Initial Project Information Document (PID) Report No: AB141. BANGLADESH-Road Sector Reform Project Region. Project Name

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Initial Project Information Document () Report No: AB141 Project Name BANGLADESH-Road Sector Reform Project Region South Asia Regional Office Sector Roads and highways (100%) Theme Infrastructure services for private sector development (P); Other public sector governance (S) Project P Borrower(s) THE GOVERNMENT OF BANGLADESH Implementing Agency(ies) MINISTRY OF COMMUNICATION/ROADS HIGHWAY DEPARTMENT Address: Sarak Bhaban, Ramna, Dhaka, Bangladesh Contact Person: Chief Engineer, Mr. Rabiul Islam Tel: Tel: (880-2) /0598 Fax: Fax: (880-2) , Environment Category B (Partial Assessment) Date Prepared June 26, 2003 Auth Appr/Negs Date September 15, 2004 Bank Approval Date March 15, Country and Sector Background Context. Bangladesh, a country having an area of 144,00 sq.km, and a population of 130 million, has about 0.55 million motorized and 1.5 million non-motorized vehicles. Transport, storage, and communication contribute about 9 percent to the country s GDP. Transport has been growing at about 6 to 7 in the last decade, and it is dominated by the road sub-sector, which accounts for 73 percent of the surface passenger trips and 63 percent of the freight traffic. As the largest sectoral expenditure, road capital investment accounts for about 20 percent of the Annual Development Plan (ADP), or about 1.7 of GDP (37.7 billion taka; US$650 million in 2000). Because of this large investment, Bangladesh has built an extensive 220,000 km road network, of which about 25,000 km is paved. The road network is classified into four broad categories: National, Regional, Feeder, and Rural roads. Feeder roads are further divided into 'Type A' and 'Type B'. The Roads and Highways Department (RHD), under the Ministry of Communication, is responsible for managing a 21,000 km road network (62% paved) made up of National Roads (3,086 km), Regional Roads (1,751 km), and Feeder Roads - Type A (15,962 km). [These lengths will change once the road re-classification approved by GOB in late March 03, is implemented]. The National Roads carry over 60% of the total traffic on the RHD network. Except for some missing links and east-west connections, the major road network is now substantially complete. Total RHD road assets are valued at over US$7.4 billion, making it the largest single asset in the country, and underscoring the need for preserving this asset. RHD received 11.9% of Annual Development Plan funds over the last 5 years. It had an annual budget of around US$ 486 million in fiscal year , of which 431 million (89%) was for capital expenditure (through the Annual Development Plan), and US$55 million (11%) for maintenance and operating expenses (Revenue Budget). RHD has implemented three IDA-assisted projects. It has a well surveyed/ documented road & bridge network on a GIS and a well established computerized asset management cell. The Local Government Engineering Department (LGED), under the Ministry of Local Government and Rural Development, is responsible for managing the 200,000 km secondary road system, comprising

2 2 Feeder Roads Type-B (22,988 km) and Rural Roads (178,236 km). About 17% of this network is paved. LGED received 12% of the Annual Development Plan funds during Main Issues: Governance and Efficiency of Road Sector Investments. Lack of a rationale planning & investment prioritization framework limits RHD s ability to optimize resource allocation among competing priorities, or to maximize the development impact of road sector investment and maintenance program. To address this, the project supports development and adoption of MTBF for RHD, with a view to rationalize RHD s expenditure across network maintenance, operations, and new road construction; and to introduce better portfolio management including early completion of ongoing priority projects, limiting new start-ups to projects with acceptable ERR or clear poverty impact within the context of integrated road network. Resource Mobilization & Sustainable Maintenance Financing. According to preliminary estimates, resources mobilized from the road sector currently account for less than 50 percent of the total road sector expenditures in Bangladesh. Inadequate resource generation has made Bangladesh s road sector overly dependent on foreign aid, currently accounting for some 40 percent of road development expenditure. The current practice of maintenance neglect, followed by large rehabilitation programs is sub-optimal and very expensive. Reliance on budgetary support for road maintenance has not worked, and does not link road sector expenditure with road use. Road maintenance funding has remained inadequate in recent years (between 33% to 50% of network need), creating the need for an investment of about US$300 million to restore sections of the RHD network to maintainable condition. A more secure and stable source of financing is urgently needed to fully fund network maintenance needs. The project will help introduce sustainable road maintenance financing in Bangladesh to fully fund priority road network maintenance needs. This will involve moving road maintenance financing from budgetary support, to dedicated funding raised through increased revenue mobilization from road users. Strengthening of Road Sector Institutions: RHD s institutional structure, incentive framework, internal processes and limited management autonomy are not aligned to achieve its stated goal...to provide the people of Bangladesh with a safe, cost effective and well maintained road network. The project supports institutional reforms and related measures to strengthen RHD capacity to better manage its network, focus on its core activities, and evolve into a modern, commercially oriented road agency. Bangladesh currently suffers from one of the highest road accident fatality rates in the Region.. To address this, the project supports establishment of a dedicated highway safety patrol to enforce traffic safety on the major road network. Government Strategy. GOB considers improvement of the country s transport system fundamental to achieving its development agenda and poverty reduction efforts. In its Fifth Five Year Plan (FFYP, ), GOB states that an adequate and efficient transport system is a prerequisite for initiating and sustaining economic development. More recently, GOB has made the transport sector a key element

