Ethiopia - Wacha - Maji Road Upgrading Project - Appraisal Report

AFRICAN DEVELOPMENT FUND Language: EnglishOriginal: English

FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

WACHA-MAJI ROAD UPGRADING PROJECT

APPRAISAL REPORT

INFRASTRUCTURE DEPARTMENT ONINCENTRAL & WEST REGIONS SEPTEMBER 2002

TABLE OF CONTENTS

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PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, i-viiiLIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS,BASIC PROJECT DATA, PROJECT LOGICAL FRAMEWORK,EXECUTIVE SUMMARY

1. ORIGIN AND HISTORY OF THE PROJECT 1

2. THE TRANSPORT SECTOR 2

2.1 Sector Overview 22.2 Transport System 22.3 Transport Policy, Planning and Coordination 3

3. THE ROAD SUB-SECTOR 4

3.1 Road Network, Vehicle Fleet and Network Traffic 43.2 The Road Transport Industry 53.3 Road Administration and Training 53.4 Road Planning, Financing and RSDP 63.5 Road Engineering and Construction 73.6 Road Maintenance 8

4. THE PROJECT 10

4.1 Concept and Rationale 104.2 Project Area and Project Beneficiaries 114.3 Strategic Context 134.4 Project Objective 134.5 Project Description 134.6 Traffic, Producer Surplus and Prices 154.7 Environmental Impact 184.8 Social Impact 204.9 Project Costs 214.10 Sources of Finance and Expenditure Schedule 224.11 Expenditure Schedule 23

TABLE OF CONTENTS (cont’d)

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5. PROJECT IMPLEMENTATION 24

5.1 Executing Agency 245.2 Institutional Arrangements 245.3 Supervision and Implementation Schedule 255.4 Procurement Arrangements 265.5 Disbursement Arrangements 275.6 Monitoring and Evaluation 275.7 Financial Reporting and Auditing 285.8 Aid Co-ordination 28

6. PROJECT SUSTAINABILITY AND RISKS 29

6.1 Recurrent Costs 296.2 Project Sustainability 296.3 Critical Risks and Mitigation Measures 30

7. PROJECT BENEFITS 30

7.1 Economic Analysis 307.2 Social Impact Analysis 327.3 Sensitivity Analysis 33

8. CONCLUSIONS AND RECOMMENDATIONS 33

8.1 Conclusions 338.2 Recommendations and Conditions of Loan Approval 34

This Appraisal Report was prepared by Messrs. M.O. AJIJO (Principal Transport Economist, Ext. 3110),A. OUMAROU (Senior Transport Engineer, Ext. 3110), and Ms. GEISLER (Senior Gender Expert)following their mission to Ethiopia in September 2002. Any inquiries relating to this report may bereferred to either the authors or to Mr. H. NYAME-MENSAH, Ag. Manager, ONIN.3, Ext. 2652 or toMr. K. BEDOUMRA, Director, ONIN Ext. 2040.

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AFRICAN DEVELOPMENT FUND01 B.P. 1387 - ABIDJAN

Tel: 20 20-44-44Fax: (225) 20 20-49-86

Telex: 23717, 22202, 22203

PROJECT INFORMATION SHEET

The information given hereunder is intended to provide some guidance to prospectivesuppliers, contractors and consultants and to all persons interested in the procurement of goods andservices for project approved by the Board of Directors of the Bank Group. More detailedinformation and guidance should be obtained from the Executing Agency of the Borrower.

1. COUNTRY : Ethiopia

2. PROJECT TITLE : Wacha – Maji Road Upgrading Project

3. LOCATION : Chena, Meinit and Dizi Districts (Weredas) ofBench – Maji Zones of Southern Nations,Nationalities and Peoples Region State(SNNPRS).

4. BORROWER : Federal Democratic Republic of Ethiopia

5. EXECUTING AGENCY : Ethiopian Roads Authority (ERA)P.O. Box 1770Addis Ababa - EthiopiaTel: (251) 1 156603Fax: (251) 1 514866E. Mail: [email protected]

6. DESCRIPTION : The project consists of:

(a) Civil works for upgrading the existing earth/track road to agravel road with a 7-m carriageway inclusive of shouldersfor a total length of 173 km between the towns of Wachaand Maji in SNNPRS. Approximately 20.0% of the roadlength (35-km) on steep grades in mountainous terrain willbe surfaced using double bitumen surface treatment;

(b) Consultancy services for i) Design review and supervisionof the civil works and ii) Project Audit service;

(c) Technical Assistance to ERA to strengthen its DesignReview Branch.

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7. TOTAL COST : UA 26.28 million

i) Foreign Exchange : UA 22.71 millionii) Local Cost : UA 3.57 million

8. BANK GROUP LOAN/GRANT

ADF : UA 22.71 millionADF/TAF : UA 0.99 million

9. OTHER SOURCE OF FINANCE

GOE : UA 2.58 million

10. DATE OF APPROVAL : May 2003

11. ESTIMATED STARTINGDATE OF PROJECTAND DURATION : April 2005 – 40 months

12. PROCUREMENT OFGOODS AND WORKS : The civil works contract will be packaged in

a single lot to be procured under InternationalCompetitive Bidding (ICB) procedures, withpre-qualification of contractors, and adomestic preference margin.

13. CONSULTANCY SERVICESREQUIRED AND STAGEOF SELECTION : Consultancy services for design review

and supervision of civil works will beacquired on the basis of a shortlist ofqualified consulting firms.

: The Technical Assistance Support servicesfor ERA Design Review Branch will beacquired on the basis of a shortlist of qualifiedconsulting firms.

: Project audit services will be procured on thebasis of a Short list of auditing firms.

1 SDR = 1 UA1 UA = US$ 1.32751 (September, 2002)1 UA = ETB 11.0544 (September, 2002)

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CURRENCY AND MEASURESCurrency Equivalents

(September, 2002 Exchange Rates)

Currency Unit = Ethiopian Birr (ETB)1 UA = ETB 11.05441 UA = US$ 1.327511 US$ = ETB 8.326867

Weights and Measures

1 metric ton (t) = 2,205 lbs.1 kilogram (kg) = 2.205 lbs.1 meter (m) = 3.281 ft1 foot (ft) = 0.305 m1 kilometer (km) = 0.621 mile1 square kilometer (km2) = 0.386 square mile1 hectare (ha) = 0.01 km2 = 2.471 acres

FISCAL YEARJuly 7- July 6

LIST OF TABLES

Table 3.1 : Road Construction and Maintenance ExpenditureTable 3.2 : Road Fund Revenue and Regular Budget AllocationTable 3.3 : Maintenance Needs and Financing SourcesTable 4.1 : Base Year (2004) Motorized TrafficTable 4.2 : Transport Requirement for “without Project” Producer Surplus TonsTable 4.3 : Annual percent Increase in Area under CropsTable 4.4 : Summary of Project Cost Estimates by ComponentsTable 4.5 : Summary of Project Cost by Category of ExpenditureTable 4.6A : Sources of Finance for ADF ComponentTable 4.6B : Sources of Finance for TAF ComponentTable 4.7 : Expenditure Schedule by ComponentsTable 4.8 : Expenditure Schedule by Source of FinanceTable 5.1 : Summary of Project Implementation ScheduleTable 5.2 : Summary of Procurement Arrangements

LIST OF ANNEXES

No of pages

1. Project Location Map 12. Ethiopian Roads Authority Organization Chart 13. Project Implementation Schedule 14. Provisional List of Goods and Services 15. Summary Financial and Economic Analysis 56. Environmental and Social Management Plan Summary 27. Summary of Bank Group Operations as of September 2002 18. Technical Assistance Support 29. List of Annexes in Project Implementation Document 1

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LIST OF ABBREVIATIONS

AADT = Annual Average Daily TrafficADB = African Development BankADF = African Development FundBADEA = Arab Bank for Economic Development for AfricaCAA = Civil Aviation AuthorityCADD = Computer Aided Design and DraftingCBR = California Bearing RatioDfID = Department for International Development (U.K.)EAL = Ethiopian AirlinesEDF = European Development FundEU = European UnionESL = Ethiopian Shipping LinesEFTC = Ethiopian Freight Transport CorporationERA = Ethiopian Roads AuthorityEIRR = Economic Internal Rate of ReturnERTTP = Ethiopian Rural Travel and Transport ProgramFE = Foreign ExchangeGPN = General Procurement NoticeGOE = Government of Ethiopia (Federal Democratic Republic of Ethiopia)GTZ = Deutsche Gereuschraft fur Technische ZusammenarbeitHDM = Highway Design and Maintenance Standard ModelICB = International Competitive BiddingIDA = International Development Association (World Bank)IFAD = International Fund for Agricultural DevelopmentIRI = International Roughness IndexJICA = Japanese International Cooperation AgencyKph = Kilometers Per HourKfW = Kreditanstalt fur WiederanfbawMoFED = Ministry of Finance and Economic DevelopmentMOI = Ministry of InfrastructureNDF = Nordic Development FundNMT = Non Motorized TransportPID = Project Implementation DocumentPER = Public Expenditure ReviewPTC = Passenger Transport CorporationRFP = Request for ProposalsRE = Regional EngineerRIU = Road Inspectorate UnitRRA = Rural Roads AuthorityRSDP = Road Sector Development ProgramSIP = Sector Investment ProgramSPN = Specific Procurement NoticeSNNPRS = Southern Nations, Nationalities and Peoples Region State.TA = Technical AssistanceTCDE = Transport Construction and Design EnterpriseTRRL = Transport Road Research LaboratoryUNDP = United Nations Development ProgramVOC = Vehicle Operating CostsVSO = Voluntary Service Overseas

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Ethiopia

COMPARATIVE SOCIO-ECONOMIC INDICATORS

Year Ethiopia AfricaDevelo-

pingCountries

Develo-ped

CountriesBasic IndicatorsArea ( '000 Km²) 1 104 30 061 80 976 54 658Total Population (millions) 2001 64.5 811.6 4,940.3 1,193.9Urban Population (% of Total) 2001 18.1 38.0 40.4 76.0Population Density (per Km²) 2001 58.4 27.0 61.0 21.9GNI per Capita (US $) 2000 100 671 1 250 25 890Labor Force Participation - Total (%) 2000 44.2 43.1 … …Labor Force Participation - Female (%) 2000 36.7 33.8 … …Gender -Related Development Index Value 1999 0.308 0.476 0.634 0.916Human Develop. Index (Rank among 174 countries) 1999 158 n.a. n.a. n.a.Popul. Living Below $ 1 a Day (% of Population) 1995 31.3 45.0 32.2 …

Demographic IndicatorsPopulation Growth Rate - Total (%) 2001 2.4 2.4 1.5 0.2Population Growth Rate - Urban (%) 2001 5.7 4.1 2.9 0.5Population < 15 years (%) 2001 45.2 42.4 32.4 18.0Population >= 65 years (%) 2001 3.0 3.3 5.1 14.3Dependency Ratio (%) 2001 93.0 85.5 61.1 48.3Sex Ratio (per 100 female) 2001 70.3 73.9 103.3 94.7Female Population 15-49 years (% of total population) 2001 22.6 23.6 26.9 25.4Life Expectancy at Birth - Total (years) 2001 43.5 52.5 64.5 75.7Life Expectancy at Birth - Female (years) 2001 44.1 53.5 66.3 79.3Crude Birth Rate (per 1,000) 2001 44.0 37.3 23.4 10.9Crude Death Rate (per 1,000) 2001 19.3 14.0 8.4 10.3Infant Mortality Rate (per 1,000) 2001 107.8 79.6 57.6 8.9Child Mortality Rate (per 1,000) 2001 185.8 116.3 79.8 10.2Maternal Mortality Rate (per 100,000) 1998 1,400 641 491 13Total Fertility Rate (per woman) 2001 6.8 5.1 2.8 1.6Women Using Contraception (%) 1995 4.3 … 56.0 70.0

Health & Nutrition IndicatorsPhysicians (per 100,000 people) 1994 4 37 78 287Nurses (per 100,000 people) 1988 8 106 98 782Births attended by Trained Health Personnel (%) 1998 8 38 58 99Access to Safe Water (% of Population) 2000 24 60 72 100Access to Health Services (% of Population) 1999 46 62 80 100Access to Sanitation (% of Population) 2000 15 60 44 100Percent. of Adults (aged 15-49) Living with HIV/AIDS 1999 10.6 5.7 … …Incidence of Tuberculosis (per 100,000) 2000 145 105 157 24Child Immunization Against Tuberculosis (%) 2000 51 63 82 93Child Immunization Against Measles (%) 2000 37 58 79 90Underweight Children (% of children under 5 years) 1999 48 26 31 …Daily Calorie Supply per Capita 1999 1 803 2 408 2 663 3 380Public Expenditure on Health (as % of GDP) 1998 1.7 3.3 1.8 6.3

Education IndicatorsGross Enrolment Ratio (%)

Primary School - Total 1997 41.0 80.7 100.7 102.3Primary School - Female 1997 30.0 73.4 94.5 101.9Secondary School - Total 1996 12.3 29.3 50.9 99.5Secondary School - Female 1996 10.3 25.7 45.8 100.8

Primary School Female Teaching Staff (% of Total) 1998 27.3 40.9 51.0 82.0Adult Illiteracy Rate - Total (%) 2001 60.4 37.7 26.6 1.2Adult Illiteracy Rate - Male (%) 2001 55.6 29.7 19.0 0.8Adult Illiteracy Rate - Female (%) 2001 65.3 46.8 34.2 1.6Percentage of GDP Spent on Education 1998 4.8 3.5 3.9 5.9

Environmental IndicatorsLand Use (Arable Land as % of Total Land Area) 1999 10.0 6.0 9.9 11.6Annual Rate of Deforestation (%) 1995 0.5 0.7 0.4 -0.2Annual Rate of Reforestation (%) 1990 10.0 4.0 … …Per Capita CO2 Emissions (metric tons) 1997 … 1.1 2.1 12.5

Source : Compiled by the Statistics Division from ADBdatabases; UNAIDS; World Bank Live Database andUnited Nations Population Division.Notes: n.a. Not Applicable ; … Data NotAvailable.

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ETHIOPIA: WACHA – MAJI ROAD UPGRADING PROJECTPROJECT MATRIX

REVISION DATE: March 2003DESIGN TEAM: M.O. AJIJO/A. OUMAROU

Narrative Summary (NS) Verifiable Indicators (VI) Means of Verification Assumptions1. Goal:1.1 To improve the efficiency and

capacity of the transport system tosupport social and economicdevelopment programmes ofEthiopia.

1.1 Inventory of the classifiedroad network in satisfactorycondition increase from 57%in 2002 to about 68% by year2008.

1.2 Road density increased from29 km/ 1000 km2 in 2002 to34 km/1000 km2 by the year2008.

1.1 Annual roadConstruction andPavement evaluationstatistics fromERA/RRAs

1.2 Road Networkstatistics.

(Goal to super goal)Reduced transport cost and improvedsocial service coverage will lead toeconomic growth and improvement ofcritical poverty indicators.

2. Project Objective:2.1. To improve accessibility and

mobility of rural population inChena, Meint and Dizi districts(Weredas) of Bench– Maji zoneof the SNNPRS to markets, socialand economic facilities andpromote market integrationbetween rural and urban areas insupport of poverty reduction.

2.1 Proportion of farms that aremore than half a day’s walkfrom the nearest all weatherroad reduced from 85% in2002 to 25% by end of projectin 2008.

2.2 Walking distance of ruralhouseholds to all weathermotorable roads reduced fromabout 2 to 3 days to less thanfive hours by 2008.

2.3 Percentage of absolutely poorcurrently at 56.5% ofpopulation reduced by 2008and beyond.

2.1 Village Level Traveland TransportStatistics (VLTTS)

2.2 ERA/RRA traffic andtravel time survey dataon project road zoneof influence

2.3 Welfare MonitoringIndicators of SNNPRSand MoFED

(Project objective to Goal)2.1 Fuel levy fund is adequate for

road maintenance

2.2 Government commitment to pro-poor policies and measurescontained in the PRSDP andRSDP II to improve rural accessand food security

3. Outputs3.1 173 km of gravel/earth roads

constructed to all weatherpassability high standard gravelroad with 20% paved in sectionswith steep grades between Wachaand Maji towns.

3.2 Capacity of ERA in design reviewstrengthened.

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3.1 138 km of earth/ deterioratedgravel road upgraded to high-class gravel road in goodcondition by December 2008.

3.2 35 km of earth/gravel road insteep grades in mountainoussections upgraded to allweather bitumen standard by2008.

3.3 18 no of ERA staff trained by2008 and capacity in designreview put in place.

3.1 Project CompletionReport (PCR).

3.2 Audit Reports3.3 Project Performance

Evaluation Report(PPER)

(Outputs to Project Objective)3.1 ERA/SNNPRS-RRA will

maintain the road network inthe three Weredas of Chena,Meinit and Dizi in accordancewith the maintenance actionplan.

3.2 MFIs effectiveness in ruralcredit delivery for incomegenerating activities,agricultural extension servicesand transport means provisionis in place is sustained

4. ActivitiesFor Civil Works and Goods:4.1 Issue and receipt of tenders,

Evaluation, negotiation and award ofcontract

4.2 Execution of civil works.

For Consultancy Services:

4.3 Approval of TOR for technicalassistance, design review &supervision and auditing services.

4.4 Issue & receipt of RFP4.5 Evaluation and approval4.6 Award of consultancy service

contracts4.7 Commencement of services.

Inputs/ResourcesInputs million UA4.1 Civil works 19.024.2 Consultancy

i) Supervision 1.39ii) Technical 1.05

Assistanceiii) Audit 0.08

4.3 Contingencies:- Physical 2.05- Price 2.70

Total 26.28

Resources:

ADF 22.71ADF/TAF 0.99GOE 2.58

Total 26.28

.

4.1 Appraisal Estimates

4.2 Supervision Reports

4.3 Quarterly ProgressReports (QPRs).

4.4 Audit Reports

(Activity to Output)

4.1 All procurement actions are onschedule.

4.2 Payments for invoices are notdelayed.

4.3 GOE budgets and timely releaseof counterpart funds.

4.4 Effective supervision by the Bankand consulting firms.

4.5 ERA effective monitoring.

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EXECUTIVE SUMMARY

Project Background

The success of socio-economic development programs initiated by the Government of Ethiopia(GOE) is seriously constrained by the absence of adequate, reliable and efficient road transportsystem capable of servicing the economy. The Government put together in response, a ten-yearRoad Sector Development Program launched in 1997 to be implemented in two phases – RSDP I(1997-2002) and the second phase - RSDP II (2002 –2007) supported by donors. Under the RSDPII, with a total program size of ETB 12.899 billion (USD 1.55 billion), GOE has given priority tothe construction and upgrading of link roads to areas of agricultural potentials in addition to on-going projects to specifically address the problem of food security, deficiencies in access in ruralareas and rural-urban market integration. There has been maximum donor support for thiscomponent as the financing of the component has been fully pledged by donors.

The Government approached the Bank Group in May 1997 with a request to finance the preparationof economically viable road projects for the on-going RSDP. The ADF approved grant resources ofUA 3.62 million in December 1998 for the economic feasibility and detail engineering designstudies of seven link roads already identified for the RSDP that included the Wacha-Maji roadproject. The project studies were completed in April 2002 and formed the basis of appraisal. Theproject when completed would be the only motorized access to the potentially rich agricultural areaof Bench – Maji zone of the Southern Nations, Nationalities and Peoples Region State (SNNPRS).The project is listed in the core program of the RSDP II and in the Ethiopian SustainableDevelopment and Poverty Reduction Program (2002 – 2004). As part of harmonizing capacitysupport for the implementation of the RSDP at the stakeholder consultative meeting in July 2002,the need for strengthening ERA in contract administration and design review were identified asareas of capacity building support. The strengthening of the design review capacity of ERA hasbeen included as institutional support component of the project.

Purpose of the Loan/Grant

The ADF loan will be used to finance the entire foreign exchange cost of UA 21.72 million and UA0.99 million of local cost for road upgrading works totaling UA 22.71 million. The ADF/TAF grantwould be used to finance the entire foreign exchange cost of UA 0.99 million of technicalassistance support for strengthening the Design Review Branch of ERA.

