Document ofThe World Bank

Report No: 23818-ALB

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 13.5 MILLION(US$17 MILLION EQUIVALENT)

TO THE

REPUBLIC OF ALBANIA

FOR A

ROAD MAINTENANCE PROJECT

June 5, 2002

Infrastructure and Energy Services DepartmentSouth East Europe Country UnitEurope and Central Asia Region

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ALBANIAROAD MAINTENANCE PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 5

C. Project Description Summary

1. Project components 62. Key policy and institutional reforms supported by the project 83. Benefits and target population 94. Institutional and implementation anrangements 9

D. Project Rationale

1. Project alternatives considered and reasons for rejection 102. Major related projects financed by the Bank and other development agencies 103. Lessons learned and reflected in the project design 124. Indications of borrower commitment and ownership 135. Value added of Bank support in this project 14

E. Summary Project Analysis

1. Economic 142. Financial 163. Technical 164. Institutional 165. Environmental 186. Social 207. Safeguard Policies 22

F. Sustainability and Risks

1. Sustainability 222. Critical risks 223. Possible controversial aspects 24

G. Main Credit Conditions

1. Effectiveness Condition 242. Other 24

H. Readiness for Implementation 25

I. Compliance with Bank Policies 25

Annexes

Annex 1: Project Design Summary 26Annex 2: Detailed Project Description 31Annex 3: Estimated Project Costs 34Annex 4: Cost Benefit Analysis Summary 35Annex 5: Financial Summary 40Annex 6: Procurement and Disbursement Arrangements 41Annex 7: Project Processing Schedule 57Annex 8: Documents in the Project File 58Annex 9: Statement of Loans and Credits 61Annex 10: Country at a Glance 62Annex 11: Road Sector - Current Situation 64Annex 12: Policy Framework for Safeguard Compliance for Minor Adverse Impacts 70Annex 13: Road Safety Component Detailed Description 73Annex 14: Description of the method of measuremnent of the Key Performance Indicators 82Annex 15: National and Rural Road Staff Reorientation Programme 87

MAP(S)IBRD No. 31359 and IBRD No. 31862

ALBANIARoad Maintenance Project

Project Appraisal Document

Europe and Central Asia RegionECSE

Date: June 5, 2002 Team Leader: Cesar QueirozCountry Director: Christiaan Poortrnan Sector Director: Hossein RazaviProject ID: P066260 Sector(s): TH - HighwaysLending Instrument: Specific Investment Loan (SIL) Theme(s): Transport

Poverty Targeted Intervention: N

1 Loan [Xp Credit 1 Grant 1 Guarantee [ ] Other:

For Loans/Credits/Others:Amount (US$m): 17.00

Proposed Terms (IDA): Standard CreditGrace period (years): 10 Years to maturity: 40Commitment fee: 0.50% on undisbursed credit balances Service charge: 0.75%beginning 60 days after signing less any waiver

s el_ a _ _ _ _ _ Jg ie

BORROWER 3.85 0.00 3.85IDA 2.87 14.13 17.00Total: 6.72 14.13 20.85Borrower: REPUBLIC OF ALBANIAResponsible agency: MINISTRY OF TRANSPORT AND TELECOMMUNICATIONMinistry of Transport and TelecommunicationAddress: Rruga Abdi Toptani, Nr. 5, Tirana, AlbaniaContact Person: Cabinet of the MinisterTel: +355 (4) 233503 Fax: +355 (4) 232389 Email:

Other Agency(ies):Ministry of Local Government and DecentralisationAddress: "Skenderbej" Square, Tirana, AlbaniaContact Person: Cabinet of the MinisterTel: +355 (4) 233545 Fax: +355 (4) 233544 Email:General Roads Directorate (GRD)Address: Rruga Sami Frasheri Nr 33, Tirana, AlbaniaContact Person: IDA financed Roads PIU DirectorTel: +355 (4) 259 897/98 Fax: +355 (4) 259 897 Email: A.Ceco@Hotmail.com

Estimated Disbursements ( Bank FY/US$m):

Annual 2.00 I 4.00 6.00 3.00 1 2.00Cumulative 2.00 6.00 12.00 15.00 17.00

Project Implementation period: 4.5 yearsExpected effectiveness date: 11/30/2002 Expected closing date: 06/30/2007cPAD FO,Wd n

A. Project Development Objective

1. Project development objective: (see Annex 1)

The project development objective is to reduce transport costs on priority sections of the main roadnetwork, reduce accident rates, and provide better accessibility to rural areas and essential social services.

2. Key performance indicators: (see Annex 1)

Outcome Indicators1. Percent of population in the pilot areas with improved access to essential social services.

2. Traffic surveys demonstrate the achievement of expected reductions in travel time on priority roadsections.

3. National accident records indicate significant reductions in traffic fatality rates.

Output Indicators1. Compliance with agreed road standards and approved designs in segments designated for maintenance,

with significant reductions in road roughness.

2. Improved efficiency of the management and maintenance of the national and rural road network by (i)restructuring the national road administration (General Roads Directorate - GRD), (ii) introducing apavemnent management system, and (iii) strengthening the rural and municipal road administration unit(Ministry of Local Government and Decentralization - MLGD).

3. Designated 'black spot' areas improved in compliance with agreed designs.

4. Improved road safety by (i) developing the institutional capacity in the Ministry of Transport andTelecommunication - MOTT/GRD and MLGD to identify hazardous locations and to design andimplement physical measures to reduce road accidents at these locations and (ii) providing technicalassistance and equipment to improve cooperation between agencies and the Directorate for Road Safety(DRS).

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: IDA/R98-109 Date of latest CAS discussion: July 30, 1998

Albania's last full CAS (IDA/R98-109) was discussed by the Board of Executive Directors on July 30,1998. The 1998 CAS has, as one of its three strategic priorities, the promotion of sustainable privatesector growth, including the improvement of infrastructure with an emphasis on private sectorparticipation. A CAS Progress Report (IDA/R2000-20) was discussed by the Board of ExecutiveDirectors on March 21, 2000. The CAS Progress Report focuses on the same strategic priorities as the1998 CAS, but places increased emphasis on poverty reduction. A Growth and Poverty ReductionStrategy (GPRS) was prepared by the Albanian government. Both the GPRS and a new CAS based on thisstrategy will be presented to the Board in June 2002. Both the GPRS and the new CAS emphasize thatinfrastructure bottlenecks continue to deter economic growth and poverty alleviation by lowering themarginal productivity of private capital and limiting access by the poor to market opportunities. The roadnetwork is an essential element of the infrastructure necessary for growth and for attracting productiveinvestmnents, which in tum are the basis for job creation needed to make sustained poverty reduction areality. Roads are a major safety hazard in Albania, a country with one of the worst traffic safety recordsin the world. The proposed investments will help establish a sustainable mechanism to support a national

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Road Safety Program leading to improved safety conditions on the national and rural road networks and onstreets in urban areas. The objectives of this project are, therefore, consistent with both the CAS and theGPRS.

2. Main sector issues and Government strategy:

Transpoit demand has changed radically since 1991 due to structural changes in the economy: The roadfleet has grown from almost zero to 185,161 vehicles in 2000, the number of flights at Rinas Airportcontinues to grow rapidly, and traffic at Durres Port has more than doubled since 1995. On the other hand,both rail freight and passenger traffic have fallen to about 10% of their pre-1991 peak. Albania hasresponded to the change in transport demand by investing in transport and privatizing a number oftransport operations. Road investments, mostly donor financed, initially concentrated on the mainEast-West (TEN Corridor 8) and North-South corridor north of Durres, and most sections are now eithercomplete or under construction or preparation. These investments were complemented by donor financedprojects directed at rehabilitating other sections of the primary and secondary road networks, or communitybased improvements in the tertiary road network. Road maintenance was not emphasized initially becausepre-1991 roads were not designed for heavy traffic and had to be rehabilitated before they could beefficiently maintained. Significant investments were also undertaken at the ports of Durres and Vlora, andat Rinas Airport. Limited investments were made in Albanian Railways. While the condition of transportinfrastructure has improved as a result of these efforts, much remains to be done. For example, only 10%of the national road network is presently in good condition, with only an additional 22% in fair condition.The Government presently spends about 2% of GDP on transport (11.7 billion Leks in 2000). The Bankassisted the Government in preparing a Medium-Term Expenditure Framework (MTEF) in 2000, and aspart of that exercise recommended that the Government increase its level of transport expenditure to about3% of GDP, in part to continue catching up with this road rehabilitation backlog.

The Government has also established a number of market-based policies since 1991 with the objective ofincreasing transport efficiency and coming into harmony with European Union (EU) regulations. Albaniahas adopted a satisfactory Road Act and has increased its road maintenance budget in stages. All roadworks (excluding routine maintenance) are carried out by contractors selected on a competitive basis.Inter-city road transport is fully deregulated and the Government has initiated road vehicle registration andinspection systems. The Government is currently updating the 1988 Railway Law to make it moreconsistent with the EU regulations. The new law is expected to be passed by the end of 2002. TheAlbanian Railways, responsible for the 440 km long railway network, has been transformed into a jointstock company (JSC). The only railway international connection, with Montenegro, has been recentlyreestablished from the border up to Bajza (reconstruction of the missing link, between Bajza and Shkoder,is expected to be completed by late 2002). A potential international connection with Macedonia wouldrequire the construction of 67.6 km of new lines at high cost (2.6 kan in Albania and 65 km in Macedonia).An independent Port Authority has been established at Durres, a Seaport Law is under preparation, andport operations are being progressively transferred to the private sector. The Government has also createdindependent JSCs to manage Rinas Airport and operate the air traffic control system, and subscribes tomost international air traffic conventions.

The Government's transport policy has evolved iteratively with support from the donor community.Government/donor coordination meetings for the transport sector are held about once each year. TheGovernment's transport policy, as summarized in the MTEF, is satisfactory. The main policy directionsfor the road sector are:

The North-South and East-West road corridors should be completed;

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- Road maintenance should be given priority;- The road maintenance budget should be increased from US$7.6 to US$10 million per annum;- Road vehicle inspection centers should be rehabilitated, a vehicle registration information system

introduced, and driver education further improved; and- The Inter-ministerial Road Safety Council should be strengthened.

The Govemment gives increased prominence to road maintenance because recently rehabilitated roads needto be maintained with modem methods, a nascent contracting industry has developed to do the work, androad organizations have matured to the stage where they can make the transition from force account tocontract maintenance. The Govemment's road maintenance strategy is elaborated in a letter sent to theBank at the time the Emergency Road Repair Project was approved (Cr. 33030, December 7, 1999, Annex8). The Govemrnment declared that: (i) national roads (3,221 km, essentially the primary road network)would be the responsibility of GRD while rural roads (about 11,800 km of secondary and tertiary roads,including 4,220 km transferred from GRD in 1996, plus 1,000 km of urban streets) would be under theresponsibility of the Commune Councils or Municipalities reporting to MLGD; (ii) new rural roadorganizations would be established; (iii) all routine and periodic maintenance would be carried out bycontract in the future; (iv) maintenance management personnel would be trained and salaries set to competewith the private sector; and (iv) private contractors would be trained. This strategy was confinmed atnegotiations and provides the framework for the project.

Under the project the condition of the national and rural road networks would be improved by (i) carryingout periodic and routine works by contract under the project, as discussed below, and (ii) assuring anadequate budget for future road maintenance. The National Roads are financed via the state budget andforeign loans. The Regional Road Directorates (RRD) prepare requests for annual budgets that arecollected and vetted by GRD. GRD, through MOTT, then submits a combined road budget to theParliament for approval. After approval of the Government budget, the Ministry of Finance sends funds toGRD and directly to most RRDs. Rural Roads are financed through the state budget and local budgets insome cases supplemented by foreign funding. Only limited central government resources are being madeavailable for rural roads at present (Annex 11). Urban roads and streets are financed by the CommuneCouncils and the Municipalities through the state budget. Besides funding from the national budget theGRD has funding from foreign loans and aids. The country's present tax structure is generally in alignmentwith EU requirements, but still needs some adjustments (see Country Report Albania-Road TransportCharges, NEI Transport for PHARE, 1999). Overall tax collection for general government revenue needsto be greatly improved and a mechanism established that assures adequate funding for the road authoritiesto maintain the desired performance of the public network. At this stage the Government is not pursuing theestablishment of a Road Fund for Albania and the Bank concurs with this approach. In order to improveroad maintenance funding: (i) the Government confirmed its intention at negotiations to increase by 5% peryear its maintenance budget; and (ii) the project includes technical assistance to help design an improvedroad user charges system.

Road management and maintenance practices would be improved by (i) contracting out routine andperiodic maintenance using modem techniques on a demonstration basis and (ii) preparing to reorganize theRRDs and RuRDs, respectively under the responsibility of GRD and MLGD, to carry out maintenance bycontract rather than by force account. GRD has successfully reduced its staff from 5,405 in 1995 to about1,500 in 2002 without social disruption. This was achieved by separating about 1,900 persons and bytransferring about 2,000 persons to RuRDs under the responsibility of MLGD in 1996. The staffreductions were successful in part because the domestic contracting industry was developing at the sametime that GRD was reducing its staff. However, the RRDs are still significantly overstaffed. There wereno private civil works contractors in Albania in 1991. Now there are more than 50, several of which are

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qualified for pavement works. These contractors developed their skills and expanded their business underprior donor and IDA-financed projects. The project includes technical assistance and training to help withthe transition to contract maintenance, and to assess its impact.

The development of the local road construction and consulting industries would be helped with contractsfinanced under the project, the reorganization of RRDs/RuRDs and substitution of contract maintenancefor force account works discussed above, improvements in the system of road maintenance finance, andtraining in modern business and maintenance practices.

Traffic safety is a significant social, economic and public health issue in Albania. The annual fatality rate,based on official statistics which are probably understated, has been slowly decreasing over the past sixyears as drivers gain experience, roads are improved, old vehicles are replaced, and the traffic safetycampaign begins to take effect Nonetheless the fatality rate in 2000 was the highest in central/easternEurope and about ten times the average rate in the EU (Annex 11).

The Government has recognized the serious road safety situation and has taken steps to introduce a newRoad Code (based on the Italian Code) and supporting Regulation for its implementation. In addition,Ministerial support has been given for the establishment of a high-level National Road Safety Council(NRSC) to give leadership to the Road Safety Program developed under the IDA National Roads Project.The NRSC was established through Order No. 13, Council of Ministers, Republic of Albania, of January15, 2002. Coordination of the Program will be the responsibility of the Directorate for Road Safety (DRS)within MOTT, that also acts as NRSC Secretariat. Within the traffic police, a specialist police accidentunit is to be established to strengthen the development of the traffic accident database. The nationalinsurance company, INSIG, is supporting government initiatives in road safety, has provided financialsupport to the Municipality of Tirana (for new traffic signal equipment), and has an agreement to assist thetraffic police (with equipment to improve law enforcement activities). The Ministry of Health hasidentified traffic accidents as one of the top three major causes of death in Albania, while injury victims oftraffic accidents are significant users of hospital emergency services. The traffic police perceive that themain causes of accidents include poor road condition, lack of safety features (e.g., signs, pavementmarking, operating traffic signals), high speed, and high alcohol levels of drivers. The police have noappropriate accident reporting and analysis system, and no speed radar or alcohol-testing equipment at thistime. The project includes 'accident black spot' improvements, equipment for the traffic police, andtechnical assistance and training to further improve road safety.

3. Sector issues to be addressed by the project and strategic choices:

The principal issue to be addressed is the need to make the Government administrative structure responsiblefor road maintenance and safety more effective. Some institutional strengthening for the road sector hasbeen carried out under previous IDA projects, including the use of contracting for major works. However,the basic structure at both the national and rural levels is still woefully inadequate, and the level ofavailable local financing is not sufficient to meet even the minimal needs of the local roads subsector.Technical assistance in this project will be used to establish the level of road funding required andrecommend the Road User Charges approach needed to begin to meet these requirements.

Strategic choices have already been made regarding the use of contracting for routine as well as periodicmaintenance, although decisions will have to be made regarding the timing and method to move from theremaining force account operations to contract operations. Currently what little periodic maintenance thereis, is contracted out, while all routine maintenance is done by force account. Also the division ofresponsibilities between MOTT and MLGD, and the appropriate structure for the planning and contracting

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authorities, needs to be fin-ther improved. Some background work has been done in this area and is includedin a report prepared by a Swiss consultant (Iteco). The Govemment's recently adopted policy regardingdecentralization will no doubt affect the outcome of the final structure. Lastly, ways of providing for anadequate level of road user charges (and how these charges should be collected) will be established duringproject implementation.

The recent opening of several new donor-funded highways has enabled drivers to attain excessively highspeeds that have resulted in a number of serious crashes. Lack of adequate safety provisions (e.g. trafficsigns, road markings, pedestrian facilities) on the roads was a contributing factor to the accidents. Thepolice lack the necessary equipment to effectively enforce speed limits (i.e. radar) and to be able to checkfor drunk-driving activity. Both GRD and MLGD lack the expertise to systematically identify accidentblack spots and to conduct traffic safety audits as an integral part of the roads planning, design, andconstruction process. All government transport agencies (including the traffic police) would benefit fromsupport in implementing the new Road Code and its associated regulations.

Improving road safety is urgently needed and the project will seek to reduce accurately reported trafficfatality rates (fatalities/10,000 vehicles) by 10% or more. Continuing work begun under previousoperations, road safety will be addressed in the project by:

* creating greater awareness of road safety issues at all levels, starting with a high level seminar in whichthe National Road Safety Council (NRSC) and the Directorate of Road Safety (DRS) in MOTT shouldplay a major role and assert their mandates;

* providing technical assistance, training and equipment to the DRS to enable this new unit to function asthe NRSC secretariat and the coordinator of road safety activities in Albania;

* developing the institutional capacity within GRD and MLGD to conduct road safety audits duringplanning, engineering, and construction of roads, to identify hazardous locations (accident black spots)in their road networks, and via pilot projects to implement appropriate remedial measures to reducetraffic accidents at selected priority locations;

* providing technical assistance, training and equipment to the traffic police to improve traffic accidentdata collection, recording, storing and analysis, and to introduce effective traffic law enforcement inaccordance with the new Road Code; and

* providing technical assistance and advisory services to the traffic police with respect to traffic lawenforcement and publicity campaigns in Tirana and to support the introduction of new regulations.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

The project consists of two components: (i) Maintenance of National and Rural Roads; and (ii) TrafficSafety, each comprising works, goods, and technical assistance sub-components. The proposed projectseeks to improve the overall maintenance of Albania's road network, including both the national and ruralroads, both in the near term and on a continuing basis. Measures to increase general road safety awarenessand strengthen coordination of road safety programming would support the establishment of an appropriateenvirownent for a multidimensional, sustainable Road Safety Program. The introduction of targetedenforcement strategies, combined with integrated road safety campaigns and remedial measures at accidentblack spots, would aim to reduce the number of traffic accidents and minimize the offsetting effects ofimproved road conditions and expected higher traffic speeds.

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The priority road sections for maintenance will include access to at least one of the regional hospitalsrecently upgraded under the IDA-financed Health Services Rehabilitation Project (Credit No. AL 26590).This will provide an opportunity to compare accessibility to the hospital before and after maintenance ofthe access roads. Technical assistance will fund an assessment of project impact on rural and healthfacility accessibility. In addition, traffic counts and surveys for this purpose will be included in theproject's overall program of counts and surveys.

Contracting out of routine maintenance will be introduced through the project. GRD will begin lettingprivate routine maintenance contracts for a portion of the overall network in various locations to test anddemonstrate the feasibility of this procedure. Nevertheless the total amount of contracting out will not,during this project, be so large as to cause reductions in GRD employment beyond normal attrition (acommon standard for attrition is usually 2-3% per year so here in five years 10% can reasonably beexpected). However, the project will include an assessment of the organizational, social and financialimpacts of a generalization of the proposed approach to the whole network, as it is expected that thisproject will set up a counter-example of quality maintenance being performed under contract and that willlead to further expansion of contracting out in the future.

The project will include the following components:

1. Maintenance of Highways 18.65 89.4 15.11 88.9National and Rural Roads

WORKS: About 500 km of roads andbridges of the national road networkand about 500 km of roads and bridgesof the rural road network.GOODS: Equipment for road surveys;office equipment, vehicles and suppliesfor effective project implementation;equipment for road databasedevelopment and implementation.TRAINING AND TECHNICALASSISTANCE: restructuring of thenational and rural road management;assessing impact on rural and healthfacility accessibility; recommendingappropriate road user charges based onfunding needs; services to prepare theengineering design and carry outsupervision of road works; training forthe private road construction industry;consultant services for PIU operation;consultant services for environmentalmanagement, training and publicinfonnation campaigns; project audits.

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2. Traffic Safety Highways 2.20 10.6 1.89 11.1

WORKS: physical measures toimprove safety selected priority areasand accident black spot locations.GOODS: traffic control devices;data storage/retrieval and analysissystem for Traffic Police accident unitand for the MOTT General Directorateof Road Safety; safety enforcementequipment.TRAlNING AND TECHNICALASSISTANCE: road safety awarenessseminar for senior GOA and otherofficials; consultant services andtraining for MOTT to supportimplementation of the DRS and itsworking procedures; consultantservices and training for GRD;consultant services and training forMLGD; consultant services andtraining for the Traffic Police.

Total Project Costs 20.85 100.0 17.00 100.0

Total Financing Required 20.85 100.0 17.00 100.0

2. Key policy and institutional reforms supported by the project:

* Restructuring the road authorities responsible for the main and rural road networks and establishmentof effective operational procedures for the restructured organizations. This will involve reflecting theGovernment's policy of decentralization, while recognizing the lack of effective institutions at the locallevel for planning and executing road maintenance operations and will include the introduction of aPavement Management System (PMS) and tools for economic evaluation of projects.

* Gradual replacement of the remaining road construction and maintenance units with contractoperations, including routine and winter maintenance.

* Creation of appropriate capacity in the agencies responsible for road maintenance to preparemulti-annual maintenance and rehabilitation programs, including financing needs..

* Support for the National Road Safety Council (NRSC) and its Secretariat, the Directorate of RoadSafety (DRS), in MOTT. Confirmation of an approved multi-dimensional Road Safety Program forAlbania and the financial means to make it sustainable.

* Support the phase-out of leaded gasoline by revising the tax structure so that unleaded gasoline is 5%cheaper than leaded gasoline.

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3. Benefits and target population:

The benefits of the project include an improved road network in the short tern, resulting from the civilworks carried out under the project, and consequently reduced transport costs. Of more importance will bethe creation of institutions capable of carrying out effective road maintenance operations over the longerrun and a means of financing for these operations. If successful, the project would lead to improved roadtransport, with lower vehicle operating costs, that would make Albanian production of agricultural andindustrial goods more competitive. Deaths in road accidents and the losses because of injuries and propertydamages are estimated to be in the order of 2-3% of GDP, not including the very high social andhumanitarian costs. Improvements in traffic safety represent a significant economic saving and socialbenefit for Albania. As the unleaded gasoline prices become competitive, vehicular lead emissions, whichgenerally contribute as much as 90% of all lead emissions into the atmosphere, will be reduced resulting inreduced health impacts from exposure to lead.

The target population would include all road users, including transport operators, agricultural andindustrial producers, and the general population using the road network. The rural road component wouldparticularly benefit the rural and farm population, including a large percentage of low income persons. Theproject would also provide jobs in the short run through the employment opportunities created by the civilworks components, and in the long run to the extent that the project assists the country in attractingproductive investment and in expanding economic activity.

Although the project is not specifically targeted to alleviate poverty, the poor will benefit from this project,especially the rural poor (almost 90 percent of Albania's poor are rural). The project will:

* Improve access to job opportunities for the poor;* Improve access to social amenities such as the regional hospitals recently upgraded under the

IDA-financed Health Services Rehabilitation Project (Credit No. AL 26590);* Improve the opportunity for trade and movement of people by lowering transport costs and creating

jobs in transport construction and service delivery. This will improve access to local markets foragricultural products, as well as better access to health and education;

* Improve system-wide transport efficiency thus increasing potential for economic growth by enhancingcompetitiveness and export base of Albania, resulting in overall increase in labor demand and income;and

* Reduce accident rates, many of which involve pedestrians and non-motorized vehicles that traditionallyconstitute a high percentage of the poor.

4. Institutional and implementation arrangements:

The cooperating agencies would include the GRD under MOTT, MLGD, and the Traffic Police underMinistry of Public Order (MPO). The Project Implementation Unit (PIU) already established for ongoingroad projects in GRD would be responsible for project management, including procurement, for allcomponents of the project. MLGD would be represented in all matters concerning the rural road network.For the implementation of the rural road works, the PIU will keep a high level of involvement of theregional and municipal governments, including asling them to appoint the members of the Bid EvaluationCommittee for works carried out in areas under their jurisdiction. All legal issues and the actions of the twoMinistries (MOTT and MLGD) will be coordinated through a Memorandum of Understanding (MOU).The road safety component, excluding civil works, would be the responsibility of the DRS under theguidance of the NRSC, with support from MOTT, GRD, MLGD and the Traffic Police.

The project would have one Project Implementation Unit (PIU) under GRD and would include at least one

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staff from the MLGD. The PIU would consist of about six persons with skills in general management,procurement, highway engineering, enviromnent, and accounting. The IDA financed Roads PIU withinGRD, currently implementing the Emergency Road Repair and the National Roads Projects will implementthe proposed project. This avoids creating a new PIU. Moreover, the PIU capacity will not be overstressedbecause the National Roads Credit will be closed on June 30, 2002, i.e. before the RMP implementationstarts up. It is also expected that GRD will collaborate with MLGD to gradually establish projectimplementation capacity on all aspects of rural and municipal roads within MLGD, as GRD already hasexperience in implementing Bank-financed projects. The road safety component, excluding civil works,would be the responsibility of the DRS but all procurement would be carried out by the IDA financedRoads PIU within GRD. The PIU will contact directly each entity for matters relating to that entity inorder to ensure an efficient implementation of the project.

During project preparation, an assessment of the GRD's capacity to conduct procurement was carried out.The PIU has a core of qualified staff with experience in Bank procurement. The agency has benefited fromyears of assistance by intemational consultants in project monitoring, procurement, and supervision.However, the experience so far with prior and post review of the PIJ's procurement activities has indicatedthat the procurement procedures are not always transparent and that the PrU is subject sometimes tooutside pressures. Therefore, the agency is rated high risk. In order to address the deficiencies identifiedduring the capacity assessment, an action plan was prepared and agreed at negotiations (see Annex 6).

D. Project Rationale

1. Project alternatives considered and reasons for rejection:-

As Albania is currently reviewing options for implementing its decentralization process a number ofalternatives are still under consideration regarding the responsibilities for rural road maintenance, includingthe role of the Ministry of Local Government and Decentralization and its relationship to GRD as well as tothe District and Municipal governments. A likely outcome is that MLGD will have overall responsibilityfor these roads, but will engage GRD to assist in carrying out the initial contracting and would rely on theregional administrations to implement road works.

The possibility of retaining routine maintenance as a force account operation was considered. Thisalternative was rejected on the ground that contracting is proving to be more efficient in many countriesaround the world and it would be more difficult to establish an effective force account operation in Albaniathan it would to establish an effective contracting operation. However, it is anticipated that there will be agradual transition from force account to contracting. This will contribute to the objective of avoidingemployment disruption and loss of earniings (see Annex 14).

Regarding financing, an alternative option would be establishing a Road Fund rather than paying for roadmaintenance operations through the budget. This option has been rejected by the Government, who at thisstage is not pursuing the establishment of a Road Fund for Albania.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

__ _____ > Bank4j - - oc&olsyti-

Implementation DevelopmentProgress (IP) Objective (DO)

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Bank-flnancedRoads, ports, and railways Transport Project (P008258) S S

Project cost: US$ 30.4 millionCompleted 1999

Rural roads Rural Roads Project S S(P008267)750 km rehabilitatedProject cost: US$33.6 millionCompleted 2000

National roads National Roads Project S S(P036060)33 km constructed13 km rehabilitatedProject cost: US$ 66.0 millionClosing June 2002

Roads emergency Emergency Road Repair S SProject (P068853)221 km restored to serviceable

conditionProject cost: US$ 14.5 millionClosing: Dec. 2003

Other development agenciesEIB Quick StartItaly Quick StartEBRD Quick StartEU (PHARE) Various + Quick StartKuwait Fund

IP/DO Ratngs: HS (Highly Satisfactory), S (Satisfactory), U (Unsatsfactory), HU (Highly Unsatisfactory)

The total foreign contnbution to the transport sector in Albania is estimated at Euro 500 million since thebeginning of the country's tansition to a market economy, including completed, ongoing, and proposedprojects. The main donors are (in million Euro): EU (160), IDA (115, including this proposed project), EEB(105), Italy (46), Arab funds (31), Germany (24), Kuwait (15) and EBRD (10).

The EU Transport program from 1994 to 1999 was Euro 138 million (Euro 88 million already contracted,Euro 45 million disbursed) and reached a cumulative amount of Euro 160 million with the 2000 allocation.Among the sector studies, the EU intends to fund: (i) a Land Use policy study with emphasis on improvingurban planning along new bypasses, (ii) the establishment of road design and construction standards, and(iii) a contribution to the road safety program. Specifically, the EU currently has an unused allocation forMOTT of Euro 0.65 million that is available for road safety activities, that may be used to address safetyissues on EU-funded new highways. Map IBRD 31359 (attached) illustrates the contribution of all donorsto the improvement of the national roads network.

3. Lessons learned and reflected in the project design:

The World Bank has had extensive experience in road maintenance in many places around the world, and inmany of the Eastern European countries as well. One important lesson leamed many years ago is theimportance of giving priority to maintenance over new construction when financing is constrained, based onthe superior rates of return that almost invariably are achieved by the maintenance operations. As anumber of the Eastern European country operations are now at or near completion, there are a number ofother important lessons that emerge.

First among these is that contracting is more efficient than force account operations. Virtually allBank/IDA operations now provide for periodic maintenance to be carried out on a contract basis. Routinemaintenance is more problematic since the tasks are more difficult to define precisely. Nevertheless, thereis growing experience in European countries such as Finland and Sweden where routine maintenance isbeing carried out on a contract basis, frequently with significant savings compared to the force accountoperations that preceded the change. It is now timely to consider contracting for routine maintenance morewidely. Furthermore, the successful use of performance-based specifications in several countries haveindicated that this approach may be preferable under certain circumstances, to the traditional "bill ofquantities" approach to contract out routine maintenance. While contracting out routine maintenance willbe introduced under the proposed project, adoption of performance-based specifications is reserved forfuture operations when the local contracting industry has acquired more sophisticated knowledge ofcontractual procedures.

The Bank's experience with the provision of financing for road maintenance is more mixed, but severallessons are clear. First, it is important that road users be assessed for the cost of maintaining the roads,just as other basic infrastructure charges for its services (as in the case of electric power or telephoneservice). The most appropriate charges are those most directly related to the use of the roads, with fueltaxes as the largest contributor in most cases. Second, while there are frequently conceptual objectionsfrom the IMF to the establishment of a Road Fund, with specific road user charges dedicated to placementin the Fund for use only for roads, it is clear that this mechanism leads to a higher level and moreconsistency in financing than if the funds are provided from the general budget. The agreement reachedbetween the World Bank and the IMF for conditions under which Road Funds could be consideredacceptable should be given attention when using this mechanism. While establishing a Road Fund is not arequired condition under the proposed project, it may be an option to be considered by the Government inthe future.

The volatility of the Albanian civil service (frequent changes in project officials, including PIU) affectingthe project day-to-day decision-making process hampered the implementation of previous projects. Thiswas improved by the establishment of an energetic and competent "independent" PIU during projectimplementation. The selected PIU members were domestic consultants, paid in accordance with localmarket rates, and acting with the delegation and autonomy defined in the appraisal and credit agreementdocuments. This lesson has been applied to this project.

The World Bank has had extensive experience in traffic safety in many places around the world. Designingand implementing a Road Safety Program is a difficult and long term process requiring strong politicalsupport and commitment. From all the involved agencies as well as other government bodies, it requires:(i) increasing awareness of traffic safety issues, (ii) good coordination, (iii) strong ownership, and (iv)adequate funding. There is also an opportunity in Albania to develop community-based road safetyinitiatives making use of cross-sector linkages via other ongoing IDA projects involved with education,health, social services and community works.

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From the perspective of safety, public road transport needs special attention. In 1993 a World Bank studywas launched to analyze the road safety situation in Central Europe and give recommendations how to stopthe negative trend. Hungary was among the countries covered by the study (the other countries were:Bulgaria, Poland, Romania, Czech Republic and Slovakia). The study assessed the financing needs of roadsafety in the six countries at US$ 414 million over three years. It recommended actions, as well asinvestments in the areas of user behavior, road infrastructure and checks and vehicle safety inspection. Theassumption was that if all multi disciplinary measures are implemented, the deteriorating safety conditionscould be reversed and injuries reduced by 10-15%, fatalities by 15% in 3 years. If the implementation isstringent this could even lead to a 25% improvement One country, Hungary has implemented therecommended program and has even achieved better results.

Experience in implementing IDA and other donor-financed projects in Albania points to common issues assummarized in the Report of Donor Coordinators' Meeting of February 16, 2001:

* Feasibility and detailed engineering studies need to be completed to good standard before a projectbegins;

* Current land use and/or transport/urban master plans (with utility locations) are required beforedetailed designs can be prepared;

* Land expropriation arrangements need to be completed before civil works contracts start;* Where appropriate, a timely and firm comritment from the Government to reimburse VAT/customs

duties is required; and* It is important for the Government to assure the continuity of key personnel in Ministries and transport

organizations.

All of these lessons have been taken into consideration in the design of this project.

4. Indications of borrower commitment and ownership:

The Government has given frequent expressions of its interest in improving its capacity for carrying outroad maintenance, including the letter from the Minister of Transport and Telecommunication and in itssupport for the findings of the Swiss study mentioned above. Also, the Ministry of Local Government andDecentralization confirmed its commitment to the project in a letter dated July 17, 2000.

The Government of Albania (GOA) recognizes that the road maintenance issue needs to be addressed assoon as possible ("Road Maintenance Strategy" letter from Minister of Finance and Minister of Transportto the President of the World Bank, dated November 1, 1999), and asked the Bank for assistance infinancing a Road Maintenance Project. This strategy and priority have been reiterated in a letter fromMinister of Transport and Telecommunication and Minister of Local Government and Decentralization tothe World Bank's Country Director for Albania, dated May 13, 2002.

The Govenmment's serious commitment to improve road maintenance in the country is also shown in the2001-2003 Medium-Term Expenditure Framework (MTEF), published by the MOF in December 2000.The MTEF includes a specific recornmendation to "increase recurrent budget allocations for roadmaintenance (both national roads under Ministry of Transport and local roads under Ministry of LocalGovernment)". Accordingly, the resource ceilings for 2001-2003 include increasing the share of GDPallocated for economic services (mainly transport) from 1.1% to 1.6% of GDP, with a priority of spendingon maintenance (see MTEF para 80 & 83).

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The Government has also given a conmmitment to initiating a Road Safety Program (RSP); notably inMOTT's 1998 correspondence with IDA about implementation of the approved RSP emanating from theNational Roads Project and, more recently, by their approval of a new Road Code and Regulation, and theestablishment of the NRSC and supporting Secretariat (DRS), through Order No. 13 of the Council ofMinisters, dated January 15, 2002. Key Govermnent agencies (i.e. MOTT, GRD, MLGD, MPO (TrafficPolice) and Ministry of Health) have expressed their strong support for improving road safety and to acceptIDA support to implement the RSP.

5. Value added of Bank support in this project:

Albania has received substantial amounts of financial support for road construction and rehabilitation fromthe European community and from international and bilateral organizations. The Bank's broad experiencein assisting in institutional strengthening of road administrations to better manage and maintain nationaland rural road networks, support and implementation of traffic safety policies, and its ability to coordinatewith a large number of co-financiers puts it in a unique position to fill this role. Also, its experience withroad financing arrangements and the execution of high level and influential road safety awareness seminarswill provide useful background for assisting the Government in these areas. Thus the Bank has acomparative advantage in undertaking the project.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):* Cost benefit NPV=US$24.2 million; ERR = 75 % (see Annex 4)O Cost effectivenessO Other (specify)

The economic analysis of investments on the national road network has been carried out using a cost -benefit approach. The selection of national road segments was also based on a social assessment of thenational roads network undertaken at the same time as the initial national roads condition survey. Theselection of rural roads to be included in the project was carried out using an approach based on costeffectiveness.

The economic analyses have been carried out on 969 km of national roads over a ten year analysis period.The original selection of roads for purposes of the economic analysis was made on the basis of their currentcondition in terms of road roughness and their suitability for periodic maintenance treatment. Out of a totalof 1,057 km of candidate roads, 88 kmn are in need of reconstruction and are not therefore suitable formaintenance works. The economic analyses were carried out using the World Bank's HDM4 simulationmodel. A set of 22 road sections made up the analysis. Within this set of 22 segments, eight constitute'social access' roads, which were included on the grounds of providing essential access to relativelydeprived and dislocated communities, i.e. their economic justification is based on the additional production(value added') which they are expected to unduce, which was not quantified.

The final selection of segments, to fit within the budget limit, comprises six segments of which two arederived from the social access roads work.

All the six road sections outside Tirana lie above the 12 percent rate of return benchmark with EIRR valuesranging between 25.6 percent and 343.9 percent. The NPV:CC ratio ranges between 0.46 to 14.11.Overall, the periodic and routine maintenance of national roads component of the project has an economicIRR of 82 percent with an NPV of US$ 21.97 million at 12 percent rate of discount.

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Road Section Name Lengh AD (US$ million) EIR Ratio Ranking

Vora - Fushe Kruja 12.0 4,722 7.67 343.9% 14.11 1Cerrik - Elbasan 14.0 32,325 337 101.5% 4.80 2Tirana - Elbasan 48.0 2,387 7.00 86.0% 3.22 3Tepelene - Carshove 63.0 880 2.22 53.0% 1.84 4Paper (N7) - 14.0 1,409 1.27 50.3% 1.54 5Shtepaje _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Kukes - Krume* 91.0 604 0.44 25.6% 0.46 6Total 242.0 - 21.97 82% -

* social access roads# at 12 per cent rate of discount

Evaluation of the candidate national road sections within Tirana was carried out using a discounted cashflow approach based on simulation estimates of current traffic on the links and assumed future trafficgrowth rates. An analysis of network effects was not undertaken. Positive returns are recorded with NPV,at 12 percent rate of discount, being US$ 2.25 million and EIRR 47.5 percent. Taken together, the nationalroads and Tirana urban road sections give values of US$ 24.2 million for NPV and 75 percent for theEIRR.

Two sensitivity analyses have been carried out. First, increasing costs by 20 percent and second, a fall inbase year traffic of 20 percent. For the national roads periodic and routine maintenance component, theproject shows a greater sensitivity to the rise in costs as opposed to the decline in traffic. In both instanceshowever, the project still shows a relatively high overall rate of return. For the Tirana urban road sections,the analysis shows a marginally greater sensitivity to the change in traffic. The overall rate of returnremains very positive.

The rural road component of the project focuses on the provision of improved accessibility to and frompopulated rural areas. Rural communities are scattered throughout the country, even in the mountainousinterior and eastern regions of the country. Out of a total rural roads network of about 4,000 kIn, about1,700 km of candidate roads were compiled and, following consultations with MLGD staff at the regionaloffice level, a total 1,340 km of candidate roads were evaluated.

An estimate was made of the population that would be expected to realize direct benefits from the roadworks envisaged and a construction cost for each link was estimated depending on length of section andterrain. From this information a cost 'cost per capita' of reaching the population associated with that linkwas derived. In addition to this quantitative cost effectiveness factor, priorities within each Prefecture andDistrict have been established on the basis of the following qualitative factors:

* Improved network continuity in terms of inter-regional accessibility;* Improved conditions in corridors leading to known areas of extreme poverty;* Improved conditions in corridors accessing areas of agricultural significance and/or tourism potential;* Reduced travel times in corridors used for access to educational and health facilities.

Based on these factors project road links (totaling about 235 km) were selected for periodic maintenancefrom the ranked set of candidate links until the budget allocation (US$ 4 million) was exhausted. Furtherroad sections of about 265 km will receive routine maintenance at a cost of US$ 0.96 million. The totallength of rural roads maintained under the project will be about 500 km.

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2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)

As there are no revenue earning enterprises associated with this project, a financial analysis was notundertaken.

Fiscal Impact:

The Govermment counterpart financing requirement, estimated at US$3.85 million equivalent, includingfinancing of 20 percent of the civil works component, will be spread over the five year life of the projectimplementation period. An initial deposit of US$ 300,000 equivalent will be a condition for theeffectiveness of the Credit. The following table indicates the impact this counterpart funding will have onthe GRD's budget, taking into account only funds provided from within the country. If there is no increasein road budget, at its peak year counterpart funding will require 3.3% of total funds. With the requirementfor a 5% annual real increase in the local roads budget the counterpart funds reach also 3.3% of total fundsin the peak year.

Fiscal Impact (US$ millions) l

Yer Counterpart Roads Budget Counterpart as Roads Budget Counrpart as %Yer Funds (GRD internal % of budget w'h 5% p.a. of budget_____ ~~~~only) _ _ _ _ __ increase _ _ _ _ _ _ _

1996 21.7 21.71997 0.7 0.71998 13.3 13.31999 31.9 31.92000 29.4 29.42001 36.1 36.12002 36.1 36.12003 0.4 36.1 1.1% 38.0 1.1%2004 1.3 36.1 3.3% 39.9 3.3%2005 1.3 36.1 3.3% 41.8 3.1%2006 0.6 36.1 1.7% 43.9 1.4%2007 0.3 36.1 0.8% 46.1 0.7%

3. Technical:

GRD is an experienced road organization that has implemented three previous IDA-supported projects. Inaddition local consulting and construction companies, developed and strengthened during implementation ofIDA projects, have now sufficient capacity to undertake road maintenance contracts. There shouldtherefore be no major technical issues other than to ensure that quality control is adequately administered,for which foreign consultants will be engaged.

4. Institutional:

The restructuring arrangements and institutional strengthening included in the project will be critical to itssuccess as one has to acknowledge that Albania still needs to continue to improve its governance and thatsupervision and other Bank procedures need to be particularly thomugh. The project includes a program oftechnical support which will contribute to the establishment of good administrative procedures andpractices. The application of World Bank procedures for the selection of consultants should help in hiringthe most capable experts to achieve the desired results.

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4.1 Executing agencies:

For the road maintenance component (Component 1) the executing agency will be MOTT working throughGRD, in close coopertion with MLGD regarding the rural network. For the traffic safety component(Component 2) the executing agency will be MOTT through DRS, and in coordination with GRD, MLGD,and the Traffic Police under MPO. All legal issues and the actions of the two Ministries (MOTT andMLGD) will be coordinated through a Memorandum of Understanding (MOU). A second MOU signedbetween MOTT and the Municipality of Tirana will addresses issues related to the inclusion in the projectof roads located within the city. A summary of the arrangements for project implementation is showngraphically in the figure below.

Summary Scheme for Project Implementation

3 ~~~~~~~~~~D C A |TbWol ni|

r Ministry of Public Ministry Of Transport Mlinitry of Local |Order *nd Telecommunication Go> Governmenta*ndICd Ta nDecentralization l

I TafcPolice G 6eneral Roads l

+ + j ~ ~ ~~irectoate rana Mncplt

Road Main enance

I ~~~~~~~Project Implet"entation…- -I - - -…- -l _ Unit

AMP aMP A~~~~~MP

Trafic Safety NainlRaaRural Roada

4.2 Project management:

One PIU would manage the project: the IDA Financed Roads PIU within GRD. MLGD will provide thePIU with at least one additional staff who will be trained during project implementation so as to establish aproject implementation capability in MLGD, including contract management. The PIU will be responsiblefor all the procurement under the proposed project. The PIU will contact directly each entity for mattersrelating to that entity in order to ensure an efficient implementation of the project. The PIU is currentlysatisfactorily implementing two IDA financed projects: the Emergency Road Repair Project (ERRP) andthe National Roads Project. The latter will be closed on June 30, 2002. Consequently there should be nooverload of the PIU to assume responsibility for implementing the proposed project.

4.3 Procurement issues:

All Bank-financed procurement would be in accordance with the Bank Guidelines. Procurement for goodsand works would follow the Bank Guidelines for Procurement under IBRD Loans and IDA Credits(January 1995 as revised in January and August 1996, September 1997, and January 1999). Procurementof consulting services would follow the Bank Guidelines for Selection and Employment of Consultants byWorld Bank Borrowers (January 1997 as revised in September 1997 and January 1999). The capabilityalready established under GRD (IDA Financed Roads PIU) will facilitate the procurement to be carried outunder the project Procurement arrangement and actions to enhance the capacity of the PIU to conductprocurement under the project are described in Annex 6.

