FOR OFFICIAL USE ONLY - World Bankdocuments.worldbank.org/curated/en/458711545447754546/...FOR...

FOR OFFICIAL USE ONLY

Report No: PAD1849

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF US$29.0 MILLION

AND

PROPOSED GUARANTEES

UP TO THE MAXIMUM AMOUNT OF US$48.0 MILLION

TO THE

REPUBLIC OF LIBERIA

FOR THE

SOUTHEASTERN CORRIDOR ROAD ASSET MANAGEMENT PROJECT

November 20, 2018

Transport Global Practice Africa Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective October 31,2018)

Currency Unit = Liberian Dollar (LRD)

LRD 158.63 = US$1

FISCAL YEAR

January 1 - December 31

Regional Vice President: Hafez M.H Ghanem

Country Director: Henry G. R. Kerali

Senior Global Practice Director: Guangzhe Chen

Practice Managers: Nicolas Peltier-Thiberge, Sebnem Erol Madan

Task Team Leaders: Kulwinder Singh Rao, Satheesh Kumar Sundararajan

ABBREVIATIONS AND ACRONYMS

AfDB African Development Bank

ARAP Abbreviated Resettlement Action Plan

CoC Code of Conduct

DBFOMT Design-build-finance-operate-maintain-transfer

DBT Design-build-transfer

DHS Demographic and Health Survey

EIRR Economic Internal Rate of Return

ESIA Environmental and Social Impact Assessment

ESMP Environmental and Social Management Plan

ESMS Environmental and Social Management System

GBV Gender Based Violence

GDP Gross Domestic Product

GIF Global Infrastructure Facility

GRM Grievance Redress Mechanism

GRS Grievance Redress Service

HDM Highway Development and Management Model

ICB International Competitive Bidding

ICT Information and Communication Technology

IDA International Development Agency

IE Independent Engineer

IFC International Finance Corporation

IIU Infrastructure Implementation Unit

IMSC Inter-Ministerial Steering Committee

IPF Investment Project Financing

IRC International Rescue Committee

KfW German Government-owned Development Bank (Kreditanstalt fur Wiederaufbau)

Km Kilometers

LIBRAMP Liberia Road Asset Management Project

LRTF Liberia Reconstruction Trust Fund

MFD Maximizing Finance for Development

MFDP Ministry of Finance and Development Planning

MIGA Multilateral Investment Guarantee Agency

MMTMP Multi-Modal Transport Master Plan

MOT Ministry of Transport

MPW Ministry of Public Works

NCB National Competitive Bidding

NGO Non-Governmental Organization

NPV Net Present Value

NRF National Road Fund

NTPS National Transport Policy and Strategy

OHS Occupational Health and Safety

OP/BP Operational Policy / Bank Policy

OPRC Output- and Performance-Based Road Contract

PAP Project-affected Person

PAPD Pro-Poor Agenda for Prosperity and Development

PDO Project Development Objective

PFMU Project Financial Management Unit

PFRAM Project Fiscal Risk Assessment Model

POM Project Operations Manual

PPP Public-Private Partnership

PPSD Project Procurement Strategy for Development

PS Performance Standard

RAP Resettlement Action Plan

RFP Request for Proposal

SEA Sexual Exploitation and Abuse

SECRAMP Southeastern Corridor Road Asset Management Project

SPV Special Purpose Vehicle

TAH7 Trans-African Highway Seven

UN United Nations

UNFPA United Nations Population Fund

UNICEF The United Nations International Children's Emergency Fund

US$ United States Dollar

WB The World Bank

WIPNET Women in Peacebuilding Network

The World Bank Southeastern Corridor Road Asset Management Project (P149279)

LIBERIA

SOUTHEASTERN ROAD ASSET MANAGEMENT PROJECT

TABLE OF CONTENTS

DATASHEET ........................................................................................................................... 1

I. STRATEGIC CONTEXT .................................................................................................... 10

A. Country Context.............................................................................................................................. 10

B. Sectoral and Institutional Context .................................................................................................. 11

C. Relevance to Higher Level Objectives ............................................................................................. 15

II. PROJECT DESCRIPTION .................................................................................................. 16

A. Project Development Objective (PDO) ........................................................................................... 16

B. Project Components ....................................................................................................................... 16

C. Project Beneficiaries ....................................................................................................................... 20

D. Results Chain .................................................................................................................................. 20

E. Rationale for World Bank Involvement and Role of Partners......................................................... 22

F. Lessons Learned and Reflected in the Project Design .................................................................... 22

III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 26

A. Institutional and Implementation Arrangements .......................................................................... 26

B. Results Monitoring and Evaluation Arrangements......................................................................... 27

C. Sustainability ................................................................................................................................... 27

IV. PROJECT APPRAISAL SUMMARY ................................................................................... 27

A. Technical, Economic and Financial Analysis ................................................................................... 27

A. Technical ..................................................................................................................................... 27

B. Economic and Financial Analysis and Greenhouse Gas Accounting ........................................... 29

B. Fiduciary .......................................................................................................................................... 30

C. Safeguards ...................................................................................................................................... 32

V. KEY RISKS ..................................................................................................................... 36

A. Overall Risk Rating and Explanation of Key Risks........................................................................ 36

VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 38

VII. INDICATIVE TERMS AND CONDITIONS FOR THE PROPOSED IDA GUARANTEE(S) AND IDA FINANCING .......................................................................................................................... 48

INDICATIVE TERM SHEETS FOR PROPOSED IDA GUARANTEE(S) ........................................................ 48

INDICATIVE TERMS AND CONDITIONS OF IDA FINANCING ................................................................ 55


ANNEX 1: Implementation Arrangements and Support Plan .......................................... 63

ANNEX 2: Detailed Description of the Project Component 1 .......................................... 66

ANNEX 3: Financial Analysis and Government Fiscal Commitment and Contingent Liability Assessment .................................................................................................................. 75

ANNEX 4: Summary of Safeguard Instruments Triggered, Implementation Arrangements and Monitoring Mechanism .......................................................................................... 78

ANNEX 5: Gender Analysis and Sexual Exploitation and Abuse Mitigation and Response Strategy ........................................................................................................................ 81

ANNEX 6: Status of the National Road Fund .................................................................. 85

ANNEX 7: Financial Management .................................................................................. 89

ANNEX 8: Procurement Management ........................................................................... 94

Map .............................................................................................................................. 99


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DATASHEET

BASIC INFORMATION BASIC_INFO_TABLE

Country(ies) Project Name

Liberia Southeastern Corridor Road Asset Management Project

Project ID Financing Instrument Environmental Assessment Category

P149279 Investment Project Financing

B-Partial Assessment

Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [✓] Fragile State(s)

[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country

[✓] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date Expected Guarantee Expiration Date

18-Dec-2018 30-Jun-2026 31-Oct-2034

Bank/IFC Collaboration

No

Proposed Development Objective(s)

The project aims to support the Recipient’s efforts to enhance road connectivity for residents living along selected sections of the Ganta-to-Zwedru Road Corridor, and to improve institutional capacity to manage the road sector.

Components

Component Name Cost (US$, millions)


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Road Improvement and Maintenance Works 118.00

Road Safety 10.00

Institutional Strengthening and Capacity Building 12.00

Organizations

Borrower: Republic of Liberia

Implementing Agency: Infrastructure Implementation Unit

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFin1

Total Project Cost 188.00

Total Financing 188.00

of which IBRD/IDA 29.00

Financing Gap 0.00

DETAILS-NewFinEnh2

Private Sector Investors/Shareholders

Equity Amount Debt Amount

Government Contribution 53.00 Commercial Debt 61.00

Government Resources 24.00 Unguaranteed 61.00

IDA (Credit/Grant) 29.00

Non-Government Contributions 26.00

Trust Funds 26.00

Total 79.00 61.00

Payment/Security Guarantee

Financed by Commercial Loans/LC and with IDA Guarantee 48.00

Total 48.00


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IDA Resources (in US$, Millions)

Credit Amount Grant Amount Total Amount

National PBA 29.00 0.00 29.00

Total 29.00 0.00 29.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025 2026

Annual 11.25 16.75 13.75 5.50 2.75 2.75 2.25 0.00

Cumulative 11.25 28.00 41.75 47.25 50.00 52.75 55.00 55.00

INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas

Transport & Digital Development Infrastructure, PPP's & Guarantees

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks

Gender Tag

Does the project plan to undertake any of the following?

a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF

Yes

b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment

Yes

c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance High


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2. Macroeconomic High

3. Sector Strategies and Policies Substantial

4. Technical Design of Project or Program Substantial

5. Institutional Capacity for Implementation and Sustainability High

6. Fiduciary High

7. Environment and Social Substantial

8. Stakeholders Moderate

9. Other Low

10. Overall High

COMPLIANCE

Policy Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [✓] No

Does the project require any waivers of Bank policies?

[✓] Yes [ ] No

Have these been approved by Bank management?

[✓] Yes [ ] No

Is approval for any policy waiver sought from the Board?

[✓] Yes [ ] No

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 ✔

Performance Standards for Private Sector Activities OP/BP 4.03 ✔

Natural Habitats OP/BP 4.04 ✔

Forests OP/BP 4.36 ✔


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Pest Management OP 4.09 ✔

Physical Cultural Resources OP/BP 4.11 ✔

Indigenous Peoples OP/BP 4.10 ✔

Involuntary Resettlement OP/BP 4.12 ✔

Safety of Dams OP/BP 4.37 ✔

Projects on International Waterways OP/BP 7.50 ✔

Projects in Disputed Areas OP/BP 7.60 ✔

Legal Covenants

Sections and Description LRTF agreement, Schedule 2, Section I, B, 2(b), "The first Annual Work Plan and Budget required under the Project shall be furnished not later than one month after the Effective Date."

Sections and Description IDA credit, “The Recipient shall not later than three (3) months from the Effectiveness Date recruit and thereafter maintain throughout the implementation of the Project in accordance with the provisions of the PPP Agreement, an IE, with terms of reference, qualifications and experience satisfactory to IDA.”

Sections and Description IDA Credit, “The Recipient shall recruit, no later than three (3) months from the Effectiveness Date, and thereafter maintain, throughout the implementation of the Project, an independent environment and social monitoring agent, with terms of reference, qualifications and experience satisfactory to IDA.”

Sections and Description IDA Credit, "The Recipient’s compliance with the RAP and RPF, and Project Company’s compliance with the Performance Standards and Environmental and Social Documents. The Recipient’s obligation to establish and maintain a separate account to deposit funds to cover the Project involuntary resettlement costs. The Recipient’s obligation to ensure that all terms of reference for any technical assistance or studies (including on road safety) carried out under the Project are consistent with, and pay due attention to, IDA Safeguards Policies and/or Performance Standards (as applicable), as well as the Recipient’s own laws and regulations relating to the environment, health and safety, labor and social aspects relevant to the Project. The Recipient shall cause the Project Company to implement or cause all sub-contractors/consultants to implement the Project in accordance with Performance Standards and the Environmental and Social Documents listed above. The Recipient shall cause the Project Company to establish and maintain, throughout Project implementation, an environmental and social management system, acceptable to IDA (e.g. ISO14000). The Recipient’s obligation to establish, maintain and publicize widely the availability of grievance redress systems, to be easily accessible to Project affected communities and Project workers, with transparent and time-bound processes to address Project related grievances.


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The Recipient shall cause the Project Company to carry out frequent information and/or awareness raising campaigns and training of Project workers, in a manner satisfactory to IDA, on environment, social and health and safety issues (including but not limited on how to engage with local communities, occupational health and safety matters, and HIV/AIDS, GBV and sexual exploitation). The Recipient shall cause the Project Company to ensure that it adopts and implements codes of conduct and protocols, satisfactory to IDA, including for Project workers and for security forces (public and private), if applicable, that are assigned or appointed to safeguard Project site and/or assets. The Recipient shall cause the Project Company to ensure it obtains the necessary environmental and work permits in a timely manner. The Recipient shall cause the Project Company to comply with national labor laws, including ratified ILO Conventions, and Performance Standard 2, throughout the implementation of the Project, by, inter alia, adopting and executing adequate labor arrangements for Project workers. The Recipient shall cause the Project Company to appoint and thereafter maintain throughout Project implementation staff and consultants, in sufficient numbers, and under terms of reference, qualifications and experience on environment, health and safety and social issues, satisfactory to IDA. The Recipient shall cause the Project Company to appoint and thereafter maintain throughout Project implementation independent environmental and social auditors, under terms of reference, qualifications and experience approved by IDA. The Recipient shall cause the Project Company to adopt and maintain a Human Resources policy, acceptable to IDA, including statements to undertake best endeavors to recruit locally, with preferential recruitment for qualified local women. The Recipient shall cause the Project Company to adopt and implement a strategy to promote transfer of skills to local women to facilitate them gain employment at the Project site. No amendment, suspension or waiver of Environment and Social Instruments without approval by IDA and compliance with consultation and disclosure requirements of the Safeguards Policies and Performance Standards. Submission to IDA of frequent reports on environmental, social and health and safety compliance (including detailed reporting of accidents in the Project site and measures undertaken by Project Company to implement the Environmental and Social Documents), in form and substance satisfactory to IDA (including with agreed indicators to track compliance). Submission to IDA of the independent auditors annual environmental and social audits of Project Company’s compliance with its contractual environmental, health and safety and social obligations."

Sections and Description Indemnity Agreement, "Usual and customary covenants included in agreements between member countries and IDA. Additionally, the Member Country will agree to: (a) implement mechanisms to minimize the risk of insufficient funds to make Availability Payments, which may include obligations to maintain a minimum [balance] [reserve amount] in a designated account solely for such purpose in accordance with and as required by applicable Funds Flow Documents ; (b) obtain IDA’s consent before agreeing to any change to any Funds Flow Document; (c) obtain IDA’s consent before agreeing to any change to the PPP agreement or any other transaction document which would materially affect the rights or obligations of IDA under the Guarantee(s) or any related document; (d) provide certain notices and reporting to IDA [including certain account information in respect of the National Road Fund[/PFMU]]; (e) comply with all of its obligations under the PPP agreement and other relevant transaction documents and take


Page 7 of 99

all action necessary on its part, in accordance with and as required by the transaction documents, to enable the Project Company to perform all of its obligations under the PPP Agreement and other relevant transaction documents; (f) comply with and ensure compliance with all Funds Flow Documents; (g) ensure compliance with the Cooperation Agreement(s); and [other project specific covenants TBD]"

Sections and Description Project Agreement, "Project Company will covenant, among other things, that it will (a) comply with applicable laws, including environmental laws, and the applicable World Bank environmental and social safeguards requirements under the World Bank Performance Standards; (b) provide annual audited financial statements and other reports; (c) provide certain notices and other information to IDA; (d) provide access to the Project; (e) not engage in (or authorize or permit any affiliate or any other Person acting on its behalf to engage in) any Sanctionable Practices in connection with the Project; (f) comply with World Bank requirements relating to Sanctionable Practices regarding individuals or firms included in the World Bank Group list of firms debarred from World Bank Group-financed contracts; and (g) obtain IDA’s consent before agreeing to any change to any transaction document which would affect the rights or obligations of IDA under the Guarantee(s) or any related agreement. "

Conditions

Type Description

Effectiveness IDA Credit, "Effectiveness and other conditions [tbd] sequencing of the conditions of

signature, effectiveness and disbursement [tbd], deadline for satisfaction of the conditions

and dated covenants [tbd]" Type Description

Effectiveness IDA Credit, "The Co-Financing (LRTF) is effective and all conditions precedent to its

effectiveness have been met except for the availability of IDA funds if it is a condition." Type Description

Effectiveness IDA Credit, "The Project Company has been established and the Recipient has provided it all

the requisite authorizations to carry out its obligations under the Project Documents, the

Environmental and Social Documents and the Financing Documents, and provided it all

Project Consents (tbd) required at that time for such purpose + legal opinions" Type Description

Effectiveness IDA Credit, "Project Company has confirmed availability of financing for Part A.2 of the

Project as finally agreed and all conditions precedent to the effectiveness of, and

disbursement under, each of the Financing Documents have been satisfied." Type Description

Effectiveness IDA Credit, "The Recipient has handed over 90 percent of the project site to the Project


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Company, free of all encumbrances." Type Description

Effectiveness IDA Credit, "PPP Agreement signed and effective and closing achieved." Type Description

Effectiveness IDA Credit, "The Implementation Agreement between the IIU and PFMU satisfactory to the

IDA has been executed." Type Description

Effectiveness IDA Credit, "Preparation and adoption of a Project Operations Manual satisfactory to the

World Bank." Type Description

Disbursement IDA Credit, "Project Company environmental and social management system acceptable to

IDA; Environmental and Social Documents adopted by Project Company, in form and

substance satisfactory to IDA; independent environmental and social auditors appointed by

Project Company - Conditions prior to first disbursement." Type Description

Effectiveness IDA Credit, "Safeguards Documents finalized in form and substance acceptable to IDA,

consulted upon and disclosed as needed in accordance with the IDA Policies (available at

www.worldbank.org) including confirmation of payment." Type Description

Effectiveness Guarantee Agreements, "Usual and customary conditions for financing of this type, including

but not limited to the following:

(a) Firm commitment for sufficient financing to complete the construction of the Project,

including satisfactory contribution of equity;

(b) Execution, delivery and effectiveness of all Project and financing agreements, in form and

substance satisfactory to IDA, including the PPP agreement, the Indemnity Agreement, the

Cooperation Agreement and the Project Agreement;

(c) Delivery of all relevant host country environmental approvals required for the operation

of the Project, and compliance with all applicable World Bank requirements relating to

Sanctionable Practices and environmental and social safeguards, including the World Bank

Performance Standards;

(d) [Effectiveness of all required insurance (to include IDA as an additional insured on third-

party liability insurance);]

(e) Satisfaction of all conditions precedent for effectiveness under the PPP agreement and

first disbursement under the financing documents, save for any condition that requires the

effectiveness of the Guarantee(s) to have occurred;

(f) External Advisor Costs paid (if applicable);

(g) Provision of satisfactory legal opinions;

(h) Payment in full of the [Initiation Fee], [Processing Fee] and [Guarantee Fee] for each


Page 9 of 99

Guarantee; and

(i) Satisfactory integrity due diligence of the Project Company (and related parties) and

guaranteed parties."


Page 10 of 99

I. STRATEGIC CONTEXT

A. Country Context

1. Liberia has made considerable progress since the 2003 Comprehensive Peace Accords but faces tremendous challenges to recover economic, human capacity, and infrastructure losses from two devastating civil wars (1989-1996 and 1999-2003) and extend development gains. Liberia reached comparatively high per capita income during 1960s- 1970s, and three successive democratic elections signal stronger democratic norms in recent years, but it is currently among the world’s least developed countries with a Human Development Index rank of 177 out of 188. Persistent governance challenges, inadequate infrastructure, limited human capacity, and other constraints continue to hinder economic development and poverty reduction, particularly in rural areas and the hinterland.

2. While the postwar economic boom delivered relatively broad-based growth across several sectors, Liberia remains dependent on foreign operated natural resource concessions1 and has yet to achieve the structural transformation and diversification necessary for resilient and sustained growth. Liberia’s economy grew an average of 6.2 percent annually from 2004 to 2013, but twin shocks of the Ebola virus outbreak and declining commodity prices pushed the country into recession from 2014 to 2016. The economic recovery that began in 2017 was driven primarily by the gains in the mining sector, demonstrating continued dependence on extractive sectors and foreign concessions.

3. Liberia has made slow and uneven progress reducing poverty. The poverty rates are increasing in less accessible and rural areas, including the far southeast where county-level poverty rates exceed 80 percent despite more stable progress reducing poverty in Monrovia and other urban areas. Although the national poverty rate declined from 64 to 54 percent from 2007 to 2013, the national poverty rate rebounded to 61 percent during the recession, largely because overall rural poverty rate surged from 70 percent to 82 percent during the 2014-2016 recession. The regional distribution of poverty has also shifted during the recession, with overall poverty rates declining in northern counties but increasing in southern counties. Rising poverty rates and extreme poverty in rural areas and the southeast, which in general have less access to roads than Liberia as a whole, reinforces recent evidence that transport connectivity plays an important role in poverty reduction in Liberia, among other factors.

4. Liberia’s development and poverty reduction programs are severely stunted by lack of road access. Nearly 60 percent of rural Liberians lack access to an all-weather road, limiting their ability to participate in economic activities and access vital services such as health and education.2 A high correlation (0.53) between road access and crop production value at the county level in Liberia suggests improved road access directly supports farm incomes. Furthermore, Liberia depends on imported medicine but fewer than half of the nation’s hospitals have reliable road access to the Monrovia port. Regional trade accounts for only one percent of the total merchandise trade, in part because of the poor condition of the key regional corridor in Liberia, Trans-African Highway Seven (TAH7).

1 Natural resource concessions in Liberia cut across extractive sectors (mining, oil and gas, agriculture, and forestry) and generate almost a third of government revenue but primarily provide low-skilled and seasonal employment to Liberians. 2 Iimi, Atsushi, and Kulwinder Rao. 2018. Spatial Analysis of Liberia’s Transport Connectivity and Potential Growth https://openknowledge.worldbank.org/handle/10986/29803.

https://openknowledge.worldbank.org/handle/10986/29803


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5. Improving road access, leading to greater economic and national integration, is also vital to Liberia’s long-term stability. Despite abundant arable land and a hospitable climate for agriculture, Liberia faces chronic food insecurity in part because lack of road access and underdeveloped agro-logistic services hinder agricultural productivity and depress farm incomes. High transport costs to hinterland areas further erodes welfare of rural Liberians, who are highly dependent on imported food and merchandise. At a macro-level, endemic rural poverty and resulting rural-urban migration are contributing to a growing population of urban youth with uncertain economic prospects, raising concerns about potential risks to future social stability.

6. The Government of Liberia has prioritized infrastructure development to support rapid economic growth and economic transformation. Recent economic forecasts suggest that the economy may grow at an average rate of 3.8 percent over the period 2018-2020, fueled in part by recent investments in transport and electricity/energy sectors. Following the 2017 general elections, the new administration has further prioritized road development in southeastern Liberia and planned development of a coastal road link joining the capital, Monrovia, with Harper, capital city of Maryland county.

B. Sectoral and Institutional Context

Overview

7. Liberia is a small and highly urbanized coastal country with a limited transport network consisting of 11,4233 kilometers (km) of roads, four sea ports spread roughly evenly along its coast, and three rail lines developed to facilitate mineral exports from the interior. Although there is significant potential to develop multi-modal links and Liberia could improve connectivity along the coast via cabotage, road transport is the most economical mode of transport for most of Liberia’s needs. Since the end of the civil wars, Liberia has made progress reconstructing some of the most essential transport infrastructure but has been unable to provide reliable primary road access into the interior. Lack of all-weather road access in the interior results in periodic isolation of many inland communities from markets, health and educational facilities, and major economic and population centers.

8. Although Liberia’s road network provides sufficient spatial coverage, poor existing road conditions, lack of maintenance, and the extended rainy season from May through October periodically render many rural communities isolated, sometimes for months at a time. Although 90 percent of paved roads are in good condition, these account for only seven percent (734 km) of the overall network. In contrast, 80 percent of the primary road network is unpaved, and nearly half of it (the unpaved primary roads) are in poor or very poor condition.4 Two-thirds of secondary and feeder roads are likewise in poor or very poor condition.

3 Liberia’s road network consists of approximately 11,423 km of roads, including a primary network of 2,846 km, a secondary network of 1,961 km, and 6,616 km of feeder roads. 4 At least half of road bridges are in poor or very poor condition.


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9. Several Development Partners are providing support to Liberia’s transport sector, but support falls dramatically short of needs.5 The Liberia Reconstruction Trust Fund (LRTF) 6 has provided more than US$190 million for the transport sector, contributing to improvement of the Monrovia-Ganta-Guinea border road and the Cotton Tree-Buchanan road. African Development Bank (AfDB) has provided financing for rehabilitating Fish Town-Harper road. By one estimate, approximately US$2.15 billion is required to improve the 2,846 km primary network, and an additional US$1.2 billion would be needed to improve secondary and tertiary roads to achieve universal access, most of which is unfunded.

Institutional Development and Challenges

10. Although the Government of Liberia has initiated a broad Ministerial-level institutional reform process, it has not yet developed a permanent institutional framework for the transport sector.7 Currently, planning, construction and maintenance of transport infrastructure fall under the mandate of the Ministry of Public Works (MPW), while the Ministry of Transport (MOT) is responsible for overall regulation of the sector, overseeing Liberia’s civil aviation institutions, and vehicle licensing and registration. The MPW established a Special Implementation Unit to implement Development Partner-financed projects in 2006, which was converted into the Infrastructure Implementation Unit (IIU) in 2009. The IIU is intended to be the nucleus of a future roads agency but continues to serve as a transitional institution. Despite very limited capacity, the IIU has contributed to the sector’s overall reconstruction through implementation externally-funded projects on behalf of MPW.

11. The transport sector is struggling to rebuild human and institutional capacity eroded when many qualified professionals left the country during the civil wars. Local universities have limited capacity to produce quality graduates in technical areas and reliance on international recruitment is unsustainable. Development projects have focused on building local human capacity over time by financing support to educational institutions (including internship programs), training the existing IIU staff, and supporting competitive salaries for local staff in the IIU. Evidence indicates foreign contractors have also invested heavily in workforce training8.

12. Improved coordination and regulation of natural resource concession-related transport infrastructure would help integrate them with the broader economy and lead to enhanced economic and poverty reduction benefits. Although Liberia has substantial experience procuring natural resource concessions, the responsible agencies have limited capacity, experience, and knowledge of the transport sector, and coordination between private infrastructure activities under concessions and national transport sector development plans is lacking. Transport infrastructure developed by concessionaires for

5 These include the AfDB, the European Union, the Government of Germany, the Government of Japan, U.K. Department for International Development, Kuwait Fund, the Government of Saudi Arabia, the U.S. Agency for International Development, and Swedish International Development Cooperation Agency. 6 The LRTF has received contributions from the European Union, the United Kingdom’s Department for International Development, Swedish International Development Cooperation Agency, Irish Aid, Norway, and Germany’s Kreditanstalt fur Wiederaufbau (KfW). 7The Governance Commission is currently examining the roles of all ministries, including MoT and MPW. Overall reforms are

not fully decided but are expected to shift implementation to implementing agencies and focus the Ministries’ roles on regulation. 8 Although the transport sector relies on foreign firms and expertise, 95 percent of the workforce under recent World Bank project was comprised of Liberians.


