Project Number: 44058 Loan and/or Grant Number(s): LXXXX; GXXXX June 2010

Nepal: Kathmandu Sustainable Urban Transport Project

Project Administration Manual

CONTENTS

I. PROJECT DESCRIPTION 1 II. IMPLEMENTATION PLANS 2 A.. PROJECT READINESS ACTIVITIES 2 B. OVERALL PROJECT IMPLEMENTATION PLAN 3 III. PROJECT MANAGEMENT ARRANGEMENTS 4 A. PROJECT STAKEHOLDERS – ROLES AND RESPONSIBILITIES 4 B. KEY PERSONS INVOLVED IN IMPLEMENTATION 5 C. PROJECT ORGANIZATION STRUCTURE 6 IV. COSTS AND FINANCING 7 A. DETAILED COST ESTIMATES BY EXPENDITURE CATEGORY 9 B. ALLOCATION AND WITHDRAWAL OF LOAN AND GRANT PROCEEDS 10 C. DETAILED COST ESTIMATES BY FINANCIER 12 D. DETAILED COST ESTIMATES BY OUTPUTS/COMPONENTS 13 E. DETAILED COST ESTIMATES BY YEAR 14 F. CONTRACT AND DISBURSEMENT S-CURVE 15 G. FUND FLOW DIAGRAM 15 V. FINANCIAL MANAGEMENT 16 A. FINANCIAL MANAGEMENT ASSESSMENT 16 B. DISBURSEMENT 17 C. ACCOUNTING 18 D. AUDITING 18 VI. PROCUREMENT AND CONSULTING SERVICES 19 A. ADVANCE CONTRACTING 19 B. PROCUREMENT OF GOODS, WORKS AND CONSULTING SERVICES 19 C. PROCUREMENT PLAN 19 D. CONSULTANT'S TERMS OF REFERENCE 20 VII. SAFEGUARDS 20 VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING AND

COMMUNICATION 21 A. PROJECT DESIGN AND MONITORING FRAMEWORK 21 B. MONITORING 21 C. EVALUATION 22 D. REPORTING 22

E. STAKEHOLDER COMMUNICATION STRATEGY 23 IX. ANTICORRUPTION POLICY 23 X. ACCOUNTABILITY MECHANISM 24 XI. RECORD OF PAM CHANGES 24

Project Administration Manual Purpose and Process

The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Ministry of Physical Planning and Works (MPPW) and implementing agencies, The Department of Roads (DOR), the Department of Transport Management (DOTM), the Metropolitan Traffic Police Division (MTPD), the Kathmandu Metropolitan City (KMC), and the Ministry of Environment (MOE), are wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB’s policies and procedures. ADB staff is responsible to support implementation including compliance by MPPW and implementing agencies of their obligations and responsibilities for project implementation in accordance with ADB’s policies and procedures. At Loan Negotiations the Government and ADB shall agree to the PAM and ensure consistency with the Loan/Grant Agreement (L-xxxx). Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the PAM and the Loan/Grant Agreement, the provisions of the Loan/Grant Agreement shall prevail.

After ADB Board approval of the project's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

Abbreviations

ADB = Asian Development Bank ADF = Asian Development Fund BLR = Bishnumati Link Road CQS = consultant qualification selection DMF = design and monitoring framework DoR = Department of Road DoTM = Department of Transport Management DSC = Design and Supervision Consultant EA = Executing Agency EARF = environmental assessment and review framework EIA = environmental impact assessment FNNTE = Federation of Nepalese National Transport Entrepreneurs HLPCC = High Level Policy and Coordination Committee IA = Implementing Agency IC = Implementation Committee ICB = international competitive bidding IEE = initial environmental examination KMC = Kathmandu Metropolitan City LACFC = Land Acquisition and CompensationFixing Committee MoE = Ministry of Environment MoF = Ministry of Finance MoH = Ministry of Home MoLD = Ministry of Local Development MoLT = Ministry of Labor and Transport MPPW = Ministry of Physical Planning and Works MTPD = Metropolitan Traffic Police Division NCB = national competitive bidding NGOs = nongovernment organizations NPC = National Planning Commission O&M = Operation and Maintenance PAI = project administration instructions PAM = project administration manual PD = Project Director PIU = project implementation unit PMCBC = Project Management and Capacity Building Consultant PMCO = Project Management and Coordination Office PSC = Project Steering Committee PT = Public Transport QBS = quality based selection QCBS = quality- and cost based selection RF = Resettlement Framework RP = Resettlement Plan RRP = report and recommendation of the President to the Board SBD = standard bidding documents SOE = statement of expenditure SUT = Sustainable Urban Transport TDF = Town Development Fund TOR = terms of reference UTS = Urban Transport System

I. PROJECT DESCRIPTION

Project's rationale, location and beneficiaries The project will improve the quality of urban life in the capital city of Nepal by delivering a more efficient, safe, and sustainable urban transport system (UTS), favoring local economic growth and addressing climate change and air pollution mitigation. The UTS will be enhanced by focusing on (i) a plan to rationalize and upgrade the existing public transport network, tested through the implementation of pilot routes provided with electric vehicles; (ii) traffic management works and measures that will enable heritage routes in the city center to be pedestrianized and improve general walkability (general walking conditions); and (iii) improvement of air quality monitoring. The project aims to integrate these components holistically.

Impact and Outcome

The expected impact of the Project will be a more efficient and sustainable urban transport system within the Kathmandu Valley (KV), favoring local economic growth and addressing climate change and air pollution mitigation. The expected outcome of the Project will be improved public transport and walkability, favoring a modal shift from private vehicles and improving traffic conditions.

Outputs

1. Public Transport is improved, and capacity of the Department of Transport Management (DOTM) is strengthened

1.1 Institutional strengthening and capacity building for DOTM 1.2 Reorganization plan of the public transport (PT) network 1.3 Implementation of two pilot bus routes, provided with electric vehicles 1.4 Promotion of the PT fleet renewal with low emission vehicle, through the

set up of a financing mechanism 1.5 Study on the reintroduction of trolley-bus services

2. Traffic management is improved

2.1 Improvement of junctions in the city center 2.2 Capacity development program and provision of equipment for the

Metropolitan Traffic Police Division (MTPD) 2.3 Awareness campaign for improved driving behaviors and drivers aspects of transport

3. Walkability in the city center is improved

3.1 Pedestrianization of heritage routes in the city core 3.2 Improvement of sidewalks in the city center 3.3 Upgrading of the existing and construction of two new pedestrian bridges 3.4 Improvement of the interchange facility and of public space on Kanti Path 3.5 Public private partnership (PPP) advisory support for Kathmandu

Metropolitan City (KMC) 4. The monitoring of air quality is enhanced.

4.1 Provision of solar power back-up systems for the existing monitoring stations 4.2 Provision of two new mobile monitoring stations 4.3 Provision of equipment for emission and mechanical testing 4.4 Data dissemination and awareness campaign

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II. IMPLEMENTATION PLANS

A. Project Readiness Activities

DOTM = Department of Transport Management, DSC = design and supervision consultant, KMC = Kathmandu Metropolitan City, MOE= Ministry of Environment, PIU = project implementation unit, PMCO = project management and coordination office, PMCB = project management and capacity building consultant, TP = Traffic Policy.

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B. Overall Project Implementation Plan

CCTV = closed circuit television, DOR = Department of Roads, DOTM = Department of Transport Management, DSC = design and supervision consultant, KMC = Kathmandu Metropolitan City, PD = project director, PM = project manager, PIU = project implementation office, PMCB = project management and capacity building consultant, PMCO = project management and coordination office, TDF = Town Development Fund.

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III. PROJECT MANAGEMENT ARRANGEMENTS

A. Project Stakeholders – Roles and Responsibilities

Project Stakeholders Management Roles and Responsibilities • MPPW - EA (PMCO)

Guides, supervises, manages and monitors overall project implementation.

Acts as the secretariat of the IC/ PSC and implements key policy level decisions provided by the HLPCC to facilitate project implementation.

Provides guidance to and monitors project implementation by the implementing agencies.

Reviews designs and all reports prepared by the IAs, and prepares all reports to internal and external agencies, such as ADB.

Liaises with all concerned Ministries and stakeholders, Coordinates all project activities. Engages PMCBC consultants. Prepares disbursement projects and withdrawal

applications for submission to ADB. Requests budgetary allocation for counterparts. Ensures and monitors compliance with loan covenants

and ADB Safeguard Policy. • DOTM, DOR, KMC, MOE, and MTPD – IA's (PIUs)

Implement Project components under their jurisdiction (DOR and KMC - design and construction; MOE and MTPD - equipment purchase and installation; DOTM - design and implementation of PT components).

Engage and design and supervision consultants. Liaise / coordinate with PSC, PMCO and stakeholders. Manage the bidding process for civil works or

equipment contracts, with support from PMCO, sign and administer the contract.

Work under the guidance of and provide all necessary information to PMCO.

Submit audited project account annually to PMCO within 6 months of the end of the fiscal year.

Submit supporting documents for withdrawal applications to PMCO (check against LA/RRP).

Take responsibility for O&M of infrastructure and equipment.

• HLPCC (NPC, MPPW, MOLTM,

MLD, MOH, MOE, MOF, and DOTM)

Provide policy direction and inter-ministerial coordination.

Reviews overall progress of the Project. • IC/PSC (KMC, MPPW, MOE,

MOLTM, MLD, DOR, DOTM, KVTDC, FNNTE, PMCO)

Guide and monitors overall project implementation. Implement policy decisions provided by the HLPCC. Ensure inter-agency coordination and resolve project

implementation issues.

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• ADB

Supervise the overall project implementation. Reviews and issues no-objection to procurement and

disbursement documents.

B. Key Persons Involved in Implementation

Executing Agency MPPW Officer's Name: Mr. Purna Kadariya

Position: Secretary Telephone Email address

Office Address ADB

Division Director Staff Name: M. Teresa Kho Position: Director, SAUD Telephone No.: +632 632 6858 Email address: mtkho@adb.org

Mission Leader Staff Name: David Margonsztern Position: Urban Development Specialist (Transport) Telephone No.: +632 632 57 87 Email address: dmargonsztern@adb.org

ADB = Asian Development Bank, IC = implementation committee, DOR = Department of Roads, DOTM = Department of Traffic Management, EA = executing agency, FNNTE = Federation of Nepalese National Transport Entrepreneurs, HLPCC = High Level Policy and Coordination Committee, IA = implementing agency, KMC = Kathmandu Metropolitan City, KVTDC = Kathmandu Valley Town Development Committee, MOE = Ministry of Environment, MOF = Ministry of Finance, MOH = Ministry of Home, MLD = Ministry of Local Development, MOLTM = Ministry of Labor and Transport Management, MPPW = Ministry of Physical Planning and Works, NPC = National Planning Commission, O&M = operation & maintenance, PSC = project steering committee, PMCO = project management and coordination office

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C. Project Organization Structure

High Level Policy

Coordination Committee

Ministry of Physical Planning and Work

EA

Implementation Committee/

Project Steering Committee Project Management and Coordination Office

(Secretariat of PSC)

Project Implementation Units at KMC, DoTM, DOR, MTPD, and MOE (IAs)

Except for DOR, IAs and PIUs are not under the direct authority of the EA. MPPW/PMCO will coordinate them to implement Project activities.

EA = executing agency, DOR = Department of Roads, DOTM = Department of Traffic Management, IA = implementing agency, KMC = Kathmandu Metropolitan City, MOE = Ministry of Environment, MPPW = Ministry of Physical Planning and Works, MTPD = Metropolitan Traffic Police Division, PMCO = project management and coordination office, PSC = project steering committee

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IV. COSTS AND FINANCING

The project is estimated to cost $30.42 million, including taxes and duties of about $3.8 million to be financed by the Government. The total cost includes physical and price contingencies, and interest charges during implementation. Detailed cost estimates by expenditure category and detailed cost estimates by financier are in Section C of this document. The investment plan is summarized in Table 1.

