Document of The World Bank

Report No: 25229-BD

IMPLEMENTATION COMPLETION REPORT(IDA-29270; IDA-29271; TF-20956)

ON A

CREDIT

IN THE AMOUNT OF SDR 105.94 MILLION (US$ 153 MILLION EQUIVALENT)

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FOR THE

SECOND RURAL ROADS AND MARKETS IMPROVEMENT AND MAINTENANCE PROJECT

January 10, 2003

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CURRENCY EQUIVALENTS

(Exchange Rate Effective June 2002)

Currency Unit = Bangladesh Taka (Tk) Tk 1 = US$ 0.017US$ 1 = Tk 57.42

FISCAL YEARJuly 1 June 30

ABBREVIATIONS AND ACRONYMS

ADBBankBCBIDSCASCHFCIDACTUDCADSMCERRFRBFYGCMGoBHRDICRIDAkmLAAPLCSLGED

mMANCAPS

MMCMMTMoLGRDC

MTRNGONMTODpa

Asian Development BankThe World BankBituminous CarpetBangladesh Institute of Development StudiesCountry Assistance Strategy of the BankSwiss FrancCanadian International Development AgencyCentral Training Unit of the LGEDDevelopment Credit AgreementDesign, Supervision and Monitoring ConsultantEconomic Rate of ReturnFeeder Road Type BFinancial YearGrowth Center MarketGovernment of BangladeshHuman Resources DevelopmentImplementation Completion ReportInternational Development AssociationKilometer(s)Land Acquisition Action PlanLabour Contracting SocietyLocal Government Engineering Department, BangladeshMeter(s)Management Capacity Strengthening Project, funded by the ADBMarket Managament CommitteeMobile Maintenance TeamMinistry of Local Government, Rural Development and Cooperatives, GoBMid Term ReviewNon-Government OrganiszationNon-motorized TransportOperational Directive of the BankPer annum

PAPPCPCDPIOpkmProject

RDPRHDRIMCRISSRMPRR1RR2RR3RRMIMP

RSDMSRTIPRUCSARSDRSDCSESEASEMESRRTFTktkmToRUPUS$VOC

Project Affected PersonPlanning Commission, GoBProject Concept DocumentProject Implementation Office of the LGEDPassenger-KilometerSecond Rural Roads and Markets Improvement and Maintenance ProjectRural Development ProjectRoads & Highways Department, BangladeshRural Infrastructure Maintenance Cell of the LGEDRural Infrastructure Strategy StudyRoad Maintenance Program, supported by CIDARural Road Type 1Rural Road Type 2Rural Road Type 3Rural Roads and Markets Improvement and Maintenance Project (Credit 1940)Road and Structure Database Management SystemRural Transport Improvement ProjectRoad Users' CommitteeStaff Appraisal Report of the BankSpecial Drawing RightsSwiss Agency for Development and CooperationSuperintending EngineerSectoral Environmental AssessmentSocio-Economic Monitoring and EvaluationStructure on Rural RoadTrust FundBangladesh TakaTonne-KilometerTerms of ReferenceUnion Parishad (Council)United States DollarVehicle Operating Cost

Vice President: Meiko NishimizuCountry Director: Frederick T. Temple

Sector Director:Sector Manager:

Vincent GouarneGuang Z. Chen

ICR Task Team Leader: Sujit Das

BANGLADESHSecond Rural Roads and Markets Improvement and Maintenance Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 45. Major Factors Affecting Implementation and Outcome 126. Sustainability 157. Bank and Borrower Performance 168. Lessons Learned 189. Partner Comments 2110. Additional Information 32Annex 1. Key Performance Indicators/Log Frame Matrix 33Annex 2. Project Costs and Financing 34Annex 3. Economic Costs and Benefits 36Annex 4. Bank Inputs 41Annex 5. Ratings for Achievement of Objectives/Outputs of Components 42Annex 6. Ratings of Bank and Borrower Performance 43Annex 7. List of Supporting Documents 44Annex 8. Socioeconomic Impact of Rural Roads 45

Project ID: P009518 Project Name: Second Rural Roads & Markets Improvement

Team Leader: K. M. Maqsoodul Mannan TL Unit: SASEIICR Type: Core ICR Report Date: January 10, 2003

1. Project Data

Name: Second Rural Roads & Markets Improvement L/C/TF Number: IDA-29270; IDA-29271; TF-20956

Country/Department: BANGLADESH Region: South Asia Regional Office

Sector/subsector: Roads & highways (89%); Agricultural marketing and trade (9%); Sub-national government administration (2%)

KEY DATESOriginal Revised/Actual

PCD: 11/30/1993 Effective: 02/06/1997Appraisal: 11/25/1995 MTR: 02/10/2000Approval: 12/19/1996 Closing: 03/31/2002 03/31/2003

Borrower/Implementing Agency: Government of Bangladesh (GoB)/Local Government Engineering Department (LGED)

Other Partners: Swiss Agency for Development and Cooperation (SDC)

STAFF Current At AppraisalVice President: Mieko Nishimizu Joseph WoodCountry Manager: Frederick Thomas Temple Mieko NishimizuSector Manager: Guang Z. Chen Marie RobinsonTeam Leader at ICR: K. M. Maqsoodul Mannan Thampil PankajICR Primary Author: Eddy Bynens; K. M. Maqsoodul

Mannan; Sujit Das

2. Principal Performance Ratings

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

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: S

Project at Risk at Any Time: NoThe Credit was first extended to June 30, 2002. It was subsequently extended to March 31, 2003, only to fund the consulting services for preparation of a follow-on project, the Rural Transport Improvement Project (RTIP). All other components of the Credit were closed on June 30, 2002.

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

3.1 Original Objective:

3.1.1 The overall project development objective of the Second Rural Roads and Markets Improvement and Maintenance Project (Project) was to help increase rural employment and incomes and reduce rural poverty by establishing an improved, sustainable rural transport and trading infrastructure. The specific project objectives were to:

(a) help remove physical bottlenecks, improve quality, and reduce costs in rural transport and marketing;(b) create employment and income-generating opportunities among the rural poor, and particularly for disadvantaged women;(c) promote participation of local communities and Non-Government Organizations (NGOs) in project activities; and(d) increase institutional capacity for efficient rural infrastructure management, including maintenance.

3.1.2 Continuing on the successful implementation of the first Rural Roads and Markets Improvement and Maintenance Project (RRMIMP, credit 1940), the development objectives of this Project were clear and relevant to the GoB’s development priorities and the World Bank (Bank)'s Country Assistance Strategy (CAS), both of which sought to remove rural infrastructure impediments to enhance agricultural productivity and increase rural incomes, and thereby reduce poverty. The 1995 CAS (and subsequent 2001 CAS) emphasized improving and maintaining physical infrastructure, as well as improving related services, which are critical for Bangladesh's international competitiveness of exports and the growth of agriculture and rural incomes. The CAS encouraged greater participation by local communities, increasing resource mobilization, adopting national standards, and strengthening local contractors. It also stressed labor-intensive growth, as part of special measures for poverty alleviation. The Project was designed in accordance with these CAS objectives.

3.2 Revised Objective:

After the devastating floods in 1998, a supplemental credit was approved in June 1999, with an additional objective to (e) facilitate rehabilitation of rural roads, markets, bridges and small jetties which had been damaged by the floods. Addition of this objective was consistent with the original objectives of the Project and with the CAS. The 1998 flood had caused major dislocations in people's lives, and the revival of the economy in part depended on the rehabilitation of the rural infrastructure network.

3.3 Original Components:

3.3.1 The original components of the Project were:

(i) improvement and upgrading of about 574 kilometers (km) of feeder roads type B (FRBs) in the project area (14 districts in the Northwest and Greater Dhaka areas), with small bridges, culverts and tree planting alongside the roads. It also included bridges and culverts on other FRBs not selected for full improvement, and road safety improvements;

(ii) establishment and implementation of a planned routine and periodic maintenance system for the LGED road network in the project area, covering all FRBs, important rural roads type 1 (RR1s), and structures on rural roads, for replication nationally in the following years;

(iii) construction of about 6,000 culverts and small bridges (about 31,600 meters (m) of drainage structures) on existing rural roads (mainly RR1 & rural road type 2, RR2), together with

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ancillary earthworks, in order to fill existing gaps on about 10,500 km of rural roads and make them passable year-round, and also correct drainage problems created by existing rural roads; this component was to particularly emphasize local participation, use of labor-intensive technologies, and employment of landless poor and disadvantaged women;

(iv) improvement of rural markets (i.e., raised and covered sales platforms, walkways, drainage, potable water supply, sanitation) in about 136 growth center markets (GCMs) in the project area, and improvement of about 14 Union Parishad (UP) center markets in the project area;

(v) rehabilitation/construction of 41 priority river jetties, or river ‘ghats’, in the project area, to improve landing/unloading facilities for country boats;

(vi) pilot program to improve safety and efficiency of non-motorized transport (NMT), particularly rickshaw vans and passenger rickshaws, which are extensively used in rural areas, with participation of appropriate NGOs;

(vii) supply of equipment for road construction and maintenance, of vehicles for supervision of works, and of office and training equipment;

(viii) institutional and human resources development for increasing and strengthening managerial and technical capacity of LGED, local government agencies, and the local construction industry, and support for a follow-on rural infrastructure project preparation; and

(ix) implementation support including technical assistance for the design, supervision, monitoring and evaluation of annual work programs, including support for financial and technical audits.

3.3.2 The project components were relevant and adequately designed to meet the development objectives of the Project. They were prepared taking into account the design and implementation lessons learned from the first RRMIMP and SDC-financed rural development projects (RDPs), as well as the recommendations of the joint Bank-GoB Rural Infrastructure Strategy Study (RISS) completed in 1995. The Project incorporated additional features, such as improving and integrating river transport with road transport, improving NMT, community and beneficiary participation in design and implementation, raising local resources, emphasis on drainage structures, emphasis on maintenance, and adoption of national standards for rural road construction and maintenance. In addition, the Project helped expand the coverage and scope of structures on rural roads (SRR) nation-wide. The Project placed a strong emphasis on institutional strengthening to particularly establish a sustainable maintenance system in LGED and strengthen the capacity of the staff to carry out adequate maintenance of the road network.

3.4 Revised Components:

Through the supplemental credit, a new component was added: (x) Flood Rehabilitation Works to rehabilitate about 1600 km of feeder roads, 5600 m of bridges and culverts, 70 markets and 3 ghats, damaged by the 1998 floods. In addition, a sub-component was added under component (ix): Implementation Support to provide technical assistance for design, supervision, monitoring of rehabilitation works of roads, bridges / culverts, markets and ghats damaged by 1998 floods in the project area. Addition of the component was appropriate.

3.5 Quality at Entry:

3.5.1 The quality at entry of the Project is rated as satisfactory for the following reasons. (i) The project objectives had clarity and consistency with the development priorities of the GoB and the CAS. (ii) The Project introduced a monitoring and evaluation system to monitor not only the output of the Project, but also its socioeconomic effects through a Socio Economic Monitoring and Evaluation (SEME) study and a short-term and longer-term socioeconomic impact study. (iii) The project risks were adequately assessed and addressed in the project design. (iv) The Project's readiness for implementation was high. Prior to the approval of the Project by the Bank's Board of Executive Directors, supervision consultant was appointed,

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some road works contracts were ready for award, procurement of construction equipment initiated, and preparation for land verification/acquisition started. (v) Finally, detailed economic and institutional capacity assessment was carried out during preparation.

3.5.2 Although a Sectoral Environmental Assessment (SEA) was prepared as part of project preparation, it did not recommend how the environmental management measures would be implemented. The Project did not formulate the required institutional mechanism and the processes for identifying and implementing the required environmental management measures.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

The overall objective of the Project to spur rural employment and incomes has been achieved, and its overall outcome is thus rated as satisfactory. A socioeconomic impact study carried out under the Project reveals that the improvement of roads had a considerable effect on rural growth and poverty reduction efforts. The impact study, carried out through a reputed domestic research institute, the Bangladesh Institute of Development Studies (BIDS), summarized in Annex 8 of this Implementation Completion Report (ICR), shows that labor force increased by nearly 13.3% in the project area versus only 9.1% in the control area. Similarly, the project areas showed a 3.1% increase on economic participation rate of the labor force, versus only 2.1% in control areas. More importantly, the bulk of the increase in employment came from increased female participation in the labor force: there was 50% increase in female employment in the project areas, but a decline in the control areas. The impact of roads on the distribution of food consumption was also found to be favorable with 1.5% annual growth in project villages compared to 0.1% in control villages. Similarly, per capita annual consumption growth in the study villages averaged 1.5% during the inter-survey period with growth in consumption expenditure being twice as high in the project roads area compared to other areas (2% versus 1%). The BIDS study also showed that poverty reduction was faster in project areas: the proportion of people below the poverty line decreased by 2% in project areas versus increase by 4% in control areas. The outcome/achievement of the specific objectives is presented below.

4.1.1 Help remove physical bottlenecks, improve quality, and reduce costs in rural transport and marketing: Achievement of this objective is highly satisfactory. Most of the physical targets of road infrastructure provision have been exceeded, especially the number of small bridges and culverts, and SRR on rural roads. The bituminous carpet (BC) has greatly improved the quality of the roads, which, together with the SRR improvements, has resulted in the high frequency of both motorized and non-motorized transportation. The SEME study, carried out through the Design, Supervision and Monitoring consultant (DSMC), shows that there is a decrease in transport costs (by 41% for passengers and by 32.9% for cargo) after the roads and structures improvements. The BIDS study indicates that the reduction in transport costs appear to have stimulated agricultural growth and the improvement of roads has raised the employment and income opportunities of transport operators in these areas.

4.1.2 Create employment and income-generating opportunities among the rural poor, and particularly for disadvantaged women: Achievement of this objective is highly satisfactory. In the project area, the construction and maintenance of roads, structures and markets have created both long-term and short-term employment and income generating opportunities among the rural poor in general and the destitute women in particular. A total of 78,000 person-years of employment have been created by the civil construction and maintenance, out of which 25% were female employment. About 5,700 maintenance crew members for both on-pavement and off-pavement maintenance are engaged round the

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year, of which 4,200 are destitute women. Moreover, as a result of the project’s initiative, 13,000 destitute women are also currently employed by the LGED, outside the project area, throughout the year, for off-pavement maintenance. In addition, due to the introduction of mobile maintenance by the Project and subsequent replication of the same in all non-project districts, about 6,600 maintenance laborers are now working for on-pavement maintenance throughout the year. In the GCMs, about 500 women have been provided with shops in the women’s corners. Moreover, the BIDS study shows that land-poor workers diversified their employment opportunities in non-agricultural activities, such as transport, trade and services.

