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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No: 35050-NI
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 4 1.1 MILLION (US$60 MILLION EQUIVALENT)
TO THE
REPUBLIC OF NICARAGUA
FOR THE
FOURTH ROADS REHABILITATION AND MAINTENANCE PROJECT
May 9,2006
Finance, Private Sector Development and Infrastructure Unit Central America Country Management Unit Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective May, 2006)
Currency Unit = CBrdoba (C$)
Fiscal Year: January 1 - December 3 1 US$1 = C$17.30
AADT
BCIE
CAFTA
CAS
COERCO
DANIDA
DGA
DPR
ENP
ERR
ESMP
FA
FARAH
FM
FOMAV
GDP
GEF
GON
HDM
HIPC
IADB
ICA
ICR
IDA
IDR
IEG
IMF
INEC
INIFOM
ABBREVIATIONS AND ACRONYMS Annual Average Daily Traffic INTUR Nicaraguan Institute of Tourism
Central American Bank for Economic Integration
Banco Cenrroamericano de Inregracidn Econdmica IRI International Road Roughness Index
Central America Free Trade Agreement ISN Interim Strategy Note
Counay Assistance Strategy LAC Latin America and Caribbean
Regional Highway Construction Agencies ISMS Living Standards Measurement System
Corporacidn de Empresas Regionales de Construccidn
Danish International Development Agency MCC Millennium Challenge Corporation
Environmental Department MCT Ministry of Consauction and Transport
Direccidn General Ambienral MDG Millennium Development Goals
Development Policy Review MDRI Multi-lateral Debt Relief Initiative
National Company of Ports MHCP Ministry o f Finance
Empresa Nacional de Puertos ME Microenterprise
Economic Rate of Return MIFIC Ministry of Industry and Commerce
Environmental and Social Management Plan
Financing Agreement (IDA Credit Agreement) NGO Non Governmental Organization
Financial Accounting, Reporting & Auditing Handbook NPV Net Resent Value
Financial Management W O N Nicaraguan Technical Norm
Road Maintenance Fund
Fond0 de Manrenimienro Vial PMR Project Management Repolt
Gross Domestic Product PMS Pavement Management System
Global Environmental Facility PND National Development Plan
Government of Nicaragua
Highway Design and Maintenance Model PPMM Road Maintenance by Microenterprises
Heavily Indebted Poor Countries
Inter-American Development Bank PRSC Poverty Reduction Support Credit
Investment Cl imte Assessment RAAS South Atlantic Autonomic Region
Implementation Completion Report
International Development Association RED Road Economic Decision Model
Institute of Rural Development SIAP Project Based Accounting System
Insriruro de Desarrollo Rural SIGFA Integrated Government Accounting System
Impact Evaluation Group TA Technical Assistance
International Monetary Fund UCP Project Coordinating Unit
Nicaraguan Institute of Statistics and Survey
Insiiruro Nicaraguense de Esradisrica y Censo
Institute for Municipal Development VAT Value Added Tax
lnsrituro de Fomento Municipal voc Vehicle Operating Cost
Instiruro Nicaraguense de Turismo
MARENA Ministry of Environment and Natural Resources
MTI Ministry o f Transport and Infrastructure
Norma Ticnica Obligatoria Nicaraguense
Programa Nacionol de Desarrollo
Proyecto de Microempresas de ~anrenimiento
Regidn Aut6noma del Arldnrico Sur
Unidad Coordinadora de Proyecto
UNDP United Nations Development Program
WB World Bank
Vice President: Pamela Cox Country Director: Jane Armitage
Sector Director: Makhtar Diop Sector Manager: Jose Luis Irigoyen
Task Team Leader: Ernrnanuel James
NICARAGUA Fourth Roads Rehabilitation and Maintenance Project
CONTENTS
Page
A . STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 1 . Country and sector issues .................................................................................................... 1
2 . Rationale for Bank involvement 4
3 . Higher level objectives to which the project contributes ..................................................... 6
..........................................................................................
B . PROJECT DESCRIPTION .................................................................................................. 7 . .............................................................................................................. 1 Lending instrument 7
2 . Project development objective and key indicators .............................................................. 7 3 . Project components .............................................................................................................. 8 4 . Lessons learned and reflected in the project design .......................................................... 10
5 . Alternatives considered and reasons for rejection ................................................. : ........... 11
C . I M P L E ~ N T A T I O N ......................................................................................................... 11
1 . 2 . 3 .
Partnership arrangements ................................................................................................... 11
Institutional and implementation arrangements ................................................................. 11
Monitoring and evaluation of outcomeslresults ................................................................ 12
4 . Sustainability ..................................................................................................................... 13
Critical r isks and possible controversial aspects ............................................................... 13 5 . 6 . Lodcred i t conditions and covenants ............................................................................... 15
D . APPRAISAL SUMMARY .................................................................................................. 15 1 . Economic and financial analyses ....................................................................................... 15
2 . Technical ............................................................................................................................ 16
3 . Fiduciary ............................................................................................................................ 16
4 . Social ................................................................................................................................. 17
5 . Environment ...................................................................................................................... 18
6 . Safeguard policies .............................................................................................................. 20
7 . Policy Exceptions and Readiness ...................................................................................... 21
Annex 1: Country and Sector or Program Background .......................................................... 22
FOR OFFICIAL USE ONLY
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
Annex 2: Major Related Projects Financed by the Bank andlor other Agencies .................. 29
Annex 3: Results Framework and Monitoring ......................................................................... 30
Annex 4: Detailed Project Description ...................................................................................... 36
Annex 5: Project Costs ................................................................................................................ 45
Annex 6: Implementation Arrangements .................................................................................. 46
Annex 7: Financial Management and Disbursement Arrangements ...................................... 51
Annex 8: Procurement Arrangements ....................................................................................... 57
Annex 9: Economic and Financial Analysis .............................................................................. 62
Annex 10: Safeguard Policy Issues ............................................................................................. 73
Annex 11: Project Preparation and Supervision ...................................................................... 77
Annex 12: Documents in the Project File .................................................................................. 78
Annex 13: Statement of Loans and Credits .............................................................................. ~ 7 9
Annex 14: Country at a Glance .................................................................................................. 81
M a p IBRD 34552 ......................................................................................................................... 83
*. 11
NICARAGUA
FOURTH ROADS REHABILITATION AND MAINTENANCE PROJECT
PROJECT APPRAISAL DOCUMENT
LATIN AMERICA AND CARIBBEAN
LCSFT
Date: May 9,2006 Country Director: Jane Annitage Sector Director: Makhtar Diop Project ID: PO83952
Lending Instrument: Specific Investment Loan
[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other:
Team Leader: Emmanuel A. James Sectors: Roads and highways (100%) Themes: Rural services and infrastructure (P) Environmental screening category: Partial Assessment
For LoanslCreditslOthers: Total Bank financing (US$m.): 60.00
Borrower: Republic of Nicaragua Nicaragua
Responsible Agency: Ministry o f Transport (MTI) Frente al Estadio Nacional Nicaragua Tel: 505 222 5913 eat @ibw.com.ni
Project implementation period: Start June 30,2006 End: June 30,201 1
... 111
Expected effectiveness date: August 18,2006 Expected closing date: December 3 1,201 1 Does the project depart from the CAS in content or other significant respects? Ref. PAD A.3 Does the project require any exceptions from Bank policies? Ref. PAD D.7
[ ]Yes [XINO
[ ]Yes [XINO [ ]Yes 1 IN0 [ ]Yes IN0
Have these been approved by Bank management?
[XIYes [ ] N o
[XIYes [ ] N o
Does the project include any critical r isks rated “substantial” or “high”? Ref. PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref. PAD D. 7 Project development objective Ref. PAD B.2, Technical Annex 3 The Project Development Objective i s to support the Government o f Nicaragua’s broad based economic growth and poverty reduction plan by relieving transportation bottlenecks that currently hinder economic growth and private sector investment. The specific objectives are to support economic growth by: (i) expanding and complementing the previous focus on trunk roads by improving a connecting network o f secondary and rural roads which w i l l be selected in a manner that would lead to the creation of paved distributor networks that can better support economic activities of a given productive zone; (ii) helping ensure the sustainability of the road improvements, through strengthening o f maintenance practices, and (iii) institution building and technical development in the Ministry of Transport and Infrastructure (MTI) and the Road Maintenance Fund (FOMAV).
Project description [one-sentence surnrnu~ of each corn~onent] Ref. PAD B.3.a, Technical Annex 4 Component 1: Road Rehabilitation (US$lO. 13 million): This component wil l finance the rehabilitation and the improvement o f the following road segments: Diriamba-La Boquita- Casares (32km); L a Virgen-San Juan del Sur (19km). Component 2: Rural Transport Improvement (US$41.87 million): This component includes an adoquines stabilization program for approximately 320 km of secondary and rural roads located mainly in competitive zones I, I11 and IV. Component 3: Road Maintenance (US$7.64 million): This component includes provisions for routine and periodic maintenance contracts. I t w i l l be managed by MTI and the FOMAV and includes subcomponents for routine and periodic maintenance. Component 4: Studies, Goods, Technical Assistance, Training and Consultant Services (US$7.75 million): This component w i l l help to implement the project and to better promote the development of the MTI, FOMAV and overall road sector management.
Which safeguard policies are triggered, if any? Ref. PAD D.6, Technical Annex 10 (i) Environmental assessment; (ii) Cultural property policy.
Significant, non-standard conditions, if any, for: Ref. PAD C.7 Board presentation: NONE
i v
Loadcredit effectiveness: Covenants applicable to project implementation: Disbursement conditions:
a)No disbursements for the second year of the Road Rehabilitation Program until MTI and FOMAV prepare and sign a rolling, 3 year agreement, acceptable to the IDA that w i l l govern the routine maintenance by microenterprises program.
b)No disbursements for the second year o f the Road Rehabilitation and the Rural Transport Improvement Programs unless the funds collected in the prior year via the special fuel surcharge have been transferred in a timely manner to the FOMAV for i t s annual maintenance program.
c) N o disbursements for road maintenance by microenterprises until s imi lar funding under the Third Roads Project (CR-3464-NI) has been committed fully.
d) No disbursements for the Road Rehabilitation Program unless the fines for vehicle overloading have been restored to adequate levels.
e) No disbursement for the Road Rehabilitation Program until an account in local currency (Cuenta Escritural de Contraparte local) for the project's counterpart funds has been opened in the Central Bank. The Cordoba equivalent o f 3 months worth o f counterpart funds should also be deposited therein.
Monitoring Conditions:
a) M T I w i l l submit semi-annual performance reports in a format to be agreed b) IDA wi l l carry out a mid-term review not later than December 3 1,2008
V
A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues
1. Nicaragua i s the largest country in Central America in terms o f land area and has a population o f around 5.4 million inhabitants. The population i s growing at an annual rate of 2.7 percent, most o f whom are concentrated in the Pacific seaboard and Central highlands. Nicaragua has a small, open economy that depends heavily on trade and transportation since i ts exports represent around 20 percent o f i t s GDP, while imports amount to 42 percent of GDP. The country’s principal exports are coffee, shrimp, lobsters, beef, and sugar, which render the country very vulnerable to commodity price shocks. Non-traditional products represent around 40 percent o f total merchandise exports. Nicaragua’s most important trading partner i s the United States (which accounts for about one-third o f i ts total exports and imports), followed by other Central American countries. Europe absorbs around 25 percent o f Nicaragua’s exports and supplies 10 percent of i ts imports.
2. Following a prior decade of economic and political instability, Nicaragua advanced far during the 1990s in restoring a stable, private sector-led market economy and in establishing a democratic, broadly participative form of government. Hyperinflation was halted in 1991 and economic growth re-emerged in 1994. Important structural changes that occurred during the last 10 years included (i) a major decline in the size o f government through cuts in government spending, a reduced public sector labor force and the privatization or closure of most state- owned enterprises and o f all public commercial banks, (ii) significant advances in the divestiture of public energy and telecommunications enterprises, reform o f the social security system and modernization of public sector management, (iii) a significant opening up of the economy in response to the reduction o f trade barriers and implementation o f a convertible currency, and (iv) the substitution o f public investment by private investment as the main source of capital accumulation. Another important structural change has been the growth o f remittances and private capital inflows, coupled with the decline of Nicaragua’s external debt burden.
3. With a per capita GDP of US$790 in 2004, Nicaragua i s one o f the poorest countries in Latin America. It had been estimated in the 2003 Liv ing Standards Measurement Survey (LSMS) that some 46 percent o f the population lives below the poverty line, while 15 percent lives in extreme poverty. The incidence of poverty i s more than twice as high in rural areas (68 percent) as in urban areas (31 percent). While Nicaragua’s social indicators are generally comparable to those observed in other lower income countries, i t stands out by having a relatively high population growth rate and low education attainment levels. Additionally, in October 1998, Nicaragua was struck by hurricane Mitch, which caused major human and physical damage, especially to the road network.
4. The current Government o f Nicaragua (GON) has designated poverty reduction as one o f i t s priorities, and endorsed the Highly Indebted Poor Countries (HIPC) initiative and the Poverty Reduction Strategy (PRSP) that was prepared in 2001. In so doing, i t took on a great number of challenges in 2002 as it inherited a rather difficult economic situation, and was forced to apply a number of stringent measures in order to arrive at an agreement with the MF. Despite this adverse economic climate, Nicaragua made significant progress, notably i t s achievement o f the HIPC initiative completion point in January 2004, which as a result helped to reduce the
unsustainable foreign debt burden that Nicaragua bore. I t s debt service was reduced to a third o f what i t paid previously; but it remains considerable at 9%' of the value o f i t s exports.
5. In addition, the IMF Board approved further debt relief for Nicaragua under the Mult i - lateral Debt Relief Initiative (MDRI) in December 2005. The World Bank's Board also approved MDRI debt relief on March 28, 2006 and plans to start implementation in FY07. While the relief provided by both initiatives greatly enhances i t s prospects for future fiscal stability, Nicaragua also has a significant domestic debt (about 25 percent o f GDP) that continues to burden public finances and deserves careful monitoring.
6. The G O N has decided further to focus on economic growth as i ts vehicle for poverty reduction. I t recognized also that a solid public-private partnership i s an essential element in this strategy. I t consequently designed a National Development Plan (NDP) that i s focused on these principles. The economic growth sought through the NDP i s based on enhancing Nicaragua's economic competitiveness given i t s geographical position with respect to i t s main trading partners and i ts insertion into the global economy through recent free trade agreements. The associated strategy i s based on four fundamental aspects: (i) direct support to the enterprise sector, (ii) attraction of direct foreign investment, (iii) social inclusion through the development of human capital, (iv) and investment in critical productive infrastructure.
Box 1: Summary of PND 05-09 Key Results and Objectives b y Strategic Areas
Overall key results 2005-2009
1. Reach an annual rate of growth o f the economy o f 5 percent while sustaining macroeconomics stability. 2. Attain the 2009 milestones for reaching the Millennium Development Goals (MDGs) emphasizing extreme
3. Double the value o f exports between 2004 and 2010. 4. Improve the quality of 1200km of the secondary and rural road network by adoquin stabilization. 5. Attract additional foreign private investments of US$130 Illillion annually.
poverty reduction.
1 Objectives by Strategic Areas
Economic growth for poverty reduction (Area I): Sustain macroeconomic stability and economic growth. Emphasis i s on improving the investment climate by making reforms to the regulatory framework for businesses needed to decrease bureaucratic costs, improve property rights, broaden financial services, promote exports, support clusters, increase the use of technology for agricultural production and promote environmentally sustainable growth.
Human capital development and social protection (Area II): Improve coverage and quality of services in education and health, with an added focus on technical training and labor conditions, including child labor. On social protection, emphasis i s on improving institutional coordination by consolidating multiple projects into key programs to increase access of vulnerable groups to basic social services.
Productive and social public infrastructure (Area HI): Increase coverage and quality o f infrastructure to support economic growth and attain the MDG targets. Emphasis for productive infrastructure i s on roads, ports and energy. Emphasis for social infrastructure i s on education, health, water and sanitation, and housing.
Governance and state reforms (Area IV): Strengthen good governance by emphasizing the reform and modernization of the justice system, respect to human rights, guarantee public safety, and support participation of civil society. Improve public financial management and modernize public procurement to increase efficiency and efficacy of the state, and to deepen transparency and accountability. Implement a national decentralization strategy to enhance the provision of public services while maintaining fiscal stability.
' The debt service would have remained at 24% of the exports without HIPC
2
7. Nicaragua has been experiencing steady but modest economic growth since the early 2000s. The GON feels that i ts policies and economic reforms may best be attained through a sustained economic growth process and based on a market oriented economy that i s open and competitive internationally. In support o f this goal, the Nicaraguan economy requires appropriate levels of transport infrastructure and the efficient delivery of transport services. However, according to the LSMS findings, overall a little above one-fifth (22.3%) o f Nicaraguan households have access to a paved road; furthermore the household numbers are 7% for the extreme poor, 11% for the poor, and 30% for the non-poor. I t i s highly doubtful that such low levels o f road infrastructure provision could support government development objectives effectively. In reality, economic growth could become constrained if key needs are not addressed soon.
Road Category
1. Trunk (asphalt) 2. Collector (asphalt and adnauin)
8. The quality of road infrastructure i s the lowest in Central America. According to the Ministry o f Transportation and Infrastructure (MTI), more than 75 percent o f the total road network in Nicaragua i s in poor condition; this however represents a considerable improvement during the last five years as conditions used to be decidedly worse. As detailed in Table 1, the trunk and collector roads have now been mostly restored to good condition but the overall poor figure i s due particularly to the abysmal condition o f the other categories (secondary, tertiary and unclassified roads) which together represent 87 percent o f the total network. T h i s largely reflects the use o f inappropriate design and construction standards coupled with the inadequate maintenance regime that have in turn resulted in premature road deterioration. These findings suggest that the poor quality o f roads, rather than their availability, i s the principal bottleneck in this sub-sector. Also, Nicaragua has very limited transport modal choices. Its seaports are run down, the domestic air transport system i s in an infant state o f development, and i ts railroad system has ceased to exist. The most important transport bottlenecks in Nicaragua therefore l ie in the roads sector.
Lengths (km) Share in goodlfair condition (1)
1,752 74% 636 88%
Table 1: Road Condition by Category
5. Unpaved and seasonal Total
1 1,525 6% 19,036 20 5%
3. Rural axes (gravel and 2,052 40% I 1 adoauinl 4. Rural all-weather 3,07 1 16% I (mavellotherl
9. The MTI’s assessment of road network quality coincides with the perception by representatives from private enterprises as shown in Figure 1. Apart from Costa Rica, the quality of rural roads in Nicaragua i s perceived as being the worst in Central America. The situation i s slightly better in urban areas where half o f the enterprises consider that road quality i s good or fair. The poor condition of infrastructure, particularly in rural areas, i s a major impediment to the
3
creation o f a sound and attractive business environment for entrepreneurs. It also reduces the capacity to export (predominantly moved by land). Finally, low infrastructure quality affects transport safety, even though the accident rate in Nicaragua i s lower than in other countries'.
Figure 1: Private Sector Perceptions of Road Quality in Central America
I SMALL CITlESlRURAL AREAS CAPITALLARGE CITIES
Source: World Business Environment Survey, 2000
10. Transport services are inefficient in urban areas also, where 60 percent o f the population lives. Although congestion i s limited due to the relatively low traffic volumes, major cities show deficiencies in all aspects o f traffic management. There i s a pressing need to improve urban transport in the interests of the urban poor. Bus services are poorly organized and most users find them to be highly unsatisfactory in terms o f quality and safety (the average bus age exceeds 17 years). Although various feasibility studies for improving urban transport have already been completed, none have yet been implemented, possibly reflecting institutional and financial disagreements between the central and the municipal governments.
2. Rationale for Bank involvement
11. The Bank's Country Assistance Strategy (CAS) for Nicaragua, which i s known formally as the Interim Strategy Note (ISN), Report No. 32570-N1, was discussed and approved b y the Board on August 4, 2005. The main objective o f the I S N was to support the Government's programs for sustaining growth and reducing poverty as expressed in the NDP. As stated in the ISN, the provision of adequate road infrastructure continues to be o f primary importance for poverty reduction and hence the inclusion of the Fourth Roads Project in the IDA lending program. The Fourth project fa l ls under the productive and social public infrastructure area of the I S N results matrix, especially the targets related to the sustainability o f maintenance and improving rural access.
