Doemet of

The World Bank

FOR OmCILL USE OnLY

-Repwt o. P-6363-BD

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

IN AN AMOUNT EQUIVALENT TO SDR 103.9 MILLION

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR A

SECOND ROAD REHABILITATION AND MAINTENANCE PROJECT

JUNE 3, 1994

Ml CROGRAPH I C'

Report. No: P- 6363 B1Type: MOP

This docament has a restricted distribution and may be used by reclpients only in tbe prfonace oftheir official dutes. Its coutenits may not otbenrise be disclosed without World Basl autboriation.

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CURRENCY EQUIVALENTS(as of January 1994)

Currency Unit = Taka (Tk)Tk 1.00 = US$ 0.0250US$ 1.00 = Tk 40.07

WEIGHTS AND MEASURES

1 hectare (ha) _ 2.4? acres1 kilometer (km) = 0.621 mile

ABBREVIATIONS AND ACRONYMS

ADB - Asian Development BankBRTA - Bangladesh Road Transnort AuthorityCCDB - Christian Commission for Development in BangladeshEIRR - Economic Internal Rate of ReturnGOB - Government )f BangladeshHDM - Highway Design and Maintenance Standards Model/Version IIINGO - Non-Governmental OrganizationODA - Overseas Development Administration (U.K.)RAP - Resettlement Action PlanRHD - Roads and Highways DepartmentRMP - Road Master Plan

RMSS - Road Materials and Standards StudyRRMP-I - Road Rehabilitation and Maintenance Project (Cr.1827-BD)RRTD - Roads and Road Transport DivisionUNDP - United Nations Lcvelopment Program

FISCAL YEAR

July 1 - June 30

FOR OFFICIAL USE ONLY

BANGLADESH

SECOND ROAD REHABILITATION AND MAINTENANCE PROJECT

Credit and Project Summary

Borrower: People's Republic of Bangladesh

Beneficiary: Not applicable

Amount: SDR 103.9 million (US$146.8 million equivalent)

Terms: Standard, with 40 years maturity

Financing Plan:

Lc_;al Foreign Total------ US$ million-------]

IDA 35.5 111.3 146.8

ODA 0.6 8.2 8.8GOB 96.5 - 96.6

Total 132.7 119.5 252.2

Economic Rateof Return: 27%

Poverty CategorY: Not applicable

Staff ADpraisalRetort: Report No. 12211-BD

Mal): IBRD No. 24202

This downmi bhas a mstlictcd distnbtion and may be used by recipients only in the peifm af therI official duties. Its contents may not otherwise be disclosod vwithout World Bank adnoizaMio

MEMORANDUM AND RECOMMENDATION OF TX PRESIDENT

OF THE INTERNATIONAL DEVELOPMENT ASSOCIATIONTO THE EXRCUTIVE DIRECTORS

ON A PROPOSEIV CREDITTO THE PEOPLE'S REPUBLIC OF BANGLADESH

FOR A SECOND ROAD REHABILITATION AND MA.INTENANCE P!.OJECT

1. I submit for your approval the following memorandum andrecommendation on a proposed development credit to the People's Republic ofBangladesh for SDR 103.9 million (US$ 146.8 million equivalent) to helpfinance a Second Road Rehabilitation and Maintenance Project. The proposedcredit would be on standard IDA terms, with a maturity of 40 years. Theproject would be cofinanced on grant terms by the Overseas DevelopmentAdministration (ODA-UK, £6.4 million).

SECTOR BACKGROUND

2. Transport Sector and the Economv. Bangladesh's surface transportsystem is severely constrained by geography and climate, and air transport hasso far had limited impact. Consisting mainly of a flat alluvial plain, thecountry is criss-crossed by rivers including some of the world's largest. Thecurrent transport system consists of a road network of over 13,000 kilometers(km) of paved roads and 150,000 km of unpaved roads, served by a predominantlyprivate road transport industry; a government-owned and heavily subsidizedrailway comprising 2,800 km of track; and a resilient and relatively efficientinland water transport system, dominated by private carriers, covering 5,200km to 8,300 km of waterways depending upon the season. The country's seabornecommerce is handled by two deep water ports (Mongla and Chittagong), and thereis a small but growing civil aviation subsector. Traditional forms oftransport--wind, animal and human power--continue to play an important role inroad and water transport. The relative roles of the transport modes areevolving, with road traisport expanding at the expense mainly of the railway,particularly for freight.

3. Bangladesh has witnessed rapid growth in t-ansport demand since themid-1970s, more than 8 per annum (p.a.) for passenger and 6% p.a. for freighttraffic; demand for road transport has increased at an even faster pace ofabout 10% p.a. This compares with a GDP growth of some 4% p.a. over the sameperiod. Nevertheless, transport intensities in Bangladesh are lower than inmany neighboring countries, and the personal mobility level is still less thanhalf that of India and only one sixth that of '.nailand. Transportrequirements are expected to intensify further as the country moves from asubsistence to a more market-based economy. Poverty alleviation is theoverriding objective of the Government's (GOB's) development strategy. Havingachieved macroeconomic stability, GOB must now direct its efforts towardaccelerating the economy's growth and employment g3neration. While most ofthe growth is expected to come from the private sector, public investment inphysical infrastructure, including transport, and human resource developmentare essential enabling conditions for private investment. Transport accountsfor about 12% of investments under GOB's three-year rolling investment program(FY93-95), of which roads account for about 64*. The transport sector as awhole generates about as much revenue for GOB as it requires in recurrentexpenditures, although on a subsectural basis only ports and roads cover theircosts.

