Completion Report

Project Numbers: 37559-023, 37559-033, and 37559-043 Loan Numbers: 2210, 2231, and 2540 August 2016

Pakistan: National Highway Development Sector Investment Program

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS Currency Unit – Pakistan rupee/s(PRe/PRs)

Loan 2210/Loan 2231

At Appraisal At Project Completion (31 October 2005) (31 December 2010)

PRs1.00 = $0.0168 $0.0116 $1.00 = PRs59.52 PRs85.76

Loan 2540

At Appraisal At Project Completion (8 August 2009) (31 December 2014)

PRs1.00 = $0.012 $0.010 $1.00 = PRs82.967 PRs100.55

ABBREVIATIONS

ADB – Asian Development Bank DMF – design and monitoring framework EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental monitoring plan EMMP – environmental management and monitoring plan HDM – Highway Development and Management Model km – kilometer LARP – land acquisition and resettlement plan MFF – multitranche financing facility MTDF – Medium-Term Development Framework NHA – National Housing Authority NHDP – National Highway Development Plan NHDSIP – National Highway Development Sector Investment Program NTP – national transport policy PFR – periodic financing request PIU – project implementation unit PPP – public–private partnership RAMS – road asset management system RSDF – road sector development framework SDR – special drawing right TA – technical assistance

NOTES

(i) The fiscal year (FY) of the government of Pakistan and its agencies ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2015 ends on 30 June 2015.

(ii) In this report, “$” refers to US dollars.

Vice-President W. Zhang, Operations 1 Director General S. O’Sullivan, Central and West Asia Department (CWRD) Director X. Yang, Transport and Communications Division, CWRD Team leader S. Campbell, Senior Social Development Specialist, CWRD Team members K. Sakamoto, Transport Economist, CWRD A. Silverio, Senior Operations Assistant, CWRD

C. Tabernilla, Project Analyst, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i

MAP x

I.  PROGRAM DESCRIPTION 1 

II.  EVALUATION OF DESIGN AND IMPLEMENTATION 2 

A.  Relevance of Design and Formulation 2  B.  Program Outputs 3  C.  Program Costs 5  D.  Disbursements 6  E.  Program Schedule 6  F.  Implementation Arrangements 7  G.  Conditions and Covenants 7  H.  Consultant Recruitment and Procurement 8  I.  Performance of Consultants, Contractors, and Suppliers 8  J.  Performance of the Borrower and the Executing Agency 9  K.  Performance of the Asian Development Bank 9 

III.  EVALUATION OF PERFORMANCE 10 

A.  Relevance 10  B.  Effectiveness in Achieving Outcome 10  C.  Efficiency in Achieving Outcome and Outputs 11  D.  Preliminary Assessment of Sustainability 12  E.  Contribution of Program to Institutional Development 12  F.  MFF Program Impact 13 

IV.  OVERALL ASSESSMENT AND RECOMMENDATIONS 15 

A.  Overall Assessment 15  B.  Lessons 15  C.  Recommendations 15 APPENDIXES 1. Design and Monitoring Framework: Performance Assessment 16 2. Project Costs at Appraisal and Loan Closing 23 3. Projected and Actual Contract Awards and Disbursement 27 4. Projected and Actual Implementation Schedule 28 5. Chronology of Main Events 30 6. Status of Compliance with Loan Covenants 34 7. Consultant Recruitment and Procurement 41 8. Economic Reevaluation 42 9. Road Expenditures 49 10. Resettlement Safeguards Implementation 50 11. Contribution to ADB Results Framework 59 

BASIC DATA A. Loan Identification 1. Country 2. Loan Numbers 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of MFF

Loan 2210 Loan 2231 Loan 2540 7. Project Completion Report Number

Pakistan 2210, 2231, and 2540 National Highway Development Sector Investment Program Islamic Republic of Pakistan National Highway Authority $770,000,000 SDR2,080,000 $180,000,000 $230,000,000 1588

B. Loan Data 1. Appraisal

– Date Started – Date Completed 2. Loan Negotiations

(Loan 2210, Loan 2231–PFR1) – Date Started – Date Completed

(Loan 2540–PFR2) – Date Started – Date Completed 3. Date of Board Approval

(Loan 2210–PFR1) (Loan 2231–PFR1) (Loan 2540–PFR2)

4. Date of Loan Agreement (Loan 2210, Loan 2231–PFR1) (Loan 2540–PFR2)

5. Date of Loan Effectiveness

(Loan 2210, Loan 2231–PFR1) – In Loan Agreement – Actual – Number of Extensions

(Loan 2540–PFR2) – In Loan Agreement – Actual – Number of Extensions 6. Closing Date

(Loan 2210, Loan 2231–PFR1) – In Loan Agreement – Actual – Number of Extensions

25 July 2005 12 August 2005 28 October 2005 29 October 2005 19 August 2009 19 August 2009 13 December 2005 15 February 2006 26 August 2009 14 June 2006 2 September 2009 14 September 2006 27 July 2006 0 2 October 2009 21 September 2009 0 31 December 2010 for both loans 31 March 2011 for Loan 2210 19 April 2011 for Loan 2231 0

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(Loan 2540–PFR2) – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan

Ordinary Capital Resources (Loan 2231–PFR1)

– Interest Rate –Commitment Charge

– Maturity (number of years) – Grace Period (number of years)

– Repayment Terms (Loan 2540–PFR2)

– Interest Rate – Commitment Charge

– Maturity (number of years) – Grace Period (number of years)

– Repayment Terms

Special Fund Resources (Loan 2210–PFR1)

– Interest Rate – Maturity (number of years) – Grace Period (number of years)

– Repayment Terms 8. Terms of Relending (if any)

31 December 2013 31 December 2014 2 LIBOR plus 0.6% per annum 0.75% per annum 25 5 Interest and other charges shall be payable semiannually on 15 June and 15 December in each year in accordance with Schedule 2 of the loan agreement. LIBOR plus 0.2% per annum 0.15% per annum 25 5 Interest and other charges shall be payable semiannually on 15 April and 15 October in each year in accordance with Schedule 2 of the loan agreement. 1% during grace period, 1.5% thereafter 32 8 Interest and other charges shall be payable semiannually on 15 June and 15 December of each year in accordance with Schedule 2 of the loan agreement. Not applicable

9. Disbursements

a. Dates (Loan 2210–PFR1) (Loan 2231–PFR1) (Loan 2540–PFR2)

Initial Disbursement 10 May 2007

16 December 2006 15 April 2010

Final Disbursement 31 March 2011 19 April 2011 3 June 2015

Time Interval 46 months, 21 days 52 months, 4 days 61 months, 3 days

Loan 2210/Loan 2231 Loan 2540

Effective Date 27 July 2008

21 September 2009

Original Closing Date 31 December 2010 31 December 2013

Time Interval 53 months, 4 days 51 months, 10 days

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b. Amount

(i) Loan 2210 (SDR million/$ million equivalent)

Original

Allocation

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance Category SDR $ SDR $ SDR $ SDR $

1. Capacity Building a. Consulting Services 1.17 1.69 0.43 0.67 0.43 0.67 0.00 0.00b. Training 0.25 0.36 0.00 0.00 0.00 0.00 0.00 0.00c. Computerized Traffic Management

System 0.24 0.35 0.00 0.00 0.00 0.00 0.00 0.00

d. Government Website 0,07 0.10 0.00 0.00 0.00 0.00 0.00 0.002. Interest Charge 0.21 0.30 0.00 0.01 0.00 0.01 0.00 0.003. Unallocated 0.14 0.20 0.00 0.00 0.00 0.00 0.00 0.00

Total 2.08 3.00 0.43 0.68 0.43 0.68 0.00 0.00

LIBOR = London interbank offered rate; PFR = periodic financing request; SDR = special drawing right. Source: Loan Agreement and Asian Development Bank loan financial information system. (ii) Loan 2231 ($ million)

Category

Original

Allocation

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance

1.National Highway Improvement

a. Civil Works 128.00 110.71 110.71 0.00 b. Consulting Services—Construction

Supervision 9.30 6.74 6.74 0.00

c. Consulting Services—Project Management

1.20 0.00 0.00 0.00

2. Incremental Administrative Cost 3.90 0.00 0.00 0.00

3. Interest and Commitment Charge 7.80 5.67 5.67 0.00

4. Unallocated 29.80 0.00 0.00 0.00

Total 180.00 123.12 123.12 0.00

Source: Loan Agreement and Asian Development Bank loan and financial information system.

(iii) Loan 2540 ($ million)

Original

Allocation

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance

1. Works 158.08 202.00 202.00 0.00 2. Consulting Services and Project

Management 4.98 3.95 3.95 0.00

3. Incremental Administrative Support 3.90 0.00 0.00 0.00

4. Interest and Commitment Charges 24.01 2.86 2.86 0.00

5. Unallocated 39.03 0.00 0.00 0.00

6. Land Acquisition and Resettlement 0.00 1.64 1.64 0.00

Total 230.00 210.45 210.45 0.00

Source: Loan Agreement and Asian Development Bank loan and financial information system.

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10. Local Costs (Financed) – Loan 2210 – not applicable

– Loan 2231 – not applicable – Loan 2540 – not applicable

C. Project Data

1. Project Cost

(i) Loan 2210 (SDR million/$ million equivalent)

Cost Appraisal Estimate

SDR $

Actual

SDR $

Foreign Exchange Cost ADB 2.80 3.00 0.43 0.68 Government 1.00 0.00Local Currency Cost Total 2.80 4.00 0.43 0.68 (ii) Loan 2231 ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 121.70 123.12 Local Currency Cost 98.60 36.50 Total 220.30 159.50 (iii) Loan 2540 ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 227.55 210.45 Local Currency Cost 39.30 36.69 Total 266.85 247.14

2. Financing Plan

(i) Loan 2210 (SDR million/$ million equivalent)

Cost Appraisal Estimate

SDR $

Actual

SDR $ Implementation Costs Borrower Financed 0.00 0.00 0.00 0.00 ADB Financed 1.87 2.70 0.43 0.68

Subtotal 1.87 2.70 0.43 0.67

IDC Costs Borrower Financed 0.00 0.00 0.00 0.00 ADB Financed 0.21 0.30 0.00 0.01

Total 2.08 3.00 0.43 0.68

ADB = Asian Development Bank; IDC = interest during construction.

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(ii) Loan 2231 ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 98.60 36.50 ADB Financed 113.90 117.30

Subtotal 212.50 153.80

IDC Costs Borrower Financed 0.00 0.00 ADB Financed 7.80 5.70 Subtotal 7.80 5.70

Total 220.30 159.50

ADB = Asian Development Bank; IDC = interest during construction.

(iii) Loan 2540 ($ million)

Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 39.30 36.69 ADB Financed 203.80 207.59

Subtotal 243.10 244.28

IDC Costs Borrower Financed 0.00 0.00 ADB Financed 23.75 2.86 Subtotal 23.75 2.86

Total 266.85 247.14

ADB = Asian Development Bank; IDC = interest during construction.

3. Cost Breakdown by Project Component (i) Loan 2210 (SDR million/$ million equivalent)

Appraisal Estimate Actual

Component SDR $ SDR $ ADB 1. Capacity Building a. Consulting Services 1.17 1.69 0.43 0.67 b. Training 0.25 0.36 0.00 0.00 c. Computerized Traffic Management System 0.24 0.35 0.00 0.00 d. Governance Website 0.07 0.10 0.00 0.00 2. Interest Charge 0.21 0.30 0.00 0.01 3. Unallocated 0.14 0.20 0.00 0.00

Total (ADB) 2.08 3.00 0.43 0.68

Government 0.00 1.00 0.00 0.00

Total 2.08 3.00 0.43 0.68

Note: SDR1.64 million ($2.60 million equivalent) cancelled on 31 March 2011 loan accounting closing. Source: Asian Development Bank loan financial information system.

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(i) Loan 2231 ($ million)

Component Appraisal Estimate Actual

1. National Highway Improvement a. Land Acquisition and Resettlement 6.30 8.30 b. Civil Works 128.00 110.71 c. Consulting Services—Construction Supervision 9.30 6.74 d. Consulting Services—Project Management 1.20 0.00 2. Incremental Administration Cost 3.90 0.00 3. Interest and Commitment Charge 7.80 5.67 4. Unallocated 29.80 0.00

Total 180.00 123.12

Note: $40 million cancelled on 11 September 2009 and 30 June 2010 ($20 million on each occasion) and $16.7 million cancelled on 19 April 2011 loan account closing. Source: Asian Development Bank loan financial information system. (ii) Loan 2540 ($ million)

Component Appraisal Estimatea Actual

Works 193.08 237.82 Consulting Services and Project Management 5.79 4.64 Incremental Administrative Support 3.86 0.00 Interest and Commitment Charge 23.75 2.86 Contingencies 38.62 0.00 Land Acquisition and Resettlement 1.75 1.82

Total 266.85 247.14 a Including taxes and duties. Note: $19.55 million cancelled on 3 June 2015 loan account closing. Source: Asian Development Bank loan financial information system. 4. Project Schedule

Item Appraisal Estimate Actual

Loan 2210‒PFR1 Consultant Selection Qtr 4 2005‒Qtr 1 2006 Qtr 4 2006‒Qtr 4 2009 Date of Contract with Consultants 17 June 2009 Implementation Qtr 3 2006‒Qtr 4 2010 Qtr 3 2009‒Qtr 4 2010 Loan 2231‒PFR1 Consultants Selection Date of Contract with Consultants

Qtr 2 2005–Qtr 2 2006 Qtr 1 2006‒Qtr 4 2006

Construction Supervision 31 Oct 2006 Project Management 6 Dec 2006 Civil Works Procurement Advance Procurement Actions Detailed Design and Preparation of Bid Documents

Qtr 1‒ Qtr 4 2005 Qtr 1‒Qtr 4 2005

Prequalification of Contractors Qtr 4 2005–Qtr 3 2006 Qtr 4 2006‒Qtr 1 2007 Date of Works Contract Qtr 3 2006 Hub–Uthal Multan–Muzaffargarth Muslim Bagh–Qila Saifullah Completion of Works

Qtr 2 2006–Qtr 2 2010

27 Dec 2006 26 Dec 2006 30 May 2007

Qtr 1 2007–Qtr 2 2010

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Loan 2540‒PFR2 Consultant Selection ‒ Construction supervision consultants were engaged under Project 1 in 2006 until 31 December 2010 (Project 1 closing date).

Consultancy contracts were carried over to Tranche 2 as follows:

Construction Supervision for Sukkur‒Jacobabad

6 May 2011

Construction Supervision for Qila Saifullah‒Zhob

6 May 2011

Civil Works Procurement Qila Saifullah‒Zhob 2005 Prequalification—approval of award Dec 2005–Jul 2009 Sukkur‒Jacobabad 2005 Prequalification—approval of award May 2008–Aug 2010 Date of Works Contract Qila Saifullah‒Zhob 25 Feb 2010 Sukkur‒Jacobabad 20 Oct 2010 Completion of Works 2012 2014 Qila Saifullah‒Zhob 31 Oct 2013 Sukkur‒Jacobabad 30 Sep 2014

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

Loan 2210 From 27 Jul 2006 to 31 Dec 2010 Satisfactory Satisfactory Loan 2231 From 27 Jul 2006 to 31 Dec 2006 Satisfactory Satisfactory From 2 Jan 2007 to 28 Feb 2007 Unsatisfactory Unsatisfactory From 1 Mar 2007 to 31 Dec 2010 Satisfactory Satisfactory Loan 2540 From 2 Sep 2009 to 31 Dec 2010 Satisfactory Satisfactory From 1 Jan 2011 to 31 Mar 2011 On Tracka

From 1 Apr 2011 to 30 Sep 2011 Potential Problem From 1 Oct 2011 to 31 Dec 2014 On Track a Starting from 1 January 2011, the performance of ADB-financed projects is monitored and rated using

eOperations—the integrated project management information system, which automates ADB business process workflows.

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D. Data on Asian Development Bank Missions

Loan 2210

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Inception (upgraded from Consultation)

16‒19 Jan 2006

3

9

a,b,c

Review 1 13 Jul 2007 1 1 d Consultation 18 Dec 2007 4 4 a,e,f,g Consultation 6‒9 Mar 2008 8 24 a,d,e,f, g,h,I,j Review 2 24 Apr 2008 3 3 b,e,g Review 3 26 Jun 2008 4 4 b,g,k,l Review 4 7‒8 Sep 2008 5 10 b,e,g,h,i Review 5 3‒4 Feb 2009 10 20 b,b,e,g,I,j,m,m,n,o Review 6 6‒7 May 2009 7 14 b,f,,j,n,o,p,q Review 7 5‒6 Oct 2009 6 12 a,f,j,o,p,q Review 8 15‒16 Mar 2010 7 14 a,b,f,j,p,q,r Review 9 29 Jul 2010 4 4 a,b,f,q Project Completion Review 12‒15 Sep 2011 2 6 g,l a = senior transport specialist, b = transport specialist, c = associate project analyst, d = transport economist, e = senior investment specialist, f = project officer, g = transport officer, h = senior portfolio management specialist, i = safeguards officer, j = assistant project analyst, k = senior project implementation specialist, l = staff consultant, m = senior project management specialist, n = senior transport economist, o = senior resettlement specialist, p = head of project management unit, q = social safeguard officer, r = principal resettlement specialist.

Loan 2231

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersb

Inception (upgraded from Consultation)

20‒27 Jan 2006

3

15

a,b,c

Consultation 16‒27 Jan 2006 2 22 a,d Consultation 28 Mar‒5 Apr 2006 2 16 a,e Special Project Administration Review

29 Jan‒3 Feb 2007

2

10

b,f

Review 1 12‒31 Mar 2007 2 28 f,g Review 2 14‒18 Jul 2007 1 4 f Consultation 19‒20 Dec 2007 4 8 a,h,I,j Consultation 10‒14 Mar 2008 8 32 a,f,h,I,j,k,l,m Review 3 25‒26 Apr 2008 3 6 b,h,j Review 4 27‒30 Jun 2008 4 12 b,j,n,o Review 5 9‒13 Sep 2008 5 20 b,h,j,k,l Review 6 5–6 Feb 2009 10 20 b,b,h,j,l,m,p,q,r,r Review 7 8‒11 May 2009 7 21 b,l,m,p,q,s,t Review 8 7‒11 Oct 2009 6 24 a,I,m,q,s,t Review 9 17‒20 Mar 2010 7 21 a,b,I,m,s,t,u Review 10 30 Jul‒2 Aug 2010 4 12 a,b,I,t Project Completion Review 15‒21 Sep 2011 2 12 j,o a = senior transport specialist, b = transport specialist, c = associate project analyst, d = project analyst, e = project implementation officer, f = transport economist, g = social development and resettlement specialist, h = senior investment specialist, i = project officer, j = transport officer, k = senior portfolio management specialist, l = safeguards officer, m = assistant project analyst, n = senior project implementation specialist, o = staff consultant, p = senior transport economist, q = senior resettlement specialist, r = senior project management specialist, s = head of project management unit, t = social safeguard officer, u = principal resettlement specialist.

