Sri Lanka: National Highways Sector Project

Transcription

1 Completion Report Project Number: Loan Numbers: 2217, 2767 and 8252 Technical Assistance Number: 4736 August 2018 Sri Lanka: National Highways Sector Project This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS Currency Unit Sri Lanka rupees/s (SLRe/SLRs) At Appraisal At Project Completion 14 November September 2017 SLRe1.00 = $ $ $1.00 = SLRs SLRs ABBREVIATIONS ADB Asian Development Bank CRE chief resident engineer CSC construction supervision consultant DMF design and monitoring framework EIA environmental impact assessment EIRR economic internal rate of return EMP environmental management plan ESD Environment & Social Division ICB international competitive bidding IEE initial environmental examination LAR land acquisition and resettlement LARC land acquisition and resettlement committee MIS management information system MOH Ministry of Highways NCB national competitive bidding NSC national steering committee OFID Organization of Petroleum Exporting Countries (OPEC) Fund for International Development PAM project administration manual PBM performance based maintenance PMU project management unit RDA Road Development Authority RMTF Road Maintenance Trust Fund RPPF road project preparatory facility RRP report and recommendation to the President TA technical assistance km kilometer m 2 square meter NOTES (i) (ii) The fiscal year (FY) of the Government of Sri Lanka ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December In this report, "$" refers to United States dollars.

3 Vice-President Wencai Zhang, Operations 1 Director General Hun Kim, Director General, South Asia Department (SARD) Director Sri Widowati, Sri Lanka Resident Mission, (SARD) Team leader Team members Aruna Nanayakkara, Senior Project Officer (Transport), SARD Navodhini Amarasekera, Project Analyst, SARD Herath Jayasundara, Social Development Officer, SARD Sudarshana Jayasundara, Social Development Officer (Gender), SARD Abira Prashanth, Associate Project Analyst, SARD Donald Sinclair, Project Officer, SARD Roshani Yogarajah, Senior External Relation Officer, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 CONTENTS Page BASIC DATA i MAP vii I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 3 C. Project Costs and Financing 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Technical Assistance 8 H. Consultant Recruitment and Procurement 8 I. Safeguards 9 J. Monitoring and Reporting 10 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness 11 C. Efficiency 12 D. Sustainability 12 E. Development Impact 13 F. Performance of the Borrower and the Executing Agency 13 G. Performance of Cofinanciers 14 H. Performance of the Asian Development Bank 14 I. Overall Assessment 14 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 15 A. Issues and Lessons 15 B. Recommendations 15 APPENDIXES 1. Design and Monitoring Framework Policy and Institutional Support Component Medium Term Institutional Strengthening Framework Project Roads and Packages Poject Cost at Appraisal and Actual of the original financing Project Cost by Financier Disbursement of ADB Loan Proceeds Chronology of Main Events Implementation Timeline and Schedule Implementation Organizational Structure Technical Assistance Completion Report Contract Awards of ADB Loan Proceeds Contract Implementation Details for Road Upgrading Social Safeguard Implementation and Restoration and Improvement of Incomes and Livelihoods of Affected Households Status of Compliance with Loan Covenants Economic Reevaluation Sustainability of National Road Maintenance Socio-Economic Benefits and Impacts of Rehabilitated Roads 100

5 BASIC DATA A. Loan Identification 1. Country 2. Loan Number and financing source 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number 8. Financing modality Sri Lanka 2217/2767 Ordinary Capital Resources, L8252 (OFID) National Highways Sector Project Government of Sri Lanka Ministry of Highways and Road Development 1 L2217: $150,000,000; L8252 (OFID): $8,000,000; L2767: $85,000, Sovereign Loan B. Loan Data 1. Appraisal Date Started Date Completed 2. Loan Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness In Loan Agreement Actual Number of Extensions L2217: 29 August 2005 L2767: 21 March 2011 L2217:07 September 2005 L2767: 8 April 2011 L2217: 02 November 2005 L2767: 29 June 2011 L2217: 04 November 2005 L2767:30 June 2011 L2217: 15 December 2005 L8252: 13 January 2011 L2767: 05 August 2011 L2217: 14 December 2006 L8252: 17 January 2011 L2767: 14 December 2011 L2217: 14 March 2007 L2767: 14 March 2012 L2217: 20 February 2007 L8252: 10 February 2011 L2767: 23 February During the approval of the original loan (L2217), the executing agency was identified as the Ministry of Highways, which was subsequently converted as Ministry of Ports and Highways. At the approval of the supplementary loan (L2767), the executing agency was identified as Ministry of Ports and Highways which was subsequently converted as Ministry of Ports, Highways and Shipping; later converted to the Ministry of University Education and Highways and later again to the Ministry of Highways and Road Development. L2217:

6 ii 6. Project completion date Appraisal Actual 7. Loan closing date Appraisal Actual Number of Extensions 8. Financial closing date Actual 9. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 10. Terms of Relending (if any) Interest Rate Maturity (number of years) Grace Period (number of years) Second-Step Borrower L2217: 31 December 2009 L8252: 31 December 2009 L2767: 31 December 2015 L2217: 31 December 2012 L8252: 21 May 2010 L2767: 31 December 2016 L2217: 31 December 2010 L8252: 30 June 2015 L2767: 30 June 2016 L2217: 31 December 2012 L8252: 21 May 2014 L2767: 31 December 2016 L2217: 2 L8252: 0 L2767: 1 L2217: 18 June 2013 L8252: 21 May 2014 L2767: 11 September 2017 L2217: LIBOR L8252: 2.75% per year L2767: LIBOR L2217: 25 Years L8252: 15 Years L2767: 25 Years L2217: 5 Years L8252: 5 Years L2767: 5 Years Not Applicable 11. Disbursements L2217 a. Dates Initial Disbursement 11 April 2007 Effective Date 20 February 2007 Final Disbursement 23 May 2013 Original Closing Date 31 December 2010 Time Interval 73.4 Months Time Interval 46.4 Months

7 iii L2767 a. Dates Initial Disbursement 10 April 2012 Effective Date 23 February 2012 Final Disbursement 31 August 2017 Original Closing Date 30 June 2016 Time Interval 64.7 Months Time Interval 52.2 Months L8252 a. Dates Initial Disbursement 18 November 2011 Effective Date 10 February 2011 Final Disbursement 28 May 2013 Original Closing Date 21 May 2014 Time Interval 18.2 Months Time Interval 39.9 Months b. Amount ($ million) L2217 Category or Original Last Revised Amount Net Amount Amount Undisbursed Sub loan Allocation Allocation Canceled Available Disbursed Balance 01A Civil Works Road Upgrading 01B Civil Works Road Maintenance 01C Civil Work Building Construction 02 Land acquisition and Resettlement 03A Consulting Services Institutional and policy support 03B Consulting Services Construction Supervision 03C Consulting Services Performancebased management 04 Project Management 05 Interest and Commitment charges 06 Unallocated Total

8 iv L2767 Last Revised Allocation Net Amount Available Category or Sub loan Original Allocation Amount Canceled Amount Disbursed Undisbursed Balance 01 Works Consulting Services Project Management Interest and Commitment charges Unallocated Total L8252 Category or Sub loan 01 Civil Works Highway upgrading Original Allocation Last Revised Allocation Amount Canceled Net Amount Available Amount Disbursed Undisbursed Balance Total C. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost Not Applicable Local currency cost Not Applicable Total 2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower financed ADB financed Other external financing Total implementation Cost IDC Costs borrower financed ADB financed Other external financing Total interest during construction cost ADB = Asian Development Bank, IDC = interest during construction.

9 v 3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual Institutional & policy support Highway upgrading Performance-based maintenance Highway secretariat building Project management Contingencies Financing charges Total Project schedule Item Appraisal Estimate Actual Date of Contract with Consultants Policy and institutional Q Q12009 Q Q12011 Construction supervision Q Q42011 Q Q32016 Civil Works Contract Puttalam Anuradhapura (A012) Q Q12010 Q Q32012 Udatenna Mahiyangana (A026) Q Q12011 Q Q12012 Nuwara Eliya Badulla (A05) Q Q12011 Q Q42012 Habarana Kanthale (A006) Q Q12011 Q Q32010 Nugegoda Homagama (A004) Not in original scope Q Q42012 Highway Secretariat Not in original scope Q Q32014 Nagoda Katukurunda (B 207) Q Q32014 Q Q12014 Pamankada Kesbewa (B084) Q Q32014 Q Q22016 Matara Akurassa (A-24) Q Q22015 Q Q22015 Hikkaduwa Baddegama (B153) Q Q22015 Q Q12016 Lewwanduwa Aluthgama (B157W) Q Q22015 Q Q32015 Q = quarter. L Project performance report ratings Ratings Development Objectives Implementation Progress Implementation Period From 20 February 2007 to 31 December 2007 Satisfactory Satisfactory From 01 January 2008 to 31 December 2010 Satisfactory Satisfactory From 01 January 2010 to 31 December 2012 Satisfactory Satisfactory From 01 January 2012 to 18 June 2013 On Track L2767 Implementation Period From 23 February 2012 to 31 December 2012 From 01 January 2013 to 31 December 2015 From 01 January 2016 to 31 December 2016 Ratings Development Objectives Implementation Progress On Track On Track On Track

10 vi D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of Person- Days Specialization of Members a Fact Finding Mission 4 May 20 May a,b,c,d,e,f Consultation Mission 4 Jul 5 Jul a,c Consultation Mission 12 Aug 15 Aug a,c,g Appraisal Mission 29 Aug 7 Sep a,c,f,h,i,j,k Consultation Mission 23 Feb 24 Feb a,b Consultation Mission 6 Jul 7 Jul a,c Review Mission 14 Nov 17 Nov a,b(2),g,i,l,m,n Inception Mission 7 Mar 13 Mar a,o(2),p Consultation Mission 7 May 11 May a,o(2),q,r Consultation Mission 14 May 18 May a,c,q Special Loan Administration Mission 14 Nov 21 Nov a,c,q,s,t Consultation Mission 12 Feb 15 Feb b,i,s,u,v,w,x Review Mission 2 Feb 7 Feb a,c,y,z,aa,ab,ac Special Project Administration Mission 11 Jun 12 Jun a,y Review Mission 17 Aug 25 Aug a,ad Review Mission 27 Oct 30 Oct ae Social Safeguards Compliance Review 8 Feb 16 Feb ae Mission Special Project Administration Mission 12 Feb 13 Feb a,i,y Mid Term Review Mission 10 May 20 May a,aa,ad Mid Term Review Mission 27 Jul 2 Aug i,o(2) Review Mission 18 Oct 22 Oct a,ad Consultation Mission 10 Nov 19 Nov a,i,o Consultation Mission 24 Jan 31 Jan a,c,d,i,o,v,ag,af Fact Finding Mission 21 Mar 8 Apr a,b,c,i,o,af,ag Review Mission 28 Mar 1 Apr a,m,aa,af,ah Review Mission 7 Nov 11 Nov a,q,af Safeguard Review Mission 5 Dec 9 Dec a,c,ae Review Mission 23 Apr 27 Apr a Review Mission 10 Dec 14 Dec a Review Mission 14 Oct 23 Oct a,p,ag,ai,aj, Review Mission 23 Jun 25 Jun a,n,ae,ai, a = lead professional; b = transport specialist; c =social development specialist; d = environmental specialist; e = staff consultant; f =principal project management specialist; g = senior environmental specialist; h = principal financial specialist; i senior project implementation officer; j = counsel; k = portfolio management specialist; l = private sector development specialist; m = senior transport specialist; n = project analyst; o = project implementation officer; p = associate project analyst; q = senior infrastructure specialist; r = gender specialist; s = senior safeguard specialist; t = senior financial control specialist; u = deputy director general; v = director; w = country director; x = head of project administration unit; y = head, portfolio management unit; z = disbursement officer; aa = disbursement analyst; ab = gender consultant; ac = environmental consultant; ad = project administrative assistant; ae = social safeguard specialist; af = operations assistant; ag = safeguard officer; ah = senior project officer; ai = senior environmental officer; aj = assistant admin officer.

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12 I. PROJECT DESCRIPTION 1. Although Sri Lanka s road density is higher than that of many developing countries, the standards and conditions of the road network were inadequate to meet the rapidly growing freight and passenger traffic. Most of the roads in the national highways network were still single and two-lane, more than 50% of the network had poor surface condition, and many portions were seriously congested. These constraints limited the roads contribution to the national development and economic growth, so the existing road infrastructure had to be improved and upgraded. Improvements to the road infrastructure also required institutional arrangements and capacity building to support the strategic management of the road transport subsector, and the planning and management of investments. 2. On 15 December 2005, the Asian Development Bank (ADB) approved the National Highways Sector Project with a $150 million loan (Loan 2217-SRI). 1 The expected project impact was an expansion of economic opportunities leading to higher income. The expected outcome was an improvement of national transport efficiency through (i) improved road sector institution and policy and (ii) upgraded and maintained national highway network that reduced transport cost and travel time. The expected project outputs were: (i) Road Development Authority (RDA) strengthened, its Environmental and Social Division established, road sector master plan developed, and annual road maintenance plans prepared; (ii) up to 270 kilometers (km) of national highways upgraded, about 80 km of the national highway ready for widening and/or upgrading, and performance-based maintenance (PBM) contracts for 1,500 km of roads piloted. Along with the loan, ADB provided a $0.4 million grant to support the establishment of the Environmental and Social Division of the RDA The project experienced cost overruns as the cost of the civil works exceeded the project appraisal estimate, requiring scope modification and reallocation of loan proceeds. On 13 January 2011, the Organization of Petroleum Exporting Countries Fund for International Development (OFID) provided $8 million co-financing, to be administered by ADB, to help improve 14 km of the national highway. 3 Subsequently, as requested by the government on 5 August 2011, ADB approved additional financing of $85 million to help the project achieve the full extent of the improvements envisaged under the original financing, by expanding geographical areas, increasing the number of beneficiaries, and optimizing access to the Southern Highway. 4 II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. The project was consistent with the government s priorities under its investment plan ( ) and its strategic vision as stipulated in Mahinda Chinthana as well as ADB s country partnership strategies of , which was developed just before the formulation of the project, and , which was developed under the original and additional financing. 5 1 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistant Grant to the Democratic Socialist Republic of Sri Lanka: National Highways Sector Project. Manila. 2 ADB Technical Assistance to Democratic Socialist Republic of Sri Lanka for Capacity Building of the Environmental and Social Division of the Road Development Authority. Manila 3 ADB Administration of Co-financing: National Highways Sector Project in Sri Lanka. Manila (OFID). 4 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan for Additional Financing, National Highways Sector Project, Sri Lanka. Manila. 5 Government of Sri Lanka Mahinda Chinthana: Vision for a New Sri Lanka A Ten-Year Horizon Development Framework Colombo; ADB Sri Lanka Country Partnership Strategy Manila; and ADB Sri Lanka Country Partnership Strategy Manila.

13 2 5. Since 2002, ADB had supported the formulation and implementation of a policy and institutional framework to improve the road sector performance. Hence, a policy and institutional component is included under the project as a continuation of the reform component of the previous Road Sector Development Project (Loan 1986-SRI). 6 The feasibility study of the investment component was prepared under project preparatory technical assistance (TA), while the detailed design was prepared and financed under the Road Sector Development Project As the Road Sector Development Project s project management units (PMUs) continued to cover the project, all preliminary works were transferred smoothly. All detailed designs of project roads were initially planned to be done by a consulting firm recruited under the earlier project to ensure implementation readiness. However, the consultant completed only three roads. At the review mission in November 2006, it was agreed to hand over the design of the remaining roads to a consulting firm recruited under the road project preparatory facility (Loan 2080-SRI), a TA loan for preparing road projects. 8 The RDA reviewed the consultant s work and finalized most of the designs by mid The road project preparatory facility continued to be used for updating feasibility studies, environmental and social studies, and other preparatory works for the additional financing. 7. The original financing for the project was delayed by 18 months between ADB s Board approval and loan effectiveness. The loan signing was delayed due to (i) the delayed procurement caused by a poor performing consultant preparing detailed design and bidding documents under the TA and (ii) safeguard compliance issues related to the project implementation of the Southern Transport Development Project, which faced an inspection by ADB s compliance review panel that required the implementation of a series of actions to bring the project back into compliance During these first 18 months, there were presidential and general elections that resulted in changes in the ruling party, and a new government was established. This necessitated slight changes to the design and monitoring framework (DMF) to be in accordance with the new government s 10-Year Development Plan: Mahinda Chinthana 10. In May 2007 an updated DMF was prepared and presented with the updated project administration manual (PAM). 11 During the implementation, the project undertook several changes in scope based on government s requests (paras. 17 and 23). The DMF was updated in 2011 during the formulation of the additional financing project which was 2 years after the end of the three-decade conflict between the Northern and Eastern provinces. This 2011 version captured the government s development goals, strategies, and post-conflict priorities more precisely. The original impact of expansion of economic opportunities was changed to expansion of economic opportunities and balanced growth. The outcome and outputs were unchanged, but the performance targets were adjusted. This 2011 version is used in this report to assess the overall project achievements (Appendix 1). 9. The project design was relevant at appraisal and remained so at completion. As there were reforms and changes in the road sector, the sector loan modality was suitable to include sector performance aspects along with the investment. The RDA s capacity for effective planning and implementation was strengthened. 6 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Democratic Socialist Republic of Sri Lanka for the Road Sector Development Project. Manila. 7 ADB Technical Assistance to the Democratic Socialist Republic of Sri Lanka for Preparing the National Highway Development Project. Manila (TA 4074-SRI attached to L SRI [SF]). 8 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Democratic Socialist Republic of Sri Lanka for the Road Projects Preparatory Facility. Manila. 9 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Democratic Socialist Republic of Sri Lanka for the Southern Transport Development Project. Manila (Loan 1711-SRI [SF], approved on 25 November). 10 A policy statement of the government ( ) 11 ADB Project Administration Manual: National Highways Sector Project. Manila.

14 3 B. Project Outputs 1. Policy and Institutional Support 10. This component was a continuation of ADB s assistance in implementing the mediumterm institutional development framework developed under the Road Sector Development Project. The Ministry of Highways (MOH) and the RDA were to be assisted in policy and institutional aspects, including reviewing and implementing a road sector master plan, transport sector policies, regulatory frameworks, and road reclassification. 12 An advisory consultancy was to be recruited to help the RDA to manage its portfolio, integrate the PMUs, and harmonize project preparation and implementation activities, with special attention to foreign-funded projects. Project funds were also allocated to construct an RDA headquarters. 11. Most of the tasks originally set for this component were achieved, including outputs specified in the DMF: (i) reorganization of the RDA under core functionalities, (ii) implementation of the road sector master plan and medium-term investment plan, and (iii) preparation of annual maintenance plans. 13 The integration of the PMUs for all foreign-funded projects was not practical to implement, but the same PMU has been utilized for ADB-funded projects. 14 Consultants successfully developed institutional and policy support systems (Appendix 2) and assisted in realizing the set tasks in the medium-term institutional development framework (Appendix 3). 12. Construction of the RDA headquarters was expanded to a highway secretariat, completed in September 2014, to also accommodate MOH. This expansion was justified as it increases efficiency of coordination and the decision-making process. 2. National Highways Upgrading and Maintenance a. Original Financing 13. Road Upgrading: About 500 km of national highways were selected from the government investment plan and appraised (Appendix 10 of the report and recommendation of the President [RRP] to the ADB Board of Directors; from which roads were prioritized given the available funds. Based on the cost estimates prepared under the feasibility study, a total length of km of roads were to be upgraded: (i) A012: Puttalam Anuradhapura (70.0 km), (ii) A005: Nuwara Eliya Badulla (54.9 km), (iii) A007: Hatton Nuwara Eliya (44.8 km), (iv) A026: Udatenna Mahiyangana (40.8 km), (v) B409: Thalgodapitiya Dombawela (26.4 km), (vi) B157: south highway Alutgama (10.5 km), 15 (vii) B153: Hikkaduwa south highway (13.3 km), (viii) A024: Matara south highway (4.0 km), and (ix) B207: Katukurunda Nagoda (2.7 km). 14. At the inception mission in 2007, the total length of roads proposed for upgrading was increased to km with (i) additional 13 km for A012: Puttalam Anuradhapura; (ii) replacement of 44.8 km of A007 with 48.0 km of A006: Habarana Kantale Road; and (iii) minor length changes in other project roads. The extension of A012 was justified as it connected to the north-bound corridor via the A020, whereas the replacement of A006 resulted from the willingness 12 Subsequently became Ministry of Highways & Road Development (2005), Ministry of Ports & Highways (2010), Ministry of Highways & Investment Promotion (2015) and at present Ministry of Higher Highways and Road Development. 13 The reduction of staff/km ratio indicator was removed from the original DMF due to changes of classification of many roads. RDA is currently also responsible to implement the Integrated Road Connectivity Program that covers more than 7,600 km of provincial and local government roads. 14 This was discussed during the project midterm review mission in May In NHSP RRP, the Southern Expressway is referred as the South Highway.

15 4 of the Millennium Partners of the United States to finance the A007. The A006 formed part of the core network and is an important link connecting Trincomalee in the Eastern Province to Colombo. Both changes were made at the request of the government. 15. Land acquisition and resettlement (LAR) for future investment. All roads entering Colombo (Colombo links) experienced congestion and required widening. The project had originally allocated some funds to acquire land along around 80.5 km of roads linking to Colombo to improve the readiness of future investment, but this component was subsequently dropped (para. 17). 16. Performance-based maintenance program. As approved, the project was expected to develop a pilot 4-year performance-based maintenance (PBM) program for 1,000 2,000 km of the national highway network in four to six executive engineer divisions. 17. Changes in scope. Under the original financing, the project experienced cost overruns during the initial stage of implementation, as the cost of civil works for the highway upgrading component exceeded the project appraisal estimate significantly. The major cause was the dramatic global price escalation for key construction materials between appraisal in 2005 and the bid preparation in To meet the cost increase, the government and ADB agreed to modify the scope and reallocate loan proceeds within the available funding envelope to give priority to the highway upgrading component and support the main objective of the project. Co-financing was also explored and undertaken to provide connectivity to the Eastern Province. As a result, the following changes required: (i) A major change in scope was approved on 12 May 2008, involving (a) the cancelation of the LAR component, (b) exclusion of national competitive bidding civil works along the south highway links (i.e., 30.5 km of B157, B153, A024 and B207) and a hilly road (26.4 km of B409), and (c) inclusion of an additional international competitive bidding (ICB) contract package for Habarana Kantale Road. 16 (ii) A major change was approved on 9 November 2010, to reduce the scope of the pilot PBM from 1,500 km to 108 km and to reduce the implementation time from 4 years to 1 year. Reallocation of funds was also done to reintegrate the road upgrading of 20 km under ICB 01 (A012), which had been dropped previously from the original scope due to the shortage of funds, and to expand the RDA headquarters to a highway secretariat building. 17 (iii) A minor change of scope was approved by ADB (February 2011) to upgrade a 20 km section of A004 of the Godagama Kirulapone Road under OFID s cofinancing. ADB would finance only construction supervision for this package. The government justified this new addition to (i) maximize the upgrading component, which had been reduced due to funding constraints and (ii) improve access to the Southern Expressway, which was due to open in late Achievements. The original financing upgraded km of roads out of the km appraisal target (91%), or out of 283 km inception target (86%). The PBM was conducted as a 1-16 Originally there were 3 ICB packages and 5 LCB packages. This change needed to include the newly added A006 as a new ICB package increasing total ICB packages to four. The inclusion of Habarana-Kantale road was important to provide connectivity to the conflict-affected Eastern Province. 17 The original civil work contract for ICB01 was offered to the contractor for 50 km due to shortage of funds. This reallocation facilitated for additional 20 km of construction. Later another 13 km was covered through loan savings, increasing total length of ICB01 to 83 km. Additional civil works offered to the original contractor by contract variations issued in January 2011 and March 2011 respectively.

16 5 year pilot program for 108 km, comprising the A004: Colombo Ratnapura Wellawaya Batticaloa Road (from km 60 post to km 96 post) and the A007 Awissawella Hatton Nuwara Eliya Road (from km 00 post to km 72 post). b. Additional Financing 19. At appraisal, the project was proposed to upgrade a total of km of (i) A024: Matara Akuressa (3.40 km), (ii) B153: Hikkaduwa Baddegama (14.34 km), (iii) B157: Horana Anguruwathota Aluthgama (23.48 km), (iv) B207: Katukurunda Neboda (2.72 km), (v) A004: Kirulapone Godagama (5.33 km), and (vi) B084 Colombo Horana (12.70 km). 20. A minor change was approved on 11 November 2011 to (i) add 9.03 km to the A004 section to give better access to the Southern Expressway, (ii) reduce 2.87 km from the B084 section due to high costs of LAR within the Colombo Municipal Area, and (iii) reduce km from the B157 due to lack of funds. The later section was then taken under the Southern Road Connectivity Project. 18 The total length constructed under the additional financing was km. c. Total Achievements 21. Appendix 4 summarizes the project road lengths envisaged at inception and achieved at completion, shown separately for the original and additional financing. Overall, the project rehabilitated km, which is about 12 km more than the target set in the DMF. 19 C. Project Costs and Financing 22. Under the original financing, the total project cost was estimated at $208 million. A cofinancing of $8.0 million was added from OFID. At appraisal for the additional financing in 2011, the total cost was $321.6 million, including $105.6 million of additional financing. At completion in 2017, the total project cost was $ million. Appendix 6 shows project costs, as envisaged at appraisal and at completion, by component, category, and finance source. These are summarized in Table 1. Table 1: Summary of Project Costs at Appraisal and at Completion ($ million) Original Financing Additional Financing Total Financing Variance Item Planned Actual Planned Actual Planned Actual (%) A. Investment Costs B. Recurrent Costs (16.82) C. Contingencies (100) D. Financing Charges (79.89) during Implementation Total Project Cost () = negative number. Note: Appendix 6 contains a detailed breakdown of cost, explanations, and sources. 23. Under the original financing, several scope changes were made to manage costs within the budget. Road upgrading costs increased considerably during implementation, due to global commodity price increases and higher prices of local materials linked to the post-conflict 18 ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Democratic Socialist Republic of Sri Lanka: Southern Road Connectivity Project. Manila. 19 The target set in the DMF considered 225 km under original financing and 62 km under additional financing by the time of its preparation in July It does not include later additions of 13 km of A012 (ICB01) and 6 km of A026 (ICB02) under the original financing.

17 6 construction boom. LAR costs also increased due to post-conflict rises in land values. Accordingly, the government and ADB agreed to modify the scope and reallocate loan proceeds within the available funding envelope toward completing as much of the highway upgrading component to support the main objective of the project. The investment costs increased $ million or 26.21%. However, there was a reduction of $ 47.5 million foreign exchange since five out of seven contractors were Sri Lankan contractors and payments were made in the local currency. 24. Under additional financing (L2767), there was an $18.8 million (17.8%) increase in total budget (Table 1). The total budget of $ million then comprised (i) an extra $24.92 million in government contribution to LAR costs, (ii) increased loan contributions to civil works costs of $4.34 million and to supervision consultant costs of $2.74 million, and (iii) overall loan savings of $13.2 million on all other items. At loan closure, unused funds of $6.12 million remained (2.6%). D. Disbursements 25. The loan proceeds, including ADB-administered OFID co-financing funds, were disbursed in accordance with ADB s Loan Disbursement Handbook. 20 The RDA was responsible for (i) preparing disbursement projections, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications to ADB. Separate project imprest accounts (one each for original and additional financing) were set up at the Central Bank of Sri Lanka and administered by the RDA. 26. There were no disbursement projections at project appraisal for either the original or additional financing. Appendix 7 provides annual and cumulative disbursements for each loan and their components. Under the original financing, ADB s first disbursement was made on 11 April and the final payment made on 23 May Under the additional financing, disbursements commenced on 10 April 2012 and the final payment made on 31 August All $150 million of the original loan were disbursed, while $6,122,041 (out of $85 million additional financing) was canceled, and all $8 million of the OFID loan were disbursed. E. Project Schedule 27. The chronology of events is shown in Appendix 8. Appendix 9 illustrates the proposed and actual schedule. The project was implemented in two different time frames (original and additional financing), with a minimal time-overlap between them. At inception, the project under the original financing was planned to take 4 years, with the procurement for civil works of road upgrading starting in December 2006 and construction completed by January Recruiting consultants for the policy and institutional support component was to begin in December 2006 and tasks were to be finished by February The performance-based maintenance (PBM) program was scheduled to start with the consultant s recruitment in October 2007 and to be completed by December 2011, simultaneous with the completion of the consultancy for the road upgrading. 21 The project under additional financing was scheduled at inception to start with procurement in May 2011 and to complete construction by June Civil works for the upgrading component under the original financing started about 1 year behind schedule due to delays in (i) finalizing designs, (ii) land acquisition and resettlement, and (iii) procurement activities. Hence, from inception, all packages were expected to finish with delays. Overall, as shown in Appendix 9, there is a 2-year delay in the road upgrading component. 20 ADB Loan Disbursement Handbook. Manila. (Amended from time to time). 21 ADB Project Administration Manual: National Highways Sector Project (L2217). Manila. 22 ADB Project Administration Manual: National Highways Sector Project (L2767). Manila.

18 7 The delays in the ICB01 and ICB02 packages were due to the extension of the length just before completion of the original scope (an extra 33 km for ICB01 and 300m for ICB02). A court case delayed the start of ICB The delays in this component reflected a combination of delay in providing counterpart funding for compensation payment for land acquisition and delay in the relocation of utilities, inclement weather, and contractors delays. The construction of the additional road package (ICB05) was completed in December 2012, and the highway secretariat building was completed in September The policy and institutional support component commenced in February 2007 but was completed 2 years late (February 2011). The PBM component finished 1 year late due to initial delays in recruiting consultants and contractors. 29. The RDA learned from the experiences under the original financing and was able to start civil works contracts under the additional financing within 3 months of loan approval. However, none of the six contract packages was completed within the original contract periods: three packages were delayed by about 13 months, two by about 7 months, and the remainder by about 5 months. The causes of delay were the same as for the original packages (para. 28). The overall delay in completion under the additional financing was 10 months. The closing date for Loan 2217 was extended to 31 Mar 2012 and then until 31 December Loan 2767 was extended to 31 December 2016 from the original loan closing date of 30 June F. Implementation Arrangements 30. The implementation arrangements as planned at appraisal (Appendix 10) are found appropriate and sufficient to implement the project. The Ministry of Highways (MOH) was the executing agency, responsible for overall implementation and inter-agency coordination. The RDA was the implementing agency responsible for project management, including (i) consultant recruitment, (ii) day-to-day project implementation, (iii) certification of withdrawal application, (iv) preparation of progress report, and (v) maintenance of project accounts and completion of loan financial records for auditing. The RDA undertook these tasks via the project management unit (PMU) which was led by a project director, assisted by a deputy project director and staff covering administration, accounting and finance, project supervision, and land acquisition and resettlement (LAR). Project supervision and LAR staff of the PMU were deployed at the construction package level. Provincial directors of the RDA, assisted by the chief engineers, acted as the RDA s representatives for supervision of the day-to-day implementation of civil works. 31. A National Steering Committee (NSC) was established for overseeing and monitoring implementation of the project and overseeing the adequacy of overall funding. The committee was chaired by the secretary of the MOH, with representatives from other relevant ministries. As envisaged at the start, the committee met at least quarterly. 32. A construction supervision consultant (CSC), consisting of an international consulting firm in association with a domestic firm, was hired to supervise project implementation. It was headed by an international team leader and a team of specialists and support staff, based in Colombo. 33. Individual consultants were hired under the policy and institutional support component, (one international and one domestic), PBM (one international and one domestic), and human resource development (one domestic). In addition, three consultants were recruited later to expedite LAR work under the original financing, being assigned to income restoration of affected persons, mediation activities between government and affected persons, and independent 23 The award of ICB01 was significantly delayed due to a court case filed against RDA s Procurement Committee decision. Eventually the package was re-bid and awarded in mid-2009 after the amicable settlement of the court case.

19 8 monitoring of LAR activities. All consultants were responsible to the RDA and operated under the purview of PMU. G. Technical Assistance 34. The feasibility study of the investment component of the project was effectively prepared in 2002 under project preparatory TA. 24 Nevertheless, detailed designs and bidding documents needed to be prepared under the Road Sector Development Project and the road project preparatory facility loans to improve the implementation readiness of the project. A capacitybuilding TA grant of $0.4 million was attached to Loan 2217 to build the capacity of the RDA s Environment and Social Division (ESD). 25 The TA was designed to improve the RDA s ability to deal with safeguards issues and to ensure compliance with the policies, guidelines, and requirements of development partners (including ADB) and the government. The TA completion report (Appendix 11) shows that person-months were fielded from 2006 to 2009 (12.79 person-months international and domestic). The TA achieved its intended outputs by producing operational manuals for environmental safeguards compliance and social assessment and involuntary resettlement compliance, and in developing management information systems and databases for safeguard compliance monitoring. Importantly, the TA helped establish the ESD as a separate division and enhanced the capacity of its staff. The TA achieved more than the outcomes anticipated and is rated successful. H. Consultant Recruitment and Procurement 35. All consultants were recruited in accordance with ADB s Guidelines on the Use of Consultants (2007, as amended from time to time). The CSC was recruited by the MOH immediately prior to the inception of the initial civil works, using quality- and cost-based selection procedures. Scott Wilson Kirkpatrick & Co Ltd, in association with Resource Development Consultants, were selected and mobilized on 1 July 2008 with an anticipated completion date of 31 December As the CSC completed services satisfactorily under the original financing, its services were extended based on the single-source selection to cover the additional financing period. The CSC s services were completed in September 2016 and their performance was satisfactory. 36. All individual consultants performed satisfactorily. An international and a domestic consultant for policy and institutional reforms were recruited in February 2007 for 2 years. In November 2007, two consultants were recruited for the PBM program: an international consultant provided 2 months intermittent input and a local consultant 16 months input. The human resource development policy and strategy consultant served for about 12 months starting from September All procurement was carried out in accordance with ADB Procurement Guidelines (2006, as amended from time to time) and government s bid procedures. ADB supported the government s initiative for adopting advance procurement and provided guidance and assistance. Appendix 12 provides details of annual contract awards and Appendix 13 provides details of contract implementation. The overall performance of the contractors was rated satisfactory. 24 ADB Technical Assistance to Sri Lanka, National Highways Development. Manila (TA SRI(JSF). 25 ADB Technical Assistance to Democratic Socialist Republic of Sri Lanka for Capacity Building of the Environmental and Social Division of the Road Development Authority. Manila 26 During the course of the project, Scott Wilson Kirkpatrick & Co Ltd was taken over by URS Infrastructure & Environmental UK. Ltd., which later become a subsidiary of AECOM.

