Document of

The World Bank

Report No: ICR00002060

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IDA-42830)

ON A

CREDIT

IN THE AMOUNT OF SDR 10.8 MILLION

(US$ 16.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF MOLDOVA

FOR A

ROAD SECTOR PROGRAM SUPPORT PROJECT

December 20, 2013

Sustainable Development Department

Ukraine, Belarus and Moldova Country Unit

Europe and Central Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 17, 2013)

Currency Unit = Leu

1.00 = US$ 0.079

US$ 1.00 = 12.664

FISCAL YEAR 2014

ABBREVIATIONS AND ACRONYMS

ACAP Anticorruption Action Plan

CAS Country Assistance Strategy

CPS Country Partnership Strategy

EBRD European Bank for Reconstruction and Development

EC European Commission

EGPRSP Economic Growth and Poverty Reduction Strategy Paper

EIA Environmental Impact Assessment

EIB European Investment Bank

EMP Environmental Management Plan

ERR Economic Rate of Return

ESIA Environmental and Social Impact Assessment

EU European Union

FM Financial Management

GDP Gross Domestic Product

HDM-4 Highway Development and Management Model

ICR Implementation Completion Report

IDA International Development Association

IFI International Financial Institution

IMF International Monetary Fund

LTIS Land Transport Infrastructure Strategy

MCC Millennium Challenge Corporation

MTRI Ministry of Transport and Road Industry

NIF Neighborhood Investment Facility

NPV Net Present Value

PAD Project Appraisal Document

PDO Project Development Objective

PIU Project Implementation Unit

PPF Project Preparation Facility

RSPSP Road Sector Program Support Project

SEA Sector Environmental Assessment

SIL Specific Investment Loan

SRA State Road Administration

TTFTF Trade and Transport Facilitation Trust Fund

WTO World Trade Organization

Vice President: Laura Tuck, ECAVP

Country Director: Qimiao Fan, ECCU2

Sector Manager: Juan Gaviria, ECSTR

Project Team Leader: Jukka-Pekka Strand, TWIFS

ICR Team Leader: Simon Ellis, ECSTR

REPUBLIC OF MOLDOVA

Road Sector Program Support Project

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................... 1

2. Key Factors Affecting Implementation and Outcomes .............................................. 7

3. Assessment of Outcomes .......................................................................................... 12

4. Assessment of Risk to Development Outcome ......................................................... 19

5. Assessment of Bank and Borrower Performance ..................................................... 20

6. Lessons Learned ....................................................................................................... 23

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 24

Annex 1. Project Costs and Financing .......................................................................... 25

Annex 2. Outputs by Component ................................................................................. 26

Annex 3. Economic and Financial Analysis ................................................................. 27

Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 28

Annex 5. Beneficiary Survey Results ........................................................................... 30

Annex 6. Stakeholder Workshop Report and Results ................................................... 31

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 32

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 43

Annex 9. List of Supporting Documents ...................................................................... 44

MAP

A. Basic Information

Country: Moldova Project Name: Road Sector Program

Support Project

Project ID: P100929 L/C/TF Number(s): IDA-42830

ICR Date: 12/20/2013 ICR Type: Core ICR

Lending Instrument: SIM Borrower: REPUBLIC OF

MOLDOVA

Original Total

Commitment: XDR 10.80M Disbursed Amount: XDR 3.71M

Revised Amount: XDR 3.71M

Environmental Category: B

Implementing Agencies:

State Road Administration

Cofinanciers and Other External Partners: European Bank for Reconstruction and Development (EBRD)

European Investment Bank (EIB)

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 11/08/2006 Effectiveness: 10/30/2007 10/30/2007

Appraisal: 02/05/2007 Restructuring(s): 12/18/2009

Approval: 03/29/2007 Mid-term Review: 09/23/2009

Closing: 06/30/2011 06/30/2011

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Low or Negligible

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Unsatisfactory

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Satisfactory

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem Project

at any time (Yes/No): No

Quality at Entry

(QEA): None

Problem Project at any

time (Yes/No): Yes

Quality of

Supervision (QSA): None

DO rating before

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 19 19

Roads and highways 81 81

Theme Code (as % of total Bank financing)

Administrative and civil service reform 17 30

Infrastructure services for private sector development 33 70

Injuries and non-communicable diseases 17

Trade facilitation and market access 33

E. Bank Staff

Positions At ICR At Approval

Vice President: Laura Tuck Shigeo Katsu

Country Director: Qimiao Fan Paul G. Bermingham

Sector Manager: Juan Gaviria Motoo Konishi

Project Team Leader: Jukka-Pekka Strand Andreas Schliessler

ICR Team Leader: Simon David Ellis

ICR Primary Author: Jukka-Pekka Strand

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) Reduce road transport costs for road users in Moldova, by improving the condition and

quality of its road network and the way it is managed.

Revised Project Development Objectives (as approved by original approving authority)

The PDO and intermediate outcome indicators were not revised following project

restructuring in December 18, 2009.

(a) PDO Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target

Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Vehicle operation costs on the roads improved under the Project have decreased

by at least 6 percent.

Value

quantitative or

Qualitative)

See HDM4 analysis

carried out during

Appraisal (in project

files).

Actual Vehicle

Operating Cost

reduction is of 6%

as compared to

pre-project VOC.

Actual Vehicle

Operating Cost

reduction is of 11%

as compared to pre-

project VOC.

Date achieved 05/01/2007 06/30/2011 06/30/2011

Comments

(incl. %

achievement)

The target was achieved for roads rehabilitated under the framework of this

project.

Indicator 2 : At the Program level, the percentage of National Roads in good condition will be

higher than in January 2007.

Value

quantitative or

Qualitative)

Good condition - 7.3%

Fair condition - 25.1%

Bad condition - 67.6%

Increase in % of

roads in good

condition

Good condition -

9.1%

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

The proportion of roads in good condition according to a condition survey in the

first half of 2012 was 6.5%. By adding the roads that have been rehabilitated

since that date the percentage goes to 9.1%. The target is achieved.

Indicator 3 : Also at the Program level, the Road Asset Value for the network of National

Roads will increase as compared to the 2006 level.

Value

quantitative or

Qualitative)

Road Asset value of

US$ 2,29 billion

(National Roads)

>2009 value US$2.96 billion

Date achieved 05/01/2007 06/30/2011 06/30/2011

Comments

(incl. %

achievement)

Increased asset values reflect the increased investment and maintenance that have

gone into the network since appraisal of the project. The target is achieved.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : At the project level, the SRA has adequately managed and implemented the Road

Rehabilition Contracts included in the Project.

Value

(quantitative

or Qualitative)

N/A Yes Yes

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

Under the project 5 contracts were included and SRA is judged to have

adequately managed and implemented them. Although there were challenges, the

final roads were of good quality and the project helped SRA to develop the key

project management functions.

Indicator 2 : At the Program Level, the SRA has successfully implemented the investments

under the Road Sector Program

Value

(quantitative

or Qualitative)

N/A Yes Yes

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

SRA is effectively managing an on-going program that is 10 times the size of the

original program. Although there are delays SRA is adapting to these new

requirements. The quality of program roads is good.

Indicator 3 : Technical Audits have confirmed that road works comply with contractual

specifications.

Value

(quantitative

or Qualitative)

N/A Yes Yes

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

SRA continue to undertake technical audits to confirm compliance with

contractual specifications. Target is achieved.

Indicator 4 :

SRA has established a system for managing road investments which is adequate

to satisfy donor requirements, in terms of (i) Accounting and FM, (ii)

Procurement, and (iii) contract management

Value

(quantitative

or Qualitative)

No Yes Yes

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

SRA have an effective accounts and procurement departments. Overall this has

been successful. The December 2013 joint partner review of the program

identified some issues over contract management and SRA have now agreed to

set up a new division.

Indicator 5 : Axle Load Control system in place and operational.

Value

(quantitative

or Qualitative)

No Yes Yes

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

There are now 13 operational mobile axle load weighing platforms through the

country. Between 2009 and 2011 the percentage of overloaded vehicle declined

from 31% to 9%.

Indicator 6 : At least $20 million equivalent available for maintainence works on public roads

in 2010

Value

(quantitative

or Qualitative)

US$ 14 million US$ 20 million US$ 100 million

Date achieved 05/01/2007 06/30/2010 11/29/2013

Comments

(incl. %

achievement)

Very good compliance with agreed target for maintenance funding to the road

fund. In 2013 the exact targets have been met and the indications are that this

will be repeated in 2014. The target is achieved.

Indicator 7 : Roads rehabilitated, Non-rural

Value

(quantitative

or Qualitative)

0 160-200 km or

400 lane-km

87km or

297 lane-km

Date achieved 05/01/2007 06/30/2011 11/29/2013

Comments

(incl. %

achievement)

This indicator is a separately added core indicator and not part of the original

project design. Higher costs associated with a greater than expected scope of

engineering work limited the length of road to be improved.

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived DO IP

Actual

Disbursements

(USD millions)

1 09/28/2007 Satisfactory Satisfactory 0.00

2 05/13/2008 Satisfactory Satisfactory 0.42

3 05/04/2009 Unsatisfactory Unsatisfactory 0.42

4 02/12/2010 Satisfactory Satisfactory 1.22

5 12/20/2010 Satisfactory Moderately Satisfactory 2.02

6 07/05/2011 Satisfactory Moderately Satisfactory 4.42

H. Restructuring (if any)

Restructuring

Date(s)

Board

Approved

PDO Change

ISR Ratings at

Restructuring

Amount

Disbursed at

Restructuring

in USD

millions

Reason for Restructuring &

Key Changes Made DO IP

12/18/2009 N U U 0.82

The Bank declared

misprocurement and cancelled

the corresponding part of the

IDA credit (US$11 million) in

December 18, 2009 after several

unsuccessful attempts by the

Bank (through visits and letters

by Europe and Central Asia

Region (ECA) senior

management) to convince the

Government to award the

contracts in line with the Bank's

procurement procedures. EBRD

cancelled €12.5 million from its

loan.

I. Disbursement Profile

.

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

Country context

1.1.1 The Republic of Moldova is a landlocked country situated between Romania and

Ukraine. With the accession of Romania to the European Union (EU) in early 2007,

Moldova became a border state between the EU and the countries further to the East. The

Pan European Corridor IX (Moscow-Kiev-Bucharest) crosses Moldova from East to

West, going through the capital city of Chisinau. Moldova’s road network totals about

9,650 km, of which 3,666 km are classified as National Roads and the remainder as Local

Roads. Considering the small size of the country and its population, the road network size

is adequate, with little need for expansion.

1.1.2 About 67 percent of National Roads and more than 75 percent of Local Roads

were classified as poor in 2007. This had resulted from severe and prolonged neglect of

the road network during the previous 15 years, when too little was spent on road

maintenance and rehabilitation. About 400 km of formerly paved roads had lost their

pavement and had reverted to unpaved gravel or earth roads. In 2006, the asset value of

the Moldovan road network was only about US$8.4 billion, instead of the US$12 billion1

it could have been with proper maintenance. The asset value loss of US$3.6 billion

equaled 1.4 times the entire Moldovan GDP in 2004.

1.1.3 The lack of investment and maintenance of Moldova’s roads had also made them

highly vulnerable to structural damage caused by overloaded trucks2. During project

preparation in 2006-2007, the damage caused by overloaded trucks was visible on roads

leading to and from cement factories, quarries, mines and steel plants. The country lacked

an axle load control system and no substantial fines were being imposed for overloading.

The only public vehicle weighing stations were at the borders, where they were used

exclusively to determine transit fees for trucks, not to protect the road network.

1.1.4 At appraisal, the Government of Moldova allocated only minimal amounts for

roads or other transport infrastructure. There was no external funding (loans or grants).

