Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-48420) ON A LOAN IN THE AMOUNT OF US$ MILLION ROMANIA FOR A

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-48420) ON A LOAN IN THE AMOUNT OF US$ MILLION TO ROMANIA FOR A TRANSPORT SECTOR SUPPORT PROJECT June 28, 2010 Sustainable Development Department Central Europe and the Baltic Countries Unit Europe and Central Asia Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective May 31, 2010) Currency Unit = New Romanian Lei (RON) US$ 1.00 = RON 3.40 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AADT Calatori CAS CESTRIN CFR CPS DPL EBRD EC ECA EIA EIB EIRR EMP EU HDM ICB ICR IFI IRI IRIS IT Annual Average Daily Traffic Romania National Railway Passenger Company Country Assistance Strategy Central Laboratory for Transport and Road Infrastructure Romanian National Railway (Infrastructure) Company Country Partnership Strategy Development Policy Loan European Bank for Reconstruction and Development European Commission Europe and Central Asia (World Bank region) Environmental Impact Assessment European Investment Bank Economic Internal Rate of Return Environmental Management Plan European Union Highway Development and Management System International Competitive Bidding Implementation Completion and Results Report International Financial Institution International Roughness Index Integrated Railway Information System Information Technology Marfa MOT MPF MTCT MTEF MTR NCB NPV PAD PAL PDO PHARE PMU RNCMNR SIL SNCFR SWAp TRP TSSP VOC Romania National Railway Freight Operations Company Ministry of Transport Ministry of Public Finance Ministry of Transport, Construction and Tourism Medium-Term Expenditure Framework Midterm Review National Competitive Bidding Net Present Value Project Appraisal Document Programmatic Adjustment Lending Project Development Objective EU Fund for Assistance to Central and Eastern European Countries Project Management Unit Romania National Company for Motorways and National Roads Specific Investment Loan National Railway Company of Romania (former) Sector Wide Approach Transport Restructuring Project Transport Sector Support Project Vehicle Operating Cost Vice President: Country Director: Sector Manager: Project Team Leader: ICR Team Leader: Philippe H. Le Houerou Peter C. Harrold Henry G. R. Kerali Mohammed Dalil Essakali Mohammed Dalil Essakali

3 ROMANIA Transport Sector Support Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower s ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP IBRD No

4 A. Basic Information Country: Romania Project Name: TRANSPORT SECTOR SUPPORT PROJECT Project ID: P L/C/TF Number(s): IBRD ICR Date: 06/28/2010 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: USD 123.3M Environmental Category: B MINISTRY OF PUBLIC FINANCE USD 180.0M Disbursed Amount: USD 123.3M Implementing Agencies: National Railway Infrastructure Company (CFR) National Company for Motorways and National Roads Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 05/24/2005 Effectiveness: 07/25/ /25/2007 Appraisal: 04/25/2006 Restructuring(s): Approval: 11/02/2006 Mid-term Review: 09/30/ /30/2008 Closing: 12/31/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Unsatisfactory Substantial Moderately Satisfactory Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Unsatisfactory Quality of Supervision: Moderately Satisfactory Implementing Moderately Agency/Agencies: Unsatisfactory Overall Bank Overall Borrower Moderately Satisfactory Unsatisfactory Performance: Performance: i

5 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: Yes Moderately Unsatisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 5 Railways Roads and highways Theme Code (as % of total Bank financing) Injuries and non-communicable diseases 20 Regional integration Rural services and infrastructure Trade facilitation and market access E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Shigeo Katsu Country Director: Peter C. Harrold Anand K. Seth Sector Manager: Henry G. R. Kerali Motoo Konishi Project Team Leader: Mohammed Dalil Essakali Henry G. R. Kerali ICR Team Leader: ICR Primary Author: Mohammed Dalil Essakali Hernan Levy F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the proposed project is to assist the Borrower to reduce transport costs through the improvement of the overall quality of its national roads and railways networks during the first years of EU accession. ii

