Completion Report

Project Number: 38625 Loan Number: 2156 June 2008

Bangladesh: Emergency Flood Damage Rehabilitation Project

CURRENCY EQUIVALENTS

Currency Unit – taka (Tk)

At Appraisal At Project Completion (30 November 2004) (13 December 2007)

Tk1.00 = $0.016949 $0.015 $1.00 = Tk59.00 Tk68.61

SDR1.00 = $1.358 $1.5831

ABBREVIATIONS

ADB BR BRM BWDB EA EIRR HDM-4 IDC IRI LGED PCR PD PSC RHD SDR Sida TA VOC

– – – – – – – – – – – – – – – – – –

Asian Development Bank Bangladesh Railways Bangladesh Resident Mission Bangladesh Water Development Board executing agency economic internal rate of return Highway Development and Management Model interest during construction International Roughness Index Local Government Engineering Department project completion review project director project steering committee Roads and Highways Department special drawing rights Swedish International Development Cooperation Agency technical assistance vehicle operating cost

NOTES (i) The fiscal year (FY) of the Government ends on 30 June. “FY” before a calendar

year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 30 June 2000.

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

Vice President L. Jin, Operations 1 Director General K. Senga, South Asia Department (SARD) Director H. Du, Bangladesh Resident Mission (BRM), SARD Team leader A. Faruque, Senior Project Implementation Officer, BRM, SARD Team members M. N. Islam, Assistant Project Analyst, BRM, (SARD)

CONTENTS

Page

BASIC DATA i MAP vi

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 4 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 8 H. Related Technical Assistance 9 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 10 K. Performance of the Borrower and the Executing Agency 11 L. Performance of ADB 12

III. Evaluation of Performance 12 A. Relevance 12 B. Effectiveness in Achieving Outcome 12 C. Efficiency in Achieving Outcome and Outputs 13 D. Preliminary Assessment of Sustainability 13 E. Other Impact 14

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 15 A. Overall Assessment 15 B. Lessons 15 C. Recommendations 16

APPENDIXES 1. Project Framework 157 2. Maps of Project Components as Completed 21 3. Appraisal and Actual Project Costs 23 4. Currency Equivalents 26 5. Projected and Actual Disbursements 27 6. Project Implementation Schedule 28 7. Status of Compliance with Major Loan Covenants 30 8. Technical Assistance Completion Report 37 9. Details of Consulting Services 39 10. Assessment of Project Impact and Benefits 40 11. Economic Reevaluation 43

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agencies Part A: Rural Infrastructure Part B: Roads and Bridges Part C: Railways Part D: Water Resources Part E: Municipal Infrastructure 6. Amount of Loan 7. Project Completion Report Number

Bangladesh 2156 Emergency Flood Damage Rehabilitation Project People’s Republic of Bangladesh Local Government Engineering Department Roads and Highways Department Bangladesh Railways Bangladesh Water Development Board Local Government Engineering Department SDR117,195,000 ($180 million) PCR: BAN 1039

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

12 September 2004 27 September 2004 13 December 2004 14 December 2004 20 January 2005 2 February 2005 20 April 2005 2 May 2005 - 31 July 2007 13 December 2007 - 1% per year 40 10

8. Disbursements a. Dates Initial Disbursement

20 May 2005

Final Disbursement

13 December 2007

Time Interval

31.2 months

ii

Effective Date

02 May 2005

Original Closing Date

31 July 2007

Time Interval

27.3 months

b. Amount ($) Categorya

Original Allocationb

Last Revised Allocation

Net Amount Available

Amount Disbursed

Undisbursed Balancec

01A 51,920,010 39,498,709 39,498,709 37,190,348 2,308,361 01B 48,230,009 40,269,436 40,269,436 37,916,032 2,353,404 01C 12,970,002 5,539,274 5,539,274 5,215,551 323,723 01D 27,660,005 13,912,667 13,912,667 13,099,591 813,076 01E 22,850,004 23,132,254 23,132,254 21,780,372 1,351,882 02 800,000 9,327,135 9,327,135 8,782,044 545,091

03A 2,060,000 1,899,566 1,899,566 1,788,553 111,013 03B 4,800,000 4,492,004 4,492,004 4,229,485 262,519 03C 1,400,000 1,478,190 1,478,190 1,391,803 86,387 03D 2,900,001 2,833,519 2,833,519 2,667,925 165,594 03E 2,120,000 1,941,952 1,941,952 1,828,462 113,490 04 2,000,000 1,015,961 1,015,961 956,587 59,374 05 289,969

Total 180,000,000 145,340,672 145,340,672 136,846,754 8,493,918 a 01A - Civil Works Part A: Rural Infrastructure; 01B - Civil Works Part B: Roads and Bridges; 01C - Civil Works Part C:

Railways; 01D - Civil Works Part D: Water Resources; 01E - Civil Works Part E: Municipal Infrastructure; 02 - Equipment and Materials; 03A - Consulting Services Part A; 03B - Consulting Services Part B; 03C - Consulting Services Part C; 03D - Consulting Services Part D; 03E - Consulting Services Part E; 04 - Interest Charge; 05 - Unallocated.

b Variation in the SDR:$ exchange rate accounts for the difference between the original amount and the revised total amount .

c An undisbursed loan amount of SDR5,365,540.21 ($8,493,918.43) was canceled when the loan was closed on 13 December 2007. Previously SDR19,433,823.00 (about $27,700,000) had been canceled on 15 November 2005.

9. Local Costs (Financed) Item Appraisal Actual Amount ($ million) 106.20 73.22 Percentage of Local Cost 63.90 53.80 Percentage of Total Cost 44.25 35.84 C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimates Actual Foreign Exchange Cost 73.80 68.17 Local Currency Cost 166.20 136.11 Total 240.00 204.28

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2. Financing Plan ($ million) Appraisal Estimates Actual Cost Foreign Local Total Foreign Local Total Implementation Costs Borrower-Financed 0.00 60.00 60.00 0.00 41.98 41.98 ADB-Financed 71.80 106.20 180.00 62.67 73.22 135.89 Cofinanced Sida 0.00 0.00 2.45 12.25 14.70 Gov’t of the Netherlands 0.00 0.00 2.09 8.66 10.75 Total 71.80 166.20 238.00 67.21 136.11 203.32IDC Costs Borrower-Financed 0.00 0.00 0.00 ADB-Financed 2.00 0.00 2.00 0.96 0.00 0.96 Cofinanced 0.00 0.00 0.00 Grand Total 73.80 166.20 240.00a 68.17 136.11 204.28ADB = Asian Development Bank, IDC = interest during construction, RRP = report and recommendation of the President, Sida = Swedish International Development Cooperation Agency. a Financing was estimated at $240.00 million and the project cost at $239.97 million during appraisal and thus reflected in the

RRP. This project completion report uses the approved figures from the RRP.

3. Cost Breakdown, by Project Component ($ million)

Appraisal Estimate Actuala

Project Component Foreign Local Total Foreign Local Total A. Civil Works Rural Infrastructure 8.90 62.98 71.88 9.90 56.45 66.35 Roads and Bridges 37.00 25.70 62.70 29.97 19.92 49.89 Railways 10.20 6.60 16.80 4.23 2.54 6.77 Water Resources 5.53 32.40 37.93 4.64 24.31 28.95 Municipal Infrastructure 3.62 28.16 31.78 4.49 26.19 30.68 Subtotal (A) 65.25 155.84 221.09 53.22 129.41 182.63B. Equipment and Materials Railways Emergency Stock 0.80 0.80 1.60 8.78 0.00 8.78 Subtotal (B) 0.80 0.80 1.60 8.78 0.00 8.78C. Consulting Services

Rural Infrastructure 0.96 1.10 2.06 0.84 0.95 1.79 Roads and Bridges 2.05 2.75 4.80 1.81 2.42 4.23 Railways 0.80 0.60 1.40 0.80 0.59 1.39 Water Resources 1.60 1.30 2.90 1.47 1.20 2.67 Municipal Infrastructure 0.34 1.78 2.12 0.29 1.54 1.83 Subtotal (C) 5.75 7.53 13.28 5.21 6.70 11.91D. Land Acquisition and Resettlement 0.00 2.00 2.00 0.00 0.00 0.00 Subtotal (A+B+C+D) 71.80 166.17 237.97 67.21 136.11 203.32E. Service Charge during Construction 2.00 0.00 2.00 0.96 0.00 0.96

Total 73.80 166.17 239.97a 68.17 136.11 204.28RRP = report and recommendation of the President. Note: Because of rounding the figures may not add up to the totals given. a Financing was estimated at $240.00 million and project cost at $239.97 million during appraisal and thus reflected in the

RRP. This project completion report uses the approved figures from the RRP.

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4. Project Schedule

Item Appraisal Estimate Actual Consultants’ Contracts Part A: Rural Infrastructure Contract Date November 2004 June 2005 Completion of Consultant Supervision

January 2007 July 2007

Part B: Roads and Bridges Contract Date November 2004 September 2005 Completion of Consultant Supervision

January 2007 July 2007

Part C: Railways Contract Date November 2004 October 2005 Completion of Consultant Supervision

January 2007 July 2007

Part D: Water Resources Contract Date November 2004 October 2005 Completion of Consultant Supervision

January 2007 July 2007

Part E: Municipal Infrastructure Contract Date November 2004 June 2005 Completion of Consultant Supervision

January 2007 July 2007

Completion of Engineering Designs November 2004–February 2006 June 2005–September 2005 Civil Works Contracts Date of Award February 2005–September

2005 June 2005

Completion of Construction January 2007 July 2007 Equipment and Supplies First Procurement May 2005 12 June 2005 Last Procurement June 2006 2 May 2006 Other Milestones:

1. 15 November 2005: Approval of partial cancellation of SDR19,433,823.00 2. 13 December 2007: Closing of loan accounts

5. Project Performance Report Ratings

Rating

Implementation Period

Development Objectives

Implementation Progress

1 Jan 2005 to 31 Dec 2005 Satisfactory Satisfactory 1 Jan 2006 to 31 Dec 2006 Satisfactory Satisfactory 1 Jan 2007 to 31 Dec 2007 Highly Satisfactory Highly Satisfactory

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D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days

Specialization of Membersa

Appraisal 12–27 September 2004

11 44 a, b, c, d, e, f, i

Inception Mission 12–18 March 2005 3 21 a, b, g Review 1 11–22 December 2005 2 16 a, g Special Loan Administration 10–20 March 2006 2 10 a, g Review 2 3–15 May 2006 2 10 a, g Special Loan Administration 3–14 September 2006 2 8 a, g Review 3 11–29 November 2006 2 10 a, g Special Loan Administration 8–9 February 2007 2 4 a, g Review 4 4–15 April 2007 2 12 a, g Review 5 23 July–6 August 2007 2 22 a, g Project Completion Reviewb 6–18 March 2008 3 12 a, g, h

a a = mission leader/senior project specialist/engineer, transport engineer, b = project implementation officer, c = senior project implementation officer, d = social development specialist, e = environment specialist, f = senior counsel, g = assistant project analyst, h = staff consultant, i = environment analyst.

b This project completion report was prepared by Ahmed Faruque, senior project implementation officer/mission leader; Md. Nazrul Islam, Assistant Project Analyst; and a transport economist (staff consultant).

vi

MAP

I. PROJECT DESCRIPTION

1. The Emergency Flood Damage Rehabilitation Project (the Project) was formulated in response to a request for emergency assistance made by the Government of Bangladesh to the Asian Development Bank (ADB) after severe flooding in the north of the country in late June to early July 2004 that affected 39 districts, including Dhaka and other central districts. The floods were the country’s worst ever in geographic extent and economic damage caused. Serious damages to infrastructure and other assets and economic disruption inflicted heavy losses on agricultural and industrial output and slowed down the growth in services.

2. The main objective of the Project was to help sustain economic growth by minimizing the devastating impact of the floods and thus enabling the early restoration of economic and social activities in the affected areas. Priority areas were identified in consultation with the Government and the private sector, and with the participation of communities. The project framework at appraisal, compared with the achievements of the Project, is shown in Appendix 1.1

3. A sector approach was followed in the selection of the highest-priority subprojects. This was most appropriate to the emergency situation, as it allowed a quick response and maximum flexibility in both geographic coverage and components, within the agreed framework and criteria.

4. The Project comprised of five components:

(i) Part A: Rural infrastructure. Rehabilitation and restoration of rural infrastructure, including rural roads, bridges, and culverts in 9 districts2 under the ADB-assisted Third Rural Infrastructure Development Project,3 and 15 other districts4 in the worst-affected areas. In addition, flood and cyclone shelters were to be rehabilitated and provided with latrines to help communities, especially the poor.

(ii) Part B: Roads. Rehabilitation of flood-damaged national, regional, and district roads, bridges, and culverts in five of the country’s seven road zones5—Barisal, Comilla, Dhaka, Rajshahi, and Rangpur.