Sector Goal and Project Objective(s)

The sectoral objective of the project is to improve the efficiency and the capacity of the transportsystem to support economic and social development of Ethiopia. The objective of the project is toimprove accessibility and mobility of rural population of Dizi, Meinit and Chena districts (weredas)of SNNPRS to markets, social and economic facilities and to promote market integration betweenrural and urban areas of Ethiopia in support of poverty reduction.

Brief Description of Project Outputs:

The project comprises the following components:

i) Construction/upgrading works of the 173-km Wacha – Maji road from earth/gravel road to anengineered high class gravel road with intermittent paved sections - representingapproximately 20% of the road length - on steep grades in mountainous terrain;

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ii) Consultancy Services for (a) design review, tender assistance and supervision of constructionworks of (i) above and (b) project audit services; and

iii) Technical Assistance to strengthen the Design Review Branch of ERA.

Project Cost

The estimated cost of the project is UA 26.28 million (net of taxes) of which UA 22.71 million(86%) will be in foreign exchange and UA 3.57 million (14%) will be in local currency. Theestimated cost is based on September 2002 prices with 10% physical contingency and a priceescalation per annum of 3% and 5% on foreign and local costs respectively.

Source of Finance

ADF and GOE will jointly finance the project. The proposed financing plan is a loan amount ofUA 22.71 million from the ADF and a grant of UA 0.99 million from ADF/TAF representingrespectively 90% of the road project cost, and 94% of the technical assistance cost. The GOEcontribution will finance a portion of the local cost amounting to UA 2.58 million that will cover10.0% of the road project cost and 6.0% of the cost of technical assistance to ERA.

Project Implementation

The Ethiopian Roads Authority will be responsible for the execution of the project. The projectconstruction will be implemented over a period of 40 months and overall project completed by July2008 followed by the 12 months defect liability period.

Conclusions and Recommendations

The project is expected to contribute to improved access, reduction in transport costs, increasedagricultural production; give rise to other socio-economic benefits, and have a significant impact onpoverty reduction in the SNNPRS of Ethiopia. The Economic Internal Rate of Return has beenestimated at 15.57%, which is higher than the opportunity cost of capital in Ethiopia currently putas 10.0%.

The project is consistent with the Bank Group's strategy for Ethiopia in the transport sector asreflected in 2002-2004 CSP. The project is well conceived, technically feasible, socially justifiedand environmentally sustainable.

It is recommended that a loan not exceeding UA 22.71 million from ADF resources and a grant ofUA 0.99 million from ADF/TAF be extended to the Government of Ethiopia for the purpose ofimplementing the project described in this report subject to the conditions specified respectively inthe Loan and Protocol of Grant Agreements.

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1. ORIGIN AND HISTORY OF THE PROJECT

1.1 The GOE launched with the support and wide consultation with its development partnersand other stakeholders in 1997, a ten year Road Sector Development Program (RSDP) with theobjective of improving the efficiency and capacity of the road transport system to support itsAgricultural Development Led Industrialization Strategy and social economic development ingeneral. The RSDP I (1997 – 2002) with a reduced program size of USD 1.29 billion at mid termreview in February 2001 has mainly focused on network maintenance, upgrading and rehabilitationof the existing road network and improving the efficiency of the Road Agencies in managing thenetwork. The RSDP II (2002 – 2007) with a program size of ETB 12.899 billion (USD 1.55billion) in addition to on going projects rolled over from the first phase would focus on networkexpansion particularly the upgrading and construction of link roads to specifically address thedeficiencies in access to potentially rich agricultural areas and mobility in rural areas as part of abroad based rural development strategy.

1.2 The Wacha - Maji road was selected for inclusion in the RSDP based on the in-house pre-feasibility assessment taking into account level of potential traffic, road condition and accessproblem including some indices which were used to prioritize the road links to be included in theprogram. Accordingly, Government commissioned the detailed engineering design andenvironmental impact assessment of the Wacha-Maji road project in 1997 and the final reportswere submitted in October 1998. However given the absence of detailed economic feasibility andsocial impact assessment studies, Government could not proceed with the project implementation.

1.3 The Government included the additional preparation studies that were required in its officialrequest to the Bank in 1997 for use of ADF/TAF resources for preparation of seven link roadprojects for implementation under the on-going RSDP. The TAF grant for the Seven Roads Studies,which included the preparation studies of the Wacha – Maji road was approved by the ADF inDecember 2000. A Bank Sector Identification Mission to Ethiopia in June 2000 identified theproject road for Bank intervention and was included in the Bank’s pipeline in December 2000.Following the advancement in project preparatory studies, the Project was included in the Bank’s2002 Indicative Lending Program. The project documentation, which included detailed economicfeasibility study, social impact assessment, detailed engineering design and updated cost estimateswere completed in April 2002. This was followed up with Government official request forfinancing in May 2002.

1.4 Following Government’s request, the Bank scheduled an appraisal mission to Ethiopia inSeptember 2002 to appraise the project, which has been admitted into the core program of the RoadSector Development Program (2002 - 2007) and the Government's Sustainable Development andPoverty Reduction Program (2002 – 2004). The appraisal report is based on the updated projectstudies, discussion held with the Government agencies and other development partners includingNon-Governmental Organizations (NGOs) /Community Based Organizations in the project zone ofinfluence and additional information collected by the Bank mission that was in Ethiopia inSeptember 2002. The Appraisal Report was further updated during the Loan and Protocol ofAgreements negotiations in March 2003.

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2. THE TRANSPORT SECTOR

2.1 Sector Overview

2.1.1 Ethiopia's land area of 1.10 million km2 is one of the largest countries in Africa. However, thelow road density of 29 km/1000 square km compared to the Africa region average of over 50 km/1000square km has resulted in poor social service coverage and lack of effective support to the productivesectors of the economy particularly, the agricultural sector for internal distribution of inputs andmarketing of produce as well as export of cash crops.

2.1.2 The transport system consists of about 63,000 km of roads; one railway line (780 km)connecting Addis Ababa with Djibouti; two international airports (Addis Ababa and Dire Dawa),twelve local airports and 38 air strips, river and lake transport of relatively little significance andmarine shipping. The sector contribution to GDP at constant factor cost has been on the average at alevel of 6.1% per annum over the last three years.

2.2 Transport System

Road Transport

2.2.1 Ethiopia’s road network of 63,00 km consists of a relatively limited classified network of about32,871 km of which about 13% is paved; and some 30,000 km of unclassified roads. Inadequatemaintenance over a long period had led to a severely deteriorated road network. Roads are thecountry's dominant mode of transport. More than 95 percent of motorized tons-km and passenger-kmare carried by road. In 1996, it was estimated that 82% of the classified roads were in a fair/poorcondition and penalized agricultural activity through its effect on vehicle operating costs, delayedevacuation and damage to crops. The ten-year Road Sector Development Program (RSDP) launchedin 1997 is to address both the past neglect and the present capacity constraint in the road sector.Further details of the road sub-sector and the RSDP are given in Chapter 3.

Rail Transport

2.2.2 Rail transport operations are undertaken by the Chemin de Fer Djibouto - Ethiopien (CDE)jointly owned by the governments of the two countries under the provision of a 1981 treaty. It is a 780km single-track rail built about 105 years back with aging track and rolling stock coupled with weakmanagement making it difficult to maintain its original operational efficiency and safety standards.The freight tonnage conveyed fell from a high of 336,000 tons in 1986 to a low of 207,000 tons in2002. The number of passengers transported fell from 1,000,000 in 1986 to 501,000 in 2002, a drop of50.0 percent. As part of GOE’s external transport strategy, efforts are currently directed at restoringthe annual lifting capacity of the rail to 350,000 tons per year. EU has funded a study, which projectedan investment program of about US$ 205 million to meet CDE's needs until 2012. Emergencymeasures estimated at 31.7 million Euro with part financing to the tune of 8.385 million Euro fromFrance is currently being implemented and involves renewal of track, rehabilitation and procurementof locomotives/rolling stock, training and technical assistance support. In addition, medium and long-term measures with an estimated cost of 102.2 million Euros have been put in place with expectedfinancing from the EU of which 35 million Euros has already been secured. There is also the intentionof the two Governments to implement CDE concession plan.

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Air Transport

2.2.3 Ethiopia is served by two international airports (Addis Ababa and Dire Dawa), twelve localairports, which are administered directly by the Ethiopian Civil Aviation Authority (CAA) and 38airstrips. The Government has embarked on upgrading of the existing infrastructure facilities and itsrelated systems to transform Addis Ababa International Airport with a new runway, five taxiways, anew international terminal, and upgraded communication and safety facilities as per ICAO standard.The project, co-financed on parallel basis by several donors including the ADF would be completed in2003. Government in support of development of tourism has invested about Birr 302.0 million inconstruction of runways, terminal buildings and upgrading of facilities in five of the twelve domesticairports of Arba Minch, Axum, Gondar, Lalibela and Mekele. Air transport services are provided byEthiopia Airlines (EAL), which services 49 destinations in its international operations. Besides, tenother international airlines operate regional and international flights into and out of Addis Ababa.Ethiopian Airlines (EAL) is still the dominant provider of domestic scheduled services to 32 domesticairports and airstrips. The demand for EAL's services is high with average passenger load factor ofabout 66 percent on all routes and 68 percent in the domestic market in 2001. As per proclamation No37/1996, domestic investors are allowed to participate in the domestic air transport services but limitedto using aircraft with seat capacity of 20 passengers, or with cargo capacity of up to 2700 kg. Atpresent five private national operators have been licensed out of which two have started operation.

Maritime Transport

2.2.4 At the moment Ethiopia is mainly served by the port of Djibouti in the Republic of Djibouti,which provides the gateway for it’s foreign trade. Ethiopia’s transit traffic in 2001 amounted to about3.1 million tons. Of this, only about 140,000 tons were exports. Imports consisted of 1.16 million tonsof petroleum products and 1.8 million tons dry cargo, half of which consisted of grains and fertilizers.The Ethiopian Shipping Lines (ESL), a Government parastatal, owns 12 ships with total liftingcapacity of 112,834 Gross Registered Tons (GRT). Ten out of the 12 ships are operational. The ESLoperates in North & Western Europe, Mediterranean & Adriatic, Far East, East Africa and Middle Eastroutes and plays an important role in the development of the country’s external sector. The totaltonnage lifted by the ESL was 259,072 tons in 2000/01. The Government as matter of policy has in1997 liberalized freight forwarding and shipping agency with 36 companies including the state ownedMaritime and Transit Services Enterprise (MTSE) involved.

2.3 Transport Policies, Planning and Coordination

2.3.1 The Government of Ethiopia's current economic policy statement calls for a greater role for theprivate sector and change to market determined decisions. The policy as enunciated in November1991 and as reflected in the Letter of Sector Policy limits the role of the state to policy formulation,sector regulations and their enforcement. Government is therefore committed to reforms includingstreamlining the role of public enterprises; and encouraging private sector participation. A lot ofinstitutional support and policy studies are being financed in the sector by donors for which actionplans are being recommended for implementation by the Government for the deregulation andprivatization of the sector.

2.3.2 The Ministry of Finance and Economic Development (MoFED) is responsible for givingdirectives and reviewing investment plans from the sector Ministries/agencies, which are submitted forapproval to the Cabinet and the Council of Representatives. MoFED also undertakes the review ofrecurrent budget, which is also approved by the Cabinet and the Council of Representatives. Theoverall co-ordination of sub-sector plans of the transport sector is coordinated by the Ministry ofInfrastructure to which all agencies in the transport sector, including those of road infrastructure report.

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The Ethiopian Roads Authority (ERA) undertakes roads planning and construction for the trunk andmain link roads while giving technical assistance to Regional Road Authorities of the regional stategovernments. The Ministry of Infrastructure (MOI) is responsible for planning of all other transportmodes, as well as regulation of the road transport industry. The administration and management ofrural/regional roads is the responsibility of the respective regional governments while themunicipalities are responsible for urban roads. Finally, the Ministry of Finance and EconomicDevelopment plays an important role in helping to co-ordinate transport strategies, providingguidelines for sectoral development plans, and setting overall levels of investment for each of the sub-sector plans. Effective co-ordination exists between the planning offices of MOI, ERA, RRAs and theMoFED.

3. THE ROAD SUB-SECTOR

3.1 Road Network, Vehicle Fleet and Network Traffic

3.1.1 The total classified road network is about 32,871 km of which 16,391 km are federal roadswhich function as the primary road system, connecting important economic centers and regionalcapitals under the direct responsibility of the Ethiopian Roads Authority (ERA), and 14,480 km ofregional roads owned by the RRAs which provide the inter-village tertiary road network. Included inthe classified network are some 2000 km of improved low class roads overseen by communities. Ofthe classified network, 3,924 km are paved while 28,947 are gravel. The condition of the federal roadnetwork marginally improved from 18% in good, 29% in fair and 53% in poor in 1995 to a currentsituation in 2001 of about 31% rated as good, 28% rated as fair and 41% in poor condition. For theregional roads about 25.0% are rated good in 1995 and presently about 35% are found to be in goodcondition. This current condition indicates an apparent poor level of service. The network hashowever expanded considerably since 1996/97 as indicated by road density data, which increased from21.7 km per 1000 km² in 1996/97 to 29 km/1000 km² in 2000/01. Much of the increase (80 percent)has been in regional roads that are important for providing access to services and markets for the ruralpoor.

3.1.2 An estimated fleet of some 140,000 vehicles provides transport services in Ethiopia resulting incurrent rate of motorization of 480 people per vehicle. There is a high preponderance of over agedvehicles that have resulted in low availability and high spare parts requirements resulting in highvehicle operating costs. Government has put in place incentives for increased motorization, and privatevehicle registration has been growing at about 8.0% per year over the last three years. Traffic flows onthe main network are high with 6 percent of the main network having an average daily traffic greaterthan 800 vehicles, 70 percent greater than 200 vehicles, and the rest 24% less than 200 vehicles.Composite ERA traffic data series for the main road sections indicated rapid traffic growth rate of8.1% per annum over the period 1990 – 2001, considerably above the trend growth rate of GDP ofabout 5.0%. The most striking feature in traffic flow trends is the continuing increase in total vehiclekilometers traveled particularly for heavy vehicles. This high rate of traffic growth is supported bydata on fuel consumption and sales, which has been growing in the region of 7 – 9% per annum.Evidence from recent national trends suggests an elasticity of traffic growth with respect to GDPgrowth of 1.4 to 1.6.

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3.2 The Road Transport Industry

3.2.1 The Government in 1992 introduced the Transport Regulation Proclamation that allowed theestablishment of non-government transport undertakings as associations, companies and privateoperators out of the aegis of Government Corporations. Deregulation of the road freight and passengertransport sector has resulted in a competitive market for the movement of goods and people. In orderto match the transport supply with demand, the private sector has received assistance from thegovernment through credits and other incentives that include tax exemptions to enable the expansionof the capacity of both freight and passenger transport fleet.

3.2.2 The road transport market, in spite of above efforts is still characterized by a situation ofimperfect competition due to the excessive presence of Government activity (own account fleets,parastatal companies, city bus public company, national protection). In particular, in the freighttransport, the presence of three large conglomerates of operators owned by the public sector, which indifferent ways exert some oligopolistic influence on the market, do not stimulate the entrance ofindividual private operators. The Government has indicated its intention to further refine policy, legaland regulatory framework and its policy implementation given the findings of the Road TransportRegulation Study with EDF funding so that competition between operators is further intensified.Current actions taken in this regard is the disbanding of bulk fuel transport associations that operate ina way that hampered widespread distribution of fuel throughout the country. Other issues of concernare i) the control of vehicle loading which is not effective with axle load limits exceeded and ii) roadsafety in Ethiopia which is extremely poor with accident fatalities of 155/10,000 motor vehiclescompared to 60/10,000 motor vehicles in Kenya and 17/10,000 motor vehicles in South Africa rankingamong the highest in Africa. The action plan in this respect which includes the implementation of roadsafety education and measures, revision of axle load legislation and strengthening the enforcement ofaxle load controls is being implemented by the Government.

3.3 Road Administrations and Training

Road Administration

3.3.1 Ethiopian Roads Authority (ERA) is responsible for overall planning, construction,maintenance and management of the country's trunk and major link roads with a Board of Directorsappointed by the Government to oversee the authority and guide its strategic management of the roadnetwork to meet the priority needs of the economy and the social demands of a large and widelydispersed rural population. As per Proclamation in 1997, ERA has been restructured as anautonomous agency. The Board has authority to approve the award of all contracts. Theresponsibilities for the construction and maintenance of rural/regional roads have been decentralizedand are administered by the Regional Government's Rural Roads Authorities (RRA), that function asautonomous agencies under management boards. The restructuring has effectively addressed theproblem of utilizing, motivating, developing and retaining professional staff. ERA has a Rural RoadsTechnical Support Branch within its structure to provide the needed technical assistance and trainingsupport to RRAs. The relationship between ERA and the region states’ RRAs is mainly with respect tonetwork planning and technical support facilities.

3.3.2 The stakeholders meeting that included participating donors in the RSDP held in July 2002recognized Contract Administration and Design Review as main areas of institutional weakness ofERA. As part of collaborative work program, donors agreed that institutional support be focused onthese two areas in order to deliver effective support to the RSDP. The institutional support componentof this project is in line with donors concern to address these weaknesses. The World Bank isproviding institutional support to ERA in Contract Administration. Though ERA has filled all senior

6

and middle level management positions and capacity at junior level has improved, there is still theneed for greater delegation of authority, which requires a delegation of authority matrix to improve onbureaucratic delays in decision-making. The preparation of such a delegation of authority matrix thatspells out the responsibility and authority of lower to senior management staff will be required forinstitutionalizing decision making. This has been made a condition of the loan.

Training

3.3.3 ERA has its own in-house and on-the-job training programs for all levels of its personnel. Theexisting training center at Alemgena (established in 1956) is capable of training personnel engaged inbuilding and maintenance of trunk and major link roads, equipment operation, trade and crafts,engineering, financial management etc. Another training institute was established in 1981 at Ginchi totrain in modern labor-based techniques suitable to the country's needs. These training centers also trainfor the RRAs and the private sector. In order to strengthen the institutional capacity of Road Agencies,advanced training courses in foreign institutions with assistance from World Bank, JICA, EU and theGovernment of Germany (GTZ) are also arranged. Since the inception of RSDP, about 58professionals have so far received overseas training in additional to short-term training as counterpartsby Consultants. Overseas training for 36 professionals of the region states’ in the field ofphotogrammetry, road design, hydrology, bridge design, and material testing has also been undertaken.

3.3.4 Technical assistance under donors’ funding in different fields has been in place to complimentthe in-house training activities of ERA and the RRAs which include contract specialist, bridgespecialist, transport economist, rural roads co-coordinator and RSDP adviser assigned by EU; threeothers working in the newly established Road Inspectorate Unit for strengthening capacity fortechnical monitoring and supervision of works, under the World Bank financing. The ADF is tostrengthen ERA Design Review Branch as detailed in Chapter IV. The Government has finalized acredit agreement with NDF for institutional strengthening of the RRAs in transport planning andcontract administration while GTZ, VSO and Ireland Aid have been actively involved in capacitybuilding for the RRAs. Ireland Aid would over the RSDP II period be involved in capacity buildingfor labor based routine road maintenance/labor based contracting system, legal/policy framework, andstandardization of design of rural roads for the RRAs. The effective utilization of the technicalassistance program is critical to the sustainability of the projects under the RSDP. The submission ofbi-annual reports on Road Sector Policy Support and Technical Assistance Program has been made acondition of the ADF earlier intervention in Butajira-Hossaina-Sodo road project approved inNovember 2001.