Table 1: Project Investment Plan

($ million) Item AmountaA. Base Costb 1. Public Transport Improvement 7.69 2. Traffic Management Improvement 12.27 3. Pedestrianization 4.99 4. Air Quality Improvement 0.34 5. Project management and capacity building 2.12 Subtotal (A) 27.41 B. Contingenciesc 2.92

C. Financing Charges During Implementationd 0.09 Total (A+B+C) 30.42a Includes taxes and duties of $3.8 million to be financed from government resources. b In mid-2010 prices. c Physical contingencies computed at 10% for civil works and equipment.. Price contingencies computed at 0.0-

1.5% on foreign exchange costs and 5.0-8.0% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate.

d Interest during construction for ADB loan has been computed at the rate of 1.0%. Source: Asian Development Bank estimates

The government has requested a loan in various currencies equivalent to SDR6.886 million, and a grant not exceeding $10 million, from ADB’s Special Funds resources, to help finance the project. The loan will have a 32-year term, including a grace period of 8 years, an interest charge of 1.0% per annum during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the draft financing agreement.

ADB financing of $20 million, or 66% of the total project cost, will be used to finance (i) part of the civil works; (ii) equipment; (iii) consulting services; (iv) part of the implementation of the pilot bus routes; (v) part of the recurrent costs; (vi) training and capacity building; (vii) awareness campaigns; and (viii) interest charges during implementation. Government and KMC financing of $7.9 million, or 26% of the total project cost, will be used for land acquisition and resettlement, taxes and duties, part of project management, and part of the civil works.

The Global Environmental Facility (GEF) grant cofinancing of $2.52 million, or about 8% of the total project cost, will be used to finance part of the public transport component, related to climate change and air pollution mitigation measures (loan to purchase electric, or other low emission vehicles in replacement of diesel microbuses on the pilot bus routes, and a feasibility study for the reintroduction of trolleybuses). ADB typically seeks approval from its Board of Directors for the administration of grant funds from co-financers only when cofinancing commitments are in place. In the case of the proposed GEF grant funding, the submission of the GEF Endorsement Document is planned in July 2010. To facilitate project implementation, the Board is requested to approve administration of the proposed grant, in an amount not exceeding

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$2.8 million (including the 10% ADB administration fee), which is expected to be confirmed subsequent to Board approval. Approval of the GEF grant will be reported to the Board by standard reporting procedures. If GEF does not approve grant financing, the portion to be financed by GEF grant will not be financed under the project. Alternatively, the government may make arrangements, satisfactory to ADB, to cover the funding shortfall. The financing plan is in Table 2.

Table 2: Financing Plan

Source Amount ($ million)

Share of Total (%)

Asian Development Bank 20.00 65.75 GEFa 2.52 8.28 Government 7.90 25.97

Total 30.42 100.00 a Global Environmental Facility Source: ADB estimates

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9 A. Detailed Cost Estimates by Expenditure Category

(Rupees Million) (US$ '000)Local Foreign Total Local Foreign Total

I. Investment Costs A. Land Acquisition and Resettlement

1. Land Acquisition and Resettlement 157.4 - 157.4 2,155.7 - 2,155.7B. Civil Works

1. Civil Works 644.0 260.4 904.3 8,821.3 3,566.8 12,388.1C. Vehicles and Equipment

1. PMCO Vehicle 0.6 4.4 4.9 7.8 60.0 67.82. CCTV Equipment 20.7 49.0 69.7 283.7 671.6 955.33. Intelligent Transport System and Automated Ticketing System 38.8 - 38.8 532.0 - 532.04. PMCO and PIU Equipment and Furniture 3.5 1.5 4.9 47.8 20.0 67.85. Traffic Equipment for Police 9.0 13.9 22.9 123.6 190.7 314.46. Traffic Signals 17.9 23.1 41.0 245.9 316.1 562.07. Air Quality Monitoring Equipment 8.3 5.0 13.3 113.0 68.6 181.6

Subtotal Vehicles and Equipment 98.8 96.9 195.7 1,353.8 1,327.0 2,680.9D. Consultant Services

1. Technical (International) 16.3 130.5 146.7 222.8 1,787.3 2,010.12. Technical (National) 167.5 - 167.5 2,294.1 - 2,294.1

Subtotal Consultant Services 183.7 130.5 314.2 2,516.9 1,787.3 4,304.2E. TDF (Grants to Purchase Electric Vehicles)

1. Grant/Loan to Purchase Electric Vehicles - 277.4 277.4 - 3,800.0 3,800.0F. Training and Capacity Building

1. Overseas - 5.1 5.1 - 70.0 70.02. In Country Training 18.0 - 18.0 246.4 - 246.4

Subtotal Training and Capacity Building 18.0 5.1 23.1 246.4 70.0 316.4G. Studies and Surveys

1. Studies and Surveys 39.6 23.9 63.5 542.1 328.0 870.1H. Advocacy

1. Awareness Campaign 13.6 - 13.6 186.1 - 186.1I. Project Management

1. PMCO and PIU Staff 31.1 - 31.1 425.4 - 425.42. PMCO and PIU Operating Cost 19.6 - 19.6 269.1 - 269.1

Subtotal Project Management 50.7 - 50.7 694.4 - 694.4J. Lease of Land for Terminals

1. Land lease for DOTM's Terminals 1.2 - 1.2 16.4 - 16.4Total BASELINE COSTS 1,206.9 794.2 2,001.1 16,533.2 10,879.0 27,412.2

Physical Contingencies 74.3 35.7 110.0 1,017.5 489.4 1,506.9Price Contingencies 100.9 2.3 103.1 1,381.9 30.9 1,412.9

Total PROJECT COSTS 1,382.1 832.2 2,214.2 18,932.6 11,399.3 30,332.0Interest During Implementation 6.4 - 6.4 88.0 - 88.0

Total Costs to be Financed 1,388.5 832.2 2,220.7 19,020.7 11,399.3 30,420.0

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B. Allocation and Withdrawal of Loan and Grant Proceeds

Unless specifically stated otherwise, the following are applicable to both the Loan and Grant proceeds:

(i) Percentages of ADB Financing. Except as ADB may otherwise agree, each item of expenditure shall be financed out of the proceeds of the Loan and Grant on the basis of the percentages set forth in the tables attached to Schedule 3 to the financing agreement.

(ii) Interest Charge. The amount allocated to category 3 in the table 3A attached to

Schedule 3 to the financing loan agreement (and in this document, below), is for financing the interest charge on the Loan during the implementation period of the Project.

(iii) Reallocation. Notwithstanding the allocation of Loan and grant proceeds and the

withdrawal percentages set forth in the tables,

(a) if the amount of the Loan and Grant allocated to any category appears to be insufficient to finance all agreed expenditures in that category, ADB may, in consultation with the Government, (i) reallocate to such category, to the extent required to meet the estimated shortfall, amounts of the loan which have been allocated to another category but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such category may continue until all expenditures thereunder will have been made; and

(b) if the amount of the loan and grant allocated to any category appears to

exceed all agreed expenditures in that category, ADB may, in consultation with the Borrower, reallocate such excess amount to any other Category.

