Document of The World Bank

Report No: 29375-VN

IMPLEMENTATION COMPLETION REPORT(IF-N0130)

ON A

CREDIT

IN THE AMOUNT OF SDR136.6 MILLION (US$195.6 MILLION EQUIVALENT)

TO THE

SOCIALIST REPUBLIC OF VIETNAM

FOR A

SECOND HIGHWAY REHABILITATION PROJECT

June 30, 2004

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 30, 2003)

Currency Unit = Vietnamese Dong (VND) VND 1 = US$ .0000645

US$ 1 = VND 15,497

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

AAP Already Affected PeopleAC Asphalt ConcreteBOQ Bill of QuantitiesCAS Country Assistance StrategyDCA Development Credit AgreementDMS Detailed Measurement SurveyDOSTE Department of Science Technology and EnvironmentEIA Environmental Impact AssessmentHRP1 Highway Rehabilitation ProjectHRP2 Second Highway Rehabilitation Project ICB International Competitive BiddingIDA International Development AssociationIRI International Roughness IndexIRR Internal Rate of Return JV Joint VentureMOT Ministry of TransportMOSTE Ministry of Science Technology and EnvironmentMTFP Mekong Transport and Flood Protection NCB National Competitive BiddingNPV Net Present ValueNRN National Road NetworkPAP Project Affected PeoplePIMS Project Information Management SystemPM Periodic MaintenancePMU1 Project Management Unit OneRAP Resettlement Action PlanRMC Road Construction and Management CompanyRRMU Regional Road Management UnitSAR Staff Appraisal ReportSDR Special Drawing RightsSOE State Owned EnterpriseTOR Terms of ReferenceVND Vietnamese DongVOC Vehicle Operating CostsVRA Vietnam Road Administration

Vice President: Jemal-ud-din KassumCountry Director Klaus RohlandSector Manager Jitendra N. Bajpai

Task Team Leader Maria Margarita Nunez

VIETNAMSecond Highway Rehabilitation Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 45. Major Factors Affecting Implementation and Outcome 126. Sustainability 147. Bank and Borrower Performance 158. Lessons Learned 179. Partner Comments 1910. Additional Information 27Annex 1. Key Performance Indicators/Log Frame Matrix 28Annex 2. Project Costs and Financing 29Annex 3. Economic Costs and Benefits 31Annex 4. Bank Inputs 39Annex 5. Ratings for Achievement of Objectives/Outputs of Components 42Annex 6. Ratings of Bank and Borrower Performance 43Annex 7. List of Supporting Documents 44

IBRD Map No. 27900R

Project ID: P004842 Project Name: VN-Hwy Rehab IITeam Leader: Maria Margarita Nunez TL Unit: EASTRICR Type: Core ICR Report Date: June 30, 2004

1. Project DataName: VN-Hwy Rehab II L/C/TF Number: IF-N0130

Country/Department: VIETNAM Region: East Asia and Pacific Region

Sector/subsector: Roads and highways (93%); Central government administration (4%); Sub-national government administration (2%); Other social services (1%)

Theme: Rural services and infrastructure (P)

KEY DATES Original Revised/ActualPCD: 08/19/1994 Effective: 07/02/1997 11/03/1997

Appraisal: 11/25/1996 MTR: 12/31/1999 10/02/2000Approval: 04/01/1997 Closing: 06/30/2002 06/30/2003

Borrower/Implementing Agency: Socialist Republic of Vietnam/Ministry of TransportOther Partners:

STAFF Current At AppraisalVice President: Jemal-ud-din Kassum Russell CheethamCountry Director: Klaus Rohland Javad Khalilzadeh-ShiraziSector Manager: Jitendra N. Bajpai Jayasankar ShivakumarTeam Leader at ICR: Maria Margarita Nunez Alain L. LabeauICR Primary Author: Maria Margarita Nunez

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:The Government of Vietnam's development strategy was to maintain macroeconomic stability, continue the transition to an open-market economy, improve basic infrastructure, alleviate poverty, reduce regional inequalities and preserve natural resources. International Development Association (IDA) support to the Second Highway Rehabilitation Project (HRP2) was consistent with this strategy and the World Bank's 1995 Country Assistance Strategy (CAS) of promoting sustainable development that can rapidly reduce poverty and help the Government plan and finance infrastructure. Bank assistance was to finance investments for transport, power and water infrastructure; IDA was to finance rehabilitation.

The project is a continuation of the rehabilitation of Highway 1 (which IDA supported under the Highway Rehabilitation Project - HRP1), which connects Hanoi with Ho Chi Minh City, the country's most important artery. Since the highway mainly crosses agricultural provinces were poverty rates are among the highest in the country, the improved highway would open up these provinces to industrial activities (agribusiness and light industries) and improve farmers' access to regional markets. Thus, it reflects the Government's strategy to improve the living conditions of the rural poor. Also, it will (a) introduce modern road building/maintenance and management methods; (b) re-design key sections to accommodate non-motorized transport; (c) strengthen highway management institutions; (d) launch pilot programs that involve modern road maintenance contracting and management methods; and (e) improve traffic safety and control heavy traffic.

The development objective was to increase economic efficiency and support economic/social development by improving transport infrastructure. As stated in the Development Credit Agreement (DCA), specific objectives were to (a) reduce road transport costs and promote economic development by improving national roads, in particular Highway No. 1; (b) enhance the Ministry of Transport's (MOT) efficiency in periodic maintenance of the national road network; (c) improve road traffic safety and reduce vehicle overloading; and (d) enhance MOT's institutional capacity to assess and monitor environmental impacts.

3.2 Revised Objective:The original development objective did not change during implementation.

3.3 Original Components:The project (SDR 136.3 million) consisted of the following components:

Component A. Road Reconstruction and Rehabilitation. 1. Reconstruction of the Vinh-Dong Ha section (292 km) of National Highway No. 1, and reconstruction of two major bridges at Chanh Hoa (90 m) and Quan Hau (500 m); and 2. resettlement and rehabilitation of project affected people (PAP) including those already affected people (AAP), as well as construction of facilities at resettlement sites and provision of building materials.

Component B. Periodic Maintenance of Selected Priority National Roads. This component was to launch a pilot program of systematic Periodic Maintenance (PM) on about 1050 km of selected sections of national highways by contract. Road sections were selected according to economic and other criteria. Besides meeting urgent maintenance needs, the program would introduce the regional road maintenance management system piloted under HRP1.

Component C: Improvement of Hazardous Road Sections. Certain sections of national highways were selected for improvements, based on the Vietnam Road Safety Improvement Study conducted

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under HRP1. Measures included controls for vehicle overloading, adequate road signs and structures, and traffic management facilities.

Component D: Institutional Strengthening and Capacity Building Support for PMU1. This was to strengthen the Project Management Unit One (PMU1) capacity to manage highway projects. It included an operating center, vehicles and equipment, consultant services for implementation, monitoring and evaluation of highway projects, environmental impact assessments (EIA), and staff training.

Component E: Institutional Strengthening and Capacity Building Support to VRA and the RRMUs. This included axle load weighing stations and maintenance equipment for the Vietnam Road Administration (VRA), and maintenance equipment for Regional Road Management Units (RRMUs).

Component F: Training. This aimed to improve the transport sector's training capacity through: 1. a program for domestic road training institutions; and 2. domestic and overseas staff training in contract administration, management and supervision.

Component G: Detailed Design and Engineering Studies. To prepare for a potential follow-up project with IDA financing, this component included a detailed design and engineering study of the Can Tho-Nam Can road and parts of the Dong Ha-Quang Ngai road section, as well as the detailed design and preparation of bid documents for periodic maintenance of road sections.

3.4 Revised Components:The component for Improvement of Hazardous Road Sections and the sub-component for VRA axle-load weighing stations were cancelled: The component was not implemented due to delays related to MOT's plan to use force account to perform the works--which was inconsistent with the DCA to follow National Competitive Bidding (NCB). The sub-component of civil works and equipment was not implemented because no proper legal framework for axle load enforcement existed. MOT proposed to postpone implementation of both to IDA's Mekong Transport and Flood Protection (MTFP) Credit 3448-VN: US$2.12 million were cancelled from the credit at the closing date.

The additional works did not require DCA amendments, were consistent with the original objectives of the project, were awarded after NCB and were completed before the extended credit closing date.

During the mid-term review MOT proposed incorporating additional road sections into the periodic maintenance program. From September-December 2001, after considering MOT's feasibility study, IDA approved five additional periodic maintenance works packages (sections NH6 package 5, NH6B, NH12, NH12B, and NH6 package 4), to be financed out of the cost savings from the Credit. Maintenance activities included, resealing, overlay, regravelling and minor rehabilitation. In May 2001, IDA agreed to finance additional works to protect about 10.5 km of severe flood prone sections, between Dong Ha and Quang Ngai, divided into three NCB contracts for US$3 million. IDA approved a revised feasibility study to protect flood prone sections in August 2001: 39 additional km were to be financed under the MTFP. The works involved elevating embankment, widening pavements, constructing cross drainage and pavement, and protecting masonry slope.

3.5 Quality at Entry:The project was not reviewed by the Bank's Quality Assurance Group at appraisal. The ICR rates quality at entry as satisfactory. The assessment is based on:

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Consistency of project objectives with Government's strategies, the CAS and previous Bank 1.interventions in the transport sector;Attention to prior implementing agencies’ performance and opportunity to improve capacity. 2.Several problems occurred during HRP implementation due to MOT's slow, multi-layered and centralized decision making processes. However, a team of consultants helped MOT during appraisal, eliminating some implementing difficulties and somehow enhancing PMU1's capacity;Progress in project preparation. Engineering designs were completed for rehabilitation of 3.Vinh-Dong Ha road section; draft tender documents were prepared and the invitation for contractors' pre-qualification was issued. Roads were selected for periodic maintenance; andMOT complied satisfactorily with World Bank safeguard policy guidelines for environmental and 4.resettlement activities during appraisal. It prepared, revised and approved a Resettlement Action Plan (RAP) with consultants help.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:The project improved economic efficiency and supported social development: Improved infrastructure is essential to alleviate poverty and reduce regional inequalities. At the time of the economic reform program, the Government committed to moving to a market economy which included liberalization, decentralization, expansion of internal relations and emphasis on the industrial sector. However, higher transportation demand was constrained by an inadequate road transport network, poor road conditions, and an obsolete transport fleet. For example, main highways could not handle the increased traffic, accidents and fatalities doubled since 1990 and are still rising rapidly; road foundations and surfaces could not sustain heavy truck traffic, many roads were impassable after the rainy season, many bridges needed to be rehabilitated or replaced, almost all ferries needed to be upgraded and road maintenance techniques and equipment needed to be modernized. The project focus on all-weather road reconstruction /rehabilitation and periodic maintenance was appropriate as road transport comprised the major mode of regional communication and traffic was concentrated on national roads and around major urban centers.

Overall, the project's development objectives were met. However, achievement of the objectives is rated marginally satisfactory: Traffic safety did not improve, vehicle overloading was not reduced and MOT’s capacity to manage maintenance activities and monitor EIA was not enhanced. The DCA’s specific objectives are discussed below and presented in Annex 1.

A. Reduce transport costs through improved national road infrastructure, particularly on Highway No. 1 (NH1). Conditions on the recently completed road sections have improved, reducing surface roughness. Fares increased 12% in real terms and market freight tariffs decreased by 4%. Travel times decreased an average 35% and average travel speed increased at slightly below the target at 53% for buses and 48% for trucks. Given the low average speeds before the HRP projects, improvements are tangible. Savings in terms of verifiable indicators in the Staff Appraisal Report (SAR) include:

i. Reduced vehicle operating costs (VOC) in real terms measured by road roughness. The target of less than 3.0 m/km IRI was reached. Roughness after completion of NH1 section Vinh to Dong Ha, November 2001, were an average 2.2 IRI, excluding the 16.7 km of cement concrete pavement that was not tested. Roughness measurements of January 2003 showed some increase compared with initial conditions, at an average of 2.6 IRI. Roughness of the concrete sections was 3.7 IRI.

The roughness survey for the Dong Ha to Quang Ngai periodic maintenance sections in January 2003 showed an average 2.5 IRI.

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ii. Reduced passenger tariffs between Vinh and Dong Ha. It was expected that some of the reduced operating costs, due to smoother road surfaces and decreased travel times, would be passed on to passengers and freight customers: The target was to reduce fares by at least 5% (in real terms). However, fares generally increased faster than the rate of inflation, and the hikes are similar to those on bus routes other than on NH1. For example, fares for conventional buses from Vinh to Hue and to Da Nang rose 12% and 11%, respectively.