(iii) Part C: Railways. Rehabilitation of flood-damaged rail infrastructure and facilities on the core rail network, including civil works to restore embankments, tracks, bridges, essential buildings, station roads, and signaling and telecommunications facilities. This component also included the provision of emergency equipment and materials to speed up repair work in future emergencies.

(iv) Part D: Water resources. Rehabilitation of flood control, drainage, and irrigation facilities; repair of embankment breaches; and repair or replacement of water control structures, protective works, and canals in 39 districts to restore them to their condition before the flood and to prevent or mitigate future disasters.

1 The project framework at appraisal has since been modified to conform to ADB’s revised design and monitoring

framework. 2 Gaibandha, Jamalpur, Kishoregonj, Kurigram, Lalmonirhat, Mymensingh, Netrakona, Nilphamary, and Sherpur. 3 ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

People’s Republic of Bangladesh for the Third Rural Infrastructure Development Project. Manila. 4 Bogra, Naogaon, Sirajganj, Tangail, Sunamganj, Sylhet, Habigonj, Moulavibazar, Brahmanbaria, Narshingdi,

Comilla, Chandpur, Feni, Laxmipur, and Noakhali. 5 The road network is divided into seven zones, namely: Barisal, Chitaggong, Comilla, Dhaka, Khulna, Rajshahi, and

Rangpur.

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(v) Part E: Municipal infrastructure. Rehabilitation of: (a) roads, drains, bridges, and culverts; and (b) footpaths and drains in the slums of about 55 municipalities6 (pourashavas) in six divisions.

5. The Project also included capacity building and training in flood-resistant infrastructure design standards to strengthen the Government’s disaster preparedness, and analytical input and capacity building to enhance early-warning systems. Two associated technical assistance (TA)7 projects were financed with a grant from ADB’s TA funding program for this purpose.

6. The Government of Bangladesh was the Borrower, and the Executing Agencies (EAs) for the project components were the Local Government Engineering Department (LGED) for parts A and E; the Roads and Highways Department (RHD) for part B; the Bangladesh Railways (BR) for part C; and the Bangladesh Water Development Board (BWDB) for part D. An ADB loan8 of $180 million equivalent from ADB’s Special Funds (SF) resources financed part of the cost of the Project. It was approved as umbrella or standby financing on the understanding that part of the loan would be canceled as soon as grant financing became available from the Netherlands or Sweden. During project preparation both governments had expressed interest, through the Swedish International Development Cooperation Agency (Sida), in providing $27.7 million cofinancing for the Project. ADB also approved the associated TA 4562-BAN: Early Warning Systems Study for $250,000 on the assumption that it would later be replaced by a corresponding grant from the Government of the Netherlands.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

7. The Project was designed while ADB’s 1999 country operational strategy9 was in force. The overall strategic objective was poverty reduction through (i) faster private sector–led economic growth, (ii) better development opportunities for the poor in rural and urban areas, (iii) human development, and (iv) environmental protection. The poverty reduction objective was reaffirmed in the partnership agreement on poverty reduction between ADB and the Government of Bangladesh.10 To maximize the impact of the Project, the EAs adopted an area approach, to focus assistance on areas with a high concentration of poverty.

8. Under the Project, key physical and social infrastructure was to be rehabilitated to pre-flood conditions to (i) restore normal economic and social activities, and (ii) create opportunities for employment or income generation. Poverty, caused by massive income

6 Bagerhat, Bhairab, Bhanga, Boalmari, Bogra, Brahmanbaria, Chandpur, Chatkhil, Comilla, Dinajpur, Faridpur,

Feni, Gabtali, Gaibandha, Gazipur, Gopalgonj, Gournadi, Habigonj, Jamalpur, Jhalokathi, Joypurhat, Khoksa, Kishoregonj, Kumarkhali, Kushtia, Lalmonirhat, Laxmipur, Madaripur, Manikgonj, Monohordi, Moulavibazar, Munshigonj, Mymensingh, Nagarkanda, Narayangonj, Narsingdi, Natore, Netrakona, Noakhali, Pabna, Patuakhali, Poshuram, Raipur, Rajbari, Ramganj, Rangpur, Satkhira, Savar, Shahjadpur, Shariatpur, Sherpur, Sirajganj, Sunamganj, Tangail, and Tongi.

7 ADB. 2005. Technical Assistance to the People’s Republic of Bangladesh for Support for Financial Management and Monitoring. Manila (TA 4561-BAN, for $150,000, approved on 20 January); and ADB. 2005. Technical Assistance to the People’s Republic of Bangladesh for Early Warning Systems Study. Manila (TA 4562-BAN, for $250,000, approved on 20 January).

8 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of Bangladesh for Emergency Flood Damage Rehabilitation. Manila (Loan 2156-BAN[SF]) was approved for the amount of $180 million equivalent on 20 January 2005.

9 ADB. 1999. Bangladesh Country Operational Strategy: Responding to the Challenge of Poverty. Manila. 10 ADB and the Government of the People’s Republic of Bangladesh. 2000. Partnership Agreement on Poverty

Reduction. Manila.

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erosion, loss of physical assets, and debt accumulation, which had intensified to an alarming extent after the flood, would thus be reduced. The infrastructure and civil works completed under the Project allowed economic activity to resume by (i) improving transportation links between agricultural farms and marketplaces, and upazila11 and district headquarters; (ii) shortening travel time for freight and passenger traffic on roads and railways, and thus reducing transportation costs; and (iii) creating employment opportunities for local skilled and unskilled labor, thereby increasing purchasing capacity, expenditure, and consumption. These resulted in higher productivity, and improved gross domestic product. The Project was designed and formulated to reduce poverty and contribute to Bangladesh’s economic recovery, according to ADB’s country strategy and overall goal. It was relevant to ADB’s country strategy at the time of design and remains relevant.

9. Of the eight ADB loans providing disaster emergency assistance to Bangladesh so far, two have undergone post-evaluation.12 ADB’s experience and the lessons of disaster assistance13 indicate the need for (i) quick preparation of disaster assistance ; (ii) a focus on restoring infrastructure facilities; (iii) completion of rehabilitation work within 2 years, to the extent possible; (iv) strong consulting support and ADB supervision during subproject design and implementation; (v) rapid government response and action; (vi) beneficiary participation in project preparation and implementation; (vii) environment and social aspects incorporated in project design and monitored during implementation; (viii) retroactive financing and imprest accounts used to facilitate government access to funds; (ix) subproject selection criteria that permit simple prioritization of subprojects and rapid implementation; and (x) upgrading, rather than mere restoration, of infrastructure, to enhance flood resistance.

10. The project components were designed and implemented according to government policy in the relevant sector. The design of part A (rural infrastructure) was in line with the Government’s sixth 5-year plan (2002–2007), which aimed at improving basic physical infrastructure in rural areas for economic development. Part B (roads) was consistent with the recommendations of the road master plan,14 whose objective was to sustain the improved riding quality of roads and reduce vehicle operating costs (VOCs). The design for part C (railways) supported the Government’s policy of promoting the railway subsector as the pro-poor mode of transport, facilitating cheap yet environment-friendly transportation of long-haul freight. Part D (water resources) was designed and implemented according to the Government’s National Water Policy,15 which aimed at taking “appropriate measures to provide desired levels of protection for life, property, vital infrastructure, agriculture and wetlands,” and the Flood Action Plan,16 prepared after the floods of 1987 and 1988, which helped determine the most appropriate action for coping with floods, including subproject selection. Part E (municipal

11 The divisions of Bangladesh are divided into 64 districts, or zila. The districts are further subdivided into 493

subdistricts, or upazila. 12 PEO466, October 1996, ADB. 1988. Report and Recommendation of the President to the Board of Directors on a

Proposed Loan to the People’s Republic of Bangladesh for the Flood Rehabilitation Project. Manila (Loan 882-BAN[SF]); and PEO444, August 1995, ADB. 1988. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of Bangladesh for the Flood Damage Restoration Project, Manila (Loan 892-BAN[SF]).

13 ADB. 2007. ADB’s Disaster and Emergency Assistance Policy; and Positioning ADB’s Disaster and Emergency Assistance: Policy in a Changing Regional Environment. Manila (drafts); Benson, C., and W. T. Linklaen-Ariens. 1999. Rehabilitation after Disasters. A Review of Lessons Learned and Emerging Issues. Manila: ADB (third draft).

14 ADB. 1988. Technical Assistance to the People’s Republic of Bangladesh for Preparation of a Road Master Plan. Manila; and ADB. 1994. Technical Assistance to the People’s Republic of Bangladesh for Preparation of a Road Master Plan (Supplementary). Manila.

15 Ministry of Water Resources, Government of Bangladesh. 1999. National Water Policy. Dhaka. 16 Flood Plan Coordination Organization, Ministry of Irrigation, Water Development and Flood Control. 1989. Flood

Action Plan. Dhaka, Bangladesh.

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infrastructure) conformed with the objectives of the Government’s sixth 5-year plan to improve municipal infrastructure, including roads, drains, bridges, and culverts.

B. Project Outputs

11. The major outputs achieved under each of the five components are described briefly in the following sections. Full details of the appraisal and detailed assessment targets compared with the actual outputs achieved are in Appendix 1. The project components as completed are shown on the maps in Appendix 2.

1. Part A: Rural Infrastructure

12. At appraisal it was envisaged that 5,500 kilometers (km) of upazila and union roads would be rehabilitated into bitumen-surfaced roads. Actual works totaled only 2,423.41 km. The rehabilitation of 13,200 meters (m) of bridges/culverts was also anticipated at appraisal, but the actual total was only 11,075.51 m. Tree plantation was estimated to cover 110 km at appraisal but actually covered only 32.98 km. Of a projected 10 flood shelters, only 9 were replaced. On the other hand, flood protection works totaling 45.62 km were rehabilitated, compared with 40 km at appraisal.

13. The shortfall in the implementation of road and bridge works can be attributed to the significant amount of time that elapsed between the preliminary damage assessment, right after the 2004 flood receded, and the detailed damage assessment during design and planning. Increased damage from continued use of these infrastructure during the long interval required more extensive rehabilitation, at higher unit costs.17 The cost of construction materials had also increased. Budget limitations dictated the cutbacks in rehabilitation.

2. Part B: Roads

14. At appraisal it was estimated that the floods had submerged 6,728 km of road and damaged 2,968 km of road, 306 bridges and culverts, and 26 ferry landings. Roads rehabilitated under the Project totaled 3,572 km,18 and bridges and culverts repaired totaled 2,115 m.

3. Part C: Railways

15. BR is divided into East and West zones. At appraisal it was estimated that 320 km of track in 117 locations and 110 bridges in the East Zone and 96 km of track in 40 locations and 18 bridges in the West Zone had been damaged by the floods.19 This component comprised (i) civil works to restore embankment track, bridges, stations, buildings, roads, and electrical, signaling, and telecommunication facilities; and (ii) provision of emergency stock of equipment and materials to increase preparedness and ability to handle future emergencies. The actual work implemented involved (i) 90,116 m of embankment re-profiling; (ii) 39,383 m of ballast wall restoration; (iii) 87,868 square meters of embankment protection; (iv) 19,834 m of embankment protection wall restoration; and (v) 391 cubic meters of embankment natural ground replacement. 17 The unit cost of road rehabilitation was Tk437,000 per km in the preliminary damage assessment report (lower

than the Tk740,000 per km calculated for the 1998 flood) and Tk1,212,000 per km during implementation (i.e., 277% higher).

18 Consisting of 99 km of national roads, 1,236 km of regional roads, and 2,237 km of district roads. 19 The appraisal report did not give details of the locations or extent of the damage.

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16. On 5 March 2006, anticipating loan savings, BR requested the substitution of steel sleepers for the wooden sleepers that were to be procured because it was having difficulty sourcing wooden sleepers. ADB approved the request on 15 June 2006. Under two separate contract packages20 28,000 meter gauge (MG) steel sleepers and 224,000 elastic rail clips21 were procured for the East Zone of BR. The equipment purchased included a rail sawing machine, rail drilling machines, rubber seal (RS) joint, lifting jacks, switch expansion joints for dual-gauge track, and trucks.

4. Part D: Water Resources

17. Financial constraints hampered the achievement of the targets set for embankments and protective works in the flood damage assessment report. Against a target of 1,056 km of embankment works, the actual works totaled only 1,029 km.22 Protective work was estimated at 30 km at appraisal and ultimately amounted to 29 km. However, the work on irrigation and drainage channels (29 km) and water structures (459) matched the appraisal targets.

5. Part E: Municipal Infrastructure

18. In this component urban infrastructure, including municipal roads, drains, bridges and culverts, and footpaths in slums located in 55 pourashavas, was to be rehabilitated or improved. Actual achievements were 1,315 km of municipal roads (compared with 1,028 km at appraisal),23 426 m of bridges/culverts (compared with 393 m), and 61.5 km of drains (compared with 47 km). Repair work on footpaths in slums and low-income areas24 was found to have been taken on by the pourashavas themselves or by various nongovernment organizations and was therefore dropped from the scope of works. Loan savings and fluctuations of exchange rate between US$ and Taka financed the increase in actual works over the targets.

