prefeasibility study for bishek - un escap report_mongolia.pdf · prefeasibility study of the...

Economic and Social Commission for Asia and the Pacific

Promotion of Investment in the selected Asian Highway Routes

in four countries (Bangladesh, Kyrgyzstan, Mongolia and Myanmar)

Final Report

Prefeasibility Study of Upgrading Khovd – Uliastai Highway

(AH32) in Mongolia

i

This study was undertaken with the financial assistance of

Korea Expressway Corporation

Bangkok

November 2014

Disclaimer

The analyses, findings, views and opinions expressed and arguments employed in the report are those of

the study team members involved with the prefeasibility study, and do not necessarily reflect the official

views of the ESCAP secretariat or of the Government of Mongolia.

The data and other information, analyses, and findings presented in the report are provided without

warranty of any kind, either express or implied, including their accuracy and completeness for investment

or for any other purpose. The user of the report specifically acknowledges the limitations of the study and

agrees that the use of any materials of the report is at the user’s sole risk.

The designations employed and the presentation of the material including on the maps in this report do

not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations

concerning the legal status of any country territory, city or area or of its authorities, or concerning the

delimitation of its frontiers or boundaries.

Mention of firm names and commercial products does not imply the endorsement of the United Nations.

This report has been issued without formal editing.

ii

Foreword

This prefeasibility study is based primarily on data that were readily available from various

secondary sources, including concerned government departments, and previous studies and reports. The

study itself did not commission any field study to complement data available from secondary sources. A

field trip was however undertaken by the study team mainly to understand the project’s physical and overall

development contexts, and the nature of its likely social and environmental impacts in broad terms. The

available data and information from secondary sources were mostly limited to physical (topographical and

cross-sectional), traffic flow, standard construction costs for different road construction items and some

socio-economic aspects. The study lacks any quantitative assessment of environmental and social impacts

based on surveyed data. However, some initial comments based on observations during the field trip are

included. Given the significance of environmental and social impacts of a road project, any future full-scale

feasibility study of the project should carefully investigate these impacts and consider suitable mitigation

measures through detailed field-level studies.

An attempt was made by the study team to understand the broader development contexts of the

project, including future potential benefits due to improved domestic and cross-border connectivity with the

neighboring countries. However, these understandings were mainly qualitative in nature (and reflected so in

narrative text in the report). A full-scale feasibility study may investigate this aspect further and examine how

the benefits of enhanced cross-border connectivity may be assessed and evaluated for use in a conventional

economic or investment analysis.

iii

Abbreviations and Acronyms

AADT

AH

ADB

AHN

B/C

BCA

CAS

COS

CPS

CSP

DBST

EIA

EIP

ESCAP

GOM

IA

IEE

IR

IRR

KEC

MDB

MRTCUD

NPV

O/D

PCE

SIP

TA

UNESCAP

VOC

WB

Annual Average Daily Traffic

Asian Highway

Asian Development Bank

Asian Highway Network

Benefit/Cost Ratio

Benefit Cost Analysis

Country Assistance Strategy

Country Operational Strategy

Country Partnership Strategy

Country Strategy and Program

Double Bituminous Surface Treatment

Environmental Impact Assessment

Environmental Investment Program

Economic and Social Commission for Asia and the Pacific

Government of Mongolia

Implementation Agency

Initial Environmental Examination

Involuntary Resettlement

Internal Rate of Return

Korea Expressway Corporation

Multilateral Development Bank

Ministry of Road, Transport, Construction and Urban Development

Net Present Value

Origin/Destination Survey

Passenger Car Equivalent

Social Investment Program

Technical Assistant

United Nations Economic and Social Commission for Asia and the Pacific

Vehicle Operating Cost

World Bank

iv

Table of Contents

Foreword……………………………………………………………………………………….. ii

Abbreviations and Acronyms………………………………………………………………….. iii

Table of Contents……………………………………………………………………………… iv

Section 1 Introduction ............................................................................................................................................. 1 1.1 Background ................................................................................................................................................. 1

1.2 Project Description ..................................................................................................................................... 2

1.3 Methodology ............................................................................................................................................... 1

1.4 Study Team ................................................................................................................................................. 2

1.5 Limitation of the study (Recommendations for a formal feasibility study) ................................................ 2

Section 2 Data Survey and Review of Previous Studies ........................................................................................ 3 2.1 Data Survey................................................................................................................................................. 3

2.2 Review of previous studies ......................................................................................................................... 3

Section 3 Development Plan and Socio-economic Characteristics ...................................................................... 5 3.1 Development Plan ....................................................................................................................................... 5

3.2 Socio-economic Characteristics .................................................................................................................. 5

3.3 Road System Inventory ............................................................................................................................. 10

3.4 Asian Highway Network ........................................................................................................................... 11

Section 4 Technical Feasibility .............................................................................................................................. 12 4.1 Route Assessment ..................................................................................................................................... 12

4.2 Traffic Forecast ......................................................................................................................................... 16

4.3 Improvement Plan ..................................................................................................................................... 18

4.4 Cost Estimation ......................................................................................................................................... 20

Section 5 Economic Analysis ................................................................................................................................. 22 5.1 Methodology ............................................................................................................................................. 22

5.2 Benefit/Cost Analysis................................................................................................................................ 23

5.3 Sensitivity Analysis ................................................................................................................................... 27

Section 6 Environmental and Social Impact ........................................................................................................ 28 6.1 Environmental Impact ............................................................................................................................... 28

6.2 Social Impact ............................................................................................................................................ 28

Section 7 Recommendation ................................................................................................................................... 29 7.1 Conclusion ................................................................................................................................................ 29

7.2 Recommendation ...................................................................................................................................... 29

7.3 Implementation Plan ................................................................................................................................. 30

Appendices 31 Appendix A. List of persons met .............................................................................................................................. 31

Appendix B. Implementation Agency ....................................................................................................................... 32

Appendix C. Economic Analysis .............................................................................................................................. 33

Appendix D. Asian highway Design Standard (1993) .............................................................................................. 36

Appendix E. Data Survey Request ............................................................................................................................ 37

Section 1 INTRODUCTION

1.1 Background

Efforts have been made in recent years to assess the current level of investment and to identify

investment needs and priorities for the development, mainly upgrade of Asian Highway (AH) to the

required technical standard, of AH Network (AHN) including:

Priority Investment Needs for the development of the Asian Highway Network (2006,

UNESCAP)

Prefeasibility study of the selected routes (upgrading of priority routes) in Armenia,

Bangladesh, Mongolia and Myanmar (2007, UNESCAP)

Investment Forum (16 November 2007, UNESCAP)

To facilitate the promotion and development of AH investment, a second phase of prefeasibility study

of selected routes in Bangladesh, Kyrgyzstan, Mongolia and Myanmar is being implemented as an

ongoing effort by UNESCAP with the financial support from Korea Expressway Corporation (KEC).

ESCAP decided that study routes should be nominated by recipient countries considering a set of

given criteria reflecting their needs and overall strategic development contexts.

Figure 1. Asian Highway Network

1.2 Project Description

Project Summary

The Ministry of Road, Transport, Construction and Urban Development (MRTCUD), Mongolia, has

proposed the improvement of Khovd-Uliastai section (473km) on AH32. It is also a part of the

Millennium Road Project. The Project connects two centers of western region, Khovd and Uliastai, as

an effort to enhancing connectivity and mobility between western region and Ulaanbaatar. It is below

AH Class III as per AH classification and design standards except Khovd~Myangad section

(Aspahalt Concrete Pavement, 24.5km), which represents AH Class III.

Figure 2. Khovd-Uliastai Section in Mongolia

Source: Based on UN country map for Mongolia available at

http://www.un.org/Depts/Cartographic/map/profile/mongolia.pdf

The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.

Khovd - Uliastay

L = 473km

1

Strategic context of the project

Strategic context of the project is as follows:

1. Formulation of the principal east to west corridor in Mongolia by connecting Khovd ~ Uliastai (473km),

which is a part of AH32. It connects:

Khovd, the capital of Khovd Aimag (Province), the far western region of Mongolia with 17

ethnicities; and

Uliastai, the capital of Zavkhan Aimag

2. Provision of improved connectivity and mobility in the western region will facilitate economic and social

development at the regional as well as national level.

1.3 Methodology

The overall approach of the prefeasibility study is represented diagrammatically in Figure 3 as below. Due to

the limited availability of data, a simple trend analysis has been used for the future traffic forecasting.

