Document of The World Bank FOR OFFICIAL. USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT TO THE KINGDOM OF CAMBODIA FOR THE

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL. USE ONLY PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR14.18 MILLION (US$2 MILLION EQUIVALENT) TO THE KINGDOM OF CAMBODIA FOR THE PROVINCIAL AND RURAL INFRASTRUCTURE PROJECT (PRP) East Asia and Pacific Region Infrastructure Department - Transport Unit August 13,23 Report No: KH This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective June 13,23) Currency Unit = Cambodian Riel KHR 1 = US$.261 US$1 = KHR3,835 FISCAL, YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS ADB CAS DRR ERR FRMR GDTA HIV/AIDS ICB IDA IFAPER LO IRRPP JFPR JICA LBAT MEF MPWT MRD NGO NPRS PDPWT PDRD PRDC PRIP RID RIP RGC SEDP 11 UXO voc Asian Development Bank Country Assistance Strategy Department of Rural Roads Economic Rate of Return Fund for the Repair and Maintenance of Roads General Department for Technical Affairs Human Immunodeficiency VirudAcquired LmmunoDeficiency Syndrome International Competitive Bidding International Development Association Integrated Fiduciary Assessment and Public Expenditure Review International Labor Organisation Implementing Rules and Regulations Governing Public Procurement Japan Fund for Poverty Reduction Japan International Cooperation Agency Labor-based appropriate technology Ministry of Economy and Finance Ministry of Public Works and Transport Ministry of Rural Development Non-Governmental Organization National Poverty Reduction Strategy Provincial Department of Public Works and Transport Provincial Department of Rural Development Provincial Rural Development Committee Provincial and Rural Infrastructure Project Road Infrastructure Department Rural Infrastructure Improvement Project Royal Government of Cambodia Second Five Year Socio-Economic Development Plan Unexploded Ordnance Vehicle Operating Cost Vice President: Country Managermirector: Sector ManagerAIirector: Task Team Leader/Task Manager: Jemal-ud-din-Kassum Ian C. Porter Jitendra N. Bajpai Sally L. Burningham

3 FOR OFFICIAL USE ONLY CAMBODIA PROVINCIAL AND RURAL INFRASTRUCTURE PROJECT (PRIP) A. Project Development Objective 1. Project development objective 2. Key performance indicators B. Strategic Context CONTENTS Page Sector-related Country Assistance Strategy (CAS) goal supported by the project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices C. Project Description Summary 1. Project components 2. Key policy and institutional reforms supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements D. Project Rationale 1. Project alternatives considered and reasons for rejection 2. Major related projects financed by the Bank and/or other development agencies 3. Lessons learned and reflected in the project design 4. Indications of borrower commitment and ownership 5. Value added of Bank support in this project E. Summary Project Analysis 1. Economic 2. Financial 3. Technical 4. Institutional 5. Environmental 6. Social 7. Safeguard Policies F. Sustainability and Risks 1. Sustainability 2. Critical risks This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed lwithout World Bank authorization.

4 3. Possible controversial aspects 28 G. Main Conditions 1. Effectiveness Condition 2. Other H. Readiness for Implementation I. Compliance with Bank Policies Annexes Annex 1: Project Design Summary Annex 2: Detailed Project Description Annex 3: Estimated Project Costs Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary Annex 6: (A) Procurement Arrangements (B) Financial Management and Disbursement Arrangements Annex 7: Project Processing Schedule Annex 8: Documents in the Project File Annex 9: Statement of Loans and Credits Annex 1: Country at a Glance Annex 11: Executive Summary of the Environmental Assessment Annex 12: Resettlement Policy Framework Annex 13: Indigenous Peoples Development Framework MAP(S) IBRD IBRD

5 CAMBODIA Provincial and Rural Infrastructure Project (PRIP) Project Appraisal Document East Asia and Pacific Region EASTR BORROWER 3. I.32 I 3.32 Responsible agency: MINISTRY OF PUBLIC WORKS AND TRANSPORT Address: Comer Norodom Boulevard and Street #16, Phnom Penh, Cambodia Contact Person: Mr. Lim Sidenine, Director Tel: (855-12) 85-4 Fax: (855-23) WB-PIU2@bigpond.com.kh Other Agency(ies): MINISTRY OF RURAL DEVELOPMENT Address: Comer Russian Boulevard and Street #169, Phnom Penh, Cambodia Contact Person: Mr. Mour Kimsan, Deputy Director General for Technical Affairs Tel: (855-12) Fax: (855-23) or or forum.org.kh Estimated Disbursements ( Bank FY/US$m): Project implementation period: 4 years Expected effectiveness date: 1/3/23 Expected closing date: 9/3/27

6 A. Project Development Objective 1. Project development objective: (see Annex 1) The development objective of the Provincial and Rural Infrastructure Project (PRIP) is to assist the Kingdom of Cambodia to enhance the livelihood of the peoples residing in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap by providing sustainable access to markets and essential services through (i) a program of road rehabilitation and maintenance; (ii) a program of capacity building and training; and (iii) development of improved public policies and strategies. 2. Key performance indicators: (see Annex 1) Achievement of the project development objective will primarily be assessed by monitoring the following leading indicators at mid-term review along the rehabilitated roads in the PRIP provinces: i) increase in traffic levels including volume of goods and passenger traffic; ii) reduction in travel time along the project roads between major provincial centers in the four provinces and increase in number of villages linked to higher level roads in good condition; iii) reduction in transport costs; and iv) increase in kilometers of roads under the Ministry of Public Works and Transport and the Ministry of Rural Development receiving regular routine maintenance. 8. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: ID 2-15 [IFC/R2-23] Date of latest CAS discussion: February 29, 2 The main objective of the World Banks CAS is to help the authorities build the foundations for sustainable development and poverty reduction for the medium to long term. These foundations are: (i) good governance, including an efficient and accountable public administration and a credible legal and judicial framework that safeguards basic human and property rights; (ii) greater access for the poor to basic social services and economic opportunities; and (iii) a policy environment that encourages private investment and entrepreneurship. Since about 85 percent of the population and 9 percent of the poor reside in rural areas, the CAS and the recent National Poverty Reduction Strategy accord special focus to rural infrastructure services and rural development. Donor coordination and partnerships are also accorded a high priority in both documents. The Provincial and Rural Infrastructure Project (PRIP) development objective, outputs, and activities are consistent with the CAS since they aim to facilitate sustainable development and reduce rural poverty by: (i) improving governance through capacity building and road sector reforms aimed at strengthening provincial management of secondary and tertiary roads, local participation in road selection, and transparency in contract management; (ii) rehabilitating physical infrastructure to improve access to markets and essential services, and stimulate growth; and (iii) facilitating private sector development by creating opportunities for development of the local contracting and consulting industry, for small businesses, for non-farm employment, for rural transport services, and for the emergence of a market for small and petty contractors for maintenance works. The project will, in addition, facilitate the physical integration of severely war-affected people and war-affected areas into the national economy by creating opportunities for employment in rural areas and a sustained livelihood. The PRIP will address key CAS monitoring indicators including the percentage increase in kilometers of rural all-weather access roads and an increased coordination between Ministry of Public Works and Transport and Ministry of Rural Development. -2-

7 The project design further addresses issues raised in analytical work and preparation of the National Poverty Reduction Strategy 23-25, including the Integration and Competitiveness Study (Part C - sector studies of rice, diversified agriculture, handicrafts, garments, tourism, labor services), prepared under the Integrated Framework for Technical Assistance Program (2 l), the PPIAF Private Solutions for Infrastructure in Cambodia report (22), the Asian Development Bank (ADB) supported Transport Sector Study (June 22), and the Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) August 23 background paper on the roads sector (June 23). The first two studies, which focus on competitiveness, highlighted the lack of an adequate network of roads in the rural areas as a significant constraint affecting economic development and thus livelihood's of residents of these areas. The second two address sector-specific issues, among these the need to introduce local participation in the selection of roads to be restored in these areas; the importance of building capacity at the local level; and the need for open and transparent selection, financing and contracting of roads. 2. Main sector issues and Government strategy: As with much of the economic infrastructure, the transport sector was severely damaged by the war. Since the mid 199s, a concerted effort by the Government, supported by the donor community, has been made to reestablish the Kingdom's main transport infrastructure. Success has been achieved in a number of areas however much remains to be done. Cambodia's National Poverty Reduction Strategy cites the lack of all-weather access to transport infrastructure and services in rural areas as an impediment to improvement in the quality of life and reduction of poverty of people in rural areas. The Second Five Year Socio-Economic Development Plan (SEDP 11) further evidences the lack of strategic positioning of the sector to effectively contribute to the country's poverty reduction strategy. IThe National Poverty Reduction Strategy (NPRS) identifies the following actions as priorities for the road sector: 1. A reliable, steady and adequate source of funding for roads, 2. Transparent management of all public funds to the transport sector by the official transport agencies, 3. Upgrading and repair of rural, provincial, and national roads, 4. Competitive bidding for all government and donor funded contracts, coupled with public outreach to the local private sector and civil society, 5. A program for institutional strengthening and capacity building at all levels in the public transport agencies, 6. Adoption of clear sector policies and strategies in support of the NPRS, 7. Encouragement of public transit services using low cost methods, and 8. Development and strengthening of regional links to facilitate the border trade with Vietnam and Thailand. I The key issues and current impediments specific to the road sector are presented below. Need for improved planning and management of the road network and a focus on maintenance through a steady source offunding. Cambodia's road network measures approximately of 38,257 kilometers (km) including 4,757 km of national roads and 5,7 km of provincial roads under the responsibility of the Ministry of Public Works and Transport (MPWT), and 27,8 km of tertiary roads under the responsibility of the Ministry of Rural Development (MRD). This network is in poor shape, notwithstanding a major effort at rehabilitation since the mid 199s. Road condition surveys in 23 indicate that 4 percent of the network is in good and fair condition, 52 percent in poor condition, and 8 percent in bad condition. Approximately 5 percent of this network is currently under reconstruction or rehabilitation. During the reconstruction period, approximately 1,5 k ms of national roads and 11, kms of rural roads were rehabilitated and reconstructed. There is a concern however that these newly -3-

8 rehabilitated roads, especially those built to gravel or laterite standard, are deteriorating prematurely due to lack of maintenance, thereby putting the sustainability of these recreated road assets in jeopardy. This lack of maintenance is attributable both to ineffective road management and to insufficient allocation of reliable and adequate funds. National -MPWT Provincial -MPWT Tertiary -MRD Total Percentage Source: Length I Good and fair I Poor Bad., Under 4,757 1,186 2,439 1,132 1,124 5,7 1,29 1 2,426 1, ,8 12,943 14,857 nla 2 38,257 15,42 19,722 3,115 1,76 4 % 52 % 8% 5% Road Condition Survey, 23, Ministry of Public Works and Transport - Road Infrastructure Department Rural Road Inventory for Rural Road, Ministry of Rural Development, December 22 There is a need to shift from the current focus on reconstruction and repair, to one based on prioritized plans for road maintenance and rehabilitation interventions in accordance with economic principles. Although MPWT carries formal responsibility for overall management and development of the roads and transport sector, it has been sidelined by the Ministry of Economy and Finance (MEF) and the Office of the Prime Minister (OPM) through funding and contracting procedures that bypass the central ministry. MPWT thus has been unable to meet the challenges of planning and preparing an integrated program of rehabilitation and maintenance; it also cannot, under the circumstances, be held accountable. MRD, with responsibility for the development and maintenance of rural roads, has been more successful in preparing and submitting budgets to MEF, and has received allocations under the Priority Action Plan for some maintenance and repairs. Need for transparent management of all publicfunds. Government recognized the issue of the need for maintenance funds and in 2 established the Fund for the Repair and Maintenance of Roads (FRMR) under Prakas 399 and SubDecree 39, which is under the authority of the Prime Minister and managed by the MEF. While the Fund was clearly intended to tackle the maintenance problem, the governing arrangements for the Fund are not well established. This lack of clarity results in the Fund being used for rehabilitation of roads and non-road infrastructure, with allocation decisions made by the OPM on the basis of proposals made by provincial governors or channeled through MEF. Funds are disbursed in three ways: (i) MEF awards contracts to private contractors and the Military Corps of Engineers without involvement of the concerned line ministries and their provincial departments; (ii) MRD receives project-specific allocations in accordance with its budget proposals, to be implemented by its provincial departments; and (iii) allocations are made directly to the provinces, which then provide funds to the respective provincial department of MPWT and MRD. Notwithstanding the fact that MRD received funds for routine maintenance for the last few years, the internal pressure and needs were such that these funds were diverted to rehabilitation. Thus, while both MPWT and MRD and their provincial (deconcentrated) agencies are well aware of the need for maintenance, routine and periodic maintenance are rarely performed, and at most substituted by emergency interventions. The lack of implementing rules, auditing, disclosure and transparency of the Fund means that it is currently not achieving its intended purpose. MEF is currently reviewing this situation in conjunction with the sector ministries. Need for continued upgrading and repair of roads with a focus on decentralization and the "missing middle". The focus during the emergency reconstruction phase has been on the primary network and some of the main urban roads. Some attention also has been given, through the now closed ADB-supported Rural Infrastructure Improvement Project (RIIP) to tertiary roads in six provinces in the -4-

9 south-east part of the country, and through the SEILA program and others, to community-based infrastructure. Attention must now be given to the secondary and tertiary network in order to link effectively the primary and community level network. The MPWT is a centralized ministry carrying out most of its non-donor funded works through machine-intensive force account units. Its Provincial Departments of Public Works and Transport (PDPWTs) have little authority and most have never let a contract. In fact, many PDPWTs act as contractors and bid for works in competition with private firms. In contrast, the MRD Second Five Year Socio-Economic Development Plan (21-25) explicitly recognizes the need for institution building at the provincial and lower levels and assigns strategic importance to the development of infrastructure to reduce rural poverty. MRD has formulated a Policy for Rural Roads which adopts labor-based appropriate technology (LBAT) as its preferred technical strategy. LBAT implies optimal use of local resources such as labor, materials and skills. MRD is undertaking a pronounced effort to assign (deconcentrate) management and implementation responsibilities for rural roads to the provincial level, and has developed detailed contract management procedures for provincial management of rehabilitation and maintenance works. These procedures are currently in place in six provinces in the south-east and will be introduced in three additional provinces under other ADB supported projects. Need for competitive bidding for all Government and donorfunded contracts. There is a concern that within the road sector that while donor funded contracts are typically competitively bid due to the required guidelines of the donor agencies, there is wide use under Government funded works of non-competitively bid and non-transparent arrangements many of which are sometimes beyond the MPWT and the MRD. Government has recognised this concern and as of January 23, successfully introduced "open" bidding, in line with the 1995 Procurement Sub-Decree (Anukret N.6) in all ministries (except the ministries of Defense, Interior and the Royal Palace) in line with the objectives in the NPRS. However, concerns remain that the Procurement Sub-Decree (i) is only interpreted to address projects that draw from the national budget, thus a toll road, a concession, a license, a Build-Operate-and-Transfer agreement, in fact any public-private contract in which there is a flow of funds to the Government or no flow of funds except from the revenue stream of users' fees, are not covered; (ii) allows for the relevant Government agency to define a procurement need as "urgent" and bypass the Sub-Decree altogether; and (iii) the Military Core of Engineers is executing a significant volume of road works for which the cost effectiveness is unknown. Need for a program of institutional strengthening and capacity building at all levels in Government agencies and the private sector. The shortage of qualified staff is a problem for all Government agencies. While MPWT has more than 1,4 staff in two of its central roads departments in Phnom Penh, and between 1 and 3 staff in each of the 24 PDPWTs, there are provinces without any qualified engineer. Given the significant demand for private sector involvement in rural infrastructure construction and maintenance, the capacity of the private sector to respond and the capacity of government agencies to manage contracts may present a bottleneck in the near future. A number of small scale contractors have been recently trained by the International Labor Organisation under the now closed Upstream Project, however substantially more will be required. The technical constraints are even more critical in MRD and its provincial agencies. Nonetheless, MRD is successfully pursuing a model which relies heavily on the contracting out of works to the private sector and has so far, through various projects, trained 22 local contractors in labor-based appropriate technology for road construction and maintenance. -5-

10 Need for adoption of clear sector policies and strategies in support of the NPRS. The Government's goals for transport in the period emphasize efficiency, competition and the contribution of transport services to economic growth and regional cooperation. This is to be accomplished by: (i) rehabilitating, maintaining and expanding transport infrastructure to facilitate market integration and trade, giving priority to rural development, domestic and international trade routes and tourism; (ii) improving the efficiency of use of existing infrastructure and institutional performance; (iii) increasing transport sector revenues to cover an increasing share of maintenance and development costs; (iv) strengthening institutional capacity in sector planning and management; and (v) promoting increased private sector participation in financing transport infrastructure. For roads, the focus is on rehabilitating and reconstructing the national roads, building road links to neighboring countries and developing a sustainable road maintenance program. The Policy for Rural Roads, April 22 of the MRD emphasizes the establishment of a strategic tertiary network linking district centers and improving access to isolated communities. These broad goals, however, are not supported by any formal clarification of the most important policy issues facing the sector and the manner by which the goals are to be achieved. A draft Transport Sector Policy Statement was prepared along with the ADB supported 22 Transport Sector Study (TSS), but has not yet been formally adopted. There remains a need to develop a consensus around a policy and strategy for the sector. Need for public outreach to the local private sector and civil society through increased transparency. The involvement of communities and their representatives i s often overlooked in the transport sector. MPWT, in particular, has no experience in outreach and does not have a public communications strategy or procedures in place for provincial level planning and prioritization. This means that there is very little local knowledge of budgets and plans with regard to national and provincial roads, and there are no established mechanisms for recourse. Increased transparency in budgets and planning would improve the Ministries' ability to respond to priorities at both the national and provincial levels. Communities, provincial level agencies, and nongovernmental agencies are currently by and large an untapped resource to improve local road safety and to prevent the spread of HIV/AIDS which can result from improved transport services. There are local programs in place for mine accident prevention and awareness, and these, coupled with on-going efforts to reduce the spread of HIV/AIDS, can successfully be built on for the benefit of the transport agencies' community communication and awareness strategies. Need for development and strengthening of regional links to facilitate border trade with Vietnam and Thailand. The key national road links to these countries has been a major focus of the Government program. The national road No 6 from Phnom Penh through Siem Reap to the Thai border is under construction through numerous projects. The national road to the east to Ho Chi Minh City in Vietnam is also under construction on both sides of the border. -6-

11 3. Sector issues to be addressed by the project and strategic choices: This Provincial and Rural Infrastructure Project (PRIP) will directly address concerns raised in the National Poverty Reduction Strategy (NPRS), as well as sector issues of importance to the attainment of the Country Assistance Strategy and of strategic importance to the transport sector. These issues are discussed below. There are, however, some critical issues that influence the sector but which the project is not directly addressing since these are addressed in the country macroeconomic dialogue with the World Bank and other donors, and also in the Bank s Structural Adjustment Credit and the Economic and Public Sector Capacity Building Project, and the RGC s Governance Action Plan and Civil Service Reform. With regard to the need for competitive bidding for all Government and donor funded contracts, continued discussions are ongoing through the mechanism of the Country Procurement Assessment Review. The PRIP project also includes a conditionality related to transparency of any non-competitively awarded contracts in the sector in the four project provinces. With regard to the encouragement of public transit services this is an area which still needs focus. With regard to the regional links, the PRIP project does not focus on these since these areas are being well supported under other programs (including the ongoing World Bank supported Road Rehabilitation Project and the support of many other donor supported projects). The PRIP is specifically designed to complement and enhance the many ongoing initiatives in the sector. The following sector issues are being addressed by the PRIP project. Maintenance management andfinancing. Given the current lack of attention to road maintenance, a key focus of the project will be to put in place proper maintenance management systems and begin to build a maintenance culture in the four PRIP provinces. Some work has been done to establish road maintenance management systems (RMMS) in MPWT and MRD; however, these systems are not yet operational. Key data, including the inventory of road assets and the condition of the network have not been entered into the systems. The project thus will build on the work done to date and provide for the installation and operation of an RMMS in both MPWT and MRD and in their provincial departments in the PRIP provinces. The decision to focus on the four provinces was made to demonstrate that maintenance i s both cost-effective and manageable. The systems that will be put in place can easily be scaled up to cover the whole network. In addition to providing the analytical tools for improved road management, the project will assist the Government in preparing annual maintenance programs and ensuring they are carried out as planned. As part of the PRIP, the Government will agree to the financing and execution of routine maintenance on all roads in good and fair condition in each of the four provinces. The maintenance needs will grow as the network is brought into maintainable condition. The larger issues of governance and administration of the Fund for the Repair and Maintenance of Roads and other public expenditure management issues are being addressed as part of the Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) and the NPRS. Improving roads and management of roads at the provincial level focussing on the missing middle. As one of the first projects in Cambodia to focus on a network approach addressing secondary, provincial and tertiary roads, the PRIP will initiate an explicit, coordinated reconstruction and rehabilitation effort of the secondary and tertiary road network in four provinces. In so doing, it will set a precedent in establishing sound processes and systems for provincial management at this level of the road network. The project will provide an opportunity to influence business practices and how the MPWT interacts with Provincial authorities on the planning and implementation of rehabilitation and maintenance of secondary roads. It will assist MPWT to implement the Government s deconcentration policy by building provincial capacity to plan in a participatory manner and manage contracts in a transparent fashion. The project will also strengthen capacity at the center in both MPWT and MRD for the required planning and coordinating support and monitoring functions. Participatory planning methods involving a range of -7-

12 stakeholders including the Provincial Rural Development Committees will enhance local involvement in decisions that affect their lives, and increase transparency and accountability (ref. E.6.2). With regard to tertiary roads, the project will extend and further strengthen existing MRD processes for provincial management to the four project provinces, and contribute to mainstream MRD s policy of local responsibility for rural road management. Capacity building of the public sector and facilitating the emergence of a private sector in the road industry. An assessment of the capacity and constraints of the national and provincial staffs of MPWT and MRD, as well as the private sector consulting and contracting industry, was carried out as part of project preparation. This assessment has shown that the demand for road works will soon exceed the capacity of the private sector to respond. Instead of developing a capacity building component that i s project-specific, the focus will be on expanding past efforts directed towards the institutionalization of a training and capacity building program. The intention is that the program will become an integral part of a continuous development of human resources for the roads and transport sector. The benefits of the program are expected to be significant. By strengthening domestic training institutes, the ad hoc nature of many past projects in this area will give way to a continuous domestic training capacity in the road sector. By training MPWTPDPWT and MRDPDRD staff in road planning and contract management, road maintenance will be accorded higher priority and the quality of works will increase. By training local contractors in business management and labor-based appropriate technology, the PRIP will stimulate the emergence of a market for private enterprise in road rehabilitation and maintenance. Job opportunities will be created on the roads in areas where unemployment and demobilization of soldiers are a concern. Additional employment will be created in the local non-farm sector, for example, through increased provision of rural transport services along the roads in poor areas. These services are often operated by poor people for poor people. Development of a policy and strategic framework. The PRIP will seek to improve both the management and condition of the secondary, provincial and tertiary road network in four provinces. These improvements can only be achieved within a larger framework of road sector policy reforms governing the organization, structure, financing and management of the sector. Although the TSS culminated in a draft policy statement, a consensus around this statement has not yet been forthcoming. However, the Government has agreed to prepare a draft letter of sector policy that clearly states the Government s objectives for the road sector (drawing on the NPRS, the Policy Rural Roads), articulates some guiding principles, clarifies the responsibilities of Government and other players, and presents a time bound actionable program for a three to five year period. The project will be implemented at the provincial level in support of the Government policy to deconcentrate implementation to the provincial level as articulated in their NPRS. The PRIP will also support implementation of some of the key recommendations of the ZFAPER such as strengthening management of the Fund for the Repair and Maintenance of Roads by establishing a formula-based allocation mechanism for maintenance funds and providing for regular financial and performance audits of the Fund. Public outreach, information dissemination and increased transparency. Community awareness programs will be carried out in the project areas to: (a) mitigate the risks of increased traffic accidents on the rural population, as pedestrians (predominantly children, women and poor people) and users of public transport and low cost vehicles are particularly exposed; (b) reduce the risk of spreading HIV/AIDS along the improved roads; (c) help ensure that the general public i s aware of the project and the procedures for road selection and management, and mechanisms for recourse if and when required; and (d) reduce the risk of mine accidents in the areas surrounding the improved roads (voluntary migrants and retumees are especially vulnerable in this regard). -a-

13 C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): In order to attain its development objective, the following will be implemented under the Provincial and Rural Infrastructure Project (PRIP) in the four northwest provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap provinces by the Ministry of Public Works and Transport (MPWT) and the Ministry of Rural Development (MRD). The PRIP will draw on, and scale up, the successful experience of earlier similar projects such as the MRD-implemented Rural Infrastructure Improvement Project (RIIP) and LO-assisted Upstream Project, and complement various Asian Development Bank (ADB) supported projects. Sustainable maintenance of the secondary, provincial and tertiary roads presents significant challenges that the proposed project intends to address. Component 1. Maintenance management (US$l.O million). The project will support (a) the installation and operation of road maintenance management systems at the national level in MPWT and MRD and in their respective provincial departments of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap and (b) the carrying out of annual programs of routine maintenance on all roads in good and fair condition in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The funds for routine maintenance are included in the cost of the project to be funded from Government annual budget allocations. Component 2. Rehabilitation and periodic maintenance of secondary-national, provincial and tertiary roads (US$18.65 million). The project will support the carrying out, in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap, of a program of rehabilitation and periodic maintenance of (a) approximately 3 km of strategic secondary-national and provincial roads under the Ministry of Public Works and Transport; and (b) approximately 3 km of tertiary roads under the Ministry of Rural Development. The works will be contracted out and a program to develop qualified private contractors will be run concurrently, increasing private sector involvement in the road sector. Works will be carried out using labor-based appropriate technology to maximize local employment. Component 3. Capacity building program (US$2.6 million). The project will support the carrying out of a program of institutional capacity strengthening for MPWT and MRD at the national level and its departments in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The project will thus support the on-going deconcentration efforts in MRD, and seek to replicate these efforts in MPWT, where applicable. Component 4. Policy and strategy development (US$.2 million). The project will support carrying out of a program to improve MPWT and MRD policy and strategy development in the areas of (a) integrated planning and budgeting of roads; (b) least cost life-cycle standards; (c) use of appropriate technology; (d) mainstreaming of road maintenance; and (e) institutional reform. This component will support on-going policy development in the transport sector, primarily supporting initiatives that are already underway. Component 5. Community awareness programs (US$.55 million). The project will support the carrying out through MPWT and MRD of a community awareness program aimed at increased awareness by transport agencies and residents of related risks in road safety; HIV/AIDS; people s participation in road planning, and access to public information; and mine and Unexploded Ordnance risks and clearance programs. -9-

14 1. Maintenance management MPWT- secondary and provincial roads MRD - tertiary roads 2. Rehabilitation and periodic maintenance MPWT - secondary and provincial roads MRD - tertiary roads 3. Capacity building program 4. Policy and strategy development 5. Community awareness programs Refunding of Project Preparation Facility Advances.32 Total Project Costs I 1. I 2. I 1. Total Financing Required I I 1. I 2. I Key policy and institutional reforms supported by the project: The proposed project supports the following key policy and institutional reforms as described in Annex 2. (a) Zntegratedplanning and budgeting of roads. The project supports adoption of an explicit policy for transparent planning and budgeting in the road Ministries and a requirement for public disclosure of any non-competitively bid contract awards; (b) Least cost &-cycle standards. The project supports the use of alternative construction standards; (c) Use of appropriate technology. The project supports the use of labor-based appropriate technology in the implementation of the works and the training of contractors; (d) Mainstreaming of road maintenance. The project supports the implementation of routine and periodic maintenance and the related maintenance management systems. Government is considering various approaches to improved management of the FRMR and support for this may be funded from the project; (e) Institutional reform. The move towards contracting out of maintenance services will shift the roles of MPWT and the PDPWT s from direct works implementation to planning, budgeting, contracts management and monitoring. To assist staff in carrying out the new functions and minimize negative impacts, there is need for capacity building and a well thought out program for human resource development. As a part of this, MPWT has informally requested the World Banks possible future assistance to advise on a possible program of reorientation and commercialization of the force account units. The MPWT is also reviewing options for the possible restructuring of the Ministry in other areas. - 1-

