Document of

The World Bank FtLE CUPA Y

FOR OFFICIAL USE ONLY

Report No. 2607-BD

BANGLADESH

STAFF APPRAISAL REPORT

SECOND HIGHWAY PROJECT

December 18, 1979

Tranportation DivisionSouth Asia Projects

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENT

The Bangladesh Taka is officially valued at Tk 34.7to the Pound Sterling. The Pound now floats relative tothe US Dollar and, consequently, the Taka-US Dollar rateis subject to change. The rate below has been used through-out this report except where otherwise stated.

US$1 = Tk 15.5Tk 1 = US$0.0645

Tk 1 million US$64,516

WEIGHTS AND MEASURES

1 foot = 0.305 meters1 mile 1.609 kilometers

PRINCIPAL GLOSSARY OF ABBREVIATIONS

ADB - Asian Development BankBTS - Bangladesh Transport SurveyGOB - Government of the People's Republic of BangladeshMIRS - Road Maintenance, Improvement and Rehabilitation

StudyMRRHRT - Ministry of Railways, Roads, Highways and

Road TransportRHD - Roads and Highways Department

FISCAL YEAR

July 1 - June 30

FOR OFFICIAL USE ONLY

BANGLADESH

STAFF APPRAISAL REPORT

SECOND HIGHWAY PROJECT

Table of Contents

Page No.

I. THE TRANSPORT SECTOR ................................. 1

A. Economic Setting ...... ...................... 1B. The Transport Sector ..... ................... 1C. Transport Management, Policy and Investment 4D. The Bank Group Assistance in the Transport

Sector. 7

II. THE HIGHWAY SECTOR. 7

A. The Highway Network and Highway Traffic 7B. Administration. 9C. Planning and Financing. 9D. Engineering, Construction and Maintenance 11

III. THE FIRST HIGHWAY PROJECT .14

A. Background. 14B. Credit 408-BD .16

IV. THE PROJECT .. 20

A. Project Formulation .20B. Project Description .20C. Cost Estimates .23D. Execution of the Project .25E. Procurement .26F. Financing and Disbursements .27G. Maintenance of Project Roads .28

V. PROJECT JUSTIFICATION ... ............................. 28

A. Sources of Benefits and Beneficiaries ....... 28B. Costs and Benefits .......................... 29C. Conclusions ................................. 30

VI. AGREEMENTS REACHED AND RECOMMENDATIONS ............... 31

This report was prepared by Messrs. L. Ahamed (Economist) and P. Dennis(Highway Engineer); Mr. Y. Abe (Economist) also assisted.

This document has a restricted distribution and may be used by recipients only in the performanceof their offlcil dutie. Its contents may not otherwise be disclosed without World Bank authorization.

ANNEXES

I - Reporting RequirementsII - Methodology Used in Economic AnalysisIII - Related Documents and Data Available in the

Project FileIV - Road Maintenance, Improvement and Rehabilitation

Study - Terms of Reference

TABLES

1 - Number of Vehicles on the Road2 - Estimated Schedule of Disbursements3 - Schedule of Plant and Equipment4 - Project Costs by Year5 - Design Standards for Bypasses

CHARTS

Structure of RHD as at January 1979 (World Bank Chart No. 20402)Implementation Schedule (World Bank Chart No. 20418)Structure of the Ministry of Railways, Roads,Highways and Road Transport (World Bank Chart No. 20419)

MAP IBRD Map 14384R

I. THE TRANSPORT SECTOR

A. Economic Setting

1.01 Bangladesh covers a land area of about 55,000 square miles, muchof which comprises a vast alluvial plain. The country is effectively dividedinto four parts by two massive rivers, the Jamuna and the Ganges which, attheir point of confluence, become the Padma River and later, at the point ofconfluence with Meghna River, become the Lower Meghna River. In additionthere are many smaller rivers, canals and other watercourses. The annualmonsoon floods require railways and roads to be built on high embankments.Few building materials are available and, owing in particular to the lackof rock for road construction in the alluvial delta terrain, road and bridgeconstruction is expensive. River channels are frequently shifted by thefloods, requiring ferries to be moved, and navigable waterways to be clearedor relocated.

1.02 Bangladesh's gross domestic product (GDP) in 1977/78 at currentfactor cost is estimated at about US$7.3 billion with a per capita GDP ofabout US$86. The population, currently about 85 million, is growing at about2.7% per annum. The real average annual growth rate of GDP has been about 7%during the past three years. The major sector in the economy is agriculture,generating about 57% of GDP. Agriculture development is largely dependenton more effective supporting services, better inputs availability and moreefficient marketing systems--implying vastly improved transportation.

B. The Transport Sector

1.03 The geography and history of Bangladesh have given rise to a variedand complex transport system. The numerous watercourses have traditionallyprovided the main avenues of commerce but have also been principal obstaclesto the development of an integrated transport network of roads and railways.The railways, originally developed in the nineteenth century as a part ofthe Indian Railways system, connect key economic centers such as Dacca,Chittagong, Mymensingh, Khulna, Ishurdi, etc. The most striking developmentin the transport sector since partition in 1947 has been the growth of roadtransport from its former negligible role to an important transport mode forboth goods and passengers. However, the significance of road transport isrestricted to certain major short and medium-haul routes. All transportmodes serve the key centers of Bangladesh. They largely complement oneanother rather than compete for traffic. In addition substantial freightand passengers are carried by non-mechanized vessels (country boats) andbullock carts. Bangladesh's transport network is shown in Map IBRD 14384R.

1.04 The transport network in Bangladesh suffered considerable damageduring the war of independence in 1971. It is estimated that 40% of the truckson the road and 35% of the buses were lost. The damage to railway workshops,locomotives and wagons and other installations was severe. In addition, 299

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railway bridges and 274 road bridges were either damaged or destroyed. Air-

fields were damaged and sunken ships blocked the ports. While, by mid 1973,

most of the damaged bridges and ports had been rebuilt, the Government of

Bangladesh (GOB) continued in the first Five-Year Plan (1973/74 - 1977/78) to

assign major priority to the restoration and reconstruction of transportinfrastructure. The implementation of the first Five-Year Plan was, however,

halted in two years because of inflation at home and abroad. The whole Plan

had to be reexamined and a "Hard-core Program" for the remaining three yearsof the Plan period prepared with more modest targets than originally envisaged.

TRANSPORT OF BANGLADESH

1969/70 1974/75 1975/76 1976/77 1977/78

Roads and Road Transport

Road Length (miles) 4481 4671 4724 4724 4750

Buses (on the road) 4365 6207 6812 7205 7509

Trucks (on the road) 9355 9378 9457 9838 9757

Railways (Route Mileage- 1786 miles)

Passenger Miles (million) 2061 2524 2772 2879 3110

Freight Ton-Miles (million) 774 381 457 436 481

Inland Waterways (IWTC)

Passengers (million) - 1.40 1.62 1.88 2.01

Freight Tons (million) - 1.45 1.84 1.56 2.28

Ocean Ports (million tons)

Chittagong 5.04 4.50 4.48 3.45 5.14

Chalna 1.54 1.53 1.09 1.78

1.05 Accurate and up-to-date data on the growth of passenger and freight

traffic modes is not available - primarily due to the significant role played

by small private operators in road and water transport. The most detailed

source of information is the Bangladesh Transport Survey (BTS), originally

completed in 1974 and updated in 1978, but it only has data up to 1975/76.The available statistics indicate that while passenger traffic has continued

to grow since 1972, the growth of freight traffic has been erratic (see Table

above). Freight traffic consists largely of exports and imports through the

maritime ports at Chittagong and Chalna and a few domestically produced or

processed goods; e.g., cement, fertilizer and petroleum products. Much of the

erratic growth in freight traffic can be attributed to the effects of fluc-tuations in imports especially foodgrains, fertilizer, and cement, and in

exports of jute and jute goods. The commodity composition and intermodalshare of freight traffic is given below:

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Estimated Freight Traffic (Main Interdistrict Movements)(thousand tons)

1972/73 1975/76

Foodgrain (Public Sector) 3,053 1,383Fertilizer 297 494Cement 330 328Jute and Jute Products 1,416 971Coal Products 151 205Iron and Steel 124 117Stones and Boulders 401 393Petroleum Products 858 773

Total 6,630 4,664Of whichRoad 1,075 481Rail 1,302 1,713Inland Water 4,253 2,470

Source: "Review and Updating of BTS," dated January 1978.

(a) Roads and Road Transport

1.06 Details of the road and road transport subsectors are discussedin Chapter II.

(b) Railways

1.07 Bangladesh Railway (BR) is state owned and managed and has a systemof 1,187 route miles of meter gauge track in the eastern part of the countryand 599 route miles of broad gauge in the west. The two halves of the systemare connected by two ferries across the Jamuna River. The track is of lowstandard and most of it is poorly maintained. Since independence, employeeproductivity, and availability and utilization rates of locomotives and roll-ing stock, have all fallen, thus reducing BR's carrying capacity. Freighttraffic is below pre-independence levels while passenger transport has in-creased considerably due to very low passenger fares and a GOB policy ofpriority to passenger traffic. BR is receiving assistance from the AsianDevelopment Bank (ADB), the UK, Saudi Arabia and Canada.

(c) Inland Water Transport

1.08 The length of navigable waterways varies from 2,300 miles in the dryseason to 3,300 miles during the monsoon. Mechanized inland water transportis provided by the Bangladesh Inland Water Transport Corporation (BIWTC) andby private operators, the latter carrying about 90 percent of passenger and50 percent of freight traffic. The mechanized fleet is supplemented by about300,000 country boats of one or two ton average capacity. The BangladeshInland Water Transport Authority (BIWTA) controls the system, regulatestraffic and fares and maintains facilities. Of the BIWTC fleet of some 600vessels, with a static capacity of about 180,000 tons, some 70 percent will

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require extensive repairs within five years; and a program of repair and

replacement is being prepared with the help of specialists provided under an

IDA credit. The private sector, comprising about 600 vessels of 155,000 tonsstatic capacity, is currently undergoing expansion with GOB help. In 1974/75,

mechanized vessels, state owned and private, carried some 3.5 million tons offreight and about 40 million passengers though operational efficiency is low.

The inland water transport subsector is receiving assistance from the Nether-

lands and Norway.

(d) Ports and Ocean Shipping

1.09 The two maritime ports of Chittagong and Chalna are operated by theChittagong Port Authority and the Port Authority of Chalna. Chittagong has

alongside berthing facilities, though considerable lighterage operations arerequired due to draft and length restrictions. In 1977/78, the port handled

5.14 million tons of cargo, a level previously reached only in 1972/73. Port

operations are characterized by poor handling, slow customs procedures and

overcrowded storage and transit sheds. Chalna port is at present operatingas an anchorage but is being developed as a full maritime port despite the

existence of draft restrictions in the Pussur River. In 1977/78 this porthandled 1.78 million tons of cargo. The state-owned Bangladesh Shipping

Corporation (BSC), established in 1972, owns a fleet of 29 vessels, all pur-

chased secondhand, and charters additional ships. In 1976/77., BSC carried9 percent of total exports and 10 percent of total imports, and GOB policyis to increase this proportion. The Corporation suffers from shortage of

experienced crews and inadequate maintenance and workshop facilities. TheChittagong Port Authority has received financial and technical assistance

from the UK, the Netherlands and ADB. The Yugoslav Government has providedfinance for the development of Chalna port while the Chalna-Khulna road isbeing constructed with assistance from ADB.

C. Transport Management, Policy and Investment

(a) Management

1.10 In January 1976 GOB reorganized two transport-related ministriesinto a new Ministry of Communications (MOC). There was a further reorgani-zation in December 1977 and the two divisions under MOC were separated intotwo ministries, the Ministry of Railways, Roads and Highways, and RoadTransport and the Ministry of Ports, Shipping and Inland Water Transport.The Ministries have control over staff appointments and promotions, wagesand salaries and budgets of operating agencies and relevant private sectoractivities under their respective jurisdiction. The civil aviation and air-ports subsector comes under the Ministry of Civil Aviation and Tourism. TheMinistry of Planning is responsible for coordinating transport investmentsand policies through the Transport Survey Section and Transport Section. Aspart of the 1974 BTS (para. 1.05), which was carried out by the EconomistIntelligence Unit (UK), the Transport Survey Section was established as the

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local counterpart for the consultants. From this initial involvement intransport survey, evolution has led to the Transport Survey Section assumingresponsibility for collecting, processing and providing information on thetransport sector and for preparing medium-term investment programs. TheTransport Section is responsible for reviewing and approving annual develop-ment programs.