Figure 3. Prefeasibility Study Process

2

1.4 Study Team

This prefeasibility study report has been issued by the Transport and Tourism Division, Economic and Social

Commission for Asia and the Pacific (ESCAP). The external consultant, Mr. Woohyun Kwon has prepared

the report with assistance from other consultants and experts.

Mr. Hyunha Kwon and Mr. Byungryeol Kim from Naekyung Engineering, Korea, provided additional

assistance with the technical study, traffic forecast and economic evaluation. Mr. Yanjiv Bayarkhuu (Head of

Researh Investigation, Drawing and Design Sector, Department of Roads, MRTCUD, Mongolia) and Ms.

Delgermaar Baatar (Officer, International Cooperation Division, Department of Roads, MRTCUD,

Mongolia) provided relevant data and inputs as national experts.

1.5 Limitation of the study (Recommendations for a formal feasibility study)

1. Given the limited resources, this study has been conducted with the objective of providing an initial

evaluation of the candidate route, which was proposed by the Government of Mongolia (GOM), to facilitate

interventions by bilateral and/or multilateral donors. In this regard, the limitation of this study and

recommendations for a formal feasibility study are as follows:

The rationale review of the candidate route, which was suggested by the recipient county, and an

exploration of its alternatives have been omitted;

The output of the report has mainly relied on the limited information and data provided by GOM.

This report benefitted significantly from the World Bank study – the 2007 Road Master plan and

Feasibility Study for Road Development in Western Aimags in Mongolia;

The route assessment for 473km long project was done during a three-day site survey while

thorough investigation of the site should be in place for efficient planning/design and estimation of

quantities regarding the improvement plan; and

Unit cost analysis instead of estimation of BOQ has been done in this regards. Cost estimates of the

previous study and CPI, as an inflator, have been used. Historical cost data and (digital) terrain map

would be necessary for detail cost estimator.

2. In countries with a low traffic demand such as Mongolia, traditional Benefit Cost Analysis may not

capture the need of infrastructure development properly. By the nature of traffic demand, a derived

secondary function of a variety of socio-economic activities and development plans, the output of the traffic

forecasting and economic analysis in Mongolia may be insignificant since the initial values of major

indicators including registered vehicles and population are very low.

Considering this, a holistic, instead of demand-driven, approach may be appropriate for Mongolia.

3. More reliable economic assessment of the project can be undertaken with the availability of the following

information.

Socio-economic data/statistics including development plan of regions and transport facilities in the

catchments;

Per-unit data for economic analysis in the context of Mongolia including reduction of traffic

accidents and environmental benefits; and

Traffic survey data including O/D, network, sectional volumes, and travel speed

3

Section 2 DATA SURVEY AND REVIEW OF PREVIOUS STUDIES

2.1 Data Survey

The project team had requested the background materials for data collection in the form of a country report

(Appendix E). National, regional and project level development context was assessed through collection of

country report from project country, internet research, document review and a field mission.

Major data collection and survey items are as follows:

A. National (and Regional) Outlook

Area, population, Currency and exchange rate

GDP/GRP, GDP per capita, Economic growth rate, Inflation rate, Employment rate by sector

Trade (Import, Export), Major trade commodities, Major trade partners (Import, Export)

B. National & Sub-national strategy and priority

Road Master Plan, Regional & sub-regional Planning

Development and upgrading plan of AHN

Strategies and priorities

C. Implementation Agency (Road authority)

Organization

Implementation process including planning, design, construction and maintenance

D. Engineering data

Design specification

Road and bridge inventory

Traffic data (volume, O/D, travel speed, number of accident)

Unit construction cost(road, box & culvert, bridge, T/N)

Maintenance cost (Routine maintenance, periodic overlay)

Toll rate

Geotechnical and hydraulic survey

E. Socio-economic data

Social discount rate (%)

Passenger Car Equivalent (PCE), Vehicle occupancies, Number of registered Vehicles

Time Value, Vehicle Operating Cost (VOC)

GRP/GDP

Land use plan

2.2 Review of previous studies

Previous studies regarding AH were thoroughly reviewed and be incorporated as needed. Major previous

studies are as follows:

1. Priority Investment Needs for the development of the Asian Highway (AH) Network (2006, UNESCAP)

National priorities and intermodal connectivity have been identified as follows:

Status of AH network: Mongolia has a total 4,286km long AH network, among which 3,501km is

below class III

Priority investment needs: Khovd-Ulanbaatar (L=1,291km, AH32) was identified as one of three

priority projects with the estimated cost of USD 188million.

4

2. Road Master plan and Feasibility study for Road Development in Western Aimags in Mongolia (2007, World Bank)

A formal feasibility study for Khovd-Uliastai was done with Engineering study, Environmental Assessment

and Economic Analysis from March to November 2007. Findings and recommendations are as follows:

3 options routes were presented for existing AC section (Khovd-Myangad, 39km), Earth road

(Myangad-Junction of Uliastai, 391.8km) and Gravel road (Junction of Uliastai-Uliastai City,

24.5km) following a comprehensive site survey (3 weeks) and route assessment.

Traffic analysis, based on the traffic count and OD survey, represents 396 (Junction of Uliastai) to

2,377 (Khovd-Myangad) AADT in 2033.

AH class III road with total 10m road width ([email protected]), AC surface (50mm), 26 new bridges

and 221 new culverts, was recommended.

Total construction cost was estimated based on the surface type; $94million (AC), $85million

(DBST) and $58 (Gravel).

Maintenance cost was also estimated for AC surface (AC/DBST, $6,471/km) and Gravel surface

($6,466/km)

Economic analysis represents feasible including 15.4% of IRR at a 12% discount rate.

The methodology used to quantify the benefits including a residual value of 35%, potential benefits

to the regional agriculture GDP (82% of total benefits) as well as traditional VOCS (15%) and

VOTS (3%).

mailto:[email protected]

5

Section 3 DEVELOPMENT PLAN AND SOCIO-ECONOMIC CHARACTERISTICS

3.1 Development Plan

1. National Development Strategy (NDS, 2007-2021)

2. National Transport Strategy for Mongolia (NTS)

3. Transit Mongolia program (2008-2015)

4. Mongolian Road Master Plan (RMP, 2008-2020)

“Further details are not available”

3.2 Socio-economic Characteristics

3.2.1 General

Mongolia is the 19th largest and the most sparsely populated country in the world. It is also the second largest

landlocked country next to Kazakhstan. It is divided into 5 regions and 21 Aimags (Provinces).

The key Socio-economic indicators of Mongolia (ADB, 2011) are as follows:

Surface Area: 1,564,116 ㎢

Population: 2.75 million

Population growth: 1.35%

GNI per capita: US $1,870 (2011)

GDP Growth Rate: 6.9%

Currency unit: Tughrik (MNT)

US $1=1,395.63 (effective as of Oct 1, 2012 )

3.2.2 Socio-economic characteristics

Population

The population of Mongolia is 2.75million (2010) with very low annual average growth rate of 1.35% since

2001.

Table 1. Population trend in Mongolia

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Growth

Rate

(‘00~‘10)

Population

(1000

people)

2,411 2,435 2,459 2,485 2,514 2,547 2,584 2,625 2,667 2,712 2,756 1.35%

Source: UNESCAP Statistics Homepage, http://www.unescap.org/stat/data/statdb

http://www.unescap.org/stat/data/statdb

6

Figure 4. Population trend in Mongolia

2,200

2,300

2,400

2,500

2,600

2,700

2,800

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Population(Thousand)

Regional distribution of Population

Mongolia is geographically divided into five regions including, Western Region (Khovd, Zavkhan, etc.),

Khangai Region, Central Region, Eastern Region and Ulaanbaatar Region.

The capital city Ulaanbaatar represents 1,152thousand, 41.4% of the total population, while Western Region

including Khovd and Zavkhan aimags represents 14.5% of the total population.

