Document of The World Bank Report No: ICR00003018 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-46640 IDA-H1710 IDA-H5250) ON A GRANT IN THE AMOUNT OF SDR 45.74 MILLION (US$ 71.00 MILLION EQUIVALENT) TO NEPAL FOR THE RURAL ACCESS IMPROVEMENT AND DECENTRALIZATION PROJECT June 24, 2014 Sustainable Development Unit Nepal Country Unit South Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective 31st December 2013) Currency Unit = Nepalese Rupee (NPR) NPR 98.76 = US$ 1.00 US$1.54 = SDR 1 FISCAL YEAR July 15 – July 14 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AF Additional Finance BER Bid Evaluation Report CBA Cost-Benefit Analysis CBAS Capacity Building and Advisory Services CBPM Community-Based performance Monitoring CEA Cost-Effectiveness Analysis DDC District Development Committee DOLIDAR Department of Local Infrastructure Development and Agricultural Roads DTMP District Transport Master Plan DTO District Technical Office EOP End of Project ERR Economic Rate of Return ESMF Environmental and Social Management Framework FMIS Financial Management Information System GAAP Governance and Accountability Action Plan GON Government of Nepal ICR Implementation Completion and Results IDA International Development Association ILO International Labor Organization ISAP Institutional Strengthening Action Plan ISN Interim Strategy Note IT Information Technology LIL Learning and Innovation Loan LRUC Local Road Users Committee MOFALD Ministry of Federal Affairs and Local Development MTR Mid-Term Review NPR Nepalese Rupee PAD Project Appraisal Document PAF Project Affect Family PCU Project Coordination Unit PDO Project Development Objective QAE Quality at Entry RAIDP Rural Access Improvement and Decentralization Project RED Road Economic Decision Model RIP Rural Infrastructure Project RuTIMS Rural Transport Infrastructure Management System SPAF Severely Project Affect Family SNRTP Strengthening the National Rural Transport Program SWAp Sector Wide Approach VCDP Vulnerable Community Development Plan VDC Village Development Committee VRCC Village Road Coordination Committee Vice President: Philippe H. Le Houerou Country Director: Johannes C.M. Zutt Sector Manager: Karla Gonzalez Carvajal Project Team Leader: A.K. Farhad Ahmed ICR Team Leader: Sri Kumar Tadimalla NEPAL RURAL ACCESS IMPROVEMENT AND DECENTRALIZATION PROJECT CONTENTS B. Key Dates ........................................................................................................................ i C. Ratings Summary ............................................................................................................ i D. Sector and Theme Codes................................................................................................ ii E. Bank Staff ....................................................................................................................... ii F. Results Framework Analysis .......................................................................................... ii G. Ratings of Project Performance in ISRs ..................................................................... viii H. Restructuring (if any) .................................................................................................. viii I. Disbursement Profile ..................................................................................................... ix 1. Project Context, Development Objectives and Design ................................................... 1 2. Key Factors Affecting Implementation and Outcomes .................................................. 5 3. Assessment of Outcomes .............................................................................................. 11 4. Assessment of Risk to Development Outcome ............................................................. 18 5. Assessment of Bank and Borrower Performance ......................................................... 19 6. Lessons Learned............................................................................................................ 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners............... 23 Annex 1. Project Costs and Financing .............................................................................. 24 Annex 2. Outputs by Component...................................................................................... 26 Annex 3. Economic and Financial Analysis ..................................................................... 27 Annex 4. Bank Lending and Implementation Support/Supervision Processes................. 37 Annex 5. Stakeholder Workshop Report and Results....................................................... 39 Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 42 Annex 7. List of Supporting Documents .......................................................................... 55 MAP .................................................................................................................................. 56 A. Basic Information Rural Access Country: Nepal Project Name: Improvement and Decentralization Project IDA-46640,IDA- Project ID: P083923 L/C/TF Number(s): H1710,IDA-H5250 ICR Date: 06/23/2014 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: NEPAL/MOF Original Total XDR 21.20M Disbursed Amount: XDR 45.70M Commitment: Revised Amount: XDR 45.70M Environmental Category: B Implementing Agencies: Department of Local Infrastructure Development and Agricultural Roads (DoLIDAR) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/14/2003 Effectiveness: 08/16/2005 08/16/2005 12/17/2009 Appraisal: 12/20/2004 Restructuring(s): 11/07/2013 Approval: 06/21/2005 Mid-term Review: 11/10/2008 11/10/2008 Closing: 12/31/2010 12/31/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No Highly Satisfactory at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Rural and Inter-Urban Roads and Highways 100 100 Theme Code (as % of total Bank financing) Decentralization 25 25 Other social development 25 25 Rural services and infrastructure 50 50 E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Praful C. Patel Country Director: Johannes C.M. Zutt Kenichi Ohashi Sector Manager: Karla Gonzalez Carvajal Guang Zhe Chen Project Team Leader: A.K. Farhad Ahmed Binyam Reja ICR Team Leader: Sri Kumar Tadimalla ICR Primary Author: Gary Taylor Sri Kumar Tadimalla F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) Original financing PAD includes: "The PDO is for residents of participating districts to utilize improved rural transport infrastructure and services and benefit from enhanced access to social services and economic opportunities." Outcome Indicators: a) 20 percent increase in motorized and non-motorized trips by beneficiaries by End of Project (EOP); and b) 20 percent reduction in travel time by beneficiaries by EOP. Revised Project Development Objectives (as approved by original approving authority) The additional financing PAD includes: "For residents of participating districts of the Recipient to utilize improved rural transport infrastructure and services in order to have enhanced access to social services and economic opportunities." Outcome Indicators at the time of additional financing included: a) 20 percent increase in motorized and non-motorized trips by beneficiaries by End of Project (EOP); b) 20 percent reduction in travel time by beneficiaries by EOP; and c) 30 percent increase in annual average daily traffic (AADT) within the project districts in the categories bus, truck, microbus and jeep. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years 20 percent increase in motorized and non-motorized trips by beneficiaries by End Indicator 1 : of Project (EOP) 20% increase in motorized and non-motorized Weighted Average Average 5.4 motorized trips (6.48 of (i) Motorized trips per VDC per day motorized trips) trips: 25.7 (145% (Alternative baseline Value increase vis-à-vis from 2011 Study: per quantitative or (Based on 2011 2011 baseline); and household per month: Qualitative) baseline – (ii) Non-motorized Weighted Average of (i) Weighted Average trips:7.3 (77% Motorized trips: 10.5; (ii) of (i) Motorized increase vis-à-vis Non-motorized trips:4.14) trips: 12.6; (ii) 2011 baseline) Non-motorized trips:4.97) Date achieved 08/16/2005 08/16/2005 10/31/2013 Comments Fully achieved as per alternative baseline. Since 2005 baseline had only (incl. % motorized trips, used a 2011 study with both motorized and non-motorized trips achievement) data as alternative baseline (see para 49 in main text for further clarifications). Indicator 2 : 20 percent reduction in travel time by beneficiaries by EOP. Value 2.5 hours average 20% reduction in Travel time for quantitative or (Alternative baseline travel time(2 Motorized trips: 29 Qualitative) from 2011 Study: hours) min (48% reduction Average time for vis-à-vis 2011 Motorized trips: 56 min (Based on 2011 baseline) Average time for Non- baseline – Average Average time for motorized trips:59 min) time for Motorized Non-motorized trips: 44.8 min trips: 38 min (35% Average time for reduction vis-à-vis Non-motorized 2011 baseline) trips:47.2 min) Date achieved 08/16/2005 08/16/2005 10/31/2013 Fully achieved as per alternative baseline. Like for earlier indicator, to assess Comments performance on both motorized and non-motorized trips, used figures from a (incl. % 2011 study as alternative baseline. See para 49 of main text for further achievement) clarification. 30 percent increase in annual average daily traffic (AADT) within the project Indicator 3 : districts in the categories bus, truck, microbus and jeep (ADT for Bus: 30% increase in 181(55% increase bus, truck, vis-à-vis baseline Value (ADT for Bus: 117; microbus and jeep ADT); Truck: 65 quantitative or Truck: 46; Jeep/micro: (41% vis-à-vis Qualitative) 162) (ADT for Bus: baseline ADT); 152; Truck: 60; Jeep/micro: 209 Jeep/micro: 211) (29% vis-à-vis baseline ADT) Date achieved 08/16/2005 08/16/2005 10/31/2013 Comments Achievement could not be conclusively established as the EoP figures were (incl. % available only for Average Daily Traffic (ADT) whereas the target was set for achievement) Annual ADT (AADT). See para 50 of main text for further clarification. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years 15% increase in the number of people participating Original hill districts live Indicator 1 : within four hours of walking to an all-season road 77% 92% 79.62% Value (Alternative baseline (Based on (Nearly 15% (quantitative extrapolated from EoP alternative increase over the or Qualitative) Accessibility Mapping baseline – 80.5%) alternative baseline) Report: 65.5%) Date achieved 08/16/2005 08/16/2005 12/31/2013 Comments Mostly achieved as per alternative baseline. Since 2005 baseline and EoP reports (incl. % used different methodologies, used an extrapolated estimate from EoP report as achievement) alternative baseline;see paras 51 & 52 of main report for details 15% increase in the number of people in participating 5 New hill districts that Indicator 2 : live within four hours of walking to an all-season road Value 65% 80% 75.31% (quantitative (Alternative baseline (Based on (More than 15% or Qualitative) extrapolated from EoP alternative increase over the Accessibility Mapping baseline – alternative baseline) Report: 54.1%) 69.1%) Date achieved 08/16/2005 12/17/2009 12/31/2013 Comments Achieved as per alternative baseline. Since 2005 baseline and EoP reports used (incl. % different methodologies, used an extrapolated estimate from EoP report as achievement) alternative baseline;see paras 51 & 52 of main report for details. 10% increase in the number of people in participating Original terai districts that Indicator 3 : live within two hours of walking to an all-season road 81% 91% 94.5% Value (Alternative baseline (Based on (less than 10% (quantitative extrapolated from EoP alternative increase over the or Qualitative) Accessibility Mapping baseline – 102.8%) alternative baseline) Report: 92.8%) Date achieved 08/16/2005 08/16/2005 12/31/2013 Comments Not achieved. as per alternative baseline. Since 2005 baseline and EoP reports (incl. % used different methodologies, used an extrapolated estimate from EoP report as achievement) alternative baseline;see paras 51 & 52 of main report for details. 10% increase in the number of people in participating New 5 terai districts that Indicator 4 : live within two hours of walking to an all- season road 75% 85% 95.14% Value (Alternative baseline (Based on (less than 10% (quantitative extrapolated from EoP alternative increase over the or Qualitative) Accessibility Mapping baseline – alternative baseline) Report: 91.1%) 101.1%) Date achieved 08/16/2005 12/17/2009 12/31/2013 Comments Not achieved. as per alternative baseline. Since 2005 baseline and EoP reports (incl. % used different methodologies, used an extrapolated estimate from EoP report as achievement) alternative baseline;see paras 51 & 52 of main report for details. total km of existing dry season road rehabilitated and upgraded to all season Indicator 5 : standard Value (quantitative 0 800 1165 1740 or Qualitative) Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Achievement far exceeded the target, mainly due to utilization of savings Comments (available through significant changes in forex rate and lower quotes received on (incl. % account of more competition due to e-bidding) to undertake more works in this achievement) category. Indicator 6 : total km of existing rural trails upgraded to dry season standard Value (quantitative 0 200 211 141 or Qualitative) Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Comments Achievement fell short of the target by about 30%. The achieved length is the (incl. % real length constructed by project excluding the overlapping length during achievement) packaging of the work for user committee and contractors. Indicator 7 : total km of road maintenance (per year) Value (quantitative 0 3500 4500 About 4600 or Qualitative) Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Comments Target fully achieved. The length of maintenance has been based on the (incl. % information provided by the DDC and maintained by sources other than RAIDP. achievement) Indicator 8 : Total numbers of trail bridges constructed Value (quantitative 0 350 317 745 or Qualitative) Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Comments Target fully achieved. Among the 745 Trail Bridges, RAIDP has supported full (incl. % construction of 164 Bridges and fabrication for 581 Bridges. achievement) all seriously affected land owners improve or at least maintain their pre-project Indicator 9 : level living standards All seriously affected Value land owners improve or at More than (quantitative least maintain their pre- 100% 100% 90% or Qualitative) project level living standards Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Comments (incl. % Fully Achieved. All SPAF identified (204) have received financial assistance achievement) Indicator 10 : 30 districts have updated DTMP Value (quantitative 0 30 10 25 or Qualitative) Date achieved 08/16/2005 08/16/2005 12/17/2009 12/31/2013 Comments Achievement exceeded much beyond the targeted levels. DTMPs of 10 Districts (incl. % have been completed in December 2012, of another 15 Districts by December achievement) 2013 and of the remaining 5 thereafter. e-bidding is piloted in 9 districts and DOLIDAR and assessment of its operation Indicator 11 : is carried out Value implemented in 74 9 districts and (quantitative 0 DDCs and 17 DOLIDAR or Qualitative) Municipalities Date achieved 12/17/2009 12/17/2009 12/31/2013 Comments Achievement exceeded much beyond the targeted levels. Districts E-bidding has (incl. % been implemented in 74 DDCs except Myagdi DDC and 17 Municipality achievement) including Metropolitan and sub metropolitan city. Indicator 12 : preparation and implememntation of asset management system Value implementatio RuTIMS has been (quantitative 0 n of asset developed for this or Qualitative) management purposes and tested system in all and ready for use project districts (30) Date achieved 12/17/2009 12/17/2009 12/31/2013 Comments Target partially achieved. By EoP, the system was developed but yet to be (incl. % implemented. Since EoP, reportedly, RuTIMS is being implemented in 9districts. achievement) Indicator 13 : development and implementation of 5 MIS modules 4 MIS Modules (rate analysis, 5 MIS Contract Value modules management, (quantitative 0 developed and ARMP and Road or Qualitative) implemented Inventory) have been incorporated in RuTIMS Date achieved 12/17/2009 12/17/2009 12/31/2013 Comments Target partially achieved. The system is substantially developed - rate analysis, (incl. % Contract management, ARMP and Road Inventory have been incorporated in achievement) RuTIMS. Since EoP, reportedly, RuTIMS is being implemented in 9districts. DOLIDAR and participating DDCs receive favourable valuation from Indicator 14 : Independent Reviews on their performance to execute the project and manage the sector in a decentralized governance structure Value (quantitative 0 Dropped or Qualitative) Date achieved 08/16/2005 12/17/2009 Comments (incl. % Dropped at the time of restructuring. achievement) A GIS-based Plan and Sector Outcome is developed and guides donor support in Indicator 15 : this sector Value (quantitative 0 Dropped or Qualitative) Date achieved 08/16/2005 12/17/2009 Comments (incl. % Dropped at the time of restructuring. achievement) Conducive regulatory and institutional framework for rural transport service Indicator 16 : provision is adopted in districts. Value (quantitative 0 Dropped or Qualitative) Date achieved 08/16/2005 12/17/2009 Comments (incl. % Dropped at the time of restructuring. achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 10/07/2005 Satisfactory Satisfactory 0.23 2 04/06/2006 Satisfactory Satisfactory 2.23 3 10/23/2006 Satisfactory Satisfactory 2.34 4 04/24/2007 Satisfactory Moderately Satisfactory 3.62 5 10/18/2007 Satisfactory Moderately Satisfactory 4.83 6 06/25/2008 Satisfactory Moderately Satisfactory 10.07 7 12/23/2008 Satisfactory Moderately Satisfactory 16.91 8 02/02/2009 Satisfactory Moderately Satisfactory 16.91 9 06/22/2009 Satisfactory Moderately Satisfactory 17.58 10 11/24/2009 Moderately Satisfactory Moderately Satisfactory 20.15 11 05/20/2010 Moderately Satisfactory Moderately Satisfactory 23.41 12 07/07/2010 Moderately Satisfactory Moderately Satisfactory 25.45 13 05/31/2011 Moderately Satisfactory Moderately Satisfactory 29.05 14 12/13/2011 Moderately Satisfactory Moderately Satisfactory 32.73 15 06/26/2012 Moderately Satisfactory Moderately Satisfactory 36.89 16 01/01/2013 Moderately Satisfactory Moderately Satisfactory 38.59 17 06/05/2013 Moderately Satisfactory Moderately Satisfactory 47.30 18 12/23/2013 Moderately Satisfactory Moderately Satisfactory 59.41 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions Adaptive and opportunistic restructuring of the project, to provide additional financing to (a) cover the shortfall in achieving the original targets (due mainly to price increases in civil works); and (b) respond to 12/17/2009 Y MS MS 20.15 Government of Nepal request to increase the scope of civil works under various categories in the existing districts and also cover 10 new districts. In order to allow sufficient time for completion of remaining ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions activities from original financing and the new activities from the additional financing, closing date has been extended by 3 years. cancellation of 6 million USD , 11/07/2013 MS MS 57.17 reallocation of funds, and change in output indicators If PDO and/or Key Outcome Targets were formally revised (approved by the original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Moderately Satisfactory Against Formally Revised PDO/Targets Moderately Satisfactory Overall (weighted) rating Moderately Satisfactory I. Disbursement Profile 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. At the time of appraisal of the Rural Access Improvement Decentralization Project in 2004-05, progress on Nepal’s economic development was under threat. Reforms that had commenced in the 1990s together with strong demand for Nepal’s exports and a healthy tourism sector had led to a steady growth rate of 5% per year. Progress over the preceding decade had led to a perceptible improvement in certain human development indicators and a decline in consumption poverty. However, the Maoist insurgency and the low rate of growth and stagnant income in the agricultural sector were a serious threat to future broad- based social and economic development, particularly in rural areas. 2. Nepal’s economic and social development had always been inextricably linked to accessibility, with various surveys indicating that poverty and human development indicators were worse in remote areas. The road network density was low relative to neighboring countries and an estimated 36 percent of Nepal’s 24 million people lived at least 2 hours walk from the nearest all-season road where public transport services might be available. 3. At the time of appraisal, completing the devolution of district roads and fiscal responsibilities to respective District Development Committees (DDCs) was a Government priority in its Immediate Action Plan for the Poverty Reduction Strategy. 