15 3. Benefits and target population: Benefits. Economic and social benefits will stem from an improved transportation system in the four project provinces. The improved road network will stimulate the provision of transport services, and reduce travel times and transport costs. This will in turn promote development of areas where agriculture and off-farm activities have been constrained due to lack of reliable all-weather road access andor high transport costs. The rehabilitated roads will provide better access from previously isolated areas to markets and sources of supply for many small-scale farmers and other producers in the provinces. They will also facilitate access to essential health and education services and other public and financial services. The project will also provide employment opportunities to previous conflict areas in dire need to reintegrate displaced people and demobilized soldiers in the social mainstream. It will enhance the impact of numerous grass-root efforts at the village and commune level as these will now be able to access district and provincial facilities and services beyond their own communities. Target population. The beneficiary population comprises all those living and/or working, and who will settle, in the project areas in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap, the rural home to 1.5 million people (out of a total Cambodian population of 12.3 million). -rich and poor farmers (subsistence and surplus), employees in the non-farm sector such as teachers, health attendants and civil servants in the districts and communities along the roads, traders and business people (petty, small, medium, and large), transport providers (bus and bicycle and motor-cycle trailer operators and truckers) and other road users. The beneficiary population also includes consumers in the small and provincial towns, local contractors and consultants, and those who will be employed in the rehabilitation and maintenance of the roads. The latter includes significant numbers of unskilled laborers, of which, in Cambodia, 4 percent are commonly women, from the project provinces. Over time, project benefits will extend to rural people in other parts of the country, especially when new road programs come on stream and follow the Government's policy for transparent planning and budgeting and the participatory decision-making processes established in the PRIP provinces. There is ample evidence in Cambodia of the close link between rural roads improvements and increased trade and rural development. MRD monitoring along improved tertiary roads indicates a doubling of road traffic (of which an increase in motorized traffic of 1 percent), a decrease in travel time of 43 percent, a decrease in transport fares of 38 percent, a 13 percent increase in goods transported, and a 6 percent increase in trips from rural areas to community centers and in trade activities in rural markets. It is expected that, over time, indirect benefits such as more qualified teachers and health staff in rural areas and improved connectivity to the rest of the country will stem from the processes introduced by the project. Additional indirect benefits will likely include: Zncreased demand responsiveness: Well-informed local participation in planning will result in interventions which are well-received and needed by the stakeholders in the provinces. This will also contribute to break in the culture of top-down decision-making in MPWT and sensitize the transport agencies, MPWT in particular, to the importance of becoming more efficient road infrastructure providers that take account of public views and priorities and facilitate mobility and access by poor people to affordable, reliable, and safe transport services. Increased transparency: An allocation of public expenditures in the road sector according to agreed upon plans at the national level and in the PRIP provinces will reduce discretionary and ad hoc decisions, and contribute to improved sector governance. It will also increase efficiency in road sector expenditures and free up significant resources for road maintenance financing

16 Related dividends would stem from the establishment of systems and technologies for capacity building and maintenance management and implementation at the provincial level. The adoption of least-cost life-cycle standards and labor-based appropriate technology for secondary and tertiary roads by MPWT and MRD will further increase value for money of road sector expenditures and stretch existing resources, thus enabling improved and sustained access to more communities. 4. Institutional and implementation arrangements: The institutional responsibilities within the road sector are divided between the Ministry of Public Works and Transport (MPWT) and the Ministry of Rural Development (MRD). To reflect this the implementation responsibility for the PRIP project will be with both MPWT and MRD. MPWT i s the lead agency which is ultimately responsible for overseeing the PRIP project, reporting overall project implementation to the Government represented by the Ministry of Economy and Finance (MEF), and fulfilling World Bank requirements. As executing agencies, MPWT and MRD will cooperate according to the provisions of the Project Implementation Plan and the Memorandum of Understanding on implementation. Any matters arising from the Memorandum of Understanding will be resolved through the Steering Committee for the project. The MEF has a role in Cambodia of reviewing contracts as described in the Memorandum. The executing responsibility in MPWT is with its Road Infrastructure Department (RID); and in MRD with its General Department for Technical Affairs (GDTA) through its Department of Rural Roads (DRR). Both offices will be staffed with the required competencies for the duration of the implementation of the project. These offices will be responsible for all goods and consultants' services contracts and for works contracts above US$5, in the case of MPWT and US$lOO,OOO in the case of MRD; the development and implementation of the training programs; the management of the participatory process for the selection of the subsequent years works; the management of and reporting on any resettlement and environmental issues; and the quality control and clearance of the works implemented by the Provincial Departments. The Provincial Departments of Public Works and Transport (PDPWT) and Provincial Departments of Rural Development (PDRD) will be responsible for the contracting and management of works below US$5, in the case of MPWT and US$lOO,OOO in the case of MRD, in accordance with the agreed Project Implementation Plan. These offices will be staffed with the required competencies for the duration of the implementation of the project. The agreed staffing for these existing departments and agreed terms of reference for their staff is reflected in the agreed Project Implementation Plan. There are no special units being set up for the PRIP. -12-

17 Implementing structure for the Provincial and Rural Infrastructure Project (PRIP) Ministry of Economy and Finance Ministry of Public Works and Transport Steering Committee Ministry of Rural Development General Department of Public Works Memorandum of Understanding on implementation W General Department of Technical Affairs Provincial Departments of Public Works & Transport (Kampong Thom, Oddar Meanchey, Preah Vihear, Siem Reap) Provincial Rural Development Committees (PRDC) Provincial Departments of Rural Development (Kampong Thom, Oddar Meanchey, Preah Vihear, Siem Reap) D. Project Rationale 1. Project alternatives considered and reasons for rejection: The four proposed provinces or another area. The PRIP focuses on the four contiguous northwest provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. As per the 2 poverty mapping of the World Food Program, these four provinces are home to the most vulnerable population in Cambodia-more than 4 percent of the households in these provinces are poor, higher than the national average of 36 percent. Of Cambodia s 24 provinces, Kampong Thom, Preah Vihear and Siem Reap, contain the highest percentage of poor households, the situation is slightly better in Oddar Meanchey but this is a new province and the census is therefore incomplete. These four provinces were particularly marked by the civil war and contain large numbers of displaced people; moving to other areas would serve the Bank overarching mission less well. Working in contiguous provinces will likely enhance the project benefits since road networks establish connectivity. Project impacts will be enhanced further by the ongoing rehabilitation of the primary national road No. 6 connecting Phnom Penh to Kampong Thom, Siem Reap and the Thai border. Even though there are environmental challenges in the four project provinces, since about 2 percent of the country is protected, selecting other provinces would bring little relief in this regard. All levels of the road network or a focus on the secondary and tertiary levels. The Government opted not to include all levels of the road network in the PRIP, but rather to focus on the missing middle which consists of secondary and tertiary roads. Over the last decade, an intense effort to repair the main arteries -13-

18 of the national road network has been made and is on-going. There are also numerous on-going and planned efforts to improve village and commune level access. The PRIP will complement and enhance the impact of these efforts. Many of the entities consulted, e.g., the members of the Provincial Rural Development Committees in Siem Reap and Kampong Thom, the chiefs of Pouk and Angkor Thom districts, and numerous NGOs, spontaneously mentioned that they would welcome the proposed investments because these would enhance the impact of their own development efforts. They also stated that improvement of secondary and tertiary roads is either beyond their mandate and/or command more resources than they have at their disposal. Single or multi sector approach. It was decided to focus on roads for two reasons: (i) sector issues are many and complex and require focus; and (ii) recent commitment of IDA support and funding by other donors to the peri-urban rural water sector, local governmentkommunity level infrastructure, and forthcoming support to rural electricity. One or two executing agencies. The project has two executing agencies-mpwt and MRD. In the interest of simplicity, the project could have opted to focus on MPWT and the secondary network only. Given the desire, however, to ensure maximum network impacts in the project area, and to capitalize on the potential for cross-fertilization between the road agencies at both provincial and central levels, it was decided that the project would have two implementing agencies. Yet another alternative would have been to address both secondary and tertiary roads but to have MPWT as the sole executing agency although in close collaboration with MRD. This alternative was rejected because of an overarching concern for the continued ownership by both Ministries. Cross-fertilization between the Ministries has been successful during project preparation and will be encouraged during implementation through the Steering Committee, the Provincial Rural Development Committees, joint field trips during supervision, joint mission wrap-up sessions, and joint meetings with the provincial agencies. National or Provincial. It was decided to reject central procurement of all civil works contracts as this would further cement the already centralized structure in MPWT. Instead, the PRIP will build on the positive experience of the MRD implemented Rural Infrastructure Improvement Project and involve provincial procurement of civil works up to US$5, in MPWT and US$lOO,OOO in MRD. Close monitoring from central authorities will be coupled with local monitoring and transparent processes. Upgrade or maintain. It was agreed that roads in good to fair condition in the project provinces would not be upgraded, even when built below standards, but maintained. Roads in poor condition will be rehabilitated or upgraded. 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Sector Issue Ban k-financed Projects including road and bridge infrastructure Project Rural Investment and Local Governance (Cr. 3747) Flood Emergency Rehabilitation (Cr. 3472) Latest SI PSR) (Bank-finance Implementation Progress (IP) S S lervision stings projects only) Development Objective (DO) S S -14-

19 Xelated projects dacro-economic operations [elated projects under preparation Ither development agencies lapan International Cooperation 4gency (JICA): 4USAID: 4SIAN DEVELOPMENT BANK :ADB): ZUROPEAN UNION: JNDP/Sida/DFID: m: Road Rehabilitation (Cr. 3181) Social Fund 11 Supplemental Credit (Cr ) Social Fund 11 (Cr. 3179) Northeast Village (Cr. 3216) Health Sector Support (Cr. 3728) Provincial and Peri-Urban Water Supply and Sanitation (Cr. 3746) Agriculture Productivity Improvement (Cr. N11) Economic and Public Sector Capacity Building (Cr. 3678) Structural Adjustment Credit (Cr. 3323) Rural Electrification and Transmission NR 6A, 7 Rehabilitation Project Bridge Rehabilitation on NR5 and 6 JFPR-Mainstreaming Labor-Based Road Maintenance to the National Roads Network, US$2.2 million, to be approved ADB 1945-CAM(SF) GMS: Cambodia Road Improvement Project, November 22 US$5 million ADB 1862-CAM(SF) Northwestern Rural Development, November 21 US$27.2 million ADB 1824-CAM(SF) Emergency Flood Rehabilitation, December 2, US$55 million ADB 1697-CAM(SF) Primary Roads Restoration, September 1999, US$68 million Rural Development Project SEILA 1 (1996-2) TRIP Rural Transport Project I S S S S S S U S U Hiahlv Unsatisi -15-

20 3. Lessons learned and reflected in the project design: Engender client ownership. Successful projects require local ownership, clear objectives and strong commitment. The project was designed by Government to build on existing structures, to be implemented by the provincial offices, to have a participatory planning and decision making approach which included all relevant structures of Government both at national and provincial levels, and to foster cooperation of different Government departments. Civil society involvement builds ownership and requires outreach. The initial investments in the project have been selected using a participatory planning and decision-making approach which is described in Section 6.2. This same approach will be used to determine future investments. The implementing agencies will contract selected nongovernment organizations to design and implement public awareness campaigns for road safety, HIV/AIDS prevention, dissemination of project information, and mine/unexploded Ordnance security. Good governance fosters sustainable and equitable development. The project will promote good governance through the development and implementation of transparent participatory planning and decision making processes. Transparency and good governance i s also included in the procurement processes and their subsequent technical and financial auditing and the disclosure of information. Capacity development of the in-country institutions requires well-tailored programs especially at the provincial level. The project includes a series of combined class-room and practical on-the-job training sessions of both the public and private sector to be dispensed on a continuous basis (Refer to Annex 2). Coordination of development efforts is necessary to reduce transaction costs on client agencies, and avoid duplication of efsorts. The project will scale up and draw extensively on the experience gained from the Ministry of Rural Development implemented Rural Infrastructure Investment Project, the Upstream Project and others. It will also support existing initiatives in policy dialogue and assist the Government to build cooperation between its technical assistance supported by the Asian Development Bank, Japan, the World Bank and others in the transport sector. 4. Indications of borrower commitment and ownership: Government collaboration, between Ministry of Public Works and Transport (MPWT) and Ministry of Rural Development (MRD), at central and provincial levels, has been highly satisfactory during project identification and preparation. There has been full involvement of staff from MPWT and MRD during missions and field trips. A participatory workshop was organized early during project preparation around the logical framework to define and build consensus around the project development objectives and outputs. The Ministers of MPWT and MRD made all the necessary resources promptly available for project preparation, such as assigning staff to the PRIP preparation team, and providing the necessary office and logistics support; two Project Preparation Facilities were used for project preparation. The provincial teams have been directly trained and involved in the field surveys of the roads, and have participated extensively in the participatory planning and decision making processes. The Ministry of Economy and Finance (MEF) has also been proactive in discussions on the financing of the sector. 5. Value added of Bank support in this project: The World Bank contribution of the US$2. million credit supporting the Royal Government of Cambodia's program in the road sector represents significant financial support to the sector. The targeting to the part of the road network which has not attracted external finance will support greater impact of the -16-

21 investment on the other parts of the road network. The Bank has, through its support during project preparation, assisted MPWT and MRD to undertake an extensive outreach and public participation in the selection of investments. Through the Banks encouragement of increased transparency, there will be public disclosure of information on all roads contracts in the project provinces whether funded by the credit or funded by the Government itself. Through work with the Government on its public procurement, the Bank has supported the move towards wider competitive bidding and through the involvement in this project towards capacity building in the use of government public procurement provisions. The Bank will also contribute to set a precedent in the sector by taking on board existing systems for provincial management of tertiary roads in MRD, established under projects supported by the ADB and EO. In this way, the Bank will signal the importance of contributing to mainstreaming and scaling up and reducing the proliferation of project specific requirements and transactions costs on the client. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): NPV=US$14 million; ERR = 35 % (see Annex 4) Cost benefit Cost effectiveness Other (specify) All candidate roads for rehabilitation, upgrading, and periodic maintenance are subject to economic analysis either using cost-benefit analysis or cost-effectiveness analysis. The costs include the cost of works, and design and supervision of such works. The main benefits are directly related to traffic including (i) savings in vehicle operating costs, (ii) savings in vehicle and passenger time costs. Additional non-quantifiable benefits include social benefits arising from better access to schools, medical facilities, and other social services. For the first years work program, traffic counts have been undertaken indicating motorized traffic, excluding motorcycles, to range from 4 AADT to 63 AADT. Given the growing network of trafficable roads, the increasing number of motor vehicles in the country, and the robust growth of Cambodia's economy, traffic is developing rapidly. Recent counts near Siem Reap indicate annual average growth rates of 16 percent for motorbikes, 4 percent for light vehicles, and 195 percent for heavy vehicles between 1998 and 2. For rehabilitation and periodic maintenance works, a cost-benefit analysis was used, applying the Highway Development and Management Model (HDM-4), which compares life cycle road costs and vehicle operating cost and passenger time savings. The net present value (NPV) of the project first year rehabilitation and improvement works amounts to US$14 million with a corresponding economic internal rate of return (IRR) of 35 percent. The NPV of the project first year periodic maintenance works amount to US$.42 million with a corresponding IRR of 28 percent. The NPV of all first year works, which represent 46 percent of the project civil work costs, amount to US$14.2 million with a corresponding IRR of 35 percent. For periodic maintenance works, the cost-benefit analysis was complemented by a cost-effectiveness analysis, comparing the financial investment costs of the road intervention with the population served on each road. The cost-effectiveness of the investments was computed due to the nature of the traffic on these roads, which is mostly low local traffic serving the local population, and the project objective of maximizing the provision of all weather access to as many persons as possible per available resources. All road sections have a cost-effectiveness ratio less than US$11 per person, which is reasonable considering that a) the average GDP per capita is US$28 in Cambodia and US$11 represents 4 percent of the GDP per capita; and b) the investments will ensure an all-weather access to the social and economic centers. For routine maintenance works, economic analysis was not applied since the premise is that the asset -17-

22 should be maintained and traditionally economic rates of return for this type of intervention are extremely high. 2. Financial (see Annex 4 and Annex 5): NPV=US$ million; FRR = % (see Annex 4) The fiscal sustainability of the project relies on success in development of the systems and incentives to ensure financing and implementation of maintenance. To improve the likelihood of success the project itself includes a maintenance component and support to policy development focused on maintenance funding. Parallel activities of the Government on this issue are ongoing. The funds needed for such routine maintenance are available in the current sectoral budget of the Government. Donor agencies active in the sector including ADB and JICA are emphasizing the need for maintenance. Fiscal Impact: The fiscal impact of the project is likely to be modest in the sector and marginal on the overall public budget (Source of data: Integrated Fiduciary Assessment and Public Expenditure Review, August 23). Sectorfiscal impact. Of the US$23.32 million project, the Royal Government of Cambodia counterpart fund contribution of US$3.32 million spread over four years represents approximately three percent of the annual Government budget spent on roads. Total annual Treasury-executed expenditure (that is, excluding external project-related assistance) on road rehabilitation and maintenance (excluding expenditures funded from the Fund for the Repair and Maintenance of Roads (FRMR)) i s estimated at Cambodian Riel 16 million, equivalent to about US$28 million, in 21. External project-related assistance to the transport sector is estimated at US$59.7 million in 21. Accumulated revenue in the FRMR reportedly is estimated at US$3.5 million in May 22. Overall public budgetfiscal impact. The total revenue of the Government i s projected at US$45 million in 23 (based on the new national accounts). Reported external assistance flows are estimated at US$472 million. In relation to other sectors, (domestically resourced spending on education i s expected to increase to US$75 million, on health to US$45 million in 22 and on the Commune/Sangat fund to about US$12 million), although the total expenditure on roads has increased significantly in the past several years, and are likely to increase further as resources become available from the FRMR, the total expenditure in 21 of US$28 million represents only 6 percent of total domestically sourced expenditure. Given the focus on maintenance and rehabilitation of secondary and tertiary roads in four target provinces, the future recurrent cost implications will be positive however relatively small and readily funded from the FRMR. By reinforcing the concept of regular maintenance to preserve the road asset base, the project will help to reduce the need for rehabilitation expenditures in the future and enhance the efficiency and effectiveness of the use of funds. 3. Technical: The specific technical issues considered in the project design are summarized below: Mines and Unexploded Ordnance (UXO). The entire project area has not been cleared of mines and Unexploded Ordnances. "Pathfinding" (i.e. marking of the location of the mines and the Unexploded Ordnance to 5m of either side of the center-line of the road) has been undertaken as part of project preparation with the support of an international charity. All the roads for the first year have been addressed. De-mining is the responsibility of the Government and shall be undertaken as part of the road works contract to a strip of 1m on either side of the centerline of the road. Improved access will reopen land to agriculture and ease pressure elsewhere, however mines will prevent people from returning to - 18-

23 their land. Subsequently, further mine clearance would have to be considered in potentially contaminated areas made accessible by the rehabilitated roads. Labor-based appropriate technology (LBAT). In the Policy for Rural Roads of the MRD, LBAT is identified as the preferred technology for rural roads. The MPWT and the PDPWTs recognize the merits of LBAT for the construction and maintenance of secondary roads, and MPWT has sought the technical assistance of LO in this regard. In several places, however, LBAT might not be an appropriate option due to unsuitable local soils, lack of available labor, or other technical considerations that would imply that an equipment based approach be followed. Government has committed US$2.4 million towards the Mainstreaming Labor-Based Road Maintenance to the National Roads Network in three provinces including two of the PRIP provinces, namely Oddar Meanchey and Siem Reap. This is complemented by a Japan Fund for Poverty Reduction grant of US$2.2 million executed by the Asian Development Bank. This is focussed on replicating the successful experience in MRD to relevant projects in the MPWT. The PRIP project will support such mainstreaming and implementation, including training arrangements which will be the same for both the Mainstreaming initiative and PRIP-supported works. Standardization of Roads and Bridges Design. Multiple designs are used for the construction of structures and roads in Cambodia. While the MPWT has adopted standard specifications these are not uniformly applied through the various donor supported programs making capacity building less sustainable. The PRP adopts the MPWT standard specifications with specific provisions for labor-based appropriate technology which are being mainstreamed into MPWT and MRD works. Alternative Road Surfaces. Though laterite is a preferred material for the wearing course on unpaved secondary and tertiary roads, there are not many sources of good laterite in the project area and many of the roads are prone to rapid gravel loss and require frequent regravelling. Thus the project supports various options of inexpensive pavements which have been field tested in Cambodia. Trafsic Safety. Improved roads will result in higher speed leading to an increase in road accidents. Apart from the human costs, accidents represent a significant drain on the country s health system. All designs will pay due consideration to safety concerns and the RGC has sought the assistance of a local NGO to design and implement an effective community based road safety awareness campaign. Market Place Design. The project will assist in the re-design of markets on a case-by-case basis where road safety concerns warrant. The district centers and markets are the interface between the rural and the provincial economies and often found at road junctions. 4. Institutional: Overarching institutional concerns include governance and public sector expenditure management and procurement, an entrenched centralized culture in MPWT, and capacity constraints in both the public and private sectors. Additional challenges include overstaffing and low salaries. MPWT, in particular, is overstaffed and salaries are low. The majority of the 9 Phnom Penh-based staff on the payroll of the RID perform external jobs to make ends meet. Whenever the RID receives funds to execute a specific task on a force account basis, mostly emergency works, staff travel expenses and per diem are budgeted so as to constitute required compensation. This situation i s mirrored in other departments of the central Ministries and in the provinces where the Director of the PDPWT, at times, acts as a contractor gathering staff and renting equipment when she gets a project. -19-

24 4.1 Executing agencies: There are two designated executing agencies for the project reflecting the fact that there are two ministries responsible for the road network. The Ministry of Public Works and Transport (MPWT) is responsible for the national, secondary-national and provincial road network, managing all roads that are numbered and carry a daily traffic volume of more than 5 motorized vehicles (two axle, four wheels). The Ministry of Rural Development (MRD) is responsible for tertiary roads. A signed joint declaration between MPWT and MRD from March 1,2, confirms the allocation of responsibilities between the two ministries with regard to the road sector. Both ministries execute their responsibilities to a greater or lesser extent through their provincial departments. Within MPWT, the three departments most directly concerned with roads are the Road Infrastructure Department (RID), the Heavy Equipment or Road Construction Center (RCC), and the Technical Research Center (TRC). The RID is responsible for coordinating road inventories and maintenance and has been designated as the MPWT executing department for the PRIP. The RCC is responsible for road construction, mostly emergency interventions. The TRC sets standards. The RID, established under the Declaration on Conduction and Procedures of Department of Road Infrastructure, dated 16 August 1999 is managed by the Director and four Deputy Directors who are in charge of two offices and two units (Le. Planning and Technical Office; Administrative and Accountant Office; Bridge Construction Unit; and Road Construction Unit). Within MRD, the Department of Rural Roads (DRR) was established under the Prakas No PrK.MRD on the Organization and Functioning of the DRR in July 22. DRR is under the General Department for Technical Affairs (GDTA) in the MRD and manages all rural roads in the Kingdom of Cambodia. The DRR carries out its duties in compliance with the Policy for Rural Roads. The DRR is headed by the Director and two Deputy Directors who are in charge of five Offices, as follows General Affairs Office, Planning and Statistics Office, Maintenance Management Office, Monitoring and Evaluation Office, and Research and Development Office. The functions of the national DRR includes policy and technical advice, sub-sector coordination, preparation of systems and technical guidelines, facilitation of training, and advocacy. The GDTA in conjunction with its DRR has been designated as the MRD executing department for the PRIP. 4.2 Project management: The MPWT and the MRD both have experience with executing World Bank supported projects. Their provincial departments, however, do not have such experience and, to date, have had little experience with contracting since this has typically been undertaken by the national offices. Local consultant services will be provided directly to the provincial departments to assist with the preparation of bid documents, the bid process, and supervision of the works. A Project Implementation Plan has been developed with common procurement and financial management arrangements. 4.3 Procurement issues: The Country Procurement Assessment Report (CPAR) is currently under preparation. There i s no current CPAR. The Country Portfolio Performance Review (CPPR) of 1 August 2 concluded that procurement is still a major impediment to efficient project implementation and disbursements. The CPPR identified the need for training and the need to amend complex and outmoded government processes and procedures. An effort to develop standardized bidding documents for both Government-funded and donor-funded projects i s underway in conjunction with the CPAR. Governance - 2 -

25 issues are a serious concern and hence provisions have been made in the procurement design. See Annex 6(A) of this document for further details. In addition, a technical and financial audit, including review of the procurement procedures will be carried out every financial year by an independent auditor to be appointed under the project. World Bank staff undertook a procurement capacity assessment (see project file) of the executing agencies Ministry of Public Works and Transport (MPWT), Ministry of Rural Development (MRD), and Provincial Departments of Public Works and Transport (PDPWTs) and the Provincial Departments of Rural Development (PDRDs) of the four project provinces Kampong Thom, Oddar Meanchey, Preah Vihear, and Siem Reap. See Annex 6(A) of this document for further details. One of the key objectives of the project is to encourage the reduced centralization of operations by supporting the development of capacity of the provincial departments of the project executing agencies, the Ministry of Public Works and Transport (MPWT) and the Ministry of Rural Development (MRD). The responsibilities are as follows: For all goods and consultants' services contracts, the Director of the MPWT-RID and the Director of the MRD-GDTA-DRR will be responsible for procurement of their contracts. The Directors will seek clearance from MEF and the World Bank as appropriate. For works below US$5, in MPWT and below US$lOO,OOO in MRD: the Director of the relevant Provincial Departments of Public Works and Transport (PDPWTs)/the relevant Provincial Departments of Rural Development (PDRDs) will be responsible to prepare bidding documents, advertise for bids, conduct bid openings in the provincial offices, prepare the bid evaluation reports, sign the contracts and supervise such works. A consultant will be assigned to the PDPWTPDRD to provide advice to the PDPWTPDRD on the steps of implementation. The Director of the PDPWTPDRD is required to seek clearance for the draft bidding documents and the bid evaluation report from the Director of MPWT-RIDDirector of MRD-GDTA-DRR. In turn the Director of MPWT-RIDDirector of MRD-GDTA-DRR, after hisher review of such documents, will seek clearance of MEF and the World Bank as appropriate. The Director of the Provincial Departments will be the "Employer" for the works contracts. A member of staff of the PDPWTPDRD will be the "Engineer" for the works contracts. For works contracts above US$5, in MPWT and above US$lOO,OOO in MRD the Director of the MPWT-RIDMRD-GDTA-DRR will be responsible to prepare bidding documents, advertise for bids, conduct bid openings, prepare the bid evaluation reports, sign the contracts and supervise such works. The Director of MPWT-RIDMRD-GDTA-DRR will seek clearance of MEF and the World Bank as appropriate for the draft bidding documents and the bid evaluation report. The Director of MPWT-RIDMRD-GDTA-DRR will conduct the bid openings in the relevant project province, and the Director of the PDPWTPDRD will be included on the bid evaluation committee. The Director of the MPWT-RIDMRD-GDTA-DRR will be the "Employer" for the contract. A member of staff of the MPWT-RIDMRD-GDTA-DRR will be the "Engineer" for the works contracts, alternatively the Director of the MPWT-RIDMRD-GDTA-DRR may contract out to a consultant to be the "Engineer". A member of staff of the PDPWTPDRD will also be assigned to the Employer's supervision team