3.4 Road Planning, Financing and RSDP

3.4.1 Road planning and programming is undertaken by ERA's Planning and Programming Division(PPD), which is well organized and staffed with economists, engineers, statisticians, budget analystsand traffic experts. The division has contact with RRAs for the overall network planning and forconsolidation of the Road Sector Development Program based on guidelines and policy directionsissued by MoFED. Budget preparation for the main trunk is also the responsibility of the PPD. Whenthe programs are finalized, the proposals and budgets are reviewed by the Board of ERA andsubmitted to MoFED for review and submission to the Government for its approval. The RSDP I(1997 – 2002), with a revised estimate of US$ 1.05 billion, has been rolled into the second phase,RSDP II (July 2002– June 2007) which commenced in July 2002. Overall RSDP I accomplishment atMarch 2002 is 86% for physical with corresponding financial disbursement rated 76%. Financing ofthe RSDPI indicated Government commitment and ownership with its contribution of ETB 4.07billion (USD 476.2 million) which is about 57.6% of program financing. The classified road network

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has also increased by about 30 percent over the period and 80% of farms that were more than half aday walk from an all weather road in 1996 have been reduced to 70% by July 2002.

3.4.2 The focus of RSDP II (2002-2007) with an overall program size of USD 1.55 billion is tocontinue with the momentum to achieve the road condition targets of 80%, 60% and 50% of paved,gravel and regional roads respectively in acceptable condition in 2007 and provide a sustainable levelof essential road infrastructure to the rural population. Proportion of area more them 5 km from allweather roads would be reduced from 75% to 70% while average distance to all weather roads wouldbe reduced from 17 km to 14 km over the program period. Prioritization of road projects is setaccording to the following criteria: i) access to ports; ii) access to existing resource areas; iii) access topotential resource areas and markets; iv) access to food deficit areas; and v) balancing distribution ofroad infrastructure among regions. The Wacha-Maji road is a major link to access potential resourceareas and markets. The financing requirement for this component of the program (upgrading andconstruction of 1,370 km of link roads) has been fully pledged (see Annex 5). An ERTTPsubcomponent is included in the RSDP II to specifically address the construction of rural roads andrural mobility at village and community levels. The RSDPII is expected to be parallel financed byIDA, ADF, EU, OPEC, BADEA, NDF, Governments of Germany, Italy, Japan, Ireland, UnitedKingdom, Sweden, NGOs, the Road Fund and the Government. Out of the total RSDP II investmentrequirement, an amount of USD 635.70 million is expected from the GOE, the Road Fund and thecommunities accounting for over 41.0% of program financing. There is still a financing gap of ETB726.4 million (USD 87.23 million) for which financing requests are being addressed to donors. Donorshave agreed on 17 Performance Monitoring Indicators of the RSDP II which are to be preparedannually for participating donors to provide a basis to assess the development impact of the programand fine-tuning of the delivery mechanism at mid term review scheduled for March 2005. RSDP IIlow case scenario by component and by sources of finance is as indicated in Annex 5 on SummaryFinancial and Economic Analysis.

3.5 Road Engineering and Construction

3.5.1 Most of the studies and designs for large and complex projects are undertaken by foreignconsultants. Transport Construction and Design Enterprise (TCDE), a Government ownedconsulting firm and local consulting firms undertake detailed engineering of minor roads andbridges. Most of the work of the engineering operations of ERA is devoted to the supervision andreview of feasibility studies and detailed engineering carried out by consultants. ERA’s capacity fordetail engineering design review is weak and the branch is to be strengthened through ADF/TAFfunding in the project (see details in Chapter 4). Prior to 1992, the force account units of ERA andRRAs undertook construction of all main roads. In order to construct more access roads in the remoteareas, Government through a proclamation has decided to invite foreign contractors mainly forconstruction of major roads. The Government has embarked on the implementation of recommendedmeasures contained in the Domestic Construction Industry Study financed by the IDA to encouragethe development of the private sector. The most significant of the elements in the action plan are theselling-off of government owned equipment on a long-term interest free credit basis, an adjudicationboard for settling disputes, licensing construction equipment as bank collateral, the provision ofmobilization advances, etc. TCDE, is fully equipped with laboratory facilities for testing of soil andmaterials, and the private sector has also developed some laboratory facilities to complement TCDEcapacity.

3.5.2 The issue of access to right of way and possession of land for contractors’ camp, quarry andborrow areas, and for temporary diversion of traffic has become a serious problem affectingimplementation progress of road works contracts in Ethiopia. Relocation of obstructions by publicutilities on road alignments is usually over delayed thus affecting contractors work programs and

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providing basis for claims by contractors. The evidence of access to right of way, designated quarries,and borrow areas before the award of construction contract has been made a condition of the loan. Theneed for an effective and pro-active Right of Way (ROW) branch to deal with these issues was raisedwith the Government. There is an on-going study on fine-tuning the ERA organization structure thatwould place the ROW Branch, presently in the Legal Services Division under the ContractAdministration Division for better co-ordination. The proposed structure scheduled for ERA Boardapproval in the first quarter of 2003 would allow the ROW Branch to be staffed with more agents andpermit projects in the same vicinity to have their own ROW agents that could follow the day-to-daytasks of right of way problems. The establishment of a well-staffed and strengthened ROW Branch inERA has been made a condition of the loan.

3.6 Road Maintenance

Organization

3.6.1 ERA undertakes the maintenance operations of its network through its ten-maintenancedistrict offices spread through out the country. The effort of turning each maintenance district intoself-accounting business units, capable of producing and implementing cost-effective maintenanceprogram is underway with DFID-UK technical assistance support. The responsibility formaintenance of regional/rural roads has been delegated to the Regional Government's Rural RoadsAuthorities. Each maintenance district of ERA is headed by a District manager who is responsiblefor planning, budgeting, and monitoring of maintenance activities under his district, and reportsdirectly to the Deputy General Manager, Operations Department of ERA. All maintenance districtshave established capability for maintenance of gravel and paved roads using own force and privatecontractors. Government, as a matter of policy and in addition to other incentives, plans to award40.0% of road maintenance works to private contractors, increasing progressively to 100.0% over aten years period in tandem with development of the domestic contracting industry to create a moreconducive environment for the private sector.

Financing

3.6.2 As shown in Table 3.1, road expenditures for the Federal Main Trunk Network administeredby ERA have increased from ETB 145 million (US$ 29 million) in 1993/94 to ETB 800 million (US$95.80 million) in 2001. Due to the on-going upgrading and rehabilitation works under the RSDP I, theshare for maintenance expenditure declined from 37% in 1993/94 to 11.6 % in 2000/01. However, theabsolute allocation for maintenance has increased more than twice over the same period, reflecting thepriority given to maintenance of the existing network.

Table 3.1Road Construction and Maintenance Expenditures (In Million ETB)

1993/4 1994/5 1995/6 1996/7 1997/8 1998/9 1999/00 2000/01

Total 145 476 582 621 681 882 800 1,180.3Construction as % in total 63 84 75 76 83 84 82 88.4Maintenance as % in total 37 16 25 24 17 16 18 11.6

Source: ERA

3.6.3 As agreed during the RSDP donors meeting of 1996, for the sustainability of investmentunder the program, a Road Fund was established by Proclamation No. 66/1997 on 06 March 1997to ring fence a steady and secured financing for maintenance. The objectives of the Road Fund areto finance maintenance works of the Road Agencies and to provide sources of fund for road safetymeasures and programs. The fund is managed by the Road Fund Board which has been established

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as an autonomous public authority under the Prime Minister's office and comprising representativesof the Federal Government (6), Regional States (5) and private transport sector (4) of which onemember is designated as chairman.

3.6.4 Revenues for the Road Fund are derived from levy on fuel consumption, vehicle license fee,overloading fines, annual allocation from the central government budget, and other prospective roadtariffs, which could be fixed as necessary. The Road Fund basic distribution of budget allocation isbased on 70% to Federal Roads (ERA); 20% to Regional Roads; 10% to selected municipalities. In2000/01, about 3% of the budget was allocated to the financing of road safety measures before thesharing among the road agencies. The revenue collected by the Road Fund Administration from RoadUsers has increased from ETB 164.46 million in 1997/98 to ETB 355.8 million in 2000/01. The RoadFund Revenue and Regular Budget Allocation for the years 1997/98 to 2000/01 is as reflected Table3.2 below. The performance of the budget in terms of utilization by the Road Agencies is on theaverage 72.68% per annum indicating that the availability of maintenance revenue has not been aconstraint. The physical performance in terms of km maintained has been rated at about 95% perannum.

Table 3.2Road Fund Revenue and Regular Budget Allocation

(ETB million)

Fiscal YearTotalRevenue

TotalAllocated

Federal(ERA)

Regional(RRA) Municipalities

TrafficSafety

1997/98 164.461 162.958 117.958 30.000 15.000 -1998/99 182.816 200.000 140.000 40.000 20.000 -1999/00 220.815 200.000 140.000 40.000 20.000 -2000/01 355.800 250.000 169.750 48.500 24.250 7.500

Source: Road Fund Administration

3.6.5 To ensure transparency and value for money, road agencies are advised and instructed to keepseparate financial records as per financial principles and procedures so that the Road Fund Auditorscan audit the books of account separately from that of other financiers. The Road Fund Administrationis developing road fund financial and technical audit system so that Road Agencies maintenanceactivities are effectively monitored to ensure that road users get value for money.

3.6.6 The Government has prepared a Maintenance Action Plan (MAP-2) for the period 2000/01to 2004/05 for the road sector. The plan reflects commitment to progressive contracting out ofmechanized and manual routine maintenance works and identified resources and sources of fundsfor its implementation. It is to be noted that in 2000/01 about 77.5 percent of the financingrequirements are to be met from the user charges with the balance being provided by transfers fromthe Government Budget and IDA to clear the maintenance backlog. By the year 2003/04, it isestimated that the contribution from the user charges will meet the maintenance needs. Otherelement of the plan is that ERA will move gradually from 100% force account in 2000/01 forperiodic maintenance to 100% contracting 2009/10. This requires further elaboration and asdemanded by donors at the February 2001 mid–term review and stakeholders’ discussion of July2002, ERA needs to develop a strategy and an action plan to realize these objectives, taking intoaccount the current weaknesses in the domestic construction industry. DFID-UK has financed atechnical assistance support project in this regard for ERA-District Road MaintenanceOrganizations that is currently under implementation. Government is proposing the establishmentof Rural Community Infrastructure Funds for maintenance of rural infrastructure and to resolve theissue of ownership of very low level earth roads, tracks and trails for sustainability of investment inthe ERTTP.

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Table 3.3Maintenance Needs and Financing Sources

(In Million ETB)

2000/2001 2001/2002 2002/2003 2003/2004 2004/2005Maintenance Needs- Federal- Regional- MunicipalitiesTotal

- Maintenance Financing- IDA- User Charges- Government Budget

Total

238.054.529.9

322.4

33.9250.038.5

322.4

401.954.830.5

487.2

152.8324.010.4

487.2

425.558.331.1

515.0

134.4369.011.6

515.0

301.963.431.7

397.0

-397.1

-___397.1

245.169.332.3

346.7

-346.7-____346.7

Source: Ethiopian Roads Authority

4. THE PROJECT

4.1 Project Concept and Rationale

4.1.1 The project road links the towns of Wacha and Maji and connects to the Major North-Southwest road corridor leading to the city of Jimma and to Addis Ababa to the north, thus playing astrategic role in linking this large area with its high agricultural potential to the rest of the country. Theroad also plays an important role in linking small towns, villages, and scattered communities along theroute and fulfils a vital role in transporting goods locally and maintaining social ties.

4.1.2 The project road has deteriorated considerably in the 1980’s for lack of maintenance.Currently, only a portion of the road of about 40 km is motorable throughout the year. Approximately130 km of the southern section of the road has been virtually impassable for motor vehicles over thelast eight years. The extremely poor access conditions to this part of the country, and the highdevelopment potentials have warranted the construction and upgrading of the road. Duringconsultations carried out by the design consultant as well as the meetings held by the Bank appraisalteam with the project beneficiaries and the civil society, along the project route, public support for theroad construction and upgrading was, without exception, very high.

4.1.3 Several alternative design and maintenance strategies for bitumen-paved, high standard gravelroad, and low standard gravel road were evaluated by the Design consulting firm. The selected option– An all-weather engineered gravel road with intermittent paved sections on steep grades – was foundto be technically and economically the most adequate solution. The detailed engineering design forthe project was reviewed and found to be appropriate.

4.1.4 The Bank Group has financed eight projects and a study in the road sector in Ethiopia for atotal amount of UA 167.91 millions. Six of the projects have been successfully completed and theBank's PCRs have been undertaken for them. Two projects and the study are ongoing without anymajor problem. Several lessons have been drawn from the Bank's experience and past intervention ofother donors in the sector. The most important of them are:

i) Implementation delays due to inadequate capacity for procurement actions;

ii) Capacity need in the Implementation Agency for reviewing and supervising designstudies;

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iii) Need for capacity strengthening of the implementation agency for monitoring andsupervision of works.

4.1.5 The Government and the Bank had acknowledged these weaknesses, and actions have beentaken to improve on these areas of poor performance. A technical assistance component for capacitybuilding in project design review has been included in this project. In addition the Bank Group hadundertaken in the recent past procurement and disbursement seminars for Executing Agencies inEthiopia as part of a solution to these problems. Besides, other donors have trained ERA staff on theirprocurement procedures and are currently providing technical assistance and institutional support incritical areas of need.

4.2. Project Area and Project Beneficiaries

A) Project Area

4.2.1 The project area is located in the Western Highlands of Ethiopia and lies entirely within theBench-Maji Zone of the Southern Nations, Nationalities and Peoples Region with area of influencecovering Chena, Meinit and Dizi weredas. The project route passes through or close to a number ofsmall towns and villages such as Bechuma, Jemu, and Maji from where it connects to the Diziwereda headquarters of Tum. The population in the direct project area of influence has beenestimated at between 70, 000 and 110,000. This accounts for about 25% of the population ofBench-Maji Zone estimated at 404,774 in 2001. About 92.0% of the populations are rural, andagriculture is the basis of their livelihood. Among the main ethnic groups are the Dizi, Me’en,Bodi and Surma that fall into the category of indigenous population with largely subsistenceoriented production systems. The sex ratio is estimated as 100.5%, which compares with nationalaverage of 101%. The working age population (15-64 years) is estimated at 53.6%, indicating ahigh dependence ratio.

4.2.2 The main subsistence and cash-crops are maize, barley, wheat, teff and sorghum, togetherwith small amounts of coffee, spices and also enset with combined production of 2,783,414 tons asper 1999/2000 Agricultural Sample Survey data by zone. Current land use pattern in the projectarea Weredas indicated percentage of cultivable land under crops as 0.9% of 236,766 ha in Dizi;4.9% of 240,126 ha in Meinit and 28.4% of 117,237 ha in Chena. There is thus no shortage ofcultivable land and rainfall and fertility are good suggesting that the area holds the potential formuch greater agricultural production. Currently farmers are constrained to put more land undercultivation, because of poor access, low agricultural technology, limited marketing opportunitiesand low producer prices. The Bank Group has programmed to co-finance a Rural Credit Programwith an estimated cost of UA 77.0 million with IFAD and also preparing a Marketing InfrastructureProject to be implemented in four regions, which include the SNNPRS. The credit is to finance off-farm and on-farm income generating activities. This would result in complementarity of the BankGroup intervention in the project zone of influence and enhance the project impact on povertyreduction.

4.2.3 Transportation is a major constraint to socio-economic development that the populationfaces. The situation is aggravated by the lack of pack animals, which are said not to survive well,due to the high altitude and humidity. Trips to the market take a minimum of 4 to 8 hours in theimmediate zone of influence and can take up to 3 days on foot for markets beyond. This carries ahigh opportunity cost both in terms of productivity and access to services. By linking this isolatedproject zone to the national road network, access to services and markets for the rural poor in thelocal markets of Wacha, Bechuma, Maji, and Tum; and beyond in the urban markets of other

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secondary cities such as Mizan, Jimma, Shehemene, Awassa (capital of SNNPRS) among othersand Addis Ababa would be possible.

4.2.4 Analysis made by the Welfare Monitoring Unit of (MoFED) in 1999 indicated that the levelof per capita income for the zone is about USD 154.9, which compares favorably with the SNNPRSaverage of about USD 145.5. However it is estimated that about 56.5% of the population isabsolutely poor with 57% of the rural population below absolute poverty line, while 46% of theurban population are found in absolute poverty. The gender division of labor in the agriculturalcommunities in the project area indicated that men are responsible for ploughing and sowing,women for weeding, draining fields and milking, while harvesting is shared between men andwomen. In the project zone, transporting is done mainly by back and head loading respectively bymen and women. Women are also exclusively responsible for domestic chores, including the timeconsuming hand grinding of grains. Among the agro-pastoralist Surma, women do almost all of theagricultural and domestic labor while men concentrate on livestock keeping and hunting.

4.2.5 Access to health facilities is low due to the lack of transport, the situation is aggravated bythe fact that many households face distances to health facilities in excess of 10 km (51 percent inKeficho Shekicho Zone, 20 percent in Bench Maji Zone), and even where lower level healthcenters are closer, referral to a hospital is almost impossible, since it is 200 km away. Women whomostly lack the money and/or means deliver their babies with traditional birth attendants, who are,however, not always able to deal adequately with complications. There is also a lack of equipmentfor diagnosis and treatment and drugs due to the poor communications and transport. The top maindiseases recorded in the project area are upper respiratory diseases, Malaria, Diarrhea, and sexuallytransmitted diseases. HIV/AIDS prevalence is not known due to lack of reliable testing facilities,but awareness is said to be high due to the activities of branches of the National AIDS Council andAIDS clubs in schools.

4.2.6 Access to education facilities seem to be less affected by the transport situation withenrolment as a whole (61 percent for primary and 8.2 for secondary schools) being at par with theregion (56.6 percent and 7.8 percent). Secondary school enrolment is, however, below the nationalaverage of 15.6 percent. Moreover in Bench Maji Zone, school attainment and literacy levels arelower than the regional average. No disaggregated figures were available for the enrolment ofindigenous populations, but experience would suggest that enrolment is substantially belownational averages.

B) Project Beneficiaries

4.2.7 The immediate beneficiaries of the proposed road upgrading are the populations livingimmediately adjacent to the road and its area of influence; particularly pronounced for thesettlements between Bechuma and Maji who have no immediate access to motorized transport atthe moment, and who are restricted in their access to alternative routes. The area of influence of thisroad, however, is expected to reach larger populations outside the road reserve who live as far asthree days travel either by foot or pack animal, because markets in the project area are located atconsiderable distance from each other.

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4.3 Strategic Context

4.3.1 The Government finalized in July 2002 its Sustainable Development and Poverty ReductionProgram (SDPRP) 2002/3-2004/5. The key sectors of emphasis identified are: i) Rural andAgricultural Development, ii) Health & HIV/AIDS iii) Education iv) Water & Sanitation and v)Roads. The SDPRP recognized the role of the road sub-sector in improving social service coverageand in supporting the productive sectors of the economy. GOE therefore in realizing the objective ofSDPRP agreed to role the RSDP to the second phase. The Wacha-Maji Road project is being executedwithin the sector investment program and has been listed in the core program of RSDP II (2002-2007)as one of the link roads to be constructed. The project will contribute to improving the efficiency andcapacity of the road sector to support social and economic program of Ethiopia by increasing networkcapacity and providing access to isolated and potentially rich agricultural resource areas; anddeveloping the institutional capacity of ERA in design review.

4.3.2 This strategic context is consistent with the Bank Group’s intervention strategy in theTransport Sector, which mainly focuses on removal of the constraints, posed by poor road networkand limited access to agricultural and rural development, which complicates the problem of foodsecurity and rural poverty. As contained in the 2002–2004 Country Strategy Paper, the BankGroup is to provide support for the effective implementation of the RSDP focusing on theexpansion and improvement of the road network in the rural areas and trunk and collector roadslinking the main agricultural regions with the marketing centers to promote the achievement of thegovernment’s food security strategy and program and reinforce the over all poverty reductionobjective.