20 9 I. Safeguards 38. The project was classified as category A for the environment. Hence, three initial environment examinations (IEEs) and one environmental impact assessment, including environmental management plans (EMPs), were prepared for all project roads in accordance with ADB guidelines. 27 Under the additional financing, new project activities were classified as category B for the environment; accordingly, six IEE reports with road-specific EMPs were prepared in line with ADB's Safeguard Policy Statement (SPS; 2009). There were no adverse environmental safeguard issues during implementation. Measures required in the EMPs were exceeded and environmental monitoring reports have been submitted to ADB and posted on the website. ADB noted the satisfactory maintenance and rehabilitation of disposal sites and borrow pits In terms of social safeguards, the project was classified as category A (under both the original and additional financing). Accordingly, resettlement action plans were prepared for all project road sections, adhering to ADB s policies, the Land Acquisition Act of 1950 (and subsequent amendments), and the National Involuntary Resettlement Policy of There were no indigenous people affected and indigenous development plans were not required. Four resettlement action plans were prepared in 2007 and 2008 based on ADB s Involuntary Resettlement Policy, 1995 under the original loan. For the additional financing, five resettlement plans were prepared based on ADB s SPS (2009). The number of households affected was 7,451 at project appraisal, but reduced to 6,231 at project completion due to the exclusion of two road sections. Income restoration programs assisted the poor and vulnerable groups and the eligible groups benefited from various activities including skills training, home garden improvements, credit facilities, and cash payments for temporary loss of business income. An independent external monitor was appointed to oversee the implementation of resettlement plans in all subprojects and to prepare quarterly and annual reports. The external monitor also assisted the PMU to resolve the grievances reported in the periodic social surveys through field visits, and through discussions with the affected people. Resettlement assistants attached to each subproject maintained regular contact with the affected people to provide project information, to advice on the preparation of land ownership documents, and to resolve grievances at the field level. They also attended the land acquisition and resettlement committees (LARCs) and Super LARC meetings and facilitated the resolution of issues related to compensation and land ownership. 30 The RDA later adopted this model for government-financed projects as well. 40. The government s intervention to restore and improve the incomes and livelihoods of affected households was highly effective and relevant (Appendix 14). The ability of the grievance redress committees, to resolve environmental, resettlement, and compensation issues was generally satisfactory. The objectives of the resettlement plans were achieved and there were no adverse social safeguard issues. 27 ADB Environmental Assessment Guidelines. Manila. 28 ADB (South Asia Department) Review Mission to Sri Lanka: National Highways Sector Project (L2217). Backto-office report November (internal). 29 ADB Involuntary Resettlement Policy. Manila; and ADB Safeguard Policy Statement. Manila. Resettlement plans for project roads were first prepared in accordance with the 1995 Policy and updated later in accordance with the Safeguard Policy Statement. National Involuntary Resettlement Policy of 2001 is the key policy document of the Government of Sri Lanka on resettlement planning. 30 Super LARC is a higher-level committee to resolve issues that could not be settled at local level.

21 10 J. Monitoring and Reporting 41. Monitoring. The RDA monitored the project through a dedicated PMU, supported by several consultants. The CSC monitored the progress of the civil works at the site level and reported monthly to PMU. The institutional and policy development consultants monitored the progress of the medium term institutional strengthening program. Other consultants monitored the PBM, using indicators developed during implementation. 42. With the assistance of the CSC, the RDA established and maintained a project performance management system to assess progress against the performance targets in the DMF. The RDA quarterly progress reports provided ADB with the information needed to update the performance reporting system. The RDA established and maintained a management information system (MIS) to maintain a database on the progress of LAR and payment of compensation, which was updated monthly. During implementation, with assistance from PMU and CSC staff, the ESD ensured social and environmental safeguard compliance at site level through periodic site visits and monitoring reports. 43. Compliance with loan covenants. All the covenants were relevant, focusing on good governance and implementation practices. Most covenants have been complied with, or compliance is in process (Appendix 15). A few have been partially complied with due to practical difficulties to implementing them. One which aimed to prevent the RDA establishing new PMUs, was not implemented as there were a large number of externally funded projects after the postconflict period. This was highlighted by the RDA at the project midterm review mission. The covenants related to PBM were also partially complied with, as scope and procurement methodology were changed. 44. Reporting. The RDA, through the MOH, provided ADB with (i) quarterly progress reports in formats consistent with ADB's project performance reporting, (ii) consolidated annual reports as detailed in the PAMs, and (iii) a project completion report. PAMs for both loans required the RDA and its PMU to maintain separate accounts and records for the project and subprojects, and components, in accordance with sound accounting principles. Although the PAM required the RDA to make the auditor s reports available to ADB within 6 months of the fiscal year-end, these reports were 1 3 months late each year. ADB s review missions stated that bookkeeping and systems of account authorizing and control were generally satisfactory. 31 III. EVALUATION OF PERFORMANCE A. Relevance 45. The project is rated relevant at appraisal and completion. The National Highways Sector Project was ADB s first transport sector loan to Sri Lanka. As such, it gave the government leverage to improve the efficiency of the RDA. Most of the sample subprojects originally identified were implemented and achieved the intended results. The loan sector modality also gave considerable flexibility to replace road sections prior to the commencement of construction, which was useful, especially to address priorities that emerged following the end of the conflict in This also ensured continued project relevance as the originally targeted roads were adjusted to properly reflect the changes in network development priorities and the availability of alternative financing. 31 ADB (South Asia Department). Review Mission to Sri Lanka: National Highways Sector Project (L2217). Back-tooffice report. 2 7 October 2009; August 2009; October 2010 (internal).

22 Although the impact, outcome and outputs of the original and final DMFs were the same, performance targets needed to be changed taking into consideration the actual scope and practicality in obtaining data (Appendix 1). 47. The institutional support component was relevant as it coincided with (i) the organizational changes of the RDA and (ii) the implementation of the road sector master plan. The component supported both of these initiatives, as well as achieving the set tasks of the component (paras. [insert para. numbers]). ADB s support for the Road Maintenance Trust Fund (RMTF) has been continued by the World Bank. Piloting the PBM program as an innovative solution for managing maintenance funding and overcoming resource constraints was timely and highly relevant, especially under the prevailing context of the sector. While the original target for the PBM was significantly changed, the positive impact made by this innovative program is demonstrated by the adoption of PBM in all subsequent ADB-funded road projects in Sri Lanka. The reduction of PBM scope prevents the project from being rated as highly relevant. B. Effectiveness 48. The project was rated effective in achieving the expected outcome and outputs, including implementation of safeguards for the project. 49. Outcome. The DMF (Appendix 1) outcome was an improvement of the national highway transport efficiency. It was expected that by project completion, combined travel time on project roads would be reduced to 6 hours. Based on surveys along project roads and the economic reevaluations (Appendix 16), the combined travel time on project roads after rehabilitation was 5.9 hours, representing almost a 4-hour reduction from the 2006 baseline of 10 hours Outputs. The DMF also envisaged outputs of (i) improved road sector institutions and policy and (ii) upgraded and maintained national highway network. The first output was realized in 2010: (i) the RDA was reorganized according to its core functionalities and (ii) a road sector master plan, medium-term investment plan, and annual maintenance plans were prepared. The second output targeted upgrading 287 km of national roads and piloting PBM for 108 km of national roads. The road upgrading component was effective, exceeding the target by 4.5%. Although the PBM component covered only 108 km, it was sufficient to introduce a new contract methodology and, as of July 2018, more than 7,000 km roads have adopted PBM under subsequent ADB-funded projects improving sustainability Safeguards. The project applied environmental and social safeguard policies and implemented good practices. The grievance redress mechanism, LARC, and Super LARC were very effective measures for addressing safeguard issues. The majority of affected households felt that their businesses and livelihoods had been reinstated, or improved. There are minor grievances related to the B084: Colombo Horana Road and B157: Horana Anguruwathota Aluthgama Road. The remaining sections of these two roads are now being rehabilitated under the Southern Road Connectivity Project and the same PMU that implemented the project is now implementing that project. As such, the Southern Road Connectivity Project PMU will continue to address remaining issues (Appendix 14). 32 Road Development Authority records. 33 Eastern and North Central Provincial Road Project, Southern Road Connectivity Project, Integrated Road Investment Program, Second Integrated Road Investment Program, Northern Road Connectivity Project and Additional Financing of Northern Road Connectivity Project.

23 12 C. Efficiency 52. The project is rated efficient in achieving its targeted outputs and outcomes. At appraisal of the original financing, the economic internal rate of return (EIRR) of the roads upgraded under the project were estimated individually and all EIRRs were between 13.5% 18.3%. During appraisal of the additional financing, the combined EIRRs of the original roads was recalculated at 15.9% (individual EIRRs range of 14.1% 18.8%), and that of the additional financing was 23.4% (individual EIRRs range of 14.7% 34.7%). In total, the combined EIRR was estimated at 18.7%. At completion, the EIRR was recalculated with the same method as at appraisal, using actual construction costs (Appendix 16). Analyses of individual project roads indicate economically viable investments: EIRRs range from 13.0% to 28.1% for the project roads under the original financing and 15.7% to 34.4% for those under additional financing. The overall project has an EIRR of 18.1%, close to the estimated EIRR of 18.7% at appraisal. A sensitivity analysis was carried out to test the robustness of the project s economic viability against a decrease in estimated benefits. No sensitivity analysis was conducted against construction costs as its actual values were used in the base-case economic analysis. The results of the sensitivity analysis indicate that the project needs a 65% decrease in estimated benefits to become unfeasible. Such a decrease in benefits is highly unlikely since it was estimated very systematically and conservatively. Therefore, the project as a whole can be considered highly robust. 53. There were implementation delays at the start of the original project, in part due to delays in preparing detailed designs and bidding documents (due to a poor performing consultant under the Road Sector Development Project). This was rectified by transferring the services to consultants under the road project preparatory facility. As a result, under the additional financing, the first contract was awarded 1 month after the loan effectiveness. Subsequent projects under the RDA have also benefited from the project preparatory facility, ensuring high readiness. 54. The project would have been rated as highly efficient but this was reduced to efficient due to process efficiency weaknesses, such as, (i) a cost overrun of 6% (despite several scope reductions) mainly due to the increased cost of civil works, LAR, and consultancy services (Appendix 7) and (ii) a delay in the completion of all construction packages to account for the delays in LAR and additional work (Appendix 12). D. Sustainability 55. The project is rated as likely sustainable. As of July 2016, all project roads are in good condition and travel time has been reduced by 40%. Maintenance has been carried out regularly, and necessary funds for such maintenance activities were channeled through the Road Maintenance Trust Fund (RMTF) and were based on the RDA s annual maintenance plan. In 2015, with World Bank assistance, the RDA established the Sri Lanka Road Asset Management System to manage road assets. The RDA has become an efficient and effective agency in preparing and implementing investment plans as well as road maintenance plans. 34 While ADB supported the establishment of the RMTF, further assistance has been provided by the World Bank. This assures long-term fund availability for maintenance. Further, under the World Bankfunded Transport Connectivity and Assets Management Project, the RMTF will be strengthened by establishing the Sri Lanka Road Asset Management System. Some project roads in hilly terrain are vulnerable to rock falls and landslides. Other projects (financed by JICA and the World Bank) introduced climate resilience systems to stabilize slopes, leading to the overall rating of likely sustainable. Appendix 17 describes maintenance issues and sustainability. 34 The RDA is currently implementing around 25% of ADB s portfolio in Sri Lanka (rehabilitating more than 7500 km of roads) with best performance in terms of contract awards and disbursements.

24 13 E. Development Impact 56. The development impact is rated satisfactory. The DMF (Appendix 1) envisaged reducing the aggregated baseline poverty head count index in the project-influenced area from 14.7% (2006) to 9.0% by completion. The latest census data (2016) shows the aggregated poverty head count index in the combined project-influenced area decreased to 3.4%. 35 This result is better than envisaged and was achieved earlier than expected. The index has been in a downward trend in recent years, so it is likely to have fallen further by completion in The rehabilitation under the project improved the overall national road network and provided easy access to provincial and local authority roads, improved under subsequent projects. 36 Three of the five project roads (A012, A006, and A026) directly improved access to the northern and eastern provinces. This improvement coincided with the government s initiative to accelerate development in these conflict-affected regions, which focused on re-establishing civil life and synchronizing regional socio-economic developments with the rest of the country. In the longer term, the upgraded roads will benefit communities in these provinces through improved passenger and freight connections. Upgrading of the A005 in hilly terrain, improved connectivity between the district capitals (Badulla and Nuwara Eliya), which along with Kandy are major socioeconomic centers in the region. This road has at least 18 sharp bends. Before the project, it took more than 3 hours to travel from Kandy to Mahiyangana; now it takes only 2 hours. This road upgrading has contributed substantially to regional economic development, especially in increasing agricultural production and improving regional passenger and goods transport services (Appendix17). 58. Roads funded through additional financing, together with a section of the A004 under original financing, improved connectivity to the Southern Expressway, which is now being extended to Hambanthota from the southwestern regional road network. The investment reduced access times for users and optimized the development impact of the expressway. Road users and local inhabitants have benefited from improved, lower-cost, and faster transport services giving easier access to economic opportunities and social services. These improvements will facilitate economic growth and contribute to reducing regional disparities, consistent with the government's goal of equitable economic growth (Appendix 18). 59. Road rehabilitation and the resulting improvement of transport services contributed to a significant social transformation in relatively isolated and less developed communities (Appendix 18), triggering major structural and relational changes, and enhancing people s access to resources, assets, networks, opportunities, asset formation, social mobility, and improved living standards. Women especially benefited from the new economic opportunities. 60. The project s contribution to the ADB results framework includes: (i) km roads build or upgraded against a target of 287 km and, (ii) 2,828,232 average daily vehicle-kilimeter in the first full year of operation. F. Performance of the Borrower and the Executing Agency 61. Based on their performances during the pre-construction and construction periods, the performances of the government (as the borrower) and MOH (as the executing agency) are rated satisfactory. The borrower and MOH were keen to minimize time and cost overruns through (i) finding additional financial and technical inputs to compensate for the poor performance of the 35 Department of Census and Statistics of Sri Lanka Household Income and Expenditure Survey Colombo. 36 ADB Report and Recommendation of the President to the Board of Directors: Proposed Multi-Tranche Financing Facility to the Democratic Socialist Republic of Sri Lanka: Integrated Road Investment Program. Manila.

25 14 original consultant in finalizing designs and other preparatory work, (ii) recruiting three additional consultants to expedite LAR activities, and (iii) handing over sites for construction, section-wise, as LAR progressed. The government found some cost overruns hard to minimize but managed effectively by allocating other funds to ensure that all important outputs were achieved satisfactorily. RDA has achieved the project targets in road upgrading in the main project component. Although the pilot PBM program applied to a greatly reduced length, the innovative approach was successful and was adopted on subsequent road projects. In addition, the government showed its commitment to implementing recommendations made under the institutional and policy support component. G. Performance of the Cofinanciers 62. The government appreciated OFID s assistance to rehabilitate A004 Kirulapone Godagama Road, which is the main access road from Colombo to the Southern Expressway. The performance of the cofinancier, OFID, was satisfactory as no issue was raised during implementation and no delay in payment noted. H. Performance of the Asian Development Bank 63. ADB s performance was appreciated by the MOH and RDA, who rated ADB as satisfactory. ADB had assisted the project since formulation under Road Sector Development Project (L1986) and, subsequently, under the RPPF (L2080). ADB did not deviate from the original objectives and managed the emerging challenges posed by the change of government and post-conflict situation. ADB s review missions were very helpful in keeping the project focused on its objectives and in providing advice on technical issues, bid document preparation and evaluation, and loan administration matters. ADB s intervention to ensure progress of the implementation was valuable, especially when the executing and the implementing agencies struggled with LAR issues under the original financing. ADB conducted awareness programs for project stakeholders as required. ADB has also maintained a collaborative relationship with development partners working in the sector, especially the World Bank and JICA (para. 57). 64. ADB s Sri Lanka Resident Mission undertook facilitation, coordination, and monitoring. It liaised closely with the executing agency and the implementing agency to monitor progress, advise on consultant recruitment, approve contractors, check invoicing, and disburse funds. Both the executing agency and the implementing agency appreciated the resident mission s knowledge and understanding of technical and financial issues, which facilitated timely decision-making in consultation with relevant agencies, such as on budget reallocations, release of contingencies, and approval of variations and scope changes. I. Overall Assessment 65. The project is rated relevant, effective, efficient, and likely sustainable. Its development impact is satisfactory. The project was relevant to the development goals strategies at appraisal and remained so at completion. The main outputs have been implemented well. The outcome and outputs were largely achieved. The re-evaluation of the economic viability showed an EIRR of 18.1%. The quality of project roads is satisfactory and performance-based maintenance piloted under the project has been adopted in subsequent projects. The project overcame major challenges during implementation and contributed to the RDA s capacity development. Accordingly, the overall rating of the project is successful.

26 15 IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 66. Having the appropriate level of government engagement, technical expertise, and information systems can help facilitate the implementation of LAR activities. Delays in the project s LAR activities were due to cumbersome land acquisition processes, i.e., the need for preliminary survey plans and verifying land ownership, which also affected the timely payment of compensation. Improvement in the process was apparent with MOH s adoption of (i) exhaustive involvement of the ESD in LAR issues, (ii) deployment of resettlement officers to project sites to accelerate compensation payments, (iii) recruitment of additional surveyors to accelerate Resettlement Plans preparation, (iv) establishment of a management information system that included data on compensation payment, relocation progress, and status of land acquisition of each project s road, and (v) fielding of an external monitor, a mediator, and an income restoration consultant. Also, acquiring the land section by section and handing it over progressively to the contractors for the civil works, which was the approach adopted under the additional financing, was found to be more efficient than holding off construction work until all LAR activities had been completed for the whole contract package. 67. Ensuring project implementation readiness can help avoid cost overruns and implementation delays. Cost overruns incurred under the original financing resulted mainly from (i) increased land acquisition costs and (ii) global commodity price escalation. Such unexpected cost increases necessitated reducing the scope of some components to reallocate funds to the road upgrading component. These lessons were learned and necessary measures were taken from the start under the additional financing to minimize cost overruns. Involving the road project preparatory facility to prepare detailed survey plans, LAR plans, and designs well in advance of procurement activities helped reduce cost overruns and implementation delays. 68. Although the pilot performance-based maintenance program was scaled back considerably in terms of road length, it provided valuable exposure for the RDA to become familiar with the new model for road maintenance. Almost all subsequent road projects have adopted a 3 5 years PBM period under the same contractor who rehabilitated the road. The approach enhances the quality of rehabilitation work because the contractors are aware of their future responsibility for maintenance. The performance-based maintenance system, piloted in this project, has made a positive impact on ensuring the sustainability of road investments. B. Recommendations 69. Future monitoring. There is no effective mechanism for preventing vehicle overloading. Project roads, especially those in hilly terrain and those providing access to the Southern Expressway, are used by relatively large numbers of overloaded vehicles. Effective monitoring and law enforcement mechanisms are required to ensure the design life of the roads. 70. Further action or follow-up. Follow up will be required for the ongoing climate resilience activities by other projects, including stabilizing slopes along susceptible hilly road sections. This will be needed to ensure that all vulnerable sections are maintained so that the anticipated project benefits are delivered to communities in all weather conditions. 71. Timing of the project performance evaluation report. All components had been completed by the time of this report preparation. A mission to prepare the performance evaluation report can be fielded from here on.

27 16 Appendix 1 DESIGN AND MONITORING FRAMEWORK Design Summary Performance Targets and/or Indicators Actual Achievement (as of October 2017) Assumptions and Risks Impact Expansion of economic opportunities and balanced growth Outcome Improvement of national highway transport efficiency By 2018: Poverty headcount index of the combined project influence areas (the districts of Badulla, Kandy, Nuwara Eliya, Kurunegala, Puttalam, Anuradhapura, and Polonnaruwa covered by original loan, and the districts of Colombo, Kalutara, Galle, and Matara covered by additional loan) decreases to 9.0% (2006 baseline: 14.7%) By completion in 2015: Combined travel time on project roads A026, A005, A012, and A006 plus A024, B153, B157, B207, A004, and B084 reduced to 6 hours (2006 baseline:10 hours). [Note 3] Achieved. Latest Household Income Expenditure Survey (2016) shows that Poverty Head Count Index as Badulla 6.8%, Kandy 5.5%, Nuwara Eliya 6.3%, Kurunegala 2.9%, Puttalam 2.1%, Anuradhapura 3.8%, Polonnaruwa 2.2%, Colombo 0.9%, Kalutara 2.9%, Galle 2.9% and Matara 4.4% [source Note 1]. The aggregated Poverty Head Count Index for all 11 districts is 3.4%. Achieved. Combined travel time for total length of project roads is 5.9 hours. [Note 4] [Note 2] Assumption Government implements land acquisition in timely manner Outputs 1. Improved road sector institutions and policy By completion in 2015: 1A. Reorganization of RDA by core functionalities implemented 1B. Road sector master plan, mediumterm investment plan, and annual maintenance plans prepared 1A. Achieved. RDA completely implemented organizational structure under four functions of: (i) planning and programming, (ii) asset development, (iii) asset management, and (iv) finance and administration by Risk 1B. Achieved. Road Sector Master Plan and Medium Term Investment Plan were prepared and implemented for the period of Annual maintenance plan first prepared in 2003 and continued to be prepared annually thereafter [source Note 5] Delay in releasing government counterpart funds

28 Appendix 1 17 Design Summary Performance Targets and/or Indicators Actual Achievement (as of October 2017) Assumptions and Risks 2. Upgraded and By completion in 2015: maintained national highway network 2A. Achieved more than targeted. 2A. 287 km of national highways upgraded. 2B. A pilot performance-based maintenance contract awarded for 108 km [Note 6]. Total number of km constructed is km (243.9 km under original financing and 55.7 km under additional financing). 2B. Achieved. Pilot performance-based maintenance (PBM) contracts awarded only for 108 km, due to funding constraints. Hereafter, all ADB funded road construction projects were approved with 3-5 year PBM. Activities with Milestones Actual Implementation Schedule Inputs 1. Improving Road Sector Institutions and Policy 1.1 Select consultant and conduct review to improve RDA s human resource development policy by December Complete the first phase of the integrated RDA s headquarters (Highway Secretariat) by December Achieved. Human Resource Development Consultants recruited in Sept.2011 and submitted final report on 14 Dec Achieved in Upgrading and Maintaining National Highway Network 2.1 Complete land acquisition and resettlement for group 1 roads (B207 and B084(N)) by October Procure contracts and complete works for group 1 roads B207 and B084 by June Complete land acquisition and resettlement for group 2 roads A024, B153, B157(W), A004, B157(E) by March 2012 In mid 2010, RDA decided to complete all the phases together and expand the RDA s headquarters to Highway Secretariat. This additional scope changes two more years to complete the building. Delayed. but contracts were awarded section-wise for commencing construction while land acquisition was in progress. The civil work for B207 was commenced on 25 May 2012, and B084 (N) on 28 March The latest acquisition for group 1 roads was made in July 2015 for B084 (N) from km to km Delayed by 10 months for the group. For B207, completed the work on 31 January 2014 and for B084 on 30 April Delayed but awarded the contracts section-wise for commencing the construction while land acquisition was in progress. The civil work for A024, B153 and B157 E commenced on 15 May 2013, and for A004 on 18 Dec B157W excluded from the project scope due Original Financing (L2217) At Appraisal ADB: $150.0 million Government:$ 58.0 million At Completion ADB: $150.0 million Government: $ 58.3 million OFID: $8.0 million Additional Financing (L2767) At Appraisal ADB: $85.0 million Government: $ 20.6 million At Completion ADB: $78.9 million Government: $ 45.5 million

29 18 Appendix 1 Activities with Milestones Actual Implementation Schedule Inputs shortage in funds. The latest acquisition for group 2 roads was made on July 2015 for B153 (CP2). 2.4 Procure contracts and complete works for group 2 roads A024, B153, B157(W), A004, B157(E) by December 2015 Delayed by 4 months for the group. For A024, completed the work on 30 June 2015 while for B157 (E) on 31 July 2015, for B153 on 28 February 2016, for A004 on 30 April B157W excluded from the project scope due shortage in funds. OFID = OPEC Funds for International Development; PBM = Performance Based Maintenance; RDA = Road Development Authority; TA = Technical assistance Notes: Note 1.Department of Census & Statistics Household Income and Expenditure Survey, 2016.Colombo. Note 2: Risks & Assumptions have been removed from the Impact statement (ADB Updated Design and Monitoring Framework Guidelines. Manila). Note 3: The baseline travel time of 10 hours was estimated for km, including km under original financing (excluding A004) and 62.0 km under additional financing, in accordance with the finalized length at the time of preparing this DMF in June Note 4: Although the total length of project roads constructed is km, the travel time given here is estimated for the km of roads envisaged at project inception to be compare with the baseline performance target of this DMF. Note 5: ADB Project Completion Report: Road Sector Development Project. Manila Note 6: In the DMF Additional financing project, due to typo error this target is mentioned as 300km. As per the major changed approved on 9 Nov 2010, this target should be 108km Sources: ADB.2011.National Highways Sector Project: Project Administration Manual. Manila; RDA Borrower s Project Completion Report: National Highways Sector Project. Colombo.

30 Appendix 2 19 POLICY AND INSTITUTIONAL SUPPORT COMPONENT The National Highways Sector Project (NHSP) provided financial assistance to recruit two consultants to Ministry of Highways (MOH) for supporting policy and institutional reforms in the road sector. These two consultants, one international and one local, were recruited in February 2007 and provided their services for 8.0 and 48 months, respectively. The tasks assigned to these two consultants and their achievements are summarized in Table A2.1, drawn from the completion report of the consultant (reference as in footnote to table). Table A2.1 Achievements of the Policy and Institutional Support Consultancy Assigned Tasks in TOR Achievements 1. Portfolio Management (a) Coordinate and oversee all ongoing public or donor funded sector activities to ensure that activities are being implemented in accordance with the directions of sector policy. (b) In cooperation with relevant RDA officials (including Chairman, General Manager, Directors, Project Directors and project management units (PMUs)) facilitate regular portfolio review meetings, participate in all ADB review missions, and follow up implementation of the agreed action plan and milestones (c) Assist the Secretary of MOH, RDA and donor partners in developing effective monitoring mechanisms to assess progress of project implementation Status: Achieved The consultant coordinated all Project Coordination Committee (PCC) Meetings with the Additional Director General (Projects) of Roads Development Authority (RDA) and the Secretary of MOH. The major issues that came up at PCC meetings were discussed separately with key relevant officials and ways were found for resolving such issues. The Consultant mainly played a facilitation role in this endeavor and helped strengthening the mechanism of project implementation and monitoring. The consultant also assisted the Secretary of MOH and the Additional Director General (Projects) in developing a uniform format for reporting the progress of the projects at PCC meetings. This, instead of varied formats by projects, made it easier to understand the progress of projects and had an overall positive impact on the monitoring process. Status: Achieved The consultant attended all the relevant meetings with RDA officials, ADB review missions and PMUs where it was necessary. Further he assisted project directors in resolving various project implementation issues especially in donor-funded projects. In those situations, the consultant analyzed the root causes for issues with the project directors and their staff and assisted them in resolving such issues at project level. If the magnitude of the issue was too complex to solve at project level, the Consultant brought it to the notice of Director General of RDA or Secretary of MOH to resolve it. Status: Achieved The consultant studied the deficiencies in the project performance monitoring process and proposed a better monitoring mechanism to the Secretary of MOH and Director General of RDA to facilitate more efficient implementation and fast tracking the progress of both local and donor-funded projects. In this mechanism, the consultant proposed a three-tier monitoring system comprising (i) project level (ii) ministerial level and (iii) national level. The idea of this three-tier monitoring system was to resolve as many as project level issues at the project level itself. Then only, unresolved issues were to be taken up at the ministerial level PCC meetings. Once the possible remaining issues were resolved at the ministry level, then the unresolved issues were to be presented at the national level monitoring

31 20 Appendix 2 Assigned Tasks in TOR (d) Conduct in-depth analysis and identify causes that may contribute to delaying project implementation and completion. (e) Recommend and assist in implementing remedial actions to fast track implementation. Achievements committee meetings. This process was found to be a faster and more effective method of resolving project issues and helped fast track project implementation. For effective implementation of the afore-mentioned monitoring mechanism, it was decided to appoint an Additional Secretary (Engineering) at the ministry level. Once this concept was agreed by the Secretary of MOH, it was communicated to the Management Service Department of the Treasury and granted approval to recruit an Additional Secretary (Engineering) for MOH. Then this proposal was discussed with the Salaries and Cadre Commission and finally gained their approval as well. As a result, the MOH was able to recruit an Additional Secretary (Engineering) to handle the above mentioned functions. Status: Achieved The consultant prepared a list of key issues related to the implementation in all projects and submitted it to the Secretary of MOH. For this work, the consultant liaised with project staff, representatives of all foreign-funded and locally-funded projects from time to time and identified the bottlenecks that delayed implementation. Then such issues were presented to the Secretary for his consideration and thereby actions were taken to ensure speedy implementation. Status: Achieved Primary tasks undertaken by the consultant were as follows, (i) Computerizing accounting work of the field operation. The consultant spearheaded a team of cross-functional people, including Director of Finance of RDA, to develop a mechanism to computerize the accounting work that was carried out at field offices of RDA at provincial level and to incorporate it with the main frame of RDA. Basically, preparation of vouchers and payments were the targeted areas. After initial work was completed, this task was assigned to a Deputy Director of Finance. Presently, the payment part has been computerized and the voucher preparation component is being processed. (ii) Introduction of a better performance appraisal system for officials. The consultant developed a more comprehensive performance appraisal system for MOHRD and RDA officers. It was decided to test this at ministry level first and then extend the same to RDA. However, it is not presently in operation. (iii) Minimizing the procurement delays: One of the major causes for delay in the procurement process was the prolonged time taken to appoint members of Cabinet Appointed Negotiating Committees (CANC), Cabinet Appointed Procurement Committees (CAPC), Project Committees (PC) and Technical Evaluation Committees (TEC). Under the existing system, because the National Procurement Agency (NPA) was not functioning, the Public Finance Department needed to obtain approval for each CAPC or CANC, which caused considerable delays and severely affected to the progress of the project. To minimize such delays, the consultant proposed that at least

32 Appendix 2 21 Assigned Tasks in TOR Achievements members (as a pool) should be nominated for each of the levels (i.e., CANC, CAPC, PC) by the Public Finance Department of the Treasury and be submitted to the Cabinet of Ministers for their approval. These members could be senior government officials (i.e., Secretaries, Additional Secretaries or any other senior officials) or retired senior public officers. Once the Cabinet approval was granted, such nominees would be assigned for any of the CANC and CAPC of any of line ministries to carry out their duties in the tender process without a delay. The consultant presented this proposal to the Secretary of Treasury, with the consent of the Secretary of MOHRD. However, on consideration of this proposal by the Secretary of Treasury, it was decided to appoint standing committees for the various levels of project implementation instead of having a common pool of officials. (iv) Arranging timely finances for projects. The consultant liaised with the Chief Accountant of MOHRD and once in every fortnight met the Director of Treasury Operations Department to obtain the required funding for highway projects. In this regard, the consultant prepared the forecast of required financing for projects with the Chief Accountant of MOHRD. (v) Financial and physical progress monitoring. The consultant, with the assistance of the Director, Planning and Monitoring of the Ministry of MOHRD, prepared monthly project progress reports, which included physical progress and financial progress of each local- and foreign-funded project. This document helped the key decision makers in understanding the overall performance of each project as well as the weak areas. (vi) Improving internal operations efficiency. The consultant continually held discussions with the Secretary of MOHRD to identify aspects to be improved and also opportunities for improvement of prevailing operational functions of RDA. Many internal circulars were issued to Project Directors and other Directors of RDA giving directions for improving weak areas of the operation. (vii) Improving and monitoring the functions of Regional Offices. The consultant introduced a new mechanism to monitor the functions carried out by the Executive Engineers, Chief Engineers and Provincial Directors of RDA. For this purpose, the consultant spearheaded a team of cross functional people, including the Director (Maintenance) of RDA, and developed a criterion-based mechanism to monitor the work done by Executive Engineers, Chief Engineers and Provincial Directors. This mechanism helped RDA to improve the performance of RDA s regional staff and thereby implementing locally funded projects effectively. (viii) Defining network performance indicators. The consultant and the Director of Planning and Monitoring of MOHRD led the task of defining performance indicators

33 22 Appendix 2 Assigned Tasks in TOR Achievements for the highways sector in order to facilitate result-based monitoring of projects and the sustainability of road assets. Agreed indicators were; Vehicle Operating Cost Average Speed Road Density Surface Distress Index Roughness Index Annual Average Daily Traffic The fatal accident rate was not included in above list because MOHRD was not tracking this information regularly. (f) Facilitate regular quarterly ADB portfolio review meetings. (g) Assist in developing sector development plans and investment forecasts for the highway sector and provide inputs in this regard for the design on new donor-funded loans and technical assistance projects. Status: Achieved The consultant attended (i) all NHSP project portfolio review meetings, (ii) progress review meetings of other ADB projects and (iii) wrap up meetings of all ADB funded projects. The Consultant also attended the loan designing meetings for new projects. Status: Achieved Primary tasks undertaken by the consultant were as follows, (i) Developing policy framework for highways sector: The consultant prepared a policy framework for the highways sector, outlining strategic initiatives, objectives, goals for the future, proposed highways sector strategies, issues and resolution criteria and investment plans. (ii) Preparation of revenue proposals for the highway sector: The consultant prepared budget/ revenue proposals that could contribute to increasing government revenue. An infrastructure levy was one of the proposals presented by the consultant, which was adopted. (iii) Assisting preparation and finalization of road sector master plan. The consultant contributed to the preparation and finalization of the 10-year National Road Sector Master Plan, which included the investment program from 2008 to 2017 for the national highway development. (iv) Facilitation of recruitment of young engineers to fill the RDA cadre: One critical area of concern was the lack of engineers for project implementation. The consultant noted that RDA had around 80 vacant engineers positions in its cadre. Taking this into consideration, and in consultation with the secretary of MOHRD, the consultant discussed this matter with the Ministry of Finance and the Salaries and Cadre Commission. After sending a comprehensive proposal to the Treasury, the consultant was able to convince both the Treasury and the Salaries and Cadre Commission to grant approval to recruit 80 engineers to RDA in two stages.