26 4.4 Financial management issues: World Bank staff undertook afinancial management assessment (see project file) of the executing agencies Ministry of Public Works and Transport (MPWT), Ministry of Rural Development (MRD) and Provincial Departments of Public Works and Transport (PDPWTs) and the Provincial Departments of Rural Development (PDRDs) of the four project provinces Kampong Thom, Oddar Meanchey, Preah Vihear, and Siem Reap. Each MPWT and MRD will have their own Special Accounts (to receive IDA funds) and Counterpart Fund Accounts and be responsible for their own Financial Management Reports in accordance with the requirements of the World Bank. Each will submit their own Withdrawal Applications to the MEF and World Bank. Both agencies have experience of implementing World Bank supported projects and satisfying the financial management requirements. See Annex 6(B) of this document for further details. 5. Environmental: Environmental Category: A (Full Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. Environmental Assessment (Operational Policy 4.1). During project preparation, an Environmental Assessment (EA), the executive summary of which is found in Annex 11, was prepared by an independent consultant in accordance with OP 4.1. The main findings are that, since the project will support rehabilitation of existing roads along their present alignments and within existing rights-of-way, any environmental impact of the project is expected to be limited to the construction effects associated with the rehabilitation and maintenance road works. The impacts may result from dust and noise, use of bitumen on sections selected for surface treatment, disposal of solid wastes, erosion control, siting and operation of borrow areas and quarries, labor camp management, etc. These impacts are common in road works and can be mitigated with proven management techniques. On the positive side, the project will achieve important environmental benefits through tree planting to reduce erosion and improve aesthetics, improved access and mobility for the motorized and non-motorized traffic, and improved drainage reducing erosion and flooding. As a precaution, an Environmental Assessment has been carried out for the project and for the first year roads even though most of the anticipated roads to be rehabilitated and maintained would be classified as environment category "B". The roads to be implemented in the first year have been defined using a participatory approach complemented by multiple criteria analysis (economic, technical, environment, social, beneficiary consultation, etc.) and represent about US$lO.O million of the total US$23. million project. A similar approach will be employed for future roads to be rehabilitated under the project. An Environmental Management Plan has been developed to mitigate environmental impacts during implementation. Natural Habitats (OP 4.4). Some of the roads proposed for rehabilitation adjoin protected landscapes, national parks, or wildlife sanctuaries and are therefore subject to OP 4.4 on Natural Habitats. National road 66, the east-west highway adjoining the Beng Per Wildlife Sanctuary, will be rehabilitated under the project. For future roads impacting national parks or other protected areas, an environmental impact assessment (EIA) would need to be conducted and submitted to the Bank for review. The EIA for such subprojects include consultations with park management authorities, confirmation that the proposed subproject would be consistent with the park management plan, and the endorsement of the Ministry of Public Works and Transport and the Ministry of Rural Development that the road is beneficial to the park and its inhabitants

27 Forestry (OP 4.36). Community forestry is an expanding form of land use in the project area and i s expected to increase even faster when the draft Community Forestry Sub-Decree is approved by the RGC. Under community forestry arrangements, local communities receive long term tenure and rights to forest products in exchange for managerial efforts undertaken in cooperation with the concerned Government agencies -- Department of Forestry and Wildlife, APSARA (National Authority for the Protection and Management of Angkor and the Region of Siem Reap), or Ministry of Environment, depending on territorial jurisdiction. The project authorities will ensure that land acquisition under the project takes due regard of the recognized authority of community forestry associations and that quarries, borrow pits and drainages do not adversely affect these areas. Project activities will not involve conversion or degradation of critical forest areas or related critical natural habitats as defined under the policy. Illegal logging is of concern in Cambodia and being addressed through other country wide initiatives. Pest Management (OP 4.9). The project will use mechanical or manual work for clearing areas for road rehabilitation. No pesticides will be used. OP 4.9 on Pest Management i s therefore not applicable. Cultural Property (OPN 21.3) Given the potential for cultural relics in the project area, particularly in Siem Reap province, OP 4.11 on Cultural Property i s applicable. Provisions for dealing with cultural property finds during construction are included in the EMP. Future sections of National road 66 cross at least three Angkor bridges which would require preservation or even restoration if it is determined that those bridges should remain on the road alignment. The implementing agencies are familiar with dealing with such issues. For example under the National road 6 currently being rehabilitated under a World Bank supported project there are Angkor era ancient bridges. The World Bank Policy on Disclosure of Information (22). In line with the World Bank disclosure policy, the Ministry of Public Works and Transport and the Ministry of Rural Development formally disclosed on March 3 1,23 the final drafts of the Environmental Assessment, the Resettlement Policy Framework and the Indigenous Peoples' Development Framework to the public. These documents are available in English at the offices of the MPWT-RID and the MRD-GDTA in Phnom Penh. MPWT and MRD also authorized disclosure of the documents at the World Bank office Public Information Center in Phnom Penh, and through the World Bank Infoshop in Washington on March 31,23. Khmer language versions of the documents were made available at the above locations as well as at the Provincial Offices of the MPWT and MRD, and the offices of the Provincial Rural Development Committee (PRDC) in Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. 5.2 What are the main features of the EMP and are they adequate? The recommendations of the Environmental Assessment are reflected in the project design. An Environmental Management Plan (EMP) has been agreed which defines the prevention and mitigation measures for all potential adverse impacts that might arise from the roads and bridges rehabilitation works and the maintenance program (see Annex 11). The EMP will be included in the works contracts for each road. Mitigation measures are included in the General Specifications of the works contracts. Provision is made in each contract for the financing of trees to be planted along the sides of the roads. The compliance of the contractors in carrying out the provisions set forth in the contract documents will be supervised during construction as part of the work supervision system established under the Project and monitored by the World Bank during the regular supervision missions. Financing of the mitigation measures is covered in the works contracts and supervision contracts. The Development Credit Agreement includes a requirement that the Borrower shall carry out the Project in accordance with the Environmental Management Plan. The MPWT and MRD will be responsible for ensuring the compliance with the environmental requirements of the project

28 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: March 3, How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? The participation process for the selection of the investments and those who participated is described in Section 6.1 below and documented in the project files. With the help of maps showing the location of protected areas like national parks, wildlife sanctuaries, protected landscapes and biodiversity areas participants in the workshops were able to determine if roads would pass through or be close to such an area. Roads in or close to such an area received lower scores in the selection process. The results are discussed in the Environmental Assessment. The Environmental Management Plan (EMP) was prepared on the basis of these findings. A Khmer language EMP will be widely distributed along the project roads chosen for rehabilitation. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? The Environmental Management Plan (EMP) contains detailed environmental compliance monitoring requirements including parameters and indicators for all activities relating to the recommended mitigation measures. Implementation of these measures would be supervised by a local consultant or NGO engaged by MPWT and MRD. The technical audit will review implementation of the works in accordance with the contract provisions. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. A Social Assessment has been carried out during the project preparation with specific objectives that included: (i) assessment of potential social impacts of the project, with particular attention to gender, and poor, vulnerable, indigenous and ethnic minority groups; (ii) as a first step, an overall assessment of the social and economic conditions of the people living in the proposed project provinces by gender, income, and ethnicity, and as a second step, consultation with beneficiaries about their needs and priorities and a more in-depth assessment of the population along the roads to be improved to establish a baseline for social monitoring and evaluation; (iii) identification of other key stakeholders, including civil society groups and locally active NGOs with interest and some capacity to participate in project implementation and monitoring; (iv) identification of any social risks; and (v) formulation of appropriate measures to mitigate potential adverse impacts and risks. The Social Assessment describes the socioeconomic situation of households in 29 villages (out of 8 1 villages) situated along the roads to be rehabilitated in the first year of the project. The villagers interviewed are almost all (97 percent) below the poverty line, indicating that the project area i s indeed one of the poorer areas of the country. The main sources of income i s from paddy farming (6 percent), and casual wage labor (2 percent). 15 percent are engaged in small scale trading or vegetable selling. The Social Assessment confirmed that generally people welcome the rehabilitation of roads, and that communication and transport is a constraint in the daily life. Most villages are fairly isolated and roads in disrepair. People had great difficulty travelling, particularly in the rainy season. People walked not just in the local community but over long distances. The most frequently used transport mode was the bicycle (85 percent) - used throughout the year. Motorcycles were used on a daily basis by only 6 percent of

29 respondents and on a monthly basis by 33 percent. Cars, buses and pick-up trucks were used infrequently, usually on a yearly base, however 65 percent of respondents had never travelled in a car, 65 percent had never travelled in a pick-up truck and 32 percent had never used a motorcycle. Rehabilitation of roads are expected by villagers to benefit them primarily for better market and business opportunities, and for easier access to health care facilities. However, villagers also fear an increase in road accidents, involving children and cattle. Indigenous Peoples (Operational Directive 4.2). No reliable figures exist about the presence of indigenous peoples in Cambodia. Indigenous Peoples, as described in OD 4.2, are often referred to as Highlands Peoples, and are mainly found in the north eastern provinces but are also found in villages in other provinces. Preliminary information suggests that indigenous minorities mostly live in forested areas away from the existing roads; no adverse impacts on these groups are foreseen. Other ethnic minority groups live in the villages and are likely to benefit from the project in terms of improved access to markets and new opportunities for income generation. At least one of the project provinces, Preah Vihear is known to have some indigenous communities. The Ministry of Public Works and Transport and the Ministry of Rural Development have adopted an Indigenous Peoples' Development Framework (IPDF) (June 23) (see Annex 13) in accordance with OD 4.2, and guidelines for screening and implementation are included in the agreed Project Implementation Plan (July 23). Indigenous Peoples will be determined based on five characteristics specified in the Operational Directive 4.2. For the first year roads, one indigenous community (a village of the Kuoy ethnic group in Preah Vihear) i s affected and a stand alone Indigenous Peoples Development Plan has been adopted by the Government. Once the remaining roads are identified during project implementation, Indigenous Peoples Development Plans would be prepared, as needed, following the provisions of the Indigenous Peoples' Development Framework. Involuntary Resettlement (Operational Policy 4.12). Since the project will support rehabilitation of existing roads, there will be limited acquisition of private assets and resettlement of people. The Ministry of Public Works and Transport and the Ministry of Rural Development have adopted a Resettlement Policy Framework (June 23) (see Annex 12) in accordance with OP 4.12 and guidelines for screening and implementation are included in the agreed Project Implementation Plan (July 23). For the first year roads, there is no land acquisition or resettlement of people required. Once the remaining roads are identified during project implementation, Resettlement Plans would be prepared, as needed, following the provisions of the Resettlement Policy Framework. Provisions and principles adopted in these Frameworks for the project supersede the provisions of relevant decrees and laws currently in force in Cambodia, wherever differences exist. Labor laws. The MPWT and MRD will ensure that the civil works contractors: (i) comply with all applicable labor laws; (ii) apply equal remuneration for men and women for work of equal value without gender differentiated wages; (iii) do not employ child labor below age 18; and (iv) seek to maximize the level of female participation in appropriate construction works. Such provisions are included in all works contracts. 6.2 Participatory Approach: How are key stakeholders participating in the project? The Ministries took a very proactive approach to the participatory process and their national and provincial offices actively led the process. A Provincial Transport Infrastructure Planning (PTIP) tool was developed, based on the requirement of the Ministries, emphasizing a process that would be able to prioritize future investments and that would provide ample opportunity for residents to ensure investments were prioritized according to their needs. The tool essentially identifies the road network,

30 evaluates existing public assets and prioritizes investments according to maximum need and impact. The planning process screens roads by comparing accessibility rankings with population served, environmental impact and economic potential. The responsibility for preparing the Provincial Transport Infrastructure Plans was with the Provincial Rural Development Committees (PRDCs). The committees were presided over by the Provincial Governors and included officials from all technical departments at the provincial level (Rural Development, Public Works, Planning, Health, Education, etc), District Representatives plus a selection of key constituents. The local "experts" included teachers, health workers, traders, transporters, women's group representatives, and other stakeholders. The selection of the workshop participants attempted to reach a real cross section of the community. During the planning process more than 5,5 people were consulted and took part in the planning and decision making. Planning activities took place from September to December 22. Initial provincial workshops were held in Kampong Thom on 28 August 22, in Oddar Meanchey on 12 September 22, and in Preah Vihear on 16 September 22 (no initial workshop was held in Siem Reap), a series of district workshops followed and then a second round of provincial workshops were held from November to December 22. This mechanism was used to finally develop the first year work program. The mechanism will again be employed to develop the program for further years and guidelines on how to conduct the participatory process for the selection of future roads are included in the agreed Project Implementation Plan. In addition, the Social Assessment provided an opportunity for systematic feed back from local residents, both through the structured interviews with more than 8 households, and the focus group discussions in 29 villages along the first year roads to be rehabilitated. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Consultation with NGOs and civil society organizations active in the project area was included in the project preparation through the participatory planning process. The collaboration with local NGOs is ensured through their participation in the PRDC. NGOs will provide support to Government in the implementation of the HIV/AIDS awareness and mitigation program, the road safety campaign, and the mine awareness campaign and mine path finding requirements. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? It is proposed to raise awareness of and build capacity for social and environmental management within the MPWT and MRD at provincial and central levels. Identified staff of the MPWT and MRD have been assigned responsibility for social aspects. 6.5 How will the project monitor performance in terms of social development outcomes? The Social Assessment carried out during the project preparation includes a socio-economic baseline that provides information on the project beneficiaries and their current situation. The baseline will be used for monitoring the social changes that the project may induce and for post-implementation evaluation of the project impacts

31 7. Safeguard Policies: Natural Habitats (OP 4.4, BP 4.4, GP 4.4) Forestry (OP 4.36, GP 4.36) Pest Management (OP 4.9) Cultural Property (OPN 11.3) Indigenous Peoples (OD 4.2) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP 4.37, BP 4.37) Projects in International Waters (OP 7.5, BP 7.5, GP 7.5) Yes No Yes NO Yes NO Yes NO Yes NO Yes No Yes NO in Disputed Areas (OP 7.6, BP 7.6, GP 7.6)" I Yes NO I 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. Implementation of environmental assessment will be ensured through inclusion of discussion of the Environmental Management Plan (EMP) provisions at the pre-bid meetings, inclusion of environmental requirements and the EMP in the construction contracts, and environment and social impact mitigation management training for both construction contractors and MPWTMRD supervisors and project personnel. All contracts will contain clauses that define the environmental requirements to be met during road construction. Compliance will be monitored through the supervision arrangements. Natural habitats will be protected through selection criteria and design. Roads selected for the first year do not cross any known heritage sites, and the EMP includes procedures to be followed to protect known or chance find of cultural property. All safeguard policies compliance will be closely monitored during World Bank supervision and mid-term review. F. Sustainability and Risks 1. Sustainability: The project is specifically designed to support sustainability by: (a) working through the existing units and structures of the implementing Ministries in line with their designated responsibilities and supporting enhancement of their capacity; (b) implementing through the existing provincial departments of these Ministries to further enhance their long term capacity; (c) strengthening on-going efforts in policy development to ensure the required management and budgeting capacity for sustainable maintenance; (d) using procurement systems in line with local procurement rules; (e) supporting the development of the local contracting and consulting industry by designing the project to be accessible to them in addition to the planned training program; and (f) introducing participatory planning methods and transparent decision making processes to last and potentially be replicated in other areas/sectors as well, particularly at the provincial level

32 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk From Outputs to Objective Road maintenance policy including sustainable maintenance financing mechanism established through ongoing projects by year 3 and adopted by RGC. Mines and UXOs cleared in the surrounding areas. Affordable transport services respond to the demand. Security and rule of law enforced and political tensions in RGC reduced. Rural health and education services expanded and improved; increased small business start-ups and local investment; and other complementary rural development projects achieved as planned. Transparent competitive tendering processes of all public road works in Cambodia. From Components to Outputs MEF promptly clears feasibility reports, commitments, contracts and payments, and requests for replenishment of Special Accounts. MEF releases counterpart funds according to predetermined schedule. MEF releases funds for routine maintenance. Overall Risk Rating Risk Rating - H (High Risk), S (Substantial Ris Risk Rating H M N M N S N M S S M (Modest Risk), N Risk Mitigation Measure Close follow up on the ADB-financed technical assistance and the IDA-supported Road Rehabilitation Project While costs are substantial, it is a Government priority to demine these provinces to encourage settlement of returnees and internally displaced population, and promote tourism development. A study on rural transport services assessed that there were no institutional, legal, financial or technical constraints that would hamper a supply response. Public information campaigns of the PRIP are likely to result in increased market confidence by local transport providers. No action possible, related to internal politics and foreign policy. Inform the Ministries of Health and Education, and the public, through regular campaigns, of the PRIP. Coordinate with other development programs. The Credit includes a conditionality that if any non-competitively bid contracts are awarded in the PRIP provinces in the road sector, the information will be publically disclosed. Close collaboration with World Bank country team and use of macro dialogue. Regular follow up of funds release and incorporated as a covenant in the Credit Agreement. Incorporated as a covenant in the Credit Agreement for the funds to be released up front quarterly. degligible or Low Risk) 3. Possible Controversial Aspects: No controversial aspects identified

33 G. Main Credit Agreement Conditions 1. Effectiveness Condition The standard condition of effectiveness of the legal opinion from the Royal Government of Cambodia applies. The following are specified as additional matters, within the meaning of Section 12.2 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely that the Environmental Management Plan, the Resettlement Policy Framework and the Indigenous Peoples Development Framework have been duly authorized or ratified by, and are legally binding upon, the Borrower. Project specific conditions of effectiveness include: (a) the Borrower shall have made the initial deposits into the Counterpart Funds Accounts out of its own resources as follows (A) deposit into the MPWT Counterpart Funds Account an initial amount equivalent to Sixty Thousand Dollars ($6,) and (B) deposit into the MRD Counterpart Funds Account an initial amount equivalent to Sixty Thousand Dollars ($6,); (b) the Borrower shall have established a financial management system, acceptable to the Association, including: (i) adoption of a financial management manual acceptable to the Association, and (ii) completion of appropriate training for staff of MPWT, MRD and their respective departments in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap; (c) the Borrower shall have adopted the Project Implementation Plan; and (d) the Borrower shall have allocated adequate resources in support of a Project staffing plan acceptable to the Association. 2. Other [classify according to covenant types used in the Legal Agreements.] In addition to the standard legal covenants requiring the Borrower to carry out the project with due diligence and efficiency and in conformity with appropriate administrative, construction, financial, engineering, environmental and public utility practices, and social and environmental standards, and supplying as needed the funds, facilities and services and other resources required for the project, the following project specific covenants apply: (a) the Borrower shall cause adequate funds for routine road maintenance in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap to be placed in the Counterpart Fund Account semi-annually to cover maintenance needs for the subsequent six month period; (b) the Borrower shall, with respect to any contracts for works on roads in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap that are pre-financed or awarded on a non-competitively bid basis and not financed out of the proceeds of the Credit, disclose publicly all pertinent contract information, including the contractor, contract terms, and such other information as the Association may from time to time require (public disclosure means disclosure within 3 days on the website for a period of at least 6 days of MPWT or MRD, as appropriate and that the following information will be disclosed: (a) name of the party to whom the contract is awarded; (b) value of the contract; (c) location of the works; (d) length of the road works; (e) duration of the contract; and (f) any non-standard financing arrangements); and (c) the Borrower shall cause MEF, MPWT and MRD to enter into a Memorandum of Understanding by December 31, 23 and thereafter, throughout the period of implementation of the project, maintain such Memorandum of Understanding in full force and effect; (d) in carrying out components 1 and 2 of the Project, the Borrower shall engage independent auditors to conduct technical assessments of Project implementation; and (e) the Borrower shall carry out the Project in accordance with, and shall implement all measures required under, the Environmental Management Plan, the Resettlement Policy Framework and the Indigenous Peoples Development Framework

34 H. Readiness for Implementation 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. c] 1. b) Not applicable. 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. 4. The following items are lacking and are discussed under loan conditions (Section G): 1. Compliance with Bank Policies 1. This project complies with all applicable Bank policies. 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. Acting for Sally L. Burningham Jitendra N. Bajpai Ian C. Porter Team Leader Sector ManageVDirector Country ManagedDirector - 3 -

35 Annex 1: Project Design Summary CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) I. Rural poverty reduced and xonomic & social ievelopment expanded. 2. National re-integration of xoject provinces. Sector Indicators: 1. Educational and literacy status (by gender, group). 2. Health status (infant and maternal mortality, etc.). 3. Nutritional status (by gender, group). iector/ country reports: from Goal to Bank Mission) 4. Income and employment status (by gender, group). 5. Increased participation in civil society and decision making (by gender, group). Project Development Objective: Enhanced livelihood of the peoples residing in Kampong rhom, Oddar Meanchey, Preah Vihear and Siem Reap by providing sustainable sccess to markets and essentia services. Outcome / Impact Indicators: 1. Increased use of health services (# clinic visits by groups, gender). 2. Increased use of education services (enrollment rates by gender, group). 3. Increased volume and revenue of tourism (WY). 4. Increased flow of information in rural areas (agricultural markedretail prices, credit, provincial budgets, et al). 5. Increased # of non-farm :mployment opportunities. Leading Indicators in PRIP vrovinces (3 years): 1. Increased # of NGOs active n the project area. 2. Increased number of villages linked to higher level.oads in good condition (WY). 3. Increased volume of goods Voject reports: [from Objective to Goal) As markets expand, farmers will increase production levels. Food availability increased. Agricultural marketing, storage and distribution facilities will complement PRIP efforts. There are no adverse unmitigated environmental or social impacts from the PRIP initiatives. Continued political stability

36 transported (WY). 4. Increased volume of rural passenger traffic (WY). 5. Transport costs reduced (m). 6. Increased km of MPWT and MRD roads receiving regular maintenance. htput from each 2omponent: I, Maintenance management iystem established and Iperational. L. Roads rehabilitated. Output Indicators: Maintenance management established and implemented for secondary and tertiary roads in MPWT and MRD. Maintenance program established in PRIP provinces: 3 km secondary roads and 3 km tertiary roads maintained to Z standard with year-round access financed by government project counterpart fund; Sustainable financing plar established by year 3. 3 km of secondary-national and provincial roads rehabilitated 3 km of tertiary roads rehabilitated 2.3 # Contractors and consultants prequalified for road works (WY). 2.4 # Contracts let. 2.5 Private contractor and consultant data base established and maintained Adr performance records. 'roject reports: lrom Outputs to Objective) Load maintenance policy icluding sustainable iaintenance financing iechanism established lrough ongoing projects by ear 3 and adopted by RGC. 4ines and UXOs cleared in ie surrounding areas. Lffordable transport services espond to the demand. lecurity and rule of law nforced and political tensions n RGC reduced. iura1 health and education ervices expanded and mproved; increased small iusiness start-ups and local nvestment; and other omplementary rural levelopment projects achieved s planned. 'ransparent competitive endering processes of all iublic road works. 5. Capacity building program :stablished and implemented. 3.1 National level capacity building program implementec and training/ta support provided based on training needs assessment: X # potential road sector contractors and

37 and strategies and implemented. consultants trained in business management, rehabilitation and maintenance; X#MF'WTandMRD staff trained in policy design, strategy development, public involvement methods, decentralized program management, and contract management and monitoring. 1.2 Provincial level capacity uilding program established md trainingita support wovided based on a training ieeds assessment: X # provincial officers trained in planning, contract management, public involvement methods, decentralized contract management, and monitoring; X # of technicians trained in LBAT, management of maintenance contracts anc supervision. 3.3 # ITC trainers trained in,bat road rehabilitation and naintenance. 3.4 Capacity in MF'WT and URD at central and provincial eve1 to manage social and 3nvironmental mitigation Aans established: # staff trained in social and environmental management; compliance in implementation of RAPS and EMPs; time to implement RAP (differentiated by number of PAPS). 4.1 Integrated planning & budgeting for roads adopted ir MPWT & MRD at national level and in PRIP provinces 4.2 Least-cost life-cycle standards for secondary and

38 rtiary roads adopted by PWT and h4rd. 3 Labor-based appropriate chnology policy adopted by PWT. 4 Sustainable funding for lad maintenance including )th periodic and routine :cured. 5 Institutional reform.. Community awareness lrograms implemented. 1 Road safety awareness 'ogram established. 2 HIV/AIDS public vareness and mitigation 'ogram established to.emote protection/.evention. 3 Participatory road anning processes involving Jblic stakeholders Stablished and implemented. 4 Mine and UXO awareness rogram implemented in -oject areas. Jroject Components / Sub-components: Zomponent 1 : Maintenance nanagement. Zomponent 2: Rehabilitation md periodic maintenance of,econdary-national, provincial md tertiary roads. Zomponent 3: Capacity milding program. Zomponent 4: Policy and itrategy development. )puts: (budget for each omponent) 'S$l.O million tb18.65 million W2.6 million rs$.2 million Project reports: Annual works plans Annual training plans Quarterly Financial Monitoring Reports (FMRs) Annual technical audits Annual financial audits (from Components to Outputs) MEF promptly clears feasibility reports, commitments, contract and payments, and requests for replenishment of Special Account. MEF releases counterpart funds in a timely manner. MEF releases funds for routine maintenance in a timely manner. Zomponent 5: Community iwareness programs rs$.55 million

39 Annex 2: Detailed Project Description CAMBODIA Provincial and Rural Infrastructure Project (PRIP) The demographic context. Of the 24 provinces in Cambodia, the PRIP project targets the four northwestern provinces of Kampong Thom, Oddar Meanchey, Preah Vihear, and Siem Reap. These four contiguous provinces are home to 1.5 million of the 12.3 million people in Cambodia and the percentage of poor in the provinces is 4 percent compared to a national average of 36 percent. (Source: World Food Program 2 Poverty mapping). h Total in Indicator Kampong Oddar Preah SiemReap PRIP Total in Thom Meanchey Vihear Provinces Cambodia Population Size () 569. I ,5 12,3 % of Total Population* I Est. No. of Poor People (OOO)* ,3 1.5 Poverty Share (%)* Population Density (Per sq Land Area (sq km) 13,814 6,158 13,788 1,299 44,59 181,35 Unemdovment Rate I, Labor Force Participation Rate Literacy Rate Female Literacy Rate Firewood as Main Source of Cooking Fuel (% of Hhs) Grid-Connected Electricity (% of Hhs) Piped Water (% of Hhs)

40 The condition of the road network. Cambodia's road network of 38,257 kilometers (km) - including approximately 4,757 km of national roads and 5,7 km of provincial roads under the responsibility of the Ministry of Public Works and Transport (MPWT), and 27,8 km of tertiary roads under the responsibility of the Ministry of Rural Development (MRD) - i s in poor shape, notwithstanding a major effort at rehabilitation since the mid 199s. The network in the four provinces has an extent of 2,445 km, with on average 44 percent being passable all year round, with 29 kilometers sealed. The provincial roads are in the poorest condition with only 25 percent being passable all year round. Efforts by the Military Engineers particularly in Oddar Meanchey mean that the network is in reasonable condition. There is a concern however that no maintenance plan is in place for such roads. Province KT Table 2.2 Characteristics of the road network in the four target project provinces I Total I All I Dry I Provincial area I All weather Network Length Weather Season Km2 Km/K" Secondary National Roads Provincial Roads Tertiary Road Subtotal I Subtotal I ,788 I.1 SRP ISecondary National Roads 261 I I (Tertiary Road ISubtotal 665 I 43 I 235 I 1,299 I.4 Total in PRIP provinces 2,445 I 1,7 I 1,375 I 44,59.2 Total in Cambodia I 38, ,35 I In order to attain its development objective, the proposed US$23. million project has been designed to deliver the following components: Component 1. Component 2. Component 3. Component 4. Component 5. Maintenance management (US$l.O million) Rehabilitation and periodic maintenance of secondary-national, provincial and tertiary roads (US$18.65 million). Capacity building program (US$2.6 million) Policy and strategy development (US$.2 million) Community awareness programs (US$.55 million)