Except for low-standard buses, their quality has greatly improved. The bus fleet was converted substantially, now operates most transport services, and is of a higher standard than in the mid-1990s. Thus, road improvements contributed to better passenger comfort and reduced trip times.

iii. Reduced freight tariffs for rice, petroleum and cement. The target was for road freight tariffs for goods in Government contracts, set by the Government Pricing Committee, to drop by at least 5%. Private sector operators are free to set their own tariffs. After improvements were completed and the standards raised for NH1 road sections (in HRP1 and HRP2), the official freight rate was reduced from VND 1,209 per ton-km in 1997 to VND 989 per ton-km in 2000, a decrease of 18%.

Market rates for freight tariffs have not shown the same decrease as official rates. In some cases, the real rate decrease was close to the 5% target or higher, but in others, it increased. Rates between Hanoi and Dong Ha have not changed in recent years, falling by about 4% in real terms. Toll stations were installed on this section, which add about VND 60 per ton-km to vehicle operating costs, which is approximately 10%-12% of freight rates between Hanoi and Vinh, and 6% between Vinh and Dong Ha, where rates per km are higher.

iv. Time saved through increased travel speeds for cars, buses and trucks between Vinh and Dong Ha. The target was to reduce travel time by bus by 10% in 2000 and to increase speed in km/hr to 65, 55 and 50 for car, bus, and truck, respectively. In 2003, travel time from Vinh to Dong Ha was an average 5.5 hours, 35% lower than in 1998. Typical bus operating speeds increased significantly, from an average of 35 km/hr to almost 53 km/hr, slightly below the target of 55 km/hr.

In 2003, average truck time from Vinh to Dong Ha was 6.3 hours, 34% lower than in 1998. Average speed was slightly lower than for buses, increasing from 30-35 km/hr to 48 km/hr. The target was basically achieved and, given the low average speed before the HRP projects, improvements were substantial. No major difference in speed was found for different size vehicles.

B. Enhance efficiency of periodic maintenance of the national road network. A survey of conditions on a sample of the national road network (NRN) showed steady improvement, overall. About 12% of the periodic maintenance budget was open to competitive bidding.

i. Reduce vehicle operating costs (VOC) in real terms measured by road roughness. The target was less than 3.0, 3.5, 4.5 m/km IRI for asphalt concrete, bituminous surface treatment and gravel surfaces, respectively. Unfortunately, comprehensive data on roughness were unavailable at credit closing. However, roughness measurements in 2001 on a sample 1,700 km of the NRN, combined with visual inspections to classify roads by condition, show a steady improvement. In 1997, 35% was good, 35 % fair and 29% bad, and in 2002, 45% was good, 35 % fair and 20% bad. Much of the improvement is probably due to the rehabilitation projects, rather than maintenance: VRA reported the maintenance budget for 2003 was only 30% - 40% of the estimated amount needed.

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ii. Number of contracts and length of tendered works increased in absolute measure and percent of total periodic maintenance (PM). The target was at least 10% of PM to be carried out through competitive tendering by 2000. Budget allocations for PM in 2002 were VND 374 billion (approximately US$24 million) for four RRMUs and four regional project implementation units under VRA. Although VND 46 billion (about US$3 million) or 12% of the PM budget was open to competitive bidding, the only companies that bid for the work were the Road Construction and Management Companies (RMC)—subsidiaries of the RRMUs. Due to a lack of information, it is difficult to know if these companies operate independently.

C. Improve road traffic safety and reduce vehicle overloading. Neither the road safety component (improvements at hazardous locations) nor the procurement of axle-load control works and equipment were implemented. Data suggest that accidents and fatalities were not reduced, and results from the 2003 weigh-in-motion surveys suggest that vehicle weights and axle overloading increased over previous years.

i. Annual number of accidents and fatalities. The target was to reduce accidents and fatalities by 20%. Data collected for sections of NH1 (within the HRP1 and HRP2 improvement areas) in 2002 showed that accidents did not decrease and the rate per number of vehicles increased. Many accidents involved motorcycles: A correlation exists between the growth in the number of motorcycles and increase in road accidents.

ii. Reduce overloading of checked vehicles and legal axle loads. The target was to reduce the number of overloaded vehicles by 5% and excess loads by 10%. Based on weigh-in-motion surveys in May 2003, it appears vehicle weights and axle loads are higher than previously. An examination of vehicles with a gross weight over 30 tons showed a significant proportion of multi-axle vehicles exceeding the limit. For other vehicle types, the percent weighing over 30 tons was higher than previously.

An analysis of vehicles with at least one axle above the 10 ton limit shows a similar situation: Axle loads were generally higher in 2003 than before. The completion of HRP1 and HRP2 may have allowed more overloading on NH1 than before, when poor surface conditions caused extensive damage to heavily loaded vehicles.

D. Enhance MOT's institutional capacity in environmental impact assessments and monitoring. While MOT prepared EIA guidelines for road projects in December 2001, it did not conduct any EIAs or produce monitoring reports.

i. EIA guidelines for road projects. The target to prepare EIA guidelines for road projects was met, as MOT completed them in December 2001.

ii. EIAs regularly conducted and monitored. Although MOT was to conduct EIAs for at least 40% of

road projects, it did none; nor did it produce monitoring reports. The Environmental Monitoring Unit was not established until April 2002, staff were not trained in environmental/social issues, did not oversee EIAs and did not monitor the environmental action plans.

4.2 Outputs by components:Component A: Road Reconstruction and Rehabilitation. (US$121.44 million, SAR; US$109.83 million, Implementation Completion Report [ICR]). This component was rated satisfactory. A field inspection after completion showed good quality construction.

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Rehabilitation of the NH1 between Vinh and Dong Ha. Civil works were performed on 292 km of NH1 between Vinh and Dong Ha, which involved rehabilitating the original alignment, a 12-meter asphalt concrete (AC) pavement, a seven-meter carriageway and 2.5 meter paved shoulders. In flood-prone areas, the road bed was raised one meter and the embankment strengthened. A cement concrete pavement of 15.8 km was built in 10 short sections in all but one flood-prone area. The roughness level immediately after rehabilitation averaged 2.3 IRI for the AC sections and 3.7 IRI for the cement concrete sections.

All four contracts were completed in 2001. However, the process of implementation was poor, design standards were modified, quantities varied, environmental performance was poor, land acquisition was delayed and several issues surfaced with resettlement and compensation of PAPs. Construction schedules were not met, which caused significant delays.

Compliance with resettlement planning and implementation. This involved resettlement and rehabilitation of project affected persons (PAP) and those already affected, including construction of resettlement facilities and provision of building materials. The Resettlement Action Plan (RAP) was consistent with Government laws and guidelines and the World Bank Operational Directive 4.30 on involuntary resettlement. It was based on 1995 socio-economic surveys, following passage of Decree No. 36/CP on traffic safety, and measurement surveys of 1996 to determine the PAPs’ losses.

Despite IDA efforts to develop PMU1 capacity to address land acquisition and resettlement issues, the project was hampered by less than adequate attention from the Resettlement Unit. When the media reported that funds were misused in Ha Tinh province, IDA required MOT to review the situation. This led to a 1999 mission which found significantly more PAPs than originally identified had received compensation, and no explanation was given for the discrepancy. IDA required that a parallel consultant survey be made of compensation funds in Ha Tinh province, along with a similar exercise for all HRP1 compensations. The surveys confirmed that funds had been mishandled.

In May 2000, PMU1 developed an action plan of remedial measures to compensate PAPs and return misused funds identified in the report. All Detailed Measurement Survey (DMS) forms were transferred from the provinces and kept in the PMU1 Hanoi office for control purposes. Discrepancies in the data were reconciled, particularly the disconnect between financial and operational data. PMU1 then prepared supporting documents for an ex-post review of expenditures for resettlement activities; it was conducted in June 2000 by the Hanoi Bank office. Ineligible expenditures were refunded to each project’s Special Account.

Overall, the project complied with resettlement procedures and the compensation program for affected households. Also, it performed satisfactorily with respect to RAP expected outputs, due to close collaboration among PMU1 authorities and Peoples’ Committees at the provincial, district and commune levels. RAP officials in the provinces rated implementation of resettlement procedures and the compensation program as satisfactory; key participants noted that the project achieved its targets and generally benefited the population in affected provinces, cities, towns, districts and communes.

Component B: Periodic Maintenance on 1,050 km of National Roads (US$60.5 million, [SAR]; US$85.99 million, [ICR]). This component is rated marginally satisfactory. Although (a) the total surpassed the 1,050 km target—1,073 were actually maintained, (b) work under ICB between Dong Ha and Quang Ngai and the NCB flood-prone sections was of good quality, and (c) average roughness was 2.5 IRI, the quality of work on sections outside NH1 is only fair, and roughness measurements for this area are not readily available. Road safety and environmental compliance was poor throughout implementation.

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Periodic maintenance under NCB. This was a program for national roads, including 70 sub-projects. National competitive bidding (NCB) was applied to 65 contracts, only three of which were carried out by private contractors—for 833 km and an estimated US$29.7 million. All contracts were implemented successfully.

Supervision consultants helped PMU1,VRA and RRMUs administer contracts, oversee works and train staff from the contractors and government agencies. Also, consultants introduced a project information management system (PIMS) for reporting purposes, and provinces were to use it to manage contracts. Although VRA interaction with consultants was limited, the latter helped identify problems, troubleshoot PMU1 implementation issues, and train local contractors and supervisors. Training was based on the needs of those involved.

Ten workshops for about 140 supervision, sub-PMU and contractor staff were held in Danang, Ho Chi Minh, Vinh and Hanoi. Topics included contract conditions, staff roles and responsibilities, quality and quantity of work, daily records and site diaries, programming and cash flow, valuation and payments, contract management, technical specifications, testing materials and reporting. On-the-job training focused on meeting immediate needs and promoting a better work environment. Consultants produced manuals on contracting procedures/administration for periodic maintenance: Contract Preparation and Supervision and Periodic Maintenance Contracts are available in English and Vietnamese. Periodic maintenance under ICB between Dong Ha-Quang Ngai. Maintenance on the Dong Ha-Quang Ngai section of NH1 was separated into four contracts and completed in 2003. These were of good quality and have performed well since completion. The average roughness level was 2.5 IRI.

The project included 230 km (non-continuous sections) of the 289km of NH1 from Dong Ha to Quang Ngai: 33 PM areas alternate with short sections of other projects, including those in flood-prone areas (see below). Sections range from under 500 meters to 48 km. Although conceived as periodic maintenance, the work also involved sub-base and base course replacement—similar to the rehabilitation on the Vinh to Dong Ha section. The general standard is a 10-meter wide AC pavement, with a 7-meter carriageway and two 1.5- meter paved shoulders.

Severe flood-prone sections under NCB. Nine sections between Dong Ha and Quang Ngai, 10.5 km long, were included shortly after the credit became effective. They were completed in the first half of 2003 and are of good quality, as reflected by an average 2.5 IRI.

The standard of work is similar to that on other sections receiving PM, except the width of AC pavement is 11 meters, and the road was raised by approximately one meter to prevent flooding.

Component C: Improvement of Hazardous Road Sections. (US$1.0 million, [SAR]; US$ 0.0 million, [ICR]). Road safety improvements, vehicle overloading controls, traffic signs and management facilities did not materialize under the project; thus, it is rated highly unsatisfactory.

The component was not implemented due to delays resulting from MOT's plan to use Force Account to perform the works—though the original plan was to use NCB procedures. The process of identifying and selecting hazardous locations was begun and a preliminary list of improvements was generated. Given the time constraints once the Force Account issue was resolved, IDA proposed carrying out the effort under the MTFP. A number of sections, of the 51 identified as hazardous, were improved by VRA with its own funds.

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Also, the lack of adequate laws to enforce axle-load controls prompted MOT/PMU1 to delay decisions on equipment specifications. Thus, the Government decided to include the weigh-control equipment and stations components under the MTFP to allow full review of the program.

Road safety on the recently rehabilitated roads and traffic management near work sites must be improved substantially. The World Bank conveyed its concerns to MOT about problems on NH1 as well as on some maintained sections: Once road conditions improved, drivers’ high speeds and generally poor behavior made the roads unsafe for all users, particularly pedestrians and two-wheel vehicles. Although road signs and markings for construction sites improved significantly during the project, little thought was given to the approach to and crossing of built-up and urban areas. Further, there are few or no highway police to control drivers’ behavior. To make matters worse, the public uses the roads improperly—for commercial and domestic activities—and has little regard for traffic. Thus, the country needs an extensive education campaign, particularly for those circulating in and near the main roads.

Component D: Institutional Strengthening and Capacity Building Support to PMU1. (US$2.01 million, [SAR]; US$1.39 million, [ICR]). The objective of strengthening PMU1 to manage highway projects was fairly well achieved. The component is rated marginally satisfactory.

Construction of PMU1’s operating center. The center—with an elevator, fire fighting system and computerized information management system—was completed in 2000. The building is 3,576 sq. meters, the land 789 sq. meters. Conveniently located downtown, it provides a good work environment.

Procurement of vehicles and office equipment. Vehicles were purchased through civil works contractors for the regional PMU1 units; office equipment was purchased in six packages and included computer hardware/software, telephone systems, and audio equipment. All have been fully utilized.