12. Nicaragua's total road network comprises almost 19,036km which yields a total road density similar to that found elsewhere in Central America and among countries with s im i la r
With 2,131 accidents in 2000, Nicaragua has a rate o f 0.4 accidents per 1,000 people or 1.4% per vehicle. The worst countries in Central America for road safety are Costa Rica (17 accidents per 1,000 people or 13% per vehicle) and Panama (16 accidents per 1,000 people or 14% per vehicle).
4
levels o f development. However, only about 15% of this road network i s paved, which represents the lowest level in Central America. Nicaragua therefore l ies in the lowest range in Central America for the density o f paved roads (15% in comparison to the Central American average o f 29%), the region being itself less endowed than countries at a similar level o f development (31%1).~ Overall, Nicaragua remains the least well endowed country in terms o f infrastructure in the Region, given that only 22% of the population has access to a paved road, and only around 20% of the network i s in good or fair condition.
13. IDA involvement for improving sector planning and expenditure management i s essential as both the provision and maintenance o f infrastructure leave a lot to be desired in Nicaragua, This was due to various factors in the recent past, especially inadequate maintenance funding levels, a weak construction industry and poor operations of service companies. In recent years, IDA has maintained a high level dialogue with the Authorities on these issues, especially on the budgetary and other funding mechanisms for maintenance, the need to improve the institutional framework, and on the advantages o f increased private sector participation in infrastructure construction, operation and maintenance to the extent feasible. The poorly maintained road network places the major investments o f the past 5 years at risk and prevents the development of least-cost transport services, especially in rural areas.
14. The provision o f adequate road maintenance had encountered difficulties primarily because of the lack o f a structured and well funded program. The Bank had advised the Government o f the importance o f such a program, and had provided seed funding for setting up the Nicaraguan Road Maintenance Fund (FOMAV) a few years back, under the previous Rehabilitation and Maintenance Projects. The FOMAV i s a good example of the synergies that were developed between the Poverty Reduction Support Credit (PRSC) and the Road Rehabilitation and Maintenance Projects. The Government recently approved a law that ensures that the FOMAV wi l l be financially self sustainable in the future, which was one o f the prior actions needed for PRSC second tranche release. The full establishment o f the FOMAV and the use of private contractors that are awarded contracts via a public bid process represent the key components o f an efficient solution to this problem.
15. Furthermore, the increased regional competitiveness that i s expected to arise from the recent Central America Free Trade Agreement (CAFTA) agreement also heightens the urgency to address the road infrastructure deficit. A well developed and maintained road network i s essential to maximizing Nicaragua’s potential for dynamic, export led economic growth. To improve i t s prospects for competing under CAFTA, Nicaragua must overcome the huge backlog of maintenance and investment in road infrastructure. The allied agenda o f policy and institutional change in this sector w i l l involve: (i) improving the quality o f rural roads and ensuring year-round rural accessibility. Such road improvements should be part o f a strategy aimed to strengthen rural-urban linkages and to foster commerce and agricultural development; (ii) designing mechanisms to protect infrastructure investments from bearing a disproportionate share of the burden of periodic fiscal adjustments and conversely to increase investments if fiscal space allows it; (iii) promoting a suitable regulatory framework for private sector participation in the construction, operation and maintenance o f transport infrastructure; and (iv) improving urban transportation systems.
Values for 1999, with per capita GDP between 2000 and 4000 USD (PPP in 1999).
5
3. Higher level objectives to which the project contributes
16. This project i s included in the ISN and i s in line completely with the Bank’s program for Nicaragua. It i s also consistent with the GON’s poverty reduction rationale, since the deficiencies o f road infrastructure constitute a limitation for economic growth in Nicaragua, by increasing transaction costs and rendering the economy less competitive than its neighbors. Both the CAS and the NDP promote sustaining economic growth as essential because without i t there would be l i t t le chance that progress could be made in meeting the other challenges facing the country, especially poverty reduction.
17. The G O N has made clear i t s commitment to a strategy that emphasizes poverty reduction through broad based growth. I t has stressed the importance o f improving road infrastructure and maintenance in i t s key strategy documents and i ts commitment i s further evidenced b y the (i) establishment o f the FOMAV and the recent approval of the law to assure i ts funding on a reliable basis, (ii) MTI’s interest in pursuing the improvement of the road network based on the more balanced approach followed under previous IDA projects which focused on both the maintenance, and rehabilitation of roads, and (iii) financing requests made at annual-donor conferences. Finally, the implementation performance of previous IDA transport projects has been one o f the best in the region. This was especially impressive given the difficult prevailing political and macro-economic climate and the need to deal with the adverse effects of the various natural disasters (Hurricane Mitch, floods, and droughts) on the road network. The project w i l l seek to continue fostering th i s efficient deployment of public resources.
18. As stated before, the most extensive and growth-crippling infrastructure bottlenecks in Nicaragua lie in the road sector. Key actions for removing these infrastructure bottlenecks that the project wi l l support include:
(i) Investments to improve and expand the paved road network to the levels of other low income comparator countries. Given the success o f the trunk road rehabilitation program so far, the next order o f priority i s to improve the grid o f secondary and major rural roads (the distributor network) that link to the trunk roads and serve the productive zones. The scaling up o f existing adoquin road stabilization programs represents a cost-effective alternative to asphalt or gravel paving o f roads, especially for the secondary network. Accordingly, th is project, together with the two previous IDA Road Projects, w i l l help the MTI to complete 630km or just over 50% of the PND’s target of 1200km o f adoquin stabilization by 2009. The remainder w i l l be attained via projects financed by BCIE (175km), IDB (135km), Millennium Challenge (200km) and by the GON (60km).
(ii) Emphasizing maintenance. I t w i l l be essential that the roads that have been rehabilitated are not left to deteriorate (as in the past) and once again allowed to become bottlenecks. A comprehensive program o f maintenance, including the guaranteeing o f funding arrangements via the FOMAV and the use o f least-cost public bid contractual approaches for works implementation represent an indispensable part of the strategy to increase paved road coverage. Even then, it wi l l be many years before Nicaragua can close the gap in paved roads compared to other countries in the region;
6
(iii) Clarifying and strengthening sub-sector institutional arrangements: Although the IDA project that supported institutional restructuring has produced significant positive results, MTI i s s t i l l affected by overall weaknesses in planning and programming. There i s s t i l l a need to develop MTI’s basic capacity to carry out road condition inventories, to fully install the Pavement Management system, to seek least cost solutions to technical and engineering problems associated with road and bridge maintenance, as well as to help foster the development o f the local consulting and contracting industries. Aside from MTI, the FOMAV needs appropriate technical assistance, particularly in contracting and procurement procedures so that i t can develop the capacity eventually to manage the maintenance o f the entire core road network. For overall sustainability and efficient road management, further analytical work i s needed to identify the appropriate roles and responsibilities o f the key players (both at central and local level, and including INIFOM, IDR and the municipalities) and to promote synergies while avoiding a duplication of efforts.
19. IDA has been supporting Government strategies for addressing road infrastructure deficiencies with considerable success but there i s s t i l l a long way to go. The strategies have been balanced in terms o f the attention paid to both the provision o f infrastructure and i ts subsequent maintenance. This Fourth Road Rehabilitation and Maintenance project w i l l therefore seek to continue supporting the GON policies by helping to remove transport bottlenecks and boosting the productivity o f public and private investments through the improvement o f connecting networks o f collector, secondary and rural roads in targeted areas with high productive potential, and that have large numbers of poor residents.
B. PROJECT D E S C R I P T I O N 1. Lending instrument
20. The GON has requested a Specific Investment Credit,
2. Project development objective and key indicators
21. The overall objective o f the project would be to support the GON’s broad based economic growth and poverty reduction plan by relieving transportation bottlenecks that currently hinder economic growth and private sector investment. The specific objectives are to support economic growth by (i) expanding and complementing the previous focus on trunk roads by improving a connecting network o f secondary and rural roads which w i l l be selected in a manner that would lead to the creation o f paved distributor networks (circuitos de distribucibn) that can better support economic activities of a given productive zone; (ii) helping ensure the sustainability of the road improvements, through strengthening o f maintenance practices, and (iii) institution building and technical development in the MTI and the FOMAV.
22. The achievement o f the project objectives w i l l be measured by the: (i) reductions in vehicle operating costs and time savings along the road corridors linking the productive zones; (ii) qualitative improvements to the network in terms o f the km of roads assessed as being in good, fair or bad condition; (iii) extent o f the participation o f the private sector in road rehabilitation and maintenance programs as measured in terms o f the numbers and value o f the
7
contracts awarded; (iv) share of the budget allocated for road maintenance; and (v) number o f rural communities provided with improved road access and generation of employment in all the components. The indicators are detailed further in Annex 3.
3. Project components
23. The project would enhance IDA’S ongoing support for a) capacity building and institutional strengthening o f MTI, b) the design and implementation of routine and periodic maintenance programs, and c) full operational establishment of the FOMAV. The project would support the improvement of some connector roads between the Panamerican highway and the Pacific coast as well as the stabilization of about 320km of secondary and rural roads. The balanced technical approach would continue along the same lines as the previous IDA projects, ensuring and emphasizing sustainability o f al l road improvements by capacity building and institutional support, and implementation of routine and periodic maintenance programs via microenterpise and private contractors for about 2,400km of roads. The project would also help the MTI to advance i ts program of decentralization o f the road network and to provide the impetus for restoring fines for truck overloading to appropriate levels. These and other components are summarized in the table overleaf. Further description of the project components i s in Annex 4. A map showing the locations of main project roads i s also included in this report.
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Table 2 - Project Components
Component
Road Rehabilitation Promam (5 lkm): for the La Virgen-San Juan del Sur trunk secondary road (19km) and for the Diriamba-Casares- La Boquita (32km) principal road network. Rural Transport Improvement Plan: Stabilization o f 320km of secondary and rural roads in Zones I, 111 and IV. Road Maintenance Promam: for the expansion of the program of routine maintenance by microenterprises (37 ME and 2,400km) and for the execution of about 80km of periodic maintenance by contract. Consultant Services; Institutional and Technical Development Program: to assist the MTI to: (i) prepare annual road improvement programs; (ii) introduce HDM4, improve PMS and update i t s data base; (iii) expand the road maintenance by contract program; (iv) cany out MTI, ME and FOMAV staff training and capacity building; (v) advance the decentralization program; (vi) carry out feasibility and transport sector studies, socio- economic monitoring, project supervision, designs, external audits; (vii) goods.
Indicative % of IDA COS& Total Financing
WS$W ( U S W
10.13 14.48 8.61
Contingencies 2.52 3.64 1.94 Total Project Costs 69.91 100.0 60.00
Total Financing Required 60.00 :: Costs are net of VAT and Municipal taxes (US$ 1.84 million equivalent)
85
85
80
100
77 86 86
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4. Lessons learned and reflected in the project design
24. The IDA has recently completed a Development Policy Review (DPR) for Nicaragua (Report Number 29115-NI o f December 3, 2005). The DPR’s analysis o f the determinants o f growth identified public infrastructure development as a key for sustaining growth in Nicaragua. Of all the growth determinants considered, i t yielded the greatest growth pay-off in simulations that consider the implementation of more aggressive reforms compared to the outcome projected if Nicaragua was to continue to evolve according to historical trends. This means that Nicaraguan authorities need to focus on strategies for reducing the country’s road infrastructure deficit. Other Bank analytical work such as the 2004 Investment Climate Assessment (ICA) confirmed this evaluation.
25. According to the Bank’s4 study on the rural drivers o f growth in Central America, education and infrastructure (particularly rural roads) were the f irst two pre-requisites that need to be provided to rural households in order stimulate economic growth and reduce poverty. The study concluded that infrastructure development may both raise growth and lower income inequality, thus implying that it may be a key win-win ingredient for poverty reduction. Infrastructure development w i l l be pro-poor if i t allows poorer individuals (especially in rural areas) to access additional productive opportunities. Furthermore, the 2006 World Development Report (WDR) also reinforces the importance o f the role played by infrastructure for promoting growth with equity scenarios.
26. The applicable lessons learned from the ongoing projects and the experience o f other donors who have been active in the transport sector, especially DANIDA and the Inter-American Development Bank (IDB), indicate that despite the Government’s typically overriding desire to rehabilitate as many roads as possible, emphasis should be placed on designing a balanced program that focuses on the sustainability o f the investments. The main elements o f sustainability are, (i) improving the planning, programming, implementation and financial sustainability o f road maintenance; (ii) ensuring that attention i s paid to safety and environmental issues in the sector; (iii) supporting the line agencies in adapting to changed roles in a policy environment of decentralization and o f greater private sector involvement; and (iv) promoting the development of the local construction industry.
27. Since the 1990s the focus o f investments in roads has rightly been on restoring the most heavily trafficked sections o f the trunk road network. Hence, given the projects completed or underway, by early 2006 most o f the trunk roads linking Managua to Honduras in the North, to Costa Rica in the South, to the port o f El Rama in the East and to Corinto port in the West had been rehabilitated. Subsequently, to better serve households and industry and to bolster economic competitiveness i t has become necessary to invest in improvements to the secondary and rural roads, defined as the distributor network, connected to the trunk roads and that serve the locations where most products start their journey to the market, as well as to complete road linkages to the Atlantic coast.
Drivers of Sustainable Rural Growth and Poverty Reduction in Central America, ESSD, 2003
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5. Alternatives considered and reasons for rejection
28. The GON cannot, at this time, address al l the public investment needs countrywide, so i t has chosen to focus on productive infrastructure. In the road sector, this implies investment in all segments o f the road network. However, by early 2006, the majority o f the trunk road network had been rehabilitated. Currently less than 5% of the secondary road network i s paved; therefore the approach proposed for the Fourth project focuses more on the secondary and rural roads connecting communities to the main trunk network. This was the approach recommended by the DPR.
C. I ~ P L E ~ N T A T I O N 1. Partnership arrangements
29. Various bi-lateral and multilateral financing institutions have, for some time, been supporting development programs in Nicaragua. In the transport sector the main ones are DANIDA, IDB, IDA, and BClE who have all worked on road infrastructure improvements. In IDA’S current Third Road Rehabilitation and Maintenance Project CR-3464-NI, the road from Managua to El Rama was rehabilitated under parallel cofinancing for discrete road sections with DANIDA, and IDB. The proposed IDA project w i l l complement the ongoing projects financed by the Millennium Challenge Corporation (MCC), IDB, BCIE, and the Nordic Fund that are located in the productive zones.
2. Institutional and implementation arrangements
30. The project w i l l be carried out by the same MTI unit that has managed the previous IDA projects very well. Although MTI w i l l retain overall project responsibility, i t w i l l prepare an agreement with the FOMAV that i s acceptable to the IDA for the implementation o f the road maintenance program. This agreement w i l l f irst cover the transition o f the management o f the routine maintenance by microenterprise program to the FOMAV by end o f 2006, Subsequently, by mid 2007 the MTI lFOMAV agreement w i l l include also the periodic maintenance program.
31. IDA has gained significant experience in the sector in the past years having carried out three projects previously. The continuity o f this intervention in itself would bring great benefits as most reforms require time to be well implemented. In the case o f Nicaragua, the balanced approach between investment and sustainability, through the enhancement o f maintenance microenterprises and the continued support to the FOMAV wi l l help to ensure the overall program sustainability. The focus o f this and previous IDA projects on maintenance was a determining factor in support o f the GON’s recently successful efforts to secure parliamentary approval of the reform to the FOMAV law required to secure i ts financing. Secondly, IDA i s the only agency that developed rehabilitation o f secondary roads through stabilization with adoquines, acquiring a significant amount o f experience o f the whole process. This work has had a great impact and the GON wishes to develop i t further and wil l do so under projects financed by IDA credits and by other donors including the MCC. Thirdly, through previous projects, IDA has helped to strengthen the MTI’s capacity for planning, social and environmental analyses, and also improved the framework for stable growth o f the local construction, contracting and
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consulting industries through transparent procurement procedures and introduction o f road maintenance by contract management.
3. Monitoring and evaluation of outcomeslresults
32. Monitoring of project outputs and performance, along with annual audits and plans, w i l l be undertaken by the UCP on an ongoing basis. In addition, the UCP wi l l manage the final stage o f the ongoing socio-economic impact evaluation study that i s focused on the rural roads improvement program.
33. The UCP already has a well functioning information and management system that was developed under the previous projects and that i s appropriate for the needs o f this project. The UCP wi l l report on both the physical and financial aspects of project implementation, thereby allowing the IDA to ascertain the implementation progress towards achieving the project development objectives. The UCP would provide: (a) subproject information, such as pertinent physical and financial data for each subproject; (b) financial management data, from which Statements o f Expenditure (SOEs) would be generated; and (c) project management information, For sub-components to be managed eventually b y the FOMAV, information gathering may be delegated to them, but ultimate responsibility for ensuring accuracy and timeliness w i l l remain with the UCP. The UCP wi l l make available monthly summary reports that can be made available to the IDA to monitor project performance indicators, review disbursements, as well as supervise implementation progress.
34. Detailed reports on the progress made under each of the project components w i l l be prepared by the UCP on a quarterly basis and submitted for review to the IDA. These reports should measure performance against the results indicators in the results framework (see Annex 3), and, in addition to financial management and procurement reporting requirements, include information on (i) status of project execution, with detailed information on budget allocations, scope o f the activities and results achieved, (ii) a summary of progress in the implementation of environmental and social measures, and (iii) an annex describing actual and potential developments likely to affect project implementation. The PCU has adequate capacity to carry out these tasks.
35. For assessing outcomes, i t i s intended to carry out (i) a mid-term review, that would focus on a number of project performance indicators (to be determined during implementation) and make mid-course corrections, as needed, in project execution; and (ii) complete the impact evaluation as described in Annex 3. The impact evaluation w i l l consist o f the final re-survey of the treatment and control groups (defined under the Third Project) and a full analysis o f the results of the entire study. Responsibility for execution o f the survey and analysis w i l l be contracted out to a specialized Nicaraguan agency (INEC) which has adequate experience in impact evaluation in the transport field. The PCU wi l l also prepare the Project Completion report and submit it to the IDA within 6 months o f completion of the project’s c iv i l works components.
36. The project monitoring indicators and the results framework are detailed in Annex 3.
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4. Sustainability
37. Sustainability w i l l be enhanced through the strengthening o f the MTI and the FOMAV, given the emphasis to be placed on planning and on developing adequate arrangements for road maintenance. The physical investments financed by the project (roads in particular) should receive adequate maintenance in order to be sustainable. The Government has taken a major step forward in this direction by approving a modest fuel surcharge to fund the maintenance program of the FOMAV that covers the core network. Some budgetary allocations w i l l s t i l l be needed for MTI for maintenance o f seasonal roads and some other less trafficked sections o f the network.
38. Given the advances made in terms o f funding arrangements, priority w i l l now be accorded to ensuring that the planning and implementation o f maintenance, especially by contracts with micro-enterprises and private contractors, i s carried out in an efficient and transparent manner. The MTI has so far done very well in terms o f establishing 33 routine road maintenance microenterprises and managing their performance successfully. The challenge during the first years o f project implementation w i l l be to complete the transfer of this program to the FOMAV (as originally contemplated by the IDA) and to expand it to 37 microenterprises.
39, Other factors affecting sustainability o f road infrastructure, such as the control o f vehicle overloading w i l l also be addressed. The conditionality for the proposed Credit reflects this sustainability concern. The first step wi l l include initiatives to restore fines for vehicle overloading to appropriate levels as well as to enforce them by expanding the use o f mobile weigh stations along high traffic routes. Subsequent steps w i l l involve completing arrangements for the self financing of the operating costs of MTI’s Vehicle Control Unit via a portion o f the fines collected for violating the law on vehicle dimensions and overloading. The feasibility of establishing an automated electronic network linking al l o f the weigh scales for both data control and monitoring purposes w i l l be also analyzed. The project w i l l also include funds for continued training and technical assistance for the strengthening o f MTI and FOMAV staff that was begun under the previous IDA projects. The goal w i l l be to help develop sound planning, investment, management and maintenance procedures for both institutions.
40. planning and the provision of adequate budgets for road maintenance.
