PCR: KAZ 28403

ASIAN DEVELOPMENT BANK

PROJECT COMPLETION REPORT

ON THE

ROAD REHABILITATION PROJECT

(Loan 1455-KAZ)

IN

KAZAKHSTAN

April 2004
 CURRENCY EQUIVALENTS

Currency Unit – tenge (T)

At Appraisal At Project Completion

(1 May 1996) (14 August 2001)
T1.00 = $0.0154 $0.0066
$1.00 = T65.00 T151.99

ABBREVIATIONS

AASHTO – American Association of State Highway and Transportation

Officials
ADB – Asian Development Bank
ADT – average daily traffic
ADTA – advisory technical assistance
BER – bid evaluation report
CEL – Committee of External Lending
COCS – Consulting Services Division
COR – Committee of Roads
DOR – Department of Roads
EA – Executing Agency
EBRD – European Bank for Reconstruction and Development
EIRR – economic internal rate of return
FIDIC – Fédération Internationale des Ingénieurs Conseils
GOST – Gosudarstvennye Standarty, Soviet Standards
IA – implementing agency
IsDB – Islamic Development Bank
km – Kilometer
m – meter
MOF – Ministry of Finance
MOTC – Ministry of Transport and Communications
MOTCT – Ministry of Transport, Communications, and Tourism
PAO – project administration officer
PCR – project completion report
PIU – project implementation unit
PPTA – project preparatory technical assistance
PSC – project steering committee
RSPS – Road Sector Policy Statement
TA – technical assistance
TOR – terms of reference
VOC – vehicle operating cost
VPD – vehicles per day

NOTE
In this report, "$" refers to US dollars.

The project completion report was prepared by K. Saari (team leader),

P. Seneviratne, and T. Capati.
 CONTENTS

Page

BASIC DATA ii
MAP vii
I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 1
A. Relevance of Design and Formulation 1
B. Project Outputs 2
C. Project Costs 3
D. Disbursements 4
E. Project Schedule 4
F. Implementation Arrangements 5
G. Conditions and Covenants 6
H. Related Technical Assistance 6
I. Consultant Recruitment and Procurement 8
J. Performance of Consultants, Contractors, and Suppliers 9
K. Performance of the Borrower and the Executing Agency 10
L. Performance of ADB 11
III. EVALUATION OF PERFORMANCE 12
A. Relevance 12
B. Efficacy in Achievement of Purpose 13
C. Efficiency in Achievement of Outputs and Purpose 13
D. Preliminary Assessment of Sustainability 14
E. Environmental, Sociocultural, and Other Impacts 14
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14
A. Overall Assessment 14
B. Lessons Learned 15
C. Recommendations 15
APPENDIXES
1. Project Framework 17
2. Chronology of Major Events in Project Implementation 21
3. Contract Packages 26
4. Maintenance Equipment Procured under the Loan 27
5. Road Maintenance Component 28
6. Cost and Financing 29
7. Cumulative Disbursements 30
8. Schedule 31
9. Compliance with Loan Covenants 32
10. Economic Reevaluation 35
11. Rating of the Project 38
ii

BASIC DATA

A. Loan Identification

1. Country Kazakhstan
2. Loan Number 1455
3. Project Title Road Rehabilitation Project
4. Borrower Republic of Kazakhstan
5. Executing Agency Ministry of Transport and Communications
6. Amount of Loan $50.0 million
7. Project Completion Report Number PCR: KAZ 808

B. Loan Data
1. Appraisal
– Date Started 7 May 1996
– Date Completed 17 May 1996

2. Loan Negotiations
– Date Started 24 July 1996
– Date Completed 26 July 1996

3. Date of Board Approval 27 August 1996

4. Date of Loan Agreement 18 October 1996

5. Date of Loan Effectiveness

– In Loan Agreement 16 January 1997
– Actual 31 March 1997
– Number of Extensions 1

6. Closing Date
– In Loan Agreement 30 November 2000
– Actual 11 December 2002
– Number of Extensions 3

7. Terms of Loan
– Interest Rate pool-based variable lending rate
– Maturity (number of years) 24
– Grace Period (number of years) 4

8. Disbursements

a. Dates

Initial Disbursement Final Disbursement Time Interval

5 June 1997 11 December 2002 66 months

Effective Date Original Closing Date Time Interval

31 March 1997 30 November 2000 44 months

 iii

b. Amount (in $)
Last
Category or Original Revised Amount Net Amount Amount Undisbursed
Subloan Allocation Allocation Canceled Available Disbursed Balance