1.11 In addition to these four ministries, certain other ministries havesome responsibility for transport. They include:

- the Ministry of Finance (MOF) which establishes and collectstaxes including those relating to transport; it also receivesthe final accounts from all public transport agencies;

- The Ministry of Rural Development (MORD) which is responsiblefor farm and feeder roads;

- The Ministry of Industries which controls the imports of varioustypes of transport equipment for private operators and promotesor controls local building of such equipment.

1.12 Within the ministries, control is highly centralized, and coopera-tion between the various ministries and agencies is largely informal. Theprevailing decision making structure suffers from a variety of problems -many of which are not unique to Bangladesh. Investment priorities are notclearly defined; qualified and experienced specialists have tended to seekemployment in the private sector and in the Middle East, and political con-siderations have influenced many investment decisions. The development ofa fully integrated and effective transport planning process is still incom-plete, and present planning methods still reflect conditions at the time ofindependence, when the emphasis was, of necessity, on embarking upon a verylarge number of reconstruction projects with priority being given to thoseprojects for which external finance was most readily available (para 1.14).

(b) Policy and Investment

1.13 In the first Five-Year Plan period (1973/74 - 1977/78), estimateddevelopment expenditures in the transport sector were about Tk 7 billion, atcurrent prices, or 17% of the total public sector expenditures. In physicalterms, the transport sector is estimated to have achieved 64% of the originallyplanned targets. Within the public transport sector, the railways receivedabout 26% of total investment; roads and road transport, 26%; ports, 14%;civil aviation and airports, 13%; inland water transport, 10%; and the balancewas allocated to the transport survey and training schools.

1.14 Several problems emerged in the implementation of the first Five-Year Plan. Firstly, some of the projects were oriented towards capacityexpansion without due consideration to economic priority or the operationalefficiency of the responsible agency. The tendency to assign greater weightto the procurement of new equipment was reinforced by inadequate allocationof funds for maintenance expenditures and for the procurement of spare parts,

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and by the high import duty on spares. The position was further exacerbatedby the urgent need to rapidly reestablish a functioning transport system afterthe depredations of the war of independence, this need being met most rapidlyby utilization of available foreign exchange for capital items. Second, poli-tical considerations have frequently influenced investment decisions, andscarce funds and experienced personnel have been spread over a very largenumber of projects (para 1.12). As a result, execution by GOB of many proj-ects has been extremely slow. The effects of spreading resources too thinlywas emphasized in the Bangladesh Transport Survey (para 1.05). As a result,work has, in fact, been suspended indefinitely on a number of road projects.Finally, although the private sector plays an important role in road andinland water transport, its access to foreign exchange and local currencycredit has been severely limited. Over the period 1973/74-1977/78, onlyTk 1.7 billion was invested in transport by the private sector. However, thegrowing importance of the private sector in the overall context of transport-ation is receiving increasing recognition by GOB, and present governmentpolicy is to actively encourage greater private participation.

1.15 GOB regulates passenger fares on all modes. The passenger fareson railways have been controlled at below cost, encouraging high rates ofgrowth in passenger traffic and diverting the limited capacity away fromfreight traffic. Passenger fares on buses have been set at such levels thatan adequate return can only be earned by overcrowding existing buses. Freightrates on the railways and for strategic commodities on inland water transportare regulated by GOB. Other freight rates are determined by market forces.The combination of government controls over tariffs and the low operationalefficiency of public transport agencies has resulted in the poor financialperformance of these agencies - the ensuing lack of funds for proper main-tenance has further exacerbated the problems of operational efficiency.

1.16 The short-term sector strategy as expressed in the two-year plan(1978/79 - 1979/80) is to:

(i) Complete the rehabilitation program of railways and roads;

(ii) Complete and commission the ongoing projects of the rail-ways, roads, CPA, PCA and civil aviation that are inadvanced stages of implementation;

(iii) Improve operational efficiency of various transport agenciesthrough completion of maintenance workshops, training centers,safety and navigational facilities; and

(iv) Encourage private investment in mechanized and non-mechanizedroad and water transport.

The plan is to allocate about Tk 4.5 billion (about US$300 million) duringthe plan period or about 13.8% of the total development outlay.

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D. Bank Group Assistance to the Transport Sector

1.17 Given the extensive involvement of the ADB and other bilateral

agencies in the transport sector, IDA assistance is limited -" the highway

and inland water transport subsectors through the First Highway Project

(Credit 408-BD) and the First and Second Inland Water Transport Projects

(Credits 424-BD and 735-BD). However, IDA is also financing minor road

development in some agriculture and fisheries projects, where this is

important to the achievement of project objectives.

1.18 The highway project (Credit 408-BD, US$25.0 million), approved in

1973, reactivated a 1964 road project (Credit 53-PAK). Execution has been

very slow because of the lack of suitable materials, poor performance of

government-supplied equipment, the reluctance of contractors to bid for work

in Bangladesh, the use of inexperienced local contractors, and delays in

agreeing on the design and location of the new Highways Department Head-

quarters building. Given these problems, and rapid price escalation, the

scope of the project, originally planned for upgrading the whole of the Dacca-

Chittagong road, had to be drastically curtailed. Of the three major compo-

nents of the project, one, the Sitalakhya bridge, was completed and opened

to traffic in December 1977; the second, Feni bypass is substantially complete

and open to traffic; and the third, the RHD headquarters building, is expec-

ted to be ready for occupancy by the end of December 1979. Many of the

delays in implementation, which resulted in extension of the credit closing

date from December 1977 to December 1979, were encountered during the first

few years of execution, but there has been significant improvement in per-

formance over the past year. The project, a detailed history of which is

given in Chapter III, will be completed by December 1979.

1.19 The First Inland Water Transport Project (Credit 424-BD, US$4.1

million), approved in 1973, provides for urgently needed spare parts and

equipment, and a supplementary credit (US$4.6 million) was approved in 1975

to finance an alternative oil transfer system at Chittagong. The Second Inland

Water Transport Project (Credit 735-BD, US$5.0 million), approved in July 1977,

provides for spare parts, materials and equipment and for technical assistance

to strengthen planning, accounting and operational capabilities of agencies

involved in the inland water transport sector.

II. THE HIGHWAY SECTOR

A. The Highway Network and Highway Traffic

2.01 Bangladesh has a poorly developed highway network with much of the

4,200 mile main-road network consisting of unconnected stretches requiring

ferry services across the numerous rivers. The main-road system administered

by Roads and Highways Department (RHD) comprises approximately 2,700 miles of

bitumen-surfaced road and 1,500 miles of fair-weather road. The minor road

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network is maintained by local authorities such as district councils, muni-

cipalities, and thanas.

2.02 The predominantly flat and low-lying topography of Bangladesh with

its many rivers requires that all-weather roads be built on high embankments

with extensive drainage structures to preclude inundation during annual monsoon

floods. The deltaic origin of the country is reflected in severe shortage of

good road-building materials. These two factors have led to high construction

and maintenance costs.

2.03 Most paved roads have been built since 1947, but they were con-

structed for much lower traffic levels than presently exist. Roads are

frequently of single carriageway width, on low standard horizontal align-

ments and with earthworks and pavement inadequate to carry the traffic loads

now imposed upon them. The results are low-average traffic speeds, high

operating costs and the need for major maintenance inputs. Many bridges are

too narrow and have substantial load limitations.

2.04 Official statistical information on the motor vehicle fleet is not

reliable, and published data are inconsistent. These inconsistencies were

recognized by BTS and were largely eliminated in the 1978 review and updating.

The BTS statistics on the number of vehicles on the road are shown in Table 1.

The motor vehicle fleet at the end of 1977, the most recent date for which

reliable figures are available, totalled about 76,700 including about 21,500

automobiles; 9,800 trucks; 7,500 buses and 26,700 motorcycles. The remainder

of the fleet comprises mainly auto-rickshaws and tractors and trailers. The

present vehicle fleet is equivalent to an average of one vehicle for 1,100

persons, with trucks at one for 8,700 persons and buses at one for 11,300

persons. The potential for major fleet growth is obvious. Trucks of carrying

capacity from 2-1/2 to 8 tons are in common use with the average diesel truck

having a nominal capacity of 5-1/2 tons 1/. The present legal maximum gross

vehicle weight is 18,600 lbs.

2.05 There are no motor vehicle manufacturers in Bangladesh, though one

public industry assembles both buses and trucks. Taxes and duties on importa-

tion of vehicles are 40% for trucks and buses and 110% to 300% for automobiles,

depending on engine size, with taxes and duties on spares standing at about 100%.

2.06 Traffic counting and compilation of traffic statistics is the respon-

sibility of RHD. In theory, simple four-day counts are carried out annually on

all roads under RHD jurisdiction and are supplemented by three-day origin and

destination surveys carried out twice a year on twelve major roads. In

practice, traffic counts have been sporadic with intervals of three-to-five

years between simple counts and with successive counts on the same road fre-

quently being taken at significantly different points 2/. This problem will

be addressed under a road maintenance, improvement and rehabilitation project

to be developed from the findings of the ongoing Maintenance Improvement and

1/ BTS, "Review and Updating, Analysis and Conclusions", November 1977.

2/ Source: RHD Annual Traffic Survey Report 1968 to 1978.

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Rehabilitation Study (MIRS). The main body of data from which meaningful

comparisons may be drawn covers the period 1973/1977. Analysis of data from

eleven census stations for this period shows an average increase in bus and

truck traffic of approximately 7% p.a. and 9% p.a., respectively, and a

decline in cars of 1% p.a.

B. Administration

2.07 Administration of the principal road network is the responsibility

of RHD which is part of the Ministry of Railways, Roads, Highways and Road

Transport (MRRHRT) (Charts WB 20419 and 20402). The Ministry controls budget,

salaries and staff appointments and promotions up to the level of Additional

Chief Engineer and is responsible for issue of route permits for trucks and

buses. Planning of the road and road transport subsectors is the responsi-

bility of the Planning Commission of the Ministry of Planning.

2.08 RHD, which was established in 1962, is responsible for road design,

construction and maintenance and for the installation and operation of truck,

car and passenger ferries, with further ferries being operated by BIWTC. The

Chief Engineer, who is the chief executive of RHD and reports to the Secretary

of MRRHRT, is assisted by five Additional Chief Engineers, one Deputy Chief

Engineer and the Director of the Bangladesh Road Research Laboratory. RHD has

an established staff of some 500 engineers of various grades and has approxi-

mately 450 diploma engineers in additional non-established posts. Salaries

of engineers in government service are low; and the existence of large numbers

of relatively highly paid posts abroad, particularly in the Middle East, has

attracted many of the more experienced engineers away from RHD. This has

resulted in a lowering of the average experience level of RHD employees and

has inevitably adversely affected the Department's level of performance.

2.09 Efficient administration of RHD has, in the past, been severely

hampered by lack of suitable headquarters accommodation necessitating the

wide dispersal of staff in a large number of offices throughout Dacca. This

has led to communications difficulties and loss of necessary interaction

between the various sub-departments. The result has been a lack of cohesion

within RHD which has contributed to the current below-average morale of staff.

The situation will be improved by the end of 1979 when RHD moves into the

new headquarters building being financed under Credit 408-BD.

C. Planning and Financing

(a) Planning

2.10 Road network master planning is the responsibility of the Planning

Commission through its Transport Survey Section. The principal source of

data on which to base master planning is embodied in the Bangladesh Transport

Survey (BTS), published in 1974 and updated in 1978 (para 1.05). In December

1977, the Transport Survey Section commenced preparation of a Road Network

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Master Plan which is now nearing completion. Pending completion and adoptionof the master plan, and given the frequent urgent need to reinstate or rebuildroads damaged or washed away during the severe monsoon floods, construction orimprovement of individual roads and road sections has had to be undertaken onan ad hoc basis.