Sustainability w i l l be enhanced through the strengthening o f the MTI, the emphasis on
5. Critical risks and possible controversial aspects
41. There are several factors of an economic, institutional, political or social nature that may affect the achievement o f the project development goals. Nicaragua i s very susceptible to natural disasters and i ts economy i s highly vulnerable to external shocks. The economy has not grown enough in the recent past, thereby exacerbating the demand for basic necessities. Nicaragua’s signing o f the CAFTA with the United States i s expected to provide a stimulus to key sectors of the economy and to foster competition. I t should be noted too that the Government attained the H P C completion point conditions, despite going through a long period o f political stagnation because of the precarious balance o f power in the National Assembly, and i s quite experienced in dealing with challenges. Finally, unlike past attempts at establishing a command economy, the
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GON development strategy places considerable emphasis on the economic growth to be generated by the private sector.
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6. Loadcredit conditions and covenants
Board Presentation: None
Effectiveness Condition: None
44. Other (classify according to covenant types used in the Legal Agreements):
Disbursement conditions:
a) N o disbursements for the second year o f the Road Rehabilitation program until MTI and FOMAV prepare and sign a rolling, 3 year agreement, acceptable to the IDA that w i l l govern the routine maintenance by microenterprises program.
b) N o disbursements for the second year o f the Road Rehabilitation and the Rural Transport Improvement programs unless the funds collected in the prior year via the special fuel surcharge have been transferred in a timely manner to the FOMAV for i ts annual maintenance program.
c) the Third Roads Project (Credit 3464-NI) has been committed fully.
N o disbursements for road maintenance by microenterprises until similar funding under
d) overloading have been restored to adequate levels.
N o disbursements for the Road Rehabilitation Program unless the fines for vehicle
e) N o disbursement for the'Road Rehabilitation Program until an account in local currency (Cuenta Escritural de Contraparte local) for the project's counterpart funds has been opened in the Central Bank. The Cordoba equivalent of 3 months worth of counterpart funds should also be deposited therein.
45. Monitoring, reporting:
a) MTI w i l l submit semi-annual performance reports in a format to be agreed
b) IDA wi l l carry out a mid-term review not later than December 31,2008
D, APPRAISAL SUMMARY 1. Economic and financial analyses
46. The economic justification for the roads rehabilitation was carried out using the Banks HDM-4 model and was based primarily on the quantified benefits that can be attributed to the road improvements, in particular savings in vehicle operating costs, The economic rate o f return was estimated at 61% for L a Virgen-San Juan del Sur and 36% for Diriamba -Casares, with Net Present Value (NPV) o f US$10.05 mill ion and US$7.67 mill ion respectively. For the rural (secondary and tertiary) roads stabilization, using a s imi lar approach, about 1,849km o f roads were analyzed using the Road Economic Decision Model (RED) model. The 320km that were identified and selected to be part o f th is program have an overall Economic Rate o f Return
15
(ERR) o f 34%, and an NPV of US$48 million at a discount rate of 12%. The overall average ERR for the road improvement component i s estimated at 35% as detailed in Annex 9.
47. Although HDM-4 and RED are very good analytical models, some benefits from the project are b y nature very difficult to quantify. Some of the most important benefits include time savings along the road corridors linking the areas of production with the areas o f competitiveness and reduction in vehicle operating costs. In addition, many of the road links included in th i s project are needed to help foster local and foreign investment in productive zones. The maintenance component represents the execution o f the routine and periodic maintenance program of over 2,480km of asphalted, adoquin and gravel roads.
48. The overall economic rate o f return i s quite robust as demonstrated by the sensitivity analysis. If the investment i s increased by 20%, the ERR would be reduced from 35% to 30%, the NPV from US$65.8 million to US$62.4 million and the cost-benefit relation from 1.3 to 1.1. If the benefits are reduced by 20% the ERR would be reduced to 25%, the NPV to US$56.5 million, and the cost-benefit relation to 1.1.
2. Technical
49. The proposed project includes basic road rehabilitation works, all completely within the existing rights o f way. Shoulders w i l l be provided in built-up locations to help promote the safety of pedestrians and of non-motorized traffic. Standard, well known technologies wil l be used to avoid any negative environmental impact and construction costs w i l l be minimized through the use of national and international competitive bidding procedures.
3. Fiduciary
50. Procurement. Procurement was managed relatively well under the previous projects and no major issues emerged. For the proposed project, standard bidding documents and largely the prevailing procurement method thresholds and prior review arrangements w i l l be retained. Annex 8 has details on the procurement arrangements. The project w i l l also provide technical assistance to strengthen the procurement unit in the MTI. Also retroactive financing for all components o f the project, not to exceed US$3.0 mill ion wil l be provided for expenditures incurred between January 1,2006 and the date of the Financing Agreement (FA). This i s needed to help ensure adherence to the project implementation schedule.
51. Financial ~ a n ~ g e m e n t , The MTI's performance has been acceptable so far in terms of IDA auditing and financial management requirements. The intention under this project i s to strengthen the UCP to improve financial and managerial reporting. The required financial. management assessment per OPlBP 10.02 has been substantially completed. The strengths o f the existing capacity in this regard have been assessed and there are no major issues. Nevertheless, areas subject to improvement have been identified and the corresponding action plan detailing the necessary steps to be taken to continue the preparation o f Financial Management Reports (FMR) has been agreed with project management. Annex 7 has more details on the financial management arrangements .
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52. Recently, under the Third Roads Project (CR-3464-NI), the MTI switched from using solely the project based system (SIAP) to the government wide SIGFA system and has encountered some problems with the transition5. In particular, there have been significant delays in the payments cycle due in part to this responsibility having been shifted somewhat to the Ministerio de Hacienda y Crkdito P6blico (MHCP), especially for the issuing of cheques. This means that supporting documents have to be processed by both MTI and MHCP before payments can be issued and as a result bottlenecks have arisen. Furthermore, with the introduction of Budgetary Law 550, and i ts accompanying MHCP regulations, all externally financed projects are subject to budget ceilings that are not necessarily consistent with the requirements of the project’s implementation schedule and that can no longer be automatically adjusted by MHCP. All budget adjustments have to be approved b y the Asamblea Nacional. I t seems that these problems may not be easily overcome and hence MTI and MHCP agreed at negotiations to work jointly on resolving them. MTI and MHCP wi l l also try to introduce and calibrate the SIGFA- PRO b y end 2007, since it may be more consistent with IDA requirements for the production of FMRs.
53. Project administration wi l l be undertaken by MTI under i ts established institutional structure. Accordingly, MTI’s Project Coordinating Unit (Unidad Coordinadora de Proyectos - UCP) w i l l be directly in charge o f financial management (FM) tasks. These w i l l basically include: (i) budget formulation and monitoring; (ii) cash flow management (including processing loan withdrawal applications); (iii) maintenance o f accounting records; (iv) preparation of interim and year-end financial reports; (v) administration o f underlying information systems; and (vi) arranging for execution of external audits.
54. The fact that MTI has ongoing experience managing projects financed by the IDA, IDB and other donors, for which it has administrative structures and systems in place, puts i t in a good position to carry out FM functions. However, the FM capacity Assessment has identified project-specific actions to be executed within a timeframe to meet the IDA’S minimum fiduciary requirements.
55. Following appraisal, adequate financial management arrangements were agreed with the MTI and the project’s operational manual was updated. Hence, the FM arrangements satisfy minimum Bank requirements. Annex 7 describes in detail the FNI arrangements and the F%l action plan.
4. Social
56. Given the nature of the works, the rehabilitation of trunk and rural roads in long developed and well trafficked corridors, and based on the social and environmental screening that were carried out, no negative impacts are expected. Also, there w i l l be no resettlement of people and the roads do not traverse any indigenous communities nor natural habitats. Under the previous IDA projects, the MTI had developed good environmental and social manuals and procedures that wi l l be applied during project design and implementation. These manuals also
In reality, MTI i s using both SIGFA and SIAP because it s t i l l needs the latter system for financial recording and generation of FMRs
17
include standard mitigation measures that are to be applied during construction. This w i l l include consultation with street vendors prior to construction.
57. In the case of L a Virgen-San Juan del Sur and Diriamba-Casares there w i l l be an archaeological evaluation study during the project design phase. This i s primarily for the case of chance-finds during project execution. The Nicaraguan Institute of Culture (INC) wil l be in charge o f this evaluation.
58. During the preparation of the project local authorities were consulted regarding development plans and investments carried out in their territory, as well as investment priorities in road infrastructure. Other institutions were also consulted including the Nicaraguan Institute of Tourism (INTUR), National Company of Ports (ENP) and the Institute o f Rural Development (DR).
59. The participation of Nongovernmental Organizations and other c iv i l society organizations has taken place since the beginning of the project. Different social sectors in the project area such as associations of farmers, livestock producers, cooperatives o f transportation, community leaders, community organizations, etc. were consulted during project identification and preparation by the MTI when carrying out the Environmental Assessment. The Environmental Impact Assessment and the Document o f Environmental Impact were made public for c iv i l society organizations review. Subsequently, a public presentation o f the project was carried out so as to inform stakeholders and obtain their suggestions that were taken into account in the project. The public presentation was supported b y the Ministry o f Environment and Natural Resources (MAWNA) and local Municipalities. During the construction phase there w i l l be coordination with several c iv i l society actors.
5. Environment
Environmental aspect: Environmental Category B
60. The MTI’s Division of Environmental Management carried out the environmental screening and assessment of al l project roads. This assessment was done under the principles established in the Environmental Manual (Guia para la Categorizacidn y Definicidn de ~equerimientos pura la Evuluacidn Ambiental y Social de Proyectos) which are based on World Bank Safeguard Policies (June 2003). This environmental manual categorizes the projects in three levels: (i) level 1 includes those projects that have a small or low impact on the environment and can be managed with the environmental standards as specified in MTI manuals, (ii) level 2 includes those projects that require an environmental impact assessment to provide specific recommendations for work implementation and, (iii) level 3 includes those projects that could induce high environmental and social impacts and therefore require a detailed environmental impact assessment approved by MARENA.
61. The road rehabilitation and maintenance projects for L a Virgen-San Juan del Sur and Diriamba-Casares qualified as Level 2, and all the projects for secondary roads stabilization with adoquines qualified as projects of level 1 that do not require the preparation o f an Environmental Impact Assessment. A brief socio-environmental screening was carried out for the aduquin
18
projects. This evaluation established the requirements for compliance with the current environmental legislation, potential environmental impacts and steps to be followed for environmental mitigation measures.
62. For the road candidates included in the rural transport improvement plan, al l the works w i l l be carried out within the existing road platform and wi l l not involve major earthworks. Based on completed environmental analysis, there w i l l not in addition be any negative impact produced by this component. Adequate technical specifications to help guarantee the adherence to acceptable environmental practices during the construction w i l l be included in the civil works contracts.
63. The MTI has completed the Environmental Assessment (EA) of the project in accordance with the stipulations of manuals and procedures developed under previous IDA projects, The EA for th i s project consists of the following four documents: (i) Estudio de Zmpacto Ambiental: Adoquinado del camino Nueva Guinea-Naciones Unidas (CORASCO, January 2006); (ii) Estudio Ambiental-Sociul: Rehabilitacio'n y ~ejoramiento de la Carreteru Diriamba-Empalme La Boquita-Casares (INOCSA, January 2006); (iii) Estudio Ambiental-Social: Rehubilitacio'n y ~ejoramiento de la Carretera La Virgen-Sun Juan del Sur (INOCSA, January 2006); and (iv) Fichus Ambientules y de Cutegorizacio'n de Proyectos de Rehabilitucio'n y A d o q u i n ~ o (MTI- DGA, January 2006). All four o f these environmental reports have been submitted to the Bank's Infoshop and have also been made public by MTI in Nicaragua. MTI also has at i t s disposal a wealth o f other useful documentation, including: Guidelines to prepare environmental impact assessments; criteria to assess environmental impact; rural roads construction manual; environmental protection guidelines for roads construction and rehabilitation; World Bank environmental policies; Norma Tdcnica Obligatoria Nicaraguense; general provisions for streets, roads and bridges construction; basic environmental standards for road construction; norms for the exploitation of material borrow pits; standards and ministerial resolutions for the basic provisions of hygiene and safety in the work place; Central American Environmental Manual for road design, construction and maintenance; and the Social Management Manual-MTI. MARENA has already granted the Environmental Permit for the project.
64. The f i rms implementing sub-projects should also comply with the provisions set in the following laws and decrees: Decree 45-94- permission and environmental impact assessment regulations, Decree 36-2002-Administration o f the System of Permission and Environmental Impact Assessment in the Autonomous Regions o f the Atlantic North and South, Decree 14-99- Regulation o f Protected Areas, Decree 32-97-Regulation General for the Control of Emissions of the Motor Vehicles, Decree 78-2003 National Policy o f Wetlands, Law 40 and Decree 52-97 Law o f Municipalities and i t s Regulation, Law 445-Law o f Property o f Indigenous Communities, Law 402-Law of Rates and Forest Utilization, Law 277-Law o f Supply o f Hydrocarbons, Law 337-Law creative of the National System for the Prevention, Mitigation and Care of Disasters, Law 387-Decree 119-2001 Special Law on Exploration and Exploitation of Mines and i ts Regulation, Law 43 1-Law o f Regimen and Vehicle Circulation, Decree 46-52 and 9-56-Law of Right of way and i ts Reform, Decree 1422-Law of Protection to the Cultural Heritage o f the Nation, among others.
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65. During project implementation and within the framework of the ESMP, an environmental follow-up, monitoring and surveillance plan w i l l be carried out. I t s objective wi l l be to control the application of each of the environmental mitigation measures, to define counteractive measures against unexpected environmental impacts, and to evaluate quantitatively and qualitatively, the ESMP level of compliance. The main actors responsible for the environmental follow-up and monitoring are: the contractor’s environmental specialist, the environmental supervisor from the supervisory firm, and the environmental specialist from the MTI. This control team through joint periodic visits w i l l monitor project activity, w i l l prepare reports regarding levels of compliance with relevant environmental aspects, and w i l l recommend corrective actions when needed.
66. There w i l l be no major earthworks or alignment changes and hence no alternative routes considered. However, whenever justified for the rural roads, adoquines wi l l be used for their improvement, Changing the road surface to adoquin (instead o f the former gravel surface) would have positive direct environmental impacts by (i) reducing erosion and high sediment runoff typical o f gravel road surfaces (thereby producing less waterway sediments) and (ii) minimizing the use o f borrow pits for repeatedly extracting new surfacing material for the routine and periodic maintenance activities required for gravel roads.
6. Safeguard policies
67. The project i s for road improvements along existing road alignments and does not involve major earth works or land acquisition. None o f the road candidates involve crossing through protected areas or other environmentall; sensitive zones. Based on the specific environmental and social analyses completed so far and the modest scope o f the improvements to be carried out, and i t s similarity to the previous three projects, the project was rated as a category B. The MTI already has acceptable manuals o f practice for ensuring compliance with Bank safeguard requirements.
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBPIGP 4.01) [XI 11 Natural Habitats (OPIBP 4.04) [I [XI
Pest Management (OP 4.09) [I [XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [I Involuntary Resettlement (OPIBP 4.12) [I Ex1 Indigenous Peoples (OD 4.20, being revised as OP 4.10) [XI
Forests (OPIBP 4.36) [I [XI
Safety o f Dams (OPIBP 4.37) 11 [XI
Projects in Disputed Areas (OPIBPIGP 7.60) [I [XI
Projects on International Waterways (OPIBPIGP 7.50) [I [XI
[XI
[I
I n addition, strategic regional environmental and social analyses were carried out that led to the definition of a suitable framework required prior to any future improvement of the road connection to the Atlantic Coast near Bluefields.
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68. Based on the analyses completed and the scope of the road improvement, no involuntary resettlement i s expected. In terms o f Cultural Property the MTI Manuals include chance-find procedures although, given the minor earthworks involved this policy i s not expected to be triggered. In terms of Natural Habitats and Forests policies, based on the assessment carried out, their findings and the project scope, no adverse impacts are expected. However, in the remote eventuality, the screening procedures to be followed under the project would help to ensure that appropriate actions are taken to mitigate any negative impacts.
7. Policy Exceptions and Readiness
69. The project requires no exceptions. The project i s ready for implementation.
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Annex 1: Country and Sector or Program Background
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Background
1. Nicaragua’s road network totals 19,036km, o f which only about 2,299km are asphalt paved primary roads while the vast majority consists largely of rural secondary or tertiary roads that are adoquin or gravel surfaced (3,362) or earthen (13,374km). Traffic levels vary widely but are generally in excess o f 5,000 vehicles per day (vpd) on the trunk roads and upwards o f 150 vpd on the secondary roads. The network’s density (15.821100km) and service index (0.4km1000pop.) in terms o f paved roads i s among the lowest in Central America. Roughly consistent with the population distribution, more than 80% of the road network i s located on the Pacific side o f the country. B y the end of the economic and politically difficult 1980s’ with almost no resurfacing or reconstruction taking place, the network had deteriorated to the point where, as measured by roughness indices and other factors, only about 12% of it was in good or fair condition. The roads in poor condition included extensive segments of the north-south trunk road (Natural Corridor) between the Honduran and Costa Rican borders, as well as the east-west road linking Managua to the port of Rama. The inadequate andlor malfunctioning transport infrastructure served as a bottleneck for external as well as internal trade, thereby limiting the competitiveness of exports as well as discouraging the development of areas with agricultural potential.
2. According to the Development Policy Review: Sustaining Broad-Based Growth, (Report No. 291 15-NI, December 2004). Nicaragua has a very Limited transport infrastructure endowment and compares unfavorably in the region. This report mentions several measures that could be taken to improve the country’s transport infrastructure:
P Expand the paved roads network to the level of other low-income countries in the region, provided it i s fiscally sustainable. In order to respond to the needs for rural infrastructure and increase the productivity in the agricultural sector i t i s recommended that the government focus in the near term on improving a total of 2,500km of distributor roads network that support the four main productive clusters.
P Emphasize road maintenance in order to prevent premature deterioration, through comprehensive maintenance programs and guaranteeing financing for the Road Maintenance Fund (FOMAV).
P Improve urban mobility by restructuring public transportation services as part o f an integrated bus routes development and improved traffic administration.
P Strengthen the capability of the Ministry of Transport and Infrastructure (MTI), in order for i t to carry out road condition inventories, to identify least cost solutions, and to promote the development of local consultancy services and industries.
P Improve ports and their associated road access
22
Main sector issues and Government strategy
3. Nicaragua has been experiencing steady economic growth since the early 2000s but it i s s t i l l the second poorest country in the hemisphere, with a 2004 GDP per capita o f US$790. Government policies and economic reforms have as their principal objective economic growth and poverty reduction in Nicaragua. This may best be attained through a sustained economic growth process and based on a market oriented economy that i s open and competitive internationally. In support of this goal, the Nicaraguan economy requires appropriate levels o f transport infrastructure and the efficient delivery of transport services. However, according to the 1999 LSMS findings (updated in 2002 and 2003), overall a little above one-fifth (22.3%) o f Nicaraguan households have access to a paved road; furthermore the household numbers are 7% for the extreme poor, 11% for the poor, and 30% for the non-poor. I t i s highly doubtful that such low levels of road infrastructure provision could support government development objectives effectively. In reality, economic growth could become constrained if key needs are not addressed soon. Hence, among the key tasks for the sector are: (i) completing the rehabilitation o f trunk roads, especially those connected to the Central American network and the principal regions of the country; (ii) implementation o f a long term distributor (secondary and rural roads) stabilization program in productive and less poor areas; (iii) ensuring sustainability via the road maintenance program.
4. The 1990's marked the beginning o f the rebuilding period with the improvement o f about 340km of primary roads and about 650km of rural roads, as well as the implementation o f programs for routine and periodic maintenance by contract during the latter half o f the decade. B y mid 1998, it was estimated that over 17% o f the network was in good or fair condition. However, Hurricane Mitch of October 1998 had unprecedented effects on the country, by adversely affecting over 850,000 people and causing some 2800 deaths. Sectorally, the more significant damages that produced lasting effects on the economy were concentrated on infrastructure, particularly the road network, and on agricultural production. In the road subsector Hurricane Mitch caused severe damages to about 2600km of the network, predominantly the literal shredding of most gravel roads in the Segovias and LeodChinandega and the partial or total destruction o f 83 major bridges. The damages were so extensive that virtually all road transport services between Managua and the Honduran border were interrupted. Fortunately, the Government, with assistance from donor countries, was able to restore basic traffic circulation in a few weeks; however the bottleneck effects s t i l l then lingered at the many roadside bypasses erected around damaged bridges. In sum, in terms of longitude but not necessarily location, Hurricane Mitch more than neutralized al l o f the road improvement gains made during the 1990s. However, the qualitatively better portions o f the network fared reasonably well and i t was estimated that, after the basic cleaning up and repairs carried out under the Emergency Programs o f the various donors, about 15% o f the total road network could be considered by then to be in good or fair condition.