Poor road infrastructure was hurting Moldova’s agriculture and agro-industry exports and

was preventing the country from making the most of its 2001 World Trade Organization

(WTO) accession. It was clear that considerable financial resources would be required to

reverse the alarming trends in the road sector.

Project background

1 World Bank Public Expenditure Review 2006 estimated Moldova’s Road Network Asset Value. 2Refers to trucks circulating with loads above the legal limit of 10 tons for paved roads and 6-8 tons for other roads

2

1.1.5 The World Bank and the Government agreed in 2006 that the World Bank would

support the Moldovan road sector through an International Development Association

(IDA) credit. This was reflected in the Country Assistance Strategy (CAS) update of

October 2006. The Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) of

2004, adopted by the Moldovan Government and its development partners, also called for

the prevention of further degradation of the road network.

1.1.6 The Government first prepared a comprehensive Land Transport Infrastructure

Strategy (LTIS) for the period 2008-2017. The preparation was supported by a consultant

firm funded through a grant from the Government of Spain managed by the World Bank.

Bank staff provided technical support for the activity. The LTIS included a Strategy for

Road Infrastructure Recovery and a prioritized 10-year Road Sector Investment and

Expenditure Plan (together called the Road Sector Program). The Road Sector Program

addressed the underlying causes behind the road infrastructure degradation and proposed

a range of institutional and physical solutions. It constituted the framework for all actions,

investments and expenditures in the road sector from 2008 until 2017.

1.1.7 The Road Sector Program Support Project (RSPSP) was the first World Bank

supported operation in Moldova’s transport sector (Figure 1). At appraisal, it was the

second externally financed road project since the country’s independence. The first

project on road rehabilitation financed by the European Bank for Reconstruction and

Development (EBRD) was cancelled prematurely in 1998 because of contract

mismanagement by the Government. The combined funding of the World Bank’s

International Development Association (IDA), EBRD and the European Investment Bank

(EIB) for the second project amounted to US$48.7 million equivalent. The IDA

allocation was US$16 million.

1.1.8 The “Project” was defined as what IDA, EBRD and EIB as external funding

agencies would contribute to the Road Sector Program based on the LTIS; the subsequent

participation of the EU and the Millennium Challenge Corporation (MCC) in the Road

Sector Program was not certain at the time of project appraisal. The focus of the “Project”

was very much on supporting the overall road sector development program both in terms

of the physical investments and the institutional strengthening agenda. For this reason the

results framework included a combination of project level indicators and program level

indicators.

1.1.9 As Moldova’s International Monetary Fund (IMF) program included a

requirement for a certain percentage of grants or concessionary lending in all new

external loan packages, IDA participation was necessary to secure the EBRD and EIB

funding. Neither could have provided stand-alone loans. It also meant that the Bank was

going to work closely together with the other external partners during project preparation

and supervision. It was also envisioned that more grant funding could later come from the

EU and MCC.

1.1.10 At appraisal, the most urgent reforms in the road sector were: (i) the creation of a

reliable and stable financing mechanism for road maintenance, (ii) the reform of road

maintenance execution, and (iii) the introduction of an axle load control system to curb the

3

circulation of overloaded trucks. These reform measures formed the background for the

Institutional Support component in the project.

Figure 1: Road sector strategy, program and project

1.1 Original Project Development Objectives (PDO) and Key Indicators (as approved)

1.1.1 The Project Development Objective (PDO) was to reduce road transport costs for

road users in Moldova, by improving the condition and quality of its road network and

the way it is managed. Success in achieving the PDO was to be measured by the following

indicators: (i) comparing vehicle operating costs before and after on project roads; (ii) a

change in the percentage of roads in good, fair and poor condition for the program; and (iii)

a change in the value of road assets for the program.

1.2 Revised PDO (as approved by original approving authority) and Key Indicators,

and reasons/justification

1.2.1 The PDO or key indicators were not revised.

1.3 Main Beneficiaries

4

1.3.1 Road users, both individuals and truckers, were expected to be the main

beneficiaries. They were to benefit from reduced vehicle operating costs resulting from

physical road improvements, through the rehabilitation of roads and better road

maintenance. Rehabilitation works included in the project were designed to improve road

condition on sections having the greatest beneficial impact on road users. Better road

condition lowers vehicle operating costs through reduced fuel consumption and reduced

wear and tear on the vehicles. The project’s institutional development component aimed

at reforming maintenance practices and increasing maintenance funding so that the

rehabilitation benefits would be sustained and that road network degradation would be

reversed.

1.3.2 The State Road Administration (SRA) was to benefit from improved capacity to

manage and implement road investments. SRA had been languishing for years with

insufficient funding and with little knowledge of international procurement or road

management practices. The project was designed to address both problems through

specific interventions at policy, institutional and human resource levels.

1.4 Original Components

1.4.1 The project had two components. The first component focused on physical road

rehabilitation. The second component supported the implementation of various institutional

and other measures which were also included in the Action Plan of the Road Sector

Program. The components as originally envisaged are described in more detail below.

Component 1: Road Network Recovery (US$44 million equivalent, of which US$13

million to be financed from IDA credit)

1.4.2 Component 1 consisted of physical road works and related consulting and other

services, such as feasibility studies, detailed engineering designs, bidding document

preparation and works supervision. The physical works included localized repair, periodic

maintenance and light rehabilitation. Heavier rehabilitation could be involved on shorter

sub-sections of roads where the base course needed to be improved or replaced. The road

sections to be rehabilitated were located along the main North-South road corridor, between

Criva in the north, Balti, Săngerei, Orhei, Chisinau, Hinçesti and Comrat in the South.

They were among the country’s most trafficked and economically important road sections

so as to best contribute to the PDO.

1.4.3 Works would mostly consist of the application of a leveling course and a wearing

course of asphalt concrete, after carrying out localized repairs on the base course. Other

works included the re-establishment of adequate drainage and the improvement of

horizontal and vertical signage. Specific road safety features, such as guardrails and traffic

calming measures, were to be included where appropriate and cost-effective. The cost for a

two-lane road was expected to be MDL2-3 million (US$150-220k) per km for works,

excluding design and supervision costs. It was envisaged that the project could include some

short, badly deteriorated road sections where unit rehabilitation costs could be significantly

higher. For that reason, and also because some road sections have four and six lanes, the

5

total length of roads to be rehabilitated under the project was expected to be between 160

and 200 km.

Component 2: Institutional Support (US$4.7 million equivalent, of which US$3 million

to be financed from IDA credit)

1.4.4 This component aimed at strengthening the Government’s capacity to manage and

maintain the national road network. It was expected to support the Government in

implementing the institutional, legal and other measures included in the Transport Sector

Strategy Action Plan. The most important activities were envisaged to be: (i) the creation of

a reliable financing mechanism for road maintenance; (ii) a review of road maintenance

practices; (iii) strengthening of SRA’s capacity to efficiently manage road maintenance and

investments; and (iv) introduction of a system to curb the circulation of overloaded trucks.

Other activities were to be included depending on the available resources. Specialized local

and foreign consultants (technical, institutional and legal) were expected to help implement

the activities and required training. Some related equipment could also be procured.

1.5 Revised Components

1.5.1 Component 1 (Road Network Recovery): The IDA contribution to Component

1 was canceled during project restructuring in December 18, 2009 due to mis-

procurement. Of the related IDA credit, US$11 million was cancelled, representing 69

percent of the original total credit. Although US$13 million of IDA had originally been

allocated to Component 1, representing the initial cost estimate of the civil works, the

lowest-cost bids came in below that, at US$11 million. Under the restructured project,

IDA did not fund any civil works. Despite the IDA credit cancellation, EBRD and EIB

continued financing Component 1, including the road sections which were originally

planned for IDA financing. The delays from this process resulted in the majority of the

EBRD and EIB works finishing after the formal close of the Bank project. With

management approval it was agreed to delay the Implementation Completion Report

(ICR) until two years after the formal closing of the project.

1.5.2 Component 2 (Institutional Support): After project restructuring, US$2 million

of IDA credit, which was left in Component 1 after cancellation of US$11 million, was

reallocated to Component 2. A more detailed agreement was reached with the State Road

Administration on the use of the remaining IDA funds of about US$5 million to include:

Support to the design and implementation of an axle load control system;

Support to the reform of road maintenance execution, including road asset

valuation;

Technical and financial audits;

Support by local consultants to SRA in the areas of procurement, environment

and financial management;

Training activities;

Design and feasibility studies future for road rehabilitation;

Other activities supporting transport sector reform.

6

1.6 Other significant changes

1.6.1 Declaration of mis-procurement in December 18, 2009 was the most consequential

setback during project implementation. A joint bidding process for the three road contracts

in Component 1 (to be funded in parallel by IDA, EBRD and EIB) was launched in

February 2008. SRA’s bid evaluation committee adequately evaluated the bids and

recommended the award of two lots to one firm and one lot to another firm. However, the

high-level Road Sector Steering Committee countered the recommendation by saying that

the price of one of the recommended firm’s was too low and that at least one lot should go

to another bidder whose bid was twice as high.

1.6.2 There were clear indications that the recommendation by the Steering Committee

was motivated by instructions from the highest political level. The Bank team refused to

change the recommendation but agreed to negotiate with the Government on increasing the

bid security for the recommended bidder.

1.6.3 The Bank declared mis-procurement and cancelled the corresponding part of the

IDA credit (US$11 million) in December 18, 2009, after several unsuccessful attempts by

the Bank (through visits and letters by Europe and Central Asia Region (ECA) senior

management) to convince the Government to award the contracts in line with the Bank’s

procurement procedures. Through this process EBRD also cancelled €12.5 million from its

loan.

1.6.4 Before mis-procurement surfaced, total amount of funding available for the project

had increased since appraisal. EBRD and EIB had decided to provide larger loans for the

road sector than planned (Table 1). The IDA proportion of total funding ended up being

much smaller than originally intended.

Table 1: Project financing plan after restructuring

IDA Credit

(US$)

EBRD Loan

(EUR)

EIB Loan

(EUR)

Total 2

(US$ Equivalent)

Originally planned

amount

US$ 16.0 € 12.5 € 12.5 US$ 48.7

Actual Amount1 US$ 16.0 € 30.0 € 30.0 US$ 90.0

Cancelled Amount US$ 11.0 € 12.5 US$ 27.4

Remaining Amount US$ 5.0 € 17.5 € 30.0 US$ 62.6 1 Both EBRD and EIB Loans were made in two tranches of EUR12.5 and EUR17.5 million 2 Exchange rate: EUR 1.00 = US$ 1.308 (as used in PAD)

2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry

2.1.1 The project’s Quality at Entry is considered satisfactory. An important lesson

which was incorporated in the design was to not have a separate Project Implementation

Unit (PIU). In this project, implementation arrangements relied on the existing State

7

Road Administration. The aim was to make a lasting impact on project implementation

capacity as the same staff within SRA was to handle both internally and externally

financed contracts.

2.1.2 The Anti-Corruption Action Plan (ACAP) for the project was built in part on the

lessons learned from the cancelled EBRD road project in 1998. The risk of public sector

corruption during procurement was assessed as being high in the PAD, especially with

the expected large increase in road spending which would result from the project. The

ACAP design was adequate even when assessed in light of the mis-procurement that

occurred during project implementation. The strong controls in place did not eventually

prevent the political interference from occurring but were instrumental in staving off the

corruption attempt. A “system failure” was not to blame, but rather a single case of high-

level political interference.

2.1.3 The physical component design can be considered adequate. The physical works

component was intended to provide much needed funding for road rehabilitation. It was

targeted at roads whose basic structure was intact and which could be rehabilitated at a

relatively low cost. Select safety, drainage and signage improvements were also to be

made during rehabilitation. The selected road works were located on the most important

corridors in terms of traffic and economic importance. With relatively little Bank funding,

the component was designed to maximize its positive impact on road users. A Project

Preparation Facility (PPF) was used to fund feasibility studies, engineering designs, and

environmental and social studies for the road sections to be rehabilitated under the

project; international consulting firms were hired for this purpose. Road designs and

bidding documents were ready by the time of project effectiveness.

2.1.4 The institutional component was also designed adequately with an aim to address

the key sector issues through developing the needed capacity and preparing a project

pipeline for the external partners. The main objective was to strengthen the Government’s

capacity to manage and maintain the national roads network and project design was

highly satisfactory in this regard. The one weakness in project design was with the

results framework which contained a number of indicators at the program level which

were difficult to attribute to this project. There were also a number of intermediate level

indicators where the targets could have been better defined and more measurable.

2.2 Implementation

2.2.1 The Bank’s coordinating activities contributed to successful implementation of

the project, notwithstanding the implementation problems caused by mis-procurement

(see 1.7). The Bank was able to bring about efficiencies in the preparation and

supervision of the investments related to the Road Sector Program in leading the policy

and institutional reform dialog with the Government on behalf of all the IFIs and donors.

All external partners subscribed to the Road Sector Program as a basis for their

investments, agreed on shared reform goals for the Government and participated in joint

supervision missions.

8

2.2.2 During the events leading to mis-procurement, SRA showed its reliability as a

project implementation agency by bringing the political interference to the World Bank’s

and other partners’ attention. Due to this and the progress made on the institutional

component, the Bank and its partners were confident that project implementation could

continue with SRA despite the partial credit/loan cancellations.

2.2.3 However, to minimize the risk of further political intervention, EBRD and EIB

did not start funding the cancelled sections until the political leadership suspected of

interference changed two years after the declaration of mis-procurement. No changes

were made to the anti-corruption guidelines or procedures which had worked as planned

alerting stakeholders to the political interference.

2.2.4 For the civil works that were eventually funded the amount of work required to

bring the roads to good condition was significantly greater than anticipated at appraisal.

The original engineering solution was the application of a leveling course and a wearing

course of asphalt concrete, after carrying out localized repairs on the base course. However,

following more detailed surveys it was clear that in many cases full rehabilitation or

reconstruction would be required to provide a long term solution. In addition, there were a

number of bridges that underwent full reconstruction. The additional scope of work

significantly increased costs, the length of time to complete the works and consequently

reduced the length of road that could be improved.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

2.3.1 It was decided during project preparation that results would be measured not only

for the small Bank-financed project activities, but also for the wider program benefiting

from the funding from EBRD and EIB. Project scope therefore went beyond IDA’s share

of the total project cost, which amounted to $48.7 million from all three entities. This

followed from the Bank’s objective of designing a sector-wide approach for reform and

using its project as leverage for a sector-wide impact.

2.3.2 Three physical indicators on vehicle operating costs, road condition and road asset

value, were selected for the Project Development Objective. They were meant to be

compared before the project in 2007 and after the project in 2011. No interim data was to

be recorded. In addition to the PDO indicators, eight intermediate outcome indicators

were included in the original project design to measure the quantity and quality of road

maintenance and investments. These indicators have remained the same through the

project and were not changed during the restructuring. Separately, a WB core indicator

measuring the length of non-rural road rehabilitation was added in 2010 as part of

mandatory retrofitting of monitoring.

2.3.3 SRA was responsible for project monitoring with support from technical auditors

and the World Bank. SRA was deemed to have the capacity using its existing data

collection and analytical tools to carry out the ex-post economic evaluation and road

condition surveys required for PDO monitoring. Intermediate outcome indicators were to

be monitored using reports and data provided by SRA together with technical auditors.

9

2.3.4 The results could have also been measured during construction against set annual

targets. That would have informed the Bank and the partners involved on progress made

and helped determine the likelihood of achieving the intended results. The indicator on

road asset valuation could have been based on one agreed methodology. In this case, the

baseline was measured using one methodology, whereas the end value was to be recorded

with a new methodology devised by consultants. The team could have taken advantage of

the project restructuring to formally revise that indicator. A road safety indicator could

also have been considered since Component 1 incorporated specific road safety features3.

Road safety later became a government priority with a Road Safety Summit organized in

May 2011.

2.3.5 None of the PDO indicators was changed during project restructuring in 2009,

although IDA’s funding for any civil works was completely removed. Project

performance would therefore be assessed on the basis of works funded by the other

external partners as part of the wider road sector program. Not even the increase in

project resources was deemed sufficient to change the physical road rehabilitation targets.

The Restructuring Paper explained that more funding was needed to deliver the original

rehabilitation works to offset the significant road construction cost increases and the

continuing road deterioration after 2007.

2.3.6 The decision to leave the PDO indicators unchanged is understandable due to the

close cooperation with the other external partners and their commitment to complete the

original works as defined in the PAD. That said, it is surprising that the quantitative

targets for 2011 were not changed despite a foreseeable, nearly two-year delay caused

largely by the mis-procurement.

2.3.7 The intermediate outcome indicators can be deemed adequate in scope but

inadequate in measuring gradual progress. Only one of the indicators, the quantity

available for road maintenance, was quantitative while all the other indicators were

qualitative, or “yes/no”, which makes it difficult to assess how much progress had been

made from a “no” to a “yes”.

2.3.8 The restructuring paper could have explicitly stated that the cancelled IDA

sections would be implemented, albeit with a delay, with funding from EBRD and EIB

and that they would be responsible for supervision and monitoring of the road works on

those sections. Explaining that all the planned rehabilitation works would eventually be

completed would have also provided another reason not to change the physical PDO

indicators during restructuring.

2.4 Safeguard and Fiduciary Compliance

3 Specific road safety features such as installation of guardrails and traffic calming measures in villages along the road

were to be included where appropriate and cost-effective,

10

2.4.1 In accordance with World Bank safeguard policies, the safeguard screening

category of the project was SF, while the environmental category was assessed as B. All

environmental and social safeguards were handled satisfactorily, and all fiduciary

requirements were met during the project. A Sector Environmental Assessment (SEA)

and a Social Assessment were carried out. All project civil works were to be

implemented within the existing right-of-way on all road sections without any need for

land or asset acquisition.

2.4.2 Three Environmental Management Plans (EMPs) were prepared for the road

segments to be rehabilitated. As per WB requirements, they were publicly disclosed and

consultations were arranged with interested parties. After the World Bank’s participation

in physical road works was cancelled, no environmental supervision of civil works by

WB staff was finally carried out. However, EBRD and EIB environmental specialists

continued to cover environmental safeguards for their respective road sections. Also, the

EMPs prepared for the original IDA sections were still used when EIB and EBRD

decided to substitute their funding for IDA’s.

2.4.3 The environmental protection standards for national roads construction were

revised with support from a WB Safeguards Specialist. A new environmental handbook

for roads was prepared in coordination with the Ministry of Environment. Public

awareness materials were distributed about the revised standards and guidance.

Throughout the TA activities, a local environmental consultant funded from the IDA

credit supported SRA on the basis of declining time contribution; this included training of

newly recruited staff who are now able to handle the environmental aspects of road

projects.

2.4.4 After the mis-procurement, procurement consisted only in consulting services.

The associated bidding processes were transparent and fair, and all procurement activities

were carried out in accordance with World Bank guidelines.

2.4.5 Using country systems for financial management created some problems from the

beginning. For example, payments through the Treasury were initially processed slowly.

All problems were eventually overcome during project implementation resulting in

efficient disbursement of the revised IDA credit funds (99.8%). SRA project

implementation capacity was strengthened through training and with help from a

financial management consultant.

2.4.6 SRA submitted quarterly Financial Management (FM) reports following the

required WB format. The Bank’s FM staff always found the reports acceptable. The

project and SRA financial statements were audited annually by independent audit firm

selected on competitive and eligibility basis. The audit reports were submitted initially

with significant delays (up to five-six months) and this resulted in downgrading the

project FM rating to moderately satisfactory. The delays were later fixed with all audit

reports being submitted on time. This allowed upgrading the FM rating.

11

2.4.7 Each project account audit report contained an unqualified audit opinion, whereas

SRA entity audits revealed a series of internal control weaknesses. The audit opinion was

therefore undermined by issues related to road asset values, such as: (i) possession of

assets (roads) in operational management without adequate supporting documentation

confirming their historic value, and (ii) a lack of assessment methodology for recoverable

road asset values. Several measures were taken to address the auditors' concerns (for

instance, road asset valuation).

2.4.8 At project closing, disbursement stood at US$4,963,341 or 99.9 percent of the

revised amount of US$4,970,000 (or 31.0 percent against the original credit of

US$16,000,000). The undisbursed amount of US$6,658.97 was cancelled on October 31,

2011.

2.5 Post-completion Operation/Next Phase

2.5.1 Although the Bank’s contribution to the Road Sector Program Support Project

was closed on June 30, 2011, the project implementation continues under financial

support of EBRD and EIB. They have also re-tendered and are funding the IDA and

EBRD contracts which were cancelled during the mis-procurement proceedings. All the

main works were substantially4 completed in 2013, which is also the new end year for the

PDO indicators of this project. MCC and the European Commission are funding other

parts of the Program. The total amount of additional external funding mobilized for

Moldova’s road sector is US$460 million, while the IDA portion was only US$5 million.

2.5.2 Despite the small size of the World Bank’s (IDA) financial involvement, the other

external partners agreed that the Bank play the role of a lead donor and coordinator. In

2011, after the closure of the WB involvement in the Road Sector Program, MCC

accepted to play that role. MCC has committed US$133 million of additional resources to

Moldova’s road sector. The transition has proceeded smoothly, with continuing World

Bank support to MCC in the various coordination activities, from reporting to

communications with the client. The other external partners also continue to support the

Road Sector Program started with the Bank project. Their continued commitment helps

solidify development gains in a sector of massive investment needs.

2.5.3 The other external partners are also committed to the original World Bank goal of

strengthening institutional capacity. They share the Bank’s interest of raising and

securing maintenance funding for the road sector and are continuing the work on

reforming the Government’s maintenance management practices. This is important as

some of the intended reforms are yet to be completed and generally take years to fully

materialize.

2.5.4 After the closing of the WB involvement in the Road Sector Program, the Bank

secured a grant of US$1.3 million from the Trade and Transport Facilitation Trust Fund

4 For one contract the main works on the carriageway have been completed but there are some secondary

works still underway.

12

(TTFST). The grant was managed by the Bank and helped the Government in developing

a new Transport and Logistics Strategy for the country for the period 2012-2022. That

strategy was approved in July 2013 and now forms the basis for the framework of reform

that the joint partner group is pursuing with the government. The Bank is presently

planning a follow-up project in the road sector as reflected in the current Country

Partnership Strategy (CPS) for the period 2014-2017, taking into account Government

interest in continued World Bank involvement in the transport sector.

3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation

3.1.1 The project objectives, design and implementation remain highly relevant to

country needs and the Government’s current objectives for the transport sector. The

project was designed to tackle the serious deterioration of the road network, a costly

problem which continues to affect Moldova’s economy as a whole and the country’s

exports in particular. The project offered a solution to both problems through road

rehabilitation and reform of maintenance funding and management.

3.1.2 The project also reflects the Bank’s and other donors’ current country assistance

strategies for Moldova. Improving management of the road network falls under Pillar 1,

Improving Economic Competitiveness, in the Bank’s Country Assistance Strategy for

2009-2012. EBRD has highlighted support for road infrastructure as a key objective in its

Strategy for Moldova 2010-2013. Improvement of transport infrastructure remains a

major objective also for EIB in its activities in Moldova.

3.1.3 The project was designed as a programmatic approach where the project,

including finance from EBRD and EIB, was contributing to a broader government road

development program. The design included indicators that related to both project and

program level indicators. In some cases the program level indicators went beyond what

could be attributable to the project particularly after the restructuring. That said there is

no doubt that this project had a substantial impact on the government program both in

terms of its investment program and reform agenda.

