Bangladesh: Dhaka–Chittagong Expressway Public–Private ...€¦ · 1. Dhaka and Chattogram...

Completion Report

Project Number: 45174-001 Loan Number: 2856 June 2020

Bangladesh: Dhaka–Chittagong Expressway Public–Private Partnership Design Project This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – Taka (Tk)

At Appraisal At Project Completion (20 Feb 2012) (7 October 2017)

Tk1.00 = $0.012 $0.012 $1.00 = Tk81.93 Tk81.96

ABBREVIATIONS

ADB

APFS – –

Asian Development Bank annual project financial statements

EDC EMP IEE MOF MORTB PIU PPP RHD SDR SPS TA VGF

– – – – – – – – – – – –

engineering design consultant environmental management plan initial environmental examination Ministry of Finance Ministry of Road Transport and Bridges project implementation unit public–private partnership Road and Highways Department special drawing right Safeguard Policy Statement technical assistance viability gap funding

NOTES

(i) The fiscal year (FY) of the Government of Bangladesh and its agencies ends on 30 June. “FY” before a calendar year denotes the year in which the fiscal year ends, e.g., FY2020 ends on 30 June 2020.

(ii) In this report, “$” refers to United States dollars. Vice-President Shixin Chen, Operations 1 Director General Kenichi Yokoyama, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division (SATC), SARD Team leader Masayuki Tanemura, Transport Specialist, SATC, SARD Team member Cynthia Gutierrez, Project Analyst, SATC, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS BASIC DATA I I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 2

A. Project Design and Formulation 2 B. Project Outputs 2 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 4 G. Consultant Recruitment and Procurement 4 H. Safeguards 5 I. Monitoring and Reporting 6

III. EVALUATION OF PERFORMANCE 6 A. Relevance 6 B. Effectiveness 7 C. Efficiency 7 D. Sustainability 7 E. Development Impact 8 F. Performance of the Borrower and the Executing Agency 8 G. Performance of the Asian Development Bank 8 H. Overall Assessment 8

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 9 A. Issues and Lessons 9 B. Recommendations 10

APPENDIXES 1. Design and Monitoring Framework 11 2. Project Cost at Appraisal and Actual 13 3. Project Cost by Financier 14 4. Disbursement of ADB Loan Proceeds 16 5. Contract Awards of ADB Loan Proceeds 17 6. Chronology of Main Events 18 7. Status of Compliance with Loan Covenants 19

BASIC DATA A. Loan Identification 1. Country Bangladesh 2. Loan number and financing source 2856-BAN, Concessional ordinary capital

resources 3. Project title Dhaka–Chittagong Expressway

Public–Private Partnership Design Project 4. Borrower People’s Republic of Bangladesh 5. Executing agency Ministry of Road Transport and Bridges 6. Amount of loan $10,000,000 equivalent to SDR6,439,000

($1.553/ SDR) 7. Financing modality TA Loan

B. Loan Data 1. Appraisal – Date started – Date completed

14 September 2011 22 September 2011

2. Loan negotiations – Date started – Date completed

29 February 2012 29 February 2012

3. Date of Board approval 30 March 2012 4. Date of loan agreement 3 April 2013 5. Date of loan effectiveness – In loan agreement – Actual – Number of extensions

2 July 2013 13 June 2013 Not applicable

6. Project completion date – Appraisal – Actual

22 January 2015 7 October 2017

7. Loan closing date – In loan agreement – Actual – Number of extensions

31 March 2016 31 March 2018 1

8. Financial closing date – Actual

13 August 2018

9. Terms of loan – Interest rate – Maturity – Grace period

1% per annum during the grace period; 1.5% thereafter 32 years 8 years

10. Terms of relending None

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11. Disbursements a. Dates

Initial Disbursement 6 October 2014

Final Disbursement 6 June 2018

Time Interval 44 months

Effective Date

13 June 2013

Actual Closing Date 13 August 2018

Time Interval 62 months

b. Amount ($ million)

Category

Original Allocation

(1)

Increased During

Implementation (2)

Canceled During

Implementation (3)

Last Revised

Allocation (4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance (6 = 4–5)

1. Consulting services

8.750 0 0 8.750 7.063 1.687

2. Contingencies 1.000 0 0 1.000 0.000 1.000 3. Financing

charges during implementation

0.250 0 0 0.250 0.145 0.105

Total 10.000 0 0 10.000 7.208 2.792

C. Project Data 1. Project Cost ($ million)

Appraisal Estimate Actual Total Cost 12.50 9.903

Note: The project cost was not separated by foreign exchange and local currency in the report and recommendation of the President or the project administration manual. 2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation cost Borrower-financed 2.50 2.695 ADB-financed 9.75 7.063 Other external financing 0.00 0.000 Total implementation cost 12.25 9.758 Interest during construction costs Borrower financed 0.00 0.000 ADB-financed 0.25 0.145 Other external financing 0.00 0.000 Total interest during construction cost 0.25 0.145

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual A. Consulting Services Engineering design 8.000 6.734 Transaction advisory 0.500 0.329 Safeguard implementation 0.250 0.000

Subtotal (A) 8.750 7.063 B. Project Management 1.250 0.797 C. Taxes and Duties 1.250 1.898 D. Contingencies 1.000 0.000 E. Financial Charges During Implementation 0.250 0.145 Total 12.500 9.903

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4. Project Schedule

Item Appraisal Estimate Actual Date of contract with consultants (engineering design) 31 Dec 2012 03 Jul 2014 Date of contract with consultants (transaction advisory) 31 Mar 2013 28 Sep 2015 Completion of engineering design 31 Jul 2017 16 Jul 2017 Completion of transaction advisory services 27 Sep 2017 7 Oct 2017

5. Project Performance Report Ratings

Implementation Period Single Project Ratingsa

From 13 June to 31 December 2013 From 1 January to 31 December 2014 From 1 January to 31 December 2015 From 1 January to 31 December 2016 From 1 January to 31 December 2017 From 1 January to 13 August 2018

On Track On Track On Track On Track On Track On Track

a Ratings for all quarterly validation periods are on track. D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of Members

Fact-finding 14–22 Sep 2011 2 18 a,c Inception 24–25 Sep 2014 2 4 a,b Review 1 3–5 Feb 2015 2 6 a,c Review 2 9–12 Nov 2015 5 20 a,c,d Project completion review 26 Feb–3 Mar 2020 5 25 a,b,c,d a = principal transport specialist, senior transport specialist or transport specialist, b = senior operations assistant or project analyst, c = senior project officer, associate project officer or project officer, d = staff consultant.