1 Civil Works 27,000,000 30,800,000 - 30,800,000 29,361,7474 1,438,253

2 Equipment 5,500,000 10,500,000 - 10,500,000 9,844,640 655,360
3 Consulting
Services 4,800,000 4,800,000 - 4,800,000 4,558,835 241,164
4 Interest and
Commitment 6,200,000a 0 0 0 0
Charge
5 Unallocated 6,500,000 3,900,000 - 3,900,000 0 3,900,000

Total 50,000,000 50,000,000 6,234,777 50,000,000 43,765,222 6,234,777

a
Reallocated to civil works and equipment category on 7 July 1997.
Source: ADB Files
9. Local Costs (Financed)
- Amount ($) 7,119,591
- Percent of Local Costs 23
- Percent of Total Cost 9

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 40.00 46.29

Local Currency Cost 37.00 31.71
Total 77.00 78.00
Source: ADB Files
2. Financing Plan ($ million)
Cost Appraisal Estimate Actual
Implementation Costs
Borrower-Financed 27.00 25.11
ADB-Financed 43.80 43.77
Other External Financing 0.00 0.00
Subtotal 70.80 68.88
IDC Costs
Borrower-Financed 0.00 9.12
ADB-Financed 6.20 0.00
Other External Financing 0.00 0.00
Subtotal 6.20 9.12
Total 77.00 78.00
ADB = Asian Development Bank, IDC = interest during construction.
Source: ADB Files
iv

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual
Road Rehabilitation
Civil Works 36.20 41.17
Road Maintenance
Equipment, Materials, and Human Resources 19.00 22.23
Consulting Services
(i) Detailed Design and Construction Supervision
of Road Rehabilitation, Road Maintenance
Assistance, and Benefit Monitoring and
Evaluation Services 4.70 4.56

(ii) Detailed Design of Other Selected Priority 0.40 0.91

Road Sections

Contingencies 10.50 -
Interest and Other Charges During Construction 6.20 9.12
Total 77.00 78.00
Source: ADB Files
4. Project Schedule
Item Appraisal Estimate Actual
Date of Contract with Consultants Aug 1996 22 Nov 1996
Completion of Engineering Designs Feb 1996 Feb 1997
Civil Works Contract
Date of Award Jan 1997 31 Jul 1997
Completion of Work Oct 1999 14 Aug 2001
Equipment and Supplies
Dates
First Procurement Aug 1996 Nov 2000
Completion of Equipment Installation May 2000 Nov 2001
Start of Operations
Completion of Tests and Commissioning May 2000 14 Aug 2002
Beginning of Start-Up May 2000 14 Aug 2001
Other Milestones No
Source: ADB Files
5. Project Performance Report Ratings
Ratings
Development Implementation
Implementation Period Objectives Progress

From Nov 1997 to Dec 1998 Unsatisfactory Unsatisfactory

From Dec 1998 to Jan 1999 Satisfactory Unsatisfactory
From Jan 1999 to Sep 2000 Satisfactory Satisfactory
From Oct 2000 to Dec 2001 Satisfactory Partly Satisfactory
From Jan 2002 to Dec 2002 Satisfactory Satisfactory

a
Satisfactory rating was given after the Review Missions during the implementation. During preparation of the
PCR it was found that development objectives were not fully reached, and the rating should have been only
partly satisfactory.
 v

D. Data on Asian Development Bank Missions

No. of No. of Specialization
Name of Missiona Date Persons Person-Days of Membersa
Fact-Finding 21 Feb–6 Mar 1996 3 37 a, c, d
Appraisal 7–17 May 1996 3 32 a, d, g
Special Loan Administration 9–11 Aug 1996 1 3 a
Inception 5–9 Dec 1996 1 5 a
Review 1 7–9 Oct 1997 2 5 a, d
Midterm Review 12–16 Mar 1999 3 15 a, d, h
Review 3 10–14 Apr 2000 1 5 a
Review 4b 29 Aug–5 Sep 2001 2 8 a
Review 5c 22–26 Apr 2002 1 2 a
Review 6b 27 Aug–6 Sep 2002 1 5 a
Project Completion Reviewd 9–16 July 2003 2 16 a, h
Note:
a
a - engineer, b - financial analyst, c - counsel, d - economist, e - procurement consultant or specialist, f - control
officer, g - programs officer, h - assistant project analyst.
b
In conjunction with Loan 1774-KAZ: Almaty-Bishkek Regional Road Rehabilitation Project.
c
In conjunction with Loan 1774-KAZ: Almaty-Bishkek Regional Road Rehabilitation Project and proposed Almaty-
Horgos Corridor Project.
d
The project completion report was prepared by K. Saari, transport specialist/mission leader, and Teresita S. Capati,
assistant project analyst.
Source: ADB Files
vii
 1