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4.4 Financial management issues:

The PIU is currently implementing two other Bank-financed projects (the National Roads and theEmergency Road Repair) and the accounting, reporting, disbursement, budgeting and auditingarrangements, including procedures and policies, have been established prior to the financial managementassessment. These arrangements are based on the same accounting system in use by the Emergency RoadRepair Project. Staffing is adequate. The project accountant have been working for several years insimilar positions in Bank-financed operations, within the GRD, gaining substantial experience inaccounting and disbursement matters, in infrastructure projects.

5. Environmental: Environmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

In accordance with World Bank Safeguard Policies (OP/BP/GP 4.01 Environmental Assessment) theproject is rated environmental category B and an Environmental Management Plan (EMP) has beenprepared by the Borrower (see Annex 8). The project is expected to have only minor negative impacts onthe environment, as it will focus on road rnaintenance and rehabilitation activities, such as filling andpatching potholes and areas of bituminous pavement that have become loose/dislodged; fixing and paintingparts of the drainage structures, culverts and pipes; replacing lost material on shoulders, improving roadsafety conditions by posting hazard warning signs and physical barriers at high risk spots. All works willbe carried out on the existing road, with no resettlement or land acquisition activities anticipated.

Slight negative impacts primarily of a temporary nature are associated with the construction phase andwould be restricted to road works related to movements of men, and materials (asphalt, rocks, dust, noiseetc.), excavation of borrow pits, disposal of construction wastes, and handling and storage of materials(concrete, asphalt, lubricants, fuels, paints). After completion, the project will have positive indirectimpacts on human health and safety through decreased number of accidents; reduced air pollution frommore even travel speeds on rehabilitated road sections; cleaning up of solid waste from roadside drains; andreduced water pollution resulting from rehabilitated drainage systems. Materials (e.g. asphalt, stone, etc.)would be supplied only from sources with approved licenses, permits, and/or approvals for environmentand worker safety, and any equipment used during construction would meet intemationally recognizedstandards for environment and worker health and safety.

A significant issue that has emerged is the dumping of solid wastes into highway drainage channels. Duringthe initial surveys it was found that in and around settlements, drainage channels and right-of-way on ruralas well as national roads all over the country are being used as receptacles for garbage, plastic bags,broken machinery and household appliances and other trash. The practice while being detrimental to publichealth, is also instrumental in deteriorating the condition of the roads due to reduced drainage capacity. Anumber of such sites have been identified under the project, some constituting major dumping groundsrequiring significant clean up efforts. Therefore, while pursuing a policy of doing no harm, the project willalso pursue opportunities for environmental improvement by cleaning up waste from roadside drains andorganizing public awareness campaigns on solid waste management.

Currently, the tax structure for gasoline in Albania favors the use of leaded gasoline as this is cheaper thanunleaded gasoline. A higher tax rate for leaded gasoline to reflect the social costs of the negative healthimpacts caused by lead is needed.

The EMP prepared by the Borrower addresses these issues and has been discussed in public meetings heldin each of the 12 Prefectures in Albania. The EMP was also released in-country in the local language.

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5.2 What are the main features of the EMP and are they adequate?

The EMP includes: mitigation plan, monitoring plan, implementation anrangements, institutionalstrengthening needs, estimated costs, and a record of the public consultations. The World Bank reviewedthe document during a pre-appraisal mission and requested some revisions and clarifications. Provisions ofthe EMP will be applied to all activities undertaken as part of the project by the GRD and MLGD,including design of road works. As appropriate, mitigation measures specified in the EMP will beincorporated in each bidding document for works and contractors will be required to build into their bidrates the envisaged costs for these mitigation measures. The terms and conditions of the contracts willrequire compliance with the EMP as a condition of the contract to proceed and Qbtain payments.

Solid waste clean up will be entrusted to licensed operators, with appropriate provisions in their contractdocuments to carry out visual inspections for hazardous materials before handling, segregate wastefractions as necessary, use appropriate safety measures while handling and transporting the wastes, anddispose at authorized dump sites with the approval of the local authorities.

The institutional strengthening measures include a local environmental engineering consultant in the PIU toassist with the preparation. of bidding documents for the solid waste clean up, and to conduct publicinformation campaigns and organize community drive to better collect and dispose of solid waste. Theconsultant will also provide training on the environmental management aspects of the project to theMinistry of Environment and its regional offices, the region level road agencies of the GRD and MLGD,and the community focal persons (on solid waste management issues). The EMP recommends that theGRD/MLGD initiate a dialogue with the appropriate government agencies on the solid waste issue andundertake measures to prohibit waste dumping on the roads.

The Borrower agreed at negotisations to implement the EMP through the institutional arrangementsdescribed in the document. The supervising consultant contract will include assistance for EMPimplementation.

5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: February 20, 2002

Final draft EMP has been delivered to the World Bank Infoshop.

5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmnental irnpacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

Stakeholders were fully consulted. Description of who were consulted, when, where, and the method ofconsultation are fully described in the EMP Section 11. Public hearings were held in all 12 Prefectures. Theparticipants included national and local public institutions, NGOs and members of affected communitiesliving close to road sections to be rehabilitated under the project. During these consultations, theChairpersons of the Prefects assisted by their technical staff and Directors of the Regional and Rural RoadDirectorates addressed questions on the environmental and social aspects of the project. The stakeholdersaffirmed their commitment to support the project in its stated environmental objectives, especially withregards to the clearing and disposal of road side solid waste.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

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A detailed monitoring program designed to validate the effectiveness of the mitigating measures is includedin the EMP. The monitoring program will be the responsibility of the Road Directorate, in collaborationwith the Ministry of Environment and its local offices.

6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

The critical need for increased access and connectivity, safety and comfort, and access to employmentopportunities are among some of the fundamental social issues in the transport sector in Albania.

Access to basic health, educational, and market services for people in isolated and remote towns has been acriterion in the selection of roads for maintenance. Consultations have revealed that people continue toremain in regions that are isolated, which provide few economic opportunities, and where access to healthcare, education and other social services are expensive or simply unavailable; current obstacles includingthe difficulty of finding affordable housing, the cost of relocating, and the lack of information about jobprospects elsewhere or confidence of finding work are major reasons why people continue to live in suchlocations. It appears that the ability of these towns to withstand the restructuring depends on whetherinvestments are being made to build on the diversification opportunities in the local economy. Maintenanceof these roads will be a first step in this direction.

It is expected that road users will benefit from the proposed improvements on account of comfort, safety,vehicle breakdown, and reduced travel time as well. Equipment items (i.e. reflective traffic signs andthermoplastic paint for road markings) will improve management of the traffic system; enforcement oftraffic regulations will improve driver's behavior, and reduce the number of accidents for passenger andfreight vehicles, non-motorized vehicles, and pedestrians. It is also expected that jobs in the roads sectorwill be created for communities through the local community contracting system.

The differentiated taxation with a 5 % difference in favor of unleaded gasoline is expected to facilitate theadjustment of consumer habits and demand, resulting in significant social benefits in terms of improvedhuman health.

The positive benefits that will accompany this road maintenance program will far outweigh any temporarydiscomforts/ disruptions in traffic, materials transport, noise and dust at the construction site, or risk ofwater contamination by improper handling of concrete, asphalt or solvents. (An EnvironmentalManagement Plan has been drafted to address these issues). No adverse impacts such as removal of kiosksor fences that overhang/extend into the right-of-way (ROW) are expected in the maintenance of nationalroads network given the limited scope of maintenance work along the highways. However, since the exactscope of civil works and engineering design plans for the rural roads and accident "black spots" are stillpending, a policy framework has been put in place for compliance with safeguard issues relating topotential minor adverse impacts that may arise in the context of the project (See Annex 12).

The project's social development outcomes are therefore improved access to economic opportunities andsocial amenities, especially in rural areas; enhanced road safety; improved health; and increasedaccountability of local govemments to its constituents.

6.2 Participatory Approach: How are key stakeholders participating in the project?

The key stakeholders in the project are the GRD, RRDs, local municipal govemments, private sector

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contractors, the local automobile clubs, the road transport operators' association, the chambers ofcommerce and road users. Since all maintenance work will be carried out within the existing ROW, and thescope of civil works is largely limited to unblocking drainage canals; filling potholes; repairing brickworkor stonework; backfilling; painting traffic markings; erecting hazard warning boards, no land acquisition isenvisaged, and social impacts are expected to be positive. There will be no forcible removal of secondaryclaims on the ROW. Groups that may be adversely affected by civil works are encroachers in theright-of-way; they will only be persuaded to remove encroachments by peer pressure from communities thatare eager to see their community roads maintained. If communities are not willing to remove suchstructures other sites will be chosen for maintenance.

The project will incorporate an information campaign to provide advance notification to the public toencourage voluntary removal of structures on the ROW, and to win public support for the project.Communities will also participate in the project as monitoring agents to ensure timely and adequateimplementation of rural road maintenance. The traditional approach to enhancing sustainability of projectsis to seek contributions in cash or kind from beneficiaries, so that they develop a stake in the success of theproject. However, given the depth of poverty, particularly in rural areas, the project preparation teamdetermined that requiring beneficiaries to make monetary contribution is regressive. The level of disrepairand lack of maintenance of roads is partly attributable to the rampant corruption and the diversion of publicfunds. As a modest measure against this, the local community contracting component of the projectincludes a requirement for public local disclosure of allotted funds against a time-table. With thisrequirement, the project seeks to begin a process of civic participation and establish an opportunity forpeople to take on new roles as consumers who pressure governments and their representatives for provisionof efficient services.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

Consultation on road safety issues and concerns were carried out with the public in different parts of thecountry during project preparation. Issues of access, the need to generate local employment opportunities,and the need to improve road safety emerged as priorities of communities nation-wide. The projectpreparation team also consulted with NGOs and relevant Albanian implementing agencies in other IDAprojects to deternine their approaches to increasing public participation in the project. An NGO (TheInstitute for Public Opinion Studies) will also disseminate information regarding allocation of funds andmapping of responsibilities on community contracts.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

A PIU will implement the project and will be responsible for all procurement under the project. Issuesrelating to the institutional relationship between the PIU and the NGO is expected to be finalized during theinitial stages of project implementation.

6.5 How will the project monitor performance in terms of social development outcomes?

Social development outcomes may be monitored using the following indicators: the number of rural roadsselected and maintained for access, the number of community-based sub-projects identified andimplemented or completed, and the number of local jobs created. Further, reduced traffic accident rateswill also be monitored throughout the project. The priority road sections for maintenance will includeaccess to at least one of the regional hospitals recently upgraded under the IDA-financed Health ServicesRehabilitation Project. This will provide an opportunity to compare accessibility to the hospital before and

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after maintenance of the access roads. Technical assistance will fund an assessment of project impact onhealth facility accessibility. Participation of cormnunities in measuring these outcomes are also beingplanned and local NGOs will be involved in securing participatory performance monitoring, as well as indetermiining the indicators of improved access and reduced travel times to social services.

7. Safeguard Policies:7.1 Do any of the followin safe rd policies a I to the roect?

Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes O NoNatural Habitats (OP 4.04, BP 4.04, GP 4.04) _ Yes * NoForestry (OP 436, GP 436) O Yes * NoPest Management (OP 4.09) C) Yes * NoCultural Property (OPN 11.03) O Yes * NoIndigenous Peoples (OD 4.20) D Yes * NoInvoluntary Resettlement (OP/BP 4.12) * Yes 0 NoSafety of Dams (OP 4.37, BP 4.37) 0 Yes 0 NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes 0 NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes 0 No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

See the environmental and social sections above. At an early stage in project preparation it was consideredthat resettlement issues might possibly arise from small business encroachments on road rights-of-way, anda policy framnework for safeguard compliance for minor adverse impacts was prepared. As the projectdefinition has evolved, and more emphasis has been placed on routine maintenance (e.g., pothole patching)rather than periodic maintenance, the probability that any resettlement issues will arise has become evenmore remote. Nevertheless the safeguard compliance framework remains incorporated in the project (seeAnnex 12 and also Annex 3 of the EMP). No land acquisition is expected under the project.

F. Sustainability and Risks

1. Sustainability:

The sustainability of the project will depend on the degree of Government commitmnent to the restructuringof the road maintenance and the performance of the NRSC and its supporting Secretariat (DRS) in carryingout road safety measures. The project will address the issue of road management capacity, roadmaintenance efficiency, and prioritization of activities according to economic criteria. However, it will not,beyond the project implementation period, provide leverage to ensure that sufficient resources are beingallocated to the conservation of road assets, and that only economically sound road construction projectsare being undertaken. These two specific aspects should continue to be monitored through other Bankactivities such as follow-on projects or adjustment lending.

2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):

From Outputs to Objective1. Govenmment may not allocate sufficient S The Government's serious commitment toresources to road maintenance and improve road maintenance in the country isrehabilitation. shown in the 2001-2003 and 2002-2004

Medium-Term Expenditure Frameworks(MTEF), published by the MOF in December

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2000 and June 2001.Loan condition to increase the annual budgets ofthe GRD for maintenance by not less than 5percent in real terms during the life of theproject.

2. Government may not adopt sound H Continued dialogue between the Bank and thepersonnel management policy, including Government on staff appointment. The projectadequate training and reduced high level includes appropriate training for staff involvedstaff turnover. in the project

3. Members of the Cabinet and/or M Approval of a new Road Code and Regulation,Parliament may not thrust traffic safety and the establishment of the NRSC andissues on the Govermnent Agenda to supporting Secretariat (DRS), through Orderdesign a real and efficient Road Safety No. 13 of the Council of Ministers, datedPolicy. January 15, 2002 is a good indication of

commitment. A high level road safety seminaris expected to help maintain the focus on safety.

4. MOTT/DRS, MLGD, GRD, Traffic M Comprehensive TA is being provided.Police, and NRSC Staff may not Key Government agencies (i.e. MOTT, GRD,understand the interdisciplinary nature of MLGD, MPO (Traffic Police) and Ministry ofthe subject and work efficiently together. Health) have expressed their strong support for

improving road safety and accept IDA supportto implement the RSP.

From Components to Outputs1. Government counterpart funds may not S 2001-2003 Medium-Term Expenditurebe made available on a timely basis. Framework (MTEF) December 2000.

Loan condition to provide counterpart funds ona timely basis with deposit into the ProjectAccount.

2. MOTT/DRS, MLGD, GRD, Traffic M Road Maintenance Strategy letter from MinisterPolice, and NRSC staff may not be of Finance and Minister of Transportresponsive to agreed changes. (November 1, 1999) asked the Bank for

assistance in financing a Road MaintenanceProject; MLGD letter of 17 July 2000 confirmsits commitment; Comprehensive TA is beingprovided.

3. Private contractors may not be M Comprehensive TA is being provided includingresponsive to new forms of contract. training.

4. Adequate staffing and resources may S Comprehensive TA is being provided withnot be available to the involved agencies specific training in key areas.and ministries.

5. Staff may not be competent to M Training will be provided for MOTT, MLGD,implement the new procedures and and Traffic Police in key road maintenance andparticipate in their installation and the safety areas.

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|related training programs.Overall Risk Rating s

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negiigible or Low Risk)

3. Possible Controversial Aspects:

The project has no controversial aspects.

G. Main Loan Conditions

1. Effectiveness Condition

The Borrower has opened a Project Account in a commercial bank satisfactory to IDA and has depositedUS$300,000 equivalent in that account.

2. Other [classify according to covenant types used in the Legal Agreements.]

(i) In addition to the counterpart financing, the annual budgets of the GRD for maintenance will beincreased each year by not less than 5 percent in real terms during the life of the project, starting from the2001 level of US$ 7.6 million..

(ii) The Government will complete the agreed financial action plan for strengthening the project financialmanagement systems by December 31, 2002.

(iii) Procurement will be in accordance with the Bank's Procurement Guidelines.

(iv) The Borrower will assure that the Environmental Management Plan is carried out.

(v) Not later than November 30 of each year, the Government will furnish IDA the annual projectimplementation work program for the next year, including procurement and financing plans, and willreview these plans with IDA before implementing them.

(vi) The Government will submit to IDA, commencing upon Credit effectiveness, a quarterly ProjectProgress Report not later that 45 days after the end of each quarter outlining progress made in theimplementation of each project component, as well as the problems encountered and how they are beingaddressed.

(vii) The Government will prepare a report, by August 31, 2004, outlining the progress made in carryingout the project, and will review the report by September 30, 2004, in order to determine if the progresstoward meeting the project objectives is on schedule; the Government will then make any necessaryadjustments suggested by the Review in order to assure that the project objectives are achieved by theproject completion date.

(viii)The Government will prepare, not later than 3 months after the Closing Date, a plan for the futureoperation of the project activities, and the Government's input into the Implementation Completion Report,both of which will be reviewed with IDA.

(ix) The Government will cause GRD to have its records, accounts and financial statements audited eachyear, commencing with the accounts for the year ending December 31, 2002.

(x) The Government will assure that all land acquisitions during the implementation of the project will bein accordance with procedures for compensation and replacement which will have been reviewed and foundsatisfactory by IDA.

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(xi) The Government will review and adjust, not later than June 30, 2003, the taxes on leaded andunleaded gasolines, so that the average retail price of the leaded gasoline is at least 5% higher than theaverage retail price of the unleaded gasoline.

H. Readiness for Implementation

1 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

0 1. b) Not applicable.

12 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

3 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

0i 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

3 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approv a e project complies with

all other applicable Bank policies.

) 7-- Ce-sar ei~roz Hossein RAp4i Christi PoortmanTeam Leader Sector Diryor Country Director

okv 2kx

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Annex 1: Project Design Summary

ALBANIA: Road Maintenance Project

Setoj-related CAS Goal: Sector IndicatoPr: Sector/ country reports: (from Goal to Bank MissGon)Probjtiv: sustainable private Improving trends in regional Bank CAS updates; trong GovernmentTosreduce transpthrough the economic and trade statistics ESW (occasionas). tommitar ent to the CASimprovement of infrastructure (2000-2005). reform agenda.provision with emphasis onprivate sector participation.

ProJect Development Outcome I Impact ProJect reports: (from ObJective to Goal)ObJective: Indicators:To reduce transport costs on Percent of population in the Specific surveys to be Macroeconomic stabilizationpriority sections of the main pilot areas with improved designed and launched. and structural reformroad network, reduce accident access to essential social pograms carried out.rates, and provide better services (Vlora and Shkodraaccessibility to rural areas and hospitals):essential social services. Baseline: 0%

Mid-term: 15%End: 30%/o

Traffic surveys demonstrate Traffic survey reportsthe achievement of expected comparing before and afterreductions in travel time of traffic statistics on improvedcars on priority national road road sections.sections (total vehicle-hours):Baseline: 0%Mid-term: 10%End: 20%

National accident records Annual traffic safetyindicate significant reductions reports/statistics.in traffic fatality rates(Baseline: 15.12fatalities/10,000 vehicles in2000):Baseline: 0%Mid-term: 5%End: 10%

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Priority road sections Compliance with agreed road Quarterly progress reports; Government will allocatemaintained. standards and approved Evaluation mission reports sufficient resources to road

designs in segments (MTR & ICR); maintenance anddesignated for maintenance, Technical audit reports rehabilitation.with significant reductions in (annual).road roughness (averagebaseline roughness, weightedby traffic volume and sectionlength)a) for Main National RoadsBaseline: 7.26Mid-term: 6.5End: 5b) for Rural RoadsBaseline: 10Mid-term: 8End: 6

Efficiency of the management National road administration Quarterly progress reports; Government will adopt soundand maintenance of the (General Roads Directorate - Supervision mission reports; personnel management policy,national and rural road GRD) restructured and Evaluation mission reports including adequate trainingnetworks improved. strengthened: (MTR & ICR). and reduced high level staff

Baseline: Not restructured turnover.Mid-term: GRD restructured,partly operationalEnd: Fully operational

Pavement and bridgemanagement systemoperational.Baseline: PBMS beingdesignedMid-term: PBMS approvedand implementedEnd: PBMS fully operational

Pavement managementsystem operational.Baseline: PMS being designedMid-term: PMS implementedEnd: PMS fully operational

Rural and municipal roadadministration (Ministry ofLocal Government andDecentarlization - MLGD)strengthened.Baseline: functioning at

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limited capacityMid-term: Strengtheningprogram underimplementationEnd: fully operational

2. - TRAFFIC SAFETY:Designated accident Number of designated Quarterly progress reports; Members of the Cabinet'blackspots' upgraded by 'blackspot' areas improved in Supervision mission reports; and/or Parliament areincorporating safety-minded compliance with agreed Evaluation mission reports mobilized and are willing todesign features. designs: (MTR & ICR); thrust traffic safety issues on

Baseline: 0 Technical audit reports the Government Agenda toMid-term: 20 (annual). design a real and efficientEnd: 30 Road Safety Policy.

Multi-agency Road Safety Institutional capacity Quarterly progress reports; MOTT/DRS, MLGD, GRD,Program implemented. developed within Supervision mission reports; Traffic Police, and DRS Staff

MOTT/GRD and MLGD to Evaluation mission reports will understand theidentify hazardous locations (MTR & ICR). interdisciplinary of the subjectand to design and implement and work efficiently together.physical measures to reduceroad accidents at theselocations, as reflected inannual programs:Baseline: No program norsafety auditMid-term: Improved accidentdata base and analysisprocedures in place, Annualaction programs prepared byagenciesEnd: Annual programssatisfactorily implemented

Institutional capacitydeveloped within the trafficpolice to improveenforcement aimed at specificunsafe road user behavior inorder to reduce trafficaccidents caused by identifiedkey causal factors:Baseline: Targetedenforcement practices limited.0% baseline (2000) foraccidents where speeding,drink-driving, no use ofseat-belts and reckless drivingare contributing factorsMid-term:Radars, alcoholtesters in use and enforcementstatistics show increasednumber of fines for speeding,drink-driving, no use of

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seat-belts and recklessdriving. Accidents involvingeach of these factors reducedby 5%End: Statistics show 10%reduction in accidentsinvolving each of the factorsof speeding, drink-driving, nouse of seat-belts, and recklessdriving

Improved cooperationbetween agencies and fullyfunctional DRS, as reflectedin DRS Quarterly Reports tothe Govermnent and to thePublic:Baseline: No reports preparedMid-term: Quarterly reportsregularly submitted to theGovernmentEnd: Reports are alsodisseminated to the public.