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their own use is often unregulated and poorly integrated with other transport infrastructure. For instance, 88 percent of the nearly 3,900 km of roads located within natural resource concession boundaries in Liberia are in poor or worse condition. Improved overall management of transport infrastructure under concessions may generate significant gains for the broader economy.

13. The transport sector faces further challenges addressing road safety and adapting to climate change. Despite a lack of reliable data, Liberia is recognized to rank among the world’s most dangerous countries for road safety and has only begun to address these challenges by developing a comprehensive Road Safety Action Plan9. Liberia also lacks a mechanism to assess and plan for climate-related risks to the transport network. Currently, 1,350 km of roads are in flood-prone areas and in poor condition.

Strategic Directions and Actions

14. The Government response in the immediate post conflict period was focused on rebuilding critical physical infrastructure, providing employment through labor intensive works while developing a functional governance structure for the road sector. During the transition period, the Government began formulating a sector reform program including legislating policies to strengthen transport planning and management capacity and to create a sustainable source of financing for the road sector. The Government started developing a national transport master plan and phased strategic investment program to integrate transport subsectors with other productive sectors such as mining, agriculture, trade and industry, tourism and with the region10.

15. The Government enacted an Axle Load Law (2015)11 and National Road Fund (NRF) Act (2016) and established a NRF under the Ministry of Finance and Development Planning (MFDP). The NRF Act establishes eight possible NRF funding sources and empowers the NRF to allocate up to 40 percent of annual revenues to road rehabilitation contracts that include at least five years of maintenance. The Government began operationalizing the NRF in second half of 2018 and the current US$0.30 per gallon fuel levy is projected to generate US$31 million annually.12

16. The Legislature is expected to enact a Road Agency Act to convert the IIU into a permanent Road Agency housed under MPW, as well as a Road Act, in the coming years. Establishing a dedicated Road Agency entrusted with implementing the road program will complete a key pillar of road sector reforms intended to consolidate and secure capacity gains in the sector. A proposed Roads Act will further streamline responsibility for different classes of roads and delegate certain classes to county government.

17. In the postwar period, the road sector has focused on restoring and improving primary road access to key urban and logistics centers. Previous efforts have resulted in improvement to priority roads

9 The plan addresses all aspects of road safety including vehicle safety, road user behavior, road safety management, facilities design, and post-crash response. 10 The National Transport Policy and Strategy (NTPS) was approved in November 2008 by Government of Liberia with technical and financial support from the World Bank. A National Transport Master Plan was prepared in 2010 and endorsed in 2012. The Transport Plan has been updated and revised in 2018. 11 The Government also issued axle load regulations in 2016. 12 Steps taken include hiring an NRF manager and staff, transferring existing levy funds from the Liberia Revenue Authority into the NRF accounts, resolving a legal challenge arising in late 2017, reinstating the levy at a higher rate of US$0.30, and establishing a timeline for parties to the lawsuit to remit fuel levy funds collected in 2017 to the Government.


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in Liberia’s east and northeast, improvement of the Monrovia-Buchannan corridor, and complete rehabilitation and upgrading of the 253-kilometer Monrovia – Gbargna – Ganta– Guinea border road, which ranks highest among primary roads in the country.

18. The southeastern road corridor (c. 650 kilometer) ranks third-highest among Liberia’s road investment priorities13, following corridors that have already been improved in the postwar period. The corridor is a logical extension to other completed or planned projects including the completed Monrovia-Ganta road, improvements to the Monrovia Freeport, the new Fuel Unloading Facility, the planned Dry Port near Ganta, and road improvements in far southeastern Liberia financed by the AfDB.

19. The southeastern corridor has degraded to a dirt track due to lack of maintenance and is often impassable during the six-month rainy season. Rehabilitation of the entire southeast corridor will bring road access into an isolated rural area of southeastern Liberia, improve access to markets and services, including the Jackson Fiah Doe Memorial Regional Hospital14 at Tappita, and improve trade connectivity and logistics among Manu River Union states15 by improving a missing link in TAH7 and connecting southeastern Liberia and Guinea to the dry port at Ganta.

20. In the post-conflict period, several World Bank transport projects have used design-build approaches to leverage expertise and management capabilities not available within Liberia. The World Bank-supported 25-year Build-Operate-Transfer concession of container services in Freeport of Monrovia raised private financing to port improvements and has performed satisfactorily since 2011. The Government also has well-advanced plans to develop a dry port in Ganta under a Public Private Partnership (PPP).

21. Liberia is one of the first countries in Sub-Saharan Africa to pioneer Output and Performance-Based Road Contracts (OPRC).16 OPRCs can cover all major phases of a road life cycle (rehabilitation, routine, and periodic maintenance) based on a design-build-operate-maintain-transfer (DBOMT) methodology and are a variant of road PPPs. The OPRC approach endeavors to realize better service quality at a similar or lower cost than conventional contracting by shifting the design and construction risks to the contractor and requiring the contractor maintain the road over a long period. Two major OPRC contracts, procured in 2012 and 2013, are currently in the routine maintenance phase and performing satisfactorily despite the outbreak of Ebola and implementation challenges related to weak client capacity. They have generally exceeded the prescribed levels of service by a significant margin, demonstrating value for money, and the country has emerged as a leading example of the OPRC approach in Africa.

13 Identified in the recent Multi-Modal Transport Master Plan (MMTMP) (2018) and the. Spatial Analysis of Liberia’s Transport Connectivity and Potential Growth report. 14 Jackson Fiah Doe Memorial Regional Hospital is one of the largest comprehensive referral hospital within Liberia’s medical system. 15 The Mano River Union is an international association established between Liberia and Sierra Leone and later joined by Guinea and Cote d’Ivoire. 16 Liberia Road Asset Management Project (P125574, 2011). The project has two ongoing OPRCs covering 253 km of road from Monrovia to Ganta-Guinea Border.


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22. Building on the success of the OPRC contracts, the Government began to develop a road PPP in 2016, the first such initiative in the country, to rehabilitate part of the southeastern corridor. Analysis of PPP options indicates the Government, underpinned by future NRF receipts, can immediately rehabilitate at least 100 kilometers of the corridor under a design-build-finance-operate-maintain-transfer (DBFOMT) PPP modality through an international competitive bidding process. This involves utilizing limited public and concessional resources efficiently to leverage commercial capital. A market sounding17 conducted in early 2018 demonstrated strong private sector interest in the PPP, which was subsequently confirmed by the participation of eleven international firms at the prequalification18 stage. The Government has engaged a reputable transaction advisor to structure, procure, and negotiate the PPP contract.

C. Relevance to Higher Level Objectives

23. The project supports the Government’s pro-poor agenda related to economic growth and transformation, supporting livelihoods of the poor, and national integration. The Government’s long-term poverty reduction strategy, the Pro-Poor Agenda for Prosperity and Development (PAPD) (2019-2023), calls for development of road infrastructure to support economic transformation necessary to sustain growth and reduce poverty. The PAPD recognizes efficient road infrastructure to be a prerequisite for developing a stable macroeconomic environment enabling private sector-led economic growth, greater competitiveness, and diversification. The project also supports the following objectives of the Country Partnership Framework (2019-2024) for Liberia19 (a) establishing an environment conducive to commercial agriculture, forestry, fisheries, and rural development; (b) promoting development of micro, small, and medium enterprises; and (c) improving access to markets.

24. The project advances the Government’s strategic objective of using the Maximizing Finance for Development (MFD) approach to identify new sources of road sector financing. Private investments in developing countries are highly sensitive to sovereign risk, more so than foreign direct investments.20 The proposed International Development Association (IDA) credit and guarantees would not only improve affordability, mitigate risks and consequently reduce risk premiums, but also bring commercial discipline and build a track record of the Government honoring long-term contractual obligations to a private entity. A successful PPP will bolster private sector confidence in the PPP model in Liberia. Over the long-term, the project and broader ongoing sector engagement aim to create a fiscally sustainable way to finance infrastructure by developing bankable investment projects.

17 Refer Annex 2 for further details of market sounding and transaction advisory services. 18 The Government is evaluating Expressions-of-Interest to shortlist firms for the Request for Proposal stage. 19 World Bank Report No. 130753-LR. The report shall be presented to the IDA Board on November 27, 2018. 20 Araya et al., World Bank (2013). The effects of country risks and conflict on infrastructure PPPs and Moszoro et al. (2016) - Political contestability, scrutiny, and public contracting.


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Figure 1: Broadening the Range of Infrastructure Finance in Liberia’s Road Sector

25. Capacity building under the project aligns with the strategic development goals at the national and sector levels. The project supports the PAPD objectives of enhancing economic stability and promoting job creation by improving transport infrastructure. The project also supports the National Transport Policy and Strategy (NTPS) goals of building capacity to manage market competition for provision of infrastructure and services, building the sector’s capacity to provide transport infrastructure and services to meet basic needs, climate resilience, and safety for all transport users and modes.

II. PROJECT DESCRIPTION

A. Project Development Objective (PDO)

PDO Statement

26. The project aims to support the Recipient’s efforts to enhance road connectivity for residents living along selected sections of the Ganta-to-Zwedru Road Corridor, and to improve institutional capacity to manage the road sector.

PDO Level Indicators

27. The achievement of the PDO will be measured by indicators with specific targets. The project will have four outcome indicators: (a) NRF fully operational (yes/no); (b) direct project beneficiaries (number); (c) share of rural population with access to an all-season road (percentage); (d) reduction in travel time along the project corridor during the dry season(minutes).

B. Project Components

Component 1: Road Improvement and Maintenance Works (Total cost: US$118 million equivalent; IDA - US$12 million; LRTF - US$23 million; GIF - US$2.0 million; Government of Liberia - US$20 million; Private Sector - US$61 million21 with US$48 million22 in IDA Guarantees)

21 Indicative amount, depending on the length of road bid by the private sector bidder, and including interest during construction. 22 US$40 million per year for Termination Payment Guarantee and US$8 million in Availability Payment Guarantee. The Termination Payment Guarantee will reduce over time, thereby reducing the guarantee exposure.

INFRASTRUCTURE PPPs WITH PRIVATE FINANCING

OPRC CONTRACTS WITH IDA CREDITS

INSTITUTIONAL CAPACITY IMPROVED & ROAD PPPs DEVELOPED

IDA CREDITS AND GUARANTEES IDA/OTHER GUARANTEESIDA CREDITS

LIBERIA – ENABLING ENVIRONMENT FOR INFRASTUCTURE DEVELOPMENT AND FINANCING

INFRASTRUCTURE DEVELOPMENT WITH PRIVATE SECTOR

ROAD PPPs WITH BLENDED FINANCING

Innovation in Infrastructure Development and Financing Approach – An MFD Example


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28. This component will support rehabilitation and maintenance of a minimum of 100 km of the Ganta-Zwedru road corridor through a fifteen-year PPP arrangement.23 The project scope includes building two 3.75 meter paved lanes and 1.5 meter paved shoulders, and all associated bridges, culverts, drainage, and street furniture. In towns/villages, the road will include 1.5 meter-wide block-paved pedestrian walkways on both sides with parallel concrete side drains. The PPP will be procured competitively with the qualified bidders competing on the basis to rehabilitate and maintain the longest stretch of project road24 given fixed payment terms and a minimum acceptable design specification and maintenance standards. The selected private sector bidder will be required to incorporate a special purpose limited liability company (special purpose vehicle or “SPV” or the Project Company). The special purpose vehicle (SPV) is expected to mobilize an estimated US$61 million in private financing (through equity and/or debt). The PPP Project Agreement will define the roles and responsibilities of the SPV and the IIU. The Government will carry out the resettlement required to clear the existing road right of way.25 The PPP contract will encompass two phases: a rehabilitation/construction phase not to exceed three years and an ensuing maintenance phase of twelve years. As with the OPRC contracts, the majority of the SPV profits will be deferred to the maintenance phase to create a powerful incentive for the SPV to optimize its design, construction and maintenance with a whole-life costing approach. The Government will employ a reputable and experienced consulting firm as an Independent Engineer (IE) to oversee the PPP implementation with due consideration to the legal obligations binding on the parties.26

29. Table 1 lists different sources of project financing for the road rehabilitation phase. The Government will make milestone-based lump-sum payments totaling US$39 million (financed by IDA Credit, LRTF and GIF grants, and its own sources) to cover a portion of the rehabilitation costs. The SPV will be required to mobilize approximately US$61 million to finance the remainder of the rehabilitation costs. The Government contribution will reduce the private sector financing during the rehabilitation phase as well as the overall financing costs over the life of the PPP, thus enabling bidders to rehabilitate a longer section of the corridor. During the ensuing maintenance phase, the Government will make quarterly performance-linked “Availability Payments” to the SPV (up to US$8 million27 per year). Performance will be evaluated against criteria related to the civil works and environmental and social impact mitigation28, as defined in the PPP Project Agreement.

30. The Government of Liberia has engaged an international transaction advisor for structuring and procuring the PPP and assisting the NRF operationalization. The scope of the transaction advisor’s responsibilities includes design and development of a suitable transaction structure (including collecting and incorporating feedback from potential bidders), preparation of bid documentation, procurement of a private sector partner and negotiations towards achieving financial closure. The scope also includes developing robust procedures and processes for the NRF to finance long-term rehabilitation and

23 The PPP is described in detail in the Section IV Project Appraisal Summary and Annex II: Detailed Description of the PPP. 24 Bidding criteria will be the length of the road to be rehabilitated and maintained, subject to a minimum of 100 km. 25 The Government will be required to complete resettlement along 90 percent of the corridor as an effectiveness condition of the Financing Agreement, and by extension, the PPP transaction agreements. 26 The Independent Engineer will monitor the SPV’s performance and compliance and assessing various matters of concern to the parties and will have independence in making its determinations. 27 A portion of US$8 million will be subject to inflation, to be proposed by the qualified firms as part of the bid submissions. 28 The project will utilize the “bucket method”. This method assigns points to various kinds of non-conformities. If the points accumulating in a given quarter exceed a predefined threshold, the corresponding quarterly availability payment will be reduced by an amount corresponding to the number of points.


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maintenance contracts. The project will retroactively finance eligible expenditure of this activity from the GIF grant.

Table 1: Project Costs and Financing Sources in Relation to Rehabilitation of the Road (US$, millions)

Activity Cost

a. Civil Works including Interest during construction 100.00

i. Private financing by the SPV (with IDA Guarantee support) for rehabilitation

61.00

ii. IDA Credit, LRTF grant and Government of Liberia contributions for the rehabilitation milestone payments

39.00

b. Involuntary Resettlement Costs (paid by Government of Liberia)

6.00

c. Consultancies and Supervision (IDA Credits and GIF Grants) 7.00

d. Guarantee fee paid by the SPV 5.00

Total 118.00

31. The proposed operation includes IDA Payment and IDA Termination Guarantee options.29 To provide flexibility in bid preparation, the bidders will have options to choose either or both of IDA termination payment and payment guarantee, but the maximum aggregate amount thereof shall not exceed US$48 million30, regardless of the combination of Guarantees provided. If any of the IDA Guarantees is called by the Beneficiary, the Government of Liberia will have the obligation under the Indemnity Agreement to repay IDA on demand, or as IDA may otherwise direct. Annex 2 details the proposed guarantee structure and other options.

32. The proposed IDA payment guarantee will cover the risk of nonpayment by the Government of Liberia. Under the PPP Contract, the Government will have an obligation to make Availability Payments during the maintenance phase. If the Government of Liberia fails to make Availability Payments as per the terms of the PPP Project Agreement, the SPV will have the right to draw on a letter of credit for the corresponding amounts31. The revolving letter of credit will be issued by a commercial bank, and the IDA payment guarantee will backstop this letter of credit.

29 The Multilateral Investment Guarantee Agency (MIGA) is also interested in supporting the project through political risk insurance (PRI) products. The bidders may also reach out to IFC for potential lending products. The bidding documentation will provide contact details of MIGA and IFC to bidders to discuss and consider such products in their bid responses. 30 For indicative structuring of IDA Guarantees of US$48 million, the project includes up to US$8 million of Availability Payment Guarantee and up to US$40 million of Termination Payment Guarantee to mitigate payment risks and mobilize private financing. Considering the proposed IDA Guarantees are structured as Payment Guarantees, the World Bank Operation Portal lists the total project cost by adding the amount of Payment Guarantees to the underlying project costs. Thus, the Total Project Cost of US$188 million presented in the Project Financing Data - Summary Table in the Datasheet includes the underlying project cost of US$140 million plus the additional IDA Guarantee amount of US$48 million. 31 Upon a draw under the letter of credit, the amounts drawn will be converted into a loan to the Government of Liberia from the letter of credit bank. The Government will have an obligation, under a reimbursement and credit agreement (to be concluded between the Government of Liberia and the letter of credit bank to repay such loan within a one-year period. Once the Government has repaid the loan, the letter of credit would be reinstated in the amount repaid. However, in case of Government default, the letter of credit bank would have direct recourse to the IDA payment guarantee for the drawn and


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33. The proposed IDA direct termination payment guarantee will compensate the SPV in case the Government terminates the contract prematurely. The amount of this termination payment guarantee and its coverage will be determined upon confirmation of the contractual provisions along with the risk allocation matrix. The termination guarantee is structured flexibly to be a direct payment guarantee or through letter of credit facility. Depending on the market appetite and cost of letter of credit, the project will finalize whether to have a single letter of credit facility with a dual purpose of providing liquidity for Availability Payments and Termination Payments.

Component 2: Road Safety (Total cost: US$10 million equivalent; IDA - US$8.0 million, Government of Liberia - US$2.0 million)

34. The project will finance road infrastructure safety enhancements along the project corridor and implementation of aspects of the Government of Liberia’s Road Safety Action Plan. This component will also support the MPW and the MOT in implementing the Road Safety Action Plan activities assigned to them, including drafting and finalizing legislation and policies on road safety, climate risk assessment of the road network, road safety-related institutional strengthening, and capacity building. The project will finance development and administration of a road safety curricula, which will include gender perspectives, in collaboration with local and international academic institutions. The project will coordinate with other development partners to address road safety problems systematically.

Component 3: Institutional Strengthening and Capacity Building (Total Cost: US$12 million equivalent: IDA - US$9.0 million; LRTF - US$1.0 million Government of Liberia - US$2.0 million)

35. This component will finance capacity building support to the road sector’s institutional reform process, support to educational institutions, and operating costs. This includes supporting transformation of the IIU into a full-fledged Road Agency, operationalization of the NRF and capacity building for its staff, climate resilience, maintenance, and environmental and social safeguards management of the road sector (including citizen engagement, Sexual Exploitation and Abuse (SEA) mitigation and response and grievance redressal). The component will also build government capacity to manage transport infrastructure aspects of natural resource concessions. Capacity building in this area will focus on regulation of private infrastructure, coordinating investment plans, and strengthening integration of concessions with the national economy to increase their development impact on the poor. This work will be carried out across all related sectors and will not necessarily be limited to the MPW. The project will also support gender balance in access to training opportunities in technical and non-technical positions within the road sector.

36. Activities under this component will include, among others, the following:

i. The provision of technical assistance and training to the Recipient to:

(a) Strengthen its institutional capacity for road sector management;

(b) Create and operationalize the proposed Road Agency;

(c) Establish processes and procedures for the operation of the NRF;

unpaid amounts plus any accrued interest under the reimbursement and credit agreement, in accordance with the guarantee agreement (to be concluded between IDA and letter of credit bank). Should IDA be required to make a payment to the letter of credit bank, the IDA payment guarantee support would be permanently reduced by the amounts paid by IDA under the payment guarantee.


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(d) Implement the measures for mitigating the environmental and social impacts in connection with Part A.2 of the Project

(e) Support for preparation of new IDA operations along Ganta Zwedru Harper and Coastal Road Corridor;

(f) Strengthen its capacity to regulate and renegotiate existing concessions involving transport components;

(g) Conduct In-country and overseas training for the staff of road sector institutions, including working with a local university;

(h) Support Liberian universities develop technical teaching, training, and research capacities (e.g. developing appropriate technical curricula, delivering these curricula, and support training of local technicians);

(i) Provide training in climate change adaptation/resilience and support for the climate risk assessment of future road investments;

ii. Conduct technical studies on road project safeguards, and gender analysis to understand the differentiated potential impacts (including gender-based violence GBV)) on women and men and how to address these;

iii. Mainstream citizens’ engagement and grievance redressal systems;

iv. The IIU/Road Agency operating costs; and,

v. Develop for the creation of a non-discrimination and equal opportunities policy for the Road Agency.

C. Project Beneficiaries

37. Project beneficiaries will include residents, businesses, and transport service companies located along the rehabilitated corridor and in adjacent areas who will benefit from access to a climate-resilient all-weather paved road. Approximately 471,000 beneficiaries in directly adjacent areas and those in towns and cities connected to the road will experience substantial cost reductions and shorter transport times. Road upgrading will generate local employment, albeit mostly for unskilled laborers, and on-the-job training opportunities for construction workers at a variety of skill levels. The MPW and IIU will also benefit from the project interventions through capacity building, support to the IIU and Road Agency (under MPW), and the institutional reform activities, which will help clarify mandates and improve their effectiveness. Local non-governmental organizations (NGO) will receive support to improve the project’s capacity to mitigate sexual exploitation and abuse (SEA) risks.

D. Results Chain

38. The project hypothesis is that establishing reliable road access and lowering transport costs will enable development of new economic linkages over time, eventually affecting all sectors in the project area, and lead to a broad economic development. Key assumptions are that improved road access will translate into increased use of the road by adjacent households and businesses; providing a reliable road connection will increase investment at various levels of the economy; and that sufficient market demand exists. Although the quality of transport services is often poor, transport costs are expected to decline by more than one-third, encouraging services to expand and enabling adjacent residents and businesses to benefit from the road. These lower costs should make services and produce along the corridor more


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marketable and reduce the cost of consumption for households along the corridor. Research indicates that small holders in Liberia have the capability to profitably produce and market poultry, goats, vegetables, cocoa, nuts and other produce; some of these are export-oriented cash crops while others can supplant imports. The PPP design ensures access to a reliable road for a minimum of 20 years, giving time for development of supply chains, cooperatives, and other investments that can enhance benefits of the road.

39. The project anticipates that immediate improvements in institutional arrangements and short-, medium-, and long-term investments in education can bring about a sustained improvement in institutional capacity and support to better management of the sector. Key assumptions are that that the Government will move forward with the plans to establish a Road Agency; individuals will retain valuable information from training and will remain employed by the IIU/Road Agency; and investment in capacity building and education improve the local labor pool in conjunction with the ongoing internship programs. The Government aims to establish a road agency within three years of project effectiveness. Furthermore, training under the project is carefully tailored to the needs of sector institutions and local universities.

Figure 1: Project Theory of Change

40. The proposed support to the NRF will help improve its creditworthiness and a successful demonstration PPP will make it easier for Liberia to undertake similar feasible projects in the future. This outcome assumes that the project is robustly structured to attract the private sector and that NRF will


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establish a track record of fulfilling its payment obligations. Experience32 from offering similar risk mitigation support in other countries confirms the project includes adequate guarantee coverage to make the project bankable and attract private sector financing.

E. Rationale for World Bank Involvement and Role of Partners

41. The project builds on a sustained partnership between the Government and the World Bank and can help establish a viable market for private infrastructure financing in Liberia. Development of the country’s first road PPP is a significant challenge for the Government and, without appropriate support, it may struggle to achieve an optimal value for money due to sovereign risk perceptions, limited technical capacity, and financing constraints. The rationale for engagement of the World Bank and other development partners (through LRTF) is in (a) helping the Government of Liberia prepare, competitively procure, and negotiate a bankable PPP transaction; (b) reducing overall commercial risk and lowering the cost of private financing by deploying IDA Guarantees and providing World Bank implementation support; (c) complementing commercial financing with IDA concessional financing and grant resources to improve overall affordability; and (d) operationalizing the NRF and ensuring a secure resource for quarterly availability payments during the maintenance phase. The World Bank involvement significantly increases the likelihood of a successful PPP leading to further private infrastructure finance in Liberia in the future.

42. The project aligns with a coordinated approach by Development Partners to support infrastructure development, sector reforms, and institutional capacity building. The project advances these institutional and policy reform goals by supporting establishment of the Road Agency and NRF and financing elements of the road safety plan developed with assistance from Gesellschaft für Internationale Zusammenarbeit (GIZ). Other Development Partners, especially KfW, are contributing directly to Component 1 of the project through LRTF and AfDB is financing improvement of the far southeastern section of the project corridor. The project will also build on and complement the experience of donors, NGOs, and development programs addressing the risk of SEA in Liberia, particularly United Nations (UN) Women, United Nations Population Fund (UNFPA), The United Nations International Children's Emergency Fund (UNICEF) and NGOs such as International Rescue Committee (IRC).

F. Lessons Learned and Reflected in the Project Design

43. The project design adopts lessons learned from road projects in general as well as experiences with PPPs in the road sector. Global experience has shown that PPPs can enhance access to capacity, financing, and efficiencies from private sector entities but may entail additional costs and challenges, financing premiums, and complex and challenging procurement. Key lessons mitigating the potential downsides of the PPP model include:

i.Equitable transfer of risks is critical to a successful PPP. Due to high economic volatility and lack of historical data, the private sector is not well positioned to assume revenue risk in the Liberian context33 (which could arise with tolling) or risks associated with estimating traffic for engineering/design purposes. The Availability Payment approach backstopped by the IDA

32 Refer http://www.worldbank.org/en/programs/guarantees-program#6 for further details. 33 The Government has opted to not pursue tolling for socioeconomic reasons and because the public contributes to the project through a user charge (NRF fuel levy).

http://www.worldbank.org/en/programs/guarantees-program#6


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payment guarantee parks both risks with the Government and is deemed appropriate to attract investors and lenders to Liberia.

ii.De-risking and managing residual risks are essential to achieve an affordable and sustainable PPP project. In this project, the proposed structure lowers investment risks by making available payment and termination guarantees to bidders. Residual risks are mitigated through operationalization of NRF and strengthening of IIU’s institutional capacity to manage the contracts. The PPP Agreement preserves performance incentives by requiring the SPV to provide a substantial performance security and through performance-based deductions to availability payments in case of a less than satisfactory outcome.

iii.The public sector should manage contingent liabilities emanating from a PPP in a fiscally sustainable manner. The Availability Payment mechanism and early termination payment obligations create contingent liabilities for the Government. The project design adopts mechanisms to limit such direct or indirect liabilities on the Government’s balance sheet. In this project, NRF, an indirect user paid revenue source, will make the contractual payment to the private sector, thus limiting the Government’s liability to supplementing any revenue shortfalls. By offering an IDA Guarantee with partial risk coverage in place of normally expected full sovereign guarantee, the proposed structure offers potential reduction in contingent liabilities.

iv.PPPs can help transfer commercial management processes, methods, and practices to build capacity in government entities. The project incorporates mechanisms such as on-the-job training requirements to enhance skills and ensure knowledge transfer to public sector staff.

44. The project also incorporates lessons from implementing OPRCs in Liberia.

i.The OPRCs required strengthened environmental, health, occupational safety, and community engagement compliance requirements. The PPP procurement will require that firms demonstrate capacity to assume the challenging social and environmental management functions of the SPV. Incorporation of these requirements into the performance-based payment system will establish incentives for compliance, streamline non-compliance penalties, and require the SPV to undertake sustained monitoring and detailed reporting to the Independent Engineer.

ii.Road rehabilitation is correlated with an increase in severe accidents in Liberia. The project will require the SPV to conduct a road safety audit during the design phase and implement specific measures to mitigate accidents during operation phase, such as clearing the right of way of debris and vehicles. Other road safety measures will be implemented through the Government’s Road Safety Action Plan.

iii.The Government had struggled with timely implementation of Resettlement Action Plan (RAP), resulting in construction delays and related contractual claims. The key lessons are that the resettlement processes require considerable time to complete, Grievance Redressal Mechanism (GRMs) need to be functional at all levels, and consultations, valuation, and payment steps should


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not be rushed.34 To mitigate the potential risks, transfer of 90 percent of the project site encumbrance-free to the SPV is a condition precedent to the effectiveness of the Financing Agreement and PPP Agreement.

45. The project strategy to mitigate and respond to cases related to Sexual Exploitation and Abuse (SEA) is based on the local context and lessons of relevant international experience. Recognizing that SEA risks are highly complex and can never be fully eliminated, the project approach to SEA follows five key actions: (i) enhanced upfront risk assessment; (ii) revamped GRM with multiple entry points for receiving complaints; (iii) involvement of a specialized NGO to provide assistance and referral services to the survivors; (iv) adoption of a mandatory workers Code of Conduct; and (v) contractual payments structured around fulfillment of specified obligations. While the approach to SEA primarily targets mitigation and response, several of the measures will have preventive effects. Table 2 lists key risks and the proposed mitigation measures (see details in Annex 5). Since knowledge on SEA in the context of linear transport projects is evolving, the project retains flexibility to incorporate future adjustments as may be necessary during the implementation phase.

Table 2. SEA Risk Mitigation and Response Issue Project Actions

Lack of understanding of SEA risk in context of the country and the project

• The project undertook a robust upfront risk assessment at country and project levels. Annex 5 provides a summary of the risk assessment and project risk classification.

• A preliminary mapping of formal services (e.g. medical care, safe accommodation, counselling, police protection) and informal resources (such as community-based organizations) in the project areas has been completed.

• The social safeguards instruments (Environmental and Social Impact Assessment (ESIA), RPF, and RAP) have been updated to reflect the latest lessons learned on effective mitigation measures.

Labor influx may increase the SEA risk 35.

• The project design creates incentives for the use of local workers by supporting training. The expected labor influx is estimated to be around 130 high-skill non-local workers for Component 1.

• The PPP contract under Component 1 will link payment to the level of social and environmental compliance.

• The PPP and Independent Engineer contracts shall require all workers and staff sign explicit Codes of Conduct (CoC) with stringent compliance requirements.

• The PPP contract will include specific requirements for the SPV: o Establishing anti-sexual harassment policies and adopting a Gender Based Violence

Action Plan (including a response and accountability framework) for implementing environmental, social, occupational health and safety standards, and mitigation measures on SEA.

o Periodic mandatory training of all workers on SEA issues.

34 It is therefore vital to (a) hold sufficient upfront consultation with community members to identify impacts and resolve uncertainties that could lead to conflict; (b) conduct accurate and careful property valuation; and (c) finalize and publish the RAP with sufficient lead-time to implement downstream steps. Other lessons relate to the importance of careful documentation of all safeguards activities, procedural mechanisms and financial controls (including separation of functions and cross-verification) and use of dedicated trained staff and explicit contractual obligations to ensure safeguards implementation compliance. 35 Often in infrastructure projects, the labor force (total or partial) needs to be brought in from outside the project area. In many cases, this influx is compounded by an influx of other people (“followers”) who follow the incoming workforce with the aim of selling them goods and services, or in pursuit of job or business opportunities. The rapid migration to and settlement of workers and followers in the project area is called labor influx.


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Issue Project Actions

o Prepare a detailed environmental and social assessment under Performance Standard (PS) 1 of World Bank Operations Policy 4.03.

• Additional measures to mitigate labor influx-related risks include (a) assessing living conditions of workers’ camps and ensuring appropriate living conditions; (b) ensuring appropriate location for these camps; and (c) taking countermeasures to reduce the impact of the labor influx on public services.

• The project will finance targeted training of the local population to encourage local female participation in high skills jobs and temporary employment on road rehabilitation. These measures are intended to improve the economic status of women, generate role models and reduce the risk of SEA.

Grievance Redress Mechanism (GRM) may not be able to respond rapidly, effectively, and comprehensively to allegations of SEA.

• The project will strengthen the GRM as one of the entry points for complaints related to SEA through adoption of information and communication technology (ICT) that, with the consent of the survivor, reports the complaint to the Government and World Bank while respecting the survivor’s confidentiality.

• The project has multiple other entry points to raise and address allegations. These entry points include the GRM, a toll-free number, a web-based reporting system, the NGO hired by the project, as well as community-based organizations identified through the mapping exercise, such as Women Concern.

• The GRM will be enhanced by the information from the finalized mapping exercise identifying partners for services for survivors of violence.

• The project will support establishment of a grievance redress policy for the road sector.

Lack of multi-sectoral coordination and inadequate monitoring capacity

• The implementing agency has appointed a gender focal point to coordinate activities related to SEA.

• The project has identified donors and NGO partners who can coordinate mitigation measures, contribute to the SEA risk assessment, and provide services (or referrals) for SEA survivors.

• The project has identified an NGO (Women in Peacebuilding Network, or WIPNET36) to provide referral services and contribute to monitoring that the SEA mitigation and response provisions are in place, including the CoC are signed, worker trainings are conducted, and referrals are made properly. The NGO has robust experience and expertise addressing SEA challenges in Liberia and a strong network of organizations and services for survivors on the ground. It has worked for several years building the capacity of grassroots women groups on SEA case management, peacebuilding, and advocacy.

• The Independent Engineer will monitor the fulfilment of SEA-related obligations by the SPV throughout the contract term. It will also monitor the provisions to mitigate and respond to SEA by reporting compliance with the Codes of Conduct, trainings to contractors, and awareness raising to the community carried out by the NGO.

• Both the Independent Engineer and the SPV will be required to have environmental and social safeguards expertise as specified in the bidding documents.

Low implementing agency capacity and community awareness of SEA-related issues

• The project will support improved management of social and environmental safeguards, identification and mitigation of gender disparities, and citizen engagement.

• Community dialogue and awareness raising will be undertaken to make sure people in the project areas are aware that they can report project-related cases of SEA through different entry points to the referral pathway (including the GRM).

46. The project will follow the recommendations of the Independent Evaluation Group’s report “Making Roads Safer” The report provides empirical evidence of the importance of adopting a comprehensive, multi-sectoral, and systematic approach backed by high-level political support to raise road safety awareness and develop a strong road safety agenda. Component 2 will include physical road

36 In case WIPNET is unable to undertake the referral services, the project shall hire other such partners with experience in SEA and GBV issues in Liberia.


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safety interventions and technical assistance to enhance institutional capacity and promote collaboration among stakeholders in this area.

III. IMPLEMENTATION ARRANGEMENTS

A. Institutional and Implementation Arrangements

47. Project implementation will follow the implementation arrangements of other World Bank-funded transport projects, which are performing satisfactorily. The arrangements are based on collaboration between the IIU of the MPW, which is responsible for technical matters and procurement, and the Project Financial Management Unit (PFMU) under the Office of the Comptroller and Accountant General of the MFDP, which is responsible for project financial management.37 While the IIU will prepare the technical specifications and packages for procurement and establish the relevant contracts, the PFMU will deal with eligible payments for the contractual obligations signed by the Government and maintain financial records, in addition to routine payments to facilitate operations. This institutional arrangement has been designed to provide checks and balances amid weak governance. The current staffing levels of the PFMU are adequate for management of the project.

48. The IIU is likely to transition into a Road Agency within the first three years of implementation. The proposed Road Agency will be responsible for all aspects of the sector from planning and scheduling to implementation and monitoring and will absorb the existing IIU staff. The project will provide technical assistance support to this transition and to operationalizing the new agency.

49. The PFMU will open a designated Southeastern Corridor Road Asset Management Project (SECRAMP) account acceptable to IDA in a commercial bank or the Central Bank of Liberia for depositing project funds. The interim-financial-report-based method of reporting will be used for reporting on a quarterly basis. The four methods of disbursement will be in use to include reimbursement, direct payments, advances, and special commitment. The PFMU will also maintain a minimum balance at the SECRAMP Project Account to cover a minimum of two quarterly Availability Payments during the maintenance phase. In the event the minimum balance is below the required amount, MFDP will bear the responsibility to top up the account back up to the minimum required balance amount. The process and procedures in setting up the account and in case of shortfall, the mechanism for the MFDP to top up the account will be set out in an Implementation Agreement between the MFDP-PFMU and MPW-IIU and the NRF. The PFMU will manage the designated account. Annex 7 provides further details of the fund flow mechanism.

50. The preferred bidder is expected to establish an SPV to raise finance on a limited-recourse-basis to rehabilitate, operate and maintain the project road. A shareholder agreement (or form of partnership or other agreement) will set forth the respective SPV shareholders’ rights and obligations. The SPV will enter a financing agreement with lenders and, depending on the nature of guarantee chosen, will also enter guarantee related agreements with the IDA. A community-based organization (Women Concern)

37 The IIU and PFMU currently manage about US$240 million worth of project activities (over a quarter of the total Development Partners’ project financing).


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will act as third-party monitor to ensure that provisions to prevent and respond to SEA and GBV are in place and functioning.

B. Results Monitoring and Evaluation Arrangements

51. Existing monitoring and evaluation arrangements in the transport sector will continue with the project. The IIU will collect project results indicator data and report this to the World Bank in quarterly reports. These are classified by their characteristics and measurement methodology: (a) progress made toward institutional capacity building of the implementing agency and the road sector; (b) development and performance of road corridor; and (c) economic and social impacts of the project on the livelihood of affected persons and local/national economy.

C. Sustainability

52. The PPP approach incorporates several mechanisms to sustainably rehabilitate and maintain the infrastructure for the intended asset life. Since the SPV bears the risk for design, construction, and maintenance performance-related responsibilities over 15 years, it has an incentive to build a road asset with optimal life cycle costs, undertake preventive maintenance measures, and incorporate climate-resilient and adaptation measures in the design and maintenance programs. Second, the handover requirements at the contract expiry will ensure sustained service for the remaining years of asset design life. The project will engage an international consulting firm as an independent engineer to monitor the performance on a continuous basis during the construction and operation phase, and also monitor the maintenance and safety management issues on a quarterly basis.

53. The project design incorporates several elements to build and retain institutional sustainability. First, the project will help anchor the knowledge and experience from the PPP transaction within the country’s road sector and the nascent local industry. IIU engineering staff will be sent to work with the Independent Engineer, who will be tasked with transferring project management, performance monitoring, and other technical skills to IIU staff. The project will support the IIU to develop a complete and self-contained organizational structure equipped with the competencies and skills to take up its eventual role as the Road Agency.

IV. PROJECT APPRAISAL SUMMARY

A. Technical, Economic and Financial Analysis

A. Technical

54. The project will extend an economic lifeline into inaccessible rural areas of Liberia with high and worsening poverty and support economic integration of a large region of the hinterland with the rest of Liberia and neighboring countries. Upgrading a section of the road to bituminous surfacing will provide reliable, all-weather road access to a large area of southeastern Liberia that is home to about four hundred fifty thousand people, facilitate economic growth and improve livelihoods in a rural population facing worsening poverty. The project corridor is also vital to the nation’s reconstruction effort, eventually enabling regional trade with Côte d’Ivoire and Guinea, and providing reliable access to the planned dry port near Ganta and to Jackson Fiah Doe Memorial Regional Hospital, Liberia’s only comprehensive referral health facility.


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55. The rehabilitated road would consist of a single carriageway of two, 3.75 meter wide lanes and 1.5 meter paved shoulders. In the urban zones, the road section will have 1.5 meter-wide block paved pedestrian walkways on both sides with concrete side drains, as required. Current traffic levels vary from an annual average daily traffic of about 300 in the southern areas to a maximum of 8,400 in the northern sections of the corridor. The lower traffic volumes reflect poor road conditions. The pavement will have a 20-year design life. During the operation phase, the SPV would provide periodic renewal of the wearing course, as required, and would be tasked to maintain road-related infrastructure such as pavement, bus bays, police check points, and weighing station(s).

56. The PPP design builds on the OPRC method successfully adopted in Liberia. The project advances the OPRC approach further by allowing the private sector to raise funds to build significantly more kilometers of road than would be possible only with the available public finances. The cost recovery through quarterly Availability Payments is well aligned with the current NRF resources. Use of performance indicators during the rehabilitation and maintenance phases provides a hedge against the risk of poor performance by the contractor.

57. The project is the first of its kind in Liberia’s road sector to maximize finance for development and leverage limited public resources with private sector financing. To enable such private financing, US$48 million of IDA Guarantees are proposed. Without the IDA Guarantees, it is unlikely that a private entity would risk entering a long-term contract with the Government at an affordable price.

58. Overall analysis indicates that the project would create both direct and contingent liabilities for the Government, which need to be managed. The project has used the World Bank-International Monetary Fund developed Project Fiscal Risk Assessment Model (PFRAM) to calculate fiscal impact on the government balance sheet. A separate contingent liability analysis was conducted to assess the level of contingent liabilities from the project obligations. The analysis indicates that the project liabilities will add between 0.1 percent and 2.2 percent of Gross Domestic Product (GDP) 38 to the Government’s liabilities. Additionally, the contingent liabilities arising from an event of termination due to government default or political force majeure are expected to be a maximum of 1.37 percent of GDP while contingent liabilities arising from a shortfall in the NRF are expected to be 0.3 percent of the government budget (see Annex 3). Regular supervision and monitoring of the revenue collected at the NRF and management of performance risk would help mitigate the need for and level of Government budget support.

59. The project’s exposure to the risk of climate change and potential impact of future climate scenarios is low. A climate and disaster risk screening, conducted during project preparation by using the Climate and Disaster Risks Screening Tool, flagged moderate climate impacts associated with extreme temperatures and the level of precipitation and flooding. The historic average temperature of the project area ranges from 26.5 (high) Celsius to 23.9 (low) Celsius. The project area receives a maximum rainfall of 380 mm and experiences an average of 12.7 and 7.9 days with heavy and extreme rain, respectively. To date, there has been no recorded incidents of flooding in the project area. Since the project is in the hinterland, it is not exposed to natural hazards such as sea level rise or strong storm surge. However, a part of the project area is susceptible to fire hazard. During future time frame (2020-2059), the project

38 Based on the updated 2017 GDP figure of US$3.285 billion provided by the Government of Liberia during Negotiations.


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area is projected to receive less rains with a peak monthly average of 304 mm, with a slight increase in the average mean temperature of about 1 degree centigrade.

B. Economic and Financial Analysis and Greenhouse Gas Accounting

Economic Analysis

60. Economic analysis of the proposed investment shows that it is economically viable to upgrade the project corridor. The Highway Development and Management Model (HDM) was used for carrying out the analysis. Benefits considered in the economic analysis include: the road user cost savings, vehicle operation costs, and travel time costs for passengers and cargo. Table 3 summarizes findings of the economic analysis, showing that economic returns on the proposed investments are high in all cases, ranging from 17 percent to 22 percent, and this is as confirmed by a sensitivity analysis of the robustness of the results. Even if construction costs increase by 20 percent and the traffic volume growth decreases by 20 percent, the economic returns on investments are still viable.

Table 3: Summary Economic Evaluation Indicators

Ganta-Tappita

Economic Internal Rate of Return (EIRR) 28 percent

Net Present Value (NPV) (US$, millions) 127.6

NPV- to Capital Costs Ratio 1.4

Sensitivity Results

NPV/EIRR (20% decrease in traffic growth rate) US$112.3 million / 26.4 percent

NPV/EIRR (20% increase in construction costs) US$111.0 million / 24 percent

NPV/EIRR (20% decrease in traffic growth rate plus 20% increase in construction costs)

US$95.7 million / 22.8 percent

Financial Analysis

The financial analysis confirms that an annual Availability Payment of US$8 million would be sufficient to support the project cost. The analysis indicates that project viability is sensitive to the total project cost and terms of debt financing. Annex 3 provides additional details. Table 4 shows the sources and uses of funds for the rehabilitation and operating periods.

Overall Vehicle and Greenhouse Gas Emissions

61. The project’s estimated net greenhouse gas emissions are positive. Using HDM, the vehicle emissions under two scenarios (with and without project investments) over a 20-year analysis period were estimated. The net vehicle emission amounts are equivalent to the difference under these two scenarios. The estimated net total vehicle emissions for the proposed investment is approximately 200,000 tons, which is equivalent to approximately 10,000 tons per year.

Table 4: Sources and Uses of Funds for the Rehabilitation and Maintenance Phases of the PPP Rehabilitation Phase US$, millions Maintenance Phase US$, millions

Uses of Funds Uses of Funds

Civil Works Costs (Incl. interest during construction)

Operating Costs and Rehabilitation Costs

20.8


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100.039 Debt Service (Principal and

Interest) of SPV debt 59.25

Sources of Funds Equity Cash flow returns of SPV 26.3

Government Contribution (through IDA Credits, LRTF grants and own resources)

39.0 Recurring IDA Guarantee Fee

and Standby Letter of Credit Fees

1.0

Private sector SPV Debt 42.7 Total 107.3

Private sector SPV Equity 18.3 Sources of Funds

Total 100.0 Availability Payments 107.340

B. Fiduciary

(i) Financial Management

62. The PFMU, currently under the MFDP, will undertake the financial management-related functions of the project. The PFMU is adequately staffed with qualified accountants and has the requisite capabilities to carry out the financial management functions and ensure that the Government’s financial management systems are also used for the project. The PFMU has been carrying out these responsibilities for the ongoing IDA-funded operations and the unit’s performance has been satisfactory. Annex 7 details the financial management arrangements, including the fund flow mechanism, internal controls, external audits, and reporting.

63. The IIU, with support from the PFMU, will be responsible for the annual work planning and budgeting preparations. Annual work planning and budgeting will be based on work programs agreed with the World Bank, to which the project will submit the planning two months before the ensuing fiscal year. Disbursement from the World Bank will be based on interim financial reports. The PFMU, in collaboration with the IIU, will submit to the Association a quarterly cash forecast as the basis for the initial disbursement. The funds will flow from the Association into a designated account in a commercial bank or the Central Bank of Liberia, acceptable to the Association. The other methods of disbursement include reimbursements, direct payment and special commitments.

64. The PFMU will be responsible for the budgeting, accounting, reporting, internal controls, and auditing arrangements of the project. The PFMU will submit to the World Bank quarterly unaudited interim financial reports 45 days after the end of each calendar quarter. The PFMU will apply the existing financial practice manual for processing the financial transactions of World-Bank-assisted projects. The PFMU will also submit the Audited financial statements six months after the financial year end.

65. The PFMU has an Internal Audit Unit assigned to strengthen the systemic controls in the projects. The internal auditors have increasingly also been engaged in supporting donor projects in the exercise of internal controls over expenditure management. The PFMU financial management system segregates duties in the expenditure processing cycle while ensuring the monitoring of cash availability at

39 This amount, US$ 100 million, refers to costs falling under the scope of the PPP contract with the private sector partner. It corresponds to the amount in row a. of Table 1: Project Costs and Financing Sources in Relation to Rehabilitation of the Road. Rows b. through d. of Table 1 are part of the overall Component 1 costs (US$118 million) but are not part of the PPP contract costs. 40 The indicative amount of availability payment includes adjustment for inflation of two percent per annum over the contract duration. The total nominal availability payment of US$96 million is therefore equivalent to US$107.3 in real terms.


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any given time. The internal auditors will ensure implementation of mitigation and corrective measures for closing the issues identified by them or the external auditors.

66. The PFMU/MFDP will put a mechanism in place to enable regular project monitoring. Under the proposed Implementation Agreement, the PFMU will interact with the NRF in receiving NRF revenues for making contractual payments to the SPV. The MFDP and MPW will be expected to include in the national budget a forecast of any NRF revenue shortfalls that need to be budgeted to make contractual payments.

(i) Procurement

67. The World Bank Procurement Regulations41 will apply to the project. The IIU will carry out the procurement activities of the project. These include procurement implementation, contract management, and the related decision-making authority under the proposed project. The Borrower and the World Bank have agreed on the procurement method, market approach, cost estimate, the World Bank’s review requirements, and implementation time-frame for each contract. The updated project procurement plan contains the abovementioned information. The project will use the World Bank’s Systematic Tracking of Exchanges in Procurement, an online tool, for planning and tracking all prior and post-review procurement transactions. Procurement arrangements, roles and responsibilities, methods, and requirements for carrying out procurement will be elaborated in the procurement sections of the Project Operations Manual.

68. The Government has finalized a Project Procurement Strategy for Development (PPSD) with IDA assistance and undertaken a market sounding to assess market interest in the proposed PPP in collaboration with its transaction advisor and the World Bank.42 The PPSD market assessments found that: (a) there are minimum entry barriers to enter the construction market in Liberia and the number of registered contractors has increased significantly since 2013; (b) local contractors are unlikely to bid for the project PPP given their limited capacity and experience; and (c) international developers/contractors and financiers have shown interest to participate in PPP contracts in Liberia. Based on the market sounding feedback, the Government decided to approach the market through an open international competitive process starting with pre-qualification of the eligible applicants before issuing a request for proposals (RFP). The project will adopt a two-envelope two-stage process and the RFP will include an optional Best and Final Offer. This process is ideal for maximizing efficiency in a highly competitive context.

69. The World Bank assessment concluded that the IIU has sufficient procurement capacity for the proposed operation. The unit has successfully carried out procurement activities for other IDA-funded projects and it has qualified procurement personnel. The risks mainly emanate from inadequate contract management capacity. The proposed project will support the engagement of an independent engineer to strengthen the skills and expertise needed to manage the PPP contract.

41 “Procurement Regulations for IPF Borrowers” (Procurement Regulations) of July 2016 and revised in November 2017 and August 2018 under the “New Procurement Framework (NPF), and the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants” of July 1, 2016 42 The PPSD will be regularly updated, if deemed necessary, during project implementation to provide justifications for procurement arrangements, procurement plans, and their updates.


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C. Safeguards

(i) Environmental and Social Safeguards

70. 72. The project triggers four World Bank Policies: Operational Policy (OP)/Bank Procedure (BP) 4.01 (Environmental Assessment), OP/BP 4.12 (Involuntary Resettlement), OP/BP 4.11 (Physical Cultural Resources) and OP 4.03 (Performance Standards for Private Sector Activities). As required by OP/BP 4.01, the Government has prepared an Environmental and Social Impact Assessment43 (ESIA) which

identifies environmental and social impacts that emanate from civil work activities under Component 1. The Government of Liberia will implement the resettlement, clear the project road right of way in compliance with OP 4.12. In addition to the resettlement, the Government also bears overall responsibility for assessment and management of social and environmental risks and impacts of the project. The private sector partner will, however, be responsible for assessment and management of social and environmental safeguard risks arising from its activities in accordance with OP 4.03.

71. The Request for Proposal (RFP) package includes a form to facilitate the assessment of prospective bidders’ safeguard management capacities. It includes, among other things, past environmental, social, health, and safety performance; implementation status of the Environmental and Social Management System (ESMS); and number and qualifications of environmental, social, health, and safety personnel, including means to address harassment and other forms of GBV. The prequalification will be established by several means, including a simple questionnaire based on a selection of relevant performance standard criteria. The Government has developed details of the questionnaire that include requesting evidence of accreditations such as ISO 14001/OSHAS 18001 held by the company, and/or alignment with ISO 26000, GRI, United Nations Global Compact, World Business Council for Sustainable Development, and/or other social responsibility standards/guidelines/formal initiatives. The Bidders will be required to demonstrate that they have recognized capacity to identify, assess, and manage the environmental and social risks associated with performance Standard 2: Labor and Working Conditions, including providing evidence of ‘third-party certification’ of relevant capabilities.

72. OP 4.03: Performance Standards for Private Sector Activities require the SPV to further assess environmental and social risks related to its activities and develop and implement appropriate mitigation and management measures. The Government of Liberia and the World Bank will review the SPV’s activities, ESMS, environmental and social management plans, Occupational Health and Safety (OHS) Plan, and Labor Force Management Procedures prepared for activities under the ESMS for consistency with the World Bank Performance Standards. The requirement to prepare these plans and procedures and all other obligations of the SPV under OP 4.03 are included the draft PPP agreement.

73. Road improvement and maintenance works under Component 1 entails involuntary resettlement and OP 4.12 was triggered and deemed applicable. The IIU has conducted impacts screening and social impact assessment exercises to determine the magnitude of potential social risks and impacts on Project Affected Persons (PAP) under Component 1. Majority impact is expected to be within the existing Right of Way. It is estimated that 1,141 PAPs households will be impacted by Component 1 activities - which includes minor or moderate effects on structures, crops, small businesses and makeshift

43 This ESIA was cleared by the World Bank and disclosed by the Government of Liberia and World Bank (as Report Number SFG3795) on November 12, 2018.


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traders. The Government is responsible for mitigating these social risks and impacts and is required to fully comply with OP 4.12 objectives and principles.

74. A Resettlement Action Plan (RAP) has been prepared by the Government to mitigate social risks and impacts identified by the census and the social assessment exercises44. The revised estimated cost of offsetting impacts on properties and livelihoods is expected to be US$5.5 million. The Government has committed to provide the required funding for financing the RAP. The Government shall be responsible for paying compensation and resettlement assistances to all PAPs, for clearing the corridor right of way and for handing over the site to the contractor. Government hand-over of 90 percent of the project site, free of encumbrances, is a condition of effectiveness of the Project and PPP

75. The land requirements associated with road realignment and detours will be known during the construction phase and these requirements shall be covered by OP 4.03 (Performance Standard 5). The SVP shall be responsible for screening social risks and impacts associated with realignments and detour land requirements. The SVP shall also be responsible for preparing Abbreviated Resettlement Action Plan(s) (ARAP)/RAP, estimating resettlement costs, conducting consultations, and paying compensation and resettlement assistances to all PAPs who will be impacted by the road realignments and detours as needed under Component 1 activities45. While preparing and implementing ARAP/RAP, the SPV shall fully comply with OP 4.03 policy requirements, particularly the SPV shall fully abide to all PS-5 stipulations.

76. The SPV will be responsible for assessing and managing risks related to influx of non-local labor and related issues in accordance with PS-2: Labor and Working Conditions. Although the SPV will train local workers for skilled construction work, the roadwork activities will require use of both local and non-local laborers. The project, therefore, triggers PS-2 of OP 4.03 (Labor and Working Conditions). The extent of applicability of PS-2 will be determined through the assessment required under PS-1 (Assessment and Management of Environmental and Social Risks and Impacts). PS-2 requirements include several international conventions and instruments, including those of the International Labor Organization and the United Nations. The SPV’s ESMS will track the requirements of PS-2. The project will take concrete measures to mitigate labor influx-related risks including (a) assessing living conditions of workers’ camps and ensuring appropriate living conditions; (b) ensuring appropriate location for these camps; (c) establishing and enforcing a mandatory Code of Conduct and training workers on its content; (d) taking countermeasures to reduce the impact of labor influx on public services and local populations; and (e) devising and implementing a strategy for maximizing employment opportunities for the local population, including provision of high-skill training for women to be employed in road rehabilitation. Measures related to addressing and preventing GBV, including sexual exploitation, are discussed in detail under section (iii) Gender, and Annex 5.

77. The PPP contract and Project Operations Manual (POM) will detail the mechanisms and management process for delivering seamless application of OP 4.03 requirements. These details will

44 The IIU disclosed the RAP on November 17, 2017 in Monrovia, Liberia and the World Bank disclosed the RAP on its website on November 15, 2017 as Report Number SFG3795. thttp://documents.worldbank.org/curated/en/425421510962301689/Resettlement-action-plan-for-Ganta-to-Tappita-road-100-km-Project. 45 The IIU has disclosed the RPF for the project on November 13, 2018 and the World Bank disclosed it on its website on the same day as Report Number SFG4800.

http://documents.worldbank.org/curated/en/425421510962301689/Resettlement-action-plan-for-Ganta-to-Tappita-road-100-km-Project

http://documents.worldbank.org/curated/en/425421510962301689/Resettlement-action-plan-for-Ganta-to-Tappita-road-100-km-Project


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include an agreed schedule for Government assessment of the SPV’s environmental and social performance. The PPP contract will link payments and level of social and environmental compliance at all stages of project lifecycle46. An embedded group of in country World Bank specialists will support the Government of Liberia in the management and supervision of the SPV’s environmental and social performance. The SPV will be required to provide its management plans for the entire project life cycle—from the pre-construction phase to decommissioning. The project obligates the SPV to arrange periodic third-party environmental and social audits. The SPV will also be required to furnish the World Bank with an Annual Monitoring Report summarizing its activities, consistent with the World Bank Performance Standards. Annex 4 summarizes the project’s safeguard implementation arrangement and monitoring mechanism.

(i) Citizen Engagement and Grievance Redressal

78. The project will build upon earlier initiatives undertaken under World Bank funded projects for enhancing project monitoring, transparency, and social accountability. The IIU has adopted a cell-phone-based geospatial application called Argo for monitoring work sites. A variant (lite-mode) of the application is also available for public use to report road-related grievances as part of efforts to enhance citizen engagement in road sector operations. The application is a tool to effectively engage communities in reporting compliance by the contractor. Under an ongoing project, a pilot is underway to provide communities residing alongside the corridor with phone and regular credit to report periodically. The project will build upon the lessons from the pilot and implement these along the entire corridor. In addition, the IIU is working to develop an iOS version of the application and to enhance some of its features (for example, data visualization and usability).

79. The project will deepen project monitoring, citizen engagement, and grievance redressal initiatives undertaken under LIBRAMP. Lessons learned from the initiatives include: (a) a detailed policy framework and detailed procedures are required for a successful grievance redress mechanism; (b) it is necessary to link the grievance redress mechanism at different levels (village, provincial, central); and (c) more effort is needed to make the public aware of the existence of a grievance redress system for lodging grievances. The activities under the project will include:

(a) developing a grievance redressal policy for the MPW;

(b) developing detailed procedures for redressal of grievances, including pinpointing grievance redressal roles and responsibilities among MPW officials;

(c) designing a web-based grievance registration system;

(d) creating a mechanism for providing feedback to complainants and monitoring the status and resolution of grievances;

(e) undertaking campaigns, including the use of billboards and radio broadcasting, to sensitize the public on the opportunity and means to register grievances; and

(f) providing support to the MPW/IIU for setting up an institutional mechanism for registration, processing, management and, resolution of grievances.

46 The payments may be reduced in case of noncompliance and suspended in case of fundamental breach of the contract.


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(iii) Gender

80. While gender gaps in Liberia have narrowed in many areas, several gaps persist in rural areas and in low-income households.47 An analysis has identified the following gaps. First, the ratio of female-to-male labor force participation is 63 percent (among the low-income population). Liberian women are absent from more profitable sectors. This is mainly due to cultural factors and lack of appropriate skills48 (For example, less than 7 percent of women are involved in construction)49. The prevalence of GBV and HIV is higher among women than men.

81. The project will contribute to closing the abovementioned gender gaps with the following activities: (a) providing technical assistance for the development of a non-discrimination and equal opportunities Policy for the Road Agency; (b) including in the SPV’s contractual obligations a provisional sum for training women with specialized skills for road rehabilitation (e. g. operating plants, driving/operating equipment , mechanics)50 and hiring a percentage of them; and (c) in case there is sufficient demand of women engineers in the partner universities, proactively target women for the technical internship program of the project.

82. The project approach to mitigate the risk of SEA and to respond promptly and adequately to SEA cases related to the project areas is based on the current knowledge of this complex issue.51 The approach will continue to evolve as the team learns from experiences both from project implementation and emerging best practices across the globe. Table 2 lists key risks and the proposed mitigation measures (see other details in Annex 5).

(iv) World Bank Grievance Redress

83. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate GRS, please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

47 World Bank. (2007) Liberia. Toward women’s economic empowerment: a gender assessment. Washington: World Bank, p. 11. 48 World Bank. (2007) Liberia. Toward women’s economic empowerment: a gender assessment. Washington: World Bank, p. 5. 49 IFC. (2014). Striving for business success: voices of Liberian Women Entrepreneurs. Washington: IFC, p. 9. 50 Contractors of the ongoing contracts under the IDA-funded LIBRAMP are already following such practice, albeit informally. The proposed project will endeavor to formalize the practice and provide women with the proper skills to perform these tasks.

51 The project has assessed the SEA risk during preparation. The mitigation approach is based on the assessment as well as global experiences and lessons from past projects (see details in Annex 5). Lessons from the upcoming WB Good Practice Note Recommendations for Addressing GBV in Investment Project Financing involving Major Civil Works (draft from June 2018) have also been considered.

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/


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V. KEY RISKS

A. Overall Risk Rating and Explanation of Key Risks

84. The overall risk is deemed “high”. A risk analysis using Systematic Risk-Rating Tool shows that there are high and substantial risks in the political and governance and macroeconomic areas, as well as in sector strategy and policy, fiduciary, institutional and sustainability, fiduciary, environmental, and social areas.

Table 5: Risk Ratings and Explanations

Risk Category and Rating

Political and Governance - High: Liberia suffers high governance risks at local and national levels. At the central government level, entities have been slow to reorganize and manage the impacts of policy decisions on ongoing civil works contracts (such as taxing and regulation of fuel and explosive imports, respectively). The Government can also be slow to resolve issues that require coordination among government entities housed under different Ministries. These factors can diminish the efficacy of project resources. Experience implementing other projects in the sector has shown heightened implementation support can ameliorate these risks to some degree. Furthermore, although the Road Fund Act incorporates mechanisms to establish the NRF as a quasi-independent entity with ring-fenced resources, there is a risk that competing fiscal priorities may create pressures to attempt to divert NRF resources. As the current Government has prioritized road investment, this risk is less likely to materialize in the short term. Over the long term, project supervision and provision of IDA Guarantees will establish reporting and accountability mechanisms to mitigate this risk. These monitoring mechanisms will reinforce overall NRF governance.

Macroeconomic - High: The key risks are that macroeconomic volatility would affect the Government’s revenues and project benefits. Liberia’s economy suffers from volatility related to dependence on natural resources and the economy’s overall low resilience to shocks. The Government has also struggled to fully implement needed reforms to support economic growth. Recent inflation is indicative of overall economic vulnerability. A rapid increase in non-concessional borrowing, recently discussed at the highest levels of government, could exacerbate economic difficulties.

Sector Strategies and Policies - Substantial: Delays to policy and institutional reforms or future changes in the fuel levy are the most significant risks. Overall, sector policies and strategies are not well articulated, sector governance remains weak, and the sector is severely resource constrained. Institutional reforms are led by the Governance Commission and two key sector reform bills (the road agency act and the road act) are pending enactment by the Legislature of Liberia. Delaying reforms would affect overall management of the sector. Past progress and sustained Development Partner engagement can help mitigate this risk. The World Bank will continue to assist the Government of Liberia in establishing operational procedures and monitoring project implementation. The IDA Guarantee, if chosen, will have IDA corporate monitoring of project performance and through reporting obligations of public (NRF, IIU) and private sector (SPV) under the PPP.

Institutional Capacity for Implementation and Sustainability - High: The key risk factors arise from limited local talent pools, the transitional nature of the key implementing agency, the IIU, and the newly set up NRF. Although the IIU has gathered substantial experience managing large and complex contracts, it is a


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Risk Category and Rating

transitional institution with limited experience managing PPPs. The IIU is also susceptible to substantial staff turnover risk, which could jeopardize hard-won capacity gains. The Government has agreed to move forward with conversion of the IIU into a permanent Road Agency within three years of project effectiveness. Establishing a capable road agency and fully operationalizing NRF will be vital to sustain gains and manage the sector going forward. Other mitigating measures include support to IIU salaries to mitigate staff attrition, capacity building programs under the project, and other ongoing capacity building programs. These programs have helped build the sector’s capacity over time. Beyond this, close project-level implementation support and sustained engagement play a vital complementary role addressing institutional capacity risks from within the sector.

Fiduciary - High: Project funds will be managed by the PFMU, which has a track record and demonstrated capacity and experience to carry out this function. Although the PFMU was recently streamlined into the Office of Comptroller and Accountant General, it has retained all its staff. The key fiduciary risks under the project are the lack of NRF track record fulfilling obligations and managing funds and the potential contingent liabilities assumed by the Government. The Government has only recently established the NRF and hired an NRF manager and staff, and the NRF’s operating procedures are not fully developed. Both shortfall in NRF revenues and early termination of PPP contract create contingent liabilities to the Government. The contingent liability analysis (Annex 4) indicates low impact on Government budget from the PPP project.

Environment and Social - Substantial: The overall post conflict and post-Ebola context of Liberia, coupled with the limited government capacity, necessitates great government care and planning in managing both environment and social risks as well as overseeing potential SPVs. The environment risk is substantial because the project involves the rehabilitation and upgrading of existing roads in a rural setting including ancillary activities (establishment and operation of quarries, borrow pits and workers’ camp) in a country with low capacity for environmental enforcement. On the social side, the project activities will trigger involuntary resettlement. More than 1,000 people, as well as structures, crops, and businesses, will be temporarily affected. Failure to complete compensation payments could impact commencement of the project. In addition, although the World Bank GBV Risk Assessment Tool rates the project GBV risk Substantial, the project also includes some mitigating measures designed for High GBV risk rating. Among these measures are including requirements in works-related contracts for stringent staff codes of conduct, relevant SEA training, and adoption of action plans for mitigating environmental and social impacts.

The project will mitigate the risk of traffic accidents through specific road safety interventions on the project roads, capacity building activities, education and enforcement.

Stakeholders—Moderate

Other - Security —Low: The area through which the proposed project road passes does not pose any security risks. No major security incidents have been reported in recent times in the project road corridor.

Overall —High . .


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VI. RESULTS FRAMEWORK AND MONITORING

Results Framework COUNTRY: Liberia

Southeastern Corridor Road Asset Management Project

Project Development Objectives(s)

The project aims to support the Recipient’s efforts to enhance road connectivity for residents living along selected sections of the Ganta-to-Zwedru Road Corridor, and to improve institutional capacity to manage the road sector.

Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline Intermediate Targets End Target

1 2 3 4 5 6

Improve institutional capacity to manage the road sector

National Road Fund fully operational (Yes/No)

No No No Yes Yes Yes Yes Yes

Enhance road connectivity along selected sections of the Ganta to Zwedru corridor

Direct project beneficiaries (Number)

0.00 0.00 53,173.00 106,345.00 106,345.00 109,078.00 111,914.00 114,879.00

Share of rural population with access to an all-season road (Percentage)

0.00 0.00 1.25 2.50 2.50 2.50 2.50 2.50

Reduction in travel time along the project corridor during the dry season (Minutes)

0.00 9.00 45.00 90.00 90.00 90.00 90.00 90.00


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PDO Table SPACE

Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO


1 2 3 4 5 6

Road Improvement and Maintenance Works

Average Annual Daily Traffic (Number)

394.00 394.00 394.00 394.00 560.00 595.00 630.00 665.00

Roads rehablitated (CRI, Kilometers)

0.00 0.00 50.00 100.00 100.00 100.00 100.00 100.00

Roads rehabilitated - rural (CRI, Kilometers) 0.00 10.00 50.00 100.00 100.00 100.00 100.00 100.00

Roads rehabilitated - non-rural (CRI, Kilometers)

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Roads Maintained (Kilometers) 0.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

Private financing mobilized (Percentage)

0.00 0.00 50.00 100.00 100.00 100.00 100.00 100.00

Road Safety

Pilot Safety Works Implemented (Yes/No)

No No No No No No Yes Yes

Person-days of training in areas of professional competency (Days)

0.00 250.00 350.00 400.00 450.00 475.00 500.00 500.00

Institutional Strengthening and Capacity Building

Establishment of the Road Agency (Yes/No) No No No Yes Yes Yes Yes Yes

Establishment of Non-Discrimination and equal opportunity policy in the

No No No No Yes Yes Yes Yes


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RESULT_FRAME_T BL_ IO


1 2 3 4 5 6

road sector. (Yes/No)

Women trained for specific skilled construction jobs (Percentage)

0.00 0.00 17.50 35.00 35.00 35.00 35.00 35.00

Women employed in construction (Percentage)

0.00 0.00 5.00 10.00 10.00 10.00 10.00 10.00

Establish a Road Agency-wide GRM Policy (Yes/No)

No No No No Yes Yes Yes Yes

Enhancement of ICT Citizen Engagement and Grievance Redressal tool (Yes/No)

No No Yes Yes Yes Yes Yes Yes

Establishment of a Road Information Management System (Yes/No)


Successful implementation of agreed GBV Action Plan (Yes/No)

No Yes Yes Yes Yes Yes Yes Yes

Grievances responded and/or resolved within stipulated service standards (Percentage)

0.00 0.00 30.00 60.00 90.00 90.00 90.00 90.00

Road network climate vulnability assessed for future investment program (Yes/No)



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IO Table SPACE

RESULT_FRAME_T BL_ UL

Indicators to be Mapped Baseline Intermediate Targets End Target

1 2 3 4 5 6

National Road Fund fully operational (Yes/No)

No No No Yes Yes Yes Yes Yes

Direct project beneficiaries (Number)

0.00 0.00 53,173.00 106,345.00 106,345.00 109,078.00 111,914.00 114,879.00

Share of rural population with access to an all-season road (Percentage)

0.00 0.00 1.25 2.50 2.50 2.50 2.50 2.50

Reduction in travel time along the project corridor during the dry season (Minutes)

0.00 9.00 45.00 90.00 90.00 90.00 90.00 90.00

Intermediate Outcome Indicators

Increased access to markets (number of trips per day) (Number)

UL Table SPACE

Monitoring & Evaluation Plan: PDO Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

National Road Fund fully operational

The National Road Fund will be fully operational (with procedures agreed upon with IDA); revenues due to it flow into its accounts in accordance with applicable procedures and it is able to

Annual.

NRF reports to IDA as required under Guarantee Agreement terms.

IDA review of the NRF reports to IDA.

IIU


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effect payments in accordance with its procedures.

Direct project beneficiaries

Estimated number of direct project beneficiaries living within 5km of the road between Ganta and Tappita.

Reporting frequency is annual. Computation may occur as data is available.

Road network condition collected by comprehensive survey (mobile phone application level of data) in 2016. Population data is from the WorldPop 2010 database and urban areas are defined by the 1995 CIESIN urban area imagery. The population in the area, and number of beneficiaries, is underestimat

Satellite imagery/sensing. Road condition data collected by mobile phone application.

Public Resources


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ed by the indicator.

Share of rural population with access to an all-season road

Increase in Liberian rural population within 2 km of all-weather road attributable to the project, holding all other factors constant.

Annually, based on construction progress.

Road condition: 2016 World Bank survey; Population: WorldPop 2010; Urban land area: 1995 CIESIN.

Road condition: smartphone application. Population and urban area: Satellite imagery/sensing.

Annual

Reduction in travel time along the project corridor during the dry season

Reduction in travel time by passengers on a designated public transport vehicle between Ganta and Tappita.

Annual.

Field survey by IIU staff.

Field survey by IIU staff.

IIU

ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Average Annual Daily Traffic

Number of public transport vehicles departing designated transport union stations in either Monrovia or Ganta and ending in Tappita.

Annual

Transport Union

Reports from Transport Union records

Transport Union / IIU

Roads rehablitated Annually

Monitoring reports of the

Independent Engineer supervision in accordance with

SPV, supervised by Independent Engineer


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Independent Engineer

contract specifications

Roads rehabilitated - rural Annual

Monitoring reports of the Independent Engineer

Independent Engineer supervision in accordance with contract specifications

SPV, Supervised by Independent Engineer

Roads rehabilitated - non-rural Annual.

Independent Engineer reports to IIU

Independent Engineer supervision in accordance with contract specifications


Roads Maintained

This indicator is defined as the number of kilometers of road maintained to levels of service defined in the PPP agreements as determined by the Independent Engineer.

Annually, based on last supervision report of each calendar year

Independent Engineer supervision reports

Data quality is IQL4 or better


Private financing mobilized Cumulative private sector debt and equity in the financial model.

Annually

PPP Financial Model

Based on rehabilitation progress

IIU

Pilot Safety Works Implemented

Pilots arise from changes in circumstances around the road as identified in post-rehabilitation safety audit.

Annually

Independent Engineer reports

SPV reports to Independent Engineer


Person-days of training in areas of professional competency

Person-days of professional training (8 hours).

Annual

IIU implementati

Beneficiary agencies will report data to the

IIU


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on reports

IIU

Establishment of the Road Agency The Road Agency will be established.

Annual

N/A

N/A

N/A

Establishment of Non-Discrimination and equal opportunity policy in the road sector.

As part of Component 3, a Non-Discrimination and equal opportunities policy will be developed and implemented for the Road Agency. The objective of the policy is to facilitate equal employment opportunities for women.

Annual

Road Agency Reports

Road Agency will report on progress in its reports to the WB

IIU/Road Agency

Women trained for specific skilled construction jobs

Defined as the cumulative number of local women trained by the SPV the use of various kinds of heavy equipment, as vehicle drivers, or in other skilled positions divided by the total number of SPV construction workers.

Annually

Last supervision report of each calendar year

SPV reports to Independent Engineer

SPV, and verified by the Independent Engineer

Women employed in construction

Defined as the cumulative number of local women employed by the SPV to operate various kinds of heavy equipment, as vehicle drivers, or in other skilled positions divided by the total number of SPV construction workers.

Annual

SPV reports to the Independent Engineer

SPV will report this data to the Independent Engineer

SPV will report this data and the Independent Engineer will verify as appropriate


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Establish a Road Agency-wide GRM Policy

As part of technical assistance to establish a Road Agency, the Agency will establish a road-sector GRM policy to enhance citizen grievance redress. This policy will include survivor-centered response protocols for sexual exploitation and abuse.

This indicator will be reported annually.

The Road Agency will develop the GRM as part of its operating procedures and will report to the World Bank as part of reporting on Road Agency technical support under the project.

Reports will be prepared by the IIU describing the technical assistance and implementation measures.

The Road Agency.

Enhancement of ICT Citizen Engagement and Grievance Redressal tool

ARGO GRM Platform is extended to SECRAMP; dedicated GRM personnel are engaged; project baseline reports are generated; monthly reports on grievance redressal are generated

Annual

ARGO consultant reports and IIU reports

IIU Reports

IIU

Establishment of a Road Information Management System

Develop a road information system integrating spatial and non-spatial data as a basis for road sector capital and maintenance planning.

Annual

IIU Implementation reports

IIU staff reporting

IIU


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Successful implementation of agreed GBV Action Plan

GVB Action Plan (including response and accountability framework) well implemented based on defined criteria including: a) trainings to workers implemented, b) awareness raising to community members implemented, c) response and accountability framework developed and implemented.

Annual

SPV & Independent Engineer reports

SPV contractual reporting


Grievances responded and/or resolved within stipulated service standards

Grievances are registered in mainstreamed ARGO system and addressed per agency policies.

Annual

ARGO system reports

Automated ARGO reporting.

ARGO system/IIU

Road network climate vulnability assessed for future investment program

Analysis identifies road network vulnerabilities to climate risks for programming future investments.

Annual

IIU implementation reports

N/A

N/A

ME IO Table SPACE


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VII. INDICATIVE TERMS AND CONDITIONS FOR THE PROPOSED IDA GUARANTEE(S) AND IDA FINANCING

INDICATIVE TERM SHEETS FOR PROPOSED IDA GUARANTEE(S)

The Republic of Liberia [through the Infrastructure Implementation Unit (IIU) of the Ministry of Public Works] (“Liberia”, “Government of Liberia”) will enter into a PPP agreement with a [Special Purpose Vehicle] selected through a competitive bidding process (the “Project Company”) under which Liberia will grant the Project Company the right to design-build-finance-operate-maintain-transfer (DBFOMT) at least 100 km of the Ganta-Zwedru road corridor. Under this PPP agreement, Liberia will make Availability Payments to the Project Company, upon satisfaction of agreed upon performance criteria. Liberia will also be required to pay a termination amount to the Project Company in the event of early termination under relevant provisions of the PPP agreement.

This term sheet contains a summary of indicative terms and conditions of a proposed guarantee or guarantees (each, a “Guarantee”) by the International Development Association ("IDA") for discussion purposes only and does not constitute an offer to provide any such Guarantee. The provision of a Guarantee is subject, inter alia, to satisfactory appraisal by IDA of the Southeastern Corridor Road Asset Management Project ("Project"), compliance with all applicable policies of the World Bank, including those related to environmental and social safeguards, review and acceptance of the ownership, management, financing structure, and project/transaction documentation by IDA, and the approval of the management and Executive Directors of IDA in their sole discretion. Without limiting the generality of the foregoing, IDA is highly selective with regard to the clients and beneficiaries it works with and is diligent with Know Your Customer requirements for all Project participants (equity investors, ultimate shareholders, lenders, contractors, advisors) and will undertake an appraisal of the Project and the Project Company including an assessment on these parameters.

This draft term sheet contains a preliminary general summary of indicative terms and conditions of potential Payment Guarantees that may be provided to:

(a) Backstop a letter of credit used to provide liquidity support for Liberia’s obligation to make Availability Payments to the Project Company through an “L/C Payment Guarantee”; and/or

(b) Backstop Liberia’s obligation to make termination payments to the Project Company through a “Direct Payment Guarantee”52.

The Project Company may choose to utilize one or both Guarantees described herein, but the maximum aggregate amount thereof shall not exceed US$48 million (the “Maximum Aggregate Guarantee Amount”) regardless of the combination of Guarantees provided.

A. PROVISIONS AND DOCUMENTS SPECIFIC TO EACH TYPE OF GUARANTEE

1. L/C Payment Guarantee

IDA-Guaranteed Letter of Credit (“L/C”)

Applicant Liberia, as represented by the Ministry of Public Works (Infrastructure Implementation Unit), as obligor of the Availability Payments under the PPP agreement

L/C Beneficiary Project Company

52 Depending on market appetite and cost of obtaining a letter of credit, an L/C Payment Guarantee may be available as an alternative arrangement for guaranteeing termination payments.


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L/C Bank A commercial bank acceptable to IDA, the Applicant and the L/C Beneficiary.

Maximum L/C Amount The maximum amount available for draw under the L/C shall not exceed US$[8] million. The Maximum L/C Amount may be reduced from time to time in accordance with the terms of the L/C and the Guarantee Agreement.

L/C Effective Date [Construction Completion Date] (or equivalent defined term under the PPP agreement)

L/C Validity Period [From the L/C Effective Date until the expiration date of the PPP agreement]

Purpose / Guaranteed L/C

Revolving standby irrevocable L/C issued in favor of the L/C Beneficiary by the L/C Bank at the request of the Applicant to backstop Availability Payment obligations of the Applicant under the PPP agreement following the occurrence of a Guaranteed Event (as defined below). Any amounts drawn by the L/C Beneficiary under the L/C that are repaid by the Applicant to the L/C Bank within the L/C Reimbursement Period (as defined below) would be reinstated. The obligation of the Applicant to repay the L/C Bank for amounts drawn under the L/C would be guaranteed by IDA up to the Maximum Guaranteed Amount. Any amounts drawn by the L/C Beneficiary under the L/C that are repaid by IDA to the L/C Bank under the Guarantee would not be reinstated. That is, any principal amount repaid by IDA would be deducted from the Maximum L/C Amount.

Guaranteed Events (Permitted Drawdown under L/C)

[Non-payment by the Applicant of the Availability Payments when due and payable under the PPP agreement]

L/C Fees An amount acceptable to the Project Company and IDA, to be payable by the Project Company to the L/C Bank.

L/C Reimbursement and Credit Agreement (RCA)

The Borrower Applicant

The Lender L/C Bank, as lender.

L/C Reimbursement Period

Following a draw under the L/C by the L/C Beneficiary, the Borrower would be obligated to repay the L/C Bank for the amount drawn under the L/C together with accrued interest thereon within a period of twelve (12) months (the "L/C Reimbursement Period") from the date of each draw pursuant to a Reimbursement and Credit Agreement to be concluded between the Applicant and the L/C Bank. In the event of a timely repayment, the L/C will be reinstated by the amount of such repayment. In the event of a non-payment on the due date, the L/C Bank would have the right to call on the Guarantee for principal amounts plus accrued interest due by the Applicant under the Reimbursement and Credit Agreement.

Interest Rate Charged by the L/C Bank

An appropriate spread above [LIBOR] agreed by the Applicant and acceptable to IDA. The maturity of the selected [LIBOR] base rate should ideally be 1 month.

Guarantee Support Agreement53

Guarantee Support Agreement

The Applicant would enter into a Guarantee Support Agreement with the L/C Beneficiary under which the Applicant would undertake to apply for and make

53 A Guarantee Support Agreement may not be needed, if all the relevant provisions are included in the PPP agreement.


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available an L/C that may be drawn by the L/C Beneficiary following the occurrence of certain Guaranteed Events, on the basis of drawdown and dispute resolution mechanisms and supporting documentation to be agreed between the parties and satisfactory to IDA.

IDA Guarantee Agreement– L/C Payment Guarantee

Guarantor International Development Association (IDA)

Guaranteed Beneficiaries

L/C Bank

Guarantee Face Value US$[8] million for L/C Payment Guarantee

Guarantee Effective Date

[TBD – but no later than the Construction Completion Date (or equivalent defined term under the PPP agreement)]

Guarantee Period The L/C Validity Period plus 14 months

Guarantee Support IDA will backstop the payment obligations of the Applicant under the Reimbursement and Credit Agreement to the extent that said obligations result from Permitted Drawdown under the L/C and the Applicant has failed to repay the L/C Bank in respect of such Permitted Drawdown in accordance with the Reimbursement and Credit Agreement. That is, if the amount remains unpaid after the expiry of the L/C Reimbursement Period, the L/C Bank would have the right to call on the Guarantee for the principal amount (equal to the amount drawn under the L/C) plus accrued interest due from the Applicant.

Maximum Guaranteed Amount

Maximum Guaranteed Principal plus accrued interest thereon in accordance with the Reimbursement and Credit Agreement. IDA may cover compound interest but IDA will not cover penalty interest, default interest or charges of similar nature.

Maximum Guaranteed Principal

The Guarantee Face Value, that is, US$[8] million. Any amount paid by IDA to the L/C Bank under the Guarantee would be deducted from the Maximum Guaranteed Principal and those amounts would not be reinstated.

Substitution of Guarantee

If IDA exercises remedies against the L/C Bank under the Guarantee Agreement for reasons attributable to the L/C Bank, then IDA may enter into a new Guarantee Agreement with a substitute L/C Bank in substantially the same terms and conditions as the original Guarantee Agreement and for the remaining term of the Guarantee Period.

2. Direct Payment Guarantee for Termination

IDA Guarantee Agreement – Direct Payment Guarantee

Guarantor International Development Association (IDA)

Guaranteed Beneficiary

Project Company

Guarantee Face Value US$[40] million

Purpose / Guarantee Support

IDA will backstop the termination payment obligations of Liberia to the Project Company upon the occurrence of a Guaranteed Termination Event, up to the Maximum Guaranteed Termination Amount.

Maximum Guaranteed Termination Amount

For any Guaranteed Termination Event, the Maximum Guaranteed Termination Amount will be 60 percent of the undisputed or finally determined termination amount payable by Liberia to the Project Company in connection with such Guaranteed Termination Event pursuant to the terms of the PPP agreement, subject to a cap of US$[40] million.

Guaranteed Termination Events

Liberia’s failure to pay termination amounts due as a result of the occurrence of certain termination events under the PPP agreement (to be agreed between Liberia and the Project Company and acceptable to IDA, but which shall in no event include


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termination in connection with any Project Company Event of Default (as defined in the PPP agreement)), as such termination amounts are determined by, and subject to: (a) an arbitral award issued against Liberia in relation to or arising out of the PPP agreement in relation to the termination amount; (b) a settlement agreement between Liberia and the Project Company in relation to the termination amount and/or payment thereof; or (c) an affidavit of Liberia’s minister responsible for finance recognizing Liberia’s liability to the Project Company in relation to the termination amount and/or payment thereof.

Termination Guarantee Validity Period

Up to [TBD]54

Termination Guarantee Effective Date

[TBD – but no later than the Construction Completion Date (or equivalent defined term under the PPP agreement)]

II. PROVISIONS AND DOCUMENTS COMMON TO BOTH TYPES OF GUARANTEES

Exclusions, Withholding, Limitation/Suspension and Termination Events

Standard exclusion, withholding, limitation/suspension, and termination events for transactions of this nature will apply in the event of failure by the Project Company or the applicable guaranteed party (i.e., L/C Bank) to comply with contractual obligations.

Conditions Precedent to the Effectiveness of the IDA Guarantee(s)

Usual and customary conditions for financing of this type, including but not limited to the following: (a) Firm commitment for sufficient financing to complete the construction of the Project, including satisfactory contribution of equity; (b) Execution, delivery and effectiveness of all Project and financing agreements, in form and substance satisfactory to IDA, including the PPP agreement, the Indemnity Agreement, the Cooperation Agreement and the Project Agreement; (c) Delivery of all relevant host country environmental approvals required for the operation of the Project, and compliance with all applicable World Bank requirements relating to Sanctionable Practices and environmental and social safeguards, including the World Bank Performance Standards; (d) [Effectiveness of all required insurance (to include IDA as an additional insured on third-party liability insurance);] (e) Satisfaction of all conditions precedent for effectiveness under the PPP agreement and first disbursement under the financing documents, save for any condition that requires the effectiveness of the Guarantee(s) to have occurred; (f) External Advisor Costs paid (if applicable); (g) Provision of satisfactory legal opinions; (h) Payment in full of the [Initiation Fee], [Processing Fee] and [Guarantee Fee] for each Guarantee; and (i) Satisfactory integrity due diligence of the Project Company (and related parties) and guaranteed parties.

Subrogation If and to the extent IDA makes any payment under any Guarantee, IDA will be subrogated immediately to the extent of such unreimbursed payment to the L/C Bank’s rights under the Reimbursement and Credit Agreement or the Project

54 Up to the end of the term of the PPP agreement plus any additional time required to resolve disputes, as determined through further due diligence


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Company’s rights under the PPP agreement, as applicable.

Signing: If the Guarantee(s) and related legal agreements (including the Indemnity Agreement, Project Agreement and Cooperation Agreement) are not signed within [24] months following approval by the Board of Executive Directors of IDA, IDA may withdraw its offer of the Guarantee(s).

Governing law English law or New York Law.

Indemnity Agreement

Parties IDA and Republic of Liberia (the “Member Country”) (including, without limitation and for the avoidance of doubt, the Ministry of Public Works, the Ministry of Finance and all relevant units thereof (e.g., the IIU and PFMU, respectively))

Indemnity The Member Country will reimburse and indemnify IDA on demand, or as IDA may otherwise direct, for all payments under the Guarantee(s) and all losses, damages, costs, and expenses incurred by IDA relating to or arising from the Guarantee(s).

Covenants Usual and customary covenants included in agreements between member countries and IDA. Additionally, the Member Country will agree to:55 (a) implement mechanisms to minimize the risk of insufficient funds to make Availability Payments, which may include obligations to maintain a minimum [balance] [reserve amount] in a designated account solely for such purpose in accordance with and as required by applicable Funds Flow Documents56; (b) obtain IDA’s consent before agreeing to any change to any Funds Flow Document; (c) obtain IDA’s consent before agreeing to any change to the PPP agreement or any other transaction document which would materially affect the rights or obligations of IDA under the Guarantee(s) or any related document; (d) provide certain notices and reporting to IDA [including certain account information in respect of the National Road Fund[/PFMU]]; (e) comply with all of its obligations under the PPP agreement and other relevant transaction documents and take all action necessary on its part, in accordance with and as required by the transaction documents, to enable the Project Company to perform all of its obligations under the PPP Agreement and other relevant transaction documents; (f) comply with and ensure compliance with all Funds Flow Documents; (g) ensure compliance with the Cooperation Agreement(s); and [other project specific covenants TBD]

Remedies If the Member Country breaches any of its obligations under the Indemnity Agreement, IDA may suspend or cancel, in whole or in part, the rights of the Member Country to make withdrawals under any other loan or credit agreement with IDA, or any IDA loan to a third party guaranteed by the Member Country, and may declare the outstanding principal and interest of any such loan or credit to be due and payable immediately. A breach by the Member Country under the Indemnity Agreement will not, however, discharge any guarantee obligations of IDA under the Guarantee(s).

Governing Law The Indemnity Agreement will follow the usual legal regime and include dispute

55 Covenants of the Member Country are subject to finalization of the Funds Flow Documents and related implementation arrangements among the Ministry of Public Works[/IIU], Ministry of Finance, PFMU, National Road Fund and any other relevant public entities. 56 “Funds Flow Documents” to include the National Road Fund Act and all other documents, instruments and mechanisms entered into or implemented by the Member Country in connection with the funds flow arrangements relating to or otherwise affecting the project.


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settlement provisions customary for agreements between member countries and IDA.

Project Agreement57

Parties IDA and the Project Company

Representations and Warranties

The Project Company will represent, among other standard and project-specific provisions, as of the effective date, that: (a) it is in compliance with applicable environmental laws and the applicable World Bank guidelines, environmental and social safeguard requirements, including the World Bank Performance Standards and other applicable requirements; and (b) neither it (nor its direct and indirect shareholders and any other relevant project participants, as determined by IDA), nor any of its affiliates has engaged in any Sanctionable Practices58 in connection with the Project.

Covenants Project Company will covenant, among other things, that it will (a) comply with applicable laws, including environmental laws, and the applicable World Bank environmental and social safeguards requirements under the World Bank Performance Standards; (b) provide annual audited financial statements and other reports; (c) provide certain notices and other information to IDA; (d) provide access to the Project; (e) not engage in (or authorize or permit any affiliate or any other Person acting on its behalf to engage in) any Sanctionable Practices in connection with the Project; (f) comply with World Bank requirements relating to Sanctionable Practices regarding individuals or firms included in the World Bank Group list of firms debarred from World Bank Group-financed contracts; and (g) obtain IDA’s consent before agreeing to any change to any transaction document which would affect the rights or obligations of IDA under the Guarantee(s) or any related agreement.

Payment of Fees to IDA:

Payment of fees due to IDA is the obligation of the Project Company.

Initiation Fee 15 bps of the Guarantee Face Value (but not less than US$100,000).

Processing Fee 50 bps of the Guarantee Face Value.

Guarantee Fee [75] basis points per annum. The IDA Guarantee fee is charged on that portion of the guaranteed amount that IDA has contractually committed and for which IDA has financial exposure under the guarantee59 and must be paid in advance in semi-annual installments. The Guarantee will terminate in the event of nonpayment of any installment of the relevant Guarantee Fee.

External Advisor Costs: Reimbursement of IDA external advisor and legal counsel expenses by the Project Company.

Cooperation Agreement

Parties IDA and the Office of the National Road Fund [and/or other relevant public entities, as appropriate].60

57 In the event that a Direct Payment Guarantee is utilized, the Project Agreement and the Guarantee Agreement may be combined into one agreement between the Project Company and IDA. 58 "Sanctionable Practices" include corrupt, fraudulent, collusive, coercive, or obstructive practices, as defined in IDA’s Anti-Corruption Guidelines. 59 Refers to the Maximum Guaranteed Principal in respect of the L/C Payment Guarantee and the Maximum Termination Guaranteed Amount in respect of the Direct Payment Guarantee. 60 Subject to further due diligence and discussions on the National Road Fund[/PFMU] and related funds flow arrangements.


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Cooperation agreement

The [relevant public entity or entities] will covenant, among other things, that it will:61 (i) make disbursements from the National Road Fund in respect of Liberia’s payment obligations under the PPP agreement in accordance with the applicable Funds Flow Documents; (ii) comply with all its obligations under applicable Funds Flow Documents; (iii) obtain IDA’s consent before agreeing to any change to any applicable Funds Flow Document; (iv) provide certain notices and reporting to IDA; (v) if applicable, take all action necessary on its part, in accordance with and as required by the terms of the applicable Funds Flow Documents, to enable the Ministry of Public Works/IIU to perform all of its obligations under the PPP Agreement and other relevant transaction documents; and (vi) cooperate with IDA and furnish to IDA all such information related to such matters as IDA shall reasonably request; and promptly inform IDA of any condition which interferes with, or threatens to interfere with, such matters.

61 Covenants in the Cooperation Agreement are subject to finalization of the Funds Flow Documents and related implementation arrangements among the Ministry of Public Works[/IIU], Ministry of Finance, PFMU, National Road Fund and any other relevant public entities.


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INDICATIVE TERMS AND CONDITIONS OF IDA FINANCING

Purpose: This term sheet contains a summary of indicative main terms and conditions of a proposed financing (“IDA Financing”) from the International Development Association (“IDA”) and is provided for discussion purposes only. It does not reflect the provisions of the IDA General Conditions for Credits and General Conditions for IDA Financing: Investment Project Financing which apply indistinctively to all IDA Financing (available on www.worldbank.org, subject to change). The terms and conditions of the proposed IDA financing will be determined once all project stakeholders have reached final agreement on the Project implementation and financing arrangements and IDA is better able to assess the residual risks to be mitigated through legal covenants and conditions. This term sheet does not constitute an offer to provide the IDA Financing. The provision of the IDA Financing is subject, inter alia, to satisfactory appraisal of the Project by IDA, compliance with all policies applicable to the IDA Financing, including those related to environmental and social safeguards, review and acceptance of the ownership, management, financing structure, and transaction documentation by IDA, and the approval of the management and Executive Directors of IDA in their sole discretion. In addition, Board approval constitutes an authorization to extend financing on the terms and conditions approved by the Board, but only if the financing agreement for such purpose is signed and declared effective no later than 18 months after the date of such Board approval. Background: The Republic of Liberia (Recipient) wishes to undertake the South-Eastern Corridor Road Asset Management Project (“Project”), comprising the following components.

Part A - Road Improvement and Maintenance Works. (1) Provision of advisory services to the Recipient for: (a) the structuring of a public private partnership for the improvement and maintenance of a minimum of 100 km of the Ganta-Zwedru Road Corridor (focusing principally on the Ganta-Tappita section) through a fifteen (15) year concession (PPP Contract) to a private sector, on a design, build, finance, operate, maintain and transfer (DBFOMT) basis; (b) preparation of the necessary analysis, structuring and development of procurement documents, following World Bank Procurement Regulations; (c) selection of a qualified SPV (the “Project Company”) on a competitive and transparent basis; and the negotiation of the Project Documents and the Finance Documents to which the Recipient is a party or which have to be in form and substance acceptable to it for the implementation and financing of such arrangement; (d) the design of a governance structure for the effective administrative and financial management of the National Road Fund; (e) preparation of a draft Implementation Agreement between the IIU, NRF and the PFMU in connection with the Contractual Payments; (2) (a) construction and rehabilitation of around 100 km of the Ganta-Zwedru Road Corridor (focusing principally on the Ganta-Tappita section); and (b) operation and maintenance of selected segments of the said road corridor; (3) supervision and monitoring of the rehabilitation and maintenance of the corridor; (4) Conducting technical studies in connection with the preparation of potential operations along the Ganta Zwedru Harper Road Corridor and Coastal Road Corridor; and (5) acquisition of associated land and provision of resettlement compensation to Project affected people. Part B - Road Safety: Strengthening the Recipient’s institutional capacity on road safety including provision of technical advisory services for: (1) implementation of road safety plans; (2) preparation of draft legislation on road safety; (3) preparation and implementation of road safety policies; and (4) piloting specific road safety interventions.

Part C - Institutional Strengthening and Capacity Building: 1. Provision of technical assistance and training to the Recipient to: (a) strengthen its institutional capacity for road sector management, (b) create and

http://www.worldbank.org/


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operationalize a road agency; (c) establish processes and procedures for the operation of the National Road Fund; (d) implement the measures for mitigating the environmental and social impacts in connection with Part A.2 of the Project;(e) carry out technical studies for the preparation of new operations along the Ganta Zwedru Harper Road Corridor and Coastal Road Corridor; (f) strengthen its capacity to regulate and renegotiate its concessions involving the transport sector; (g) conduct in-country and overseas training for the Recipient’s staff in the road sector institutions; (h) develop and implement training on research in the transport sector to strengthen the capacity of the Recipient’s universities; and (i) provide training in climate change adaptation/resilience and conduct climate risk assessment of future road investments. 2. conduct technical studies on road projects’ safeguards, and gender analysis to understand the differentiated potential impacts (including GBV) on women and men and how to address them; 3. Carry out activities for mainstreaming citizens’ engagement including the use of the grievance redress system; (4) financing of the Operating Costs of the road agency; and (5) developing a non-discrimination and equal opportunities policy for the road agency.

The Project except for Part A.2 (rehabilitation and maintenance of selected segment(s) of the corridor) will be implemented by the Ministry of Public Works’ Infrastructure Implementation Unit with support from the Project Financial Management Unit. Part A.2 will be implemented by a special purpose vehicle established by the sponsors and selected under Part A.1 of the Project (the “Project Company”) to: (i) enter into the PPP Contract with the Recipient (the “PPP Agreement”) and related Project documents (collectively, the “Project Documents” yet to be developed and agreed between the parties thereto), and (ii) raise most of the financing required for the implementation of Part A.2 (b) of the Project (pursuant to the “Finance Documents” yet to be developed and agreed between the parties thereto).

The Project is expected to be financed as follows:

• a US$2,000,000 GIF Grant to be extended by the Global Infrastructure Facility (GIF) to the Recipient to finance Part A.1 of the Project;

• the equity to be provided, and the financing (expected to be commercial) to be raised by the Project Company, for an aggregate amount estimated as of the date of this Term Sheet at US$61,000,000 equivalent, would finance a large portion of Part A.2, with support from the Recipient (as negotiated as part of the Project Documents) and IDA, through its proposed guarantee;

• a US$29,000,000 IDA credit to be provided by IDA to the Recipient to finance (i) part of the Recipient’s lumpsum payments to the Project Company under the PPP Agreement; (ii) Part A.3, A.4 and (iii) a portion of Parts B and Part C of the Project;

• a US$24,000,000 LRTF grant to be provided by the Liberia Reconstruction Trust Fund (LRTF) to the Recipient to finance: (i) part of its lumpsum payments to the Project Company under the PPP Agreement under Part A.2(a), and (ii) a portion of Part C of the Project; and

• an amount of US$24,000,000 equivalent provided by the Recipient: (i) as counterpart funds to finance part of the payments to be made by the Recipient under the Project Documents and not financed using IDA or LRTF resources such as (i) land acquisition and resettlement compensation under Part A.5, (ii) part of Part B.4 (road safety pilots) (iii) part of Part C.2 (technical studies) of the Project.


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Estimated Cost of the Project

[188,000,000 US$]62 tbd (as of November 2018) 63

Project Development Objective

To support the Republic of Liberia (Recipient)’s effort to: (a) enhance connectivity for residents living along selected sections of the Ganta to Zwedru Road Corridor; and (b) improve institutional capacity to manage the road sector.

IDA Credit

Recipient of the IDA Credit

Republic of Liberia

IDA Credit US$29,000,000

Proposed Project Implementation Arrangement

The Recipient shall maintain the Infrastructure Implementation Unit (IIU) which shall be responsible for the procurement under the Project except for Part A.2, and the Financial Management Unit (PFMU) which shall be responsible for the financial management of the Project except Part A.2, each with staff in adequate number and with terms of reference, qualifications and experience satisfactory to IDA.

For the implementation of Part A.3 of the Project, the Recipient shall not later than three (3) months from the Effectiveness Date recruit and thereafter maintain throughout the implementation of the Project in accordance with the provisions of the PPP Agreement, an Independent Engineer, with terms of reference, qualifications and experience satisfactory to IDA.

The Recipient shall recruit, no later than three (3) months from the Effectiveness Date, and thereafter maintain, throughout the implementation of the Project, an independent environment and social monitoring agent, with terms of reference, qualifications and experience satisfactory to IDA.

For the purpose of carrying out the Recipient’s Respective Part of the Project, the Recipient through the PFMU and MPW through the IIU, shall enter into an implementation agreement (“Implementation Agreement”) under terms and conditions which shall have been approved by the IDA including, inter alia, the terms and conditions set forth in the PPP Project Agreement.

The Recipient shall prepare and adopt a Project Operations Manual (POM) satisfactory to the IDA; and thereafter implement the Project in accordance with said manual.

Proposed Recipient Project Coordination/ Monitoring Arrangement

Standard Annual Work Plans and Budgets, prepared by the Recipient and acceptable to IDA, reflecting the Project activities proposed to be undertaken in the following calendar year and the related proposed budget and financing sources including the amount of counterpart funds to be made available for such purpose and cashflow projections.

Proposed IDA IDA Financing Agreement between IDA and the Recipient.

62 The Total Project Cost of US$188 million presented in the Project Financing Data - Summary Table in the Datasheet includes the underlying project cost of US$140 million plus the additional IDA Guarantee amount of US$48 million. 63 The cost of the Project cannot be determined with finality before full negotiations of the PPP and its commercial financing.


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Financing Documents And all documents referred to in the above agreements, including IDA Disbursement and Financial Information Letter.

Financial Terms: Standard IDA terms for concessional financing as indicated in the World Bank Policy: Financial Terms and Conditions for World Bank Financing (available on www.worldbank.org).

Disbursement terms In accordance with disbursement guidelines (available on www.worldbank.org), and provisions of the Disbursement and Financial Information Letter.

Four (4) disbursement methods available, except when the country has lapsed loans

Payment Dates January 15 and July 15

Payment Currency US$

Proposed Allocation of IDA Financing

Allocation among Project Components [TBD] on the basis of annual work plan and budget agreed between IDA and the Recipient. [tbd]

Proposed Retroactive IDA Financing

[Maximum 20 percent of the amount of the IDA Credit, to finance Eligible Expenditures incurred for the Project not earlier than 1 year before the expected Signature Date at the time of negotiation of this Term Sheet.]

Proposed Closing Date [June 30, 2026,] or [84 months after the Financing Agreement Signature Date.]

Prorata financing of expenditures

Tbd by component or as per the Annual Work Plans and Budgets agreed between the Recipient and IDA.

Proposed other Financing Documents

In addition to IDA Financing Agreement:

LRTF Grant Agreement between IDA and the Recipient

[Project Agreement between the Recipient and the PC [tbd]]

GIF Grant Agreement between IDA and the Recipient

[Commercial financing agreement(s)’ tbd]

(all legal agreements to be on terms and conditions consistent with the Terms Sheet)

Sequencing of disbursements

Tbd

Proposed Principal Project Documents

PPP Agreement

[Project Agreement] [tbd]

Implementation Agreement

[others TBD]

(all Project Documents and related legal opinions, to be in form and substance acceptable to IDA)

Proposed Main The Recipient shall not, and shall ensure that the Project Company does not, take the




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Restricted Decisions

following actions without prior approval from IDA:

(A) Modification of Part A.2 of the Project

(B) Amending, waiving or terminating any provision of the Project Documents which substantially affect Part A.2 of the Project and its implementation arrangements

(C) Amending, waiving or terminating any provision of the environmental and social documents.

[others TBD]

Proposed Additional Triggers for IDA Remedies

Additional event giving rise to exercising of IDA remedies include breach of a Project Document (remaining uncured after the contractual period) which affects materially and adversely the implementation of the Project.

