PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB4286 Project Name

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB4286 Project Name ET-Road Sector Dev. Stage IV Proj (APL4) in Support of Govt. s RSDP Program Region AFRICA Sector Roads and highways (96%);Central government administration (4%) Project ID P Borrower(s) GOVERNMENT OF ETHIOPIA Implementing Agency Ethiopian Roads Authority P. O. Box 1770 Ethiopia Tel: Fax: era1@telecom.net.et Environment Category [] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared November 25, 2008 Estimated Date of January 13, 2009 Appraisal Authorization Estimated Date of Board May 28, 2009 Approval 1. Key development issues and rationale for Bank involvement The Government of Ethiopia is currently implementing its second PRSP, named as Plan for Accelerated and Sustained Development to End Poverty (PASDEP) set for the period 2005/ /10. One of the eight pillars underpinning PASDEP is strengthening the infrastructure backbone of the country. Since 1997, in the context of PASDEP, the Government has concentrated on improving and extending the main road network under Road Sector Development Program (RSDP) to restore inadequate main and regional (classified) roads while developing plans for wereda level development. The current classified road length is 44,359km (which was 24,970km in 1997), yet Ethiopia remains among the countries with lowest road density in SSA. Road Network (2008) (Length in km) Class of Road Paved Unpaved Total Federal Roads 6,066 14,363 20,429 Regional Roads - 23,930 23,930 Subtotal (classified roads) 6,066 38,293 44,359 Rural Roads(unclassified roads) - 70,038 70,038 Total 6, , ,397

2 Roads Public Expenditure Pattern by Jurisdiction Rural Roads Pattern of Total Roads Public Expenditure by Finance Source ETB mill. (nominal terms) Regional Roads Federal roads All Roads ETB mill.(nominal terms) Japan ADB EC IDA Road Fund GoE The share of the road investment as a proportion of the total Government capital investment has been increasing in the past 10 years - from 32% in 1998 to 37% in The total road sector expenditure (including all financing sources) has substantially increased from ETB3.1 billion to ETB8.67 billion (nominal) in The share of the Government in the total road expenditure, especially after 2005, has Growth of Classified Road Network & Vehicle-Km increased with a spike which necessitates close monitoring of the macro-economic situation throughout the project implementation. From 1997, the IDA, together with other donors, provided grants/credits to support the RSDP, and since June 2003, road sector APL has started in 3 overlapping stages bringing the total IDA support to RSDP to $1.1 billion. IDA s participation has therefore been instrumental in the implementation of the long-term national program. 1.2 Achievements and Lessons Government s RSDP Development impacts: In the past 10 years ( ) the vehicular-km growth (147%) far exceeded the classified road network growth (69%) which shows substantial improvement in the facilitation effect of the network expansion on economic and social development. Quality of Roads: The proportion of roads in good condition has overtaken the proportion of roads in poor condition from 2004 onwards. Road Fund: Since the inception of the Road Fund (RF) in 1997, fund revenue, budgetary allocations and actual transfers to road agencies have increased dramatically. Since 1997/98, the RF annual revenue amount increased more than six-fold (in real terms three-fold). However, more revenue sources need to Growth Index (relative to 1997/98) Percentage (%) / / / / / / / / / / /08 Road Condition Improvement ( ) Year Vehicle-Km Classified Roads (km) Good Fair Poor

3 be explored to future needs. Domestic construction industry: During the RSDP, reform and capacity development measures were embraced to build local contractors capacity and increase their involvement in various aspects of the program. As a result, the share of annual total contract price awarded to local contractors substantially increased - reaching 58% in Lessons from IDA s APL1-3 Development Objectives: DOs differ slightly among APLs, but they are broadly categorized into four. Details of the DO evaluation of individual APLs are described in the Independent Review and Assessment Report prepared by a consultant. DO1. Improve mobilization and use of resources for road maintenance: This has been fully achieved. The maintenance budget of the Ethiopian Roads Authority (ERA) rose from Birr million in 1996/97 to Birr million in 2006/07 (nominal), close to a 7-fold nominal increase in 10 years (Birr million at 1996/97 present value using GDP deflator a 4-fold increase) fully covered by the RF revenue. DO2. Increase road transport infrastructure and improve its reliability (road condition): This has been fully achieved. The current road density (38.6 km/1000sq. km) has exceeded the APL1 & 2 targets (36.2 km/1000sq. km at the end of 2009). DO3. Strengthen capacity for road management: This has been partially achieved. The IDA, in concerted efforts with other donors, provided short and long term capacity building. A number of manuals and training modules were prepared and training conducted, which will be further supported by Addis Ababa University. Some of the achievements recorded are: (i) Annual contract price awarded: In 2005, the total works contract price awarded was $289 million reaching $1,284 million in implying 4.5 times increase (nominal) in the contracts management capacity of ERA; (ii) Number of contracts awarded: In 2005, the number of works contracts awarded was 44, and this increased to 80 in 2007 also showing substantial management capacity increase; and (iii) Time for payments to consultants/contractor: Time for payments to consultants has been efficiently reduced. In 2007, the recorded time dropped to 49% compared with DO4. Develop capacity in private sector: This has been partially achieved. The growth of the DCI has been facilitated through various capacity building activities provided by ERA, the IDA and other donors. As a result, the share of the total contract price annually awarded to local contractors has substantially increased - reaching 58% in However, DCI participation in maintenance works remains very low (e.g., participation in long-term routine maintenance remains around 10%). Comprehensive capacity building: Through various support provided by the IDA and other donors, ERA has received considerable technical assistance (TA). However, many of the activities jointly financed by the various donors have been based on needs developed at the start and during implementation of RSDP. Changing needs in program scope and overall sector organization at national, regional and wereda level call for a Comprehensive Capacity Building program, which DAG has agreed to jointly support its preparation and implementation.