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Project Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)1 - ROAD MAINTENANCE: US$18.65 million Quarterly progress reports, Govermnent counterpart

supervision reports, financial fimds will be made availableL.a - Periodic and routine annual audit reports and on a timely basis.maintenance of about 500 Iam quarterly disbursementof main national roads. reports. MOTT/DRS, MLGD, GRD,l.b - Periodic and routine Traffic Police, NRSC Staffmaintenance of about 500 km responsive to agreed changes.of rural roads.l.c - Equipment for road Private contractors responsivesurvey (pavement to new forms of contract.management), office suppliesand vehicles.l.d - Technical assistance(restructuring roadmanagement, road usercharges and maintenancefinance), project design,supervision of civil works,and training.l.e - Equipment for roaddatabank implementation.

2 - TRAFFIC SAFETY: US$2.20 million Same. Adequate staffing andresources made available to

2.a - Improvement of about the involved agencies and15 accident black spots not ministries.located on roads whereperiodic maintenance is doneunder the project.2.b - Road safety equipment,hardware and software.2.c - Equipment forenforcement of road coderegulations.2.d - Technical assistance Staff are competent to(road safety awareness implement the newseminar, strengthen DRS), procedures and participate inproject design, supervision of their installation and thecivil works, and training related training programs.(GRD, MLGD, MPO-trafficpolice).

A methodology for monitoring indicators has been discussed with the implementing agencies and is developed inAnnex 14

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Annex 2: Detailed Project DescriptionALBANIA: Road Maintenance Project

By Component:

Project Component 1 - US$18.65 million

Maintenance of National and Rural Roads

Civil Works:

a. Periodic and routine maintenance works on paved routes of the Main National Network, including theirurban sections if any, totaling 244 km. Highest priority sections were selected from a list of 3,200 km ofroads on the basis of an engineering analysis and an economic evaluation using HDM4. (US$ 8.0 million).

* Periodic maintenance will be carried out on sections totaling 77 kin, to bring their condition back toa level of service and trafficability which will allow routine maintenance operations to preserve thislevel of service constant in the medium term. Works will include major repairs to each of the roadelements (embankment slopes, shoulders, pavement layers, signing), to the structures and the drainagesystems as required, followed by a general pavement overlay and appropriate road markings, signs andguardrails and would include improvement of about 15 traffic accident "Black spots" along the selecteditineraries.* Routine maintenance will be carried out on sections located between and adjacent to the sectionswhere periodic maintenance will take place.

b. Routine maintenance works contracted to the private sector including minor repairs on the roadway,pavement, drainage system and structures, road markings, signs and guardrails, for the above 244 km ofroads of the Main National Road Network during two years and on 260 km of other recently rehabilitatedsections of the Main National Road Network during three years (US$ 3.0 million).

c. Periodic maintenance works on about 235 km of mainly unpaved roads and on bridges of the RuralRoad Network. Highest priority sections were selected from a list of 1,700 km of roads on the basis of anengineering analysis and of an assessment of socioeconomic impacts (amount of rural populationconcerned, need to improve access to health or education facilities, to agricultural markets or tourist sites)(US$ 4.0 million).

d. Routine maintenance works contracted for three years to the private sector including grading of thesurface, minor repairs on the roadway, drainage system and structures, for the above 235 km of roads ofthe Rural Road Network during two years and on 265 km of other recently rehabilitated sections of theRural Road Network during three years (US$ 0.96 million).

Goods:

a. Equipment for road survey for GRD and MLGD (pavement strength and roughness measurementdevices, automatic traffic counters, axles load scales), office equipment, vehicles and supplies for effectiveproject implementation (US$ 0.3 million).

b. Computer hardware and software (including GIS and plotter) for the road and bridges databasedevelopment and for implementation of a road asset management system (US$ 0.1 million).

Training and Technical Assistance:

a. Training and consultant services for MOTT/GRD/MLGD to assist in:* the restructuring of the Main National, and Rural roads management organization and systems,including reorganization of GRD and development of a Rural Road Department within MLGD,

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definition of general operation, contract management, budgeting and accounting procedures as well astraining of the key staff in their application. Assessing the social and financial impacts of thisreorganization as well as of utilization of maintenance by contract for the whole road network in orderto develop adequate mitigation measures (US$ 0.15 million);a designing and recommending an appropriate road user charge system (including definition of taxbases and rates, collection, banking, accounting and disbursement mechanisms, method of allocation toeach type of roads, methods of adjustment for inflation) for financing road maintenance operationsbased on an analysis of road maintenance funding requirements (US$ 0.15 million);* evaluating project impact on access to social amenities, particularly health facilities, schools,markets and of impact on improvement on safety and on access to local employment and marketopportunities (US$ 0.05 million).

b. Consultant services to prepare the engineering design, the contract documents and carry outsupervision of all the road periodic and routine maintenance works (IJS$ 1.49 million).

c. Support and training for the development of the private road construction industry, includingorganization of new firms, preparation of business and financing plans, preparation of tenders, organizationfor implementation of maintenance projects, contract management and invoicing methods, employment ofunskilled labor, and possibly utilization of labor intensive methods (US$ 0.2 million for basic support,training being mainly provided by the supervision consultants).

d. Consultant services for PIU operation (US$ 0.25 million).

Project Component 2 - US$2.20 million

Traffic Safety

Civil Works:

a. Remedial work on 15 traffic accident "Black spots" on Main National Roads from a list of 96 (inaddition to 15 traffic accident "Black spots" expected to be included in the above mentioned periodicmaintenance contracts) which the Traffic Police has identified as especially dangerous to the variouscategories of road users, i.e. to pedestrians, bicyclists and other road users as well as the occupants ofvehicles. Remedial works will include horizontal (road markings) and vertical (signs) signalisation inaddition to physical improvement of the road pavement and its shoulders, plus installation of roadsidebarriers along hazardous parts of certain mountain roads and additions to unsafe bridge parapets.Intersection treatments will be applied for the first time to both old and newly constructed locations, andspecial treatments will be devised as interim solutions at particularly dangerous locations (US$ 0.75million).

Goods:

a. Hardware and software for the Traffic Police accident unit to establish a data storage/retrieval andanalysis system, and for the MOTT Directorate of Road Safety to facilitate establishment of a GOAtransport and road safety statistics web-site (US$ 0.1 million);

b. Equipment for the traffic police to improve specific enforcement priorities, including speed management(laser or radar equipment) and drink driving (Breathalyzer and blood testing equipment), to supportaccident investigations, and for emergency response activities (first aid kits) (US$ 0.25 million).

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Training and Technical Assistance:

a. Consultant services to conduct a road safety awareness seminar for senior GOA and other officials(US$0.1 million);

b. Consultant services and training (US$1.0 million) for MOTT, GRD, DRS, MLGD and Traffic Policeand other agencies for:

- supporting establishment of the DRS and its working procedures;- developing working/reporting DRS arrangements with NRSC to introduce a sustainable RoadSafety Program;- developing coordinated working procedures among NRSC, DRS, GRD, MLGD, Traffic Police,Ministry of Health, Ministry of Education, Ministry of Finance, municipal governments, and otherpublic and private sector agencies involved in road safety;- reviewing/updating of the Road Code/Regulation for road safety initiatives;- developing strategies/plans for road safety campaigns and carrying out such campaigns;- identifying potential uses for the INSIG 'traffic accident prevention fund' and encouraging widerparticipation of insurance companies in road safety;- reviewing driver training and testing procedures/ quality control of driving schools, instructors andexaminers/ potential for 'graduated licensing';- reviewing vehicle testing and inspection procedures/quality control of testing stations andinspectors;- reviewing current licensing/franchising of commercial passenger vehicles (bus, mini-bus, vans,taxis) and recommending improvements to increase safety and efficiency of passenger road transport;- liaison with EU-funded projects having a road safety focus;- liaison with other projects that have cross-cutting sector themes with road safety;- developing road safety education within the schools system;- developing GOA web-page of transport and road safety data;- identifying needs and justifying annual budget allocation for road safety activities;- operationalizing traffic safety audit procedures during roads planning, design and construction;- developing techniques to identify priority accident black spot locations and implement remedialmeasures;- liaison with rural community groups and road safety associations (including other IDA-fundedprojects in Albania);- designing traffic control devices at hazardous locations on the GRD/MLGD road network;- extending (GRD) road referencing system to MLGD road network;- introducing the accident site report form, establishing the accident database and analysis system,and procedures for data dissemination;- establishing targeted enforcement strategies/campaigns to improve road safety and road userbehavior;- developing strengthened emergency response and accident investigation procedures.

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Annex 3: Estimated Project Costs

ALBANIA: Road Maintenance Project

1. Maintenance of National and Rural Roads 5.31 10.64 15.95

2. Traffic Safety 0.29 1.15 1.44Total Baseline Cost 5.60 11.79 17.39

Physical Contingencies 0. 84 1.77 2.61Price Contingencies 0.28 0.57 0.85

Total Project Costs' 6.72 14.13 20.85Total Financing Required 6.72 14.13 20.85

1. Works 5.82 10.89 16.712. Goods 0.00 0.75 0.753. Services and Training 0.90 2.49 3.39Other 0.00 0.00.00

Total Project Costs' 6.72 14.13 20.85

Total Financing Required 6.72 14.13 20.85

All the estimated costs are excluding VAT.

Identifiable taxes and dubes are 0 (US$m) and the total project cost, net of taxes, is 20.85 (US$m). Therefore, the project cost sharing ratio ts 81.53% oftotal project cost net oftaxes.

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Annex 4: Cost Benefit Analysis Summary

ALBANIA: Road Maintenance Project

The economic analysis of investments on the national road network has been carried out using a cost -benefit approach and is described in the first part of the following annex. The selection of national roadsegments was also based on a social assessment of the national roads network undertaken at the same timeas the initial national roads condition survey. The selection of runal roads to be included in the project hasbeen carried out using an approach based on cost effectiveness which is described in the second part of thethis annex.

Part 1: NATIONAL ROAD NETWORK - Cost Benefit Analysis

Present Value of Flo s (US$ million)Economic analysis

Net Benefits: 24.2EIRR: 75 %

Summary of Benefits and Costs:The economic evaluation has been carried out on that part of the project concerned with the application ofperiodic and routine maintenance works to the national road network. The proposed maintenanceinterventions cover 242 km of roads out of a paved national network of 3,176 km and 1.8 km of roads inthe capital, Tirana. The budgetary ceiling for the proposed maintenance interventions is US$ 8 million.

The project encompassing the national roads, involves both periodic and routine maintenance componentsand the economic evaluation has been carried out incorporating both maintenance interventions for each ofthe proposed road sections.

Main Assumptions:The economic analyses have been carried out on 969 km of national roads over a ten year analysis period.The original selection of roads for purposes of the economic analysis was made on the basis of their currentcondition in terns of road roughness and their suitability for periodic maintenance treatment. Out of a totalof 1,057 km of candidate roads, 88 km are in need of reconstruction and are not therefore suitable formaintenance works.

The economic analyses were carried out using the World Bank's HDM-4 simulation model using theconventional approach of comparing vehicle operating cost and time savings between the base, withoutproject case, and the proposed, with maintenance project case. The model output enabled the road sectionsto be ranked on the basis of EIRR and Net Present Value to Capital Cost (NPV:CC). A set of 22 roadsections made up the analysis. Within this set of 22 segments, eight constitute 'social access' roads, whichwere included on the grounds of providing essential access to relatively deprived and dislocatedcommunities, i.e. their economic justification is based on the additional production ('value added') whichthey are expected to induce, which was not quantified. Of the eight road sections selected for socialreasons, the economic analysis showed that six of them produced a positive NPV at the 12 percent rate ofreturn benchmark, with only two recording negative NPV values. The final selection of segrnents, to fitwithin the budget limit, comprises six segments of which two are derived from the social access roadswork.

Much of the input data used in the model have been estimated with reference to secondary data through

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available reports and previous studies together with inputs provided directly by the General RoadsDirectorate. The input data have also been guided by the engineering-based field surveys allied with theexperienced engineering judgment of the Consultant. Primaxy data input to the model have come from fieldsurveys in respect of traffic counts and road roughness measurements.

The traffic count surveys indicate current daily traffic volumes ranging between less than 100 vehicles perday (vpd) on some of the social access and feeder road portions of the national network, to 2,400 vpd onthe primary interurban connection between Tirana and Elbasan and more than 5,000 vpd on the road linkbetween Vora and Fushe Kruje. Traffic was assumed to grow at 7% per year for cars and buses and 5%per year for trucks, i.e. conservatively in line with projected GDP growth (the Basic Indicators andMacroeconomic Framework, 2000-2004 section from the November 2001 Growth and Poverty ReductionStrategy projected real GDP to grow at 7% per year over 2002- 2004).

The complete set of input values used for the HDM analysis is provided as an attachment in Annex 8. Theresults of the economic analyses are summarized in the following three tables.

Table 1 - Road Sections and Capital Costs

Road Section Road Length Capital Costs (US$ r illion)Name ID # (km) Overlay Preparatory Routine Total Cumulative

______________ ________ ~~~works __ _ _ _ Costs Costs

Vora - Fushe 52 12.0 0.54 0.01 0.00 0.54 0.54Kruja_ _ __ __ _

Cemk - Elbasan 70 14.0 0.70 0.01 0.00 0.70 1.25Tirana - Elbasan 3 48.0 1.42 0.73 0.02 2.18 3.42Tepelene - 75 63.0 1.09 0.09 0.03 1.20 4.63Carshove__ _ __ _ _ _ __ _ _ _ _

Paper (N7) - 59 14.0 0.45 0.37 0.00 0.82 5.45Shtepaie* I

Kukes - Krume* 23 91.0 0.33 0.60 0.05 0.97 6.41Sub-total 242.0 4.53 1.81 0.10 6.41Notes: * social access roadsSource: GRD consultants

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Table 2 - Traffic, NPV, and EIRR

Road ectio Name Length Traffic NPVEIR NVCRoad Section Name() ADT (US$ milUon) EIRR NPRaoc Ranking(km) ADT ~~~~~~~~Ratio

Vora - Fushe Kruia 12.0 4,722 7.67 343.9% 14.11 1Cernik - Elbasan 14.0 2,325 3.37 101.5% 4.80 2Tirana - Elbasan 48.0 2,387 7.00 86.0% 3.22 3Tepelene - Carshove 63.0 880 2.22 53.0% 1.84 4Paper (N7) - 14.0 1,409 1.27 50.3% 1.54 5Shtepaje _ _ _ _ _ _ __ _ _ _ _ _ _

Kukes - Krume* 91.0 604 0.44 25.6% 0.46 6Total 242.0 _ 21.97 82%Notes: * social access roads

# at 12 per cent rate of discountSource: GRD consultants

Table 3 - Roads in Tirana

Traffic Capital NPV EIRR EIRRRoad Section Name ADT costs (US$ (US$ EIRR +20% -20%

ADTra 2million) million) # costs trafficRing road: "21December Square" -"Vasil Shanto" bridge 5,760 0.63 1.183 54.9% 45.6% 43.6%(0.445 am) _

Bajram Curri road: 2,000 0.57 0.437 31.5% 25.0% 23.6%(0.740 Ian) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Don Bosco road: 2,000 0.30 0.632 60.7% 50.5% 48.4%

Total (1.785 km) 1.500 2.252 47.5% 39.1% 37.3%

Notes: # at 12 per cent rate of discountSource: GRC consultants

All the six road sections outside Tirana lie above the 12 percent rate of return benchmark with internal rateof return (IRR) values ranging between 25.6 percent and 343.9 percent. The NPV:CC ratio rangesbetween 0.46 to 14.11.

Overall, the periodic and routine maintenance of national roads component of the project has an economicIRR of 82 percent with an NPV of US$ 21.97 million at 12 percent rate of discount. For the Tirana roadsections, positive returns are recorded with NPV, at 12 percent rate of discount, being US$ 2.25 millionand EIRR 47.5 percent.

Conclusions:The national roads periodic and routine maintenance component of the project shows a relatively high netpresent value with a correspondingly high economic internal rate of return. The NPV, at 12 percent rate ofdiscount, is US$ 21.97 million and the EIRR is 82 percent. The composition of the road sectionscomprising the project includes both very high volume sections and relatively low volume roads, which

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have been incorporated on the grounds of providing critical social accessibility. Although some of theselower volume social roads reflect lower NPVs, their inclusion on social grounds is more than compensatedfor by the high retums recorded by those road sections canying high traffic volumes. Taken together, thenational roads and Tirana road sections give values of US$ 24.2 million for NPV and 75 percent for theEIRR.

Sensitivity analysis / Switching values of critical items:Two sensitivity analyses have been carried out. The two sensitivity tests assume a rise in intervention costsof 20 percent on the one hand, and a fall in base year traffic of 20 percent on the other. The results of thisanalysis for each road section are shown in Table 3 (Tirana roads) above and Table 4 (other Nationalroads) below.

Table 4 - Sensitivity Analysis

Length Trffic NPVEIRR EIRRRoad Section Name Length Traic (US$ EIRR +20% -20%

(kmn) ADT miflion) # costs trafficVora - Fushe Kruia 12.0 4,722 7.67 343.9% 216.9% 256.1%Cerrik - Elbasan 14.0 2,325 3.37 101.5% 69.5% 79.9%Tirana - Elbasan 48.0 2,387 7.00 86.0% 58.1% 67.8%Tepelene - Carshove 63.0 880 2.22 53.0% 34.7% 41.2%Paper (N7)- 14.0 1,409 1.27 50.3% 32.9% 39.2%Shtepaje*Kukes - Krume* 91.0 604 0.44 25.6% 12.1% 17.4%Total 242.0 - 21.97 82% 53% 63%Notes: * social access roads

# at 12 per cent rate of discountSource: GRD consultants

For the national roads periodic and routine maintenance component, the project shows a greater sensitivityto the rise in costs as opposed to the decline in traffic. In both instances however, the project still shows arelatively high overall rate of retum, with half of the social access road sections continuing to remaineconomically viable. For the Tirana road sections, the analysis shows a marginally greater sensitivity tothe change in traffic. The overall rate of return remains very positive.

Part 2: RURAL ROAD NETWORK

The rural road component of the project focuses on the provision of improved accessibility to and frompopulated rural areas. Rural communities are scattered throughout the country, even in the mountainousinterior and eastern regions of the country. They were originally established in areas having a potentiallyhigh level of agricultural productivity, or areas containing reserves of mineral resources, or areas havingsome strategic significance. The predominant source of income and livelihood for these communities nowis based almost exclusively on the farming sector.

In the initial stage of analysis, candidate links in each of the country's twelve regions were identified using acriterion that they be connected directly at one or both ends to a national road. Out of a total rural roadsnetwork of about 4,000 km, about 1,700 km of candidate roads were thereby compiled. Following a round

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of consultations with Ministry of Local Government and Decentralization staff at the regional office levelsome of links have been discarded and others have been identified and added leaving a total 1,340 km ofcandidate roads for evaluation. The road links were given an identity number in order to conform with thenumbering system established under the 1999 Iteco Engineering Ltd. study of the rural roads network andare grouped into the individual Prefecture (Circle) and District areas.

The selection approach assumes that benefits accruing would be proportional to the number of person-trips- to commercial and amenity centers for instance - for which travel cost and time savings could be expectedto occur. The analysis included an estimate of the population that would be expected to realize directbenefits from the road works envisaged. Population levels were derived for the communes and adjacentvillages in each prefecture and in each region using INSTAT national census data from April 2001. Byexamining the connecting roadways under regional government jurisdiction, a population was derived foreach 'catchment area' served by that possible project road link. A construction cost for each link wasestimated depending on length of section and terrain. A cost 'cost per capita' of reaching the populationassociated with that link was derived. In addition to this quantitative cost effectiveness factor, prioritieswithin each Prefecture (Circle) and District have been established where possible on the basis of thefollowing qualitative factors relating to potential reductions in social dislocation and impacts:

* Improved network continuity in terms of inter-regional accessibility;* Improved conditions in corridors leading to known areas of extreme poverty;* Improved conditions in corridors accessing areas of agricultural significance and/or tourism potential;* Reduced travel times in corridors used for access to educational and health facilities.

Based on these factors project road links (totaling about 235 lum) were selected for periodic maintenancefrom the ranked set of candidate links until the budget allocation (US$ 4 million) was exhausted. Furtherroad sections of about 265 km will receive routine maintenance at a cost of US$ 0.96 million. The totallength of rural roads maintained under the project will be about 500 km. The complete set of inputs usedand rankings obtained for the rural roads analysis are provided as attachments in Annex 8.

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Annex 5: Financial SummaryALBANIA: Road Maintenance Project

Years EndingDecember 31

| Yearl I Year2 I Year3 | Year4 I Year5 I Year6 I Year7Total FinancingRequiredProject CostsInvestment Costs 2.4 7.3 7.3 2.6 1.3 0.0 0.0Recurrent Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total Project Costs 2.4 7.3 7.3 2.6 1.3 0.0 0.0Total Financing 2.4 7.3 7.3 2.6 1.3 0.0 0.0

FinancingIBRDIIDA 2.0 6.0 6.0 2.0 1.0 0.0 0.0Government 0.4 1.3 1.3 0.6 0.3 0.0 0.0

Central 0.4 1.3 1.3 0.6 0.3 0.0 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-flnancIers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User Fees/Beneflciaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Project Financing 2.4 7.3 7.3 2.6 1.3 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Main assumptions:A five-year disbursement period was assumed.

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Annex 6: Procurement and Disbursement Arrangements

ALBANIA: Road Maintenance Project

Procurement

Procurement - General

All Bank-financed procurement would be in accordance with the Bank Guidelines. Procurement for goodsand works would follow the Bank Guidelines for Procurement under IBRD Loans and IDA Credits(January 1995 as revised in January and August 1996, September 1997, and January 1999). Procurementof consulting services would follow the Bank Guidelines for Selection and Employment of Consultants byWorld Bank Borrowers (January 1997 as revised in September 1997 and January 1999). The terms Bankand IDA will be further used interchangeably.

Procurement Responsibility

All procurement will be carried out by the General Road Administration (GRD). A full-time technical staffmember from the GRD has been assigned to carry out the procurement activities. The responsibilities ofthe procurement specialist would include inter alia: (i) to prepare and submit to the Bank all procurementdocuments which require the Bank's prior review; (ii) carry out any procurement action; (iii) prepare theprocurement reports, including an updated procurement plan, to be submitted periodically to the Bank; (iv)update the General Procurement Notice and prepare Special Procurement Notices; (v) ensure that theprocurement process is conducted based on principles of efficiency, economy and transparency.

