Completion Report

Project Number: 37266-032

Grant Number: 0051
July 2016

Nepal: Road Connectivity Sector I Project

This document is being disclosed to the public in accordance with ADB’s Public Communications
Policy 2011.
 CURRENCY EQUIVALENTS

Currency Unit – Nepalese rupee/s (NRe/NRs)

At Appraisal At Project Completion

14 April 2006 27 October 2015
NRe1.00 = $0.0138 $0.0095
$1.00 = NRs72.23 NRs104.50

ABBREVIATIONS

ADB – Asian Development Bank

ARMP – Annual Road Maintenance Plan
CIP – Community Information Point
CSP – Country Strategy and Program
DOR – Department of Roads
DOTM – Department of Transport Management
EIA – environmental impact assessment
EIRR – economic internal rate of return
EMP – environmental management plan
EOT – extension of time
FIDIC – Fédération Internationale Des Ingénieurs-Conseils
GESU – Geo-Environmental and Social Unit
GTS – Galchi-Trishuli-Syaphrubesi
ICB – international competitive bidding
IEC – information, education, and communication
IEE – initial environmental examination
km – kilometer
m – meter
MPIT – Ministry of Physical Infrastructure and Transport
NCB – national competitive bidding
NGO – nongovernment organization
NPV – net present value
OFID – Organization of the Petroleum Exporting Countries Fund for
International Development
QAS – Quality Assurance System
RBN – Roads Board Nepal
RMF – road maintenance fund
SRN – strategic road network
TA – technical assistance
VOC – vehicle operating cost

NOTES

(i) The fiscal year (FY) of the government and its agencies ends on 15 July. FY
before a calendar year denotes the year in which the fiscal year ends, e.g.,
FY2015 ends on 15 July 2015.

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

Vice-President W. Zhang, Operations 1
Director General H. Kim, South Asia Department (SARD)
Director K. Yokoyama, Nepal Resident Mission, SARD

Team leader N. Pradhan, Project Officer (Transport), SARD

Team members T. Limbu, Head, Portfolio Management Unit, SARD
D. Singh, Senior Environment Officer, SARD
L.P. Subedi, Senior Social Development Officer (Safeguards), SARD
S. Subba, Senior Social Development Officer (Gender), SARD
R. Tuladhar, Project Analyst, SARD

In preparing any country program or strategy, financing any project, or by making any
designation of or reference to a particular territory or geographic area in this document, the
Asian Development Bank does not intend to make any judgments as to the legal or other status
of any territory or area.
 CONTENTS
Page

BASIC DATA i

I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 2
A. Relevance of Design and Formulation 2
B. Project Outputs 3
C. Project Costs and Financing 4
D. Disbursements 4
E. Project Schedule 4
F. Implementation Arrangements 4
G. Conditions and Covenants 5
H. Related Technical Assistance 5
I. Consultant Recruitment and Procurement 6
J. Performance of Consultants, Contractors, and Suppliers 6
K. Performance of the Borrower and the Executing Agency 7
L. Performance of the Asian Development Bank 7
III. EVALUATION OF PERFORMANCE 7
A. Relevance 7
B. Effectiveness in Achieving Outcome 8
C. Efficiency in Achieving Outcome and Outputs 8
D. Preliminary Assessment of Sustainability 9
E. Impact 10
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13
A. Overall Assessment 13
B. Lessons 13
C. Recommendations 14

APPENDIXES
1. Design and Monitoring Framework 16
2. Project Roads 19
3. Outputs of HIV/AIDS and Anti-Trafficking Program 20
4. Project Cost Breakdown by Sources 29
5. Implementation Schedule 31
6. Status of Compliance with Grant Covenants 33
7. Technical Assistance Completion Report 40
8. Economic Analysis 42
9. Summary Environment Monitoring during Implementation and Operation 58
 BASIC DATA

A. Grant Identification

1. Country Nepal
2. Grant Number 0051
3. Project Title Road Connectivity Sector I Project
4. Borrower Government of Nepal
5. Executing Agency Ministry of Physical Infrastructure and Transport
6. Amount of Grant $55.2 million
7. Project Completion Report 1575
Number

B. Grant Data
1. Appraisal
– Date Started 3 April 2006
– Date Completed 14 April 2006

2. Grant Negotiations
– Date Started 22 June 2006
– Date Completed 23 June 2006

3. Date of Board Approval 10 August 2006

4. Date of Grant Agreement 11 September 2006

5. Date of Grant Effectiveness

– In Grant Agreement 10 December 2006
– Actual 20 November 2006
– Number of Extensions None

6. Closing Date
– In Grant Agreement 30 June 2013
– Actual 27 October 2015
– Number of Extensions 1

7. Terms of Loan Not Applicable

– Interest Rate
– Maturity (number of years)
– Grace Period (number of years)

8. Terms of Relending (if any) Not Applicable

– Interest Rate
– Maturity (number of years)
– Grace Period (number of years)
– Second-Step Borrower
 ii

9. Disbursements
a. Dates
Initial Disbursement Final Disbursement Time Interval

1 May 2007 13 May 2014 84.4 months

Effective Date Actual Closing Date Time Interval

20 November 2006 27 October 2015 107.3 months

b. Amount ($ ‘000)
Last Net
Original Revised Amount Amount Amount Undisbursed
a
Category Allocation Allocation Canceled Available Disbursed Balance
Consulting
Services 6,700 6,278 422 5,575 703

Civil Works 38,000 44,500 (6,500) 44,183 317

Equipment 200 164 36 147 17

HIV/AIDS 200 227 (27) 177 50

and Anti-
Trafficking
Program

Unallocated 10,100 31 10,069 0 31

Total 55,200 51,200 4,000 50,082 1,118

a
The undisbursed balance was cancelled on 27 October 2015.
( ) = negative.

10. Local Costs (Financed)

- Amount ($ ‘000) 0.0
- Percent of Local Costs
- Percent of Total Cost

C. Project Data

1. Project Cost ($ ‘000)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 80,000 73,826

Total 80,000 73,826
 iii

2. Financing Plan ($ ‘000)

Cost Appraisal Estimate Actual
Implementation Costs
ADB Financed 55,200 50,082
OPEC Fund 10,000 8,873
Government of Nepal 14,800 14,871
Total 80,000 73,826
ADB = Asian Development Bank, OPEC = Organization of the Petroleum Exporting Countries.

3. Cost Breakdown by Project Component ($ ‘000)

Component Appraisal Estimate Actual
A. Base Cost
Sample Roads 24,400 20,183
Non-Sample Roads 28,500 39,744
Consulting Services 6,700 5,575
HIV/AIDS and Anti-Trafficking 200 177
Subtotal 59,800 65,679
B. Equipment 200 147
C. Contingencies 12,500 2,000
D. Financing Charge during Implementation 7,500 6,000
Total 80,000 73,826

4. Project Schedule
Item Appraisal Estimate Actual
Date of Contract with Consultants Sep 2007 Mar 2007
Completion of Engineering Designs Jun 2008 Mar 2008
Civil Works Contract
Date of Award Dec 2008 Jul 2008
Completion of Work Dec 2011 Jul 2014
Equipment and Supplies Jun 2010
Dates
First Procurement Dec 2008 Jul 2008
Last Procurement Jun 2009 Sep 2009
Final Cancellation 27 Oct 2015

5. Project Performance Report Ratings

Ratings
Development Implementation
Implementation Period Objectives Progress
From 1 October to 31 December 2006 Satisfactory Satisfactory
From 1 January to 31 December 2007 Satisfactory Satisfactory
From 1 January to 31 December 2008 Satisfactory Satisfactory
From 1 January to 31 December 2009 Satisfactory Satisfactory
From 1 January to 31 December 2010 Satisfactory Satisfactory
From 1 January to 31 December 2011 On track On track
From 1 January to 31 December 2012 On track On track
From 1 January to 31 December 2013 On track On track
From 1 January to 31 December 2014 On track On track
From 1 January to 27 October 2015 On track On track
 iv

D. Data on Asian Development Bank Missions

No. of No. of Specialization
Name of Mission Date Persons Person-Days of Members
Fact-finding 8–22 Aug 2006 5 50 a,b,d,e,o
Appraisal 3–14 April 2006 5 40 a,b,c,d,e
Inception 17–24 April 2007 5 35 a,d,e,m,o
Special Grant Administration 6–7 December 2007 4 8 a,d,f,n
Review 1 26 February–3 March 2008 4 20 a,b,d,g
Consultation 24–30 May 2008 2 14 a,d
Review 2 1–17 March 2011 4 40 h,i,j,m
Mid-term review 18 December 2011–9 4 50 h,i,j,m
January 2012
Review 3 6–31 August 2012 4 30 i,j,k,m
Review 4 28 January–8 February 4 30 h,i,j,k,m
2013
Review 5 18 June–2 July 2013 3 15 h,m
Review 6 7–17 April 2014 3 20 h,l,m
Project completion review 2–23 November 2015 3 20 h,j,m
a = senior transport specialist; b = transport specialist; c = counsel; d = social development specialist; e =
social/environment officer; f = senior environment specialist; g = transport economist; h = project officer (transport); i
= senior environment officer; j = senior social development officer (safeguards); k = senior social development officer
(gender); l = head, portfolio management unit; m = project analyst; n = senior administrative assistant; o = staff
consultant.
 I. PROJECT DESCRIPTION

1. Poor road connectivity is a major development constraint in Nepal. Due to inadequate

feeder roads, the remote rural areas in the country’s northern hill regions are isolated, and
deprived from social facilities and employment opportunities. Improved access to such facilities
and opportunities is essential to foster inclusive social and economic development, and reduce
poverty. This project was developed in response to the Government of Nepal's emphasis on
expanding access and transport facilities in remote Nepal.

2. The Asian Development Bank’s (ADB’s) Nepal Country Strategy and Program, 2005–
2009 (CSP) 1 envisaged supporting Nepal’s broad-based inclusive development goals and
addressing the needs of disadvantaged women, ethnic minority groups, poor and
underprivileged people, and Dalits.2 The project was designed to promote regional and social
balance by improving access of the poor to basic services, employment opportunities, and
participation in the development process.

3. ADB approved the Road Connectivity Sector I Project on 10 August 2006.3 The grant
agreement for the project was signed on 11 September 2006 and became effective on 20
November 2006. The original project completion date was 30 June 2013, but the
implementation period was extended by 13 months until 31 July 2014. The grant was financially
closed on 27 October 2015.4 The Ministry of Physical Infrastructure and Transport (MPIT) was
the executing agency and the Department of Roads (DOR) was the implementing agency.5

4. The project aimed to reduce the poverty of isolated people in hilly northern Nepal by
boosting the economic development activities. The project’s expected outcomes were enhanced
access to district headquarters, markets, employment opportunities, and social services,
including health and education; increased traffic growth; reduced transport costs; a reduced
road accident rate; improved efficiency and sustainability of the DOR in planning, constructing,
and managing the strategic road network (SRN); enhanced capacity of local construction and
consulting services; and prevention of HIV and human trafficking. The project was in line with
the government's plan for connecting all district headquarters by all-weather roads in 10 years.

5. The project had two outputs—road connectivity and HIV prevention and anti-trafficking—
with nine indicators: (i) increase road connectivity (construction of 227 kilometers (km) of
sample feeder roads and 263 km of non-sample feeder roads), (ii) connect three district
headquarters, (iii) maintain SRN, (iv) improve the DOR’s road safety capacity, (v) strengthen the
road safety database, (vi) prevent overloading, (vii) increase capacity of the DOR and local
contractors, (viii) prevent HIV, and (ix) increase participation of domestic contractors for project
road works to more than 50%.

1
ADB. 2004. Country Strategy and Program: Nepal, 2005–2009. Manila.
2
People who have been suffering from caste-based untouchability practices, as well as religious, social, political,
and cultural discrimination.
3
ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development
Fund for Nepal for Road Connectivity Sector I Project. Manila.
4
This was to settle the pending imprest advance (of $189,000).
5
The executing agency’s name was changed from the Ministry of Physical Planning and Works to the Ministry of
Physical Infrastructure and Transport, through a government decision on 21 February 2013.
2

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

6. The project’s overall design and formulation was consistent with the government’s
strategy outlined in the Priority Investment Plan, 1997–2006, Tenth Five Year Plan, 6 and
Eleventh Three Year Interim Plan, 2008–2010. Major elements of these frameworks include (i)
repair, maintenance, and rehabilitation of highways and feeder roads; (ii) low-cost construction
of roads to district headquarters yet to be connected to road networks; (iii) labor-oriented
construction methods geared to maximize local participation and address poverty; and (iv)
resolution of social problems from the increased connectivity. The design was highly relevant for
the government’s objectives to strengthen political and administrative linkages, reduce poverty,
minimize transportation cost and adverse social and environmental impacts, and achieve other
strategic objectives in the road sector, such as (i) increasing private sector participation in
construction and maintenance and (ii) enhancing the institutional capacities of the DOR and
private sector to promote cost-effective sustainability of the road network.

7. The project was designed following ADB's Country Strategy and Programs (CSP) for
Nepal, 2005–2009, in its objectives of promoting broad-based, inclusive social and economic
development for a steady decline in poverty. The CSP also identified road connectivity as a core
sector of ADB assistance, noting that inadequate road networks were a critical constraint to
inclusive growth. The government’s policy to improve the overall sector performance through
network improvements, institutional reforms, and improved asset management for the transport
sector remained a high priority. The participation and ownership of government stakeholders
was high during design and formulation. Both sample and non-sample roads were included in
the government's 10-Year Road Sector Midterm Program (2006-2015), which aimed to connect
all district headquarters by all-weather roads. 7 The project’s road length was reduced in
December 2012 from 490 km to 318 km because of cost escalation during the detailed
engineering design phase. 8 The cost escalation was mainly attributed to external or unforeseen
factors beyond the project’s control, such as a sharp increase in the price of oil and construction
materials, and a depreciation of the dollar from the 2007–2008 global financial crisis. A sector
project modality was adopted for the first time in Nepal’s road sector, providing flexibility in
selecting and implementing non-sample projects, considering the uncertain implementation
environment in the country’s post-conflict political transition process. Subprojects were selected
based on the feasibility studies, with economic internal rates of return (EIRRs) of higher than
12%. They also met government and ADB policies on social, resettlement, and environmental
requirements ensuring people-centric road infrastructure improvement.

8. The project further increased its relevance by addressing the social risks associated with
increased road connectivity, through launching an HIV/AIDS and human trafficking awareness
program among stakeholders and vulnerable people. Prevention of HIV and human trafficking
was identified as an urgent need in the government's Tenth Five Year Plan and successive
three-year interim plans. The project achieved desired results by mobilizing nongovernment
organizations (NGO), as envisaged in the social action plan. Accordingly, the project’s overall
design and formulation was highly relevant in alignment, but because of design issues, the
project is assessed as relevant.

6
National Planning Commission. 2002. Tenth Five Year Plan, 2002–2007. Kathmandu.
7
Sample roads refer to roads requiring major investment to upgrade from gravel to black-top; non-sample roads
refer to roads requiring minor investment and upgrading such as widening and patching.
8
The Nepal Resident Mission country director approved the minor change in scope on 20 December 2012.
 3

B. Project Outputs

1. Road Connectivity

9. The project had nine indictors for two outputs (Appendix 1), eight of which are for road
connectivity. At appraisal, upgrading or construction of 11 roads totaling 490 km and
construction of one bridge were planned (output 1). However, during implementation, 318 km of
roads comprising three sample roads (240 km),9 three non-sample roads (78 km) and Sunkoshi
Bridge was completed.10 The project’s road length was reduced in December 2012 from 490 km
(227 km sample and 263 km non-sample roads) to 318 km (Appendix 2), as explained in para. 7.
As a result, the project was able to provide road connectivity with all-weather access to 12
districts compared with the target of 17 (output 2). The project output also contributed to two
indicators of ADB’s result framework.11

10. The engineering structure and standard of the roads followed international practices for
a 10-year life period with a provision for resealing as periodic maintenance towards the 10th year
to extend the life by 10–15 years.12 The designs were based on the projected traffic, allowable
axle loads, existing pavement structure, subgrade strength, and the quality of available
materials.

11. As planned, the project regularly maintained the constructed and upgraded roads in a
satisfactory condition (output 3). Similarly, the project improved the DOR’s capacity by
developing a road safety audit manual and training 20 staff from the Department of Transport
Management (DOTM) (output 4), while also strengthening the road safety database by
purchasing data software and training 10 staff from the DOR and DOTM (output 5). To control
vehicle overloading, 20 road safety equipment items were purchased, and a heavy vehicle
management policy and directives to operate weighbridges along the highway were approved
and implemented (output 6). The project also led to the increased capacity of the DOR (output 7)
and the substantial engagement of domestic contractors to undertake the civil works (output 8).
An associated technical assistance (TA) under the project enhanced the capacities of (i) the
DOR in road feasibility studies, particularly in social, resettlement, and environment impact
analysis and management; and (ii) local construction and consulting industries in applying
Fédération Internationale Des Ingénieurs-Conseils (FIDIC) contract management and the
Quality Assurance System (QAS) in road construction.13

2. HIV Prevention and Anti-Trafficking Program

12. The project recognized the importance of preventing HIV and human trafficking as a
discrete output (output 9). The project sensitized 2,140 construction workers (1,945 male and
195 female), 73 transport operators, 22 females vulnerable to sex work, and 1,206 community
members (701 male and 505 female) on HIV and AIDS, and provided training to 55 peer
educators to spread awareness of the issue among risk groups and in the project-area
community. The project linked the transport sector with HIV/AIDS and anti-trafficking programs,

9
Galchi-Trishuli-Syaphrubesi (90 km); Tamakoshi-Manthali-Khurkot (55 km); and Phidim-Taplegunj (95 km).
10
Dhalkebar-Janakpur (25 km); Bhaktapur-Changunarayan (6 km); and Bhairawaha-Taulihawa (47 km).
11
The project achieved 617,961 average daily vehicle-km in the first full year of operation, and 318 km of roads were
built and upgraded against the revised targets of 554,710 vehicle-km and 318 km.
12
The cost of resealing per km would be in the range of NRs2.5–3 million and is about 30% compared to the initial
investment cost.
13
ADB. 2006. Technical Assistance to Nepal for Capacity Building in Road Feasibility Study, Construction, and
Contract Management. Manila.
4

in support of government strategies to increase access to services and care for HIV-affected
people. The anti-trafficking program helped increase HIV and AIDS awareness, thereby
reducing the spread of HIV. The achievements on HIV prevention are provided in Appendix 3.