I. PROJECT DESCRIPTION 1. Dhaka and Chattogram (formerly called as Chittagong) are the two major metropolitan areas of Bangladesh. The Dhaka–Chattogram corridor is central to Bangladesh’s economy since it generates almost 50% of the national gross domestic product and handles about 80% of international maritime trade. The 250-kilometer, two-lane National Highway N1 is the only major road that connects Dhaka to Chattogram. But road traffic along the N1 had long been hampered by a lack of capacity and bridge load restrictions. The journey between Chattogram and Dhaka can take up to 10 hours because of road congestion. To alleviate pressure on the N1 highway, the government planned a new access-controlled expressway between Dhaka and Chattogram. The new expressway would provide additional capacity and improve safety along this important corridor while also accommodating future traffic growth. 2. An earlier Asian Development Bank (ADB) project, the Road Maintenance and Improvement Project, produced a feasibility study and conceptual design in 2008 to finance an “access-controlled Dhaka-Chittagong Expressway” under a public–private partnership (PPP) scheme.1 This study selected a road alignment that was technically, economically, and financially viable based on 2008 assumptions, costs, and revenue streams. However, the government failed to attract private investment for the proposed design, and instead began to consider an entirely new route alignment. The cost and revenue stream subsequently changed after the 2008 study, and an understanding was reached by the government that detailed project preparation would be required to implement the Dhaka–Chittagong Expressway Project—the first large-scale PPP project planned for Bangladesh’s transport sector. 3. At the request of the Ministry of Communications (now the Ministry of Road Transport and Bridges), ADB approved a technical assistance (TA) loan of $10.0 million equivalent from ADB’s concessional ordinary capital resources on 30 March 2012 for the Dhaka–Chittagong Expressway Public–Private Partnership Design Project.2 The loan agreement was signed on 3 April 2013 and became effective on 13 June 2013. The expected impact is the efficient construction, operation, and management of the Dhaka–Chittagong Expressway by 2020 under a PPP arrangement. The planned outcome is an agreed-upon design of the Dhaka–Chittagong Expressway implemented under a PPP. The project’s intended outputs are listed in paragraph 8. The loan was financially closed on 13 August 2018. The preparation of this project completion report was delayed because in October 2019 the government decided not to proceed with the ensuing project.

1 ADB. Bangladesh: Road Maintenance and Improvement Project. Manila. At the request of the government, ADB

approved the use of loan savings from the Road Maintenance and Improvement Project to undertake the feasibility study and conceptual design for the four-lane, access-controlled Dhaka–Chattogram Expressway.

2 ADB. Bangladesh: Dhaka–Chittagong Expressway Public–Private Partnership Design Project. Manila. The Ministry of Communication was renamed the Ministry of Road Transport and Bridges in September 2014 to better reflect the nature of its work.

https://www.adb.org/projects/33243-013/main

https://www.adb.org/projects/45174-001/main

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II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 4. In ADB’s country partnership strategy for Bangladesh, 2011–2015, ADB committed to support Bangladesh in improving roads and developing corridors to facilitate subregional trade.3 In terms of private sector participation, private sector operations would initially focus on encouraging bankable PPPs for toll roads and elevated expressways. The country partnership strategy for Bangladesh, 2016–2020 commits ADB to helping Bangladesh ease infrastructure constraints in transport through, among others, transaction advisory services for PPPs.4 The project was in line with the following components of ADB’s Strategy 2030: reducing poverty and inequality, strengthening government capacity, and fostering regional cooperation. 5 The construction of the Dhaka–Chittagong Expressway was listed in Bangladesh’s Sixth Five-Year Plan, 2011-2015 as a priority project of the Road and Highways Department (RHD), a department of the Ministry of Road Transport and Bridges (MORTB).6 The expressway is also among the goals and targets of the Seventh Five-Year Plan, 2016–2020, which further promotes PPPs to address a lack of PPP implementation capacity within the MORTB and its departments.7 5. Because the project was designed to prepare the engineering design for an ensuing PPP project and to help the government implement that project (including the preparation of bidding documents), a TA loan was an appropriate vehicle for ADB assistance. The design and monitoring framework clearly described the TA loan project’s potential achievements, with realistic targets and indicators. Under the project, the RHD and ADB consulted with stakeholders to ensure that the PPP scheme for the ensuing project would be feasible. The project would be Bangladesh’s largest and most costly PPP ever; the RHD realized that its success would require strong project ownership.

6. After the loan closing date in March 2018, the RHD continued its efforts to launch the Dhaka–Chittagong Expressway PPP project, with the assistance of a PPP technical assistance fund provided by the PPP Authority under the Prime Minister’s Office. The Bangladesh University of Engineering and Technology conducted a technical review of the design prepared by the engineering design consultant (EDC) under the TA loan project. The RHD issued a request for registration of interest on 6 February 2019 to consult with prospective developers, concessionaires, investors, and financiers for their feedback in developing the project structure. A total of 29 entities responded from all over the world, 22 of which had market sounding consultations with ADB to obtain feedback regarding project delivery considerations. However, in October 2019, the government decided not to proceed with the PPP project, and is now requesting that ADB instead finance the Dhaka–Chattogram National Highway Project, which will involve widening of the existing National Highway N1 instead of constructing an entirely new highway. B. Project Outputs 7. The project implemented two consulting services for (i) feasibility study and detailed design, and (ii) transaction advisory. However, the transaction advisory consulting services were not fully completed.

3 ADB. 2011. Country Partnership Strategy: Bangladesh, 2011–2015. Manila. 4 ADB. 2016. Country Partnership Strategy: Bangladesh, 2016–2020. Manila. 5 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 6 Government of Bangladesh, Planning Commission. 2011. Sixth Five-Year Plan, FY2011–FY2015. Dhaka. 7 Government of Bangladesh, Planning Commission. 2015. Seventh Five-Year Plan, FY2016–FY2020. Dhaka.

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8. The expected outputs of this project are (i) a feasibility study with an assessment of different route alignment options; (ii) economic and financial analysis of the ensuing Dhaka–Chittagong Expressway Project, structuring of the PPP, establishment of the financial model, and recommendation of the PPP structure for the project; (iii) capacity development for PPP project implementation; (iv) detailed engineering design for the selected option including the finalization of all safeguard documents; (v) transaction advisory services for the preparation of the prequalification and bidding documents for the concession agreement, preparation of the concession agreement, and support for the project executing agency during the bidding process; and (vi) support for safeguard implementation in the project. 9. At project completion, outputs 1–4 had been achieved, output 5 had been partially achieved, and output 6 had not been achieved. Delivery of achieved outputs were not timely as indicated in the design and monitoring framework since the contracts for the two consulting services were delayed. The EDC was mobilized in July 2014 and conducted the feasibility study along with an assessment of different alternative alignment options based on the economic and financial analysis, and it completed the detailed engineering design and drawings for the selected option. A number of PPP structures were assessed and build-operate-transfer was selected as a suitable structure for the ensuing project. The report on the recommended PPP structure was submitted in November 2014 and approved by the government (for outputs 1, 2, and 4). For output 3, two trainings for project officers were carried out to enhance their capacity for PPP project implementation. The EDC submitted the final report in April 2017. After being mobilized in October 2015, the transaction advisory consultant prepared a prequalification document and financial model, and recommended that the RHD implement the project in three packages. The transaction advisory consultant also prepared a draft request for qualification. The RHD asked the Ministry of Finance (MOF) to approve viability gap funding (VGF) to ensure the feasibility of the PPP project. However, the MOF delayed approval of the VGF because of an argument between the RHD and the Bangladesh Bridge Authority about the executing authority of the PPP project. Regarding output 5, the transaction advisory consultant prepared the draft prequalification document but did not prepare bidding documents for the concession agreement within the timeline because MOF’s approval of VGF was delayed and RHD could not extend the loan closing date (para. 13). Output 6 was not conducted because the government had decided in 2016 that this should be done during the implementation stage of the project. C. Project Costs and Financing 10. The original project cost was $12.5 million, with $10.0 million equivalent (80%) to be financed by ADB. The ADB loan was from ADB’s concessional ordinary capital resources under its London interbank offered rate-based lending facility, with a 32-year term, including an 8-year grace period. At completion, the total project cost was $9.9 million, of which $7.2 million was disbursed by ADB without cost overrun. Final disbursement was undertaken in June 2018. The cost underrun was caused by the (i) contractual savings of the two consulting services, (ii) unconducted components under the transaction advisory consulting service, and (iii) unconducted safeguard implementation support consulting service. In August 2018, undisbursed loan proceeds totaling SDR1.3 million ($1.9 million equivalent) were canceled and the loan was closed. 11. The original financing plan assumed that ADB would finance $10.0 million for consulting services, contingencies, and financing charges during implementation, while the government would finance $2.5 million for project management and tax and duties. ADB actually financed $7.2 million for consulting services, contingency, and financing charges. The government financed $2.7 million for project management services and tax and duties.

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D. Disbursements 12. The loan proceedings were disbursed in accordance with the applicable guidelines under ADB’s Loan Disbursement Handbook (2007, as amended from time to time). ADB originally projected to disburse $1.7 million in 2015 and $8.3 million in 2016, which was realistic. The first actual disbursement of $0.28 million was made on 6 October 2014. However, the loan closing date was extended by 2 years (para. 13), and the final disbursement of $3,600 was made on 6 June 2018. The total disbursed amount was $2.8 million less than the original amount with the reasons discussed in para. 10. Only direct payment was used under this loan. E. Project Schedule 13. The original loan closing date was 31 March 2016. To account for the initial delay in recruitment and mobilization of the international EDC for the feasibility study and detailed design (para. 16), the loan closing date was extended once, to 31 March 2018. The contract between the RHD and the international consultant for transaction advisory services was signed on 28 September 2015, 30 months behind the original schedule, to synchronize it with the schedule for the EDC and the government’s decision-making timeline for the ensuing PPP project (para. 17). Based on the recommendation by the transaction advisory consultant, the RHD submitted the VGF application to the MOF for the PPP project. Also, the transaction advisory consultant prepared a draft request for proposal for the PPP project. The RHD then requested that ADB extend the loan closing date again, to 30 June 2019. However, ADB did not support the request and closed the loan validity on 31 March 2018 (para. 18). The project implementation period from the loan’s effective date to its closing date was 58 months, 24 months behind the original schedule. F. Implementation Arrangements 14. The MORTB was the executing agency of the project. It formed the project implementation unit (PIU) which comprised five officers headed by a project director, all from the RHD. At the time of project inception, two PIU positions were vacant. The project steering committee included representatives from the ministries or government agencies overseeing national planning, commerce, trade, finance, and energy; two municipalities; and concerned districts. The project steering committee was in charge of high-level and cross-sectional policy decisions, such as the selection of the preferred expressway route and the preferred PPP scheme. This steering committee represented a wide range of stakeholders, but may not have been an effective vehicle for making high-level decisions concerning a highly complex and novel PPP project. The RHD also established a project implementation committee composed of the chief engineer of the RHD (chair) and representatives from the planning commissions of the MORTB and the RHD. The project implementation committee was tasked with (i) monitoring the progress of the project, (ii) assisting the project director to undertake the project, (iii) resolving issues and problems arising out of implementation, and (iv) making recommendations to the steering committee to improve project implementation. These supervising structures basically worked to manage the project, but a smaller steering committee comprising key policy-level decision makers at the MOF, the MORTB, the Office of the Prime Minister, and ADB would have enabled sharper focus on key issues and faster decision making. G. Consultant Recruitment and Procurement 15. Consulting services were to be undertaken through three contracts: (i) feasibility study and detailed design (international consultant), (ii) transaction advisory (international consultant), and

