwise disconnected or marginalized. The existing track is completely impassable ina hilly section northo fYalo, althoughthere is access from Aba Ala southward for about 80 kmto the town o fNehile. The new connection would markedly improve the efficiency o f local government and the provision o fbasic services to the local populations inthe Weredas o f Yalo, Megale, andAba-Ala. The region i s believedto have mineral deposits, primarily gold, marble, andbase metals. The connection also offers an 19 import route for the muchneeded grain products o f the Tigray Region to these Afar Region Weredas. Itwill also improve the efficiency o f food aid distribution, currently one o fthe major users o ftransport links inthe area. 2. Technical 58. The APL3 project comprises civil works and consultant services with respect to rehabilitation and strengthening o f federal trunk and link roads o f asphalt pavement standard, as well as constructiono f a new section o f gravel-surfaced regionalroad. ERA, with the assistance o f consultant services provided under the Road Sector Development Program Support Project (RSDPSP: Cr. 3032-ET) andAPL1, has already completed economic feasibility analyses and EIAreports for the roads proposed inAPL3. The economic andtechnical feasibility analyses constitutedreview, verification, andupdate o f existing designs. Consultancy services for detailed engineering designs for the selected roads are completed. 59. The final designs were based on Ethiopian national (andother comparable international) road design standards and specifications, which havebeenprepared byERA with TA support underRoadRehabilitationProject (RRP: Cr. 2438) andcontinuedunder RSDPSP. The design standards andspecifications adopted for individual roadsections also take into account recommendations arising out o froad safety studies financed bythe EU, as well as provisions satisfactory to ERA, the Association, and donor partners. The design andtechnical standards havebeen selected to meet the class functions o fthe specific roads. Contract documents are also being prepared underthe same consulting services, and support is being given to ERA for the prequalification o f contractors for the civil works contracts. The project costs havebeen estimated on the basis o f detailed designs andavailable cost data from ongoing andrecently completedcontracts, which have hrther been revisedwith an independent consultant to reflect the recent price hikeof fuel andresultant cost increases, especially o f constructionmaterials, and equipment. Construction supervision i s to be entirely carried out byprivate consultants, in association with international and Ethiopian firms involving foreign and local engineers and technicians, or local firms alone ifandwhen they qualify. 60. Road classificationandnumbering, as well as pavement management systems have been established with the Association support under RRP.The systems provide the basis for the road network administration andplanning, as well as assessment o froadmaintenance and other improvement needs. Actions agreed on underAPLl and2 for increased participation o fdomestic contractors would be further continued under APL3. 3. Fiduciary 61. The existing accounting andreporting system o f ERA is capable o fproducing accurate andreliable informationregardingproject resources andexpenditures. The system willprovide reliable records and reports on all assets and liabilities and financial transactions o f the project, and sufficient financial information for managing andmonitoring activities. ERA's financial management system i s designed to produce financial statements o fthe entity as a whole to be used by all donors and the GOE. 62. ERA's HumanResource andFinanceDepartment is staffed with adequate and appropriately qualified people. The Project Finance Section inthe department handles all project 20 related transactions. Staff working inthe section have very good experience and are capable o f handlingproject financial transactions inaccordance with IDA'Sdisbursement guidelines and procedures. 63. The overall conclusion from the recent diagnostic exercises i s that considerable progress has been made inthe rationalizationand strengthening o fbudgeting process at the federal level. Various capacity-building efforts are being undertakenat the regional level as well. Despite some progress made inlast three years, there are weaknesses inthe medium term inplanning, accounting, auditing, andreporting. Remedial actions on the weaknesses are being taken through the Expenditure Management and Control Program (EMCP), the Capacity Buildingfor DecentralizedService Delivery Project and the Public Service Delivery Capacity Building Program (PSCAP). 64. The Association, through APL2, i s providing technical assistanceto ERA inorder to Wher strengthen the financial management capacities ofthe HeadOffice andDistrict Offices. The objective o f the technical assistance i s to support the overall ERA reform started about eight years ago. 65. ERAwill open aDesignated Account (DA) inthe National Banko fEthiopia. The Association will transfer the initial advance and subsequent deposits to the created DA. ERA will thenpaycontractors andsuppliers fromtheDA. 66. The Federal Auditor General will assign external auditors, acceptable to the Association, to conduct the audit o fthe project financial transactions. Currently, the Audit Services Corporation is assigned as the external auditor of ERA. The annual audited financial statements, along with the management letter, will be submitted to IDAno later than six months after the end o fthe fiscal year. 4. Social 67. CASand PASDEP. The Bank's Interim Country Assistance Strategy (ICAS), May 1, 2006, supports Ethiopia's PASDEP. ICAS addresses: (i) core governance inpublic administration, decentralization, and public financial management; (ii) provision o fbasic services ina fair and accountable way; (iii) promotion o f free enterprise; (iv) improved agricultural productivity; and (v) development o f infrastructureto nurture the growth o f small towns and growth corridors. Support to the road sector i s considered a catalyst to these focal areas, andvarious activities includedinthe sector program for promoting sector reform are also inlinewiththe ICAS strategic objective. 68. Social Assessment. Social assessmentswere carried out on all project roads in conjunction with the feasibility studies. The assessments included consultations with local and regional governments and focus group discussions with local communities traversed bythe road alignment. The assessmentshighlightedthe situation o fmarginalizedgroups such as rural women andpastoral communities and the benefits to them o f enhanced access and mobility, basic services, and market access (one o fthe major goals o fPASDEP). 69. Poverty and Equity. Social equity, interms o f geographical distribution ofAPL3 road projects andthe socioeconomic benefits o fpopulations inthe roadproject area, constitutes the basis o f RSDP o fwhich APL3 is a component. As result o fthe RSDP expansion o fthe road network over the past 10years, today about "42 percent o frural households are now less than 21 five kmaway from the closest all-weather road, while around 58 percent still need to travel five or more kmto reach the nearest all-weather road" (PADSEP: 42). APL3 will continue to further reduce the number o f rural households that have to walk more than five kmto an all-weather road. 70. The main social contribution o f ApL3 is the provision o fbasic regional andnationalroad access andmobility to populations traversed bythe roads, andto other users transporting goods andpeople. Social andpoverty-focusedoutcomes o fAPL3 include: (i) creation and income- job generating opportunities inrural areas; (ii) provision o f all-weather transport access; (iii) development o f infrastructureaccess to promote the growth o f small towns, villages, and settlements inthe road corridors; (iv) connecting agricultural products to markets; and(v) enhanced trade andmobility o f goods andpeople, which will eventually contribute to achieving the MDGs. 71. Gender Issues. Gender issueswere assessedandhighlighted inthe social assessmentsand taken into account inthe project designs andinthe RAPS.APL3 will benefit women, men, and the elderly byresponding to their mobility needs byproviding them all better access to basic social services (health, church, school, administration) andto markets. Particular attention will, however, be given to providing safe and enhanced access to marketplaces along the roads, which will benefit rural women and children. UnderAPL2, funds from the Japanese Social Development Fundwere secured to target emergency access with focus on maternalhealth. APL3 will implement the activities identified. 72. Participation. The identification o fproject components was deeply anchored ina participatory process with the major stakeholders, government officials, regional officials, the ERAmanagement, and development partners. Project roadalignments were selected based on consultations with local communities, local governments, regional authorities, and national authorities, taking into account access and mobility needs o fvarious populations. Representatives o f local governments ando fpersons affected bythe project will makeup the compensation committees o f each roadproject. Inthe Afar Region, for the Yalo-Dalol road, the compensation committees will be anchored inthe sociocultural organizations o f the Afar people. Localpopulations traversed bythe road alignments will be offered income-generating opportunities, giving thempriority inobtaining variousjob positions inthe roadconstruction process. 73. HIV/AIDS Prevention. The response to HIV/AIDS at ERAhas been comprehensive. The approach andresult o fthe HIV/AIDS prevention work carried out bythe ERA HIV/AIDS unit underthe EnvironmentalMonitoring andSafety Branchhavebecome the best practice example for the EthiopiaMAP and AFTTR. The program addressesHIV/AIDSissues insector policy, at the institutional and humanresources levels within ERA, and at the project level incivil works and with contractors, employees, and local communities. The program will continue under APL3 andensure the implementationo fthe HIV/AIDS clauses inthe works contracts. 74. The HIV/AIDSprevention unit has beenresponsible for creating the HIV/AIDS policy, initiating the institutionalresponse for HIV/AIDS training (covering 16,000 ERA employees), andproviding access to voluntary counseling andtesting andpreventive andtreatment pharmaceuticals. Outcomes from this program are highlevels o f awareness o fHIV/AIDS (95 percent o fERA staff, 85 percent o fworkers), reduced stigmatization, and access to treatment. In addition, the program has created simple monitoring forms that are usedby all contractors and 22 manyo fthe program's materials andoutputs were used as training materials at the HN/AIDS Prevention inthe Transport Sector Workshop in2005. 75. Capacity-building and mainstreamingsocial issues in roadprojects. In2003, the Bank Teamandthe ERA cosponsored training onthe social dimensions o ftransport with the World Bank's Social Development Anchor andAfrica units. This training included more than 100local participants from ERA, other ministries, social scientists, private sector consultants, Right o f Way (ROW)agents, contract specialists, regionalroadmanagers, health/HIV specialists, academics, civil society, and other transport sector stakeholders. The objective was to builda constituency o f stakeholders cognizant o f the range o f social issues intransport andwith the capacity to address them. APL3 will carry out a sequel to the training on social dimensions o f transport, inview o f strengthening the inclusion and assessmento f social benefits o fApL3 road projects. 76. The procedures developed under APLl and2 for mainstreaming social issues into civil works will be fbrther implemented under APL3. All design terms o freference (TOR) now include attention to social issues and roadcorridor community development plans. Bidding documents for civil works include environmental, social, and HIV/AIDS clauses that are reportedon inthe monthlyconsultant documentation. 77. Impact assessment. To assess the poverty impacts and social benefits o f APL3 road projects, TPO were initiated to assess road constructionprocess impacts, access impacts, and mobility impacts under APLl and APL2 on four o fthe roadprojects. These will be continued underAPL3 on eachroad alignment at the local community level. MDGindicators will also be monitored as inAPL2. The MDG indicators give a national picture o f the impact o fthe RSDP, while the TPOs focus on the social impacts ofparticular roadprojects at the local level. ERA and the Bank will explore ways o f integrating the information into the monitoring capacities o fthe ERA'SGeographical Information System (GIs). Inaddition, APL3 will continue to support the rich social agenda that was initiated under APLl and 2, inparticular HIV/AIDS prevention and control, health emergency access, andcapacity building. 5. Environment 78. Individual EIAswere carried out for the four roadprojects, including EMPs.No salient environmentalimpacts have been identified. Environmental protection clauses as well as sexually transmitted diseases and HIV/AIDSpreventionclauses will be incorporatedinthe works contract documents, inspecifications, as well as inthe bills o f quantities. Implementation o fthe EMPs, will be undertaken by the ERA EMSB. 79. APL3 will continue to support EMSBto implementEMPs and the RAPSprepared for each o f the proposed follow-on roadprojects. The program will also strengthen management capacity o f the unit through training and logistical support. Supervision o fproject operations will include a social scientist and environment specialists. Project progress reports shall include monitoring o f environmentalmitigation measures. 23 6. Safeguard Policies Safeguard Policies Triggered by the Project Yes No EnvironmentalAssessment (OP/BP 4.01) [ XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.11) [I [XI InvoluntaryResettlement (OP/BP 4.12) [XI [I IndigenousPeoples (OP/BP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects inDisputed Areas (OP/BP 7.60)* [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI 7. Policy Exceptions and Readiness 80. There are no policy exceptions from those already governing implementation o fthe APLl andAPL2. 81. The project is ready for implementation as a result o fthe following. The financial management andprocurement arrangements are inplace, andERA'Sproject staff are already mobilized andat post. M&EBranch o f ERA i s inplace and the routine project monitoring arrangements have beenmadewith the independent consultant mobilized for annual data collection andreporting. Engineering design documents for the first year's activities are ready for implementationas part o fthe overall biddocument package. All key safeguard reports have been disclosed incountry and inthe Bank's InfoShop (Annex 10). The procurement planhas also been confirmed andwill be updated at least once a year. 'By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claimson the disputedareas 24 Annex 1: Country andSector or ProgramBackground ETHIOPIA: RoadSector DevelopmentStageI11Project(APL3) Countryandsector issues 1. In2002, the GOE launched the SDPRP, its first PRSP, to reduce povertyby enhancing economic growth while improving service delivery.The SDPRP objectives are further being extended inthe recently completed second PRSP, the Plan for Accelerated and Sustained Development to EndPoverty (PASDEP - 2005/06 - 2009/10 dated September 2006). The strategy o f ADLI i s maintained, but with important enhancements to capture the private initiative o f farmers and support the shifts to diversification and commercialization o f agriculture. There i s also now a consensusthat growth i s o f the essence, and an accelerated growth strategy i s at the core o f the PASDEP. 2. Inthe context ofPASDEP, the GOE RSDP is plannedto involve amajor expansion o f the road network, with a target o f constructing almost 20,000 km o f new roads by 2010 (90 percent o f them inrural areas) and ensuringimprovedmaintenance so that 84 percent o fthe network will be ingood condition. 3. The Bank's ICAS o f May 1,2006, supports Ethiopia's PASDEP. ICAS addresses: (i) core governance inpublic administration, decentralization, and public financial management; (ii) provision o fbasic services ina fair and accountable way; (iii) promotion o f free enterprise; (iv) improved agricultural productivity; and (v) development o f infrastructureto nurturethe growth o f small towns and growth corridors. Support to the road sector i s considered a catalyst to these focal areas, and various activities included inthe sector program for promoting sector reform are also inline with the ICAS strategic objective. 4. The Transport System. Ethiopia's transport systemcomprises a roadnetwork estimated ' (end o f 2006) at 39,477 km (of which about 19,3 13 km are federal roads and 20,164 kmregional roads); a 781 kmrailway line from Addis Ababa to Djibouti (about 709 kmwithin Ethiopia); a nationalmerchant marine; and air transport facilities including 2 international airports, 7 major domestic airports, and more than 30 other domestic runways and airstrips. Ethiopia i s a landlocked country, and almost 98 percent o f the country's export and import needs are presently served through the Djiboutiport. The ports o f Sudan and Berbera in Somaliland are also serving, to some extent, within their zones o f influence from the western and eastern parts o fthe two countries. 5. RoadTransportInfrastructure.Roads are the dominant mode oftransport, carrying about 95 percent o f the country's passenger and freight traffic and providing the only form o f access to most rural communities. Despite considerable efforts to expand the roadnetwork over the past few decades, the country still has one o f the lowest road densities inAfrica. Transport infrastructure inEthiopia at 35.9 kmper 1,000 km2in2006, although better than in 1994 (at 21 kmper 1,000 km2),the densityis still below the average o f60 kmper 1,000 km2for Africa. It is inadequate to support an efficient production and distribution system to serve the country's economic strategic objectives. As a result o f the investmentsmade under RSDP, the share o f federal paved roads ingood condition improved from 17 percent in 1997 to 60 percent in2006, and the share o f federal gravel roads ingood condition improved from 25 percent in 1997 to 45 25 percent in2006. It i s estimated that about 70 percent o fthe total area o f the country i s now more than half a day's walk from all-weather roads. 6. Road Transport Services. The operational registered vehicle fleet inEthiopia i s estimated at about 190,000 (in2006) representingvehicle ownership o f more than two vehicles per 1,000 population, which is low incomparison with other Sub-Saharan African countries. As aresult o fthe low level o fmotorization, the traditionalmode o ftransportation o fwalking andhead loading are the transport modes inrural areas, with motorized vehicles usedonly for long distance freight and passenger services. It i s expectedthat the level o fmotorizationwould increasebut still be low compared to current levels inKenyao f 18 vehicledl,000 people andZimbabwe o f27.2 vehicles11,OOO people. Untilrecently, the combined fleet of the public and private sectors has been inadequate for the size o f the population. The problem has been compounded by the age o f the private sector fleet. Recently, there hasbeena sharp increase inthe import o fmotor vehicles, reflecting the effects o f deregulation o froadtransport industry. 7. Urban Transport. Urban transport inAddis Ababa has been characterized by heavy congestion duringpeak periods, low vehicle utilization, weak application o ftraffic management measures, inadequate facilities for pedestrian and nonmotorizedtransport movement, andpoor road safety arrangements and highnumber o f accidents. Public transport consists o fpublicly owned bus services, private minibus operators, and conventional taxis. As mentioned above, the current motor vehicle fleet in2006 i s estimated to have reached 190,000, but 45 percent o f the vehicle fleet i s reported to be older than 30 years. The motor vehicle ownership i s low inAddis Ababa at one automobile per 44 persons. The modal split for trips inthe mid-90s was also estimated at pedestrian trips (70 percent), public transport (26 percent), and cars (4 percent). Much infrastructureimprovement has taken place recently inAddis Ababa. Introduction o f middle-size commuter buses and mass transit development i s currently planned; however, a complete physical development master plan and urban transport management plan i s yet to be implemented. Governance Issues. 8. InlinewiththeBank's country assistancestrategies (inparticular theMay 2006 ICAS), throughout the Association's support to the GOE's RSDP and the Association-financed APL stage projects, importancehas been given to addressing a number o fkey governance issues. (i) As described inother sections ofthe PAD, muchhasbeendone inthe context o f the RSDP to support GOE in setting up robust institutional arrangements with built-inaccountabilities and responsibilitiesfor planning, management, procurement and financial management, as well as construction and road maintenance financing and its works execution. Some specific actions o fnote include: (a) the creation and functioning of the ERA Board, with a wide sectoral representation to provide general oversight and guidance on ERA'Sprogram management and execution; (b) creation and functioning o f the Office o f the RoadFundAdministration with a Board including representation o f the private sector and various sectors; and (c) settingup the Roads Inspectorate Unit, as an independentoffice for inspectingthe performance ofmajor components o f RSDP interms o f financial, technical, contractual, and managerial efficiency and effectiveness. 