C. Project Costs and Financing

13. At appraisal, the total project cost was estimated at $80 million, comprising a $55.2
million ADB grant, a $10.0 million Organization of the Petroleum Exporting Countries Fund for
International Development (OFID) loan (Loan 8231), and $14.8 million equivalent from
government counterpart funds. The actual project cost was $73.82 million, of which ADB
financed $50.08 million, OFID funded $8.87 million, and the government funded $14.87 million.
The $5.12 million in grant savings arose because of the appreciation of dollar against the rupee
during the later stage of implementation, and was cancelled.14 The cost breakdown by sources,
including quarterly disbursements, is in Appendix 4.

D. Disbursements

14. Loan proceeds were disbursed following ADB’s Loan Disbursement Handbook (2015, as
amended from time to time). As per the grant agreement, the DOR established an imprest
account in Nepal Rastra Bank with a $2.5 million ceiling. Disbursement was slow during the first
two years of implementation, which was envisaged during the appraisal, but improved from the
third year. Despite the completion of physical works in July 2014, the project account remained
open until October 2015 for the settlement of pending imprest advance ($189,000). The total
disbursement under the grant was $50.08 million. The imprest account supported the DOR to
ease the cash flow constraint for timely payment to contractors and consultants. The imprest
account was fully liquidated before the project is financially closed.

15. As per the loan agreement, the DOR maintained a separate account to facilitate
payments from OFID’s loan. From the $10 million loan, $9.5 million was committed and $8.87
million disbursed. OFID’s loan supported the civil works (financed at 19.2%) for all six feeder
roads (318 km).

E. Project Schedule

16. At appraisal, the project was envisaged to be implemented over six years, with a 30
June 2013 completion date. The implementation progress was satisfactory, as 22 of 23 civil
works contract packages were completed prior to the original completion date. The construction
of Sunkoshi Bridge was delayed because of the difficult geological condition encountered that
required an updated design. The contractor’s weak management capacity also contributed to
delays in bridge construction. Hence, to complete the Sunkoshi Bridge construction, the
completion date had to be extended by 13 months, to 31 July 2014. The actual implementation
schedule compared to the original at appraisal is in Appendix 5.

F. Implementation Arrangements

17. Overall, the implementation arrangement was satisfactory. The project directorate office
within the DOR (established under the previous ADB-funded projects) was responsible for
overall procurement and implementation. A full-time senior officer with adequate technical and

14
Cancellation occurred $2.0 million on 23 October 2013, $2.0 million on 9 July 2015, and $1.12 million on 27
October 2015.
 5

administrative experience and qualifications was assigned as a project director and assisted by
qualified technical and administrative staff. The DOR’s Geo-Environmental and Social Unit
monitored and assured safeguards compliance.

18. The DOR appointed four full-time project managers and deputy project managers to the
subprojects. Stationed at the project sites, they reported directly to the project director and were
responsible for day-to-day project implementation supervision.

19. The design and supervision consultant recruited for the road connectivity component
undertook the required responsibilities, and ensured road construction quality. The consultant
submitted monthly and quarterly progress reports to the DOR. The DOR ensured the reports
included an assessment of project progress, including the social safeguards, land acquisition,
resettlement plan, environmental management, road and labor safety, training, public
campaigns, and other activities critical to implementation. The DOR satisfactorily monitored
project preparation and implementation following the implementation schedule, and kept ADB
informed of any significant deviation that could have affected the schedule.

G. Conditions and Covenants

20. Conditions for grant effectiveness were complied with in time, and the grant was
declared effective after 2.3 months of the signing. The executing agency complied with all grant
covenants (Appendix 6) and implemented the project with due diligence and efficiency, in
conformity with sound administrative, financial, engineering, and environmental practices. The
executing agency provided adequate oversight, coordination, and financial support for
implementation. The procurement of all civil work contracts and engagement of consultants
were carried out following ADB guidelines and procedures. The executing agency implemented
the measures for environmental and social aspects throughout the project. The executing
agency also prepared the project reports as required and submitted them to ADB on a timely
basis. None of the project’s major covenants were modified, suspended, or waived, as most
remained relevant and realistic.

H. Related Technical Assistance

21. The project included an associated TA (footnote 13) for $300,000 to strengthen the
DOR's capacity in road feasibility study, construction and contract management, and road
safety management. The TA also supported enhancing the capacity of local construction and
consulting industries in applying FIDIC contract management and QAS in road construction.
Under this TA, DOR officials were trained in road feasibility study; social, resettlement, and
environmental impact analysis and management; and road accident data management and
analysis. The local construction and consulting industries were trained to apply FIDIC contract
management and QAS in road construction. The strengthened capacity of local contractors and
consulting industries contributed to private sector development.

22. The TA consultants' inputs were used in project implementation and capacity
enhancement of DOR staff, local contractors, and consultants. The consultants conducted
capacity development trainings and exposure visits for the executing agency and the DOR. The
TA was rated successful. The TA completion report is in Appendix 7.
6

I. Consultant Recruitment and Procurement

23. Consultants were recruited following ADB’s Guidelines on the Use of Consultants (2013,
as amended from time to time). Consultants were required for feasibility studies for non-sample
roads, detailed design for sample and non-sample roads, construction supervision, and
implementation and monitoring of (i) gender and HIV and human trafficking prevention activities,
(ii) land acquisition and resettlement, (iii) environmental management, and (iv) road safety
improvement.

24. The project used 66.8 person-months of international and 2,348 person-months of
national consultant inputs for design and supervision, compared to appraisal estimates of 60
person-months of international and 3,086 person-months of national consultants. The person-
months for international consultants increased with the recruitment of an additional contract
management specialist to supervise Sunkoshi Bridge. Two NGOs were engaged to support
social safeguard activities and HIV/AIDs and anti-trafficking program.

25. Civil works procurement was done following ADB’s Procurement Guidelines (2007, as
amended from time to time). Civil works were procured following both international competitive
bidding (ICB) and national competitive bidding (NCB) procurement methods. Among the
awarded 23 contracts, 11 were ICBs and 12 were NCBs. The percentages of ICBs are 74% and
NCBs are 26% as per the contracted amount. Local contractors won 17 of the 23 contract
packages. The project’s capacity building efforts contributed to the contractors’ efficient work
implementation. The ICB contract documents were prepared following ADB’s Standard Bidding
Documents, based on the FIDIC Conditions of Contract Multilateral Development Bank
Harmonized Edition, March 2006. The NCB contract documents were prepared with ADB
Standard Bidding Documents (Small Works).

J. Performance of Consultants, Contractors, and Suppliers

26. The performance of consultants is rated satisfactory. The consultants’ terms of reference
were clear, and the consultants assisted the DOR in project design and supervision, ensuring
high-quality roads, and managed contracts under the FIDIC conditions of contract. In addition,
consultants helped the DOR comply with the environment and social safeguards, conduct
project performance monitoring and evaluation, and prepare periodic progress reports.

27. The DOR regularly assessed the performance of consultants, NGOs, and the
contractors. Performance of the NGO assigned for resettlement plan implementation and
rehabilitation activities was not satisfactory, as it did not deliver the agreed deliverables. Hence,
the contract with this NGO was terminated. Individual resettlement experts were recruited to
support resettlement plan implementation. This change meant the envisaged activities to be
delivered in time. The HIV/AIDS and anti-trafficking program was successfully implemented
through a separate NGO.

28. For civil works, all 12 NCB packages had extensions of time (EOTs) of 4–8 months,
which the consultant deemed legitimate based on obstructions to works from several force
majeures (political unrest, natural disasters, strikes, and blockades). The ICB contracts required
EOTs of 3–6 months (excluding Sunkoshi Bridge, which was extended by 13 months). All ICB
contracts had absence of international joint venture partners at the field level, and informal and
unauthorized subcontracting by the appointed contractors was also observed in several
 7

contracts during implementation. 15 Nevertheless, all contracts except Sunkoshi Bridge were
completed before the original grant closing date. The DOR, consultant, and ADB regularly
monitored contractors’ progress and supported them in contract management and technical
supervision. Overall, the contractors’ performances were assessed satisfactory, as they
completed the projects within the agreed timeline after EOTs and in the challenging
environment of the country’s sustained political transition.

K. Performance of the Borrower and the Executing Agency

29. The overall performance of the borrower, the executing agency, and the DOR is rated
satisfactory. Throughout implementation, the government categorized the project as core to its
annual program, which ensured adequate budgetary provisions. Key project staffs were retained
during implementation, and turnover of the project director and project managers was minimal.
The TA developed DOR and DOTM staff capacity in road design, construction supervision, and
contract management. The DOR has improved its capacity in project implementation,
monitoring, fiduciary risk, and safeguards management.

L. Performance of the Asian Development Bank

30. The performance of ADB is rated satisfactory. The project was delegated to the Nepal
Resident Mission on 1 October 2010, after the procurement of all 23 packages. In total, 13
review missions were fielded, including an inception, midterm and project completion. ADB
missions mostly focused on project inputs, contract management, physical progress, safeguards,
covenant compliance, and financial management. ADB organized monthly meetings with the
DOR to monitor contract award, disbursement, counterpart funding, and other implementation
issues, which improved project performance.

III. EVALUATION OF PERFORMANCE

A. Relevance

31. Both at appraisal and completion, the project is rated relevant to the government‘s and
ADB‘s policies, strategies, and priorities. Due to timely changes in scope to address cost
escalation, the project was rated as relevant instead of highly relevant. With Nepal having
experienced a decade-long civil conflict associated with abject rural poverty and socio-economic
disparity, the government’s strategic focus was to promote broad-based and inclusive social and
economic development to achieve a steady decline in poverty. Within this context, the project
was designed to (i) promote balanced regional development, (ii) improve the poor’s access to
basic services and opportunities for economic advancement, and (iii) address the needs of the
disadvantaged, women, ethnic groups, and lower castes.

32. The project roads were strategically selected to meet these objectives and provide vital
connectivity to remote and poor districts, although it could not fully cover the intended districts
because of the impacts of the global commodity price hike and 2007–2008 financial crisis. The
completed three sample roads provided better connectivity, with paved roads for the first time,
to the three remote districts of Ramechhap, Rasuwa, and Taplejung. The Sunkoshi Bridge
provided vital connectivity of the mid-eastern remote hilly districts to Kathmandu and the
15
The main lead contractor of Sunkoshi Bridge did not manage the contract in the beginning. The associate
contractor who managed the site was less experienced, with limited equipment and resources to work in a difficult
geological condition. At the later stage, the main lead contractor, backed up with required equipment and
resources, completed the bridge within the given EOT.
8

southern districts—supplying a lifeline for the districts to connect to commercial and industrial
centers, and to the People’s Republic of China and India. The Galchi-Trishuli-Syaphrubesi (GTS)
road connecting the China border also boosted trade volume with China. The Phidim-Taplejung
road improved north-south corridor connectivity in the eastern hill districts with Terai, and
increased tourist flow to Kanchangunja conservation area.

33. Most of the benefitting districts had suffered from high levels of poverty because of their
remoteness, and the project-provided connectivity led to wide-scale enhanced access to social
services and livelihood activities, contributing to reduced poverty and regional imbalance. The
project also helped protect the socioeconomically disadvantaged population by addressing HIV
prevention and anti-trafficking through awareness activities, and by providing skills training for
livelihood support to displaced people. The use of a sector project modality was also relevant
amidst the post-conflict political transition and provided flexibility to respond to unforeseen
circumstances. The project design still remains relevant, since providing transport connectivity
remains a vital element of the government’s and ADB’s strategy to promote economic activities
and better access to social services, for socioeconomic integration within the country and with
neighboring economies.

B. Effectiveness in Achieving Outcome

34. The project was less than effective in achieving its envisaged outcomes. The scope for
roads was reduced from 490 km to 318 km, though this was because of external factors (para.
9). As a result, project districts had to be reduced from 17 to 12 (para. 9). While there was
overachievement in sample feeder roads, non-sample feeder roads were lower than the target
(30%) because of cost escalation. Therefore the project could not achieve the envisaged
outcome. While a sector loan modality for the project increased flexibility in subproject selection
and facilitated appraisal and approval during implementation, it generally results in lower project
readiness and increases the risk of time and cost overrun. Besides the roads completed, the
project effectively achieved outcomes, such as (i) traffic growth by 79.2% against the appraisal
estimate of 6%, (ii) vehicle operating cost saving by 19.2% against a 10% estimate; (iii)
reduction on peoples’ travel time by 57.4% against a 20% estimate, and (iv) estimated reduction
in road accidents by 1% and associated deaths by 48% against the 10% target of road
accidents (deemed significant given the significantly increased road traffic). For project
institutions’ capacity, progress was achieved in DOR and DOTM capacity building with on-the-
job training on project preparation and implementation including safeguards, action plan
preparation and implementation for road safety and the Heavy Vehicle Management Policy, and
weighbridge installation and operation at strategic locations. The capacity of national contractors
was enhanced through training and engagement of domestic contractors was higher at 74% of
the works against the appraisal target of 25%. Finally, awareness of HIV/AIDS increased among
vulnerable people (such as road construction workers and transport operators) by 4.8%, with
increased access to HIV prevention services. Awareness among local people of human
trafficking improved by 45.9% through programs implemented under the project.

C. Efficiency in Achieving Outcome and Outputs

35. The project is rated efficient in achieving its outcome and outputs. Although the project
scope for roads was reduced from 490 km to 318 km due to external or unforeseen factors
(para.34), 22 of 23 road contracts were completed with the original grant closing date of 30 June
2013, and one contract was completed within the extended completion target of 31 July 2014.
All other project outputs—including road maintenance, road safety, overloading prevention,
 9

capacity building of project departments and contractors, and HIV prevention—were completed
and achieved appraisal targets, although implementation took longer than appraisal estimates.

36. The road subprojects have proven their economic viability and benefit to the target
population, demonstrated by the economic analysis using the methodology followed at appraisal
and complying with ADB guidelines (Appendix 8). 16 The economic internal rates of return
(EIRRs) of these subprojects range between 15.6% and 23.6%, with an average of 18.9%. All
the subprojects have positive net present values and cost benefit ratios below one. The
sensitivity analysis shows that the EIRR calculation is robust for a set of changes in input
parameters and remains above the 12.0% threshold.17 The higher economic viability of some
subprojects has been possible because of the significant road-induced changes, along with
increased reliability of road operation, on both sample and non-sample roads. The project was
able to achieve the outcomes and outputs thanks to coordination between stakeholders—
especially the Ministry of Physical Infrastructure and Transport (MPIT), the DOR, and ADB—
and measures adopted for timely completion of subprojects.

D. Preliminary Assessment of Sustainability

37. The project outcomes are rated as likely to be sustainable. The project has improved the
DOR’s capacity in project preparation, engineering design, procurement, construction contract
management, monitoring and evaluation, and safeguards. All road sections are functional and
being maintained at the desired standard. The DOR has put into operation a robust routine
maintenance plan, in response to the substantial traffic increase in most project roads. Overall,
the traffic volume increase was by 79.2%. In particular traffic volume of GTS road that opened
trade and transit route to China increased by 108%. All road sections were adequately
maintained as of the project completion review.

38. For sustainable road maintenance, the DOR has established (i) an asset inventory of the
strategic road network (SRN) with coding under a geographic information system, and (ii) a
system of performance monitoring and maintenance planning. On this basis, the DOR prepares
an Annual Road Maintenance Plan (ARMP) for maintenance activities required for its entire
road network. The ARMP’s main purpose is to ascertain and justify the budget allocation in a
transparent and logical manner in line with the DOR’s requirements. It also serves as a
monitoring and evaluation tool, and provides inter-linkages between divisions, regions, and
central management with clear roles and processes outlined. It covers the budget estimation
process for routine, recurrent, specific, periodic, and emergency maintenance, including bridges’
routine and recurrent maintenance. In addition, the ARMP forms the database that can be
referred to by higher authorities for policy making and planning of maintenance intervention and
fund management.

39. The government has also established a road maintenance fund (RMF) under the Roads
Board Nepal (RBN). The RMF aims to achieve sustainable funding for planned maintenance of
the SRN and local roads. The mechanism is reliable, practical, and operational for enhancing
sustainability of these roads. The RBN generates funding from fuel levies, road users fees, and
the vehicle registration fees. The government through its annual budget also supplements the
fund. At present, the RBN fully funds routine and recurrent maintenance every year, whereas
there has been a funding gap for periodic maintenance. While the total funding for road

16
ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila.
17
For example, when maintenance cost, vehicle operational cost, and value of time is increased by 10% from the
baseline level and generated traffic benefits are assumed to decrease by 5%, the EIRR still remains at 14.1%.
10

maintenance increased by 54% from NRs2.4 billion to NRs3.7 billion between FY2011 and
FY2015 the RBN has only been able to cover about 65% of the estimated requirement for
periodic maintenance. To manage the shortfall, the RBN prioritizes roads based on the traffic
volume.

40. Sustaining the road assets remains a critical policy dialogue agenda in ADB’s continued
partnership in the transport sector, which is a priority sector of assistance. Reducing the funding
gap and improving the quality of maintenance are prioritized in ongoing and pipeline projects;
for example, the inclusion of multi-year maintenance in the road improvement contracts. To help
build the capacity of the MPIT and DOR in planning, prioritizing, budgeting, monitoring, and
managing road assets, a TA is being provided to develop and implement a roadmap for the
integration of road investment and maintenance, enhancement of RMF with road user charge
systems and an increased tax base, and wider and stronger application of overloading
prevention management, along with the enhancement of road safety systems.18

41. The project helped reduce the vulnerability of project-area identified groups to HIV and
other sexually transmitted diseases, and improved the access to services and products.
However, access to preventive services such as Community Information Points and condoms
must be continued for program sustainability. This can be ensured by integrating such programs
under the DOR’s Geo-Environmental and Social Unit.

E. Impact

42. The project’s impact is significant because it helped reduce poverty of isolated people in
Nepal’s hilly north and supported economic growth of rural communities. One notable evidence
of change is that the poverty rate in the project area reduced by 21%. The Project Performance
Monitoring Study indicates agricultural commercialization and access to finance have also
improved. In addition, the project (i) provided better regional connectivity and enhanced access
to district headquarters, social services, markets, and employment opportunities by providing
all-weather road access, and (ii) improved the DOR’s efficiency and sustainability in planning,
constructing, and managing SRN through capacity development trainings. 19 These
improvements collectively contributed to socioeconomic development of project districts and
reduced disparity between well-endowed and remote districts.

43. Socioeconomic. The project had a positive socioeconomic impact. The Project
Performance Monitoring Study shows that, because of improved connectivity, the per capita
income of the project roads’ influence area has increased by 102%, from NRs15,627 to
NRs31,691; cash crop production increased by 8%; and the average travel time to the nearest
market reduced by 45%, from 2.21 to 1.22 hours. The project contributed significantly to
economic growth and poverty reduction in isolated rural communities of the hill districts of
Ramechhap, Rasuwa, and Taplejung, where poverty incidence had been high. The project
demonstrated above evidences of road-induced socioeconomic transformation in these districts.
Improved social indicators were also noted in decreased primary school dropout and increased
middle school attendance rates, increased telephone connection per household, and reduced
unattended home births.

44. Improved road connect has also increased access to finance, with more than 10 banks
and financial institutions opening branches in Dhunche (Rasuwa), Manthali (Ramechap), and

18
ADB. 2013. Technical Assistance to Nepal for Capacity Building of Sustainable Road Transport. Manila.
19
Department of Roads. 2014. Project Performance Monitoring Study Report. Kathmandu.
 11

Taplejung; cooperatives forming (savings and credit, agricultural, and dairy); and social
mobilization by NGOs expanding. The small and medium-sized enterprises sector has also
expanded through access to credit from banks and financial institutions. The number of tourists
to Dhunche (Rasuwa) and Taplejung has doubled. The tourism industry has grown considerably,
with an increase in hotels, lodges, and restaurants, as well as home-stays.

45. Contractors used local laborers (both men and women) for construction and
maintenance, which promoted local employment. With the increased mobility, more women are
participating in agriculture, running market-area shops, and operating cottage industries. The
livelihood support provided to 500 project affected people due to involuntary resettlement
through vocational and skills training helped supplement incomes and increase access to
employment opportunities.

46. Environment. The project was initially classified as environment category B, which was
upgraded to category A, as 30 km of the GTS road passed through the Langtang National Park.
All other roads were classified as category B. An environmental impact assessment (EIA) was
prepared with 120 days disclosure for GTS and initial environmental examination (IEE) for all
other roads, along with an environmental management plan (EMP) following government
regulations and ADB’s Environment Policy (2002). During project preparation, a summary EIA
was done consolidating the EIA and two IEEs of Phidim-Taplejung and Tamakoshi-Manthali-
Khurkot roads. The environmental assessment and review framework (EARF) guided the
environmental assessment and monitoring requirements for other subprojects, for which
individual IEEs were prepared.

47. The DOR obtained all required environmental statutory clearances, such as
environmental and forest clearance, prior to commencing the civil works. GESU of DOR was
responsible for monitoring environmental safeguard compliance. The design and supervision
consultant also supported the project in compliance monitoring. With some delays, the DOR
submitted semi-annual environmental monitoring reports for the category A subproject, and
annual reports for category B subprojects. The project complied with all labor-related project
covenants, particularly those concerning child labor, gender-biased wage rates, and HIV/AIDS
and trafficking. The EMP and environment-related clauses were included in the contract and the
bill of quantities. ADB regularly monitored the environmental compliance through project review
missions and a special safeguards mission.20

48. The environment assessments (IEE and EIA) of roads were of good quality. However,
scope for further improvement was noted in implementation of mitigation measures by
establishing systematic mechanism for monitoring, documenting and reporting. The overall
safeguards performance of the project was found to be satisfactory. A few environment related
clauses were included in the contractor’s bill of quantities, which is considered as a good
practice. The project generally complied with the EMP requirements such as spoil management,
working in day hours (7 am to 6 pm) to avoid disturbing wildlife at night, occupational health and
safety measures (including distribution of safety gears and first aid kits to the workers), dust and
noise control, water management and laborers insurance. The contractor appointed accident
prevention officers (safety officers). However, improvements were required in the bio-
engineering for slope stabilization, compensatory tree plantation, spoil management, and
closure of quarry site. No major public grievances were received other than informal disputes
that the project readily resolved.

20
A special safeguard mission was fielded from 23 November to 30 December 2011.
12

49. The Langtang National Park (LNP) has tropical to alpine vegetative ecology at 2,000m to
7,245m altitude and is a pristine Himalayan habitat of endangered musk deer, snow leopards,
red pandas, Himalayan black bears, mountain antelopes (Ghorals), and wild dogs. Despite the
park being an important biodiversity habitat, the GTS followed the existing road alignment and
width passing through the park’s western fringe, which has significant human settlements.
Hence, the construction did not require tree cutting or other disturbances to the habitat. The
project had sufficient consultation with the local people, park officials, and other stakeholders,
including the NGOs, and conducted public hearings at several locations during EIA preparation.

50. Work within LNP was conducted in close coordination with the park officials. Contractors
generally procured aggregates from private crusher plants operating out of LNP, hence
minimizing potential impacts. The material yards and labor camps were fenced with lighting and
drainage facilities, and were managed with due care for environment protection. Worker’s camp
inside LNP was established with their approval. Workers were given strict instructions not to
disturb or kill wildlife. General awareness campaign was conducted by the project in GTS road
to protect wildlife and refrain from wildlife trafficking and poaching activities. No event of wildlife
hunting and poaching by the project staff in LNP was recorded during the implementation
period. Kerosene instead of firewood was supplied by the contractors for cooking and heating in
most of the camps, although use of firewood was also observed in some occasion.

51. Increase in trade and transit from China through Kerung pass has tremendously
increased the traffic volume along the GTS road, increasing traffic through LNP. Nevertheless,
since the 30 km stretch of the road is aligned through the extreme western edge of the Park and
through extensive human settlement area, their impact on the park and wildlife habitat is
observed to be minimal. A total of seven cases of wildlife hunting were reported in LNP in the
last four years, which were not related with the operation of GTS road. LNP officials also
confirmed that no case of death of wildlife due to collision with moving vehicles is so far
recorded. Activity of poaching, killing of wildlife or illegal trade of timber from the Park since the
operation of the road has been minimal, since the Park enjoys fulltime guarding by the Nepal
Army and forest guards. The summary results of environment monitoring are provided in
Appendix 9.

52. Involuntary resettlement. The project was categorized as B for involuntary

resettlement. The scope of land acquisition was limited to design width only, which required a
small strip of land for road-widening works. The executing agency and ADB prepared and
approved the land acquisition and resettlement plan consistent with ADB’s Involuntary
Resettlement Policy (1995). The project undertook a complete socioeconomic survey and a joint
verification survey for the land acquisition and resettlement plan during implementation. The
verification survey identified some changes in land ownership because of the differences
between the cadastral survey at appraisal and actual location, which were rectified during
implementation by updating the resettlement plan. In addition to the compensation for losses
incurred by affected people, the land acquisition and resettlement plan included rehabilitation
measures benefitting the community. These included skills training on livelihood options such as
livestock and cash crop promotion, which had immediate income and employment potentials.

53. Under the road connectivity component, 1,092 land plots and structures owned by 586
households were affected, of which 953 plots and 43 structures (23 buildings and 20 sheds and
toilets) were compensated. The remaining could not be compensated because of absentee
landowners and ownership disputes. The compensation amounts were handed over to district
compensation committees for payment to absentees upon their return. The project was
categorized as B for indigenous people. No indigenous people and/or ethnic minority issues
 13

emerged during implementation. A total of 500 affected people were trained on income- and
employment-generating activities, through driving, tailoring, basic computer, and
entrepreneurship courses. The training was instrumental in providing supplementary income
and employment opportunities to local people. About 20% of those trained are self-employed.

54. A grievance redress mechanism was established in all project sections. All affected
households were individually informed about the grievance redress procedures. Most
grievances were resolved locally through negotiations with affected people. Socioeconomic data
on affected people and communities were collected through household surveys, focus group
discussions, and interviews with local government officers, and published sources. Local
consultative forums were formed in village development committees to ensure project-affected
people were properly informed, consulted, and involved. The social mobilizers, NGO,
consultants, and DOR coordinated to address grievances during implementation, and no
outstanding grievances were recorded.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

55. Overall, the project is rated successful. Its design was relevant to meet the development
objective of providing remote and poor districts with all-weather road connectivity within the
districts, and with the country’s commercial and industrial centers and neighboring economy,
thereby contributing to reduced poverty and regional socioeconomic disparity. However, the
project is rated less than effective in achieving the envisaged major outcomes as the project
scope was reduced from the target 490 km to 318 km and targeted 17 to 12 districts.21 The
other intended outcomes were mostly exceeded the targets such as in the roads improved,
which are related to transport hardware (traffic volume, transport costs, and road accidents) and
software (DOR capacities in road planning and implementation, maintenance, and safety
management of local contractors), as well as HIV prevention and anti-trafficking. In achieving
outcome and outputs, the project is rated efficient. Under the project’s primary output of road
improvement, 22 out of 23 contracts were completed within the original closing date, although
implementation gaps were noted, such as difficulty in deploying international contractor’s
personnel and maintaining due disciplines in contract management. The project is also rated
likely to be sustainable. While a funding gap for periodic maintenance (about 35% of that
required) remains, rigorous efforts are being made as a critical policy dialogue issue under
ADB’s continued partnership in the road transport sector, supporting necessary instruments
such as maintenance contracting by road improvement contractors and stronger revenue bases.
Finally, the project has contributed to the intended goal of poverty reduction in isolated districts.

B. Lessons

56. Project readiness. Based on the government’s feasibility studies, the project prepared a
long list of indicative sample and non-sample projects at appraisal. The engineering designs
were completed during implementation. The project cost estimate increased significantly during
the detailed design and procurement stage because of several external factors, and this
necessitated a reduction in project scope. This indicates that adequate project readiness should
be ensured during appraisal, by advancing detailed design and procurement before project
approval and agreement signing.

21
The districts taken out due to unforeseen circumstances in this project (namely, Okhaldhunga, Solukhumbu,
Lamjung, Manang and Myagdi districts) were taken up in separate ADB-assisted and government-funded projects.
14

57. Appropriate procurement packaging and stringent construction management. The

project could not enforce international lead joint venture contractor to be present in executing
the ICB packages for civil works, whereas national contractors also tended to use
subcontractors to implement works. This calls for appropriate procurement packaging so that
their size is commensurate to attract the interest and deployment of eligible international and
national contractors without causing excessive dependence on joint venture partners and less
experienced subcontractors. More stringent and tight contract management is also needed to
enforce contractual requirements so timeliness, efficiency, and quality can be ensured.

58. Land acquisition. The project acquired the land only for the roads’ designed width.
During construction, any minor shift of cross section and/or L-section (either longitudinal or
vertical) caused changes in land acquisition size and location. This led to deviation in the
number of affected households and sizes, requiring additional consultation and acquisition and
delaying implementation. This may be avoided by acquiring a slightly wider slip (10%),
depending on the elevation and dimensions of the road cross sections.

59. Progress reporting and monitoring by management. Effective reporting measuring

the progress, gaps, and actions to address the gaps can provide an essential tool for senior
government officials and ADB staff in providing effective guidance on field activities, and help
expedite project implementation.

60. Performance evaluation system of consultants and contractors. An appropriate

mechanism should be developed to regularly measure the performance of consultants and
contractors. Such a mechanism can be used for troubleshooting and identifying appropriate
corrective measures.

C. Recommendations

1. Project Related

61. Road maintenance. Scheduled maintenance of the completed roads should continue,
with prioritized allocation of RMF for routine and recurrent maintenance, as well as periodic
maintenance (once in about 10 years) of resealing the roads.

62. Monitoring of project impacts. To promote strategic planning and implementation for
road projects, an independent monitoring mechanism should be established that will observe
road projects’ performance and impact, including the socioeconomic dimensions of diverse
social groups, and HIV prevention and anti-trafficking.

63. Timing of project performance evaluation report. It is recommended the project

performance evaluation be prepared after two years, when the economic development in
project-influenced areas reaches the maturity.

2. General

64. Future sector investments. Road connectivity in Nepal has significant gaps. Improving
road networks is critical for Nepal to achieve better connectivity and improve regional balance,
requiring continued high priority accorded in ADB’s assistance strategy. Future projects should
however be prepared with higher readiness by advancing detailed design and procurement
 15

before approval, for which the use of existing sector project funds can be considered. The
DOR’s capacity to prepare and implement the projects should also be strengthened.

65. Improved procurement planning. The procurement process should be improved for
higher accountability of employers, consultants, and contractors. Packaging should pursue
optimal sizes that can attract genuine interest from international and national contractors who
will be directly involved in contract execution without excessively relying on subcontracting.
Evaluation and qualification criteria relating to experience of contractors and consultants need to
be tightened to avoid selecting weak contractors and consultants.

66. Strengthening capacity and disciplines of contractors. The project implementation

required significant monitoring, supervision, and hands-on guidance to local contractors,
indicating the need to enhance their capacity and disciplines. To address the gaps, procurement
governance should be enhanced by (i) the introduction of electronic procurement systems
including the contract database (to prevent collusion and over-commitment by contractors), and
(ii) stringent contract management to enforce critical contractual provisions. Contractor capacity
should be strengthened by (i) promoting larger-sized ICBs in which genuine international lead
and national JV partners work together, and (ii) providing handholding support to the contractors
(by the consultants and employers) for efficient contract execution.
16 Appendix 1
Design Summary
Impact
Poverty of isolated people
in hilly northern Nepal
reduced, and economic
growth of rural communities
supported
Outcome
Access to district
headquarters, markets,
employment opportunities,
and social services,
including health and
education, enhanced
Traffic growth rate
increased
Transport costs reduced
Road accident rate reduced
Efficiency and sustainability
of DOR in planning,
constructing, and managing
the SRN improved
Capacity of local
construction and consulting
services enhanced
HIV and trafficking
prevented
Outputs
A. Road Connectivity
Road connectivity
increased
DESIGN AND MONITORING FRAMEWORK
Performance Indicators/Targets
• Rural poverty rate reduced
• Freight and passenger transport
increased in hilly areas
• Socioeconomic indicators improved
in rural areas, including income per
capita per district, annual production
of main cash crops, villages with
telephone connections, primary
school drop-out rate, middle school
attendance rate, and unattended
home births
17 rural-area districts provided with all-
weather road access to markets
Traffic growth increased by 6.00%
VOC reduced by 10.00%
Travel time reduced by 20.0% on project
roads
Road accidents reduced by 10%
20 DOR officials trained in feasibility
study and construction management
Ability of managerial and technical staff
of local contractors and consultants
improved by training 20 companies and
consulting firms
Works by domestic contractors increased
to more than 25% of total works by 2012
Awareness campaign of HIV/AIDS and
human trafficking conducted
Access to testing and treatment of
HIV/AIDS increased
Human trafficking reduced
227 km of sample feeder roads and 263
km of non-sample feeder roads (ADF
grant) constructed and upgraded to all
weather standard
Achievements
• Poverty rate reduced to 21%
• Freight and passenger transport
rate increased by 10%
• Production of cash crops like
cardamom, potato, and fruits crops
increased by 8%
• 12 rural districts provided with all-
weather access to markets (number
reduced due to change in project
scope on non-sample roads)
• Traffic growth of 79.21% occurred
• VOC reduced by estimated 19.18%
• Travel time reduced by estimated
57.4%
• Number of road accidents reduced
by estimated 1%, whereas deaths
reduced by 48%
• 22 DOR staff trained in feasibility
study and construction management
• Improvement achieved through
training and capacity development
support to 20 companies and firms
• 74% of the construction work
contracted to domestic contractors
• Successful awareness campaign
conducted
• Greater access to testing and
treatment achieved
• Awareness of human trafficking
problem increased
• Construction and upgrading of 240
km sample feeder roads, and 78 km
of non-sample feeder roads to all-
weather standard achieved

Design Summary Performance Indicators/Targets
District headquarters 3 district headquarters connected for the
connected first time by road to highways
SRN maintained 490 km of SRN upgraded to a
maintainable condition, including 263 km
financed by ADF grant
DOR’s road safety capacity Road safety audit manual, tools
improved developed; 20 DOTM staff trained
Road safety database Updated data software purchased; 10
strengthened DOR and DOTM staff trained
Prevention of overloading 20 road safety equipment purchased and
applied
Heavy Vehicle Management Policy
implemented
Weighbridges installed at 15 key
positions
Capacity of DOR and local Technical capacity of DOR and local
contractors increased contractors increased
Domestic contractors More than 50% of works contracted to
engaged for project road domestic contractors
works
B. HIV Prevention and Capacity increased in preventing HIV
Anti-Trafficking and human trafficking
Appendix 1 17
Achievements
• Ramechhap (Mantheli), Rasuwa
(Dhunche), and Taplejung
connected by DBST-standard all-
weather road; access to finance and
tourism activities increased in these
districts
• 318 km of SRN upgraded to a
maintainable condition
• 20 staff trained and community-
based traffic awareness program
successfully undertaken
• Data software purchased; road
safety management training
successfully conducted for 20
DOTM staff
• Road safety equipment purchased
• Heavy Vehicle Management Policy
approved; draft act prepared and
awaiting approval
• Weighbridges purchased
• Workshop for carrying out feasibility
studies (economic analysis and
environmental studies) undertaken
(Nov and Dec 2007)
• Orientation training on social
safeguards, resettlement planning
and implementation, and monitoring
and verification completed for NGO
staff
• Capacity of the national local
contractors enhanced by
participation in the project work
• 74% of the work undertaken by
domestic contractors
• Program to reduce HIV vulnerability
and increase access to HIV
prevention services undertaken
• 10 awareness programs organized
to disseminate knowledge on human
trafficking, with more than 900 local
participants
(Details in Appendix 3)
18 Appendix 1

Design Summary Performance Indicators/Targets Achievements

Activities with Milestones
1. Road connectivity component Inputs:
1.1 Civil works procured by April 2008 • ADF grant: $55.2 million
1.2 Civil works implemented by December 2012 • OFID Fund loan: $10.0 million
2. HIV/AIDS and anti-trafficking component (ADF grant) • Government financing: $14.8 million
3. Consultant services component • Attached TA: $0.3 million
3.1 Consultant selected by September 2007 (engaged March 2007)
4. Capacity building component
4.1 Consultant selected by August 2007
4.2 DOR capacity in road project feasibility studies strengthened
by February 2008
ADF = Asian Development Fund, DBST = double bituminous standard treatment, DOR = Department of Roads,
DOTM = Department of Transport Management, km = kilometer, NGO = nongovernment organization, OPEC =
Organization of the Petroleum Exporting Countries, SRN = strategic road network, TA = technical assistance, VOC =
vehicle operating cost.
Note: The project’s road length was reduced from 490 km to 318 km because of cost escalation during the detailed
engineering design phase. The Nepal Resident Mission country director approved the minor change in scope on 20
December 2012.
Sources: Asian Development Bank. 2006. Report and Recommendation of the President to the Board of Directors:
Proposed Grant to Nepal for the Road Connectivity Sector Project. Manila; and Department of Roads.
2014. Project Completion Report. Kathmandu.
 Appendix 2 19

PROJECT ROADS

Table A2.1: Roads Included at Design Phase and at Construction Phase

Design Phase Construction Phase
Sample Road Non-Sample Road Sample Road Non-Sample Road
Galchhi-Trishuli- Dhalkebar-Janakpur Galchhi-Trishuli- Dhalkebar-Janakpur
Syaphrubesi Road Road Syaphrubesi Road Road
Contract Package – 4 Contract Package – 2
Phidim-Taplejung Sunkoshi Bridge Phidim-Taplejung Road Sunkoshi Bridge
Road Contract Package – 11 Contract Package – 1
Tamakoshi-Manthali- Outer Ring Road Tamakoshi-Manthali- Bhaktapur-
Khurkot Road Kolphu Khurkot Road Changunarayan Road
Contract Package – 3 Contract Package – 1
Harkapur-Okhaldhunga Bhairahawa-Taulihawa
Road Road
Contract Package – 1
Okhaldhunga-Sallery
Road
Hilepani-Diktal Road
Bhaktapur-
Changunarayan Road
Khudi-Chame Road
Bhairahawa-Taulihawa
Road
Source: Department of Roads. 2014. Project Completion Report. Kathmandu.

Table A2.2: Sample Roads

Number of
No Road Section Development Region Length (km)
Contracts
1 Galchhi-Trishuli-Syaphrubesi Central 89.88 4 ICBs
2 Tamakoshi-Manthali-Khurkot Central 55.15 3 ICBs
3 Phidim-Taplejung and Link Roads Eastern 94.88 11 NCBs
Total 239.91
ICB = international competitive bidding, km = kilometer, NCB = national competitive bidding.
Source: Department of Roads. 2014. Project Completion Report. Kathmandu.

Table A2.3: Non-Sample Roads

Number of
No Road Section Development Region Length (km)
Contracts
1 Dhalkebar-Janakpur Central 25.04 2 ICBs
2 Bhaktapur-Changunarayan Central 5.73 1 NCB
3 Sunkoshi Bridge & Approaches Central 0.50 1 ICB
4 Bhairahawa-Taulihawa Western 47.24 1 ICB
Total 78.51
ICB = international competitive bidding, km = kilometer, NCB = national competitive bidding.
Source: Department of Roads. 2014. Project Completion Report. Kathmandu.
20 Appendix 3

OUTPUTS OF HIV/AIDS and ANTI-TRAFFICKING PROGRAM

1. The program aimed to increase access to HIV prevention services by engaging local
people, migrant workers, construction workers, and other target groups to adopt prevention
measures, as well as by increasing HIV testing and AIDS treatment. In addition, the program
sought to increase awareness on human trafficking, especially among women and children from
poor economic backgrounds. Likewise, a road safety component was integrated to raise
awareness on road safety measures.

A. Outputs and Outcomes

2. Activities focused on educating those vulnerable to HIV and trafficking, and increasing
their access to HIV prevention services. The Road Connectivity Sector I project provided an
opportunity to link the transport sector with existing HIV and anti-trafficking programs in support
of government strategies, and to increase access to HIV and AIDS services and care. The anti-
trafficking program helped mitigate the spread of HIV. This was undertaken while also building
capacity of the community, nongovernment organization (NGO), and client stakeholders.

3. The expected project impact is reduced vulnerability of population groups who are at risk
of HIV and trafficking because of increased road connectivity. This impact was to be achieved
through the following outcomes:
• The risk of HIV transmission is reduced among construction workers, local
resident communities, vulnerable groups (women and children), ethnic groups,
commercial sex workers, truck drivers, and migrants in the project area.
• The risk of human trafficking in the project areas is reduced.

4. Similarly, program outputs were envisaged as follows:

• Increased awareness about HIV transmission by vulnerable people in the project
area.
• Increased access and ability to use HIV prevention services and products.
• Effective behavior change program established using information and education
campaigns, community mobilization, and condom distribution.
• Risk of being trafficked reduced for women and children.
• Increased capacity of the Department of Roads (DOR) to handle HIV/AIDS and
anti-trafficking issues in road projects.
• Detailed work plan formulated and monitoring indicators identified.
• HIV/AIDS and anti-trafficking issues managed by the DOR in road projects.

5. The following program activities were undertaken in the project areas:

• Stakeholder meetings
• Manual design and publication
• Training and orientation for project personnel (resident engineers, assistant
resident engineers, senior inspector of works, engineers, supervisors and
contractors, and all project personnel and contractor representatives)
• Training and orientation for community members (e.g., community consultation,
village development committee-level orientation, district-level orientation)
• Training and orientation for construction workers
• Peer educators
• Establishment of Community Information Points (CIPs)
• Training and orientation for transport workers
 Appendix 3 21

• Training and orientation for schoolteachers and children

• Orientation for hotel staff
• Orientation and training for female community health volunteers
• Consultation with female sex workers
• Referral services established for voluntary counseling and testing (VCT)
• Information, Education, Communication promotions
• Condom promotion and distribution

6. The implementation of the HIV prevention and anti-trafficking component was carried out
through an NGO, SAHARA-NEPAL, under the overall responsibility of the Project
Implementation Unit, while the DOR provided adequate counterpart facilities and support staff.

7. As part of implementation, essential DOR officials were trained to build the DOR’s
capacity to continue these activities after the project end. In total, 161 DOR staff, the
consultants and contractor representatives were sensitized on HIV and anti-trafficking issues at
10 events. A series of training manuals to raise awareness on HIV and human trafficking, as
well as on issues of road safety, were prepared to orient DOR staff and the consultants.

8. The outputs envisaged were grouped into five statements and result areas as follows:

a. Output 1: Increased awareness about HIV transmission of

vulnerable people in the project area

9. The project positively contributed to raising awareness about HIV and AIDS and issues
related to human trafficking in project areas among road construction workers, transport drivers,
female sex workers, migrant workers, and community workers. SAHARA-NEPAL prepared a
training manual on HIV/AIDS and human trafficking in 2009. The training manual is noted to be
comprehensive and informative, and to meet the needs of professionals with various
competencies, including high-level professionals (project managers, engineers, consultants),
mid-level professionals (project staff, DDC, and municipalities), and grassroots workers
(construction workers).

10. The project coverage was wide and included multiple stakeholders. In total, 161 project
personnel (28 female and 133 male) were trained through 10 events. Similarly, village
development committee-level orientation, community consultation, and district-level orientation
was provided to 1,206 community participants (701 male and 505 female, of which 506 were
Brahmin and Chettri, 41 were Dalit, 392 were from ethnic groups and 267 from other groups).

11. The project oriented a total of 2,140 construction workers (1,945 male and 195 female)
through 55 events, during which they were sensitized on HIV prevention and available services.
Other project outputs included selecting and training 53 peer educators (40 male and 4 female);
training 2,741 school children (1,228 male and 1,493 female, of which 1,083 were Brahmin and
Chettri, 1,241 were from ethnic groups, 77 were Dalit and 320 from other groups) in 37
sessions; and training 2,140 migrant construction workers in 55 sessions. Twenty-two female
sex workers in the project areas were sensitized on risks, preventive measures, and testing
services related to HIV and AIDS. According to the knowledge, attitude, and practice survey
result, 100% of these female sex workers were aware of issues related to HIV and human
trafficking after the training.
22 Appendix 3

b. Output 2: Increased access and ability to use prevention services

and products; effective behavior change program established
through information and education campaigns, community
mobilization, and condom distribution

12. To ensure vulnerable groups have increased access to prevention services, 24 CIPs
were established through all project sites, particularly in strategic locations easily accessible by
the identified vulnerable groups. These CIPs were run by trained peer educators and included
condoms; information, education, and communication (IEC) materials; posters; awareness-
raising leaflets; and access to and use of prevention services and products.

13. A total of 28,904 IEC materials such as posters, hoarding boards, banners and
calendars were posted and distributed in project roads and their vicinity. The banners and flex
prints used simple language and were informative, particularly about the risks of human
trafficking and preventive measures. The IEC materials on HIV/AIDS and other sexually
transmitted infections were also effective, comprising information on prevention, testing,
counseling, and treatment. However, it was also noted that producing more IEC materials in the
local language could have been more effective in sensitizing the community.

14. The project also referred 321 people for counseling and testing services, and distributed
88,120 condoms to construction workers, project personnel, and community members through
CIPs and peer educators.

15. Overall, the project helped to reduce the vulnerability to HIV and other sexually
transmitted infections of the identified groups along project corridors, and contributed to
improving access to associated services and products.

c. Output 3: Reduced risk of being trafficked for women and children

16. It is a commonly held belief that increased road connectivity exacerbates the spread of
HIV and also facilitates human trafficking because of easy access. However, with appropriate
safeguard measures in place, this need not be the case. Field-based consultation during the
project completion review process with community members, community health workers, and
female community health volunteers showed that people perceived reduced risk because of
higher levels of awareness of these issues among people, as well as improved access to formal
education. In perception surveys, people expressed being more sensitive, aware, and vigilant of
the risk, and perceived trafficking to have reduced despite better connectivity.

17. To quote a male community health worker, based in Rasuwa Medical Hall, Dhunche,
Rasuwa: “Though we do not have exact figures on [the] number of human trafficking cases in
the area, we do believe that after the road construction, many have become aware about the
issue and this has led to a decrease in such incidences. Initially it would be hard to tell which
way and where the trafficker is taking the victim, while now, as everyone is aware about the
road route, it has become harder to deceive potential victims.” Similarly, he stated that the road
construction had led to increased mobility of people, institutions, and NGOs, which contributed
to increased awareness about social issues such as HIV/AIDS and gender-based violence in
the community.
 Appendix 3 23

Table A3.1: Overview of the Program Activities

No. of Female
Activities Carried No. of Male Female Participation
No Out Participants Participants Total (%) Remarks
1 Training and 133 28 161 17%
orientation for project
personnel
2 Training and 701 505 1,206 42%
orientation for
community people

3 Training and 1,945 195 2,140 9% In general, there

orientation for are more male
construction workers construction
workers than
female
4 Selection of peer 49 4 53 8%
educators
5 Training and 225 35 260 13%
orientation for peer
educators

6 Training and 73 0 73 0%
orientation for
transport workers

7 Training and 1,228 1,493 2,741 54%

orientation for school
teachers and
children

8 Orientation for hotel 25 14 39 36%

staff

9 Orientation and 0 292 292 100%

training for FCHVs
10 Consultation with 0 22 22 100%
female sex workers

11 Referral services to 293 28 321 9% Out of those

VCT referred, 28
were female
construction
workers
FCHV = female community health volunteer, VCT = voluntary counselling and testing
Source: NGO Report

18. The project components include training 39 hotel staff on HIV/AIDS and anti-trafficking
issues and sensitizing 2,721 students and 2,831 local people (including hotel owners and
transport operators).
24 Appendix 3

d. Output 4: Increased capacity of the Department of Roads to handle

HIV/AIDS and anti-trafficking issues on road projects

19. The program organized a series of capacity building events for DOR staff. In these
events, DOR staff, consultants, and contractor representatives were sensitized and trained on
HIV/AIDS and human trafficking issues, enabling the DOR to handle HIV/AIDS and trafficking
issues on road projects.

20. Similarly, a comprehensive training manual was prepared for facilitators and targeted
participants, providing basic knowledge on HIV/AIDS and other sexually transmitted infections,
condoms, and human trafficking. The manual aimed to increase the capacity of the DOR as well
as other relevant government and nongovernment organizations to address challenges related
to HIV/AIDS and human trafficking in road projects. It was noted that training and orientation
provided to DOR personnel increased their knowledge on the issues. However, it is suggested
that the resources developed be used for institutional knowledge transfer and to capacitate
other staff members.

e. Output 5: Formulation of detailed work plan and identification of

monitoring indicators

21. Various government and non-government agencies worked together to finalize a

detailed work plan as well as monitoring indicators. In particular, the Ministry of Health, Ministry
of Women, Children, and Social Welfare, and National Centre for AIDS and STD Control were
consulted in developing the tools. The program used the collective and collaborative inputs from
relevant ministries and departments (DOR and implementing agencies) to update and finalize
the work plan and monitoring indicators.

B. Lessons

22. While awareness-raising programs, such as through IEC materials, were found to be
successful in improving knowledge and awareness of these issues, the absence of follow-up
programs created a gap in maintaining the flow of information among school attendees, peer
educators, and female community health volunteers.

23. Developing IEC materials in the local language may be more effective in disseminating
information and increasing interest and ownership. Districts such as Rasuwa, with a large
Tamang community, could have benefited more from localized training and IEC products.

24. Awareness tools need to be location specific in their design to be effective. For example,
street plays were noted to not appeal to the masses in one project area and, hence, were not as
effective as other activities carried out in that community.

25. Ensuring community ownership of and partnership with the program by integrating it into
existing support networks would have contributed to its sustainability.

26. More subtle and localized project monitoring is necessary to ensure local NGOs and
community-based organizations do not feel exploited during the training processes. Some
community-based organizations expressed feeling they were not paid fairly by national
implementing agencies.
 Appendix 3 25

C. Recommendations

27. Based on the review and assessment of the component, the project completion mission
recommends the following for sustaining initiatives undertaken by the program.

28. IEC materials need be tailored for the user group and can be further strengthened to
increase intended impact. For example, though gender, equity and social inclusion (GESI
sensitivity and child friendliness were considered in developing materials, the resources can be
further strengthened by incorporating key issues for women and children.

29. Materials in local languages may increase their effectiveness. Similarly, training
materials and curriculum for peer educators, schoolchildren, and adolescents can be
strengthened, and these groups should be supported further to continue peer education on
human trafficking and HIV and AIDS at their respective schools and community groups.

30. Using the manuals, guidelines, and IEC materials prepared with project support by
relevant agencies (e.g., the DOR) may help strengthen organizational capacity and provide
technical support to stakeholders.

31. Designing community-specific awareness tools can be more effective than having a
standard package for all project sites.

32. Given that infrastructure and transportation development is often linked with the spread
of HIV and a heightened risk of human trafficking, it is recommended to prioritize and further
integrate these sensitive issues at the implementation phase of future investment projects.
26 Appendix 3

Table A3.2: Design and Monitoring Framework

Performance
Design Summary Targets/Indicators Achievements
Impact
• Vulnerability of • HIV prevalence reduced in • Through various activities and comprehensive
population groups the general population and coverage of stakeholders, the project sensitized
at risk of HIV and vulnerable subgroups in the vulnerable groups.
trafficking because project area
of increased road • Trafficking cases reduced
connectivity reduced among the general population • NCASC HIV Epidemic Update of Nepal, 2013
and vulnerable groups in the suggested declining trends of HIV infection and
project area number of trafficking cases in Nepal.
• HIV/AIDS and anti-trafficking
issues integrated in future
road projects • Both HIV/AIDS and anti-trafficking issues have
been integrated in future road projects.

Outcome

• Risk of HIV • 90% of target groups reached • The project reached a wide range of
transmission among with HIV/AIDS and anti- stakeholders through the following activities to
construction human trafficking awareness help reduce the risk of HIV transmission among
workers, local vulnerable groups:
resident
communities, • 70% of target group • Training and orientation provided to a range of
vulnerable groups individuals practice safe project personnel, community members,
(women and behavior construction workers, peer educators, transport
children), ethnic workers, school teachers and children, hotel
groups, commercial staff, and female sex workers. IEC materials and
sex workers, truck condoms widely promoted and distributed.
drivers, and
migrants in the • Pre and post KAP survey reported 100%
project area reduced awareness on HIV/AIDS and anti-trafficking
campaigns.

• Risk of human • Improved road connectivity resulted in improved

trafficking in the • Access to HIV and anti-
access to HIV testing, counseling, diagnosis,
project areas trafficking prevention services
treatment, and care. NCASC reported improved
reduced increased
service delivery points with 44 antiretroviral therapy
sites, 62 prevention of mother-to-child transmission
sites, and 18 CD4 Count and Facs Calibre sites all
over Nepal in 2013.

• With improved road networks, various hospitals,

clinics, and service centers have been established
in the road corridor, contributing to better
surveillance on human trafficking in the area.