2.11 In December 1978, GOB, through RHD, commissioned consultants tostudy requirements for maintenance and improvement of the existing road andferry network. This study, known as the Road Maintenance, Improvement andRehabilitation Study (MIRS) is being financed under IDA Credil 622-BD and hasas its principal objective the identification of high-prioritv investmentneeds in road and ferry maintenance, rehabilitation and improvement, consist-ent with the Government's development strategy.

2.12 The study, terms of reference for wlhich are shown in Annex IV, isbeing carried out in two phases. Phase I, which will be reviewed by GOB andIDA, primarily comprises review and analysis of existing road data and exam-ination of RHD's responsibilities and capabilities. Phase II, the preciseorientation of which will be determined after review of Phase I, will priori-tise physical and institutional requirements and will identify elements suit-able for external financing. It was originally envisaged that the studywould result in identification of a project providing continuity of IDAassistance when Credit 408-BD comes to an end in December 1979. Considerabledelays have, however, been experienced in execution of the study. The finalPhase I report will now be presented in December 1979. Following review ofthis report, work on Phase II will commence in January 1980, and the Phase IIdraft report will be completed in July 1980, with the final report expectedin October 1980. After discussions between GOB and IDA on the priorityinvestment requirements identified in the report, and the suitability ofthose requirements for IDA financing, an appropriate project is expected tobe prepared by early 1981.

2.13 The draft Phase I report, though requiring some modification, indi-cated a likely project embracing maintenance, improvement and rehabilitationwith improvement of the Dacca-Comilla road (including the Chandina section)being of the highest priority.

(b) Financing

2.14 Financing of capital and recurrent costs of major roads is bycentral government, funds being channeled to RHD through MRRHRT. Total ex-penditures for roads increased rapidly from 1973-74 to 1976-77 before declin-ing slightly in 1977-78. Allocations for 1978/79 at about US$48 millionequivalent show an increase of about 23% over the 1976-77 expenditures. Ofthe US$48 million equivalent allocated for 1978/79, some US$39 million isfor capital works and US$9.0 million for maintenance. Of the allocation forcapital works, some US$6.3 million equivalent (16% of the total) is derivedfrom external aid of which IDA financing for the First Highway Project accountsfor about US$1.6 million.

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2.15 The allocation for capital works is insufficient to adequatelyfund all of the projects in hand. As a result, progress on many domesticallyfinanced projects is seriously delayed by shortage of funds and some incompleteprojects have been suspended. No shortage of counterpart funds has beenexperienced under the First Highway Project (Credit 408-BD). However, anumber of minor domestically financed capital projects are executed throughthe use of maintenance funds with a consequent reduction in the general scopeand efficiency of maintenance operations. This unofficial reallocation offinancial resources is facilitated by the utilization of common human andphysical resources for both maintenance and force account capital works (para2.27).

2.16 Details of highway expenditures since 1973-74 are as shown below:

Capital and Recurrent Expenditure for Roads 1972-79(million Takas)

1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 /a

Capital ExpenditureConstruction andTmprovement 165.0 214.0 324.7 496.0 442.7 607.5(US$ m Equivalent) (10.6) (13.8) (20.9) (32.0) (28.6) (39.2)

Recurrent ExpenditureMaintenance 48.5 71.0 90.0 112.7 147.2 138.3(US$ m Equivalent) (3.1) (4.6) (5.8) (7.3) (9.5) (8.9)

Total 213.5 285.0 414.7 608.7 589.9 745.8(US$ m Equivalent) (13.7) (18.4) (26.7) (39.3) (38.1) (48.1)

/a Budget allocations.

D. Engineering, Construction and Maintenance

(a) Engineering

2.17 RHD is responsible for the technical aspects of road projects.Feasibility studies are generally carried out by foreign consultants. Somestudies are, however, carried out by the staff of the Additional ChiefEngineer, Planning, RHD (Chart WB 20420). Detailed engineering of roadsfinanced through external aid is normally carried out by foreign consultantsas was the case with the First Highway Project and as is the case with theproposed Second Highway Project. Although rudimentary design standards wereproposed in BTS, no formal standardized basis for design has been generallyadopted. Design standards for any given project depend, therefore, on theprofessional judgment of the designer and of the staff of RHD. Phase I ofthe MIRS requires the consultants to review road design capabilities, stand-ards and facilities. Areas requiring improvement will be considered forinclusion in a possible third highway project (paras 2.12 and 2.29).

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(c) Construction

2.18 Road construction is normally executed by contractors through unit-price contracts. Most contract work is carried out by domestic contractc,r,and the strengthening of the domestic construction industry is seen as a highpriority by both the Government and the Bank, and IDA has agreed to financeconsultancy services to help GOB attain the following objectives:

(a) Development of a long-term strategy to improve the volumeand quality of the industry's output and to bring it inline with total demand through rational resource allocationand planned increase in capacity and efficiency; and

(b) Development of a short-term program focusing on resolutionof issues which will directly and immediately improve opera-tions of the industry and, in particular, its contractingsector.

2.19 Construction costs are generally high due to the need for roads tobe built on high embankments, the requirement for extensive drainage struc-tures, and the shortage of good road-building materials (para 2.02).

2.20 Traditionally domestic contractors engaged on road constructionrely upon RHD to provide the plant and equipment needed to execut:e the work.This is seen as a constraint on the development of an efficient and indepen-dent construction industry. The terms of reference for the proposed construc-tion industry review (para 2.18) call for examination of contract:ors' plantneeds and formulation of recommendations to meet those needs in t:he mostfeasible and practical manner. Among the alternatives to be examined is theestablishment of a contractors' service organization and an equipment poolfrom which contractors could acquire equipment on a hire-purchase basis.

2.21 Construction work carried out in the past has frequently been ofpoor quality and has been extremely slow in execution due to one or more ofthe following failings:

(a) lack of experience of domestic contractors in executingadequate-standard work, under strict supervision to arigid time schedule;

(b) inadequate or low-standard construction specifications;

(c) inability of RHD to provide and maintain in good workingorder necessary construction plant and equipment; and

(d) inadequate supervision.

2.22 These weaknesses were reflected in the construction of the Fenibypass, financed under Credit 408-BD. However, through utilization of speci-fications of an appropriate standard and through intensive supervision andguidance provided by consultants, domestic contractors have achieved a fullyacceptable standard of work--the quality of bridgeworks in particular has been

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very high. Thus, given intensive supervision and guidance by consultants andthe use of appropriate specifications, achievement of satisfactory rates ofprogress by domestic contractors depends upon:

(a) supply and maintenance of sufficient equipment by RHD; and

(b) matching of contract size and complexity to the contractors'organizational, managerial and financial capabilities.

2.23 The equipment and spares components of the proposed project will,together with the suitable RHD equipment already identified, ensure thatsufficient equipment is available for timely execution of construction. Thesubdivision of the relatively simple construction work into five sectionswill ensure that the organizational, managerial and financial capabilitiesof domestic contractors are not unduly strained. The growing understandingby RHD personnel of their vital role in support of project construction hasbeen a major factor in the improvement of Feni bypass progress exhibitedduring the past year.

(d) Maintenance

2.24 RHD is responsible for maintenance of major roads totalling some4,200 miles. Most major roads have been built to standards unsuited topresent traffic levels, being of inadequate width and insufficient strength.The result is that many of these roads are near failure; and strengthening,widening or rehabilitation is taking precedence over maintenance. Fundsallocated for maintenance are being utilized for urgently needed improvementsthus exacerbating the problems inherent in attempting to maintain alreadyinadequate facilities with limited funds. The MIRS will address this problemand will formulate a strategy for its resolution (para 2.12).

2.25 Responsibility for maintenance and domestically financed capitalworks falls under the Additional Chief Engineer, Operations, who is assistedby two Deputy Chief Engineers--one for the eastern half of the country andone for the western half. The Deputy Chief Engineers carry out maintenancethrough the activities of nine circles, each comprising four or five divisionsof which one is a mechanical division (Chart WB 20420).

2.26 Periodic maintenance and improvement are carried out in part byforce account operations and in part through contract. Routine maintenanceis carried out through force account.

2.27 Personnel and equipment in circles and divisions are employed onboth maintenance and domestically financed capital works with no apparentorganizational differentiation between the two operations. The adequacy ofequipment available for maintenance, together with the adequacy of equipmentmaintenance and repair facilities and procedures are currently being studiedunder MIRS. The approximately 500 engineers and diploma engineers fallingunder the Additional Chief Engineer, Operations, is a sufficiently largenumber to handle both a reasonable development program and maintenance of4,200 miles of road.

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2.28 Expenditures on routine and periodic maintenance since 1973/74 are

as follows:

Maintenance Expenditure

Year Routine Periodic

(million Takas)

1973-74 48.5 /a

1974-75 71.0 /a

1975-76 90.0 /a

1976-77 112.7 /a

1977-78 102.2 45.0

1978-79 84.8 /b 53.5 /b

/a No differentiation between routine and periodic.

/b Budget allocation.

2.29 The 1978-79 allocations show approximately US$1,100 per mile for

routine maintenance plus US$700 per mile for periodic requirements. The rela-

tionship between maintenance expenditure and expenditures on improvement will

be examined through MIRS which will recommend an appropriate maintenance

strategy and derive funding requirements. The MIRS recommendations, after

being agreed by GOB and IDA, will provide the principal input for a major

component of a Third Highway Project scheduled for FY81.

III. THE FIRST HIGHWAY PROJECT

A. Background

3.01 In 1960/61, a comprehensive transportation survey of what was then

East Pakistan was carried out by Transportation Consultants, Inc. (TCI) for

USAID. Based on the findings of this survey, USAID assisted the Government

of Pakistan (GOP) with preparation by consultants of feasibility studies of

the main road network. A number of these feasibility studies, completed in

late 1963, were analyzed and discussed by USAID and IDA to determine whether

or not the potential projects merited financing. As a result of these dis-

cussions, it was agreed that two projects should be further considered by

the agencies: the Dacca-Chittagong road by IDA; and the Dacca-Aricha road

by USAID.

3.02 Arising from this agreement, an IDA mission appraised the Dacca-

Chittagong road project in November 1963 and found it to be of the highest

priority. As a result, a credit (Credit 53-PAK, US$22.5 million) was approved

on June 11, 1964. The project comprised: completion of 135 miles of the

150-mile highway between Dacca and Chittagong, including bypasses to severely

congested towns and a bridge over the Sitalakhya River near Dacca; construc-

tion of a 5-mile link from southwest of Dacca to Narayanganj; employment of

management consultants; employment of consultants for the detailed design

and supervision of the project; and employment of consultants for further

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feasibility studies. Construction work was to be divided into a relativelysmall number of large contracts which were expected to be carried out by for-eign contractors. Allowing one year for completion of contract documentsand mobilization and four years for construction, the closing date for thecredit was set at December 31, 1969.

3.03 Completion of the necessary detailed design work was delayed by theIndo-Pakistan conflict of 1965, and problems were experienced in acquiringthe necessary land. Project costs were reestimated in 1966-67 on the basisof detailed designs and were found to be 65 percent higher than the originalestimates, due to additional bridge and culvert requirements, increasedconstruction quantities and increased prices. As a result of these costincreases, the scope of construction work under the project was reduced in1968 to: Dacca-Demra including Narayanganj extension; Sitalakhya Bridge;Daudkhandi-Chandina-Comilla including necessary bypasses; Feni bypass; mis-cellaneous bridges; and connections to Chittagong port and city. The revisedproject now covered only 70 miles of the original 135 miles of the Dacca-Chittagong road, plus the 5-mile Narayanganj link, but the credit amountremained unchanged.

3.04 Tendering for the modified project revealed little internationalcontractors interest, and very few bids were received. Tender documentswere revised in an effort to reduce contractor risk and to increase biddinginterest, and rebids were called. This second invitation to bid producedonly two tenders for Sitalakhya bridge and the Feni bypass bridges and nobids for the roadworks. Contracts for construction of the Sitalkhya bridgeand the Feni bypass bridges were awarded in April and May 1970, respectively,the Sitalakhya bridge contract being won by a foreign contractor and theFeni bypass bridges by a domestic contractor. No contract award for road-works was possible due to lack of tenderers. Because the earthworks requiredunder the project exceeded the capacity of local industry to complete thejob within an acceptable time, the scope of road construction under the creditwas further reduced in April 1970 from 75 miles to 35 miles, with the balance,including the Comilla and Chandina sections, to be improved by RHD on forceaccount. The amount of the credit remained unchanged, but the constructionwork under the project had now been reduced to: Dacca-Demra includingNarayanganj extension; Sitalakhya bridge; Feni bypass; and six bridges on theFeni-Chittagong road. Special emphasis was given in the revised project toimproving the capability of local contractors by providing advisory servicesand by permitting contractors to hire or purchase government-owned construc-tion equipment.