4 Maintenance works quality: In the ERA capacity building process, and also from the technical audit conducted by the Office of Road Fund, shortcomings in maintenance quality and technology were determined which needs to be addressed and rectified. Rural access road development: Importance of rural access roads expansion has been well recognized under RSDP. To facilitate this, Ethiopia Rural Travel and Transport Program (ERTTP), a Subprogram of RSDP, has been supporting the preparation of long term wereda cross-sectoral development plans - from which priority rural access roads would be developed/maintained. The proposed three roads in APL 4 will incorporate the priority rural access roads identified in these plans. DFID has been financing the pilot implementation in 8 pilot weredas to identify capacity development needs based on which the Protection of Basic Services-2 (PBS-2) Project will support strengthening of wereda administrations in the coming 3 years. However, there are few or no experienced local contractors for the civil works requiring the establishment of new local small labor-based (LB) contractors. Maintenance needs and funding: Under APL1, a road financing study was conducted (2004/05) and the road user charge level was determined. However, as a result of an expanded network and recent cost increase, it is estimated that the maintenance expenditure would exceed RF revenue from 2009/10 - requiring in depth maintenance needs review. Road safety: Ethiopia is one of the countries with the highest accident fatalities in the world losing about 2,000 lives each year. The Government requested IDA to invite Global Road Safety Facility (GRSF) to Ethiopia (October 2008) to discuss the possible dispatch of experts to conduct road safety management capacity review to which GRSF has responded positively. Traffic data: The facilitation of development impact of the RSDP has been demonstrated with road network expansion being surpassed by vehicle-km growth in para However, available traffic data/statistics are limited to the federal road network requiring comprehensive traffic/transport data collection. 1.3 Triggers Based on the evaluation report prepared by an independent consultant, two of the three triggers have been met. Stages Trigger Indicators Remarks (1) 60% disbursement of Grant proceeds from APL1. COMPLETED Stage 4 (2) Management of equipment including plant-leasing arrangements implemented. COMPLETED (3) 100% of DMOs function as commercial units, delivering cost effective maintenance services within a framework of internal performance agreements. NOT YET COMPLETED Trigger (1): The current disbursement rate of APL1 is 78% (USD million as of November 03, 2008) and has fully satisfied the requirement. Trigger (2) and (3): The ERA DMOs are now divided into Client District Engineering Department and Service Provider - District Road Maintenance Contractor (DRMC) and are operating under commercial principles under a pre-agreed internal Service Level Agreement with separate accounts, but still remaining under DMO premises - not as a separate commercial business units. Arrangement for the equipment/plant leasing is completed, and the rental rates prepared by ERA Equipment and Supply Division are expected to be instituted early Recent working draft action plan indicates that the application of the revised internal

5 performance agreement and service level agreement for equipment leasing is the first step toward full separation of DRMCs as maintenance companies with full completion by Dec The Bank will closely monitor, review and confirm the plan with the recipient at appraisal. 2. Proposed objective(s) The objectives of APL4 are in line with the preceding stages: to assist the Government in (i) strengthening and increasing its road transport infrastructure and its reliability; and (ii) strengthening the institutional efficiency in road sector management. Being the last APL, road user benefits and poverty/gender aspects critical for the achievement of MDG will also be closely monitored. 3. Preliminary project description Component 1 Upgrading and Construction of Federal Link Roads: This comprises upgrading of two link roads from an existing gravel surface to asphalt surface, and construction of one new gravel link road as follows: (i) Upgrading of Mekanejo-Dembi Dollo Road Project (181 km asphalt - originally designed for APL3): This road connects weredas of West Wollega zone and zonal capital towns like Gimbi and Nekemte and leads to Gambella region. The section is a continuation of Gedo- Nekempt-Mekenajo road rehabilitated under APL1 and APL3. (ii) Upgrading of Welkite-Hosaina Link Road Project (127 km asphalt): This road connects agricultural hinterlands of the SNNP region. The road links the Addis-Jimma road (rehabilitated with EU funding) with Addis-Mojo-Sodo-AlabaMinchi road (partly rehabilitated by EU) to accommodate agricultural traffic. A part of his road (67km) received heavy maintenance works (2002/04) under IDA Emergency Rehabilitation Project. (iii)construction of Ankober-AwashArba Link Road Project (92 km gravel): This road will link the two major roads of Addis-Kombolcha-Weldia-Mekele road (first half partly rehabilitated by EU and second half by IDA and GOE) to the Addis-Djibouti road (rehabilitated by IDA under RRP and RSDPSP and AfDB), providing access to the highland/agricultural area of Amhara and the lowland/nomadic area of Afar region.; and (iv) supervision of these three roads. The project will continue supporting the social development initiatives launched under the previous APLs, and small social infrastructure investments in communities to enhance access. Component 2 Institutional Strengthening/Capacity Building for ERA: Based on the lessons learned, various institutional strengthening/reform and capacity building activities will be provided comprising: (i) Support to prepare and carry out a harmonized Comprehensive Capacity Building to enhance sector management capacity including ERA, RRAs, wereda administrations and private sector. The Government and donors agreed to address this issue through the DAG Transport Sector Working Group in line with consensus reached in the DAG Workshop in October 2008 toward preparing and implementing a coordinated/harmonized sector operational and management capacity building program elements.