34 Appendix 2 23 Assigned Tasks in TOR Achievements 2. Assist MOHRD and RDA in improving relevant sector issues (a) Facilitate the regular Road Sector Forum initiated by MOHRD/RDA, attended by development partners and other stakeholders (b) Review and monitor the implementation of road maintenance program and the operation of the Road Maintenance Trust Fund. (c) Review existing report on the assessment of the regulatory framework and follow up the recommendations for adoption as appropriate. (d) Review and improve existing regulatory framework in road sector (e) Reclassification of Road Network (f) Assist in implementing activities in Medium Term Institutional Strengthening Framework Status: Achieved The Consultant organized and convened the Road Sector Forum as and when it was required in consultation with the Secretary of MOHRD. Status: Achieved The Consultant prepared a conceptual proposal and a cabinet memorandum to establish a dedicated road fund and assisted and facilitated the establishment of the road maintenance trust fund. Status: Achieved The major works undertaken for this activity were (i) facilitating and assisting the MOHRD to complete the amendments to national thoroughfares bill, (ii) facilitating and assisting the MOHRD to complete the amendments for Road Development Authority Act, and (iii) assisting in preparation of draft proposal for the establishment of an Expressway Authority. Status: Achieved Strengthening the institutional structure of the road sector to function as a well-integrated system was essential to resolving sector-related issues efficiently. For this purpose, the consultant developed a road sector key management structure, including functions of a policy committee. This initiative created a platform for a higher-level discussion to resolve sector related issues of national importance. Status: Not Achieved This activity was not carried in view of the anticipated difficulties in obtaining support from different levels of road administration to accept any reclassification. As the administration of roads is a devolved subject in Sri Lanka, roads are administered at three levels of: (i) Central Government, (ii) Provincial Councils, and (iii) Local Authorities. Therefore, changes in classification could have led to changes in administration for some roads. Such changes in administration are a time-consuming process in Sri Lanka, and with the risk of no final agreement. Status: Partially Achieved The consultant extended his assistance to implement RDA s Medium Term Institutional Strengthening Framework with considerable contributions on (i) implementing RDA s new organizational structure, (ii) finalizing of the road sector master plan (iii) improvement of maintenance policy, planning and programming, (iv) development of operational manuals, (v) implementing integration of the PMUs, and (vi) harmonization of project preparation and implementation activities, with special attention to foreign-funded projects. However, only some of these activities were fully implemented, while others partially or not attended. (Refer to Appendix 3)

35 24 Appendix 2 Assigned Tasks in TOR Achievements 3. Establish partner agency contacts with National Highways Authority of India (NHAI) (g) Arrange an appropriate program with NHAI to enhance the skills and expertise of RDA engineers 4. Review and Improve RDA s Human Resource Development Policy and Strategy (a) Development of computerized personnel database (b) Assessment of RDA s business procedures (c) Review RDA s recruitment Policies (d) assess the current and future workload, qualification and skills requirement of the staff, staff shortage/excess (e) Identification of training needs (f) Develop recruitment strategies, a performance evaluation system and a career development program. (g) Proposal regarding reducing excess staff (h) Formulation of career development plans Status: Achieved The consultant was able to negotiate with NHAI on, (i) training of RDA engineers in India through programs arranged by NHAI for their own trainees and international participants, and (ii) an exclusive short secondment program of not more than 2 months duration to train RDA engineers in NHAI and its site offices. Once this proposal was approved by the Government of Sri Lanka, a memorandum of understanding (MoU), prepared by the by the consultant with the assistance of the legal consultant of MOHRD, was signed between RDA and NHAI for above objectives. From 2009, approximately engineers of RDA were trained under this program in different subject areas. Due to lack of funding, the program was only continued up to Status: Achieved A separate consultant was hired in Sep 2011 for one year to develop a human resource development policy and strategy to complement with RDA s new organizational structure implemented since The consultant was able to carry out assigned tasks satisfactorily despite delay in recruitment. 5. Additional Activities [Note 1] (a) Finding solutions for scarcity of construction materials, especially metals (b) Development of a comprehensive national-scale strategic concept for early recovery and reconstruction of the Northern Province Status: Achieved The consultant spearheaded a team of cross-functional personnel to identify metal quarries in each province. He worked closely with Geological Survey & Mines Bureau, Urban Development Authority, and Ministry of Cultural Affairs etc. in order to find solutions to this problem. The idea of this endeavor was to (i) identify potential mega metal quarries in each province that had no operations, (ii) identify the mega quarries previously operated but presently abandoned and (iii) identify metal quarries which were in operation. As a result of this study, 12 potential mega quarries were identified in different provinces and vested with RDA for future use and Cabinet approval was also obtained for the same. Status: Achieved Based on a request made by the Presidential Task Force on the Northern Province Development, in which the consultant served as a member on behalf of the Secretary of

36 Appendix 2 25 Assigned Tasks in TOR (c) Identification of priority roads for rehabilitation in Northern and Eastern Provinces Achievements MOHRD, he prepared an early recovery program and a mid-term development program covering all economic sectors of the Northern Province. The paper prepared by the consultant was accepted by the Presidential Task Force and was also circulated among diplomatic missions. Status: Achieved The consultant conducted a comprehensive study to identity the priority roads that needed urgent rehabilitation or repair. He presented the findings of this study, with financial implications, to the Secretary of MOHRD. Some of these identified roads were implemented under subsequent ADB funded programs (Conflict Affected Region Emergency Project (CAREP) and Eastern and North Central Provincial Road Project (ENCPRP)). CANC = Cabinet Appointed Negotiating Committees; CAPC = Cabinet Appointed Procurement Committees; CAREP = Conflict Affected Region Emergency Project; ENCPRP = Eastern and North Central Provincial Road Project; MOHRD = Ministry of Highways and Road Development; NHAI = National Highway Authority in India; NHSP = National Highways Sector Project; PC = Project Committees; PCC = Project Coordinating Committee; RDA = Road Development Authority TEC = Technical Evaluation Committees; TOR = Terms of References Note 1: Additional activities are the tasks which were not stipulated in original scope of work for the assignment but carried out by the consultant in mutual agreement with MOHRD or RDA. Source: H. Singh and A.A. Senaviratne Draft Inception Report: Institutional and Policy Development. Colombo; A.A. Senaviratne Completion Report of Institutional and Policy Development. Colombo.

37 26 Appendix 3 MEDIUM TERM INSTITUTIONAL STRENGTHENING FRAMEWORK Since 2002, the ADB-funded Road Sector Development Project (RSDP) has provided support to establish and implement institutional strengthening programs to improve the overall road sector performance in Sri Lanka. For this purpose, a medium term institutional strengthening framework was developed, detailing tasks to be achieved in the future. At the appraisal of the NHSP, the successor to RSDP, ADB decided to continue its assistance in this endeavor by providing technical assistance inputs to monitor the achievements of the tasks set in the medium term institutional strengthening framework. Table A3.1 summarizes the achievements in the medium term institutional strengthening program during implementation period of the NHSP. Activity 1. Organizational Structure Table A3.1: Achievements in Medium Term Institutional Strengthening Framework Achievement a. Develop a new organizational structure based on four functions Status: Achieved The Roads Development Authority (RDA) was established in 1981 through the RDA Act (No. 73). In line with the Act, RDA s board comprised five appointed members and five other members representing different ministries. One among the appointed members held a full-time appointment and serves as the chairman. In addition, there was a General Manager (GM) in charge of the overall business of RDA, including administrative control of RDA s employees. At the appraisal of the project in 2005, RDA s operations were being carried out through 15 functional divisions and 9 provincial offices, each headed by a director. This arrangement resulted in the GM s very large span of control, which adversely affects the efficient functioning and coordination of RDA. It gave the GM insufficient time to establish close top management relationship with his/her immediate subordinates, which was needed for effective control and direction of the organization. In addition, there were 10 project management units (PMUs), each headed by a project director in charge. At appraisal of the project in 2005, an alternative organizational structure for RDA had been approved by RDA s Board to ensure manageability of its works, particularly the core businesses as mandated by the RDA Act. According to this structure, the RDA organization was under a board of management with one of them as a full time chairman and with a General Manager as the Chief Executive Officer. Although its top management level remained the same as the previous, functional areas were restructured into 4 elements: (i) planning and programming, (ii) asset development, (iii) asset management, and (iv) finance and administration. Each of these were to be headed by an additional GM (AGM). In addition, a central support service office consisting of (i) procurement and contract division, and (ii) environmental and social division (ESD) with responsibilities for environmental impact studies and clearance, and land acquisition and resettlement were proposed to be established. Although initially these two divisions were to report directly to the GM, when implementation commenced it was established under as separate additional GM. Also, when implementing the new structure, the AGM s scope of work was further diversified with responsibility for (i) land, environmental and social, (ii) property management, (iii) training, (iv) research and development, (v) legal and (vi) mechanical. Further, another new AGM was appointed for managing PMUs of different projects. In brief, under this structure there were six AGMs and 13 directors in charge of different functional

38 Appendix 3 27 Activity Achievement divisions, except the Internal Auditor Division, which was directly under the GM. This organizational structure was effective from 2007 till The RDA organizational structure was subjected to a change again in 2010, resulting from the recommendations made by the Road Sector Development Project funded by ADB. Under this structure, a Director General (DG) was to act as the Chief Executive Officer (CEO), assuming the duties of the General Manager under the previous structure. Instead of six AGMs under previous structure, five Additional Directors General (ADGs) were appointed under new structure for the functional areas of (i) asset operation and management, (ii) construction design (iii) network planning, (iv) finance and administration and (v) projects. Further, the number of functional divisions had been increased up to 17, with newly established divisions of (i) rural bridge construction and (ii) expressway operation and management, while separating (i) procurement and legal as two divisions and (ii) environmental and social development and lands for two divisions. The Director for Property Management, under previous structure was omitted in the new structure, transferring the duties to a Director Lands and a Director Environmental and Social Development. This organization structure was implemented since 2010 to date. [Source: Note 1] b. Implement the new organizational structure Status: Achieved 2. Human Resources Originally proposed new organizational structure in 2005 was implemented in 2007 and prevailed until This structure was again changed and implemented in 2010 and has prevailed to date. a. Develop a new human resource development strategy based on the new organizational structure b. Approve and apply the new human resources development strategy Status: Achieved At the appraisal of NHSP project in 2005, it was realized that the prevailing human resources policy and strategy did not comply with the requirements under the proposed new organizational structure. Therefore, the project financed an individual consultant to assess (i) prevailing human resources policy and strategy, (ii) prevailing and future work load and (iii) the staff resources and skills mix required by RDA to fulfill its mandate following the adoption and implementation of the new organizational structure. The consultant was hired in September 2011 and carried out the assigned tasks successfully in relation to the organization structure implemented in Status: Achieved RDA accepted and implemented the most of the proposals made in the new human resources development strategy. 3. Project Management a. No new project management units (PMUs) to be established Status: Not Achieved At the appraisal of the National Highways Sector project (NHSP), there were ten PMUs. This number of units remained same by the end of 2010 (but for different projects). However, the number increased to 22 by the end of At completion of the project in 2017, there were 17 PMUs in operation.

39 28 Appendix 3 Activity Achievement Restricting the number of PMUs was difficult for the RDA because the government investment on national roads had considerably increased since In 2005, it was about SLRs 21 billion but almost doubled by 2007 to SLRs 40 billion. Again, by 2009 it was SLRs 83 billion. By 2012, the amount increased again up to SLRs 135 billion and remained above SLRs 130 billion until By completion of the project in 2017, this commitment had exceeded SLRs 200 billion. (See Figure A3.1 below). Such growth in investment created a heavy workload for RDA, making it difficult for them to handle with existing PMUs. Further, the projects formulated with these investments were technically highly diversified and hence fell under different capacity requirements, demanding a grouping of different expertise (eg. bridges, expressways, flyovers, climate resilience etc.). Therefore restricting number of PMUs was recognized as an impractical approach and hence RDA made advance request to ADB to disregard this loan covenant of NHSP. Allocation/Expenditure (SLRs Mn.) 250, , , ,000 50,000 44,818 39,870 51,904 63,420 77,005 82,584 Allocation Expenditure 83,299 84, , , , , , , , , , , , , , , , Note: Expenditure in 2017 is the revised allocation for 2017 mentioned in 2018 Budget Source: National Budegets (2007 to 2018) - Year b. One new project management unit each for ADB, World Bank (WB), Japanese Bank for International Cooperation (JBIC) and other donors Figure A3.1: Annual Allocation & Expenditure for National Roads & Expressways [Source: Note 2] Status: Partially Achieved During last ten years, ADB, WB, Japan International Cooperation Agency (JICA), JBIC, Agence Française de Développement (AFD), the European Union (EU), Economic Development Cooperation Fund-Korea (EDCF), and China have been the government s major development partners for the road sector. In addition, during the last decade, the government also received financial assistance from the Kuwait Fund, the Nordic Countries (Scandinavia, the United Kingdom (UK), United `States of America s Agency for International

40 Appendix 3 29 Activity c. Develop harmonized project management procedures, systems, standard documents, and safeguard requirement acceptable to aid agencies d. Utilize existing chief engineer s offices as project implementation units in the respective sites 4. Planning & Programming a. Develop a road sector master plan and medium term investment plan Achievement Development (USAID), Saudi Arabia, Spain, Sweden, and the OPEC Fund for International Development (OFID). The financial contribution from these sources varied drastically over time. During 2006 to 2015, foreign sources of funding made a total investment of SLRs 545,671 million, of which Chinese funds accounted for 36%, JICA/JBIC 27%, ADB 15%,WB 7%, AFD/EU 3%, EDCF 3% and the rest totaling 9%. Although funding agencies such as JBIC and WB made their funds available for one project at a time during last 10 years (JBIC/JICA for the Southern Expressway then the New Kelaniya Bridge; and WB only for Road Sector Assistance Project (RSAP)), ADB and Chinese based sources (Exim Bank mainly) invested on multiple projects at a time. The greater work loads and wider technical diversity of these projects forced RDA to establish different PMUs, even though the funds were channeled through a single source. However, there was a continuity of the same staff and resources of one project to take up another project in the pipeline, especially under ADB-financed projects. (eg: the Roads Sector development project (RSDP) staff took over the Road Project Preparatory Facility (RPPF) and sequentially the original Northern Road Connectivity Project (NRCP) and its additional funding, the Port Access Elevated Highway (PAEH) and the Transport Project Preparatory Facility (TPPF); NHSP (original) staff continued with its additional funding and then the Southern Roads Connectivity Project (SRCP). [Source: Note 3] Status: Achieved The consultants hired for policy and institutional development components of NHSP assisted RDA to develop harmonized project management procedures, systems, standard documents, and safeguard requirements covering the most common features of all those aid agencies actively participating road sector financing. However, specific requirements of each aid agency were taken into grant during implementation of projects under their financing. Status: Partially Achieved This did not fully materialize, due to a shortage of resources, technical capacity and limited office spaces available at chief engineers offices. However, Provincial Directors as the representatives of RDA in each province, directed their chief engineers and executive engineers to oversee the implementation of construction work in his/her region. If Provincial Directors found any malfunctioning of a project in their area, it was his/her responsibility to inform the corresponding PMU or RDA immediately. Status: Achieved In 2004, ADB provided financial assistance through TA 4315-SRI for the preparation of a Road Sector Master Plan for 2007 to 2017 (RSMP). The consultants hired for the policy and Institutional development component under NHSP also assisted in reviewing and compiling the RSMP. This comprised a road network assessment, inventory, development scenarios, road classification, design standards, legal framework, overall network plan, and an investment plan including financing strategies. It had also covered an assessment of national and provincial roads, and a framework for rural roads as stipulated in their terms of reference. However, the RSMP was confined to the national roads and expressways. The master plans for

41 30 Appendix 3 Activity b. Develop a 3-year national highway project preparatory program based on the approved investment plan 5. Operation and Maintenance a. Improve the budgeting and expenditure control b. Develop annual road maintenance plan to be submitted to the road maintenance trust fund Achievement provincial road in the Northern, North Central and Eastern provinces were prepared under the NRCP and the Eastern and North Central Provincial Road Projects (ENCPRP) [Source: Note 4] Status: Achieved In 2004, the RPPF was formulated under TA L2080 for realizing the objectives of (i) enable road sector institutions to conduct preconstruction on time without waiting for funds from external agencies, and (ii) ensure readiness of the follow-on road infrastructure projects. The RPPF intended to be used for preparatory work of project roads identified in the investment plan prepared under the RSMP ( ). The facility was also to cover roads proposed by the government and which ADB agreed as being urgent, before and while the investment plan was under preparation. Moreover the facility was expected to accommodate projects intended for downstream ADB financing as well as for non-adb projects. In addition, the RPPF intended to contribute to capacity building of respective road agencies and local consultants. At inception, RDA and the Ministry of Local Government and Provincial Councils (MLGPC), in consultation with respective provincial councils, identified a total of 2,200 km of national roads and 3,900 km of provincial roads to conduct preparatory work under RPPF. At completion, RPPF has conducted feasibility studies for 2,195 km of national roads, 45 km of expressways and 3,653 km of provincial and rural roads. Out of those, detailed design has been conducted for 1,278 km of national roads, 14 km of expressways and 2,950 km of provincial and rural roads. These roads were subsequently implemented under different projects such as NRCP (and NRCP Additional), NHSP (and NHSP additional), Conflict-Affected Region Emergency Project (CAREP), ENCPRP, SRCP and Integrated Road Investment Program (iroad): WB and JICA also used the output of RPPF for their projects. [Source: Note 5] Status: Achieved The Road Maintenance Budgeting and Expenditure Control (RMBEC), developed with the assistance of TA 3691-SRI, was only used for a year and then rejected due to a malfunction in the software. Since then the maintenance budget of national roads has been manually managed. The consultant hired under RSDP initially attempted to improve this but later recommended to replace it with a Highway Development and Management Model (HDM-4), as a replacement for the original RMBEC. This has been more productive, even though the majority of staff trained in the HDM-4 left the respective divisions later and the manuals prepared under the RSDP were not being used. However, the training and documentation obtained under a subsequent WB TA has supported using the HDM-4 continuously. Since 2007, the RDA now prepares its annual and mid-term maintenance plans and makes its budget requests using HDM-4. [Source: Note 6] Status: Achieved Since 2007, the Road Maintenance & Management Division (RMMD) of RDA, with the assistance of Planning Division, prepares the annual maintenance programme for upcoming years, based on the outputs of HDM-4. Once this annual maintenance programme is prepared in provincial basis, RDA sends them to

42 Appendix 3 31 Activity Achievement respective provincial directors for (i) their comments on road selection and prioritization and (ii) detailing interventions and budgeting in road-wise. Provincial Directors, in consultation with their divisional offices, identify maintenance interventions required for each road section included in the program in detail and budgets accordingly. Once the annual program is finalized at provincial level, Provincial Directors send it back to the RMMD of RDA for further refinement. The RMMD, with the assistance of the Planning Division, further refines and verifies the selections and prioritization, using available databases of road conditions, traffic levels and speeds etc. During this process, respective Provincial Directors are also consulted again. On completion of the refinement and verification process, RMMD internally finalizes the annual maintenance program in discussion with the Provincial Directors, depending on the limit of funds that can be allocated. In parallel to the internal finalization, RMMD liaises with the Road Maintenance Trust Fund (RMTF) for the realization of finance requirement for the annual programme. At present, the total maintenance allocation is distributed among Provincial Directors in the proportions of their actual expenditure in the previous year. [Source: Note 7] c. No new recruitment of casual labors Status: Not Achieved d. Develop and pilot performance based maintenance (PBM) contracts e. Apply the performance-based maintenance contracts on 50% of the network This could not achieved as the policy of the government was to increase the number of government servants to reduce unemployment. Status: Partially Achieved At appraisal, NHSP was to develop a pilot 4-year road maintenance program for 1,000-2,000 km of the national highway network in four to six executive engineer divisions. Selected roads for this program would be included in 4-6 contracts and executed through private sector contractors and the small contractors formed with current casual labor available in the respective divisions of RDA. Subsequently, RDA reached an agreement with ADB to conduct this program only for 108 km, in view of a shortage of funds. Eventually the program was implemented as a one year pilot program for 108 km of the A004 (Colombo-Ratnapura- Wellawaya-Batticaloa Road from km 60 post to km 96 post) and the A007 (Awissawella-Hatton-Nuwara Eliya Road from km 00 post to km 72 post), with road sections contracted to CML-MTD Construction (78 km) and to a maintenance group formed with casual labors of RDA (30 km). The program was developed and implemented with the technical assistance and supervision of an international consultant and a local consultant. [Source: Note 8] Status: Partially Achieved Even though the PBM pilot was implemented successfully (if on a reduced road length), its application on 50% of the national road network could not realize due to (i) inadequate finance allocation, (ii) unavailability of local contractors outside western province, (iii) about 60% of the network was not in a maintainable condition (by 2010) and hence would require being rehabilitated prior to implementing PBM. However, PBM was implemented for all subsequent road projects funded by ADB for more than 7500km roads in following loans: L2639/2640 Northern Road Connectivity Project; L2890/2891 Northern Road Connectivity Project (Additional); L2626 Conflict Affected Region Emergency Project; L2546 Eastern and

43 32 Appendix 3 6. Procurement Activity Achievement North Central Provincial Road Project; L3027/3028 Southern Road Connectivity Project, L3171/3221/3222 Integrated Road Investment Program, and L3579/3580 Second integrated Road Investment Program [Source: Note 9] a. Establish a Procurement Division Status: Achieved RDA established a Central Procurement Unit (CPU) as a sub-unit in Central Support Unit which directly came under the General Manager in January Changes made in organizational structure in 2010, placed procurement division under a separate director who directly reported to the Director General of RDA. [Source: Note 10] b. Develop harmonized standard bidding documents c. Develop harmonized consultant selection, prequalification, procurement procedures 7. Environmental and Social Safeguard a. Establish an Environmental and Social Division b. Develop and implement (i) an environmental operations manual (ii) a land acquisition and resettlement operations manual Status: Achieved ADB provided technical assistance to RDA through TA 7153-SRI, in late 2008, to improve the capacity of the CPU. This capacity improvement program was carried out under three phases. Phase I included an assessment of staff and equipment requirements of the CPU and recommended functions of CPU to RDA, Phase II included (i) an assessment of the procurement knowledge of the staff assigned to the CPU, (ii) the development of training programs on donor- and government- financed procurement, and (iii) a review of procurement reporting requirements and development of procurement templates. Phase III focused on a review and development of the CPU s procurement monitoring mechanisms. TA assisted in hiring individual consultants for Phase I and a firm for Phases II and III. RDA, with the assistance of consultants hired for the TA, was able to standardize its bidding documents, consultant selection process and procurement procedures. The individual consultant hired under the NHSP for Institutional and policy development also assisted in this endeavor. [Source: Note 10] Status: Achieved An Environmental and Social Division (ESD) was originally established within RDA in 2004, as a sub-division of Land Division with the financial assistance of RSDP. In 2007, with effect of implementation of RDA s new organizational structure, the ESD is transferred to Central Support Unit which directly came under the purview of General Manager. Then in 2010, upgraded organizational structure established the ESD as a separate division headed by a director reporting directly to the Director General. Subsequently provided technical assistance TA4736 (piggybacked to L2217) improved the capacity of ESD division. [Source: Note 11; Appendix 11] Status: Achieved ADB provided TA4736 (piggybacked to L2217) for building capacity of the environmental and social division of RDA. This TA facilitated RDA to develop and implement (i) an environmental operations manual (ii) a land acquisition and resettlement operations manual. These operation manuals were formerly named as (i) Environmental Safeguards Compliance Manual and (ii) Social Assessment and Involuntary Resettlement Compliance Manual respectively. [Source: Appendix 11]

44 Appendix 3 33 Activity c. Develop a land acquisition and resettlement management information system Status: Achieved Achievement The TA (TA4736) facilitated RDA in developing a land acquisition and resettlement management information system for ESD. This was formerly named as Management Information System. [Source: Appendix10] ADG = Additional Director General; AFD = Agence Française de Développement; AGM = Additional General Manager; CAREP = Conflict-Affected Region Emergency Project; CEO = Chief Executive Officer; CPU = Central Procurement Unit; DG = Director General; EDCF = Economic Development Cooperation Fund- Korea; ENCPRP = Eastern and North Central Provincial Road Project; ESD = Environmental and Social Division; EU = European Union; GM = General Manager; JBIC = Japan Bank for International Cooperation; JICA = Japan International Cooperation Agency; MLGPC = Ministry of Local Governments and Provincial Councils; NHSP = National Highways Sector Project; NRCP = Northern Road Connectivity Project; OFID = OPEC Funds for International Development; PAEH = Port Access Elevated Highway; PBM = Performance Based Maintenance; PMU = Project Management Unit; RDA = Road Development Authority; RMBEC = Road Maintenance Budgeting and Expenditure Control; RMMD = Road Maintenance and Management Division; RMTF = Road Maintenance Trust Fund; RPPF = Road Project Preparatory Facility; RSAP = Road Sector Assistant Project; RSDP = Road Sector Development Project; RSMP = Road Sector Master Plan; SRCP = Southern Road Connectivity Project; TA = Technical assistance; TPPF = Transport Project Preparatory Facility; USAID = United `States of America s Agency for International Development. Notes and Sources: Note 1: ADB Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistant Grant to the Democratic Socialist Republic of Sri Lanka for the National Highways Sector Project. Manila.; World Bank Sri Lanka: Review of Maintenance Funding in National Roads. Colombo Note 2: Government of Sri Lanka, Ministry of Finance. National Budget. Colombo (12 years: ). Note 3: ADB Country Assistant Program Evaluation. Manila. Note 4: ADB Technical Assistant Completion Report: TA 4315 SRI. Manila. Note 5: Project Management Unit Borrower s Project Completion Report: Road Project Preparatory Facility. Colombo Note 6: ADB Borrower s Project Completion Report: Road Project Preparatory Facility. Colombo; ADB Sector Assistant Program Evaluation. Manila Note 7: World Bank Sri Lanka: Review of Maintenance Funding in National Roads. Colombo Note 8: Project Management Unit Borrower s Project Completion Report: National Highways Sector Project. Colombo. Note 9: Project Management Unit Borrower s Project Completion Report: National Highways Sector Project. Colombo.; World Bank Sri Lanka: Review of Maintenance Funding in National Roads. Colombo. Note 10: ADB Technical Assistance Completion Report: Establishment of Central Procurement Unit in the Road Development Authority. Manila. Note 11: ADB Project Completion Report: Road Sector Development Project. Manila.

45 34 Appendix 4 Financing Category Road Upgrading PROJECT ROADS & PACKAGES Table A4.1: Roads & Packages under Original Financing Package 1 Code Roads Name Original Proposed 2 (Nov. 2005) Length (km) Inception 3 (May 2007) Completion ICB01 A012 Puttalam - Anuradhapura ICB02 A026 Udatenna - Mahiyanganaya ICB03 A005 Nuwara Eliya - Badulla A007 Hatton Nuwara Eliya ICB04 A006 Habarana - Kantale ICB05 A004 Nugegoda - Homagama LCB01 B409 Thalgodapitiya - Dombawela Omitted LCB02 B157 South Highway - Aluthgama Omitted LCB03 B153 Hikkaduwa South Highway Omitted LCB04 A024 Matara South Highway Omitted LCB05 B207 Katukurunda - Neboda Omitted Building LCB06 Construction (NCB01) Highway Secretariat 3 floors 8 floors 10 floors Land A001 Kiribathgoda - Nittambuwa Omitted Acquisition A004 Kirulapone - Godagama Omitted (for Colombo B084 Pamankada Bridge - Horana Omitted Links) B435 Orugodawatta - Ambatale Omitted PBM 1,000-2,000 1,000-2, Abbreviations: ICB = International Competitive Bidding; LCB = Local Competitive Bidding; NCB = National Competitive Bidding; PBM = Performance Based Maintenance; RDA = Roads Development Authority. Notes: 1 Package Number at Inception is given within brackets if it is different to the completion 2 Length of each package as shown in the Report & Recommendation of the President to the Board of Directors in Nov Length of each package is as appeared in the Project Administration Memorandum in May Sources: ADB.2005.Report & Recommendation of the President to the Board of Directors: National Highways Sector Project. Manila.; ADB Project Administration Memorandum: National Highways Sector Project. Manila.; URS Consultant s Roads Development Authority (RDA) Project Completion Report(s): National Highways Sector Project. Colombo. 34 Appendix 4 Financing Category Road Upgrading Package Table A4.2: Roads & Packages under Additional Financing Code Roads Name Length (km) Inception 1 Completion (June 2011) CP01/ICB A024 Matara - Akuressa CP02/ICB B153 Hikkaduwa - Baddegama CP03/ICB B157W Aluthgama Southern Expressway CP06/ICB B157 E Madurugoda Southern Expressway Omitted CP04/ICB B207 Katukurunda - Neboda CP05/ICB A004 Kirulapone - Godagama CP07/ICB B084 Colombo - Horana Abbreviations: CP = Contract Package; ICB = International Competitive Bidding; LCB = Local Competitive Bidding Note: 1 Length of each package is as appeared in the Project Administration Manual, June Sources: ADB Report & Recommendation of the President to the Board of Directors: Additional Financing for National Highways Sector Project. Manila; ADB Project Administration Manual: Additional Financing for National Highways Sector Project. Manila; URS Consultant s Project Completion Report(s): National Highways Sector Project. Colombo.

46 PROJECT COST AT APPRAISAL AND ACTUAL OF THE ORIGINAL FINANCING ($' 000,000) Appendix 5 35

47 36 Appendix 6 PROJECT COST BY FINANCIER

48 Appendix 7 37 DISBURSEMENT OF ADB LOAN PROCEEDS I. ORIGINAL LOAN 1. During the project appraisal, no projections were made for disbursements in the original financing (L2217). Hence, a comparison of cumulative actual and projected disbursements is not possible. Further analysis of actual disbursements of L2217 is presented in Table A7.1, and in Figures A7.1 and A7.2. Table A7.1: Annual and Cumulative Disbursement of Loan 2217 (Original Financing) Annual Disbursement Cumulative Disbursement Amount Amount Year ($ million) % of Total ($ million) % of Total % % % % % % % % % % % % % Total % Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission. Figure A7.1: Annual Disbursements for Loan 2217 (Original Financing) CSC= Construction Supervision Consultant; CW = Civil Works; HS = Highway Secretariat PBMC = Performance- Based Maintenance Contract Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission

49 38 Appendix 7 Figure A7.2: Cumulative Disbursements of Loan 2217 (Original Financing) CSC= Construction Supervision Consultant; CW = Civil Work; HS = Highway Secretariat; PBMC = Performance Based Maintenance Contract Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission II. ADDITIONAL LOAN 2. During the project appraisal, no projections were made for disbursements under additional financing (L2767). Therefore, no comparison of cumulative actual and projected disbursements is possible. Further analysis of actual disbursements of L2767 is presented in Table A7.2 and Figures A7.3 and A7.4. Table A7.2: Annual and Cumulative Disbursement of Loan 2767 (Additional Financing) Year Annual Disbursement Amount ($ million) % of Total Cumulative Disbursement Amount ($ million) % of Total % % % % % % % % % % % % Total % Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission

50 Appendix 7 39 Figure A7.3: Annual Disbursements of Loan 2767 (Additional Financing) CSC= Construction Supervision Consultant; CW = Civil Work; HS = Highway Secretariat PBMC = Performance Based Maintenance Contract Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission Figure A7.4: Cumulative Disbursements of Loan 2767 (Additional Financing) CSC= Construction Supervision Consultant; CW = Civil Work; HS = Highway Secretariat PBMC = Performance- Based Maintenance Contract Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission

51 40 Appendix 8 Year Date Events 2005 CHRONOLOGY OF MAIN EVENTS 4 20 May Fact Finding Mission 4 & 5 July Consultation Mission 9 Aug Management Review Meeting Aug Consultation Mission 29 Aug 7 Sept Appraisal Mission/Signed Memorandum of Understanding 13 Sept. Vice President (Operation 1) approved the concept paper for TA4736-SRI (Piggy-backed to L2217-SRI) 26 Sept. Staff Review Committee Meeting 2-4 Nov. Loan Negotiation 17 Nov Board Circulation 15 Dec. ADB Board circulation & approval for project (and TA-4736) & 24 Feb. Consultation Mission 24 April Signed agreement letter for TA June Commencement of consultant s services for TA4736 (2 international consultants) 6 & 7 July Consultation Mission (mission noted the progress of detailed design was very poor) Nov. Road Sector Review Mission including NHSP 14 Dec. Signed the loan 20 Feb Loan 2217 became effective 20 Feb Hired a local consultant for Institutional and Policy Development Consultancy 26 Feb Hired an international consultant for Institutional and Policy Development Consultancy 7-13 Mar. Inception Mission 19 Mar Submitted Draft Inception Report for Intuitional and Policy Development May Consultation Mission 9 12 Oct. Review Mission Nov Special Loan Administration Mission Feb Consultation Mission 31 March GoSL requested for major change (reallocate funds from (i) land acquisition and resettlement of Colombo link roads, (ii) consultancy supervision consultancy and (ii) PBM consultancy service to road upgrading) 12 May Approved of the afore-mentioned major change in scope and reallocation of loan proceedings 25 April Signed the contract for ICB04 (ICC-China Harbor) 30 April Construction Supervision Consultancy agreement was signed with Scott Wilson Kirkpatrick 4 July Issued Notice-to-Proceed for civil work of ICB04 package 11 July Commenced civil work for ICB04 package 08 th Aug Signed the contract for ICB02 package 24 th Sep Signed the contract for ICB03 package 1 st Nov Issued Notice-to-Proceed for civil work of ICB02 package 1 st Nov Commenced civil work for ICB02 package 28 th Nov Issued Notice-to-Proceed for civil work of ICB03 package 2 nd -7 th Feb Review Mission 23 rd March Appointed an External Monitor (Centre for Environmental Studies of University of Peradeniya) for environmental safeguard aspects of the project. 9 th June Signed the contract for ICB01 package 11 &12 June A special Project Administration Mission to review the progress of payment of compensation and resettlement activities.