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Loan 2540

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Consultation 6–13 May 2009 7 14 a, d, g, j, o, p, r Inception 5–14 October 2009 6 18 a,d, j, o, p, r Review 1 15–23 Mar 2010 7 21 b, d, I, a, a, p, p, r Review 2 29 Jul–4 Aug 2010 4 8 b, a, o, p Review 3 20–28 Oct 2011 5 20 c, a, m, n, f Consultation 14–15 Feb 2012 3 8 c, b, e, s Review 4 14–20 Feb 2012 6 18 c, b, e, f, m, s Review 5 27 Mar–2 Apr 2012 4 12 c, b, k, o Review 6 15–21 May 2012 6 18 c, b, k, n, o, p Review 7 10–16 Jul 2012 5 15 c, b, k, n, o Review 8 9–15 Oct 2012 5 15 c, b, k, n, o Review 9 30 Jan–11 Feb 2013 6 30 c, b, k, l, n, o, Review 10 9–22 Apr 2013 5 30 c, b, k, n, p Review 11 22–26 Jul 2013 5 10 c, b, e, k, o Midterm Review 1–9 Oct 2013 7 35 c, a, b, m, n, o, q Review 12 25 Feb–7 Mar 2014 7 35 c, b, l, l, m, n, o Consultation 10–14 Jun 2014 1 2 e Review 13 10–18 Jun 2014 7 21 c, a, b, e, f, o, q Review 14 18–26 Nov 2014 7 14 c, a, b, m, n, o, q Review 15 19–27 Feb 2015 7 14 c, b, h, m, n, o, q Project completion review 26–29 Apr 2015 2 5 b, h a = transport specialist, b = senior transport specialist, c = lead transport specialist, d = head, portfolio management unit, e = director, f = deputy country director, g = senior transport economist, h = transport economist, i = principal resettlement specialist, j = senior resettlement specialist, k = resettlement specialist, l = senior social safeguards specialist, m = social safeguards specialist, n = environmental specialist, o = project officer (transport), p = safeguards officer, q = project analyst, r = assistant project analyst, s = associate project analyst Notes: (i) Mission combined with other missions in the project area.

(ii) In each mission team, the member mentioned first was also the team leader. (iii) An additional mission, for facility completion review, was conducted in April 2016 by a senior social

development specialist.

I. PROGRAM DESCRIPTION

1. The Asian Development Bank (ADB) approved a multitranche financing facility (MFF) for loans of up to $770 million to the Islamic Republic of Pakistan for its National Highway Development Sector Investment Program (NHDSIP) 1

in December 2005. Project 1 of the NHDSIP was financed by a loan of $180 million (Loan 2231) from ordinary capital resources for capital investments approved in February 2006. ADB also approved a loan of SDR2,080,000 (equivalent to $3 million) in December 2005 (Loan 2210) to strengthen the institutional capacity of the National Highway Authority (NHA), which was implemented in parallel with Project 1. A project completion report for these two loans was published in December 2011.2 A periodic financing request (PFR) for a second tranche of the MFF, Project 2, was approved in August 2009 (Loan 2540, for $230 million).3 This facility completion report considers the performance of Project 2, and the program as a whole. 2. The importance of the transport sector to Pakistan’s economy forms the rationale for the project. In 2005, transport contributed 10% to of gross domestic product (GDP). Road transport was the dominant mode, accounting for 91% of passenger and 96% of freight traffic. During the 1990s, the overall demand for road transport grew at 7–8% per year, compared with average GDP growth of 4–5%. The number of registered motor vehicles was growing at 9% annually. In 2005, the national highway network comprised 8,320 kilometers (km) of national highways and 710 km of motorways, carrying 75–80% of all national traffic. A detailed condition survey in 2001 indicated that 50% of the network was in poor to very poor condition. Some deteriorated sections were located on important interprovincial and subregional routes connecting Pakistan with Afghanistan and providing access to southern ports. 3. The NHA developed the National Highway Development Plan (NHDP) from the federal government’s Medium-Term Development Framework 2005–2010 (MTDF). The NHDSIP was designed to finance the rehabilitation and improvement of strategic road sections. Institutional capacity building was added to Project 1 to enhance program sustainability and to help the NHA further define and execute policy reform, promote strategic thinking and planning for the sector, improve oversight of maintenance, and ensure the upkeep of new assets. The program’s twin objectives were:

i) Physical investment projects to improve the national highway network, particularly road-sector efficiency on the main transport corridors, through reduced average travel times, sustained road network operation and maintenance, and decreased transport costs.

ii) Institutional capacity building of the NHA, through strengthened strategic planning and management of the national highway network, enhancing public–private partnerships (PPPs) for provision of road transport infrastructure, and investing in priority sections of the network, with a focus on subregional connectivity.

4. Outputs were similarly divided between identification of physical investments ($963.80 million) combined ADB and government investments, or 99.7% of total program cost ($966.80), and NHA institutional strengthening ($3.00 million), 0.3% of total program cost).

1 ADB. 2005. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility and Loan to the Islamic Republic of Pakistan for the National Highway Development Sector Investment Program. Manila.

2 ADB. 2011. Completion Report, Pakistan: National Highway Development Sector Investment Program—Project 1. Manila.

3 ADB. 2009. Periodic Financing Request Report: MFF 0002-PAK: National Highway Development Sector Investment Program—Proposed Tranche 2. Manila.

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II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. Physical investment projects (loans 2231 and 2540). The program’s investment projects were drawn from the government’s NHDP, which was based on its MTDF 2005–2010. The NHDP sought to develop and improve the country’s road network to facilitate transport and trade with neighboring countries and also aimed at enhancing the capacity of road-sector agencies. The NHDP’s 10-year implementation plan, ending in 2015, identified public sector projects totaling PRs138.50 billion ($2.30 billion) and private sector investment projects totaling PRs30.80 billion ($0.51 billion). The roads selected for improvement under the MFF continue to have local, provincial, national, and subregional importance. The subprojects included in both Project 1 and Project 2 were focus areas identified in the NHDP. Project 1 was formulated along regional cooperation lines, since it was designed as part of ADB’s country strategy and program update for Pakistan for 2004–2006, which aimed to support subregional cooperation, and improve cross-border facilities and agreements, trade facilitation, and transport efficiency on the country’s main transport corridors.4 Project 2 roads were selected based on the implementation readiness and as per the selection criteria for subprojects contained in the Financing Framework Agreement, and submitted in the second periodic financing request (PFR2). 6. Project 1 was designed to reduce transport costs and travel times. An additional objective was to relieve congestion in urban and industrial areas on N25 and N70. These were relevant aims and the designs were appropriate to their realization. Most of the design modifications before and during construction were minor, including changes to improve drainage and provide underpasses to benefit local communities, but a significant alteration involved the construction of an additional carriageway on N25 to substitute for the originally planned improvement and rehabilitation of of the existing roads. ADB and the NHA agreed that this change enhanced the relevance of the subproject by increasing capacity to meet projected traffic growth to and from Karachi port. ADB approved the second tranche of the MFF in 2009 to finance Project 2, which involved road construction and improvements on two highway sections: N65 Sukkur–Jacobabad (65 km) and N50 Qila Saifullah–Zhob (155 km) (footnote 3). N50 faced start-up delays when the consultant’s design review found that the initial design was insufficient to address recurrent drainage and flooding issues. A number of additional cross-drainage structures were proposed, which the NHA and ADB agreed enhanced the relevance of the subproject by increasing resilience to climate change. The N50 is now the fastest route from Quetta to Peshawar.

7. Institutional strengthening project (Loan 2210). The institutional strengthening project was designed to meet the NHA’s needs, as reflected in the MTDF. ADB had been engaged in policy dialogue and institutional reform initiatives in Pakistan and with the NHA since 2001. When the NHDSIP was approved, several areas remained to be addressed and these were included in a road sector development framework (RSDF) that was based on dialogue between ADB and the NHA. The framework was to be implemented in two phases and the institutional strengthening project under Loan 2210 constituted the first phase. The scope of the interventions under this project was relevant to the NHA’s needs. This was particularly true of those related to the development of national transport policy, PPP projects, road maintenance planning, and road safety.

4 ADB. 2003. Country Strategy and Program Update for Pakistan for 2004–2006. Manila.

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B. Program Outputs

8. Output 1: Physical investment projects (loans 2231 and 2540). The program was designed to complete three road sections totaling 376 km in Project 1, a further 460 km of road sections in Project 2, with scope for later identification of a further batch of road subprojects for an envisaged Project 3. These three projects and provision for their construction supervision comprised the four Output 1 indicators, of which three were achieved (the program did not require a third project/tranche). At appraisal the procurement plan indicated nine interrelated civil works packages for projects 1 and 2. The program delivered 166 km of road improvements in Project 1 and 218.6 km of road improvements in Project 2, for a total of 384.6 km of road constructed or improved in five civil works contracts. Although the total kilometers of road were less than anticipated at design, the roads were completed to a high standard, with additional design features responding to hydrology, community needs, and changes in traffic forecasts. The works were completed on time and within budget despite a challenging security environment for the largest projects, located in Balochistan.

(i) Project 1: Hub–Uthal on N25. This subproject’s outputs were achieved. The actual length of the road improved was 79.5 km.5 The road was improved and also widened to a two-lane road with 7.3 meter-wide pavement and 3 meter-wide shoulders. Improvements included 17 bridges and 208 box culverts. The civil works started in January 2007. A design change from the original plan to merely improve and widen the existing road led to the construction of an additional carriageway within the right-of-way. This additional work increased costs by 28.9% of the contract price and added 12 months to the contract duration, so that it was completed in January 2010. Nonetheless, after allowing for (i) the cost of changing the scope of works to include an additional carriageway, (ii) price escalation, and (iii) depreciation of the Pakistan rupee against the US dollar, total costs remained within the original loan amounts for the project.

(ii) Project 1: Multan–Muzaffargarh on N70. The outputs were achieved as planned, with the targeted total of 36.5 km of road improved. This included expanding 20 km of road from the original two lanes to a four-lane road with shoulders. A 16.5-km four-lane bypass to avoid the Muzaffargarh urban area was also constructed, as well as 8 bridges and 102 culverts along the four-lane road.

(iii) Project 1: Muslim Bagh–Qila Saifullah on N50. The intended outputs were delivered and 50.1 km of road between Muslim Bagh and Qila Saifullah were widened and improved to the national highway standard for a two-lane road (7.3m wide). The report and recommendation of the President had envisaged improving 255 km on N50 between Khanozai and Zhob in two concurrent contract packages. However, the 155-km Zhob–Qila Saifullah package faced procurement difficulties, so it was deferred to Project 2. The remaining section was shortened to start from Muslim Bagh rather than Khanozai because the NHA had since taken up this section using domestic funds.

(iv) Project 2: Qila Saifullah–Zhob on N50. The intended outputs were delivered and 150.3 km of road were widened and improved to the national highway standard for a two-lane road. This included 19 bridges and 845 culverts to improve cross-drainage. The road section was 4.7 km shorter than appraised because of design changes and more detailed measurement. Completion of this project dramatically

5 The distance between Hub and Uthal on N25 is 84.5 km. The road improvement did not include two sections of

2.225 km (from km 10+100 to km 12+325) and 2.775 km (from km 26+950 to km 29+725), which were excluded from the scope.

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improved the main transit route for goods from Quetta to Peshawar, and the main artery in northern Baluchistan.

(v) Project 2: Sukkur–Shikarpur–Jacobabad on N65. The intended outputs were delivered and 68.3 km of additional carriageway from Sukkur to Jacobabad were completed, including the Shikarpur bypass of 4.9 km. This included seven bridges. This section of N65 now links Quetta, the capital of Baluchistan, with Sindh and Punjab.

9. The indicators for success of Output 1 for the program included (i) mobilization of construction supervision consultants in three batches (two batches were required as only two projects were implemented and successfully mobilized); (ii) substantial completion of three subprojects on N25, N50, and N70 (all completed, although one with slightly reduced scope [see para. 8, item (iii) above] was transferred to Project 2); and (iii) approximately 460 km of additional roads completed in Project 2 (218.6 km of roads completed). 10. Output 2: Institutional strengthening project (Loan 2210). This output was completed by the end of Project 1 and its results were reported in the associated completion report in detail (footnote 2). In summary and with updates where the NHA has made further progress beyond the end of the subject loan but within the program’s time frame:

(i) Development of a national transport policy (NTP). This was achieved as planned although not adopted by the government (Ministry of Communication). At program completion, there is renewed support for an NTP and this task has been included in a new technical assistance (TA) project implemented by the Planning Commission.6 Reports and papers on transport policy, performance indicators, strengthening and restructuring of the NHA, and development of the national highway network were completed.

(ii) A road maintenance plan for 2007–2011. This plan was prepared and is now updated yearly by the NHA, as planned. Provision of funding to finance the maintenance of roads remains problematic. Costs increase as the network grows, road standards are raised, and the number of road users grows. At program close maintenance funds, including income from toll roads, traffic infringement fines, and concessions, plus a government budget allocation, were estimated at around 50% of requirements. Innovative solutions have formed the basis of ADB–NHA discussions in 2016.

(iii) NHA investment plan for 2007–2011. This was partially achieved. A comprehensive business plan for 2000–2020 was prepared for the NHA but was not endorsed by the federal government, since it was linked to the NTP, above. During Project 2, however, the NHA improved its investment planning through implementation of a road asset management system (RAMS) and associated annual maintenance plans. It also adopted the National Trade Corridor investment plan, a multimodal plan to optimize investments in roads, rail, ports, and air transport.

(iv) Identification and implementation of PPP projects. Achieved as planned. Reviews of the PPP policy framework and actual concession agreements were completed. Guidelines for negotiating PPP projects were prepared. A draft toll policy was prepared. The NHA identified PPP projects estimated at PRs197 billion. At program completion, six were under implementation, four under procurement, and seven at the project preparation stage (NHA website).

6 ADB. 2015. Technical Assistance to Pakistan for Enabling Economic Corridors through Sustainable Transport

Sector Development, Manila (TA 8990-PAK, $15.41 million, approved on 17 November, financed by the Government of the United Kingdom).

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(v) Social safeguards. The project completed capacity needs assessments and a capacity building program, and formulated standard operating procedures and guidelines. It also conducted training workshops for more than 85 NHA staff.

(vi) Grievance website. A grievance website was established on a trial basis and was being updated to a fully functional online complaint tracking system. At program completion, the NHA informed ADB that the system was operational and being maintained by the NHA’s management information system department.

(vii) Intelligent highway systems. The project piloted intelligent highway systems on sections of N5 and a motorway (M3). It also reviewed alternative traffic management systems, and developed traffic simulations.

(viii) Bridge design. Lectures and workshops, design reviews for more than 20 bridges, and a feasibility study for a bridge at Syed Wala were completed.

(ix) Financial management system. Implementation was not completed because the NHA revised the consultant’s terms of reference and reduced the duration of the assignment to avoid duplication with a World Bank–financed project. The revised scope could not be completed due to non-availability of suitable experts. At program end, the NHA informed ADB it now has a financial management system.

(x) Road safety component. This was dropped because a suitable consultant could not be recruited. This is now covered under a new ADB TA project (footnote 6).

11. Owing to a delay in the procurement and mobilization of consultants, only 23 person-months could be filled, compared with the budgeted 50 person-months. This reduced the extent of interaction between consultants and NHA staff and the associated transfer of skills—and, therefore, the beneficial impact of the TA. Moreover, because the project start was delayed by 3 years, its ability to improve the NHA’s capacity and skills for implementing the investment project was greatly reduced. 12. Appendix 1 provides the updated design and monitoring framework (DMF) and compares the anticipated program and project outputs with the actual results. Project 1 did not have a separate design and monitoring framework, but Project 2 did, providing baselines for indicators that were missing at MFF appraisal (albeit from 2009, not 2005). This can be considered a lesson learned as this was the first MFF undertaken by ADB. C. Program Costs

13. Physical investment Project 1 (Loan 2231). At appraisal, the cost of Project 1 was estimated at $220.30 million (for 376 km of road improvement), with a foreign exchange cost of $121.70 million (55.2%) and a local currency cost equivalent to $98.6 million (44.75%). The actual project cost at loan closing was $159.5 million (for 166 km of road improvement), with a foreign exchange cost of $123.0 million (77.1%) and a local currency cost equivalent to $36.5 million (22.9%). The project costs at appraisal and loan closing are compared in Appendix 2. Table 1 provides a breakdown of the civil works costs. 14. Physical investment Project 2 (Loan 2540). At appraisal, the cost of Project 2 was estimated at $266.85 million (for 218 km of road improvement). The actual project cost at loan closing was $247.14 (for 218.6 km of road). 15. The increase in the civil works costs on Project 1 can be attributed to the additions to the project’s scope after the contract awards. In the case of the Hub–Uthal road, the increase was due to construction of an additional carriageway rather than the originally planned rehabilitation and improvement of the existing road. Other cost increases for this subproject resulted from the

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construction of additional bridges and culverts; provision of guide banks for bridge embankments; elevating the road profile by 3.5 meters in problematic areas (km 30–32) due to high levels of water and mud flow; slope protection; and elevating the profile of new roads to accommodate the culverts needed for diverting high flood discharges. In case of the Multan–Muzzaffargarh road, the costs increased due to items added to the bill of quantities, such as construction of loops, U-turns, bus bays, slope protection works, retaining walls at the bridges, and pipe culverts. The savings in Project 2 can be attributed to the ‘follow-on’ nature of the projects, with contractors and supervision consultants from Project 1. The civil works cost was also approximately $20 million less than appraised, even after a security premium was awarded to address the difficult conditions on N50, and an extension granted to the supervision consultants to cover the longer construction time due to start-up delays (due to design changes).

Table 1: Civil Works Costs for Physical Investment Projects Item ICB-1

Hub–Uthal,

N25

ICB-2 Multan–Muzaffargarh,

N70

ICB-3 Muslim Bagh–Qila Saifullah,

N50

ICB-3B Qila

Saifullah–Zhob, N50

ICB-5Sukkur–

Jacobabad, N65

Initial civil works contract price (PRs billion) 2.35 3.59 1.66 8.35 6.71Final civil works contract price (PRs billion)a 2.77 4.12 1.64 9.70 9.81Increase/decrease in contract price (%) 18.0 14.7 (1) 11.5 46.95Cost per km (PRs million/km) 34.84 112.88 32.8 62.58 150.89

Cost per km ($ million/km) at project close

at program close

0.40 0.33

1.40 1.08

0.40 0.31

0.67 0.62

1.52 1.38

ICB = international competitive bidding; km = kilometer. a Including variations. Note: The rate of exchange adopted by ADB as of 21 April 2016 is PRs104.70 per US$. 16. Institutional strengthening project. At appraisal, the project cost for Loan 2210 was estimated at $3 million for consulting services. The actual project cost at completion was $0.6 million due to the reduced inputs. D. Disbursements

17. Detailed estimates for loan disbursements were not prepared at appraisal for Project 1, but were provided for Project 2 under the approved PFR2. However, the implementation schedule provides a timeline for expenditures between 2006 and 2015. Appendix 3 compares projected against actual contract awards and disbursements. The disbursement delays on Project 1 were mainly attributed to (i) delays in procurement; (ii) late deployment of project staff, contractors, and consultants; (iii) long delays during construction; and (iv) extra time consumed in processing withdrawal applications, sometimes due to incomplete or incorrect details. The NHA provided additional staff and ADB provided coaching to address the problems. Project 2 performed much better in terms of timely procurement, deployment of staff, and construction. E. Program Schedule

18. At appraisal, the program was to be implemented over 10 years, with completion by 30 June 2015. This was achieved, albeit with a slightly reduced scope, despite delays in construction caused by redesigns, land acquisition difficulties, security incidents, and major flooding. Appendixes 4 and 5 show the projected and actual implementation schedule, and chronology of events. 19. The implementation period for Project 1 was to be 5.5 years, including pre-construction beginning in mid-2005 and ending in 2010. The award of civil works contracts was planned for

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the third quarter of 2006. Although planning and design activities proceeded as scheduled, limited progress was made on implementation in the first 2 years. The key contributing factors included (i) late mobilization of contractors and consultants, (ii) insufficient staffing at consultant and contractor offices, and (iii) prolonged implementation of the land acquisition and resettlement plan (LARP). The completion of major activities was targeted at appraisal for 30 June 2010. Loan closure was scheduled for 31 December 2010. All three civil works contracts were in fact substantially completed by the 30 June 2010 target date despite start-up delays, and the loan closed in April 2011. The institutional strengthening project loan also closed in April 2011. 20. The implementation period for Project 2 at appraisal (August 2009) was for physical completion by 31 December 2012 and loan closing on 30 June 2013. The loan was declared effective in September 2009 and contractors commenced works for N50 in March 2010 and for N65 in February 2011. Following extensions on both works contracts, N50 (two extensions) reached physical completion in October 2013, and N65 (three extensions) in September 2013. The Project 2 loan closed in June 2015.