1 The policy of devolving development authority and service delivery responsibility to local bodies had been institutionalized through the Local Self-Governance Act (LSGA) 1999. Under the Act, Village Development Committees (VDCs), municipalities and District Development Committees (DDCs) were assigned responsibility for development programs and service delivery in their respective localities. While the legal framework for decentralization was in place, there was still a need to make its provisions operational and fully effective. 4. The Ministry of Federal Affairs and Local Development’s Department of Local Infrastructure Development and Agricultural Roads (DOLIDAR) provided technical support and backstopping to DDCs on all rural infrastructure issues. 5. The Rural Access Improvement and Decentralization Project (RAIDP) was a follow up operation to the Bank’s Learning and Innovation Loan (LIL) for the Rural Infrastructure Project (RIP, Credit 3215-NEP). It was designed to replicate, scale up and mainstream the positive lessons and good practices from RIP in support of the Government’s decentralization and improvements to rural access priorities. 1 Annex 2, entitled Key Actions of the Immediate Action Plan, 2002 (IAP), The Tenth Plan (Poverty Reduction Strategy Paper), 2002-2007, His Majesty’s Government, National Planning Commission, Kathmandu, Nepal, May 2003. 1 1.2 Original Project Development Objectives (PDO) and Key Indicators 6. The project development objective (PDO) under the original operation was as follows: “For residents of participating districts utilize improved rural transport infrastructure and services and benefit from enhanced access to social services and economic opportunities.” 7. The key outcome indicators were: (a) 20 percent increase in motorized and non-motorized trips by beneficiaries to key social and economic centers by End of Project (EOP); and (b) 20 percent reduction in travel time by beneficiaries to key social and economic centers by EOP. 8. The Development Grant Agreement for SDR 21.2 million was dated August 1, 2005. 1.3 Revised PDO and Key Indicators, and reasons/justification 9. In 2009, as part of an adaptive and opportunistic restructuring carried out to provide additional financing, the Project Development Objective (PDO) was slightly revised to “for residents of participating districts to utilize improved rural transport infrastructure and services in order to have enhanced access to social services and economic opportunities”. The additional financing was provided to (a) cover the shortfall in achieving the original targets (due mainly to price increases in civil works); and (b) respond to the Government of Nepal request to increase the scope of various categories of civil works in the existing districts and cover 10 new districts. In order to allow sufficient time for completion of remaining activities from the original financing and the new activities from the additional financing, the closing date was extended by 3 years. 10. Following the additional financing, the results framework for the project was revised to capture the increased scope of outputs. A summary of the original and revised targets for the major categories of civil works (under the Rural Transport Infrastructure component) is provided below; for further details of the changes, please see the section on revised components below. Rural Transport Original 2009 Restructuring/Additional Infrastructure Sub- (2005 Estimate of Financing (2009/10) component PAD) outputs‡ Additional Revised Planned Targets Targets Outputs All-Season roads 800 km 615 km 550 km 1165 km Dry-season roads 200 km 61 km 140 km 211 km Rural Roads 3500 km 3500 km 1000 km 4500 km Maintenance Trail Bridges 350 nos 166 nos -- 317nos ‡ Considered as possible with the then existing allocations; Source: Mid-Term Review Aide Memoire, April 2009 11. In addition, as part of the restructuring, a new civil works sub-component, entitled “River Crossing Structures” was added with a target of constructing 10 bridges by the end-of- project (EOP). This reflected a key finding from the original operation which was that bridges are a key element of providing all season road access in Nepal. The other major changes to indicators were related to the Capacity Building and Advisory Services (CBAS) 2 component, wherein two new indicators were added, one indicator was modified and three were dropped2, as detailed below: S/N Outcome Indicator Action @ 2009 Restructuring 1 Preparation and implementation of Asset Management Systems Added 2 Development and implementation of 5 MIS modules Added 3 30 districts to have updated District Transport Master Plans and use it for Modified (from 30 investment and maintenance prioritization and budgeting districts to 10 districts) 4 DOLIDAR and participating DDCs receive favorable valuation from Deleted Independent Reviews on their performance to execute the project and manage the sector in a decentralized governance structure 5 A GIS-based Plan and Sector Outcome is developed and guides donor support Deleted in this sector 6 Conducive regulatory and institutional framework for rural transport service Deleted provision is adopted in districts 12. The revised PDO and outcome indicators were made applicable to both the original project (IDA Grant No. H171-NEP) as well as the Additional Finance Grant/credit. The revised Financing Agreement, for a credit of SDR 15.7 million and grant of SDR 12.8 million was signed on May 17, 2010. 13. The project was restructured again in November 2013, just prior to the closing date. This was mainly to effect a reallocation of amounts across different categories and cancel the unutilized amount. 1.4 Main Beneficiaries 14. The main beneficiaries of the project were the residents living in the area of influence of the roads to be improved. In addition, some roads carried long distance traffic and those road users benefited from reduced vehicle operating costs and travel time costs. Reliable access and lower transport costs also benefited service providers since improved roads made it easier to engage in economic activities. The original financing was estimated to directly benefit 900,000 people, the additional financing in 2009 was expected to benefit 1.5 million more (including approximately 450,000 in the new districts). 1.5 Original Components 15. A summary of the original two main components of the project, together with their costs as estimated at the time of appraisal, is as follows: 16. The RTI component ($34.63 million) comprised: (a) rehabilitation and upgrading of about 800 km of existing dry-season rural roads to all-season standard; (b) upgrading of about 200 km of existing rural trails and tracks to dry-season standard in remote hill districts; (c) 2 This revision was in-line with the recognition in the MTR mission that the ISAP for DOLIDAR was too detailed and would need to be recalibrated to what was reasonably achievable. 3 maintenance of about 3,500 km of rural roads, covering routine and recurrent maintenance; (d) construction of 350 short-span trail bridges; and (e) development of small community infrastructure. 17. The CBAS component ($7.31 million) comprised: (a) implementation of training-related activities; (b) provision of technical assistance and advisory services; (c) preparation of a GIS-based transport master plan; (d) undertaking a rural transport study; (e) undertaking a socioeconomic impact study; and (f) provision of project implementation support, including logistics and operations costs, to DOLIDAR and the DDCs. 1.6 Revised Components 18. The additional finance continued to have two components but with a modified scope, mainly to include more of the same activities in the original set of districts and in 10 new districts. The total additional finance was $54 million with $45 million being provided by IDA and $9 million by Government of Nepal (GON) and DDCs. 19. RTI. Following the restructuring, the RTI component included an increase in the scope of various categories of civil works over and above what was estimated to be achievable with the original allocations, viz., (a) upgrading to all-weather standard of approximately 1,165 km (615 km from original and 550 km through additional financing); (b) upgrading of approximately 211 km of tracks to dry season standard (61 km from original and 140 km through additional financing); (c) 317 trail bridges (166 nos from original and the balance through a SWAp3); (d) completion of 4,500 km of maintenance (3,500 km envisaged under original financing); (e) ten key river-crossings (new activity); and (f) community infrastructure with an outlay of $2.4 million (of which, $1.2 million from original financing). In all, the IDA financing for this component increased from $34.63 million to $71 million. 20. CBAS. The financing for this component increased from $7.31 million to $13.31 million, with a substantive part (about $4 million) of the increased allocation directed towards implementation support and incremental costs, mainly on account of the increase in the scope of activities under various categories of civil works. Also, the scope of the support for remaining activities aimed at capacity building was recalibrated keeping in view what was feasible and was mostly limited to developing an IT-based data system including road asset management, within DOLIDAR and the DDCs. The project continued to support the Rural Transport Service Study and policy recommendations contained therein. Support was also extended for measures aimed at ensuring effective application of the Environment and Social Safeguard Framework (ESMF); the implementation of the social action plans; and timely completion of the Remedial Action Plan. 3 Under the original financing, the trail bridges were envisaged to be constructed through a combination of IDA support and contribution from DDC and the communities. Whereas, under the SWAp (Sector- wide Approach) arrangement, the IDA financing was envisaged to be a part of a multi-donor effort for building bridges across all districts (including non-RAIDP districts) but meeting only the cost of steel fabrication components of those bridges. From the documentation made available to the ICR team, it is not clear how the revised target of 317 bridges was fixed for this activity at the time of the additional financing. 4 1.7 Other significant changes 21. Some of the other significant changes at the time of additional financing in 2009/10 were: (a) a shift of the support to trail bridges through a SWAp arrangement;4 (b) a change in the percentages of expenditures to be financed by IDA support for the major categories of civil works, from 100% to 90%; and (c) the introduction of a Governance and Accountability Action Plan (GAAP). 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 22. The project design was focused on the enhancement of rural access – which was widely recognized as the weak link in the rural infrastructure and, hence, a key stumbling block for rural development – through a balanced mix of interventions in civil works (Rural Transport Infrastructure component) and institutional strengthening (Capacity Building and Advisory Services component). Within the civil works, the selection of interventions ranged from upgrading of trails and other roads respectively to dry-season and all-season standard to construction of trail bridges. On the other hand, the capacity of the DOLIDAR – which was then a still a fledgling institution – was sought to be enhanced through putting in place medium to long term systems to enhance the quality of planning and asset management practices, e.g., District Transport Master Plans, IT-based Road Asset Management Systems, Implementation Support, etc. The project was in conformity with the then country assistance strategy of the Bank in terms of its emphasis on contributing to broad-based economic growth and improving governance via rural transport infrastructure investments aimed at bolstering the agricultural sector, rural economy and employment, and capacity development of the government institutions at the central and district level. 23. This aspect was also noted by the Quality Assessment Group, which rated the project as “Highly Satisfactory” for Quality At Entry (QAE), and particularly commended the project for its handling of the elements of risk assessment and risk mitigation, poverty, social development and gender aspects and the sharp focus and neat design of the project approach (following up on a Learning and Innovation Loan). In relation to the preparation process, the Panel also noted a well-developed partnership with other donors, strong Borrower commitment and a deep involvement of the community. 24. Yet, with the benefit of hindsight, it appears that the project could have paid more attention to two notable factors that seriously impacted the implementation – namely: (i) the price escalation of key raw materials; and (ii) the challenges associated with the construction of dry-season roads. This eventually led to a shortfall (of funds) in achieving the targeted outputs under the original financing. Another area in the project design with scope for improvement is the M&E framework, especially with respect to (a) the establishment of targets related to enhancement of access; and (b) ensuring sufficient attention to the quality of works in the M&E framework and other arrangements. The QAE Panel also identified the following areas for the project team’s attention: (a) more disaggregation of M&E findings to measure impacts on different groups; (b) close monitoring of quality of 4 See previous footnote. 5 technical audits; (c) close monitoring of the training program to identify skills gaps; and (d) following up on the low level of financing of the Road Fund 5 . The targets related to enhancement of access, in particular, proved to be rather ambitious, especially in the districts in the Terai region which already had a relatively high coverage of road network and accessibility. 2.2 Implementation 25. The project commenced in 2005 in a difficult environment towards the end of Nepal’s decade-long ‘people’s war’, which formally ended following a ceasefire agreement in 2006. Despite this, the project made good initial progress. It is important to note that the project existed in a relatively unstable external environment at many times during implementation. The most extreme example of this was the 2007 abduction and killing of a project engineer in Siraha district by the Terai People's Liberation Front. Though less extreme, the political instability experienced during Nepal’s post-conflict era also posed formidable implementation stage challenges including: various attempts to ratify a constitution, budget impasses, and frequent transfers of staff. 26. The implementation of the project stands out for demonstrating good flexibility in two notable ways. First, it was possible to redistribute funds to program districts with fast progress from those with slow progress. This helped to maintain overall progress when, for example, local conflicts re-emerged in some of the Eastern Terai districts in 2007. Second, the project was able to modify its support to the Trail Bridge Program subcomponent by joining in a harmonized SWAp approach with other donors in 2009. 27. The Government, too, recognized the opportunity for additional financing in the project at an early stage. The timely application for increased support facilitated the preparation of a substantial additional financing. The Mid Term Review was instrumental in improving implementation by articulating the case for additional financing to bridge the shortfall in original financing and to meet Government of Nepal’s request for expanding the scope of project coverage. The consequent restructuring also (a) recalibrated the outcome indicators related to CBAS component to take out or recalibrate the elements that were assessed to be difficult to achieve (e.g., GIS-based Plan and sector outcome, adoption of conducive regulatory and institutional framework for rural transport services); and (b) added a GAAP responsive to the local context (e.g., governance and peace filter). 28. The project also received significant benefit in terms of savings, especially after the 2009 restructuring, in terms of lower-than-estimated prices for all-season road contracts (due to e-bidding) and significant increase in the value of US$ vis-à-vis NPR. These savings played a critical role in the over-achievement of targets with respect to all-season roads and trail bridges. 29. On the other hand, the implementation was hampered by abrupt changes of key government staff and an underestimation of the amount of support required to DDCs. For 5 Note that there was an apparent lack of consistency between the original Development Grant Agreement and the Project Appraisal Document (PAD). Schedule 1 of the former indicates 100% of the costs would be financed by the Grant whereas the PAD shows a Borrower contribution of $ 9.94 million to the project costs. However, this did not present a problem during implementation. 6 example, the sudden change of Project Coordinator in September 2012 had a significant negative impact on progress. After some months, the situation improved following the appointment of a new Project Coordinator in early 2013. In a similar vein, the lack of capacity at DDC-level had adversely affected the dry-season roads sub-component in particular. Also, the inadequacy of the original financing to meet the targets fixed at the time of appraisal suggests room for improvement with respect to cost estimates. Yet another area of concern was the monitoring of quality aspects. The project made notable impacts by establishing laboratories at the district level and appointing a quality control specialist at the PCU level. However, much more remains to be done to ensure sustained attention to quality aspects. This was a key lesson learned that the Association has taken into the successor operation. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 30. The project monitoring indicators appeared to be mostly relevant and appropriate for the purpose of measuring outputs. Good use was made of the monitoring data to inform decision making and resource allocation. This was apparent at the Mid Term Review and also at other times throughout the implementation. 31. However, the selection as well as setting of the targets for measuring outcomes also had certain important limitations. To begin with, the three key PDO indicators – namely, increase in number of trips, reduction in travel time and increase in Annual Average Daily Traffic (AADT) – are all focused mainly on the immediate benefits of rural transport infrastructure investments and less on the more important outcomes and impacts resulting from those investments. The project could have attempted to target next level of outcomes which it appears to have had eventually contributed to; the socio economic study carried out at the end of project points to several substantive outcomes such as, for example, increase in agricultural yields (attributable to better access to inputs) and increase in land prices (owing to better access to social infrastructure). On the other hand, the targets set for intermediate outcome indicators related to access (within 2-hours of walking distance to an All-season standard) in Terai districts – that is, a target of 10% increase in this type of access in an area already having a wide road network coverage - had turned out to be highly ambitious. This was compounded by issues related to inconsistency in measurement, viz., the original baseline did not contain data on all parameters (e.g., numbers and travel times for non-motorized trips) and, in another instance, the methodologies used for estimating the data at the EoP were different from those used for the baseline. These limitations made it difficult to directly compare the achievements vis-à- vis targets, thereby requiring construction of other proxy measures. 32. Also, the results framework appears to have given little or no attention to the quality aspects. This makes it difficult to comment on the quality issues that have been raised by various stakeholders. Similarly, the community infrastructure sub-component – which accounted for only about 3% of the IDA financing and was apparently well-received by the stakeholders – lacked indicators making it difficult to assess the degree of its success. 7 2.4 Safeguard and Fiduciary Compliance 2.4.1 Safeguard Compliance Overall Rating: Moderately Satisfactory 33. Social Safeguards (Satisfactory). The implementation of social safeguards in this project was largely successful and the project closed with a satisfactory rating on social safeguards. Based on the experience of this project DOLIDAR is preparing a sector wide Environmental and Social Management Framework (ESMF) that will be internalized for all its projects. 34. A noteworthy feature of this project was the involvement of communities, contributing to the land as well as the monitoring of sub-projects. For instance, the community donated 2.13 million square meters of land, which, at the prevailing market rates, is estimated at NPR 5.63 billion (US$ 56.3 million); this is several times more than the NPR 64.4 million (US$0.65 million) provided by the project as assistance to the affected persons. Similarly, in case of the 237 community assets created by the project with an expenditure of NPR 217.6 million (US$2.18 million), the communities contributed about 37% of the value, in terms of cash/labor. As of February 2014, the project conducted first, second and third round(s) of community-based monitoring respectively for 152, 136 and 103 sub-projects. 