Proposed Environmental and Social Documents

(i) the upstream Environmental and Social Impact Assessment, including the Environmental and Social Management Plan contained in such document, already prepared by the Recipient during Project preparation.

(ii) the Resettlement Policy Framework (RPF) and Resettlement Action Plan (RAP), already prepared and implemented by the Recipient during Project preparation.

(iii) the updated Environmental and Social Impact Assessment, including the related detailed Environmental and Social Management Plan (ESMP) (Project Company’s ESMP), which Recipient shall cause to be prepared and implemented by the Project Company.

(iv) the Health and Safety Plan, which Recipient shall cause to be prepared and implemented by the Project Company (either as a stand-alone document or as part of the detailed Project Company’s ESMP).

(v) the Labor Influx Management Plan, which Recipient shall cause to be prepared and implemented by the Project Company (either as a stand-alone document or as part of the detailed Project Company’s ESMP).

(vi) the Road Safety and Traffic Management Plan, which Recipient shall cause to be prepared and implemented by the Project Company.

(vii) Codes of Conduct and protocols, including for Project Workers (setting out, inter alia, requirements on how to engage with local communities), and in relation to GBV, child/forced labor, and use of security forces, which Recipient shall cause to be prepared and implemented by the Project Company.

(viii) the agreed Environmental and Social Action Plan, detailing, inter alia, any other supplemental Environmental and Social Documents required to comply with Safeguard Policies and/or Performance Standards, which Recipient shall cause to be to be prepared and implemented by the Project Company.

(all Environmental and Social Documents to be in form and substance acceptable to IDA, with consultation and disclosure conforming to the requirements of the IDA Safeguard Policies (RAP only) and Performance Standards -available on www.worldbank.org).

Proposed Environmental and

The Recipient’s compliance with the RAP and RPF, and Project Company’s compliance



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Social (including Health and Safety, Labor, Gender, Security Issues) Covenants

with the Performance Standards and Environmental and Social Documents.

The Recipient’s obligation to establish and maintain a separate account to deposit funds to cover the Project involuntary resettlement costs.

The Recipient’s obligation to ensure that all terms of reference for any technical assistance or studies (including on road safety) carried out under the Project are consistent with, and pay due attention to, IDA Safeguards Policies and/or Performance Standards (as applicable), as well as the Recipient’s own laws and regulations relating to the environment, health and safety, labor and social aspects relevant to the Project.

The Recipient shall cause the Project Company to implement or cause all sub-contractors/consultants to implement the Project in accordance with Performance Standards and the Environmental and Social Documents listed above.64

The Recipient shall cause the Project Company to establish and maintain, throughout Project implementation, an environmental and social management system, acceptable to IDA (e.g. ISO14000).

The Recipient’s obligation to establish, maintain and publicize widely the availability of grievance redress systems, to be easily accessible to Project affected communities and Project workers, with transparent and time-bound processes to address Project related grievances.

The Recipient shall cause the Project Company to carry out frequent information and/or awareness raising campaigns and training of Project workers, in a manner satisfactory to IDA, on environment, social and health and safety issues (including but not limited on how to engage with local communities, occupational health and safety matters, and HIV/AIDS, GBV and sexual exploitation).

The Recipient shall cause the Project Company to ensure that it adopts and implements codes of conduct and protocols, satisfactory to IDA, including for Project workers and for security forces (public and private), if applicable, that are assigned or appointed to safeguard Project site and/or assets.

The Recipient shall cause the Project Company to ensure it obtains the necessary environmental and work permits in a timely manner.

The Recipient shall cause the Project Company to comply with national labor laws, including ratified ILO Conventions, and Performance Standard 2, throughout the implementation of the Project, by, inter alia, adopting and executing adequate labor arrangements for Project workers.

The Recipient shall cause the Project Company to appoint and thereafter maintain throughout Project implementation staff and consultants, in sufficient numbers, and under terms of reference, qualifications and experience on environment, health and safety and social issues, satisfactory to IDA.

The Recipient shall cause the Project Company to appoint and thereafter maintain throughout Project implementation independent environmental and social auditors, under terms of reference, qualifications and experience approved by IDA.

64 In the event that an IDA Guarantee is utilized for the Project, a Project Agreement will be entered into between IDA and the Project Company in respect of such guarantee and will include the environmental and social obligations of the Project Company as direct covenants to IDA.


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The Recipient shall cause the Project Company to adopt and maintain a Human Resources policy, acceptable to IDA, including statements to undertake best endeavors to recruit locally, with preferential recruitment for qualified local women.

The Recipient shall cause the Project Company to adopt and implement a strategy to promote transfer of skills to local women to facilitate them gain employment at the Project site.

No amendment, suspension or waiver of Environment and Social Instruments without approval by IDA and compliance with consultation and disclosure requirements of the Safeguards Policies and Performance Standards.

Submission to IDA of frequent reports on environmental, social and health and safety compliance (including detailed reporting of accidents in the Project site and measures undertaken by Project Company to implement the Environmental and Social Documents), in form and substance satisfactory to IDA (including with agreed indicators to track compliance).

Submission to IDA of the independent auditors annual environmental and social audits of Project Company’s compliance with its contractual environmental, health and safety and social obligations.

Proposed main conditions precedent to the availability of the IDA Financing

Effectiveness and other conditions [tbd] sequencing of the conditions of signature, effectiveness and disbursement [tbd], deadline for satisfaction of the conditions and dated covenants [tbd]

The Co-Financing (LRTF) is effective and all conditions precedent to its effectiveness have been met except for the availability of IDA funds if it is a condition.

The [Project Company has been established and the Recipient has provided it all the requisite authorizations to carry out its obligations under the Project Documents, the Environmental and Social Documents and the Financing Documents, and provided it all Project Consents (tbd) required at that time for such purpose + legal opinions.

Project Company has confirmed availability of financing for Part A.2 of the Project as finally agreed and all conditions precedent to the effectiveness of, and disbursement under, each of the Financing Documents have been satisfied.

The Recipient has handed over 90 percent of the project site to the Project Company, free of all encumbrances.

PPP Agreement signed and effective and closing achieved.

The Implementation Agreement between the IIU and PFMU satisfactory to the IDA has been executed.

Preparation and adoption of a POM satisfactory to the World Bank.

Project Company environmental and social management system acceptable to IDA; Environmental and Social Documents adopted by Project Company, in form and substance satisfactory to IDA; independent environmental and social auditors appointed by Project Company - Conditions prior to first disbursement.

Safeguards Documents finalized in form and substance acceptable to IDA, consulted upon and disclosed as needed in accordance with the IDA Policies (available at www.worldbank.org) including confirmation of payment.



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Corruption Compliance with the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants (revised as of July 1, 2016) (available on www.worldbank.org, subject to change)

Procurement Compliance with the Procurement Regulations and the rolling Procurement Plan for the Project approved by IDA.

Tbd = to be determined

[-] = still under consideration



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ANNEX 1: Implementation Arrangements and Support Plan

COUNTRY: Liberia Southeastern Corridor Road Asset Management Project

1. The Implementation Support details how the World Bank and other Development Partners will support project implementation, mitigate anticipated risks, and achieve objectives and targets. The plan focuses on three critical areas: (a) supporting the IIU in the procurement and implementation of the project; (b) supporting monitoring and management of safeguards risks; and (c) monitoring and supporting the Borrower on contract management for a fixed period. This plan anticipates that the Borrower will continue to maintain a close relationship with the World Bank after project closure and will continue to meet its reporting obligations under the IDA Guarantees.

Implementation Support Strategy and Approach

2. The project will be implemented through the Infrastructure Implementation Unit (IIU) in the Ministry of Public Works (MPW). To manage the institutional capacity risks, the project design shifts engineering risks to the SPV and focuses the IIU’s efforts on management of a single PPP contract. As procurement and supervision of a large PPP contract of this nature is complex and exceeds the IIU’s capacity, the IIU has procured a transaction advisor for structuring and executing the PPP. An “Independent Engineer” will support the Government with implementation and contract management. This approach requires fewer but more experienced technical staff in the IIU than would be required for management of multiple smaller contracts. This project design will require greater implementation support from the World Bank to ensure the project reaches successful financial closure and is implemented on schedule.

3. The World Bank’s implementation support strategy allocates supervision resources in proportion to the anticipated risk and technical complexity of various project stages. Implementation support during initial years of the project will far exceed typical Investment Project Financing operations. Procurement and negotiation of the PPP are technically challenging and require specialized experience not available in the IIU. This support will address heightened implementation risks and increased technical complexity leading up to the PPP financial closure. The World Bank’s implementation support during this period will focus on helping the IIU manage risk perceptions related to the transaction, procurement of the PPP, and negotiation and financial closure and will cover financial, legal, engineering, safeguards, and procurement areas.

4. The IIU will require specialized support from the World Bank for implementing World Bank policy and managing certain project activities and risks. Although the Output- and Performance-Based Road Contact format is not new to Liberia, World Bank OP 4.03, which applies to Component 1 (Road Improvement and Maintenance Works), is new to the implementing agency. The institutional coordination between IIU and other government agencies (NRF and PFMU among others) and private sector would require additional skills and management capacity. The implementation supervision by the World Bank staff and corporate monitoring of project exposure will continue until the end of guaranteed period.

5. Close supervision is planned during the road rehabilitation phase. Liberia is a fragile state with less resilient systems and periodic shocks and other challenges are expected to introduce new implementation challenges and exacerbate others. Recent experience suggests that resolution of these challenges in


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fragile contexts is likely to take longer and may require more World Bank support than in contexts with stronger institutional and technical capacity. This supervision plan anticipates more than biannual supervision missions throughout the rehabilitation phase of the project, which may extend up to four years of implementation, depending on the timing of financial closure. These technical missions will be staffed with a team with extensive experience in contract management (particularly of PPP contracts), seasoned engineers, and safeguards specialists. Supervision will also draw on procurement, financial management, PPP, guarantees, and engineering staff who are currently based in the field.

6. Implementation support would include corporate monitoring of matters related to the IDA Guarantee(s) if they arise under the project. The World Bank implementation support resources allocated to the project will depend on the nature of the financial products utilized in the PPP transaction. If an IDA Guarantee is chosen by the private sector, Public and private sector parties would face additional reporting obligations. Regardless if guarantees are chosen or not, the World Bank will provide implementation support to (a) ensure the NRF establishes and maintains adequate funds flow arrangements and financial controls to meet the project’s effectiveness conditions and fulfill its financial obligations under the PPP contract, and (b) continue to monitor the NRF and ensure that emerging challenges that could affect the NRF’s ability to make Availability Payments are identified and addressed. IF an IDA Guarantee is chosen and sufficient guarantee-related risks were to arise, the IDA Guarantee staff would re-open implementation support to address these emerging challenges.

Implementation Support Plan and Resource Requirements

7. Tables 1.1–1.2 describe the anticipated project implementation support requirements of each phase of the project.

Table 1.1: Skills Mix

Time Focus Skills Needed Resource Estimate First twelve months (initial phase of the Project)

Intense implementation support with focus on the successful procurement of the PPP Contract through financial closure; assisting the IIU to adjust to managing the PPP.

Finance* and Guarantees; procurement; engineering, social and environmental; legal; gender; and financial management; procurement

Technical staff time (engineering, procurement, safeguards, and finance): 104 staff-weeks.

12–48 months rehabilitation phase of the PPP

Significant support with a focus on contract management to ensure completion of rehabilitation works to the standards stipulated in the contract; NRF Governance and funds flow, (proactive mitigation of guarantee-related risks, if applicable)

Engineering; finance; public finance; procurement; environmental and social; gender

Technical staff time: 55 staff-weeks per year

48–84 Months (maintenance

Light support focused on monitoring and

Engineering (road asset management);

Technical staff time: 45 staff-weeks per year


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Time Focus Skills Needed Resource Estimate phase of the OPRC)

management of output and performance of the road contracts; contract management

environmental and social; gender; monitoring and evaluation; procurement

Throughout project duration

Institutional development of the implementing agency; monitoring risks associated with the Road Fund

Finance; engineering Staff time: five staff-weeks per year

After project closure

Monitoring risks associated with the Road Fund and optional Guarantee (including Corporate Monitoring)

Finance* Staff time: two Guarantee staff-weeks per year and through follow-up projects

* Finance includes expertise related to any securities included in the final PPP agreement.

Table 1.2: Skills, Staff-Weeks, and Trips

Skills Needed Number of

Staff-weeks

Number of Trips

Field and Headquarter Staff Mix

Engineering 120 14 Field-based staff (with support from HQ staff)

Social development 42 14 Field-based staff (with support from HQ staff)

Gender specialist 42 14 HQ staff

Procurement 42 0 Field staff

Public financial management

35 0 Field staff

Financial solutions/private sector development

24 5 HQ staff

Legal/Guarantee, LEGSG 10 2 HQ staff

Environment 35 10 Field staff (with support from HQ staff)


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ANNEX 2: Detailed Description of the Project Component 1


General

1. The 225-kilometer (km) Ganta-Zwedru Road is mostly a gravel single carriageway with widths varying from 6 – 8 meters (m). Surface conditions vary by section, with some village road sections having been surfaced, but the road condition is poor overall and the road frequently impossible to transit during the rainy season. Over the years, repeated grading has lowered critical sections to below the original ground level. This has created an entrenched cycle of “ponding” on the carriageway, resulting in significant rutting under truck loads and further deterioration of the road. Figure 2.1 illustrates typical rainy season conditions. The southernmost sections between Cestos River and Zwedru (about 80 km) are reported to have the worst conditions during the rainy season.

Figure 2.1: Typical Conditions at Critical Sections Under Truck Loading in the Rainy Season

(Photographs courtesy of IIU)

2. There is one long bridge (190 m) and many smaller bridges (5–30 m) along the route with widths of approximately 7 m between the curbs. The bridges have either steel or concrete beams and their condition varies. Although there are no signs of excessive damming or overtopping at the bridge locations, continuous grading of the road has lowered many of the approaches to below deck level. The existing drainage systems have significantly deteriorated due to lack of maintenance and many are eroded, blocked, and/or overgrown by vegetation.

Proposed Interventions for Upgrading the Ganta-Zwedru Road

3. A recently completed conceptual design proposes full construction to a two-lane carriageway with bituminous surfacing along the existing right of way. Table 2.1 shows the pavement proposed for a 20-year design life. The conceptual design study anticipates reduced vehicle operating costs and reliable year-round road access would result in significant generated traffic over the short term. Average annual daily traffic (AADT) could increase from 8,400 to 13,300 in the busiest section, near Ganta, and from around 300 to around 1,450 in the least utilized section, between Zwedru to Toe Town.


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Table 2.1: Proposed Pavement Structure

Layer Thickness (millimeters)

Asphalt, medium grade, wearing course 60

Crushed stone base 150

Stabilized gravel subbase 150

Natural gravel subgrade 150

Natural gravel fill 150

4. Figure 2.2 and Figure 2.3 show the typical cross sections of the road design in towns/villages and rural areas, respectively. The cross sections consist of 3.75 m lanes and 1.5 m paved shoulders. In towns/villages it will be modified with the addition of 1.5 m wide block paved pedestrian walkways on both sides of the road with parallel concrete side drain wherever possible.

Figure 2.2: Typical Cross Section in Towns/Villages

Source: Final Report: Conceptual Design and Preparation of Works Contracts for Ganta to Zwedru (KM 225.4) Using OPRC under design-build-transfer (DBT) Methodology.

Figure 2.3: Typical Cross Section in Rural Areas

Background

5. In the first half of 2017, the Government of Liberia received unsolicited proposals to develop portions of the southeastern corridor. The Government and the World Bank were at that time preparing to improve a portion (40 km or more) of the corridor under Output and Performance-based Road Contract (OPRC) using an IDA Credit. Following receipt of the unsolicited offers, the World Bank prepared a preliminary analysis which found a PPP could enable immediate rehabilitation of a much larger section


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(100 km or more) of the corridor. The choice of PPP using a DBFOMT modality was intended to scale-up the project under fiscal and borrowing constraints and access private sector asset management efficiencies.

6. In July 2017, the Government of Liberia and the World Bank (with the financial support of the GIF of the World Bank) initiated a market-sounding exercise, through an international consulting firm, to assess potential private sector bidders’ and financiers’ appetite in the proposed public-private partnership (PPP). Private sector feedback suggested the PPP option was viable with appropriate IDA support, including guarantee products to make the project attractive to investors and lenders.65 Based on the market sounding results, the Government concluded that there was market interest in the project and decided to structure it as a public-private partnership. The Government of Liberia also procured the same firm as transaction advisor to build market interest in the transaction, structure the PPP transaction, prepare bid documentation, advise the Government during procurement, and support the Government in achieving commercial and financial closure. The advisor collected further private sector feedback during three investors’ conferences (in Nairobi, Paris, and Monrovia) in 2018.66

7. The evaluation process of Expression of Interests for the PPP transaction was completed by the Government and their transaction advisor in October 2018. The World Bank team is reviewing the evaluation report. Once the shortlisting is approved, the Government and their transaction advisor will initiate the RFP stage by inviting the shortlisted bidders to receive bidding documentation for consultation. The draft bidding documentation is under preparation by the transaction advisor and will be provided to the shortlisted bidders for their comments. The Government and the transaction advisor will update the final bidding documentation for review and approval by the World Bank. The shortlisted bidders will be required to submit their bids based on the final bidding documentation.

8. The PPP financing plan includes US$12 million in IDA Credit resources to make the project affordable. These IDA Credit resources, along with the contribution from the Government and LRTF, will partly finance the project through rehabilitation period milestone payments to the SPV. While the Government will be the Borrower of the IDA Credit, the amount will be used for making milestone payments to the SPV. The remaining constructions costs are expected to be financed by the private sector through debt and equity. The Term Sheet for the IDA credit is attached above.

9. The transaction advisor recommended the Government undertake an international, open competitive procurement process. The Government provided clearance to designate the project as a concession, in accordance with Liberia’s Public Procurement and Concession Act of 2005. Table 2.2 shows the risk allocation reflected in the draft PPP Agreement. The Government and their advisors will be selecting the private partner through a two-stage international competitive procurement, following the World Bank Procurement Regulations. The contract period of 15 years includes a three-year construction period. The financial feasibility of the PPP has been validated through a detailed financial model, results

65 These include changes to the PPP procurement timeline and to the length of the PPP term. 66 Firms generally supported the following recommendations: ensure timely handover of an unencumbered right-of-way; schedule quarterly Availability Payments during the operations period; index the Availability Payment to inflation to match costs and equity returns for the Project; clearly defined performance standards; utilize a credible Independent Engineer to validate any performance deductions from the Availability Payment; and extend the Pre-Qualification period to facilitate greater participation among interested firms.


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of which are presented in Annex 3. Figure 2.4 shows the indicative PPP design, which will be finalized after negotiations with the selected private partner.67

Figure 2.4: Indicative Structure of the PPP

10. The PPP risk allocation is designed to make the project bankable and result in better value for money to the Government. The structure of the PPP contract will ensure that only risks that are normally within the ability of private sector to manage will be passed to the SPV. The risk allocation proposed in this project is based on international experience and feedback received from potential bidders through market sounding and bidder conference. The proposed risk allocation matrix is presented in Table 2.2 to be further refined as part of the preparation of bid documentation and bidder consultation.

Table 2.2: Risk Allocation Matrix Risk Private Sector Government Risk of delayed right of way handover / resettlement ✓

Design Risks ✓ ✓ (axle loading)

Construction Risks (to time & budget) ✓

Operating and maintenance Risks ✓

Force Majeure Risk ✓ (insurable risks) ✓ (political risk)

Traffic Risk ✓

Contractual Performance Risk ✓

Environmental and Social Risks (PSs) ✓

Payment Risk ✓

Market Risks ✓

Political Risks ✓

Termination Risk ✓ (SPV event of default) ✓ (Authority event of default)

11. Key features of the indicative PPP arrangement are:

67 The final PPP structure will be determined based on the financing proposal of the winning bid submission.


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• During the rehabilitation phase, the Government will partially finance (through borrowing from IDA, grant contributions from LRTF and proceeds from the NRF the project through making milestone payments under the PPP Contract. This contribution will help minimize the overall financing cost of the project.

• During the maintenance phase, the Government will make Availability Payments (annually US$8 million plus inflation equivalent) under the PPP Contract, through amounts collected at the NRF.

• Market feedback indicates that the private sector will require adequate risk mitigation and payment security for entering a long-term contract for this project. Guarantees from a multilateral development institution, such as the World Bank Group, is one of the most suitable options to mitigate this risk. The indicative PPP structure therefore anticipates use of IDA Payment Guarantees to mitigate Availability Payment and Termination risks. To reassure bidders that IDA Guarantees would be available to eligible parties, the Government has also asked IDA’s Board to approve the IDA Credit and Guarantees while the PPP is under procurement.

• As the NRF provides the main source of repayment for the PPP contract, its establishment, governance structure, operational decisions, and financial management are critical to the development and implementation of the PPP. An IDA Guarantee would include a corporate monitoring arrangement where IDA will receive reporting from the Government authorities (IIU and Road Fund) on performance and operations of the Road Fund. Further details of the Road Fund and its status are explained in Annex 6.

12. The IDA Guarantee package will include up to a maximum of US$48 million. The IDA Guarantees of an aggregate amount of US$48 million will be offered as part of the procurement documentation for bidders to choose. Bidders can choose one or both guarantees up to a maximum of US$48 million, depending on the risk perception and financial structure of their bids while ensuring an optimal risk mitigation package. The two IDA payment guarantees to the SPV/Project Company will be used to backstop the Government’s Availability Payment and termination compensation payment obligations, respectively. Given that the Government will make the contractual payments through the amounts to be collected at the new Road Fund, the guarantees are expected to provide adequate comfort to both the SPV and its financiers that the Availability Payments will be made on time. The IDA payment guarantee will backstop payments under a revolving letter of credit to be issued by a letter of credit bank. If the Government of Liberia fails to make timely contractual Availability Payments, the selected SPV will have the right to draw down the letter of credit for the corresponding amounts. Figure 2.5 provides a schematic of the payment guarantee arrangement.

13. A guarantee payout by IDA would trigger the obligation of the Government of Liberia to repay the IDA/World Bank. Upon a draw under the letter of credit, the amounts drawn will be converted into a short-term loan to the Government of Liberia from the letter of credit bank. The Government of Liberia will have an obligation, under a reimbursement and credit agreement (to be concluded between the Government of Liberia and the letter of credit bank) to repay such loan within a one-year period. Once the Government of Liberia has repaid the loan, the letter of credit would be reinstated in the amount repaid. However, if the Government of Liberia fails to repay the loan, the letter of credit bank would have direct recourse to the IDA payment guarantee for the drawn and unpaid amounts plus any accrued interest under the reimbursement and credit agreement, in accordance with the guarantee agreement (to be concluded between IDA and letter of credit bank). Should IDA be required to make a payment to


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the letter of credit bank, the IDA payment guarantee support would be permanently reduced by the amounts paid by IDA under the payment guarantee. This obligation will be incorporated in the Indemnity Agreement (to be concluded between IDA and the Government of Liberia), which will require Liberia to repay IDA on demand, or as IDA may otherwise direct.

Figure 2.5: Proposed L/C Payment Guarantee Structure

14. The letter of credit bank will be chosen through a competitive process. The IDA will assist the Government of Liberia with qualitative evaluation of the competing banks and ensure that the selected bank has the needed expertise and is acceptable to the SPV and its lenders. The letter of credit bank will be selected from a shortlist of banks meeting the following criteria: (a) a strong experience in the field of structured finance and trade finance activities; (b) creditworthiness acceptable to address the long-term drawdown needs over the letter of credit tenure; and (c) competitive pricing of the letter of credit. An “expression of interest” was circulated in November 2017 to 15 financial institutions, including commercial banks, export credit agencies, regional, and local banks. A few commercial banks have already expressed interest to provide a letter of credit. The process to select the letter of credit bank will continue once the preferred bidder is chosen and the need for payment guarantee has been established. If a letter of credit is not available, an IDA direct payment guarantee is the alternate option.

15. The proposed reserve account and letter of credit structure provides for levels of defense against a potential call on the Guarantee. These are critical for this project given the risks surrounding the Road Fund and the broader country context. The proposed reserve account and letter of credit and the associated replenishment and cure periods will give IDA sufficient time to step in and try to resolve any issues related to the ability of the IIU and Road Fund manager.

16. A termination payment guarantee is also included to compensate the SPV. This will be triggered if the PPP contract is terminated before its expiration for Government event of default, as defined in the PPP Agreement. The PPP contract will include provisions for the compensation arrangements for debt and equity, in case of a termination event. The IDA Guarantee will backstop the government obligation to make this compensation on time and in required amounts.


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Figure 2.6: Availability Payments Made from the NRF to the SPV

17. Several project development and procurement risks require clear mitigation arrangements. Table 2.3 shows the key risk categories that will affect project development and implementation and describes the individual risks and associated mitigation measures.

18. Table 2.3: Project Risks and Mitigation Arrangements Risk Category/Rating Risk Description Proposed Risk Mitigation

Road Fund Governance and Operation Risks arising from uncertainties in governance and operation of the Road Fund. Substantial

Operational independence of the Road Fund, as set out in the act is critical to provide confidence to private sector partner and the World Bank (as a Guarantor) that the provisions of the NRF Act will be followed.

The World Bank will continue to assist the Government of Liberia in establishing the operational procedures and governance arrangements. In addition, the World Bank implementation support and supervision efforts will continue to monitor the operation of the Road Fund including as part of capacity building activities. During the operations period, there will be NRF reporting requirements as part of the guarantee related agreements.

Road Fund Revenue Risk Inadequate revenue collected at the Road Fund Substantial

Revenue collected at the Road Fund (40 percent apportioned for Rehabilitation and Improvement) becomes insufficient to make contractual payments, arising either from less than projected user charges (related to GDP growth factors) or from other externalities (for example, natural force majeure).

