Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-47570) 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-47570) ON A LOAN IN THE AMOUNT OF US$ MILLION TO ROMANIA FOR A TRANSPORT RESTRUCTURING 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 BMS Calatori CAS CESTRIN CFR CPS DPL EBRD EC EIA EIRR EMP EU HDM ICR IFI IRIS Bridge Management System 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 Environmental Impact Assessment Economic Internal Rate of Return Environmental Management Plan European Union Highway Development and Management System Implementation Completion Report International Financial Institutions Integrated Railway Information IT Marfa Metrorex MOT MPF MTCT MTR NPV PAD PAL PDO PHARE PMS PMU PSC PSO RNCMNR TRP TSSP System Information Technology Romania National Railway Freight Operations Company SC METROREX SA (Bucharest Metro) Ministry of Transport Ministry of Public Finance Ministry of Transport, Construction and Tourism Midterm Review Net Present Value Project Appraisal Document Programmatic Adjustment Lending Project Development Objective EU Fund for Assistance to Central and Eastern European Countries Pavement Management System Project Management Unit Public Service Contract Public Service Obligations Romania National Company for Motorways and National Roads Transport Restructuring Project Transport Sector Support Project Vice President: Philippe H. Le Houerou Country Director: Peter C. Harrold Sector Manager: Henry G. R. Kerali Project Team Leader: Mohammed Dalil Essakali ICR Team Leader: Mohammed Dalil Essakali

3 ROMANIA Transport Restructuring 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 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 Restructuring 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 82.0M Environmental Category: A MINISTRY OF PUBLIC WORKS AND TRANSPORT USD 225.0M Disbursed Amount: USD 82.0M Implementing Agencies: National Company for Motorways and National Roads (NAR) National Railway Infrastructure Company (CFR) S.C. METROREX S.A. Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 08/26/2003 Effectiveness: 07/28/ /28/2005 Appraisal: 06/28/2004 Restructuring(s): Approval: 11/16/2004 Mid-term Review: 04/14/ /29/2008 Closing: 07/31/ /31/2009 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Unsatisfactory Substantial Unsatisfactory Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Unsatisfactory Government: Unsatisfactory Quality of Supervision: Moderately Implementing Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Performance: Unsatisfactory Overall Borrower Performance: Unsatisfactory 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 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) Railways Roads and highways Theme Code (as % of total Bank financing) Injuries and non-communicable diseases 17 Other urban development Pollution management and environmental health 16 State enterprise/bank restructuring and privatization 17 5 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 project aims to improve the efficiency of the railways and road sectors, and thereby reduce the overall costs of transportation. 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 traffic crashes in Romania (fatalities per 10,000 registered vehicles) Value -7% (a target rate -4.1% (a rate of quantitative or 6.8 of 6.3) 6.5) Qualitative) Date achieved 12/31/ /31/ /30/2009 Comments (incl. % Partially achieved. achievement) Indicator 2 : Railways Labor productivity (pkm and tkm per staff) x1,000 includes private operators' pkm and tkm Value quantitative or Qualitative) Date achieved 12/31/ /31/ /30/2009 Comments (incl. % achievement) The PAD has a baseline of 310,000 TU/staff. The baseline ratio in the PAD excludes freight handled by private operators and corresponds to 2003 traffic. The monitoring of this indicator includes private operators' freight traffic. Indicator 3 : Percentage of Road maintenance procured through competition Value quantitative or Qualitative) 0 25 pilots Most periodic maintenance is outsourced Date achieved 12/31/ /31/ /30/2009 Comments Routine winter and summer maintenance is mostly done by force account. (incl. % Periodic maintenance is mostly outsourced. achievement) Indicator 4 : Reduction in traffic passing through cities Value quantitative or Qualitative) N/A N/A No progress (bypass component not implemented), technical designs prepared under the Project Date achieved 12/31/ /31/ /30/2009 Comments (incl. % Not achieved achievement) Indicator 5 : Complete independent managerial control at Marfa Value Public Done No Change iii