4.1.3 Promote participation of local communities and NGOs in project activities: Achievement of this objective is satisfactory. Prior to this Project, local communities were not involved in the process of planning and implementation, while the implementing agency, LGED, being an engineering organization, did not have expertise in participatory process. The Project has promoted local participation in the design and implementation of rural infrastructure projects. The SRRs, comprising 42% of the actual cost of the original project, were selected using participatory process. The local bodies had put 10-20% of the structure costs up-front to signal their financial stake and ownership. The women's corners in the markets were set up in consultation with the women traders. Another benefit from this Project is the capacity development of the LGED to facilitate beneficiary participation in planning and implementation. However, participation of the stakeholders in operation and management of the markets and ghats was inadequate.

4.1.4 Increase institutional capacity for efficient rural infrastructure management, including maintenance: Achievement of this objective is satisfactory. LGED's permanent staff and project-funded staff managed the Project efficiently. The Rural Infrastructure Maintenance Cell (RIMC) in LGED has established a planned routine and periodic maintenance system for the feeder and rural roads network in the project area and in the whole country. Training programs for all LGED staff based on a needs assessment have helped in improving the institutional capacity of LGED.

4.1.5 Facilitate rehabilitation of rural roads, markets, bridges and small jetties which have been damaged by the devastating floods of 1998: Achievement of this objective is highly satisfactory. The restoration of feeder roads, markets, bridges, jetties, damaged by the 1998 flood, were completed on schedule.

4.2 Outputs by components:

4.2.1 Improvement of FRBs. Achievement of this component is rated highly satisfactory. The Project improved 606 km of FRBs (versus the initial target of 574 km) with substantially improved quality standards for BC. Tree planting alongside the roads was carried out on 327 km of roads (instead of 574 km), because tree planting was already carried out along some part of the selected roads. 2,600 m of bridges and culverts on project FRBs (versus 1,915 m, the Staff Appraisal Report, SAR, target) and 1,848 m of non-project FRB bridges and culvers (versus 1,750 m in the SAR) have been completed by June 2002. Road safety improvements have been included in the design of the feeder roads and structures, although more could be done in future projects to improve road safety through education of the road users.

4.2.2 Maintenance of Roads. Achievement of this component is rated satisfactory. Revised periodic maintenance target of 1,386 km of FRBs (appraisal length 747 km) and 403 m of structures (appraisal length 13,000 m) were successfully completed during the project period. In order to sustain and institutionalize the maintenance activities, RIMC has been established and it has implemented a planned routine and periodic maintenance system for the LGED road network in the project area. This system has subsequently been implemented in the whole country. The planning phase involves the thana engineers

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updating the data in the computerized Road and Structure Database Management System (RSDMS) and consultations with the local communities. For the routine on-pavement maintenance, the Project has developed Mobile Maintenance Teams (MMTs) manned by Labor Contracting Societies (LCSs) run by poor workers including women. This system was found to be successful in the project area, and then replicated all over the country. LGED, through the LCSs, have engaged destitute women for off-pavement maintenance. This has also been replicated country-wide.

4.2.2.1 The Project required that the LGED appoint qualified Maintenance Engineer in every district and thana (sub-district) by March 31, 1997. A Maintenance Engineer has been provided to every thana of the country, and the Assistant Engineer has been given the responsibility for maintenance at the district level. The position of Maintenance Engineer at the district level has been proposed in the new organogram of the LGED, awaiting approval by the GoB.

4.2.2.2 In terms of maintenance funding, the Project required the GoB to provide an annual budget allocation of at least US$ 21 million equivalent for Financial Year (FY) 1997-98 for rural roads maintenance, and, thereafter, increase the budget allocation annually by US$ 2.5 million equivalent, reaching US$ 31 million by FY 2001-02. However, actual allocations were only about US$ 22.3 million equivalent in FY 2001-02, about 28% less than the agreed amount. In addition, the Project required that, in the event of external funding for the Canadian International Development Agency (CIDA)-supported food-aid Road Maintenance Program (RMP) was reduced from the 1996-97 funding level, the GoB was to provide additional budget or obtain funds from other sources in an amount at least equivalent to the FY 1996-97 external funding. US$ 11 million funding for RMP in 1996-97 was reduced to US$ 3 million in 2001-02, but GOB did not make up the shortfall in RMP. The combined effect of the shortfall in intended GoB revenue budget contribution and reduced funding for RMP, substantially reduced the available maintenance budget. The shortfall in total maintenance funding in FY 2001-02 was about 22%; a total of about US$ 33.6 million was available as compared to the requirement estimated at about US$ 42.9 million. The provision for FY 2002-03 is however better due to increased allocation by the GoB (US$ 23.4 million) and substantial increased funding from food-aid programs (US$ 8.5 million). The total available fund is about US$ 37.4 million (including funding through RDPs), as compared to the requirement of about US$ 42.9 million, thus projecting a shortfall of about 13% in FY 2002-03.

4.2.3 Construction of Structures on Rural Roads (SRRs). Achievement of this component is rated highly satisfactory. The initial targets for construction of about 6,000 culverts and small bridges (about 31,600 m) were exceeded to about 46,500 m, and were carried out within the project timeframe. The drainage structures were built on existing rural roads (mainly RR1 & RR2) nationwide, together with ancillary earthworks, which filled existing gaps on 10,943 km of rural roads and made those passable year-round. These also corrected drainage problems created by the existing rural roads. This involved community participation in the selection of the structures and financial contribution by the local governments. Interest from local communities was very high, and an efficient implementation by the LGED allowed this component to be ahead of schedule. In view of the growing demand of the rural communities, local bodies and beneficiaries, and the benefits derived from the implementation of this component, the physical targets were increased.

4.2.4 Improvement of Rural Markets. Achievement of this component is rated satisfactory. The Project improved 137 GCMs (versus SAR target of 136) and 15 UP center markets (versus SAR target of 14). There were some initial delays (because of high community participation), but the Project was able to catch up during the later years and eventually finished the component within time and quality standards. The quality of the design and of the works was improved continuously (for example, systematic inclusion of latrines for men and women, inclusion of women’s corners with shops reserved for women, testing of

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wells for arsenic, effective supervision of the local contractors, etc).

4.2.4.1 While the construction phase was very successful, the operation and management of the markets still need improvement. The Project trained and assisted the Market Management Committees (MMCs) that supervise the markets and leaseholders in charge of toll collection, cleaning and guarding. However, the expected 40% increase in the lease value of the markets after improvement has not been achieved. Only 7.5% increase on average has been achieved. In most cases, the low increase or even decrease was due to collusion among the potential leaseholders that depress the bid price for the rights to collect tolls from the users. When this problem was detected, the Ministry of Local Government, Rural Development and Cooperatives (MoLGRDC) improved the market leasing procedures, and this had some impact. Further efforts are being made to improve the leasing and market management procedures. Satisfying the project covenant, the GoB maintained its reduced 25% share of the lease revenues earned from the markets, thus allowing more financial resources for the UPs.

4.2.5 Rehabilitation / Construction of River Jetties (Ghats). Achievement of this component is rated satisfactory. Following consultations with the community and considering hydrological factors, the number of ‘ghats’ was reduced to 35 from a target of 41 in the SAR. The revised target has been achieved. It is however difficult to estimate the socioeconomic impact of this component, even though the benefits of improving river transport facilities are considered high.

4.2.6 NMT Pilot Program. Achievement of this component is rated unsatisfactory. This component was supposed to improve safety and efficiency of NMT, particularly rickshaw vans and passenger rickshaws, with the participation of appropriate NGOs. The NGO in-charge of the first phase was successful in designing and producing an improved passenger rickshaw with the participation of the users. 85 improved rickshaws were produced. The improved rickshaws were judged comfortable by the users and pullers. However, popularization / marketing of the improved rickshaws through two NGOs during the second phase was not successful. Both NGOs are being brought to the court by the LGED for non-execution of the contracts. The reasons for failure of this component are: (i) the implementation of the component was not well defined in the project design and the SAR; (ii) the Terms of Reference (ToR) for the NGOs did not clarify the situation; (iii) the selection procedures of the NGOs yielded unfortunate results (commercially minded NGOs got selected rather than NGOs interested and involved in the NMT sector); (iv) insufficient attention by the LGED officials for this small but complex component; and (v) supervision by the Bank (funded 14% of the component) and the SDC (funded 86%) was not adequate. However, a very large number of passenger rickshaws having close resemblance to the new design developed under the Project, have been found plying in the roads of New Delhi. It is reported that the passengers prefer to ride the new design rickshaws compared to the old design ones, because of increased comfort and safety.

4.2.7 Supply of Equipment. Achievement of this component is rated satisfactory. The procurement included: (i) road construction and maintenance equipment for leasing to the contractors; (ii) supervision vehicles for LGED and consultant's staff; (iii) equipment for five LGED district laboratories; and (iv) training equipment. Availability of lease equipment was a major factor in encouraging very small contractors in participating in the Project, specially in construction of SRRs. The Project required the GoB to increase the road construction equipment hire charges to cover the maintenance and replacement costs and to provide LGED with sufficient funds to maintain and replace equipment (equivalent to the hire charges collected by the GoB). The hire charges have been increased by the LGED and the Roads and Highways Department (RHD) in a coordinated way, but not enough to cover the maintenance and replacement costs. Funding by the GoB to the LGED for maintenance and replacement of equipment is also inadequate.

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4.2.8 Institutional and Human Resources Development. Achievement of this component is rated satisfactory. This component comprised several sub-components, including capacity building, policy support, promotion of private sector, and preparation of follow-on project.

4.2.8.1 Training: The Project Implementation Office (PIO) of the LGED, in coordination with the Central Training Unit (CTU) of the LGED, provided inputs and resources for conducting various types of training for the LGED staff, contractors and local authorities within the project area. During the project period, a total of 53 training courses, workshops and seminars were organized. A total of 9,036 participants received training during this period, including 17 LGED engineers who received overseas training. Recently, with the initiative of the PIO, CTU carried out a pilot study on effectiveness of the training program. The results of the study show that the training program has contributed to ensuring the quality of different project components as well as to build up the LGED's capacity and update the skills of its staff. The most difficult task for the LGED was to find out committed officers to take the responsibility of training. A systematic training monitoring system is yet to be introduced within the LGED.

4.2.8.2 Staffing: LGED provided additional staff (funded under the Project) to allow for an efficient implementation of the Project. The Project required the GoB to turn seven of the incremental high level staff positions into regular revenue positions by FY 2000-01. Accordingly, two positions (Additional Chief Engineer and Superintending Engineer (SE) Design) were turned into revenue positions in 1998, and other five positions (Transport Economist, two Assistant Engineers Design, Monitoring & Evaluation Expert, and Sociologist) have been included as permanent positions in the revised organogram awaiting approval of the GoB. The Project also required the GoB to implement the recommendations of the 1995 study carried out under the Management Capacity Strengthening Project (MANCAPS), which recommended reduction in control span of the LGED Chief Engineer by creating about six regional offices by March 31, 1997. Ten regional offices, each headed by a SE, have been created by the LGED, under project budgets. The proposal for converting these to permanent regional offices has been vetted by the MoLGRDC, and is awaiting approval from the Ministry of Establishment.

4.2.8.3 Studies: The project design included studies on (i) Long-term Socio-economic Impacts of the Rural Infrastructure Investment in the project area, (ii) Small Scale Contracting Industry, (iii) Pavement Behavior, (iv) Road Construction Contractor Unit Costs, (v) Regional Prioritization for FRBs, rural roads and markets, and (vi) Local Resources Mobilization with special emphasis on UPs. Study at (i) was to be carried out in three phases: benchmark survey, short-term impacts, and longer-term impacts. First two phases have been carried out, through the BIDS. The findings have been summarized in Annex 8. The survey for the third phase is planned to be undertaken from May 2003. As planned, Study on Long-term Socio-economic Impacts of first RRMIMP has also been completed, through the BIDS. The study at (iii) on pavement behaviors was not undertaken. Additionally, SDC carried out (i) Monitoring of Effectiveness of Training, (ii) Study on Market Management under the Project, and (iii) Study on Road Maintenance Management under the Project. All the above studies have been useful in assessing the socio-economic impacts and in formulating various important recommendations for implementation.

4.2.8.4 The Project required the GoB to establish by March 31, 1997, under MoLGRDC, a Working Committee to promote private sector participation in infrastructure sector. This committee has been established in 2001, and had one meeting till date. It is too early to evaluate its impact. Under this component, LGED has appointed a consultant for preparation of a follow-on RTIP. The RTIP is under preparation currently.

4.2.9 Implementation Support. Achievement of this component is rated satisfactory. A major

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consultancy contract was awarded for providing implementation support including technical assistance for design, supervision and monitoring of works under the Project. This component also included support for financial and technical audits. The findings of the audits were implemented.

4.2.10 Flood Damage Rehabilitation. Achievement of this additional component is rated satisfactory. The GoB did not wait for the Bank's supplemental credit, and carried out substantial rehabilitation works with other funds. Therefore, the initial targets under the credit (1600 km of roads, 5600 m of structures, 70 markets, 3 ghats) were found to be overestimated, and substantial savings were made. The flood in 2000 caused further damages to the roads and structures in the project areas. It was agreed between the GoB and the Bank to utilize the savings for rehabilitation of roads and structures damaged by the 2000 flood. Finally, the targets were revised to 915 km of feeder roads and 2,872 m of structures, covering the damages both of 1998 flood and of 2000 flood. The revised targets were achieved.

4.3 Net Present Value/Economic rate of return:

4.3.1 For selected 13 roads, detailed surveys - traffic volume, traffic mix, passenger fare and freight charges - were carried out. The combined Economic Rate of Return (ERR) for these roads is 56.51% as compared to 40.08% at appraisal. Similarly, the ERR for SRRs varied from 20.48% to 56.55% and compares with the typical ERR of 30.2% at appraisal. A detailed write up on economic costs and benefits is presented in Annex 3.

4.3.2 Study for the 20 markets improved under the Project shows that the average value of annual turnover increased by 26.5%, attendance increased by 33.33%, toll revenue increased by 28.6%, lease value increased by 7.5%, and the price of perishable items declined by 14.2%, between 1997-98 (before improvement) and 2000-01 (after improvement). Overall ERR for 5 markets selected for economic evaluation is 35% compared to 20.2% estimated at appraisal. Detailed data collected on 5 ghats improved during the project period showed a marked increase in the productivity of cargo handling of 300% and improvement in safety, measured as losses suffered during transfer of cargo to land from boat (output loss/tonne throughput) reduced by 99.2%.

4.4 Financial rate of return:

Not applicable.