52 Appendix 8 41 Year Date Events 15 th June Issued Notice-to-Proceed for civil work of ICB01 package 1 st Aug Commenced the civil work for ICB01 package 17 th -25 th Aug Review Mission to assess physical progress of NHSP. 27 th -30 th Oct Review Mission on Environmental Safeguard Compliance 23 rd Nov Mobilized the international PBM specialist 26 th Nov Mobilized the local PBM specialist th to 16 th Feb Review Mission on Social Safeguard Compliance (A006) 12 th & 13 th Feb Special Project Administration Mission to review RPs and status of compensation payments 10 th -20 th May Project Mid-Term Review. 27 th July 2 nd Aug Review Mission on livelihood restoration (special attention to A006) 31 st Aug. RDA took over completed project road under ICB04 package 4 th Oct Government of Sri Lanka (GoSL) signed agreement with OFID for financing $8 million for a section of A004 8 th Oct Contract for NCB01 awarded (civil works for Highway Secretariat) 18 th -22 nd Oct Project Review Mission 4 th Nov. Commenced civil work for the Highway Secretariat (Stage I) 10 th -19 th Nov Consultation Mission (additional financing) 9 Nov. Request for major change of scope (reduce scope of PBM to 300 km; reallocate funds to finance additional 20 km and Highway Secretariat) 15 Nov Commenced the preparatory work for additional financing 24 th -31 st Jan Consultation Mission for additional financing 28 th Jan Awarded Type 1 Contract for PBM (catch-up and preventive maintenance of 108 km to CML-MTD construction 11 Feb GoSL requested for approval for minor change (administering co-financing of 14km of Kirulapone-Homagama Road) 3 rd March Commenced Type 1 Contract of PBM (CML-MTD) for 108 km for six month contract period 21 st Mar-8 th Apr Fact Finding Mission 28 th Mar-1 st April Project Review Mission May Signed the contract for ICB05 package 26 May Commenced civil works for ICB05 package 25 July GoSL requested for approving reallocation of loan proceeding to support building construction and re-included 20 km of ICB01 and extension of loan closing date from 31 Mar 2012 to 31 Dec 2012 to accommodate completion of construction of Highway Secretariat and ICB05 package 5 Aug Approved the loan 2767 (additional financing) 3 Sept Completed Type 1 contract for PBM by CML-MTD Sept Appointed Human Resource Development Consultant 3 Nov Commenced PBM work on Colombo-Ratnapura-Wellawaya-Baticaloa Road and Avissawella Hatton Nuwara Eliya Road. (78 km) by Contractor CML- MTD Construction 7-11 Nov Project Review Mission 5-9 Dec. Safeguard Review Mission 14 Dec Loan signed additional financing Feb L2767 (additional financing) became effective 29 Feb RDA took over completed project road under ICB02 package (including extra 6 km) 22 March Signed the contract for CP-4 under additional financing April Project Review Mission 31 Aug. RDA took over completed project road under ICB01 package 30 Oct. Signed the contract for CP-7 under additional financing 3 Dec GoSL requested for loan reallocation (Interest and commitment charges to (i) civil work; (ii) consultancy services and (iii) project administration) Dec. Project Review Mission

53 42 Appendix 8 Year Date Events 14 Dec Human Resource Development Consultant submits final report 17 Dec Completed civil work for ICB05 package 24 Dec. RDA took over completed project road under ICB03 package 18 January Signed the contracts for CP-2 & CP-03 under additional financing 26 Feb. RDA took over completed project road under ICB05 package 23 April GoSL requested for reallocation of funds (loan savings to road upgrading and road maintenance) April GoSL requested for minor change (sharing foreign currency with local currency) 30 March Signed the contract for CP-1 under additional financing 25 Nov. Reallocated loan proceeding for additional financing (total unallocated category to civil works and consultancy services) 26 Nov. Signed the contract for CP-5 under additional financing Oct. Review Mission for additional financing Jan. RDA took over completed project road under CP-04 package 26 Sep. RDA accepted substantial completion of Highway Secretariat building June Review Mission for additional financing 30 June RDA took over completed project road under CP-01 package 31 July RDA took over completed project road under CP-03 package 30 Nov. RDA took over completed project road under CP-05 package 8 July Extended loan completion date for additional financing (30 June 2016 to 31 Dec February Completed all outstanding work of Highway Secretariat 28 Feb. RDA took over completed project road under CP-02 package 30 April RDA took over completed project road under CP-07 package July Extended the loan winding-up period for additional financing to 11 September 2017 Abbreviations: CP = Contract Package; GoSL = Government of Sri Lanka; ICB = International Competitive Bidding; LAR = Land Acquisition and Resettlement; NCB = National Competitive Bidding; NHSP = National Highways Sector project; OFID = OPEC Funds for International Development; PBM = Performance-based Maintenance; PMU = Project Management Unit; RDA = Roads Development Authority; TA = Technical Assistance Sources: ADB/Sri Lanka Resident Mission (SLRM) Aide Memoires; RDA Borrower s Project Completion Report: National Highways Sector Project. Colombo.

54 Appendix 9 43 IMPLEMENTATION TIMELINE AND SCHEDULE (PART 1) Table A9.1: Original Financing, Policy, Maintenance and Pre-Construction

55 44 Appendix 9 IMPLEMENTATION TIMELINE AND SCHEDULE (PART 2) Table A9.2: Highway Construction, Original and Additional Financing

56 Appendix 9 45 Table A9.3: Explanatory Notes and Sources DLB = Defect Liability Period; ICB = International Competitive Bidding; LCB = Local Competitive Bidding Notes: Note 1: Note 2: Project excluded A007 and B409 during implementation and included a section of A006 All these project roads are excluded from original financing and reconsidered under additional financing Note 3: All these project roads are excluded during implementation Note 4: Scheduled and Actual timelines do not represent A004 which was not in the original scope. The agreement for construction of A004 was signed on 28th April 2011 Note 5: Contractors were not procured for LCB packages as they were excluded from investment scope; Scheduled and Actual timelines do not represent LCB of Highway Secretariat which was not in the original scope. The agreement for construction of Highway Secretariat was signed on 8 Oct 2010 Note 6: Timeline for consulting service covers both original and additional financing as same consultant were deployed with an extension offered at the end of original contract Note 7: Defect Liability Period is limited for one year for each project road: scheduled and actual liability periods shown are only applicable for the latest completed. Same scenario applies for all other roads appeared as a group to represent timeline Note 8: Scheduled timeline does not appear since the project was not in the original scope of work Note 9: Scheduled timeline does not appear since the project was not in the original scope of work Note 10: The land acquisition completion date for B207 is taken as the day on which agreed to give up land acquisition at Nagoda Junction and continue with existing ROW, i.e June 2013 Note 11: Project road B157 E was disregarded during implementation Sources: ADB Project Administration Memorandum: National Highways Sector Project. Manila ADB Project Administration Manual: Additional Financing for National Highways Sector Project. Manila URS Consultant s Project Completion Report(s): National Highways Sector Project. Colombo. Appendix 9 45

57 46 Appendix 10 IMPLEMENTATION ORGANIZATIONAL STRUCTURE National Steering Committee MOH (Chairs) MOFP (represented by ERD, FABMD, NBD, NPD, SD, CEA WLFD (As needed) Road Development Authority Project Management Unit (Headed by Project Director) Asian Development Bank Planned Added during Implementation Consultants for Performance Based Maintenance Component Consultants for Social Safeguard (Mediator, External Monitor, Income Restoration) Consultants for Institutional Support Component Upgrading Component (including Construction of Highway Secretariat) Provincial Director (North Western Province) Assisted by Chief Engineer 1. At Puttalam ICB01-A012 Provincial Director (Central Province) Assisted by Chief Engineer 1. At Kandy ICB03-A026 Provincial Director (Eastern Province) Assisted by Chief Engineer 1. At Trincomalee ICB04-A006 Provincial Director (North Central Province) Assisted by Chief Engineer 1. At Anuradhapura ICB01-A012 (part) 2. At Polonnaruwa ICB04-A006 Construction Supervision Consultant Team Leader Provincial Director (Southern Province) Assisted by Chief Engineer 1. At Galle ICB:CP02-B At Matara ICB:CP01-A024 Provincial Director (Western Province) Assisted by a. Colombo Municipal Council ICB:CP5-A004 b. Chief Engineer 1. At Colombo ICB05- A004 ICB:CP7 -B At Kalutara ICB:CP4 - B207 ICB:CP3 B157W Deputy Team Leader (Chief Resident Engineer) & Supervision Team at Anuradhapura for ICB01 & ICB04 Deputy Team Leader (Chief Resident Engineer) & Supervision Team at Kandy for ICB02 & ICB03 Deputy Team Leader (Chief Resident Engineer) & Supervision Team at Aluthgama for ICB:CP01/CP02/CP03/CP04/CP07 Contractors (ICB01/ICB04) Contractors (ICB:CP05/NCB01) Contractors (ICB02/ICB03) Contractors (ICB:CP01/CP02/CP03/CP04/CP07) CEA = Central Environmental Authority; ERD = External Resource Department; FABMD = Foreign Aid & Budget Monitoring Department; MOFP = Ministry of Finance and Planning; MOH = Ministry of Highways; NBD = National Budget Department; NPD = National Planning Department; SD = Survey Department; WLFD = Wild Life and Forest Department Note: The Policy and Institutional Support and the Performance-Based Maintenance components were part of the original implementation structure but were not shown in the Project Administration Manual. These have now been reinstated in this diagram by the PCR mission. Source: ADB.2007.Project Administration Manual: National Highways Sector Project. Manila.

58 Appendix TECHNICAL ASSISTANCE COMPLETION REPORT TA No., Country and Name: Amount Approved: $400,000 TA4736-SRI: Capacity Building of the Environmental and Social Revised Amount: Not Applicable Division of the Road Development Authority Executing Agency: Ministry of Source of Funding Amount Undisbursed: Amount Utilized: Highways and Road Development ADB s Special Funds $ 31,323.9 $368,676.1 TA Approval Date: TA Signing Date: Resources Fielding of First Consultant(s): TA Completion Date Original: 30 Jun Dec Apr Jun 2006 Account Closing Date Original: 30 Jun 2007 Actual: 31 Aug 2009 Actual: 16 Sep 2010 Description The technical assistance (TA) grant was piggy-backed to the National Highways Sector Project (NHSP) original financing. 1 The TA was designed to improve the RDA s capacity in dealing with safeguard issues, particularly in incorporating environmental and social dimensions in highway development, in complying with relevant policies, guidelines and requirements of ADB and the government, and in supervising and monitoring safeguard measures during project implementation. Expected Impact, Outcome, and Outputs The expected impact of NHSP was expansion of economic opportunities and balanced growth, while the outcome was improvement of national highway transport efficiency. The outputs of NHSP were (i) improved road sector institutions and policy, and (ii) upgraded and maintained national highway network. The consisted of 3 components: (i) environmental, (ii) social, and (iii) land acquisition and resettlement (LAR) components. The outputs of the TA were (i) operations manuals for incorporating environmental and social dimensions consideration in RDA s operation prepared; (ii) ESD and other relevant officials trained in using the manuals; (iii) ESD staff trained to review and clear environmental studies and resettlement plans of the subprojects of NHSP; and (iii) management information system (MIS) developed to monitor the progress of LAR implementation. Delivery of Inputs and Conduct of Activities The TA was formulated following the inspection case of the Southern Transport Development Project by the ADB s compliance review panel. A team of consultants, consisting of two international consultants (Environmental Specialist/Team Leader, Resettlement Specialist) and two national consultants (MIS Specialist, Resettlement specialist) were recruited. 2 The two international consultants were fielded in June 2006 to prepare an Inception Report that took into account suggestions of stakeholders. A total of person months were fielded over the period (12.79 person months international and national). Two steering committees were established to oversee the implementation of the components: An Environmental Steering Committee and a LAR Steering Committee. As envisaged, the consultants delivered their tasks through: (i) a review of current government and ADB policy, regulations, and requirements for environmental, social and LAR for road developments, (ii) preparing separate operational manuals, based on the review findings, for (a) environmental, (b) social and (c) LAR, (iii) obtaining approval of operational manuals from respective steering committees, (iii) applying operational manuals in NHSP and recommending any further improvements required, and (iv) providing training for RDA staff in operational manuals and on best practices in environmental and social safeguards. The MIS was developed to provide outputs of: (i) detailed information for each affected person on type and extent of losses, including, inter alia, measurements, valuations, entitlements, payments, relocation requirements, (ii) monthly, quarterly, and annual monitoring reports, and (iii) monthly social audit reports for LAR. ADB closely monitored the TA activities and outputs through regular communication with the consultants. ADB staff actively facilitated the TA activities, coordinated consultants field visits and monitored outputs and provided guidance in the preparation of TA reports. The overall performance of ADB was satisfactory. Appendix ADB Report and recommendation by the President to the Board of Directors: Proposed Loan and Technical Assistance Grant, Democratic Socialist Republic of Sri Lanka, National Highways Sector Project. Manila 2 The International Resettlement Specialist and national MIS Specialist were changed during the period.

59 48 Appendix 11 Evaluation of Outputs and Achievement of Outcome The TA achieved all originally intended outcomes and outputs, while extending support in various capacities to improve environmental and social safeguards in the road sector. Both the manuals and MIS developed under the TA were comprehensive and well organized and hence they are in use to date, without requiring any major changes. The additional works carried out under the TA were justified because they contributed immensely to enhancing the capacity of the ESD. These additional works compensated for late completion of the TA, resulting mainly from delays in preparing the SAIRC manual. The TA achieved its originally intended outputs of producing operational manuals for (i) Environmental Safeguards Compliance (ESC), and (ii) Social Assessment and Involuntary Resettlement Compliance (SAIRC) (covering social and LAR aspects). The manuals guided RDA, and ESD staff in particular, on safeguard compliance policies, legislations, and guidelines. The TA also assisted RDA staff in reviewing project-related safeguard compliance documents. The MIS for safeguard compliance monitoring and database was satisfactorily operating by TA completion. The TA also assisted with (i) establishing the ESD as a separate division within RDA s new organization structure, (ii) assessment of staffing requirement for ESD, (iii) capacity building RDA staff in environmental and social safeguard aspects (3 workshops and 2 interactive seminars), (iv) training selected RDA staff in non-technical skills (eg: language skills, computer literacy), (v) procuring computer hardware and software for MIS database management. They also assisted in environmental and social safeguard aspects for several of RDA s projects, including NHSP. Overall Assessment and Rating The TA s overall implementation rating is successful as the TA s major outputs were met and the assigned tasks under the TORs were implemented. The TA is assessed relevant because it directly contributed to enhance the capacity development of RDA in dealing with safeguard issues in highway development and in supervising and monitoring safeguard measures during project implementation. The TA is rated effective and efficient based on the productive delivery of all expected outputs. Its actual achievements are beyond the anticipated outputs and outcomes at inception. The TA is assessed likely to be sustainable because it is clearly justified by the current success gained by the ESD in executing environmental and social safeguard aspects during pre-construction, construction and postconstruction activities. Major Lessons The success of the TA resulted from not only satisfactory design and final outputs, but also on the process of its implementation. The ESD staff was fully involved in the process of developing the primary TA outputs (manuals and MIS) and consequently these have since been continuously in use. Active involvement of stakeholders during implementation of any TA is vital to create ownership and thereby ensure the long-term sustainability of the outputs. Recommendations and Follow-Up Actions Currently, inputting data to MIS is possible only at ESD level. Data collected at site level is entered in Excel format for ESD to enter in the MIS. This is time-consuming. An online system will improve data entry efficiency and allow realtime input and reporting of information. TA inputs to improve non-technical capacities of staff (computer literacy, English language communication/writing skills) were invaluable and should continue. To retain trained staff ESD should introduce motivation schemes and provide job security. Prepared by: Aruna Nanayakkara Designation and Division: Senior Project Officer (Transport), SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgements as to legal or other status or any territory or area.

60 Appendix CONTRACT AWARDS OF ADB LOAN PROCEEDS Table A12.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds Annual Contract Awards Cumulative Contract Awards Amount Amount Year ($ million) % of Total ($ million) % of Total % % Original % % Financing % % % % % % Additional % % Financing % % Total % Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission Cummulative Contract Awards ($ million.) Figure A12.1: Projected and Cumulative Contract Awards of ADB Loan Proceeds Actual Projected Year Source: PCR computations, Asian Development Bank Sri Lanka Resident Mission Table A12.2: Summary of Contract Awards by Year Year Actual Projected 2007 Individual Consultants (Institutional and Policy Support) Individual Consultants (Institutional and Policy Support/Performance-Based Maintenance components); Construction Supervision Consultant; one road upgrading package Two road upgrading packages; civil work for Pilot 2008 Construction Supervision Consultant; three road upgrading packages (ICB02,03& 04) Performance Based Maintenance 2009 One road upgrading package (ICB01); Individual consultants for Performance-Based Maintenance 2010 Construction of highway secretariat (NCB01) None 2011 Civil work for Pilot Performance-Based None Maintenance 2012 Two road upgrading packages (CP04& CP07) 6 road upgrading packages 2013 Four road upgrading packages (CP01, CP02, CP03 & CP05) Source: Appendix 9 1 contract for road upgrading; construction of highway secretariat Appendix 3 49

61 50 Appendix 13 CONTRACT IMPLEMENTATION DETAILS FOR ROAD UPGRADING Table A13.1: Original and Additional Financing

62 Appendix SOCIAL SAFEGUARD IMPLEMENTATION AND RESTORATION AND IMPROVEMENT OF INCOMES AND LIVELIHOODS OF AFFECTED HOUSEHOLDS I. INTRODUCTION 1. The National Highways Sector Project (NHSP) rehabilitated eleven road sections under two loans (original financing and additional financing), in order to increase road capacity and efficiency. It included upgrades to standard of two lane or four lane configurations, incorporating cycle lanes, parking, drainage, and bus bays at necessary locations. The improved road conditions aimed to contribute to meeting the increasing traffic demand, saving travel time and easing access to social infrastructure. The intention was to benefit road users, such as the public, government agencies, businesses, transport providers and others. 2. The original financing was intended to finance four road sections, with a total length of 187 km in seven districts (Puttalam, Anuradhapura, Polonnaruwa, Trincomalee, Kandy, Nuwara Eliya, and Badulla). The project ended up rehabilitating 244 km of five road sections. A resettlement framework, including likely resettlement impacts, was prepared in 2005 for the original four road sections. 3. The government obtained additional ADB financing for upgrading six national highways under original financing, which included link roads to the Southern Expressway from the districts of Colombo, Galle and Matara, and upgrading of two link roads to four lanes included Godagama- Kirulapona road (A004) and Pamankada- Kesbewa road (B084). A total of 55.7 km were rehabilitated. II. RESETTLEMENT PLANNING 4. Better access to basic social infrastructure, resulting from improved road conditions and transport facilities, have a potential to contribute to increasing incomes and employment opportunities and can assist in reducing poverty. However, it can also be argued that without proper resettlement planning and implementation, physical displacement and other negative resettlement impacts from land acquisition tend to reduce incomes and worsen living conditions of some affected persons. Therefore, it is necessary to adopt basic principles in involuntary resettlement, to ensure that the affected people s income and living standards are not adversely affected as a result of land acquisition and relocation. 5. In compliance with the ADB Involuntary Resettlement Policy 1 and the National Involuntary Resettlement Policy (NIRP) 2, a resettlement framework for sector projects was prepared. 3 RAPs, based on these, were prepared for subprojects during 2007 to 2011 and approved by government and ADB. Appendix 3 51 A. Legal Framework for Land Acquisition and Compensation 6. Land and other assets were acquired within the framework of the Land Acquisition Act (1950) and its amendments. The legal provisions under this Act did not meet the requirement of ADB Involuntary Resettlement Policy and therefore, the government introduced project-specific compensation packages, including payment for replacement costs of land and structures, as well as rehabilitation assistance, particularly for the vulnerable families and encroachers. Land 1 ADB Handbook on Resettlement: A Guide to Good Practice. Manila 2 The National Involuntary Resettlement Policy of Sri Lanka, May Colombo 3 Road Development Authority Resettlement for the National Highways Sector Projects. Colombo

63 52 Appendix 14 Acquisition and Resettlement Committees (LARC) were established to pay non-statutory compensation and other allowances in the entitlement matrix, approved by government and ADB. 7. During project implementation the regulations for the payment of compensation were enacted by Parliament (March 2009). These stipulated the basis for calculating market values for acquired land and replacement values for structures, and compensation for injurious impacts, severance and other disturbances. Under these new regulations the Valuation Department was given authority to determine replacement costs and rehabilitation, replacing the LARCs used in many road construction and rehabilitation projects. However, because the LARC system was recognized and provided an opportunity for the affected people to participate and negotiate for the compensation payments, the project authorities continued to use the LARC and Super LARC systems for payment of replacement costs for land and structures and the 2005 compensation package developed by RDA. Parliament approved the establishment of LARCs in 13 subprojects in 2013, including the Horana-Pamankada road subproject. All subprojects used the LARC and Super LARC systems. B. Resettlement Framework and Resettlement Action Plans 8. The resettlement framework and Resettlement action plans (RAPs) for subprojects were prepared, revised and updated to meet changes in project scope, alterations in engineering designs and for other technical reasons. Four resettlement action plans were prepared in 2007 and 2008 based on ADB involuntary resettlement policy 1995 under the original financing. Under additional financing five resettlement action plans were prepared based on ADB SPS 2009.The RAP for each subproject was based on an inventory of losses survey, using preliminary plans or advanced tracings, and described the policies, procedures, entitlements, implementation responsibilities and monitoring activities. 9. The resettlement framework and a RAP for each subproject were prepared to ensure that those loosing lands, structures, livelihoods and other assets are fairly compensated and that affected persons are assisted, at least in regaining their incomes and living conditions as pertained before the project and also to improve livelihoods of the poor and vulnerable families. It also assessed the nature and types of lost properties in each subproject and outlines the measures to mitigate negative impacts by adequate compensation and assistance in relocation and income restoration. In addition the loan agreements included assurances and specific loan conditions for the mitigation of adverse resettlement impacts. 10. The compensation package prepared by the RDA in 2005 is a good example of the actions taken to comply with ADB and NIRP policies. The resettlement planning activities, in terms of the initial preparation and revisions, are shown in Table A14.1.

64 Appendix Table A14.1: Resettlement Planning Subproject Initial RAP Revised and Upgraded RAP National Highways Sector Project (NHSP) Original financing Puttalam - Anuradahapura (A012) June 2007 September 2008, January 2009 and updated in January 2013 Udatenna - Mahiyangana (A026) March 2008 Revised in 2009, updated in December 2012 Nuwara Eliya Badulla (A05) April 2008 Revised in 2009 and updated in December 2012 Habarana Kanthale (A006) May 2008 Revised in October 2009 National Highways Sector Project (NHSP) Additional financing Nagoda Katukurunda (B 207) July 2011 No revision/upgrade Lewwanduwa-Aluthgama (B157) March 2011 No revision/upgrade Hikkaduwa-Baddegama (B153) October 2011 No revision/upgrade Matara-Akurassa (A24) August 2011 No revision/upgrade Pamankada-Kesbewa road (B084) May 2011 November 2011 Source: Resettlement action plans prepared (RAPs) from 2007 to The subprojects were implemented from 2007 under original financing. Each adopted a system of payments for replacement cost for lands and structures and rehabilitation assistance agreed through the LARCs. In addition, RDA prepared a compensation package in 2005 called Ex-gratia Package for the People Affected by Highway Projects. This was used to develop the entitlement matrix used in the RAPs. A higher-level committee, chaired by the Secretary of the MOHRD, was introduced to address grievances that could not be handled at LARC level. This was named the Super LARC. C. Entitlement Matrix 12. In each subproject an entitlements matrix was prepared to consider the cash payment for lost assets and rehabilitation assistance for the identified categories of affected households. A resettlement budget was also prepared. The budget items included the following categories of payment and eligibility for payment, was to be decided at the LARC meetings. (i) Compensation for lands at replacement value (ii) Compensation for structures (houses, shops and secondary structures) at replacement cost (iii) Loss of income from business (iv) Loss of wages/salaries from employment (v) Cash payments for loss of fruit and timber tress (vi) Shifting allowance of SLRs 15,000 (vii) Self-relocation allowance: SLRs150,000 in Pradeshiya Sabha, SLRs 300,000 in Urban Council and SLRs 500,000 in Municipal Council areas. (viii) Temporary accommodation up to SLRs 50,000 (ix) Cost of re-connection of water, telephone and electricity lines (x) Preparation of documents: SLRs 2,500 (xi) Special grant for vulnerable persons: SLRs 15,000 (xii) Handing-over possession of properties before deadline: 5% of statutory compensation for land (minimum SLRs 10,000 and a maximum of SLRs 100,000) and 25% for structures (minimum of SLRs 25,000 and maximum of SLRs 500,000). 13. During consultation meetings with the affected persons, the owners of fully affected houses and shops preferred self-relocation when they were informed about the number of cash allowances to be paid, which included a house rent allowance over six months (the rate depending Appendix 3 53

65 54 Appendix 14 on location 4 ), transport allowance of SLRs 15,000, livelihood grant of SLRs 15,000, loss of business income during the relocation period, ex-gratia payments of 25% of the statutory valuation of the structure, allowances for the re-connection of electricity lines, telephone and water and, more importantly, a self-relocation allowance of up to SLRs 500,000 (depending on the local authority area). The RAP does not prepare a relocation plan for those who do not have sufficient land to re-build the structure because of the preference of the affected persons for self-relocation. The process of self-relocation was monitored and two cases studies in Box 1 and 2 highlight the process and effectiveness of relocation in a sample house and a shop. D. Planned and Actual Implementation Schedules 14. Project management unit of RDA implemented the process of land acquisition, compensation payments and monitoring of self-relocation. This unit was led by the Project Director and a Deputy Project Director in charge of the resettlement program and Resettlement Assistants attached to each subproject coordinate project activities at local level. The Divisional Secretaries were responsible for land acquisition and payment of compensation. The Divisional Secretary chaired the LARC meeting and other members were the District Superintendent of Survey Department, the District Valuer or a representative, and the Deputy Project Director or Resettlement Assistant. LARCS discussed and negotiated with affected people for ex-gratia payments and the consent was obtained to finalize the decisions made at the meeting. The LARC system and payment of ex-gratia payments was a key feature of the project. 15. Project implementation schedules were prepared for the effective implementation of RAPs in subprojects. The project management units (PMUs) of the Roads Development Authority (RDA), were responsible for timely acquisition of land and compensation payments for all lands, structures and other affected properties, before giving the notices to proceed to the contractor. It was also necessary to replace some common facilities and public infrastructure affected by land acquisition and construction activities. In order to expedite the road construction works RDA in consultation with ADB took a proactive approach allowing the commencement of road construction works in a road section where land acquisition and compensations payments were completed. It was the responsibility of RDA to identify resettlement impacts free road section and ADB approved the handing over of the section to the contractor. According to the schedule of land acquisition in RAPs it was expected to complete land acquisition and compensation by March 2009 under the original financing, and construction works by August However, the actual completion date was June 2013 with a delay of about two years. Under additional financing the land acquisition and compensation and road construction work took about 6 years (2010 to 2016). The actual implementation schedule indicated a difference between original time schedules and actual time schedules in original financing and additional financing due to some protests for land acquisition, land ownership disputes and delays in releasing the funds. lll. AFFECTED PEOPLE AND TYPES OF RESETTLEMENT IMPACT A. Affected People 16. RAPs in the nine subprojects indicated that 6,231 households were affected (about 31,100 people) by land acquisition for road widening and improvement along the nine subproject road sections. A total of ha were acquired (Table A14.2), including private, government (some lands with encroachments), and other lands, 4 In rural area a maximum of SLRs 50,000, related to floor area of the house before relocation in same Pradeshiya Sabha areas, SLRs 75,000 in Urban Council areas and SLRs 100,000 in Municipal Council areas over 6 months.