I. PROJECT DESCRIPTION

1. The Almaty-Astana road was designed according to Soviet standards for 6 ton axle
loads. It was built in the 1960s and 1970s, but the design was not fully adhered to and
substandard materials and work methods were sometimes used. Recent heavy traffic with more
than 10 ton axle loads, poor initial construction and insufficient maintenance had caused serious
deterioration of most road sections prior to the start of the Project. As Kazakhstan moves toward
a market-based economy, rehabilitation of the national road network connecting the key centers
of the country as well as routine road maintenance are essential for the country’s economic
development. Astana (known as Akmola until 1998) was made the capital of Kazakhstan in
1997 and the Almaty-Astana road was selected as the first road to be rehabilitated by
international financing. The loan from the Asian Development Bank (ADB) was the first road
rehabilitation loan in Kazakhstan and the first of several loans for the Almaty-Astana road. The
World Bank, the Islamic Development Bank (IsDB), and the Kazakh Government financed the
rehabilitation of the other sections of the road. The rehabilitation of the road was completed in
October 2003.

2. The main objective of the Project was the rehabilitation of the 192-kilometer (km) road
section between Gulshad and Akchetau (km 596 to km 788) of the Almaty-Astana road, routine
maintenance of other sections of the road, procurement of road maintenance equipment, and
development of a new routine road maintenance system.

3. The Project was also intended to assist the Government in (i) implementing market-
oriented policy, regulatory reforms, and institutional restructuring; (ii) increasing road funding
through improved cost recovery measures; (iii) developing institutional capacity; and
(iv) preparing a human resources development plan. Institutional strengthening of the road
sector was supported by Technical Assistance (TA) 2631-KAZ1 attached to the loan.

4. Feasibility studies for road sections to be selected for rehabilitation under the second
road project2 were done under TA 2632-KAZ3 attached to the Loan.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The Project was highly relevant during appraisal and continued to be so after
completion, as it rehabilitated the most deteriorated section of the most important road in
Kazakhstan, leading from the cultural and commercial center of Almaty to the new capital,
Astana, which is located 1,220 km away. The road is also a major international transport
corridor from the Kyrgyz Republic and Uzbekistan to the Russian Federation.

6. At the time of project preparation, the main objective of ADB’s interim operational
strategy in Kazakhstan was to facilitate the country’s transition to a market economy. In
cooperation with the International Monetary Fund (IMF) and the World Bank, ADB selected the
transport sector as one of the areas to assist Kazakhstan to improve its infrastructure. ADB’s

1
ADB. 1996. Institutional Strengthening of the Road Sector. Manila. (TA 2631-KAZ for $750,000, approved on 27
August 1996).
2
ADB. 2000. Almaty-Bishkek Regional Road Rehabilitation Project. Manila. (Loan 1774-KAZ for $50 million,
approved on 31 October 2000).
3
ADB. 1996. Feasibility Study of Priority Road Sections. (TA 2632-KAZ for $250,000, approved on 27 August
1996).
2

sector strategy was to (i) corporatize and privatize transport, road maintenance, and
construction industry operations; (ii) restructure road administration to meet market demands;
(iii) secure and increase road sector funding; (iv) develop human resources; and (v) protect the
environment. Elements of all these issues were included in the Project and were addressed
during the Project with variable success. The project framework is in Appendix 1.
7. The Borrower and the Executing Agency (EA) showed strong ownership in the Project
and tried to direct its preparation and implementation as best as they could. No major changes
were made to the project during its implementation except for the frequent changes in the
staffing of the EA and the consultant for detailed design and construction supervision (the
Engineer).
8. The project preparatory technical assistance (PPTA) for the Project was implemented
from July 1995 to February 1996.4 The PPTA identified the section of the road to be
rehabilitated, and prepared a feasibility study and preliminary engineering design. The
consultant for detailed engineering design considered the preliminary design as inappropriate
particularly with regard to the technical solutions proposed, and the EA wanted to execute the
civil works following Soviet standards, Gosudarstvennye Standarty (GOST), instead of the US
standards, American Association of State Highway and Transportation Officials (AASHTO)
standards, used in the design.

9. The cost estimate of the rehabilitation civil works at appraisal was $36.2 million. The
actual civil works contract awarded was $34.95 million, and the final cost of the civil works
contract was $41.2 million.