4.5 Institutional development impact:

Institutional impact of this Project is substantial. Some achievements under the institutional development component of the Project are described under section 4.2.8 hereinbefore. The Project has made notable impacts in terms of increased capacity within the LGED to plan, manage and implement rural infrastructure, and to maintain the road network. The Project contributed to the improvement of the LGED organization structure by helping LGED implement the main recommendations of the MANCAPS. Improvements include: (i) creation of high level positions to decrease the span of control; (ii) development of design capacity; and (iii) inclusion of non-engineering fields such as economics, sociology and monitoring and evaluation in LGED staffing capacity. The Project also helped LGED to improve its capacity within the RIMC to plan and implement road maintenance country-wide. The GoB increased the maintenance spending for feeder and rural roads (although not up to the target set in the Project). The Project introduced 'mobile maintenance' successfully, and this is currently being expanded country-wide. During the project period, RIMC prepared 'Guidelines for Maintenance of Rural Roads and Culverts' for country-wide use, and it also started preparing Annual Maintenance Reports for the whole rural infrastructure in the country. Compared to the earlier project first RRMIMP, inclusion of the Dhaka region

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in the Project led to development of the contracting industry, availability of more construction equipment, and more trained staff, in the region. The Project helped in developing skills in LGED in participatory process, currently being used country-wide. Under the Project, the thana storekeepers were converted to community organizers through training, and this has been replicated nation-wide. The Project prepared standard technical specifications for the road and bridge works, and helped in adoption of the same country-wide. Also, standard bidding documents have been prepared based on the experience of the Project, and these documents are expected to be introduced nation-wide shortly.

4.6 Environmental Management:

4.6.1 The Project had several environmentally beneficial aspects, and the overall performance was good. The improved roads had reduced erosion of the embankments in most of the places. The structures constructed on the roads, overall, reduced possible flood damage at places, obliterated the potential damage to channel-beds by building causeways and temporary earthen structures, and had good health and hygiene impacts. The GCMs, generally, improved the muddy floor conditions, introduced better community sanitation; and the jetties reduced the damage to the flood embankments due to anchoring of boats. Potable water was provided in the markets; the tube-wells were systematically tested for arsenic contamination. In 7 of 100 cases, arsenic contamination was found, and alternative sources of potable water were arranged in those markets. The significant environmental achievement through the Project had been 327 km plantation along the roads. The trees survived well, and there were replacement plantations, where necessary.

4.6.2 An SEA was prepared as part of the project preparation, which in itself was an improvement over the previous project. The SEA did not predict any adverse impact on physical or ecological environment. Positive environmental interventions were predicted. The Project proposed to ensure drainage, slope stability and erosion protection measures. The SEA, however, did not recommend how the environmental management measures would be implemented.

4.6.3 The institutional framework for implementing the environment management actions in the Project was inadequate; the participatory planning and design was weak in managing environmental issues; and there was absence of requisite supervision and monitoring. This resulted in cases of site-specific negative impacts and mixed experience in implementing a few other intended mitigation/management measures. The roads continue to have deficiencies in terms of cross-drainage. The embankments and the shoulders have already been eroded wherever close to significant water bodies, and the required erosion protection measures were not implemented at some places (although turfing on non-critical stretches has survived well). The markets were to be designed as free-draining areas, but due to inadequate planning and maintenance of drainage system, some of the markets still have local waterlogging. No provision of wastewater treatment was made in any market or ghat, and the wastes flow directly into nearby water bodies. In some markets, the disposal of solid waste (including slaughterhouse wastes) and wastewater has created hazards in the surrounding areas; the community toilets are ill maintained, and in a few cases, the effluent is directly flowing into the river. Nevertheless, there have been significant improvement in the environmental surrounding of the markets compared to the condition prior to the Project. Overall, the Project could have fared better had there been better preparation and supervision.

4.7 Land Acquisition and Resettlement:

4.7.1 This was the first LGED project to use the Bank’s Operational Directive (OD) 4.30 on Involuntary Resettlement. The Project implemented a Land Acquisition Action Plan (LAAP), which was prepared according to the OD 4.30. The total amount of land acquired was nearly 161 hectares, which affected 15,195 landowners. On average, the loss per landowner was 0.01 ha, which was a small proportion of their landholdings. There was no displacement from homesteads. Assistance were provided to a very small

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number of sparsely located small shops (mostly movable units and run by households living by the roads) to relocate close to their homes and known clientele.

4.7.2 To legalize the acquisitions under the present land administration system, lands were acquired by using the existing land acquisition law of the country. However, the eligibility criteria used for compensation and the policies thereof were formulated according to the requirements of OD 4.30. The legal acquisition process, which is extremely time-consuming and cumbersome, often caused delays in payment of the compensation and continuity in the execution of the civil works. The acquisition process was made much more complicated by several unforeseen issues associated with small-scale strip acquisition and compensation process for a large number of works dispersed over a large number of districts or land administration/acquisition units.

4.7.3 This is the first project in Bangladesh which used no NGO services for implementation of the resettlement activities. The LGED used a number of sociologists and community organizers who worked along with the LGED engineers at the district and community levels. By July 31, 2002, compensation / entitlements were cleared for more than 93% of the project affected persons (PAPs). The key reason for pending payments to the remaining PAPs, as the LGED informed the Bank, is that the compensation amounts are too small to cover the time and costs to be spent to collect those as well as the costs of updating the legal documents and clearing the arrear taxes on the acquired land. The fund for compensation to these PAPs will remain with the Deputy Commissioners at the district level, who acquire the lands under the law.

4.7.4 Although LGED’s overall performance with implementation improved considerably over time, information management remained consistently inadequate with regard to detailing the losses suffered by the PAPs. In addition, lack of full knowledge about the actual site conditions, ownership of the existing roads and their physical conditions, and about the ownership of the abutting land, resulted in wastage of time, as acquisition proposals were to be revised in the advanced stage of the acquisition process.

4.8 Procurement:

4.8.1 Staff with considerable past experience, gained under several donor assisted projects, were engaged to handle procurement of works and goods, with assistance provided by the DSMC for preparation of bidding documents and bid evaluation. Total number of contracts were 8,496 for works and 89 for goods. LGED's handling of the vast number of contracts, with the assistance provided by the DSMC, is commendable. Apart from administrative deviances for some contracts, the performance of the LGED in execution of procurement is satisfactory. Procurement for SRRs was handled at the district / thana level. Most of the district / thana engineers had no procurement training and were not familiar with the procurement for Bank-financed works. In addition, the situation was further complicated by the political or other non-economic influences exerted by the local UPs / miscreants in not allowing interested bidders to submit bids. This was addressed by arranging submission of bids at two locations, with the concurrence of the Bank. However, such arrangement needs to be reviewed before applying for any other Bank-financed project. In view of very large number of contracts, deviance in procurement process occurred in some cases.

4.8.2 An independent post review of 75 works and goods contracts in 6 districts, was conducted through a local Chartered Accountants firm. The main findings of the review were: (i) approved bidding documents appeared to have been used but some deficiencies were identified in respect of some contract packages; common deficiencies were allowance of short period for sale of bidding documents, award of contracts beyond original bid validity, non-submission of performance security as required by the bid document; (ii)

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non-availability of important documents in some packages/contracts; common missing documents were dates and minutes of pre-bid conference, and copies of Statement of Expenses and withdrawal applications; (iii) estimated cost was found fair and accurate as compared to quoted price; (iv) two contracts appeared to be collusive and not transparent; (v) payments were approved by authorized persons; and (vi) record system was not found uniform for similar projects. However, the comment about collusive bidding was not conclusive as it had appeared from the Bank's review of the borrower's response and associated documents.

4.9 Financial Management:

During the project implementation, financial management system was satisfactory except for the slow pace of settlement of financial audit observations. The Bank received all the audit reports timely during the project period. LGED responded timely on material audit observations that required clarification from the Bank's perspective. The Bank received in June 2002, a time bound action plan to resolve outstanding audit observations. A tripartite meeting involving Foreign Aided Project Audit Directorate, MoLGRDC and LGED, was held, in line with the action plan, to resolve audit observations relating to government policy and procedure, for FY 1995-96 and 1996-97. A series of tripartite meetings are planned as per the action plan, for the resolution of the remaining observations pertaining to FY 1997-98, 1998-99 and 1999-2000.

4.10 Other Sectoral and Institutional Issues:

4.10.1 Road Classification: The Project required the GoB to finalize re-classification of the roads in consultation with the Bank. A study was completed on the subject, and LGED and the RHD have submitted their respective proposals to the Planning Commission (PC). The Bank has also communicated its recommendations on several occasions. The PC has formed a sub-committee to look into the matter, and make final recommendations. However, the final decision has not been made yet in this regard.

4.10.2 UP's Financial Resources Mobilization: The Project required the GoB to implement a plan of action by December 31, 1998, following a study. The study was completed, and the recommendations are awaiting endorsement by the MoLGRDC prior to implementation. The GoB did not decrease the 50% allocation to the UPs of revenues earned from the land transfer tax, satisfying the project covenant.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

The Project suffered from natural disasters such as the 1998 and 2000 floods. The implementation of the project works was interrupted due to submersion, inaccessibility to the sites and the damages to the works under implementation. The subsequent flood damage rehabilitation works increased the workload under the Project. However, efficient management by LGED helped prevent delays in completing the Project.

5.2 Factors generally subject to government control:

GOB's compliance with some project covenants (such as maintenance funding, road re-classification, staffing with revenue budget, etc.) were achieved or partially achieved, often with much delays than the agreed dates in the Development Credit Agreement (DCA). The arrangements for management of markets and ghats are not fully satisfactory. There were inordinate delays in land acquisition, implemented through the district authorities. There was also some delays in awarding the contract to the project preparation consultant for the follow-on project RTIP, leading to the extension of the

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credit closing date. The delay was because of slow decision making by the caretaker government prior to the general elections in 2001. However, the above factors did not have any significant impact on the project outcomes.

5.3 Factors generally subject to implementing agency control:

Overall, there were almost no factors under the control of the LGED that affected in a negative way the achievement of the project outcomes. LGED usually took quick action to correct any factor that occurred even at levels normally beyond its control. LGED also handled the procurement more efficiently as compared to first RRMIMP. However, the training program of the Project was affected because the LGED could not provide motivated staff to manage the training program for the Project.

5.4 Costs and financing:

5.4.1 The original Credit approved in 1996 was for Special Drawing Rights (SDR) 91.2 million (US$ 133.00 million equivalent at appraisal). However, because of depreciation of SDR against US$, the US$ equivalent available under the original Credit reduced to about US$121.32 million at project closing. The Supplemental Credit for rehabilitation of infrastructure damaged by the 1998 floods was for SDR 14.74 million (US$ 20.00 million equivalent originally, reduced similarly to about US$ 19.43 million). SDC's total financing commitment (including the supplemental) was for Swiss Franc 19.45 million (US$ 15.12 million equivalent). Again, the available US$ amount from SDC reduced to about US$ 12.68 million equivalent because of exchange rate fluctuations. As of December 24, 2002, the net disbursement from the IDA was US$ 139.83 million out of available IDA credit of US$ 140.75 million. The disbursement from the SDC has been US$ 12.43 million, out of available about US$ 12.68 million. The fund flow from the GoB was adequate, and had no adverse impact on project implementation.

5.4.2 The latest estimate of the cost of the original Project is US$ 171.66 million, which is about 89% of the appraisal estimate US$ 192.36 million. This is because: (i) actual cost of various components (except the SRR component) was below the appraisal estimates, and (ii) lower inflation of US$ compared to what was assumed at appraisal, thus requiring less price contingencies. Even though the scope of SRR component was increased from 31,600 m to 46,500 m, additional expenditures were easily met from the savings accrued from other components; and the Project succeeded in completing all its components within the total cost estimate and the reduced US$ amount under the Credit. However, in local currency (Taka) terms, the actual cost of the original Project is about Tk 9,031 million, which is about 108% of the appraisal estimate Tk 8,343 million including price contingencies. The increase in cost in Taka is mainly due to increase in the scope of SRR component. The cost of supplemental project however remained about the same as compared to the estimates made at approval. Component-wise scope of works and cost estimates both in US$ and in Taka, both at appraisal as well as actual, are shown in the table below. It may be noted that the actual cost in Taka for various components is closer to the appraisal estimates, as compared to the actual costs in US$ which are much lower than the appraisal estimates. This variation is due to very low inflation of US$ during the project period and high depreciation of Taka compared to US$.

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Project Cost by ComponentAppraisal Estimate Actual CostS. No. Component

Quantity US$ million

Tk. million

Quantity US$ million

Tk. million

1. Improvement and Upgrading of FRBs

574 km roads3665 m of structures574 km tree planting

70.10 2984.8 606 km roads4448 m of structures327 km tree planting

54.14 2794.7

2. Maintenance of Roads 747 km roads13000 m of structures

13.10 548.1 1386 km roads403 m of structures

8.75 468.4

3. Construction of Drainage Structures on Rural Roads (SRR)

31600 m 64.14 2805.5 46500 m 71.87 3845.0

4. Improvement of Rural Markets 150 nos. 12.90 544.5 152 nos. 10.25 548.85. Rehabilitation / Construction of

River Jetties41 nos 2.40 101.9 35 nos. 1.93 103.5

6. Pilot Program to Improve Non-Motorized Transport (NMT)

1.05 48.9 0.30 15.9

7. Supply of Equipment 8.55 370.1 6.01 307.88. Institutional and Human Resources

Development3.92 179.8 3.51 147.6

9. Implementation Support 16.19 759.7 14.90 799.210. Flood Damage Rehabilitation Works 1600 km

roads5600 m of structures70 markets3 jetties (ghats)

25.00 NA* 915 km roads2872 m of structures

24.15 1292.0

11. Implementation Support for Flood Damage Rehabilitation Works

0.60 NA* 0.60 29.3

Total Cost 217.95 196.41 10352.2*Data not available

5.4.3 The actual cost in Taka for 'Improvement and Upgrading of FRBs' is about 94% of the appraisal estimate, in spite of substantial increased road length (106%) and number of structures (121%) and much higher price escalation (although tree planting was 57%). This is because the earthworks estimated at appraisal were not required under the Project, but carried out under 'food for work' program. The actual cost in US$ is about 77% of the appraisal estimate, because of lower cost due to no earthworks as well as very low inflation of the US$. The actual cost for 'Maintenance of Roads' in Taka is about 85% and in US$ is about 67% of the respective appraisal estimate, in spite of 86% increase in road length. During implementation, only patch repairs and thin seal coat were provided for maintenance (with the Bank supervision team's concurrence), whereas the appraisal estimates were based on thicker pavement layer. In addition, much less number of structures had to be actually repaired compared to high number assumed at appraisal.