3.05 From about April 1971, it became increasingly difficult for contrac-tors to work, due to military activities and the resultant dislocation ofessential services, these difficulties being particularly acute at the Fenibypass site which was very close to the border with India. Although, betweenJuly and September 1971, five contracts were awarded, to four local contractorsand one foreign firm, for construction of embankments and small structureson Feni bypass, no construction progress was made on these contracts beforeall work was halted in November 1971 by the war of independence. At the timeall work was stopped, the only real progress had been in construction of theSitalakhya bridge where three of the seven piers had been partially completed.

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B. Credit 408-BD

3.06 After attaining independence, GOB requested a new credit to ieaLivate the project and, following a number of missions to reappraise and furtherrefine the project components, Credit 408-BD, for US$25.0 million equivalent(including US$3.6 million previously disbursed under Credit 53-PAK), wassigned on June 20, 1973.

3.07 Credit 408-BD, whilst having the same fundamental objec:ive as theearlier Credit 53-PAK, that is to improve the Dacca-Chittagong road, showeda number of changes from the earlier project. The project now comprised:

(a) construction of a 20-mile bypass at Feni (reduced from 24miles);

(b) repair of the war-damaged Surma River bridge at Sylhet;

(c) completion of construction of the Sitalakhya bridge;

(d) construction of a new headquarters building for RHD;

(e) improvement of ferries on the Dacca-Chittagong road;

(f) provision of spare parts, tools and workshop facilities; and

(g) provision of consultancy services.

The changes in detailed project structure reflected recognition of two fund-amental issues: firstly, the constraint imposed upon efficient RHD opera-tions by lack of a headquarters building, with resultant dispersal of staffinto a large number of offices scattered throughout Dacca; and, second, theneed to improve RHD's capability to maintain and repair its plant and equip-ment.

3.08 At the time of signing of the credit, it was envisaged that con-struction would commence in October 1973 and be completed in 3-1/2 construc-tion seasons by the end of 1976. The credit closing date was accordinglyset at December 31, 1977.

3.09 Construction of the Sitalakhya bridge and Feni bypass embankments,bridges and culverts was to be through reactivation of contracts suspendedat the end of 1971 (paras 3.05 and 3.06); and, in September 1973 followinglengthy negotiations, contracts were renegotiated with the original foreigncontractor for the Sitalakhya bridge and with three domestic contractors forFeni bypass. Of the five contractors originally appointed for Feni bypass,one domestic contractor no longer existed and the sole foreign contractordeclined to reactivate his contract. Two of the three renegotiated contractsfor Feni bypass were small, but the third was large and complex by Bangladeshstandards, amounting to some 37 million takas and including three majorbridges as well as embankment construction. Completion dates and contractperiods for these three contracts were:

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Contract II-1 (earthworks and culverts): May 31, 1975 (2 construction seasons)Contract II-2 (earthworks and culverts): July 31, 1975 (2 construction

seasons)Contract II-3 (earthworks, culverts

and major bridges) : April 30, 1976 (3 constructionseasons)

Since paving was to be executed by separate contract after completion of earth-works, it was essential that these completion dates be met in order for allconstruction to be completed by the end of 1976 (para 3.08).

3.10 Serious implementation problems were encountered on the Feni bypassfrom the outset. Contractor organization and management were weak, andresource mobilization was extremely slow. RHD was unable to provide, main-tain and repair an adequate quantity of construction equipment and, duringthe first construction season, difficulty was experienced in obtaining right-of-way and in procuring essential construction materials. At the end of thefirst construction season, progress was negligible and, although land andmaterials procurement problems diminished, after two full construction seasonswork on the bypass was only about 29 percent complete. By far the worstproblems were being experienced on Contract II-3--the largest and most com-plex of the three contracts.

3.11 Some improvement in contract management and organization was broughtabout by the intensive efforts of RHD and the supervising consultants, andprogress on the two smaller contracts reached an acceptable level in the thirdseason. The largest contract, however, continued to fall further behind pro-gram, and shortage of adequate plant continued to be a major constraint onprogress for all contracts.

3.12 In June 1977, Contract 11-1 was closed out with only 87 percent ofthe work completed, since the contractor had made virtually no progress inthe preceeding year. The balance of work remaining on thiq contract wastransferred to Contract II-2 where progress had been consistently better.In October 1977, Sitalakhya bridge, built by foreign contractors and rela-tively free from the problems besetting Feni bypass, was satisfactorilycompleted. Contract II-2 was successfully completed in January 1978 and,during the 1977-78 construction season, progress on Contract II-3 improveddramatically. The reason for this improvement on Contract II-3 is a com-bination of improved management brought about largely by advice and assistancegiven through intensive supervision, together with the increased technicalexpertise being built up by the contractor through execution of the work.This contract was completed in March 1979.

3.13 As the earthworks and bridging contracts neared completion, itwas possible to commence paving and a contract for the paving work was awardedto a domestic contractor in January 1978. The contract period was 406 days,and the scheduled completion date was April 30, 1979. As with the earliercontracts, the contractor was slow to mobilize, suffered from weak organiza-tion and management and, by the end of the first construction season, hadaccomplished only 2 percent of the work required under the contract. RHD

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had been unable to provide the contractor with adequate plant and a highlycontentious issue emerged as to whether the poor progress was due to lackof plant or to poor organization and management. IDA agreed to alleviatethe chronic equipment shortage by sanctioning procurement of five dumptrucks and a wheeled loader but, when work resumed in October 1978, thecontractor still lacked any effective site management and direction. Finally,in December 1978, the contractor yielded to the intensive pressure which hadbeen exerted by RHD, the consultants and IDA, and strengthened his sitemanagement staff and simultaneously introduced a number of key plant opera-tors and technicians. These improvements, together with close monitoringof progress and detailed work planning in which all parties were involved,resulted in a dramatic increase in productivity and led to substantial com-pletion of the paving work in June 1979.

3.14 Repairs to the Surma River bridge and improvement of ferries onthe Dacca-Chittagong road were completed early in the credit period, andconstruction of the RHD headquarters, despite initial delays, is proceedingsatisfactorily. The project will be completed by December 1979.

Problems and Lessons

3.15 Execution of the first highway project revealed many major problems,resolution of which would be essential to successful implementation of anyfuture highways project in Bangladesh. These problems, many of which areinter-related, and the possible solutions are discussed in detail and analyzedbelow:

(a) Short construction season. The fact that the main con-struction season lasts for only about seven months meansthat, each construction season, contractors must beorganized to commence work at full speed the moment therains finish. There is no time for a slow build-up topeak efficiency since much of the season would be lostbefore the peak is reached. This is particularly cri-tical in the first season, and it is essential that anadequate lead time be allowed between contract award andthe start of the first construction season. The proposedproject makes such allowance;

(b) Contractor capability and experience. The capability andexperience of domestic contractors are limited, and theindustry is in its infancy. There is a grave shortage ofcompetent and experienced contract administrators capableof dealing successfully with large contracts or with majorand complex implementation problems. Contracts should berelatively small and as simple as possible, as is the casewith the proposed project. Such implementation problems ascan be identified in advance should be solved before contractaward, leaving contractors to concentrate only on solutionof problems which could not reasonably have been foreseen.Additional contract management expertise must be providedthrough appropriate contract supervision arrangements andan environment must be created wherein the contractor, the

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supervision agency, and the government work closely togetherto produce the optimum result with the minimum conflict. Therequired additional management expertise can, at present, beprovided only by competent and experienced consultants andappropriate provision is made in the proposed project. Thetime allowed for construction should be such that a relativelyinexperienced contractor can, with reasonable effort, achievetimely completion and is not faced with what is, in effect,an impossible task. The proposed project allows adequatetime.

(c) Domestic contractors are not yet in a position to executecontracts without hiring most, if not all, of their con-struction plant from RHD. The shortage of plant in theRHD fleet, together with lack of adequate service andrepair facilities during the first two years of the con-struction period of the First Highway Project, placed acritical constraint on the contractors and seriouslydetracted from any benefits they could have gained fromefficient site management and planning. In such circum-stances, it was extremely difficult to persuade contrac-tors to expend time and effort in effective contractmanagement. A second, but equally important, effect ofthe unsatisfactory plant position was on the attitudeof RHD staff. The fact that RHD was unable to provideand maintain the necessary plant brought about continuouscriticism from the contractors. RHD recognized that muchof this criticism was valid, but RHD engineers were power-less to rectify the situation. As a result, RHD moralesuffered, tensions built up between contractors, con-sultants and RHD; and RHD engineers were unable to playtheir full part in execution of the work. The proposedproject addresses these problems through early identifi-cation of equipment requirements, earmarking of suitableavailable plant and provision for timely procurement ofthe balance of the required machinery.

Conclusions

3.16 Domestic contractors are capable of high-standard work but requireintensive supervision, improved site management and optimum support throughprovision and maintenance of adequate construction equipment. The size, com-plexity and timing of contracts must be carefully tailored to the implementa-tion capabilities of an industry which is still in its infancy.

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IV. THE PROJECT

A. Project Formulation

4.01 As detailed in Chapter III, the First Highway Project eventuallyencompassed only a small part of the Dacca-Chittagong road, despite thefact that the whole road was identified in 1963 as being of the highestpriority. The time taken to implement the first project has not diminishedthe importance of the road, and the severe traffic constraints imposed bythe congested towns of Comilla and Chandina have intensified as traffichas increased. Although solution of such problems will form part of themaster plan now under preparation (para 2.10), the nature of the solutionto the problems at Comilla and Chandina--the construction of bypasses--lendsitself to immediate implementation without jeopardizing future strategy.Designs exist, the necessary land has been acquired, the First Highway Projectis virtually completed, and the high priority of the road has been reconfirmedby the draft Phase I report of MIRS. GOB has accordingly requested IDA tofinance the proposed project.

4.02 RHD engineers have gained valuable experience from the difficultiesfaced in the first project but, for further development of their administrativeand engineering expertise, need to participate in a project successful imple-mentation of which more directly reflects the quality of their input. Furtherdevelopment of domestic contractors' ability and RHD expertise is considerednecessary for successful implementation of more complex projects such as thatenvisaged for the possible third highway project (paras 2.12, 2.17 and 2.29).

4.03 The proposed project: fully reflects the lessons learned from exe-cution of the First Highway Project (para 3.15); meets a high-priority need(para 4.01); and provides the opportunity for further development of RHDexpertise and contractor capability which will be needed for the possiblethird highway project which is expected to start in two years' time (paras2.12, 2.17 and 4.02).

4.04 The principal objectives of the proposed project are to:

(a) further reduce transport costs between the principalport of Chittagong and the main areas of productionand consumption by improving the Comilla and Chandinaroad sections; and

(b) further develop the implementation capability of RHD.

B. Project Description

4.05 The project comprises:

(a) the construction of two bypasses, 12.5 miles and 2.2miles long, around the towns of Comilla and Chandina

on the Dacca-Chittagong road;

(b) the provision of mechanical equipment and spare partsfor construction work of (a) above; and

(c) the provision of consultancy services for constructionsupervision.

The location of the road sections proposed for construction are shown onIBRD Map 14384R.

(a) Construction of Bypasses

4.06 Each of the proposed bypasses would provide a two-lane road com-pletely bypassing the town as an alternative route for through traffic. Theaverage daily volumes of heavy vehicles (adt) expected to use the bypasses inthe first year after opening are about 750 trucks and 90 buses. The geometricstandards of the bypasses are compatible with maintenance of an acceptablelevel of service for at least 20 years whilst the pavements are designed tobe strengthened by bituminous overlay after about 5 years and to performwithout further overlay for 15 years thereafter. During negotiations, GOBagreed that the necessary overlay would be constructed when required and thatbefore December 31, 1982, a date would be agreed by GOB and IDA for suchconstruction. The routes taken by the bypasses are flat, and both roads willbe on embankment throughout their length to avoid inundation during the annualmonsoon floods. It is understood that the land required for both bypasseshas already been acquired. During negotiations, GOB confirmed that this landacquisition had been completed and that GOB would acquire or otherwise makeavailable, in a timely manner, such other land as may be required for thetemporary use of contractors and for access to the sites of the works.

4.07 The detailed design of the two bypasses was originally carried outby Messrs. Ammann & Whitney (US), consulting engineers, early in the 1960sas part of the design of the Dacca-Chittagong road which was to have beenconstructed under Credit 53-PAK (para 3.02). The original cross-section,comprising a 22-ft carriageway with two 9-ft shoulders, is still valid, butthe shoulders are considered unnecessarily wide for the volume and type oftraffic now forecast. A reduction in shoulder width to 7 ft will produceapproximately 10% savings in earthworks cost without prejudicing expectedbenefits. The original pavement design incorporated a 2-inch thick asphalticconcrete wearing course which is expensive and is not at present justified bytraffic volumes and axle loading. It is proposed that a much cheaper wearingcourse consisting of a thin carpet of precoated stone equivalent in perform-ance to a double-surface treatment, be adopted. This type of wearing courseis in common use in Bangladesh and performs satisfactorily. Modificationof designs and preparation of contract documents have been carried out byAmmann & Whitney who are assisting RHD in the execution of the ongoinghighway project (Credit 408-BD) and who had all necessary background infor-mation. This modification and preparation was financed from the provisionfor Consultancy Services in Credit 408-BD. During negotiations, it wasagreed that the modified design standards would be applied to the construc-tion of the bypasses.

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4.08 Comilla Bypass. The town of Comilla is located some 53 miles eastof the capital, Dacca, on Ehe only road directly linking Dacca to the prin-cipal port of Chittagong. The road from Sylhet to Chittagong joins the Dacca-Chittagong road at a point some 4 miles to the west of Comilla. The existing13.5 mile road through Comilla comprises three basic sections- a length ofapproximately 3 miles of rural road west of the town; 3.5 miles of urban roadthrough the town and a further 7 miles of rural road east of the town. Amongthe deficiencies noted are: narrow pavement (18 ft); poor horizontal align-ment; failed pavement of excessive roughness; lack of sidewalks in much of theurban section; close proximity of urban roadside development to carriagewayedge. Motorized traffic, which predominantly comprises trucks and buses, isin severe conflict with pedestrians and bicycLe rickshaws.

4.09 Chandina Bypass. The town of Chandina is located some 42 miles eastof the capital, Dacca, on the Dacca-Chittagong road. The existing 2.4 mileroad through Chandina is inadequate for motorized traffic. Inr addition todeficiencies noted for the road through Comilla, the Chandina road has exces-sive curvature and inadequate sight distance.

(b) Provision of Mechanical Equipment and Spare Parts

4.10 Achievement of a satisfactory rate and quality of construction willbe dependent upon availability of appropriate plant for earthworks compactionand pavement construction. Such plant is traditionally provided to contractorsby RHD. RHD does not, however, have sufficient construction plant in reliableoperating condition to enable a contractor to perform in an efficient andexpeditious manner. Much of the plant owned by RHD has reached the end ofits working life, and is subject to frequent breakdowns. The proposed projectincludes the provision of construction equipment to a value of US$1.65 millionwhich will be sufficient to ensure that construction is not delayed throughlack of equipment or through utilization of inadequate or unreliable equipment.In addition, provision has been made in the proposed project for a smallquantity of priority spare parts (US$60,000) for existing RHD equipment ingood working order and available for use on the proposed construction. RHDis currently being assisted by Messrs. Ammann & Whitney in the preparationof equipment specifications. During negotiations, GOB agreed that all plant,equipment and spares procured with the proceeds of the proposed Credit wouldbe used only on the proposed project until the project is completed. Assuranceswere also obtained from GOB that the plant and equipment to be provided by RHDwould be made available in a timely manner and all plant and equipment wouldbe properly maintained and repaired by RHD in such a way as to avoid any delayto the construction work.

4.11 Equipment hire rates currently charged by RHD have not been revisedas plant and spares costs have increased. These hire charges are thereforetoo low to reflect the true cost to GOB of hiring equipment to contractors.In order to redress this anomaly, during negotiations it was agreed that allplant and equipment hired by RHD to contractors would be hired at realisticand economically justified rates agreed between RHD and IDA. RHD has con-firmed that it will make available adequate numbers of suitable operators foroperation of all equipment supplied to contractors.

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4.12 The types of equipment to be procured are all suitable for thenormal construction, reconstruction and maintenance operations of RHD andwill, on completion of the proposed project, help to make good part of RHD'spresent general equipment shortage.

(c) Consultancy Services for Construction Supervision

4.13 High-quality supervision by consultants is a prerequisite for suc-cessful project implementation. The proposed project would, therefore,provide for a total of about 234 man-months of engineering time and 848man-months of non-professional support staff time. The average cost ofengineering time is estimated to be US$2,900 per man-month ranging fromUS$8,900 for senior expatriate staff to US$550 for Bangladesh nationals.The average cost of support staff is estimated to be US$210 per man-month.All estimated costs include allowances, internal and external travel, officesupplies and communications expenses. The composition of the supervisoryteam would necessarily vary through the course of the contract but theestimated man months are as follows:

Senior Resident Engineer 35Resident engineer 28Other engineers 171Technicians 452Junior Assistants 385

In recognition of the need to balance the requirement for effective super-vision with the requirement to upgrade the capabilities of Bangladeshnationals, only the posts of Senior Resident Engineer and Resident Engineerwill be filled by expatriates, with the remaining posts being filled by localstaff. In the course of their supervision duties, the consultants will berequired to collect data on basic construction costs and methods. These datawill be supplied to, and discussed with the Bangladesh Road Research Laboratory(BRRL) as an input into BRRL's studies on the cost and quality of alterna-tive construction methods. During negotiations it was discussed and agreedwith GOB that RHD would retain suitable consultants, under terms and condi-tions satisfactory to IDA, and that the appointment of such consultantsshall be a condition of effectiveness of the Credit.

C. Cost Estimates

4.14 The total cost of the project is estimated at US$13.6 millionequivalent with, assuming construction by domestic contractors, a foreignexchange cost of US$4.7 million equivalent (35%). Costs are based upon pricesat January 1, 1979, with allowances for physical and price contingencies.Details are given by year in Table 4. Construction cost estimates have beenprepared on the basis of final engineering design and on the quantities shownin the contract documents. A summary of project cost estimates is shownbelow.

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Item Localla Foreign Total/a Local/a Foreign Total/a ParticipationTakas (millions) US$ (millions) US$ (millions)

Construction

Comilla Bypass 63.08 17.52 80.60 4.07 1.13 5.20 3.89Chandina Bypass 14.57 4.34 18.91 0.94 0.28 1.22 0.95ConsultancyServices 4.19 8.68 12.87 0.27 0.56 0.83 0.83

Plant and Equipment

New Plant and Spares 16.89 24.80 41.69 1.09 1.60 2.69 1.60Spares for ExistingPlant 0.93 0.93 1.86 0.06 0.06 0.12 0.06Subtotals 99.66 56.27 155.93 6.43 3.63 10.06 7.33

Contingencies

(a) Physical 9.15 4.34 13.49 0.59 0.28 0.87 0.66

(b) Price 28.83 12.09 40.92 1.86 0.78 2.64 2.01

TOTALS 137.64 72.70 210.34 8.88 4.69 13.57 10.00

/a Including taxes and duties Takas 31.15 million (US$ 2.01 million).

4.15 Construction costs are based upon the application of unit rates toestimated quantities. Unit rates are based upon detailed price analysis ofthe main construction items supplemented by productivity analyses and compari-son with recent bid prices for similar work. Quantities are based upon thosecomputed for the original design modified to reflect agreed design changes(para 4.07). The estimated cost of construction plant and spares is basedupon a detailed list of proposed plant and on bid prices received for similarplant in 1978. An allowance has been made for spares for all plant procuredunder the proposed credit, this allowance being 17% of the cost of the plant.To avoid any element of double counting of the cost of plant and spares to beprocured under the proposed credit or already procured under Credit 408-BD,plant hire charges (para 4.11) are excluded from the construction cost esti-mates. Depreciation cost of plant and the cost of spares have, however, beenincluded in the construction costs for the purpose of the economic evaluation(Annex II). The cost estimate for consultancy services for supervision ofconstruction is based upon prevailing rates for similar services in Bangladesh.

4.16 Physical contingencies of 5% have been allowed for procurement ofequipment and spares and 10% for all other items. Contingency allowancesfor price escalation over January 1, 1979 prices are estimated overall at

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24.2% of base cost plus physical contingencies on the basis of the imple-mentation schedule and on the following annual rates of escalation:

Plant + Equipment Other Items

January 1, 1978 - December 31, 1978 14.0% /a N.A.January 1, 1979 - December 31, 1979 6.0% 10.0%January 1, 1980 - December 31, 1983 N.A. 10.0% p.a.

/a Used to update 1978 bid prices to base of 1/1/79.

D. Execution of the Project

4.17 An outline of the implementation schedule which was discussed andagreed with GOB during negotiations is shown in World Bank Chart No. 20418.As shown in the schedule, it is expected that the proposed project will becompleted by the end of May 1983.

4.18 Execution of the project will be the responsibility of RID, assistedby the technical assistance team. RHD will be responsible for equipmentoperation and repair and for general supervision of contract works. Duringnegotiations, assurances were obtained from GOB that they would administerproject execution through a unit within RHD established for that purpose, asin the case of the First Highway Project and would establish a suitablyequipped and staffed site workshop, such workshop being available from thesite of the Feni bypass financed under Credit 408-BD. The proposed projectrepresents an additional workload on RHD of about 10% over that which has beencarried in recent years assuming that the GOB's highway budget continues atits present level. While the work may not be attractive to internationalcontractors, it is considered that the project will attract enough local con-tractors to ensure fully compeitive bidding and the size and complexity ofindividual contracts have been designed accordingly. Prequalification oflocal contractors is being carried out on criteria developed from experiencein execution of Credit 408-BD and will be completed by March 1980.

4.19 Project construction is planned to commence in October 1980 andto be completed in 32 months by May 1983 (WB Chart 20418). Preparation ofdraft bid documents for construction contracts was completed by consultantsby end-August 1979, and amendments to these documents, agreed by RHD and IDA,will be incorporated by December 1979. Bid documents for supply of equipment,also being prepared by consultants, will be completed in time for scheduledbidding in November/December 1979. Delivery dates scheduled for equipmentare compatible with the proposed construction timing. In order that equip-ment procurement can be expedited, the proposed Credit would provide up toUS$200,000 for retroactive financing of equipment procurement. Appointmentof consultants for supervision by the scheduled date (i.e., before crediteffectiveness) will ensure availability of consultancy services through theconstruction phase.

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4.20 The construction work is expected to be executed by contract usinglabor-intensive methods insofar as these methods are compatible with afinished product of an acceptable standard. Bulk earthworks and stonecrushing will be labor-intensive operations, whilst earthworks compactionand pavement construction will be plant intensive. Since there is an ade-quate supply of labor and since the proposed labor-intensive operations canbe efficiently executed as already demonstrated by limited adoption underCredit 408-BD, the proposed construction methods are satisfactory.

4.21 Progress will be recorded and reported to IDA through monthlyprogress reports. The Government will also be asked to prepare a ProjectCompletion Report within six months of the Credit's Closing Date. Duringnegotiations, the progress reporting procedures and the project completionreport arrangements were discussed and confirmed with GOB (Annex I).

4.22 Construction of the roads to be financed under the proposed creditwill be on new alignments and will take some 500 acres of land alreadyacquired by GOB. The construction will be carried out in a manner which willnot exacerbate the effects of monsoon flooding, and excavation of borrow pitswill provide sources of water during the dry season. The net impact on theenvironment will be minimal.