Figure 5. Regional distribution of population

Bayan-Olgii4%

Govi-Altai2%

Zavkhan3%

Uvs3%

Khovd3%

Arkhangai3%

Bayankhongor3%

Bulgan2%

Orkhon3%

Ovorkhangai4%

Khovsgol4%Govisumber

0%

Darkhan-Uul3%

Dornogovi2%

Dundgovi2%

Omnogovi2%

Selenge4%

Tov3%

Dornod3%

Sukhbaatar2%

Khentii3%

Ulaanbaatar41%

2010 POPULATION, by aimags and the Capital

7

Table 2. Regional distribution of population (unit: 1000 people)

Region Aimag 2010 2009 2008

Populaion(B) B/A Populaion(B) B/A Populaion(B) B/A

Western

Bayan-Olgii 100.8 3.6% 101.9 3.7% 101.3 3.8%

Govi-Altai 58.4 2.1% 59.4 2.2% 59.8 2.2%

Zavkhan 76.9 2.8% 79.3 2.9% 79.8 3.0%

Uvs 78.2 2.8% 78.8 2.9% 79.8 3.0%

Khovd 88.4 3.2% 88.5 3.2% 88.4 3.3%

Sub Total 402.7 14.5% 407.9 14.9% 409.1 15.2%

Khangai

Arkhangai 91.6 3.3% 92.5 3.4% 92.5 3.4%

Bayankhongor 85.1 3.1% 85.4 3.1% 85.2 3.2%

Bulgan 62.6 2.3% 62.3 2.3% 61.4 2.3%

Orkhon 85.8 3.1% 83.1 3.0% 81.9 3.1%

Ovorkhangai 117.4 4.2% 117.5 4.3% 116.6 4.3%

Khovsgol 124.6 4.5% 124.1 4.5% 123.0 4.6%

Sub Total 567.1 20.4% 564.9 20.6% 560.6 20.9%

Central

Govisumber 13.8 0.5% 13.3 0.5% 12.9 0.5%

Darkhan-Uul 91.7 3.3% 90.0 3.3% 88.2 3.3%

Dornogovi 59.5 2.1% 58.3 2.1% 57.2 2.1%

Dundgovi 46.3 1.7% 47.7 1.7% 48.2 1.8%

Omnogovi 51.0 1.8% 49.3 1.8% 47.7 1.8%

Selenge 106.6 3.8% 103.5 3.8% 101.6 3.8%

Tov 90.2 3.2% 88.5 3.2% 86.8 3.2%

Sub Total 459.1 16.5% 450.6 16.5% 442.6 16.5%

East

Dornod 73.6 2.6% 73.6 2.7% 73.6 2.7%

Sukhbaatar 55.0 2.0% 55.0 2.0% 54.9 2.0%

Khentii 71.8 2.6% 71.5 2.6% 71.0 2.6%

Sub Total 200.4 7.2% 200.1 7.3% 199.5 7.4%

Ulaanbaatar Ulaanbaatar 1,151.5 41.4% 1,112.3 40.7% 1,071.7 39.9%

Grand Total(A) 2,780.8 100.0% 2,735.8 100.0% 2,683.5 100.0%

8

Number of Registered Vehicles

Mongolia represents relatively small number of registered vehicles, 608,255, in 2012. It is noted that annual

average growth rate of registered vehicles is 19.3% during 2002-2012. It is also noted that annual growth rate

has increased sharply between 2010 and 2009 by 61.0%.

Table 3. Number of registered vehicles

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Growth

Rate

(‘02~‘12)

No. of

vehicles 103,805 105,775 120,418 131,184 140,872 161,989 190,459 265,572 427,526 529,885 608,255 19.3%

Source: National Statistical Office of Mongolia Homepage, http://www.nso.mn/v3/index2.php

Internal data (2009-2012, Department of Road)

Figure 6. Number of registered vehicles

Passenger Car represents the largest portion, 64%, of the total vehicles with annual average growth rate of

30.3% as below1.

Table 4. Number of vehicles by types and annual growth rate

Year Passenger car Truck Bus Others Total

2007 110,150 68.0% 33,676 20.8% 13,038 8.0% 5,125 3.2% 161989 100.0%

2008 127,538 67.0% 41,138 21.6% 15,780 8.3% 6,003 3.2% 190459 100.0%

2009 153,906 58.0% 47,291 17.8% 16,136 6.1% 48,239 18.2% 265,572 100.0%

2010 281,182 65.8% 97,577 22.8% 4,563 1.1% 44,204 10.3% 427,526 100.0%

2011 340,944 64.3% 115,157 21.7% 5,168 1.0% 68,626 13.0% 529,895 100.0%

2012 388,888 63.9% 133,817 22.0% 5,584 0.9% 79,966 13.1% 608,255 100.0%

Growth

Rate

(‘07~‘12)

28.7% 31.8% -15.6% 73.2% 30.3%

Source: National Statistical Office of Mongolia Homepage, http://www.nso.mn/v3/index2.php Internal data (2009-2012, Department of Road)

1 It is noted that significant deviations were identified in growth rate among vehicle types. It may be due to the possible

change of vehicle classification.

http://www.nso.mn/v3/index2.php

http://www.nso.mn/v3/index2.php

9

Figure 7. Per cent of vehicles by type

Number of vehicles by region

59% of total vehicles are in Ulaanbaatar while 3.6% are in the project region (Khovd and Zavkhan Aimag).

Table 5. Number of vehicles by region

Region Aimag

2011Year 2010Year 2009Year

Number of

Vehicles (B) B/A

Number of

Vehicles (B) B/A

Number of

Vehicles (B) B/A

Western

Bayan-Olgii 12,270 2.3% 10,406 2.4% 7,289 2.7%

Govi-Altai 7,038 1.3% 6,546 1.5% 4,915 1.9%

Zavkhan 8,635 1.6% 7,593 1.8% 6,501 2.4%

Uvs 8,719 1.6% 6,804 1.6% 5,209 2.0%

Khovd 10,521 2.0% 9,223 2.2% 7,667 2.9%

Sub Total 47,183 8.9% 40,572 9.5% 31,581 11.9%

Khangai

Arkhangai 7,087 1.3% 6,065 1.4% 5,632 2.1%

Bayankhongor 12,150 2.3% 11,173 2.6% 8,293 3.1%

Bulgan 7,610 1.4% 5,897 1.4% 4,736 1.8%

Orkhon 15,314 2.9% 12,635 3.0% 9,527 3.6%

Ovorkhangai 12,657 2.4% 10,381 2.4% 7,988 3.0%

Khovsgol 14,466 2.7% 11,890 2.8% 8,931 3.4%

Sub Total 69,284 13.1% 58,041 13.6% 45,107 17.0%

Central

Govisumber 1,894 0.4% 1,550 0.4% 1,236 0.5%

Darkhan-Uul 13,966 2.6% 11,711 2.7% 8,814 3.3%

Dornogovi 12,734 2.4% 10,546 2.5% 4,381 1.6%

Dundgovi 6,101 1.2% 5,069 1.2% 4,224 1.6%

Omnogovi 16,993 3.2% 13,164 3.1% 9,646 3.6%

Selenge 13,942 2.6% 11,756 2.7% 8,471 3.2%

Tov 9,534 1.8% 7,399 1.7% 6,240 2.3%

Sub Total 75,164 14.2% 61,195 14.3% 43,012 16.2%

East

Dornod 10,459 2.0% 8,335 1.9% 6,353 2.4%

Sukhbaatar 7,180 1.4% 5,601 1.3% 3,827 1.4%

Khentii 6,704 1.3% 5,569 1.3% 4,245 1.6%

Sub Total 24,343 4.6% 19,505 4.6% 14,425 5.4%

Ulaanbaatar Ulaanbaatar 313,911 59.2% 248,213 58.1% 131,447 49.5%

Grand Total(A) 529,885 100.0% 427,526 100.0% 265,572 100.0%

10

GDP

The annual growth rate of GDP represents 6.9% from 2001 to 2010.

Table 6. GDP trend (2005 Nominal price)

(unit : Million 2005 US dollars)

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Growth Rate

(‘01~‘10)

GDP 1,898 1,988 2,127 2,353 2,523 2,739 3,019 3,289 3,247 3,454 6.9%

Source: UNESCAP STATISTICS Homepage, http://www.unescap.org/stat/data/statdb

Figure 8. GDP trend

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GDP(Million 2005 US dollars)

3.3 Road System Inventory

The road network in Mongolia comprises 49,186 kilometers, of which 2,063.9 kilometers are paved State

Roads.

Table 7. Pavement type by level of administration

Administrative

Level

Paved Unpaved Total

Con’c AC Gravel Improved Earth Earth

State 56.6 2,007.3 1,508.4 1,312.3 6,282.6 11,136.2

Local 55.0 276.0 498.0 499.0 36,637.0 38,031.0

Total 111.6 2,283.3 2,006.4 1,811.3 42,919.6 49,186.2

Source: DOR, 2007

http://www.unescap.org/stat/data/statdb

11

3.4 Asian Highway Network

The Asian Highway network in Mongolia is consisted of 3 routes as below. Out of total 4,318km long AH,

2,450km is unpaved roads.