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(iii) safeguard implementation support (national consultant). All were to be recruited through quality- and cost-based selection: international consultants with a technical:financial ratio of 90:10, and national consultants using 80:20. Recruitment of consultants was carried out in accordance with ADB’s Guidelines on the Use of Consultants (2013, as amended from time to time). To avoid start-up delays, the government requested that ADB carry out international consultant selection for the first two contracts on its behalf, retaining its authority for contract negotiation and contract signing. ADB evaluated the consultants’ proposals and selected the consultants, and the RHD subsequently negotiated with them. 16. According to the approved implementation schedule, the consultant for the first contract (feasibility study and detailed design) was to be selected in December 2012. On 14 November 2013, ADB issued a letter requesting that the RHD negotiate with SMEC International Pty Ltd in a joint venture with Oriental Consultants Co Ltd and in association with Castalia Ltd and ACE Consultants Ltd, the first-ranked EDC for the package. RHD’s negotiation committee held official negotiations with the first-ranked EDC on 26–27 November and 3 December 2013, but they failed to reach an agreement on the level of outputs required for the detailed design. Eventually, the RHD sought ADB’s recommendation. ADB provided guidance as an observer to the negotiations. The RHD and the first-ranked EDC finally signed the contract on 3 July 2014, which was 18 months behind the original projection, and the EDC was mobilized in July 2014. The contract amount was originally estimated at $8.0 million; the actual contract amount was $7.4 million. 17. At loan approval, the contract for the transaction advisory services was to be selected by March 2013, 3 months after the selection of the EDC. Since the transaction advisory work involved preparing bid documents for the PPP and the support of the RHD in carrying out the PPP procurement process, this contract was closely linked to government decision-making regarding the ensuing PPP project. During the inception mission in September 2014, the RHD requested that ADB commence the process of recruiting the consultant so that the consultant could be mobilized by May 2015 (more than 2 years after the March 2013 target date) to enable project procurement to be synchronized with the work of the EDC, which would save substantial time. The contract with the transaction advisory consultant, PricewaterhouseCoopers, was actually signed on 28 September 2015, 30 months behind the original schedule. The actual contract amount of $0.5 million matched the original contract. 18. Only 3 weeks before the loan closing date, the RHD requested a second extension of the loan closing date. At that time, ADB was concerned that (i) the concessionaire selection process under the project had not yet started, (ii) it was unclear if the concessionaire selection process could be completed within the requested extension period, (iii) the VGF for the ensuing project had not been approved yet by the MOF, and (iv) it was uncertain whether the project could go through as a PPP without the government advancing VGF, land, resettlement and rehabilitation, and utility shifting activities. Because of these concerns, ADB did not extend the loan closing date and closed the loan as scheduled in March 2018. As a result, the transaction advisory consultant did not complete some of the expected works within the timeline, and the contract was closed. H. Safeguards 19. The project was not expected to have any adverse environmental or social impacts because of the nature of the TA loan. The project was categorized C for environment, involuntary resettlement, and indigenous peoples. The EDC prepared safeguard documents for the PPP project, such as the initial environmental examination (including the environmental management plan), the resettlement plan, and the indigenous peoples plan, in compliance with ADB’s Safeguard Policy Statement (2009) and government guidelines, regulations, and policies. The

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MORTB duly approved these safeguard documents. During the preparation of the initial environmental examination, the EDC consulted with the public to discuss environmental baseline conditions and degradation of the environment. The EDC assessed gender, consultation and participation, labor, HIV/AIDS, and other social risks to the PPP project and prepared a mitigation plan to address these risks. 20. Though the project originally intended the safeguard implementation support for the ensuing PPP project which would support land acquisition or displaced persons’ resettlement and rehabilitation, this was not realized because the government had decided in 2016 that this should be done during the implementation stage of the ensuing PPP project. I. Monitoring and Reporting 21. Implementation of the project complied with most loan covenants. Out of 29 covenants stipulated in the loan agreement, 15 covenants were complied with, 2 covenants were not complied with, and 3 covenants were not relevant since no procurement occurred and no bidding documents were prepared. The covenant on establishing a PIU headed by a project director within 30 days of loan effectiveness was not complied with (the PIU was established 3 months after loan effectiveness). The covenant on ensuring that the same persons continue to be assigned to key positions (including that of project director) in the PIU throughout the project implementation period was not complied with since three persons held the role of project director. The nine operational covenants were not applicable since the project did not materialize. Detailed status of compliance with the covenants is attached as Appendix 7. 22. The project administration manual required the MORTB to monitor project performance, policy compliance, safeguards, and gender and social dimensions. ADB requested that the MORTB provide ADB with (i) quarterly progress reports, (ii) consolidated annual reports, and (iii) a project completion report. However, the MORTB failed to submit quarterly progress reports or consolidated annual reports since the government failed to recognize those requirements. 23. The RHD maintained the account for the project, and prepared and submitted annual project financial statements (APFS) audited by the Foreign Aided Projects Audit Directorate. All the APFS from effective date to closing date (Fiscal Year [FY] 2014 to FY2019) were submitted on time (except for the first APFS, which was 0.5 months late), which met the financial reporting and audit covenant prescribed in the loan agreement. The Foreign Aided Projects Audit Directorate issued unqualified (clean) opinions for all the APFS. ADB reviewed the APFS and made clarifications and requests for action by the RHD to make the APFS compliant with loan covenant requirements and to enhance their quality. Constrained by existing project reporting templates, the RHD failed to address these ADB requests. ADB completed the review of the final APFS (FY2019) and awaits a response to its observations (e.g., clarification on some arithmetical errors in the statements, a request to submit a detailed reconciliation summary, and confirmation of actions taken to address two audit recommendations).

III. EVALUATION OF PERFORMANCE A. Relevance 24. The project is relevant during appraisal and continues to be relevant at completion. The expected impact of the project is Dhaka–Chittagong Expressway efficiently constructed, operated, and managed under a PPP. As traffic demand grew and as transport capacity between Bangladesh’s two main cities continued to be limited, the PPP project was expected to relieve

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these constraints. The project as envisaged seeks to contribute to the country’s vision of becoming a middle-income country by 2021, reaching upper-middle-income status by 2030, and reaching high-income status around 2041. The government’s Seventh Five-Year Plan, 2016–2020 included the Dhaka–Chittagong Expressway PPP Project in its priority list of projects. The project was in line with ADB’s country partnership strategy to support private sector investment. Although the government officially cancelled the construction of the Dhaka–Chittagong Expressway in October 2019, it appears that this decision was made at a high level of government and that the RHD could not have foreseen this decision. PPP remains an appropriate modality for developing transport infrastructure in Bangladesh. The government will continue to promote PPP through the PPP Authority, which was established in 2010, and the PPP Act (2015). Any future effort to rekindle the expressway project can be built on the achievements of this project. The project was well-designed and the design and monitoring framework was adequately prepared. Since the mission of the project was to prepare the engineering design and support the government to implement the PPP project, including the preparation of bidding documents for the ensuing project, a TA loan was an appropriate vehicle (paras. 5, 32). The expected and actual results of the TA loan did not overlap with other development partners’ interventions. Therefore, this project is rated relevant. B. Effectiveness 25. The expected outcome of the project is an agreed-upon design of the Dhaka–Chittagong Expressway implemented under a PPP. The first outcome indicator—submission and approval of a feasibility study, including recommended PPP, in 2014—was achieved. The second indicator—submission and approval of design and PPP contract documents in 2015—was partially achieved, since the contract documents were not prepared. Upon completion of the project, only four out of the six outputs had been achieved (para. 9). The output related to the selection of a concessionaire was not achieved because of the government’s cancellation of the PPP project. 8 Based on the level of achievement of the outcome and the outputs, this project is rated less than effective. C. Efficiency 26. TA loans do not require an economic internal rate of return analysis at appraisal or completion. The costs of consulting services for the feasibility study and detailed design were lower than originally projected. The total project underrun was $2.6 million (para. 10). Procurement of the EDC was delayed since it took longer than forecasted for the government to approve the shortlist of consultants and to negotiate with the awarded EDC. This delay, combined with additional work that remained to be completed (such as contracting the transaction advisory consultant), led to the loan closing date being extended by 2 years. The original project implementation period was 34 months, and the actual implementation period was 58 months. Despite the extension, two outputs were not achieved. Based on these issues, the project is rated less than efficient. D. Sustainability 27. Despite the best efforts of the RHD to take ownership of the project, a decision taken at the highest level of government ultimately led to the project being abandoned. Although the outputs of this TA loan project were not used to construct the Dhaka–Chittagong Expressway, the

8 Despite the cancellation of ensuing PPP investment project, the preparation of environmental and social safeguards

documents were all complied with and approved by MORTB (paras. 19-20).