Procurement Capacity Assessment of the PIU

During the project preparation an assessment of the GRD capacity to conduct procurement was carried outBy that time, the Country Procurement Assessment Review was finalized. The PIU is currently inoperation implementing the Emergency Road Repair and the National Roads Projects. All the structures arein place and the transition to the new project should not cause major challenges particularly that theNational Roads Project is expected to be completed by June 30, 2002. Thus the PIU has a core of qualifiedstaff with experience in Bank procurement. The agency has benefited from years of assistance byintemational consultants in project monitoring, procurement and supervision. Salaries are generally in linewith the private sector. However, the experience so far with prior and post review of the PIIJs procurementactivities has indicated that the procurement procedures are not always transparent and that the PIU issubject sometimes to outside pressures. Therefore, the agency is rated high risk. In order to address thedeficiencies identified during the capacity assessment, an action plan was prepared The action plan, agreedat negotiations, stipulates that: (i) the PIU will prepare an operational manual defining the procedures,flows of documents, procurement filling system, signatory powers, composition of the tenderingcommittees,and ethical requirements for the procurement staff; (ii) the local staff assigned to conductprocurement will receive procurement training; (iii) an asset register will be maintained through the projectimplementation for all goods and works financed out of Bank funds; (iv) technical assistance inprocurement during project implementation will be provided by international consultants with experience inBank procurement; (v) the latest versions of the Bank bidding document will be used, including the NCBand MW bidding documents; (vi) Bank, GRD/MOTT will organize a project-launch workshop.

Notification of Business Opportunities

A General Procurement Notice was published after negotiations to announce the bidding opportunitiesunder the project and invite interested eligible suppliers and consultants to express interest and request anyadditional information from the GRD. The General Procurement Notice will continue to be updatedannually. Specific Procurement Notices, on line, will be published for the ICB packages in UN

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Development Business.

Procurement Methods

(i) Works

International Competitive Bidding (ICB): would be used to procure works for contracts estimated to costUS$ 1,000,000 or more each.

National Competitive Bidding(NCB): would be used to procure works for contracts estiinated to cost lessthan US$ 1,000,000 up to an aggregate amount of US$ 9 million.

Minor Works (MW): would be used to procure works for contracts estimated to cost less than US$100,000 per contract up to an aggregate amount of US$ 1.2 million. Minor works will be procured underlump-sum, fixed-price contracts awarded on the basis of quotations obtained from three (3) qualifieddomestic contractors in response to a written invitation. The invitation shall include a detailed descriptionof the works, including basic specifications, the required completion date, a basic form of agreementacceptable to the Association, and relevant drawings, where applicable. To minimize the risk of gettingonly one or two quotations, clients are advised to initially request more than three quotations. The awardshall be made to the contractor who offers the lowest price quotation for the required work, and who hasthe experience and resources to complete the contract successfully.

Prior and post review by the Association of minor works contriacts: all contracts for the supply of MWestimated to cost the equivalent of US$ 100,000 or more will be subject to prior review as well as allcontracts awarded without competition, if any. The first two contracts for MW under each of the twocomponents of the project for each year will be subject to prior review. All other contracts will be subjectto post review.

(ii) Goods

International Competitive Bidding (ICB): would be used to procure goods for contracts estimated to costUS$ 100,000 or more each.

International Shopping (IS): would be used to procure goods for contracts estimated to cost less than US$100,000 each, up to an aggregate amount of US$ 280,000. The Borrower shall obtain quotations from atleast three suppliers from at least two different countries, which may include the Borrower's. To minimizethe risk of getting only one or two quotations, clients are advised to initially request more than threequotations. The Borrower may also at the time of the request, verify whether those being invited will makean offer or not. Quotation for foreign goods located in the Borrower country and offered by a firm locatedin the Borrower country, are considered as quoted from abroad for purposes of satisfying the "two differentcountries" rule.

Prior and post review by the Association of goods contracts: all contracts for the supply of goodsestimated to cost the equivalent of US$ 100,000 or more will be subject to prior review as well as allcontracts awarded without competition, if any. All other contracts will be subject to post review.

(iii) Consulting Services

Quality and Cost Based Selection (QCBS): would be used to hire consulting firms to provide technicalassistance and training under the project, except as otherwise provided below.

Selection Based on Consultants' Qualification (CQ): would be used to hire consulting firms up to anaggregate amount of US$ 300,000 to provide training and technical assistance under the project.

Least Cost Selection (LCS): would be used for the contract for audit services.

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Individuals: would be hired to provide technical assistance in accordance to Section V of the Guidelines upto an aggregate amount of US$ 300,000 (includes the PIU staff).

Prior and post review by the Association of the Consulting Contracts: aU contracts estimated to cost theequivalent of US$ 100,000 or more per contract with firms and US$ 50,000 or more with individuals willbe subject to prior review. All other contracts will be subject to post review, and all Terms of Referencewill be subject to prior review.

Procurement Implementation Schedule:

The agreed procurement plan will be used as a basis for procurement monitoring and will be updated twicea year and whenever necessary.

Procurement methods (TkbIe A)

Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

1. Works 6.49 9.01 1.21 0.00 16.71(5.19) (7.20) (0.97) (0.00) (13.36)

2. Goods 0.47 0.00 0.28 0.00 0.75(0.47) (0.00) (0.28) (0.00) (0.75)

3. Services 0.00 0.00 3.39 0.00 3.39(0.00) (0.00) (2.89) (0.00) (2.89)0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

Total 6.96 9.01 4.88 0.00 20.85___ ___ ___ __ ___ ___ _(5.66) (7.20) (4.14) (0.00) (17.00)

"Figures in parenthesis are the amounts to be financed by the IDA Credit All costs include contingencies.1 Includes civil works and goods to be procured through international shopping, consulting services,

services of contracted staff of the project management office, training, technical assistance services, andincremental operating costs related to (i) managing the project, and (ii) re-lending project funds to localgovermnent units.

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Table Al: Consultant Selection Arrangements (optional)(US$ million equivalent)

A. firms 2.73) 0.00 0.00 0.06 0.30 0.00 0.0 39(2.32) (0.00) (0.00) (.05) (0.26) (0.00) (00) 2.3

B. Individuals 0.00 0.00 0.00 0.00 0.00 0.30 0.0 0.30(0.00) (0.00) (0.00) (0.00) (0.00) (0.26) (0.00) (0.26)

Total 2.73 0.00 0.00 0.06 0.30 0.30 0.00 3.39(2.32) (0.00) (0.00) (0.05) (0.26) (0.26) (0.00) (2.89)

1\ Including contingencies

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of Consultants Guidelines),Commercial Practices, etc.N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be financed by the Bank Credit.

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Prior review thresholds (Table B)

Table B: Thresholds for Procurement Methods and Prior Review

1. Works >1,000 ICB 6.96<1,000 .NCB 9.01<100 MW 0.40

prior review threshold: 1002. Goods >100 ICB 0.47

<100 Other (IS) allprior review threshold: I100

3. Services firms >100 QCBS 2.73firms <100 Other (CQ, LCS)

prior review threshold: 100Individuals prior review IC

threshold: 50

Total value of contracts subject to prior review: US$19.57 million or93.9% of the

total cost of the Project

Overall Procurement Risk Assessment

High

Frequency of procurement supervision missions proposed: One every six months (includes specialprocurement supervision for post-review/audits)

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Capacity of the Implementing Agency in Procurement and

Technical Assistance Requirements

Brief Statement

A capacity assessment of the Borrower was conducted during project preparation. The Borrower has previousexperience with Bank procurement however, the practice so far has not been always satisfactory and theprocurement environment is risky. Therefore, an action plan was prepared to enable the Borrower to conductprocurement under the project in accordance with Bank procurement procedures.

Country Procurement Assessment Are the bidding documents for the procurement actions for the firstReportr was prepared. year ready by negotiations :Consultants hired under the Emergency

Road Repair Project are preparing the bidding documents for thefirst year.

TRANING INFORMATION AND DEVELOPMENT ON PROCUREMENT

Estimated Date Date ofpublication Indicate if there is Domestic Domestic Preference forof Project of General procurement subject to Preference Works, if applicable:Launch Procurement mandatory SPN in for Goods:Workshop: May 31, 2002 Development N/A

Oct. 31, 2002 Business: YesNo. However, it is

recommendedthat ICB civilworks contractsbe advertised online.

Retroactive Financing: No Advance Procurement:Explain: No.Explain briefly the Procurement Monitoring System:Procurement information will be collected and recorded by the Borrower and submitted to the Bank as part ofsemi-annual progress reports prepared by the PIU. This information will include (ii) revised cost estimates forindividual contracts; (b) revised timing of procurement actions including advertising, bidding, contract awardand completion time for individual contracts; and (c) compliance with aggregate limits on specific methods ofprocurement; (d) actual data for contracts already procured, indicating the contracts subject to prior and postreview.Cofinancing: Explain briefly the Procurement arrangements under co-financing: N/A

SECTION 4: PROCUREMENT STAFFING

Indicate name of Procurement Staff or Bank's staffpart of Task Team responsiblefor the procurement inthe Project: Name: Irna Luca Extension:87092

Explain briefly the expected role of the Field Office in Procurement: The Field Office will perform the servicefunction.

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Procurement Action Plan-summaryAs part of the pre-appraisal mission an assessment of the capacity of the General Road

Directorate-GRD (the Agency) to implement procurement was carried out. The Agency hasexperience with Bank procuremaent under the Emergency Road Repair and National Roadsprojects. In order to address some of the weaknesses identified and develop the capacity of theAgency to conduct procurement according to World Bank procedures, the following Action Planis recommended:

ACTION DUE DATEThe Agency will formulate operational procedures related to By April 30, 2002procurement (participants, roles, signatory powers)- to beincluded in the PIP. Requirements of ethical behavior by theprocurement staff to be included.The PIU staff in charge of procurement shall receive Bank By June 30, 2002procurement training.An asset register will be maintained through the project Throughout the projectimplementation for all goods and works financed thorough the implementation period.Bank fuids.Technical assistance in procurement, project supervision and By April 2003contract management during project implementation will beprovided by international consultants with experience inWorld Bank procurement procedures and practices.The latest version of the IDA standard/sample bidding Latest version to bedocuments shall be used: downloaded from the web. The

web address is:htto://www.worldbank.ora/html/oor/procure/bdocoaae.html

For eligibility check:http://www.worldbank.org/ht

Recommended sample documents to be provided by the Bank ml/picIPROCURE.htmlfor NCB works, Intemational and National Shopping, selectionbased on Consultant Qualifications and Individual Consultants. Electronic copies to be

provided during appraisal.In NCB, Bank procedures will apply. Whenever NCB applies.GPN to be published. By May 31, 2002IDA and GRD/MOT to organize a project-launch workshop. By October 31, 2002IDA assistance and advice in procurement. During project preparation and

implementation

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Disbursement

Allocation of credit proceeds (Table C)

Table C: Allocation of Credit Proceeds

1. Works 13.36 802. Goods 0.75 1003. Services 2.89 85

Total Project Costs 17.00

Total 17.00

Use of statements of expenditures (SOEs):

The Credit proceeds would be disbursed against certified statement of expenditures (SOEs) for: (a) civilworks contracts costing less than US$100,000 equivalent; (b) goods costing less than US$100,000; (c)Consulting firms contracts costing less than US$100,000; (d) individual consultants contracts and trainingfor less than US$50,000. All other contracts would be fully documented. Supporting documentation forSOE would be retained by the PIU and made available to the World Bank staff during supervision missionsand to external auditors or as requested.

Special account:In order to facilitate disbursement of the IDA Credit, the Borrower should agree to open and maintain aSpecial Account (SA) in a commercial bank on terms and conditions satisfactory to IDA. The PIU willoperate the SA in US dollars. The Authorized Allocation deposit in the SA would be US$1 million,representing the estimated average expenditures for a quarter for the items financed by IDA. At the start ofthe project, the SA deposit will be limited to US$0.5 million and the remaining portion of the authorizedallocation could be requested only after the cumulative disbursement reach a level of SDR 2,500,000. Theapplications for the replenishment of SA would be submitted by the PIU on a monthly basis or when 20%of the initial deposit has been utilized, whichever occurs earlier. The SA and Project Account would beaudited and the audit certificate would be furnished within six months of the end of the fiscal year.

Financial Manaaement

A financial management assessment has been carried out to determine whether the arrangements establishedby the PIU are acceptable to the Bank.

In our opinion, the financial management arrangements currently in place are acceptable and capable ofrecording all transactions and balances, supporting the preparation of regular and reliable FinancialMonitoring Reports (FMRs) beside the required information for the Albanian Government. The systemtherefore satisfies the Bank's minimum financial management requirements. As a standard requirement, thePIU's financial management system will also be subject to an external audit that will be carried out byauditors acceptable to the Bank.

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The conclusions of the financial management assessment can be summarized as follows:

1. Implementing Entity Satisfactory The PIU has already implemented otherBank-financed projects and is farniliar withoverall Bank requirements

2. Funds Flow Satisfactory There will be only two sources of financing, IDAand Borrower, and flow of funds would berelatively straightforward

3. Staffing Satisfactory Accounting and disbursement arrangements willbe handled by one staff that is familiar with theBank's financial management requirements

4. Accounting Policies and Satisfactory Procedures are in place. An Accounting Manual,Procedures describing the financial management policies and

procedures for the project, have been prepared

5. Internal Audit N/A Considering the limited size of the project and ofthe PIU, an internal audit function has not beenincluded into the design of the financialmanagement arrangements

6. External Audit Satisfactory The project will be audited by auditors acceptableto the Bank. The auditors will be appointed by theMoF

7. Reporting and Monitoring Satisfactory The PIU will report on the basis of FinancialMonitoring Reports (FMRs) which format hasbeen agreed with the Bank

8. Information Systems Satisfactory The accounting system is based on an softwarethat is able to produce all the reports required bythe Bank. The system is also used by the PIU forthe Emergency Road Repair Project, as a separatepartition

9. Disbursement Satisfactory An assessment of the disbursement capacity hasbeen carried out. The disbursement arrangementsand capacity is satisfactory

10. Risk Management Satisfactory The PIU's financial management capacity andreadiness to implement the project is satisfactory.Risk management would be contained by "ringfencing" the project.

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Country financial management issues: A draft report on Country Financial Accountability Assessment(CFAA) for Albania has been prepared on April 2002 and the following issues, that could affect the projectfinancial accountability, have been identified:

Public financial accountability:(i) weak capacity in several institutions(ii) weak internal controls including inadequate cash management and weak internal audit function(iii) absence of a solid legal basis for internal audit in the public sector.

Private sector accounting and auditing:(i) need to differentiate between banks, insurance companies, listed companies, non-listed companiesand other entities for determining applicable accounting standards(ii) weak audit capacity and lack of experience in implementing International Standards on Auditing.

Further to these issues, the review by the Bank of the project's audit reports indicates that in Albania thereis not enough adequate understanding of the Bank's financial management policies and procedures on thepart of the auditors. Since this affects negatively the country auditing capacity and the overall financial riskin the Bank-financed operations, the Bank would soon conduct a formal review of the capacity of the auditfirms that audit Bank-financed operations in Albania in order to establish a list of acceptable auditors.

In Albania, the fiduciary risks in Bank-financed project are also contained by requiring the establishment ofimplementing entities separate by the respective line Ministries. This allows a higher degree of transparencyin the financial management and procurement arrangements.

Implementing entity and staffing: The project will be implemented by a PIU that is currentlyimplementing other two Bank-financed projects within the GRD. The PIU staffing for this new projectwould consist of about six persons, including a specialist in charge of the accounting and the disbursementmatters. Considering the limited size of the project and that the National Roads Project will be closing on30 June 2002, staffing is adequate and financial management capacity will not be overstressed.

The accounting/ disbursement specialist have been hired by the PIU less than a year ago after anotherBank-financed project, within the GRD, was closed. Thanks to the experience gained in different PIUswithin the same transport sector the accountant has had a substantial exposure, including training, to theBank's financial management requirements. Due to this experience, the accountant proved good initiativeand overall understanding of Bank requirements in the establishment of the financial managementarrangements for the project (customization of the accounting system, drafting of the FMRs and drafting ofthe Accounting Manual).

Accounting arrangements: Although the PIU is within the GRD, all financial management arrangementswill be handled autonomously by the PIU.

At the time of the assessment, the financial management arrangements were already in place. Theaccounting system is based on the same software in use for the Emergency Road Repair Project. Thesystem has been customized by the accountant with the assistance of a consulting firm. An initial Chart ofAccounts have been established to reflect the project components and categories of expenditures describedin the Project Appraisal Document (PAD). Although some accounts would be added, if deemed necessary,during project implementation, the core accounts have been already defined.

The format of the reports have been agreed with the Bank and the software have been already customizedto produce automatically the Financial Monitoring Reports (FMRs). Although the package is already inuse, the new arrangements have been specifically tested for the project. The customization of the softwarehas been relatively easy, due to the fact that the system was already in place for the Emergency RoadsRepair project and the accountant is familiar in its use.

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The method of accounting that will be adopted by the project is cash basis. An Accounting Manualdescribing the overall accounting, disbursement, reporting, budgeting, controls and auditing procedureshave been prepared by the accountant with the assistance of the consultants. For each project (EmergencyRoads Repair and Road Maintenance Projects) the PIU have now specific Accounting Manuals. The onefor the new project is substantially an improvement of the Emergency Roads Repair Project.

Information system: The accounting system is based on a software (Alpha-FMR) that have been developedby a local software house (IMB). Although the package have been adopted successfully by several otherBank-financed projects, the system established for this specific project have been further tested in order toverify that the data posted in the accounting journal correctly supports the preparation of the reports. Thepackage is able to produce automatically the templates of the reports agreed with the Bank (FMRs). Thepackage has all the most common features of similar accounting systems including: (i) ability to accountunder different bases of accounting (cash and accrual), (ii) ability to track and report on multiple projects,(iii) ability to track and report on flexible reporting cycles (e.g. month, quarter, etc.), (iv) ability to generatedifferent types of reports, including FMRs, with a clear audit trail and (v) capacity to track actual , budget,forecast and life of project data.

Reporting and monitoring: The Financial Monitoring Reports (FMRs) that the PIU has to prepare, andhave been agreed between the Bank and the PIU, are the following:

Financial ReportsI. Project Sources and Uses of Funds Statement2. Uses of Funds by Project Activity Statement3. Special Account Statement4. Project Account Statement

Project Progress Report5. Output Monitoring Report

Procurement Reports6. Procurement Process Monitoring (Goods and Works)7. Procurement Process Monitoring (Consultant's Services)8. Contract Expenditure Report (Goods and Works)9. Contract Expenditure Report (Consultant's Services)

These reports would be prepared on a quarterly basis and submitted to the Bank within 30 days from theend of the quarter. The accounting system is comprehensive and includes also the data needed for thereporting to the Ministry of Finance. Since these reports are prepared on templates provided by the MoF,the accountant will fill them in manually.

Disbursement arrangements andflow offunds: Considering that the PIU is also implementing two otherBank-financed projects, a review of the disbursement arrangements of the Emergency Road Repair Projectwas conducted, with the cooperation of the Bank's Disbursement Assistant, in order to assess the PIUsystem. Disbursement capacity is fully satisfactory and the accountant/ disbursement specialist'sfamiliarity with the Bank requirements provide adequate assurance that these arrangements can be properlyhandled. All disbursement documentation has been properly filed by the PIU and all WithdrawalApplications reviewed are consistent with project documentation. Disbursement will follow the traditionaltransaction-based method (e.g. reimbursements with full documentation, SoEs, direct payments and specialcommitments).

The Special Account will be opened in the Central Bank and funds will be transferred to a Project Account(USD) in a commercial bank. An account in Lek will also be opened in a commercial bank to which funds

- 54 -

from the Project Account in USD will be transferred. This account will be needed for payments in localcurrency.

Audits: as for all non-revenue eaming projects financed by the Bank in Albania, the auditors will beappointed by the Ministry of Finance under a general agreement. For the FY02 audit, the auditor should beappointed, at the latest, in early 2003. The audit fees will be covered by the Albanian Government,therefore this activity is not included in the project's cost estimations. Despite that the appointment of theauditors is handled by the MoF, the final responsibility for ensuring that the project financial statements areaudited, and that the audit report and management letter are submitted to the Bank within six months of theend of each fiscal year, remains with the PIU. The audit TORs will be cleared by the Bank and theauditors appointed would be acceptable to the Bank.

Risk Analysis: the following table summarizes the risk assessment:

SMNComments

Inherent Risk

1. Country Financial S A draft CFAA for Albania have been prepared and haveManagement Risk identified several issues in the public financial accountability

and in the private sector accounting and auditing that needimprovements.Recommendation: in order to contain the fiduciary risk, the"ring fencing" arrangements in Bank-financed operations inAlbania should be maintained

2. Project Financial M The PIU's accountant is familiar with the Bank financialManagement Risk management requirements. The arrangements established for

the project are satisfactory and are able to record alltransactions and provide reliable reports

3. Perceived H In Albania, perceived corruption is high.Corruption Recommendation: in order to provide the appropriate

fiduciary safeguards, the "ring fencing" of the project, witheffective financial management and procurement monitoring,would contain the risk

Control Risk

1. Implementing Entity M The PIU has adequate experience in implementingBank-financed projects

2. Funds Flow M The flow of funds arrangements is quite simple and the PIUhas adequate disbursement experience and capacity

3. Staffing M An experienced staff will be handling all financialmanagement arrangements, including accounting anddisbursement matters

4. Accounting Policies M Overall, adequate financial management policies andand Procedures procedures (described in the Accounting Manual) are in place

5. Internal Audit M Due to the limited size, the project does not require aninternal audit function

6. External Audit M External audit will be carried out by an auditor acceptable tothe Bank. The auditor will be appointed by the MoF

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o. Infrmation Systems m V The project hami place an adequate accounting software

H - High S - Substantial M - Moderate N - Negligible or Low

Proposed Acdon Plan: the project financial management arrangements are in place and satisfies theBank's minimum requirements. However, due to the fact that at the time of the financial managementassessment the budgeting have not been finalized, because the project documents were still to be finalized,the following actions will have to be completed:

1. preare the budget for FY02 (from the date of effectiveness) 30 September, 2002

2. prepare the budget for FY03 15 December 2002

Supervision Plan: the financial management supervisions will be carried out regularly by the project'sFinancial Management Specialist (FMS), at least once a year. The FMS will also: (i) review the FMIRs assoon as these reports are submitted to the Bank (on a quarterly basis); and (ii) review the Audit Report (andManagement Letter), and follow up issues during project supervision. The first Audit Report is due byJune, 2003.