6 Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Reduction in road transport costs on sections financed through this project Value Between 90% and quantitative or 100% 60% 95% Qualitative) Date achieved 11/02/ /31/ /31/2009 The periodic maintenance works led to reduction in vehicle operating costs in the Comments order of 5-10 percent for maintenance works using asphalt concrete overlay (incl. % depending on the type of vehicles. This range is considered normal for this type achievement) of works. Indicator 2 : Increase in train operating speeds on sections financed through this project Value quantitative or Qualitative) 100% 140% freight 130% passenger See comment Date achieved 11/02/ /31/ /31/2009 The target was achieved on a smaller scale because of the reduced scope of the Comments railways component. In addition, major floods at the start of the project further (incl. % damaged the track, increasing the amount of hazard locations and speed achievement) restrictions. (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Percentage of national roads in good and fair condition Value (quantitative or Qualitative) 61.5% 70% 77.6% Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) The target was exceeded, as a result of a combination of the project-financed works, and similar works in other roads carried out with financing from state budget or other financiers. Indicator 2 : Funding increase in current terms for periodic maintenance and current repair of national roadsand (ii) hazard locations (number) Value (quantitative or Qualitative) RON 363 million (=100%) Increased by 30% +38.6% iii

7 Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) The government during the project period met the target, by increasing the allocation from the State budget, since the highway agency's own revenues remained about constant during the period Indicator 3 : Unit costs for Summer maintenance decrease in current terms Value (quantitative or Qualitative) RON 11,836 / km Reduced by 9.5% % Date achieved 06/15/ /31/ /31/2009 Comments (incl. % Unit costs were reduced by more than originally expected. achievement) Indicator 4 : Implementation and effective use of road management system by RNCMNR Value (quantitative or Qualitative) No Yes Implementation and effective use in RNCMNR's CESTRIN Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) The target was partially achieved, since a broader use of the road management system was hampered by lack of progress under the parallel Transport Restructuring Project (TRP) regarding the reclassification of the road system. Indicator 5 : Capacity of road administrations (RNCMNR) to manage road maintenance Value (quantitative or Qualitative) N/A One area-wide maintenance contract Study completed and first pilot identified and prepared in Date achieved 06/15/ /31/ /31/2009 Comments RNCMNR reported in early 2010 that the documentation is ready for launching (incl. % the bid. This is expected to happen after loan closing. achievement) Indicator 6 : Road user satisfaction surveys done and published Value (quantitative or Qualitative) None One/year None Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) Indicator 7 : Length of rail track generating speed restrictions on the interoperable lines Value (quantitative or Qualitative) 630 km 585 km See comment Date achieved 06/15/ /31/ /31/2009 Comments (incl. % See comment for PDO Indicator 2. achievement) Indicator 8 : Number of hazard locations on the interoperable lines Value 1,060 1,030 About 30% of iv

8 (quantitative or Qualitative) initially expected reduction Date achieved 06/15/ /31/ /31/2009 Comments (incl. % See comment for PDO Indicator 2. achievement) Indicator 9 : Update of Business Plan for the periods and Value (quantitative or Qualitative) No Yes Partially done Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) Initial Business Plan for was updated to cover New business plan was prepared by CFR management, but never approved by CFR's board of directors Effective development and use of a rolling medium-term (5-year) railway Indicator 10 : infrastructure maintenance planning system (to be prepared as part of the exercise to update CFR business Plan) Value (quantitative or Qualitative) No Yes Not yet part of Business Plan Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) This target is interlinked with the Business Processes Redesign activity implemented in parallel under the Transport Restructuring Project. Such activity was not completed. Indicator 11 : Effective use of an economic evaluation methodology for preparing the Annual maintenance program. Value (quantitative or Qualitative) No Yes Not yet part of Business Plan Date achieved 06/15/ /31/ /31/2009 Comments (incl. % See comment for Indicator 9 achievement) Indicator 12 : Train operator satisfaction surveys done and published Value Surveys was (quantitative None One/Year undertaken in 2008 or Qualitative) Date achieved 06/15/ /31/ /31/2009 Comments (incl. % achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 04/05/2007 Satisfactory Satisfactory 0.00 v

9 2 01/09/2008 Moderately Moderately Unsatisfactory Unsatisfactory /05/2008 Moderately Satisfactory Satisfactory /07/2008 Moderately Satisfactory Moderately Satisfactory /08/2009 Moderately Satisfactory Moderately Satisfactory /11/2009 Moderately Moderately Unsatisfactory Unsatisfactory /05/2010 Moderately Moderately Unsatisfactory Unsatisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile vi