6 (ii) Preparatory study toward establishing a Maintenance Engineering Research Center to address shortcomings in maintenance quality and technology. The Center, once established, is also expected to function as a highway technology center in the long term. (iii)support to Ginchi Training Center for maintenance works to strengthen the ongoing maintenance training through provision of experts and training equipment to improve the performance of technicians, foremen and operators. (iv) Preparatory study to assess and test the most effective mechanism for establishing and promoting small LB local contractors at the wereda level to be carried out through provision of technical advisory services in 2 phases (i) preparatory study, and (ii) evaluation of various strategic options - including business management training and piloting of financing options for LB works. Component 3 Network Management Studies: Based on the lessons learned, various studies will be conducted comprising: (i) Update of Road Financing Study to identify maintenance needs and required funding arrangement for the coming 10 years reflecting recent price hike, rapid vehicle and road network expansion and development of advanced maintenance technology. (ii) Road safety study to follow up road safety management review to be conducted by GRSF toward preparation of cross-sectoral and comprehensive road safety action plan. (iii)preparatory study toward establishing a nationwide Road Traffic Census Program through provision of technical advisory services to enable accurate/comprehensive measurement of traffic volume and transport statistics, and monitoring of development impacts; and (iv) Transport and poverty observatories (TPOs) to assess the poverty and social impacts of the road investments. TPOs are panel surveys started that under APL2 and will be carried out for five years. Indicative financing plan: Due to recent substantial price hike in civil works as a result of the global oil price increase, the total indicative project cost is estimated at US$ million which will be further revised before appraisal to ensure accuracy in cost estimation. The IDA s financing for APL4 would need to be increased by US$ million from the Board approved allocation of US$ million to US$ million as shown in the following table: Indicative Financing Plan for APL 4 (Length in Km &Cost in Million USD@1 ETB = US$ 9.50) Component Indicative Costs (US$M) % of Total Association financing (US$M) % of Association financing 1. Upgrading and Construction of Federal Link Roads % % 1.1 Mekanejo-D/Dollo road (181km asphalt) % % 1.2 Welkite-Hosaina road (127km asphalt) % % 1.3 Ankober-AwashArba road (92km gravel) % % 1.4 Supervision of the above three roads (5% of works costs) % %

7 2. Institutional Strengthening/Capacity Building % % 2.1 Support to prepare and conduct Harmonized Comprehensive Capacity Building % % 2.2 Preparatory study toward establishing Maintenance Engineering Research Center % % 2.3 Support to Ginchi Training Center for maintenance works % % 2.4 Preparatory study toward establishing/promoting small LB local contractors at wereda level (in 2 stages) % % 3. Studies % % 3.1 Update of Road Financing Study % % 3.2 Follow on study of GRSF safety management review % % 3.3 Preparatory study toward establishing Road Traffic Census Program % % 3.4 Transport and poverty observatories to assess poverty impacts % % Total project costs % % Contingencies (10%) % % Price escalation (15%) % % Total financing required % % 4. Safeguard policies that might apply Safeguard Policies Triggered Yes No TBD Environmental Assessment (OP/BP 4.01) The potentially adverse impacts to be induced by project operations include: soil erosion, temporary and permanent loss of land and property, HIV/AIDS diffusion, and other site specific disturbances. Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) OP 4.01 has been triggered, consequently, OP Also, the SA identified a graveyard in the right of way SA of the Welkite Hosaina road. Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) The civil works on the three roads will require land acquisition and actions to address temporary and permanent loss of land and property.

8 Safeguard Policies Triggered Yes No TBD Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT International Development Association (IDA) Total Contact point Contact: Yoshimichi Kawasumi Title: Sr. Highway Engineer (Task Team Leader) Tel: Dama Line Fax: