Completion Report

Project Number: 30076 Loan Number: 1653 (segment 1) September 2007

Viet Nam: Third Road Improvement

CURRENCY EQUIVALENTS

Currency Unit – dong (D)

At Appraisal At Project Completion (13 November 1998) (31 December 2005)

D1.00 = $0.0000719 $0.0000630 $1.00 = D13,899 D15,864

ABBREVIATIONS

ADB – Asian Development Bank ATB – asphalt treated base BME – benefit monitoring and evaluation CGFED – Research Centre for Gender, Family and Environment

in Development DBST – double bituminous surface treatment EIRR – economic internal rate of return FRW – flood rehabilitation works GDP – gross domestic product GPS – global positioning system HDM4 – highway development and management tool HDM-III – highway design and maintenance model, version 3 HDMQ – variant of HDM-III; includes congestion effects ICB – international competitive bidding IRI – international roughness index ISDP – implementation of sector development policy JBIC – Japan Bank for International Cooperation MIO – menu of improvement options MOT – Ministry of Transport NH1 – national highway number 1 NHC – national highway component OECF – Overseas Economic Cooperation Fund PCCP – Portland cement concrete pavement PCRM – project completion review mission PCR – project completion report PDOT – provincial department of transport PMU1 – project management unit number 1 PPMU – provincial project management unit PPTA – project preparatory technical assistance PRC – provincial roads component RIMS – road information management system RoSy® – pavement management system software suite RRMC – road repair and management company RRMU – regional road maintenance unit SDR – special drawing rights UDB – unified database (ISDP-developed database at VRA) VBMS – Viet Nam bridge management system VOC – vehicle operating cost VRA – Viet Nam Road Administration WB – World Bank

WEIGHTS & MEASURES

newton – 0.102 kg of force decanewton – 10 newtons

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.

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

Vice President Director General Country Director Team leader Team member

C. Lawrence Greenwood, Jr., Operations Group 2 A. Thapan, Southeast Asian Department (SERD) A. Konishi, Viet Nam Resident Mission (SERD) L. D. Thang, Project Implementation and Program Officer, SERD Ng. T. Phuong Hoa , Assistant Project Analyst, SERD

CONTENTS

Page

BASIC DATA i

MAPS v

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11

A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 13 D. Preliminary Assessment of Sustainability 14 E. Impact 15

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 15

A. Assessment 15 B. Lessons 16 C. Recommendations 18

APPENDIXES

1. Project Framework 19 2. Chronology of Major Events 21 3. Projected and Actual Disbursements 23 4. Implementation Schedule 24 5. Contract Details 25 6. Status of Compliance with Loan Covenants 28 7. PCRM Summary Review of Road Maintenance and Design 34 8. Economic Reevaluation 39 9. Review of Implementation of Sector Development Policy 60 10. Flood Rehabilitation Works 69 11. Resettlement 71 12. Quantitative Assessment of Overall Project Performance 75

BASIC DATA

A. Loan Identification

1. Country Socialist Republic of Viet Nam 2. Loan Number 1653 (segment 1) 3. Project Title Third Road Improvement – National Road

and Provincial Road 4. Borrower Socialist Republic of Viet Nam 5. Executing Agency Ministry of Transport 6. Amount of Loan SDR92.307 million 7. Project Completion Report Number 983

B. Loan Data

1. Appraisal – Date Started 27 July 1998 – Date Completed 15 August 1998

2. Loan Negotiations – Date Started 3 November 1998 – Date Completed 6 November 1998

3. Date of Board Approval 10 December 1998

4. Date of Loan Agreement 13 April 1999

5. Date of Loan Effectiveness – In Loan Agreement 20 September 1999 – Actual 20 September 1999 – Number of Extensions 0

6. Closing Date – In Loan Agreement 31 December 2003 – Actual 27 April 2006 – Number of Extensions 2

7. Terms of Loan – Interest Rate 1% per annum – Maturity (number of years) 40 years – Grace Period (number of years) 10 years

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8. Disbursements

a. Dates Initial Disbursement Final Disbursement Time Interval 17 December 1999 27 April 2006 76 months Effective Date Original Closing Date Time Interval 20 September 1999 31 December 2003 51 months

b. Amount ($)

Last Net

Original Revised Amount Amount Amount Undisbursed

Category Allocation Allocation Canceled Available Disbursed Balance

Civil works 113.76 94.74 0.00 94.74 94.74 0.00

ISDP 2.38 0.00 0.00 0.00 0.00 0.00

PPMU support 0.39 0.22 0.00 0.22 0.22 0.00

PMU1 operations 0.65 0.00 0.00 0.00 0.00 0.00

Consulting services 8.87 12.35 0.00 12.35 12.35 0.00

Service charge 3.95 4.04 0.00 4.04 4.04 0.00

Unallocated 0.00 0.00 0.00 0.00 0.00 0.00

Total 130.00 111.35 18.65 111.35 111.35 0.00

ISDP = implementation of sector development policy, PMU1 = project management unit number 1, PPMU = provincial project management unit.

9. Local Costs (Financed) Appraisal Actual

- Amount ($ million) 38.10 27.82 - Percentage of Local Costs 39.33 21.61 - Percentage of Total Cost 15.96 12.04

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange 141.87 102.31

Local Cost 96.85 128.72

Total 238.72 231.03

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Foreign Local Total Foreign Local Total

A. Implementation Cost

ADB Financed 87.97 38.10 126.07 79.49 27.82 107.31

Government Financed 0.00 33.70 33.70 0.00 31.13 31.13

OECF Financed 50.00 25.00 75.00 18.78 69.72 88.50

Subtotal (A) 137.97 96.80 234.77 98.27 128.67 226.94

B. Interest During Construction Costs

ADB Financed 3.95 0.00 3.95 4.04 0.00 4.04

Government Financed 0.00 0.00 0.00 0.00 0.05 0.05

Beneficiaries Financed 0.00 0.00 0.00 0.00 0.00 0.00

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Subtotal (B) 3.95 0.00 3.95 4.04 0.05 4.09

Total 141.92 96.80 238.72 102.31 128.72 231.03 ADB = Asian Development Bank, OECF = Overseas Economic Cooperation Fund

3. Cost Breakdown by Project Component ($ million)

Appraisal Estimate Actual

Item Foreign Local Total Foreign Local Total

A. Base Cost

Land 0.00 15.00 15.00 0.00 10.17 10.17

Civil Works 67.63 41.37 109.00 67.27 44.74 112.01

Supervision 6.63 1.03 7.66 10.38 0.11 10.49

PMU1-operations 0.00 0.50 0.50 0.00 0.70 0.70

PDOT Support 0.00 0.30 0.30 0.00 0.27 0.27

ISDP 1.50 0.50 2.00 1.84 0.18 2.03

Subtotal (A) 75.76 58.70 134.46 79.49 56.17 135.66

B. Contingencies

Physical

8.03 4.63 12.66 0.00 0.00 0.00

Price

4.13 8.52 12.65 0.00 0.00 0.00

Subtotal (B) 12.16 13.15 25.31 0.00 0.00 0.00

Total Base Cost 87.92 71.85 159.77 79.49 56.17 135.66

C. Interest/Service Charge

Interest During Construction 0.00 0.00 0.00 0.00 0.05 0.05

Service Charge on Bank Loan 3.95 0.00 3.95 4.04 0.00 4.04

Subtotal (C) 3.95 0.00 3.95 4.04 0.05 4.09

D. Miscellaneous (Project Preparation Cost) 0.00 0.00 0.00

0.00 2.78 2.78

E. Bridges – OECF 50.00 25.00 75.00 18.78 69.72 88.50

Total Project Cost

141.87 96.85 238.72 102.31 128.72 231.03 ISDP = implementation of sector development policy, OECF = Overseas Economic Cooperation Fund, PDOT = provincial department of transport, PMU1 = project management unit number 1.

4. Project Schedule

Item Appraisal Estimate Actual Consulting Services Contract:

Supervision Date of Award 31 Jan 1999 03 Sep 1999 Date of Completion 31 May 2003 30 Jun 2005

ISDP: Date of Award - 5 Apr 2004 Date of Completion - 31 Dec 2005 Civil Works Contract Highway Improvement

Date of Award 31 Mar 1999 5 Nov 1999 Completion of Work 30 Sep 2003 31 Dec 2003

Provincial Roads Date of Award Feb 2000 6 Apr 2001 Completion of Work 30 Jun 2002 30 Apr 2003

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Other Milestones 30 June 2005 : First extension of loan closing date 20 December 2000 : First cancellation of $8 million for redeployment of the 2000 Flood

Rehabilitation Works under Segment 2 of the loan 31 December 2005 : Second extension of loan closing date 27 April 2006 : Actual closing date of loan account

ISDP = implementation of sector development policy.

5. Project Performance Report Ratings Ratings

Implementation Period Development Objectives

Implementation Progress

From 13 April 1999 to 31 December 1999 S S From 01 January 2000 to 31 December 2000 S S From 01 January 2001 to 29 April 2001 S HS From 30 April 2001 to 31 December 2001 S S From 01 January 2002 to 27 February 2002 S PS From 28 February 2002 to 31 December 2002 S S From 01 January 2003 to 31 December 2003 S S From 01 January 2004 to 31 December 2004 S S From 01 January 2005 to 31 December 2005 S S From 01 January 2006 to 31 July 2006 S S HS = highly satisfactory, S = satisfactory, PS = partly satisfactory.

D. Data on Asian Development Bank Missions

Name of Mission Dates Persons (number)

Person-days (number)

Specialization of Members

a

Fact-Finding Mission 16 Mar–4 Apr 1998 3 80 a, b, c, d, Appraisal Mission 27 Jul–15 Aug 1998 3 60 a, b, d Loan Inception Mission 8–13 Sep 1999 2 10 a, g Loan Review Mission 12–21 Sep 2000 1 9 d Hand-over and Joint Review Mission

13–22 Feb 2001 2 18 d, f

Special Project Administration Mission

11–16 Jun 2001 2 10 d, f

Loan Review Mission

5–15 Nov 2001 1 10 f Mid-term Review Mission

22 Apr–3 May 2002 2 22 e, f

Review Mission 15–16 Aug 2002 2 4 e, f Review Mission

4–8 Nov 2002 2 8 e, f

Special Loan Review Mission 13–14 Jan 2003 1 2 f Review Mission

24–28 Mar 2003 2 8 f, h

Review Mission 18–20 Aug 2003 2 16 f, h Review Mission

13–15 Oct 2003 2 4 f, h

Review Mission

09–11 Feb 2004 2 4 f, h Review Mission

13–15 Sep 2004 2 4 f, h

Financial Management Review Mission

29 May–2 Jun 2006 3 12 f, i

Project Completion Review Mission

b 25 Mar−4 Apr 2007 3 30 f, g, 2k

a a = senior project economist, b = senior social development specialist, c = senior project engineer, d = project

engineer, e = principal project implementation officer, f = program officer and project implementation officer, g = assistant project analyst, h = principal project implementation specialist, i = senior integrity specialist, k = staff.

b The project completion report was prepared by Le Dinh Thang, project implementation and program officer.

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I. PROJECT DESCRIPTION

1. The involvement of the Asian Development Bank (ADB) in the road sector in Viet Nam started in early 1990 when the Government recognized that, following three decades of war and insufficient investment, the country’s deteriorated infrastructure was a serious hindrance to economic development. Highest priority was given to improving national highway number 1 (NH1), which runs for 2,200 kilometers (km) from the border with the People’s Republic of China in the north to the southernmost tip of Viet Nam. ADB, the World Bank (WB) and Japan’s Overseas Economic Cooperation Fund (OECF)1 were requested to assist in the improvement of NH1. ADB’s Road Improvement Project rehabilitated the 435 km section from Ho Chi Minh City to Nha Trang through an ADB loan approved in November 1993.2 Project preparatory technical assistance (PPTA)3 was also approved for a feasibility study of two other sections of NH1: from Hanoi to the border with the People’s Republic of China (161 km), and from Dong Ha to Nha Trang (700 km). The study found improvements to both parts of NH1 to be feasible on economic grounds. The Government accorded highest priority to the section between Hanoi and the Chinese border. This section also had the higher economic internal rate of return (EIRR). ADB responded in November 1996 by approving the Second Road Improvement Project for improvement of NH1, which resulted in the reconstruction of the section between the Chinese border and Hanoi, and minor improvements to selected rural roads.4 2. Concurrent with loan approval for ADB’s second project to improve NH1, a PPTA was approved to carry out economic analysis, detail design, environmental, and social studies in preparation for a third loan for further improvement of the highway.5 The ensuing project, to which this project completion report (PCR) relates, was implemented under Loan 1653-VIE(SF) for which approval was granted on 10 December 1998. The Third Road Improvement Project improved the NH1 road section from Nha Trang to Quang Ngai (400 km). In parallel with the ADB loans, WB has funded rehabilitation of NH1 from Hanoi to Vinh, from Vinh to Dong Ha, and from Ho Chi Minh City to Can Tho, and flood rehabilitation works between Dong Ha and Quang Ngai. OECF has funded the replacement and construction of bridges more than 20 meters (m) long along NH1. 3. In conjunction with the preceding improvement projects on NH1, the objectives of the Project were to further encourage economic integration of the northern, central, and southern regions of the country through reduction in transport costs and travel time, and to improve transport reliability and access of the rural population to social and economic opportunities. At appraisal, the Project consisted of five components.6 1 Now the Japan Bank for International Cooperation (JBIC).

2 ADB.1993. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Socialist Republic of Vietnam for the Road Improvement Project. Manila. (Loan 1272, for $120 million, approved on 23 November 1993.

3 ADB. 1993. Technical Assistance to the Socialist Republic of Vietnam for Second Road Improvement. Manila. (TA 1997, approved ,on 23 November 1993, for $2.1 million. A supplementary grant, approved on 31 May 1995, for $850,000.)

4 ADB. 1996. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Socialist Republic of Vietnam for the Second Road Improvement Project. Manila. (Loan 1487, for $120 million, approved on 21 November 1996)

5 ADB. 1996. Technical Assistance to the Socialist Republic of Vietnam for Third Road Improvement. Manila. (TA 2636, approved ,on 23 November 1996, for $1.3 million.)

6 ADB. 1996. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Socialist Republic of Vietnam for the Third Road Improvement Project. Manila. (Loan 1653, for $130 million, approved on 10 December 1998.)

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(i) National highway component (NHC), involving rehabilitation of about 400 km of NH1 from Quang Ngai to Nha Trang.

(ii) An OECF-financed bridge component. (iii) Provincial roads component (PRC), consisting of the improvement of about 1,000

km of selected provincial roads within the project influence area extending to five provinces: Quang Ngai, Gia Lai, Binh Dinh, Phu Yen, and Khanh Hoa.

(iv) Consulting services for supervision of works associated with the NHC and PRC components.

(v) Implementation of sector development policy (ISDP), which was the provision of facilities, equipment, and staff training for Ministry of Transport (MOT) and Viet Nam Road Administration (VRA) personnel.

4. Work had commenced by mid-2000. In September 2000 a further subcomponent was added to the PRC. The 1999 flood rehabilitation works (1999 FRW) subcomponent was included to rehabilitate roads damaged as a result of the 1999 floods in four of the influence-area provinces and Quang Nam, an additional province immediately to the north.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. Both the Government and ADB recognize that improved efficiency, poverty reduction, and environmentally sound development will be effectively promoted through further improvement of geographical linkages. The primary linkage nodes are Hanoi in the north, Da Nang in the central region, and Ho Chi Minh City in the south. Upgraded transport corridors connecting these growth areas with selected rural areas are essential to an improved business environment. Provincial and local roads from these transport corridors into the hinterland help bring these areas into the economic mainstream. The Project was formulated and designed based on these strategies. The project influence area consisted of four coastal provinces—Quang Ngai, Binh Dinh, Phu Yen, and Khanh Hoa—plus the province of Gia Lai in the central highlands. 6. NH1 is the sole connector of the country’s three primary nodes. Since the early 1990s the Government has given the highest priority within the sector to the improvement of NH1, which had restrictive 7 m carriageway and insubstantial shoulders. The Project was basically a continuation of the assistance to the road sector started under the Road Improvement Project (1993), followed by the Road Improvement Project (1996). With the Third Road Improvement Project, the financing of improvements to NH1 was put in place. OECF cofinanced the replacement and construction as required of multispan bridges longer than 20 m within the NHC. Improvements to other sections of the highway were completed by WB and OECF. With the completion of the Project, improvement of the entire NH1 to Ho Chi Minh City was assured.7 7. At project inception, the Government made a request to ADB that four new bypasses be included. Attendant benefits were presented as a reduction in resettlement and a reduction in NHC implementation cost. ADB approved the addition of new bypasses to the Project in December 1999. This was the first major development away from the plan developed at appraisal. Subsequent to the commencement of services by the supervision consultant in

7 A WB-funded project (Third Highway Rehabilitation Project) is currently completing improvement of the remaining

section of NH1 between Ho Chi Minh City and the southernmost point of Viet Nam at Nam Can.

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January 2000, further changes were made to the original survey design work that had been carried out in 1997. The pavement was strengthened on the carriageway and extended to the shoulders, and road widening through urbanized areas was implemented over a significantly greater length than had been previously envisaged. The scale of bridge work needed was also substantially affected by deterioration and damage caused by annual flooding and increased traffic volumes experienced during the 4 years between the time of appraisal and the commencement of substantive construction. Whereas the original design called for the replacement of one bridge on NH1, 34 other bridges which were originally scheduled for retention, repair, and widening were replaced during implementation. Overall, the additions to the design benefited road users, particularly with regard to the absence of roadside encroachments on the new bypasses, as well as reduced interaction with other vehicles, particularly motorcycles, on the widened subsections through urban developments. B. Project Outputs

1. National Highway Component 8. The capital Hanoi and the major cities of Vinh, Hue, Da Nang, Quy Nhon, Nha Trang, and Ho Chi Minh City are now linked by a good quality road, with the project’s NHC being the final link. The improvement works carried out under the NHC generally ranged from overlays to complete reconstruction. At most locations the previous 7 m pavement has been widened to 10 m, consisting of a 7 m carriageway and 1.5 m shoulders (1 m asphalt concrete paved and 0.5 m earth verge). There are some urban sections that have 2 m asphalt concrete paved shoulders and a 0.5 m earth verge. Most of the approximately 400 km included in the NHC is now reasonably homogeneous in terms of design standard and road condition. The bridge works involved reconstruction and improvement of short bridges. Part of the Project provided for the rehabilitation or reconstruction of single- and multispan bridges up to 20 m long, and of single-span bridges more than 20 m long, along the 400 km of NH1. The Japan-funded complementary program replaced the more major bridges. 9. The works were executed in four contracts, one in each of the provinces within which the NHC is located. Civil works contractors were procured under international competitive bidding and in accordance with ADB guidelines. Typically the minimum work involved the application of 7–10 cm of asphalt treated base (ATB) and 5 cm of asphalt concrete pavement. In some areas 15–30 cm of base course, and occasionally 25 cm of sub-base, was included to increase pavement strength to appropriate levels. The pavements were designed to have a service life of 10 years before requiring overlay. 10. On completion there were four sections of four-lane standard road in urban areas, and four bypasses on new alignments around urban areas. In total these comprised about 8% of the total NHC length. The four bypasses on new alignments incorporated in the NHC had a total length of 13.9 km. The bypass at Quang Ngai was four-lane standard with concrete pavement. Only this bypass was included at appraisal. At the other three locations—Ngo May, Binh Dinh, and Phu Lam—the design standard was the same as the general standard for the improved existing sections of NH1. In four of the major urban locations, with a total length of 19 km, the design standard was raised to a four-lane road, almost all of which had a dividing median strip, providing a 14-meter-wide carriageway and a total 21 m width of pavement.

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2. Provincial Roads Component

11. The original PRC was designed to improve about 1,000 km of selected provincial and district roads in five provinces of the south central region of Viet Nam. Physical work started in 2001. Early In the same year the PRC was extended to include work related to flood damage that had occurred during 1999 in the four original coastal provinces and in an additional coastal province, Quang Nam, which is located immediately north of Quang Ngai. This was identified as the 1999 Flood Rehabilitation Works (1999 FRW).8 Despite this addition the final completed length of works remained at approximately 1,000 km. Also, the addition of the flood protection works did not change the scope of the Project. The works designated as restoration and flood protection in these provinces were also partly improvement (similar to that carried out on the other roads) and included rehabilitation and upgrading. The PRC involved 112 individual contracts that were implemented in stages; stage 1 in 2001–2002, and both stage 2 and the 1999 FRW in 2002–2003. In total, 67 road sections totaling 1,037 km were included. 12. The original concept of the PRC at appraisal was that roads should not be sealed, because the cost could not be justified. The objective was that roads should be improved to all-weather standard by raising embankments and improving drainage. Generally a 3.5 m pavement was provided, consistent with a Class V road in the Viet Nam design standards. Although road surfaces were generally not to be sealed, short sections of double bituminous surface treatment (DBST) would be put down on steep gradients and in settled areas to prevent dust. This intended program appears to have been interpreted flexibly. On most roads there is some DBST sealing, often for very short distances, but there are also some lengths of asphalt concrete surface and sections of concrete pavement. The policy of sealing only in villages does not seem to have been followed in all cases. In total, 330 km (one third of the road length) is now sealed or has concrete pavement. Most road sections are currently in fair to good condition but there is a significant amount of damage to the sealed pavements (due to overloaded trucks in most cases) and on steep gradients on the unsealed sections due to water erosion.

3. Implementation of Sector Development Policy

13. Among six objectives to be met under the ISDP component, possibly the two most salient were (i) to develop an application of effective planning procedures for efficient national highway network maintenance; and (ii) to promote the utilization of a uniform road information management system (RIMS) with modern information technology to supply inputs for planning, management, and operation of the national highway network, and for management and administration at VRA. 14. The ISDP successfully developed a progressive and uniform RIMS, comprising (i) modules for strategy analysis of the national road network to meet long-term planning needs, (ii) a comprehensive pavement management system for short- and medium-term maintenance programming, and (iii) enhancement to the existing Viet Nam bridge management system (VBMS). Necessary interfaces were coded for running applications on a unified database (UDB), so enabling the widespread use of an advanced computerized tool for planning and management at different levels within VRA, its subordinate bodies, and 48 provincial

8 A separate flood-related component, Emergency Assistance for Flood Rehabilitation Component (Flood 2000),was

added to the loan as a second segment on 20 December 2000, to assist in the rehabilitation of roads and structures damaged as a result of the year 2000 floods. Roads were grouped in two locations outside the project area; four provinces in the north central region and nine provinces in the Mekong region. $8 million was cancelled for redeployment. Loan Segment 2 is not included for review in the present PCR.

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departments of transport (PDOTs) responsible for the management of the national road network. 15. The unified RIMS was implemented and tested. The UDB was populated up to test level sufficient to commission HDM4,9 together with the proprietary pavement management system installed throughout VRA and PDOTs. It wasn’t possible, however, to use the planning processes and systems to provide a full working assessment of the maintenance needs of the whole national road network, or to determine maintenance funding requirements under specific maintenance strategies, as the previously established network database in VRA was found to be inadequate. A corrective survey on a national scale with the acuity of observation and collection necessary was beyond the resources assigned to the ISDP component. A sample section of 200 km on NH1 was surveyed to provide the road condition data specifically required as input to the system as installed.

16. The ISDP procured the range of equipment needed for the implementation of the planning and management system. Computer equipment was supplied to MOT, VRA, its subagencies, and the 48 PDOTs to enable these entities to operate appropriate RIMS software and other standard software compatible with their functions in the management of the national road network. Under the ISDP, 158 licenses for the proprietary pavement management system were purchased and distributed. The PDOTs were supplied with basic equipment for activities involved with road and bridge inspection. 17. The changes incorporated into the NHC (additional bypasses and widening, redesign of pavement) did not directly prolong the Project, nor did the addition of the 1999 FRW subcomponent to the PRC. The Project was completed late for other reasons, indicated below in the outline of the project schedule. The Project was completed within cost. C. Project Costs

18. At appraisal, the total project cost was estimated at $238.7 million equivalent, with foreign exchange costs of $141.9 million (59.4%) and local currency costs of $96.8 million equivalent (40.6%). The ADB-financed component of the total cost was estimated at $163.7 million equivalent (68.6%), with OECF contributing $75 million equivalent. The proposed financing plan was based upon an ADB loan of $130 million, an OECF contribution of $75 million, and a Government contribution of $33.7 million.

19. For the ADB-financed part of the Project (i.e., excluding bridges more than 20 m long, which were financed by OECF) the total cost estimate at appraisal of $130 million comprised $91.9 million foreign exchange costs and $38.1 million local currency costs. Civil works on the NHC and PRC were estimated to account for $109 million (83.8%) of the ADB-financed component. Actual costs at completion for the ADB-financed components amounted to $111.3 million equivalent, of which $83.5 million (75%) was in foreign exchange and $27.8 million equivalent (25%) in local currency. Expenditure on civil works for the NHC and PRC amounted to $112.2 million. 20. The final NHC cost for the civil works was close to estimate, although a considerable amount of additional construction was added during implementation. The four international

9 Highway Development and Management Tool, Copyright, World Road Association.

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competitive bidding (ICB) civil works contracts for the NHC and 112 local competitive bidding contracts for the PRC were awarded for a total value that equaled about 87% of the loan category allocation. This was partly due to the quantities in the NHC tenders being underestimated and partly by low bids being offered by the four tenderers (joint ventures; two wholly Vietnamese and two Korean–Vietnamese). It subsequently became necessary during implementation to vary the original scope of the construction works in all four ICB contracts under the NHC. The Government requested that ADB approve a number of priority and essential variation orders to cover things such as (i) inadequate quantities in the tenders, (ii) changes in pavement design, (iii) bridge replacements, (iv) bypasses, and (v) the widening of sections in urban areas. Additional person-months were required on the international supervision contract. The variation orders were approved and accomplished using savings across the five components of the Project and on the loan service charge for total savings of about $22 million, together with cancellation of a portion of the unallocated category of about $9.5 million. 21. The cost of the flood rehabilitation works carried out under the Project and borne by the loan amounted to about $9.1 million. This was reallocated in September 2000 as the 1999 FRW.

D. Disbursements

22. No disbursement schedule was included in the Report and Recommendation of the President. However, indicative annual budget requirements were presented in the Project Administration Memorandum.10 These showed an expected 5-year disbursement period running from 1999 to 2003, with the greatest annual flows occurring during 2000–2002. The projected expenditures are shown in Appendix 3, along with the actual disbursements during project implementation. The loan was disbursed more slowly than initially envisaged because of project implementation delays. These were mainly due to the slow progress of civil works brought about by tardiness in mobilization of the NHC contractors and delay in implementation of the ISDP component. Loan proceeds were disbursed in accordance with ADB’s Loan Disbursement Handbook (2000) by direct payment procedures for both civil works and consulting services. On 27 April 2006 the last withdrawal application was finalized and the loan’s imprest account was liquidated. E. Project Schedule

23. The ADB Board of Directors approved the loan on 10 December 1998 and the Loan Agreement became effective on 20 September 1999. The original closing date of the loan was 31 December 2003, though this was extended at the request of the Government to 31 December 2005. At appraisal, the Project was expected to be implemented over 66 months, inclusive of preconstruction activities that had already commenced under advance procurement action approved in May 1997, with completion of the NHC and PRC forecast by mid-2003. Actual implementation, including contractor prequalification and consultant selection, took place over 90 months, lasting until 31 December 2005. The actual and appraisal implementation schedules are compared in Appendix 4. 24. The contracts for the NHC works had originally been expected to be signed by 31 March 1999 and the works completed by the end of June 2003. Substantive construction started early

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ADB. 1999. Loan 1653 Third Road Improvement Project Administration Memorandum. Manila.

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in May 2000 but by February 2001 it was evident that progress was lagging, with only 9% of the works completed with 31% of the time elapsed. By the end of 2002, the situation had become extreme with just 48% completed and 78% of contract time elapsed. During 2003 and thereafter, however, progress markedly improved and by September 2004 the work was substantially complete. The unsatisfactory rate of progress up to early 2003 was due to multiple factors, mainly concerned with contractor performance. On its inception mission in September 1998, ADB expressed reservations about the quality of the contractors put forward by the Government in its award recommendation. ADB’s reservations were based upon unsatisfactory performance of some of the proposed contractors on ongoing ADB projects. These concerns were well founded. Over the next 4 years the poor progress in the NHC construction works was mainly a result of (i) poor management in most of the contractor teams, (ii) an ad hoc approach to planning, (iii) an inadequate supply of materials, (iv) a lack of equipment, and (v) inadequate materials testing facilities. The situation was exacerbated by the limited financial resources of the contractors combined with the negative effects of unrealistically low bid prices, especially when sizeable portions of the works that were being carried out were on the additional proposed scope of the NHC and not in the original scope. This work could not be billed and paid for until the additional work had been formally authorized by ADB. In turn, ADB was hindered in providing this authorization by the slow progress made by project management unit number 1 (PMU1) in preparing for ADB approval the associated variations to contracts to cover the additional work. 25. Work on the PRC, including the 1999 FRW, progressed smoothly in comparison. First stage construction was started in early 2001. The second stage, together with the 1999 FRW, was completed by April 2003. The ISDP component, in contrast, caused more delay to the completion of the Project as a whole. The ISDP terms of reference were finalized by the executing agency on 20 January 2003 but the contract for technical assistance services by the selected consultant was not signed until September 2004. The excessive gap between these two events is a reflection of the Government’s lengthy processes of cross-authorization. With 12 months of input allocated for completion of the tasks under the ISDP component, the loan period of necessity had to be extended. In the event, the ISDP needed a 3-month extension to complete some key tasks (Appendix 9) up to December 2005. F. Implementation Arrangements

26. Implementation arrangements were as envisaged at appraisal. The borrower was the Government and the executing agency was MOT. Within MOT, PMU1 was responsible for all preconstruction activities, including (i) selection of supervision consultants, (ii) the award of civil works contracts, (iii) land acquisition, and (iv) management of the resettlement plan. PMU1 was also responsible for construction management after civil works began. The PDOTs though their provincial project management units (PPMUs) were the implementing agencies for the PRC in their respective provinces and were responsible to PMU1 for the day-to-day implementation of the PRC. MOT’s vice-minister was assigned overall responsibility for the Project. G. Conditions and Covenants

27. Details of compliance with the covenants under the loan are shown in Appendix 6. The Government complied as far as it could with all loan covenants including (i) engagement of consultants, (ii) the preparation of an action plan for the ISDP component, (iii) the compilation of data on traffic and condition of the improved roads, and (iv) the preparation of road maintenance plans for the improved roads. Preparation of road maintenance plans have been delayed by the inability of the ISDP to bring into operation the full network management system it put in place.

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This was due to some inadequacy in VRA’s existing database for the national road network. The situation is currently being rectified and satisfactory datasets are expected to be available by the end of 2007. H. Related Technical Assistance

28. No related technical assistance was associated with the Project. I. Consultant Recruitment and Procurement

29. ADB approved advanced procurement action for the Project, including for the recruitment of consultants, in May 1997. Nevertheless, consultant supervision of works for the NHC and PRC commenced behind schedule, as did the technical assistance to VRA under the ISDP project. Two teams of consultants were engaged: one to supervise the NHC and PRC and one to execute the ISDP component. All consultants were recruited in accordance with ADB guidelines. In April 1998 it was expected that the supervision consultant would be selected before January 1999. It took considerable time to recruit the consultant and the supervision contract was not signed until January 2000. For the ISDP contract, 20 months elapsed between submission of the terms of reference to the Government for approval and contract signing. Contract details for the consulting services, as well as for civil works, are shown in Appendix 5. J. Performance of Consultants, Contractors, and Suppliers

30. The same consultant supervised works for both the NHC and the PRC. After a rather indifferent early phase through to the end of 2002, the performance of the supervision consultant on the NHC was ultimately satisfactory. Personnel changes were the prime cause of poor communication between all parties up to that time, with the worst occurring in November 2002. In addition to the replacement of two managers in the contractors’ teams, two of the four resident engineers departed the supervising consultant’s team, and the project manager (who had replaced an earlier manager) resigned in December 2002. The situation was considered critical, particularly when heavy rains and constant heavy-vehicle traffic were causing dramatic failure of new pavement work on all contracts, with the failure of an estimated 90,000 m2 of ATB on one of the contracts. 31. The turning point came with the arrival of new supervision management and engineers. At the same time, impetus for improvement also came from the official visit of a mission led by the Minister of Transport to meet with PMU1 staff as well as consultants, contractors, and subcontractors. As a result of this mission, widespread changes were implemented in order to solve major problems (both in resources and financial matters) that had plagued the NHC since the start. Thereafter, the performance of the supervising consultants on the NHC was very satisfactory. 32. The supervision of works on the PRC was uneventful by comparison. The contractors were well supported by the consultants, with the holding of small workshops and additional meetings to gain familiarization with the requirements of contracting under internationally funded projects. In general the ISDP consultants also performed well, particularly in the international procurement of road and bridge equipment. This aspect was time consuming and was a major factor in the need to extend the consultant’s contract. The delay was outside the consultant’s direct control. VRA rates the consultant’s performance as satisfactory.

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33. Bids on the four ICB contracts for the NHC were invited on 28 November 1998 and received on 11 March 1999. The bid prices were very low, particularly on two of the contracts, where the estimates were less than half of those at appraisal. In addition to the low prices, two of the proposed contractors were showing slow progress on ongoing contracts financed by ADB. During the inception mission, ADB shared with PMU1, MOT, and the Ministry of Planning and Investment concern about potential delays and the prospect of poor quality of works. However, MOT explained that it would be difficult to reject the lowest bids, which complied with Government procurement procedures. The implementation schedule had already been delayed by several months, with a prospect of further delay in the event of disagreement between ADB and the Government. ADB concurred and the contracts were awarded on 29 November 1999 in line with the Government’s bid evaluation. 34. In the event, none of the four ICB contracts for the NHC was completed on time. All contractors throughout the construction period faced financial problems, which prevented them from maintaining regular productivity. Communication between the contract managers and the supervision consultant was problematic until the beginning of 2003. The supervision of all contracts was unsatisfactory; laborers were often left unattended, which in some cases resulted in low quality work. Maintenance of the roads during the construction period, particularly during the rainy season, was also unsatisfactory. Mobilizing heavy equipment and labor in time to start construction work immediately after the rainy season was often slow, leading to delays. Contractors did not take adequate measures to protect public safety and maintain normal traffic movement. This was particularly evident in some urban areas where excavation to subgrade level had taken place but had remained incomplete due to a lack of aggregate. This caused not only an inconvenience but also a serious traffic hazard. ADB’s midterm review mission in May 2002 rated the situation overall as unsatisfactory due to (i) financial problems, (ii) unqualified management, (iii) unskilled labor, (iv) poor equipment, (v) high management personnel turnover rate, and (vi) attendant slow progress of works. 35. Deficiencies in environmental mitigation measures were no less concerning. A special project administration mission in June 2001 first drew attention to unsatisfactory environmental protection during construction, a view which was subsequently reinforced by observations during the midterm review. These issues were associated more with bridge works than highway construction; more than 90% of the highway work consisted of improvement of existing roadway without major realignment. Widening of the roadway was carried out on just 31 km and most of this involved embankment construction rather than excavation, which would have had the greater potential for environmental damage. Problems were mainly connected with the substantial expansion of bridge works on NH1 involving reconstruction rather than repair works as originally envisaged. With some 40 new bridges under construction, the widespread blockage and closure of watercourses was evident, brought about by the careless disposal of waste material from excavations of pier and abutment foundations. In response to the findings of the midterm review, PMU1 and the supervision consultant compelled the contractors to relocate disposal to places confirmed as acceptable by local authorities. The issuing of completion certificates was delayed until the clean-up was completed, with the threat of the application for liquidated damages combined with reduced contract payments used as incentive to get the work completed. The handover of discarded bridge components (such as girders and handrails) for disposal to road repair and management companies (RRMCs) under regional road maintenance unit number 5 (RRMU5) was henceforth also strictly enforced. 36. By the end of the first quarter of 2003 the outlook had improved due to (i) reorganisation within one of the joint venture companies at a critical point, (ii) the mobilisation of subsidiary companies, (iii) an infusion of additional financial resources in all NHC contracts, and (iv)

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additional construction equipment on site. Importantly, the major change in personnel of the supervision consultant firm resulted in a superior team approach that brought about a totally different picture than had been evident just a few months previously. Among other improvements, the environmental damage caused by earlier carelessness had been remedied and monitoring measures were implemented by management to ensure that there would be no further occurrences. This positive situation persisted throughout the remainder of the NHC construction period. Despite delays in civil works, which resulted from large-scale rejection of unsatisfactory early works, the project completion review mission (PCRM) inspection found that the final quality of construction by all contractors was good. 37. For the PRC, the contractors completed most of the 112 projects on schedule. A few delays were experienced because official approval to proceed was given just prior to the onset of the rainy season. Nearly all the contractors were unfamiliar with working on internationally funded projects and with the requirements and procedures for submitting the appropriate documentation, specifically interim payment certificates. The problem was resolved satisfactorily by basing the certificates on estimations of work completed rather than on measured quantities. The PRC served as a valuable learning process for local contractors and will benefit future similar projects. A number of roads under the component were visited by the PCRM and the quality of the roads was found to be generally satisfactory. K. Performance of the Borrower and the Executing Agency

38. The performance of the borrower, represented by the State Bank of Viet Nam and MOT through PMU1, was generally satisfactory. PMU1 had previously gained useful experience in implementing the first and second road improvement projects, which helped it manage the implementation of this project. This was in spite of a number of problem areas such as design changes. The detailed design had become outdated in the 4 years that elapsed between original design and substantive implementation. The unusually heavy rains during the rainy seasons of 1999 and 2000 had caused serious damage; the pavement structure on NH1 had been seriously weakened and a redesign was necessary. Over 30 bridges originally scheduled for rehabilitation now required reconstruction. PMU1 also managed well the major addition to the NHC of three new bypasses and additional widening in urban areas. There was, however, scope for MOT and PMU1 to have been quicker in the preparation of variation orders for these major additions and modifications had the internal procedures for approvals of variation orders been less cumbersome. This had a negative impact on payments to contractors for work actually already done, with consequences for their cash flow and motivation to progress with the works. 39. PMU1’s performance in implementing the ISDP component was satisfactory. VRA, as the end-user, should have had a stronger role in coordinating concurrent projects financed by different donors, managed by different PPMUs and implemented by different consultant teams and contractors. It would also have been beneficial if the ISDP component had been under the guidance of a project steering committee, which would have promoted the ISDP work by further facilitating cooperation between the ISDP team, PMU1 and VRA management. L. Performance of the Asian Development Bank

40. Project formulation was relatively quick, taking about 8 months from fact-finding to loan approval in December 1998. Following the inception mission in September 1999, ADB carried out 15 review missions, including a midterm review, between September 2000 and June 2006. These reviews concentrated on both the NHC and PRC. However, attention was focused on the

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NHC and its attendant problems, particularly those needing resolution during the period up to early 2003. The staff membership of the missions was stable; indeed the continuity of project appreciation and approach to issues subsequent to the handover of administration of the Project to VRA was exemplary. At the earlier stages of the Project, particularly at inception, there was scope for ADB to be more assertive in pressing its concerns on the unsuitability of some contractors recommended by the Government for the NHC. This could have completely changed the NHC for the better. By avoiding contractor firms known to have an indifferent performance record on other ADB projects, many of the subsequent problems in quality assurance and project scheduling would probably have been greatly reduced. The additional early delay that might have resulted from resolution of differences between ADB and the Government over contractor selection would probably have been significantly shorter than the actual setbacks that were subsequently experienced. PMU1 considered ADB’s overall performance satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

41. The relevance of the Project is rated “high”. The Project was consistent with the Government’s development objectives and ADB’s strategy in the road subsector in Viet Nam, which aims to (i) address development constraints imposed by the poor condition of roads; and (ii) concentrate on rehabilitation, improvement, and periodic maintenance of the country’s basic road infrastructure in order to achieve better integration of the economy, reduce transport costs, and stimulate production in rural areas, thereby increasing the earnings of low-income groups. 42. The Project improved a crucial section of the most important highway in Viet Nam to a premium standard, improving transport efficiency conducive to economic growth. By improving access roads in the hinterland to all-weather standard, the PRC has brought an extended area of the south central region into the economic mainstream, reduced transport costs, and may have stimulated production and increased earnings for low-income groups. Through the ISDP these project components were complemented by assistance in strengthening the agency and subagencies charged with managing Viet Nam’s national road network. B. Effectiveness in Achieving Outcome

43. The rehabilitation of NH1 from Quang Ngai to Nha Trang has fully achieved its purpose. Rehabilitation and new construction have reduced the roughness of the road to an international roughness index (IRI) level of about 3, and decreased the travel time for the 400 km journey from 14 hours to 6.5 hours. As a result, road users save 15% to 40% on transport costs, depending on the vehicle type and road section. Paved shoulders 2.5 m wide have helped to free the faster lanes of slower-moving vehicles, such as tractors and motorcycles. These measures, and the four bypasses, have improved traffic safety. Quantifying the impact on traffic safety has not been possible because of insufficient accident statistics. The Japan Bank for International Cooperation (JBIC) informed ADB that it considered the OECF-financed bridge component firmly successful and was satisfied with its cooperation with the ADB-financed component. 44. Improving the PRC roads has primarily assured year-round access, reduced travel time and lowered road-user cost by reducing road roughness (from about IRI 12 to between IRI 3 and 5, depending on the surface type of the improved roadway). Prior to the Project, roads were

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often almost impassable even in the dry season. The improved asphalt concrete sections, in particular, are in very good condition with surface smoothness equal to that on the Project’s NH1 section. Additional traffic has been generated since the PRC roadworks were completed. Annual increases as high as 50% have been noted over the last 3–4 years on some roads. Improvement of the PRC roads gives an EIRR in excess of 20%. The EIRRs on individual roads vary from very high, where relatively heavy traffic flows are now using those roads that were in a particularly bad state of repair before the Project, to less than the 12% threshold value. There are, however, additional project benefits that are not explicitly quantified in the EIRR computations. On site visits, it was made clear during interviews with users and residents that much had been gained since the improvements. Small businesses consistently report increase in turnover of 30% to 50% due to increased demand by customers. Farmers are also getting better prices by taking their own produce to market, often on their newly acquired motorcycles, rather than relying, as previously, on visits by the sole dealer in the area. Dust nuisance has been largely removed, and the local perception is that residents were better attired. Above all, the ability to use the road all year round, rather than the improved quality of its surface, is perceived as the primary benefit. 45. One concern is that the PRC roads completed by the Project were constructed for light traffic, but many actually have significant traffic loads. At project appraisal it was foreseen that the roads selected under the PRC would generally be lightly trafficked and could be adequately improved with low-cost spot improvement. The budget allocation to the PRC was correspondingly low, being equivalent to $20,000 per km. In the event, traffic on most of the selected roads has been heavier than expected, resulting in inadequate design which was determined by budget limitations rather than actual traffic requirements. A selection procedure better aligned with more appropriate assumptions underlying the PRC should have been employed. Alternatively, funds should have been found to enable better correspondence between traffic requirements and the standard of improvement implemented. Roads that feed NH1 (particularly those provincial roads that connect directly with NH1) generally carry similar traffic to that observed on the highway. On several occasions heavy trucks, including articulated vehicles, were observed on PRC roads.11 46. Despite the planning deficiencies, civil works on PRC roads are generally of high quality. The extent of rehabilitation is impressive given the limited funds available. Some pavement damage can be observed, but it is isolated. Often, in instances where it might be expected, the risk of damage by heavy trucks has been countered by the provincial authorities. Many of the project roads have already been further improved with DBST sealing completed on sections left unsealed at the end of the Project. The 1999 FRW have been completed to high standard; the restored roads have stood up well to several rainy seasons with no undue failure. Some roads have been completed with asphalt concrete pavement interspersed with Portland cement concrete pavement (PCCP) at particularly vulnerable locations. In some cases this treatment has gone beyond restoration and extended to improvement and rehabilitation of the complete road. 47. The ISDP met most of its primary objectives. Tangible and valuable results of this component are (i) a progressive and uniform RIMS comprising modules for strategy analysis of the national road network to meet long-term planning needs, a comprehensive pavement

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The situation is recognized in the ongoing Central Region Transport Networks Project (2005) and the roads are being designed accordingly (Appendix 7). All of the Third Road Improvement Project provinces are included in the new project, and several of the Third Road Improvement Project roads have been proposed for further upgrading in this project.

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management system for short- and medium-term maintenance programming, and enhancement to the existing Viet Nam bridge management system; and (ii) procurement and distribution throughout VRA, its subagencies, and 48 PDOTs of a range of computer equipment and software needed for the implementation of the planning and management system that has been put in place. 48. The ISDP was not in a position to complete, as envisaged, an assessment of the maintenance needs of the national road network to determine overall maintenance funding requirements under specific maintenance strategies. The premise upon which this element of the ISDP’s terms of reference was based proved to be insufficient; the existing VRA database of the national road network was inadequate. Certain features of the available data were not consistent with the needs of the information management system set up by the ISDP and the data could not be used. This is currently being corrected and VRA expects ongoing data collection and processing into its database to be complete by August 2007, at which time it will be possible to get the full benefit from the ISDP’s efforts. C. Efficiency in Achieving Outcome and Outputs

49. For the reevaluation the economic viability has been assessed by computing all incremental benefits and costs resulting from project implementation. The EIRR recalculated for the NHC as a whole is 21.2%, which compares favorably with the economic opportunity cost of capital of 12%. At appraisal the calculated EIRR was slightly greater at 23.9%. During benefit monitoring and evaluation (BME) for the Project carried out in 2004 the estimate made was 22.3%.12 Statistically, these three estimates are not considered to be significantly different from one another. The reevaluation of the four NHC contract sections shows all to be economically viable with EIRRs in the range of 16.6% to 26.5%. 50. In addition to the reevaluation of the NHC, an economic analysis has been carried out by the mission on a representative sample of 27 roads included within the PRC. The EIRRs for 90% of the sample range between 3% and 35%. The resulting EIRR for the PRC as a whole is estimated at 20.3%. It has not been possible to compare the PRC results with the corresponding results at appraisal, since economic evaluation of the PRC was not completed prior to implementation. However, a benefit and cost analysis was included for the PRC during the Project’s BME in 2004. The reevaluation is based on the same approach. The BME work calculated the EIRR for the PRC at a lesser value of 18.3%. The primary reasons for the difference between the reevaluation and the BME result are (i) an increase in the forecast rate of growth in traffic demand resulting from updated knowledge on traffic-flow patterns on provincial roads over the last 3 years, (ii) recognition of a component of generated traffic13 in the assessed trends in traffic development, and (iii) changes in base-year traffic flows arising from a closer investigation and more detailed assessment of traffic-flow data collected at the provincial level. Appendix 8 shows the recalculated EIRRs as well as the supporting assumptions. 51. Given the considerable implementation delays and the lack of coordinated action to avoid them, and notwithstanding an acceptable economic performance, the efficiency of the Project in achieving outcome and outputs is ranked less than the Project’s performances in the other main areas of relevance and effectiveness.

12

Wilbur Smith Associates in association with Pacific Consultants International. 2005. ADB 3 Project Final Report, Benefit Monitoring and Evaluation. Hanoi. Wilbur Smith Associates in association with Pacific Consultants International

13 This is the additional traffic resulting from journeys made only after the road project has been implemented.

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D. Preliminary Assessment of Sustainability

52. NH1 is in good condition and no major maintenance has been required. Minor routine maintenance, mainly concerning occasional pothole patching, has been diligently carried out. Routine maintenance has not been carried out on a few PRC roads but attention is evident and is adequate on most. Usually it is the unpaved gravel sections that are not attended to. In those project provinces where road maintenance is particularly underfunded, routine maintenance activities tend to be prioritized on traffic usage and the seasons. As a general rule, existing and potential traffic demand is less on the unpaved subsections. Given the elapsed time since project improvements were completed, some periodic maintenance activity in the form of regraveling should be evident. Periodic maintenance appears to be prioritized in a similar manner to routine maintenance. All the gravel subsections traveled on by the mission suffered from excessive gravel loss. Nevertheless they were still relatively easily passable and retained the overarching benefit to the users of allowing year-round travel. During roadside interviews no complaints specific to gravel surfaces were made. Periodic maintenance works on sealed surfaces and overlays on the NH1 and resealing on the PRC are not yet due and thus the mission could not make an assessment. Generally speaking the prospect of fulfilling the needs of forthcoming periodic maintenance was viewed with some trepidation in the project provinces. Without sufficient funds to cover routine maintenance, the financing of periodic maintenance was viewed as a future challenge. 53. VRA estimates that allocations for maintenance of the national road network currently meet only 50% to 60% of requirements. Three PDOTs in the project area attested that allocations were as low as 30% to 40% of requirements and two PDOTs reported that the funds received covered 50% to 60%. One PDOT affirmed that funds available recently had been sufficient to cover needs. District roads generally obtain smaller allocations than provincial roads. During the next 5 years, significantly heavier expenditure demands on project road maintenance can be expected as periodic activities progressively need to be implemented. There does not appear to be a plan in place that will meet this increased need. However, the recent redefinition of VRA’s role and responsibility may provide resolution for national roads. At ministerial level, MOT has in the past been responsible for the development of the capital construction plan and VRA has been responsible for the planning of road maintenance. In March 2007 there was devolution of responsibility and accountability for planning programming and budgeting of capital works from MOT down to VRA. MOT’s only role in future will be to review sector plans and budgets for consistency with general transport policy and for national transport budget allocations.. The formulation of plans and budgets not only for network maintenance but also for development planning and budgeting will henceforth be centralized in VRA. The unification in the planning of capital projects and multiyear maintenance programming is a positive indication that the challenge of the next few years will be met with a better balance between national network development through new projects and the upkeep of existing assets. This significant rationalization should serve to strengthen the Government’s ability to meet its commitment to adequate network maintenance. 54. The ISDP achieved major targets and the system of procedures and management it developed for implementation at VRA will serve VRA well in its expanded portfolio of responsibility. The devolution of network capital planning to VRA was one of the main tenets of the ISDP’s proposals arising from its review of institutional issues. Thus the ISDP’s work will be sustained not only in the technical features of VRA’s planning procedures and network management in the future, but also as a formative influence in the wider view of the enhanced role of VRA as an instrument of the Government.

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55. Pressure is on VRA to develop an assessment of the maintenance needs of the road network and determine routine and periodic maintenance funding requirements under specific maintenance strategies. Without this, the creation of a budgetary process for allocation of funds to road maintenance cannot be firmly grounded. Nor is it possible for a Government policy that will balance capital works and the preservation of the existing network to be properly formulated. The wider responsibilities vested in VRA recently have been accompanied by the effects of some institutional dislocation within MOT, and this situation may take time to resolve. In the short term VRA cannot be expected to have the budgetary planning programs put in place by the ISDP fully operational. Rationalized plans for the sourcing of maintenance funds will take time to emerge, but in the short term (well within the next 5 years) periodic maintenance will be due on the project roads. The funds made available to VRA and the PDOTs over the last several years have hardly been sufficient to cover 50% of routine maintenance requirements. Overall sustainability of the project roads is assessed “less likely”, due to the prospect of continued low budget allocations for the preservation of the national and provincial road networks. E. Impacts

56. At appraisal, the initial environmental examination report concluded that no substantial adverse environmental impacts would arise from the Project. Therefore, a full environmental impact assessment was not required. During implementation there were short-term environmental issues concerning NHC contractors’ disregard for standards in respect of waste disposal and dust control. More seriously, NHC contractors could have taken more care in respect of the safety of the traveling public. Obstructions, lane closures, and inadequate signage were of concern to NH1 users, particularly during the rainy season. 57. A comprehensive resettlement action plan was prepared during PPTA. PMU1 arranged for land to be acquired and for affected households to be resettled according to Government procedures and ADB's Involuntary Resettlement Policy (1995). A finalized action plan was in place prior to commencement of civil works. The implementation of the resettlement action plan was independently monitored. The actual impact of resettlement was of the same order as estimated at appraisal.14 No unanticipated indigenous peoples’ issues were encountered during project implementation. Overall, the environmental and social measures implemented under the NHC were satisfactory.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Assessment

58. Overall the Project is considered “successful”, based on a review of its relevance, effectiveness, efficiency, and sustainability. The objectives of the NHC have been fully achieved. NH1 from Quang Ngai to Nha Trang has been improved and the quality of civil works is good. Travel time has been reduced from 14 hours to 6.5 hours, resulting in cheaper, more efficient transport. Bypasses have reduced the volume of heavy vehicles passing through towns, with attendant environmental and economic benefits. Paved shoulders for slow-moving traffic have improved road safety. Four-lane sections will ease future potential congestion in busy areas. The NHC, as finished, is a significantly enhanced version of what was envisaged at

14

Appendix 11.

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appraisal. Three of the four bypasses were not in the original concept, the existing road is wider over a longer distance than the original design allowed for, and more than 30 bridges have been reconstructed to modern standards when originally they were scheduled for repair and widening. All of these later additions to the overall design have been accomplished within the original project cost estimate. The economic reevaluation of the NHC produced an EIRR that is not significantly different from that calculated at appraisal and at the BME stage.

59. The PRC was implemented to develop the south central regional economy by providing better access to the mainstream national economy as well as to local markets, and by offering income-generating opportunities and ready access to social services whenever required. The long-term sustainability of some rural roads may be in jeopardy because they have not been designed to support the heavy traffic using them. However, the ongoing Central Region Transport Networks Project (2005) in the region will serve to minimize this risk by implementing a superior technical design. The quality of civil works in the PRC was generally good. There is a wide range of estimated EIRR values for PRC roads but taken together the road improvements were economically viable. The ISDP component met important objectives, has simulated institutional development, and engendered the upgrading of professional skills within VRA and its subagencies. 60. Resettlement and compensation to affected persons was satisfactory. There have been no major adverse environmental impacts. Details of the project’s rating are shown in Appendix 12. B. Lessons

61. The prequalification of firms that did not have the capacity to undertake civil works in a timely manner resulted not only in delays but also necessitated the extension of the input of the construction supervision consultants. The prequalification process needs to be more rigorous to avoid delays in implementation of civil works contracts resulting from the incorrect choice of contractors. Any form of qualification process is bound to falter if the lowest price bid is unconditionally given preeminence over all others. At worst, the application of International Federation of Consulting Engineers conditions of contract for international construction can become impossible when practiced with insufficiently experienced contractor management and labor. The Project was close to the limit and its professional engineering supervisory capacity was inevitably, and understandably, severely challenged in completing the NHC satisfactorily. Flexibility in technical supervision as a pragmatic response is essential when dealing with inexperience. The supervising consultant commendably responded by using the right approach with the small PRC contractors by, for example, basing their payment on estimation rather than on the more involved criterion of measurement. 62. At project appraisal it was foreseen that the roads selected under the PRC would be lightly trafficked and could be adequately improved with low-cost spot improvement. Although the majority of provincial roads are in fact constructed for light traffic, they have significant traffic loads, including heavy vehicles. With the PRC expenditure target of $20,000 per km for improvement, an important portion of the PRC roads remained under-designed after completion. The selection procedure should either have ensured selection of roads with low traffic volumes, or abandoned the expenditure limit and treated fewer roads to a higher standard. There should have been as much interaction between ADB and the Government to respond to an obvious mismatch between intent and requirement on the PRC as there was in formulating and implementing the large-scale physical modifications to the NHC. The concept and design of the

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PRC was essentially a repeat of the rural road component of Road Improvement Project (1996) and bore the same weaknesses. The lessons of Road Improvement Project (1996) were too late to influence the Third Road Improvement Project (1998). However, ADB’s ongoing Road Improvement Project (2001) and Central Region Transport Network Project (2005) are benefiting. 63. Savings were realized during the course of the NHC implementation because local contractors primarily carried out construction rather than international regional contractors as was envisaged at appraisal. The savings enabled realization of additional NHC components which have significantly improved the project and contributed to its long-term sustainability. Flexibility during project implementation is important to ensure that opportunities for further improvement can be taken. However, some restraint should be exercised regarding any expansion of physical works on the scale eventually accomplished during implementation of the NHC. The end result was far removed from that which had been evaluated at appraisal. Justification for the modification and expansion of the NHC was not as fully developed as would have been the case if these were included at appraisal. The economic feasibility of the major changes, such as the additional bypasses and extra widening in urban areas, could have been more fully investigated in terms of costs and benefits. A phasing of these additions would then have been assessed and some elements might have been shown to benefit from a degree of postponement. 64. The situation also placed heavy demands on project management, which lacked the capacity to rapidly process major variation orders to contracts so that the contractors could get promptly paid for work completed on the additions. This was particularly important given that the financial resources of the contracting firms were extremely limited. Confusion and consternation among all involved parties would have been avoided by explicitly maintaining the delineation between work that had been approved by ADB and work that had not. In the PRC there was a parallel, but more minor, situation. Work under the 1999 FRW expanded beyond road restoration to rehabilitation and improvement of roadway well outside the vulnerable stretches. This was not recognized as a variation, nor was it formally justified to the extent that it should have been. 65. The ISDP successfully served VRA well by putting in place a system of procedures and management for national network management. However, the ISDP suffered significantly from being driven by technology. Development of the RIMS and supporting organizational structures for its implementation were made the core issues, but these systems could not be made operational due to the lack of suitable input data. This could have been readily recognized during the ISDP formulation stage. The target should have been as much one of data acquisition as of data processing and reporting. Future similar projects should be designed around a more practical and knowledgeable appraisal of inputs available and outputs achievable and less focused on the technology to be placed between the two. Also, the formulation of ISDP-type components of road development projects should be carried out much closer to the start of implementation of the main components than was the case in this Project. Finally, the formulation should have had a significant staff training budget. There were no training resources assigned; training costs had to be sourced from the component covering ISDP data collection. This is not good practice, particularly where the implementation of new technology is involved.

18

C. Recommendations

66. The prequalification process needs to be more rigorous to avoid delays and poor performance caused by the incorrect choice of contractors. It is recommended that ADB should be more assertive when there is potential conflict in bid evaluation results between the Government and ADB. It is considered preferable to experience delay in the procurement process rather than to generate more severe situations of delay and contention during implementation. 67. As late as November 2001 ADB and PMU1 were jointly considering the termination of one of the civil works contracts on the basis of unacceptable performance. However, the decision was made not to proceed because of the possibility of additional delay. Although provisional notice of termination was issued in one instance, the problem of poor contractor performance was never formally addressed by project management. It is recommended that in future projects, if and when the same problems arise, more use should be made of the contract conditions to penalize contractors for their failure to fully comply with their obligations. This is especially relevant to the suspension of contractors and to strict enforcement in the application of liquidated damages for failure to complete the works on time. 68. The maintenance of roads is critical to the long-term success of the Project. The Government’s future annual submission of maintenance planning, strategy, and budget allocations need to ensure that the project roads are adequately maintained. These programs will be sourced mainly by VRA when the RIMS becomes fully operational. It is recommended that ADB regularly monitors the progress made in bringing the operation of the ISDP’s product to fruition, and be prepared to sponsor further technical assistance in support if necessary. 69. The problem with the PRC was that at appraisal spot improvements were envisaged to what were seen as essentially rural roads, when at implementation much of the works consisted of substantial improvements of provincial roads providing more major connections between centers of population and with NH1. It is recommended that improvement works on provincial roads should be dealt with separately under appropriately targeted projects.15 This is preferable to an approach that deals with this important aspect as a component of a national road project. The treatment of the PRC could have been more definitive and substantial at appraisal. The demand and service picture varies widely among PRC roads and the blanket treatment originally envisaged was not appropriate. The same design philosophy cannot be applied unmodified to a provincial road adjoining or close to NH1 and carrying heavy vehicles as to a more remote gravel road. 70. For future projects similar to the ISDP component it is recommended that the total management process, including a practical approach to the resolution of problems concerning the availability and accessibility of input data, should be designed into the initial formulation. It is also recommended that a staff training budget be explicitly included and that project components such as the ISDP should be implemented closer to the start of the project.

15

The ongoing Road Improvement Project (2001) and Central Region Transport Networks Project (2005) have been designed as provincial roads improvement projects in their own right.

PROJECT FRAMEWORK

Design Summary Appraisal Performance

Indicators/Targets Project Achievements

Key Issues and Recommendations

A. Goal National economic integration Increased socioeconomic opportunities in the project region Enhanced institutional management

Increased economic growth particularly in the central region Efficient and effective road subsector development, operations, and system maintenance

The capital Hanoi and the major cities of Vinh, Hue, Da Nang, Quy Nhon, Nha Trang, and Ho Chi Minh City are now linked by a good standard road. The project section on NH1 was the final link. The economic and social conditions of the rural population in the project area have been improved by the creation of year-round connections on provincial roads, bringing them into the economic mainstream A uniform road information management system has been established within VRA

The 400 km of Viet Nam’s backbone connection improved by the Project is an enhanced facility compared with design at appraisal. It includes additional bypasses and a wider road over longer distances. The Government is committed to developing VRA, as evidenced by the recent devolution from the MOT of additional responsibilities for capital investment planning on the road network.

B. Objectives Improved road transport Reduced travel time and costs Development of VRA into a modern road administration

Improved road condition Higher vehicle operating speeds Change in vehicle mix to larger, more efficient commercial vehicles Organization, budget, and staffing including adequate staff skills

The original pavement of the project section of NH1 was over 30 years old and in an indifferent condition. More than one third was considered in very poor condition for a major highway. The project section is now a good quality road. Travel times have been reduced from 14 hours to 6.5 hours and vehicle operating costs reduced by 15% to 40% depending on vehicle class. Software, equipment, and training have been provided to VRA through the ISDP component of the Project.

The flows of heavy truck traffic have increased at a rate considerably in excess of that of other vehicle classes. There is evidence of overloading, which will have a deleterious effect on the quality of the road in the medium term if left unchecked. VRA needs to take earnest action to restrain offending vehicle owners. VRA needs to complete a satisfactory dataset of network descriptors before the full benefits of ISDP are achieved.

C. Outputs Improvement of about 400 km of NH1 between Quang Ngai and Nha Trang

Improvement of road surface and provision of 2 m wide shoulders for breakdowns and slow-moving vehicles.

On completion, the minimum standard was 7 m carriageway with 2 m shoulders. There were four sections of four-lane standard road in urban areas, and four bypasses on new alignments around urban areas.

The 1999 flood rehabilitation works were accommodated in the ongoing provincial roads component of the Project and financed with loan savings. The

Ap

pe

ndix

1 4

Design Summary Appraisal Performance

Indicators/Targets Project Achievements

Key Issues and Recommendations

Improvement of about 1,000 km of provincial roads in five provinces Integration of HDM4, ‘RoSy’ road management software and ‘Bridgeman’ bridge management software already in use in VRA into a comprehensive unified road information management system

Improvement of access liability for the population within the influence area of the road. Improved VRA capability to carry out its responsibilities All works completed by mid-2002

1,037 km of provincial and district roads were improved to all-year standard. This included restoration of 107 km of roadway and 297 m of bridges damaged during the 1999 floods. The Project put in place at VRA and its subagencies (i) a system comprising modules for strategy analysis to meet long-term planning needs, (ii) a comprehensive pavement management system for short- and medium-term maintenance programming, and (iii) enhancement to the existing Viet Nam bridge management system

restoration works have shown themselves to be satisfactory during subsequent rainy seasons. The roads were also improved to the standard applied to the original roads within the component. Achievement of the full benefits of the Project’s output for VRA await the completion of ongoing data collection across the network. This data is necessary to complete the implementation of the road information management system

D: Inputs Four civil works contracts for the national highway component awarded following international competitive bidding procedures Appropriate number of civil works contracts awarded following local competitive bidding for the provincial roads component. OECF financing for major bridge construction on NH1

Civil works contracts to be signed by April 1999. Civil works to commence by April 1999 and be completed by May 2002 Consulting services contract to be negotiated and signed by 15 March 1999 Government budget to provide adequate counterpart funding

Civil works contracts signed on 29 November 1999 Consulting services contract signed on 11 January 2000 112 contracts for provincial and district roads signed between April 2001 and June 2002 Consultant contract for VRA advisory services signed on 15 September 2004.

The prequalification process needs to be more rigorous to avoid delays and poor performance during project implementation of civil works contracts by the incorrect choice of contractors. VRA advisory services were late commencing. Project work finished on 31 December 2005.

HDM4 = highway development and management tool version 4, ISDP = implementation of sector development policy, MOT = Ministry of Transport,

NH1 = national highway 1, OECF = Overseas Economic Cooperation Fund, VRA = Viet Nam Road Administration.

20

A

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1

Appendix 2 21

CHRONOLOGY OF MAIN EVENTS

Year Date Event 1996 29 August ADB approved PPTA 23 December PPTA contract signed

1997 1 March Commencement of PPTA 21 May ADB approved advance procurement action for civil works

and consultant services

1998 16 March–04 April Fact-Finding Mission 11 June PMU1 forwarded to ADB a preliminary copy of the

prequalification evaluation report. 21 July ADB approved invitation documents, proposed evaluation

criteria, draft contract, and shortlist for consulting services. 27 July−15 August Appraisal Mission. 27 July ADB received prequalification evaluation results of civil works

contractors. 11 September Staff Review Committee meeting 3−6 November Loan negotiations 28 November Government invited bids for four ICB civil works contracts of

the NHC 10 December Loan approved

1999 11 March Bids received by Government for four ICB civil works

contracts of the NHC 13 April Loan Agreement signed 01 September ADB received evaluation report for civil works contracts 07−14 September Inception mission fielded 20 September Loan effectiveness 28 October ADB approved award of four civil works contracts of the NHC 29 November Four main civil works contracts of the NHC were signed December ADB approved additional bypasses for inclusion in the NHC

2000 11 January Supervision contract was signed 21 February

September 20 December

“Notice to Commencement” was issued to contractors of four main civil works contracts $9.1 million was reallocated for inclusion of the 1999 FRW $8 million was cancelled for redeployment of the 2000 FRW under Segment 2 of the loan.

2001 22 February Loan transferred from ADB Head Quarter to Vietnam Resident Mission’s administration

27 March PMU1 sent the Bid Evaluation Report to ADB on packages of provincial roads in Quang Ngai, Binh Dinh, Gia Lai, Khanh Hoa, and Phu Yen provinces under stage 1 of the PRC.

30 March ADB approved contracts awards for packages in Binh Dinh, Gia Lai, and Quang Ngai provinces.

1 April ADB approved contracts awards for packages in Khanh Hoa and Phu Yen provinces.

6 April Bid Opening for civil works contracts under stage 2 of the PRC for Binh Dinh, Gia Lai, and Quang Ngai provinces.

17 April Contracts under stage 1 of the PRC were signed. 21 June ADB approved PMU1’s request for increase of imprest

account ceiling up to $5 million 24 August Civil works contracts under flood protection roads for Binh

Dinh, Khanh Hoa, Phu Yen, Quang Nam, and Quang Ngai

22 Appendix 2

Year Date Event provinces were signed

2002 30 January Completion of civil works contracts under stage 1 of the PRC 20 May Bid Opening for civil works contracts under stage 2 of the

PRC for Khanh Hoa and Phu Yen provinces 30 May Completion of civil work contracts under flood protection

roads 17 June Civil works contracts under stage 2 of Khanh Hoa and Phu

Yen provinces were signed 30 June Civil works contracts under stage 2 of Binh Dinh and Quang

Ngai provinces were signed 15 July Civil works contracts under stage 2 of Gia Lai province were

signed

2003 3 April PMU1 requested for extension of loan closing date from 31 December 2003 to 30 June 2005

16 April PMU1 submitted draft terms of reference for implementation of ISDP to ADB

30 April Completion of last PRC civil works contract 5 September ADB approved the first request for loan closing date

extension from 31 December 2003 to 30 June 2005 31 December

Completion of four civil works contracts under the NHC

2004 8 September 15 September 5 October

ADB approved international consulting services contract for ISDP component. The international consulting services contract for the ISDP was signed Consultants under the ISDP contract were mobilized.

2005 10 June State Bank of Vietnam sent the request for loan extension to 31 December 2005

21 June 30 June

ADB approved the second request for loan extension to 31 December 2005. Completion of supervision contract.

27 September Addendum No.1 to the international consulting services contract for the ISDP was signed extending period to 31 December 2005

31 December Completion of the ISDP contract

2006 27 April Actual loan closing with cancellation of loan savings of $7.29 million.

ADB = Asian Development Bank, FRW = flood rehabilitation works, ICB = international competitive bidding, ISDP = implementation of sector development policy, NHC = national highway component, PMU1 = project management unit number 1, PPTA = project preparatory technical assistance, PRC = provincial roads component, VRA = Viet Nam Road Administration.

Appendix 3 23

PROJECTED AND ACTUAL DISBURSEMENTS ($ million)

Table A3.1 Projected and Actual Disbursements 1999–2006

Year Projected Actual

1999 13.00 5.41

2000 31.20 5.95

2001 40.30 14.89

2002 33.80 24.72

2003 11.70 28.37

2004 25.05

2005 7.35

2006 (0.39)

Total 130.00 111.35 Source: Asian Development Bank Loans Financial Information System.

Disbursement Details

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

1999 2000 2001 2002 2003 2004 2005 2006

Year

$ M

illi

on

Projected Actual

4 A

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4

IMPLEMENTATION SCHEDULE

Project Component 1998 1999 2000 2001 2002 2003 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Highway Improvement (NHC)

Consulting Services

Selection

Supervision

Civil Works

Prequalification

Bidding, Approval, Award

Construction

Provincial Roads (PRC)

Consulting Services

Selection

Supervision

Civil Works

Stage 1

PBA&A

Construction

Stage 2

PBA&A

Construction

1999 FRW

PBA&A

Construction

ISDP

PBA&A

Implementation

Sources: RRP, PMU1. PBA&A = prequalification, bidding, approval and award.

Appraisal

Actual

Appendix 5 25

CONTRACT DETAILS

Table A5.1: Supervision Consultant Contract Details

Item Contract 1 Contract 2 Contract 3 Contract 4

Contractor Wilbur Smith Associates in association with Pacific Consultants International

Original Contract Amount ($) 9,120,139

Final Contract Amount ($) 10,368,438

Dates

Shortlist Approved by ADB Jun 21, 1998

Jun 21, 1998 Jun 21, 1998 Jun 21, 1998

Invitation to Proposal Jul 23, 1998 Jul 23, 1998 Jul 23, 1998 Jul 23, 1998

Proposal Received Oct 10, 1998

Oct 10, 1998 Oct 10, 1998 Oct 10, 1998

Evaluation Report to ADB Mar 25,

1999 Mar 25, 1999 Mar 25, 1999 Mar 25, 1999

Date Approved by ADB Sep 03,

1999 Sep 03, 1999 Sep 03, 1999 Sep 03, 1999

Contract Signed Jan 11, 2000

Jan 11, 2000 Jan 11, 2000 Jan 11, 2000

Original Completion Date Apr 30, 2003

Apr 30, 2003 Apr 30, 2003 Apr 30, 2003

Actual Completion Date Jun 30, 2005

Jun 30, 2005 Jun 30, 2005 Jun 30, 2005

Source: Project management unit number 1

Table A5.2: Civil Works. National Highway Component

Item Contract 1 Contract 2 Contract 3 Contract 4

Section Km 1045 to

km 1125 Km 1125 to

km 1243 Km 1243 to

km 1366 Km 1366 to

km 1445 Length (km) 80 118 123 79

Contractor Kukdong with

CIENCO5 CIENCO5 with

Thanh An Kukdong with

CIENCO5 CIENCO6 with

CIENCO5 Dates

Prequalification May 11, 1998 May 11, 1998 May 11, 1998 May 11, 1998

Invitation to Bid Nov 23, 1998 Nov 23, 1998 Nov 23, 1998 Nov 23, 1998

Bid Opening Mar 11, 1999 Mar 11, 1999 Mar 11, 1999 Mar 11, 1999

ADB Approval Nov 05, 1999 Nov 05, 1999 Nov 05, 1999 Nov 05, 1999

Contract Signing Nov 29, 1999 Nov 29, 1999 Nov 29, 1999 Nov 29, 1999

Commencement Feb 21, 2000 Feb 21, 2000 Feb 21, 2000 Feb 21, 2000

Original Completion Feb 19, 2003 Feb 19, 2003 Feb 19, 2003 Feb 19, 2003

Actual Completion Dec 31, 2003 Dec 31, 2003 Dec 31, 2003 Dec 31, 2003

Original Contract Value (D million)

210,813 201,996 252,740 171,206

Final Contract Amount (D million)

251,164 332,430 365,351 246,107

Source: Project management unit number 1

26 Appendix 5

Table A5.3: Civil Works. Provincial Roads Component Province

Item Quang Ngai

Binh Dinh

Phu Yen Khanh Hoa Gia Lai Quang Nam

Number of roads 18 13 8 18 5 5 Total length (km) 214 234 212 157 166 54 Initial contract value (D million)

78,158 80,179 85,468 52,842 54,249 41,306

Final contract amount (D million)

76,774 78,627 85,002 52,156 53,737 41,009

Stage 1

No. of contractors 5 11 8 8 7

Invitation to Tender Dec 28 2000

Dec 28 2000

Jan 19 2001

Jan 03 2001

Jan 07 2001

Bid Opening Feb 03 2001

Feb 03 2001

Feb 19 2001

Feb 12 2001

Feb 09 2001

ADB Approval Apr 06 2001

Apr 06 2001

Apr 10 2001

Apr 10 2001

Apr 06 2001

Contract Signing Apr 17 2001

Apr 17 2001

Apr 17 2001

Apr 17 2001

Apr 17 2001

Commencement Apr 28 2001

Apr 28 2001

Apr 30 2001

Apr 30 2001

Apr 28 2001

Original Completion Jan 28 2002

Jan 28 2002

Jan 30 2002

Jan 30 2002

Jan 28 2002

Actual Completion Jan 30 2002

Jan 20 2002

Feb 04 2002

Jan 28 2002

Jan 13 2002

Not included in original

PRC

Stage 2 No. of contractors 9 7 9 8 5

Invitation to Tender Nov 19 2001

Nov 19 2001

Jan 03 2002

Dec 05 2001

Mar 28 2002

Bid Opening Dec 06 2001

Dec 06 2001

Jan 25 2002

Dec 25 2001

Apr 18 2004

ADB Approval Apr 06 2002

Apr 06 2002

May 20 2002

May 20 2002

Jun 04 2002

Contract Signing Jun 06 2002

Jun 06 2002

Jun 05 2002

Jun 05 2002

Jun 06 2002

Commencement Jun 30 2002

Jun 30 2002

Jun 17 2002

Jun 17 2002

Jul 15 2002

Original Completion Mar 30 2003

Mar 30 2003

Mar 17 2003

Mar 17 2003

Apr 15 2003

Actual Completion Apr 15 2003

Apr 15 2003

Apr 15 2003

Apr 15 2003

Apr 30 2003

Not included in original

PRC

1999 FRW No. of contractors 7 6 5 2 8

Invitation to Tender May 15 2001

May 19 2001

May 30 2001

May 15 2001

May 15 2001

Bid Opening Jun 05 2001

Jun 12 2001

Jun 18 2001

Jun 15 2001

Jun 5 2001

ADB Approval Aug 16 2001

Aug 16 2001

Aug 16 2001

Aug 16 2001

Aug 16 2001

Contract Signing Aug 24 2001

Aug 24 2001

Aug 24 2001

Aug 24 2001

Aug 24 2001

Commencement Sep 25 2001

Sep 25 2001

Sep 25 2001

Sep 25 2001

Sep 25 2001

Original Completion May 25 May 25 May 25 May 25

No flood rehabilitation works

May 25

Appendix 5 27

Province

Item Quang Ngai

Binh Dinh

Phu Yen Khanh Hoa Gia Lai Quang Nam

2002 2002 2002 2002 2002

Actual Completion May 30 2002

May 10 2002

Apr 19 2002

May 15 2002

May 30 2002

ADB = Asian Development Bank, FRW = flood rehabilitation works, PRC = provincial roads component Source: Project management unit number 1.

Table A5.4: Implementation of Sector Development Policy

Item Details of Implementation of Sector Development Policy

Consultant Carl Bro International in association with SMEC International Pty Ltd.

Shortlist Approved by ADB Sep 12, 2003

Invitation to Proposal Sep 25, 2003

Proposal Received Dec 11, 2003

Evaluation Report to ADB Feb 19, 2004

Date Approved by ADB Apr 05, 2004

Contract Signed Sep 15, 2004

Original Completion Date Oct 05, 2005

Actual Completion Date Dec 31, 2005

Original Contract Amount ($) 1,998,602

Final Contract Amount ($) 1,980,154

ADB = Asian Development Bank Source: Project management unit number 1.

28 Appendix 6

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant Reference in Loan Agreement

Status of Compliance

Sector Covenants 1. The Borrower shall ensure that the Project Road

and the Project Provincial Roads are maintained to design standards and in accordance with sound road construction and maintenance practices. The Borrower shall further ensure that annual road maintenance plans are prepared in respect of the Project Road and the Project Provincial Roads, on the basis of traffic volumes, assessment of needs, and agreed upon maintenance standards. The Borrower shall ensure that sufficient funds are available for carrying out the maintenance and annually review the allocation of funds for maintenance.

Schedule 6, para 8.

Not yet complied with (i) Project roads are partly maintained. Sufficient funds have not been available to comply fully with the Covenant. (ii) The preparation of road maintenance plans is ongoing and awaits completion of network data collection for full implementation of ISDP RIMS.

2.

The Borrower shall prepare an ISDP Action Plan identifying subprojects and other actions necessary to improve the capacity and efficiency and policy foundation of VNRA and the road transport sector. Prior to finalization of the ISDP Action Plan, the Borrower shall submit a draft of such Plan to the Bank for the Bank’s review and comments. Items to be covered in the ISDP Action Plan shall include road maintenance and investment planning and funding, road user charges, human resources development, road design standards, organizational adjustments, road safety, licensing, vehicle weights and dimensions, accounting procedures, and information technology. The Borrower shall also keep the bank informed in respect of all transport sector and road subsector studies undertaken in Viet Nam, and shall provide the Bank with copies of all documents relevant to such studies, including consultant’s reports, and shall ensure that the Bank has the opportunity to comment on the recommendations of the studies. The Borrower and the Bank shall from time to time exchange views on the progress of the Borrower in carrying out the policies and actions recommended by such sector and subsector studies. The Borrower shall maintain a policy dialogue with the Bank in respect of problems and constraints affecting and development of the road subsector.

Schedule 6,

para 9.

Complied with

3.

In respect of the Project Road, the Borrower shall monitor and evaluate Project benefits by compiling and analyzing traffic, axle load and other data. For this purpose PMU-1 shall arrange for survey to be carried out at the commencement of Project implementation, to establish base line data, and shall arrange for follow-up surveys immediately

Schedule 6,

para 11.

Complied with

Appendix 6 29

Covenant Reference in Loan Agreement

Status of Compliance

following completion of the Project Road. The findings and supporting data of such surveys shall be incorporated in the report submitted to the Bank under Section 4.07 (c) of the Loan Agreement. The data to be collected and the methodology for its analysis shall be agreed upon by MOT and the Bank.

4.

In respect of the Project Provincial Roads, the Borrower and the Bank shall agree on the nature and extent of the benefit monitoring to be conducted, and on the methodology for its accomplishment.

Schedule 6,

para 12.

Complied with

Environmental Covenants

1. The Borrower shall ensure that all environmental mitigation measures identified in the Summary Environmental Impact Assessment Report prepared in respect of the Project are incorporated in the Project design, and are followed during construction, operation and maintenance of the Project Road and the Project Provincial Roads. The Borrower shall ensure that all environmental clearances required pursuant to the Borrower’s Environmental Impact Assessment regulations of April 1995 have been obtained prior to the issuance of invitations to bid for civil works under the Project. The Borrower shall further ensure that the Project is designed and implemented in accordance with all applicable environmental laws and regulations of the Borrower and the Bank’s “Environmental Guidelines for Selected Infrastructure Projects (Highways and Roads)”. In its selection of sites for the excavation of construction materials to be used for the Project, PMU-1 shall all necessary actions are taken to avoid damage to agriculture land, cultural and historic sites and the natural environment.

Schedule 6, para 5.

Complied with

Social Covenants 1. The Government shall make available, promptly as

needed, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project facilities.

Section 4.02. Complied with

2.

PMU1 and MOT shall be responsible for compensation, relocation, and resettlement of Project affected people. The Borrower shall ensure that such compensation, relocation, and resettlement are carried out in accordance with the Resettlement Action Plan (RAP) agreed upon between the Borrower and the Bank, the Borrower’s

Schedule 6,

para 6.

Complied with

30 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

procedures, and the Bank’s requirements as defined in the Bank’s Policy on Involuntary Resettlement. In case of discrepancies between the Borrower’s procedures and the Bank’s requirements, the Bank’s requirements shall apply. PMU1-shall submit to the Bank monthly status reports on the RAP starting from January 1999 until all necessary approvals by the Borrower have been obtained, and quarterly reports thereafter until completion of resettlement. The Borrower shall cause PMU-1 to engage a domestic agency acceptable to the Bank, under terms of reference to the Bank, to monitor the RAP.

3. Without limitation to the overall application of the Bank’s Policy on Involuntary Resettlement, the following principles shall apply in respect of compensation and resettlement of Project affected people: (i) Project affected people shall be compensated and assisted in such a way that generally their economic and social future will not be unfavorably affected by the Project and, in particular, that they will not face a material reduction in income, deterioration of living standards or unnecessary social and cultural dislocation as result of the Project; and (ii) Project affected people shall not be required to have formal legal title to the land used by them to be eligible for compensation.

Schedule 6, para 7.

Complied with

Financial covenants 1. The Borrower shall maintain, or cause to be

maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof.

Section 4.06 (a). Complied with

2. The Borrower shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are later than twelve months after end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors

Section 4.06 (b). Complied with

Appendix 6 31

Covenant Reference in Loan Agreement

Status of Compliance

relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

3. The Borrower shall enable the Bank, upon request, to discuss the Borrower’s financial statements for the Project and its financial affairs related to the Project from time to time with the Borrower’s auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by the Bank, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Section 4.06 (c). Complied with

4. The Borrower shall furnish, or cause to be furnished, to the Bank all such reports and information as the Bank shall reasonably request concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods and services and other items of expenditure financed out of the proceeds of the Loan; (iii) the Project; (iv) the administration, operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof; (v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vi) any other matters relating to the purposes of the Loan.

Section 4.07 (a) Complied with

5. Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the Loan.

Section 4.07 (c) Complied with

Others 1. The Borrower shall cause the Project to be carried

out with due diligence and efficiency and in conformity with sound administrative, financial,

Section 4.01 (a) Complied with

32 Appendix 6

Covenant Reference in Loan Agreement

Status of Compliance

engineering, environmental and highway and road construction practices.

2. In the carrying out the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to the Borrower and the Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

Section 4.03 (a) Partial compliance. The performance of several contractors was below the expected standard.

3. The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and the Bank. The Borrower shall furnish, or cause to be furnished, to the Bank, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as the Bank shall reasonably request.

Section 4.03 (b) Complied with

4. The Borrower shall ensure that the activities of its department and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Section 4.04 Complied with

5. The Borrower shall make arrangements satisfactory to the Bank for insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.

Section 4.05 Complied with

6. The Borrower shall enable the Bank’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Section 4.08 Complied with; the Financial Management Review of the Project was conducted by the Bank in 2006.

7. The Borrower shall ensure that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, and maintenance and operational practices.

Section 4.09 Partly complied with; awaiting completion of network data collection for full implementation of ISDP RIMS.

8. It is the mutual intention of the Borrower and the Bank that no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the assets of the Borrower. To that end, the Borrower undetakes (i) that, except as the Bank may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the pricipal of, and service charge and any other charge on the Loan ; and (ii) that the Borrower, in creating

Section 4.10 (a) Complied with.

Appendix 6 33

Covenant Reference in Loan Agreement

Status of Compliance

or permitting the creation of any such lien, will make express provision to that effect ; provided, however, that if for any constitutional or other legal reason, such provision cannot be made with respect to any lien on assets of its political subdivision, the Borrower shall, at no cost to the Bank, promptly secure the principal of, and interest and other charges on, the Loan by an equivalent lien on assets of the Borrower satisfactory to the Bank.

9. The provision of section 4.10 (a) shall not apply to (i) any lien created on property, at the time of purchase of, solely as security for payment of the purchase price of such property ; or (ii) any lien arising in the ordinary course of banking transactions and securing not more than one year after its date.

Section 4.10 (b)

Complied with

34 Appendix 7

PROJECT COMPLETION REVIEW MISSION SUMMARY REVIEW OF ROAD MAINTENANCE AND DESIGN

A. Background

1. The national highway component (NHC) of the Third Road Improvement Project (1998) is described as road improvement. The previous standard of national highway 1 (NH1) was generally a 7-meter-wide pavement, with surface condition varying from excellent to poor. The original pavement was well-constructed asphalt concrete, but was approximately 30 years old. In places it had been strengthened with either an asphalt concrete overlay or penetration macadam overlay, and surface treatment or sand seal had also been applied. The pavement condition was highly variable over short distances, the result of underfunding of maintenance and a policy of strengthening the most deteriorated single kilometer sections to the extent that annual budgets would allow. In 1997 at feasibility study stage, approximately 20% of NH1 had an international roughness index (IRI) of less than 3 and was considered to be in excellent condition, but 35% had an IRI of over 5 and could be considered in very poor condition for a major highway, although only 3% had a roughness level of over IRI 7. The improvement works carried out under the Project generally ranged from overlays to new construction. Typically the minimum work involved the application of 7–10 cm of asphalt treated base (ATB) and 5 cm of asphalt concrete pavement. 2. Preproject traffic levels on roads in the provincial roads component (PRC) were known to be low in most cases. Consequently, the original concept of the PRC was that roads should not be sealed because the cost could not be justified. The objective was that roads should be improved to all-weather standard, by raising embankments and improving drainage, with a cost limit of $20,000 per km. Prior to the Project many of the roads were observed to be in very poor condition, being barely passable even outside the rainy season. On nearly all PRC roads there is now some sealing by double bituminous surface treatment (DBST), even though it is often for short distances, and there are also asphalt concrete surfaces and sections of concrete pavement in Binh Dinh and Khanh Hoa provinces. A total of 330 km (almost exactly one third of the road length) was given a sealed or concrete pavement during the Project. Bridge works were included in the PRC. In some cases these were stand-alone works without road improvements, but most were on the road sections which were improved. Low-cost floodways were used where practical. B. Project Completion Review Mission

3. During site visits to assess the initial operation of the NHC and PRC, the project completion review mission (PCRM) met with regional road maintenance unit number 5 (RRMU5) and the provincial departments of transport (PDOTs) in the six provinces served by the Project to assess the opinions of senior officials most directly involved in the operation and maintenance of the project roads. The mission’s observations and chosen areas of discussion were targeted on (i) the condition of the roads, (ii) road maintenance issues, (iii) design methodology and standards, and (iv) traffic control and management including road safety. The mission traveled the NH1 within the NHC and on two PRC roads in Quang Nam province, three roads in each of Quang Ngai, Binh Dinh, Gia Lai, and Phu Yen provinces, and four roads in Khanh Hoa province.

Appendix 7 35

C. National Highway 1

4. The pavement structure of the NHC is in good condition. There are occasional short sections on which the asphalt concrete surface has had to be patched to fill cracks and mend potholes. At some locations where the alignment is winding, as well as at intersections, there are signs of minor heaving of the pavement surface. NH1 is generally in uniform condition throughout the 400 km length of the Project. 5. The modified pavement design that was implemented (based on accepted design standards in Viet Nam and the American Association of State Highway and Transportation Officials 1993 guide for the design of pavement structures) was a practical response to actual traffic conditions and existing pavement condition at the time of construction. With just three main types of pavement structure implemented, the actual approach was less involved than it would have been had the family of responsive treatments for 40 individual sections of the NHC determined as optimal during the feasibility study 4 years earlier been applied. In the event, this was a fortunate variation. Given the problems that emerged with quality control of contractors’ works throughout construction, a more involved design would have exacerbated an already very difficult management situation. D. Provincial Roads

6. In contrast to NH1, the condition of the post-project pavement structure on the PRC roads varies markedly. The condition overall is good to excellent in Quang Nam, Binh Dinh, and Khanh Hoa provinces. In Quang Ngai, Gia Lai, and Phu Yen, however, potholes and edge-breaks on DBST seals are too frequently observed. The remaining unsealed sections on the PRC roads in Gia Lai and Phu Yen generally show marked deterioration of the driving surface and embankments. Roads 662 and 675 in Gia Lai and roads 642 and 643 were singled out as being in need of immediate attention. Bridge, culvert, and retaining wall structures were found to be in good condition overall.

1. Availability of Funds for Road Maintenance

7. Over recent years the release of funds for routine maintenance of the PRC roads, as well as the NH1, has been well below the amount needed. It is commonly reported that the funds actually needed to carry out just routine maintenance (without even including periodic works) are estimated at twice the actual amounts available. In Phu Yen and Gia Lai, where remoteness and particularly challenging weather patterns are major factors, maintenance funds can be as low as one third the required amount. Rather than regular scheduled activity, road maintenance here is often more of a preventative and remedial action that mainly occurs at specific times, particularly just before and immediately after the rainy season, or for example in readiness for extra travel demands over the Tet holiday. In all provinces it appears that district and commune roads are even more starved of resources; a shortfall of 70% to 80% is typical. The situation regarding funding shortfalls for provincial roads and NH1 is shown in Table A7.1.

36 Appendix 7

Table A7.1: Comparison of Shortfall in Funds Released for National Highway Component and Provincial Road Component Routine Maintenance

(D million per km per year 2003–2006)

Item Required Funds Released Funds

Provincial Roads

Quang Nam 15–17 10–12

Quang Ngai 15–17 4–6

Gia Lai 15–17 4–6

Binh Dinh 15–17 10

Phu Yen 15–17 5–6

Khanh Hoa 15–17 15–17

NH1 (RRMU5) 25–27 15–17

NH1 = national highway 1, RRMU5 = regional road maintenance unit number 5 Sources: Provincial departments of transport, regional road maintenance unit number 5.

2. Implementation of Road Maintenance

8. Maintenance implementation arrangements are almost the same in all provinces. There is a provincial project management unit (PPMU) under each PDOT that manages the work. The PPMU in each province charges a sole company with the responsibility of maintaining provincial roads. This company is either state owned or a joint stock enterprise in which the capital is divided into small units, permitting a number of investors to contribute varying amounts to the total. Each company has a complement of dedicated road maintenance teams, with each team having a defined area, or road group, upon which it works. The maintenance of district roads is managed separately and independently by district authorities. Although there are exceptions, it appears to be the general case that the maintenance of district roads is carried out with less experience, skill, and application than is typically shown by the provincial road teams. The poorer condition of district roads compared with provincial roads is frequently a reflection not only of decidedly tighter budgets but also of the organizational differences that exist in the management and treatment of facilities. It sometimes happens that the provincial authority will take over a poorly maintained district road if it is an important provincial link. 9. Although the team-based structures for maintaining provincial roads are generally the same from province to province, the way the teams are funded and the policy behind their management can vary quite widely. In Binh Dinh, for example, lump-sum contracts are signed with each team for the maintenance of its authorized road sections. Importantly, the contracts are performance-based and have built in to them a monitoring and evaluation clause to facilitate ongoing quality control and also to provide firm ground on which to make a decision as to whether or not particular contracts will be renewed. This model appears to be effective and is performing well. 10. Phu Yen and Gia Lai PDOTs have the same overall implementation arrangement, with each PPMU managing a maintenance company that employs professional work teams. However, a main feature of road maintenance management in the two provinces, which has been avoided in Binh Dinh, is the imposed requirement that no immediate maintenance item shall be accomplished without prior approval of cost and the works to be performed. This inevitably leads to delays in maintenance action.

Appendix 7 37

11. The management policies in Khanh Hoa are different to all the other project provinces. The philosophy is that rapid and immediate maintenance response is the key to preserving the province’s road assets. If circumstances demand, maintenance teams are given the latitude to initiate and even complete tasks without the prior issue of formal authorization. It is permissible to submit cost returns and work items together with supporting documents to PDOT for retrospective approval. This responsive arrangement is further strengthened by the active interest that the Khanh Hoa provincial people’s committee (PPC) takes in good roads across the province. PDOT may avail itself of up to 10% of Khanh Hoa’s capital construction budget in support of preserving existing road assets. For major construction works that may damage roadway, the contractor is required at the outset to commit a deposit payment to a specially opened account to ensure the road will be returned to its original state when construction is complete. One such account was active at the time of the PCRM. Workshops and training sessions in road maintenance are regularly organized. Public interest is reinforced by the PPC, with awareness campaigns in the local media on the importance of good road connections for the economic and social health of the province. For obvious reasons, the best collection of roads seen during site visits was in Khanh Hoa. This flexible, progressive, and publicly supported arrangement is an example for all provinces to follow. It is notable, and laudable, that Khanh Hoa has as a matter of course implemented an arrangement in which capital expenditure on new construction connects with the preservation of existing infrastructure. This is the essential feature of the institutional changes made by the Government in respect of the expanded responsibilities of the Viet Nam Road Administration (VRA) for preservation of the national road network.

3. Design of Pavement for Provincial Roads and Future Improvement Projects

12. On PRC roads four types of pavement structure can be found: gravel, DBST, asphalt concrete and Portland cement concrete pavement (PCCP). On most roads a mixture of more than one surface type has been applied. The approach to the PRC design promoted this mix, with some stretches improved but left unsealed, some short subsections sealed with DBST, and some sealed with asphalt concrete. A number of the roads selected for the 1999 flood rehabilitation works (1999 FRW) were restored with stretches of PCCP. This mixture leads to logistical difficulties in scheduling work for the maintenance teams and often is a major contributing factor to the difficulties of sustaining a complete road of an acceptable standard. A view frequently expressed was that it would have been preferable if the Project had defined the PRC works not so much on a linear basis along the project roads, but rather had shared the works with PDOTs, perhaps on fewer roads, such that the final product on each improved road was more homogeneous along its complete length. A common suggestion was that in future projects the works might be better accomplished if, for example, the PDOTs were assigned responsibility for embankment and ancillary works, with ADB taking care of rehabilitating and upgrading the roadway. 13. Some DBST subsections are deteriorating rather badly. Although insufficient maintenance is clearly a prime factor; pavement design is another. DBST pavement structure in most provinces is designed to a strength of 770 daN/cm2 (with a base course of 15–20 cm). Given the profile of the traffic load that can be observed it would be more appropriate for pavement strength to be increased to 980 daN/cm2 or greater.1 PCCP structure has a design

1 The design that is currently being implemented in the Central Region Transport Networks Project (2005) is based

on increased pavement strength. For the design of structures, Central Region Transport Networks Project (2005)

38 Appendix 7

compressive strength of 200–250 daN/cm2 in most provinces. Cracks, broken joints, and

surface breaks can be observed on some subsections. An appropriate increase is indicated to a minimum design compressive strength of 300 daN/cm2, which would be in accordance with the rigid pavement design standard (22 TCN 223-95) in Viet Nam. Furthermore, observations indicate that there is scope for improvement in concrete design-mix and construction quality control. E. Road Safety on National Highway 1

14. The only source of information on road accidents on NH1 is the monthly report record produced by regional road maintenance units (RRMUs), which are from the same data source as those prepared by the Viet Nam Traffic Police. Information from RRMU5 on the accidents reported on the project sections of NH1 are shown in Table A7.2. These are the only statistics available and are believed to be incomplete due to general under-reporting of road accidents in Viet Nam.

Table A7.2: Road Accident Data

Year Accidents Deaths Injuries

1998 575 235 744

1999 — — —

2000 698 317 848

2001 665 298 759

2002 529 210 610

2003 675 429 668

2004–2006 2,000 946 2,303

—: not available Source: Regional road maintenance unit number 5.

15. The improvements on NH1 were effectively completed during 2003. The widening of the pavement would normally be expected to produce a fall in the number of accidents. However, the results shown do not reflect any clear trend, but given the increase in traffic over the period, particularly the latter part, a reduction in the accident rate in recent years is suggested by the above figures. 16. There have been some improvements to the alignment to improve safety, and speed reduction strips have been applied to the carriageway to reduce speeds outside schools, markets and intersections, but these probably have little impact. Intersections in particular are high-risk spots; too often users do not respect road rules at intersections, even when control signs are on prominent display. Currently traffic signals are being installed at critical locations. Intersection design for the future needs to accommodate to the extent possible the known traits of driver behavior and discipline. A disturbing feature of the improved road is the high speed maintained by many drivers, especially through populated areas. It would help if road safety awareness campaigns were run well in advance of the opening of the improved road facilities.

is upgrading the Third Road Improvement Project design in response to the presence of heavy vehicles on the project roads.

Appendix 8 39

ECONOMIC REEVALUATION

A. Introduction

1. The analysis reported in this appendix is related to two of the main components of the Third Road Improvement Project (1998), the national highway component (NHC) and the provincial roads component (PRC). The evaluation of benefits and costs at the time of appraisal encompassed the NHC only. The selection of roads for the PRC was carried out by means of an ordinal ranking procedure using economic and social indicators. The PRC selection did not involve the quantification of costs and benefits arising from the proposed road improvement. For the PRC the comparison described below is between the reevaluation of the Project by the project completion review mission (PCRM) and the benefit cost evaluation carried out during the 2004 project benefit monitoring and evaluation (BME). 2. The PRC included an additional flood protection subproject. The 1999 flood rehabilitation works (1999 FRW) embodied a program of emergency assistance and was included in the PRC to restore roads damaged as a result of the 1999 floods in four of the influence area provinces and Quang Nam, an additional province immediately to the north. The works were implemented and supervised as part of the PRC. Despite being classified as works on the restoration of flood protection infrastructure and flood damaged roadway, they were actually similar to the main PRC works, involving upgrading and periodic maintenance as well as restoration. The 1999 FRW was not evaluated at the BME stage. 3. The general approach for the reevaluation of both the NHC and the PRC follows conventional economic appraisal methodology for road projects. It takes into account factors that can be quantified, such as road construction and maintenance costs, traffic levels, and the level of benefit in terms of reduced vehicle operating costs (VOC) and time savings for road users. It compares the with-project case (the situation with improvement to the road) and the base case (the situation that would have been likely to occur if road sections had remained at their original standards). Being an analysis of a completed project, actual construction costs are used for the with-project case, together with observed traffic levels and road condition information for the initial period following implementation, rather than relying on forecasts and projections as would be needed in a feasibility study. B. National Highway Component

1. Evaluation at Appraisal

4. At appraisal it was observed that the project sections of national highway number 1 (NH1) ranged from new overlaid pavement in very good condition to very rough dressing on failed asphalt. It was thus established that a complete range of treatments would be needed to suit the actual condition of each design section. It was considered that the road would continue to function reasonably well if appropriate works such as reseals, simple overlays, and strengthening overlays were carried out. Some stretches would require reconstruction. Selection of the optimum treatment was based upon three criteria.

(i) Is the pavement strength adequate to carry the estimated traffic up to 2012? (ii) Is the present pavement smooth enough not to require correction? (iii) Is the present pavement new enough not to require resealing in the next 4 years?

40 Appendix 8

5. The decision logic and the related improvement options were discussed with project management unit number 1 (PMU1) and ADB, and it was agreed that practical simple solutions that could be readily implemented by regional contractors were needed. The logic of minimum action to pavements with adequate strength was not questioned; it was agreed that this minimum action should be a thin overlay (3 cm). 6. The pavement improvement options were consolidated into a matrix of five deflection values and four roughness categories subject to five traffic-flow levels. The matrix is shown in Table A8.1. The existing road condition varied from kilometer to kilometer and theoretically 400 analysis sections would have been required for a fully accurate description of economic performance under improvement. During the feasibility study, the project road was divided into 40 analysis sections and the tabulated treatments were applied section by section. An averaging procedure was used in the pavement improvements matrix where conditions encountered on an individual section were contained in more than one cell. The individual economic performances on the 40 analysis sections were consolidated to produce the summary results shown in Table A8.2.

Table A8.1: Summary Matrix of Pavement Improvement Options Traffic Volume = 1,000–1,499 vpd

IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5 d0 Action EIRR Action EIRR Action EIRR Action EIRR

40 TOL 25.4 TOL 49.3 TOL 53.7 TOL 74.4 60 TOL 27.0 TOL 50.3 TOL 64.7 TOL 75.1 80 OL 29.0 OL 51.7 OLL 67.7 TOL 76.1 100 OL 18.1 OL 25.6 COL 34.5 REC 36.7

120 COL 16.9 COL 23.2 COL 27.7 REC 31.4

Traffic Volume = 1,500–1,999 vpd IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5

d0 Action EIRR Action EIRR Action EIRR Action EIRR 40 TOL 33.5 TOL 70.3 TOL 90.1 TOL 111.4 60 OL 36.3 OL 72.4 TOL 91.2 TOL 113.1 80 OL 27.2 OL 41.9 OLL 60.8 TOL 57.9 100 COL 23.7 COL 35.5 REC 45.4 REC 58.2 120 COL 22.1 COL 30.3 REC 37.0 REC 45.0

Traffic Volume = 2,000–2,499 vpd

IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5 d0 Action EIRR Action EIRR Action EIRR Action EIRR

40 TOL 41.6 TOL 94.1 TOL 118.2 TOL 154.1 60 OL 46.5 TOL 97.5 TOL 120.7 TOL 157.0 80 OL 30.0 OL 44.9 COL 61.5 REC 75.9 100 COL 29.3 COL 43.3 REC 53.1 REC 68.3 120 COL 28.5 COL 38.7 REC 45.4 REC 55.1

Traffic Volume = 2,500–2,999 vpd

IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5 d0 Action EIRR Action EIRR Action EIRR Action EIRR

40 TOL 44.4 TOL 103.4 TOL 124.4 TOL 173.1 60 OL 40.3 OL 77.3 OLL 102.8 OLL 121.1 80 OL 30.6 OL 45.8 COL 63.4 REC 79.5 100 COL 30.0 COL 44.1 REC 56.9 REC 70.2 120 COL 29.4 COL 40.7 REC 48.7 REC 59.4

Traffic Volume = 3,000–3,499 vpd IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5

d0 Action EIRR Action EIRR Action EIRR Action EIRR 40 TOL 50.1 TOL 121.2 TOL 132.2 TOL 206.0 60 OL 39.6 OL 72.3 OLL 97.2 OLL 110.6 80 OL 30.0 COL 72.3 REC 75.4 REC 96.1

Appendix 8 41

Traffic Volume = 3,000–3,499 vpd IRI = 2.5 IRI = 3.5 IRI = 4.5 IRI = 5.5 d0 Action EIRR Action EIRR Action EIRR Action EIRR 100 COL 33.2 COL 49.4 REC 63.6 REC 79.6 120 COL 33.2 COL 46.2 REC 56.6 REC 67.0 OL = overlay, COL = combined overlay, d0 = deflection in mm x 10

-2, EIRR = economic internal rate of return, IRI =

international roughness index, OLL = overlay with levelling course, REC = reconstruction, TOL = thin overlay, vpd = vehicles per day. Source: TA No. 2636-VIE: Viet Nam Third Road Improvement; Wilbur Smith Associates in association with TEDI South, January 1998

7. The economic internal rates of return (EIRR) shown in Table A8.1 are generally higher than those in Table A8.2 because they were based on the cost of the particular improvement only. The EIRRs in Table A8.2 are based on complete cost including supervision, resettlement, and other ancillary road improvements.

Table A8.2: Results of Economic Evaluation at Appraisal

Switch Values

b

at 12% Road Section

Base Case EIRR

10% Cost Increase

10% VOC Savings

Reduction

Combination Case 1

and Case 2 Sensitivity Indicator

a Cost Benefit

(Case 1) (Case 2) (Case 1) (Case 2) Contract 1 15.8 15.0 14.9 14.0 0.51 0.57 56 (37) Contract 2 25.6 24.4 24.3 23.1 0.47 0.51 270 (74) Contract 3 23.8 22.5 22.4 21.2 0.55 0.59 261 (67) Contract 4 27.7 26.4 26.3 25.0 0.47 0.51 345 (78) Overall 23.9 22.7 22.6 21.5 0.50 0.54 219 (69) a sensitivity indicator = percentage change in EIRR divided by percentage change in project cost or VOC savings

b switch value = percentage change in project cost or VOC savings necessary to produce an EIRR of 12%

EIRR = economic internal rate of return, VOC = vehicle operating costs Source: RRP

2. Changes at Implementation

8. The matrix represented by Table A8.1 became known as the menu of improvement options (MIO). It was foreseen that the structural condition of the project road might be markedly different at the time of improvement compared with at the time of the feasibility study. To ensure that the appropriate improvements were undertaken when the contractors were ready to start civil works, it was planned that the supervision consultant would direct the contractors to make certain tests (to include roughness and deflection) along the contract sections. Based on the results of these tests, combined with current traffic flow information, the consultant would select the appropriate works to be done from the MIO. 9. Events overtook this plan. There were substantial changes in the design philosophy between project preparation and later design revisions during the construction phase. The rainy seasons during 1999 and 2000 featured abnormally heavy and prolonged rains which started early. Flooding persisted over long periods resulting in rapid deterioration of the existing pavement structure. With weakened pavement, structural redesign was called for. In comparison with the improvements listed in the 1998 MIO the new design that was considered appropriate involved a considerable increase in the thickness of the asphalt concrete pavement, including asphalt treated base (ATB) and levelling layers. With increased traffic flow and an escalating incidence of vehicle overloading, a minimum thickness of 7 cm of ATB replaced the 3 cm proposed under the original design to help prevent reflective cracking occurring before paving with the asphalt concrete layer was implemented.

42 Appendix 8

10. Another factor that brought about increased application of ATB compared with the original design was related to actual driver behaviour. Vehicles often do not follow the marked traffic lanes. From observation of behaviour on already improved stretches of the NH1 elsewhere, particularly on the Road Improvement Project (1993) section, it was noted that a large number of heavily overloaded trucks use the widened shoulder on a regular basis. In response to this situation, it was agreed that the design to be implemented should lay the ATB pavement over the widened shoulders. Overall, the quantity of ATB applied on the Project rose from 206,000 tons estimated under the original design to 892,692 tons actually used during implementation. 11. Apart from pavement redesign, there were also changes made to the design width of the road at some locations. Urban development had progressed during the 4 years since the original design had been completed. Many urban areas had developed and expanded along the project road length bringing a large increase in population and traffic. Cheap motorcycles, imported from the People’s Republic of China, had proliferated. The redesign called for widening and other specific improvements on sections through the new urban areas. The quantity of associated work had to be increased over the original 1997 design.

3. Evaluation During Benefit Monitoring and Evaluation

12. In addition to changes in the technical characteristics of improvement of the original project road outlined above, there were also changes to the amount of new construction. At appraisal, the Project included the construction of a bypass at Quang Ngai. On completion four bypasses had been constructed and opened under the Project. These developments, together with the changes in the work to be carried out on the existing road, are clearly salient to the assessment of the economic performance of the NHC. This was recognised at the BME stage in 2004, when a new appraisal was carried out along conventional lines taking into account the actual situation that had transpired at implementation. Major points taken into account in the NHC analysis during the BME were that:

(i) preproject roughness levels vary over very short distances and benefits and costs vary likewise;

(ii) different sections were completed at different times; (iii) urban sections raise special issues of excessive side friction and higher volumes

of motorcycle traffic; (iv) at certain major urban locations the design standard was raised to a four-lane

road providing a 21 m pavement width; benefits on these sections are different from those on the standard two-lane road;

(v) four bypasses on new alignments carry civil works costs that are significantly greater per km than improvement costs; and

(vi) recent duplication of NH1 by new parallel sections, established under separate project work, may draw traffic away from the NH1 and lower the benefits of the NHC improvements.

13. At the feasibility study stage, the highway design and maintenance model (HDM-III) and HDMQ1 had been used as the main analytical tools for economic evaluation. At the BME stage, the highway development and management tool (HDM4) was employed. The analysis during

1 HDM-III developed over 30 years by WB et al.; HDMQ is a variant of HDM-III designed to take into account

congestion effects on vehicle operating costs.

Appendix 8 43

the BME was better able to accommodate congestion and the effects of side friction, and importantly took explicit account of the impact of the high numbers of motorcycles in total traffic flows. The project road was divided into 34 analysis sections at BME, based primarily on preproject characteristics and conditions together with postproject traffic shares under route choice offered by the new bypasses and the existence of new four-lane stretches along the route. Seven main issues were specifically addressed.

(i) There were numerous short urban sections of road, with traffic levels very different from the general pattern, especially in terms of the high volume of motorcycle traffic. These sections had high levels of side friction, intersections and other disruptions to traffic flow that all affect vehicle speed and benefit levels. In some cases the higher traffic levels and friction effects extended well outside the urban areas, following ribbon development along the highway.

(ii) In four of the major urban locations, with a total length of 19 km, the design

standard was raised to four-lane road, almost all with a dividing median strip, providing 14 m carriageway and a total 21 m width of pavement. Traffic levels were generally not high enough to cause serious congestion if these sections had been retained as two-lane roads, but the benefits on these sections would be different from those of the standard two-lane sections.

(iii) Four bypasses on new alignments were incorporated into the NHC, with a total

length of 13.9 km. The bypass at Quang Ngai was four-lane standard with concrete pavement. At the other three locations—Ngo May, Binh Dinh, and Phu Lam—the design standard was the same as the general standard for the improved sections. The civil works costs of these were significantly higher per km than the improvement costs. Benefits per vehicle km were higher on these sections, but traffic levels were lower because traffic flow was divided between the bypass and the original alignment. The bypasses also produced benefits to traffic remaining on the original alignment by lowering traffic volume and so reducing congestion. In the case of bypasses, it was particularly difficult to estimate the level of benefits to those using the new alignment by avoiding urban congestion.

(iv) There were a number of locations where the NH1 was duplicated by new

sections of road associated with Japanese-funded replacements for major bridges. These bridgeworks diverted traffic away from the parallel NHC sections, and reduced the benefits attributable to the NHC from the project improvements. Some involved only short sections of road, such as the 800 m section associated with the bridge at Ban Tach. These could be ignored in the evaluation, but longer lengths of duplication needed to be considered as separate sections. There were sections of approximately 5 km north of Quang Ngai, where the bridge and approach roads for a northern extension on the NHC provided a bypass, and at Bong Son. The Da Rang Bridge, plus approach roads, would provide a 12.1 km bypass around Tuy Hoa and Phu Lam (not open at time of BME). At the southern end of this bypass the overall traffic flow would be divided three ways between the original route, the project-funded Phu Lam bypass, and the new Da Rang Bridge route.

(v) There were some other recently completed or planned nonproject-funded works

on NH1 that would duplicate sections included in the NHC. Immediately south of

44 Appendix 8

Quy Nhon, for example, a new section of coast road designated as NH1D opened in 2002. Combined with NH19 and other access routes from NH1 to Quy Nhon, this duplicated NH1 for approximately 33 km. This new route avoided the Cu Mong Pass but was longer than NH1 and would not normally be used by through traffic. However, it would divert traffic with an origin or destination in Quy Nhon from NH1, and some long-distances buses that call at Quy Nhon. Another project was the freeway proposed from Da Nang to Quang Ngai. The alignment and opening date were not known at the time of the BME. When completed this would divert traffic away from the northern section of the NHC.

(vi) There were several sections where NH1 traversed hilly terrain. Most of these

were short enough to be included in longer sections and the terrain could be reflected in small adjustments to the road definition parameters, but the Cu Mong and Ca passes were long enough to be defined as separate sections. They had significant grades, high levels of curvature, zero side friction, and lower levels of traffic, especially motorcycle traffic. All of these features would have a direct impact on benefits.

(vii) Different sections were completed at different times. Most were effectively

completed during 2003, but two of the bypass sections were not officially opened to traffic until 2005.

14. The results from the BME are summarized in the figure below. Improvements on 50 km of the project road had an EIRR of 30% or more. Work on 175 km returned 20% or more. Only four short subsections showed an EIRR of less than 12%; all were above 10%. The EIRR for the NHC as a whole was estimated at 22.3%, slightly less than the estimate of 23.9% made at appraisal. Sensitivity analysis on the economic performance of the NHC showed the economic viability of the project component to be a safe conclusion (Table A8.3).

Table A8.3: Sensitivity Analysis of Results Obtained from Benefit Monitoring and Evaluation

Item EIRR (%)

Base case 22.3 20% Capital cost increase 17.7 12% Traffic growth

a 25.8

4% Traffic growtha 16.9

No time value for nonwork trips 18.5 No time value included 12.9 aCentral estimate of future traffic growth = 8% a year

Source: Final Report, BME; Wilbur Smith Associates in association with Pacific Consultants International,

March 2005.

Appendix 8 45

Distribution of EIRR against NHC Kilometers

10

20

30

40

50

60

70

0 50 100 150 200 250 300 350 400

NHC Length (km)

EIR

R (

%)

Source: BME Final Report, op cit

4. Project Completion Review Mission Reevaluation

a. Approach

15. The work done by the BME was sound. Although they are almost 3 years old, most of the assumptions are still valid. The BME represented the first and only evaluation of the Project as completed. During the period when design changes to pavement structure and road width and the addition of new bypasses were being considered, no renewed evaluations were carried out to compare with the original assessment made in 1997 during project preparatory technical assistance (PPTA). The original work, although valid at the time, cannot be replicated now because most of the assumptions and estimates made then have since lost relevance. The core of the evaluation at appraisal was the MIO, which is no longer applicable; although optimal at the time, the MIO’s improvement options do not reflect sufficiently well what was actually done subsequently. The BME is the truest available representation of a real assessment and the reevaluation is based upon it.

b. Investment Costs

16. The BME used precise costs based on actual records of the then nearly completed contracts 1 to 4. The conversion of these financial costs to economic costs was made by using a factor of 0.93. The common practice in such conversion is to divide costs into tradable and nontradable goods. Nontradable goods are converted to world price using a standard factor, and unskilled labor resources are valued using an applicable shadow wage rate 2. Major road construction projects generally consume predominantly traded goods (such as fuel and tires), with nontraded goods making a minor contribution. Overall conversion factors of 0.9 and somewhat greater are common. Actual resettlement costs were taken as economic costs. The tax component of $300,000 was deducted from the design and supervision costs. Small items of cost incurred before the year 2000 (such as surveys) were allocated to that year. The phasing of

2 Shadow wage rate is the economic price of labor measured as the weighted average of its demand and supply

price

46 Appendix 8

expenditure for 2000–2004 was slightly different for the four contracts but a standard pattern was assumed as follows, relating to the execution of works, rather than to the payments made.

Table A8.4: Phasing of Project Expenditure 2000-2004

2000 2001 2002 2003 2004

0% 20% 20% 30% 20%

Source: BME Final Report, op cit

17. Residual values, representing the remaining asset value of the works, were included at the end of the evaluation period. The effect on the result is small when an evaluation period of more than 20 years is used, however, because of the impact of discounting. Nominal values of between 30% and 0% of the construction costs were included as residual value investment costs. The higher figure related to new alignments and the 0% value applied where only an overlay was provided. 18. Event timings were also assessed to a close tolerance. The planning period in the original 1997 evaluation was 20 years. The BME reduced this to 19 years for most sections, or 18 years for those not completed until 2004. The start of the implementation of civil works was taken as year 2000, with costs and benefits considered from that year. The start of the flow of benefits was synchronized with the completion of surfacing. This varied between 2003 and 2004 for different sections. Early benefits from partial completion were not included, nor were the costs of traffic disruption during construction.

c. Traffic

19. The only specific area where the BME work might need updating concerns the estimates of NH1 traffic flows used. Three more years of information is now available and there may be potential for improvement in the BME estimates of the current flows and the future growth rate of traffic demand on the NHC. All available historical information on traffic counts for motorized vehicles with four or more wheels is shown in Table A8.5.

Table A8.5: Average Daily Traffic Counts on Project Section of National Highway 1

1997–2001

Year Station

No. Car Light Truck

Medium Truck

Heavy Truck

>3 Axle Truck

Mini Bus Bus Total

1997 11 206 226 715 362 77 303 646 2,535 2001 6 308 361 651 552 209 612 607 3,300 2002 6 275 447 615 591 195 650 737 3,510 2003 8 268 311 584 380 205 402 432 2,582 2004 6 330 334 524 338 232 376 443 2,577 2005 9 313 469 705 394 297 449 553 3,180 2006 11 374 550 598 363 346 487 480 3,198 Sources: 1997; PPTA Final Report, op cit: 2001–2006; RRMU5 regular traffic count program

20. The flows shown are average counts over all available count stations active on the project road in the given year. The data has been accumulated in this way in an attempt to gain some statistical stability in the information and so discern underlying trends. In truth, traffic flows vary quite considerably depending on location. However, the chosen approach of averaging across stations is unavoidable given the problems that are associated with the data. Regular manual classified traffic counts are carried out on national highways by the regional road

Appendix 8 47

maintenance units (RRMU) on behalf of the Viet Nam Road Administration (VRA). The entire project section of NH1 is under the jurisdiction of RRMU5 based in Da Nang. The standard procedure for these counts is that they are carried out over a 24-hour period for 3 days every month at fixed locations. However, it appears that the counts are not carried out according to this schedule. The locations of many of the count sites have changed, making the traffic data less useful for determining trends in traffic levels. Sometimes count stations are left out of the annual tabulations. More seriously, there appears to be a significant amount of unreliable data in the RRMU counts. Although some data appears to be accurate, it is difficult to determine if a given set of figures can be accepted as a valid indicator of the observed traffic level. In Table A8.5 the counts appear generally reasonable, but there are some queries concerning sudden changes that are sometimes apparent in class counts taken at individual stations. Problems with the RRMU count data were noted during the feasibility study in 1997, with unacceptable trends in the annual averages shown at some sites. Because of this, a separate series of strictly supervised counts was carried out at that time. 21. In the column of totals in Table A8.5, the temporary increase early in the decade has no clear explanation. It is likely to be the result of some unknown factor concerning the arrangements for collecting the counts at that time. What seems clear, however, is a true marked increase in the flows of trucks with more than three axles. The annual rate of increase for this class has been in the region of 15% over the last 9 years. It is possibly this phenomenon that gives rise to the generally held opinion that there has been a burgeoning of traffic on NH1. The true situation appears to be more modest although still extremely strong recently. Since 2003 the annual rate of increase of all four-wheel and larger vehicle traffic volumes on the project road would appear to have been in excess of 10%. Taking the longer view over the 9 years 1997–2006, the average growth rate was around just 3% a year. The reason is the plateau in the statistics between 1997 and 2004. There is no evidence in the RRMU counts to suggest that traffic flow as a whole grew significantly between the time of feasibility study and project completion. 22. Traffic growth is closely related to economic growth. In the early 1990s the annual growth in gross domestic product (GDP) averaged about 10% in real terms, with annual population growth at about 2.5%. GDP growth in the second half of the 1990s remained impressive compared with most countries, but was lower than the earlier period, averaging 7.5% a year. In the 5-year period 2001–2005, the growth rate was the same to begin with, but there was an increase towards the end. Based on first quarter performance, it is now considered that GDP growth in 2007 may exceed 8%, reflecting a continuation in the shift towards industrialization and modernization. The rate of growth in traffic volumes is often significantly above GDP growth in developing countries. Changes in the vehicle fleet have probably depressed traffic growth rates, with the introduction of higher capacity vehicles enabling transport capacity to expand faster than vehicle numbers. 23. At appraisal, the forecast growth rate for trucks and buses was about 11% from 2000 to 2005 and 8.5% thereafter. For the BME, a blanket rate of 8% a year for all traffic was applied throughout the planning period for vehicles with four or more wheels. Motorcycle flows were increased annually by 12% to 2007, 10% to 2012 and 8% thereafter. For the reevaluation, a higher growth rate has been applied for large articulated trucks (10% a year), with all other vehicles (including motorcycles) being retained at the same annual rates as used during the BME. It is considered that the BME traffic level for 2004 of an annual average daily traffic flow of 3200 for the project road as a whole may have been high, as the count returns in the last two years do not appear to fully support this estimate. The BME 2004 flows would appear to be

48 Appendix 8

more appropriate for 2006. For the reevaluation, the estimated 2004 annual average daily flow overall has been reduced to 2750.

d. Axle Loads

24. An extensive axle-load survey was carried out at eight sites on the project section of NH1 in early 2000, immediately prior to the start of construction, using automatic weigh-in-motion equipment. A similar survey had been carried out in 1997 as part of the original feasibility study. As far as is known, no subsequent vehicle weight measurements have been taken on the project section of NH1 other than those taken during the BME. (Permanent weighbridges that were operated by the Road Traffic Inspection Department of VRA to monitor vehicle weights on national highways were closed in early 2004.) 25. It is standard practice for the BME of highway projects to include surveys of vehicle axle loads. It can be an important issue for the evaluation, especially if significant vehicle overloading occurs. As part of the BME study, weigh-in-motion surveys were conducted at four sites on the project section of NH1 in September 2004. These were continuous 7-day, 24-hour surveys. The equivalent standard axles recorded were used in the vehicle specifications applied in the HDM4 coding.

e. Passenger Time Valuation

26. The BME included passenger time savings as a component in the computation of EIRRs. Passenger numbers and the proportions of working and nonworking passengers in each vehicle type were derived from the results of earlier origin-destination surveys carried out for ADB and World Bank (WB) projects. The assumption was made that nonworking time had 25% of the value of working time. Updated estimates are shown in Table A8.6.

Table A8.6: Passenger Time Values by Vehicle Class ($ per hour per vehicle)

Motorcycle Car Minibus Light Bus Heavy Bus 0.19 0.69 1.17 1.97 3.92

Source: Project Completion Review Mission estimates.

f. Road maintenance Costs

27. The amount of maintenance required each year is determined within the HDM4 analysis. The unit costs applied to maintenance operations included in the analysis are shown in Table A8.7. These are based on enquiries during the mission, as well as usage in recent feasibility work. Economic costs were assumed to be 93% of the estimated financial costs.

Table A8.7: Road Maintenance Costs

($ per m2)

Maintenance Type $

Crack sealing 2.0

Pothole patching 10.0

Edge repairs 10.0

Asphalt concrete overlay (including preparation) 10.0

Source: Project Completion Review Mission estimates.

Appendix 8 49

g. Other Inputs

28. There is insufficient information on accident rates and no attempt was made to incorporate accident costs at appraisal or in the BME. 29. Flood prevention work on the NH1 was carried out before the Project commenced, and so the benefits of removing flooding delays do not need to be considered. 30. The bridges included in the Project are not major structures and can be considered an integral part of the road section, with no specific benefits given to the bridgeworks.

h. Results of Project Completion Review Mission Reevaluation

31. The results of the reevaluation are shown in Tables A8.8 to A8.10. At 21.2%, the EIRR value in the base case for the NHC as a whole is slightly less than the corresponding value at appraisal (23.9%) and at the BME stage (22.3%). The EIRRs for the four main contract sections in the reevaluation range from 16.6% to 26.5% in the base case. A few short analysis sections among the 34 listed do not achieve an EIRR of at least 12%. They are marginal cases, with the exception of the low traffic volume and relatively high-cost pass at Cu Mong. They are not sufficiently significant in scale to affect the economic viability of the contract 2 or contract 3 sections. A similar number of analysis sections at appraisal did not achieve 12% EIRR, but again these were marginal cases. 32. The sensitivity tests confirm that the Project remains economically viable even with potentially adverse errors in the assumptions underpinning the estimation of VOC, or in the unknown factors concerning future traffic growth rates on the project road. The risk that the EIRR for the project road as a whole is actually less than 12% is estimated at 1 in 12 (8% risk). This result is developed from a scenario in which the probability distributions of traffic growth and VOC savings are triangular, ranging downward from the respective modal values to zero probability at zero value of the variable. Forecast resource flows are shown in Table A8.11.

Table A8.8: Section Traffic 2006 with Results of Economic Reevaluation at Project

Completion Report Stage

Contract Section

Section Number

From km To km Length

(km) Notes

Vehicles (AADT)

Motorcycles (AADT)

EIRR (%)

1 1,045.0 1,051.2 6.2 4,000 6,000 29.4

2 1,051.2 1,056.0 4.8 2,000 5,000 52.8

3 1,056.0 1,059.6 3.6 Quang Ngai bypass 2,000 2,000 19.0

4 1,059.6 1,070.0 10.4 3,500 10,000 50.5

5 1,070.0 1,105.0 35.0 3,000 5,000 23.1

Contract 1

6 1,105.0 1,125.0 20.0 3,000 3,500 13.4

7 1,125.0 1,143.2 18.2 3,500 5,000 13.0

8 1,143.2 1,148.4 5.2 Bong Son 2,000 4,500 30.7

9 1,148.4 1,157.0 8.6 3,500 3,500 14.4

10 1,157.0 1,194.1 37.1 3,500 5,000 25.3

11 1,194.1 1,198.2 4.1 Ngo May bypass 3,000 2,000 18.3

12 1,198.2 1,209.3 11.1 5,000 8,000 17.1

13 1,209.3 1,212.1 2.8 Binh Dinh bypass 3,000 2,000 27.0

Contract 2

14 1,212.1 1,218.5 6.4 4,500 14,000 50.6

50 Appendix 8

Contract Section

Section Number

From km To km Length

(km) Notes

Vehicles (AADT)

Motorcycles (AADT)

EIRR (%)

15 1,218.5 1,231.0 5.0 4-lane Phu Tai 5,000 16,000 25.0

16 1,231.0 1,239.0 8.0 3,000 10,000 35.3

17 1,239.0 1,243.3 4.3 Cu Mong Pass 1,500 2,000 9.1

18 1,243.3 1,248.0 4.7 Cu Mong Pass 1,500 2,000 9.1

19 1,248.0 1,277.7 29.7 2,500 3,500 13.1

20 1,283.2 1,300.8 17.6 3,000 3,500 13.3

21 1,300.8 1,303.0 2.2 4-lane Chi Than 4,000 5,000 25.0

22 1,303.0 1,324.4 21.4 4,000 5,000 26.1

23 1,324.4 1,333.1 8.7 4-Lane Tuy Hoa 4,000 12,000 18.0

24 1,334.5 1,337.9 3.4 Phu Lam bypass 2,500 1,000 10.2

25 1,337.9 1,340.0 2.1 3,000 7,000 27.1

26 1,340.0 1,350.0 10.0 2,500 5,000 18.4

Contract 3

27 1,350.0 1,366.5 16.5 Ca Pass 2,500 1,500 15.6

28 1,366.5 1,375.0 8.5 Ca Pass 2,500 1,500 15.6

29 1,375.0 1,392.5 17.5 2,500 3,000 10.8

30 1,392.5 1,394.6 2.1 4-lane Van Gia 3,000 6,000 28.6

31 1,394.6 1,408.0 13.4 2,500 3,000 14.7

32 1,408.0 1,428.8 20.8 4,000 5,000 15.4

33 1,428.8 1,438.4 9.6 4,500 5,000 19.9

Contract 4

34 1,438.4 1,445.0 6.6 3,500 5,000 21.3

NHC Overall

1,045.0 1,445.0 385.6

21.2

AADT = annual average daily traffic, EIRR = economic internal rate of return, NHC = national highway component Source: Project Completion Review Mission reevaluation.

Table A8.9: Results of Sensitivity Analysis

Road Section

Base Case EIRR

10% VOC Savings

Reduction

Future Traffic Growth Rate 6%

Combination Case 1 and

Case 2 Sensitivity Indicator

a

Switch Values at 12%

b

(Case 1) (Case 2) Case 1 Case 2 Savings Traffic

Contract 1

26.5 25.4 23.9 23.1 0.55 0.49 (71) (94)

Contract 2

23.5 22.5 21.1 20.3 0.50 0.54 (66) (84)

Contract 3

18.0 17.3 15.9 15.1 0.46 0.58 (45) (59)

Contract 4

16.6 15.9 14.7 13.9 0.45 0.49 (39) (51)

Overall 21.2 19.7 18.1 17.1 0.48 0.52 (53) (71) a sensitivity indicator = percentage change in EIRR divided by percentage change in VOC savings or traffic growth

rate b

switch value = percentage change in VOC savings or traffic growth rate necessary to produce an EIRR of 12% EIRR = economic internal rate of return, VOC = vehicle operating costs Source: Project Completion Review Mission reevaluation.

Appendix 8 51

33. The contribution of passenger time savings to overall NHC viability is shown below in Table A8.10.

Table A8.10: Impact on EIRR of Excluding Person Time Value

Item EIRR (%) Base case 21.2 No time value for nonwork trips

17.9

No time value included

13.9

EIRR = economic internal rate of return

Source: Project Completion Review Mission reevaluation.

Table A8.11: Costs and Benefits Streams – Project Road ($ million)

Costs Savings Year Capital Recurrent Total VOC Time Total Net Flows 2000 (17.5) 2.5 (15.0) 0.0 0.0 0.0 (15.0) 2001 (16.1) 0.6 (15.5) 1.8 0.0 1.8 (13.7) 2002 (44.8) 0.8 (44.0) 0.2 0.0 0.2 (43.8) 2003 9.3 0.5 9.8 11.9 2.9 14.7 24.6 2004 0.5 0.5 1.1 10.7 3.2 13.9 15.0 2005 12.0 0.2 12.2 14.5 3.7 18.2 30.4 2006 0.0 0.2 0.2 7.6 3.9 11.4 11.7 2007 7.3 0.0 7.3 10.6 4.4 15.0 22.3 2008 4.1 0.0 4.1 3.5 4.4 7.9 12.0 2009 6.9 0.1 7.0 4.1 4.9 9.0 15.9 2010 8.3 0.1 8.4 3.0 5.3 8.3 16.7 2011 8.5 0.1 8.6 0.9 5.8 6.7 15.4 2012 (12.9) 0.1 (12.8) (2.6) 6.3 3.7 (9.1) 2013 (8.4) 0.1 (8.3) 1.1 6.9 8.0 (0.3) 2014 (20.6) 0.0 (20.6) 2.9 7.6 10.5 (10.1) 2015 3.4 0.1 3.4 11.9 8.3 20.2 23.6 2016 10.4 0.1 10.5 14.2 9.1 23.3 33.8 2017 13.2 0.1 13.3 11.8 10.0 21.9 35.2 2018 3.1 0.1 3.1 4.8 11.0 15.8 18.9 2019 5.4 0.1 5.5 5.3 12.0 17.4 22.9 2020 (1.1) 0.0 (1.1) 1.6 13.1 14.7 13.6 2021 3.6 0.1 3.6 5.7 14.4 20.1 23.7

VOC = vehicle operating costs Source: Project Completion Review Mission reevaluation

C. Provincial Roads Component

1. Analysis at Appraisal

34. In the original appraisal study for the PRC the proposed candidate roads were ranked for priority within each province, using indicators based on social and economic characteristics and the estimated improvement cost for each road. The economic indicators were population density and proportion of cultivated land in the area served by the road (assumed to be 2 km on either side). The social indicators were the presence of ethnic minority groups and the number of facilities (such as markets, health centers, and schools) in the area served. These indicators do

52 Appendix 8

not provide quantified benefits that can be used to calculate a rate of return on investment; they only allow the relative priority to be determined based on potential economic and social benefits. There is therefore no available base for evaluating the impact of the completed works. Updating the indicators with current information will not quantify the impact of the road improvements. 35. In the appraisal study, estimates were made of the potential road-user savings that could be obtained from road improvements, based on the VOC of different vehicle types on a range of surface roughness levels. These figures could have been used with traffic data to estimate quantified benefits, and these could have been compared with improvement costs to calculate rates of return. However, this was an overall analysis and the results were not applied to specific roads. The reason for this was that the traffic data was considered too unreliable. At appraisal, estimates were made for some roads using moving observer surveys during field inspections, but these could only provide a general indication of the traffic level when short, low-traffic roads are involved. Instead, the potential VOC benefits were presented as a matrix that showed the level of investment per km that would earn at least a 12% rate of return according to the original roughness and the traffic level. The matrix is shown in Table A8.12. The traffic levels are shown as average daily traffic flow related to four-wheel vehicles only, but the VOC benefits used also included those for motorcycles, with motorcycle traffic level assumed to be five times that of four-wheel vehicles.

Table A8.12: Traffic Levels Required for Given Initial Improvement Costs

Improvement Cost (per km)

Initial IRI = 8 (ADT)

Initial IRI = 10 (ADT)

Initial IRI = 12 (ADT)

$7,500 35 30 30

$10,000 45 40 40

$15,000 60 55 50

$20,000 80 70 65

$25,000 100 85 80

$30,000 110 100 95

ADT = average daily traffic, IRI = international roughness index Source: PPTA Final Report, op cit.

36. The benefits used as a basis for this matrix were calculated on the assumption that the improved road would have a surface condition corresponding to an international roughness index (IRI) of level 4. This is a low level for unsealed rural roads, the improved standard assumed at the time. However, the roughness levels used for the range of initial roughness levels in the matrix are also low. Many of the roads were virtually impassable to vehicles before the Project. Such roads have roughness levels far higher than the maximum IRI 12 tabulated in the matrix. 37. The intention was that the potential of each recommended subproject road to earn this threshold rate of return would be verified before implementation, by checking the road condition and the traffic level. However, it appears that although road condition surveys were carried out in 2000 as an initial stage of the PRC project supervision, traffic levels were not determined.

Appendix 8 53

2. Analysis During Benefit Monitoring and Evaluation

a. Approach

38. There had been no economic evaluation of the PRC prior to the BME. The BME approach represented a first attempt at evaluation based on road-user savings. The general approach used followed the same conventional economic appraisal methodology as used for the NHC. It compared the with-project case (the situation with improvement to the road) and the base case (the situation which would have been likely to occur if road sections had remained at their original standards), taking into account road construction and maintenance costs, and the VOC and time costs of road users. 39. As part of the BME, provincial authorities were asked to provide current information on all the PRC sections relating to (i) present condition, (ii) works carried out since the Project, and (iii) current traffic levels. However, when obtained, it was considered that this information did not provide a sufficiently accurate and consistent set of data on all roads. The evaluation was based on a sample of 27 road sections, comprising 500 km, or approximately 50%, of the total length of the PRC works. These randomly selected sections were inspected and a simplified evaluation conducted on them; the results were then taken as representative of the whole PRC3.

b. Results of Benefit Monitoring and Evaluation

40. The results of the BME are shown in Table A8.13. There was a wide range in the EIRR figures, from –1.4% to more than 75%, with the overall sample having a return of 18.3%. Just over half of the sample sections were below the normally required rate of 12%. The average was well above the required 12% because of the impact of very high returns obtained from a few roads, largely as a result of significant traffic flows and a previously bad surface.

Table A8.13: Results of Evaluation of Provincial Roads Component Roads During Benefit Monitoring and Evaluation

Province Road From Km

To Km

Length (km)

2004 ADT

EIRR (%)

Quang Ngai PR621 1.0 23.6 22.6 113 6.5

NH1 – Duc Pho 0.8 12.0 11.2 79 5.3

NH1 – Do Moc 0.0 4.1 4.1 113 12.2

NH1 – Pho Vinh 12.0 16.0 4.0 86 8.5

NH1 – Binh An 0.0 13.6 13.6 86 8.7

Son Tinh – Tinh Hoa 0.0 12.9 12.9 128 17.3

NH1A – Minh Tan 1.0 5.0 4.0 83 (1.0)

NH1A – Duc Phong 0.0 5.6 5.6 98 1.7

Binh Dinh PR636 0.0 22.5 22.5 260 6.6

PR636B 0.0 20.0 20.0 123 4.2

Gia Lai PR670 0.0 45.5 45.5 68 14.5

PR662 0.0 80.5 80.5 83 26.1

Phu Yen DT642 0.0 41.0 41.0 277 20.9

3 Vehicle operating cost was calculated as a function of roughness (IRI) and average speed (km/h). Speed was calculated as a function of roughness, pavement width and curvature.