E. Procurement

4.23 During negotiations, the following procurement arrangements werebe discussed and agreed with GOB. Procurement under the various projectcomponents is as follows:

(a) Construction work will be carried out by contractsawarded through international bidding procedures witha 7-1/2% preference allowed to local contractors inaccordance with IDA's "Guidelines for Procurement."Bidding for construction works will be on a slice-and-package basis with individual elements being ofa size and complexity commensurate with the knowncapabilities of domestic contractors;

(b) Procurement of new equipment and spares for new equip-ment for construction will be by international com-petitive bidding with a 15% preference, or the importtariff amount, whichever is the less, allowed on locallyassembled items in accordance with IDA's guidelines.Bidders will be post-qualified and compete againstminimum specifications on the basis of cost, deliverytime and reliability of subsequent dealer service;

(c) In the interest of speed and economy, "off-the-shelf"items costing under US$20,000 equivalent would beprocured with GOB's normal procedures after bids have

- 2? -

been received from at least three suppliers, and pro-prietary spare parts for equipment not procured underthe proposed credit but utilized in the constructionwould be procured direct from the equipment manufactureror his appointed agent. The cost of all such "off-the-shelf" items or direct procurement of spares shall notin total exceed US$200,000;

(d) Procurement by GOB of local construction materials suchas stone, sand, bricks, etc. will be through local com-petitive bidding according to GOB's normal procedureswhich are acceptable to IDA; and

(e) IDA will review all contracts and related documentationfor goods and civil works estimated to cost US$200,000equivalent or more before an award is made.

F. Financing and Disbursements

4.24 The proposed credit of US$10.0 million will finance about 74% ofthe total cost net of plant hire charges (86% excluding taxes and duties).The credit would, therefore, finance foreign exchange cost plus about US$5.3million equivalent of local cost. The remaining project cost would amount toabout US$3.6 million equivalent including US$2.0 million equivalent for taxesand duties and would be met by GOB. During negotiations, assurances wereobtained from GOB that all local funds required for the proposed project wouldbe made available in a timely manner, and any increase in the cost of theproject, foreign or local, would be borne by GOB. Approval by GOB of theProject Proforma 1/ will be a condition of effectiveness of the Credit.

4.25 Disbursement of the proceeds of the proposed Credit will be madeon the following basis:

(a) 72% of total costs net of equipment hire charges forconstruction of Comilla and Chandina bypasses by contract;

(b) 100% of foreign exchange expenditures and 100% of localexpenditures (ex-factory) for procurement of new plant,spares for new plant and spares for existing plant tobe used on the construction works; and

(c) 100% of total expenditures for consultancy servicesfor supervision of construction.

1/ An internal GOB document, the approval of which is a pre-requisitefor release of funds.

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Expenditures on equipment procurement, subsequent to October 1, 1979, areto be retroactively financed by IDA in the first year of the project andwould amount to, at maximum, US$200,000. Based on the above and the projectimplementation schedule (WB 20418), the schedule of disbursements has beenestimated (Table 2). Disbursement arrangements and the schedule were dis-cussed and agreed with GOB at the time of negotiations.

G. Maintenance of Project Roads

4.26 The roads to be constructed under the proposed project, togetherwith the road constructed under the First Highway Project, have a combinedlength of only about 30 miles. Adequate maintenance of so small a lengthof road and of the bridge and RHD Headquarters building constructed underthe First Highway Project, is within the present financial and technicalcapability of RHD.

4.27 The nationwide road maintenance requirements of Bangladesh arecurrently being analyzed through the MIRS and, during negotiations, it wasagreed that GOB would consult with IDA on the findings and recommendations ofthe study and would formulate, for possible IDA financing, a project designedto improve general maintenance practices and standards (para 2.12).

V. PROJECT JUSTIFICATION

A. Sources of Benefits and Beneficiaries

5.01 The proposed project is designed to facilitate the movement ofvehicles and reduce operating costs along the main Dacca-Chittagong trunkroad by allowing traffic to bypass two particularly congested sections of thepresent route. The following benefits can be attributed to the project:

(a) The traffic currently using the present route is subjectto constant changes in speed due to the congested condi-tions in Comilla and Chandina. The necessity to con-tinually brake and accelerate engenders high operatingcosts on the present route. The flow of traffic usingthe bypass will face fewer such disturbances while therelief of congestion within the towns will reduce thefrequencies of speed changes on traffic that still con-tinues to use the present route.

(b) Operating costs of vehicles using the bypasses will befurther reduced since (i) the road surface on the bypasseswill represent a considerable improvement over the roadsurface on the present route; (ii) the present routethrough Chandina, with its very high curvature, impedesthe smooth flow of traffic and raises operating costs.

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(c) Certain traffic flows, notably on the Chandpur-Chittagongroute will benefit from substantial distance savings.

(d) At present heavy vehicle traffic passing through thetowns of Chandina and Comilla is a considerable nuisanceto the residents. The diversion of a substantial pro-portion of this heavy traffic from the town centers tothe bypasses will reduce accident rate, noise pollutionand other attendant costs of congestion within the towns.

5.02 The benefits (a) to (c) accruing to bus and truck traffic that willuse the bypass have been estimated. No attempt has been made to quantify theintangible benefits to residents of the towns arising from the project. Norhave the benefits of reduced congestion to the traffic that continues to usethe present route been estimated. The benefits of the project are furtherunderstated in the economic evaluation since it was assumed that the costsassociated with congestion, and identified in (a) above, will increase pro-portionately with traffic growth. It is much more likely that as trafficgrows the problems of congestion will become critical and costs will increasemore dramatically.

5.03 The bypasses lie along the trunk road connecting the main port ofBangladesh, Chittagong, with the primary urban center, Dacca. The freightcarried along this route consists of some bulk commodities such as cement,iron and steel and petroleum products and general high value cargo. Sincethe trucking industry is highly competitive, with freight rates determinedby market forces, a fall in operating costs will be quickly apparent on thelevel of freight rates; and the benefits of the project will be passed on toconsumers. Bus fares are currently controlled by GOB and have been kept ata low level. A fall in operating costs will improve the profitability ofthe Dacca-Chittagong route to private bus operators, attracting additionalcapacity into this service which will lead to a reduction in overcrowding.The effect of the proposed project on BR will be negligible since such coM-petition as exists between road and rail transport is based far less onfreight rates than on adequacy of service, with road transport providingmore reliable service in timing.

B. Costs and Benefits

5.04 The volume of traffic that will use the bypasses is estimated onthe basis of Origin and Destination surveys conducted at the beginning of1979. The growth of traffic along the Dacca-Chittagong highway has beenextremely high since independence. Periodic traffic counts between Comillaand Dacca indicate that, since 1972, truck traffic has increased by 17% p.a.and bus traffic has increased by 12.5% p.a. This high growth rate was theresult of a variety of external factors including initial low levels oftraffic after the war of independence, the ensuing period of reconstructionand the opening of the Sitalakhya Bridge in December 1977. Average annualtraffic growth for the future is estimated at 8% per annum until 1992 and 5%

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thereafter. The costs of construction have been estimated as outlined in para3.13. The project period comprises four construction seasons with civil worksbeing executed in the last three seasons, and it is estimated that the newplant acquired will depreciate by 33% over the construction period. Estimatedvehicle operating costs along the present route include a premium to reflectthe additional costs associated with speed changes due to congestion and afurther premium in Chandina for the increase in operating costs (lue to thehigh curvature of the present route. The congestion premium was estimated onthe basis of a large sample of empirical observations on speed changes oftrucks passing through Comilla and Chandina. The increase in operating costsdue to the high curvature of the present route through Chandina was estimatedusing surveys on the geometrics of the road. Details of the methodologyadopted in the economic analysis are outlined in Annex II.

5.05 The Comilla bypass will be 12.7 miles in length and inc:ludes some600 ft of bridging. In its initial year of operation, traffic oni the bypassis estimated at some 750 trucks per day and 90 buses per day. Benefits wouldaccrue in the form of reduced vehicle operating costs. The economic evalua-tion shows that economic returns on the Comilla bypass will be sufficient tojustify this component of the project. Based on a construction period offour years and an economic life of 15 years, this component of the projectwould yield economic returns of 17.5%.

5.06 The Chandina bypass will be 2.24 miles in length and includesthree bridges, each of approximately 100 foot span. Traffic volumes inthe initial year of operation are estimated at approximately 740 trucksper day and 230 buses per day. This component of the project yields aneconomic return of 15.7%. The bypass around the town of Chandina thereforewould be well justified.

C. Conclusions

5.07 The overall rate of return for the project is estimated at about17%. It should be noted that this understates the full benefits arising fromthe project since the intangible benefits of reduced congestion to the residentsof the towns and benefits accruing to vehicles continuing to use the existingroads have not been taken into account. Sensitivity of the economic returnsto increases in construction costs and reduction in traffic growth rate hasbeen analysed and shows a reduction in return from an average of about 17%to an average of about 15% in the case of reduced traffic growth rate andincreased construction cost. Details of the analysis are shown below:

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Internal Rates of Return

7% growth intraffic and

7% traffic 10% increase in 10% cost

Component Base Case growth construction cost increase(8% trafficgrowth)

Comilla Bypass 17.5 16.8 16.0 15.3

Chandina Bypass 15.7 15.0 14.3 13.6

Weighted Average 17.2 16.5 15.7 15.0

5.08 Individual contracts have been formulated such that their sizes and

complexity are within the known capabilities of domestic contractors, timelyprovision and maintenance of adequate plant has been assured, and lead and

construction times are appropriate to contract sizes and contractor capabil-ities. The contract documents are based upon appropriate construction

standards, and the provision for consultancy services for supervision willensure adequate contractor guidance and quality control. Project risks aresmall.

VI. AGREEMENTS REACHED AND RECOMMENDATIONS

6.01 Conditions of effectiveness will be that: GOB approves the Project

Proforma (para. 4.24); and GOB retains the services of consultants on condi-tions and terms of reference acceptable to IDA (para 4.13).

6.02 During negotiations, agreement was reached on the following prin-

cipal matters:

(a) GOB to make available any necessary land (para 4.06);

(b) overlay to project roads to be carried out whenrequired (para 4.06).

(c) new plant, equipment and spares to be used exclusivelyon the project (para 4.10);

(d) plant and equipment provided by GOB to be made availablein a timely manner (para 4.10);

(e) all plant and equipment to be properly maintained andrepaired (para 4.10);

(f) RHD to charge contractors cost based hire rates for

equipment (para 4.11);

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(g) RHD to provide necessary supervision and supportservices (para 4.18);

(h) RHD to produce monthly progress reports and ProjectCompletion Report (para 4.21 and Annex I); and

(i) timely release of funds to RHD for the project and anyincrease in cost to be borne by GOB (para 4.24).

6.03 The proposed project would provide a suitable basis foran IDA credit of US$10.0 million equivalent to GOB.

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ANNEX I

BANGLADESH

SECOND HIGHWAY PROJECT

Reporting Requirements

1. During the construction phase of the project, the government will submitmonthly progress reports to the Association, these progress reports containingthe following information:

(a) A description of the work carried out during the monthand the current status of the project;

(b) Quantification of work completed and comparison withtargets and program;

(c) Estimation of project cost and comparison of estimatewith tender sum; and

(d) Analysis of problems encountered or anticipated andrecommendations on solutions.

2. Within six months of the completion of the project, the Government

will submit to the Association a Project Completion Report on the executionand initial operation of the project, its cost and the benefits derived orexpected to be derived from it and an assessment of the performance by Govern-ment and by the Association of their respective obligations under the CreditAgreement and the accomplishment of the purpose of the credit. Details of thecontents and requirements of the Project Completion Report were discussedand agreed during negotiations.

November 1979

_ 34 -

ANNEX IIPage 1

BANGLADESH

SECOND HIGHWAY PROJECT

Methodology Used in Economic Analysis

1. BASIC ASSUMPTIONS

The following assumptions were used in carrying out the economicanalysis:

(a) Physical Characteristics of Vehicles

Trucks Buses

(i) Years in use - Chassis 15 yrs 15 yrsBody 5 yrs 7 yrs

(ii) Annual mileage 40,000 miles 30,000 miles

(iii) Gross vehicleweight 8 tons 8.5 tons

(iv) Average age ofvehicle 5 yrs 6.5 yrs

(b) Physical Characteristic of Present Route and Bypasses

PresentRoute Bypass

(i) Roughness 6,000 mm/km 2,000 mm/km(ii) Av. Speed of trucks 25 mph 40 mph(iii) Av. Speed of buses 20 mph 30 mph

(c) Shadow Prices (as proportion of market rate)

(i) Semi-skilled or skilled labor 1.0(ii) Unskilled labor 0.5(iii) Foreign exchange 1.3

_ 35 -

ANNEX IIPage 2

Retail Net of Local Foreign Economic

(d) Prices (Taka '79 prices) Price Taxes Cost Exchange Cost

(i) Truck

Engine plus chassis 264,480 198,900 40,000 158,900 246,570

Body 40,000 38,100 30,000 5,100 39,630

(ii) Bus

Engine plus chassis 271,440 204,680 43,202 161,478 253,123Body 96,000 89,000 54,000 34,000 98,200

(iii) Tyres (each) 3,500 1,750 584 1,166 2,100

(iv) Diesel (per gallon) 9.47 8.02 0.80 7.22 10.19

(v) Lubricating oil 44.00 36.75 3.67 33.08 46.67(per gallon)

(vi) Mechanic wages - - 5.00 - 5.00

(per hr.)