C. Project Costs

19. At appraisal, the project cost was estimated at $240.00 million equivalent—$73.80 million (31%) in foreign exchange cost (including $2.00 million for service charges and interest during construction [IDC]) and $166.20 million equivalent (69%) in local currency cost (including taxes and duties). The ADB loan of $180 million equivalent from Special Funds would finance 75.0% of the project cost. It would cover all of the foreign exchange cost and about 64% of local currency cost.

20. The project completion cost estimated by the Project Completion Review (PCR) Mission was $204.28 million equivalent, with a foreign exchange cost of $68.17 million equivalent ( 33%) and a local currency cost of $136.11 million equivalent (67%). ADB financed $136.85 million equivalent (67% of the total), the Government of the Netherlands $10.75 million equivalent

20 Subproject contract packages BR/EZ/PQ-06 and BR/EZ/PQ-09 were invited on 20 June 2006. The bids for these

contract packages was later discovered to be nonresponsive as the bidders had failed to comply with the qualification criteria, and the packages were rebid on 5 September 2006.

21 Pandrol clips. 22 These figures represent both full and partial works on embankments. 23 The original appraisal target of 1,028 km of roads was revised to 1,121.46 km by an ADB review mission in

April 2006 to fully achieve project objectives. This revised target was increased again to 1,181 km in August 2006 and further to 1,315 km in April 2007.

24 The 63 km of footpaths targeted at appraisal were only in the Siraganj and Chandpur pourashavas.

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(5%), and Sida $14.70 million equivalent (7%).25 Cofinancing amounted to $25.45 million equivalent (12%). The Government of Bangladesh financed the remaining $41.98 million equivalent in local costs. The actual costs were lower than the appraisal estimates mainly because of the loan savings generated under part B (roads)—$49.89 million compared with $62.70 million estimated at appraisal. The contractors bid prices were significantly lower than the appraisal estimates. The devaluation of Taka relative to US dollar was another factor. Loan savings were also made under part E (municipal infrastructure), enabling an increase in outputs achieved in this component. The unused balance of the loan was cancelled when the loan account was closed on 13 December 2007.

21. Details of the actual costs for each component compared with the estimates at appraisal are shown in Appendix 3. For cost comparison, the local currency costs incurred by the EAs were converted into dollars at the prevailing rate during each transaction. The average exchange rates used are in Appendix 4.

D. Disbursements

22. No disbursement schedule was included in the appraisal. However, on the basis of the implementation schedule prepared at the time of appraisal, the projected disbursements were developed and are shown in Appendix 5 along with the actual disbursements during implementation. The Loan Agreement was revised and part of the ADB loan was canceled on 15 November 2005 when cofinancing from the Government of the Netherlands and Sida was confirmed. The Government of the Netherlands approved a grant for €10.79 million ($13 million) for the water resources component (part D) and a further grant of $250,000 equivalent for TA 4562-BAN: Early Warning Systems Study. Sida approved a grant of SKr120 million ($14.7 million) for the rural infrastructure component (part A). These grants were administered by ADB. The amount canceled from the ADB loan was SDR19,433,823 ($27.7 million). ADB canceled the remaining balance of SDR5,365,540.21 ($8,493,918.43) after the last disbursement on 13 December 2007.26 The first (20 May 2005) and final disbursements (13 December 2007) spanned 31.2 months, compared with the 27.3-month disbursement period envisaged at appraisal. Although all physical activities under the loan were completed by the original loan closing date (31 July 2007), the loan account was kept open until 13 December 2007 to accommodate some late withdrawal applications to ADB.

23. RHD (part B)27 and BR (part C) had a backlog of disbursements. RHD’s backlog was due to (i) slow progress under several contract packages, particularly those involving bridges; and (ii) delayed release of adequate counterpart funds by the Government. BR disbursements under part C were slowed down by (i) procedural formalities involved in the processing of interim payments and withdrawal applications, (ii) delayed delivery of materials and equipment by suppliers, (iii) the practice of bunching withdrawal applications to ADB, and (iv) delayed release of counterpart funds by the Government. Part D, administered by BWDB, also lagged behind in disbursements. The delay was mainly due to the traditional BWDB requirement of having its project monitoring team inspect the dumping of materials on-site before certifying payment. BWDB later agreed to waive this requirement to speed up disbursement, and the 25 As envisaged at appraisal the ADB loan was approved as umbrella or standby financing on the understanding that

part of the $180 million loan would be canceled once grant financing became available from the Netherlands or Sweden. The partial cancellation was made when cofinancing became available from the Government of the Netherlands and Sida (para. 22).

26 The grants from the Government of the Netherlands (no. 0038) and the Government of Sweden (no. 0039) were also closed on 13 December 2007.

27 As of 28 March 2006 only $3.99 million had been disbursed for part B, compared with contract awards of $34.79 million.

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backlogs were cleared toward the end of the Project. Another cause of delay in disbursements was the nationwide political unrest, which slowed down the movement of payment documents from the field to the EA headquarters in Dhaka.

24. Imprest accounts, as envisaged at appraisal, were set up for each component, except part B (roads). For part B, the reimbursement procedures were the same as those for current ADB-financed projects, with RHD as the EA. ADB’s statement of expenditures (SOE) procedure was followed in reimbursing eligible expenditures and liquidating advances to the imprest accounts. The EAs’ imprest accounts were well maintained and the SOE procedure facilitated timely payment to consultants, contractors, and suppliers.

E. Project Schedule

25. The ADB Board approved the loan on 20 January 2005. The Loan Agreement was signed on 2 February 2005 and became effective on 2 May 2005. The loan was closed on 31 July 2007, as envisaged at appraisal. Because of the emergency nature of the Project, it was stipulated at appraisal that all subprojects under the five components had to be completed within 25 months, i.e., by 31 January 2007. However, to use the savings28 from low bid prices and from other EAs (especially RHD), LGED undertook additional subprojects.29 ADB extended the completion deadline for all subprojects to 31 May 2007. By 31 March 2007 93% of the civil works for part A, 87% for part B, 75% for part C, 88% for part D, and 95% for part E were completed. Because of delays in procurement and the awarding of contracts (para. 35) it was not until 31 July 2007 that all the subprojects were completed. Some subprojects that made extremely slow progress had to be canceled. Although these delays did not adversely affect the project implementation schedule, timely action by the EAs (especially BR) could have minimized the delays and brought the project benefits earlier to the affected people. Appendix 6 compares the actual and the appraisal implementation schedules for each component.

F. Implementation Arrangements

26. The implementation arrangements were as envisaged at appraisal. The Borrower was the Government of Bangladesh and the EAs for the five components were LGED for parts A and E, RHD for part B, BR for part C, and BWDB for part D. As in previous ADB-financed flood damage rehabilitation projects, the already established project steering committee (PSC),30 chaired by the Member for Programming Division of the Planning Commission, Ministry of Planning, was responsible for coordinating the overall project , overseeing governance matters, resolving interagency issues and procedural matters, and ensuring counterpart funding, as well as monitoring overall project implementation. Coordination among ADB and the EAs, government agencies, consultants, and contractors was adequately maintained through regular PSC meetings. Each EA established a project management unit (PMU) and appointed a full-time project director (PD), who was responsible for project implementation and coordination. For each of parts B and C, a project coordinator was appointed to coordinate among the multiple PDs in different zones. In some components the PD changed several times. For part B (roads), there were changes in the PD in some of the zones, and for part C (railways), there were three 28 In December 2005, the loan savings were estimated at $10.0 million. 29 LGED undertook an additional 42 subprojects for part A, and 40 for part E. 30 A PSC was created for the first time for the 1998 Flood Damage Rehabilitation Project and found to be very

effective. It comprised the member for physical infrastructure of the Planning Commission and representatives from the Economic Relations and Finance divisions of the Ministry of Finance, the Cabinet Division, the Implementation Monitoring and Evaluation Division of the Planning Commission, and the EAs involved in emergency rehabilitation works under ADB, World Bank, and other aid agency projects.

8

PD changes in the East Zone and two in the West Zone. But for parts A (rural infrastructure), D (water resources), and E (municipal infrastructure), the PDs were the same throughout the Project. The PDs under some components changed because of promotion or transfer to other departments of the same organization. The implementation of the Project, however, did not suffer adversely from these changes. The Bangladesh Resident Mission (BRM) hosted frequent coordination meetings with the PDs and consultants to review the physical progress of each component, discuss problems, and agree on solutions. The activities of the PSC proved very effective in identifying problems and taking remedial actions at an early stage, thus minimizing implementation delays. The Government also approved simplified procedures for tendering, approval, and awarding of contracts. The Government’s single-stage, one-envelope system of local competitive bidding, approved by ADB, was followed. ADB also simplified its system for approving the awarding of civil works contracts. Tender evaluation and contract documents for civil works for the first subproject selected by each EA, and for civil works exceeding $200,000 equivalent, were reviewed and approved by ADB before the contracts were awarded. All other subprojects were approved after they were awarded. Contracts could thus be awarded much faster, consistent with the emergency nature of the Project. This simplified procedure of contract awards did not detract from the successful implementation of the subprojects.

27. Given the urgency of the Project and the need to commence the flood damage rehabilitation before the next monsoon season, ADB approved advance action for the procurement of goods, services, and works, and the recruitment of consultants, provided that this took place on or after 12 September 2004 (date of appraisal). ADB also agreed to provide retroactive financing for eligible expenditures subject to certain conditions.31 Considering the complexity of the Project, the overall implementation arrangements were generally satisfactory and effective. The provision of grant funding by the Government of the Netherlands and the Government of Sweden, through Sida, constituted a major change in the scope of the Project.

G. Conditions and Covenants

28. Details of compliance with the loan covenants are given in Appendix 7. The Government and the EAs generally complied with the covenants and substantially met the reporting requirements. However, the EAs submitted their project completion reports separately. The reports therefore lacked uniformity in format, and, largely because of the EAs’ unfamiliarity with ADB’s reporting requirements, in the data and information they provided. Each EA also maintained separate records and accounts to identify the goods and services financed under the loan. The accounts were audited annually by independent auditors and the audited accounts were generally submitted on time to ADB and substantially met the covenant requirements.

31 ADB agreed to provide retroactive financing of $25 million for eligible expenditures for the immediate rehabilitation

of key infrastructure and facilities and for consulting services incurred not earlier than 12 September 2004 (date of appraisal), provided that the expenditures conformed to agreed procedures and were certified by the EAs and consultants, and that the certification was acceptable to ADB. Retroactive financing was to be approved under the following conditions: (i) the consultants were in the field and had prepared the subproject, (ii) contracts over $50,000 equivalent were approved by ADB, and (iii) works were procured according to tender procedures acceptable to ADB and certified by the consultants (ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grants to the People’s Republic of Bangladesh for the Emergency Flood Damage Rehabilitation Project. Manila [Loan 2156-BAN(SF)], para. 52).

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H. Related Technical Assistance

29. ADB included two TA grants in the Project. These were (i) Support for Financial Management and Monitoring,32 and (ii) Early Warning Systems Study.33

30. The overall objective of the first TA was to assist the Government of Bangladesh in monitoring the Emergency Flood Damage Rehabilitation Project. This entailed supporting the PSC and its secretariat, the Implementation Monitoring and Evaluation Division (IMED) of the Planning Commission, in the tasks mandated by the Government for the effective monitoring and evaluation of the Project. The IMED was the EA for this TA. The Government did not have to sign a TA agreement for this small-scale TA, which was implemented over 24 months. The consultant’s contract was signed on 4 July 2005 and the consultant was fielded on 24 July 2005 and completed the work on 23 August 2007. Overall the TA was rated as success. No TA completion report (TCR) was prepared.34

31. The objective of the TA for the Early Warning Study was to assist the Government in assessing the effectiveness of its flood forecasting system and in drawing up a strategy for enhancing its usefulness and early-warning capability. This entailed assessing institutional, technical, physical, and other constraints and developing a strategy for improving the system. The Government of the Netherlands approved grant financing of $250,000 equivalent, leading to the cancellation of the equivalent amount earmarked by ADB for the TA. ADB, however, administered the TA, with BWDB as Executing Agency. As originally envisaged, the TA was to be implemented over 6 months, from 15 February 2005 to 14 August 2005. The signing of the TA Agreement by the Government was, however, significantly delayed—the agreement was not signed until 23 April 2005—and so was the selection of the individual consultants. Eleven individual consultants were short-listed only in February 2006 and their contracts were signed only during 19 April–21 June 2006 for intermittent inputs from 1 May 2006 to 31 October 2006. Internal reallocation of the person-months of the international and national consultants also contributed to some delay. Although this was a 7-month study, it took two more months for the final report to be completed. The recommendations prompted the national steering committee to approach the development partners for the high-priority investments needed to improve the flood forecasting and warning system. Overall, the TA was rated as success. Full details of the TA and its outputs are given in the TCR in Appendix 8.