• Capacity of DOR and other • Building capacity of DOR and other relevant
agencies related to agencies related to HIV/AIDS and anti-trafficking
HIV/AIDS and anti-trafficking was one of the program’s key elements.
increased
 Appendix 3 27

Performance
Design Summary Targets/Indicators Achievements
Outputs

1. Increased 1.1 90% of road construction
awareness about HIV workers, transport operators,
transmission by female sex workers, labor
vulnerable people in the migrants, a n d populations
project area living along the road corridors
reached
• Awareness was raised about HIV transmission
through orientation and sensitization of 2,140
construction workers (1,945 male and 195
female), 73 transport operators, 22 FSWs, and
1,206 community members (701 male and 505
female).

• 22 FSWs in the project areas were sensitized on

risks, preventive measures, and testing services
related to HIV. According to the KAP survey
results, 100% of these FSWs were aware of
issues related to HIV and human trafficking.

2. Increased access and • According to the NDHS (2011), 71% of women

2.1 70% of the male target
ability to use prevention and 84% of men aged 15–49 know using
group and female sex workers
services and products; condoms and limiting sexual intercourse to one
report consistent condom use
effective behavior uninfected partner can reduce the risk of getting
change program HIV. The survey also stated that about 86% of
established through women and 97% of men have heard of HIV and
information and AIDS.
education campaigns,
community mobilization, • 28,904 IEC materials, including 15,477
2.2 100% of the male target
and condom distribution brochures, 7,410 p amphlets, and 5,752
group and female sex workers
p osters, along with leaflets, hoarding flex,
know the benefit of using
banners, and calendars, were distributed along
condoms
project corridors. The materials were mostly
disseminated through CIPs.

2.3 Condom sales increased by • 88,120 condoms were distributed, mostly through
50% PEs and CIPs, to construction workers,
community members, and project personnel.
Condom sales increased in the project areas.

2.4 50% of the target groups • 321 people were identified and referred for TCT
access TCT services services. Improved road connectivity along with
sensitization campaigns helped improve
awareness among the target group.

3. Reduced risk of 3.1 100% of girls and women
being trafficked for aged 11–25 and boys aged 6–
women and children 12 reached with anti-trafficking
messages
• 2,741 school adolescents were trained and
mobilized as PEs, and 392 FCHVs, who were
effective in sensitizing the community in
preventive measures for HIV and human
trafficking, were orientated.

4. Increased capacity of 4.1 DOR staff sensitized and • 161 DOR staff, the consultants and contractor
DOR to handle trained on HIV/AIDS and anti- representatives were sensitized on HIV/AIDS
HIV/AIDS and anti- trafficking issues and anti-trafficking issues at 10 events.
trafficking issues in
road projects
28 Appendix 3

Performance
Design Summary Targets/Indicators Achievements
5. Detailed work plan 5.1 NCASC, Ministry of Health, • Final work plan and monitoring indicators were
formulated and and MWCSW collaborate to prepared with collective inputs from concerned
monitoring indicators finalize detailed work plan and ministries, departments, and other relevant
identified; HIV/AIDS monitoring indicators stakeholders.
and anti-trafficking
issues in road
projects managed by
DOR

CIP = community information point; DOR = Department of Roads; FCHV = Female Community Health Volunteers;
FSW = female sex worker; IEC = information, education, and communication; KAP = knowledge, attitude, and
practice; MWCSW = Ministry of Women, Children, and Social Welfare; NCASC = National Centre for AIDS and STD
Control; NDHS = Nepal Demographic Health Survey; PE = peer educator; TCT = testing, counseling, and treatment.
Sources: Asian Development Bank. 2006. Report and Recommendation of the President to the Board of Directors:
Proposed Grant to Nepal for the Road Connectivity Sector Project. Manila; and Department of Roads.
2014. Project Completion Report. Kathmandu.
 Appendix 4 29

PROJECT COST BREAKDOWN BY SOURCES

Table A4.1: Project Cost Breakdown by Sources

($ million)

Appraisal
Cost Estimate Actual
ADB financed 55.20 50.08

OPEC Fund 10.00 8.87

Government of Nepal 14.80 14.87

Total 80.00 73.82

ADB = Asian Development Bank, OPEC = Organization of the Petroleum Exporting Countries.
Sources: ADB Grant Financial Information System; Loan Financial Information System; Department of Roads. 2014.
Project Completion Report of the Road Connectivity Sector I Project (June). Kathmandu.
30 Appendix 4

Table A4.2: Quarterly Contract Awards and Disbursements

Contract Awards Disbursements

Year Quarter
Projected Actual Projected Actual
2007 I 0.000 5.575 0.510 0.000
II 5.100 0.000 0.210 0.336
III 0.000 0.000 0.210 0.392
IV 0.000 0.000 0.930 0.120
Subtotal 5.100 5.575 1.860 0.848
2008 I 0.000 0.000 0.298 0.228
II 0.000 0.000 0.251 0.300
III 10.000 6.103 2.000 0.887
IV 10.238 17.403 0.800 0.091
Subtotal 20.238 23.506 3.349 1.506
2009 I 4.600 5.871 2.670 0.042
II 9.600 7.821 3.000 1.679
III 6.724 3.668 5.000 3.941
IV 4.700 3.420 2.000 2.347
Subtotal 25.624 20.780 12.670 8.009
2010 I 0.000 0.000 2.000 0.180
II 0.000 0.147 2.700 4.375
III 0.180 0.000 1.000 5.440
IV 0.000 0.000 2.100 0.961
Subtotal 0.180 0.147 7.800 10.956
2011 I 0.058 0.074 3.045 3.045
II 0.000 0.000 6.772 6.772
III 0.000 0.000 0.847 0.847
IV 0.000 0.000 11.128 11.128
Subtotal 0.058 0.074 21.791 21.791
2012 I 0.000 0.000 0.969 1.130
II 0.000 0.000 0.386 0.225
III 0.000 0.000 1.053 1.053
IV 0.000 0.000 2.170 2.170
Subtotal 0.000 0.000 4.578 4.578
2013 I 0.000 0.000 0.025 0.305
II 0.000 0.000 0.058 0.417
III 0.000 0.000 0.824 0.879
IV 0.000 0.000 0.000 0.094
Subtotal 0.000 0.000 0.907 1.695
2014 I 0.000 0.000 0.000 0.044
II 0.000 0.000 0.019 0.019
III 0.000 0.000 0.000 0.000
IV 0.000 0.000 0.000 0.637
Subtotal 0.000 0.000 0.019 0.700
2015 I 0.000 0.000 0.086 0.000
II 0.000 0.000 0.000 0.000
III 0.000 0.000 0.000 0.000
IV 0.000 0.000 0.000 0.000
Subtotal 0.000 0.000 0.086 0.000

Total 51.200 50.082 53.060 50.082

Source: Asian Development Bank Grant Financial Information System.
 IMPLEMENTATION SCHEDULE

Activities Year 2007 2008 2009 2010 2011 2012 2013 2014
Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
A Sample Road

1 Consultant selection

2 Detailed design

3 Procurement of civil
contracts

4 Land acquisition

5 Construction

6 Defects liability

B Non-Sample Road

1 Feasibility study

2 Detailed design

3 Procurement of civil
contracts

4 Land acquisition

5 Construction

Appendix 5
6 Defects liability

7. Construction of Sunkoshi
Bridge

31
 Activities Year 2007 2008 2009 2010 2011 2012 2013 2014

32
Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
C Road Safety Program
(Community Based)

Appendix 5
D HIV/AIDS Program

E Institutional Strengthening

Source: Department of Roads. 2014. Project Completion Report of the Road Connectivity Sector I Project (June). Kathmandu.
Original
Actual
 Appendix 6 33

STATUS OF COMPLIANCE WITH GRANT COVENANTS

Reference in
Grant Status of
No Covenants Agreement Compliance
Sector
1. Operation and Maintenance Schedule 4, Complied with.
para. 16
The Recipient shall ensure that (a) DOR will be
responsible for the operation and maintenance of the
Project roads through proper technical supervision and
adequate allocation of funds; and (b) additional
budgetary allocations are made available for periodic
maintenance of at least 500 km of Strategic Road
Network (SRN) each fiscal year from 2007/08 -2012/13
and, thereafter for all maintainable roads required as
per road conditions.
2. Road Safety and Overloading Schedule 4, Complied with.
para. 17
The Recipient shall make effective and implement its EA prepared short-
Heavy Vehicle Management Policy, ensure the use of and long-term action
weighing bridges to monitor overloading and apply plan to implement
measures for load enforcement, including imposition of heavy vehicle
applicable penalties on violators in accordance with this management policy.
policy, the Vehicle and Transport Management Act and
Public Roads Act of Nepal. DOR shall provide an annual Report on Load
report to ADB on the status of load enforcement Enforcement
measures, incidence of vehicle overloading, and other Measures and
agreed upon benchmarks. Incidence of Vehicle
Overloading
submitted to ADB on
15 July 2015.
Environmental
3. The Recipient shall ensure that DOR shall: Schedule 4, Complied with.
para. 14
(a) implement mitigation measures and environment
management plan (EMP) for the Sample Roads and
for Non-sample Roads as described in the initial
environmental examination, environment impact
assessment, and summary environment impact
assessment (SEIA) reports in accordance with the
environmental laws and regulations of Nepal and
ADB's Environment Policy (2002);
(b) implement the environment assessment review
framework for the Non-Sample Roads;
(c) provide ADB with environmental assessment report
prior to its approval of the subprojects and obtain all
necessary Government clearances, including the
forest clearance prior to commencement of civil
works contracts;
(d) implement and monitor, on a timely basis, all
conditions attached to these clearances;
(e) submit semi-annual reports to ADB and other
relevant agencies on the implementation of EMP
and conditions of clearance for "A" category roads
34 Appendix 6

Reference in
Grant Status of
No Covenants Agreement Compliance
and annual report for "B" category roads as part of
the progress report on project implementation;
(f) submit SEIA to ADB for "A" category roads to be
disclosed to public through ADB's website at least
120 days prior to subproject approval; and
(g) provide the contractors with the environmental
assessment reports including EMP, and ensure that
contractors implement the required mitigation
measures and EMP as described in such reports.
Realignment; Change in Project Road
4. Realignment: Change in Project Road Schedule 4, Complied with.
para 15
If any major realignment or change in Project road is No change of
required, the Recipient shall submit a proposal to ADB alignment.
for approval of the economic, engineering,
environmental and social/resettlement assessment of
such a change. The Recipient shall ensure that
applicable environment clearance is obtained. The RP
shall be updated in accordance with ADB's Policy on
Involuntary Resettlement and submitted to ADB for
approval prior to commencing any land acquisition and
resettlement activities for the realigned or new section.
Financial
5. OPEC Fund for International Development Schedule 4, Complied with.
para 20
Without prejudice to Section 5.01 of the Grant Agreement signed for
Agreement, in the event that the loan from OPEC Fund OPEC loan and
for International Development does not materialize or is declared effective.
suspended due to any reason, the Recipient and ADB
shall agree to reduce the scope of the Project.
6. Counterpart Funds Schedule 4, Complied with.
para. 21
The Recipient shall ensure that sufficient budgetary
allocations, counterpart funds (including additional funds
as required in case of revisions to resettlement plans)
and staff are made available in a timely manner for the
efficient and timely implementation of the Project.
7. The recipient will (i) maintain, or cause to be maintained, Section 4.02 Complied with.
separate accounts for the Project; (ii) have such (a)
accounts and related financial statements audited
annually, in accordance with appropriate auditing
standards consistently applied, by independent auditors
whose qualifications, experience and terms of reference
are acceptable to ADB; (iii) furnish to ADB unaudited
project accounts and financial statements within six
months after the end of each related fiscal year; (iv)
furnish to ADB, as soon as available but in any event
not later than nine months after the end of each related
fiscal year, certified copies of such audited accounts and
financial statements and the report of the auditors
relating thereto (including the auditors’ opinion on the
use of the Grant proceeds and compliance with financial
covenants of this Grant Agreement as well as on the
 Appendix 6 35

Reference in
Grant Status of
No Covenants Agreement Compliance
use of the procedures for imprest account and
statement of expenditures), all in the English language;
and (v) furnish to ADB such other information
concerning such accounts and financial statements and
the audit thereof as ADB shall from time to time
reasonably request.
Social
8. Land Acquisition and Resettlement Schedule 4, Complied with.
para. 13
The Recipient shall ensure, and cause MPPW /DOR to
ensure, that all land and other property acquisition,
relocation, resettlement and compensation of all affected
persons will be carried out in accordance with the
applicable laws and regulations of Nepal, ADB's Policy
on Involuntary Resettlement (1995) and as set out in the
agreed RPs with respect to the Sample Roads, and as
set out in the RFs with respect to the Non-sample
Roads, including the following:

(a) the land and rights-of-way shall be acquired in a

proper, lawful and timely manner;
(b) compensation and assistance shall be provided to
the affected persons, including those without formal
title, at replacement costs and entitlements as
stipulated in the RPs, and will be paid to all the
affected persons in the first section of each contract
package prior to (i) their displacement from their
houses, land and assets, and (ii) commencement of
civil works in the first section. The subsequent
sections under each contract package will be
handed over to the contractor only after payment of
compensation and assistance to the affected
persons is completed for each such subsequent
section prior to their displacement from their
houses, land and assets;
(c) RPs for Non-sample Roads, based on detailed
design, shall be prepared in accordance with ADB's
Policy on Involuntary Resettlement and the RF,
disclosed to the affected persons in local language
and submitted to ADB for approval prior to award of
civil works contracts;
contracts;
(d) after completion of detailed design, the RPs for
Sample Roads shall be updated on the basis of the
final alignment and will be submitted to ADB for
approval prior to award of civil works contracts and
the revised plans will be disclosed to all affected
persons as per ADB's Public Communication Policy
(2005);
(e) in case of any impact on indigenous people, an
indigenous peoples development plan (IPDP) shall
be prepared and implemented in accordance with
ADB's Policy on Indigenous Peoples (1998), and as
36 Appendix 6

Reference in
Grant Status of
No Covenants Agreement Compliance
set out in the agreed indigenous peoples
development framework and submitted to ADB for
approval prior to award of civil contracts;
(f) quarterly progress and completion reports on land
acquisition, resettlement, and IPDP, if any, shall be
submitted to ADB in a timely manner;
(g) an independent monitoring expert shall be
appointed prior to commencement of land
acquisition and resettlement activities and reports
will be simultaneously submitted to DOR and ADB;
(h) all land acquisition and resettlement costs shall be
borne by the Recipient;
(i) appropriate identification measures shall be
immediately undertaken for all eligible affected
persons, including those with non-titled holdings to
avoid fraudulent claims for compensation under the
resettlement plans;
(j) essential public infrastructure affected by land
acquisition and resettlement shall be replaced
appropriately and expeditiously;
(k) a Grievance Redress Committee shall be formed to
address the grievances related to RP
implementation activities;
(l) all civil works contractors engaged shall comply with
the requirements of the RPs, the applicable laws
and regualtions of Nepal and ADB's Policy on
Involuntary Resettlement, to the extent applicable to
contractors; and
(m) in the event of any difference between any local law
or regulation and ADB's Policy on Involuntary
Resettlement, the Recipient shall consult with ADB,
and ensure that ADB's Policy on Involuntary
Resettlement is fully applied.
9. HIV/AIDS and Anti-Trafficking Schedule 4, Complied with.
para 18
The Recipient shall engage qualified consultants/NGOs
to implement the HIV/AIDs prevention and anti-
trafficking program. The Recipient shall ensure that
information on the risks of HIV/AIDS and
women/children trafficking will be disseminated
continuously through consultants/NGOs to (i) local
communities before the Project commences; (ii)
construction personnel and local communities during
construction work; and (iii) transport operators and truck
drivers when using Project facilities. The Recipient shall
ensure that all civil works contracts reflect the need for
an information and education campaign on HIV/AIDS
and anti-trafficking of women and children as part of the
health and safety program.
10. Labor Laws Schedule 4, Complied with.
para 19
The Recipient shall ensure that the civil works
contractors comply with all applicable labor laws and
 Appendix 6 37

Reference in
Grant Status of
No Covenants Agreement Compliance
regulations of Nepal and, in particular, (i) do not employ
child labor for construction and maintenance activities,
and (ii) provide appropriate facilities for children at
construction campsites. The Recipient shall require
contractors not to differentiate wages between men and
women for work of equal value. The Recipient shall
ensure that specific clause will be included in the
bidding documents to ensure adherence to these
provisions and that compliance will be strictly monitored
during project implementation
Others
11. Project Implementation Unit Schedule 4, Complied with.
paras. 1, 2, 3,
(i) MPPW shall be the Project Executing Agency and 4&5
shall be responsible for the overall supervision and
execution of the Project.
(ii) The Project Directorate (ADB) at DOR shall serve as
the Project Implementation Unit (PIU), and shall be
responsible for overall Project coordination,
monitoring of progress and implementation. PIU
shall also have the overall responsibility for
implementation of the HIV/AIDS prevention and anti-
trafficking component that will be implemented by
local NGOs.
(iii) The Project Director shall have responsibility for all
aspects of Project implementation and management,
including procurement, progress monitoring, financial
management, reporting, land acquisition and
resettlement, and HIV/AIDS and human-trafficking
prevention programs. The Project Director shall act
as Project coordinator among concerned
Government agencies. DOR shall maintain the
appointed full-time Project Director for at least the
initial two years of Project implementation and
promptly inform ADB of any change of Project
Director. DOR shall ensure that the person
appointed will (i) be a senior officer with adequate
technical and administration experience and
qualifications, and (ii) be assisted by appropriate and
adequate technical, financial, and administrative staff
including project manager, project engineer, project
accountant, procurement and other specialists.
(iv) DOR shall set up Project offices as may be
necessary to monitor day-to-day implementation and
will report to Project Director. DOR shall assure
adequate counterpart facilities, and staff to assist in
the implementation and essential DOR officials will
be trained to ensure sustainability of DOR capacity
after the Project.
12. Governance Schedule 4, Complied with.
para. 6
The Recipient shall ensure that all contracts financed by
ADB in connection with the Project shall include
38 Appendix 6

