Afghanistan Reconstruction Trust Fund Proposal Kabul Urban Roads Improvement Project (KURIP) (November 11, 2008)

Transcription

1 ARTF Proposal: KURIP Afghanistan Reconstruction Trust Fund Proposal Kabul Urban Roads Improvement Project (KURIP) (November 11, 2008) Applicant: Brief Description: Project Development Objective: Performance Indicators Sector: Location: Total Project Cost: Islamic Republic of Afghanistan (IRA) This Project is aimed at rehabilitation of priority roads within Kabul City and forms a part of ANDS which sets out a target of rehabilitation of existing damaged roads by The development objective of the project is to improve traffic flow on priority corridors or segments of the main urban roads in Kabul. This will be achieved through rehabilitation of priority roads, improvement of some points/intersections, and side drains systems; which are critical for smooth flow of traffic in Kabul City. Length of roads rehabilitated (km) Roads and Highways Kabul City USD 18.0 million Amount Requested USD 18.0 million for ARTF MC Approval Implementing AgencyKabul Municipality (KM) Implementation Period: Implementation Arrangements Contact for further information 24 months the expected grant closing date is December 31, The project will be implemented by the Kabul Municipality with the help of an Implementation Consultant (IC). Al-Haj Wahid Ahad, Deputy Mayor (Technical), Kabul Municipality arcwahid@hotmail.com Tel: Reviewed and Cleared by the Administrator Hasan A. Zaidi, Transport Specialist, The World Bank hzaidi@worldbank.org Tel: & Loan Department; Legal Department; Country Management and Sector Management Units 1

2 Kabul Urban Roads Improvement Project (November 11, 2008) Table of Contents I. STRATEGIC CONTEXT AND RATIONALE...3 A. Key Development Issues... 3 B. Rationale for ARTF Involvement... 4 II. PROJECT DESCRIPTION...4 A. Project Development Objectives... 4 B. Project Components... 5 C. Project Cost by Components... 5 D. Economic Analysis...6 III.IMPLEMENTATION...6 A. Institutional Arrangements... 6 B. Procurement... 7 C. Financial Management...7 D. Monitoring and Reporting... 8 E. Sustainability and Risks... 8 F. Social and Environmental Issues IV. Annex 1 Detailed Project Description V. Annex 2 Project Cost by Component for ARTF Proposed Funding VI. Annex 3 Economic Analysis VII. Annex 4 Financial Management Arrangements VIII. Annex 5 Procurement Arrangements & Procurement Plans IX. Annex 6 Environmental & Social Management Plan...39 X. Annex 7 Abbreviated Resettlement Framework

3 I. STRATEGIC CONTEXT AND RATIONALE A. Key Development Issues Kabul Urban Roads Improvement Project (November 11, 2008) 1. The current population of Kabul city is estimated to be about 4 million, which accounts for more than half of the country s total urban population. It is estimated that more than 20 percent of Kabul city population lives below the poverty line. 2. Due to massive destruction caused by the war, rapid population growth and little investment in city infrastructure, the current transport service levels are very low in Kabul. Kabul City has more than 1,200 kms of roads, of which only 350 kms are paved. About 60 percent of the paved roads are damaged, while the remaining are in bad state of repair. In addition, it is estimated that 50 percent of drains are not functional. Current traffic congestion levels on Kabul s inadequate road network are a cause for serious concern. More than 61 percent of the urban population accesses their homes by unpaved roads. About 60 percent of the city is informally developed with poor access to urban services. Efforts are ongoing to address these deficiencies; however, these are insufficient to meet the present and projected demand for municipal infrastructure and services. 3. The traffic management in Kabul City, as the capital of the country, may be one of the worst in the region. This is mainly due to poorly functioning or absent infrastructures; weak traffic law enforcement; security protection barriers created by government authorities, national and international organizations, diplomatic centers and military bases in the city, which cause traffic blockade in main corridors and other connecting networks. Lack of adequate parking zones is a major cause of congestion, particularly in the commercial areas. In addition, small kiosks have been established along the roads across the city, which is another source of traffic congestion. According to the traffic police department, about 450,000 vehicles are currently operating in Kabul and another 150 new vehicles are added to this number every day, while the original design of the city roads were only for about 150,000 vehicles. Kabul Municipality (KM) has no function for public transport services; buses are operated by Ministry of Transport (MOT), taxies are supposed to be regulated by MOT, and Ministry of Interior (MOI). The only urban transport function of Kabul Municipality is for physical improvements of road infrastructure (traffic control is the responsibility of police under MOI). In Afghanistan, the urban transport responsibility of municipalities is very limited. 4. Kabul Municipality has estimated the investment needs for improvement of the city roads to be about US$653 million for the next 5 years and US$1,159 million for the 15 years. This would include rehabilitation and widening of the main roads, asphalting of the unpaved secondary roads, construction of the Ring Road and construction of new roads required to meet the needs of the rapidly expanding city. Within the five-year program mentioned above, and out of the US $653 million, Kabul Municipality has estimated three-year immediate requirement ( ) for priority improvement of the Kabul City road system to be US$127 million. 5. Keeping in view the challenges, Kabul Municipality embarked on a major Road Rehabilitation and Construction Program. Several donors are actively supporting Kabul Municipality in the rehabilitation plan. During the past 4 years, the Ministry of Finance has allocated US$ 51 million for rehabilitation and construction of about 60 kms of the main and secondary roads. The German Ministry for Economic Cooperation and Development (BMZ) financed the Road 3

