Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 59665-CO

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF

US$350 MILLION

TO THE

REPUBLIC OF COLOMBIA

FOR THE

SUPPORT TO THE NATIONAL URBAN TRANSIT PROGRAM PROJECT

June 20, 2011

Sustainable Development Department

Colombia and Mexico Country Management Unit

Latin America and the Caribbean Region

This document has a restricted distribution and may be used by recipients only in the

performance of their official duties. Its contents may not otherwise be disclosed without World

Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 31, 2011)

Currency Unit = Colombian Peso (CO$)

CO$1,825.69 = US$1

US$0.0005477 = CO$

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

BRTS Bus Rapid Transit System

CAF The Andean Development Corporation (Corporación Andina de

Fomento)

CGN General Accounting Office (Contraduria General de la Nación)

CGR General Comptrollers Office (Contraloria General de la

Republica)

CPS Country Partnership Strategy

CONFIS National Fiscal Council (Consejo Superior de Política Fiscal)

CONPES National Economic and Social Council (Consejo Nacional de

Política Económica y Social)

DNP

EMF

National Planning Department (Departamento Nacional de

Planeación)

Environmental Management Framework

EMP Environmental Management Plan

FM Financial Management

GHG Greenhouse gas

GoC Government of the Republic of Colombia

IADB Inter-American Development Bank

IBRD International Bank for Reconstruction and Development

ICB International Competitive Bidding

IGAC Agustin Codazzi Geographic Institute (Instituto Geográfico

Agustin Codazzi)

IMTS Integrated Mass Transit System

IRR Internal Rates of Return

ISR

ITS

Implementation Status and Results Report

Intelligent Transportation Systems

MHCP Ministry of Finance & Public Credit (Ministerio de Hacienda y

Crédito Público)

MOT Ministry of Transport (Ministerio de Transporte)

NPV Net Present Value

NQS North Quito South Line of the Bogotá Transmilenio S.A

(Corredor Norte Quito Sur de Bogotá Transmilenio S.A)

NUTP

ORAF

National Urban Transit Program

Operations Risk Assessment Framework

PAD Project Appraisal Document

PCU Project Coordination Unit

PDO Project Development Objective

RAP Resettlement Action Plan

RPF

SIL

STPS

Resettlement Policy Framework

Specific Investment Loan

Strategic Public Transit Systems

Regional Vice President: Pamela Cox

Country Director: Gloria M. Grandolini

Sector Director:

Sector Manager:

Laura Tuck

Aurelio Menéndez

Task Team Leader:

Co-Task Team Leader:

Mauricio Cuellar

Camila Rodríguez

Table of Contents I. Strategic Context ..................................................................................................................... 1

A. Country Context ............................................................................................................... 1

B. Sector Issues ..................................................................................................................... 3

C. Institutional Context ......................................................................................................... 5

D. Higher Level Objectives to which the Project Contributes .............................................. 7

II. Project Development Objectives............................................................................................. 8

A. PDO .................................................................................................................................. 8

a) Project Beneficiaries ..................................................................................................... 8

b) PDO Level Results Indicators ...................................................................................... 9

III. Project Description............................................................................................................... 9

A. Project Components ......................................................................................................... 9

B. Project Financing............................................................................................................ 11

a) Lending Instrument..................................................................................................... 11

b) Project Financing Table .............................................................................................. 11

c) Detailed Project Costs for IBRD Financing of Eligible Cities under the NUTP ........ 13

C. Lessons Learned and Reflected in the Project Design ................................................... 14

IV. Implementation .................................................................................................................. 15

A. Institutional and Implementation Arrangements ............................................................ 15

B. Results Monitoring and Evaluation ................................................................................ 16

C. Sustainability .................................................................................................................. 17

V. Key Risks .............................................................................................................................. 17

VI. Appraisal Summary ........................................................................................................... 19

A. Economic and Financial Analysis .................................................................................. 19

B. Technical ........................................................................................................................ 20

C. Financial Management ................................................................................................... 21

D. Procurement ................................................................................................................... 21

E. Social .............................................................................................................................. 22

F. Environment ................................................................................................................... 25

Annex 1: Results Framework and Monitoring.............................................................................. 28

Annex 2: Detailed Project Description ......................................................................................... 35

Annex 3: Implementation Arrangements ...................................................................................... 38

Annex 4 Operational Risk Assessment Framework (ORAF) ....................................................... 55

Annex 5: Implementation Support Plan ........................................................................................ 61

Annex 6: Team Composition ........................................................................................................ 64

Annex 7: Characterization of Public Transit Service Provision in Colombia .............................. 65

PAD DATA SHEET

Colombia

Support to the National Urban Transit Program (NUTP) Project

PROJECT APPRAISAL DOCUMENT

Latin America and the Caribbean

Transport Unit

Date: June 20, 2011

Country Director: Gloria M. Grandolini

Sector Director: Laura Tuck

Sector Manager: Aurelio Menéndez

Team Leader(s): Mauricio Cuellar/Camila

Rodríguez

Project ID: P117947

Lending Instrument: Specific Investment Loan

(SIL)

Sector(s): Transport

Theme(s): Urban Transport (70%), Urban

Renewal (30%)

EA Category: B

Project Financing Data:

Proposed terms: IBRD flexible loan with a Fix-spread, repayment schedule linked to

commitment, bullet repayment and all conversion options (Currency, Interest Rate, and

Caps/Collars)

[X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

Source Total Amount (US$M)

Total Project Cost:

Cofinancing:

Total Bank Financing:

IBRD

407

0

350

350

Borrower: Republic of Colombia. Ministry of Finance and Public Credit.

Responsible Agency: Ministry of Transport

Contact Person: Felipe Targa, Deputy Minister of Transport

Telephone No.: (57 1) 324-0800

Fax No.: (57-1) 324-0800

Email: ftarga@mintransporte.gov.co

Estimated Disbursements (Bank FY/US$ m)

FY 2012 2013 2014 2015 2016 2017

Annual 60 80 80 80 30 20

Cumulative 60 140 220 300 330 350

Project Implementation Period: August 31, 2011-November 30, 2016

Expected effectiveness date: August 2011

Expected closing date: November 30, 2016

Does the project depart from the CAS in content or other significant

respects?

○ Yes ● No

If yes, please explain:

Does the project require any exceptions from Bank policies?

Have these been approved/ endorsed (as appropriate by Bank

management?

Is approval for any policy exception sought from the Board?

○ Yes ● No

○ Yes ● No

○ Yes ● No

If yes, please explain:

Does the project meet the Regional criteria for readiness for

implementation?

● Yes ○ No

If no, please explain:

Project Development objective:

The Project Development Objective is to enhance the efficiency, affordability, quality, safety,

and environmental sustainability, of the provision of public transit services in the participating

cities.

Project description [one-sentence summary of each component]

Component –Part A: Integrated Mass Transit Systems. This component entails the

construction of Bus Rapid Transit systems in Bucaramanga, Cartagena, Medellin, and Pereira.

Component-Part B: Strategic Public Transit Systems. This component entails the

rehabilitation of the road network, travel demand management strategies and urban renewal in

Valledupar and Sincelejo.

Safeguard policies triggered?

Environmental Assessment (OP/BP 4.01)

Natural Habitats (OP/BP 4.04)

Forests (OP/BP 4.36)

Pest Management (OP 4.09)

Physical Cultural Resources (OP/BP 4.11)

Indigenous Peoples (OP/BP 4.10)

Involuntary Resettlement (OP/BP 4.12)

Safety of Dams (OP/BP 4.37)

Projects on International Waterways (OP/BP 7.50)

Projects in Disputed Areas (OP/BP 7.60)

● Yes ○ No

● Yes ○ No

○ Yes ● No

○ Yes ● No

● Yes ○ No

○ Yes ● No

● Yes ○ No

○ Yes ● No

○ Yes ● No

○ Yes ● No

Specific Conditions and Legal Covenants:

Financing Agreement

Reference

Description of

Condition/Covenant

Date Due

Conditions of Effectiveness

Article V.