The project design and risk assessment described in the Appraisal document assume that the Government will only draw on fuel levy receipts to fund its obligation under the PPP and utilizes a conservative estimate of GDP growth. If fuel levy receipts were to be insufficient, the Government can develop additional User Charges identified in the NRF Act to fill a shortfall. In addition, other funding sources such as Government of Liberia Budget contribution, loans/grants and borrowings could be a mitigation factor in circumstances that are caused by externalities.

Traffic and Road Usage Risk Risk arising from high/low traffic and more/less usage of the Road

High traffic: high induced traffic (for example, higher axle loads) resulting in higher maintenance and operational cost risks, leading to increase in contractual payments.

The traffic risk is primarily with the public sector. Any increase or decrease beyond the contract stipulated traffic profile will impact road maintenance costs and trigger performance risk and therefore, will be deemed as a compensating event. The PPP Agreement will define threshold levels for contractual base


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Risk Category/Rating Risk Description Proposed Risk Mitigation

Moderate

Low traffic: low traffic resulting in lower usage of the road asset, while contractual payments are locked-in for 15 years.

traffic projections.

Counterparty Risk Risks arising from the Government of Liberia’s poor institutional strength and other capacity-related risks. Substantial

Inadequate institutional capacity to be a counterparty to private sector under the PPP contract. As public institutions have a critical role in implementation and contract management, private sector partner would require a credible counterpart for the life of the contract (15 years) to ensure project decisions are made on a timely basis. The MPW-IIU does not have a dedicated team for managing this project.

Under the project design, a specific component is included to strengthen IIU’s institutional capacity and processes, to support the project. The IIU will also use the support of external advisors, including an IE, to help manage the project. The task team will continue to support the IIU in implementing the project through continued supervision beyond the implementation period (potentially up to six years from the start of project).

The provision of right of way is a key risk to ensure that the private sector can start the construction on schedule.

The PPP contract contemplates clearance of 90 percent of the project corridor as a condition of effectiveness and the remaining 10 percent is expected to be cleared within one year of the commencement of PPP contract.

Financing Risk Risk arising not able to attract private finance for the Project Substantial

More than 50 percent of the project is expected to be financed through private finance. The risk is that the required amount of private finance is either unavailable or delayed, impacting financial closure.

Financing is primarily a private sector responsibility, where the bidder will have to work with potential financiers to secure financing. Bidders will be asked to submit a financing plan as part of their bid response, which will enable evaluation of financing risks associated with each bid. To mitigate financing risk, the Government and transaction advisor, with the assistance of World Bank, have also been proactively engaging commercial financiers and development finance institutions to consider financing the project.

Environmental and Social Safeguard Risk Risk arising from lack of compliance of environmental and social safeguard on project corridor, communities and end-users Substantial

Lack of compliance with environmental and social safeguards can affect the communities and end users.

Operational Policy 4.03 is triggered and the implementation responsibility rests with the private sector. The preferred bidder will be selected in part based on assessment of their capacity to develop and manage World Bank PSs based on their bid submissions. Annex 4 summarizes safeguard instruments triggered, implementation arrangements, and compliance monitoring mechanism.

Political and Governance Risk Risk arising from

Being the first road PPP in Liberia, key political risks affect institutional coordination, procurement and

Liberia has previous experience in output-and performance-based road contracts, a form of PPP contract. Thus, the policy and legislative


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Risk Category/Rating Risk Description Proposed Risk Mitigation

country specific governance and legal characteristics. Moderate

management, including policy, regulatory, and legislative constraints that affect participation of domestic and international private sector entities.

arrangements allow for participation of the private sector in infrastructure. In addition, the project has already received clearance to be procured as a PPP under the Public Procurement Concession Act, 2005.

Currency/Macro-Economic and Fiscal Impact Risk Risks arising from the currency volatility, broader macro-economic environment and fiscal impact Moderate

Currency volatility and convertibility risk can impact project economic and financing returns. Project payments and debt may also have fiscal impact on the Government of Liberia’s balance sheet and borrowing capacity.

The currency of the underlying contract will be in U.S. dollars and the fuel levy that will finance the Government’s contributions to the project is collected at a U.S. dollar denominated rate. This design fully mitigates the currency volatility and convertibility risk. The key source of funding for this project is expected from the Road Fund through user charges, thus minimizing the direct need from the Government of Liberia’s balance sheet. The team has also conducted a detailed assessment of the project fiscal impact using the PFRAM tool, as part of the appraisal.


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ANNEX 3: Financial Analysis and Government Fiscal Commitment and Contingent Liability Assessment


1. A financial analysis of the project confirms that the US$8 million Availability Payment may be sufficient to support a total project cost of US$100 million. Construction costs are assumed to be funded through a public contribution of US$39 million, which includes IDA, the LRTF, and the Government of Liberia through the amounts transferred by the NRF, with the remainder financed by private sector. Assumptions for maintenance phase cost include operating costs of 0.8 percent of the construction cost per kilometer, SPV debt service payments, and guarantee fees. As presented below, the financial viability of the project is highly sensitive to the total project cost and the debt financing terms, as indicated through cover ratios and financial returns68.

Table 3.1: Project Cost Sensitivity Analysis for a length of 100 km69

Project Construction Cost (US$, millions) US$80 (Upper Case)

US$95 (Base Case)

US$120 (Lower Case)

Minimum Debt-service Coverage Ratio (ratio) 1.22 1.20 1.16

Equity Internal Rate of Return (percentage) 14% 13% 11%

Project Internal Rate of Return (percentage) 11% 10% 10%

Payback Period (years) 9 9 9

Table 3.2: Cost of Debt Sensitivity Analysis for a road length of 100 km70

Cost of Debt (interest rate) 5 % 7 % (base case)

9 %


Equity Internal Rate of Return (percentage) 15% 13% 10%


Payback Period (years) 9 9 9

2. Financial indicators show a project viability but are lower than market expectations. The base case of a US$95 million in construction costs, plus interest during construction and any upfront guarantee fees, results in a minimum debt service coverage ratio of 1.2 times throughout the contract life with a 13 percent return for equity providers. These financial indicators are lower than market expectations from similar projects and the bidders may provide feedback on this during the procurement. However, open competitive bidding is expected to lower project cost for the proposed minimum length of 100 km, and potentially improve cost efficiency and thus improve the financial indicators.

3. Project viability is also sensitive to the fuel levy amount collected and transferred by NRF. The US$8 million Availability Payment per year is about 25 percent of the US$31 million estimate of current annual NRF revenues from fuel levy. This proportion of funds (allocated to the project is about 2/3rd of

68 DSCR – Debt Service Cover ratio; IRR – Internal rate of Return. 69 The figures presented above are only indicative and are based on several assumptions. The private sector bidder would be proposing their rehabilitation and maintenance phase cost structure, as part of their bid submissions. 70 The figures presented above are only indicative and are based on several assumptions. The private sector bidder would be proposing their financing structure and terms and conditions of such financing, as part of their bid submissions.


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the admissible transfer of 40 percent of the total annual receipts available for similar rehabilitation and improvement works. Assuming this proportion holds, a 10 percent decrease in the fuel levy revenue can result in a decrease of approximately US$1 million per year in Availability Payments. Table 3.3 shows the sensitivity to changes in fuel levy revenue on Availability Payment. However, the risk of reduced collection of Road Fund fuel levy revenue can be mitigated through initiating other sources of revenue collection, as identified in the Act, including meeting shortfalls through budget support.

Table 3.3: Sensitivity Analysis of Collection and Availability Payment (at 25% fixed ratio)

Road Fund Collections (US$, millions) $24* $28** $31**

Availability Payment (US$ millions/year) US$6 US$7 US$8


Equity Internal Rate of Return (percentage) -3% 5% 13%


Payback Period (years) 11 10 9 *Availability Payments constitute the legal maximum of 40 percent of total NRF revenues shown. **Availability payments constitute 25 percent of the total NRF revenues shown.

4. Preliminary analysis indicates the project has a marginal impact on the government liabilities. The fiscal impact on the government balance sheet has been calculated using the World Bank-International Monetary Fund developed PFRAM model. High level analysis indicates that the PPP project will only add between 0.1 percent and 2.2 percent of GDP71 to the Government’s liabilities. This takes into account the overall liabilities and not just the liability that arises out of private sector financing. Figure 3.1 shows the impact of the project on Government debt as a percentage of estimated GDP.

Figure 3.1: Stock of Government Liabilities due to PPP (percentage of estimated GDP)

5. The contingent liability analysis assesses the Government’s contingent liability under the PPP Contract. The contingent liability is created through two events - termination due to government default or SPV default; and annual revenue shortfall from the NRF due to insufficient fuel levy collection. Based

71 Based on the 2017 GDP figure of US$3.285 billion provided by the Government of Liberia during Negotiations.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Financial liability (stock) Non-financial liability (stock)


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on the analysis, the worst case contingent liability from such events presented could be limited to 1.37 percent of the GDP. However, risks that could lead to such events can be mitigated through the implementation arrangement proposed in the project and through periodic review and supervision by the World Bank. Strengthening the capacity of IIU, through Component 3, would also be critical to ensure the PPP contract is managed effectively.

6. In the event of the contract termination due to government default or political force majeure, the Government is expected to incur a maximum contingent liability of less than 1.37 percent of GDP for making compensation payments. In the event of government default or political force majeure, the Government is obligated to pay: (a) senior debt; (b) termination cost; (c) subcontractor breakage cost; (d) average daily payment for the relevant period; and (e) equity payables to meet the required IRR. Senior debt and equity payables are the largest components of these five and account for approximately 99 percent of the termination payment. As shown in Figure 3.2, the Government’s contingent liability is largest in 2022 - equivalent of 1.37 percent of GDP - and gradually decreases over the contract period to 0.04 percent of GDP by 2033.

Figure 3.2: Contingent Liability Under Government Default or Political Force Majeure by Calendar Year (percentage of GDP and Government budget)

7. Contingent liability in the event of an NRF revenue shortfall. In the case of the revenue shortfall from insufficient fuel levy collection at the NRF, the Government will have to meet the shortfalls through budget contribution. A high-level simulation analysis for calculation of projected budget contribution due to projected shortfalls indicate that the contingent liability of the Government to provide budget support may be limited to 0.3 percent of the government budget levels of 2017/18. However, this simulation analysis can be strengthened further to assess revenue projections for the Road Fund, once the Road Fund continues to operate and build a track record of revenue collection.

0%

2%

4%

6%

8%

10%

12%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

% g

ove

rnm

ent

bud

ge

t 2

01

7/2

01

8

% G

DP

Senior debt Average Daily Payment for the relevant period

Subcontractor Breakage Cost Termination Cost

Equity Payables to meet the required IRR Contingent Liabilities as a % of government budget 2017/2018


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ANNEX 4: Summary of Safeguard Instruments Triggered, Implementation Arrangements and Monitoring Mechanism


Policy or Performance

Standards

Implementation arrangement

Safeguard Instrument and Monitoring mechanism

Required document (s) and preparation status

Timeline for Finalization of the

document(s)

Operational Policy (OP)/World Bank Policy (BP) 4.01 – Environmental Assessment

To be implemented by the Government of Liberia.

ESIA was prepared, reviewed and disclosed as part of the project preparation. [Add details].

The Government of Liberia has prepared an ESIA in line with the requirements of OP 4.01 and the Environmental Protection and Management Law of Liberia. As detailed below, the SPV will update these documents based on the final design and they will be reviewed and redisclosed prior to construction.

The ESIA has been reviewed and cleared by the World Bank and was disclosed on November 12, 2018. Updated ESIA will be finalized, reviewed, and disclosed prior to construction.

Operational Policy (OP)/World Bank Policy (BP) 4.12 of Safeguard Policies. Involuntary Resettlement


RAP monitoring and evaluation plan will be followed – one month after completion of implementation of the RAP and then on a 6-monthly basis, for three years. Third Party evaluation after 24 months.

RPF and RAP already prepared. The IIU disclosed the RAP on November 17, 2017 and updated RFP on November 13, 2018 and the World Bank disclosed the RAP and RPF on it’s website on November 15, 2017 and November 13, 2018 respectively.

Operational Policy (OP)/World Bank Policy (BP) 4.11


The private sector partner will report on chance finds in its regular report to the IIU.

A stand-alone physical cultural resources management plan is not required. A chance find procedure has been incorporated in the ESIA. The private sector partner’s

Incorporated in the ESIA.


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Standards





document(s)

environmental and social management plan will include an updated version of the procedure.

PS-1 of OP 4.03. Assessment and Management of Environmental and Social Risks and Impacts

To be implemented by the SPV.

As part of the final design process, the SPV will update the ESIA discussed above. The ESIA will also elaborate on the monitoring and review mechanism, which will be led by the SPV's safeguards specialists. Implementation review will be conducted regularly by the Government with oversight from the World Bank. Per OP 4.03, annual independent (third party) auditing of ESIA implementation will be conducted according to the SPV's contract and the ESIA mechanisms. The SPV will also be required to furnish the World Bank with an Annual Monitoring Report summarizing the SPV activity's consistency with the World Bank PSs and identifying environmental and social issues that arise during implementation and how they have been addressed.

The SPV will updated the ESIA and establish and maintain an ESMS appropriate to the nature and scale of the project and commensurate with the level of its environmental and social risks and impacts.

As soon as the SPV has been awarded the contract. The contract documents will include the time frame for implementation.

PS-2 of OP 4.03. Labor and Working Conditions

Labor issues will be identified as part of the ESIA process by the SPV. Requisite plans and processes will be outlined in the ESIA. The SPV will implement the plans as outlined in the ESIA.

Monitoring mechanisms as identified in the ESIA and accompanying labor plans and processes documents.

The ESIA may include an occupational health and safety (OHS) issues. A stand-alone OHS plan and labor force management plan will be developed to the meet the requirements of PS-2.

As above.

PS-3 of OP 4.03. Resource Efficiency and Pollution Prevention

The requirements of PS-3 are usually assessed as part of the project ESIA. The SPV will be responsible to implement the requirements of this PS.

The ESIA/ESMP will include monitoring indicators that the IIU and the SPV can use for monitoring purposes. Regulatory agencies such (for example, Environmental Protection Agency of Liberia) have statutory responsibility to

No stand-alone instrument is required to meet the PS-3 requirements. The implementation of the actions necessary to meet the

As above.


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Standards





document(s)

conduct monitoring. These provisions will be included in the annual independent audit (see PS-1 above) according to OP 4.03 requirements.

requirements of this PS will be managed through the ESMP.

PS-4 of OP 4.03. Community Health, Safety and Security

The requirements of PS-4 are usually part of the project ESIA or included in a stand-alone Health and Safety Plan which the Project Company is responsible to implement.

As above. The SPV will be required to prepare a stand-alone OHS Plan to include community health, safety and security in addition to the issues covered in the ESIA.

As above.

PS-5 of OP 4.03. Land Acquisition and Involuntary Resettlement

Land acquisition and involuntary resettlement related activities will be implemented by the Government of Liberia.

Same as mechanism mentioned in OP 4.12 above.

RAP already prepared. In case, some changes in the alignment, the SPV will require to prepare ARAP/RAP and implement it.

The RAP already finalized and disclosed for implementation by the Government of Liberia.

PS-6 of OP 4.03. Biodiversity Conservation and Sustainable Management of Living Natural Resources

The SPV will be responsible to implement the requirements of this PS.

The ESMP will include monitoring indicators for the IIU and the Project Company to use for monitoring purposes. Regulatory agencies such as the Environmental Protection Agency have statutory responsible to conduct monitoring. These provisions will be included in the annual independent audit (see PS-1 above) per OP 4.03 requirements.

The implementation of the actions necessary to meet the requirements of this PS is part of the ESIA process. No Stand-alone document is required.

As above.

PS-8 of OP 4.03. Cultural Heritage

Implementation by SPV according to the assessment and plans in the SPV's construction ESMP.

The ESMP, will be the mechanism used for monitoring. This will be done by the SPV's safeguards specialists. These provisions will be included in the annual independent audit (see PS-1 above) per OP 4.03 requirements.

A Chance Finds Procedure has been incorporated in the ESIA. The ESIA did not identify any known cultural site that may be affected by the road alignment or establishment of quarries, borrow pits and camp sites. A stand-alone management plan is not required.

As above.


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ANNEX 5: Gender Analysis and Sexual Exploitation and Abuse Mitigation and Response Strategy


Gender analysis, actions and indicators

1. The project will contribute to closing identified gender gaps in Liberia related to women’s equal access to economic opportunities. A gender analysis highlights that, despite some advancements in Liberia to close gender gaps, the ratio of female labor force participation is only 63 percent (among low income women). Data from the Demographic and Health Survey (DHS) 2013 shows that approximately three-fourths (74.7 percent) of women in non-agricultural work are self-employed. Gaps in employment are even more pronounced in certain sectors as the infrastructure one. This is mainly due to cultural factors and lack of appropriate skills72 (only approximately 7 percent of women are involved in construction).73 The percentage of women working in the MPW also indicate this situation. Of a total of 559 employees in the MPW, only 114 are women, of which only 17 are in high-level positions.

2. The project will carry out the following activities to address said gaps. To institutionalize gender balance in the workplace, the project will provide technical assistance for the Road Agency for the development of a non-discrimination and equal opportunities policy. This policy entails a written institutional commitment by the Road Agency to enabling equal opportunities, opposing discrimination and preventing sexual harassment in the workplace. Moreover, the policy may include a target for female student participation in the internship program.

3. Given the gap in women’s participation in the construction sector, the project will pilot an intervention with the contractor to train women with specialized skills, including the use of heavy machinery to open future employment opportunities. A provisional sum for training and providing women with high-level skills for road rehabilitation (e.g. operating plants, construction, including driving forklifts, driving/operating paving equipment, mechanics) will be included in the SPV’s contractual obligations. This is an ambitious and relevant objective given the low rate of women participating in construction. Evidence shows that women are normally employed on “soft” tasks (signal control at construction sites) and that social norms can be an impediment to their employment in more “male” dominated fields (e.g. operation of heavy construction equipment). Studies have shown that the generation of role models can have a transformative effect in communities.74 The project acknowledges the relevance of employing women in these male dominated areas and will start with a pilot to make sure that all the required measures (e.g. training -both theoretical and practical, community sensitizations and anti-sexual harassment policies) are put into place.

4. The project will monitor the progress on three fronts: (a) Non-discrimination and equal opportunity policy for the Road Agency designed; b) Percentage of women trained in specialized skills; and c) Percentage of women employed in specialized high skills jobs.

72 World Bank. (2007) Liberia. Toward women’s economic empowerment: a gender assessment. Washington: World Bank, p. 5. 73 IFC. (2014). Striving for business success: voices of Liberian Women Entrepreneurs. Washington: IFC, p. 9. 74 Casabonne, Ursula; Jimenez Mota, Bexi Francina; Muller, Miriam. 2015. Roads to agency: effects of enhancing women’s participation in rural roads projects on women’s agency - a comparative assessment of rural transport projects in Argentina, Nicaragua, and Peru (English). Washington, D.C.: World Bank Group.


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Mitigating and Responding to Sexual Exploitation and Abuse

Risk assessment

5. GBV, including SEA, affects women and girls in Liberia. In 2006, Liberia passed a Rape Law, and on January 2018, the President of Liberia issued an Executive on Domestic Violence. However, despite these legislative instruments GBV is rife in the country. For instance, according to available data from the DHS 2007, prevalence of Intimate Partner Violence is 38.5 percent. The prevalence of women who have experienced sexual violence is 17.6 percent (above regional average according to the World Health Organization (WHO)). Moreover, the DHS 2013 results show that certain existing gender norms perpetrate GBV. For instance, 33 percent of women believe that a man is justified to beat his wife if she argues with him. According to another study from the United Nations75, rape is the second most commonly reported serious crime in Liberia. In 2013, rape and domestic violence together accounted for over 70 percent of all serious reported crimes.

6. The project identified certain project GBV risk factors requiring mitigation. As established by the International Finance Corporation (IFC) Handbook to Address Project-induced Migration, evidence shows that in-migration is associated with negative environmental, social, and economic impacts that often lead to deterioration in the social context in which the project’s host communities reside and the project is operating. Because they are far from home and need to socialize, influx populations may hasten the introduction and/or increased expression of vices such as prostitution, gambling, alcoholism, and drug use, which can have significant negative social impacts and consequences. The handbook also identifies risks related to a rise in the "four Ms": men, money, movement (influx), and mixing (that is, the interaction between high and low disease prevalence groups).

7. The impact of labor influx is assessed as low to medium based on the World Bank Labor Influx Guidance Note, given the number of workers and absorptive capacity the host community. Although the project will take place in remote rural areas, it will involve around 850 workers for Component 1 one of which around 130 or 15 percent will be non-local skilled workers. Experience from LIBRAMP, which also included road rehabilitation and maintenance, suggests that contractors will again overwhelmingly engage local laborers (about 95 percent). The project will target that at least 10 percent of the skilled workers be women who will be trained on the use of heavy machinery.

8. Even though labor influx impacts are rated low-to-moderate, the GBV risk assessment indicates substantial risk when other risk factors (contextual and project-related) are accounted for. The project will put in place some measures defined for high-risk contexts in response to the estimated prevalence the following risk factors in the project area, as reported in secondary sources: sexual violence and intimate partner violence, approval attitudes towards violence in the community, high rates of sexual violence, child marriage and increase of disposable income of workers vis-à-vis the communities leads the project to adopt certain measures as for high risk projects.

Mitigation Measures

9. The project will undertake several activities to mitigate SEA risks emanating from its activities. These include (a) the SPV’s contractual obligations to reduce the SEA risks due to labor influx; (b) strengthening the GRM to effectively handle SEA complaints, through collaboration with an NGO with expertise responding to cases of SEA; (c) enhanced multi-sectoral coordination and monitoring

75 United Nations in Liberia (2013). United Nations Development Assistance Framework 2013-2107. Liberia: UN.


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mechanisms; and (d) capacity building of the implementing agency and community awareness raising activities to implement these SEA mitigation measures effectively.

Defining Contractual Obligations

10. The project will introduce contractual obligations into the PPP contract to mitigate the SEA risks. The project includes the following measures to operationalize these requirements: (i) briefing prospective contractors on the Environmental, Social, and OHS Standards, and SEA-related requirements during pre-bid meetings; (ii) requiring that contractors and consulting firms submit “Codes of Conduct” with their bids; (iii) requiring contractors to establish anti-sexual harassment policies, adopt Action Plans for implementing environmental, social, and occupational health and safety standards, and mitigation measure on SEA; and (iv) requiring firms pay a partner NGO to provide worker training on SEA, HIV/AIDS mitigation, and CoC obligations. The PPP contracts will directly link payment penalties in case of noncompliance with specified environmental and social performance indicators.

Strengthening the GRM

11. The project approach is for survivors of SEA to have multiple entry points to confidentially report SEA through service providers in addition to an enhanced GRM. The existing GRM will be enhanced and adapted by building on its capacity to refer complainants to SEA service providers and the GRM operators will be trained on how to collect SEA cases confidentially and empathetically. The project has undertaken a mapping exercise to identify community-based organizations in the area (e.g. Women Concern, Women Peace Huts) which previously have been trained by IRC on case management, including referrals. The service partner NGO will facilitate coordination between the GRM and other service providers, carry out capacity building related to enhancing the GRM, and promptly address any potential grievance from survivors of SEA.

12. If the GRM receives a case on SEA related to the project, it will be recorded, and the survivor will be referred to the NGO (or partner Community Based Organization) for assistance and, if needed, for referral to other service providers. Service providers will also be trained about the availability of the GRM, so that they can refer survivors of SEA in the project area. The contracted NGO will keep the information confidential to protect the privacy of survivors. The project shall strengthen the GRM as one of the entry points for complaints, including SEA, by adopting an ICT tool that, with the consent of the survivor and while still protecting the complainant’s confidentiality, immediately reports the existence of the complaint to the Government and to the World Bank. In cases, where the perpetrator(s) is linked to project activities then the SPV will take appropriate actions as per the CoC signed by the person. Moreover, this will not preclude prosecuting perpetrators as per Liberian law.

Capacity building, community dialogue and awareness raising

13. Component 3 will support improved management of project implementation and supervision, social and environmental safeguards, identification and mitigation of gender disparities, and citizen engagement. The project, in partnership with the partner NGO, will launch activities and learning modules to enhance the IIU’s capacity to address SEA and properly design a project-level GRM with SEA-sensitive protocols, strong mechanisms for reporting, and a feedback system for timely response to complaints. The protocols will include provisions to protect confidentiality. The project will also support the Government’s efforts to enhance its response to SEA and GBV by mapping ongoing initiatives through multi-sectoral coordination.


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14. Moreover, the partner NGO will carry out community dialogue and awareness raising in the communities to make sure people potentially affected by the project are aware of the different entry points to the referral pathway (including the role of the GRM). This NGO’s outreach will take into account lessons from its previous successful community outreach and experience introducing SEA topics in closed environments. For instance, lessons can be drawn from UN Women’s experiences raising awareness and community sensitization within its economic empowerment agenda and other activities.

Monitoring and Multi-sectoral coordination

15. The IE will monitor the fulfilment of SEA-related obligations by the SPV throughout the contract term. The IE will monitor compliance with, among others Codes of Conduct, SPV staff/worker training, and awareness raising carried out by the NGO. Both the IE and contractor will have environmental and social personnel with the GBV-specific skillset defined in their respective contracts.

16. With the survivor’s agreement, the partner NGO (and the linked Community Based Organizations) will support reporting to the GRM and IIU any SEA case where the perpetrator is identified project-related. The partner NGO will also monitor that provisions to mitigate and respond to SEA are in place and functioning. This includes monitoring that a GBV Action Plan with a clear Response and Accountability Framework is in place and properly applied for registering complaints, survivor referrals, and resolution of complaints; that the different entry points for survivors of SEA are coordinated; and that survivors’ confidentiality is maintained at every stage. The partner NGO will also monitor development of the CoC and their signing.