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4. Bangladesh: Transport Sector Review (Report No. 9414-BD, June 25,1991), prepared by Bank staff with substantive participation by governmentministries and other sector agencies involved in the transport sector andconcerned donors, gives a comnprehensive overview of the country's transportsector, identifies the main constraints and opportunities, and proposes astrategy for its future development, including policy and institutionalreforms and investment priorities. GOB has initiated action on many of thereport's recommendations and, with the assistance of further technicalassistance (United Nations Development Program/UNDP-funded, IDA-executed), isdeveloping a long-term integrated strategy for the transport sector, whichwill form, the basis of future sector investment plans.

5. Road Subsector. The road subsector has been the most dynamic areaof transport development in Bangladesh since Independence, and now handlesnearly 70% of passenger and 60% of freight traffic. IDA's recently completedTransport Sector Review concluces that the road subsector is functioningreasonably well and identifies c!e major issues affecting its development as aproliferation of road projects with poor budgetary controls, planning and pri-oritization, inadequate maintenance and a poor safety record. GOB's subsectorstrategy outlined in the Fourth Five Year Plan (FY91-95) broadly addressesthese concerns, and good progress has been already been made in each area.First, after a delayed start-up, the Road Mast^: Plan (RMP) study (UNDP-funded, Asian Development Bank/ADB-executed), based on the Bank' s HighwayDesign and Maintenance Standards Model/Version III (HDM), was completed in1992, providing GOB with an objective and efficient basis for planning futureinvestment and maintenance activities for its main road network (about 13,700km of national, regional and type A feeder roads) under the responsibility ofthe Roads and Highways Department (RHD). GOB has undertaken that future roadinvestments and maintenance works will substantially follow the RMP, whichwill also provide the basis for annual updating of RHD's three-year rollinginvestment program. One of the RMP study's fundamental recommendations is theneed for an intensive program of periodic maintenance, particularly asphaltconcrete overlays, on RHD's paved road network in order to defer more costlyrehabilitation and reconstruction of the more heavily trafficked roads in fairto poor condition. Second, good progress has been made in implementing theRoad Maintenance Action Plan for RHD agreed under the ongoing Road Rehabilita-tion and Maintenance Project (RRMP-I: Cr.1827-BD). RHD's maintenance budgethas increased in line with requirements, tripling since FY87; periodicmaintenance is now mostly contracted out (leaving only routine maintenance toRHD force account); planning, monitoring and evaluation units have been set upin RHD zonal offices; and the Road Materials and Standards Study (RMSS: 1992)(European Union-funded) was completed. Third, UNDP and ADB have providedassistance to the Bangladesh Road Transport Authority (BRTA) in the area ofroad safety, mostly in clarifying its legislative, regulatory and enforcementfunctions; action to date has been mainly in the area of registration,licensing and vehicle inspection.

6. While actions have been taken on several fronts as noted above,full implementation has yet to be effected in many cases (e.g., systematicdata collection/monitoring of road conditions has not commenced; RHD manage-ment is not conversant with HDM and insufficient staff are trained in its use,hence, it is not being used; RMSS findings have yet to be endorsed by RHD/GOBand put into a practicable format for field application), and improvements areneeded in related areas of RHD's operations (e.g., supervision and qualitycontrol of contractor's work is poor). Moreover, a road safety study is

urgently needed to design an action plan for targeted improvements. Follow-uptechnical assistance to RHD, BRTA and the Communication Ministry's Roads andRoad Transport Division (RRTD) addressing these issues, among others, will beprovided under the proposed project. In addition, in line with the RMPfindings, the project will finance a 4-year time slice of the urgently neededperiodic maintenance works in western Bangladesh, as well as continuing therehabilitation work begun under RRMP-1; ADB's Road Overlay and ImprovementProject (approved in December 1993) provides similar assistance in areas eastof the Jamuna. To enable RHD to assume responsibility for periodic mainte-nance over the longer term, GOB will need to continue annual increases ir.RHD's maintenance budget. The main issues concerning local access roads underthe Local Government Engineering Department--road rehabilitation andmaintenance and construction of missing structures on otherwise completedpriority roads--are being addressed under ongoing/proposed rural road projectsfunded by IDA, ADB and other donors.,

7. Lessons Learned from Previous IDA Operations. IDA's involvement inthe transport sector to date has included five lending operations for roads,three for inland water, one for ports and several multi-sectoral operations(e.g., rural development, fertilizer transport, and cyclone and floodrehabilitation); of these, three road projects and one inland water projectare ongoing. Performance of the recent transport projects has been uneven,but overall satisfactory. IDA has also been executing agency for selectedUNDP-funded projects (e.g., preparation of Jamuna Multipurpose Bridge Projectand implementation of Bangladesh Transport Sector Study).