Section 5.01.(a)

Each of the updated

Subsidiary Agreements for the

Large Participating Cities has

been executed by the parties

90 days after the date of the

Agreement, but in no case

later than 18 months after the

Bank‘s approval

Article V.

Section 5.01.(b)

The Operational Manual has

been updated by the Borrower

90 days after the date of the

Agreement, but in no case

later than 18 months after

Bank‘s approval

Article V.

Section 5.01.(c)

The additional FM staff

referred to in Section I.A.3.1.

(a) of Schedule 2 has been

hired in a manner satisfactory

to the Bank

90 days after the date of the

Agreement, but in no case

later than 18 months after

Bank‘s approval.

Implementation

Arrangement Covenants

Schedule 2

Section I.A.3(a) and (b)

(a) The Borrower, through

MOT, shall hire and thereafter

maintain additional financial

management staff acceptable

to the Bank

(b) The Borrower, through

MOT, shall cause each of the

Implementing Entities to be

staffed with financial

management staff acceptable

to the Bank

Throughout Project

implementation

Schedule 2

Section I.B.1.

The Borrower, though MHCP,

MOT and DNP shall maintain

a Subsidiary Agreement with

each of the Participating Cities

and the relevant Implementing

Entity

Throughout Project

implementation

Schedule 2

Section I.D.1.(c)

The Borrower, through MOT,

shall, and shall cause the

Participating Entities and the

Implementing Entities to,

maintain and implement an

EMF

Throughout Project

implementation

Schedule 2

Section I.D.2.(a) and (b)

Prior to initiating the

construction of any works

under Part A.1. and/or Part

B.1 of the Project, the

Borrower, though MOT, shall

provide evidence to the Bank

demonstrating that

(a) for those specific civil

works impacting Affected

Persons, the resettlement and

rehabilitation of Affected

Persons has taken place in

accordance with the relevant

RAP, RPF, the Operational

Manual and this Agreement

and

(b) the Participating Cities and

the Implementing Entities

have developed and thereafter

implemented for the purposes

of each activity under Part A

and/or Part B of the Project an

EMP

Throughout Project

implementation

Schedule 2

Section I.D.4.

The Borrower, through MOT,

shall ensure, and shall cause

the Participating Cities and the

Implementing Entities to

ensure, that the terms of

reference for any

consultancies related to

studies, technical assistance or

capacity building under Part

A.3, Part B.1.(a) and Part B.3.

of the Project shall be

satisfactory to the Bank

Throughout Project

implementation

Disbursement Conditions

Schedule 2

Section IV.B.1. (c), (d), (e)

and (f)

Notwithstanding the

provisions of Part A of this

Section, no withdrawal shall

be made: […] under categories

(1), (2), (3) or (4) unless a

Notice from the corresponding

Implementing Entity to the

corresponding Fiduciary

Agent has been delivered

informing the Fiduciary Agent

of the existence of the Anti-

corruption Guidelines

Before disbursing under any

of the following Categories:

(1)-(Bucaramanga), (2)-

(Cartagena), (3)-(Medellin)

and/or (4)-(Pereira) (Large

Participating Cities).

Schedule 2

Section IV.B.1(g) and (h)

Notwithstanding the

provisions of Part A of this

Section, no withdrawal shall

be made: […] under

categories (5) or (6) unless: (i)

the respective Subsidiary

Agreement has been updated

and signed; (ii) a Notice to the

corresponding Fiduciary

Agent regarding the Anti-

Corruption Guidelines has

been delivered; (iii) the

Implementing Entity has

fulfilled with specific

conditions set forth in the

Agreement; (iv) the EMP and

RAP have been approved by

the Bank; and (v) the

Procurement Plan has been

approved by the Bank.

Before disbursing under any

of the following Categories:

(5)-(Sincelejo) and/or (6)-

(Valledupar) (Medium

Participating Cities)

1

I. Strategic Context

A. Country Context

Political Context

1. A new Government was inaugurated in August 2010 with a strong political mandate that gave its ―national unity‖ coalition an 80 percent majority in Congress. The new President won

the second round of the Presidential poll by more than 70 percent of the vote against a former

mayor of Bogotá. The new Government campaigned on a continuation of the former President‘s

democratic security and economic policies. The elections demonstrated the maturity of

Colombia‘s democratic process and reflected a strengthening of political institutions. The

country has undergone a transformation since 2002, striving to move away from internal

violence, drug trafficking, and weak institutions that has plagued the country for many years.

Today, Colombia has a resurgent economy with promising prospects. It is a safer, more stable

country that is more popular with foreign investors, and it aspires to join the OECD group of

countries.

2. The new Government registered several significant achievements early in its first term. This includes the restoration of diplomatic and trade relationships with Venezuela, which had

been broken off shortly before the second round of the presidential elections in July 2010.

Relationships were also fully normalized with Ecuador. Finally, an agreement reached with the

United States increases the likelihood that the bilateral Free Trade Agreement, which was

negotiated in 2008, will eventually be implemented. Overall, these positive developments have

helped boost the popularity ratings of the new President and strengthened the national unity

coalition.

3. The new Government has launched a very ambitious reform program. To consolidate the fiscal stance and manage windfalls from commodities production, the Government has presented

to Congress a new fiscal rule, a reform of the royalties system, and a proposal to make fiscal

sustainability a Constitutional right. Tax exemptions have been reduced, loopholes closed, and

import tariffs lowered in an effort to enhance revenues and promote competitiveness. Legislation

has been passed to reduce informality and encourage youth employment. A new legal framework

is being introduced to improve the performance of the health system, including the enactment of

an ordinary Health Law in 2011. And, a Victims Law (Ley de Victimas), pending the new

President‘s approval, will compensate victims who have been harmed by actions as a result of

conflict.

4. Municipal and regional elections are scheduled for October 2011, and the next legislative and presidential elections are set for March and May 2014, respectively. The outcome of the

municipal and regional elections will help to gauge the support for the various coalition members

as well as the opposition during 2011–2015.

2

Recent Economic Developments

5. Colombia is an upper-middle income country whose economic performance is typical of the major economies in Latin America. The economy is well endowed with natural resources,

including oil, coal, gas, iron, and gold. The domestic market is sizeable, making it important for

aggregate demand growth. Agribusiness (particularly coffee) and manufacturing (e.g., the car

industry) are also relatively well developed. Improved security combined with business-friendly

investment rules has led to a surge in foreign direct investment, particularly in the oil and mining

sector.

6. Following a longer period of broad-based economic growth, the economy was not affected too severely by the global economic crisis. Between 2002 and 2007, GDP growth

averaged 5.0 percent per year on account of an improving security situation and a favorable

external environment. The economy slowed down in 2008 to a growth rate of 3.5 percent, as

economic policies were tightened to address overheating. The country‘s strong macroeconomic

framework and the resilience of the financial sector helped cushion the impact of the global

economic crisis. Monetary policy responded swiftly as the policy rate was lowered from 10 to 3

percent. Fiscal policy also contributed to support aggregate demand. Countercyclical policies

were combined with a flexible exchange rate regime, which acted as a shock absorber to counter

the deceleration in external demand. By 2010, the economy had largely recovered from the

slowdown, although a collapse in exports to Venezuela has held back some economic expansion.

The GDP growth increased by 4.3 percent in 2010 compared with 1.5 percent in 2009.

7. As the recovery phase consolidates, Colombia is facing economic policy dilemmas similar to those experienced by other Latin American countries.1 On the one hand, the authorities

face the challenge of keeping inflation expectations anchored in the face of higher economic

activity and rising inflation. On the other hand, international capital flows are exerting

appreciation pressures on the Colombian Peso and could also prompt credit booms and asset

price bubbles, which could in turn destabilize the financial sector.2 The monetary authorities

increased the policy rate by 100 basis points during 2011, and this coincided with a slight decline

in observed and expected inflation (despite higher global prices and a weather-related

emergency.) The Government has taken a range of measures to smooth the exchange rate

adjustment toward its long-term equilibrium value, including a program of reserve accumulation

(with some sterilization), macro prudential measures, tariff and tax adjustments, as well as non-

monetization of dollar proceeds.