4 Kabul Urban Roads Improvement Project (November 11, 2008) Repair Project in Kabul City through KfW within the framework of German Financial Cooperation with total funding of 5 million during The mentioned funding was complemented by an Afghanistan Reconstruction Trust Fund (ARTF) financing of US$3 million, which was successfully completed during November 2003 December A follow up ARTF co-financing project (US$20 million) for repair of Kabul Roads was supposed to be undertaken as a component of the IDA financed Kabul Urban Reconstruction Project (KURP), which did not occur due to insufficient funding in ARTF during that year. 6. The Abu Dhabi Fund for Development of United Arab Emirates has committed US$30 million for rehabilitation of 18 kms of Kabul City roads. An international private firm has already been hired for the project design and construction supervision consultancy services, and implementation has already commenced. In addition, the Turkish Government has committed US$ 24 million for construction of a flyover and approximately 22 kms of roads in Kabul. 7. The Ministry of Finance through their letter of April 23, 2007, requested the allocation of US $18 million from ARTF for this project. The allocation is already approved in the government core budget by the cabinet and the parliament. The preparation for the project was delayed inordinately due to prolonged and delayed procurement process for selection of Implementation Consultant by Kabul Municipality. The agreement with the Consultant firm was finally signed on April 2, B. Rationale for ARTF Involvement 8. According to ANDS benchmark on urban development, By end-2010: Municipal governments will have strengthened capacity to manage urban development and to ensure that municipal services are delivered effectively, efficiently and transparently. The ANDS sets out a target of rehabilitation of existing damaged roads by 2009, and increased reconstruction of asphalt roads in major cities by The proposed project forms part of the ANDS. 9. The proposed project is fully aligned with the Afghanistan Interim Strategy Note (ISN) of April The ISN states the World Bank's intention to make additional funding available for infrastructure and urban development (Para 88 & 89 of Page 35). 10. As mentioned in the preceding paragraphs, the need for investments for improving roads infrastructure of Kabul city is quite huge. Kabul Municipality is still struggling to keep whatever is left of the infrastructure functioning, and is not in a position to mobilize any resources on its own to take up the required development programs. Well functioning urban road system is a basic requirement for transport services improvement as well as for all future development and environmental protection of the city. Financial assistance is, therefore, being sought by the Government to support the priority roads and traffic improvement program of Kabul Municipality as a matter of urgency. 11. The proposed investments are economically viable: Economic Internal Rate of Return (EIRR) = 21.1%; Cost/Benefit ratio = A. Project Development Objectives II. PROJECT DESCRIPTION 4

5 Kabul Urban Roads Improvement Project (November 11, 2008) 12. The development objective of the project is to improve traffic flow on priority corridors or segments of the main urban roads in Kabul. This will be achieved through rehabilitation of priority roads, improvement of some points/intersections, and side drains systems; which are critical for smooth flow of traffic in Kabul City. 13. The project would also support setting up of a small and efficient locally staffed unit within Kabul Municipality to assist the Municipality in project management and data collection activities. 14. For measurement of the outcome, length of roads rehabilitated (km) has been identified as the key indicator. Various options were considered, including reduction in travel time and reduction in roughness or improvement in ride quality. Travel time reduction was eventually discarded as significant improvement is not foreseen considering the traffic volumes and congestion on these main roads. Roughness measuring equipment and baseline data was also not available, hence the only appropriate indicator to be considered was road length rehabilitated. 15. The base line and adequate monitoring arrangement to measure this indicator have been agreed and developed during project preparation and progress would be monitored on regular basis during project implementation. B. Project Components 16. The project will have two components: Component A Improvement of the Road Network in Kabul: Carrying out investments for the improvement of key city roads in Kabul, including: (i) rehabilitation of 12 kms of existing roads; (ii) construction and rehabilitation of road side drains and walkways; (iii) construction of roundabouts at key intersections; and (iv) installation of street lights. The civil works would be carried out through private sector construction firms. The estimated per/km cost for rehabilitation has been reviewed, and in comparison to other road rehabilitation projects undertaken in Afghanistan, was found reasonable. Component B Project Management Support: a) Provision of support to Kabul Municipality for the preparation, design, implementation and supervision of the Project; and b) Establishment of a Project Management Unit within Kabul Municipality to strengthen the institutional capacity of Kabul Municipality. The details are provided at Annex 1. C. Project Costs by Components Total USD million* Component A - Rehabilitation/Improvement of Key City Roads and Side Drains Component B - Project Preparation, Design and Supervision, Institutional capacity building, and setting up a Project Management Unit in Kabul Municipality