3.2 Achievement of Project Development Objectives

3.2.1 The Project Development Objective (PDO) was to reduce road transport costs for

road users in Moldova, by improving the condition and quality of its road network and

the way it is managed. Implementation success was to be measured by the following PDO

level indicators: (i) comparing vehicle operating costs before and after on project roads; (ii)

a change in the percentage of roads in good, fair and poor condition for the program; and

(iii) a change in the value of road assets for the program.

3.2.2 All PDO and intermediate indicator targets have been met or partially met. The

change in Vehicle Operating Costs has been evaluated on the road section which had

been rehabilitated by May 2011. On that section, the end target of 6% lower Vehicle

Operating Costs has been exceeded (reduction of 11 percent compared to the pre-project

13

VOC). The story on the condition of the road network is more complicated in part

because of differences in the ways that road condition has been measured over time. The

latest figures suggest that 29% of the network is in good or fair condition compared to

32.4% at appraisal. However, the latest figures also include a third category, not included

originally, that includes 51% of roads. It seems reasonable that at least some of these

roads would have been included in the fair category in the original formulation. These

latest figures are from 2012 and the consultant at the time estimated that the road

condition in the country had at least stabilized following many years of declining

condition. Given the large on-going rehabilitation program and increased maintenance

finance the trend is towards steadily improving road condition. As such this indicator can

be judged to be partially met. The value of road assets has been judged to have increased

since project launch, as confirmed by an external consultant. The higher road asset value

reflecting the increased investment and maintenance funding in the sector in recent years.

3.2.3 The separately added core indicator for the length of road rehabilitated was not

met. The original target was for between 160-200km of road rehabilitated or about 400

lane-kms. To 2013 works have been completed for 87 km or 297 lane-km using EIB and

EBRD funding. The lower than expected length of road improved was because of the

greater scope of engineering interventions than anticipated at appraisal.

3.2.4 Under Institutional Support Component, the World Bank supported the

Government in: (i) putting together a coherent Road Sector Program, including a Road

Sector Strategy and a prioritized Road Sector Investment plan, (ii) defining and

implementing road sector reforms, (iii) setting up implementation arrangements for

externally funded road projects, and (iv) bringing in EBRD, EIB, MCC and EC to fund

the Road Sector Program.

3.2.5 The level of maintenance funding had been grossly inadequate until the project

started. Increasing the funds was a condition for road sector funding from the World

Bank and the other external partners. The Government committed to increasing the funds

available by approving the Land Transport Infrastructure Strategy on February 1, 2008.

The enactment of the new Road Fund Law in December 2009 was a practical milestone

in increasing maintenance funding. It included a commitment to allocating no less than

50, 65 and 80 percent of fuel excise tax revenue, in budget years 2010, 2011 and 2012,

respectively, to the Road Fund for road maintenance.

3.2.6 The Government complied with the amended Road Law in 2010 and allocated 50

percent of the fuel excise tax revenue to the Road Fund, which was also a “Condition

Precedent” in the Compact with the MCC. The 65 and 80 percent targets for 2011 and

2012 are reached as well. The encouraging results achieved can be attributed to the

project and the Bank’s coordinating role behind the external partners’ shared push for

reform of maintenance funding and execution (Table 2).

Table 2: Road maintenance funding 2007-2011

14

US$ mln 2007 2008 2009 2010 2011 2012 2013

Actual 14 18 21 53 65 80 100

Project Target - 16 18 20 - - *Estimates from Minutes of IFI Visit July 2011 and December 2013; Source for 2007-2010: Implementation Status

Reports

3.2.7 The introduction of an axle load control system has been successful in reducing

truck overloading. Thirteen mobile axle load weighting platforms, procured under State

budget, are currently operating across the country. The Ministry is planning to expand the

system in 2014 with a purchase of 13 new systems and by increasing monitoring to 24

hours with three shifts in place. The project aimed to have it operational by June 2011,

yet it was launched already in mid-2009. To better control for corruption risk, some

technical improvements were subsequently made to the system based on

recommendations from the IDA-funded consultant.

3.2.8 The main improvement was the installation on the mobile units of 26 cameras,

which stream live picture to a new operational control center in Chisinau. The results

have been positive (Table 3). The number of trucks weighted has been rising, while the

percentage of overloaded trucks has fallen from 31 to 9 percent over 2009-2011. The

fewer overloaded trucks in circulation, the less road deterioration will take place. In the

future, it will be easy for the Government to expand a system which fully finances itself

from the amount of fines collected.

Table 3: Results from axle load control system

2009 2010 2011

Number of load control units 10 10 13

Number of weighted trucks 6,156 17,349 24,596

Number of overloaded truck 1,880 2,691 2,175

Percentage of overloaded/weighted 31% 16% 9%

Amount of fines collected (MDL) 3,715,471 4,058,134 2,478,882 Source: SRA

3.2.9 The activities under the institutional component were expanded during project

restructuring and were fully completed by the closing date of June 2011. In particular, the

large consultant assignment for building a pipeline of new road investment projects was

delivered according to expectations. It included feasibility, design, environmental and

social studies for 650 km of priority road sections. Studies on road maintenance reforms

have also been completed. The most important concrete reform action resulting from the

studies is the consolidation of the existing 39 road maintenance companies into only 12

companies (now ongoing). Another outcome was the need to update the Road Fund

legislation; this has also been achieved by now.

15

3.2.10 The IDA credit also funded technical assistance to the State Road Administration

in the areas of Financial Management, Procurement and Environmental Safeguards. The

Government’s Treasury department is applying the financial controls introduced to this

project to other externally funded projects. SRA has started using supervision engineers

on internally funded contracts.

3.2.11 The result of the various technical assistance activities was improved capacity of

SRA in managing road investment projects, as envisaged in the Project Development

Objective. Other ministries are also taking notice and they are trying to use the same

model of using line agencies to implement externally funded projects.

3.2.12 The decision to not establish a PIU and instead use the State Road Administration

to manage project implementation has been conducive to long-term capacity and

institutional development. For example, having followed International Financial

Institution (IFI) contract monitoring requirements, SRA is starting to use supervision

engineers also in its internally funded projects. SRA staff received training in

environmental and social safeguards, procurement and financial management with lasting

benefits to their professional skills and to the capacity of the SRA as an institution.

3.3 Efficiency

3.3.1 The original Component 1, Road Network Recovery, included physical road

works and related engineering and consulting services amounting to US$44 million. The

total length of the roads planned for rehabilitation was 160-200 km, or up to 400 lane-km.

During project preparation, economic analyses were carried out for 400 km of main and

secondary roads which were candidates for inclusion into Component 1; they were used

to select the road sections that were actually included in the project. The cost-benefit

analysis resulted in a positive net present value (NPV) of US$177 million for all sections

combined, using a 12 percent discount rate and 2005 values.

3.3.2 The original economic analysis for Component 1 was carried out during appraisal

and is reflected in the PAD. The ex-post economic analysis can be found in Annex 3. To

summarize there was a total of 6 completed road sections that were analyzed, with a

length of 87 km’s (297 lane km’s) and total construction costs of US$ 67 million. As with

appraisal and HDM-4 analysis was undertaken to determine the economic viability

following construction. For the overall project the Economic Rate of Return (ERR) was

25.5% and an NPV of US$ 106.4 million. All road links comfortably exceeded the hurdle

rate of 12%.

3.3.3 All development targets of the Institutional Support Component were met. Under

this component the Bank disbursed approximately US$5 million for capacity building,

various technical assistance activities and the axle load control system. The WB-led

reform dialogue and the coordination efforts led by the Bank through this component

reassured the external partners that their planned road sector investments would be

implemented within a more robust institutional framework.

16

3.3.4 The declaration of mis-procurement of two civil works contracts (one to be

funded by IDA and the other by EBRD) reduced the efficiency of project activities. The

time and effort that went into preparing the tender for the mis-procured road sections

were lost. The cancellation of US$11 million of IDA credit funds and of €12.5 million of

EBRD loan funds under the first component deprived the client of the potential benefits

associated with the planned road rehabilitation works. The cancelled IDA amount also

had an opportunity cost of not being able to fund another project. Although EIB and

EBRD were willing to continue funding road works in Moldova, including the cancelled

sections, the whole road sector rehabilitation program was delayed by two years due to

the mis-procurement case.

3.3.5 After restructuring, relatively few Bank inputs leveraged a number of physical

outputs, mostly funded by other development partners. The concessional nature of IDA

funding enabled funding from EBRD and EIB. Without the Bank project, the two

institutions would have not been able to start their projects, not at least until the IMF’s

concessionality condition would have been fulfilled by IDA or some other institution.

MCC benefited from the feasibility studies funded with IDA funds. Had it not been for

the Bank project, MCC could have still entered the road sector but probably not as

quickly or in the same scale. EU contributions were facilitated by the road sector strategy,

project pipeline and improved SRA capacity to absorb funds resulting from the WB

project. EU did not rely on the Bank for its activities but was able to build on the existing

WB project. The external partners in the road sector have so far committed a total of

US$460 million in road sector funding, in addition to the US$5 million provided by IDA

(Figure 2).

Figure 2: Amount of funding mobilized from external partners during project

implementation (US$ mln)

EBRD second

loan, 101

EIB second

loan, 101

EC grants, 62

MCC grants,

133

IDA, 5

EBRD, 23

EIB, 39

RSPSP, 67

17

3.3.6 Close cooperation between the Bank and the external partners also contributed to

efficient project implementation. The Bank led the cooperation and was asked by the

external partners to lead the reform dialogue with the Government. All external partners

in the road sector were speaking to the Government with one voice and shared goals for

capacity building and road sector reform. The World Bank led joint missions twice a year,

including staff from EBRD, EIB, MCC and EC. No preparatory or consulting work was

duplicated. On the contrary, all external partners and the Government had a shared road

sector vision borne out of the Land Transport Infrastructure Strategy (LTIS) and linked

their loan conditions to reform targets expressed in the LTIS. That the Bank took on the

coordinator responsibility required little extra funding, but played a decisive role in

launching a comprehensive, long-term, multi-donor involvement in the road sector.

3.4 Justification of Overall Outcome Rating

Rating: Moderately Satisfactory

3.4.1 The project remains highly relevant to sector needs and achieved considerable

impact with great efficiency under the Institutional Support Component. The Bank’s

success in leveraging support from external partners exceeded expectations. There is now

a significant on-going road rehabilitation program financed by multiple external partners

and implemented by a considerably strengthened SRA. The government is now fully

meeting its commitments to the road fund which now stands at five times the level

envisaged under the original project. There has also been reform of the road maintenance

industry through consolidation of the numerous state owned maintenance companies. The

circumstances leading to the cancellation of IDA support for the Road Network Recovery

Component, as described earlier, prevent the overall outcome from being highly

satisfactory. The resulting delays in road works have also postponed the achievement of

the PDOs. However, all PDO indicators were either met or partially met by the end of

2013 according to a revised construction schedule.

3.5 Overarching Themes, Other Outcomes and Impacts

(if any, where not previously covered or to amplify discussion above) (a) Poverty Impacts, Gender Aspects, and Social Development

Not applicable.

(b) Institutional Change/Strengthening

(particularly with reference to impacts on longer-term capacity and institutional development)

Refer to 3.2 for details on institutional change/strengthening.

(c) Other Unintended Outcomes and Impacts (positive or negative)

The handling of the mis-procurement case initially appeared to diminish the risk of

corruption in IFI and donor funded road projects as an unintended positive outcome. That

the IFIs did not budge from their refusal to allow political interference and insisted on

“absolutely clean” procurement was a clear message. The cancellation of parts of the IDA

credit and EBRD loan signaled that political interference will be detected and repelled.

18

However, procurement issues on the EBRD-financed M3 section among others suggest

that the risk of political interference has not completely diminished. The IFIs therefore

have to continue careful procurement monitoring with adequate anti-corruption measures.