66 Appendix Table A14.2: Extent of Land Acquired and Number of Affected Households Subproject Number of households Extent of land acquired (perches) Extent of land acquired (ha) Puttalam - Anuradahapura (A012) Udatenna - Mahiyangana (A026) , Nuwara Eliya Badulla (A05) , Habarana Kanthale (A Nagoda Katukurunda (B 207) Lewwanduwa-Aluthgama (B157) 550 2, Hikkaduwa-Baddegama (B153) 945 3, Matara-Akurassa (A-24) 407 2, Pamankada-Kesbewa road (B084) 954 1, Total 6,231 40, Source: Resettlement action Plans from 2007 to 2012 B. Types of Affected Shops and Houses 17. The RAPs identified the types of structures affected while acquiring lands and the need for taking appropriate measures to mitigate negative social and economic impacts on the individuals and households. The lists of affected persons were first identified on land survey maps with the information on the extent of lands acquired in lots, land uses and types of primary and secondary structures and other affected properties, such as trees and cultivated crops. Table A14.3 lists the categories of affected structures given in the RAPs. Table A14.3: Types of Affected Houses and Shops by Subproject Fully affected houses Partially affected houses Fully affected shops Partially affected shops Subproject Total Puttalam - Anuradahapura (A012) Udatenna - Mahiyangana (A026) Nuwara Eliya Badulla (A05) Habarana Kanthale (A Nagoda Katukurunda (B 207) Lewwanduwa-Aluthgama (B157) Hikkaduwa-Baddegama (B153) Matara-Akurassa (A-24) Pamankada-Kesbewa road (B084) Total Percentage of total Source: Resettlement action plans in sub projects from 2007 to As per the RAPs, about 76% of houses and shops were only partially affected and did not require physical relocation. However, 341 houses and 344 shops were fully affected, accounting for 24% of total primary structures. Appendix 3 55 C. Estimated Relocation Impacts 19. In each RAP the number of fully affected houses and shops requiring relocation were based on the final engineering designs and land survey plans (Preliminary plans) and the options available were listed. There was no change in the number of households relocated between the project appraisal and completion. The first option was to re-construct the buildings on the same land, where sufficient land was available. The second option was to pay adequate compensation to the affected person to buy a house or a shop or to purchase land and re-construct the structure. The third option was for the project, in consultation with the affected person, to provide a block of land ( m 2 ) on which to re-build the structure, based on his/her requirements and the family

67 56 Appendix 14 situation. According to the socio-economic survey conducted before land acquisition, the majority preferred self-relocation. It was also found that the majority of fully affected structures (houses and shops) could be re-built on the same land lot but temporary accommodation facilities and rehabilitation assistance were needed. Table A14.4 shows the number of fully affected shops and houses requiring relocation outside the original land lots. Table A14.4: Houses and Shops Requiring Relocation Outside Original Land Lot Sub project Houses Shops Total Puttalam - Anuradahapura (A012) No relocation No relocation 0 Udathenna - Mahiyangana (A026) Nuwara Eliya Badulla (A05) Habarana Kanthale (A006 No relocation No relocation 0 Nagoda Katukurunda (B 207) Lewwanduwa-Aluthgama (B157) Hikkaduwa-Baddegama (B153) Matara-Akurassa (A-24) Pamankada-Kesbewa road (B084) Total Percentage of total Source: Resettlement action plans in subprojects, from 2007 to The RAPs identified 285 fully affected houses and shops requiring relocation outside the original land lot, based on the inventory of losses surveys. It estimated that 60% of the total number of shops and houses requiring relocation would be in two subprojects of the Nuwara Eliya-Badulla road and the Pamankada-Kesbewa road. Relocation allowances of SLRs 150,000 were provided in the resettlement budget for five subprojects under the additional financing: the Pamankada-Kebewa, Hikkaduwa-Baddegama, Matara-Godagama, Nagoda-Katukurunda and Lewwanduwa-Aluthgama roads. In the original financing a relocation allowance was set at SLRs 15,000. D. Extent of Private Lands by Types of Land Use 21. Lands owned by the affected persons were categorized according to types of land use, as presented in Table A14.5. Table A14.5: Types of Land Uses in Private Land lots Types of use Extent (perches) Extent (Ha.) Percentage Residential land 12, Commercial land 7, Agricultural land 7, Non-agricultural land 5, Total 33, Source: Resettlement action plans from 2007 to Generally, the majority of private lands acquired (60%) were in two categories: (i) residential, and (ii) commercial lands used for residential and commercial activities. Out of the 19.4 ha of agricultural land acquired, 86% was in three subprojects (Anuradhapura-Puttalam, Nuwara Eliya-Badulla and Udayhenna-Mahiyangana roads). 23. The types of resettlement impacts varied, largely depending on the extent of land acquired, the full or partial damages to the primary structures, and the amounts of incomes derived from

68 Appendix the lost properties, as a percentage of the total income. For example, the acquisition of a small extent of residential, commercial or agricultural land had little direct impact on the incomes and livelihoods of the affected households. Also, there were other socio-economic conditions, which were not-related to the project, but created impacts (such as family events, land ownership and tenure etc) and contributed to the use of compensation for other activities that were not directly related to income restoration. The acquisition of agricultural lands cultivated with paddy, trees and upland crops generated some incomes but given the small extent of land acquired, had less impact. E. Vulnerable Affected Persons 24. Six categories of vulnerable persons were been identified in subprojects: (i) Female-headed households with low income (ii) Elderly (above 70 years of age) (iii) The poor (iv) Disabled persons (v) Ethnic minorities (vi) Households without security of land tenure 25. When planning income restoration programs, the RAPs also identified vulnerable families based on the magnitude of resettlement impacts from land acquisition. These included farmers losing agricultural lands, farmers with less than 0.4 ha of residual agricultural land, and farmers loosing reasonable income from home gardens. Such families were few in the subprojects. IV. KEY COMPONENTS OF SOCIAL IMPACTS MITIGATION PROGRAM 26. The project s resettlement program included three components for mitigating social and resettlement impacts, a land acquisition and compensation program, income restoration program, and grievances redress mechanisms. A. Land Acquisition and Compensation Program 27. The land acquisition and resettlement program was responsible for acquiring lands under LAA, determining the replacement values of acquired properties, and determining other entitlements as displacement support and assistance to vulnerable groups complying with the entitlement matrix. The estimated cost of land acquisition and resettlement was about $40 million and the actual cost was $61.58 million which is about 55% of the increase from planned cost. This increase is largely due to the enhanced payment for land and structures after negotiations with the affected people at LARC and Super LARC meetings (Appendix 4). Appendix 3 57 B. Income Restoration Programs (IRP) 28. The RAPs for subprojects included a chapter on the proposed income restoration measures for the affected households that would enable them to receive income restoration assistance. However, there was no budget item for this, except in the subproject of Udathenna- Mahiyangana, which had provision for SLRs 4.5 million. The categories of persons considered to be eligible were farmers loosing agricultural lands, farmers with less than 0.4 ha, those losing reasonable income from home gardens, people losing business income, and the poor and vulnerable groups. Under the additional financing project Income Restoration Programs (IRPs) were prepared for five subprojects but they were implemented in only three subprojects. Generally,

69 58 Appendix 14 the IRP was primarily focused on training and skills development to revive their livelihoods, rather than direct financial or material support. 29. The following key elements of the IRPs were spelt out: (i) Increasing awareness of the IRP by conducting a socio-economic survey using participatory techniques and an assessment of needs (ii) Formation of self-help groups and local societies to address common issues (iii) Home garden development training: planning, use of fertilizer, water and distribution of coconut, mango and one jack plants to trainees (iv) Developing managerial and entrepreneurial skills and leadership qualities (v) Vocational training (vi) Building linkages with credit institutions and technology transfer such as the Vidatha Centers for technology training, banks, vocational training institutions, nongovernmental organizations (NGOs) and community based organizations (CBOs) in planning and implementation of the IRP (vii) Providing employment to the affected persons, as drivers, masons and carpenters during the construction stage of the project. 30. The IRP was developed by the consultant appointed by the PMU of RDA, with a broader objective to identify the severely affected persons, address resettlement impacts of each subproject and to ensure at least the restoration of incomes and living standards of the affected persons and households, particularly for the poor and vulnerable groups. Under original financing, IRPs were implemented for three subprojects (Anuradhapura-Puttalam, Badulla-Nuwara Eliya and Udathenna-Mahiyanganaya roads) from 2010 to The same consultant was appointed to implement the program in three subprojects under additional financing from 2011 to 2013, covering the Hikkaduwa-Baddegama, Lewwanduwa-Mathugama and Pamankada-Kesbewa road subprojects. 31. ADB appointed a consultant in February 2010 to meet 31 complainants to discuss issues of non-payment of compensation for encroached state lands in the Habarana-Kantale subproject. The consultant recommended a microfinance program with SLRs 1.0 million as seed funds to help the affected owners of small shops. In addition, resettlement assistants attached to the PMU in each subproject provided some assistance to the affected persons to negotiate their entitlements and to resolve the construction-related impacts, which affected their incomes and livelihoods. Because of the generous compensation, the resettlement assistance package and other support that was available from the PMU as part of the resettlement process, the project authorities assumed that higher and middle income groups of affected persons could restore their incomes and livelihoods using their cash compensation payments and other project assistance. The IRP was considered as an additional support to help the poor, disabled, old and other vulnerable categories to improve their incomes and livelihoods. 32. The RDA signed an agreement with the consultant to develop and implement the IRP. It was the main responsibility of the consultants was to engage social mobilizers, business development officers and vocational skills trainers to implement the IRP. C. Eligibility Criteria for the Income Restoration Program 33. The IRP in each subproject identified some households in the category of poor, who would require assistance to restore incomes and livelihood, based on the findings of the social surveys conducted before start of the land acquisition process. The reported monthly income of a sample of households was considered to be the main criterion.

70 Appendix A number of factors were considered at the LARC meetings, such as levels and sources of income, and availability of alternative land, to identify persons eligible for the IRP additional cash compensation. The categories of households identified as eligible to receive assistance under the IRP in six subprojects (Udatenna - Mahiyangana (A026), Nagoda Katukurunda (B207), Lewwanduwa-Aluthgama (B157), Hikkaduwa-Baddegama (B153), Matara-Akurassa (A24) and Pamankada-Kesbewa road (B084)) were as follws: (i) Farmers losing agricultural lands (ii) Farmers with less than one acre of residual agricultural land (iii) Farmers loosing reasonable income from home gardens (iv) Affected businessmen losing incomes (v) The very poor (vi) Vulnerable families. 35. In road rehabilitation projects, the number of affected persons in the first three categories (farmers) is almost negligible, because of the small extent of land acquired and the land use pattern adjacent to the road. 36. In the Puttalam-Anuradhapura subproject the monthly incomes of affected households reported by the sample surveys were used in planning the IRP. Eligibility criteria for income restoration assistance varied according to income level, focusing on: (i) Higher income group (home garden development and building linkages with the service providers) (ii) Average income groups (home garden development, vocational training, livelihood training, management training and linkages to appropriate technology), (iii) Low income group (home garden development, vocational training, livelihood training, management training and linkages to appropriate technology), (iv) The poor group (home garden development and vocational training). 37. The criteria used in the IRP for the Nuwara Eliya Badulla (A05) road differed from other subprojects. They considered the severely affected households due for self-relocation outside their present land lot, the loss of business income from temporary economic displacement, and wage earners in shops and vulnerable families. In this subproject, the severely affected households were identified based on self-relocated people outside the village, loss of business income, and loss of jobs as wage earners in shops. Other vulnerable families included those with elderly and disabled members. D. Summary of Income Restoration Activities 38. A total of 35 shops in the Hakgala area were removed. The project constructed shops with basic facilities and paid SLRs 12 million for the loss of income during the period of displacement. Along the Habarana-Kantale road 65 business units were provided with displacement support allowances to recover the temporary loss of income from trade and business. Table 13.6 shows the total number affected persons participated in the program. 39. Table A14.6 shows the income restoration activities that were carried in six subprojects (Anuradhapura-Puttalam, Udathenna-Mahiyangana, Nuwara Eliya-Badulla, Hikkaduwa- Baddegama and Lewwanduwa-Mathugama) from 2010 to Appendix 3 59

71 60 Appendix 14 Table A14.6: Completed Activities in Income Restoration Programs SI Activities Total Persons 1. Business management Training Self-help group Family expenses management Home garden improvement Micro-finance Driving Sewing Beauty culture Information technology Food technology School bags Ladies garments Mosquito nets Ladies footwear Mushroom Mobile phone repair Orchid cultivation 9 Total 1,170 Source: Progress report. Project Management Unit, A number of training topics were selected, such as driving, business development etc. One of the objectives was to promote home garden development, and self-employments after training. The other major component of the program included developing skills training for youth such as driving, information technology, and business management 41. The consultant also contacted a number of government organizations and private enterprises, including the Samurdhi Authority, wholesale dealers and microfinance institutions, to gain the required support for promoting self-employments, such as credit, raw materials, markets and technical knowledge. Fifteen families along the Pamankada-Kebewa road received SLRs 25,000 each as low interest loans from the Samurdhi Bank and 30 families were linked with wholesale traders to purchase raw materials for shoe making and mosquito net production. In the Anuradhapura-Puttalam road sub project. Coconut, mango and jack plants were distributed free the 225 trainees, who participated in home garden development training (all categories were eligible). E. Grievance Redress Committees 42. In each RAP it was recommended to establish a GRC at the Divisional Secretary area level as locally constituted GRCs for dispute resolution involving land acquisition procedures, project operations, and construction related issues. GRCS were established with the Chairmanship of Assistant Divisional Secretary and other members were Deputy Project Director/Resettlement Assistant, members selected to represent community based organization, and others were invited based on the nature of complaints/disputes. The committee reviewed and resolved issues related to road construction impacts, which were the majority of the complaints. The contractors reviewed complaints for compensation payments related to some damages to structures during construction based on the conditions of the contract. V. SAMPLE SURVEY ON THE INCOMES AND LIVELIHOOD RESTORATION ACTIVITIES 43. The project intervention to restore and improve the incomes and livelihoods of affected persons included resettlement planning, compensation packages, income restoration measures and project assistance. This section presents the perceptions of a sample of respondents and

72 Appendix their assessments of whether the objectives of the income and livelihoods restoration program as per the RAPs were achieved. The planning and implementation of the income restoration program was one component to restoring incomes and livelihoods. 44. The section describes the social and economic impacts on the incomes and livelihoods of the persons affected due to rehabilitation of nine national highways (A005, A006, A012, A026 under original financing and A024, B153, B157, B207, B084 under additional financing). Two rehabilitated road sections on the A004 (one each under original and additional financing) were not considered for this study because they were located within urban commercialized areas, with minimal impact on local inhabitants. It is based on the findings of a sample survey conducted from August 2016 to February 2017, a review of project documents and field observations. It also identifies the issues and problems encountered during land acquisition, displacement, reestablishment of commercial activities, re-construction of structures and the process of restoring of incomes and livelihoods. 45. The method of study included a combination of quantitative and qualitative means of data collection, such as a sample survey representing all categories of affected persons, interviews and case studies. In addition, project documents were reviewed, including compensation payment schedules, resettlement action plans for each subproject, periodic monitoring reports prepared by the independent external monitor, review of income restoration planning and implementation documents, and other progress monitoring reports prepared by the PMU. A. Sampling Method 46. The available sampling frame was the list of affected persons/households contained in the RAPs for each subproject. A stratified random sampling method, with a weighted sampling system, was adopted to select the sample households. Six categories of affected persons were identified, based on types of property losses from land acquisition: (i) Owners/occupants of fully or partially affected shops and houses (the structure is used for both residential and commercial purpose) (ii) Owners/occupants of fully or partially affected commercial structures (iii) Owners/occupants of fully or partially affected houses (iv) Affected persons whose commercial lands were acquired (v) Affected persons whose residential lands were acquired (vi) Affected persons whose agricultural/non-agricultural lands were acquired 47. The categories of severely affected households (first three categories, with higher resettlement impacts) were oversampled. The estimated number of households was 6,231 in 23 Divisional Secretary (DS) areas in the nine subprojects. The sample of 506 households was selected from the lists of 4,740 affected households (11%) in 15 DS areas. The survey data was analyzed using the Statistical Package for Social Sciences (SPSS). The distribution of sample households is presented in Table A Appendix 3 61

73 62 Appendix 14 Table A14.7: Distribution of Sample Households in Subprojects Sub project Shop & house Com. Struct. House Com. Land Res. Land Agric Land Total No of h/holds Pepiliyana-Kesbewa ,338 (B084) Matara-Godgama (A24) Nagoda-Katukurunda (B207) Hikkaduwa-Baddegama (B153) Lewwanduwa Mathugama (B157) Habarana-Kantale (A006) Puttalam-Anuradhapura (A012)* Nuwara Eliya-Badulla (A005) Udathenna Mahiyangana (A026) Total sample ,740 Percentage Agric Land = Agricultural Land; Com Land = Commercial Land; Com Struct = Commercial Structure; H/hold = Household; Res Land = Residential Land. Note: National highway samples were selected in five Divisional Secretariat areas. 5 Source: Resettlement Action Plans and Sample Survey, August Table A14.7 indicates that out of the 506 sampled households, about 61% were considered to be severely affected persons, whose shops and houses were fully or partially affected and also their residential and commercial lands were acquired. B. Development of Survey Questionnaires 49. Two survey questionnaires were submitted to ADB and the Project Director (PD) for review and approval. They were then translated into Sinhala and pre-tested in a sample section of the Nagoda-Katukurunda road. 50. This first questionnaire was to collect information on the primary structures affected in three categories (shops and houses, shops, and houses). The information collected included: (i) Magnitude of impacts on the structure (partial/full) (ii) Crops and trees affected (iii) Extent of land acquired (iv) Progress of re-construction of the structure (v) Reasons for any delays in re-construction of the house/commercial structure (vi) Whether commercial activities were re-established (vii) Reasons for any delays or any decision not to re-start commercial activities (viii) Floor area of the new commercial structure (ix) Intention to increase the floor area of a commercial structure (x) Business or other income loses and the status of recovery (xi) Percentage of income increased or reduced from business activities (xii) Changes in occupations (xiii) Progress of re-construction of the house 5 In three subprojects, the survey was conducted in selected DS areas - two DS area were selected from six DS areas of the Puttalam-Anuradhapura road, one DS area from the three DS areas of the Udatheena Mahiyangana road and two DS areas from the Nuwara Eliya-Badulla road.

74 Appendix (xiv) Reasons for re-constructing a larger commercial building or a larger house (xv) Uses of compensation (xvi) Level of participation in income restoration programs and the number of new employments created (xvii) Complaints/grievances submitted to different agencies and their responses (xviii) Participation in income restoration and livelihood restoration measures (xix) Present socio-economic conditions (xx) Types of economic, social and environmental benefits after the opening of rehabilitated roads. 51. The second questionnaire was to collect information on the residential/commercial/agricultural/ non-agricultural lands acquired and their secondary structures affected (fences, walls, wells, temporary structures etc.). There were some direct impacts on income losses from land acquisition in some land lots due to losses of cultivated crops (vegetables, bananas etc) and products from trees (coconut, Jack etc). The progress of reconstruction of secondary structures (fences, wells, walls and other structures) using the compensation money was the main activity in replacing lost assets. C. Baseline Data and Pre-project Conditions of Affected Households 52. The project director arranged a meeting with the consultant, who revised and updated the RAPs for subprojects to find out whether the information collected in previous RAP social surveys of each subproject could be used as baseline information. Although some questionnaires were available at the PMU, it was difficult to tally these with the identification of affected persons/households in the preliminary plans (final land survey maps prepared by the Survey Department). There were no lists of affected households linked with land lot numbers in the preliminary plans. Moreover, no tabulated data sheets were available. Because the baseline information was not available at the time of issuing Section 2 notices or at the time of RAP preparation under original financing and additional financing, the perceptions of sample respondents regarding the pre-project situation and the present socio-economic conditions were compared and analyzed. The lack of baseline data appeared to be a problem for documenting the pre-project situation. It is also difficult for project management to maintain databases on the incomes of the affected households at pre-project and post-project points because of the large number of households (6,231). D. Selection of Investigators and Training 53. Social science graduates with experience in conducting social surveys, were selected for the field surveys. They were given training at the home office regarding the contents of survey questionnaires, profiles of affected households, good approaches to self-introduction and rapport building, and methods of conducting good interviews. They were also trained in the project procedures for land acquisition, compensation payments, income restoration measures and resettlement activities. The field survey activities were coordinated by the Consultant and a Survey Coordinator. The project director also issued letters to respective Divisional Secretaries to inform them about the field survey, requesting their support. Appendix 3 63

75 64 Appendix 14 VI. SAMPLE SURVEY FINDINGS A. Socio-economic Profiles of Sample Households 54. Out of the 506 sample households selected in subprojects, 66 involved structures used for both residential and commercial purpose, 158 were shops, 84 houses, 104 residential lands, 64 were commercial lands and 30 were agricultural lands. Most of the lands acquired were adjacent to the road and were used mainly for residential and commercial activities. 55. Family members were employed in the majority of commercial establishments, while other members were employed in public and private sector institutions. The majority of traders depended on the customers who were road users or living in the surrounding villages. Small-scale commercial activities were managed as family businesses. The larger business units employed staff on monthly salaries or daily wages. About 10% of the people in businesses were employees, for whom livelihoods were affected temporarily. B. Impacts of Land Acquisition 56. Two criteria used to assess the magnitude of impacts of land acquisition were: (i) (ii) The extent of land acquired Types of damage to the houses and shops. 57. Table A14.8 presents the extent of lands acquired in subprojects. Table A14.8: Extent of Land Acquired in Subprojects Subproject Extent in m Total Puttalam - Anuradahapura (A012) Udatenna - Mahiyangana (A026) Nuwara Eliya Badulla (A05) Habarana Kanthale (A Nagoda Katukurunda (B 207) Lewwanduwa-Aluthgama (B157) Hikkaduwa-Baddegama (B153) Matara-Akurassa (A-24) Pamankada-Kesbewa road (B084) Total % Note: Original categories in perches, converted to approximate m 2 equivalents (xx/0.0396) Source: Sample survey, August 2016 to February About 40% of total land lots acquired were less than 50 m 2. The impact of such acquisitions had minor impacts in rural areas, where the average land holding size is about 500 m 2. About 44% reported that the extent of acquired lands was between 50 and 125 m Table A14.9 shows the distribution of the six categories of primary structures identified in the sample survey.

76 Appendix Table A14.9: Distribution of Fully and Partially Affected Primary Structures Primary structures affected Total Percentage Fully affected shops and houses Partially affected shops and house Fully affected shops Partially affected shops Fully affected houses Partially affected houses Total Source: Sample survey, August 2016 to February Out of the 308 sampled primary structures affected, 74 were fully affected (24%) but many affected persons, who had to demolish the full structure, did not want to move too far away from the existing location, if their remaining land was suitable for re-construction of their house or shop. 61. Table A14.10 presents the number of affected secondary structures, crops and types of trees. Table A14.10: Secondary Structures Affected, Loss of Crops and Trees Types of impacts Total % Crops-vegetables cultivated Timber tress Fruit trees Coconut tress Jack trees Fence/gate/boundary wall Well Temporary structure (store room, garages) Other Total Source: Sample survey from August 2016 to February Out of 506 sample households, 344 households (68%) reported the removal or loss of secondary structures, trees and crops. About 41% reported the loss of fences, gates and boundary walls. The next category of losses (46%) was the income generating assets, including crops, timber trees, coconut palms and jack trees. The entitlement matrix in each RAP recommended cash payment for crops and trees. C. Status Of Payment Of Compensation And Use Of Compensation 63. The sample households were asked whether all the compensation agreed at the LARC and Super LARC meeting were paid (entitlement certificates were not available with many sample households). At the time of conducting the survey (August 2016 to February 2017), each respondent was asked the status of compensation in terms of (i) the full payment with interests accrued, (ii) full payment without accrued interests, (iii) cash payment for land deposited in courts, and (iv) other allowances/entitlements paid or not. This information was checked with the compensation payment schedules available at the PMU. Table A14.11 shows the status of compensation payments. Appendix 3 65

77 66 Appendix 14 Table A14.11: Status of Payment of Compensation Status of compensation payment Total Percentage Full payment without interests Deposited in courts Some allowances were not paid Total Source: Sample survey, August 2016 to February These allowances, which were not paid were related to the handing over of land after demolishing of structures and clearing lands. As these 17 APs were not complied with this requirement, RDA has engaged separate contractors to demolish structures and clearing lands. About 80% of sample respondents said that the compensation money was used for reconstructing the structures and 8% said that the money was partly used for children s education. About 55% of respondents, whose lands and secondary structures were affected, reported that the compensation money was used for family needs and others reported the use of money for reconstruction of secondary structures. D. Re-construction of Shops and Houses 65. Table A14.12 shows the progress of re-construction of affected shops and houses in sub projects as reported by sample households. Table A14.12: Status of Re-construction of Affected Shops and Houses Status of Re-construction Total Percentage Fully completed Not yet completed Decided not to re-construct Not removed after design changes Total Source: Sample survey, August 2016 to February The data indicate that 60% of affected structures have been re-constructed but that 33% were incomplete. The completion of re-construction of houses and shops were delayed because of other priorities in sample households and the construction of bigger structures. The selfrelocation process was monitored to ensure that the project does not result in homelessness and case studies in Box 1 and 2 in Appendix 14 show the successful self-relocation process. About 43% of incomplete structures are in Pamankada-Kesbewa road subproject. In this area, compensation payments were made in 2014 and 2015 and therefore re-construction of some structures was started in only 2015 and were yet to be completed. About 5% of respondents decided not to re-construct the building because they had spent their compensation cash on urgent family needs. Table A14.13 shows the reasons given for delays in re-construction. Table A14.13: Reasons for Delays in Re-construction of Structures Reasons Total Percentage Inadequate compensation High cost of re-construction Re-construction of bigger structure Prioritized for family needs Total Source: Sample survey, August 2016 to February Out of 308 sampled shops, 33% had not yet completed re-construction: owners gave various reasons for this. About 79% of sample respondents stated that the amount of compensation payment was not adequate to complete all the work. This category included shared

78 Appendix land owners, encroachers of state lands, and also those who decided to re-construct bigger structures. E. Re-establishment of Commercial Activities 68. Out of 224 sample respondents, about 83% had re-commenced their commercial activities. Those who had not been able to re-start gave the following reasons: (i) not enough physical space (23%), (ii) they had found a job or were engaged in business activities in another location (17%), (iii) re-construction activities were simply delayed (17%), (iv) compensation money was deposited in courts (8%), and (v) a variety of other reasons such as illness, purchasing land, selling the remaining land for higher prices, and re-payment of debts. 69. The sources of incomes of the household, the turnover of the business and the scale of commercial activities varied from small commercial activities to large-scale business establishments. Some sample respondents (66) carried out their commercial activities in the house and the compensation money had to be used to construct a dual purpose building, residential and commercial. When a rental income was more attractive, the family-managed business was abandoned and they constructed separate units for renting, particularly by older people. Also, when the main income source was from family members who were working outside the area, the parents decided to use the building to enable working family members to live with them. F. Size of New Structures Compared to Old Structures 70. Some affected persons used the opportunity to construct a bigger house or a commercial structure, using construction materials that were removed from their demolished buildings. They sometimes used additional funds from their savings or bank loans to supplement their cash compensation received for lands and structures. As a result the floor area was larger and the standard of their houses and shops were better than those replaced. Table A14.14 summarizes the changes in sizes of houses and shops after land acquisition. Table A14.14: Size of the New Building Compared to Old Structure Size of the structure Total Percentage Larger Same Smaller Total Source: Sample survey, August 2016 to February Although 47% of sample respondents considered the new house or shop is smaller compared to the floor area of the old structure but the new structure is in better quality and has access to basic amenities with a good living environment. About 36% sample households considered higher investments in a larger house or shop as significant improvements in their living standard. They also used modern features, such as tiled floors, pantries, attached bath rooms etc, particularly along road sections in urban areas. The main reasons for constructing a bigger building were: (i) expansion of commercial activities (71%), (ii) renting-out part of the structure (32%), (iii) starting a new commercial activity (13%), and (iv) more space for children to start new commercial activities in future (6%). In some cases, the bigger houses or shops were intended to accommodate at least one child within the household after marriage, to look after their parents in old age. Although some respondents rated the present house or shop as similar to the old structure, in terms of the same floor area, the new structure had extra space and facilities. However, 52% of respondents stated that they could not construct a larger structure and that the Appendix 3 67

79 68 Appendix 14 new building was smaller: reasons appear to reflect the lower incomes from small-scale commercial activities. G. Improvements of Commercial Activities after Re-establishment 72. The sample surveys in some subprojects were conducted about four to five years after land acquisition and compensation payments. Affected people had sufficient time to reconstruct their buildings, re-establish business activities and use their cash compensation for livelihood improvements. The exception was the Pepiliyana-Kesbewa road subproject, where some households were paid compensation only recently (2014 or 2015). These people could not answer the questions regarding the effectiveness of income restoration and re-establishment of business activities. 73. Table A14.15 presents the progress of business activities after re-establishment. Table A14.15: Progress of Commercial Activities after Re-establishment Progress Total Percentage Improved No difference Not improved Total Source: Sample survey, August 2016 to February About a third of affected respondents said that they had restored their incomes to preproject levels. Out of 73 sample respondents who reported not improved 37 were in Pepiliyana- Kesbewa road (B084) and the re-construction of structures commenced in 2015 and therefore, it was difficult to make good assessment of the situation at the time of conducting the sample survey in The increase in monthly incomes was about 10% to 25% of total incomes, which was considered to be significant. Out of 73, respondents, 37 along the Pepiliyana-Kesbewa road reported reduced incomes. In this subproject the majority of shops were constructed in only 2014 or Therefore, it was too early for the respondents to make reliable assessments of progress in their business activities. The reasons for not improving their income levels were given as: (i) limited vehicle parking facilities (44%), (ii) not enough space for commercial activities (36%), and (iii) reduced number of customers (23%). H. Changes in Occupation Pattern 75. The sample survey focused on three occupational groups of households: (i) family engaged business activities, (ii) larger business activities with engagement of salaried or wage earning staff, and (iii) occupants of rented premises. The sample respondents were asked to compare the situation before land acquisition and assess any subsequent change. In the first category of family business establishments, about 66% said that there were no changes in business. Others reported an increase in family members engaged. In the second category of larger business establishment with employees, out of 60 respondents 82% reported increases in the number of employees, indicating improved business. The third category, which refers to renters, the number of such units increased with the construction of bigger shops. I. Participation of IRP Activities 76. The IRP was implemented for about two years in each subproject. Initially, a lot of time was required to contact the affected persons, develop awareness programs to promote possible income-generating activities, obtain full commitment from the affected persons to participate in

80 Appendix skills and vocational training and to form self-help groups, particularly for starting selfemployment activities to improve incomes and livelihoods. 77. Table A14.16 shows the participation in IR activities. IRP Activities Table A14.16: Participation in IRPs Lost land/ secondary structures Lost land/ primary structures Total % Awareness meetings Member of a self-help group Participated in skills training Vocational training completed Found a job after training Started self-employments Participated in home garden development program Not aware of IRP or did not participate in IRP activities Total Source: Sample survey, August 2016 to February Table 13:16 demonstrates that out of the 506 respondents only 22% were aware of the IR activities and participated in the activities. The main reason for reporting unawareness of the IR program was that it was not targeted for all affected households and eligible groups were identified based on social surveys. The severely affected (significant income loses), poor and vulnerable groups were considered as eligible. Those who lost small extents of lands and no significant income losses were also excluded in the social survey. Nearly 60% had participated in only the awareness program and others received some skills training. Three sample respondents started self-employment and seven found jobs after vocational training. Compared to the women, men were not very interested in the IRPs, the main reason appeared to be their primary focus on investments using cash compensation to construct bigger structures and to expand commercial activities. Some shortcomings of the IRPs were the limited number of skills and vocational training programs that were attractive to men. J. Social and Economic Conditions and Living Environment after Land Acquisition 79. The sampled households were asked to indicate their views on their present income levels and living conditions compared to the pre-project situation. Table A14.17 shows their perceptions. Table A14.17: Income and Living Condition: Pre-Project v Post-Project Changes in incomes and livelihoods Number of sample respondents Percentage Improved incomes and better living conditions Appendix 3 69 No difference Reduced incomes and poor living conditions Total Source: Sample survey, August 2016 to February 2017

81 70 Appendix About a third were satisfied with their present income and living conditions compared with pre-project conditions and about 38% reported that there was no difference, indicating that they had restored their incomes and were satisfied with their access to basic facilities, such as electricity and water. They felt that their living environment was similar or better, compared to preproject conditions. About 30% reported their dissatisfaction with both reduced income levels and living environment and some problems related to land acquisition and road construction. This group had reported a wide range of grievances to the project authorities (eg: drainage and damages to their houses). Most of these grievances are related to the B084:Colombo-Horana road and B157: Horana-Anguruwathota-Aluthgama road. The remaining sections of these two roads are now being rehabilitated under SRCP and the same PMU which implemented the project is implementing SRCP. As such SRCP PMU will continue to address remaining issues. 81. Some respondents gave reasons for reduced business incomes as: (i) competition of business activities with the starting of new establishments, (ii) lack of parking space, (iii) fewer customers, and (iv) the reduced floor areas of new structures. Of 506 sample respondents, 75% said that they made some complaints, especially in Udathenna-Mahiyangana subproject, to the PMU, DS office or Grama Niladhari regarding non-payments of compensation or allowances (eg: handing-over allowances) and problems related to contractors during construction 6. K. Benefits from Road Rehabilitation 82. The social and economic benefits of road rehabilitation were reported by those sample respondents who lived or conducted business activities on either side of the road (Table A14.18). Some respondents gave two or three answers, so the percentages were calculated from the total number of answers. Table A14.18: Social and Economic Benefits of Road Rehabilitation Social and economic benefits Total Percentage Reduced travel time Land values increased New business activities Less road accidents Total Source: Sample survey, August 2016 to February Some 41% of the affected persons believed that rehabilitation had increased land values in the area. They also reported the benefits of reduced travel time (38%). In some road sections the improved road conditions and transport facilities had attracted new business activities: this was noted mainly in urban road sections. The land acquisition process and compensation payments procedures had resulted in creating both positive and negative impacts for the affected population. Some positive impacts included re-establishment of business activities with more floor area, starting new business activities using compensation money by those who lost only commercial, residential and agricultural land, and expansion of new businesses with more diversified of activities. 84. Some case studies (at the end of this Appendix) illustrate how some severely affected households restored their incomes and livelihoods to the pre-land acquisition levels after project interventions. These case studies cover different themes such as replacement of housing and commercial structure in the same land lot, self-relocation outside the location, project support for vulnerable groups, and other monetary and non-monetary assistance in the process of re- 6 Grama Niladhari is a village level administrator appointed by the government

82 Appendix construction of structures and income restoration. These efforts are in addition to the IRP activities carried out in some subprojects. VII. MONITORING AND REPORTING 85. Internal monitoring activities were conducted by PMU with the support from ESD. A two tiered monitoring system was developed at the project and Ministry level to resolve project operation issues at project coordinating meetings. The internal reporting system of issues was carried out in the field by resettlement staff and the Deputy Director, resettlement played an important role in reporting the problems to the next level. The Project Director in Head office in Colombo coordinated with the relevant office in RDA and other organizations. The management information system was developed with formats for data collection on the progress of land acquisition, compensation payments. Resettlement Assistants provided the information to PMU to develop the MIS. The progress reports were prepared and presented at project coordination committee meetings. 86. PMU appointed the Center of Environmental Studies of the University of Peradeniya as the external monitoring agency from March 2009 for the original financing. It prepared a monitoring framework and reporting system of the computerized information. The PMU decided to appoint an independent external monitor for the additional financing from 2013 for two years. The monitor prepared quarterly and annual reports based on the information collected using a stratified sample of 500 households. The annual monitoring reports in 2014 and 2015 covered the areas of status of compensation payments, progress of self relocation, re-establishment of business activities, re-construction of houses, income restoration activities, and levels of satisfaction of affected people about the resettlement plan implementation process. The monitoring reports were submitted to PMU and ADB for review and the reported complaints and Grievances were discussed with the Project Director and SLRM, ADB for early actions. The case studies in boxes provide some examples of such problems. VIII. CONCLUSIONS AND RECOMMENDATIONS 87. The sample survey found that 83% of commercial activities had re-established their livelihoods and others were on the path to recovery. This shows a substantial recovery in the reestablishment of commercial activities. There was a minority of the owners of commercial establishment who could not re-start activities and reported reduced incomes. About 60% of all affected structures were re-constructed and others were in the process of completing reconstruction or repairing houses and commercial structures. Almost all the affected sample respondents reported that their compensation payments were fully paid, except the accrued interest in some cases. 88. The restoration of incomes and livelihoods of sample households had mixed results. About one-third of the sample respondents believed that their incomes had been reduced during re-establishing commercial structures. A number of factors unrelated to the project contributed to these income reductions, such as family events and land ownership and tenure issues. Encroachers on state lands received lower compensation and this had an impact on the reestablishment of their commercial activities and re-construction works. 89. The income restoration programs (IRPs) were implemented in seven subprojects and only a few people started self-employments or found jobs after vocational and skills training. 90. The extent of acquired lands varied from less than 50 m 2 to 250 m 2. Many households had other sources of income from working in the formal salaried sector or as wage labor. There was Appendix 3 71