S. Of the five road projects, two have been completed, both of whichinvolved RRD, the implementing agency for the proposed project, and three areongoing, one of which involves RHD (RRMP-I: Cr.1827-BD). Because of GOB'slack of commitment to improve its low construction standards and maintain theexisting network, IDA suspended lending for new road projects for severalyears after the first two highway projects. Drawing on lessons learned underthese projects, the physical works under RRMP-I are being implemented in twophases and the project includes extensive technical assistance. Physicalimplementation of RRMP-I has generally been good and quality high; projectcompletion is expected on time in 1995. Because of a lack of transparency inthe process of prequalifying contractors under RRMP-I, more stringent criteriaare being used and contractors informed of their capacity limits at the timeof bid invitation under the proposed project. While implementation of theinstitutional support components under RRMP-I has been slow, good progress hasbeen made in implementing the agreed Road Maintenance Action Plan and thebasic studies have been completed. These efforts now need to be consolidatedand made a part of RHD's everyday activities; this will be done through theinstitutional development program under the proposed project. To ensuretimely start-up of project activities, selected contracts are being awardedbefore Board presentation/credit effectiveness.

9. Rationale for IDA Involvement. With poverty alleviation theprimary objective of development in Bangladesh, GOB's development strategy andIDA's country assistance strategy (discussed by the Board on February 17,1994) reflect the two-pronged approach to poverty alleviation outlined in the1990 World Development Report--broadly based labor-intensive economic growth,mainly from the private sector, but complemented by public investment inphysical infrastructure and human resource development to create the necessaryenabling environment. IDA's assistance strategy calls for continued efforts

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to reduce infrastructure bottlenecks through physical investments in, andmaintenance of, transport infrastructure and institutional improvements in thesector. The proposed project is consistent with this strategy and complementsIDA's three ongoing road projects. It follows up much of the work initiatedunder RRMP-I and will, in particular, assist RMD to initiate implementation ofthe Road Master Plan. The project supports physical implementation of a 4-year time slice of the RMP's periodic maintenance program in the west andhelps develop RHD's institutional capacity to plan and implement such aprogram. At the same time, it continues a limited program of rehabilitationon the highest priority roads begun under RRMP-I and complements ADE's paral-lel project for the east. Through a comprehensive institutional developmentprogram, the project will assist RHD/GOB to bring together the key findings ofthe recent studies and technical assistance provided under RRMP-I and otherdonors' projects, -ad to operationalize them, so they can be used. ODA, whichhas traditionally been involved with bridges in Bangladesh, is grant-financingthis component which it sees as critical to sustaining the subsector's-pro-gress and contributing to the country's overall development. The project isan important test case for new approaches to effecting land acquisition andresettlement in Bangladesh, in line with the Bank's guidelines, on a smallerscale than in the recently approved Jamuna Bridge Project (Cr.2569-BD).

THE PROJECT

10. Proiect Obiectives. The proposed project's overall objective is toreduce the total cost of road transport on Bangladesn's most travelled roadsby improving the RHD road network through more effective planning, design andconstruction (including reconstruction) of road investments and more effectiveprogramming and implementation of road maintenance. More specifically, theproject assists RHD/GOB: (a) to initiate physical implementation of the RMP inareas west of the Jamuna, thus preserving the country's capital base of roadinfrastructure and improving high priority sections in a systematic manner;and (b) to strengthen its institutional and technical capacity to plan andprogram works, administer and supervise works contracts, and operate andmaintain the country's main road system.

11. Proiect Description. The project comprises three main components:(a) road works--a 4-year time slice of RHD's Road Master Plan for national,regional and type A feeder roads in western Bangladesh, including about 168 kmof rehabilitation, l00 km of widening to 2-lane standard and 1,800 km ofperiodic maintenance (mainly asphalt concrete overlays and some resealing);(b) project preparation and implementation support--consultancy services toprogram and supervise implementation of the project road works, carry outfeasibility studies, detailed engineering and other preparatory work forfuture priority road construction and improvement works, and assist inplanning, implementing and monitoring land acquisition and resettlement underthe project; and (c) institutional development--a 4-year program of integratedsupport, including consultancy services, twinning arrangements, officer andstaff training, research and associated equipment, to RHD to improve itsplanning, management and implementation of road works, RRTD to strengthen itsplanning and economics capabilities, and BRTA to enhance its road trafficsafety efforts.