8. Colombia is experiencing some of the heaviest rainfall in recent history leading to widespread flooding and landslides. The heavy and prolonged rainfall that peaked in November

and December 2010 (and which re-emerged in April 2011) is largely attributed to the

meteorological phenomenon known as La Niña. Almost 3 million people, especially the poor,

have been directly affected through loss of homes or being seriously deprived of access to most

essential public services. Economic losses are expected to have exceeded 1 percent of GDP, but

the weather shock has not derailed the economic recovery. The impact on food prices also

1 See ―LAC Success Put to the Test‖ (World Bank, 2011) for a detailed discussion.

2 The Colombian foreign currency bond credit rating was upgraded to investment grade for the first time since 1999

by Standard and Poor‘s (in March 2011) and by Moody‘s (in May 2011). This upgrade gives Colombia access to a

new class of investors and this may increase capital inflows further.

3

proved temporary. The fiscal cost of the disaster increased the Central Government deficit by 0.2

and 0.4 percent of GDP in 2010 and 2011, respectively.

B. Sector Issues

9. Like most Latin American countries, Colombia has experienced high population increases in urban centers due to several economic and social factors. By the mid twentieth-

century there was an especially sharp rise in both population growth and the rate of urbanization.

Urban dwellers increased in search of employment and schooling opportunities as market forces

drew labor to the cities from regions where the returns to labor were relatively lower. Higher

standards of living and access to basic public services in rural areas relative to urban, also

worked as catalysts for urban migration. Furthermore, the urbanization process in Colombia,

unlike that of its peers, has been affected by several decades of armed conflict and violence,

which occurred mostly in rural areas. Today, 75 percent of Colombians live in cities, compared

to 60 percent in 1973. There are seven metropolitan areas with an estimated population of more

than 600,000, and 22 cities with a population of more than 250,000.3

10. Cities have long been the engines of Colombia‘s economic growth. More than 50 percent of Colombia‘s GDP growth in the last four decades can be attributed to the economic growth in

the urban sector. Cities have also contributed to poverty reduction, and data on poverty rates at

the department (departamento) level in Colombia show a negative relationship between poverty

and urbanization.4 Hence, establishing a medium- to long-term vision of the role of cities in

supporting Colombia‘s effort to develop from a middle to a higher income country is a policy

priority for the country.

11. Against this backdrop, public transport has been a long standing concern for planners and decision makers in Colombia. At the national and local levels, urban transport is regarded as a

catalyst for higher productivity, greater access to economic opportunities, and social inclusion.

Across urban transport modes, public transport plays a pivotal role in city efficiency. Although

the country is undergoing a natural process of motorization5, the majority of the population –

particularly those belonging to the middle and lower income groups – uses public transportation

to access jobs, healthcare, education and culture. A transport system which is able to provide

efficient, low-cost and safe mobility and accessibility for all inhabitants in the city is a powerful

tool to promote growth, alleviate poverty, and achieve social cohesion, while at the same time

improving environmental conditions and prompting public space improvements.

12. Prior to the end of the 1990s, Colombia‘s public transportation was entirely characterized by an institutional arrangement that led to an oversupply of buses and low-quality service. In this

traditional scheme, bus companies obtain route ―permits‖ from the local transit authority to

3 Departamento Nacional de Estadística (DANE). Census 2005

4 The World Bank (2011). Colombia Urbanization Review: Amplifying Gains from Urbanization. Concept Note.

5 Colombia‘s vehicle fleet has nearly tripled in the last 15 years (1994-2009), increasing from 2 million to 5.9

million vehicles. While current motorization rate (130 vehicles per 1,000 people) in Colombia is low compared to

similar middle-income countries in the region, under conditions of sustained economic growth motorization will

place higher strain on public space and roads.

4

provide transit services. In turn, bus companies own the routes granted to them by the city

government but are not required to own the bus fleet. Individual investors own buses, and bus

companies rent out to bus owners the right to operate a certain route. Responsibility for service

provision, therefore, rests with the bus owners—and even the driver hired by the owner—and not

the bus companies. The arrangement induces bus owners to compete in the streets against other

buses, irrespective of demand patterns, as their revenue and the wage of the bus driver is directly

proportional to the number of passengers carried. Bus companies also have the incentive to lure

as many buses as possible to operate their routes. The incorporation of a number of buses beyond

those required to serve the market has led to excessive competition, locally known as ―the penny

war‖ (guerra del centavo) because drivers literally fight for each prospective passenger. The

aforementioned scheme, coupled with a weak institutional, technical and regulatory framework,

results is a pervasive oversupply of buses on the streets that increases congestion and reckless

driving and reduces the quality of service.

13. Colombia has taken important steps over the past decade to improve mobility and gradually replace the traditional public transit system. Initial efforts go back to 1998 when the

city of Bogotá first embarked on a radical program to improve the quality of public transit

services by implementing the Transmilenio Bus Rapid Transit (BRT) system. In this system, a

competitive bidding process is used to determine which bus operators will have the right to

operate a route or a number of buses. Bus operators, in turn, need to own the bus fleet and

operate it under close supervision from Transmilenio, which determines whether operators

supply the scheduled service. On the infrastructure side, the system uses exclusive busways,

high-capacity buses and other technologies to offer high-quality service (Refer to Annex 5).

14. The Transmilenio experience served as a model for the roll-out of BRTs throughout Colombia‘s largest cities, and allowed the Government of Colombia (GoC) to outline a

comprehensive and programmatic policy platform to address urban transport issues in

Colombian cities. In nine of Colombia‘s largest cities (more than 600,000 inhabitants), BRTs are

in the process of being implemented in the highest demand corridors, but the systems have yet to

replace the traditional bus system. In twelve medium-sized cities (between 250,000 and 600,000

inhabitants), interventions are being designed but include less infrastructure-intensive

components and will not require the implementation of BRTs. These cities also face a

disorganized and traditional supply of public transport, but present a number of unique

challenges compared to larger cities including prevalence of informal public transport (such as

motorcycle taxis and vans), and different mobility patterns (greater number of non-motorized

trips, and shorter trips relative to larger cities)6. Hence, urban transport interventions will include

policy packages with more instruments on the supply and demand management side, including

carefully planned fleet size and operations, incentives for the creation of transport operating

companies, integrated fare collection systems, centralized fleet control systems, control and

optimization of traffic management. Reforms also target city-center urban renewal, public space

upgrading and one-stop shops for municipal services7, in order to promote these cities as

economic growth centers of their respective regions.

6 In cities like Sincelejo and Valledupar, non-motorized trips represent more than 30 percent of the modal split.

7 The one-stop shop for municipal services is termed CAMIS (Centros de Atención Municipales de Información y

Servicio).

5

C. Institutional Context

15. To leverage the success of Bogotá‘s Trasmilenio, in 2002 the GoC adopted the National Urban Transit Program

8 (NUTP) as a national policy to provide competitive, efficient,

affordable, safe, and environmentally sustainable mobility options for the urban population. The

NUTP calls for the implementation of BRTs or Integrated Mass Transit Systems (IMTS) in large

cities (more than 600,000 inhabitants) and Strategic Public Transit Systems (SPTSs) in medium-

sized cities (between 250,000 and 600,000 inhabitants). The goal of the NUTP is to support the

implementation of these transit systems as a means to: (i) improve the efficiency and safety of

public urban transport services; (ii) provide reliable transport accessibility for the poor; (iii)

enhance private sector involvement in service provision; (iv) reduce air pollution and greenhouse

gas (GHG) emissions; (v) foster comprehensive and sustainable urban development processes;

and (vi) promote inter-municipal coordination within the metropolitan areas, interagency

coordination within the cities, and knowledge sharing between the national and local

governments.