26 (ii)Oneareaof socialaccountabilitypromotedundertheprogramisassuringthat the roadplanning andprogrammingprocess leads to a fair distribution o froad infrastructureassets by ensuring an equitable distribution o fpriorities among the various regions o fthe country. Under the GOE's RSDP, the distribution o froads to be constructed, upgraded, or rehabilitatedwith program resources overall, and inparticularwith the support ofthe Association andother donor resources, has generally beenfound not to reflect any political bias. Rather, the selection o f roads has been motivated by expected economic returns. However, as the country seeks to increase transport contribution to poverty reduction objectives, especially by constructingrural roads and main access into areas otherwise marginalized, consideration will increasinglybe turnedto basing decisions on social factors such as increased access, equity, and so forth. The TPOs that are beingset up to monitor and report the poverty impact o ftransport projects, and the level o fachievement ofMDGs,wouldprovide abetterunderstanding o fthe impact o f transport projects on poverty a the local level, and greatly contribute to highlightingimportant poverty-relatedprioritization criteria for improving the planning process. (iii)PASDEPreportsthattheGOEisimplementingasystemof servicedelivery report cards that were introduced under the PBS to obtain feedback from the communities on the performance o f development projects, and their effectiveness incontributing to the livelihoods o fthe people. PASDEP has already reported positive impacts o froad construction on mobility. This i s an approach that could be incorporated into the TPO to complement the application o f community score cards under the PBS program, and/or integrated as backgroundinformation on social impacts. (iv) Procurement and contract administrationprocedures set up inERA also ensure that award o f contracts i s undertakenin accordance with the Bank's Procurement and Operational Guidelines,which have been adopted and are equally applicable to those o f other keypartners such as ADB, and inline with the GOE's procurement guidelines. The EUhas chosen to support the remainder o fthe program through Sector Budget Support, and hence has deferred such concerns to be addressedwithin the context o f the country systems. The Bank carries out with the GOE regular country and sector procurement capacity assessment, which enables confidence to be established inmanaging the procurement process. Every effort i s therefore made to ensure that the procurement process i s transparent and minimizes the chances o f corruption. Factors such as equal and fair opportunities for participation by all firms inthe private sector and creation o f employment opportunities inall regions are taken into account. ERA'Saccumulated rich experience inimplementingprocurement under the RSDP incompliance with fundamental principles o fpublic procurement procedures will be further strengthened. Existing staff will be given refresher courses, while new recruits will be provided with training on Bank's procurement and operational guidelines and the new harmonized SBD for works. 27 (v) Lack of competition, increasing construction costs, and the needfor vigilance in eliminatingpossible collusivepractices: As the overall RSDP implementationhas continued through Phases Iand 11, as evidenced inthe contract processing under the Association's APLl and APL2 there has beena reduction inthe number and country representation o f international contractors participating inroad contracts inEthiopia, leading to inadequate competition, with suspicions of collusive practices inthe case o frecent contracts under process, four o fwhich have beenrebid. The growing situation andits impact have already beenrecognized by the GOE and, with the Association's support, it i s taking steps to improve the levels o f competition on the contracts processed under the program. GOE, for example i s extending its efforts to countries outside o f Ethiopia inorder to promote the roads program and to attract much wider participation o f firms from different countries. Associated increased construction contract bidprices and actual finishedconstruction costs have also highlighted the need for close and constant monitoring o f unit rates o f construction contract bill items. (vi) ERA'SPublic RelationhformationOffice has also been equippedto cover report, and share information on various aspects of the worksprogram from its planning and design to the road construction and maintenance stages. The creation o f the ERA Web site will allow for reporting on upcoming events and seeking public opinion, as well as reporting on overall project and specific contract implementation progress and contractor performance. The specific activities include seekingpublic opinions through community consultation and addressing issues arising duringimplementation, including review o f community plans and concerns, compensations paid to people associated with theproject, and deliberate actions to provide for the social needs o f communities. The recently completed Association-financed program can already report on actions taken on completed roads, which include linkingroad drainage structures to agricultural irrigation schemes and supporting community development efforts and needs. This has highlightedthe concept o froad corridor development, which provides opportunity for potential multisector complementary development. Other Sector Issues 9. The PASDEP, interms o f road development,highlighted a number o f issues, including that, beyond efforts to expand the network, it i s important to maintainthe existingnetwork, ensure better road safety, and develop the local contractor base. Inthe course o f implementing the Road Sector Development ProgramPhaseIand I1(RSDP I& II), also insupport o fthe and PASDEP, a number o fkey issues still need to be addressed: 10. Limited Quality and Quantity of the Road Network. It i s estimated that more than halfof the country's roadnetwork needs to be properly linked,rehabilitated, or reconstructed, and the network needs to be expanded to contribute to meetingthe MDGs. 11. StrengtheningInstitutional Reform, commercialization of ERA operations, andfuture modernization. ERA i s responsible for the constructionand maintenance o f federal roads as well as for the country's road network planning and donor coordination. Its capacity was enhanced 28 through T A support and training duringthe GOE's overall RSDP Phase Iinthe areas o fplanning andprocurement and network management, and further indesign and contract administration underthe RSDP Phase 11.Inaddition, anumber o f studieswere completedleading to establishment o fworking systems for an improved network management. However, expansion o f the program and the competition posed by attractive private sector employment has begunto take its toll on ERA staff outputs. Also, with the expansion o f the work program as proposed under RSDP Phase111,much more needs to be done to strengthenthe critical areas o fprocurement processing, including review and approval o f road designs, internal regulations, project implementationfollowup and monitoring, evaluation and technical reporting, and quality assurance. Inaddition, the commercialization o f the DMOs, and ERA modernizationi s being facilitated through the ongoingbusiness process re-engineering under the Ministry o f Capacity Building, inline with the Letter ofRoad Sector Policy (June 2004). This process will be further facilitated under APL3. Inaddition, the commercialization o f DMOs and modernization o f ERA are beingfacilitated through the ongoingbusiness process re-engineering. 12. Strengthening Regional RoadAuthorities. R R A s have beenresponsible for construction and maintenance o f regional roads network since February 1993, but their capacity to do so i s limited.Duringimplementation o fthe RSDP Iand 11, different donors have assistedin developing their capacity, especially for planning and contract administration. There i s still a need to strengthen the role o f R R A s to more effectively plan, program, mobilize, and administer finance and other resources, and manage and oversee implementation; and further financial support by the EUwill be continued duringRSDP I11 13. Adequacy of Road Maintenance and Financing Arrangements. Total collection by the RoadFund, established in 1997, amounts to ETB 3.086 billion (US$347.4 million), while the disbursementsare ETB 1.428 billion (US$160.8 million). The ORFreports that its budget for FY07 i s Birr 756 million (US$85. 1 million), with 1.14 percent and 2.29 percent o fthe allocation beingfor road safety and office support (financial and technical audit support), while the other 96.57 percent will be allocated for road maintenance. Sixty-five percent o f the roadmaintenance allocation i s for ERA for federal roads, 25 percent for RRAs, and 10 percent i s for selected municipalities, o f which 50 percent i s for Addis Ababa city. The ORF has also reported that both the fuel levy and V A T collection on fuel sales i s being transferred to the fund. While routine maintenance needs o fthe federal road network are beingmet, the requirementso fthe regional road network and for periodic maintenance needto be assessed and addressed. Inview o f the backlog, and efforts by the executing agencies to keep the network ina passable condition, a planned and closely monitored maintenance regimei s to be applied. Steps are being taken to improve the linkage among the pavement management system, the maintenance management system, and the roadcondition surveys to help establish the overall maintenance needs ofthe network and requiredfinancing, taking into account that the disbursement amount for maintenance works startedexceeding the allocated annual budget in2004/05, which implies the near future need for enhanced RFrevenue diversification. Though the current estimation shows sufficient revenue, it will be essential that inthe early stages o f this development, the O W takes necessary steps to further enhance RFrevenue diversification. 14. Limited Capacity ofDomestic Construction Industry (DCI): The D C I inEthiopia i s still largely characterized by an inadequate capital base, limitedand poorly managed equipment fleets, and deficiencies intechnical, managerial, financial, and entrepreneurial skills resulting from previous policies that were not favorable to its development. Some reform measures were 29 embraced under RSDP Iand I1to change this scenario and build local capacity and increase involvement inthe various aspects o f the program. Inthis context, the Association's support has been extended inagreement with GOE by dedicating some contracts for award to domestic contractors on a NCB basis. EUalso continues supporting D C I capacity buildingduringPhase 111.ERA andRRAs have also contracted out works to domestic contractors alongwith changing some conditions o f contracts inGOE-financed projects, to create an enabling environment. To date, except as subcontractors, no domestic contractors have beenable to participate in Association-financed ICB contracts because o f failure to meet the qualification criteria and some conditions o f contract. There i s therefore a needto review the qualification criteria and some conditions o f contract ifincreased participation o f domestic contractors inICB contracts i s to occur. 15. Rural Travel and Transport. The key issues identified inthe Rural Roads and Transport Policy and Strategy are: (i) absence o f sound organizational structures to cater to the characteristics and levels o f travel and transport requirementsat the household and community levels; (ii)absence o fplanning and programming methodologies to consider the nature and size o f transport demand inimproving local-level access to economic and social services; (iii) lack o f coordination and popular participation inthe identification and prioritization o frural roads; (iv) lack o f correspondence between design standards and travel and transport demand requirements; and (v) shortcomings inthe expansion o f labor-based technology inthe context o f generating employment opportunities and effective use o f local resources inaccordance with the GOE's overall strategy. The Association will provide necessary technical assistance during APL3 to monitor andto promote Wereda development and funding arrangements for WIDP implementation and followup, so as to foster effective coordination and linkages with other Wereda-level interventions and take advantage o f resources to be made available underthe DFID's transport sector budgetary support and LIGschemesproposed underthe secondphase o f the Association-financed PBS project. 16. Transport Costs. There i s a continuing needto understand better the full impact o f internal and external transport costs on trade and the overall socioeconomic development efforts. Some studies indicate that, among others, domestic off-road transport cost i s very difficult to pinpoint, as i s segregating transaction costs from the movement o fthe harvest from farm gate to market. 17. Road Network Planning and Transport Master Plan. ERA has recruiteda consultant to prepareaNational Transport Master Plan. This step has derivedfrom the need to better use the full potential ofthe various modes o ftransport: air, rail, roads, and to a limitedextent river transport, inmeetingthe transport needs across the country. The National Transport Master Plan would cover the needs o f all modes o f transport. GOE Strategy 18. The GOE continues to attach a highpriority to the road sector inits overall economic development program and PRS. In 1997, a major 10-year RSDP (later expanded to 15 years) was launched inorder to address the limitedcoverage and poor state o f the road network, as well as the growing transport requirementsofthe country. RSDP was launched with significant donor support to create adequate capacity inthe road sector, and to facilitate the economic recovery process through the restoration o f the essential roadnetwork. With the completion o f the Phase I of RSDP (RSDP I) the end o f June 2002, the GOE started RSDP 11.The program aimed at the at 30 further development ofa strong management and technicalcapacity to manage theroadnetwork, inorder to addresskeyoutstanding sectoral issues, alongwith development o fthe capacity ofthe DCI. 19. With less than a year left to completion o fPhaseI1(9 years since the launcho fRSDP PhaseI), the GOEhas made remarkable achievement inboth physical and financial terms. 20. With the impendingcompletiono fthe RSDPI1at the end o fJune 2007, the GOE announced the thirdphase o f RSDP (2007-12) at a stakeholders' workshop inNovember 2006. This RSDP I11was prepared inthe context o fthe GOE's PASDEP. The Road Infi-astructure Needs Assessment for the MDGs (October 2004) was the basis for preparing the RSDP under the PASDEP. 21. The main objective o f RSDP I11i s to continue restoring and expanding Ethiopia's road network. Side by side the program would assist indeveloping strong management and technical capacity to manage the roadnetwork and develop the capacity o f the domestic construction industry.Investments under the programwill also continue to improve access o frural communities to markets, off-farm economic opportunities, and social services, which are still the major impediments to a sustainable social and economic development. The RSDP I11time frame covers the period from July 2007 to June 2012. 22. The key areas for strengtheningthe reform program and investment allocation priorities identifiedinRSDPand to be continued duringPhase I11include: (i)Rehabilitating,improving,andconstructingpriorityroadsessentialforthe distribution and marketing o f agricultural products; (ii) Implementing the Ethiopian Rural Travel and Transport subprogram to improve accessibility, reduce transport burden, and alleviate poverty; (iii) Strengthening the administration and management o f federal, regional, and community roads to keep the networks insatisfactory condition, including: (a) attaining a commercially oriented ERA organization; (b) commercializing and decentralizingDMOs; and (c) strengthening the capacity o fthe R R A s and Weredas to achieve decentralized deliveryo f improvements to rural travel and transport; (iv) Sustaining the ongoing governance practices that have enhanced the performance o f the road sector development program, and introducing new actions to generate and increase the interest o f a greater variety o f qualified international firms in participating inthe RSDP. Implementingactions to monitor consultant and contractor performance and to eliminate potential collusive practices; (v) Enhancingroadworks implementationcapacity throughpromotion and increasing the participationo fdomestic contractors; (vi) Strengtheningresource mobilization by wideningthe financial base o fthe RF and enhancing community participation inroad construction and maintenance; (vii) Implementingroad safety measures and axle loadregulations and compliance; and (viii) Enhancing focus on social and other development impacts o ftransport investments. 31 BankSupportto the RSDP 23. The first Bank operation insupport o f the GOE's RSDP was the RSDPSP (Cr. 3032-ET, which was approved inJanuary 1998 at US$309.20 million with a final disbursemento f US$333.37 million at closing on May 31,2005. This was preceded by the Road Rehabilitation Project (RRP: Cr. 2438-ET), with a final expenditure o fUS$90.60 million to cover mainly the rehabilitation o f Mille-Assab roadto Ethiopia's mainport at the time, plus sector capacity- buildingand network development studies. Inthe course o fthe RSDP implementation, the roads component o fthe Emergency ReconstructionProgram (ERP)was approved in2001. Under this, GOEhas expended an additional US$111.62 million to improve the condition o froads otherwise damaged by various factors o f the Ethiopian-Eritrea Border conflict, and restored damaged road equipment to the ERA. The total Bank direct contribution to the GOE's RSDP, apart from the APL, which are ongoing, amounted to US$535.59 million between 1995 and 2006. 24. The Association support to the GOE's RSDP, which is continuingthrough APL, is being implemented in four stages (APL1 - APL4), in support o f the GOE's RSDP. The first stage (APL1)was approved on June 17,2003, as an IDA Grant ofUS$126.8 million, andbecame effective November 14,2003. The second stage (APL2) was approved September 22,2004, as an IDA Credit o fUS$160.9 million, and became effective June 10,2005. An additional financing to the APL2 as an IDA credit amounting to US$87.3 million was approved on June 22, 2006, and became effective December 22,2006. This document applies to the third stage o f the program APL3, and subsequent stages will overlap with the previous ones over an overall implementationperiod o f 12 years (2003-14), which will be subject to reviewwith experience. The following table summarizes the planned four stages o fthe APL as cleared by the Association's Board. The updated APL2 amount i s US$ 248.2 million. Program Financing Data IndicativeFinancingPlan EstimatedImplementation Period(Bank FY) I Recipient % Federal Democratic APL 1 Republic of Grant I126.80 57.8% I 92.47 219.27 0611712003 0613012009 Ethiopia Federal 58.7% 113.29 274.19 1 0912212004 106/30/2010 Democratic Republic of I I Ethiopia Federal 100.0% 87.30 0612212006 06/30/2012 Democratic Republic of Ethiopia Credit I Federal 225.00 58.2% 161.68 1 386.68 0513112007 0613012014 Democratic Republic of I Ethiopia 32 Federal APL 4 Democratic Loadcredit 119.77 75.3% 39.39 159.16 05/31/2009 06/30/2016 Republic of ITotal I Ethiopia 719.77 63.9% I I406.83 I1,126.60 I * Supplement to the original APL2 Credit. 25. Agreed-Upon Triggers: Trigger indicators have been defined for each of the stages, and their achievements are indicatedbelow. As the program progresses, further reviews o fthe triggers are expected to b e carried out at annual and stage-by-stage midtenn review meetings involving GOE, donor partners, and other stakeholders. The triggers for APLl and APL2 were met earlier and those for APL3 have also been met. Contract awarded for Urban Transport Study II I I Contract awarded for setting up independent technical and COMPLETED ~ financial audit o f the RoadFund. II ~ Split o f ERA District Maintenance Organizations into District "Contractor" & District Engineering Divisions and the DMOs to // COMPLETED function as cost centers. II Pilot routine maintenance activities undertaken by contractors through a competitive process in2 o f ERA'S55 road COMPLETED ~ maintenance sections. II 11 ~ ~~ Povertylsocial criteria established and inuse inassessing road ~ investment imDact. II COMPLETED Overall average disbursement o f 30% o f the on-going civil COMPLETED ~ works under APLl and 2. I 60% disbursement of Grant proceeds from APLl, I Management o f equipment including plant-leasing arrangements I effective maintenance services within a framework o f internal I 33 32 aeft. e, * 9 5uu P Y .