5. Nicaragua has a fleet o f about 275,054 vehicles (an average o f 0.05 vehicleslperson - one of the lowest in the region), which includes about 125,000 trucks and 14,952 buses. There i s limited recent data on the age o f the vehicle fleet although it i s estimated that about 50% of the freight transport fleet i s more than 10 years old. Land transport i s by far the dominant mode for over 95% o f freight and passenger movements. Preliminary estimates place road transport
23
volumes close to 5.7 billion vehicle-km per year, with almost 50% being performed by trucks and buses. The provision of freight transport services i s fully private. All public enterprises that provided road transport services during the 1980s Socialist administration have been privatized. Operators are organized in transport cooperatives and there are 94 of these in the light and heavy duty segment of the freight market. Half o f the freight operators are owner-drivers while the other half own, on average, a maximum of three trucks. In general, aside from the aged vehicles and poor road conditions, i t i s the combination of the mostly shoulder-less, two lane roads together with the ever present agricultural vehicles, cattle and non-motorized traffic that contribute to the relatively difficult transport operating environment on the road network.
6. The MTI i s responsible for managing the entire primary and rural road network, and for the operation and regulation o f road, sea and air transport. In addition to managing road construction, i t s transport functions relate to the promulgation and implementation o f regulations relating to the safety and efficiency o f operation of al l means o f public transport, by land, sea and air. This includes establishing tar i f fs for inter and intra-urban transport o f passengers, authorizing licenses for the operation of vehicles and vessels on particular routes, including those temporarily in the national territory. MTI, formerly MCT - Ministerio de Construccio'n y Transporte, resulted from the 1997 implementation of administrative reforms, supported by the First IDA Transport Project (Cr-287 1 -NI) and Institutional Development Project (Credit 2690- NI), that promoted the change to an agency less deeply involved in the day to day activities o f the sector, and more concerned with ensuring that the provision o f services by others is closely related to the needs o f the users, and preventing abuses in a more open and competitive environment. The future focus w i l l thus be on the design and implementation of regulations regarding vehicle design and safety, driver competence and environmental controls. The regulatory role o f MTI has been reduced to the minimum level necessary to help ensure safety and competitiveness in the provision of services. MTI has about 807 staff and their level o f training varies widely. A t the highest levels, due to training programs financed under the Second and Third Projects (CR-3085-NI and 3464-NI), there i s now a cohort of about 18 MTI staff with post-graduate specialist qualifications, very pertinent to the tasks for which they are responsible, while at the other extreme, there s t i l l remain many staff without any qualifications beyond secondary school.
7. Currently, the major issues affecting the road subsector are related largely to the (i) sheer size of the rehabilitation backlog, (ii) need for strengthening the capacity of MTI and FOMAV to manage a sustainable and continuous road maintenance program, (iii) weaknesses in the planning and budgeting process, and (iv) the challenges o f decentralization o f road network management. In order to address the rehabilitation backlog, based on an HDM derived prioritization of the overall road network needs, a US$620 mill ion plan for the rehabilitation and maintenance of key segments of the road network during 2005 - 2009 has been formulated. Completion o f this component w i l l lead to the restoration to good condition o f over 90% of the trunk or primary asphalt paved roads, and about 900km o f departmental roads. The program includes also some US$200 million for the stabilization o f rural (secondary or tertiary) roads, with a focus on the improvement of priority agricultural linked roads. The remainder o f the program wi l l be for bridge rehabilitation and periodic maintenance by contract.
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8. The MTI i s currently preparing a decentralization plan for road network management in accordance to the central government's decision to transfer budgetary resources to the municipalities. In order to achieve this objective a two stage strategy i s proposed. First, the National Government should transfer 10,OOOkm of dry season and secondary municipal roads to the AZcaZdias while MTI continues to manage the remainder o f the road network. Subsequently, by the year 2010 when municipalities are expected to have acquired more experience and have improved their administrative capacities a further 2,065km of secondary and collector roads w i l l be transferred to them. This w i l l leave a core network o f about 7,OOOkm to be managed by MTI. I t i s recommended that the MTI starts building relations with the Institute for Municipal Development (INIFOM) and with the municipalities in order to be able to develop consensus on the design and implementation o f these kinds o f programs.
9. In line with the commitments made at the 1999 Stockholm post-Hurricane Mitch conference, several o f the projects in the program are already underway and are being financed by the IDB, DANIDA, European and Japanese governments, and other donors. Th is decade should continue to be one o f recovery in the road subsector in accordance with the objectives set at the National Development Plan, the CAS and the PRSP. The MTI's very good performance under the current IDA projects and also in carrying out the Mitch Emergency Recovery programs with the various donors provides evidence o f i ts ability to manage large programs in the short term, as the expenditure equivalent o f almost one year's normal program was implemented within the 5 months post-Mitch. The challenges now relate to planning and managing a large program in the medium and longer terms.
10. As the improvement program progresses, i t w i l l be essential that the roads be maintained adequately in order to prevent premature deterioration. Nicaragua actually enjoyed a tradition o f good maintenance in the past as prior to the turbulent 1980s, i t s road network was cited perennially for being the best kept in Central America. The problems arose primarily due to the adverse effects o f the c iv i l strife and political turmoil, the resultant shortages and economic crises, and weak planning and implementation arrangements in the 1980's. Currently, however, the situation can be characterized as one o f a promising recovery. There have been significant improvements in the recent past with the introduction of routine maintenance b y contract using microenterprises under the First IDA Road Rehabilitation and Maintenance Project (Credit 287 1- NO, the establishment of the FOMAV and the introduction o f periodic maintenance using private contractors under the Second and Third IDA Project. The Government came acceptably close to fulfilling i ts annual commitments to IDA on the level o f budgetary allocations for maintenance. However, in order to optimize performance, the allocations need to be released in a more timely manner and some o f the limitations in the MTWOMAV that hamper the planning and implementation o f maintenance need to be addressed. In terms o f funding reliability, after many years of earnest attempts, the National Assembly on December 13, 2005, approved an amendment to the FOMAV law that would enable i ts program to be funded through fuel surcharges. The good implementation experience of IDA projects, coupled with conditionalities under the PRSC, provided the significant leverage needed for attaining this goal.
11. The MTI intends to gradually increase the share o f maintenance performed by contractors to a feasible maximum, and will continue to reduce the parastatals Regional Highway Construction Agencies (COERCO) to the minimum level needed for their deployment during
25
emergencies or in locations where there are s t i l l security problems or no other viable alternatives. There i s s t i l l much room for improvement and to do so it w i l l be necessary to develop further the MTI's capacity to manage maintenance by contract as well as to strengthen the local construction industry. This includes developing MTI's capacity to carry out condition inventories of the roads, design and implement annual and multi-annual routine and periodic maintenance programs, as well as to seek least cost solutions to technical and engineering problems associated with road and bridge maintenance. MTI w i l l require a long-term program of technical assistance to help accomplish al l of these goals.
12. The fore-mentioned issues also resonate from a regional perspective, given the recently signed CAFTA agreement. A well-developed and well-maintained road infrastructure i s crucial to maximize CAFTA potential for a dynamic export-led economic growth in the region. For most of the Central American countries, road quality remains inadequate and ranks lower than the LAC average. Road density i s low (3.8Km per 1,OOO people compared with 5.2 in LAC), while the share o f paved roads i s way below countries with s imi lar GDP per capita.
Figure 1 Central America: Share of Paved Roads (%y
70.0% 1 I
60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%
I
* 1999 Source: WBI
13. Guatemala exhibits the best road network in the region in spite o f i t s limited density (1.3Km per 1,000 people). Nicaragua has the poorest quality of roads, with nearly 50 percent o f the total road network unusable during the rainy season. In El Salvador only 8 percent of total unpaved roads (80 percent o f total network), was classified as in good condition. Even Costa Rica, which outperforms its neighbors in most infrastructure indicators, shows a road quality below regional average. The overall poor quality of roads i s most likely to affect rural development and price-competitiveness o f agricultural goods.
14. The increased regional competitiveness that i s expected to arise from the recent CAFTA agreement also heightens the urgency to address road transport improvement issues. As discussed, Nicaragua i s lagging behind with a road infrastructure poorly adapted to the demands likely to be imposed by CAFTA. In order to improve its prospects for competing under CAFTA, Nicaragua must overcome the huge backlog o f maintenance and investment in road infrastructure. The allied agenda of policy and institutional change in this sector w i l l involve: (i)
26
extending coverage in rural roads which have a high social rate of return (typically 14 to 31 percent for Bank projects). Such expansion should be part of a strategy aimed at strengthening rural-urban linkages and develop trade corridors; (ii) designing mechanisms to protect infrastructure investment from fiscal adjustments and to increase investments i f fiscal space allows it; (iii) promoting a suitable regulatory framework for private sector participation in the construction, operation and maintenance o f transport infrastructure, and (iv) improving urban transportation systems.
Country Argentina Bolivia Brazil
15. There are also significant equity considerations that are associated with road infrastructure development and that are relevant to Nicaragua. Calderh and ServCn (2004a) provide an empirical evaluation o f the impact of infrastructure development on economic growth and income distribution for a large set of countries, including Nicaragua and other L A C countries. B y infrastructure development, the authors consider not only the accumulation o f physical infrastructure but also improvements in their quality. The authors conclude that infrastructure both raises growth and lowers income inequality, thus implying that infrastructure development may be a key win-win ingredient for poverty reduction. Infrastructure development w i l l be pro-poor if it allows poorer individuals (especially in rural areas) to access additional productive opportunities.
Growth Effects Redistribution Effects Stocks Quality Total Stocks Quality Total 2.2% 0.9% 3.2% -4.8 -1.6 -6.4 4.8% 1.0% 5.8% -10.2 -1.8 -12.0 2.4% 1.9% 4.4% -5.2 -3.4 -8.6
Figure 2 Changes in Growth and Income Inequality in LAC countries due to higher infrastructure
development (in percentages and basis points)
27
Sector issues to be addressed bv the Project and strategic choices
16. Road transportation i s by far the dominant (if not often the only) mode for most freight movements in Nicaragua. Nicaragua no longer has a railroad and i ts seaports, though rundown, have adequate capacity to handle current traffic levels. Most o f i t s exports are now headed for Atlantic destinations which means that Nicaragua has to use the ports in neighboring countries (Honduras and Costa Rica) for i ts foreign trade and partly as a result i t has for long been subjected to periodic bouts o f severe 'landlocked country treatment' b y i t s neighbors. Nevertheless, for improved service characteristics Nicaragua has rehabilitated key sections of its trunk road network and thereby removed transport bottlenecks from the corridors leading to its own secondary port at El Rama, and along the North - South routes to ports in Honduras and Costa Rica. The rehabilitation of these corridors wi l l help to reduce foreign trade costs. The next priority would be to improve transportation infrastructure along the selected secondary roads so as to facilitate their connection to export corridors and to productive agricultural areas and zones with high economic returns. These priority areas form a coherent program that would go far in eliminating the road infrastructure constraints to economic growth. The proposed Fourth project therefore addresses the following:
(a) Road Maintenance and Rehabilitation. The various links were selected for their economic importance and for their potential contribution to restoring efficient transportation on both trunk and secondary roads. In addition there w i l l be an increase in routine road maintenance by microenterprises and a gradual transition of the said program from MTI to FOMAV management.
(b) Institutional Development and Training. The proposed project would provide support for improving the planning, funding, and implementation o f balanced road maintenance and rehabilitation programs as well as the appropriate training o f MTI staff. Under the project, i t w i l l be necessary to continue programs started in the earlier IDA projects for strengthening the planning division, improving contract management, training staff in the use o f the HDM and other planning models, and the preparation o f annual and multi- annual economically prioritized road improvement programs.
28
Annex 2: Major Related Projects Financed by the Bank andlor other Agencies
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
I Sector Issue
Transport
Other Development Agencies
DANIDA financed: Main and rural roads improvement
IDB financed: Road Improvement co-financed with Nordic Funds.
IDB/Nordic Funds Main and Feeder Roads
EU financed:
Spanish Government financed:
BCIEMCxico.
IPlDO Ratings: * Project Status Report (PSR)
Project
CR-2871-NI: Road Rehab. I (i) Izapa - Le6n - Chinandega
CR-3085-NI: Road Rehab. I1 (i) Portezuelo-Aeropuerto-San Benito (29.70Km) (ii) Hurricane Mitch Emergency Program CR-3464-NI: Road Rehab. I11 (i) Muhan - E1 Rama (90.30Km) (ii) Las Piedrecitas - Izapa (62.6Km) (iii) Rural Roads Adoquin (232Km) (iv) Routine and Periodic Maintenance, FOMAV and others.
(i) Nandaime - Rivas - Peiias Blanca. San Benito - San Lorenzo. (ii) Feeder Roads Program: Rio Blanco Siuna - Puerto Cabezas. Esteli, Nueva Segovia, RAAN y RAAS.
(i) REMEVIAL (ii) Pan American Hwy. Rehab. (206Km) (iii) San Lorenzo - Muhan (88Km) (iv) Tipitapa - Masaya (22Km)
Main and feeder roads in Competitive Zone 11: Chinandega - El Viejo - El Congo - Emp. Cosiguina. Telica - Malpaisillo, Chinadega - Corinto
Study and Rehab. Guayach - Jinotega.
Ticuantepe - Masaya - Granada
Last Supervision, (PSR*) Ratings
(IDA-financed projects only)
IP
HS
HS
H S
Chinandega - Guasaule.
Adoquin: Santa Clara - Susucayan - El Jicaro.
I S (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly
DO
HS
H S
HS
isatisfactory)
29
Annex 3: Results Framework and Monitoring
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
PDO (i) Improve transpon infrastructure along key main roads
(ii) Improve secondary and rural roads;
(i i i) help ensure the sustainability o f the road improvements
(iv) Institutional strengthening
intermediate Results One per Component
Component One: Km o f road improved each year.
Component Two: Km o f roads stabilized each year. Number of contractorslMCA working
Component Three: Number o f micro-enterprises established Km of roads being maintained
Component Four: Number o f MTI and FOMAV staff trained in planning and mgt courses. Share of road network condition surveyed. Dissemination workshops on project monitoring and evaluation. Share o f road network transferred to Departmental and Municipal management
(i) At project Completion: a 10% increase in traffic volume and over 15% reduction in vehicle operating costs
(ii) Increased mobility for residents o f rural communities
(iii) Increased share (22%) o f road network in good and fair condition
(iv) Incorporation of improved management and planning procedures by MTI and FOMAV
Component One: Road Rehabilitation Program 5 1 km o f main roads (Diriamba- Casares and La Virgen - San Juan del Sur) improved by 2007 Component Two : Rural Transport Improvement Program: About 320 km of rural secondary and tertiary roads located mostly in zones I, 111 and I V stabilized with adoquines and gravel by 2010 Component Three: Routine and Period road Maintenance Program: 37 micro-enterprises established and maintaining 2400 km. 80 km o f periodic maintenance completed by the end o f 2010 by private contractors Component Four: Institutional and Technical Development Program: Preparation o f annual road improvement programs; (ii) expansion o f HDM4 to most o f core network (4800km) and updating o f PMS (iv) 20 MTI staff trained; (v) complete workshops on network decentralization and studies for control o f truck overloading; (vi) continuation o f monitoring and impact evaluation program; and (vii) completion o f project supervision, detailed engineering; and feasibility studies.
i) To promote sector development :oak
ii) To maintain public support for vral road program and show widence o f meeting the long :xpressed needs o f rural people.
iii) Promote transport efficiency and iemonstrate effective use of road iser charges
iv) Demonstrate MTI and FOMAV nstitutional growth
Use of Results Monitoring
Component One: Evaluate MTI and overall GON performance
Component Two: Verify compliance with agreed targets.
Component Three: Assess development o f FOMAV management capacity.
Component Four: Provide evidence o f growth in institutional capacity,
30
r- m 0 0 0
r- m m d 0
E 2 Y 8 2 r- m
8 2 F;
E 8 2 N r- m m
c a
0 0
N
0 0 d c.l
3 N
b *
IC1 W m - 3 m
W m m 3 vi -
W m 3 0 d
vi m N IC) yr,
v, c? 3 0 m
Y
Socio economic monitoring of the Rural Roads Improvement program
1. Under the previous project, CR-3464-NI, work had started in 2001 on establishing a baseline along 6 treatment and 6 control roads and subsequently in 2003 and 2005 for carrying out re-surveys so as to monitor socio-economic changes in the area that may be attributed to the road improvement program. The overall objective of the socio-economic study was to collect baseline information on the targeted areas in order to establish their existing socio-economic conditions and social services access and to subsequently determine the size and nature of the benefits from rural transport infrastructure.
2. The analysis was to be based on the difference-in-differences methodology which compares the means of the changes, especially in headcount and extreme poverty levels for representative surveyed households along both treatment and control roads. A specialized Nicaraguan entity (INEC) was responsible for the study, design, survey and evaluation of the results.
3. benchmarks to determine the impact o f roads on:
The November 2001 baseline survey and the re-surveys were intended to establish
a. Income levels of target communities and groups;
b. Education and health sectors, particularly access to schools at the primary level, quality of education, drop-out rate, access to health centers, and prevention programs, such as immunization and prenatal care;
c. Agricultural economy: Volume, Productivity, production diversification, distribution channels and employment;
4. completion o f the road improvements (udoquin program), this was not possible.
The original plan was to complete the entire study by 2004; however due to delays in the
5. In Nicaragua, as in most developing countries, rural transport networks are st i l l underdeveloped and of poor quality. Rural households, and particularly women, spend much time and effort on transport activities to fulfill their basic needs7 Driven partly by the Millenium Development Goals (MDG) agenda, in recent years the resultant emphasis for assisting very poor populations through sustained rural development has led governments and donors to accelerate resource flows to rural infrastructure, with a large proportion being directed at improving transport infrastructure.
6. Developing a good rural road infrastructure network i s an essential requirement for rural development, although by itself i t i s not sufficient to guarantee success. Without an adequate network, communities w i l l lack the necessary physical access for basic domestic chores, agricultural activities, social and economic services and job opportunities. Without reliable
Lebo, Jerry and Schelling, Dieter “Design and Appraisal of Rural Transport Infrastructure” Ensuring Basic Access for Rural Communities, 2001. The World Bank
33
access to markets and productive resources, economic development stagnates, and poverty reduction initiatives cannot be sustained.
7. Poverty reduction strategies require a comprehensive framework for implementation. The simultaneous development of adequate rural infrastructure, productive sectors, social and economic services, an appropriate macroeconomic framework, and good governance and local ownership are required for rural poverty alleviation. Effective transport, as a complementary input to nearly every aspect o f rural activity, i s an essential element o f rural poverty reduction.
8. Because transportation has a pervasive influence across a country’s economy and i ts social fabric, i t is hard to trace and measure the ultimate impact o f transport interventions on the welfare of poor households. However, it i s widely accepted that improvements in transport have the greatest impact on poor people when other sectoral interventions are also in place, and that without good transport linkages many o f the other sectoral interventions may not reach their potential impacts. For example, well-staffed schools or health centers would be o f minimal benefit to poor people who cannot get to them.
9. From a broader perspective, adequate transport services can help reduce poverty in all i t s dimensions by stimulating economic and social development and inclusion by: creating opportunities for people to market their products and services, providing better access to schools and clinics; facilitating the access to information that i s vital to social participation, inclusion and accountability; and enhancing the ability of government to provide basic services, including security, to the population at large. The availability year-round o f reliable transportation can also greatly reduce vulnerability to household-level risks such as medical or family emergencies.