10 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal At the time of the appraisal of the Transport Sector Support Project (TSSP) in April 2006, Romania was expecting to join the European Union (EU) in 2007, and much of the government s social and economic development policies were driven by this goal. EU accession would require wide ranging reforms of the Romanian economy in order to prepare for competition, and to improve physical infrastructure. Romania was pursuing a balanced modernization approach between roads and railways, the two dominant transport modes carrying more than 90 percent of goods and passengers. Thanks to a long process of railway reforms that started in the 1990s, and still continuing at the time, railways had managed to keep a relatively high transport market share. While the government had achieved significant progress in structural and institutional reform of the transport sector with support of the World Bank, the state of Romania s transport infrastructure was a key challenge for convergence and integration with EU member states. The quality of road and rail infrastructure was deemed to be limited, the efficiency and safety of transport was below EU standards, and a large backlog in rehabilitation and maintenance had accumulated partly because Romania had underinvested in transport infrastructure. There was an urgent need to speed up the improvement of infrastructure quality and to rationalize transport institutions. These issues had been identified in the government s transport sector strategy for the period as well as in the National Development Plan. The Bank s Country Partnership Strategy (CPS) covering the period notes that the overarching long term objective of Romania is to achieve convergence with the EU. The CPS also notes that the main issues facing the transport sector are the poor quality of infrastructure, the inadequate financing of maintenance and the need to complete the program of railway restructuring. The World Bank had actively supported Romania s transport sector through three investment operations and advisory services since the mid-1980s. The most recent operation prior to the TSSP was the Transport Restructuring Project (TRP), approved two years before the TSSP. The TRP included financing for new road investments the construction of city bypasses and, for railways, the procurement of railway maintenance equipment to support CFR s mission as the railway infrastructure manager. The TRP included a significant policy reform and institutional development component to be achieved through a series of technical assistance inputs as well as the provision of management information systems to improve the quality of decision making for the management of both railways and roads. At the time of preparation of the TSSP, the Bank was also implementing the first series of the Programmatic Adjustment Loan (PAL) for Romania. The expectation was that the PAL program would support the TRP reform objectives. The TSSP was implemented in parallel with the TRP. While the TRP loan was approved two years earlier than the TSSP, both projects were expected to be completed at about the same time, because the TSSP was conceived as a fast disbursing operation. A number of factors that affected performance under the TSSP also did so under the TRP. The ICR of the TRP complements and provides in some areas more details than this ICR. 1

11 1.2 Original Project Development Objectives (PDO) and Key Indicators As stated in the Loan Agreement, the objective of the Project is to assist the Borrower to reduce transport cost through improvement of the overall quality of its national roads and railways networks during the first years of EU accession. The objective would be reached through: (i) In the road sector: a. Increasing the percentage of national roads in good condition b. Providing sustainable funding for road maintenance, rehabilitation and road safety, through a coherent multi-year rolling program c. Improving the capacity within the Romanian road administration (RNCMNR and others) to operate efficiently and effectively in managing road maintenance and rehabilitation Key PDO indicators: reduction in road transport costs, improvement of road condition, better funding for road maintenance, effective use of road management systems. (ii) In the railways sector: a. Reducing the number of hazard locations and the proportion of sections on the main lines subject to temporary speed restrictions, through repair and rehabilitation of track infrastructure and signaling and electrification b. Providing sustainable funding for railway infrastructure maintenance, current and periodic repair and overhaul, through a coherent multi-year rolling program c. Improving the capacity within the infrastructure railway company to operate efficiently and effectively in managing railway maintenance and rehabilitation Key PDO indicators: increased train operating speeds, reduction in number of sections with speed restrictions, reduction in number of hazard locations, development of rolling 5-year infrastructure maintenance planning system 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO and Key Indicators were not revised. 1.4 Main Beneficiaries The PAD does not specifically identify the project beneficiaries. The project objectives and components suggest the main beneficiaries would be the operators of the road and railway systems, and the users of these two transport systems. In the case of roads, the maintenance programs will allow the Romania National Company for Motorways and National Roads (RCNMNR) to address a significant backlog in the maintenance of the national road network, preventing further deterioration and therefore reducing future road maintenance costs. Road users will benefit from reduced vehicle operating costs and safer roads. In the case of the railways, CFR and the various railway operators will benefit from the elimination of speed restrictions, which will allow a more efficient use of railway equipment. Railway users will benefit from faster services, and probably increased frequency of some services that will be made possible by the elimination of speed restrictions and consequent increase in rail track capacity. 2