-F 9 58 P *3 2 i: d 2 m 9 Y u 3 P u Annex 2: Major RelatedProjects Financedby the Association and/or other Agencies ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) I I No. I Project Rating Status 1. Sector Issues Covered Association-financed (a) limitedquality and quantity o f the road network and Road Sector Development rural travel and transport; (b) strengthening institutional 1 Stage I1Project -APL2 Ongoing reform; (c) adequacy o f road maintenance and financing (Cr. 3989) arrangements; (d) facilitate increased use o f domestic contractors and consultants inroad construction and maintenance. (a) limited quality and quantity o f the road network and Rural Travel and Transport; (b) strengthening institutional reform; (c) adequacy o f road maintenance and financing arrangements; (d) facilitate increased use o f domestic contractors and consultants inroad Road Sector Development construction and maintenance; (e) adequacy o f road 2 Stage 1Project -APL1 Ongoing maintenance and financing arrangements; (f) (Grant H049-ET) developing a network based approach and addressing development issues ina comprehensive manner; (g) strengthening delivery o f urban transport infrastructure and services; (h) establishing TPOs to assess the impact o f provision o f improved transport services inreducing poverty; (i)define a clear national transport policy and a long-term Transport Master Plan. (a) restoration o f the existing trunk road network aiming at minimizing transport cost and enhance the efficacy o f the transport services; (b) strengthen ERA'SandRRAs' program management and contract administration capacity; (c) facilitate increased use o f domestic Road Sector Development contractors and consultants inroad construction and 3 ProgramSupport Project Closed maintenance; (d) improve rural travel and transport; (e) (RSDPSP) (Cr. 3032-ET) ensure policy reform measures undertaken include sufficient budgetary provisions and financial capacity; ( f ) appropriate speed o f investments in light o f implementation constraints balanced against the need for rapid development o f the economy and poverty alleviation. Emergency Recovery and (a) facilitate increased use o f domestic contractors and 4 Reconstruction Project Closed consultants inboth construction and maintenance o f the (Cr. 3438-ET) road network; (b) facilitate the increased application o f labor-based technology (a) strengthenedrehabilitatedsections o f the main import and export road corridor; (b) established road classification and pavement management systems; 5' The Road Rehabilitation Project (Cr. 2438-ET) Closed (c) standard design manual and technical specifications; (d) financial management support to ERA; and (e) 1 1 prepare follow-on operations for roads under APLl and Community and rural road improvements through cash FoodSecurityProject S Ongoing 1for work. 35 ~ Protectionof Basic Services S Ongoing Communityirural road improvementsthrough cash for work. Project Rating Status 2. Sector Issues Covered Other DevelopmentAgencies Strengtheningofthe Semera-Elidar (a sectionofMille- Assab) road (parallel financing with IDA Cr. 2438-ET); S Completed the construction of the Chida-Sodoroad (PCR 1998) 1 African DevelopmentBank andthe upgrading of the Alemgena-Butajira-Sodoroad, 7 roads study. Wacha-Maji andJimma-Mizan roadupgrading; and S Ongoing roaddesignreview TA to ERA, ERTTP studies in6 Weredas. (a)Design review of Dembe-BedeleandGore-Gambella 2 roads; (b) upgrading works of the same Dembe-Bedele BADEA S Ongoing and Gore-Gambellaroads; and (c) co-financing of the - upgradingofAzezo-Metema roadproject TA supportto ERA, incontractpreparationand legal aspects of contracts, design, and maintenance 3 DFID S Completedmanagement.Commercialization of ERA DMO operationsandHead Office Services (HOS). - S Ongoing ERTTP pilotprojects andmanualspreparation - 4 DCOI S Comuleted ERTTP pilot study TA andinstitutional support to ERA, including policy studies relatedto axle load distribution, road safety, roadtransport regulation, as well as designs for Harar- 5 EuropeanCommissiodnion CompletedJijiga, Mieso-Dire Dawa-Guelile, Arba Minch-Jinka, and Gonder-Humeraroads (only pre-FS). Rehabilitation and strengtheningof the Addis-Awassa, study to define the National Transport Policy and prepare a long Sector Budget Support Rehabilitation and strengtheningof: Addis-Jimma road; Addis-Woldiya road (Lot 2); National TransportMaster Plan studies; Ongoing Mieso-Dire Dawa-Guelile Road, feasibility studies; Design, and Tender Documentation; Sectionof an alternative corridor Addis - Port of Djibouti; Sector Policy Support Programfor the Roads Sector 36 Annex 3: Results Framework and Monitoring ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) Results Framework APL* ProgramDO ProgramOutcome Use of ProgramOutcome Indicators Information (i) GOE'sRSDPinrestoring support Contribution o f APL (to GOE and expanding Ethiopia's road RSDP): network (a) Increase road density from 0.04 To measure the overall impact o f the A P L km/l,OOO km2in 2005106 to 0.41 on the RSDP and quality o f the road km/l,OOO km2by2014. network on annual basis. With this, suitable (b) Increaseproportiono fgoodfair adjustments ininvestment outlays can be condition of: (1) federal asphalt made to ensure achievement o f objectives. surfaced roads from 3.810.6% in 2005/06 to 17.6/21.8% by 2014; (2) federal gravel roads from 0.810.3%in 2005106 to 2.913.5% by 2014. (3) Regionahral roads from 010% in2005106 to 1.010.7% by2014. (ii)promoting growth and mobility (a) Expand regionaUrura1roads by To measure the overall contribution o f A P L ina socially andenvironmentally 207 km. to Regional roads expansion inthe RSDP. sustainable manner (b) Improvingrural travel and To enhance Weredas ability to program and transport services through implement their transport and overall completing 130 WIDP. development activities. (iii)increasing efficiency o f road (a) DMOs 100% commercialization To ensure that ERA can maintainDMOs sector through sector reform, by 2010. operating ina competitive market; and to capacity building, and institutional (b) ERA reformedas small assess ERA'Sefficiency and effectiveness reformo f ERA as a commercial organization as regulatory, planning, overtime. entity policy formulating, contract administrating and standard setting entity by the end o f program. (iv) Create conditions conducive to (a) Share (YO)o f periodic To measure the increased participation o f domestic construction industry maintenance (invalue terms) domestic contractors inRSDP participation inthe road transport contracted on a competitive basis to implementation on an annual basis. sector domestic contractors increased from 60 in2005106 to 100 by 2012. (b) Share (%) o froutine maintenance (invalue terms) contracted on a competitive basis to domestic contractors increased from 3 to 100 by 2012. (v) reduce poverty and increase Employment generated under APLs To measure the extent o f the APL employment will be increased from 37,O 10 man- contribution to employment creation and to months in2005106 to 259,461 man- poverty reduction ingeneral. Also provide a months by 2012. basis for setting employment policies. Note: * AP L ProgramDO means the 1 3 to be achieved through APL1, APL; k APL3 insupporting GOE's RSDP 37 Use of Projec Infoimatio (i)Strengthenand increase road (a) Road network ingood and fair T o assess the imuact o f the APL3 on the transport infrastructure and condition, total (%) from 70 in2006 RSDP and quality o f the road network on improving the reliability thereof to 82 in2014. annual basis. (b) Roadnetwork ingood and fair condition, federal asphalt road (%) from 79 in2006 to 88 in2014. (c) Road network ingood and fax condition, federal gravel road (%) from 59 in2006 to 89 in2014. (d) Roadnetwork ingood andfair condition, regional rural roads (%) from 74 in2006 to 79 in2014. (ii)strengthen the institutional (a) Works contracts completed T o regularly assess the contractors' capacity inquality and efficiency o f within contract period and budget, performance and to guide any corrective road construction, management and and with satisfactory quality. contractual actions. maintenance; and create conditions (b) RFrevenue increased from258.2 T o assess the annual revenues for road conducive for the domestic million ETB in2005106 to 1,075 maintenance against expenditures and guide construction industry to develop in million ETB by 2014. any new sources o f revenue if needed. the road transport sector (c) NCB bidding successfully T o assess the level o f improvement in completed by the end o f APL. domestic contractor participation. Intermediate S IntermediateOutputs Use of IntermediateOutput Indicators Monitoring Component One: ComponentOne: Component One: Upgraded federal trunk and link Road upgraded (Bank) federal trunk To assess the rate o f progress and take any roads opened to traffic and linkroad (km) 509 corrective measures to increase performance o f contractors . Component Two: ComponentTwo: Component Two: Regional road opened to traffic Road constructed (Bank) regional Supervision consultants' monthly progress (km) 70 report; and RSDP Quarterly Progress Report Component Three: ComponentThree: Component Three: (i)safeguardincompliance (i)safeguardQAinplace (i)(ii):assessimprovementsin to (ii)procurement timely processed (ii)procurement QA inplace safeguards and procurement quality (iii)performance monitored and (iii)performance monitoring (iii) todetermineimprovementsin (iv): disclosed functioning contractor perfoxmance, assess unit rates and (iv) cost monitored and data (iv) cost monitoring functioning make adjustments as necessary. disclosed (v) DMO commercialization as per (v) DMO's fully commercialized by (v) to review ERA DMOs progress intheir schedule December 2010 commercialization Component Four: ComponentFour: ComponentFour: (i)followup projects designing and (i)followup roads and performance- (i) TofollowupERA'Sreadinessfor (ii): biddingdocuments prepared. based maintenance projects the preparation and appraisal o f APL4; identified make adjustments as needed indefining (ii)identifiedtraining for urban (ii) transportmanagement urban future components. transport management conducted by study completed byDecember 2009 38 s s t d rl 4 E 0 t- 2 s za za t- I ' x a -4 n 2 = Y E 2 G 3 - n w x * a \o + E m W 3 2 QI d w a \o h Y E $3cm a \o n, ! I -b x $ 0 E Y r- 0 x 3 E Y 0 P I . I -x- 0 d r- 3 I . I a> =g N -- 3 N -Y E 2 W v, G G 0 T U d Annex 4: DetailedProjectDescription ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) GOERoadSector DevelopmentProgramandthe ProposedSupport 1. The Road Sector Development Program, launched in 1997 as a major 10-year program (later extended to 15 years), i s the GOE's strategy for achieving its policy objectives inthe road sector (and i s the basis for the road sector component o f the PASDEP). This program, prepared bythe Ethiopian Roads Authority, includes not only investmentinphysicalinfrastructureand expenditure on maintenance o f existing andnew infrastructure, but also investmentin institutional strengthening andcapacity buildinginorder to improve road sector management. 2. The first phase o fthe program (RSDP I: 1997-2002, was concluded in2002, and the second phase o f RSDP II(2002-2007) was launched at the end o f June 2002. The RSDP aimed at developing a strong management and technical capacity parallel to physical development. The investments under RSDP continue restoring and expandingthe roadnetwork to improve access o frural communities to markets, off-farm economic opportunities, and social services, which are still the major obstacles to sustainable economic development. The programreceivedsignificant donor support to create adequate capacity inthe road sector, and contributed to economic recovery through the restorationo fthe essential roadnetwork, partly the main import-export corridors, and expansion o fregionalroads network. RoadSector DevelopmentStage 3 Project-APL3 3. The Bank's Adaptable Program Lendingwould support GOE's RSDP, which hrther supports the ADLI andthe PASDEP (200906-2009/10, dated September 2006) with the objective o frealizing the MDGs andcontributingto GOE's decentralization efforts. To date, underthe APL, atotal o fUS$375.0 million, includingUS$126.8 millionunder APLl and US$160.9 millionunder APL2, along with an additional supplemental financing o fUS$87.3 million, has been allocated from IDAresources. Given the continuing needto strengthen and rehabilitatethe road network, and to expand the currently insufficient road system, the GOE presented to IDA its proposal for IDA assistance over the RSDP I11period, which i s to be implemented initially through the APL3 instrument. 4. The IDA'Sfinancing allocation for APL3 initially estimated at the appraisal stage o fAPL program(May 2003) was US$150.26 million, which was 66.5 percent o fthe total estimated projects cost (US$225.94 million). However, because o fthe recent substantial price hike o fthe civil works as a result o fthe global oil price increase, the revisedproject cost is now estimated at US$386.68, more than a 58 percent cost increase. The additional financing o fUS$74.74 million i s allocated to APL3, yet the percentage o f the IDA financing decreasedto 58.2 percent. The APL3 will overlap with the previous ones over an overall project implementation period o f 8 years (2007/08-201445). The support would cover primarily the rehabilitation andupgradingo f priority federal roads; rehabilitationandconstruction o fpriority federal link roads and a regional ruralroad; institutional strengthening and modernization o fERA to efficiently implement RSDP I11inareaso fquality assuranceo fprocurement processing; contract administration; monitoring o f environmental, social, and safety activities; andmonitoring o fthe performance o f contractors 42 and consultants as shown inthe following table. The financing will also be extended to support ERA'Songoing effort to commercialize district roadmaintenance contractors into autonomous commercial entities. IndicativeFinancingPlanfor APL3 (US$ million) Cost Estimate (US%) I I 2.1 ISupervision I I I 13.99 1 5.99 I 19.98I Institutional Strengthening 2*2 IERAModernization 1 4.26 I 1.82 1 6.08 1 Physical (10%) 18.85 12.73 315 8 Financial 17.67 21.62 39.29 Subtotal 36.52 34.35 70.87 ITOTAL 225.00 I 161.68 I 386.68 I 5. Through implementing the proposed roadprojects, the country's road densityand condition would be improved substantially. The original IDA share o f financing for the APL3 was estimated at the start o f the APL in2003, but because o f the recent price increase, this allocation will not be sufficient to cover the proposed scope o fprojects based on the preliminary engineeringcost estimates for the roads, and the IDA fundingwas increased by US$74.74.The rest i s to be borne by GOE. 6. The following sections show the project descriptionby component. The project i s broken down infour (4) components. 43 ProjectComponent1FederalRoads Development US$287.25 million (IDA - US$169,33million) Upgradingof FederalTrunk and Link Roads:The roadsections being financed under APL3 were proposed duringthe appraisal o f APLl. The feasibility studies, environmental impact assessments, and detailed engineering designs for the three roadprojects underthis component were financed under the IDA Grant H049-ET. This component involves the upgrading o f 509 km o f federal trunk and link roads to asphalt pavement surface standard. (i) UpgradingoftheGonder-DebarkRoadProiect(107km)US$51.75million(IDA US$30.11million).The Gonder-Debark roadis located largely inAmhara National Regional Sate inthe northernpart o f Ethiopia, and forms part o f one o f the major south-north road links in the country. Amhara state has an international border with the Sudan inthe west, and the national boundaries are with Tigray inthe northeast and Afar inthe east, Oromiya inthe south, and Benishangul-Gumuz inthe southwest. The Topography along the Gonder-Debark road section i s predominantly rolling, with some hilly andmountainous sections with altitudes o f about 2,300 m at Gonder, peaking slightly above 3,000 m at km 34.1, and 2,960 m at Amba Georgis, and 2,850 mat Debark. This section is a continuation o f IDA-funded (RSDSP: Cr.3032-ET) DebreMarko -Gonder upgrading project leading to the Tigray region and further to the Eritreanborder. The project road i s also a shortcut to important agricultural and tourist areas inthe Simien Mountains. The current roadcondition can be described as poor. The road i s classified as a trunk road and i s to be upgraded from the present gravel road surface to a hot asphalt mix surface roadwith a 7.0 m width carriageway and 1.5 mwide shoulders. (ii) RehabilitationoftheGedo-NekemDteRoad(134km)US$77.03million(IDA US$44.82million). The project roadis located inwestern Ethiopia inOromiya National Regional State, Merab Shoa, and Misrak Wolega Zones. The total area o f the zone i s about 2,340 sq. km. The main towns along the project road include Gedo, Ijaji, Tibe, Bako, Ano, Sire, and Nekemte. The road generally traverses mountainous and hilly terrains. This section i s located betweenthe Germany (KfW)-fundedGedo-Addis Ababa rehabilitationproject and the IDA- funded(APL1)Nekempte-Mekenajo upgradingproject, and is connected through the OFID- fundedMekenajo-Mendi upgradingproject to the Benishangul-Gumuz region and further to the Sudaneseborder. The road i s classified as a trunk road and i s to be rehabilitatedwith a hot asphalt mix surface road with a 7.0 mwidth carriageway and 1.5 m wide shoulders. The project area mainly grows subsistence crops: wheat, barley, oats, maize, sorghum, teff, pulses, and several oil seeds. Cash crops such as coffee are cultivated inthe Nekempte area. The project road, once rehabilitated, i s expected to contribute to enhancing the performance o fthe economy o f the country ingeneral and the Oromiya Region inparticular. (iii) UppradinpoftheAposto-Wendo-NegeleRoad(268km)US$139.68million(IDA US$81.25million). The project roadis located 350 kmsouth o fAddis on the Shashamene-Agere Mariam trunk road that forms part o f the Addis-Ababa-Moyale (Kenya border road) route. It traverses parts o f the Southern Nations, Nationalities & Peoples region (SNNPR), Oromiya, and Somali regions and i s the main access route for the development o fthe Sidamo, Borona, and Dolo areas insoutheast Ethiopia. The project road condition at present could be rated as poor gravel road, characterized by highsurface roughness relating to roadriding surface and poor geometric features associated with highcurvature, gradients, and a narrow carriageway width. 44 This section i s an extension o f the EU-funded Addis-Awassa rehabilitation project connecting the SNPPR with the Oromiya region, and further to the Somali region. The roadwill be upgraded from gravel to a double bituminous surface-treated (DBST) roadwith a carriageway width o f 7 mand 1.5 mwide shoulders inlinewith the standards o fits classification. The economic activities along the road consist mostly o f agricultural farming activities, some livestock, and trading. The project road transverses coffee-growing areas, the gold miningcenter at KibreMengist, and the grazing lowlands o f the Somali region. The section betweenAposto and Wadera has land use potential for annual and perennial crops. Coffee and enset are the major perennials, while maize, barley, wheat, and teff are the most important crops. The section from Wadera to Negele has highpotential for livestock production. (iv) ConstructionSupervision US$18.78 million(IDA US$13.15 million). This involves - the provision o fconsultancy services for the supervision o fthe civil works contracts for the three roads described above, including implementation o fthe associated environmental, safety, and resettlement plans and adverse social impact mitigation. The TOR for these services are being prepared by ERA, to include any new developments over the past years since the TOR for APL2 roads were prepared and agreed upon, and procurement processing will be carried out in accordance with the procurement plan and the TOR discussed and agreed on between the Bank and ERA. ProjectComponent2 RegionalRoadDevelopment US$18.19 million(IDA - US$11.88million) Constructionof RegionalRural Road.The priority underthe RSDP Iwas the rehabilitation and strengtheningo f the highest-prioritytrunk roads that were found to be indilapidated condition. The RSDP I11focuses on improving road densityby opening up new potential development areas and increasing connectivity, along with completion o fthe rehabilitation and upgrading requirementso fthe roadnetwork. As a result, IDA'Ssupport to the RSDP I11will also involve the constructiono f the Yalo - Nehile(70 km) road. The feasibility study, EIA, detailed design, and biddingdocuments preparation have been carried out under consultancy services financed from the proceeds o fthe NDF Credit No. 207. (i) The constructionof the Yalo-NehileRoad(70 km) US$17.00 million(IDA US$11.05 million). The proposed road stretches from the towns ofYalo to Nehile (70 km),which is the southern section o fYalo-Dalol road. To improve the existing track it was initially proposed to construct it as a fully engineered gravel surface roadwith a carriageway width o f 6 m from Yalo to Ab Ala (149km). Duringthe appraisal, however, it was identifiedthat the existing track ina hilly section north ofYalo which i s completely impassable, although there i s access from Aba Ala southwards for about 80 kmto the town o fNehile. It was concludedto give the top priority to constructing the missinglink betweenNehile and Yalo to open up an access to the isolated areas adopting a stage construction approach. Therefore, additional designreview services are requiredto be conducted duringthe ALP3 implementationperiod, which i s now included in Component 2 (ii). (ii) ConstructionSupervision US$1.19million(IDAUS$0.84million).Thisinvolvesthe - provision o f consultancy services for the design review o f Yalo-Dalol road, and supervision o f the civil works contracts for the Yalo-Nehile road described above, including implementation o f 45 the associated environmental, safety, and resettlement plans and adverse social impact mitigation. ProjectComponent3 - InstitutionalStrengthening/ERAModernization US$6.08 million - (IDA US$4.26million) (0 Quality Assurance US$1.16million(IDA US$0.82 million). The focus o fthis - component i s to provide quality control and technical advisory services (TA) to support quality assurance in: (i) procurement processing, contract management, and documentationby providing experts to work directly with key line managers and staff; and (ii) monitoring and documentation o f actions to mitigate adverse impacts o f environmental, social, and safety-related activities, and implementationo f social aspects o ftransport services ingeneral by conducting independent routine project site visits and quality control. This would include organizing technology transfer and training activities for the relevant staff. (ii) Rates US$3.72 million(IDA US$2.60 million). The focus o fthis component is to support -Monitoringof Contractor/ConsultantPerformance,and ContractCosts and Unit ERAthrough the establishment ofin-house systems for monitoring: (i) performance o f contractors and consultants; and (ii) constructioncosts and unit rates. This will include collection o f construction cost information from ongoing contract bidprices and actual data from contract implementation, as well as collaboration with the M O W and the Central Statistics Agency in the publication and updating o f construction labor wages and material prices and associated annual changes. (iii) ERA/DMO Modernization - US$1.20million(IDAUS$ 0.84 million). This component will support implementingthe recommendations made as part o fthe ongoing E W D M O re- engineeringactivities facilitated underthe Ministryo f Capacity Buildingunder a new businesshegulatory environment. All o f this i s requiredto establish a modernized ERA as a "small organization interms o f manpower only dealing with regulatory, planning, policy formulating, contract administrating and setting design standards" as stipulated inthe Letter o f Road Sector Policy issued by MOFED (June 25,2004). ProjectComponent4 - PreparatoryActivities/Studies US$4.29million(IDA US$3.00 - million) Supportto Accomplishment of PropramObiectivesUS$4.29million(IDA US$3.00 million). The purpose o fthis component will be to provide consultancy services to carry out: (i) feasibility and EIA studies as well as design and design review for road projects to be includedunder follow-on operations; (ii) designingo f apilot project o fthe output- and performance-based road contract as a follow-on component o f ongoing term maintenance contracts; (iii) support to ERTTP coordination and implementation; and (iv) technical and management study and support incapacity buildingto improve urbantransport management. The follow onprojects mentioned above could be those to be executed under the APL4 or RSDP I11ingeneral. 