35. Although the project involved the upgrading of existing roads rather than new alignments, some land acquisition was required and there were a number of Severely Project Affected Families (SPAF). Implementation of the social safeguard requirements was initially slow and such that, by the time of the Mid Term Review, it was rated as “highly unsatisfactory”. Amongst other things, this was due to non-payment of compensation to severely project affected families because of the absence of the required re-settlement action plan. In response, the PCU undertook an assessment of voluntary land donation impacts and the numbers of affected families which led to preparation of a Remedial Action Plan. Implementation of this Plan brought about substantial improvement in social safeguards compliance, resulting in resolution of 97% of the land ownership issues by the EOP ( The remaining land owners could not be compensated as they were either absentee land owners or there were litigations linked to those land parcels. In total, there were 12,558 affected families out of which 204 severely affected families (land 162, structure 37, and livelihood loss 5) had received their assistance by the EOP. This improvement resulted in a final rating of “moderately satisfactory”. 36. Environmental safeguards (Moderately Satisfactory). Environmental safeguards were reported as a concern even until late 2012, mainly due to delays in preparing environmental documents such as the Initial Environmental Examinations (IEEs) or Environmental Management Plans (EMPs), designing site specific plans for mitigation works, and implementation of mitigation measures. Delays in central and district level monitoring were also a concern. Environmental performance varied from road to road, typically between moderately unsatisfactory to moderately satisfactory. However, it is noteworthy that following updating of the ESMF during preparation of additional financing and subsequent provision of additional support of environmental specialists at the central and cluster levels, there had been distinct improvement in compliance to environmental issues. Also, the team was given to understand that the GoN had made necessary arrangements for 8 funds and human resources for completion of the remaining works by June 2014. With this in view, the performance on environmental safeguards is rated as Moderately Satisfactory. 2.4.2 Fiduciary Compliance Overall Rating: Moderately Satisfactory 37. Procurement (Satisfactory). Procurement under the project was carried out in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" and the provisions stipulated by the Financing Agreements. As per the project’s decentralization objective, the procurement of works was carried by the respective districts while the goods and services were procured by the PCU. Considering the nature and size of works, almost all the civil works contracts were procured through National Competitive Bidding. Some of the small works contracts for the dry season roads subcomponent were procured by direct contracting through users’ committees/groups. 38. The PCU played a significant role in verifying/reviewing Bid Evaluation Reports (BERs) prepared by districts to ensure their consistency with the approved evaluation and qualification criteria. The PCU also checked for any evidence of collusion or coercion or limited participation/competition. There were several examples of PCU’s interventions that halted the award of contracts where there was credible evidence of potential mis- procurement. The introduction of e-bidding considerably reduced the risks of intimidation of bidders and non-competitive bidding. This and the training6 provided under the project had enhanced the procurement process by the EOP. 39. Financial Management (Moderately Satisfactory). The fiduciary risk rating of the project was downgraded from an initial rating of “Moderate” to “Substantial” during the mid- course of the project due to some control deficiencies and frequent turnover/vacancy of finance staff, which was later bridged with consulting support. The major control deficiency noted was inadequate district level monitoring of expenditures and, in the case of some districts, the project was not able to immediately furnish requisite supporting documents for review purposes. Some of the audit observations reported were mainly related to control deficiencies such as (a) large advance payments provided in the last month of the fiscal year to avoid freezing of the budget (this raises a question of prudent spending as well as on the quality of the outputs), (b) delays in settling advances provided by DDCs, and (c) misuse of project’s assets. These limitations were bridged through consultancy support, which, along with a computerized Financial Management Information System (FMIS), helped to maintain the regular transactions. As a result, both the trimester financial monitoring reports and audit reports were submitted mostly on time. The Bank followed up on all audit observations and suggested improvements to the control and monitoring system as well as the overall quality of financial reporting. Accordingly, the financial management performance of the project was rated as Moderately Satisfactory. 40. The challenges faced in this project clearly underscore that the follow-on project would need to pay particular attention to (a) establishing an effective system for financial monitoring and reporting at the district level; (b) ensuring deployment of qualified and 6 During the project period, 316 participants were trained on the subject of “Procurement and Contract Management” alone, through 14 formal programs. 9 experienced finance staff (backed by the consultant, if necessary); and (c) updating the current FMIS to meet the requirements of the new project. 41. Governance: As part of the additional financing in 2009, following up on a Governance, Peace and Security Assessment, the project adopted Governance and Accountability Action Plan (GAAP) and “Peace Filter”. The GAAP, covering seven broad areas of operations including organizational arrangements, project selection, contract management and monitoring and evaluation, gave a significant boost to aspects such as e-bidding, social accountability and community participation, which are duly highlighted in their respective sections. The Peace Filter, on the other hand, did not seem to have made much headway as (a) it did not find strong ownership either among task teams or within implementation agencies and (b) because of the divergent views as to what constitutes peace. Overall, albeit some significant achievements, the scope of GAAP appears to have been rather ambitious especially in committing the project leadership to undertake measures that are beyond its capacity or jurisdiction such as, for example, in the case of building capacity of local contractors and enforcing the Civil Service Act. Owning to these shortcomings, the implementation of GAAP in the project could be rated as moderately satisfactory. 2.5 Post-completion Operation/Next Phase 42. A key lessons learned from RAIDP relates to the challenges of maintaining rural transport assets in Nepal. This is a lesson that has also come from other development-partner supported rural transport programs in Nepal. For example, DfID’s most recent annual review of the Rural Access Program notes that “[A] More strategic approach to road maintenance is required for ensuring road sustainability.” Similarly, the recent Nepal Road Sector Assessment Study (P124396) identified that maintenance continues to receive less priority throughout both Government and donor supported rural transport/road programs. These lessons have fed into the IDA-supported project for Strengthening the National Rural Transport Program (SNRTP) which was approved in December 2013. SNRTP’s design encourages a ‘maintenance first’ approach to rural transport infrastructure by: (i) requiring districts to provide for maintenance on their core road networks before obtaining project resources for road upgrading or new crossing structures; (iii) supporting the development of routine maintenance systems (group-based length persons); (iii) putting project districts into regular annual maintenance programming cycles with measurable process milestones; (iv) focusing efforts and resources on district level core road networks. These features have all come from lessons or pilot initiatives from RAIDP. 43. Another important lesson learned from RAIDP relates to the nascent level of capacity within district institutions and District Technical Offices (DTO) in particular. DTOs manage civil works programs for a multitude of competing needs (not just transport). However they are also in the best position to deliver results in the rural transport sub- sector. Plans to reshape Nepal’s government along a federal model may further increase their importance. This has informed the design of both Bank and other development partner funded initiatives. The institutional strengthening and technical assistance component of SNRTP, too, builds on and takes forward the institutional gains made under RAIDP through lining up future support to MOFALD, DOLIDAR and participating districts in planning and managing the local rural transport system. 10 3. Assessment of Outcomes 44. The project was formally restructured in 2009 and again in 2013, very near the end of project. The PDO was also revised as part of the first round of restructuring. However, for the purposes of this ICR, the original and restructured (additional financing) segments of the project are considered as a continuum and evaluated as a single project, for three reasons. Firstly, the revision of the PDO was not a substantive alteration of the objective but essentially to bring more clarity, i.e., the enhanced access to social service and economic opportunities to be achieved through the project is that which could be reasonably attributable to the project’s interventions 7 . Secondly, a number of works initiated under the original financing were telescoped into the period after restructuring, duly consuming a part of the support extended through the additional financing. Thirdly, the (baseline) data for some of the key indicators were measured through studies carried out during the additional financing period thereby making it difficult to distinguish – and separately assess – the achievements in and attributable to the pre and post-revised segments of the project. As regards the second restructuring in November 2013, although the targets for various civil works were revised at that time, these were not taken into consideration for the purposes of the ICR evaluation as they were set almost at the end of the project period. 3.1 Relevance of Objectives, Design and Implementation (Satisfactory) 45. Relevance of Objective: The revised development objective “for residents of participating districts to utilize improved rural transport infrastructure and services in order to have enhanced access to social services and economic opportunities” was, and is, highly relevant to Nepal’s development objective of broad-based economic growth 8 , for which lack of access to rural areas remains a significant constraint. 46. The project was relevant to the Bank’s country strategy as it sought to address two of the three pillars of the Interim Strategy Note (June 2009), namely, enhancing equitable access to services and social inclusion and creating an environment conducive to sustainable private-sector led growth and employment generation. It also remains consistent with current development objectives of the Bank, and is in line with the two out of the three pillars of Interim Strategy Note FY 12-13, aimed at supporting the GoN to build a peaceful, prosperous and just Nepal, viz., (i) enhancing connectivity and productivity for growth; and (ii) promoting access to better quality of services. 47. The initial premise was that improved transport access created by rural roads would result in overall development of the areas while the local residents would experience improvements in their livelihoods. A recent Study has confirmed the economic impact of 7 That is, via utilization of the rural transport infrastructure improvements under the project, and hence, measured through road-related access enhancement parameters. 8 Government of Nepal’s PRSP (Tenth Plan) and World Bank’s Country Assistance Strategy (CAS, 2004-2007). 11 rural transport access by showing a correlation between higher farm profits and proximity to north-south road linkages in Nepal9. 48. Relevance of Design and Implementation. The project design had a mix of rural transport infrastructure improvements and capacity building and advisory services (CBAS). There was awareness at the project design stage that there would be various capacity constraints and process gaps to implementing infrastructure improvements and the local level. The chosen mix of components enabled these constraints to be addressed, in partnership with other development partners, through the CBAS component. The project was well-designed in complementing support provided to the rural transport infrastructure sub-sector by other development partners through its geographical coverage. The implementation, though lagging at times, was mostly effective in terms of identifying and addressing both challenges and opportunities, as evidenced in the analysis of the Mid-Term Review and the consequent adaptive and opportunistic restructuring of the project to provide additional financing to (a) cover the shortfall in achieving the original targets (due mainly to price increases in civil works); and (b) respond to the GoN request to increase the scope of various categories of civil works in the existing districts and cover 10 new districts. A shortcoming of the design was the M&E framework, particularly in relation to setting targets for enhancing access, lack of adequate focus on monitoring quality and use of different methodologies for assessing the outcomes at the beginning and end of the project. In view of these minor shortcomings, the relevance of objectives, design and implementation is rated as Satisfactory. 3.2 Achievement of Project Development Objectives 49. PDO Indicators: Overall, the project was successful in achieving its targeted PDO indicators, viz., increase in trips, reduction in travel time and increase in traffic. The Socio- Economic Impact Study 10 carried out towards the end of the program showed that the target of a 20% increase in motorized and non-motorized traffic was fully achieved with a 145% increase in motorized-trips (per household per month) and 77% increase in non- motorized trips (per household per month) on 22 sampled roads between 2011 and 2013. Here, it is important to note that these achievements are measured against an alternative set of baseline numbers from a Socio-Economic Impact Study carried out in year 2011. This is because, at the time of project appraisal in 2005, the baseline values were provided only for the motorized trips. Hence, in order to consistently measure the achievements w.r.t. both motorized and non-motorized trips, the ICR team relied on the Socio Economic Study Reports carried out in 2011 and EoP, which contained data for both modes for traffic. The same Study showed a 48% reduction in travel time for motorized trips and 35% reduction for non-motorized trips compared to the target of 20% reduction. 50. Regarding the achievements on the indicator of traffic, too, a note of clarification would be in order. At the time of appraisal, the targets related to traffic were set out w.r.t. increase in 9 Shrestha, Slesh A. “Access to the North-South Roads and Farm Profits in Rural Nepal”, University of Michigan, 2012. 10 Chhetri Ram B. “Report on Socio-Economic Impact Study” MOFALD, December 2013. 12 the Annual Average Daily Traffic (AADT) for three different modes of transport, buses, trucks and jueeps/micro-buses. However, the EoP study provided data only for Average Daily Traffic (ADT).11 A comparison of the baseline and EoP numbers of Average Daily Traffic– that is, without any seasonal adjustment – indicates an increase of 55%, 41% and 29% for buses, trucks and jeeps/micro-buses respectively. Although this compares favorably with the target of a 30% increase in each of these transport modes, it would be difficult to conclusively establish the achievement of the target as it was set for AADT and not ADT (which does not include seasonable adjustments). 51. Intermediate Outcome Indicators: The project sought to assess its achievement with respect to enhancing accessibility, through two intermediate outcome indicators, viz., increasing the percentage of population living within four hour’s walk of an all-season road in the Hill districts and two hour’s walk in the Terai (Plains) districts. The ICR team could not make a clear assessment of the achievement with respect to these indicators because the Accessibility Mapping Report12 produced towards the end of the program period used a different methodology to that used for establishing the baseline at the beginning of the project.13 52. However, an attempt has been made to use the Accessibility Mapping14 methodology used at the end of project to “estimate” the impact of the RAIDP network using population numbers from 2011. For example, in the original 11 Terai districts, the existing network was within 2-hours of walking for nearly 6.7 million (92.8% of a total 7.2 million), and the additions to the network due to RAIDP have brought 6.9 million (94.5% of total) within 2- hours of walking to a road network. Going by this metric, the achievements of increase in access in Terai districts are: 1.7 percentage points (92.8% to 94.5%) in the original districts and 4 percentage points (91.1% to 95.1%) in the Additional districts, and both are below the target of 10% increase envisaged at the time of appraisal and additional financing. In contrast, in case of Hill districts, the target of a 15% increase in the number of people 11 It is to be noted that the team could not arrive at AADT from ADT because of lack of enough information. 12 Dhakal Binod P. “Preparation of Accessibility Mapping and Finding out the Increment of Population due to Intervention of RAIDP Roads in the Zones of Influences” Government of Nepal, December 2013. 13 EoP studies used a different methodology given the following weaknesses in the 2005 baseline studies: (i) the logic used for the calculation of time was rather weak (aerial distances; use of a factor in the case of hills for factoring up access time); (ii) road-heads as opposed to the whole road lengths were considered for the estimation of access time; (iii) the use of incomplete road related information. The revised methodology in EoP study was based on terrain modelling, updated road information in the estimation of access time. 14 “Accessibility Mapping of rural roads is the visualization of the level of accessibility of the local people to all-weather rural roads. This is measured basically through the time to reach the nearest road head from the individual households or settlements. Accessibility level thus depends upon the spatial distribution of the settlements and the road alignments and it can be well mapped and analyzed with the application of GIS” – from the report, entitled “Preparation of Accessibility Mapping and finding out the increment of population due to intervention of RAIDP Roads in the zone of influences”, by Binod Prasad Dhakal, in December 2013, for RAIDP. 13 within 4-hour walk of an all-season road was almost equaled (65.5% to 79.6%) in original districts and exceeded (54.1% to 75.3%) in Additional districts. 53. The apparent under-achievement in the Terai districts appears to be due to an initial under- assessment of the baseline and limited analysis at Entry of what was realistically achievable. The relatively dense network of roads and easier terrain in the Terai meant that most of the population already lived within two hours walk of an all-season road before the RAIDP roads were upgraded15. 54. Output Indicators: The project’s achievement on output indicators related to the Rural Transport Infrastructure component – that is, outputs directly linked to investment flows – have exceeded targets in all sub-categories of civil works, except the upgrading of tracks/roads to dry-season standard. 55. All-season roads: The total number of kilometers upgraded to all-season standard significantly exceeded the target. By 31st December 2013, a total of 1,741 kilometers of road had been fully upgraded compared to a revised target of 1,165 kilometers set at the time of the Additional Financing Agreement. In addition, there were a further 16 roads totaling 133 kilometers in length that were under construction and expected to be completed within 2-3 months of EOP. This strong result was mainly due to the utilization of savings from lower bidding costs and foreign exchange rate gains as well as a significantly improved rate of progress during the later stages of the project. 56. Dry-season roads: The total length of trails upgraded to dry season standard motorable roads was 141 km. This was about 30% below the target of 211 km. The main reasons given for this were the long delay in procuring consultants – who were to assist the local communities in design – and the weak management at DDC level. 