16. Under the NUTP, the GoC and cities participating in the program enter into a partnership whereby the GoC contributes up to 70 percent of the total sub-project costs in each city, and the

city commits to finance the remainder of the sub-project.9 The financial contributions of the GoC

and of the cities are allocated through a flow of earmarked yearly fiscal transfers (“vigencias

futuras”) from the program‘s inception (2002) to 2017. The GoC and cities signed Subsidiary

Agreements (Convenios de Cofinanciación) laying out the financial and technical commitments

to carry out the program. Through this model, the GoC: (i) creates an incentive for cities to

participate in the program by securing future budget support and eliminates the risk of a potential

change in GoC or municipal policy; (ii) transfers program implementation to the participating

cities, promoting local ownership and knowledge creation; and (iii) provides an incentive for

participating cities to focus on sound and longer-term policy and related investments.

17. The Bank‘s engagement with the GoC on urban transport dates back to the mid 1990s when the government was pursuing a series of regulatory reforms to promote private sector

participation in infrastructure, and when the city of Bogotá was first embarking on the

implementation of Transmilenio. The Bank has supported the NUTP since 2004 and its

engagement in the field of urban transport has comprised the full range of Bank instruments,

including: (i) knowledge services (analytical work, technical advisory); (ii) convening services;

and (iii) financial services (Figure 1). This partnership has helped Colombia lead the way in

urban transport issues and become internationally known for innovations in public transport,

namely, the BRTs. The BRT scheme has been replicated in many cities because they are a cost-

effective transport solution that can be implemented in relatively short time. Delegations from

more than 20 countries, including China, India, Vietnam, South Africa, Kenya, Finland and the

8 The NUTP is built on Law No. 86 passed in December, 1989. Two National Economic and Social Policy Council

documents (CONPES No. 3167and No.3260) approved in 2002 and 2003 have established the policy and

institutional framework for the NUTP. 9 Law No.310 passed in 1996 approves the co-financing arrangement between the Government and cities. On the

other hand, cities main source of funding is the gasoline surtax, mostly paid by automobile users. Nonetheless some

have tapped into property tax revenue and royalties to secure their project contributions.

6

United States have visited Colombia to learn about the NUTP program and how BRTs are being

implemented in Colombian cities. Furthermore, there has been a significant South-South

collaboration and level of knowledge transfer originating from the Colombian experience.

Figure 1. World Bank Support for Urban Transport in Colombia

18. As part of this portfolio of services, the Bank has supported the NUTP through three loans totaling US$757 million (Integrated Mass Transit System Project and two subsequent

Additional Financings) aimed at financing the GoC‘s commitments to large cities for the

construction and implementation of BRTs.10

Although the NUTP targets nine large cities

including Barranquilla, Bogotá, Bucaramanga, Cali, Cartagena, Cucuta, Medellin-Valle de

Aburrá, Pereira and Soacha, the Bank has so far financed six out of the nine cities – Barranquilla,

Bogotá, Bucaramanga, Cartagena, Medellin-Valle de Aburrá, and Pereira.11

Currently Cali is

being financed by the Inter-American Development Bank (IADB), and Cucuta has partnered

with the Andean Development Corporation to implement the project. As the main focus of the

interventions in large cities is the implementation of BRTs, to date five out of the nine cities have

10

The Bank has supported the IMTS project through three operations: the first IMTS Loan (Loan 7231-CO,

P082466) was approved in June, 2004 for US$250 million, the second corresponds to the First Additional Loan

(Loan 7457-CO, P101356) approved in June, 2007 for US$207 million, and the third corresponds to a Second

Additional Loan (Loan 7739-CO, P114325) approved in August, 2009 for US$300 million. 11

As the NUTP progressed, and new participating cities were incorporated, the program also began to target

Metropolitan Areas (Areas Metropolitanas) comprising more than one city. As such, Soledad was also included to

the project in Barranquilla, Floridablanca, Piedecuesta and Girón were incorporated to the NUTP along with

Bucaramanga, in Medellin-Valle de Aburrá, Itagui and Envigado joined the NUTP, and lastly, in Pereira,

Dosquebradas was also included in the NUTP.

Go

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Initial Engagement

The Foundations

(1996-2003)

• National Urban Transit Program

• National Economic and Social Policy Council Documents (CONPES) to Implement Bus Rapid Transit Systems (BRTs)

• Technical Advisory to Transmilenio

• Support to Transmilenio 's Annual Urban Transport Forums

• Bogotá Urban Transport Project• Colombia Regulatory Reform Project • Bogotá Urban Services Project

Strengthening Urban

Transport Policies

(2004-2010)

• CONPES to Monitor Implementation of BRTs in Large Cities

• Infrastruture Policy Note (Workshop)

• Nat'l Communication Strategy BRTs Implem.

• Road Safety Training

• Universal Access BRTs

• Integrated Mass Transit Systems Project & First and Second Additional Loans• Bogotá Urban Services Project Additional Loan

Mainstreaming Urban

Transport Policies

(2011- )

• CONPES to Mainstream Urban Transport Policies in Medium-sized Cities

• CTF Investment Plan for Bogotá

• Regulatory Framework for Integration Public Transit Services

• Support to the National Urban Transit Program Project (proposed)

Stages of Urban Transport Engagement in Colombia

7

BRTs under operation (Barranquilla, Bogotá, Bucaramanga, Cali and Pereira), while the

remaining are under construction.12

19. The proposed Project continues to scale up the Bank‘s support to Colombia‘s NUTP by financing the GoC‘s commitments to the large cities (except Bogotá for which the GoC

commitments have already finalized and Barranquilla that is expected to be financed by another

Multilateral Development Bank) that were previously supported by the IMTS project, and to two

new medium-sized cities requested by the GoC.13

In large cities, the Project will provide

financing so that the infrastructure required to begin the operation of BRTs is in place, and key

technical, institutional and regulatory reforms are consolidated for these systems to effectively

operate. In medium-sized cities, the NUTP anticipates support for twelve cities including

Armenia, Buenaventura, Ibague, Manizales, Monteria, Neiva, Pasto, Popayan, Santa Marta,

Sincelejo, Valledupar and Villavicencio, which are all at the planning stage.14

To date, seven

cities have formalized the support from the GoC through the approval of National Economic and

Social Council (CONPES) and National Fiscal Council (CONFIS) documents. For these cities,

the NUTP foresees urban transport interventions that focus less on infrastructure but address the

negative incentives of the traditional bus system, and tackles new issues such as informal public

transport (motorcycle cabs and vans). The policy package for these medium sized cities will

include instruments on the supply and demand management side, including carefully planned

fleet size and operations, incentives for the creation of transport operating companies, integrated

fare collection systems, centralized fleet control systems, control, and optimization of traffic

management. The GoC has requested the Bank to support these types of interventions in the

medium-sized cities of Sincelejo and Valledupar (Refer to Annex 5).

D. Higher Level Objectives to which the Project Contributes

20. The Project is consistent with the World Bank Group‘s new Country Partnership Strategy (CPS) for FY12-16

15, which is also aligned with the key themes of the National Development

Plan (2010-2014), and with the Bank‘s strategic engagement in the country, particularly the

Sustainable Growth with Enhanced Climate Resilience pillar. The CPS has three themes: (i)

Expanding Opportunities for Social Prosperity, (ii) Sustainable Growth with Enhanced Climate

Resilience, and, (iii) Inclusive Growth with Enhanced Productivity. Each theme supports three

long term outcomes. The CPS recognizes that to continue to address the needs of Colombia‘s

highly urbanized population, it is necessary to meet Colombia‘s ambitious plans for growth and

economic development with the explicit policy objectives of the new administration to make

12

Out of the six cities being financed by the Bank under the IMTS Project, four BRTs are in operation in

Barranquilla, Bogotá, Bucaramanga, and Pereira, while the other two (Cartagena and Medellin-Valle de Aburrá) are

under construction. 13

In this sense, the Bank will finance a definite number of cities that are part of the NUTP, while other Multilateral

Development Banks may finance other cities that are part of the national program. There will be no co-financing of

cities between different MDBs, which clearly delineates the proposed project‘s fiduciary and safeguards

requirements and accountability, as had been done with the previous IMTS projects. 14

Seven out of the twelve cities already received initial support from the Government through CONPES documents:

Pasto (CONPES 3549, November 2008), Santa Marta (CONPES 3548, November 2008), Armenia (CONPES 3572,

March 2008), Popayan (CONPES 3602, August 2009), Valledupar (CONPES 3656), Monteria (CONPES 3638) and

Sincelejo (CONPES 3637). The CONPES document provides a formal approval of the Government to assist and

provide financial support to the projects. 15

To be discussed by the Board on July 21, 2011.