4.4 Project Objectives

The sector goal of the project is to improve the efficiency and capacity of the transportsystem to support economic and social development programs of Ethiopia. The objective of theproject is to improve accessibility and mobility of the rural population to markets, social andeconomic services/facilities and promote market integration between rural and urban areas insupport of the poverty reduction program. At project completion, the proportion of farms in thethree project weredas that are more than half a day’s walk from nearest all-weather road would bereduced from the current level of about 85% to 25%. The walking distance of rural households toall-weather motorable roads would be reduced from current level of 2 to 3 days to less than fivehours with considerable savings in journey time. The project would contribute to the reduction ofthe current estimate of 56.5% of the population categorized as absolutely poor.

4.5 Project Description

4.5.1 The expected outputs of the project are as follows: (i) 173 km of high standard engineeredgravel road with intermittent paved sections on steep grades; and (ii) strengthened design reviewcapacity of ERA.

4.5.2. The project comprises the following components:

1) Construction works for upgrading the existing earth/track road to an all-weatherengineered gravel road with a 7-m carriageway inclusive of shoulders for a totallength of 173 km between the towns of Wacha and Maji in the Southern NationsNationalities and Peoples Region. Intermittent sections representing approximately 20percent of the road length (35 km) on steep grades (greater than 8%) in mountainous

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terrain will be surfaced using double bitumen surface treatment to avoid rapid gravelloss, and minimize erosion.

2) Consulting services for:- Design review, tender assistance, and supervision of the construction works.- Project audit service.

3) Technical assistance for capacity building in Design Review, CADD training, postgraduate academic training, and computer equipment for the design review branch ofthe Executing Agency.

A. Construction Works

4.5.3 The Wacha - Maji road construction/upgrading project is an engineered gravel road, whichincludes improved horizontal and vertical alignments, an adequate road structure, the construction ofbridges and drainage structures, and the installation of traffic and roadside safety devices. Topographicsurveys, soil investigations, and detailed engineering design plans and specifications were carried outby an international engineering consulting firm for the preparation of construction and biddingdocuments.

4.5.4 The proposed road alignment generally follows the existing one with some realignments andimprovements to the horizontal curves and the vertical profile to accommodate the design speed of 60km/h, and to meet road safety requirements. It has been designed in accordance with the Ethiopiangeometric design standards DS5. The cross-sectional characteristics are a 7-m carriageway inclusiveof shoulders.

4.5.5 Drainage structures including side ditches, concrete pipes, box culverts and bridge openingswill be provided to carry peak flows for a 50-year return period. To minimize erosion andsedimentation due to high water velocities, the side ditches will be paved where slopes exceeds 5%and stone rip-raps will be used as energy dissipators at culverts and ditches outfalls.

4.5.6 The structural design of the pavement was based on the CBR values of the road sub-gradealong the alignment and the expected traffic load during the design period. The road was divided inhomogenous sections falling into three categories based on CBR values. The cumulative trafficloading over a 20-year design period was estimated at 855,000 ESAL. The pavement design methodused the TRRL Overseas Note 31 and the Kenyan road design manual as they provide an appropriatesolution based on actual experience in similar tropical climates. Intermittent sections of the roadrepresenting approximately 20 percent of the total length (35 km) on steep grades (greater than 8%) inmountainous terrain will be surfaced using double bitumen surface treatment, to prevent rapid gravelloss and erosion.

4.5.7 Highway signs including regulatory, warning, and guide signs for the safe movement of trafficwill be provided. Guardrails will be installed at high embankments and at bridge approaches for safetypurposes.

B. Consultancy Services

4.5.8 Supervision consultancy services for the construction works will be carried out by anexperienced consulting firm on behalf of ERA. The selected firm will carry out a design review,prepare bidding documents, and participate in the tender evaluation process. It will also administer theconstruction contract, inspect the works, supervise the necessary quality control testing performed by

15

the contractors, track progress and costs, and maintain close liaison with ERA and relevant ministriesresponsible for the project. A description of the services for the consulting firm will be detailed in aTerms-Of-Reference and in the respective contract agreement. In addition an auditing firm will carryout the audit of the project annually.

C. Technical Assistance to ERA

4.5.9 The technical assistance support will provide for the recruitment of Experts, the training ofcounterparts, and computer aided design software and hardware for strengthening ERA designreview unit. ERA will provide the list of staff to be trained in the identified areas of need. Theiracademic qualifications and professional experience for the specific training need for which theyare proposed shall be acceptable to the Fund. This has been made a condition precedent to firstdisbursement of the ADF Grant.

4.5.10 The Technical assistance support for strengthening ERA Design review unit, includes thesub-component listed below. More details are provided in Annex 8.

(a) The recruitment of experts in Computer Aided Design and Drafting (CADD), highwaydesign, pavement/material design, drainage, and structural design;

(b) The training of counterparts locally and abroad in a professional engineering designenvironment in the use of CADD in highway design (geometric, pavement, materials),drainage and structural design; postgraduate academic training at Masters Degree levelfor two civil engineers;

(c) The development of a CADD standard manual; and

(d) The provision of CADD equipment and software.

4.6 Traffic, Producer Surplus and Prices

a) Traffic Levels and Producer Surplus

4.6.1 There are no historic traffic data as the Wacha – Maji road link is not covered by the ERAtri-annual traffic counts. Vehicular traffic exists only on the first 56km section of the road fromWacha to Bechuma. Traffic surveys were undertaken in January 2001 by the Consultant thatundertook the Updated Studies using a seven-day classified manual count and Origin andDestination surveys. Over this motorized section of the project road, the traffic survey resultsindicated that no motorized traffic had origin and destination beyond Bechuma. The majority ofcurrent traffic on the motorized road section comprises small trucks, which account for over 80% ofthe Average Annual Daily Traffic (AADT) of 30 vehicles. Beyond Bechuma, the route up to Majiis mainly earth/track with mainly pedestrian traffic using back and head loading. The project roadwould provide the first all weather motorable access to Maji from the main road network. However,there is an alternative access to Tum from where 3-4 hours walking to Maji is possible during dryseason through desert terrain from Mizan to the West through Jima. The route, inaccessible attimes, provides the only feasible access for freight requirement for the urban population of Tumand Maji. The traffic using this desert route is estimated at 18 vehicles per day. There is also anestimate of likely traffic diversion from air transport, which now goes to Tum estimated at about93.0% of air passengers put at 2790 passengers.

16

4.6.2 The traffic counts undertaken in 2001 thus provided the basis of traffic assessment. Theundertaking of regular traffic counts on the project road during and after construction has been made acondition of the loan. The forecasting approach used relates vehicle ownership and use to the growthin income and population and is found to be appropriate for the project road with a strategic rather thana specific location function. Based on low, medium and high forecast traffic and using the mediumforecast scenario, car/light vehicles are projected to grow at 5.8% per annum from 2000 up to 2010and at 4.6% thereafter up to 2027, while a growth rate of 6.9% and 5.7% for commercial vehicles areused over the same term periods. The Wacha – Bechuma section volume of normal traffic is estimatedat an AADT of 30 vehicles in 2004, as indicated in the Table 4.1 below.

Table 4.1Base Year (2004) - Motorized Traffic* - (AADT)

Links Car 4WD

SmallBus

LargeBus

SmallTruck

MediumTruck

HeavyTruck

Truck &Trailer

Total

Wacha - BechumaNormalDivertingTotal

000

202

202

101

241539

000

134

000

301848

Composition % 4.17 4.17 2.08 81.05 0.00 8.33 0.0 100.0 The diverting traffic indicated is added in 2004 only for purpose of pavement design; diverted traffic would be realized

in 2008 when project is completed and opened to traffic.

4.6.3 The Bechuma – Maji road section is extensively used for pedestrian access, which is the onlymode of transport. A recent study of transport activities of rural communities, the Village LevelTravel and Transport Study (VLTTS) June 1999, indicated that all weather road access would conferbenefits to pedestrians and other non-motorized transport using the proportion of pedestrian time spentin travel which would have a resource cost implication. It is recognized based on the study that 77.0%of pedestrian trips would have an economic value. Some animal carts were observed as part of non-motorized vehicle fleet but mostly in the sub-urban rather than in the rural areas. The pack animals areused for a number of well-defined trips a year with range of annual km between 900 down to 600. Thevolume of non-motorized traffic on the project road has been inferred from trip propensitiesextrapolated from the VLTTS since no moving observation counts were undertaken because ofweather conditions. Transport demand is estimated at 739.3 annual travel hours for women, of which75% is by pedestrian means while annual travel hours for men of 1008.7 of which 56.0% is bypedestrian means. It is estimated that 77.7% and 77.1% of the period used walking is for productivepurposes for women and men respectively. Substantial amount of the existing producer surplus tonscurrently moved by pedestrian head and back loading will undergo modal shift from pedestrian to lowcost motorized transport. The without project case surplus tons are estimated to increase from 10,162tons to 15,325 tons in Dizi Wereda; from 53,809 tons to 82,024 tons in Meinit Wereda for the period2001 to 2027 which constitute projected existing normal freight traffic that will undergo modal shift tomotorized transport. The vehicular transport requirements for movement of the producer surplus tonshave been estimated as per Table 4.2 below. The degree to which the modal shift occurs and the pacehas been estimated from 70.0% at the completion of the road in 2008 rising to a maximum of 90.0% in2027 using ten-ton trucks.

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Table 4.2Transport Requirements for “Without Project” Producer Surplus Tons

Year Dizi Wereda (20 kms) MeinitWereda

(100km)

SurplusTons

Pedestriansrequired

TrucksRequired

Surplus tons PedestriansRequired

TrucksRequired

20012027

1016215325

37125598

68

5380982024

1965629,963

2945

4.6.4 Generated vehicular traffic is not taken into account except incremental producer surplusdue to project road. Incremental Producer Surplus Benefits arise from the combined increase infarm-gate prices and the increase in agricultural production arising from an increase in area undercrops. The underlying assumptions for these changes are given in the following tables.

Table 4.3Annual Per Cent Increase in Area under Crops

2002-2007 2007-2012 2012-2017 2017-2022 2022-2028Without Road 1.1 1.1 1.1 1.1 1.1With Road 1.1 3.5 4.0 1.3 1.0

4.6.5 Total crop area is forecast to be 31.5% higher (1.1 growth per annum) in the without roadcase (over 25 years) and 71.1% higher (2.2% growth per annum) in the with project road case. Theincremental producer surplus is estimated as 2,706 tons in 2008 increasing to 70,843 tons in 2028with an overall growth rate of 2.3% per annum (see details in PID).

b) Prices/Intervention Costs

4.6.6 The road user costs include vehicle operating costs (VOC), travel time values and accidentcosts. The VOCs depend on type of vehicles and of road surface conditions. The VOC is estimatedbased on prices of vehicles, types of tires for the various vehicle types on the road, fuel andlubricants costs, labor costs for drivers/crew and maintenance labor. The cost of these input data forVOC estimation is based on Birr 3.6/litre for petrol and Birr 2.94/litre for diesel, crew cost thatranges from Birr 13.89/hour for cars, Birr 6.95/hour for light commercial vehicles, Birr 9.90/hourfor small buses, Birr 13.58/hour for large bus, Birr 10.14/hour for medium truck, Birr 14.13/hourfor heavy truck, and Birr 24.93/hour for articulated truck, and maintenance labor cost of Birr6.95/hour, new vehicle prices that ranges from Birr 29,790 for cars and Birr 147,947 for articulatedand heavy trucks; and tire prices that ranges from Birr 513 for cars to Birr 2,520 for heavy andarticulated truck (VOC estimates for various vehicle types and road surface conditions aregenerated by HDM-IV with the details in the PID).

4.6.7 Passenger travel time values have been estimated from the origin destination surveys basedon vehicular passenger occupancy, income levels, and trip purpose. Based on the assumptions ofthe project study: i) Household incomes of passengers in light vehicles are 75% above nationalaverage incomes; ii) House hold income of bus passengers are at the national average; iii) 50% oflight vehicle passengers’ time is paid time; and iv) 30% of bus passengers’ time is paid time. Onthe basis of above, passenger hourly time values for motorized traffic is estimated as Birr 0.89 andBirr 0.28 respectively for light vehicles and bus passenger respectively. In the case of pedestrianmode, the pedestrian time value has been estimated at Birr 0.13 per hour with economic hourlyvalue estimated at Birr 0.08 after adjustment by shadow wage and trip purpose factors. The road

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intervention unit costs in terms of maintenance and construction activities for gravel and pavedroads are based on current rates in the construction industry in Ethiopia (Routine Maintenance/km –Birr 30,006.7; Grading/km – Birr 443.80; Spot re-gravelling/m3 – Birr 58.6; Regravelling/m3 – Birr64.0; Patching/m2 – Birr 27.7 and Resealing/m2 – Birr 16.8). Farm gate prices are taken from twosources, study field investigation (2001) and the most recent Central Statistics Authority review ofproducer prices in rural areas (2002).

4.7 Environmental Impact

4.7.1 In accordance with Bank's environmental guidelines, the project has been classified as categoryII. The project is not crossing environmentally sensitive areas such as, wetlands, flood plains orprotected wildlife habitat. It is the upgrading of an existing earth road to gravel/paved standard withimprovements to the horizontal and vertical alignments. The environmental impact assessment wascarried out as part of the feasibility study. The study concluded that the environmental impacts due tothe road upgrading would be minor. The impacts are mainly related to the construction activities andtherefore of temporary nature. The mitigating measures and good construction practices included inthe tender documents for the contractor would help to minimize them.

4.7.2 The following environmental effects both positive and negative are expected to be associatedwith the project. Proposed mitigating measures to minimize the adverse effects are discussed belowand will be specified in the bidding documents. The related costs for the implementation of themeasures have been included in the project cost estimates.

Positive Impacts - The road upgrading will produce the following positive environmental impacts:

(i) The erosion and sedimentation of the water courses of the existing road surface will bereduced;

(ii) The new pavement will reduce dust and therefore improve the health of road users andsettlers along the road;

(iii) Vehicles will stay in better condition due to improved road surface, thus reducing airemissions.

Negative Impacts - The following negative impacts are mainly related to construction activities:

(i) Soil erosion and sedimentation due to removal of vegetative cover within theconstruction limits and at borrow pits;

(ii) Soil erosion and sedimentation due to temporary road detours;

(iii) Excessive noise, vibrations and dust due to construction activities;

(iv) Potential water and soil contamination by improper disposal of used oils and lubricantsor by spills and leakage at the construction camp or along the road; and

(v) Potential hazard due to excessive speeding by motorist.

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Mitigating Measures

4.7.3 The following recommendations are made to minimize the potential adverse impacts to theenvironment during the road construction phase. These techniques are well known and are part of thecontract specifications.

(i) To control erosion, the various techniques recommended include minimization ofclearing, especially during rainy period; quick reestablishment of vegetative cover; use ofprotective mulches; and minimization of exposed slope length.

(ii) To control sedimentation and sediment loading, construction in and around perennialrivers should be conducted during dry season; on-site drainage management using dikes,sediment traps, and silt fences will be implemented.

(iii) To minimize post-construction soil erosion, the following measures are provided in theconstruction documents: grass planting on cut and fill slopes; provision of gabions orstone pitching at bridges; concrete or grass lining of ditches; and stone riprap protectionat inlets and outlets of culverts.

(iv) To minimize noise and vibrations all construction activities in towns shall be scheduledto take place only during daytime.

(v) To minimize dust in towns during construction by regularly wetting the road surface.

(vi) All borrow pit areas and construction detours will be completely reclaimed as much aspossible to their original state.

(vii) Campsites will be located in areas so as to avoid or minimize disruption to localpopulation, fauna and flora and watercourses; adequate drainage facilities and treatmentof sewerage and waste disposals will be provided. Camp areas will be dismantled andrehabilitated once construction is completed.

(viii) To prevent pollution hazards by spillage of pollutants to water sources or leakage to theground, all temporary and permanent storage facilities will be located away from thesesites and in bounded enclosures with impermeable liners.

(ix) Installation of appropriate road signs for traffic safety during and after construction.

4.7.4 The supervision consultants and the Environmental Management Branch of the EthiopianRoads Authority will monitor the implementation of the above outlined mitigation measures. Fullconsultations with local authorities and close follow-up of specific clauses in contract documents willalso be carried out by ERA.

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4.8 Social Impact

4.8.1 The project will have some positive social impacts on the zone of influence. The mostimportant is improved social service coverage in the Dizi, Meinit and Chena Weredas and theconsiderable reduction of the burden of transport for women in carrying out their various domesticchores. The long walking trips to markets, grinding mills and hospitals will be reduced as publictransport opportunities emerge and income to pay for the transport can be generated by increasedeconomic activity. An improved road and transport network will open the area for increasedagricultural production, small-scale businesses and social services. The road will result in thelinkage of the currently isolated districts to the wider economy. This would facilitate extensionservices delivery for improved agricultural practices and other social service delivery ofgovernment.

4.8.2 The access to markets, increased farm gate prices and consequent increased acreage putunder cultivation would increase house-hold income and reduce the percentage of the absolute poorcurrently estimated at a level of about 56.5% of the population. Since the larger area of influence ofthe road may go beyond immediate five kilometers from the road reserve, the complementary sub-program of the ERTTP which is in the process of establishing the transport needs of all weredas,will provide feeder links to the project road and connect such further villages to the national roadnetwork. The program is currently underway in eight weredas and various donors, including theBank Group, have pledged support for studies in a further 290 weredas with the objective ofcovering the whole 530 weredas. During the construction and maintenance of the road, it isexpected that the local population will benefit from the employment opportunities with hiring ofskilled and unskilled workers particularly unskilled labor force from the local population. Since theacceptability of women in construction is very high in the project area, women will be particularlyencouraged to participate in the road works and also the indigenous populations, should they wishto obtain labor on the road works.

4.8.3 There are however some likely negative impacts. One such concern is with respect to roadsafety. On large sections of the road, people do not have the experience with motorized transport atall. Given the large numbers of pedestrians and NMTs that would use the road, training in roadsafety will be essential to avoid accidents. The installation of traffic signs and speed bumps atcritical places on the road will enhance the safety of road users. Other negative impacts of theproject would be the importation of a large foreign workforce, which could result in spread ofdiseases, increase in consumer prices, and conflicts with local population. In order to mitigateagainst these effects, substantial proportion of the unskilled workers will be hired locally. For theindigenous population care will be taken that the social change brought about by the road and theincreased influx of business (wo)men and tourists, proceeds in a manner and at a pace that is in tunewith the indigenous populations lifestyle and does respect their wishes. To that effect the contractorwill employ a social expert as part of key staff to discuss problems and opportunities with theaffected populations and to seek solutions and dialogue. This approach is in line with thegovernments Cultural Policy of 1997.

4.8.4 HIV/AIDS is a serious problem in Ethiopia, with an estimated 10.0% of the populationinfected. The opening up of the area might exacerbate the problem as increased traffic andmovement of workforce along roadside communities might expose local populations to a greaterdegree to the pandemic. However, the Ethiopian government is fully aware of the dangers of thepandemic and has put in place in 1998 a policy and strategy that is based on integrated multi-sectoral response to prevention and control of the pandemic. Two national NGOs and the BranchOffice of the National HIV/AIDS Council Secretariat are active in the field in the project areainvolved in awareness raising, control and prevention. In line with the policy, ERA has taken the

21

initiative to develop and implement HIV/AIDS awareness and prevention operations in the roadsector. In this context, for internationally financed road projects, close collaboration has to beestablished between the project social/health staff and the respective Wereda Health Bureaux orDepartments for awareness raising, control and prevention, focusing mainly on the workforce androadside communities. A line item to cover the cost of HIV/AIDS preventive measures will beincluded in the bill of quantities for the civil works contract. In addition a social/health expertwould be employed in the contractor’s team to ensure that construction workers and roadsidecommunities are informed about HIV/AIDS and other sexually transmitted diseases and thepreventive measures to avoid them. This is to complement all other on-going initiatives in theproject zone of influence.

4.9 Project Costs

4.9.1 The estimated project cost (net of all taxes and duties) not including technical assistance is UA25.23 million (ETB 278.91 million) of which the foreign exchange cost is UA 21.72 million (ETB240.10 million) or 86% of the total and the local cost is UA 3.51 million (ETB 38.81 million) or 14%of the total.