12. The project cost is estimated at US$ 252.2 million equivalent, witha foreign exchange component of US$ 119.5 million equivalent (47t) and taxesand duties estimated at abott US$ 27.6 million equivalent. IDA will finance

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US$ 146.8 million equivalent (93% of the foreign exchange and 27% of localcosts); ODA will finance the remaining foreign exchange and a small amount oflocal costs (US$ 8.8 million equivalent). Retroactive financ4ng of up toUS$ 8.0 million equivalent (5S of the proposed credit), for expendituresincurred after November 1, 1993, is provided for the supervisory conisultant,periodic maintenance works and non-governmental organization (NGO)/consultantsassisting in resettlement to enable the start of road works irt the 1994-95 dryseason and completion of land acquisition and resettlement by mid-1995. Abreakdown of project costs and the financing plan are shown in Schedule A.Amounts and methods of procurement and of disbursements, and the disbursementschedule are shown in Schedule B. A timetable of key project processingevents and the status of Bank Group operations in Bangladesh are presented inSchedules C and D, respectively. A map is also attached. The Staff AppraisalReport, No. 12211, dated June 3, 1994, is being distributed separately.

13. Project Implementation. The proposed project will support PHD'srehabilitation and maintenance program in the west over the period FY95-98 andwill be completed by about June 1999. RHD will implement the project, withassistance from the supervisory and institutional development consultants;foreign and local contractors will execute the physical works. The implementa-tion arrangements are generally similar to those under RPMP-I which have beensatisfactory. The Project Civil Works Director in RHD, appointed for purposesof the project, will be responsible for the rehabilitation works, while theAdditional Chief Engineers, in charge of existing zonal offices, will beresponsible for the periodic maintenance works in their areas. The supervi-sory consultant will have two teams: one for rehabilitation and one formaintenance. For the latter, the consultant will draw heavily on RHD staff ofthe concerned zonal offices, to be trained on the job, as an integral part ofhis team, and supervision will include assistance in preparing RHD's annualmaintenance work program for the west.

14. The institutional development program will integrate and build uponpast technical assistance to the road subsector. An 8-10 year program isenvisaged, of which the first four years will be financed under the proposedproject. Considerable flexibility will be required in implementing theprogram to enable its adaptation to GOB's evolving needs. The proposedassistance arrangement, comprising a partnership among consultants, othergovernment road agencies and research laboratories, and universities andtechnical training institutes, should provide this flexibility and enable thedevelopment of a more comprehensive and longer term relationship between theconcerned agencies in Bangladesh and the supplying agencies. A preliminaryprogram of specialist assistance and training has been designed, leaving scopefor additional assistance as needs are identified. Formation of an HDM unitin RHD and planning cell in RRTD, and assignment of sufficient qualifiedcounterpart staff to the institutional specialists will be prerequisites forthe program's success. An Institutional Review Committee has been establishedin the Communications Ministry to oversee the program.

15. Project preparation is at an advanced stage. Contracts for thesupervisory consultant, first year maintenance works and NGO assisting inresettlement have been signed, and contractors prequalified/bids invited forthe rehabilitation works; physical works will start in the 1994-95 dry season.Negotiations are ongoing with the selected twinning/consultancy team forinstitutional development, with a view to appointing and mobilizing the teamby August 1994.

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16. Project Sustainability. The proposed project, together with ADB'sparallel project, will assist RHD to initiate implementation of the RMP whichprovides the framework for future road investments and maintenance works.While the rehabilitation works will continue efforts under RRMP-I to bringimportant national and regional roads in the northwest to maintainablecondition, the maintenance works will assist RHD to nearly eliminate itsbacklog of periodic maintenance in the west before the concerned roads alsorequire rehabilitation and reconstruction. Technical assistance under theproject will develop RHD's capability to update the RMP using the HighwayDesign and Maintenance Standards Model, use this as a basis for preparingannual work programs, and implement these programs in a timely manner and withgood quality control. In an effort-to ensure that this leads to sustainableimprovements in the main road network's management and operation, increasingresponsibility for works supervision will be transferred to RHD as the projectprogresses, and various safeguards have been incorporated in the institutio..aldevelopment program and milestone achievements and target handover datesidentified for key tasks.

17. Agreed Actions. Agreements were reached with RHD/GOS duringnegotiations as follows:

(a) On sectoral matters, (i) RHD will submit to IDA anmually a reporton its previous year's work program, and will prepare for reviewwith IDA, by April 15 of each year, the proposed work program forthe next year and updated RMP for the coming three years; budgetaryallocations will be in accordance with RMP requirements; (ii) RHD/GOB will, not later than December 31, 1996, prepare en updatedanalysis of the structure and level of road user charges for reviewwith IDA; and (iii) key action areas for assisting the local roadconstruction industry's development over the near term will includecommon classification of colutractors, streamlining of contractingprocedures including introduction of new standard contract forms byJune 30, 1996, and training/other assistance to contractors to beprovided under the institutional development program;

(b) Orn project specific issues, (i) the services of key RHD projectpersonnel and the Institutional Review Committee will be retainedthroughout the project; (ii) the HDM unit in RHD) and planning cellin RRTD will be set up with adequate staff and facilities byOctober 31, 1994, and the environmental unit established in RHD byJune 30, 1995; (iii) the widening and periodic maintenance programsfor the west under the project will be prepared for review by IDAby December 31 of the year before the work is to commence; (iv) allnecessary measures to mitigate any adverse impact of the project onthe environment will be implemented; (v) land acauisition andresettlement will be carried out in accordance w-.th the finalagreed resettlement action plan (dated May 26, 1994i, a¢d (vi) acomprehensive mid-term review will be carried out not later thanDecember 31, 1996; and

(c) On actions to be completed before credit effectiveness, vi) GOB/ODAwill sign the ODA grant agreement and appoint the twinning/consul-tancy team for the institutional development program; (ii) RHD/GOBwill complete joint verification of land/other property to beacquired under the project, and the Deputy Commissioners will

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provide to RHD the estimat-3 budgetary requirements for acquisitionof the same; and (iii) GOL gill issue a separate legal opinionconfirming that all necessary governmental action required forimplementing the agreed resettle-ent plan has been taken.