10. The road maintenance component of the loan was also relevant as the project road was
the first section of the Almaty-Astana road to be rehabilitated, and the Kazakh road
maintenance enterprises did not have sufficient and proper equipment to maintain the road.
However, the road maintenance component was not carefully formulated. The equipment
procured under the loan for $9.84 million was given to the Republican State Road Enterprise,
Kazakhavtodor, which was not in line with the Project’s aim to corporatize and privatize the
road maintenance industry and to increase private sector involvement. Because the road
maintenance industry was not privatized, Kazakhavtodor was the only state owned road
maintenance firm to take over the equipment, though establishment of an equipment rental
company is a covenant under a follow-on loan (Loan 1774-KAZ). Kazakhavtodor was awarded a
road maintenance contract for $6 million and three semi-private companies were awarded
contracts for $0.5 million equivalent using counterpart funds, without prior knowledge of ADB.
Similarly, ADB was not consulted regarding the contract awarded to Kazakhavtodor for
$4.25 million using counterpart funds to repair buildings belonging to the Ministry of Transport
and Communications (MOTC).

B. Project Outputs

1. Civil Works

11. The civil works were packaged in one contract, which was procured through international
competitive bidding (ICB) procedures. The contract was awarded to a British-Turkish-Kazakh
joint venture (the Contractor) on 31 July 1997 and signed on 6 November 1997. The works were
completed on 14 August 2001. The major events of the Project are listed in Appendix 2 and the
contract packages financed by the ADB loan are listed in Appendix 3.

4
ADB. 1995. Road Rehabilitation Project. Manila. (TA 2285-KAZ for $600,000, approved on 11 January 1995).
 3

12. Due to the Contractor’s internal problems coupled with the high staff turnover of the EA
and the EA’s weakness in construction management even with the help of international
consultants, the civil works suffered delays and were completed 22 months behind the original
schedule. In addition, the cracking of the asphalt concrete pavement during the first winter
season caused further delays in the works. The EA, the Engineer, and the Contractor could not
agree on the reasons for the defects and several studies were conducted on the aggregate and
the bitumen. The EA requested the Engineer to adopt former Soviet standards in preparing mix
designs for asphalt concrete, but the Engineer refused and claimed that the mine waste that had
been recommended by the EA for use as aggregate was the main cause of the defects. The
completed road surface shows cracks throughout the project section. According to an
independent study completed in February 2003,5 the main reason for the defects can be
attributed to the quality of the bitumen;6 also, the pavement will need additional maintenance (by
crack sealing) over the next 5 years at an annual estimated cost of $600,000. The study further
recommends that the present wearing course should be recycled and compacted and a new
wearing course should be placed during the sixth year at a cost of about $20 million.

2. Road Maintenance Program

13. The road maintenance program consisted of procurement of road maintenance

equipment and routine maintenance of road sections not under rehabilitation (by ADB, IsDB, or
World Bank).

14. The road maintenance equipment was procured under the loan for $9.84 million
following ICB procedures (Appendix 4). The bids were received in January 1999 and the
contract was awarded on 12 November 1999. The contract was signed on 26 April 2000 and
delivery of equipment was completed on 18 May 2001. The long delays in the procurement
process were due to the disagreements between the EA, the Engineer, and ADB about the bid
evaluation. The EA wanted to declare all bids nonresponsive except for one. The Engineer and
ADB finally persuaded the EA to accept the bid evaluated by the Engineer as the lowest as well
as substantially responsive. The equipment is being used by Kazakhavtodor’s maintenance
units.7

15. Counterpart funds amounting to $12.39 million were used for road materials and routine
maintenance, including $1.66 million for maintenance equipment, and $4.25 million for repair of
buildings (Appendix 5). The road maintenance contracts were awarded for $10.73 million during
1999–2002 using local bidding procedures as planned at appraisal.

16. The Engineer prepared a maintenance manual for the Almaty-Astana road as part of the
road maintenance services component of the consulting services contract. However, the EA did
not use it as it considered the manual inappropriate for adoption.

5
Finnroad Ltd. 2003. Services of Independent Expert to investigate the Cause of Pavement Defects in Gulshad to
Akchetau Section (km 596-788)
6
Similar pavement cracks were observed in some ADB-financed road rehabilitation works in the Kyrgyz Republic
(Loan 1444-KGZ), and Mongolia (Loan 1364-MON), where the bitumen quality was found to be the main reason for
the defects.
7
Kazakhavtodor is MOTC’s maintenance company, which maintains most public roads in Kazakhstan.
4