12 1.5 Original Components Component A: Road Sector Support (US$112.5 million). Subcomponent A1: Periodic Maintenance and Current Repair Works on National Roads (US$109.5 million). This comprises financial support for the RNCMNR s Infrastructure Maintenance Program planned for , which is part of a larger national roads program that covers the period up to This subcomponent ensures that there is an appropriate balance between expenditures on maintenance, reconstruction and development within the multi-year investment program. The program is expected to cover over the two years a total of 2,909 kilometers, with works divided between asphalt concrete overlay for heavily trafficked roads, and single and double surface treatment for medium traffic roads. Subcomponent A2: Technical Assistance for RNCMNR (US$3.0 million). This comprises studies and consulting services aimed at: (a) preparing and implementing a pilot of output-based area-wide, multiyear contracts, (b) hiring a Technical Adviser to improve management and technical capacity within RNCMNR, (c) conducting a first road user satisfaction survey, (d) training of RNCMNR staff on preparation, procurement and technical/financial management of maintenance activities, and (d) the design of periodic maintenance and current repair works. Component B: Railways Sector Support (US$112.5 million). Subcomponent B1: Maintenance, current and periodic repair, and overhaul works on interoperable lines, and supply of necessary goods (US$98.7 million). This comprises financial support for CFR s Infrastructure Maintenance Program for interoperable lines, planned for This program is part of CFR s longer term infrastructure maintenance program spanning whose main objective is to eliminate temporary speed restrictions and improve traffic safety. This subcomponent is designed to fund three types of maintenance works: (a) overhaul of public infrastructure (i.e. tracks, bridges, tunnels and embankments, in track sections requiring comprehensive repairs of various kinds), as well as interlocking and signaling electrification systems (45 percent of cost), (b) repair and maintenance of above public infrastructure, in sections requiring selective repairs (35 percent of cost) and (c) repair and maintenance of interlocking, signaling and electrification systems (20 percent of cost). Subcomponent B2: Technical Assistance for CFR (US$13.8 million). This comprises studies and consultants needed for the implementation of the maintenance program, including (a) the design and inspection of maintenance works, (b) training on procurement and financial management, and (c) support to improve railway management practices through the development of an updated Business Plan for the periods and The development of an immediate and medium-term (5 years) maintenance plan based on the effective use of the information technology (IT) system and the track geometry car will be carried out through the TRP Technical Assistance for CFR s maintenance management program 1.6 Revised Components The project components were not revised. 1.7 Other significant changes (in design, scope and scale, implementation arrangements and schedule, and funding allocations) 3

13 The loan closing date was extended by one year, to December 31, 2009, in three stages. The first 3-month extension was approved to give time to the government to provide views on the future of the TRP and the TSSP. The second, a one-month extension was meant to provide the government with additional time to confirm the availability of funding for the extension period. The third, an 8-month extension, was intended to allow completion of most of the road component, and a large part of the rail component. An amount of US$35 million of the loan was canceled, since disbursing this amount would not have been possible under the (revised) closing date. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Preparation The project was prepared in conjunction with the supervision of the Transport Restructuring Project. Both projects covered railways and roads and dealt with the same agencies, which facilitated preparation of the TSSP project. Conditions for appraisal included an agreed policy framework and reforms before start of the project, a sustainable expenditure framework linked to the government s Medium Term Expenditure Framework (MTEF), and agreements on institutional capacity building. The appraisal was further linked to progress on key institutional development activities under the TRP, notably (i) selection of consultants by RNCMNR to evaluate road management systems and organization, and (ii) preparation by CFR of terms of reference for business development and updated business plan. The project, initially envisaged as Sector Wide Approach Project (SWAP), was structured as a fast-disbursing, specific investment loan to be implemented over a period of two and a half years, and was intended to be the first of a series of programmatic support for the transport sector in Romania. Project design took into account lessons from previous transport projects. Because the ongoing (at the time) TRP and PAL projects had substantial institutional objectives, the TSSP, while complementing the institutional objectives, focused on ensuring the execution of maintenance and rehabilitation of roads and rail infrastructure and systems. Attention to road and railway infrastructure maintenance although a clear necessary condition to improve the quality of the service in roads and rail had not received adequate funding from the various transport projects supported by European funds or other international financial institutions (IFIs). Experience with past projects had shown that the Romanian implementing agencies were competent in procuring and implementing civil works. It had also shown that technical cooperation was needed in conceptualizing and implementing new management methods, training both management and staff, prioritizing projects within budget constraints and updating standards and regulations. Quality at Entry (QAE) There was no assessment of the project s QAE by the Bank s Quality Assessment Group (QAG). Risks One risk to project development objective was considered substantial and four were considered modest. The overall risk was rated as modest. The risks and the mitigation measures were the following: 4