7 quantitative or Qualitative) Date achieved 12/31/ /31/ /30/2009 Comments (incl. % achievement) Indicator 6 : Value quantitative or Qualitative) Despite its commercial status, the managerial independence from its owner (the state) has not improved. Passenger Service PSC (US$ million per year) Date achieved 12/31/ /31/ /30/2009 Comments Achieved. The baseline of 305 corresponds to the actual values of The (incl. % PAD baseline refers to the situation prior to Board approval in November achievement) RNCMNR publishes Annual Report with details of its performance Indicator 7 : Value quantitative or Qualitative) Report with insufficient details Report with indicators Report with insufficient data Date achieved 12/31/ /31/ /30/2009 Comments (incl. % Partially achieved achievement) Indicator 8 : Improved regulation of urban transport in large cities Value quantitative or Qualitative) N/A Done Draft Law to create Metropolitan Transport Authority Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Partially achieved achievement) Indicator 9 : Investment plans for improving Bucharest metro-rail urban transport system Value quantitative or Qualitative) N/A Done Done Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Achieved. Investment plan developed and first phase under implementation. achievement) (b) Intermediate Outcome Indicator(s) Indicator Indicator 1 : Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Method to allocate the road sector budget between road owners Actual Value Achieved at Completion or Target Years iv

8 Value (quantitative or Qualitative) None Done None Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Not achieved. achievement) Indicator 2 : Maintenance standards established for road classes Value (quantitative or Qualitative) None Done for all roads Done for county roads under Rural Development Project Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Partially achieved. achievement) Indicator 3 : Design-build contract awarded Value (quantitative or Qualitative) 0 >1 0 (Design-build prepared under the Project for Medias by-pass and ready for tender) Date achieved 12/31/ /31/ /31/2009 Comments RNCMNR did start Design & Build contract under other road investment (incl. % programs. achievement) Indicator 4 : City by-passes built Value (quantitative or Qualitative) 0 5 By-pass and road safety components not implemented Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Not achieved. achievement) Indicator 5 : Road Traffic crashes in affected cities Value (quantitative or Qualitative) % reduction -3% By-pass and road safety components not implemented Date achieved 12/31/ /31/ /31/2009 Comments (incl. % achievement) Indicator 6 : Bridges rehabilitated Value (quantitative or Qualitative) of the original list & 70 under the additional Emergency repair v

9 of flood-damaged bridges Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Achieved considering the additional bridges. achievement) Indicator 7 : Marfa prepared for privatization Value (quantitative or Qualitative) N/A Marfa Private Government prepared own privatization study Global Financial Crisis negatively impacted privatization plans Date achieved 12/31/ /31/ /31/2009 Comments (incl. % Not achieved. achievement) Indicator 8 : ICT Utilization, IRIS mainstreaming Value Railway Network Some progress (quantitative N/A interoperable made or Qualitative) Date achieved 12/31/ /31/ /31/2009 Comments (incl. % achievement) Progress has been made to streamline ICT and IRIS utilization. However, the Business Processes Redesign study was not completed. The study was aimed to make recommendations whose implementation would have increase the productivity of CFR and Marfa. Maintenance, power supply and signaling equipment acquired Indicator 9 : Value (quantitative N/A 100% or Qualitative) Date achieved 12/31/ /31/ /31/2009 Comments Maintenance equipment partially acquired. Power supply and signaling (incl. % equipment subcomponent was not implemented. achievement) 30% of program in value Indicator 10 : Environmental Management Value 40% of component (quantitative N/A 100% value or Qualitative) Date achieved 12/31/ /31/ /31/2009 Comments Equipment acquired. Environmental Management System study for CFR (incl. % completed. achievement) vi

10 G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 12/22/2004 Satisfactory Satisfactory /20/2005 Satisfactory Satisfactory /23/2006 Satisfactory Satisfactory /02/2007 Moderately Satisfactory Moderately Unsatisfactory /09/2008 Moderately Satisfactory Moderately Unsatisfactory /05/2008 Moderately Satisfactory Moderately Satisfactory /06/2008 Moderately Satisfactory Moderately Satisfactory /09/2008 Unsatisfactory Moderately Unsatisfactory /08/2009 Unsatisfactory Moderately Unsatisfactory /09/2009 Unsatisfactory Unsatisfactory /05/2010 Unsatisfactory Unsatisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile vii