F. Implementation Arrangements

21. The NHA was the executing agency for both the investment projects and the institutional strengthening project. An investment program coordinating committee headed by the NHA chairperson was responsible for monitoring the use of loan funds and overall implementation performance. A project implementation unit (PIU) under a project director was set up for each of the Project 1 and 2 subprojects. The four PIUs (the two N50 contracts were contiguous so they used the same PIU) operated from the relevant NHA provincial office, each under the authority of a general manager. The PIUs were coordinated by NHA’s headquarters, where a general manager and a director supervised the ADB-funded projects. The NHA provided expertise land acquisition and resettlement activities, grievances, and environmental impacts, either through the construction supervision consultant or from its own staff resources. The NHA managed the institutional strengthening project directly through a policy formulation and coordination office, and recruited a national policy coordinator to monitor the activities of the consultants. These implementation arrangements are assessed as adequate to deliver the program’s outputs and achieve its purpose. G. Conditions and Covenants

22. The borrower complied with 30 of 36 covenants in the combined loan agreement for Project 1 (loans 2231 and 2210); the remaining covenants were partially complied with. Partial compliance did not, by the end of the program, significantly impact project performance other than by causing initial delays:

(i) A PIU for the institutional strengthening project was not set up, but a policy formulation and coordination office (para. 21), performed the intended function.

(ii) The government did not promulgate the NTP by loan closing. This activity was taken up under Technical Assistance to Pakistan for Enabling Economic Corridors through Sustainable Transport Sector Development (footnote 6).

(iii) A road safety cell within the NHA was not fully functional. This activity was taken up in the above Technical Assistance, which will achieve compliance.

(iv) An NHA investment plan was prepared but the government did not endorse it. This has now been superseded by Comprehensive Business Plan 2000–2020.

(v) Professional posts were not completely filled due to a shortage of available candidates in the country with the necessary technical skills.

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(vi) The NHA installed a financial management system subsequent to the project, however no external evaluation has been undertaken to date. This activity was taken up in the above Technical Assistance, which will achieve compliance.

23. The borrower complied with all 27 covenants in the loan agreement for Project 2 (Loan 2540). Appendix 6 provides the compliance details. The improved performance reflects the fact that Project 2 was a fairly standard construction project with realistic covenants, whereas Project 1 included ambitious initial efforts (with related covenants) to promote NHA capacity and implement policy reforms to support the 2005 RSDF agreed between ADB and the NHA. The RSDF was updated and expanded in 2007, with actions linked to subsequent ADB investments.7 H. Consultant Recruitment and Procurement

24. Consultants were selected in accordance with ADB’s Guidelines on the Use of Consultants (2006, as amended from time to time) while goods, services, and civil work contracts were procured as planned at appraisal, in accordance with ADB’s Procurement Guidelines (2015, as amended recently). Details are in Appendix 7. Recruitment of consultants for the institutional strengthening project was delayed due to the NHA’s reservations about the project’s perceived benefits. In addition, the procurement for this contract yielded only a single proposal, which was eventually awarded in June 2009. A delay of more than a year resulted in the proposed team leader being unavailable, causing further delays. Procurement of civil works for Project 1 was rebid in a smaller lot and 150 km of the road was repackaged to be bid in Project 2 as a result of all initial bids coming in over the project estimate. I. Performance of Consultants, Contractors, and Suppliers

25. Highway improvement projects. Both the supervision consultants (Minconsult International Limited for both contracts on N50 and Oriental Consultant Company Limited for N25, N70, and N65) and their national associates performed satisfactorily. The actual cost of supervision was less than envisaged because bids came in lower than expected. The consultants were familiar with ADB procedures, supervised the contractors appropriately, and ensured improvement in contractor performance. 26. The performance of the civil works contractor, Limak Insaat Sanayi Ve Ticaret A.S. in joint venture with Zahir Khan and Brothers (for N25: Hub–Uthal and N50: Muslim Bagh–Qila Saifullah) was rated partly satisfactory at completion of Project 1. This was because the contractors demonstrated limited skills in (i) planning and execution of works; (ii) managing working capital; (iii) managing a consistent supply of construction materials; (iv) maintaining equipment and machinery; (v) making proper traffic management, safety, and environmental impact mitigation arrangements during construction; and (vi) contract management. However, the same contractor completed N50 Qila Saifullah–Zhob and N65 Sukur–Jacobabad under Project 2, by which time contractor capacity had increased in all these areas. At completion of Project 2, therefore, this contractor was rated satisfactory.

27. The performance of the contractor for the Multan–Muzaffargarh subproject under Project 1, Husnain Cotex, was rated unsatisfactory. The contractor was consistently slow in implementing the project and, despite repeated notices from the supervision consultant and the NHA, failed to improve its performance. The contractor also abandoned the construction site in

7 ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility and Technical Assistance Grant, National Trade Corridor Highway Investment Program (Pakistan). Manila.

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some instances. The work was completed to a satisfactory standard only after an extension of 11 months and legal proceedings against the contractor for incomplete construction works.8

28. Institutional strengthening project. The performance of the consultant for this project was rated only partly satisfactory at completion because not all targets were met (para. 10). A delayed project start (para. 24) required the consultancy firm to replace the originally nominated team members who were no longer available. Performance was thereafter plagued by problems, including (i) the NHA’s rejection of replacements; (ii) government refusal to issue visas; (iii) refusal by some consultants to mobilize because of security concerns; (iv) the death after elective surgery of the PPP specialist, who was also the acting team leader; (v) a lack of resources to field suitable staff profitably arising from the firm’s low financial proposal; and (vi) NHA changes in the consultant’s terms of reference. J. Performance of the Borrower and the Executing Agency

29. The performance of the borrower for the program is rated satisfactory. Counterpart funding was provided, although it was delayed in some cases due to the difficult fiscal situation in Pakistan. For Project 2, the government therefore asked ADB to increase its share of the civil works funding from 80% to 85%. The government made the loan proceeds available to the NHA through budget reallocation. The performance of the NHA is rated satisfactory. By the end of the program, the NHA and ADB had a highly productive working relationship. The NHA significantly improved network management and planning capability through implementation of a RAMS. The NHA’s ability to carry out the necessary land acquisition activities was hampered by (i) the need to work through provincial governments, which have legal responsibility for land matters; and (ii) difficulties harmonizing national laws and ADB policy for social safeguards. 30. Despite these shortcomings, the NHA was able to implement the two investment projects within the given time frame and within budget, albeit with reduction in the scope (total kilometers) envisaged at program appraisal. The NHA needs continued support in applying ADB’s land acquisition and resettlement policy, which the NHA identified as an area of weakness and which was flagged as a problem area in a report written by an independent consultant engaged under the institutional strengthening project in 2007.9 NHA designs for project roads were used during appraisal and, while satisfactory for cost estimates, were upgraded by project consultants in order to provide roads more suited to actual traffic and hydrology (para. 6). K. Performance of the Asian Development Bank

31. ADB’s performance is rated satisfactory. ADB staff regularly reviewed progress, recommended actions, and helped the NHA address institutional weaknesses and resolve implementation issues. The NHA noted that early in the program, the ADB mission leader sat in the NHA office for two weeks to ensure that the necessary systems and understanding of ADB’s procurement policy were established. ADB fielded several consultation and review missions, a pre-project completion and project completion mission for both Project 1 and 2. ADB also shared critical analyses, made recommendations for improvement, and advised on project planning, procurement, construction management, contract administration, resolution of issues, compliance with covenants, social safeguards, environmental mitigation measures, RAMS, training, and PPPs. ADB’s Pakistan Resident Mission improved implementation of the LARPs.

8 The extension led to a contract increase in PRs, yet, due to a shift in the USD rate from 63.98 in December 2006 to

85.746 in November 2010, the total contract disbursement in USD was actually reduced. See Appendix 7. 9 Takahashi, K. 2007. Policy and Institutional Strengthening of National Highway Authority. Islamabad.

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32. The one weakness in ADB’s performance during project implementation was frequent changes in ADB project officers, affecting consistency in project administration. In addition, the MFF document itself was unnecessarily complex, particularly the DMF, reflecting the fact that this was the first MFF for ADB. Rationalization of outputs with more detailed activities or reference to an agreed action plan would have simplified implementation monitoring and better reflected the project’s balance between physical investments and NHA capacity building. 33. ADB and the government have been progressively addressing these shortfalls. The 2009–2013 country partnership strategy for Pakistan committed ADB transport sector operations to further combined physical and nonphysical investments, including policy and operational reforms, strengthening institutional functions, and improving financial resource management and planning in the NHA. The ADB resident mission increased human resources for transport and resettlement (one international and one national for each), based in Islamabad, to interact daily with the NHA.

III. EVALUATION OF PERFORMANCE

A. Relevance

34. The program is rated relevant. The program was consistent with the country’s development priorities and with ADB’s country strategies at both appraisal and completion. The program design was an appropriate response to national development needs in terms of the importance of the sector, and a priority subsector (national highways). The reduction in the program’s scope was unavoidable because of delays in preparation. The largest proportion of project roads completed were in Baluchistan—the biggest province with the greatest need, and, with recurrent security problems, arguably one of the most difficult provinces to work in. Road sections identified at project preparation and not taken up under the program have subsequently been taken up under other projects. The institutional strengthening component was extremely relevant in terms of its contribution to development needs and the needs of the NHA. The design of this component, however, could have been strengthened by closer collaboration with the NHA prior to loan approval. NHA’s lack of buy-in caused delays and changes to the terms of reference, which prevented the achievement of some targets. However, the activities and policy reforms, referenced from the road sector development framework, continued on subsequent investments, confirming their relevance. The NHA addressed deficiencies in investment planning during Project 1 though implementation of a RAMS and system of annual maintenance planning during Project 2. The MFF modality was highly relevant for financing a series of national highway improvements from an identified program. B. Effectiveness in Achieving Outcome

35. The program is rated highly effective. The rating is on the basis of the outputs for the two investment projects, which were broadly achieved as planned (para. 8). The main outcome of improving road efficiency along the project roads has been significantly achieved by a distinct reduction in road user costs. An increase in traffic on all roads is linked to growth in economic activities. Traffic counts on subproject road sections of the national roads in 2011 for Project 1 and assessments of reductions in travel time and cost for Project 2 in 2014 indicate the following:

(i) N25: Traffic growth at an average annual rate of 38.1% from 2007 to completion. (ii) N50 Muslim Bagh–Qila Saifullah: Average annual growth from 2007 was 23.9%. (iii) N70: The average annual growth from 2007 was 11.1%.

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(iv) N65: Reduction in travel time from 2.5 hours to under 2 hours (20%). Increase in traffic from 4,816/day to 21,780/day (352%). Increase in freight speed from 27 km/hr to 34 km/hr (26%).

(v) N50 Qila Saifullah–Zhob: Increase from 1,801 to 6,553 vehicle movements per day (264%). Increase in freight speed from 25 km/hr to >55 km/hr (120%).

36. The program benefits envisaged at appraisal were achieved. Table 2 shows the vehicle operating cost (VOC) savings and vehicle operating time (VOT) savings, speed improvements, and reductions in travel time that the subprojects had achieved at project completion.10 In the case of the N70 subproject, the findings were confirmed by driver reports of time savings of at least 20 minutes and up to an hour at peak times. The results for the N70 subproject underestimate the benefits since they exclude the reduction in congestion in urban traffic in Muzaffargarh due to the construction of the bypass road. All traffic now using the new bypass would have previously had to pass through the town. In the case of N50, the two projects combined (totaling 200 km) reduced the Quetta–Zhob freight travel time from 10 hours to 5 or 6 hours.11 The NHA considers this road to be a major achievement, contributing not only to the Baluchistan economy but also enhancing peace and security in the area. The provincial government increased the number of link roads to this section of N50 from 110 to 600, the land value in the area has increased tenfold (provincial data obtained by the NHA), and substantial increased localized economic activity is indicated by a rapid increase in the number of hotels, petrol stations, and other facilities.

Table 2: Summary Table for Key Outcomes Subproject Roads

Outcomes Project 1 Project 2

N25 N50A N70A N70B N50B N65Average VOC savings (%) 12 14 6 14 5 9 Average increase in speed (%) 33 34 25 173 18 33 Average VOT savings (%) 22 24 21 63 8 19 Average travel time saved (minutes/passenger) 17 14 4 25 30 18

VOC = vehicle operating cost; VOT = vehicle operating time. 37. While the program aimed to construct in excess of 836 km of national highways and only achieved 385 km, this is due in large part to the project’s unrealistic scope. The institutional strengthening project was rated effective. While lower than envisaged outcomes resulted from a delayed start and reduced inputs, key outputs were achieved, notably those concerning PPPs and road maintenance. Other activities not completed under the project have been subsequently adopted or implemented by the NHA. Had the project been implemented on schedule, with the original areas of focus maintained, the benefits of improved NHA capacity could have been felt more keenly. By 2016, most of the incomplete activities have been included in new investments. C. Efficiency in Achieving Outcome and Outputs

38. The program is rated highly efficient. Project 1 was rated efficient with an overall economic internal rate of return (EIRR) of 20%. This would have been higher, except costs in this project were higher than appraised and the increased scope of N25 increased the time by

10 Calculations based on Highway Development and Management–IV software (HDM-4) modeling. HDM is a tool for

analyzing, planning, managing, and appraising road maintenance, improvements, and investment decisions. HDM-VOC is the model used for assessing vehicle operating costs.

11 Interview with Brigadier Laiq Khan, Chief Coordinator, Aided Projects, NHA, April 2016.

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12 months (see para. 8 [i]), although additional financing was not required. Project 2 had an overall EIRR of 22.2% and was rated highly efficient.

Table 3: Summary of Economic Performance Indicators Base Case Subproject Roads (Project 1) Subproject Roads (Project 2) N25 N50 N70 Total N50 N65 TotalEconomic internal rate of return (% pa) 29.6 13.7 16.3 20.0 19.6 25.9 22.2Net present value (PRs million) 5,251 304 1,809 7,364 2,840 4,880 7,720Benefit–cost ratio 2.74 1.14 1.39 1.76 1.35 1.81 1.55Switching value: a costs (%) 173 14 39 75 131 181 151Switching value: b benefits (%) -63 -12 -28 -43 -24 -45 -35Note: Net present value for each project was calculated in different price years (2011 for Project 1 and 2016 for Project 2). They are therefore not directly comparable. 39. Through reevaluation, the difference between the with- and without-project cases gave the net costs and benefits of each subproject. Table 3 shows the key economic indicators for both projects. Each of the subprojects had an EIRR higher than the benchmark 12%, with Project 2 values particularly high. The overall Project 1 EIRR of 20% and Project 2 EIRR of 22.2% indicate very high economic efficiency. Appendix 8 provides the results of the economic reevaluation. D. Preliminary Assessment of Sustainability

40. Overall, the program is likely to be sustainable. Project highways must be maintained to sustain their economic life. Upgrading the program roads has led to a significant growth in traffic using them (para. 35). The NHA shared with ADB a series of annual maintenance plans and information from the RAMS demonstrating improvements in the condition and roughness of the overall national highway network. Roads in poor or very poor condition went from 50% of the network in 2014–15 to 30% in 2015–16. In the same two periods, roads with poor or very poor roughness dropped from 84% of the network to 52% (NHA RAMS data). Roughness data for the program roads showed that between 2 and 5 years after completion, average roughness remains at around level 4 (good)12. Concerns remain, however, about funding for maintenance, with NHA revenues from tolls (which were raised in 2015), fines, and concessions, plus federal funds, remaining below required levels. Appendix 9 shows growing revenue for maintenance over the last 7 years, which, however, remains insufficient. Discussions have commenced between the NHA and ADB about a future investment project in road maintenance backlog reduction, including resurfacing and strengthening high-maintenance sections of the network. Related aspects of financial sustainability, as well as the perennial problem of truck overloading, have been taken up under a new TA project (footnote 6). E. Contribution of Program to Institutional Development

41. While the institutional strengthening project within the program did not achieve all its outputs, those achieved laid a good foundation for the continued growth of the NHA, and the partnership between the NHA and ADB. ADB’s transport portfolio in Pakistan has grown from this single investment in 2005, to eight investments (6 with the NHA) in 2016 totaling $1,755.4 million. As noted elsewhere, outputs not achieved have been picked up in subsequent investments, confirming their ongoing relevance. The NHA’s capacity to manage projects improved during the program, as did the capacity of contractors and consultants continuing to Project 2. 12 NHA measures the International Roughness Index (IRI) to evaluate the road network, whereby a newly completed

asphaltic surface may have an IRI of 2, and a newly completed concrete surface may have an IRI of 3 (very good).

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F. MFF Program Impact

1. Physical Investment Projects 42. The impact of the investment project is likely to be significant due to its contribution to an increase in economic activities in the project areas. The impact indicators in the NHDSIP DMF are rather broad—an increase in Pakistan’s GDP and a reduction in costs of goods and passenger transport in the country. GDP growth was 1.7% in 2009 and 3.8% in 2010 (Project 1), and 4.2% in 2015 (Project 2), but the project’s possible contribution to these increases is difficult to establish. These DMF indicators were not appropriately linked to the envisaged project results. Given that contiguous links of the highway network are now also slated for upgrade, it appears that the program has contributed to the much wider program of national connectivity (Karachi port to Quetta, Quetta to Peshawar, etc.).

43. Socioeconomic impacts. The N70 subproject had a very visible impact at the local level. Increased economic activities along the highway led to a rise in property prices (para. 39). The bypass road around Muzaffargarh was intended to alleviate traffic congestion within the city and provide an alternate route for intercity traffic but the road has attracted more residential and commercial development, which has resulted in an increase in local traffic. This may also be attributable to factors such as urban sprawl and improved access to other infrastructure, including water supply. Growth of economic activities is also visible along N50: The town of Nasai was a small, sparsely populated place in 2005, but now has nine hotels, more than 50 commercial shops, and several workshops. In all subproject areas there has been visible growth in local businesses, especially services, i.e., refueling stations, shops, and restaurants.

44. Institutional impacts. The investment project had positive institutional impacts by providing on-the-job training for NHA staff. This improved the project management capabilities of staff members and raised their awareness of safeguard issues.