10. Transport i s a derived demand and hence improving i t can be considered to reduce poverty not through consumption of transport itself but rather through improving the quality and security of access to work, markets and services, and by releasing or making available increased resources for consumption and production. Tracing the poverty impacts o f transport interventions i s thus a very complex challenge.
11. The selection o f road candidates for IDA-financed transport projects i s usually justified by relatively robust economic appraisal methodologies and no further analysis i s needed in this respect. However socio-economic monitoring can enhance the economic justification by trying to (i) demonstrate how transport interventions contribute to the attainment o f a country’s poverty reduction objectives; and (ii) define ways in which the performance o f the transport sector itself, especially for the delivery o f rural transport services, can be improved. More generally, monitoring involves changes over time, not only in transport sector inputs (e.g. investment and maintenance costs, private expenditures) but also in outputs (road condition, extension), and sector outcomes (marketing o f crops, access to health facilities, responsiveness to poor people’s needs, and improved accountability for sector management) and poverty reduction outcomes (rural incomes, consumption, school attendance).
34
Methodology:
12. As mentioned before, the study i s based on the difference-in-differences methodology. The design centers on a baseline and follow-up survey data for a sample of project (treatment) and non-project (control) communities and households.
13. The baseline would measure difference in variables at time t, with another sample collected at time t + k, in order to estimate the observed changed. A total of about 460 households were surveyed. Six “treatment” and six “control” roads were selected. Selection o f appropriate controls was done through matched-comparison techniques. In theory, the control group, selected through matched-comparison techniques, i s identical to the project group according to both observed and unobserved characteristics so that resulting outcomes in program communities can be attributed to the project intervention.’ In this case control and treatment roads were selected so they would be in the same general geographical area and have s im i la r poverty levels; they also have similar topography and road conditions, poverty level, and to the extent feasible the same amount of beneficiaries.
14. The idea was that one year after the “treatment” roads were completed, another survey would be done to quantify the impact o f the road project in the different variables to be analyzed, such as education, health, access to services, etc. The interview would be done for the same household in order to do a panel analysis. However, due to delays in project implementation it was decided to do a re-survey every 2 years and a final survey at least one year after all roads have been treated. Interestingly, there were some reported reductions in headcount poverty levels along certain treatment and control roads following the 2003 re-survey. But at that time the road improvement programs had just begun and hence it was premature to assign any causality (other than direct and indirect employment) to the road project. I t was more likely a reflection o f the overall decline in rural poverty levels registered in Nicaragua at that time.
15. All roads had been ‘treated’ by end 2005 and the December 2005 re-survey should provide more interesting results from a transport perspective. I t i s planned to start doing an in- depth review of the findings o f the 2005 re-survey as soon as data become available. However, the main results and conclusions o f the socio-economic monitoring study w i l l be drawn from the final re-survey that wi l l be carried out in 2007, during the implementation o f the Fourth project.
Dominique Van de Walle, “Assessing the Poverty Impact of Rural Road Projects in Vietnam”, Annex 1.15 from “Evaluating the Impact of Development Projects on Poverty” by Judy L. Baker. The World Bank.
35
Annex 4: Detailed Project Description NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
The project w i l l include the following four components:
Component 1: Road Rehabilitation- US$10.13 million
1. segments: Diriamba-La Boquita-Casares (32km); L a Virgen-San Juan del Sur (19h) .
This component w i l l finance the rehabilitation and the improvement o f the following road
2. The road segment Diriamba-La Boquita-Casares was built in the 1970s, and connects to one of the more important tourism areas of the country. This section i s currently very deteriorated with an IRI greater than 10 and it carries more than 1100 vehicles per day. The proposed works include recycling and stabilization in order to reduce costs and minimize any environmental impact, as well as improving the roadside drainage.
3. The road segment L a Virgen-San Juan del Sur (19km) was built in the 1970s and connects key agricultural areas to the Pan American Highway. This section i s currently in poor condition with an IRI greater than 8 and i s used by more than 1200 vehicles per day. Similar to the above mentioned sections, the project w i l l basically rehabilitate the deteriorated asphalt pavement and install adequate roadside drainage. Consultants w i l l be hired to supervise project implementation.
Component 2: Rural Transport Improvement- US$41.87 million
4. This component includes an adoquines stabilization program for approximately 320km o f secondary and rural roads located mainly in productive zones I, III and IV. It wi l l support Government strategies for the development of a road network in areas of high economic potential (agriculture, milk and dairy products and tourism) in order to promote development, improve standards o f living, and employment generation. The works w i l l be carried out by national or international private contractors and consultants. Based on previous IDA experience the adoquines stabilization program i s cost effective and enables contractors and local community work groups called the ~ ~ d u l o s Comunitarios de Adoquines (MCA) to rapidly improve rural road conditions to a level where they become transitable year-round by vehicular and bicycle traffic. Due to Nicaragua’s rainy weather, the use of adoquines i s more cost-effective than any other stabilization option. The use o f adoquines also offer other positive characteristics such as: (i) the production as well as the installation o f the udoquines are labor intensive tasks; (ii) the use of imported inputs i s less than for any other road stabilization technique; (iii) the project cycle requires less logistical and managerial support; (iv) road maintenance requirements are reduced significantly after the stabilization process; and (v) there i s little use o f costly and heavy equipment during execution o f works and also for maintenance. Given the mixed traffic (vehicle, bicycles, pedestrians) along the roads, the municipalities w i l l be asked to build shoulders and paved side walks along the improved roads once the MTI has completed the adoqu~nado.
36
Component 3: Road Maintenance- US$7.64 million
5. This component includes provisions for routine and periodic maintenance contracts. Eventually, i t w i l l be managedjointly by MTI and the FOMAV. Table 1 shows a breakdown o f the program.
Periodic Maintenance. This sub-component includes US$3.05 million for the continued implementation of the periodic maintenance by contract program that began under the Second Road project. The program wi l l help to promote the participation o f private contractors in the road sector.
Routine Maintenance by Microenterprises. This sub-component includes US$4.59 mill ion to expand the microenterprises routine maintenance program that was initiated under the First Roads Project (CR-2871-NI) and the Second Roads Project (CR-3085-NI) and that i s currently under way with the Third Roads Project (CR-3464-NI). In addition, IDA wi l l finance partially costs o f training and supervision, promotional activities, materials for training, per diem, goods, operating costs and the required technical assistance. It i s expected that 4 additional microenterprises w i l l be formed, reaching a total o f 37 microenterprises, in order to cover the maintenance o f 2,400km.
Component 4: Studies, Goods, Technical Assistance, Training and Consultant Services - US$7.75 million
6. This component wi l l help to implement the project and to better promote the development of the road sector. I t w i l l include consultancy services for project supervision, for financial audits, feasibility studies, preparation and updating o f detailed engineering. Given the supervision requirements o f the project, four vehicles (pick-ups) w i l l be purchased and provided for field operations.
7. I t w i l l provide training and institutional strengthening for various units o f the MTI, for planning, road safety, environmental and social aspects (DGA) and for FOMAV staff (for microenterprises management); the MTI has already submitted an adequate training plan to the IDA. I t w i l l also fund socio-economic monitoring o f the rural roads program that had begun under the Third Roads Project (CR-3464-NI) and provide technical assistance to the MTI including the holding of two workshops intended to help provide national and international expertise for designing the road decentralization program. Assistance w i l l also be provided for MTI’s efforts to restore the fines for vehicle overloading to more appropriate levels. As shown in table 3, the fines have been reduced to levels that cannot serve as an adequate deterrent to vehicle overloading. In addition, this sub-component wil l also provide for the purchase of 4 mobile scales to help control vehicle axle loading.
8. This component w i l l contribute to network development by helping to improve the planning and programming o f the PMS (Pavement Management Systems) developed by the MTI’s Planning Unit. Assistance w i l l be provided for updating o f 3 year rolling investment plans using HDM and other Bank analytical planning models. Special attention w i l l be given to the integration of environmental practices in the project cycle. The PMS Unit collects data, creates
37
archives o f inputs, and gathers and conducts the analyses using the HDM-3 model. The data are analyzed and used to define homogenous road sections based on the traffic, the type o f the pavement and the condition of the ways. All this helps the development o f high-priority road maintenance and improvement programs.
9. In terms o f safeguard policies i t w i l l contribute to the institutional growth and improvement o f the Environmental and Social Management Division (DGA) through the financing o f specialized consultancy services that w i l l support the preparation o f policies and systems for environmental management, and updating o f tools and instruments of environmental management The DGA has a vested interest in developing a strong role for environmental protection and to share i ts plans with other actors by organizing and financing workshops seminars and forums. The project w i l l also support training o f DGA personnel.
10. and detailed engineering, and (iii) supervision o f components 1 and 2 o f the project.
Consulting services w i l l be needed mainly to carry out (i) feasibility studies, (ii) designs
11. the Project.
A national andor international firm wi l l be hired to perform annual financial audits for
12. high quality access to about 400,000 people. This i s detailed in table 4.
In sum, the implementation o f all project components i s expected to provide year-round
38
Table 1: Annual Goals for Road Maintenance
6. IDA Financing (US$ millions)
7, IJlA Program: Maintenance by Contract
7.1 Kilometers
7.1.1 Routine Maintenance
7.1.1.1 Paved (Asphalt, Adoquines and Gravel)
- by Microenterprise
- Other Contracts (Modulos, etc)
7.1.2 Periodic Maintenance
7.1.2.1 Paved (Asphalt, Adoquines and Gravel)
7.1.2.2 Other
7.2 Total Cost (US$ Millions)
7.2.1 Routine Maintenance
7.2.1.1 Paved (Asphalt, Adoquines and Gravel)
- Microenterprise
- Other (Modulos, etc)
7.2.2 Periodic Maintenance
7.2.2.1 Paved (Asphalt and Adoquines)
7.2.2.2 Other iote: Data has been rounded up regarding costs and goals
0.60 2.40 2.51 0.60
2,086 2,180 2,340 2,400
2,086 2,140 2,300 2,400
2,086 2,140 2,300 2,400
2,086 2,140 2,300 2,400
0 40 40 0
0 40 40 0
0.75 3.00 3.14 0.75
0.75 1.50 1.50 0.75
0.75 1.50 1.50 0.75
0.75 1.50 1.50 0.75
0 1.5 1.64 0
0 1.5 1.64 0
39
Table 2: FOMAV Work Program
1 RosdSegment 1 1) National Resources Management Plan
bn%h oan) 400.20
I 1. I Paved Road Network I 160.68 1 I
40
TOTAL I 1,202.17 1
41
Table 3: Vehicle Overloading Fines (Nicaraguan Cordoba)
No. Type of Fine
1 2
3
Lack o f Weights and Dimensions Certificate
Expiration o f Weights and Dimensions
Alteration of Weights and Dimensions Certificate
Resolution Transport General 02-2003 Law (Ley General de Cordoba Transporte)
Cordoba 750 100-200
2,250 200-300
300 100-200
29
30
3 1
42
removing excess loads
personnel
respect towards personnel
Lack of respect towards inspectors and MTI 0.0 200-300
Relapse on alteration o f I tem land lack o f 0.0 400-600
Relapse on lacking Item 1 0.0 200-400
I I
m d-
I
0 - N N
Annex 5: Project Costs
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Local Foreign Total
$million $million $million Project Cost By Component andlor Activity US us US
1. Road Rehabilitation 3.04 7.09 10.13 2. Rural Transport Improvement 24.12 17.75 41.87 3. Road Maintenance 5.12 2.52 7.64 4. TA., Cons. Svcs., Goods, Training & Studies 0.39 7.36 7.75 Total Baseline Cost 32.67 34.72 67.39 Physical and Price Contingencies 1.22 1.30 2.52
Total Project Costs' 33.89 36.02 69.91 Total Financing Required 33.89 36.02 69.91
Net of Taxes
45
Annex 6: Implementation Arrangements NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
1. The MTI wi l l be responsible for the implementation o f the project. However, all maintenance works wi l l be delegated or shared with the FOMAV so as to help establish it fully as a road maintenance agency that i s specialized in using private contractors and microenterprises.
2. The basic implementation arrangements have been developed under the previous projects and have worked very well. The same technical team (UCP) of the MTI that managed the previous IDA projects wi l l be responsible for day to day project management. Organization charts o f the UCP and the FOMAV are included in this annex. Other tasks w i l l include:
Monitor, evaluate and report physical and financial progress o f the project;
Manage the selection o f consultants to be engaged under the project (Le. prepare terms o f reference (TOR), shortlist qualified f i rms, prepare letters of invitation and supplementary documents, invite proposals, define evaluation criteria, etc.);
Manage the flow o f project funds and maintain all accounts for the project;
Coordinate the preparation of the project's annual Audit Report and forward report to IDA;
Ensure that the GON makes adequate budget allocations for the project, and that funds be made available in a timely manner;
Prepare and submit disbursement requests to IDA;
Coordinate project preparation studies;
Prepare a project completion report.
3. It i s worthwhile commenting a bit further on project management and implementation arrangements in Nicaragua. The IDA has never utilized any parallel consultant staffed Project Implementation Unit (PTU) for the management of any o f the three previous road projects; instead the projects have been managed by Nicaraguan civ i l servants, led by a project coordination unit (UCP). The UCP serves as interlocutor with the IDA and the point of contact for all project transactions, including project supervision, studies, and institution building within the MTI as a whole and the FOMAV. Within MTI, the UCP organizes and coordinates the input required from other MTI divisions (for example from MTI's Procurement, Planning, Environmental, Training, legal departments) that may be required for project implementation. UCP also organizes meetings and workshops with private sector representatives such as the construction and consulting industry when needed to address specific issues.
46
4. For the project as a whole, all operating costs and administrative expenses are borne by the GON at standard civil service rates. For the UCP staff, there are no project-financed or other salary supplements. The three IDA transport projects have all been implemented very well and the Impact Evaluation Group (IEG) has supported a highly satisfactory rating for the recently completed Second Project (CR-3085-NI) and a s imi lar rating w i l l probably be assigned for the now substantively completed Third Project (CR-3464-NI). The key to success has been the commitment o f both the government and the IDA to making it work.
5. From the outset, the Nicaragua projects were setup and managed under the “no-PIU” model and it has proven to be very successful, even though capacities were weak and experience with the IDA non-existent. The risks of this approach for a start up operation in a country known for rapid rotation of staff had been explained to the Nicaraguan counterparts at the outset. However, the then MTI leadership was enthused with the idea and promised to try to ensure stability and to keep the UCP staff (then called the Technical Support Team - TST) always involved and integrated with the rest of the MTI. In this sense the Nicaragua program i s ahead of the curve in terms of the IDA’S current commitment to the reduction o f the number o f parallel PIUs as being one of the key actions the aid community could take to promote greater capacity development and increase aid effectiveness. Hence there has been a focus on sustainable institutional capacity development and a true strengthening of the MTI’s systems and organization.
6. This approach has also enhanced the productivity o f project-financed consultants as there are no ‘staff consultants’; consultants are hired instead to work within and to provide technical assistance to specific MTI units or departments, e.g. for the deployment and calibration of the HDM within the Pavement Management unit, or to assess the performance o f microenterprises for the Maintenance department, or, earlier on, to help design and setup the FOMAV. UCP manages these technical assistance initiatives as well as other standard local and foreign consulting inputs for studies, project supervision, audits, etc. Training programs were designed with MTI staffing and program sustainability needs in mind, rather than mainly opportunities for more overseas trips. Hence, under the Second project a Master’s program for a cadre of MTI staff was organized and carried out at a local university. MTI staf f themselves now prepare project ICRs and also conducted most o f the supporting analyses as well as the document preparation for the Fourth project.
7. The “no-PIU” model i s now a well accepted concept in MTI, and the GON as a whole has been pushing this model for the IDA and other donor financed projects in all sectors. Still, the main risk as perceived by donors probably arises from the tradition o f staffing instability in Nicaragua as each administration usually tries to change key staff, especially those at director level, such as the head of the UCP (see organization chart in this Annex). While this risk wil l always exist, to some extent i t can be mitigated by covenants requiring the selection and retention of qualified and experienced staff acceptable to the IDA for project management purposes. If the implementation experience i s successful (and this depends on close IDA support) then i t i s more likely that incoming administrations w i l l respect the existing arrangements as has occurred in Nicaragua. In this manner, a virtuous circle can be set in operation, i.e. a situation where the implementation paradigm i s shifted towards organizational structures that
47
systematically foster more sustainable capacity development through greater use of and support for country institutions while ensuring timely project implementation and disbursement.
8. The approach to project management used for the transport projects could help to supplement weak government structures rather than supplant them or reduce opportunities for growth. Many of the negatives associated with PrUs could be thus avoided. These negatives include their (i) typically being staffed by technical advisers and established outside the regular government structures; (ii) assuming many routine ministerial functions; (iii) hiring away the most competent staff and creating friction over compensation levels within ministries; (iv) reluctance to share key operational know-how with local staff; (v) tendency to promote the illusion that they represent the tradeoff between rapid and efficient project implementation versus bottlenecks associated with long term capacity building in government institutions; (vi) duplication o f ministry functions and capabilities; (vii) closed or ‘turnkey’ management style whereby non-PIU staff inputs are minimized until the completed project is handed over to the government for operation and maintenance; (viii) tendency to foster perverse incentives, e.g. their presence can help to guarantee adequate project budget allocations; and (ix) serving as a vehicle for circumventing civil service rules and practices. All of this implies that, in the reverse of the normal practice for too many projects, the rationale for establishing a PIU needs to be carefully examined in each case.
48
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1
Annex 7: Financial Management and Disbursement Arrangements
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Summary Conclusion of Financial Management Assessment
1. The financial management assessment (FMA) presents the following conclusions:
(9
(ii)
(iii)
The executing agency, MTI, w i l l be responsible for managing the fiduciary aspects o f the proposed project, through the Project Coordinating Unit (“Unidad Coordinadora de Proyectos- UCP), located within Direcci6n General de Vialidad o f MTI.
MTI has adequate experience managing externally-financed projects and a good basic administrative structure and staff, which puts i t in a good position to take over the financial management (FM) functions of the proposed project (currently, MTI i s managing the Third Road Rehabilitation and Maintenance Project CR-3464-NI financed by IDA). However, the F;MA has identified project-specific actions in order to strengthen the FM capacity o f UCP and enable to it to carry out the financial activities of the proposed project effectively.
Therefore, assuming that MTI carries out the proposed action plan presented here, i t would have in place adequate financial management arrangements that meet the IDA’S fiduciary requirements to manage the specific financial activities o f the proposed project.
Organizational Arrangements
2. The Borrower wi l l be the Republic o f Nicaragua, represented by the Ministerio de Hacienda y Crkdito Pdblico (MHCP). Overall project coordination and administration w i l l fall under the Ministry of Transportation and Infrastructure (MTI). Within MTI, the Project Coordinating Unit ~ ‘ U n ~ d a d Coordinadora de Proyectos” or UCP), in coordination with Direcci6n General de Vialidad and Direcci6n General de Administracih y Finanzas of MTI and National Treasury of MHCP, w i l l be directly in charge o f financial management (FM) tasks for the proposed project. These w i l l basically include: (i) budget formulation and monitoring; (ii) cash flow management (including processing credit withdrawal applications); (iii) maintenance of accounting records; (iv) preparation o f within-year and year-end financial reports; (v) administration of underlying information systems; and (vi) arranging for execution of external audits.
3. The UCP i s currently managing IDA’S Third Road Rehabilitation and Maintenance Project CR-3464-NI that i s scheduled to be closed in August 2006. Therefore, based on the evaluation of the current financial arrangements, the level o f experience, sk i l ls and number o f financial management staff members within the unit, i s considered adequate for the proposed fourth Project. I t should be mentioned that UCP staff i s dedicated to the IDA projects, and no additional staf f needs have been identified because it i s expected that this current staff w i l l be retained.
51
4. On FOMAV’s side, the principal activity i s the road network maintenance management. This task i s defined through an Annual Agreement between the MTI and the FOMAV. Through FOMAV the generation o f employment i s encouraged, contracting services and activities of Routine Maintenance along the National and the Municipal Road Networks b y hiring microenterprises integrated b y people who reside in the same region where the maintenance i s carried out and also by hiring private contractors. In order to obtain financial resources in a timely manner, i t would be preferable for the FOMAV to have an operational account (revolving fund) assigned by the UCP.