WITHDRAWAL OF LOAN PROCEEDS

(Kathmandu Sustainable Urban Transport Project) CATEGORY ADB FINANCING

Number Item Amount Allocated

SDR Category

Percentage and Basis for Withdrawal

from the Loan Account

1 Works 5,782,000 68 percent of total expenditure claimed

2 Vehicle and Equipment 386,000 21 percent of total expenditure claimed

3 Interest Charge 61,000 100 percent of amount due

4 Unallocated 657,000

Total 6,886,000

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ALLOCATION AND WITHDRAWAL OF GRANT PROCEEDS (Kathmandu Sustainable Urban Transport Project)

CATEGORY ADB FINANCING

Number Item Amount

Allocated $

Category

Percentage and Basis for Withdrawal

from the Grant Account

1 Vehicles & Equipment 1,375,000 51 percent of total expenditure claimed

2 Consulting Services 3,823,300 89 percent of total expenditure claimed

3

TDF (Grants to purchase Electric or low emission Vehicles & Equipments) 1,800,000 47 percent of total expenditure claimed

4 Training & Capacity Building 316,400 100 percent of total expenditure claimed*

5 Studies and surveys 342,000 39 percent of total expenditure claimed

6 Advocacy 186,100 100 percent of total expenditure claimed*

7 Project Management 175,200 65 percent of total expenditure claimed

8 Lease of land for Terminals 16,400 100 percent of total expenditure claimed*

9 Unallocated 1,965,600

Total 10,000,000 * Exclusive of taxes and duties imposed within the territory of the Beneficiary

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C. Detailed Cost Estimates by Financier

Amount d% of Cost Category Amount d

% of Cost Category Amount

% of Cost Category Amount

% of Cost Category

A. Land Acquisition and Resettlement 2,155.7 100.0 2,155.7B. Civil Works 8,397.8 67.8 - - - - 3,990.3 32.2 12,388.1C. Vehicles and Equipment 560.0 20.9 1,375.0 51.3 - - 745.8 27.8 2,680.8D. Consultant Services

1. Technical (International) - - 1,787.3 88.9 - - 222.8 11.1 2,010.12. Technical (National) - - 2,036.0 88.7 - - 258.1 11.3 2,294.1

Subtotal Consultant Services - - 3,823.3 88.8 - - 480.9 11.2 4,304.2E. TDF (Grants to Purchase Electric Vehicles and Equipment) - - 1,800.0 47.4 2,000.0 52.6 - 3,800.0F. Training and Capacity Building

1. Overseas - - 70.0 100.0 - 70.02. In Country Training - - 246.4 100.0 - 246.4

Subtotal Training and Capacity Building - - 316.4 100.0 - 316.4G. Studies and Surveys - - 342.0 39.3 520.0 59.8 8.1 0.9 870.1H. Advocacy - - 186.1 100.0 186.1I. Project Management

1. PMCO and PIU Staff - - - - - - 425.4 100.0 425.42. PMCO and PIU Operating Cost - - 175.2 65.1 - - 93.8 34.9 269.0

Subtotal Project Management - - 175.2 25.2 - - 519.2 74.8 694.4J. Lease of Land for Terminals - - 16.4 100.0 - - 16.4Total BASELINE COSTS 8,957.8 32.7 8,034.4 29.3 2,520.0 9.2 7,900.0 28.8 27,412.2

Physical Contingencies 492.4 32.7 1,014.5 67.3 - - 1,506.9Price Contingencies 461.8 32.7 951.1 67.3 - - 1,412.9Interest During Implementation d 88.0 100.0 - - - - 88.0

Total Costs to be Financed c 10,000.0 32.87 10,000.0 32.87 2,520.0 8.28 7,900.0 25.97 30,420.0a Global Environmental Fundb

c The amounts disbursed by ADB for eligible expenditures under a cost category will be subject to the ceiling set by the allocation of loan proceeds for such cost category.d Bank charges will be financed from the fund source.

TotalGEFa GovernmentADB Loan b ADB Grant b

Amount of ADB loan and grant proceeds allocated to the cost category.

Source: Asian Development Bank estimates.

13 D. Detailed Cost Estimates by Outputs/Components

CapacityPublic Traffic Building

Transport Management Actions in Air and PhysicalNetwork Measures Favor of Quality Project Contingencies

Improved Strengthened Pedestrians Improved Management Total % Amount

I. Investment Costs /a A. Land Acquisition and Resettlement - 2,155.7 - - - 2,155.7 - -B. Civil Works 1,251.7 6,626.0 4,510.3 - - 12,388.1 10.0 1,238.8C. Vehicles and Equipment 532.0 1,831.6 - 181.6 135.6 2,680.9 10.0 268.1D. Consultant Services

1. Technical (International) 1,051.3 830.0 - 73.4 55.3 2,010.1 - -2. Technical (National) 450.9 740.4 403.4 50.4 649.1 2,294.1 - -

Subtotal Consultant Services 1,502.2 1,570.3 403.4 123.8 704.4 4,304.2 - -E. TDF (Grants to Purchase Electric Vehicles) 3,800.0 - - - - 3,800.0 - -F. Training and Capacity Building

1. Overseas - - - - 70.0 70.0 - -2. In Country Training - - - - 246.4 246.4 - -

Subtotal Training and Capacity Building - - - - 316.4 316.4 - -G. Studies and Surveys 570.0 50.0 30.0 - 220.1 870.1 - -H. Advocacy 20.0 30.0 50.0 32.9 53.2 186.1 - -I. Project Management

1. PMCO and PIU Staff - - - - 425.4 425.4 - -2. PMCO and PIU Operating Cost - - - - 269.1 269.1 - -

Subtotal Project Management - - - - 694.4 694.4 - -J. Lease of Land for Terminals

1. Land lease for DOTM's Terminals 16.4 - - - - 16.4 - -Total BASELINE COSTS /b 7,692.3 12,263.8 4,993.7 338.3 2,124.1 27,412.2 5.5 1,506.9