11 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal At the time of the appraisal of the Transport Restructuring Project (TRP) in June 2004, the economy of Romania had been steadily growing at 5 6 percent per year for more than a decade. Economic reforms were underway since the 1990s to transform the economic system from a centrally planned economy to a free market model. The country aspired to join the European Union (EU) in the first decade of the millennium. Integration with the EU required a range of measures to be taken by Romania, including improving strategic transport links. Romania s transport system, dominated by roads and railways, was largely inadequate to serve the country s trade needs, or to provide good access to services and markets for its population of 23 million inhabitants. On the road side, there was insufficient capacity. Road density, with respect both to population and land area, was among the lowest in Europe. Car ownership was low, and it was expected to grow faster than the economy. Truck transport and intercity bus travel were expected to grow at a high rate, gaining markets from railways, with trucking benefiting from the restructuring of the economy. Roads were a constraint to the movement of goods and people on two accounts: its small size and its poor condition, since 50 percent of the national road network was reported to be in poor condition. In addition, road safety was poor, and it was estimated that the gross cost of traffic crashes in Romania could be around 2 percent of GDP. On the railway side, the problem was the opposite, with excess capacity that could only be corrected by abandoning uneconomic railway lines. In 2003, rail transport constituted about 45 percent of all passenger and freight transportation in the country. Rail share of total transport had steadily decreased over previous decades, for example, from 1960, when rail accounted for 80 percent of the freight and 70 percent of passenger traffic. As a consequence, the railway s financial deficit rose, and the railways could not fund maintenance and investment in its assets. Also, heavy losses were incurred because of overstaffing, outdated equipment, and outstanding receipts of payments from many state-owned enterprises. As a result, the government launched in 1996 a railway reform program, which was jointly financed by the Bank, the EBRD, the EU and the government. After some adjustments, the reform led to the division of the national railway companies into three joint stock companies: infrastructure (CFR), freight (Marfa) and passenger (Calatori), with the state as the sole shareholder in all three. A number of other reforms were achieved by the end of 2003, in part supported by the Bank (Loan 3976). Despite these reforms, passenger services required large subsidies, while freight services made a modest profit. The Bank had actively supported the transport sector in Romania through investment operations and advisory services for the 15 years preceding project appraisal. The most recent operations included the Railway Rehabilitation Project (Loan 3976-RO) and the Second Roads Project (Loan 4178-RO). These two, and the previous transport projects, were successfully completed with the railway project rated as highly satisfactory although in some cases after significant implementation delays. The current project was therefore developed to consolidate the reforms in the railways subsector and to improve the performance in the roads sector by removing some of the critical bottlenecks caused by inadequate capacity of the national and rural road network, and further build capacity for road administration and management. The project was outside the 2001 Country Assistance Strategy (CAS) that covered The next Country Partnership Strategy (CPS) was approved in 2006 covering the period , and the TRP did fit with the CPS, which had three pillars: (a) accelerating structural and institutional reforms to support sustainable growth; (b) addressing fiscal vulnerabilities and 1

12 modernizing the public sector; and (c) targeting poverty reduction and promoting social inclusion. The TRP, with its emphasis on the reform of the railways and improvement of its financial performance, and the improved management and efficiency of the road system, matched well with pillars (a) and (b) of the CPS. At the time of preparation of the TRP, the Bank was also preparing to launch a Programmatic Adjustment Loan (PAL) series for Romania. The expectation was that the PAL program would support the TRP reform objectives. At about the same time, the government was preparing to meet European Union pre-accession conditions with important policy and institutional targets for transport under the Acquis Communautaires. These two factors the PAL and the preaccession environment in Romania were expected to be important contributors for the TRP to meet its policy and institutional reform objectives. About two year after approving the TRP, the Bank approved the Transport Sector Support Project (TSSP) that provided further support for the improvement of roads and railways in Romania by focusing mainly on the critical issue of infrastructure maintenance. The TSSP was implemented in parallel to the TRP, and a separate Implementation Completion Report was prepared for this. 1.2 Original Project Development Objectives (PDO) and Key Indicators The objectives of the project, as stated in the Loan Agreement, were to improve the efficiency of the railways and roads sub-sectors, reducing the overall costs of transportation, improving road safety, and reducing the negative impacts of traffic congestion and pollution in selected cities, and to support the institutional development of Metrorex. As detailed in the Project Appraisal Document (PAD), these objectives would be achieved through the following outputs: i. Rehabilitate, modernize and develop transport facilities to improve safety and mobility of all travelers. Relieving traffic congestion in or near cities is of the highest priority in order to improve traffic flow and preserve old historic cities. ii. Restructure the administration of roads through reclassification of the road network and associated changes in the road management and financing. Increase efficiency of road works through privatization and development of the domestic construction industry. iii. Complete restructuring of the state railway companies to improve productivity towards full cost recovery (counting Public Service Contracts PSCs as legitimate income rather than subsidy) and prepare the railways for open competition within the EU. iv. Improve efficiency and effectiveness of urban transport planning and management, as well as the urban transport unit within the Ministry of Transport, Construction, and Tourism (MTCT). v. Stimulate liberalization of the domestic transport market by privatizing service delivery for both railways and roads. The key performance indicators identified in the PAD were: i. Road traffic safety: reduce the number of fatalities per 100,000 vehicles. ii. City by-passes effectiveness: reduce through traffic volumes and air pollution and noise in the city s main streets. iii. Road management effectiveness: review of functional classification and budget allocation methodology. iv. Railway management effectiveness: full cost PSCs for passenger services, labor productivity and track maintenance costs. 2