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project contributed indirectly to enhancing the RHD’s knowledge of PPPs for future projects. This will come in handy considering that the government continues to support PPP projects (para. 23). Nonetheless, these positive effects are below expectations. The project is rated less than likely sustainable. E. Development Impact 28. Because the construction of the Dhaka–Chittagong Expressway was cancelled, the development impact of the project is rated unsatisfactory. F. Performance of the Borrower and the Executing Agency 29. The implementation arrangements were well prepared but a smaller project steering committee might have led to faster decision-making (para. 14). Although the loan closing date was extended by 2 years, the RHD finally requested the VGF to the MOF to realize the PPP project. The RHD was unable to take full control of the project because of an argument within the MORTB regarding the executing authority of the project (para. 9) so the MOF could not approve the VGF for the same reason. ADB ultimately denied the RHD’s request for a second extension of the loan closing date because VGF approval from the MOF was uncertain. As a result, some of the outputs expected from the transaction advisory consultant were not completed within the project period. The project completion review team observed project ownership by the RHD, but the RHD should have communicated more with ADB to keep the project on track. Also, the RHD failed to submit required reports, resulting in two covenants in the loan agreement not being complied with. Those deficiencies could have been avoided had the RHD communicated more closely with ADB. The performance of the borrower and the executing agency is rated less than satisfactory. G. Performance of the Asian Development Bank 30. From project commencement to project closure, six ADB officers managed the project. ADB fielded an inception mission in September 2014 and review missions in February and November 2015. No official mission was fielded from 2016 to 2018 when two consulting services were carried out and necessary reports were submitted because discussions in the MORTB on the executing authority of the ensuing project were ongoing (para. 9). The RHD was unable to discuss project implementation and financing of the ensuing project with ADB during this time. However, ADB communicated with the RHD closely, taking opportunities from missions for other projects to monitor the project status. ADB carefully and frequently advised the RHD at every important step of the project. This included closely reviewing the terms of reference (TOR) for consulting services to ensure compliance with ADB’s Safeguard Policy Statement. Furthermore, to avoid start-up delays, upon the government’s request, ADB carried out consultant selection on behalf of the government for (i) feasibility study and detailed design, and (ii) transaction advisory services. The MORTB highly appreciated this support. The performance of ADB is rated satisfactory. H. Overall Assessment 31. The project is rated relevant since it was aligned with the strategies of the government and ADB, and the design was appropriate and adequate. The project is rated less than effective because the outcome and output indicators were only partially achieved. The project is rated less than efficient because it took longer than projected to complete the limited outputs. The project is rated less than likely sustainable because the outputs will not be utilized for the project as planned

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given the cancellation of the ensuing PPP investment project. However, the outputs may be used for future projects. The overall rating of the project is less than successful.9

Overall Ratings Criteria Rating Relevance Relevant Effectiveness Less than effective Efficiency Less than efficient Sustainability Less than likely sustainable Overall Assessment Less than successful Development impact Unsatisfactory Borrower and executing agency Less than satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons 32. Since developing detailed design, preparing bidding documents or safeguard documents will take a long time, enhancing project readiness by preparing these documents before project approval is a key to reduce project implementation delay. The project did not achieve the intended outcome and some of the outputs due to the unexpected cancellation of the PPP project. However, considering the need for the project to prepare an ensuing PPP project, the TA loan was a suitable modality. Same types of project might be funded by project readiness financing, the subsequent modality of TA loan. 33. Consultants should be engaged expeditiously to support a streamlined and efficiently prepared PPP project, which will allow the government to enter into a fair agreement with the private sector based on a detailed design and proper allocation of risks between the parties. The recruitment of the consultants by the RHD should have been done as scheduled to avoid uncertainty on the PPP scheme and implementation delay. Since the RHD and the consultant took a long time in the negotiation of the consulting service for the feasibility study and detailed design, the recruitment of the transaction advisory consultant was delayed and project implementation took more time than its original schedule This caused the extension of the loan closing date and negatively affected the efficiency of the project. In the contract negotiation, there was the gap in interpretation of the TOR between RHD and the consultant in terms of the level of the detailed design to be developed. Actually, the TOR intended that the consultant would develop the detailed design mainly for reasonable cost estimate for the ensuing PPP project, while a concessionaire of the ensuing PPP project was expected to develop its own efficient and economic detailed design for actual construction works. If RHD and the consultant had understood this difference appropriately, the prolonged debate on this issue could have been avoided and an agreement reached more quickly. Taking into consideration the purpose of detailed design, the TOR of the consulting service for detailed design for future PPP design projects needs to be elaborated in order not to cause misinterpretation of requirements.

9 The draft PCR was sent to the government for their review but no comments were received within the agreed review

period.

10

B. Recommendations 34. Because funds available for the project are limited and the financing needs are large, opportunities for private sector participation had to be identified to structure and implement the ensuing PPP project. While many countries have attempted to use the PPP modality to develop road infrastructure, it remains challenging for large-scale infrastructure projects since the private sector may not decide on a large amount of investment and it is time-consuming to include various stakeholders in the PPP project and to conclude risk allocation among them. Therefore, the RHD should consider both PPP and public sector financing fairly under feasibility studies of future projects. If the project had been publicly financed, the construction of the expressway could have started right after the completion of the detailed design in July 2017. If PPP is found viable, collaboration between the RHD and ADB’s Office of Public–Private Partnership is required and recommended.

35. Further action or follow up. The RHD should maintain PPP implementation capacity, which was developed through the training provided under the project, and take advantage of this skill when necessary for future PPP projects. Assuming continued traffic growth between Dhaka and Chattogram, the RHD should consider with ADB how to address the lack of capacity of the road between the two cities without the PPP project, and to come up with alternative measures and appropriate financing arrangement.