Table 8. Current Status of AH network in Mongolia

Route

No. Itinerary Length (km)

Paved (km) Unpaved

(km) 2 Lanes or

more 1 Lane

AH3 Altanbulag-Darkhan-Ulaanbaatar-Nalayh-

Saynshand-Zamiin Uud 992.0 868.1 123.9

AH4 Ulaanbaishint-Khovd-Bayan Ulgii-Yarantai 743.1 194.3 548.8

AH32 Sumber-Choibalsan-Ondorkhaan-Nyaayh-

Ulaanbaatar-Uliastai-Khovd 2,583.0 805.5 1,777.5

Total 4,318.1 1,867.9 2,450.2

Percentage 100.0% 43.3% 56.7%

Source: Internal data (Department of Roads, MRTCUD, Mongolia)

Figure 9. Asian Highway Routes in Mongolia

Source: United Nations ESCAP

12

Section 4 TECHNICAL FEASIBILITY

Technical viability of candidate route was assessed in terms of its geometry, alignment, traffic volume,

project cost and cross-border connectivity.

4.1 Route Assessment

4.1.1 Field Mission

A UNESCAP mission comprising Mr. Abdul Quium (UNESCAP), Mr. Woohyun Kwon (KEC), Mr. Hyunha

Kwon and Byungryeol Kim (Naekyung Engineering) visited Mongolia from May 6 to 12, 2012. Meetings

were held with Department of Roads and Department of Roads and Transportation Policy, including Mr.

Enkhtur Baasandorj (Director General), Mr. Onon Rentsendorj (Deputy Director General), Mr. Bayasgalan

Choijiljav (Head of Road Construction, Production, Management and Supervision Div.), Mr. Batsuuri

Namsrai (Head of Road Utilization, Maintenance Management and Supervision Div.), Mr. Yanjiv Bayarkhuu

(Head of Researh Investigation, Drawing and Design Sector), Ms. Delgermaa Baatar (Officer, International

Cooperation Div.), Mr. D. Naranpurev (Director General, Road and Transport Policy Department), and Mr.

Ganbold Khatanbaatar (Senior Officer, Road and Transport Policy Department).

The mission also met Mr. Nyamdavaa Gendenjav (Governor, Khovd Aimag), Mr. Yadamsuren Sanjmyatav

(Governor, Uliastai City, Zavkhan Aimag) and Mr. Jamiyansuren Sodnomstseren (Governor’s Consultant,

Uliastai City, Zavkhan Aimag) during a three day site visit to Khovd-Uliastai (L=473km) from May 9 to

May 11, 2012.

Mr. Yanjiv Bayarkhuu (Head of Researh Investigation, Drawing and Design Sector) and Ms. Delgermaa

Baatar (Officer, International Cooperation Div.) joined the site visit.

The objectives of the mission were:

To identify the strategic context of the project;

To assess the road and traffic conditions; and

To identify social and environmental constraints, if any

The mission provided comments to MRTCUD to assist them with formulating investment proposal including

traffic forecast, economic analysis and safeguard during the meetings and one day capacity building

workshop on May 8, 2012.

4.1.2 Review of road and traffic conditions

General

Since the site survey for the 473km long project has been done in a relatively short period, 3 days, selected

outputs and findings from the previous study2 that surveyed the site for 3 weeks were used as a main

reference.

Alignment: No significant constrains were identified for the alignment except Khar Us National Park since

the project road runs flat and rolling terrain mostly. The climatic characteristics of the project represent dry

steppe and Gobi desert mainly. It is noted that the provision of drainage system is needed as well as surfacing

the project road except for the city of Khovd and Uliastai sections.

2 Road Master plan and Feasibility study for Road Development in Western Aimags in Mongolia (2007, World Bank)

13

Bridges: Seven bridges were identified with good conditions.

Social and Environmental Impact: Land acquisition and resettlement may not be needed for the project road

due to the Government land ownership. No significant negative impact on the environment of the catchment

of the project road is expected. It was categorized as class B in terms of the World Bank guideline in the

previous study, which was done in 2007.

Division of homogeneous road sections: Considering the surface type, terrain, climate and characteristics of

traffic, eight homogeneous road sections were formulated as below.

Table 9. Division of sections

Section

No

Section Surface Type Length (km)

From To

1 Khovd city Myangad soum Asphalt Con’c. 39

2 Myangad soum Dorgon soum Earth track 58

3 Dorgon soum Sar Khairhan Bridge Earth track 77

4 Sar Khairhan Bridge Junction to Urgamal Earth track 83

5 Junction to Urgamal Zavhanmandal soum Earth track 51

6 Zavhanmandal soum Erdenehayrhan soum Earth track 53

7 Erdenehayrhan soum Aldarkhaan soum Earth track 86

8 Aldarkhaan soum Uliastai city AC under construction 26

Total 473

1. Khovd~Myangad (Section 1 AC pavement section)

The Khovd~Myangad is 39km long, two-lane asphalt pavement section, which was constructed in 1996. It is

Asian Highway Class III standard. The overall surface condition is fair/bad. It is noted that raising the height

of embankment is needed to prevent highway deterioration from permafrost in the middle of the section. This

section represents fair alignment and includes 3 bridges with good conditions.

Table 10. List of bridges in section 1

No Location

Types Length (m) Width (m) N E

BR 1 48 09 12.4 91 44 53.4 RC T-beam 54.0 8.0+0.5*2

BR 2 48 09 26.2 91 44 49.3 RC T-beam 45.0 7.8+0.5*2

BR 3 48 14 47.8 91 54 24.3 RC T-beam 145.0 7.8+0.5*2

Source: Road Master plan and FS for Road Development in Western Aimags in Mongolia (2007, World Bank)

For this section, the improvement of pavement with partial repair based on the current alignment is

recommended.

2. Myangad~ Sar Khairhan (Section 2, 3 KHar Us National Park section)

The Myangad~Sar Khairhan section is 135km long, unpaved, earth road. It passes on the flat steppe and

14

rolling terrain, mostly pasture-land, and is below Asian Highway Class III standard. It is noted that Asphalt

Concrete pavement with a proper height of embankment and drainage should be in place to avoid freezing

and thawing.

Approximately 20km of the section passes close to Khar Us Lake National Park, one of six Ramsar sites in

Mongolia. Remedies shall be provided during the detailed study. Current alignment alongside the Chono

Kharaikh River at Dorogon needs to secure proper spacing to protect the embankment from flooding.

List of bridges in this section is as follows:

Table 11. List of bridges in section 2 and 3

No Location

Type Length (m) Width (m) N E

BR 4 48 17 22.7 93 29 13.5 RC T-beam 72.0 6.5

BR 5 48 17 48 93 29 46.5 PS Box girder 127.0 8.0+0.75*2


Figure 10. Route map of Khovd~Sar Khairhan secton

3. Sar Khairhan Bridge~Zavhanmandal (Section 4, 5 Gobi desert section)

15

This 134km long section is an earth road, which runs on the flat steppe and rolling terrain. It is below Asian

Highway Class III standard. Due to the influence of Gobi Desert, this section represents lack of grazing for

animals and lack of water for agriculture. It is recommended that Asphalt Concrete pavement with a proper

height of embankment and drainage system may be in place to avoid freezing and thawing.

Figure 11. Route map of Sar Khairhan-Zavhanman Section

4. Zavhanmandal~ Aldarkhaan (Section 6, 7)

This 139km long section is an earth road, which runs on the dry steppe and rolling terrain. It is below Asian

Highway Class III standard. It is recommended that Asphalt Concrete pavement with a proper height of

embankment and drainage system should be in place to avoid freezing and thawing. .

5. Aldarkhaan~Uliastai city (Section 8)

This 26km long section connects from Donoi airport to Uliastai city. Construction of Asphalt Concrete

pavement is underway. It is below Asian Highway Class III standard.

16

List of bridges in this section is as follows:

Table 12. List of bridges in section 8

No Location (km) Type Length (m) Width (m)

BR 6 4.25 RC T-beam 15 11

BR 7 5.1 RC T-beam 15 11


Figure 12. Route map of Zavhanmandal~ Aldarkhaan

4.2 Traffic Forecast

17

4.2.1 Current Traffic condition

Due to the limited survey period, and lack of data in Asian Highway Database, traffic survey from the

previous study was used as a baseline data, which represents significantly low volumes.