C. Project Costs

17. The actual project cost amounted to $78.00 million, compared with the appraisal
estimate of $77.00 million. The actual foreign and local costs were $46.29 million and
$31.71 million, respectively, as against appraisal estimates of $40.00 million and $37.00 million,
respectively. The ADB loan of $50.00 million was originally envisaged to finance 100% of the
foreign exchange cost ($40.00 million) and 27% of the local currency expenditure
($10.00 million). At loan closing, ADB’s financing of $43.77 million consisted of 79.2%
($36.65 million) of the foreign exchange cost and 22.5% ($7.12 million) of the local currency
cost. The reduction in ADB’s financing of the foreign exchange cost (from 100% to 79.2%) was
due to the shift from ADB to the Government of financing the interest during construction
($9.12 million) and consulting services for detailed design of other selected priority road
sections ($0.91 million). ADB’s financing of the local currency cost decreased from 27.0% to
22.5% because of the increase in its financing of the civil works contract that was in the foreign
exchange component; ADB financed all consulting services in foreign currency. A summary of
the project cost financing is in Table 1 and the details by component are in Appendix 6 a and b.

Table 1: Project Cost and Financing ($ million)

Appraisal % of Actual % of
Foreign Local Total Total Foreign Local Total Total

ADB 40.00 10.00 50.00 64.9 36.65 7.12 43.77 56.1

Government 00.00 27.00 27.00 35.1 9.64 24.59 34.23 43.9

Total 40.00 37.00 77.00 100.0 46.29 31.54 78.00 100.0

Source: ADB files.

D. Disbursements

18. Of the $50.00 million loan, $43.77 million was disbursed and the unutilized amount of
$6.23 million was cancelled upon loan closure on 11 December 2002. Disbursement of loan
proceeds took 20 months longer than envisaged during appraisal (66 months actual vs. 46
months estimate) mainly because of the delays in the implementation of the civil works contract
and partly because of the delay in the release of the counterpart funds in 1999. To allow the
disbursement of loan proceeds, the original loan closing date of 30 November 2000 was
extended three times up to 31 March 2003. The annual disbursements are shown in Table 2
and the cumulative annual disbursements are shown in Appendix 7

Table 2: Annual Disbursements ($ million)

Year Disbursement % of Total Cumulative %

1997 4.61 11 4.61 9
1998 7.00 16 11.61 27
1999 5.43 12 17.04 39
2000 19.04 43 36.08 82
2001 5.60 13 41.68 95
2002 2.09 5 43.77 100
Source: Staff calculations.
 5

E. Project Schedule
1. Civil Works

19. The loan negotiations were held in July 1996 and the loan was approved in August
1996; however, the loan became effective only on 31 March 1997 due to the delays in
Parliament’s ratification and preparation of the legal opinion by the Government.

20. The civil works contract, completed on 14 August 2001, was delayed by 22.5 months
from the original schedule of October 1999 (Appendix 8). The delayed completion occurred due
to: (i) long preconstruction activities of 14.5 months (from prequalification on 23 August 1996 to
contract signing on 5 November 1997) due to the EA’s lack of experience in international
bidding processes and unfamiliarity with Fédération Internationale des Ingénieurs Conseils
(FIDIC)-type contracts, compared with the appraisal schedule of 6 months; (ii) prolonged
mobilization period of about 6 months due to winter conditions and due to the difficulties of
transporting road construction equipment to Central Asia (from contract signing in November
1997 to commencement of work in May 1998) compared with the appraisal schedule of 2
months (February–March 1997); (iii) delayed counterpart funds in 1999 when the contractor
stopped working for a few weeks until the arrears were paid; and (iv) additional civil works
needed in several sections of the project road where the designed rehabilitation strategy was
found inappropriate.

21. The settlement of disputes between the Contractor’s final claim and the Engineer’s final
statement of satisfactory completion of works failed to materialize since the disputes remain
unresolved and the parties (Government represented by the Ministry of Justice, and Contractor)
are expressing their intentions to go to arbitration as provided for under the civil works contract.

2. Consulting Services

22. The consultant for detailed design and construction supervision, road maintenance
assistance, and benefit monitoring evaluation (the Engineer) started working in November 1996.
The contract sum for services until 30 April 2000 was $3.70 million. Due to the delay in the civil
works and the need for additional services during the defects liability period of the civil works,
the consultant’s contract was extended three times until 14 August 2002. The terms of reference
(TOR) of the consultant’s contract were revised in November 1998 to include 30 person-months
of international and 60 person-months of domestic consultant work for the road maintenance
component of the contract, which were omitted in the original TOR and contract. The final cost
of the consulting services was $4.56 million.

23. There was a plan to use part of the loan funds to finance the detailed design of Almaty-
Bishkek Road Rehabilitation Project during 2001 while the Almaty-Bishkek Road Rehabilitation
Loan (1774-KAZ) was not yet effective. After the consultants were selected in October 2001, the
Government decided to finance the work from government funds.