6 Kabul Urban Roads Improvement Project (November 11, 2008) Total Cost 18.0 Requested ARTF Financing 18.0 * Taxes are included in the respective component cost. Further details are provided at Annex 2. D. Economic Analysis 17. Assumptions made on the economic analysis are based on the following considerations: (i) (ii) (iii) (iv) Only road pavement costs are considered for 12 km length and the costs are expressed in million USD. Different types of road traffic of total 9,000 vehicles per day are considered in the Highway Design and Maintenance Standards Model (HDM-4) to determine the total Vehicle Operating Costs under the current road surface condition and proposed road surface conditions to determine the net benefits between the two options. Most of the parameters of HDM-4 are taken as default values, but the costs are corelated in the local market without using the economic conversion factor. Output results shows an economic advantage of 20 years life period of the pavement with an Economic Internal Rate of Return (EIRR) of 21.1%. Results summarized in Table below: Results of the Economic Analysis 10 Years 15 years 20 Years Internal Rate of Return (IRR) % 15.8 % 21.1% Cost Benefit Ratio Present Value Details are presented in Annex 3. A.Institutional Arrangements III. IMPLEMENTATION 18. The project will be implemented by Kabul Municipality with the assistance of an IC. The IC s main scope of work includes preparation, design and supervision of the project on behalf of the Municipality. 19. The World Bank had agreed to single source selection of M/s SMEC International as IC for the project. After obtaining Bank no objection, the agreement between Kabul Municipality and 6

7 Kabul Urban Roads Improvement Project (November 11, 2008) SMEC was signed on April 2, SMEC staff was mobilized in July 2008 for preparation of design and procurement of civil works under the project. 20. M/s SMEC shall be responsible for overall project management including construction supervision, financial management, environmental and social safeguards monitoring, and overall reporting of the project on behalf of the Municipality. 21. Annex 4 provides further details on the implementation arrangements including financial management for the project. B. Procurement 22. The roads proposed to be undertaken from the ARTF funding are divided in 4 contract packages i.e. W1 to W4. The procurement process for two contract packages was completed in October 2008 and award of civil works to contractors is expected in November The remaining two contract packages are ready for bidding. The total length of these four contract packages is 12 km approximately. Procurement for the Project is being carried out by the procurement specialist of IC. 23. Procurement will be in accordance with the World Bank s Guidelines: Procurement under IBRD Loans and IDA Credits (dated May 2004) revised in October 2006; Guidelines: Selection and Employment of Consultants by World Bank Borrowers (dated May 2004) revised in October 2006; and the provisions stipulated in the ARTF Grant Agreement. The Bank s Standard Bidding Documents, Requests for Proposals, and Forms of Consultant Contract will be used. The summary of the procurement capacity assessment of the implementing agencies and precise arrangements are presented in Annex 5. C. Financial Management Financial Management, Disbursement and Audit Arrangements. 24. A Public Financial Management (PFM) performance rating system has been recently developed for Afghanistan by the Public Expenditure and Financial Accountability (PEFA) multi-agency partnership program, which includes the World Bank, IMF, EC, and other agencies. Afghanistan s ratings against the PFM performance indicators portray a public sector where financial resources are, by and large, being used for their intended purposes as authorized by a budget that is processed with transparency and has contributed to aggregate fiscal discipline. 25. Financial management and audit functions for proposed project will be undertaken through the agents contracted under the Public Administration Capacity Building project and the Public Financial Management Reform project. This is the primary instrument for continuing to strengthen the fiduciary measures put in place for ensuring transparency and accountability of funds provided by the Bank and other donors. Under these contracts, two advisers Financial Management and Audit are responsible for working with the government and line ministries to carry out these core functions. The Financial Management Agent (FMA) is responsible for helping the MoF maintain the accounts for all public expenditures, including IDA-financed projects and for building capacity within the government offices for these functions. 7