46 Annex 5: ProjectCosts ETHIOPIA: RoadSector DevelopmentStage I11Project (APL3) ~~~ Project Cost by Component and/or Activity Local Foreign Total U S $million US $million U S $million Rehabilitationand Upgrading o f Federal Roads 112.28 156.18 268.46 Construction o f Regional Rural Road 4.69 12.31 17.00 Construction Supervision 6.99 12.99 19.98 Institutional Strengthening of/ERA Modernization 1.22 4.86 6.08 T A for Preparation o f Various Design & Feasibility Studies 0.86 3.43 4.29 Total Baseline Cost 126.04 189.77 315.81 Phvsical Contingencies* 12.60 18.98 31.58 Price Contingencies 18.75 20.54 39.29 Total Project Costs1 157.39 229.29 386.68 Identifiable taxes and duties are US$ 41.19 million, and the total project cost, net o f taxes, i s US$345.49 million. Therefore the share o fproject cost net o f taxes is 89 percent. 47 Annex 6: ImplementationArrangements ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) A. InstitutionalArrangements 1. The Ministry of Works and UrbanDevelopment: The MOWUD oversees and follows up on the performance o f agencies responsible for constructionworks inthe country, and coordinates and facilitates efficient resolution o f cross-sectoral issues. The M O W was re- established by Proclamation No. 471/2005 dated November 17, 2005, which redefinedthe organization, powers, and duties o fthe Executive Organs o fthe Federal Democratic Republic o f Ethiopia. Some o fthe functions related to constructionworks that were relegated to the Ministry o f Infrastructure(MOI), initially set up inOctober 2001, have now been transferred to the M O W . The powers and duties given to the Ministry o f Federal Affairs with respect to the urbandevelopment sector have also beentransferred to MOWUD. The ministryis responsible for, inter alia: (i) settingstandards for design and constructionworks, ensuringthe preparation o f designs and contract documents for construction works financed by the federal government, and cause the supervision o fthe works and inspectiono f the quality o f execution; (ii)registering engineering consultants, contractors, surveyors, architects, and other constructionprofessionals; (iii)undertakingresearch to improve the types and quality o f local constructionmaterials and ensuringthe proper construction and maintenance o f federal roads and the proper uses o fthe road fund; and (iv) delegating part o f its powers to other federal organs as necessary. The ministry, inter alia, also exercises powers and functions related to urbandevelopment, some of which are pertinentto the strategy and interventions associated with urban transport infrastructure and rural travel and transport development. The ministryundertakes studies: (i) relatingto urbanization, and sets criteria for grading urban centers; (ii) set general directions to for housing constructionby urban dwellers, and to provide capacity building support to centers; and (iii) on the integration o f urban development with poverty reduction activities. Inaddition, the ministry i s to: (iv) provide comprehensive and coordinated support to urban centers to become development centers so as to influence their surroundings; and (v) provide capacity- buildingsupport and training to urbancenters. By the proclamationabove, the ERA, the O W and the RentedHouses Agency (MA) are all accountable to the MOWUD. 2. The Ministry of Transport and Communications(MOTC): The MOTC has also now beenre-established under the same ProclamationNo. 471/2005, with the transfer o fthe rights and obligations relating to transport and communications that previously fell under the MOI. The MOTC shall therefore have the powers and duties to: (i) promote expansion o ftransport and communications services; (ii) that the provision o f transport and communication services ensure i s inline with the country's development strategy and meets requirements for equitable regional distribution; (iii) integrate provision o f transport and communication services; (iv) formulate and implementregulatory frameworks to ensure the provision ofreliable and safe transport and communication services; (v) regulate maritime and transit services; and (vi) follow upon the activities o f the Ethio-Djibouti Railways inaccordance with agreements concluded betweenthe two countries. The Federal Transport Authority (FTA) and the Ethiopian Civil Aviation Authority are accountable to the MOTC. 48 3. Ministry of Agriculture and RuralDevelopment:For ERTTP, the Ministryo f Agriculture and Rural Development chairs the Central Program Coordinating Board (CPCB) at the federal level. 4. EthiopianRoadsAuthority: ERA is a legally autonomous federal government road agency with a board comprising membersfrom different institutions. ERA i s responsible for overall coordination o f the program inresolving sectoral issues, monitoring proper implementationo fworks, and giving overall direction. ERA has been and i s the executing agency for all roadinfrastructureprojects inEthiopia financed by donor agencies, including the Association. 5. ERAwill manage and administer the Trunk andMajor LinkRoads Programas well as the ERTTP. ERA i s organized into three main departments as follows: (i)Engineering and Regulatory Department: This department i s responsible for planning, monitoring and evaluation, research and development, management o f civil works contracts, and coordination o f local and external financing. It carries out its responsibilities through five divisions: (a) Planning, Programming (including Monitoring and Evaluation, Rural Roads Technical Support and EnvironmentalMonitoring and Safety, and Management Information System branches); (b) Construction Contracts Implementation, including also Right-of-way and Road Protection, and Administrative support branches; (c) Engineering Sewices Procurement, Design and Technical Support; (d) Network Management, including Pavement Management, Bridges Management, EngineeringResearch and Contract Management branches; and (e) District Engineering, with representation inthe 10 ERA districts. (ii)Operations Department: This department i s responsible for the force account construction andmaintenance, roadmaintenance, equipmentmanagement, procurement and supply activities, emergency road constructionand maintenance, and associated logistics support. It carries out its responsibilitiesthrough 3 Divisions and 10DMOs (iii) ResourceandFinancialManagementDepartment:Thisdepartmentcarriesoutits Human responsibilities through 3 divisions. Finance, Human Resources Development, and Personnel Administration together constitute a support service unit,responsible for fiscal, personnel administration, training and similar services. The three Departments are headedby Deputy Director Generals who report to the Director General o f the Authority. The Director General reports to the Board o f ERA. Inaddition, to facilitate the monitoring functions, the Road Inspectorate Unit will continue to perform technical and financial audits to ensure the timely and proper implementation o fplans and directives and to report its findings to the Board and executive management o f ERA. 6. ERAhas set up a ProgramAdvisory Office (PAO) underthe Director General to assist in the coordination o fprogram activities. Staffo fthe PA0have been supported with T A comprising an RSDP advisor (a senior highway engineedcivil works contract administration specialist) fundedby the EC, who has now completed the second three-year term o f his assignment. The P A 0 advises the Director General on matters related to program coordination, including the coordination o f T A and the related multidonor support and interests. 7. The EngineeringProcurement, Design and Technical Support Divisiono fthe Engineering and Regulatory Department i s responsible for issuing expressions o f interest and procurement notices; preparingthe request for proposal and biddingdocuments; evaluating 49 proposals and bids; awarding contracts upon approval o f the Contract Award Committee followed by the approval by the Director Genera, the Board o f ERA, and finally the financiers/donors. The Contract ImplementationDivisionunder this department i s responsible for administration o f the supervision and civil works contracts execution. 8. ERAhas long since started the process ofmodernizingERA, and as the first step toward modernization the process o f full commercialization o f its District Maintenance Organizations was supported by T A provided by DFID,which was just completed as mentioned below. APL3 will continue supporting ERA'Sefforts toward modernization by implementing the recommendations made as part o f the ongoing E W D M O re-engineering activities ina new business/regulatory environment which has beenfacilitated underthe Ministry o f Capacity Building.All ofthis is requiredto establish amodernizedERA as a "small organization interms o f manpower only dealing with regulatory, planning, policy formulating, contract administrating and setting design standards" as stipulated inthe Letter o fRoad Sector Policy issued by MOFED (June 25,2004). 9. ERADistrictMaintenanceOrganizations(DMOs): Maintenanceo fthe federal trunk and link roads, requiredto preserve the new road investments and keep existingroads passable, will be carried out bothbythe DMOs o f ERA (which are currently inthe process o f commercialization) and private contractors, inaccordance with the agreed Maintenance Action Plan, and annual works program submittedby ERA management to OW. The functions o f DMOs have now been dividedinto two: District RoadMaintenance Contractor (DRMC) and District EngineeringDivision (DED).The DRMCs are responsible for the works execution (contractor) activities o f former DMOs. The DEDs (client) are responsible for the engineering activities and extend Head Office management and supervision functions at the district level. ERAhas started skills development training for some ofthe DMOs staff, and is reviewing the required legal amendment to fully commercialize DMOs by July 2009, with some delays from what has been anticipated inAPL2. DFIDfinanced TA support for implementing the reforms formally endedMarch 2007, and the TA component under APLl provides D M O commercialization support duringthe transitional period after the phasing out o f DFID support. 10. RegionalRoadAuthorities: Following the reforms and decentralization ofthe 1990s, responsibility for the administration and management o f the rural roadnetwork was transferred to the RRAs. R R A s have beenset up as legally autonomous Regional Government's Road Agencies, and are responsible for managing and administeringthe Regional Roads Program. They will also maintain the regional roads either directly or by contract inaccordance with their capacity. The administration o fregional roads inTigray, Amhara, Oromiya Gambella, Benishangul-Gumuz, and Southern Peoples regions i s organized under autonomous authorities headedby the Board, which i s accountable to the region's council. Inthe other regions (Afar and Somali), the rural roads are under the authority o f the Regional Bureauo f Rural Development. The RRAs are directly responsible for planning, management, and implementationo fthe development and maintenance o f the regional roads networks and the RRA representative serves as secretary o f each Region's RTTP Coordinating Committee. NDF, GTZ, and the EUhave provided a range o f assistanceto supplement and improve the efficiency o f the RRAs, which will be further continued inRSDP111.A RuralRoads Technical Support Branchwas set up within the ERA headquarters and aRural Roads Coordinator was appointed. ERA support to the regions has beenmainly through overall rural roads network planning and programming and provision and coordination o f training. The Rural Roads and Technical Support Branch o f ERAprovides 50 technical assistance/advice to regions inthe formulation o f strategic plans and renders advice to the regions on many aspects o f contract implementation. 11. EthiopianRuralTravel andTransport Program:Village Development Committees, whose activities are organized and coordinated by Wereda Development Committees (WDCs) and the Wereda Rural Development Office, implement the ERTTP. The WDCs are supported by Regional Program CoordinationBoards (RPCB), and Central Program CoordinationBoard (CPCB). The CPCB, whose secretariat i s ERA, assumes the leading role inpolicy formulation, legal dispositions, regulation, awareness development, and provision o f technical guidance and support, while the RPCBs, whose secretariats are RRAs, guide and monitor the planning and execution o f ERTTP initiatives. ERA has also been providing training courses under the framework o f ERTTP. 12. Office of the RoadFund: Giventhe growing size o fthe roadprogram and other urgent demands on the GOE's budget, it was not possible to allocate sufficient funds for road maintenance from the consolidated budget inthe early 1990s. Itbecame imperative, therefore, to gradually shift the road sector onto a "fee-for-service" basis under which road users would pay directly for roadmaintenance. To this end, the Road Fund, sourced from fuel levy, axle load charges and overloading fines, was`established on 6th March 1997. Administration o fthe Road Fundis presentlythe responsibilityof ORF under the RoadFundBoard, which comprises representatives o fthe federal government, regional states, ERA, and local stakeholders. This arrangement i s to continue to ensure that (i)sufficient funds are allocated for maintenance; (ii) maintenance allocations cover all roads; (iii) financial discipline i s strengthenedto ensure that the public gets value for money; and (iv) the fiscal burdenon GOEi s reduced. 13. The IDA-fundedroad financing study was completed and the final report was submitted on October 28,2005. ORF has initiated a draft proclamationto enable it to expand its funds base to include vehicle licensing, overloading fines, and so forth, all based on the recommendations o f the study. The ORF has now moved to a new office inthe Ministry o f Works and Urban Development, using administrative support from the ministryto reduce the cost o f day-to-day administrative expenses. 14. The budgetallocated for the RoadFundfor the FY07was Birr 756 million (equivalent to US$85.1 million), o fwhich 1.14 percent and 2.29 percent were allocated for road safety activities and for the financial and technical audit, respectively (which now enables the ORF to audit and monitor the usage o fthe fundby ERA and RRAs), while the balance o f 96.57 percent was allocated for roadmaintenance. Sixty-five percent o fthe road maintenance allocation i s for ERA, 25 percent for the RRAs, and 10percent for selectedmunicipalities, o fwhich 50 percent is for Addis Ababa city. Currently, both the fuel levy and VAT on fuel sales are fully transferred to the Road Fund.Total collection o fthe fund over the last nine years stood at ETB 3.086 billion (equivalent to US$347.4 million), while the disbursementsare ETB 1.428 billion (equivalent to US160.8 million), and the balance was reported to have been investedintreasury bonds. However, since 2004/05, the disbursementamount for maintenance works started exceeding the allocated annual budget, though current revenue estimate shows sufficient revenue, which implies aneedinthe near future for enhancedRFrevenuediversification. 51 B. ImplementationArrangements 15. The Roads Program's supervision and monitoring falls directly under the Deputy Director General, Engineeringand Regulatory Department o f ERA.Procurement o f works and services will be implementedby Design and Procurement, and the Contract Implementation Divisions o f this department with the approval o f the ERA Board on major procurement decisions. These divisions are well organized, with qualified and experienced engineers in contract administration and management. The Planning and ProgrammingDivisionunder the same department manages other studies. Institutional support to ERA for planning and procurement o fprojects, design review and approval, contract administration, claims avoidance and management i s beingprovided under the IDA-financed APLl and APL2. This, together with the support o fother donor partners (AfDB, DFID, EC), has equippedERA to expand the procurement and contract administrationresponsibilities requiredfor the RSDP 111. 16. ERAwill continue to assign engineers for close followup on andtimelyresponse to correspondence forwarded from the consultants and contractors. Right-of-Way (ROW)agents are assigned to projects so that ERA can promptly address requests forwarded from contractors for landacquisition andright-of-way clearance. ERA attends tripartite monthly progress meetings and conducts site visits to discuss and address issues related to progress o f works. Also, ERA conducts separate meetingswith supervision consultants to address issues and measures to be taken by each party for successful contract implementation. 17. On the financial management and auditing aspects, the existing accounting and reporting systemo fERA is capable o fproducing accurate andreliable informationregardingproject resources and expenditures. The system will provide reliable records and reports on all assets and liabilities and financial transactions o fthe project; and sufficient financial information to manage and monitor activities. ERA'Sfinancial management system i s designedto produce financial statements o fthe entity as a whole to be usedby all donors and GOE. Further,APL2 supports the upgrade o fthe FMS o f ERA. The Finance Division o fthe Human Resource and Finance Departmentmanages the services. 18. ERAwill continue managing all the components ofthe project inthis stage ofthe APL, but insubsequent stages ofthe APL, R R 4 s and ERTTP offices at all levels will assumemore responsibility for implementation. ERA i s currently implementingtwo active projects financed by the World Bank: the Road Sector Development Stage 1Project inSupport o fthe RSDP I1 (APL1-Grant H049-ET); and Stage2 Project inSupport ofthe RSDP I1(APL2- Credit No.39890-ET). ERAhas implementedvarious donor-financedprojects inthe past successfully, including the RRP (Cr. 2438-ET), which was closed inDecember 2002 (the ICR was completed inJune 2003); theRoadSector DevelopmentProgram Support Project (RSDPSP, Cr. 3032-ET), for which the ICR was completed November 30,2005; and road components o f the Emergency Recovery Project (Cr. 3438-ET), which was closed inDecember 2006. Inthe existing active projects and the already closed ones, management and administration o f funds are done at a central level by ERA and there have beenno problems with disbursementsand accounting o f funds. 