14 Turnover of leadership and staff in RNCMNR (Substantial): technical assistance and training of staff. Resistance to institutional change in RNCMNR (Modest): close monitoring of the technical assistance activities. Insufficient funding for road maintenance and rehabilitation (Modest): increase in Rovinieta 1 revenues and careful and timely assessment of the 5-year road program and its supporting MTEF. Insufficient funding for repair and overhaul of railway infrastructure (Modest): provision of sufficient budget allocation in the MTEF for railway infrastructure. Lack of management support to continue railway restructuring (Modest): frequent and effective supervision and cooperation with the railway management. The leadership and staff risk, rated as substantial, was likely the result of the experience with the TRP, which in its early implementation years was already suffering from significant turnover in the management and staff of the RNCMNR. 2.2 Implementation The TSSP was implemented in parallel with the TRP, and some of the same problems that affected TRP also affected TSSP, especially budget ceilings imposed by the government and management and staff turnover. Implementation of the TSSP also was affected by the nonachievement of reforms under the TRP, such as the restructuring of RNCMNR or the implementation of Business Processes Redesign in CFR, which were essential to materialize some of the TSSP s expected outputs. Altogether, implementation of the TSSP was simpler than TRP, since the physical components were the annual maintenance programs of the roads and railway sectors rather than new investments requiring detailed technical specifications or complicated negotiations between the road agencies and local city government and land acquisition (in the case of the city bypasses included in the TRP). Initial Delays and Implications. The project was negotiated in May 2006, but, due to delay in submission of the audit reports for CFR and RNCMNR the loan was not approved until November Thereafter, effectiveness was also delayed as it had happened with the TRP and was only declared in July As a result, it became apparent very early during implementation that it would be unlikely that the project could be completed, in one and a half years, by the original closing date at the end of A number of other issues, listed below, led to delays during implementation. Implementation organization and management. Contrary to what had happened in previous transport projects, the TSSP (as well as the TRP) did not have a unified PMU, but separate units responsible for the road and rail parts of the project, with diffused responsibilities for the technical assistance components. Frequent changes of senior management of RNCMNR and CFR led to recurrent changes in, and shortage of, the staff responsible for implementing the project. The changing investment priorities in the transport sector in Romania further contributed to instability in the management of project and implementation delays. Budget ceilings. The budget approved by the government for 2008 provided for only about 60 percent of the CFR program for the year, and about one third of the funds necessary to cover the road contracts expected to be executed during the year. These were spending limits on IBRDfinanced investments, which also occurred in 2007 and 2009, and they were an important factor 1 Time-based road user fee charged to users of national roads in Romania. 5

15 contributing to implementation delays. These budget ceilings decision seemed to reflect the government s goal at that time of graduating from the Bank and moving to raise debt in the international financial market. Temporary Suspension of Procurement. In late 2008 and early 2009, the road and rail agencies suspended procurement procedures for contracts not yet awarded, pending a decision regarding restructuring of the project and its extension as explained in more detail in the next sections of this report. This suspension was a contributing factor to the project s further implementation delays. Pilot for Outsourcing Road Maintenance. This component became complicated due to the fact that a similar study was underway under an EBRD-financed project. As a result, the Bankfinanced study was not launched. However, the Bank supervision missions coordinated with EBRD and followed closely the progress and results of the study. Floods. Major floods in 2007, when project implementation was starting, damaged roads and rail infrastructure, meaning that the condition of transport infrastructure at the start of the project was in a worse condition than estimated at appraisal. Comparative Progress of the Roads and Rail Component. By the end of 2007, RNCMNR had managed to carry out the agreed Annual Maintenance Program for that year. In contrast, CFR at that time was still hesitant to prepare or launch any works for two main reasons: (i) drastic constrains on the state budget allocated to CFR and lack of own sources, which prevented CFR from awarding contracts for technical designs necessary to start the works under this component, and (ii) the effects of the 2007 floods on the scope of works that were envisaged under the railway Annual Maintenance Program. Therefore, CFR could not even prepare technical documentation and bidding documents that would have allowed it to launch the bids as soon as the budget situation was resolved. It took CFR a few months in 2008 to catch up and launch the first bids, thanks mainly to the appointment at the start of the year of a dedicated project team. Final Project Cost and Loan Cancellations. Due to implementation delays, and the loan cancellation, the final project cost was substantially lower than originally estimated: US$175.1 million actual cost compared with US$225.0 million at appraisal. Most of the reduction of project cost was in the railway component. There was also a drastic cut in the amount of technical assistance for both road and rail, which was practically reduced to zero. Project at Risk Status The project s development objective (PDO) was rated moderately unsatisfactory in September 2009, and this rating remained until project closing. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design The M&E framework included two project outcome indicators, one for roads, reduction in transport costs, and one for railways, increase in operating speeds. The railway indicator was a well selected, simple indicator and the target was realistic. The road indicator, however, posed a problem in that transport costs are influenced by many factors in addition to the condition of roads. Further, that target a reduction of 40 percent in transport costs appeared optimistic. A reduction in vehicle operating costs would have been a more sensible indicator, and the target value could have been determined through a modeling exercise considering the baseline road condition and the expected road condition at completion. 6