3 3 of its Interim-Poverty Reduction Strategy Paper, and has drafted National Land Transport Policy, articulating its vision and strategy for the transport sector. Prepared in consultation with the main stakeholders in the country and the donor community, the draft National Land Transport Policy addresses many of the sector issues outlined above. The Government's strategy includes the following measures to improve the performance of the road sector: Developing an integrated transport policy and implementation plan; Clarifying road classification and ownership among LGED, RHD, and local governments; introducing long-term road network planning. Securing sustainable funding for road maintenance with a view to maintaining the road network at a level which protects the value of the investment. Towards this GOB is currently considering establishing an autonomous road maintenance fund, managed by a board, that includes representatives of the private sector and road users. Improving the management and operations of the RHD and LGED. Undertaking a Procurement Reform program (with IDA assistance). Increasing private sector participation in road works and improving capacity of the domestic contracting industry. Improving road safety. 2. Objectives The objective of the Project is sustainable delivery of a safe and efficient major road network system. 3. Rationale for Bank's Involvement The Bank s contribution will include: Helping GOB undertake politically difficult reforms that are essential for sustainable development of the road sector. Bringing international experience and lessons in road sector reforms to bear on the challenges facing the sector, including reforming of policy formulation, planning and budgeting, road maintenance financing, road asset management, agency restructuring and commercialization, road safety enforcement, procurement, financial management and environmental & social safeguard policies and procedures, etc.. Facilitating inter-donor policy coordination. Filling critical financing gaps for works aimed at preservation and improvement of the major road network.

4 4 4. Description I. Physical Component.The physical components include network preservation, network improvement, and highway safety enforcement sub-components. (i) The Network Preservation sub-component will finance rehabilitation and strengthening of about 1000 km of roads and 4000 meters of bridges. The civil works will be carried out on existing carriageways (without substantial upgrading or widening), and will include road safety improvements identified through a corridor safety audit. The specific roads and bridges to be improved will be identified through a feasibility study on the basis of a network strategic analysis, the available resource envelope and a local consultation process. To the extent possible, preservation works will be concentrated on selected high priority corridors or zones to maximize development impact and avoid spreading resources too thinly across the country. (ii) The Network Improvement sub-component will finance widening, upgrading and safety improvements of about 150 km of existing road links (including some bridges). The specific links and bridges will be identified through a feasibility study. The actual financing split between components (i) and (ii) will be firmed up once the results of feasibility studies are available. (iii) The Highway Safety Enforcement sub-component will provide equipment and logistical support for establishing an effective Highway Safety Patrol. It is envisioned that this will be housed under the MOC, as proposed in the National Land Transport Policy. Further details of this sub-component will be developed during the preparation phase of the project, learning from successful models developed elsewhere in the South Asia Region. II. Policy & Institutional Component. The policy support and institutional strengthening component will support (a) implementation of key policy reforms and (b) provide advisory assistance and capacity building support for various institutional strengthening activities to be implemented by the Ministry of Communications (MOC) and Roads & Highways Department (RHD). MOC Sub-component: (i) establish a secure and stable road maintenance funding and management arrangement; (ii) undertake a Road Network Master Plan Study; and (iii) establish and operationalize a Highway Safety Patrol; RHD Sub-component: (i) implement RHD reorganization; (ii) commercialize equipment pool and workshops; (iii) strengthen asset management practices, (iv) initiate corridor management approaches, (v) improve financial management system and procurement practices, (vi) strengthen Environmental Management and Resettlement capacity; and (vii) developing second generation Institutional Reforms. III. Land Acquisition, Resettlement & Rehabilitation related to the project physical works I. Physical Component (i) Network Preservation (Rehabilitation and Strengthening and safety improvement of about 1000 km of and 4000 meters of Bridges) (ii) Network Improvement (Widening and Upgrading and safety improvement of 150 km of road links including key bridges) (iii) Design and Supervision of Civil Works Contracts and other technical studies (iv) Equipment and Logistical Support for Highway Safety Patrol II. Policy & Institutional Component: Capacity Building and Advisory Support to MOC, and RHD. III. Land Acquisition, Resettlement & Rehabilitation 5. Financing Source (Total ( US$m)) BORROWER ($61.00) IDA ($192.00) UK: BRITISH DEPARTMENT FOR INTERNATIONAL DEVELOPMENT (DFID) ($0.00) Total Project Cost: $253.00