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Annex 7: Project Processing Schedule

ALBANIA: Road Maintenance Project

Time taken to prepare the project (months) 20

First Bank mission (identification) 10/30/2000 10/30/2000Appraisal mission departure 04/15/2002 04/15/2002Negotiations 05/01/2002 05/01/2002Planned Date of Effectiveness 11/30/2002

Prepared by:

Project Team

Preparation assistance:

Consultant Trust Funds from Canada and Netherlands

Bank staff who worked on the project included:

Cesar Queiroz Co-Team LeaderOlivier Le Ber Co-Team LeaderArtan Guxho Project Officer, TransportIrina Luca Senior Procurement SpecialistSandro Zanus Michiei Senior Financial Management SpecialistNeville Weeks Consultant, Traffic SafetyNirinala Saraswat Consultant, Environmental IssuesPeter Whitford Consultant, Environmental IssuesWilliam Denning Consultant, Transport EconomistJacques Bure Consultant, Highway EngineeringRadhika Srinivasan Consultant, Social IssuesJesus Renzoli Procurement SpecialistAnil Bhandari, Peer Reviewer Highways AdviserAnders Bonde, Reviewer Consultant, Quality at EntryCharles Chandler, Reviewer Contractor, Quality at Entry

- 57 -

Annex 8: Documents in the Project File*ALBANIA: Road Maintenance Project

A. Project Implementation Plan

UAlbaniaRMPpip.pd

B. Bank Staff Assessments

Aide-Memoires:

Identification Mission, July 2001 - Pre-Appraisal Mission, December 2001 - Appraisal Mission, April2002

ALBaidememoireRMPJuly2001 ALBaidememolreDecember2001 AideM_1 of3.pdt

AideM_2of3.pdl AideM_3of3.pd1

C. Other

Country Report Albania - Road Transport Charges, Netherlands Economic Institute (NEI), TransportPhare, 1999

CREP_ALB.doc ALB_DAT.XLS

Republic of Albania, Ministry of Finance, Medium-Term Expenditure Framework, 2001-2003, Tirana,December 2000

ALBMediumTermExpenditureFramewoi

Transport Sector Coordination Meeting European Commission/World Bank, Tirana, November 6, 2000Minutes of Transport Sector Donors' Coordination Meeting, February 15-16-2001

TranspDonCoordMtg.p,

Balkans Regional Infrastructure Program for Water and Transport - Technical Assistance ProjectsSummary (Contract No. PCE-1-00-98-00013) in cooperation with Institute for Public Private Partnerships,Louis Berger International, Transportation and Economic Research Associates, Inc., and Urban Institute(BoozAllen & Hamilton)

Balkans Regional Infrastructure Program - Assessment of the General Roads Directorate and SuggestedImprovements (Draft), Ministry of Transport and Telecommunication (GRD), Tirana, Albania, September2001

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Republic of Albania, Council of Ministers, Order No. 13, dated January 15, 2002 on The Establishment ofthe Inter Ministerial Committee of Road Safety.

Republic of Albania, Ministry of Transport (GRD) Preparation of Road Maintenance Project,Environmental Management Plan, Louis Beer Group Inc., February 2002

EMP February 2002 Revised April 200,

Road Maintenance Strategy, MOF and MOT, November 1, 1999 and MoTC and MLGD, May 13, 2002

MOT.pdf confirmation of Road Maintenance Strateg

Consultants Inception Report, Louis Berger Group, December 21, 2001

Iii INtable of content IR.do main doc. iR.doc

Decision of Council of Ministers on Procedures of Expropriation

Decision of CM on the procedures of expropriati

Capacity Assessment of the PIU to Conduct Procurement

Executive Summary.dc Appendix 1.htrr ATT.2.doc Action Plan.doc List of the persons met.di

Estimation of budget increase needed to reduce maintenance backlog.

Backlog Maintenance Estimate02

GOA Road Safety Initiatives

GOA Road Safety Initiatives.c

Action Plan for Road Safety prepared by the Min. of Transport and Telecommunication, April 8, 2002.

MOTT_Action Plan-Road safety_2002-04-1

Memoradum of Understanding (MOU) between Min. of Transport and Telecommunication and Min. ofLocal Govemment and Decentralization setting out their roles and responsibilities with regard to managingthe project.

Memoradum of Understanding (MOU) between Min. of Transport and Telecommunication and the City of

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Tirana setting out their roles and responsibilities with regard to managing the project.

MOU_MOTT-Tirana_2002-04-29.

ECONOMIC ANALYSIS - BACKGROUND MATERIALSHDM model, details of model inputs. Rural roads selection process and results.

HDM4inputOl.doc rural_roads_1 st_ranking 1700km_2002-I rural_roads_2nd rankinq 1340km_2002-4

*Including electronic files

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Annex 9: Statement of Loans and Credits

ALBANIA Road Maintenance Project02-May-2002

Difference between expectedand actual

Odginal Amount In USS Millions disbursements

Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev'dP069479 2002 FISHERY DEVT 0 00 5 60 0 00 5 51 0.00 0.00P070078 2001 TRADE & TRANS FACIL IN SE EUR 00 8.10 000 6 70 260 000

Po55383 2001 SOC SERV DEVT 0 00 10 00 0.00 9.55 .0.25 0.00

P054736 2001 AG SERVICES 0.00 9.90 0 00 9.26 0.09 0.00

P066491 2000 WSURGREHAB 000 1000 000 7.38 4.22 0.00

P057182 2000 LEGIJUDREF 0.00 900 0.00 7.60 376 0.00

POSS63 2000 EMGROADREPAIR 000 13.65 000 665 513 345

P069079 2000 FIN SEC IBTA 0 00 6 so 0.00 4.17 1 48 0 00P069120 2000 EDUCREF 0.00 12.00 000 1032 -011 0.00P069939 2000 PUS ADM REF 0.00 8 so o00 7.46 2 40 0.00P051309 1999 cOMMuNrTYWORKS 0.00 9.00 000 041 -5.27 000P051310 1999 MICROCREDIT 0.00 12 00 0.00 5.00 -0 74 0 00P043178 1999 IRRJG&DRAINII 0.00 24.00 000 8.64 -1.28 0.00

P045312 1998 HEALTHRECOVERY 0.00 1700 000 12.00 1315 000P051602 1998 PRIV IND REC 0.00 10.25 0.00 5.32 586 0.00P054384 1998 RCVRY PROG TA 0 00 50 0 0.00 0.46 OA8 0.54

P040975 1998 LAND DEVT 0 00 10 00 0.00 6 51 5.82 0.00

P040818 1998 DURRESPORT 0.00 16.99 000 838 809 070

P008271 1996 FORESTRY 0 00 8.00 0 00 1.95 2.67 .0.11

P034491 1996 POWERTRNSM&DIST 0.00 2950 449 11.30 1996 0.00

P038060 1996 NATL ROADS 0.00 25.00 000 0.69 233 0.00

Total: 000 259.99 4.49 13526 70.38 4.59

ALBANIASTATEMENT OF IFC's

Held and Disbursed PortfolioJan - 2002

In Millions US Dollars

Committed DisbursedIFC , IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1998 AAP 0.00 28.50 0.00 0.00 0.00 9.15 0.00 0.002000 NCBank 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.001999 SEF Eurotech 0.90 0.00 0.00 0.00 0.90 0.00 0.00 0.001999 SEF FEFAD Bank 0.00 0.98 0.00 0.00 0.00 0.98 0.00 0.002001 Seainent 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio: 15.90 31.48 0.00 0.00 0.90 12.13 0.00 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic1998 Patos Mannza 30.00 0.00 0.00 50.002001 Patos Marinza In 10.00 0.00 0.00 0.00

Total Pending Commitment: 40.00 0.00 0.00 50.00

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Annex 10: Country at a GlanceALBANIA: Road Maintenance Project

-Europe S& Lower.POVERTY and SOCIAL Central middle-

AlDania Asib Income Development diamond'20Population, mid-year (millions) 3.4 475 2,046 Life expectancyGNt per capita (Atlas meohod, USSJ t,230 2,010 1,140GNI (Atlas method, US$ bilUtonsa 4:2 956 2,327

Average annual growth. 1995-01

Population (ff 0.9 0.1 1.0Labor forcme (% 1.3, 0.6 1.3 GNI Gross

per - primaryMoat recent estimate (latest year availmble, 1995-01) capita enrollment

Poverty (% of population below naVtonal povony line)Urban Population 1% ot total PoPulaton) 40 67 42Life expectancv at birth (years) 74 69 69Infant mortalitv (per 1,000 live births) 20 21 32Child mainutrition (% of children under C) 8 .. II Access to Improved water sourceAccess to an Improved water source (16 of populatUon) .. 90 80liiteracy (% ofpopulaton age 16+) 15 3 15Gross primary enrollment (% of school-age population) 110 100 114 Albanla

Male 109 101 116 ---- Lower-middle-Income groupFemale 110 99 114

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

19t1 1991 2000 2001Economic ratios'

GDP (USS billions) .. 1.1 3.8 4.1Gross domestic Investment/GDP 35.1 7.3 18.6 19.4Exports of aoods and saervicesGDP 230 7.2 18.9 20.4TradGross domestic seavins/GDP 36.6 -13.0 -2.9 -3.7Gross national savinPs/G0P .. -14.2 11.6 13.1

Current account balancelGDP .. -21.6 -7.2 -6.3 Domestic ' Interest payments/GDP . 0.2 0.2 0.3 savingsvstmentTotal debUGDP .. 44.9 20.9 23.0 savngTotal debt service/exPort .. 3.9 2.1 2.7Present value of debUGDP .. .. 12.9Present value of debt/exports .. .. 38.5

Indebtedness1981-91 199S141 2000 2001 2001405

(averge annual arowth)GOP -0.5 5.4 7.8 6.5 6.7 AlbaniaGDP.- aer capita -2.4 4.6 6.9 5.6 6.3, -- -- -Lower-middle-lncome groupExports of goods and services 11.7 5.8 24.8 5.5

STRUCTURE of the ECONOMY1981 1991 2000 2001 Growth of Investment and GDP (Xl

(S6 of GDP) 20Aariculture 32.4 39.3 51.0 49.1Industry 43.0 42.7 26.3 27.3 1s

Manufacturing .. 36.5 11.6 11.6Services 24.6 18.0 22.7 23.6

Private consumptlon 54.9 90.9 92 0 90.9 .10General govemment consumption 8.5 22.1 10 9 12.9 GDI - CGDPImports of goods and services 21.5 27.6 40 4 43.5

1981-91 1091-01 2000 2001 Growth of exports and Imports (%)(aweraeg annual growth)Agriculture 1.0 6.1 4.0 1.4 eo -Industry -0.5 5.0 11.4 10.7 40

Manufacturina .. -0.8 5.0 6.5 20Services -3.0 5.1 13.3 13.6 o s i

Private consumption .. 5.4 2.8 6 7 -20General government consumption .. 3.1 7.4 12.0 .40Gross domesUc Investment -1.0 20.1 17.9 11.1 Exports :ImportsImports of goods and services .. 11.0 6.5 23.5

Note: 2001 data are preliminary estimates.

The diamonds show tour kev Indicators In the countrv (in bold) compared wlth Its Income-group averaae. If data are missing. the diamond willbe Incomplete.

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Albania

PRICES and GOVERNMENT FINANCE1981 1991 2000 2001 Inflatn

Domestic pmces(% change) 40 .Consumer prices .. 49.4 0.1 3.1 30-Impliclt GDP deflator -2.2 34.5 -1.2 2.8 20 --

Government finance 10(% of GDP, Includes currnt grants)Current revenue .. 34.3 22.4 23.0 .10 96 97 9s 99 00 01

Current budget balance .. -21.7 -2.4 -1.2 - GDP deflator C CPIOverall surplus/deficit .. -27.8 -9 1 -8.5

TRADE1981 1991 2000 2001 Export and Import levels (US$ mill.)

(US$ millions)Total exports (fob) 419 101 256 305 1,60

Commodity 1 .. .. 28 .. 250Commodity 2 .. .. 14 Manufactures .. .. 218

Total Imports (cli) 384 409 1,070 1,332 '60

Food .. .. 217 .. sooFuel and energy .. .. 71 .. 2s0Capital goods .. .. 230 .. o J

Export pdca index (1995--100) ~~~~~~~99 96 97 as 99 00 01Export price Index (1995=100) .. .. s ooImport prIce index (1995=100) .. .. .. .. * Exports * ImpotsaTerms of trade (1995-100) ..

BALANCE of PAYMENTS

(USS millions) 1981 1991 2000 2001 Current account balance to GDP (%)Exports of goods and services 431 82 705 840 oImportsofgoodsand services 403 314 1,520 1.791Resource balance 28 -232 -815 -951

Netincome 11 -22 106 148 -Net current transfers .. 8 439 543

Current account balance 45 -246 -270 -260 o *.

Financdng items (net) -19 24 381 391Changes in net reserves -26 221 -111 -131 16

Mremo:Reserves including gold (US$ millions) .. .. 638 767Conversion rate (DEC, locallUSS) .. 14.4 143.7 143.5

EXTERNAL DEBT and RESOURCE FLOWS1981 1991 2000 2001

(US$ millions) Composition of 2000 debt (USS mill.)Total debt outstanding and disbursed .. 512 784 945

IBRD .. 0 0 0 G 37IDA .. 0 346 .. F:37

Total debt service .. 4 27 41IBRD 0 0 0IDA 0 2 3 E2t8 8.346

Composition of net resource flowsOfficial grants .. 320 161Offical creditors .. 20 93Private credtors .. 28 -1Foreign direct Investment . 0 143 .DPortfolioequlty *- 0 0 D C 8

Worid Bank programCommitments .. 0 54 20 A - IBRD E -BilateralDisbursements .. 0 64 34 B -IDA D -09er multilateral F- PrivatePrincipal repayments .. 0 0 0 C -IMF G -Short-termNet flows .. 0 64 34Interest payments .. 0 2 3Net transfers .. 0 62 31

Development Economics 5/14/02

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Additional Annex 11: Road Sector - Current SituationALBANIA: Road Maintenance Project

The Road Act of the Republic of Albania was gazetted as law No. 8378 on July 22, 1998. It defines theclass of roads as follows:

Main National Roads are roads which- link the Prefectures or District centers with each other;- link the Main National Roads network with sea ports, intemational airports or major centers ofeconomic activity;- link the Main National Roads network with that of neighboring countries; or- represent a special interest for the national economy.

* Rural (or District) Roads are roads which:- link the District centers with administrative sub-centers within the district (municipalities) orcenters of economic activity at the district level;- link the administrative sub-centers or centers of economic activity at the district level with eachother;- link the District center, the administrative sub-centers and the centers of economic activity at thedistrict level with the Main National Road network.

* Urban Roads are roads located within the territory of a municipality and which are not eitherMain National Roads or Rural Roads.

The total length of the road network is about 16,000 km. Table 1 provides a breakdown of the roadnetwork.

Table 1: Length of Different Road Types in Kilometers 2001

Type of Road Length Institution ResponsibleNational Road Network 3,221 MOTT (GRD)Urban Roads 1,000 MunicipalitiesRural Roads 4,126 MLGD (D)Other (agricultural, mining, forest) 7,653 Relevant Entities

Total 16,000

Only 8 km of the main national road network (between Tirana and Durres) can be called "motorway", withstandards not in accordance with those of European motorways. The condition of the roads is in genealpoor for all categories of roads. Of the national road network, about 10% is in good condition, 22% in faircondition, and 68% in poor condition. A substantial backlog in periodic maintenance exists. Therehabilitation of the two main corridors (North-South and East-West) has started back in 1994 and is stillin .process. For the next 5 years there are no plans for new construction of motorways. Only reconstructionand rehabilitation of existing roads and completion of some new two-lane roads between majormunicipalities are planned. The Ministry of Local Government and Decentralization oversees themunicipalities responsible for about 1,000 km of urban streets, and local government organizationsresponsible for the 4,126 km of rural roads recently separated from GRD.

The road subsector has become an increasingly important part of Albania's transport system in the lastdecade, with rapid growth of vehicle traffic at the expense of other transport modes (see Table 2).

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Table 2: Total Number of Vehicles Over the Last Six Years

Type of Vehicle 1996 199 199 1999 200 2001Passenger car 67,278 76,822 90,766 92,038 114,301 133,288Buses & minibuses 7,612 8,747 9,227 12,223 16,687 20,706Trucks 27,77 30,10 34,378 34,841 43,015 48,096Road tractors 2,83N 3,151 2,731 1,858 2,273 2,715Trailers 3,49 3,74, 3,99C 4,206 5,119 6,297Other (motorcycles) 5,541 3,645 4,19C 3,169 3,766 3,403

Total 114,540 126,277 145,38A 148,335 185,161 214,505

Albania has been the recipient of substantial amnounts of foreign assistance directed to the improvement ofthe road network, including four IDA projects. In spite of this, the road network is in very poor condition(see Table 3) and is verging on being a major constraint to the Govermment's growth strategy as expressedin the Interim Poverty Reduction Strategy Paper mentioned above. The Government recognizes this, andhas requested IDA assistance to improve the country's road maintenance capacity. Specifically, in a letterfrom the Minister of Transport dated June 22, 2000, the Government confirmed to IDA that it considers theproposed Road Maintenance Project to be a high priority for the country, and also outlined an overallstrategy for restructuring the management of road maintenance to make it more effective.

Table 3: Condition of Different Types of Roads in Year 2000

Type of Road Good (%) Fair (%) Poor (%)National Road Network 10 22 68Urban Roads 10 30 60Rural Roads 20 25 55Other (agricultural, mining, forest) 0 0 100

Overall 8 13 79

The funding of road maintenance and investment activities in Albania takes place according to thefollowing principles. The National Roads are financed via the state budget and foreign loans. TheRegional Road Directorates prepare requests for annual budgets that are collected and vetted by GRD.GRD, through the Ministry of Transport, then submits a combined road budget to the Parliament forapproval. After approval of the Government budget, the Ministry of Finance sends funds to GRD anddirectly to most RRDs through a District Authority Bank The Rural Roads are financed through the statebudget and local budgets in some cases supplemented by foreign fumding. Only limited central governmentresources are being made available for rural roads at present. Urban roads and streets are financed by theCity Councils and the Municipalities through the state budget. The Government budget for the transportsector is given in Table 4. Table 5 shows the budgets for national and local roads.

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Table 4: Government Budget for the Transport SectorIncluding foreign funded projects (Lek millions, current value)

1997 1998 1999 2000 2001actual actual actual actual budget

Total Income (National Budget) 93,518 107,506 120,588 136,462Total Expenditure 141,627 165,692 175,844 189,022

Expenditure on Transport - MOTDomestic funding 2,129 3,636 5,600 5,285 6,455Extemal funding M.E51 2.801 | .62 6.420 6.700

Total 3,780 6,437 12,262 11,705 13,155

National roads 1,752 4,804 11,048 10,646 11,907Civil aviation 1,242 1,221 49 152 n/aOther transport 786 412 1.165 907 1,248

Total 3,780 6,437 12,262 11,705 13,155

Expenditure on RoadsMOT Expenditure on

National Roads 1,752 4,804 11,048 10,646 11,907Expenditure on Rural

and on Urban Roads 529 1.014 1.161 1.137 1.150Total Expenditure on Roads 2,281 5,818 12,209 11,783 13,057

GDP 341,716 460,631 506,205 539,210 594,346

National expenditure on trasport 1.1% 1.4% 2.4% 2.2% 2.2%as % of GDP

Total expenditure on roads 0.7% 1.3% 2.4% 2.2% 2.2%as % of GDP _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Source: MTEF, GRD, IBRD

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Table 5: Budget of Road OrganizationsIncluding foreign funded projects (Lek millions, current value)

Authority 1996 1997 1998 1999 2000 2001Authority actual actual actual actual actual budget

National (GRD)Internal financing 2,267 102 2,061 4,386 4,226 5,937External financing 147 1.650 2,743 6.662 6.420 5.970

Total GRD 2,414 1,752 4,804 11,048 10,646 11,907

% of external financing 6% 94% 57% 60% 60% 50%

LocalUrban roads 353 840 374 361(municipality)Rural roads (MLG) 321 763 789

Total Local 563 529 1,014 1,161 1,137 1,150Grand Total 2,977 2,281 5,818 12,209 11,783 13,057

Exchange rate 104.32 147.55 150.30 137.41 143.78 143.57(LekIUS$)

Grand Total in US$ 28.5 15.5 38.7 88.9 82.0 91.0

Source: GRD, MLG, IBRD

The country's present tax structure is generally in alignment with European Union requirernents, but stillneeds some adjustments (see Country Report Albania-Road Transport Charges, NEI Transport forPHARE, 1999). What are seriously needed are vastly improved tax collections feeding the general revenuesof the govermment and a mechanism that assures good budgeting of adequate funding for timelymaintenance that is then turned over to the road authorities to maintain the desired performance of thepublic network. At this stage the Govermnent is not pursuing the establishment of a Road Fund forAlbania.

Funds to the General Road Directorate come directly from the national budget. Besides this budget fundingthe GRD also has funding from foreign loans and aid. The national budget is only a one-year budget,which seriously hinders multi-annual planning of maintenance and reconstruction works. There is also nostraight relation between budget and costs. GRD has two budgets: Investment and Maintenance. Theinvestment budget includes all works that need to be tendered: construction, rehabilitation (see first part ofTable 6) and also periodic maintenance. Periodic maintenance which is of very limited scope and scale inAlbania is typically contracted out, whereas the Regional Road Directorates carry out routine maintenance(see second part of Table 6). As the Regional Road Directorates carry out the routine maintenance works,the maintenance budget of the GRD is in fact that of the RRD's. A substantial part of the total maintenancebudgets of the RRD's is used for staff salaries, equipment and housing. Since 1999, because of thetransfer of Rural Roads network from MOTT to MLGD, National Roads expenditures no longer includeexpenditures related to the Rural Roads. This explains the decrease in GRD routine maintenance figuresfrom 1998 to 1999.