16 The M&E also included six intermediate outcome indicators for roads, of which three could be measured in numerical terms and three were of the yes/no type, and another six intermediate outcome indicators for the railways, of which two numerical and four of the yes/no type. Baselines were established for all indicators. However, major floods in 2007, at the start of implementation, damaged the rail track, further increasing the number of railway sections and kilometers with speed restrictions, effectively altering the baseline for this indicator. The source of the data for monitoring was expected, for roads, to come from the road data register being developed under the TRP project. The technical assistance component for that project also included the development of performance indicators for the road sector. For the railway sector, monitoring was provided by the Integrated Railway Information System (IRIS), and Oracle Financials systems, both of which were already in operation, and staffed with trained personnel, at start of the TSSP. Implementation and Utilization Monitoring data was regularly reported in the PMU s periodic reports to the Bank and discussed with the supervision missions. The data was utilized by RNCMNR and CFR for their own management control and monitoring purposes. 2.4 Safeguard and Fiduciary Compliance Environment The TSSP piloted the Use of Country Systems under the Bank s Operational Policy OP/BP Equivalency analysis of the Bank and Romania procedures carried out in 2006 concluded there are no gaps between the two procedures. Therefore, the project was carried out in conformity with the Romanian Environmental legislation. Bank supervision teams undertook several reviews and concluded that the approach agreed between the government and the Bank was followed. Given the relatively good practice with regards environmental assessment in Romania which is compliant with EU practices the piloting of the use of country systems was not expected to make any significant changes in an already existing capacity in the country. The use of country systems did however reduce Bank supervision efforts and more importantly removed any confusion or additional burden on the implementing entities since they were using their national systems with which they were already familiar. Financial Management The Loan Agreement required project audits as well as entity audits of RNCMNR and CFR. There were some delays in submitting the entity audit reports by the annual deadline of June 30, which delayed project approval by the Bank. The audits for 2004 were the first audits of RNCMNR in its new legal form as a joint stock company. Although RNCMNR s annual audits have been received and they have been found satisfactory to the Bank, the entity audits were qualified because of the significance of valuation of RNCMNR s concession rights, impairment of asset, and because of emphasis of matter on the going concern issue. The qualified auditors opinion raises the questions of the suitability of RNCMNR s legal status as a joint-stock company and the broader issue of long term road sector funding. Social safeguards Works under the project were within the existing right-of-way, and there was no resettlement or land acquisition. 7

17 Procurement During project preparation, it was envisaged that the project would be implemented using a SWAp approach relying on Romania s public procurement law. However, the assessment done by the Bank found differences between Bank and Romanian procurement procedures, which did not permit the use of country systems for procurement. Using Romanian systems would have probably led to a much faster and streamlined implementation. Given the relatively small size of road maintenance contracts, a large number of works contracts fell under National Competitive Bidding (NCB), and RNCMNR and the Bank agreed to use the Bank s ECA regional sample bidding document in Romanian language and to have procurement done at the level of RNCMNR s regional directorates. This approach has proved to be very successful. In the case of CFR, the project consisted of more than 250 contracts, spread all over the country. CFR chose to develop its own sample bidding document for works and goods for NCBs modified to meet Bank requirements as per the loan agreement. Arriving at a document acceptable to the Bank took valuable time and contributed to the delay in the railway component. On the positive side, the procurement of goods under this component turned out to be very smooth despite the complexity of several ICB packages. 2.5 Post-completion Operation/Next Phase The improved road and railway infrastructure was put in operation as the works were completed. The investments financed under the project are integral parts of annual maintenance programs for roads and railways. Thus, these investments, and their operations and management, are the responsibility of the RNCMNR and the CFR, with funding provided by their respective budgets. The institutional and managerial improvements supported by the TSSP are being adopted by the respective road and rail agencies, although their effective implementation is contingent on the completion of activities launched under the parallel TRP project. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Improving the road and railway infrastructure and management was and remains an important priority for Romania. Strong economic growth in Romania through 2008 continued to put pressure on the country s transport system, confirming the importance of carrying out satisfactory maintenance of road and rail infrastructure. While the economy contracted in 2009 due to the global economic downturn, it is expected to recover in 2010/2011, bringing with it a resumption of transport demand growth and requiring the operation of infrastructure in good condition. The current CPS, issued in 2009 in the midst of the global economic and financial crisis, notes that the new Government faced the difficult task of reconciling short-term fiscal consolidation with the need to mitigate the social costs of the crisis and restore the sources of sustainable and equitable growth. The government had put in place a program aimed to address the situation. According to the CPS, the World Bank Group will complement and support this program by (i) helping the Government to implement structural reforms to help mitigate the crisis by reducing social and economic vulnerabilities and (ii) putting in place the basis for sustainable economic growth in the medium-term. The TSSP by helping improve critical transport infrastructure that was in poor condition following years of accumulated backlog maintenance, and, together with 8