4. Assessment of Risk to Development Outcome Rating: Low

4.1.1 The project succeeded in generating reform momentum which is now being

sustained by not only the Government but also the external partners. The institutional

component has already produced good results with all related outcome indicators having

been achieved. The Government has implemented all the required reform measures since

project beginning and stays committed to reform, which is also a condition of continued

disbursement of remaining IFI funds.

4.1.2 Risks exist to the achieved institutional outcomes, but they can be considered low.

It is possible, although unlikely, that the reform process is halted or reversed if the

political situation changes or if new priorities are set for the road sector. If agreed

mechanisms for the allocations of funds for road maintenance are not applied, the

disbursement of funds from external partners would be affected or stopped. The various

loan agreements include pre-defined road maintenance allocations among the covenants.

However, road maintenance allocations are now less vulnerable to politics because of the

new Road Fund legislation of December 2009 which established clear allocation

mechanisms.

4.1.3 The new Road Fund Law included a commitment to allocating no less than 50, 65

and 80 percent of fuel excise tax revenue, in budget years 2010, 2011 and 2012,

respectively, to the Road Fund for road maintenance. The Government complied with the

amended Road Law in 2010 and allocated 50 percent of the fuel excise tax revenue to the

Road Fund, which was also a “Condition Precedent” in the Compact with the MCC. The

65 and 80 percent targets for 2011 and 2012 are reached as well, which reduces the risk

of the Government not increasing maintenance spending.

4.1.4 Further risks stem from the possible departure of key staff at SRA, which could

diminish the agency’s capacity and its commitment to reform. The local staff of SRA

who have been involved in the preparation and implementation of externally funded

projects have gained useful skills and experience, which could be of value outside SRA

or even in other countries. If many of them leave in search of other, better-paid

opportunities, their expertise will cease to benefit SRA. Of course, if they move to the

private sector and stay in the country, their skills could still continue to benefit the road

sector.

4.1.5 Disbursement risk is real in a country where local industry capacity for road

construction is weak. Local contractors lack equipment, staff and knowledge of FIDIC

contracting standards and may not be able to deliver construction works on agreed

schedule. These reasons may create further delays to funds disbursement and thereby

19

postpone the achievement of intended development outcomes. In fact, SRA signed five

construction contracts in 2011, which are being implemented with significant delays.

4.1.6 Another source of risk was the discontinuation of a formal Bank role in the

support of the Road Sector Program. Until the end of the Bank’s involvement in mid-

2011, the Bank had led the dialogue and reform efforts on behalf of all external partners

in the road sector. The Bank has now passed on the coordinating role to the MCC who

are doing an excellent job in taking forward the reform agenda. However it remains to be

seen if MCC can fulfill this role in the longer term, especially since the MCC’s compact

with the Government will expire in 2013. However, this risk is also considered to be low

as the other external partners share the Bank’s and the Government’s aims and it is likely

that the Bank will again have a project in support of the Road Sector Program.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory

5.1.1 The Bank’s performance in ensuring quality at entry was satisfactory. Project

design was highly relevant to the country needs combining urgently needed investments

with institutional reforms required to sustain them. The Bank team patiently explained

the rationale of the project to each new transport minister during preparation. The Bank

team tried to ensure that the proposed rehabilitation works were justified and

economically sound and fit into a wider transport sector strategy, which the Bank helped

prepare through the mobilization of grant funding and direct technical support. The

Institutional Support Component as defined by the Bank’s staff addressed the most

pressing weaknesses in road maintenance management. The two components reinforced

each other in generating reform momentum, which increased the likelihood of achieving

the development outcomes.

5.1.2 The Bank team’s input during project preparation also ensured that

implementation arrangements were sound and also innovative in avoiding the creation of

a PIU. Project implementation through the State Road Administration ensured a more

lasting development impact despite the more intensive up-front support and training

required. The government was actively consulted throughout project design and

preparation, which helped create strong ownership and trust. Preparation pace was also

brisk. It took only seven months from the start of formal project preparation to Board

approval. With hindsight, neither the client nor the external partners said that they would

have designed any aspects of the project differently.

20

(b) Quality of Supervision

Rating: Moderately Satisfactory

5.1.3 The Bank’s supervision performance was satisfactory. The client appreciated the

Bank always providing prompt and professional responses to all queries. The

arrangement of having just one point of contact on the team, the TTL, was considered an

efficient means of communication. The Bank effectively led the reform dialogue with the

Government and coordinated this effort with other IFIs, including joint missions every

six months. The Bank performed this role successfully according to both external

partners and the client. They saw the Bank team as possessing unique sector knowledge

and a strategic vision, which it was communicating effectively with the other

stakeholders.

5.1.4 The Bank’s proactive role in maintaining the reform momentum helped leverage

funding from the partners, which had included specific reform measures, such as

maintenance spending requirements, as loan and grant conditions. It is also worth noting

that it was the Bank team which brought the IMF on-board over the establishment of a

road fund and the associated funds earmarking.

5.1.5 The Bank team’s supervision performance was commendable even when

problems surfaced with procurement of the first rehabilitation contract. As soon as

politically motivated interference emerged, the team emphasized that the Bank’s

procurement guidelines must be followed. No valid reason existed to overturn the bid

evaluation committee’s recommendation. There were no major shortcomings in the

Bank’s handling of the situation. The Bank did its utmost in trying to protect the integrity

of the procurement process.

5.1.6 The one short-coming of supervision was that during restructuring, the projects

indicators were not changed to better reflect the current situation on the ground. For this

reason the equality of supervision is judged to be overall moderately satisfactory.

(c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory

5.1.7 Overall Bank performance in this project can be considered as moderately

satisfactory. All interviewees (from EBRD, MCC, EC, SRA and MTRI) were satisfied

the Bank team’s performance from preparation through supervision to closure. The

difficult circumstances surrounding mis-procurement did not greatly diminish the

positive perception. That the project survived the setback, albeit with a revised funding

structure, is testament to the good work which was already on-going on other project-

related aspects. The one short-coming related to the restructuring process where changing

the indicators would have been prudent.

21

5.2 Borrower Performance

(a) Government Performance

Rating: Unsatisfactory

5.2.1 The Government’s major shortcoming was its role behind the perceived political

interference into the bidding process for road rehabilitation works. The interference

materialized through the attempt to disqualify the firm to which the bid evaluation

committee had proposed the award of two contracts. The political instruction was to

award one contract to a firm that had given a considerably higher bid price. Although

denied by forceful opposition from the IFIs, the interference attempt caused a declaration

of mis-procurement and the cancellation of portions of the IDA credit and the EBRD loan.

It also delayed the planned road works by almost two years and jeopardized the timely

achievement of Project Development Objectives.

5.2.2 Otherwise the Government met its loan covenants and other obligations

satisfactorily. It changed the Road Fund Law, increased road maintenance funding as per

requirements of the new legislation, introduced the axle load control system and provided

all tax exemptions and permits for road works as requested. The politicians suspected of

involvement in the interference are no longer in power. However, the satisfactory

Government efforts on most project obligations were greatly overshadowed by the severe

rupture in project implementation caused by the partial credit/loan cancellations.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory

5.2.3 The implementing agency’s performance was satisfactory overall. Members of the

World Bank and external partner teams as well Ministry of Transport and Finance

officials were satisfied with the implementing agency, SRA, and did not flag any major

shortcomings. What prevents the rating from being highly satisfactory is that SRA’s

performance in some areas, such as procurement, financial management and safeguards,

was initially slow and required capacity development at the beginning of project

implementation. This resulted from the conscious decision to not have a separate PIU but

rather leverage and develop SRA’s own resources for IFI-funded project implementation.

During the mis-procurement incident, SRA staff courageously maintained its professional

integrity despite heavy political pressure. SRA deserves much credit for trying to uphold

the integrity of the procurement process in the difficult circumstances where some of its

staff were threatened with job termination and even imprisonment.

(c) Justification of Rating for Overall Borrower Performance

Rating: Moderately Satisfactory

5.2.4 The combined rating is moderately satisfactory. The implementing agency ratings

are satisfactory while the government rating is unsatisfactory. It is worth noting that in

22

this project the implementing agency’s good performance saved the whole project from

being cancelled. If it had failed to cooperate with the Bank during the restructuring, it

would have been more difficult to retain the Institutional Support Component after the

Bank decided to cancel its involvement in the Road Network Recovery Component.

6. Lessons Learned

6.1 More resolute, up-front action could have been taken to counter the political

interference which led to mis-procurement. By agreeing to negotiate with the

Government on increasing the bid security for the recommended bidder, the Bank and

partner IFIs may have inadvertently left the impression that the Government can get away

with its unwarranted demands. It could have been better to stand up against political

interference without negotiations or meetings, and with clear deadlines for contract award.

6.2 Relatively modest investment funding can be used to leverage other external

resources with a programmatic approach. That the World Bank committed its funding

first was pivotal. EBRD and EIB funding could not be raised without some amount of

concessional financing provided by IDA credit. The Bank team also supported the

development of a long-term road sector investment strategy and solid implementation

arrangements, which provided a foundation for the external partners to select the road

sector for their investments.

6.3 Coordination with development agencies can make operations more efficient

and have a greater development impact. This project formalized cooperation among

the IFIs. During project preparation, the PAD was partly written by EBRD and EIB staff,

who also used much of the World Bank’s PAD text for their own project documentation.

As the first mover in the sector, the Bank took the lead in organizing joint preparation

and supervision missions and communicating shared positions. This avoided work

duplication and prevented mixed signals being sent to the Government.

6.4 The Bank can differentiate itself from other development agencies through

its expertise on institutional and policy reform. The external partners deferred to the

Bank on its unique knowledge of sector policy and institutional issues. They trusted in

the Bank’s proposed reform program for the Government and supported it throughout

project preparation and implementation. None of them had an institutional component in

their projects. Without the Bank, it is unclear who would have been the “reform

champion”.

6.5 Project outcome indicators should be limited in time and scope; they should

measure results which can be influenced by the Bank. The PDO indicators in this

project were not limited to results within Bank-financed road sections, but also included

section financed from EBRD and EIB. While this is understandable from the perspective

of joint project design, it can inadvertently make it more difficult to attribute program

success to specific institutions. In this case, although the Bank credit closed in mid-2011,

the final PDO data was only available in 2013 when the partner-funded road sections

were to be completed. The problem is that between project closure in June 2011 and

23

program completion in 2013, the Bank was rated on results over which it had little

control. Supervision missions were ended together with project closure. When designing

projects that are supporting a government program it is very important that there is a clear

separation between what the project can achieve and be measured upon and what it is

hoped the overall program will achieve. The later may or may not be under the control of

the project.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

The following quotations5 represent a sample of observations made by the implementing agency

and cofinanciers.

(a) Borrower/implementing agencies

SRA

"World Bank leadership was very good during project preparation and

supervision - the frequency of supervision missions was sufficient."

"The World Bank was decisive in attracting other IFIs."

"Other IFIs can learn from the WB how things are done at low cost but with high

quality."

"The World Bank provided quick and professional responses to all queries during

the project."

(b) Cofinanciers

EBRD

"World Bank performance was highly satisfactory."

"Transition of lead donor role from the World Bank to MCC has been very good." "Bank performance during supervision was very good, no complaints, except for

misprocurement."

"Misprocurement might have been prevented if the Bank had been more insistent up-

front on the Government to award the contracts to the recommended bidder."