57. Trail Bridges and Other Bridges: The total number of trail bridges constructed was 745, which was significantly above the target of 317. The total achieved included 164 bridges fully constructed with RAIDP funds and an additional 581 bridges for which RAIDP contribution was limited to steel fabrication parts. This shift to “fabrication only” – a result of the shift to the SWAp approach for this activity – was the main reason for exceeding the target by such a large margin. Even so, adjusting the achievement figure based on the proportion of fabrication costs to total construction costs gives a total ‘equivalent’ achievement of 404 trail bridges, at least in financial terms, and thus appears to have well exceeded the target. 58. Maintenance: The number of kilometers of rural road maintenance achieved in the program districts by the EOP was 4,622, slightly above the target of 4,500. The maintenance was carried out using Government of Nepal funds and the reported length was based on information provided by the participating DDCs. 59. All 204 seriously project affected people (SPAF) had received the planned financial assistance by the EOP, as against the target of at least 90% of SPAF receiving the planned assistance. 15 A reduction in the target percentage and/or a reduction in the walking time measure would have produced a more appropriate target. 14 60. Under the Capacity Building and Advisory Services component, which accounted for 12% of the total support, most of the revised targets were achieved, with the notable exception of implementation of the Road Asset Management System and MIS modules by EoP. However, since EoP, Road Asset Management System and MIS modules are being implemented in 9 districts. The District Transport Master Plans were prepared for 25 districts as against the revised target of 10 districts; 5 more DTMPs were almost completed by the EOP and reportedly DTMPS for the remaining 5 districts too were completed thereafter. The introduction of e-bidding for works contracts proved highly successful as it was spread beyond the original target of adoption in 9 DDCs and has been introduced in all 74 DDCs and 17 Municipalities. The targets for the preparation and implementation of a road asset management system and MIS modules were achieved only partially; in both cases the systems were substantially completed but had not been fully implemented by the EOP. 61. In summary, the achievement on most outcome indicators and investment linked outputs appear to be mostly satisfactory, except the following shortcomings: (a) 30% shortfall in dry season roads target (6% of budget);(b) lack of clearly comparable baseline and EOP analysis in certain outcome/intermediate outcome indicators; and (c) low achievement on implementation of MIS modules. Considering these shortcomings as moderate, the achievement of the project development objectives is rated as Moderately Satisfactory. 3.3 Efficiency 62. The Cost-effectiveness and Cost-Benefit Analyses of RAIDP Roads Report of January 2014 showed that all projects surveyed were well within the cost effectiveness ceiling of $100 per beneficiary with the majority at $50 or below. The cost effectiveness (that is, investment cost per person) of almost all roads surveyed was also lower than the original estimates. One of the reasons for this was that the contract prices achieved were significantly lower than estimated due mainly to fierce competition among local contractors. 63. The same report included a Cost-Benefit Analysis of a small sample of upgraded roads. This indicated a satisfactory economic justification for the investments with all roads showing an Economic Rate of Return (ERR) in excess of the minimum benchmark of 12%. The Analysis showed an average first year ERR of 28 percent with a total Net Present Value of $8.6 million for the whole program. 64. Also, in case of upgrading to all-weather standard – the largest sub-component in the project accounting for about 50% of the total costs by EoP – the project achieved almost 50% higher output than the target of 1,165 kilometers. For this particular activity, the cost per kilometer for the original project roads totaling 648 kilometers in length was $23,157. This figure did not change significantly for the additional project where the average cost was $23,382 for a further 1,104 kilometers. Similar good progress was achieved to time and budget for the Trail Bridge subcomponent where the construction of 750 bridges was supported. The average cost per meter span of the trail bridges was approximately $390 with little change between the original and the additional finance projects. 65. Most of the civil works, which accounted for the majority of the financing support, were thus constructed within the original thresholds for the cost-effectiveness and cost-benefit 15 analysis and the budgeted estimates and also the sample set of projects yielded an Economic Rate of Return higher than the 12% benchmark. In view of this, the efficiency of the project is rated as Satisfactory. 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) Rating: Moderately Satisfactory 66. The PDO remains highly relevant to the economic and social development situation of Nepal. The modification of PDO in 2009 was essentially to bring about more clarity about the objective. The targets were adjusted at the same time to take into account the changed scope but with no change to the parameters. The targets for outcome and output indicators have been achieved and in many cases exceeded within the project period. The design of the project proved effective in completing almost all of the rural infrastructure subcomponents within the planned costs and time period. The CBAS component provided effective and relevant support that complemented the rural infrastructure component and strengthened both DOLIDAR and local authorities’ ability to manage the rural road network. 67. The project has thus been rated “Satisfactory” with respect to its relevance and efficiency, and “Moderately Satisfactory” in achievements with regard to the project development objectives, as assessed through its performance vis-à-vis targets for various indicators of the results framework. Combining all these factors, the overall outcome has been rated as “Moderately Satisfactory”. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 68. The Impact Study clearly indicated the perceived benefits of enhanced access in the project areas. Ease of access to service centres and increasing awareness about health and hygiene appeared to be factors for an increase in the frequency of trips by men and women. In the Focus Group Discussions, women acknowledged that they were able to visit health centres more often after the improvement of the roads since they could use public transport including buses. There was an overall average increase in trips of 30% but an 86% increase in trips to hospitals. 69. There was a significant increase in agricultural production in the project areas due almost entirely to an increase in yields per hectare (e.g. from 36 to 42 quintals per hectare for paddy rice). Farmers reported the reason for this was easier and timely access to agricultural inputs. Moreover, farm households in the project areas reported a shift in strategy from one of production for home consumption to production for the market. 70. Land prices increased in the project areas in most cases because of the improved transport infrastructure and associated developments (e.g., proximity to markets, schools, hospitals, etc.). The price for Khet land and house/residential plots were reported to have risen by more than 150% while the price of Bari land had increased by 30% 16 . This was 16 Socio-economic Impact Study, December 2013, Section D. p23. 16 accompanied by a slight decrease in average landholdings in the project areas. Focus Group Discussions suggested that some households in the project areas were selling some of their land after road improvements to neighbours or to the new settlers (i.e., in-migrants) and making investments in other gainful businesses like poultry, fisheries, tea-shops, etc. 71. Another critical aspect of the project was the harnessing as well as enhancement of the capacity of the communities through their substantial involvement in terms of (a) participation in identification, building and/or monitoring of civil works; and (b) contribution in the form of land, cash and/or labor. (b) Institutional Change/Strengthening 72. The development of the capacity of the government implementing institutions was one of the major benefits brought about by the project. At commencement, DOLIDAR was a relatively new institution and the RAIDP was the largest project that it had managed. However, through the capacity building and experience gained through this project, it became able to manage other large projects. This includes the ADB-funded Rural Reconstruction and Rehabilitation Sector Development Program (RRRSDP), which has recently been successfully completed, and the Bank funded Strengthening the National Rural Transport Program (SNRTP), which has been recently launched with a total budget of $175 million over 5 years. 73. The gains in capacity at DDC level have been more modest but also important as these will increasingly become the key institutions for the implementation of infrastructure development projects in their respective geographical jurisdictions. In the program districts, these institutions have developed such that they are able to manage local contracts with the necessary facilities and procedures for site supervision and quality control albeit with some resource constraints and management weaknesses. (c) Other Unintended Outcomes and Impacts 74. Increased environmental pollution was the major negative impact of the project roads reported by rural residents. This was because most of the roads were improved to gravel standard and this, with increased motorized traffic, caused a lot of dust. In a similar vein, safety – particularly for the children – was reportedly often cited as a major concern for the households adjoining the project roads. 75. Another unintended outcome of the project was an increase in people working outside the village. The March 2012 impact study on the original project roads showed nearly twice as many working outside the village but within Nepal and over three times as many working outside Nepal in the project areas compared to the control areas17. 76. A positive outcome that was not specifically targeted was that many of the project’s procedures and approaches have become DOLIDAR’s standard nationwide, e.g., e-bidding process, ESMF, etc. 17 March 2012 Impact Study, Table 6.3 17 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 77. The team conducted a half-day workshop in Kathmandu on 10th March 2014 in order to gain an understanding of the perceptions of the project among the various stakeholders, mainly drawn from the implementation agencies at the central and district levels. The workshop participants were generally satisfied with the achievements of the program and particularly the good progress with the upgrading of roads to all-weather standard. They reported positively on the benefits in terms of travel time savings and easier access to social and economic services. They highlighted some concerns with the standards and quality of the program roads. Some participants were dissatisfied with these aspects while others felt that the planned standards should have been better communicated to the beneficiaries. The fixed ceiling on per kilometer costs imposed by the project was felt to have contributed to the problems with inadequate technical standards. Several participants also noted how the irregular flow of funds from the government to the DDCs had disrupted progress. 4. Assessment of Risk to Development Outcome Rating: Moderate 78. The implementation of the RAIDP has demonstrated the crucial importance of good leadership and management. The sudden and seemingly unplanned transfer of key staff continues to be a risk to sustainability of the development outcome of improved rural access. This risk may progressively diminish as the Government now has a larger pool of experienced with enhanced capabilities acquired through implementation of large-scale programs such as RAIDP and SNRTP at several geographical locations and levels of the rural transport infrastructure institutional architecture. 79. Yet another major risk to sustaining the development outcome is the likely neglect of maintenance of the improved roads. Existing government systems for rural road maintenance are weak and resources allocated are low compared to the needs. Without regular and timely maintenance, the low-cost rural roads produced by the RAIDP are vulnerable to rapid deterioration due to heavy monsoon rains, steep gradients and unstable slopes. Adequate budgetary support from Government both for road maintenance and management of the road network remains a risk to sustaining the Development Outcome. With the many pressures on the government budget, this is likely to remain a threat. 80. The RAIDP recognized this risk and sought to address it through several measures including: (a) the requirement that DDCs allocate 20% of the investment cost for maintenance from their own resources established a flow of financial resources for road maintenance at district level through the life of the project; (b) the shift to otta seal surfacing for some of the higher-trafficked all-weather roads reduced the vulnerability to surface attrition and washing out that occurs with gravel surfacing; (c) testing and development for improvements to basic otta seal road designs that helped increase durability; (d) a system of routine maintenance by length-persons on trial sections was initiated in three districts, with support from ILO, to establish a practical system for the regular maintenance of district roads; (e) designing and piloting a road maintenance related decision support system has been designed and piloted by RAIDP; and (f) use of concrete edge blocks in Terai on an experimental basis. 18 81. In addition to the aforementioned measures, the risk of lack of future road maintenance is further mitigated through the follow-on “Project for Strengthening the National Rural Transport Program (SNRTP)”, as it provides enhanced support to road maintenance in these districts through an output-based approach. In particular, the length person schemes that RAIDP piloted are being scaled up to all SRNTP project districts. 82. Considering the aforementioned risk factors and the measures in place for mitigating them, the risk to development outcome is rated as Moderate. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 83. The Bank’s performance during the preparatory period was rated highly satisfactory by the QAE panel mainly on the basis of the project’s strategic relevance and approach. ICR team’s analysis and conclusions regarding the strategic relevance of the project (detailed in Section 3.2) also supports this understanding. With regard to project design too, an appropriate mix of investments in dry season roads, all-season roads and trail bridges was selected for achievement of the PDO. This was combined with important capacity building support to improve planning procedures and build management capability. Also, the main lessons learned from the previous support to the subsector appear to have been applied and the RAIDP built on the achievements of the previous RIP project. 84. A notable area of limitation at the time of preparation was the results framework. As highlighted in the Section 2.3 on Monitoring and Evaluation, the selection as well as setting of the targets for measuring outcomes had significant scope for improvement. To begin with, the PDO indicators focused mainly on the immediate benefits of rural transport infrastructure investments and less on the more important outcomes and impacts resulting from those investments, e.g., improvement in the incomes and/or quality of life of households. The targets in some cases such as, for example, improvement of access in Terai districts, were also rather ambitious. These limitations were further compounded by issues related to availability of relevant data and consistency in measurement. 85. Also, the subsequent events during the implementation suggest that the attention given in project preparation turned out to be inadequate at least in case of two major risks – post- conflict environment and weak institutional capacity of implementation agencies, especially at the operational level – indicating the scope for improvement in the area of design measures for mitigating them. 86. In all, the aforementioned limitations have affected the project’s implementation as well as its case for fully and more accurately presenting and claiming credit for some of its contributions and achievements. Considering this shortcoming, the Bank’s performance in ensuring quality at entry is rated as “Moderately Unsatisfactory”. 19 (b) Quality of Supervision (including of fiduciary and safeguards policies) Rating: Moderately Satisfactory 87. There was good engagement between the Bank, the Borrower and the Implementation Agency throughout the project period. Regular supervision missions were carried out with the active involvement of all relevant disciplines. The Bank staff was proactive in the identification of potential issues and engaged with the Borrower and Implementation agency in finding appropriate solutions. A case in point is the way in which the challenges and poor performance in several components and functional disciplines were duly noted, analyzed and addressed through appropriate remedial actions, e.g., community contributions in terms of land and monitoring (social), e-bidding (procurement), additional financing (civil works) and restructuring (recalibration of the CBAS component). Again, it is important to note that project implementation took place during a period of post- conflict transition and political instability in Nepal. This added an additional layer of complexity to the inherent challenges of supervising decentralized implementation, in terms of disruptions due to insurgency activities, physical threats and unsafe operating conditions for field staff in several districts. 88. The Mid Term Review carried out by the Bank proved helpful in re-focusing some of the project components where progress was slow and targets elusive. It also identified opportunities through the project to work in harmony with other development partners by adopting a SWAp approach for the Trail Bridge component. 89. A notable limitation in the implementation, however, was the apparent lack of recognition and reporting of the savings arising out of lower bid prices and variations in foreign exchange rates. Ideally, these savings should have been appropriately highlighted by the Bank supervision team at an early stage to trigger a re-planning of the project budgets and targets; in the absence of such proactive action, these savings appear to have automatically found their way into supporting the upgrading of more roads whilst critical maintenance tasks remained only partially addressed. In part this reflects very strong beneficiary demand for new all-weather connectivity. This demand combined with additional resources available eventually resulted in superlative performance of a major sub-component and thereby furthered the achievement of the project’s development objective. Accordingly, this is considered as a moderate shortcoming, and the Bank’s performance during the supervision is rated as Moderately Satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 90. Normally, a combination of “Moderately Unsatisfactory” and “Moderately Satisfactory” ratings of Bank’s performance respectively at Entry and Implementation would suggest an overall performance rating of “Moderately Unsatisfactory”. However, it is important to recognize that, despite the shortcomings at Entry, the project eventually achieved an overall “Moderately Satisfactory” outcome and, in line with the ICR guidelines for such a context, the overall Bank performance is rated as Moderately Satisfactory. 20 5.2 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory 91. Initially, there was a high level of commitment to the project from the Government side and this greatly facilitated the project preparation and guidance. For instance, in the initial phases of the project, despite the difficult context of post-conflict environments, the government showed good flexibility in allowing the project to quickly redistribute funds to program districts with fast progress from those with slow progress, thereby maintaining the overall progress. Also, the Government recognized the opportunity for enhancing the scope of the project, and thereby paved the way for ensuing restructuring and additional financing. 92. The government support, however, was not entirely consistent and has been significantly lacking during the critical phases of implementation. In particular, the implementation was hampered by abrupt changes of key staff and inadequate provision of financial support to DDCs. A case in point is the large level staff rotations in DDCs in the fall of 2005 and a few other sudden change of the Project Coordinator in subsequent periods. Yet another example is the lack of capacity at DDC-level to undertake technical designs that had adversely impacted the implementation of the dry-season roads sub-component. Although the Government eventually rectified this in the latter stages of the project period, considering the adverse impact of delay in achievement of PDOs, the Borrower Performance is rated as Moderately Unsatisfactory. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 93. The project was the largest that had been managed by DOLIDAR to date and the first time that significant responsibility for implementation had been given to DDCs. Also, the project had to be implemented in the difficult context of the post-conflict environment in 2005, very weak capacity of several ground-level implementation agencies (DDCs), intermitted disruptions due to insurgency activities in several project districts, formation of strong cartels adversely affecting and even hindering procurement of certain civil works including through physical threats, etc. 94. Despite these myriad factors, DOLIDAR rose to the challenge well and steadily improved in their management capability. The DDCs, starting from a weaker position, also improved but required more support. Both DOLIDAR and DDCs progressively enhanced their respective capacities, albeit to a varying degree, and lend themselves capable to implement other similar large-size projects such as the ADB-funded RRSDP and the Bank-funded SNRTP. Because of these improvements in management capability, the implementing agencies were able to eventually catch up on progress that had been lagging such that almost all project targets were achieved by the EOP. Accordingly, the performance of the implementation agency has been rated as Moderately Satisfactory. (c) Justification of Rating for Overall Borrower Performance 21 Rating: Moderately Satisfactory 95. Here, too, a combination of “Moderately Unsatisfactory” and “Moderately Satisfactory” ratings of respective performances of government and implementing agencies would suggest an overall performance rating of “Moderately Unsatisfactory”. Again, considering the overall “Moderately Satisfactory” outcome at the project level, the overall borrower performance has been rated as Moderately Satisfactory. 6. Lessons Learned 96. On the basis of project experience the following lessons were learned that could be useful for similar projects in future, and, in particular, the recently launched follow-on project, entitled Strengthening the National Rural Transport Program. 97. Adequate and effective maintenance of infrastructure is the major challenge to sustaining the project benefits. The lesson learned is that the development of projects involving local (low-cost) rural infrastructure should address maintenance as a first and top priority step in the process. 98. The financial cost per kilometer of works should not be constrained by a specific ceiling when there are sound technical reasons for higher investments that remain economically viable. A project-imposed cap on contract costs per kilometer led to short term cost savings at the design stage, such as the under-provision of cross drainage structures and omission of road safety measures, with consequent higher whole-life costs for the roads. The lesson learned is that investments should meet minimum technical and safety criteria as well as economic viability. 99. DDCs need support in the preparation and management of contracts that ensures their ownership and accountability. The junior engineers provided as extra support to each district under the RAIDP tended to be left by the District Technical Officer without adequate supervision and assigned responsibility such that the DTO sometimes did not feel accountable for managing the project. The lesson learned is that where support is provided to the district level this should be done in such a way that the district authorities remain fully responsible and accountable. 100. In a rural infrastructure project spread across a wide geographical area, institutional strengthening, especially at the lower rungs of government such as DDCs, requires not only significantly more resources and attention but also needs to be tackled early on to be able to better assess the actual improvements achieved. For instance, under RAIDP, there the Institutional Strengthening measures and these too were mostly focused on outputs such as, for example, completion of e-procurement, asset management system, RuTIMs, etc., and most of these were implemented during the final phases of the project. Such an approach leaves no clear indication of the effectiveness and/or sustainability of these systems and how these systems, in turn, actually resulted in improving the capacity of the DoLIDAR and DDCs. Anecdotal evidence suggests that although technical and fiduciary systems in place, these were often not followed in practice at the district level as there has been little or no ownership of these from DDCs and DTOs. The lesson learned is that (a) training is required to ensure district officers are aware of the systems that they are to follow; (b) there are procedures in place to verify that these systems are followed; and (c) all such issues should ideally be addressed during the early phases of the project. 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners 101. The implementation agency and borrower have shared the following comments on the draft ICR vide their email dated May 15, 2014:  Intermediate outcome indicator should be verified with borrower's ICR report on accessibility because some data are not matching.  DTMPs of all 30 districts have been completed.  RuTIMS software is prepared and is being implemented in 9 districts.  There is increase in value of project output indicators even though there is cancellation of 6 MUSD project cost because of low construction cost (low bidding through e- procurement system) and change in exchange rate of Dollars and Nepali Rupees.  Target of dry season roads was reduced to 140 Km in 2013. The project feels that the target in dry season roads is also met considering this new value.  Quality aspects were not omitted and there was no compromise on quality aspects from the districts and it was regularly monitored by the project. Although there were some queries regarding the quality of works completed in short period of time in a half day workshop in Kathmandu on 10 March, 2014, the sub projects in the districts have met the standard quality as specified which can be observed in the field and from the documentation (test results) also as compared to the low investment cost & other similar projects in the districts. The project feels that there has been great improvement in the quality of works in the districts through the intervention of RAIDP.  The project feels that it may not be justifiable to rate as MS by considering only minor shortcoming as explained in para 61. There are appreciable major achievements gained by the project as compared to other similar infrastructural projects in our context.  The reimbursement of IDA fund is almost complete within the grace period. 102. The factual information/corrections provided vide the comments of the Borrower have been duly incorporated in the final version of the ICR. 23 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimates Revised Estimate (Dec 2013) Estimate Appraisal Appraisal (Restruct Estimate Category Estimate uring, % of (Addl. Total Amount (PAD:May Nov Appraisal Financing, 2005) 2013) Nov 2009) (1) (2) (3)=(1)+(2) (4) (5) (6)=(5)/(4) A. Rural Transport Infrastructure Improvement Component (i) All-season Rural Roads 16.80 22.91 39.71 45.62 115% (ii) Dry-season Rural Roads 7.00 7.13 14.13 5.32 38% (iii) Rural Road Maintenance 2.63 2.63 5.30 202% (iv) Trail Bridges 76.90 7.00 6.00 13.00 10.62 82% Construction (v) Community Infrastructure 1.20 1.33 2.53 3.52 139% and Pilot Transport Services (vi) River Crossing Structure 3.33 3.33 2.45 74% Sub-Total 34.63 40.70 75.33 76.90 72.83 97% B. Capacity Building and Advisory Services (i) Training 0.80 0.45 1.25 0.51 41% (ii) Institutional Strengthening 0.75 0.60 1.35 0.15 11% (iii) Planning 0.50 0.20 0.70 0.34 49% (iv) Transport Services Study 0.06 0.06 7.64 0.14 233% and Policy Development (v) Socioeconomic Impact 0.10 0.10 0.20 0.06 30% Monitoring Study (vi) Implementation Support 4.60 4.05 8.65 6.10 71% (vii) PPF Refund 0.50 0.50 0.23 0.23 46% (viii) Incremental Expense 0.60 0.60 1.77 1.51 252% (xi) Social Safegaurd Fund 1.00 1.00 1.00 0.60 60% Sub-Total 7.31 7.00 14.31 10.64 9.64 67% Total Base Cost 41.94 47.70 89.64 87.54 82.47 92% Physical and Price 2.10 1.80 3.90 Contingencies 20% DDC matching fund for 4.50 4.50 4.50 11.79 maintenance Total Project Costs 44.04 54.00 98.04 92.04 94.26 92% 24 (b) Financing Actual/Latest Appraisal Estimates Estimate (Dec 2013) Revised Appraisal Appraisal Estimate Estimate Category Estimate (Restructuring, % of (Addl. Total Amount (PAD:May Nov 2013) Appraisal Financing, 2005) Nov 2009) (1) (2) (3)=(1)+(2) (4) (5) (6)=(5)/(4) Borrower 9.94 9.00 18.94 18.94 23.35 123% International Bank for Reconstruction and -- -- -- -- -- -- Development IDA 32.00 45.00 77.00 71.00 70.38 91% SDC 2.10 -- 2.10 2.10 0.53 25% Total 44.04 54.00 98.04 92.04 94.26 96% 25 Annex 2. Outputs by Component Component/Activity Output A. Rural Transport Infrastructure (RTI) Improvement Rehabilitating and upgrading 1,741 km of existing dry season road rehabilitated and upgraded to all of existing dry-season rural season standard (Target: Original:800 km; Revised:1,165 km) roads to all-season standard Upgrading existing rural trails 140 km of existing rural trails upgraded to dry season standard (Target: and tracks to dry-season Original:200 km; Revised:211 km) standard About 4,600 km of road maintenance per year. (Target: Original: 3500 km; Maintenance of Rural roads Revised: 4500 km) A total of 745 trail bridges constructed (Target: Original: 350 nos.; Revised: Construction of trail bridges 317nos.) All SPAF identified (204) have received financial assistance (Source: Serious affected land owners Progress Status report on Social Safeguards, December 2013) B. Capacity Building and Advisory Services (CBAS) 25 districts have updated District Transport Master Plans by EoP (Target: Update DTMPs Original: 30 districts; Revised: 10 districts) and the remaining 5 districts thereafter Implementation support Implementation support extended as envisaged E-bidding has been implemented in 74 DDCs except Magdi DDC and 17 eBidding Municipality including Metropolitan and sub metropolitan city. (Target: 9 districts) Target partially achieved. By EoP, the system was developed but yet to be Asset Management implemented. Since EoP, reportedly, RuTIMS is being implemented in 9 districts. Target partially achieved. The system is substantially developed - rate analysis, Contract management, ARMP and Road Inventory have been IT Modules/MIS incorporated in RuTIMS. Since EoP, reportedly, RuTIMS is being implemented in 9districts. Note: The revised targets referred to in the Table above pertain to recalibrated targets set at the time of Additional Financing in 2009. The project was restructured second time in November 2013 and the targets for various civil works were revised at that time. However, those revised targets are not being taken into consideration for the purposes of the ICR evaluation as they were set almost at the end of the project period. 26 Annex 3. Economic and Financial Analysis 1 Methodology Used For the economic evaluation of the RAIDP, the project road works were classified into two categories: (a) road works that improved a track or road to provide basic dry-season motorable road access and (b) road works that provided a higher level of service than basic dry-season road access, for example, by provision of an otta seal. All roads were subject to a Cost- Effectiveness Analysis (CEA) and the roads that were improved to provide a low-cost bituminous surface such as otta seal were subject to a Cost-Benefit Analysis (CBA) using the World Bank’s Road Economic Decision Model (RED). Based on the available budget and the rural population density in Nepal, a maximum CEA of USD 100 per person was set as the threshold point above which road works would not be financed. The costs were derived as the minimum for bringing each road from its existing condition to one where it would be passable to motor vehicles in all seasons. The number of persons was derived from the number of households in the zone of influence and an average household size. The RED model used in the CBA adopted a consumer surplus approach in which project benefits were calculated based on road user cost savings. The minimum threshold for economic viability was set at an Economic Rate of Return (ERR) of 12 percent. The calculation of The Net Present Value was carried out over a period of 15 years at a discount rate of 12 percent and an assumed future traffic growth rate of six percent per annum. 2 Ex-ante Results at Original Appraisal (May 2005) The CEA was carried out for the road schemes that commenced in first year program of the Original RAIDP Project. This comprised 24 roads in 13 districts of total length 602 kilometers. An estimate population of 776,000 was served by these roads at an average investment cost of USD 18,173 per km. The calculated CEAs fell in the range of USD 3.9 to 41.8 per person with an overall average of USD 17.0 per person. These results were well within the threshold of USD 100 per person. The full results are shown in Table A1. The CBA was carried out for a representative sample comprising 15 first year program roads with motorized traffic above 50 vehicles per day. For analysis purposes, it was assumed that upgrading would be to sand seal in the Terai and otta seal in the hills. It was further assumed that sand seal would increase the upgrading cost by USD 3,500 per km and Otta seal by USD 6,000 per km. The evaluation showed that this representative program would have an overall ERR of 28 percent with a total Net Present Value of USD 6.8 million. It was calculated that the ERR would fall to 23 percent with a 20 percent increase in investment costs, and to 22 percent if benefits were 20 lower than estimated. The switching value analysis showed that for the ERR to fall to 12 percent, costs would need to be 2.2 times higher, or benefits 47 percent lower than estimated. This indicated a satisfactory economic justification for the roads meeting the ERR criteria as well as for the overall representative program. The full results are shown in Table A2. 27 Table A1: First Year Program Cost Effectiveness Analysis (Original Project) Investment Surface Road Investment per km per pop. District Proposed Sub-project Type Work (M US$) (US$/km) (US$/person) Banke M RM - Titihiriya -Sonpur- Earth Upgrading 0.23 13,153 7.9 Udharapur Kapilvastu Siwalawa - Labani- Earth Upgrading 0.139 4,365 4.3 Lakhanchock(M RM ) Kapilvastu lmiliya- M aharajgunj- Earth Upgrading 0.224 8,795 10.0 Hardauna Rupandehi M ukundagadh-Semera- Earth Upgrading 0.271 20,211 40.6 Thikahawa Nawalparasi Daldale- Dhawadi Earth Upgrading 0.696 31,629 41.8 Nawalparasi Panchanagar-M aheshpur Earth Upgrading 0.494 26,583 27.0 Palpa Aryabhanjayng-Rampur Earth Upgrading 0.629 15,724 10.9 Palpa Harthok- Chhahara -Tingire Earth Upgrading 0.371 14,533 11.7 Palpa Banstari- Jhadewa Earth Upgrading 0.378 16,095 22.7 Syanja Rangkhola-Biruwa Earth Upgrading 0.365 20,873 23.5 Syanja M irdi-Jagatbhanjayng- Earth Upgrading 0.406 15,904 15.7 Chapakot Kaski Lamachaur-M achhapuchre Earth Upgrading 0.321 20,052 26.2 Kaski Rakhi - M ijure Earth Upgrading 0.428 22,551 16.5 Dhading Dhadingbesi - Salyantar Earth Upgrading 0.721 20,611 20.7 Dhading Bhimdhunga - Lamidanda Earth Upgrading 0.562 18,745 20.5 M akwanpur Hatiya - Raigaun Earth Upgrading 0.222 14,815 12.3 Sarlahi Karrnaiya-Hathiaul Earth Upgrading 0.417 7,716 4.8 Sarlahi Kodena - Janakinagar Earth Upgrading 0.125 8,333 3.9 M ohottari Jaleshwor - Rauja- Earth Upgrading 0.833 20,325 9.4 Krishnapur - M RM M ohottari M aitihani - Pipra - Earth Upgrading 0.625 25,000 10.9 Bhrahampura -M ahadaiya Siraha Lahan - Bhagawanpur-Thadi Poor Gravel Rehabilitation 0.521 28,935 14.0 Siraha Zeromile - Bariyarpatti Poor Gravel Rehabilitation 0.521 28,935 12.4 Udayapur Gaighat - Nepaltar Earth Upgrading 0.326 10,880 15.5 Udayapur Gaighat - Beltar - Chatara Earth Upgrading 0.535 21,389 25.1 Total 10.361 Average 18,173 17.0 Source: Annex 9, Table 9.4. Project Appraisal Document, May 2005. 28 Table A2 Representative Cost-Benefit Analysis Summary (Original Project) Low cost Paving Option M otorized District Road Section Terrain Investment Investment/km Vehicles Bicycles ERR NPV Type (M US$) (US$/km) Traffic Traffic (%) (M US$) Banke M RM -Titihirya-son[ur-Udharapur Terai 0.291 16,653 87 412 21% 0.162 Kapilvastu Siwalawa-Labani-Lakhanchock(M RM ) Hill 0.329 10,365 66 694 47% 0.791 Kapilvastu lmiliya- M aharajgunj- Hardauna Hill Hill 0.377 14,795 262 464 47% 0.900 Nawalparasi Daldale- Dhawadi Terai 0.773 35,129 68 517 16% 0.150 Nawalparasi Panchanagar- M aheshpur Hill 0.606 32,583 79 100 12% 0.004 Palpa Aryabhanjayng-Rampur Hill 0.869 21,724 77 0 12% 0.012 Palpa Harthok- Chhahara -Tingire Hill 0.524 20,533 97 528 39% 0.909 Syanja Rangkhola-Biruwa Terai 0.427 24,373 158 0 37% 0.674 Kaski Lamachaur-M achhapuchre Terai 0.377 23,552 146 29 34% 0.527 Kaski Rakhi - M ijure Hill 0.542 28,551 88 22 12% 0.011 M akwanpur Hatiya - Raigaun Terai 0.275 18,315 119 0 30% 0.304 Sarlahi Karmaiya-Hathiaul Terai 0.606 11,216 89 287 32% 0.792 Sarlahi Kodena - Janakinagar Terai 0.178 11,833 90 297 25% 0.139 Siraha Lahan - Bhagawanpur - Thadi Hill 0.629 34,935 261 459 33% 0.837 Siraha Zeromile - Bariyarpatti Hill 0.629 34,935 238 729 27% 0.580 Total 7.431 28% 6.792 Source: Annex 9, Table 9.8. Project Appraisal Document, May 2005. 3 Ex-ante Results at Additional Financing (November 2009) As part of the preparation for the Additional Financing in 2009, a CEA was carried out for the additional financing program road works comprising 60 road sections in 29 districts. The average estimated beneficiary population was about 2,960 persons per kilometer. The CEA indicated that (i) all roads had an investment lower than the threshold of USD 100 per person; (ii) the average investment was USD 15.4 per person; and (iii) the average investment costs were around USD 45,600 per km (USD 36,300 per km in the Terai and USD 53,400 per km in the Hills). The full results are shown in Table A3. Three roads that were to be improved under the Additional Financing to otta seal standard were subject to a CBA using the RED Model. The analysis was similar to that carried out for the Original Project but with updated construction and road user costs. The evaluation showed that the three roads would have an overall ERR of 29 percent with a total Net Present Value of USD 1.8 million. It was calculated that the ERR would fall to 25 percent with a 20 percent increase in investment costs, and to 24 percent if benefits were 20 percent lower than estimated. The switching value analysis shows that for the ERR to fall to 12 percent, costs would need to be 2.2 times higher, or benefits 55 percent lower than estimated. These results indicated a satisfactory economic justification for the investments. The full results are shown in Table A4. 29 Table A3: Additional Financing Program Cost-Effectiveness Analysis Total Investment per Investment per Investment Km Population Road S ection Road work (M US$) (M US$/km) ($/person) Suspension Bridge - Kutiyakavar Upgrade to Gravel 0.36 0.0358 8.17 Red Cross - Baghphanta Upgrade to Gravel 0.36 0.0358 12.45 Parasan - Tribhuvanbasti - Laxmipur - Belauri Upgrade to Gravel 0.36 0.0358 11.93 Sadakpur - Joshipur - Vajani Upgrade to Gravel 0.21 0.0358 10.74 Dudejhari - Tikapur Upgrade to Gravel 0.26 0.0358 4.09 M ainapokhar - Basgadhi Upgrade to Gravel 0.18 0.0358 14.32 Bholagauri-Danphe Upgrade to Gravel 0.18 0.0358 14.32 Khairapur- Taratal-Pragatinagar Upgrade to Gravel 0.18 0.0358 15.84 Chama - Samjhanachowk - Khajura - Radhapur Upgrade to Gravel 0.40 0.0358 13.42 Ratnagala - Dhannapokhara Upgrade to Gravel 0.52 0.0522 25.82 Baddichaur - Guttu Upgrade to Gravel 1.04 0.0522 34.25 Kapurkot - Nigalepani Upgrade to Gravel 0.26 0.0522 30.73 Kalakate-Gadhawa Upgrade to Gravel 0.52 0.0522 8.39 Pawan Nagar-Purandhara Upgrade to Gravel 0.63 0.0522 14.84 Bagdula-Bahane Upgrade to Gravel 0.68 0.0522 31.73 Chemeta-Puranthanti-Jogitari Upgrade to Gravel 0.57 0.0522 28.59 Sandhikharka-Balkot Tamghas Upgrade to Gravel 0.57 0.0522 47.88 Sandhikharka- Dhakabang Chunia Upgrade to Gravel 0.57 0.0522 64.56 Chama - Ridi -RudrabenI -Wamitaksar Upgrade to Gravel 0.57 0.0522 19.68 Tamghas-Simaltari-Purkotdaha Upgrade to Gravel 0.57 0.0522 38.31 Chama - Tikkar-Buddhi-Bijgauri-Hulaki Upgrade to Gravel 0.39 0.0358 11.22 Bansgadi - Gajedi - Suryapura Upgrade to Otta seal 0.41 0.0517 11.30 Farsatikar - M anpakadi - Chhapiya Upgrade to Gravel 0.29 0.0358 16.36 Daldale-Dhauwadi Upgrade to Gravel 0.63 0.0522 9.50 Tribeni-M aheshpur Upgrade to Gravel 0.26 0.0358 11.18 Aryabhanjyang-Rampur Upgrade to Otta seal 0.69 0.0688 9.49 Harthok- Chhahara Upgrade to Gravel 0.42 0.0522 13.26 Rangkhola- Biruwa Upgrade to Gravel 0.42 0.0522 25.64 N agdanda- Karkineta Upgrade to Gravel 0.42 0.0522 30.28 Putalikhet-Aruchaur Upgrade to Gravel 0.31 0.0522 53.12 Kahunkhola-Kavre Danda Upgrade to Gravel 0.44 0.0522 19.03 Chhorepatan-Kristi Upgrade to Gravel 0.43 0.0522 11.53 Bhimad - Bhirkot (Shringa Path) Upgrade to Gravel 0.78 0.0522 26.83 Dulegauda - Sankhe Raipur (Dhorbarahi Upgrade to Gravel 0.78 0.0522 36.44 Bhimdhunga-Lamidanda Upgrade to Gravel 0.46 0.0522 62.83 Dhadingbesi-Salyantar Upgrade to Gravel 0.42 0.0522 14.79 Trishuli-Deurali-M eghang Upgrade to Gravel 0.52 0.0522 72.55 Nuwakot - Bageshwori - Urleni Upgrade to Gravel 0.31 0.0522 45.42 Hetauda-Padampokhari-Hadikhola Upgrade to Gravel 0.26 0.0522 6.42 Kulekhani-Phakhel-Humanebhanjang Upgrade to Otta seal 0.65 0.0688 73.51 Daman- Dandabas Upgrade to Gravel 0.26 0.0522 23.32 Atama Ram Path (M ahendra Path) Upgrade to Gravel 0.43 0.0358 11.33 Janata Sadak Upgrade to Gravel 0.43 0.0358 10.32 Bahuwari - Simraungadh - Aruwa Nadi Upgrade to Gravel 0.36 0.0358 14.09 Kabahigoth - Bariyarpur Upgrade to Gravel 0.47 0.0358 14.59 Gaur-Ganga Pipra-Samanpur-Santapur Upgrade to Gravel 0.21 0.0358 5.77 Aurahaiya - Rampurkhap - Bankul - Himalibas Upgrade to Gravel 0.21 0.0358 6.05 Karmaiya - Hathiaul Upgrade to Gravel 0.29 0.0358 20.16 Kaudena - Janakinagar Upgrade to Gravel 0.21 0.0358 14.91 J aleshwor- Rauja-Bardibas Upgrade to Gravel 0.18 0.0358 3.93 M atihani-Pipra-Bhamarpura - M ahdaiya-Tapanpur Upgrade to Gravel 0.18 0.0358 3.39 Devpura - Ghodghas - Fulgama - Tulshiyahi Upgrade to Gravel 0.18 0.0358 9.37 M ahuwa - Khajuri - Jaddukwaha - Balabakhar Upgrade to Gravel 0.18 0.0358 11.54 Janakpur - M anaharpur - Kharihani Upgrade to Gravel 0.18 0.0358 9.57 Siraha - Kalyanpur - M irchaiya Upgrade to Gravel 0.18 0.0358 10.59 Zeromile - Bariyapatti Upgrade to Gravel 0.18 0.0358 14.32 Lahan - Thadi Upgrade to Gravel 0.23 0.0358 11.68 Gaighat - Beltar Upgrade to Gravel 0.52 0.0522 46.64 Jandaul- Kushaha Upgrade to Gravel 0.36 0.0358 18.35 Kushaha - Belhi Upgrade to Gravel 0.47 0.0358 17.17 Total 24.03 0.0456 15.40 Source: Annex 8, Table 8.2. Project Paper on a Proposed Additional Credit, November 2009. 