(vii) Total crew wages(per hr.)Truck 16.00 11.00Bus 10.00 8.00

Notes: (1) Truck Crew: 1 Driver @ 6 Taka/hr (semi-skilled)5 laborers @ 2 Taka/hr (unskilled)

(2) Bus Crews : 1 Driver @ 6 Taka/hr (semi-skilled)Conductor plus 1 helper @ 2 Taka/hr (unskilled)

- 36 _

ANNEX IIPage 3

2. On these assumptions, the following estimates of vehicle operatingcosts for unimpeded traffic flows were calculated (using UK TRRL LR 723,Tables 41-49):

VEHICLE ECONOMIC OPERATING COSTS(Taka/mile)

PresentTrucks Route Bypass

(neglectingcongestioncosts)

1. Fuel Consumption 0.61 0.732. Oil Consumption 0.07 0.073. Tyre Consumption 0.40 0.284. Parts Consumption 3.48 1.555. Labor Maintenance 0.17 0.096. Depreciation - Chassis 0.47 0.47

- Body 0.20 0.207. Crew wages 0.44 0.27

TOTAL 5.84 3.66

Buses

1. Fuel Consumption 0.79 0.842. Oil Consumption 0.07 0.073. Tyre Consumption 0.40 0.284. Parts Consumption 0.67 0.125. Labor Maintenance 0.03 0.016. Depreciation - Chassis 0.51 0.51

- Body 0.46 0.467. Crew wages 0.40 0.27

TOTAL 3.33 2.56

_ 37 _

ANNEX IIPage 4

3. Based on the experimental data on speed changes of trucks and thesurvey of the geometrics of the road, the following estimates of vehicleoperating costs (Taka/mile) including costs due to congestion and thecurvature of the present route were derived (see Economic Analysis forHighways, Robley Winfrey, 1969).

Total Vehicle Operating Costs on Present Route

Comilla Chandina

(1) Average effective increase 4.76 miles (36 0.97 (57 expe-in length due to speed experiments) riments)changes

(2) Effective increase in - 0.3 mileslength due to curvatureof present route

(3) Subtotal 4.76 1.27

(4) Length of present route 13.48 miles 2.475 miles

(5) Premium due to congestionplus curvature (3 - 4) 0.35 0.51

(6) Operating costs of vehiclesin unimpeded traffic(taka/mile)

Trucks 5.84 5.84Buses 3.33 3.33

(7) Total vehicle operatingcosts on present route(including congestionplus curvature premium)(6) + 1(5) x (6)](taka/mile)

Trucks 7.88 8.82

Buses 4.50 5.03

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ANNEX IIPage 5

4. COMILLA BYPASS

4. There are three separate traffic flows that will use the Comillabypass. The characteristics of the various traffic flows are as follows:

TRAFFIC FLOW CHARACTERISTICS

Average Daily Length of Length ofTraffic

(Jan. 1979) Present Route Bypass RouteTrucks Buses miles miles

(a) Dacca-Chittagong 450 178 13.43 12.73(b) Hajiganj-Chittagong 95 23 13.46 7.64(c) Hajiganj-Dacca 20 52 6.76 5.15

Assuming that 100% of trucks identified in O&D study and 30% of the buses willuse the bypass after construction and an 8% traffic growth until 1992, thebenefits in the first year (1983/84) are as follows:

BENEFITS IN 1983/84(million Takas)

(a) Dacca- (b) Hajigani- (c) Hajiganj-Trucks Chittagong Chittagong Dacca

(1) Yearly Traffic (000s) 241.34 50.95 10.73

(2) Operating costs along presentroute (length x 7.47 Taka/milex yearly traffic) 25.54 5.40 0.57

(3) Operating costs along bypass(length x 3.44 Taka/mile xyearly traffic) 11.24 1.42 0.20

Operating cost savings(2)-(3) 14.30 3.98 0.37

Total Benefit to Trucks = 18.65 million taka.

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ANNEX IIPage 6

(a) Dacca- (b) Hajiganj- (c) Hajiganj-Buses Chittagong Chittagong Dacca

(1) Yearly Traffic (000s) 28.64 3.70 8.37

(2) Operating costs on 1.73 0.22 0.25present route (lengthx 4.05 Taka/mile xyearly traffic)

(3) Operating costs on 0.93 0.07 0.11Bypass (length x 2.32Taka/mile x yearlytraffic) _

(4) Operating cost savings(2)-(3) 0.80 0.15 0.14

Total Benefits to Buses = 1.09

Total Benefits to Trucks and Buses = 19.74 million Taka

5. The construction costs are translated into economic costs using ashadow price of 0.5 for unskilled labour and a shadow price of 1.3 for foreignexchange.

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ANNEX IIPage 7

ECONOMIC COSTS OF CONSTRUCTION(million Takas)

NEW PLANT & SPARES /a 1979/80 1980/81 1981/82 1982/83

(1) Financial costsexcluding taxesand price con-tingencies

(a) Foreign 8.86 0.91 - _

(b) Local - 0.02 - -

(2) Economic Costs 11.76 1.20 - -

CONTRACT CONSTRUCTION

(1) Financial costsexcluding taxesand price con-tingencies

(a) Foreign 2.66 4.13 4.02 7.84(b) Local Unskilled Labor 1.43 3.55 3.58 1.82

(c) Other Local 7.62 9.50 14.37 19.76

(2) Economic Costs 11.80 16.60 21.41 30.88

CONTRACT SUPERVISION

(1) Financial costsexcluding taxesand price con-tingencies

(a) Foreign 0.82 2.73 2.59 1.50

(b) Local 0.41 1.23 1.23 0.81

(2) Economic Costs 1.47 4.78 4.59 2.76

Total Economic Costs 25.03 22.58 26.00 33.64

/a New plant is assumed to depreciate by 33.3% over the construction period.

6. The following subsequent costs will also be necessarv:

(i) Yearly maintenance: 0.39 million taka(ii) Overlay in 1988/89: 19.74 million taka(iii) Resealing in 1993/94: 8.79 million taka

7. The Comilla bypass yields an economic return of 17.5% (see Annex II,

Table I).

41~

ANNEX IIPage 8

8. CHANDINA BYPASS

8. The characteristics of traffic flows at Chandina are as follows:

TRAFFIC FLOW CHARACTERISTICS

Average Daily Traffic Length of Bypass(Jan. 1979) Length of Present Route Route

Trucks Buses (miles) (miles)

528 313 2.47 2.24

Assuming that 95% of the trucks and 50% of the buses will use the bypassafter construction and an 8% traffic growth until 1991, the benefits in the

first year (1982/83) are as follows:

BENEFITS IN 1983/84 (000 Taka)

Trucks Buses

(1) Yearly traffic (000s) 269.01 83.93

(2) Operating costs on old route 5.86 /a 1.04 /b

(3) Operating cost on bypass 2.21 /c 0.48 /d

(4) Operating cost savings(2) - (3) 3.65 0.56

Total benefits = 4.21 million Taka

/a 269.01 x 2.47 miles x 8.82 Taka/mile.

lb 83.93 x 2.47 miles x 5.03 Taka/mile.

/c 269.01 x 2.24 miles x 3.66 Taka/mile.

/d 83.93 x 2.24 miles x 2.56 Taka/mile.

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ANNEX IIPage 9

9. The construction costs are translated into economic costs using a

shadow price of 0.5 x market price for unskilled labor and a shadow price

of 1.3 x market price for foreign exchange.

Economic Costs of Construction(million Takas)

(A) New Plant + Spares /a 1979/80 1980/81 1981/82 1982/83

(1) Financial Costs(a) Foreign 2.09 0.20 - -

(b) Local 0.05 0.04 - -

(2) Economic Costs 2.76 0.30 - -

(B) Contract Construction

(1) Financial Costs(a) Foreign 0.66 1.38 1.14 1.50(b) Local unskilled

labor 0.38 1.02 0.93 0.40(c) Other local 1.17 3.03 3.48 3.77

(2) Economic Costs 2.82 5.34 5.42 5.91

(C) Contract Supervision

(1) Financial Costs(a) Foreign 0.20 0.68 0.65 0.37

(b) Local 0.10 0.31 0.31 0.20

(2) Economic Costs 0.36 1.19 1.15 0.68

Total Economic Costs 5.94 6.83 6.57 6.59

/a New plant is assumed to depreciate by 33.3% over the construction period.

10. The following subsequent costs of maintenance and rehabilitation

will be necessary:

(i) Yearly maintenance : 0.07 million Taka(ii) Overlay in 1988/89 : 3.55 million Taka(iii) Resealing in 1993/94 1.58 million Taka

11. The Chandina Bypass yields an economic rate of return of 15.7%

(See Table II).

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ANNEX IITable I

COMILLA BYPASS(million Taka)

Year Construction Cost Maintenance Benefits

1979/80 25.03 0.00 0.001980/81 22.58 0.00 0.001981/82 26.00 0.00 0.001982/83 33.64 0.00 0.001983/84 0.00 0.39 19.741984/85 0.00 0.39 21.321985/86 0.00 0.39 23.021986/87 0.00 0.39 24.871987/88 0.00 0.39 26.861988/89 19.74 0.39 29.001989/90 0.00 0.39 31.321990/91 0.00 0.39 33.831991/92 0.00 0.39 36.541992/93 0.00 0.39 39.461993/94 8.79 0.39 41.431994/95 0.00 0.39 43.501995/96 0.00 0.39 45.681996/97 0.00 0.39 47.961997/98 0.00 0.39 50.36

Economic Rate of Return = 17.5%

SENSITIVITY ANALYSIS

8% growth rate 7% growth rate 10% increase 7% growth rateto 1992, 5% to 1992, 5% in construc- and 10% costthereafter thereafter tion cost increase

Economic return 17.5% 16.8% 16.0% 15.3%

- 44 -

ANNEX IITable II

CHANDINA BYPASS(million Takas)

Year Construction Cost Maintenance Costs Benefits

1979/80 5.94 0.00 0.001980/81 6.83 0.00 0.001981/82 6.57 0.00 0.001982/83 6.59 0.00 0.001983/84 0.00 0.07 4.211984/85 0.00 0.07 4.551985/86 0.00 0.07 4.911986/87 0.00 0.07 5.301987/88 0.00 0.07 5.731988/89 3.55 0.07 6.191989/90 0.00 0.07 6.681990/91 0.00 0.07 7.221991/92 0.00 0.07 7.791992/93 0.00 0.07 8.421993/94 1.58 0.07 8.841994/95 0.00 0.07 9.281995/96 0.00 0.07 9.741996/97 0.00 0.07 10.231997/98 0.00 0.07 10.74

Economic Rate of Return = 15.7%

SENSITIVITY ANALYSIS

8% growth rate 7% growth rate 10% increase 7% growth rateto 1992, 5% to 1992, 5% in construc- and 10% costthereafter thereafter tion cost increase

Economic return 15.7% 15.0% 14.3% 13.6%

November 1979

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ANNEX III

BANGLADESH

SECOND HIGHWAY PROJECT

Related Documents and Data Available in the Project File

International Bank for Reconstruction and Development, Bangladesh TransportSector Memorandum, September 26, 1978

The Economist Intelligence Unit with Scott Wilson Kirkpatrick and Partners,Bangladesh Transport Survey, November 1974

Planning Commission, Ministry of Planning, Bangladesh, Review and Updating ofthe Bangladesh Transport Survey, January 1978