Reference in
Grant Status of
No Covenants Agreement Compliance
provisions specifying the right of ADB to audit and
examine the records and accounts of the Recipient,
MPPW, DOR and all contractors, suppliers, consultants,
and other service providers as they relate to the Project.
13. The Recipient shall conduct technical audits at key Schedule 4, Complied with.
Project implementation milestones in respect of para. 7
procurement, payment, and construction quality to Final Technical Audit
promote transparency and good governance in Report submitted to
infrastructure construction. Before the Project midterm ADB on 29
review (MTR), DOR, assisted by individual consultants December 2011.
appointed by the MPPW from among NVC's nominees,
shall carry out Project technical auditing of project
procurement, contract administration, and quality
inspection, in cooperation with NVC. The consultants'
final report shall be submitted to ADB and NVC through
the MPPW, and shall be published in MPPW's bulletin
board and publications, as appropriate. NVC shall
provide counterpart staff to help the consultants to carry
out the technical auditing. The Recipient will promptly
investigate any suspected irregularities and undertake
any disciplinary or legal procedures as may be
necessary.
14. The Recipient shall disclose information to the public in Schedule 4, Complied with.
respect of Project implementation at DOR's website on a para 8
pilot basis within 12 months of the Effective date of this
Grant Agreement. The information will at least cover
procurement process and progress related to
resettlement/social and environment and the findings of
the technical auditing.
15. Project Review and Evaluation Schedule 4, Complied with.
para. 9
In addition to regular reviews by ADB staff, a joint MTR fielded from 18
midterm review by the Recipient and ADB shall be December 2011 to 11
carried out to assess the Project's progress and to January 2012.
agree upon any changes to scope or implementation
arrangements. Before the midterm review, MPPW shall
submit to ADB a detailed status report on Project
implementation.
16. Without limiting the generality of Section 6.04 of the Schedule 4, Complied with.
Grant Regulations, and in addition to the requirements para. 10
of Section 6.04 of the Grant Regulations, DOR shall
submit to ADB monthly progress reports. DOR shall
ensure that (a) the monthly progress reports to MPPW
and ADB include the status of land acquisition,
resettlement, environmental management, training,
prevention of HIV/AIDS and human trafficking, and other
activities critical to project implementation but not
directly included in the scope of engineering services.
17. DOR shall submit a Project completion report in a format Schedule 4, Complied with.
acceptable to ADB within three months of physical para. 11
completion of the Project. DOR shall monitor Project
implementation in accordance with the implementation
schedule, and keep ADB informed of any significant
 Appendix 6 39

Reference in
Grant Status of
No Covenants Agreement Compliance
deviation that could result in deviation from the
schedule.
18. DOR shall develop a baseline for performance Schedule 4, Complied with.
monitoring in accordance with the ADB's requirement on para. 12
Project Performance Management System, and
establish a systematic Project performance monitoring
including benefits monitoring and evaluation. The survey
shall be conducted periodically. The indicators to be
collected and the form and content of reporting shall be
agreed upon between DOR and ADB.
ADB = Asian Development Bank, DOR = Department of Roads, EA = executing agency, EMP = environment
management plan, IPDP = indigenous people development plan, MPPW = Ministry of Physical Planning and Works,
MTR = midterm review, NGO = nongovernment organization, NVC = National Vigilance Centre, OPEC =
Organization of the Petroleum Exporting Countries, PIU = project implementation unit, RP = resettlement plan, SEIA
= summary environment impact assessment, SRN = strategic road network.
Source: Department of Roads. 2014. Project Completion Report of the Road Connectivity Sector I Project (June).
Kathmandu.
40 Appendix 7

TECHNICAL ASSISTANCE COMPLETION REPORT

TA Number, Country, and Name: Amount Approved: $300,000

TA 4825-NEP: Capacity Building in Road Feasibility Study and Revised Amount: Not Applicable
Construction and Contract Management

Executing Agency: Department Source of Funding: TASF Amount Undisbursed: Amount Utilized:
of Roads $6,993.38 $293,006.62
TA Approval TA Signing Fielding of First TA Completion Date
1
Date: Date: Consultant: Original: 31 Dec 2012 Actual: 31 Jul 2012
10 Aug 2006 7 Dec 2006 3 Sep 2007
Account Closing Date
Original: 31 Dec 2012 Actual: 31 Jul 2012
Description

The importance of road sector capacity building was widely recognized, and there have been several interventions
with support from external partners to enhance related agencies’ capacity. The DOR is the key agency for road
development in Nepal, responsible for managing road assets and resources allocated to the sector. The DOR’s
capacity on the economic, environmental, and social aspects of road feasibility studies was inadequate. The DOR’s
capacity on adopting a QAS in construction management was also insufficient. These important areas had impeded
DOR’s project preparation efforts, thus the need to increase its management capacity.
2
To address this, a TA was approved along with Grant 0051 to enhance the capacity of (i) the DOR in road feasibility
studies—particularly in economic analysis and social and safeguard aspects; and (ii) local construction and
consulting service industries in road construction and contract management.

Expected Impact, Outcome, and Outputs

Impact:
Poverty of isolated people in Nepal’s hilly north reduced, and economic growth of rural communities supported.

Outcome:
• Improved efficiency and sustainability of the DOR in planning, constructing, and managing the Strategic Road
Network.
• Enhanced capacity of local construction and consulting services.

Outputs:
• Strengthened capacity of the DOR in road feasibility studies, particularly in social, resettlement, and
environmental impact analysis and management;
• Enhanced capacity of local construction and consulting industries in applying FIDIC contract management and
QAS in road construction; and
• Improved road safety capacity in the DOR.

Delivery of Inputs and Conduct of Activities

There was a provision of (i) 3 person-months each of international input for transport economics and social
resettlement, (ii) 2 person-months of international input for FIDIC applications and QAS, and (iii) 2 person-months of
domestic input for environmental assessment. Consultant recruitment was based on ADB’s Guidelines on the Use of
Consultants (2013, as amended from time to time). Consultant services were used for: (i) developing the road
feasibility studies toolkit following ADB’s guidelines, with modifications for Nepal; (ii) training for DOR staff, local
contractors, and consultants in applying FIDIC contract management and QAS in road construction; and (iii) training
for DOR staff in road safety. The consultants collaborated effectively with ADB and the executing agency throughout
the TA. The performance of the executing agency and ADB was satisfactory. The consultants’ performance was
rated satisfactory. Both the executing agency and ADB rated the TA effective in increasing the DOR’s technical

1
TA was closed before the original closing date, as all TA physical and financial activities were completed ahead of
schedule.
2
ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development
Fund for Nepal for Road Connectivity Sector I Project. Manila.
 Appendix 7 41

capacity on road safety audits and road feasibility studies—particularly in social, resettlement, and environmental
impact analysis and management—as well as local contractors’ capacity in applying FIDIC contract management
and QAS in road construction.

Evaluation of Outputs and Achievement of Outcome

The TA outcome and outputs were successfully achieved. The TA achieved the outcome of improved efficiency and
sustainability of the DOR in planning, constructing, and managing the SRN and road safety issues, and enhanced
the capacity of local construction and consulting services. The capacity building training helped the DOR to develop
road safety audit manuals and tools. The TA outputs were useful in developing the DOR’s capacity in planning,
constructing, and managing the SRN. Materials were used to design and implement the training packages for the
DOR staff, local contractors and consultants.

Overall Assessment and Rating

The TA was rated successful, as it supported the capacity development of the DOR and local contractor and
consulting industries.

Major Lessons

(i) A properly identified, designed, and implemented TA, based on the beneficiaries’ needs, can increase the
ownership of outputs produced under the TA; and (ii) the capacity development of private sector contractor and
consulting industries should be continued.

Recommendations and Follow-Up Actions

The executing agency needs to retain staff who benefitted from TA activities to preserve the knowledge and skills.
The transport sector needs continued capacity development so that the DOR can effectively implement the TA
recommendations, such as FIDIC contract management and QAS in road construction, and fully use the road safety
audit manuals and tools.
ADB = Asian Development Bank, DOR = Department of Roads, FIDIC = Fédération Internationale Des Ingénieurs-
Conseils, QAS = quality assurance system, TASF = technical assistance special fund, SRN = strategic road network,
TA = technical assistance.

Prepared by: Naresh Pradhan Designation and Division: Project Officer (Transport), NRM

In preparing any country program or strategy, financing any project, or by making any
designation of or reference to a particular territory or geographic area in this document, the
Asian Development Bank does not intend to make any judgments as to the legal or other status
of any territory or area.
42 Appendix 8

ECONOMIC ANALYSIS

A. Introduction

1. Consistent with the Report and Recommendation of the President for the Road
Connectivity Sector I Project,1 the economic analyses of all project roads and the bridge
were done using the same methodology as at appraisal and following the Asian
Development Bank (ADB) guidelines.2

1. Evaluation Parameters

2. Civil works for upgrading and rehabilitating the project roads started in July 2008
and ended by 30 June 2013, with the exception of the construction of Sunkoshi Bridge
and the approach road, which were completed in July 2014. The lives of the roads and
bridge are assumed to be 20 years, up to 2033 for the roads and 2034 for the bridge.

3. Annual cost and benefit streams are converted to represent 2013 values for
roads and 2014 values for the bridge using a social discount rate of 12% per annum.
The social discount rate is the economic opportunity cost of capital used for economic
evaluation.

2 Evaluation Criteria

4. Two indicators of economic viability—the net present value (NPV) and the
internal rate of return—are calculated to test project components’ viability.

3. Salvage Value

5. To account for the project’s value remaining at the end of the evaluation period, a
negative cost is included at the end equivalent to the remaining unused portion of the
project’s life (i.e., its residual value). A weighted life of 50 years has been considered for
all project roads and the bridge.

4. Evaluation Methodology

6. The following steps are essential for the economic evaluation of project
components and for comparison with the values estimated in the feasibility study:
i. Estimate the economic costs of investments required for completion of
project components.
ii. Estimate the economic costs required to maintain project components.
iii. Estimate the existing traffic, compare with estimates in feasibility study,
and forecast future traffic likely to use project roads and the bridge.
iv. Estimate the economic benefits for users who directly gain from upgraded
and rehabilitated roads and a new bridge.
v. Compare streams of costs and benefits.

1
Asian Development Bank (ADB). 2006. Report and Recommendation of the President to the Board of
Directors: Proposed Loan to the Road Connectivity Sector I Project. Manila.
2
ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila.
 Appendix 8 43

B. Economic Costs

1. Economic Capital Cost

7. The economic costs are estimated by applying a standard conversion factor of

0.92 on actual financial costs required to complete the project components’ civil works,
as used in the feasibility study. The estimated economic costs are in Table A8.1.

Table A8.1: Estimated Economic Project Costs (NRs million)

No. Road Section Actual

1 Galchhi-Trishuli-Syaphrubesi 1,512.34
2 Tamakoshi-Manthali-Khurkot 897.61
3 Phidim-Taplejung and Link Roads 1,088.55
4 Dhalkebar-Janakpur 626.31
5 Bhaktapur-Changunarayan 58.82
6 Bhairahawa-Taulihawa 376.07
7 Sunkoshi Bridge 138.63
Project Total 4,698.33
Source: Consultants’ Survey and Estimates.

2. Economic Maintenance Costs

8. The same standard conversion factor of 0.92 is also used for converting financial
maintenance costs of project roads and the bridge to economic costs.

9. Estimating benefits arising from project implementation requires comparison of

the with-project situation with the without-project situation. The without-project situation
is therefore critical in that it determines the level from which incremental benefits from
project implementation are derived.

10. To simplify the economic evaluation of project components, the without-project

situation is assumed to be the situation before implementation, in which quality of
service provided by access roads was maintained by sustaining the condition at a
certain level. Any further deterioration was controlled by maintenance activities to
sustain the access roads’ condition. The expenditure level on such maintenance
activities is defined as “holding maintenance” cost. The holding maintenance cost is
assumed to include routine and recurrent maintenance costs. The holding maintenance
costs are shown in Table A8.2. Standard maintenance measures have been assumed
for the with-project situation. The maintenance activities align with the Department of
Roads' Policy Document on Design Standards for Roads. The suggested annual routine
and recurrent maintenance and periodic resealing every fifth year are assumed
adequate to keep the access roads’ condition at the same level over the project life.
Thus, the deterioration of the roads over time, from traffic and environmental influences,
is not considered. The estimated maintenance costs are shown in Table A8.2.
44 Appendix 8

Table A8.2: Economic Maintenance Costs (NRs million/km/year)

Activities Maintenance Cost

Routine and Recurrent Maintenance 0.08
th
Periodic Maintenance Every 5 Year 0.89
Holding Maintenance Cost 0.05
km = kilometer.
Source: Department of Roads.

C. Users’ Costs

1. Vehicle Operating Costs

11. To estimate benefits from the project roads’ improvement, vehicle operating
costs (VOCs) in with-project and without-project situations are calculated. For VOC
calculations, the Roads Economic Decision model (HDM-43 module calibrated to Nepali
conditions) is used. This model is considered the most suitable for predicting VOCs on
Nepal’s roads and predicts the consumption of VOC components, such as fuel, tires,
spare parts, maintenance labor, crew costs, and depreciation, as a function of operating
conditions. Table A8.3 shows the estimated VOCs.

Table A8.3: Vehicle Operation Costs in the Project Roads

Vehicle Operating Cost (NRs/km)

All Vehicles
Motorcycle

Average of
Mini-Truck
Microbus
Minibus

Tractor
Utility
Truck
No Road Section Period
Bus
Car

Galchhi-Trishuli- Before 6.37 23.79 87.31 62.68 45.26 91.73 69.08 39.10 47.60 52.55
1
Syaphrubesi After 4.36 16.36 70.59 50.19 32.83 78.94 56.31 27.83 40.32 41.97
Tamakoshi- Before 6.37 23.79 87.31 62.68 45.26 91.73 69.08 39.10 47.60 52.55
2
Manthali-Khurkot After 4.36 16.36 70.59 50.19 32.83 78.94 56.31 27.83 40.32 41.97
Phidim- Before 6.37 23.79 87.31 62.68 45.26 91.73 69.08 39.10 47.60 52.55
3 Taplejung and
Link Roads After 4.36 16.36 70.59 50.19 32.83 78.94 56.31 27.83 40.32 41.97

Dhalkebar- Before 5.27 17.85 49.92 35.31 33.31 43.24 41.65 27.61 37.38 32.39
4
Janakpur After 4.05 13.71 37.57 28.06 25.31 34.02 31.79 21.37 32.22 25.34
Bhaktapur- Before 4.85 19.60 70.44 56.41 37.71 91.27 65.35 26.09 47.84 46.62
5
Changunarayan After 4.52 18.37 67.75 52.89 29.76 88.74 62.12 24.75 45.45 43.82
Bhairahawa- Before 5.27 17.85 49.92 35.31 33.31 43.24 41.65 27.61 37.38 32.39
6
Taulihawa After 4.05 13.71 37.57 28.06 25.31 34.02 31.79 21.37 32.22 25.34
Sunkoshi Bridge Before 6.37 23.79 87.31 62.68 45.26 91.73 69.08 39.10 47.60 52.55
7
Approach Road After 4.36 16.36 70.59 50.19 32.83 78.94 56.31 27.83 40.32 41.97
Average of Before 5.87 21.21 73.86 52.58 40.40 74.57 59.07 34.29 43.82 45.07
8
Project Roads After 4.25 15.48 59.58 42.81 30.32 63.97 48.14 25.68 37.62 36.43
km = kilometer.
Source: The RED Model and Consultants’ Surveys, 2014.

12. The components’ financial costs are converted to economic costs by deducting all
prevailing duties, tariffs, and taxes from reported prices of the components in Nepal

3
The World Bank’s highway design and maintenance standards model.
 Appendix 8 45

during the first quarter of 2014, as obtained from a survey of road users, vehicle sales
agents, and fuel pumps.

2. Porter Cost

13. In the without-project situation, Tamakoshi-Manthali-Khurkot road and Phidim-

Taplejung road were closed during heavy rains. During closures, goods were transported
by porters and by walking. The cost of transporting goods by porter was NRs.0.75 per
kilogram per kilometer (km) at 2014 prices. This value is used for economic evaluation of
the roads after implementation.

3. Travel Time Costs (Value)

14. Since project road conditions had been bad, with poor pavement surfaces, the
upgrading has significantly reduced travel times. VOCs represent the value of travel time
saved by vehicle drivers and crews, but not that by passengers. The values placed by
travelers (passengers in motorcycles, cars, jeeps, and buses) on travel time savings are
best established using revealed or stated preference surveys. In the absence of survey
results, there are two approaches to valuing time savings:

• Use of an empirical relationship between the value of time and gross

domestic product per capita, using regression between pairs of values
from stated and revealed preference studies; or
• Use of appropriate income levels.

15. The appropriate income levels approach was used during appraisal and for this
analysis. The value of time for work or business trips is assumed to relate to average
regional incomes. Non-work trips are given no value. The value of passenger travel time
is higher for passengers with higher incomes. The values of time for passengers in
different vehicles are shown in Table A8.4.

Table A8.4: Personal Travel Time Values

Passenger Vehicle VOT (NRs/hr)

Motorcycle 12.26
Car 48.08
Bus 461.54
Minibus/Microbus/Commercial Jeep 196.15
Pedestrian 11.54
VOT = value of time.
Source: Consultants’ Surveys, 2014.

16. The travel time values of passenger vehicles in project roads are estimated by
vehicles’ speeds and time values in project roads. Speeds are derived using the Roads
Economic Decision model, as derived during appraisal.
46 Appendix 8

D. Economic Benefits

1. Users' Benefits

17. Road users’ benefits arise from the differences of VOCs and passengers’ time of
vehicle traffics before and after implementation. Passengers’ time and VOCs reduced
because of improvements in road pavement conditions and bridge construction.

18. Road users’ benefits from the upgrades arise from (a) the decrease in VOCs and
passengers’ time because of better road pavement conditions, (b) generated traffic, and
(c) diverted traffic in the case of the project bridge. The bridge construction shortened
the travel distance of traffic from Terai to Dolkha and Sindhupalchowk.

E. Traffic

1. Background

19. To estimate road users’ benefits from the project roads and bridge in VOCs and
time savings, traffic data before and after the project are collected and analyzed.