45. Social Safeguard impacts. Project 1: The N25 project was constructed on government-owned land and it did not involve any land acquisition or resettlement impacts. The N50 project involved acquisition of 278 acres of private land, which affected 475 landowners. The NHA paid 355 landowners for 208 acres of land by project completion in 2011, leaving 120 landowners unpaid mainly due to the issue of communal land with an exact number of shareholders yet to be defined by the deputy commissioner of Qila Saifullah. The NHA has managed to pay another PRs118 million (of the unpaid amount of PRs125 million) to 99 landowners, leaving PRs7.0 million in the deputy commissioner’s account for payment to 21 shareholders once the issue of shares in the communal land acquired has been decided. 46. The third subproject, N70, experienced an increase in the number of affected persons (APs) persons affected during implementation, from the 758 originally identified to 874, owing to the division of a single landholding between multiple heirs on the death of the owner. Some of those affected also lodged a complaint with ADB’s Office of Special Project Facilitator (OSPF) for resolution. The original LARP was later divided into sub-LARPs, since land acquisition issues were delaying construction work. All the APs including the complainants, were fully compensated and a satisfaction survey conducted by OSPF confirmed resolution of outstanding issues. 47. Under the institutional strengthening project, the NHA established a safeguards wing called Environment, Afforestation, Land, and Social Issues (EALS) and staffed the unit with land acquisition and legal experts. This improved the process of land acquisition but the wing remained capacity deficient in planning and implementation of land acquisition because a

14

qualified and experienced resettlement specialist was never recruited. ADB’s engagement with the NHA on safeguards preparation and policy compliance improved Project 2 readiness. 48. Project 2: Except for acquiring land for construction of the 3.5 km bypass road to avoid the congested city area of Shikarpur on N65 (Category A), both subprojects included rehabilitation and upgrade of existing highways with resettlement impacts mainly limited to clearance of the government-owned right-of-way. Due to resettlement impacts emerging during construction on N50, this subproject was re-categorized from Category C to B and a resettlement plan was implemented. Despite the fact that some of the identified APs by N65 have not been paid to date due to legal complications regarding land ownership, the mission concluded that there were no pending resettlement issues related to both subprojects. The Pakistan Resident Mission has confirmed this. During implementation of the LARPs a number of grievances were received. A fully responsive grievance response mechanism on both subprojects recorded and resolved grievances in an efficient manner. Further detail is in Appendix 10. 49. Environmental Impacts: The N70 subproject was classified as environment Category A due to the environmental impacts of construction activities, such as increased dust and noise, the presence of volatile gas from hot-mix plants, disruption of traffic, loss of roadside trees, and an increase in suspended solids in bodies of water. An environmental management plan (EMP) was prepared and implemented by the contractor under the supervision of an external independent consultant. The external monitor’s report at completion certified the satisfactory implementation of the EMP, confirmed by a separate ADB mission. The other two subprojects under Project 1 were classified as Category B, and were effectively supervised and monitored by the supervision consultants. 50. Under Project 2, N65 was classified as environmental Category A. An environmental impact assessment (EIA), including an environmental management and monitoring plan (EMMP) was prepared. The EMMP was implemented by the contractor and monitored and supervised by the supervision consultants. The main impacts of the project related to the health and safety of the community and workers, disruption of traffic and road safety measures taken during the construction phase, an increase in dust, and management of effluents from the two campsites. The final report from the supervision consultant and ADB mission confirmed that environmental safeguards had been satisfactorily implemented during the project. 51. The N50 project was classified as environmental Category B and an initial environmental examination, including an EMMP, was prepared by the NHA, implemented by the contractor, and monitored and supervised by the supervision consultants. The main impacts were similar to N65, above. The final report from the supervision consultant confirmed compliance. 52. Gender impacts. The project had no gender design elements and no specific gender impacts were identified that could be attributed to the project. Indirect impacts, especially for N50, include improved access to government and nongovernment services (health, education, training, information), and increased localized economic activity (shops, hotels, road services). 2. Institutional Strengthening Project 53. The impact of the institutional strengthening project was modest in scope but significant in impact. The project helped the government develop a draft NTP, which assists in long-term planning. The road maintenance plan and the PPP policy framework have had longer-term impacts, with benefits sustained at least to program completion. The experience gained in safeguards implementation and other project training has built capacity within the NHA,

15

including the establishment of the EALS (para. 47), although ongoing support remains necessary. Although road safety is an important issue in Pakistan, the related project component was not implemented, yet has been picked up on a more recent investment project.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

54. The program is rated successful, since it completed 385 km of road for $410 million. Completed national highways were built to a higher standard than anticipated at appraisal, through addition of supplementary carriageways (N25), drainage structures and bridges to ensure sustainability against increasing flood events (N50), and redesigns to allow for community utility (underpasses on N65). The adjusted program was completed on time and within budget despite considerable start-up delays to allow for redesigns, and recurrent security problems on N50. An envisaged third tranche did not materialize. The appraisal estimate of $770 million for 836 km of roads was overambitious, given the 10-year time frame, the acknowledged low capacity of the NHA at appraisal, known security problems in Baluchistan, and the new financing modality. The subsequent MFF (footnote 7) for $890 million, targeted a more realistic 346 km of highways plus institutional development measures.

55. The institutional strengthening part of the program was less than successful overall. This work did, however, set the stage for continuous engagement with the NHA on institutional and policy measures, many of which appeared in subsequent loans and TA projects, adapted to evolving sector requirements. Again, the scope of this loan was overambitious. Nevertheless, some of the achieved outputs were significant and important, such as development of a system of annual road maintenance planning, work contributing to a national transport plan, identification of investments suitable for PPPs, piloting of intelligent highway systems, and capacity building in bridge design.

56. The use of MFF for the program financing brought several advantages. As a financing instrument it was highly efficient, preparing a second tranche during the first, avoiding the time and costs associated with preparation TA and government approvals, allowing the flexibility to defer a road section to a subsequent tranche rather than dropping it altogether, and providing greater responsiveness to the borrower’s long-term investment program.

B. Lessons

57. The DMF for the MFF had no baselines and an excessive number of targets. Review of subsequent MFFs shows that ADB has learnt to include verifiable baselines and keep the DMF more focused. As the first MFF approved by ADB, the considerable overestimation of what could be achieved (in terms of volume of works contracts as well as concurrent institutional strengthening) is understandable.

C. Recommendations

58. It is recommended that future monitoring include sufficient maintenance of program roads, attention to axle loads, and continuous development of NHA capacity in planning, policy, and project management. Remaining unmet covenants should be waived. Those relating to institutional strengthening and policy development have largely been picked up in subsequent projects. Those relating to land acquisition have actions in place for resolution, but ADB should continue to monitor until completion. No further actions are needed to complete implementation. The program performance evaluation could be prepared 5 years after completion.

16 A

ppendix 1

DESIGN AND MONITORING FRAMEWORK: PERFORMANCE ASSESSMENT

Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks A. Impact 1. Improved and

sustainable economic growth

1.1. GDP increases maintained on

a sustainable basis 1.2. Transport cost for goods and

passengers reduced, thus increasing the efficiency of economic activities in Pakistan

Achieved. Pakistan’s GDP grew at 1.7% in 2009, 3.8% in 2010, 3.6% in 2013, and 4.2% in 2015. However, it is difficult to draw a clear link between project impacts and national GDP growth. Achieved. Vehicle operating cost savings and travel time savings have been achieved on all sections of national highway improved.

Government economic statistics and reports Transport surveys undertaken by the NHA ADB project completion mission

Assumption Continued government commitment to upgrading national highway network Risk Continued political stability

B. Outcome 1. National Highway

Network: Improve road sector efficiency on the main transport corridors in Pakistan

1.1. Average travel time on the

project highway sections for freight traffic reduced by 10%

1.2 Systematic road network

operation and maintenance sustained (i.e., IRI<4 “good standard”) from 5.4 to 4.4 (per World Bank National Highway Investment Project)

1.3 Average unit transport cost on

the project highway sections reduced by 10% (P2 2009 baseline was PRs17.25/km freight, PRs14.10/km passenger.

1.4 Average unit fares/prices on

Achieved. Average travel time savings are estimated to exceed 10%. Speeds of freight traffic on N50 increased from 25 km/hr in 2009 to 70 km/hr in 2015. Achieved. Per km IRI data for every km of each road averaged 3.49 by 2015. Achieved. Average perceived road user costs for passenger vehicles (excluding motorcycles) with the project are 15–20% lower than those in the without-project scenario Assumed achieved.

NHA traffic surveys on the project sections Road network maintenance monitoring surveys conducted by the NHA ADB project completion mission Economic reevaluation Consultant’s final report

Assumptions Continued normal economic growth Continued provision of counterpart funding

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Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks 2. Institutional

capacity building of NHA

the project highway sections reduced by 5%

2.1 Improvement of transport

efficiency by: – Strengthening the NHA to

perform its core role of strategic management and planning of the national highway network

– Enhancing PPP in provision of road transport infrastructure

– Investing in priority sections of the network with focus on subregional connectivity

No data are available on fares and freight rates but the market is competitive so cost reductions are expected to be reflected in prices. Achieved. The project improved awareness in road maintenance and safeguards. Achieved. A road maintenance plan was prepared and at program close there was evidence of multiple annual maintenance plans. Achieved. PPP projects were identified and there is a strong pipeline. Achieved. All investment subprojects are strategically important to development of interprovincial and international trade. At program close there are many further connectivity projects under preparation.

ADB review missions NHA policy reform office reports

Risk Continuing political will to undertake policy and institutional reforms

C. Outputs 1. National highway

road network infrastructure and operations improved.

1.1 Construction supervision

consultants mobilized as follows: Batch 1 by 30 Jun 2006

1.2 By 30 Jun 2006, batch 1, three

sample subprojects (N25, N50, and N70) totaling 376 km are substantially completed.

Achieved. Consultants were mobilized on N25: 13 Nov 2011 N50: 2 Jan 2007 N70: 11 Nov 2006 Achieved. With the N50 section reduced in scope, the three subprojects, with a total length of 166 km, were substantially completed by 30 Jun

Consultant’s final report ADB review mission ADB project completion report Resettlement monitoring reports

Assumption Sufficient number of experienced and skilled contractors available and willing to work in project areas

18 A

ppendix 1

Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks 2010.

2. National Highway Authority institutional strengthening

2.1 By 30 Jun 2007, adoption of national transport policy by Cabinet (milestone: M1)

2.2 By 31 Jul 2006, complete

identification of PPP projects and financing plan 2007–2011 (milestone: M2-1)

2.3 By 31 Jul 2008, prepare

projects to the value of PRs60 billion for bidding (milestone: M2-2)

2.4 By 31 Jan 2007, prepare NHA

investment plan 2007–2011 (milestone: M3-1)

2.5 By 30 Jun 2007, federal

government endorsement of NHA investment plan 2007–2011 (milestone: M3-2)

2.6 By 30 Jun 2007, establish

grievance website (milestone: M3-3)

2.7 By 30 Jun 2007, establish road

safety cell in the NHA (milestone: M4–1)

2.8 By 30 Jun 2007,

implementation of pilot study

Partly achieved. A draft NTP was submitted to the government but was not adopted. Achieved. PPP projects were identified. Eight PPP projects were in operation or procurement by Project 1 end. Achieved by program end. Not achieved, but in 2016 the NHA has an investment plan based on RAMS. Not achieved: Prepared but endorsement beyond the control of the NHA. Achieved A trial version of the complaint-tracking website was created. An offline system now exists at the NHA in the MIS section. Achieved Road safety component was not implemented in this project but the NHA established a road safety cell under a director in June 2007. Not achieved. Included in a 2015 TA grant.

Consultant’s final report ADB review missions NHA policy reform office reports PPP projects pipeline NHA consultant reports NHA consultations NHA communication reports NHA consultations NHA consultation NHA project completion report

Risk Sustained government and NHA commitment to policy reforms

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Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks on road safety recommendations for national highway (milestone: M4-2)

2.9 By 30 Jun 2006, complete road

maintenance plan (2007–2011) and funding modality (milestone: M5-1)

2.10 By 30 Jun 2007, federal

government endorses road maintenance plan and funding requirements (milestone: M5-2)

2.11 By 30 Jun 2010, complete

assessment of Intelligent Highway Systems and review proposals.

2.12 By 30 Jun 2010, develop and

implement financial management systems

2.13 By 30 Jun 2010, provide

training to NHA staff on safeguards, and bridge planning and design

2.14 By 30 Jun 2010, ADB, the

NHA, and the government agree to second-generation reforms for implementation during remaining period of the investment program

Not achieved on time, achieved by end of program. In 2016 the NHA has a well-functioning RAMS-generated maintenance planning system. Partially achieved. The road maintenance plan has not received sufficient financing from the federal government. But annual maintenance budgets have been increasing, with increasing toll revenues. Achieved. Not achieved on time, but achieved by program close. Achieved. 85 NHA staff were trained in social safeguards practices, 5 lectures and workshops were conducted on bridge planning and design. Not achieved on time, but achieved by program end and incorporated into subsequent investments.

NHA project completion report NHA consultation NHA consultation NHA consultations NHA consultations

20 A

ppendix 1

Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks D. Activities/Inputs 1. Investment Project

(Loan 2231) 1.1 Civil works procurement 1.2 Recruitment

of consultants 1.3 Completion of civil works

Contracts procured by 30 Jun 2006 Consultant contracts procured by 31 Mar 2006 Civil works completed by 30 Sep 2009

Civil works were procured on 22 Dec 2006 for ICB-1 (Hub–Uthal) and ICB-2 (Multan–Muzaffargarh) and on 22 Jan 2007 for ICB-3A (Muslim Bagh–Qila Saifullah). Supervision consultants were recruited on 5 Nov 2006 for CSP-1 (Muslim Bagh–Qila Saifullah, Qila Saifullah–Zhob, Zhob–Mughal Kot, and Qila Saifullah–Waigum Rud), and on 19 Oct 2006 for CSP-2 (Hub–Uthal, Multan–Muzaffargarh, and Sukkur–Jacobabad). Civil works for the three subprojects were substantially completed by 30 Jun 2010.

2. Institutional Strengthening Project (Loan 2210)

2.1 Recruitment of consultants

2.2 Consulting

services completion

Recruitment completed by 30 Jun 2006 Completion of consulting services by 30 Sep 2009

Contract for the institutional strengthening consultant was signed on 17 Jun 2009. Consulting services for institutional strengthening were completed on 31 Dec 2010. Of 50 person-months of consulting services budgeted under Loan 2210, only 23 were provided.

ADB = Asian Development Bank, CSP = consulting service package, GDP = gross domestic product, hr = hour, ICB = international competitive bidding, IRI = international roughness index, km = kilometer, MIS = management information system, NHA = National Highway Authority, NTP = national transport plan, NTRC = National Transport Research Centre, PPP = public–private partnership, RAMS = road asset management system, TA = technical assistance.

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Loan 2540-PAK

Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks Impact Improved economic performance along N50 and N65.

Increased median per capita income around project area from the median range of PRs10,000 to PRs15,000 by 15% in 2013.

Assumed achieved. Transport surveys did not include income data. However, property prices increased significantly in project areas, and many new businesses (hotels, restaurants, transport service industries) were established.

Transport surveys undertaken by the NHA ADB program performance report

Assumption Continued government commitment to upgrading the national highway network Risks Political instability Deteriorating security situation

Outcome Efficiency gain for road users along N50 and N65.

Average travel speed along N50 and N65 for freight traffic increased by 50% from 25 km/hour by 2013. Freight vehicle operating cost reduced by 15% by 2013 from PRs17.25/km. Passenger vehicle operating cost reduced by 10% by 2013 from PRs14.10/km.

Achieved. 68.3 km of N65 from 27 km/hr to 34 km/hr (26%), 150.3 km of N50 from 25 km/hr to >55km/hr (120%). Weighted average 90%. Partly Achieved. Economic reevaluation shows the following: Freight: N65: 19%, N50 12% Passenger: N65 13%, N50 8%

Average travel time study conducted by NTRC NHA annual road condition surveys Socioeconomic survey conducted by NHA transport economist ADB project completion report

Assumptions Government commitment to the development program Timely completion of projects Adequate resource mobilization by NHA Risk Delays in release of counterpart funds

Outputs 225 km of National highway N50 and N65 rehabilitated and upgraded

N50 and N65 highways rehabilitated/upgraded to a maximum of IRI 3.0 by December 2013.

IRI 2 at completion.

NHA submission of PFR.Consultant progress reports.

Assumptions Government and the NHA are committed to reforming the road sector.

22 A

ppendix 1

Design Summary Performance Indicators/Targets Project Achievements Monitoring

Mechanisms Assumptions

and Risks The NHA strengthened

Policy formulation and coordination office established in the NHA, with full staff and operational resources by December 2010. The project will benefit some 22 million people in the provinces of Baluchistan and Sindh.

This office was established. However, by program completion it was dysfunctional and disbanded. Now policy comes from each respective work unit and is approved by either the NHA Board or the Council. A coordination unit for multilateral projects remains. Project roads are main arterials in 3 provinces with a combined population (1998) of 110.5 million.

NHA submission of PFR.Consultant progress reports. ADB review missions, which will include reviewing implementation of institutional strengthening recommendations. NHA annual reports ADB project completion reports

Timely provision of counterpart resources and support for the program. Timely procurement of consultants and civil works Timely progress claims payment to the contractors Risks Delays in handing over of sites to the contractors Lack of project management capacity leading to implementation delays

Activities with Milestones Award civil works contracts by September 2009 Completion of civil works by December 2012

Contracts awarded in July 2009 and August 2010. Physical completion of works in September and October 2013. Delays due to resettlement complexities on N65 and security on N50.

Inputs ADB loan of $227.5 million (OCR) government counterpart budget of $39.3 million

ADB = Asian Development Bank, IRI = international roughness index, km = kilometer, NHA = National Highway Authority, NTRC = , OCR = ordinary capital resources, PFR = periodic financing request.

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PROJECT COSTS AT APPRAISAL AND LOAN CLOSING

Table 1: Loan 2231-PAK: Highway Improvement Project ― Project 1 ($ million)

Appraisal Estimatea Actualb

Total TotalItem FX LC ADB % Gov't Cost ADB % Gov't CostA. Base Cost a. National Highway Improvement―Project 1 i. Land acquisition and resettlement 0.00 6.30 0.00 0.00 6.30 6.30 0.00 8.30 8.30 ii. Civil works: 96.80 64.50 127.40 79% 33.90 161.30 110.71 80% 28.20 138.91 N25- Hub–Uthal 34.84 8.87 43.71 N50- Muslim Bagh–Qila Saifullah 19.22 4.90 24.12 N70- Multan–Muzaffargarh 56.65 0.00 56.65 iii. Environmental Management and Monitoring 0.50 0.30 0.60 78% 0.20 0.80 0.00 0 0.00 0.00 iv. Consulting services - Construction Supervision 4.50 4.80 9.30 100% 0.00 9.30 6.74 100% 0.00 6.74 v. Physical contingency 9.20 10.10 19.30 100% 0.00 19.30 0.00 0 0.00 0.00 vi. Price contingency 2.70 7.70 10.40 100% 0.00 10.40 0.00 0 0.00 0.00 Subtotal (a) 113.70 93.70 167.10 77% 40.30 207.40 117.45 76% 36.50 153.95 b. Consulting Services - Project Management 0.20 1.00 1.20 100% 0.00 1.20 0.00 0 0.00 0.00 c. Incremental Administration Cost 0.00 3.90 3.90 100% 0.00 3.90 0.00 0 0.00 0.00 Subtotal (A) 113.90 98.60 172.20 81% 40.30 212.50 117.45 76% 36.50 153.95 B. Interest and Commitment Charge 7.80 0.00 7.80 100% 0.00 7.80 5.67 100% 0.00 5.67 Total (A+B) 121.70 98.60 180.00 82% 40.30 220.30 123.12 77% 36.50 159.62 Note: A total of $40.0 million was cancelled in two instances prior to loan account closing. Civil works detailed cost estimates were not provided by subproject during appraisal. a Includes duties and taxes totaling $47.6 million. FX - foreign exchange, Gov't = government, LC = local currency Source: Asian Development Bank estimates. b As of 2 October 2011. Sources: Asian Development Bank loan financial information system; Pakistan National Highway Authority.

The status of the civil works contracts is as follows:                        

                   Original Amount Variations and Price Escalations Revised Amount

Road Sections     PRs $ Equiv PRs $ Equiv PRs    $ Equiv

N25 Hub–Uthal 3,047,497,305 35,659,926 492,929,557 5,850,102 3,540,426,862 41,510,028

N50 Muslim Bagh–Qila Saifullah 1,667,191,270 18,782,716 45,914,157 536,976 1,771,299,354 20,947,249

N70 Multan–Muzaffargarh 3,595,703,868 54,121,286 2,374,202,484 15,824,892 5,969,906,352 69,946,178

Note: ADB financing is 79% net of tax.               

24 Appe

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Table 2: Loan 2210-PAK: Institutional Strengthening Project (SDR million/$ million equivalent)

               Appraisal Estimatea Actualb

Item             SDR $   SDR $ Asian Development Bank (ADB)    A. Capacity Building    1. Consulting services 1.17 1.69 0.43 0.67   2. Training 0.25 0.36 0.00 0.00   3. Computerized traffic management system 0.24 0.35 0.00 0.00   4. Government website 0.07 0.10 0.00 0.00 Subtotal (A) 1.73 2.50 0.43 0.67B. Interest Charge 0.21 0.30 0.00 0.01C. Unallocated 0.14 0.20 0.00 0.00 Total ADB 2.08 3.00 0.43 0.68Government 0.00 1.00 0.00 0.00 Total       2.08 4.00 0.43 0.68a Appraisal cost estimates were calculated in $ million. However, ADB agreed to lend to the Borrower from ADB's Special Funds Resources an amount in various currencies equivalent to SDR2.08 million. b As of 17 October 2011.  Source: Asian Development Bank loan financial information system.