4.9.2 The project cost estimates are based on the construction bill of quantities, and the engineer'scost estimate provided by the design consultants. These estimates have been updated to September2002 prices by taking into account the recent bid prices for the Alemgena-Butajira road upgradingproject, and other similar construction works and supervision services. Allowances have been madefor physical and price contingencies. Physical contingencies are estimated at 10% of base cost.Average price escalation of 3% per annum on foreign exchange and 5% per annum on local currencyprior to and during implementation has been adopted. These rates are based on the recent trend ofprice inflation within Ethiopia's construction industry. An amount of UA 1.70 million (ETB 18.84million) or 7% of the construction base cost has been allocated for the design review and supervisionconsultancy services. A lump sum amount of UA 0.1 million (ETB 1.10 million) has been included forauditing services of the project accounts during the implementation stage. The project cost estimatesby project components and by category of expenditure are presented in Table 4.4 and Table 4.5respectively. More detailed cost estimates are given in Annex 4.

4.9.3 The cost for the Technical Assistance support is estimated at UA 1.05 million (ETB 11.61million) net of taxes, which is made up of UA 0.99 million (94%) in foreign exchange cost, and UA0.06 million in local cost.

Table 4.4Summary of Project Cost Estimates by Component (Net of Taxes)

Ethiopian Birr (million) Unit of Account (million)

Component ForeignExchange

Local Cost Total ForeignExchange

Local Cost Total

%F.E.

1. Civil works 184.27 25.99 210.26 16.67 2.35 19.02 88%

2. Consultancy Services

i) Design Rev./Supervision 11.58 3.72 15.30 1.05 0.34 1.39 76%

ii) Audit 0.88 0.00 0.88 0.08 0.00 0.08 100%

3. Technical Assistance 10.93 0.68 11.61 0.99 0.06 1.05 94%

Base Cost 207.66 30.38 238.04 18.79 2.75 21.54 87%

Physical Contingencies 19.67 2.97 22.64 1.78 0.27 2.05 87%

Price Escalation 23.69 6.13 29.82 2.14 0.56 2.70 79%

Total 251.02 39.49 290.51 22.71 3.57 26.28 86%

22

Table 4.5Summary of Project Cost by Category of Expenditure (Net of Taxes)

Ethiopian Birr (million) Unit of Account (million)

Category of Expenditure ForeignExchange

Local Cost Total ForeignExchange

Local Cost Total

%F.E.

1. Civil works 184.27 25.99 210.26 16.67 2.35 19.02 88%

2. Consultancy Services 12.46 3.72 16.18 1.13 0.34 1.47 77%

3. Technical Assistance 10.93 0.68 11.61 0.99 0.06 1.05 94%

Base Cost 207.66 30.38 238.04 18.79 2.75 21.54 87%

Physical Contingencies 19.67 2.97 22.64 1.78 0.27 2.05 87%

Price Escalation 23.69 6.13 29.82 2.14 0.56 2.70 79%

Total 251.02 39.49 290.51 22.71 3.57 26.28 86%

4.10 Sources of Financing

Wacha Maji Road and related consulting services

4.10.1 ADF and GOE will jointly finance the road and consultancy services components of theproject. The proposed financing from ADF will cover the entire foreign exchange cost (UA 21.72million) and 28.14% of the local cost (UA 0.99 million) for a total commitment of UA 22.71million (ETB 251.02 million). The GOE will finance 71.86% of the local cost amounting to UA2.52 million (ETB 27.89 million). The GOE’s contribution will amount to 10.0% of the projectcost net of taxes. GOE will in addition be responsible for 14.0 to 15.0% of the total project cost netof taxes, for whatever is necessary to cover taxes, duties, royalties, levies, and right-of-wayacquisition which are not eligible for financing by the ADF. The proposed financing plan bysource of finance is presented in Table 4.6A below:

Table 4.6ASources of Finance for the ADF Components (Net of Taxes)

(in UA million)

Source Foreign Exchange Local Costs Total Costs % of Total

ADF

GOE

21.72-

0.992.52

22.712.52

9010

Total 21.72 3.51 25.23 100

Technical Assistance Support

4.10.2 ADF (TAF) and GOE will jointly finance the Technical Assistance support. The ADF(TAF) Grant will cover the entire foreign exchange cost of UA 0.99 million (ETB 10.93 million)representing 94.0% of the technical assistance cost. GOE will finance the local cost amounting to UA0.06 million (ETB 0.675 million) and representing 6.0% of the cost. The proposed financing plan bysource of finance is presented in Table 4.6B below.

23

Table 4.6BSources of Finance for the TAF Component

(in UA million)

Source Foreign Exchange Local Costs Total Costs % of Total

ADF (TAF)

GOE

0.99-

-0.06

0.990.06

9406

Total 0.99 0.06 1.05 100

4.11 Expenditure Schedule

4.11.1 The expenditure schedule by component of the project is shown in Table 4.7 below.

Table 4.7Expenditure Schedule by Component (Net of Taxes)

(In UA million)

Component 2004 2005 2006 2007 2008 Total

Civil WorksDesign Review & SupervisionAudit ServicesTechnical Assistance Support

0.000.340.020.20

6.910.340.020.39

7.140.340.020.36

7.140.340.020.10

2.240.340.020.00

23.431.700.101.05

Total 0.56 7.66 7.86 7.60 2.60 26.28

4.11.2 The expenditure schedule by Source of financing is shown in Table 4.8 below.

Table 4.8Expenditure Schedule by Source of Finance (Net of Taxes)

(In UA million)

Source 2004 2005 2006 2007 2008 Total

ADF

TAF

GOE

0.33

0.20

0.03

6.55

0.35

0.76

6.77

0.34

0.75

6.75

0.10

0.75

2.31

0.00

0.29

22.71

0.99

2.58

Total 0.56 7.66 7.86 7.60 2.60 26.28

4.11.3 The local costs of the project are estimated at UA 3.57 million net of taxes and UA 7.14million including taxes and duties. These amounts are fairly high and would put a severe strain on thealready limited budget resources of the country, had they to be entirely financed by the GOE. Duringthe border conflict period (1998-2000) the domestic borrowing of the government rose to 10% ofGDP. This situation in turn led to a large increase in budget deficit, which rose to 11.5% of GDP in1999/2000. But apart from the two-year border conflict with Eritrea, the country has exhibited

24

prudent fiscal management overall, and has built a good track record of implementing a broadspectrum of sound macroeconomic and structural reforms. The Government has launched a seriesof reforms that would significantly improve the budgetary process and expenditure tracking,including the finalization of its SDPRP in July 2002 within a sustainable a macroeconomic andfiscal framework and a welfare monitoring system. The Government has also instituted annualpublic expenditure review in collaboration with its development partners, including the AfricanDevelopment Bank, to improve expenditure programming. Despite these strong reform efforts,Ethiopia remains a poor country with a low Revenue/GDP ratio of 4.7%. The fragile financialsituation as well as the remarkable measures taken by the government are strong arguments tosupport its request to the ADF to finance 28.14% of the local cost.

5. PROJECT IMPLEMENTATION

5.1 Executing Agency

The Ethiopian Roads Authority (ERA) will be responsible for the execution of the project.ERA is a legally autonomous agency responsible for overall planning, construction, maintenance andmanagement of the country's trunk and major link roads. ERA is headed by a General Managerreporting to a Board of Directors appointed by the Government. It has three technical departments,each headed by a Deputy General Manager as follows: (a) Regulatory and Engineering ServicesDepartment, in charge of planning and programming, contracts administration, and Design andNetwork Management; (b) Operations Department, which has responsibility for force accountmaintenance, emergency road construction and maintenance, and associated logistic support; and (c)Human Resources and Financial Management Department. The ERA's organizational structure isgiven in Annex 2. Qualified and experienced professionals staff all the departments and divisions ofERA. Out of a total of 14,258 employees, about 5% are professionals. Women make up 4% of thetotal staff, and about 16% of them are professionals. The Government is trying to recruit morewomen in the professional categories.

5.2 Institutional Arrangements

The project’s supervision and monitoring falls under the purview of the Deputy GeneralManager, Regulatory and Engineering Department of ERA. The implementation of the works will beunder the responsibility of the Contract Administration Division. ERA will assign a civil engineer tobe the project coordinator. The designated engineer shall have a minimum of five years of experienceand qualifications that are acceptable to the Bank. This has been made a condition of the loan. He willbe responsible for overall monitoring of the activities of the project, and serve as a contact person forall the parties involved in the project. The Project Coordinator in collaboration with the head of theEnvironment Management Branch will also monitor the environment and social management plan.Over the last five years ERA has been implementing the 10-year Road Sector Development Program,which is financed by the Government and several donors including the World Bank, the EuropeanUnion, and the African Development Bank. The Agency has also benefited from technical assistancesupport provided by DfID, the EU and JICA. As a consequence ERA has gained considerableexperience in implementing road projects and its performance has significantly improved. The generalconsensus among donors however is that there is still insufficient capacity in the areas of designreview and contract administration in particular. To improve on these areas of poor performance atechnical assistance component for capacity building in project design review has been included in thisproject. Annex 2 shows the Project Implementation Unit (PIU) arrangement within the ERAOrganizational chart.

25

5.3 Supervision and Implementation Schedule

5.3.1 The construction works for the Wacha-Maji Road project will be carried out by a contractor.The works will be inspected and supervised by an engineering consulting firm. The constructionworks will be implemented over a period of 40 months starting from April 2005.

5.3.2 The supervision consulting services for the project will begin 10 months prior to thecommencement of works to provide time to carry out the design review and preparation of biddingdocuments. The tentative project Implementation schedule, which has been agreed to with theExecuting Agency is shown on table 5.1 below. A more detailed implementation schedule isprovided in Annex 3.

Table 5.1Summary of Project Implementation Schedule

Activities Date Agency Responsible

Approval/ADF May 2003 ADFPublication of GPN June 2003 ERA/ADF

Consultancy Services for Pre-contract, Supervision, and Technical Assistance

Advertisement and Notification (SPN) July 2003 ERA/ADFReceipt of Expressions of Interest August 2003 ERAShort listing completed Sept. 2003 ERAApproval of Short-listed consultants & RFP Oct. 2003 ADFIssue of RFP Oct. 2003 ERAReceipt of Proposals Dec. 2003 ERAEvaluation Jan. 2004 ERAApproval of evaluation Feb. 2004 ADFAward of Contracts Feb. 2004 ERACommencement of Consultancy Services March 2004 ERA/ADFDesign Review completed July 2004 ERA/ConsultantCompletion of Consultancy services July 2009 ERA/ADF

Construction of Works Contract

Publication of GPN June 2003 ERA/ADFAdvertisement and Notification (SPN) Feb. 2004 ERA/ADFReceipt of Applications for pre-qualification April 2004 ERAPre-qualification and tender documents July 2004 ERAApproval of pre-qualification and tender doc. Aug. 2004 ADFIssue of tenders Sept. 2004 ERAReceipt of Tenders Nov. 2004 ERAEvaluation Jan. 2004 ERAApproval of evaluation Feb. 2004 ADFNegotiation and signing of Contract March 2004 ERACivil Works commenced April 2005 ERA/ADFConstruction completed July 2008 ERA/ADFEnd of defects liability period July 2009 ERA/ADF

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5.4 Procurement Arrangements

Introduction

5.4.1 Procurement arrangements are summarized in Table 5.2. All procurement of goods, works andacquisition of consulting services financed by the Bank will be in accordance with the Bank's Rules ofProcedure for Procurement of Goods and Works, or as appropriate Rules of Procedure for the Use ofConsultants, using the relevant Bank Standard Bidding Documents.

Civil Works

5.4.2 The procurement of civil works will be carried out under International Competitive Bidding(ICB) procedures, with pre-qualification of contractors and a domestic preference margin of 10%. Thecivil works contract for the construction of the Wacha-Maji road is valued at UA 23.43 million, andwill be packaged in a single lot.

Table 5.2Summary of Procurement Arrangements

UA million

Project Categories ICBShort-List

Total

1. Civil Works

1.1 Wacha-Maji Road Construction

2. Consulting Services

2.1 Design Review &Supervision of Road Construction

2.2 Technical Assistance Support

2.3 Project Account Auditing

23.43 [21.08]

1.70 [1.53]

1.05 [0.99]

0.10 [0.10]

23.43 [21.08]

1.70 [1.53]

1.05 [0.99]

0.10 [0.10]

TOTAL 23.43 [21.08] 2.85 [2.62] 26.28 [23.70]

[ ] Figures in brackets are amounts financed by the ADF.

Consulting Services

5.4.3 Procurement of consulting services, as detailed in Table 5.2 above, will be undertaken inaccordance with the Bank’s “Rules of Procedure for the Use of Consultants”.

5.4.4 The consulting services for engineering design review and supervision of road construction,as well as technical assistance support will be procured on the basis of short-lists of qualifiedconsulting firms. The selection procedure, in each case, will be based on the technical quality withprice consideration. The technical assistance consultant will also act as a procurement agent for theacademic training services (UA 70,000), as well as computer equipment and software (UA150,000), which will be procured through international shopping. The cost of these twosubcomponents will not be included under the financial evaluation of consultants’ proposals, in linewith clause 3.8.12 of the Rules.

Project Audit Services

5.4.5 The audit services will be procured through a short-list of auditing firms, subject toclearance by the Federal Auditor General’s Office, prior to call for bids. Since the amount ofcontract for audit services is less than UA 350,000, the Borrower may limit the publication of the

Mise en forme : Puces etnuméros

Mise en forme : Puces etnuméros

Supprimé :

27

announcement to national or regional newspapers. However, any eligible consultant, beingregional or not, may express his desire to be short-listed. The selection procedure will be based onestablishing the comparability of technical proposals and selection of the lowest financial offer.

National Procedures and Regulations

5.4.6 Ethiopia’s national procurement laws and regulations have been reviewed and determined tobe acceptable. There are no areas of possible conflicts with the Bank’s Procurement Rules andRegulations.

Executing Agency

5.4.7 The Ethiopian Roads Authority (ERA) will be responsible for the procurement of works,technical assistance support, supervision consulting, and audit services. The resources, capacity,expertise and experience of ERA are adequate to carry out the procurement. In the specific case ofcivil works procurement, the supervision-consulting firms through pre-contract services will assistthe Executing Agency.

General Procurement Notice

5.4.8 The text of a General Procurement Notice (GPN) has been agreed to with ERA duringnegotiations. It will be issued for publication in the United Nations Development Business, uponapproval of the loan by the Board of Directors.

Review Procedures

5.4.9 The following documents are subject to review and approval by the Bank.

Specific Procurement Notices Invitation for pre-qualification Documents Tender Documents and Requests for Proposals Tender Evaluation Reports and Reports on Evaluation of Consultants' Proposals Draft Contracts, if the Form of Contract document in the Standard Bidding Document has been

amended.

5.5 Disbursement Arrangements

The loan will be disbursed for two categories of expenditure including Civil Works, andconsulting services for Design Review and Supervision, and Audit Services. The TAF Grant willbe disbursed for the Technical Assistance Support. The Direct Payment Disbursement Method willbe used for both the loan and the grant, following the procedures and standard supportingdocuments outlined in the Bank’s Disbursement Hand Book.

5.6 Monitoring and Evaluation

5.6.1 ERA shall regularly provide the Bank with quarterly progress reports for the projectincluding the implementation of the social and environmental action plan, in the established formatcovering all aspects of the concerned components. These reports will include ERA’s Performanceindicators, which will assist in verifying whether or not the objectives are being achieved. Inaddition, monitoring of the project will be done through the Bank’s supervision mission program,in accordance with the Bank Group’s Operations manual. A mid-term review will be undertaken

Mise en forme : Puces etnuméros

Mise en forme : Puces etnuméros

Mise en forme : Puces etnuméros

28

during the second year of implementation in 2006 to identify any major constraints facing theproject and provide the required corrective measures.

5.6.2 The implementation of the environmental mitigation measures will be monitored by thesupervision consultant and the ERA Environment Management Branch (EMB) that had beenstrengthened through the IDA technical assistance to ERA.

5.6.3 Within six months of project completion, ERA will prepare the Borrower’s ProjectCompletion Report to be submitted to the Bank. Subsequently, the Bank will carry out its ownPCR. The two reports and ERA’s performance statistics and financial results will form the basis forthe post-evaluation of the project.

5.7 Financial reporting and auditing

5.7.1 The Finance Division of ERA will be responsible for the financial management and reportingfor the project. The Division has been strengthened through an IDA financed technical assistancewhich has put in place an Accounting and Financial System Manual as of March 2000, to enhanceaccountability, managerial autonomy, and financial control. The division is now fully staffed withover thirty accountants, accounting clerks, and other support staff. The division is in the process ofmigrating its accounting system from a Microsoft Excel-based application to a professional accountingsoftware-ACCPAC. The software package was provided under a technical assistance support fromGTZ based on the new Manual. The ACCPAC software was installed and configured on ERAcomputer system and staff training is ongoing. The use of the new Financial Information System iscritical for internal control and efficient financial reporting and auditing of projects. The migrationfrom the existing obsolete system to the new Financial Information System under ACCPAC softwarehas been made a condition precedent to first disbursement of the ADF loan.

5.7.2 The Financial Division of ERA will open and maintain a separate account for the project,and keep all the financial records of the projects. The financial statements and project accounts willbe audited annually during project implementation following the Bank’s Guidelines for ProjectAudit. Qualified independent audit firms procured on the basis of terms of reference acceptable tothe Fund shall undertake the auditing services. The Audit reports shall be submitted to the Bankregularly once every year and after project completion.

5.8 Aid Co-ordination

5.8.1 Aid co-ordination has been achieved through the Consultative Group (CG) meetings, whichprovided opportunities for donors both bilateral and multilateral to periodically review Ethiopia’sdevelopment program as well as co-ordinate their development assistance in support of theprogram. The third CG meeting was held in Addis Ababa in December 1996 while the fourth wasscheduled for December 2002. The complementarity of the development partners’ efforts have beenfacilitated by the co-financing under the Sector Investment Programs (SIPs) and the extensiveinternal donor co-ordination involved in program implementation progress monitoring. The PER inwhich the Bank effectively participates has also provided an effective forum for dialogue betweenthe Government and its development partners as this affords close donor collaboration on analyticalissues and commitment to a more systematic follow-up process.

5.8.2 The Ministry of Finance and Economic Development (MoFED) has been effective in the in-country donor co-ordination mechanism which involves different levels of meetings among whichis the one at ambassadorial level whereby donor ambassadors and heads of key developmentagencies meet to review development co-operation issues. There is also the co-ordination at

29

informal level by the Development Assistance Group (DAG) Agencies led by the World Bank todiscuss development issues and aid co-ordination with sub-sector groups. Also there are periodicreview meetings of sector investment programs involving the Government, donors and otherstakeholders in which the Bank Group effectively participate. For the road sub-sector, a mid-termreview of the implementation performance of the RSDP - I was undertaken in February 2001,which provided the forum for drawing lessons for the effective delivery of the program. Astakeholders’ discussion including donors participating in the RSDP was also held in July 2002 inwhich program targets and policy issues for RSDP II were discussed and agreed upon. The Bankappraisal Mission held consultative discussion with all major donors participating in the RSDP viz.World Bank, ADF, EU, DFID-UK, GTZ, KfW, NDF, JICA and SIDA. They all confirmed andagreed on the priority of the Wacha-Maji road project as one of the main linked roads in theRSDPII to open up potential agricultural areas of the country.

6. PROJECT SUSTAINABILITY AND RISKS

6.1 Recurrent Costs

6.1.1 Through out the construction and mandatory one-year maintenance period, the constructionfirm will be responsible for maintenance of the project road. There after ERA would be responsiblefor the routine maintenance expenditure of the project which involves maintenance of the road side,ancillary works including pothole patching up on paved sections, re-grading of gravel sections tothe end of the project service life in 2028. In addition ERA would meet the financing requirementfor periodic maintenance, which involves resealing every 8 years of service life for the pavedsections and re-gravelling every 5 years on the gravel surfaced sections of the road. The financialrecurrent and periodic maintenance cost for the project road over its service life of 20 years isestimated at Birr 64.21 million ($ 7.71 million). This amounts to about Birr 3.21 million (US$0.385 million) per annum as against the estimated expenditure of Birr 0.5 million (US$ 0.06million) per annum under the existing road maintenance regime. The incremental recurrent costimplication for the project amounts to Birr 2.71 million ($0.325 million) per annum.