I8. Environmental and Resettlement Aspgcts. The project is notexpected to have a major impact on the environment. The road works arerehabilitation, widening and maintenance along existing alignments, except for27 km of new construction in five sections unde: the rehabilitation componentwhich will involve acquisition of about 19 km of new right-of-way. Theconsultants assisting RHD in preparing the project carried out an environmen-tal analysis for the overall project, and prepared a plan for mitigatingpotential impacts and monitoring critical parameters. The analysis concludesthat environmental considerations have generally been incorporated in eachstage of the project, including appropriate attention to the project'spotential impact on the area's hydrology, and project designs and constructionspecifications modified to take intd account environmental safeguards. Asthere is no focal point for addressing environmental issues and monitoringfollow-up actions in RHD's present organization, the analysis recommends anenvironmental unit, reporting to the Ciiief Engineer and with subunitsresponsible for environment, land acquisition/resettlement and arboriculture,be established. Necessary assistance will be provided under the institutionaldevelopment program.

19. The 19 km of new right-of-way, about 115 hectares (ha), will haveto be acquired by HUM/GOB; this is distributed over five sections ranging from3 ha to 60 ha. An estimated 1,365 households, about 8,000 people, are living,cultivating or working in the affectcd area; about 70% of the land to beacquired is agricultural. In November 1993, RHD contracted the ChristianCommission for Development in Bangladesh (CCDB), one of Bangladesh's largerNGos which has been active in the project area, to assist in preparing andimplementing a plan for land acquisition and resettlement under the project.While a preliminary socio-economic survey had been carried out in late 1992,CCDB conducted a new survey and prepared a resettlement action plan (RAP)detailing key characteristics of the affected population, nature of lossessustained, compensation policies, implementation schedule, organizationalframework and estimated budget. Bank staff have reviewed the RAP and found itsatisfactory. The compensation policies developed under the RAP are primarilycash-based, except for support for relocation to poor households (mainlysquatters). This is judged appropriate for acquisitior. of strips of land(right-of-way) as under the proposed project. The basic policy packageincludes compensation for land and other property based on replacement value,compensation and assistance to affected non-property owners, compensation forrelocation costs and compensation for temporary loss of income. Importantfeatures of the policy are the introduction of area-specific land valuationteams to advise in valuation of lost properties and grievance redressalcommittees to assist affected persons with complaints.

20. The Acquisition and Requisition of Immovable Property Ordinance,1982 provides the legal basis for acquisition of land and other property underthe project. RHD has primary responsibility for land acquisition andimplementation of the resettlement plan, and has appointed a Chief Resettle-ment Officer and three area Resettlement Officers with appropriate field stafffor this purpose. The Deputy Commissioner's Office is the acquiring bodyacting on behalf of RHD. CCDB, with the assistance of tecbnical experts as

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necessary, is assisting RHD in preparing and implementing the plan andmonitoring its effectiveness, and will effect payment of compensation toentitled persons except that covered by the Deputy Commissioner. Theestimated base cost of land acquisition and resettlement included in theproject is about US$ 5.1 million equivalent, with an additional US$ 221million equivalent for contingencies due to uncertainty in the valuation ofland and other property. The organizational arrangements and budget areconsidered adequate. The land acquisition process is still in its earlystages; completion of eviction and handing over of sites to the contractors isscheduled for mid-1995. Joint verification of land and other property to beacquired and the Deputy Commissioner's provision to RHD of the estimatedbudgetary requirements for their acquisi_ion will be completed by September1994. An information brochure outlining, inter alia, the project, entitle-ments and agencies involved will be distributed during joint verification.