Technical support for project implementation/training. This sub-component was not implemented. No TA was approved for PMU1and staff received only on-the-job training while the project was implemented and through selective participation in the Second Program for Retraining Road Sector Professionals.

Monitoring/evaluation. Quarterly monitoring evaluation and reporting were not produced. A consultant team, selected in 2002, created the framework and procedures for reviewing performance indicators and ex-post project evaluation. The consultant completed the assignment, and the final report is a good compendium for PMU1 to evaluate/monitor implementation.

Support for environmental impact assessments (EIAs). The Environmental Unit, with a staff of two, was to have been established at PMU1 by the end of 1997; also, steps were to be taken during the design and construction of the road projects to mitigate any adverse environmental impacts. PMU1’s environmental unit was to oversee EIAs and monitor environmental action plans during construction. Further, staff were to conduct training in during the EIA studies, consistent with the Ministry of Science Technology and Environment (MOSTE) guidelines, including monitoring the mitigation measures. However, the Environmental Unit was only created in April 2002, with staff that did not have experience to conduct EIAs and do environmental monitoring, or prepare environmental reports. To assess the contractors’ mitigation measures (as required under the contract) for the construction period, the environmental team adopted the General Schedule of Mitigation Measures used for road projects. Finally, at the requirement of IDA and the Environmental team during the defects liability period, contractors took measures to mitigate adverse environmental impacts caused by construction.

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The team staff did not receive environmental training. The environmental team staff was to receive environmental training needed using the HRP2 budget allocation, or a possibly Bank-IDF grant for environmental training in road construction. But, training for the team never occurred.

Compliance with mitigation measures. A 1996 EIA was prepared before project implementation. MOSTE officials in Hanoi and the Department of Science, Technology and Environment (DOSTE) in the provinces confirmed that the project complied with EIA requirements.

Environmental issues were not given priority during construction and the project did not comply with Government and Bank EA requirements during implementation. Inadequate attention was paid to measures to mitigate adverse impacts—despite the EMP and Sub-Clause 19.1 on safety, security and protection of the environment in contract documents, as well as periodic reminders from construction supervision consultants. To improve their performance, the consultants withheld payments, suspended works, removed workers from construction sites, and advised that works would be carried out by other parties at the contractors’ cost. However, these measures had little or no effect. No monitoring reports exist to show if there was compliance with 31 mitigation measures recommended in the EIA, and environmental monitoring was not carried out after the project was completed. But based on available documents, it is clear that contractors did not satisfactorily address at least a third of the measures.

The Bank asked the construction supervision consultants to incorporate all outstanding environmental concerns (clean-up and restoration of asphalt and batching plants, construction camps, equipment sites including proper disposal of all waste materials) in the Defect Lists to be submitted to the contractors. If the latter failed to comply (to the Bank and PMU1 satisfaction) within a given period, a competent sub-contractor would be appointed to complete the work at the contractors’ expense. The Bank also recommended that PMU1 and the construction consultants delay giving the contractors the Completion of the Defect Liability Certificates in order to retain monetary leverage and pay for the site clean-up, if sub-contractors were retained to complete the work. At project completion, the contractors had complied with most of the above mitigation measures.

Overall, the project complied in a marginally satisfactory manner with the environmental procedures.

Component E: Institutional Strengthening and Capacity Building Support to VRA and the RRMUs. (US$5.2 million, [SAR]; US$3.74 million, [ICR]). This component is rated marginally satisfactory.

The axle-load subcomponent was not implemented, due to the Borrower's concern that a proper legal framework for enforcement measures did not exist. IDA asked VRA to strengthen the framework and supported the Government decision to develop the program under the MTFP credit. Acquisition of five goods packages (Highway Maintenance Equipment, Road Marking Unit, Bridge Inspection Unit, Transportation Equipment, and Survey and Inspection Equipment) further enabled VRA to respond to periodic maintenance needs. All equipment purchased under the project was utilized except that for survey and inspection which was not used and was placed in storage.

Component F: Training (US$1.0 million, [SAR]; US$ 0.75 million, [ICR]). A consultant team was to retrain road sector professionals; the component was marginally satisfactory.

Besides on-the-job training from foreign consultants on managing and supervising PM, MOT engineering and management staff and trainees from various agencies of the road sector participated in short-term training (11-week): Second program for retraining of road sector profesionals. This was only organized

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during the later part of the project. The courses were attended by staff from MOT departments, PMUs, research institutes, road construction corporations, consultant firms and supervision consultants. Training included case studies, site visits, project work and assessments: 309 individuals completed the courses, a number that was 35% fewer than the original plan. The program produced a set of training materials in CD-ROMs for dissemination.

Table 4.1 - HRP2 Second Retraining Program 2003

Course / Activity Planned ICR ActualSenior manager 75 56Middle/junior manager 100 49Highway engineer 75 64Bridge tunnel engineer 75 44Construction supervision 150 96Total 475 309

Component G: Detailed Design and Engineering Studies (US$3 million, [SAR]; US$ 0.0 million, ICR. This component was cancelled upon confirmation of PHRD grant funding for subsequent project design.

4.3 Net Present Value/Economic rate of return:The Borrower performed an economic re-evaluation of the rehabilitated roads and major PM sections. The general approach followed conventional economic appraisal methodo1ogy for road projects: It compared conditions where roads were improved to those that would most likely have materialized without the project. (See Annex 3 for current traffic levels, construction and maintenance costs, and potential benefits and evaluation per section).

Table 4.2 summarizes results for the two main projects. Values of the main components are shown in millions, discounted to base year values at 10%, with the internal rate of return (IRR) in the final column. Net present value (NPV) is the sum of all savings minus capital costs. Project sections are viable, with IRRs significantly above the 12% target. The economic re-evaluation of road components suggests the original assumptions were accurate and confirmed the justification for the investment.

Table 4.2 - Summary of Evaluation Results (Present Value at 10% in US$ million)

Capital Cost

Increase

Maint. Cost

Savings

VOC Savings

Pass. Time Savings

Flood Delay

Savings

NPV IRR (%)

Vinh-Dong Ha 47.33 3.10 52.38 35.03 5.26 48.43 21.6Dong Ha- Quang Ngai 37.35 3.99 53.73 27.40 2.70 50.48 30.0

Sensitivity analysis. This was performed to determine the impact of various inputs/assumptions in the areas with the greatest uncertainties, such as the rate of traffic growth, value of passenger time savings, and timing of overlays applied in the base case. Tests were performed with traffic growth at 12% and 4% a year, non-working passenger time and all passenger time values set at zero, and base case overlays given at the beginning of the evaluation period. The test with all passenger time valued at zero was an extreme case to show the level of return with a major decrease in benefits.

Table 4.3 lists results in terms of the IRR, together with those of the main evaluation for comparison.

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Changing traffic growth has only a limited impact on results. If all time values are set to zero, the IRRs are much reduced, as would be expected. If it is assumed that an AC overlay is given to the existing road at the beginning of the evaluation period, the IRR changes little because, although the surface would be improved initially to a standard similar to that achieved in the HRP2 works, such overlays would deteriorate more rapidly than the HRP2 surface. Thus, the “with project” case will have less roughness than the base case over the evaluation period.

Table 4.3 - Sensitivity Test Results (IRR)

MainEvaluation

Traffic Growth(12%)

Zero Value(4%)

Vinh-Dong Ha 21.6 24.1 19.2Dong Ha- Quang Ngai 30.0 33.0 26.6

4.4 Financial rate of return:Not applicable.

4.5 Institutional development impact:The institutional development impact was modest. The project exposed PMU1 and VRA staff to doing PM by contract and adopting competitive procurement processes. Knowledge and technology transfer occurred during implementation related to PM, local engineers with foreign experts supervised the PM contracts and 309 individuals (MOT staff and construction/supervision engineers) were trained in domestic courses. However, much must still be done to (a) promote environmental concepts including protection, mitigation and monitoring of measures during implementation; and (b) introduce market mechanisms into highway maintenance operations, particularly by contract, to improve the quality/efficiency.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Adverse climate conditions. In 1999, the central coast experienced heavy rains that destroyed significant parts of the transport infrastructure and caused about 600 casualties. The Vinh to Dong Ha and Dong Ha to Quang Ngai contract areas had severe flooding that heavily damaged the roads. IDA agreed to finance additional works not envisaged under the original project in order to perform extensive PM along the most affected sections. Also, the detailed designs of several flood-prone sections were revised to strengthen vulnerable sections and protect maintenance investments.

5.2 Factors generally subject to government control:Use of force account to improve hazardous sections. The project included a component to improve hazardous locations by national competitive bidding. However, in 2002, after considerable delays, the Government asked to implement it under force account (with its Road and Repair Management Enterprise). After many discussions and when the Government decided to move forward, there was little time left under the credit. Thus, it was impossible to implement the component and the unutilized proceeds were cancelled when the credit was closed. Guidance to large state-owned-enterprises. During implementation of the ICB contracts, most foreign contractors were crowded out by the SOEs’ extremely low prices; moreover, when a joint venture (JV) was formed, foreign contractors had only a management role. The SOEs suffered from chronically inadequate equipment and lack of skilled labor, which affected the quality of works. The SOEs were also committed to numerous other contracts, were unable to provide basic financial data thus it was impossible to assess their technical and financial situation. Supervision consultants complained that contractors disregarded their

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advice and followed the MOT/PMU1. Many discussions were held between the Bank and MOT/PMU1 to assess contractors’ schedules, restore performance and comply with JV arrangements.

Resettlement compensation. In June 1999, resettlement issues surfaced when it was revealed that the number of project affected persons (PAPs) had increased significantly—from 8,487 in 1996 to 11,914 in 1998. Newspaper reports on non-payment of compensation to many PAPs in Ha Tinh ultimately brought the issue to the Bank’s attention. Despite the Detailed Measurement Survey (DMS) and socio-economic surveys while the RAP for HRP2 was prepared, the number of PAPs in Ha Tinh continued to increase during implementation. This was partly caused by design changes during implementation. However, it was shown that commune authorities failed to adequately implement the compensation policy.

Database discrepancies were reconciled, particularly the disconnect between financial and operational data. PMU1 prepared all supporting documents for an ex-post review of the statement of expenditures with respect to financing resettlement activities. DMS forms were transferred from the provinces and kept in Hanoi’s PMU1 offices for control purposes. With support from a consultant, PMU1 reviewed the data in June 2000 and a Resettlement Remedial Action Plan was developed. Accounts were reconciled and VND 15,663,743,887 were refunded to the credit.

Compensation issues were eventually resolved in a manner satisfactory to IDA, and implementation continued after initial delays.

Delays in TA and training. Institutional strengthening activities generally started late, due to prolonged discussions and lengthy MOT internal approval processes. TA and training for implementation and environmental monitoring/reporting were not performed and the second program for retraining was reduced in scope due to time constraints.

5.3 Factors generally subject to implementing agency control:Environmental monitoring/reporting and training. Contractors and supervision engineers did not pay enough attention to the project’s environmental aspects. Local practices and low bidding prices made implementation difficult. Although specific requirements on environmental aspects and their associated costs were listed in the bidding/contract documents, and monitoring/reporting responsibilities were included in the supervision engineer’s TOR, environmental monitoring reports were never submitted.

While capacity was to be enhanced, and an environmental unit was established for monitoring purposes, team members did not benefit from environmental training. IDA requested PMU1 to start the necessary environmental training in road projects, but, training for the environmental team did not materialize and capacity remains weak.

Extensive contract variation. Major design changes to the PM contracts, including the flood-prone sections of NH-1, were initiated immediately after contracts were awarded and this adversely affected contract prices and the specified completion period. A weak original design was the main cause of cost increases, as occurred with the PM contract, where variation orders were issued for 62 of 69 contracts and up to 139% of contract value for various appropriate reasons.

PM contracts between Dong Ha and Quang Ngai increased in value by an average 62%. The increments were caused by a review of pavement design and after the unusual rainfall of 1999 and urban road section improvements: Increments on the design were justified by changes in pavement thickness to offer greater support to traffic loads. On the urban roads, increments were also justified since the sections were widened to accommodate the various users. Supervision review of the flood-prone sections and MOT significant

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changes contributed to an increase of about 40% in contract values from the original BOQ.

Financial management. The ability of PMU1 to access information on implementation progress and financial information was poor. The Bank's team highlights a major concern in this regard with PMU1’s shortcomings to provide basic financial data on the project financial situation throughout project duration. The final phase of the project took PMU1 with about US$16 million of unprocessed contractual payments to be submitted for disbursement in a short time, for no other reason than slow processing time.