Physical Contingencies /c 178.4 845.8 451.0 18.2 13.6 1,506.9 - -Price Contingencies /d 186.5 615.1 492.2 9.6 109.4 1,412.9 7.5 106.1

Interest During Implementation /e 23.4 39.8 17.2 1.1 6.5 88.0Total PROJECT COSTS 8,080.6 13,764.5 5,954.2 367.2 2,253.5 30,420.0a Includes taxes and duties of $3.8 million to be financed from government resources.b In mid-2010 prices.c Physical contingencies computed at 10% for civil works and equipment.d Price contingencies computed at 0.0-1.5% on foreign exchange costs and 5.0-8.0% on local currency costs; includes provision for potential exchange rate fluctuation under the

the assumption of a purchasing power parity exchange ratee Interest during construction for ADB loan has been computed at the rate of 1.0%.Source: Asian Development Bank estimates

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E. Detailed Cost Estimates by Year

Base Cost Foreign Exchange2010 2011 2012 2013 Total % Amount

I. Investment Costs A. Land Acquisition and Resettlement

1. Land Acquisition and Resettlement 1,077.9 1,077.9 - - 2,155.7 - -B. Civil Works

1. Civil Works - 6,888.5 4,629.2 870.4 12,388.1 28.8 3,566.8C. Vehicles and Equipment

1. PMCO Vehicle 67.8 - - - 67.8 88.5 60.02. CCTV Equipment - 955.3 - - 955.3 70.3 671.63. Intelligent Transport System and Automated Ticketing System - 532.0 - - 532.0 - -4. PMCO and PIU Equipment and Furniture 67.8 - - - 67.8 29.5 20.05. Traffic Equipment for Police - 314.4 - - 314.4 60.7 190.76. Traffic Signals - 562.0 - - 562.0 56.3 316.17. Air Quality Monitoring Equipment - 115.0 66.6 - 181.6 37.8 68.6

Subtotal Vehicles and Equipment 135.6 2,478.7 66.6 - 2,680.9 49.5 1,327.0D. Consultant Services

1. Technical (International) 1,180.1 498.0 332.0 - 2,010.1 88.9 1,787.32. Technical (National) 886.4 971.5 369.8 66.4 2,294.1 - -

Subtotal Consultant Services 2,066.5 1,469.4 701.8 66.4 4,304.2 41.5 1,787.3E. TDF (Grants to Purchase Electric Vehicles)

1. Grant/Loan to Purchase Electric Vehicles - 3,800.0 - - 3,800.0 100.0 3,800.0F. Training and Capacity Building

1. Overseas 35.0 35.0 - - 70.0 100.0 70.02. In Country Training 61.6 61.6 61.6 61.6 246.4 - -

Subtotal Training and Capacity Building 96.6 96.6 61.6 61.6 316.4 22.1 70.0G. Studies and Surveys

1. Studies and Surveys 735.0 60.0 25.0 50.0 870.1 37.7 328.0H. Advocacy

1. Awareness Campaign 123.8 23.8 22.8 15.8 186.1 - -I. Project Management

1. PMCO and PIU Staff 106.3 106.3 106.3 106.3 425.4 - -2. PMCO and PIU Operating Cost 67.3 67.3 67.3 67.3 269.1 - -

Subtotal Project Management 173.6 173.6 173.6 173.6 694.4 - -J. Lease of Land for Terminals

1. Land lease for DOTM's Terminals - 16.4 - - 16.4 - -Total BASELINE COSTS 4,409.0 16,084.9 5,680.6 1,237.8 27,412.2 39.7 10,879.0

Physical Contingencies 13.6 936.7 469.6 87.0 1,506.9 32.5 489.4Price Contingencies 46.1 679.7 497.1 190.0 1,412.9 2.2 30.9

Interest During Implementation 13.0 51.4 19.3 4.4 88.04,481.6 17,752.6 6,666.6 1,519.2\ 30,420.0Total PROJECT COSTS

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F. Contract and Disbursement S-curve

G. Fund Flow Diagram

The following diagrams show how the funds will flow from ADB and the MOF to implement project activities

(v)

ADB

MPPW, PMCO (3 imprest accounts)

IAs / PIUs (5 PIUs project accounts)

Contractors < $100,000 and other expenses

MOF (District Treasurer Office)

PMCO project account

Trim

estri

al b

udge

t re

leas

e

(iv) (viii)

(iii) (vii)

(xi) (vi)

(xi)

(x)

(ix)

Consulting services and Contractors > $100,000, and TDF

Governement counterpart

(i)

(ii)

Fund Flow Document Flow

ADB = Asian Development Bank, IA = implementing agency, MOF = Ministry of Finance, MPPW = Ministry of Physical Planning and Works, PMCO = project management and coordination office, PIU = project implementation unit, TDF = Town Development Fund.

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V. FINANCIAL MANAGEMENT

A. Financial Management Assessment

Financial management assessments (FMAs) indicated that the financial management practices in the executing agency and implementing agencies are generally sound, except for DOTM and KMC whose financial management capacities have been assessed to be weak (including a lack of experience with donor funded project). Nevertheless, the FMA did identify some shortcomings: (i) financial management systems in the executing agency (EA) and implementing agencies (IAs) need to be streamlined and modernized, incorporating a results or performance-based orientation to planning, budgeting, monitoring and control; (ii) effective financial performance monitoring system is required to measure the impact and utilization of funds; (iii) financial management operational procedures manual are inadequate; (iv) asset recording and safeguards need to be improved; (v) the financial units in the IAs need to be expanded, with clearly defined duties, responsibilities, lines of supervision and limits of authority; and (vi) a computerized financial management reporting system is required for improved efficiency. Assessment of the financial condition of the IAs has shown that these agencies are financially sound, with the exception of KMC.

To alleviate these shortcomings, financial management specialists in PMCO will build capacity within MPPW, DOR, KMC, DOTM, MOE and MTPD in financial planning (including tariff setting), accounting, reporting, auditing and control. The consultants will assist the IAs in strengthening and modernizing their financial management systems, develop and install a performance-based planning and budgeting system under the project, enhance the computerized financial management system, and support these IAs to use the national financial system designed by MOF. The consultants will also ensure that the Financial Management Information System (FMIS) developed and installed at the PMCO and PIUs is integrated with the IA’s systems. For KMC, the specialists will assist in strengthening their revenue generation capacity.