30 Table A4: Cost-Benefit Analysis Summary (Additional Financing) Road S ection Cost per Km Car/Bus/ NPV ERR Motorcycle Total (M US$/km) Truck (M US$) (%) Bansgadi - Gajedi - Suryapura 0.0517 258 52 310 0.52 32 Aryabhanjyang-Rampur 0.0688 108 48 156 0.06 14 Kulekhani-Phakhe1-Humanebhanjang 0.0688 170 206 376 1.26 42 Total/Average 0.0638 173 103 276 1.84 29 Source: Annex 8, Table 8.5. Project Paper on a Proposed Additional Credit, November 2009. 4 Ex-post Cost Effectiveness of RAIDP Roads (January 2014) Towards the end of the project period, the CEA and CBA were repeated for some of the project roads using actual construction costs and updated benefits data. CEAs were carried out for program works in 24 roads in 13 districts under the Original Project and for 55 roads in 29 districts under the Additional Financing. These were the same roads that were analysed at the time of the appraisals. All the 24 roads analysed in the Original Project had been implemented but only 55 of the 60 roads analysed for the Additional Financing had been implemented. Therefore, there was a slight difference in the sample size between the ex- ante and ex-post analyses. The end of project population figures per kilometer for each road implemented were estimated by projecting forwards the figures used at the Appraisal dates (2005 and 2009) using the average population growth rate for the relevant district according to the censuses of 2001 and 2011. The population in most hill districts had decreased slightly while in most Terai districts it had increased over the project period. The estimated investment costs at appraisal were inflated to 2013 prices using the Construction Materials Price Index. Consequently, the estimated investment costs for the Original Project in 2005 were inflated by approximately 80 percent and those at the time of the Additional Financing in 2009 by about 20 percent. These adjusted investment cost estimates together with the projected population figures per kilometer were used to establish an updated CEA figure for each project road. This was compared with the CEA based on the actual project costs, inflated to 2013 prices using the same construction price indices, divided by the population figures projected to 2013. For the project roads under the Original Project, the actual cost per head of all roads was well below the set threshold of USD 100. Compared to the ex-ante estimates, 21 of the 24 roads showed a lower actual cost per head. Three roads showed increases in cost per head ranging from 2.8 to 6.9 percent. The actual cost per head for each road varied from USD 3.9 to 59.9. The full results are shown in Table A5 below. The results are shown graphically in Chart 1. The main reason that the end of project CEAs were lower than the original ex-ante estimates was that the actual construction costs were significantly lower than the estimates. 31 Table A5: Comparison of Estimated and Actual Cost Effectiveness Analysis (Original Project) Cost per head US D Projected Projected Road Name Estimates Actual Change (2013 Price) (2013 Price) M RM -Titihiriya- Sonpur- Udharapur 18.79 6.52 -65.29% Sibalawa - Labani - Lakhanchowk (M RM ) 27.06 19.88 -26.53% Imiliya-M aharajgunj-Hardauna 63.17 42.92 -32.05% M ukundagadh-Semara-Tereni 55.86 44.69 -20.00% Daldale - Dhauwadi 56.15 38.4 -31.62% Panchanagar-M aheshpur 36.52 20.21 -44.66% Aryabhanjyang-Humane-Rampur 22.31 14.87 -33.32% Harthok-Chhahara - Tingire 23.01 14.43 -37.28% Banstari-Jhadewa-Gothadi 35.08 23.45 -33.16% Rang Khola-Biruwa 55.37 58.85 6.28% M irdi-Jagatbhanjyang-Chapakot 41.59 42.77 2.83% Lamachaur-M achhapuchhre 52.45 40.99 -21.85% Rakhi-M ijure 33.13 24.43 -26.27% Dhadingbesi-Salyantar 36.13 31.49 -12.82% Bhimdhunga - Lamidanda 45.77 39.57 -13.54% Hatiya-Raigaon 21.62 12.75 -41.03% Karmaiya-Hathioul 26.98 9.05 -66.44% Kaudena-Jankinagar 24.81 6.77 -72.71% Jaleshwor-Rauja-Bardibas 43.7 13.21 -69.77% M atihani-Pipra-M ahadiya-Tapanpur 5.1 2.04 -59.92% Lahan-Bhagwanpur-Thadi 14.51 15.51 6.90% Zeromile-Bariyarpatti 14.29 3.93 -72.47% Gaighat-Nepaltar 31.32 19.62 -37.37% Gaighat - Beltar - Chatara 44.66 28.13 -37.01% Source: Table 6. Cost Effectiveness and Cost Benefit Analyses of RAIDP Roads. Final Report. January 2014. Chart I Cost-effectiveness Analysis of First Year Financing Programs 8 Actual 7 Number of Programs 6 Estimates 5 4 3 2 1 0 1-10 10-20 20-30 30-40 40-50 50-60 60-70 Cost-effectiveness (US $/Person @ 2013 Prices) 32 For the project roads under the additional financing, all roads analysed had costs per head lower than the project estimates. One road, Sandhikharka-Balkot-Tamghas Road, had an actual cost per head of USD 123.6 i.e. above the USD 100 threshold. However, this was still below the ex-ante estimated cost per head inflated to 2013 prices. The cost per head of the other roads ranged widely from USD 1.3 to USD 80.6. The full results are show in Table A6 below and graphically in Chart II. Table A6: Comparison of Estimated and Actual Cost Effectiveness Analysis (Additional Finance) Cost per head US D Projected Projected Road Name Change Estimates Actual Suspensio n B ridge-B abathan-Kutyakavar Ro ad 3.54 1.83 -48.00% Red cro ss-B aghphanta Ro ad 8.72 3.21 -63.00% P arasan-Tribhuvanbasti-Laxmipur-B elauri Ro ad 6.04 2.91 -52.00% Sadakpur (B auniya)-Jo shipur-B hajani Ro ad 10.66 3.58 -66.00% Dudejhari-Tikapur Ro ad no t taken up M RM -B asgadhi-M ainapo khar Ro ad 7.51 3.58 -52.00% B ho lagauri-Danphe Ro ad no t taken up Khairapur-Taratal-P ragtinagar Ro ad no t taken up Chyama-Samjhanacho wk-Khajura-Radhapur 11.97 5.06 -58.00% Ratanag;a-Dharampo khari Ro ad 17.32 8.84 -49.00% B addichaur-Guttu Ro ad 21.58 12.62 -42.00% Kapurko t-Nigalepani Ro ad no t taken up Kalakati - Ghadhawa Rural Ro ad 5.33 2.92 -45.00% P awannagar – P urandhara Rural Ro ad 12.88 6.93 -46.00% B agdula - M achhi - Thulabesi Ro ad 21.48 13.86 -35.00% Cherneta - P uranthati - Jo gitarii Ro ad 18.8 11.51 -39.00% Sandhikharka-B alko t Tamghas Ro ad 41.83 27.61 -34.00% Sandhikharka-Dharapani-Chujathati Ro ad 55.48 36.18 -35.00% Ridi-Rudrabeni-Wamitaksar Ro ad 8.74 3.25 -63.00% Tamghas-Simaltari-P urko tdaha Ro ad 20.67 14.97 -28.00% Tikargudhi-B ijgauri Hulaki Ro ad 7.62 5.4 -29.00% B ansgadi-Gajedi-Suryapura 7.59 5 -34.00% Farsitikar-M anpakadi-Chhapiya Ro ad no t taken up Daldale-Dhauwadi Ro ad 9.81 5.59 -43.00% M aheshpur-Tribeni 15.26 8.6 -44.00% A ryabhanjyang - Rampur Ro ad 7.84 5.2 -34.00% Hartho k-Chhahara-Tingire Ro ad 11.8 8.19 -31.00% Rang Kho la-B iruwa 10.93 7.45 -32.00% Nagdanda-Karkineta Ro ad 22.92 20.13 -12.00% P utlikhet-A ruchaur Ro ad 31.29 24.04 -23.00% Table continued on next page 33 Table A6 Continued Cost per head US D Road Name Projected Projected Change Kaunkho la-Dudhapo khari-ro ad 24.58 12.93 -47.00% Chho repatan-Kristi-Nirmalpo khari-B haratpo khari 9.89 5.23 -47.00% B himad-B hirko t Ro ad 25.58 15.9 -38.00% Dulegaunda-Sankhe-Raipur 24.71 14 -43.00% B himdhunga-Lamidanda Ro ad 37.45 27.7 -26.00% Dhadingbeshi-Slyantar Ro ad 11.63 9.94 -15.00% Trisuli-Deurali-M eghang Ro ad 47.84 32.34 -32.00% Nuwako t-B ageshwo ri-Urleni Ro ad 26.18 12.33 -53.00% Hetauda-P adampo khari-Handikho la Ro ad 5.7 4.63 -19.00% Kulekhani-P hakhel-Humanebhanjyang Ro ad 46.89 29.43 -37.00% Daman-Dandabas Ro ad 21.38 10.74 -50.00% A tmaram P ath Ro ad 9.63 6.43 -33.00% Janta sadak 9.96 5.93 -40.00% B ahuari-Simraungadh-A ruwanadi Ro ad 12.18 6.43 -47.00% Kabahigo th-B ariyarpur Ro ad 11.9 7.73 -35.00% Gaur-Ganga-P ipra-Samanpur-Santapur Ro ad 5.56 2.74 -51.00% A uraiya-Rampurkhap-B ankul-himalibas 4.8 2.94 -39.00% Karmaiya-Hathiaul Ro ad 12.99 5.33 -59.00% Kaudena-Janakinagar Ro ad 14.43 5.61 -61.00% Jaleshwo r-M adai-Rauja-B ardibas Ro ad 4.44 2.28 -49.00% M atihani-P ipra-B hramarpura-M ahadaiya-Tapanpur 3.58 1.1 -69.00% Devpura-Gho dghas-Fulgama-Tulsiyahinikas-Jabdi 10.24 4.27 -58.00% M ahuwa-Dhabauli-Yaduko ha-B alabakhar- Ro ad 10.54 3.94 -63.00% Janakpur-M anaharpur-Khariyani-Ro ad 13.23 5.46 -59.00% Siraha-Kalyanpur-M irchaiya Ro ad 11.37 6.44 -43.00% Zero mile -B ariyarpati Ro ad 10.58 6.07 -43.00% Lahan-Thadi Co uld no t be implemented due to late B ER Gaighat-B eltar-B irendracho wk Ro ad 34.83 20.48 -41.00% Jandual-Kushaha Ro ad 22.74 12.47 -45.00% Kushaha-B elahi Ro ad 12.12 5.91 -51.00% Source: Table 7. Cost Effectiveness and Cost Benefit Analyses of RAIDP Roads. Final Report. January 2014. Chart II: Cost-effectiveness Analysis of Additional Financing Programs 40 Estimates 35 Number of Programs 30 Actual 25 20 15 10 5 0 1-10 10-20 20-30 30-40 40-50 50-60 60-70 Cost-effectiveness (US $/Person @ 2013 Prices 34 As for the roads under the Original Project, the main reason that the end of project CEAs for most roads were lower than the ex-ante estimates was that the actual construction costs were significantly lower than the estimates. 5 Ex-post Cost Benefit Analyses of RAIDP Roads (January 2014) Of the 15 roads for which a CBA was carried out at the commencement of the Original Project, only 11 were completed to the required standard by December 2013. Similarly, of the 3 roads analyzed at the commencement of the Additional Financing in 2009, only one had been completed to the required standard by December 2013. Therefore, the CBA was only repeated for the 13 roads from the original CBAs that had been completed. Actual financial costs were converted to economic costs by applying standard conversion factors (SCFs) that had been calculated during a Study for the Economic Assessment of Four Sample roads under RAIDP in 2012. Consequently, an SCF of 0.76 was used to convert financial costs to economic costs for upgrading a road to gravel standard. Similarly, an SCF of 0.84 was used to convert financial costs to economic costs for upgrading to otta seal. A similar approach was used for future road maintenance costs. The same mix of vehicles was used to calculate road user costs as that for the CBAs at commencement. However, the economic costs were recalculated using updated data. During 2013, classified manual vehicle counts were carried out on the 11 completed roads. This data was used to derive estimated Annual Average Daily Traffic on the Project roads. For the economic analysis, a 6 percent annual traffic growth was assumed – the same as that used for the original calculations. A summary of the CBA results is shown in Table A7. The range of ERRs for the Original Project roads was from 14.4 to 73.4 percent with an average of 44.9 percent. For the one road analysed under the Additional Financing, the ERR was 15.7 percent. The actual traffic volumes at completion were below that originally estimated for 7 roads, above for 3 roads and the same for 1 road. However, the effect on the economic analysis of lower traffic volumes was generally outweighed by the lower investment costs per kilometer. Therefore, overall the CBAs based on actual costs and traffic showed marginally higher returns than the original ex-ante calculations. 35 Table A7: Cost Benefit Analysis Summary Econom ic Motorised NPV S.NO. District Road Nam e Cost Vehicle ERR (%) (‘000 US $) (US $/Km ) Traffic I. First Year Financing Program 1 Banke MRM-Titihiriya- Sonpur- Udharapur 11101.78 64 19.85 47.9 2 Kapilvastu Sibalaw a - Labani - Lakhanchow k (MRM) 17541.52 117 15.3 13.19 3 Kapilvastu Imiliya-Maharajgunj-Hardauna 32964.43 168 14.4 4.8 4 Naw alparasi Panchanagar-Maheshpur 16846.32 239 34.47 398.78 5 Palpa Aryabhanjyang-Humane-Rampur 17592.66 192 54.21 2483.2 6 Palpa Harthok-Chhahara - Tingire 14711.48 112 33.11 320.85 7 Syangja Rang Khola-Biruw a 40779.77 86 14.65 13.72 8 Kaski Lamachaur-Machhapuchhre 32386.14 250 51 1493.2 9 Kaski Rakhi-Mijure 34343.43 135 23.65 439.86 10 Makw anpur Hatiya-Raigaon 13622.06 116 28.35 197.12 11 Siraha Lahan-Bhagw anpur-Thadi 29247.26 301 73.38 1224.0.9 Total 261136.85 1780 44.89 7029.16 II. Addditional Financing Program 1 Rupandehi Bansgadi-Gajedi-Suryapura 20963.17 42 15.71 34.74 Source: Table 15. Cost Effectiveness and Cost Benefit Analyses of RAIDP Roads. Final Report. January 2014. 36 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Kiran R. Baral Consultant SARPS Asif Faiz Consultant SACPA Bigyan B. Pradhan Senior Financial Management Specialist SACNP Binyam Reja Lead Transport Specialist/TTL EASCS Gladys Stevens Temporary DECRG Narayan D. Sharma Consultant SASDT Rajesh Bahadur Singh Dongol Program Assistant FFSAB Surendra Govinda Joshi Consultant SASDT Terje Wolden Consultant MNSTI Zarafshan H. Khawaja Lead Social Development Specia AFTCS Supervision/ICR Annu Rajbhandari Environmental Specialist Ashok Kumar Sr Highway Engineer SASDT Bigyan B. Pradhan Senior Financial Management Specialist SACNP Deepak Man Singh Shrestha Senior Transport Specialist SASDT Drona Raj Ghimire Environmental Specialist SASDI Farhad Ahmed Sr. Transport Specialist/TTL SASDT Gary Taylor Consultant SASDT Gizella Diaz Munoz Country Program Assistant ECCU8 Hiramani Ghimire Sr. Governance Specialist I. U. B. Reddy Senior Social Development Spec SASDS John L. Hine Consultant AFTTR Keshav Thapa Consultant SASDT Kiran R. Baral Consultant SARPS Marianne Kilpatrick Sr Transport. Spec. SASDT Nagendra Nakarmi Senior Program Assistant SARFM Natalya Stankevich Transport Specialist ECSTR Neena Shrestha Procurement Assistant SARPS Nicole Wynands Junior Professional Associate SASDT Parthapriya Ghosh Sr. Social Development Specialist SASDS Pradeep Kumar Shrestha Financial Management Consultant Rekha Shreesh Social Development Specialist SASDS Samantha L. Forusz Program Manager HRDPR Satya N. Mishra Social Development Specialist SASDS Shambhu Prasad Uprety Procurement Specialist SARPS Shubu Thapa E T Temporary SASDO Silva Shrestha Water & Sanitation Specialist SASDU Sri Kumar Tadimalla Senior PPP Specialist SASDT Sunita Gurung Program Assistant SASDO 37 Surendra Govinda Joshi Consultant SASDT Yogesh Bom Malla Financial Management Specialist Yuka Makino Sr Natural Resources Mgmt. Specialist SASDC Zarafshan H. Khawaja Lead Social Development Specialist AFTCS (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY04 134.06 FY05 168.30 FY06 8.84 FY07 -0.48 FY08 0.00 Total: 310.72 Supervision/ICR FY04 0.00 FY05 0.00 FY06 75.79 FY07 101.25 FY08 73.08 Total: 250.12 38 Annex 5. Stakeholder Workshop Report and Results As part of the preparation of the ICR Report, a half-day workshop was held at the Annapurna Hotel in Kathmandu on 10th March 2014 with a range of stakeholders including:  DOLIDAR Staff  DDC staff from some of the project districts  Consultants who had worked on the project  World Bank Kathmandu office staff who had worked on the project The Director General of DOLIDAR opened the meeting. The ICR Team Leader then explained that the purpose of the workshop was not that of an audit but a reflection and frank exchange of views on the implementation of the project. The data on the project inputs and outputs was already available. Therefore, what was required was to give the ICR Team a flavor of the challenges faced during implementation and how these were overcome as well as comments on the quality of the results. This was followed by three presentations that set the scene for the subsequent discussions. These were:  Key Achievements and Challenges  A presentation on the Capacity Building Component  A presentation on the Safeguards Issues The key issues that emerged during the subsequent discussions are summarized below: a. Outcomes: Several participants commented on the easier travel now between villages and District Headquarters. In a number of cases, the number of trips had decreased because more services were available/accessible at village level reducing the need to travel to the District Headquarters. b. Progress: There was general appreciation from the participants of the good rate of progress in the latter stages of the project such that the targets for road upgrading, which had been lagging, were eventually exceeded. It was noted that the overall project achievements were good despite the fact that there was no elected local district bodies throughout the project period. c. Quality: There were numerous comments on the final quality of the roads improved under the project and the reasons for this. These included:  The planned quality of the roads to be improved under RAIDP had not been properly communicated to the beneficiaries and this led to a degree of disappointment over the final quality of these roads compared to other Department of Roads projects;  The upper limit of cost per kilometer set by the Bank resulted in poorer quality roads due to, in some cases, cost saving measures such as the omission of side drains, structures and surfacing; 39  It was questioned whether the increased rate of progress towards the end of the project period was achieved by compromising on quality;  Inadequate field supervision meant the quality of works was not assured;  Quality suffered due to very low bids of some winning contractors;  DDC laboratories were not fully equipped and outside laboratories were not very effective;  Low capacity of some consultants and contractors revealed weak capacity of the local industry. Against this, other participants felt that “the quality of work was good in comparison to work done in other roads in the district” and the “otta seal pavement was far better than expected in comparison to the earlier existing road condition hence people were satisfied with the pavement work”. d. Procurement: Some DOLIDAR staff felt that the procurement challenges should be highlighted, particularly the delays in procurement at district level. However, there was general agreement amongst all the participants that the introduction of e-bidding had been a success although some DDC staff were concerned that the very keen bids received had sometimes led to a reduction in the quality of work carried out (see above). A number of DDC staff remarked on the difficulty of taking action against non-performing contractors. e. Capacity Building: The DG of DOLIDAR noted that RAIDP was the first big project in DOLIDAR requiring various activities like IEE, EIA, and procurement of consultants/contractors and resulted in on the job training to department staff. With such on the job training on this project, another large project from ADB was successfully completed: Also as a result of capacity building, DOLIDAR is taking up the SNRTP $100 million project. In addition, he noted that the DDCs were active for the first time in managing the implementation of a project of this magnitude and gained valuable experience. Several participants reflected on the hiring of fresh graduates under the project to support the DDCs. Despite the wider benefits of this, DDC staff expressed their need for more experienced staff at district level. f. Road Maintenance: The lack of proper maintenance was noted as a challenge faced by the project. Some DDC participants felt that the sustainability of the road improvements was questionable due to the low standard of road construction. One DTO felt that the maintenance of otta seal by pre-mix carpet will be costly. g. Safeguards: Participants felt that more time should be allowed for land deed transfers to allow for the process required and possible delays due to budget constraints. Some felt that the environmental requirements should be more flexible. Several participants remarked on the environmental problems caused by the use of heavy equipment to widen narrow road tracks particularly where the approach of stage construction was not adopted. The importance of ownership of Environmental Management Plans by the DDC/DTO was also emphasized. h. Impact Study: The opinion was expressed that the Baseline survey not done properly. It was felt that this had less priority by the Bank and there were no specific guidelines from the Bank. A logical framework should have been there with fixed indicators. An 40 assessment of beneficiaries before road construction should have been carried out as well as a mid-term evaluation. i. Community Infrastructure: Community infrastructure projects were not fully approved and implemented as requested by the communities and more income generation activities were needed for better impact. j. General: Despite the comments given above, there was general agreement amongst all the participants that RAIDP had been one of the most successful projects carried out on the district road system to date. 41 Annex 6. Summary of Borrower's ICR and/or Comments on Draft ICR I SALIENT FEATURES OF THE PROJECT Project Title Rural Access Improvement and Decentralization Project Project ID P083923 and P107853 Borrower Country Nepal Executing Agency MoFALD, Department of Local Infrastructure Development and Agricultural Roads (DOLIDAR) Project Implementation Start Date: Aug 16, 2005 End Date: Dec 31, 2013 Period Financing Source (US$M) Original Finance Additional Total Actual Finance US$ Million US$ M US$ M US$ M IDA 32.00 45.00 77.00 70.38 SDC 2.10 0 2.10 0.53 GoN/DDCs/VDCs/UCs 9.94 9.00 18.94 23.25 Total 44.04 54.00 98.04 94.26 No of participating district Original: 20, Additional Financing added 10; and total 30 districts Benefitted Population Main beneficiaries are the people of 30 participating districts, DDC/DTOs and DOLIDAR. Physical Achievement Target in Target in Target in RTI Sub-Component Original phase Additional Restructuri Achievement (PAD May Financing (PAD ng (Nov. 2005) Nov. 2009) 2013) All Weather Roads 800 km 1,165 km 1,350 km 1,654 km* Dry Season Roads 200 km 211 km 140 km 141 km Road Maintenance 3,500 km 4,500 km - 4,622 km Community Infrastructure Demand for more than 1150 nos. 584 nos. complete 745 nos (164 full construction and Trail Bridges 350 nos. 317 nos 650 nos 581 fabrication of steel parts only) River crossings - 10 10 12 completed (Motorable Bridge) *actual road length of 1,741 km upgraded under all-weather component though contracts length was 1874 km in which 133 km is repeated/overlapped while upgrading from earthen to gravel and gravel to otta seal roads. 