19. Currently, the Audit Services Corporation i s the external auditor o f ERA. This arrangement will continue for the future. The annual audited financial statements, along with the management letter, will be submittedto IDA no later than six months after the end o f the fiscal year. 52 20. ERAwill produce quarterly FinancialMonitoring Reports (FMRs) and submit the same to IDA 45 days after the end o f each quarter. The FMRs will include financial, physicalprogress, and procurement information. ERA has selected the traditional way o f disbursement usingDA, SO, and direct payment procedures for disbursement o fIDA Funds.ERA will open a DA at the National Bank o f Ethiopia. IDA will transfer the initial advance and subsequent deposits to the created DA.ERA will thenpay contractors and suppliersfrom the DA. 21. M&Ewill bethe overall responsibilityo fthe Monitoring and Evaluation Branch (MEB) o f the Planning and ProgrammingDivision. Under the RSDP Phase Iand11, special arrangements for collecting data annually on the agreed-upon 19program indicators were carried out by a local consultant financedwith EC support, and later financed from GOE resources. ERA selected a consultant inDecember 2006, through a competitive process, to provide the services above for five years (2006-10) for updatingthe RSDP performance and MDGTransport Indicators. The consultant i s also expected to measure the extent o f the role o f transport inthe achievement o fthe MDGs, using general indicators adopted by the African Ministers o f Transport/Infrastructure. 22. The arrangements described above will be usedor extended to serve the performance monitoring needs o f the APL3 stage. Output and outcome indicators and the results-based M&E data collection are outlined inAnnex 3. ERA will continue reporting on these indicators as part o fthe annual reviews o fproject performance. 23. Inadditionto the World Bank implementation support andreviewo fthe performance o f the program through periodic visits and during the plannedmidterm review time, all donors will have a chance to participate inreview o fworks progress at donors' meetings held annually. 53 Annex 7: FinancialManagementandDisbursementArrangements ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) Introduction 1. The financial management assessment i s conducted inline with the Financial Management Practice Manual issuedby the FMBoard on November 3,2005. The objective o f the assessmenti s to determine whether the implementingentities have acceptable financial management arrangements, which will ensure that: (i) the funds are usedonly for the intended purposes inan efficient and economical way; (ii) periodic reports are prepared accurately, reliably, and intimely fashion; and (iii)the entities' assets are safeguarded. This FMassessment was done inJanuary and February 2007. 2. The FM assessments for APLI and I1were conducted inMarch2003 and June 2004 respectively. The purpose o f this FMassessment i s to update recent developments, inthe FMand disbursement areas, inthe ERA.The assessmentswere conducted on the basis o f desk reviews, a few visits to ERA, and the team's cumulative knowledge and experience o fthe program and ERA'Sfinancial management. Summary of Project Description 3. The objectives o f the APL3 i s to support the increase inroadtransport infrastructure and improve its reliability; strengthenthe capacity for road construction, management, and maintenance; and create conditions conducive to domestic construction industryparticipationin the roadtransport sector. These objectives are to be achieved through: (i) construction, rehabilitation, upgrading, and preservation o fthe priority federal and regional road network; (ii) a strengthenedERA reformprogram; and (iii) developing the capacity inprogram implementation. CountryIssues 4. The recently completed Joint Budget and Aid Review (JBAR) and the Fiduciary Assessment (FA) show that Ethiopia has made significant progress in strengthening public financial management inrecent years. As part o f the JBAR, the Bank incollaboration with other donors conducted a Public FinancialManagement (PFM) status review usingthe Public Expenditure and Financial Accountability (PEFA) framework. Out o f the 14 indicators covered underthis review, Ethiopiamet those relating to the planning, budgetingandreporting systems. Generally, Ethiopia scores highinmacroeconomic management, including aggregate fiscal discipline and minimizing fiscal risks. Satisfactory progress was also noted inbudgetingand accounting reform, though the adequacy and quality o fbudgetreporting leave room for improvement and remainkey concerns. 5. The FA, which was completed inearly 2005, notes that considerable progress hasbeen made inimplementingFMreforms inboth federal and regional level administrations. The areas o f improvements include budgetprocesses, internal controls, and cash management. Also, some steps have been taken inreforming internal and external audits. Nevertheless, there are some weak areas that require attention. These include delays infinancial reporting (both in-year and annual), inadequate capacity o f the auditors general to discharge their responsibilities, and weakness inlegislative scrutiny o f audited financial reports. At the regional level, the situation varies. The roll-out o f PFMreforms occurred first inthe SNNPR and Tigray region, with the 54 support o f the government and donor initiatives to support these reforms. They both show improvement inthe overall public finance function and a consequential reduction infiduciary risk.Otherregions are at an earlier stage o finvestmentinPFMor havenot yet commenced their plans and therefore demonstrated less progress inPFM improvement. More recently, Amhara and Oromiya have improved their performance significantly, as evidenced by timeliness in closure o f accounts and also implementation o f the budget and accounts reforms. 6. Ethiopia's public financial management reforms have beenmanaged by the Expenditure Management and Control sub-program (EMCP) o f the government's civil services reform program. EMCP has developed a revised strategic plan to implement the nine components o f the subprogram. The EMCP, as a key component o fthe Public Sector Capacity BuildingProgram (PSCAP) interms o f financial and human resources, i s now a priority. 55 1. RISKANALYSIS RiskAssessment andMitigation Risk Risk RiskMitigating Conditions Remarks rating Measures for Incorporatedinto negotiations, ProjectDesign boardor Effectiveness @/N) Inherentrisk M Country level S This risk is being N Lack o ftrained manpower dealt with at the inthe areaofaccounting and country level through auditing and low pay scales the Civil Service to attract qualified people. Reform Program There i s no national professionalassociation and accounting and auditing standards. These are being addressedby the government outside this project supported by PSCAP.Also, PSDCBP is supporting some private sector initiatives. Entitylevel M Through APL2 IDA N ERA as an entityhas long- financing, ERA i s in time experience in the process o fhiring implementingvarious large an international firm contracts. ERA will to upgrade its continue to discharge its financial management responsibilities ina more systeminadditionto proactive way. the various capacity- buildingactivities. Project level M ERA is inthe process N ERA as an entityhas long- ofhiring an time experience in international firm to implementingvarious large upgrade its financial contracts. ERA will management system continue to discharge its inadditionto the responsibilities ina more various capacity proactive way. buildinn activities. ControlRisk M Budgeting L N Accounting M ERA'Saccounting N ERAhas a good system of system will be further accounting that i s capable o f 56 strengthenedthrough recording and reporting the consultancy financial transactions. service and other initiatives. Internal M Inthe last couple o f N The InternalAudit Unit Control years, ERA has undertakes postaudit recruited additional activities for all ERA internal auditors to financial transactions. strengthenthe department's capacity. FundsFlow L N All the payments will be effected through the Head Office. There i s no reported problem inthis area Financial M ERA'Sreporting Therewere delays in Reporting systemwill be further N producing regular financial strengthenedthrough statements. ERA i s the consultancy introducing a new service and other computerized accounting initiatives. systemto be completedby end of2007, and this will solve delays inproducing financial statements. Auditing M New computerized N Inthe past, audit reports accounting system were issued late. As will improve delivery indicated above, o f reports from the introduction o fthe new auditors/ Audit computerized accounting Services Corporation. system will facilitate on- time delivery o freports from the auditors and the I Audit Services Corporation H=High S: Substantia M=Moderate L=Low The overall financial management risk rating for this project i s assessed as Moderate. Strengths and weaknesses 7. The country's discipline inexecuting budget and compliance with the existing government regulations i s the major strengthinimplementingprojects andprograms inthe country. ERhihas full-timefinance officers with adequate educational qualifications and experience. The program will be implementedcentrally, which i s an advantage inproducing the required information in a timely manner. ERA has long-time experience inimplementinglarge roadprojects, including donor-financed projects. Recruiting and maintaining accountants at the districts level are the major problems for ERA, and ERA i s improving the benefits packages for district accountants so as to avoid the highturn-over o f staff. 57 8. ERAhas implemented all the action plans agreed to duringthe preparationo fAPL2. ERAhas decentralized its accounting system and is usingthe ACCPAC accounting system. There has been progress inthe last two years inclosing annual accounts and ingetting regular financial reports from the districts. ERA has recruited additional internal auditors to strengthen the department's capacity. ImplementingEntitiesfor the Roads Program 9. Overall program and project management and coordination i s the responsibility o f ERA. ERAwill manage all the components o fthe project. 10. ERAi s currently implementingtwo active projects financed bythe Association: APLl and APL2. ERA has successfully implementedvarious Association and donor-financedprojects inthe past, includingRoadSector Development Program Support Project (RSDPSP, Cr. 3032- ET); RoadRehabilitationProject (RRP, Cr. 2438-ET); androad components o f Emergency Recovery Project (3438-ET). Management and administration o f funds have been done at the central level and there were no problems indisbursementsand accounting o f funds. 11. Inthepast four years, there hasbeen substantial improvement inthe finance division o f ERA interms ofbothqualified manpower and quality ofthe annual financial reports. The backlogs in submission o f entity audit reports, which existed at the start o f the RSDP in 1997, have beencleared and currently ERA i s up to date inclosing the accounts and submittingthe entity audit reports. The qualificationpoints on the annual audit reports have also beenreduced substantially inthe last couple o f years. The main qualification points mentioned inthe last couple o f years were long outstanding balances ingoods intransit, debtors, creditors, and cash at bank accounts. 12. IDA, GTZ, andDFIDprovided technical assistanceinterms oflong-term consultancy services to improve the financial management systems o f ERA. Significant progress has been made instrengtheningthe financial management capacity o f ERA through the TA. 13. There is, however, a needto coordinate donors to increase the pace o f the financial management reform inERA.To further increase the FMcapacity o f ERA. IDA, through APL2, i s to provide TA, and recently IDA gave its no-objection to upgrade the financial system o f ERA. Budgeting 14. ERA'Sannualbudgetis includedinthe annual budgetproclamation o fthe federal government. ERA submits its budget annually to the MOFED for inclusion inthe federal government budget.The federal government budget i s approved by the Parliament. ERA'S annual budget includes sources from donors and the federal government. Accounting 1.5. ERAuses an accrual basis of accounting on a double-entry system. ERA follows the International Accounting Standards (IAS) inrecording and reporting financial transactions. ERA has developed a financial management manual to be usedas a reference book for all the staff. The ACCPAC accounting software i s installed both at the Head Office and districts. 16. At the Head Office (HO) level, ERA has a Finance and Administrative Department with adequate and appropriately qualified staff. The Project Finance Section inthe department handles all project related transactions. Staff working inthe section have very good experience 58 and are capable o fhandlingproject financial transactions inaccordance with IDA'Sdisbursement guidelines and procedures. At the district level, there are at least two graduate accountants, and ERA is inthe process o f strengtheningits districts by employing additional accountants and also providing in-house training to new accountants. Starting 8 July 2003, ERA decentralized its accounting functions. All 10 districts maintain their own accounting records, keepingand reporting the financial transactions o ftheir districts. Each district submits a complete trial balance to the HO and the HOprepares consolidated financial statements for ERA as a whole. The financial transactions for all donor-financedprojects are beinghandledby the HO. Internal Controland InternalAuditing 17. Internal control comprises the entire system o f control, financial or otherwise, established bymanagement inorder to: (i) out the project activities inan orderly and efficient manner; carry (ii) adherencetopoliciesandprocedures;and(iii) assure safeguard the assets o fthe project and secure as far as possible the completeness and accuracy o f the financial and other records. 18. ERAhas anInternalAudit Unit that reports directly to the Director General ofERA.In the past, the unit mainly conducted special investigations, butrecently it has startedpost audit activities. The unit will include the project inits annual work program. Currently, the Unit has 19 internal auditors with adequate qualifications and experience. ExpenditureCategory Amount in US$million FinancingPercentage Civil Works (trunk roads) 156.18 100% o f foreign currencv Dortion I Civil Works (regional road) I 11.05 I 65% I Consulting Services and 21.25 70% Training Contingencies 36.52 Total Project Costs 225.00 59 Use of Statements of Expenditures (SOEs): 22. Disbursementsmade on the basis o f SOEs will be as follows: (i) civil works less than for US$500,000; (ii) for goods less than US$lOO,OOO; (iii) consulting firms on all contracts less for than US$lOO,OOO and for individual consultants on all contracts less than US$50,000; and (iv) for training and workshops on all contracts regardless o f the amount. The recipient will retain all the supporting documentationfor SOEs, including completion reports and certificates. The supporting documents will bemade available to IDA duringproject supervision and be audited annually by independentauditors acceptable to the Association. Disbursements for expenditures above these thresholds will be made against presentation o f full documentationrelatingto those expenditures. DesignatedAccount 23. To facilitate disbursementsagainst eligible expenditures under the Credit, ERA will establish a DA inthe National Bank o f Ethiopia. The authorized allocation for the DA will be US$20.0 million. ERA will submit replenishment applications at least once ina month. Counterpartfunds 24. ERA,inits annual budgets, will includethe counterpart contributions inlocal currency to cover the projected expenditure for the following financial year. Reporting and monitoring 25. The existing accounting and reporting systemo f ERA i s capable o f producing accurate and reliable information regardingproject resources and expenditures. The systemwill provide reliable records and reports on all assets and liabilities and financial transactions o f the project, and sufficient financial information for managing and monitoring activities. ERA financial management system i s designedto produce financial statements o f the entity as a whole to be usedby government and all donors. The sources from all donors would be easily identifiedfrom the chart of accounts and the expenditures couldbereported bymajor categories of expenditure. 26. ERAwill produce quarterlyIFRsand submitthe same to IDA 45 days after the end of each quarter. At a minimum, the financial reports should include the sources and uses o f funds, expenditures by main expenditure classifications, beginningand ending cash balances, and other supporting schedules. The formats o fthe IFRshave beenagreed on duringnegotiations. ExternalAudit 27. According to the audit policy o f IDA, ERA will prepare consolidated accounts, which include all the sources from donors and the government and related expenditures, and the auditors will express a single opinion on the consolidated accounts. The audit reports should be submittedto IDA six months after the end o f each fiscal year, which ends on 7 July of each year. 28. Since the Auditor General i s responsible for auditing all government funds, it will conduct the audit or assign other external auditors to the project. Currently, the Audit Services Corporation i s assigned as the external auditor o f ERA.This arrangement will continue for the future. 29. The audited entity and projects accounts for the year ended July 7,2006 havebeen receivedby the Association. 60 Conditionfor Boardpresentation 30. There are no conditions o f Boardpresentation. FinancialCovenants 31. The Recipient shall maintain a financial management systemand prepare project financial statements inaccordance with IAS.ERA shall submit audited financial statements no later than six months after the close o f each fiscal year. Inaddition, ERA shall submit unaudited financial reports 45 days after the end o f each calendar quarter. Social Accountability Measures 32. To complement the financial management system described above, ERAwill utilize data coming from more qualitative sources such as the services delivery score card reports and the TPO reports at the local level. Transparency is expected to be improvedby this triangulation. 61 Annex 8: ProcurementArrangements ETHIOPIA: Road Sector DevelopmentStage I11Project(APL3) A. General 1. Procurement for the proposed project would be carried out inaccordance with the World Bank's Guidelines: Procurement Under IBRDLoans and IDA Credits, dated May 2004 and revised October 2006; Guidelines: Selection and Employment of Consultants by World Bank Borrowers, dated May 2004 and revisedOctober 2006; and the provisions stipulated inthe Legal Agreement. The general descriptionofvarious itemsunder different expenditurecategories are presented below. For each contract to be financed by the credit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreedbetweenthe Recipient and the Bank's project team inthe Procurement Plan. The Procurement Planwill be updated at least annually, or as required, to reflect the actual project implementationneeds and improvements ininstitutional capacity. ProcurementEnvironment 2. Public procurement inEthiopia follows the federal structure o f the government. Procurement at the federal level is governed by the procurement code issued by the federal government on January 12,2005. At the regional level the procurement code i s enacted bythe regional government, and the procurement directive i s adapted to each region based on the model prepared by the federal government. 3. The Country Procurement Assessment Report (CPAR) conducted in2002 identified weakness inthe country procurement system. The government has taken the following actions based on the recommendationof the CPAR: (i) a new procurement code has been enacted at the federal level and at the four major regions that would be included inthe project; (ii) an independentPublic Procurement Agency with monitoring functions has been established at the federal level; (iii)new Federal Procurement Directives were issued inJuly 2005; (iv) standard biddocuments for procurement o fworks, goods, and selection of consultants have beenprepared and distributedto federal and regional government bodies; and (v) procurement has been fully decentralized to implementingagencies. However, gaps incapacity building still remain, as the large training program envisaged inthe CPAR action plan could not be implementedinfull. In addition, independentregulatory bodies have not beenestablished inthe regions. It has been reportedthat professional staff have been assigned inthe Oromiya region and that similar efforts have been made at the SNNPR. However, there i s a need for further actions to make the regulatory agencies at each o f the regions fully staffed and functional. 4. Procurementof Works:Works procuredunderthis project, would include contracts for the upgrading o f 509 kmo f federal trunk and link roads to asphalt pavement road surface standard, and the construction o f a 70 kmregional road from a barely existent trail to a gravel- surfaced road. 5. The procurement will be done usingthe Bank's Standard BiddingDocument (SBD) for all ICB, and the use o f the Bank's SBD as adapted for NCB contracts. Prequalification o f international contractors would consider proven performance o f contractors inthe implementation o f similar works. The poor performance o f contractors engaged insimilar works 62 inEthiopia over the last five years as demonstrated with fulldocumentary evidence not attributable to the employer could be abasis for nonqualification. The prequalification document would allow bidders to demonstrate their experience insimilar contracts with respect to physical size, nature, and complexity. The contractors' Performance monitoring systemto be established underthis project will enable ERA to monitor performance on a sustainable basis. 