41 By Component: Project Component 1 - US$1.OO million Maintenance management. The project will support: (a) the installation and operation of road maintenance management systems at the national level in the Ministry of Public Works and Transport and the Ministry of Rural Development and in their respective provincial departments of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap; and (b) the carrying out of annual programs of routine maintenance on all roads in good and fair condition in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The funds for routine maintenance are included in the cost of the project to be funded from Government annual budget allocations. The component includes the following: 1.1 Works for routine maintenance - US$778, (fully funded by Government at about US$4/km) (MPWT - US$435, and MRD - US$343,). 1.2 Consulting services for Maintenance Planning - US$15, 1.3 Government staff incremental operating costs for transportation and accommodation - US$72, The installation of the road maintenance management systems (RMMSs) will be financed by IDA, including the cost of equipment, training and consultant services. Such system will consistent with and complement other ongoing initiatives. Both MPWT and MRD have recently engaged consultants to develop RMMSs. MPWT has piloted a RMMS in Kandall province and has prepared for its replication in six additional provinces. At the same time, efforts are underway to inventory and survey the MPWT roads under the IDA financed RRP. The RMMS in MRD consists of three components: (i) Planning; (ii) Contract management; and (iii) Financial management. It has four categories (tertiary, sub-tertiary 1, 2, and 3) and relies on an inventory of road assets (rural roads, bridges, culverts, road signs, and so on), a road condition survey, and prioritization criteria. The full rural road network will be surveyed under the PRIP and all rural roads entered into the system. MRD has already installed the RMMS in the Department of Rural Roads and will pilot it in the six RIP provinces. It foresees the installation of the system in three of the four PDRD-DRRs in the PRIP provinces under on-going and forth-coming projects financed by the ADB. This means that only Preah Vihear province will require the equipment and system software to be financed under PRIP. Assuming that the MRD-GDTA-DRR and three PDRDs will already be equipped with the RMMSs by the time of PRIP start, the PRIP design will make provision to: a) install the MRD RMMS in Preah Vihear Province (PDRD-DRR); and b) install and operate a RMMS in MPWT-RID and the four PDPWTs. Annual programs of routine maintenance on all roads in good and fair condition will be implemented in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The JFPR-ADB-RGC supported proposed project "Mainstreaming of Labor-based Road Maintenance to the National Roads Network" will also support implementation of routine maintenance works and thus implementation modalities will be harmonised between PRIP and the Mainstreaming project, including but not limited to aspects such as harmonised bidding documents, implementation procedures, formats of submission to MEF in request for financing, and provision of training to the labor-based contractors. The funds for routine maintenance are included in the cost of the project to be funded from Government annual budget allocations. An inventory and condition survey of the tertiary, provincial and secondary national roads in the four PRP provinces has been undertaken and roads priortised for maintenance based on their condition (see Tables 2.2). Targets for the first year include about 177 kilometers (km) under MPWT

42 responsibility and about 19 km under MRD (see Table 2.3). The network of roads receiving regular routine maintenance is planned to increase annually to reach maintenance of about 4 km of secondary national roads and provincial roads and 3 km of tertiary roads in the third year (as shown in Table 2.4) covering about a third of the network of 2,445 km in these four provinces. The maintenance needs and plan will be updated annually. The cost during the first year is estimated at US$18,834 to be funded by Government counterpart funds. Cost estimated at a general US$4 per kilometer for works (or US$5 per kilometer including supervision and other costs). Appropriate standards and guidelines will be applied by PDPWTs and PDRDs in the RMMS to determine treatments, programming and cost estimates to establish maintenance programs in each PRIP province. They will then contract and supervise the routine and periodic maintenance works. Province Description I Length(km) I CostUS$ Ministry of Public Works and Transport (MPWT) Siem Reap I NR I 7,52 Siem ReaD I NR I 6,4 Siem Reap Oddar Meanchey Oddar Meanchey Oddar Meanchey Kampng Thom Preah Vihear Subtotal NR ,516 NR183 8.OO 3,2 NR ,186 NR ,992 NR ,78 NR ,

43 Project Component 2 - US$18.65 million Rehabilitation and periodic maintenance of secondary-national, provincial and tertiary roads. The project will support the carrying out, in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap, of a program of rehabilitation and periodic maintenance of (a) approximately 3 km of strategic secondary-national and provincial roads under the Ministry of Public Works and Transport; and (b) approximately 3 km of tertiary roads under the Ministry of Rural Development. Annual planning process. MPWT and MRD will carry out the works in accordance with annual plans acceptable to the World Bank. Such annual work plans shall be submitted prior to any expenditure and only items on the agreed work plan shall be eligible for disbursement. Such plans shall include information on (i) the environmental and social assessment, (ii) road description, (iii) type of works, (iv) road length, (v) expected cost, (vi) economic rate of return, (vii) traffic count data, (ix) number of beneficiaries, (x) mine and UXO clearance arrangements, and (xi) procurement plan. Details are outlined in the Project Implementation Plan. Road selection process. The roads for the first year works plan have been selected on the basis of a participatory process. One of the criteria influencing the final selection of roads for the first year work plan was the need to meet the general consensus that each province and each provincial department should have works in the first year, since the key objective of the project is the development of provincial capacity. Further roads will be selected on the basis of the participatory procedures as outlined in Project Implementation Plan. Implementation of road works. Works will be contracted out in line with the procurement procedures set out in Annex 6 (A) and a training program to develop qualified private contractors will be run concurrently, increasing private sector involvement in the road sector. Works will be carried out using labor-based appropriate technology (LBAT) to maximize local employment. Works will be implemented in line with the requirements of the Environmental Management Plan which will be included in all contracts and in line with the requirements of the Resettlement Policy Framework and the Indigenous Peoples Development Framework. The JFPR-ADB-RGC supported project "Mainstreaming of labor based Road Maintenance" will also support implementation of periodic maintenance works and thus implementation modalities between PRIP and the Mainstreaming project will be harmonised including but not limited to aspects such as harmonised bidding documents, implementation procedures, formats of submission to MEF in request for financing, and provision of training to the labor-based contractors. Mines and UXO clearance process. The MPWT and MRD are responsible to ensure that all mine/uxo clearance activities are carried out in accordance with UN Guidelines. Provisions will be included in all contracts for the contractor to subcontract to a certified mine clearance party and demining contractor as certified by Cambodian Mine Action Center (CMAC), a Government body. In addition, the implementing agencies will contract with a certified de-mining expert to verify the program of the contractor and the demining contractor. Alternatively, if the road has already been cleared, then MPWT and MRD shall provide certification of such clearance from CMAC or the relevant Provincial Rural Development Committee. Scope of road works. Civil works comprise rehabilitation and periodic maintenance of roads, culverts, bridges and market access arrangements and include traffic signs and localized safety improvements in particular the crossings in built-up areas. All works contracts will include tree planting along the roads with trees being selected on advise from the relevant provincial department

44 The component consists of the following: 2.1 Works US$ million (MPWT - US$ million and MRD - US$4.32 million) 2.2 Supervision consultants for works component US$9 18, representing approximately 5 percent of the cost of the works (MPWT - US$48, and MRD US$438,) 2.3 Detailed design consultants for additional roads and bridges works US$522, representing approximately 5 percent of the cost of the works (MPWT - US$366, and MRD - US$156,) 2.4 Government staff incremental operating costs for transportation and accommodation - US$72,. Design specifications. The design standards adopted for this project are the Ministry of Public Works and Transport national standards for roads and bridges (CAM PW ). A review of Roadworks Standards and Design Criteria was undertaken during project preparation, the results of which are incorporated into the designs. There have been a number of alternative surfacing trials ongoing including handpacked stone roads and the project will support implementation of some of the successfully tested alternatives. In many cases the roads will be upgraded to surfaced standards, given the rate of deterioration of gravel surfaces in Cambodia, and where justified on an economic basis. Traffic surveys carried out for the project plus those by LO around the Puok Market (on both main and secondary roads) (Refi Trafsic Characteristics around Puok Market, Socio-economic Series February 22 Ministry of Rural Development and International Labor Organisation), indicate a very large proportion of bicycles in the traffic on PRP roads, representing up to 6 percent of the traffic. Stabilized shoulders (with lime/cement/pozzalan, and using a bituminous sand seal) that appear not to be paved, yet are smooth enough for bicycle traffic are included in the designs. The shoulder will also be strong enough to resist the very aggressive steel rimmed ox car wheels. Further, considering the available resources, road standards have been somewhat relaxed in terms of width (but not load carrying capacity or safety, and so more route kilometers can be constructed with a fixed amount of funding). Road Category Carriageway width Shoulders (of suitable construction strength and preferably sand sealed) Roadway (shoulder edge to shoulder edge) Side drains Lateral clearances or berm Batter End edging Secondary National; R4 Provincial; R3 Tertiary road; R2 6.5 m 6. m 4. m (2 lanes+.25m marginal (2 lanes+.25m marginal (1 lane without margin) with white line marking) Rural & hilly area =.75 m Urban area = 1.OO m Rural & hilly = 8.m with white line marking) Rural & hilly area =.75 m Rural & hilly area =.5 m Urban area = 1. m Rural & hilly = 7.5m Urban area = 1.OO m Rural & hilly = 5.m Urban = 8.5 m Urban = 8. m Urban = 6. m Rural area = continuous Rural area = continuous Rural area = continuous road side channel road side channel road side channel Urban area = masonry side Urban area = masonry side Urban area = masonry drain drain side drain Hilly area = V gutter and Hilly area = V gutter and Hilly area = V gutter gabion walls gabion walls and gabion walls Minimum: 6. meter Minimum: 4. meter Minimum: 2. meter Clayey soil: 1V : 2H Clayey soil: 1V : 2H Clayey soil: 1V : 2H Sandy silt: 1V : 3H Sandy silt: 1V : 3H Sandy silt: 1V : 3H Dressed stone block:.2 Dressed stone block:.2 None - 4 -

45 Soil Verge width (outside of shoulder) Paved Crossfall Unpaved Crossfall (gravel) Minimum height of road surface above highest flood level in meters (2 years return period) Paved Traffic Capacity ADT (24 hrs) in PCU for 3 vears Droiected ADT Road No. I wide x.3 thick wide x.3 thick. m. m 3% 3% 5 % (Shoulder) 5 % (Shoulder).5 meter.5 meter.5 meter P 3, - 1, 1, - 3, 15-1, Labor laws. The MPWT and MRD will ensure that the civil works contractors: (i) comply with all applicable labor laws; (ii) apply equal remuneration for men and women for work of equal value without gender differentiated wages; (iii) do not employ child labor below age 18; and (iv) seek to maximize the level of female participation in appropriate construction works. Cambodia is signatory to the provisions of the International Labor Organisation. Specific labor clauses are included in all works contracts. The first year annual work program comprises (see procurement plan in Annex 6(A)), Siem Reap Location Length I Starting Point End Point (km) ($1 I Structures Of ($1 ITotal Cost ($)I Table 2.6 Component 2 - First Year Work Program for Rehabilitation Soutr Nikum District #65 Centre Junction with road ,621,778 67,59 1,689,368 #66 Junction with road 66 Beung Mealea (ch 8+427) ,144 53, 69,144 I I I #27 DamDaek Kampong Kleang , ,842 #181-1 #181-3 Samrong & Bos Sbov Communes , ,3 798,763 Kok SOW Cbone Kal District subtotall ,171, ,1751 1,58,721 I I I - I I I I -41 -

46 Project Component 3 - US$2.6 million Capacity building program. The project will support the carrying out of a program of institutional capacity strengthening for MPWT and MRD at the national level and its departments in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The project will thus support the on-going deconcentration efforts in MRD, and seek to replicate these efforts in MPWT, where applicable. Annual planning process. MPWT and MRD will carry out the training under this component in accordance with annual plans acceptable to the World Bank. Such annual training plans shall be submitted prior to any expenditure and only items on the agreed training plan shall be eligible for disbursement. Annual training plans shall include details on (i) proposed date and duration of training; (ii) location of training; (iii) full breakdown of expected cost; (iv) number of participants; (v) method of procurement and delivery of such training services. The training delivered shall be reported in the quarterly progress reports. Similarly for any incremental operating costs MPWT and MRD will incur expenditures in accordance with annual plans acceptable to the World Bank. Such annual plans for incremental operating costs shall be submitted prior to any expenditure and only items on the agreed plan shall be eligible for disbursement. The expenditures shall be reported in the quarterly progress reports. The component consists of the following: 3.1 Training program - US$457,8 covering items such as materials, venue, and contracted consultant services. 3.2 English language training - US$lSO,OOO 3.3 Computer training - US$3, External financial auditing - US$18, Financial management and accounting services - US$72, (MPWT - US$36, and MRD - US$36,)

47 External technical auditing and monitoring - US$128, Integrated Rural Accessibility Program - US$2, Office renovation costs - US$135, (MPWT - US$24, and MRD - US$111,) Vehicles and office equipment - US$l,OOO,OOO (MPWT - US$5, and MRD - US$5,) Incremental operating costs for office running costs such as office supplies and consumables, communications and printing costs, web-site maintenance costs- US$157,2 (MPWT- US$78, and MRD - US$79,2) Incremental operating costs for operation and maintenance of the project vehicles - US$192, (MPWT - US$96, and MRD - US$96,) Incremental operating costs for transportation and accommodations for project staff in carrying out monitoring and supervision - US$6, (MPWT- US$36, and MRD -US$24,). IDA funding excludes salaries or salary supplements The identified training needs of the national and provincial staffs of MPWT and MRD and the private sector consulting and contracting industry and the ITC form the basis of the PRIP capacity building program. The guiding principle for the program is to avoid, to the extent possible, project specific training and build on existing material and past efforts (e.g., MRD-RIIP-ADB; MRD-LO-Upstream-SIDA) to contribute to the institutionalization of a training and capacity building program that will become an integral part of a continuous development of human resources for the roads and transport sector. The capacity building program has identified eight types of courses, seminars, and study tours. The targeted groups can in some cases usefully participate in the same training events, for example contract supervisors (department staff or private consultants) and contractors can usefully both attend the site supervision training. Project Component 4 - US$.2 million Policy and strategy development. The project will support the carrying out of a program to improve MPWT and MRD policy and strategy development in the areas of (a) integrated planning and budgeting of roads; (b) least cost life-cycle standards; (c) use of appropriate technology; (d) mainstreaming of road maintenance; and (e) institutional reform. This component will support on-going policy development in the transport sector, primarily supporting initiatives that are already underway, including building on the recommendations of the Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) (August 23), and the National Poverty Reduction Strategy Paper (NPRS). It will further assist with specific actions identified as priorities in the Letter of Sector Policy being developed by MPWT and MRD. The purpose of this component is, thus, to ensure funds are available to pursue specific aspects of policy development, participatory approaches, analyses leading to legislative change, institutional strengthening and implementation support. Many of these areas are currently receiving support from various sources; this component will focus on gaps in this support, and on the integration and rationalization of activities as required. Some of the initiatives that are underway but which may need additional support include: (a) Integrated planning and budgeting of roads. As highlighted in the IFAPER, there is currently no reliable or consolidated information on planned andor actual expenditures on roads, nor is there information on total road expenditures by source (government, donor, private financing). It further is not clear how much of this money is released, as MEF makes many decisions over the budget

48 allocation process and disburses funds directly to implementers, whether provincial, military or private contractor. Funding decisions are not always made in a transparent manner and contracts often are not awarded competitively. This arrangement not only undercuts MPWT s role as the technical ministry responsible for the primary and secondary roads, but also destroys accountability and transparency in the use of funds. While MRD has prepared annual programs and budgets since its inception in 2, MPWT has not submitted a budget to MEF for expenditure of the national budget for the last two years. An important starting point for improving the management of the sector therefore will be to put in place a coherent and clear process for developing prioritized plans and programs. Such a process will build on the participatory planning process being used by MRD, as well as the inventories and planning tools (maintenance management systems) being established in the two roads ministries with donor (including IDA) support. Based on these plans, realistic and appropriately prioritized budgets can be prepared and submitted to MEF for approval. Provided funds are released on a timely basis and according to the agreed plan, the efficiency and effectiveness of the sector should be greatly enhanced. This is particularly true as estimates of expenditure in the road sector suggest that the problem is not the amount of money available to the sector, but rather the ineffective use of that money. Finally, as roads and transport are to be included in the Medium Term Expenditure Framework in the next round, timely assistance may be required to develop the necessary inputs. (b) Least cost life-cycle standards. In planning and prioritizing roads, it is important to take into account both the capital cost (construction, rehabilitation) and the recurrent cost (routine and periodic maintenance) over the life of the road. For higher volume roads, cost benefit analysis considers the cost of the road over its total life of, say, 15 years versus the benefits expected to accrue over the same period. For low volume roads, where the objective i s to provide basic access, the roads selected would be constructed to a standard that minimizes the cost over the life of the road. (c) Use of appropriate technology. The Policy for Rural Roads of the MRD identifies labor-based appropriate technology (LBAT) as the preferred technology for rural roads. The MPWT and PDPWTs recognize the merits of LBAT for the construction and maintenance of secondary roads, and MPWT has sought the technical assistance of LO in this regard. In some circumstances an equipment based approach may be the most suitable, depending on the type of road, terrain and available materials. Assistance to further develop and extend this approach could be a candidate for PRIP assistance. MPWT may be awarded a JFPR grant of US$2.2 million to mainstream labor-based works in that ministry. (d) Mainstreaming of road maintenance. Ensuring sustainable funding for road maintenance including both periodic and routine maintenance. The ZFAPER estimates that in 21, capital expenditures made up about 78 percent of the total spent on roads in 21, and of the 22 percent from the recurrent budget, most was spent on emergency repairs, leaving little for routine maintenance. The Fund for the Repair and Maintenance of Roads was established in 2 to ensure the availability of funding for road maintenance. However, at present the FRMR is being used to finance capital expenditures not just for roads, but also for irrigation, water supply, and other development projects, and there are serious problems of transparency and accountability. Government i s considering various approaches to improved management of the Fund, including procedures that would enable allocation and disbursement of funds against maintenance plans prepared by the technical ministries, and verification of how the funds were used through a system of technical and financial audits. Assistance could be made available under this component to help, for example, with the development of maintenance standards, guidelines, allocation procedures, and implementation of the technical and financial audits

49 (e) Institutional Reform. The move towards contracting out of maintenance services, already underway in MRD, will have consequences for the staff of MPWT, many of whom are employed to carry out maintenance activities. As more works are contracted out, MPWT and PDPWT s roles will shift from direct implementation to planning, budgeting, contracts management and monitoring. To assist staff in carrying out the new functions and minimize negative impacts, there i s need for capacity building and a well thought out program for human resource development. As a part of this, MPWT has informally requested the World Banks possible future assistance to advise on a possible program of reorientation and commercialization of the force account units. The MPWT is also reviewing options for the possible restructuring of the Ministry in other areas. Project Component 5 - US$.55 million Community awareness programs. The project will support the carrying out through MPWT and MRD of a community awareness program aimed at increased awareness by transport agencies and residents of related risks in road safety; HIV/AIDS; people s participation in road planning, and access to public information; and mine and unexploded ordnance risks and clearance programs. (a) Road Safety awareness program (US$25,) - The RGC i s developing a national road safety campaign. MPWT will be implementing aspects of this including public information campaigns, streamlining road safety into the design of their road works. (b) HIWAIDS awareness program (US$125,) - MPWT and MRD plan to target key road sections with an AIDS awareness program following the United Nations Development Program including use of standard contractual clauses in the works contracts for the target roads to address both the road workers and the surrounding residents. The HIV/AIDS protection program will be developed with assistance of the National Aids Authority and the Ministry of Health. (e) People s participation in road planning, and access to public information (US$75,) - a successful planning process was undertaken for the development of the first year work program involving extensive public participation, the same model will be used for future selection of roads. A model will also be developed for providing public information during implementation of the road works. (d) Mines and Unexploded Ordnance risk and clearance awareness program (US$lOO,OOO) - MPWT and MRD have been working closely with HALO Trust for mine path finding during project preparation

50 ~~ Annex 3: Estimated Project Costs CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) 1. Maintenance management for MPWTPDPWT 1. Maintenance management for MRDPDRD 2. Rehabilitation and periodic maintenance of 3 km of secondary and provincial roads under MPWT 2. Rehabilitation and periodic maintenance 3 km of tertiary roads under MRD. 3. Capacity building program in MPWT 3. Capacity building program in MRD 4. Policy and strategy development 5. Community awareness programs Refund of Project Preparation Facility Advances Total Baseline Cost Physical Contingencies Price Contingencies oo oo n Tr n m c I i nn v. 13 U.LJ 1.VU Total Project Cost Total Financing Required Works Goods Consultant Services Training Incremental Operating Costs Refund of Project Preparation Advances Unallocated Total Project Cost2 Total Financing Required oo oo Details of the breakdown of costs for each component are included in Annex 2. In addition the following apply: 1. The physical contingency is estimated at five percent and applied only to works and included in the works category. 2. The price contingency is estimated using foreign inflation estimated at 2 percent per annum (based on the World Bank's Development EC Planning Assumptions Note) and local inflation rate is estimated at 3 percent per annum based on the local CPI data and applied only to works. 3. Government to provide a minimum 1 percent allocation for counterpart funds net of taxes (to comply with IDA requirements applicable to all countries and projects BP6.3 September 1993). 4. Government will finance all taxes (the taxes are to be financed per category of items, the 1 percent VAT is included in the cost estimate for works) and will finance all staff allowances. 5. A nominal cost has been allocated to land acquisition and resettlement. Should any such costs arise these will be fully funded by Government. 1 Identifiable taxes and duties are (US$m) and the total project cost, net of taxes, is (US$m). Therefore, the project cost sharing ratio is 85.76% of total project cost net of taxes

51 Annex 4: Cost Benefit Analysis Summary CAMBODIA Provincial and Rural Infrastructure Project (PRIP) The objective of the project i s to reduce road transport costs and preserve the road network in an efficient and sustainable manner. The proposed investments will reduce road user transport costs by lowering vehicle operating and travel time costs. An economic evaluation was done for the Phase 1 of the project, consisting of rehabilitation and improvement works (162. km) and periodic maintenance works (96.2 km), corresponding to an investment of US$1 million (46 percent of the project civil works costs). The evaluation was done with the Highway Development and Management Model (HDM-4), which compares life cycle road costs and vehicle operating cost and passengers time savings. The table below summarizes the results of the analysis, which was done using a 12 percent discount rate. The overall Net Present Value (NPV) is US$14.2 million and the overall Internal Rate of Return (IRR) is 35 percent [For projects with benefits that are measured in monetary terms] Financial Analysis Rehabilitation Periodic maintenance Total costs: Rehabilitation Periodic Maintenance Total Net Benefits: Rehabilitation Periodic maintenance Rehabilitation Periodic maintenance Total 35% 28% 35% Summary of Benefits and Costs: Main Assumptions: Under the PRIP project three road categories are taken into consideration: Secondary National Roads (two digits), Provincial (three digits) and Tertiary Roads (connecting district centers). The result of a Transport Infrastructure Inventory is summarized in the following table: indicating road condition and existing surface

52 All Weather Dry Season Only Earth Lateritic Bitumen Earth Lateritic Surface Surface Surface Surface Surface Secondary National Roads Provincial Roads Tertiary Road Total Percent 2% 4% 1% 55% 1% Total Percent % % % % 1% To identify which roads are to be included into the PRIP project a screening and prioritization methodology was developed based upon consultation to ensure solid participation in the planning process. During provincial workshops, the participants have screened all roads on the basis of the following criteria: accessibility, population served, environmental impact, economic impact, availability of local resources, and tourism potential. At an inter-provincial workshop, a tentative Phase 1 program was selected and on the basis of this plan the detailed engineering surveys and economic analysis were initiated. Phase 1 comprises 162. km of rehabilitation and improvement works, 96.2 km of periodic maintenance works and km of routine maintenance works. The table below presents a summary of Phase 1 road works costs. Routine Maintenance Periodic Maintenance Rehabilitation and Improvement Total Table 4.2 I Phase 1 Sum" Der Works Activity I Length cost cost/km m) (US$) (US$/km) , ,521 4, ,263,152 57, ,76,57 Road works costs were estimated in financial and economic terms (net of taxes), economic costs being on average 85 percent of financial costs. Average unit maintenance costs estimates are given on the table below

53 Table 4.3 I Tvpical Maintenance Costs I IMaintenance Work I Unit Cost I Pothole patching 15. $lm2 Double surface dressing resurfacing 1.87 $lm2 Routine Maintenance 35 $h-y Reeravell in P 6. Skm The L O Upstream Project conducted a survey on road user costs in 21 and this data was updated in Siem Reap province in December 22 for the PRIP Project. Vehicle fleet characteristics and economic vehicle unit costs were defined for ten motorized vehicle and two non-motorized vehicles. The following table presents the average vehicle fleet characteristics. Vehicle Annual Annual Service Private Number Work Number Operating Loading Utilization Utilization Life Use Passengers Trips Wheels Weight Factor Type I (km) (hours) (years) (%) (#) (%) (#) (tons) (ESA) Motorcycle Motorcycle w Trailer Medium Car 4wD Light Goods Vehicle Mini-bus Medium Bus Light Truck Heavy truck I Articulated Truck Bicycle ox cart I o.ooo] The following table presents average fleet economic costs. Table 4.5 Vehicle Type Motorcycle Motorcycle w Trailer Medium Car 4wD Light Goods Vehicle Mini-bus Medium Bus Light Truck Heavy truck Articulated Truck Bicycle ox cart New New Fuel Lub. Oil Labor Crew Overhead Interest Work Non-Work Cargo Vehicle Tire Cost Cost Cost Cost Cost Rate Time Time Time ($/veh) ($/tire)

54 The following table presents typical economic unit road user costs, in $ per 1 vehicle-km, for a roughness equal to 4. IRI. * Table 4.6 Typical Road User Costs for Roughness = 4. IRI ($/looovehicle-km) Vehicle I Lub. Spare Maint. Depr. & Work Non-Work Cargo Fuel Oil Tires Parts Labor Interest Crew Overhead Time Time Time Total L Motorcycle Motorcycle w Trailer Medium Car Light Goods Vehicle Mini-bus Medium Bus Light Truck Heavy truck Articulated Truck Bicycle ox cart I The following table presents typical total economic unit road user costs, in $ per vehicle-km, for different roughness levels. Vehicle Type Motorcycle Motorcycle w Trailer Medium Car 4wD Light Goods Vehicle Mini-bus Medium Bus Light Truck Heavy truck Articulated Truck Bicycle ox cart Table 4.7 Typical Unit Road User Costs ($/vehicle-km) Roughness (IRI) For the Phase 1 roads under consideration for rehabilitation or improvement, a one-week traffic count and origiddestination survey has been carried out on Secondary National and Provincial roads and a traffic count survey was conducted for only three days in the case of Tertiary roads. In addition to the daytime traffic count survey, a night traffic count surveys was carried out on road number 65, indicating that the average night traffic is around 1 percent of the average annual daily traffic volume (AADT). Traffic volumes on Siem Reap and Kampong Thom provinces were found to be higher than on Oddar Meanchey and Preah Vihear provinces, which is explained by the relatively higher population density and economic development of Siem Reap and Kampong Thom provinces. The table below presents the average traffic volumes on the Phase 1 rehabilitation and improvement program roads

55 Table 4.8 Motorized Traffic Non-Motorized Provinces 4-Wheel Plus1 Motorcycles1 Total Traffic Siem Reap & Kampong Thom 266 I Total Traffic 3597 Otdder Meanchey & Praey Vihear I All PRIP Provinces The table below presents the typical daily traffic composition on the Phase 1 rehabilitation and improvement program roads. Typic I Traffic Composition (%) Vehicle %e Motorcycle Motorcycle w Trailer Medium Car 4wD Light Goods Vehicle Mini-bus Medium Bus Light Truck Heavy truck Articulated Truck Bicycle ox cart Total Siem Reap & Kampong Thom 35.4%.4% 1.6% 1.3% 5.5%.1%.%.9%.6%.% 45.4% 8.6% 1.% Oddar Meanchey & Preah Viheat 37.9%.%.8% 2.8% 2.3%.1%.%.3% 1.8%.% 45.4% 8.6% 1.% Given the growing network of trafficable roads, the increasing number of motor vehicles in the country, and the robust growth of Cambodia's economy, traffic has developed rapidly. Recent counts near Siem Reap indicate annual average growth rates of 16 percent for motorbikes, 4 percent for light vehicles, and 195 percent for heavy vehicles between 1998 and 2. Conservatively, for the economic evaluation, on Siem Reap and Kampong Thom provinces, the traffic growth rate was considered to vary per vehicle type between 5 and 7 percent for the first 5 years; 3 to 5 percent from years 6 to 1; and thereafter decrease to 2 to 3 percent. On Oddar Meanchey and Preah Vihear provinces, the traffic growth rate was considered to vary per vehicle type between 2 and 6 percent for the first 5 years and thereafter decrease to 1 to 3 percent. For discounting future costs and benefits to compute net present value and as a cut off point for IRR, a discount rate of 12 percent has been used; the evaluation period used was 15 years; and the construction period used was 1 year