 

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Table 3: Loan 2540-PAK: Highway Improvement Project ― Project 2 ($ million)

Appraisal Estimatea Revisedg Actual Govern- Total Govern- Total Govern- Total Item ADB % ment % Cost ADB % ment % Cost ADB % ment % Cost A. Investment Costs

1. Land acquisition and resettlement 0.00 0 1.75

100 1.75 2.60 100 0 2.60 1.64 90 0.18 10 1.82

a. Sukkur‒Jacobabad 0.00 1.75 1.75 2.60 2.60 1.61h 0.18 1.79 b. Qila Sailfullah‒Zhob 0.00 0.00 0.00 0.00 0.03 i 0.00 0.03 2. Civil works 156.40 81 36.68 19 193.08 214.00 85 37.30 15 251.30 202.00 85 35.82 15 237.82 a. Sukkur‒Jacobabad 73.00 17.12 90.12 99.89 17.41 117.30 98.59 17.06 115.65 b. Qila Sailfullah‒Zhob 83.40 19.56 102.96 114.11 19.89 134.00 103.41 18.76 122.17 3. Consulting servicesb 4.92 85 0.87 15 5.79 6.30 85 1.10 15 7.40 3.95 85 0.69 15 4.64 a. Sukkur‒Jacobabad 2.30 0.41 2.71 2.94 0.51 3.45 2.35 0.41 2.76 b. Qila Sailfullah‒Zhob 2.63 0.46 3.09 3.36 0.59 3.95 1.60 0.28 1.88 Subtotal (A) 161.32 81 39.30 19 200.62 222.90 85 38.40 261.30 207.59 85 36.69 15 244.28 B. Incremental Administrative Costc 3.86 100 0.00 0 3.86 0.00 0.00 0.00 0.00 0.00 C. Contingencies 38.62 100 0.00 0 38.62 4.00 0.00 4.00 0.00 0.00 0.00 1. Physicald 19.31 0.00 19.31 0.00 0.00 0.00 0.00 2. Pricee 19.31 0.00 19.31 0.00 0.00 0.00 0.00

D. Financing Charges During Implementationf 23.75 100 0.00

0 23.75 3.10 3.10 2.86 100 0.00 2.86

Total Project Costs 227.550 85 39.30 15 266.85 230.00 85 38.40 15 268.40 210.45 85 36.69 15 247.14 a Including taxes and duties. b Construction supervision services are partially included under Project 1, which financially closed on 19 April 2011. c Incremental administrative cost, including remuneration, travel allowance, project implementation unit expenses, out-of-pocket expenses of project staff, and bank charges. d Physical contingencies at 10% of civil works. e Price contingencies at 10% of civil works. f 10% of civil works, construction services, contingencies. g On 24 October 2014, ADB approved the Government’s request to increase ADB financing ratio for civil works from 81% to 85%, applicable retroactively. due to budget constraints. Savings from the ADB loan, from the contingency category, other expenditure categories including IDC, were reallocated to civil works and consulting services categories to cover the increase in ADB financing for civil works and the shortfall in disbursements caused by contract variations and price escalations. ADB financing ratio for the whole project remained at 85%. h On 6 October 2011, ADB approved the government’s request to finance the resettlement cost of Sukkur‒Jacobabad road. i On 29 January 2013, ADB approved the government’s request to finance the resettlement cost of Qila Saifullah‒Zhob road. Source: ADB loan financial information system and National Highway Authority estimates.

26 Appe

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Table 4: PAK-MFF National Highway Development Sector Investment Program (million)

Appraisal Estimate Revised Actual

ADB Gov't $

Total ADB Gov't

$ Total

ADB Gov't $

Total Item Financing SDR $ SDR $ SDR $

1. Project 1 - Loan 2231-PAK OCR 0.00 180.00 40.30 220.30 0.00 180.00 40.30 220.30 0.00 123.12 36.50 159.62

2. Institutional Strengthening Project - Loan 2210-PAK(SF) SF 2.08 3.00 1.00 4.00 0.00 3.00 0.00 3.00 0.43 0.68 0.00 0.68

3. Project 2 - Loan 2540-PAK OCR 0.00 227.55 39.30 266.85 0.00 230.00 38.40 268.40 0.00 210.45 36.69 247.14

Total 2.08 410.55 80.60 491.15 0.00 413.00 78.70 491.70 0.43 334.25 73.19 407.44 Source: ADB loan financial information system and National Highway authority estimates.

Appendix 3 27

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENT

Table 1: Institutional Strengthening Project ($ million)

Contract Award Disbursement

Year Projected Actual Projected Actual  2006 0.000 0.000 0.000 0.000 2007 0.100 0.190 0.160 0.076 2008 1.000 0.000 1.000 0.050 2009 1.500 0.483 0.750 0.035 2010 0.000 0.000 0.300 0.278 2011 0.000 0.000 0.000 0.238 Total 2.600 0.673 2.210 0.677

Source: Asian Development Bank loan financial information system.  

 

Table 2: Highway Improvement Project—Project 1 ($ million)

Contract Award Disbursement

Year Projected Actual Projected Actual  2005 0.000 0.000 0.000 0.000 2006 13.000 91.032 2.700 0.069 2007 36.600 18.783 17.300 21.363 2008 55.000 0.000 25.000 38.140 2009 18.000 7.634 27.000 34.589 2010 0.000 0.000 19.000 24.507 2011 0.000 0.000 0.000 4.450 Total 122.600 117.449 91.000 123.118

Source: Asian Development Bank loan financial information system.  

 

Table 2: Highway Improvement Project—Tranche 2a ($ million)

Contract Award Disbursement

Year Projectedb Actual Projectedc Actual  2010 175.566 201.998 18.833 18.493 2011 5.839 3.945 27.748 27.347 2012 0.000 0.000 43.564 40.329 2013 0.000 0.000 73.035 72.295 2014 30.504 1.644 66.819 49.013 2015 0.000 0.000 0.000 0.110 Total 211.909 207.587 230.000 207.587a Loan account financially closed on 3 June 2015. b c Contract awards and disbursements in the main frame were replaced by eOperations system on 1 January 2011. The projected contract awards and disbursements are based on loan financial information system at project closing.

28 Appe

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PROJECTED AND ACTUAL IMPLEMENTATION SCHEDULE

Loan 2231-PAK, Loan 2210-PAK

1. Loan 2231-PAK: National

Highway Improvement

Batch 1 Subprojects

Detailed design

Land acquisition

and resettlement

Supervision consultant

selection

Civil works procurement

Construction

2. Loan 2210-PAK NHA

Policy Reform and

Institutional Strengthening

Consultant selection

Implementation

Project Component H2

2006 2007 2008 2009

H2 H1 H2 H1

2013

H1 H2 H1 H2 H1

2010

H1 H2 H1

2014

H2H1 H2 H1 H2

2005

H1 H2

2011 2012

Appe

ndix 429

Loan 2540-PAK

3. Loan 2540-PAK: National

Highway Improvement

Batch 2 Subprojects

Feasibility Study/Detailed

Design

Detailed Design Review

Land acquisition and

resettlement

Construction supervision

Consultant Selection

N50 (Qila Saifullah-Zhob)

N65 (Sukkur-Jacobabad)

Implementation

N50 (Qila Saifullah-Zhob)

N65 (Sukkur-Jacobabad)

Civil works

Procurement

N50 (Qila Saifullah-Zhob)

N65 (Sukkur-Jacobabad)

Construction

N50 (Qila Saifullah-Zhob),155 km

N65 (Sukkur-Jacobabad), 68 km

H2H1 H2 H1 H2 H1H2 H1 H2 H1 H2H1 H2 H1 H2 H1Project Component H1 H2 H1 H2

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

 =  planned            =    actual

H1 = first half calendar year, H2 = second half calendar year, NHA = National Highway Authority. Source: Periodic financing request 2 and Pakistan National Highway Authority project completion reports.

30 Appendix 5

CHRONOLOGY OF MAIN EVENTS

Date Main Events

28 November ADB approved VO No. 1 for Hub‒Uthal (ICB-1); civil works increased by $8.55 million equivalent and construction period extended by 12 months.

2009 6 March ADB approved compliance report on implementation of the LARP for Section

B2, allowing civil works to start 17 June Consultancy contract for policy reforms and institutional strengthening of the

NHA (Loan 2210) signed 10 August EA submitted its due diligence report for Section B3 (Multan‒Muzaffargarh). 16 August PPP specialist appointed as team leader for Loan 2210, mobilized in the

absence of a qualified team leader since original candidate was no longer available

15 September ADB approved the borrower’s request on 7 September to delete Qila Saifullah‒Zhob from Tranche 1 and cancel $20.0 million.

27 September Consultant Sheladia’s home office coordinator and senior associate (Loan 2210) arrived to assist the acting team leader in project start-up and finalization of inception report

16 October EA submitted safeguards compliance matrix 20 October ADB approved major change in scope, reducing the output from 326 km to

166 km 2010 19 January Acting team leader (Loan 2210) was hospitalized and died shortly after an

elective operation 22 February Team leader mobilized 12 April Final report of special project facilitator on N70 (Multan‒Muzaffargarh),

complaint received 6 May ADB waived fielding of midterm review mission by NHA 30 June Physical completion date 2 July ADB approved the borrower’s request to cancel an additional $20.0 million,

which would not be used 17 September ADB approved engagement of a bridge expert for capacity building of the

NHA’s design section 2011 31 March 2011 Loan 2210 financially closed 19 April Loan 2231 financially closed 15‒21 September Project completion review mission fielded

3. Loan 2540 (Tranche 2)

2005 8 September Concept paper approved 15 December Invitation for prequalification of contractors for N50 (Qila Saifullah–Zhob

road), initiated under Loan 2231-PAK 2006 19 October Contract signed with design review and construction supervision consultant

for N65 (Sukkur–Jacobabad road)

Appendix 5 31

Date Main Events

5 November Contract signed with design review and construction supervision consultant for N50 (Qila Saifullah–Zhob road)

2007 1 January‒30 April Review of detailed design completed by the consultant 2 May Design review report submitted by consultant to the executing agency 2008 8 May Invitation for prequalification of contractors for N65 (Sukkur‒Jacobabad

Section road) published, with deadline of 20 June 2008 11 June ADB approved prequalification evaluation report for N50 (Qila Saifullah–

Zhob road) 12 June Invitation for bids issued to prequalified contractors for N50 (Qila Saifullah–

Zhob road), with deadline of 11 August 2008; as issued, bid documents submitted to ADB

1 August Safeguards documents submitted to ADB 9 August Prequalification evaluation report for N65 (Sukkur‒Jacobabad road)

submitted to ADB 11 August Bid opening for N50 (Qila Saifullah–Zhob road) 4 November ADB approved prequalification evaluation report for N65 (Sukkur‒Jacobabad

road) 2009 30 March PFR 2 received from the EA 1 April BER for N50 Qila Saifullah–Zhob submitted 21 April Invitation for bids issued for N65 (Sukkur–Jacobabad road) 19 May Consultation mission to discuss further with the government the

requirements for submission of PFR 2 5 June Bid opening for N65 (Sukkur–Jacobabad road) 11 June Safeguards Policy Compliance Memorandum released by RSDD 23 June ADB approved BER for N50 (Qila Saifullah–Zhob road) 22 July Award of contract for N50 (Qila Saifullah‒Zhob) to Limak‒ZKB JV approved 28 July Revised financing plan of PFR 2 submitted to ADB 19 August Loan negotiations conducted via video conference 24 August PFR 2 report to management submitted 26 August ADB approved PFR 2 2 September Loan and project agreements signed 21 September Loan 2540 declared effective, with original closing date of 31 December

2013 20 November ADB approved BER for N65 (Sukkur–Jacobabad road), including Shikarpur

bypass/link road 2010 25 February Contract signed with civil works contractor for N50 Qila Saifullah‒Zhob road

(M/s Limak–ZKB JV) 9 March Contractor for N50 (Qila Saifullah‒Zhob road) commenced work 31 August Award of contract for N65 (Sukkur‒Jacobabad road) to Limak–ZKB JV

approved.

32 Appendix 5

Date Main Events

20 October Contract signed with civil works contractor for N65 (Sukkur–Jacobabad road), (M/s Limak–ZKB JV)

2011 26 January Construction supervision consultant for N65 (Sukkur–Jacobabad road)

mobilized 24 February Contractor for N65 (Sukkur–Jacobabad road) commenced work 6 May Contract of design review and construction supervision consultant

(Minconsult International) carried over to N50 (Qila Saifullah‒Zhob road section)

15 July EA requested ADB financing of the resettlement cost of N65 (Sukkur–Jacobabad road) due to the government’s serious financial constraint

6 October ADB approved request for ADB financing of the resettlement cost of N65 (Sukkur–Jacobabad road)

2012 5 January Documents regarding court case of M/s Limak–ZKB JV versus Federal

Investigation Agency (Pakistan) received 24 January ADB provided comments to the Economic Affairs Division on the court case

of M/s Limak–ZKB JV vs. Federal Investigation Agency 8 March Original completion date of contractor for N50 (Qila Saifullah–Zhob road) 10 May ADB approved extension for the Qila Saifullah–Zhob construction from 8

March 2012 to 20 May 2013 6 November Notice to proceed for the remaining Sections 2 and 4 of the N65 (Sukkur–

Jacobabad road) issued 19 November ADB approved the final SRP for N50 (Qila Saifullah–Zhob road)

2013 15 January Engagement of M/s Sustainable Solutions as EMA under the Minconsult

International Ltd. contract approved 29 January ADB approved EA request for ADB financing of the resettlement cost of N50

(Qila Saifullah–Zhob road) due to the government’s financial constraint 1 March EMA was mobilized Payment of compensation to APs started for N50 (Qila Saifullah–Zhob road) 20 May Revised completion date (first extension, 439 days) of the contractor for N50

(Qila Saifullah–Zhob road) 30 May Notice to proceed issued for the resettlement-affected sections of N50 (Qila

Saifullah–Zhob road), as recommended by the EMA 7 June ADB approved contract variation 3 for modification of civil works contract

and cost effect of N50 (Qila Saifullah–Zhob road) 6 August Closing notice issued by OAI on court case involving M/s Limak–ZKB JV and

Pakistan’s Federal Investigation Agency due to insufficient evidence 23 August Original completion date of contractor for N65 (Sukkur–Jacobabad road) 1–9 October Midterm project review mission fielded 31 October Revised completion date (second extension, 164 days) of the contract for

N50 (Qila Saifullah–Zhob road). Physical completion of N50. 25 November Final EMR for N50 (Qila Saifullah–Zhob road) completed and presented by

the EMA

Appendix 5 33

Date Main Events

10 December ADB approved civil works contract variations 1 and 2 of N65 (Sukkur–Jacobabad road) related to road design changes due to heightened water levels following unprecedented heavy rains in September 2012

23 December ADB approved minor change and reallocation of loan proceeds and first extension of loan closing date, from 31 December 2013 to 30 June 2014

31 December Revised completion date (first extension) of contract for N65 (Sukkur–

Jacobabad road) 2014 27 June ADB approved second extension of loan closing date, from 30 June 2014 to

31 December 2014 30 June Payment of compensation to APs completed for N50 (Qila Saifullah–Zhob

road) Revised completion date (second extension) of contract for N65 (Sukkur–

Jacobabad road) 25 July ADB approved request for extension to 30 September 2014 and cost

adjustments of the construction supervision consultant (Oriental Consultants Co. Ltd.) for N65 Sukkur‒Jacobabad road

30 September Revised completion date (third extension) of contract for N65 (Sukkur–Jacobabad road)

Rehabilitation project for N65 (Sukkur–Jacobabad road) physically completed

24 October ADB approved reallocation of funds and additional financing of the loan through increase in ADB financing percentage, from 81% to 85%

31 December Project 2 (Loan 2540-PAK) closing date

2015 3 June Unutilized loan proceeds cancelled and loan account financially closed

2016 26 April Program and facility completion review mission fielded

ADB = Asian Development Bank, AP = affected persons, BER = bid evaluation report, EA = executing agency, EMA = external monitoring agent, EMR = external monitoring report, ICB = international competitive bidding, LARP = land and resettlement plan, NHA = national highway authority, OAI = Office of Anticorruption and Integrity , PFR = periodic financing request, PPP = public‒private partnership, RSDD =Regional and Sustainable Development Department, SRP = short resettlement plan, VO = variation order.

34 Appendix 6

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Assessment of compliance of covenants for Loans 2210 and 2310 are covered in the PCR for

Project 1 (main document text, footnote 2). Covenant

Reference in Loan

Agreement

Status of Compliance

Loan 2540

In the carrying out of the Project, NHA shall employ competent and qualified consultants and contractors acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

PA, Section 2.03 (a)

Supervision consultant was recruited under Tranche 1.

NHA shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. NHA shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

PA, Section 2.04

Complied with.

NHA shall maintain, or cause to be maintained, records and accounts adequate to identify the Goods, Works and consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

PA, Section 2.06

Complied with.

NHA shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

PA, Section 2.08 (b)

Complied with. The quarterly reports were regularly submitted by the construction supervision consultants.

NHA shall (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited

PA, Section 2.09 (a)

Complied with. Audited Project Financial Statements (APFS) were submitted for fiscal years 2010 to 2014.

Appendix 6 35

Covenant

Reference in Loan

Agreement

Status of Compliance accounts and financial statements and the report of the auditors relating thereto (including the auditor’s opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. NHA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. Project Executing Agency and Management NHA as the Project Executing Agency (EA) shall be responsible for carrying out of the Project. A coordinating committee chaired by the Chairman of NHA shall monitor the utilization of the Loan proceeds and implementation of the Project.

LA, Schedule 5, para 1 (a) and (b)

Complied with. Committee has been set up.

NHA shall establish separate project implementation units (PIUs) for each of the Project components. Each such PIU shall be headed by a project director and complemented with a supervision team and accountant/administration specialist. NHA shall provide staff and resources to the PIUs as may be necessary from time to time.

LA, Schedule 5, para 2 (a) and (b)

Complied with.

Each PIU shall be responsible for the day-to-day implementation of the Project including, among other things, (i) monitoring the progress of the Project implementation; (ii) preparing withdrawal applications and Project progress reports; (iii) maintaining Project accounts and completing financial records for auditing the project; and (iv) carrying out procurement, including advance contracting activities.

LA Schedule 5, para 3

Complied with.

The Borrower shall cause NHA to consult with ADB on all significant matters relating to management and implementation of the Project to ensure continuity, transparency, efficiency, and good management. All matters relating to selection or appointment, or any changes to such selection or appointment, of any project director or deputy project director, will be duly notified to ADB along with the qualifications of the incumbents and the departing officers and reasons for such changes. A project director or deputy director shall not be terminated or terms of such appointment altered in any material way until the third anniversary of such appointment unless a determination of gross dereliction of duty or such other serious misconduct is made through due process.

LA Schedule 5, para 4

Complied with.

The Borrower shall ensure effective coordination and consultation among the EA, PIU and other government agencies during Project implementation.

LA Schedule 5, para 5

Complied with.

Counterpart Funding The Borrower shall ensure that all funds and LA Schedule Complied with.

36 Appendix 6

Covenant

Reference in Loan

Agreement

Status of Compliance resources necessary for rehabilitating the Project Road are provided on a timely basis in accordance with the financing plan agreed for the Project. The Borrower shall cause NHA to provide timely certification and release of payment to the contractor/consultants as per the respective contracts.