(c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

5 Recorded during interviews and confirmed separately via email

24

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)

Actual/Latest

Estimate (USD

millions)

Percentage of

Appraisal

Road Network Recovery 44.0 67.2 153%*

Institutional Support 4.7 5.0 106%**

Total Baseline Cost 48.7 72.2 148%*

Physical Contingencies

0.00

0.00

0.00

Price Contingencies

0.00

0.00

0.00

Total Project Costs 48.7 72.2 148%*

Front-end fee PPF 0.00 0.00 .00

Front-end fee IBRD 0.00 0.00 .00

Total Financing Required 48.7 72.2 148%*

(b) Financing

Source of Funds Type of

Cofinancing

Appraisal

Estimate

(USD

millions)

Actual/Latest

Estimate

(USD

millions)

Percentage of

Appraisal

Borrower 0.00 0.00 0.00

European Bank for Reconstruction

and Development 16.4 22.9 140%*

EC: European Investment Bank 16.4 39.3 240%*

International Development

Association (IDA) 16.0 5.0 31%

*EBRD and EIB increased their commitment to the project by EUR 17.5 million each. See Section 1.7 for

details.

** During project restructuring, some funding was reallocated from Component 1 to Component 2.

25

Annex 2. Outputs by Component

Component 1: Road Network Recovery (USD67.2 million, of which USD0 million of

IDA contribution)

The IDA contribution to Component 1 was cancelled during project restructuring in

2009. The original plan was to allocate US$ 13 million of IDA funds for road

rehabilitation, but US$ 11 million was cancelled after the misprocurement and US$ 2

million were reallocated to Component 2. Component 1 nevertheless retained a large

volume of road works funded by EIB, EBRD (including EC grant finance).

It is important to note that while the IDA-funded input to the project ended on June 30,

2011, EIB and EBRD have increased their lending amounts and extended the time frame

for the Project until 2013. At present 87 km of road works have been completed with

funding from EIB and EBRD. This translates to about 297 lane-km of road rehabilitation

and improvement. The target of "400 lane-km or roads rehabilitated" was not met

because of the need for more substantial works than first anticpiated.

Component 2: Institutional Support (US$5 million equivalent, of which US$5

million of IDA credit)

Through this project component, the World Bank was able to support the Government of

Moldova in (i) putting together a coherent Road Sector Program, including a Road Sector

Strategy and a prioritized Road Sector Investment plan, (ii) defining and implementing

the necessary road sector reforms and the implementation arrangements for externally

funded road projects, and (iii) bringing in several other external partners into the Road

Sector Program (EBRD, EIB, MCC and EC) who are now continuing to fund the Road

Sector Program. The total amount of additional external funding that was mobilized as a

direct result of this component is of US$ 460 million, while the actual World Bank (IDA)

funding for the project was only US$ 5 million. While the IDA-funded portion of the

Road Sector Program Support Project closed on June 30, 2011, EBRD and EIB increased

their funding under the project and extended their involvement until 2013. The activities

under this component were expanded during project restructuring and fully completed by

the closing date of the IDA portion of the project.

26

Annex 3. Economic and Financial Analysis Introduction

The original Component 1, Road Network Recovery, included physical road works and

related engineering and consulting services amounting to US$44 million. The total length

of the roads planned for rehabilitation was 160-200 km, or up to 400 lane-km. During

project preparation, economic analyses were carried out for 400 km of main and

secondary roads which were candidates for inclusion into Component 1; they were used

to select the road sections that were actually included in the project. The cost-benefit

analysis resulted in a positive net present value (NPV) of US$177 million for all sections

combined, using a 12 percent discount rate and 2005 values.

The analysis presented here is based on the actual traffic for 2013, road user costs savings

(transport user benefits from using the new roads), and project economic cost. The HDM-4 model

was used to calculate the respective road user costs and economic rates of return. Most of the

works were denominated in Euros and hence that is principal currency of evaluation here with

dollar values based on November 2013 exchange rates.

Traffic

There has been a gradual increase in traffic on the network since appraisal of the project but

comparing the appraisal traffic numbers with the ex-post traffic numbers has been difficult. This

is mainly because the km markers for traffic counts in the originally appraised sections don’t

match exactly with the current traffic stations. It is also likely that there was some reliability

issues with some of the original data. The traffic presented in Table 1 is 2013 data collected from

a combination of manual, automatic and video counts.

Table 1: Road section descriptions and traffic levels

Road Road Section Length

(km)

Number

of Lanes

Roughness

2013 (IRI)

Traffic

2013 (AADT)

1 Chişinău-Hînceşti section km

7+820 - km 22+000 (EIB)

14.2 3 6.2 7,556

2 Chişinău-Hînceşti section km

22+000 - km 29+920 (EIB)

7.9 3 6.6 7,556

3 M2 Chişinău-Soroca, section

km 5+733 - km 26+200 (EIB)

20.5 4-6 6.2 15,278

4 M2 Chişinău-Soroca, section

km 26+600 - km 54+850

(EBRD)

28.3 4 2.5 15,278

5 M2 Chişinău-Soroca, section

km 54+850 – km 71+165

(EIB)

16.3 2 3.0 7,812

Total 87.1 4.2 10,932

27

Road User Costs

The Road User Costs (RUC) savings compares the transport user benefits on the new roads for

different vehicle types. The RUC savings consists of time and vehicle operation costs. The time

savings are mainly based on the increased capacity where the roads were widened and through

improved condition which allowed for higher operating speeds. The vehicle operation costs

savings are mainly based on savings in fuel consumption, depreciation, vehicle maintenance costs,

etc, which also depend on the road length, road conditions, and traffic volume and composition.

With help of the HDM-4 model savings were calculated for seven vehicle types: small bus,

medium bus, big bus, small truck, medium truck, big truck, and trailer.

Project Costs

The project costs over the evaluation period consist of costs for construction civil works, routine

and periodic maintenance costs, and other operating costs. The construction civil works have a

large impact on the final project costs particularly as the extent of the work was much greater

than estimated at appraisal. In many cases a full reconstruction or rehabilitation was undertaken

whereas during appraisal it was estimated that only a heavy periodic maintenance would be done.

These decisions were based on value engineering decisions at the time on the most appropriate

interventions to take. The civil works costs for the roads are given on the Table 2.

Table 2: Description of road works and costs (millions)

Road Description of works Estimated

Cost at

bidding

Final Cost Final/

Estimated

Final

Cost/km

1 Reconstruction and

Widening to 3 Lanes

€14.495

$19.568

€12.958

$17.493

0.89 €0.914

$1.234

2 Reconstruction and

Widening to 3 Lanes

€8.0

$10.8

€7.891

$10.653

0.99 €0.996

$1.345

3 Rehabilitation and

Reconstruction of 3 bridges

€10.0

$13.5

€9.26

$12.502

0.93 €0.452

$0.611

4 Rehabilitation and

Reconstruction of 8 bridges

€15.0

$20.25

€14.862

$20.063

0.99 €0.526

$0.710

5 Rehabilitation and

Reconstruction of 3 bridges

€5.0

$6.75

€5.236

$7.069

1.05 €0.321

$0.433

Total €52.495

$70.868

€50.208

$67.780

0.96 €0.562

$0.759

Economic Rate of Return

The economic rate of return (ERR) of the project roads is based on the construction values given

in Table 2. The actual ERR for all roads are lower than estimated at the appraisal stage due to

much high civil works costs. At appraisal it was estimated that costs would range from

US$ 150,000 to US$ 220,000 per km but the average cost was US$760,000 per km and the range

was between US$ 430,000 and US$ 1.34 million in 2013 prices.

28

The ERR for the overall project is estimated at 25.5% with an NPV of US$ 106.4 million. The

ERRs for individual road links varied from 17.1% to 60.1% as shown in Table 3. At appraisal the

project had an NPV calculated of US$177 million and ERRs that varied from 30% to 240%.

Table 3: Economic rates of return for the project roads

Road NPV

(€ Million)

NPV

($ Million)

ERR(%)

1 5.0 6.8 19.1

2 3.1 4.2 19.3

3 54.9 74.1 60.1

4 14.3 19.3 21.9

5 1.5 2.0 17.1

Total 78.8 106.4 25.5

29

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Andreas Schliessler Lead Transport Specialist ECSTR Task Team Leader

Irina Babich Financial Management Specialist ECSO3 Financial

management

Arcadii Capcelea Senior Environmental Specialist ECSS3 Environmental

safeguards

Sandu Ghidirim Operations Officer ECSS2 Operational support

Marie Antoinette Laygo Program Assistant ECSSD Project support

Ross S. Pavis Senior Operations Officer AFTDE Quality control

Cesar Augusto Queiroz Consultant INTSC Technical support

Viorica Dumitri Strah Program Assistant ECCMD Project support

Sanjay N. Vani Lead Financial Management Spec OPCFM Financial

management

Supervision/ICR

Andreas Schliessler Lead Transport Specialist ECSTR Task Team Leader

during Supervision

Simon Ellis Lead Transport Specialist ECSTR ICR Team Leader

Andrei Busuioc Financial Management Specialist ECCAT Operational support

Arcadii Capcelea Senior Environmental Specialist ECSS3 Enviromental

safeguards

Jukka-Pekka Strand Infrastructure Finance Specialist TWIFS

Task Team Leader

At Closing/Main

author of ICR

Oxana Druta Financial Management Analyst ECSO3 Financial

management

Sandu Ghidirim Operations Officer ECSS2 Operational support

Yevhen Bulakh Transport Specialist ECCU2 Operational support

Romain Pison Junior Professional Associate ECSS5 Technical

supervision

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including

travel and consultant costs)

Lending

FY07 40.42 227.42

FY08 1.00 0.66

Total 41.42 228.08

30

Supervision/ICR

FY07 0.00 0.00

FY08 21.46 82.11

FY09 24.75 103.45

FY10 23.40 82.69

FY11 35.68 89.38

FY12 8.31 35.28

Total 113.60 382.91

31

Annex 5. Beneficiary Survey Results

N/A

32

Annex 6. Stakeholder Workshop Report and Results

N/A

33

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

The State Road Administration sent a project completion report to the Bank on

September 23, 2011. The report has been included in this annex in its entirety and

original form. The report has not been edited for style, language or content.

The Project Completion Report is referred to the period mid-2007 to 30.06.2011 of the

RSPSP and it provides the following sections:

I. Project Description

II. Assessment of the operation’s objective, design, implementation, and

operational experience

III. Assessment of the outcome of the operation against the agreed objectives,

updated performance indicators for the project

IV. Evaluation of the borrower’s own performance during the preparation and

implementation of the operational, with special emphasis on lessons

learned that may be helpful in the future

V. Evaluation of the performance of the banks, and co-financiers, or of other

partners during the preparation and implementation of the operation,

including the effectiveness of their relationships, with special emphasis on

lessons learned

VI. Description of the proposed arrangements for future operation of the project,

sustainability of investments

VII. Total project costs

I. PROJECT DESCRIPTION

The Government of Moldova (Government), represented by the Ministry of Transport

and Road Infrastructure (MTRI), is implementing a Road Sector Program Support Project

(RSPSP) financed by the World Bank (WB), European Bank for Reconstruction and

Development (EBRD), European Investment Bank (EIB) and European Commission

(EC) together referred to as International Financial Institutions (IFI). RSPSP is in direct

support of the Government’s overall Road Sector Program. The Borrower is the Republic

of Moldova. The implementing agency is the State Road Administration (SRA), which is

under the control of the MTRI.

The proposed Road Sector Program Support Project is the first World Bank supported

operation in Moldova’s transport sector. It is the second externally financed project in

Moldova’s Road Sector since the country’s independence in 1991, after an earlier EBRD-

financed road rehabilitation project which commenced in 1995 and was cancelled

prematurely in 1998.

In early 2006 the World Bank and the Government reached an agreement that the WB

would support the Government’s Road Sector Program through IDA funds. In June 2006

34

it was agreed that the WB would also help the Government to prepare a Transport Sector

Program with special focus on the Road Sector. A Spanish consulting consortium

mobilized in September 2006 to support the Government in the preparation of Moldova’s

National Transport Program for the 10-years period from 2008 to 2017.