56 ~ ~~ Rehabilitation and Improvement Works: The table below presents the main road characteristics of the Phase 1 rehabilitation and improvement program. Rov. Road Road Starting Elass No. Point End Point Table 4.1 SRP SN 65 Soutr Nikom Dist. Cen. Junction with road 66 SRP SN 66 Junction with road 66 Beung Mealea Temple P 27 Sou@ Nikom Dist. Cen. Kampong Khleang T Varin Angkor Chum P 181 Samrong & Bos Sbov Chong Kal District a P 181 KrasangCommune Chong Kal District T Kouk Mon #56B SN 71 KampongThmor ch 5+7 SN 71 ch5+7 Kampong Cham Border T Stoung Sala Visai P 213 RoVengBridge Kampong Salau T Svaypat (#&I) sdao Ipv T, a - Phase 1 Rehabilitation Starting End Point Point Soutr Nikom Dist. Cen. Junction with road 66 Junction with road 66 Beung Mealea Temple Soutr Nikom Dist. Cen. Kampong Khleang Varin Angkor Chum Samrong & Bos Sbov Chong Kal District Krasang Commune Chong Kal District Kouk Mon #56B Kampong Thmor ch 5+7 ch 5+7 Kampong Cham Border Stoung Sala Visai 213 Ro Veng Bridge Kampong Salau Svaypat (#64) Sdao Width (m) Selected Alternative Upgrade DSD Upgrade DS Upgrade SSD Upgrade SSD Upgrade SSD Upgrade SSD Upgrade SSD Upgrade DSD Upgrade DSD Rehabilitate LS Upgrade SSD Upgrade SSD qam Road Characteristics Length Motorized Traffic Non-Motorized 1 (km) Wheel Motorcycles Total Traffic Percent 46% 46% 46% 35% 37% 37% 37% 53% 53% 33% 69% 57% All roads are unpaved roads and are currently in poor to very poor condition. The economic evaluation compared up to three rehabilitation or improvement project-alternatives with a without-project alternative that consisted of keeping the roads unpaved but with a proper level of maintenance according to the functional classification and traffic. The table below presents the selected project-alternative per road and the corresponding investment costs. Total DSD - louble Surface Dressing, SSD - Single Surface Dressing. pm Investment Costs T Works Costkml Structures1 Total Cost1 Total Cos% (US$) 96, 1,627,186 47,243 6,2 579,873 52,716 78, ,692 78,279 32, ,89 32,859 28, ,5 589,593 66,246 36, ,438 1,298,352 71,338 23, ,875 42,14 33,79 92, ,291 92,858 85, ,94 85,337 21, ,741 21,721 54,496 89,25 1,91,976 59,347 36, , ,44 I 1,337,2631 9,263,

57 The following table presents the results of the economic evaluation. - j Table 4.12 Road Road I Starting End NPV IRRl Prov. Class - No. Point Point SRP SN 65 Soutr Nikom Dist. Cen. Junction with road 66 SRP SN Junction with road 66 Beung Mealea Temple.89 33% SRP P Soutr Nikom Dist. Cen. Kampong Khleang % SRP T Varin Angkor Chum % OMC P Samrong & Bos Sbov Chong Kal District.34 22% OMC P Krasang Commune Chong Kal District % OMC KT KT KT T SN SN T Kouk Mon Kampong Thmor ch 5+7 Stoung #56B ch 5+7 Kampong Cham Border Sala Visai % 4% 43% 62% PV P 213 Ro Veng Bridge Kampong Salau.3 17% PV - T Svaypat (#64) Sdao.26 2% Total I % The NPV of the rehabilitation and improvement program is US$ million and the IRR i s 35 percent. Most roads obtained a satisfactory rate of return due to the relatively high traffic for unpaved roads and the low investment costs per km of the upgrading options. The exception was the road between Krasang Commune and Chong Kal District, with a 7 percent IRR, which has 19 vehicles per day of 4-wheel plus motorized vehicles and a proposed investment of US$71,338 per km. Options of reducing the standards and investment costs of this road are being reviewed. Periodic Maintenance Works: The periodic maintenance works consist typically of regravelling 96.2 km of roads that are in poor condition, with an average cost of US$4, per km. No traffic surveys were done specifically for the Phase 1 periodic maintenance roads due to the extend of the network and the relatively low traffic on the network. Thus, the economic evaluation was done considering typical road classes with different traffic levels, which are presented on the table below. Road Class Road with 1 AADT Motorized Traffic Road with 15 AADT Motorized Traffic Road with 2 AADT Motorized Traffic Road with 25 AADT Motorized Traffic Table 4.13 Motorized Traffic Non-Motorized 4-Wheel Plus Motorcycles Total Traffic The economic evaluation was done with the HDM-4 Model and consisted on comparing a with-project alternative, representing regravelling the road and bringing it to good to fair condition (12 IRI average roughness), with a without-project alternative, representing leaving the road in poor condition (18 IRI average roughness). The table below presents the results of the economic evaluation of each road class

58 Table 4.14 I Economic Evaluation of UnDaved Road Classes I Road with 15 AADT Motorized Traffic % Road with 2 AADT Motorized Traffic % Road with 25 AADT Motorized Traffic % Conservatively, considering that the Phase 1 roads have an average traffic of 15 AADT of total motorized traffic (26 AADT 4-wheel plus motorized traffic) and that there are 96.2 km of road works, the NPV of the periodic maintenance program is US$.42 million and the IRR i s 28 percent. The evaluation of the Phase 1 periodic maintenance works was complemented using the cost-effectiveness method, which compares the financial investment costs of the road intervention with the population served on each road. The cost-effectiveness of the investments was computed due to the nature of the traffic on these roads, which is mostly low local traffic serving the local population, and the project objective of maximizing the provision of all weather access to as many person as possible per available resources. The table below presents the Phase 1 periodic maintenance program and the corresponding cost-effectiveness ratios, which expresses the amount of US dollars that the periodic maintenance will cost per population served. All road sections have a cost-effectiveness ratio less than US$ 11 per person, which is reasonable considering that a) the average GDP per capita is US$28 in Cambodia and US$ 11 represents 4 percent of the GDP per capita; and b) the investments will ensure an all-weather access to the social and economic centers. Road Road Starting End Length Cost/km Total Cost Population Prov. Class No. Point Point oun) US$^) (US$) Serve* SRP P 22 Pouk District Center Reul 8.5 4,75 4, SRP T Siem Reap Puok 1. 3,8 38, 3771 SRP T Siem Reap Rolous 8. 3,8 3,4 467 SRP T Siem Reap Peak Sneang 5. 3,8 19, 148 SRP T Peak Sneang Wat Prei 4.2 3,8 15, SRP T Chi Kraeng Khvav ,8 88, OMC P 181 Somrong & Bos Sbov Chong Kal District 9. 4, OMC P 183 Somron & Bansay Reak Kouk Mon #56B 1. 4,5 45, 121 OMC P 171 # 68 Kirivom Village #67 Anlong Veng District 1.o 5,25 5, OMC P 174 Anlong Veng District C. Trapeang Prasat.1 5, OMC T Kok Phoas Bantaey Ampil 17. 3,8 64,6 358 Total ,39 388, CE Ratio Sensitivity analysis / Switching values of critical items: The sensitivity analysis of the results show that most works will continue to show rates of return above the cutoff of 12 percent in the event of a 2 percent increase in the investment costs, a 2 percent decrease in the benefits or a combination of the two. In the latter event, the overall project IRR results to be 24.4 percent. The following table summarizes the results of the sensitivity analysis

59 ~ Table 4.16 Phase 1 Sensitivity An2 F- toad I Road IStarting End :lass1 NO. lpoint Point - Base A-Cost +2% B-Benefits - 2% SN I 65 ISoutr Nikom Dist. Cen. Junction with road % 32.1 % 3.9% SN 66 Junction with road 66 Beung Mealea Temple 32.8% 28.3% 27.3% P T P P T 27 Soutr Nikom Dist. Cen. Varin 181 Samrong & Bos Sbov 181 Krasang Commune Kouk Mon Kampong Khleang Angkor Chum Chong Kal District Chong Kal District #56B 52.3% 9.7% 22.1% 6.5% 3.9% 44.4% 76.2% 18.2% 4.4% 26.7% 42.8% 73.3% 17.4% 4.% 25.9% SN SN T KampongThmor ch5+7 Stoung ch 5+7 Kampong Cham Border Sala Visai 39.7% 43.1% 62.% 33.4% 36.3% 53.7% 32.1 % 34.9% 52.% PV P 213 RoVeng Bridge Kampong Salau 16.8% 13.7% 13.% IPV T Svaypat (#64) Sdao 2.2% 17.4% 16.8% Total Re 35.4% 3.% 28.9% Periodic 28.2% % 28.2% Total Phase % 29.9% 28.8% - A&B 25.8% 23.4% 36.2% 61.7% 14.% 2.% 22.2% 26.8% 29.2% 45.1% 1.2% 14.3% 24.2% 28.2% 24.4%

60 Annex 5: Financial Summary CAMBODIA: Provincial and Rural infrastructure Project (PRIP) Years Ending December - the financial year of the Royal Government of Cambodia I Year1 I Year2 I Year3 I Year4 I year5 I Year6 I Year 7 Total Financing Required Project Costs Investment Costs Recurrent Costs Total Project Costs Total Financing Financing I BRDA DA Government Central Provincial Co-financiers Total Project Financing Main assumptions: Costs are assumed to cover a four year period although the executing agencies will be aiming to implement within a possible three year period. Total project cost is US$23.32 million; Royal Government of Cambodia financing is US$3.32 million and IDA supported funding is US$2. million equivalent

61 Procurement Annex 6(A): Procurement Arrangements CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) Summary of the Assessment of Agency's Capacity to Implement Procurement and Measures for Strengthening 1. World Bank procurement accredited staff carried out a procurement assessment in October 22 of the implementing agencies, Ministry of Public Works and Transport (MPWT) and the Ministry of Rural Development (MRD) and their relevant provincial departments in the four project provinces, Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The assessment was discussed with the implementing agencies. The assessment indicates the risk to be "high". The reason is that the procurement of works by National Competitive Bidding is intended to be carried out by the provincial departments with clearances and support from the national offices. These provincial departments do not have experience in carrying out IDA funded or other donor funded procurement, although the provincial departments of Rural Development in Siem Reap and Kampong Thom have some experience in handling procurement of small works with other donors i.e. the United Nations Development Program and the World Health Organisation. The use of the provincial departments is integral to the objective of the project to develop provincial capacity. The national offices, which will carry out the procurement of all goods, services and International Competitively Bid works plus have a clearance function for the provincial National Competitively Bid procurement of works, do have experience with World Bank funded projects and have shown satisfactory performance in this regard. There will be no special Project Implementing Units created and the project will be implemented directly by the responsible departments. The strengths of other provincial departments have been developed under other donor supported projects and the Ministries plan to rotate staff from stronger provinces with experience to the less experienced ones to share experiences. 2. In order to mitigate the risk, the following procurement action plan has been agreed with Government and is incorporated into the design of the project as follows. Ensure that the MPWT, MRD and their provincial offices in four provinces are being assisted by a procurement consultant with excellent procurement knowledge and experience for at least the first year. Provide training of staffs in the MPWT, MRD and their provincial offices in World Bank procurement procedures. Project Implementation Plan (PIP) shall be finalized and translated into local language and distributed to all participating provinces. Conduct procurement supervision missions by one every four months for the first two years and one every six month for the year after. An annex to the procurement schedule in the Development Credit Agreement is included for National Competitively Bid (NCB) procedures containing the provisions requirements to ensure consistency in procurement procedures with World Bank's Guidelines. 3. The procurement rules and regulations of the Royal Government of Cambodia, i.e. the Sub-Decree Governing Public Procurement no. 6 dated July 31, 1995 and the Implementing Rules and Regulations Governing Public Procurement (IRRPP) dated August 31, 1995 and the Amendment in 1998, are generally consistent with the World Bank's Guidelines. The exceptions are:

62 (1) Domestic Competition Bidding (DCB), which is similar to the World Bank s NCB, is mainly designed for local bidders although foreign firms doing business in Cambodia may be permitted to submit bids (IRRPP Article 6.1.3). This provision limits the bidding to only foreign firms doing business in Cambodia. The World Bank s procedures have no such limitation. (2) Pre-qualification Scoring System (PSS) is used for evaluation of Pre-qualification Applications (IRRPP Annex 3). The World Bank requires passgail criteria. (3) The only available method for employment of consulting firm is similar to the World Bank s Quality-Based Selection Method (QBS) (IRRPP Annex 5). Under the World Bank s procedures, the preferred method for the selection of consultants is Quality and Cost Based Selection (QCBS) and other methods of selection such as Least-Cost Selection and Consultants Qualification are available. (4) Bids received must be opened publicly at the stipulated date, time, and place of opening as mentioned in the bidding documents. The bid opening time should not be more than one hour from the deadline for submission of bids. (IRRPP Article 8.1.5). For reason of transparency, the World Bank s procedures do not permit any time gap between bid closing and bid opening. (5) If there is obvious lack of competition, (unexpectedly low turn-out of bidders) or if all the bid prices substantially exceed the cost estimates, or if none of the bids conform to the specifications, all the bid may be rejected. Thereafter, a re-bidding may be done but only after measures have been taken to remedy the causes of the failure of bidding. If all the bid prices exceed the cost estimates, negotiations with the lowest - priced evaluated responsive bidder to bring down the price may be resorted to instead of calling for new bids. A reduction in price may be based on reduction in scope of the contract or reduction of responsibilities or obligations. (IRRPP Article ). The last sentence was added in the IRRPP With the 1998 addition, the only major diference with the World Bank s procedures is that negotiation is still permitted when the lowest complying bid exceeds the Govemment s cost. 4. With the above exceptions, the procurement practices in the IRRPP 1998 are consistent with international practice and the World Banks guidelines. Inconsistent procedures are addressed in the Development Credit Agreement as discussed below. Procurement variances in an annex to the procurement schedule in the Development Credit Agreement 5. As normally done for World Bank financed projects in the country, procurement variances are included in an annex to the procurement schedule in the Development Credit Agreement. The Government s sub-decree on public procurement and related procedures are acceptable and will be used for the project, subject to the following provisions in respect of contracts for goods and works financed under the Project and procured according to national competitive bidding procedures. (1) Foreign suppliers and contractors from eligible countries shall, if they are interested, be allowed to participate without being required to associate or form joint ventures with local suppliers or contractors. (2) Prior registration shall not be a requirement to participate in bidding procedures; but it may be required in the case of a selected bidder as a condition of signing a contract. (3) Pre-qualification of contractors shall be required for competitive bidding in the case of large or complex works; in all other cases, pre-qualification shall only be required in justifiable cases and with the prior approval of the Association

63 (4) When pre-qualification is required, the evaluation methodology shall be based on pasdfail criteria relating to the firm's experience, technical, financial, physical and human resource capacities. (5) A public bid opening ceremony shall take place immediately after the deadline for presentation of bids, and without any intervening time lag, and, during such public bid opening ceremony, bids shall be opened and read out in public, and in the presence of bidders' representatives who wish to attend. (6) In all cases, the award shall be made to the lowest evaluated responsive and complying bid and, except with the prior approval of the Association, no negotiations shall take place with any bidder prior to the award, even when all bids exceed the cost estimates. (7) In the case of all contracts with a duration in excess of 18 months, bidding documents shall allow for price adjustment formulae. (8) Bidders, who disagree with arithmetic corrections made by the evaluating committee during the evaluation stage, shall not be allowed to withdraw their bids without forfeiting their bid security. (9) The Association reserves the right to require that all contracts under national competitive bidding procedures financed by the Association, include a provision requiring suppliers and contractors to permit the Association to inspect their accounts and records relating the performance of the contracts and to have them audited by auditors appointed by the Association. Procurement Guidelines 6. The procurement of goods and works will be carried out in accordance with the World Bank's Guidelines Procurement under IBRD Loans and IDA credits (January 1995, revised January and August 1996, September 1997, and January 1999). The procurement of services will be carried out in accordance with the World Bank's Guidelines Selection and Employment of Consultants by World Bank Borrowers (January 1997, revised September 1997, and January 1999 and May 22). 7. As provided in the Guidelines, the procurement of works according to National Competitive Bidding (NCB) will be carried out according to the 1995 Sub-Decree Governing Public Procurement in the Kingdom of Cambodia No. 6, which is the legal basis for procurement in the country, and as supplemented by Implementing Rules and Regulations governing Public Procurement of 1995 (IRRPPs) and as amended 1998, except where such are not consistent with the World Bank relevant procurement Guidelines. The IRRPP allows that "contracts financed by external lending agencies shall be governed by the provisions of the loan or aid agreement... should there be any inconsistency or conflict between these IRRPP and the methods and procedures of these foreign institutions, the latter will prevail. In the absence of such conflicts the IRRPP may likewise be applied to foreign-funded contracts". With a few exceptions that are agreed in the annex to the procurement schedule in the Development Credit Agreement, the Sub-Decree and the IRRPPs are consistent with the World Banks procurement Guidelines. Any procurement not financed by the World Bank will be carried out in accordance with the IRRPPs

64 Standard Bidding Documents 8. The latest World Bank standard bidding documents for goods and works and standard bid evaluation reports will be used. The Standard Bidding Document - Smaller Contracts January 1995 revised June 22 and March 23 (or any update thereto) will be used for International Competitive Bidding and adapted for National Competitive Bidding. For consulting services, the World Banks standard Request For Proposals dated July 1997, revised 1998, July 1999 and March 22, sample evaluation report October 1999, and sample contracts will be used. Advertisement 9. A General Procurement Notice (GPN) was published in the United Nations Development Business online (UNDB online) and in the Development Gateway Market (dgmarket) after appraisal, announcing all procurement of goods and works on the basis of International Competitive Bidding (ICB) and major consulting services to be procured under the project. The GPN will be updated annually for all outstanding procurement over the life time of the project. For International Competitive Bidding, invitations to bid shall be advertised as Specific Procurement Notices in the "Cambodian Daily" and 'I Remsey Kampuchea", newspapers of national circulation, and will appear twice in accordance with the IRRPP and shall also be published in United Nations Development Business online (UNDB online) and in the Development Gateway Market (dgmarket). For National Competitive Bidding, invitations to bid shall be advertised as Specific Procurement Notices in the "Cambodian Daily" and "Remsey Kampuchea", newspapers of national circulation, and will appear twice in accordance with the IRRPP. All adverts will also be placed on the MPWT and MRD web sites. Implementation Arrangements 1. The project will be implemented by the Ministry of Public Works and Transport (MPWT) and the Ministry of Rural Development (MRD) including the Provincial Departments of Public Works and Transport (PDPWT) and the Provincial Departments of Rural Development (PDRD) in the project provinces of Kampong Thom, Oddar Meanchey, Preah Vihear, and Siem Reap. Within MPWT, the Road Infrastructure Department will be directly responsible and within MRD, the General Department for Technical Affairs (GDTA) in conjunction with the Department of Rural Roads will be directly responsible. The PDPWTs and PDRDs will handle National Competitive Bidding procurement of all road works with a clearance function from the national offices. Good governance provisions 11. Specific lessons learned from other projects in the region have been explicitly incorporated into the Project Implementation Plan including but not limited to the following. Standard form of advertisement required and included in the Project Implementation Plan. All adverts will be placed in the "Cambodian Daily" (in English) and "Remsey Kampuchea" (in Khmer), newspapers of national circulation, and will appear twice in accordance with the IRRPPs. The source of funding for the adverts is defined and the responsible agency to actually place the adverts is defined. A requirement that all contracts must be awarded within the 9 days bid validity period. There will be no extensions of bid validity periods. A provision that no changes to the bid documents are allowed once they have been approved. Any need for changes require new approvals

65 A specific detailed terms of reference for the field consultants providing support to the provincial departments is included so that the provincial project staff know what is expected of the consultant. Annual independent audit of adherence to the procurement procedures and of technical standards. At the end of each quarter, the implementing agency, MPWT-RID and MRD-DRR will publish in the"cambodian Daily" and "Remsey Kampuchea", for all contracts awarded to date, the following information: (i) name of all bidders who submitted a bid; (ii) bid prices as read out at bid opening; (iii) name and evaluated prices of all bids that had been evaluated; (iv) name of bidders that were disqualified and the reasons for their disqualification; and (v) name of the bidder recommended for award and reason for recommendation, price, duration and summary scope of the contract in a format to be agreed. For ICB contracts, this will be done within 2 weeks of the World Banks no objection and published in United Nations Development Business online (UNDB online) and in the Development Gateway Market (dgmarket). Anonymous calls can be made to the World Bank fraud hotline at , alternatively collect calls can be made to USA Information is also available at and included in the Project Implementation Plan. Procurement methods (Table A) Procurement Methods (Table A) A total of US$23. million of works, goods, consultant services, training and incremental operating costs is expected to be financed under the project, using the following procedures: Procurement of Works (US$18.42 million) 12. Intemational Competitive Bidding (ICB): (US$2.42 million) Rehabilitation and periodic maintenance of roads with contracts at and above US$l,OOO,OOO per contract will follow ICB procedures. No pre-qualification of bidders is proposed for any of the ICB works procurement. Where international competitive bidding is applied, a margin of preference of 7.5 percent will be granted to domestic contractors and joint ventures between domestic and foreign firms with no more than 1 percent subcontracting to foreign firms. Two or three such contracts are expected. 13. National Competitive Bidding (NCB): (US$15. million) Rehabilitation and periodic maintenance of roads with contracts below US$ 1,, per contract will follow NCB procedures. Foreign contractors from eligible countries shall, if they are interested, be allowed to participate without being required to associate or form joint ventures with local contractors. Where national competitive bidding is applied, no margin of preference i s granted. 3 such contracts are expected. 14. Non-Bank Financed (N.B. F): (US$l.O million). Routine maintenance works. Procurement of Goods (US$1.18 million) 15. Goods including office equipment (such as computers, printers, faxes etc), office furniture and office supplies and vehicles will be procured under the following procedures: 16. National Competitive Bidding (NCB): (US$.2 million) Procurement of goods such as equipment, below US$2, per contract will follow NCB procedures which are acceptable to the -61 -

66 Bank and where any interested international suppliers shall be allowed to participate. 17. International Shopping (IS):( US$O. 15 million) Procurement of goods, e.g. office equipment including computers and printers, below US$lOO,OOO per contract will follow International Shopping procedures where three quotations from at least three suppliers in two different countries shall be obtained as stated in Articles 3.5 and 3.6 of the Guidelines Procurement under IBRD Loans and IDA Credits. 18. National Shopping (NS): (US$O. 4 million) Procurement of some simple office equipment, office supplies and furniture, in different provinces would be carried through National Shopping. National shopping may be used where the desired goods are ordinarily available from more than one source in the country at competitive prices. The estimated cost will be around US$2, per contract. National Shopping will be conducted on the basis of a comparison of at least three written price quotations as stated in Articles 3.5 and 3.6 of the Guidelines on Procurement under IBRD Loans and IDA Credits. 19. Procurement through United Nations Inter-Agency Procurement Services Ofice: (US$O. 8 million) Procurement of motorcycles and vehicles will be done through the United Nations Inter-Agency Procurement Services Office. There is a wide range of specifications of vehicles to choose from at standard advertised prices. Procurement of Consultant Services (US$2.1 million) 2. Quality- and Cost- Based Selection (QCBS): (US$1, I million) Consulting services for construction design and supervision, contract management, quality assurance, contracting for roads, and capacity building of the Ministry of Public Works and Transport and the Ministry of Rural Development will follow QCBS method. 21. Least-Cost Selection (LCS): (US$O.I million) This method will be used for selection of audit firms for project audits. 22. Consultant Qualifications (CQ): (US$.5 million) These are small contracts estimated to cost less than US$lOO,OOO per contract. 23. Single Source (SS): (US$O. I million) Because of their involvement and knowledge of local issues, community needs, and participatory approaches some consultants may be procured on a single source basis. These are small contracts estimated to cost less than US$lOO,OOO per contract. 24. Selection of Individual Consultants (SIC): (US$.3 million) Individual consultants for project implementation including procurement, financial management, coordinators, civil works engineers, and technical specialists to prepare major bidding documents and technical specifications, will be contracted through SIC procedures as in clauses 5.1 to 5.4 of the Guidelines wherein it is stated that individual consultants are selected on the basis of their qualifications for the assignment. However, in exceptional cases where sole source selection is justified, the Borrower could select the consultant on sole source basis with Banks prior approval. Training (US$.7 million) 25. Expenses for training and workshops will be procured and disbursed with prior approval of the World Bank based on an annual implementation plan. Cost of training materials (printing), rental

67 facilities, transportation, food and board, and tuition for trainees will follow Statement of Expenditures (SOE) procedures. Incremental operating costs (US$.6 million) 26. This includes US$.3 million to be funded under the credit and includes the funding of 5 percent of such costs as office supplies and consumables, communications and printing costs, web-site maintenance costs, operation and maintenance of the project vehicles, costs for transportation and accommodations for project staff in carrying out monitoring and supervision. US$.3 million is funded by the Government and covers the 5 percent counterpart for the items discussed above. Any proposed staff salary supplements are separately and fully funded by Government. Table A: Project Costs by Procurement Arrangements (US$ million equivalent) 6. Refunding of Project Preparat ionadvance Total (.) (.) (.3) (.) (.3) (.) (.) (.32) (.) (.32) (3.23) (13.62) (3.15) (.) (2.) "Figures in parentheses are the amounts to be financed by the IDA Credit. All costs include contingencies. 2' Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units and procurement of vehicles from UNIAPSO

68 Table A1 : Consultant Selection Arrangements (optional) (US$ million equivalent) 1 I (.95) I (.) I (.) I (.9) I (.77) I (.9) I (.) 1 (1.9) I Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parentheses are the amounts to be financed by the Bank Credit

69 Table B indicates the thresholds for prior review. The Bank will conduct prior review of procurement documents and actions in accordance with procedures set forth in paragraph 2 of Appendix 1 to the procurement Guidelines. The following will be subject to World Bank prior review: Works: All ICB contracts and the first NCB contracts of each province for both MPWT and MRD of each year. Goods: All ICB and the first NCB and IS contracts. Consultants' Services: Contracts equal to or greater than US$lOO,OOO for firms and those equal to or greater than US$5, for individual. All single source contracts for firms. Proposed post review ratio: One out of four contracts. Table B: Thresholds for Procurement Methods and Prior Review 1. Works equal to and greater than US$1 million ICB Goods less than US$1 million NCB 7.5 National Shopping.4 all contracts I UNIAPSO Services equal to or above us$loo,ooo equal I Total value of contracts subject to prior review: Overall Procurement Risk Assessment: Frequency of procurement supervision missions proposed: High One every 6 months (includes special procurement supervision for post-review/audits)

70 The Procurement Plan shall be reviewed and approved annually by the project team of the World Bank and it shall be monitored and implemented in accordance with the Banks guidelines and the project legal agreement. Should there be a need to change the procurement method or the aggregated amount for a particular contract or method before the annual review of the procurement plan during project implementation, the Borrower shall seek the World Banks prior approval. Expected Procurement Plan for Year 1 is given in the table below. The first batch of civil works contracts i s expected to be bid out according to the following schedule with more details available in the Microsoft Project procurement schedule. Contract number I Ministry 1 code Procurement Plan for works for Year 1 (23) of MPWT I Road(Km)l Method I Province Length of Procurement Advertisement Starts Complete 1 Description Date I Works I Works 1 I I I I I I I I I I Note: ICB-International Competitive Bidding NCB -National Competitive Bidding

71 Procurement Plan for works for Year 1 (23) of MRD Province Contract number Ministry code Description Length of Procurement Advertisement Starts Road (Km) Method Date Works Complete Works I I ISu b-total: MRD First Year Works Program - Periodic Maintenance PRIPOI/SRP-RWRD6 I MRD I SRP lsrp to Pouk & SRP Rolous PRIPOl/SRP-RWRD7 MRD SRP SRP to Peak Sneng to Wat Prei NCB 1-Aug-3 25-Sep-3 25-Sep NCB I-Aug-3 25-Sep-3 25-Sep-4 Note: NCB -National Competitive Bidding

72 Procurement Plan for goods to be done Nationally by MPWT and MRD Province Estimated Procurement Advertisement Starts Complete I Contract Number I Ministry I Code I Description I cost (US.$)I Method 1 Date 1 Works I Works I Note: Total MPWT & MRDl 1,228,241 Ofice equipment is computers, printers, faxes, etc IS - International Shopping NS - National Shopping UNIAPSO - United Nations Inter-Agency Procurement Services Office

73 Procurement Plan for Consultant Services by MPWT and MRD Note: QCBS - Quality Cost Based Selection LCS- Least Cost Selection SS - Sole Source