36. Timing of the project performance evaluation report. ADB should prepare the project performance evaluation report as soon as possible. The PIU has already been dissolved which could make it difficult to obtain information.

Appendix 1 11

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and Targets Project Achievements Impact Dhaka–Chittagong Expressway efficiently constructed, operated, and managed under a PPP

Dhaka–Chittagong Expressway in operation under a PPP by 2020

Not achieved. The government decided not to proceed with the ensuing PPP project.

Outcome Agreed upon design of the Dhaka– Chittagong Expressway for implementation under a PPP

Submission and approval of feasibility study including recommended PPP in 2014 Submission and approval of design and PPP contract documents in 2015

Achieved. Feasibility study was submitted to, and approved by, RHD. Partially achieved. PPP contract documents were not prepared since the government decided not to proceed with the ensuing PPP project.

Outputs 1. Feasibility study with assessment of different route alignment options

Option for detailed design selected, and detailed design and tender documents completed by 2015

Achieved. Feasibility study and detailed design including tender documents were completed and the report was submitted by the consultant.

2. Economic and financial analysis for the follow-on project, structuring of the PPP, establishment of the financial model, and recommendation of the PPP structure for the follow-on project

PPP scheme selected by 2014 Achieved. Several PPP schemes were assessed and proposed by the consultants, and the government selected the build–operate–transfer structure.

3. Capacity development for PPP project implementation

Training program established by 2013 and training implemented by 2015

Achieved. Two trainings for capacity building were held by the consultant to provide realistic and practical ideas regarding the operations, maintenance, and overall performance of the completed expressway project.

4. Detailed engineering design for the selected option including the finalization of all safeguard documents

Detailed design report completed by 2015

Achieved. Detailed design with safeguard documents was completed and a report was submitted to RHD.

5. Transaction advisory services for the preparation of the prequalification and bidding documents for the concession agreement, and support for the project

Concessionaire under proposed PPP scheme selected by 2015

Partially achieved. Bidding documents were not prepared, and concessionaire was not selected since the government decided not to proceed with the PPP project.

12 Appendix 1

Design Summary Performance Indicators and Targets Project Achievements executing agency during the bidding process 6. Support for safeguard implementation in follow-on projecta

Safeguard documents prepared by 2014 Not achieved. The government decided to implement the safeguard support service at the implementation stage of the ensuing PPP project, but the government decided not to proceed with the ensuing PPP project.

a Expected output if the follow-on project is financed by ADB. Source: Asian Development Bank.

Appendix 2 13

PROJECT COST AT APPRAISAL AND ACTUAL ($'000)

Appraisal Estimate Actual

Item ADB GoB Total Cost ADB GoB

Total Cost

A. Base Cost 1. Consulting services

a. Feasibility study and detailed design

8,000 0 8,000 6,734 0 6,734

b. Transaction advisor 500 0 500 329 0 329 c. Safeguard implementation

component 250 0 250 0 0 0

2. Project management 0 1,250 1,250 0 797 797 3. Tax and duties 0 1,250 1,250 0 1,898 1,898

Subtotal (A) 8,750 2,500 11,250 7,063 2,695 9,758 B. Contingencies 1,000 0.00 1,000 0 0 0

Subtotal (B) 1,000 0.00 1,000 0 0 0 C. Financing Charges During Implementation

250

0

250

145

0

145

Subtotal (C) 250 0 250 145 0.00 145 Total (A+B+C) 10,000 2,500 12,500 7,208 2,695 9,903

ADB = Asian Development Bank, GoB = Government of Bangladesh. Sources: Asian Development Bank and Road and Highways Department estimates.

14 Appendix 3

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier

ADB

GoB

Amount

($ thousand) % of Cost Category

Amount ($ thousand)

% of Cost Category

Total Cost ($ thousand)

Item {A} {A/D} {B} {B/D} {D} A. Investment Costs

1. Consultants a. Feasibility study and detailed design

8,000 100.00 0 0.00 8,000

b. Transaction advisor 500 100.00 0 0.00 500 c. Safeguard implementation

component 250 100.00 o 0.00 250

2. Project management 0 0.00 1,250 100.00 1,250 3. Taxes and duties 0 0.00 1,250 100.00 1,250

Subtotal (A) 8,750 0.00 2,500 0.00 11,250 B. Contingencies 1,000 100.00 0 0.00 1,000 C. Financial Charges During

Implementation 250 100.00 0 0.00 250

Total Project Cost (A+B+C) 10,000 80.00 2,500 20.00 12,500 % Total Project Cost

ADB = Asian Development Bank, GoB = Government of Bangladesh. Source: Asian Development Bank.

Appendix 3 15

Table A3.2: Project Cost at Completion by Financier

ADB = Asian Development Bank, GoB = Government of Bangladesh. Source: Asian Development Bank and Roads and Highways Department estimates.

ADB

GoB

Amount

($ thousand) % of Cost Category

Amount ($ thousand)

% of Cost

Category Amount

($ thousand) Item {A} {A/D} {B} {B/D} {D} A. Investment Costs

1. Consultants a. Feasibility study and detailed design

6,734 100.00 0 0.00 6,734

b. Transaction advisor 329 100.00 0 0.00 329 c. Safeguard implementation

component 0 0.00 0 0.00 0

2. Project management 0 0.00 797 100.00 797 3. Tax and duties 0 0.00 1,898 100.00 1,898

Subtotal (A) 0 0.00 0 0.00 0 B. Contingencies 0 0.00 0 0.00 0 C. Financial Charges During

Implementation 145 100.00 0 0.00 145

Total Project Cost (A+B+C+D) 7,208 72.79 2,695 27.21 9,903 % Total Project Cost

16 Appendix 4

DISBURSEMENT OF ADB LOAN PROCEEDS

Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Annual Disbursement Cumulative Disbursement

Year Amount

% of Total Amount

% of Total 2014 1.0032 13.92 1.0032 13.92 2015 2.1491 29.82 3.1523 43.73 2016 2.4998 34.68 5.6521 78.41 2017 1.4913 20.69 7.1434 99.10 2018 0.0646 0.89 7.2080 100.00 Total 7.2080 100.00

ADB = Asian Development Bank. Source: Asian Development Bank.

Appendix 5 17

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Annual Contract Awards Cumulative Contract Awards

Year Amount

% of Total Amount

% of Total 2014 8.0764 93.9 8.0764 93.9 2015 0.5210 6.1 8.5974 100.0 Total 8.5974 100.0

ADB = Asian Development Bank. Source: Asian Development Bank.