6. CapacityBuildingof DomesticConstructionIndustryUsingNCBProcedureswith Postqualification. One ofthe objectives ofthe project is to buildthe capacity ofdomestic contractors by increasingtheir participation inthe major works contracts. Works involving constructingthe Yalo-Nehile road section may be carried out under the National Competitive Biddingprocedure acceptable to IDA.Consideringthe low volume o fthe number o froadworks contracts executed by domestic contractors inEthiopia over the past five years, GOE has recommended, andIDA has agreed, that an appropriate consideration will be given insetting procurement requirementsunder the programs for domestic contractors biddingfor the works underthisprogram. 7. The upperlimit o fthe NCB will be determinedand agreed based on the domestic contractors' performance and capacity assessment to be carried out as part o f the designreview and planningfor the selected road. The government's request to keep the upper threshold for N C B at US$20million will also be reviewedas part o f this process. 8. The biddingprocess o f contracts dedicated to the D C I capacity-building initiative will follow a postqualification procedure inorder to enhance competition among the already limited numbero fpotentialdomestic bidders.This practice provedto yieldreasonable lowest evaluated bidprices underAPL 1bidprocessing and will be adopted inthis project too. Bidders' qualifications will be assessedbased on their total capacity to handle contracts infinancial terms. The criteria to determine the capacity infinancial terms will beclearly specifiedinthe bidding document. It will also state the minimumequipment availability to perform the contracts, minimumfinancial requirements,personnel capabilities, andpast performance. 9. For this capacity buildingcomponent, the GOE has again agreed to waive Performance Bonds, to be substitutedwith the retentionmoney. GOE will also facilitate the access to Advance Payment Guarantee provided by the local banks, for those domestic contractors that are awarded the contracts, based on submission o f (i)signed contract with ERA (on behalf o f the GOE); (ii) a an account maintainedby the contractor inthe bank providing the guarantee; and (iii)formal a letter from the ERA (on behalf o fthe GOE) confirming that the advance payment in accordance with the contract wouldbedeposited inthe contractor's account heldwith the same bank upon receipt o f a guarantee from the bank, provided the contractor has a good financial standing with the bank. Alternatively, advance payments couldbe released up to the amount (but below the specified advance payment amount) actually spent based on specific documentary evidence such as provision o f the shipping documents for importation o froad construction equipment,receipt o f imported equipment, procurement o f road construction materials, and service agreement with firms for contract management and technical support, and so forth. 10. Selectionof Consultants: Contracts for consulting services for: (i) construction supervision for the above civil works estimated at US$19.98 million; (ii) institutional strengtheningo fERA quality assurance inprocurement, contract administration, and management and monitoring o f environmental and social mitigation measures estimated at US$1.16 million; (iii) institutional strengthening o f ERA for monitoring o f 63 contractors'/consultants' performance and contract costs and unit rates estimated at US$3-72 million; (iv) feasibility and EIA studies, and design review and civil works contracts processing for APL4 roads or projects planned under RSDP I11at US$2.42 million; (v) T A support for implementing the ERA'Smodernization activities at US$1.20 million; (vi) technical and management study and provision o f technical assistance incapacity buildingto improve urban transport management inAddis Ababa at US$0.95 million; and (vii) other studies and technical assistance. The services are expected to be provided through consultancy firms that will be procured following the Quality and Cost-Based Selection (QCBS) method. Individual consultants will be hiredon the basis o ftheir qualification inresponse to needs for specific expertise; and for `issue studies'. It will be conducted inaccordance with section V o f the Guidelines.Other methods o fprocurement such as SelectionBasedon Consultants Qualifications (CQS) may be used for small value services such as specialized engineeringand technical advisory services and auditing; and Single Source Selection (SSS) may be adopted as found appropriate for subcomponents. 11. Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract maybe composed entirely ofnational consultants inaccordance with the provisions o fparagraph 2.7 o f the Consultant Guidelines. B. Assessment of ERA'Scapacityto implementprocurement 12. ERAwill carry out procurement activities. The Engineeringand Regulatory Department will be responsible for overall management o fthe procurement process. 13. There are currently 6,453 permanent and 6,008 contract employees o f ERA. The EngineeringServices Procurement and DesignDivisionis responsible for formulating projects and procuring engineering services including road design, as well as bids for works. Staff inthe division have grown from 37 to 58 civil engineers between 2003/04 and 2006/07. Over the period, procurement contracts handledhave also increased from 78 to the current levels o f 140 projects inaddition to supervisingthe preparation o f designs for 30 roadprojects every year. The size o fprocurement conducted over the last three years consists o f about US$1.21 billion for civil works and US$83.5 million for consultancy services. The number o f contracts undertaken for procurement i s more than double the size it was during the appraisal o f APL 2. Inorder to respond to the drastically increasing demand for capacity to process such size o fprocurement, ERAhasrecruited and assigned to these divisions 15 engineers graduating inthe special field o f studies inconstructiontechnology and management. 14. With support from IDA under APL 1project and a support from AfDB, two TAs are providing support inthe areas o f contract procurement, contracts administration, and environmental management. Various training courses have also beenprovided for staff inthe Procurement andDesign Branches and the Network Management Legal Services Branches. UnderAPL1, four staffhavecompleted M.Sc. courses inconstruction management from UK universities, and another four engineers are doing M.Sc. courses to be completedby October 2007. Recognizingthe increasing volume o fprocurement, ERAhas started outsourcing procurement functions to private procurement agents and consulting firms. Duringthe budget year 2006/07, ERA reports outsourcing the procurement o f 23 consulting services contracts, out o f 140 contracts, packaged for three procurement agents/consultants. O fthe total outsourced procurement activities, 15 contracts have been completed. 64 15. At appraisal, selection o f an internationalprocurement agent/consultant was inprogress for a fourth package comprising seven services contracts. A combination o f these outsourcing arrangements, provision o f international consultant technical advisory services for works tendering, and recruitment and training more engineers is expected to further strengthenERA'S capacity for the increased procurement workload. Table: Summaryof ERA'SAnnualProcurementWorkloadandCapacity Year No. of No. of No. of Contracts Engineers Procurement Handledby Services the Division Outsourced I2003/04 II 178 37 None 2004/05 I1101 II39 IINone 2005/06 162 I l5 III 2006/07 140 58 23 16. The Civil Contract ImplementationDivisioni s responsible for administration o f civil works and the associated supervision consultancy services contracts. The total number o f construction contracts to be implemented i s expected to increase from 58 to 72 within the fiscal year 2006/07 (35 local and 37 international constructioncontracts). ERA also has revised the structure o fthe division to respond to the expected increases o fthe workload. To enhance the division's effectiveness, the following measures were taken: (i) number o f Construction the Contract Implementation Branches has been increased from two to four with each branch administering a more manageable numberbetween1520 construction contracts; (ii) the Right o f Way Branch section has been strengthenedwith new graduate professionals inmanagement; and (iii) financesectionwasestablishedundertheAdministrationBranch.ERAisalso one increasing delegation to the branch heads to facilitate the decision-makingprocess and improve contract administration as part o f its modernization process. 17. BetweenDecember 15,2006, and February 26,2007, the Bank's Senior Procurement Specialist carried out an assessmento f the capacity o f the implementingagency to implement procurement actions for the project. The assessmentreviewedthe issues highlighted above, and the organizational structure for implementing the project and the interaction betweenthe project's staff responsible for procurement and the unit's head o fprocurement and contract administration. 18. Most o f the issues and risks concerning the procurement component for implementation of the project have beenidentified, including: (i) turnover o f experienced staff has occurred high inboththeprocurement andcontract implementationbranches; (ii) quality ofprocurement the documents prepared by consultants i s not always up to the requiredstandard; (iii) procurement plans are not effectively used for monitoring projects; and (iv) the increased workload o fERA 65 may result indelays inprocurement processing and decisions inaddition to decline inthe quality o f documents. 19. Inorder to address the issues andrisks identifiedduringthe capacity assessment, the following corrective measures are beingtaken by ERA: (i) new staffwith a relevant field o f study are beingemployed so that the requirement for extended on-the-job-training is avoided; for example, the ongoing T A that i s beingprovided under the APL 1is, inter alia, preparing a training manual and developing systems for new engineers to quickly familiarize themselves with their expected duties; (ii) T A that will beprovided to support the monitoring of the contractors'/consultants' perfonnance under APL 3 i s expected to encourage consulting firms to assure the quality o f the services they provide; and (iii) the TA that will beprovided underAPL3 to strengthenthe quality assurance capacity o f ERA inprocurement i s expected to enhance ERA'Sprocurement capacity. The above-mentioned TAs will beprovided inthe first year of implementation. The overall project risk for procurement i s Moderate. C. Procurement Plan 20. The Recipient, at appraisal, developed a Procurement Plan for project implementation that provides the basis for the procurement methods. This planwas agreed on by the Recipient and the Project Team on April 13,2007, and i s available at ERA at the office o f the Deputy Director General for Engineering and Regulatory Department. It will also be available inthe project's database and inthe Bank's external website. The Procurement Planwill be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. D. Frequency of Procurement Supervision 21. Inadditionto the previous review supervision to becarried out from Bank offices, the capacity assessmento fthe implementingagency has recommended bi-annual supervision missions to visit the field to carry out postreview o fprocurement actions, ifany. 66 Attachment 1 DETAILS OF THE PROCUREMENTARRANGEMENT INVOLVING INTERNATIONAL AND NATIONAL COMPETITION 1. Works andno-consultingservices. (a) List o f contract packages, which will be procured following ICB, NCB and direct contracting: 1 1 1 2 3 4 1 5 6 1 7 8 9 1 Ref Contract Estimated Procuremen P-Q Expected Comments No. (Description) cost t Bid - Million Method Opening US% Date I I B1. I Gonder-Debark I B.Upgradingof Gonder-Debark Road (1contract) 51.75 I ICB I Yes I Yes I Prior I Nov9.2007 I Note* The upper limit of the NCB will be determined and agreed based on the domestic contractors'performance and capacity assessment to be carried out aspart of the design review andplanning. (b) The prior review procedures set forth inparagraph 2, 3 and 5 ofAppendix 1to the Procurement Guidelinesshall apply to each contract: (i) goods, and services (other than for consultants' services) estimated to cost US$250,000 or more and (ii) to each contract for works estimated to cost US$500,000 or more and procured on the basis o f international competitive bidding, or national competitive bidding. 67 (c) The following prior review procedures shall apply to each contract to be procured on the basis o f direct contracting: (i) execution o f the contract, the Recipient shall provide to before the association a copy o fthe specifications and the draft contract for its approval; (ii) the contract shall be awarded only after the association's approval shall have been given; and (iii) proceduressetforthinparagraphs2(h) and3ofAppendix1totheProcurement the Guidelines shall apply. 2. ConsultingServices. I (a) List o f consulting assignments with short list o f international firms. 1 2 3 4 5 6 Ref. Descriptionof Assignment Estimated Selection Review Expected Comments No. cost Million Method by Bank Proposals US$ (Prior I Submission Post) Date Aposto-Wendo-Negele Al. Contract 1. (km0.0- km 3.34 QCBS Prior Jul18,2007 94.1) Aposto-Wendo-Negele A2. Contract 2. (km94.1- km 4.10 QCBS Prior Jul18,2007 202.6) Aposto-Wendo-Negele A3. Contract 3. (km202.6- km 2.34 QCBS Prior Jul18,2007 267.8) Yalo-Nehile I 1.19 I OCBS 1 Prior =Jul18.2007 1 I Oct 10,2007 Oct 10,2007 Jun 18,2007 B1. Quality Assurance 1.16 Individual Prior Aug 15,2007 B2. Monitoring System 3.72 QCBS Prior Sep 16,2007 B3. EMDM0Modernization 1.20 QCBS Prior Sep 17,2007 1 C.PREPARATORYACT~ DesignReviewFeasibility 2.4 1 QCBS Prior INov 21,2007 I I "* studies, EL4 Pilot Performance-Based 0.35 QCBS Prior Nov22,2007 Support to UrbanTransport 0.95 QCBS Prior Nov 23,2007 I C4. 1ERTTP Moderation 1 0.58 IIndividual I Prior INov26,2007 I I 68 (b) Consultancy services for firms estimated to cost above US$lOO,OOO per contract, and individual consultants estimated to cost the equivalent o fUS$50,000 or more, per contract; and each single-source selection o f consultants (firms and individuals) will be subject to prior review bythe Bank. (c) Short lists composed entirely ofnational consultants: Short lists o f consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely o f national consultants inaccordance with the provisions ofparagraph 2.7 of the Consultant Guidelines. 69 Annex 9: EconomicandFinancialAnalysis ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) Introduction 1. For the national and regional roadprojects, traffic counts and projections were prepared together with preliminary engineering designs to appraise the economic feasibility o fthe roads. The analysis is presented inthree sections. SectionA presents key assumptions, input data, and methodology usedinthe analysis. Section B presents the economic analysis for rehabilitation and upgrading o f the three federal roads: Gonder-Debark (107 km), Gedo-Nekempte (134 km) andAposto-Wendo-Negele Road (268 km). SectionC presents an analysis ofthe constructiono f the Yalo-Dalol regional road. 2. The original feasibility studies for the federal roads were undertaken in2003; these were furtherreviewedbetween June and September in2006. A feasibility study for the Yalo-Dalol road was undertaken in2002. A subsequent final revision o f the engineeringconstruction costs was undertaken prior to the preparation o f the project appraisal document. A. Assumptions, InputData, andMethodology 3. Traffic Levels. The table below shows the estimated average annual daily traffic for the three federal roads in 2006. Road link Length Car L/R S/Bus L/Bus S/T M/T H/T T/T Total (km) Gonder-Debark 107 5 104 24 23 35 33 42 18 284 Gedo-Nekempte 134 2 84 89 45 36 169 150 40 614 Aposto-Negele 268 1 53 16 14 76 25 15 14 214 For the Gedo-Nekempte road, an additional 39 vehicles per day are estimated to divert to the roadupon completion from the Addis-Jimma-Metu-Gambellaroad. The Gedo-Nekempte road i s approximately 40 km shorter indistance between Gambella and Addis Ababa; however, currently the Jimma road i s usedinpreference because o fthe current condition o f the Gedo road. 4. The Yalo-Dalol road will effectively provide a new link. In2002, traffic volumes on the current tracks along this, and adjacent alignments, were estimated to be inthe region o f 46 vehicles per day. 70 Forecast traffic volumes. 5. An analysis o fthe Ethiopian RoadAuthorities Traffic Stations has shown that inthe period 1994 to 2003 traffic growth averaged 6.06 percent per year, with cars and light vehicles growing at 2.76 percent, buses at 9.48 percent, single trucks at 5.39 percent and articulated trucks at 9.06 percent. 6. Based on an interpretationo fpast trends and the economic circumstances o f each road different traffic growthrates were assumed for eachroad. For Gonder-Debark, traffic growth rates ranged from 6.3 percent for large buses to 7.9 percent for articulatedtrucks. For Gedo- Nekempte, average traffic growth rates rangedfrom 4.8 percent for trucks to 6.3 percent for cars and light vehicles. For Aposto-Negele, traffic growth rates were forecast to be 8.4 percent for cars and light vehicles and 7.2 percent for heavy vehicles. For Yalo-Dalol, traffic growth was assumedto grow at 7 percent for the period to 2012 and 6 percent thereafter. Generated traffic. 7. Each o f the feasibility studies has assumed that new generated traffic will result from the road investment.Generated traffic i s forecast to be 20 percent for Gonder-Debark and Aposto- Negele. For Gedo-Nekempte, it i s forecast to be 15 percent from 2011to 2013, 30 percent from 2014 to 2023, and 10percent from 2024 to 2030. Because o f the very significant change in accessibility brought about by the road investment on the Yalo-Dalol road induced traffic i s forecast to be 62 vehicles when the road i s first opened, rising to 149 vehicles by 2022. Appraisal Methodology. 8. The three federal roads were appraised usingthe HDM4roadappraisal model. Ineach case the proposed option was compared with a "do minimum" case that assumes routine and minimalperiodic maintenance for the without case. The economic analysis i s based on benefits to roadtraffic (interms o f savings invehicle operating costs) compared with the costs o f rehabilitatinghpgrading and changes inroadmaintenance percent increase incosts, a 20 percent decrease inbenefits, and a worst-case scenario wherein costs rise by 20 percent and benefits fall by20 percent. 9. The proposed road investmentswill reduce vehicle operating costs, reduce travel time, reduce noise and air pollution, improve road safety, and contribute to economic development and welfare inthe area through reduced transport and marketing costs. B.Rehabilitationand Upgradingof FederalRoads The EconomicAnalysis of the Gonder-Debarkfederalroad(104 km-AC) 10. Cost. The construction cost o f this project i s estimated to be US$51.75 million. The economic cost i s estimated to beUS$43.99 million. 11. NPV/EIRR and Sensitivity Analysis. Three sections have beendefinedfor economic analysis o fthe Gonder-Debark road: Gonder-Weleka, Weleka-Debat, and Debat-Debark. In comparison with the base case and double surface treatment, asphaltic concrete was shown to be the best option. 71 Summaryof Results Criterion Base case Costs Benefits Costs + 20% +20% - 20% Benefits-20% NPV @ lo%, $M 50.61 42.59 32.46 24.44 EIRR 20.8 % 18 % 17.4% 14.8% FYRR 16.5 Yo 13.7 % 13.2 % 11 % 12. The base case has an economic internalrate o freturno f 20.8 percent and a net present value of US$50.61 million. The sensitivity analysis shows that the project's EIRRvaries from 14.8 percent to 18 percent, dependingon the sensitivity test applied. Eveninthe worst-case scenario (costs + 20 percent and benefits -20 percent), the project i s still shown to be viable, with an EIRRof 14.8 percent 13. The first year rate o freturn (FYRR) criterion i s above the discount rate o f 10percent, indicating that project timing i s optimal, that is, there i s little to be gained by postponing the project. The Economic Analysis of the Gedo-NekempteRoad( 134 km, AC) 14. Cost.The construction cost o fthis project i s estimated to be US$77.03 million. The economic cost i s estimated to beUS$65.48 million. 15. NPVZERR and SensitivityAnalysis. Two sections have been definedfor economic analysis o fthe Gedo-Nekempte road: Gedo-Bako and Bako-Nekempte. Incomparison with the base case and double surface treatment, asphaltic concrete was shown to be the best option. Summaryof Results Criterion Base case Costs Benefits Costs + 20% +20% - 20% Benefits-20% NPV @ lo%, $M 52.54 41.48 30.97 19.9 EIRR 18.2 % 15.7% 15.1 % 12.9 % FYRR 11.4 % 9.5 % 9.1 % 7.6 % 16. The base case has an economic internal rate o freturn (EIRR) o f 18.2 percent and a net present value o fUS$52.54 million. The sensitivityanalysis shows that the project's EIRRvaries from 12.9 percent to 15.7 percent, dependingon the sensitivity test applied. Eveninthe worst- case scenario (costs + 20 percent and benefits -20 percent), the project i s still shown to be viable with an EIRRof 12.9 percent. 17. The FYRRcriterion isjust above the discount rate o f 10percent, indicating that project timingis broadly optimal. However, inthe sensitivityanalysis the FYRRdoes fall below the discount rate. 72 The EconomicAnalysis of the Aposto-NegeleRoad(268 km,AC) 18. Cost. The constructioncost o f the project i s estimated to beUS$139.68 million and the economic cost i s estimated to be US$118.74 million. 