Completion Report

Project Number: 36266 Grant Number: 8198 (TF) August 2008

Timor-Leste: Emergency Infrastructure Rehabilitation Project – Phase 2

CURRENCY EQUIVALENTS

Currency Unit – US dollar ($)

ABBREVIATIONS

ADB CTAEAEIRP-1EIRP-2EIRRGDPHDMICBIEEIRILCBMWPWPCRPMURSIPSOETATFETUNTAETVOC

–––––––––––––––

– –––––

Asian Development Bank chief technical advisor executing agency Emergency Infrastructure Rehabilitation Project Phase 1 Emergency Infrastructure Rehabilitation Project Phase 2 economic internal rate of return gross domestic product Highway Development and Management international competitive bidding initial environmental examination International Roughness Index local competitive bidding Ministry of Water and Public Works project completion review project management unit Road Sector Improvement Project statement of expenditure technical assistance Trust Fund for East Timor United Nations Transitional Administration in East Timor vehicle operating cost

NOTES

(i) The fiscal year (FY) of the Government is from 1 August to 31 July. “FY” before a calendar year denotes the year in which the fiscal year ends. For example, FY2004 begins on 1 August 2003 and ends on 31 July 2004. From 2007, the fiscal year of the Government changed to commence on 1 January and end on 31 December.

(ii) In this report, "$" refers to US dollars.

(iii) On 18 November 2002, the secretary of Asian Development Bank (ADB) changed the country name from East Timor to the Democratic Republic of Timor-Leste through Circular No. 51-02. Since the change in name occurred during project implementation, the report will use Timor-Leste as the country name. However, East Timor is also used when appropriate.

Vice-President C. Lawrence Greenwood, Jr., Operations Group 2 Director General I. Bhushan, Officer-in-Charge, Pacific Department (PARD) Director I. Bhushan, Pacific Operations Division, PARD

Team leader C. Chen, Infrastructure Specialist, PARD Team member C. Bantugon, Project Officer (Portfolio Management), PARD

CONTENTS

Page

BASIC DATA i

MAP

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2B. Project Outputs 3C. Project Costs 5D. Disbursements 5E. Project Schedule 6F. Implementation Arrangements 7G. Conditions and Covenants 7H. Related Technical Assistance 8I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 10K. Performance of the Recipient and the Executing Agency 11L. Performance of ADB 11

III. EVALUATION OF PERFORMANCE 12A. Relevance 12B. Effectiveness in Achieving Outcome 12C. Efficiency in Achieving Outcome and Outputs 12D. Preliminary Assessment of Sustainability 13E. Other Impacts 14

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14B. Lessons Learned 15C. Recommendations 15

APPENDIXES 1. Project Framework 17 2. Details of Works Undertaken for Civil Works Contract Packages 20 3. Technical/Procurement Documents Developed Under EIRP-2 21 4. Summary of Contracts Funded 22 5. Projected and Actual Disbursements 23 6. Project Implementation Schedule 24 7. Chronology of Major Events 25 8. Project Management Unit (EIRP-2) Organization Chart 26 9. Status of Compliance With Major Grant Covenants 27 10. Technical Assistance Completion Report 34 11. Economic Evaluation 36 12. Assessment of Project Impacts and Benefits 42 13. Quantitative Assessment of Overall Project Performance 44

BASIC DATA

A. Grant Identification

1. Country 2. Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Grant 7. Project Completion Report Number

Timor-Leste Grant 8198-TIM(TF) Emergency Infrastructure Rehabilitation - Phase 2 United Nations Transitional Adm. in East Timor Ministry of Water and Public Works $9.0 millionPCR: TIM-1052

B. Grant Data

1. Appraisal – Date Started – Date Completed

2. Grant Negotiations – Date Started – Date Completed

3. Date of Board Approval

4. Date of Grant Agreement

5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions

6. Closing Date – In Grant Agreement – Actual – Number of Extensions

7. Terms of Grant – Interest Rate – Maturity (number of years) – Grace Period (number of years)

14 February 2001 28 February 2001

22 January 2002 25 January 2002

18 May 2002

18 May 2002

16 August 2002 18 May 2002 none

31 December 2003 17 October 2007 3

Not applicable

8. Disbursements a. Dates

Initial Disbursement

13 March 2003

Final Disbursement

17 October 2007

Time Interval

56 months

Effective Date

18 May 2002

Original Closing Date

31 December 2003

Time Interval

19 months

ii

b. Amount ($) Categorya Original

AllocationLast

Revised Allocation

Amount Cancelled

Net Amount Available

Amount Disbursed

Undisbursed Balanceb

01 6,720,000 6,680,000 0 6,680,000 6,679,605 395 02 1,350,000 2,320,000 0 2,320,000 2,318,369 1,631 03 930,000 0 0 0 0 0

Total 9,000,000 9,000,000 0 9,000,000 8,997,974 2,026 a 01 = Civil Works, 02 = Consulting Services, 03 = Unallocated. b An undisbursed grant amount of $2,025.48 was refunded to the World Bank, the trustee of Trust Fund for East

Timor (TFET), at the grant closing date of 17 October 2007.

9. Local Costs (Financed)

Appraisal Actual Amount ($ million) 0.00 0.00 Percent of Local Cost 0.00 0.00 Percent of Total Cost 0.00 0.00

C. Project Data

1. Project Cost ($)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 9,000,000 8,997,974

Total 9,000,000 8,997,974

2. Financing Plan ($)

Cost Appraisal Estimate Actual Implementation Costs Beneficiary-Financed ADB-Financed Other External Financing (TFET) 9,000,000 8,997,974

Sub Total 9,000,000 8,997,974 IDC Costs Beneficiary-Financed ADB-Financed Other External Financing (TFET)

Grand Total 9,000,000 8,997,974

ADB = Asian Development Bank, IDC = interest during construction, TFET = Trust Fund for East Timor.

iii

3. Cost Breakdown by Project Component ($ million)

Project Component Appraisal Estimate Actual A. Civil Works Backlog and Earth Works 4.02 4.16 Slip Rehabilitation 1.35 1.99 Routine Maintenance Program 1.35 0.52 Subtotal (A) 6.72 6.67

B. Consulting Services Project Management and Training 1.02 1.96 Detailed Engineering 0.33 0.36 Subtotal (B) 1.35 2.32

C. Contingencies Physical 0.77 Price 0.16 Subtotal (C) 0.93

Total 9.00 8.99Notes: Project management and training includes the costs of consultant supervision. At appraisal no breakdown of the cost of the project management unit and training and construction supervision was given. The actual costs of $1.96 million at Project completion included $0.69 million for construction supervision.

4. Project Schedule

Item Appraisal Estimate Actual Consultants Contracts Chief Technical Advisor – 1 (international) June 2002 5 January 2003 Chief Technical Advisor – (interim) 10 March 2003 Chief Technical Advisor – 2 (international) 12 October 2003 Chief Technical Advisor – (interim) 24 June 2004 Chief Technical Advisor –3 (international) 23 August 2004 Chief Technical Advisor – 4 (international) 6 September 2006 Project Manager (local) June 2002 16 June 2003 Chief Financial Administrator June 2002 13 December 2002 Financial Administrator June 2002 19 June 2003 Road Maintenance Engineer Advisor August 2002 28 November 2003 Road Maintenance Engineer (local) August 2002 1 February 2004 Design and Supervision (Road Program) August 2002 28 September 2004 Design and Supervision (Cassa Bridge) August 2002 2 February 2004 Civil Works Contracts Date of First Award January 2003 9 December 2004 Completion of Last Civil Works December 2003 28 February 2007 Equipment and Supplies First Procurement August 2002 14 July 2003 Last Procurement December 2003 7 February 2007

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5. Project Performance Report Ratings

Ratings

Implementation Period Development Objectives Implementation Progress

From 30 June 2002 to 17 October 2007 Satisfactory Satisfactory

a a = engineer, b = economist, c = environment specialist, d = project analyst, e = infrastructure specialist, f = national officer, and g = staff consultant.

b The project completion report was prepared by Chen Chen, infrastructure specialist and mission leader; Ms. Cecilia Bantugon, project officer (portfolio management); and a transport economist (staff consultant).

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

PersonsNo. of

Person-Days

Specialization of Membersa

Fact Finding / Appraisal 14–28 February 2001 3 45 a, b, c Inception 21–24 June 2002 1 4 b Consultation Mission 16 September 2002 1 1 b Special Grant Review 16 November 2002 1 1 b Review 1 18–21 August 2003 2 8 b, d Review 2 1–6 December 2004 1 6 e Review 3 18–27 October 2005 2 20 e, f Review 4 21 Aug–1 Sept 2006 1 12 e Project Completion Reviewb 15–29 May 2008 3 37 e, f, g

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I. PROJECT DESCRIPTION

1. In the democratic consultation on 30 August 1999, the people of Timor-Leste voted overwhelmingly for independence. This was followed by a campaign of destruction, during which about three quarters of the population fled their homes. Most of the road network, particularly bridges, was damaged during the conflict period and was unable to support the humanitarian relief or security operations. In an emergency response, the Trust Fund for East Timor (TFET) was established, under the trusteeship of the International Development Association, to finance assistance to address the physical and social dislocation. A joint assessment mission coordinated by the World Bank was fielded in October–November 1999 to prepare a medium-term restoration program. The Asian Development Bank (ADB) took the lead in implementing infrastructure sector restoration in the program. The Emergency Infrastructure Rehabilitation Project Phase 1 (EIRP-1) was administered by ADB utilizing TFET funds.1

2. The Emergency Infrastructure Rehabilitation Project Phase 2 (EIRP-2, the Project), also financed by TFET funds, was provided to Timor-Leste as a supplementary grant of EIRP-1.2

The Project aimed to intensify and extend the objectives of EIRP-1 and focus on restoring the road network to a maintainable condition, where routine maintenance could effectively preserve the road assets. The objective of the Project was to support earthworks to diminish the annually recurring emergency needs by reducing the backlog of periodic maintenance. The Project was also intended to continue the programs initiated under EIRP-1 to establish a viable and efficient maintenance operation in Timor-Leste and support the technical preparation of the country’s maintenance service to carry out routine maintenance and contract village groups. Due to the limitation of available TFET funds, the size of the Project was constrained and flexibility was built into Project design to allow for necessary revision in scope as needs were identified during Project implementation. There were two components envisaged at appraisal: civil works, and consulting services.

1. Civil Works

(i) Backlog and earthworks. Earthworks rehabilitation was to support the reconstruction and minor realignment of short road sections that had become unstable and had the potential for technical correction. Some areas that needed resurfacing treatment on the roads were also to be identified under this subcomponent and a treatment strategy initiated. Additionally, a small bridge replacement program was incorporated to support the repair or replacement of substandard and vulnerable major drainage structures on the main roads.

(ii) Slip rehabilitation. The soils, topography, and climate combined to render the road network vulnerable to landslides. Bioengineering techniques were to be used to enhance slope stability.3

(iii) Routine maintenance program. The Project was to provide technical support to establish community-based maintenance programs and the related technical capacity in the field organization.

1 ADB. 2000. Report on a Project Grant from the Trust Fund for East Timor to the United Nations Transitional

Administration in East Timor for the Emergency Infrastructure Rehabilitation Project. Manila. 2 ADB. 2002. Report on Supplementary Funding from the Trust Fund for East Timor to East Timor for the

Emergency Infrastructure Rehabilitation Project – Phase 2. Manila. 3 Under these techniques, indigenous plants that will effectively reduce soil moisture, resist surface erosion, and bind

surfaces with strong and deep root systems will be identified.

2

2. Consulting Services

(i) Project management and training. The Project was to use the already established project management and implementation arrangements that had been agreed in EIRP-1, including the project management unit (PMU). The Project was to support the incremental time and personnel requirements of the PMU. As a significant level of skill upgrading was needed to enable the East Timorese to assume managerial and technical responsibility for implementing (i) the routine and periodic maintenance regime, (ii) bioengineering and other engineering techniques, and (iii) financial and administrative accountability for the sector, the Project was to provide training to establish the technical capability of the road maintenance organization.

(ii) Detailed engineering. This was to cover the detailed design of the civil works to be included under the Project.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

3. The Project’s design and formulation was consistent with ADB’s country strategies for Timor-Leste from the time of appraisal to completion,4 which all prioritized infrastructure rehabilitation and development as one of the key areas for intervention. The Project was also in line with the Government’s national development plan,5 which placed high importance on the development of road infrastructure.

4. At the time of its independence in 2002, the Government of Timor-Leste inherited an extensive road network, most of which, particularly the bridges, was damaged during the conflict period. The total length of the road network is about 6,000 kilometers (km), but half of it is rural roads that are undeveloped tracks. The core road network, linking the thirteen districts, comprises the two (northern and southern) coastal roads and five roads traversing north-south connecting the two coastal roads. About 80% (or 1,800 km) of core roads were paved, but the road surface started degrading to gravel due to difficult terrain, unstable geology, torrential rains, low design standards, and lack of maintenance.

5. Among other activities,6 EIRP-1 implemented road rehabilitation to restore accessibility to remote areas and facilitate humanitarian aid works being undertaken by the United Nations, but these road works were only carried out to address immediate road closures instead of being permanent engineering solutions. EIRP-1 also supported strategic development of the roads sector, including institutional and capacity development and establishment of a routine maintenance mechanism. However, to reduce the long-term maintenance burden of the new Government, additional resources were needed to improve the condition of the road network.

4 ADB. 2000. Country Assistance Plan 2001–2003 East Timor. Manila; ADB. 2003. Country Strategy and Program

Update (2003–2004): Timor-Leste. Manila; ADB. 2004. Country Strategy and Program Update (2005–2006): Timor-Leste. Manila; and ADB. 2005. Country Strategy and Program Update (2006–2008): Timor-Leste. Manila.

5 Timor-Leste. 2002. The National Development Plan for East Timor. Dili. 6 EIRP-1 implemented rehabilitation works in three infrastructure sectors—roads, ports, and power.