5.4 Costs and financing:At appraisal, the project cost was estimated at US$236.7 million (including contingencies of US$42.5 million), of which US$195.6 million was to be financed by IDA. The total actual cost is estimated at US$201.7, IDA financed US$173 and US$6.8 were cancelled. Civil works for reconstruction and rehabilitation of NH1 from Vinh to Dong Ha, including land acquisition and resettlement, were estimated at US$148.3million at appraisal, while the actual cost was about US$109.8 million -- project savings of about 5%. Periodic maintenance was estimated at US$74.2 million, and actual costs were estimated at US$86.0 million – an increase of about 16%, because of substantial increases and expansion of severe flood sections (see section 5.3). Annex 2 summarizes project cost by item.

6. Sustainability

6.1 Rationale for sustainability rating:The project will most likely be sustainable and enhanced by follow-up IDA assistance to the sector, including the ongoing Mekong Transport and Flood Protection Project (MTFP - Cr. 3448), the Road Network Improvement Project (RNIP - Cr. 3843), and the proposed Vietnam Road Safety project, as well as other donors' programs. The project is expected to maintain the achievements related to the NH1 improvements and selected sections of national roads, as all Government levels have demonstrated commitment to improvements of the national road network.

Although MOT carried out 99% of the latest project components, the aspects that were cancelled could have generated even greater returns, since they would have expanded the Ministry’s and agencies’ capacity to preserve the economic impact of assets and reduce traffic accidents: Unfortunately, the project did not improve the implementing agency and VRA management capacity. The VRA and regional units acquired equipment to plan, manage and perform road maintenance activities; but, MOT’s bussiness process for road maintenance was not developed and the road and bridge inspection equipment acquired (under the project) was not utilized. Also, routine and periodic road maintenance is still under-funded. Substantial dialogue is underway to address maintenance issues, and the sector portfolio and pipeline are focused on road maintenance and safety.

6.2 Transition arrangement to regular operations:The project’s civil works were properly performed, are fully operational and assumed by VRA. The project provided a pilot experience—introducing competitive bidding for road improvements and PM. Implementing units began to appreciate the benefits of the competitive approach in terms of shorter construction periods. However, local private companies were not encouraged to participate and most PM contracts were awarded to SOEs of the sub-regional units known as road construction and management companies. MOT plans to expand the road construction industry and bring the SOEs into the new contracting environment.

The project supported institutional capacity building for staff at the central and sub-PMU levels, as well as for supervisors and contractors. Still, VRA’s capacity to manage road maintenance must be further strengthened. Problems include VRA’s lack of planning/programming abilities and of a PM framework,

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and its unwillingness to outsource to local companies and gain experience with modern maintenance practices.

7. Bank and Borrower Performance

Bank7.1 Lending:IDA's performance in the preparation stage was marginally satisfactory.

During identification, the task team ensured that development objectives and project scope were consistent with the Government's sectoral priorities and IDA's assistance strategy. The project preparation team complied with all relevant safeguard policies. The economic evaluation correctly assessed the project's viability for the major works. However, though monitoring indicators were identified at appraisal, baseline data were not established. The main risks, again correctly identified, were: (a) inadequate experience in using IDA procedures such as those for procurement, disbursements and audits, which could delay project implementation; (b) lack of adequate counterpart funds; and (c) inexperience with and changes in resettlement policies and practices. For other risks related to institutional development which were applicable and only identified later --such as the use of the regional road maintenance management system, validation of the private sector participation, staffing, training and funding-- IDA could have been more engaged.

IDA’s projects, as well as those of other ODA donors, are managed by PMUs. However, the implementation functions, including those related to contracts, environmental and resettlement issues, financial management and project monitoring/reporting were not consolidated within PMU1, given that understaffing and under-funding was a continuous problem. Implementing units are supposed to function, with consultants’ help, until all project-related tasks are incorporated into the clients' line institutions. At the time of project design, there was an opportunity to seek long-term solutions to MOT’s capacity for implementation, such as mainstreaming the project into its regular functions.

Assessments of VRA's capacity to benefit from the pilot experience for PM, as well as to comprehend the force account issue, and the adequacy of the legal framework for axle load control, were overly optimistic.

SOEs were allowed to participate in the bidding process and awarded IDA-financed ICB and NCB contracts for civil works. While the prices they proposed were low, they usually had inadequate equipment and funds, as well as unskilled labor, which resulted in low-quality work, cost hikes and delays. IDA could have identified appropriate incentives for MOT to restructure the SOEs and thus produce a more level playing field for the private sector; also, it could have engaged the Government in a reform program that would have facilitated gradual divestiture, modernization and timely assessment of the SOEs’ technical and financial capacities.

7.2 Supervision:The performance of IDA staff during supervision is rated satisfactory. IDA conducted 10 supervision missions between July 1998 and June 2003 which were supported with continuous assistance from the Bank’s Hanoi office. As with the HRP1, the civil works were supervised by international consultants who were often unable to improve the pace of project delivery. And, as was the case with the on-site engineers, IDA’s supervision missions had problems improving poor performance. This limited effectiveness and raised supervision costs.

The supervision team continually tried to improve PMU1's ability to handle land acquisition, resettlement and environmental issues. Due to PMU1’s shortcomings, the team monitored PMU1 and the consultants,

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who were addressing resettlement and environmental concerns in order to safeguard compliance. Work at completion is rated satisfactory.

7.3 Overall Bank performance:Overall, IDA performance is rated satisfactory. HRP2 continued IDA’s previous involvement in the transport sector, and was identified and implemented while HRP1 was under way. IDA has been flexible when dealing with the changes in project scope, such as the addition of the severe flood-prone sections, and to the Borrower’s request to extend the credit by one year.

Borrower7.4 Preparation:The Borrower’s performance during preparation was satisfactory. It was led by MOT staff, and the VRA and PMU teams were committed to the project. Technical reports and proposals, of professional quality, correctly identified key issues following the advice from external consultants.

7.5 Government implementation performance:The Government’s implementation performance was marginally satisfactory. MOT was responsible for quality during implementation and actively resolved problems. However, VRA showed little commitment: It did not get involved nor provide information on traffic, maintenance activities and conditions on national roads with which to monitor the project. A key problem was VRA's position on the improvements at hazardous locations and the load-control works and equipment sub-component. This negatively affected the project outcomes on traffic safety and the vehicle overloading.

PM on national roads other than NH1 was of fair quality, more staff would have increased quality of outputs. Poor quality was caused by too little attention to testing materials and quality control on many road sections. Higher standards should have been required of the supervision staff and contractors, and construction should have been constantly checked to ensure it conformed with agreed standards. The site laboratories were not used regularly to confirm continued compliance.

7.6 Implementing Agency:The project implementation agency’s performance was marginally satisfactory. PMU1 carried out the major civil works, though not in the timeframe and budget. The main contracts were continually delayed in the project’s first phase and variation orders increased the costs of the PM.

In August 1999, IDA initially rated project implementation progress, procurement schedules and resettlement unsatisfactory, due to (a) project's performance, (b) pending issues in the design and feasibility studies of the flood-prone sections and PM and (c) PMU1’s shortcomings to handle land acquisition and resettlement issues. However, by the end of 1999, after a Bank team assessed the situation—based on quarterly outputs that restored performance and improved resettlement activities—it changed the rating to satisfactory. After this, conditions improved slightly on the main contracts, due to extra resources that were better managed. Performance of the other components was similarly fair throughout the project.

Failure to properly staff and train members of the Environmental Unit had a major negative effect on implementation. PMU1’s environmental team was not created until mid-2002 and its members had no experience conducting EIA studies, monitoring the environment or preparing environmental reports. Also, they were not trained in environmental issues.

Environmental performance was not a priority during construction and implementation generally did not comply with Government or Bank EA requirements: No monitoring records or reports exist assessing

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compliance against the mitigation measures recommended in the EIA report, and the environment was not monitored after the project was completed. A quick review at completion performed by PMU1, showed that contractors had complied with most of the required mitigation measures.

Overall, the project was marginally satisfactory in its compliance with environmental procedures.

7.7 Overall Borrower performance:Borrower and MOT performance is rated satisfactory. MOT complied substantially with the credit’s conditions and project agreements. IDA’s requirements were followed, with the exception the use of IDA fund for ineligible resettlement compensation expenses and carry out the project in accordance with implementation program, and some reporting: semi-annual monitoring and annual expenditure program for the road sector.

8. Lessons Learned

Institutional capacity building ownership. The project aimed at enhancing institutional capacity of the recipient agency in several competencies; road maintenance, implementation of highway projects, traffic management and in road transport sector training system. Even though these activities were an integral part of the project and the Credit Agreement, MOT was reticent in approving technical assistance, only a few of the activities were approved and implemented, and training only started during later part of the project. Thus, institutional capacity building was not achieved as planned. The continued Bank support to the transport sector capacity building should take place only after careful consideration and discussion with the agencies involved. Preparation of the institutional capacity components should be well advanced during project preparation, including definition of clear performance indicators, a set of intermediate results linked to with project outcomes, and emphasis to obtaining clear signs of ownership from the client.

Proper policies and business procedures for road maintenance management are needed. MOT needs to improve its ability to plan, budget and monitor maintenance activities to facilitate sustainable preservation and improve access for road users. Asset management activities, related to road condition surveys, and traffic safety and heavy loading data collection, are seldom performed by VRA resulting in the lack of a proper framework for road maintenance planning, prioritization and funding. MOT should take into account their Ten-year Strategic Maintenance Plan, when preparing annual work programs. Finally, monitoring implementation of annual work programs and regular reporting on the road network condition provide critical feed back for adjusting road maintenance programs.

The role of the Supervision Engineer should be strengthened. This was the first IDA-funded project where National contractors were engaged under standard conditions of contracts, (before contracts were performed by force account or direct contracting). During execution of the periodic maintenance civil works a large variation in effectiveness of the supervision and quality control. The Engineers were not exercising their authority as provided in the contract. It was found that in those cases where adequate testing was carried out, the finished work was generally of better quality. Roles should have been clarified to all parties, and duties and responsibilities should have been formally detailed. It will take further experience and training by all parties to understand the implications of the conditions of contracts. Further training is recommended for the benefit of future programs .

Design and Construction standards should be consistent with the project objective. During project design, appropriate standards were adopted for road rehabilitation and maintenance. The candidate roads were selected in accordance with economic and safeguards criteria, however, soon after rehabilitation or periodic maintenance was completed, MOT and the provinces decided to widen several road sections:

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agreements on selection of standards are not applied. VRA's planning and programming processes for road maintenance, should be further enhanced with capacity building and standards for maintenance works. The adoption of the standards should be a prerequisite for any future road maintenance program.

Due diligence on environmental and social inputs improve project implementation. A mechanism to monitor and evaluate the environmental impact at project-design phase was established, however, environmental monitoring and reporting was not implemented, despite repeated requests from IDA's project team. Capacity building activities including training of PMU1's staff responsible for environmental issues was not approved by MOT. A strategic framework under which the environmental issues could have been addressed was missing. The framework should have been consistent with internationally recognized practices for design, implementation, and operation of road projects. Future lending infrastructure projects in Vietnam should have independent environmental and resettlement Monitoring.

Continued focus on the Government’s program of SOE equitisation program is needed. The Government has slowly been restructuring and privatizing SOEs for nearly a decade. After some initial difficulties, MOT’s equitised SOEs have shown improvement in operational and financial performance, however, there remain a large number of SOEs to which reform has not been applied thus creating an environment with considerable state intervention which hinders competition and lack access to sound management practices. The equitisation process could have continued through this project with a programmatic approach that would have created the right incentives for MOT's innovation, supporting some successful case models for future application, focusing on equisitation of profitable enterprises and extending the reform to large SOEs.

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9. Partner Comments

(a) Borrower/implementing agency:The implementing agency submitted the Project Monitoring and Evaluation Report and a set of tables with information relevant to the project outputs, to the Bank in August 7, 2003. The full report is available in the project files and an unedited summary is presented here.

1. Achievement of Objectives

Vinh - Dong Ha Rehabilitation Project. The HRP 2 civil work on the 292 km Vinh - Dong Ha section of NH1 consists of rehabilitation on the original alignment as a 12 metre asphaltic concrete (AC) pavement, consisting of a 7 metre carriageway plus 2.5 metre paved shoulders. In areas subject to flooding the road bed was typically raised by 1 metre and the embankment strengthened as part of the rehabilitation. A cement concrete pavement was provided in ten short sections with a total length of 16.7 km, all but one in flood prone areas. The roughness level immediately after rehabilitation averaged IRI 2.3 for the AC sections and 3.7 for the cement concrete sections.

Dong Ha - Quang Ngai Periodic Maintenance Project. A total of 230 km of the 289km of NH1 from km 756 at Dong Ha to km 1045 in Quang Ngai Province is included in the HRP 2 Periodic Maintenance Project. These works are not in continuous sections. There are a total of 33 separate periodic maintenance sections that alternate with short sections of other projects, including those of the HRP 2 Severely Flood Prone Sections discussed below. Individual sections range in length from 48 km to less than 500 metres.