Financial management risks should be considered and updated throughout the life of the project. Risk mitigation measures should also be updated accordingly.

For Direct Payment to Contractors and Consultant (i) Contractors and consultant issue claims to PIUs/PMCO (ii) PIU/PMCO check the claims and make payment (Gov't counterpart) (iii) PIU sends contractor's/consultant's invoices to PMCO for direct payment from ADB

and other evidence of payment of government counter to PMCO (iv) PMCO send request to ADB for direct payments together with contractors' and

consultants' invoices (v) ADB makes direct payment to contractor and consultant

For Other Expenditures (vi) Contractors < $100,000 issue claims to PIUs/PMCO (vii) PIU sends expenditure statement to PMCO including contractor's value below

$100,000 (viii) PMCO consolidates statement of expenditures and request ADB for replenishment (ix) Consolidated expenditure statement from PMCO to MOF (District Treasury Office)

on monthly basis (x) ADB makes replenishment to imprest account (xi) PIUs/PMCO makes payment

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More details on Financial Management Assessment for IAs and Town Development Fund (TDF) is available in Annex E. B. Disbursement

The Loan and Grant proceeds including ADB administered co-financier funds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time),1 and detailed arrangements agreed upon between the Government and ADB. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS),2 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list (Appendix 5) to subprojects financed by ADB. The following financing and disbursement arrangements can be used under the project.3 • Direct payment procedure – where ADB, at the Government's request, pays a designated

beneficiary directly.4 • Commitment procedure – where ADB, at the Government's request, provides an irrevocable

undertaking to reimburse a commercial bank for payments made or to be made to a supplier agains a Letter of Credit (LC) financed from the loan account.5

• Reimbursement procedure – where ADB pays from the loan to the Government's account or, in some cases, to the project account for eligible expenditures which have been incurred and paid for by the project out of its budget allocation or its own resources.6

• Imprest fund procedure – where ADB makes an advance disbursement from the loan account for deposit to an imprest account to be used exclusively for ADB's share of eligible expenditures.7

The Government will, immediately after loan and grant effectiveness, establish three imprest accounts at the Nepal Rastra Bank. The currency of the imprest accounts will be [Dollar], to be managed by MPPW. The imprest accounts ceiling will not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first 6 months of Project implementation, or (ii) the equivalent of 10% of the Loan amount. The PMCO and each of the PIUs will each open a project account at a commercial bank acceptable to ADB. The request for intial advance to the imprest account should be accompanied by an Estimate of Expenditure Sheet8 setting out the estimated expenditures for the first 6 months of project implementation, and submission of evidence satisfactory to ADB that the imprest account has been opened. For every liquidation and replenishment request of the imprest account, the Government will furnish to ADB (a) Statement of Account (bank statement) where the imprest account is maintained, and (b) the Imprest Account Reconciliation Statement (IARS) reconciling the above mentioned bank statement against the EA's records.9

1 Available at: http://www.adb.org/Documents/Handbooks/Loan_Disbursement/loan-disbursement-final.pdf 2 Available at http://www.adb.org/Documents/Policies/Safeguards/Safeguard-Policy-Statement-June2009.pdf 3 Available at http://www.adb.org/documents/handbooks/loan_disbursement/chap-06.pdf 4 Available at http://www.adb.org/documents/handbooks/loan_disbursement/chap-07.pdf 5 Available at http://www.adb.org/documents/handbooks/loan_disbursement/chap-08.pdf 6 Available at http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf 7 Available at http://www.adb.org/documents/handbooks/loan_disbursement/chap-10.pdf 8 Available in Appendix 29 of the Loan Disbursement Handbook. 9 Follow the format provided in Appendix 30 of the Loan Disbursement Handbook.

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The statement of expenditure (SOE) procedure will be adopted to reimburse eligible expenditures or liquidate advances provided into the imprest account. Any individual payment to be reimbursed or liquidated under SOE procedure will not exceed the equivalent of $100,000. SOE records should be maintained and made readily available for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit.10 Payments for contractors (above $100,000), and consultant invoices contracted by PMCO and PIUs will be paid directly by ADB which requires PMCO submission and PIUs submission, through PMCO, of approved invoices and documentation to ADB in accordance with ADB's Loan Disbursement Handbook. The grant money for the pilot bus routes to be managed by TDF will also be directly disbursed from ADB to TDF account. Before the submission of the first withdrawal application, the Government should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum amount per withdrawal application is US$100,000, unless otherwise approved by ADB. The Government is to consolidate claims to meet this limit for reimbursement and imprest account claims. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. For the disbursement and liquidation procedures for Government funds, refer to the fund flow diagram and its legend, in Section IV. C. Accounting

The MPPW and each of the IAs, and the TDF, will maintain separate project accounts and records by funding source for all expenditures incurred on the Project. Project accounts will follow international accounting principles and practices or those prescribed by the Government's accounting laws and regulations. D. Auditing

The MPPW, through the PMCO, will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing and/or in accordance with the Government's audit regulations by an independent auditor acceptable to ADB. The audited accounts will be submitted in English language to ADB within 6 months of the end of the fiscal year by MPPW. The annual audit report will include a separate audit opinion on the use of the imprest accounts and the SOE procedures (as applicable). The Government and MPPW have been made aware of ADB’s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited accounts. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB’s financing is used in accordance with ADB’s policies and procedures. For revenue generating projects only, ADB requires audited financial statements (AFS) for each executing and/or implementation agency associated with the project. 10 Checklist for SOE procedures and formats are available at:

http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-100-Below.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-Over-100.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Operating-Costs.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Free-Format.xls

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VI. PROCUREMENT AND CONSULTING SERVICES

A. Advance Contracting

The Government has requested ADB's approval of advance contracting for the recruitment of Consultants. All advance contracting will be undertaken in conformity with ADB’s Procurement Guidelines (February 2007, as amended from time to time) (ADB’s Procurement Guidelines)11 and ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time) (ADB’s Guidelines on the Use of Consultants).12 The issuance of invitations to bid under advance contracting will be subject to ADB approval. The Government, MPPW and each of the IAs have been advised that approval of advance contracting does not commit ADB to finance the Project.