18 Appendix 6

CHRONOLOGY OF MAIN EVENTS Date Event 2011 14–21 September Fact-finding Mission 2012 30 March Loan approval 2013 3 April Loan Agreement between Borrower and ADB 13 June Loan effectivity 2014 3 July Contract signed with EDC 29 July Minor change in implementation to defer APFS from December 2013 to December 2014 24–15 September Inception Mission (Inception Mission organized) 30 September Minor change in Implementation Arrangement to defer the requirement on the

submission of APFS for the year ended 2013 (submission of the APFS due on December 2013 be deferred to December 2014)

2015 12 January Extension of loan closing date from 31 March 2016 to 31 March 2018 3–5 February Review Mission 22 April Workshop on Draft Feasibility Study Report 28 September Signing of contract with TAC 30 September Original project completion date 9–12 November Review Mission December Submission of Inception Report by TAC 2016 31 March Original loan closing date 6 April Replacement of technical expert (ADB issued no-objection to the replacement of the

technical expert under TAC) September Submission of Final PPP Option Structuring Report (Volume 1) by TAC October Completion of Detailed Design by EDC November Submission of Final PPP Option Structuring Report (Volumes 2 and 3) by TAC 2017 13 April Submission of Final Reports by EDC 10 July Time extension of consulting services for (i) detailed design and feasibility study, and

(ii) transaction advisory services (EDC: from 16 July 2017 to 15 October 2017, TAC: from 7 October 2017 to 31 March 2018)

16 July Original contract end date for EDC 7 October Original and actual contract end date for TAC 15 October Actual contract end date for EDC December Submission of Inception Report by TAC 2018 8 March Request for extension of TAC work from RHD 15 March Request for extension of loan closing date (letter dated 8 March 2018) 31 March Actual contract end date for TAC 13 August Loan financial closing ADB = Asian Development Bank, APFS = audited project financial statement, EDC = engineering design consultant, PPP = public–private partnership, RHD = Road and Highways Department, TAC = transaction advisory consultant. Source: Asian Development Bank.

Appendix 7 19

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Loan

Agreement

Status of

Compliance Particular Covenants (a) The Borrower shall: (i) maintain, and cause the Project Executing Agency to maintain, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. (b) The Borrower shall enable ADB, upon ADB's request, to discuss the Borrower's and the Project Executing Agency's financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by the Borrower pursuant to subsection (a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Section 4.02

Complied

The Borrower shall enable ADB's representatives to inspect the Project, the Goods and Works, and any relevant records and documents.

Section 4.03

Complied

The Borrower shall carry out and shall cause the Project Executing Agency and RHD to carry out the Project with due diligence in conformity with sound administrative, financial, fiscal and engineering and transport practices.

Section 4.04

Complied

20 Appendix 7

Covenant

Reference in Loan

Agreement

Status of

Compliance Implementation Arrangements The Borrower and the Project Executing Agency shall ensure that the Project is implemented in accordance with the detailed arrangements set forth in the PAM. Any subsequent change to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

Schedule 5, para. 1

Complied

The Borrower shall ensure that no later than 30 days after the Effective Date, the Project Executing Agency shall have established a PIU and nominated a Project Director for the PIU within such Project Executing Agency, and that the PIU shall have been staffed in a manner satisfactory to ADB.

Schedule 5, para. 2

Not complied. There was a delay of 3 months since the Project Director/PIU was established only in September 2013.

The Borrower and the Project Executing Agency shall ensure that throughout the Project Implementation Period, the PIU is staffed adequately with competent full-time personnel, according to the staffing schedule agreed with ADB.

Schedule 5, para. 3

Complied

The Borrower and the Project Executing Agency shall undertake best efforts to ensure that the same persons will continue to be assigned to key positions (including the position of Project Director) in the PIU throughout the Project Implementation Period.

Schedule 5, para. 4

Not complied. There were 3 staff changes for the position during the significant part of the ADB loan.

Environment The Borrower and the Project Executing Agency shall ensure that the proceeds of the Loan shall be utilized in accordance with (i) all applicable laws and regulations of the Borrower relating to environment, health and safety, and (ii) the Environmental Safeguards.

Schedule 5, para. 5

Complied

The Borrower shall ensure, and shall cause the Project Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision that preparation, design, construction, implementation, operation and decommissioning of the Follow-on Project and all Follow-on Project facilities comply with (a) all applicable laws and regulations of the Borrower relating

Schedule 5, para. 6

Complied

Appendix 7 21

Covenant

Reference in Loan

Agreement

Status of

Compliance to environment, health and safety; (b) the Environmental Safeguards; and (c) all measures and requirements set forth in the IEE, the EMP, the RP or IP if any, and any corrective or preventative actions set forth in a Safeguards Monitoring Report.

In case of any discrepancies between the Borrower's environmental laws, regulations, and procedures and ADB's requirements, the SPS shall prevail. The Borrower shall ensure through the Project Executing Agency that no construction work of any kind under the Follow-on Project shall be commenced until all applicable environmental clearances have been obtained and that all the above requirements are incorporated in the bidding documents and civil works contracts to ensure compliance.

Schedule 5, para. 7

Complied

Land Acquisition; Resettlement The Borrower shall ensure, and cause the Project Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision that all land and all rights-of-way required for the Follow-on Project are made available to the works contractor in accordance with the schedule agreed under the related works contract and all land acquisition and resettlement activities are implemented in compliance with (a) all applicable laws and regulations of the Borrower relating to land acquisition and involuntary resettlement, (b) the Involuntary Resettlement Safeguards, and (c) all measures and requirements set forth in the RP, and any corrective or preventative actions set forth in the Safeguards Monitoring Report.

Schedule 5, para. 8

Complied

Without limiting the application of the Involuntary Resettlement Safeguards or the relevant RP, the Borrower shall ensure or cause the Project Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision and require that no physical or economic displacement takes place in connection with the Follow-on Project until:

(a) compensation and other entitlements have been provided to affected people in accordance with the RP; and

(b) comprehensive income and livelihood restoration

Schedule 5, para. 9

Complied

22 Appendix 7

Covenant

Reference in Loan

Agreement

Status of

Compliance program has been established, where relevant, commensurate with the size, scale and significance of Project impacts, in accordance with the RP.