The IDA credit was to provide financing of a number of activities included in that

Program, but more importantly, the project’s implementation arrangements were

designed to create a reliable, transparent and unified system for planning and managing

large-scale road sector investments. This, in turn, was expected to open the doors for

large-scale donor support to Moldova’s road sector. Subsequently, both EBRD and EIB

indicated their willingness to participate in the funding of a project. In 2007 three

separate financing agreements were signed between the Government of Moldova on one

side, and IDA, EBRD and EIB on the other.

Source of

Finance

Document Name /Credit

Number

Credit

Amount

Tranches

I II

WB / IDA Financing Agreement / 4283-

MD,

signed 03.05.2007

US$

16,000,000 US$ 16,000,000

EBRD Loan Agreement / 37671,

signed 28.06.2007

EUR

30,000,000

EUR

12,500,000

EUR

17,500,000

EIB Finance Contract / FIN Serapis No

2006 0485, signed 28.06.2007

EUR

30,000,000

EUR

12,500,000

EUR

17,500,000

The Government

of Japan

Agreement between Republic of

Moldova and IDA / TF057793,

signed 23.02.2007

US$

725,000 US$ 725,000

EU-NIF* Financing Agreement /

ENPI/2007/019549-MD-02,

signed 09.12.2008

EUR

12,000,000 EUR 12,000,000

EC Multi-Sector

Grant

TF094952 (EC Grant), signed

07.08.2009

EUR

2,800,000 EUR 2,800,000

*European Union Neighbourhood Investment Facility Grant

In 2011, two further separate financing agreements were signed between the Government

of Moldova on one side, and, EBRD and EIB on the other, under the Project. A third

financing agreement is being negotiated with the EC.

Source of

Finance

Document Name /Credit

Number

Credit

Amount

Tranches

I II III

EBRD Loan Agreement / 41442,

signed 29.10.2010

EUR

75,000,000

EUR

27,000,000

EUR

25,000,000

EUR

23,000,000

EIB Finance Contract /FIN Serapis No

2010-0154, signed 23.11.2010

EUR

75,000,000

Up to 20 Tranches in a minimum amount of

EUR 2,000,000

NIF Fund

grant from the

EC

Under negotiation EUR

31,200,000 EUR 31,200,000

35

PROJECT DEVELOPMENT OBJECTIVE

The development objective of the proposed project is to reduce road transport costs for

road users in Moldova by improving the condition and quality of its road network and the

way it is managed.

1. The Project consists of two components. The first component envisaged physical

road rehabilitation and the second component was aimed at supporting the implementation

of various institutional strengthening measures.

Component A: Road Network Recovery:

2. This consists of physical road works and of consulting and other

services directly related to those works, such as feasibility studies

(technical and economic), detailed engineering design, preparation of

bidding documents and supervision of works on selected road sections

along the main North-South road corridor between Balti, Singerei, Orhei,

Chisinau, Hincesti and Comrat under the responsibility of the SRA.

Component B: Institutional Strengthening Component:

1. Provision of support to improve the Government’s capacity to plan,

manage and maintain the network of national roads in Moldova,

including activities such as the development of a reliable road

maintenance financing mechanism, improvements to the system of road

maintenance execution and contracting, and implementation of a system

designed to curb the circulation of overload trucks.

2. Provision of support to strengthen the capacity of the SRA to

efficiently manage and maintain the roads under its responsibility and to

manage investment programs for road rehabilitation, reconstruction and

construction.

II. ASSESSMENT OF THE OPERATION’S OBJECTIVE, DESIGN,

IMPLEMENTATION, AND OPERATIONAL EXPERIENCE

The RSPSP has been designed initially for four years period from mid-2007 to the end of

2011 and present Implementation Completion Report (ICR) analyses the execution and

results of this period.

As stated in the original Project Appraisal Document (WB, March 2007), the

development objective of the Project was to reduce road transport costs for road users in

Moldova, by improving the condition and quality of its road network and the way it is

managed. The project had two components. The first component was focused on physical

road rehabilitation. The second component supports the implementation of various

institutional and other measures which were included in the Action Plan of the Transport

Sector Strategy. Component A consisted of physical road works and of consulting and other

36

services directly related to those works, such as feasibility studies (technical and economic),

detailed engineering design, preparation of bidding documents and supervision of works.

This component was to absorb about 90 percent of total project resources. The type of works

carried out through the project has been characterized as localized repair, periodic

maintenance and light rehabilitation. Heavier rehabilitation has been involved on shorter

sub-sections of roads where the base course needs to be improved or replaced. The

component B aimed at strengthening the Government’s capacity to manage and maintain the

network of National roads. It provided various types of support to the Government towards

the implementation of institutional, legal and other measures which have been included in

the Transport Sector Strategy Action Plan. The component mostly consisted of advisory

services provided by specialized local and foreign consultants (technical, institutional and

legal), training and the purchase of some equipment.

The overall outcome of the project is rated moderately satisfactory for Component A

because the project partially met the objectives and is rated very satisfactory for

Component B because all the objectives were met including institutional strengthening

through implementation of axle load control system, preparation of the reform of road

maintenance management and operations, road safety assessment, and strengthening the

capacity of the SRA in procurements, financial management and environmental and

social matters and others.

III. ASSESSMENT OF THE OUTCOME OF THE OPERATION AGAINST

THE AGREED OBJECTIVES, UPDATED PERFORMANCE

INDICATORS FOR THE PROJECT

The implementation progress and success of the program was measured in terms of

outcomes (results) and of outputs (physical achievements). The outcome of lower vehicle

operating costs for road users was measured by calculating and comparing vehicle

operating costs on the rehabilitated roads, before and after the project. Therefore,

vehicle operation costs on the roads improved under the Project have decreased to

some extent due to the implementation of one rehabilitation contract ICB3:

Rehabilitation of R3 Chisinau - Hincesti Road km 7+820 – km 22+000. However,

there is a shortcoming related to procurement of two rehabilitation contracts ICB1:

Rehabilitation of R14 Balti - Sarateni Road km 44+320 – km 66+670 and ICB2:

Rehabilitation of M2 Chisinau - Orhei Road km 5+733 – km 26+200, which were

mis-procured due to the fact that WB procurement procedures were not followed.

The outputs (physical achievements) are rehabilitation of 14,2 km of aforementioned R3

road (with 4,3 and 2 lanes) financed by EIB. A total of 51.8 lane-kilometres were

rehabilitated on the R3 road.

Contract reference Description of Road

Rehabilitation Works

Funding

Source

Admin-

istrator

Procurement

Procedure

Contract

signed

ICB1: REHABILITATION OF R14 BALTI -

SARATENI ROAD KM 44+320 – KM

66+670

WB WB WB misprocured

37

ICB2: REHABILITATION OF M2

CHISINAU - ORHEI ROAD KM 5+733 – KM

26+200

EBRD misprocured

ICB3: REHABILITATION OF R3 CHISINAU

- HINCESTI ROAD KM 7+820 – KM 22+000 EIB

19.01.2009

(completed on

21.02.2011)

Under the second stage of the Project (years 2010-2013) tenders for the procurement of

road rehabilitation works for five contracts have been launched. During the first half of

2011, four road rehabilitation work contracts have been signed and a further one has

been awarded.

Contract

reference

Description of Road

Rehabilitation Works

Funding

Source

Procurement

Procedure

Tender

Package

Contract

signed

RSPSP/W2/01 R14 Balti-Sarateni Road km

10+780-26+600

EC NIF

Grant EBRD I 15.03.2011

RSPSP/W2/02 M2 Chisinau-Soroca road

km 26+200 – km 54+850 EBRD

WB

II

18.02.2011

RSPSP/W2/03 M2 Chisinau-Soroca road

km 54+850 – km 71+165 EIB 18.02.2011

RSPSP/W2/04 R3 Chisinau-Hincesti road

km 22+000 – km 29+920 EIB 18.02.2011

RSPSP/W2/05 R14 Balti-Sarateni Road km

10+780-26+600

EC Multi-

sectorial III awarded only

Besides physical road works, Road Network Recovery component also included

consulting and other services directly related to those works, such as feasibility studies,

detailed engineering design, preparation of bidding documents and supervision. In this

respect, the objectives related to preparation of feasibility studies, environmental and

social impact assessments (ESIAs) of 697.4 km of roads, serving as a pipeline for the

further road sector investment projects, has been achieved.

For the institutional strengthening component, a number of critical objectives have

been reached that include: (i) An axle load control system has been implemented and

additional equipment for axle load control service was purchased; (ii) Road maintenance

reform management and operations were prepared. (iii) Road safety assessment of

approximately 3,000 km of road network was carried out; (iv) Support of individual

consultants in order to strengthen the capacity of Implementing Entity in procurement,

financial management and environmental and social matters; Elaboration of the

Environmental Road Handbook and Public Awareness activities were carried out; (v) 3

Road Engineering Standards regarding Environmental aspects were updated; (vi)

Financial Audit for fiscal years 2008, 2009, 2010; (vii) Technical Audit has been

conducted.

Consequently, the outcome of Road Network Recovery component can be rated as

moderately satisfactory due to misprocurement of two road rehabilitation lots at the first

stage whereas institutional strengthening component is rated satisfactory.

38

IV. EVALUATION OF THE BORROWER’S OWN PERFORMANCE

DURING THE PREPARATION AND IMPLEMENTATION OF THE

OPERATIONAL, WITH SPECIAL EMPHASIS ON LESSONS

LEARNED THAT MAY BE HELPFUL IN THE FUTURE

The performance of the Borrower and State Road Administration (SRA) in carrying out

the responsibilities assigned to them was satisfactory. The capacity of the SRA increased

form the beginning of the project implementation. Government willingness and

prioritized approach to tackle road infrastructure issues has also increased during the last

few years. Thus, in late December 2009 the revised Road Fund Law was enacted to

include a commitment for allocating no less than 50%, 65% and 80% of the revenue from

the fuel excise tax, in budget years 2010, 2011, and 2012, respectively, to the Road Fund

for road maintenance. The fuel excise tax has been significantly increased in 2010 to a

level of US$ 234.7 and US$ 97.8 per ton of gasoline and diesel, respectively. In 2010 the

Government allocated 50% of the fuel excise tax revenues to the Road Fund, in

compliance with the amended Road Fund Law. The revenue and expenditure of the Road

Fund in 2010 was US$ 50.7 million (including US$ 39.1 million from the fuel excise tax

and US$ 11.6 million from other taxes and fees). In 2011 the Government kept the fuel

excise taxes at the 2010 level, with the Government projection showing that both the 65%

allocation of the excise tax on fuel will be met and that LTIS target is to be substantially

met providing a total of about US$ 68.5 million, US$ 1 million (1.5%) short of the LTIS

target of US$ 69.5 million;

At the project level, the SRA has adequately managed and implemented one

rehabilitation contract. At the Program level, the SRA has successfully implemented

the investments under the Road Sector Program, having currently in place unified

accounting and Financial Management system and adequate contract management

system. 13 mobile axle load control teams have been established, properly equipped

and these are presently operating on the road network of Moldova. At least US$ 69.5

million equivalent is available for Road Maintenance in 2011.

V. EVALUATION OF THE PERFORMANCE OF THE BANKS, AND

COFINANCIERS, OR OF OTHER PARTNERS DURING THE

PREPARATION AND IMPLEMENTATION OF THE OPERATION,

INCLUDING THE EFFECTIVENESS OF THEIR RELATIONSHIPS,

WITH SPECIAL EMPHASIS ON LESSONS LEARNED

The performance of the Banks (IDA/EIB/EBRD) was considered satisfactory. The

IFI fielded 12 missions including one pre-appraisal mission, one appraisal and

negotiations mission, and 10 supervision missions. Banks missions were focused on

projects inputs and outcomes (physical progress of the works and consulting services

39

directly related to road works as well as improvement of the Government’s and SRA’s

capacity to plan, manage and maintain the road network in Moldova efficiently).