Roads and Highways Department, Ministry of Railways, Roads, Highways andRoad Transport, Rehabilitation and Improvement of Road Communication,August 1976

Bangladesh Bureau of Statistics, Ministry of Planning, Monthly StatisticalBulletin of Bangladesh

Roads and Highways Department, Ministry of Railways, Roads, Highways andRoad Transport, Schedule of Rates for Road and Bridge Works, July 1978

Roads and Highways Department, Ministry of Railways, Roads, Highways andRoad Transport, Estimates of Maintenance Expenditures 1978/79

Ministry of Railways, Roads, Highways and Road Transport, Physical andFinancial Progress Report for Development and Reconstruction Works UnderRoads and Highways Department, January 1979

International Bank for Reconstruction and Development, Bangladesh - Reviewof the Construction Industry, June 14, 1978

Planning Commission, Government of Bangladesh, The Two-Year Plan 1978-80(Draft), March 1978

International Bank for Reconstruction and Development Bangladesh - CurrentTrends and Development Issues, December 15, 1978

Roads and Highways Department: Transport Section, Unofficial List of ProjectsIncluded in the 1978/79 ADP (Annual Development Plan) and Revised 1978/79 ADP,January 1979

July 1979

_ 46

ANNEX IV

BANGLADESH

SECOND HIGHWAY PROJECT

Maintenance, Improvement and Rehabilitation Study

Summary Terms of Reference

Phase I

(a) The organization, administration and operation of RHD;

(b) Road maintenance organization, administration and operations;

(c) The relationship between the road construction program andRHD's maintenance capability;

(d) Construction plant and equipment, including quantity, type,availability, utilization, operational efficiency, disposaland replacement;

(e) Collection of traffic data;

(f) Equipment-servicing policy, procedures and adequacy;

(g) Spare parts management, procurement and control;

(h) The road system planning process, selection of prioritiesand design standards and capabilities;

(i) The ferry system, facilities, management, operation,repair, maintenance, cost, user charges; and

(j) The road transport industry.

Phase II

(a) Preparation of a five-year maintenance program identifyingrequired organization, resources and finance;

(b) Identification of high-priority road improvement andrehabilitation needs;

(c) Analysis of work methods and identification of labor andequipment required to achieve acceptable work standards;

- 47 -

ANNEX IVPage 2

(d) Detailed examination of equipment management with recom-mendations for necessary improvement;

(e) Identification of equipment rehabilitation requirementsincluding spares and workshop equipment requirements;

(f) Details of proposed ferry improvements;

(g) Recommendations for establishment or improvement ofworkshops;

(h) Recommendations on spare parts requirements and sparesmanagement and procurement;

(i) Identification of training needs of RHD maintenance staff; and

(j) Economic evaluation of components of a project suitable forexternal financing.

July 1979

48

TABLL 1

BANGLADESH

SECOND HIGHWAY PROJECT

Number of Vehicles on the Road 1/

Cars, Taxis Auto Motor-Year and Jeeps Buses Trucks Rickshaws cycles Others Total

1970 23,232 5,787 9,378 7,854 18,849 3,412 68,512

1971 23,795 5,907 9,895 7,907 18,765 3,507 69,776

1972 13,871 4,497 7,278 5,206 12,996 2,425 46,273

1973 14,860 6,030 8,440 7,375 15,264 2,760 54,729

1974 16,164 6,207 9,380 8,424 17,726 3,076 60,977

1975 16,808 6,812 9,457 7,398 20,194 3,265 63,934

1976 19,900 7,205 9,838 7,699 24,083 3,483 72,708

1977 2/ 21,503 7,509 9,757 7,953 26,709 3,263 76,694

Average Growth Rates since Independence (1972):

Trucks - 6% p.a.

Buses - 11% p.a.

Source: 1/ Bangladesh Transport Survey Review and Updating (January 1978).

2/ MRRHRT Based on aggregation of Divisional registration data.

June 1979

- 49 -

TABLE 2

BANGLADESH

SECOND HIGHWAY PROJECT

Estimated Schedule of Disbursements

Cumulative Disbursements atIDA Fiscal Year End of Quarterand Quarter (US$ '000 Equivalent)

1979/80

December 31, 1979 -March 31, 1980 100June 30, 1980 1,850

1980/81

September 30, 1980 2,400December 31, 1980 2,950March 31, 1981 4,180June 30, 1981 4,500

1981/82

September 30, 1981 4,920December 31, 1981 5,430March 31, 1982 6,320June 30, 1982 6,810

1982/83

September 30, 1982 7,340December 31, 1982 7,940March 31, 1983 9,030June 30, 1983 9,880

1983/84

September 30, 1983 9,970December 31, 1983 10,000

November 1979

BANGLADESH

SECOND HIGHWAY PROJECT

Plant and Equipment for Bypasses

Item _ No. Unit Cost Us$ Total Coat USa Spares (17%) Total wi a s

Motor Grader (125 h.p.) 5 86,500 432,500 73,500 506,000

Water Distributor (6000 litre) 5 26,500 132,500 22,500 155,000

Asphalt Plant (6 - lOt/hr) 4 37,000 148,000 25,200 173,200

Asphalt Kettle and Power Handspray 3 23,000 69,000 11,700 80,7100

Pad-foot Self-propelled Compactor 6 52,000 312,000 53,000 365,000

4-wheel-drive Inspection Vehicle 2 12,000 24,000 4,100 28,100

Portable Steel Bridging 600 ft 425 255,000 43,400 298,400

Total Foreign Exchange Costs 1,373,000 233,400 1,606,400

Local Costs (3%) 41,000 7,000 48,000

June 1979

tH

BANGLADESH

SECOND HIGNWAY PROJECT

Project Costs by Year (Us$ millions)

Year 1 Year 2 Year 3 Year 4 TOTALLocal For. Taxes Total Local For. Taxes Total Local For. Taxes Total Local For. Taxes Total. Local For, Taxes Total

Construction

1. Comilla Bypass 0.53 0.16 0.06 0.75 0.74 0.27 0.12 1.13 1.05 0.24 0.13 1.42 1.27 0.46 0.17 1.90 3.59 1.13 0.48 5.20

II. Chandina Bypass 0.13 0.04 0.01 0.18 0.24 0.08 0.02 0.34 0.26 0.07 0.02 0.35 0.24 0.09 0.02 0.35 0.87 0,28 0.07 1.22

III. Consulting Services 0.03 0.06 - 0.09 0.09 0.20 - 0.29 0.09 0.19 - 0.28 0.06 0.11 - 0.17 0.27 0.56 - 0.83

Plant, Equipment and Spares

IV. Plant and Equipment 0.04 1.37 0.82 2.23 - - - - - - - - - - - - 0.04 1.37 0.82 2.23

V. Spares for New Plant 0.01 0.23 0.22 0.46 - _ _ _ - 0.01 0.23 0.22 0,46

VI. Spares for Existing Plant - 0.06 0.06 0.12 - - _ - _ _ - - - - - _ - 0.06 0.06 0.12

Subtotal 0.74 1.92 1.17 3.83 1.07 0.55 0.14 1.76 1.40 0O50 0.15 2.05 1.57 0.66 0.19 2.42 4.78 3.63 1.65 10.06

Contingencies l

Quantity Increases(107. on I, II, III; 5% on IV, V, VI) 0.07 0.11 0,06 0.24 0.11 0.06 0.01 0.18 0.14 0.05 0.02 0,21 0.16 0.06 0.02 0.24 0.48 0.28 0.11 0.87

Price IncreasesItems I, II, III; Year I 107 0.08 0.03 0.01 0.12 0.08 0.03 MI 0.12

Year II 21% 0.25 0.13 0.03 0.41 0.25 0.13 0.03 0.41Year III 33% 0.51 0.18 0.05 0.74 0.51 0.18 0.05 0.74Year IV 45% 0.77 0.33 0.09 1.19 0.77 0.33 0.09 1.19

Items IV, V, VI 67. - 0.11 0,07 0.18 _ __ - 0.11 0.07 0,18

Subtotal Contingencies 0,15 0.25 0.14 0.54 0.36 0.19 0.04 0.59 0.65 0.23 0.07 0.95 0.93 0.39 0.11 1.43 2.09 1.06 0.36 3.51

GRAND TOTAL 91.31 43 1.43 0.74 0.18 2.35 2.05 0.73 0.22 3.00 2.50 1.05 0.30 3.85 6.87 4.69 2.01 13.57

Source: Mission and GOB Estimates

November 1979

- 352 -

TABLE 5

BANGLADESH

SECOND HIGHWAY PROJECT

Design Standards for Bypasses

Design speed: 60 mph

Right-of-way: 160 ft

Minimum radius: 1,000 ft

Maximum gradient: 3%

Maximum super elevation: 8%

Shoulder width: 7 ft

Pavement width: 22 ft

Pavement wearing course: Thin pre-coatedstone carpet

Pavement design: 0.5 million standardaxles before overlaystrengthening

Bridge design load: HS20-44 AASHTO

Width between curbs for bridges: 24 ft

BANGLADESHPROPOSED SECOND HIGHWAY PROJECT

Structure of RHD as at January 1979

ChiefEngineer

Additional Chief .Additional Chief Additional Chief Additional Chief Additional Chief Deputy Chief GirectorEngineer, Planning Engineer, Operations Engineer, Special Engineer, Engineer, Engineer, Road Research

Projects Mechanical Administration Procurement/Stores Laboratory

Superintending Deputy Chief Superintending SuperintendingEngineers Engineers - 2 Enginee p ntending Engineers 3 u APlanning - 2 Chief Arbori- Senior rigineers - 3 Superintending n 5 AssistantDesign - 2 culturist - I Structural Audit/ Engineers - 2 Directors -- 3Senior Superintend- Designel 2 Accounts l 1Economist - 1 ing Engineer - 1 l D -1 _ll

-_______ | |Executive | Executive Executive

Engineers - 31 Engineers - 19 Executive Executive Executive Engineer - 1Executive Assistant Structural Engineer s 1 7 Engineers - 3 Engineers - 6 Assistant

Engineers - 21 Engineers - 73 Designers - 6 Assistant Assistant Assistant Engineer - 1Economists 2 Assistant Engineers 32 Engineers - 4 Engineers - 2 Research

| Assistant | | Sub-Divisional Engineers - 68 Sub Divisional Accounts Officer - 1Engineers - 65 Engineers 102 Engineers 12 Officers - 5 Sub-Divisional Junior

Arbori- Sub-Divisional Engineers 2 Researchculturists - 13 Engineers - 10 Officer - 2

Source: RHDJune 1979 World Bank -20402

BANGLADESHSECOND HIGHWAY PROJECT

Implementation Schedule

1979 1980 1981 1982 | 1983

Credit Effective

EQUIPMENT & SPARES IPreparation of Bid Documents *

Advertisement

Preparation of Bids _

Bid Evaluation and Award JSupply of Equipment ||

CONSTRUCTION OF BYPASSES 7Invitation to Prequalify

Finalization of Bid Documents _

Prequalification of Bidders _

Preparation of Bids

Bid Evaluation and Award

Order of Local Materials

Construction I_

CONSULTANCY SERVICES

Appointment of Supervision Consultants

Pre-construction Administration

Supervision of Construction 1 _ t iii

Source: RHD & Mission EstimatesNovember 1979 World Bank - 20418

BANG LADESHPROPOSED SECOND HIGHWAY PROJECT

Structure of MRRRT

Mi nister

ISecretary

railway Wing Road and RoadTransport Wing

Deput Joint Secretary ||_Additional Secretary and .

Secretary Enquiries and Financial Adviser Jointl Establishment Secretary

Directors:Railway Section Deputy DirectorPlanning Etc. Off icers Finance and Budget _Member

Engineering Etc. r ~ ~~~~~~~~~~~~~~~~~senior Demputy SecretaryEngTi n eeraffic ng E tc .|Deputy Secretary Deputy Secretary Transport Secretary Transport Financial

Roads & Highways Road Transport Economist Admin. Coordination Adviser

Additional Section Officer Section Section Section Section Movement Deputy

| Director l l Fiance l l Off icers Officers fficers Officers Financial

| Section l I I l I i I I I I I I t { Adviser

Assistant'FinancialAdviser

Source: MRRRTSoure: MRRT World Bank - 20419

June 1 979

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