5, para 6 Despite experiencing difficulty on counterpart funding at the start of the project due to serious financial constraint, the government was able to provide its share of financing at project completion amounting to PRs4.01 billion ($39.90 million equivalent).

Land Acquisition and Resettlement Borrower shall ensure through NHA that land acquisition and resettlement are undertaken in accordance with applicable laws, and ADB’s Involuntary Resettlement Policy (1995), as well as in accordance with the resettlement framework and resettlement plans.

LA Schedule 5, para 7

Complied with.

The Borrower shall cause NHA to: (i) prepare and implement resettlement plans, in accordance with ADB’s Involuntary Resettlement Policy (1995) with the principles and procedures laid out in the agreed resettlement framework, (ii) disclose land acquisition and resettlement plan(s) (LARP) to affected persons (APs) in a form and language easily comprehensible to APs prior to submission to ADB for review and approval before award of related civil works contracts or a similar milestone, (iii) monitor and submit the quarterly progress and completion reports on land acquisition and resettlement, (iv) appoint an independent monitoring expert prior to commencement of land acquisition and resettlement activities, and (v) ensure that reports are simultaneously submitted to NHA and ADB.

LA Schedule 5, para 8

Complied with. The NHA prepared and implemented the resettlement plans in accordance with ADB’s Involuntary Resettlement Policy (1995) with the principles and procedures laid out in the agreed resettlement framework and disclosed the LARP to the APs. The NHA also appointed an independent monitoring expert and reports were simultaneously submitted to NHA and ADB.

The LARP shall be fully implemented prior to the commencement of the Work on the Project Road or the relevant component thereof.

LA Schedule 5, para 9

Complied with. The NHA implemented the LARP fully prior to commencement of the works on the project road; however, a few land issues still persisted that were eventually resolved. Sukkur–Jacobabad Road. The LARP was updated and implemented in four sectional LARPs. Full implementation of the LARP was confirmed by the external monitoring agent in all four sections in August 2013. Later, during construction, additional land acquisition (totaling 11 acres) was identified as necessary at four locations in Sections 1–3. The NHA processed acquisition of this additional land through

Appendix 6 37

Covenant

Reference in Loan

Agreement

Status of Compliance negotiation with the affected households.

The resettlement budget will be revised based on the new data collected, and additional land acquisition and resettlement cost that maybe required will be borne by the Borrower. If there is any change in the scope of the Investment Program subprojects, the resettlement plans will be revised and submitted for ADB approval prior to award of Works contract.

LA Schedule 5, para 10

Complied with. The resettlement budget is revised whenever any change occurs in the approved LARP and its cost is borne by the Borrower. Also, if there is any change which occurs in the scope of work, the LARP is revised and submitted to ADB for concurrence.

The Borrower shall through NHA ensure that (i) compensation for land and structure shall be provided to AP in full at replacement value including financial assistance/grants, if any, prior to taking possession of their assets, and that essential public infrastructure affected by land acquisition and resettlement are replaced appropriately and expeditiously; (ii) acquire or make available on a timely basis (i.e., strictly in accordance with the schedule as agreed under the related Works contract) the land and rights in land, free from any encumbrances; and (iii) clear the utilities, trees, and any other obstruction from such land, on a timely basis (i.e., strictly in accordance with the schedule as agreed under the related Works contracts), as required for construction activities relating to each section of the related Works contract under the Project.

LA Schedule 5, para 11

Complied with. Sukkur-Jacobabad (N-65) Subproject. Project length was divided into 4 sections for implementation of LARP and to facilitate execution of the project. A total of 699 households were affected of which 685 were compensated for their acquired assets and losses; 34 community structures were paid to relocate out of the project RoW. Two households in land and crops category in section 2 could not be paid due to legal and administrative impediments. For these, compensation was deposited in a trust. In section 3, one structure owner never showed up to collect compensation so in that section the project road was completed without relocating the structures. For 11 households in the employee category (4 in section 1 and 7 in section 3), the entitled persons left the project area and their whereabouts remain unknown. Qila Saifullah-Zhob (N-50) Subproject. Out of 234 affected households, 232 were compensated for different types of project impacts, i.e., loss of structures, fruit trees, wood trees, and crops. Two affected households were not interested and refused to file compensation payment.

Environment The Borrower, through NHA, shall ensure that the Project is carried out in accordance with, and that all

LA Schedule 5, para 12

Complied with.

38 Appendix 6

Covenant

Reference in Loan

Agreement

Status of Compliance Project’s components are designed, carried out, maintained and monitored with (a) all applicable laws and regulations, (b) ADB’s Environmental Policy (2002), and (c) the relevant environmental mitigation plan (EMP), including the mitigation measures and monitoring requirements arising from the implementation of the environmental assessment and review procedures outlined in the EIA. The Borrower shall ensure that the EMP is (i) incorporated into the design of the Project, (ii) implemented in accordance with its terms during the construction, operation and maintenance of the Project, (ii) implemented in accordance with its terms during construction, operation and maintenance of the Project, and (iii) updated at such time when the detailed engineering design becomes available. The Borrower, through NHA, shall ensure that (a) Works contractors’ specifications include requirements to comply with the environmental mitigation measures contained in each EIA and EMP; and (b) Works contractors are supervised to ensure compliance with the requirements of each EIA and EMP.

LA Schedule 5, para 13

Complied with. Corrective action plans to address issues were developed and implemented accordingly.

The Borrower shall ensure that NHA obtains all necessary national and provincial environmental statutory clearances such as environmental clearance, forest clearance, and no objection certificates prior to commencing any Works under the Project. The Borrower shall cause NHA to ensure that all conditions attached to these clearances are implemented and monitored, and to develop and implement EMP and submit semiannual reports to ADB and relevant agencies on the implementation of the EMP.

LA Schedule 5, para 14

Complied with. The NHA obtained the necessary national and provincial environmental statutory clearances, such as environmental clearance, forest clearance, and no objection certificates, prior to commencing any works under the Project. The NHA also ensured that all conditions attached to these clearances were implemented and monitored.

The Borrower shall ensure that NHA reports to ADB any change of road alignment or “as change” in a project component that occurs after the EIA report was approved by ADB. ADB’s prior approval will be required to any such changes taking effect, where in the opinion of ADB, additional environmental assessment will be made. The Borrower shall cause NHA to prepare a semiannual report on implementation of the EMP as part of the progress reports on investment program implementation, and to provide the contractors with the environmental assessment study reports including the EMP. The Borrower shall cause NHA to ensure that the contractors implement the mitigation measures and EMP as described in such reports.

LA Schedule 5, para 15

Complied with. The NHA reported to ADB any change of road alignment or “as change” in a project component that occurred after the EIA. The NHA prepared semiannual reports on implementation of the EMP and ensured that the contractors implemented the mitigation measures and EMP as described in such reports.

Labor, Gender, Health and Social Protection The Borrower shall cause NHA to ensure that Works contracts under all the subprojects incorporate

LA Schedule 5, para 16

Complied with. Some awareness programs were

Appendix 6 39

Covenant

Reference in Loan

Agreement

Status of Compliance provisions requiring contractors to (i) carry out HIV/AIDS and women/children trafficking awareness and prevention programs for laborers; (ii) follow and implement legally mandated provisions on labor, health, safety, sanitation, and working conditions, (iii) abstain from child labor in construction and maintenance activities, and (iv) otherwise comply with all applicable labor laws. The Borrower shall ensure that NHA engages qualified locally based consultants under construction supervision contracts to carry out the HIV/AIDS prevention and anti-trafficking component as agreed with ADB. The PIUs will supervise the consultants and work closely with Pakistan’s National AIDS Control Program and other networks dedicated to preventing sexually transmitted infections, HIV/AIDS, and women/children trafficking; and to the empowerment of women and children.

carried out at the project site with the involvement of local authorities. These were given top priority under the Project. Doctors and environment engineers were engaged by the consultant as well as by the contractor to look after the health, food, and living conditions. Everyone was made aware of child labor, labor laws, and trafficking in light of local laws and ADB guidelines.

The Borrower shall further ensure that NHA (i) encourages Works contractors to hire women and minorities, including Gypsies wherever possible, (ii) provides equal opportunity for women for road construction activities, and (iii) requires contractors to not differentiate wages between men and women for work of equal value. The Borrower, through NHA, shall ensure that specific clauses to this effect are included in all relevant bidding documents, and compliance is strictly monitored and documented during Project implementation. Recognizing the challenges in recruitment of women for such employment, a reputable private organization shall be appointed to independently monitor, develop suggestions and guidelines for improvement of performance in each of these areas and on a quarterly basis, and report on all such matters to ADB through NHA.

LA Schedule 5, para 17

Complied with. The women were deployed to do office work. No wage difference between men and women.

Construction Quality The Borrower shall ensure that NHA (a) improves the Project Road in accordance with the design technical specifications; and (b) performs construction supervision, quality control, and contract management in accordance with internationally accepted standards.

LA Schedule 5, para 18

Complied with. The NHA carried out the construction works according to the approved design/specifications and performed construction supervision through supervisory consultants hired through International Competitive Bidding (ICB). The consultants and the Project authorities ensured quality control in accordance with the approved design. The contract management was done in accordance with the relevant clauses of FIDIC adopted in the agreed contract agreement

40 Appendix 6

Covenant

Reference in Loan

Agreement

Status of Compliance between both parties.

Road Safety The Borrower shall ensure that NHA installs appropriate road safety facilities during Project implementation and after completion, such as pavement markings, roads signs and signals, communication facilities, hazard barriers, and traffic monitoring facilities, all in compliance with applicable laws and international conventions. The Borrower shall further ensure that relevant government agencies provide strict road patrol to prevent trafficking of humans, wildlife, endangered species, and illegal substances on the Project Road.

LA Schedule 5, para 19

Complied with. During construction, all information and warning signs were temporarily installed in accordance with traffic/diversion plans. At completion of any portion, all pavement marking road signs and other facilities are constructed according to the drawings and specifications.

Anticorruption The Borrower shall comply with, and shall ensure NHA complies with ADB’s Anticorruption Policy (1998, as amended to date). The Borrower, consistent with its commitment to good governance, accountability and transparency, agrees (a) that ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and (b) to cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. In particular, the Borrower shall (i) conduct periodic inspections on the contractors’ activities related to fund withdrawals and settlements, (ii) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of all contractors, suppliers, consultants and other service providers as they relate to the Project, and (iii) the construction supervision consultant shall verify the contractors’ invoices in accordance with working drawings and contract specifications.

LA Schedule 5, para 20

Complied with. Necessary provisions were incorporated in the bidding documents and in the contracts.

Midterm Review A comprehensive midterm review, the timing of which is to be determined in agreement with the Borrower and ADB for each component of the Project, shall be undertaken jointly by ADB and NHA to review all aspects of Project implementation, including procurement financing and scheduling matters.

LA Schedule 5, para 21

Complied with. Midterm project review mission fielded 1–9 October 2012.

Performance Audit The Borrower shall undertake an annual performance audit for each of the components of the Project pursuant to the terms of reference agreed with ADB.

LA Schedule 5, para 22

Complied with. Annual performance audit undertaken pursuant to the terms and reference agreed with ADB.

Appendix 7 41

CONSULTANT RECRUITMENT AND PROCUREMENT

A. Consultant Recruitment 1. The NHA engaged consulting firms for supervision engineering for each of the three subprojects under Project 1. They were the Oriental Consultants Company for the Hub–Uthal and Multan–Muzaffargarh subprojects and Minconsult International Ltd for the Muslim Bagh–Qila Saifullah subproject. In addition, the NHA engaged two firms for design review: National Engineering Services Pakistan for the Hub–Uthal and Multan–Muzaffargarh highway sections and Infra-D-Consultants and Sheladia Associates for the Muslim Bagh–Qila Saifullah road.1 For Project 2, the NHA retained the services of Oriental Consultants for the Sukkur–Jacobabad road section and Minconsult International Ltd for the Qila Saifullah–Zhob road section, both covering construction supervision and design review.

B. Procurement 2. Five civil works contracts for the investment project were awarded following international competitive bidding procedures among prequalified bidders. The following firms were awarded the contracts and they completed the civil works:

(i) N25: Hub–Uthal: Limak Insaat Sanayi Ve Ticaret A.S. in joint venture with Zahir Khan Brothers;

(ii) N70: Multan–Muzaffargarh: Husnain Cotex; (iii) N50: Muslim Bagh–Qila Saifullah: Limak Insaat Sanayi Ve Ticaret A.S. in joint

venture with Zahir Khan Brothers; (iv) N50: Qila Saifullah–Zhob: Limak Insaat Sanayi Ve Ticaret A.S. in joint venture

with Zahir Khan Brothers; (v) N65: Sukkur–Jacobabad: Limak Insaat Sanayi Ve Ticaret A.S. in joint venture

with Zahir Khan Brothers. 3. The contract packaging was appropriate, although the Pakistani contractor Husnain Cotex (Pvt) Ltd performed poorly (main text, para. 27).

1 This was the Pakistan arm of Sheladia Associates, operating independently of the U.S. arm that was contracted to

provide institutional strengthening services under Loan 2210.

42 Appendix 8

ECONOMIC REEVALUATION Project 2

A. Scope 1. This appendix contains the economic reevaluation of Tranche 2 of the multitranche financing facility (MFF) approved by the Asian Development Bank (ADB) in 2005 for the National Highway Development Sector Investment Program in Pakistan. Tranche 2 comprised the improvement of two roads, namely (i) Qila Saifullah–Zhob (150km) on N50 in Balochistan Province and (ii) Sukkur–Jacobabad (68.35km) on N65 in Sindh Province. This appendix is to be read together with the economic reevaluation of Tranche 1, which contained three stretches of national highway: (i) Hub–Uthal on N25, (ii) Muslim Bagh–Qila Saifullah on N50, and (iii) Multan-Muzaffargah on N70.1 2. Civil works on the Qila Saifullah–Zhob road started in March 2010 and were effectively completed by early 2014. Civil works on the Sukkur–Jacobabad road started in February 2011 and were substantially completed by the end of September 2014. B. Economic Analysis at Appraisal 3. The Qila Saifullah–Zhob road improvement was originally earmarked for batch 1 of the MFF. The section of the N50 from Khanozai to Zhob (255km), of which Qila Saifullah–Zhob is part, was appraised as part of the MFF report and recommendation of the President in November 2005. It had an economic internal rate of return (EIRR) of 21.0%. 4. The National Highway Authority (NHA) undertook an economic analysis of the Sukkur–Jacobabad road as part of the periodic financing request (PFR) for Tranche 2. The calculated EIRR at that time in 2009 was 15.2%.

5. For both roads, the main benefits quantified at appraisal were (i) vehicle operating cost (VOC) savings, and (ii) time savings. Benefits from generated traffic were considered for both roads, whereas diverted traffic was only considered (but not quantified) for the N50.

C. Economic Reevaluation 6. ADB conducted an economic reevaluation of Tranche 2 at completion to ascertain whether the project remained economically viable. This reevaluation compares “with-“ and “without project” scenarios, and calculates incremental changes to costs and benefits. 7. The with-project scenario involves (i) the reconstruction and widening of the two-lane Qila Saifullah–Zhob road from 6 to 7.3 meters; and (ii) the reconstruction and widening of the two lane Sukkur–Jacobabad road to a four-lane dual carriageway 14.6 meters wide, including completion of a bypass around the city of Shikarpur, roughly midway between Sukkur and Jacobabad. For the Qila Saifullah–Zhob road, post-construction roughness measured as International Roughness Index (IRI) is improved to 2.0, consistent with observations at the end of 2015. A conservative estimate of vehicle speeds notes that they increased from 40 kilometer an hour (km/hr) (ranging from 35km/hr for heavy-goods vehicles to 50km/hr for cars) to 50km/hr

1 Available at: http://www.adb.org/documents/pakistan-national-highway-development-sector-investment-program-

project-1

Appendix 8 43

(40km/hr for heavy goods to 60km/hr for cars).2 For the Sukkur–Jacobabad road, IRI was reduced from 8.5 to 2.6 with the project. Vehicle speeds are assumed to resemble those on the Qila Saifullah–Zhob road. On the Shikarpur bypass, speeds are averaged at 67km/hr. Generated traffic benefits are included in the with-project scenarios for both roads. 8. The without-project scenario assumes that the roads would continue to be maintained but not reconstructed. For the Qila Saifullah–Zhob road, the IRI would increase from a reported value of 6.5 in 2005 to 9.5. Traffic speeds would remain at pre-construction levels. The roads financed under Tranche 1, as described in para. 1, were considered to be complete in the without-project scenario, to avoid double counting. 9. For both roads the appraisal period is constituted as construction followed by 20 years’ operation, i.e., 2010–2033 for the N50 and 2010–2034 for the N65. Economic costs and benefits are based on domestic prices. Using data for 2009–2010 to 2014–2015 from the State Bank of Pakistan and Federal Board of Revenue, the shadow exchange rate factor (SERF) is estimated at 1.04. Construction contracts are denominated in Pakistani rupees (PRs) and therefore the adopted unit of account is also PRs. The price date is 2016. D. Demand Estimation 10. The demand analysis at appraisal was based on estimates of annual average daily traffic derived from classified traffic counts from 2005 for the Qila Saifullah–Zhob road (as a weighted average for the 255 km section from Khanozai to Zhob) and from 2009 for the Sukkur–Jacobabad road. 11. The demand analysis for the economic reevaluation is based on traffic counts conducted by the NHA and supervision consultants post-completion, in 2014 for the Qila Saifullah–Zhob road, and in 2013 for the Sukkur–Jacobabad road. Table 1 shows daily traffic in 2010 and 2014 for the Qila Saifullah–Zhob road and in 2013 for the Sukkur–Jacobabad road. 12. For the Sukkur–Jacobabad road, traffic estimates at completion considered two measurements, conducted for the Sukkur–Shikarpur and Shikarpur–Jacobabad sections of the road. The traffic counts from 2013 on the section between Sukkur and Shikarpur (shown as section N65/1 in Table 1) are unrepresentative of interurban conditions. A flow rate of 16,000 vehicles/day (12,000 vehicles/day excluding motorcycles) would be sufficient to cause considerable congestion on this section and lead to traffic diversion. To arrive at a conservative estimate for this section, it was decided to take N65/1’s heavy goods and truck-trailer traffic as adequately representative of interurban conditions, but for other vehicle classes to take the average of N65/2’s and N65/1’s traffic. This gives a 2013 estimate of 9,650 vehicles/day. For the Shikarpur–Jacobabad section, the traffic counts from 2013 were adopted as the basis for the reevalaution.

2 A speed survey in April 2015 based on driver interviews (i.e., not based on actual measurements) reported very

high with-project speeds, from 60-80km/hr for goods vehicles to 120-140km/hr for private passenger vehicles. Actual with-project speeds for the entire project road are likely to be much lower, although still considerably higher than those in the without-project case.

44 Appendix 8

Table 1: Baseline motorized traffic demand Road section and year

Motor-cycles

Cars Pick-ups Mini-buses

Bus 2-axle trucks

3-axle trucks

Truck-trailers

Agric tractors

AADTveh/day

N50 2014a 1,545d 1,833 1,474 62b 1,160 371 16 91 6,552N65/1 2013c 4,086d 6,614 2,747 489 276 711 769 474 177 16,343N65/2 2013e 833 1,466 839 245 72 525 666 165 239 5,050

AADT = annual average daily traffic. a Minconsult 48-hr count between Qila Saifullah and Zhob on Sun 14 Sep and Mon 15 Sep 2014. b No minibuses recorded. The bus count is assumed to include minibuses in the same proportion as in 2010. c NHA 24-hr count between Sukkur and Shikarpur, Fri 27 December 2013. d Most motorcycle traffic is local. For evaluation purposes the volume on the N50 is reduced to 1,000 per day and to

2,000 per day on the N65. (Motorcycle traffic makes a small contribution to road-user benefits.) e NHA 24-hr count between Shikarpur and Jacobabad, Sat 28 December 2013. Source: Asian Development Bank estimates and the National Highway Authority. 13. According to the International Monetary Fund (IMF), annual GDP growth for 2011–2015 averaged 3.9% and is forecast to average 4.9% for the period 2016–2020. National traffic growth is therefore likely to be approximately 5% per year. In the project completion report for Tranche 1 it was argued that traffic growth in Balochistan, the province in which the N50 lies, would be somewhat lower. For this reevaluation the Tranche 1 reevaluation growth rates are taken for the N50. Growth on the N65 is more likely to reflect national conditions and the N50 growth rates have increased by 0.5–1.0%. The assumed traffic growth rates are shown in the table below. From 2023 annual traffic growth is reduced to 2% in order to avoid spuriously high levels of congestion in the without-project case on the busiest road sections.