17. The project will develop a web-based grievance registration system as one of the entry points for SEA complaints. The complaints registered in this system will be managed by a dedicated trained administrator to receive reports on SEA with strict confidentiality and, if the survivor approves, liaise with the NGO to receive proper care.

18. The IIU has appointed a gender focal point for coordinating activities linked to SEA mitigation. The focal point will be trained on specific GBV skills and will lead mitigation of SEA risks from the implementation agency side. The focal point will also be in constant communication with the specialized partner NGO, which will serve as well as a technical advisor.

Women’s skill development

19. The proposed project plans to develop women’s skills along the road corridor. Discussions held with stakeholders (NGOs, international organizations, and community-based organizations) have revealed that transactional sex is a common practice in Nimba County, partly because of a lack of employment opportunities. Interested women will be provided training on the operation of the heavy machinery and the SPV will be encouraged to employ these women, in addition to unskilled female laborers, as possible.

20. The skill development measures targeting women will be fully financed by the project under Component 3.


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ANNEX 6: Status of the National Road Fund


A. Background

1. The Government of Liberia enacted the NRF Act76 to provide sustainable financing for the road sector’s reconstruction effort in December 2016. The NRF Act provides financing for the rehabilitation and maintenance of roads and institutionalizes a culture of maintenance to sustain investments in roads. The NRF was set up under the aegis of an Inter-ministerial Steering Committee (IMSC)77 with the MPW and the MFDP playing pivotal roles in its governance. The IMSC oversees Road Fund policy and is chaired by the Minister of MPW, who is responsible for road infrastructure policy, while the NRF is governed by the Minister of MFDP.

2. The NRF Act establishes the key objectives of the NRF, namely, “to: (a) ensure road assets are sustained and sufficient funds for periodic and routine maintenance are collected for this purpose; (b) ensure each of the categories of national, sub-national, and feeder roads have sufficient share of the total budget so these roads can operate as an integrated network; (c) defray the costs of loans approved by Government to extend the length of maintainable roads; and (d) ensure the needs of the roads users and those affected by roads are considered in terms of safety, security, and environment.”

B. Progress and Current Status

3. Before the enactment of the NRF Act, starting 2015, the Ministry of Commerce had started levying a “storage fee” equivalent to US$0.50 per gallon of fuel imports. After enactment of the NRF Act in December 2016, 50 percent of the “storage fee” collected (i.e. US$0.25 per US gallon) was being set aside as a fuel levy. Although private parties raised a legal challenge to this requirement in 2017, the challenge was amicably resolved, and the case was withdrawn in mid-2018, leading to reinstatement of the levy and agreement that the parties would pay the past due levy amounts. To date, US$1.9 million of this has been remitted to the Government78 and the Government has confirmed a further US$21 million is owed. As part of its settlement of the legal challenge, the Government and private parties established timelines for payment of the remaining outstanding funds79. Although the NRF should be able to meet its obligations under the project even if these funds are not eventually collected, the Government has agreed to report the status of the payments to the World Bank biannually until fully repaid.

4. Following resolution of the legal challenge in June 2018, the Government moved quickly to re-establish the levy and establish the NRF. Actions to operationalize the NRF include hiring an NRF manager and staff, establishing operating procedures for the NRF, opening NRF accounts and transferring initial fuel levy receipts into the NRF accounts. In 2018, the Government also increased the fuel levy rate to US$0.30 per gallon to ensure annual NRF receipts quickly reach the target level of US$30 million per year. As of November 1, 2018, US$1.4 million in NRF funds collected by the Liberia Revenue Authority have transferred to the NRF account, while a further US$4.78 million was pending transfer. The fund flow has

76 An act to establish the NRF for road maintenance in the Republic of Liberia, enacted by the Senate and House of Representatives, approved on December 12, 2016. 77 IMSC was set up through a government decree. 78 As of early November 2018. 79 Of these, approximately US$10 million is due by June 30, 2019, US$4.1 million is due December 2022, and US$6.97 million is due December 2024.


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been streamlined to allow all road fund receipts to be paid within five days of being deposited into the Consolidated Fund.

5. The institutional structure of the NRF and its functions are summarized in Figure 6.1.

6. Figure 6.1: Institutional Structure of the NRF and its Functions

C. Role of the National Road Fund in SECRAMP

7. The NRF is an important and main source of funds for the Government to build an integrated primary road network. NRF revenues, through the PFMU, will fund the Government contribution to the rehabilitation milestone payments and the Availability Payments under the PPP contract. The Availability Payment is expected to be covered under the Rehabilitation and Improvement provision of the Act, whereby 40 percent of NRF annual proceeds can be allocated to rehabilitation contracts that include at least five years of maintenance (section B.4.d of the Act). With a projected US$30 million in annual revenues, as much as US$12 million is eligible for Rehabilitation and Improvement contracts. The Government has assigned about two-thirds of this, US$8 million, for SECRAMP’s Availability Payment.

8. To ensure SECRAMP is supported by the NRF, the following arrangements are envisaged:

(a) PFMU will create a dedicated SECRAMP Project Account, where NRF will transfer, in advance, the payments due under the PPP Agreement.


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(b) NRF transfer will include additional amounts to allow the PFMU to maintain a Minimum Required Balance amount to meet two quarterly Availability Payments and emergency payments during the maintenance phase.

(c) Periodic reviews of NRF proceeds to assess income and expenditures are in line with current projections, including discussions with the Government in deploying other sources of funds identified in the Act.

(d) Prioritization of Road Fund proceeds for SECRAMP, in case shortfall occurs in revenues.

D. Other Potential Revenue Sources for the NRF

9. The Government fuel levy is one of eight potential sources of NRF revenue allowed under the NRF Act. The NRF Historical analysis80 shows that Liberia’s fuel imports tend to hover around 5.1 percent of GDP. Thus, for every US$1 increase in GDP, fuel imports increase by 5.1 cents. World Bank forecasts average annual GDP growth of 3.8 percent to 2020. If this rate of GDP growth were to continue for the next decade, the fuel levy receipts would increase to just over US$40 million per year.

Figure 6.2: NRF Revenue Forecast (US$, M)

10. The Liberian Public Procurement and Concessions Act of 2005 allows tolling on roads/bridges under concessions. The Government is considering tolling newly improved road sections by charging commercial road vehicles and depositing the receipts into the NRF accounts. Although the project road will not be a toll road when rehabilitated under the project, it will open opportunities for residents in broader economic and social activities and will greatly facilitate the ongoing mining and cocoa concessions

80 Historical fuel import data collected from the Liberia Petroleum Refining Company (LPRC).


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and any future concessions. The World Bank is also currently assisting the Government in developing a greenfield dry port located at 10 km of this road on a PPP basis. Paving of a 10 km link to this corridor is thus critical to the success of the dry port concession. The preliminary estimate suggests that the Government might earn a significant fee from the dry port concession and could use it for recovering its outlay on the road. Such potential receipts could offset the NRF contributions towards Availability Payments to the SECRAMP. However, the Government should develop a National Road Tolling policy before it embarks on tolling the SECRAMP or any other national roads.


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ANNEX 7: Financial Management


1. The World Bank conducted a financial management assessment of the PFMU under the MFDP, which will manage the project’s finances. The aim of the assessment is to determine whether (a) the funds will be used for the purposes intended in an efficient and economical manner and the entity will be capable of correctly and completely recording all transactions and balances related to the project; (b) the project’s financial reports will be prepared in an accurate, reliable, and timely manner; (c) the assets acquired under the project will be safely guarded; and (d) the project will be subjected to auditing arrangements acceptable to the World Bank.

2. The PFMU will undertake financial-management-related functions of the project. The PFMU is adequately staffed with qualified accountants and has the requisite capabilities to carry out the project financial management functions. The PFMU is currently carrying out the financial management responsibilities of IDA-funded operations and satisfactorily The PFMU is an appropriate and acceptable institution to support financial management implementation and will utilize the Government of Liberia’s financial management systems for the project. The PFMU will be responsible for the internal control, accounting, reporting, and auditing arrangements of the project. The MoU between the MFPD-PFMU, NRF, and the MPW-IIU establishes the funds flow arrangements for the project.

Annual Work Plan and Budgeting.

3. The IIU will liaise with the PFMU and NRF and prepare an annual work plan and budget for the project each year. The annual work planning and budgeting will be based on the work programs agreed with IDA. The PFMU will submit the annual work planning and budgeting to the IDA for its concurrence two months before the ensuing fiscal year. Disbursement from the IDA will be based on interim financial reports. The PFMU, in collaboration with the technical unit, will submit to the IDA a six-month cash forecast as the basis for the initial disbursement. The funds will flow from the IDA into a designated account opened at a Commercial Bank and acceptable to the World Bank.

4. The funds flow arrangement shows the flow of funds from the collection of the fuel levy to the SPV. The structure is designed to ensure the Availability Payments are made as scheduled without any detrimental impact on the project. The funds flow will follow the diagram in Figure 7.1 and be as follows:

(a) All road fund fuel levy proceeds are collected by the Liberian Revenue Authority and deposited in the consolidated account with Central Bank.

(b) Under a standing instruction, the Central Bank transfers the road fund proceeds to the Road Fund account managed by the Road Fund Manager by the 8th day of each month.

(c) The Road Fund Manager transfers the Availability Payment of US$8 million per year in quarterly installments to the project reserve account.

(d) The Government of Liberia through the Ministry of Finance holds six months of Availability Payment (US$4 million) in reserve in an interest-bearing account. The reserve is established to provide the Ministry of Finance / Government of Liberia the opportunity to rectify any shortfall


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in the NRF and prevent an immediate draw on the L/C81. As the NRF builds a track record for collections and payments, this reserve account can be decreased over time.

Figure 7.1: Funds Flow Arrangements between the NRF, PFMU and the SPV

(e) In the event of a delay in payment or non-payment from the Road Fund, the Project Company can draw on the dedicated reserve account. Once drawn, Ministry of Finance has an obligation to top up the reserve account up to the required 6 months of Availability Payment.

(f) If there is a non-payment of the Availability Payment from the Road Fund, and the reserve account has been depleted and not replenished, the Project Company can call on the L/C (refer to IDA Guaranteed L/C section for details on L/C and Guarantee mechanism).

Accounting and Reporting

5. The PFMU will produce quarterly unaudited interim financial reports for the funds received and used under the project. The reports are to be submitted to the World Bank within 45 days of the end of each calendar quarter, and the PFMU will agree with the World Bank on the format and content of reports. The reporting requirements will be incorporated into the grant management module of the SUN system to enable automated generation of the interim financial reports.

81 As indicated in the Guarantee annex, a draw on the L/C would result in an obligation of the Government of Liberia to replenish the L/C, which would include an interest payment.


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6. The interim financial reports submitted to the World Bank will have a section on financial reporting and disbursement containing the following:

(a). Reporting section includes:

• Statement of sources and uses of funds by disbursement category; and

• Statement of uses of funds by project activity/component.

(b) Disbursement section includes:

• designated account activity statement;

• bank statements for both the designated and operating accounts (if any);

• summary statement of designated account expenditures for contracts subject to prior review; and

• summary statement of designated account expenditures not subject to prior review.

7. The accounts/financial statements will comprise:

(a) A statement of sources and uses of funds/cash receipts and payments, which recognizes all cash receipts, cash payments and cash balances controlled by the entity; and separately identifies payments by third parties on behalf of the entity;

(b) The accounting policies adopted and explanatory notes. The explanatory notes should be presented in a systematic manner with items on the statement of cash receipts and payments being cross-referenced to any related information in the notes. Examples of this information include a summary of fixed assets by category of assets, and a summary of interim financial report withdrawal schedule, listing individual withdrawal applications; and

(c) A management assertion that World Bank funds have been expended in accordance with the intended purposes as specified in the relevant World Bank legal agreement.

Internal Controls/Internal Auditing

8. The PFMU has established internal control procedures and processes in the financial practices manual. The manual provides for the control of financial transactions by establishing routine procedures for initiation, authorization, and approval by designated personnel. These internal control procedures provide proper segregation of duties between approval, execution, accounting, and reporting functions. The PFMU has a centralized Internal Audit Unit with qualified Internal Auditors who conduct internal audit reviews of World Bank assisted projects. This unit is headed by a certified fraud examiner and will be responsible for the internal audit functions of the project. The PFMU manager will conduct periodic internal control reviews. The internal audit unit will generate and furnish internal audit reports to the World Bank forty-five days after every six months of March and September each year. In addition, each financial statement will include an annex containing an inventory of fixed assets acquired with project funds, broken down by asset classes, dates of purchase, location and cost.

External Audit Arrangements

9. Audited financial statements will be submitted to the World Bank on an annual basis within six months of the end of the Government of Liberia’s fiscal year. General Audit Commission will be expected to audit the financial statements of the project. The project will conclude the terms of references (ToRs)


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of the assignment with the external auditor six months into project effectiveness. The project financial statements, including the cash movements in the designated accounts will be audited in accordance with The International Standards of Supreme Audit Institutions and a single opinion will be issued to cover the project financial statements in accordance with the World Bank’s audit policy. The auditors’ terms of reference will be agreed with the World Bank.

10. FM Supervision plan: Consistent with the risk rating, semi-annual FM implementation support missions will be carried out at least every six months. The FM supervision missions’ objectives will include ensuring that strong financial management systems are maintained for the project at both implementing entities. The supervision will include desk reviews of interim financial reports, testing of expenditures, review of audit reports, and evaluation of the efficiency of the payment processing, internal control processes, and funds flow arrangements.

Disbursement Methods

11. The disbursement letter and the preliminary information memorandum will provide details about the disbursement methods to be utilized under the project. The following disbursement methods will be eligible:

(a) Direct payment: Under direct payment, the World Bank makes payments directly to vendors or service providers.

(b) Advances: Funds may be requested and deposited into the designated account for small procurements and operating expenses.

(c) Reimbursements: Project activities can be pre-financed and reimbursement claimed later.

(d) Payment against special commitment: an irrevocable commitment entered into by the World Bank in writing to pay such amounts for eligible expenditures, notwithstanding any subsequent suspension or cancellation to a commercial bank, based on which a letter of credit is issued by the commercial bank to the supplier or vendor.

12. As stated in the funds flow arrangements above, disbursements relating to large procurements will be made using the direct payment method. Advances will be used for small procurements and operating expenses

Project Monitoring.

13. The PFMU will not have direct interaction with the NRF which, as stipulated in the NRF Act, 2016, is governed by the MFDP. The PFMU/MFDP will maintain a separate register to track maturity dates of payments, identify payments falling due, and follow up with the MFDP and the Accountant General for timely payments.


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Table 7.1: Project Financial and Payment Monitoring

Action Date due by Responsible

1 Agree the format of Interim Financial Report with the World Bank

Completed PFMU/World Bank

2 Agree audit terms of reference Before effectiveness PFMU/World Bank

3 Open designated account Before effectiveness PFMU

4 Train on World Bank financial management issues

Before disbursement and when needed

PFMU

5 Recruit external Auditors (GAC) 4 months into implementation

PFMU

Implementation Plan

14. Based on the outcome of the financial management risk assessment, the following implementation support plan is proposed. The objective of the implementation support plan is to ensure the project maintains a satisfactory financial management system throughout the project’s life.

Table 7.2: Financial Management Implementation Plan

Activity Frequency

Desk reviews

Interim financial reports review Quarterly

Audit report review of the program Annually Review of other relevant information such as interim internal control systems reports.

Continuous as they become available

On site visits

Review of overall operation of the financial management system

Semi-annual or (Implementation Support Mission) as informed by identified risks

Monitoring of actions taken on issues highlighted in audit reports, auditors’ management letters, internal audit and other reports

As needed

Transaction reviews (if needed) As needed Capacity building support Financial management training sessions Before effectiveness and during

implementation and as and when needed.

Financial Management Risk Rating

15. The financial management arrangements meet the minimum requirements for World Bank financed operations. The financial management risk is rated “moderate”.


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ANNEX 8: Procurement Management


1. The Borrower will carry out procurement under the proposed project in accordance with the

World Bank’s “Procurement Regulations for Investment Project Financing (IPF) Borrowers” (Procurement

Regulations) dated July 2016, revised November 2017 and August 2018 under the “New Procurement

Framework, and the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed

by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006 and revised in January 2011 and as of

July 1, 2016, and other provisions stipulated in the Financing Agreements.

Institutional Arrangements for Procurement

2. Procurement under this project shall be carried out by the IIU of MPW. The institutional

arrangements for procurement build on the institution arrangements used for the previous Urban and

Rural Infrastructure Rehabilitation Project (URIRP, P113099), Rural Roads Emergency Maintenance

Project (REEMP, P156236) and the ongoing Liberia Road Asset Management Project (LIBRAMP, P125574).

3. The World Bank conducted a capacity assessment of the IIU during the period September 2016-

July 2017. The assessment found that there is satisfactory capacity at the IIU under the MPW for the

implementation of SECRAMP. The assessment also found that the IIU as a procuring entity has a history

of implementing World Bank-financed procurements including the abovementioned projects. The IIU has

a Procurement Unit headed by a qualified Procurement Specialist who is supported by two engineers, all

of whom have experience implementing World Bank-financed procurement. Nevertheless, the contract

management capacity of the IIU will be further enhanced to effectively implement the proposed project.

4. The abovementioned assessment rated the overall procurement risk Substantial, the residual risk

will become Moderate following adoption of the project mitigation measures. given the procurement

scope and associated risks identified. The main risks include (a) weak contract management resulting into

poor contract performance; and (b) insufficient knowledge and experience in appropriate application of

the World Bank Procurement Regulations for IPF Borrowers, rules and procedures particularly with

respect to the new possibilities afforded by the New Procurement Framework. The risks and mitigation

measures are further elaborated in Table 8.1 below.


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Table 8. 1. Procurement Risk Control Measures

Ministry of Public Works, Infrastructure Implementation Unit Substantial/Moderate

Risk Action Responsible Agency

Expected Completion Date

Weak contract management. Recruitment of an IE with qualifications and experience satisfactory to the Bank to strengthen the skills and expertise needed to Manage the PPP Contract.

IIU

Within three Months of Project Effectiveness

Insufficient knowledge, and experience in appropriate application of the World Bank Procurement Regulations for IPF Borrowers, rules and procedures particularly with respect to the new possibilities afforded by the New Procurement Framework.

Capacity building will be provided by the World Bank on NPF procurement.

World Bank and IIU

Throughout project implementation

The procurement procedures of this project will be reflected in the POM.

IIU will prepare a Procurement Manual, which will be part of the POM, to introduce procurement arrangements planned for this project.

IIU

Prior to Effectiveness

5. Filing and record keeping: The IIU shall continue maintaining a good record keeping system with

a logbook of the contracts with a unique numbering system. The Procurement Procedures Manual will set

out the detailed procedures for maintaining and providing readily available access to project procurement

records, in compliance with the Grant Agreement. The IIU will also continue assigning a dedicated person

to be responsible for maintaining the records.

6. The signed contracts as in the logbook shall be reflected in the commitment control system of the

IIU’s accounting system or books of accounts as commitments whose payments should be updated with

reference made to the payment voucher. This will put in place a complete record system whereby the

contracts and related payments can be corroborated.

Project Procurement Strategy for Development

7. The IIU (with support from the World Bank), has prepared their PPSD as part of preparation of the

project. The PPSD accounts for (a) a market survey and analysis of potential contractors and suppliers

available for the proposed procurement scopes; (b) the assessment of operational context; (c) the clients


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institutional capacity; and (d) a procurement-related risk analysis. Based on these assessments, the PPSD

makes recommendations on procurement arrangements under the proposed project and the associated

Procurement Plan, and addresses how procurement activities would support the achievement of the PDO

and deliver the best value for money under a risk-managed approach. The PPSD is a living document that

should be updated regularly during project implementation to provide necessary justifications for

procurement arrangements and procurement plan updates. The PPSD indicates the following

procurement scope for IDA financing, which will support the achievement of the PDO:

(a) Civil works. Rehabilitation and maintenance of the Ganta to Tappita 100 km road through

DBFOMT PPP.

(b) Goods. Office Equipment, Motor vehicles, Laboratory Diagnostic equipment, office furniture

and software for Information Management System.

(c) Consulting services. Consulting Services for the construction monitoring/supervision of Ganta

to Tappita road, Consulting services for Technical Assistance.

(d) Non-consulting Services. Project operation costs such as motor vehicles operation and

maintenance cost, maintenance of equipment, communication costs, rental expenses,

utilities expenses, consumables, supervision etc.

8. The PPSD market assessments found that: (a) there are minimum entry barriers to enter the

construction market in Liberia and the number of registered contractors has increased significantly since

2013; (b) local contractors are unlikely to bid for the project PPP given their limited capacity and

experience; and (c) international developers/contractors and financiers have shown interest to participate

in PPP contracts in Liberia. The Government decided to approach the market through an open

international competitive process starting with pre-qualification of the interested developers/contractors

before issuing a request for proposals (RFP). The project will adopt a two-envelope single-stage process

and the request for proposals will reflect an optional Best and Final Offer. The bidders whose proposals

are deemed responsive may be given an opportunity to revise their proposals to make a best and final

offer. This process is ideal for maximizing efficiency in a highly competitive context.

9. Summary of procurement arrangements. The World Bank has reviewed the outputs of the

Procurement Strategy developed by the Borrower and agrees with the proposed Procurement

Arrangements under the project. Details are provided in Section 7 of the PPSD.

10. Procurement Thresholds: The table below depicts the Thresholds and Procurement Methods to

be used under the project for now for a risk rating of Substantial:


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Table 8.2 Procurement Thresholds

Prior-review Thresholds

Thresholds for Procurement Methods

Procurement Type

Substantial Risk

(US$`000)

Works Goods, IT & Non-Consulting Services

Shortlist of National Consultants

Works 10,000 Open International

or ICB (US$'000

Open National or NCB (US$'00

0)

Request for

Quotation or

National Shopping (US$'000)

Open internation

al or ICB (US$'000)

Open National or NCB (US$'00

0)

Request for

Quotation or

National Shopping (US$'000)

Consulting

Services (US$'000

)

Engineering & Construction Supervision (US$'000)

Goods, IT & Non-

Consulting Services

2,000

≧ < ≦ ≧ < ≦ < ≦

Consultants (Firms)

1,000

5,000 5,000 200 500 500 100 100 200 Individual Consultan

ts

300

*These thresholds are for the purposes of the initial procurement plan for the first 18 months. The thresholds will be revised

periodically based on re-assessment of risks. All contracts not subject to prior review will be post-reviewed.

11. Procurement Plan: IIU has prepared a Procurement Plan for the project, based on the findings and

recommendations of the PPSD. The Procurement Plan is subject to public disclosure and will be updated

on an ongoing basis or as needed by including contracts previously awarded and to be procured. The

updates or modifications of the Procurement Plan shall be subject to the World Bank’s prior review and

‘no objection’. The World Bank shall arrange for the publication of the Procurement Plans and their

updates on the World Bank’s external website directly from STEP, while IIU will do the publication on their

project and e-mansion websites.

12. Monitoring by STEP: Through mandatory use of STEP by the borrowing agencies, the World Bank

will be able to consolidate procurement/contract data for monitoring and tracking of all procurement

transactions. Using STEP, comprehensive information of all prior and post review contracts for goods,

works, technical services, and consultants’ services awarded under the whole project will be available

automatically and systematically on a real time basis whenever required, including, but not limited to, (a)

the reference number as indicated in the Procurement Plan and a brief description of the contract; (b) the

estimated cost; (c) the procurement method; (d) time lines of the bidding process, (e) the number of

participated bidders; (f) names of rejected bidders and reasons for rejection; (g) the date of contract

award; (h) the name of the awarded supplier, contractor, or consultant; (i) the final contract value; and (j)

the contractual implementation period.

13. Publication of Procurement Information: The project will follow the World Bank’s policies on

publication of procurement information that are set forth in the World Bank’s procurement regulations.


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14. Procurement Post Review: Contracts below the abovementioned prior review thresholds shall be

subject to post review according to procedures set forth in Procurement Regulations on an annual basis

by the World Bank team. The rate of post review is initially set at 20 percent. This rate may be adjusted

periodically based on the performance of the IIU.

15. Training, Workshops, Study Tours, and Conferences: Training activities would comprise of

workshops and training, based on individual needs, as well as group requirements, on-the-job training,

and hiring of consultants for developing training materials and conducting trainings. Selection of

consultants for training services follows the requirements for selection of consultants above. All training

and workshop activities (other than consulting services) would be carried out on the basis of approved

Annual Work Plans / Training Plans that would identify the general framework of training activities for the

year, including: (i) the type of training or workshop; (ii) the personnel to be trained; (iii) the institutions

which would conduct the training and reason for selection of this particular institution; (iv) the justification

for the training, focusing on how it would lead to effective performance and implementation of the

project; (v) the duration of the proposed training; and (vi) the cost estimate of the training. Report by the

trainee(s), including completion certificate/diploma upon completion of training, shall be provided to the

Project Coordinator and will be kept as parts of the records, and will be shared with the World Bank if

required.

16. A detailed plan of the training/workshop detailing the nature of the training/workshop, number

of trainees/participants, duration, staff months, timing and estimated cost will be submitted to IDA for

review and approval prior to initiating the process. The selection methods will derive from the activity

requirement, schedule and circumstance. After the training, the beneficiaries will be requested to submit

a brief report indicating what skill have been acquired and how these skills will contribute to enhance

their performance and to attain the project objective.

17. Operational Costs: Operational costs financed by the project would be incremental expenses,

including office supplies, operation and maintenance of vehicles, maintenance of equipment,

communication, rental expenses, utilities, consumables, transport and accommodation, per diem,

supervision, and salaries of locally contracted support staff. Such services’ needs will be procured using

the procurement procedures specified in the POM accepted and approved by the World Bank.

18. Procurement Manual: Procurement arrangements, roles and responsibilities, methods and

requirements for carrying out procurement shall be elaborated in detail in the Procurement Manual which

may be a section of the POM. The POM shall be prepared by the Borrower and agreed with the World

Bank by the time of project effectiveness.


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