8

development environmentally and socially sustainable. To reach such a goal the CPS gives high

priority to the improvement of access to high quality urban services for the least privileged

segments of the population, and to the priority of achieving these goals in an environmentally

sustainable manner. In this area, the Project by supporting initiatives to organize and make more

efficient urban transit systems, is expected to foster productivity and competitiveness, provide

better services to the poor, improve environmental conditions (i.e. better air quality and GHG

emission reductions), and quality of life in urban areas. Additionally, the Project is expected to

enhance institutional capacity both at the national and local level, particularly as it relates to

strengthening implementation capacity of cities in large-scale infrastructure projects and in

public transport regulation.

II. Project Development Objectives

A. PDO

21. The Project Development Objective (PDO) is to enhance the efficiency, affordability, quality, safety, and environmental sustainability, of the provision of public transit services in the

participating cities.

a) Project Beneficiaries

22. Direct beneficiaries of the Project include users of the public transit system who will directly benefit from an enhanced public transport service provision. Since this public transport

constituency is primarily made up of lower-income users (up to 70 percent of public transport

users are from the lower income strata16

—strata 2 and 3) the Project will improve their access to

services, markets and economic opportunities, and lower their travel costs and times. The Project

is furthermore designed to allow the use of public transit by the disabled population, and improve

safety conditions, especially for women by introducing proper lighting and restricted access to

improve security conditions in bus stations. More generally, the Project will indirectly benefit the

urban population at large, who will experience better overall urban mobility and environmental

conditions, through the relief of traffic congestion, reduction of road accidents and air pollution.

With the implementation of the Project, cities will promote the renewal of the existing bus fleet,

reduction of the bus over-supply, introduction of cleaner fuels, reduction of inefficient routes,

and an improvement of public space to promote greater walking and cycling. Other potential

indirect beneficiaries are the residents and businesses along the bus corridors and the renewed

public space, which are likely to see an increase in property value by having better accessibility

and improved mobility options.

16

In Colombia, according to Law 142 of 1994, there are legally six socio-economic strata as defined by the National Department of Statistics (DANE) for the purposes of classifying households. The methodology takes into account the level of poverty of

household owners, accessibility to public utility services, urban/rural population, etc. The percentage of population included in

each strata is: strata 1 (low-low) = 22.3% pop. , strata 2 (low) = 41.2% pop., strata 3 (medium-low) = 27.1% pop., strata 4

(medium) = 6.3% pop., strata 5 (medium -high) = 1.9% , and strata 6 (high) = 1.2% pop (according to latest household survey).

9

b) PDO Level Results Indicators

23. Project performance and success in achieving the proposed PDOs of the Project, will be measured against the following outcome indicators:

Enhanced efficiency of public transit services:

Reduction in average travel time for the lowest income strata users (income strata 1 and 2)

Enhanced affordability of public transit services:

Percentage of household expenditure in urban transport with respect to total household income

Enhanced quality of public transit services:

Percentage of people rating the system as being better than the previous system

Enhanced safety of public transit services:

Reduction in the number of accidents per 1 million passengers

Enhanced environmental sustainability of public transit services:

Reduction in local emissions (PM10). This indicator will be measured in cities that are currently monitoring local emissions through their Local Environmental Authority.

Enhanced institutional capacity in urban transport policy formulation:

Restructuring of the existing public transport route system

III. Project Description

A. Project Components

24. To achieve its objectives, the NUTP relies on an effective public-private partnership in which roles are assigned as follows: (i) the public sector finances, builds and maintains the

required infrastructure through co-financing arrangements between the GoC and municipal

governments; (ii) the private sector provides the equipment (i.e. fleet, fare collection and fleet

control system) and service provision under concession contracts granted by the city; and (iii)

each city participating in the NUTP establishes a transportation entity to plan, regulate and

control the operation of the BRTs (in large cities) or of the new urban transport system in

medium-sized cities. Furthermore, the NUTP relies on an effective technical collaboration

between the GoC and the cities participating in the program. At the national level, the MOT,

through a Project Coordination Unit, oversees the overall management and implementation of

the Project, provides technical support to cities participating in the NUTP and is responsible for

the follow-up and supervision of program implementation. The unit has proven to be effective in

the implementation of IMTS project and provides direct support to the participating cities and

Implementing Entities in technical, operational, environmental, social, resettlement, and

procurement aspects. As has been the case with the previous IMTS Project, the MOT, through

the PCU will provide targeted technical assistance aimed at strengthening the institutional

capacity, both at the national and local level. Annex 2 presents a more comprehensive

description of the NUTP reform agenda and of the roles played by each actor. This section

describes the components that are financed by this loan which mainly concern the required

infrastructure investments in large and medium-sized cities, the supervision (interventorías) of

10

construction works and the strengthening of the capacity of the Implementing Entities in

medium-sized cities, including the hiring of specialized technical staff for the implementation of

the Project.

25. Component A17: Integrated Mass Transit Systems (US$ 253 million). 1. Expansion of the physical scope and geographical and social coverage of the NUTP in large cities, through the carrying out of the following selected activities: (a)the

revision of detailed engineering designs; (b) the construction of bus rapid transport

segregated busways; (c) the construction of bus stops, terminals and transfer centers; (d)

the construction of mixed-traffic lanes adjacent to busways corridors; (e)the construction

of sidewalks and bicycle paths; (f) the rehabilitation of feeder routes; (g) the

construction of pedestrian ways along busways corridors, including pedestrian bridges;

(h) the construction or adaptation of complementary transport corridors to the segregated

busways; (i) the carrying out of required adaptation and/or relocation of public service

networks adjacent to the construction areas; (j) the construction of bus workshops and

parking; (k)the review and upgrading of technical designs; (l)the carrying out of

supervision (interventorías) of construction works referred to in this paragraph A.1, all

under terms of reference acceptable to the Bank.

2. (a) Provision of financing for the acquisition of land required for the carrying

out of Part A.1 of the Project; (b) provision of financing for the resettlement of, and the

provision of compensation to, Affected Persons pursuant to the provisions of the

corresponding RAP, in connection with the carrying out of Part A.1 of the Project.

3. Design and implementation of EMPs for the carrying out of Part A.1 of the

Project.

26. Component B: Strategic Public Transit Systems (US$ 97 million). 1. Expansion of the physical scope and geographical and social coverage of the

NUTP in the medium-sized cities through the carrying out of, the following selected

activities:(a)the development of detailed Project engineering designs of integrated

transport systems, all under terms of reference satisfactory to the Bank; (b)the

construction and rehabilitation of road networks; (c) the construction and rehabilitation of

sidewalks, public space, pedestrian ways along bus corridors and bicycle paths; (d)the

construction of pedestrian bridges;(e)the construction of bus stops, terminals and transfer

centers; (f)the construction of bus workshops and parking places; (g)the acquisition of

control centers for strategic public transport systems, including fleet control, traffic lights

and traffic signaling; (h)the rehabilitation and renewal of historic centers;(i)the provision

of equipment and training to the Implementing Entities; (j) the hiring of specialized

technical staff for the Implementing Entities for the implementation of the Project; (k)the

financing of Operating Costs; (l)the hiring of Project auditors; (m) the design and

construction of centers of public citizen services; (n)the design and implementation of

broad communication strategies; and (o) the supervision (interventorías) of all the

activities specified in paragraphs (a) through (n) referred to in this paragraph B.1, all under terms of reference satisfactory to the Bank.

17

In the Loan Agreement, Component A is referred to as Part A of the Project. The same is true for Component B

(Part B).

11

2. (a) Provision of financing for the acquisition of land required for the carrying

out of Part B.1 of the Project;(b) provision of financing for the resettlement of, and the

provision of compensation to, Affected Persons pursuant to the provisions of the

corresponding RAP, in connection with the carrying out of Part B.1 of the Project.