21. Proiect Benefits. The economic justification of the Road MasterPlan and the proposed project has been analyzed using the Bank's HighwayDesign and Maintenance Standards Model, modified slightly to tal intoconsideration congestion conditions in Bangladesh. The RMP work provided themain basis for the economic evaluation of the proposed project, using updated(actual) road conditions, traffic and prices wherever possible. The weightedaverage economic rate of return (EIRR) for the project as a whole is estimatedto be 27%. The EIRRs of the individual components are about 22% for therehabilitation component, 25% for the widening works, and 34% for the 4-yearperiodic maintenance program. The technical assistance and training providedduring project implementation and through the institutional developmentprogram is expected to lead to sustainable improvements in the country'smanagement of its main road network. While the potential benefits of this arehigh, only the cost of the technical assistance (about 9% of total projectccsts) has been included in the overall evaluation. Based on updated fielddata and HDM analyses, RHD with the supervisory consultant's assistance willprepare annual maintenance work programs for years two, three and four of theproject and a widening program to commence in year three; these programs willbe agreed with IDA before bids for the works are invited. Upon completion ofthe proposed project and ADB's parallel project, about 40% of RHD's 8,200 kmpaved road network will have been included in a program of overlays, widening,rehabilitation and reconstruction since the start of RRMP-I (1988). Inaddition, systematic procedures will have been established in RHD for planningand executing regular network maintenanc-., thereby deferring more costlyrehabilitation and reconstruction.

22. Risks. The main risks for the physical works include delays inproject implementation and failure to impl ent the optimal maintenanceprogram. The first has been mitigated by signature of the supervisoryconsultant and first year maintenance contracts and invitation of bids for therehabilitation works before Board presentation, and completion of jointverification of land and other property to be acquired under the projectbefore credit effectiveness. As for the second, the supervisory consultantwill work closely with RHD staff in preparing the annual work program usingthe HDM and in implementing it; relevant specialists under the institutionaldevelopment program will also be available to provide assistance. On theinstitutional side, the main risks are over-dependence on consultants,ineffective and slow implementation of the institutional development program,and lack of motivation on the part of RHD staff. RHD staff will be integralmembers of the supervisory consultant's team and will be given increasing

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responsibility as the project progresses. The institutional developmentprogram will begin with a skills gap assessment; a Review Committee has beenestablished in the Ministry to oversee program implementatiorn. In an effortto maximize the programla effectiveness, various safeguards have beenincorporated, such as minimum criteria for staff as specialist's couinterparts,initiatives to motivate staff, and milestone achievement and target handoverdates for key tasks. Involvement of local institutions outside the Ministrywill enhance its sustainability. Close supervision by IDA/ODA and a jointmid-term review will also help to keep the overall project on track.

23. Recommendation. I ani satisfied that the proposed developmentcredit would comply with the Articles of Agreement of the AssociatioL andrecommend that the Executive Directors approve the proposed credit.

Lewis T. PrestonPresident

Attachments

Washington, D.C.June 3, 1994

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SCHEDULE A

BANGLADESH

SECOL4D ROAD REHABILITATION AND MAINTENANCE PROJECT

Estimated Costs and Financinc Plan

(US$ million)

Local Foreign Total

Estimated Proiect Costs a/

Road Works

Rehabilitation/Widening 39.5 31.2 70.7

Periodic Maintenance 66.8 58.8 125.7

Preparation/Implementation Support 6.0 5.7 11.8

Institutional Development 1.1 7.1 8.2

Base Cost 113.4 103.0 216.4

Physical Contingencies 12.7 10.3 23.0

Price Contingencies 6.6 6.2 12.8

Total Project Cost 132.7 119. 252.2

Financing Plan

IDA 35.5 111.3 146.8

ODA b/ 0.6 8.2 8.8

GOB 96.6 - 96.6

Total 132.7 ll9.5 252.2

a/ Total project cost net of duties and taxes (US$ 27.6 million) is US$ 224.6

million. Totals may not add due to rounding.

b/ An allocation of up to 6.4 million pounds sterling (about US$ 9.5 million)

of British grant assistance over four years for the project's

institutional development program has been approved.

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SCHEDULE BPage I of 2

- -EANGLA~SH.--- ----

SECa-NT ROAD REiIA-ILITATION ANt) !01ATNTU%!CK PROJECT

Procurement Methods and D1a sbursemeit (USq ml i1 on n

Procurement is beina carried out accordiing Lo the following table:

Procurement Method TotalProject Element lCS LCB Other N.S.F. Cost

Civil Works

Rehabilitation 58.2 - - 58.2(46.6) (46.6)

Widening 19.1 - - 19.1(15.3) (15.3)

Periodic Maintenance 122.3 20.0 142.3(60.0) (10.0) (70.0)

Materials and Equipment

Vehicles/Equipment (Maintenance) 0.8 1.0 0.5 2.3(0.5) (0.6) (0.3) (1.4)

Facilities/Equipment (Institutional Development) p/ - - 1.1 1.1(-X) (-)

Consultancy Services. Fellowships and Training

Road Works Supervision - - 7.5 - 7.5(7.5) (7.5)

Feasibility/Detailed Design/other Preparatory - - 5.1 - 5.1(5.1) (5.1)

RAP Preparation/Ilplementation - - 0-9 - 0.9(0.9) (0.9)

Institutional Development Specialists a/ - - - 6.5 6.5(-) ( )

Training/Research a/ - - - 1.9 1.9t-) (.)

Other

Land Acquisition/Resettlement 1/ - - 6.3 6.3C-) C-)

Staff Incentives b/ - - - 1.0 1.0

Totat 200.4 21.0 14.0 16.8 252.2(122.4) (10.6) (13.8) ( - ) (146.8)

Note: Figures in parentheses are respective amounts financed by the credit. Totals may not add due torounding. N-d.F = not Bank financed.

a/ Financed by ODA and GOB.b/ Financed by GOB.