3

6. Under the authority delegated by ADB’s Board of Directors, the President of ADB signed the Grant Agreement for the Project during his visit to Dili on 19–20 May 2002.7 The supplementary grant was to intensify and extend the objective of the then-ongoing EIRP-1 to prepare for Timor-Leste a road network that could be maintained with a relatively modest budget. The formulation of the Project was based on (i) consultation with the United Nations Transitional Administration in East Timor (UNTAET), which administered Timor-Leste until 19 May 2002; (ii) consultation with the Government, which commenced its regulation from 20 May 2002; and (iii) close coordination with development partners, particularly the World Bank.

7. The emergency nature of the Project and time constraints did not allow a comprehensive feasibility study and project design. At appraisal, the Project was designed with considerable flexibility to incorporate necessary revisions to address the most urgent rehabilitation needs on short sections of unstable road. The objectives of the Project at appraisal remain relevant to the development of the roads sector of Timor-Leste at completion. Together with EIRP-1, the Project improved the connectivity between districts, and effectively maintained the access to remote areas for supporting humanitarian relief, security operations, and social and economic development.

B. Project Outputs

8. The major outputs achieved under the Project are briefly described in the following sections. Full details of the appraisal and detailed assessment targets compared to the actual outputs achieved are in the project framework in Appendix 1.8

9. Civil Works. At appraisal, there were no specifics in defining where work was to be undertaken except for a tentative list of Project roads. The ADB inception mission in June 2002 preliminarily determined the detailed scope of the Project in terms of a procurement plan. The civil works of the plan included (i) completion of the Cassa Bridge, which was partially constructed under the Indonesian regime; and (ii) road programs, including road rehabilitation, drainage improvement, slope protection, and bioengineering works.

10. In July 2003, the Government requested ADB’s no-objection approval of some minor changes in the scope of the Project affecting the selection of the road sections to be rehabilitated, and this had a minor impact on the implementation plan and the allocated funds. ADB approved (i) a reduction in the section of road between Batugade and Maliana (deletion of the section between Batugade and Balibo), and (ii) the addition of the section of road between Lolotoe and the junction with the road between Maliana and Bobonaro. Based on the detailed engineering design, the civil works for road programs were to be tendered through nine contract packages for the most critical sections along five national road alignments: (i) Baucau–Viqueque, (ii) Manatuto–Natarbora, (iii) Tibar–Ermera, (iv) Ermera–Maliana, (v) Maliana–Zumalai, and (vi) Bobonaro–Lolotoe. Due to the limitation of funds, a total of seven contract packages were eventually tendered (para 39).

11. The work undertaken by the Project covered (i) improvement of the road conditions, from the level of the embankment to the base course and, on some of the sections, up to the surface works; (ii) new construction and rehabilitation of four critical bridges—Cassa Bridge, Gleno Bridge, Vikida Bridge, and Malushun Bridge; (iii) slope protection works and retaining walls with

7 ADB. 2000. Joint Management Arrangements for the Trust Fund for East Timor. Manila. 8 The project framework at appraisal has been modified to be in line with the revised design and monitoring

framework now adopted by ADB.

4

an appropriate total volume of 29,443 cubic meters; (iv) drainage improvement works which included 61 meters (m) of box culverts, 442 m of pipe culverts, and 3,582 m of surface drains; and (v) bioengineering works of 5,269 m. The details of the actual works achieved under each contract are shown in Appendix 2.

12. The project completion review (PCR) mission visited the civil works and found that the works had been implemented successfully and were in a good state of repair. However, at Laclubar on the Manatutu–Natarbora road the cross-drains and side drains had been destroyed in a landslide in March 2008. A new alignment of the road was being undertaken at the time of the PCR mission as the repair cost of the damaged section was too high. The PCR mission visited the bridges at Cassa, Gleno, Vikida, and Malushun and found all of them to be in a good state of repair. Minor damage caused by erosion of the subgrade was noticed on the road approaches of the Casa and Vikida bridges.

13. Establishment of a Routine Maintenance Regime. The Project also aimed to provide technical support to establish a community-based maintenance program and related technical capacity in the field organization. This component was not implemented as envisaged and should be reassessed in view of two related technical assistance (TA) projects, both of which were financed by ADB. The first TA project, undertaken during the same period as the Project, conducted a comprehensive investigation of the roads sector of Timor-Leste.9 It proposed the Road Sector Improvement Project (RSIP), including a component of labor-intensive maintenance to facilitate the sustainable maintenance of the road network, and a community empowerment initiative to engage communities in the construction and maintenance of rural roads. The RSIP was later financed by ADB Grant 0017.10 The second TA project was ongoing at the time of the PCR mission.11 It provided training to personnel from both the Government and private sector on activities such as survey, design, contract management, and construction supervision.

14. Training. It was envisaged at appraisal that, in order to enable the executing agency (EA) to assume managerial and technical responsibility for implementing the routine and periodic maintenance regime, significant skills upgrading would be needed. The training that took place within the PMU concentrated on on-the-job training of selected personnel who were assigned as counterpart staff to the supervising consultants during the implementation of the civil works. The PMU selection of candidates for the positions was completed in November 2005. The counterpart staff included resident engineer, material engineer, and laboratory technicians. These counterpart staff were located in the Baucau and Maliana offices that were established under the Project. The evaluations of the counterpart staff by the supervision consultants showed that all counterpart staff members were fully dedicated to the Project and were gaining experience in most aspects of construction supervision and the understanding of contract documents. The actual total input of the counterpart staff was 89 person-months.

15. The capacity of the EA was strengthened through working closely with the PMU. All counterpart staff trained in the Project were employed after completion of the Project. This enabled the two testing laboratories in the field offices to be functional following the departure of international consultants for construction supervision. The project manager of the PMU has been promoted to the position of minister for infrastructure of Timor-Leste, and the material 9 ADB. 2001. Technical Assistance to East Timor for Transport Sector Improvement. Manila.10 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Asian

Development Fund Grant to the Democratic Republic of Timor-Leste for the Road Sector Improvement Project.Manila.

11 ADB. 2005. Technical Assistance to Timor-Leste for Infrastructure Sectors Capacity Development. Manila.

5

engineer in the Maliana office has been promoted to secretary of state for public works. A number of technical and procurement documents developed under the Project have been transferred to the EA and adopted as guidelines or standards for similar projects. Appendix 3 presents a list of the documents.

C. Project Costs

16. At appraisal, the Project cost was estimated to be $9,000,000. The actual costs were $8,997,974, lower than the appraisal estimates by only $2,026.

17. The actual cost of civil works of $6.67 million was slightly lower than the appraisal estimate of $6.72 million (excluding contingencies). If contingencies are included in the appraisal estimate, the costs were about $7.49 million, resulting in the actual costs being lower by about $0.82 million, or almost 11%. No civil works procurement packages were stated at appraisal. During Project implementation it was originally planned to undertake nine road improvement civil works contract packages. However, it was only possible to tender seven of the packages due to limitation of funds (para 39). It is not possible to compare the actual costs of individual civil works contract packages with those at appraisal as no individual estimates for civil works were made at appraisal.

18. The appraisal estimate of consulting services, which included both project management and training and detailed engineering, was $1.35 million (excluding contingencies). The costs of construction supervision were not specified separately in the overall total of $1.35 million. The actual costs of consulting services amounted to $2.32 million. The overall increase in consulting services costs was $0.97 million, or about 72%. The project management and training item under consulting services was envisaged at appraisal as $1.02 million; the actual cost was $1.96 million. The cost of engineering design under consulting services was estimated at $0.33 million at appraisal; the actual cost was $0.36 million. The increase in costs under consulting services is attributable to the delays that were encountered at the beginning of Project implementation (para 22). As a result of these delays, the closing date of the grant was extended (three times in total, para 21–25) and the contracts of both the PMU staff and the consulting services for design and supervision had to be extended. In order to finance this additional cost, a reallocation request was submitted by the Government to ADB on 16 February 2006 based on the utilization schedule at the time. The unallocated category, and also savings that had arisen from some completed civil works contracts, were then used to cover the additional costs of the PMU staff and the design and supervision consultants. The actual detailed costs for each component of the Project compared with the estimates at appraisal are in section C3 of the basic data, and a summary of the contracts funded is in Appendix 4.

D. Disbursements

19. ADB administered the disbursement of funds for Project implementation on behalf of TFET. No disbursement schedule was included in the appraisal. However, based on the implementation schedule prepared at appraisal, the projected disbursements were developed and are shown in Appendix 5 along with the actual disbursements that took place during implementation. Disbursements were slower than expected due to the initial delays that occurred. As of 31 August 2006, the total awarded contracts amounted to about 97% of the grant whilst disbursements were only 70%. On 22 January 2007, the EA requested approval for a 4-month grace period to 30 June 2007 to properly close the financial records. ADB approved this on 12 February 2007. Following the last disbursement on 17 October 2007, ADB cancelled the remaining undisbursed balance of $2,025.48. The initial disbursement (13 March 2003) and

6

final disbursement (17 October 2007) were made over 56 months, compared with a disbursement period of 18 months envisaged at appraisal.

20. The imprest account that was established for EIRP-1 was used for disbursements under the Project, as envisaged at appraisal. The use of imprest funds has facilitated the timely payment to consultants, contractors, and suppliers under the Project. ADB’s statement of expenditures (SOE), as well as full supporting documentation replenishment procedures, were followed to reimburse eligible expenditures, and replenish or liquidate advances to the imprest account. Independent auditors audited the use of funds from 1 July 2004 to 30 June 2007 (para 28) and found all expenditures from the imprest account during the period were accurately recorded and appropriate. SOE items were also checked by ADB during Project implementation. The PCR mission reviewed all unchecked SOE items and found that the expenditures had proper supporting documents. The undisbursed amount in the imprest account was refunded by the Government to the World Bank (the trustee of TFET) on 17 October 2007.

E. Project Schedule

21. The grant was approved and became effective on 18 May 2002. The original closing date of the grant, as envisaged at appraisal, was 31 December 2003 though this was finally extended to 28 February 2007 after three extensions at the requests of the Government. At appraisal it was envisaged that the Project would be implemented over a period of 18 months from June 2002 to December 2003. Actual implementation of the civil works was completed in February 2007, an overall delay of 38 months. The actual and the appraisal implementation schedules for each activity are compared in Appendix 6.

22. Project activities did not start until December 2002. In August 2003, the Project was already 8 months behind schedule. There was a series of delays during (i) the preparation of the civil works procurement plan, (ii) the selection of the short-list of qualified firms to be invited to submit proposals for the provision of detailed design consulting services, (iii) the selection of the regional engineer, and (iv) the selection process for the position of the chief technical advisor (CTA) for the PMU. In order to allow adequate time for completing the Project, on 17 February 2004, ADB approved an extension of the grant closing date from 31 December 2003 to 31 May 2005.

23. The Project made significant progress from September 2004 with the mobilization of the new CTA. The implementation schedule of the Project was revised again after the consultants for detailed engineering design submitted their inception report. The scope of road works proposed in the inception report included nine contract packages, the implementation of which required another 18 months after the grant closing date that had been revised to 31 May 2005 by the first grant extension. To complete the works, it was necessary to extend the grant closing date to 30 November 2006. A second extension of the grant closing date was recommended by an ADB review mission in December 2004.12 ADB approved the extension to 30 November 2006 on 22 December 2004. The contracts of the PMU and construction supervision consultants were also extended.

24. Due to the law-and-order problem in the country during April–July 2006, there were further delays to the implementation of the Project. The supervision consultants had to leave their offices in Baucau and Maliana on 24 May 2006. As security improved, the construction

12 The review mission was conducted on 1–8 December 2004.

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supervision consultants were remobilized on 23 June 2006 in the Baucau office and on 17 July 2006 in the Maliana office. The consulting services needed to be extended due to this delay. By August 2006, the civil works were only 87.02% complete. During the ADB review mission in August–September 2006, it was agreed that a further extension to the grant closing date to 28 February 2007 would be necessary to complete the remaining works.13 ADB approved the final extension on 18 September 2006.

25. Up to its completion, the Project experienced a total of three extensions of the grant closing date. Appendix 7 gives a chronology of the major events during the implementation of the Project.

F. Implementation Arrangements

26. The MWPW was the EA at appraisal. Shortly after appraisal the MWPW was reorganized to the Ministry of Transport, Communications and Public Works, which then became the EA of the Project. On 27 July 2005, the Ministry of Transport, Communications and Public Works was split into two ministries—the Ministry of Transport and Communications, and the Ministry of Public Works, the latter of which became the EA of the Project until its completion in February 2007.14 The PMU, which coordinated daily activities of the Project, was set up under the EA and remained functional during the Project implementation. An organization chart of the PMU is in Appendix 8.

27. At appraisal, it was envisaged that a project steering committee would be established in order that broad stakeholder representation was achieved in Project implementation. In actuality, two project steering committees were established—the road steering committee,15 and the road working committee.16 The road steering committee met twice in 2003 and the road working committee met seven times. Since that time, there has been no record of regular meetings of these two steering committees. However, coordination between ADB, the EA, and related Government agencies, consultants, and contractors was adequately maintained through regular meetings and ADB review missions.

G. Conditions and Covenants

28. Details of compliance with the major covenants under the grant are presented in Appendix 9. No covenant or condition of the Grant Agreement was modified, suspended, or waived during project implementation. The Government and the EA generally complied with the grant covenants as observed, monitored, and reported upon by ADB review missions. Reporting requirements under the Project have substantially been met. Out of the 29 major load covenants, 25 were fully complied with, two were partly complied with, one was not complied with, and it was not possible to comply with one covenant. One of the partly complied with covenants related to audited project accounts. The EA maintained separate records and accounts to identify the goods and services financed under the Project. The accounts have been audited annually by independent auditors and the audited project accounts were submitted to ADB and substantially met grant covenant requirements. However, the submissions of

13 The review mission was conducted on 21 August–1 September 2006. 14 In 2007, the Ministry of Infrastructure was established and the previous Ministry of Public Works was absorbed into

the Ministry of Infrastructure as the Department of Public Works. 15 Membership of the road steering committee was drawn from the departments of Planning and Finance; Internal

Administration; Agriculture and Forestry; and Transport, Communications, and Public Works. 16 Membership of the road working committee was drawn from the departments of Internal Administration; Agriculture

and Forestry; and Transport, Communications and Public Works.

8

audited project accounts were repeatedly delayed, although the delays did not adversely affect the implementation of the Project.17 Another partly complied with covenant relates to the project steering committee (para 27). The covenant that was not complied with relates to the bidding process for civil works greater than $1 million (para 36). One covenant, relating to insurance of the civil works, was not possible to comply with as no insurance companies exist in Timor-Leste. Bank guarantees for civil works were used as an alternative.

H. Related Technical Assistance

29. Although there was no TA provided as piggy-back TA to the grant, there was a related TA of $500,000 for transport sector improvement (footnote 9). As this TA is related to the implementation of the Project, it has been reported upon here. The objectives of the TA were to support the establishment of sustainable operations, management, and administration of transport sectors. In view of the significant change in the environment in Timor-Leste, the goal and purpose of the TA was revised to stress the need to prepare an updated and comprehensive development strategy for the road system. The updated outputs included (i) identification of an optimal level of expenditure on road construction and maintenance, (ii) preparation of a road investment program, (iii) development of a program to increase expenditure and management capability for sustainable road maintenance, (iv) recommendations on road use charges, and (v) preparation of basic information that will serve the longer-term road planning and management needs of the Government. Overall, the TA was rated successful.18 A technical assistance completion report is in Appendix 10. Its outputs effectively facilitated the strategic planning of the transport sector, particularly for road maintenance and rehabilitation. The Government was satisfied with the outputs and approved the road sector investment program developed by this TA.

I. Consultant Recruitment and Procurement

1. Consultant Recruitment

30. As envisaged at appraisal, both international and national consultants were required for detailed engineering and project management. The consultants were recruited in accordance with ADB’s Guidelines on the Use of Consultants.

31. The detailed design of Cassa Bridge had already been carried out by consultants for UNTAET before the independence of Timor-Leste in 2002. The same consultant was engaged, under the direct negotiation procurement mode, for completing the tender documents and the construction supervision. ADB approved the supervision consultant for Cassa Bridge on 16 November 2004.

32. The detailed design consultants for the road rehabilitation civil works were recruited in September 2004 and were mobilized on 18 October 2004 for a 5-month assignment. For the construction supervision, it was proposed to ADB by the PMU that the design consultants for the road works be invited to submit technical and financial proposals not to exceed $400,000 for the services in order to assure continuity and consistency with the design and to expedite the recruitment procedure. This proposal was approved by ADB on 11 February 2005. Proposals for construction supervision were submitted on 22 March 2005. The evaluation of the proposals

17 As indicated in the project performance report, the submission of audited project accounts for FY2004 was delayed

by 17 months, for FY2005 by 5 months, for FY2006 by 18 months, and for FY2007 by 6 months. 18 ADB. 2008. Technical Assistance Completion Report: Transport Sector Improvement (Timor-Leste). Manila.

9

was completed by the PMU on 22 April 2005 and submitted to ADB for concurrence. ADB gave its no-objection approval on 5 May 2005 and the contract for construction supervision services was signed on 23 May 2005. The supervision consultants mobilized on 15 June 2005 and completed their mobilization soon after the contractors mobilized on site. The consultants set up two regional offices—Baucau (east) and Maliana (west)—to undertake construction supervision for the civil works contract packages.

33. At appraisal, it was envisaged that approximately 60 person-months of consulting services would be required to support the PMU (para 9 of Appendix 7 to the report and recommendation of the President). The actual consulting services supporting the PMU were 154 person-months. The increase is mainly due to the delays in Project implementation (paras. 22–24).

34. The staff of the PMU consisted of four professionals: project manager, financial administrator, road maintenance engineer, and CTA. A chief financial administrator and a road maintenance engineer advisor were engaged additionally for a short period to support the operation of the PMU. There was a total of four CTAs throughout the Project, which affected the implementation progress. The first CTA, who had been appointed in January 2003, suddenly resigned after only two months. Whilst recruitment of a permanent CTA was being undertaken, the CTA under EIRP-1 was appointed on an interim basis until 9 October 2003. A second permanent CTA was appointed in October 2003. On 24 May 2004, ADB was notified that the EA wanted to terminate the services of the CTA as his ability to prepare and review documents in accordance with ADB guidelines, evaluate bids, and conduct negotiations with selected bidders, was not satisfactory. It was noted that since his appointment in October 2003, little implementation progress had been made. ADB replied on 24 May 2004 with no-objection on this, and so the services of the second CTA were terminated on 25 May 2004 and he was given 1-month's notice (to 24 June 2004). An interim CTA (the CTA of EIRP-1) was again appointed until a permanent CTA was recruited. The third permanent CTA was appointed on 23 August 2004. It was necessary to recruit a fourth CTA as the third CTA had to resign due to pressing family concerns. The third CTA left on 6 September 2006, and the handover to the fourth CTA spanned the period from 18 August to 6 September 2006.

35. The contracts of the PMU staff had to be extended on two occasions due to the delays in the implementation of the Project. Originally, the PMU contracts were to end in December 2004. Based on the revised implementation schedule, the PMU contracts were extended to 30 November 2006. At that time it was then agreed that, starting on 1 December 2006, the PMU staff contracts would be funded under ADB Grant 0017-TIM (footnote 10).

2. Procurement

36. Procurement of project goods and services was envisaged to be conducted through international competitive bidding (ICB), local competitive bidding (LCB), and international shopping procedures in accordance with ADB’s Guidelines for Procurement. The Grant Agreement indicated in para 4 of section 1 in schedule 3 that civil works contracts estimated to cost the equivalent of more than $1,000,000 would be awarded on the basis of ICB. However, due to the security problems in Timor-Leste and the small size of contract packages, international contractors were not interested in undertaking the works. To expedite the Project progress, all contract packages were procured through LCB and approved by ADB. The PCR mission is of the view that the LCB mode ensured the smooth progress of civil works and strengthened the capacity of local contractors.

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37. A prequalification of contractors exercise was conducted in 2001 under EIRP-1. It was envisaged that the same prequalified contractors would be invited for the Project. However, the construction industry in Timor-Leste had changed dramatically since that time. ADB agreed with the PMU to conduct upcoming bids under the post-qualification procurement method. This would thus ensure equal opportunities for domestic contractors.

38. The first contract to be bid for was for the completion of Cassa Bridge, and the bids were issued on 12 August 2004. Seventeen contractors purchased bid documents, and bids were submitted by 10 contractors. The award of contract was approved by ADB on 29 October 2004. Cassa Bridge was substantially completed on 10 June 2005 and it was inaugurated by the President of Timor-Leste. The certificate of substantial completion was issued on 30 June 2005. The defects liability should have been up to 30 June 2006 but due to security conditions in mid-2006 the inspection of the bridge did not take place until 27 July 2006. Minor repairs were necessary along the road approaches and these were completed on 5 August 2006. The Certificate of Acceptance of the Works was issued on 9 August 2006.

39. Activities relative to the preconstruction of the civil works for the roads started in February 2005. Originally, nine road civil works packages were to be procured: (i) Baucau–Viqueque, contract BV 1-1; (ii) Tibar–Ermera, contract TE 2-1; (iii) Ermera–Hatolia, contract EH 2-2; (iv) Hatolia–Maliana, contract HM 2-3; (v) Manatuto–Natarbora, contract MN 3-1; (vi) Manatuto–Natarbora, contract MN 3-2; (vii) Bobonaro–Lolotoe, contract BL 4-1; (viii) Maliana–Zumalai, contract MZ 5-1; and (ix) Maliana–Zumalai, contract MZ 5-2. However, only seven contracts were tendered; two contracts (BL 4-1 and MZ 5-2) were not tendered due to a shortage of funds.19

40. The bids for the other seven contract packages were issued as follows: BV 1-1 on 24 March 2005 (nine bids received), TE 2-1 on 1 April 2005 (eleven bids), EH 2-2 on 4 May 2005 (five bids), HM 2-3 on 20 May 2005 (five bids), MN 3-1 on 10 May 2005 (four bids), MN 3-2 on 10 May 2005 (five bids), and MZ 5-1 on 4 May 2005 (four bids). The bids were evaluated and the resulting bid evaluations recommending award of contracts were sent to ADB. After ADB gave its no-objection approval, all seven contracts were awarded, contracts signed, and the notices to proceed issued within the period June–August 2005. The works on the contract packages20 was completed as follows: for BV 1-1 on 28 February 2007, for TE 2-1 on 20 February 2007, for EH 2-2 on 12 February 2007, for HM 2-3 on 23 October 2006, for MN 3-1 on 9 December 2006, for MN 3-2 on 16 December 2006, and for MZ 5-1 on 2 February 2007. Taking-over certificates were issued by the supervisory consultants.

J. Performance of Consultants, Contractors, and Suppliers

1. Consultants

41. The consultant firm engaged for completing the tender documents of Cassa Bridge did not perform as expected at the start. The submitted bid documents did not conform to ADB’s standard documents. After revision by the consultants, ADB approved the bidding document on 6 August 2004. The same consultant was also engaged for construction supervision of the Cassa Bridge and performed satisfactorily. 19 It was estimated that an additional $1 million would be required to cover the cost of these contracts. These bid

documents were transferred from the PMU to the EA for procurement and implementation from its own funds. 20 Due to unstable security conditions in July 2006, work on the Tibar–Ermera contract (TE 2-1) and the Ermera–

Hatolia contract (EH 2-2) was not resumed by the respective contractors. The remaining work on the two contracts was continued as variation orders by another two capable contractors engaged under the Project.

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42. The performance of the consultants for the road program was satisfactory. The same consultant firm was engaged for the detailed design and the construction supervision. The design services were satisfactorily completed on 22 April 2005 with the submission of the following reports: (i) final design with drawings, (ii) geotechnical, (iii) environmental, (iv) bioengineering, and (v) unit rates analysis. The consultants conducted construction supervision for all the seven contract packages of the Project. Due to security problems in 2006, the supervision consultants had to leave their offices temporarily, but they were able to resume the tasks after the civil unrest to complete all road works. Overall, the performance of the consultants was satisfactory.

2. Contractors

43. The performance of the contractor for completion of the Cassa Bridge was rated satisfactory, and the construction was completed in a timely manner. The contract time was for 182 days and construction started on 24 November 2004. The works were substantially completed on 10 June 2005. The contract time of 182 days was extended by 20 days to allow for the provision of maintenance for road approaches. An acceptance certificate was issued after the defects liability period on 9 August 2006.

44. The performance of contractors for the road program has generally been satisfactory. There were, however, two contractors that did not complete their work (footnote 20). The contractors for these two contract packages were not able to resume their works after the civil disorder. Their contracts were terminated by the EA and were subsequently awarded as variation orders, which were approved by ADB, to contractors working on the other Project contract packages in order to avoid further delays in Project implementation.

K. Performance of the Recipient and the Executing Agency

45. The Government of Timor-Leste was the recipient of the grant and performed satisfactorily during the Project implementation. The EA also performed satisfactorily. At the commencement of Project implementation, the PMU under the EA was not able to provide sufficient support and guidance to the consultants. This significantly improved after the mobilization of the third CTA in September 2004. During the implementation of civil works, the PMU was efficient at solving issues and established standard procedures for the Government’s future operation.

L. Performance of ADB

46. ADB provided essential support and assistance in monitoring the implementation of the Project. ADB conducted an inception mission, a consultation mission, a special grant review mission, and four review missions. The missions included visits to the Project sites and also to the EA and PMU headquarters in Dili, where coordination meetings were held. ADB had a total of three project officers involved during implementation of the Project. ADB's Special Office in Timor-Leste maintained regular meetings with the EA and the PMU and carried out field visits to civil works during the Project implementation. The role performed by the ADB missions in providing advice on technical issues, preparing and evaluating bid documents, and matters of loan administration was recognized by the EA and the PMU. It was noticed by the PCR mission that delays in the early phase of Project implementation could have been reduced or avoided if corrective measures were undertaken. More frequent and closer monitoring is thus

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recommended for future projects of Timor-Leste. Overall, the performance of ADB was rated "satisfactory."

III. EVALUATION OF PERFORMANCE

A. Relevance

47. The Project is rated "highly relevant". Due to its emergency nature, the Project scope incorporated the necessary flexibility to adapt the Project during implementation to better meet the needs of the roads sector. The goals and objectives of the Project were designed with the consideration that the then ongoing EIRP-1 would restore the basic accessibility of the road network, and the Project would implement more permanent engineering solutions for road infrastructure to diminish emergency rehabilitation needs. The envisaged outputs of the Project were consistent with the needs for maintaining connectivity of the road network in Timor-Leste. At the beginning phase of implementation, the Project scope was further refined under the goals and objectives at appraisal. The roads and bridges finally rehabilitated or constructed under the Project have contributed to the integration of the country. The Project also promoted the institutional capacity of the young Government to manage its inherited extensive transport infrastructure. The Project was in line with both the country’s development priorities and ADB’s country strategy (footnote 4 and 5). The Project is, therefore, considered highly relevant.

B. Effectiveness in Achieving Outcome

48. The Project is rated "effective". Under the Project, the most critical national roads were rehabilitated, which significantly reduced the backlog of periodic road maintenance. The slope protection and drainage improvement works contributed to reducing the risk of landslide and flood damage, and reliable access was generally restored, although continuing slips are inevitable due to the weak and eroded geotechnical conditions. The capacity of the EA was strengthened through on-the-job training and other assistance. However, considering the limited TFET funds of $9 million and the extensive road network of over 6,000 km, the Project could only be an initiative to improve the whole road network to a maintainable condition, where routine maintenance could effectively preserve the road assets. Difficult terrain, geology, and weather conditions keep imposing considerable additional costs for the maintenance and rehabilitation of road infrastructure. An efficient and responsive road maintenance capability will be critical in the future, so as to clear flood damage and unblock roads rapidly. A considerable amount of work still needs to be done to improve the condition of the road network in Timor-Leste.

49. The objective of establishing a routine maintenance regime was only partially achieved in the Project due to budget limitation. The ADB-financed TA for transport sector improvement (footnote 9), which was related to the Project, prepared a comprehensive approach for improving the roads sector of Timor-Leste. The approach included the parallel carrying out of major rehabilitation on core roads, labor-intensive road maintenance, and community empowerment for developing rural roads. The approach is being exercised in a follow-up project (footnote 10).

C. Efficiency in Achieving Outcome and Outputs

50. The Project was not financially evaluated because it does not generate revenue.

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51. As the Project was of an emergency nature, no economic analysis was undertaken to justify the investments at appraisal. The Project focused on the restoration of damaged key road infrastructure. The economic benefits of such restoration activities were, in fact, those that accrued at the time of initial operation. Project-financed restoration brought road infrastructure back to original productivity and efficiency levels. These benefits are high, though not always quantifiable for all project components. No estimates of the economic internal rate of return (EIRR) were made at appraisal. Without defined baseline or time series socioeconomic data for most components, and given the fact that the damaged facilities were restored only to their pre-damaged status, no attempt was made to conduct economic evaluation for those components with little or no data.21

52. The PCR mission has, however, conducted an economic evaluation to evaluate the efficiency, as measured by the EIRR, for the works that were undertaken under the Project. The PCR mission, with the assistance of the PMU, undertook traffic counts along the Project roads in order to carry out the economic analysis as far as possible with the limited data available. The results show that the estimated EIRRs for individual Project road sections range from 13.2% to 88.9%. The EIRR for the Project as a whole was 37.5%. Therefore the Project is rated "highly efficient".22 The economic reevaluation of the Project is described in Appendix 11.

D. Preliminary Assessment of Sustainability

53. The civil works undertaken in the Project were of an emergency nature, aimed at meeting immediate needs and enabling a return to normal economic and social activities of the affected areas by preventing future landslides and thus keeping the roads open to traffic. The sustainability of the Project components is dependent upon the Government’s priorities on road maintenance and development. To preserve the civil works produced by the Project, the Government needs to carry out regular maintenance activities on pavement, slope protection, and drainage facilities. The unstable terrain will cause additional needs for emergency rehabilitation to clear frequent landslides. The EA is, however, faced with funding shortfalls each year. The PCR mission’s discussions with the EA indicated that only approximately $5 million is available per year for routine maintenance in the roads sector, which is insufficient for maintaining the comprehensive road network of over 6,000 km. Deterioration of the roads is inevitable unless current funding levels and the road maintenance regime are improved. ADB’s follow-up road projects, such as the RSIP, will contribute to increasing the sustainability of the road network. The bridges at Cassa, Gleno, Vikida, and Malushun are in very good condition as confirmed by the field trips of the PCR mission, and are sustainable as they are constructed as permanent structures. These structures, however, should continue to be maintained by the EA to ensure their sustainability. The Project outputs are therefore rated "unlikely to be sustained".

21 ADB. 2004. Operations Manual. Manila. Section 25, page 4, footnote 1, states that “the rehabilitation loan may

finance numerous subprojects that are small in size and prima facie economically viable. For such small projects, internal rate of return analysis may not be feasible or practical.” Also, OM Section D7/BP states: "Although rigorous rates-of-return analysis may not be feasible, estimates in an order of magnitude should be provided and justified in as much detail as possible."

22 According to Operations Evaluation Department guidelines, if the estimated EIRR exceeds 18%, a project is normally rated "highly efficient."

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E. Other Impacts

1. Environmental Impact

54. An initial environmental examination (IEE) conducted for the entire Project area indicated that no significant adverse environmental impacts were associated with the Project. The IEE indicated that construction-related environmental impacts were unavoidable but these were only temporary in nature. The IEE recommended environmental mitigation measures to be used in the construction phase and these were incorporated into the design of the civil works contracts and the measures were implemented by the civil works contractors. Construction supervision consultants’ field investigations formed the basis for environmental analysis. Based on these investigations, environmental concerns were communicated to contractors so that environmental mitigation measures could be undertaken. The civil works that have been implemented have decreased erosion and the occurrence of landslips.

2. Socioeconomic Impact

55. An initial social assessment was carried out at appraisal. In accordance with ADB's social safeguard policies,23 a structured process of impact assessment, planning, and mitigation measures to address any adverse effects of the Project was undertaken at appraisal. As envisaged at appraisal, no land acquisition was necessary for the Project and therefore no persons were displaced or resettled either permanently or temporarily. No ethnic minority groups, including Muslim groups, were adversely impacted by the implementation of the Project. It was expected at appraisal that significant positive impacts would occur for the local communities. Employment generation occurred during the implementation of the Project and local village labor was used in the civil works contracts. The exact amount of labor recruited is unknown as there was no benefit monitoring exercise undertaken during the implementation of the Project. As no monitoring was undertaken during the Project, it is also impossible to determine if the Project had a significant impact in terms of poverty reduction. An assessment of Project impacts and benefits on the basis of a sample of roads that were visited by the PCR mission is in Appendix 12. At Vikida Bridge, approximately 30 local village people were employed over a period of about 4 months to assist in bridge construction. From this temporary employment, the local village people earned about $3 per day. At another section of road works, approximately 100 local village people were employed for a whole year. One major significant impact was due to the completion of the Cassa Bridge. Before the bridge was open, the travel time from Zumalai to Hatudo was approximately 4.5 hours; since Cassa Bridge opened the same trip takes only 30 minutes. The rainy season, which extends from November to March, had previously cut off some sections of road by landslides. These areas are now protected and thus the roads can remain open. The reliability of road access has been increased and has enabled local communities to carry out their daily social and economic activities. No persons were displaced because no land acquisition was required for the Project.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

56. The Project is rated "successful", based on a review of its relevance, effectiveness, efficiency, and sustainability. Appendix 13 includes the quantitative assessment of project performance to determine the project rating. With a limited budget, the Project has significantly

23 ADB Involuntary Resettlement Policy (1995) and Policy on Indigenous Peoples (1998).

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improved the connection between major population centers of the country, and efficiently built the capacity of Government and national contractors. These achievements outweigh the low rating of sustainability, which is rated "unlikely to be sustainable" considering the limited budget and emergency nature of the Project. The Project is therefore rated "successful" with an overall rating of 2.10.

B. Lessons Learned

57. Difficult terrain, geology, and weather increases the deterioration of roads. Terrain, geology, and weather conditions impose considerable additional costs for the provision and maintenance of roads. For example, a landslide at Laclubar on the Manatuto–Natarbora road in March 2008 destroyed the cross-drains and side drains of the Project. A road maintenance regime, including arrangements to address emergency needs, is desperately needed to preserve the infrastructure assets of road sector.

58. Construction during rainy season is difficult. In the approximately 5-month rainy season between November and March, a large part of the road network becomes impassable after heavy rains. Due to the difficulty of transporting material and following road construction specifications in rainy seasons, the period suitable for road construction is from April to November.

59. Repetitive works could be minimized through coordination with the Government and development partners. The PCR mission noted some civil works overlapped with assistance from other development partners. For example, the Gleno Bridge was constructed only a few meters away from another bridge which was built by the Japan International Cooperation Agency. This could have been avoided to save money for rehabilitating other critical road sections if more comprehensive consultations with the Government and development partners had been conducted.

60. The capacity of local contractors is limited. Local contractors have been used to implement the Project, but they are neither technically nor financially capable to undertake large-scale road projects independently. International consultants for project management and construction supervision provided opportunities for capacity development of local contractors. When more extensive road network development is pursued, international contractors should be introduced to undertake the tasks together with local contractors.

C. Recommendations

1. Project Related

61. Future Road Development. As emergency needs are abated, more attention could be given to quality and sustainability. As the Project was an emergency in nature, its aim was to undertake as much restoration work as possible over a wide geographic area. Due to this, the investment in each of the works undertaken was small. The engineering solutions that were undertaken were the best that could be done within the limited budget. The maintenance of Project facilities is critical to the long-term success of the Project. The ongoing RSIP reflects the initial attempt to move from emergency work to road development, as it includes rehabilitation of longer stretches of roads as well as initiatives to practice labor-intensive maintenance methods and community participation in development of rural roads. Further efforts, such as quality implementation of road maintenance and rehabilitation projects, and periodic review of the road sector investment program, are needed to more effectively improve road infrastructure.

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Improvement of the core road network, labor-intensive road maintenance, and community participation in rural road development need to be integrated and progressively expanded in future projects in the roads sector.

62. Future Project Monitoring. It is recommended that project reviews by ADB should be conducted at least every 6 months and preferably more frequently in the early phase of the implementation of future projects. For emergency projects, close monitoring of implementation of early phase is more critical to ensure the expected outputs are achieved timely and effectively to address the urgent needs.

63. Covenants. The requirement for insurance needs to be further assessed during the processing of future projects. There was no insurance company in Timor-Leste during the Project implementation, and insurance companies of other countries were not willing to provide insurance to civil works because of the adverse law-and-order situation. As an alternative, the contractors of the Project were requested to provide bank guarantees equivalent to 10% of their contract amounts.

64. Timing of the Project Performance Evaluation Report Preparation. It is recommended that project performance be evaluated in another 1–2 years to determine if the Project is still meeting its objectives. It should be borne in mind that, as the Project implemented emergency works, not all works will be sustainable over a long period.

2. General

65. The Capacity of the EA Needs to be Strengthened. The EA still faces challenges in managing its road assets and implement large capital development programs. Inadequate institutional set-ups and weak absorptive capacity in the private sector are major factors contributing to the difficult situation of the EA. Further assistance for capacity development needs to be incorporated into future road projects. However, such a program could only work if the Government makes efforts to encourage the career development of its staff and provides adequate opportunities in order to attract capable people. Considering the weak capacity of the EA, interim measures to improve the performance of road sector may include (i) effectively utilizing source from development partners for strategic planning, (ii) outsourcing parts of the EA’s functionalities to private sector, such as engineering design, road condition surveys, and routine maintenance, etc., and (iii)involving communities in rural road development.

Appendix 1 17

PROJECT FRAMEWORK

Performance Indicators and/or TargetsDesign Summary Appraisal Actual

Project Monitoring Mechanisms

Assumptions and/or Risks

Impact

Hand over the road network in adequate condition to contribute to economic development, and from which it can be adequately maintained.

Establish a field organization for maintenance of the road network.

Significantly reduce backlog maintenance requirement.

Address all landslips to facilitate access.

Employ local labor and develop skills to develop sustainable employment opportunities in road sector management.

Field offices established in Baucau and Maliana.

Achieved.

Achieved.

Achieved. Local labor was employed for civil works.

ProjectManagement.

Consultation with communities and authorities.

Assumptions

� Timely implementation of the Emergency InfrastructureRehabilitation Project Phase 2 (EIRP-2).

� Organization of local employment.

� Identification of road sections where sustainable engineering solutions can reduce emergency road restoration need.

.Outcome

Road backlog reduction.

Slip reparation.

Establish routine maintenance organization.

Restore road sections where engineering solutions can be viably maintained over time.

Empower local contracting industry.

Develop an effective contracting regime.

Repair slips on essential access roads.

Build capacity in the established field depots to build an indigenous field maintenance administration.

Critical sections were identified during implementation and engineering solutions implemented.

Local contractors were used during implementation.

Procurement procedures were established in the project management unit (PMU).

Achieved. Slips repaired on identified critical road sections.

Not achieved.

Periodic EIRP-2 reports

Project review missions

Tripartite meetings

Assumptions

� Timely contracting arrangements.

� Availability of funding from the Trust Fund for East Timor (TFET).

� Effective project implementation.

18 Appendix 1

Performance Indicators and/or TargetsDesign Summary Appraisal Actual

Project Monitoring Mechanisms

Assumptions and/or Risks

Outputs

1. Road restoration where engineering solutions can be viably maintained over time

2. Empower local contracting industry and develop a routine maintenance organization

3. Project management

Reduce backlog, carry out rehabilitation earthworks, and realign minor road sections.

Clear and repair sections incurring annual failures.

Slip reparation: stabilize slopes and introduce bioengineering

Improve alignments

Establish technical field maintenance supervision capacity

Develop community-based maintenance program

Establish a contractual regime

Supply technical and managerial support to local contracting industry

Deliver training in technical and managerial disciplines

Plan works and establish planning capacity for the Department of Infrastructure.

Achieved. Earthworks undertaken.

Achieved. Most critical sections on national roads were repaired

Achieved. Slips repaired and bioengineering introduced to stabilize slopes.

Some small realignments in some sections, e.g., Gleno Bridge approach ramps.

Field offices were established in Baucau and Maliana.

Not achieved. This will be undertaken in the Road Sector Improvement Project (Grant 0017-TIM).a

Procurement procedures established in the PMU.

Local contractors received on-the-job training in technical skills.

On-the-job training carried out with PMU and counterpart staff by international consultants.

This was undertaken in TA for Transport Sector Improvement (TA 3731-TIM).b

Designs

Civil works contracts

Road network performance indicators

Review meetings and missions

Periodic project reports

Assumption

� Availability of TFET funding.

Appendix 1 19

Performance Indicators and/or TargetsDesign Summary Appraisal Actual

Project Monitoring Mechanisms

Assumptions and/or Risks

Deliver road asset management planning instrument, complete with inventory

Effective project management

This has been taken over by the Japanese International Cooperation Agency.

The PMU now effectively manages projects.

Inputs

1. International and national consultant services

2. Civil works

Selection of international and domestic consultant services for project management by November 2001 ($0.7 million).

Issue civil works for backlog and earthworks contracts by 15 December 2001 ($4.0 million), slip rehabilitation contracts by 31 January 2002 ($1.35 million), and prepare a multidimensional technical and managerial institution development program for establishment of a routine maintenance regime by 15 December 2001 ($1.35 million).

International consultants not selected until 2004 and PMU staff in 2003 ($2.32 million).

Civil works contracts not issued until 2005 due to refinements in contract packages and changes in selection of works, earthworks ($4.16 million), and slip rehabilitation ($1.99 million).

Routine maintenance ($0.52 million).

Project reports

Assumptions

� Timely deployment of competent consultants.

� Timely tender process.

ADB = Asian Development Bank, EIRP-2 = Emergency Infrastructure Rehabilitation Project-2, PMU = project management unit, RSIP = Road Sector Improvement Project, TA = technical assistance, TFET = Trust Fund for East Timor. a ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Asian

Development Fund Grant to the Democratic Republic of Timor-Leste for the Road Sector Improvement Project.Manila.

b ADB. 2001. Technical Assistance to East Timor for Transport Sector Improvement. Manila.

20 Appendix 2

DET

AIL

S O

F W

OR

KS

UN

DER

TAK

EN F

OR

CIV

IL W

OR

KS

CO

NTR

AC

T PA

CK

AGES

Leng

th (k

m)

Con

trac

t C

ontr

act

Pack

age

No.

R

ehab

ilita

ted

Sec

tions

R

oad

Leng

th

Roa

d Se

ctio

n(n

o.)

Brid

ge

(no.

)D

rain

age

(line

ar-m

eter

)

Slop

ePr

otec

tion

(m3 )

Bio

-en

gine

erin

g (li

near

-met

er)

Com

plet

ion

of

Cas

sa B

ridge

N

one

1

Box

cul

vert:

31

.000

Pip

e cu

lver

t: 14

3.70

0 B

auca

u -

Viq

uequ

e R

oad

BV

1-1

2.

27

37.6

0 7

Sur

f. dr

aina

ge:

2.83

4

7,47

4.80

1,

497.

00

Box

cul

vert:

Pip

e cu

lver

t:

48.0

00

Tiba

r - E

rmer

a R

oad

TE 2

-1

0.80

40

.00

7 1

Sur

f. dr

aina

ge:

421.

500

4,61

0.16

1,

720.

00

Box

cul

vert:

22

.800

Pip

e cu

lver

t:

114.

000

Erm

era

- Hat

olia

R

oad

EH

2-2

1.

02

16.9

0 10

Sur

f. dr

aina

ge:

998.

800

7,60

4.57

70

0.00

Box

cul

vert:

Pip

e cu

lver

t:

19.0

00

Hat

olia

- M

alia

na

Roa

d H

M 2

-3

0.83

19

.40

6

Sur

f. dr

aina

ge:

257.

000

3,33

0.59

Box

cul

vert:

7.

600

Pip

e cu

lver

t:

41.0

00

Man

atut

o -

Nat

arbo

ra R

oad

MN

3-1

0.

85

11.0

0 8

1

Sur

f. dr

aina

ge:

737.

300

3,82

9.73

60

8.20

Box

cul

vert:

Pip

e cu

lver

t:

66.6

50

Man

atut

o -

Nat

arbo

ra R

oad

MN

3-2

1.

11

22.4

0 8

1

Sur

f. dr

aina

ge:

733.

800

1,28

6.00

17

9.00

Box

cul

vert:

Pip

e cu

lver

t:

10.0

00

Mal

iana

- Zu

mal

ai R

oad

MZ

5-1

0.51

10

.70

3

Sur

f. dr

aina

ge:

431.

000

1,30

6.75

56

5.00

Sou

rce:

Asi

an D

evel

opm

ent B

ank

estim

ates

.

Appendix 3 21

TECHNICAL/PROCUREMENT DOCUMENTS DEVELOPED UNDER EMERGENCY INFRASTRUCTURE REHABILITATION PROJECT – PHASE 2

a. Standard Specifications for Roads, Bridges, and Airports

b. Construction Supervision Guide

c. Generic Documents for Medium Contracts

d. Documents to Request for Quotation (small contracts)

e. Bid Documents for Dilor Bridge

f. Bid Documents for Welolo Bridge

g. Bid Documents for CP BL 4-1: Bobonaro–Lolotoe road

h. Bid Documents for CP MZ 5-2: Maliana–Zumalai road

22 Appendix 4

SUM

MA

RY

OF

CO

NTR

AC

TS F

UN

DED

Des

crip

tion

Pack

age

No.

Proc

urem

ent

Mod

e En

gine

er's

Es

timat

eO

rigin

al

Con

trac

t A

mou

nt

Tota

l Cos

t In

clus

ive

of

Varia

tions

Cos

t of

Varia

tions

A

gain

st O

rigin

al

Con

trac

t Cos

t

Diff

eren

ce b

etw

een

Tota

l Cos

t and

En

gine

er's

Es

timat

eA

. Civ

il W

orks

Com

plet

ion

of C

assa

Brid

ge

LC

B

1,26

2,08

0 88

7,99

9 83

1,89

8 (5

6,10

1)

(430

,182

) B

auca

u - V

ique

que

Roa

d a

BV

1-1

LC

B

2,28

2,54

3 1,

649,

000

2,49

8,52

0 84

9,52

0 21

5,97

7 Ti

bar -

Erm

era

Roa

d b

TE 2

-1

LCB

1,

296,

267

843,

202

314,

586

(528

,616

) (9

81,6

81)

Erm

era

- Hat

olia

Roa

dc

EH

2-2

LC

B

1,26

9,59

8 89

8,92

6 57

1,71

3 (3

27,2

13)

(697

,885

) H

atol

ia -

Mal

iana

Roa

d d

HM

2-3

LC

B

693,

607

514,

900

848,

729

333,

829

155,

122

Man

atut

o - N

atar

bora

Roa

d 1

MN

3-1

LC

B

981,

681

663,

191

589,

883

(73,

308)

(3

91,7

98)

Man

atut

o - N

atar

bora

Roa

d 2

MN

3-2

LC

B

633,

483

509,

064

447,

612

(61,

452)

(1

85,8

71)

Mal

iana

- Zu

mal

ai R

oad

MZ

5-1

LCB

78

8,78

2 60

9,54

3 57

6,70

3 (3

2,84

0)

(212

,079

) Su

b to

tal (

A)

9,20

8,04

1 6,

575,

825

6,67

9,64

4 10

3,81

9 (2

,528

,397

)

B

. Con

sulti

ng S

ervi

ces

D

etai

led

Eng

inee

ring

D

etai

led

Eng

'g o

f Cas

sa B

ridge

DN

19,0

00

18,8

54

(146

)

Det

aile

d E

ng'g

of R

oad

Pro

gram

QC

BS

30

8,36

5 34

2,27

9 33

,914

Con

stru

ctio

n S

uper

visi

on

S

uper

visi

on o

f Cas

sa B

ridge

DN

75,1

85

75,1

85

0

Sup

ervi

sion

of R

oad

Pro

gram

DN

490,

882

613,

144

122,

262

O

n-th

e-jo

b Tr

aini

ng

31

,226

31

,238

12

Pro

ject

Man

agem

ent U

nit

1,

237,

630

1,23

7,63

0 0

Su

b to

tal (

B)

2,

162,

288

2,31

8,33

0 15

6,04

2

Tota

l

8,73

8,11

3 8,

997,

974

259,

861

( )

= n

egat

ive,

DN

= d

irect

neg

otia

tion,

LC

B =

loca

l com

petit

ive

bidd

ing,

QC

BS

= q

ualit

y- a

nd c

ost-b

ased

sel

ectio

n.

a The

fina

l cos

t inc

lude

s th

e ba

lanc

e of

wor

ks te

rmin

ated

in p

revi

ous

cont

ract

or o

f TE

2-1.

b T

he b

alan

ce o

f wor

k w

as te

rmin

ated

and

issu

ed a

s va

riatio

n or

der t

o B

V1-

1.

c The

bal

ance

of w

ork

was

term

inat

ed a

nd is

sued

as

varia

tion

orde

r to

HM

2-3.

d T

he fi

nal c

ost i

nclu

des

the

bala

nce

of w

orks

term

inat

ed in

pre

viou

s co

ntra

ctor

of E

H2-

2.

Appendix 5 23

PROJECTED AND ACTUAL DISBURSEMENTS ($ million)

Year Appraisal Actual

2002 3,000,000 2003 6,000,000 120,569 2004 342,7942005 2,693,7082006 3,215,6902007 2,625,213

Total 9,000,000 8,997,974 Note: In the absence of any appraisal estimate of disbursements, the Project Completion Report Mission estimated the disbursements at appraisal based on the implementation schedule.Source: Asian Development Bank Loan Financial Information System.

24 Appendix 6

12

34

56

78

910

1112

1314

1516

1718

1920

2122

2324

2526

2728

2930

3132

3334

3536

3738

3940

4142

4344

4546

4748

4950

5152

5354

5556

5758

5960

6162

6364

6566

6768

6970

7172

Redu

ction

of E

merg

ency

Main

tenan

ce R

equir

emen

tP A P A P A P A P A P A

Bioe

ngine

ering

P A P A P A P A

Perio

dic M

ainten

ance

P A P A

Estab

lishm

ent o

f a R

outin

e Main

tenan

ce R

egim

e d/

P A P A P A P A P A P A

EA =

Exec

uting

Age

ncy,

IS =

inter

natio

nal s

tanda

rd, L

CB =

local

comp

etitiv

e bidd

ing, R

RP =

repo

rt an

d rec

omme

ndati

on of

the p

resid

ent.

a/Pr

ojects

wer

e ten

dere

d usin

g LCB

.b/

LCB

Earth

work

Prog

ram.

Lege

nd:

P for

tenta

tive s

ched

ule in

RRP

c/No

earth

work

proje

ct im

pleme

nted u

sing I

S.d/

Train

ing on

road

main

tenan

ce w

ere p

rovid

ed to

Gov

ernm

ent p

rojec

ts up

on re

ques

t by t

he E

A.A

is for

actua

l per

iod im

pleme

nted.

Sour

ce: A

sian D

evelo

pmen

t Ban

k esti

mates

.

Task

Nam

e

2006

2007

2002

2003

2004

2005

1QTR

2QTR

3QTR

Selec

tion o

f Deta

iled D

esign

Eng

ineer

Geote

chnic

al As

sess

ment

and D

etaile

d Des

igns

Enga

geme

nt of

Bioe

ngine

ering

Sup

port

Tend

er (I

CB) f

or R

ealig

nmen

t and

Bac

klog

a/

ICB

Earth

works

Pro

gram

b/

IS E

arthw

orks

Pro

gram

c/

Small

Brid

ge R

eplac

emen

t Pro

gram

Road

Ass

et Ma

nage

ment

and M

ainten

ance

Sy

stem

Contr

actor

Tra

ining

Inves

tigati

on of

Loca

l Plan

ts an

d Nur

serie

s

Identi

ficati

on of

Bioe

ngine

ering

Pro

gram

Train

ing an

d Imp

lemen

tation

Perio

dic R

oad M

ainten

ance

Con

tracts

PROJ

ECT I

MPLE

MENT

ATIO

N SC

HEDU

LE

Maint

enan

ce Im

pleme

ntatio

n

Prep

arati

on of

Main

tenan

ce M

anua

lsInt

egra

tion o

f Main

tenan

ce D

uties

in D

epot

Wor

k Pr

ogra

m

Ongo

ing W

orks

Sup

ervis

ion

Imple

menta

tion o

f Com

munit

y Main

tenan

ce

3QTR

4QTR

1QTR

2QTR

3QTR

2QTR

3QTR

4QTR

1QTR

2QTR

3QTR

4QTR

4QTR

Indica

- tor

1QTR

4QTR

1QTR

2QTR

3QTR

4QTR

1QTR

2QTR

Appendix 7 25

CHRONOLOGY OF MAJOR EVENTS

Dates Description of Events

14–28 Feb 2001 Fact-finding cum appraisal mission held.

22–25 Jan 2002 Grant negotiations.

18 May 2002 Board approval and date of signing of the Grant Agreement.

16 Aug 2002 Asian Development Bank declares grant effectiveness.

21 Aug 2003 Minor change in the road program to replace sections already rehabilitated by Japanese Peace-Keeping Force engineers.

17 Feb 2004 First extension of closing date from 31 December 2003 to 31 May 2005 approved.

22 Dec 2004 Second extension of closing date from 31 May 2005 to 30 November 2006 approved.

22 Mar 2006 Reallocation of loan proceeds from unallocated to allow financing of the shortfall on consultancy services and civil works.

18 Sep 2006 Third extension of closing date from 30 November 2006 to 28 February 2007 approved.

17 Oct 2007 World Bank’s confirmation on receipt of refund of the undisbursed balance for $2,036.86; hence the grant was financially closed.

26 Appendix 8

PRO

JECT

MAN

AGEM

ENT

UNIT

(EIR

P-2)

ORG

ANIZ

ATIO

N CH

ART

Proj

ect M

anag

emen

t Uni

t

Line

of A

ctio

n---

------

--Li

ne o

f Coo

rdin

atio

n

AD

BM

inis

ter o

f Pub

lic W

orks

ADB

= As

ian

Dev

elop

men

t Ban

k, E

IRP

= Em

erge

ncy

Infra

stru

ctur

e R

ehab

ilitat

ion

Proj

ect.

Sour

ce: A

sian

Dev

elop

men

t Ban

k.

Dire

ctor

of R

oads

, Br

idge

s, a

nd F

lood

Co

ntro

l

Proj

ect M

anag

er E

IRP

2Vi

ce M

inis

ter

Chie

f Tec

hnic

al A

dvis

er

Road

Eng

inee

r (M

aint

enan

ce)

Fina

ncia

l Adm

inis

trato

r

Secr

etar

y of

Sta

te

Appendix 9 27

STATUS OF COMPLIANCE WITH MAJOR GRANT COVENANTS

Description Reference in

Grant Agreement StatusFinancial Conditions The Recipient shall maintain, or cause to be maintained, records and accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Recipient responsible for carrying out the Project or any part thereof.

Art. IV, Section 4.01 (a).

Complied with.

The Recipient shall: i. Have the records and accounts including those for the Special

Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to ADB;

ii. Furnish to ADB as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as ADB shall have reasonably requested; and

iii. Furnish to ADB such other information concerning said records and accounts and the audit thereof as ADB shall from time to time reasonably request.