83 72 Appendix 14 a group that reported no change in household income compared to the pre-land acquisition period. Land acquisition had no significant impact and they have now restored their incomes. 91. The sample survey findings indicate that the majority of affected households reconstructed their houses, shops and secondary structures. However, some affected people are still involved in court cases concerning land disputes: Divisional Secretaries should inform them about the current status of their court case and provide information and guidance on hiring lawyers and appearing in courts. IX. CASE STUDIES 92. The following Case Studies illustrate some of the specific findings of the sample survey. Box 1. Case Study: Replacement of Housing and Commercial Structure in the same Land lot Self-relocation Both the house and small-scale commercial establishment were affected with the land acquisition of 10.5 perches (about 250 m 2 ). The displaced family found alternate accommodation in a close relative s home for SLRs 5,000 and decided to build a new structure on their remaining land area of 7.5 perches (about 210 m 2 ). They also rented a building for commercial activities in close proximity to avoid income losses. The total compensation amounted to about SLRs 2.0 million and was used to construct a two-storey building, which has now more space for the house and commercial activities. The floor area has increased compared with the old structure. He also expects the children to add a third floor based on their requirements. He believes that he was able to use his cash compensation for re-construction of a bigger house and commercial building, and to re-establish his business without significant income losses. Box 2. Case Study: Replacement of Housing outside original Location Self-relocation The house and commercial structure were fully affected and also 22 perches (about 550 m 2 ) of land were acquired. The affected person was paid SLRs 8.0 million. The allowances included a shifting allowance (SLRs 15,000), house rent (SLRs 50,000), water supply (SLRs 20,000), electricity connection (SLRs 20,000), telephone connection (SLRs 10,000), resettlement allowance (SLRs 15,000), documentation (SLRs 2,500) and self-relocation support (SLRs 300,000). The affected person purchased a house on 10 perches (250 m 2 ) of land which was closer to her son s house. She deposited some money in the bank to gain interest income. Although she lost income from commercial activities, she later decided not to re-start these activities in the new location because of old age and instead to help with her son s business. The adequate compensation and timely cash payment for purchasing a new house in a good residential area was appreciated Box 3. Case Study: Supporting Vulnerable Households The house was partly affected but the owner decided to demolish the old house after receiving compensation. She was 73 years old and her husband was disabled. They requested additional compensation for the reconstruction of the house. The extent of land acquired was 1.7 perches (about 45 m 2 ). The house was partly affected and required demolition of only a part of the building. At the LARC meeting the owner agreed to remove part of the house and compensation was paid for lost assets; (i) land (SLRs 609,000), (ii) part of the house (SLRs 500,000), and (iii) other structures (SLRs 45,000). Displacement support included house rent (SLRs 50,000), shifting allowance (SLRs 15,000), vulnerable

84 Appendix persons allowance (SLRs 15,000) and SLRs 20,000 each for water and electricity supply reconnection, and SLRs 2500 for documents. The handing over allowance was SLRs 52,125. The construction of a new house (about 1,100 sq feet, 10.2 m 2 ) required about SLRs 3.0 million, according to cost estimates. The request was that the SLRs 1.3 million offered was inadequate and she requested compensation for the cost of rebuilding the whole house (in fact the house had been fully demolished by the owner without informing the DS office or the PMU for valuation of the property). A Super LARC was held and requested the project office to re-consider the case for further support. The PMU paid an additional SLRs 550,000 for the re-construction. The affected person constructed a bigger house (two storey) and the ground floor was rented out for commercial activities Box 4. Case Study: Non-monetary Assistance on Replacement of Housing The affected person was about 75 years of age. The house was fully affected as a result of 1,800 m 2 of land acquired. The remaining land is a paddy field and no upland was available for house construction The affected person requested the approval for filling the paddy land for house construction. The PMU requested the contractor, who agreed to fill the 250 m 2 area and the house was re-constructed. Box 5. Case Study: Supporting the Female-headed Household The affected person was an elderly woman and the compensation money was deposited in court because of a land ownership dispute. She could not complete house construction and requested support for income restoration to complete the building. The IRP provided training on tailoring and also gave her a sewing machine. Box 6. Case Study: Supporting the wage earner The affected person worked in a printing shop, which was fully affected. She lost her job and lived in a rented home. As the family income was reduced after land acquisition the IRP provided training on horticulture and the affected person started a small nursery, which has become a good source of additional income for the family. Box 6. Case Study: Supporting the wage earner The affected person worked in a printing shop, which was fully affected. She lost her job and lived in a rented home. As the family income was reduced after land acquisition the IRP provided training on horticulture and the affected person started a small nursery, which has become a good source of additional income for the family. Appendix 3 73

85 74 Appendix 15 Schedule Para No. STATUS OF COMPLIANCE WITH LOAN COVENANTS Table A15.1: Original Financing Description 5 2 Fielding of Consultants Complied 6 4 Established, Staffed, and Operating Project Management Unit (PMU) or Project Implementation Unit (PIU) Complied Project Implementation: The various components of the Project shall be implemented by Road Development Authority (RDA) through its existing project management unit for Road Sector Development Project (Loan No SRI). The Borrower shall cause RDA to ensure that the PMU is adequately staffed with experienced personnel at both managerial and professional levels including staff with accounting and financial management expertise and resettlement experience during the entire duration of Project implementation. RDA shall delegate sufficient administrative autonomy to the PMU for effective and timely decision making on subprojects and project implementation matters. (LA, Sched. 6, paras. 4, 5 & 6) 3 7 Except as ADB may otherwise agree, the Borrower shall establish immediately after the Effective Date, a separate imprest account at the Central Bank of Sri Lanka for RDA. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook dated January 2001, as amended from time to time, and detailed arrangements agreed upon between the Borrower and ADB. The imprest account shall be used for all payments arising from the Project. The initial amount to be deposited into this imprest account shall not exceed $6,500,000 or the estimated relevant eligible expenditures for the next 6 months, whichever is lower. (Schedule 3, para 7[a]) 6 8 RDA will not establish any new project management unit or any other unit having the same functions as a project management unit for any new project. (LA, Sched. 6, para 8) 6 9 By no later than June 2007, RDA shall have developed and adopted the RDA Human resources Strategy and will have fully implemented the RDA Human Resource Strategy by no later than Dec (LA, Sched. 6, para. 9) 6 10 The RDA will not recruit any new casual labor throughout the Project implementation period and shall ensure that all current casual labor retire at age 57 years. (LA, Sched. 6, para. 10) 6 11 The Borrower shall ensure that a road sector master plan shall be developed and adopted by 30 June 2006, in a form and Status of Compliance/ Remarks Complied Not Complied. During the midterm review from 10 to 20 May 2010, the government requested to waive this covenant due to practical difficulties. Partially Complied; Final Report submitted by the consultant in Dec 2012 Partially Complied; RDA restricted casual labor recruitment though not stopped completely. Complied

86 Appendix Schedule Para No. Description substance satisfactory to ADB and the Borrower and RDA shall ensure that: (a) as part of the road sector master plan, the RDA shall prepare an investment plan ( ) which will set out its investment program for the road sector and will make such plan, together with the summary of the road sector master plan, available to the public, through the RDA's and ADB's websites, for at least 90 days after completion, for public comments, and such investment plan will be adopted by 30 June 2006, and (b) At least 65% of the national highway network will be brought into maintainable condition by (LA, Sched 6, para. 11) 6 13 (a) RDA will develop and implement performance-based maintenance contracts (PBMCs) in four to six divisions as agreed with ADB. PBMCs will be for a four year period which may be extended and replicated in other divisions. Status of Compliance/ Remarks The Road Sector Master Plan was approved on 1 October 2007 and the investment plan was prepared and adopted on 1 January The RDA brought 65% of national highway network to maintainable condition by (a) Partially Complied; PBMC is implemented as a one year pilot project for 108 km covering 3 Executive Engineer s Division. This major change was approved by VP on 9 November (b) PBMCs will be for a fixed fee and RDA will establish and implement well defined monitoring procedures, combined with penalties for non-compliance of the agreed program of maintenance. PBMCs will be awarded to domestic private contractors and if possible, to road maintenance group formed from casual labor available in the relevant division. (c) The bidding process of PBMCs will ensure maximum competition and clarity. The award of PBMCs will be in accordance with ADB's Guidelines on Procurement or such other procedures acceptable to ADB. (d) For piloting purposes, RDA shall use its best endeavors to ensure that 50% of PBMCs will be procured in a competitive manner, to private domestic contractor firms and the remaining 50% will be directly negotiated with small contractor (who will form into road maintenance groups) transformed by the Project from the current labor work force. (LA,Sched 6 para 13 [a,b,c & d] (b) Complied; PBMC awarded for a local contractor and a group formed with casual labors of RDA (c) Complied (d) Partially Complied; 75% of road length on competitive basis and 25% on negotiation with a group formed with RDA labor Appendix Road Maintenance and Road maintenance Trust Fund (RMTF) The RDA shall ensure that the Project Roads will be maintained to a proper standard to the satisfaction of ADB and that the benefits of the rehabilitated Project roads will be realized over the whole of the expected lifetime of such rehabilitated roads. (LA, Sched. 6, para. 14) Complied

87 76 Appendix 15 Schedule Para No. Description 6 15 The Borrower shall, starting in fiscal year 2006, to allocate at a rate of SLRe 1.0 per liter of petrol and SLRs 0.5 liter of diesel from all sales of petrol and diesel (except for diesel used for power generation), all receipts of which, will be directly deposited to the RMTF. All budgetary allocations for road maintenance currently given directly to implementing agencies will also be channeled through the RMTF. (LA, Sched. 6, para. 15) 6 16 The Borrower shall gradually increase the resources for the RMTF by increasing budget allocation and/or increasing fuel levy or imposing vehicle registration fee to ensure that 100% requirement for maintaining national highway network will be met by The increase shall continue thereafter, to ensure that the RMTF is able to cover the increase of required financing for maintenance of National Highways. (LA, Sched. 6, para. 16) 6 17 The operation of the RMTF will be reviewed after 3 years from the commencement, to ensure the effectiveness of the RMTF in providing sustainable road maintenance financing, to seek ways of improving the operations of the RMTF, and to consider when it would be appropriate to bring forward legislation to establish a dedicated fund managed by an independent road maintenance fund board. (LA, Sched. 6, para 17) 6 18 The Borrower shall ensure that no changes will be made to the RMTF or its operations without the prior concurrence of ADB. (LA, Sched. 6, para 18) 6 19 Commence works for each project road only after attaining necessary environmental clearances for the respective contract from relevant agencies; (LA, Sched. 6, para 19[vii]) 6 19 Ensure compliance of the Central Environmental Agency (CEA) environmental assessment requirements for each subproject; (LA, Sched. 6, para 19 [vi]) 6 19 Inform ADB of any change in alignment after the Initial Environmental Examination (IEE)/ Environmental Impact Assessment (EIA) reports for a particular subproject have been completed so that ADB can determine whether additional environmental assessment study is required. (LA, Sched. 6, para 19[ix]) Status of Compliance/ Remarks Complied Maintenance funds for national roads channeled through the RMTF Complied Budgetary allocation for the RMTF was continuously increased by the government Complied. The RMTF was transferred from Ministry of Finance to the Ministry of Port & Highways in April RMTF secretariat commenced operations in March 2012 Complied Complied Complied Complied 6 19 Submit for ADB's review the EIAs of the non-sample project Complied roads and make available the summary environment impact assessment to the general public at least 120 days before approval of the respective subproject; (LA, Sched. 6, para 19[iv]) 6 19 Implement mitigation measures identified in all IEEs, EIAs and Complied Environmental Management Plans (EMPs) as appropriate, in timely and efficient manner and in particular, ensure that all mitigation measures identified in the relevant IEEs, EIAs and EMPs shall be incorporated in to the detailed designs for the respective subprojects and are comprehensively followed during construction, operation and maintenance; (LA, Sched. 6, para 19 [v]) 6 19 RDA will implement the project in accordance with ADB's Complied

88 Appendix Schedule Para No. Description Environmental Policy (2002) as amended from time to time and the Borrower's environmental Policy laws. (LA, Sched. 6, para 19) 6 19 Obtain ADB's prior approval of the IEEs of the non-sample project roads before awarding and respective civil works contracts; (LA, Sched. 6, para 19 [iii]) 6 19 Submit semiannual reports to ADB on the implementation of the respective EMPs; (LA, Sched. 6, para 19[viii]) 6 19 Prepare IEE, EIA and EMP for each non-sample Project Road in accordance with the environmental assessment review framework as agreed with ADB; (LA, Sched. 6, para 19 (ii)) 6 20 Land Acquisition, Resettlement and Indigenous Peoples The Borrower shall ensure that RDA shall implement the Project in accordance with the Borrower's National Involuntary Resettlement Policy and with ADB's Involuntary Resettlement Policy (1995) and ADB's Indigenous People's Policy (1998) as amended from time to time. (LA, Sched. 6, para 20) 6 21 The Borrower and RDA shall: (i) Consult with all affected people during the preparation of the resettlement plans (RPs), and disclose the RPs to the affected people before implementation of land acquisition and resettlement, and confirm that the RPs are posted in the ADB's website in a timely manner; (ii) Prepare and implement resettlement plans and undertake special actions (if any) and include any specific action for indigenous peoples (if required), in respect of all subprojects in accordance with the Resettlement Framework Policy (RFP) and ensure that all RPs are updated on the basis of detailed design and final alignment of the relevant Project Road. All RPs will be submitted to ADB for approval prior to an award of any relevant civil works contract; (iii) Undertake necessary due diligence during preparation of RPs in order to determine whether there are any outstanding land acquisition or resettlement related grievances or any land acquisition or site clearance has or is taking place in anticipation of any subproject. If there are any such outstanding land acquisition issues a "retrofitted" RP shall also be prepared and submitted to ADB for approval; (iv) Submit all RPs in a timely manner to the Ministry of Land and the CEA to obtain all necessary clearances for each subproject; (v) Prepare an Initial Poverty and Social Analysis (IPSA) for each subproject and shall be submitted to ADB upon finalization in order to be placed on the ADB website land (vi) Ensure that all draft RPs, revised RPs and final RPs are made available to affected people immediately upon completion. All relevant information contained in such RPs will be made available as brochures, leaflets in local languages. All such RPs will be made publicly available on ADB website following submission to ADB. Status of Compliance/ Remarks Complied Complied Complied Complied Complied Appendix 3 77

89 78 Appendix 15 Schedule Para No. Description (LA, Sched 6, para. 21) 6 22 The Borrower shall ensure that and shall cause RDA to ensure that all title to land shall be acquired in a timely manner. (LA, Sched. 6, para. 22) 6 24 The Borrower shall ensure that it shall not use any emergency provision or process under any legislation or ordinance that allows land to be acquired or possessed without prior payment at full replacement value to an affected people. (LA, Sched. 6, para. 24) 6 25 To ensure timely monitoring of resettlement plan implementation, RDA will appoint an independent monitoring expert within 3 months of the Effective date. The expert shall be responsible for providing to ADB through RDA once every three months monitoring reports and social audits and mid-term and end-term evaluation reports on the implementation of RPs under the Project. (LA, Sched. 6, para. 25) 6 28 Health and Labor laws The Borrower will ensure that RDA will ensure that all civil works contracts will require contractors to (i) provide appropriate and timely information and awareness to construction workers on the risks of sexually transmitted diseases and HIV/AIDS and antitrafficking of women and children; (ii) comply with all applicable labor laws and regulations of Sri Lanka and in particular (a) to not employ child labor for construction and maintenance activities (b) provide appropriate facilities for children at construction sites (c) to provide safe and health working conditions (iii) the contractors will provide equal opportunity to all women and men in construction activities; (iv) women will be encouraged to participate in the planning and implementation of the project (LA, Sched, 6, para. 28) 6 29 Award and Execution of Civil Works Contracts: The Borrower will not and shall ensure that RDA will not award any civil works contract unless the following requirements are met for each subproject; (i) RDA has obtained ADB approval on relevant RPs, IEEs and EIAs in accordance with para 19(iii), 19(iv), 21 (i), and 21 (ii) of Schedule 6 (ii) RDA has acquired or made available the land and rights in land, free from any encumbrances, cleared any obstruction from the related Section required to be handed over to the contractor for commencement of construction in accordance with the work schedule as shall be agreed under the relevant civil works contract. (LA, Sched. 6, para. 29) 6 30 The Borrower will not and shall ensure that RDA shall not issue any notice to proceed under any civil works contract with respect to any subproject unless and until RDA has obtained necessary environmental clearance for the respective contract from the relevant agencies. (LA, Sched. 6, para. 30) 6 31 Project Benefit and Monitoring: Within 3 months of the effective date, RDA shall establish a Status of Compliance/ Remarks Complied Complied Complied Complied (i) Complied (ii) Complied despite delay in land acquisitions Complied Complied

90 Appendix Schedule Para No. Description project performance management system and with the assistance of the project construction supervision consultants, monitor and evaluate the Project's benefits progress and performance in such form and detail as briefly described in para 82 of the RRP or otherwise as required by ADB. (LA, Sched 6, para. 31) 6 32 Without limiting the generality of Section 2.08 of the Project Agreement and without prejudice to any other provision of this Loan Agreement, RDA shall prepare and submit to ADB monthly progress report in a brief form as agreed with ADB. RDA will also prepare more detailed quarterly reports which will be submitted to ADB and which will contain basic data, utilization of funds, achievement of immediate development objectives, compliance covenants, implementation progress, land acquisition and resettlement progress and any major issues and problems. The monthly reports shall be received by ADB within 15 days of the end of the month and the quarterly reports shall be received by ADB within 21 days of the end of the appropriate quarter year. (LA,Sched 6,para.32 [a]) 6 32 Within three months of physical completion of the project, the Borrower will furnish ADB, a project completion report providing a detailed evaluation of the Project design, costs, contractors' and consultants' performance, social and economic impact, economic rate of return and other detailed as may be requested by ADB. In addition report will include: (i) a concise history of land acquisition and resettlement issues relating to the Project from the Effective Date to Completion. (ii) an evaluation of implementation of the resettlement framework and land acquisition and resettlement related loan covenants; a (iii) a summary of the external monitoring and evaluation reports. (LA,Sched,6 para.32 [b]) 6 33 In addition to regular reviews, there shall be a midterm review of the Project by ADB, the Borrower and RDA around June 2008, that shall (i) review the scope, design and implementation arrangements of the Project, (ii) identify any changes needed from the time of Project appraisal, (iii) assess implementation performance against Project performance indicators, (iv) review resettlement operations, (v) review and establish compliance with legal covenants, (vi) identify problems and constraints, and (vii) if necessary, agree to any changes needed to achieve Project objectives, (LA,Sched 6,para 33) RDA Reorganization RDA will implement the RDA Reorganization Plan in an expeditious manner consistent with the milestone agreed with ADB. (LA, Sched. 6, para. 7) The Reorganization Plan shall include: (i) implementation of a new organizational structure based on four distinct functions; (ii) streamlining of project implementation units; (iii) utilization of existing chief engineers offices as project implementation units in the respective Project sites; (iv) establishment of a procurement division; and (v) development of harmonized standard bidding documents Status of Compliance/ Remarks Complied Complied despite delay in submission of the report. Complied Mid-term Review Mission was conducted in May The mission was delayed due to delay in loan effectiveness. Complied RDA Reorganization Plan was approved in October It included all five elements for implementation. Appendix 3 79

91 80 Appendix 15 Schedule Para No. Description and harmonized consultant selection, prequalification and procurement procedures RDA shall maintain separate accounts for the Project and subprojects and for its overall operations and have such accounts and related financial statements audited annually and furnish to ADB not later than 6 months after the close of the fiscal year to which they related. RDA shall (unless otherwise insured by the Borrower) take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for; insurance of Project facilities and other equipment and assets financed out of the proceeds of the Loan to such extent and against such risks and in such amounts as shall be consistent with sound practice. (Project Agreement Section 2.05) Private Sector Development 1. The Borrower shall ensure that it will not allow the state owned Mega Neguma Company or any of its subsidiaries, to distort the market for road construction industry. In particular, the Borrower will ensure that neither Mega Neguma Company nor any of its subsidiaries will, in any calendar year, carry out no more than 25% of Borrower funded construction activities. (LA, Sched. 6, para. 12) Status of Compliance/ Remarks Complied Complied Complied 2(a) RDA will develop and implement performance-based maintenance contracts in 4 to 6 divisions as agreed with ADB. PBMC will be for a fixed 4-year period which may be extended and replicated in other divisions. 2(a) Partially Complied; PBMC is implemented as a one year pilot project for 108 km covering three Executive Engineer s Division 2(b) PBMC will be for a fixed fee and RDA with establish and implement well defined monitoring procedures. PBMC will be awarded to domestic private contractors and, if possible, to road maintenance groups formed from casual labor. 2.b Complied; PBMC awarded to a local contractor and a group formed with casual labors of RDA 3. For piloting purposes, RDA shall use its best endeavors to ensure that 50% of PBMCs will be procured in a competitive manner, to private domestic contractor firms and remaining 50% will be directly negotiated with small contractors (who will form into road maintenance groups) transformed by the Project from the current casual labor work force. 3. Partially Complied; 75% of road length on competitive basis and 25% on negotiation with a group formed with RDA labor Abbreviations: CEA = Central Environmental Authority; EIA = Environmental Impact Assessment; EMP = Environmental Management Plan; IEE = Initial Environment Examination; IPSA = Initial Poverty and Social Analysis; LA = Loan Agreement; PBMC = Performance Based Maintenance Contracts; PIU = Project Implementation Unit; PMU = Project Management Unit; RDA = Road Development Authority; RFP = Resettlement Framework Policy; RMTF = Road Maintenance Trust Fund; RP = Resettlement Plan Source: ADB. Loan Agreements & Project Agreement of National Highways Sector Project (L2217).

92 Appendix Table A15.2: Additional Financing Schedule Para No. Description 2 Without limiting the generality of the foregoing, Road Development Authority (RDA) shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter. (P.A.Sec 2.08 B) 2 RDA shall maintain, or cause to be maintained, records and accounts adequate to identify the items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, their operations and financial condition. (P.A Sec. 2.06) 2 RDA shall enable ADB, upon ADB's request, to discuss its financial statements for the Project and its financial affairs related to the Project from time to time with the auditors, appointed by RDA pursuant to Section 2.09(a) here above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of RDA unless RDA shall otherwise agree. (P.A Sec (b) 5 2 The Borrower shall ensure and cause RDA to ensure that the preparation, design, construction, implementation and operation of the Project and all Project facilities comply with: (a) all applicable laws and regulations of the Borrower related to environment, health and safety; (b) the Environment Safeguards; and (c) all measures and requirements set forth in the Initial Environmental Examination (IEE), the Environment Management Plan (EMP) and any corrective or preventative actions set forth in a Safeguards Monitoring Report. (L. A. Schedule 5, Para 2) 2 RDA shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB, for insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. RDA shall be deemed to have opted for self-insurance in the absence of any specific insurance for the project. (P.A.Sec.2.05 (a)) 2 Except as ADB may otherwise agree, RDA shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works and Consulting Services financed out of such proceeds are used exclusively in the carrying out of the Project. (P.A. Sec 2.13) 2 RDA shall at all times operate and maintain its sites, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, Status of Compliance/ Remarks Complied Monthly and quarterly reports were submitted to ADB Complied Complied Complied Complied Complied Complied Appendix 3 81

93 82 Appendix 15 Schedule Para No. Description highway development, and maintenance and operational practices. (P.A.Sec 2.11 c) 2 RDA shall at all times conduct its business in accordance with sound administrative, financial, environmental and highway development and maintenance practices, and under the supervision of competent and experienced management and personnel (P.A.Sec 2.11 b) 2 RDA shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business (P.A.Sec 2.11 a) 2 RDA shall enable ADB's representatives to inspect the project, the goods, works and consulting services financed out of the proceeds of the Loan, all other plants, sites, properties and equipment of RDA, and any relevant records and documents. (P.A.Sec 2.10) 2 Promptly after physical completion of the project, but in any event not later than 3 months thereafter or such later date as ADB may agree for this purpose, RDA shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by RDA of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan. (P.A.Sec 2.08 C) 2 RDA shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods and Works and Consulting Services financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of RDA; and (v) any other matters relating to the purposes of the Loan (P.A.Sec 2.08 A) 2 ADB and RDA shall cooperate fully to ensure that the purposes of the Loan will be accomplished. (P.A.Sec 2.07 (a) 2 RDA shall (i) maintain separate accounts and records by. funding source for the Project and for its overall operations; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreements as well as separate opinions on the use of the procedures for imprest account and statement of expenditures), all in the English language. RDA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. (P.A Sec (a) 2 Except as ADB may otherwise agree, RDA shall not sell, lease or otherwise dispose of any of its assets which shall be required for Status of Compliance/ Remarks Complied Complied Complied Complied despite delays incurred in submitting the borrower s project completion report. Complied Complied Complied Complied

94 Appendix Schedule Para No. Description the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement (P.A.Sec.2.12) 2 RDA shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental and highway development and maintenance practices. (P.A.Sec 2.01 (a) 2 RDA shall make available, promptly as needed, the funds, facilities, services, equipment, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project. (P.A.Sec 2.04) 2 Without limiting the generality of the foregoing, RDA undertakes to insure, or cause to be insured, the Goods to be imported for the Project and to. Be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods. (P.A.Sec 2.05 b) 2 In the carrying out of the Project, RDA shall employ competent and qualified consultants, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB (P.A.Sec 2.03 (a)) 2 Except as ADB may otherwise agree, all goods, works and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB. may refuse to finance a contract where Goods, Works or Consulting Services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.(P.A.Sec 2.03 (b) 2 RDA shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, the Loan Agreement or the Subsidiary Loan Agreements, or the accomplishment of the purposes of the Loan.(P.A.Sec 2.07 (b) 2 ADB and RDA shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, RDA and the Loan. (P.A.Sec 2.07 C) 2 RDA shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its enabling laws which might affect the project and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon. (P.A.Sec 2.14) 2 In the carrying out of the Project and operation of the project facilities, RDA shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to RDA. (P.A.Sec 2.01 (b)) 2 RDA shall make available, promptly as needed, the funds, facilities, services, equipment, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the project. (P.A.Sec 2.02) 5 3 The Borrower shall ensure or cause RDA to ensure that all land and all rights-of-way required for the Project are made available to Status of Compliance/ Remarks Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied despite delays incurred in Appendix 3 83

95 84 Appendix 15 Schedule Para No. Description the Works contractor in accordance with the schedule agreed under the related Works contract and all land acquisition and resettlement activities are implemented in compliance with: (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement; (b) the Involuntary Resettlement Safeguards (c) all measures and requirements set forth in the RP, and any corrective or preventative actions set forth in the Safeguards Monitoring Report. (L. A. Schedule 5, Para 3) 5 4 Without limiting the application of the Involuntary Resettlement Safeguards or the Resettlement Plan (RP), the Borrower shall ensure or cause RDA to ensure that no physical or economic displacement takes place in connection with the Project until: (a) compensation and other entitlements have been provided to affected people in accordance with the RP; and (b) a comprehensive income and livelihood restoration program has been established in accordance with the RP. (L. A. Schedule 5, Para 4) 5 5 The Borrower shall ensure that the Project does not have any indigenous people impacts within the meaning of the Safeguard Policy Statement (SPS). In the event that the Project does have any such impact, the Borrower shall take or cause RDA to take all steps required to ensure that the Project complies with the applicable laws and regulations of the Borrower and with the SPS. (L. A. Schedule 5, Para 5) 5 6 The Borrower shall make available or cause RDA to make available necessary budgetary and human resources to fully implement the EMP and the RP. (L. A. Schedule 5, Para 6) 5 7 The Borrower shall ensure or cause RDA to ensure that all bidding documents and contracts for Works contain provisions that require contractors to: (a) comply with the measures relevant to the contractor set forth in the IEE, the EMP, and the RP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set forth in a Safeguards Monitoring Report; (b) make available a budget for all such environmental and social measures; (c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise during construction, implementation or operation of the Project that were not considered in the IEE, the EMP and the RP; (d) adequately record the condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction; and (e) reinstate pathways, other local infrastructure, and agricultural land to at least their pre-project condition upon the completion of construction. (L. A. Schedule 5, Para 7) 5 8 The Borrower shall do the following or cause RDA to do the following: (a) submit semiannual Safeguards Monitoring Reports to ADB and disclose relevant information from such reports to affected persons promptly upon submission; (b) if any unanticipated environmental and/or social risks and Status of Compliance/ Remarks land acquisition. Complied Complied This was not relevant due to absence of indigenous people in the project influenced area Complied Complied Complied

96 Appendix Schedule Para No. Description impacts arise during construction, implementation of operation of the Project that were not considered in the IEE, the EMP and the RP, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan; (c) no later than 6 months after effectiveness, engage qualified and experienced external experts or qualified Non- Government Organizations (NGOs) under a selection process and terms of reference acceptable to ADB, to verify information produced through the project monitoring process and advice on safeguard compliance issues, and facilitate the carrying out of any verification activities by such external experts; and (d) report any actual or potential breach of compliance with the measures and requirements set forth in the EMP or the RP promptly after becoming aware of the breach. (L. A. Schedule 5, Para 8) 5 11 The Borrower shall make available, and ensure that RDA makes available, adequate budgetary allocations of the required counterpart funds in respect of the Project on a timely and regular basis. (L. A. Schedule 5, Para 11) 5 12 ADB shall conduct periodic reviews of the progress of the Project as necessary and undertake any necessary midcourse corrections. In addition, ADB shall conduct special reviews as appropriate. The Borrower shall give all possible assistance for carrying out such reviews. (L. A. Schedule 5, Para 12) 5 13 The Borrower and RDA shall (i) comply with ADB s Anticorruption Policy (1998, as amended to date); and (ii) cooperate with any investigation by ADB and extend all necessary assistance, including providing access to all relevant books and records, for satisfactory completion of such investigation. (L. A. Schedule 5, Para 13) 5 14 RDA shall ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants, and other service providers as they relate to the Project. (L. A. Schedule 5, Para 14) 5 15 RDA shall ensure that its website provides updated, detailed information on project implementation, especially procurementrelated information including the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and adequate details of the Goods, Works and Consulting Services procured. (L. A. Schedule 5, Para 15) Status of Compliance/ Remarks Complied Complied Complied Complied Complied Abbreviations: EMP = Environmental Management Plan; IEE = Initial Environment Examination; LA = Loan Agreement; PA = Project Agreement; NGO = Non-Government Organization; SPS = Safeguard Policy Statement; RDA = Road Development Authority; RP = Resettlement Plan Source: ADB. Loan Agreements & Project Agreement of Additional Funding for National Highways Sector Project (L2767). Appendix 3 85

97 86 Appendix 16 ECONOMIC REEVALUATION I. INTRODUCTION 1. The economic reevaluation for this project completion report (PCR) was conducted to assess the economic viability of the National Highways Sector Project (NHSP), covering investments made for each individual project road, each financing source and the overall project. Table A16.1 separately lists the completed project roads under the two financing sources, with their actual construction lengths. Table A16.1: List of Project Roads Source Code Road Name Length (km) A012 Puttalam - Anuradhapura A026 Udatenna - Mahiyanganaya Original A005 Nuwara Eliya - Badulla Financing A006 Habarana - Kantale A004 Nugegoda - Homagama Sub-Total (Original Financing) Additional Financing Source: Appendix 4 A024 Matara - Akuressa 3.40 B153 Hikkaduwa - Baddegama B157W Aluthgama Southern Expressway B207 Katukurunda - Neboda 2.72 A004 Kirulapone Godagama B084 Colombo - Horana 9.83 Sub-Total (Additional Financing) Total Project The economic evaluation compares the economic costs and benefits under the with project and without project scenarios. In the without project scenario, road users are assumed to experience relatively higher vehicle operating costs (VOC) and travel time costs (TTC) as compared to the with-project scenario. A. General II. APPROACH 3. The approach to evaluating the economic viability of the project follows the analytical framework of the Highway Development and Management (HDM) Model, which is based on the concept of pavement life cycle analysis. 1 The key assumption is that road pavements deteriorate as a result of several factors, including traffic loading, climatic conditions, and maintenance regimes. Impacts of the road condition and design standards on road users are measured to predict economic resource consumption reflected in economic costs. Such road user costs comprise vehicle operating costs (fuel, tires, oil, spare parts consumption, depreciation and capacity utilization); costs of travel time for both passengers and freight, capital costs involved in the vehicle fleets, and costs to the economy of road accidents. The model ensures that traffic volumes would reach the capacity of the road (either in the "without" or in the "with project situation), while not allowing to grow beyond the ceiling during the period under review. The primary inputs to the model include road characteristics and sectioning, proposed works interventions, vehicle fleet, vehicle operating cost (VOC) and value of passenger travel time (VOTT), updated to the current year. 1 World Road Association (PIARC) HDM-4 Version 2. Paris.

