Georgia Secondary and Local Roads Project

“Reconciling Growth and Poverty Impact Objectives in Rural Roads Selection”

Situation in Rural Roads Sector in Georgia

• Traffic volumes a fraction of that in the early 1990s

• Extreme rural poverty (30%) linked to collapsed infrastructure

• Roads in very poor condition – 15 kmph

• High construction costs - $100k-$50k/km

• Negligible maintenance – expenditures of about $600/km – with most of it spent on the primary network

• Roads Department influenced by political and geo-political considerations in road selection.

Georgia Secondary and Local Roads ProjectLocation of the 16 Roads to be Evaluated

The Selection Problem

• Utility of standard approaches (HDM/RED) limited due to uncertainty on traffic – present poor indicator of future.

• Need to pay attention to poverty AND growth impacts.

• No real basis for weighting growth vs poverty in a multi-criteria function.

• Rather than rank projects, need to separate “good” from “not as good” projects – i.e. separate wheat from chaff.

Growth and Poverty Impact Possibilities Frontier

• Growth characterized as NPV(@12%)/$1000 invested

• Poverty impact as #Poor Served/$1000 invested

• Both indicators are better the higher their value

• Each road plotted on scatter diagram of growth vs poverty

• In the scatter plot, points furthest from the origin have high “NPV/$1000” and/or high “Poor/$1000”

• Points near the origin considered inferior to points farther away.

• Points farthest away form the “Growth and Poverty Impact Possibilities Frontier”

Georgia - Secondary and Primary Roads Project

Road sections with Zone of Influence

Expert Opinion Survey

• To address the high risk in traffic forecasts

• Four experts (2 agriculture, 1 tourism, 1 transport)

• Each road rated on a scale of 1-10 for agricultural potential and off-farm employment opportunity

• Results based on NPV were checked against ratings by the experts

• Out of 8 roads selected using NPV, 5 also emerged in the expert opinion

Road IDTotal

PopulationPopln below poverty line

Investment (million US$)

Poor served per $1000 of Investment

NPV per $1000 of

Investment

Expert Assessment of

Economic Growth

SH002 112,804 38,684 1.53 25 2,869 44SH004 39,020 13,657 1.09 13 550 38SH006 197,487 69,120 2.22 31 2,294 33SH008 117,300 38,598 1.03 37 1,938 33SH014 260,469 93,466 1.67 56 1,552 33SH019 42,767 9,248 0.79 12 1,762 42SH022 76,735 12,365 0.89 14 2,909 36SH029 167,893 41,973 1.01 42 1,090 37SH030 1,156,265 504,615 1.42 355 2,251 42SH031 1,148,176 508,934 4.99 102 1,404 53SH034 31,384 10,464 0.63 17 478 41SH042 212,156 44,430 1.93 23 778 44SH043 191,920 37,904 4.47 8 3,762 44SH055 41,476 11,946 0.48 25 1,036 36SH068 27,373 12,318 0.48 26 3,314 41SH070 32,035 12,044 0.58 21 171 39

Georgia - Secondary and Primary Roads Project

Georgia - Secondary and Local Roads Project

0

500

1000

1500

2000

2500

3000

3500

4000

0 10 20 30 40 50 60

Poor persons serverd per $1000 of Investment

NP

V p

er $

1000

of

Inve

stm

ent

SH002 SH004 SH006 SH008 SH014 SH019 SH022 SH029

SH030 SH031 SH034 SH042 SH043 SH055 SH068 SH070

SH031

SH030

102 353

SH014

SH006

SH068

SH022

SH043

SH008

SH002

Georgia - Secondary and Local Roads Project

30

35

40

45

50

55

0 10 20 30 40 50 60

Poor persons serverd per $1000 of Investment

Exp

ert

Ass

essm

ent

of

Eco

no

mic

Im

pac

t

SH002 SH004 SH006 SH008 SH014 SH019 SH022 SH029

SH030 SH031 SH034 SH042 SH043 SH055 SH068 SH070

SH031

SH030

SH014

SH008

SH006

SH068

SH022

SH043

SH008

102 353

SH002

Georgia - Secondary and Local Roads Project

0

500

1000

1500

2000

2500

3000

3500

4000

0 10 20 30 40 50 60

Poor persons serverd per $1000 of Investment

NP

V p

er $

1000

of

Inve

stm

ent

NPV/$1000 + 50 X Poor/$1000 = 500NPV/$1000 + 300 X Poor/$1000 = 3000

Participatory Input to Selection

• As a final check we visited roads in the first year program

• Conducted a meeting of local representatives at each place

• The value of this was clearly demonstrated in the case of Tianeti road