5 5 6. Implementation The Roads and Highway Department under the MOC will be the main project implementing agency. RHD sub-components will be implemented through the mainstream RHD organizational structure, headed by the RHD Chief Engineer. MOC will take direct responsibility for implementing components related to the Road Maintenance Fund, the Road Master Plan Study and the Highway Safety Patrol. An inter-ministerial Project Steering Committee, composed of senior policy makers, will provide overall guidance for preparation and successful implementation of the reform program. These arrangements will be further discussed with the borrower during the course of project preparation. Procurement: Procurement under the project will largely involve civil works contracts, followed by consultants services and small quantity of equipment. All civil works contracts will be implemented by RHD. Under the physical components, the envisaged approximate number of civil works contracts are as follows: 15 ICB contracts (about 12 contracts for periodic maintenance and rehabilitation of 1,000 km priority corridors, 3 contracts for improvement of 150 km of critical road links including bridges), and 20 NCB contracts for rehabilitation and strengthening of 4,000 meter bridges. Equipment will largely be procured using ICB procedures. The key consultancy contracts under physical and institutional component will follow quality- and cost-based selection (QCBS) and/or selection under a fixed budget (SFB) depending on the type of assignments; they include: design and supervision of civil works, advisory and capacity building support to Planning Commission, the Ministry of Communication, and RHD. As part of project preparation activities, RHD is inviting expressions of interest for four packages relating to the following preparatory studies: network improvement, engineering design and supervision, environmental & social assessment, and road maintenance financing & commercialization of RHD s non-core activities. Project financial management and disbursement at RHD will be handled through the Audit and Accounts unit of Management Services Wing of RHD. Reporting will be conducted by the PD. Corresponding arrangements will be made by the MOC. Auditing Arrangements: RHD and the MOC would be responsible for getting the project financial statements audited by their internal auditors and Auditor General s (CAG) office within six months from the end of a fiscal year. In addition to the financial audit, at least two performance audits would be carried out during the implementation of the project, by independent auditors and with terms of reference satisfactory to IDA. Disbursements: IDA's share of the project cost would be disbursed under traditional disbursement procedures through Special Accounts to be established for the MOC and RHD. 7. Sustainability A key goal of this project is sustainable delivery of the major road system. This will be achieved through various reforms and related measures proposed as part of the project: (i) Strong Government and stakeholder ownership for the reform program has been ensured by building the program within the framework of GOB's draft Land Transport Policy. Stakeholder ownership will be fostered through regular stakeholder consultations which will form part of the road financing reform and annual maintenance cycle. Also by promoting transparent practices. (ii) Adopting a rationalized road classification system, that clarifies network ownership and management responsibilities;.

6 6 (iii) Adopting a Medium Term Budget and expenditure Framework for RHD, that improves the balance between expenditures on network preservation and operation and network expansion; ensures improved portfolio management and minimizes unviable, politically motivated projects. (iv) Establishing secure road network maintenance management and financing arrangements, based on increased resource mobilization from road users. Also strengthening of asset management system and practices, including independent technical and financial audits. (v) Strengthening RHD's capacity to manage its road network. (vi) Ensuring thorough social and environmental assessments of proposed investments. Helping mainstream safeguard procedures by establishing RHD-wide environment management and R&R policies. 8. Lessons learned from past operations in the country/sector The following lessons from OED evaluation of road sector reform projects, as well as from the experience in Bangladesh are reflected in the project design. Successful implementation of institutional and policy reforms requires: (i) ability and flexibility to adapt to changing circumstances; (ii) sustained commitment by senior management for reform; and (iii) use of consultants with local knowledge to assist with the implementation of complex reforms. The government's ownership towards the objectives of the project and the policies underlying the project is essential for successful implementation of the project. Continuity in Bank strategy through successive projects is essential for supporting institutional reforms and for consolidating the results achieved. Road Financing Reform Must be part of Wider Institutional Reform. Projects that involved road funds had limited success, not because of weaknesses in the road fund model, but rather because prerequisite institutional reforms were not included as an integral part of the road financing reform process. Road fund reforms are likely to succeed when the following institutional measures are include: (i) separate road fund administration, (ii) strong oversight, (iii) revenue from user charges only, (iv) effective day-to-day management,(v) sound legal framework, (vi) sharing procedures among national, local, and municipal governments. Improve Personnel Incentives. A perennial issue in road sector agencies has been the lack of appropriate incentive structure to attract and retain qualified staff. Reforms should focus on achieving appropriate incentives to retain and motivate road administration staff in order to ensure an effective and efficient work force that preserves institutional knowledge. Contracting of maintenance with the private sector improves efficiency compared to force account operations. However, the benefits of contracting out can be eroded if the public road agency lacks adequate capacity and transparency to manage contracts and minimize the transaction costs embedded when the design and implementation of civil works are carried out by contract.