6.1.2 Government has established a Road Fund in March 1997 with the goal that all maintenanceexpenditure will be financed from the Fund on a “fee for service” basis as a first step towardsprogressively achieving long term marginal cost recovery for the road sector, initially focusing on fullroad maintenance recovery. Routine and Periodic maintenance under the RSDP II (Low Case)amount to Birr 1.28 billion (USD 149.7 million) to be dispensed over the period 2002-2007, hasindicated GOE commitment to meet the recurrent expenditure needs of the network (See Annex 5on Summary Financial and Economic Analysis). As of date and based on the appraised resourcemobilization and road financing (Paras. 3.6.3 to 3.6.8 ref), meeting the recurrent expenditure need isnot constrained by resources as the Road Fund will be able to meet all the needs from user charges.

6.2 Project Sustainability

The Government has recognized in the conception and design of the RSDP that thesustainability of the investment in the program in the long run would depend on i) the institutional andcapacity strengthening of the Road Agencies, ii) increasing the capacity of the local private contractorsand commercialisation/decentralisation of ERA force account unit, and iii) effective resourcemobilization for road maintenance financing. In this regard, Government has implemented andcontinues to put in place policies, measure and action with technical assistance support from donors toaddress these concerns. The restructuring of ERA was addressed by Proclamation in 1997 thattransformed ERA from a supplier of road infrastructure to a manager and purchaser of services andworks for network maintenance and development. Donors have also assisted ERA with technical

30

assistance support for institutional strengthening in critical areas. ERA’s policy of commercializationof its force account unit and contracting out increasingly to match pace of development of domesticcontracting capacity in line with the Maintenance Action Plan (2001–2005) endorsed by donors willensure project sustainability. In addition, the Road Fund Administration is a well led office effectivelymobilizing resources and monitoring the use of funds by the beneficiary agencies (ERA, RRAs of theRegions and municipalities) in order to ensure that road users get value for money through theproposed technical audits to be financed under EDF-technical assistance. All these measures wouldensure the sustainability of the investment in the project. In addition Government would ensureeffective axle load control measures to protect the investment in the project. In this context, theimplementation of policy measures with respect to axle load control on the road network is beingimplemented with EU technical assistance support.

6.3 Critical Risks and Mitigating Measures

6.3.1 Implementation of the project does not present major risks, but two factors could influence itsviability. Firstly, an increase in the project cost due to delay in the implementation and secondly, theprojected traffic growth could be slower than anticipated. The risk of delay in the implementation hasbeen minimized through actions taken in the RSDP, by way of providing technical assistance to ERAand organizing seminars/workshops and training to ERA staff. Regarding the risk on the projectedtraffic growth, recent experience in similar projects has shown a traffic increase of twice or more, thanthe original estimated growth.

6.3.2 Further, these factors were taken into account in the economic analysis, which shows that theproject will remain economically viable even with a combined increase of 28 percent in investmentcosts and a decrease of 28 percent in the benefits.

7. PROJECT BENEFITS

7.1 Economic Analysis

a) Methodology

7.1.1 The methodology used is based on combining HDM IV and producer surplus approach for theeconomic appraisal, which is found to be appropriate (see Annex 5). The project road condition datainput into the HDM IV has been in a “with” and “without” project scenarios using the characteristicsof the different road sections (Wacha – Bechuma and Bechuma – Maji). HDM IV allows formodelling over the analysis period of the link, the interaction between traffic volume, composition,road condition, geometry and characteristics and the vehicle operating costs for the “with” and“without” project scenarios.

7.1.2 For Economic Analysis, financial construction and maintenance costs have been converted intoeconomic costs by applying a conversion factor of 0.78. The measures of project worth used are theEIRR, NPV, BCR and the FYRR at 10% discount rate. The base year taken for economic evaluation is2004, the year in which construction is expected to commence with a construction period of 40 monthsand first year under traffic of the project road is estimated as 2009. (See Annex 5 and details of themethodology in the PID)

b) Costs

7.1.3 The costs taken into account are the Road Agency costs in the “with” and without projectscenarios which include both the cost of maintenance and the investment costs of upgrading theproject road to a higher gravel design standard with intermittent bituminous surfacing in steep

31

grades in mountainous sections. These costs include the base cost for civil works plus the physicalcontingencies, consulting services for supervision, design review, project audit, and technicalassistance. The financial contingencies are not taken into account, as they do not constituteconsumption of economic resources. Total financing capital investment costs net of taxes areestimated to be ETB 249.08 million in financial terms which result in an economic investment costof ETB 221.68 million to be disbursed as follows: 1.35% in 2004, 29.305% in 2005, 2006 and2007; and 10.734% in 2008. Residual values have been calculated for a road operating life of 20years and have been assumed at about 14.4% of original economic investment cost, which isestimated at ETB 31.92 million and taken as a benefit at the end of analysis period (See Annex 5 onSummary Financial and Economic Analysis).

c) Benefits

7.1.4 Vehicle Operating Cost Savings on the 56 km road section from Wacha to Bechuma thatcurrently has motorized traffic is taken as part of project benefits. The forecast vehicle operating costssavings are derived from the road-planning model HDM-IV. Truck Diversion Benefits are also takeninto account in the economic evaluation. The VOC and timesavings benefits for normal and divertedtraffic increased from ETB 6.06 million in 2009 to ETB 20.45 million in 2028.

7.1.5 The Modal Shift Benefits relate only to Dizi and Meinit Weredas where no passable roadcurrently exists. It is assumed that the forecast agricultural surplus that would occur in the withoutproject case will be transported to the market. Benefits are estimated from the differences in transportcosts in the “with “ and “without” project scenarios in moving the without project producer surplus.The modal shift benefits are estimated at ETB 16.72 million in 2009 when project road is open totraffic and increasing to ETB 40.87 million in 2028 at end of project service life (See Annex 5).

7.1.6 Incremental Producer surplus benefits were also taken into account and relate to the increasein agricultural output induced by better accessibility and lower transport costs of the road.Correspondingly, a change in farm gate prices and a significant response in terms of an increase incropping area and thus in agricultural production is assumed. Incremental Producer surplusbenefits are estimated to increase from a level of ETB 8.05 million in 2009 when the road iscompleted and open to traffic to a level of ETB 49.81million in 2028. (See Annex 5 and details inPID).

7.1.7 Some air diversion benefits are likely to be achieved as it is estimated that around 3000passengers per year travel between Maji and Mizan by air. The current fare is Birr 142 comparedwith the bus fare of Birr 20. From the differences in travel time and cost, it is estimated that withthe opening of the road, 93 % of the air passengers will divert to the road. The estimated benefitsare derived from the difference in bus and airfares adjusted to economic benefits by the shadowprice factor of 0.78. The air diversion benefits are expected to increase from ETB 0.39 million in2009 rising to ETB 0.96 million in 2028.

7.1.8 NMT benefits taken into account relate to the non-motorized traffic currently using the existingroad. It is estimated that about 3000 units of NMT use the road daily. However trip distances areusually low at an average of 2.5 km. The benefits relate to improved speed (and increasedproductivity) of NMTs using an improved road surface. The benefits are derived from the HDM-IVmodel and are estimated at a level of ETB 0.05 million in 2009 rising to ETB 0.12 million in 2028.

7.1.9 No generated motorized freight traffic benefits (other than that relating to induced agriculturaloutput) has been assumed in the economic appraisal. It is expected that some generated passengermovement will arise as a result of the improved road. Increased travel covering visits to hospital,

32

clinic, looking for work, visiting friends and relations, and other social purposes together with themovement of government officials, teachers, extension officers are all likely to occur, and suchbenefits of increased social service coverage has only been qualified.

c) Results of Cost-Benefit Analysis

7.1.10 The results of the economic evaluation using the measures of investment worth on the basisof most likely motorized traffic forecast scenario and in which benefits to non-motorized transportand agricultural surplus benefits were estimated resulted in an Economic Internal Rate of Return of15.57% which is higher than the current opportunity cost of capital in Ethiopia of 10.0%, agreedbetween Government and Ethiopian Development Partners for admission of a project in the RSDPII. All measures of project investment worth in the base case scenario of NPV at ETB 129.72million, BCR of 1.68 and a FYRR of 13.6% confirm the viability of the intervention in theupgrading of the Wacha – Maji road project. (See Annex 5 for the flow of benefits, costs and theresults)

7.2 Social Impact Analysis

7.2.1 The Bank’s intervention in the project civil works will generate temporary employment fora significant number of the local population. Local household incomes will improve considerablyas a result. In addition there will also be indirect employment opportunities for local business in thesupply of food, other goods and services for the labor force thus providing a boost to the localeconomy in the short term. In the long term the improved road and transport network will stimulateagricultural production which is currently underdeveloped due to lack of access to markets andinputs and low agricultural technology. The project will provide the basis for poverty reduction in aregion where about half the population lives below the absolute poverty line.

7.2.2 While the economic boost will positively affect all members of society indirectly, womenare also bound to gain directly, both as workers during road construction and by offering incomegenerating activities during and after road construction, such as the selling of foodstuffs and drinksby the roadside, etc initially to workers and later to passers-by. Most significantly women arebound to gain from the reduction in workload, both by reducing time and energy spent on headloading produce and by the project road offering access to grinding mills thus reducing the time andenergy spent on food processing. Easier access to health facilities in conjunction with higherincomes will make it possible for women to give birth in a safer environment than is currentlypossible and to see to the health of children in more appropriate and manageable ways, thusreducing the risk of complications and mother and infant mortality and sickness. It is hoped that thesuccessful implementation of ongoing ERTTP and the follow-on rural credit project will furtherenhance the situation of women, in the more remote areas of influence of the road through NMTs,feeder roads and off-farm and on-farm income generation activities. The project will contribute tofostering economic and social development through the linkage of rural production centers to urbanmarkets.

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7.3 Sensitivity Analysis

7.3.1 Sensitivity Analysis was undertaken on the base case result of the economic evaluation todetermine the effect of changes in some important parameters of analysis, using a threshold of 10%for admission of projects into the RSDP II as basis for viability. The results indicated in Annex 5confirm that the project is economically viable. All scenarios tested indicated that the projectviability is satisfactorily robust. Even in a worst case scenario of simultaneous 15.0% increase incosts and 15.0% decrease in benefits, the project still remained viable with an EIRR of 12.3%, aNPV of Birr 54.9 million, a BCR of 1.25 and a FYRR of 10.0%.

7.3.2 In addition to the sensitivity test on the base case scenario, switch values analysis to indicatepercentage change in benefits and costs that would bring the economic rate of return to 10.0 %threshold were undertaken. The results indicated that a 73.1% increase in investment cost and a40.3% decrease in benefits respectively are required before feasibility is threatened. It would alsorequire a combined change of investment cost increase of 28.8% and benefit decrease of 28.8% toarrive at an EIRR of 10% (see Annex 5 on Summary Financial and Economic Analysis).

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

8.1.1 The Wacha – Maji Road Upgrading Project is expected to benefit the population in the Dizi,Meinit and Chena Weredas of the Bench – Maji zone of SNNPRS by expanding their access tomarkets, improving the transport services to enlarge social service coverage and linking the threedistricts to the larger economy. Health facilities, water points and grinding mills will be inmanageable reach of the population whose travel time, cost and efforts would be reduced by about80.0%. This would free more time for more productive purposes and help in the contribution topoverty reduction. Expanding the road network by construction of the project road and promotingtransport means that include both conventional and increased use of IMTs, is expected tosubstantially ease the women’s burden of head-loading and men’s back loading, thus freeing themfor more productive endeavors. The project is consistent with the Bank Group’s assistance strategyfor Ethiopia in the Transport Sector as indicated in 2002-2004 CSP, and included in the coreprogram of RSDPII and SDPRP (2002-2004).

8.1.2 The project is well conceived, technically feasible, socially justified and environmentallysustainable. The project would generate an Economic Internal Rate of Return of 15.57%, which ishigher than the opportunity cost of capital of 10.0% in Ethiopia. The upgrading of the project roadwhich will be the only motorized access to a potentially rich agricultural zone of the SNNPRS wouldhave a significant impact on poverty reduction in the project area whose major constraint has been lackof motorized access.

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8.2 Recommendations

It is recommended that a loan not exceeding UA 22.71 million and a TAF grant of UA 0.99million be extended to the Government of Ethiopia respectively for the upgrading of Wacha–MajiRoad and the technical assistance for institutional strengthening of the Ethiopian Roads Authority indesign review subject to the following conditions:

A. Conditions Precedent to the Entry into Force of the Loan Agreement

The entry into force of the Loan Agreement shall be subject to the fulfillment by theBorrower of the provisions of Section 5.01 of the General Conditions Applicable toLoan Agreement and Guarantee Agreements of the Fund.

B. Conditions Precedent to First Disbursement of the Loan

The obligation of the Fund to make the first disbursement of the Loan shall beconditional upon the entry into force of the Loan Agreement and the fulfillment by theBorrower of the following conditions. The Borrower shall have:

(i) Nominated from the Ethiopian Roads Authority, a Civil Engineer, with a minimumof 5 years post qualification experience as a full time Project Coordinator for theimplementation of the road project, and whose qualifications and experience areacceptable to the Fund (para. 5.2)

(ii) Provided evidence satisfactory to the Fund that ERA’s Financial ManagementSystem has been migrated from the current Excel based financial managementsystem to the ACCPAC Software Financial Management System, which wasfinanced through technical assistance from Donors (para. 5.7.1);

(iii)Provided evidence satisfactory to the Fund that all land required for the right-of-way, designated quarries, and borrow pits has been acquired (para. 3.5.2); and

(iv)Provided an undertaking to perform regular traffic counts on the project road duringand after construction (para. 4.6.2).

C. Other Conditions of the Loan

In addition the Borrower shall:

(i) Submit to the Fund a Delegation of Authority Matrix with clearly defined authoritiesand responsibilities from section heads to Senior Management of ERA by mid-termreview of the Road Sector Development Program II (RSDP II) in March 2005 (para.3.3.2); and

(ii) Provide evidence satisfactory to the Fund that a Right-of-Way Section has beencreated and adequately staffed within ERA by mid-term review of the RSDP II inMarch 2005 (para. 3.5.2).

(iii)Undertake regular traffic counts on the project road during and after construction(para. 4.6.2).

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D. Conditions Precedent to Entry into Force of the Protocol of Agreement

The entry into Force of the Protocol of Agreement shall be subject to the fulfillment bythe recipient of the provisions of Section 4.01 of the General conditions Applicable toProtocol of Agreement relating to the activities of Technical Assistance Fund (TAF) ofthe ADF.

E. Conditions Precedent to First Disbursement of the Grant

The obligations of the Fund to make the first disbursement of the Grant shall beconditional upon the entry into force of the Protocol Agreement and to the fulfillment byRecipient of the following condition.

The Recipient shall have:

(i) Nominated from the Ethiopian Roads Authority, the list of staff to be trained inthe identified areas of the need and whose educational qualification andcurriculum vitae are acceptable to the Fund for the specific training need forwhich they are proposed (para. 4.5.9).

ANNEX 1

Source: African Development Bank

ETHIOPIAWACHA MAJI ROAD UPGRADING PROJECT

Map of the Project Area

Wacha

Maji

Hossaina

International Boundary

National Capital

RailroadRoad

Track

0 50 100 150 Kilometers

0 50 100 150 MilesERITREA

SUDAN

DJIBOUTI

KENYASOMALIA

Himora Aksum Adigrat

Mek’ele

Maych’ewGonder

DebreTabor

DebreMark’os

Asosa

Gambéla

Bahir DarAsayita

Kurmuk

Weldiya

Desé

DabreBirhan

Nek’emtéAddisAbaba

DiréDawa

Harer Jijiga

Metu

Jima

Nazrêt

Kelem

ArbaMinch

ShashemenéAwasa

Goba

KibreMengist

Negélé

Moyalé

SOMALIA

Degeh Bur

Imi

K’ebriDehar

Godé

Werdér

DoloOdo

This map was provided by the African Development Bank exclusively for the use of the readers of the report to which it is attached. The names used and theborders shown do not imply on the part of the Bank and its members any judgment concerning the legal status of a territory nor any approval or acceptanceof these borders.

WACHA

MAJI

ANNEX 2ETHIOPIAN ROADS AUTHORITY ORGANIZATIONAL STRUCTURE

Source: Ethiopian Roads Authority, Sept. 2002

Legal & Protection

of Right-Of-Roads Division

Internal Audit service

Information and Public Relations

Services

Procurement Services

Own Force Construction Division

Own Force Maintenance District (10)

Equipment and Supplies Division

Operations Department

Deputy General Manager

Contract Formulation Branch

Civil Contract Implementation Branch

Civil Contract Administration

Design Research & Network

Management Division

Environmental Management Branch

Planning & Programming Division

Engineering & Regulatory Department

Deputy General Manager

Project Accounting

Finance Division

Human Resource Development Division

Personnel Administration Division

Human Resources & Financial Department

Deputy General Manager

GENERAL MANAGER

ERA BOARD

PROJECT PIU

ANNEX 4ETHIOPIA: WACHA – MAJI ROAD UPGRADING PROJECT

Source: ADF Appraisal Mission, Sept. 2002

Provisional List of Goods and Services

Cost in ETB Cost in UA Co- Financing

ForeignExchange

LocalCost

TotalCost

ForeignExchange

LocalCost

TotalCost

ADF GOEItem Description

(Birr) (Birr) (Birr) (U.A.) (U.A.) (U.A.) (U.A.) (U.A.)

1 General Provisions 15,915,900 2,244,550 18,160,450 1,439,780 203,046 1,642,825 1,496,957 145,868

2 Earthworks 55,672,500 7,851,250 63,523,750 5,036,230 710,238 5,746,467 5,236,233 510,235

3 Pavement Layers and Surfacing 67,519,920 9,522,040 77,041,960 6,107,968 861,380 6,969,348 6,350,532 618,815

4 Drainage and Structures 37,752,647 5,324,091 43,076,738 3,415,169 481,626 3,896,796 3,550,795 346,000

5 Ancillary Road Work 7,407,465 1,044,643 8,452,108 670,092 94,500 764,592 696,703 67,889

Sub-Total Civil Works 184,268,432 25,986,574 210,255,005 16,669,239 2,350,790 19,020,029 17,331,221 1,688,808

6 Design Review 1,653,691 531,544 2,185,235 149,596 48,084 197,680 163,136 34,544

7 Supervision Consulting Services 9,922,146 3,189,261 13,111,407 897,574 288,506 1,186,080 978,818 207,263

8 Audit Services 884,352 0 884,352 80,000 0 80,000 80,000 0

Sub-Total Consultancy 12,460,189 3,720,805 16,180,994 1,127,170 336,590 1,463,760 1,221,954 241,807

9 Staff training 2,640,498 675,822 3,316,320 238,864 61,136 300,000 238,864 61,136

10 Recruitment of Experts 6,632,640 0 6,632,640 600,000 0 600,000 600,000 0

11 Computer & CADD Equipment 1,658,160 0 1,658,160 150,000 0 150,000 150,000 0

Sub-Total Technical Assistance 10,931,298 675,822 11,607,120 988,864 61,136 1,050,000 988,864 61,136

Total Base Cost 207,659,919 30,383,201 238,043,119 18,785,273 2,748,516 21,533,789 19,542,039 1,991,750

Physical Contingency (10%) 19,672,862 2,970,738 22,643,600 1,779,641 268,738 2,048,379 1,855,318 193,061

Price Contingency 23,686,776 6,133,542 29,820,318 2,142,746 554,851 2,697,597 2,298,992 398,605

Total Project Costs 251,019,557 39,487,481 290,507,037 22,707,660 3,572,105 26,279,765 23,696,349 2,583,416

ANNEX 5Page 1 of 5

Source: Ethiopian Roads Authority

SUMMARY FINANCIAL AND ECONOMIC ANALYSIS

A) RSDP II BY COMPONENTS AND SOURCES OF FUNDING (ETB Million)*

No Component GOE RoadUser

Community PrivateSector

Donors Unidentified Total

A. Federal Roads

1 Rehab of Trunk Roads 260.2 1,584.7 1,844.9

2 Upgrading of Trunk Roads 1,150.3 2,317.6 3,467.9

3 Construction of Trunk Roads 33.1 107.0 140.1

4 Upgrading of Link Roads 387.8 758.1 1,145.9

5 Construction of Link Roads 689.7 1,151.9 1,841.6

6 Roads Heavy Maintenance 25.1 684.6 709.7

7 Roads Routine Maintenance 640.4 640.4

8 Feasibility Study of New Roads 4.2 18.6

9 Procurement of Equipment 142.3 142.3

10 Bridge, Structure and Equipment 73.3 15.0 88.3

11 Policy and Capacity Building 25.7 45.0 250.1 320.8

12 Recurrent Budget 133.9 133.9

B. Regional Roads

13 Construction 600.0 600.0

14 Emergency Maintenance 3.0 20.2 23.2

15 Routine Maintenance 298.7 298.7

16 Recurrent Budget 298.3 298.3

C. Community Roads/ERTTP

17 Preparation and Physical Program 153.6 181.8 726.4 1,061.8

D. Municipality

18 Routine Maintenance of MunicipalityRoads

122.6 122.6

Total 3,684.6 1,106.7 153.6 - 7,213.3 726.4 12,899.0

* 1.0 USD = ETB 8.55

B) RSDP BY FINANCIERS (Low case) - (ETB Million)

RSDP I RSDP II RASP I & II

Cost in Million Birr Cost in Million Birr CostFinancer

Length(Km)

Secured Pipeline Expected Total Length(Km)

Secured Pipeline Expected Total Length(Km)

(in Mill.Br.)