8 Kabul Urban Roads Improvement Project (November 11, 2008) 26. At the project level, the Finance Department of Kabul Municipality will undertake responsibility of the financial management functions with support from the Implementation Consultant. Kabul Municipality has gained good experience from previous and currently implemented Bank and other donor funded projects. However, staffing remains weak within Kabul Municipality, and therefore an Implementation Consultant has been hired to provide implementation, procurement and financial management support. The Kabul Municipality Finance Department also has reasonable financial management arrangements and its capacity will be strengthened with the engagement of the IC. 27. Quarterly Interim Unaudited Financial Reports will be prepared by Kabul Municipality with support from the IC. Consolidated project reports will be prepared, reviewed, and approved by the MoF, supported by the FMA. 28. A Designated Account (DA), will be opened at Da Afghanistan Bank (DAB, Central Bank) or in a local commercial bank in the name of the project on terms and conditions satisfactory to IDA. The DA will be maintained by the MoF. Withdrawal applications for replenishment will be submitted monthly. Financial management arrangements for the project are stated in details in Annex 4. Disbursement Method 29. Disbursements from the ARTF grant will make use of advances, reimbursements, direct payments and special commitments. Records (full documentation) will be required for all expenditures on contracts greater than USD 20,000 and all other expenditures will be reported against statements of expenditures, as appropriate. Audit of Project Funds 30. The Auditor General, supported by the Audit Agent, is responsible for auditing the accounts of all IDA and ARTF-financed projects. Annual audited project financial statements will be submitted within six months of the close of GoA s fiscal year. 31. The Bank-funded projects already or currently being implemented by Kabul Municipality have over due audit reports for Solar Year The key issues raised in these projects previous audit reports have been resolved satisfactorily. D. Monitoring and Reporting 32. The Project Management Unit of the Kabul Municipality, supported by the IC would be responsible for overall monitoring and reporting to the World Bank. The World Bank task team would conduct regular supervision missions, and the project status reports would be submitted to ARTF every six months. E. Sustainability and Risks 33. Key lessons learnt from the implementation of previous ARTF projects include: (i) Keep the design of project simple. Countries emerging from conflict generally face considerable damage to institutional capacity, social capital, economic conditions and infrastructure. Under these circumstances, projects need to be designed as 8

9 (ii) (iii) (iv) (v) (vi) Kabul Urban Roads Improvement Project (November 11, 2008) simple as possible, focusing on one or two key objectives and minimizing the institutional demands on the weak public sector administrations; Rotation and change of management and staff on the client side increase the need for clear and robust fiduciary systems; at the same time attracting quality local staff to the country who can put in place and update such systems is difficult; Capacity and skill-set of client s staff is very weak and capacity building efforts need to be targeted to at least those staff involved in project implementation; On-the-job training of client's staff is a better way to develop capacity. Short term solution has to be in place for the implementation until the government implementing agency is capable to manage the projects; While building the capacity, client ownership should be assured; and As most of the client staff cannot speak English, the key documents or a summary needs to be translated into the local language to enable them to understand the project requirement at different stages. 34. Keeping in view the lesson learnt from earlier IDA & ARTF projects, and the limited capacity of the Implementing Agency, the design of the project is simple. Also the proposed project design includes mitigation measures, wherever possible, to reduce the anticipated risks. As the project is located within Kabul city, the Task Team of the Bank will get the opportunity to frequently visit the project sites for field verification during implementation phase. 35. Anticipated risks and proposed measures to reduce them are shown in the table below. Risks and Risk-mitigation Measures Risks Mitigation measures Risk Rating with Mitigation Security concerns: The political and security situations in Afghanistan remain volatile. These constraints may limit the speed of implementation, as the Supervision of projects may be difficult at times. Institutional Weak Institutional Capacity of the implementing agencies Governance Issues Corruption This risk is outside the control of the ARTF. The project is not situated in high risk area, as all roads proposed to be included in the project are within Kabul city. There is however substantial risks of abduction of international staff of consultant and contractors. These would be mitigated by adopting appropriate security procedures, and dependency to some extent on suitably qualified national staff for project supervision. The capacity gap would be bridged with the use of experienced international consultant firm to support Kabul Municipality for design, procurement and project management. NCB procurement would be used for most packages, which would be subject to prior review by the Bank at all required stages of procurement. The use of similar implementation procedures have helped to reduce time delays in contract awards in other project. Also use of an IC to handle all procurement would mitigate this risk to some extent. Moderate Moderate Moderate 9