Table 13. Current traffic volumes in AH32 (2011)

Survey Location AADT Traffic Composition (%)

Truck Bus Light vehicle

Khovd 433 26 4 70

Myangad Bridge 166 47 2 51

Sarhairkhan Bridge 35 51 1 48

Yaruu river Bridge 36 29 6 65

Gants Pass 40 40 3 57

Khovd-Modon ovoo Hill 92 19 9 72


4.2.2 Traffic forecast

Simple Trend Analysis

A simple trend analysis has been used for the future traffic forecasting considering the limited budget,

absence of comprehensive traffic database including traffic count and O/D survey and transport network data.

Traffic Projection of existing road

Traffic volume in the base year, including traffic conversion from adjacent road by upgrading the project, is

as below based on the above-mentioned study.

Table 14. Traffic volume in base year including diverted traffic

Section Passenger

car

Bus Truck Motorcycle Total

Small Large Small Medium Large

Khovd - Myangad Bridge 192 8 3 18 52 32 63 368

Myangad Bridge -

Sarkharkhan Bridge 26 4 2 12 27 7 12 90

Sarkhairkhan Bridge -

Durbuljin soum 16 3 0 7 16 2 9 53

Durbuljin soum - Uliastai 32 13 4 14 14 6 18 101


30 year traffic projection has been provided as below to synchronize the period of economic analysis from

year 2016 to 2045 considering 3-year construction periods from 2013 to 2015. The GDP growth rate was

used as an independent variable for the regression model of traffic forecasting considering the strong

correlation between traffic growth and GDP growth3. The future estimates from the IMF were used as below

in this regards.

3 However, it may lead to overestimating traffic projections since GDP growth rate is higher than the growth rate of

vehicle registration in the catchment of the project

18

Table 15. GDP Projection by IMF

Subject 2011 2012 2013 2014 2015 2016 2017 After 2017

GDP growth (%) 17.514 12.667 15.742 11.81 4.719 13.807 9.686 9.272

Source: International Monetary Fund, World Economic Outlook Database, October 2012

Table 16. Traffic Projection

Section Year Passenger car

Bus Truck Motor Cycle Total

small large small Medium Large

Khovd - Myangad

Bridge

2016 392 16 6 37 106 65 129 751

2020 561 23 9 53 152 94 184 1,075

2025 874 36 14 82 237 146 287 1,675

2030 1,362 57 21 128 369 227 447 2,610

2035 2,318 97 36 217 628 386 761 4,067

2040 3,305 138 52 310 895 551 1,085 6,335

2045 5,150 215 80 483 1,395 858 1,690 9,870

Myangad Bridge -

Sarkharkhan Bridge

2016 53 8 4 25 55 14 25 184

2020 76 12 6 35 79 20 35 263

2025 118 18 9 55 123 32 55 410

2030 184 28 14 85 192 50 85 638

2035 314 48 24 145 326 85 145 995

2040 448 69 34 207 465 121 207 1,549

2045 697 107 54 322 724 188 322 2,414

Sarkhairkhan Bridge -

Durbuljin soum

2016 33 6 0 14 33 4 18 108

2020 47 9 0 20 47 6 26 155

2025 73 14 0 32 73 9 41 241

2030 113 21 0 50 113 14 64 376

2035 193 36 0 85 193 24 109 586

2040 275 52 0 121 275 34 155 912

2045 429 80 0 188 429 54 241 1,421

Durbuljin soum - Uliastai

2016 65 27 8 29 29 12 37 206

2020 94 38 12 41 41 18 53 295

2025 146 59 18 64 64 27 82 460

2030 227 92 28 99 99 43 128 716

2035 386 157 48 169 169 72 217 1,116

2040 551 224 69 241 241 103 310 1,739

2045 858 349 107 375 375 161 483 2,709

4.3 Improvement Plan

19

Summary of Current status

Based on the given information, discussion and site survey, major findings are as follows:

Most sections run through flat and rolling steppe terrain.

Part of the sections, section 4, 5, 6, is in the influence of Gobi desert. Availability of underground

water during construction need to investigated.

Most sections are earth road and represent below Asian Highway Class III standard except section 1

(AC) and 8 (AC is underway); however overall alignment doesn’t need to be improved.

The overall surface condition of AC pavement, section 1, is fair and poor.

To avoid freezing and thawing, a proper height of embankment and drainage system nee to be in

place.

7 bridges are found to be in good conditions.

To address these challenges, upgrading plan for the minimum Asian Highway class Ⅲ standard is proposed

as follows:

Improvement of Asphalt Concrete pavement in Khovd~Myangad (Section 1, 39km)

Construction of two-lane, asphalt concrete pavement for Myangad~ Aldarkhaan (Section 2~7)

For the last section, Aldarkhaan to Uliastai (Section 8, 26km), no suggestion was made since

construction of Asphalt Concrete pavement is already underway.

From Myangad to Sar Khairhan Bridge (Section 2 and 3, 135km), a northern bypass of Khar Us

Lake National Park and Har Lake was proposed.

From Urgamal Junction to Aldarkhaan Soum (Section 5, 6 and 7), three alternatives were explored

considering the connectivity and mobility of small villages alongside the routes.

Alternative 1: Northern route which provides connectivity to Zavhanmandal and Erdenehayrhan

Soum.

Alternative 2: Central route, the shortest one, which connects Uliastai directly without connecting

any Soum.

Alternative 3: Southern route which provides connectivity to Durvoljin, Argalant and Ugoomor

Soum.

Table 17. Comparison of Alternatives

Alternatives Contents of improvement plan Quantity

Alternative 1

1. Section 1: Improvement of AC pavement 39 km

2. Section 2~7: Construction of AC pavement 408 km

3. Section 8 : AC pavement is under construction 26 km

Alternative 2




Alternative 3




20

4.4 Cost Estimation

Given the limited inputs, cost estimates from the previous study were used mainly as below. Local conditions

including seasonal restrictions on work in Mongolia, availability of materials and transport cost were taken

into account.

Estimation of average total cost per km

Average total cost per km in the previous study4 is as below.

Improvement of asphalt pavement : US $ 88,836/km

Total construction of 1 km of paved road : US $ 220,655/km

Table 18. Average total cost

Content Length(km) Cost(US$) Average total cost per km

Improvement of AC HU-1 39 3,464,620 88,836

New AC

HU-2 58 12,955,896 223,378

HU-3 77 16,523,273 214,588

HU-4 86 18,798,819 218,591

HU-5 90 19,071,387 211,904

HU-6 81 19,147,580 236,390

Total 392 86,496,955 220,655

The cost has been escalated by use of CPI from the base year of the previous study (2006) to 2011.

Table 19. Consumer Price Index (Country)

Year 2006 2007 2008 2009 2010 2011 2006~2011

CPI 105.1 114.6 143.3 152.3 167.8 183.7 174.8%

Source: World Databank Home Page, World Bank

Note: Dec. 2005 = 100

Escalated Average total cost per km is as follows:

Improvement of asphalt pavement per km: US $ 155,285/km

Total construction of 1 km of paved road : US $ 385,705/km5

4 Road Master plan and FS for Road Development in Western Aimags in Mongolia (2007, World Bank)

5 It falls within the given average construction cost of USD 375000~385700 from MRTCUD, Mongolia, which cannot

be used due to the lack of details at this time.

21

Preliminary construction cost estimation

Based on the work items under each alternative and its unit cost, a preliminary construction cost for each

alternative is estimated as below.