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SCHEDULE BPage 2 of 2

Disbursements

(US$ milliosn)

Category - - Amount Expenditure to be Financed

Civil Works

Road Rehabilitation and Widening Works 53.1 80%

Periodic Road Maintenance Works 62.3 60% in FY95,

50% in FY96 and FY97,40% in FY98 and thereafter

Equipment and Materials 1.2 100t of foreign

expenditures, 100% of localexpenditures (ex-factory

cost) and 60% ofexpenditures for otheritems procured locally

Consultant Services and Training 12.0 100%

Unallocated 16.2

Total 146.8

Estimated Disbursements:

IDA Fiscal Year FY95 FY96 FY97 FY98 FY99 FY00

Annual 24.7 32.2 38.1 30.8 17.5 3.5Cummulative 24.7 56.9 95.0 125.8 143.3 146.8

SCHEDULE C

BANGLADESH

SECOND ROAD REHABILITATION AND MAINTENANCE PROJECT

Timetable of Key Project Processing Events

(a) Time taken to prepare the project: Four years

(b) Prepared by: Government with assistance offoreign/local consultants and IDA

(c) v'irst IDA mission: October 1988

(d) Appraisal mission departure: March 1993

(e) Negotiations: May 1994

(f) Planned date of effectiveness: October 1994

(g) List of relevant PCRs and PPARs: Project Performance Audit Report(No. 7954), June 1989, coveringCredits 408-BD, 964-BD and 1301-BD

The following staff were involved in project preparation:Ms. J. Koch (Task Manager) and Mr. S. Lundebye (Transport Engineer)--SAlEI;Messrs. A. Banerjee (Operations Officer) and M. Quazi (Program Officer)--SAlBG;Mr. A. Byl (Transport Economist)--ASTIN; Ms. R. Jaywardene (Resettlement Speci-alist) and Mr. A. Jerve (Anthropologist)--ASTHR; and Messrs. R. Armijo (CivilEngineer/HDM Specialist), J. Rolt (Civil Engineer/Institutional Specialist) andR. Weatherell (Civil Engineer/Institutional Specialist) --Consultants.

SCHEDULE D- 1- ag of 2

THE STATUS OF BANK GROUP OPERATiONS IN BANGtLAESH

A. STATEMENT OF aANK LOANS AND IDA CREDITS

(As of Msfch S1, 194)