B. Procurement of Goods, Works and Consulting Services

All procurement of goods and works will be undertaken in accordance with ADB’s Procurement Guidelines. International competitive bidding procedures will be used for works contracts estimated to cost $1 million or more, and supply contracts valued at $500,000 or higher. National competitive bidding procedures will be used for works contracts estimated to cost between $100,000 and $1 million and for supply contracts valued between $100,000 to $500,000. Shopping will be used for contracts for procurement of works and equipment worth less than $100,000. Before any procurement processing, ADB and the Government will review the public procurement laws of the Government to ensure consistency with ADB’s Procurement Guidelines. An 18-month procurement plan indicating threshold and review procedures, goods, works and consulting service contract packages and national competitive bidding guidelines is in Section C All consultants will be recruited according to ADB’s Guidelines on the Use of Consultants.13 The terms of reference for all consulting services are detailed in Section D. An estimated 466 person-months (73 international, 393 national) of consulting services will be provided to (i) facilitate project management and implementation including overall monitoring and evaluation of the Project at the PMCO; (ii) assist DOR, KMC, and DOTM in carrying out detailed design and construction supervision of their respective components, including monitoring for safeguards compliance; (iii) carry out preliminary design of the trolley bus system; and (iv) provide capacity building of the IAs, strategic planning, pilot implementation of the public transport network, and institutional development support of the DOTM. Consulting firms will be engaged using the quality- and cost-based selection (QCBS) method with a standard quality:cost ratio of 80:20.

C. Procurement Plan

See Annex B. 11 Available at: http://www.adb.org/Documents/Guidelines/Procurement/Guidelines-Proccurement.pdf 12 Available at: http://www.adb.org/Documents/Guidelines/Consulting/Guidelines-Consultants.pdf 13 Checklists for actions required to contract consultants by method available in e-Handbook on Project

Implementation at: http://www.adb.org/documents/handbooks/project-implementation/

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D. Consultant's Terms of Reference

Outline terms of reference for all consulting services are shown in Annexes Annexes C to E

VII. SAFEGUARDS

1. Environmental Safeguards. An Environmental Management Plan (EMP) has been prepared for the Project as part of the Initial Environmental Examination (IEE) report. The following are institutional roles and responsibilities to ensure that the EMP is implemented during design and construction stages: PMCO. The PMCO, with assistance from the project management consultant is to (i) confirm Environmental Impact Assessment (EIA) or IEE, including EMP, is undertaken or updated based on detailed designs in accordance with the Government rules and ADB's policy requirements; (ii) confirm whether EMP is included in bidding documents and civil works contracts; (iii) provide oversight on environmental management aspects of the Project and ensure EMP is implemented by IAs, DSCs, and contractors; (iv) establish a system to monitor environmental safeguards of the project including monitoring the indicators set out in the monitoring plan of the EMP; (v) facilitate and confirm overall compliance with all Government rules and regulations; (vi) review, monitor and evaluate the effectiveness with which the EMP is implemented, and recommend necessary corrective actions to be taken as necessary; (vii) consolidate quarterly environmental monitoring reports from IAs and submit annual monitoring reports to ADB; and (viii) ensure timely disclosure of the final EIA, IEE including EMP in locations and form accessible to the public. Implementing Agencies. Two IAs, namely DOR and KMC, with the assistance of design and supervision consultants, are to: (i) undertake or update an EIA/IEE including EMP during detailed design stage and have them approved by concerned authorities; (ii) ensure EMP is included in bidding documents and civil works contracts; (iii) ensure compliance with all Government rules and regulations; (iv) oversee implementation of EMP including environmental mitigation measures and monitoring by contractors; (v) take corrective actions when necessary to ensure no environmental impacts; and (vi) submit quarterly environmental monitoring reports to the PMCO. In DOR, its Geo-Environment and Social Unit (GESU) is responsible for ensuring environmental safeguards compliance. 2. Social Safeguards (Involuntary Resettlement). A draft Resettlement Plan (RP) has been prepared for the Project. Land acquisition and involuntary resettlement impacts are limited to one subcomponent only, i.e., junction improvements along the BLR. The cost related to land acquisition and resettlement/rehabilitation will be borne by the Government. The PMCO is to ensure that affected persons (APs) are compensated prior to land acquisition and commencement of civil works. The following are institutional roles and responsibilities to ensure the RP is implemented during design and construction stages: PMCO. The PMCO is to (i) conduct internal monitoring of resettlement process to ensure smooth implementation; (ii) ensure the IA (DOR) with assistance from DSC update and finalize the draft RP during the detailed design stage; (iii) ensure timely payments of compensation and other entitlements as per the final RP and made before land acquisition and commencement of civil works; (iv) ensure ongoing consultations with communities and affected persons; and (v) submit semiannual monitoring reports to ADB that describe the progress of the implementation of resettlement activities and any compliance issues and corrective actions.

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Implementing Agencies. DOR, through its GESU and with assistance from DSC, will: (i) ensure the draft RP is updated based on detailed design; (ii) engage in ongoing meaningful consultations with stakeholders and affected persons; (iii) implement the final resettlement plan; (iv) provide timely payments to affected persons before land acquisition and commencement of civil works; (v) facilitate the provision of training and capacity building activities to APs; (vi) ensure all grievances are addressed and coordinate with the Grievance Redress Committee; (vii) take corrective actions where necessary; and (viii) submit quarterly monitoring reports to PMCO and clearly communicate the implementation status of RP and the status of APs throughout the project period. Civil Works Contracts. The Government will ensure that civil works contracts and bidding documents under the Project include specific provisions requiring contractors to comply with all (a) applicable labor laws and core labor standards on (x) prohibition of child labor as defined in national legislation for construction and maintenance activities, on (y) equal pay for equal work of equal value regardless of gender, ethnicity or caste, and on (z) elimination of forced labor, and (b) the requirement to disseminate information on sexually transmitted diseases including HIV/AIDS to employees and local communities surrounding the Project sites. In addition, under the two pilot bus routes subcomponent, the Project will construct foursmall bus terminals, which locations in the periphery of Kathmandu have not been determined yet. The pilot routes and the terminals will be implemented and constructed following a feasibility studies to be carried out by DoTM, with the help of the PMCO consultants, during the first year of Project implementation. It is unlikely that land acquisition will be needed as the land for the terminals is proposed to be leased from government, private sector or individuals. However, a RF has been prepared in case any land acquisition is identified during implementation and in the feasibility study. In such unlikely event, the following steps will be taken: (i) assessment to find out whether any type of displacement – physical or economic or both – will take place because of the project; (ii) formulation of RP in accordance with the RF, in consultation with affected peoples and other stakeholders and approval of it by ADB and disclosure; and (iii) implementation of RP. The construction activities may proceed, only after these requirements are met. No vulnerable and marginalized indigenous people will be affected by the Project.

VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION

A. Project Design and Monitoring Framework

See Annex F. B. Monitoring

1. Project performance monitoring. The PMCO will establish a project performance management system using the targets, indicators, assumptions, and risks in the DMF. The baseline data for output and outcome indicators will be gathered during the detailed design stage, within 9 months of loan effectiveness, disaggregated by income levels, sex, caste, and ethnicity. After the initial baseline survey, the PMCO will conduct annual monitoring using the same indicators and submit quaterly reports to ADB throughout project implementation. Results of a comprehensive completion survey will be included in the project completion report. These quarterly reports will provide information necessary to update ADB's project performance

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reporting system.14 2. Compliance monitoring. Status of compliance with loan covenants—policy, legal, financial, economic, environmental, and others— will be reviewed at each ADB review mission. All non-compliance issues, if any, will be updated in quarterly progress reports together with remedial actions. 3. Safeguards monitoring. Status of the implementation of the EMP and EARF, and resettlement plan and resettlement framework will be discussed at each ADB review mission and integrated into quarterly progress reports. 4. Poverty and Social, and Gender action plans. Status of the implementation will be discussed at each ADB review mission and integrated into quarterly progress reports15.

C. Evaluation

The Government and ADB will jointly review the Project at least twice a year. This includes (i) the performance of the PMCO, PIUs, TDF, consultants, and contractors; (ii) physical progress of works and equipment installation, and effectiveness of capacity building support; (iii) compliance with loan assurances; and (iv) assessment of project component sustainability in technical and financial terms. In addition to the regular reviews, the Government and ADB will undertake a comprehensive midterm review at the end of the second year of Project implementation to identify problems and constraints encountered and suggest measures to address them. Specific items to be reviewed will include (i) appropriateness of scope, design, implementation arrangements, and schedule of activities; (ii) assessment of implementation pace against project indicators; (iii) effectiveness of capacity building support; (iv) compliance with safeguard measures; (v) lessons learned, good practices, and potential for replication; and (vi) changes recommended. Within 6 months of physical completion of the Project, MPPW will submit a project completion report to ADB.16 D. Reporting

MPPW will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions; (c) updated procurement plan and (d) updated implementation plan for next 12 months; and (iii) a project completion report within 6 months of physical completion of the Project. To ensure projects continue to be both viable and sustainable, project accounts and the executing agency AFSs, together with the associated auditor's report, should be adequately reviewed. Project Implementing Units will provide PMCO with monthly progress reports and monthly expenditure reports within 7 days of the following month using the standard format prepared by PMCO.

14 ADB's project performance reporting system is available at:

http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool 15 Staff Guide to Consultation and Participation: http://www.adb.org/participation/toolkit-staff-guide.asp and CSO

Sourcebook: A Staff Guide to Cooperation with Civil Society Organizations: http://www.adb.org/Documents/Books/CSO-Staff-Guide/default.asp 16 Project completion report format available at: http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-

Sector-Landscape.rar

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E. Stakeholder Communication Strategy

The vision for sustainable urban transport will be communicated to residents by various media (newspaper articles, TV video clips, radio, advertising hoardings) as part of a communication plan to be managed by the PMCO with the support of the capacity development consultants. In a similar manner, IAs have funds allocated to carry out their own communication strategies. The Traffic Police will focus on improved driving behavior, linked to the introduction of a Highway Code, better enforcement, demonstration junctions and more rigorous driving tests. The DoTM will conduct campaigns to promote public transport, linked to the introduction of the two pilot routes. The MOE will disseminate air quality readings from its monitoring stations to make the public aware of the health implications of traffic emissions and to educate drivers to take more care of the environment through selection of low or zero emission vehicles or improved vehicle maintenance. KMC will conduct pedestrianization in close collaboration with those residents directly affected in both the Historic Core and the Central Area. In both cases the works will be determined by the outcome of local area improvement programs that will involve intense community participation. Improvements to the pedestrian environment within the central area will be one third financed from occupiers of properties fronting the sidewalks. Improvements within the Historic Core will be carried out in conjunction with other infrastructure improvements identified by residents. Other improvements will be partly financed by user group contributions in accordance with the normal KMC procedures for ward level projects. These lines of communication will commence at the start of the project and continue as and when necessary throughout the 4 year project period.

IX. ANTICORRUPTION POLICY

ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the Project.17 All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all Project contractors, suppliers, consultants and other service providers. Individuals/entities on ADB’s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contracts under the Project.18 To support these efforts, relevant provisions are included in the loan agreements, regulations and the bidding documents for the Project. The Project incorporates other measures, in addition to the standard ADB requirements, to deter corruption and increase transparency. The Project will (i) build the EA and the IAs' capacity to comply with ADB and Government procedures; and (ii) establish a project website to disclose information about project implementation. The project website will provide updated, detailed information on project implementation. For example, it will include procurement-related information, such as the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods and/or services procured. The Project website will be established by MPPW within [6] months of the loan and grant effectiveness, with the help of the PMCO consultants.

17 Available at: http://www.adb.org/Documents/Policies/Anticorruption-Integrity/Policies-Strategies.pdf 18 ADB's Integrity Office web site is available at: http://www.adb.org/integrity/unit.asp

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X. ACCOUNTABILITY MECHANISM

People who are, or may in the future be, adversely affected by the project may address complaints to ADB, or request the review of ADB's compliance under the Accountability Mechanism.19 The Project will establish a grievance redress mechanism to ensure greater accountability. With the assistance of the PMCO consultants, MPPW will set up the grievance redress mechanism within 6 months of the loan and grant effectiveness, to receive and resolve complaints, as well as to act upon stakeholders’ reports of irregularities on project related matters, including grievances concerning resettlement. The EA will widely publicize the existence of this mechanism to ensure that stakeholders are aware that a venue is available to address concerns or grievances relating to fraud, corruption, abuse, and any other aspects of project implementation.

XI. RECORD OF PAM CHANGES

The first draft of PAM has been prepared and agreed upon at the loan fact-finding.

19 For further information see: http://compliance.adb.org/.