Table 20. Preliminary construction cost of Alternatives

Alternatives Contents Quantity

Unit

cost

(US $)

Cost

(US $,

thousand)

Alternative 1

1. Section 1: Improvement of AC 39 km 155,285 6,056

2. Section 2~7: Construction of new AC pavement 408 km 385,705 157,368

3. Section 8: Under construction of AC pavement 26 km -

Sub Total 163,424

Alternative 2




Sub Total 154,167

Alternative 3




Sub Total 163,809

22

Section 5 ECONOMIC ANALYSIS

5.1 Methodology

General

Economic feasibility was reviewed by Benefit/Cost Analysis (BCA). Benefit Cost Analysis is a calculation of

the stream of both benefits and costs over the lifetime of the facility or strategy. Major indices of BCA are as

follows:

Internal Rate of Return (IRR): The ratio of the total discounted benefit to the total discounted cost

),....2,1(0)1(1

nir

CiBiN

ti

Net Present Value (NPV): The discounted value of the absolute welfare gain minus discounted

value of the investment over the whole life of the project

),....2,1()1(1

nid

CiBiNPV

N

ti

Benefit Cost ratio (B/C): The discount rate that equates the present value of a future stream of

benefits to the investment (Discount rate such that NPV=0)

N

ti

N

ti

nid

Ci

d

BiCB

11

),.....,2,1()1(

/)1(

/

Where, Ci = cost in year i, Bi= benefit in year i, i = year, N = project life, i = discount rate

Figure 13. Economic Analysis Process

23

Evaluation Criteria

Internal Rate of Return (IRR) > Social Discount Rate

Benefit - Cost Ratio (B/C) > 1

Net Present Value (NPV) > 0

5.2 Benefit/Cost Analysis

5.2.1 Economic Analysis Criteria

Basic assumptions for the analysis are as follows:

Project road: Khovd – Uliastai (473km)

Construction period: 3 years (2013-2015)

Analysis period : 2016 ~ 2045 year (30 years after opening)

Discount rate : 12.0% (proposed value of ADB)

Basic Price: Market price in 2011

(Economic price, converted from market price, was used for the analysis)

5.2.2 Estimation of Costs

Construction and maintenance cost were estimated and used for the analysis. For the economic analysis, the

shadow price was calculated by eliminating taxes and interests from the total costs.

Initial Cost

Construction cost was equally divided into 3 years of construction as below.

Table 21. Allocation of construction cost for the analysis

Year

Annual Cost(US thousand dollars)

Alt. 1 Alt. 2 Alt. 3

2013 46,303.4 43,680.6 46,412.7

2014 46,303.4 43,680.6 46,412.7

2015 46,303.4 43,680.6 46,412.7

total 138,910.2 131,041.8 139,238.0

�

Maintenance Cost

It is assumed that the periodic maintenance shall be done in every 10 years and the cost of routine

maintenance is estimated as a 10% of periodic maintenance work. For this project, only periodic

maintenance cost was included considering the extremely low traffic volumes.

Table 22. Estimated Maintenance Cost

Year Maintenance Cost(US thousand dollars)

Alt. 1 Alt. 2 Alt. 3

Periodic 49,475 46,965 49,580

24

Routine 4,948 4,696 4,958

5.2.3 Estimation of Benefits

Vehicle Operation Cost Saving (VOCS)

The costs of operation of a selection of vehicle types, when used under a range of operating conditions can

be estimated by Vehicle Operating Cost models. Due to the absence of relevant data from Government of

Mongolia, Korean VOC model has been used. Vehicle types are modified in the context of Mongolia.

Table 23. Vehicle operating cost for vehicles under various speed (2009)

(Unit: Korean Won/km)

Speed(km/h) Passenger car Pick-up Bus Truck Trailer

10 440.40 384.62 758.41 601.31 856.25

20 356.45 307.64 606.76 463.47 678.65

30 302.56 256.91 498.49 395.27 573.27

40 258.87 222.01 424.54 343.42 505.78

50 227.08 200.79 379.76 314.02 457.58

60 209.93 187.20 353.58 296.70 432.27

70 198.03 179.51 339.52 290.20 419.52

80 186.08 176.21 332.23 292.85 417.90

90 180.47 179.53 330.49 308.11 440.10

100 178.57 190.10 339.93 347.08 465.02

110 179.54 384.62 363.26 - -

120 183.15 - 758.41 - -

Source: Guidelines for Transport project evaluation, 4th edition (MLTM, 2011)

VOC model for this study was estimated by regression as below.

Where, VOC: VOC for vehicles under ideal conditions (Won/Veh-km)

V: Speed under ideal conditions (km/hr)

a,b,c,d: parameters

The unit VOC of Motorcycle was assumed as 1/5 of Passenger car VOC due to the lack of data in Mongolia.

Table 24. VOC model parameters

Vehicle type a b c d R2

Passenger car 400.734 -4.68767 1172.673 0.024462 0.997121

Pick-up 690.8032 -9.26246 2119.066 0.05802 0.996183

Bus 366.5035 -5.04615 933.398 0.033327 0.998794

Truck 551.848 -7.98578 1653.167 0.059748 0.998844

25

Trailer 795.9204 -10.7247 2215.565 0.075531 0.999495

Travel speed was estimated as:

40km/h for unpaved road

60km/h for 2-lane paved road

80km/h for 2-lane improved road

Table 25. Per unit cost of VOC

(Unit: Korean Won/km)

Travel

Speed Passenger car Small Bus Large Bus Small Truck

Medium

Truck Large Truck

Motor

Cycle

40km/h 281.68 353.03 466.11 241.32 369.34 543.17 56.34

60km/h 227.08 277.34 379.24 199.27 315.35 461.27 45.42

80km/h 196.93 236.79 347.62 187.77 316.04 449.03 39.39

Alternative 2, the central route, is approximately 23~24km shorter than others as below.

Table 26. Comparison of travel distance among alternatives

Alternatives Length (km)

Alt. 1 473

Alt. 2 449

Alt. 3 474

VOCS benefit is as follows:

Table 27. VOC saving

(Unit: US thousand dollars/yr)

Alternatives 2016 2025 2035 2045

Alt. 1 1,738.3 3,875.8 10,279.2 22,832.1

Alt. 2 2,068.5 4,611.9 12,231.7 27,168.9

Alt. 3 1,724.6 3,845.1 10,197.9 22,651.4

Travel Time Saving

Due to the lack of proper data in the context of Mongolia, GNI Per capita was used to estimate the value of

time (VOT) in Mongolia instead of average wage rate per various types of vehicles, which shall be used in

the Marginal Substitution method to value all activities. Experience demonstrates that approximately 30% of

Travel Time Savings could be used as a production inputs in developing countries. The output of VOT

26

estimation in Mongolia is as below.

Table 28. VOT Calculation by GNI, Annual workdays and Average working hours

Classification Detail

Per capita GNI (USD) 2,320 (WB, 2011)

Annual workdays(days) 280

Average working hour for a day(hours) 8

% of Travel Time Savings can be used as a

Production inputs 30%

Per capita VOT (USD/hours) 0.311

Table 29. Time Value of Passenger by Vehicle Types

(Unit: USD/ vehicle·hour)

Classification Passenger

car

Bus Truck Motor-cycle

small large

Passenger6 2.3 10 18 1 1.5

VOT/vehicle 0.715

3.107 5.593 0.311 0.466

average VOT/vehicle 4.350

The output of Travel time saving has been relatively low comparing VOCS due to the level of income in

Mongolia.

Table 30. Travel Time Saving

(Unit: US thousand dollars/yr)

Alternatives 2016 2026 2036 2046

Alt. 1 317.6 708.1 1,877.9 4,171.2

Alt. 2 341.0 760.2 2,016.2 4,478.3

Alt. 3 316.6 705.9 1,872.1 4,158.4

Other Benefits

Given the limited availability of data, only two user benefits including Vehicle Operating Cost (VOC) and

Travel Time Saving are used in this project. Other benefits can be considered are as follows:

Change in Externality Costs: traffic accident, environmental costs, regional developments

6 Vientiane 3rd Ring Road Feasibility Study, December, 2008, Lao People's Democratic Republic

27

Change in system operating costs and revenue

Co-benefits (CO2 emission reduction)

Benefits due to new developments

5.2.4 Results of Economic Analysis

As expected, the shortest alternative, Alternative 2, represented better output in economic analysis as below.