Art. IV, Section 4.01 (b).

Complied with.

Partly complied with. The accounts have been audited annually, but the submissions of auditor reports were repetitively delayed (para. 28 refers).

Complied with.

For all expenditures with respect to which withdrawals from the Grant account were made on the basis of statements of expenditure, the Recipient shall:

i. Maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures;

ii. Retain, until at least one year after ADB has received the audit report for the fiscal year in which the last withdrawal from the Grant Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;

iii. Enable ADB’s representatives to examine such records as ADB shall from time to time reasonably request; and

iv. Ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate

Opinion by said auditors as to whether the statements of expenditures submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.

Art. IV, Section 4.01 (c).

Complied with.

Complied with.

Complied with.

Complied with.

International Competitive Bidding Each civil works contract estimated to cost the equivalent of more than $1,000,000 each supply contract for equipment or materials estimated to cost the equivalent of more than $500,000 shall be awarded on the basis

Schedule 3, Section 1 Para 4.

Not complied with. All contracts,

28 Appendix 9

Description Reference in

Grant Agreement Statusof international competitive bidding as described in Chapter II of the Guidelines for Procurement Bidders for civil works contracts shall be prequalified before bidding.

including those above $1.0 million, were awarded using LCB and approved by ADB. The PCR Mission is of the view that the use of LCB is valid in the sense that the small size of contracts and security situation in the country make it unlikely to attract foreign competition.

International Shopping With respect to each civil works contract estimated to cost the equivalent of $1,000,000 or less and each supply contract for equipment or materials estimated to cost the equivalent of $500,000, or less (other than minor items), such contracts shall be awarded on the basis of international shopping as described in Chapter III of the Guidelines for Procurement.

Schedule 3, Section 1 Para 5.

Complied with.

Direct Purchase Goods, materials and equipment estimated to cost less than the equivalent of $100,000 per contract may generally be procured on the basis of direct purchase/negotiation or single tender in accordance with the provisions of paragraph 3.05 of the Guidelines for Procurement.

Schedule 3, Section 1 Para 6.

Complied with.

Local Competitive Bidding Notwithstanding the provisions of paragraph 5 above and paragraph 8 below, small works contracts (defined as any civil works contract estimated to cost the equivalent of less than $100,000) may at the discretion of ADB be procured under lump-sum, fixed-price contracts awarded on the basis of local competitive bidding among prequalified contractors. Any such procurement shall be in accordance with procurement procedures acceptable to ADB, with prequalification, selection and engagement of contractors being subject to the approval of ADB in consultation with the Ministry of Water and Public Works. Without limiting the generality of the foregoing, whenever local competitive bidding is approved, quotations shall be obtained from three qualified contractors in response to a written invitation. The invitation shall include a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to ADB, and relevant drawings, where applicable. The award shall be made to the contractor who offers the lowest price quotation for the required work, and who has the experience and resources to complete the contract successfully.

Schedule 3, Section 1 Para 7.

Complied with.

Appendix 9 29

Description Reference in

Grant Agreement StatusCommunity Participation Works required for the Project are expected to incorporate labor-intensive, employment-generating methodologies wherever possible. Least-cost methodologies shall be adopted under the Project to ensure maximum use of local labor, materials, and contractors. In this connection, community participation shall be permitted, with such participation being procured in accordance with procedures acceptable to ADB in consultation with the Ministry of Water and Public Works.

Schedule 3, Section 1 Para 8.

Complied with.

Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the Project Management Unit shall furnish ADB with a proposed procurement plan for the Project for its review and approval. Procurement of all goods and works shall be undertaken in accordance with such procurement plan as shall have been approved by ADB.

Schedule 3, Section 1 Para 9.

Complied with.

Invitation to Bid/Contract Award a) With respect to each contract awarded on the basis of international

competitive bidding, procurement actions shall be subject to review by ADB in accordance with procedures set forth in Chapter IV of the Guidelines for Procurement. Each draft prequalification invitation to bid, to be submitted to ADB for approval under such procedures, shall reach ADB as far as possible in advance of when it is to be issued and shall contain such information as ADB shall reasonably request to enable ADB to arrange for the separate publication of such invitation.

b) With respect to all other contracts, each draft invitation to bid and related bid document shall be submitted to ADB for approval before they are issued.

c) Each award of contract shall be subject to prior ADB approval.

Schedule 3, Section 1 Para 10.

Complied with.

Complied with.

Complied with.

Employment of Consultants a) The services of consultants shall be used in the carrying out of the

Project, particularly with regard to the staffing of the Project Management Unit.

b) The terms of reference of the consultants shall be agreed by ADB and the Recipient.

Schedule 3, Section II Para 11.

Complied with.

Complied with.

The consultants shall be nationals of (i) any of the member countries of ADB, (ii) East Timor, (iii) countries that have entered into a contribution agreement with the Trustee with respect to the TFET, and (iv) countries that are members of any organization that has entered into a contribution agreement with the Trustee with respect to the TFET.

Schedule 3, Section II Para12.

Complied with.

Subject to the qualification stated in the foregoing paragraph, the selection, engagement and services of the consultants shall be subject to the provisions of the “Guidelines on the use of Consultants by Asian Development Bank and its Borrowers” dated October 1988, as amended from time to time, and the following provisions of Section II of this Schedule.

Schedule 3, Section II Para13.

Complied with.

All consultants shall be selected and engaged by the Recipient in accordance with the following procedures:

i. A list of the candidates together with their qualifications and a draft contract shall be furnished to ADB for approval before the selection of consultants;

ii. Promptly after the contract is signed, ADB shall be furnished with

Schedule 3, Section II Para14.

Complied with.

Complied with.

30 Appendix 9

Description Reference in

Grant Agreement Statusthe evaluation of the candidates and a brief justification for the selection, together with a copy of the signed contract and

iii. If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval.

Complied with.

Project Management Unit

The Project Management Unit shall program, administer and coordinate daily Project activities, and shall implement the Project in accordance with ADB’s guidelines. The Project Management Unit shall report and be accountable to the Minister of Water and Public Works. The Project Management Unit shall comprise an East Timorese project manager, financial manager, and engineers, and an international chief technical advisor, financial advisor, and engineer.

Schedule 4, Para 1.

Complied with.

Steering Committee

The Minister of Water and Public Works shall, in consultation with other relevant ministries, nominate a Steering Committee for the Project to involve stakeholder representation of the Recipient in Project implementation. The Steering Committee shall meet every two months to discuss and resolve emerging issues in Project implementation, future Project work plans, review and comment on Project reports, and the attainment of Project objectives.

Schedule 4, Para 2.

Partly complied with. Although the steering committee did not meet regularly, project coordination was sufficientbecause ADB, the EA, the related agencies, consultants and contractorsmaintained regular meetings (para 27 refers).

Involuntary Resettlement In carrying out any part of the Project, the Recipient through the Project Management Unit shall ensure that: a) Appropriate engineering and environmental standards and practices

designed to minimize acquisition of land and avoid involuntary resettlement of Affected Persons have been followed; and

b) ADB’s Policy on Involuntary resettlement and ADB’s Handbook on Resettlement 1998, as amended from the time to time, have been complied with, and, if applicable, appropriate compensation arrangements have been completed and are satisfactory to the Affected Persons.

Schedule 4, Para 3.

Complied with.

Complied with.

For the purposes of paragraph 3 above, Affected person means any person who solely on account of and as a direct result of the physical implementation of the activities under Schedule 2, has or would have his or her: (i) standard of living adversely affected; (ii) right, title or interest in any house, land (including premises, agricultural land and grazing land) or any other fixed or movable asset acquired or possessed, temporarily or permanently; or (iii) business, occupation, work, or place of residence or habitat adversely affected.

Schedule 4, Para 4.

Complied with. There was no permanently or temporarily affected property during project implementation.

Environment In the rehabilitation, repair, operation, and maintenance of road Schedule 4, Complied with.

Appendix 9 31

Description Reference in

Grant Agreement Statusinfrastructure, the Recipient shall ensure due compliance with all existing laws, regulations and standards concerning environmental protection, and ADB’s environmental guidelines. Environmental monitoring shall be under the guidelines of the Project Management Unit. In addition to regular inspections of works to ensure that all possible mitigation measures have been taken, the Project Management Unit shall (i) measure the effectiveness of environmental improvements, (ii) identify problems that may arise during the works and, if necessary, (iii) provide ecological audit information for future works of this nature.

Para 5.

Reporting Without limiting the generality of Section 8.06 of the General Conditions, the Recipient shall cause the Project Management Unit to prepare and furnish to ADB the following reports:

a) A brief inception report, to be submitted within four weeks of the start of the Project , which shall, inter alia, outline the Project Management Unit’s approach, methodology, and work plan, as well as cost implications for consulting services; the report shall also provide a bar chart of all activities under the Project;

b) Quarterly progress reports on the achievement of Project objectives; progress and status of activities including expenditures; any emerging difficulties; and progress in implementing policy initiatives, transport policy and regulations, and organizational changes. The quarterly reports shall provide, in clear graphical presentations, the status of Project progress and performance, and plans for the next six months’ work, including budgets, and quarterly disbursement and payment forecasts;

c) A technical draft final report, to be submitted no later than one month prior to completion of the Project, which shall summarize all project activities and recommendations, and shall outline continuing training programs, and programs for establishment, implementation, and strengthening of the relevant institutions, and recommendations for future support; and

d) A final report, to be submitted by the Project Management Unit immediately prior to completion of the Project, after receipt of the comments on the draft final report from ADB.

Schedule 4, Para 6.

Complied with.

Complied with.

Complied with but delayed due to late notice from World Bank about the financial closing date.

Same as above.

Currencies in which Withdrawals are to be Made Except as the Recipient, ADB and the Trustee shall otherwise agree, withdrawals from the Grant Account shall be made in the respective currencies in which the expenditures to be financed out of the proceeds of the Grant have been paid or are payable; provided, however, that withdrawals in respect of expenditures in the currency of the Recipient shall be made in such currency or currencies as the Trustee shall from time to time reasonably select.

Art. IV, Section 4.01.

Complied with.

Reallocation Notwithstanding the allocation of an amount of the Grant or the percentages for withdrawal set forth or referred to in the Trust Fund Grant Agreement, if ADB has reasonably estimated that the amount of the Grant then allocated to any withdrawal category set forth in the Trust Fund Grant Agreement or added thereto by amendment will be insufficient to finance the agreed percentage of all expenditures in that category, ADB may, by notice to the Recipient.

Art. V,Section 5.04.

32 Appendix 9

Description Reference in

Grant Agreement Statusa) Reallocate to such category, to the extent required to meet the

estimated shortfall, proceeds of the Grant which are then allocated to another category and which in the opinion of ADB are not needed to meet other expenditures; and

b) If such reallocation cannot fully the estimated shortfall, reduce the percentage for withdrawal then applicable to such expenditures in order that further withdrawals under such category may continue until all expenditures there under shall have been made.

Complied with.

Complied with.

Treatment of Taxes It is the policy of ADB and the Trustee that no proceeds of the Grant shall be withdrawn on account of payments for any taxes levied by, or in the territory of, the Recipient on goods or services, or an the importation, manufacture, procurement or supply thereof. To that end, if the amount of any taxes levied on or in respect of any item to be financed out of the proceeds of the Grant decreases, ADB may, by notice to the Recipient, increase or decrease the percentage for withdrawals set forth or referred to in respect of such item in the Trust Fund Grant Agreement as required to be consistent with such policy.

Art. V,Section 5.08.

Complied with.

Payment by the TrusteeThe Trustee shall pay the amounts withdrawn by the Recipient from the Grant Account only to or on the order of the Recipient and following receipt of a letter of instruction from ADB.

Art. V,Section 5.09.

Complied with.

Cooperation and Information a) The Recipient and ADB shall cooperate fully to assure that the

purposes of the Grant will be accomplished. To that end, the Recipient and ADB shall:

i. From time to time, at the request of any one of them, exchange views with regard to progress of the Project, the purposes of the Grant, and the performance of their respective obligations under the Trust Fund Grant Agreement; and furnish to the other party all such information related thereto as it shall reasonably request ; and

ii. Promptly inform each other of any condition which interferes with, or threatens to interfere with, the matters referred to in paragraph (i) above.

b) The Recipient shall afford all reasonable opportunity for representatives of ADB to visit any part of its territories for purposes related to the Grant.

Art. VIII. Section 8.01.

Complied with.

Complied with.

Complied with.

Financial and Economic Data The Recipient shall furnish to ADB all such information as ADB shall reasonably request with respect to financial and economic conditions in its territory including its balance of payments and its external debt as well as that of its political or administrative subdivisions and any entity owned or controlled by, or operating for the account or benefit of the Recipient or any such subdivision and any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Recipient.

Art. VIII. Section 8.02.

Complied with.

Appendix 9 33

Description Reference in

Grant Agreement StatusInsurance The Recipient shall insure or cause to be insured, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Grant against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation. Any indemnity for such insurance shall payable in a freely usable currency to replace or repair such goods.

Art. VIII. Section 8.03.

There is no insurance company in Timor Leste. Bank Guarantees are issued which is 10% of the total purchase cost.

MaintenanceThe Recipient shall at all times operate and maintain, or cause to be operated and maintained, any facilities relevant to the Project, and promptly as needed, make or cause to be made all necessary repairs and renewals thereof.

Art. VIII. Section 8.07.

Complied. At the time of the PCR Mission, the Project works were in good condition with the exception of the works at Lacubar which were destroyed in the February – March 2007 landslide.

Land Acquisition The Recipient shall take, or cause to be taken, all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out of the Project and shall furnish to ADB, promptly upon its request, evidence satisfactory to ADB that such land and rights in respect of land are available for purposes related to the Project.

Art. VIII. Section 8.08.

There was no land acquisition required as works undertaken on the existing road alignment.