10 Impact of forthcoming Elections Sustainability Shortage of timely funding for the maintenance of the rehabilitated roads Shortage of staff capable of managing the urban road network. Social and Environmental Safeguards Kabul Urban Roads Improvement Project (November 11, 2008) The impact of forthcoming elections on the investments covered under the project is assessed to be moderate - as the designs and scope of the project has already been finalized, with the help of Implementation Consultant. With no counterpart funding, the risk of counterpart fund diversion is not there. It is also expected that all major procurement will be completed much before next elections. Two constraints on the sustainability of project benefits are a shortage of timely funding for the maintenance of the rehabilitated roads, and a shortage of staff capable of managing the urban road network. While the impact of this particular risk is considered substantial, however this is being addressed by designing the road structure/pavement for a longer performance period i.e. 20 years instead of the usual years, with the expectation that in the medium term Kabul Municipality would be in a position, and would have the necessary resources to take up periodic maintenance of the rehabilitated roads. The project design includes hands on training by the Implementation consultant to Kabul Municipality staff both during design and construction supervision stage. In accordance with the contract documents for civil works, the contractor engaged will be responsible for rectification of defects for one year after completion of works. Social & Environmental impacts of the projects are expected to be small and overall positive. During construction environment and social effects such as noise pollution, disposal of waste and unsuitable material, expected loss of livelihood due to closure of roads, etc. would be mitigated through the implementation of the Environmental and Social Mitigation Framework. Wide dissemination of information to all stakeholders etc. Moderate Substantial Moderate/ Substantial Low/ Moderate Land acquisition or As the project aims to rehabilitate existing roads without relocation of squatters in the widening of existing carriageways, hence land acquisition is right-of-way may cause delaynot envisaged. in project implementation Procurement and Financial Management With completion of proposed works, significant positive environmental impact would be achieved through improvement of air quality, reduction in dust and carbon emissions from vehicles, proper surface drainage of rainwater etc. As mentioned above, the use of implementation consultant will mitigate these risks to some extent. Furthermore strong fiduciary oversight by the Bank Task Team will monitor the project at all stages to make sure that identified risks do not materialize. Moderate/ Substantial (for FM) Overall risk rating is assessed to be Moderate for the project. F. SOCIAL AND ENVIRONMENTAL ISSUES 36. The project activities involve rehabilitation/overlay of existing roads, hence it is expected that no major adverse environmental or social impact will be caused by the project activities. Kabul Municipality will ensure that each proposed sub-project road will have been screened for its 10

11 Kabul Urban Roads Improvement Project (November 11, 2008) environmental impacts in compliance with the requirements of the GoA and the World Bank/ IDA Guideline, and will not cause any major adverse impact on the environment/social. To achieve this, the Kabul Municipality through IC has carried out an assessment of the issues, and has prepared an Environmental and Social Management Plan (ESMP) for the project roads in accordance Environmental and Social Safeguard Framework for emergency reconstruction projects in Afghanistan as agreed between the World Bank/ IDA and Government of Afghanistan. 37. The following issues have been considered during the preparation of ESMP, so that natural, cultural, and social environmental impacts are minimized: Bridges and culverts. Efforts to prevent any adverse impacts to the environment / water bodies and road users during the construction or operation will be managed. Construction stage. This may include (i) disruption of traffic in the construction area, (ii) increased air pollution due to increased dust and other volatile chemical substances from asphalt plant, (iii) noise and vibration from construction plant and equipment, (iv) disruption of water systems due to earth works, and (v) potential landslide associated with elevating or widening of the roads. Social impacts. This may be an issue during construction, which mainly stem from negative interactions between project activities and local communities, for example, insensitive scheduling of construction activities, or inappropriate timings of construction traffic. Ensure that only approved Borrow areas are used for soil or aggregate material. Others. Ensure protection of Cultural Heritage, Forests, Wild Life etc. 38. The Implementation Consultant on behalf of Kabul Municipality has carried out social analysis of the project including assessment of gender and indigenous people and has prepared appropriate action plan included in ESMP. This analysis was carried out in accordance with the guidelines of WB and Poverty and Social Analysis policy of Afghanistan cited in Afghanistan Interim Strategy Note (ISN). In this project the rehabilitation work are to carried out within the existing road widths, so resettlement impacts are nonexistent. 39. Negative social impacts are expected during construction activities due to the possible influx of construction workers, location of residential accommodations and storage and dumping sites and inappropriate construction scheduling and other similar matters. All these issues have been addressed in the social analysis. 40. In this project most of the road improvement can be undertaken within the existing right of way. Where this is the case, the only resettlement issues arise in urban areas where commercial encroachments are common. Most of the candidate roads traverse areas where no significant resettlement impacts are expected. Therefore Resettlement Plans are likely to be needed for limited areas on the project. 41. The Kabul Municipality will ensure translation of ESMP in two local languages (Dari and Pashtu), and the translated documents will be shared with all stakeholders. The Kabul Municipality will also ensure that the ESMP will be disclosed publicly, and made available at the World Bank/ IDA Public Information Centre. Construction phase 11