5.4.4 In case of 'Construction of Drainage SRR', the length increased by 47%, whereas the cost increased by 37% in Taka and by 12% in US$. The average cost per unit length reduced substantially,

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because simple pipe culverts and small box culverts were mostly taken up for which the foundation costs were low as compared to higher costs assumed at appraisal. The actual cost in Taka for 152 'Markets' was practically the same as the appraisal estimate for 150 markets. This was because some markets were built smaller than what originally envisaged either because of less need or less land availability, thus reducing the cost.

5.4.5 For the 'Supply of Equipment' component, the actual cost in Taka is 83% and in US$ is 70% of the respective appraisal estimate. The reduced cost was due to (i) reduction in number of high-value equipment procured, (ii) dropping some less important equipment, and (iii) lower rates quoted by the Chinese supplier. In case of 'Implementation Support' component, which mainly comprises the DSMC's services, the actual cost in US$ is less due to very low inflation of US$ compared to what assumed at appraisal. In case of additional component 'Flood Damage Rehabilitation Works', the cost in US$ has been practically same as at approval, in spite of much reduced length and number of works, because the extent and severity of damages were much more than the estimate.

6. Sustainability

6.1 Rationale for sustainability rating:

6.1.1 The Project’s sustainability is considered likely, because of the quality of the works implemented, the improved road maintenance funding, increased institutional capacity, and the community participation resulting in stronger stakeholder ownership. The Project has enhanced the capacity of LGED to plan, finance and implement roads, structures, markets, ghats rehabilitation and maintenance. The improvement of the road maintenance capacity in LGED ensures that the benefits will continue to accrue to the beneficiaries. The RIMC has made considerable progress in establishing the framework for road maintenance by setting up a road inventory database, introducing national maintenance guidelines, and establishing a training program. The ongoing use and promotion of labor-intensive technology for maintenance with appropriate hand-tools would make infrastructure maintenance affordable and would enhance sustainability. Moreover, the GoB continues to show a strong commitment in planning and implementation of rural infrastructure maintenance program, and LGED has deployed the necessary staff to oversee maintenance activities at the district and thana levels. However, although the GOB has increased maintenance funding, it has not been able to allocate the full fund required for appropriate maintenance of the rural roads. This aspect will require continued attention of the GoB.

6.1.2 Each MMC is expected to have adequate funds for operation and maintenance of respective market, out of the money to be earned by leasing out the market for tolling from the sellers. The training of the MMC members would also help in further sustainability. The operation and performance of the MMCs should be monitored, and further improvements should be made in the market management system, in order to make it a more efficient and transparent system.

6.1.3 Sustainability of the institutional impacts of the Project has been strengthened by demonstrated success of improved contracting, consulting and maintenance management procedures. The analyses and findings of the socio-economic impact studies show the positive impacts of rural transport infrastructure development on various outcomes. The formulation of a follow-on project is an additional factor ensuring sustainability of the project outcomes. It should take care of a few areas needing improvement, such as, sustainable funding for rural roads maintenance, improving institutional capacity at the local government level including increasing their financial resources, improving management of markets and ghats, and road safety.

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6.2 Transition arrangement to regular operations:

6.2.1 The assets created and/or improved under the Project would continue to remain under the overall management of the LGED. Routine, periodic and emergency maintenance of roads and bridges/culverts will continue following the LGED's maintenance guidelines. Maintenance will constitute both on-pavement and off-pavement maintenance. The on-pavement routine maintenance will be carried out by the MMTs based at district level, and the off-pavement maintenance for roads will be carried out through destitute women labours forming LCS. A computerized RSDMS has been established at district level as well as at the RIMC at LGED headquarter. The thana engineers update the data periodically. The annual periodic maintenance program will be developed by applying established system based on RSDMS data, including consultation with the public representatives, local people, and road users committee. Periodic maintenance of roads is usually carried out through contractors, at an interval of 3 to 5 years.

6.2.2 Operation and maintenance of the markets will be carried out following the market management guidelines issued by the MoLGRDC. Two committees, Union Hat-Bazar Management Committee (headed by the UP Chairman) and the Upazila Hat-Bazar Management Committee (headed by the Upazila/Thana Nirbahi Officer), are currently involved in operation and maintenance of the markets. The guidelines have been revised recently, which incorporates several changes including formation of MMC for each market. All the markets are leased out annually. The lessee raises toll from the sellers at specified rates. 25% of the lease money earned is earmarked for maintenance and improvement of respective market. The GoB is considering the ghats constructed under the Project, as integral part of the adjoining markets. Therefore, management, operation and maintenance of the ghats will be part of the market management system and will be looked after by the respective MMC.

6.2.3 LGED has an established system for operation and maintenance of construction equipment, which will be followed for the equipment procured under the Project. Repair and maintenance of the equipment and vehicles are done through a separate budget allocation.

7. Bank and Borrower Performance

Bank7.1 Lending:

The Bank’s performance in identifying, preparing and appraising the Project was satisfactory. The project preparation was undertaken during the later years of the earlier project first RRMIMP, under close supervision of the Bank and SDC. The Bank team gave due consideration to the recommendations of the RISS, worked closely with the LGED team, and made a positive contribution in preparing the Project. It consulted the PC and the MoLGRDC as required, and brought them into confidence on various issues. The Bank appraisal resulted in a comprehensive project with nine components taking into account the GoB's strategies and the CAS. The Bank team gave due attention to the land acquisition issues, gender issues, and participation process. However, the Bank's performance on preparation for environmental safeguard was relatively weak. No environmental specialist took part in preparation and project appraisal.

7.2 Supervision:

7.2.1 The Bank's performance on supervision was satisfactory. The Bank conducted nine supervision missions, mostly jointly with the co-financier SDC. During the project implementation, three different staff were responsible for leading the Bank's task team. After the Mid Term Review in February 2000, the third leader took over, and the formal supervision mission was carried out once only in a year. However, close monitoring and supervision was provided by the task team leader from the Bank's country office during this

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period. Taking into account the borrower's institutional capabilities and needs, the Bank team assisted the GoB and LGED in solving implementation problems, decision making, getting better quality of works, and responding positively and timely to the needs that arose during implementation. It agreed to change (mostly, increase) in the scope of the activities wherever considered appropriate. The Bank closely monitored compliance of OD 4.30 for land acquisition and resettlement, through routine monitoring and formal supervision. All issues related to timeliness of land acquisition and compensation payment were brought to the borrower’s attention. Considering the moderate impact on the PAPs, the Bank accepted unavoidable delays in compensation payment.

7.2.2 However, no environmental specialist participated in Bank supervision missions. The Aide Memoires included environment management aspect but did not make any specific recommendation for improved environmental management. Supervision of the NMT pilot program component was not satisfactory. The Bank's supervision on socio-economic studies have been also inadequate.

7.3 Overall Bank performance:

The Bank’s overall performance is rated as satisfactory.

Borrower7.4 Preparation:

The Borrower’s performance in preparation of the Project is rated satisfactory. LGED prepared the Project with close partnership with the Bank, the SDC and the project preparation consultant. LGED prepared the Project, drawing lessons from several other RDPs undertaken with various partners and replicating successful experiences. The preparation of the Project was supervised by a committee comprising senior officials of the LGED and representatives from the project preparation consultant and the PC. The LGED team in-charge of implementation of the earlier project first RRMIMP, was in charge of preparation of this Project, which helped in satisfactory preparation.

7.5 Government implementation performance:

The GoB’s implementation performance is rated as satisfactory. The MoLGRDC considered the Project as one of the priority projects, and generally helped LGED in implementation. Counterpart funds were made available on time. The GoB also provided necessary funds for the project activities which started prior to the project approval by the Bank. The GoB generally took action on those brought to its attention by the Bank supervision missions. However, most of the legal covenants were only partially met or in advance stage of completion.

7.6 Implementing Agency:

7.6.1 LGED's performance is rated as highly satisfactory. Management of the Project has been quite dynamic, which was supported by competent field staff. Implementation problems were identified, assessed, and appropriate actions were initiated. LGED carried out technical audits on a regular basis, and the recommendations thereof were implemented. In addition, LGED carried out SEME study and socio-economic impact studies, to assess the Project's impacts and effectiveness. Compared to the experience in first RRMIMP, LGED handled the complex issue like land acquisition in a more competent way. LGED also managed to succeed to a great extent in the new areas like ghat improvement and community participation. Qualified staff, targeted staff training, and efficient management, enabled the LGED to gradually improve the technical quality, procurement management, and minimize implementation delays. Financial management issues were given due consideration during implementation, and the capacity

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in financial management developed under the Project can be further utilized in LGED.

7.6.2 While LGED kept the transfer of staff at headquarter and in the field to a minimum, there were cases of frequent transfer of Executive Engineers in a couple of districts (out of 14 districts), which affected smooth implementation in such districts. There was inadequate monitoring with regard to environmental management. Although LGED’s overall performance with implementation of land acquisition and resettlement improved considerably over time, information management remained inadequate.

7.7 Overall Borrower performance:

The Borrower’s overall performance is rated as satisfactory.

8. Lessons Learned

8.1 Road Maintenance Funding and Sustainability: Due to expansion of the road network, the maintenance needs have grown by 15% yearly and the shortfall is increasing. In order to make sufficient means available for maintenance, the Bank should explore with the GoB additional means of funding of maintenance such as establishment of a Road Fund using solutions inspired by those tested in other countries such as imposing supplementary levy on fuels, motor spares, registration fees of motor vehicles, etc. The GoB should make an urgent decision to increase the budget allocation by the amount of the shortfall, and in the following years increase funding according to the needs. The responsibilities of rural roads (RR2s and rural roads type 3, RR3s) should be vested to the local bodies for proper coordination and implementation. There also has to be a clear GoB decision on the classification and responsibility for feeder roads between LGED and RHD.

8.2 Preparation of follow-on Project: Large-scale projects such as this need a long time for preparation. The fact that the Project is a follow-on project of a successful project, does not reduce the time required for project preparation. The project preparation (until effectiveness) took more than three years. The advantage of the long preparation period was that the Project was well prepared and the DSMC was hired before the project start. This allowed the Project to be on schedule from the beginning. For the follow-on project, (i) the design consultant should be appointed at least a year or more earlier than the project start or the project preparation consultant should carry out a part of the designs and procurement assistance, so that the implementation can start with the project start, allowing time required for land acquisition and implementation of resettlement action plan for the first year works, (ii) the implementing agency's earlier project team should preferably continue for preparation and implementation of the follow-on project, and (iii) land acquisition process should be started much earlier than the project start.

8.3 Improving institutional capacity and financial resources at the local government level: The role of local governments has become increasingly important in managing rural infrastructure. However, their institutional capacity is very low and important efforts should be made to improve the capacity of the local government officials (elected and employed). Training is required for local government staff in planning, budgeting, funding and executing routine and periodic maintenance of roads and structures.

8.3.1 The increasing responsibilities of the local governments are not matched by the resources available to them. To ensure sustainability of rural infrastructure maintenance, it is critical to strengthen the financial status of the local bodies and to make those accountable for maintenance success. Local governments have not always collected local taxes to avoid unpopularity. Funding agencies for RDPs and the GoB should insist on good management. Use of the matching fund concept could provide an incentive to local

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governments to improve tax collection.

8.4 Execution of Pilot Program and NMT: Although the first phase comprising improvement of safety and design of rickshaws was successfully carried out, the wider use of this improved NMT did not materialize due to lack of effective participation, dissemination of information, political commitment and ownership. In future, adequate steps should be taken from the outset for (i) involvement of all stakeholders; (ii) effective information campaign; (iii) building a sense of ownership and commitment of the borrower in launching the program; and (iv) selection of reputable NGO/organization having proven track record in satisfactory implementation of this kind of activities.

8.5 Procurement: The total number of contracts undertaken under the Project was overwhelmingly large. Procurement for SRRs was handled at the district and thana levels, where most of the engineers had no procurement training and were not familiar with procurement of works under Bank financing. Involvement of such large number of staff in procurement resulted in deviance in procurement process in some cases. In future projects, the number of contracts should be substantially reduced by packaging a few works in nearby areas into a contract. In addition, appropriate familiarization and training on procurement process for Bank-funded works need to be provided to the staff involved in procurement prior to their involvement in the procurement process. Provision should be made to receive bids in the LGED district offices for higher value packages (say, costing more than Tk 5,000,000) in order to avoid local pressure group / collusive bidding and to encourage adequate competition. Currently, the LGED has to obtain approvals from the GoB for all decisions relating to the consulting services exceeding Tk 7.5 million, which delays the process. It is suggested that this limit be upwardly revised to facilitate faster decision making. Similarly, the GoB may consider to raise the limit for the Chief Engineer's approval for works from the present Tk 40 million to say all national competitive bidding packages.

8.6 Environmental Management: A programmatic SEA, without implementation arrangements and detailed guidelines for planning/design and implementation, is not an efficient tool for projects involving numerous sub-projects. Regular, intensive and effective supervision and monitoring are required to ensure that the intended environment management measures are integrated into planning/design and construction management of the sub-projects. If participatory planning/design is expected to integrate environmental management into the sub-projects, the participatory framework needs to be robust and needs to include all relevant stakeholders.

8.7 Land Acquisition and Resettlement: Land acquisition procedures are outdated, time consuming and provides opportunities for corruption. The situation is further worsened by outmoded and obsolete land recording system. In order to expedite the land acquisition process, the GoB should take immediate steps to computerize the land recording system, and streamline the land acquisition procedures. In the interim period, diligent efforts and upfront actions should be taken for the following: (i) land acquisition estimates and proposals should be prepared after necessary verification at site, surveys of the roads and abutting lands, and the engineering designs prepared to match with the physical conditions at site; (ii) all actions related to land acquisition (and payment of compensation) and resettlement activities should be completed prior to start of corresponding works; and (iii) arrangements should be made for making spot payment of compensation rather than the affected persons collecting the compensation amount from the district offices. The land acquisition process under the project should not be used to collect the arrear taxes.

8.8 Arrangement for Construction Equipment, and Building a more sustainable Construction Industry. Currently, hire charges for the construction equipment rented by the LGED to the contractors are lower than the maintenance and replacement costs for such equipment, effectively discouraging the ownership of equipment by the contractors. Although the Project included a covenant requiring the

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equipment hire charges to be increased to cover maintenance and replacement costs of the equipment, it did not happen. The same should have been implemented prior to the credit negotiation. LGED (and the RHD) should be encouraged to sell off their equipment to the contractors or private equipment leasing company, which may lead to emergence of private equipment leasing companies. In addition, for future projects of the LGED, the civil works contract sizes should be increased gradually, which would allow the contractors to procure key construction equipment out of the advance payments for the contract (additional advance payments can be made against procurement of equipment), and no further procurement of equipment by the LGED should be encouraged. Increasing size of contracts would help in building a more reliable and resourceful construction industry. To develop and promote small scale contractors' output and efficiency, emphasis should be given to continued training of such contractors.