3. Design and implementation of EMPs for the carrying out of Part B.1 of the

Project.

B. Project Financing

a) Lending Instrument

27. The Project will be financed by a Specific Investment Loan (SIL) in the amount of US$350 million, to be carried out over a period of 5 years. The SIL was chosen because of the

targeted nature of the proposed Project and its intention to support implementation of specific

activities in a number of large and medium-sized cities. The SIL is also considered a good

instrument for financing consulting services as envisioned in the Project.

b) Project Financing Table

28. The GoC has requested the Bank to finance the Government‘s NUTP commitments to large and medium-sized cities eligible for IBRD financing from 2011-2017, which amount to

approximately US$407 million (see Table 1). Due to the limitations and competing priorities of

the Colombia country envelope, the Bank will only be able to support the program with a

US$350 million loan. However, the Bank expects the GoC to request a subsequent follow up

operation to complete the NUTP financing until 2017.18

29. The GoC has also requested the Bank to continue to finance the cost of land required to construct the infrastructure and related public space in both large and medium-sized cities, and

the compensation stemming from land acquisition and resettlement processes. The Bank has

made land an eligible expenditure for Bank financing since the Second Additional Financing for

the IMTS Project. To date, US$3 million have been disbursed out of a total of US$3.5 million

allocated for land acquisition to the cities of Itaguí and Envigado (in the metropolitan area of

Medellin-Valle de Aburrá).19

To date, the land acquisition process has progressed in a

satisfactory manner and this has been validated through regular supervision missions and

comprehensive analysis of the resettlement and land acquisition process. Maintaining land

acquisition as an eligible expenditure for Bank funds will provide an additional degree of

flexibility on the cost allocation between the national and the municipal contributions. The

eligibility of land as an expenditure does not affect the Project‘s safeguards approach; under the

18

At the time of the original IMTS project approval (and the first and second request for Additional IMTS Loans),

the Bank anticipated that the GoC would likely seek further Bank financing for the later years of the program (2011-

2017). See original PAD (Loan 7231-CO) pg. 3: ―…since the implementation of the NUTP will continue beyond

2008, it is likely that GOC will request the Bank to provide a follow-on operation to continue supporting the

program‖. Additional Financing Project Paper (PP) pg. 8: ―It is proposed that the follow-on financing for the NUTP

would be structured as a series of lending operations. The first one would be the US$ 207 million Additional

Financing to cover the NUTP transfers through the end of 2007.‖ A second Addition Financing for US$300 million

followed, which brought total financing for the NUTP to US$757 million. 19

Initially, the Second Additional Financing for the IMTS project allocated US$26 million for the acquisition of

land. In April, 2011, the GOC requested a re-categorization of loan proceeds, whereby US$3.5 million where

allocated to land acquisition.

12

existing operation, all land acquisition undertaken with non-Bank funds uses the same safeguards

approach to managing Involuntary Resettlement OP 4.12 issues. In accordance with Bank Policy,

the Bank‘s Land Committee reviewed the proposed arrangements for the Bank to finance land

acquisition and found them appropriate. Land acquisition and compensation are expected to

amount up to US$45 million of the proposed operation, and will be conducted as established in

the BP 6.00, Annex A—Special Authorization Arrangements for Selected Types of Expenditure,

―Guidance Note on World Bank Financing of Land Acquisition For Protected Areas‖ dated

August 11, 2005 and related documentation.

30. Table 1 summarizes the estimated Project costs. The table reflects the fact that the proposed US$350 million loan will only partially cover the GoC‘s financing needs to cities

eligible for Bank financing under the NUTP until 2017, which amount to US$407 million. In

effect, the loan will meet the GoC‘s financial requirements to the NUTP for all large cities

(2011-2015), and will only partially finance the program for medium-sized cities. The proposed

loan will finance Component A: Integrated Mass Transit Systems in Large Cities in the amount

of US$253 million, and Component B: Strategic Public Transit Systems in Medium-sized Cities

in the amount of US$97 million.

Table 1. GoC Budget Commitments to the NUTP for Cities Eligible for IBRD Financing

(Calendar Year 2011-2017, US$ Million)

Source: CONPES Document No. 3657 Note: Exchange Rate based on 1USD=COP 2,000.

31. Table 2 describes the total cost of the Project and financing from IBRD.

Table 2. Project Financing Table

Large C it ies Eligible

fo r IB R D F inancing2011 2012 2013 2014 2015 2016 2017 T OT A L

Bucaramanga-M etro linea - 11 18 20 - - - 49

Cartagena-Transcaribe 33 - - - - - - 33

M edellín-M etroplus - 13 53 55 41 - - 163

Pereira-M egabus 8 - - - - - - 8

T OT A L 41 24 71 75 41 - - 253

M edium-Sized C it ies

Eligible fo r IB R D

F inancing

2011 2012 2013 2014 2015 2016 2017 T OT A L

Sincelejo 2 8 28 9 6 4 - 57

Valledupar 3 8 30 6 15 1 34 97

T OT A L 5 16 58 15 21 5 34 154

C UM ULA T IVE T OT A L

(Large & M edium-

sized C it ies)

46 86 215 305 368 373 407 407

Component and/or Activity Total Project

Cost

(US$ million)

Total IBRD

(US$ million)

% IBRD

Financing

Component A: Integrated Mass Transit Systems 253.0 253.0 100%

Component B: Strategic Public Transit Systems 154.0 97.0 63%

Total Financing: 407.0 350.0 86%

13

c) Detailed Project Costs for IBRD Financing of Eligible Cities under the NUTP

32. As previously mentioned, the Bank has already supported the NUTP through three loans totaling US$757 million aimed at financing the GoC‘s commitments to large cities for the

construction and implementation of BRTs: (i) Integrated Mass Transit System Project (Loan

7231) for US$250 million, of which US$249.9 million have been disbursed; (ii) First Additional

Financing for the Integrated Mass Transit System Project (Loan 7457) for US$207 million, of

which US$206.8 million have been disbursed20

; and (iii) Second Additional Financing for the

Integrated Mass Transit System Project (Loan 7739) for US$300 million, of which US$297.6

million have been disbursed. Table 3 presents detailed cost information that shows exactly how

these Loans have been applied to each of the cities being financed.

33. The total amount of IBRD financing in each city corresponds to the information provided by each Implementing Entity of their Procurement Plans on a per contract basis. Because related

expenditures for each contract took place in Colombian pesos, and different exchange rates were

applied at the time of the disbursement processing, the numbers related to total expenditures

cannot match with the overall disbursements to date. Furthermore, Annex 2 includes a related

table that provides summary cost information in each of the large cities being financed per type

of infrastructure investment. For the proposed new Loan, Table 3 reflects an approximate

allocation of Loan proceeds for each sub-project.

Table 3. Total IBRD Financing of Eligible Cities under the NUTP

Note: Information based on Local Implementing Entities Procurement Plans as of November, 2010. Information

for Bogotá as of April, 2011.

Totals may not reflect total disbursements due to exchange rate fluctuations. An average exchange rate of

COP1950/USD was used for period 2004-2010.

* Approximate allocation of Loan proceeds for each sub-project. Financing of land, which amounts to US$45 million for this project, is reflected in total allocated to each city.

20

Loan 7231 and Loan 7457 have closed.