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Table 6: Expenditures of Road Organizations by TypeIncluding foreign funded projects (Lek millions, current value)

1996 1997 1998 1999 2000 2001Authority actual actual actual actual actual budget

GRDRehabilitation and newconstruction

intemal financing 977 na 422 2,740 3,469 4,859extemal financing 147 1 650 2.743 7.538 6.420 5.970sub-total 1,124 1,650 3,165 10,278 9,889 10,829

Periodic Maintenance 276 na 360 311 327 750(contracted out)

Routine Maintenance 1,014 na 1,279 459 430 328(force account)

Total GRD 2,414 1,752 4,804 11,048 10,646 11,907

Local 563 529 1,014 1,161 1,137 1,150(MLG + Municipal)

Grand Total 2,977 2,281 5,818 12,209 11,783 13,057

Exchange rate 104.32 147.55 150.30 137.41 143.78 143.57(LeklUS$)__ _ _ _ __ _ _ __ _ _ _ _

Grand Total in US$ 28.5 15.5 38.7 88.9 82.0 91.0

Source: GRD, MLG, IBRD

Traffic safety is a significant social, economic and public health issue in Albania. Table 7 shows that theannual fatality rate using official statistics has been slowly decreasing over the past six years, possibly dueto improved levels of enforcement and a growing general awareness of safety issues. However, there isevidence to suggest that the numbers of fatalities in Albania are generally under-reported (relative tointernational definitions), yet official statistics indicate that the relatively lower (compared to previousyears) fatality rate in 2000 (i.e. the number of fatalities/10,000 vehicles) was the highest in eastem Europe,and about ten times the EU average. Comparative international fatality rate statistics for 1996 are shownin Table 8. These use officially published statistics and, as noted, accident fatality figures for Albania arebelieved to be under-reported relative to international definitions of a traffic fatality.

Table 7: Albania Traffic Fatality Rates (Fatalfftes/10,000 Vehicles) over the Last Six Years on allRoads

199( 199 1998 1999 200( 2001No. of fatalities 251 26 308 274 280 297Total vehicles 114,54C 126,271 145,382 148.335 185,161 214,505Annual fatality rates 22.4! 21.0 21.18 18.48 15.12 13.85

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Table 8: Comparative International Fatality Rates for 1996

Country _ Annual Fatality Rates 1996 Country Annual Fatality Rates 1996Albania 24.1 Austria 2.3Bosnia 18.6 Canada 1.8Bulgaria 4.1 Denmark 2.3Czech Republic 2.9 Greece 4.0Croatia 7.5 Italy 1.8Hungary 4.6 Netherlands 1.5Latvia 11.3 Sweden 1.3Macedonia 5.1 United Kingdom 1.5Poland 5.7 USA 2.0Romnania 9.0Slovakia 5.0 _ ___ __X_X

Yugoslavia 6.5

Source: Estimatin2 Global Road Fatalities: 1996. TRL Report 445, 2000. This is the most reoently availablesummary with good comparability across countries. For Albania TRL used a 1996 figure for total vehicles of106,630, together with traffic fatalities of 257, to arrive at a fatality rate of 24.1.

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Additional Annex 12: Policy Framework for Safeguard Compliance for Minor AdverseImpacts

ALBANIA: Road Maintenance Project

Adverse Condition Scope of Civil Potential Adverse Recommended Mitigationof Road Works Social Impact Mitigation Measure Approach;Serviceability Required ActionsRequiring CivilWorks

- Longitudinal - Cleaning of Limited or - Placement of Publicditches damaged or drainage structure constrained access concrete/steel pipes encouragement toblocked involving demolition to private property in correspondence remove

of access to private of each access road encroachmentsproperty in order to assure

continuity to theroad drainagesystem

- Retaining walls, - Reinstatement of - Provision of Public informationcurbs and gutters the original situation altemative solutions campaign atdemolished due to particular assuring road national and local

engineering access to project level will besolutions needed in affected people included in the TORthat location of the supervision

consultants to winpublic support.

Technicalspecificatonsbetween thecontractor and GOAwill specifymitigation measure.

No intervention ofpublicadministration willbe sought in theeventencroachments arenot voluntarilyremoved. Roadsection will remainoutside the scope ofthe current project.

- Longitudinal - Clean the filled Loss of access to - Additional Publicdrainage occupied ditch and move the services (including excavation for encouragement toby minor/major water pipe water, electricity, subsequent works removewater pipes elsewhere if etc.) that were in order to move encroachments

possible acquired through the existing pipe tomisuse of a new location suchdrainage/road that roadstructure for private serviceability and

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networks continued access toservices is restored

- Culverts used as - Reinstate the - Leave the Technicalpassage for original situation by situation like it is, in specificationsminor/major water removing case of small between thepipes impediment diameter water pipe contractor and GOA

which in any case will specifywill not affect the mitigation measure.serviceability of theculvert; if the waterpipe is obstructingthe culvert, buildanother culvertclose to thislocation in order toreinstate thedrainage system

Leave the situation Intervention oflike it is. It is relevant public

- Structures used - Remove assumed that the authority will not befor the passage of impediment serviceability of the sought to removewater pipes structure is not impediment in order

going to be affected to carry out civilworks.

- N/A- Structures used - Removefor the passage impedimenthigh/low voltagepower lines- Kiosks, small - Remove Loss of structures N/A Publicbrick/r.c. buildings impediment that were raised on encouragement tobstructing public land for remove

longitudinal drainage unauthorized encroachments.r invading the road commercial Public information

carriageway activities campaign atnational and locallevel will be included

N/A in the TOR of thesupervisionconsultants.

- Fencing, retaining - Step back Grievancewalls, power poles impediment Mechanism to bereducing the road made available tocarriageway affected people to

register complaintsregarding mitigation

N/A measure. Affectedpeople have optionof denying access tocomplete projectworks, in which caseproject works will be

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stopped.Unauthorized road - Minimize or

obstacles reducing remove impediment Technicalroad safety (i.e. specificationscommercial between theadvertising, contractor and GOAunauthorized will specifyhigMow voltage mitigation measure.power poles, etc.) In addition, it will

instruct contractorsat there will be no

forced removal ofkiosks/dwellings/fences or otherunauthorized roadobstacles fromROW's.

There will be noexpropriations in thisproject.

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Additional Annex 13: Road Safety Component Detailed DescriptionALBANIA: Road Maintenance Project

Background

Investigations of the road safety situation in Albania and integral discussions with representatives from theresponsible govermment agencies and traffic police have determined that there is a need for a comprehensiveroad safety program. It is evident that the official traffic accident statistics are under-reporting trafficfatalities and personal injury accidents, yet the official figures already indicate the highest fatality ratesfrom traffic accidents of all European countries. This situation is cause for concem by the government,given that current motorization levels are relatively low but increasing at a rate of over 10% per annum.Furthermore, the economic costs of traffic accidents to Albania are estimated to be about 2-3% of theGDP, which excludes the social and humanitarian impact that loss of human life and/or disabilitatinginjuries can have on families - particularly is a family income-eamer is involved.

The investigations and discussions during the preparation of the project have clearly shown that there are awide-ranging series of technical and institutional issues and activities which will have to be addressed inAlbania so that the present unsatisfactory road safety situation may be brought under control. Forecasts ofrapidly increasing motorization rates in Albania wiU result in a continuation of the rising trends in trafficfatalities and total accidents, unless road safety issues are addressed.

A focused, comprehensive, well-planned and multi-dimensional road safety program is urgently needed toaddress the problems in Albania. The program should involve both public sector and private enterprisesworking together towards a common goal, with the ful support of civil society. In order to ensure the roadsafety program is effective and sustainable, strong support from political leaders will be essential.Govemment support and commitment has been demonstrated by the recent (January 15 2002)establishment of the 'Inter-Ministerial Committee of Road Safety' and of its Secretariat within the Ministryof Transport and Telecommunication (the 'Directorate of Road Safety and Traffic'). Government's'Action Plan for Road Safety' is appended in annex 8, together with the Directorate's preliminary 4-yearPlan (2002-2005).

The scale of the problem is demonstrated by a review of official traffic accident statistics for 2001.Although fatality rates have decreased in 2001 (to about 13 persons/10,000 vehicles), the numbers offatalities have increased. (A 'fatality' in Albania is defined as a victim being dead at the accident site,compared to the international definition of death within 30 days of an accident).

A summary of the main results is as follows:

Most recorded accidents occurred on paved national roads outside of urban areas (83%), and most recordedaccidents occurred during daylight hours (73%), with (22%) occurring during hours of darkness, and theremainder (5%) occurring during twilight hours. Most recorded accidents occurred on dry road conditions(90%), and on flat terrain (88%).

Of the 297 recorded traffic fatalitv accidents:

- 44% resulted in the death of pedestrians (37%) and cyclists (7%);- 8% resulted in the death of motor-cycle riders;- 22% resulted in the death of drivers (of cars (18%), trucks (3%) and buses (1%)); and

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- 26% resulted in the death of passengers in vehicles.- 54% involved drivers with less than 5 years driving experience; and- 85% involved drivers with less than 10 years driving experience.- 21% involved drivers aged 18-24 years;- 39% involved drivers aged 25-35 years;- 24% involved drivers aged 36-45 years; and- 16% involved drivers aged over 45 years.- 74% were assessed as the driver's fault; of these, records indicated that excess speed was a factor in

42%, and reckless driving (i.e. passing error, driving on the wrong side of the road, general negligence)was a factor in 37%; and

- 22% were assessed as the pedestrian's fault.

Of the 250 recorded Personal injury accidents:

- 31% involved pedestrians (25%) and bicycles (6%);- 8% involved motor-cycles;- 18% involved drivers (of cars (17%) and trucks (1%)); and- 42% involved passengers in vehicles.- 50% involved drivers with less than 5 years driving experience; and- 85% involved drivers with less than 10 years driving experience.- 20% involved drivers aged 18-24 years;- 38% involved drivers aged 25-35 years;- 31 % involved drivers aged 36-45 years; and- 11% involved drivers aged over 45 years.- 73% were assessed as the driver's fault, of these, records indicated that excess speed was a factor in

30%, and reckless driving (i.e. passing error, driving on the wrong side of the road, general negligence)was a factor in 47%; and

- 23% were assessed as the pedestrian's fault.

The accident records do not identify whether the condition of the road (other than whether it waspaved or unpaved, wet or dry), or of traffic control devices were contributingfactors to the accidents.

There is an evident need to expand the data recorded at site in order to determine whether road conditionand/or absence or poor working condition of traffic control measures (signs, markings and signals) werecontributing factors to accidents. The fact that pedestrians are the predominant victims of all trafficaccidents indicates that a safety awareness campaign is needed for pedestrians themselves, and for drivers.In addition, since excess speed and reckless driving behaviour are identified as significant causal factors intraffic accidents, this indicates a need for a combined road safety campaign (via all available media) andstrict enforcement targeting speed and reckless driving.

Furthermore, since vehicle passengers are involved in a significant percentage of traffic fatalities and (inparticular) in personal injury accidents, this is clear evidence that seat-belts are not being used. Thewearing of seat-belts should be included as part of an intensive road safety campaign, that should bestrongly supported by targeted police enforcement of seat belt regulations. Although less of an evidentissue at the present time, consideration should also be given to the application of legislation, regulationsand enforcement of crash-helmet requirements for motor-cycle riders.

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Comprehensive Road Safety Program

The road safety program for Albania should be based on the 3 Es' of:

* Education, (for senior officials in relevant govenmment agencies, general public, road users, trafficpolice, school children, etc);

* Engineering, (to introduce safety conscious planning and design for roads and traffic schemes, and forremedial measures at accident blackspot locations, etc); and

* Enforcement, (to introduce policies for targeted enforcement aimed at changing unsafe road userbehaviour, etc).

To ensure the program is effective and sustainable on a routine day-to-day basis, all involved agenciesshould practice the 3 'Cs' of:

* Cooperation, (in developing joint road safety priorities and inter-agency working arrangements, etc);* Coordination, (in sharing information on traffic accidents, accident blackspots and road safety issues,

etc); and* Collaboration, (in developing solutions and plans to address specific road safety issues and

requirements, and in monitoring of their effectiveness following implementation).

The road safety problem is perceived as too large and complex for a single government agency to address.As has been recognized in many countries, road safety is a social and public health issue and has effects ina number of sectors. In Albania, these other sectors (e.g. social services, public health, hospitals,education, local government, etc) are the responsibility of govermment ministries and agencies other thanthe Ministry of Transport and Telecommunication. Therefore, it will be important that all relevantagencies practice the 3 'Cs' to consolidate the basic foundation of a road safety program for Albania. Inrecognition of the multi-dimensional nature of road safety, the Government of Albania has recentlyestablished the 'Inter-Ministerial Committee for Road Safety' to give leadership and direction to the roadsafety program. (The main stakeholders and their priority activities are described later in this Annex).This Committee provides an essential first step in providing the enabling environment to develop andimplement a comprehensive road safety program for Albania.

The program may be considered to have nine main components with each having several integral elements,as illustrated below. (This program was first presented during the IDA "Road Safety Study and Program"and was approved by GOA in 1998). For each component, specific strategy objectives need to bedeveloped, together with realistic targets/minimum outputs and performance indicators.

Activities for an Integrated Road Safety/Maintenance Project

Within the context of the Road Maintenance Project, support will be given to several key components of theComprehensive Road Safety Program for Albania. Working with the 'Inter-ministerial Committee forRoad Safety' (i.e. the National Road Safety Council), the Ministry of Transport and Telecommunication(Directorate for Road Safety and Traffic, and General Directorate of Roads), Ministry of LocalGovernment and Decentralization, and the Ministry of Public Order (Traffic Police), the major activitieswithin each component will be as follows:

1. Accident Data System

Hardware, software, technical assistance and training for the traffic police accident unit to establish a datastorage/retrieval and analysis system, and for the MOTT Directorate of Road Safety to facilitate

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establishment of a GOA transport and road safety statistics web-site. This will also include assistance tothe traffic police to introduce the accident site report form (as included in the new Albanian Road Code),and in developing procedures for data dissemination, and in accident investigation.

2. National Road Safety Council

Technical assistance for the effective NRSC for Albania (i.e. the 'Inter-Ministerial Committee for RoadSafety') to assist with the development of a sustainable road safety program for Albania., budgetdevelopment and its allocation. Technical assistance and training for its supporting Secretariat in theMOT' (i.e. the Directorate for Road Safety) to enable the latter to function as coordinator for thecomprehensive Road Safety Program, including development of strategies for cooperation andcollaboration between all key public and private sector stakeholders, with rural community groups and roadsafety associations on local safety issues.

3. Infrastructure Improvement

Civil works to improve about 30 identified accident blackspots on the road network as demonstrationprojects, including channelization and other physical remedial measures, including the installation ofappropriate traffic control devices. Materials for vertical and horizontal traffic control devices(reflectorized traffic signs and thermoplastic paint for road markings) for the demonstration projects.Technical assistance and training to GRD, MLGD and the traffic police to develop systematic techniquesfor blackspot identification, to increase local practitioners' capability to develop remedial measures, tomonitor and evaluate the effects of remedial measures, and to identify agencies' annual budget allocationsfor safety engineering improvements. Consulting services will also develop procedures to operationalizeand institutionalize traffic safety audit procedures and other safety conscious planning approaches withinGRD and MLGD, and to maintain traffic control devices on the road network.

Consulting services to include safety engineering on two road and intersection rehabilitation projects for theMunicipality of Tirana.

4. Legislation

Consulting services to review and update the Albanian Road Code and Regulation to strengthen safetyconscious approaches on all roads planning, design, construction and maintenance activities for nationaland rural roads, and for urban roads and traffic management schemes.

5. Traffic Police Enforcement

Technical assistance and training to the traffic police within MPO, and to municipal police in Tirana toestablish targeted enforcement strategies and publicity campaigns focused on specific enforcementpriorities, in order to improve road safety and deficient road user behaviour.

6. Education and Publicity

Technical assistance and training for the development of strategies and plans for mass action road safetycampaigns and publicity in support of targeted police enforcement, to increase public awareness of safetyissues, and for campaign monitoring and evaluation. Consulting services to develop road safety educationwithin the schools system.

7. Driver Training and Testing

Consultant services to review driver training and testing procedures, and quality control of driving schools,instructors and examiners, including the potential for the introduction of 'graduated' licensing. The

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requirements for drivers of public service vehicles will be given particular attention.

8. Vehicle Testing and Inspection

Consultant services to review vehicle testing and inspection procedures, and quality control of testingstations and inspectors. The requirements for commercial and public service vehicles will be givenparticular attention.

9. Emergency Services

Technical assistance and training to strengthen emergency response procedures, including training for firstresponders in emergency first aid and improved coordination between police, fire, amnbulance/hospitalemergency services. Provision of first aid kits for emergency responders.

Seminar on Road Safety Awareness

The RMP project will conduct a 2-3 day seminar in Tirana for high level participants, aimed at increasingroad safety awareness and raising the profile of Government's Comprehensive Road Safety Program forAlbania. While providing the opportunity to examine road safety as a global health and social issue, alsoprofiled will be Albania's road safety performance and comparisons with other countries, and 'lessonslearned' from other national road safety programs. Key Albanian agencies involved in road safety willoutline government policies, strategies and plans to address the problems and concems by means of amulti-dimensional, coordinated program of physical and other measures. Opportunities will also beprovided for other donors (e.g. EUT), private sector representatives and other participants (e.g. communitygroups) to discuss road safety concerns and issues, and to identify potential additions to the road safetyprogram.

As progress is achieved on the RMP, an additional, high level road safety seminar will be held todemonstrate the effects of the comprehensive road safety program.

Stakeholders and Priorities

1. Stakeholders

The principal Albanian stakeholders in road safety are as follows:

1.1 Govemment

* Inter-Ministerial Committee for Road Safety (IMCRS)* Ministry of Transport and Telecommunication (MOTT)- Directorate of Road Safety and Circulation- General Directorate of Transport Management (Road Transport)- General Directorate of Road Transport Services- General Road Directorate (GRD)* Ministry of Public Order (Traffic Police)* Ministry of Finance (MOF)* Ministry of Local Government and Decentarlization (MLGD)* Ministry of Health (MOH)* Ministry of Education (MOE)* Municipalities

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1.2 Ouasi-Govermment

* INSIG INSIG is expecting to be privatized in the near future.* INSTAT* Albanian TV and radio* Albanian newspapers

1.3 Private Sector

* Private insurance companies (4)* Petroleum companies* Transport companies* Transport equipment companies

1.4 Civil Societv

* Non-govermmental groups* Red Cross* Local community groups

2. Priorities for Major Stakeholders (i.e. under 1.1 above)

As preparation for the Road Maintenance Project (Road Safety Component), and in order to initiate theComprehensive Road Safety Program for Albania, the following priority action items should be pursued byeach of the major stakeholders. (Consulting services support for these activities will be provided withinRMP once the project becomes operational):

* Inter-Ministerial Committee for Road Safety (IMCRS)

- approve road safety policies, goals and objectives, including accident reduction targets and strategies- approve roles and responsibilities of all road safety stakeholder groups- approve program, schedule and key Albanian participants for a high level road safety awareness

seminar- approve and identify accountability for a source of funding for road safety activities (e.g. portion of

driver/vehicle insurance premiums)- identify senior government official responsible for implementation of the road safety program in

Albania- approve cooperative working procedures between goverwnent stakeholders- approve comprehensive road safety program- approve annual road safety programs, priorities and budgets- approve updates of road safety legislation as and when necessary- consider introduction of traffic court system- encourage private sector and civil society participation

* Ministry of Transport and Telecommunication (MOTT)

(i) Directorate of Road Safety (DRS)

- develop road safety policies, goals and objectives, including accident reduction targets and strategies- define roles and responsibilities of all road safety stakeholder groups

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- develop program, schedule and key Albanian participants for a high level road safety awarenessseminar

- provide liaison between IMCRS and other stakeholder agencies- provide general secretariat services to IMCRS- develop comprehensive road safety program and stakeholder responsibilities- develop annual road safety programs, priorities and budgets- implement approved cooperative working procedures between government stakeholders- monitor and evaluate approved road safety activities- review road safety legislation and regulations, and recommend updates as and when necessary- identify opportunities and mechanisms for private sector and civil society participation in road safety

(ii) General Directorate of Transport Management (Road Transport)

- review driver training, testing and licensing programs and standards- review vehicle testing, inspection and licensing programs and standards

(iii) General Road Directorate (GRD)

- identify senior official responsible for implementation of the road safety program on national roads inAlbania

- review road sections and intersections where vertical and horizontal traffic control and safety measuresare required, and identify priorities

- participate with the traffic police in developing a systematic method of defining and locating accident'blackspots', in planning for improvements, and identifying priorities

- collaborate with MLGD and the traffic police in defining and documenting a road referencing systemfor Albania, in order to facilitate accurate recording of traffic accident locations

- introduce traffic safety conscious planning and road safety audit procedures in all road improvements,including during roadworks

- participate with DRS in preparing annual road safety budgets, including estimates of needed goods andservices

- collaborate with DRS and the traffic police in monitoring and evaluating the effects of road safetyengineering remedial measures

- coordinate with non-govemmental and community groups in addressing road safety concerns

* Ministry of Finance (MOF)

- approve annual budget allocations for road safety activities; including MPO, GRD and MLGDactivities, and use of insurance and other contributions

- conduct annual financial audit of road safety activities, comparing costs and benefits.