IDA 789.0 1,523.7 - - 1,523.7 2,158.0 2,290.0 1,100.3 - 3,390.3 2,947.0 4,914.0

EU 316.0 657.3 - - 657.3 676.0 1,031.9 231.2 - 1,263.1 992.0 1,920.4

ADB 291.0 527.9 - - 527.9 239.0 655.1 - - 655.1 530.0 1,183.0

Japan 64.0 158.1 - - 158.1 214.0 298.0 20.0 - 318.0 278.0 476.1

Germany - 22.8 - - 22.8 125.0 174.8 - - 174.8 125.0 197.6

UK (DFID) - 23.2 - - 23.2 - 74.0 - - 74.0 - 97.2

Italy - - - - - 170.0 271.7 - - 271.7 170.0 271.7

OPEC - 0.3 - - 0.3 179.0 281.5 - 29.0 310.5 179.0 310.8

BADEA - - - - - 111.0 164.7 - 29.0 193.7 111.0 193.7

NDF - 14.8 - - 14.8 - 35.0 5.2 85.5 125.7 - 140.5

Ireland Aid - 2.6 - - 2.6 - 47.8 - - 47.8 - 50.4

Sweden - - - - - - 54.4 - - 54.4 - 54.4

GoE 7,177.0 3,313.5 - - 3,313.5 1,907.0 2,793.7 375.9 514.9 3,684.5 9,084.0 6,998.0

Road Fund - 869.8 - - 869.8 1,517.0 1,353.8 101.5 - 1,455.3 1,517.0 2,325.1

Unidentified - - - - - - - - 726.4 726.4 - 726.4

Community - - - - - 3,840.0 - - 153.6 153.6 3,840.0 153.6

Total 8,637.0 7,114.0 - - 7,114.0 11,136.0 9,526.4 1,834.1 1,538.4 12,898.9 19,773.0 20,012.9

* 1.0 USD = ETB 8.55

ANNEX 5Page 2 of 5

a) Methodology and Assumptions for Economic Evaluation

i) MethodologyThe approach to the economic evaluation has been conditioned by the mix of the benefits accruing toinvestments in what involves upgrading of 56km (Wacha – Bechuma section) of deteriorated motorizedgravel road section to a higher level of gravel road and what is essentially a new link in the road network(120km section from Bechuma – Maji); and paving of 25% of the link in steep grades in mountainoussections. The methodology used was therefore based on combining HDM IV and producer surplus approachfor the economic appraisal, which is found to be appropriate. Road condition data input into the HDM IVhave been in a “with” and “without” project scenarios. The road is broken into Wacha – Bechuma usingVOC and HDM-IV and Bechuma - Maji and using Producer Surplus Approach due to induced agriculturalproduction as a result of new road access. HDM IV allows for modelling over the analysis period of the link,the interaction between traffic volume, composition, road condition, geometry and characteristics and thevehicle operating costs for the “with” and “without” project scenarios.

All appraisal components have been inputted into the model in USD; output values are in Ethiopian Birr atthe current rate of exchange at appraisal. For Economic Analysis, financial construction and maintenancecosts have been converted into economic costs by applying a conversion factor of 0.78. The measures ofproject worth used in the Cost Benefit Analysis are the EIRR, NPV, BCR and the FYRR at 10% discountrate. The base year taken for economic evaluation is 2004, the year in which construction is expected tocommence with a construction period of 40 months and first year of service of the project road estimated as2009 with a service year of 20 years ending in 2028. Details on the methodology is in the ProjectImplementation Document (PID)

ii) Appraisal Assumptions

i) Maintenance StrategiesMaintenance of the existing road has been minimal and intermittent consisting mainly of spot repairs andsome grading. The maintenance strategies incorporated into the appraisal are as follows:

“Without project” do minimum: which is essentially the historic maintenance practice on the existingsection of the road. This involves a grading frequency of once a year and spot re-gravelling of 30m3 per kmper year. In practice routine maintenance is not annual through out the route (56kn section of Wacha -Bechuma) and both grading and spot re-gravelling used in the analysis are overestimated above currentpractice. The rest of the route (Bechuma – Waji) where the model is run to calculate modal shift benefits, thecurrent alignment is assumed to be an unmaintainable track.“With project “high standard: which comprises annual routine maintenance, grading at a frequency of oneblade pass after each 260,000 vehicles, spot regravelling to a maximum 50m3 per km per year, andresurfacing when gravel thickness reduces 100mm estimated at every 5 years, and resealing of paved sectionsevery eight years.

ii) Residual ValueResidual values have been calculated for a road operating life of 20 years based on various investmentcomponents of the project made up of general, earthworks, drainage structures, ancillary & road works,bridges, and design and supervision services. This has been estimated at 14.4% of original economicinvestment cost of Ethiopian Birr 221.68 million and amounts to Ethiopian Birr 31.92 million.

iii) Costs and Benefits

CostsThe costs taken into account are the Road Agency costs in the “with” and without project situationswhich include both the cost of routine and periodic maintenance, the investment cost of upgrading theproject road to a higher design gravel standard and intermittent bituminous surfacing in steep grades inmountainous sections. The investment costs taken into account include the financial base cost for civilworks plus the physical contingencies, consulting services for supervision, design review, audit technicalassistance for capacity building. These are converted to economic cost using the conversion factor of0.78. The financial contingencies are not taken into account, as they do not constitute consumption ofeconomic resources. The economic investment cost amounts to Ethiopian Birr 221.68 to be disbursedover the period 2004 to 2008.Benefits

ANNEX 5Page 3 of 5

The benefits include road user benefits in terms of VOC and time savings on the motorized sections andon diverted truck traffic from alternative desert route, NMT savings, modal shift benefits from pedestrianback and head loading to motorized transport, air diversion benefits, and producer surplus benefits due toopening up and accessing the agricultural potentials in Project Area of Influence.

The motorized VOC and Time Savings benefits for existing normal vehicular traffic and diverted trafficbased on HDM-IV modeling increased from Ethiopian Birr 6.06 million in 2009 to Ethiopian Birr 20.45million in 2028.

Benefits for the Non Motorized Transport (NMT) using the existing part of the road are benefits accruingto pack animals and pedestrians. The volume of NMT over the existing motorized section input intoHDM-IV are inferred from previous study on Butajira – Hossaina – Sodo which indicate observations atthe rate of 55 NMT per km per day. On this basis it is estimated that approximately 3000 units of NMTwould pass over the project road per day (See PID). At an average trip length of 2.5km, the NMT ADTequivalent is put at 125 of which 10.0% are pack animals and the rest are pedestrian head and backloaders. NMT benefits are projected to increase at the rate of population growth increasing fromEthiopian Birr 00.05 million in 2009 to Ethiopian Birr 0.12 million in 2028.

Producer surplus benefits have been estimated on the basis of Values of Producer Surplus by Area ofInfluence Weredas disaggregated for each of the three weredas of Dizi, Meinit and Chena. Theproducer surplus in volume terms is annual production less the portion of the crop lost by environmentalfactors, poor husbandry and storage, seeds required for the next planting season and householdconsumption of farmers. Current Producer Surplus tones are estimated at 10,161.7 for D131, 53,808.9for Meinit and 195,671 for Chena. Farm gate prices are applied to the volume of producer surplus tocalculate the value. The net surplus increasing from Ethiopian Birr 8.05 million in 2009 to EthiopianBirr 49.81million in 2028. It is assumed that with the road project, constraints on agricultural technologyare removed or eased and access to markets improved thereby providing incentives to take additionalland into cultivation. In the “without project” case the area of land under cultivation is seen to increase bysome 30% over the next two decades, leaving the relationship between total output and producer surpluslittle changed, though both would increase with population growth. In the “with project” case, theincrease in cultivated area in respond to improved opportunities for agricultural marketing is assumed toincrease by 70%. Though the cropping pattern is seen unchanged, there would be greater emphasis ofhigher value added crops. The details of the estimation are available in the PID.

Modal Shift Benefits is the shift from pedestrian headloading/backloading to lower cost motorized modewhen the project is completed and open to traffic on the 120km of track that is impassable to motorizedtransport under the without project case. HDM.4 has been run to compare the cost of moving therelevant tonnage of produce surplus over an unmaintained track of the geometric characteristics of theproject alignment with those of moving same volumes in a 10-ton truck over a gravel road of thestandard proposed for the project. The investment models was also run to determine the cost of movingthe tonnage by head loading over an unmaintained track and determine the cost of the equivalentmovements by a 10-ton truck over the new road. The model runs were then compared to calculatebenefits from modal shift, which increased from a level of Ethiopian Birr 16.72 million in 2009 to Birr40.87 million in 2028.

The composition of benefits in the “base case” indicated VOC benefits for normal traffic as 1.9%,Motorized time savings 0.3%, NMT savings 0.1%, Modal Shift benefits 44.0%, Truck diversion benefits16.4%, Producer Surplus Benefits 36.3% and Air Diversion benefits of 1.0%. The forecast benefits aredominated by the modal shift, producer surplus and truck diversion benefits.

Result of Cost – Benefit AnalysisThe results of the economic evaluation using the measure of investment worth on the basis of most likelytraffic forecast scenario and in which exogenous benefits to both non-motorized transport and agriculturalsurplus benefits were estimated resulted in an Economic Internal Rate of Return of 15.57% which ishigher than the current opportunity cost of capital in Ethiopia of 10.0%, agreed between Government andEthiopian Development Partners for admission of projects in the RSDP II. All measures of projectinvestment worth in the base case scenario of NPV at Birr 129.72 million, BCR of 1.68 and a FYRR of13.6% confirm the viability of the intervention in the upgrading of the Wacha – Maji road project. (SeePage 5 of 5 of Annex 5 for the flow of benefits and costs and the base case results)

ANNEX 5Page 4 of 5

Sensitivity AnalysisSensitivity testing has been made on the result of the base case scenario with respect to all measures ofinvestment worth for the project road and the results indicated in the Table below confirm the projectviability. When producer surplus benefits are reduced by 20%, and modal shift benefits are reduced by20% respectively, the results indicated that the project is still viable. In a worst-case scenario ofsimultaneous increase of project costs by 15% and benefits reduction by 15%, the project is still viable.

Scenarios EIRR % NPVBirr Million

B/CRatio

FYRR

1. 20% reduction in producer surplusbenefits

2. 20% reduction in freight diversionbenefits

3. 20 % reduction in modal shift benefits

4. 10 % reduction in all benefits

5. 10% increase in costs

4. 15% increase in costs and 15% reductionin benefits

14.7

15.2

14.5

14.4

14.5

12.3

106.0

119.2

101.8

97.6

112.0

54.9

1.55

1.62

1.53

1.51

1.53

1.25

12.8

13.1

12.0

12.1

12.3

10.0

In addition to the sensitivity test on the base case scenario, switch values analysis to indicate percentage changein benefits and costs that would bring the economic rate of return to 10 % threshold were undertaken. Theresults as in table below indicated that a 73.1% increase in investment cost and a 40.3% decrease in benefitsrespectively are required before feasibility is threatened. It would also require a combined change of investmentcost increase of 28.8% and benefit decrease of 28.8% to arrive at an EIRR of 10%.

Table 7.1: Switch values for EIRR of 10.0%

Case % ChangeIncrease in investment costsDecrease in benefitsCombined change in both

73.1%40.3%28.8%

ANNEX 5Page 5 of 5

BASE CASE ECONOMIC ANALYSIS

Source: ADF Appraisal Mission, Sept. 2002

Capital Costs (financial): 249.08 Million Birr Capital Costs (economic): 221.68 Million Birr

Benefits to Existing Traffic Modal Truck Air Producer Capital Without project With project Net 10% Disc. Net

Year MT VOC MT Time NMT Shift Diversion Diversion Surplus Costs Maintenance Maintenance Benefit and Disc factors Benefit and

Savings Savings Savings Benefits Benefits Benefits Benefits Costs Costs Cost stream Cost stream

2004 0.00 0.00 0.00 2.9948968 -2.99 1.0000 -2.992005 0.02 0.00 0.00 64.963324 -64.95 0.9091 -59.04

2006 0.02 0.00 0.00 64.963324 -64.95 0.8264 -53.68

2007 0.03 0.00 0.00 64.963324 -64.93 0.7513 -48.792008 0.03 0.00 0.00 23.795131 -23.76 0.6830 -16.23

2009 0.34 0.04 0.05 16.72 5.68 0.39 8.05 0.29 1.87 29.69 0.6209 18.432010 0.35 0.04 0.05 17.19 6.07 0.41 9.48 0.29 1.87 32.00 0.5645 18.06

2011 0.36 0.04 0.05 18.03 6.49 0.44 10.99 0.29 1.87 34.80 0.5132 17.86

2012 0.37 0.04 0.04 18.95 6.93 0.46 12.58 0.29 1.87 37.80 0.4665 17.642013 0.38 0.04 0.04 19.92 7.41 0.49 14.27 2.39 7.14 37.80 0.4241 16.03

2014 1.85 0.26 0.09 20.93 7.92 0.52 16.04 0.29 1.87 46.03 0.3855 17.75

2015 1.64 0.25 0.09 21.97 8.47 0.55 17.92 0.29 1.87 49.31 0.3505 17.282016 1.28 0.19 0.09 26.28 9.06 0.58 19.89 0.29 4.59 53.07 0.3186 16.91

2017 0.95 0.14 0.08 27.00 9.57 0.60 21.97 0.29 1.87 58.73 0.2897 17.01

2018 0.68 0.08 0.07 27.50 10.12 0.63 24.16 0.29 7.14 56.40 0.2633 14.85

2019 0.94 0.05 0.04 28.11 10.69 0.66 26.47 0.29 1.87 65.40 0.2394 15.66

2020 2.91 0.37 0.11 29.09 11.30 0.69 28.90 0.29 1.87 71.79 0.2176 15.622021 2.35 0.33 0.11 30.17 11.95 0.73 31.45 0.29 1.87 75.51 0.1978 14.94

2022 1.71 0.24 0.10 31.48 12.63 0.76 34.14 0.29 1.87 79.50 0.1799 14.30

2023 1.08 0.14 0.08 32.74 13.35 0.80 36.97 2.39 7.14 80.41 0.1635 13.15

2024 0.65 0.06 0.04 34.07 14.11 0.83 39.95 0.29 4.59 85.41 0.1486 12.70

2025 0.43 0.03 0.00 38.52 14.91 0.87 43.07 0.29 1.87 96.26 0.1351 13.01

2026 3.80 0.52 0.13 39.62 15.76 0.91 46.36 0.29 1.87 105.52 0.1228 12.962027 3.32 0.47 0.12 40.87 16.66 0.96 49.81 0.29 1.87 110.63 0.1117 12.36

2028 3.32 0.47 0.12 40.87 16.66 0.96 49.81 -31.92 0.29 7.14 137.29 0.1015 13.94

FYRR EIRR 15.57% NPV

0.136 129.72

Disc Net Costs Disc Benefits Disc B/C

191.78 321.50 1.68

ANNEX 6Page 1 of 2

ETHIOPIAWACHA – MAJI ROAD UPGRADING PROJECT

ENVIRONMENTAL AND SOCIAL MANAGEMENT PLAN SUMMARY

a) Brief description of the project and key environmental and social components

The road from Wacha to Maji is located southeast of Addis Ababa in Southern Ethiopia. The projectroad runs 173 km from Wacha to Maji. The project consists of upgrading the existing earth/track road tohigh-class gravel road with DBST paving of about 20% of the road on steep gradients in mountainoussections. The project construction involves improved horizontal and vertical alignments, andconstruction of drainage structures.

b) Major environmental and social impacts

Soil Erosion removal of vegetative covers for road construction and at material borrow pits willgenerate erosion and affect the road itself, the shoulders, the road reserve, and the nearby land andcrop fields. Road erosion silt the watercourses and under the bridges. Erosion may also occur atstorm water drainage outfalls when water velocities are not controlled. Design is critical toalleviate this problem.

Disturbance of natural water flows occurs mainly when there are changes in drainage patternsor when drainage facilities, culverts, and bridges are not adequately designed, implemented, ormaintained. This results in inundation, road overflow, erosion, and downstream waterabstraction, which affect fauna and flora.

Water pollution by oil spillage: Results from road construction and operation and affect surfaceand groundwater resources in specific areas as well as affect resources use by population andanimals.

Traffic disruption: This is a minor temporary disruption during road rehabilitation works. Traffic Noise: in the rural areas, noise is a minor impact as residences are scattered and road

traffic is low. Waste materials from drain cleaning and pavement reconstruction: Impacts are minor if

disposed properly, i.e. in areas to be reclaimed, but not in rivers. Safety of road workers from careless commuters: risks of accidents are temporary during road

rehabilitation, especially when road signing is poor. New developments and settlements, induced by improved access usually in the form of

markets and other business premises, new clearing for cropping, and homestead implementation. Landscape disturbance, besides borrow pits, this is mainly limited to road reserve and results

from clearing for improved visibility. Un-rehabilitated borrow pits become hazards and/orbreading sites for disease vectors (e.g.: malaria, shistosomiasis).

c) Mitigating Measures

Design and construction measures: 1) Minimization of clearing, especially during rainy period;quick reestablishment of vegetative cover; 2) To control sedimentation and sediment loading,construction in and around perennial rivers should be conducted during dry season; on-site drainagemanagement using dikes, sediment traps, and silt fences will be implemented; 3) Regular watering ofroad works in operational areas; 4) Install water diversions on the road alignment designed tominimize erosion in the road reserve and fields; 5) Provide necessary and adequate drainage works; 6)Provide stone riprap at inlets and outlets of culverts to minimize erosion due to high velocities ofstorm water runoff; 7) Avoid materials extraction in or close to human settlement areas whereverpossible; and 8) Protect erosion susceptible surfaces by grassing and stone pitching and/or with mulchor fabric.

ANNEX 6Page 2 of 2

Rehabilitation works: Rehabilitate quarries into water points or by replanting vegetation.Maintenance works: Cure gullies abutting the road using gabion works.Law enforcement: 1) Enforce air and noise pollution standards; 2) Schedule work in towns onlyduring daytime.