7 7 9. Environment Aspects (including any public consultation) Issues : Road location and design in Bangladesh is influenced by two key factors: the physiography of the country and the high population density. With the exception of Chittagong Hills in the southeast and the low hills of Sylhet in the northeast, Bangladesh consists mostly of a broad deltaic plain (about 80 percent of the landmass) drained by some 700 rivers, with elevations seldom exceeding 15 m above sea level. About 10,000 square kilometers of the total area of Bangladesh is covered with water and larger areas are routinely flooded during the Monsoon season. Most roads are constructed on embankments from borrow material and require extensive cross-drainage structures ranging from small culverts to major bridges. Thus hydrology and drainage are the defining factors with respect to environmental impacts associated with roads. Pressures on Bangladesh's environment are intense and growing due to inadequate management of aquatic and terrestrial resources, population growth, overexploitation of natural resources, agricultural expansion into marginal lands, and unplanned development of infrastructure, including roads and bridges. Arable land in Bangladesh is at a premium; it is intensively cultivated and its conversion to non-agricultural uses is often attended by environmental and social dislocation. Roads in urban and peri-urban zones can bring about irreversible changes in human and natural habitats with major impacts on land use, water quality, and the urban environment. The physical components of the project ( rehabilitation and strengthening of roads and bridges, widening and improvement of critical road links,) and the proposed privatization of RHD's equipment pool and workshops will require environmental assessment and mitigation measures. a) Network Preservation: Rehabilitation and strengthening of roads and bridges. Adverse impacts could result from improper construction practices such as inappropriate disposal of bituminous waste and debris from construction sites, inappropriate location and operation of rock crusher and asphalt hot-mix plants resulting in dust and smoke, material transport by heavy equipment causing damage to existing roads and bridges while creating a road safety hazard, poor management of quarries and borrow pits, pollution from spills of fuel, oil, lubricants and construction camp wastes, cutting down of roadside trees and wood burning in labor camps, and higher incidence of road accidents from poor traffic control at road and bridge construction sites. Construction works may disrupt drainage and cause flooding in ribbon developments along the roads. Pedestrian and non-motorized traffic may also be disturbed. It is unlikely that any land acquisition would be involved although removal of illegal encroachments in the right of way might pose a problem. Most of these impacts can be easily mitigated and are reversible. The mitigation measures can be addressed by changing construction specifications and incorporating appropriate clauses and BOQ items in the construction contracts. For example, tree plantation has been a major environmental success under previous road projects. b) Network Improvement: Widening and geometric/safety improvement of critical road links. In addition to the impacts identified for network preservation works above, irreversible impacts can result from road widening and improvement works, unless these are carefully managed. These include cutting of slow growing hardwoods to permit road widening; and poorly constructed embankments that can disrupt natural drainage channels and drain wetlands, resulting in erosion, siltation and overall deterioration of water quality, loss of traditional fisheries, destruction of aquatic habitats, eutrophication of water bodies, and an increase in disease vectors from poorly managed borrow pits and stagnating waters blocked by the road embankments. By restricting this component to existing road links and by excluding new bypasses, it is not expected to irrevocably alter existing land use or significantly encroach on wetlands and other sensitive areas. Widening and/or small realignments related to safety improvements may require acquisition of limited strips of land contiguous to the ROW in some reaches. The identification of impacts and the design of mitigation measures in a few cases may require baseline surveys, detailed mapping of impacts, and appropriate public disclosure and

8 8 consultation. The mitigation measures may increase the cost of the works. A sectoral EA and screening methodology and EMPs (for a few highly sensitive sites) should suffice to ensure compliance with Bank safeguard policies. c) Commercialization of RHD s equipment pool and workshops. The proposed commercialization of RHD s equipment pool and workshops or even the transfer of management of these units to private management would require a prior EA to identify possible environmental liabilities that might transfer to the new owners or managers of these units. These liabilities and the related mitigation measures might relate to disposal of deadlined equipment and vehicles, and surplus hazardous materials used in the workshops; accumulated aquifer pollution caused by leaking fuel tanks and uncontrolled disposal of waste oils, lubricants, and other toxic materials; unsafe electrical wiring circuits and leaky fuel and water lines in the workshops, and unsafe electrical and mechanical workshop equipment. RHD/GOB would either agree to cover future risks and damages that might accrue from these liabilities or undertake appropriate mitigation measures before transferring the facilities and equipment to the private parties. 10. List of factual technical documents: 11. Contact Point: Task Manager Navaid A. Qureshi The World Bank 1818 H Street, NW Washington D.C Telephone: Fax: For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.