Although designated as periodic maintenance, the work undertaken was more substantial than the usual concept of periodic maintenance, involving the sub-base and base courses. It is of a similar standard to the rehabilitation carried out on the Vinh to Dong Ha section, except that the overall pavement width is less. The general standard is a 10 metre wide AC pavement, consisting of a 7 metre carriageway and two 1.5 metre paved shoulders. The average roughness level after implementation was IRI 2.5.

Dong Ha - Quang Ngai Severely Flood Prone Sections Project. Nine sections of flood prone road between Dong Ha and Quang Ngai, with a total length of 10.5 km were included in the HRP 2 Project. These works were completed in the first half of 2003. The standard of work is similar to that of the periodic maintenance project sections, except that the total width of the AC pavement is 11 metres, and the road has been raised by approximately 1 metre to prevent flooding of the road, except by floods occurring at more than 10-year intervals. The average roughness level of those sections completed by the time the surveys were carried out was IRI 2.5.

Periodic Maintenance of Selected Priority National Roads. Seventy sections of roads nationwide with a total length of 870 km were subjected to periodic maintenance by contract. The description of the contract packages is included in Table C.1 attached.

Improvement of Hazardous Locations. This component was cancelled.

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Institutional Strengthening and Capacity Building Support to PMU1. The operating centre was built and is functioning properly equipped with electricity, elevator and fire fighting system. The vehicles and office equipment was procured in six packages which included computer hardware, software, telephones, conference audio systems and other office equipment. A consultant firm was selected to produce the project monitoring and evaluations study and the environmental and social assessment.

Support to VRA and RRMUs. The maintenance equipment was procured in five packages, which included highway maintenance, bridge inspection, transport road marking and survey and inspection equipment. The Axle Load Weight Stations sub-component was cancelled.

Training. A second program for retraining of roads sector professionals was conducted was delivered for 309 trainees of various agencies of road sector. The courses were in senior management, junior management, and bridge and tunnel, construction supervision and highways engineer.

2. Overview of Construction Standards

The following brief comments are provided as an overview of the construction of the roads sections evaluated in the study. Surface roughness, measured in terms of the International Roughness Index (IRI), is among the most important inputs for the economic analysis of road projects. Differences between IRI levels with and without projects are a major determinant of the level of benefits of road rehabilitation and maintenance projects.

Vinh - Dong Ha Rehabilitation ProjectThe HRP 2 work on the Vinh - Dong Ha section of NH1 consists of rehabilitation on the original alignment as a 12 metre asphaltic concrete (AC) pavement. The average roughness level measured in November 2001 (just after road completion) was IRI 2.2. This level of roughness for a recently constructed highway is reasonable. For the roughness level to be improved to higher standards then the construction of the base and AC would need improved level control. The pavement has performed for a reasonable period of time and there are no indications that provided reasonable maintenance is provided that the intended design life will be achieved.

A cement concrete pavement was provided in ten short sections with a total length of 16.7 km. The average roughness level measured in July 2002 (within one year of project completion) was IRI 3.7. This is very rough for a recently constructed concrete pavement. The work was carried out using a special concrete paving machine that is known to be able to produce high quality concrete finishes. However, it is important that the rate of concrete supply is high to ensure that the machine can run continuously without stopping and starting. It was also noted that a number of joints have been repaired indicating that the attention to the joints was probably lacking. For example the rigidity and alignment of the dowels is important to ensure free movement during shrinkage of the concrete. For short lengths of concrete pavement the most practical method of construction is by hand rather than by machine. The rate of concrete supply and the attention to level and quality of the formwork should ensure that the hand method could achieve the desired finish of concrete pavement.

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Dong Ha - Quang Ngai Periodic Maintenance ProjectA total of 230 km of of NH1 from km 756 at Dong Ha to km 1045 in Quang Ngai Province was included in the HRP 2 Periodic Maintenance Project. The average roughness level measured in January 2003 (just after completion) was IRI 2.5. This average level of roughness for a recently constructed highway is fair. It is likely that the road base was constructed using a grader and the AC was applied to thickness control rather than level control. The road was constructed in 33 separate sections and this method of construction is considered reasonable. It was noticed from site inspections that the pavement has shown some signs of asphalt fatigue. It is also noted that the work was still under defect period at the time and areas were being repaired. It is recommended that the work be checked carefully before acceptance.

3. Economic Rate of Return

Basic EvaluationThe results of the economic evaluation are shown in Table E.1 summarized for the two main projects, as $ million, and discounted to base year values at 10%. All three projects are shown to be clearly viable, with IRRs significantly above the target rate of 12%.

Table E.1: Summary of Evaluation Results (Present Value at 10% in $mill)

Capital Cost

Increase

Maint. Cost

Saving

VOC Savings

Pass. Time

Savings

Flood Delay

Savings

NPV IRR (%)

Vinh-Dong Ha 47.33 3.10 52.38 35.03 5.26 48.43 21.6Dong Ha- Quang Ngai 37.35 3.99 53.73 27.40 2.70 50.48 30.0

The Vinh - Dong Ha rehabilitation project was evaluated as a series of 15 separate road sections, each representing a combination of pre-project surface roughness, traffic level, and project pavement type. All the sections produced an IRR above 12%.

High rates of return for the cement concrete sections are the result of allocating the benefits of removing flooding delays to those sections. Without these additional benefits, the higher capital costs and higher levels of surface roughness after project implementation resulting in rates of return much lower than the AC section with the same traffic level. This suggests that, although the costs of preventing flooding are justified, the cement concrete pavement cannot be justified in comparison with AC.

The Dong Ha - Quang Ngai periodic maintenance and flood prone sections have been evaluated by section in a similar way to the Vinh - Dong Ha project. Lower traffic levels and high costs per km for the road sections from Dong Ha south to the Hai Van Pass result in much lower rates of return than for the areas to the south of Da Nang, but they are above 12%.

The IRR for the Hai Van Pass section was only 1.2%, reflecting the diversion of a significant part of the current traffic flow away from the section in 2005, following completion of the ongoing tunnel project. A secondary reason is the lower benefit achieved on this section per vehicle-km, because the high degree of gradient and curvature reduces speeds, and so does not enable the usual level of VOC and travel time benefits from improved surface condition to be achieved.

The IRR for the Da Nang City section is very high, which reflects the high traffic level and the improvement to four-lane standard, overstates the true rate of return. This is because there were capital costs associated with the section in addition to those funded by the HRP 2 project. These have not yet been

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determined, and would reduce the IRR if included in the evaluation.

The Dong Ha - Quang Ngai Flood Prone sections IRRs are all relatively high because the additional benefits of removing delays from flooding have been allocated to these sections.

Sensitivity Tests. The IRRs of at least 20% indicate a significant margin. That is, they are likely to be viable even if some of the input values or analysis applied have over-estimated the benefits. Sensitivity tests have been carried out to show the impact of future traffic growth at 12% and 4% per year, non-working passenger time and all passenger time values set at zero, and base case overlays given at the beginning of the evaluation period. The results of the sensitivity tests are shown in Table E.2. As can be seen, changing traffic growth has only a limited impact on the results.

Table E.2: Sensitivity Test Results (IRR)

MainEvaluation

Traffic Growth(12%)

Zero Value(4%)

Vinh-Dong Ha 21.6 24.1 19.2Dong Ha- Quang Ngai 30.0 33.0 26.6

4. Major Factors Affecting Implementation and Outcome

Vinh-Dong Ha Section

A. Compliance with Environmental Assessment and Monitoring Requirements. The Vinh-Dong Ha project has generally complied with the environmental assessment requirements of the Government of Vietnam and the World Bank. An EIA Report was prepared in March 1996 prior to project implementation. Key officials of MOSTE in Hanoi and DOSTE in the provinces of Ha Tinh, Quang Binh and Quang Tri have also confirmed that this project was in compliance with environmental assessment requirements.

However, environmental performance was not given priority during the construction period. The contractors’ compliance with measures to mitigate the adverse environmental impacts has been unsatisfactory. The Consultants learnt that the contractors were not motivated in addressing and mitigating the construction impacts despite the inclusion of the EMP and Sub-Clause 19.1 on safety, security and the protection of the environment in the contract documents, as well as periodic reminders from the construction supervision consultants (SMEC and Roughton International). In order to improve their performance, the construction supervision consultants resorted to withholding of payments, suspension of works, removal of workers from construction sites, and advising that works would be undertaken by other parties at the contractors’ cost. However, these measures had little or no impact on the contractors’ performance.

There are no monitoring records and reports to show the detailed compliance assessment of each of the 31 mitigation measures recommended in the EIA report. However, based on available documents, the contractors have not satisfactorily addressed the following:

• Control dust generated from non-surfaced road sections and from the operation of quarry and batching plants;

• Proper disposal of waste soils from excavation of foundations for slope protection works at various sections of the road;

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• Proper disposal of waste materials from bridge construction and rehabilitation works;• Full provision of guardrails and road signs at school, market and other strategic locations of

the road section;• Rehabilitation and clean-up of asphalt plants, batching plants, construction camps and

equipment maintenance sites;• Replanting of grasses/shrubs/bushes to protect and promote the establishment of vegetation to

control soil erosion in the sand dune areas;• Control roadside development works that affected pavement and roadside drainage;• Protection and maintenance of water flow in irrigation channels; and• Maintenance of traffic control and safety management throughout the construction period.

The World Bank requested the construction supervision consultants to incorporate all outstanding environmental concerns (clean-up and restoration of asphalt and batching plants, construction camps, equipment sites including proper disposal of all waste materials from the construction sites) in the Defect Lists that would be issued to the contractors. Should the contractors fail to comply with this requirement to the satisfaction of the World Bank and PMU.1 within a given timeframe, a competent sub-contractor would be appointed to complete the work at the expense of the contractors. The World Bank has also recommended that PMU.1 and construction supervision consultants defer the issuance of the Completion of the Defect Liability Certificates to the contractors in order to retain monetary leverage and to pay for the site clean-up and restoration in the event that sub-contractors would be retained to complete the work.

During the interviews, the DOSTE officials have indicated that environmental monitoring was not carried after the completion of the project.

B. Compliance with Resettlement Planning and Implementation. A RAP was prepared for this project consistent with all relevant laws and guidelines of the Government of Vietnam and the World Bank Operational Directive 4.30 on involuntary resettlement. The RAP was based on socio-economic surveys in April and November 1995 following the enforcement of Decree No. 36/CP on traffic safety, and the outcome of the detailed measurement surveys undertaken from June to August 1996 to determine the accurate losses of project affected persons (PAPs).

As indicated in the RAP, there are 8,487 households (37,764 persons) that will be affected by the project. Of this total, 2,327 households (11,056 persons) will suffer impacts due to re-organization or relocation of structures; 1,571 households (6,713 persons) will be affected by acquisition of residential land; and 4,589 households (19,995 persons) will be affected by agricultural and forestry land acquisition. It should be noted, however, that based on the independent monitoring conducted by HGRC, the total number of households affected by the project increased significantly from 8,487 in 1996 to 11,914 in 1998. This increase reflected the results of the subsequent surveys conducted by PMU.1 and the local resettlement authorities.

In 2001, a total of 19,353 households were afected by the project. Of this 13,562 households had land affected, 5,791 households had structures affected. There were 33 public facilities affected by the project.

Consultations with the PAPs were undertaken during the preparation and implementation of the RAP. There were instances where PAPs had complaints or grievances about inaccurate estimates of the extent and compensation rates of affected or displaced assets. However, these complaints and grievances were discussed and resolved amicably by the concerned parties.

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Based on HGRC reports on resettlement and rehabilitation assistance monitoring, resettlement activities in Quang Tri and Quang Binh provinces were carried out effectively and completed earlier than the expected schedules. There were delays in Ha Tinh province due to some inconsistencies in guidance and instructions from authorities at the various levels, and failure to quickly resolve concerns of some PAPs.

Overall, the Consultants believe that this project has complied satisfactorily with the resettlement procedures and compensation programme for the affected households. Likewise, the project has also achieved satisfactorily the expected outputs of the RAP. This was made possible through the close collaboration and coordination among the concerned authorities of PMU.1 and the peoples’ committees at the provincial, district and commune levels. Key officials of the RAP departments in the provinces of Ha Tinh, Quang Binh and Quang Tri as well the World Bank office in Hanoi have also rated the implementation of resettlement procedures and compensation programme for this project as being satisfactory.

C. Impacts of the Road Rehabilitation Project. The overall impact of the Vinh-Dong Ha rehabilitation project has been positive and its intended objectives have been met. All key informants have also affirmed that this project has achieved its targets and has brought about mostly beneficial impacts to people in the affected provinces, cities, towns, districts and communes. When asked to rate their current income level, 81% of the total respondents acknowledged that they have a better level of income now than before 1996. The remaining 19% indicated that there was no change over the last six years. It should be noted though that 46% of the total respondents had also mentioned negative impacts. These were increased noise from traffic (33%) and increased incidence of road accidents (13%).