42 II INTRODUCTION Background: In August 2005, the World Bank approved a full grant of US$ 32 million (original finance) towards the Rural Access Improvement and Decentralization Project (RAIDP) and in December 2009 the World Bank approved a grant and credit of US$ 45 million (additional finance). Project Objectives, Outcomes and Indicators1: See footnote. Project Districts: During the first (original) phase 20 project districts were grouped into four clusters and 10 more districts were included during Additional Financing Phase. The trail bridge construction sub-component was implemented in 58 districts, 30 from RAIDP road districts and 28 other non-roads served districts. Implementation Arrangements: DOLIDAR, under the MOFALD, is the main central level implementing agency for the project execution. A central Project Coordination Unit (PCU) was established at Kathmandu to implement/ coordinate the project activities with a project coordinator and full-fledged administration, technical, and financial staff from GoN side. The PCU coordinated with the MOFALD, DOLIDAR, all the related 30 DDCs/ DTOs, and the Bank staff for implementation of project. The participating DDCs/ DTOs were responsible for planning, design, and procuring activities related to project’s civil works components and community infrastructures. To support the DDCs/ DTOs in technical and safeguard issues the project employed number of individual consultants namely Planning and Design Engineer (PDE) for technical, Social Development Consultant (SDC) for safeguard issues, and Environmental specialists along with cluster level environmental Expert (CLE) for environmental safeguard. In case of dry season roads PCU employed a separate design and supervision consultants namely M/s. BDA - GEOCE JV and M/s. IDRS - Soil Test JV for original phase and M/s. SILT-ERMC JV for additional financing phase. These consultant’s service was procured, monitored and supervised by the PCU District Road Coordination Committee (DRCC) was formed at district level for coordination and to make necessary decision. DRCC comprises of LDO, DTO, representatives of political parties of the district and district chiefs of line agencies. Village Road Coordination Committees (VRCC) was formed along each VDCs of the road corridor to coordinate and manage on project related issues. Local Road User Committees (LRUC) was formed to each road to facilitate, coordinate and manage the road works. III ASSESSMENT OF IMPLEMENTATION EFFECTIVENESS AND OUTCOMES The Project performed to achieve its oveall Project Development Objectives (PDO) which was "Residents of participating districts utilize improved rural transport infrastructure and services and benefit from enhanced access to social and economic opportunities". A Component-Wise Achievement 1 The Project Objectives, Outcomes and Indicators are identical to the information given in the main ICR text and, hence, not repeated here. 43 A.1 Rural Transport Infrastructure (RTI) Component a) All Weather Road Sub-Component: In this sub-component existing dry-season roads were upgraded to all-weather standard. All the candidate roads were subjected to the technical, social and environmental screening. During original phase 800 km dry season roads were targeted to upgrade to all weather roads. During Additional Financing phase, total target of all-weather roads revised to 1,165 km. Later in restructuring on November 2013 the total target was revised to be 1,350 km. The main reason for increase in the target length was due to savings from the CBAS component and competitive bidding in the contracts. In overall project period the length of achieved upgraded road is 1,654 km which is even higher than the revised target. b) Dry Season Road Sub-Component: In this sub-component existing rural trails and tracks were upgraded to dry-season road standard in remote hill districts. Though the original target was 200 km it was revised to 211 km in Additional Financing phase and further revised to 140 km while restructuring in November 2013. The revision to reduce the target was mainly due to delay in procurement of services of the consultant which subsequently delayed the survey and design activities. Under the overall project period total 141 kms of dry season road in eight hill districts has been upgraded from existing trail to dry season road. c) Rural Road Maintenance Sub-Component: As per original financing the project districts carried out road maintenance (routine and recurrent) of 3,500 km of maintainable rural roads. The source of funding the road maintenance was from district’s own resources and could include central government block grant and Roads Board Nepal. In the additional financing this target was increased to 4,500 km and further it was made necessary that all project districts allocate and spend a minimum of 20% of the project costs for the maintenance of district roads from their own resources. To improve the planning and implementation of maintenance and to establish the road asset management system, project developed Road Rural Transport Information Management System Consultant (RuTMS). Piloting length person system for executing routine maintenance works has been started with the technical support from ILO in three districts. d) Community Infrastructure Sub-Component: This is demand driven subcomponent. Grants to the communities have been provided for construction, repair and improvement of small scale infrastructure sub-projects identified by the proponent communities. Recipient communities also contribute partially-paid labor, local materials and other kind contribution. In all, 584 community infrastructure works have been taken up with a total cost of NPR261 million. e) Trail Bridge Sub-Component: Construction of 350 short span trail bridges was one of the main components of the project’s original phase where SDC was also supposed to provide parallel financing of 2.1 million USD. In the preparation of additional financing the Trail bridge sub-component of the project was agreed to be implemented under the Government’s SWAp approach. As per the project reporting the total numbers of bridges constructed under project financing is 745 of which 164 was fully financed and 581 were financed for fabrication of steel parts. These trail bridges were spread over 58 districts. 44 f) River Crossing Structures Sub-Component: This sub-component of river crossing structures (under the Rural Transport Infrastructures) was added during additional financing mainly to enhance accessibility during rainy season. The project target was ten river crossing structures based on priority plan for the project districts. Due to high demand from the project districts seventeen river crossing structures were started in twelve project districts. Almost all the bridges are RCC beam having span varying from 15 to 40 m (total length 385 m). Among them total twelve bridges are reported to be completed by end of the project period. A.2 Capacity Building and Advisory Services Sub-Component (CBAS) a) Training sub-component: During the project period the project conducted 28 training in 6 major disciplines to build the capacity DDC, DTO, DOLIDAR and the project. Altogether 657 officials were trained. Besides the training within Nepal the project also supported international training and observation visit to the officials. Altogether, 59 officials were supported to participate in 8 international training and observation visit. b) Institutional Strengthening sub-component: b.1)Technical Assistance and Advisory Services: Project support consultant’s (PSC) team and few additional experts were hired at the central level PCU as a Technical and Advisory Support to plan and implement the project. In addition, field based technical experts and support staff (SPDE, SSDC, PDE, SDC, EC) were hired and assigned to each DDC/DTOs and cluster.91 field based experts/consultants were hired and deputed for 30 project districts to implement their programs. Some additional Lab technicians were also hired to support operation of district’s laboratory and to conduct on the job training to the district lab technicians. b.2) Institutional Strengthening and Action Plan of DOLIDAR: In the original financing phase, the Institutional Strengthening Action Plan (ISAP) of DOLIDAR was being considered to be supported by the project. In the additional financing the scope of this subcomponent was limited to developing IT based data system within DOLIDAR and the DDCs including road asset management system, and some support to the ISAP of DOLIDAR. Under this subcomponent the following were achieved during the project period:  Improved Financial Management Information System (FMIS), a software based on Microsoft Access is prepared and operated at project level assumes to serve as financial data bank of the project. Financial data are received from districts and fiscal report is prepared in RAIDP. This system is yet to internalize in DOLIDAR.  Final Report on LID Strategic Action Plan has been approved by the Ministry and endorsed by DOLIDAR;  Development of implementation of e-bidding system in DOLIDAR, 74 DDCs and 17 municipalities.  Developed Rural Transport Infrastructure Management System (RuTIMS) to be used as asset management system which also consists of planning tools, rate analysis, contract management, and ARMP.  Establishment and operation of Material Testing Laboratory in all project districts. c) Planning: Under the project implementation GIS based DTMPs has been prepared for all the 30 project districts. These DTMPs were prepared as per DTMP guidelines 2010. 45 d) Rural Transport Services Study and Policy Development: A major accomplishment of this sub-component was that the project conducted the planned “Rural Transport Services Study and Policy Development” and a report was prepared in September 2011. e) Socioeconomic Impact Monitoring Study: Socioeconomic base line studies for the districts under original financing as well as additional financing were conducted to fix the base data for impact studies. Two socioeconomic impact studies were carried out one after completion of original financing completion date (in year 2011) and another near completion of additional financing date (in end of year 2013). It is to be noted that there will be another impact evaluation study to be carried out after 2 to 3 years after closing of project i.e.: tentatively in year 2016. This impact study shall be carried out by the DOLIDAR and the study outcomes shall be shared with the Bank. f) Implementation Support: Under this subcomponent a team of Project Support Consultant and individual experts were hired to support the centre level PCU. A number of additional individual consultants like S/PDEs, S/SDCs, ECs, NGOs were hired to support the DDCs/ DTOs at district level implementation support. In case of dry season roads a separate consultant’s teams were hired for the necessary survey, design, and supervision of works being implemented through community contracts. For implementation support 30 supervision vehicles and 60 motorcycles are provided to the project districts. Necessary logistic support for day to day works like computer, printer, photocopy were also provided to enhance the efficiency as well as to support the E-bidding being introduced in project’s procurement. To improve the quality assurance and control in the project works, various lab equipment and accessories were also provided to project districts to establish and operate the laboratory B Governance and Accountability Action Plan (GAAP) With an objective to contribute in strengthening of governance mechanisms in the rural road sector and increase in the demand for transparency and accountability at the local government level the project used specific GAAP approach. C Social and Environmental Safeguard a) Social Safeguard: All social safeguard activities have been completed in time, including land transfers, implementation of Voluntary Land Donation Impact Mitigation Plans (VDIMPs), Vulnerable Community Development Plans (VCDPs) and Remedial Action Plan (RAP) for all schemes under the original as well as additional financing. The project as a good practice provided incentive for voluntary land donation and all those donating land more than 10% of their land holding were compensated for the extent of land donated beyond 10% of their holding. The transfer of donated land titles has been completed for 97.1% under additional financing primarily due to non-availability of land owners and few disputed cases. Based on the experience of this project DOLIDAR is preparing sector wide ESMF that will be internalized for all projects under DOLIDAR. Public Consultation and Disclosure: The Environmental and Social Management Framework of RAIDP has provisions of consultation with project affected peoples and disclosure of the documents through LRUC/VRCC about the proposed actions. Project awarded letter of appreciation to all land donor (11,866) and displayed their names in public places including offices of DDC and VDCs of the project area. The project affected people, local communities 46 and user committees were consulted during the preparation and implementation phases of a subproject. Grievance Management: Grievances were redressed by a Grievance Hearing Committee (GHC) formed in each project district. The project received 921 grievances across all the project districts of which total cases were satisfactorily resolved. A few grievances were remaining to resolve because of the delay in implementation of VCDPs which resolved after VCDP training. The ICT based grievance redress mechanism will be internalized for all DOLIDAR projects. Social Safeguard Management Capacity: A Social Development Expert (SDE) Twenty Social Development Consultants (SDC) and 10 Senior Social Development Consultants (SSDCs) were hired to support RAIDP in the management of social safeguards. PCU further recruited social mobilisers (SM) in all the districts. These appointments helped project in mobilizing the community for land donation, coordination with line departments and land transfer, preparation of VDIMPs and VCDPs. Monitoring and Supervision: The project has conducted first round CBPM of 152 sub- projects under construction, 136 second round CBPM, and 103 third round CBPM. The CBPM reports show that almost all social issues are recorded and addressed properly according to the principles described in the ESMF of the project. In addition, HELVETAS under Partnership for Transparency Fund (PTF) has hired the services of NGOs to strengthen the capacity of Community-based Organizations or CBOs (such as LRUC and VRCC) for monitoring civil works and contracts process under RAIDP and to inform the concerned agencies of their grievances. Monetization of the donated land and Community role and contribution in community infrastructure component (as of October, 2013): The community has donated 2,178,491sqm of land for the purpose of roads. Given the prevailing market rate, the value of land donated stands at NPR 5630 million (USD 56.30 million). The project however provided NPR 67.40 million (USD 0.67 million) as assistance The community has contributed 37% in cash / labour towards community infrastructures created under the project. The project created 237 community assets spending NPRs 217.56 million (USD 2.18 million) of which community’s contribution was NPR 58.98 million (USD 0.59 million). Skill Level Training to project affected people as per VCDP: Livelihood Enhancement Training at local level was conducted to 1058 participants in 167 events; the vulnerable people were defined as SPAFs, women headed households, Dalits and marginalized groups and poor and designed skill development and income generation training as per the discussion with the groups at local level. Areas covered were:  Skill development training such as , driving, anvil work, mechanics, hair cutting, plumbing, masonry, carpentry, handicrafts, sewing, etc.  Income generation training such as micro-enterprise, vegetable production, poultry, piggery, etc.  Safe motherhood, women empowerment, leadership, health and hygiene,  Nursery establishment, plantation of fruits and fodder and so on, and  Other appropriate skill development and vocation training as per the need of the people 47 b) Environmental Safeguard: Environmental Screening (ES) and Environmental Management Plan (EMP) of 145 (all weather) and 7 (dry season) road subprojects and bridges in 30 Terai and Hill districts were prepared and the EMP activities are implemented either by contractor or by user committees. The study of Initial Environmental Examination (IEE) was also undertaken for 3 different road sub project while it was noticed that the road passes through buffer zone area. Similarly, 5 improved bio-engineering site plan including higher risk roads, 1 improved Quarry site plan, 7 improved tipping site plan were prepared, approved and taken into implementation. Furthermore, the outstanding issues (not addressed in EMP) and identified during construction of road sub project were addressed by preparing EMP documents and was prepared and implemented for 37 road sub projects of 19 districts. Final environmental status reports of all road sub projects (145 all weather and 7 dry season) were prepared after the sub-project was issued with the letter for DLP. Altogether 59 orientation and awareness programs for DTO personnel, workers, users and staffs were given on environmental safeguard issues. Some of the EMP works of 32 road sub projects of 19 districts are remained and Government has agreed to continue the remaining work even after 31st Dec 2014. D Impact Study and Results Framework The impact study report (2012) for the roads under Original financing showed that the upgrading of RAIDP roads has reduced the travel time to reach the nearest town and social amenities. Similarly, travel behavior of the beneficiaries has changed considerably due to easier access to work place and nearest town. Traffic volume also increased in most of the RAIDP roads compare to baseline data. Overall growth of social amenities in the project area is 12 percent and due to road upgrading works the people have got timely treatment in case of the emergency. Significant positive impact has been also reported in agriculture sector. Though the reasons for increase in production could be several such as timely monsoon rain, easy access to agricultural inputs, improvement of irrigation facilities but improvement of market access through project roads may have a significant effect. According to the GIS study the number of population increments in hill districts (within 4 hour accessibility) due to project road improvement works is found to be 16.52 percent. The percentage increases in people’s accessibility under original and additionally financed hill districts are 14.12 % and 21.19 %, respectively. Similarly the total population increase within 2 hour accessibility in Terai district is calculated to be 2.36 percent. The percentage increments in people’s accessibility under original and additionally financed Terai district are 1.69 % and 4.02 % respectively. Results Framework2 IV KEY FACTORS AFFECTING IMPLEMENTATION AND OUTCOME Procedural Delays: During the initial stage, design and procurement was slow and hence a few contracts received delayed approval for the