19. NPK EIRR ,and Sensitivity Analysis. Six sections have beendefined for economic analysis o f the Aposto-Negele road: Aposto-Aleta Wendo, Aleta Wendo-Yirba Muda, Yirba Munda-Kibre Mengist, Kibre Mengist-Wadera, Wadera-Bitata, and Bitata-Negele. Ina comparisonwith the base case and reconstructed gravel, double surface treatment and asphaltic concrete double surface treatment was found to be the most economically viable. Summaryof Results Criterion Base case Costs Benefits Costs + 20% +20% - 20% Benefits-20% NPV @ lo%, $ M 47.44 25.52 16.03 -5.89 EIRR 13.9 % 11.8 % 11.4% 9.6% FYRR 10.7 % 8.9 % 8.6 % 7.2 % 20. The base case has an EIRRo f 13.9 percent and a net presentvalue o f US$47.44 million. The sensitivityanalysis shows that the project's EIRRvaries from 9.6 percent to 11.8 percent, depending on the sensitivitytest applied. Eveninthe worst-case scenario (costs + 20 percent and benefits -20 percent), the project has a small negative NPV and an EIRR o f 9.6 percent, marginally below the test discount rate o f 10percent. 21. The FYRRcriterion i sjust above the discount rate o f 10percent, indicating that project timingis broadly optimal. However, inthe sensitivityanalysis the FYRRdoes fall below the discount rate. C. The EconomicCase of the Yalo-DalolRoad 22. The road was identified ina study financed by NDF as one o f the high-priority roads forming part o f a program aimed at strengtheningthe road sector development inthe less developed and low-road-density Afar region. The proposed road stretches from the town o f Yalo to Nehile (70 km), which i s the southern section o fYalo-Dalol road. The existing track ina hilly section north o f Yalo i s completely impassable, although there i s access from Aba Ala southwards for about 80 kmto the town o fNehile. The mainjustification i s based upon consideration o f the social equity aspects o f this remote and isolated area that nonetheless has development potential, to ensure an equitable distribution o fpriorities among less developed regions o f the country. Improvedtransport should help to reduce poverty through constructing rural road access into otherwise disconnected and marginalized areas. 73 Fiscal Impact Analysis 23. Duringthe appraisal o fIDA Credit 39890-ET, a fiscal impact analysis for RSDPwas carried out to show projections o frevenue and expenditure (as percent o f GDP) for the road sector program, along with the health and education sector programs, and this has beenextended to show separately the agricultural sector inthis PAD. Similar analysis showing the aforementioned sectors was undertaken for the RSDP Phase II,2002/03-2006/07, and indicated expenditures inabsolute terms and as a percentage o f GDP. The analysis i s based on statistical data obtained from the ERA, MOFED, NBE, and OW, as well as the PASDEP- September, 2006. 24. The updated annual results o f the analysis for the period 2002/03-2006/07 are intables 1Aand 1Binabsolute amounts and as apercentage o fGDP, respectively. Ineach case, the Sector InvestmentPrograms (SIPS) were fully implemented as planned. The fiscal projections o f revenueand expenditure for the RSDP I11for the period2007/08-2011/12 are depicted intables 2 A and 3A, bothinabsolute terms, and intables 2B and 3B as a percentage o f GDP. For both cases, the scenarios presented are: (i) fully implementedas planned, and (ii) SIPs excluding unidentified sources. 25. For RSDP Phase II,2002/03-2006/07, the annual actual spendingversus projection o f current and capital expenditure for the roads sector i s also presented. While assessingthe yearly recurrent spendingon major sectors o f the economy in2002/03-2006/07, the amount spent for road sector i s generally less than the amount expended on agriculture, education, and health. For example, out o fthe total average recurrent expenditure from 2002103 to 2006/07, the road sector constituted 2 percent, whereas agriculture, education, and health accounted for 7, 22 and 6 percent, respectively. Inthe same period, on average, ETB 346 millionwas spent for the road sector o fwhich the RoadFundAdministration financed 75 percent o f the expenditure while the remainingbalance came from the treasury. 26. A close look at capital expenditure for major sectors o fthe economy inthe period 2002/03-2006/07 reveals that expenditure for the road sector surpasses the amount o f spending for agriculture, education, and health sectors. As far as total average capital expenditures are concerned, the share o f the road sector stood at 21 percent, while that o f agriculture, education, and health were 18, 15, and 5 percent, respectively. Inthe same period, ETB 13,232 million was disbursedas capital expenditure for the road sector. With regard to financing, 49 percent was obtained from external sources, while the remainingbalance was covered from domestic sources. InRSDP 11,the yearly capital expenditure exceedsthat o fthe projectedamount. This is mainly attributedto the actual disbursemento f committed donor funds, largely the result o fthe Recipient's and contractors' improved capacity to implement andcomplete the program as scheduled. 27. The analysis also presents fiscal projections o frevenues and expenditures for the RSDP I11for the period2007/08-2011/12. Eventhough data for the projectionperiod are incomplete, the total expenditure for the road sector is assumedto register an average growth rate o f 33 percent. Specifically, the recurrent and capital expenditures are projected to register a yearly average growth rate o f 7 percent and 37 percent, respectively. With regard to the financing aspect of the road sector, 91 percent o f the total recurrent expenditure will be covered by the ORF; the remainingbalance will be covered bybudget allocations from the treasury. Onthe 74 other hand, the source o f financing o fthe capital expenditure depicts that 21 percent o f the amount will be covered from external sources. 28. The overall results o f the actual past expenditure o f the RSDP I1period provide useful sectoral inputs, which can be used for overall national public expenditure review. On the other hand, the fiscal projections will be further reviewed against actual revenue and expenditure duringimplementation ofthe program. 75 76 77 78 81 Annex 10: Social andSafeguardPolicyIssues ETHIOPIA: RoadSector DevelopmentStageI11Project(APL3) A. EnvironmentalAssessments andResettlementAction Plans 1. Individual EIAs, including EMPs and Resettlement Action Plans (RAPs) for the four APL3 roadprojects have beenprepared; likewise, aResettlement RehabilitationPolicy Framework, (RPF). The ERA prepared all the safeguards instruments.The four EIAs, the four RAPs, and the RPFwere cleared by the Ethiopia EnvironmentalProtection Agency (EPA) and bythe Bank's Africa Safeguards Policy ENhancement (ASPEN), and they were provisionally disclosed inEthiopia as well as at the Bank's Infoshop, before appraisal. The'in-country disclosure o f the 4 RAPs and the RPFwas effected December 26,2006, and the four EIAswere disclosed on January 20,2007. The Infoshop disclosure for all nine safeguards documents was effected on January 30, 2007. 2. N o salient adverse environmental impacts have been identifiedby the EIAs. The impacts identified are minor. They are site-specific, relatedto civil works and limitedto the execution o f the following civil works operations: (i) campsites o f contractors and resident engineers; (ii) borrow pits; (iii) diversions; and (iv) quarry sites. The adverse impacts transpire as temporary loss o f flora, permanent loss o ftopsoil, runoff, soil erosion, noise, and dust. EMPshave been prepared for each project road inconjunction with the EIAs, and mitigation and monitoring measures have been established and costed. FieldVerificationof SafeguardsInstruments'Findings 3 , Fieldverification during the appraisal mission confirmed the basic findings o f the EIAs and the RAPs. The number o fproject-affectedpersons may, however, be reduced on the Yalo- Dalol road, as the RAP did not systematically take into consideration, the reductiono f the right o fway, by 15 meters, inurban sections, likewise, on the Gonder-Debark road and on the Aposto- Wendo-Negele project roads. ResettlementDtehabilitation,No. of PAPsandPreliminaryBudget Project EstimatedNo. ofPAPs Cost EstimateinUSD IIIAposto-Wendo-Negele I 1,375 households/8,371 persons I US$4.3 million Gedo-Nekempte 587 households/3,896 persons 1I US$2.5 million 1 II 1I Gonder-Debark 1,500 households/7500 persons US$580,000 Yalo-Dalol 15 households/l20 persons US$$35,000 Total I1II3,477 households/l9,887persons 1I US$7,415 million 1I The total base cost for the implementation o fthe four roads is estimated at US$285.46 million. 82 4. To help the project strengthenits effectiveness inreaching the poor and the most vulnerable groups and achieve its planned development outcomes, the following social actions have beenundertaken. A Social Impact Assessment (SIA) was conducted by the GOE for each o f the four roadprojects, inconjunctionwith the EIA. The EIA teams included both social scientists and environmentalists. The socioeconomic data, which were collected through review o f existing documentation andpublic consultations, covered issues relatedto land acquisition, involuntary resettlement, road safety and HIV/AIDS, vulnerable groups, indigenous peoples, and cultural property. 5. The SIAs concludedthat project operations will have adverse social impacts inducedby: (i) acquisitionresultingininvoluntaryresettlement;and(ii) land dislocation o f social values resulting inthe spread o f HIV/AIDS. About 3,500 households are expected to be adversely affected by roadproject operations, o fwhich 813 households are likely to have their houses affected, 2,687 households will lose strips o f land along the road corridor, and about 700 households will permanently lose their strips o f land. For the purpose o fmitigating adverse social impacts on PAPS,four individual RAPs have beenprepared, approved, and cleared by ASPEN; they were disclosed inEthiopia and at Infoshop before project appraisal. A ResettlementPolicy Framework (RPF)prepared for APLl and APL2 projects, disclosed in February 2003, updated inJanuary 2007, and disclosed with the four RAPs. B. Safeguards-RelatedRisks 6. The potential adverse impacts o froadproject implementationinclude soil erosion, temporary loss o f strips o f farmland along the road alignment, disturbances inthe water quality. Inaddition, noise and dust arepresumedto induce bothadversephysical and social environmentalimpacts duringroad constructionwork. Environmentalprotection clauses are included inthe contract documents, as well as social clauses including HIV/AIDS prevention. Compliance inthe implementation o fthe clauses will be monitoredby the ERA Environmental Monitoring and Safety Branch (EMSB). C. Alternatives Consideredto MinimizeAdverse Safeguard-RelatedImpacts 7. Drawing from experiences o f APLl and APL2, the road designs were requiredto take into consideration the road alignment location, with the aim o f reducing adverse environmental and social impacts. The right-of-way requirements will be reduced intown sections where adverse social impacts are presumedto be severe. D. Consultationswith Various Stakeholdersand Affected Groups 8. The design o fthe GOE's Road Sector DevelopmentProgram andthe related Association- financed APL stages has beenparticipatory at several levels. Public consultations were held throughout the EIA and SIA processes incommunities along the corridors o f roads selected for design and inclusion inthe program. The stakeholders included local governments and administrations, community-based organizations, community-based facilitator, NGOs, regional governments, sectoral administrations, and federal authorities. The consultations focused on assessing the viability o f the project, identifying potential areas o f conflict betweenstakeholders, and defining areas o f collaboration. A social assessment training provided inconjunction with APLl and APL2 inFebruary-March 2003 for the ERA and key stakeholders will be repeated. The focus will be on the consultative and participatory techniques and poverty impact studies, bothto be further employed throughout implementation o f the APL3 roadprojects. 83 9. Also, the consultations involved local communities, farmers' groups, other nonprofit service providers, SMEs, and the infomal sector; and focused on assessingthe viability o f the roadprojects, identifyingpotential areas o f conflict between stakeholders and definingpotential areas o f collaboration. The result o f the public consultations carried out inthe SIA inconjunction with the EIA and ERA'Sadditional consultations, among others documented on video films, confirms solid support for the implementation o fthe roadprojects. Both local governments, civil society (for example, the Fistula Hospital), NGOs, CBOs, CBFs; and vulnerable groups such as women, youth, the handicapped and the elderly are infavor o f the roadprojects. 10. To further improve stakeholders' participation, the following actions are proposed: (i) within ERA, create coordination committees that will include private, informal, andpublic organizations representatives; (ii) conduct o ftraining activities to increase awareness o frelevant issues and actions and to introduce the culture o f continuous public consultation and feedback in the planning, development, maintenance, and operation o f the road and transport network; (iii) increase consultation among project stakeholders, local governments, local communities, and PAPSalong the road alignment during the APL3 implementation and the various stages o f the project cycle to improve the planning and design proposals for APL4. The consultations will provide the opportunity for the stakeholders (particularly rural stakeholders) to express their concerns and provide suggestions through public hearings and information and sensitization campaigns and to ensure that the people's needs have beentaken into account. 11. Consultations with local communities will be continually organized during the implementation o f all stages o f the civil works to minimize conflicts, enhance cooperation, and improve social benefits and performance o f the works contracts. E. Long-TermAdverse SafeguardImpacts 12. The safeguards impacts identifiedare not expected to have any long-term or cumulative effects. F. EnvironmentalMitigationPlans Prepared 13. EMPs for each o f the four roads and any requiredRAPs have beenprepared to mitigate adverse environmental and social impacts. The mitigation measures have been costed. The EMPs will be reviewedby the residentengineer duringcontract mobilization andbe updated as necessary. The EMPs include both internal and external monitoring arrangements. The internal monitoring will be conducted by the EMSB.The external monitoring will be conducted by the regional and the national environmental protection authority o f the Federal Democratic Republic o f Ethiopia. Both the EIAs and the R A P s have been submittedto the EPA at regional and national levels. G. Assessment of Capacity and Commitmentof Client to Address SafeguardIssues 14. The EMSB will address the safeguards issues. The EMSB is the result o fthe RSDP I, EA recommendations. At the outset, the EMSBwas called EnvironmentalMonitoring Unit, and focused on reviewing EIAreports prepared by designand EA consultants. Inresponse, however, to the challenges and findings raised by thejoint World Bank and ERA 2003 workshop on social dimensions o f transport, the name o fthe branch was changed to capture safety issues, hereby, the EnvironmentalMonitoring and Safety Branch. Progressively, the EMSBhas beenengaged in: (i) reviewing EA reports prepared by design and EA consultants; and (ii) monitoring all IDA subproject operations and providing support to other donor-financedprograms inthe mitigation 84 o f adverse environmental and social impacts. Also, the EMSBhas been responsible for the production o f the Environmental Procedures Manual and the Resettlement/Rehabilitation Policy Framework. Furthermore, the EMSB prepared a Sectoral Policy to address HIV/AIDS issues within ERA; and a 3 Years Strategic Work-planfor HIV/AIDS Prevention and Control in ERA. The four documents are beingusedinERA'Sproject preparationand have beeninstrumentalin the implementation o f overall RSDP, and APL1, APL2, and APL 3 roadprojects. Inaddition, significant effort has gone into improving R A P s and social assessmentso f roads as a part o f EIA. These documents now systematically address issues o f vulnerability and conflict management mechanisms at the local level. 15. The EMSB i s staffed with one highway engineer and an environmentalist (master's degree), two ecologists (one inmaster's training inthe Netherlands), one geologist, one health officer, and three "sociologists" (social workers). One o f the sociologists works full time addressing HIV/AIDS prevention and treatment, together with the health officer. The unit has the necessary logistics, computers, phones, and cars to carry out its work programs. 16. Also, over the past five years ERA has increased the number o f right-of-way agents from 10 to 50. This has resulted inincreased capacity to address compensation and mitigation issues and ensure timelypayments. 17. Support to the EMSBwill continue under APL3, with the aim of: (i) strengthening the analytical capacity o f the unit and the management capacity o f the unit through training and logistical support; and (ii)facilitating the implementation and monitoring o f EMPsprepared for each o f the proposed roadprojects. A second workshop on the social dimensions o f transport will be carried out before mobilization o f APL3 project roads. H. Fundingof SafeguardMitigationMeasures 18. Cost for covering safeguard mitigation measures i s included inthe bills o f quantity. I. ReferencestoMitigationplansintheProjectLegalArrangements 19. The mitigation o f adverse environmental and social impacts identifiedi s incorporated in the financing agreement and inthe contract documents. J. Mechanisms to Monitor the ImplementationofAgreed-UponMitigationPlans 20. Monitoring will be a continuous process. Project progress reports shall include environmental and social development outcomes. The day-to-day field monitoringo fthe implementationo f agreed-upon mitigation planwill be conducted by the roadprojects' resident engineers and captured inthe monthly and quarterly progress reports, which are subject to review by the EMSB.Also, social andenvironmental specialists will be assignedundereachResident EngineerTeam, to facilitate the implementationandmonitoringofenvironmental and social mitigationplans, as inAPL2 roadproject contracts. The EMSB will continually take stock o f all expropriation and compensation reports prepared by the right-of-way agents and analyze them on regular basis. APL3 will continue to support the EMSB to monitor the implementationo f the EMPs and the RAPs prepared for each o f the proposed road projects. EMSB operations are supported by the completed Environmental Procedures Manual (EPM) and the Resettlement Policy Framework (RPF).The program will also strengthenthe analytical and monitoring capacity o f the unit through hands-on training. Implementation o f the EMPs and the RAPSwill be launched prior to commencement o f civil works. 85 21. TPOs initiated under APLl and APL2 on four o f the roadprojects that focus on road constructionprocess impacts, access impacts, and mobility impacts will be continued under APL3 on each road alignment at the local community level. K. SupervisionArrangements,IncludingStaffingandResources 22. UnderRSDP I,the recipient has laidthe foundation for sound environmental and social management within the roads sector inEthiopia. The EMSB was created. The EMSBnow consists o f a highway engineer, two ecologists, a geologist, three sociologists, including a health officer addressing HIV/AIDSissues. 23. Supervision will be a continuous process. The day-to-day field supervision will be conducted bythe road contact resident engineers and captured inthe monthly and quarterly progress reports, which are subject to review by the EMSB. Also, social and environmental specialists will be assignedunder eachResident EngineerTeam to facilitate the implementation and supervision o f environmental and social mitigationmeasures, as inAPL2 roadproject contracts. The EMSBwill continually take stock o f all expropriation and compensation reports established by the ROWand analyze them on regularbasis. 24. The EMSBwill produce quarterly progress reports on environmental and social performance o f the road contracts. The reports will form part o f the overall project monitoring system.APL3 will continue to support EMSBthe supervision o fthe implementationo fthe EMPs and the RAPSprepared for each o fthe proposed road projects as well as to strengthenthe analytical supervision capacity o f the EMSB through hands-on training and logistics. 