I. Consultant Recruitment and Procurement

1. Consultant Recruitment

32. Consultant recruitment was as envisaged at appraisal and conformed to ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Because the Project had a short implementation period and issues needed to be addressed as quickly as possible, the consultants had to be recruited without delay. ADB therefore agreed to the direct engagement of consultants and approved advance action in that regard. At the request of the Government, made through the Economic Relations Division in December 2004, ADB agreed to engage the consultants directly on behalf of the Borrower. The consultants were recruited from

32 ADB. 2005. Technical Assistance to the People’s Republic of Bangladesh for Support for Financial Management

and Monitoring. Manila (TA 4561-BAN, for $150,000, approved on 20 January). 33 ADB. 2005. Technical Assistance to the People’s Republic of Bangladesh for Early Warning Systems Study. Manila

(TA 4562-BAN, for $250,000, approved on 20 January). 34 According to Project Administration Instruction 6.08, a TCR is not required for small-scale technical assistance,

which is currently defined as TA with an approved value of no more than $150,000.

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ADB’s various ongoing loan projects and were fielded from 20 December 2004. By 1 January 2005 all the consultants were in the field.

33. ADB selected five consulting firms, one for each of the five components. The selection was based on (i) current or prior substantial and satisfactory experience in ADB-financed flood damage rehabilitation projects in Bangladesh, (ii) capacity to deploy needed expertise of the specified relevance and quality at short notice, and (iii) previous selection for ongoing projects following ADB’s Guidelines on the Use of Consultants and satisfactory performance in those prior engagements. ADB on 15 December 2004 invited the five consulting firms to submit their technical and financial proposals, and by the end of that month had received proposals from all five consultants. All the consultants’ contracts were signed by 12 October 2005. The consultants’ inputs procured under the five components totaled 236 person-months of international consultants (compared with 25035 at appraisal) and 2,237 person-months of national consultants (compared with 2,200 at appraisal). The consulting inputs as envisaged at appraisal and as used by project completion are summarized in Appendix 9.

2. Procurement

34. Project goods and services financed by ADB were procured through local competitive bidding (for civil works) and through international competitive bidding and international shopping (for equipment and materials), according to ADB’s Procurement Guidelines (2007, as amended from time to time), as envisaged at appraisal. A total of 1,684 civil works contract packages were procured for the Project, comprising 709 contracts36 for part A; 120 contracts37 for part B; 75 contracts for part C; 278 contracts for part D; and 502 contracts for part E.38 Equipment and materials for part C (railways) were procured through international competitive bidding.

35. The procurement of all contract packages went reasonably smoothly, with some exceptions. In part A there were allegations that LGED did not follow due diligence in procurement and contract implementation, and strong indications of corruption by LGED’s field staff in quality assurance. Through review missions, coordination meetings, and PSC meetings, ADB closely monitored these incidents, and in some cases advised rebidding or cancellation of contracts. Procurement for Part B was protracted, with an average lead time of 10 months. Several contract packages had to be rebid or canceled because of inadequate integrity in the bidding process, the submission of forged bid securities by the bidder, and incidents of coercion. In part B there were six contract packages in Comilla zone. Out of the 120 firms that purchased bidding documents for these contracts, only 5 submitted bids. Investigation by ADB’s Anticorruption Unit strongly indicated that other contractors had been barred through coercive and restrictive practices from submitting bids. The six contract packages were canceled. This isolated incident, however, does not detract from the performance of LGED (see para. 40).

J. Performance of Consultants, Contractors, and Suppliers

1. Consultants

36. The performance of the consultants under all five components was generally satisfactory, considering the multitude of small contracts and the wide dispersion of the project

35 The appraisal report quoted 250 person-months of international input. But the appendixes to the report indicated a

total of 246 person-months for the five components. 36 Including additional contract packages made possible by loan savings. 37 Comprising 101 road packages and 19 bridge packages. 38 Including additional contract packages made possible by loan savings.

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sites. However, the consultants’ monitoring systems and practices could have been strengthened further through (i) greater vigilance by their ground-level staff, (ii) closer coordination between the consultants’ Dhaka base and the field through more frequent meetings, (iii) the presence of the team leader in the country during key or peak project activities, and (iv) the enhanced integrity of the consulting staff in supervising contractors’ work.

2. Contractors

37. The performance of all contractors was generally satisfactory and the quality of the completed works was good. Several components, however, suffered delays due to the following: (i) contractors’ reluctance (or inability) to prepare adequate work plans, (ii) the occurrence of three rainy seasons during the project period, (iii) contractors’ lack of proper management capacity, (iv) delay in getting some material testing reports, and (v) political disturbances in the country. In some components, because of the inadequate financial capabilities of many contractors, interim payment certificates had to be resubmitted several times, holding up the implementation of works. Some small contractors mobilized late; thus, some subcomponents were not completed on time. Additionally, some contracts that were making little or no progress were canceled.39

3. Suppliers

38. The only component that involved the supply of equipment and materials was part C (railways). The provision of steel sleepers was delayed, as a supplier had difficulty obtaining supply from its principal in India. The supplier eventually subcontracted the package for steel sleepers. Political unrest also delayed the production of steel sleepers. Overall, however, the performance of the suppliers of equipment and materials was satisfactory.

K. Performance of the Borrower and the Executing Agency

39. The performance of the Borrower and the EAs was satisfactory. Despite the complexity of the Project—the short implementation period, and the involvement of five sectors and four EAs—the Borrower performed satisfactorily and achieved successful project implementation. The PSC, established quickly within the Planning Commission, performed well and fulfilled most of its obligations in monitoring project implementation by the different EAs. However, during the early stages of the Project, substantial delay in approving the award of contracts and release of government counterpart funds delayed the progress of work.

40. Among the four EAs, the performance of LGED (parts A and E), RHD (part B), and BWDB (part D) was highly satisfactory. LGED effectively used the loan savings from other components to undertake 42 additional subprojects. Allegations of procurement corruption (para. 35) do not undermine its performance. Although RHD disbursements were slow at times, mainly because of slower than expected progress under several bridge projects,40 on the whole, RHD did well and, despite the initial delays in the awarding of contracts, completed all works by the loan closing date of 31 July 2007. The performance of BWDB (part D) was also highly satisfactory, particularly in managing the highly technical and time-based river-borne structures, although there were minor start-up delays. On the other hand, the performance of BR (part C)

39 Slow progress led LGED to cancel 17 subprojects. 40 Some bridge projects were canceled as they could not be completed within the loan period.

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was only partly satisfactory. The implementation of works under the BR component suffered from poor planning and lengthy procurement procedures41 inherent in BR’s outdated system.

L. Performance of ADB

41. The Project was processed and administered by ADB’s Bangladesh Resident Mission (BRM). BRM conducted an inception mission, five review missions, and three special loan administration missions. The mission teams visited the project sites and also the EAs’ headquarters in Dhaka, where coordination meetings were held. Two ADB project officers were involved in the implementation of the Project.42 The role carried out by the ADB missions in giving advice on technical issues, preparing and evaluating bid documents, and assisting with loan administration was recognized by the EAs. ADB authorized advance procurement action for equipment and materials, and the recruitment of consultants, and agreed to provide retroactive financing, which was effective and saved time. ADB also recommended simplified approval procedures43 for contract awards, which were realistic for the Project. ADB-BRM carried out effective coordination through quarterly PSC meetings and monthly meetings with the EAs’ project directors. Overall, the performance of ADB was satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

42. The Project’s design and formulation conformed to the Government’s development strategy of promoting economic development by improving infrastructure, and was in line with ADB’s 1999 country operational strategy, which was aimed at reducing poverty through economic development. The Project was designed to restore flood-damaged infrastructure facilities essential to economic growth. All of the objectives envisaged at appraisal were achieved during the Project. With the infrastructure restored, affected sectors were able to contribute to economic growth, at least at pre-flood levels. No major changes were made in the project design during implementation. The Project is therefore considered highly relevant to ADB’s present country operational strategy and the Government’s latest development strategy, and remains relevant.

B. Effectiveness in Achieving Outcome

43. The Project was highly effective, as the completed subprojects in all components achieved their principal objective of restoring damaged infrastructure to pre-flood levels, thus enabling the country to return to the normal economic and social activities that had been disrupted by the floods. Farmers in low-lying, flood-prone areas benefited from reduced water logging of agricultural land. Rehabilitation works on the railways enabled train services to and from the affected areas to return to normal.44 The restoration and rehabilitation of road and bridge subprojects gave isolated villages access to markets and social services in nearby urban centers. This was particularly important for agro-based industries, which are the main economic activity in the majority of the areas affected by the floods. 41 Some of this delay can, however, be attributed to the suppliers of equipment and materials. 42 The two project officers were based in BRM. 43 Government of Bangladesh. Circular No. PD NEC-EC/NEC/Coordination-2/13/98/223. 16 October 2000. 44 The slope protection works on railway embankments, using geo-textile technology, avoided the recurrence of

temporary repair works and thus resulted in considerable savings in government expenditures.

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44. In general, all project components made notable contributions to poverty reduction in the immediate vicinity of the subprojects. Subproject construction activities generated employment opportunities for local labor. Those employed in the works benefited from increased income and purchasing power. An assessment of the project impact and benefits, based on a sample of subprojects that were visited by the PCR Mission, is in Appendix 10.

C. Efficiency in Achieving Outcome and Outputs

1. Financial Performance

45. The Project did not undergo financial evaluation because it was not revenue-generating.

2. Economic Performance

46. As the Project was of an emergency nature, no economic analysis was undertaken to justify the investments at appraisal. The Project focused on the restoration of flood-damaged key infrastructure facilities, and capital costs were considered sunk costs. The economic benefits of such restoration activities were, in fact, those that accrued at the time of initial construction but were mostly lost because of flood damage. Project-financed restoration brought infrastructure back to its original productivity and efficiency levels. These benefits are high, though not always quantifiable for all project components. At appraisal the economic internal rate of return (EIRR) on past flood damage rehabilitation projects was in the range of 18% to 55%.

47. Without defined baseline or time-series socioeconomic data for most components, and given the fact that the damaged facilities were restored only to their pre-flood status, no attempt was made to conduct economic evaluation for those components with little or no data.45 Economic efficiency, as measured by the EIRR, was assessed for two sample road sections in part B (a regional road and a ‘district’ road) because road projects are more amenable to benefit quantification. The results show that the investment has been highly efficient.46 The calculated EIRRs were 39.9% for the regional road, and 23.9% for the ‘district’ road. These EIRRs compare favorably with the 12% economic opportunity cost of capital. Appendix 11 shows the calculated EIRRs as well as the supporting assumptions.

D. Preliminary Assessment of Sustainability

48. The rehabilitation and restoration works under the Project were of an emergency nature, aimed at meeting immediate needs, and enabling a return to normal economic and social activities in the affected areas. These rehabilitated components have shown their ability to withstand future floods. Immediately after the completion of the Project, floods occurred during

45 ADB.1995. Operations Manual. Section 25/BP: Rehabilitation Assistance after Disasters. Manila (page 4, footnote

1) states that “the rehabilitation loan may finance numerous subprojects that are small in size and prima facie economically viable. For such small projects, internal rate of return analysis may not be feasible or practical.” Also OM Section D&/BP states that although rigorous rate-of-return analysis may not be feasible, estimates in an order of magnitude should be provided and justified with as much detail as possible.

46 According to the guidelines of ADB’s Operations Evaluation Department, if the estimated EIRR exceeds 18% a project is normally rated highly efficient. An EIRR less than or equal to 18% but greater than or equal to 12% indicates an efficient project; an EIRR less than 12% but greater than or equal to 6%, a less-efficient project; and an EIRR of less than 6%, an inefficient project.

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two short periods over 3 months in July–September 2007.47 A large part of the 2007 floods affected the project area. The embankment protection works, rehabilitated road projects, and rail works undertaken during the Project did not suffer any damage. This was verified by the PCR Mission during visits to several completed civil works subcomponents under the Project.

49. The sustainability of the project components depends on the EAs’ ability to preserve the rehabilitated assets through proper maintenance. To ensure sustainability and facilitate monitoring, covenants relating to the Project’s operation and maintenance expenditures may need to be specific to each sector. The EAs, however, are faced with funding shortfalls each year. On average, the road routine maintenance budget is about $2.0 million.48 Periodic maintenance is allocated about $42.0 million yearly, or around $2,000 per km. This current allocation is insufficient. The absence of regular maintenance due to budgetary shortages has resulted in a considerable backlog of maintenance work. A recent study49 has estimated that the maintenance requirement may be double the present allocation. For the road subcomponents (parts A and B) the Government is seriously considering establishing a road maintenance fund (RMF). A draft bill50 for consideration by the Ministry of Finance and the Ministry of Communications (MOC) has been prepared. An 11-member committee set up by MOC reviewed the bill on 20 March 2007. A second meeting to finalize the bill is expected before it is presented to the Cabinet. The Government is committed to establishing the RMF and has been receiving assistance from the Road Fund Establishment Office,51 which was established to draft the legislation. The subprojects under parts A and B have an economic life of about 5 years, as they were rehabilitated to meet immediate needs. They will need further periodic maintenance in 2010 or 2011 (most of the road rehabilitation was completed in 2005 or 2006).52 The establishment of the RMF before then (expected in 2008) will ensure funding for road maintenance. The other components rehabilitated and restored under parts C, D, and E consist mainly of permanent structures (e.g., bridges, culverts, protective works, sluice gates, embankments, and railway tracks) that are still in good condition and proved their sustainability during the 2007 floods. As confirmed by the PCR Mission, these structures are still intact and have not been damaged. The structures should, however, continue to be maintained by the EAs. Overall, therefore, the project outputs are rated likely to be sustainable.