13 v. Urban transport planning and management effectiveness: improve regulation of urban transport in large cities and investment plans for improving Bucharest metro-rail urban transport system. vi. Private sector participation: percentage of road maintenance budget spent through competitive contracting. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDOs were not revised. 1.4 Main Beneficiaries The PAD does not explicitly identify the primary target group. However, the project objectives and key indicators suggest that the main beneficiaries of the TRP would be the following: Users of transport services, through better and safer roads and more efficient rail services. Urban population, thanks to less pollution and congestion in the cities main streets. The private sector, through expanded opportunities for participating in railway freight services and in the maintenance of the road network. At the highest level, citizens and taxpayers, thanks to better, more efficient and fiscally responsible management of public services in the transport sector, through the reforms in the railway and road sectors. 1.5 Original Components Component 1: Road Sub-sector Components (estimated cost US277.7 million) Institutional Development (estimated cost US$7.7 million). Technical cooperation and training to improve efficiency of road maintenance and administration targeted at the Romania National Company for Motorways and National Roads (RNCMNR), specifically (a) review and update functional and administrative classification of the public road network, development of the RNCMNR environmental policy and programs, and development of data services and analytical capabilities in road management, (b) development of RNCMNR planning methods and capabilities, (c) review and diagnosis of RNCMNR technical specifications and technical documents, (d) harmonization of RNCMNR technical standards with those of the EU, (e) carrying out a road user charges study. Also included are consultancies for engineering design, training in project management and modernization of RCNMNR computer systems. Road Safety Improvements (estimated cost US$7.9 million). Raise public awareness of safety, support implementation and application of a road traffic crash database, finance a Linear Village traffic safety pilot project and corrective measures at road sections with high traffic crash rates (black spots). Construction of By-passes (estimated cost US$222.5 million). By-passes for five cities: Bacau, Brasov, Reghin, Medias and Targy Mures. The aim is to relieve congestion, environmental pollution and reduce travel costs for traffic traveling through key cities experiencing major bottlenecks for both passenger and freight transport. Supervision of Civil Works During Construction (estimated cost US$12.7 million). Consulting services to ensure quality of civil works during construction. 3

14 Bridge Rehabilitation (estimated cost US$13.9 million). Repairs or replacement of selected bridges that are in critical condition. Other (estimated cost US$13.0 million). Land acquisition, annual financial audits, permits, contingencies. Component 2: Railway Sub-sector Components (estimated cost US$ 99 million) Technical Cooperation and Training (estimated cost US$13.6 million). Activities to further consolidate the reforms achieved in the railways under the previous Bank loan. The component comprises: (i) management training and development to assist the railways adopt commercialization/private sector practices and to institutionalize railway management training, (ii) Business Process Redesign, comprising three consultancies, that include software and hardware components, cover freight marketing, training operations for CFR and infrastructure maintenance and management, (iii) survey and analysis of market demand for passenger services, to help Calatori update its 5-year plan, (iv) training to the project management unit (PMU) and railway management staff. Completion of the IRIS Hardware and Communications Network (estimated cost US$7.2 million). Completion of the National Data Transmission Network, launched under the previous Bank project, to facilitate implementation of the IRIS in all the railway units. Infrastructure Maintenance, Power Supply and Signaling Equipment (estimated cost US$75.9 million). Purchase of various equipment for track maintenance, and for the modernization of power supply and signaling at selected railway stations and segments. Systems for Quality and Environmental Management (estimated cost US$1.2 million). Purchase of equipment and systems for monitoring emissions, metrological measurements, and environmental management. Other (estimated cost US$1.1 million). Annual financial audits, contingencies and unallocated. Component 3: Urban Transport Component (estimated cost US$1.2 million) Institutional Development. Technical assistance to support institutional development for MTCT and Metrorex, consisting of: (i) organizational development of the urban planning and management unit within MTCT, and the establishment of the Bucharest Metropolitan Transport Authority, (ii) reorganization of the Metrorex institutional structure to improve efficiency and effectiveness, (iii) feasibility study for the extensions to the Metrorex commuter services within Bucharest metropolitan districts, and (iv) provision of consultant services for audit of the project accounts during project implementation. 1.6 Revised Components Reallocation of loan funds to finance emergency repairs to infrastructure. At the government s request dated June 10, 2005 a little more than a month before loan effectiveness the Bank agreed to allocate 10 percent of loan proceeds for emergency repairs to road bridges damaged by major floods that occurred in the spring of Similar agreements were reached between the government and other international financing institutions (IFIs) that had ongoing road projects in Romania. In the government s request to the Bank, it was estimated that US$22.5 million would be required from the loan US$37.5 million including government contribution to repair the 4