98 Appendix The economic analysis was conducted for each project road individually covering their corresponding evaluation periods, which included the construction period and a 20 year benefit period starting immediately after construction completion. Table A16.2 summarizes the evaluation periods established for each project road, taking their construction commencement and completion into account. Table A16.2: Evaluation Periods for Project Roads Source Code Road Name Construction Period Evaluation Period (including 20 years) A012 Puttalam - Anuradhapura A026 Udatenna - Mahiyanganaya Original A005 Nuwara Eliya - Badulla Financing A006 Habarana - Kantale A004 Nugegoda - Homagama Original Financing A024 Matara - Akuressa B153 Hikkaduwa - Baddegama B157W Aluthgama Southern Expressway Additional B207 Katukurunda - Neboda Financing A004 Kirulapone Godagama B084 Colombo - Horana Additional Financing Overall Project Source: PCR Consultant s Estimate based on the project implementation details provided in Appendix The evaluation period for the overall project is and it builds up with the evaluation periods of for original financing and for additional financing. 6. The economic evaluation used the border price numeraire. A Standard Conversion Factor (SCF) was applied to the opportunity costs of skilled and unskilled labor, non-tradable local resources including construction materials and transport, and project outputs of value of travel time, to convert financial costs to economic costs. Unless otherwise stated a standard conversion factor of 0.97 (estimated from trade data) is used for approximating the border price equivalent of non-traded inputs and outputs. The evaluation further adopted a residual value of 20 % at the end of the benefit period and a discount rate of 12% to actualize net benefits. B. Traffic Analysis 7. The base year traffic volume, expressed in terms of Average Annual Daily Traffic (AADT), its composition, and future growth rates are key inputs to the economic analysis. The base year of 2008 was considered for the project roads funded under the original financing, except for the A004 for which 2010 was considered was adopted for all project roads funded under additional financing. The base year AADT and its composition, estimated from vehicle counts conducted by the Planning Division of Road Development Authority (RDA), is presented in Table A16.3 for each project road. Appendix 3 87

99 88 Appendix 16 Project Road (Code) Table A16.3: Base Year AADT and its Composition on Project Roads Base Year AADT - Motorized (Base Year) Motor Cycle Three Wheeler Car/Jeep Composition of AADT - MT (Base Year) Van AADT -Non Motorized (Base Year) Original Financing A , A , A , A , A , Additional Financing A , B , B157W , B , A , B , Source: Planning Division, Road Development Authority. Bus Light Goods Medium Goods Heavy Goods 8. Motor cycles have become the dominant mode of motorized transport for all project roads, ranging from 25.5% to 54.1% of total composition. Three wheelers, used on personal and hired bases, also form a significant proportion of traffic volume, accounting for more than 15% of motorized traffic, except for the A012 and A006, on which three wheelers represent only about 7.5%. The composition of vehicles identified under Car/Jeep range from 5.0% to 23.4% across all project roads, whereas the composition of vans ranged from 5.1% to 13.6%. 9. Public Transport modes, categorized as buses, are less than 10% of the motorized vehicle share for all project roads except for the A004, A005 and A006. The A006 carries the highest share of buses (13% of its AADT), while the A004 and A005 carry about 11.0% each. Goods vehicle composition maintains a share of 8.4% to 20.3% of motorized traffic volume for most of the project roads. However, the A006 and A026 have nearly 30% of goods vehicle due to lorries transporting paddy rice and construction materials (such as sand and soil). 10. Pedal cycles are the only non-motorized mode considered for this analysis. As most of the project roads are through semi-urban areas or hilly terrain, cycles have not become a popular mode of transport for any project road. The highest number of cycles recorded per day is only 341 on the A Likely future traffic growth rates for the national road network have been estimated by RDA province-wise. These growth rates have been derived by relating growth in population, per capita income, and gross domestic product (GDP), to the growth of buses, private vehicles and goods vehicles, respectively, for each province. Such derived growth rates were used to forecast the traffic for project roads during their evaluation period. Table A16.4 presents the traffic growth rates in 10 year time frames covering the project evaluation period for the provinces where project roads are located. M/Axle Tractor

100 Appendix Province Table A16.4: Average Annual Traffic Growth Rates (%) Public Private Freight Public Private Freight Public Private Freight Central North Central North Western Southern Western Uva Source: Planning Division, Road Development Authority. 12. Improved road conditions will motivate road users to shift from non-motorized to motorized modes, such as two and three wheelers. Such modal shifts have been taken into account in estimating traffic growth rates for private vehicles and hence are not considered as generated traffic for the purposes of avoiding double counting. However, following the improvement, there would be a diversion of vehicles to project roads from other roads in competition. For these project roads it is presumed that such diversions would increase traffic by 10% and are considered thus in the analysis. C. Economic Benefits 13. The following benefits were included in the economic evaluation: (i) Savings in VOC s for both motorized and non-motorized transport modes. (ii) Savings in travel time for passengers and goods transported in motorized and nonmotorized modes (iii) Savings in road maintenance costs 14. In addition to the above quantifiable benefits, non-quantifiable socio-economic benefits, such as increased productivity of agriculture, improved access to basic needs, and livelihood improvements, also accrued due to the improvement of project roads. Such benefits are discussed and assessed in detail in Appendix Following the upgrading, average speeds on the project roads almost doubled, reducing travel times by 40-50%. The travel times without and with project are estimated by the HDM Model, and the value of time saved is included in the analysis. The unit value of passenger time used in the HDM model is given in Table A16.5. Estimates of the values of passenger times were based on current income levels and published data for Sri Lanka, using the methodology from the government manual, which define users of public and private transport by income categories. 2 The value of cargo delay was derived as the opportunity cost of capital tied up in delayed cargo (value of cargo multiplied by the interest rate) and was estimated at SLRs 22 per hour and SLRs 66 per hour for light commercial vehicles and trucks, respectively. This assumes cargo values of SLRs 200,000 and 2,500,000 per tonne for, respectively, light commercial vehicles and trucks, an interest rate of 15% and that two-thirds of cargo vehicles benefited. The shadow wage rate factor for unskilled workers was applied to public transport user s time value, assuming one-third of public transport users are unskilled workers. All time values were converted to border price equivalent. Appendix Ministry of Finance and Planning, Sri Lanka Assessing public investment in the transport sector. Colombo.

101 90 Appendix 16 Table A16.5: VOTT for Passengers and Occupancy Rates Vehicle Type Value of work time (SLRs/hr) Value of non-work time (SLRs/hr) Occupancy Rate Two & Three Wheeler Car/Jeep Van Public Transport Source: PCR Consultant s Estimates 16. The HDM model is used to estimate the VOC for both motorized and non-motorized traffic on each project road under the with and without project situations. The model estimates VOC taking into account the speed, travel time, surface quality, road congestion, and vehicle characteristics (including fuel consumption rates). The net reductions in VOC are presented as savings. III. ECONOMIC COST OF CONSTRUCTION & MAINTENANCE 17. The cost estimates used in the analysis are based on the actual construction costs of each project road. The costs include those for civil works, environmental impact mitigation (to control dust, noise, waste, and traffic disruption caused by construction), shifting utilities, quality control, construction supervision, project management and physical contingencies. The financial cost of the construction is converted to economic cost by leaving out Value Added Tax (VAT) first and then applying a Conversion Factor (CF) of 0.85 to the remainder. The conversion factor of 0.85 is calculated based on border price numeraire and in accordance with the ADB guidelines 3 by applying SCF and Shadow Wage Rate Factor (SWRF) 4 as required to the cost component of the project. The calculation of the conversion factor is demonstrated in Table A16.6. Cost Items Table A16.6: Estimation of the Conversion Factor Proportion Factors Adjustment Conversion Traded goods Domestic Resources 51.0 SCF Scarce Labor 10.0 OCSCL*SCF Surplus Labor 6.0 OCSL*SCF Taxes & Duties Total Conversion Factor (CF) 0.85 OCSCL = Opportunity Cost of Scarce Labor; OCSL = Opportunity cost of Surplus Labor; SCF = Standard Conversion Factor Note: The proportion of cost items is calculated based on an analysis of actual construction cost. Value Added Tax (VAT) is not considered in above analysis as it is refunded by the contractors after sometime. 18. Table A16.7 presents the calculated economic construction cost per km for each project road. 3 ADB Guidelines for the Economic Analysis of Projects. Manila. 4 A shadow wage rate factor of 1.0 for scarce labors workers and 0.72 for surplus labors was used.

102 Appendix Table A16.7: Economic Cost of Construction Source Code Road Name Economic Cost/km (SLRs million) A012 Puttalam - Anuradhapura A026 Udatenna - Mahiyanganaya Original A005 Nuwara Eliya - Badulla Financing A006 Habarana - Kantale A004 Nugegoda - Homagama A024 Matara - Akuressa B153 Hikkaduwa - Baddegama Additional B157W Aluthgama Southern Expressway Financing B207 Katukurunda - Neboda A004 Kirulapone Godagama B084 Colombo - Horana Source: PCR Consultant s Estimate based on the project cost details provided in Appendix Maintenance costs are based on Highway Schedule of Rates (HSR) and an analysis of recent road expenditure details. For asphalt concrete roads, cost for periodic overlay was estimated at SLRs 1,600 per m 2 for 50 mm thickness. Unit prices for treatments were estimated SLRs 750 per m 2 for patching, SLRs 1,100 per m 2 for edge repair, SLRs 330 per m 2 for crack sealing, SLRs 9,400 per km for shoulder repairs, and SLRs 27,000 per km for grading. For Double Bituminous Surface Treatment (DBST) roads, unit cost for surface treatments was estimated at SLRs 700 per m 2. IV. RESULTS OF ECONOMIC ANALYSIS 20. The results of the economic analysis suggest that the investment made on road upgrading is economically feasible: each project roads individually provides an Economic Internal Rate of Return (EIRR) above the minimum cut-off of 9%. The EIRRs ranged from 13.0% to 28.1% for roads under the original financing and 15.7% to 34.4% for those under additional financing. The estimated EIRRs for all project roads, under original financing and additional financing, are 17.2% and 23.2%, respectively. The EIRR for the overall project is 18.1%. Table A16.8 summarizes the economic analysis results, including EIRRs and net present values (NPVs). The cost-benefit stream for the overall project is shown in Table A The reevaluation demonstrates an adequate economic viability of the project with an EIRR of 18.1% and NPV of SLRs 20,341 million at 12% discount rate. The economic analysis of the project further indicates that savings in vehicle operating costs account for 46% of total benefits, whereas savings in travel time accounts for 56% over the design life of 20 years of each project road. Overall, the economic feasibility of the project is robust and can tolerate adverse developments to the primary benefit and cost categories and changes in other parameters. 22. The sensitivity analysis, by means of switching values, was carried out to test the robustness of project s economic viability against decrease in estimated benefits. No sensitivity analysis was conducted against construction cost as its actual values were used in base-case economic analysis. The results of the analysis indicates that the project needs 65% decrease in estimated benefits to turn unfeasible. Such decrease in benefits is highly unlikely since it was estimated very systematically and conservatively. Therefore, the project as a whole can be considered as highly resistance to turn unfeasible due to decrease in estimated benefits. Appendix 3 91

103 92 Appendix 16 Table A16.8: Economic Analysis Results Source Code Road Name EIRR, % NPV, (SLRs 12% discount rate) A012 Puttalam - Anuradhapura ,839.4 A026 Udatenna - Mahiyanganaya Original A005 Nuwara Eliya - Badulla ,081.8 Financing A006 Habarana - Kantale ,052.5 A004 Nugegoda - Homagama ,447.7 Additional Financing Original Financing ,784.0 A024 Matara - Akuressa B153 Hikkaduwa - Baddegama B157W Aluthgama Southern Expressway B207 Katukurunda - Neboda A004 Kirulapone Godagama ,189.9 B084 Colombo - Horana ,214.1 Additional Financing ,764.2 Overall Project ,242.3 Note: NPV values for the overall project does not equal to the arithmetic aggregation of NPV values of each project road due to differences in evaluation periods of project roads. The given NPV value for overall project is calculated for full evaluation period of NHSP project, i.e from 2008 to 2036.

104 Appendix Year Table A16.9: Cost Benefit Stream for Overall Investment of the Project (SLRs million) Capital Costs Recurrent Costs VOC Savings VOTT Savings NMT Benefits Net Benefits Discounted Benefits ,289.3 (0.5) (1,288.8) (1,288.8) ,636.8 (0.4) (356.1) (1.1) (3.1) (3,996.8) (3,568.5) ,237.7 (0.3) (430.1) (1.3) (4.2) (4,673.1) (3,725.3) ,050.1 (2.8) (131.0) (2.2) (3,999.7) (2,846.9) ,989.7 (6.4) (123.9) (1.8) (2,918.2) (1,854.6) ,411.5 (6.0) 1, , , ,082.6 (17.6) 1, , , ,552.6 (18.0) 1, , , (564.4) (18.8) 2, , , , (338.6) (13.1) 3, , , , (10.9) 2, , , , (24.3) 2, , , , ,544.8 (27.7) 2, , , , (60.3) (28.2) 2, , , , (28.8) 3, , , , (7.7) 3, , , , (476.5) (31.7) 3, , , , (318.0) (32.8) 3, , , , (39.6) 3, , , (41.4) 3, , , ,298.3 (21.3) 4, , , (137.6) (33.4) 3, , , (464.0) (44.6) 4, , , (43.9) 3, , , (3,202.0) (40.2) 4, , , (218.7) (3.1) 1, , , (44.3) (25.6) 1, , , (534.0) (25.3) 1, , , (256.7) (0.3) TOTAL 18, , , , ,242.3 NPV (SLRs 12% 10,242.3 EIRR 18.1% EIRR = Economic Internal Rate of Return; NMT = Non-Motorized Traffic; NPV = Net Present Value; VOC = Vehicle Operating Costs; VOTT = Value of Travel Time Note : Negative values are within brackets Source: PCR consultant s calculations Appendix 3 93

105 94 Appendix 17 SUSTAINABILITY OF NATIONAL ROAD MAINTENANCE I. INTRODUCTION 1. The sustainability of road maintenance primarily depends on: (i) soundness of practices and procedures adopted in maintenance management (including planning, programming and budgeting) and execution, and (ii) adequacy and timeliness of road maintenance financing. The status of national road maintenance with respect to these aspects is discussed here in more detail. A. Current Procedures II. ROAD MAINTENANCE MANAGEMENT 2. At present, Planning Division of RDA prepares the annual maintenance program for upcoming years, based on the results of HDM 4 and sends these to Provincial Directors for finetuning. Provincial Directors, in consultation with their divisional offices, identifies in detail the maintenance interventions required for each section included in the program and budgets accordingly. The scale of work that can be accommodated for the next year is benchmarked on the allocation for the current year. 3. Once the annual program is finalized at provincial level, Provincial Directors submit it to the Road Maintenance Management Division (RMMD) of RDA for further refinement. The RMMD, with the assistance of the Planning Division, further refines and verifies the selections and prioritization, using available databases on road conditions, traffic levels and speeds etc. During this process, respective Provincial Directors are also consulted. 4. On completion of this refinement and verification process, RMMD internally finalizes the annual maintenance program in discussion with the Provincial Directors, depending on the limit of fund available. Simultaneously, RMMD liaise with the RMTF for the realization of finance resources for the annual program. At present, the total maintenance allocation is distributed among Provincial Directors in proportion to their actual expenditure in the previous year. 5. Meanwhile, RDA was seeking a new model that could more accurately simulate the deterioration of all road-related assets and thereby improve accuracy, reliability and consistency in road maintenance programming. RDA is now working on a Road Asset Management System, which facilitates programming and budgeting of road maintenance functions based on predicted deterioration of road sections. This system has been named as Sri Lanka Road Asset Management System (SLRAMS). B. The Sri Lanka Road Asset Management System 6. As a part of the restructuring of RDA under RSDP, an Asset Information Management System (AIMS) was provided for pavement assets, consisting of the Highway Information Management System (HIMS) database and the HDM-4 decision support tool. Although the technology available to store and share information has since changed dramatically, the structure and processes of AIMS have remained largely unchanged. Because only the Pavement Management System (PMS) module of HIMS was purchased (the version installed being the desktop edition built on a Microsoft Access database) the ability to share and use information widely across the organization was severely limited. Due to such constraints in AIMS, RDA developed separate database systems and/or spread sheets for its bridge, slope and roadside furniture assets. These deficiencies indicated a requirement for a new asset management system.

106 Appendix Hence RDA decided to develop a comprehensive SLRAMS for all road related assets, such as pavement, bridge, slope, roadside furniture. 7. SLRAMS is a centralized asset management system for all road related assets of the national road network, which will make road data widely available to all relevant stakeholders, and will assist RDA in planning and earmarking budgets for road network maintenance on the basis of current and future predicted condition. This asset management system was again developed based on HIMS software, which is a powerful relational database and analytical system with in-built Global Information System (GIS) and reporting platforms. The outputs of HIMS are also used as inputs for HDM 4 in analyzing network performances, prioritizing road maintenance and rehabilitation, Life Cycle Cost Analysis, Asset Valuation and Risk Analysis, road user and agency costs etc. 8. Government has received funds from the International Development Association (IDA) for the purpose of improving Asset Management practices. A portion of the proceeds of this credit line has been applied to upgrading the HIMS Asset Management System. Government through RDA, awarded a consultancy services contract entitled, Consultancy Services for HIMS System Upgrade and Calibrating HDM-4 to SATRA Infrastructure Management Services Pvt Ltd. India, a subsidiary of HIMS Ltd of New Zealand. 9. SLRAMS includes the following modules: (i) Road Information System (RIS) (ii) Location Referencing Management System (LRMS) (iii) Pavement Management System (PMS) (iv) Bridge Management System (BMS) (v) Routine Maintenance Management System (RMMS) (vi) Traffic Information System (TIS) (vii) Crash Information Management System (CIMS) (viii) Road Furniture Management System (RFMS) (ix) Slope Management System (SMS) (x) Disaster Planning System (DPS) (xi) System Administration Module (xii) GIS Module. The development of this system was completed by customizing HIMS. The consultant also provided training on SLRAMS for nominated RDA staff and carried out user acceptance tests. Under the Institutional Strengthening and Capacity Building for Asset Management component of the World Bank funded Transport Connectivity and Assets Management Project, RMFT and road assets management systems will be further strengthened. III. ROAD MAINTENANCE EXECUTION Appendix At present, RDA carries out its maintenance work through RMMD, which is headed by a Director reporting to the Additional Director General (Asset Operations & Maintenance). Under the Director of RMMD, ten Provincial Director Offices have been set up, representing RDA at provincial level. These offices cover the full extent of the national road network, to carry out road maintenance and small construction works. These offices also have officers (about 50 60), who are charged with carrying out accounting, engineering and administration functions. Each Provincial Director is supported by several Chief Engineers designated for each district. There are 25 Chief Engineer Offices covering all districts nationally and each office has a technical staff of officers. The functions assigned to the District Chief Engineer is further divided across two or three Executive Engineer s Offices, depending on the extent of the network in the particular district. The staff under the Executive Engineer is predominantly field staff, such as technical

107 96 Appendix 17 officers, work supervisors (similar to works foremen), drivers, operators and laborers. The area of an Executive Engineer is further divided into another 3-4 sub areas, designated as maintenance depots. Each such depot comes under a technical officer, who is assisted by 4-5 work supervisors. 11. In summary, there are 10 Provincial Directors, 25 Chief Engineers, 52 Executive Engineers, 322 Technical officers, 376 work supervisors, and 4,024 permanent laborers and 2,428 contract laborers at regional levels. This labor force is not necessarily engaged on road maintenance work only, although they are usually considered as maintenance laborers. They are also engaged in various rural road construction and maintenance works handled by the Executive Engineers. 12. The RDA carries out its periodic and routine maintenance through their provincial centers, allocating funds to the Provincial Directors. Routine maintenance activities are usually carried out using direct labor employed under the divisional offices. However, almost all periodic maintenance activities, including structural improvements, are carried out by contractors selected through a bidding process. These contracts are method based, which are paid on unit rates. However, now all ADB funded road construction projects tend to include a Performance-Based Maintenance component, coupled with the civil work contract. In such cases, the contractor appointed for the civil works also becomes responsible for maintaining the road for 3-5 years, as per the specific agreement. 13. Performance-based road maintenance contracts (PBMCs) differ significantly from the method-based contract that has been traditionally used to maintain roads. PBMC is a type of contract in which payments for the management and maintenance of road assets are explicitly linked to the contractor successfully meeting or exceeding certain clearly defined minimum performance indicators. In the traditional method-based (unit rate) contracts, the road agency, as client, normally specifies techniques, technologies, materials and quantities of materials to be used, together with the time period during which the maintenance works should be executed. The payment to the contractor is based on the amount of inputs (e.g., cubic meters of asphalt concrete, number of working hours). In PBMC the client does not specify any method or material requirements (provided the national standards are met). Instead, the client specifies performance indicators that the contractor is required to meet when delivering maintenance services. For example, the contractor is not paid for the number of potholes patched, but for the output of the work: no pothole remaining open (or 100% patched). Failure to comply with the performance indicators or to promptly rectify revealed deficiencies adversely affects the contractor's payment through a series of clearly defined penalties. In case of compliance, payments are made regularly, usually in equal monthly installments Output and Performance Based Road Contracts (OPRC) is a new concept for Sri Lanka, although several road projects formulated under ADB and World Bank are to include 10 year OPRC coupled with Civil Work Contracts. OPRC are a further development of the earlier PBMC. The focus of OPRC has been extended to cover (i) rehabilitation works to be carried out in order to bring the road up to pre-defined standards, (ii) improvement works aimed at adding new characteristics to the roads in response to new traffic, safety or other considerations, and (iii) emergency works comprising activities needed to reinstate the roads after damage resulting from unforeseen natural phenomena with imponderable consequences. IV. NATIONAL ROAD MAINTENANCE FINANCING 15. Road maintenance had been neglected over several decades, particularly before 2005, mainly due to (i) an inadequacy of funds, (ii) inconsistency of fund releasing, and (iii) poor 1 Source:

108 Appendix institutional capacity, especially in terms of labor, machinery and equipment. Although funds for road maintenance were allocated through the annual national budget of RDA, such allocations did not meet the financial requirements for the execution of annual maintenance programs. The situation is further worsened when even such limited funds are not received in time to match the annual maintenance program. This causes delay in execution of annual maintenance and more often results under-utilization of allocated budgets at the end of the year. The institutional capacity, in terms of technical personnel and equipment, is also a concern for road maintenance but could have been mitigated through outsourcing, if adequate funds were available. A. Establishment of Road Maintenance Trust Fund (RMTF) 16. By 2005, about 50% of the entire road network, including national and provincial roads, were in poor condition. Having appreciated that this was due mainly to inadequate and unreliable sources of funding especially for maintenance, government was keen to develop a mechanism that provided predictable and reliable fund allocations for road maintenance to ensure realization of the annual maintenance programs for all types of roads. In 2005, government proposed to finance the road maintenance through a Road Maintenance Trust Fund (RMTF) financed by a levy on fuel sold to road users. The proposed charges were SLRs 1.00 per litre on petrol and SLRs 0.50 per litre on diesel sold, to be credited to the RMTF official bank account for the purpose of financing road maintenance. Diesel fuel used for the railway system and power generation was excluded. Thus, only about 50% of the diesel sold was used to calculate the road maintenance charge. However, the maximum amount that could be raised by this method was SLRs 1.5 billion annually, whereas the requirement for road maintenance was very much higher. Therefore, disregarding the fuel charges, the Treasury continued to finance road maintenance expenses, without specifically accounting for the fuel use. At its establishment, RMTF was to finance maintenance of all roads but to date is still limited to national roads. 17. Government has been operating the RMTF since January It was established under the Trust Ordinance by a Deed of Trust, signed in December 2005 with the assistance of the Road Sector Development Project (RSDP), financed by ADB. The RMTF is governed by a Board of Trustees (BOT), appointed from the Ministry of Finance and Planning (MFP), the Ministry of Ports and Highways (MOPH) and the Finance Commission. The BOT is administratively supported by a Secretary and secretariat appointed by the BOT. A Technical Advisory Committee (TAC) provides advice to the BOT and the secretariat on road maintenance programs and related matters. The RMTF was originally established in the MFP and operated in collaboration with the Ministry of Port and Highways. The RMTF was later transferred from MFP to the MOPH by an Extraordinary Gazette Notification (No.1651/20, April 2010). The RMTF secretariat commenced operations in March Treasury transfers maintenance allocations to the Ministry of Ports and Highways, which in turn deposits the money in the RMTF Trust Account. The RMTF secretariat disburses money for road maintenance. Appendix 3 97 B. Annual Allocation for Road Maintenance 18. The National Budget allocates funds to the RMTF through domestic sources, based on the budget proposals submitted by the RMTF Secretariat. Table A17.1 shows the budgetary allocation and actual expenditure for national roads channeled through the RMTF for the period of 2004 to This shows that actual allocation for national road maintenance kept increasing until 2011 and later started to decrease consistently till In 2015 the actual utilization was only SLRs 4.4 billion. It had been reached to SLRs 7.8 billion in 2011 before starting a continuous decline. This decline may reflect an improved network and elimination of previously unnecessary maintenance.

109 98 Appendix Figure A17.1 shows the condition of the national road network over the period of 2007 to 2014, based on the roughness data collected by RDA. Approximately 50% of national roads were in poor or bad condition by 2005 and hence required extensive investment on road rehabilitation and improvement. Since 2007, the government realized that the deteriorating road network was a major obstacle in achieving economic development targets and hence proposed to increase investment on road network rehabilitation. During the last 12 years, most of the national roads (approximately 6,000 km), were rehabilitated using asphalt concrete. As a result of this consistent investment, by 2014 the condition of overall national road network was improved: 30% were in excellent condition, 38% in good condition, and 10% in fair condition. This recent improvement in national road network quality demands less maintenance intervention and in turn less maintenance funding. The inclusion of PBM in all road rehabilitation projects also contributed to less maintenance funding requirement. Table A17.1: Funding for Road Maintenance through RMTF ( ) (SLRs billion) Budgetary Allocation Actual Utilization Source: Sri Lanka National Budgets Figure A17.1: Condition of National Roads Percentage, % Bad Poor Fair Good Excellent Source: Road Development Authority, The declining trend in road maintenance funding (Table A17.1), is mainly due to the continuous improvement of the network and hence it is highly responsive to the condition of the national road network, as illustrated in Figure A17.1. This shows a strong correlation between road maintenance funding and network condition and further indicates that the government has now been able to rationalize maintenance funding, especially after establishment of RMTF. As the people have enjoyed the benefit of very good quality of road network, the government is fully committed to ensure road network is in good condition. Under the ongoing Institutional Strengthening and Capacity Building for Asset Management component of World Bank funded

110 Appendix Transport Connectivity and Assets Management Project, RMFT and road assets management systems will be further strengthened. As such there is no reason to be uncertain over future sustainability of road maintenance in terms of funding and assets management. V. CONCLUSIONS 20. After going through evolutionary developments over several years, the RDA now has a reasonably well-established road maintenance practices and procedure consistent with international best practices. Further, it has been able to rationalize the road maintenance funding for national roads with the establishment of the RMTF. This rationalization is clearly evident by the responsiveness of actual maintenance allocation to the network condition over the last 12 years or so. Therefore, it is evident that RDA now has reached a better position to ensure the sustainability of its network, in both the short and long-term. Appendix 3 99

111 100 Appendix 18 SOCIO-ECONOMIC BENEFITS AND IMPACTS OF REHABILITATED ROADS I. INTRODUCTION 1. The National Highways Sector Project (NHSP) was launched for the purposes of widening, upgrading and maintaining the national highways. The project s main focus was to upgrade the single and two-lane standard roads to two-lane or four-lane configurations, respectively. Project interventions included improving the geometric design, widening the carriageways, incorporating cycle lanes and parking, strengthening the pavements, improving surface conditions, drainage systems and bridges, and providing signage and marking bus bays. The anticipated benefits included raising the level of service of the project highways, reducing transport and vehicle maintenance costs, shorter travel times, and improving accessibility, road safety, and riding comfort As part of the preparation of this project completion report (PCR), ADB commissioned an assessment of the social and economic benefits of the rehabilitated and upgraded roads under NHSP, particularly with respect to the roads beneficiaries and users. The beneficiaries were to include a variety of persons and groups, such as men and women of different ethnic and religious communities, their youth and children, farmers and fishermen, as well as businessmen, professionals, and institutions (such as businesses and market outlets, service delivery agencies and religious institutions). This report presents the results of a qualitative assessment that captured the socioeconomic benefits and impacts of the rehabilitated roads as perceived by a cross-section of the roads beneficiaries/users along a selected number of road sections. II. STUDY METHOD 3. The study adopted a qualitative approach, to allow for cross-comparisons of pre- and postproject situations as perceived by communities, and to give a better understanding of the broad social changes, including changes in community behaviors, social structures and relationships, since completion of the rehabilitations and improvements. These project interventions involved land acquisitions and both physical and economic displacements, at varied levels. However, the present study, conducted in March 2018, was not mandated to discuss these resettlement issues. Its exclusive focus was on eliciting the experiences and perceptions of beneficiaries/users of the roads, particularly on the socioeconomic benefits and impacts of the rehabilitations. 4. Consultations were conducted with a cross-section of the road beneficiaries/users, who lived beside the rehabilitated roads and who provided insights into a range of social and economic impacts of the roads on beneficiary communities as well as into their concerns and other issues. 5. The study reviewed resettlement plans developed for the selected roads, progress reports of the income restoration programs conducted by the project, reports of the external monitor, an impact assessment on livelihoods and income restoration program (Appendix 14), and relevant documents of the project financier. 1 ADB Proposed Loan and Technical Assistance Grant Democratic Socialist Republic of Sri Lanka: National Highways Sector Project. Manila

112 Appendix Plate 1. Rehabilitated Roads Rehabilitated Puttalam- Anuradhapura road Rehabilitated Nuwara Eliya Badulla road Rehabilitated Pamankada-Kesbewa road Rehabilitated Aluthgama S Expressway 6. A sample of six rehabilitated roads was selected for the study. The sample represented two A grade highways (A005: Nuwara Eliya- Badulla and A012: Puttalam-Anuradhapura roads), one A grade (A024: Matara-Godagama), and three B grade roads (B157W: Aluthgama-Southern Expressway, B207: Katukurunda-Naboda and B084: Pamankada-Kesbewa) that provide direct connectivity to the Southern Expressway. Of the six roads, two had been completed in 2012, one in 2014, two in 2015 and the other in These project completion periods allowed a reasonable consolidation phase for the expected project benefits to mature and for the surrounding communities to feel the impacts of the rehabilitated roads. Details of the sample of road projects are given in Table A Data was elicited through consultations conducted with project beneficiaries and key informant interviews (KIIs). Altogether, 12 consultations and 16 KIIs were conducted. These were attended by 147 persons, comprising 72 men and 75 women (Table A18.2). The staff of NHSP organized and coordinated the consultations and the interviews. The assessment outcomes presented and discussed in this report are confined to the selected road projects and examples Appendix 3 101

113 102 Appendix 18 from individual projects are quoted in support of evidence. Abbreviations for road names have been used in the text for readers convenience. 8. Section III of this report discusses the economic impacts of the rehabilitated projects. Section IV focuses on the social impacts of the road projects. Section V presents the study conclusions. Table A18.1: Sample of road projects selected for the study No. District/s Name of Road and Abbreviation Road Length (Km) Completion date 1. Nuwara Eliya & A005 Nuwara Eliya NB Dec Badulla Badulla Road 2. Matara A024 Matara Godagama MG 3.40 June 2015 Road 3. Kalutara B157W Aluthgama Southern Expressway ASE July Kalutara B207 Katukurunda Neboda Road 5. Colombo B084 Pamankada-Kesbewa Road 6. Puttalam & A012 Puttalam Anuradhapura Anuradhapura Road Source: PCR socioeconomic impact study, 2018 KN 2.72 Jan 2014 PK 9.83 April 2016 PA Aug Table A18.2: Project Beneficiaries Consulted Road Date No. FGDs No. Key Informant Participants Interviews Male Female NB Road MG Road ASE Road KN Road PK Road PA Road & TOTAL Source: PCR socioeconomic impact study, 2018

114 Appendix Plate 2: Consultations with local communities III. ECONOMIC IMPACTS A. Expansion and Development of Townships 9. Rehabilitation and improvement of roads significantly contributed to the expansion and development of small townships located along these roads. People observed a rapid transformation of their formerly rural and isolated communities, quickly absorbing features integral to urban settings and penetrating into the urban areas. The rural-urban dichotomy began to disappear gradually: as some people observed we felt like town is moving towards us. Growth of townships was a result of many factors and processes but the key among them was the combined effect of the development of roads and transport services. Investments from outside began to reach the newly developed areas, leading to the growth of commercial business sectors with diverse forms of economic activities. People living along all six roads had witnessed increases in the volume of commercial activity (such as hotels, restaurants, market outlets, textile shops, retail grocery shops, communication centers, private medical services, vehicle servicing centers) since the roads rehabilitation. 10. Along with the improvements of the roads, opportunities for investments in commercial activities were seen by local communities, as well as by people from outside. People, who were Appendix 3 103

115 104 Appendix 18 affected by land acquisitions began to invest part of their cash compensation for assets lost, in new income generating activities. This was clearly visible in a number of road projects, such as along the MG, PK, and KN roads. While using part of the compensation to restore their damaged residential dwellings and other structures, the rest of the money had been used to build commercial structures in the remaining portions of their land, which they would use either to run a business enterprise themselves or rent it to outside traders. Some affected parties re-built their houses with two floors, in which they used the ground floor for commercial activities and the upper floor for residential purposes. Some others shifted their newly built houses to the rear side of the remaining land and used the front portion to build commercial structures. Respondents reported that many people who opened up commercial ventures were outsiders, who had leased buildings from local people. 11. This trend was evident from the results of a parallel study of the restoration and Improvement of Incomes and livelihoods of affected households (Appendix 14). The main observations were: (i) (ii) Some sample respondents carried out their commercial activities in the house and the compensation money had to be used to construct a dual purpose building, residential and commercial. When a rental income was more attractive, the familymanaged business was abandoned and they constructed separate units for renting, particularly among older people. People rebuilt/improved their houses and commercial units to match with modernity and, as a result the entire area looked more organized and attractive. (iii) They sometimes used additional funds from their savings or bank loans to supplement their cash compensation received for lands and structures. As a result the floor area was larger and the standard of their houses and shops were better than those replaced. About 36% sample households considered higher investments in a larger house or shop as significant improvements in their living standard. (iv) They also used modern features, such as tiled floors, pantries, attached bathrooms etc, particularly along road sections in urban areas. 12. The main reasons given in the study (Appendix 14) for constructing a bigger building were: (i) expansion of commercial activities (71%), (ii) renting-out part of the structure (32%), (iii) starting a new commercial activity (13%), and (iv) more space for children to start new commercial activities in future (6%). 13. Modernized and cleaner commercial structures and environment, coupled with sufficient space left for vehicle parking in front side of those business units attracted more customers than prior to road rehabilitation. Another advantage was the mitigation of floods as part of roads rehabilitation work. Frequent flooding of roads and their surrounding areas had been a major threat that adversely affected the livelihoods, incomes, health and environment of the households and commercial entities. Now, floods hardly disrupt the day-to-day lives of the people students can go to schools and adults can go to their work places during rainy days without much hassle.