Table 31. Economic Analysis

Content Alt. 1 Alt. 2 Alt. 3

B/C 0.204 0.253 0.202

NPV (US 1,000＄) -99,167.1 -87,879.3 -99,637.4

IRR 0.33% 1.84% 0.27%

In terms of the evaluation criteria, the economic viability of the representative alternative, Alt. 2, is

significantly slim as follows:

Internal Rate of Return (IRR) = 1.84%< Social Discount Rate (12%)

Benefit - Cost Ratio (B/C) = 0.253< 1

Net Present Value (NPV) = -99,637.4< 0

5.3 Sensitivity Analysis

The sensitivity of economic analysis for Alt. 2 was done by re-running B/C, NPV and IRR calculations for:

Total Benefits at +/- 10% and 20%

Total Costs at +/- 10% and 20%

Table 32. Sensitivity Analysis (Alt. 2)

Cost Indicator Benefit

0% -10% -20%

0%

B/C 0.253 0.228 0.203

NPV -87,879.3 -81,127.5 -83,791.4

IRR 1.84% 1.10% 0.27%

10%

B/C 0.230 0.207 0.184

NPV -88,973.9 -91,637.8 -94,301.7

IRR 1.17% 0.43% -0.42%

20%

B/C 0.211 0.190 0.169

NPV -99,484.2 -102,148.1 -104,812.0

IRR 0.56% -0.20% -1.06%

28

Section 6 ENVIRONMENTAL AND SOCIAL IMPACT

6.1 Environmental Impact

For the project road, Environmental Safeguarding would be triggered due to the impact on the wild life and

Khar Us Lake National Park; however, no significant negative impact on the environment of the catchment

of the project road is expected. It may be categorized as class B in terms of the World Bank guideline.

Trigger of Environmental safeguard should be decided based on the detailed site survey.

Followings are the Environmental Categorization in MDB guidelines.

Table 33. Environmental Categorization (ADB)

A

• Environmental Impact Assessment(EIA) report

• Environmental Management Plan including a budget

• Public consultation(at least twice)

• Disclosure 120 days in advance of Board Consideration

B • Initial Environmental Examination(IEE) report

• Public consultation

C • Review of Environmental Implications(No EIA or IEE is required)

FI

• Environmental Management System(Equity Investment)

• EMS including Environmental Assessment and Review Procedures

for Subprojects(Credit Lines)

6.2 Social Impact

No land acquisition and resettlement is needed for the project road due to the Government ownership of the

land and the nomadic characteristic of Mongolian.

Women’s economic and social empowerment is essential in economic growth and poverty reduction. The

project will provide better access to the employment, child care, education, health & political processes for

the women in the rural areas including Myangad, Durgon, Urgamal, Zavkhanmandal, Erdenekhairkhain

Soum.

Social Safeguarding including Involuntary Resettlement (IR) and Gender Impact shall be assessed in terms

of National, Bilateral and Multilateral donors’ guidelines during a formal study.

29

Section 7 RECOMMENDATION

7.1 Conclusion

1. It is noted that Khovd-Uliastai section (473km) on AH32 connects two centers of the western region,

Khovd and Uliastai, as an effort of enhancing connectivity and mobility between western region and

Ulaanbaatar. It is also noted that most of the sections are below AH Class III standard except

Khovd~Myangad section (AC Pavement, 24.5km, AH Class III).

2. The shortest connection between Khovd and Uliastai was proposed with AC surfacing. The total cost is

estimated as USD 154 million.

Improvement of AC pavement (39km, USD 6.1million)

Construction of new AC pavement (384 km, USD 148.1million)

It is also estimated that traffic projection in 2045 is maximum 2,709 (Khovd - Myangad bridge 9,870)

vehicles per day, which is significantly low.

3. Based on the given information, AC pavement option is economically infeasible in light of evaluation

criteria as below. IRR cannot be found under the given conditions.

Internal Rate of Return (IRR) = 1.84%< Social Discount Rate (12%)

Benefit - Cost Ratio (B/C) = 0.253< 1

Net Present Value (NPV) = -99,637.4< 0

This economic output appears inconsistent with the 2007 World Bank study that represents 15.4% of IRR at

a 12% discount rate. It is mainly because the previous study quantified benefits including:

a residual value of 35%; and

Potential benefits to the regional agriculture GDP (82% of total benefits) as well as traditional

VOCS (15%) and VOTS (3%).

7.2 Recommendation

1. 2-lane AC pavement is found to be economically infeasible; however, a holistic, instead of demand-driven,

approach may be appropriate for the countries like Mongolia, which represents very low initial values of

major indicators for traffic projection including registered vehicles and population. In the long-run, wider

economic benefits are expected if the road is constructed.

2. In this regards, improved connectivity and mobility should be provided in the near term with sustainable

financing solutions, which will be vital for economic and social development in the western region as well as

whole nation.

30

7.3 Implementation Plan

7.3.1 Preparation and Procurement

The output of this study was presented during Investment Forum in October 2013 (Bangkok, UNESCAP) for

a Project Identification of major donors. Subsequently, project preparation, project appraisal, loan/credit

negotiations, loan/credit approval and signing will take minimum two years depending on the internal

process of multi-lateral or bi-lateral donors. Then, procurement process will follow.

7.3.2 Implementation

The project area represents an extreme continental climate with long, cold winters and short summers

including:

Average annual temperature of minus 2.9 ℃.

Extreme temperature in winter, maximum 45 ℃ below zero Celsius at night

Annual precipitation of 350mm, which is extremely low.

Pavement works can be done for 6 months, from May to October in this regards.

Table 34. Implementation Plan

Work Item 1st Year 2nd Year 3rd Year

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Earth Work

Pavement

Work

Bridge Work

31

Appendices

Appendix A. List of persons met

Ministry of Road, Transport, Construction and Urban Development (MRTCUD)

Road and Transport Policy Department

Mr. D. Naranpurev (Director General)

Mr. Ganbold Khatanbaatar (Senior Officer)

Department of Roads

Mr. Enkhtur Baasandorj (Director General)

Mr. Onon Rentsendorj (Deputy Director General)

Mr. Bayasgalan Choijiljav (Head of Road Construction, Production, Management and Supervision Div.)

Mr. Batsuuri Namsrai (Head of Road Utilization, Maintenance Management and Supervision Div.)

Mr. Yanjiv Bayarkhuu (Head of Researh Investigation, Drawing and Design Sector)

Ms. Delgermaa Baatar (Officer, International Cooperation Div.)

Local Government

Mr.Nyamdavaa Gendenjav (Governor, Khovd Aimag)

Mr. Yadamsuren Sanjmyatav (Governor, Uliastai City, Zavkhan Aimag)

Mr. Jamiyansuren Sodnomstseren (Governor Consultant, Uliastai City, Zavkhan Aimag)