8.9 Technical Audit: Contract for the technical audit under the Project was awarded to a local consulting firm. This had placed the local firm in an awkward position, because the firm worked for LGED in other similar projects. Future projects should require that the technical audit consultant should not have commercial relation with the organization whose works they would be auditing.

8.10 River Jetties: The jetties (ghats) constructed under the Project are of standard design and of permanent structures and can not be shifted during erosion, siltation and flooding. For future projects, opportunities should be explored for the construction of jetties using steel structures/pontoons which are cost effective, and can be shifted based on the hydrological behavior of the river, and should be designed according to the requirements of each site.

8.11 Management of Markets and Ghats: The capacity of the MMCs in supervising the leaseholders needs further strengthening. An effective MMC with a clear mandate and authority should be introduced in each market. Participation of users, local communities and local bodies need to be ensured in operation, management and maintenance of markets and ghats. The tendering procedures for the leases and the application of the procedures, need to be more transparent in order for the leases to produce the expected financial returns. The training and monitoring the performance of the MMCs should be continued and strengthened in order to establish an efficient and transparent management system.

8.12 Training: Although a large number of training courses were organized and a large number of participants received training, the training staff of the Project were found to be either non-motivated or inefficient. The CTU of the LGED should manage the training component of any future project. Instead of the engineers coordinating the training matters, it is necessary that persons having the background and aptitude for human resources development are made in-charge, and they implement the training programs with the assistance of the technical experts.

8.13 Socio-economic Studies: Review of the design of the SEME studies carried out through the DSMC and the socio-economic impact studies carried out through BIDS, reveals that the studies were designed independently without a common survey framework that could make the studies complementary rather than competitive. It is necessary to prepare the ToR for the studies in a more coordinated and complementary way, in order to draw synergies between the two studies and exploit the comparative advantages of each study. The complementary as well as distinctive features of both SEME and impact studies should be highlighted and synchronized. There was an apparent lack of coordination in the data collection and analyses among the two studies, as well as there was inordinate delays in completion of impact study reports by the BIDS. It is necessary to monitor the conduct of such studies more closely, for the outputs being timely available and more useful.

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9. Partner Comments

(a) Borrower/implementing agency:

Comments by the Local Government Engineering Department (LGED)

1.0 Introduction

The government of Bangladesh received financial assistance from the World Bank and the Swiss Development Corporation (SDC) for the implementation of the Second Rural Roads and Markets Improvement and Maintenance Project (RRMIMP-2) amounting to US$ 212.36 million. The Project was implemented over a period of 66 months from January 1997 to June 2002. Details of the loan/credit are as follows.

Date bilateral agreement was signed with IDA : 8 January 1997Amount of IDA credit : SDR 105.94 millionDate bilateral agreement was signed with SDC : 19 November 1996Amount of SDC credit : CHF 19.45 millionSupplementary agreement with IDA for flood damage repair : May 1999Supplementary agreement with SDC for flood damage repair : 3 February 1999

2.0 Objectives of the Project

The overall development objective of the proposed project was to help increase rural employment and incomes and reduce rural poverty. More specifically, the project objectives were to:

help remove physical bottlenecks, improve quality and reduce costs in rural transport and marketing;lcreate employment and income-generating opportunities among the rural poor and particularly for l

disadvantaged women;promote participation of local communities and NGOs in project activities; andlincrease institutional capacity for efficient rural infrastructure management, including maintenance.l

3.0 Scope of the Project

The main components of the project were:

Improvement and upgrading of 574 km of feeder roads Type B (FRBs) in the 14 districts of the lproject area to full all-weather bitumen surfaced standard, including the construction of 1915 linear meters of drainage structures on these roads; construction of 1950 linear meters of drainage structures on other FRBs in the project area; and tree planting along the FRB embankments.

The planning and implementation of a coordinated system of routine and periodic road maintenance of lthe road network in the project area, comprising FRBs and important Rural Roads Type 1 (RR1) for replication nationally in following years.

Construction of 31,600 linear meters of drainage structures (culverts and small bridges) on existing lrural roads in the project area and other parts of Bangladesh, together with ancillary earthworks on the roads, with special emphasis on local participation in planning, financing, and implementation. The structures were selected through a participatory process involving local bodies and local communities,

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who contributed 10% of the cost, and use was made of labor intensive technologies requiring the employment of landless poor and disadvantaged women.

Planning, improvement and maintenance of the market infrastructure (internal roads and footpaths, ldrainage, sales platforms and sheds, latrines and potable water supply) in 136 Growth Centre Markets (GCM) and 14 rural markets in the project area.

Planning rehabilitation/improvement and maintenance of 41 priority rural "ghats" in the project area lto improve landing, loading and unloading, and other facilities for operation of country boats.

Pilot program to improve the role of non-motorized means of transportation in the project area, with lparticipation of NGOs.

Procurement of equipment for construction, maintenance and supervision.l

Institutional and human resource development to strengthen the management and technical capacity of lLGED, including the provision of training, the conduct of studies and the expansion of LGED capability in participatory development of rural infrastructure.

The construction of a new LGED District office in the Dhaka district and extension of Sirajganj lDistrict office.

Technical assistance support for the implementation of project activities including the design, lsupervision, monitoring and evaluation of the annual work programs and support for institutional development.

4.0 Floods of 1998 and 2000

The project proceeded well until the devastating floods of 1998, which occurred between 20 July and 6 September of that year. Considerable damage occurred and also delayed progress. The IDA and SDC agreed to finance the costs of repairing the damage and a supplementary credit of US$20 million was approved by IDA on 11 May 1999. SDC financed additional DSMC costs of US$0.8 million.

Flood damage repair works commenced in January 1999 and were substantially completed by June 2000. However, further flooding occurred in 2000 and unspent funds from the 1998 flood were utilized to repair flood damage.

5.0 Project Implementation Details

Design and Documentation : The consultants prepared the contract documents and designs for the project. However, these were based on LGED standards and experience gained on other rural development projects. During implementation the targets set forth earlier in different components had to be adjusted, in reality increased in many of the cases, based on actual requirement.

FRBs and Structures : Construction work was carried out through contract and because contracts were small (to allow small local contractors to participate in tenders) this resulted in a considerable number of contracts. Construction work was largely carried out by labor intensive methods and construction plant was hired from LGED. Locally available materials, such as, bricks and sand were used in pavement construction. A total of 606 km of FRBs was improved or constructed and 2600 meters of structures were

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constructed on project and other FRBs.

Structures on Rural Roads : A total of 46,500 meters of structures was constructed requiring 6535 construction contracts. Selection of SRRs was undertaken jointly by LGED and local authorities. This was a very successful program, which had a major possible impact of the accessibility of many rural areas.

Markets and ghats : The identification, planning and construction of 152 markets (including 15 rural markets) and 35 ghats were carried out with considerable local participation. Construction work was carried out by contract. A new concept was the construction of facilities for women in the growth centres.

Equipment : A considerable quantity of equipment was purchased under the project. This equipment included construction and office equipment as well as transport. The total contract value of the equipment purchased was US$ 4.31 million.

Maintenance : Maintenance of 1386-meter roads and 403-meter bridges was largely carried out by contract. However, routine maintenance of roads was carried out using mobile maintenance units and some equipment for these units was purchased under the contract. Maintenance of markets and ghats is the responsibility of the Market/Ghat Management Committees.

Quality Control : Laboratories were provided in each of the 14 districts and they carried out the full range of testing needed to ensure the quality of the works. The LGED staff and TA staff of the consultancy team jointly worked in the laboratories.

Tree planting : Tree plantation was carried out along 327 km length of the roads and this provided employment opportunity to a considerable number of destitute women. These women employed under "Labor Contracting Societies (LCS)" were also responsible for the maintenance of the plants. This was an excellent program benefiting both destitute women and it favorably contributed towards improvement of the environment.

Participation : Participation by the local community in the selection, planning, design, implementation and maintenance of improved infrastructure was an important component of the project. The LGED officials and Consultants worked closely in the early stages of the project to prepare guidelines for user’s participation and implemented a number of training courses (40 in number) to inform and orient all the stakeholders in the participation process. However, it appeared that more training will be required for the management of ghats and markets and more transparency is required in financial matters.

Land Acquisition : Land acquisition problems caused some delay towards physical progress at the early stages of the project but the matter was improved and there was no significant problem regarding disruption to the progress of the work after the initial stage. The nature of work of the project did not require extensive land acquisition and only 182 hectares of land were acquired. LGED and the consultants staff worked together closely to expedite payments of compensation and sort out related problems/issues.

Environmental & Social Issues : The project did not have a major environmental impact due to the nature of the works. Roads were improved using the existing alignment and little new land was required. Trees were planted on road slopes, embankments were planted with grass, and drainage was improved through construction of bridges/culvert on roads. In the markets and ghats drainage was improved, clean drinking water was provided and garbage disposal and sanitation facilities were provided. The issue of arsenic in tubewells for drinking water was addressed by testing and only 7 tubewells were found to have

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an arsenic content in excess of the tolerance limit and appropriate measures were taken.

Non Motorized Transport : This was a pilot program to improve the non-motorised transport in the rural areas. The design of rickshaws, rickshaw vans, bullock carts, women's bicycle and bicycle trailers were reviewed and prototype designs developed. Although there was considerable participation by users and rickshaw pullers in the development of the new type rickshaw, in practice, the new design has not been generally accepted by rickshaw pullers and perhaps further modification will be required for better acceptance by the end users. More attention needs to be given to marketing the new rickshaw which is considered to be a considerable improvement on the existing design.

Training : A total of 131 local training courses were held during the project period and 10062 personnel received training. Training was imparted on the following issues/topics:

Non-motorised transportPlanningRoad safetyParticipationLand acquisitionComputer operationRural employmentMarket and ghat management and maintenanceSRR methodologyMechanicalRoad maintenanceProject managementContractor trainingField and laboratory testingGlobal positioning systemAccounting and computerized accounting

In addition, the project consultants provided some training in participation, maintenance and equipment management. The volume of training provided under the project was considerable. However, follow-up training is essential and the LGED training unit will ensure that a comprehensive program of follow up training is implemented in the longer term.

In addition to the local training, overseas training has been imparted on the following subjects:

International Workshop on InfrastructurelTraining on ProcurementlInternational Procurement SeminarlFinancial Management & Disbursement CourselRural Road Development and Maintenance Training CourselWorks Procurement Management Training CourselManagement of Training CenterlManagement of appropriate technology in the road sector developmentl

The total number of participants was 37 attending 20 no. of courses.

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6.0 Project Results

Socio-economic Monitoring and evaluation (SEM&E) : An SEM&E study was carried out by the consultants. The results of this study as detailed in the final SEM&E report indicate substantial benefits of this project. The economic benefits of FRB improvement were considerable. However, in the case of ghats and markets economic benefits, although positive, need further economic analysis. The following summarizes the effects of the infrastructure improvements under the project:

The effect of improvements to transport infrastructure has produced a significant change in modal mix lof rural transports. Passenger transport charges decreased by an average of over 40% and freight charges by 36%.Improvement of ghats has brought about significant benefits in productivity & safety.lEconomic viability of road investments has been manifestly justified.lThe effects of improvement of markets are positive. Lease values are picking up.l

For long-term Socio-economic impact evaluations another study through BIDS (Bangladesh Institute of Development Studies) was also undertaken. The results of this study as detailed in the final report indicate substantial benefits of the project.

7.0 Performance of different entities

(a) Contractors : Contracts for the implementation of the project activities were small to permit small local contractors to undertake the work. The large number of contracts resulted in a large number of contractors and the quality of these contractors varied and many contracts required additional time to complete.

(b) Consultancy for the Project : A joint venture of consultants consisting of international and local consultants, known as Design Supervision and Monitoring Consultants (DSMC) were responsible for providing advice and assistance on project plan, design, implementation, operation & maintenance and monitoring and evaluation. The joint venture consisted of the following consultants:

Snowy Mountains Engineering Corporation LtdMott MacDonald LtdDevelopment Design ConsultantsResource Planning and Management Consultants

DSMC worked closely with LGED personnel in the preparation of design, supervision and monitoring of construction works and certified the satisfactory completion of all the works to the required quality standard. Favorable comments about the generally good quality of work indicated the satisfactory performance of DSMC under the project.

(c) Project Management : An LGED Project Implementation Office (PIO) was formed at the Head Office in Dhaka to plan and implement the project. The 14 district offices were responsible for implementation of project work in the respective districts including supervision, measurement and payment. The consultants played a role in evaluating tenders but PIO was responsible for awarding those. Supervision was done jointly for implementing all components of the project.

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In general, the performance of PIO was satisfactory and the project was completed within only three months over the original project period in spite of the delays caused by extensive flooding in 1998 and 2000. However, the very large number of small contracts made it difficult for the PIO to enforce contract conditions and a fewer number of larger contracts would be easier to manage.

(d) World Bank and SDC, the financiers : The World bank and SDC monitored the progress of the project by means of annual evaluations and regular liaison between the project implementation officials and the Donor officials. During the Annual Review Missions, all aspects of the project were discussed and amendments to project requirements were made. The local World Bank officials also made site visits to inspect the progress of the works. The Review Missions were very successful in identifying problems and proposing for their solutions. The timing of the missions was appropriate and time spent in the field was sufficient.

Overall performance of the World Bank and SDC was highly satisfactory. They happened to be spontaneous in providing decisions/comments and all other matters related to the project implementation.

8.0 Operation & Maintenance and sustainability:

In course of implementation of the project activities, operational plan of assets procured and resources created has been prepared and it is being applied. The activities being undertaken under this plan have facilitated proper use of the assets/resources and ensured sustainability of those in future. The operational plan has included, inter-alia, the following issues.

maintenance of roads – routine maintenance, periodic maintenance and emergency maintenance. lmaintenance of bridges/culverts – routine maintenance, periodic maintenance and emergency lmaintenance. operation and maintenance plan of growth centres/markets. loperation and maintenance plan of ghats.loperation and maintenance of construction and laboratory equipment.loperation and maintenance of vehicles. loperation and maintenance of functional buildings . l

9.0 Manuals, Guidelines and Documents prepared:

A number of manuals, guidelines and documents have been prepared under this project and these have been used. Further use of the documents will contribute to the institutional development of LGED, Local Government Institutes (LGIs) and other stakeholders. The documents cover the technical and other professional areas and the list is given below:

Participation Guidelines for Planning and Implementation of Markets and Ghats.lParticipation Guidelines for Maintenance and Management of Markets and Ghats.lParticipation Guidelines for Planning, Implementation and Maintenance of Structures on Rural Roads l(SRR).Planning and Implementation Guidelines for SRRs and Ancillary Earthworks.l

10.0 Lessons learnt, Proposals and Recommendations:

Some lessons learnt through implementation of the project and a few proposals and recommendations based

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on the lessons learnt are indicated below:

Contracts : For a project of this size, there are too many contracts and too many less experienced contractors. With such a large number of contracts being undertaken at any given time, it is very difficult to properly enforce contract conditions, particularly when it is apparent that contract periods are too short. The situation would be improved by larger contracts with more realistic contract periods, and stricter enforcement of contract conditions. The contract periods should take account of the disruption caused by the monsoon rains. It is suggested that this would result in the emergence of better quality contractors. Smaller contractors could still find work as sub-contractors.