54 Appendix 8

Province Road From Km

To Km

Length (km)

2004 ADT

EIRR (%)

DT643 0.0 36.0 36.0 254 25.8

DT641 15.0 36.0 21.0 557 37.6

DT644 0.0 35.5 35.5 104 10.2

DT647 0.0 30.7 30.7 47 14.8

Khanh Hoa PR3 1.0 14.1 13.1 188 40.4

PR10 2.0 10.5 8.5 218 13.0

PR8 0.0 12.9 12.9 213 7.0

PR7 0.0 11.0 11.0 304 31.4

PR4 0.0 6.1 6.1 806 75.2

Khanh Vinh A 0.0 9.9 9.9 99 21.9

DR39 Dien Khanh 0.0 5.8 5.8 95 2.1

Xuan Son Road 0.0 7.4 7.4 86 6.9

PR9 1.0 6.0 5.0 431 4.1

Bin Tan – Suoi Cat – Trang E

6.0 15.7 9.7 41 (1.4)

Overall Sample 18.3

ADT = average daily traffic, EIRR = economic internal rate of return Source: BME Final Report, op cit.

3. Project Completion Review Mission Reevaluation

a. Approach

41. The approach to the reevaluation is the same as that employed at the BME. Later, and slightly more extensive, information has been obtained from provincial authorities that could be incorporated to check against the BME results. However, the same analytical problems remain. The policy of allowing some double bituminous surface treatment (DBST) sealing, but with budgets generally inadequate for the full length of the sections, resulted in alternating surface types. In some cases the alternating sections of sealed and unsealed surface are very short. Changes between sealed and unsealed surfaces often appear to be at arbitrary points rather than at the edge of settlements. Where there are alternating sections it is possible to combine the lengths of sealed and unsealed roads for evaluation purposes, and although it is analytically inconvenient, this does not present a major problem. 42. The main complication is that most of the PRC roads have already been further improved with the DBST sealing completed on sections left unsealed at the end of the Project. The evaluation of the original project works is difficult in these cases. As outlined by the BME, one option would be for a short evaluation period to be used, with a residual value for the project works applied, reflecting the difference in future costs of upgrading to sealed standard with and without the project investment. However the evaluation periods would then be too short to be meaningful. Another option would be for the project works to be considered as the first stage of upgrading, and to carry out an evaluation of the overall upgrading to calculate a rate of return from all costs and benefits. However, this would mean that the returns on the project works would not be determined, and also the costs of the subsequent upgrading needed for the evaluation would be very uncertain. As in the BME, the only practical method appears to be to carry out a nominal evaluation of the project works, without taking into account any subsequent

Appendix 8 55

upgrading, by estimating the performance of the improved road as upgraded during the Project, and estimating what it would have been if it had not been further upgraded by the province.

b. Implementation Costs

43. Construction costs have been taken as the final contract values. Economic costs have been obtained by applying the standard factor of 0.93. No resettlement costs were involved. PRC supervision costs have been estimated to be 17.5% of the overall project supervision costs. In most case the physical works on any section were completed in one year and, for simplicity, it has been assumed that all projects were completed in the calendar year in which they began. A period of 10 years of benefits has been used; a longer period might be more appropriate because much of the investment was in embankment and drainage works. However, it is probable that the majority (if not all) of the roads will be further upgraded within 10 years from the PRC work and thus the long term becomes increasingly less relevant. It is therefore appropriate to use a shorter evaluation period. A residual value of 50% has been used to represent the value of the works beyond the evaluation period.

c. Road Maintenance

44. Actual maintenance that would be carried out the roads in the base and with-project cases is difficult to determine. Virtually all the roads were originally unsealed, and usually had some form of gravel surface. However, these roads are not maintained in the standard way for gravel roads, which is with periodic gravel resurfacing and frequent grading. Roads generally receive annual ad-hoc repair works, plus periodic maintenance involving spot regraveling every few years. Normally it would be expected that works of the type carried out in the Project would reduce maintenance costs, but it is not certain that this occurs in practice. There is no evidence that maintenance practices are different on the unsealed improved roads compared with previous practices. Therefore this cost would apply in both the base case and with-project case and is not relevant to the reevaluation. Where a DBST surface has been provided these costs would not be incurred in the with-project case. Sealed roads require routine maintenance in the form of edge-break repair, patching, and crack sealing, with periodic maintenance in the form of a reseal typically required after 8 years. Unless there is road failure such maintenance costs would be very low and a standard amount of $250 per km per year has been applied, in line with the approach adopted at BME.

d. Road Condition

45. Roads have been classified according to general surface type and condition (good, fair, poor, or bad). On roads traveled by the mission, surface roughness was estimated from visual inspection and riding quality, with average vehicle speeds used as a supporting indicator. For other PRC roads the earlier BME assessments have been used as guidelines. The same preproject condition and photographs in the 2000 survey reports were used as the main source to estimate previous roughness levels. 46. A simple assessment of the overall condition of the roads before project implementation is necessary as a basis for determining benefits. In particular it is necessary to produce an estimate of roughness. The general estimates of roughness (IRI) that have been used are given in Table A8.14.

56 Appendix 8

Table A8.14: Assignment of Standard Road Roughness Indexes to Qualitative Assessment of Road Condition

Item IRI

Sealed Surface:

Good 4

Fair 6

Poor 8

Bad 10

Unsealed Surface:

Good 6

Fair 10

Fair/Poor 12

Poor/Bad 15

Bad 18

Very Bad 25 IRI = international roughness index Source: Project Completion Review Mission reevaluation

47. The assumption adopted was that, with ongoing maintenance, unsealed roads would remain in their preproject condition. For postproject condition, the general condition observed in the survey undertaken was that, with some exceptions, unsealed sections of the improved roads are in fair condition and sealed sections are in good condition. The initial roughness of the unsealed sections of the improved roads has been taken to be IRI 6. The initial roughness assumed for improved roads with DBST pavements is assumed at IRI 4 and with asphalt concrete paving at IRI 3. Deterioration rates of IRI 0.5 per year for unsealed and IRI 0.2 per year for sealed roads have been applied, to limits of IRI 10 for unsealed and IRI 6 for sealed roads. These general assumptions of roughness progression have been adjusted in cases where roads have clearly deteriorated at a faster rate.

e. Traffic

48. There was considerable uncertainty at the BME about the level of traffic on individual provincial roads, and this uncertainty remained at the PCR stage. A major traffic counting program would be required to accurately determine levels. Not only are there over 80 separate road sections or stand-alone bridge projects, it is clear that traffic levels vary significantly along some sections, requiring more than one count to provide representative data. 49. For the reevaluation the PDOTs were asked to supply traffic count data for a selection of the PRC roads on which 2004 traffic flow estimates had been made during the BME. Often these showed both lower and higher levels of traffic than the BME estimates. This was not unexpected. Generally there are difficulties in obtaining stable count figures because of the possibility of high variability in daily and seasonal traffic flows that often occurs on low-traffic rural roads. The PCRM carried out moving observer counts as a check. Where these indicated that the count data supplied was probably valid, they were used. Traffic flows have been estimated for the following five general classes of vehicle:

(i) motorcycle, (ii) cong nong (locally made light truck), (iii) light vehicle (car, four-wheel-drive, pick-up), (iv) bus, and (v) truck.

Appendix 8 57

50. Given the uncertainty in both the previous and current traffic counts it has not been possible to determine appropriate traffic growth rates from apparent trends. The feasibility study assumed that four-wheel vehicle traffic would grow at 5% a year and motorcycle traffic at 7% a year. The BME adopted the same growth rates as used for the NHC, i.e., 8% a year for four-wheel vehicles, and 12% a year declining to 8% a year for motorcycles.4 There is evidence that traffic growth has been much higher than this on some roads. Examples collected and checked are shown in Table A8.15.

Table A8.15: Traffic Flow History on Selected Provincial Roads Component Roads Vehicles per Day 2003–2006

Road Code DT615 DT621 DT662 DT636 DT641 DR39 Province Quang

Nam Quang Ngai

Gia Lai

Binh Dinh

Phu Yen Khanh Hoa

Vehicle type

Four-wheel

2003 — 51 159 270 96 248

2004 88 59 211 290 115 304

2005 206 69 249 300 127 359

2006 355 75 229 350 151 639

Motorcycle

2003 — 910 921 1380 2144 709

2004 1625 1010 1098 1290 2363 839

2005 2076 1222 1561 1380 3876 932

2006 3653 1358 1717 1690 4666 1013 —: not available Sources: Provincial departments of transport.

51. The traffic flow estimates have grown over the last 3–4 years at rates of between 10% and 35% a year for four-wheel vehicles. For motorcycles, increases averaging up to 50% a year have been recorded. The relatively rapid appearance of motorcycles is to be expected. During field interviews with residents and businesses served by the project roads, one of the most frequent responses confirmed that the usual first response of the people affected by the new road was to buy a cheap motorcycle. Half the motorcycles on the roads observed by the mission were transporting agricultural products. 52. The significant improvement in the condition of many roads will have resulted in generated traffic;5 in some cases most current traffic is probably generated. However, rather than the conventional 50% of benefit, at the BME the full road-user benefit was given to this traffic as for normal traffic because the costs associated with the preproject transport alternative were not known. 53. For the reevaluation, a growth rate of 15% a year has been assumed for four-wheel vehicles from the base year to 2011; half of this is taken as generated flow. Thereafter all traffic has been assumed to be normal, growing at an annual average rate of 8%. A similar treatment

4 These are very similar to the values adopted in the more recent Central Region Transport Networks Project (2005)

preparation work for provincial roads improvements. 5 This is the additional traffic resulting from journeys made only after the road project has been implemented, as a

response to the lower cost of travel.

58 Appendix 8

has been applied to motorcycles, with average annual growth assumed at 25%, again with half the resultant traffic flows considered as generated traffic. The costs and benefits described above have been used to calculate a rate of return on the capital cost of the works on the sample roads. The results of the reevaluation are shown in Table A8.16. There is a wide range in the EIRR values, from 0.7% to 63%, with the overall sample showing an EIRR of 20.3%. Nearly 50% of sample roads are below the normally required rate of 12%. As was the case at the BME, the overall picture remains one of viability, mainly because of the impact of the high returns obtained from a few roads. The EIRR results are slightly higher overall than the corresponding figures provided at the BME, primarily because the assumed future traffic growth rates are typically greater. Also the spread of EIRR values among the sample roads is slightly smaller than the comparable BME list. 54. The analysis carried out is approximate. There are other benefits to take into account. In most cases the improvements have provided an all-weather road or a road subject to only brief closures, where before there was only seasonal access in many cases. This is the key point made by interviewees. Irrespective of the current roughness of some of the gravel sections, as long as a motorcycle loaded with the farm’s produce can get through, the users consider that they have been well served by the improvements.

Table A8.16: Results of Reevaluation of Provincial Roads Component Roads at Project Completion Report Stage

Preproject

Province Road Length

(km) Surface Condition

2006 (eVPD)

EIRR (%)

Quang Ngai PR621 22.6 Gravel Poor 211 8.0

NH1 – Duc Pho 11.2 Earth/gravel Poor 110 6.3

NH1 – Do Moc 4.1 Earth Poor 156 11.5

NH1 – Pho Vinh 4.0 Earth Poor 128 9.0

NH1 – Binh An 13.6 Gravel Poor 124 9.1

Son Tinh – Tinh Hoa 12.9 Earth Poor 184 16.2

NH1A – Minh Tan 4.0 Gravel Fair 121 0.7

NH1A – Duc Phong 5.6 Gravel Fair 135 3.3

Binh Dinh PR636 22.5 Gravel Fair 588 8.5

PR636B 20.0 Gravel Fair 173 5.4

Gia Lai PR670 45.5 Earth Poor 99 17.8

PR662 80.5 Earth Bad 399 28.1

Phu Yen DT642 41.0 Gravel Poor 367 19.0

DT643 36.0 Gravel Poor 332 23.0

DT641 21.0 Gravel Poor 627 32.5

DT644 35.5 Gravel Bad 167 10.6

DT647 30.7 Earth Bad 102 17.8

Khanh Hoa PR3 13.1 Earth Bad 261 35.1

PR10 8.5 Earth Fair 290 15.5

PR8 12.9 Sealed Poor 292 7.6

PR7 11.0 Gravel Fair 323 28.4

PR4 6.1 Gravel Poor 777 63.1

Khanh Vinh A 9.9 Earth Poor 136 21.0

DR39 Dien Khanh 5.8 Gravel Fair 739 12.6

Appendix 8 59

Preproject Province Road

Length (km) Surface Condition

2006 (eVPD)

EIRR (%)

Xuan Son Road 7.4 Gravel Fair 125 12.1

PR9 5.0 Sealed Fair 561 5.2

Bin Tan – Suoi Cat – Trang E

9.7 Gravel Poor 77 4.4

Overall sample 20.3 EIRR = economic internal rate of return, eVPD = equivalent vehicles per day. Note: Motorcycle basic vehicle operating cost computed at one tenth that of average four-wheel vehicle. Source: Project Completion Review Mission reevaluation.

60 Appendix 9

REVIEW OF IMPLEMENTATION OF SECTOR DEVELOPMENT POLICY

A. Objective

1. The Viet Nam Road Administration (VRA) has its own legal status and has been given a substantial degree of autonomy with broad powers. Until recently VRA was established as a department directly subordinate to the Ministry of Transport (MOT). VRA is responsible for the administration and management of road transport infrastructure. Specific responsibilities include (i) planning; (ii) construction; (iii) maintenance and operation of highways; (iv) driver and vehicle management, including standards, regulation, inspection, and licensing; and (v) traffic safety management, including standards, reporting, and removal of hazards. 2. The main objective of the subproject for the implementation of sector development policy (ISDP) was to improve the management efficiency and operational planning of the national road network at VRA, in its subordinate bodies, and in those provincial departments of transport (PDOTs) in charge of national road network management. Six specific areas for improvement were defined in the terms of reference for the program.

(i) Development of a set of management indicators to be used for management and administration by VRA.

(ii) Development and application of effective planning procedures for efficient national highway network maintenance.

(iii) Utilization of a uniform road information management system (RIMS) with modern information technology to supply inputs for management and operation of the national highway network and for management and administration at VRA.

(iv) Procurement of equipment and collection of data necessary to operate the RIMS. (v) Based on the planning processes and systems established as indicated, an

assessment of the maintenance needs of the road network to determine maintenance funding requirements under specific maintenance strategies. A review of the budgetary process for allocation of funds to road maintenance and the determination of the adequacy of funding in terms of maintaining or improving the quality of the road network.

(vi) Review the possibility of establishing a road fund that would ensure financing for national highway network maintenance.

B. Consultancy Services

3. The contract for consultancy services for the ISDP component was signed in September 2004 and the work was carried out over a period of 15 months to 31 December 2005. The final report was submitted in March 2006. Input to the ISDP component amounted to 25 person-months by international specialists and 123 person-months by local specialists. During the period of the ISDP work it was necessary for VRA to coordinate the work of the ISDP and two other major projects running concurrently: (i) the road network improvement program financed by the World Bank (WB), and (ii) the national bridge management project financed by the Japan Bank for International Cooperation (JBIC). There was potential for substantial overlap between the targeted outputs of these two projects and those of the ISDP component.

Appendix 9 61

C. Implementation of Sector Development Policy Road Information Management System

1. Architecture

4. The software suite that was put in place at VRA by the ISDP comprised the highway development and management tool (HDM4) coupled to the RoSy® pavement management system.1 The selection of the systems and processes developed under the ISDP component was largely determined by the facilities that VRA already used. VRA management had previously selected and used HDM4 on trial for the management of the national highway network. Some agencies subordinate to VRA—specifically regional road maintenance unit number 2 (RRMU2) and its road repair and management companies (RRMCs)—were already using RoSy® software for management of the road network and Bridgeman software for the management of bridges. The ISDP aimed to expand the use of RoSy® to all RRMUs and PDOTs in charge of the management of national highways. The ISDP also put HDM4 into use at VRA in a form fully integrated with RoSy®. 5. The core of the ISDP component was to study and make recommendations on strategic and operational road maintenance planning for the national road network and apply effective procedures to implement the associated planning program. The strategic planning process was built upon the already established use of HDM4 in VRA, making use of HDM4’s module for strategy analysis which is designed to prepare medium- to long-term planning estimates of expenditure for road conservation and development under different budget scenarios. The accompanying procedures for operational road maintenance planning were developed from an application of RoSy®PLAN, a module of RoSy® pavement management system and the engine for analyzing optimum short- and medium-term maintenance programs for the total network as well as individual road sections. RoSy®PLAN has common ground with HDM4’s program analysis module. For bridge management the ISDP enhanced the existing Viet Nam bridge management system (VBMS) in use at VRA.2 6. The host that was developed and modified for the overall planning processes carried out by VRA was the ISDP’s RIMS. The heart of the RIMS is a unified database (UDB) with interfaces to RoSy®, HDM4 and VBMS. The UDB may be interrogated to produce a complete suite of reports, or subsets thereof, on the status of the present and planned national road network. 7. The RIMS enables network maintenance costs to be forecast over longer periods than is possible by manual processes and can assist in making the best long-term decisions aimed towards minimizing total network maintenance costs while maximizing overall standards. In the hierarchical context, the RIMS represents the planning component of VRA’s administration-wide management database that is currently under development.

2. Process

8. Substantial demands are made on VRA’s human resources by the operation and maintenance of the RIMS as a fully functioning, effective planning system. At the lowest level, the process design requires the provincial RRMCs to collect and input current road information

1 RoSy®, pavement management system software suite developed by Carl Bro Pavement Consultants, Denmark, Copyright.

2 Based on TRL’s BridgeMan program, improved, extended, and entirely converted to Vietnamese conditions.

62 Appendix 9

using the RoSy®BASE module of the RIMS, which is a database application that contains primarily road inventory and road condition data. At the provincial level a minimized version of RoSy®BASE is used. This includes just the functions that are relevant for data entry, updating, and export to the next level upward. The overall process design requires bridge information which is collected and entered by the RRMC directly to the VBMS. 9. At the next level of process design, the RRMUs consolidate and further process the imported data by using the full versions of RoSy®BASE together with RoSy®PLAN and the VBMS. The system design accommodates an outline program analysis at regional level. Exploratory one-year and multiyear work programs are assessed with and without budget constraints as precursors to the amalgamation into the national network picture that takes place at the third (and highest) VRA level. 10. The RIMS involves several hundred national highway staff at three organisational levels. The need for adequate staff resources to support the management and operation of the system is critical to its long-term success and sustainability. Similarly, it is an essential requirement that adequate recurrent cost budgets are assured for future system maintenance, the most important aspect of which is keeping data collection on the national network up to date.

3. Data Collection

11. During 2004, VRA collected road data covering approximately 11,600 km of the 17,300 km national network. Quality assessment by the ISDP of this data, based on input requirements for HDM4 calibration and application, exposed inaccuracies that significantly compromised the usefulness of the information for the implementation of the RIMS and associated planning procedures. Of the 94 VRA data fields, 37 keys fields were quality assessed. When tested against the validation rules for the 159 data fields used in HDM4, the records collected on more than 7,600 km were found to be inadequate because of data-entry errors or missing data cells. 12. The need for additional data became evident and a program of new data collection was set up under the ISDP. This was completed and reported on in September 2005. Spot checks were carried out on 365 km of road sections that had been surveyed in 2004 and on which the collected data had proved satisfactory. Data was also collected on an additional 200 km of previously unsurveyed roadway. The survey coverage is summarized in Table A9.1.

Table A9.1: Implementation of Sector Development Policy Data Collection Survey, August 2005

Item Unit Quantity HDM4 data collection km 200 GPS road centreline survey km 14,051 Spot check on 2004 road data km 365 Spot check on 2004 bridge data number 50 GPS = Global Positioning System; HDM4 = highway development and management tool version 4 Source: ISDP Final Report, March 2006. Carl Bro in association with SMEC International Pty Ltd

13. The total cost of completing the four items was $93,120. An additional $6,758 was used for staff training out of a total data collection budget of $100,000. The training given was not primarily associated with data collection. The expenditure on staff training was directed at the management and use of the RIMS generally. No funds had originally been allocated for training activities associated with the implementation of the RIMS.

Appendix 9 63

4. Staff Training

14. The RIMS training plan targeted the participation of staff from VRA, RRMUs, PDOTs and RRMCs. In addition, the training courses were aimed at some other secondary groups, including persons who were not directly involved with the operation of the RIMS but who, it was considered, should gain familiarization for support purposes or because they may be involved with the system in future through job rotation. 15. A training tour at four regional centers was completed from 1 to 19 August 2005. In total, 203 participants attended 2–3 day courses on RoSy®BASE and VBMS. Advanced training was provided in Hanoi in September 2005 for VRA and RRMU specialists on the other modules of the RIMS. Seven senior staff attended 4-week pavement management courses in Denmark. D. Subproject Extension

16. The original contract period was from 5 October 2004 to 4 October 2005. By the end of May 2005 it became evident that the subproject might well not be completed within contract and that a 3-month extension would be needed to complete all activities. Without an extension, it was the view of the ISDP consultant that critical activities would need to be reduced in scope and duration. In particular, analysis work that would arise subsequent to data collection activities would be late. Without this analysis the initial stages of implementation of the RIMS would be jeopardized. Training was also considered to be at risk; the advanced training for VRA staff in Hanoi in HDM4, UDB, RoSy®PLAN and other RIMS modules was seen as being unlikely to be set up before the second half of September 2005, which was too close to the existing contract completion date. 17. Another source of concern to the ISDP team arose from internal procedural delays experienced in the bidding for, and procurement of, road and bridge inspection equipment. With a delay in the issue of the equipment procurement contract, and with the delivery period for supply of 10 weeks commencing from receipt of the letter of credit from the supplier’s bank, it was judged that the expected receipt of goods could not take place before the end of October 2005. 18. The contract addendum providing for the requested ISDP extension was signed in late September 2005. The term of the ISDP component was extended to 31 December 2005. E. Equipment Acquisition

19. Due to difficulties in the process of opening the letter of credit for the supplier, the field equipment had not been received by the end of October 2005. An addendum to the equipment procurement contract was drawn up in November 2005 stipulating the latest date of delivery of the road and bridge inspection equipment as 15 December 2005. By the end of December 2005 the road and bridge inspection equipment had been delivered to the end users.