74 Annex 6(B): Financial Management and Disbursement Arrangements CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) Financial Management 1. Summary of the Financial Management Assessment The Countly Financial Accountability Assessment (CFAA) was carried out by the World Bank and the report was delivered to the Government in May 23. It was noted that the legislative and regulatory framework governing public finances in Cambodia is generally acceptable, with the exception of the control function, which requires a complete overhaul. However, the implementation of public expenditure is very weak, resulting in a lack of transparency and a high level of risk concerning the reliability of public expenditure management. In addition, the financial management systems and procedures cannot be relied upon to provide any assurance that the public funds are used for authorized purposes. Local government accounting and budget management remain undeveloped. The system i s all in cash based and most receipts and almost all payments do not pass through bank accounts. Such a system provides many opportunities for corruption and misuse of public funds. The overall country fiduciary risk in Cambodia i s considered to be high. In spite of the multiplicity of controls and the centralized nature of the Public Expenditure Management system, weak financial management practices pose serious fiduciary risks. The fundamental problems result from a weak control environment, severe weaknesses in National Treasury operations, especially in the area of cash management, inadequacies in the public accounting system, and weak internal and external auditing capacity. These problems are so serious that the Government s budget and reporting systems cannot be relied upon to expend resources in an accountable manner. These systemic weaknesses thus raise serious concerns about fiduciary risks and possible corruption. However, such fiduciary risks are expected to be mitigated through the proposed system. These risks are considered as manageable due to the risk-mitigation measures to be taken as outlined in the financial management action plan. To assess the existing capacity at the implementing agencies a financial management (FM) assessment was carried out of the various implementing units, a summary of which is stated below. The detailed financial management assessment is available on project files. Financial management assessments were conducted at Ministry of Public Works and Transport (MPWT), Ministry of Rural Development (MRD) and Provincial Departments of Public Works and Transport (PDPWTs) of the four project provinces and the Provincial Departments of Rural Development (PDRDs) of Kampong Thom, Oddar Meanchey, Preah Vihear, and Siem Reap. MPWT has an existing FM unit at the Road Infrastructure Department (RID) which currently manages the IDA financed National Roads component of the Flood Emergency Rehabilitation Project (FEW - Credit 3472 KH) and the Project Preparation Facility Advances and the PHRD grant funds of the proposed Provincial and Rural Infrastructure Project. As a result this FM unit is conversant on accounting software, contract payments, accounting procedures including IDA disbursement procedures and IDA Financial Monitoring Reporting requirements. Since the staff at this FM unit at RID posses adequate skills in project financial management, the Government has assigned the same staff for the financial management of the PRIP subject to training on management of provincial Project Accounts and refresher training on a computerized accounting system. RID has agreed for this training to be provided by the consultant firm hired to establish a financial management system for the project. MRD has in operation two FM units for ongoing ADB and IDA funded projects and both units maintain satisfactory project accounts and a financial management system for the purpose of assessing FMS for OPBP 1.2. However, the project management of the MRD component of PRIP will be at the General - 7 -

75 Department for Technical Affairs (GDTA) through its Department of Rural Roads (DRR) which was only recently established in June 22. As a result capacity of DRR for managing the finances of PRIP needs to be developed. GDTADRR will be responsible for all aspects of project financial management of the MRD component by installing a dedicated project accounting system and the hiring and training of staff in accounting software, procedures and reporting. There is no established double entry based FMS nor is there any other accounting/financial system in the any of the eight PDPWTs or PDRDs at present which maintains Project accounts for the purpose of accessing FMS for OPBP 1.2. Some of the target provinces are allocated donor funds but these are managed by the donors or by MRD or MPWT directly from Phnom Penh through project implementation units or Provincial project implementing units which by-pass the PDRDPDPWT structure. The funds allocated under the SEILA program, a rural development fund in Cambodia, are also not managed by PDRDs or PDPWTs as these were formerly managed by the PRDCs of each province and are now being managed by the Commune Councils. All of the PDPWTs and PDRDs lack adequate capacity for its financial activities and none manage any bank accounts. Present accounting staff of these departments carry out very basic functions and their skills are very limited in these areas. Before each PDRDPDPWT can function as a fully fledged financial management unit, the staff will have to be trained on the recording and submission of appropriate documentation to Phnom Penh for paymentheplenishment and staff trained on the responsibility of management of a provincial Project Accounts. In addition, the system installed at Phnom Penh needs to be integrated into the financial units of PDPWTsPDRD and staff trained on the procedures before the provincial level financial units can function as fully fledged units. The overall assessment is that the MPWT's Road Infrastructure Department has the capacity to manage project financial activities while the capacity at the of MRD's GDTAJDRR needs to be developed. MRD has decided to assign an accountant to the GDTAJDRR who has been working on the IDA funded Northeast Village Development Project which is due to close and for which the FM was satisfactorily handled. Also the capacity at the provincial level at both MPWT and MRD needs to established for project financial management at the provincial level. 2. Audit Arrangements Annual project financial statements for each component will be produced by both MPWT-RID and MRD-GDTA-DRR for the respective project components. These shall be consolidated by RID of MPWT into project annual financial statements and audited by an independent auditor appointed under terms of reference satisfactory to IDA. The Provincial Project Bank Accounts, if any, shall also be audited by auditors acceptable to IDA as part of the annual financial audit. The auditor will be required to express opinions on: (i) the annual Financial Statements; (ii) whether the Special Account(s) funds have been correctly accounted for and used in accordance with the Credit agreement; and (iii) the adequacy of documents and controls surrounding the use of the Statements of Expenditures as a basis for disbursements. The audited financial statements will be submitted to IDA within six months of the year-end

76 3. Disbursement Arrangements Disbursement of the proceeds of the Credit would be made against expenditure categories as shown in Table C. Allocation of credit proceeds (Table C) It is expected that the proposed IDA credit of US$ 2. million would be disbursed over a period of approximately 4 years. The closing date is September 3,27. The allocation of credit and grants proceeds according to expenditure category i s outlined in Table C. Table C: Allocation of Credit Proceeds (1) Works (a) MPWT Rehabilitation and periodic maintenance (b) MRD Rehabilitation and periodic 3. I maintenance I 9 percent 9 percent (b) MRD Goods l(3) Consultants' services (a) MPWT Consultants' services (b) MRD Consultants' services (4) Training (a) MPWT training. (b) MRD training (5) Incremental operating costs (a) MPWT Incremental operating costs (b) MRD Incremental operating costs (6) Refunding of Project Preparation Advances (7) Unallocated I % of foreign expenditures, 1% of local expenditures (ex-factory cost), and 85% of local expenditures for other items procured locally. 1% of foreign expenditures, 1% of local expenditures (ex-factory cost), and 85% of local expenditures for other items procured locally. 95 percent 95 Dercent 1 percent 1 percent 5 percent 5 percent Amount due pursuant to Section 2.2 (c) of the Credit Agreement ITotal Project Costs with Bank Financing1 2. botai I

77 Use of statements of expenditures (SOEs): Reimbursement will be made on the basis of Statement of Expenditures for the following: (a) works under contracts each costing less than US$l,OOO,OOO equivalent; (b) all goods contracts regardless of the cost; (c) consultants' services under contracts awarded to consulting firms each costing less than US$ 1, equivalent; (d) consultants' services under contracts awarded to individual consultants each costing less than US$5, equivalent; (e) training, regardless of the cost; and (f) incremental operating costs, regardless of the cost. The documentation will be made available for the required audits as well as to the World Bank supervision missions, and will be retained by MPWT, MRD and in the Provincial Departments for at least four years after receipt by the Bank of the audit report for the year in which the last disbursement was made. For contracts above these amounts, Withdrawal Applications would be supported by full documentation and signed contracts. Special account: To receive IDA credit funds, MPWT and MRD shall each maintain a separate dollar Special Account at the National Bank of Cambodia or in a commercial bank acceptable to IDA on terms and conditions satisfactory to IDA, including appropriate protection against set off, seizure and attachments. The Special Accounts will cover the IDA shares of eligible foreign and local expenditures in all disbursement categories. The MPWT Special Account will have an authorized allocation of US$1.5 million with an initial deposit of US$.5 million equivalent to be withdrawn from the credit account and deposited in the Special Account. When the amount withdrawn from the credit account totals SDR 2. million equivalent, the initial allocation will be increased to the authorized allocation. The MRD Special Account will have an authorized allocation of US$.5 million with an initial deposit of US$.2 million equivalent to be withdrawn from the credit account and deposited in the Special Account. When the amount withdrawn from the credit account totals SDR.5 million equivalent, the initial allocation will be increased to the authorized allocation. Withdrawal Applications for replenishment of the Special Account would be submitted regularly, preferably monthly or whenever the Account has been drawn down by about 2 percent of the initial deposit, whichever occurs first. Financial Management Arrangements Accounts and funds flow i) National level. At the national level in Phnom Penh, each executing agency, MPWT-RID and MRD-GDTALDRR, shall maintain a Counterpart Funds Account to receive RGC counterpart funds and a Special Account to receive IDA credit funds. The MPWT and MRD Counterpart Funds Accounts shall

78 each receive an initial deposit of US$6, from MEF. ii) Provincial level. Each PDPWT and PDRD may maintain a provincial Project Account to ensure that funds are readily available for payment to small contractors. The provincial Project Accounts will be maintained in US$ and shall be opened at a commercial bank in the four provinces on terms and conditions satisfactory to IDA. Given the current lack of banking facilities in Preah Vihear and Oddar Meanchey the Project Accounts for these provinces may be maintained in a commercial Bank acceptable to IDA in Kampong Thom, Siem Reap, or Banteay Meanchey. These provincial Project Accounts will be opened with a initial advance of US$lOO,OOO per account funded by the Government and flowing through the Counterpart Funds Accounts. The provincial Project Accounts will be periodically reimbursed through a funds transfer from the Special Accounts to the Counterpart Funds Accounts (IDA funds shall not be advanced to the provincial Project Accounts). Reimbursement will be based on submission of duly certified proof of payment by PDPWT or PDRD as appropriate. Applications to replenish the provincial Project Accounts supported by appropriate documentation shall be submitted at least 3 days from the date of the last cash advance or whenever expenditures reach 1/3 of the advance, whichever comes first. All contract payments can be made from the Special Accounts and Counterpart Funds Accounts in Phnom Penh. Alternatively, if the Government wishes, contract payments up to US$lO,OOO may be made from the provincial Project Accounts. Contract payments above US$lO,OOO shall be requested by the PDPWTs and PDRDs to be paid directly to the contractor from the Special Accounts and Counterpart Funds Accounts. All contract payments will be by check drawn on the name of the contractor or by electronic bank transfer to the account of the contractor. For the purpose of facilitating payments contractors will be required, at the time of contract signing, to open a bank account in a bank of their choice, which is readily done in Cambodia. Financial Management unit set up and stafsing IDA will review the capacity of staff at all Financial Management units as the project progress and make recommendations if further staffing and training is needed. i) National Level: at MPWT-RID and MRD-GDTMDRR.. At the national level, MPWT-RID and MRD-GDTADRR will each establish a Financial Management (FM) unit. Each FM unit shall be staffed with one full time Project Accountant and at least one Assistant Accountant. Staff shall possess qualifications and experience to the satisfaction of IDA. The Ministries have already appointed the Assistant Accountants and are in the process of appointing the Project Accountants. Terms of reference are in the Financial Management Manual. The accountants will report to the respective Project Director of MPWT-RID and MRD-GDTADRR. During implementation MPWT-RID and MRD-GDTADRR will hire additional Assistant Accountants to supplement the capacity of the existing staff if the volume of work necessitates such. MPWT-RIDS assignee will be from within staff of the existing FM unit at MPWT-RID and who has thus gained experience in project accounting, English language, computer skills and in processing documentation and coordinating with IDA on replenishment applications. MRD-GDTADRR will appoint a suitable staff from within its ministry cadre, a staff who has gained experience on a donor funded project. The FM staff of MPWT-RID and MRD-GDTADRR will be given introductory training by the consulting firm on the software package and related accounting procedures. In addition, training will be provided on IDA disbursement procedures by MEF. ii) Provincial Level: at PDPWTs and PDRDs. At the provincial level, each PDPWT and PDRD will utilize existing staff in existing Financial Management (FM) units subject to capacity enhancement

79 and training. Each FM unit will be staffed with an Accounting Officer, and at least one Accounting ClerWCashier. Staff shall possess qualifications and experience to the satisfaction of IDA. Terms of reference are in the Financial Management Manual. MPWT-RID and MRD-GDTA/DRR will give introductory training to the FM staff of PDPWTs and PDRDs on managing and replenishment of a provincial Project Account, invoice processing and basic record keeping and provide follow-up on the job training during project implementation. Financial Management responsibilities The financial management responsibilities for the Project at the national and provincial level are described below. A Financial Management Manual describing in detail, the planning, budgeting, expenditure authorization, payment, recording and reporting has been produced. i) National Level: at MPWT-RID and MRD-GDTNDRR. The staff at each Financial Management unit at MPWT-RID and MRD-GDTA/DRR shall be responsible inter alia for: ensuring that World Bank guidelines and procedures are followed on disbursements, auditing and overall financial management. maintaining books of accounts and recording transactions of the Special Accounts, Counterpart Funds Accounts and the provincial Project Accounts preparing Withdrawal Applications and dealing directly with MEF and IDA on replenishments. verifying that for all transactions the supporting documentation and authorizations are adequate obtaining authorisation for payments from the Special Accounts/Counterpart Funds Accounts from the head of MPWT-RID or MRD-GDTA/DRR respectively. ensuring all expenditures follow intemal approval procedures at MPWTMRD and the payment procedures stated in the Financial Management Manual. effecting payments through check payments or fund transfers, on satisfaction of necessary approvals. preparing their quarterly Financial Monitoring Reports (FMRs). MPWT-RID shall consolidate these FMR into an overall project FMR. preparing the annual project budget for their respective project components in coordination with the respective PDRDs and PDPWTs. MPWT-RID shall consolidate these budgets into an overall project budget. preparing annual project financial statements and ensuring auditing by independant auditors and submission to IDA coordinating with MEF on counterpart fund requirements coordinating on direct contract payment requests from the provinces and effecting such payments replenishment and monitoring of the provincial Project Accounts training financial staff at the PDPWTs and PDRDs The Project Directors at MPWT-RID and MRD-GDTA/DRR shall be responsible for ensuring adequate performance and staffing of the FM unit and FM staff authorization of payments after verification by the Financial Management staff. ii) Provincial Level: at PDPWTs and PDRDs. The staff at the Financial Management units at each PDPWT and PDRD shall be responsible for inter alia: initiating and approving contracts/invoices requesting direct payments from MPWT-RID or MRD-GDTA/DRR to contractors maintaining records

80 If the province has a provincial Project Account, the staff at the Financial Management units at each PDPWT and PDRD shall also be responsible for inter alia: maintaining cash book and expenditure records preparing bank reconciliation statements and on a monthly basis (at least 3 days from the receipt of the last cash advance or when expenditures reach 1/3 of the advance, whichever comes first) submitting reports with supporting documentation to MPWT-RID and MRD-GDTA/DRR for review and replenishment of the provincial Project Account. forwarding information on expenditures to MPWT-RID or MRD-GDTA/DRR for inclusion in the overall project financial statements and for initiating replenishment effect payments from provincial Project Accounts through check payments or a fund transfers, on satisfaction of necessary approvals ensuring all expenditures follow internal approval procedures and the payment procedures stated in the Financial Management Manual. The head of the respective PDPWTPDRD shall be responsible for ensuring adequate performance and staffing of the FM unit and FM staff authorization of any payments after the verifications by the Financial Management staff Financial management system. The financial management system operational at MPWT for the IDAsupported Road Rehabilitation project will be adopted subject to modification of the chart of accounts to generate IDA required Financial Monitoring Reports (FMRs) for PRIP. The computerized accounting system with have a chart of accounts which will separately identify the disbursements of the components by each provincial and central level and will facilitate financial management and consolidation of financial statements. The computerized accounting system will be established at both MPWT-RID and MRD-GDTA/DRR to capture the transactions of the respective accounts. The proposed accounting system contains the following features: (a) application of consistent principles of accounting for documenting, recording, and reporting financial transactions; (b) use of the cash method of accounting; (c) a double entry accounting system; (d) a chart of accounts and a coding system that allows meaningful reporting to IDA and the Government; and (e) the production of quarterly financial statements acceptable to IDA. A consulting firm has been hired to assist the project in the above process. The consulting firm will design the chart of accounts taking into account the decentralizedcentralized fund flow arrangements and the centralized recording and reporting arrangements of PRIP. The Financial Management Manual is guided by the existing Financial Management Manuals of RRP and FEW and the internal invoice processing procedures in operation at the central and decentralized levels at MPWT, MRD and each PDRD and PDPWT. Appropriate procedures have been established for provincial fund flows and a single entry based manual accounting system operationalized in the provincial units given the lack of capacity in Financial Management knowledge and English in the provinces. Withdrawal of the IDA creditfinds. Disbursement of IDA funds will be based on Statements of Expenditures, Withdrawal Applications or Direct Payment Applications. MPWT-RID and MRD-GDTA/DRR shall each prepare Withdrawal Applications to be submitted to IDA for their respective Special Accounts and through MEF deal with IDA on replenishments. Signatories on the IDA Withdrawal Applications shall be the Minister of Finance and Economy or hisker designee and the Minister of Public Works and Transport/Minister of Rural Development or hisker designee. Financial Monitoring Reports. Each MPWT-RID and MRD-GDTA/DRR shall prepare quarterly Financial Monitoring Reports (FMRs) which shall include at a minimum, the following documents: 1. 1-A Project Uses and Sources of Funds by IDA Disbursement Category 2. 1-B Project Uses of Funds by Project Activity 3. Contract Expenditure reports (Goods, Works and Consulting Services)

81 4. Contract Monitoring report (Goods, Works and Consulting Services) MPWT-RID will consolidate 1A (Project Uses and Sources of Funds by IDA Disbursement Category) and 1B (Project Uses of Funds by Project Activity) prepared by MPWT-RID and MRD-GDTA/DRR into one project-wide report 1A and 1B. The Contract Expenditure and Contract Monitoring reports may be presented for each individual executing agency and be attached without consolidation. MPWT-RID will submit the consolidated FMRs to IDA on a quarterly basis within 45 days of the quarter end starting the first quarter following project first disbursement. Additional output monitoring reports will be developed, if appropriate, during implementation. Strengthening of Financial Management. It has been agreed that the MPWT-RID, MRD-GDTA/DRR and the PDPWTs and PDRDs shall carry out a time-bound action plan as stated below for strengthening of their financial management system. As a condition of credit effectiveness, the Borrower shall have established a financial management system, acceptable to the Association, including: (i) adoption of a financial management manual acceptable to the Association, and (ii) completion of appropriate training for staff of MPWT, MRD and their respective departments in the provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. When installation of the accounting system is complete IDA will review and approve the system. PRIP Financial Management Improvement Action Plan Action Item 1. As a pilot and training exercise for PRIP, install Peachtree Accounting Software at MPWT-RID to record transactions of the PPF. 2. Agreement on format Financial Monitoring Reports (FMRs). 3. Establish a computerised financial management system, including the chart of accounts, capable of providing Financial Monitoring Reports (FMRs) acceptable to IDA. 4.1 Design accounting procedures for the provincial and central levels and finalize the Financial Management Manual. 4.2 Adopt the Financial Management Manual. 5. Training of i) staff at MPWT-RID and MRD-GDTA/DRR on the accounting system and procedures ii) staff at MPWT-RID and MRD-GDTA/DRR on IDA disbursement procedures. iii) provincial staff at PDPWTs and PDRDs. Resuonsibilitv MPWT-RID with assistance from RRP. MPWT; MRD with assistance of a consulting firm MPWT and MRD i) MPWT and MRD with assistance of a consulting firm ii) MEF iii, MPWT and MRD Complete Date Completed. Completed at negotiations Effectiveness (status - ongoing) 4.1 Effectiveness (status - completed) 4.2 Effectiveness Effectiveness

82 Funds Flow Arrangements for PRIP (applies both to MPWT and MRD) j i 1 j Special Account Counterpart Funds Account I I / I / / I I I I I / I / I / I / I / I / I / I / I I 1 I / + v / / I / Payment of Contractors Provincial Project Accounts for PDPWTPDRD Kampong Thom, Oddar Meancheay, Financial Management Unit at PDPWTs/PDR& in each province I I Payments < $1,... b Initial advance from Counterpart Funds Account to provincial Project Accounts -) Reimbursement of eligible IDA expenditures to Counterpart Funds Account Payments to contractors -- 3 Request direct payments to contractors from MpWT/MRD... b Report all provincial payments to MpWT/MRD

83 Annex 7: Project Processing Schedule CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) /Time taken to prepare the project (months) I 26 I 27 I First Bank mission (identification) Appraisal mission departure 2/28/21 5/5/23 2/28/21 6/2/23 Negotiations 5/ 12/23 6/13/23 Planned Date of Effectiveness 1/3/23 Prepared by: The Ministry of Public Works and Transport and the Ministry of Rural Development of the Royal Government of Cambodia. Preparation assistance: A Japanese Policy and Human Resources Development (PHRD) grant for US$73 1, (TF Recipient executed) was received and used for project preparation by the Government to contract consulting services for the following preparation activities (including a contract with the International Labor Organisation in an amount of US$49,): (a) improve the coverage, coherence and sustainability of rural infrastructure provision in Cambodia through policy and strategy formulation; (b) strengthen the institutional framework for rural roads and transport; (c) identify rural access needs and solutions at the provincial and district levels; (d) promote small businesses in the delivery of Infrastructure services (e) assist in the Preparation of the Project Implementation Plan; (f) carry out a baseline socio-economic impact assessment and prepare an Environmental Assessment and an Environmental Management Plan; and (g) strengthen project management and monitoring capacity. Grant Implementation and Results. The grant was successfully executed. All planned outputs were completed. Both the Government and stakeholders benefited from training programs and consultative workshops carried out, as well as gaining experience in program management and administration, the establishment of separate project financial management systems, and international procurement. The Government also utilized two Project Preparation Facilities in amounts of US$26,23 (Q279) and US$114, (42791). These were used for a provincial staff training series, vehicles and survey equipment, and mine path finding by The Halo Trust (US$76,584)

84 Bank staff who worked on the I Name Alain L. Labeau Sally L. Burningham Christina Malmberg Calvo Imogene R. Jensen Jitendra J. Shah Lars L. Lund Mei Wang Clifford Garstang Lingzhi Xu Chinnakorn Chantra Preethi K. Wijeratne Rodrigo Archondo-Calla Christopher De Serio Dieter Schelling Zhi Liu Jennie Litvack Speciality Lead Transport Specialist Task Team Leader, Senior Engineer Lead Economist Senior Economist Senior Environment Engineer Senior Social Scientist Counsel Legal Consultant Senior Procurement Specialist Procurement Specialist Financial Management Specialist Technical Specialist, Transport Sector Program Assistant Peer Reviewer Peer Reviewer Peer Reviewer at project concept stage - 8 -

85 Annex 8: Documents in the Project File* CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) A. Project Implementation Plan Project Implementation Plan, August 23 Procurement Plan, August 23 B. Bank Staff Assessments Aide-memoire of identification mission, February 2 1 Aide-memoire of preparation mission, April 22 Aide-memoire of pre-appraisal mission, December 4 to 18, 22 Aide-memoire of appraisal mission, June 23 Financial Management Assessment for the PRIP project, October 22 Procurement Capacity Assessment for the PRIP project, October 22 Integrated Fiduciary Assessment and Public Expenditure Review (IFAPER) Cambodia Enhancing Service Delivery Through Improved Resource Allocation and Institutional Reform, Report No KH, World Bank, August 23 including the Country Financial Accountability Assessment (CFAA) Draft of the Country Procurement Assessment Review (CPAR), World Bank, July 23 Country Portfolio Performance Review (CPPR), World Bank, August 2 C. Other Social Assessment, May 23, Ministry of Public Works and Transport and Ministry of Rural Development for the PRIP project, Royal Government of Cambodia Environmental Assessment, June 1,23, Ministry of Public Works and Transport and Ministry of Rural Development for the PRIP project, Royal Government of Cambodia Resettlement Policy Framework, June 23, Ministry of Public Works and Transport and Ministry of Rural Development for the PRIP project, Royal Government of Cambodia Indigenous Peoples Development Framework, June 23, Ministry of Public Works and Transport and Ministry of Rural Development for the PRIP project, Royal Government of Cambodia Main Technical Report, July 23, produced by the International Labor Organisation for the PRIP project Policy for Rural Roads, April 22, Royal Government of Cambodia, Ministry of Rural Development Road Condition Survey, 23, Ministry of Public Works and Transport - Road Infrastructure Department Rural Road Inventory for Rural Road, Ministry of Rural Development, December 22 *Including electronic files -81 -

86 Annex 9: Statement of Loans and Credits CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) July -23 Difference between expected and actual Original Amount in US$ Millions disbursements' Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd PO KH-Health Sector Suppolt Project PO KH-Prov & Peri-urban Water Supply PO KH- Rural Investment and Local Governance P KH-Land Management and Administration PO KH. Eco. & PS Capacity Building Project PO KH. Demobilization and Reintegration PO KH-Flood Emergency Rehabilitation Proj P KH-BIO & PROTEC AREAS M PO526 2 KH 81 & PROT AREA M PO KH - Cambodia SAC P 63 2 KH-Forest Concession Mgt & Control Pilot PO KH-EDUCATION QUALITY IMPROVEMENT P KH-Road Rehab PO KH-SOCIAL FUND II PO KH-NORTHEAST VILLAGE PO KH-URBAN WATER SUPPLY PO KH-AGRICULTURAL PRODUCTIVITY IMPROVE Total: CAMBODIA STATEMENT OF FC's Held and Disbursed Portfolio July - 23 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 23 Amanresort SEF ACLEDA Bank Total Portfolio: Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic 2 SEF ACLEDA Bank Total Pending Commitment:

87 1 POVERTY and SOCIAL 21 Population, mid-year (millions) GNI per capita (Atlas method, US$) GNI (Aflas method, US$ billions) Average annual growth, Population (%) Labor force (%) Annex 1: Country at a Glance CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) Most recent estimate (latest year available, ) Poverty (% of population below national poverty line) Urban population ( A of total population) Life expectancy at birth (years) Infant mortality (per 1, live births) Child malnutrition (% of children under 5) Access to an improved water source (% ofpopulation) Illiteracy ( A ofpopulation age 15+) Gross primary enrollment (% of school-age population) Male Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS GDP (US$ bilhons) Gross domestic InvestmenUGDP Exports of goods and services/gdp Gross domestic savings/gdp Gross national savings/gdp Current account balance/gdp Interest payments/gdp Total debt/gdp Total debt service/exports Present value of debt/gdp Present value of debt/exports 1981 East Asia & Cambodia Pacific income Development dlamond* I , Life expectancy 33 1,649 1, ~ I I Access to improved water source Cambodia 13 Low-income group (average annual growth) GDP GDP -~ Der caoita Exporis of goods and services STRUCTURE of the ECONOMY ( A of GDP) Agriculture Industry Manufacturing Services Private consumption General government consumption Imports of goods and services (average annual growth) Agriculture Industry Manufacturing Services Private consumption General government consumption Gross domestic investment lmoorts of aoods and services Economlc ratlor -*m* Trade 1 Indebtedness Cambodia Low-income group Growth of investment and GDP (%) *MW*GDI IOIGDP I Growth of exports and imports (%) Note: 21 data are preliminary estimates. *The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete I

88 Cambodia PRICES and GOVERNMENT FINANCE Domestic prices ( A change) Consumer prices Implicit GDP deflator Government finance ( A of GDP, includes current grants) Current revenue Current budget balance Overall surplus/deficit GDP deflator -CPI I TRADE (US5 millions) Total exports (fob) Rubber Logs and sawn timber Manufactures Total imports (cif) Food Fuel and energy Capital goods Export price index (1995=1) Import price index (1995=1) Terms of trade (1995=1) , , ,451 1,95 Export and import levels (US$ mlll.) ~2,5 T I E3 Exports Imports BALANCE of PAYMENTS (US$ millions) Exports of goods and services Imports of goods and services Resource balance ,587 1, ,681 2,6 1 Current account balance to GDP (%) Net income Net current transfers Current account balance Financing items (net) Changes in net reserves Memo: Reserves including gold (US$ millions) Conversion rate (D C, /oca//us$) , ,924. EXTERNAL DEBT and RESOURCE FLOWS (US5 millions) Total debt outstanding and disbursed IBRD IDA , , , :omposltlon of 21 debt (US$ mill.) Total debt service IBRD IDA Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment Portfolio equity World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers A. IBRD E. Bilateral B. IDA D - Other multilateral F - Private C. IMF G - Short-term

89 Additional Annex 11 : Executive Summary of the Environmental Assessment CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) The Executive Summary of the Environmental Assessment June 1,23 is presented here. The full report is available separately on request or can be found on the World Bank web-site. 1. EXECUTIVE SUMMARY 1.1 Purpose of Environmental Assessment Following the World Bank Operational Directive (OD) 4. 1, this Environmental Assessment (EA) was prepared to ensure that the Provincial and Rural Infrastructure Project (PRIP) i s environmentally sound and sustainable by recognizing environmental consequences and identifying ways to prevent, minimize or mitigate adverse effects. The first purpose of the EA was to determine the characteristics of the existing bio-physical and built environments that may be impacted by the PRIP. The second purpose was to provide the basis for the Environmental Management Plan (EMP), designed to prevent or mitigate potential negative impacts that may be caused by the project. The specific objectives of the EA are to: Describe and assess the existing environments that would be affected or impacted by the proposed road rehabilitation and maintenance project; Identify and assess the types and magnitude of potential environmental impacts and identify issues or important areas of impact requiring additional, in-depth assessment; Identify and describe measures to prevent or mitigate potential environmental impacts; and Prepare an Environmental Management Plan (EMP) of impact prevention and mitigation actions to be taken and a monitoring program to ensure compliance with the plan. This EA is based upon the review of available documents, field inspections of the road sections to be rehabilitated and the environmental and social characteristics of areas through which the roads pass, and consideration of the construction methods and quantities that will be involved on each road section. 1.2 Project Description The PRIP is a 5-year project to be implemented by the Ministry of Public Works and Transport (MPWT), responsible for secondary and provincial roads, and the Ministry of Rural Development (MRD), responsible for rural roads. Located in four provinces north of Tonle Sap, the project has the long-range goal to alleviate poverty. The project area and the road sections selected for the PRIP Year-1 program are shown on Exhibit 1. The PRIP is designed to rehabilitate 3 to 4h of existing national-secondary (2-digit roads), provincial (3-digit roads), and tertiary-1 (rural roads) along their present alignments and within their existing rights-of-way (ROW). All existing roads are dirt roads. They are to be made all-season roads. Most will be bitumen coated. Many bridges and culverts, particularly along rural roads, are deteriorated or lacking but a number of bridges along provincial roads have been recently upgraded under Cambodia's Social Fund. The type and magnitude of planned works varies by road section. Works involve completion and minor

90 raising of embankments, the sealing of completed roads with either a single or double coat of bitumen, the repair or replacement of damaged or under-strength bridges and culverts, and the periodic and routine maintenance of maintainable roads in the PRIP area. Completed road sections will be 5-8m wide, with shoulders of 5-1cm. They will be constructed on existing but improved embankments of lateriteklay designed to be above the 1-year flood level. This means that the final grades will be an average of about 5cm higher than their present grades. Labour Based Assisted Technology (LBAT) construction techniques will be employed. Exhibit 1: Project Area and PRIP Year-1 Roads Where possible, embankment construction material will be obtained from borrow pits within the ROW, alongside the existing roads. However, on four road sections, it will be necessary to obtain materials from outside the ROW. In these cases, laterite or clay material will be bought from land owners at agreed prices per cubic metre extracted and be transported by truck to each road section. Gravel will also be transported by truck from quarries nearby. Embankment material and gravel will be spread by hand. Borrow pits will be approximately 2cm deep (laterite is located in this soil zone). After materials extraction from pits within the ROW, the pits will be finished as wide ditches to drain the completed roads or as ponds to retain water for local use and aquaculture. Borrow pits outside the ROW will be graded and stabilized or, when requested by local communities, made into ponds. Information on the road sections selected for PRIP year-1 and the planned works program is summarized in Exhibit 2. Examples of the road cross-sections designed by the International Labour Organization (KO) are shown in ANNEX A.1.1 Project Description.