At the initial stage the World Bank had provided technical support and financing of

the Project through a Project Preparation Facility (PPF) of US$ 800.000. The WB

has also formally requested the Government of Japan to provide a PHRD project

preparation grant of US$ 708.450. IDA intended to provide an amount equivalent to

US$16 million, in the form of a Specific Investment Loan (SIL). EBRD and EIB

contribution was to be EUR 12,5 million each as the first tranches. The total combined

financing for the project from the three donors was estimated at US$ 48.7 million

equivalent. Upon successful completion of the first tranches, EBRD and EIB each

contribute was to be EUR 17,5 million as the second tranches. However due to declared

mis-procurement of two contracts, the WB cancelled the amount equivalent to US$

10,482,137.1 from the credit as of December 19, 2008, and EBRD, cancelled Tranche I

of Loan as of February 6, 2009, an amount of EUR 12,500,000.

Source of

Finance Credit Amount Cancelled Amount

Tranches

I II

WB / IDA XDR 10,800,000 XDR 7,082525,07 XDR 3,717,474,93

EBRD EUR 30,000,000 EUR 12,500,000 cancelled EUR

17,500,000

EIB EUR 30,000,000 --- EUR

12,500,000

EUR

17,500,000

Notwithstanding the aforementioned cancellation, the remain WB credit EIB credit

(Tranche I and partly Tranche II) has been successfully utilized for the implementation of

the following projects and activities:

PHRD Grant

1. Feasibility study and detailed design

2. Procurement of office equipment for project

WB credit

1. An axle load control system has been designed and implemented. Its objective

is to protect Moldova’s road network by reducing truck overloading on public

roads. To this purpose, 13 mobile axle load control teams were established

throughout Moldova.

2. Additional equipment for axle load control service, including 3 vans, 3 sets of

weighing scales and 26 cameras for live streaming were purchased in order to

increase the operational effectiveness and transparency of aforementioned

teams. The video output of the cameras is transmitted in real-time to an

operational control centre in Chisinau.

3. A large WB-funded contract for the preparation of feasibility studies,

environmental and social impact assessments (ESIAs), serving as a pipeline for

the further road sector investment projects, has been completed. After some

40

mutually agreed changes in road sections, the contract covered 11 road sections

totalling 697.4 km, as listed below:

R1: Chisinau – Ungheni – Sculeni – Romanian border (121.3 km)

R6: Section between M1 and R3 (6.5 km)

R13: Section Balti – Gura Camencii (39.9 km)

R16 Balti – Falesti – Sculeni (54.8 km)

R9: Section Arionesti - Otaci (9.6 km)

R33: Hincesti – Lapusna – M1 (37.2 km)

R34: Hincesti – Slobozia Mare (125.1 km)

R3: Hincesti – Cimislia (38.8 km)

M3: Ciumai – Giurguilesti (57.6 km)

M14: Balti – Criva (132.9 km)

R9: Drochia Jct. – Arionesti (31.1 km)

4. Preparation of the reform of road maintenance management and operations in

Moldova. The study included reviews, evaluations and recommendations in the

areas of:

(i) Reform of road maintenance operations;

(ii) Road asset valuation;

(iii) Road maintenance management, including a review of the existing

Pavement Management System.

The main recommendations in the area of road maintenance reform operations

are as follows:

Reviewing and amending of Road Fund Law, allowing multiannual

routine maintenance contracts and the fund to be distributed according

to traffic classes;

Reducing the current 39 maintenance enterprises by combining these

into 12 new enterprises;

The competition between the new maintenance enterprises and the

private sector should be gradually introduced;

Present maintenance contracts should be revised and adapted to

international standard using quantities for specified work items and

units;

A penalty system using de-merit points should be introduced;

Alternative methods and equipment for pothole repair (spray patching)

should be introduced.

5. Road safety assessment of approximately 3,000 km of the national road

network, including risk and crash cost mapping, Star Rating of the inspected

road network, a survey of driven speeds on roads, recommendations for high

return investments, recommendations for investment in targeted road safety

road engineering schemes and other proposals;

41

6. Strengthen the capacity of the State Road Administration in procurements,

financial management and environmental and social matters with the support

of individual consultants;

7. Elaboration of the Environmental Road Handbook and Public Awareness

activities were carried out;

8. Three Road Engineering Standards regarding Environmental aspects were

updated;

9. Training on project Environmental Assessments were held for all main

stakeholders (MTRI, Ministry of Environment, State Environment Inspectorate,

State Road Administration, road design and planning institutes, NGOs.) to

build up relevant national capacities in this area;

10. Financial Audit for fiscal years 2008, 2009, 2010;

11. Technical Audit comprising seven audit visits which have foreseen

examination of the quality of works executed, and compliance of road works

with the technical specifications and standards described in the bidding

documents has been conducted. Those technical audits covered all road works

carried out on National roads, under both domestic and external funding, and

included the drilling of road core samples and their laboratory analysis.

EIB Credit

Rehabilitation of the first section of R3 Chisinau – Hincesti Road, km 7+820-

22+000 has been completed;

Construction supervision for R3 Chisinau – Hincesti Road, km 7+820-

22+000 has been carried out;

Technical Assistance provided by International Engineering and Management

Consultant for the efficient and effective implementation of the Projects

during the feasibility and environmental study, design, tender, construction

and post construction phases.

Details on current funding sources are not provided in cases where the implementation of

the objectives is not yet completed.

VI. DESCRIPTION OF THE PROPOSED ARRANGEMENTS FOR

FUTURE OPERATION OF THE PROJECT, SUSTAINABILITY

OF INVESTMENTS

In 2007, the MTRI prepared a Land Transport Infrastructure Strategy (LTIS) for the

period 2008-2017 which was formally adopted by the Government through Cabinet

Decision No. 85 of February 1, 2008. The WB supported the preparation of the LTIS by

mobilizing grant funding from Spain for technical assistance, and through direct technical

advice. The LTIS was limited to three areas: (a) road infrastructure; (b) the railway

subsector; and, (c) urban transport in Chisinau.

42

While the LTIS is still valid, there is a need to prepare and adopt a broader Transport and

Logistic Strategy (TLS) which should incorporate and update the LTIS; (ii) cover other

transport subsectors, such as Freight and Passenger Road Transport Airports and Air

Transport, Ports, Freight Forwarding and Logistics Services, and Inland Waterways and

Maritime Transport; and, (iii) include measures aimed at improving of the Border

crossing and Customs services, since these are an essential part of the logistics chain. In

particular, the new Transport and Logistics Strategy should focus on making the transport

and logistics sector an enabling factor for the development of Moldova’s economy and

export trade, and support the ongoing process of harmonizing Moldova’s transport

system with the EU standards, legislation, and related regulations. To this purpose, the

WB is planning to provide grant funding from the multi-donor Trade and Transport

Facilitation Trust Fund (TTFST). This will pay for technical support services to be

provided by an international consulting firm.

The integrated an updated LTIS under TLS will reflect the changed timing for investments,

the latest status of funding sources and amounts, and updated road maintenance costs.

VII. TOTAL PROJECT COSTS

At the first phase the three banks (WB/EBRD/EIB) allowed to determine the financial

volume of the Projects, as follows: (i) The WB contribution through IDA resources of

US$ 16 million; (i) the EBRD and EIB - each contribution of € 12.5 million to the Project.

The loan agreements with EBRD and EIB were € 30 million each, including a second

tranche of € 17.5 million each. As has been mentioned above, the WB cancelled from the

credit, as of December 19, 2008, the amount equivalent to US$ 10,482,137.1 (XDR

7,082,525.07) and EBRD, cancelled from the Tranche I of Loan, as of February 6, 2009,

the amount of EUR 12,500,000 due to declared mis-procurement of two contracts.

Therefore, the total project costs up to the end of June, 2011 are presented in the table

below.

Project Activity Status Amount (US$)

PHRD Grant

Feasibility studies and detailed design Completed 708 450.00

Office equipment for Project Completed 14 155.52

TOTAL PHRD Grant 722 605.52

IDA

Technical audit Completed 470 573.73

Elaboration of SEA report Completed 5 656.99

Financial management consultant Completed 29 163.03

Procurement consultant Completed 27 283.14

Environmental issues consultant Completed 45 672.34

Assistance in preparing of SRA financial statements based on IFRS In process 104 318.48

Financial audit In process 190 053.68

Office equipment for MTRI Completed 19 736.22

Introduction of an Axle Load Control System Completed 673 685.17

43

Axle Load Control Equipment Completed 151 143.91

Assessment of the safety of Moldova's Road Infrastructure Completed 198 232.00

Roads feasibility and Detailed Design Studies Completed 2 781 735.24

Design and Implementation of Road Maintenance Reform Completed 1 048 854.02

Updating the Engineering Standards & Training on Environmental

Assessments

Completed 30 296.98

Preparation of National Environmental Road Handbook & Public

awareness activities

Completed 22 998.13

Bank charges 15 809.28

TOTAL IDA 5 815 212.34

44

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

45

Annex 9. List of Supporting Documents

Land Transport Infrastructure Strategy 2008-2017

PCN package documents

Project Appraisal Document

Negotiations package documents

Board package documents

Legal documents

Restructuring correspondence and memos

Restructuring Paper

Mission announcement and follow-up letters

Aide-Memoires from 2006-2011

Implementation Status Reports from 2007-2011

Chisinãu

Moghiliov-Podolski

Costesti

Camenca

Mãrculesti

Rezina

Dubãsari

Giurgiulesti

Moghiliov-Podolski

LipcaniCriva

Lãpusna

Chiperceni

Balatina

Costesti

Sculeni

Leuseni

Mãrculesti

Grigoriopol

DubãsariCriuleni

Orhei

RîbnitaRezina

Soldãnesti

CamencaDrochia

Donduseni

OcnitaBriceni

Edinet

Rîscani

Glodeni

Fãlesti

Ungheni

Cãlãrasi

Strãseni

Telenesti

Nisporeni

Floresti

Soroca

Sîngerei

Hîncesti

Ialoveni

Vulcãnesti

Cahul Taraclia

Ceadîr-Lunga

ComratBasarabeasca

Cimislia

Cãinari

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Tiraspol

Slobozia

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Cantemir

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B l a c kS e a

DanubeLake

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To Kirovograd

To Bolgrad

To Reni

To Berezino

To BerezinoTo Berezino

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47°00'

48°00'

27°00' 27°30' 28°00' 28°30' 29°00'

29°30' 30°00' 48°00'

47°30'

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47°30'

46°30'

46°00'

45°30'

27°00' 27°30' 28°30' 29°00' 29°30' 30°00'

46°00'

45°30'

POLANDBELARUS

UKRAINE

ITALY

TURKEY

GEORGIA

ROMANIA

CZECHREP.

SLOVAKREP.

AUSTRIA HUNGARYMOLDOVA

BULGARIA

SERBIA

CROATIASLO

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BOS.&HERZ.

ALBANIA

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MA

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ARMEN

IA

AZERBAIJAN

BlackSea

Caspian Sea

FYRMAC.

RUSSIANFEDERATION

GREECE

MONTENEGRO

RUSSIANFED.

LATVIA

LITHUANIABalticSea

SWEDEN

IBRD 35280

MA

RCH

2007

0 10 20 30 40 50

KILOMETERS

MOLDOVA

ROAD SECTOR PROGRAMSUPPORT PROJECT

ROAD SECTIONS TO BE IMPROVEDUNDER THE PROJECT

NATIONAL ROADS

LOCAL ROADS

RAILROADS

AIRPORTS

PORTS

RIVERS

SELECTED CITIES AND TOWNS

RAYON CAPITALS

RAYON BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by theMap Design Unit of The World Bank.The boundaries, colors,denominationsand any other information shown onthis map do not imply, on the part ofThe World Bank Group, any judgmenton the legal status of any territory,orany endorsement or acceptance ofsuch boundaries.