F. Implementation Arrangements

24. The Ministry of Transport, Communications, and Tourism (MOTCT) was the EA and the
Department of Roads (DOR) was the implementing agency (IA) for the Project until 1999, when
MOTCT was renamed the Ministry of Transport and Communications (MOTC) and DOR was
replaced by the Committee of Roads and Road Transport (COR) (para. 31).
6

25. The EA and project implementation unit (PIU) personnel were frequently replaced, which
was detrimental for successful implementation of the Project. The Minister of MOTC was
replaced four times and MOTC was reorganized twice. With every change of minister or the
ministry, a new team was posted to PIU and assumed responsibility for project implementation.
The new PIU teams had no, or only a little, understanding of the Project and its implementation
requirements. In 2001 the Ministry of Finance (MOF) decided to abolish all PIUs in Kazakhstan
to cut administrative costs and the MOTC’s PIU was abolished with effect from 1 January 2002.
This further disrupted project implementation.

26. While a project steering committee (PSC) was established under the Project as planned,
there was no information available to the ADB missions to indicate the contribution of the
committee. PSC was abolished on 1 January 2002 and its functions were transferred to
Department of State Borrowing, which has not had any meetings on the Project.

G. Conditions and Covenants

27. Compliance with the loan covenants is listed in Appendix 9. The covenants were not
revised during the implementation of the Project. However, some covenants were only partially
complied with as follows:
(i) PIU staff were frequently changed during the Project and finally the PIU was
abolished at the beginning of 2002 and prior to the completion of the Project;
(ii) PSC was abolished 1 January 2002 and its functions were transferred to the
Department of State Borrowing. There is no information available to indicate the
effectiveness of either body;
(iii) Following the recommendations of TA 2631-KAZ attached to the loan, a cost
recovery plan was adopted and the Road Fund was established in 1995.8
However, the Road Fund was abolished in 1998 when it was merged with the
general revenue account of MOF, in spite of the recommendations of TA 2631-
KAZ; and
(iv) The Committee for Transport Sector Legal Reforms and the National Transport
Advisory Committee have not had any meetings.

28. Specific loan covenants on a cost recovery plan, road funding, maintenance, and
privatization/corporatization of the road construction industry may have made the situation
clearer. The project financed road maintenance in the amount of $23 million or almost 30% of
the total project cost. The back-to-office reports of review missions and minutes of site meetings
held during the missions reflect ADB’s desire to establish an equipment rental company for the
equipment procured under the loan. No such company was formed and the Government
expressed the desire that such a role in the future would be carried by Kazakhavtodor.

8
The Road Fund was established by Decree No. 2701 of the President of Kazakhstan on 21 December 1995.
 7

H. Related Technical Assistance

29. During the project preparation (1995), MOTCT requested assistance for the EA in
practical project management and training of domestic consultants and contractors in
competitive conditions.9 The consultants for TA 2285-KAZ conducted two seminars involving the
officials of the Roads Department, Kazzhol (predecessor of Kazakhavtodor), as well as private
road construction companies in tendering procedures and contract management. About 80
people from these organizations attended a 2-day training course. Also, the consultants of TA
2631-KAZ (footnote 1) conducted some training to the personnel of MOTCT.

30. The TA was intended to provide institutional strengthening for the Kazakh road sector.
The work on the TA began in December 1996 and was completed in October 1997. The TA had
an ambitious plan to (i) restructure the Kazakh road administration; (ii) train the personnel of the
EA and prepare a continuous training program; and (iii) provide a legal framework for the road
sector and recommend revisions to the law. The TA produced the following reports: Final Report
(general); Systems Development Plan; Human Resources Development Plan; Road User Cost
Recovery Program; and Road and Road Transport Act and Regulations Study.

31. Following the recommendations of the TA, a new Road Act was passed, including
legislation relating to a Road Fund, and MOTCT was renamed MOTC and DOR was renamed
COR in 1999.

32. In practice, nothing significant has changed (para. 24). COR continued to manage the
projects and Kazakhavtodor continued working as a contractor with an almost complete
monopoly in road maintenance works and with preferred status as contractor of road works
financed by MOTC. Consequently, MOTC asked the European Bank for Reconstruction and
Development (EBRD) to assist in reorganizing the road administration under the Aktau-Atyrau
road rehabilitation feasibility study contract, which was completed in January 2003. The
reorganization of the Kazakh road administration was also included in TA 3530-KAZ10, attached
to loan 1774-KAZ (footnote 2), which is presently being implemented and is scheduled for
completion by April 2004. MOTC apparently did not consider the recommendations of the
consultants of EBRD as appropriate and was expecting to get what it hopes to be better advice
from the consultants under the ongoing TA 3530-KAZ. Better coordination between ADB,
EBRD, and MOTC might have eliminated some redundancy and overlapping in the scope of
some of these TAs.