Dong Ha-Quang Ngai Section

A. Compliance with Environmental Assessment and Monitoring Requirements. This HRP2 road section has complied with the environmental assessment requirements. The DOSTE officials in Quang Tri, Thua Thien Hue and Quang Ngai have also confirmed that an EIA was carried out before the project was implemented.

Similar to Vinh-Dong Ha, the environmental performance during the construction period was poor. The contractors’ compliance with environmental protection measures is also assessed as unsatisfactory despite the inclusion of the EMP and Sub-Clause 19.1 on safety, security and the protection of the environment in the contract documents. The construction supervision consultants (Hyder Consulting Limited, et al) have been requested to monitor contractors’ compliance with mitigation measures through inclusion of environmental and safety measures in their monthly progress reports but this was not given due consideration. The World Bank had requested the construction supervision consultants to incorporate all outstanding environmental concerns in the Defect Lists that was issued to the contractors. Based on available documents, the contractors have not satisfactorily addressed the following:

• Control dust generated from non-surfaced road sections and from the operation of aggregate crushing and concrete-mixing plants;

• Provision of proper canvas for the contractors’ lorries transporting soil, aggregate and asphalt to work areas;

• Proper disposal of waste soils from excavation of foundations for slope protection works at various sections of the road;

• Full provision of guardrails and road signs at school, market and other strategic locations of the

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road;• Rehabilitation and clean-up of asphalt mixing plants, aggregate crushing plants, construction

camps and equipment maintenance sites;• Maintenance of water flow during culvert construction works; and• Maintenance of traffic control and safety management throughout the construction period.

The DOSTE officials have also indicated during the interviews that there was no environmental monitoring implemented for those road sections that have already been completed.

B. Compliance with Resettlement Planning and Implementation. This project involved periodic road maintenance and improvement works in 10 flood-prone sections. There were no resettlement activities undertaken for this road section. However, there were households whose structures, trees and crops, homestead and agricultural land have been affected by the road improvement works in the 10 flood-prone areas. A RAP was also prepared based on detailed measurement surveys conducted by PMU.1 and the local resettlement committees.

A total of 515 households living along the 10 flood-prone areas in the provinces of Quang Ngai, Thua Thien Hue and Quang Tri were affected by the project. Of this total, 264 households had structures and homestead land affected, while the remaining 251 households had their agricultural land and trees on land affected.

The Consultants believe that this project has complied satisfactorily in the implementation of the compensation programme for the affected households. This was made possible through the joint collaboration and close coordination of PMU.1 and the resettlement committees at the provincial, district and commune levels.

Consultations with the affected households were conducted during the implementation of the project. There were also instances where affected households had complaints or grievances about the legality of classification as affected households (as in the case in Phong Dien district), as well as inaccurate estimates of the extent and compensation rates of affected or displaced assets. However, these complaints and grievances were discussed and resolved by the affected households and the local authorities.

Based on HGRC monitoring reports, most of the affected households in the 10 flood-prone sections were satisfied with the compensation provided by the project. It was learnt that the compensation prices for homestead land as well as trees and agricultural crops in all flood-prone sections were generally consistent with prevailing market prices. As for the affected structures, compensation price was assessed as being 1.2 to 1.5 times higher than their real values. It was reported though that there was a need to regulate the compensation price for agricultural land in Thua Thien Hue province to be comparable with the other flood-prone areas of HRP2.

Key officials of the RAP departments in Quang Tri, Thua Thien Hue and Quang Ngai have also rated the implementation of the compensation programme for affected households in their areas of jurisdiction as being satisfactory.

C. Impacts of the Road Rehabilitation Project. Overall, the periodic maintenance and improvement works for this road package have achieved positive impacts and the project objectives have been met. All key officials of the RAP departments and DOSTE offices in the provinces of Quang Tri, Thua Thien Hue and Quang Ngai have also assessed that this project has achieved its targets and has brought about mostly

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beneficial impacts to people in the affected areas. When asked to assess their current income level, two-thirds (66%) of the total respondents declared that they have a better income now compared to six years ago, 32% stated that there was no change, and the remaining 2% had no response. There were 38 respondents (39%) who claimed that there were also negative effects. These were increased noise from traffic (33%) and increased incidence of road accidents (6%).

Recommendations

Based on the results and findings, and in order to further improve performance in future road projects, the following actions are recommended:

Environmental Aspects

• Strengthen capacity in construction supervision of environmental matters and concerns. There is an urgent need for the Environmental Team of PMU.1 to undergo environmental training, such as carrying out EIA studies, monitoring implementation of mitigation measures, and preparation of environmental reports;

• Incorporate and strictly enforce Environmental Management Plans in contracts for contractors, and disbursements of contract payments should be tied up to environmental performance;

• Conduct monitoring during construction to determine compliance of contractors and to assess the effectiveness of mitigation measures indicated in the EIA report;

• Conduct post-construction audits to determine outstanding environmental issues and concerns and determine whether site clean up and rehabilitation are required;

• Prepare and maintain a database of all environmental monitoring activities.

Social Aspects

• Consistently implement resettlement and compensation guidelines at all levels (provincial, town, district and commune). There is a need for additional training of some members of resettlement committees in order to implement guidelines in an objective manner;

• Impose a fixed cut-off date for the listing of PAPs to have a more accurate listing of PAPs and to minimize if not avoid complaints and grievances during implementation;

• As much as possible, make all compensation rates of affected structures and affected lands consistent with prevailing market prices;

• Provide timely compensation payments for PAPs to avoid delays in construction schedules;• Where applicable, undertake consultation with PAPs on the location and design of resettlement

sites;• Properly design and implement training programmes for affected households. Training needs

assessment, skills inventory, job/work availability and other support services should be considered;• Promote road safety at all times to minimise the occurrence of accidents. This could be made

possible through continuous information and education campaign (IEC) programmes, proper maintenance of road markings and signs, strict enforcement of traffic regulations, check points, and penalty system for offending drivers and transport companies;

• Undertake monitoring and evaluation of resettlement activities and rehabilitation assistance of affected households to assess its effectiveness and to generate information required in further refining resettlement and rehabilitation assistance programmes and guidelines.

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5. Lessons Learned

A number of lessons relating the HRP projects were learnt from undertaking the evaluation and monitoring exercise.

Overall economic viability is unlikely to be in doubt for civil works to rehabilitate or maintain major i.roads that are carrying several thousand vehicles a day. Unless there is a rapid failure of the road surface the benefits of such work will normally justify the cost over a short period. Predicting future pavement condition is critical to an accurate assessment of economic performance. All projects should include an allowance to measure the pavement performance indicators (IRI and Benkelman Beam tests for both maximum deflection and curvature). This work can be included as a provisional sum in the contract so that the work can be undertaken by the employer rather than the contractor.

Upgrading to higher design standards rather than rehabilitation should be considered where traffic ii.levels are high. The HRP 1 funded HCMC - Can Tho rehabilitation project was not considered in this Study, but the 40 km widening work to Trung Luong Junction, using domestic funds, that was initiated soon after the rehabilitation was completed, suggests that a higher standard should have been considered for the HRP 1 work. The provision of by-passes to avoid urban and other densely populated areas should have been considered as part of the HRP 2 appraisal process, so that foreign planning assistance and funding could be made available for such works.

Performance by contractors in terms of compliance with measures to mitigate adverse environmental iii.impacts during construction needs to be improved. Similarly, the contractors need to reduce the severe disruption to traffic during construction, caused by the poor condition of the route provided for traffic whilst rehabilitation and periodic maintenance works are ongoing.

Data requirements for road management, project appraisal and evaluation should be reviewed. In iv.theory comprehensive traffic and road data are collected on a regular basis, but the quality and availability of these need to be improved. The requirement to collect traffic data on a monthly basis at many sites could be reduced, but with a greater effort to supervise data collection and to ensure that data are stored and made available for road planning purposes. Automatic traffic counters, bump integrators, FWDs, and other road monitoring equipment supplied, should be used on a regular basis and the results made available at central level.

Project targets such as reductions in the number of accidents and the incidence of vehicle overloading v.are unlikely to be achieved without specific action to improve the enforcement of regulations.

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):

10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

(a) reduced vehicle operating costs (VOCs) measured by(i) road roughness through International Roughness Index

3 IRI on all four rehabilitation contracts on Highway No. 1

2.5 IRI was recorded along Vinh - Dong Ha, as measured in January 2003

(ii) reduced tariffs for transport of passengers and goods in real terms;

(ii) (a) passengers tariffs reduced by 5% in real terms

(ii) (b) freight tariffs for rice/Petroleum/Cement reduced by 5% in real terms

(ii) (a) Rates between Vinh and Dong Ha increased about 12% in real terms

(ii) (b) market freight rates reduced by 4% in real terms

(iii) increased travel speed. Travel time by bus reduced by 10%

Travel speed (km/h) Car Bus TruckVinh-Gianh F. 65 55 50Gianh F.-Dong Ha 65 55 50

Bus travel time reduced 35%

Travel speed (km/h) Car Bus TruckVinh - Dong Hoi NA 52.5 46Dong Hoi - Dong Ha NA 52.5 49

(b) enhance efficiency in carrying out periodic maintenance measured by:(i) increase in volume of periodic maintenance undertaken by competitive bidding in absolute measure and as percent of total periodic maintenance works

at least 10% of PM of local funding is undertaken by competitive bidding

12% of total periodic maintenance budget was open to competition. Only RMcs companies participated

(ii) reduced vehicle operating cost in real terms measured by road roughness IRI (m/km)

IRI < 3 on Asphalt concrete pavement (AC)IRI < 5 on Bituminous surface treatment (BST)IRI < 4.5 on Gravel roads

AC =NABST = NAGravel = NA

(c) reduction in annual number of accidents and fatalities measured on Highway 1 sections in Ha Tinh and Dong Hoi provinces.

reduction of 20% of each accidents and fatalities

No finite data available. Data suggests that there is not a reduction in accidents

(d) reduced overloading in % of checked vehicles and in % overloading over legal axle loads measured annually at permanent weighstation along Vinh-Dong Ha.

reduction of 5% in % of vehicles checkedreduction of 10% in % excess of legal load

Overloaded Vehicles have increased form 6% to 12% range (vehicle type 3 axle) and axle load overloaded increased from 24% to 30% (vehicle type 3 axle)

(e) enhance institutional capacity in EIA and monitoring measured through EIA guidelines for road projects prepared and EIAs regularly conducted and monitored.

at least 40% of road projects by MOT have EIA done in-house by 2001

EIA Guidelines established. No EIAs or monitoring activities were conducted.

NOTE: NA = Not availableOutput Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Civil works completed on Highway 1 % 100 100

PAP resettled % 100 100

Roads under periodic maintenance in km 750 833

Improved hazardous sections in % 100 0

Equipment for PMU1 purchased 100 100

Equipment for Vietnam Road Administration (VRA) and Regional Road Management Units (RRMU) purchased

100 50

Completed training components 100 651 End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ millionA. Road Rehabilitation 121.44 109.83 90.4B. Periodic Maintenance 60.50 85.99 142.1C. Improvement to Hazardous Road Sections 1.00 0.00 0D. Support to PMU1 2.01 1.38 68.7E. Support to VRA, RRMUs 5.20 3.74 71.9F. Training 1.00 0.75 75G. Studies 3.00 0.00 0

Total Baseline Cost 194.15 201.69 Physical Contingencies 13.38 Price Contingencies 29.12

Total Project Costs 236.65 201.69Total Financing Required 236.65 201.69

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 148.09 42.22 2.09 14.76 207.16(133.94) (38.14) (2.06) (0.00) (174.14)

2. Goods 5.52 0.00 0.35 0.00 5.87(5.37) (0.00) (0.23) (0.00) (5.60)

3. Services 0.00 0.00 15.23 0.00 15.23(0.00) (0.00) (14.71) (0.00) (14.71)

4. Training 0.00 0.00 1.15 0.00 1.15(0.00) (0.00) (1.15) (0.00) (1.15)

5. Land Acquisition & Compensation

0.00(0.00)

0.00(0.00)

0.00(0.00)

6.56(0.00)

6.56(0.00)

6. PMU1 Operating Costs 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.70(0.00)

0.70(0.00)

Total 153.61 42.22 18.82 22.02 236.67(139.31) (38.14) (18.15) (0.00) (195.60)

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Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 138.22 36.15 0.00 6.00 180.37(124.40) (32.90) (0.00) (0.00) (157.30)

2. Goods 3.91 0.00 0.00 0.00 3.91(3.91) (0.00) (0.00) (0.00) (3.91)

3. Services 0.00 0.00 11.65 0.00 11.65(0.00) (0.00) (11.65) (0.00) (11.65)

4. Training 0.00 0.00 0.75 0.00 0.75(0.00) (0.00) (0.75) (0.00) (0.75)

5. Land Acquisition & Compensation

0.00(0.00)

0.00(0.00)

0.00(0.00)

4.60(0.00)

4.60(0.00)

6. PMU1 Operating Costs 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 142.13 36.15 12.40 10.60 201.28(128.31) (32.90) (12.40) (0.00) (173.61)

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.A. Road Rehabilitation 115.30 32.76 90.01 19.83 78.1 60.5B. Periodic Maintenance 67.20 6.95 77.81 8.18 115.8 117.7C. Improvement to Hazardous Road Sections

1.11 0.12 0.00 0.00 0.0 0.0

D. Support to PMU1 1.45 0.90 1.31 0.07 90.3 7.8E. Support to VRA, RRMUs

5.86 0.20 3.74 0.00 63.8 0.0

F. Training 1.15 0.00 0.75 0.00 65.2 0.0G. Studies 3.33 0.12 0.00 0.00 0.0 0.0

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Annex 3. Economic Costs and Benefits

A. ECONOMIC COSTS AND BENEFITS

The general approach used for the evaluation of the civil works component of the HRP projects followed conventional economic appraisal methodology for road projects. That is, it compared the situation occurring with the project improvements to the roads, and the situation that is most likely to have occurred if the project had not been implemented. These situations are often referred to as the “with project case” and the “without project case” respectively. The “without project case” can also be referred to as the “base case”, because it is the alternative against which the project is compared. Being an analysis of completed projects, actual construction costs and also, for at least part of the analysis period, observed traffic levels and indicators of road condition can be used for the "with project case”, rather than relying on forecasts and projections as in a feasibility study. However, the principles of the process are exactly the same as in a feasibility study.