32

Appendix B. Implementation Agency

33

Appendix C. Economic Analysis

ALT. 1

discount rate 12.0% B/C 0.204

Base Year 2011 NPV -99,167.1

IRR 0.33%

Unit:1,000US ＄

Year

Cost Benefit

CV PV VOCS Time saving VOCS+Time

saving PV

2013 46,303.4 36,912.8

2014 46,303.4 32,957.8

2015 46,303.4 29,426.6

2016 4,947.5 2,807.4 1,738.3 317.6 2,055.9 1,166.6

2017 4,947.5 2,506.6 1,901.3 347.3 2,248.6 1,139.2

2018 4,947.5 2,238.0 2,079.6 379.9 2,459.5 1,112.5

2019 4,947.5 1,998.2 2,274.5 415.5 2,690.0 1,086.5

2020 4,947.5 1,784.1 2,487.8 454.5 2,942.3 1,061.0

2021 4,947.5 1,593.0 2,718.4 496.6 3,215.1 1,035.2

2022 4,947.5 1,422.3 2,970.5 542.7 3,513.2 1,010.0

2023 4,947.5 1,269.9 3,245.9 593.0 3,838.9 985.4

2024 4,947.5 1,133.8 3,546.9 648.0 4,194.9 961.4

2025 4,947.5 1,012.4 3,875.8 708.1 4,583.8 937.9

2026 4,947.5 903.9 4,235.1 773.7 5,008.8 915.1

2027 4,947.5 807.0 4,627.8 845.4 5,473.3 892.8

2028 4,947.5 720.6 5,056.9 923.8 5,980.7 871.1

2029 4,947.5 643.4 5,525.8 1,009.5 6,535.3 849.8

2030 4,947.5 574.4 6,038.2 1,103.1 7,141.3 829.1

2031 4,947.5 512.9 6,716.1 1,226.9 7,943.0 823.4

2032 4,947.5 457.9 7,470.1 1,364.7 8,834.8 817.7

2033 4,947.5 408.9 8,308.8 1,517.9 9,826.7 812.1

2034 4,947.5 365.1 9,241.7 1,688.3 10,930.0 806.5

2035 4,947.5 326.0 10,279.2 1,877.9 12,157.1 800.9

2036 4,947.5 291.0 11,034.9 2,015.9 13,050.9 767.7

2037 4,947.5 259.8 11,846.1 2,164.1 14,010.3 735.8

2038 4,947.5 232.0 12,717.0 2,323.2 15,040.2 705.3

2039 4,947.5 207.1 13,651.8 2,494.0 16,145.9 676.0

2040 4,947.5 185.0 14,655.4 2,677.4 17,332.8 648.0

2041 4,947.5 165.1 16,014.3 2,925.6 18,939.9 632.2

2042 4,947.5 147.4 17,499.2 3,196.9 20,696.1 616.8

2043 4,947.5 131.6 19,121.7 3,493.3 22,615.0 601.8

2044 4,947.5 117.5 20,894.7 3,817.2 24,712.0 587.1

2045 4,947.5 104.9 22,832.1 4,171.2 27,003.3 572.8

Total 287,335.8 124,624.7 254,606.0 46,513.5 301,119.5 25,457.6

34

ALT. 2


Base Year 2011 NPV -87,879.3

IRR 1.84%

Unit:1,000US ＄

Year

Cost Benefit


saving PV

2013 43,680.6 34,821.9

2014 43,680.6 31,091.0

2015 43,680.6 27,759.8

2016 4,696.5 2,664.9 2,068.5 341.0 2,409.5 1,367.2

2017 4,696.5 2,379.4 2,262.4 372.9 2,635.4 1,335.2

2018 4,696.5 2,124.5 2,474.5 407.9 2,882.4 1,303.9

2019 4,696.5 1,896.8 2,706.5 446.1 3,152.7 1,273.3

2020 4,696.5 1,693.6 2,960.3 488.0 3,448.2 1,243.5

2021 4,696.5 1,512.1 3,234.8 533.2 3,768.0 1,213.2

2022 4,696.5 1,350.1 3,534.7 582.6 4,117.3 1,183.6

2023 4,696.5 1,205.5 3,862.5 636.7 4,499.1 1,154.8

2024 4,696.5 1,076.3 4,220.6 695.7 4,916.3 1,126.7

2025 4,696.5 961.0 4,611.9 760.2 5,372.1 1,099.2

2026 4,696.5 858.0 5,039.6 830.7 5,870.2 1,072.5

2027 4,696.5 766.1 5,506.8 907.7 6,414.5 1,046.3

2028 4,696.5 684.0 6,017.4 991.9 7,009.3 1,020.9

2029 4,696.5 610.7 6,575.4 1,083.8 7,659.2 996.0

2030 4,696.5 545.3 7,185.1 1,184.3 8,369.4 971.7

2031 4,696.5 486.9 7,991.7 1,317.3 9,309.0 965.0

2032 4,696.5 434.7 8,889.0 1,465.2 10,354.2 958.4

2033 4,696.5 388.1 9,887.0 1,629.7 11,516.7 951.8

2034 4,696.5 346.5 10,997.0 1,812.7 12,809.7 945.2

2035 4,696.5 309.4 12,231.7 2,016.2 14,247.9 938.7

2036 4,696.5 276.3 13,130.9 2,164.4 15,295.3 899.7

2037 4,696.5 246.7 14,096.2 2,323.5 16,419.7 862.4

2038 4,696.5 220.2 15,132.5 2,494.3 17,626.8 826.6

2039 4,696.5 196.6 16,244.9 2,677.7 18,922.6 792.3

2040 4,696.5 175.6 17,439.1 2,874.5 20,313.7 759.4

2041 4,696.5 156.8 19,056.1 3,141.1 22,197.2 740.9

2042 4,696.5 140.0 20,823.0 3,432.3 24,255.3 722.9

2043 4,696.5 125.0 22,753.8 3,750.6 26,504.3 705.2

2044 4,696.5 111.6 24,863.5 4,098.3 28,961.8 688.1

2045 4,696.5 99.6 27,168.9 4,478.3 31,647.2 671.3

Total 271,936.3 117,715.0 302,966.4 49,938.6 352,905.0 29,835.8

35

ALT. 3


Base Year 2011 NPV -99,637.4

IRR 0.27%

Unit:1,000US ＄

Year

Cost Benefit


saving PV

2013 46,412.7 36,999.9

2014 46,412.7 33,035.6

2015 46,412.7 29,496.1

2016 4,958.0 2,813.3 1,724.6 316.6 2,041.2 1,158.2

2017 4,958.0 2,511.9 1,886.2 346.3 2,232.5 1,131.1

2018 4,958.0 2,242.7 2,063.1 378.7 2,441.8 1,104.6

2019 4,958.0 2,002.4 2,256.5 414.3 2,670.8 1,078.7

2020 4,958.0 1,787.9 2,468.1 453.1 2,921.2 1,053.4

2021 4,958.0 1,596.3 2,696.9 495.1 3,192.0 1,027.7

2022 4,958.0 1,425.3 2,947.0 541.0 3,488.0 1,002.7

2023 4,958.0 1,272.6 3,220.2 591.2 3,811.4 978.3

2024 4,958.0 1,136.2 3,518.8 646.0 4,164.8 954.5

2025 4,958.0 1,014.5 3,845.1 705.9 4,551.0 931.2

2026 4,958.0 905.8 4,201.6 771.3 4,972.9 908.5

2027 4,958.0 808.8 4,591.2 842.9 5,434.0 886.4

2028 4,958.0 722.1 5,016.9 921.0 5,937.9 864.8

2029 4,958.0 644.7 5,482.1 1,006.4 6,488.5 843.8

2030 4,958.0 575.7 5,990.4 1,099.7 7,090.1 823.2

2031 4,958.0 514.0 6,662.9 1,223.2 7,886.1 817.5

2032 4,958.0 458.9 7,411.0 1,360.5 8,771.5 811.9

2033 4,958.0 409.7 8,243.0 1,513.3 9,756.3 806.3

2034 4,958.0 365.8 9,168.5 1,683.2 10,851.7 800.7

2035 4,958.0 326.6 10,197.9 1,872.1 12,070.0 795.2

2036 4,958.0 291.6 10,947.6 2,009.8 12,957.3 762.2

2037 4,958.0 260.4 11,752.4 2,157.5 13,909.9 730.6

2038 4,958.0 232.5 12,616.3 2,316.1 14,932.4 700.2

2039 4,958.0 207.6 13,543.8 2,486.4 16,030.2 671.2

2040 4,958.0 185.3 14,539.5 2,669.2 17,208.6 643.3

2041 4,958.0 165.5 15,887.6 2,916.6 18,804.2 627.6

2042 4,958.0 147.8 17,360.7 3,187.1 20,547.8 612.4

2043 4,958.0 131.9 18,970.4 3,482.6 22,453.0 597.4

2044 4,958.0 117.8 20,729.4 3,805.5 24,534.9 582.9

2045 4,958.0 105.2 22,651.4 4,158.4 26,809.8 568.7

Total 287,977.5 124,912.6 252,591.0 46,370.7 298,961.8 25,275.2

36

Appendix D. Asian highway Design Standard (1993)

Notes: Figures bracket are desirable values

Minimum horizontal curve shall be determined in conjunction with super-elevation

37

Appendix E. Data Survey Request

Section 1. General Information

1.1 National/Regional Outlook

Area, Population

Currency and exchange rate:

GDP/GRP/GNI, GDP/GNI per capita:

Economic growth rate, Inflation rate, Employment rate by sector

Trade (Import, Export), Major trade commodities, Major trade partners (Import, Export)

1.2 Traffic related information

Driving style: Left-hand side drive

International border crossing points (example)

Maximum gross weight and axle load permissible

Major Tourism spot

Section 2. Data Collection and Survey

2.1 Implementation Agency (Road authority)

Organization

Implementation process including planning, design, construction and maintenance

2.2 National & Sub-national strategy and priority, Guidelines

Road Master Plan

Regional & sub-regional Planning

Development and upgrading plan of AHN

Strategies and priorities

Design specification

2.3 Asian Highway Database – Any update of AHDB 2011(draft, Appendix 1) including:

Traffic data (volume, accident, etc.)

Road and bridge inventory

Toll rate

2.4 Other Engineering and Socio-economic data (Appendix 2) including

Social Discount Rate

Travel speed, Time value, Value of Time

O/D, Number of registered Vehicles

Land use plan

Unit construction cost(road, box & culvert, bridge, T/N)

Maintenance cost (Routine maintenance, periodic overlay)

Geotechnical and hydraulic survey

Appendices

Appendix 1. AHDB 2011(draft version to UNESCAP)

Appendix 2. Engineering & Socio-economic Data (attached)

prefeasibility study for bishek - un escap report_mongolia.pdf · prefeasibility study of the...

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