Equipment : At present, the contractors are hiring their equipment from LGED and there are no developed private sector companies which provide construction plant on hire. It is considered that this is an inefficient method of providing construction equipment and it is recognized that the private sector can provide a better and more efficient service in the long run. If construction work is carried in larger contracts and LGED phases out its own equipment plant, this will encourage the emergence of the private plant leasing companies. Of course other public construction agencies especially Roads & Highways Department should also opt for the same. Larger contractors may also choose to purchase some key construction equipment.

Bridges : There are often erosion problems near bridge wing walls and it is apparent that the present wing wall design needs some modification. The design of appropriate and economic wing walls is important for the long term security of the bridge approach roads. It is suggested that different wing wall designs should be prepared under the new project to determine the best design for the long term prevention of embankment erosion. [A committee in LGED formed very recently is working on this.]

Routine road maintenance : This project has provided some equipment and vehicles for routine road maintenance. However routine maintenance of roads and bridges needs further attention. The approach of road maintenance assessment within LGED may be changed to HDM-4 gradually. Usually much time is elapsed in between preparation of the estimate and actual commencement of work, when further deterioration occurs resulting in revision of the contract too often. This can be avoided by putting a condition in the tender that the bidder must put the rates envisaging probable additional damage by the time he would commence the work

Road shoulders : The maintenance of road shoulders is not upto the mark and "edge break" of the surfaced pavement is the most common form of initial pavement failure. The provision of "hard" shoulders has been beneficial but additional measures are required at locations where traffic travels frequently on the shoulders. This happens on sharp corners where vehicles tend to cut the corner by travelling on the unsurfaced shoulder. It is recommended that various shoulder treatments should be included on the next project to determine the most appropriate treatment on sharp corners.

Quality Control Testing : The arrangement for carrying out quality control testing of construction is adequate. However, there is a room for improvement as far as the quality of testing is concerned. It is suggested that the LGED central laboratory may play a greater role in this regard by carrying out more regular correlation testing. In practice, this can be achieved by joint collection of samples on site, splitting the samples and testing separately. Test results can be compared and if there are any differences, the central laboratory staff may investigate the reasons and correct incorrect testing procedures.

Contractors : There is a need to provide more training to the contractors and improve their capacities to become more professional and efficient. The award of larger contracts and stricter enforcement of contract

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conditions will also help remove inefficient contractors and allow better contractors to expand their activities. Contractors that perform badly may be removed from the prequalification list.

Markets : The improvement and construction of growth centre markets has been a success. However, the management of the completed markets is not so satisfactory as shown by the generally inadequate maintenance. It is recommended that the Market Management Committees formed on adhoc basis should be regularized & given with legal status, should receive more training and the procedures should be in place to increase their responsibilities & capabilities.

Ghats : At present, there are Ghat Management Committees also on adhoc basis, to manage the ghats. It is recommended that the ghats may be managed as part of the linked market and a ghat Sub Committee may be formed and it may report to the Market Management Committee.

Non Motorized Transport : It is considered that the new rickshaw developed under the project is an improvement over the existing rickshaw presently in use all over Bangladesh. It is suggested that more attention may be given to marketing the new rickshaw to the buyers of the rickshaws and the provision of credit, where necessary, may be made.

Training: The project has successfully implemented a lot of training. However, there is a need to have follow up for monitoring effectiveness of training and the LGED training unit is to provide adequate follow-up training. Some of the Engineers posted to the training centres feel reluctant in discharging their duties due to lack of HRD knowledge and absence of incentives available in the unit. It is suggested that a core set up of dedicated engineers having HRD knowledge and committed to their jobs should be established along with a resourceful unit having sufficient incentives made available.

(b) Cofinanciers:

Comments by the Swiss Agency for Development and Cooperation (SDC)

1.0 Introduction

The Rural Roads and Markets Improvement and Maintenance Project-2 (RRMIMP-2) is the second generation of rural infrastructure development project of Swiss Agency for Development and Cooperation (SDC) and World Bank (WB) to support the Government of Bangladesh (GOB). Built on the lessons learnt from the first project, RRMIMP-2 was designed with an overall development objective to help increase rural employment and income and reduce rural poverty by establishing an improved, sustainable rural transport and trading infrastructure. The project is a large and innovative project covering 14 districts. It started in July 1996 and will come to an end in June 2002.

2.0 Outputs of the Project

The project has been very successful in terms of making an outstanding progress in civil works and financial disbursements. It has also made significant achievements in social development and institution development aspects. The project intervention has significantly contributed to the removal of physical bottlenecks in the rural areas, such as development of markets, toilets, bridges, culverts, roads, etc.. It has generated rural employment and income, reduced costs in rural transport and increased marketing facilities for agricultural products.

It is expected that the following components will be completed by the end of the project.

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Improvement of 610 km of Feeder Roads B (FRB)lImprovement of 137 growth centre markets and 15 union rural marketslImprovement of 35 ghatslConstruction of 47,500 meters of structures on rural roadslPeriodic maintenance of 1,420 km of FRBs and 410 linear meters of structureslRehabilitation of 915 km flood damage roads and 2,872 meters of structuresl

In view of these achievements, it may be concluded that the overall objective of the project has largely been achieved.

3.0 Effects of the Project

3.1 Employment Generation : In the project area, the construction and maintenance of roads, structures and markets have created both long-term and short-term employment and income generating opportunities among the rural poor in general and the destitute women in particular. A total of 78,000 person-years of employment have been created by the civil construction and maintenance, out of which 25% are women. About 5,700 maintenance crew members for both on-pavement and off-pavement maintenance are engaged round the year, of which 4,200 destitute women are exclusively employed in the off-pavement maintenance activities and roadside tree plantation. Moreover, as a result of the project’s initiative, 13,000 destitute women are also currently employed by LGED outside the project area throughout the year for off-pavement maintenance. In addition, due to the introduction of mobile maintenance by the project and subsequent replication in all non-project districts, about 6,600 maintenance laborers are now working for on-pavement maintenance throughout the year.

3.2 Socio-Economic Impact: Besides the employment generation by developing the rural transport and trading infrastructure, the project has also contributed to the growth of overall rural economy. The Socio Economic Monitoring and Evaluation (SEM&E) unit of the project has surveyed 20 out of 191 improved roads, 23 of 137 markets and 8 of 38 ghats of the project. The main findings are as follows. Feeder Roads B (FRBs):

Increased in Vehicle Km (annual change from appraisal) - motorized vehicles 22.4% pa and non lmotorized vehicles 2.1% pa Increased in Tonne Km (annual change from appraisal) - motorized vehicles 19.4% pa and non lmotorized vehicles 7.0% pa Passenger transport charges (in Tk/pkm) decreased (difference between pre and post improvement) – lRickshaw 24.6%, Rickshaw van 77.9%, Auto Rickshaw 50.9%, Bus 47.0%Freight transport charges (in Tk/tkm) decreased (difference between pre and post improvement) - lRickshaw van 32.0%, Animal cart 35.4%, Hand cart -37.6%, Truck 38.0% Accesses increased (percentage difference between pre and post improvement) - attendance at leducational facilities 7.0%, attendance at banks 33.7%, number of shops 67.8%, attendance at health facilities 60.6%EIRR increased by 16.4% (post investment appraisal)l

Growth Centre Markets (GCMs):Increased - turnover 26.5%, lease value 7.5%, attendance 33.3%, toll revenue 28.6% l

Ghats:Reduced - freight charges 20%, passenger charges 24%l

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Increased - number of motorized boats 88.2%, lease value 67.6% l

4.0 Results of Project Implementation

4.1 Standard of civil works: Built on RRMIMP-1 experiences, LGED has consistently maintained the standard of civil works, especially in Rajshahi region (RRMIMP-1 area). In Dhaka region, which a new inclusion to RRMIMP-2, the project has contributed to building the capacity of contractors as well as LGED staff. Although the project faced difficulty to introduce the quality control system at the beginning, the quality achieved in the end has been satisfactory.

4.2 Structures on Rural Roads (SRR): One of the major successes of the project is the implementation of small drainage structures on rural roads throughout the whole country. The project started with 10% financial contribution from the community/local bodies, which was eventually increased to 20%. There were enormous responses from the Union Parishads to participate in this program. The participatory planning process has been introduced by the project. The users and communities participated in the process of identifying, planning, financing and implementation of SRR.

4.3 Participation: A remarkable achievement of the project is the promotion of participation of the users/communities/local bodies in planning, design and implementing the markets, ghats and SRRs and raising the local contributions. On the other hand, the user participation in operation, management and maintenance of markets and ghats has not been introduced. As a result, the markets and ghats are poorly managed and conflicting issues are evident in many markets. The project helped building capacity of LGED staff, especially those dealing with social issues, through external support of NGOs and consultants. Necessary steps have been initiated by LGED with a view to institutionalizing and sustaining community participation. However, the question still remains that how much LGED would be able to succeed in dealing with the social issues as an engineering organization. The objective of introducing an effective Road Users Committee (RUC) in each Upazila has not been achieved. The objectives of RUC were optimum and effective use of roads, advise and suggest measures on improvement and maintenance of roads; traffic movement and management; awareness building on road safety and rules, etc. which were not achieved.

4.4 Mobilization of Local Resources: The project contributed to change the GOB policy in mobilizing local resources. The Union Parishad has a very weak financial base. With the initiative of the project, 1% land transfer money is set-aside for the UPs. In addition, 25% of the developed market lease value is allocated to the concerned UPs while 15% is given in case of undeveloped markets. While the UPs have got some funds from the market lease and land transfer, it remains weak in fund management and lacks accountability and transparency.

4.5 Maintenance: A significant progress has been made in infrastructure maintenance. A well-organized road maintenance unit (RIMC) has been set up within LGED. RIMC plays a vital role in formulating policies, strategies and guidelines. An effective off-pavement maintenance system is already in place throughout the country. In addition, mobile maintenance system has recently been replicated nationally after successfully piloting in two project districts. With continuous efforts from the project, LGED has been able to influence GOB to increase maintenance revenue budget every year. However, this is still inadequate compared to actual needs to cover the entire LGED road network. The shortfall between needs and budget has been steadily growing over the past years and has now reached to 30% of the required budget. Moreover, the maintenance program is not planned and implemented in an adequate manner in the field with the available budget because of low motivation of the field maintenance engineers. The GOB policy on new construction vs maintenance is somehow controversial. A significant amount of GOB funds have been provided for new rural road construction that are quite unimportant from traffic point of view,

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while GOB does not allocate sufficient fund for road maintenance.

4.6 Training: The project has implemented training need assessment with the help of the Central Training Unit (CTU) of LGED and the courses have been designed on the basis of need assessment. Most of the training courses were implemented by CTU. A study on effectiveness of training shows that the participants are utilizing their training knowledge in their daily practical work of respective field. The training program of the project has contributed to a great extent to strengthen the institutional capacity of LGED in project implementation and management, participatory planning and maintenance management. However, the Training Unit of the project remained very weak throughout the project period and contributed very little. Although the study shows positive effects of training, a systematic training monitoring system is yet to introduce within LGED. Moreover, CTU, which is in the process of functioning on its own without any external support, is not staffed with qualified LGED members due to lack of committed staff to work in this non glamorous Unit.

5.0 Project Management

The overall project management of LGED has been satisfactory. The Project Implementation Office (PIO) has been quite efficient and dynamic which was adequately supported by the competent field staff in implementing the project. The Design, Supervision and Monitoring Consultants (DSMC) have played an important role in ensuring the quality of civil works, transferring technical skills and training in the areas like participation and maintenance. Based on the experience of RRMIMP-1, LGED handled the complex issue like land acquisition in a more competent way. It managed to succeed to a great extent in the new areas like ghat improvement and structures on rural roads including participation. LGED has also been advanced in the area of maintenance and institutional development.

6.0 Lessons Learnt

Besides FRBs, GOB has made huge investments in new construction on least important rural roads lincluding RR1, RR2, RR3. GOB should focus its strategy on maintaining roads that have already been constructed rather than constructing any new roads. It should take necessary measures for providing adequate maintenance fund to maintain the whole LGED road network. Otherwise, the huge investments made on road construction over last 15 years will not be able to contribute, as much as expected, to the socio-economic development in the rural area.

LGED has to put serious efforts in dealing with social development issues. Participatory process lshould be institutionalized in case of planning, implementation and management of markets, ghats and SRRs. LGED staff should work more closely with the communities, users, and local bodies to ensure their participation in the process.

The whole market and ghat management is a complex issue, which is not functioning, in its present lsetting. For this, the socio-economic impact in the improved markets is not as good it was expected. An effective market management committee with a clear mandate and authority should be introduced in each market by GOB. Participation of users (seller and buyer groups) needs to be ensured in operation, management and maintenance of markets and ghats to get the maximum benefit of the improved infrastructures.

Local governance issues should be dealt in a more adequate manner. The local govt. bodies e.g. UPs, lmarket and ghat management committees should be given adequate authority and needed support and resources to manage the local infrastructures.

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The concept of introducing a road users committee under this project has been proved to be wrong in lthe rural transport setting. Thus, this should not be pursued any further by LGED in its present form.

The training staffs of the project have been found to be either non-motivated or inefficient. Thus, the lseparate Training Unit for the project has not been found effective. CTU should manage the training component of any future project. More training should be organized for contractors, local govt. bodies and social development and maintenance staff of LGED.