33. The main reasons for the lack of major impact of TA 2631-KAZ is the limited ownership
of MOTC of the recommendations of the TA to first implement the recommendations of the TA
and later revert to the status quo (see para. 7 above). The EA had implemented the
restructuring of road sector institutions and reallocated activities between DOR and
Kazakhavtodor. The progress stopped in terms of reforming road sector institutions and road
funding after the move of the MOTC to the new capital, Astana. The Road Sector Policy
Statement (RSPS)—earlier adopted by MOTC to provide a policy framework for the road sector

9
The COR repeated the same request for practical guidance during the inception and midterm meetings of the
ongoing TA 3530-KAZ in May and September 2003. MOTC wants to obtain training for its personnel in project
administration, training for domestic consultants to improve the quality of supervision, and training for domestic
contractors to improve the quality of works and enable them to observe international contract conditions.
10
ADB. 2000. Improvement of the Road Sector Efficiency. (TA 3530-KAZ for $740,000, approved on 31 October
2000).
8

and to promote efficient transport through free competition subject to justifiable limits of
economic, safety, and environmental considerations—was ignored. This was mainly because of
an almost complete turnover in the personnel of MOTC and DOR/COR when the capital was
moved to Astana. The TA consultant may have been too independent in recommending the
reforms in the road sector and did not foresee such drastic changes in the Government’s
structure and location. ADB’s intervention to keep the reforms on track, as recommended by the
consultant, could have been more active. During the course of the TA, ADB fielded only one
loan review mission, which did not appear to have interacted with the consultant in the field.

34. The second TA attached to the loan (TA 2632-KAZ, footnote 3) prepared a feasibility
study and preliminary design for Almaty-Bishkek Regional Road Rehabilitation Project (Loan
1774-KAZ). TAs 2631-KAZ and 2632-KAZ were completed in 1997 and 1998, respectively. In
the late 1990s no TA Completion Reports were prepared on TAs attached to loans.

I. Consultant Recruitment and Procurement

35. Seven firms were short-listed for the consultant selection11 in April 1996 for detailed
design, construction supervision, and benefits monitoring and evaluation. The proposals were
received on 25 July 1996. The contract was signed on 22 November 1996. The delays were due
to the EA’s original reluctance to use ADB’s evaluation criteria and format.

36. The TOR and schedule of the design and construction supervision consultant should
have anticipated delays in project implementation and the need for services during the defects
liability period. The person-month estimates were 80 person-months of international and 100
person-months of domestic consultant work. The actual consultant inputs were 300 and 800
person-months, of which about 40% were due to the delay in the construction works by 22
months and additional services of the Engineer during the defects liability period, which
extended the consultant’s contract period from 35 to 70 months. When selecting the Engineer,
the EA failed to pay enough attention to the Engineer’s experience in working in extremely cold
conditions, which may have contributed to the poor quality of the pavement. None of the
Engineer’s team members had previous experience in arctic conditions.

37. Advance recruitment action and retroactive financing for $1.5 million were approved for
consulting services on 12 April 1996 and the consulting services from 30 November 1996 to 31
March 1997 were financed under it until the loan became effective.

38. There were 17 applicants for prequalification as civil works contractors, from which
seven were prequalified on 23 April 1997. The main reason for disqualification was lack of
experience as a road contractor in Central Asia or similar conditions. As the EA wanted the civil
works to be started in 1997, the bidding period was reduced to 60 days. In short, due to the
delays in contract award, the 1997 construction season was lost. Four bids were received and
their respective bid prices were $34.95 million, $36.29 million, $39.76 million, and
$54.66 million. The second lowest bidder proposed an alternative pavement structure to replace
the lower layer of the pavement with penetration macadam to be placed using a paver. The
alternative would have reduced the bid price by $5.23 million but the alternative design was not
approved for technical reasons. The contract was awarded on 31 July 1997 to the lowest bidder,

11
One each from Canada, Germany, India, Japan, Switzerland, Turkey, and United States.
 9

a joint venture company from Kazakhstan, Turkey, and the United Kingdom,12 for $34,945,000.
Initially, MOF’s Committee of External Lending (CEL) did not understand the conditions of the
contract and wanted to change the lump sum items to itemized ones. CEL also wanted all the
payments to the Contractor to be made in local currency through a local bank. The contract
was signed only on 5 November 1997 after lengthy negotiations with the Contractor without any
change in the contract. During the negotiations, problems emerged in the Contractor’s joint
venture agreement and it had to be modified, which further delayed the signing of the contract.