The evaluation takes into account factors that can be quantified, such as the road construction and maintenance costs, traffic levels, and the potential level of benefit in terms of cost savings to road users. The evaluation period was 12 years.

The evaluations have been carried out using the HDM-4 model. This model simulates for each road section, year-by-year, the road condition and resources used for maintenance under a specified strategy, as well as the vehicle speeds and physical resources consumed by vehicle operation. Physical quantities involved in construction, road works and vehicle operation are estimated. Then user-specified prices and unit costs are applied to determine the costs involved in monetary terms. Benefits are calculated for different alternatives by comparing costs in the “with project” alternatives with costs in the “base case”. Finally, present value and rate of return computations are carried out to indicate the economic viability of project alternatives. Thus, the economic returns from road investment are determined, taking into account the level of the construction and road maintenance costs, and savings in road user costs due to the provision of a better road facility. The 1.3 version of HDM-4 was used for the evaluation analysis.

Vinh - Dong Ha Rehabilitation Project

The HRP 2 civil work on the 292 km Vinh - Dong Ha section of NH1 consists of rehabilitation on the original alignment. The general standard is a 12 meter asphalted concrete (AC) pavement, consisting of a 7 meter carriageway plus 2.5 meter paved shoulders, but with short sections of divided four-lane road in the urban areas of Hong Linh, Dong Hoi and Dong Ha. The previous standard was generally a 7 meter penetration macadam pavement. In areas subject to flooding the road bed was typically raised by 1 meter and the embankment strengthened as part of the rehabilitation, to lessen the incidence of flooding and reduce future maintenance requirements. A cement concrete pavement was provided in ten short sections, all but one in flood prone areas, with a total length of 16.7 km.

The completed project is generally homogeneous in terms of the type of works and standard. However key factors in the evaluation are the standard and condition of the road before the project, and the level of traffic. Thus it was not possible to consider the section as a single project for evaluation purposes. It was necessary for it to be divided into separate sub-sections, each being reasonably homogenous in terms of the key input parameters, principally the pre-project surface roughness and the traffic level.

Each of these groups was further subdivided according to the estimated level of traffic. Three traffic bands were used. The different traffic bands used in the evaluation are shown in Table 3.1, with the AADT

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shown as 2003 levels.

Table 3.1: Vinh - Dong Ha Traffic Bands (2003 Traffic Levels in AADT)

Traffic Band

From km To km Vehicles Motorcycles

A Vinh 463 Cam Xuyen 528 3,100 4,500B Cam Xuyen 528 Dong Hoi 660 2,200 2,000C Dong Hoi 660 Dong Ha 756 3,000 2,200

Dong Ha - Quang Ngai Periodic Maintenance Project

A total of 230 km of the 289 km of NH1 from km 756 at Dong Ha to km 1045 in Quang Ngai Province is included in the HRP 2 Periodic Maintenance Project. These works are not in continuous sections. There are a total of 33 separate periodic maintenance sections that alternate with short sections of other projects, including those of the HRP 2 Severely Flood Prone Sections discussed below. Individual sections range in length from 48 km to less than 500 metres.

Although designated as periodic maintenance, the work undertaken was more substantial than the usual concept of periodic maintenance, involving the sub-base and base courses. It is of a similar standard to the rehabilitation carried out on the Vinh to Dong Ha section, except that the overall pavement width is less. The general standard is a 10 meter wide AC pavement, consisting of a 7 meter carriageway and two 1.5 meter paved shoulders.

Four basic traffic bands were used for the evaluation of sub-sections on the Dong Ha to Quang Ngai section of NH1, with separate traffic data used for the Hai Van Pass and Da Nang sub-section. These are shown in Table 3.2, with the AADT shown as 2003 levels.

Table 3.2: Dong Ha-Quang Ngai Traffic Bands (2003 Traffic Levels in AADT)

Traffic Band

From km To km Vehicles Motorcycles

D Dong Ha 756 Hue 833 3,000 2,500E Hue 833 Hai Van Pass 894 2,500 1,500F Hai Van Pass 894 Hai Van Pass 914 2,500 300G Da Nang City 914 Da Nang City 927 3,750 12,500H Da Nang 927 Vinh Dien 948 5,000 8,000I Vinh Dien 948 km 1045 1045 3,200 5,000

Dong Ha - Quang Ngai Severely Flood Prone Sections Project

Short sections of the road between Dong Ha and Quang Ngai identified as being prone to flooding were excluded from the original scope of the HRP 2 Periodic Maintenance Project. These sections were intended to be improved during the subsequent MTFP project. However, following particularly severe flooding in 1999, a request was made to utilize unallocated loan funds to include the most severely flood prone sections in the HRP2 Project. As a result, nine sections of flood prone road between Dong Ha and Quang Ngai, with a total length of 10.5 km were included in the HRP2 Project. The standard of work is similar to that of the periodic maintenance project sections, except that the total width of the AC pavement is 11 meters, and the road has been raised by approximately 1 meter to prevent flooding of the road except by floods

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occurring at more than 10-year intervals. The edges of the embankment are protected to prevent erosion during flooding.

The nine sections were evaluated in three groups according to the traffic levels for the Dong Ha to Quang Ngai section as shown in Table 3.2. Separate pre-project levels of roughness were used for the three groups, as shown in Table 3.3.

Table 3.3: Dong Ha - Quang Ngai Flood Prone Sections Evaluated

ID No. Type IRI Length (km) Traffic Band64 Flooding Section 4.3 4 D65 Flooding Section 2.6 3 E66 Flooding Section 4.8 4 I

Total 10

B. BASE CASE

The main assumption for the “base case” used to define the without project situation for the rehabilitation and maintenance projects is that the existing roads would receive a 5 cm AC overlay when roughness reached a level of IRI 6 or more. This would initially restore the surface condition to a roughness level of IRI 3, similar to that achieved by the HRP2 works. It was assumed that this overlay would be applied to different sections in stages over a number of years, with the roughest sections of the road implemented first.

C. PROJECT COSTS

The main component of project costs is the civil works cost, but land acquisition and resettlement costs, plus design and construction supervision costs are also project costs and need to be considered.

The civil works cost item included in the economic evaluation is, in most cases, the cost of rehabilitation or periodic maintenance of the original road. Civil works costs have been taken from the final contract payments, or the latest estimates of final costs as in the case of the Dong Ha - Quang Ngai section. These costs, which are shown in Table 3.4, are significantly higher than the costs estimated at appraisal stage and the original contract costs in most cases.

Table 3.4: Summary of Works Contract ValuesProject/Contract From

(km)To

(km)Length

(km)Cost

(VND million)

Vinh - Dong Ha Rehabilitation: 291.2 1,201,276Contract 1 463.6 528.6 65.1 292,613Contract 2 528.6 624.9 96.3 354,186Contract 3 626.1 670.8 44.7 195,819Contract 4 670.9 756.1 85.1 358,659

Dong Ha - Quang Ngai:Periodic maintenance contracts 229.8 680,063

Contract 1 756.1 833.0 57.4 208,388Contract 2 833.0 904.6 66.3 220,509Contract 3 904.6 960.0 38.7 99,869Contract 4 960.0 1,045.0 67.4 151,296

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Severely flood prone sections 10.5 41,654Contract 1 762.8 794.3 3.4 14,943Contract 2 795.7 878.8 4.2 17,905Contract 3 1,032.5 1,043.0 3.0 9,702

The costs shown include the costs of the replacement and repair of minor bridges. In the case of the Vinh - Dong Ha section these costs amount to VND 71 billion, or almost 6% of the total contract cost. The bridge costs are negligible in the case of the periodic maintenance contracts on the Dong Ha - Quang Ngai section. Details are not currently available for the severely flood prone sections, but bridge costs would form a substantial part of the total. In all cases the bridgeworks have been considered an integral part of the projects and the associated costs included as part of project.

In the case of the rehabilitation of the Vinh - Dong Ha section, the costs include those of the ten cement concrete sections, which had a combined length of 16.7 km. The exact cost of these cannot be separated from those of the rest of the contracts, but the paving costs suggest that the average cost of these sections was generally at least 30% higher than the typical cost of the asphalted concrete (AC) sections. An exception was the 2.7 km section of cement concrete road in Dong Hoi town, which has four lanes and a per km cost almost double the typical cost for Vinh - Dong Ha.

For evaluation purposes these costs need to be expressed in economic terms. A standard conversion factor of 0.93 has been developed in Vietnam and has been used in similar studies. This factor has been applied to all civil works cost items, reducing the economic cost of road works to 93% of the financial costs shown.

Land acquisition and resettlement costs . On the Vinh - Dong Ha section they add approximately 5% to the civil works costs, reflecting that the rehabilitation involved widening to a 12 meter pavement. The Dong Ha - Quang Ngai periodic maintenance project was largely carried out within the existing right of way, and land acquisition and resettlement costs are negligible compared with the civil works costs. It is believed that virtually all of these costs were incurred on the severely flood prone sections, for which some additional land was required. If the costs shown are applied only the severely flood prone sections they also add 5% to the civil works cost. However the costs shown do not include all land and relocation costs for the Dong Ha - Quang Ngai section. In Da Nang City there were probably significant costs, but these were not administered by PMU.1, and it has not been possible to determine the level of costs. Local funding was also used for the civil works cost for the road section in Da Nang City in addition to HRP 2 funds.

D. BENEFITS

Benefits for each road section have been considered over the period from the year following completion of works, to the end of the 12-year evaluation period. No potential benefits obtained prior to this, for example from partial completion of the section, have been included in the analysis. Similarly, no costs to road users caused by disruptions to traffic during the construction period have been included, although significant disruption to traffic was caused by the HRP2 works. In the case of the rehabilitation works on Vinh - Dong Ha, where the construction period was over three years, from 1999 to 2001, the benefit period is nine years. In the case of the works on the section Dong Ha to Quang Ngai, which were implemented over two years starting in 2000 or 2001, the benefit period is ten years. The types of benefit which have been quantified and incorporated in the economic evaluation of projects are: Vehicle operating cost savings, Passenger time savings, Flood delay cost savings, and Maintenance cost savings.

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Flood Delay Cost Savings

Delay cost savings, associated with the reduction of road closure as a result of flooding have been calculated externally to HDM-4, and then included as exogenous benefits in the HDM-4 economic analysis for those sections where such benefits apply. A precise calculation of the benefits associated with removing flood delays at several points is very complicated. It depends on the timing of closures, and the reaction of vehicle operators to the closure. However an approximation can be made that is adequate to indicate the scale of benefits. The benefits are significant in terms of the evaluation of the works over short lengths of flood prone sections, but not in terms of the evaluation of the overall HRP2 projects. At points on the project sections where the road was subject to flooding, and traffic flow was disrupted, the works carried under HRP2 included the raising of the road bed, and the strengthening of the embankment. This work was designed to overcome the level of flooding likely within a 10-year period. Information on the incidence of flooding on the Vinh to Dong Ha section before the project was implemented is available from the feasibility study of the rehabilitation of that section Second Highway Rehabilitation Project - Highway No. 1 between Vinh and Dong Ha -Feasibility and Detailed Engineering Studies, Dessau-Experco, May 1995.. For the Dong Ha to Quang Ngai section the same information is available from two reports Flood Mitigation Project Highway No. 1 between Dong Ha and Quang Ngai - Feasibility Study of Severly Flooded Sections, Transport Engineering Design Inc (TEDI), July 1998.& Third Highway Rehabilitation Project- Economic Assessment of Flood Mitigation Options for the Dong Ha to Quang Ngai Section of Highway No., APECO, Maunsell, June 1999 that examined the benefits of reducing the incidence of flooding. These reports indicate that, for both sections, over a 10-year period there was typically flooding two to three times a year, and on each occasion the road was closed on average for 2-4 days. An average closure period of five days per year has been used. This is a conservative figure. Longer periods of closure occurred at times of exceptional flooding. Also the flooding did not occur at the same time at all the flood prone areas. Therefore, over the period of a year the road was closed for longer than the closure at any one point.