Amount in US$ Million(less cenceLlertion-el

rfertlt No. FY aorrower PUrao Sink iDA Undiebureed

2 Loans and .31 Creditls have been fully d.sbuisod - 58.0 3,352

of whicht SECALs. SAL# and Program Credits a> 1,004.7

Cr. 1487-BD 1984 Bangladesh BWOB Small Schemes - 41.5 0.7 b>

Cr. 1688-80 1985 Bangladesh Second Gas Developmente- 110 0 3e.8

Cn. 1591-80 1985 Bangladesh Flood Control & Drainage III 45.1 7.1

Cr. 1633-60 1988 Bangladesh Rural ElectrifIcation II 79.0 28.1

Cr. 1651-t0 1985 Bangiadesh Shrimp Cultui e 22.0 9.7 b>

Cr. 1734-SO 1987 Sangladesh Ohaka WASA III 30.0 8.3

Cr. 1749-4SD 1987 Bangladesh Refinery Modification & LPG 47.0 7.3

Cr. 1784-BD 1987 Bangladesh Flood Control & Drainage IV 20.0 8.2

Cr. 1827-80 1987 Bangladesh Road Rehab & Maintenance 102.0 47.7

Cr. 1870-80 1988 Banglades8h Sm So FCD & irrigation It 81.5 19.1

Cr. 1930-4D 1988 Bangladesh Urban Development I 38.8 31.0

Cr. 1940-SD 1988 Bangladesh Rural Roads & Markets e2.3 30.8

Cr. 2000-BO t989 Bangladesh Export Development 25.0 8.2

Cr. 2016-8 l989 Bangladesh Powor Distribution (10 Towns) 87.0 59.3

Cr. 2048-80 198S Bangladesh Flood Rehabilitation III 133.8 201

Cr. 2099-80 1990 Bangladesh BWOB System Rehab 53.9 48.0

Cr. 2118-80 1990 Bangladesh General Education 159.3 98.1

Cr. 2129-8D 1990 Bangladesh Rural Electrification III 1050 93.3

Cr. 214SO 1990 Bangladesh Fisheries III 44.0 41.6

• Cr. 2152-BD 1990 Bangladesh Financial Sector Adjust. Credit 175.0 52.3

Cr. 2232-8D 1991 Bangladesh Inland Water Transport 45.0 43.2

Cr. 2233-80 1991 Bangladesh Agric. Support Services 35.0 29.3

Cr. 2246-BD 1991 Bangladesh National Minor Irrigation 54.0 50.1

Cr. 2253-80 1991 Bangladesh Shallow Tubewelfs 75.0 54.3

Cr. 2258-ED 1991 Bangladesh Population and Health IV 1S0.0 144.8

Cr. 2263-8D 1991 Bangladesh LPG Distribution 67.2 68.4

Cr. 2340-80 1992 Bangladesh Private Sector Ind. Credit 25.5 24.7

Cr. 2361-50 1992 Bangladesh Public Resource Management 150.0 101.4

'. 2390-dD -^ Bangladesh Technical Assistance VI 25.0 23.0

%r. 2387-210 ;.192 Bangladesh Forest Resourees Management 49.6 44.8

* Cr. 2427-SD i93 Bangladesh Industrial Sector SECAL II 103.5 49.9

Cr. 246-5O0 1993 Bangladesh Female Secondary School Assistance 8S.0 6&3

Cr. 2567-BO c> 1984 Bangladesh Bangladesh Jute Sector Adjustment Credit 247.0 247.0

Cr. 25698-0 c> 19S4 Bangladesh Jamuna Bridge 200.0 200.0

Total 56.9 6,139.6 d> 1,800.7 d>

of which has been repaid 18.8 113.1

Total now held by Bank and IOA 38.0 6,026.4

Amount sold 0.4Of which repaid 0.4 Total Undisbursed 1.00.7

ac--sne

a> Approved during or after FYs8.

b> ClosedJune30, 193.

c> Not yet effective.d> The principal amounts of IDA credits are shown In US Dolar equivatent at date of negoiations, as shown In the President's

Report. Undisbursed amounts shown in US Dollar equivalent are valued at the exchange rate apprlcable on the date of thic

statement. In some cases, therefore, the undisbursed balance Indicates a dollar amount greater than the original principal

credit amoui;t expressed in dollars.

* SAL. SECAL or Program Loan.

- 15 -

Scbhme DEM2 of 2.

STATEMENT OF FC INVESTMENS(As of March 31, 1993) a>

Committed for IFC's A 8omInvestment Fiscal - Type of Loan Equity Total

Year ObliLQr Business (USS MilIion

2 Projects closed

528 1980 Industral Promotion andDevelopment Company of DevelopmentBangladesh, Ltd. Financing 0.00 1.05 1.05

785 1985 Industrial DevelopmentLeasing Company of Money and CapitalBangladesh Markets .75 0.15 0.90

767/ 1985/86 Bata Shoe Company857 (Banglesh) Ltd. Geneal Manufctuing 0.00 0.26 0.26

2395 1991 Dynamic TextileIndustries Ltd/ Textiles 2.50 0.00 2.50

Total Gross Commitments 3.25 1.46 4.71

Total Commitments now held by IFC a> 3.25 1.46 4.71

Total Un4iursed 0.00

a> Includes transactions of Capital Mades Depatment and Enegy Uit

b> Exchange adjustments acout for variation in totl gross commitments, less caelis, etc., and toalcommitume ow held by IFC.

IBRD 2420.

88° J a9 90o ~~~~BANGLADESH

NEPAL i Rt ~~SECOND ROAD REHABILITATION' |o - . ~~~AND MAINTENANCE PROJECT

- * . rixchog>,<<< 2 ? PRO~~~~~e9F%ED PROIECT;

,>vk M 5< l _,* =^ ~~~~~~~~~I kOAD REHABIUTATION

ThakurqaOno '. (NAT> X -IOoNAL IXRTEGIONALI / FEEDER ROADS)-26: g X < s ~~~~~N}lphomari . PREVIOUS PROJECT (CR 1827ZB1.

aL X \_ AQ >o Oolnionarhot ;POAD REHABILITATION

~~, lleldseg5ra m c- ~~~~~~~~ DEFERRED hAINfENAANCE ONQ

>, } \ ' _ z k ~~~~~~~~~NATIONAL ROADS

) o.,<(Prrbotipu%o .- [ t a>v ts -- REGIONAL ROADS

.<, 0thg jpur > . ZX - RAILROADS

~~~~~~~~~~~~~~~~- ' ) - I - - - DISTRICT BOUNDARIES

9 > ;aibandthlt --- INTERNATIONAL BOUNDARIES

jPfWtnitalozal 5e tuiul > w x i :5 t l o~~~~~~~~~~ 2t0 40 60 so 1oo 2

-25° ', 'tt KILOM&ETERSX~~~~~~~)M a devpurJ I mo Bo

8 .} >1 X-1 <, i groh {'AK \

FaqDQt~~~urh - , -R

_9 t>QiS A~~~~~~~~~~~~~~~~~~~~~~b the /J 1/W gffiy$eXB'-240 tQtpt for thowe,,io" 249

- _i~~~~~~~~~~~~~~~~~~~~~~~~rou p. The dnominaBcns wzl

Meherpr m \ S sr \DAK\ws a; dono imply. on th

? >s' ,'t W )At 9t-uat ,,^ @ v ,~~~~~~~~~~~~momuet :ny f

I N D i A

iw W<~~~~~~~~~~~~~~~~~~~~~!Nt