15 most urgent bridges put forward for Bank financing. Considering the bridge rehabilitation subcomponent originally included in project and estimated at US$13.9 million, the total allocation for bridges was estimated to reach US$51.4 million. The reallocation was agreed on the basis that the government would later request additional financing in order for the project to have enough funds to finance the construction of the five city by-passes included in the project. The project indicators were not formally revised to reflect the addition of the emergency repairs of flood-damaged bridges. Dropping of road user charges study. This study was dropped from the project because of an ongoing (at the time) EU PHARE funded study with approximately the same objectives as the TRP-funded study. It was agreed with the government that the Bank would be able to comment on the PHARE study prior to its completion. The Bank s PAL program was to support the policy recommendations of such a study. 1.7 Other significant changes Closing date. The closing date was extended from the original July 31, 2009 to December 31, 2009, in order to allow the completion of several subcomponents that were under implementation at the time the government and the Bank came to a mutual conclusion that a longer extension was not possible under the circumstances in Romania in early 2009 (see section 2.2, MTR). Loan cancellation. US$120 million were canceled from the loan, corresponding mostly to the bypass subcomponent and several railway equipment and systems subcomponents that could not be procured within the new closing date. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Preparation The TRP was prepared jointly with the supervision of the then ongoing Second Roads Project, and occasionally with the Railway Rehabilitation Project. Preparation benefited from experience over 15 years in Bank-supported transport projects in Romania. The initial project concept called for a US$100 million loan, with funds divided about one third for the railways and two thirds for the roads. The loan amount was increased to US$225 million as the Bank found a strong government commitment in 2003/2004 to implement policy reforms. Submission of audited accounts for 2003 for both RNCMNR and CFR, were conditions of negotiations. Design The design of the project took into account lessons learned from two previous Bank projects, the Railway Restructuring Project (Loan 3976-RO) and the Second Roads Project (Loan 4178-RO). The key lessons from these projects taken into account in the design of the TRP were: (i) projects with several components should not be planned to the last detail, it should be sufficient to define the goals, objectives and targets to be achieved during implementation, and (ii) the Romanian implementing agencies are competent in procuring civil works and equipment, and technical cooperation is desirable to support improvement of management systems and procedures, including training of management and staff, and for updating standards and regulations. With retrospect, these lessons proved not to be applicable to the TRP. The TRP, because of its strong 5

16 emphasis on institutional development, and a physical component the city by-passes that required difficult coordination between the road agency and city governments, was overly complex. This, combined with the application of the wrong lessons, led to weak quality at entry and the project not being ready for implementation (see Sections 5.1a and 5.2b). Consideration of alternative project design regarding the bypass construction included continuing the rehabilitation of existing roads. This was rejected because it would not contribute to solving the traffic, road safety, and direct land access control problems in and near the cities which were top government priorities. Similarly, in the railways, rehabilitation of infrastructure was considered but rejected in favor of enabling continued infrastructure maintenance and rehabilitation using own funds and promoting good railway services to customers. There was no Quality at Entry rating by the Bank s Quality Assurance Group for this project. Risks The following were the risks identified and the mitigation measures considered: Insufficient budget for passenger railways PSC: reduce passenger service, surveillance of budget discipline and Bank loan conditions. Insufficient budget for RNCMNR road maintenance: increase road user charges, supported by observance of the International Monetary Fund (IMF) and Bank loan conditions. Marfa loses traffic to private operators: reduce Marfa service. Resistance to institutional restructuring: issue to be raised with government in the context of the Bank s Programmatic Adjustment Lending (PAL) operation. Insufficient counterpart funding: advance assurance from government and quarterly joint reviews with the Ministry of Public Finance (MPF). 2.2 Implementation Project implementation was hampered by a number of factors, which led to changes in the components and major delays, which in turn had an impact on completing the project. The project was considered to be a problem project at various times. Key issues during implementation are discussed below. Some of these issues also affected implementation of the parallel Transport Sector Support Project, since both projects were under the same implementing agencies and were similarly affected by government policies and management. Flood Damages to Transport Infrastructure. A few months after the project was approved by the Bank, major floods throughout Romania in the spring of 2005 resulted in major damages to roads, bridges and rail infrastructure. At the government s request received in June 2005 a little more than a month before effectiveness project funding for bridge rehabilitation included under the project was substantially increased in order to carry our emergency repairs to the most critical road bridges. While the original project included rehabilitation works on 16 bridges, an additional set of 70 bridges were added for post-flood repairs under the project. A similar agreement was reached between the government and other IFIs to include repair works of flood-damaged bridges in other ongoing road projects. Counterpart funding. Provision of counterpart funding was hindered at various times during implementation. At the start of the project, a requirement from the IMF demanded to reduce disbursements from all external financing by 20 percent in Towards the end of the project, the government s own budget ceiling for 2008 reduced the funding allocated for the project by 6