E. Other Impact

1. Environmental Impact

50. An initial environmental examination (IEE) of the entire project area indicated that no significant adverse environmental impact was associated with the Project. All subprojects recommended by the EAs were also subjected to environmental screening. Subprojects that were perceived to have a harmful impact on the environment were to be excluded. The subprojects were checked by BRM to ensure that they satisfied environmental requirements

47 The first flood was from the end of July until mid-August and inundated about 30% of the country’s land mass. The

second flood occurred after prolonged and heavy rainfall from the end of August to mid-September, flooding about 42% of Bangladesh.

48 This is to cover routine maintenance on about 21,000 km of road, for a budget of about $126 per km. 49 World Bank. 2006. Road User Charges Study for Sustainable Road Maintenance Financing. Washington, DC

(undertaken as part of the Road Sector Reform Project, March). 50 The bill sets out the purpose of the fund, the source of its revenues, the composition and general duties of the road

fund board, and the preparation and review of the annual road maintenance program of the road agencies. 51 Set up under the Consolidated Institutional Component project financed by the Department for International

Development of the United Kingdom. 52 The PCR Mission observed that most project roads visited were in satisfactory condition after 2 years of service

and were likely to last their design life of 5 years.

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before they were approved. All the subprojects nominated by the EAs met the required environmental standards and incorporated environmental mitigation measures where necessary. As the subprojects were already existing, no additional environmental impact assessment was considered necessary. The environmental mitigation measures recommended in the IEE were incorporated into the design and civil works contracts. The consultants’ field investigations formed the basis for the environmental analysis. Environmental concerns that were uncovered during these site visits were communicated to contractors so that they could undertake environmental mitigation measures. Compliance with the recommendations was subsequently checked by the EA and the consultants. The project activities did not interfere with ecosystems, as almost all work was restorative. In a few cases where designs were modified slightly for the relocation of damaged infrastructure, no adverse environmental effects were allowed. The PCR Mission observed in some urban areas (part E: municipal infrastructure) that drains were blocked by waste materials from local residents. The PCR Mission suggested to the EA that a public awareness campaign and discussions with local residents might enable the latter to understand the need to protect their environment as these rehabilitated roads, drains, and other assets were improving their way of life. No other environmental problems were observed.

2. Socioeconomic Impact

51. The Project has had significant direct and indirect socioeconomic impact. The project works have generally improved the quality of life of the rural communities, the principal beneficiaries. The restoration works have allowed normal activities to resume, with easier access to markets, hospitals, and schools. People have returned to their homes and normal activities with greater assurance that the physical infrastructure can now cope with future floods.

3. Resettlement Impact

52. Although no land acquisition or involuntary resettlement was anticipated, a resettlement framework was prepared at appraisal as required under ADB’s safeguard policy for sector loans. All work was undertaken in existing alignments or original sites, and no land acquisition or resettlement was undertaken.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

53. The Project is considered highly successful, on the basis of a review of its relevance, effectiveness, efficiency, and sustainability. Appendix 12 presents a quantitative assessment of project performance to determine the project rating.

B. Lessons

54. Projects that involve several sectors, and therefore several EAs, must be monitored through a central PSC of the Borrower. Regular interaction between the Government and ADB through the PSC contributed greatly to the success of the Project. The use of a sector approach was extremely beneficial in identifying appropriate subprojects scattered over a wide area and enabling funds to be reallocated from one sector to another as the need arose.

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55. The three EAs that have done well in implementing ADB-funded emergency flood damage rehabilitation projects are LGED, RHD, and BWDB. The fourth EA, BR, has significant capacity constraints. It needs capacity building to improve its contract administration and knowledge of the procurement and disbursement procedures of ADB so that it can implement civil works contracts without delay.

56. The use of simplified approval procedures has proved effective and enabled quick implementation of the Project, and early restoration of people’s livelihoods in the areas affected by the Project. The use of this type of procedure did not detract from the successful implementation of the Project.

56. As other ADB emergency flood projects have shown, the delegation of authority to the ADB mission in the borrower’s country is essential for close monitoring and speedy decision making.

C. Recommendations

1. Project-Related

57. The Government should regularly provide adequate funds for routine, periodic, and emergency maintenance of completed subprojects under the Project, through allocations in the annual development program for each fiscal year. This relates to all subcomponents and will require annual monitoring by the EAs. The creation of the RMF in the near future will ensure adequate funding for road infrastructure maintenance. ADB is monitoring the creation of the RMF. The completed subprojects related to riverbank protection and flood control embankments should be closely monitored annually by BWDB, particularly during each monsoon season. Similarly, the restoration work undertaken by BR on embankments, ballast walls, and bridges should also be closely monitored. All EAs should undertake urgent remedial measures where necessary.

58. It is recommended that a project performance evaluation report (PPER) is undertaken in another 2 years to determine if the Project is still meeting its objectives. To gather the necessary data, ADB should require the Government to continue monitoring the performance of the completed subprojects and reporting the project benefits until the PPER mission is fielded.

2. General

59. For the successful implementation of future ADB-supported emergency assistance projects, a central coordination and monitoring unit such as the PSC should be identified and planned in detail at appraisal. The funding and disbursement mechanism should include the establishment of imprest accounts by EAs, if possible with a higher ceiling of 20% of the allocated fund. These accounts will help expedite project implementation through adequate coordination and ensure uninterrupted cash flow for contractors and consultants.

60. To overcome the capacity constraints of EAs identified during the implementation of the Project, ADB may provide regular training to the staff of the EAs implementing the subprojects. The objective should be to educate and acquaint the staff with ADB’s project cycle and ADB procedures relating to procurement and loan disbursement.

17 Appendix 1

PROJECT FRAMEWORK Design Summary

Appraisal Performance Indicators/Targets

Project Achievements

Key Issues and

Recommendations

Impact Contribute to sustainability of economic growth by minimizing the devastating impact of severe floods

• Economic recovery and increase in economic activity in flood-affected areas • Recovery leading to restoration of pre-flood conditions in affected areas

Economic recovery and increased economic activity have been achieved as evidenced by the increased volume of traffic in the project areas. All pre-flood assets, i.e., road, bridge, rail, water protection facilities (including embankments), etc., have been restored and improved.

Increases in traffic volumes on selected roads are described in Appendix 11. The restored assets prevented damage in the 2007 flood.

Outcome 1. Restore economic and social activities in

flood-affected areas 2. Reduce vulnerability to future floods

Rehabilitated infrastructure, adopting appropriate flood-resistant design standards Reduced damage to

infrastructure in the event of

future floods Improved access to health

and education facilities and

markets Improved incomes and self-

reliance

During the 2007 floods the embankment protection and other works undertaken in the water resource sector preserved the assets that were rehabilitated under the Project. Access to health and education facilities has improved as the rehabilitated roads have shown a considerable increase in traffic. Economic development has been stimulated in the project areas, and incomes and employment have increased. Labor from local villages gained employment directly from the Project during the construction period.

See paras. 43–44 and Appendix 10. The floods of 2007 did not damage the assets rehabilitated during the Project. Increases in traffic volumes on selected roads are described in Appendix 11. See para. 44 and Appendix 10.

Component/Outputs 1. Rural Infrastructure • Rehabilitated rural infrastructure including feeder roads (upazila roads), rural roads (union roads), bridges, and culverts

Rehabilitation completed by 31 January 2007 Rehabilitation of upazila and union roads = 5,500 km

Rehabilitation completed by 31 July 2007 Upazila and union roads = 2,423.41 km Bridges/Culverts on upazila and union roads = 11,075.51 m

See paras. 12–18.

A

ppendix 1 18

Design Summary

Appraisal Performance Indicators/Targets

Project Achievements

Key Issues and

Recommendations

• Rehabilitated flood and cyclone shelters provided with latrines 2. Roads • Rehabilitated national, regional, and district roads and bridges 3. Railways • Rehabilitated railway infrastructure and facilities including restoration of embankments, track, bridges, essential buildings, station roads, and signaling and telecommunications, using flood-resistant design standards 4. Water Resources • Rehabilitated flood control, drainage, and irrigation facilities, including repair of embankment breaches, water control structures, protective works, and canals; and provision of pump stations 5. Municipal Infrastructure • Rehabilitated municipal roads, drains, bridges, and culverts • Rehabilitated municipal footpaths, and drains in slums

Bridges/Culverts on upazila and union roads = 13,200 m Tree plantations = 110 m Flood refuge shelters = 20 Flood protection works = 40

km Rehabilitation completed by 31 January 2007 Roads = 2,968 km Bridges = 306 Rehabilitation completed by 31 January 2007 Embankment re-profiling =

103,501 m Ballast walls = 32,224 m Embankment protection (geo-

textile) = 78,599 sq m Embankment protection walls

= 24,668 m Embankment natural ground

replacement = 571 cu m Repair and modernization of

bridges = 156 Rehabilitation completed by 31 January 2007 Embankment: full = 128.932

km, part = 926.908 km Irrigation/Drainage: full =

3.855 km, part = 25.362 km

Water control structures: full = 33, part = 426

Protective work: full = 15.5 km, part = 14.087 km

Rehabilitation completed by

Tree plantations = 32.98 m Flood refuge shelters = 9 Flood protection works = 45 km Rehabilitation completed by 31 July 2007 Roads = 3,572 km Bridges = 2,115 m Rehabilitation completed by 31 July 2007 Embankment re-profiling = 90,116 m Ballast walls = 39,383 m Embankment protection (geo-textile) = 87,868 sq

m Embankment protection walls = 19,834 m Embankment natural ground replacement = 391

cu m Repair and modernization of bridges = 146 Rehabilitation completed by 31 July 2007 Embankment: full = 105.099 km, part = 923.698

km Irrigation/Drainage: full = 3.855 km, part = 25.287

km Water control structures: full = 33, part = 426 Protective work: full = 15.5 km, part = 13.753 km Rehabilitation completed by 31 July 2007 Municipal roads = 1,315 km Bridges/Culverts = 426 m Drains = 61.5 km Footpaths in slum areas = 0 km

Footpath rehabilitation was not undertaken as this was done by the municipalities themselves (see para. 18).

19 Appendix 1

n Summary

Appraisal Performance Indicators/Targets

Project Achievements

Key Issues and

Recommendations

31 January 2007 Municipal roads = 1,028 km Bridges/Culverts = 393 m Drains = 47 km Footpaths in slum areas = 63

km Activities 1. Preparation of tender documents 2. Procurement (civil works) 3. Construction supervision and project

management

ADB loan approved by 13 January 2005 and effective by 1 February 2005 Government budgets for 2005–2007 provide adequate annual counterpart funding

Inputs 1. Asian Development Bank financing: $180 million 2. Cofinancing from the Gov’t of the Netherlands: $13 million 3. Cofinancing from Sida: $14.7 million 4. Counterpart financing from Gov’t of Bangladesh: $60 million 6. Technical assistance: $400,000

ADB = Asian Development Bank, cu m = cubic meter, km = kilometer, m = meter, Sida = Swedish International Development Cooperation Agency, sq m = square meter.

Desig

Appendix 2 20

MAPS OF PROJECT COMPONENTS AS COMPLETED

21 Appendix 2

Appendix 2 22

23 Appendix 2

Appendix 2 24

25 Appendix 3

APPRAISAL AND ACTUAL COSTS ($ million)

Appraisal Estimate Actual Project Component Foreign Local Total Foreign Local Total A. Civil Works 1. Rural Infrastructure 8.90 62.98 71.88 9.90 56.45 66.35

2. Roads and Bridges 37.00 25.70 62.70 29.97 19.92 49.89

3. Railways 10.20 6.60 16.80 4.23 2.54 6.77

4. Water Resources 5.53 32.40 37.93 4.64 24.31 28.95

5. Municipal Infrastructure 3.62 28.16 31.78 4.49 26.19 30.68

Subtotal (A) 65.25 155.84 221.09 53.22 129.41 182.63 B. Equipment and Materials 1. Railways Emergency Stock 0.80 0.80 1.60 8.78 0.00 8.78

Subtotal (B) 0.80 0.80 1.60 8.78 0.00 8.78 C. Consulting Services 1. Rural Infrastructure 0.96 1.10 2.06 0.84 0.95 1.79 2. Roads and Bridges 2.05 2.75 4.80 1.81 2.42 4.23 3. Railways 0.80 0.60 1.40 0.80 0.59 1.39 4. Water Resources 1.60 1.30 2.90 1.47 1.20 2.67 5. Municipal Infrastructure 0.34 1.78 2.12 0.29 1.54 1.83

Subtotal (C) 5.75 7.53 13.28 5.21 6.70 11.91 D. Land Acquisition and Resettlement 0.00 2.00 2.00 0.00 0.00 0.00 Subtotal (A+B+C+D) 71.80 166.17 237.97 67.21 136.11 203.32 E. Interest during Construction 2.00 0.00 2.00 0.96 0.00 0.96 Total 73.80 166.17 239.97a 68.17 136.11 204.28 a Financing estimated at $240.00 million while project cost was estimated at $239.97 million during appraisal and

reflected accordingly in the report and recommendation of the President. This PCR uses the approved figures from the RRP.