12 Kabul Urban Roads Improvement Project (November 11, 2008) 42. The construction phase of the project will potentially incur environmental impacts on the local population. These impacts could be reduced, and to some extent mitigated if proper arrangements are put in place. The following environmental and social impacts are predicted during the construction phase: (i) (ii) (iii) (iv) (v) (vi) (vii) Transportation of construction materials, and possible cut and fill of road will create excessive dust and health hazards for the people. Possibility of further deterioration of air quality by production of additional smoke and pollution by construction machinery. Further traffic congestion in the crowded streets of Kabul city will cause further violation of the traffic rules in the already weak traffic regulation system in the city and causing possible hazards of accidents and safety issues for the drivers, passengers, pedestrians, cyclist, as well as nearby residents. Debris created by construction activities will hamper traffic flow, bicycling and side walking in the city. Possibility of blocking of side drain by construction debris, causing water overflow and stagnation, which in turn can create breeding places for vectors of diseases and can create nuisance for the locals. Labor camps of the civil works contractors can potentially pose a specific risk with regards to HIV/AIDS. Municipality/IC will ensure that orientation and information campaign are conducted to raise awareness. The project safeguard officer will monitor the progress of works, using the agreed checklist for this purpose and ensure labor safety and security on the project side. Operations Phase 43. Once completed, the project will have potential positive environmental impacts as it will decrease dust, and to some extent help in traffic management and thus reduce traffic congestion and could contribute to improve air quality in the city to some extent. 44. However, if during the implementation of the project certain standard procedures for the drainage and other measures stipulated in the ESMP and ESMF are not implemented in letter and spirit chances are there could be potential Environmental impacts damaging the health and safety of the local population. For example, if side ditches are not given proper slope stagnated water will create breeding place for vectors of disease, nuisance and can create problem for traffic flow. Environment & Social Management Plan and Abbreviated Resettlement Frame work are attached as Annex 6 and Annex 7 respectively. 12

13 Kabul Urban Roads Improvement Project (November 11, 2008) Annex 1 Detailed Project Description The project comprises two components: Component A Improvement of the Road Network in Kabul This component will support investments for rehabilitating existing city roads. The main scope of work includes rehabilitation/reconstruction/overlays of existing pavement structure, construction/ rehabilitation of road side drains, walkways, construction of roundabouts at key intersections, and installation of street lights etc. The civil works would be carried out through private sector construction firms. Kabul Municipality has identified priority roads that require urgent repair and rehabilitation. The total length of these main roads is about 75Kms and the width varies from 6 meter to 30 meter. A list of these roads and a location Map are attached at the end of this Annex. Kabul Municipality had initially envisaged the rehabilitation of 50 km of roads from the priority list. This was based on the assumption that (i) a simple overlay would be required to bring the proposed roads up to the required standards, and (ii) standard width of a single carriageway two lane road was considered for initial estimation of costs. Later on a condition survey was carried out, through which it was established that most of the roads were highly distressed, and would require comprehensive rehabilitation/reconstruction. The project is now targeting the reconstruction/rehabilitation of approximately 12 km of priority roads. The selected roads are of different widths, with average width approximately 17 meters, which converts to 4.6 standard lanes of 3.65 meters. Hence 12 km of selected roads converts to approximately 27 km of standard two lane single carriageway, with an average cost of US$ 550,000 per km, which is quite comparable to road rehabilitation projects undertaken in Afghanistan recently. While precise comparison cannot be made between highways and urban roads, however the Table below provides some idea about the relative reasonability of cost. Cost/km at time of Year of bid/ Cost/km projected to Road Donor award (USD) award current year (USD) Kabul-Doshi WB 410, ,281 Taloqan-Kishim WB 380, ,800 Kishim-Faizabad USAID 1,000, ,000,000 Kabul-Sarobi EU 640, ,840 Kandahar-Heart USAID 720, ,200 Kabul-Kandahar Japan 550, ,500 Kabul Urban Roads WB 550, ,000 For comparison sake, all road costs have been calculated based on standard two lane single carriageway. 13