17 about two thirds, from US$22.9 million to US$7.4 m for the road component, and from US$68 million to US$21 million for the rail component. Effectiveness delay. It took more than 8 months until the loan was declared effective after being approved by the Bank. 1 The main reason for the delay was the time it took the government to complete the subsidiary loan and project agreements for the three implementing agencies (CFR, RNCMNR and Metrorex) and for each implementing agency to provide the Bank with official legal opinion on those agreements. Institutional reforms. Progress was slow throughout implementation. Recent Bank assessments 2 of reforms in Romania suggest that the government appeared to have lost its incentives for pursuing reforms including those under the project once it became a member of the European Union. Implementation delays. Adjusting the project to include the bridge emergency repairs and the problems with project funding created delays. But there were other factors that caused major delays, especially: Frequent changes in top management of RNCMNR and CFR, staff turnovers and staff shortages seriously impacted implementation of the project components. The above changes especially those of top management resulted in declining support and implementation capacity for the road institutional components, which started late and slowly. For example, agreement to launch two important road policy studies was only reached during a supervision mission in April 2008, that is, some three years after the project had been declared effective. The dismantling of the PMU that had worked well under previous projects, and whose competence the Bank relied upon during project preparation, leading to different units of the RNCMNR and the CFR managing different parts of the project (until late in the project 2008 when a CFR PMU was revamped). The procurement process of road components was slow due to RNCMNR staff being involved in several bid evaluations simultaneously and time lost in nominating and convening evaluation committees. This process improved through the introduction of project directorates, hiring of more staff and consultants, and increase in salary for project staff. Construction of by-passes the project s largest component accounting for 59 percent of the original project cost suffered major delays, and ultimately was not carried out, due to very frequent political and managerial changes both nationally and in the affected cities, large increases in traffic due to GDP growth, urbanization and car ownership requiring redesign of some by-passes, change in by-passes priorities and the Bank approval procedures. The testing of the design-build approach in one of the by-passes, Brasov originally, later changed to Medias, proved to be especially challenging from a procurement point of view, and it took the Bank and RNCMNR several rounds of revisions until an acceptable bidding document was arrived at. In an attempt to address the implementation delays that also affected projects financed by other IFIs the Bank facilitated the establishment of a Steering Committee including representatives of the government, IFIs and the European Commission (EC). 1 Similar delays in effectiveness had occurred in the previous two projects, the Second Road Project and the Railway Rehabilitation Project. 2 See Country Partnership Strategy (Bank report No RO June 2009), and PAL Implementation Completion Report (Bank report No. ICR June 2008). 7