18 the TRP, by supporting improvement in the management of the road and rail sector, contributes to the government program and the CPS strategy. Project design focused on supporting the annual maintenance program of roads and railways was appropriate to meet the project objectives. The road and rail agencies were responsible for preparing and implementing their maintenance programs. This approach helped strengthen the agencies, as they had to deliver timely programs to be included for financing under the project. The TSSP s limited institutional development goals were appropriate, because the parallel TRP had a strong focus on policies and institutions and the need to avoid duplication of efforts. At the same time, the project s fast-disbursing concept, to be completed in a two-year period, was reasonable considering the focus of the project on physical components, that such components did not involve complex engineering or environmental analysis, and that the respective implementing agencies had the capacity to prepare their annual maintenance programs. Still, the rail component was considerably more difficult to implement than the road component, because it required procuring a substantial number of goods and equipment under international competitive bidding (such as transformers, related electrical equipment, rail sleepers) in addition to civil works. All in all, the design of the project as a fast-disbursing loan was relevant. Despite the delays in starting the project, the budget limits imposed by the government, the impact of the global financial crisis on ongoing Bank loans to Romania in 2009, the project had one of the highest disbursement performance of any Bank specific investment loan to Romania. 3.2 Achievement of Project Development Objectives A number of factors combined to prevent the project from fully achieving its objectives. First, initial delays between project negotiations and Bank approval, and further delays until the project became effective, meant that civil works that were planned to be carried out in 2006 and 2007 had to be postponed until the implementing entities were certain the loan would be approved and become effective. The delay between negotiations and Board approval of the loan was due to the Bank s concerns over the auditor s opinion which became available after negotiations regarding RNCMNR s unusual legal status as a joint stock company. For a two-year fastdisbursing project, a delay of several months in starting implementation was very critical. A second, major factor affecting outcome, was the spending limits on IBRD-financed projects imposed by the government in 2007, 2008 and These spending limits or ceiling constraints in the last two years came at a time when the road and rail agencies had greatly improved their implementation capacity. A third factor, affecting some of the TSSP s expected outputs, was the lack of progress in the institutional components under the TRP project. A fourth factor was major floods in 2007, before project implementation had actually started, that substantially worsened the condition of road and rail infrastructure, altering some of the project baselines, which would have required to formally amend them as well as performance indicators targets. A. Road Sector Overall the project outputs necessary to meet the project objectives and targets were mostly achieved. The proportion of national roads in good condition improved from 61.5 percent at start of the project to 77.6 percent at closing, exceeding the original target of 70.0 percent for The improvement in road condition reflects in part the maintenance and rehabilitation works carried out on 2,197 kilometers under the project through the end of 2009 (versus 2,909 kilometers 9