Table 2: Traffic growth rates (percent)

Road Motor-cycles

Cars Pick-ups

Mini-buses

Bus 2-axle trucks

3-axle trucks

Truck-trailers

Agric tractors

Averagea

Qila Saifullah–Zhob 3.0 6.0 4.0 4.0 4.0 4.0 4.0 5.0 4.0 4.2 Sukkur–Jacobabad 3.0 7.0 4.5 4.5 4.5 5.0 5.0 5.5 4.5 5.1 a Weighted by traffic in Table 1. Source: Asian Development Bank estimates. 14. Generated traffic was estimated for both roads. Average generalized road-user costs for passenger vehicles (including motorcycles) are approximately PRs46 per veh-km in the without-project case and PRs40 in the with-case, which equates to a 13% reduction in road-user costs. Assuming a price elasticity of -0.6 passenger-vehicle generated traffic was estimated at 10% of normal traffic for both roads. E. Economic Costs

15. Investment costs. A comparison of actual investment costs with those forecast at appraisal is in Table 3. At constant 2016 prices, actual investment costs are estimated to be 80% of those used at appraisal. In view of the 11-year lag between appraisal and reevaluation, indexation assumptions have a significant bearing on the comparison. As such project costs in Table 3 do not match those in Appendix 2.

Appendix 8 45

Table 3: Actual and forecast investment costs

(2016 prices, $ million)

Road

Price date

At appraisala Actual at completion Actual/

appraisalWorks

$mb CS $m

LAR$m

Total$m

Works$mc

CS $m

LAR $m

Total$m

Qila Saifullah–Zhob 2005 113.26 3.09 0.0 116.3 2016 139.7 3.8 0.0 143.5 118.8 1.77 0.03 120.6 0.84

Sukkur–Jacobabad 2005 99.13 2.70 1.75 103.6 2016 122.3 3.3 2.2 127.8 92.3 2.5 1.8 96.6 0.76

Both roads combined 2016 262.0 7.1 2.2 271.3 211.1 4.3 1.8 217.1 0.80CS = consultant supervision; LAR = land acquisition and resettlement. a Brought to 2016 prices using the World Bank’s Manufactures Unit Value index. b Including 10% physical contingencies. c Based on payment certificates in PRs brought to 2016 PRs using consumer price index and converted to $ using 2016 exchange rate (PRs105 = $1). Source: Asian Development Bank estimates. 16. For the economic reevaluation, work costs are distributed across the construction period pro rata to payment certificates and brought from 2010 to 2016 prices. Escalation payments are ignored. Deducting a contractor’s income tax of 6% and adjusting for shadow wages of unskilled labor (assumed to represent 7% of work costs and with a shadow wage rate factor of 0.7—both assumptions taken from the December 2011 completion report for Project 1 under the MFF) brings work costs at constant 2016 financial prices to economic prices. The implied conversion factor is 0.89. A conservatively estimated residual value equal to 30% of the initial investment cost is inserted as a negative cost in the final year of the evaluation period. 17. Consulting service costs are converted to 2016 PRs and adjusted by the SERF; they are distributed uniformly over the construction period. Land acquisition and resettlement costs are converted to PRs and assumed to be incurred in the first 2 project years.

Table 4: Project investment costs

Road

Works (PRs bn)

CS($m)

LAR($m)

Econ costPRs bn

2010(%)

2011 (%)

2012 (%)

2013(%)

2014(%)

(PRs bn) (PRs m/km)

Qila Saifullah–Zhob 10.1 1.60 0.03 11.3 75.6 6 24 35 28 7a

Sukkur–Jacobabad 8.6 2.35 1.61 9.10 133.0 0 5 15 52 28 bn = billion ; CS = consultant supervision; km = kilometer; LAR = land acquisition and resettlement; m = meter. a As the improved N50 was effectively open by the start of 2014, for evaluation purposes 2014’s cost is combined

with that of 2013. Source: Asian Development Bank estimates. 18. Maintenance costs. Identical maintenance regimes were assumed for both the with- and without-project cases. Interventions and costs are taken from the NHA’s 2014–2015 annual maintenance plan (unit cost summary for economic analysis), brought to 2016 prices. Table 5 summarizes interventions, costs, and effects.

46 Appendix 8

Table 5: Maintenance costs

Intervention Intervention criteria Financial PRs Economic

PRs Effect

50-mm overlay IRI≥10, interval≥10 yrs, year≥2014 1,470/m2 1,250/m2 Derived in HDM-4

Pothole patching >2 per km 260/m2 230/m2 85% patched, 12 months elapsed before patching

Crack sealing All cracking >10% 200/m2 170/m2 85% effective Drain clearing, etc. Annual 106,000/km 90,000/km HDM-4 = Highway Development and Management-IV Model; IRI = international roughness index; m2 = square meters; mm = millimeters. Source: Asian Development Bank estimates. F. Economic Benefits 19. Using standard Highway Development and Management-IV Model (HDM-4) software, and comparable to economic analysis at appraisal, the economic benefits considered at reevaluation were VOC savings and time savings, for normal and generated traffic. 20. Vehicle fleet characteristics are adapted from NHA standard values shown in their 2014–2015 annual maintenance plan. Vehicle and tire prices are brought to 2016 levels and adjusted by the SERF. Values of journey time, crew, and maintenance labor costs are also taken from the NHA’s 2014–2015 annual maintenance plan but are increased in proportion to the change in GDP per head since 2014.

Table 6: N50 and N65 motorized vehicle fleet

Item Unit Motor-cycle

Car Pick-up Mini-bus

Bus 2-axle truck

3-axle truck

Truck-trailer

HDM-4 base type Car med

Light delivery

Minibus Bus medium

MGV HGV Art truck

Axles No 2 2 2 2 2 2 3 5Km/year 1,000 km 10 40 70 150 240 150 150 150Service life Years 10 10 8 8 7 12 14 14No. of passengers No 1 2 10 15 35 0 0 0Operating weight tonnes 0.2 1.2 1.7 3.0 10.5 16 20 28Vehicle cost (econ) PRs000 51 1,490 1,490 4,050 7,760 7,610 9,460 9,020Tire cost (econ) PRs000 1.5 6.6 6.8 15 27 27 27 27Maintenance labor PRs/h 110 110 110 110 110 110 110 110Crew PRs/h 80 170 90 150 150 110 110 115Passenger working time PRs/h 85 165 55 55 55 Passenger non-working time PRs/h 21 42 14 14 14 - -% of work-related trips % 75 80 90 90 95 - - -HGV = Heavy Goods Vehicle; hr = hour; km = kilometer; MGV = Medium Goods Vehicle. Source: Asian Development Bank estimates, and the National Highway Authority. 21. The shadow price of gasoline and diesel is estimated at PRs67 per liter. This estimate is based on a World Bank price forecast for crude oil at $67/barrel for the period 2016–2025 (Source: World Bank Commodity Markets Outlook, April 2016, converted from current dollars to constant 2016 prices), an estimated refining cost of 15¢ per liter and NHA estimates of transport and distribution costs. G. Results of Economic Reevaluation

22. The results of the economic reevaluation covering the full project period for both roads are in Table 7. The economic indicators provided are: EIRR, net present value (NPV), and

Appendix 8 47

benefit-to-cost ratio (BCR). For the Qila Saifullah–Zhob road, EIRRs at appraisal and completion are very similar. For the Sukkur–Jacobabad road, all indicators at completion are better than they were at appraisal, in particular the NPV, which has doubled. The principal reasons for the differences are (i) higher opening traffic, (ii) reduced investment costs at constant prices (Table 3), and (iii) changes to without-project maintenance assumptions.

23. All three reasons increase the economic effectiveness of the project, especially the Sukkur–Jacobabad road.1

Table 7: Project Economic Indicators

Section NPV(PRs, bn)

BCR(ratio)

EIRR(%)

Qila Saifullah–Zhob

At appraisal a N/A N/A 21.0 At completion 2.84 1.35 19.6

Sukkur–Jacobabad At appraisalb 2.27 1.41 15.2 At completion 4.88 1.81 25.9

Combined At appraisal N/A N/A N/A At completion 7.72 1.55 22.2 BCR = benefit-to-cost ratio; bn = billion ; EIRR = economic internal rate of return; km = kilometer; NPV = net present value. a For Khanozai–Zhob, which covers the Tranche 1 road from Khanozai to Qila Saifullah as well as Qila Saifullah to Zhob (only EIRR reported in appraisal documentation). b At reappraisal in 2009. Source: Asian Development Bank estimates, project preparatory technical assistance consultant’s report. 24. Table 8 shows annual incremental costs and benefits at completion.

Table 8: Project Incremental Costs and Benefits in PRs billion

Year N50 Qila Saifullah-Zhob N65 Sukkur-Jacobabad Combined net

benefitsa Capital costa

Re-currenta

RUC savingsa

Net benefitsa

Capital costa

Re-currenta

RUC savingsa

Net benefitsa

2010 0.68 -0.01 0.00 -0.67 0.00 -0.01 0.00 0.01 -0.66 2011 2.72 -0.01 0.10 -2.61 0.46 -0.00 0.28 -0.17 -2.79 2012 3.97 -0.01 0.28 -3.68 1.37 -0.01 0.63 -0.73 -4.41 2013 3.97 -0.01 0.62 -3.33 4.75 -0.01 1.07 -3.67 -7.00 2014 -1.12 0.00 6.74 7.87 2.02 0.00 1.63 -0.39 7.47 2015 0.00 0.00 1.23 1.23 0.00 0.00 1.01 1.01 2.24 2016 0.00 0.00 1.45 1.45 0.00 0.00 1.22 1.22 2.67 2017 0.00 0.00 1.65 1.64 0.00 0.00 1.47 1.47 3.11 2018 0.00 0.01 1.77 1.76 0.00 0.00 1.73 1.73 3.49 2019 0.00 0.01 1.88 1.87 0.00 0.00 2.00 2.00 3.87 2020 0.00 0.01 2.00 1.99 0.00 0.00 2.31 2.30 4.29 2021 0.00 0.01 2.12 2.11 0.00 0.00 2.68 2.68 4.79 2022 0.00 0.01 2.22 2.22 0.00 0.01 3.10 3.09 5.31 2023 0.00 0.00 2.24 2.24 0.00 0.01 3.47 3.46 5.70 2024 0.00 0.00 2.22 2.22 0.00 0.01 3.88 3.87 6.09 2025 0.00 0.00 2.14 2.14 -0.28 0.01 4.35 4.61 6.75 2026 0.00 0.02 2.04 2.03 0.00 0.00 1.34 1.34 3.37 2027 -1.12 0.02 2.05 3.16 -0.31 0.00 1.13 1.44 4.60 2028 0.00 0.02 -6.32 -6.34 0.47 0.00 -2.86 -3.33 -9.67 2029 1.37 0.00 -7.72 -9.09 0.70 0.00 -1.45 -2.14 -11.23

1 In the case of the Sukkur–Jacobabad road, no overlay was included in the maintenance schedule of the without-

project scenario; in the case of the Qila Saifullah–Zhob road, the appraisal report mentions overlays but not their intervention criteria. Allowing for their inclusion in the without-project scenario effectively reduces the incremental cost of maintenance brought about by the project, and therefore positively impacts the project economics.

48 Appendix 8

Year N50 Qila Saifullah-Zhob N65 Sukkur-Jacobabad Combined net

benefitsa Capital costa

Re-currenta

RUC savingsa

Net benefitsa

Capital costa

Re-currenta

RUC savingsa

Net benefitsa

2030 0.00 0.00 0.63 0.63 0.00 0.00 1.00 1.00 1.62 2031 0.00 0.00 0.66 0.66 0.00 -0.00 1.10 1.10 1.76 2032 0.00 0.00 0.71 0.71 0.13 -0.00 1.22 1.09 1.80 2033 0.00 0.00 0.71 0.71 0.00 -0.00 1.63 1.63 2.34 2034 -3.40 -0.00 0.77 4.18 -2.74 -0.00 1.81 4.55 8.73 PV 8.16 -0.02 11.00 2.84 6.04 -0.01 10.91 4.88 7.72 EIRR 19.6% 25.9% 22.2% BCR 1.35 1.81 1.55 BCR = benefit-to-cost ratio; bn = billion ; EIRR = economic internal rate of return; PV = present value (at 12% discount rate). a Changes of sign arise in years of periodic maintenance interventions in the without-project case Source: Asian Development Bank estimates, project preparatory technical assistance consultant’s report. 25. The table below summarizes economic indicators for both projects and for the combined project. It also shows the effects of applying sensitivity tests. The economic performance of each road individually, and both roads combined, is sound and remains so throughout a wide range of sensitivity tests.

Table 9: Results of the Sensitivity Analysis

Item Unit Subproject Total

N50 N65 Sensitivity of EIRR to: Operation and maintenance costs x 1.2 percent 19.4 25.9 22.2 VOC benefits x 0.8 percent 14.5 20.6 16.8 VOT x 0.8 percent 18.9 24.9 21.8 Traffic growth x 0.8 percent 14.0 23.9 18.3 Switching values: Operation and maintenance costsa percent -c - c - c Benefitsa percent -24 -45 -35 EIRR = economic internal rate of return; VOC = vehicle operating cost; VOT = vehicle operating time. a The percentage by which costs or benefits need to change to give an EIRR of 12%. b Diverted traffic only affects the N50. c Switching values are extremely large values because O&M costs form a very small part of net benefits Source: Asian Development Bank estimates. 26. In sum, the project return exceeds the 12% threshold (for each road and for the two roads combined), and the project remains economically viable.

Appendix 9 49

ROAD EXPENDITURES

Item

Actual FY

2009 FY

2010 FY

2011FY

2012FY

2013 FY

2014FY

2015Construction (PSDP) (PRs billion) 32.3 44.7 28.3 56.5 50.7 57.6 111.5Annual growth (%) 12.8 38.4 (36.6) 99.6 (10.3) 13.6 93.5Maintenance (PRs billion)

Toll revenue 6.5 8.3 10.4 12.4 12.8 14.0 16.0Federal grants 0.9 1.0 1.1 1.2 1.4 1.5 1.6

Others (police fines, ROW revenue, weigh bridges) 1.4 2.0 1.6 2.5 2.3 2.9 4.6Total (PRs billion) 8.8 11.3 13.1 16.1 16.5 18.4 22.2Annual growth (%) 28.3 15.9 22.9 2.5 11.5 20.6… = not available, ( ) = negative, FY = fiscal year, PSDP = Public Sector Development Program, ROW = right-of-way. Source: National Highway Authority Road Asset Management System Report.

1. The following graph, from the NHA 2014-2015 Annual Maintenance Plan, shows progress in road condition (roughness) towards a target of IRI 3 (very good), prior to the 2010 severe floods, which diverted the maintenance budget to flood rehabilitation.

50 Appendix 10

RESETTLEMENT SAFEGUARDS IMPLEMENTATION

1. The summary below was prepared by the project completion report (PCR) mission of the Asian Development Bank (ADB) to Pakistan in September 2011 (Project 1) and review missions in November 2015/February 2015 (Project 2). It is based on (i) the mission’s observations; (ii) reports from the executing agency, supervision engineers, and external monitors; (iii) meetings with officers of the executing agency at the headquarters of the National Highway Authority (NHA) and in the field; (iv) the PCR mission’s discussions with the community of affected persons (APs); and (v) meetings with the external monitors. A. Pakistan: National Highway Development Sector Investment Program—Project 1,

Loans 2231 and 2210 a. Implementation of Land Acquisition and Resettlement Plans (LARPs) 2. Three national highway subprojects—(i) Hub–Uthal, N25; (ii) Khanozai–Zhob, N50; and (iii) Multan–Muzaffargarh, N70—were financed by ADB through Loan 2231. The N25 project was constructed on government-owned land and it had no land acquisition or resettlement impacts. The N50 project (Khanozai–Muslim Bagh section, including the Muslim Bagh bypass) involved acquisition of 278 acres of private land, which affected 475 landowners. Of these, the NHA paid 355 landowners for 208 acres of land when the project completion review was prepared in 2011, leaving 120 landowners unpaid mainly because the deputy commissioner of Qila Saifullah had yet to determine the exact number of shareholders of communal land involved. At present, the NHA has paid PRs118 million (of the unpaid PRs125 million) to an additional 99 landowners, leaving only 21 to be paid after the issue of shares in the communal land acquired is decided. The remaining unpaid amount of PRs7.0 million is with the deputy commissioner’s account, with NHA staff following up for completion of payment. The deputy commissioner will pay the remaining shareholders as soon as their status is defined. 3. The number of those affected by the third subproject, N70, during implementation of the LARP changed from 758 APs (originally identified in the LARP) to 874 APs owing to the division of a single landholding between multiple heirs on the death of the owner. Those affected also lodged a complaint to ADB’s Office of Special Project Facilitator (OSPF) for resolution. The original LARP was later divided into sub-LARPs, due to the land acquisition issues, holding up the construction work. All those affected were fully compensated and a satisfaction survey conducted by OSPF confirmed the eventual satisfaction of complainants on the payments. OSPF also received a complaint on behalf of 53 APs relating to access to information from the NHA (project executing agency) about potential displacement due to road alignment for which they requested compensation. In 2008, actions to resolve this complaint during the consultation phase were undertaken, including the announcement and payment of compensation to APs whose lands were acquired for road construction. In 2009, the construction of two underpasses, demanded by those affected by the project, were completed. The complainants later confirmed that they were satisfied with their compensation and the constructed underpasses. OSPF issued its final report in March 2010 and concluded the complaint. On 14 April 2014, a session on the lessons learned was attended by 25 participants from the NHA, the government of Pakistan, the Economic Affairs Department, transport and safeguards staff of ADB’s Central and West Asia Department, and OSPF staff and external monitoring consultant.

Appendix 10 51

b. Institutional Strengthening Project, Loan 2210 4. The NHA established a safeguards wing called Environment, Afforestation, Land and Social Issues (EALS) in the NHA under this loan and initially staffed the unit primarily with land acquisition and legal experts. This somewhat improved the process of land acquisition but the wing remained capacity deficient in planning and implementation of land acquisition and resettlement as the wing was not able to recruit a qualified and experienced resettlement specialist. While this left a capacity gap for the NHA to address, ADB’s engagement with the NHA on safeguards preparation and policy compliance improved project readiness through special safeguard actions which the NHA agreed to implement after ADB’s persistent engagement with the highest levels of government and the Ministry of Communications. This included the NHA’s completion of land acquisition, preparation of a LARP and independent land valuation studies (to ensure compensation at full replacement costs as required in ADB’s Involuntary Resettlement Policy [1995]), and institutional arrangements, including safeguard specialists being installed before award of each contract. B. Pakistan: National Highway Development Sector Investment Program—Project 2,

Loan 2540

a. Introduction

5. Project 2 under the multitranche financing facility (MFF) for the National Highway Development Sector Investment Program (NHDSIP) covered two subprojects: (i) rehabilitation and upgrading of 68 kilometers (km) of the Sukkur–Jacobabad section of N65 in Sindh Province and (ii) rehabilitation and upgrading of 150 km of the Qila–Saifullah Zhob section of N50 in Balochistan Province. Except for acquiring land for construction of the 3.5 km bypass road to avoid the congested city area of Shikarpur in the Sukkur–Jacobabad (N65) subproject, both subprojects included rehabilitation and upgrade of existing highways with resettlement impacts mainly limited to clearance of the government-owned right-of-way (ROW). Based on the land acquisition for construction of the 3.5 km bypass road on Sukkur–Jacobabad (N65), this subproject was categorized as Category A for involuntary resettlement and a full resettlement plan was implemented. Due to resettlement impacts emerging during construction on the Qila Saifullah to Zhob section of N50, this subproject was recategorized from involuntary resettlement Category C to B and a short resettlement plan was implemented to ensure project implementation was fully compliant with ADB’s Involuntary Resettlement Policy (1995) requirements and the loan covenants.