2. Traffic of Project Roads and Bridge

a. Traffic Estimates

20. To understand the volume and composition of traffic movements on the project
roads and bridge before and after project completion, annual average daily traffic levels
estimated during the feasibility study and by the Project Performance Monitoring Study
consultants were collected, analyzed, and compared.

21. The traffic levels are assessed for a common year—the first full year following
completion of road improvements—which was taken as 2013 for the roads and 2014 for
Sunkoshi Bridge.

22. To convert the calculated annual average daily traffic of 2008 to 2013 levels,
traffic growth rates applied during the appraisal are used. Annual normal growth rates of
6% from 2008 to 2012 and 8% in 2013 are used to project traffic.

23. Traffic levels recorded before and after the project in the project road sections are
compared to allow meaningful comparisons. The comparisons clearly show the project's
impact on traffic levels. The increased traffic was generated traffic in all road subprojects,
and generated and diverted traffic in the project bridge, as shown in Table A8.5. There
was no diverted traffic in the project roads.
 Appendix 8 47

Table A8.5: Annual Average Daily Traffic of the Two Periods

AADT

Motorcyc

Microbus

Vehicles
Minibus

Total of
Tractor
Utility
Truck

Truck
No Road Section Period

Mini-
Bus
Car

All
le
Galchhi-Trishuli- Before 259 18 0 49 30 0 64 53 15 488
1
Syaphrubesi After 564 84 5 25 17 158 35 127 2 1017
Tamakoshi- Before 16 11 0 35 5 0 29 11 0 108
2
Manthali-Khurkot After 174 25 8 73 2 86 25 48 2 442
Phidim-Taplejung Before 205 34 0 31 4 0 67 16 18 375
3
and Link Roads After 283 19 23 60 8 65 55 176 84 773
Before 712 46 105 284 86 35 627 30 116 2041
4 Dhalkebar-Janakpur
After 1006 158 283 93 12 403 62 354 121 2493
Bhaktapur- Before 761 183 0 16 105 44 57 654 327 2147
5
Changunarayan After 7132 671 18 748 49 24 621 575 153 9990
Bhairahawa- Before 1628 515 153 142 200 22 1190 75 569 4494
6
Taulihawa After 1579 117 78 103 38 312 47 226 85 2585
Sunkoshi Bridge Before - - 4 - - - - 8 - 12
7
Approach Road After 180 41 12 26 11 45 42 64 - 420
Total of Project Before 3580 807 262 558 431 101 2034 848 1044 9665
8
Roads After 10917 1115 428 1129 137 1092 887 1571 446 17720
AADT = annual average daily traffic.
Source: Consultants’ Survey and Estimates.

b. Traffic Forecasts

24. To estimate economic user benefits, the same traffic growth rate is assumed for
normal, diverted, and generated traffic. Traffic is assumed on average to grow annually
at 8% during 2014–2020 and 6% during 2021–2034, as estimated in the feasibility study.

F. Economic Evaluations

25. The economic evaluation of project components is undertaken by comparing cost

and benefit streams. All costs and benefits are expressed in economic terms and at
constant 2014 prices. In the evaluation, the net benefits and costs are discounted back
to 2014, at a rate of 12%. Two indicators of economic viability—NPV and internal rate of
return—are calculated to test the viability of project outputs.

26. The economic evaluation results are summarized in Table A8.6. It is evident that
the project components generate adequate returns to ensure economic viability. This
conclusion is supported by positive NPVs and rates of return above 12%. Details of the
cost–benefit analysis are shown in Tables A8.8–A8.15.
48 Appendix 8

Table A8.6: Economic Evaluation Results

NPV EIRR
Road
(NRs million) (%)
Galchhi-Trishuli-Syaphrubesi 263.21 15.64
Tamakoshi-Manthali-Khurkot 526.89 19.12
Phidim-Taplejung and Link Roads 992.00 22.59
Dhalkebar-Janakpur 211.09 19.38
Bhaktapur-Changunarayan 31.33 23.28
Bhairahawa-Taulihawa 195.57 22.64
Sunkoshi Bridge 141.52 23.56
Overall Project 137.68 18.95
EIRR = economic internal rate of return, NPV = net present value.
Source: Consultants’ Survey and Estimates.

G. Comparison of Economic Internal Rate of Return with Appraisal

27. The roads’ economic internal rates of return (EIRR) at the time of appraisal and
at the project completion review are summarized in Table A8.7. The comparison
provides mixed results, as some roads have a significant increase in EIRR at project
completion compared to appraisal, while the opposite is true for one road. There was no
such estimate for the non-sample road at the time of appraisal.

Table A8.7: Comparison of Economic Internal Rate of Return: Appraisal versus

Project Completion Review

EIRR (%)
Road
Appraisal PCR
Galchhi-Trishuli-Syaphrubesi 23.40 15.64
Tamakoshi-Manthali-Khurkot 16.10 19.12
Phidim-Taplejung and Link Roads 12.70 22.59
Dhalkebar-Janakpur - 19.38
Bhaktapur-Changunarayan - 23.28
Bhairahawa-Taulihawa - 22.64
Sunkoshi Bridge - 23.56
Overall Project 18.00 18.95
EIRR = economic internal rate of return, PCR = project completion review.
Source: Consultants’ Survey and Estimates.

28. Because of the significant project-induced changes in terms of agricultural

commercialization and reductions in VOCs, the EIRR for Phidim-Taplejung and the
linked road is significantly higher than at appraisal. Due to stagnant economic activity, a
less-than-estimated traffic flow from Kerung (site bordering Tibet), and less-than-
estimated reduction on VOCs, the EIRR for Galchi-Trishuli-Syaphrubesi road was lower
than appraisal estimates. With the sustainable opening of trade from the Kerung border
with China, this road’s EIRR is likely to increase and be sustained in the future.

29. While the cost of the Bhaktapur-Changunarayan road upgrading was low, this
has reduced the VOCs significantly and saved passengers’ travel time. This has been
 Appendix 8 49

instrumental to speed the pace of the area’s urbanization, resulting in significant

increases in traffic volume and vehicle movement. This was the main factor for the road
having a significantly higher EIRR of 23.28%.

H. Sensitivity Analysis

30. The sensitivity analysis was done by analyzing various combinations to check the
effect on EIRR. It shows that the EIRR is robust for several changes in input parameters
and remains above the 12% threshold. For example, when maintenance cost, VOC, and
value of time is increased by 10% from the baseline and generated traffic benefits are
assumed to decrease by 5%, the EIRR remains at 14.12%.
 50
Table A8.8: Cost–Benefit Analysis of Whole Project
(NRs million)
Without Project With Project

Appendix 8
Total Net Cost Generated Total
Year Total
Maint Total Total Capital Maint Total Value Total (Benefit) Traffic Benefit
Value
Cost VOC Cost Cost Cost VOC of Cost Benefit
of Time
Time
1 1447.077 1447.077 -1447.077 -1447.077
2 3376.513 3376.513 -3376.513 -3376.513
3 18.085 2015.533 191.489 2225.106 32.150 1634.004 148.850 1815.005 410.101 325.033 735.135
4 18.085 2173.435 207.765 2399.285 32.150 1763.346 161.503 1956.999 442.286 350.251 792.538
5 18.085 2343.847 225.426 2587.357 32.150 1903.033 175.230 2110.413 476.944 377.449 854.393
6 18.085 2527.770 244.587 2790.441 32.150 2053.899 190.125 2276.175 514.267 406.783 921.050
7 18.085 2686.197 261.219 2965.501 357.67 2183.985 203.054 2744.712 220.789 432.027 652.815
8 18.085 2854.671 278.981 3151.737 3
32.150 2322.400 216.861 2571.411 580.326 458.856 1039.182
9 18.085 3033.835 297.952 3349.872 32.150 2469.681 231.608 2733.439 616.432 487.373 1103.805
10 18.085 3224.374 318.213 3560.672 32.150 2626.403 247.357 2905.911 654.761 517.683 1172.444
11 18.085 3427.019 339.851 3784.955 32.150 2793.177 264.177 3089.505 695.451 549.902 1245.353
12 18.085 3642.547 362.961 4023.593 357.67 2970.652 282.141 3610.467 413.126 584.150 997.276
13 18.085 3871.785 387.643 4277.513 3
32.150 3159.524 301.327 3493.001 784.512 620.558 1405.069
14 18.085 4115.615 414.002 4547.702 32.150 3360.529 321.817 3714.497 833.206 659.262 1492.468
15 18.085 4374.975 442.155 4835.214 32.150 3574.455 343.701 3950.306 884.908 700.410 1585.318
16 18.085 4650.864 472.221 5141.170 32.150 3802.140 367.072 4201.363 939.807 744.156 1683.963
17 18.085 4944.347 504.332 5466.764 357.67 4044.478 392.033 4794.184 672.579 790.668 1463.248
18 18.085 5256.557 538.627 5813.268 3
32.150 4302.419 418.692 4753.261 1060.007 840.122 1900.129
19 18.085 5588.700 575.253 6182.038 32.150 4576.977 447.163 5056.290 1125.748 892.706 2018.453
20 18.085 5942.063 614.371 6574.518 -2701.211 32.150 4869.234 477.570 2677.743 3896.775 948.620 4845.395
NPV at 12% discount rate (NRs million) 137.68
EIRR (%) 18.95
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.
 Table A8.9: Cost–Benefit Analysis of Bhairahawa-Taulihawa Road
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 112.821 112.821 -112.821 -112.821
2 263.248 263.248 -263.248 -263.248
3 2.126 571.412 61.376 634.914 3.779 535.639 49.383 588.801 46.113 25.963 72.076
4 2.126 617.640 66.593 686.359 3.779 579.157 53.580 636.516 49.843 27.755 77.598
5 2.126 667.639 72.254 742.018 3.779 626.237 58.135 688.151 53.868 29.672 83.539
6 2.126 721.717 78.395 802.238 3.779 677.172 63.076 744.028 58.210 31.721 89.931
7 2.126 768.445 83.726 854.297 42.044 721.202 67.365 830.611 23.686 33.461 57.147
8 2.126 818.223 89.420 909.768 3.779 768.117 71.946 843.842 65.926 35.298 101.224
9 2.126 871.252 95.500 968.878 3.779 818.107 76.838 898.724 70.154 37.236 107.390
10 2.126 927.747 101.994 1031.867 3.779 871.375 82.063 957.218 74.649 39.281 113.930
11 2.126 987.934 108.930 1098.990 3.779 928.138 87.644 1019.561 79.429 41.439 120.868
12 2.126 1052.058 116.337 1170.521 42.044 988.626 93.603 1124.273 46.248 43.715 89.963
13 2.126 1120.377 124.248 1246.751 3.779 1053.086 99.968 1156.834 89.917 46.117 136.034
14 2.126 1193.168 132.697 1327.991 3.779 1121.780 106.766 1232.325 95.666 48.652 144.317
15 2.126 1270.726 141.720 1414.572 3.779 1194.987 114.026 1312.793 101.779 51.326 153.105
16 2.126 1353.364 151.357 1506.847 3.779 1273.006 121.780 1398.566 108.281 54.149 162.430
17 2.126 1441.418 161.649 1605.193 42.044 1356.156 130.061 1528.261 76.932 57.127 134.059
18 2.126 1535.245 172.642 1710.012 3.779 1444.776 138.905 1587.460 122.552 60.269 182.821
19 2.126 1635.226 184.381 1821.733 3.779 1539.227 148.351 1691.357 130.375 63.585 193.960
20 2.126 1741.767 196.919 1940.812 -210.598 3.779 1639.896 158.439 1591.516 349.296 67.084 416.380
NPV at 12% discount rate (NRs million) 195.57
EIRR (%) 22.64
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.

Appendix 8
51
 52
Table A8.10: Cost–Benefit Analysis of Bhaktapur-Changunarayan Road

Appendix 8
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 17.645 17.645 -17.645 -17.645
2 41.171 41.171 -41.171 -41.171
3 0.258 99.146 13.214 112.618 0.458 93.928 11.091 105.478 7.141 4.021 11.161
4 0.258 107.011 14.337 121.606 0.458 101.375 12.034 113.867 7.739 4.362 12.101
5 0.258 115.506 15.556 131.320 0.458 109.418 13.057 122.934 8.386 4.733 13.119
6 0.258 124.682 16.878 141.818 0.458 118.106 14.167 132.732 9.086 5.135 14.221
7 0.258 132.595 18.026 150.879 5.100 125.599 15.130 145.829 5.050 5.484 10.534
8 0.258 141.016 19.252 160.526 0.458 133.572 16.159 150.189 10.337 5.856 16.193
9 0.258 149.978 20.561 170.797 0.458 142.056 17.258 159.772 11.025 6.254 17.279
10 0.258 159.516 21.959 181.733 0.458 151.085 18.431 169.975 11.757 6.679 18.437
11 0.258 169.666 23.452 193.376 0.458 160.694 19.685 180.837 12.539 7.133 19.671
12 0.258 180.469 25.047 205.773 5.100 170.921 21.023 197.044 8.730 7.618 16.347
13 0.258 191.966 26.750 218.974 0.458 181.805 22.453 204.716 14.258 8.135 22.393
14 0.258 204.204 28.569 233.031 0.458 193.389 23.980 217.827 15.204 8.688 23.892
15 0.258 217.230 30.512 248.000 0.458 205.719 25.610 231.788 16.212 9.279 25.490
16 0.258 231.095 32.587 263.940 0.458 218.843 27.352 246.654 17.286 9.909 27.195
17 0.258 245.854 34.803 280.914 5.100 232.813 29.212 267.125 13.790 10.582 24.372
18 0.258 261.565 37.169 298.992 0.458 247.684 31.198 279.340 19.652 11.302 30.953
19 0.258 278.290 39.697 318.245 0.458 263.514 33.320 297.292 20.953 12.070 33.022
20 0.258 296.095 42.396 338.749 -32.937 0.458 280.366 35.585 283.473 55.276 12.890 68.166
NPV at 12% discount rate (NRs million) 31.33
EIRR (%) 23.28
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.
 Table A8.11: Cost–Benefit Analysis of Dhalkebar-Janakpur Road
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 187.893 0.000 187.893 -187.893 -187.893
2 438.416 0.000 438.416 -438.416 -438.416
3 1.125 260.710 31.966 293.801 2.000 230.096 22.889 254.985 38.816 56.392 95.208
4 1.125 281.277 34.683 317.085 2.000 248.350 24.835 275.185 41.900 60.862 102.762
5 1.125 303.484 37.631 342.240 2.000 268.068 26.946 297.014 45.226 65.691 110.917
6 1.125 327.462 40.830 369.417 2.000 289.366 29.236 320.603 48.814 70.906 119.720
7 1.125 348.131 43.606 392.863 22.250 307.735 31.225 361.210 31.653 75.404 107.056
8 1.125 370.119 46.572 417.816 2.000 327.283 33.348 362.631 55.185 80.189 135.375
9 1.125 393.512 49.739 444.375 2.000 348.085 35.615 385.700 58.675 85.282 143.957
10 1.125 418.399 53.121 472.645 2.000 370.223 38.037 410.261 62.384 90.702 153.086
11 1.125 444.877 56.733 502.735 2.000 393.784 40.624 436.408 66.327 96.470 162.797
12 1.125 473.049 60.591 534.765 22.250 418.860 43.386 484.497 50.269 102.608 152.877
13 1.125 503.025 64.711 568.861 2.000 445.550 46.337 493.886 74.975 109.141 184.117
14 1.125 534.921 69.111 605.157 2.000 473.957 49.487 525.444 79.713 116.095 195.808
15 1.125 568.861 73.811 643.797 2.000 504.194 52.853 559.046 84.751 123.496 208.246
16 1.125 604.978 78.830 684.933 2.000 536.379 56.447 594.826 90.107 131.373 221.480
17 1.125 643.411 84.191 728.727 22.250 570.640 60.285 653.175 75.552 139.758 215.310
18 1.125 684.313 89.915 775.353 2.000 607.111 64.384 673.495 101.858 148.684 250.542
19 1.125 727.841 96.030 824.996 2.000 645.936 68.762 716.698 108.298 158.185 266.483
20 1.125 774.168 102.560 877.852 -350.733 2.000 687.268 73.438 411.974 465.878 168.300 634.178
NPV at 12% discount rate (NRs million) 211.09
EIRR (%) 19.38
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.