Source: Asian Development Bank estimates.

Appendix 4 26

CURRENCY EQUIVALENTS

Year Tk:$ Rate

2004 60.88 2005 64.65 2006 70.29 2007 70.46 2008a 69.76

a 2008 exchange rate is based on 1 January–11 March 2008. Source: Asian Development Bank estimates.

27 Appendix 5

PROJECTED AND ACTUAL DISBURSEMENTS ($ million)

Year Appraisal Actual53

2005 55.26 26.44 2006 76.67 78.54 2007 48.07 31.87

Total 180.00 136.85

Source: Asian Development Bank Loans Financial Information System.

53 ADB cancelled $27.4 million of loan funds following cofinancing by the Government of Netherlands and Sida for the

equivalent amount.

PROJECT IMPLEMENTATION SCHEDULE

28 Appendix 6

29 Appendix 6

Source: Asian Development Bank estimates.

Appendix 7 30

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant

Reference in Loan Agreement

Status of Compliance

Sector Covenants 1. In the carrying out of the Project and

operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth.

Schedule 6 (Section 4.01)

Complied with.

2. The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by Comptroller & Auditor General of the Borrower; (iii) furnish to ADB, as soon as available but in any event not later than the sixth month after the end of each related fiscal year, certified copies of such audited 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 financial covenants of this Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Section 4.02 (a) Complied with. (i) Separate Project accounts were maintained; (ii) periodical audits were completed; (iii) certified copies of audit reports were submitted to ADB; (iv) completed as requested.

3. Without limiting the generality of Section 6.05(A) of the Loan regulations, the Borrower shall furnish, or cause to be furnished, to ADB quarterly reports on the carrying out of the Project and on the operation and management of the Project facilities.

Section 4.03 Complied with.

4. The Borrower shall enable ADB’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Section 4.04 Complied with.

5. Project Executing Agency: LGED shall be the Project Executing Agency for Part A and E of the Project; RHD shall be the Project Executing Agency for Part B of the Project; BR shall be the Project Executing Agency for Part C of the Project; and BWDB shall be the Project Executing Agency for Part D of the Project.

Schedule 6, Para. 1

Complied with.

31 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance

Project Implementation-Project Steering Committee (PSC): The PSC, chaired by the Member of Programming of the Planning Commission of the Ministry of Planning of the Borrower. Shall be responsible for monitoring implementation of the Project and overseeing all Project governance-related matters, including any issues that may arise relating to mismanagement and breach of quality standards in design or execution of the Project. It will meet at regular intervals but at last once every 60 days to review progress of the Project. Prior to each such meeting, IMED shall provide to the Chairman and each member of the PSC with a copy to ADB a written report on their findings with respect to monitoring of the Project activities over the relevant prior period. The PSC may, from time to time, invite independent experts drawn from reputable national institutions to assist it in the discharge of its responsibilities. The Chairman or any member of the PSC may request for enlistment of such an expert. The cost of enlisting such expert participation, if any, shall be borne out of the unallocated funds in the Project budget.

Schedule 6, Para. 2

Complied with. PSC was formed and regular meetings held with EAs and ADB.

7. Project Management Unit: Each of LGED, RHD, BWDB and BR shall be responsible for implementing its designated Part or Parts of the Project through their respective Project Management Units (PMUs), each of the PMUs shall report on the progress of their respective Parts) of the Project at least once every 60 days to the PSC.

Schedule 6, Para. 3

Complied with.

8. Subproject Selection Criteria and approval Process: The Borrower shall ensure that all subprojects carried out under the Project meet, to the satisfaction of ADB, the agreed general and sector-specific selection criteria and implementation arrangements and that all subprojects are properly controlled and monitored to the satisfaction of ADB. Subprojects to be carried out under the Project will be identified and selected in accordance with sector-specific criteria agreed between the Borrower and ADB as set forth in Appendixes three to seven in the RRP. In addition, irrespective of the sector, each subproject proposal will be subject to evaluation on the basis of the following general criteria as agreed.

Schedule 6, Para. 4

Complied with.

Appendix 7 32

Covenant

Reference in Loan Agreement

Status of Compliance

9. Borrower’s Commitment to Operation and Maintenance of Facilities: The Borrower shall ensure that all facilities rehabilitated under the Project are properly operated and maintained by the relevant Project Executing Agency concerned in accordance with sound practices. To this end, within six months of the date of Loan Effectiveness, each relevant Project Executing Agency shall prepare an action plan that will include financial requirements and management/monitoring procedures and other pertinent elements for year-round effective maintenance of rehabilitated facilities. A copy of each of the action plans shall be submitted.

Schedule 6, Para. 5

Complied with. A time-bound action plan was prepared and submitted to ADB.

10. Enhanced Beneficiary Participation: The Borrower shall ensure that active beneficiary participation occurs in the selection, design, and implementation of all rehabilitation works carried out under the Project.

Schedule 6, Para. 8

Complied with.

11. Project Monitoring and Review: The Borrower shall ensure that each Project Executing Agency shall conduct annual and random performance audits during project implementation to determine the degree to which project funds have been effectively and efficiently utilized to implement the Project and achieve its objectives, outputs and performance indicators.

Schedule 6, Para. 15.

Complied with. Monitored through Ministerial review meetings periodically.

12. Achieving Good Governance: Consistent with its commitment to good governance, accountability and transparency, ADB reserves the right to investigate directly, or through its agents, any possible financial or management impropriety in conducting the Project. The Borrower and the relevant Project Executing Agency agree to cooperate with any such investigation and extend all necessary assistance, including access to all relevant books and records as well as engagement of independent experts that may be needed for satisfactory completion of such investigations. All external cost related to such investigations shall be borne by the Project.

Schedule 6, Para. 16.

Complied with.

13. The Borrower shall submit all project activities, including all procurement matters under the Project, to independent performance audits by the private sector auditors referred to in paragraph 18 above to ensure transparency and objective and independent assessment of

Schedule 6, Para. 19.

Complied with.

33 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance

such activities. Such performance audit shall be conducted once every quarter in accordance with terms of reference for the audit prepared by ADB.

14. Reports: Without limiting the generality of Section 4.03 of this Loan Agreement, the Borrower shall cause the supervision consultant to be engaged under the Project to submit monthly progress statements and quarterly progress reports to each of the Project Executing Agency, the PSC and the Bank throughout the Project implementation period.

Schedule 6, Para. 20

Complied with.

15. Establishing a Baseline: Each of the Project Executing Agencies shall conduct a sample survey to establish a baseline (Baseline) for subsequent Project performance monitoring unless accurate and reliable Baseline is already available in documented form and is made available to the Project consultants who are satisfied with their contents. The Borrower shall ensure that the relevant Project Executing Agency carries out Project performance monitoring upon completion of civil works carried out under the Project and the monitoring results are reviewed against the Baseline; and

Schedule 6, Para. 21.

Complied with.

16. Review of ADB Project Portfolio: The Borrower and the ADB shall complete within six months of the signing of the Loan Agreement a review of the prior approved projects currently active on ABD’s portfolio of projects in Bangladesh financed by ADB to assess how their design and operational methods could be improved to better mitigate possible recurrence of flooding and other natural disasters and, where necessary, identify specific changes in the design and operational practices of the relevant project. The Borrower shall promptly adopt the amendments in the project design or operations, if any, that are recommended at the conclusion of the review process.

Schedule 6, Para. 22.

Complied with.

Appendix 7 34

Covenant

Reference in Loan Agreement

Status of Compliance

Environmental Covenants 1. Resettlement, Environment and Other Social

Matters: The Borrower shall ensure that adequate environmental mitigation measures in accordance with (a) the Borrower’s environmental regulations and (b) ADB’s Environment Policy (2002) and ADB’s Environmental Assessment Guidelines (2003) are incorporated into all subproject design and implementation. The Borrower will ensure that the agreed environmental assessment framework is implemented; that all subprojects for which an IEE is required include such as IEE in the subproject proposals; and that all subprojects for which government environmental clearance is required receives such clearance prior to the award of any contracts for the subject subproject.

Schedule 6, Para. 10

Complied with.

2. The Borrower will ensure that all ADB-financed contracts under the Project include contractual clauses during design and construction requiring that all necessary steps be taken to avoid adverse consequences to the natural environmental, prevent noise pollution, environmental hygiene related issues.

Schedule 6, Para. 14

Complied with.

Social Covenants 1. The Borrower shall ensure that, to the extent

possible, subprojects will not require land acquisition or involuntary resettlement. In the event that land acquisition or involuntary resettlement is required for any subproject, then the Borrower will prepare a resettlement plan in accordance with the Borrower’s applicable laws and regulations, ADB’s Policy on Involuntary Resettlement (1995) and the resettlement framework agreed between the Borrower and ADB and submit to ADB for review and approval before any land acquisition is initiated.

Schedule 6, Para. 11.

Complied with.

2. The Borrower shall ensure that, in accordance with ADB’s Policy on Gender and Development (1998), (a) project interventions take into account the different impacts and needs of women and men, (b) special features are built into subprojects to facilitate and encourage women’s involvement and to ensure tangible benefits to women; (c) specific women-related interventions include activities that uplift women from situations of vulnerability to position of stability and (d) project reporting reflects how gender-related needs are being addressed under the

Schedule 6, Para. 12.

Complied with.

35 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance

Project, and details the successes encountered, constraints met, and measures adopted to overcome them.

3. The Borrower shall ensure that no subproject shall adversely affect vulnerable population groups, such as indigenous peoples. In the event of involvement of indigenous people in any of the subprojects, the Borrower will take necessary actions required under ADB’s Policy on Indigenous Peoples (1998).

Schedule 6, Para. 13.

Complied with. All subprojects had a positive impact and no adverse impact on any vulnerable population group.

Financial Covenants 1. The Borrower shall enable ADB, upon ADB’s

request, to discuss the Borrower’s financial statements for the Project and its financial affairs related to the Project from time to time with the Borrower’s auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ABD, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Section 4.02 (b) Complied with.

2. Counterpart Funds: The Borrower will allocate on a timely basis, adequate counterpart funds from its budget for each fiscal year during project implementation.

Schedule 6, Para. 6

Complied with.

3. Delegated Financial Powers Shall Apply: The Borrower shall ensure that delegated financial powers, as approved by the Ministry of Finance of the Borrower on 1 July 2004 and 4 July 2004, respectively, are followed for this Project.

Schedule 6, Para. 7

Complied with.

4. Audits: Without limiting the generality of Section 4.0-2(b) of this Loan Agreement, the Borrower shall have the consolidated Project accounts and related financial statements audited annually (in addition to the Office of the Comptroller and Auditor General of the Borrower) by recognized local private sector auditors acceptable to ADB, that shall be appointed by the Office of the Comptroller and Auditor General of the Borrower. The Office of the Director of Accounts (or an office with equivalent functions) in each of the Project Executing Agencies shall be responsible for coordinating all account activities and ensuring compliance with the Bank’s audit and accounting requirements, which shall be followed up in regular reviews by the Bank.

Schedule 6, Para. 18

Complied with.

Appendix 7 36

Covenant

Reference in Loan Agreement

Status of Compliance

Others 1. Established, Staffed, and Operating

PMU/PIU Review and Revision of the Standing Orders for Disasters: On or prior to 30 April 2005, the Borrower shall undertake a review of the Borrower’s Standing Orders for Disasters with the aim to strengthen coordination, effectiveness of relief and rescue operations and medical support and strengthen disaster preparedness and mitigation. The review shall be completed by 30 June 2005 and a draft revised Staffing Orders for Disaster released for review by ADB and for general public comment on or before 30 September 2005.

Schedule 6, Para. 17

Being complied with. Standing Orders Disaster reviewed/updated and Strategic Plan 2005–2006 approved by the Cabinet in 2006. Draft Disaster Management Act is being reviewed by the Ministry of Law.

IEE = initial environmental examination, LGED = Local Government Engineering Department.