LN.7231 LN. 7457 LN.7739 Total IMTS Project New Loan*

(1) (2) (3) (1)+(2)+(3)

Large Cities

Barranquilla 4,712,496 16,282,870 36,673,796 57,669,162 -

Bucaramanga 27,591,055 30,392,419 23,351,392 81,334,866 49,000,000

Cartagena 20,120,103 20,817,962 31,276,566 72,214,630 33,000,000

Medellin 32,562,564 20,607,014 12,617,004 65,786,582 163,000,000

Pereira 26,172,872 - - 26,172,872 8,000,000

Bogota NQS Corridor 147,564,448 118,255,760 176,500,000 442,320,208 -

Medium-Sized Cities -

Sincelejo - - - - 45,000,000

Valledupar - - - - 52,000,000

Technical Assistance 2,300,000 617,130 2,500,000 5,417,130 -

Land - - 3,000,000 3,000,000

TOTAL 261,023,538 206,973,154 285,918,758 753,915,450 350,000,000

Approved IBRD Loan Amounts 250,000,000 207,000,000 300,000,000 757,000,000

Disbursements to Date 249,940,000 206,810,000 297,600,000 754,350,000

City

IBRD Financing (USD)

14

C. Lessons Learned and Reflected in the Project Design

34. The Project has been designed taking into account the lessons learned from previous Bank operations and analytical work on urban transport projects. Based on the lessons learned,

the Project has incorporated the following design features:

35. There is a role for the GoC in the implementation of urban transport services reforms. Reforms in the sector normally require large investments and complex technical decisions. Given

that cities lack both financial and technical resources, the GoC‘s participation becomes crucial in

promoting reforms at the municipal level.

36. Reliable funds are key to implement long term reform. Urban transport financing should be seen as an integrated whole, justifying the use of taxes on auto users to provide reliable funds

to implement public transport projects. In the case of Colombian cities, gasoline surtax, mostly

paid by private car users, is providing about 34 percent of total NUTP cost, and more importantly

is helping the cities to leverage funds from the GoC.

37. The regulatory framework is key in advancing sound reform. Within the different planning stages for urban transport reforms, most of the attention goes to the technical aspects of

the projects (engineering designs, technology, equipment, etc.), neglecting the regulatory design

of the operation. Given the crucial role of the private sector in the operation of urban transport

systems, the planning process should concentrate more on the definition of several issues that

regulate the partnership between the public and private sector. Efforts should focus on improving

the regulatory framework to encourage efficient, competitive and quality service-standard bus

operations.

38. Environmental and social management are important to ensure successful project implementation. The local Implementing Entities include environmental and social management

teams. Experience has shown that the earlier these teams are onboard and being able to

participate in project design and planning, the higher the rate of success for the particular project

activity. On the other hand, examples have shown that where environmental and social teams

were not brought onboard early on, unmanaged social issues caused serious implementation

delays, and adverse impact on the affected populations. Furthermore, environmental and social

management teams need to place especial consideration on tackling problems and designing

communication and implementation strategies for vulnerable groups, including the poorest

member of a community, informal street vendors, disabled people and women.

39. Implementation strategy should have both high political commitment and strong technical support. Of the several lessons that arise from the successful implementation of

Transmilenio (Bogotá) and Megabus (Pereira), two are particularly critical. The first is that the

implementation of such an initiative requires visionary leadership willing to take risks and

closely involved in the process. The second is that there is the need to create local Implementing

Entities with strong technical capacity to design, plan, and control the new public transit

operation.

15

40. The implementation of public transit systems goes beyond the construction and/or rehabilitation of the road network. Another lesson resulting from the Transmilenio and Megabus

experiences is that the project cannot be limited solely to the construction of the segregated

busway, or the rehabilitation of the road network. Other complementary actions must be

implemented to guarantee the completion of the urban transport strategy within a comprehensive

perspective that includes reorganizing bus routes, implementing traffic demand management

measures, developing measures to reduce the oversupply of obsolete bus fleet, investing in the

renewal of public space and bicycle paths to promote non-motorized transit, strengthening the

institutional and regulatory capacity of the local transport authority, etc. This demonstrates that

the value added of these types of projects goes far beyond the construction of the required

infrastructure.

41. Synergies and knowledge transfer are fostered by the simultaneous implementation of projects in multiple cities. Important synergies have been created as a result of the simultaneous

implementation of projects in cities participating in the NUTP. This has resulted in a continuous

flow of know-how and best practices among participating cities, the PCU and the Bank in areas

such as civil works management, procurement and fiduciary processes, safeguards management,

operational design, strategies for initiation of operation, among others. The Project has also

benefited from these informal knowledge sharing arrangements to strengthen the implementation

and institutional capacity of the new medium-sized cities which will begin implementation under

this operation. Through this framework, the NUTP is enhancing institutional capacity, fostering

best practices and fast-tracking the learning curve in the large cities that have yet to the operation

of their BRTs, and in medium-sized cities.

IV. Implementation

A. Institutional and Implementation Arrangements

42. At the national level, the implementing agency of the NUTP is and will continue to be the Ministry of Transport (MOT), in close coordination and collaboration with the National Planning

Department (DNP) and the Ministry of Finance and Public Credit (MHCP). MOT has the overall

responsibility for the execution of the Project, provides technical support to the NUTP and is

responsible for monitoring and evaluating program implementation. The MHCP is in charge of

the overall management of resources (including GoC transfers and disbursements), and the

National Planning Department (DNP) carries out preparatory studies, prepares CONPES

documents for each city participating in the program, and also oversees project implementation.

Currently, there is a PCU at MOT that oversees the overall management and implementation of

the NUTP. This unit reports to the Deputy Minister of Transport and is staffed by a mix of civil

servants and individual consultants, including urban transport engineers, economists, accountants

and social and environmental specialists, among others. The unit has proven to be effective in the

implementation of IMTS project and provides direct support to the participating cities and

Implementing Entities in technical, operational, environmental, social and resettlement, and

procurement aspects. The PCU will continue to exist within the MOT to oversee the

implementation of the Project.

43. At the local level, all large cities that participated in the IMTS project have established Implementing Entities that are in charge of executing the civil works and operating the BRTs

16

once the infrastructure is completed.21

These Implementing Entities are corporate transportation

entities, created upon city council approval and pursuant to the provisions of Colombia‘s

industrial and commercial enterprise laws.22

With respect to medium-sized cities, their CONPES

documents call for the creation of simplified corporate transportation entities, similar to those

created in the IMTS project cities. These project Implementing Entities are currently being

created in each city, and need to be established before the GoC commits co-financing resources

through the Subsidiary Agreements. Furthermore, and as is the case with the IMTS project, these

Implementing Entities will have to work in close collaboration with other municipal agencies,

including the local Transport Authority (Secretaria de Transito), Finance Secretariat (Secretaria

de Hacienda) Public Works or Infrastructure Secretariat (Secretaria de Obras

Publicas/Infraestructura), and Planning Secretariat (Secretaria de Planeación) to execute their

projects. Despite the know-how that has been created at the local level with the implementation

of the IMTS project, and the knowledge transfer created by these institutional arrangements –

whereby the GoC promotes the leadership of the city in the planning, execution and control of

the system, while levering its role as policy regulator, through participation in the Board of

Directors of the Implementing Entities in charge of system development and control— the

project team foresees to a greater extent some higher institutional risks in the implementation of

the Project in medium-sized cities. These institutional risks emerge as a result of their relatively

weaker institutional and technical capacity vis-à-vis the larger cities. However, risk mitigation

plans, developed at appraisal and put in place during implementation will address these and other

risks with mitigation actions, such as, training and capacity building, close supervision by MOT

and PCU, and increased Bank supervision. In addition, the MOT will ensure that each of the

Implementing Entities is staffed with a core team with functions, responsibilities, qualifications

and experience acceptable to the Bank, all throughout Project implementation, in the following

areas: environment, resettlement, procurement, and financial management, and ensure that said

core team is supported by any other professional and administrative staff, as appropriate.

B. Results Monitoring and Evaluation

44. Project progress reports will be prepared by the local Implementing Entities on a semi-annual basis will be reviewed by the PCU and will be submitted to the Bank. These reports will

indicate the progress made under the different components of the Project and measure

performance against the results indicators established in the results framework (Annex I). The

PCU will also prepare and submit to the Bank semi-annual project progress reports that include

the following information: (i) assess progress in the carrying out of the Project, with respect to

each component; (ii) assess progress in the implementation of the Environmental and Social

Management Plans laying out problems identified as well as documenting environmental and

social impacts of the Project in the areas of intervention; (iii) provide a procurement report, and

an updated procurement plan; and (iv) identify any potential developments that could affect

project implementation, and propose solutions to resolve such.