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

None

10. Additional Information

None.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

(a) (1) Increase in length of continuously passable Rural Roads in project area. Unit: Additional km of continuously passable RR present norm: 1.5 km for each gap filled; At Project Completion: 10500;

11000 10943

(a) (2) Reduced transport charges on FRBs improved under the project, after one year of completion. Unit: % reduction in transport charges on improved FRBs on goods for composite traffic unit (in constant price); At Project Completion: 25;

28 32.9

(b) (3) Employment created on project activities. Unit: Person-years; At Project Completion: 15000;

25000 78000

(c) (4) Rural markets and river jetties designed and SRRs selected with beneficiary participation:

(i) With involvement of Participation Specialist. Unit: Number of project schemes; At Project Completion: 1500;

6500 1750

(ii) Others. Unit: Number of project schemes; At Project Completion: 3000;

4550

(d) (5) Increase in lease value of Improved Growth Centre markets vs pre-development. Unit: % increase in lease value; At Project Completion: 40;

40 7.5

(d) (6) Average size (km) of FRB contracts awarded. Unit: km; At Project Completion: 5;

5 3.5

(d) (7) FRB network in project area in good, paved condition. (As per initial network of 3200 km). Units (1) % of FRB network; (2) Km/Sq.km.; At Project Completion: 60;

60 64

(d) (8) Average elapsed time between invoice submission and payment to contractor. Unit: Number of days; At Project Completion: 15;

15 30

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

(1) FRB Road Improvement Contracts Completed. Unit: km; At Project Completion: 574;

606 606

(2) Road Side Tree Planting Completed. Unit: km of road; At Project Completion: 562;

275 327

(3) SRR Contracts Completed. Unit: m; At Project Completion: 31600;

47000 46500

(4) GC Market and River Jetty Contracts Completed. Unit: No.; At Project Completion: 177;

Not Available 172

1 End of project

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Annex 2. Project Costs and Financing

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

Actual/Latest Estimate

Percentage of Appraisal

Project Cost By Component US$ million US$ millionImprovement and Upgrading FRB 70.10 54.14 77.23Maintenance of Roads 13.10 8.75 66.79Construction of Drainage Structure on Rural Roads (SRR) 64.14 71.87 112.05Improvement of Rural Markets 12.90 10.25 79.46Rehabilitation/Construction of River Jetties (Ghats) 2.40 1.93 80.42Pilot Program to Improve NMT 1.05 0.30 28.57Supply of Equipment 8.55 6.01 70.29Institutional and Human Resource Development 3.92 3.51 89.54Implementation Support 16.19 14.90 92.03Flood Damage Rehabilitation Works 25.00 24.15 96.6Implementation Support for Flood Damage Rehabilitation Works

0.60 0.60 100

Total Baseline Cost 217.95 196.41

Total Project Costs 217.95 196.41Total Financing Required 217.95 196.41

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

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.00 172.74 9.94 0.00 182.68(0.00) (134.26) (7.95) (0.00) (142.21)

2. Goods 3.04 5.00 1.00 0.00 9.04(2.00) (3.00) (0.52) (0.00) (5.52)

3. Services 0.00 0.00 16.11 0.00 16.11(0.00) (0.00) (4.77) (0.00) (4.77)

4. Land Acquisition 0.00 0.00 0.00 4.96 4.96(0.00) (0.00) (0.00) (0.00) (0.00)

5. Project Administration 0.00(0.00)

0.00(0.00)

4.17(0.58)

0.00(0.00)

4.17(0.58)

6. Training 0.00(0.00)

0.00(0.00)

1.00(0.00)

0.00(0.00)

1.00(0.00)

Total 3.04 177.74 32.22 4.96 217.96(2.00) (137.26) (13.82) (0.00) (153.08)

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

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 0.00 164.86 0.44 0.00 165.30(0.00) (131.89) (0.09) (0.00) (131.98)

2. Goods 4.27 1.74 0.00 0.00 6.01(2.93) (1.41) (0.00) (0.00) (4.34)

3. Services 0.00 0.00 13.87 0.00 13.87(0.00) (0.00) (4.88) (0.00) (4.88)

4. Land Acquisition 0.00 0.00 0.00 5.33 5.33(0.00) (0.00) (0.00) (0.00) (0.00)

5. Project Administration 0.00(0.00)

0.00(0.00)

5.14(0.72)

0.00(0.00)

5.14(0.72)

6. Training 0.00(0.00)

0.00(0.00)

0.76(0.00)

0.00(0.00)

0.76(0.00)

Total 4.27 166.60 20.21 5.33 196.41(2.93) (133.30) (5.69) (0.00) (141.92)

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

project management office, training, technical assistance services, and incremental operating costs.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

IDA Govt. CoF. IDA Govt. CoF. IDA Govt. CoF.Improvement and Upgrading FRB

52.11 17.99 0.00 41.81 12.33 0.00 80.2 68.5 0.0

Maintenance of Roads 6.55 6.55 0.00 4.29 4.46 0.00 65.5 68.1 0.0Construction of Drainage SRR

51.32 12.82 0.00 57.50 14.37 0.00 112.0 112.1 0.0

Improvement of Rural Markets

10.32 2.58 0.00 8.20 2.05 0.00 79.5 79.5 0.0

Rehabilitation/Construction of River Jetties (Ghats)

1.92 0.48 0.00 1.54 0.39 0.00 80.2 81.3 0.0

Pilot Program to Improve NMT

0.15 0.00 0.91 0.04 0.00 0.26 26.7 0.0 28.6

Supply of Equipment 5.45 3.10 0.00 3.83 2.18 0.00 70.3 70.3 0.0Institutional and Human Resources Development

2.92 0.00 1.00 2.75 0.00 0.76 94.2 0.0 76.0

Implementation Support 2.27 0.83 13.09 2.09 1.03 11.78 92.1 124.1 90.0Flood Damage Rehabilitation Works

20.00 5.00 0.00 19.77 4.38 0.00 98.9 87.6 0.0

Implementation Support for Flood Damage Rehabilitation Works

0.08 0.00 0.52 0.10 0.00 0.50 125.0 0.0 96.2

TOTALS 153.09 49.35 15.52 141.92 41.19 13.30 92.7 83.5 85.7

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Annex 3. Economic Costs and Benefits

1. Economic Evaluation Methodology - SAR

Cost-benefit analysis was carried out for three component/sub-component - FRB improvements, construction of SRRs and growth center markets improvement - which accounted for about 75% of the original project cost.

1.1 FRB road improvements: ERR was estimated based on quantifiable benefits mainly from reduced transportation costs (reduced passenger fares and freight charges) of different transport modes after the improvement of the feeder roads and due to change in modal mix. Data on reduced transport costs was collected from earlier studies carried out to assess the socio-economic benefits of improving feeder roads ‘with’ and ‘without’ the project, funded by the Bank and other multilateral agencies.

The traffic was estimated to grow at 8% for the normal traffic throughout the 15 year design life period of the roads. In addition, benefits from generated and diverted traffic were also included. The traffic assumptions made in the SAR led to an overall traffic growth of 55% in passenger-km (pkm) and 104% in tonne-km (tkm) in the 3 year period following completion of a typical road. The traffic growth rates assumed in the SAR were lower than those observed during the socio-economic survey of the earlier similar projects. For normal traffic, the total benefits of reduced costs were considered, while for generated and diverted traffic only half of the benefits were considered for the economic analysis.

The project economic cost included cost of improvement of road, construction of structures, land acquisition and tree plantation, routine and periodic maintenance during the 15 year analysis period, and 7% for project design and supervision. Taxes, duties and contingencies were excluded. Local currency financial costs were converted into economic prices by using a standard conversion factor of 0.9. The overall ERR for the 69 roads selected, derived as a weighted average, was 30.3% and ranged from 12% to 66%. About one-third of the road sections had an ERR of less than 12% when exclusion of time savings and other sensitivity tests were considered, but were selected due to poor condition and in consideration for geographic distribution.

1.2 Growth Center Markets: Economic benefits of market improvement were estimated on the assumption of reduced spoilage of perishable goods, i.e. the difference in the average and the maximum prices of a commodity realized by the seller during the day of the trade. It was argued that the prices of the perishable commodities declined faster during the day in an unimproved market due to poor ground condition, while this difference reduced after the market was improved and the sellers used paved and raised platforms and the market had better sanitation facility. It was assumed that this spoilage will decline by 3% of the turnover. The annual turnover, in term of quantity, was assumed to grow by 5% per annum and an additional growth of 15 percent generated turnover was assumed in the first year of market improvement. The financial benefits thus accrued were converted into economic benefits by using a factor of 0.9.

The cost of market improvement were averaged for three market sizes: small, medium and large. In addition to improvement cost, routine maintenance cost on yearly basis and periodic maintenance cost at 5 year interval were included. The improvement costs were spread over a 2 year period. Allowance of 7% for design and supervision were added to the improvement costs. Financial costs were converted into economic costs using a factor of 0.9 for local items, which formed 70% of the improvement cost. For imported items, a factor of 1.0 was used. ERR for the typical market was computed for a 15 year life cycle of the market with no residual value. The average ERR for all the selected markets was estimated at 20.2% with

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14.4% for small, 19.1% for medium and 24.9% for large markets. The ERR for small markets fell below the threshold level of 12% under sensitivity analysis.

1.3 Structures on Rural Roads: The cost-benefit analysis for the SRRs was carried out by estimating the benefit streams of bridging the gap to the road users in terms of savings in Vehicle Operating Cost (VOC) due to i) charges for the boat to cross the gap, and ii) distance due to longer alternative route or improved condition for vehicle movement through the gap; and savings in passenger and vehicle time due to i) elimination of delays in crossing gaps and in diverting to alternative routes to avoid gaps; and ii) elimination of standing time for the vehicles. The cost of the SRR was estimated for an average length of 3 running meter per kilometer of rural road (average length of 5.7 km). The structures were to be completed in the first year. The financial costs were converted into economic costs by using a factor of 0.9 for local costs (75% for the construction) and 1.0 for the imported materials. In addition, routine maintenance costs and periodic maintenance costs were also included for the 15 year period. 7% of construction costs was taken as an allowance for design and supervision.

Traffic were estimated to grow at 5-10% for pedestrian, motor cycle, rickshaw and bicycle in the first 10 years and 4-8% in the subsequent 5 years of analysis. In case of bullock carts, the traffic was assumed to contract at 5% in the first 10 years and at 4% in the next 5 years. In addition, the generated traffic in the first year of opening was estimated to vary between 5% and 25% for different vehicle types based on the traffic study of roads ‘with’ and ‘without’ gaps in proximity to each other. Other motorized traffic was not considered for analysis, since most of the roads did not have such traffic. The ERR for the typical SRR was estimated at 30.2%, which was quite robust to the increase in cost and decrease in traffic.

2. Economic Evaluation Methodology - ICR

DSMC carried out socio-economic monitoring and evaluation of various components of the Project. Relevant data were collected for various project components, 3 times during the life of the Project: i) before the start of project implementation (base line data), ii) at the time of mid-term appraisal, and, iii) after the project completion. A set of FRBs, growth center markets, ghats and SRR were selected to represent various geographic areas, traffic levels and regional economic development. A set of control FRBs in the vicinity of the selected roads were identified, and similar data were collected to segregate the impact of improvement and externalities. 2.1 FRB road improvement: A sample of 13 project roads and 2 control roads were selected for data collection on traffic growth, passenger and freight charges for different modes and changes in travel pattern. The cost of improvement of each of the road was collected from actual expenditure. Economic evaluation was carried out using the methodology described in the SAR and the current costs were converted into 1994 prices.

2.2 Growth Center Markets: Data on turnover, spoilage (value of quantity of goods left unsold or sold at very low price at the end of the day), lease value of the market, number of transactions, and prices for different commodities traded at the markets were collected for the baseline year 1997-98 and the 2000-01 by which time 20 markets were improved. Since no data were collected on the maximum and average price variation during the hat (weekly market) day for different commodities at the improved markets, the methodology used in SAR could not be used for economic analysis. Also, improved access to markets has resulted in reduced prices of all commodities, except a few, in real terms. Therefore, the growth in market turnover in value term is lower than actual volume of trade. The economic analysis for this component was therefore carried out by recalculating the spoilage percent for the base line volume of trade and then used to determine the benefit of improved market. Economic evaluation was carried out for 5 selected markets.

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2.3 Structures on Rural Roads: Six, one from each district, typical SRRs were selected for collecting the data on traffic before and after the Project. The ERR for these SRRs was calculated using the appraisal methodology with actual cost and traffic. The costs and benefits were converted into 1994 prices.

3. Findings of Socio Economic Monitoring and Evaluation (SEME) Study

3.1 Traffic and modal mix: The traffic on the 13 selected roads increased at annual rate of 14.6% in terms of tkm and 7.5% in terms of pkm between appraisal, 1994, and the final survey, 2000-01, i.e. an increase by 126% in freight and 54% in passenger. The modal mix also changed in favor of motorized traffic after improvement of roads. In case of freight traffic, the share of motorized tkm increased from 54.1% to 69.2%, while that of non-motorized declined to 29.1% from 44.0%. The share of motorized passenger traffic increased from 15.9% to 45.9%, while that of non-motorized and pedestrian traffic declined to 31.2% and 22.9% from 44.0% and 40.1% respectively.

3.2 Passenger and freight charges: The freight transport charges on an average declined from Tk 27.87 per tkm to Tk 18.71 per tkm at constant prices, i.e. by 32.9%, before and after improvement of roads. The prices declined for each mode type, rickshaw van by 32%, animal cart by 35.4%, hand cart by 37.6% and truck by 38%. Similarly for passengers, the decline for rickshaw was by 24.6%, auto rickshaw by 50.9% and bus by 47%, with an average decline by 41%. The average rate declined from Tk 2.12 to Tk 1.25 per pkm, at constant prices.

3.3 Market transactions, attendance, toll charges, lease value, price of commodities and spoilage: For the 20 markets improved under the Project, the average value of annual turnover increased by 26.5%, attendance increased by 33.33%, toll revenue increased by 28.6%, lease value increased by 7.5%, price of perishable items declined by 14.2% and the spoilage in financial value increased by 2.1% between 1997-98 (before improvement) and 2000-01 (after improvement). The increase in spoilage should be compared in conjunction with increase in annual turnover and when the combined effect is considered the spoilage decreased by almost 24% over the same period. Also, if the impact of reduced prices is added to the increase in annual turnover, the annual turnover for these markets increased by over 40% in term of volume for perishable goods for which the data is available. In the absence of data on overall increase in consumption of the food items at national level during this period, it would be difficult to assess diversion of trade from nearby markets to the improved markets.

3.4 Productivity and safety of boat operations at ghats: Data collected for 5 ghats, which were improved during the project period, showed a marked increase in the productivity of cargo handling of 300% and improvement in safety, measured as losses suffered during transfer of cargo to land from boat (output loss/tonne throughput) reduced by 99.2%.

3.5 Employment generated and number of vulnerable population employed: In the project area, the construction and maintenance of roads, structures and markets have created both long-term and short-term employment and income generating opportunities among the rural poor in general and the destitute women in particular. A total of 78,000 person-years of employment have been created by the civil construction and maintenance, out of which 25% are women. About 5,700 maintenance crew members for both on-pavement and off-pavement maintenance are engaged round the year, of which 4,200 destitute women are exclusively employed in the off-pavement maintenance activities and roadside tree plantation.