Prevention and waste disposal: 1) Provide adequately located and maintained latrines and roadsidelitter disposal facilities; 2) Create awareness on HIV/AIDS and other related diseases and providelimited health care services.

d) Monitoring program and complementary initiatives

Monitoring and supervision are conducted to ensure that potential environmental impacts are minimizedthrough adequate implementation of mitigation measures and also to provide early warning on unforeseenimpacts. Some of the key parameters for monitoring and supervision in the Wacha Maji road upgradingproject include: 1) Erosion of the road, control the limits of disturbance during construction; 2) Waterquality in critical water resources affected by road construction, by controlling proper implementation ofsediment control measures; 3) Vegetation, assess encroachment on forested areas by non plannedeconomic activities, especially new clearing for cropping, and homestead development; 4) Trafficaccidents in order to improve road signing; and 5) Diseases such as malaria, especially around borrowsites.

e) Institutional arrangements

The supervision consultants and the Environmental Management Branch of the Ethiopian RoadsAuthority will monitor the implementation of above outlined mitigation measures. Full consultationswith local authorities and close follow-up of specific clauses in contract documents will also be carriedout by ERA.

f) Public consultations and disclosure requirements

During project preparation and design phase, as well as during the EIA report studies, extensiveconsultation with local authorities and stakeholders were carried out.

g) Estimated costs

There are two types of costs associated with the adverse environmental and social impacts of the roadupgrading: 1) the impacts that are in the road right of way, for which the cost is integrated in theoverall project design and costing; 2) and the potential impacts that are out of the right of way, forwhich the local government will make the necessary arrangements for mitigation.

h) Implementation schedule and reporting

Implementation of the mitigation measures follows the civil works of upgrading the road. The twoactivities are fully integrated

ANNEX 7Page 1 of 2

ETHIOPIA - SUMMARY OF BANK GROUP OPERATIONS AS OF 30 OCT. 2002

SOURCE NET LOAN DISB UNDISB LOAN STATUS BALANCES

YEAR OF DATE AMOUNT AMOUNT AMOUNT PERCENT CLOSING OF CANCELLED

No APPROVED PROJECT FUNDS SIGNED Million UA Million UA Million UA DISB DATE PROJECT Million UA

AGRICULTURE0.161 1975 Southern Rangeland Livestock ADF 20-02-1976 4.59 4.59 0.00 100.00 30-Jun-94 Completed 0.01

2 1977 Amibara Irrigation ADF 18-08-1977 4.25 4.25 0.00 100.00 31-Dec-87 Completed 1/ 0.353 1979 Finchaa Sugar Study ADB 16-05-1979 4.85 4.85 0.00 100.00 31-Dec-85 Completed 0.154 1980 Wush Wush Tea ADF 12-12-1980 7.36 7.36 0.00 100.00 31-Dec-95 Completed 1/ 0.015 1981 Addis Ababa Fuekwood* ADF 25-06-1982 6.62 6.62 0.00 100.00 31-Dec-94 Completed 1/ 2.596 1982 Bebeka Coffee Plantation ADB 06-05-1982 10.00 10.00 0.00 100.00 31-Dec-94 Completed 1/ ***7 1982 Agricultural Line of Credit ADF 02-08-1983 7.33 7.33 0.00 100.00 30-Jun-94 Completed 1/ 0.048 1984 Gelena Irrigation TAA 05-11-1984 1.10 1.10 0.00 100.00 30-Jun-90 Completed 0.329 1984 Dairy Rehabilitation & Dev.* ADF 28-01-1985 5.01 5.01 0.00 100.00 11-Jul-95 Terminated 1/ 15.4

10 1985 Small Scale Irrigation* ADF 09-05-1985 5.36 5.36 0.00 100.00 31-Dec-95 Terminated 1/ 10.311 1985 Awash Basin Water Study TAA 09-05-1985 1.19 1.19 0.00 100.00 30-Jun-94 Completed ***12 1985 PADEP (Sidamo /Gamo/Gofa)* ADF 07-05-1986 5.44 5.44 0.00 100.00 31-Dec-95 Terminated 1/ 13.713 1986 Tepi Coffee Development ADB 24-04-1987 4.68 4.68 0.00 100.00 31-Dec-98 Completed 2.92

ADF 24-04-1987 16.05 16.05 0.00 100.00 31-Dec-9814 1987 Amibara Drainage I ADF 27-08-1987 14.78 14.78 0.00 100.00 31-Dec-97 Completed 0.1615 1988 Finchaa Sugar ADB 25-04-1989 78.25 78.00 0.25 99.68 31-Dec-99 Completed 1.75

ADF 14-02-1989 14.46 14.46 0.00 100.00 31-Dec-9916 1989 South East Rangelands ADF 01-12-1989 18.28 18.28 0.00 100.00 31-Dec-00 Completed 3.8317 1989 EVDSA Institutional Building TAF 01-12-1989 2.56 2.56 0.00 100.00 31-Dec-93 Completed 1/ 0.3518 1989 Wush Wush II ADF 14-02-1990 6.42 6.42 0.00 100.00 30-Jun-99 Completed 3.7119 1990 Meat Plant Feasibility Study TAF 21-02-1991 1.02 1.02 0.00 100.00 31-Dec-97 Completed 0.0720 1991 Omo-Ghibe Master Plan Study TAF 31-12-1991 5.07 5.07 0.00 100.00 31-Dec-97 Completed21 1991 Birr- Koga Irrigation Study TAF 24-12-1991 2.48 2.48 0.00 100.00 31-Dec-97 Completed 0.2922 1992 Amibara Drainage II study TAF 22-01-1993 0.54 0.36 0.18 66.67 31-Dec-95 Completed23 1997 National Fertilizer Project ADF 21-02-1998 36.43 36.43 0.00 100.00 30-Jun-02 Completed24 1998 National Livestock Project ADF 21-11-1998 27.00 7.38 19.62 27.33 30-Jun-04 On Going25 2000 Pastoral Area Development Study TAF 15-12-2000 0.71 0.00 0.71 0.00 31-Dec-02 On Going26 2001 Koga Irrigation ADF 19-07-2001 32.59 0.11 32.48 0.34 31-Dec-06 On Going

TAF 19-07-2001 1.33 0.16 1.17 12.08 31-Dec-06 On Going27 2001 Genale-Dawa Master Plan Study TAF 16-11-2001 3.93 0.00 3.09 0.00 31-Dec-06 On Going

TRANSPORT28 1977 Jimma-Chida Road ADF 13-12-1977 6.45 6.45 0.00 100.00 16-Jul-85 Completed

29 1980 Rural Roads( Sidam, Bale) ADF 22-06-1980 7.11 7.11 0.00 100.00 30-Jun-85 Completed 0.25

30 1981 Rural Roads( Gondar and Shoa) ADF 30-12-1981 10.94 10.94 0.00 100.00 31-Dec-97 Completed 0.1131 1984 Gore-Tepi Road* ADF 10-02-1984 15.69 15.69 0.00 100.00 31-Dec-94 Completed 1/ 0.74

32 1989 Assab Port Development ADF 29-05-1989 8.58 8.58 0.00 100.00 31-Dec-94 Terminated 32.44

33 1989 Road Maintenance & Rehab. ADF 01-12-1990 43.75 38.61 5.14 88.25 31-Dec-01 Completed34 1990 Ethiopian Airlines Inf. Dev. ADB 14-03-1991 24.55 24.55 0.00 100.00 31-Dec-98 Completed 3.65

35 1992 Addis Ababa Airport Study TAF 22-06-1992 1.93 1.93 0.00 100.00 31-Dec-95 Completed

36 1992 Chida Sodo Road ADF 14-04-1993 20.76 20.76 0.00 100.00 31-Dec-98 Completed 3.18

37 1996 Addis Ababa Intl. Airport Dev. Proj. ADF 20-12-1996 19.50 14.96 4.54 76.72 31-Jun-01 On Going

38 1998 Alemgena-Butajira Road Upgrading ADF 21-07-1998 18.50 6.20 14.87 33.51 31-Dec-02 On Going39 1998 Seven Roads Study TAF 17-12-1998 3.4 0.15 3.25 4.47 30-Jun-02 On Going

40 2001 Butajira-Hossaina-Sodo Road ADF 16-11-2001 41.31 0 41.31 0.00 31-12-08 On Going

ANNEX 7Page 2 of 2

* Projects whose loan balances (totalling UA 44.11 million) were reallocated to the ERRP in 19921/ Completed Projects for which PCR have been Prepared*** Cancelled loan balance less than UA 5,000.00

SOURCE NET LOAN DISB UNDISB LOAN STATUS BALANCES

YEAR OF DATE AMOUNT AMOUNT AMOUNT PERCENT CLOSING OF CANCELLED

No APPROVED PROJECT FUNDS SIGNED Million UA Million UA Million UA DISB DATE PROJECT Million UA

PUBLIC UTILITIES41 1975 Addis Ababa Sewerage I ADF 16-01-1976 4.60 4.60 0.00 100.00 31-Dec-79 Completed 1/ ***42 1979 Rural Electricity ADB 16-05-1979 1.50 1.50 0.00 100.00 30-Jun-84 Completed 1/

NTF 16-05-1979 5.00 5.00 0.00 100.00 30-Jun-8443 1979 Assab Water Supply ADF 27-02-1980 6.13 6.13 0.00 100.00 31-Dec-90 Completed 0.3244 1986 Power Transmission Lines ADB 24-04-1987 9.37 9.37 0.00 100.00 30-Jun-98 Completed 0.63

(Electricity I) ADF 24-04-1987 24.90 24.90 0.00 100.00 30-Jun-98 0.1245 1979 Addis Ababa Sewerage II ADF 16-05-1979 6.63 6.63 0.00 100.00 30-Jun-94 Completed 1/ ***46 1982 Six Centers Water Supply ADF 02-03-1983 13.58 13.58 0.00 100.00 31-Dec-97 Completed 1/ 0.2347 1983 Eight Centers Water Supply ADF 04-05-1984 11.60 11.60 0.00 100.00 31-Dec-97 Completed 1/ 2.1748 1984 Telecommunications I ADB 05-11-1984 24.01 24.01 0.00 100.00 31-Dec-95 Completed 1/ 0.0249 1985 Chemoga Yeda Hydro Study TAA 07-05-1986 0.55 0.55 0.00 100.00 30-Jun-94 Completed ***50 1989 Five Towns Water Study TAF 29-05-1989 1.44 1.44 0.00 100.00 31-Dec-95 Completed 0.1951 1989 Addis Ababa Master Plan TAF 01-12-1989 1.09 1.09 0.00 100.00 30-Apr-97 Completed 0.0152 1990 Aleltu Hydro Feasib. Study TAF 21-02-1991 1.58 1.58 0.00 100.00 30-Jun-98 Completed 0.0653 1991 12 Towns Water Supply Study TAF 19-03-1992 1.79 1.79 0.00 100.00 31-Dec-97 Completed 1/ 0.5154 1992 Addis Ababa Water III Study TAF 12-05-1993 2.39 2.39 0.00 100.00 31-Dec-99 Terminated 0.08

ADF 12-05-1993 3.05 3.05 0.00 100.00 31-Dec-99 0.5655 1992 Telecommunications II ADB 14-04-1993 23.79 23.79 0.00 100.00 30-Jun-02 On Going 8.61

ADF 14-04-1993 6.41 3.38 3.23 52.73 30-Jun-02 7.9156 1992 Northern Ethiopian Power Trans. ADB 14-04-1993 20.11 20.11 0.00 100.00 31-Dec-98 Completed 0.73

ADF 19-04-1993 26.72 26.72 0.00 100.00 31-Dec-98 0.5357 1993 Hydro-Power Feasibility Study TAF 06-09-1994 2.35 2.35 0.00 100.00 31-Jun-01 Completed 1.958 2001 Rural Electrification Project ADF 14-03-2002 37.67 0.00 37.67 0.00 31-Dec-05 On Going59 2002 Harar Water Supply & Sanitation ADF 19.89 0.00 19.89 0.00 31-Dec-09 On Going

TAF 1.12 0.00 1.12 0.00 31-Dec-09

SOCIAL60 1983 Primary Teachers & Sec. Education ADF 13-06-1983 14.98 14.98 0.00 100.00 31-Dec-95 Completed 1.1561 1992 Basic Educ., Tech. & Voc. Training ADF 22-01-1993 4.53 4.53 0.00 100.00 31-Dec-99 Completed 10.2162 1998 Education III Project ADF 21-11-1998 32.00 7.20 29.42 22.50 31-Dec-02 On Going

TAF 21-11-1998 0.30 0.00 0.30 0.00 31-Dec-02 On Going63 1998 Primary Health Care ADF 17-12-1998 29.67 2.65 29.37 8.93 31-Dec-02 On Going

INDUSTRY & MINING64 1987 Lega Dembi Gold ADB 19-11-1987 16.55 16.55 0.00 100.00 31-Dec-95 Completed 1/ 0.5365 1989 Lega Dembi Gold Study TAF 30-01-1990 2.11 2.02 0.09 95.73 31-Dec-97 Completed 0.6866 1993 Biklal Phosphate Study TAF 26-01-1994 2.60 1.17 1.43 45.00 31-Dec-01 On Going67 2000 Privatisation T/A Project TAF 08 03 2001 3.00 0.11 2.89 3.77 31-Dec-03 On Going68 1992 ERRP ADF 14-05-1992 86.62 86.62 0.00 100.00 30-Dec-97 Completed 1/69 1993 SAL ADF 09-07-1993 63.54 63.54 0.00 100.00 30-Jun-96 Completed 0.0170 1998 Suplementary Financing Mechanism ADF Not signed 0.00 0.00 0.00 0.00 31-Dec-99 Cancelled 7.7971 2001 SAL II ADF 16-11-2001 60.00 40.00 20.00 66.67 31-Dec-03 On Going72 2001 Capacity Building of MoFED TAF 15-01-2002 0.52 0.15 0.37 27.98 31-Dec-04 On Going

TOTAL 1125.84 862.35 272.39 76.60 85.76

ANNEX 8Page 1 of 2

TECHNICAL ASSISTANCE SUPPORTFOR DESIGN REVIEW

STAFF TRAINING1. Onsite staff training in CADD and other design software: 10 staff trained for six months (60 staff-months)2. Offsite staff training in a professional engineering design environment: six staff trained for six months (36

staff-months)3. Academic Training: Post Graduate Training for 2 civil engineers at the Master’s Degree level (one in

Highway/Transport Engineering and one in Material Engineering)

RECRUITMENT OF EXPERTS1. Senior Highway Road Design Engineer with demonstrated expertise in the planning and design of highways

using automated systems – 24 man-months2. Senior Civil/Hydraulics Engineer with demonstrated expertise in the hydraulic design of drainage structure,

and storm water management facilities using standard drainage design software – 18 man-months3. Senior Structural/Bridge Engineer with demonstrated expertise in the design of bridges and other highway

structures using automated systems – 12 man-months

CADD EQUIPMENT AND SOFTWARE

CADD Design Standards

Development of CADD standards Handbook for surveying and design including at a minimum:

Definition of a standard CADD platform

Standard layering systems

Pen Sizes, Lettering standards & Design scales

Format of electronic and hard copy deliverables

Standard drawings & Standard symbols

Drafting Software

AUTOCAD Drafting software (full 3D options) from AutoDesk: Network version for six seats

MICROSTATION Drafting software from Bentley: Network version for six seats

Highway Design Software

Highway design software (Network Version) compatible with AUTOCAD such as EaglePoint or similar

Highway design software (two seats) compatible with MICROSTATION such as GEOPAK, INROADS or similar

Structural Design Software

Packages from: SAND, Master Series, Prokon, Smart Engineer, Strand7, or Leap5.

Hydrology and Drainage Design Software

Packages as recommended in the ERA "Drainage Design Manual" as follows:

TR55 - SCS Method for Runoff Estimation;

HY8 - Hydraulic Performance of Culverts;

WSPRO - Water surface profile model;

HEC-1 - Flood Hydrograph package;

The design software must be the latest version, must be capable of being used simultaneously by six users and should

be compatible with AutoCAD.

All software shall be supplied with a three-year maintenance support option included in the purchase price. All

software shall be sealed, originals as supplied by the registered publisher, complete with appropriate manuals, licenses,

and guarantees.

The design software shall be compatible with the PC operating system (Windows 2000)

CADD Equipment

CADD equipment shall be as detailed below, as a minimum:

ANNEX 8Page 2 of 2

6 CADD Workstation Computers, Pentium P4, 2 GHz, 256MB RAM upgradeable, 40GB HD, Monitor

21" (1800x1440 resolution @ 80 Hz), 10/100 MPS network card, re-write able CD drive, Windows 2000,

Office XP;

6 No. UPS, 1200VA;

6 No. Sets CADD Workstation furniture, fittings, and appropriate documentation storage;

1 No. A3 Inkjet color network printer, 1200dpi, 15ppm color (A4); 1 No. A3/A4 Laser mono network printer, 1200 dpi, 10/20ppm; 1 No. A0 self standing Inkjet color network plotter, 1200 dpi, plotter stand, paper roll feeder, automatic

paper cutter;

Technical Assistance Support

Cost Estimate (UA)

DESIGNATION UNIT QUANTITY UNIT PRICE EXTENSION

STAFF TRAINING

Onsite staff training in CADD and other design software Lump sum 27,000

Offsite staff training in a professional engineering firm Lump sum 200,000

Academic Training: Post Graduate Training for 2 civil engineers Lump sum 70,000

Sub-Total 297,000

RECRUITMENT OF EXPERTS

Senior Highway Road Design Engineer Man-Month 24 10,000 240,000

Senior Civil/Hydraulics Engineer Man-Month 18 9,500 171,000

Structural/Bridge Engineer Man-Month 12 8,000 96,000

Sub-Total 507,000

CADD DESIGN STANDARD MANUAL

CADD Design Expert Man-Month 8 8,000 64,000

CADD Operator Man-Month 4 8,000 32,000

Sub-Total 96,000

CADD EQUIPMENT AND SOFTWARE

Drafting Software

AUTOCAD Drafting software (full 3D options) No. 6 4,000 24,000

MICROSTATION Drafting software No. 2 4,000 8,000

Highway Design Software

Highway design software (AUTOCAD) No. 3 8,000 24,000

Highway design software (MICROSTATION) No. 1 8,000 8,000

Structural Design Software No. 1 12,000 12,000

Hydrology and Drainage Design Software No. 1 12,000 12,000

CADD Equipment

CADD Workstation Computers, Pentium P4, 2 GHz, 256MB RAM40GB HD, Monitor 21" (1800x1440 resolution @ 80 Hz), 10/100MPS network, CD drive, UPS, Windows 2000, Office XP;

No. 6 6,000 36,000

CADD Workstation furniture, fittings No. 6 500 3,000

A3 Inkjet color network printer, 1200dpi, 15ppm color (A4); No. 1 5,000 5,000

A3/A4 Laser mono network printer, 1200 dpi, 10/20ppm; No. 1 3,000 3,000

A0 self standing Inkjet color network plotter, 1200 dpi, plotter stand,paper roll feeder, automatic paper cutter;

No. 1 15,000 15,000

Sub-Total 150,000

Total 1,050,000

ANNEX 9

ETHIOPIAWACHA MAJI ROAD UPGRADING PROJECT

List of Annexes in the Project Implementation Document (PID)

1. SUMMARY OF PROJECT SCOPE AND OBJECTIVES

2. PROJECT MAPS

3. PROJECT DESIGN

4. DETAILED PROJECT COSTING

5. SUMMARY OF PROCUREMENT ARRANGEMENTS

6. PROJECT IMPLEMENTATION SCHEDULE

7. PROJECT SUPERVISION PLAN

8. TRAFFIC DEMAND AND ROAD USER PRICES

9. PARAMETERS FOR ECONOMIC ANALYSIS

10. HDM RESULTS FOR LINK ROADS AND PROJECT ROAD

11. SCHEDULE OF DISBURSEMENT

12. ENVIRONMENTAL AND SOCIAL IMPACTS ASSESSMENTS