14 Kabul Urban Roads Improvement Project (November 11, 2008) Component B Project Management Support: (a) This component will support Kabul Municipality, through the services of an Implementation Consultant (IC), in preparation, design and supervision of the project. The objective of the consulting services is to provide support to Kabul Municipality in two main activities: (1) project preparation, and (2) project implementation. The scope covers project preparation, design and construction supervision of priority roads in Kabul City. The Project Preparation and design stage included environmental and social management plan, preparing project document and technical specifications, design of some of the priority roads, preparation of the bidding document and performing bidding process. The civil works will be contracted out to private sector based on competitive bidding. The Consultant will check the accuracy of construction as per the design and construction standards. M/s SMEC have already been hired by the Municipality as the Implementation Consultant. SMEC mobilized in July 2008, and have been able to complete the topographical surveys and soil investigation for the entire length of 75 km. The detailed designs for 51 km road length have been completed. The roads proposed to be undertaken from the ARTF funding were divided in 4 contract packages (W1 to W4) only. The procurement process for two contract packages were completed in October 2008 and award of civil works to contractors is expected in November The remaining two contract packages are ready for bidding. The total length of these four contract packages are 15 km approximately. (b) Establishment of a Project Management Unit (PMU) to strengthen institutional capacity of Kabul Municipality. The objective of this sub-component is to provide project management support to the Municipality by setting up of a small but efficient Project Management Unit (PMU) consisting of three national engineers and allied support staff. The Project Management Unit will be responsible for coordinating between Kabul Municipality and the IC, collecting data and reporting on behalf of the Municipality, and act as focal point for environment and social safeguards. 14

15 15 ARTF Proposal: KURIP

16 16 ARTF Proposal: KURIP

17 ARTF Proposal: KURIP Table A.1: Project Cost by Component for ARTF Proposed Funding Project Costs by Components Annex 2 Total USD million* Component A - Rehabilitation/Improvement of Key City Roads and Side 14.8 Drains. Component B - Project Preparation, Design and Supervision, Institutional 3.2 capacity building, and setting up a Project Management Unit in Kabul Municipality. Total Cost 18.0 Requested ARTF Financing 18.0 * Taxes are included in the respective component cost. Table A.2: Estimated Costs by Category of Expenditure (US$ million) Phase-I Expenditure Category Goods, Works, Incremental Operating Costs**, Training and Consultant Services Amount of the Grant Allocations (US$ ) 18 Total 18 **For purposes of this paragraph, the term Incremental Operating Costs means incremental expenses incurred on account of Project implementation, support and management including the rental of office space, the operation, maintenance, rental and insurance of vehicles, fuel costs, communications supplies and charges, advertisement expenses, books and periodicals, office administration and maintenance costs, bank transaction charges, utility charges, domestic travel and per diem, but excluding salaries of officials and staff of the Recipient s civil service. 17

18 Economic Analysis Annex 3 Name of Project : KURIP Date (Current) : 08/31/2 008 Capital Cost : 11.5 Annual Rate of Discount : 12 Project Life : 20 Year of ConstrucFon : 2009 ConstrucFon Period : 1 Year Period RouF ne Maint Cost Periodic Maint Cost Capital Costs Total Cost Discou nt Factor Prese nt Value VOC Benefi t Total Prese Benefint t Value Net InFlo w Net Prese Prese nt nt Value Value Total PV IRR = % 8.4 Benefit Cost RaFo =

19 Name of Project : KURIP Date (Current) : 08/31/2 008 Capital Cost : Annual Rate of Discount : 12 Project Life : 20 Year of ConstrucFon : 2009 ConstrucFo n Period : 1 Year Perio d Savin RouF Perio g ne dic Disco Prese VOC Time Total Prese Maint Maint Capital Total unt nt Bene Bene Bene nt Cost Cost Costs Cost Factor Value fit fit fit Value Net InFlo w Prese nt Value Net Prese nt Value Total PV IRR = % 15.8 Benefiit Cost RaFo = 1.25 Name of Project : KURIP 19

20 Date (Current) : 08/31/2 008 Capital Cost : 11.5 Annual Rate of Discount : 12 Project Life : 20 Year of ConstrucFon : 2009 ConstrucFo n Period : 1 Year Perio d Savin RouF Perio g ne dic Disco Prese VOC Time Total Prese Maint Maint Capital Total unt nt Bene Bene Bene nt Cost Cost Costs Cost Factor Value fit fit fit Value Net InFlo w Prese nt Value Net Prese nt Value Total PV IRR = % 21.1 Benefiit Cost RaFo =