Small Ethnic Communities

The Borrower shall ensure and cause the Project Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision that: (a) the Follow-on Project shall not have adverse impacts on small ethnic communities within the meaning of the SPS, and (b) in the event that the Follow-on Project does have any such impact, the Project Executing Agency shall ensure that the preparation, design, construction, implementation and operation of the Follow-on Project comply with (i) all applicable laws and regulations of Bangladesh relating to small ethnic communities; (ii) the Small Ethnic Communities Safeguards; and (ii) all measures and requirements set forth in the relevant SECP, and any corrective or preventative actions set forth in the Safeguards Monitoring Report.

Schedule 5, para.10

Complied

Human and Financial Resources to Implement Safeguards Requirements

The Borrower shall ensure and cause the Project

Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision and require that the Project Executing Agency shall make available necessary budgetary and human resources to fully implement the EMP, the RP and the SECP for such Follow-on Project, as applicable.

Schedule 5, para. 11

Complied

Labor Law, Health, Social Protection The Borrower shall ensure and cause the Project Executing Agency to ensure, that the designs and preliminary works to be prepared under the Project in relation to the Follow-on Project shall envision that: works contracts and bidding documents under the Follow-on Project include specific provisions requiring contractors to comply with all (a) applicable labor laws and core labor standards on (i) prohibition of child labor as defined in national legislation for construction and maintenance activities, on (ii) equal pay for equal work of equal value regardless of gender, ethnicity or caste, and on (iii) elimination of forced labor; and (b) the requirement to


Not relevant. There was no procurement done in this project.

Appendix 7 23

Covenant

Reference in Loan

Agreement

Status of

Compliance disseminate information on sexually transmitted diseases including HIV/AIDS to employees and local communities surrounding the work sites for the Follow-on Project. Such contracts shall also include clauses for termination by the Project Executing Agency in case of any breach of the stated provisions by the contractors.

Gender and Development 13. The Borrower shall cause the Project Executing Agency to ensure that measures in accordance with (i) the Borrower’s applicable laws, policies and regulations on gender; and (ii) ADB's Gender Policy will be incorporated into all Follow-on Project designs and that these measures are incorporated if or when the Follow-on Project is financed in whole or in part by ADB.


Not relevant. There was no procurement done in this project.

Counterpart Support The Borrower shall ensure that the Project Executing Agency shall provide promptly and as and when needed, all adequate counterpart staff and resources required for timely and effective implementation of the Project. Such resources are to be made available on an annual basis for each fiscal year.

Schedule 5, para.14

Complied

Governance and Anticorruption The Borrower and the Project Executing Agency shall comply with ADB’s Anticorruption Policy (1998, as amended to date), and cooperate fully with any investigation by ADB directly or through its agents of any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project, and extend all necessary assistance, including providing access to all relevant books and records for the satisfactory completion of such investigation.


Complied

The Borrower and the Project Executing Agency shall ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project.


Not relevant. Since there is no procurement for this project, no bidding document was prepared.

24 Appendix 7

Covenant

Reference in Loan

Agreement

Status of

Compliance Project Website

No later than 3 months after the Effective Date, the Project Executing Agency shall create within the existing RHD website a section dedicated to the Project and accessible to the public. The Project Executing Agency shall announce the Project and business opportunities associated with the Project on the Project website. In addition, the website shall disclose, at a minimum, the following information in relation to Consulting Services procured for the Project: (i) the list of participating bidders, (ii) the name of the winning bidder, (iii) the amount of the contracts awarded, and (iv) the services procured.


Complied

OPERATIONAL COVENANTS Follow-on Project The Borrower shall ensure that the Follow-on Project if financed in whole or in part by ADB shall utilize the project documents (including the environmental and social assessments, resettlement plans, detailed designs and bid documents) prepared under the Project.


Not applicable. There is no follow-on project.

The Borrower shall ensure that all reports of or in relation to feasibility studies and detailed design work under the Project shall be submitted to ADB for review.



PPP Office and Institutional Framework Development The Borrower shall, following the applicable ADB approvals, undertake agreed institutional framework reforms relating to PPP mechanisms, under ADB Technical Assistance Loan “PPP Project Development Loan”, collectively aimed at streamlining and enhancing evaluation and approval processes of the Borrower for infrastructure projects using PPP schemes and mechanisms.



Road Sector Reform The Borrower shall continue and expedite reform processes in the road sector in accordance with the Borrower’s undertakings in Loan No. 1790-BAN: Road Maintenance and Improvement Project and legal agreements thereunder dated 18 December 2000 (as amended).



Appendix 7 25

Covenant

Reference in Loan

Agreement

Status of

Compliance Use of Consultants The Borrower shall ensure that the Project shall be utilized as follows: (a) Supervision of Consultants' Work. The Project Executing Agency shall be responsible for monitoring and supervising the consultants for the Project. The Borrower shall ensure that the Project Executing Agency shall provide necessary logistical support to the consultants and review the consultants' outputs. (b) Terms of Reference. The Borrower and the Project Executing Agency shall ensure that detailed terms of reference for the consultants shall be presented in each approved contract package for any Subproject. The Project Executing Agency shall ensure that the terms of reference for consultants engaged under the Project shall be substantially in accordance with those in the outline terms of reference included in the PAM.



The Borrower acknowledges and agrees that no provision contained in this Loan Agreement shall be construed as committing ADB to provide finance or any form of assistance to the Follow-on Project.



Conditions to Award of Contracts under the Follow-on Project In connection with the Follow-on Project if or when financed by ADB in whole or in part, the Borrower shall not award, and shall ensure that the Project Executing Agency shall not award, any contract which involves environmental impacts until: (a) The relevant ministry or department of the Borrower has granted the final approval of the IEE updated for the relevant site; and (b) the Borrower acting through the Project Executing Agency has incorporated the relevant provisions from the EMP into the contract.



In connection with the Follow-on Project if or when financed by ADB in whole or in part, the Borrower shall not award, and shall ensure that the Project Executing Agency shall not award, any contract which involves involuntary resettlement impacts; provided however that in the event that contracts in respect of any relevant site are later



26 Appendix 7

Covenant

Reference in Loan

Agreement

Status of

Compliance determined to potentially involve any involuntary resettlement impacts, as determined under the SPS, no contract shall be awarded until the Borrower has prepared and submitted to ADB a final RP based on the Follow-on Project's detailed design for such contract and obtained ADB's clearance of such RP.

In connection with the Follow-on Project if or when financed by ADB in whole or in part, the Borrower shall not award, and shall ensure that the Project Executing Agency shall not award, any contract which involves impacts on small ethnic communities; provided however that in the event that contracts in respect of any relevant site are later determined to potentially involve any impacts on small ethnic communities, as determined under the SPS, no such contract shall be awarded until the Borrower has prepared and submitted to ADB a final SECP and obtained ADB’s clearance of such SECP.



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