91 Road Section Siem Reap NR-65 Soutr Nikum NR-6N?-66 NR-66 NR-65A3 Mealia VaridA. Chum Tertiary road Kampong Thom NR-71 K. ThmorK. Cham border Stoung NR-6lSala Visai NR-64 Tertian road Oddar Meanchey PR-181 SamrongJChangkal districts Kouk Mon, NR-56PR- 183 Tertiary road Preah Vihear PR-213 Phnom Deik NR-64/Rik Reav commune Svaypat NR-64lSdao Tertiary road Total (approximate) Exhibit 2: Summary Information on PRIP Year-1 Roads Approx Length (W west I 1 north km Road width 8m Double-coat bitumen seal Some embankment material from outside the ROW Road width 8m Double-coat bitumen seal Road width 5.25m Single-coat bitumen seal Works Summary Road width 8m Double-coat bitumen seal Some embankment material from outside the ROW Road width 5.25m Single-coat bitumen seal Road width 8m Single-coat bitumen seal Some embankment material from outside the ROW Road width 5.25m Single-coat bitumen seal Road width 8m Single-coat bitumen seal Some embankment material from outside the ROW Road width 5.25m Single-coat bitumen seal 25cm gravel base course 44, cu.m. gravel 25cm gravel base course 18, cu.m. gravel 2cm gravel base course 22, cu.m. gravel 25cm gravel base course 3, cu.m. gravel 2cm gravel base course 28, cu.m. gravel course 36, cum. gravel course 13. cu.m. gravel 25cm gravel base course 4, cum. gravel 2cm gravel base course 25, cu.m. gravel I Approx cost o ~ Notes: Several road sections are expected to take more than 1-year to complete. No road in the Year-1 works program passes through or close to an important wetland, forest area, river, or archaeological site. Costs provided by ILO are stated to be indicative only. Construction will be similar on all roads. Differences lie in the number of bitumen coats, the gravel base course and the road width. Roads will have laterite or clay base overlain by gravel compacted by vibrating compactor. Bitumen will be heated in-situ and applied to all roads, 2-coats for national and provincial roads, 1-coat for provincial and rural roads. Gravel and laterite embankment material (for the 4 road sections where there is insufficient material within the ROW) will be transported by truck. Embankment material and gravel will be spread by hand

92 1.3 Rights-of-way National highway rights-of-way (ROW) are 5m, 25m each side of the road centreline. Provincial road ROW are 4m, 2m each side of the road centreline, and for rural roads, the ROW are 3m, 15m each side of the centre line. But Cambodian practice i s to take a clear zone considerably less in width than the legal ROW. Clear zones of 8-1m, sufficient for all PRIP roads, are vacant along all roads selected for PRP Year-1. There will be no resettlement, no acquisition of assets and, therefore, no need for compensation payments. However, asset acquisition may be required in PRIP Years 2 to 5 should part of a required clear zone be used by villagers. For example, if it were used for farming or contain fruit-bearing trees, residences, commercial buildings, or other structures that would need to be removed. In such a case, compensation would be paid to users and owners according to the MPWT and MRD policies on Involuntary Resettlement. Rights-of-way (ROW) in the Kingdom of Cambodia are governed by the Prime Ministerial Edict: Measures to Eliminate Anarchical Land Grabbing (1 999), declaring public land on the verge of roads that must not be occupied per the ROW determined for each type of road. 1.4 Environmental Baseline Information on the environmental baseline i s set out in Exhibit 3. Exhibit 4 shows PRIP Year-1 roads in relation to national reserves and sanctuaries and that no PRIP Year-1 road enters or crosses a reserve or sanctuary. Exhibit 3: Summarj Road Section Environmental Baseline Information - PRIP Year-1 Roads Environmental Baseline Siem Reap: Road clear-zones are adequate for all planned works and no resettlement is necessarv. NR-65 Soutr Nikum, NR-6 to NR-66 NR-66 From NR 65 to Boeng Mealia Koul (A, Chum) to Varin Tertiary or rural road Over the 22km of road there are 18 different villages and a high population density. Land is very productive with much of it in paddy rice and mixed agriculture. The existing road of laterite carries a high volume of traffic compared to other PRIP roads. The clear-zone is adequate and no resettlement is necessary. No pictures were taken over this particular 9km stretch with 3 villages. The environmental setting is very similar to that on the northern part of NR-65 and the western part of NR-66 ( just west of NR-65) and parts of the Koul to Varin road. The land is sandy soil with patches of rice paddy and scrubland. The population density and traffic volume are much lower than along NR-65. The area around the first part of this road from Angkor Chum to about km13 is productive rice paddy. After that, proceeding north, the soil becomes sandy and of low productivity except in scattered cleared areas among scrubland. In the area of sandy soil, the setting is similar to that along NR-66 (above) but the ROW is surrounded in parts by land mines that are currently being cleared

93 I Road Section Kampong Thom: Road "clear-zones" are adequate for all planned works and no resettlement is necessary. NR-71 K. Thmor to K. Cham border Stoung NR-6 to Salavisai on -64 Tertiary or rural road Two road sections Environmental Baseline The land traversed by the road for the first 6km is very productive and reflected in the population density. After about km6, the land deteriorates to dry scrubland on dry sandy soil with only occasional patches of rice in lower lying areas (e.g., around Sralau Toung - kml to kmll). There are two abandoned factories at km9. There are two road sections: approximately 21km in a west section and approximately 6km in the east section. The two sections are different. Only the west section is included in PRIP Year-1. There are 19 villages along the western 21km, indicating high population density. Also there are many trees along this section of road and in several villages -- but away from the road the area has been logged and cleared for agriculture. The east 6km section passes through land of sandy soil of low productivity and the road and bridges are extensively damaged. The road runs E-W crossing a large number of small seasonal streams. Extensive seasonal floods imdede access severely. Oddar Meanchey: Road "clear-zones" are adequate for all planned works and no resettlement is necessary. PR-181 SamronglChangkal districts Two road sections Kouk Mon, NR-56 to PR-183 Tertiary or rural road There are two road sections: approximately 12km on the northern section and 6km on the southern section. Both are located in an area of sandy soil. Only the northern section is included in PRIP Year-1. There are patches rice land of low productivity in logged and partly cleared forest and scrubland. The northern section has more extensive rice paddy lands and a higher population density than the southern section but both are in very similar environmental settings. The 12km road connects two E-W road sections of very poor condition. The areas of sandy soil and lenses of loam support patches of rice paddy amongst logged forest and scrubland. There is only one bridge over a seasonally wet ditch. There are no streams. Preah Vihear: Road "clear-zones" are adequate for all planned works and no resettlement is necessary. PR-213 Phnom Dek, NR-64 to Rik Reav Commune Svaypat, NR-64 to Sdao Tertiary or rural road The road runs partly along the north side of Boeng Per Wildlife Reserve. Srae Thnong, near NR-64, is an indigenous community. From NR-64 to about Rik Reav Commune, there are large rice paddy areas and smaller patches of rice amongst scattered logged forest and scrubland. The 24km section of road included in the PRIP Year-1 program crosses two small rivers. North of Rik Reav almost to the Saen River crossed by a broken high viaduct bridge, the land is sandy for some 15km. There are no houses, no rice paddy and only poor quality logged forest and scrubland. This tertiary road, 27km in length traverses 14 small bridges, areas with many trees, and large stretches of sandy soil. There are few areas of rice paddy and low population density (3 villages along 27km of road)

94 1.5 Summary of Likely Impacts Negative environmental impacts will relate principally to construction activities. Impacts include those resulting from short-term construction traffic, dust, noise and other nuisance, potential erosion, and damage to small ponds and wetlands. Because construction activities using LBAT methods use human labour rather than heavy equipment, many of the impacts normally caused by road rehabilitation activities will be less significant than those caused by mechanized construction methods. For example, the noise, dust, air pollution and traffic problems created by many thousands of truck movements transporting earthworks materials will be much reduced as will the use of graders. Embankment material will be spread by hand. Borrow pits will be shallow and dug by hand. Hence, the land will be easy to stabilize and restore or the pits made into ponds. The LBAT construction method will employ many local people from villages along the roads. They will return home at night but to cope with day-time sewage and domestic waste, latrines and domestic waste disposal pits will be constructed at suitable locations adjacent to worksites. The Social Assessment (SA) of communities along PRIP Year-1 roads identified the social baseline, addressed potential impacts including those on Indigenous Peoples, and found Srae Thnong on PR

95 (Preah Vihear province) to be an ethnic-minority community. For this reason, an Indigenous Peoples Development Plan (IPDP) was prepared for Srae Thnong. Both the SA and IPDP are under separate covers. Long-term negative impacts will be confined to those arising from increased traffic and travel speeds along the roads and the potential for long-term damage to reserves due to the increased access provided by the roads. One road selected for rehabilitation in PRIP Year-1 (PR-213) abuts a short, 7km stretch of the northern boundary of Boeng Per Wildlife Sanctuary. The current road is wide and graveled and the section alongside the sanctuary easily accessible by car. The proposed treatment will upgrade the base of the road, bituminize its surface and improve drainage and culverts. Positive socio-economic impacts will include reduced travel time and cost, improved access to health and education facilities, services and cultural activities, improved access to markets and employment opportunities, short-term jobs created during the construction period, and improved access to heritage sites (to improve tourism income generation). Benefits will also derive from improved flood control through the drainage facilities to be installed as part of the road designs. The improved drainage will result in better year-round access, particularly during the wet season when road sections often flood. When roads have been rehabilitated, cars and 4-wheel drive vehicles used by Police and other Government authorities, as well as NGOs, will have easier and faster access to areas served by PRIP roads (compared to the current easy access only by heavy trucks). 1.6 Impact Mitigation Impact mitigation measures identified below relate to the above issues and to the need for the management of travel speed, truck axle loadings, and the dissemination of road safety information to villages located along the alignments. This EA only addresses potential impacts that may be created during PRIP Year-1. However, the EMP and Environmental Impact Checklist will guide EA in all PRIP years when candidate roads are considered for inclusion in annual works programs. 1.7 Conclusions from the EA The existing or baseline environment and potential project-caused environmental impacts have been identified for all road sections included in the PRIP Year-1 Works Program. These are typical, well understood, and can be either readily avoided or easily mitigated, for example, by adopting good engineering practices. Impacts will be addressed by implementing standard impact prevention or mitigation measures, for example, by adopting normal engineering practices, to ensure that: Adequate temporary and permanent drainage is constructed; The faces of embankments and waste materials piles are stabilized and planted to prevent erosion; Borrow pits are stabilized or finished to become fish-ponds or wide drainage ditches; Tree planting and landscaping and the design treatment of bridges, enhance the road-scapes and increase the benefits accruing from the project. Involuntary resettlement is not required for PRIP Year-1 roads and not expected to become a major issue in subsequent years. The EMP set out below will be included in the Contract Documents for each road section

96 1.8 PRIP Environmental Management Plan Activity or Impact Impact Description and Mitigation Measures to be taken IUST, ODOR, AIR and NOISE Refer to MPMk Specification :ction 1.1 lust, odor and dry materials Dry material handling and transport produce large iandling amounts of dust. The Contractor shall prepare a dust control program. Water shall be sprayed where dry materials are handled, crushed and transported. Vehicles transporting materials will be covered to reduce spills and dust. Mixing and crushing plants will be equipped with filters or water sprays. Operators should wear dust masks and ear protection. )ust from road works Regular road user vehicles and construction vehicles create large amounts of dust. Water shall be sprayed during construction, particularly in towns and villages, to ensure that dust is minimized throughout the construction zone. iir pollution and noise Vehicle and equipment emissions cause air pollution and noise. Vehicles and equipment will be maintained to meet Cambodian emission and noise standards (or Thailand s standards if these are acceptable to MOE). Construction within loom of a village or town will be limited to daylight hours. WATER and WATER RESC JRCES Refer to MPWT Specification ~ :ction 1.1 )amage to wetlands ponds & Wetlands and ponds are valuable natural habitats vaterways and resources for human use. Wetlands and ponds are to be retained wherever possible or replaced. Where appropriate the design of culverts will incorporate slots for inserting wood or sheet metal to form water-gates behind which water could be retained for dry-season use. Extra care will be taken to prevent runoff from works sites entering water bodies, wetlands, rivers or other sensitive areas by providing and maintaining sediment controls such as silt traps, rice-straw bales and plant cover within and around work sites. Stockpiles and materials waste piles will be located away from wetlands and water-courses. ilteration of drainage The quality of water in water bodies and the flow of water in watercourses are important for natural habitats and human use of natural resources (e.g., water and fish). Materials will be properly disposed of so as not to block streams and watercourses or damage water quality. Dry streambeds will be kept unobstructed and are not to be altered. Materials are not to be borrowed from streambeds. Tater Contamination h e most severe water quality impact would be from,pilled bitumen, diesel or waste oil. These Location and Timeframe Throughout corridor During construction houghout corridor 3uring :onstruction rhroughout corridor During construction Wherever encountered During construction Wherever encountered During construction See site plans Implementation & Monitoring Contractor/ MPWT-RID ES Sontractor 3s?ontractor HOE 3 Contractor RIDIDGTA Environmental staff (ES) Contractor ES Contractor MOE

97 tagnant water and sect-bome disease vectors,ilting PROTECTION of CULTUR 'rotection of cultural heritage 'rotection of national parks & onservation areas substances are toxic to living organisms. Bitumen, diesel and waste oil will be handled and stored carefully to prevent leakage or spill. Waste oil will be collected, stored in drums and disposed at a site approved by the Engineer (according to MOE advice). Waste oil storage will be in drums, raised off the ground, covered to keep rain out and surrounded by a bund to contain any spills and simplib clean UP. The Contractor shall prepare a Spill Contingency Plan (including measures to be taken and equipment to be used) to ensure adequate clean up of any spills. Standing waters often lead to the spread of insect-bome diseases such as malaria, dengue fever and schistosomiasis. Contractors will minimize standing waters by removing used tires and storage drums and ensuring adequate temporary drainage. Silting of water bodies causes deterioration in water quality, loss of use for human consumption and damages habitats. Sediment traps or ponds will be built and maintained to intercept drainage waters and capture sediment before it reaches any water body. L SITES, NATIONAL PARKS and CONSERVAT Road construction can damage cultural and heritage sites and artifacts When an archaeological s& is found, work will be stopped immediately and the Project Manager be notified. Then the Contractor will take the following steps: J Isolate the location, then call the Apsara Authority to assess the site and determine whether and how it should be preserved; J Document andphotograph the site and area immediately around it; J Stop construction until advised by the Apsara Authority to proceed. When an archaeological artifact is found, work is, again, stopped immediately and the Project Manager and Apsara Authority notified to assess the artifact and determine whether and how it should be excavated and moved. The Contractor: J Documents and photographs the artifact and the area immediately around it; J Does not proceed with construction until advised by the Apsara Authority. Roads provide access to protected areas and so can contribute to damage to forests, to poaching of flora and fauna and to trade in endangered species The MPWT/MRD will advise the Ministry of Environment (MOE) when a road is to be rehabilitated within 5km of a national park, conservation area or wildlife reserve. The MPWT, in concert with the MOE will design facilities to be built along the road to control access and to accommodate officers involved in enforcement of park access, anti-poaching and CITES regulations. uring construction 'herever encountered uring construction ee site plans bring construction IN AREAS Wherever necessary luring construction Wherever necessary luring construction ES Contractor ES Contractor ES Contractor RID and DGTA ES APSARA Authority Contractor RID and DGTA ES MOE oil Erosion Eroded material from embankments, waste disposal Primarily at water Contractor sites and borrow pits can block ditches and culverts, damage adjacent land and cause deterioration in water quality. crossings During construction ES

98 Slopes will be drained adequately, graded and :onsolidated and then planted. idequate temporary and permanent drainage will $e constructed and maintained. Culverts will be cleared regularly to prevent sbstruction of runoff andflood-water. Construction will be undertaken in the dry season zs much as possible. Works sites will be cleared in stages to meet :onstruetion needs and planted immediately after :onstruetion so as to minimize the area of land :leared or disturbed at any one time. agricultural land and restoration of borrow pits Loss of arable land and topsoil diminishes farm and.ncomes and wastes natural resources. irable lands should not be used as borrow or rtorage sites but where unavoidable, the topsoil dl be removed and replaced after excavation. 4fter materials extraction, borrow pits will be :raded and planted or made into ponds. 'hroughout corridor )uring construction Contractor RID and DGTA ES Solid Waste Disposal from work camps & works sites I Loss of trees Tree planting and environmental enhancement Solid waste can create nuisance, encourage disease iectors (such as flies and rats) and block drainage :hannels. hfficient garbage containers will be provided in :onstruetion camps and at works sites, and be "tied daily, the waste being disposed of in a bndfill approved by the Engineer. Frees along the edges of the ROW provide valuable ;hade, landscape features and improve air quality in iillages by trapping dust. rrees will not be cleared from the ROW without prior approval by the Engineer. Tree planting will be carried out where ippropriate in order to enhance the ambiance of he immediate environs around the road. A total budget of $US2, is set aside to purchase 1, seedlings of indigenous tree species, 1 to be plantedkm along the road as advised by local :ommunities. Fach Contract will be allocated $5 for tree ilantingper km in the Contract. Payment for tree planting will be by lump sum for 111 materials, labour, equipment and other expenses he Contractor may incur as follows: 9 25% of the lump sum when 5% of the Contract price has been paid. 9 25% of the lump sum upon issue of the Taking-Over Certificate. 9 5% of the lump sum upon issue of the Defects-Liability Certificate. MPWT/MRD will work with the local authorities, oca1 communities and the Department of Forestry o prepare and implement an appropriate ree-planting program. :onstruction camp and iorks sites lefore and during onstruction Jear trees along ROW see EA) luring clearing Contractor ES Contractor Forest Dep't RID and DGTA TRAFFIC, PUBLIC CONVE Maintenance of traffic flow and Road safety b e existing road serves many users and contributes o local and national incomes. Vormal traffic flow will be maintained by :ooperation among the Contractor, the Provincial bansportation Department, and the Police. rhe Contractor will: 9 Control construction vehicle speed through clear instructions, road safety education and fines. 9 Provide for adequate traffic flow around construction areas. 9 Provide adequate signage and barriers 'hroughout comdor luring construction Contractor RID and DGTA ES

99 lamage to roads used as haul 'outes toad use monitoring - Iperational phase to control traffic. 9 Communicate to the public through newspaper and village notices regarding the scope and timeframe of works and access restrictions. Road construction traffic often damages rural roads used as materials haul routes. Trucks used for hauling construction materials are to be restricted in size to 5 cu. m. capacity in order to reduce damage to rural roads during the construction period. Contractors shall restore roads damaged during construction. Traffic speed and truck overloading can damage road surfaces and cause accidents. Road use and axle loads will be monitored. 4 traffic safety awareness program will be implemented to raise awareness of potential dangers caused by increased motorized traffic and travel speeds and the particular problems caused by the mix of slow-moving and faster moving All rehabilitated roads During operations Contractor RID and DGTA ES RID and DGTA Police LOCAL PARTICIPATION nal employment 'ublic information I Many unskilled job opportunities will be created in digging and placing embankment material, in checking its quality, in digging and maintaining temporary and permanent drainage, in compacting slopes, spreading soil, and so on. Local villagers will be employed wherever possible. Locally affected people require information about the road works and potential impacts. Meetings will be held with community representatives to discuss the project, its impacts, and community issues. Signs and information sheets are posted on and around construction sites to provide information about the project. Provide opportunities for local residents to communicate with the Engineer. Maintain a register of complaints and how they were followed up. Wherever possible During construction All works areas Before and during construction Contractor RID and DGTA Contractor RID and DGTA ES Steps to ensure implementation of the EMP The two ministries will include the EMP in the Contract Documents for each works package. At the Pre-Bid Meetings, the two ministries will explain the EMP, the impact mitigation requirements and the associated cost implications, to short-listed contractors. The MPWT and MRD will engage the services of a suitable Environmental Consultant sub-contractor to deliver basic environmental training to contractors, supervisors, engineers and ministry staff and to monitor environmental management performance during construction. Soon after the appointment of contractors, the Environmental Consultant will deliver seminars to the contractors, supervisors, engineers and ministry staff. The seminars will explain the causes of environmental impacts caused by road works, the prevention and mitigation of those impacts by implementing the EMP and by following the Specifications, and the environmental management monitoring to be undertaken during the construction period. The Environmental Consultant will prepare for the Supervising Engineer, monthly environmental monitoring reports with respect to compliance with the EMP and the Specifications (detail on monitoring i s provided in section 5.2)

100 Additional Annex 12: Resettlement Policy Framework CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) The overall goals of the proposed Provincial and Rural Infrastructure Project (PRIP) are to reduce rural poverty and expand economic and social development, and to contribute to the national re-integration of the project provinces into the mainstream national development. The development objective of the project is to provide sustainable, year-round, and safe improvements in rural accessibility to markets and essential services in the four provinces of Kampong Thom, Oddar Meanchey, Preah Vihear and Siem Reap. The PRIP will rehabilitate and maintain strategic secondary and tertiary roads in the four northwest provinces covered by the project. Since the project will rehabilitate existing roads, no significant acquisition of private assets and displacement of population are foreseen. It is, however, possible that rehabilitation of some road sections and development of market areas may require acquisition of land or people may need to be resettled. This could result in loss of private assets, including loss of incomes or place of residence. The Resettlement Policy Framework, presented below, addresses adverse social impacts that may result due to involuntary acquisition of assets and changes in land use and includes provision for compensation and rehabilitation assistance. 1. DEFINITIONS Compensation means payment in cash or in kind for an asset to be acquired or affected by a project at replacement cost. Cut-off Date is the date prior to which the occupation or use of the project area makes residentshers of the project area eligible to be categorized as affected persons. The cut-off date coincides with the date of the census of affected persons within the project area boundaries. Persons not covered in the census, because they were not residing, having assets, or deriving an income from the project area, are not eligible for compensation and other entitlements. Eligible landholders are affected persons who (a) hold title to land; or (b) do not hold title but whose possession of land can be legalized with a title pursuant to the Land Law of Cambodia. Entitlement means a range of measures comprising compensation, income restoration support, transfer assistance, income substitution, and relocation support which are due to affected people, depending on the nature of their losses, to restore their economic and social base. Project Authorities are the Ministry of Public Works and Transport through its Road Infrastructure Department and the Ministry of Rural Development through its Directorate General of Technical Affairs. Project Affected Persons (PAPS) includes any person or persons, households, a firm, or private or public institution who, in the context of acquisition of assets and change in land usage, as of the cut-off date, on account of the execution of the project, or any of its subcomponents or part, would have their: (a) Standard of living adversely affected; (b) Right, title, or interest in any house, land (including residential, commercial, agricultural and grazing land) or any other moveable or fixed assets acquired or possessed, in full or in part,

101 permanently or temporarily adversely affected; or (c) Business, occupation, places of work or residence or habitat adversely affected, with or without displacement. PAP includes persons and affected household and consists of all members of a household residing under one roof and operating as a single economic unit, who are adversely affected by a project or any of its components. For resettlement purposes, affected persons will be considered as members of affected households. Rehabilitation means assistance provided to project affected persons seriously affected due to the loss of productive assets, incomes, employment or sources of living, to supplement payment of compensation for acquired assets, in order to achieve, at a minimum, full restoration of living standards and quality of life. Replacement cost. With regard to land and structures, replacement cost is defined as follows: For agricultural land, it is the pre-project or pre-displacement, whichever i s higher, market value of land of equal productive potential or use located in the vicinity of the affected land, plus the cost of preparing the land to levels similar to those of the affected land, plus the cost of any registration and transfer taxes. For land in urban areas, it is the pre-displacement market value of land of equal size and use, with similar or improved public infrastructure facilities and services and located in the vicinity of the affected land, plus the cost of any registration and transfer taxes. For houses and other structures, it is the market cost of the materials to build a replacement structure with an area and quality similar to or better than those of the affected structure, or to repair a partially affected structure, plus the cost of transporting building materials to the construction site, plus the cost of any labor and contractors fees, plus the cost of any registration and transfer taxes. In determining the replacement cost, depreciation of the asset and the value of salvage materials are not taken into account, nor is the value of benefits to be derived from the project deducted from the valuation of an affected asset. Resettlement means all measures taken to mitigate any and all adverse impacts of a project on PAP property and/or livelihood s, including compensation, relocation (where relevant) and rehabilitation as needed. Vulnerable group are distinct groups of people who might suffer disproportionately or face the risk of being marginalized from the effects of resettlement and specifically include: (i) female headed households with dependents, (ii) disabled household heads, (iii) households falling under the generally accepted indicator for poverty, (iv) elderly households with no means of support and landlessness, and (v) indigenous minorities. 2. CAMBODIAN LEGAL PROVISIONS The Constitution of Cambodia provides for land acquisition for public purposes. In Article 2 it states that Nobody shall be forced to transfer his or her ownership, if forcing is necessary in public interest and if no proper and just indemnity has been paid to owner. Regarding compensation, Article 4 of the Constitution states that..the right to confiscate (land) possession from any person shall be exercised only in the public interest as provided for under law and shall require fair and just compensation. Some protection for vulnerable groups is also specified in the Constitution in Article 73: The State shall give full consideration to children and mothers. The State shall establish nurseries, and help support women and children who have inadequate support and Article 74: The State shall assist the disabled and the families of combatants who sacrificed their lives for the nation