37 Appendix 8

TECHNICAL ASSISTANCE COMPLETION REPORT Division: BRM

Amount Approved: $250,000 TA No., Country and Name TA 4562-BAN: Early Warning Systems Study (EWSS) Revised Amount: Not revised Executing Agency: Bangladesh Water Development Board (BWDB) under Ministry of Water Resources (MoWR)

Source of Funding: Dutch grant

Amount Undisbursed: $65,773.19

Amount Utilized: $184,226.81

Date TA Completion Date Original: 14 August 2005

Actual: 30 September 2007

Account Closing Date

Approval 20 January 2005

Signing 23 April 2005

Consultant(s) Contract (Intermittent) Duration: 01 May 2006–31 October 2006 Original:

14 August 2005 Actual: 17 August 2007

Background In the year 2004, Bangladesh witnessed unprecedented flood. Majority of the country went under water for at least one month. Disruptions and damages to economy and livelihood caused by the flood have been quite significant. The workshop “Options for Flood Risk and Damage Reduction in Bangladesh” held during 7-9 September 2004 indicated a set of recommendations in pursuit of short-medium-long term actions for reducing risk and damages of flood. The available lead time was considered to be inadequate and forecasts could still be meaningful if operational guidelines could be made available. It was felt important that all the Policies, Strategies and Plans relevant to existing flood forecasting system (FFS) were reviewed and the gaps are identified for future action. ADB launched a major two year long (2005-06) Emergency Flood Damage Rehabilitation Project (EFDRP) (L2156-BAN). This TA was attached to that loan as a piggy-backed TA. Description Bangladesh has several institutions involved in flood forecasting risk monitoring, and mapping. These include (i) the Flood Forecasting and Warning Center (FFWC), (ii) Bangladesh Meteorological Department (BMD), (iii) the Space Research and Remote Sensing Organization (SPARRSO), (iv) the Institute of Water Modeling (IWM), and (v) the Center for Environment and Geographic Information Services (CEGIS). Among these, FFWC and BMD are responsible for issuing warnings and transmit them to GOB administrative functionaries and NGO communities in flood-prone areas. In view of the increased frequency of disasters including severe floods, several improvements were felt to be necessary. These included, (i) transfer of new technology (ii) streamline organizational responsibilities, (iii) increase institutional capacities, (iv) enhance flood mapping and forecasting systems, (v) provision of new equipment, such as radars, and (vi) access to regional meteorological and hydrological data. During conceptualization of the TA, one critical issue was to enhance early warning capability by improving flood forecasting and make more accurate predictions, adapted to the various needs at different levels, sectors and, organizations, providing the different stakeholders including the poor and vulnerable groups, with early and easily understandable information. The objective of the EWSS TA was to assist the Government of Bangladesh in assessing the effectiveness of existing flood forecasting system and in preparing a strategy to enhance the Flood Forecasting Strategy (FFS) to improve its usefulness and early warning capability. This entailed assessing the existing system with respect to institutional, technical, and other constraints; in developing an enhanced FFS, and prepare project profiles and pre-feasibility studies including capacity building and training. Expected Impact, Outcome and Outputs Impact: Improved Flood Forecasting and Warning System with sufficient lead time and improved dissemination mechanism. Outcome: A clear understanding about the earlier gaps in flood forecasting and warning system along with specific recommendations for possible interventions (investment proposals at pre-feasibility level) in order to redress those. Outputs: Reports on National FFS and EWS fully owned by the Ministry of Water Resources (MoWR) and FFWC of BWDB which includes proposal for 22 possible interventions (investment proposals at pre-feasibility level) covering following types of activities, i) Increasing accuracy and timeliness of input data, ii) Improving flood forecasts to meet demands of end users, iii) Improving the extent of coverage and the penetration of the flood early warning system and iv) Improving / expanding coordination between key institutions involved in flood early warning system. The total cost of the proposed interventions is approximately $35 million to be implemented in about 5 years duration. Delivery of Inputs and Conduct of Activities Although, the activities under the TA was supposed to commence much earlier, there had been a significant delay in signing the TA letter by the Government and selection procedure of the competent individual consultants for the study. The man-months of the international and the national consultants needed to be reallocated through an internal

Appendix 8 38

procedure which also contributed to some delay. The short-listing of 11 consultants was complete only in February 2006. Contracts were awarded in March 2006 for intermittent inputs during May to October 2006. Although the duration of the study was seven months, it entailed two more months for completion of the final report. Nine domestic consultants involving 29 person-months of consultancy and two international consultants involving 4 person-months services worked in a team. The whole exercise was divided into two themes; i) flood forecasting and ii) improved dissemination of flood information. The consultants were recruited individually, but representing the centre of excellences like IWM, CEGIS, Bangladesh Disaster Preparedness Centre (BDPC), Danish Hydraulic Institute (DHI) and River Technology Incorporated (RTI). The recruitment of the consultants was done cost-effectively (instead of firm based selection, consultants were recruited individually on their merits on a competitive basis) and the consultants’ inputs were of high quality. This is the reason why there is cost saving. The performance evaluation reports (PER) for eleven consultants were accomplished and their performance was satisfactory. Two national workshops were held to share the work-in-progress and the draft reports. Government officials and policy makers, water sector experts, and civil society and local government representatives participated in the workshops. The performance of ADB and the EA was satisfactory and there was high degree of ownership by GoB on the Final Document. The FFWC of BWDB the Implementing Agency (IA) provided full support to the consultants. The IA also provided required counterpart manpower. The TA received strong support from senior IA staff. The National Steering Committee (NSC) headed by the Secretary of the MoWR was fully involved in the process from the very beginning and finally approved the draft final report in a NSC meeting held on 19 Feb 2007, which endorsed the recommendations of the TA. Evaluation of Outputs and Achievement of Outcome The reports were generated through sound team-work and efficient planning and at reasonable costs. The reports were of good quality and the Government, other agencies and stakeholders were satisfied with the reports. The reports were consistent with the TORs. Recommendations, to prioritize the interventions, received at the workshops were incorporated in the reports. Some recommendations also included further research on systematic assessment of flood damages to communities and infrastructure both inside and outside FCD projects, and review and update hydraulic design guidelines for infrastructures etc. Accuracy of short-term (1-2 days) forecast was found to be adequate. Medium term forecast (3-7 days) needs improvement involving new technologies. Introduction of long-term climate based forecasts for both flood and drought was considered to be of high importance. Delivery of outputs was slightly delayed due to country’s political context and there was also delay in submission of reports. On the basis of the recommendations the NSC decided to approach the development partners to support the highly priority investments to improve the flood forecasting and warning system. Overall Assessment and Rating The TA can be rated as successful. The ownership by the GoB on the final document is very high as they formally approved it in their NSC meeting on 19 Feb 2007. For sustaining the work done, it will be essential for the Government to implement the recommendations with appropriate adoption of rules and regulations. Government showed commitment to carry forward the process of both implementation of the recommendations of the TA and inter-ministerial coordination as required. BWDB is expected to implement, on its own, recommendations of operational nature (not requiring legal or policy coverage) for strengthening the institutional capacity of the FFWC. MoWR will take care of the legal and policy matters, such as the role of BMD and local government institutions in the dissemination of flood information. Major Lessons The achievements under the TA depended on the excellent team-work under the committed leadership of the team-leader from IWM and the good working environment provided by the IA. The existing work-culture and the available general institutional capacity of the IA also allowed it to provide the needed support to the TA. One on the major lesson of the TA is that the government owned the process from the very beginning as NSC was formed at an early stage, although it was facilitated / supported by the consultants. Finally, twenty two high priority investment portfolios have been identified in order to improve the flood forecasting and warning system under the purview of an enhanced FFS. In addition, it has also identified the capacity development aspects of FFWC, which is crucial. Recommendations and Follow-Up Actions ADB should follow-up with the EA to ensure that the significant work done under the TA leads to early adoption of the national flood forecasting strategy and improvement of early warning system. As the owner of the findings and recommendations of the TA, MoWR should immediately prepare for implementation of the twenty two proposed high priority interventions. Based on this, the EA should start implementing the ones which are required on short-term basis and which does not involve high investment. EA may approach the development partners for financial assistance, if needed. The Government’s strategy on this issue will be presented in the Local Consultative Group (LCG) – (subgroup water management) meeting. The meeting will be facilitated by BRM. Prepared by Zahir U. Ahmad

Designation Project Implementation Officer

39 Appendix 9

DETAILS OF CONSULTING SERVICES

Component

Appraisal Estimate (person-months)

Actual (person-months)

Part A: Rural Infrastructure 1. International consultant 26 30 2. National consultant 588 564 Part B: Roads 1. International consultant 110 110 2. National consultant 800 680 Part C: Railways 1. International consultant 30 28 2. National consultant 50 108 Part D: Water Resources 1. International consultant 64 48 2. National consultant 342 471 Part E: Municipal Infrastructure 1. International consultant 16 20 2. National consultant 420 414 Total 1. International consultant 246a 236 2. National consultant 2,200 2,237

a The appraisal report quoted a total international input of 250 person-months. But the appendixes to the report indicate only 246 person-months of international input for the five components.

Source: ADB. 2005. Report and Recommendations of the President to the Board of Directors on a

Proposed Loan to the People’s Republic of Bangladesh for the Emergency Flood Damage Rehabilitation Project. Manila (Loan 2156-BAN[SF]); EAs’ project completion reports for parts A, B, C, D, and E; and findings of the Project Completion Review Mission.

Appendix 10 40

ASSESSMENT OF PROJECT IMPACT AND BENEFITS

1. The socioeconomic analysis is based on a review of documents related to the Project, such as the report and recommendation of the President, and project completion reports on the different components, prepared by the executing agencies (EAs) or consulting firms. Discussions were also held with officials of the various EAs. In addition, the Project Completion Review (PCR) Mission made field visits to appraise selected subprojects and, wherever possible, to obtain the views of the direct beneficiaries through informal discussions. The overall assessment was limited to the post-project physical conditions and performance of the interventions at the time of the field visits. The assessment, nevertheless, provides reasonable feedback on the impact, benefits, and effectiveness of the project components in general.

2. The PCR Mission visited selected subprojects in 13 districts, namely, Gaibandha, Kurigram, Lalmonirhat, Bogra, Sirajganj, Tangail, Sylhet, Moulavibazar, Brahmanbaria, Comilla, Bhairab, Gazipur, and Rangpur. The subprojects included rural roads, national and regional roads, urban (pourashava) roads, bridges/culverts, drainage and irrigation facilities, water control structures, slope and embankment protection works for rail tracks, and retaining walls of bridges.

3. The benefits for each project component are discussed below.

(i) Part A: Rural infrastructure. The PCR Mission visited projects in the districts of Brahmanbaria, Moulavibazar Gaibandha, Bogra, Kurigram, and Sirajganj including the upazilas of Sadar, Sundarganj, and Raiganj.54 In all of the subprojects visited, the works were found to be in good order. The restoration of flood-damaged roads (upazila and union roads), bridges, and culverts assisted in restoring the activities of rural people back to their original pre-flood level. The road subprojects restored accessibility to trade centers, educational, and health facilities. The improved surface condition and riding quality of the roads restored from their flood-damaged condition led to savings in vehicle operating costs for motorized traffic and reduced the travel time between important centers on the network covered by these roads. Construction activity during implementation generated employment for the local population. Incomes increased as a result of enhanced commercial activity along the improved roads, helping alleviate rural poverty. The reconstruction or repair of bridges and culverts, which were washed away or severely damaged, saved local villagers from long detours, allowing them to benefit from reduced travel time and lower transport costs.

(ii) Part B: Roads. The PCR Mission visited Comilla, Sylhet, Rangpur, and Rajshahi zones to examine subprojects that had been completed under this component.55 The benefits in this component are similar to those in part A. Rehabilitation of flood-damaged roads (including national, regional, and zila roads), bridges, and culverts helped restore traffic to its pre-flood level and allowed passenger movement and transportation of agricultural produce. Dislocation of the road

54 Road and bridge subprojects on the following contracts were visited: 200504/FDR/BBAR, 200528/FDR/BBAR,

200503/FDR/GAI, 200501/FDR/MOUL, 200501/FDR/BOG, 200501/FDR/BOG, 200505/FDR/KURI, 200505/FDR/KURI, 200505/FDR/KURI, and 200505/FDR/SIRA.

55 The contracts visited by the PCR Mission were: (i) EFDRP/CZ/BB/Z-01 on the Sultanpur–Chinair–Akhaura road (0.0 km to 8.3 km), Darkhar–Akhaura–Senarbadi road (0.0 km to 16.0 km) and Baria–Lalpur Road (0.0 km to 15.0 km); EFDRP/CZ/SYL/Z-02 on the Sari–Goainghat road (0.0 km to 16.0 km); EFDRP/RGZ/KR/N-01 on the Rangpur–Barobari–Kurigram road (0.0 km to 11.0 km) and Saidpur–Nilphamari road (0.0 km to 16.0 km); EFDRP/RZ/NT/N-01 on the Bogra–Natore road (0.0 km to 63.0 km); and EFDRP/RZ/SR/R-01 on the Sirajganj link road (0.0 km to 10.0 km).