21

In the case of Bogotá, the city relies on specialized municipal works agency— Instituto de Desarrollo Urbano

(IDU) — to carry out the construction of the BRTs infrastructure. 22

The Implementing Entities for the cities participating in the IMTS project are: Barranquilla‘s Transmetro S.A,

Bogotá‘s Transmilenio S.A, Bucaramanga‘s Metrolinea S.A, Cali‘s Metrocali S.A (MIO), Cartagena‘s Transcaribe

S.A, Medellin‘s Metroplus S.A, Pereira‘s Megabus S.A, , and Soacha‘s BRTs will also be managed by Transmilenio

S.A.

17

C. Sustainability

45. Improving the provision of urban transport service provision is a key goal of Colombia‘s National Development Plan. The proposed Project was requested by the GoC as part of a

continued dialogue and support to the National Urban Transit Program. The GoC and the cities,

by entering into co-financing arrangements to finance the implementation of the NUTP , and by

committing resource to strengthening the institutional capacity at the national and local level,

have signaled their commitment to and ownership of the Project, both of which are critical

conditions for the long-term sustainability of activities. Yet, cities have fallen short in devising

schemes to ensure the maintenance of the road infrastructure constructed/rehabilitated, and not

earmarked funds for such activities. With regards to the sustainability of investments in urban

renewal, the cities and the local Implementing Entities are also looking to enter into partnerships

with the private sector to maintain public space and green areas, and are revisiting their Land

Use Master Planes (Planes de Ordenamiento Territorial) to assess changes in land use.

46. Also, direct measures are being taken to ensure the sustainability of the operation of the urban transport service provision. On the one side, when changing from a competition in the

market to a competition for the market arrangement for transit service provision, costs could go

up as externalities are being internalized. To prevent fares from going up, subsidies might be

needed. In fact, this is one of the key policy debates in the area of public transport, and one that

the new GoC administration will likely tackle, particularly as to who pays for such subsidies

(national or local government, private car users, etc). On the other side, the technical capacity of

cities in the planning, control and operation of the new transport system is a key sustainability

factor. The GoC has committed to allocating resources to strengthen the planning and operational

capacity of large and medium-sized cities participating in the NUTP, particularly at the initial

implementation stage (beginning of operations).

V. Key Risks

47. The overall risk rating for the Project is High. Potential risks and proposed mitigation measures are detailed in the Operations Risk Assessment Framework (ORAF) in Annex 4. For

project implementation, a risk rating of High was selected as there are implementation risks

related to: (i) safeguards and fiduciary management of the Project; (ii) implementation (and

supervision) complexities stemming from the Project‘s scope of activities and geographical

coverage, (iii) weak implementation capacity in new medium-sized cities, (iv) prevalence of

informal transportation, including motorcycle taxis, that may hinder the reorganization and

formalization of the transport sector by decreasing overall demand for public transit; and (v)

alleged cases of fraud and corruption.

Project Governance Approach

48. In addition to standard requirements under Bank financed projects (including those required under the Bank‘s Procurement Guidelines), the current Project includes some explicit

measures to improve transparency and accountability during Project implementation

incorporating the lessons learned over 7 years of implementation of the NUTP. These include:

18

Independent review of compliance processes: Audit by the CGR. While all projects in Colombia being implemented by lines Ministries are subject to the Contraloria General de la

Republica23

– CGR‘s (General Comptroller‘s Office) internal and quality procedures reporting,

the proposed Project will be audited on an annual basis, including an innovative procedure

agreed among the Borrower through MOT, the CGR and the Bank, in the sense that the audit

Terms of Reference will include specific and concrete provisions for interim visits by the

auditors to each of the participating cities throughout the year at different intervals, to look at

specific issues. The results of such interim visits will be shared with the Bank and used during

Bank supervision of the project. The decentralized task force of the CGR also oversees sub-

project implementation in all of the cities participating in the NUTP. As part of the use of CGR

for audits of Bank financed operations, the Bank will continue to provide regular

training/information sessions to CGR to explain and clarify Bank guidelines. Additional efforts

will be undertaken to build the capacity of the CGR auditors as regards World Bank fiduciary

policy and procedures.

Technical audits. In addition to the use of interventorias, technical audits will continue to be conducted under the Project, focusing on sub-projects representing higher risks (e.g. contracts

that have received complaints, contain frequent price variations, or are subject to delayed

implementation). These technical audits will include site visits focusing on verifying that work

has been performed according to contractual standards, and that oversight by both the

Implementing Entity and the interventoria is appropriate.

Prior review of all procurement processes in medium-sized cities. For the medium-sized cities, where capacity is expected to be weaker, the Bank will carry out prior review of all

procurement procedures for the first years of the operation.

Creation of a mechanism for handling procurement complaints. A complaint handling mechanism will be established as a new measure to allow contractors and the community

members to report possible issues related to contract award and implementation. The complaint

handling mechanism will be described in the Project‘s Operational Manual.

Developing price monitoring mechanisms across participating cities. In order to lessen the risk of inflated cost estimates which can often result in higher bid prices downstream, during

implementation, the Bank will work with the Government to assess the feasibility of developing

a price monitoring mechanism for civil works contracts to provide benchmarks to establish the

reasonableness of the prices quoted by Implementing Entities and bidders.

Access to bidding opportunities. Invitations to bid will be proactively made available to contractors‘ associations, such as the Camaras de Infraestructura and Camara de Comercio.

Business outreach events will also be organized. Bidding documents for each contract will be

available for access and download by potential bidders on the MOT website and the

Implementing Entities‘ website.

Communications and outreach. The MOT, in coordination with the local Implementing Entities, have launched a broad Communications Strategy with the objective of informing

stakeholders as a whole, with particular emphasis on civil society, public opinion shapers, and

23

Per MOU between the Ministry of Finance, CGR and the Bank dated March, 2007.

19

the media, on the strategic objectives of the NUTP and the co-financing partnership between the

Government and cities to carry out its implementation. The Communications Strategy, initiated

during the Second Additional IMTS Project and financed by the Bank, will continue throughout

the implementation of the proposed Project. A key component of this communication strategy is

the ―Visible Works‖ (Obras Visibles) campaign. Under this initiative, the Government, in

conjunction with the participating city, organizes a public forum with all relevant stakeholders,

including civil work construction companies, work supervision contractors, relevant chambers of

commerce, city authorities, community representatives, public opinion shapers, and the media, to

openly discuss the progress made in each sub-project and tackle specific challenges moving

forward. These forums have proven extremely effective to signal local communities of the

Government‘s oversight and commitment to the effective implementation of the NUTP.

Complaint and grievance mechanisms, including the Centers for Public Attention. During implementation, Centers for Public Attention are probably the most critical mechanism and point

of contact with the local community for receiving questions, claims and complaints. The Centers

for Public Attention are to be set up under the guidelines established in the Project‘s

Environmental Management Framework. These grievance mechanisms exist in all subproject

areas and are a one-stop-shop located for citizen attention and problem resolution. The Centers

are used to publicize works plans, work progress and traffic measures and to receive complaints

and grievances of all types. Such a tool allows for contractors and community members to report

possible issues related to the contract awards and contract implementations. Claims can also be

posted on the website of the local Implementing Entity, received directly in their office or in a

local office in the field. In each city, every step of this process is well documented and the teams

also digitize all information. Lastly, citizens can also place specific complaints regarding

fraudulent or corrupt practices by calling the Government‘s corruption hotline (Línea

Transparente 01-8000-913040).

Capacity building and training. As part of implementation support, the Bank will provide training to build the capacity of Implementing Entities, targeting technical and fiduciary areas, in

particular for new medium-sized cities. Furthermore, the fiduciary training will also target topics

of governance and anti-corruption. These training events will be provided by the Bank.

VI. Appraisal Summary

A. Economic and Financial Analysis

49. A standard cost-benefit analysis was carried out for the large cities of Cartagena and Medellin-Valle de Aburrá, which have yet to start operations, and for the two medium-sized

cities. The analysis includes all public and private costs associated with the implementation a