The HR 2 funded work on severely flood prone areas on the Dong Ha - Quang Ngai section involves improvement at nine separate locations. However flood prone areas remain at 18 other locations that are to be improved under the MTFP project. The benefits applied to the HRP2 improvements have been reduced until 2005, when it is expected that the completion of the MTFP project and all significant flood prone areas will have been upgraded. Until that happens there will be times when the road remains closed to traffic because of flooding, and the full benefits of the road being open in the HRP2 areas will not be obtained.

E. EVALUATION RESULTS

The results of the economic evaluation are shown in the following series of tables. In Table 3.5 the results are summarized for the two main projects. In this Table the values of the main components are shown as $ million, discounted to base year values at 10%, with the overall Internal Rate of Return (IRR) shown in the final column. The Net Present Value (NPV) is the sum of all savings minus the capital cost. All three projects are shown to be viable, with IRRs significantly above the target rate of 12%.

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Table 3.5: Summary of Evaluation Results (Present Value at 10% in $mill)

Capital Cost

Increase

Maint. Cost

Saving

VOC Savings

Pass. Time Savings

Flood Delay

Savings

NPV IRR (%)

Vinh-Dong Ha 47.33 3.10 52.38 35.03 5.26 48.43 21.6Dong Ha- Quang Ngai 37.35 3.99 53.73 27.40 2.70 50.48 30.0

The Vinh - Dong Ha rehabilitation project was evaluated as a series of 15 separate road sections, each representing a combination of pre-project surface roughness, traffic level, and project pavement type. The purpose of this analysis was to determine if particular sections of the project had significantly higher of lower rates of return than others. As would be expected the higher traffic levels in Traffic Band A (Vinh to Cam Xuyen) produce higher rates of return. The IRR of each section is shown in Table 3.6. It should be noted that the IRRs are lowest of the sections where the pre-project surface condition was the roughest (IRI >7). This is the opposite of what would normally be expected. The reason is that it was assumed that in the base case these roughest sections would be the first to receive an overlay as part of the regular maintenance of the road. The overlay would have reduced roughness levels similar to those achieved with implementation of the HRP 2 rehabilitation project, significantly reducing the benefits. In the case of the other sections the road would have deteriorated over several years in the base case before an overlay was provided, resulting in increasing roughness and so increasing benefits of the project.

The high rates of return for the cement concrete sections are the result of allocating the benefits of removing flooding delays to those sections. Without these additional benefits, the higher capital costs and higher levels of surface roughness after project implementation result in rates of return much lower than the AC sections with the same traffic level. This suggests that the costs of preventing flooding are justified. However, although the cement concrete pavement will be better able to withstand flooding, this is considered to be only a minor advantage if the raising of the road as part of the project has prevented most occurrences of flooding. Therefore, the use of a cement concrete pavement appears not be justified economically in comparison with an AC pavement.

Table 3.6: Vinh - Dong Ha Road Section IRRs

ID No. Type Traffic Band Length (km) IRR (%)1 Roughness >7 A 1 20.02 Roughness 5 to 7 A 13 36.53 Roughness 3 to 5 A 26 33.84 Roughness <3 A 20 32.45 Concrete A 6 32.46 Roughness >7 B 30 12.37 Roughness 5 to 7 B 56 16.88 Roughness 3 to 5 B 35 14.99 Roughness <3 B 8 13.910 Concrete B 2 41.211 Roughness >7 C 28 14.212 Roughness 5 to 7 C 38 21.313 Roughness 3 to 5 C 15 20.414 Roughness <3 C 8 19.315 Concrete C 6 25.2

Total 292

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The Dong Ha - Quang Ngai periodic maintenance and flood prone sections have been evaluated by section in a similar way to the Vinh - Dong Ha project. The resulting IRRs for the road sections are shown in Table 3.7 and Table 3.8, respectively. The lower traffic levels and high costs per km for Traffic Bands D and E (the road sections from Dong Ha south to the Hai Van Pass) result in much lower rates of return than for the areas to the south of Da Nang. Benefit levels per vehicle-km for the Dong Ha - Quang Ngai section are generally lower than those for Vinh - Dong Ha, largely because the lower design standard results in lower benefits in the form of time saving benefits. This is because the friction effects of road side activity and non-motorized traffic on vehicle speed were not reduced significantly by the project. In other words, the project improvement above the standard in the base case is less than on the Vinh - Dong Ha section. However the lower capital cost results in similar rates of return.

The very low IRR for the Hai Van Pass section results from the diversion of a significant part of the current traffic flow away from the section in 2005, following completion of the ongoing tunnel project. A secondary reason is the lower benefit achieved on this section per vehicle-km, because the high degree of gradient and curvature reduces speeds, and so does not enable the usual level of VOC and travel time benefits from improved surface condition to be achieved.

The high IRR for the Da Nang City section, which reflects the high traffic level and the improvement to four-lane standard, overstates the true rate of return. This is because there were capital costs associated with the section in addition to those funded by the HRP2 project. These have not yet been determined, and would reduce the IRR if included in the evaluation.

Table 3.7: Dong Ha - Quang Ngai Maintenance Section IRRs

ID No. Type Traffic Band Length (km) IRR (%)51 Roughness <3 D 3 16.152 Roughness 3 to 5 D 40 17.253 Roughness 5 to 7 D 15 19.154 Roughness <3 E 14 8.255 Roughness 3 to 5 E 25 11.656 Roughness 5 to 7 E 19 13.857 Hai Van Pass (km894-914) F 20 1.258 Da Nang City (km914-927) G 13 56.559 Roughness <3 H 8 67.660 Roughness 3 to 5 H 4 89.061 Roughness <3 I 38 42.762 Roughness 3 to 5 I 9 58.863 Roughness 5 to 7 I 21 59.3

Total 230

The Dong Ha - Quang Ngai Flood Prone sections IRRs are all relatively high because the additional benefits of removing delays from flooding have been allocated to these sections.

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Table 3.8: Dong Ha - Quang Ngai Flood Prone Sections IRRs

ID No. Location Traffic Band Length (km) IRR (%)64 km 762.8 to 794.3 D 4 30.465 km 795.7 to 878.8 E 3 25.566 km 1,032.5 to 1,043.0 I 4 62.8

Total 10

G. SENSITIVITY TESTS

Sensitivity tests have been carried out to show the impact of varying inputs and assumptions where there is most uncertainty. These are the rate of future traffic growth, the value of passenger time savings, and the timing of overlays applied in the base case. The tests were carried out with future traffic growth at 12% and 4% per year, non-working passenger time and all passenger time values set at zero, and base case overlays given at the beginning of the evaluation period. The test with all passenger time valued at zero was an extreme test to show the level of return with a major decrease in benefits.

The results of the sensitivity tests are shown in Table 3.9 in terms of the IRR, together with those of the main evaluation for comparison. As can be seen, changing traffic growth has only a limited impact on the results. If all time values are set to zero the IRRs are much reduced, as would be expected. If it assumed that an AC overlay is given to the existing road at the beginning of the evaluation period there is little change in the IRR. This is because, although the surface would be improved initially to a similar standard to those achieved with the HRP2 works, such overlays would deteriorate more rapidly than the HRP2 surface. Thus the with project case will have less roughness than the base case over the evaluation period.

Table 3.9: Sensitivity Test Results (IRR)

MainEvaluation

Traffic Growth(12%)

Zero Value(4%)

Vinh-Dong Ha 21.6 24.1 19.2Dong Ha- Quang Ngai 30.0 33.0 26.6

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/PreparationIdentification08/13/1993 2 HIGHWAY ENGINEER (1)

CONSULTANT (1)11/3/1993 1 HIGHWAY ENGINEER (1)Preparation09/11/1995 6 HIGHWAY ENGINEER (1)

RESETTLEMENT SPEC. (1)PUBLIC FINANCE SPEC. (1)INFRASTRUCTURE ENG. (1)UPBAN PLANNING SPEC. CONSULTANT (1)SENIOR TRANSP. ENG. (1)

12/16/1995 5 HIGHWAY ENGINEER (1)RESETTLEMENT SPEC. (1)INFRASTRUCTURE ENG. (1)UPBAN PLANNING SPEC. CONSULTANT (1)SENIOR TRANSP. ENG. (1)

Appraisal/NegotiationAppraisal12/12/1996 15 TEAM LEADER (1)

HIGHWAY ENGINEER (2)TRANSPORT ECONOMIST, CONSULTANT (1)URBAN PLANNER (1)RESETTLEMENT SPEC. (2)SR. LEGAL COUNSEL (1)DISBURSEMENT OFFICER (2)ENVIRONMENTAL SPEC. (2)PROCUREMENT SPEC. (1)TASK ASSISTANT (2)

Negotiation01/13/1997 1 TEAM LEADER

Supervision

07/03/1998 4 TEAM LEADER (1); OPERATIONS OFFICER (1); RESETTLEMENT SPEC. (1); ENVIRONMENTAL SPEC. (1)

S S

10/10/1998 4 TASK MANAGER (1); S S

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OPERATIONS OFFICER (1); RESETTLEMENT SPEC. (1); ENVIRONMENTAL SPEC. (1)

03/12/1999 4 TASK MANAGER (1); OPERATIONS OFFICER (1); RESETTLEMENT SPEC. (1); ENVIRONMENTAL SPEC. (1)

S S

07/14/1999 5 TTL (1); SR. ENVIR. SPEC. (1); OPER. OFFR. (1); RESETTLMT. SPEC. (1); SR. FINANC. SPEC. (1)

U S

11/05/1999 7 TASK TEAM LEADER (1); OPERATIONS OFFICER (1); SR ENVIRON SPECIALIST (1); RESETTLEMENT SPECIALST (2); PROCUREMENT SPECIALIST (1); RESETTLEMENT OFFICER (1)

S S

05/05/2000 6 TASK TEAM LEADER (1); OPERATIONS OFFICER (1); RESETTLEMENT SPECIALST (1); PROCUREMENT SPECIALIST (1); RESETTLEMENT OFFICER (1); ECONOMIST OFFICER (1)

S S

03/24/2001 6 TASK TEAM LEADER (1); RESETTLMNT SPECIALIST (1); OPERATIONS OFFICER (2); RESETTLEMENT OFFICER (1); FINANCIAL OPERATIONS (1)

S S

12/14/2001 8 TASK TEAM LEADER (1); SR. TRANSPORT ECON. (1); RESETTLEMENT SPECIALST (1); SR. ENVIRON SPECIALIST (1); OPERATIONS OFFICER (1); RESETTLEMENT OFFICER (1); SOCIAL DEVELOP SPECLST (1); FINANCIAL MGMT SP. (1)

S S

07/05/2002 7 TRANSPORT SPECIALIST (2); HIGHWAY ENGINEER (1); RESETTLEMENT SPECIALST (1); OPERATIONS OFFICER (1); RESETTLEMENT OFFICER (1); SOCIAL DEVLMNT SPCLST (1)

S S

02/11/2003 6 TASK TEAM LEADER (1); TRANSPORT COORDINATOR (1); PROCUREMENT ANALYST (1); SR. ENVIRONMENTAL SPEC (1);

S S

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ENVIRONMENTAL SPECIALIST (1); OPEATIONS OFFICER (1)

ICR07/24/2003 3 TASK TEAM LEADER (1);

OPERATIONS OFFICER (1); ENVIRONEMNTAL SPECIALIST (1)

S S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 154.1 621.6Appraisal/Negotiation 21.4 92.6Supervision 153.2 456.3ICR 12.0 37.5Total 340.7 1,208.0

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Country Assistance Strategy for the Socialist Republic of Vietnam. Report No.15053 -VN, October 1.25, 1995.

Staff Appraisal Report. Second Highway Rehabilitation Project. World Bank Report No. 16108-VN. 2.February 28, 1997.

World Bank Aide Memoires and Project Status Reports for the period January 1998 to November 3.2003.

Tehnical Assistance for Periodic Maintenance of National Highways. Final Report. Hyder 4.Consultants. February 2002.

Implementation Completion Report (No. 23840-VN). Highway Rehabilitation Project (Cr. 5.25490-VN). June 26, 2002.

Second Programme for Retraining of Road Sector Professionals. Final Report. SMEC in Association 6.with International Pty. Ltd., Vietnam Bridge and Road Association and Hanoi University of Civil Engineers. June 2003.

Project Monitoring and Evaluation Report. Project Monitoring and Evaluation Study. Asia Pacific 7.Engineering Consultants in association with Maunsell Group. July 2003.

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