116 Appendix Plate 3: Ground floor of the houses used for business activities 14. Apart from the economic activities that emerged with the development of townships along the improved roads, service delivery agencies, both government and private, also developed and expanded their services. For example, a branch of the Sri Lanka Foreign Employment Bureau will soon be established in Hali Ela (on the NB road) in a multi-storied building. This Bureau will help many people, both men and women, and particularly the youth in the surrounding areas like Badulla, Bandarawela and Nuwara Eliya who are either employed in foreign countries, or are seeking employment, to get the necessary services including training, without needing to travel to Colombo. 15. The hospital in Hali Ela had been upgraded with sufficient medical staff and infrastructure to provide efficient medical and health services to people in the area, including child and maternity care services and the delivery of health related awareness programs. As such, people now have less need to travel to Badulla hospital. The private medical services opened up in Godagama on the MG road and in Nochchiyagama on the PA road provide services of specialist doctors and laboratory facilities for diagnostic services. It was reported that specialist doctors from the Karapitiya Teaching Hospital in Galle would travel along the Southern Expressway, and reach Godagama within minutes to provide the channeled services. Previously, people had to depend on Matara town where such services are concentrated. In Nochchiyagama, people benefit from the specialist doctors who come from Anuradhapura, for whom the travel time is only minutes. Now, people in Nochchiyagama hardly go to Anuradhapura from where they previously received those medical services. 16. Table A18.3 below shows the establishment of a variety of service delivery agencies, both government and private, as recalled by the community members. The list may be incomplete, but it provides a snapshot of a variety of services that became established since the development of the six roads and the townships. Appendix B. Development of Trade and Businesses 17. Since development of the roads and transport services, there had been a remarkable expansion and growth of business and trading activities alongside the roads. In the preceding section, we have described how the households affected by land acquisitions, used their cash compensation to initiate various business activities, either by themselves or by renting them to businessmen who came from outside. Table A18.3 outlined the various economic activities that emerged around small townships, expanded and developed with the improvements of roads.

117 106 Appendix 18 Economic ties between local communities and the rest of the regions in the country began to grow and consolidate. People on EIRR road observed a large number of delivery vans and lorries belonging to big manufacturing companies commuting between Puttalam and Anuradhapura and delivering a variety of goods to retail shops on credit (electronic and other household goods), which they would sell to households on hire purchase schemes, and purified water for household consumption. Services have reached the doorstep of the households and the need for people to travel to large urban centers like Anuradhapura and Puttalam to buy their provisions has diminished. Table A18.3: Expansion and Development of Townships Road Location New institutions established NB Road Hali Ela Police station; branch of the Foreign Employment Bureau; Cargill s Food City; Cooperative Wholesale Establishment (CWE); National Savings Bank (NSB); vehicle service centers; 2 open fairs (polas); 2-3 private medical centers; 150 shops; Atampitiya 7-8 restaurants and tea kiosks; Keppetipola Dedicated Economic Centre; shopping complex; shops MG Road Godagama About 200 commercial units which include textile shops; retail groceries; hardware shops, mini-super markets; bakeries; plant nurseries; around 30 restaurants; medical channeling centers; pharmacies; garages; communication centers ; 6-7 three-wheeler parks ASE Road Kotapitiya 5 hotels between Aluthgama and 5 th Mile Post; 3-4 restaurants/tea kiosks; 3-4 retail groceries; hardware shops; garages; 3-4 fruit stalls; 2 private medical channeling centers; Cargill s food cities KN Road Nagoda Retail shops; book shops; a branch of the food outlet of Perera & Sons; motor vehicle sales outlets; 2 car parks PK Road Papiliyana and Kesbewa PA Road Korakahawewa, Pandulagama Nochchiyagama Sirambiadiya Source: PCR socioeconomic impact study, 2018 A large number of business units; a market complex; restaurants and food outlets; mobile vendors Retail shops; hardware shops; garages and vehicle service centers; hotels; tea kiosks; a campus for vocational training; a private tuition class; a maize processing factory; mobile vendors A private nursing home; around 60 hotels for tourists (around Wilpaththu wildlife sanctuary); safari jeep renting agencies (with 117 jeeps); 3 private schools; private tuition classes; Vidatha center under the Ministry of Science and Technology to support poor women in food processing technology; mobile vendors Vehicle service center; a garage; a shop that sells compact discs of songs and films; retail shops; private tuition classes; mobile vendors

118 Appendix Meanwhile, businessmen in Nochchiyagama extensively benefitted from tourists, both local and foreign, who visit the Wilpaththu national park and came to Nochchiyagama town for dining and shopping. They could now reach Nochchiyagama town in minutes along the PA road. A number of hotels (around 60) had been built around Wilpaththu and Nochchiyagama for the benefit of tourists. Several agencies started providing safari jeeps on hire for tourists to visit the national park. It was reported that there had been fewer than 10 safari jeeps prior to road rehabilitation: this had now increased to 117. Businessmen in Nochchiyagama are also patronized by the large numbers of pilgrims who visit the popular Madhu shrine in Mannar and the Thanthirimale temple, as they would turn from Nochchiyagama town to travel along the Oyamaduwa road to reach these pilgrimage sites. Meanwhile, the frequent visitors from different parts of the country attend the Don Bosco Institute in Nochchiyagama (a catholic organization committed to skills development for youth), which constitutes another clientele for businesses in Nochchiyagama. 19. Linked to the development of business and trading activities along the improved roads, is the emergence of a significant number of mobile vendors who come to the roadside to sell a variety of products to the commuters who use the rehabilitated roads. This phenomenon is visible across all the six roads. A majority of the mobile vendors are women. They do not have sufficient resources to invest in a permanent structure or to rent a building, they could operate from a temporary structure erected by the roadside. A majority of the mobile vendors would operate during daytime, whereas others who are engaged in food supplies like rice and curry and hoppers would operate both day and night. C. Increased Land Values 20. As shown in Table A18.4, land prices along the rehabilitated and improved roads have risen. Travel convenience, connectivity to the Southern Expressway, and the transport networks developed and expanded to other regions and cities largely contributed to an escalation in demand for land. The trend in rising land values was augmented by the availability of water, electricity and telecommunication facilities along the developed roads. The demand for land increased with the influx of businessmen, who began to invest in a variety of newly emerged business opportunities, as well as from the professionals and employees of government departments and private sector who sought to settle in the newly developed areas. The grama niladahris consulted during this study along the six roads, observed a significant number of new households, ranging from 10-50, who had migrated to their respective divisions since the rehabilitation of the roads. Table A18.4: Land Prices Before and After Road Rehabilitation Road Land prices (per perch in SLRs) Before After NB Road Very low 500,000 MG Road 100,000 1,500,000 ASE Road 70, ,000 KN Road 100, , , ,000 PK Road 800,000 2,300,000 PA Road 20,000-30, ,000 Note: 1.0 Perch = 25 m 2 Source: PCR socioeconomic impact study, 2018 Appendix 3 107

119 108 Appendix 18 D. Employment and Incomes 21. Employment opportunities, particularly for the unemployed youth, emerged with the development of small townships and business activities along the rehabilitated roads. Though it does not capture the holistic picture of the volume of employment generated across the entire area of the redeveloped roads, Table A18.5 presents a snapshot of the types of employment generated at micro level and the estimated number of persons engaged in such jobs, as recalled by participants at consultations. 22. As already discussed, apart from people s employment in a variety of commercial enterprises, rehabilitated roads have also created opportunities for self-employment, particularly for women, to engage in business activities such as vending at open fairs and at road sides. Overall, transport services and small townships largely contributed to employment generation (formal and informal, and direct and indirect) for a significant section of the population in the areas that the rehabilitated roads traverse. Table A18.5: Employment Generated in New Business Enterprises Road Location Employment NB Road Hali Ela Around 20 young boys and girls are employed at the Cargill s Atampitiya Keppetipola food city; around 10 people work in 3 vehicle service stations About 10 people worked as laborers during road construction Around people found direct and indirect employment in business places such as watchers, storekeepers, technical officers etc. MG Road Godagama 5-6 women work in plant nurseries, 4-5 women work in a curtain-making shop, 3 women work in a t-shirt fabric shop, 5-6 are running vegetable stalls ASE Road Kotapitiya 1,000-1,200 people work for the garment factory in Darga town. Women also undertake subcontracts from the factory to do sewing from their homes PK Road Borelasgamuwa 20 persons work in a restaurant, 3 persons work in a three wheel seat manufacture shop, 3 women work for the laundry, 6 persons work in a hotel, 2 persons work in a fish stall, 5 persons work in a vegetable stall, 3 persons work in a garden gates manufacture shop, and 10 people work in a hardware shop PA Road Pandualagama People work in the maize processing factory, army camp and Palm Garden hotel as laborers Sirambadiya Source: PCR socioeconomic impact study, 2018 About 10 persons work in a garage, 2 girls work in a dressmaking center. 23. The new economic opportunities taken up by the local communities living around the rehabilitated and improved roads also generated substantial incomes to their households. As discussed above, incomes had been generated through a number of livelihood sources. 24. Direct and indirect employment. This derives from the large number of commercial business establishments that evolved around the small townships along the rehabilitated roads. Such employment provided stable monthly or daily incomes for employees. The parallel income restoration and improvement of income study noted that In the second category of larger business establishment with employees, out of 60 respondents 82% reportediee increases in the number of employees, indicating improved business (Appendix 14) 25. Income generating activities. People initiated these in their home compounds, particularly the households affected by road development, utilizing their compensation money was the second source. About a third of affected respondents said that they had restored their

120 Appendix incomes to pre-project levels. The increase in monthly incomes was about 10% to 25% of total incomes, which was considered to be significant (Appendix 14). 26. Rental incomes from the commercial structures. These were let to businessmen, constituting another source of income for local communities. The modernized and upgraded commercial structures are leased out at exorbitant rates by their owners. On MG road, a participant at a consultation reported that he had rented his commercial structure for SLRs 20,000, which was earlier rented for only SLRs 4,000 a month. Rental incomes, on average, ranged between SLRs 10,000 to 15,000 a month in Godagama, as reported by the grama niladhari. In Nochchiyagama, people mentioned that the value of a commercial structure would be in the range of SLRs 8-10 million if bought outright, whereas their monthly rentals would vary from SLRs 15,000 to 100,000 depending on the floor area, structure type and location. A commercial structure that was rented for SLRs 15,000 a month in Kewbewa (PK road) is now rented at SLRs 30,000 to 40, Incomes from renting rooms for boarders. The demand for boarding places by employees working for newly established government and private business sector agencies, as well as from students, universities and technical colleges, was another potential source of income for households living closer to the rehabilitated roads. In some households, people built separate structures adjacent to their houses, to provide accommodation for boarders. Others allocated one or two rooms in their own homes for the lodgers. Monthly rents charged for a single boarder ranged from a minimal of SLRs 3,000 depending on the size of the room, type of accommodation sought (i.e. single or shared), and the facilities provided. In most cases, meals are not been provided, and boarders to eat at nearby restaurants, which in turn is an additional source of incomes for restaurants. 28. Incomes generated from self-employment activities. These include trading in openfairs or on the sides of rehabilitated roads, dress-making, beauty salons, selling ornamental plants etc. These added other sources of income for local communities, particularly for poor men and women who do not have sufficient resources to invest in formal business ventures. IV. IMPROVED TRANSPORT SERVICES AND CONNECTIVITY 29. The rehabilitation of the roads significantly contributed to the development of transport services. Meanwhile, there had been a rapid increase in both the public and private modes of transport. Deteriorated road conditions, frequent damages caused to vehicles, excessive travel time and high operational costs, had discouraged many transport providers from operating on such roads. Since rehabilitation, not only has the number of service providers increased but also their reliability, frequency, size and the number of vehicles that they operate on these roads. Appendix 3 109

121 110 Appendix 18 Plate 4: Street Vendors along the Puttalam-Anuradhapura Road V. SOCIAL IMPACTS A. Transport Services and Connectivity Improvement 30. At household level, people claimed having either a motorcycle or a three-wheeler. A fourwheel tractor was owned by a significant number of households in the dry zone districts of Anuradhapura and Puttalam. Households began to acquire private vehicles for a number of reasons, including time saving, travel convenience, better road conditions and reduced vehicle maintenance costs due to improved roads. These private modes of transport had been complemented by the increase of public transport services operated by both the Sri Lanka Transport Board and the private sector. Dedicated transport services for school children are also run by government and the private sector. 31. Transport services are used for a variety of purposes, such as to travel to work places, business activities, schools, markets, hospitals and health centers, religious places, government service delivery agencies (like divisional secretariats, agrarian services department etc) and holiday destinations. Table A18.6 shows the changes in transport services operated on some of the roads before and after the road rehabilitation. 32. Improved road conditions, together with improved transport services, strengthened the connectivity of the communities with a wider network of regions and towns, service providing institutions, markets and employment opportunities. As already discussed, significant changes resulting from this improved connectivity were observed in the communities that lived beside the improved roads, such as increased mobility of people, movement of goods and services across different towns and regions, emergence of new economic activities and service centers and increased access to better health and educational services, and competitive market outlets. Table

122 Appendix A18.7 shows the interconnectivity of a selected number of roads to other urban and peri-urban centers. Table A18.6: Changes in Transport Services Before and After Road Rehabilitation Road Location Changes in the transport modes Before After NB Road Hali Ela Only a few buses operated and they were irregular Number of buses operating between Hali Ela and Badulla increased to 20 (15 private and 5 CTB) Atampitiya Keppetipola Less than 10 households had a vehicle Only 5-6 women used a vehicle to come to clinics 90% of the households have a vehicle, mostly motocycles and three wheelers 75% of the women use their motorcycles or hired three wheelers to attend clinics; women come in their own motorcycles 3-4 three-wheelers three wheelers MG Road Godagama 4-5 households had a vehicle motorcycles motorcycles; grama niladahri and family health worker also use motorcycles for their work and home visits 60% of the households have a vehicle lorries come in a day with traders from Kuliyapitiya, Dambulla, Matara and Colombo to the Dedicated Economic Centre Almost all the households have a vehicle; public transport is available even at nights. School children use private vans and motorcycles ASE Road Kotapitiya Increased public transport facilities; students come to school in motorcycles; 4 school vans operate; students travel from Warapitiya, Aviththawa, Udugama and Sirikandura (after school s status was elevated to Maha Vidyalaya level) KN Road Nagoda People who have vehicles use expressway to go for work in Colombo, public transport services are abundant PA Road Pandulagama Nochchiyagama Sirambiadiya Source: PCR socioeconomic impact study, 2018 Very few buses operated on this road. People had to wait for ½ hour 1 hour to get a bus Public transport services are available almost every ¼ hour. 80% of the households have a vehicle (motorcycles, three wheeler or tractor), women use motorcycles to take their children to schools and tuition classes Appendix 3 111

123 112 Appendix 18 Table A18.7: Connectivity of the Roads to Urban and Peri-urban Centers and Regions Road Connectivity to other regions, and urban and peri-urban centers A005 Nuwara Eliya Badulla Road From Hali Ela to Nuwara Eliya, Badulla, Welimada, Keppetipola, Passara, Kandaketiya, Neluwa, Kandy, Balangoda, Ratnapura, Colombo, Ampara, Batticaloa, Galle, Matara, Kataragama A024 Matara Godagama Road Southern Expressway, Deniyaya, Akuressa, Matara, Hambantota, Kataragama B157W Aluthgama Southern Levuwanduwa, Aviththawa, Kadawatha, Maharagama, Akkaripattu, Expressway Kalawana, Galle A012 Puttalam Anuradhapura Road Source: PCR socioeconomic impact study, 2018 B. Travel Convenience and Reduced Travel Time Akkaraipattu, Baticaloa, Ampara, Vavunia, Mannar, Jaffna, Trincomalee, Galle, Matara, Colombo 33. People shared anecdotal evidence to explain their increased travel convenience on the rehabilitated roads. On NB road, people in Atampitiya are able to travel to Colombo and return on the same day, after attending to their business. A bus would leave at 1.00 am from Atampitiya to Colombo and would return at the same time on the following morning. Long distance travelers who earlier had to transit in 2-3 buses to reach their final destinations can now travel in one single bus and saving time, energy and cost. This is mainly because of the long-distance transport services that started operating on the improved roads. On the same NB road, patients and their carers, who use public transport, would travel to the out-patient department (OPD) at Badulla hospital around 6.30 pm and return home around 8.30 pm after receiving treatment. Since the OPD is kept open until 8.30 pm, patients prefer to go there in the evenings when it is less crowded. Before the improved transport services along NB road, patients and their carers had to travel in the morning and wait in long queues for treatment. The improved transport services also benefitted the employees and workers who travel to their work places in Badulla, Bandarawela, Welimada and Nuwara Eliya. 34. On roads that are connected to the Southern Expressway, fleets of vehicles operating on those roads have increased remarkably. Many people employed in jobs in Colombo would commute daily to their work instead of staying in lodgings in Colombo. This cuts-down their costs of board and lodging in Colombo, and enables more time to be spent with their families. One participant at a consultation remarked that we can now use the expressway to go for our businesses in Colombo and return home for lunch while saving our time and money spent on meals and refreshments at restaurants, which are mostly unhealthy for consumption. 35. On PA and MG roads, upgrading of the roads and transport services has immensely benefited many people. Roadside vendors found commuters a good and stable market for their farm products, food varieties and handicrafts. Businessmen are able to transport their heavy loads of commodities, such as building construction materials, more conveniently and efficiently. Moreover, people travelling to Anuradhapura, Vavunia, Jaffna and Mannar preferred to use the rehabilitated PA road instead of the route via Kurunegala and Dambulla that they had used previously. As such the vehicle fleet operating on this road increased significantly including at night time. 36. Apart from increased travel convenience, people also perceived a significant decrease in their travel time as a result of improved road conditions and transport services. Table A18.8 shows how the travel time of the villagers to different destinations has decreased with improved transport services operated on a selected number of improved roads, as perceived by the villagers.

124 Appendix Table A18.8: Reduced Travel Time before and after Road Rehabilitation Road Destinations Travel time Before After A005 Nuwara Eliya Badulla Road Hali Ela Badulla minutes minutes Nuwara Eliya Badulla 3 3 ½ hours 1 ½ hours Welimada Badulla 1 ½ hours 50 minutes A024 Matara Godagama Road Matara Colombo 7-8 hours 1 ½ hours B157W Aluthgama Southern Kotapitiya Matugama 1 hour 30 minutes Expressway Kotapitiya Aluthgama 20 minutes 10 minutes B207 Katukurunda Neboda Road Naoda Colombo 2 hours 45 minutes 1 hour A012 Puttalam Anuradhapura Korakahawewa, Pandulagama 30 minutes 10 minutes Road Anuradhapura Nochchiyagama Anuradhapura 1 hour 20 minutes Nochchiyagama Puttalam 1 1 ½ hours 30 minutes Source: PCR socioeconomic impact study, 2018 C. Benefits to School Children 37. Children benefited in a number of ways from road and transport improvements. Regular public transport services, together with hired vans or three-wheelers provided travel convenience for school children, particularly for those who travel long distances (20-25 km), to and can return home earlier after school. For example, children from Deniyaya and Akuressa would travel to their schools in Matara and return home early and safely. Some children would travel to schools on their own motorcycles, while others are accompanied by parents in their own vehicles. Children in Hali Ela could reach their schools in Badulla in 10 minutes. Time that children had to spend on travelling reduced remarkably and they no longer needed to start in early mornings or to return home late. Time savings allowed children to spend more time on their studies and recreational activities. Well illuminated roads, with street lamps and improved road conditions, ensured the safety of children, both males and females. 38. Children s access to alternative schools or tuition increased with efficient transport services. Children from Hali Ela studying science or mathematics for their General Certificate of Education (GCE) Advanced Level (AL) examinations would travel to Kandy over the weekends to attend tuition classes, whereas children from Matara, Godagama, Kalutara, and Aluthgama can now travel to classes in Colombo and return home conveniently. Students of Sabaragamuwa University can commute daily for lectures from their homes in Hali Ela without having to stay in hostels. A number of tuition classes were also set up in the new townships like Nochchiyagama, where classes are conducted by qualified and competent teachers coming from Kurunegala and Anuradhapura. Furthermore, three private schools have been set up in Nochciyagama, offering additional educational opportunities for children. Regular school attendance of children and their pursuit of better educational facilities and opportunities, in the long-run, will obviously contribute to an increase in the standards of education in rural and urban areas and employment opportunities. 39. Improved transport services and travel convenience equally benefited the school teachers and parents. Teachers are able to sustain a regular attendance and report for work more punctually. They are also able to conduct extra classes or other extra-curricular activities for students after school because of the availability of regular transport services for their return even at late evenings. Parents are also able to participate in the meetings of the school development societies and other school based activities, which are generally conducted after school hours. Appendix 3 113

125 114 Appendix 18 D. Benefits to Women 40. Improved road conditions and transport services significantly benefited women in terms of their travel convenience and safety. Women s access to better transport services run by the public and private sectors, including their own personal modes of transport, optimized their time management, and efficiency of managing their reproductive roles. Many women along the PA road used their own motorcycles to take their children to schools, pre-schools and tuition classes, which also improved the safety of their children. Managing household chores became easier for women with better transport services to their work places, markets, clinics and hospitals. Wellilluminated roads and frequent transport services promoted their safety. Women in urban areas would go for recreational activities early in the mornings as the roads are well lit with street lamps. 41. Pregnant mothers attending maternity clinics and health care-related programs at Hali Ela hospital can now travel on their own motorcycles/three wheelers or in hired three wheelers in time for the program and can return home earlier. Previously, the women were late in attending clinics (held from 8.00 am), and they would reach the clinics only around 9.00 am because of not having adequate transport services. The family health midwife also observed an increase in the numbers of mothers attending the clinics and their participation in awareness raising programs related to maternal health, nutrition, child care, and dengue prevention. 42. The numbers of mothers participating in educational programs increased from 7 8 attendances to attendances. Moreover, their regular interaction with the medical and health staff of the hospital led to the growth of healthy relationships between the two parties. The family health midwife who uses her motorcycle to visit the homes of pregnant mothers and infants is able to deliver a more efficient service with more regular visits. Earlier, she did not have a motorcycle and was anyway afraid of using one because of the bad road conditions. She could make only 7-8 visits per month, as she had to travel on foot. Now she is able to make about 15 home visits a month and sometimes two visits to the same home because of the improved travel convenience. Furthermore, women who had to seek early admissions to hospitals for child deliveries, largely because of poor transport facilities, are no longer required to do so as they can now reach hospital in few minutes. The opening of channeling centers 2 in Nochchiyagama and Godagama particularly benefited the women, who needed the services of gynecologists. 43. Apart from the social benefits that women accrued from improved roads and transport services, they also benefited from the new economic opportunities that emerged after road rehabilitation. Engagement of women in these economic activities constitutes the primary source of household income, particularly for women-headed households, whereas it is a supplementary income source for others. Section III described the influx of women vendors, together with their counterpart men, almost in equal numbers, to engage in trading activities in the Hali Ela openfairs. It was also explained how poor women living along the PA road and the MG road, have grabbed the opportunities surrounding the developed roads to sell a variety of products, mainly to the commuters. Women have also taken the lead in running the commercial activities that households have set up in their newly-built commercial structures on their homesteads. They proactively engaged with their husbands or other family members in running restaurants or groceries and preparing food and other refreshments for their customers. 44. Women, and particularly the girls, also find employment in the newly established commercial business ventures, such as in Cargill s food cities, ornamental plant nurseries, textile and hardware shops, dress-making centers, beauty salons, shops and restaurants, communication centers and medical centers. Such employment generated stable monthly/daily incomes for women. 2 The channeling centers are the places where medical doctors conduct private consultations for a fee.

126 Appendix Another economic opportunity that women captured was the renting of lodging rooms in their homes for outsiders, who come to their respective areas to work in government and private agencies. Running lodging places is quite popular across the developed roads and has become a lucrative source of income for households, and particularly for women who usually manage these places. E. Road Accidents 46. Perceptions of local communities on the incidence of accidents were divided. Some people observed that the number of accidents had remarkably reduced since rehabilitation and upgrading of the roads. They attributed this reduction to widening of the roads from one lane to two lanes (giving sufficient space for over-taking), the straightening of bends, precautions taken to prevent soil erosion, erection of safety fences at locations vulnerable to accidents, display of sign boards, imposition of speed limits, and good maintenance of the roads. However, they also opined that road accidents are largely due to the carelessness of the drivers/riders and their excessive driving/riding speed. 47. In contrast, a majority of the people consulted along the six roads were of the opinion that the incidence of road accidents had substantially increased. The police station in Welimada (NB road) had recorded 112 road accidents in 2016 in their police division of which had occurred on the NB road. In 2017, the same police station had records of 76 road accidents of which they estimate would have happened on the NB road. On the MG road, people recalled 7-8 fatal accidents of which the victims of three or four were from their own village of Godagama. Accidents have damaged several electricity posts as well. Fatal accidents on ASE road had taken the lives of people including a child who ended up with permeant disability. People have also observed daily accidents on the PK road and recently three fatal accidents in Kesbewa. In Nochchiyagama, people reported witnessing at least two accidents per week on the PA road. 48. The underlying causes of accidents were pointed out to be the increase of the vehicle fleet operating on the rehabilitated roads, high speed driving and inadequate speed control measures. People living beside the roads that are connected to the Southern Expressway alleged that drivers from the expressway continue to maintain the same speed levels on the two lane connecting road through their village. VI. COMMUNITY CONCERNS 49. Overall, road beneficiaries/users expressed satisfaction with the improvements carried out to roads and the consequential developments that had transpired in the local communities. However, as discussed in the preceding section, people expressed serious concerns about (i) accidents, and (ii) drainage systems. 50. There were complaints about the inadequate measures taken by the authorities to avoid/minimize the risk of accidents. They further expressed annoyance that the authorities had not engaged them in any process of consultation and communication when road safety measures were planned and implemented. People felt that road safety measures were introduced arbitrarily without paying any attention to the convenience and safety of the road users. 51. People along the six roads considered a second critical issue was the poor maintenance of the drainage system. A number of issues were reported. They included (i) construction defects in the side drains including improper leveling off the bottom of the drains that prevents the efficient conveyance of the water flow, (ii) discharge of waste water from the drains to irrigation canals and other natural water sources, (iii) inadequate width of the concrete slabs laid on the drains to provide access to households, (iv) partial coverage of the drains with concrete slabs and keeping Appendix 3 115

127 116 Appendix 18 the rest open, (v) risks of accidents to people and animals in open drain sections, (vi) disposal of garbage in the drains, especially by commuters (on the Southern Expressway), (vii) stagnation of solid waste inside the drains blocking the conveyance of waste water, (viii) breeding of mosquitos inside the drains, (ix) high risk of flooding and environmental pollution, and (x) inadequate/lack of regular garbage disposal system and the proper maintenance of the side drains by the relevant authorities. 52. Grievances of the people on above issues have not been addressed satisfactorily despite their regular reporting to the authorities. Plate 5: Poor maintenance of the drains VII. CONCLUSIONS 53. Rehabilitation and upgrading of roads and the development of transport services are interdependent and interrelated. As discussed in this report, they both contributed enormously to a significant social transformation in the relatively isolated and less developed communities. Moreover, they both triggered major structural and relational changes in the economic and social domains in terms of enhancing people s access to a range of resources, assets, networks and opportunities, asset formation, social mobility and improved living standards. 54. The six roads that were chosen for this study had immensely contributed to attracting external investments for commercial and business activities, emergence of diverse economic opportunities for local populations, including (i) access to multiple sources of livelihoods and incomes, (ii) increasing people s mobility and connectivity to wider regional networks of economic and social relations, (iii) augmenting the social and economic value of people s land and other assets, (iv) improving people s access and convenience to services and public institutions, and (v) reducing people s vulnerability to poverty and deprivation. New livelihood opportunities and income sources have, no doubt, contributed to bringing about economic and social stability in the lives of local communities and reinforcing their social status, esteem and contentment. Overall, it can be concluded that rapid developments in infrastructure, such as roads and transport services, have a significant bearing on poverty reduction and enhancing people s overall wellbeing. 55. In the midst of rapid changes that occurred in the local communities since the rehabilitation of roads, women have especially benefited from the new economic opportunities that reached

128 Appendix their communities, and with their increased access and convenience to public services. Women have been able to perform a proactive role in the upliftment of the living conditions of their families, and more importantly in bringing about sizeable incomes to their households. Youths have benefitted from a range of economic and employment opportunities that have obviously contributed to strengthening their productive roles in the wider society. Children have benefitted in terms of their easier access to educational institutions and services, which eventually will contribute to their higher performance and achievements in the educational field. Despite the positive benefits and impacts of road development projects, increasing incidence of road accidents and poor construction defects and maintenance of road drainage system had raised serious concerns and grievances on the part of road beneficiaries and users. It is recommended that relevant authorities take appropriate measures to address these issues and in particular, enter into a meaningful consultation and dialogue with road beneficiaries, users and local communities to plan and implement effective measures to avoid/minimize road accidents and to properly maintain the drainage system. Appendix 3 117

129 118 Appendix 18 CASE STUDIES Case Study 1: Commercial units of Mr Darmasiri Mr. Darmasiri from Boralesgamuwa owned 11 semi-permanent buildings, which he inherited from his parents. These buildings, located beside the PK road, had been leased out to various business ventures. Widening of the PK road required acquisition of part of his land and buildings, for which he received cash compensation to the value of SLRs 12.6 million. Mr. Darmasiri used his compensation money to convert his semi-permanent structures into permanent buildings and to add another two units, which now altogether comprised 13 units. All the 13 units were provided with individual toilets, washrooms, electricity and vehicle parking spaces. The 13 units are now given on 2-year leases to from outside. These commercial units are used for a variety of purposes, such as a restaurant, a hotel, a laundry, a fish stall, a vegetable stall, a hardware shop, manufacturing three wheeler seats, fabrication of garden gates. The monthly rental that Mr Darmasiri gets from individual businessmen varies from SLRs 30,000 to 50,000, depending on the floor area of the building. Monthly rental that Mr. Darmasiri charged prior to reconstructing ranged from SLRs 6,000 to 12,000 per single unit (interview with Mr. Darmasiri). Case Study 2: Boralesgamuwa Suneth Plaza Land acquisitions for the PK road caused loss of 22 perches (550 m 2 ) of land belonging to Suntehra Mahadevi Piriven Viharaya in Pepiliyana. This temple received cash compensation for the lost property in the range of SLRs 42 million. The chief incumbent of the temple invested this money to construct a market complex in Boralesgamuwa town (Suneth Plaza), where the commercial units are rented out to different businessmen. The rental income is now used for the maintenance of the temple (FGD at the temple).

130 Appendix Case Study 3: Hali Ela Open-Fairs The two open-fairs (polas) in Hali Ela along the NB Road that are run on Wednesdays and Saturdays bring together more than 100 traders a day not only from Hali Ela area but also from faraway places like Hambantota, Balangoda, Matara, Batticaloa etc. into trading of a variety of goods. Of the traders, 50% are women. Traders from other regions would travel overnight in their vehicles loaded with goods and return home after spending almost 12 hours in the fairs. People in Hali Ela immensely benefit from these open fairs since their need to travel to Badulla to buy their household needs has now reduced remarkably. They are able to purchase their goods from the fairs while saving both their travel time and money. The restaurants in Hali Ela also benefit from the influx of traders who patronize them for their meals and refreshments Case Study 4: Keppetipola Dedicated Economic Center The dedicated economic center established in Keppetipola along the NB road attracts 1,000 1,200 traders and farmers a day. Traders come from different parts of the country to purchase vegetables and fruits brought by farmers in Uva Paranagama, Welimada, Bandarawela etc. There are vehicles that reach the economic center daily. Prior to the rehabilitation of the NB road, not many farmers sold their produce in Keppetipola and their numbers ranged from only. However, with the ease of travel due to road improvement, farmers now prefer to transport their produce to the economic center in Keppetipola. On the other hand, transactions at the economic center are direct and between the trader and the producer. Except for a small commission paid to the middlemen, farmer producers do not have to entirely depend on the middlemen to sell their produce. Furthermore, because of the large numbers of traders who come to the economic center, farmers are able to sell their produce at competitive prices. As in the case of Hali Ela, daily influx of traders and farmers to Keppetipola benefits the service centers like restaurants and other business activities with sustained demand for their services. It was reported that the fuel sales at the service station in Keppetipola operated by the Multi-Purpose Cooperative Society had increased by 20% after the development of the NB road. Appendix 3 119

131 120 Appendix 18 Case Study 5: Flower vendors in Borelasgamuwa On the MG road, there are mobile vendors who sell ornamental plants, green-leaves, vegetables, kola kenda (herbal porridge), curd and hoppers to the commuters who would exit or enter the Southern Expressway from Godagama. The commuters on the ASE road have access to king coconuts and tea sold by women vendors. There had been 32 women vendors who occupied the roadside on the PK road and sold flowers, incense sticks, coconut oil, lamps made out of clay etc. to people who go for their offerings in the surrounding temples. Widening of the PK road caused displacements to these 32 women vendors. The NHSP intervened and provided compensation for these women vendors at the rate of LKR 90,000 per person for the loss of their livelihoods and additionally built semi-permanent structures in close vicinity to facilitate these women vendors to continue their businesses. On the same road, mobile vans operate to sell fish and a variety of food items particularly in the evenings. A large number of mobile vendors are observed along the PA road who would sell vegetables, fruit juices, boiled corn, curd, kola kenda, hoppers, vade, rice packets to the commuters who travel between Puttalam and Anuradhapura. Case Study 6: A Grain Collector A young man of 28 years in Nochchiyagama was engaged in selling produce from his own chena (highland cultivations under slash and burn agriculture) as well as the produce he collected from other farmers. After the road rehabilitation, he built a small structure closer to the PA road to store the different grains that he collected from farmers. He would buy paddy, corn, soya, sesame etc. from the farmers and would keep them stored until he is able to sell them to traders coming from outside. His business grew gradually and he is now considered a rich man in the area. He employs a permanent staff of 50-60, of whom about 15 are women. Women are engaged in drying grains while men do the storing and packing. His office staff is 10, of whom 5 are women. During harvesting periods, he would hire casual laborers. Around 20 lorries come daily to his factory to buy the grains. His business subsequently led to the emergence of a number of other small businessmen, who started to function as middlemen to the main grain collector (story related by the grama niladhari of Nochchiyagama).