18 Implementation significantly improved since early 2008, except for actions that required policy decisions. The volatile investment strategies and the absence of any master framework for Transport or the Medium Term Expenditures Framework (MTEF) that could have provided predictability in the allocation of funding for project components. Mid-Term Review (MTR). A joint MTR for the TRP and the TSSP was carried out in September October The MTR concluded that the TRP was unlikely to meet its development objectives by the original closing date of July 31, 2009, due to significant delays in the implementation of the physical and institutional components, by continuous changes in personnel in the road and railway companies, and by frequent political changes in the Ministry of Transport. The MTR report analyzed in detail the status and potential for achievement of each of the project objectives. For some of the objectives, an additional two years beyond the original closing dates would have been required for components supporting those objectives to be completed. The MTR report noted that given the acceleration of the implementation pace during 2008, substantial impacts could still be achieved under the project if government commitment towards the project were reconfirmed, adjustment made to some of the targets, and a time extension provided for project implementation. The MTR expected that soon after the general elections in late 2008, the Bank and the new government would discuss and agree on the following steps and the future of the project, including the option of project restructuring in early No Project Restructuring. Despite the conclusions of the MTR, the project was not restructured, and the targets were not modified. In the face of the state of dialogue between the Bank and Romania in early 2009, the impact of the global financial crisis on Romania, and the lack of agreement between the Bank and the government on the project s reform component, a large portion of the loan was canceled and the loan closing date was extended by five months to allow the completion of ongoing contracts and bring the project to an orderly closure. Project Cost. Inflation, in US dollars, due to delays, appreciation of the Euro and the Romanian RON versus the dollar, plus redesign of the Brasov bypass making it a four-lane expressway standard and almost doubling its estimated cost from EUR 48 million to EUR 75.6 million, made the project cost to exceed substantially the original PAD estimate of US$377.9 million. In any case, due to implementation delays leading to the cancelation of several components that could not be completed within the project closing date, project cost at closing was US$104 million or 27 percent of the original estimate. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design The PAD s results framework comprised a list of outcome indicators and of intermediate results, for monitoring progress and outcomes, divided into six areas. The design included separate, specific indicators for the project road, rail and urban transport sub-objectives, and covered physical as well as institutional results. The indicators were simple to collect. Baselines were established for each indicator, with the exception of reduction of traffic passing through cities that was to be determined during implementation. There were however some inconsistencies between the PAD s main text and annexes regarding the definition of some outcome indicators. Responsibility for data collection was split in accordance with the respective subsector, and involved RNCMNR, CFR, Marfa, Calatori, and MOT. Most of the indicators were to be reported 8

19 annually, the exception being the reduction in traffic passing through cities, reported bi-annually, and the achievement of independent control at Marfa, reported to the supervision missions. Implementation and Utilization The performance indicators were monitored periodically, and reported in the Aide-Memoires of the supervision missions. The indicators were used both by the government transport agencies and the Bank to monitor performance and to propose remedial actions when needed. 2.4 Safeguard and Fiduciary Compliance Environmental safeguards The road by-pass component was the main project activity that was expected to have significant environmental impacts. This component fell under Category A for the purpose of OP/BP 4.01 Environmental Assessment. The Environmental Impact Assessment (EIA) developed during project preparation was adequate and Environmental Management Plans (EMPs) were prepared as part of the EIA report. The physical implementation of the by-passes component did not materialize. During the preparation of the detailed designs for the by-passes, the EIAs were updated to reflect changes in some design parameters such as road alignments. The revised EIAs were duly reviewed and approved by the Bank. In addition, the EMPs were used for the contracts for the bridge rehabilitation component. It should be noted that the emergency bridge rehabilitation component has significant positive environmental impacts including hydrological works and the rehabilitation of river beds. Social safeguards The by-passes component required land acquisition. A Land Acquisition Policy Framework was prepared by RNCMNR and approved by the Bank during project preparation, which clarified steps and procedures in the land acquisition process. The detail designs were prepared for the bypasses, however no land acquisition took place because the component was not implemented due to the partial cancelation of the loan. 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, triggering a Bank warning for loan suspension in 2007 that was lifted after the overdue entity audit reports were received 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. Procurement Procurement arrangements were well defined. However, there were significant delays in having procurement procedures started in the first 2 3 years of project life due mainly to: (i) turnover of project implementing entity staff; (ii) delays in preparation of terms of reference for key consultancies such as design and supervision or railway business processes redesign (in this case the project involved three different independent companies, only one, CFR being part of the loan. CFR has no authority over the other two); (iii) cumbersome organization of bid evaluation committees; (iv) considerable delay in Bank s decision on the form and details of the design & 9