implementation. Delays were experienced in 2 The Results Framework is as reported elsewhere in the ICR Report and is not repeated here. 48 receiving the bid evaluation reports from districts resulting in necessity of extension of bid validity period as well as cancellation of bids. Some of the road sub-projects which were in influence of national park and reserve forest were delayed due to need for environmental compliance. Necessary environmental studies and, approval process took quite long time and resulted in delay implementation. Fund Release: Project funds/ budget were not released on time due to delays in approval of national budget especially in year 2013 when the project works at high and the lack of budget affected progress of works. Once the budget is sent to respective DDCs the delegation of budgetary authority for RAIDP works from DDC to DTO also took time as well as resulted in some conflict among the DDC and DTO. Planning and Design: Selection, survey and design of some of the road sub-projects and river crossing structures was delayed such that most of the implementation was accumulated to the last two fiscal years 2011/12 and 2012/13, respectively. The Dry season road output was much affected due to substantial delay in selection of consultant for survey, design and supervision. Considering the monsoon up to September and followed by annual festivals (Dashain/Tihar) in October/ November, national election, there was almost no working period when the project closed at end of December 2013. Procurement: The weak procurement management of the districts because of the under capacity and ignorance of the officials towards the time limit for the procurement activities have considerably delayed the project implementation. Also it is reported that due to delay in the bid evaluation report preparation and approval 15 contracts could not be awarded near end of the project which were to be taken in the next phase. Implementation and Supervision: Non availability of quarry site for sub-base material, mostly due to restriction of forest offices or DDCs delayed sub-base laying work. Lack of adequate monitoring and supervision for implementation, quality assurance and day to day contract management by the officials of DDC/DTOs were also major factors affecting implementation of project. Also, the officials of DTO being responsible for many other district level projects and at the same time non-fulfillment of all technical posts in DTO office affected the implementation of project activities. Considering the physical distance of road sub-project and bridge sites the necessary vehicular support for effective supervision were noticed to be insufficient in the districts. Conflict and Insurgency: Though the conflict created by Maoist ended during initial phase of project, local conflicts continued due to identity crises. The most affected were Terai districts where Madhes Andolan took flight and continued for years. One of the engineers from DOLIDAR was killed by armed group of Terai while he was on duty in one of the training program under RAIDP. At one point all the project activities/ works were suspended in Terai districts that were affected by Madhes Andolan. Conflict among the groups and lack of elected local government also caused a lot of uncertainties and delay in the public service delivery. Governance: Conflicts and insurgency in the project districts highly affected good governance. In addition the lack of elected local body at the local level also created environment for degradation of good governance. In many districts the planned stakeholder mobilization and participation were not possible as envisioned in the project preparation. 49 Timely fulfillment of the necessary posts in the DDC/ DTO offices was seen a major problem due to threats from the local groups. Very frequent transfer of project staffs, LDO, and DTO chiefs in the project districts affected highly in implementing the project activities not only Terai districts but also in the hill districts. In some cases financial audit also could not take place in a few Terai districts. In year 2012/2013, it is worth to note that the Ministry and CIAA took action and even filed cases against district staff of 4 Terai districts for misappropriation of DDC funds. V ASSESSMENT OF GOVERNMENT OF NEPAL AND WORLD BANK PERFORMANCE Performance of Government of Nepal: Government of Nepal as a borrower and recipient and DOLIDAR as an Executing Agency put its effort to function smoothly in implementing the RAIDP and to achieve the objective set for the project. RAIDP was a major project of DOLIDAR funded by IDA in rural transport sector. On GON side, release of fund to the project from Ministry of Finance was delayed due to budget approval process in a few fiscal years. This problem was not for RADIP alone, but a national problem. The MoFALD, DOLIDAR and the PCU remained engaged in coordinated manner with the project throughout and provided assistance and inputs as were required. Senior members of the Ministry participated in key decision meetings (including during the regular Review Missions) and senior staff within DOLIDAR maintained a close interest in the project progress. Staffing levels within the PCU were maintained throughout the project and the rotation of staff was not a major concern. GoN Staffing at the District level was moderately satisfactory and was to some extent complicated by the lack of officially constituted local bodies. The project required the establishment of a RAIDP Units fully deputed by one dedicated engineer in each District, within the DTO. For sometimes in some districts the DTOs posts were vacant which resulted delays in implementation. Project hired engineers, social development consultants, environmental experts and central level experts/consultants and supported DTOs in the planning and implementation of project components. Projects coordinators during 2005 to 2008 of original phase were transferred frequently (four persons). There was lack of coordination between ministry of environment and ministry of federal affairs and local development resulting approval and management of quarry sites problematic ultimately construction work was delayed and complicated. Approval of environmental report (IEEs) from the concerned ministry took lots of time which affected the construction of sub projects timely. At the end of the project, government of Nepal accepted it as a model project in rural transport sector. Performance of the World Bank: Management of the Project within WB was delegated to the Nepal Resident Mission (NRM). The World Bank remained cooperative and supportive for the implementation of RAIDP. Regular six-monthly Review Missions were held, throughout the project implementation period. Routine contact was maintained – and regular meetings held – with the project coordination unit (PCU) in Kathmandu and with adequate field visits also whenever necessary and issues were resolved. Sometimes, there was higher intervention from bank side in some cases. 50 More than fifteen Review Missions were held, from 2005 and the final mission in November 2013. A Mid-Term Review was conducted in May 2009, which was the basis for the Additional Financing. Each mission included field visits to a number of Project Districts to view progress at first hand and to discuss issues and problems with the implementing agencies, local affected populations and contractors. The bank also played positive role while approving the budget and program form MoF, NPC, MFALD and transferring it to districts in close coordination with the concerned authorities. Reimbursement of withdrawal application was done timely after getting some clarification (if felt). WB clearance and concurrence was required at a number of key stages during the project implementation process. Specifically, WB’s prior review and NoLs for DPRs, bid evaluation and safeguarding processes were necessary in respect of each of the Rural Road Sub- Components and these approvals were generally received in a timely manner with only few exceptions and did not lead to any disruptions or delays to the implementation process. However, WB agreed for post review of most of these processes in the AF, keeping in view the enhanced capacity of PCU. The project could not complete 21 sub projects by 31, December, 2013 and they have to be taken by GoN. If project time extension of about 3 month could be done, these sub projects might have completed. The World Bank's follow up and cooperation was instrumental in achieving its target and project objectives. The World Bank also initiated its new follow up project - Strengthening National Program for Rural Transport (SNPRT) and completed the formal negotiation and Board approval. The overall performance of the bank is found satisfactory from the result of successful implementation of RAIDP ultimately resulting in the development of a similar project (SNRTP) with increased volume of investment. VI LESSONS LEARNT Social Safeguard: All roads to upgrade under additional finance are existing roads and caused minimum negative social impact. Hence, the project did not displace a single individual but provided assistance, livelihood enhancement allowance and skill development and income generation training to the affected people. Moreover, the good thing the project has done is transfer of land ownership that already donated to the road and exempted people from the land tax which is appreciated by the people. The good practices or lessons learnt are listed as follows: 1. Preparation of VDIMP: Preparation of VDIMP is a good practice which addresses the impacts of voluntary donation of land by providing assistance and land transfer incentives to the affected people. 2. Preparation of VCDP: Preparation of VCDP is accepted by locals as a good practice because it helped 1257 SPAFs and vulnerable individuals by offering them income generations and skill development trainings. Almost all participants of the training are gaining their livelihood by utilizing the skills and knowledge of the training. 3. Recognition to Land Donors: another good practice of RAIDP is recognition to land donors by offering them letter of appreciation and keeping their names in the hoarding board. 51 4. Definition of Impact Corridor (CoI): RAIDP defines CoI in the beginning of a subproject selection. In the presence of an engineer of District Technical Office, the locals define impact corridor of the road and therefore the process of land donation begins of the CoI only. However, the project informs the locals about restriction of the construction of permanent structure in RoW. Due to the definition of CoI, the land affected people are ready to donate the land voluntarily. As a result, 98 percent land donors (except absentee) have transferred the land ownership on time. 5. Exemption from the Land Tax: The locals were paying the tax of the land for the existing land. However, the project has completed the legal process of land ownership transfer to GoN. As a result, the locals who have donated land to the road long time back are exempt from the land tax now. 6. Roads shown in cadastral maps: All the road subprojects upgraded and constructed by RAIDP has now shown in cadastral maps after completion of the land ownership transfer. Moreover, 217.8 ha lands received by GoN by voluntary donation. 7. Budget for land Transfer: During implementation, the budget for land ownership transfer and VDIMP implementation was not sufficient. Adequate budget for land transfer activities, VDIMP implementation and recruitment of social mobilizers should be allocated for future projects so that the coordination of land transferring task could be done effectively. 8. Coordination of land transfer process: The land transfer process from the land revenue office and survey office at district and field level was found very difficult and sometimes became a burden to all the stakeholders. For effective coordination among the land revenue office and land survey office, it is recommended to have a central level coordination committee which could help the project in transferring land ownership more effectively. 9. Community Infrastructures (CI) supporting local participation: Provision of CIs has been found to be very effective tools to get support from the community which ultimately enhances participation of local users while implementing main components of the project. Environmental Safeguard: Participation of local people in implementation of environmental safeguard activities is found effective due to involvement of local people in each activity of road subproject. The present ESMF document needs to be reviewed and amended based on the findings of the project implementation (RAIDP-Environmental Safeguard Completion Report, 2014). Planning, implementation and supervision of environmental safeguard activities could not be highly effective due to lack of experiences and capacity of DDC/DTO as well as DOLIDAR since there is no central Environmental and Social Unit. Compliance monitoring needs to be frequent and strengthened to improve the implementation of EMPs and IEEs. Awareness raising programs and discussions on environmental safeguard was found to be effective for enhancing precautionary measures. Frequent supervision by the field level staff and compliance monitoring from Department and Ministry is essential to improve the implementation. Environmental Friendly Road Construction in dry season roads: Participatory approach of roads construction helped in generating local employment which ultimately enhanced the local economy. Ownership feeling was developed among local communities that empowered them which could help in effective operation and maintenance of the completed roads. Environment- 52 friendly approach of road construction helps to adopt Indigenous technologies for managing environmental impacts during road construction. Local people have learned the efficient method and safe work practices in construction. Orientation on environmental safeguard and construction safety to local people became very important tool for effective implementation of the Concept. Institutional Strengthening: Though there were no elected local bodies in the districts, effort was made to implement the sub-projects by utilizing the existing and available mechanism in district through the DDCs/DTOs. Close consultation was made and a decision making mechanism was established with the local political parties which had positive role in planning, execution and monitoring. E-bidding system was introduced at local level to prevent the collusion among the bidders, which enhanced transparency and created environment for open competition. It also improved the capacity of DOLIDAR, RAIDP PCU and DDCs in managing the procurement and contract management system. Still the local level implementing agency’s capacity in procurement and contract management in terms of meeting the prescribed time and managing contract records needs improvement. Maintenance Directive of DOLIDAR is not fully followed for planning and implementation of maintenance. Most of the DTOs are unaware and or not following the Annual Road Maintenance Plans (ARMP) Guideline. Capacity enhancement of the DDCs/DTOs and project using the individual consultant’s support is questionable in context of sustainability. No convincing indication has been perceived to assure sustainability of the enhanced capacity in absence of the project supported consultants. Rather sustainability on institutional part lies on DDC/DTOs capacity to procure and manage the service, works and goods. Social mobilizers need to be trained on the ESMF requirements and to be mobilized by the DTO/DDCs at the beginning stage of implementation. Similarly, members of Grievance Handling Committees need to be trained at initial stage of the project. Quality Control: Material Testing Lab has been widely accepted and established in all districts. But still commitment of adequate resources from DDCs is required to make it fully functional. Only a few contractors established material testing laboratory at field. When field level laboratory from the contractors' side is required, then the contract needs to include the necessary cost to establish such labs. Regular supervision needs to be improved from the DDC/ DTO to assure the quality of works. Additional field level supervisors should have been recruited at local level to overcome such deficiencies. A regular monitoring on the contractor’s technical/ managerial personnel is required to assure the quality and progress of implemented work. It is recommended to strictly verify the compliance and or control testing of materials and works implemented by the contractor. Timely approval or rejection of materials and works to be followed by the engineer in charge is essential to get the required quality output. Quality Assurance Plans are to be prepared, approved, followed, and monitored to assure the quality of materials and works. Training on quality assurance plan is also felt necessary for district and field level staff. 53 Technical Audit: Introduction of technical audit in the implementation stage through NVC has been good experience among the local as well as central level implementing agencies. Technical audit process and the reports on non-conformation of various subprojects has initiated discussions on the specification, design, quality of implementation, variation in cost and time, payments, and contract management issues. This needs to continue and if possible, a separate technical audit for designs and procurement process also needs to be introduced to enhance the value of works. All the Technical Audit reports have indicated the weaknesses in construction supervision and hence the major cause for poor quality works and workmanship, particularly the structural works. Low Cost Sealing (Otta/Sand Seal): Use of Otta Seal as low cost sealing over the sub-base has been found to enhance the mobility of traffic in rural roads. It reduces maintenance cost and life cycle cost compared to gravel surface. It provides reliable and effective service delivery. It preserves the assets (particularly surfacing materials e.g. gravel). It helps in productive gains on adjoining agricultural lands. It reduces the adverse effects, especially the dust pollution on adjoining residential properties. However, it is also noted that otta seal surface over the sub base course has been found to be not effective where heavy trucks ply and when the grade is high in hill roads. Proper water management is very essential to protect the deterioration of surface. People have the perception of Otta Seal as standard black top bituminous pavement and expect the same performance. Whereas, it is only low cost measure to improve the gravel surface for the reason mentioned above. Due to this perception, people have generated negative feeling, where otta seal surface is damaged due to use of heavy trucks. So in cases where there is potential for generation of truck traffic due to quarry operation or road serving as shortest by pass road it is recommended to design the pavement thickness, accordingly. Maintenance: Most of the roads do not have systematic maintenance mechanism in place. Implementation of an effective maintenance system by DDCs/ DTOs in rural roads, do not exist except in roads where the project piloted length person system using technical assistance from ILO. The maintenance works at present are in ad-hoc basis. When the road is already damaged, then maintenance works are done, not to prevent the potential damage in future. DOLIDAR Maintenance Directives is not followed properly. ARMP introduced by RBN to make the maintenance operational is not followed fully. On the basis of past experiences of Department of Roads in strategic roads and few pilot length persons in rural roads, similar approach could be followed for routine/recurrent maintenance of rural roads. However it is to be noted that, now DOR length persons have formed large unions and turned to be a similar to regular government staffs to some extent. Whereas field works in the site is expected to be based on output and result basis. As there is already LRUCs for each road involving the LRUCs, managing and carrying out maintenance work could be done through these committees. Local user’s group does know the need for regular maintenance but lacks in the required resources and involvement in maintenance. Maintenance contract could be piloted in some rural roads generating high traffic volume and hence the fund on trial basis. 54 Annex 7. List of Supporting Documents Project Documents  Aide Memoires and Management Letters and Environmental/Social notes of various  Missions, 2005 to 2013.  Development Grant Agreement, August 2005  Financing Agreement, May 2010  Implementation Status Results Report: Sequence 1 to 17, 2005 to 2013.  Project Appraisal Document, May 2005  Additional Financing Paper, November 2009  Quality at Entry Assessment (QEA 7), FY 2004-05, June 2005 Related Reports  Cost-effectiveness and Cost-Benefit Analyses of RAIDP Roads, January 2014  District Transport Master Plans of a few districts  Impact Study of RAIDP Road Sub-projects  Report on Capacity Assessment of CBAS component of RAIDP, December 2013  Report on Socio-Economic Impact Study, December 2013 Other Bank Documents  Interim Strategy Note for Nepal, January 2007  Interim Strategy Note for Nepal, FY10-11, May 2009  Interim Strategy Note for Nepal, FY12-FY13 55 MAP 56