20. While the road and bridge inspection equipment was supplied through the international shopping procedure, computer equipment was bought locally through the national shopping procedure. Local procurement was packaged into three contracts to meet the requirements of Government procurement regulations for national shopping which stipulates a maximum value of D2 billion per contract. Territorial packaging assisted in the timely delivery of the goods to the

64 Appendix 9

48 PDOTs in August 2005. The scale of provision is indicated in Table A9.2 in summary form for the main items.

Table A9.2: Implementation of Sector Development Policy Computer Equipment Supplied

in August 2005 (number)

Item PDOT RRMU VRA MOT Desktop computer (with UPS) 140 7 Scanner 115 1 Notebook computer 19 8 6 5 Printer 121 3 Server 1

MOT = Ministry of Transport, PDOT = provincial department of transport, RRMU = regional road maintenance unit, VRA = Viet Nam Road Administration, UPS = uninterruptible power supply Source: Implementation of sector development policy

21. Some complaints were received at the ISDP from users about the perceived poor quality of equipment, particularly the computers. In October 2005, the ISDP requested all users to officially report on the working status of their equipment. The response was incomplete at the time of the ISDP final report when feedback had been received from two of the four RRMUs and 11 of the 48 PDOTs. Based on the feedback it was identified that a number of the computers suffered a common motherboard defect; this was rectified under warranty. F. Road Maintenance Fund

22. The ISDP’s review of the budgetary process for allocation of funds to road maintenance was fully reported, with a view taken on the adequacy of funding in terms of maintaining or improving the quality of the national road network. In particular, various options for the creation and management of a road maintenance fund were reviewed. Since substantive work was already ongoing on these issues by other agencies, in particular by WB, it was reiterated during midterm discussion on the scope of the ISDP’s remit that the subproject’s approach to funding sources for network maintenance should be limited to making only a general review of status. A prescriptive analysis was not entered into. 23. There is general agreement that more funds should be allocated to medium-term repairs to the national road network to protect past, current and future investments. There has been considerable discussion over the past 3–4 years (much of it led by MOT and the Transport Development and Strategy Institute) on the issue of road maintenance and the establishment of a road maintenance fund with suitable sustainable funding arrangements. Underfunding at the present time is of great concern because new projects will tend to take precedence over medium-term maintenance needs. 24. The potential sources of funding for an established fund represent one important issue, but of equal importance is the management and application of the resources that would be available from the fund. Exact details are unknown of the necessary medium-term maintenance work to be done across the network in respect of the current backlog requiring attention. There is no definition of the length of road that is approaching the stage where medium maintenance is economically justified. The primary cause of the situation is the scant attention and funding so far given by the Government to the need to set aside funds to establish and carry out road engineering and traffic data collection and management activities.

Appendix 9 65

25. Another major constraint to the efficient and effective functioning of the road network, including provincial and local roads, is the current institutional arrangement insofar as it engenders fragmentation of funding. There appears to be insufficient accountability, there is an apparent lack of coordination between various Government departments, and the responsibility for development and management of the network is sometimes placed in the wrong hands. G. Organization of Road Management

26. Up until recently, the planning of capital construction for national roads was separated from maintenance work activities, the two being carried out by different authorities. At ministerial level, MOT was responsible for the development of the capital construction plan and VRA was responsible for planning road maintenance. Most construction works were decided by MOT, with VRA being mainly responsible for developing procedures for construction. Under VRA, four RRMUs directly managed the maintenance of part of the national road network; 44% was managed by 48 PDOTs and their RRMCs under the authority of VRA. Any budget reallocation for national road maintenance work by RRMUs and PDOTs was decided upon by VRA. However, for new construction works on national roads that were assigned to the PDOTs these authorities were required to individually report to, and receive funds from, MOT. 27. In order to help improve efficiency the ISDP proposed reorganization of road management. The proposal was largely reflected in the March 2007 devolution of responsibility and accountability for planning programming and budgeting of capital works from MOT down to VRA. Henceforth MOT’s role will be to review VRA’s sector plans and budgets for consistency with general transport policy and for national transport budget allocations along with its other responsibilities. The formulation of plans and budgets for maintenance, and development planning and budgeting, will be centralized in VRA. Under ISDP’s proposal it was envisaged that RRMUs would develop 3–5 year plans based on the cost effectiveness of available road treatment options. More significantly, however, it was proposed that PDOTs, as well as the RRMUs, would report to, and receive funds directly from, VRA in all aspects relating to the development as well as maintenance of national roads. 28. In detail, the objective of the ISDP proposal was to concentrate strategy analysis and works formulation at the national level. With operations centralized in VRA, the only planning and budgeting function at RRMC and PDOT level would be traffic and data collection on road network condition, and the implementation of maintenance works. The RRMUs would formulate annual routine maintenance needs and medium and large works programs for the network, all based on the information generated by, and collected from, the subagencies. VRA would be provided with a list of annual routine maintenance needs from the RRMUs, together with annual and multiperiod programs of work proposals for medium and large projects. The strategic road network development program for the long term would be created entirely within VRA, based upon these inputs. H. Post-ISDP Review

29. In August 2006, 8 months after completion of the ISDP component, a review study concluded that the RIMS was not performing satisfactorily, mainly due to data entry problems in the PDOT road management offices.3 It was reported that VRA was not receiving the necessary inputs, either in quantity or quality, to adequately maintain the RIMS and perform strategic and

3 Special Assistance for Project Implementation (SAPI), JBIC, January 2007.

66 Appendix 9

operational road maintenance planning using HDM4, RoSy®PLAN and VBMS. Three main problem areas were defined.

(i) Limited appreciation of system requirements at most road management offices. Problems ranged from lack of competence on hardware matters (such as inappropriate hard-key installation to activate software under the licensing agreements taken out with the system suppliers) to a marked lack of technical knowledge on general road maintenance planning matters and the aims of the RIMS in particular.

(ii) Lack of suitable reference documentation on RoSy®BASE at all road management offices. Staff involved with data input often could not understand the manuals provided. It was reported that these manuals were more appropriately written for VRA specialist staff. In some cases difficulties were compounded because reference documentation did not relate to the installed version of RoSy®BASE.

(iii) Insufficient continuity of staff in working with the system. In many instances staff members involved in collection and input to RoSy®BASE were required to perform other unconnected duties and responsibilities. The net manpower resources assigned to the system were commonly inadequate.

I. Observations on the Implementation of Sector Development Policy

1. Data Availability on the National Road Network

30. The first of two serious issues concerning the ISDP component is the consequence of the lack of reliable information throughout the national road network. Some 85% of the existing national network database was found to be unusable in the ISDP’s RIMS because of possible data-entry errors and missing data. As a result, the ISDP’s design for strategic and operational road maintenance planning for the national road network could not be properly implemented, nor could the RIMS be brought to the status of a fully commissioned working facility on the national scale as intended. As is was lacking network information, the ISDP was understandably not in a position to make a consolidated assessment of the maintenance needs across the national road network or determine national maintenance funding requirements under specific maintenance strategies. 31. The ISDP itself did not have the time or the human resources to collect a complete set of new data throughout the national network to meet the needs of the RIMS. This is a large-scale endeavor in terms of management and logistics and it would not be reasonable to expect this to have been attempted by the subproject team. Although the terms of reference called for the “collection of necessary data to operate the RIMS”, realistically this can only be viewed as covering necessary information additional to that presumed to be already in the VRA database and adequate to bring the RIMS to an operational status. The low budget allocation for the ISDP data collection of $100,000 was consistent with this view. The ISDP would have needed possibly another 12 months to complete all the necessary data collection. 32. It was not until the end of April 2005 that there was agreement on the course of action to take in the face of data limitations across the network. It would have been better if, as a precursor to the ISDP, a comprehensive assessment of the VRA database on the network had been made separately. One of two courses should then have been taken: either (i) the setting up and implementation of an adequately resourced program of full data collection across the network based on a realistic budget; or (ii) a redesign of the RIMS for incremental introduction at

Appendix 9 67

regional level, with an integrated approach towards the national picture as experience was gained and the availability of funds permitted. 33. It is essential that future road inventory and data collection includes quality assurance and validation checks to ensure that the information is adequate such that it can be entered into the UDB and confidently used for strategy and program analysis. A comprehensive program of network data collection by VRA is ongoing and is expected to be complete by August 2007.

2. Staff Training in the Road Information Management System

34. The second main issue of concern is the approach to staff training under the ISDP component. In effect, staff training was treated more as an incidental add-on to the duties of the ISDP rather than a substantial component in its own right. There should have been an explicit budget allocation for training at the outset. The RIMS is complex and requires a wide range of skills. The majority of people work at provincial level and do not possess, or need, the expertise found at VRA. Two- or three-day courses, as were set up by the ISDP, can be appropriate for professional staff but they are unlikely to be as effective for data clerks in a road management office. 35. From the start there should have been an identifiable training section, staffed by associated professionals, within the ISDP team structure, and it should have been active throughout most of the 15 months of the work. This would have helped mitigate some of the less desirable effects on issues of human resource development in what was, to a notable extent, a technology-led exercise. Classroom instruction on RoSy®BASE and VBMS would have been more appropriate for the bulk of the staff connected with the RIMS than were itinerant seminar-style presentations by core specialists in the ISDP team. 36. A program of staff training, whatever its form, cannot be effective without relevance and continuity. Most of the participants on the training sessions run by the ISDP were road or bridge engineers, and many possessed good computer skills. However, it must be remarked that some of them were wrongly selected to attend as their regular duties had no connection with the software they were being trained on. It should be a strict condition that training should be useful to both participant and employer. 37. The special assistance for program implementation exercise of August 2006 produced recommendations for a comprehensive training program for staff engaged in the RIMS at road management offices across the provinces. If this goes ahead, new documentation will be written and instruction given on RoSy®BASE and VBMS within a structured, longer-term training regime. This is needed before anything else to ensure that the RIMS is eventually successfully implemented and sustained. During the project completion review mission (PCRM), it appeared that poorly trained staff may still be carrying out data entry for the ongoing collection program across the national network.

3. Other Observations

38. Insufficient time was given to the end users of the RIMS equipment to learn to use the road management tools provided by the ISDP. From the outset, it should have been more fully appreciated that the ISDP timeframe should at least have allowed the beneficiaries to carry out a full annual cycle of data collection involving entering this data into the UDB and subsequently

68 Appendix 9

carrying out strategy and program analysis with validated data across the whole national network. 39. The ISDP international consultant experienced difficulty in acting as purchaser for the goods procurement contracts. The most critical issues encountered were concerned with (i) opening letters of credit, (ii) importation and local transport arrangements, (iii) clearance of customs duties, and (iv) control of suppliers during the warranty periods. The problems encountered in these areas were the main cause for the request for an extension of the consulting services contract from October to December 2005. Ideally, it would have been preferable if equipment procurement contracts were kept separate and independent from consulting services contracts, particularly those that are short term such as the ISDP component. 40. The ISDP did not have a project steering committee, and the ISDP team management felt this lack severely. It was considered that this markedly affected implementation of ISDP work by compromising the cooperation between the ISDP, PMU1 and VRA. 41. VRA should seek to strengthen its role in coordinating concurrent projects financed by different donors, managed by different PMUs, and implemented by different consultant teams and contractors. All beneficiaries should endeavor to be involved in all phases of the project cycle, particularly at the beginning when project identification, planning, and design are formulated.

Appendix 10 69

FLOOD REHABILITATION WORKS

1. The provincial roads component (PRC) commenced in April 2000. In early 2001 the PRC was extended to include work related to 1999 flood damage in the four original coastal provinces, and Quang Nam, an additional coastal province immediately north of Quang Ngai. This program of emergency assistance was known as the 1999 flood rehabilitation works (1999 FRW). At vulnerable locations throughout the five provinces, both roadway and bridges had been damaged. Embankments, pavement, and drainage structures had suffered and the integrity of the substructures of bridges had been badly compromised. As a result, the level of service provided by the roads had been seriously degraded. Users were isolated from, or had extreme inconvenience and difficulty in accessing, places of work, education, health care, and other community facilities. The emergency program was defined and approved by the Government on 24 August 2000 and approved by ADB on 19 September 2000. The cost of the works carried out for the 1999 FRW, which in the event included both restoration and road improvement, was about $9.1 million. This was funded from savings under Loan 1653-VIE(SF). Apart from one national road, all the roads selected for restoration were provincial and district roads. The proposed works were designed essentially to reduce the risk of flooding and to ensure that the road would be in a serviceable condition for as much of the year as possible. The restoration works included the construction of higher embankments, the sealing of pavements, construction of causeways and ancillary structures, and specifically in Khanh Hoa the construction of new bridges to replace existing causeways. The roads restored (and in some cases improved) under 1999 FRW were as follows:

(i) Quang Nam: (a) National road 14E, 33 km (b) Provincial road 611, five bridges with a total length of 72 m (c) Provincial road 615, 8.5 km (d) Provincial road 609 and provincial road 610B, 9.8 km

(ii) Quang Ngai: (a) Road Son Tinh – Tinh Hoa, 12.9 km (b) Road Di Lang – Ba Tieu, 13 bridges with total length of 174 m (c) National road 1A – Cho Chua, 6.8 km (d) National road 1A – Duc Phong and National road 1A – Minh Tan, 9.6 km (e) National road 1A – Binh Minh, 10.8 km (f) National road 1A – Binh Phu, 10.1 km

(iii) Binh Dinh

(a) Provincial road 629, 2.3 km, including a 15 m bridge (b) Provincial road 630, 3.3 km (c) Provincial road 638, two bridges with a total length of 36 m

(iv) Phu Yen

(a) Road Doc Lap – Binh Kien – Hoa Kien, 17 km (b) Road Xuan Phuoc – Phu Mo, 30.7 km

(v) Khanh Hoa:

(a) Road Binh Tan – Suoi Cat – Trang E, 9.7 km, including a 40 m bridge (b) Road Khanh Binh – Ninh Xuan (Cau Khanh Binh), 1.9 km, including a 40

m bridge.

70 Appendix 10

2. Another similar program was subsequently included under the loan. This second program, which was known as Emergency Assistance for Flood Rehabilitation Component (Flood 2000), assisted in the rehabilitation of roads and structures damaged as a result of the 2000 floods. The Flood 2000 roads were grouped in two areas outside the Third Road Improvement Project area. Subprojects in four provinces in the north central region were administered from Vinh, and subprojects in nine provinces of the Mekong region were administered from Can Tho. The civil works involved 393 km of roads and 40 bridges. Implementation was initiated in early 2001 and works were completed by April 2003. 3. Instead of processing a new loan for flood rehabilitation emergency assistance to fund the necessary works for Flood 2000, ADB decided to use loan savings from 10 existing loans. For the Government this was financially beneficial because the said loans were provided under the old terms which stipulated a 1% service charge, while a new loan would have been subject to the then current terms, which included a 1.5% interest rate after a grace period. For the ADB the arrangement was expeditious. In order to avoid having to change 10 loan agreements, which would have been cumbersome, it was decided to use one of the existing loans as a repository for all the loan savings from the 10 loans that were to be used to fund the emergency assistance. Loan 1653-VIE(SF) was selected as the most convenient loan for this purpose because, among other things, the remaining period until completion of the original Project was long enough to carry out all the works required under Flood 2000. Thus in an innovative approach, the ADB Board of Directors approved in effect a new project financed from old (cancelled) funds, with the use of an existing loan to enable the emergency assistance funds to be readily available with a minimum of paperwork.

Appendix 11 71

RESETTLEMENT

1. In October 1999 project management unit number 1 (PMU1) signed a contract with the Research Centre for Gender, Family and Environment in Development (CGFED) to conduct monitoring activities of the processes of compensation, land acquisition, resettlement, and stabilization of life that were being carried out as part of the Project. CGFED pursued the following objectives:

(i) confirmation that the process of compensation for land acquisition and resettlement of affected households had been implemented according to the resettlement action plan; and

(ii) assessment of whether the main objective of the resettlement action plan had been achieved, based upon the criterion that the living standards of affected households must be equal to, or better than, their former living standards.

2. Monitoring was conducted with good effect in numerous tranches over several years throughout the life of the Project and results were reported quarterly and annually to PMU1 and ADB. Based upon detailed survey at completion, a core report presented an assessment of the living standards of project-affected people compared to the standards pertaining prior to project impacts. 3. The area required for implementation of the Project was 137.4 hectares (124 hectares at appraisal) with 4,562 households affected (4,220 at appraisal). At appraisal it was estimated that 529 structures would need to be completely removed, but the actual number was considerably less, at 183 structures. Resettlement impacts, particularly removals, along the additional new bypasses were less intense than those that would otherwise have been encountered under the original plan to retain the existing highway route through the corresponding urban areas. Table A11.2 gives a summary of PMU1 statistics on the Project’s resettlement processes. 4. For the national highway component Project as a whole, the average number of household affected was 11.4 per km. The density of households affected was much more intense in the northern half of the Project, where the rate was over 20 households per km compared with less than three households per km in Khanh Hoa in the south (Table A11.1 provides summary details). The cost of land acquisition, resettlement, and management averaged D 30 million per household, ranging between D 23 million and D 38 million without any significant trend by area.

Table A11.1: Distribution of Intensity of Resettlement Activity by Project Province NHC

Contract Province Affected Area Affected

Households Costa

(hectare per km) (number per km) (D million per km)

1 Quang Ngai 0.41 20.2 487

2 Binh Dinh 0.36 16.1 520

3 Phu Yen 0.44 6.7 258

4 Khanh Hoa 0.11 2.8 64

Overall 0.34 11.4 343 a.

Land acquisition, resettlement, and management. NHC = national highway component Source: Project management unit number 1

5. Nearly all resettlement issues had been resolved and compensation paid by May 2002, although there was some dissent about the level offered in a few cases and also some impediments to the removal of minor utility installations. The resolution of these took time, but all issues were finally settled by September 2003. The handover of land for commencement of work by contractors had originally been scheduled to take place in tranches much earlier, between September 1999 and July 2000. In the event, the extensive delay in getting resettlement compensation finalized was not in itself deleterious to the overall progress of the Project because there were concurrent impediments to making a timely start on substantive construction works on the highway. The pressure to complete the delayed resettlement processes would very likely have become acute in other circumstances if the administrative and technical management of the Project in its early stages had been more proficient. 6. CGFED’s later interview surveys conducted among affected persons and local authorities found a high appreciation of the positive impacts that the Project had produced on local economic development and the lives of local people. Improvements were evident in the material and spiritual lives of household members affected. Upgraded households by the roadside were perceived to be more spacious and visually more attractive. The proportion of properties with private water wells increased from 91% to 98% after compensation, the proportion with bathrooms rose from 74% to 86%, and the installation of septic tanks was observed in 56% of households following compensation, compared with 31% previously. 7. The surveys also revealed a marked improvement in the immediate environment of affected households brought about by a change in the types of fuel in daily use. The use of firewood, charcoal, and solid waste was less in evidence than previously. In CGFED’s earlier surveys prior to compensation, the proportion using these fuels was observed at 71%; after compensation the proportion had dropped to 55%. The use of electricity and kerosene was found to be more widespread. The use of liquefied gas, which previously had been registered in 6% of households, was now recorded in 27% of households. 8. CGFED concluded that the living standards of project-affected households had not been reduced by the resettlement processes and that their living environment had much improved. CGFED considered, however, that there were some limited grounds for complaint regarding the process of assessment of the compensation level. In a limited number of cases the policy adopted had not strictly followed that of other infrastructure development projects in the same localities. Decree 36-CP had not been fully adhered to in all cases, with the result that inequalities between households had been created. Another specific issue, which was highlighted in respect of the opening of the Phu Lam bypass, was the effect on householders whose land partially fell within the 20 m safety corridor extending outward from the edge of the roadway. While compensation for loss of land taken up by the roadway itself was paid, there was no compensation for the imposed restriction of use within the safety corridors, where householders were precluded from building structures or developing the land in other ways. Given that it remained permissible to grow crops in the safety corridors, it was recommended that loss of any such land should in future be compensated for based on the difference in compensation rates between residential land and farm land. A policy decision by national and provincial authorities is awaited. 9. Land acquisition and resettlement were not required under the PRC. No unanticipated indigenous peoples’ issues were encountered during the PRC implementation. In the period since project completion the authorities in Phu Yen have mounted a program to attract ethnic minorities away from remote hill areas to the vicinity of the improved PRC roads so they can

Appendix 11 73

avail themselves of the improved level of social services that can be more readily accessed there.

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Table A11.2: Resettlement Details

Affected Area (hectares)

Affected Households (number)

Affected Commercial or Public Facilities (number)

Location Total Building

Total Completely Removed

Total

Completely Removed

Land Acquisition and

Resettlement (D million)

Resettlement Management

(D million)

UXO Removal (D million)

A. National Highway Component - NHC

Quang Ngai Province 33.1 15.2 1615 27 27 0 36,486 2,448 Son Tinh District 2.3 1.1 11 2 1 0 1,240 0

Quang Ngai City 0.4 0.2 28 1 2 0 1,246 0 Tu Nghia District 1.3 1.3 148 0 5 0 5,575 0

Mo Duc District 18.9 6.1 755 0 16 0 15,869 0 Duc Pho District 10.1 6.5 673 24 3 0 12,556 0

Binh Dinh Province 42.4 21.5 1895 108 36 0 58,652 2,652 Hoai Nhon District 8.0 5.6 765 3 12 0 18,283 0

Phu My district 11.4 7.9 99 1 4 0 8,445 0 An Nhon district 11.3 2.4 266 1 5 0 12,263 0 Phu Cat District 8.3 3.2 223 23 7 0 6,400 0

Tuy Phuoc District 0.9 0.8 193 80 1 0 6,042 0 Qui Nhon City 2.4 1.6 349 0 7 0 7,219 0

Phu Yen Province 53.6 2.1 827 48 18 0 29,439 2,332 Song Cau District 28.2 0.8 468 23 8 0 15,763 0

Tuy An District 12.9 0.6 227 10 5 0 6,188 0 Tuy Hoa City 1.6 0.2 65 0 0 0 2,574 0

Tuy Hoa District 10.9 0.4 67 15 5 0 4,914 0

Khanh Hoa Province 8.4 1.3 225 0 10 0 3,778 1,301 Van Ninh District 7.7 1.3 185 0 10 0 3,464 0 Ninh Hoa District 0.0 0.0 17 0 0 0 85 0 Nha Trang City 0.7 0.0 23 0 0 0 229 0

Sub-total (A) 137.4 40.0 4562 183 91 0 128,356 8,733 12,207

B. Provincial Roads Component - PRC

No reported land acquisition and resettlement

Total 137.4 40.0 4562 183 91 0 128,356 8,733 12,207

UXO: unexploded ordnance

Source: Project management unit number 1.

Appendix 12 75

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Table A12.1: Overall Rating

Criteria Assessment Rating (0–3)

Weight (%)

Weighted Rating

Relevance

a Highly Relevant 3 20 0.6

Effectivenessb Highly Effective 3 30 0.9

Efficiencyc Less Efficient 1 30 0.3

Sustainabilityd Less Likely 1 20 0.2

Overall Rating Successful 2.0 a

Project objectives and outputs were relevant to the strategic objectives of Government and the Asian Development Bank.

b Project achieved its outcome. c Project achieved objectives in an efficient manner. d Project benefits and development impacts are sustainable. Source: Asian Development Bank.

Table A12.2: Rating System

Rating Value 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

Source: Asian Development Bank.