Summing up, improvement of transport infrastructure has produced a significant change in the modal mix, reduced cost of transport and provided employment to a large number of vulnerable section of

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the society. While the total turnover and attendance increased substantially in the markets improved under the Project, its overall economic impact cannot be clearly defined. Improvement of ghats brought significant benefits in productivity and safety.

4. Economic Revaluation Results

4.1 FRB Road Improvements: For the selected 13 roads, detailed surveys - traffic volume, traffic mix, passenger fare and freight charges - were carried out. The combined ERR for these roads is 56.51% as compared to 40.08% at appraisal. Except for 2 roads, the ERR is significantly higher than at appraisal, while for the 2 roads, it is marginally lower. The post-investment ERRs are higher because of i) reduced cost of completing the project by about 5% at constant prices; and, ii) much higher increase in traffic as well as very high shift to motorized mode than estimated at appraisal. Table 3.1 lists the comparative cost and ERR for the selected 13 roads.

Table 3.1: Appraisal and Post Investment Costs and Economic Returns

Name of Road Investment Cost(million Taka)

ERR (%)

Appraisal ICR Appraisal ICRSingair - Baira 14.30 16.45 29.20 31.40Sirajdikhan - Taltala 20.70 26.51 29.10 42.70Dighirpar - Tongibari 47.00 38.52 46.70 53.30Araihazar - Uchitpur 45.60 51.76 49.36 46.70Sreepur - Barmi 12.90 19.77 39.80 82.20Balabo - Puradia 17.50 22.21 51.80 59.40Barrahat - Rajpara 33.30 24.34 70.30 80.80Mohadevpur-Matajee 35.60 33.50 35.60 79.60Nachole-Mollickpur 49.00 29.41 22.91 33.90Dhunot-Mothurapur 32.50 33.50 52.40 49.40Pathanpara - Hopehat 7.10 5.87 32.71 82.20RHD - Dekuria 7.30 8.21 27.10 33.30Akkelpur - Tilokpur 44.30 34.64 34.00 59.70Average 28.24 26.51 40.08 56.51Source: SEME Report, 2002

4.2 Growth Center Markets: Five markets were selected for carrying out detailed economic evaluation based on actual costs, transactions and spoilage for the perishable commodities. Overall ERR for these 5 markets is 35%, varying from 19% to 52%, which is higher than 20.2% for all selected markets estimated at appraisal. The comparative ERRs for the 5 markets at the appraisal and after completion are tabulated in Table 3.2.

Table 3.2: Appraisal and Post Completion Economic Results for MarketsMarket At Appraisal After Completion

ERR (%) NPV ('000 Taka) ERR (%) NPV ('000 Taka)Sonatola 37 13827 48 11616Mominpur 25 8025 34 6331Syedpur 14 2055 19 6680Kawraid 32 26647 40 38388Source: Analysis provided by LGED

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4.3 Structures on Rural Roads: Six structures were selected from six different districts for detailed data collection and economic evaluation. The length of these structures varied from 2.5 m to 12 m and the cost from Tk 174,000 to Tk 850,000 for these six structures. Since, at appraisal, only a typical structure was considered for economic evaluation, the results for individual structures were not available for comparison. The results of economic evaluation of these structures, based on the post investment traffic and actual costs, are summarized below in Table 3.3. The ERR of structures varied from 20.48% to 56.55% and compares with the typical ERR of 30.2% at the time of appraisal.

Table 3.3: Post-construction Economic Evaluation of Structures

District Upazilla Name of Road Span (meter) Cost ('000 taka) ERR (%)Gazipur Gazipur-S Nawjur-Kashimpur 4.00 360 47.36Cox's Bazaar Ramu Tuttangarchara-Madrasha 12.00 621 30.99Sylhet Sylhet-S Malarchar-Bimandar 2.50 174 44.06Bagerhat Bagerhat-S Gotatpara-Taleshar 4.50 388 21.38Sirajgunj Sirajgunj-S Mohishamura-Simanatabazar 9.00 848 56.55Jhalokati Nalcity Bhabanipurbazar-Nalbunia 9.15 820 20.48Source: Information provided by LGED

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Annex 4. Bank Inputs

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

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

ImplementationProgress

DevelopmentObjective

Identification/PreparationNovember 1994 3 TS (1); TE (1); HECONS (1)May-June 1995 5 TS (1); TE (1); HECONS (1);

CONS (2)

Appraisal/NegotiationNov. -Dec. 1995 9 TS (2); TE (1); HEPRCONS

(1); HECONS (1); RS (2); INSCONS (1); SEIS (1)

SupervisionFeb. -Mar. 1997 5 TS (1); TE (1); HEPRCONS

(1); INSCONS (1); RS (1)S S

November 1997 7 TS (1); TE (1); SEIS (1);HEPRCONS (1); RS (1); DO (1); INSCONS (1)

S S

May-June 1998 5 TS (1); TE (1); RS (1); SEIS (1); DO (1)

S S

November 1998 5 TE (2); HEPRCONS (1); RS (1); DO (1)

S S

March 1999 1 TE (1) S SSeptember 1999 5 TE (1); RS (1); SEIS (1); DO (1);

FMS (1)S S

Jan.-Feb. 2000 7 TE (1); RS (1); SEIS (2); DO (1); FMS (1); HEPRCONS (1)

S S

Feb.-Mar. 2001 6 TS (1); TE (1); RS (1); SEIS (1); DO (1); FMS (1)

S S

ICRMay 2002 8 TS (1); HE (1); TP (1); RS

(1); FMS (1); SEIS (1);DO (1); INSCONS (1)

S S

TS=Transport Specialist, TE=Transport Engineer, HECONS=Highway Engineer Consultant, CONS=Consultant, HEPRCONS=Highway Engineer / Procurement Consultant, RS=Resettlement Specialist, INSCONS=Institutional Consultant, SEIS=Socio Economic Impact Specialist, DO=Disbursement Officer, FMS=Financial Management Specialist, HE=Highway Engineer, TP=Transport Planner

(b) Staff:

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

Identification/Preparation 102 273Appraisal/Negotiation 97 226Supervision 182 368ICR 18 37Total 399 904

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

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

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

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

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Annex 6. Ratings of Bank and Borrower Performance

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

6.1 Bank performance Rating

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

6.2 Borrower performance Rating

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

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Annex 7. List of Supporting Documents

Staff Appraisal Report, November 22, 1996Development Credit Agreement, January 8, 1997Memorandum and Recommendation of the President on a proposed Supplemental Credit, May 19, 1999Agreement amending the Development Credit Agreement, June 21, 1999Aide MemoiresSocio-Economic Monitoring & Evaluation, Completion Report, June 2002Borrower's Project Completion Report Socio-Economic Impact Study, Final Report

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Additional Annex 8. Socioeconomic Impact of Rural Roads

1. Background

1.1 Based on the GoB’s strategy for rural development, the LGED has been implementing a series of RDPs to improve rural transport and trading infrastructure. One of these was the Bank-funded RRMIMP, which was implemented in eight districts of the northwest region. A follow-on project (the Project) was initiated in mid-1996 to extend the scope and the geographical coverage of the earlier project, and added six more districts in Greater Dhaka area.

1.2 A built-in element of the Project was the continuous monitoring and evaluation of the direct and indirect effects of the Project. The BIDS was commissioned to carry out a study to analyze and quantify both the short-term and longer-term impacts of rural road improvements on pertinent economic and social indicators within the project influence areas. The BIDS conducted a benchmark socio-economic survey before road improvements took place in May-September 1997. The survey was repeated during August 2000 to February 2001 after the road improvements, in order to collect the same set of information, for assessing the impacts on short-term. This annex summarizes the BIDS findings on the employment and poverty impact of the Project, in the short-term. Third phase of surveys will be carried out later, to assess the longer-term impacts. The findings of the SEME study, carried out separately through the DSMC, are presented under Annex 3.

2. Data Description and Methodology

2.1 For the purpose of the impact study, ten project roads and four control roads were originally selected for the study. Six of the project roads were in the northwestern districts, and the four were in the Greater Dhaka Area. The two control roads were in northwestern districts, while the other two were in Greater Dhaka districts. The control roads were chosen to make sure that they are not programmed for development for the duration of the study, and were selected from areas that were similar to the areas around the relevant project roads in socio-economic and ecological conditions and road density. For the analysis, the four project roads that had controls were designated as Project-I roads, while the remaining six project roads for which no controls were selected were designated as Project-II roads.

2.2 In terms of the selection of villages for the study, one roadside village was selected for each of the 14 sample roads (ten project and four control roads). In addition, one remote village was selected for each of the sample roads for assessing the decay effects of infrastructure development. The remote villages are similar to the roadside villages, except for their distance and were purposively selected to be at least two km away from the study road or from any other paved road. Thus, there were 28 study villages in all - 14 roadside and 14 remote, of which 8 fell under Project-I area, 8 were control villages, and 12 fell under Project-II area.

2.3 In terms of household survey, 50 households were originally selected (for benchmark survey) from each of the 28 study villages using stratified random sampling procedure, which gave 1400 sample households. However, because of the reduction in the number of study roads and people moving out of the area, the size of the sample households for the repeat survey was reduced to 872.

2.4 Information on a wide range of socio-economic variables were collected from the study area for “before-after” and “with-without” infrastructure development situations. The “before-after” comparison was intended to indicate the change that had taken place during the inter-survey period. The information

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was contrasted with the data from the “with-without” situation to ascertain the extent to which the observed changes were autonomous in nature and not influenced by road development. Multivariate regression analysis were used to assess the direction and the magnitude of change and to examine whether there are differences between the project and the control area with respect to these changes.

2.5 Three sets of field surveys were initiated for collecting information regarding the impact of road and market infrastructure improvement on various sectors of the rural economy. These are: (a) Household Survey, (b) Market, Community & Facility Survey, and (c) Transport Survey.

3. Findings of the Study

3.1 Impact on Rural Employment and Agriculture Diversification

3.1.1 Migration. The analysis conducted using the ex ante and ex post data reveals that the reduction in transport costs resulting from the developments of rural transport infrastructure facilitates the movement of labor to employment centers, and thus reduces the need for out-migration from rural areas to the far away places in search of employment. The number of household members in project area increased by 1.8%, after controlling for normal population, suggesting that there was an in-migration to the villages with project roads. In contrast, in the control areas, the number of household members declined by 1.5%, after controlling for normal population changes, suggesting an out-migration of people from villages where rural road improvements did not take place.

3.1.2 Labor Force Growth and Participation. During the inter-survey period, labor force, defined as those persons between the ages of 10 and 86 who were either employed or actively looking for work, increased by nearly 13.3% in the Project I area and by 9.1 % in the control area. Similarly, the project areas showed a 3.1% increase on economic participation rate of the labor force, versus only 2.1% in control areas.

3.1.3 Incidence of Female Employment. The bulk of the changes observed in labor force and in economic participation appear to be due to increase in the size of the female labor force and female participation rate, suggesting that the rural road improvements had a gender dimension. Before road development, the incidence of female employment was rather low in the study area, and the bulk of female employment before road development was in the service sector including housemaid, teacher, other services etc. During the inter-survey period, female employment declined in the control area but increased by 50% in the project area. However, almost all the incremental employment remained limited to the service sector.

3.1.4 Non-agricultural Employment. Diversification of the rural economy away from agriculture is one of the prime considerations behind initiatives towards rural infrastructure development. The results show that agriculture has been the dominant economic activity in the study area both before and after road development. However, while agriculture accounted for nearly 64.9% of the employed population in the project area before road development, it declined after road improvement to 52.9%. More importantly, the decline in agriculture employment was more pronounced in the project area than the control area. The evidence therefore suggests that road infrastructure development results in employment diversification where non-agricultural employment increased at a much higher rate in project areas compared to the control area during the inter-survey period.

Trade, transport, and service were the dominant forms of non-agricultural activities in the study area with manufacturing being somewhat less important. After road development, however, project areas experienced higher growth in manufacturing employment, as compared to the control areas. Increase in

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manufacturing employment took place in bakery, sweetmeat, handloom, and goldsmith.

3.1.5 Diversification to Non-Crop Agriculture. An expected outcome of rural infrastructure development is diversification of agriculture through the development of various non-crop activities. The evidence shows that there has been some improvement in the project area in this respect. Employment in livestock and poultry activities increased from 0 to 7 in project areas. One possible interpretation of this limited improvement is that while infrastructure development is a necessary condition for growth of non-crop agriculture, this alone may not be sufficient to overcome other supply-side bottlenecks that may be constraining the growth of these sub-sectors.

3.2 Impact on Poverty

3.2.1 Changes in Poverty level. The analysis shows that faster progress in poverty reduction during the inter-survey period was observed in the project areas than the control areas. The proportion of population below the poverty line decreased by 2% in the project areas, while it increased by 4% in the control areas.

3.2.2 Physical Asset. Higher physical capital endowment such as agricultural and non-agricultural assets is an important source for accelerating growth in household incomes. Three aspects are noteworthy. The pace of physical capital accumulation was much higher in project areas than in control areas. The average amount of fixed assets has increased across the land ownership groups during this period. However, there was a high degree of inequality in the ownership of non-land fixed assets. A significant shift has taken place in the portfolio of assets favoring non-agricultural assets across all the land ownership categories. This is, perhaps, because these assets yield higher incomes than agricultural assets. The portfolio diversification in favor of non-agriculture has been more pronounced in the context of project areas compared with the control areas, consistent with the hypotheses that road improvements support diversification activities in rural areas. The share of non-agricultural assets has increased dramatically from 25% to 51% after road improvement in the project areas, while the pace of diversification was rather modest in the control areas, increasing from 25% to 30 % in the inter-survey period.

3.2.3 Growth in Consumption Expenditure. Per capita annual consumption grew by 1.5% during the inter-survey period in all study villages. But the growth in consumption expenditure was twice as high in the project areas compared with the control areas (2% vs. 1%). It may be noted that the initial level of consumption was higher in the project areas than in control areas.

3.2.4 Incidence of “Hungry Poor”. The incidence of “hungry poor”, measured by the head-count index based on direct calorie intake, has gone down at a faster pace in the project areas relative to the control areas. The annual growth rate in per capita calorie intake was 1.5% in the project areas compared with only 0.1% in the control areas. Faster progress in the overall supply of calorie at the aggregate level is possibly the outcome of higher agricultural growth and greater expansion of non-agricultural opportunities in the project areas following the development of road network. From the food security perspective, it is important to consider the distribution of food consumption across, suggesting that the impact of roads on the distribution of food consumption has been quite favorable.

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