86 Annex 11:Project Processing ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) Planned Actual PCNreview NIA N/A InitialPID to PIC NIA NIA Initial ISDS to PIC NIA N/A Appraisal 02112/07 02/12/07 Negotiations 04112/07 04112/07 Board1RVP approval 0513 1/07 Planneddate o f effectiveness 0813 1/07 Planneddate o fmid-term review 08131/10 Plannedclosing date 0613O/ 15 Keyinstitutions responsible for preparation o fthe project: The World Bank Ethiopian Roads Authority Bank staff and consultants who worked on the project included: Name Title Unit Yoshimichi Kawasumi Sr. Highway Engineer (TTL) AFTTR Negede Lewi Sr. Transport Specialist AFTTR Mesfin Wadajo Jijo Highway Engineer AFTTR John Riverson Consultant - Highway EngineerIPolicy and AFTTR Institutional Aspects Antoine Lema Consultant - Social Safeguards AFTTR Wendy Walker Consultant - Social Scientist AFTTR John Hine Sr. Rural Transport Specialist / Transport Economist TWUTD Nina Chee Environmental Specialist ATFS3 Samuel Haile Selassie Sr. Procurement Specialist AFTPC Eshetu Yimer Sr. FinancialManagement Specialist AFTFM Marie Khoury Consultant - DisbursementOfficer LOAG2 Jonathan D.Pavluk Sr. Counsel LEGAF Jordi Agusti-Panevera Legal Specialist LEGAF Vivian N-Irondi Program Assistant LEGAF Irene Xenakis Acting Operations Director AFTVP V. S. Krishnakumar Regional Procurement Manager AFTPC Tesfaalem Gebriyesus Sr. Procurement Specialist AFTPC RichardA. Cambridge Operations Adviser AFTQK Arianna Legovini Sr. Economist & Impact Evaluation Cluster Leader AFTRL Soheyla Mahmoudi Operations Officer AFTRL Jacomina de Regt Consultant - Social Scientist / QER Panel and Peer AFTP 1 reviewer 87 Jonathan Brown Operations Adviser / QER Panel HDNGA Herbert Acquay Sr. Country Operation Officer / QER Panel AFTS2 Henry G. Kerali Lead Transport Specialist / QER Panel and Peer ECSSD reviewer Jean-Noel Guillossou Sr. Transport Economist/ QER Paneland Peer SASE1 reviewer Colin Rees Consultant - Environmental Specialist / QER Panel AFTTR Farida Khan Operations Analyst AFTTR Nina M.Jones Prog,amAssistant AFTTR Yeshi Gizaw Program Assistant AFCE3 Bank funds expended to date on project preparation: 1. Bank resources: US$215,235 2. Trust funds: NIL 3. Total: US$215,235 EstimatedApproval and Supervision costs: 1. Remaining costs to approval: US$ll3,528 2. Estimatedannual supervision cost: US$ 95,000 88 Annex 12: Documents inthe ProjectFile ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) A. ProjectImplementationPlan Project ImplementationPlan - November 2006. B.Bank StaffAssessments Country Procurement Assessment Report Country Financial Accountability Assessment Report C.Other 1. Road Sector Development - Phase 11,EnvironmentalImpact Assessment Study Report, Preparedby Africon International (South Africa), February 2001. 2. ERA, Resettlement Action Plan (RAP) for 4 Roads, preparedby Kocks Consult Joint Venture with Metaferia Consulting, FINNROAD inassociation with J & W and Saba Engineering, BKS in association with Beza Consulting EngineeringPlc. - December 2006. 3. Final Feasibility Study for 4 Road Projects, prepared by BKS in association with BEZA Consulting Engineering, December 2006. 4. ERA RSDP Performance: Nine Years Later, dated November 2006. 5. ERA SeventhAnnual Road Sector DevelopmentProgramme (RSDP) Performance Monitoring Indicators (2004/05) Report and the Methodological Framework and Baseline data for the MillenniumDevelopmentGoals (MDGs)Transport Indicators, Executive Summary, Volume 1,2 & 3, November 2006. 6. Road Sector Development Program Phase 111,Ethiopian Roads Authority, dated November 2006. 7. DFIDFinal CompletionReport on DMO commercialization. 8. Plan for Accelerated and Sustained Development to EndPoverty (PASDEP - 2005/06 -2009/10 dated September 2006). 9. ERA, Wereda Integrated Development Plans (Implementation Status and Future Direction) dated February 2007. 10. ERA, Expansion o f Rural Roads Network, dated February 2007. 11. ERA: PavementDesignManual Vol. I. Pavement and Gravel Roads. (Addis Ababa), 2002. Flexible 12. ERA: Bridge Design Manual. (Addis Ababa), 2002. 13. ERA: Drainage Design Manual. (Addis Ababa), 2002. 14. ERA: Geometric DesignManual. (Addis Ababa), 2002. 15. ERA: Pavement Rehabilitation and Asphalt Overly Design Manual. (Addis Ababa), 2002. 16. ERA: Site InvestigationManual. (Addis Ababa) 2002. 17. ERA: Standard Detail Drawings. (Addis Ababa), 2002. 18. Federal Democratic Republic of Ethiopia. Ministryo f Finance and Economic Development: Ethiopia: Sustainable Development and Poverty ReductionProgram. Addis Ababa, 2002. 19. Federal Democratic Republic of Ethiopia: Ministryo f Transport & Communications. RoadTransport Authority: Study on RoadTransport Regulations. Final Report. (Addis Ababa), 2002. 20. Road FunctionalClassification and Pavement Management System - Phase 1-RFCS Main Report, prepared by BCEOM, January 1997. 89 Annex 13: Statementof Loansand Credits ETHIOPIA: RoadSector DevelopmentStage I11Project(APL3) Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Fm.Rev'd ~ PO97271 2006 ET-Electricity Access (Rural) Expansion 0.00 133.40 0.00 0.00 0.00 138.59 0.00 0.00 PO94704 2006 ET-Financial Sector Cap Bldg. Project 0.00 0.00 0.00 0.00 0.00 15.22 0.00 0.00 PO79275 2006 ET-Cap. Building for Agric. Sew (FY06) 0.00 54.00 0.00 0.00 0.00 55.26 0.00 0.00 PO74015 2006 ET-Protection of Basic Services (FY06) 0.00 0.00 0.00 0.00 0.00 228.61 111.44 0.00 PO87707 2005 ET-Productive Safety Nets APLl (FY05) 0.00 14.30 0.00 0.00 0.00 38.53 -2.79 0.00 PO82998 2005 ET-Road Sec Dev Prgm Ph 2 Sup12 0.00 160.90 0.00 0.00 0.00 219.35 19.21 0.00 (FY05) PO78692 2005 ET-Post Secondary Education SIL (FY05) 0.00 40.00 0.00 0.00 0.00 36.09 16.69 0.00 PO78458 2005 ET-ICT Assisted Dev SIM (FY05) 0.00 25.00 0.00 0.00 0.00 23.42 8.51 0.00 PO50272 2005 ET-Priv Sec Dev CB (FY05) 0.00 19.00 0.00 0.00 0.00 21.90 2.03 0.00 PO76735 2004 ET-Water Sply & Sanitation SIL (FY04) 0.00 75.00 0.00 0.00 0.00 86.98 16.32 0.00 PO74020 2004 ET-Pub Sec Cap BldgPrj (FY04) 0.00 100.00 0.00 0.00 0.00 63.87 9.94 0.00 PO50938 2003 ET-Dec Serv Del CB (FY03) 0.00 26.20 0.00 0.00 0.00 17.94 13.29 -0.74 PO81773 2003 ET-EmergDrought Recovery ERL(FY03) 0.00 0.00 0.00 0.00 0.00 0.07 -2.40 -5.73 PO44613 2003 ET-RSDP APLl (FY03) 0.00 0.00 0.00 0.00 0.00 89.61 29.24 0.00 PO49395 2003 ET-Energy Access SIL (FY03) 0.00 132.70 0.00 0.00 0.00 138.36 106.94 0.00 PO75915 2003 ET-PastoralCommunity Dev APL (FY03) 0.00 0.00 0.00 0.00 0.00 6.13 -9.83 0.00 PO57770 2002 ET-Cultural Heritage LIL(FY02) 0.00 5.00 0.00 0.00 0.00 2.69 1.53 0.00 PO50383 2002 ET-Food Security SIL (FY02) 0.00 85.00 0.00 0.00 0.00 67.19 15.41 0.00 PO67084 2001 ET-EmergRecov & Rehab ERL (FYOI) 0.00 230.00 0.00 0.00 0.00 8.59 -11.30 -20.98 PO69886 2001 ET-MAP (FYO1) 0.00 59.70 0.00 0.00 0.00 0.61 -3.86 -3.86 PO73196 2001 ET-Demob & Reinteg ERL. (FYO1) 0.00 170.60 0.00 0.00 0.00 14.39 7.56 -3.21 PO35147 2001 ET-GEF Med Plants Cnsv & Sust Use 0.00 0.00 0.00 1.so 1.00 0.17 1.so 0.00 (FYO1) PO00733 1998 ET-Agr Research& Training SIL (FY98) -0.00 60.00 0.00 0.00 0.00 2.82 `1.52 0.14 Total: 0.00 1,390.80 0.00 1.80 1.00 1,276.39 331.25 - 34.38 ETHIOPIA STATEMENT OF IFC's Held and DisbursedPortfolio InMillions ofU S Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Total portfolio: 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 90 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. Total pending commitment: 0.00 0.00 0.00 0.00 91 Annex 14: Country at a Glance ETHIOPIA: Road Sector Development Stage I11Project (APL3) Sub- POVERTY and SOCIAL Saharan Low- Ethiopia Africa income levelopment diamond, 2005 Population,midyear (millions) 713 741 2,353 GNIpercapita (Atlas method, US`$) EO 745 580 Lifeegectancy GNI(Atlas method, US$billions) 114 552 1364 - Average annual growth, 1999-05 Population (%) 2.1 2.3 19 Labor force (%) 2.2 2.3 2.3 GNI Gross per primary M o s t recent estimate (latest year available, 1999-05) capita enrollment Poveriy (%of populationbelownationalpo vefiy line) 44 Urbanpopulation("of totalpopulation) 6 35 30 hfe eqeclancyatbirth(pars) 42 46 59 I Infantmortaiity (per 1000livebifihs) m 0 0 80 Childmainutnti0n (%of childrenunder5) 47 29 39 Access to improvedwatersource Access to animprovedwatersource @of population) 22 56 75 Literacy(%ofpopulationage54 62 Gross primaryenrollment (%of school-age population)) 93 93 104 -Ethiopia Male 0 1 99 It3 Lowincomegroup Female 86 87 99 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1985 1995 2004 2005 IEconomic ratios. GDP (US`$ billions) 9 4 7 6 97 112 I Gross capital iormatiodGDP 114 8 0 213 263 Egortsof goods andserviceslGDP 5 8 9 7 154 E 4 Trade Gross domestic savingsiGDP 5 8 119 4 1 3 6 Gross nationalsavingsiGDP 7.5 207 62 i72 Current account baianceiGDP -40 2 5 -5 1 -91 Interest paynents1GDP 0 4 0 8 05 Total debtiGDP 553 1355 675 Total debtsewiceiegorts 277 8 1 59 Presentvalue of debt1GDP 212 Present valueof debtiexpons e 4 5 1 Indebtedness 1985-95 1995-05 2004 2005 2005-09 (averageannualgmwth) GDP 08 4 0 e 3 8 7 5 6 -Ethiopia GDP percapita -19 16 01 68 34 -Low-Incomearou~ Exports of goods and services -14 t32 364 -25 117 STRUCTURE of the ECONOMY 1985 1995 2004 2005 ("of GDP) Growth o f capital and GDP (%) Agricuiture 55.5 57.7 46.3 47.7 45 Industry e.3 9.9 13.5 13.3 30 Manufacturing 5.1 4.8 5.3 5.1 15 Services 32.1 32.4 402 39.0 0 Householdfinal consumption egenditure 84.0 79.6 819 82.2 .15 Generalgov't final consumption eqenditure 0.3 8.4 14.0 14.2 lmpons of goods andservices 115 15.7 32.6 39.1 -GCF -GDP 1985-95 1995-05 2004 2005 (averageannualgrowth) Growth o f exports and imports (%) Agriculture 3.0 2.2 7.3 P.0 40 Industry -3.8 5.2 6.8 6.6 30 Manufacturing -5.1 3.5 5.4 5.0 20 Services -0.2 5.2 5.8 5.8 M Householdfinal consumption eqenditure 19 3.0 14.7 117 0 Generalgov't final consumptionegenditure -3.1 9.8 0.4 8.6 -m Gross capital formation -16 5.1 3.4 30.1 I imports of goods andservices -0.1 9.2 8.5 23.4 -Emorts -Inports I Note:2005 data arepreliminaryestimates. This table was producedfrom theDevelopment Economics LDB database. `The diamonds showfour keyindicators inthecounlry(in bold)compared withits income-groupaverage.If dataare missing,the diamondwill beincomplete. 92 Ethiopia ~~ ____ PRICES andGOVERNMENT FINANCE 1985 1995 2004 2005 Domestic prices Inflation ("A) I (%change) Consumer pnces 19.1 0.0 3.3 116 Implicit GDP deflator 32.1 0.5 9.6 6.0 Government finance (%of GDP.includes current grants) Current revenue 14.1 14.4 8.4 192 Current budget balance 0.3 3.1 4 2 5.7 Overall surplusldeficit -5.8 -3.5 -6.6 -6.5 I ---GDPdeflator &CPI 1 TRADE 1985 1995 2004 2005 (US$ millions) Export and import levels (US$ mill.) Totalexports (fob) 360 454 600 8 8 4 . m Coffee 7 225 288 224 335 Pulses andoil seeds 16 25 105 0 8 3 , m Manufactures e4 76 62 79 Total imports (cif) 975 1063 2,587 3,633 2 . m Food 283 8 1 269 247 Fuelandenergy 8 6 8 9 311 669 1,wO Capital goods 249 350 920 1265 0 Exportprlceindex(ZOOO=WO) 110 6 6 81 0 2 99 00 01 02 03 04 05 import price index(ZOOO=DO) 100 86 1i7 0 3 Exports minporls Terms of trade (ZOOO=WO) 110 8 2 69 77 BALANCE of PAYMENTS 1985 1995 2004 2005 (US$ miliions) /Current account balance to GDP (X) Exports of goods andservices 549 784 1,498 1829 imports of goods andservices 1,082 1272 3,71 4,367 Resource balance -533 -488 -1673 -2,538 Net Income -33 -60 -64 -36 Net current transfers 8 3 739 1238 1561 Current account balance -373 8 0 -499 -100 Financing items (net) 420 -ni 903 1225 Changes innet reserves -48 -79 -405 -2e Memo: Reserves includinggold (US$ millions) 2t6 589 1,350 1555 Conversion rate (DEC,iocal/US$) 2.1 6.3 8.6 8.7 EXTERNAL DEBT and RESOURCE FLOWS 1985 1995 2004 2005 (US$millions) Composition of 2004 debt (US$ mill.] Total debt outstanding anddisbursed 5,206 10,308 6,574 IBRD 49 0 0 0 IDA 437 1470 3,488 3,359 Totaldebt service 159 154 97 IBRD 7 4 0 0 IDA 6 23 36 72 Compositionof net resourceflows Officialgrants 5 6 476 1,422 Official creditors 527 8 9 259 Privatecreditors 59 -48 71 Foreigndirect investment (net inflows) 0 14 545 Portfolio equity(net Inflows) 0 0 0 c:m3 World Bank program Commitments 32 142 8 9 E-Bilateral Disbursements 50 84 202 8 2 A . IBRD B IDA - D .Other rmllilateral F. Private Principal repayments 7 6 0 44 C-IMF G Short-tart - Net flows 43 67 8 9 118 Interest paynents 7 I1 23 28 Net transfers 36 56 t67 90 Note:This table was producedfrom the Development Economics LDB database. 8lWO6 93 Annex 15: UpdatedLetter of RoadSector Policy ETHIOPIA: RoadSector DevelopmentStage I11Project (APL3) 94 nhWw A..P,&-c\T! w?W?`r.hPed T m h Y3"rH.nS ehPP9a A T + ="I,th*C The Federal Democratic Republic of Ethiopia Ministry of Tmance andEcoaorn3c Development 95 THEROADSECTOR UEVELOJ?MENTPROGRAM ImplementationofRSDPto-date 2. S h c c the Donor's confeivnce of Jnnuiq 1946 orpoized in soliciting fundiiig for the RSDP, n iicunbcr of donors including the Xorld Bank, the Europenn Urnoil, the hfricnii Development Bank (ADB), thc Saudi Dcvelopinciit Fund, the Korchc Dmrelopineut Iuid (NUII),the OITX Fund for Iiitenianond Dmrelopincm (UFrU), Bank f ~i-.~oliimuc ~ i as the Governrnmr of Ethiopin inch id in^ thc Huad Fund pledged and extended Fiiiancid Ilr.cdiqmir:rit iii Alilci (HAlX-A), tlic (;ovcnitnms 01 lapn, (;cnriaq, I'.K., Irrlaritl, cis wrU support for the execution of the Program 3. T h e IISDI-'which i s on going Since July 1997 has made rcmnrlcablc nclicq-ement 111 umnsfori-iungthe road Sector where dtuing the last 9 yenis a total of 51,437 Iun of roads were coiisuwted, up~~dcd/l.eh~tbili~tcdmdnmned; of svhich 8,495 km are federd laads and and 2 96 Thc Third Phaec of RS1)Y 5 L5DP phase I11is an integd put of the major program RSDP. 1GDP 111, being:thc continuation of the &%r ccvo phnses, will proceed stuting fromJdy 2007 and will last fur the next five yeus. 'llie RSUP 111basic propin eiivisages r e h b ~ t a t i o n / u p ~of~(1,388~kin, r ~ i iicw cosistructinti ol5,5{,7 kin, peuodic iii&itmwce CJI~ 303'1' km, a i d ttiutiric ~i~mi~cri;iii~:c of all tylws oi' fi-tlcrd rrrrtls ~ r i c l ~ i d r1)ridgr wtirkr. ,4s r i ~ rwds thr pv.jgmm would crlnsixt of c.r)nrrrur+iw of 7000 km of nml n of 45548 km of communityroads, periodic mniiitennnceon 1403 km of niral roads androutine mdntenmce on all roads, Rased on rhe cost estimates, the order ofmagninlde OS planned expendim i s about Birr 52,180.1 d o n (US $5963.4d o n ) ; ie,, Bin.429 billionfar fedeml roads, Birr 7 9 billion for rcgioiial ronds, f3kr 1.1 billion for local roll& and Birr Q.3 billion for ufbsn roads me. 'Ilie third phase uiIl also build on the c o q x I ;id I ~ i ~~ir~gii)l~rrtteriidrtirig Ihc Imi+211s 111 e t l decemrxlizadnii of rhc rn:&umcc actividrs, commemalizatian o f road works, improvements inplanrriag, nndcontractprocuremeatprocessingandimplementarioa,ere. 97 5 99 SUSTAINABILITYOF RSDP 100 in &ie country along a& mobile weighlxidgc.!j. The Grxymrm.t ktends to strengthea rhis etyorr by &e esmblishmeix of &her weighbridge srations firming up rhe replatoby enTkonrnent so IS to cnnve effrcieslt axle loed contra1 and manzgement. For the hrwc, coiisidemtion dldso be given to the posshility of oursowing the n~anigenlcntof axle load collurd. 6 - W 101 8 102 ' 103' . . Annex 16: Maps ETHIOPIA: RoadSector DevelopmentStageI11Project(APL3) IBRD35295 datedApril 2007 IBRD35398 datedApril2007 105 IBRD 35295 35° 40° 45° E R E T H I O P I A R e d 15° Gash I R E P U B L I C O F 15° ROAD SECTOR DEVELOPMENT R. T R R. Zalambessa Y E M E N STAGE 3 PROJECT (APL3) S U D A N Mereb E Adi Shire Adigrat S e a Abun Dalol A Humera Inda Silase Axum Adwa Asele Tekeze R. R. T I G R AY Wukro Sullo Abiy Adi IDA FINANCED ROADS, APL 3 Mesfinto Mekele Nehile IDA FINANCED ROADS, APL 2 Debark Adi Gudom L. Afdera Abergele Betemariam Metema IDA FINANCED ROADS, APL 1 Atbara Dabat Korbeta Maychew Tsellari COMPLETED IDA FINANCED REHABILITATION/ Yalo Aykel Gonder R. Sekota UPGRADED ROADS CV3032 (RSDSP)/2438 (RRP) Azezo Korem R. en Gorgora Meri Alamata d ERP: HEAVY MAINTENANCE COMPLETED Hida A FA R f A Balas Adis Zemen Kobo o ASPHALT, ALL-WEATHER ROADS L. Tana Gob Lalibela f Omedla Debre Logiya l Woreta Tabor Gob Weldiya D J I B O U T I G u Nefas GRAVEL, ALL-WEATHER ROADS Mille R.Tendadho Asaita Almahel Bahir Dar Mewcha L. Assal Hor Wegel Tena Mile L. Gamarri RURAL AND/OR DRY-WEATHER ROADS Bumbadi A M H A R ABete Guba Dangla Hayk Adet Tis Isat Abay Tenta L. Abe INTERNATIONAL AIRPORTS BENSHANGUI- Kasamender Mota Bati Dewele R. Injibara R. Chagni Mekane Desse GUMUZ Finote Debre Selam Kombolcha Awash SELECTED TOWNS Bure Work R. Kabi Aysha Kurmuk Belad Dabus Selam Were Ilu STATE/ REGION (UNOFFICIAL 1994 BOUNDARIES) Karakore Bichena Guder Jamma Mehal Meda INTERNATIONAL BOUNDARIES Angar Debre Alem Efeson Markos Dejen Sela Gewane Ketema Dingay 10° R. 10° Asosa Goha Robit Didesa Jihur Mendi Alibo Tsiyon Fiche Debre Awash Gebre Guracha Dire Birhan Debre Sina Dawa 0 100 200 300 Bombasi Togochale Nejo Shambu Kachise Mukature Erer Ejersagoro Kulubi KILOMETERS Hena R. O R O M I A Fonyan Fincha Muger Gorabela Bira Jijiga Guliso Alem Maya Mekenajo Jeldu Inchini Sheno R. Mieso Hirna Harer Gimbi Nekempte Bako Kessem Arba Deder Yubdo Gedo Adis Alem Sendafa Awash Asbe Girawa H A R A R This map was produced by the Map Design Unit of The World Bank. Guyr Sire Gerer Ambo Ginchi Addis Ababa The boundaries, colors, denominations and any other information shown Metehara Teferi Burka Arjo Akaki Gelemso Fafan on this map do not imply, on the part of The World Bank Group, any Alge Welenchiti Meyumuluke Dacata judgment on the legal status of any territory, or any endorsement or Duba Mojo Mechara Supe Bedele Giyon Tulubolo Nazret Abomsa acceptance of such boundaries. Jikao Gambela Metu Ramis Degeh Aware Suntu Welkite L. Koka Magna Bur Gore Dera Sire Fik G A M B E L L A Indibir L.Ziway Butajira Ziway Wabi Misrak Gashamo Gila Agaro Shebele 35° 40° 50° R. Assela SAUDI ARABIA Hora Domo Jima Langano Ticho Abgiata Shek Husen Red Gog Asendabo Hayk Gecha Chira O R O M I A Hosaina Shola R. Segeg Hayk Fafem Akobo Tepi Kolito Bekoji Bonga Shashemene Agarfa Shet Ginir S O M A L I R E P. O F R. Dimbira Chida Awasa Hayk ' Geladi Sea Y E M E N Baro Warder 15° Mizan Teferi Waka Robe Goro 15° E R I T R E A Sodo Awasa KofoleDodola Adaba Goba Dubub Shasha Kebri Dehar Omo Megalo Wabi Aposto Yirga Alem Nansebo S U D A N Jamu S E P R A Abaya Hayk Aden Wendo Gulf of Chencha Bore Imi Denan D J I B O U T I Maji Felege Gelta Dila Meslo Gestro Wabi S U D A N Neway Arba Minch Kibre Shilabo Ch'amo Fiseha Mengist Gode 10° Hayk Genet Shebele 10° E T H I O P I A Jinka El Kere Kelafo Addis Ababa Omo Agere Shakiso Hamer Key Afer Maryam Bitata Ganale W R. Mustahil Koke enz Sagan Konso Negele Dor S O M A L I A ya Ferfer 5° Kelem Filtu Lema Shilindi 5° L. Yabela Yet Dawa 5° 5° Turkana L. Chew Bahir SOMALIA Wachile Dolo Odo Mega UGANDA I N D I A N El Leh K E N YA I N D I A N 0° O C E A N 0° Moyale Lake U G A N D A O C E A N Victoria 35° K E N Y A 40° 45° 35° 40° 45° 50° APRIL 2007 IBRD 35398 35° 40° 45° E T H I O P I A E R ROAD SECTOR DEVELOPMENT R e d 15° Gash I R E P U B L I C O F 15° PROGRAM (1997-2012) R. T R PROPOSED AND COMPLETED R. Zela Anbesa Y E M E N S U D A N Mereb E Adi Adigrat S e a Abun Dalol A ROAD IMPROVEMENTS Humera Inda Silase Axum Adwa Asele Tekeze R. PROGRAM: R. T I G R AY Wukro Sullo RSDP III ROAD IMPROVEMENTS Abiy Adi Mesfinto Mekele Nehile TRUNK ROADS REHABILITATION Debark Adi Gudom L. Afdera TRUNK ROADS UPGRADING Abergele Hiwane Metema Betemariam LINK ROADS UPGRADING Atbara Dabat Korbeta Maychew Tsellari Yalo NEW LINK ROADS Aykel Gonder R. Sekota Azezo Korem R. en REGIONAL RURAL ROADS Gorgora Meri Alamata Elidar A d Kobo A FA R f EXISTING: Balas Adis Zemen Hida o L. Tana Gob Lalibela f Omedla Debre l RSDP COMPLETED ROADS (NOV. 2006) Woreta Tabor Gob Weldiya Logiya D J I B O U T I G u Nefas Tendadho Almahel Mille R. Asaita ASPHALT, ALL-WEATHER ROADS Bahir Dar Mewcha Wegel Tena L. Assal Hor MileL. Gamarri Bumbadi A M H A R ABete Hayk GRAVEL, ALL-WEATHER ROADS Guba Dangla Adet Tis Isat Abay Tenta Bati L. Abe BENSHANGUI- Kasamender Mota Dewele RURAL AND/OR DRY-WEATHER ROADS R. Injibara R. Chagni Mekane Desse GUMUZ Finote Debre Selam Kombolcha Awash INTERNATIONAL AIRPORTS R. Aysha Dabus Bure Selam Work Kabi Were Ilu Karakore SELECTED TOWNS KurmukBelad Bichena Guder Jamma Mehal Meda STATE/REGION (UNOFFICIAL 1994 BOUNDARIES) Angar Debre Alem Sela Efeson Gewane Markos Dejen Ketema Dingay INTERNATIONAL BOUNDARIES 10° Asosa Goha Robit R. 10° Didesa Jihur Tsiyon Mendi Alibo Fiche Debre Awash Note: The 8043 km regional roads to be rehabilitated and the Gebre Guracha Birhan Debre Sina Dire Dengego 5399 km to be constructed under RSDP I are not shown. Bombasi Dawa Nejo Shambu Kachise Mukature Erer EjersagoroTogochale Kulubi Hena R. O R O M I A Fonyan Fincha Muger Gorabela Jijiga 0 100 200 300 Guliso Alem Maya Bira Mekenajo Jeldu Inchini Sheno R. Mieso Hirna Harer Gimbi Nekempte Bako Sendafa Kessem Arba Deder KILOMETERS Yubdo Gedo Adis Alem Girawa H A R A R Addis Ababa Awash Asbe Guyr Sire Gerer Ambo Ginchi Akaki Ejire Teferi Burka This map was produced by the Map Design Unit of The World Bank. Arjo Metehara Gelemso Fafan The boundaries, colors, denominations and any other information shown Alge Welenchiti Meyumuluke Dacata on this map do not imply, on the part of The World Bank Group, any Duba Mojo Mechara Supe Bedele Giyon Tulubolo Nazret judgment on the legal status of any territory, or any endorsement or Abomsa Jikao Gambela Metu L. Koka Ramis Degeh Aware acceptance of such boundaries. Suntu Welkite Magna Gore Dera Sire Fik Bur L.Ziway Misrak Gashamo Akobo G A M B E L L A Indibir Butajira Ziway Wabi Gila Agaro Shebele 35° 40° 50° R. Assela Domo SAUDI ARABIA Jima Hora Ticho Abgiata Langano Shek Husen Red Gog Asendabo Hayk Gecha Chira O R O M I A Hosaina Shola R. Segeg Hayk Bekoji Fafem Akobo Tepi Kolito Bonga Agarfa Shashemene Shet' S O M A L I R E P. O F Robe Ginir R. Dimbira Chida Awasa Hayk Geladi Sea Baro Goro Warder Y E M E N 15° Mizan Teferi Waka SodoAwasa KofoleDodolaAdaba 15° E R I T R E A Goba Dubub Shasha Kebri Dehar Omo Megalo Wabi Aposto Yirga Alem Nansebo S U D A N Jamu S E P R A Abaya Aden Wendo of Hayk Gulf Chencha Bore Imi Denan D J I B O U T I Maji Felege Gelta Dila Meslo Gestro Wabi S U D A N Neway Arba Minch Kibre Shilabo Ch'amo Fiseha Mengist Gode 10° Hayk Genet Shebele 10° E T H I O P I A Jinka El Kere Kelafo Addis Ababa Omo Agere Shakiso Hamer Key Afer Maryam Bitata Ganale W R. Mustahil Koke enz Sagan Konso Negele Dor S O M A L I A ya Ferfer 5° Kelem Filtu 5° Lema Shilindi Yet 5° 5° L. L. Chew Yabela Dawa Turkana Bahir SOMALIA Wachile Dolo Odo I N D I A N Mega UGANDA O C E A N El Leh K E N YA I N D I A N 0° 0° Moyale Lake U G A N D A O C E A N Victoria 35° K E N Y A 40° 45° 35° 40° 45° 50° APRIL 2007