* Ministry of Public Order (Traffic Police)

- identify senior officer responsible for implementation of the traffic police responsibilities within theroad safety progran in Albania

- introduce intensive enforcement of seat belt legislation, with accompanying publicity campaigns- review current levels of sanctions and fines for their adequacy in changing errant driver behaviour- review and recommend modifications/additions to the Road Code and present regulations, including

consideration of a traffic court system- review enforcement policies to improve police visibility and to introduce targeted enforcement aimed at

changing driver behaviour

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- participate with GRD and MLGD in developing a systematic method of defining and locating accident'blackspots', and planning for improvements

- collaborate with DRS in preparing annual road safety budgets, including publicity campaignrequirements, and in sharing traffic accident data

- collaborate with DRS, GRD and MLGD in the improvement of accident data recording and analysis- participate with MOH in developing improvements in monitoring and recording the condition of

hospitalized traffic accident victims within 30 days after a crash- participate with MOH in developing improvements in emergency response procedures and response

rates

Ministry of Local Government and Decentralization (MLGD)

- identify senior official responsible for implementation of the road safety program on rural roads inAlbania

- review road sections and intersections where vertical and horizontal traffic control and safety measuresare required, and identify priorities

- participate with the traffic police in developing a systematic method of defining and locating accident'blackspots', in planning for improvements, and identifying priorities

- collaborate with GRD and the traffic police in defining and documenting a rural road referencingsystem for Albania, in order to facilitate accurate recording of traffic accident locations

- introduce traffic safety conscious planning and road safety audit procedures in all road improvements,including during roadworks

- participate with DRS in preparing annual road safety budgets, including estimates of needed goods andservices

- collaborate with DRS and the traffic police in monitoring and evaluating the effects of road safetyengineering remedial measures

- coordinate with non-governmental and community groups in addressing road safety concerns

Ministry of Health (MOH)

- identify senior official responsible for implementation of MOH responsibilities within the road safetyprogram in Albania

- collaborate with DRS and traffic police in providing information and statistics on hospitalized trafficaccident victims

- participate with traffic police in developing improvements in monitoring and recording the condition ofhospitalized traffic accident victims within 30 days after a crash

- participate with DRS in preparing annual road safety budgets, including estimates of needed goods andservices

- participate with traffic police and fire services in developing improvements in ambulance and hospitalemergency response procedures and response rates

- participate with traffic police in training in first aid and trauma treatment by emergency responders

Ministry of Education (MOE)

- identify senior official responsible for implementation of MOE responsibilities within the road safetyprogram in Albania

- investigate opportunities to introduce road safety instruction for students at all levels within theAlbanian education system

- collaborate with DRS and traffic police in developing a road safety education program for

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irnplementation within the Albanian education systemparticipate with DRS in preparing annual road safety budgets, including estimates of needed goods andservices

* Municipalities

- identify senior officials responsible for implementation of the road safety program in urban areas- collaborate with MLGD in the introduction of safety conscious planning techniques in all urban traffic

improvement schemes- collaborate with MLGD, DRS and the traffic police in exchanging information on urban situations

where road safety is a concern- participate with and MLGD and DRS in preparing annual road safety budgets, including estimates of

needed goods and services.

Two recent govermnent publications (GOA Road Safety Initiatives: (i) Road Safety Action Plan (MOTT);and (ii) Road Safety and Traffic Directorate; Program 2002-2005) serve to confirm the commitment toaddress road safety issues in Albania. These were provided to the mission in April 2002 and are attachedin Annex 8.

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Additional Annex 14: Description of the method of measurement of the Key PerformanceIndicators

ALBANIA: Road Maintenance Project

A. OUTCOME / IMPACT INDICATORS

1. Percent of population in the pilot areas with improved access to social amenities

The two hospitals of Vlora and Shkodra, which were recently rehabilitated under the Bank Health Projectwill be the reference points to measure the impact of RMP on accessibility to social amenities. Theindicator will consider the ratio of the population which lives in a 10 km wide band on each side of any ofthe Main National Roads and Rurl Roads on which maintenance works were successfully completed underthe RMP to the total population living in the area where the population using these hospitals lives.

The targets are:Baseline: 0 %Mid-term: 15 %End: 30 %

2. Traffic surveys to demonstrate the achievement of expected reductions in travel time of carson priority road sections

The RMP periodic and routine maintenance works on the Main Road Network and on the Rural Roads aimto improve the level of service provided by these roads and therefore to reduce transport costs and traveltimes. The indicator will be the reduction of total travel time for cars, in vehicle-hours, on the road sectionswhere periodic and routine maintenance works will be carried out under RMP. It will be computed asshown in the table below:

Road section Length Measured travel Average Annual Vehicle-Hourtime for cars (in Daily Traffic for

hours) cars(1) (2) (lx2)

Section 1

Section 2

E tc ... _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

T o tals_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

The Baseline survey will be carried out by GRD and MLGD at Project inception stage.

The indicator reduction targets are:Baseline: 0%Mid-term: 10%End: 20%

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3. National accident records indicate significant reductions in traffic fatalities rates

The indicator will consider the reduction in fatalities per 10,000 vehicles in the whole country (Baseline:15.12 fatalities per 10,000 vehicles in 2000). This will be calculated from the official GOA traffic accidentand vehicle registration statistics.

The indicator reduction targets are:Baseline: 0%Mid-term: 5%End: 10%

B. OUTPUT INDICATORS

1. Compliance with agreed road standards and approved designs on road sections designatedfor maintenance works with significant reductions in road roughness

The compliance with road standards and approved designs will be assessed from the Supervisionconsultants Progress Reports in which the difficulties experienced by the contractors to fulfill the technicalspecifications will be discussed.

Road roughness is measured by the GRD Soils and Materials Laboratory using the Bump Integrator whichwas already used at the project design stage. The indicator will be the average of the roughness measuredfor all the road sections included in the project for either periodic or maintenance works, weighted by trafficvolume and section length. It will be computed as shown in the table below:

Road section Average Annual Total RoughnessLength IRI Daily Traffic

(4)=(l x2x3)(1) (2) (3)

Section 1

Section 2

Etc

TotalsTotal (4)t [Total

Indicator (1) * Total (2) *

Total (3)]

A-different target is set for Main National Roads which are paved and the Rural Roads which are unpaved.a) for Main National Roads

Baseline: 7.26Mid-term: 6End: 5

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b) for Rural RoadsBaseline: 10Mid-term: 8End: 6

2. National Road Administration (General Roads Directorate, GRD) restructured andstengthened

The General Road Directorate should be restructured in order to reduce its activity in maintenance done onforce account and to manage an increasing number of contracts for both periodic and routine maintenanceworks, and to introduce safety conscious techniques for roads planning, design, maintenance andrehabilitation/re-construction. This restructuring will involve a revision of the whole GRD organization, ofthe key staff job descriptions, the development of new operational procedures and training for their properapplication.

The targets are:Baseline: Not restructuredMid-term: GRD restructured, partly operationalEnd: Fully operational

3. Pavement and Bridge Management systems operational

A Pavement and Bridge Management System is being designed at GRD during project preparation. It aimsto store and analyze data on roads and bridges condition and traffic in order to optimize programming andbudgeting of maintenance operations. Its implementation will require collection of data to complement thesepresently available and training of GRD staff in its effective utilization.

The targets are:Baseline: PBMS being designedMid-term: PBMS approved and implementedEnd: PBMS fully operational

4. Rural and municipality road administration department (Ministry of Local Government andDecentralization, MLGD) strengthened

The Ministry of Local Government and Decentralization only recently received the responsibility ofmaintaining the Rural Roads and to assist the Municipalities with the Urban Roads. A Department wascreated for this purpose and its Head was recently appointed. The Department has to guide, coordinate andsupervise the activities of the districts road staff in charge of doing the maintenance on the Rural Roads andto support the Municipalities as far as maintenance of urban roads are concerned.

The Project will support this Department and develop its capacity to plan, budget, program and implementmaintenance works on the Rural Roads by contract. This will include attention to road safety for all roadworks on rural and urban roads.

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The targets are:Baseline: Rural and Municipal Road Administration Department functioning at limited

capacityMid-term: Strengthening program under implementationEnd: Department fully operational

5. Number of designated "black spots" areas improved in compliance with agreed design

Some of the 60 black spots which the Project aimns to improve are located on roads on which periodicmaintenance will be carried out and their improvement in safe operation will be done as part of thisactivity. Others will be dealt with on an individual basis. For each of them GRD needs to design propersafety engineering improvement measures including, as appropriate : improvements in road geometry,construction of separators, installation of crash barriers, repairs to bridge parapets, road marking, erectionof signs, etc.

The indicator will be the total number of designated "black spot" areas (these located on roads receivingperiodic maintenance plus the others) improved in compliance with the agreed designs:

The targets are:Baseline: 0Mid-term: 20End: 30

6. Institutional capacity developed within MOTT/GRD and MLGD to identify hazardouslocations and to design and implement physical measures to reduce road accidents at these locations,as reflected in annual programs

The project includes several actions to develop road safety awareness and institutional capacity withinMOTT/GRD and MLGD to identify hazardous locations (in cooperation, coordination and collaborationwith the traffic police), and to design and implement physical measures to reduce road accidents at theselocations. The objective is to have these agencies prepare annual programs to identify and improve accidentblack spots and to institutionalize safety audits for the planning, design and construction of all roadprojects.

The targets are:Baseline: No program nor safety auditMid-term: Improved accident data base and analysis procedures in place, Annual action

programs prepared by agenciesEnd: Annual programs satisfactorily implemented and safety audits being carried out

7. Institutional capacity developed within the traffic police to improve enforcement aimed atspecific unsafe road user behavior in order to reduce traffic accidents caused by identified key causalfactors

The project includes technical assistance and training to the traffic police in various aspects of theirresponsibilities aimed at attaining improvements in enforcement policies and activities within the context ofa comprehensive road safety program. The project also includes the provision to the traffic police of radarguns and alcohol-testing equipment to assist with the enforcement of excess speeding of vehicles in criticalareas, and of drink-driving. The traffic police consider that these two characteristics may be significant

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causes of deaths and personal injuries in serious traffic accidents in Albania. Other factors include: verylimited use of seat-belts and reckless driving. The objective will be to develop targeted enforcementstrategies to change unsafe road user behavior.

The targets are:Baseline: Targeted enforcement practices limited. 0% baseline (2000) for accidents where

speeding, drink-driving, no use of seat-belts and reckless driving are contributing factorsMid-term: Radars, alcohol testers in use and enforcement statistics show increased number of

fines for speeding, drink-driving, no use of seat-belts and reckless driving. Accidents involving each ofthese factors reduced by 5%

End: Statistics show 10% reduction in accidents involving each of the factors ofspeeding, drink-driving, no use of seat-belts, and reckless driving

8. Improved cooperation between agencies and fully functional DRS, as reflected in DRSQuarterly Reports to the Government and to the Public

The Directorate of Road Safety (DRS) should assist other MOTT Departments, MLGD, the Municipalitiesand the Traffic Police to address traffic safety issues in Albania, particularly as far as safety considerationsfor the planning, design, the construction or the improvement of road infrastructure is concerned. Thiscooperation and support activity will be reported in DRS Quarterly Reports to the Government and to thepublic. The reports should also incorporate the involvement of other key ministries (Health, Education andEnvironment) and other agencies (e.g. INSIG, community groups) in addressing road safety issues. Theindicator will be based on the production, content and distribution of these reports, as follows:

The targets are:Baseline: No reports preparedMid-term: Quarterly reports regularly submitted to the GovernmentEnd: Reports are also disseminated to the public

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Additional Annex 15: National and Rural Road Staff Reorientation ProgramALBANIA: Road Maintenance Project

1. Development of the Local Road Construction Industry by reorienting the existing RoadAgencies labor force.

1.1 International Developments in Road Maintenance - Privatization and Commercialization

The idea of 'Privatization' or 'Commercialization' in the road sector is now almost universally acceptedand normally focuses on 'contracting out' the execution of works.

This process, whilst the growing trend internationally, does not in itself answer the problems of what to dowith existing labor force of existing road agencies. The answers to these problems are far more complex,but have been tackled in other countries in ways that were both socially and politically acceptable.

1.2 The Overall Objectives of Adopting a Local Contractor (LC) Development System at thisTime in Albania

An overriding objective of adopting a development program for Local Contractors at this time is that it is inpursuance of the Govermnents policies on privatization, and decentralization, but will also address theserious problems associated with such policies, especially in the areas of poverty alleviation and jobcreation.

The program is intended primarily to re-orientate the existing General Roads Directorate (GRD), and whererequired the Ministry of Local Government and Decentralization (MLGD), labor force over to the privatesector, and ultimately to give them the opportunity to improve their standard of living and employmentpossibilities.

The program proposed therefore intends to re-orientate many of the staff and services of the road agencieswithin the country to the private sector over a period of time - possibly up to four years - and shape theroad network management and operations processes to match and support this program.

This process however has to be carried out with due sensitivity to those workers in the public service whocould be socially disadvantaged by the program.

The desirable objectives of the program are:

(i) To realign the existing labor forces in GRD and MLGD closer to functioning as a private sectorindustry;

(ii) To encourage the many younger men currently employed in the road agencies to stay in their homedistricts by giving them an identifiable role and guaranteed employment in the program of road repair andmaintenance.;

(iii) To ensure that any proposed infrastructure programs do not simply deliver repaired or improvedroads, and road networks - with only a one time opportunity for employment - but also facilitate thedevelopment of a trained and registered private sector local construction industry.

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To achieve these objectives the program must however ensure:

(i) That it gives the existing pool of available manpower potentially better rewards, wider recognitionand sustainable employment, in the form of contracted works and skill development, near the location oftheir own homes;

(ii) It does not marginalize or bypass individuals or groups currently employed by the Government, butgives equal opportunity and encouragement to all those experienced road sector staff that are capable ofchanging for the future;

(iii) That the program fully enjoys political support and will at both local and central levels, and alsowith all donors and agencies involved in the national infrastructure building programs.

The LC development program must be seen and publicized as a window of opportunity to bring roadworkers into the mainstream of modenization of the road network management and opeations based oncontracting maintenance works out, by giving them the opportunity to undertake all the road works forwhich they are uniquely qualified, thus giving them the chance to enhance their abilities through sinpletraining programs, ultimately identifying the retrained and re-orientated men as 'contractors'.

1.3 The Terms of Reference for Developing Local Contractors

a) To produce a fully privatized and skilled road construction and maintenance industry atdecentralized level by combining the existing road agencies labor, with recognized contractors in a'Assistant' role during the RMP implementation - as an initial step to exposing them to the opportunitiesthat exist in the private sector construction industry.

b) To design and prepare all future road repair and maintenance programs that are financed by theGovenment of Albania, in such a way that they support this private sector development scheme, bytailoring all routine maintenance activities to contracted works, to suit the constitution of a localcontracting industry.

c) To create a 'corporate' environment within the road sector management function by outsourcingsome of the planning and programming of works to qualified engineers and technicians, thus optimizing thecommercial returns from the maintenance programs that use the Local Contractor model.

d) Localizing appropriate vocational training programs - with all the instruction/courses being givenin the local districts and villages (and in local languages) where the men live.

1.4 Introduction of a Vocational Training Program for Local Contractors

Develop a regionally based vocational training program in general construction that offers appropriate andwell defined training/retraining courses to the contractors in order to develop this retained (ex-government)workforce. AlR training to be vocational and simple. Initially it will all be building trade based, and given inthe local residential areas of the contractors.

1.5 Grading the Local Contractors for Appropriate Contracted Works

The program will issue all Local Contractors registered as such in a database with an "incorporationdocument" that gives the LC manager's bio-data and skill definition. This document will recognize him as a

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'Contractor' and show any training/retraining program that he has undertaken and will be updated with hiswork experience details as he undertakes work as a contractor.

The contractors will be graded or certified according to the vocational training courses they havesuccessfully completed and received Certificates of Accreditation for.

2.0 Road Works Exclusively Allocated to Local Contractors Tendering

All road works that are of a routine nature, and which naturally are executed through labor intensivemethodologies, will be placed in contracts that will only be tendered through the LC system. Thesecontracts, as a consequence, will be let exclusively to this cadre of contractors. The works could beexpected to initially include:

* Drainage and roadside ditch cleaning* Shoulder repairs* Carriageway repairs (shingle roads)* Grass and vegetation control

As the ability of some of the LC's could be expected to improve with experience and further training, theirworks could then be expanded to include:

* Minor brick and block work repairs* Painting and repair of signs and kilometer posts* Production and painting of simple roadside markers

For the few LC's which will develop more advanced road pavement construction skills then the workswould be further expanded to also include:

* Simple carriageway potholing and patching repairs using bituminous materials and gradedaggregates.

The progressive development of the LC level of contracting would be geared to the type of contract andworks that could be exclusively tendered to a local construction industry.

As the privatized/commercialized maintenance program begins to take effect and the general level of roadand highway serviceability improves, so the techniques and methodologies of maintenance, especially of thepavement, would also be enhanced. This would require appropriate training to those contractors whichdeveloped in capacity and capability.

The actual program within the first year (2003) will depend very much on the speed at which themechanism for Government funding of this form of road maintenance (speed of embracing privatization) isset up and ftmds are made available for contract payments.

All works in each of the regions will be subject to utilizing standardized contract documentation for the LCcontract scheme, designed according to Government guidelines. The new documentation will be applieduniversally throughout the road agencies for all parts of the road network as an component of the overalldrive to generally inprove the quality of highway maintenance outputs in Albania.

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A new 'National Specification For Highway Works', should be prepared within the first three months ofthe programs onset. It will cover all road maintenance works on all Main National, Rural and Urban roads.The purpose of this National Specification is to ensure that works concerning maintenance, rehabilitation,or reconstruction of roads and highways, are carried out to one quality performance standard.

Goals for the Reorientation of GRD and RRD's Labor Force

a) To produce a fully privatized and skilled road maintenance organization where possible from theexisting maintenance labor force, but supplemented by localized contracting capacity where necessary;an organization that is well suited to serve the maintenance and conservation needs of the Albanian roadnetwork This makes use of the invaluable local knowledge of roads within the labor force.

b) To redesign how road maintenance is forecasted and works are ordered by tailoring all routinemaintenance activities in the form of contracted work - to suit the constitution of the local contractingindustry.

c) To create a corporate environment within the management function at GAD and RRD level to makethe planning and programming of works more effective, with maximum economic returns frommaintenance programs that utilize the Local Contractor model.

d) Reduce the effects of any unavoidable retrenchment of the existing road workforce to a minimum bythe creation of a domestic construction industry by concentrating the program firstly in those areaswhere enforced unemployment will create the greatest hardship i.e. rural locations with lintle alternativeemployment.

e) Create the necessary social protection for this embryo contracting industry by establishing fixedconditions of contractor involvement and participation in all Government and guasi-Rovernmentalproiects and programs within all districts of the countrv. The creation where appropriate of 'Guaranteesof Work'.

f) Ensure the maximum participation in the program of the labor force, by localizing the vocationaltraining programs - with all the instruction/courses being given in the local districts and villages (and inlocal languages) where the men live and, carrying out the training for the labor whilst pavine theirexisting salaries and during their normal working hours.

3.0 Labor Utilization During the Road Maintenance Program

The rationalization of the labor force is being considered departmentally, but is not yet complete.

The IDA funded project, will not define how soon the labor will all be nrivatized (or retrenched) becausethe speed with which the institution takes up maintenance by contract on the whole network, will bedependent upon the Government perception of the results of the project

It is not possible therefore to forecast either the sWeed of take up or even if privatized maintenance ispreferred. The project is however designed to show a process of how this may be best achieved.

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The basic principle is to expose the labor to the work of private sector contractors and thus let the labor seefirst hand the better retums and rewards for working as a private sector contractor.

The important part of this process is to formalize the linkage between the laborer and the contractor. This isdone by naming him (her) as an 'Assistant' to the contractor for the duration of the contract.

3.1 The Government Labor as 'Contract Assistants' on the Pilot Contract Lengths

For all roads that are the subject of a pilot project of routine maintenance (or including routinemaintenance, the names of the GRD (or Rural Development Department) men who are designated as theGovernment paid laborers for the specific section on which the contract is located, will be notified to theContractor as 'Contract Assistants' (or Counterparts) for the duration of his contract.

This process will enable the Contractor-

- To utilize the knowledge of the laborer of the section to improve the safety procedures on site forhis staff - the laborers are very aware, from their experience, where the most dangerous sites are for menworking in the traffic stream.

- To utilize the knowledge of the laborer of the section to find where the sites of recurrent drainageand water problems exist when there are especially heavy rains or floods.

- To utilize the knowledge of the laborer of the section to locate hidden pipes, culverts, or other roadfurniture that may not be immediately apparent, but that need maintenance.

- To utilize the knowledge of the laborer of the history of the road to take into account when overlaysand other special treatments took place.

- To utilize the knowledge of the laborer of the location of materials such as aggregates, watersupply for site use, and local services such as petrol and diesel supplies.

For the Laborer this hands on experience:

- Provides an insight into the level of financial reward that can be gained from his existing skill - ifhe moves into the private sector.

- Can introduce alternative employment opportunities with the contractor on other works and sites.

- Will usually reflect well on himn personally, within the local community, as the 'beat' or section forwhich he is responsible on a day-to-day basis is improved back to original or near original condition.

3.2 Institutional Conditions that Can Facilitate the Road Construction Industry DevelopmentProgram in Albania

1) The Characteristics of the Existing Labor Force

The existing GRD labor force does not have a great number of staff members that are approachingretirement age. There are a few however, aged in the upper fifty age group, that could perhaps be

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persuaded to take earlier retirement, if the conditions for separation were suited to them.

There is a significant number of younger men, who, given the right sort of opportunities, may well have theentrepreneurial spirit to move over to the private sector in a very short time frame. They would only needthe opportunity of contracts and/or guarantees of work in the short term. The LC development program -as designed by the Consultants - is aimed at just this type of person. Added to the contracts and guaranteesof work for this younger group of men is a vocational training program that aims to teach them additionalskills.

2) The Technical Staff of the GRD and RRD

Within the staffs that are in the seven GRD regional offices there is a general feeling that the only wayforward for effective road maintenance of the national roads is through privatization.

In meetings with the Consultants, several of the engineers and technicians (in each region) have asked if itis possible for them to participate in the program in a private capacity. They were told that this could onlytake place if they were not public sector employees. Several said that they were ready to move to theprivate sector if they could receive some form of work guarantee over a period of years.

They were only considering a role for themselves as contractors. The Consultants pointed out to them that amore important role would be that of Program Designer or Supervisors, in a private consultant capacity,and this would be an even more valid in the future.

3.3 The Rationalization Program for the GRD Labor Force

If the privatization process being proposed through the RMP program is then adopted for all works on thecomplete network of national roads this would mean a total number of 1053 (at the 31st March 2002)staff being affected from the labor force.

During the coming four year period 20% of these would reach retirement age. This would result in acandidate list for the LC Scheme of approximately 800 although it could be anticipated that some wouldnot wish to be re-orientated as contractors.

It may therefore be expected that 600 persons whom the scheme could train and reorient to the privatesector. It could also be expected that some of the staff would pool their experience and organize as'enterprises' (and this process should be encouraged) and they then can be considered for works of a largerscale, especially in subjects like shoulder reconstruction and spot improvement works. Then over the RMPfour-year period this would provide enough private sector contractors in the market to guaranteecompetition for routine maintenance contracting.

3.4 The Rationalization of the MLGD Staff

The privatization process for the labor force working on the Rural and Urban Roads will be more difficult.The range and complexity of works, where there are also some areas of urban street maintenance, willrequire a specialist approach and will have to be the subject of a more detailed analysis when the level ofcontract works are determined. However since RMP will concern only about 25% of the total secondaryroad network in Albania, it may be anticipated that the privatization of maintenance will have a lowerimpact on the MLGD affected staff.

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Report No. 23818 ALBType: PAD