Budget Planning
5. The aggregate project expenditures w i l l be incorporated by MTI into its multi-annual budget and be integrated into the annual budget formulation process. Between August and September of each year, MTI w i l l prepare i ts tentative investment program for the next year. The program should be consistent with the budget policy provided by MHCP, be incorporated into the national public investment system (SNIP), and -once approved- be reflected in MTI’s budget proposal. This budget, in turn, w i l l be incorporated by MHCP into the general state budget for i t s submission to the Asamblea Nacional by each October.
6. procurement plan (POA), which wi l l be reviewed by the IDA.
On the basis of the approved budget, MTI w i l l adjust as needed i t s annual work and
Accounting and Financial Reporting
7. Accounting Policies and Procedures. The main FM regulatory framework for the project wi l l consist o f (i) Law 550 of Financial Management and Budget Regime ii) the annual Law of the General State Budget; (iii) MHCP instructives based upon the cited laws; and (iv) the Unit’s operating norms (operational manual).
8. Project-specific FM arrangements that are not contemplated in the documents cited above wi l l be documented in a concise FM section of the project’s operational manual. Among others, specific reference w i l l be made to: (i) the contractual and payment terms o f road rehabilitation and improvement works; (ii) the internal controls (e.g., payment terms and clearance of advances) related to agreements with microenterprises; and (iii) the formats o f project financial and audit reports.
9. Information Systems. Since October 2001, the UCP Project has implemented an integrated information system “Sistema Integrado de Administracibn del Proyecto (SIAP)”, satisfying the financial information requirements o f the UCP and the IDA and it i s currently operating adequately. Nevertheless, some options are not being used and some changes to the initial design have to be updated in the system’s operational manual. In addition, SIAP does not have an automatic link with the Government-wide integrated financial management system (SIGFA), resulting in additional steps to register budget execution and risk of lack of data consistency between both systems. An alternative to solve this problem is SIGFA’s project module (SIGFAPRO), which i s in i ts final adjustment stage. As the design structure of the system i s s im i la r to the SIAP, i ts implementation in the UCP should be relatively effortless. The
52
UCP i s in discussions with MHCP about the potential implementation o f the Government’s integrated financial management system to process projects’ financial transactions (SIGFAPRO).
10. Financial Reports. On a semestral basis, MTI wi l l prepare and submit to the IDA an unaudited interim financial report for monitoring purposes only, containing: (i) a statement o f sources and uses of funds and cash balances (with expenditures classified by subcomponent); (ii) a statement o f budget execution per subcomponent (with expenditures classified by the major budgetary accounts); and (iii) a special account activity statement (including a copy o f the bank statement) The interim financial reports w i l l be submitted not later than 45 days after the end of each semester.
11. On an annual basis, MTI wi l l prepare project financial statements including cumulative figures, for the year and as of the end o f that year, o f the financial statements cited in the previous paragraph. The financial statements wi l l also include explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard (IPSAS), and MTI’s assertion that credit funds were used in accordance with the intended purposes as specified in the Financing Agreement. These financial statements, once audited, wil l be submitted to the IDA not later than six months after the end of the Government’s fiscal year (which equals the calendar year).
12. The supporting documentation from the semestral and annual financial statements w i l l be maintained in MTI’s premises, and made easily accessible to IDA supervision missions and to external auditors.
Flow of Funds
13. methods:
IDA Disbursement Methods. Credit proceeds w i l l be withdrawn by MTI using two
a) Advances subject to monthly Statement o f Expenditures (SOEs) properly identifying the payments related to contracts subject to the IDA’S prior review (see Annex 8). At any time, the SOE supporting records w i l l be available for review by the external auditors and IDA supervision missions.
b) For certain large contracts of works estimated in US$10.2 mill ion (if required under the applicable procurement procedures), there may be a need for the use o f direct payments or special commitment procedures. The minimum value o f applications for direct payments w i l l be 20% of the authorized advance allocation (see below).
14. it and, if granted, agree to revise, update or reissue the Disbursement Letter.
Should the need arise during implementation for other procedures, the JDA wi l l evaluate
15. IDA Designated Account. MHCP’s National Treasury wil l open and maintain a segregated account in U S Dollars in the Central Bank o f Nicaragua, to be used exclusively for deposits and withdrawals o f credit proceeds for eligible expenditures. After the designated account has been opened, MTI w i l l submit i ts f i rst disbursement request to the IDA. For
53
subsequent withdrawals, MTI wi l l submit the disbursement request along with the mentioned SOEs. At any time, the undocumented advance to the designated account cannot exceed the tentative authorized allocation of USS.0 million.
16. Financing Agreement.
Disbursement Deadline Date. Four months after the closing date specified in the
17. Flow of Funds - I n General. Payments to providers wi l l be made by two methods:
a) For large payments that exceed MTI’s rotating fund thresholds, the National Treasury w i l l pay directly out of the Designated Account to the provider in accordance with instructions to be submitted by the UCP.
b) For other payments, UCP would open an operational account in C6rdobas that would receive transfers of funds from the Designated Account for subsequent payment to providers of eligible expenditures. The operational account would function as a rotating fund with periodic advances and documentation o f expenditures.
18. The processing of payments in US Dollars through the Central Bank and with the revolving funds takes approximately 15 days in normal conditions, which i s considered reasonable. When abnormal situations arise due to lack o f budgetary allocation andlor lack of fluidity in the internal proceedings o f preparation and document review in the Centers of Responsibility (review, authorization and approval o f the requests), the disbursement delays could last up to 60 days. This situation highlights the need for budget and cash flow programming adequately linked to the procurement planning and contract management functions.
19. Flow of Funds - Specifics. The contracting and payment terms for transport activities has to be detailed and updated in the project’s operational manual. In the current Credit 3464-NI, MTI’s Direccion de Vialidad sends the works progress reports with the support documentation to the UCP, who reviews, records and prepares the CUC (Comprobante Unico Contable) and sends to MHCP to process the payment. The same process applies to FOMAV.
54
IDA Disbursement Schedule [based on cost tables]
Expenditure Category
1. Road Rehabilitation: a) Diriamba - Casares b) L a Virgen - San Juan del Sur
2. Rural Transport Improvement
a) Routine (Microenterprises) b) Periodic
3. Road maintenance
4. Goods and materials 5. TA, Studies, Consultants sv’cs 6. Training a) MTI & FOMAV Staff b) Microenterprises 7. Unallocated
Total
Credit Amount Financing Percentage
(in US$ millions) 8.61 85% 5.17 3.44
35.59 85% 6.11 3.67 80% 2.44 80%
0.3 1 85% 7.00 100% 0.44 0.34 100% 0.10 80% 1.94
60.00
Audit Arrangements
20. w i l l require a project- specific internal audit contract (outsourced).
Internal Audit. In view o f the limited capacity in MTI’s internal audit department, UCP
21. External Audit. The annual project financial statements prepared b y UCP wi l l be audited following International Standards on Auditing (ISA), by an independent firm and in accordance with terms o f reference (TORS), both acceptable to the IDA.
22. The IDA’S audit policy, documented in “Guidelines: Annual financial reporting and auditing for World bank-financed projects” w i l l be applicable to the project. This means, that in terms o f audit opinion on project accounting records maintained by the project, a single audit opinion covering: (i) program financial statements, (ii) special account statement, and (iii) adequacy of supporting documentation maintained b y UCP and F O M A V in respect o f expenditures claimed for reimbursement via transaction-based procedures and eligibility of such expenditures for financing under the respective Financing Agreement (FA) for the IDA Credit w i l l be required.
23. In addition to the audit opinion, the auditors w i l l have to present the management letter, covering: (i) weaknesses noted by the auditors in the internal control systems o f the project, (ii) cases of application of inappropriate accounting policies and practices, (iii) issues regarding
55
general compliance with broad covenants, and (iv) any other matters that the auditors consider should be brought to the attention of the Borrower.
MTI
24. While the audit reports are to be issued annually and submitted to the IDA no later than six months after the end o f each fiscal year, the external auditors are expected to perform at least one review visit per quarter, producing management letters accordingly. Depending on the date of project effectiveness, i t i s possible that the f irst audit wi l l cover the period from effectiveness to the end o f the next fiscal year (if the period i s no more than 18 months).
4 months after signing FA
25, The audits w i l l be co-financed with credit proceeds under the “consultant services” category. The UCP wi l l appoint the external auditors within four months after signing of the FA. Each audit contract i s expected to cover at least two reporting periods.
Financial Management Action Plan
Action
1. Update FM section o f the project operational manual. 2. Finalize audit TORS and the format of the semestral interim financial report (FMRs). 3. Strengthen project specific internal audit function. 4. Arrange with MHCP to begin implementation of the SIGFAPRO according to specific requirements. 5. Contract external auditors.
Responsible Completion Entit
March 30,2006
March 30,2006
4 months after signing FA
MTI 1 4 months after
I signingFA
26. FM Supervision Plan. An IDA FM Specialist should perform a supervision mission prior to effectiveness to verify the organization and staffing strengthening of UCP and the FM system. After effectiveness, the FM Specialist must review the annual audit reports, should review the financial sections of the semestral interim financial reports, and should perform at least one supervision mission per year.
56
Annex 8: Procurement Arrangements
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
A. General
1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the IDA in the Procurement Plan. The Procurement Plan w i l l be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement of Works: Works required for the project, which would include rehabilitation and upgrading of existing roads, would be procured using the Bank’s Standard Bidding Documents (SBD) for al l ICB and SBD agreed with the IDA for NCB and shopping (model Request for Quotations - RfQ). In the specific case of microenterprises already providing road maintenance routine services to municipalities under the previous Roads Rehabilitation project (Cr-3464-NI) financed by the IDA, contracts with those microenterprises w i l l be extended subject to verification that they have been providing the required maintenance services satisfactorily.
3. Procurement of Goods: Goods procured under this project wil l include computer hardware and software, office furniture and equipment, vehicles, etc. The goods wil l be procured using the Bank’s Standard Bidding Documents (SBD) for all ICB and SBD agreed with the IDA for NCB and shopping (model Request for Quotations - RfQ).
4. Procurement of Non-Consulting Services: Non-Consulting Services required for training activities such as workshops, hotel and transport services, as well as other services as needed w i l l be procured using SBD or model RfQ agreed with the IDA.
5. Selection of Consultants: Consulting f i rms and individual consultants w i l l be hired under the project to provide services such as performance audits and project technical support services, engineering design and supervision, impact evaluation studies, diagnostics, financial and procurement audits, advisory services from individual consultants, supervision, etc. Advertisements requesting expressions o f interest w i l l be published in either national or international newspapers, depending on the estimated amounts of the contracts, and NGOs wi l l be selected through a competitive process as per the IDA Consultant Guidelines.
6. Training: Training would include costs o f training facilities, transport and per diem of trainees, training fees, training materials, costs o f logistics, transportation, materials, etc would be procured to the extent possible following IDA procurement procedures applied to goods using agreed standard documents for NCB or RfQ.
57
7 , Operational Costs: Operational costs have been identified in the procurement plan.
NCB
Shopping
8. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works, goods and consulting services procured, are presented in the Project’s Operations Manual.
First two contracts
First two contracts
9. Thresholds recommended for the use of each method discussed above are identified in the table below. These thresholds wi l l be reviewed annually when the capacity i s reassessed during procurement post-review missions. As indicated in paragraph 1 above, the agreed procurement plan w i l l determine which contracts w i l l be subject to IDA prior review.
Direct contracting
QCBSlQBWBSILCSI
Thresholds for Procurement Methods and Prior Review
All
All contracts above $100,000
Contract value Expenditure threshold a
>1,500 150 to 1,500 ........................................................................ Works
>150 1 50 to 150
Goods
Regardless of value
> 200 Consulting < 200
(firms) a ........................................................................ Regardless of value
Consulting Regardless of value (individual) a 1
Note: QCBS = Quality- and Cost-Based Self FBS = Fixed Budget Selection
Procurement method Contracts subject to prior review
ICB All First two contracts I First two contracts
................................................................................................................................................................................................. NCB S hovving
Direct Contracting I All I C B I All
QCBSIQBSIFBSILCS K Q S
Single Source ..............................................................................
Section V in the Guidelines
All contracts above $50,000
tion QBS = Quality-Based Selection LCS = Least-Cost Selection
CQS = Selection Based on Consultants‘ Qualifications
B. Assessment of the agency’s capacity to implement procurement
10. An assessment o f the capacity o f the Ministry o f Transport and Infrastructure (MTI) to implement procurement actions for the Third Road Rehabilitation and Maintenance Project was carried out by a Bank Procurement Specialist in June 2000. Since then, Bank procurement specialists have been carrying out procurement supervision for the implementation of the project, A Bank procurement specialist visited MTI and FOMAV to assess the present situation as i t concerns present staff available to carry out procurement for the proposed project. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and MTI’s Department for Administration and Finance. The assessment reviewed the three main components o f the
58
program, plus operational costs. These components w i l l require procurement of small c iv i l works, consulting services and goods.
1 1. Overall financial management and administration w i l l be under the responsibility o f MTI’s Administrative Directorate. In this context, M T I w i l l be responsible for supervising the implementation of all procurement for the project. These arrangements have worked well under the Third Road and Rehabilitation Project and throughout the implementation of the project the staff at MTI and F O M A V acquired adequate procurement capacity.
12. for procurement i s AVERAGE.
In light o f the past experience of MTI with IDA-financed projects, the overall project risk
C. Procurement Plan
13. The Borrower has developed a procurement plan for project implementation that provides the basis for the procurement methods. This plan was agreed between the Borrower and the IDA team, following extensive discussions. It w i l l be available in the project’s database and in the Bank’s external website. The procurement plan w i l l be updated in agreement with the UCP annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
14. recommended that procurement supervision take place once a year.
In addition to the prior review supervision to be carried out by the IDA i t i s
15. i s considered adequate to implement the procurement activities listed in the Procurement Plan.
Organization, Staffing and Functions: The procurement staff at both MTI and FOMAV
16. a good database for monitoring procurement activities.
Sumort and Control Systems: MTI and FOMAV have auditing procedures in place and
17. Record Keeping: Both MTI and the FOMAV have proper record keeping.
59
E. Details of the Procurement Arrangement involving international competition.
1.
a.
Goods and Works and non consulting services.
List o f contract Packages which w i l l be procured following ICB and Direct contracting:
1
Ref No.
2
Contract (Description)
ente rises ~
Estimated cost
ente rises ~
Procurement P-Q Domestic Review Method Preference by IDA
(yedno) (Prior I Post)
entemrises
3 1 4 I S 1 fi I 7
$3.0M DC No No Prior
$606,000 DC No No Prior
8
Expected Bid-
Opening Date
May 2006 June 2006 Jan 2007
Jan 2007
Jan 2007
Jan 2007
Jan 2007
Jan 2007
Jan 2007
March 2006 March 2006 NA
NA
NA
NA
NA
NA
NA
9
Comments
Road maintenance Road maintenance Road maintenance Road maintenance Road maintenance Road maintenance Road maintenance Road maintenance
60
2. Consulting Services.
(a) L i s t of Consulting Assignments with short-list of international f i rms.
1 2 3 4 5 6 7
Ref. No.
1
2
3
4
Review Expected Comments byIDA l,r... ~
(Prior I Submission Post) Prior May 2006
Description of Estimated Selection Assignment Method cost
Works $264,822 QCBS supervision Works $446,016 QCBS supervision Works $421,882 QCBS supervision Works $894,234 QCBS
Prior
Prior
Prior
June 2006
Dec 2006
Dec 2006
5 supervision Works $773,017 QCBS Prior Dec 2006
(b) Consultancy services estimated to cost above $100,000 per contract and Single Source selection of consultants (firms) wi l l be subject to prior review by the IDA.
6
(c) Short lists composed entirely of national consultants: Short l is ts of consultants for services estimated to cost less than $200,000 equivalent per contract, may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
supervision Works $586,343 QCBS Prior April
61
7
8
supervision 2006 Works $289,815 QCBS Prior April supervision 2006 Works $8 13,050 QCBS Prior April supervision 2006
Annex 9: Economic and Financial Analysis
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Benefits (US$ million)
Diriarnba -Casares - Boquita Rehabilitation La Virgen - San Juan del Sur Rehabilitation Rural Roads Adoquin Rural Roads Adoquin (MCA) Total Diriamba -Casxes - Boquita Rehabilitation La Virgen - San Juan del Sur Rehabilitation
costs (US$ million)
Rural Roads Adoquin
Benefits and Costs Summary
14.48 10.26 87.58 10.13
122.45 6.09 4.04 37.77
Background
Net Benefits
1. The project components consist o f the rehabilitation, improvement and maintenance o f selected primary, secondary and rural roads, and an institutional strengthening component that w i l l offer a wide range of benefits to Nicaragua. The maintenance component represents the continuing implementation of the program for priority routine and periodic maintenance that was developed under the First, Second and Third Highways projects, where the Highway Design and Maintenance Model (HDM-HI) as well as the Roads Economic Decision Making Model (RED) were used for the economic analysis. All together, the support provided by the project to improve the processes for planning and programming o f road improvement works, more participation of private contractors, effective planning for routine maintenance and the priority accorded to maintenance w i l l help guarantee more effective use of public funds in the road sector and help to achieve the CAS objectives. Also the institutional component wi l l help guarantee that the improvements achieved with the project wi l l be sustainable and that the MTI w i l l be in a better position to confront the challenges o f modernization. The overall project Economic Rate o f Return (ERR) i s 35% and the Net Present Value (NPV), at 12 percent discount rate, i s US$65.8 million. Table 1 summarizes the project economic analysis indicators.
Rural Roads Adoquin (MCA) 4.10 Total 52.00 Diriarnba -Casares - Boquita Rehabilitation 10.05
Table 1: Economic Analysis Summary
(US$ million)
Economic Rate of Return (8)
La Virgen - San Juan dei Sur Rehabilitation 7.67 Rural Roads Adoquin 40.87 Rural Roads Adoquin (MCA) 7.23 Total 65.83 Diriamba -Casxes - Boquita Rehabilitation 36% La Virgen - San Juan del Sur Rehabilitation 61% Rural Roads Adoquin 30% Rural Roads Adoquin (MCA) 58% Tntnl 35 %
Primary Roads
2. The selected roads have a significant economic importance for Nicaraguan and Central American commerce. The roads Diriamba - Casares - L a Boquita and L a Virgen - San Juan del
62
Sur have also a high tourism potential and a detailed economic evaluation was done using the HDM-III model to complete the economic justification of the proposed improvements.
M a i n Assumptions
Traffic
3. The derivation of the daily traffic on these l inks was based on 3 day traffic counts for 12 hours and pro-rated to 24 hours, that was completed b y MTI. The traffic composition indicates 18% heavy vehicles on the first link and 31% heavy vehicles on the second link. The evaluation of the historical annual traffic growth rate for both l inks yields an annual growth o f 4%, which i s considered a conservative figure but was used also to represent the future traffic growth rate.
Benefits and Beneficiaries
4. The benefits obtained from the rehabilitation works are directly related to savings in road user costs. The vehicle operating costs savings were derived from a recent MTI study o f vehicle operating costs (VOC) on roads in good and poor condition in Nicaragua, after making the necessary adjustments for taxes and subsidies. The results indicate that the costs savings vary by vehicle type, ranging from 39% for pickups to 50% for heavy trucks, which i s not surprising since the project would improve the condition of the roads considerably. Other quantifiable benefits included in the flow o f net benefits are the savings in travel times due to the increased travel speeds on the rehabilitated roads.
5. The project w i l l generate other benefits that are difficult to quantify, such as: (i) improvements of the management o f the road network due to more emphasis being given to maintenance activities; (ii) better access to agricultural and tourism zones; (iii) improved comfort and safety of road transport services; and (iv) road safety improvements. Road safety benefits are especially important for the Diriamba - Casares - L a Boquita link that has deteriorated to the point of creating safety hazards on i ts initial 20km. The rehabilitation works w i l l also generate employment for around 1,100 workers during the estimated construction period of 48 months,
Sensitivity and Switching Values
Economic Evaluation Results
6. The economic evaluation results for the Diriamba - Casares - L a Boquita link yield an Economic Rate of Return @RR) of 36% and for the L a Virgen - San Juan del Sur link an ERR o f 61%. The Net Present Value (NPV), at 12 percent discount rate, of the f irst link i s US$7.67 mill ion and o f the second link i s US$lO.OS million. The ERR was computed considering rehabilitation costs, appropriate routine and periodic maintenance costs and savings in vehicle operating costs and travel times.