34 Appendix 10

TECHNICAL ASSISTANCE COMPLETION REPORT

Division: PAHQAmount Approved: $500,000.00 TA No., Country and Name

TA 3731-TIM: Transport Sector Improvement Revised Amount: $500,000.00 Executing Agency:Directorate General of Roads, Bridges and Flood Control of the Secretary of State for Public Works, in collaboration with the Planning Unit under the Ministry of Transport, Communications and Public Works

Source of Funding:

Japan Special Fund

Amount Undisbursed

$68,988.71

Amount Utilized

$431,011.29

Date TA Completion Date Original31 August 2002

Actual 30 June 2006

Account Closing Date

Approval

01 October 2001

Signing

19 November 2003

Fielding of First Consultants 14 February 2005

Original31 August 2002

Actual 31 March 2008

Description The democratic consultation of 30 August 1999 was followed by a campaign of destruction that demolished much of the country’s infrastructure. All administrative structures became dysfunctional as documentation destroyed and institutions depleted of their staff. Under a resolution of the Security Council of the UN, the United Nations Transitional Administration in East Timor (UNTAET) was established with powers to ensure stability; establish a transitional government; and establish the judiciary, laws, and policies. Timor-Leste was still under the administration of UNTAET at the time of this TA’s approval and until its independence on 20 May 2002.

A joint assessment mission coordinated by the World Bank was fielded in October-November 1999 to prepare a medium-term restoration program. ADB took a lead-agency role for implementing infrastructure sector restoration in the program. The ADB-financed TA 3401, Transport Sector Restoration, prepared an approach for transport sector establishment with requirements to implement effective transport sector institutions and regulatory frameworks. The cabinet of East Timor Transitional Administration (ETTA) agreed on 12 September 2000 to establish for the transport sector common legislation that would embrace the three transport modes: roads, maritime, and aviation. As a follow-up action, this TA for Transport Sector Improvement was prepared to support the operational improvement of transport sectors toward autonomous and effective service delivery.

Expected Impact, Outcome and Outputs The objective of this TA was to support establishment of sustainable operations, management, and administration of the transport sectors. The TA was intended to assist legal and operational establishment of effective and appropriately sized operations of port, airport, and road subsectors. For each of the three subsectors, the principle outputs included (i) establishment of domestic counterpart, regulations and performance indicators; (ii) development of legal frameworks, operation improvement plans, and business development plans; (iii) applications to the necessary international conventions; (iv) recommendation of cost recovery measures; (v) plan for ensuring maximum private sector involvement; and (vi) a time-bound plan for approving and implementing the legislation and operational proposals and support their implementation. The executing agency (EA), Department of Infrastructure under ETTA, was managing ports, airports, and road activities at the time.

The TA was relevant considering the situation of Timor-Leste at the time. It was designed on the basis of the understanding reached with the domestic counterparts and UNTAET, and recommendations from previous projects.

Delivery of Inputs and Conduct of Activities Almost immediately after the TA’s approval, the Government received various offers of assistance from several sources for the same sector, some of which overlapped with the scope under the TA. The TA therefore was not offered to the Government nor was it cancelled as the then ADB project officer had a view of eventually redesigning the TA, if necessary. The TA was offered to the Government in its original form in 5 November 2003. Verbal agreement was reached at a donor’s meeting in December 2003. In view of the fact that the environment in Timor-Leste had significantly changed since the approval of the TA, an ADB review mission, from 10 to 13 August 2004, discussed and agreed with the Government on the update of this TA. A minor Change in Scope and Change in Implementation Arrangements was approved by ADB on 2 September 2004 for the update.

Appendix 10 35

The revised goal and purpose of this TA was to stress the need to prepare an updated, comprehensive development strategy for the road system. The updated outputs included: (i) identification of an optimal level of expenditure on road construction and maintenance; (ii) preparation of a road investment program; (iii) development of a program to increase expenditure and management capability for sustainable road maintenance; (iv) recommendation on road use charges; and (v) preparation of basic information that will serve the longer term road planning and management needs of the Government. The EA was changed to the Directorate General of Roads, Bridges and Flood Control of the Secretary of State for Public Works, in collaboration with the Planning Unit under the Ministry of Transport, Communications and Public Works.

The project was back on track since the change got approved. Inputs delivered through the TA were adequate to achieve the intended objectives. Terms of reference (TOR) for consultants were properly defined. An international consultant firm, in association of a local firm, was engaged for this TA. The TA reviewed Government’s Transport Sector Investment Program and relevant studies, conducted surveys for the core road network, performed analyses and assessments on engineering, economic, poverty, social and environment aspects of transport sector. The consulting activities were conducted with high professional standards. However, the contract administrative of this international consultant firm was poor and delayed the financial closing of this project significantly. Overall, the performance of the consultant was satisfactory. The performance of the EA and ADB was satisfactory.

Evaluation of OutputsThe final TA reports are of high quality and result into two ADB publications as knowledge products. The government was satisfied with the outputs and approved the road sector investment program (RSIP). Major achievements under the TA include: (i) Road Inventory and Survey: This is the first time that the entire road network has been systematically inspected

and a written summary of the road conditions prepared. The inventory and survey will be useful in decision making as well as to document the changes in roadway conditions over the long term.

(ii) Road Investment Program: A 10-year investment program was developed based on economic analysis to the core road network with consideration of social/poverty problems. The program provides a planning tool for the government and donors to choose future road projects.

(iii) Road Rehabilitation Project Preparation: The TA proposed an investment on 3 National Roads in the first year of the 10-year RSIP and completed preliminary engineering design and draft bid documents.

(iv) Labor Intensive Maintenance: The proposed road project included a component of labor-intensive maintenance to facilitate the sustainable maintenance of road network.

(v) Community Empowerment Initiative: The proposed road project also included socially inclusive and gender-responsive features. A community empowerment initiative was designed to apply a community-based approach to connect isolated communities to the major roads, or the closest social facilities such as clinics or markets.

(vi) Institution: To strengthen the institutional capacity of transport sector, the TA made recommendations for transport services; consulting services and contracting industry; the institutional organization in the road sector; management of the road networks; and the financing of the road networks.

Overall Assessment and RatingThe TA is rated as successful. It was originally designed as a follow-up action of previous TA, but properly adjusted before implementation to accommodate the significant changes since the TA’s approval. The outputs effectively facilitated the strategic planning of transport sector, specifically road development and management. The implementation methodology of this TA gives practitioners an example of good practices for road projects in the areas of investment planning, poverty reduction, and sustainable development in Pacific developing member countries.

Major LessonsThe main lesson learned is that the initial delay of this TA due to overlapping with assistances from other donors could be avoided if more comprehensive coordination with development partners was made.

Recommendations and Follow-Up Actions The TA’s main recommendation was the 10-year road investment program which was approved by the Government. The 3 National roads identified for the first year of the program was included in the later approved and ongoing ADB Grant 0017: Road Sector Improvement Project.

The finding and recommendations of this TA is helpful in preparing future road projects in Timor-Leste. The institutions in road sector did not have adequate capacity at the time to ensure sustainable maintenance on a large scale and to monitor and implement an accelerated road investment program. Plans for strengthening institution were prepared to improve the situation. In addition, the TA recommended a series of complementary actions to increase the impact of transport improvement on poverty reduction.

Prepared by Chen Chen Designation Infrastructure Specialist

36 Appendix 11

ECONOMIC EVALUATION

A. General

1. Economic evaluation was not carried out at appraisal as the Project was of an emergency nature and also it was considered at appraisal that the economic benefits were difficult to quantify. However, for assessing the efficiency of an investment, it is desirable to conduct economic evaluation and estimate the economic internal rate of return (EIRR). The project completion review (PCR) mission has therefore conducted a post-construction evaluation for the Project. Road sections where works were undertaken under the Project were (i) the Tibar–Ermera–Maliana road, (ii) the Maliana–Zumalai road, (iii) the Manatuto–Natarbora road, (iv) the Baucau–Viqueque road, and (v) Cassa Bridge.

2. The methodology used in the economic evaluation involved a comparison of with-project and without-project situations to determine the effects of the emergency works on the Project roads and to estimate the benefits and calculate the EIRR. In the absence of any baseline data or any earlier economic evaluation, it was necessary to make reasonable assumptions in order to carry out the analysis.

B. Methodology

3. General. The economic analysis was carried out for the Project roads by comparing the with-project and without-project scenarios using the Highway Design and Management (HDM-4) model. The economic analysis covers the period 2005–2016, based on a rehabilitation period of 1 year starting in 2005 for Cassa Bridge, and 10 years of economic benefits, and the rehabilitation starting in 2006 for all other road projects and 10 years of economic benefits. The benefit period of only 10 years is a reasonable assumption given the fact that the works undertaken were of an emergency nature and also that it is not expected that the works will be sustainable due to limitations in the budget for maintenance work and frequent landslides. The exception to this is Cassa Bridge, where the works of completing the bridge are expected to be sustainable due to the fact that they were of a more permanent nature than the works undertaken along the Project roads. The Project roads are also susceptible to further landslides, whereas Cassa Bridge will not be affected. All benefits and costs are in constant 2007 prices. The economic prices have been expressed using the world price numeraire.

4. Due to the emergency nature of the works—the main purpose of which was to keep open to traffic the roads that were susceptible to problems such as landslips and drainage failure—it has been necessary to evolve a methodology which gives a realistic interpretation of the benefits that have been derived from implementing the works.

5. For the road sections where works have been undertaken—the Tibar–Ermera–Maliana, Maliana–Zumalai, Manatuto–Natarbora, and Baucau–Viqueque roads—an examination has been made of what would occur if these roads were closed during the rainy season due to landslides and flooding. The rainy season can vary between an average of 4 months (from December to March) for areas with low rainfall and 8 months (from November to June inclusive) for areas with high rainfall. If the works had not been undertaken on these roads then there is a high probability of road closure during the rainy season due to landslips and flooding, effectively stopping travel. If this was the case then traffic would have to divert to the nearest alternative route which was open to traffic. As most traffic throughout Timor-Leste travels between urban centers, this is not an unreasonable assumption. For example, traffic on the Maliana–Ermera–Tibar road would have to divert from Maliana and drive along the coast road via Batugade,

Appendix 11 37

Lacluta, and Liquisa and then to Tibar. Figure 1 shows the location and also a schematic presentation of the diversion route compared to the direct route from Maliana to Tibar. The distance between Maliana and Tibar is approximately 107.5 kilometers (km); the route from Maliana to Tibar via the coast road is 141.9 km. Thus, there is an increase of 34.4 km if the road between Maliana and Tibar was closed due to landslips. The diversion of traffic to the coast road would only be the case for approximately 6 months of the year, i.e., during the rainy season; for the other 6 months of the year the road would remain open as there would be no landslides at that time of year.

Figure A1.11: Direct and Diversion Route Between Maliana and Tibar

6. The completion of Cassa Bridge has also been evaluated in a similar way to the individual road projects that have been undertaken. If the bridge at Cassa had not been completed, then the traffic from Zumalai to Hatuto on A13 would have to divert firstly north from Zumalai to Aituto, then from Aituto south via Same and then west back to Hatuto. The direct distance from Zumalai to Hatuto is about 25 km; the total distance via the diversion is 124.1 km, a difference of 99.1 km. In the case of Cassa Bridge, the diversion route would be the only route open to traffic if the bridge had not been completed.

C. Traffic Analysis and Projections

1. Existing Traffic

7. Based on Timor-Leste’s existing vehicle fleet, the following nine vehicle types were adopted for the traffic analysis: (i) motorcycles, (ii) cars and taxis, (iii) jeeps and four-wheel drives, (iv) pickups and vans, (v) micro and minibuses (up to 12 seats), (vi) medium and large buses (more than 24 seats), (vii) light trucks (less than 5 tons [t]), (viii) medium trucks (up to 10 t), and (ix) large trucks (over 10 t).

Maliana

Batugade

Lacluta Ermera

Hatolia

Dili

Liquisa Tibar

Diversion Route Regular Route Source: Asian Development Bank.

38 Appendix 11

8. The PCR mission, with the assistance of the project management unit (PMU), conducted traffic surveys using two methods: fixed location surveys and moving traffic counts. The traffic surveys were conducted on the roads where works (i.e., slip rehabilitation, earthworks, etc.) had been undertaken during the Project implementation. The fixed location traffic surveys were undertaken for 12 hours, from 6 am to 6 pm, avoiding out-of-the-ordinary events such as market days, severe weather conditions, and Sundays. In addition to the fixed location counts, moving traffic counts were undertaken by the PCR mission at various times during the day. These moving counts were used to determine daily traffic where no 12-hour traffic count had been undertaken by factoring the moving counts (dependent upon what time the traffic had been observed) to the average factor on the 12-hour counts for the same time period.

9. The traffic count information obtained from the 12-hour count from 6 am to 6 pm was then adjusted to incorporate an estimate for nighttime traffic. In order to do this, the PCR mission referred to previous work that had been undertaken in Timor-Leste under the ADB technical assistance (TA).1 It was estimated by the TA project consultants that nighttime traffic between 6 pm and 6 am the following day would be approximately 20% of the daytime traffic. This estimate is considered conservative and was adopted by the PCR mission to factor the traffic counts obtained. The TA also took into account seasonal variation as the counts undertaken during the TA were during the rainy season and thus the TA made adjustments to account for this. As the traffic counts that were undertaken by the PCR mission were not undertaken in the rainy season there was no seasonal variation to take into account. The TA had also taken account of another seasonal factor—the coffee season, which runs from April to September. As the counts obtained by the PCR mission were undertaken in May, i.e., during the coffee season, no further adjustments were made. The annual average daily traffic for each of the road sections, and across Cassa Bridge, are shown in Table A11.1.

Table A11.1: Annual Average Daily Traffic (2008) (vehicles per day)

Vehicle Category Manatuto- Natarbora

Tibar-Maliana

Cassa Bridge

Maliana-Zumalai

Baucau- Viqueque

Motorcycle 14 100 49 66 122 Cars 0 0 0 0 0 Jeeps and 4WD 7 32 1 12 32 Pick-Up and Vans 9 21 6 10 17 Minibus 0 38 0 18 47 Medium and Large Bus 0 21 0 13 0 Light Truck 5 0 0 0 26 Medium Truck 2 18 16 7 20 Heavy Truck 0 6 0 2 6

Total 37 236 72 128 270 4WD = four wheel drive. Source: Asian Development Bank estimates.