20 build procurement document a non-standard procurement method for one of the by-passes; and (v) the time it took CFR and the Bank to make decisions on key railway packages such as the supply and installation of traction power substations. 2.5 Post-completion Operation/Next Phase Maintenance and operation of the physical investments under the project are the responsibility of the respective implementing agencies. RNCMNR will maintain the bridges with funding from its budget and similarly CFR is expected to maintain the project-financed equipment and IT systems. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation A Country Assistance Evaluation (CAE) prepared by the Bank s Independent Evaluation Group in 2005 found that the Bank s overall strategy for Romania, allocating 60 percent of its commitment during the CAE review period ( ) for private sector development and supporting infrastructure, correctly reflected the important role that the private sector must play for generating growth and reducing poverty. The TRP was an important component of this strategy, and did fit well within the 2006 CPS, as noted in Section 1 of this ICR. The current CPS approved by the Bank in July 2009 in the midst of the global economic and financial crisis and covering the period July 2009 June 2013 noted 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 mediumterm. The TRP, with its emphasis on economic reforms in the road and rail sectors, and the financing of infrastructure essential to support private sector activities, would had its objectives been achieved have made an important contribution to the government program and the current CPS. During the preparation of the CPS, the government and the Bank were in agreement that the TRP objectives remained very relevant, but the poor performance of the project had already, by then, led the government and the Bank to agree that it should not be extended. The project s institutional and physical components were key sector priorities. Regarding the road sector, the institutional subcomponent had a wide focus, aimed at restructuring the road administration through reclassification of the road network, and at effecting changes to improve road management and financing and increase the efficiency of works through privatization and development of the road construction industry. The physical component, focusing on works to improve safety and mobility and on relieving traffic congestion in or near cities to improve traffic flows and preserve old historic cities, addressed very important investment priorities. Regarding railways, restructuring the state railways to improve productivity and prepare the railway sector for open competition within the EU was a clear and important priority. At the same time, providing equipment to improve railway infrastructure maintenance and completing and expanding the railways communications and data transmission to facilitate implementation of the integrated railway information system (IRIS) in all of the railway service units, were also well established priorities. A small urban transport component provided technical assistance to support institutional development of capacity for planning and managing urban passenger transport, with 10

21 a view to improving efficiency and effectiveness of the metro-rail urban transport operator in Bucharest (Metrorex) was very relevant given the transport issues facing the city of Bucharest. Successful reforms in previous Bank-supported transport projects appeared to bode well for the proposed TRP reforms. However, the earlier reforms were first generation reforms during Romania s economic transition years, and although they were very important they were generally less difficult to carry out. For example, a significant staff reduction in the railways prior to TRP was accomplished partly by disposing of subsidiaries that were not a core railway business and by attractive retirement packages to an aging work force at that time. But once such initial reforms were completed, it fell to the TRP to support second generation and more complicated reforms, such as the redesign of railway business processes or the revision of the road user charges system. The TRP was a high reward, high risk project. The substantial institutional and reform objectives for the road and rail sectors made it as most projects of this nature potentially risky. A strong government support during project preparation and appraisal for the project objectives, and the significant benefits that it would yield in terms of a more efficient transport system especially important given the need for Romania to close the gap with EU standards justified going ahead with it. Yet, the serious reform agenda of the TRP may have been difficult to achieve under a Specific Investment Loan (SIL) instrument, the implementation time may have been too short, and the EU accession, once realized, could have dampened government s support for reform. There were also substantial risks with the project s main physical components, which, in retrospect, appeared as not being ready for implementation. 3.2 Achievement of Project Development Objectives The project intended to improve the efficiency of the railways and roads sub-sectors, reducing the overall costs of transportation, improving road safety, and reducing the negative impacts of traffic congestion and pollution in selected cities, and to support the institutional development of Metrorex. 3 Attaining the outputs necessary for the project to meet its objectives was impacted by significant implementation delays of both physical and institutional components, reflecting a loss of reform momentum in Romania once EU accession was secured as suggested by several recent Bank assessments 4 and frequent political and management changes in the Ministry of Transport and in the roads and railways companies. As a result, only part of the objectives were achieved by the revised closing date. The completion of the project outputs is assessed as follows. A. Road Sector: (i) Modernize, improve safety, relieve traffic congestion, (ii) Restructure agency, increase efficiency of road works A1. Rehabilitate, modernize and develop transport facilities to improve safety and mobility of all travelers. Relieve traffic congestion in or near old historic cities. Overall, this was not achieved. The project s main physical output, the by-pass construction program by far the project s largest component was not carried out. As a result, the expected 3 Objectives as per the Loan Agreement. This wording is more detailed that the project objective described in the PAD. 4 See Country Partnership Strategy (Bank report No RO June 2009), and PAL Implementation Completion Report (Bank report No. ICR June 2008). 11