7. The sensitivity analysis considered: (i) decrease in benefits by 20% and (ii) increase in investment costs by 20%, yielding an ERR of 29.8% and 28.6% percent respectively for the first link, and 51.4% and 49.5% respectively for the second link. The switching values analysis
63
indicates that in order to produce a NPV equal to zero, investment costs need to be multiplied by 1.6 on the f i s t link and by 2.3 on the second link, or benefits multiplied by 0.35 on the f is t link and by 0.65 on the second link. Table 2 summarizes the economic analysis.
Base Case costs +20% Benefits -20% Without Time Savings
Table 2: Primary Roads Economic Evaluation Results
ERR (96) million) ERR (%) million) 36.0 7.67 61.0 10.05 29.8 6.60 51.4 9.42 28.6 5.07 49.5 7.41 32.7 6.52 58.1 9.43
- costs (9-6) - Benefits (96)
Rural Roads
158 232 35 65
8. The improvement of rural roads i s an important component o f the Government’s poverty reduction and growth strategy. The objectives of improving rural roads are to reduce the costs of production, provide a better market price for the producers, and to facilitate the export o f such products, reducing travel times and vehicle operation costs, and facilitating, at the same time, the delivery of social services. This component focuses attention on the connecting o f communities with an average population o f 11,600 inhabitants to main highways that are important for the needs of the poor rural communities and for the restoration o f effective transport communications. Normally almost 60% to 70% of the time of a trip for an ordinary journey o f residents of poor communities begins and terminates along these rural roads. The inadequate provision and the poor quality o f most rural roads have been well documented in Nicaragua. According to the LSMS study done in 1999, in general, a little more than a fifth (22%) o f Nicaraguan homes have access to a paved road, also, the same study indicated that the proportion
64
reduces to 6% in the case of the poor homes in the countryside. For that reason, the objectives of economic growth and poverty reduction w i l l be difficult to achieve without the qualitative improvements of rural roads.
9. The secondary and tertiary road network in Nicaragua was heavily damaged by Hurricane Mitch and i ts improvement forms a fundamental component for the restoration o f transport services, especially in the countryside. The roads targeted for project support are mainly located in zones with a good potential for agricultural production and the development o f other key productive clusters. The selection o f the rural roads to be part of the project was done on the basis o f a positive NPV, at a discount rate o f 12%, the populations served, the economic potential of the zones in consideration and the degree of connectivity with other rural and main roads. The levels o f traffic in those rural roads have a range between 50 and 400 AADT. Of the total evaluated network (l,849km), approximately 243km o f sections with higher traffic w i l l be stabilized with adoquines. The use o f adoquines provides additional benefits to the largely unskilled rural populations because it i s a highly labor intensive approach to road improvement. The municipalities w i l l be asked to build shoulders along the improved roads once the MTI has completed the adoquinado
10. The definition and the economic evaluation o f the program of improvement o f rural roads was made applying the Roads Economic Decision Model (RED), developed by the World Bank for the Africa Road Management Initiative, which adopts the consumer surplus approach to estimate the project benefits. The RED model evaluates net benefits of project alternatives, which are characterized by the average level of service provided over the evaluation period; the corresponding road user costs are compared using the HDM-3 model relations. Table 3 presents the unit vehicle operating costs for seven vehicle types for different roughness levels.
Table 3: Vehicle Operating Costs (US$IT(m)
Source: PMS and MTI.
11. The rural roads program was divided into two subcomponents. The first subcomponent consists of the improvement o f rural roads with adoquines, using private contractors, located in: (i) Zone I, including the Departments of Granada, Masaya, Carazo, Rivas and Managua, since this zone, besides having a high level o f poverty, i s a zone with dense population and high tourism and economic potential; and (ii) Zone IV, including the departments of Chontales,
65
Boaco, and Rio San Juan which have a high productive potential for agricultural and dairy products. The Poverty Map of Nicaragua o f 2000 and the World Bank Poverty Evaluation Report o f 2000 indicate that in Zone I, 5 1 % of the population i s poor and 16% i s in extreme poverty and in zone IV, 66% of the population i s poor and 16% i s in extreme poverty, which can be compared with the rest of the country where 50% of the population i s poor and 20% i s in extreme poverty. Table 4 presents the Nicaragua poverty indicators by Department.
Rio San Juan Boaco Matagalpa RAAS
Table 4: Nicaragua Poverty Indicators
69,804 49,882 71% 25,369 36% 136,656 93,174 68% 44,787 33% 382,342 259,586 68% 121,852 32% 270.323 177.884 66% 83.109 31%
Source: INEC 200 1.
12. The second subcomponent consists of the adoquines stabilization o f rural road segments, by means of Community Groups (MCA). This program consists of paving road sections of short length, with labor from groups o f people o f the beneficiary community, formed and trained by MTI social promoters, with experience in this type o f social activity. In 2004, a pilot project of adoquin stabilizations was carried out with MCA, which has been considered successful, since it involved the execution of the project b y the community, municipalities, producers and local investors, and brought direct benefits to the community as well as a sense o f ownership of the program on the part o f the community. Road sections located on 18 different municipalities were selected considering historical requests o f the population, productive potential o f the benefited zones, traffic and condition o f the roads. To a large extent the sections selected to be including in this subcomponent are in Zones I and IV, nevertheless, there are a few sections in this subcomponent that belong to zones 11 and 111.
66
13, The 217.4 kilometers of roads to be including in the first subcomponent o f the program of improvement of rural roads, were divided in 13 homogenous sections. The traffic data for these sections was obtained from the Pavement Management System (PMS). The condition of each section was verified by means o f field visits to each municipality and road section by a group of specialists with environmental, economic and engineering backgrounds. Roughness measurements were made by the PMS unit. Tables 5,6, and 7 present the overall network condition and traffic statistics.
Rivas 11 1.46 215.66 327.12 Total 0.00 264.56 936.54 647.83 1,848.92
Table 5: Network Condition on Zones I and I V (km)
Traffic (AADT)
I 200
> 200
Total
IRioSanJuan 1 I 23.88 I 229.36 I 24.79 I 278.03 I
Condition Good Fair Poor Total
189.05 1,251.94 1,440.99
75.5 332.43 407.93
0.00 264.55 1,584.37 1,848.92
Table 6: Network Traffic on Zones I and I V (km)
1 TOTAL (krn) 1,661.41 I 187.51 1 1,848.92
Table 7: Network Condition and Traffic on Zones I and IV (km)
14. The priorities among road sections were derived on the basis o f the requests presented to the MTI through governmental institutions and local governments, among them the Secretary of the Presidency, Ministry of Tourism and the municipalities. These priorities were categorized in
67
three global categories (high, average and low priority) and those ratings were compared later with the priorities given by the economic analysis to help establish a compatibility o f the economic analysis with the perceived priorities. Table 8 presents the network length per perceived priorities.
AADT
> 200
Table 8: Zone I and Zone IV - Perceived Priority (km)
High Medium Low Total
52.14 56.39 90.37 198.9
- < 200
Total
55.02 59.56 50.5 165.08
107.16 115.95 140.87 363.98
15. The homogenous road sections were evaluated by means of evaluating representative road classes that are function of: traffic (3 levels), condition (3 levels), geometry (3 types) and road width (2 types). Table 9 presents the project alternatives considered and unit costs.
Regravelling and 15 cm cement stabilization (6.0 meters wide).
Table 9: Project Alternatives and Unit Costs
15,000 2.50
Adoquin (5.5 meters wide including borders) for traffic 50>AADT<200:
Adoquin (6.0 meters wide including borders) for traffic AADT>200
120,000 21.82
130,000 21.67
16. The roughness of the existing roads was estimated to vary from 10 IRI (good condition) to a 20 IRI (poor condition), roughness measurements done on (adoquin stabilized) roads show roughness values ranging from 4 to 5 IRI, and the average roughness o f asphalt paved roads was considered to be 3.5 IRI. In addition, the corresponding routine maintenance and annualized periodic maintenance costs needed to maintain a road in good condition were estimated, I t was estimated at around US$1,300h-year for adoquin pavements with 6.0 meters, US$1,2OOUn- year for adoquin pavements with 5.5 meters, US$2,000/km-year for dirt roads and US$4,000/km-year for gravel roads. The economic evaluation was done for an evaluation period of 20 years, a discount rate of 1296, and a traffic growth rate o f 4%.
17. The traffic levels that yield a NPV higher than zero were determined. The economic investment costs are US$130,000km for adoquin pavement with 6.0 meters wide, US$120,0OOUn for adoquin pavements with 5.5 meters wide. For the traffic levels that do not justify adoquin pavement, the recommended road work i s regravelling with cement stabilization with a thickness of 15 cm on a 6.0 meters wide road and with a cost o f US$15,00O/km. Table 10 presents the recommended project alternatives per traffic range.
68
Table 10: Recommended Project Alternatives
Adoquin 5.5 meters wide
Adoquin 6.0 meters wide
50 <AADT < 250
250 <AADT <400
I Traffic 1
us$120,000/km
US$130,000/km
Recommended Road Works 1 Investment Cost 1 US$15,000Un Regravelling with cement stabilization 15 cm (6.0
meters wide). AADT < 50
18. Based on the results o f the recommended road works per road class, the recommended road work for each homogenous road section was defined and the sections were sorted according to economic priority, according to the decreasing ERR. Table 11 presents the economic analysis summary results for a priority network of 280.19.
Table 11: Economic Analysis Summary (Rural Roads)
19. Given the financial constraints, a network o f 280.19km was identified, that has the highest priority based on ERR, from the overall network described previously. This program results in 100% of the budget being used for adoquin (BC) pavements with the following
69
theoretical distribution: 65% for adoquin pavement with 5.5 meters wide and 35% for adoquin pavements with 6.0 meters wide. In practice, al l the roads (except for Nueva Guinea - Naciones Unidas 6 meters) w i l l be stabilized at 5.5 meter width. The NPV of this subcomponent i s US$40.87 million, the ERR i s 30%, and al l road works have a positive NPV.
Department
Managua
Carazo
20. If the investment costs increase by 20%, the NPV decreases to US$37.275 mill ion and the ERR to 27%. If the benefits decrease by 20%, the NPV decreases to US$28.586 mill ion and the ERR to 26%. If the investment costs increase by 20% and the benefits decrease by 20%, the NPV decreases to US$22.418 million and the ERR to 22%. In order to produce an NPV equal to zero, costs would have to be multiplied by 2.00 or benefits multiplied by 0.77. These events are extremely improbable; therefore, the economic justification o f the program i s robust.
Link
Proincasa - Cofradia San Antonio - San Gregorio - San Juan de la
21. A s imi lar analysis was carried out for the minor rural roads to be done via i t s community work modules (MCA). The requests for road improvements on the part of the population, the economic potential o f the benefited zones, the population served, and the condition and traffic o f the roads were considered. This subcomponent was evaluated separately from the other subcomponent for two reasons. The cost per km i s lower by MCA than private contractors, at approximately US$90,000 per km for a 5.5m wide road. Secondly, the sections selected for th is subcomponent are o f short length, unattractive to contractors, and located in zones of very high unemployment. Table 12 presents the economic analysis summary for al l the l inks analyzed for this subcomponent.
4.65
6.00
3.80
2.00
Table 12: Economic Analysis Summary (Minor Roads)
134 2,500 Poor
282 2,500 Poor
200 5,000 Poor
207 15,000 Poor
72
83
70
75
I Rivas INacascolo - Talanmera
BC5.2 0.418 2.001 113
BC5.2 0.540 1.412 70
BC5.2 0.342 0.477 45
BC5.2 0.180 0.275 48
Rivas
70 78
I Masaya IMasaya - Tisma
BC5.2 0.140 0.151 35 BC5.2 0.540 0.871 50
Acceso Sistema Penitenciario Emp. Chaguitillo -
5.50
5.70
1.50
1.50
1.30
Information
259 2,500 Poor
645 15,000 Poor
95 Poor
97 Poor
205 Poor
Estimated
~
6.00 212 7,500
39.81 I
Economic Evaluation
~
60 BC5.2 0.135
60 JByII ~ 0.135 I r: ~
50 BC5.2 0.059
3.497 7.234 58
70
22. The economic analysis indicated an optimal treatment option of paving using adoquin for a 5.5 meters wide road, for al l sections. The NPV of this subcomponent i s US$7.23 mill ion and the ERR i s 59%. All road works have a positive NPV at 12% discount rate.
23. If investment costs increase by 20%, the NPV decreases to US$6.742 mill ion and the ERR to 48%. If benefits decrease by 20%, the NPV decreases to US$5.269 million and the ERR to 46%. If investment costs increase by 20% and benefits decreases by 20%, the NPV decreases to US$4.645 mill ion and the ERR to 38%. In order to produce a NPV equal to zero, investment costs need to be multiplied by 2.5 or benefits multiplied by 0.765. These events are improbable; therefore, the economic justification of the program i s robust.
Risks
24. The project i s not susceptible to r isks aside from the r isks associated normally with project execution, The use o f consultants and contractors with suitable experience wil l help to diminish these risks. The project conditionality w i l l require the provision of adequate budgets for road maintenance to cover the needs of the network in good and fair condition; also, the support to be provided under the project for better planning and programming of road works and the greater participation o f private contractors for road maintenance w i l l help to protect the road investments and also promote a more efficient use o f resources. As far as the risks associated with micro enterprises, given the experience o f the Bank in other countries, the requirements for management and operation are now already well known and the MTI has suitable mechanisms established to diminish risks. In general, the continued work program with the IDA and the technical support to be provided with the project also w i l l contribute to reduce the risks o f execution of the project.
Distributional Impacts
25. Due to the systematic rehabilitation o f the primary network, the country as a whole w i l l benefit from reduced vehicle operating costs and from reduced consumption of both imported fuels and spare parts for vehicle maintenance. The residents o f the zones of influence o f the project w i l l benefit from employment opportunities that wil l be generated for skilled and un- skilled labor during the implementation o f the project. The beneficiaries of the improvements o f rural roads w i l l include the predominantly poor rural communities that live in the towns located throughout the area o f influence of the project. Studies indicate that the level of income of these communities i s typically below the national average. Finally, the lower transport cost and year round potential for access to agricultural productions w i l l help to maintain the momentum needed for economic growth.
Fiscal Impacts
26. These w i l l be very moderate and w i l l be within current budgetary parameters. The project investments are modest and represent a small portion o f the annual public investments o f the government (less than 4 percent). For the same reason, the future needs for maintenance expenditures wil l not represent a fiscal burden. This i s because in Nicaragua road user revenues that are collected from license fees, fuel levies, etc., amount to several times the annual
71
expenditures in the road network. Therefore, there should be enough revenues to cover the maintenance needs of the roads that are going to be rehabilitated with the project. Nicaragua has also approved a modest surcharge on fuels that w i l l be channeled to the FOMAV for use on the annual maintenance programs for the core networks.
72
Annex 10: Safeguard Policy Issues
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Environmental and Social Aspects
1. The MTI’s Division of Environmental Management has completed most o f the environmental and social assessment required for the preparation o f the proposed Fourth Project (including for the Nueva Guinea - Bluefields road. These tasks were completed in accordance with the principles established in the Environmental Manual (Guia para la Categorizacidn y Definicidn de Requerimientos para la Evaluacidn Ambiental y Social de Proyectos) which are based on the World Bank Safeguard Policies (June 2003). This environmental manual categorizes the projects in three levels: (i) level 1 includes those projects that have a small or low impact on the environment and can be managed with the environmental standards of the sector; (ii) level 2 includes those projects that require an environmental impact assessment to provide specific recommendations for work implementation and; (iii) level 3 includes those projects that could induce high environmental and social impacts and therefore require a detailed environmental impact assessment approved by the Environmental Authority. I t can be concluded that none o f the road candidates involve crossing through protected areas or other environmentally sensitive areas. For IDA purposes, the project i s now classified as category B Project.
2. The MTI has prepared the terms of reference for hiring consulting engineering f i r m s to carry out the engineering and designs, including the specification o f environmental and social mitigation measures and rules for contractors that are in keeping with procedures specified in MTI manuals developed under previous IDA projects. During project implementation the MTI’s environmental department (DGA) wi l l be responsible for monitoring consultant firm’s compliance with the contract agreement. The DGA w i l l carry out partial and complete evaluations of products delivered by the firm.
3. For road sections L a Virgen-San Juan del Sur and Diriamba-Casares only basic rehabilitation within the existing pavement formation i s planned. However, some roadside vendors w i l l be affected temporarily during construction and extensive prior consultation was carried out in accordance with World Bank Safeguard policies.
4. For the rural roads, all the works w i l l be carried out within the existing road platform and will not involve major earthworks. Based on completed environmental and social analyses, there w i l l not be any additional significant negative impacts produced by this component. Adequate technical specifications to help guarantee the adherence to acceptable environmental practices during the construction w i l l be included in the civ i l works contracts.
Project Environmental Management
5. MTI wi l l have to follow the stipulations o f manuals and procedures developed under previous IDA projects. A wealth of documentation exists including: guidelines to prepare environmental impacts assessments, criteria to assess environmental impact, rural roads construction manual, environmental protection guidelines for roads construction and
73
rehabilitation, World Bank environmental policies, Norma Tbcnica Obligatoria Nicarag~e~se (NTON), general provisions for streets, roads and bridges construction, basic environmental standards for road construction, norms for the exploitation o f material borrow pits, standards and ministerial resolutions for the basic provisions of hygiene and safety in the work place, Central American Environmental Manual for road design, construction and maintenance (SJECAS) and the Social Management Manual-MTI.
6. Some of the activities within the scope o f EA preparation include: a diagnosis o f the biotic, abiotic and socioeconomic conditions of the area o f influence o f the project, analysis o f environmental legislation, identification, and categorization of direct environmental impact, prevention and mitigation measures for the environmental impact, and Environmental and Social Management Plan costs. Each one of these environmental mitigation measures and their appropriate costs wil l be incorporated in the quantities and works cost estimates. The supervision team wi l l ensure adherence to al l the environmental specifications applicable during the construction of the works.
Monitoring; and Evaluation
7. The four EA reports for the various road segments to be rehabilitated and improved under this project indicate all the needed environmental management and mitigation measures, such as the Implementation Plan for Environmental Measures, environmental technical training, and environmental monitoring. Once the works are under way, the contractor w i l l become the main responsible party and the Project Coordination Unit and the DGA are the responsible supervision agencies.
8. During construction and within the framework o f the Environmental and Social Management Program (described in the EA reports), an environmental follow-up, monitoring and surveillance plan wi l l be carried out. I t s objective i s to control the application o f each one o f the environmental mitigation measures, to define new counteractive measures against unexpected environmental impacts, to redefine measures when the designed measures are not effective, and to evaluate quantitatively and qualitatively, the Environmental and Social Management Program level of compliance. The main actors responsible for the environmental follow-up and monitoring are: the contractor’s environmental specialist, the environmental supervisor from the supervisory firm, and the environmental specialist from the DGA-MTI. This control team through joint periodic visits (weekly and monthly) w i l l monitor every project activity, w i l l prepare a report regarding level o f compliance with relevant environmental aspects, and wi l l recommend actions in order to correct non-compliance aspects.
Social Aspects
9. Given the nature of the works, the rehabilitation o f trunk and rural roads in long used and well trafficked corridors, and based on the social assessments that were carried out, no negative impacts are expected. Also, there w i l l be no resettlement o f people nor do roads traverse any indigenous communities. Hence, in this regard, there should be no adverse effects from project implementation.
74
10. The participation of Nongovernmental Organizations (NGOs) and other c iv i l society organizations has taken place since the beginning of the project. Different social sectors in the project area such as associations o f farmers, livestock producers, cooperatives o f transportation, community leaders, community organizations, etc were consulted during project identification and preparation by the MTI when carrying out the Assessment. Other institutions were also consulted including the Nicaraguan Institute of Tourism (INTUR), National Company o f Ports (ENP) and the Institute of Rural Development (IDR). All documentation was made public for c iv i l society organizations review. Subsequently, public presentations o f the project were carried out so as to inform stakeholders and obtain their suggestions that were subsequently taken into account in the project design. The public presentations were supported by MARENA and local Municipalities.