1 ADB. 2001. Technical Assistance to East Timor for Transport Sector Improvement. Manila.

Appendix 11 39

2. Traffic Forecast

10. To be conservative, only normal traffic growth has been considered.2 Normal traffic growth rates were based on the projected gross domestic product (GDP) growth rate.3 Traffic growth rates for 2007–2015 were subsequently based on the income elasticity for the national transport demand in relation to GDP growth, estimated at 1.2 (footnote 1). Therefore, overall normal traffic growth was estimated at 6%.

3. Construction Costs

11. The economic construction costs were derived from the financial costs of civil works, physical contingencies, and construction supervision, excluding price escalation, price contingencies, and interest during construction. All financial costs were converted to economic costs. A shadow wage rate factor of 0.5 was used to adjust the opportunity cost of labor, as labor in Timor-Leste is in surplus supply and unemployment and underemployment are high. For unskilled labor, the minimum wage is $80 per month; however, the black-market rate is often about 50% less (footnote 1).

D. Economic Benefits

1. General

12. The estimated economic benefits were based on a comparison of the with-project and without-project cases. The main benefits consist of savings in vehicle operating costs (VOCs) and time for road users. Without the Project, it would have been necessary in the rainy season to divert to an alternative route for an average of 6 months of the year due to the roads being closed by landslides. With the Project, the road would remain open, even during the rainy season, due to the slope works that have been undertaken which have prevented landslides. Due to the road having to be closed for about 6 months if the Project works had not been done, the economic benefit is the savings in VOCs due to a greater distance having to be traveled if the road were closed, i.e., traffic would have to divert to an alternative route that was open to traffic. The VOC savings have been calculated for diverted traffic.

2. Vehicle Operating Cost Savings

13. The economic VOCs were updated by the PCR mission based on previously collected data (footnote 1). The data was used in the Highway Development and Management (HDM-4) model to calculate the VOCs. The costs were updated to 2007 economic prices by excluding taxes and duties and were calculated for the nine representative vehicle types (para 9).

14. Normally in the HDM-4 economic analysis the rate of road deterioration is based on the level of surface roughness that existed before the Project was implemented, i.e., the without-project case, compared with the roughness values in the with-project case, and the VOC savings due to the road improvement are calculated. The road roughness level is measured by the International Roughness Index (IRI).4 In the case of the current Project there were no

2 Generated traffic, i.e., people who did not travel before that now find a benefit in doing so because of the improved

road conditions, has not been considered. In most economic evaluations, generated traffic is estimated to be 10%–20% of normal traffic. To be conservative in the estimation of benefits, such generated traffic has not been estimated.

3 International Monetary Fund medium-term outlook for Timor Leste is 5% GDP growth per year. 4 The IRI is measured in meters per kilometer (m/km).

40 Appendix 11

significant changes to the surface roughness of the road as no civil works were undertaken for pavement treatment. The benefits calculated for this Project are only those that are due to avoiding the extra distance involved by having to use a diversion route if the road was closed due to landslides. The IRI values for each of the Project roads were measured in the ADB TA 3731-TIM that was undertaken (footnote 1). The PCR mission verified that the IRIs were reasonable through its visits to the project roads. IRI values ranged from 5.0 m/km to 15.0 m/km.

3. Time Savings

15. The value of time as derived in the economic analysis is made up of two components: working time and nonworking time. The value of working time during productive hours was derived from the per capita average income of $366 per year.5 A 48-hour working week and 48 weeks of work per year were assumed. The hourly value of working time used in the analysis was therefore $0.16. The value of nonworking time was estimated to be a quarter of the value of working time, or $0.04 per hour. This conservative assumption is commonly used to acknowledge that time is a valuable resource, even if the time is not used to earn income. These two values were used as inputs into the HDM-4 model, along with other assumptions made on vehicle characteristics, to determine the value of time at a disaggregated level. Other vehicle characteristics considered are (i) annual km driven, (ii) working hours per year, (iii) percentage of private use of the vehicle, and (iv) work-related passenger trips. Based on a typical day of 8 hours of work and 16 hours of “leisure” or other time, the PCR mission estimated that the daily value of time would be around $1.92.

E. Results of Economic Evaluation

16. The EIRR for the individual road sections and for Cassa Bridge were calculated on the basis of the stream of estimated costs and benefits over the construction period, plus 10 years of economic life. The results are shown in Table A11.2. The EIRRs range from 13.2% to 88.9%. The large EIRR for the Maliana–Zumalai road is due to the length of the diversion that would be necessary if the road was closed because of a landslide. These EIRRs compare favorably with the opportunity cost of capital of 12% for the acceptance of economic feasibility and therefore indicate that the economic performance of the Project roads is satisfactory; so it may be concluded that the investment was highly efficient. The EIRR for the Project as a whole is 37.5%. The economic costs and benefits for the Project as a whole are given in more detail in Table A11.3. If the section of road from Maliana to Zumalai, i.e., the section with the high EIRR of 88.9%, was not considered then the resulting EIRR for the Project as a whole would reduce to 32.3%, still indicating a high level of economic viability.

5 Statistics database, Pacific Department, ADB.

Appendix 11 41

Table A11.2: Economic Evaluation of Individual Project Roads (Net Benefit Streams) ($ million)

YearCassa Bridge

Manatuto- Natarbora

Tibar-Maliana

Maliana-Zumalai

Baucau- Viqueque

TotalProject

2005 (1.06) (1.06) 2006 0.39 (1.42) (2.98) (0.79) (2.80) (7.60) 2007 0.42 0.24 0.41 0.65 1.27 2.992008 0.45 0.26 0.45 0.69 1.37 3.212009 0.48 0.28 0.48 0.74 1.47 3.452010 0.51 0.30 0.52 0.79 1.58 3.702011 0.55 0.32 0.56 0.85 1.69 3.972012 0.59 0.34 0.60 0.91 1.82 4.262013 0.63 0.37 0.65 0.97 1.95 4.572014 0.67 0.39 0.70 1.04 2.10 4.912015 0.72 0.42 0.77 1.12 2.27 5.312016 0.46 0.85 1.21 2.47 4.98

EIRR (%) 41.6 17.4 13.2 88.9 51.4 37.5

( ) = negative, EIRR = economic internal rate of return. Source: Asian Development Bank estimates.

Table A11.3: Economic Evaluation of the Project($ million)

YearCapital Cost

VOCSavings

TimeSavings

NetBenefit

2005 (1.06) (1.06) 2006 (7.99) 0.38 0.01 (7.60) 2007 2.81 0.18 2.99 2008 3.02 0.19 3.21 2009 3.24 0.20 3.45 2010 3.48 0.21 3.70 2011 3.74 0.22 3.97 2012 4.02 0.24 4.26 2013 4.32 0.25 4.57 2014 4.65 0.26 4.91 2015 5.03 0.28 5.31 2016 4.70 0.28 4.98

EIRR (%) 37.5

( ) = negative, EIRR = economic internal rate of return, VOC = vehicle operating cost. Source: Asian Development Bank estimates.

42 Appendix 12

ASSESSMENT OF PROJECT IMPACTS AND BENEFITS

A. General Context

1. Timor-Leste is a rural country. Three quarters of the population live in villages, and three in four rural households rely exclusively on income from agriculture. Diversifying income sources outside of agriculture is an important mechanism to cope with farm income fluctuations. Nonfarm employment is vital for raising living standards in rural areas. Nevertheless, agriculture will remain the main sector of employment and source of income for the majority of the population for decades to come.

2. Poverty in Timor-Leste shows a remarkable variation in the different areas of the country. Poverty generally increases from east to west. The three districts that comprise the western region (Oecussi, Bobonaro, and Cova-Lima) are home to one fifth of the population, but account for a quarter of the poor. In contrast, the three districts of the eastern region (Baucau, Lautem, and Viqueque) account for a quarter of the population, but less than one fifth of the poor. Poverty also increases with altitude above sea level.

3. These geographical patterns are partly, but not entirely, a reflection of the degree of urbanization. In line with experience in other developing countries, poverty in rural areas is higher than in urban areas. Since three quarters of the population reside in rural areas, poverty is overwhelmingly a rural phenomenon—six out of seven poor people live in rural areas.

4. The importance of infrastructure development cannot be overstated. As has been shown in other low-income countries, living standards improve dramatically as access to services expands. Transport infrastructure is an important key to enabling reliable access. However, quantity is no substitute for quality. Low operating efficiency, inadequate maintenance, and lack of attention to the needs of users can result in gains made from initial infrastructure investments evaporating quickly, as may be the case in the Project. However, some immediate benefits have been seen by the effects on the local rural people in the Project areas.

5. The socioeconomic analysis presented here is based on a review of documents related to the Project, such as the report and recommendation of the President, and the project completion report prepared by the executing agency (EA). Discussions were also held with officials of the EA. In addition, the project completion review (PCR) mission made field visits to appraise selected works and, wherever possible, to obtain the views of the direct beneficiaries through informal discussions. The overall assessment was limited to the post-project physical conditions and performance of the interventions at the time of the field visits. The assessment, nevertheless, provides reasonable feedback on the Project impacts, benefits, and effectiveness of the project components in general.

6. The PCR mission visited the areas where the Project works had been undertaken: (i) the Tibar–Ermera–Maliana road, (ii) the Maliana–Zumalai road, (iii) the Manatuto–Natarbora road, (iv) the Baucau–Viqueque road, and (v) Cassa Bridge.

B. Project Impacts and Benefits

7. An initial social assessment was carried out at appraisal. It was expected that significant positive impacts would occur for the local communities. Employment generation occurred during the implementation of the Project and local village labor was used in the civil works contracts.

Appendix 12 43

The exact amount of labor recruited is unknown as there was no benefit monitoring exercise undertaken during the implementation of the Project. As no monitoring was undertaken during the Project, it is also impossible to determine if the Project has had a significant impact in terms of poverty reduction.

8. The PCR mission visited the civil works that had been implemented along each of the project roads, including earthworks and slope protection, drainage, and bioengineering areas. The PCR mission’s discussions with the rural population revealed that people from the local villages had been employed during the construction stage of the implemented civil works. At Vikida Bridge approximately 30 local village people were employed over a period of about 4 months to assist in bridge construction. From this temporary employment the local village people earned about $3 per day. Another area, where drainage works had been incorporated, employed approximately 100 local village people for a whole year. Local labor was also used on several other civil works components throughout Project implementation, e.g., Gleno Bridge and Cassa Bridge. By increasing local employment, the incomes of several households have been increased due to the temporary employment that was generated by the Project. This increase in income has in turn enhanced commercial activity due to an increase in the spending power of the rural people and thus has helped to alleviate rural poverty, even though this effect was only temporary. It was not possible during the PCR mission to obtain detailed employment estimates as no benefit monitoring exercise had been undertaken and no records were kept by the civil works contractors on actual employment numbers.

9. The works that have been undertaken along the Project roads have (i) allowed the roads to remain open in the rainy season, (ii) assisted in preventing further landslides, and (iii) improved the drainage in the Project areas. The reliability of road access has been increased and has enabled local communities to continue their daily economic and social activities. The rainy season, which extends from November to March, had previously cut off some sections of road by landslides, leading to severe detours for people wanting to travel. The areas where the civil works were undertaken are now protected and thus enable the roads to remain open. By keeping the roads open, the works have enabled the activities of the rural people in these areas to continue rather than be disrupted in the rainy season, and has enabled them to have access to other areas along the roads, e.g., trade centers and health and educational facilities.

10. Keeping the roads open to traffic has also enabled savings in vehicle operating costs and in travel time due to the fact that travelers would have had to use a diversion route as the road would have been closed in the rainy season. One major significant impact was due to the completion of the Cassa Bridge. The completion of this bridge has enabled travel time savings between Zumalai and Hatuto (where a large majority of people in the area work). Before the bridge was completed, it took approximately 4.5 hours to travel between Zumalai and Hatuto via a circuitous route; the travel time between Zumalai and Hatuto since the bridge has been completed is only 30 minutes. The saving has not only lowered the travel time but has also decreased the transport costs.

11. The general opinion of most people that the PCR mission had discussions with was that the local residents indicated that, by remaining open, the roads had improved their way of life and they did not feel so isolated and cut-off. The PCR mission also found, in its discussions with several village people, that they would have liked to have been involved more in discussions of what improvements were needed in the areas in which they lived, e.g., drainage works and slope protection.

44 Appendix 13

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

1. Overall Rating

CriteriaAssessment Rating

(0–3)Weight

(%)Weighted

Rating Relevance Highly Relevant 3 20 0.60 Effectiveness Effective 2 30 0.60 Efficiency Highly Efficient 3 30 0.90 Sustainability Unlikely 0 20 0.00

Overall Rating Successful

2.10 Notes: Even though the sustainability of the Project is rated “unlikely”, the Project has still been rated “successful.” Previously, in the Operations Evaluation Department (OED) guidelines, a project should be automatically downgraded to the next level, i.e., “partly successful”, if any rating is zero. In the new OED guidelines, this automatic downgrading no longer applies but is left to the interpretation of the reviewers. Considering the emergency nature and limited budget of the Project, the PCR mission is of the opinion that the Project should still be rated “successful.”

Relevance: Project objectives and outputs were relevant to strategic objectives of the Government and ADB.

Effectiveness: Project achieved its outcome. Efficiency: Project achieved objectives in an efficient manner. Sustainability: Project benefits and development impacts are sustainable.

2. Rating System

RatingValue

Relevance Effectiveness Efficiency Sustainability

3 Highly Relevant Highly Effective Highly Efficient Most Likely 2 Relevant Effective Efficient Likely 1 Partly Relevant Less Effective Less Efficient Less Likely 0 Irrelevant Ineffective Inefficient Unlikely

Rating: Greater than 2.7 = Highly Successful Between 1.6 and less than 2.7 = Successful Between 0.8 and less than 1.6 = Partly Successful Less than 0.8 = Unsuccessful