21 Annex 4 Financial Management Arrangements Country Issues The Bank has gained substantial experience and understanding of the financial management environment in Afghanistan through the large number of projects under implementation over the past four years. The Public Administration Capacity Building Project (PACBP) and the Public Financial Management Reform Project (PFMR) are the primary instruments to continue and enhance the fiduciary measures put in place during the past years to help ensure transparency and accountability for the funding provided by the Bank and other donors. A PFM performance rating system using 28 high-level indicators that was developed by the Public Expenditure and Financial Accountability (PEFA) multi-agency partnership program was applied in Afghanistan in June PEFA is comprised of the World Bank, IMF, EC, and several other agencies. The system is structured around six core dimensions of PFM performance: i) budget credibility, ii) comprehensiveness and transparency, iii) policy-based budgeting, iv) predictability and control in budget execution, v) accounting, recording, and reporting, and vi) external scrutiny and audit. Afghanistan s ratings against the PFM performance indicators generally portray a public sector where financial resources are, by and large, being used for their intended purposes. This has been accomplished with very high levels of support from international firms; this assistance will continue to be needed over the medium term if these ratings are to be maintained. There is also much room for improvement. In spite of undeniable gains made in reconstruction since the end of 2001, the challenges facing Afghanistan remain immense; not least because of the tenuous security situation in the region and continued prevalence of a large illegal and illicit economy. The policy framework benchmarks have not yet been fully costed so various priorities are funded through the annual budgeting process. The rising costs of the security sector constitute the major constraint on attainment of fiscal sustainability. With regard to executive oversight, the national assembly will play an increasingly active role. All in all, the new national strategy has created high expectations of the executive which could prove to be quite difficult to meet. The public sector, in spite of considerable efforts to reform its core functions, remains extremely weak outside of Kabul. The lack of qualified staff in the civil service and the absence of qualified counterparts in the government after 30 years of war and conflicts is a binding constraint. Delays in reforming the pay structure and grading of civil servants have severely crippled the public administration of the country. Domestic revenues lag behind expenditures by a factor of ten to one. Large-scale corruption could emerge to undermine the government s efforts to enhance aid flows through national accounts. Capacities to track expenditures and monitor expenditure outcomes have improved, but they need rapid and substantial strengthening if progress toward the attainment of national development targets is to be monitored. Currently, 75% of external revenues bypass government appropriation systems. The World Bank is financing a Financial Management Advisor to assist the Ministry of Finance, an Audit Advisor to assist the Control and Audit Office, and a Procurement Advisor to assist in 21

22 Procurement-related activities. Also an Internal Audit function is being developed within the Ministry of Finance with World Bank financing. USAID, and earlier the Indian Aid Assistance Program, is financing a team of consultants and advisors to assist the Da Afghanistan Bank in local as well as foreign currency operations. The activities carried out under the existing Public Administration projects have helped the Government to ensure that appropriate fiduciary standards are maintained for public expenditures, including those supported by the Bank and the donor community. Progress has been slower than expected in shifting from operations support provided by the three Advisors to capacity development and knowledge transfer to the civil servants. Given that, is expected that the Advisors will continue to be required for the medium term. Challenges still remain in attaining the agreed upon fiduciary standards and also to further enhance them. And to make matters more complex, the regulatory environment in Afghanistan has advanced significantly in the past three years. Unfortunately, even mastery of basic skills in the early environment does not fully qualify the civil servants to work effectively in the new emerging environment. Risk Assessment and Mitigation The table below identifies the key risks that the project may face and indicates how these risks are to be addressed. The overall FM risk rating is high but the residual risk rating after application of the mitigating measures is substantial. Risk Inherent Risk Risk Rating Risk Mitigation Measures Residual Risk Condition of negotiations, Board or Effectiveness (Y/ N) Country Inherent Risk M Source PFM study M N Project Financial Management Risk H Minimize use of Designated Account, maximize direct payments to contractors, consultants, etc.; all procurement through Procurement Advisor Perceived Corruption H Government commitment, internal controls and new internal audit will help to reduce the high level of perceived corruption Overall Inherent Risk H S S S N N Control Risk 1. Weak Implementing Entity S Utilization of the services of an Implementation Consultant M N 22

23 2. Funds Flow S Payments will be made to contractors, consultants, Suppliers, etc. from the Designated Account (DA) by SDU-MoF. In addition to payments out of DA funds, the implementing entities can also request the SDU to make i) direct payments from the Credit Account to contractors, consultants or consulting firms, and ii) special commitments for contracts covered by letters of credit. These payments would only be made by SDU after due processes and proper authorization from the respective component implementing entities. 3. Budgeting S A budget committee will be appointed to coordinate the preparation of annual work plan and the derivation of annual budget there from. It will include representatives from relevant departments of Kabul Municipality and the Implementation Consultant, and shall report to the 4. Accounting Policies and Procedures S Kabul Municipality management. Will follow international standards. Project accounting procedures and details of the FM arrangements will be documented in an FM Manual to be prepared by Kabul Municipality and approved by the Bank M M M N N N An MoU will be developed by Kabul Municipality for standards of service for payment processing 5. Internal Audit H Internal Audit Directorate of KM will be responsible for the review of project internal control systems 6. External Audit H Will be audited by CAO with 7. Reporting and Monitoring H support from Audit Advisor Strengthening the SDU is a priority under the FM Advisor contract, to provide information that will comply with agreed format of financial reports. This will be facilitated by the computerized accounting system that is presently being utilized by Kabul Municipality to maintain records and generate required reports. Overall Control Risk H S S S S N N N 23