41 Appendix 10

network had caused immense economic loss to rural communities they served. The road subprojects, particularly the zilla roads, restored market accessibility to the local farmers. Transportation of perishable agricultural produce like vegetables was made easier for villagers using nonmotorized transport, for example, cycle-rickshaws. Improvement in the overall condition of the road surface from their flood-damaged condition has led to savings in vehicle operating costs for motorized traffic and also reduced the travel time between villages and important market centers covered by these roads. The reconstruction or repair of bridges and culverts, which were either damaged or washed away by the floods, saved the local villagers from long detours, thus allowing them to benefit from reduced travel time and from lowered transport costs. The civil works contractors also employed local village labor, both men and women, on several subprojects, thus generating employment and additional income.

(iii) Part C: Railways. Flood damage restoration works for railways included civil works to restore embankments, tracks (including steel sleepers), ballast works, bridges, and capacity restoration by provision of emergency stocks of equipment and materials for handling future emergencies. Train services in the flood-affected areas were disrupted by the sudden onrush of floodwaters, which washed away the ballast and sleepers from the railway tracks, and heavily damaged the embankments. The successful completion of civil works in the affected sections ensured smooth and early operation of train services disrupted by the floods. The track repairs have resulted in an increase in running speeds compared with pre-flood levels. The embankment repairs are helping prevent further flood damage. This was seen during the floods of 2007 from July to mid-August, when the protection works on embankments under the Project helped protect the restored assets. The PCR Mission visited rail subprojects in both the East Zone and the West Zone of the rail network and the findings confirmed the good quality of the construction works completed..

(iv) Part D: Water resources. Under this component of the Project the PCR Mission visited subprojects in Sylhet, Moulavibazar, Gaibandha, Rangpur, and Kurigram districts.56 The rehabilitation works for the subprojects related to flood control embankments, sluice gates, water control structures, and drainage canals enabled a return to normal (i.e. pre-flood-level) economic activity in those areas that were affected by the floods. The work undertaken has also served to prevent further disasters from floods and thus assisted in preserving the installed facilities under other components, i.e., roads, railways, etc. This was demonstrated during the floods that took place between July and mid-August 2007. The flood embankment works undertaken by the Project in the subprojects visited by the PCR Mission were not damaged by the 2007 floods.

(v) Part E: Municipal infrastructure. The PCR Mission visited several subprojects under this component.57 Rehabilitation of municipal roads (resealing and repair of

56 Contracts visited were: SYL-09 in Sylhet; MVI-13, MVI-14, and MVI-15 in Moulavibazar; GAI-04 in Gaibandha;

RAN-06 in Rangpur; and KUR-08 in Kurigram district. 57 Subprojects visited were: (i) Moulvibazar, contract PR-31 (A) for the rehabilitation of Syed Mustafa Ali road and

contract PR-32 (A) for the rehabilitation of K. B. Alauddin road; (ii) Gaibandha, contract PR-32 for the rehabilitation of Station road to Katchari; (iii) Rangpur, contract PR-1 for the rehabilitation of Station road starting from Shapla Chattar up to Chorpair Mazar, contract MD-4 for the construction of a drain at Islambag Khalifatatari from Shanticdhara Mosque to the Canal, and contract PR-69 for the rehabilitation of the Bus Terminal road starting from

Appendix 10 42

potholes, eroding sub-base, edges, and shoulders), bridges, and drains/culverts in 55 project58 pourashavas resulted in improved drainage and living environments for town residents, who benefited from the removal of unsanitary conditions arising from blocked drains, and damaged roads. The PCR Mission observed in some areas that the drains were blocked by debris that had been thrown into them by local residents. The drains in some areas are covered and are thus protected from such debris. The PCR Mission was informed by the EA preventing local residents from throwing their waste into the drains was a constant problem. The PCR Mission said that a publicity campaign and discussions with local residents might enable the latter to understand that they need to protect the environment in which they live, as these rehabilitated assets are improving their way of life.

RK road (near the Central Bus Terminal) to Station road at Shapla Chattar; and (iv) Bogra for the rehabilitation of Shahid Abdul Jabber road.

58 Flood damage affected about 159 pourashavas throughout Bangladesh.

43 Appendix 11

ECONOMIC REEVALUATION

A. General

1. Economic evaluation was not carried out at appraisal as the Project was of an emergency nature. However, to assess the effectiveness/efficiency of any investment, it is desirable to conduct economic evaluation and estimate the economic internal rate of return (EIRR). As road projects are the easiest to measure in terms of their economic benefits, a post-construction evaluation was undertaken for a representative sample of project road sections. Two roads were selected, namely, a regional road and a zila road. The selection of the roads was based on the availability of sufficient relevant data, e.g., traffic, road characteristics. The selected project roads were as follows: (i) the regional road section Tongi–Kaliganj–Gorashal–Pachdona (R301), and (ii) the zila road section Gaibandha–Sadullahpur (Z5553).

2. The methodology used in the economic evaluation involved a comparison of “with” and “without” Project situations to determine the effects of rehabilitating the project roads and to estimate the benefits and calculate the EIRR. The main economic benefit of the road repair and restoration work is a reduction in vehicle operating costs (VOCs). The economic evaluation considered the economic costs and benefits over the construction period plus 5 years of operation.59 All costs and benefits were expressed in 2007 constant prices. The methodology for calculating the EIRR used the Highway Development and Management Model (HDM-4).60 In the absence of any baseline data or any earlier economic evaluation, it was necessary to make reasonable assumptions for carrying out the analysis. These are discussed below.

B. Economic Costs

1. Construction Costs

3. The economic construction costs were derived from the financial costs of civil works, physical contingencies, and construction supervision, excluding price escalation, price contingencies, and interest during construction. All financial costs were converted to economic costs by deducting taxes and duties and by differentiating local currency costs into indirect foreign exchange and local currency costs. A standard conversion factor (SCF) of 0.8061 was applied to the local currency costs of those items that were non-tradable.

2. Maintenance Costs

4. Maintenance costs, in 2007 prices, were obtained by the Project Completion Review (PCR) Mission from the Roads and Highways Department (RHD). In the “with Project” case only annual regular routine maintenance costs were considered. This is because periodic maintenance (i.e., overlay) would be required after 5 years of operation and the economic evaluations only considered the useful life of the rehabilitated road sections (about 5 years). Routine maintenance costs were calculated per kilometer (km) per year. The cost of annual routine maintenance, according to RHD, is about Tk63,600 per km per year.

59 The economic life of the roads is assumed to be 5 years of operation as most of the flood-damage restoration

works comprised repairs and a seal coat. After this time further periodic maintenance or overlay would be required. 60 The model, developed by the World Bank, has been adopted as best practice worldwide. 61 The SCF of 0.80 is consistent with that of other recent projects in Bangladesh.

Appendix 11 44 C. Economic Benefits

1. General

5. The estimated economic benefits were based on a comparison of the with-Project and without-Project cases. Without the Project, the roads would generally have been in extremely poor condition after the 2004 floods, and would accommodate only low vehicle speeds, and therefore would have caused high VOCs. With the Project, the roads would be in good condition. With the improved surface condition, higher vehicle speeds would then be possible, and these would, in turn, reduce VOCs.

2. Traffic Forecasts

6. The PCR Mission obtained traffic count data for the selected project roads from RHD. The data obtained were for traffic along the selected roads before the 2004 flood and traffic data along the roads after the roads were completely restored. The traffic data were annual average daily traffic (AADT), taking into account daily and monthly variation factors, for nine different vehicle categories, namely, car/utility, light truck, medium truck, heavy truck, micro bus, medium bus, large bus, auto rickshaws, and motorcycles. The total traffic volumes along the selected roads for 2004 and 2007 are shown in Table A11.1. Traffic composition by vehicle type is shown for traffic in 2007 in Table A11.2.

Table A11.1: Traffic Volume Comparison, 2004 and 2007 (total motorized traffic AADT)

Road Section

2004

2007

Annual Average Growth Rate

(% per year) R301: Tongi–Kaliganj–Gorashal–Pachdona Road 4,079 7,468 22.3 Z5553: Gaibandha–Sadullahpur Road 555 733 9.7

AADT = annual average daily traffic. Source: Roads and Highways Department.

Table A11.2: Traffic by Vehicle Type, 2007

(AADT) Road

Car/ Utility

Light Truck

Medium Truck

Heavy Truck

Micro Bus

Medium Bus

Large Bus

Auto Rickshaw

M/C

Total

Regional (R301)

1,401 588 1,039 56 1,433 688 185 1,602 476 7,468

Zilla (Z5553)

17 29 80 0 13 12 8 169 405 733

AADT = annual average daily traffic, M/C = motorcycles. Source: Roads and Highways Department.

7. Actual annual traffic growth from 2004 to 2007 on the selected project roads varied by road section and by vehicle type and ranged on average from 9.7% to 25.6% per year. This growth may be attributed to the release of suppressed demand with the completion of large-scale road improvement works, complemented by a shift away from rail transport on account of the poor quality of service. Obviously such high growth is not sustainable in the long term. Besides, as much of the suppressed demand is likely to have been already catered to by

45 Appendix 11

the investments in the road sector, future traffic growth may not be as high as in the past. Thus projections are based on more realistic traffic growth rates. The number of registered motor vehicles in the country has grown at 7.5% over the last decade. The long-term traffic growth rate by RHD is 7.8% per year. For the economic evaluation the rate of 7.5% per year has been used for traffic growth during the 5-year benefit period from 2007 to 2011. This traffic growth rate is conservative and is in line with other recent road economic evaluations that have been undertaken in Bangladesh.

3. Vehicle Operating Cost Savings

8. The economic VOCs were updated by the PCR Mission on the basis of data obtained from RHD. The data were used in the HDM-4 model to calculate the VOCs. The costs were updated to 2007 economic prices by excluding taxes and duties and were calculated for the nine representative vehicle types (see para. 6). The rate of road deterioration used in the economic analysis is based on the levels of surface roughness that existed after the 2004 flood before the Project was implemented, i.e., the without-Project case, compared with the roughness values in the with-Project case, and the VOC savings due to the road improvement were calculated. The road roughness level, as measured by the International Roughness Index (IRI),62 after the improvement of the project road was set to IRI 4.0 m/km at the year of opening. This IRI value was verified by the PCR Mission in visits to the selected project roads.

9. Typical VOCs for various vehicle types, based on opening-year surface roughness levels in accordance with the IRI, are shown in Table A11.3 along with the VOCs for the average surface roughness of the without-Project case, which averages between IRI 6.0 m/km and IRI 10.0 m/km depending on the road. The rate of road deterioration used in the economic analysis is based on the levels of surface roughness that existed before the Project was implemented, i.e., the without-Project case, compared with the roughness values in the with-Project case, and the VOC savings due to the road improvement were calculated.

Table A11.3: Typical Vehicle Operating Cost, with and without Road Improvements

(Tk per km) Vehicle Type

With (IRI = 4)

Without (IRI = 6)

Without (IRI = 10)

Car 5.09 5.70 5.97 Micro Bus 12.39 13.45 14.04 Medium Bus 14.71 14.98 15.72 Large Bus 24.94 26.62 27.81 Small Truck 14.91 15.20 16.05 Medium Truck 21.62 21.76 22.78 Auto Rickshaw 3.40 3.48 3.51 Motorcycle 2.32 2.46 2.51

IRI = International Roughness Index, in meters per kilometer. Source: Asian Development Bank estimates. D. Results of Economic Evaluation

10. The EIRR for the project roads was calculated on the basis of the stream of estimated costs and benefits over the construction period, plus 5 years of economic life. The results are 62 The IRI is measured in meters per kilometer.

Appendix 11 46 shown in Table A11.4. The EIRR was 39.9% for the regional road, and 23.9% for the zila road. These EIRRs compare favorably with the opportunity cost of capital of 12% for the acceptance of economic feasibility and therefore indicate that the economic performance of the selected project roads is highly satisfactory; so it may be concluded that the investment was efficient.

Table 11.4: Economic Evaluation of Selected Project Roads (Tk million)

EIRR = economic internal rate of return, VOC = vehicle operating cost.

Year

Capital Cost

Incremental Maintenance

Cost Total Cost

VOC

SavingsNet

Benefit R301: Tongi–Kaliganj–Gorashal–Pachdona

2006 67.45 67.45 −67.45 2007 0.58 0.58 15.61 15.03 2008 0.58 0.58 17.90 17.32 2009 0.58 0.58 34.57 33.99 2010 0.58 0.58 73.75 73.17 2011 0.58 0.58 88.75 88.17

EIRR 39.9%

Z5553: Gaibandha–Sadullahpur

2006 7.58 7.58 7.58 −7.58 2007 0.60 0.60 2.17 1.57 2008 0.60 0.60 2.64 2.04 2009 0.60 0.60 3.58 2.98 2010 0.60 0.60 4.76 4.16 2011 0.60 0.60 5.41 4.81

EIRR 23.9%

Source: Asian Development Bank estimates.