Appendix 8
53
 54
Table A8.12: Cost–Benefit Analysis of Galchhi-Trishuli-Syaprubesi

Appendix 8
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 453.703 453.703 -453.703 -453.703
2 1058.639 1058.639 -1058.639 -1058.639
3 4.045 396.975 36.333 437.352 7.190 300.362 33.118 340.671 96.682 84.495 181.177
4 4.045 428.590 39.421 472.056 7.190 324.143 35.933 367.267 104.789 90.991 195.780
5 4.045 462.747 42.772 509.564 7.190 349.827 38.987 396.004 113.560 97.992 211.552
6 4.045 499.654 46.408 550.106 7.190 377.566 42.301 427.057 123.049 105.538 228.587
7 4.045 531.496 49.564 585.104 79.993 401.485 45.178 526.656 58.448 112.026 170.475
8 4.045 565.388 52.934 622.366 7.190 426.936 48.250 482.376 139.991 118.918 258.909
9 4.045 601.463 56.533 662.041 7.190 454.017 51.531 512.738 149.303 126.240 275.543
10 4.045 639.863 60.378 704.285 7.190 482.835 55.035 545.060 159.226 134.018 293.243
11 4.045 680.740 64.483 749.267 7.190 513.501 58.777 579.468 169.799 142.281 312.080
12 4.045 724.253 68.868 797.166 79.993 546.136 62.774 688.903 108.263 151.060 259.324
13 4.045 770.576 73.551 848.172 7.190 580.866 67.042 655.099 193.073 160.388 353.461
14 4.045 819.891 78.553 902.488 7.190 617.828 71.601 696.620 205.868 170.299 376.167
15 4.045 872.392 83.894 960.331 7.190 657.167 76.470 740.827 219.504 180.831 400.334
16 4.045 928.288 89.599 1021.932 7.190 699.036 81.670 787.896 234.035 192.022 426.057
17 4.045 987.800 95.692 1087.536 79.993 743.600 87.224 910.817 176.719 203.914 380.633
18 4.045 1051.164 102.199 1157.407 7.190 791.034 93.155 891.379 266.028 216.552 482.580
19 4.045 1118.630 109.148 1231.823 7.190 841.524 99.490 948.204 283.619 229.983 513.602
20 4.045 1190.468 116.570 1311.083 -846.912 7.190 895.270 106.255 161.804 1149.279 244.257 1393.537
NPV at 12% discount rate (NRs million) 263.21
EIRR (%) 15.64
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.
 Table A8.13: Cost–Benefit Analysis of Tamakoshi-Manthali-Khurkot Road
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 269.282 269.282 -269.282 -269.282
2 628.325 628.325 -628.325 -628.325
3 2.482 185.977 17.507 205.966 4.412 95.667 7.256 107.335 98.631 40.328 138.959
4 2.482 199.805 18.995 221.282 4.412 103.211 7.873 115.497 105.785 43.524 149.309
5 2.482 214.673 20.609 237.765 4.412 111.358 8.542 124.312 113.453 46.975 160.428
6 2.482 230.662 22.361 255.505 4.412 120.154 9.268 133.834 121.671 50.703 172.374
7 2.482 244.360 23.882 270.724 49.084 127.735 9.899 186.718 84.006 53.918 137.924
8 2.482 258.883 25.506 286.870 4.412 135.801 10.572 150.785 136.086 57.339 193.424
9 2.482 274.280 27.240 304.002 4.412 144.381 11.291 160.084 143.918 60.979 204.896
10 2.482 290.605 29.093 322.179 4.412 153.510 12.058 169.980 152.198 64.853 217.051
11 2.482 307.914 31.071 341.466 4.412 163.222 12.878 180.512 160.954 68.975 229.929
12 2.482 326.268 33.184 361.933 49.084 173.555 13.754 236.393 125.540 73.362 198.902
13 2.482 345.730 35.440 383.652 4.412 184.550 14.689 203.651 180.001 78.031 258.032
14 2.482 366.369 37.850 406.701 4.412 196.249 15.688 216.349 190.352 83.001 273.353
15 2.482 388.256 40.424 431.162 4.412 208.697 16.755 229.864 201.298 88.290 289.588
16 2.482 411.469 43.173 457.123 4.412 221.943 17.895 244.250 212.873 93.919 306.793
17 2.482 436.087 46.108 484.677 49.084 236.039 19.111 304.234 180.443 99.911 280.355
18 2.482 462.198 49.244 513.923 4.412 251.040 20.411 275.863 238.061 106.290 344.351
19 2.482 489.893 52.592 544.967 4.412 267.004 21.799 293.215 251.753 113.079 364.832
20 2.482 519.270 56.169 577.920 -502.660 4.412 283.994 23.281 -190.973 768.893 120.307 889.200
NPV at 12% discount rate (NRs million) 526.89
EIRR (%) 19.12
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.

Appendix 8
55
 56
Table A8.14: Cost–Benefit Analysis of Phidim-Taplejung Road

Appendix 8
(NRs million)
Without Project With Project
Generated
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Traffic
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Benefit
of Time of Time
1 326.566 326.566 -326.566 -326.566
2 761.987 761.987 -761.987 -761.987
3 4.270 479.129 25.175 508.574 7.590 359.984 19.991 387.565 121.009 84.138 205.146
4 4.270 515.043 27.315 546.628 7.590 387.224 21.690 416.504 130.124 90.676 220.801
5 4.270 553.683 29.637 587.590 7.590 416.550 23.533 447.674 139.916 97.729 237.645
6 4.270 595.257 32.156 631.683 7.590 448.125 25.534 481.249 150.434 105.337 255.771
7 4.270 630.908 34.343 669.520 84.443 475.227 27.270 586.940 82.580 111.885 194.465
8 4.270 668.721 36.678 709.669 7.590 503.990 29.124 540.705 168.964 118.845 287.809
9 4.270 708.832 39.172 752.274 7.590 534.517 31.105 573.213 179.061 126.243 305.304
10 4.270 751.380 41.836 797.486 7.590 566.918 33.220 607.729 189.757 134.108 323.865
11 4.270 796.516 44.681 845.467 7.590 601.310 35.479 644.379 201.088 142.468 343.556
12 4.270 844.400 47.719 896.389 84.443 637.815 37.892 760.150 136.240 151.356 287.596
13 4.270 895.201 50.964 950.435 7.590 676.566 40.468 724.624 225.811 160.805 386.616
14 4.270 949.099 54.430 1007.798 7.590 717.702 43.220 768.512 239.286 170.852 410.138
15 4.270 1006.286 58.131 1068.686 7.590 761.372 46.159 815.122 253.564 181.533 435.097
16 4.270 1066.964 62.084 1133.317 7.590 807.735 49.298 864.624 268.693 192.890 461.583
17 4.270 1131.349 66.305 1201.924 84.443 856.959 52.650 994.052 207.872 204.966 412.838
18 4.270 1199.672 70.814 1274.756 7.590 909.222 56.230 973.042 301.713 217.807 519.521
19 4.270 1272.176 75.630 1352.075 7.590 964.714 60.054 1032.358 319.717 231.462 551.179
20 4.270 1349.120 80.772 1434.162 -609.590 7.590 1023.637 64.138 485.776 948.387 245.983 1194.370
NPV at 12% discount rate (NRs million) 992.00
EIRR (%) 22.59
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.
 Table A8.15: Economic Analysis of the Sunkoshi Bridge Project
(NRs million)
Without Project With Project Generated
and
Total Total Net Cost Total
Year Maint Total Total Capital Maint Total Total Diverted
Value Value (Benefit) Benefit
Cost VOC Cost Cost Cost VOC Cost Traffic
of Time of Time Benefits
1 41.590 41.590 -41.590 -41.590
2 97.044 97.044 -97.044 -97.044
3 3.780 22.184 5.917 31.881 6.720 18.328 5.122 30.170 1.712 29.696 31.408
4 3.780 24.070 6.420 34.270 6.720 19.886 5.557 32.163 2.107 32.080 34.187
5 3.780 26.116 6.966 36.862 6.720 21.576 6.030 34.326 2.536 34.657 37.193
6 3.780 28.336 7.558 39.674 6.720 23.410 6.542 36.672 3.001 37.443 40.445
7 3.780 30.263 8.072 42.114 74.760 25.002 6.987 106.749 -64.635 39.849 -24.786
8 3.780 32.320 8.621 44.721 6.720 26.702 7.462 40.884 3.837 42.410 46.247
9 3.780 34.518 9.207 47.505 6.720 28.517 7.970 43.207 4.298 45.138 49.436
10 3.780 36.866 9.833 50.478 6.720 30.457 8.512 45.688 4.790 48.043 52.833
11 3.780 39.372 10.501 53.654 6.720 32.528 9.091 48.338 5.316 51.136 56.452
12 3.780 42.050 11.216 57.045 74.760 34.740 9.709 119.208 -62.163 54.431 -7.732
13 3.780 44.909 11.978 60.667 6.720 37.102 10.369 54.191 6.476 57.939 64.416
14 3.780 47.963 12.793 64.536 6.720 39.625 11.074 57.419 7.117 61.676 68.793
15 3.780 51.224 13.663 68.667 6.720 42.319 11.827 60.866 7.801 65.656 73.456
16 3.780 54.708 14.592 73.079 6.720 45.197 12.631 64.548 8.531 69.895 78.426
17 3.780 58.428 15.584 77.792 74.760 48.270 13.490 136.521 -58.729 74.410 15.681
18 3.780 62.401 16.644 82.824 6.720 51.553 14.408 72.680 10.144 79.219 89.363
19 3.780 66.644 17.775 88.199 6.720 55.058 15.387 77.166 11.034 84.342 95.375
20 3.780 71.176 18.984 93.940 -77.635 6.720 58.802 16.434 4.321 89.619 89.798 179.417
NPV at 12% discount rate (NRs million) 141.52
EIRR (%) 23.56
EIRR = economic internal rate of return, maint = maintenance, NPV = net present value, VOC = vehicle operating cost.
Source: Consultants’ estimate.

Appendix 8
57
58 Appendix 9

SUMMARY ENVIRONMENT MONITORING DURING IMPLEMENTATION AND OPERATION

1. The project was first classified as environment category B. However, it was upgraded to
category A because a 30-kilometer (km) section of the Galchi-Trishuli-Syaphrubesi road passed
through Langtang National Park. An environmental impact assessment was prepared for the
road. All other project roads were classified as category B, as presented in Table 9.1.

Table A9.1: Classification of Project Roads

Type of Environmental Environmental
No Road and Bridge
Road Work Type Category Assessment
1 Galchi-Trisuli-Syaphrubesi Sample Road Upgrading of A EIA
(hill road – 90 km) existing road
with
bituminous
pavement
2 Tamakosi-Manthali- Sample Road Do B IEE
Khurkot (hill road – 55 km)
3 Phidim-Taplejung (hill road Sample Road Do B IEE
– 95 km)
4 Dhalkehar-Janakpur (Terai Non-Sample Do B IEE based on
road – 25 km) Road EARF
5 Bhaktapur- Non-Sample Do B IEE based on
Changunarayan (hill road Road EARF
– 6 km)
6 Bhairahawa-Taulihawa Non-Sample Do B IEE based on
(Terai road – 47 km) Road EARF
7 Sunkoshi Bridge (hills – Non-Sample Double span B IEE based on
101.6 m) Road steel truss EARF
bridge
EARF = environment assessment review framework, EIA = environmental impact assessment, Env = environment,
IEE = initial environmental examination, km = kilometer, m = meter.
Note: Do means upgrading of existing road with bituminous pavement.
Source: Asian Development Bank. 2006. Report and Recommendation of the President to the Board of Directors:
Proposed Grant to Nepal for the Road Connectivity Sector Project. Manila

2. The type of road works involved: (i) widening existing roads to about a 4.5 meter (m)
carriageway width including a hard shoulder; (ii) improving drainage in villages and other areas;
(iii) building causeways across streams and rehabilitating culverts; (iii) realigning and building
geotechnical landslip stabilization works; (iv) building bus and truck stops; and (v) improving
road alignment, bioengineering, landscape, and accessories.

3. The Geo-Environmental and Social Unit (GESU) of the Department of Roads (DOR) was
responsible for the environmental compliance monitoring of implementation. The unit is the
DOR’s safeguards wing and is responsible for safeguards monitoring during operation of all the
country’s strategic roads. In addition to GESU, the Asian Development Bank monitored the
project’s environmental compliance through routine project review missions and by fielding
special safeguards monitoring (23 November–30 December 2011). The design and supervision
consultant supported the project and GESU in field-level compliance monitoring.

4. The project review missions and independent safeguards mission recorded that although
environmental assessments of sample and non-sample roads were of good quality,
improvements could have been made in implementing mitigation measures and conducting
systematic monitoring, documenting, and reporting. Nevertheless, the project’s overall
 Appendix 9 59

safeguards performance was found to be satisfactory. Some environment-related clauses were

included in the contractors’ bill of quantities, which is considered good practice. Contractors
generally had accident prevention or safety officers to manage safety, as well as safeguards
implementation. Spoil and natural drainage were generally managed satisfactorily, and slopes
were comparatively stable along all project roads. Contractors generally procured aggregates
from private crusher plants, minimizing the need to operate their own crusher plant. The project
coordinated with Langtang National Park authorities while preparing the environmental impact
assessment and implementing the environmental management plan. The material yards and
labor camps were fenced with lighting facilities and managed with due care for environment
protection.

5. Plantation of trees was not properly planned and implemented in all roads. Tree saplings
planted on a small scale in some roads did not survive because of a lack of guarding and
maintaining them. Firewood was found being used to cook food in the labor camps. One
contractor did not submit a quarry closing plan and tree plantation plan to the employer, despite
repeated requests. Contractors generally insured their workers, distributed safety gear (although
not in sufficient quantity), and kept a first aid box at work sites. Slope stabilization using the
vegetative method, labor camp management, occupational health and safety, and
compensatory plantation were the weaker areas in the overall environmental management plan
(EMP) compliance. The project complied with the two environment-related project covenants,
although the submission of periodic environmental compliance monitoring reports was partially
complied. The executing and implementing agencies responded positively to most follow-up
action plans suggested by missions, although with partial compliance.

6. The project worked closely with the Langtang National Park (LNP) authorities on
application of mitigation measures for any potential adverse impacts incurred by the project
implementation. Forest and trees were minimally affected by the road upgrading inside the Park
since the road followed the existing track without disturbing the environmental setting of the
area. The project in fact contributed in strengthening slope stabilization along the road
alignment through the use of bio-engineering covering 24920m2 area in the Park. Worker’s
camp inside LNP was established with close coordination and approval of the concerned
authorities. Contractor’s and consultant’s camps at Kalikasthan and Bharkhu were established
in coordination with LNP. Most of the camps were established in rented house without the need
to build additional facilities. Special attention was given to protect rare and protected wildlife
species such as orchids and walnut trees from damage by the construction work. Almost all
grades of crusher products required for construction were brought from existing crushers
operating out of LNP area. No asphalt plants, mixing plants, and rock crushers were established
inside the Park. Awareness programs were organized focusing different age groups,
professions, institutions and local people for encouraging in protection of wildlife and vegetation.
Construction activities were limited within 7am to 6pm, and the night shift work was strictly
restricted to avoid disturbance to wildlife. Harassing and killing of wildlife was strictly prohibited
by providing awareness training and control by the construction supervisor. None of the events
of wildlife hunting, poaching and smuggling by the project staff from the national park was
reported. Kerosene instead of firewood was supplied by the contractors for cooking and heating
in most of the camps, although use of firewood was also observed in some of them.

7. Increase in trade and transit from China through Kerung pass has tremendously
increased the traffic volume along the road. Nevertheless, since the 30 km stretch of the road in
LNP area is aligned through the extreme western edge of the Park, impact of traffic on the park
and wildlife habitat is expected to be low. A total of seven cases related to wildlife hunting and
poaching were reported in LNP in the last four years, although the cases are not directly related
60 Appendix 9

with the project road. LNP officials confirmed that death of wildlife due to collision with the
moving vehicle has been rare. Activity of poaching, killing of wildlife or illegal trade of timber
from the Park after opening of the road has been minimal, since the Park enjoys round the clock
guarding by the armed team of Nepal Army and forest guards.

8. In May 2013, the GESU submitted an environmental compliance monitoring report,

which recommended corrective actions as follows.

a. Galchi-Trisuli-Syaphrubesi Road
• Traffic safety signs. The installed road safety signs were missing or damaged.
Hence, awareness on road safety needs to be provided, and missing signs should be
replaced to enhance traffic safety.
• Village access road. The non-engineered village roads intersect with the strategic
roads without an adequate plan. They become a natural drainage during rainy
season and deposit sediment on the roads, choke culverts and side drains, and
increase accident risk. The Galchi-Trishuli-Syaphrubesi road has 16 village road
intersections. Coordination with district development committee and village
development committee is suggested to stop such unauthorized intersections and
improve the existing connections to acceptable standards.

b. Tamakosi-Manthali-Khurkot Road
• Bioengineering. Bioengineering works done during construction need protection
from grazing animals. The bioengineering works carried out near Kalidhaha require
protection from domestic and wild animals to permit proper growth.
• Traffic safety signs. The installed road safety signs were missing or damaged.
Hence, awareness on road safety needs to be provided, and missing signs should be
replaced to enhance traffic safety.

c. Phidim-Taplejung Road
• Quarry site. The quarry used by the project at km 5+000 is close to Phidim market.
If the quarry is not properly closed, unauthorized quarrying by locals will likely
continue. Unauthorized quarrying has been observed even after the quarry’s safe
closure by the contractor following the contract. The quarry may pose a threat with
landslides and cause damage to the road.
• Ribbon settlement. Increased roadway encroachment was noted, heightening traffic
and safety hazards, in particular between km 17+900 and km 18+080. Proliferation
of such illegal settlements should be controlled jointly with the local administration.

d. Dhalkebar-Janakpur Road
• Clogged drains from waste disposal. The roadside drains were clogged by
dumping of household waste, particularly from km 14+000 to km 25+039. Drain
blockage was a major cause of road flooding. The chocked drains should be
regularly cleaned in coordination with the municipality and alongside a public
awareness campaign.

e. Bhaktapur-Changunarayan Road
• Local construction. Local people stockpile cement and bricks on the road
carriageway for personal construction work. This has disrupted the flow of traffic and
created safety hazards.
 Appendix 9 61

• Right of way. Protection of the right of way is a major problem on the road. Local
people cut soil from the road embankment’s terraced valley side to place on their
fields. This practice needs to be discouraged, and embankment protection measures
such as bioengineering need to be implemented and maintained.

f. Sunkoshi Bridge and Approaches

• Workers health and safety. Workers are not using safety gear, particularly while
working underwater to place gelatin for blasting in the well, which should be a
primary safety concern.

g. Bhairahawa-Taulihawa Road
• Load limits. Heavily overloaded trucks (exceeding design load) have started to
damage the road with bitumen stripping and pothole formation.

9. The project covenant’s seven environmental safeguards-related items were found

complied.

10. Recommendations from the safeguards implementation experience and analyses of

project weaknesses include the following:
• Project design should maintain a provision for establishing safeguards
implementation mechanisms and ensure they are followed during the project cycle.
• Project shall keep at least 3 person-months of annual inputs from an environment
consultant to verify EMP compliance and prepare semi-annual environmental
compliance monitoring reports.
• Project stakeholders (employer, consultant, contractor, and beneficiary groups)
should be oriented on the importance of environmental protection and be responsible
to ensure safeguards in their operation.
• EMP implementation should be included in project cost (clear bill of quantity items)
with funding source identification.
• Submission of periodic safeguards reports, particularly semi-annual or annual
environmental compliance monitoring reports, should be made mandatory.
• Project mission leaders are aware that implementation data and information is
required for preparing project completion reports, but information on environmental
performance will be available only if the borrower regularly submits monitoring
reports. Therefore, safeguards officers should participate as members of project
review missions at least once a year.