19 estimated in the PAD). 2 The improved road condition of the national roads is estimated to have reduced vehicle operating cost by about 5 percent on roads receiving asphalt concrete overlay and that have not deteriorated to the point where they need reconstruction and by a lower percentage on roads receiving single or double surface treatments. This level of reduction in vehicle operating costs is considered fairly standard. The project target expecting a reduction of 40 percent in road transport cost (as opposed to vehicle operating cost) as a result of the road maintenance and rehabilitation works was unrealistic, as noted in Section 2.3. Funding for periodic maintenance increased in current terms by 38.6 percent compared to 2006, exceeding the target of a 30 percent increase. Progress was made in the preparation for a pilot for performance-based maintenance, in which there was collaboration between the EBRD, who financed the initial study, and the Bank team that reviewed the study and the bid documentation. Delays, mainly due to the complexity of the initial bid and draft contract documents suggested by the consultants, prevented launching the pilot during The documents were revised, a road section in Dolj county (Craiova region) has been selected for the pilot, and a contract is expected to be awarded after loan closing. Lack of progress under the TRP on the road reclassification and related reorganization of the RNCMNR hampered further improvement in the utilization of the road management system that had been developed under previous road projects. B. Railway Sector Overall, most of the project targets for railways were not met. Even with the one-year extension of the loan closing date, only about 44 percent of the railway component in value was implemented 30 percent of the works and 75 percent of the goods originally planned to be supplied under the project were effectively delivered. While some speed restrictions were eliminated, this had only limited influence on achieving the targets, which increased significantly because floods at the start of the project further increased the initial number of speed restrictions. In addition, an increase in deferred maintenance of the rail track since project appraisal until the start of implementation due to insufficient CFR allocations for track maintenance further raised the initial number of speed restrictions. The combination of the effects on the railway infrastructure of the floods and the increased deferred maintenance meant that at the start of project implementation the condition of the railway infrastructure was substantially worse than assessed at appraisal. To account for this situation, the baseline regarding the number of speed restrictions should have been amended, and corresponding adjustments should have been made in the respective target. However, since only 30 percent of the works were executed, a change in the baseline and targets would have had no substantive effect on the assessment of the outcome. 2 The link between the overall improvement in the condition of the road network and the number of kilometers improved under the project is complex. The condition of the roads improved in part because of the project-financed road improvements, but there were during the project period other road improvements financed by EU funds or other IFI projects, which also contributed to improving the road conditions. It is impossible in practice to isolate the effect on road condition of the Bank project only. On the other hand, the condition of the road is assessed on the basis of the road surface s roughness, by measuring the IRI (international road index). Some road maintenance works, such as asphalt overlays, change the roughness and can greatly reduce the IRI. Other works, such as single or double bitumen treatment, mainly seal the roads, without altering the IRI, although the seal prevents the surface from deteriorating and extends the life of the road. 10

20 CFR prepared a draft business plan identifying investment required in infrastructure, and expects to have it approved by its board of directors after loan closing. Studies for the rationalization of the railway network have been carried out under the TRP Business Processes Redesign component, and their recommendations are under review, although their actual implementation is uncertain. 3.3 Efficiency The ICR economic re-evaluation was conducted separately for the roads and railway components. The economic analysis shows that the efficiency of the periodic maintenance works undertaken under the road component was very strong. The economic analysis of the railway component which was done for CFR s overall maintenance program shows that the program in itself remains an efficient solution compared to deferring the maintenance, but the efficiency of the program will depend on whether the program will effectively be completed by CFR after the loan is closed. Roads. For the economic analysis, five representative road sections were selected to perform a cost-benefit analysis of the maintenance strategy selected using the Highway Design and Management model (HDM-4). The analysis also made an estimation of the reduction in vehicle operating costs (VOC). The results of the economic analysis show high economic internal rate of return for asphalt overlay works reflecting in part the relatively high level of traffic as well as the appropriateness of this maintenance strategy when funds are available. The economic rate of returns of the surface treatment are higher than the cut-off rate of 12 percent, and the analysis shows that this strategy is a much better and cost-effective maintenance solution to preserve and extend the life of roads that have not been severely damaged to the point where they need reconstruction. At the same time, the reduction in VOC immediately after the implementation of the project is estimated to be around 5 percent on average for road sections receiving asphalt concrete overlay. This level of VOC reduction is in line with experience elsewhere with this type of periodic maintenance (40 mm AC overlay) for roads that have not approached the collapse of their structural integrity and which have predominately private car traffic. The reduction in VOC is lower for the roads receiving surface treatment. This is also expected because the key objective of surface treatment is to prolong the lifecycle of the road by sealing the road surface against ingress of water, arresting deterioration of the road surface, and providing a skid resistant road surface with the resultant benefits of reduction in accidents. The roughness of the road to which VOC is directly linked is affected only marginally by surface treatment, although such treatment significantly slows down the deterioration of the road s surface condition over time. The positive NPV and the good EIRR reflect these benefits. Railways. The project intended to support CFR s infrastructure maintenance, current and periodic repair, and overhaul program for nine interoperable lines in order to eliminate temporary speed restrictions and improve the safety of traffic. The ICR economic analysis used a similar approach to the analysis carried out at project appraisal but using different assumptions due to project changes and to implementation delays especially with regards the phasing out of the multiannual investment program to account for the limited financial and physical capacity of CFR to implement such a program. The results show that the implementation of the program originally 11