102 The new 21 Land Law provides that no person shall be deprived of their ownership unless this action is for the public interest consistent with formalities and procedures provided by laws and regulations, and after just and fair compensation there are currently no such laws and regulations and there continues to be an absence of definition for just compensation. In addition, a person holding illegally possessed property cannot claim compensation, even if there i s a title (Article 19). Further, any illegal and intentional or deceitful acquisition of the public domain of the State or public legal entity shall be punished with a fine and/or imprisonment. This penalty can be doubled if the landholder is held to damage or delay work in favor of the common interest, especially the possession of land necessarily reserved for maintaining roads. Under the new Land Law, those who have occupied a right of way or public properties may not be entitled to any compensation or social support, regardless of their being an affected person or a member of a vulnerable group. Although individual rights to ownership and compensation are protected by present laws, there are no clearly defined specific provisions or a mechanism for land acquisition by the State through expropriation. The expropriation of immovable properties is based on decisions of government staff and implementation in an ad-hoc manner varying from one project to another. Traditional private land ownership was abolished during the Khmer Rouge period ( ) and was not re-introduced until the late 198s. Determining ownership and obtaining documentation to prove ownership is a cumbersome and time consuming process which many landholders have not utilized. The boundaries of public land still remain unclearly defined and it can be difficult to distinguish between public and private land. This blurring between public and private land is particularly acute with regard to rights of ways for roads, irrigation channels and the like. There was no specific law or regulation on rights of way until 1999 when a Government of Cambodia Decree identified a 5-meter right of way for some specified national roads and 6 meters for other national roads. The width of other rights of way varies depending on the type of road. No efforts were made to publicize the claimed rights of way and no physical demarcations have been made for these rights of way. Presently, the Government s Inter-ministerial Resettlement Committee (IRC) i s charged with determining entitlements, valuation of affected assets and in fixing of compensation rates. Current legal provisions governing land acquisition, compensation and resettlement in Cambodia do not meet the objectives and principles of World Bank s Operational Policy (O.P.) 4.12 on Involuntary Resettlement. This policy framework conforms to the objectives and principles of the World Bank s O.P In the case of any inconsistency between the provisions of the Cambodian legal framework and this policy framework, the Cambodian law shall be waived to the extent necessary. 3. OBJECTIVES AND PRINCIPLES OF THE POLICY 3.1 Overall Objectives This Policy framework seeks to address the inadequacy of the existing legal provisions discussed in the previous section. This policy is based on the philosophy that the project must serve the needs of society and ensure that PAPS are at least as well off due to the project. This can be ensured through the following basic objectives: (i) Avoid involuntary resettlement where feasible and minimize resettlement where population displacement is unavoidable,

103 (ii) Ensure that displaced people receive compensation, assistance and rehabilitation so that they would be at least as well off as they would have been in the absence of the project, (iii)paps will benefit from the project, and (iv) Project stakeholders (which includes PAPs) are consulted and given the opportunity to participate, as practicable, in the design, implementation, and operation of the project. (v) Appropriate assistance and compensation, in cash or in kind, provided to adversely affected people, including indigenous groups, ethnic minorities and pastoralists who may have usage or customary rights to the land or other resources taken for the project. Three important elements of involuntary resettlement are: (i) compensation for loss of assets, loss of livelihood and income, (ii) assistance for relocation, including provision of relocation sites with appropriate facilities and services, and (iii) assistance for rehabilitation to improve, or at least restoration of incomes and living standards to the pre-project level. 3.2 Principles on Compensation and Entitlements The overriding principle for all development projects i s that people unavoidably affected should be compensated and assisted, so that their economic and social future would be at least as favorable as it would have been in the absence of the project. This will be accomplished using the following specific principles. (1) Acquisition of land and other assets and shifting of people will be avoided and minimized as much as possible. (2) Only PAPs who are found to be living in, doing business, or cultivating land, or having rights over resources within, the project area as the date of the census (cut-off date) are eligible for compensation for loss of assets, other assistance and rehabilitation for social and economic losses. PAPs will be compensated for affected land, either through receiving replacement land or replacement cost for their land or by receiving special assistance in lieu of compensation for land located on public rights of way. If landlessness results from this taking of land for public purposes, then suitable replacement land shall be provided for landless PAPs. (3) cost. All compensation for affected land, structures, and other fixed assets shall be paid at replacement (4) The resettlement transition period will be minimized and the acquisition of assets, compensation, resettlement and rehabilitation for a segmenthection or phase (except where long-tem rehabilitation measures such as vocational training) will be completed at least one (1) month prior to the initiation of construction work under the respective segmenthection or phase thereof. (5) PAPs losing all of their assets (farmland, house or business), or in case of partial loss when the remaining assets are determined as un-viable for continued use, will be entitled for compensation for the entire assets at replacement cost. (6) In the case of a partial impact on the assets, Le., partial loss of land or structures and the remaining assets remain viable for continued use, compensation for the affected assets will be paid in cash. (7) Other types of landholders who are on a right of way or public land as of the cut-off date will be

104 compensated for affected structures, other fixed assets and other losses but not for land. However, such affected persons shall receive special assistance such that they are not made worse off by the project taking the land on which they were located. (8) In case of land for land for arable land, the replacement land should be in the form of land of equivalent productive value and/or characteristics at a location acceptable to PAPs. If replacement land at a location acceptable to PAPs is not available, cash representing replacement cost of land should be compensated. (9) In case of land for land for residential and commercial sites, the Implementing Agency shall provide PAPs the appropriate plot of land with basic services such as electricity, water, drainage, emergency sanitation service, and access at least at the pre-project level. (1) For resettlement site land, the plot owner of the proposed relocation site will also be entitled to compensation for hisher land, and depending on hisher choice, the compensation may be in cash or in the form of a replacement land within or outside the relocation site. (11) The project authorities will provide resettlement assistance and the following minimum allowances to eligible PAPs: (a) Disruption allowance shall be given to PAPs whose business income i s temporarily lost due to the project. The independent shops on a right of way that temporarily lose business during construction are eligible for this allowance. The allowance should be provided in cash based on the temporary projected business income lost, (b) Vulnerable group assistance shall be provided for vulnerable families, such as female-headed household, poor families, and disabled headed households in an amount that shall assist them to become economically viable. In addition to any specific allowances to which members of vulnerable groups may be entitled, they shall also receive rehabilitation assistance based on their priorities and needs. (c) Rental allowance shall be given to house tenants of affected main structures who will be forced to find a new place to live, at an amount equivalent to three months rent. It shall also be given to affected persons forced to lease premises until replacement land and housing is available to them up to a maximum period of three months. (d) Transportation allowance (in cash or in kind according to mutual agreement of the PAP and the project authorities) to relocating PAPs. When the allowance i s in cash, it shall be an amount equivalent to actual transportation costs. (e) Repair allowance is given to PAPs affected by a partial loss of structures and those affected during moving locations based on cost of repairs. (12) Rehabilitation assistance is a form of special skills training or other development support to PAPS severely affected due to the loss of productive assets and/or their only source of income and which will require them to engage in some other income-earning activities. The project authorities, by consulting with stakeholders, will coordinate closely with concerned agencies (local authorities and independent assigned NGOs) that have the mandate and the expertise to undertake the needed rehabilitation assistance. - 1-

105 (13) The project authorities will provide vulnerable PAPs the rehabilitation assistance needed to cope with a new environment and to improve their status. This assistance shall be based on the needs and priorities of the vulnerable groups. (14) Any PAPs loss due to any acquisition or restriction on access to common resources as a common property will be mitigated by arrangements of such property that will ensure, as a first option, that new access of those PAPS to an equivalent resource will occur on a continuing basis, if feasible. If it is not feasible, then other alternatives shall be identified in consultation with the PAPs. (15) Resettlement programs will include adequate institutional arrangements to ensure effective and timely design, planning, consultation and implementation of compensation and resettlement. The project authorities will ensure effective coordination with relevant agencies for the implementation of the Resettlement Plan (RP). (16) Adequate arrangements will be made for the timely conduct of social assessments, inventory of affected assets, socioeconomic survey, and the preparation and implementation of RPs, including the timely conduct of internal and external monitoring of RP implementation. General entitlements for compensation and rehabilitation assistance for different categories of PAPs are shown in the Entitlement Matrix below but the relevant Resettlement Plan may provide for more specific or additional allowances. Type of Loss Application Entitled Person Compensation 1 Arable land Loss of arable land. Temporary acquisition or easement Eligible landholder Non-titled but possessory landholder1 Agricultural laborer Lease holder Eligible landholder Land for land or cash compensation for lost land at replacement cost according to AP choice. Land for land will be provided in terms of a new parcel of land of equivalent productivity and free of taxes, registration and transfer cost; at a location acceptable to PAP; and with long-term security of tenure. Eligible for economic rehabilitation assistance and other allowances, as applicable. No compensation but additional assistance given so that they are not worse off due to the project and to enable them to replace affected assets. Cash compensation for agricultural laborer equivalent to three months salary and assistance in getting alternative employment. Cash compensation equivalent to replacement cost of gross harvest for one vear. Cash compensation based on opportunity lost during the period

106 Residential land Commercial land Loss of residential land Temporary accluisition Plots used for business affected Eligible landholder Non-titled but possessory landholder Lessee Eligible landholder Non-titled but possessory landholder Lessee Eligible landholder Non-titled but possessory landholder Lessee Compensation in cash at replacement cost or, at PAP choice, replacement land of minimum plot of acceptable size or a plot of equivalent size, whichever is larger, in a nearby resettlement area with adequate physical and social infrastructure. Replacement land to be free from taxes, registration and transfer costs. Eligible for relocation assistance and other allowances as applicable. No compensation but additional assistance provided so that they are not worse off due to the project and enable them to redace affected assets. Eligible for relocation assistance and other allowances, as applicable. Cash compensation for the net loss of income and damaged assets. Assistance provided so that they are not worse off due to the project. Cash compensation and other allowances. as auulicable. Compensation in cash at replacement cost for the affected portion or, at PAP option, replacement land of sufficient size for business continuation in market area of resettlement area or at location comparable to previous site. When the affected premises are larger than the relocation plot, cash compensation at replacement cost to cover the difference in area. Eligible for relocation assistance and other allowances, as applicable. Eligible for economic rehabilitation assistance. No compensation but additional assistance provided so that they are not worse off due to the project and the assistance enables them to replace affected assets. This includes replacement land of sufficient size for business continuation in market area of resettlement area or at location comparable to previous site. Eligible for relocation assistance and other allowances, as applicable. Eligible for economic rehabilitation assistance. Assistance for finding new commercial place. Eligible for relocation assistance and other allowances, as applicable

107 A Structures Loss of business I incomes or employment Standing crops, trees Common resources Electric andor water connection Public facilities Special assistance Structures affected Loss of business I incomes I employment Crops or trees affected by land acquisition or temporary acquisition/ easement Loss of access Loss of, or damage to, affected assets, partially or entirely. Loss of, or damage to, public infrastructure Special assistance to vulnerable group and indigenoust ethnic minorities Owner Tenant Affected APs Owner of crops or trees APS A P S Concerned agencies Vulnerable groups and indigenous1 ethnic minorities Eligible for economic rehabilitation assistance Compensation in cash for affected portion of the structure and other fixed assets at replacement cost, without depreciation and without deductions for salvaged material. Assistance in restoration of any remaining structure, if applicable. Eligible for relocation assistance and other allowance. Three months rent allowance and other allowances as applicable. Cash compensation for the loss of business, incomes and wages. Assistance during the transition period. Eligible for rehabilitation assistance and other allowances, as auulicable. Compensation in cash calculated on the basis of type, age and productive value of affected crops or trees. Other allowances as applicable. Arrangement for new resource or rehabilitation assistance. Replacement or compensation to cover cost of restoring the facilities. Replacement or compensation in cash at replacement cost to respective agencies. Vulnerable group and indigenous peopleslethnic minorities assistance I allowance based on identified needs and priorities. 4. Public Participation and Consultation The project authorities would be responsible for public consultation and public information dissemination. Consultations and public participation would be carried out as an ongoing process throughout project planning, design and implementation stages. Preparation of appropriate documents and planning and implementation for the acquisition of land and other assets will be carried out in consultation with the PAPs and the PAPs will receive prior information of the compensation, relocation and other assistance available to them including:

108 The relevant details of the project; The resettlement plan and various degrees of project impact; Details of entitlements under the resettlement plan and what is required of PAPS in order to claim their entitlements; Compensation process and compensation rates; Relocation and resettlement site development operation in order to obtain agreement and support of affected people in participating in these operations; and Implementation schedule with a timetable for the delivery of entitlements. Information concerning grievance procedures and how to use them. The project authorities would also provide a detailed explanation of the grievance process and enlist the help of village leaders and other influential community officials in encouraging the participation of the PAPs in resettlement activities. Finally, the project authorities shall attempt to ensure that all vulnerable groups including indigenous peoples/ethnic minorities understand the process and that their needs are specifically taken into consideration. Public participation is performed and information is made available during both preparation and implementation of the Resettlement Plan and should include, at a minimum, public information booklet, community meetings and television and radio reports. 5. Grievance Redress mechanism Grievances related to any aspect of a project will be handled through negotiations and are aimed at achieving consensus. All complaints received in writing (or written when received verbally) from the PAPs will be documented by each level grievance committee, established by the project authorities at varying governance levels, Le., commune, district and/or provincial levels. PAPs will be exempted from all administrative and legal fees incurred in pursuant to the grievance redress procedures. Grievance committees would comprise of representatives of PAPs, community leaders and independent assigned NGOs, in addition to the representatives of commune and district officials, and project authorities. If PAPs do not receive any response from an established grievance redress body (at whatever level) within 2 (twenty) days from the filing of the complaint, or if the decision of grievance redress body is not satisfactory, the PAP will have the right to submit the complaint to the next higher level of the grievance redress mechanism. If the matter still remains unresolved after all levels of grievance redress have been utilized, the complainant may then forward hisher case to a court of law. In projects where indigenous minorities are affected, all complaints shall be discussed and negotiations shall be carried out in the community where the affected indigenous minorities live. Where necessary, the project proponents will provide assistance so that the rights of the indigenous minorities are protected. In addition to the above mechanisms, and at the option of the PAPs, grievances may be taken to other mediating bodies, such as a council of village elders, monks at a local pagoda, or any other dispute resolution mechanism as may be decided by the PAPs

109 6. Monitoring and Evaluation 6.1. Internal Monitoring The WB-PIU2 would appoint adequate full time staff to monitor the process of resettlement. In order to assist with this monitoring, the authorities shall obtain and maintain appropriate baseline data prior to the resettlement impacts. The monitoring staff will submit periodic progress reports to the involved authorities for inclusion in the progress report. The main objective of the reports is to determine whether the resettlement is effective and to make the needed recommendations for change. The monitoring staff will be present in the field as well as at every meeting related to resettlement External Monitoring In the project, sub-project or any component thereof, with significant resettlement, an external agency will be contracted to monitor the process of resettlement. The external monitoring agency would be provided full access to project documents and database to facilitate monitoring process. The external monitoring agency will prepare periodic monitoring reports for submission to the WB-PIU2 of MPWT as well as to the World Bank. In the event monitoring by either the internal or external monitor shows that PAPs are not receiving entitlements due to them, or there are other problems in implementation in accordance with the Resettlement Plan, then the project authorities will take, on a priority basis, all steps necessary to rectify the situation and ensure compliance with a Resettlement Plan. 6.3 Evaluation Six months to one year after the completion of resettlement in the project, the project authorities will contract a competent external agency for ex-post evaluation of resettlement implementation to determine whether the objectives of the policy have been achieved and severely affected PAPs have been able to restore their incomes and livelihood to the pre-project levels. Where necessary, and based on the outcome of the evaluation, additional assistance would be provided by the project authorities to achieve the objectives of the policy framework. 7. Reporting and Documentation 7.1. Initial Social Assessment The project authorities will carry our initial social assessment to determine potential social issues and likely adverse impacts at the sub-project identification stage. Based on the initial social assessment decision can be taken on the types of detailed studies and field investigations required and necessary documentation. 7.2 Abbreviated Resettlement Plan Where in a sub-project less than 2 people are affected due to the loss of assets, incomes, employment or businesses, project authorities would carry out field surveys covering full census of affected people and inventory of affected assets, and prepare an abbreviated Resettlement Plan. The abbreviated Resettlement Plan would include: (i) brief description of the sub-project, location and its impacts; (ii) consultation with project affected people; (iii) the baseline information of affected people; (iv) category - 15-

110 of PAPs by degree and type of impacts; (v) entitlement to compensation, allowances, and rehabilitation assistance by category of impacts in a compensation matrix; (vi) information on relocation site, where applicable; (vii) institutional responsibilities for implementation and monitoring; (viii) grievance redress procedures; (ix) estimated cost of resettlement and yearly budget; and (x) a time-bound action plan for implementation. 7.3 Resettlement Plan Where in a sub-project more than 2 people are affected, project authorities would be required to conduct detailed field investigations including census, inventory of affected assets and socio-economic baseline surveys of severely affected persons and prepare a Resettlement Plan for submission to the Bank. The Resettlement Plan (RP) would include: (i) brief description of the sub-project, location and its impacts; (ii) principles and objectives governing resettlement preparation and implementation; (iii) Legal framework; (iv) the baseline information of affected people; (v) category of PAPs by degree and type of impacts; (vi) entitlement to compensation, allowances, and rehabilitation assistance by category of impacts in a compensation matrix; (vii) information on relocation site together with socio-economic conditions on the secondary PAPs and host communities; (viii) institutional arrangement for planning and implementation; (ix) participatory procedures during planning and implementation; (x) grievance redress procedures; (xi) estimated cost of resettlement and yearly budget; (xii) a time-bound action plan for implementation; and (xiii) internal and external monitoring procedures, including the TOR for external monitoring and evaluation. 8. LEGAL AND INSTITUTIONAL REQUIREMENTS The Ministry of Public Works and Transport (MPWT) and Ministry of Rural Development (MRD) are jointly responsible for planning and implementation of the PRIP. As the project proponent, both the ministries will be responsible for, at a minimum, the following resettlement activities: (a) Carry out all necessary surveys and field investigations and preparation of necessary documents; (b) With assistance from other relevant agencies and local authorities, implementation of resettlement activities in accordance with the approved RPs; (c) Address all deficiencies identified in resettlement implementation; (d) Ensure timely allocation of resources and budgetary provisions, and process compensation claims of PAPs to ensure that the same are paid in time as planned; and (e) Supervise and monitor RP implementation. 9. Costs and Budget Necessary funds for planning and implementation of Resettlement Plan / IPDP will be provided by the project authorities. The project authorities will also provide for all costs related to mitigating adverse social impacts based on budgetary requirements established in the RP. All of these costs are to be a part of the total project cost. Each RP will detail cost estimates for compensation and relocation (if applicable) of PAPs with a

111 breakdown by category of PAPs and by type of asset affected, such as agricultural, residential, and commercial land; affected house, structures and other fixed assets; and type of assistance, such as transport allowance, disruption allowance, etc. The cost estimates will include adequate provisions for contingencies. In case of overruns due to unforeseen circumstances or delays, the project authorities will allocate additional funds as necessary. 1/ Special assistance can include provision of suitable land., rental allowances, disruption allowance, etc., as well as a vulnerable group allowance. The main point is that affected persons are not made worse off than they would have been had the development project not taken place. 2/ Where significantly large or entire landholdings are affected by the project or in cases where only partial land is affected but the remaining land becomes economically non-viable, the general mechanism for compensation of lost agricultural land will be through provision of land for suitable land arrangements of equivalent productivity and at a location acceptable to the PAP. Where the PAPs stand to lose are losing residential land with structures that exist in a closely located group exceeding 2 households, the project authorities, in consultation with affected households, may offer a relocation option to fully developed resettlement sites, or alternative facilities to housing projects. If suitable residential / agricultural replacement land is not available, and at the informed request of the PAPs, cash compensation at replacement cost will be provided

112 I. Introduction Additional Annex 13: Indigenous Peoples Development Framework CAMBODIA: Provincial and Rural Infrastructure Project (PRIP) 1. The overall goals of the proposed Provincial and Rural Infrastructure Project (PRIP) are to reduce rural poverty and expand economic and social development, and to contribute to the national re-integration of the project provinces into the mainstream national development. The development objective of the project is to provide sustainable, year-round, and safe improvements in rural accessibility to markets and essential services in the four provinces of Siem Reap, Oddar Meanchey, Kampong Thom, and Preah Vihear. 2. The PRIP will rehabilitate and maintain strategic secondary and tertiary roads in the four northwest provinces covered by the project. Since the project will rehabilitate existing roads, no significant acquisition of private assets and displacement of population are foreseen. Three of the project provinces are known to have some indigenous ethnic minorities. Preliminary information suggests that several indigenous minorities live in the forest areas, some distance away from the existing roads. Some indigenous minority communities live close to the provincial roads or villages and are likely to benefit from the project in terms of improved access to markets and new opportunities for income generation. No significant adverse impacts on indigenous minority groups are foreseen but in some cases their access to community resources may be affected. It is also possible that rehabilitation of some road sections and development of market areas may result in increased in-migration, creating pressure on the land. The Indigenous Peoples Development Framework, presented below, addresses the principles and procedures for sub-projects in areas where indigenous ethnic minorities reside. 11. PRIP and Operational Directive As a prerequisite to World Bank support, PRIP must meet the requirements of Operational Directive 4.2 (Indigenous Peoples). This policy directive requires that special measures be established to protect the interests of ethnic minorities, i.e. social groups with a social and cultural identity distinct from the dominant society that makes them vulnerable to being disadvantaged in the development process. Indigenous peoples can be identified in particular geographical areas by the presence in varying degrees of the following characteristics: (a) a close attachment to ancestral territories and to the natural resources in these areas; (b) self-identification and identification by others as members of a distinct cultural group; (c) an indigenous language, often different from the national language; (d) presence of customary social and political institutions; and (e) primarily subsistence-oriented production. 4. The largest ethnic minority groups in Cambodia include people of Vietnamese and Chinese descent, Muslim Chams and ethnic Lao, all of whom, although (b), (c), and (d) above are present, are generally not considered to be indigenous to the area where they live in Cambodia, and therefore not covered under the OD 4.2. However, the Bank has determined that OD 4.2 applies with reference to indigenous minorities, often referred to as Highland Peoples, because these groups are indigenous to the area where they reside, and maintain cultural and socioeconomic practices different than those practiced by the Khmer national majority. Though their numbers are relatively small in proportion to the national population, the Highland Peoples are estimated to represent a majority of the population in Ratanakiri and Mondolkiri provinces, both in the northeast. They represent much smaller proportions in other provinces. These groups, among them the Tampuan, Kuy, Jarai, Phnong, Kreung, Kavaet, Brou,

113 Stieng, Lun and others, are estimated to total about 12, people, or about one percent of the national population. 5. It is estimated that indigenous communities are present in three of the four PRIP Provinces: Preah Vihear (Kuy), Kampong Thom (Pear and Kuy), and Siem Reap (Kuy). PRIP activities will not affect land tenure or otherwise cause any direct adverse impacts. However Highland Peoples lifestyles and livelihoods are under pressure in some areas because of in-migration by others, forestry concession programs, and discouragement of shifting cultivation practices. PRIP-related improvements of roads and infrastructure could well induce future in-migration and pressure on access to resources. For these reasons, the Highland Peoples are considered potentially vulnerable to being disadvantaged in the development process, and this plan reviews actions taken, or to be taken, to safeguard their interests. 6. In the context of this project, it is important to note that the OD 4.2 refers to social groups and not to individual families. The identification of ethnic minorities in the project area will therefore be triggered by the identification of groups of ethnic minority families and individuals. 7. The primary objectives of OD 4.2 are: to ensure that such groups are afforded meaningful opportunities to participate in planning that affects them; to ensure that opportunities to provide such groups with culturally appropriate benefits are considered; and to ensure that any project impacts that adversely affect them are avoided or otherwise minimized and mitigated. 8. The following general principles and procedures will be applied during project preparation and implementation, if ethnic minorities are identified in any of the project areas. For the purpose of this Framework, the project areas are defined as the area influenced by the upgrading of the road (approximately within 3 km from the road). In the PRIP project the purpose of the Framework is to ensure culturally appropriate consultation with indigenous minorities (where present), an opportunity to participate in the project, and additional support needed for coping with the impact of improved access The Cambodian Legal Context 9. Under the Cambodian constitution, the Highland Peoples are afforded Cambodian citizenship. However, at present there is no comprehensive legislation or regulation relating specifically to protection of Highland Peoples rights or interests. 1. In 1997, a special Inter-ministerial Committee for Highland Peoples Development released a draft General Policy for Highland Peoples Development. The draft, culminating from a long process of consultations among local groups, NGOs, international development agencies and government, has never been formally adopted by the government. The policy statement would provide a number of protections for Highland Peoples, many relating to land rights and access to resources. Of particular importance in the context of RILGP are these provisions in the general policy statement: the government shall promote understanding and respect of cultural diversity and ensure that Highland Peoples can practice their own cultures (para. 1); Highland Peoples shall have the right to be fully informed about, determine the priorities for and to exercise control over their economic, social and cultural development (para. 6);

114 and this provision in the policy guidelines section of the document: Highland Peoples communities shall be given the opportunity to participate and take responsibility in all decisions regarding infrastructure projects that affect them. The affected community and persons must have agreed, after being fully informed in a language that they clearly understand, of the project and all its consequences for them and their natural environment, before any development project may proceed (para. 7.2). 11. For the purposes of PRIP, the above policy provisions have guided project design and implementation arrangements. Specific measures to ensure adequate opportunities to participate in both village and commune decision-making processes are explained in the sections that follow. IV. Framework for identifying and assisting indigenous minority communities under the project 12. After the overall prioritization of roads to be rehabilitated has been done in a participatory process of stakeholders at the provincial level, and the next years roads identified, the detailed planning starts. The road-by-road social assessment is one of the activities incorporated into the detailed planning of works to be carried out on individual roads. This will follow the Project Implementation Plan, which specifies the technical, environmental and social procedures and standards. With regard to social aspects, the major areas of activities are (i) Information dissemination and consultation, (ii) identification of the need for land acquisition, after minimization (alternatives) has been considered, and (iii) the identification of indigenous minorities for whom special measures would have to be taken. 13. For each subproject with indigenous minorities, the project authorities will prepare a standalone Indigenous Peoples Development Plan, based on extensive consultations, and will be part of the annual work program to be approved by the project authorities and submitted to IDA for review. 14. A social impact assessment and consultations would be carried out in preparation of the Indigenous People Development Plan (IPDP). The impact assessment will include the following information: (a) Household ownership of economic and productive assets; (b) Annual income from primary and secondary opportunities; (c) Economic information on the community (e.g., brief information on economic and natural resources, productive and livelihood systems, tenure systems); (d) Social information on the community (brief description of kinship, value system, type of social organizations of formal and informal groups, farming groups, etc., especially those that can help the group in adjusting to the potential impacts of the project and including an assessment of the degree of inclusiveness and representativeness of those groups, particularly with regard to vulnerable, marginal, and poor groups); (e) Potential impact on basic services (e.g., water supply, health center, and school); and ( Potential impact of the project on social and economic livelihood. 15. In order for meaningful consultation and participation to take place, specific steps will include: a) information dissemination conducted in the local language; b) an indigenous minority representativeaeader and an independent assigned NGO representative or a social scientist knowledgeable in indigenous peoples history and tradition are present in all discussions with clusters of - 11-