6. The PCR mission reviewed the LARPs and discussed the final outcome of the resettlement with various stakeholders, including local government officials, affected persons along the road, and the external monitor engaged by ADB for this project. No evidence was found that any affected person was dissatisfied with his or her terms of compensation. The mission concluded that there were no pending resettlement issues related to either subproject. The Pakistan Resident Mission has confirmed this.

b. Implementation of the Land Acquisition and Resettlement Plans

LARP for Sukkur–Jacobabad (N-65) subproject:

7. For improvements of 68 km of N65 between the cities of Sukkur and Jacobabad under Tranche II of the MFF NHDSIP, the subproject included construction of a new 3.5 km bypass road to avoid crowded Shikarpur City located along the project road. Except for construction of the new 3.5 km bypass, the project works were limited in the 110-foot wide existing NHA-

52 Appendix 10

owned ROW of the national highway.

8. The project impacts included acquisition of 35.5 acres of land for the bypass section and clearance of structures encroaching on the government-owned ROW near en-route settlements. The project road was sectionalized for land acquisition and resettlement purposes because the process was holding up the contractor’s work. Dividing the project by road sections allowed work to begin on the stretches of road where no land acquisition or resettlement was required and for the progressive release of other stretches as land acquisition or resettlement procedures were completed. Accordingly, the LARP prepared during project processing was updated as four sectional LARPs (see below) to facilitate execution of the project in sections where full LARP implementation was validated by the external monitor.

a. Sukkur–Jacobabad (N65) Section 1 LARP (km 0+000 to km 17+500). With a total length of 17.5 km, this section covered Sukkur City (km-0+000) to the town

of Lakhi (km 17+500). The project works were limited to the existing 110-foot-wide ROW and the identified impacts included clearance of this ROW mainly near city portions. As per the LARP, 300 households faced resettlement impacts and 5 community structures were relocated

b. Sukkur–Jacobabad (N65) Section 2 LARP (km 17+500 to km 33+250). This section covered 15.750 km of road, which included rehabilitation of 12.25 km of road within the existing ROW and construction of the new 3.5 km bypass around Shikarpur City. It started at Lakhi (km-17+500) and terminated at km 33+250, i.e, at the end of the bypass. About 35.5 acres of agricultural land were acquired for the 3.5 km new bypass road while the impacts in the rest of the section were limited to clearance of encroachments on the RoW, and, as per the LARP, there were 85 households entitled to compensation and 3 community structures that were relocated on this section.

c. Sukkur–Jacobabad (N65) Section 3 LARP (km 33+250 to km 53+450). This section covered 20.2 km of road from Shikarpur City (km-33+250) to the town of Haymun (km 53+450). Under the LARP, 241 households were entitled to compensation against their losses and 21 community structures were relocated for clearance of the encroached RoW.

d. Sukkur–Jacobabad (N65) Section 4 LARP (km 53+450 to 68+350). This section covered 14.9 km of road from the town of Hamun (km 53+450) to Jacobabad City (km 68+350). In this section there were 73 households entitled to compensation and 5 community structures were relocated.

9. As per ADB-cleared sectional LARPs, a total of 699 households were affected, of which 685 have been compensated for their acquired assets and other losses. In addition, relocation costs for 34 community structures were paid to relocate such structures out of the project RoW. The external monitoring agent’s final assessment and data provided in the NHA’s PCR confirmed implementation of the LARP by payment of compensation to all affected households by highlighting that 2 households in the land and crops category could not be paid in section 2 due to legal and administrative impediments (ownership of land under dispute with the court). For these, compensation was deposited in a trust. In section 3, one structure owner never showed up to collect compensation so in that section the project road was completed without relocating the structure. For 11 households in the employee category (4 in section 1 and 7 in section 3) the entitled persons left the project area and their whereabouts remain unknown. The figure below represents the overall payment status of the LARP for Sukkur–Jacobabad (N65).

Appendix 10 53

Figure 1: LARP Payment status Sukkur–Jacobabad (N65) subproject

AP = affected person; LARP = land and resettlement plan. Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2540-PAK).

10. Corrective Action Plans Implementation: Besides compensation under LARP provisions to the above affected households, based on community concerns on land ownership at three locations, the ROW limits were investigated by the survey department in the identified sections. The verification process confirmed that in the identified sections the carriageway ROW was inadequate and additional land needed to be acquired to complete the project as per design. Thus, additional land and resettlement impacts identified at a later stage included acquisition of small land parcels at three locations along the project road alignment, i.e., at km 8+260 ~ 8+360 and 9+000 ~ 9+225 in section 1, at km 9+000 ~ 9+225 in section 2, and at km 46+146 ~ 48+700 in section 3. The land was acquired through private negotiations under the Land Acquisition Act of 1894 and in accordance with ADB Safeguard Policy Statement’s clause on negotiated settlement. The affected persons freely negotiated the compensation price with the NHA and the negotiation committee headed by the land acquisition collector (LAC). Based on the price agreed among the parties (the NHA, affected persons, and LAC), corrective action plans (CAPs) were prepared, disclosed and implemented as addenda to the sectional resettlement plans. Thus, in addition to the compensation paid under the LARP, an additional 25 people were compensated for their lost assets as per the ADB-approved CAPs. The table below provides details of affected persons with respective land loss paid under CAPs prepared as addenda to sectional LARPs of the Sukkur–Jacobabad (N65) subproject.

Table: 8.1 LAR impacts compensated under Corrective Action Plans

Corrective Action Plan Land acquired Affected Persons Land Cost Payment Status

Entitled Compensation

Paid Unpaid

CAP Section 1 0.9 acre 10 PRs3,340,000 10 -

CAP Section 2 0.225 acre 5 PRs180,000 5 -

CAP Section 3 9.8 acres 10 PRs2,137,0784 10 -

Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2540-PAK).

54 Appendix 10

II. Short Resettlement Plan for Qila Saifullah–Zhob (N-50) subproject.

11. Initially, this subproject was placed under involuntary resettlement Category C and construction works were started accordingly. However, during construction, resettlement impacts related to relocation of encroaching assets in the ROW limits popped up in a few sections scattered at different locations along the 150-km project section of N50, so the subproject was recategorized as Category B. A short resettlement plan (SRP) was prepared which ADB approved in November 2012. As per the SRP, 232 of 234 affected households were compensated for different types of project impacts as detailed in Figure 2, below:

Figure 2: LARP Payment status Qila Saifullah–Zhob (N50) subproject

AP = affected person; LARP = land and resettlement plan. Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2540-PAK).

Table 8.2 shows the external monitor’s assessment of LARP implementation, together with the PCR mission’s assessment made after completion of civil works.

Table 8.2: Summary and Assessment by Subproject LARP Implementation

LARP Section LARP Approval External assessment PCR Mission Assessment Submission ADB Cleared Implementation Status

i) Sukkur–Jacoababad (N65) subproject Section 1 LARP September, 2011 October 2011 100% implementation confirmed by EMA

Construction allowed in March 2012

Civil works completed No outstanding Issue

Section 2 LARP January 2012 February 2012 100% implementation confirmed by EMA , Construction allowed in November 2012

Civil works completed No outstanding Issue

Section 3 LARP November 2011 December 2011 100% implementation confirmed by EMA Construction allowed in August 2012.

Civil works completed No outstanding Issue

Section 4 LARP

January 2012 February 2012 100% implementation confirmed by EMA Construction allowed in November 2012

Civil works completed No outstanding Issue

ii) Qila–Saifullah–Zhob (N50) subproject. Short RP October 2012 November 2012 100% implementation confirmed Civil works completed

No outstanding Issue.

ADB = Asian Development Bank; LARP = land and resettlement plan; NHA = National Highway Authority; PCR = project completion report; RP = resettlement plan. Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2540-PAK).

Appendix 10 55

12. Grievance handling and redress: During implementation of LARPs and project works a number of grievances were received. A fully responsive Grievance Redress Committee (GRC ) on both subprojects recorded and resolved grievances in an efficient manner. For the Sukkur–Jacobabad (N-65) subproject 112 complaints were received, of which 77 were about correction in names of affected persons and the remaining 35 were about reassessment to include missing assets and names in the inventory. For the Qila–Saifullah–Zhob subproject 168 complaints about reassessment were received and resolved.

13. One grievance about legal and policy issues was referred to ADB by an affected household in the Qila–Saifullah–Zhob (N50) subproject in December 2013. The complaint was logged in the project complaint tracking (PCT) system and a project officer advised the complainant to meet the transport team in Pakistan Resident Mission to clarify his grievance to enable ADB to facilitate getting his grievance resolved. The transport team in PRM coordinated with the complainant to schedule a meeting and discuss the grievance, but the complainant, instead of meeting with the ADB team, in January 2016 informed them that the chief minister of Baluchistan Province had constituted a committee headed by the senior member of the Board of Revenue to look into his concerns; after the committee’s decision he said he would coordinate with ADB. Since then the complainant has stopped responding to ADB’s calls for a meeting and accordingly the complaint was closed in January 2016. The table blow provides a summary of how complaints were dealt with:

Table 8.3: Summary of Complaints and Grievances resolved by subproject

Subproject Road Section

Issue Complaints Filed

Resolved Remarks

i) Sukkkur–Jacobabad (N65)

Section 1

RoW land issues Reassessment and missing assets in inventory

3 11

3 11

2 complaints found genuine, CAP prepared and land compensation paid to 10 APs. Additional compensation paid after assessment to 11 APs.

Section 2 Valuation for additional land acquired

1 1 CAP prepared and land compensation paid to 5 APs

Section 3

RoW land issues Reassessment and missing assets in inventory

1 16

1 16

Complaints found genuine, CAP prepared and land compensation paid to 10 APs. Additional compensation paid after assessment to 16 APs.

Section 4 0 0 ii) Qila–Saifullah–Zhob (N50)

SRP N50

Reassessment and missingassets in inventory RoW land issue

168 1

168 1

72 complaints found genuine and paid additional compensation for missing assets. A high-level committee headed by the chief minister of Baluchistan on complainants request is investigating the issue; the NHA was confirmed to implement the committee recommendations as and when received.

AP = affected person; CAP = corrective action plan; NHA = National Highway Authority; ROW = right-of-way. Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2450-PAK).

14. Acquisition of Land: The N65 subproject concerned rehabilitation of existing roads with an available ROW of 110 feet wide. Hence the land acquisition was limited to construction of a bypass road to avoid a congested city portion that required 35.5 acres of agricultural land

56 Appendix 10

and an additional 11 acres of land at different locations in the Sukkur–Jacobabad (N65) subproject to meet design requirements. For the Qila–Saifullah–Zhob (N50) subproject no additional land requirement was identified. However, 16.4 acres of cropland was eventually affected due to clearance of the encroached RoW. All such losses were compensated on a replacement cost basis. The table below provides the extent of land acquired in the different sections.

Table 8.4 Permanent Loss of Private Land by Category: Sukkur–Jacobabad (N65) subproject

LARP Section Land

Category Acquired Land Remarks

Acres Hectares LARP Section 1 Agricultural

Commercial

0.775

0.125

0.30

0.05

Agricultural land parcel acquired under CAP and a land parcel in use for commercial activity in rural area.

LARP Section 2 Agricultural Agricultural

35. 5

0.225

14.20

0.09

Land acquired under LARP for construction of bypass. Land acquired under CAP to meet bypass ROW requirement.

LARP Section 3 Agricultural Commercial

7.3

2.475

2.92

0.99

Land acquired under CAP to meet ROW requirement.

Total Acquired Land

Commercial Agricultural

2.6

43.8

1.13

17.5

Total land included 35.5 acres acquired for bypass under LARP and 10.9 acres under CAP.

CAP = corrective action plan; LARP = land and resettlement plan; NHA = National Highway Authority; ROW = right-of-way.

Source: External Monitoring Reports and NHA progress reports, Islamabad (Loan 2450-PAK).

15. Besides making payment under approved LARP provisions, some additional affected households were paid under corrective action plans, and after reassessment of the impact inventory to resolve their grievances. Thus, the actual number of those affected was a little above that estimated when the LARPs were drawn up. Accordingly, the amount paid is slightly higher than planned in the sectional LARPs for the Sukkur–Jacobabad subproject (N65). For details, see tables 8.4 and A8.5, which are also derived directly from the external monitor’s report and data provided by the NHA in its progress reports prepared and disclosed to APs in 2012-14.

Table 8.5: Summary of Affected Households of subprojects implemented under Project 2

Name of Section Number of affected and Paid Households

Paid Community Structures LARP Nos. Actual Nos. a Paid Nos. b

Sukkur–Jacobabad (N65) Section 1 300 319 315 5 Sukkur–Jacobabad (N65) Section 2 85 90 88 3 Sukkur–Jacobabad (N65) Section 3 241 264 256 21 Sukkur–Jacobabad (N65) Section 4 73 73 73 5 i) Sukkur–Jacobabad (N65) subproject Total 699 746 732 34

Appendix 10 57

Name of Section Number of affected and Paid Households

Paid Community Structures LARP Nos. Actual Nos. a Paid Nos. b

ii) Qila–Saifullah–Zhob (N50) subproject Total 234 234 232 - Total LARP impacts of Tranche 2, NHDSIP 933 980 964 34

a) Actual numbers include AHs paid for land acquired under the Addenda Resettlement Plan and new AHs determined by GRC after reassessment of impact inventory to resolve the grievances.

b) In the Sukkur–Jacobabad (N-65) subproject paid numbers are less than actual because 14 AHs could not be paid because one AH in the structure owner category declined compensation and the project works were completed without relocating the structure, 2 AHs in the land category could not be paid due to legal and administrative impediments, and 11 AHs in the employee category left the project area and their whereabouts are unknown. In the Qila–Saifullah–Zhob subproject 2 AHs declined to receive a meager compensation amount.

AH = affected household; AP = affected person; GRC = Grievance Redress Committee; LARP = land and resettlement plan; NHA = National Highway Authority; NHDSIP = National Highway Development Sector Investment Program. Source: External Monitoring Reports and NHA project progress reports Islamabad (Loan 2540-PAK).

Table 8.6: Summary of Planned Budget and Actual Disbursement, Tranche II Subprojects LARP Planned

PRs

Actual Disbursement Balance Remarks

Amount PRs

% planned Amount % Planned

i) Sukkur–Jacobabad (N65) subproject

Section 1 LARP 48.65 53.80 111% (5,15) (0.11) Paid cost exceeded planned costs due to compensation paid under CAP and GRC recommendations. The NHA allocated additional land costs to meet CAP budget requirements.

Section 2 LARP 26.18 25.97 99% 0.21 0.01

Section 3 LARP 30.02 52.56 175% (22.55) .75

Section 4 LARP 09.62 09.62 100% - -

Total 114.47 141.95 124% (27.48)

ii) Qila Saifullah–Zhob (N50) subproject SRP 30.41 33.35 110% (2.94) Paid cost exceeded

planned costs due to compensation paid under GRC recommendations, which was met from 10% contingencies.

Total (i+ii) 144.88 175.30 121% (30.42)CAP = corrective action plan; GRC = Grievance Redress Committee = ; LARP = land and resettlement plan; NHA = National Highway Authority; SRP = short resettlement plan. Source: External Monitoring Reports and NHA project progress reports, Islamabad (Loan 2540-PAK).

16. The external monitor carried out a satisfaction survey of affected families after the completion of land acquisition and resettlement activities for each subproject. Interviews were conducted with a sample of affected families from en-route settlements. The survey outcome is summarized as follows:

(i) The majority of respondents said that they knew the resettlement policy and the grievance procedures.

(ii) When asked about their level of satisfaction with procedures, compensation amounts, and timeliness of payment, the majority expressed themselves satisfied, and few showed only partial satisfaction with support provided under LARPs.

58 Appendix 10

Recommendations 17. The following key recommendations are made to improve the NHA’s safeguards and grievance redress management capacity for ongoing and future projects:

The NHA’s should strengthen its LAR management capacity by recruiting a full-time resettlement specialist on terms of reference acceptable to ADB.

The NHA should systematize the internal and external monitoring of LARPs by recruiting qualified and experienced monitoring and evaluation experts in consultation with ADB.

The NHA should engage an experienced grievance redress management specialist to institutionalize grievance management and ensure a functional online grievance logging and tracking system.

Appendix 11 59

CONTRIBUTION TO ADB RESULTS FRAMEWORK

No.

Results Framework Indicators Targets Achieved Methods or Comments

1.

National highway road network infrastructure operations improved N25 N50 N70

84.5 km 255 km 36.5 km

79.5 km 50.1 km 36.5 km

Project completion report Two sections (2.225 km) and (2.775 km) were excluded from the scope 155 km were included in Project 2

2. National highway rehabilitated and upgraded N50 N65

155 km 68.3 km and 4.9 km bypass

150.3 km 68.3 km and 4.9 km bypass

Project completion report Road section was reduced in scope due to design change

3. Institutional strengthening

(i) By 30 Jun 2007, cabinet adopted a national transport policy

Partly achieved A draft NTP was submitted to the government but was not adopted.

(ii) By 31 Jul 2006, complete identification of PPP projects and financing plan 2007–2011

Achieved Eight PPP projects were in operation or procurement by Project 1 end.

(iii) By 31 Jul 2008, prepare projects to the value of PRs60 billion for bidding

Achieved by program end

(iv) By 31 Jan 2007, prepare NHA investment plan 2007–2011

Not achieved In 2016 NHA has an investment plan based on RAMS.

(v) By 30 Jun 2007, federal government endorsement of NHA investment plan 2007–2011

Not achieved Prepared, but endorsement beyond the control of NHA.

(vi) By 30 Jun 2007, establish grievance website

Achieved A trial version of the complaint-tracking website was created. An offline system now exists at NHA in the MIS section.

(vii) By 30 Jun 2007, establish road safety cell in NHA

Achieved Road safety component was not implemented in this project but NHA established a road safety cell under a director in Jun 2007.

(viii) By 20 Jun 2007, implementation of pilot study on road safety recommendations for national highway

Not achieved Included in a 2015 TA grant.

(ix) By 30 Jun 2006, complete road maintenance plan (2007–2011) and funding modality

Not achieved on time, but achieved by end of program

In 2016 NHA has a well-functioning RAMS-generated maintenance planning system.

(x) By 30 Jun 2007, federal government endorses road

Partially achieved

The road maintenance plan has not received sufficient financing

60 Appendix 11

No.

Results Framework Indicators Targets Achieved Methods or Comments

maintenance plan and funding requirements

from the federal government. But annual maintenance budgets have been increasing with increasing toll revenues.

(xi) By 30 Jun 2010, complete assessment of intelligent highway systems and review proposals

Achieved

(xii) By 30 Jun 2010, develop and implement financial management systems

Not achieved on time, but achieved by program close

(xiii) By 30 Jun 2010, provide training to NHA staff on safeguards, and bridge-planning design

Achieved 85 NHA staff were trained in social safeguards practices, 5 lectures and workshops were conducted on bridge planning and design.

(xiv) By 30 Jun 2010, ADB and NHA/government agree to second-generation reforms for implementation during remaining period of the investment program

Not achieved on time, but achieved by program end and incorporated into subsequent investments

ADB = Asian Development Bank, GRC = Grievance Redress Committee, km = kilometers, NHA = National Housing Authority, NTP = national transport policy, PPP = public–private partnership, TA = technical assistance.