Proposed Nueva Guinea - Naciones Unidas - Bluefields Road
1 1. The Nueva Guinea - Naciones Unidas - San Francisco- Taleno - Las Pavas - Bluefields road (96.6km) consists of three road sections with varying stages o f transitability and that traverse differing terrains. Nueva Guinea - Naciones Unidas (22.5km) i s a long developed, heavily trafficked (>120vpd) rural road that has fallen into severe disrepair and needs to be rehabilitated. I t mostly serves well fenced cattle farmlands and there are no sensitive social or environmental issues. The second segment Naciones Unidas - San Francisco (34.6km) i s a dry season trail that enters the Cerro Silva forest reserve and i s located on mostly gently rolling terrain with only 2 small rivers crossing (Las Milpas and El Limdn). The final section, San Francisco - Taleno - Las Pavas - Bluefields (39.lkm) crosses the protected forests and also a Ramsar Wetlands site that circumscribes Bluefields town and bay. Currently, there i s an existing unpaved road alignment that restricts the passage o f motorized vehicles between Naciones Unidas and Bluefields mainly to the dry season.
12. As part of project preparation, the MTI carried out a comprehensive Environmental and Social strategic analysis (RESA) of the key environmental and social factors affecting the development of the road from Nueva Guinea to Bluefields, especially the section from Naciones Unidas to Bluefields. In addition, with DANIDA support, the MTI has completed the feasibility study and preliminary engineering for the entire route. The issues identified were discussed on the basis of the E S A and Feasibility study reports during two Washington-Managua video- conferences on September 8 and 9,2005, the first o f which included representatives of the MTI, Bank, DANIDA, the CarlBro and Roughton consulting firms, and many stakeholder groups. Subsequently, there was a follow-up video conference between MTI, DANIDA and the Bank on October 11, 2005 at which the issues were further refined, especially those related to the environmental and social pre-requisites for Naciones Unidas - Bluefields section.
13. Nueva Guinea-Naciones Unidas: In the September 9, 2005 video-conference, i t was agreed in principle that the IDA would finance the upgrading (adoquin stabilization) of only the road segment between the towns o f Nueva Guinea and Naciones Unidas, as part of the Fourth Roads Project. This road improvement i s regarded to be a low-risk Category ‘B’ from an environmental and social standpoint because (i) an all-weather road (passable by all types of vehicles) already exists between Nueva Guinea and Naciones Unidas; (ii) the road passes through areas that have already been long established and settled; and (iii) b y terminating within
75
the town o f Naciones Unidas, i t would remain some 10-15km from the boundary of the Cerro Silva Reserve. In fact, changing the road surface from gravel to adoquin (cobble) pavement would have positive direct environmental impacts by (i) reducing erosion and high sediment runoff from the road surface (with less waterway sedimentation), and (ii) minimizing the use o f borrow pits to obtain new surfacing material for routine and periodic maintenance activities. Also, the Nueva Guinea-Naciones Unidas road segment i s considered to be economically justified on i ts own, even without considering the much more environmentally sensitive Naciones Unidas-Bluefields segment.
14. Naciones Unidas-Bluefields: Beginning from about 20ktn East o f Naciones Unidas, the road segment between Naciones Unidas and Bluefields, i s considered to be environmentally highly sensitive because i t passes through the Cerro Silva Forest Reserve and subsequently the Bluefields RAMSAR Wetlands Site at a location between Taleno and Bluefields town. This road section i s not included in the project. However, i t would be appropriate if MTI and MARENA were to identify more precisely the activities that a conservation project could support, in advance o f any potential future Naciones Unidas-Bluefields road project. The cost estimates for the activities should take into account that much of the technical work has already been recently carried out by other programs (including the Mesoamerican Biological Corridor). For example, a Management Plan for the Cerro Silva Reserve has been drafted, but not agreed upon, due to a lack o f consensus on management responsibilities and land use zones (particularly between MARENA and the indigenous communities). Similarly, there i s a general understanding that titling o f the indigenous community lands at this point requires mostly political will, rather than any expensive technical work (which has mostly already been done). This should be discussed further with the key actors involved in the region and sustainable development plans for the general project area should be developed. These plans could largely be taken “off the shelf’ and implemented, without repeating most of the preparation that has already taken place under other projects .
76
Annex 11: Project Preparation and Supervision
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
Planned Actual PCN review 11/03/2005 11/03/2005 Initial PID to PIC 1 21 1 612005 Initial ISDS to PIC 121 1612005 Appraisal 03/14/2006 031 1512006 Negotiations 05/02/2006 05/02/2006 Board/RVP approval 06/08/2006 Planned date o f effectiveness 0811 812006 Planned date o f mid-term review 1213 112008 Planned closing date 12/31/201 1
Key institutions responsible for preparation o f the project:
Ministry o f Transport and Infrastructure (MTI)
Bank staff and consultants who worked on the project included:
Name Title Unit E. James Task Team Leader LCSFT E. Correa I. Escolano E. Roman D. Graham R. Cunningham G. Ledec J. Kamine M. Mallo
Sr. Social Specialist Procurement Specialist Financial Management Specialist Sr. Environmental Specialist Senior Finance Officer Lead Ecologist Counsel Team Assistant
LCSEO LCOPR LCOAA LCSEN LOAGl LCSEN LEGLA LCSFT
, 77
Annex 12: Documents in the Project File NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
A. Project Implementation Plan
Manual de Operaciones del Cuarto Convenio de Crddito, MTI.
B. Bank Staff Assesment
1. de competitividad I, II y IV.
Evaluacidn Tdcnico - Econcimica del 10s Caminos no Pavimentados del las zonas
C. Other
1. Estudios y diseiios: Carreteras Diriamba - Casares y L a Virgen - San Juan del Sur. Diciembre 2005. 2. Apoyo a1 Programa del Sector Transporte 2004 - 2008, DANIDA, a1 30 de Octubre del 2005. 3. Norrhas Ambientales Biisicas para la Construccibn Vial (NIC-2000); MTI, Unidad Ambiental. 4 Estudio de Impact0 Ambiental: Adoquinado del camino Nueva Guinea-Naciones Unidas (CORASCO, January 2006). 5. Estudio Ambiental-Social: Rehabilitacion y Mejoramiento de l a Carretera Diriamba-Empalme L a Boquita-Casares (INCOSA, January 2006). 6. Estudio Ambiental-Social: Rehabilitacicin y Mejoramiento de l a Carretera L a Virgen-San Juan del Sur (INCOSA, January 2006). 7. Fichas Ambientales y de Categorizacicin de Proyectos de Rehabilitacih y Adoquinado (MTI-DGA, January 2006). 8. Programa de Capacitacicin con el IV Convenio de Crddito, MTI, Managua, Setiembre del 2005. 9. Evaluacibn de 10s procesos de Presupuesto, Flujo de Fondos y Sistemas Informiiticos, German Escobar y UCPIMTI, Diciembre 2005.
78
Annex 13: Statement of Loans and Credits NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
~~
Difference between expected and actual
disbursements Original Amount in US$ Millions
Project ID Ey Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d
PO82885 2004 NICARAGUA PRSC I 0.00 70.00 0.00 0.00 0.00
PO78891
PO73246 PO56018 PO64906 PO64916 PO55823
PO68673
PO70016 PO649 15 PO56087 PO49296 PO55853 PO50513
PO52080 PO35753 PO53705 PO41790
2004
2003 2002 2001
2001 2001
2001 2001
2000 2000 2000
2000 2000
1999 1998
1998 1997
N I PUBLIC SECTOR TA N I Offgrid Rural Electrification (PERZA)
NI LAND ~ M ~ I S ~ A T I O N PROJECT
NI Poverty Red.&Local Dev. FISE
NI Natural Disaster Vulnerability Reduc
NI SECOND RURAL MUNICIPAL DEV. PROJECT NI Road Rehab. and Maintenance 111 NI Competitiveness LIL
NI AG TECHN & RURAL EDU (APL) N I Pension and Financ. Market Reform TA
N I ECONOMIC MANAGEMENT TAC
N I - COMMUNICATION REFORM
NI SECOND BASIC EDUCATION PROJECT NI FORESTRY
NI HEALTH SECT I1 N I TRANSPORT I1
GEF NI Atlantic Biological Corridor
0.00
0.00 0.00 0.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00
23.50 0.00 0.00 0.00
12.00 0.00 0.00 0.00
32.60 0.00 0.00 0.00 60.00 0.00 0.00 0.00 13.50 0.00 0.00 0.00
28.70 0.00 0.00 0.00
75.00 0.00 0.00 0.00
5.00 0.00 0.00 0.00 23.63 0.00 0.00 0.00
8.00 0.00 0.00 0.00 20.90 0.00 0.00 0.00 15.90 0.00 0.00 0.00
52.50 0.00 0.00 0.00
9.00 ’ 0.00 0.00 0.00 24.00 0.00 0.00 0.00 47.40 0.00 0.00 0.00
0.00 0.00 7.10 0.00
36.03 23.36 15.81
35.41 34.28 11.35
13.03
26.88 3.27 5.37 1.21 1.16 1.06
7.66
0.64 2.21 1.41
1.85
-1.03 0.00
0.00 0.00 2.53 0.00 1.57 0.00
27.28 -9.72
9.61 0.00 19.77 0.00
-55.98 0.00 2.36 0.00 7.57 0.00
-5.73 0.09 -19.09 0.00
1.71 0.00 -45.23 0.00
1.08 0.00 1.81 0.00
2.06 0.00 7.16 5.06
Total: 0.00 521.63 0.00 7.10 0.00 221.99 - 42.55 - 4.57
NICARAGUA STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions of U S Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
2000 Finarca 0.80 0.00 0.00 0.00 0.80 0.00 0.00 0.00 1998 Frutan 0.39 0.36 0.00 0.00 0.39 0.00 0.00 0.00
1998 La Colonia 1.13 0.00 0.50 0.00 1.13 0.00 0.50 0.00
1999 SEF Dicegsa 0.50 0.00 0.00 0.00 0.50 0.00 0.00 0.00
Total portfilio: 2.82 0.36 0.50 0.00 2.82 0.00 0.50 0.00
79
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
2004 Banca Confia 0.01 0.00 0.00 0.00
Total pending commitment: 0.01 0.00 0.00 0.00
80
Annex 14: Country at a Glance
NICARAGUA: Fourth Roads Rehabilitation and Maintenance Project
-7.2 10.3 2.4 3.0
POVERTY and SOCIAL Nicaragua
-Exports &lm)orts
2004 Populatm, mid-year (miirons) GNI percapita (At/as method, US$j GN I (Atlas methad, US$ bl//ions)
Average annual growth, 1998-04
Population (%) Labor force (%)
Most recent estimate (latest year available, 1998-04) Poverty (% of populabon below nabonai mvertv irnej Urban population (% of f o f ~ ~ u / a t i o n j Life expectancy at birth (yearst Infant motlalily (per 1,000 irve biflhsj Child minutrition (% of chiMren under5) Access to an improved water source (% Of popu/abm) Literacy (% ofpopulation aqe 1st;) Gross pnmaty enrollment (% of School-aqe muiafon)
Mal8 Female
KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984
GDP (US$ bi///msj 3 1 Gross capital formationlGDP 22.2 Exports of qoods and ServlceslGDP 16 4 Gross domestic savinqYGDP 9.2 Gross national savinqslGDP 3 4
Current account b a W G D P -22 0 Interest paynentslGDP 1 1 Told deWGDP 154 2 Total debt serv@elexports 18 4 Present value of W G D P Present value of debtieXP0rtS
1984-94 1994-04
-21 4 1 -46
Ewports of go& and services 3 6 9 2
(averaqe annual qrowth)
5 6 790 4 4
2 5 3 1
48 58 69 30 10 81 77
108 109 108
1994
3 0 20 4 15 6 3 8
-10 4
-30 5 3 2
402 9 39 9
2003
2 3 -03 8 1
Latin America & Carib.
541 3,600 1,948
1 4 0 9
77 71 28
89 89
123 126 122
2M13
4 1 37 1 24 1 108 21 0
-177 1 3
167 2 14 8 37 6
111 9
2004
3 7 1 4 1 9
Low- income
2,338 510
1,184
1.8 2.1
31 58 79 44 75 61 94
101 88
2004
4.4 35.7 21.9 10.1 23.2
-15.5
2004-08
4.2 2.1 2.2
Development diamond.
Life expectancy
T GNI Gross
capita enrollmenl per pnmac)
Access to improved water source
Nicaragua ~ Low-income arwD
-
Economic ratios.
Trade
Indebtedness
-Nicaragua
STRUCTURE of the ECONOMY
(% of GDPj Agriculture Industry
Manufacturing 25.4 16.9 14.3 13.8 Services 43.3 55.9 56.9 58.2
Household final consumption expenditure 55.4 86.1 73.6 74.4 General gov't final consumption expenditure 35.3 10.1 15.6 15.5 Imports of goods and services 29.5 32.2 50.4 47.5
'984 1994 2003 2004
::: 2; 2: :::: -GCF ' - 6 G D P
1988-94 1994-04 2004 1 Growth of exports and imports (%) (average annual aroWh) I Industry
Services
AgriCUltUr8
Manufacturing
-1.0 4.2 3.2 0.2 3oT -3.2 4.1 2.4 0.5 / 2 a i A -4.1 4.4 2.1 -0.3 -2.0 4.0 1.9 6.5
Household final consumption expenditure 3.4 1.6 0.9 3.4 General gov't final consumptim expenditure -10.8 6.6 1.3 7.6 Gross capital formation Imports of goods and services
10
0
-10
Note: 2004 data are preliminary estimates. This table was produced f r m the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will
be incomplete.
81
PRICES and GOVERNMENT flNANCE
Domestic prices (% change) Consumer prices Implicit GDP deflator
Government finance (% of GDP, includes Current grants) Current revenue Current budget balance Overall surpluddeficit
TRADE
(US$ m7lions) Total exports (fob)
cotfee Shrimp and lobster Manufactures
Total imports (ci0 . Food Fuel and energy Capital goods
Export price index (2000=7W) Import price index ~ZLW0=7W) T e n s of trade (ZOGiklW)
BALANCE of PAYMENTS
(US$ m'//ions) Exports of goods and services Imports of goods and services Resource balance
Net income Net current transfers
Current account balance
Financing items (net) Changes in net reserves
Memo: Reserves including gold (US$ mi/lions) Conversion rate (DfC, /mUUS$)
EXTERNAL DEBT and RESOURCE FLOWS
(US$ mii/ions) Total debt outstanding and disbursed
IBRD IDA
Total debt service l8RD IDA
Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)
Worid Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers
Composition of net resource flows
1984
36.4 39.0
1984
41 3 122 13 58
825 107 145 238
92 49
166
1984
462 884 -423
-263 0
-686
601 85
2.89E-9
1984
4,807 134 59
86 15 0
56 344 11 0 0
0 22 7
15 9 7
1994
7.8 80.1
12.5 -0.8 -6.2
1994
335 73 42
117 867 188 123 21 8
97 84
115
1994
463 949 -486
-472 50
-908
976 -69
141 6.7
1994
I 1,996 76
254
207 25 3
181 245
-6 47 0
68 52 19 33 9
24
2003
7.3 6.9
16.2 0.5
-6.7
2003
m5 86 69
286 1,m8
460 194 362
93 111 84
2003
853 2,004 .1,151
-106 528
-731
738 -7
447 15.1
2003
6,915 0
998
205 0 3
495 162 28
201 0
27 112
0 112
3 109
2004
6.7 7.1
16.7 4.3
-3.7
2004
631
321 1,653
286
100 115 87
2004
907 2,056 .1,148
-96
-676
696 -20
524 15.9
2004
~ GDP deflator +CPI
Export and import levels (US mill.) I
Current account balance to GDP (%) 1
omposition of 2003 debt (US4 mill.)
. ~ * IBRD B * IDA D ~ Other muftilateral F - Private C - IMF
E -Bilateral
G - Shortden
Note: This table was produced from the Development Economics LDB database. 8/25/05
82
REGÍON AUTONOMISTAATLÁNTICO NORTE
REGÍON AUTONOMISTAATLÁNTICO SUR
JINOTEGANUEVA
SEGOVIA
MADRIZ
ESTELÍ
MATAGALPA
BOACO
CHINANDEGA
LEÓN
RÍO SANJUAN
CHONTALES
RIVAS
CARAZO
MANAGUA
GRANADAMASAYA
MANAGUA
OCTOCAL
SOMOTO
ESTELÍ
LÉON
JINOTEGA
CHINANDEGA
MATAGALPA
BOACO
JUIGALPA
JINOTEPE
RIVAS
GRANADA
MASAYA BLUEFIELDS
SAN CARLOS
PUERTO CABEZAS
ZONE I
ZONE IV
ZONE III
Bilwaskarma
Raiti
Teotecacinte
Jalapa
Las Manos
SantaMaria
Murra
Palacaguina
Condego
SomotilloPotosi
Limay
La Vigía
El Tuma
Rio BlancoMatiguas
Sébaco
Telica
Chichigalpa
Monotombo
Izapa San Benito
Nandaime
Altagracia
La Virgen
Moyagalpa
Peñas Blancas
San Jacunti
El Sauce
Malpaisillo
Mina ElLimón
QuilaliTotogalpa
PuebloNuevo
San Pedro
Guasaule
Corinto
Poneloya
Salinas Grandes
Puerto Sandino
El Tránsito
Masachapa
Nancimí
Diriamba
La BoquitoCasar de Casares
El Astillero
San Juan del Sur
Rio Grande
PuertoMorazán
V. 15 Julio (Pte.Estero Real)
CiudadDarío
Bonanza
El Salto
SiunaSusucayam
San Juande Rio Coco
La Rosita
Limbaica
Makantaka
Nauawás
Camoapa
Comalapa
Morillo
San Miguelito
Morrito
San Ubaldo
Pto.Díaz
La GateadaAcoyapaLovago
MuhanSto. Tomas Villa SanFrancisco
EsquipulasS. José deLos Remates
Santa Lucía
Santo Domingo
La Libertad
Muy Muy
EL Rama
El Bluff
Punta Gorda
San Juan del Norte
Nueva Guinea
Salto Grande
San Pedrodel Norte
Puerto Isabel
Tuara
Tuapí
La Constancia
Waspam
H O N D U R A S
C O S TA R I C A
CayosMiskitosIslands
To SanSalvador
To SanSalvador
To SanJose
San LorenzoBridgeManagua
Airport
PACIFICOCEAN
WaniLagoon
PaharaLagoon
BluefieldsBay
PuntaGorda
Bay
LakeManagua
Lake
Nicaragua
Gulf ofFonseca C a r i b b e a n
S e a
PerlasLagoon
Karata Lagoon
WountaLagoon
Río
Bambana
Río Kurinwás
Río Grande de Matagalpa Río Tuma
Rí
o
Boca
y
Río Coco (Río Segovia
)
Río Wawa
Río Prinzapolca
Río Siquia
Río Mico Rio Escondido
Río San Juan
Rio Punta Gorda
83°84°85°86°87°
83°84°85°86°87°
11°
12°
13°
14°
15°
11°
12°
13°
14°
15°
0 20 40
KILOMETERS
60 80 100
ROADS UNDER THE REHABILITATIONPROGRAM OF THE PROJECT
THIRD PROJECT ROADS
ZONES UNDER THE RURAL TRANSPORTIMPROVEMENT PLAN:
ZONE I
ZONE III
ZONE IV
PAN AMERICAN HIGHWAY
MAIN PAVED ROADS
ALL-WEATHER ROADS (GRAVEL)
DRY WEATHER ROADS
PRINCIPAL PORTS
OTHER PORTS
INTERNATIONAL AIRPORT
SECONDARY AIRPORTS
INLAND WATERWAYS
RIVERS
SELECTED TOWNS
DEPARTMENT CAPITALS
NATIONAL CAPITAL
DEPARTMENT BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
NICARAGUA
FOURTH ROAD MAINTENANCEAND REHABILITATION PROJECT
0200
500
2000
IBRD 34552
MARCH 2006
ALTITUDES IN METERS:
AT L A N T I CO C E A N
PA C I F I CO C E A N
14
10
90
90
86 82
10
14
1818
86 82 78
MEXICO
GUATEMALA
ELSALVADOR
COSTA RICA PANAMA
COLOMBIA
BELIZE
HONDURAS
NICARAGUA