39. Due to the delayed implementation of the civil works contract, the procurement of the
road maintenance equipment was deferred from mid-1996 to the last quarter of 1998. The bids
for procurement of road maintenance equipment were received in January 1999. The first bid
evaluation report (BER) submitted by the EA in May 1999 was unacceptable to ADB because
the recommendation for the award of contract was based on the opinion of the Government
Tender Committee, and not on an evaluation of bids. The revised BER was received by ADB in
August 1999. After several clarifications on the BER and two procurement committee meetings,
ADB approved the BER in October 1999. Even after approval by ADB, EA delayed the contract
signing until November 2000. There were some delays also on the part of ADB, mainly because
of delays in clarifying the critical issues in the BER. The EA did not understand the ADB
Guidelines for Procurement and could not present their evaluation according to the guidelines.
Therefore they finally had to accept the Engineer’s evaluation, which was acceptable to ADB.

J. Performance of Consultants, Contractors, and Suppliers

40. The Engineer did not always strictly supervise the works. Despite evidence of inferior
bitumen (with penetration grade of only 50 as against a minimum requirement grade 80 and
bitumen been overheated in storage) no action was taken by the Engineer to reject the
substandard bitumen. The EA was not satisfied with the Engineer’s performance in checking
and revising design, which the EA thinks caused cost overruns and contributed to pavement
defects.

41. The Engineer did not want to take any responsibility for the poor quality of the pavement
as evidenced by the cracking. The EA several times asked the Engineer to prepare the asphalt
mix design according to GOST standards. The Engineer refused stating that GOST standards
could not be accepted because they were not in the original bid documents.13 The Engineer did
not understand GOST standards, the use of which can lead to good quality pavement, if applied
properly. The EA did not understand AASHTO standards but asked the Engineer to use the
AASHTO standards properly, stating that good quality pavement can be laid in extremely cold
places like Alaska according to AASHTO standards.

42. The Engineer prepared the tender documents for road maintenance equipment including
specifications, but failed to specifically mention the performance requirements in Kazakhstan’s
harsh climatic conditions.

43. The design and supervision consultants wanted to independently exercise their power as
per their contract. The EA did not recognize them as the Engineer’s representatives, which

12
Balfour Beatty and Mensel in association with Afdan and Zhezkazgan Zholdary.
13
6 April 2001 letter from the Engineer to the EA.
10

caused problems as the EA suspected them to be more sympathetic to the Contractor and
equipment suppliers. That became very clear in the context of the pavement defects as the
Engineer had to defend his own design. The consultants defended their attitude in the draft
project completion report prepared in September 2002. However, the report reveals that the
consultants did not fully understand their role as the Engineer’s representatives, whose task
was to supervise the works and procurement to be done according to the contract.

44. All international consultants of the Engineer’s team were replaced at least once. The
original Project Manager (Chief Resident Engineer) could not come to Kazakhstan and was
replaced immediately after signing the contract. During project implementation, the Engineer
changed project managers three times for various reasons.

45. Due to the delayed tendering and the Contractor’s internal problems, the first full
construction season was almost completely lost (1998), and the EA threatened to cancel the
contract in August 1998 due to the delay in mobilization. During 1998, the Contractor carried out
earthworks on the first 12 km long section and only 6 km of asphalt pavement was laid. It was
found to be of poor quality and was replaced in 1999. Again in spring 2000, the Contractor was
asked to repair, at his own cost, the cracks on a 42 km long section of the road built during the
previous winter.

46. On 13 March 1998, the Contractor asked to use Russian bitumen because Kazakh
bitumen was unavailable; the Contractor understood that the contractor of the Bishkek-Osh road
rehabilitation project (Loan 1444-KGZ) was using Russian bitumen. ADB declined the request
and assured him that in the Kyrgyz project Uzbek bitumen was being used. The Contractor had
probably found only suppliers of Russian bitumen as, in a site meeting on 12 August 2000, the
delay in supplying Russian bitumen was mentioned as a reason for delays in the asphalt works.
The Contractor informed the meeting that in 1999 such delays had not occurred.

47. Traffic safety on the road being rehabilitated was poor. In a site meeting on 25 August
2000, the Engineer criticized the Contractor for not taking care of traffic safety, because during
1999 14 people were killed and 41 injured in traffic accidents on the project road. However, the
Engineer should also bear some responsibility as it is the Engineer’s responsibility to supervise
the Contractor in meeting the requirements of traffic safety on the construction site.

48. The supplier of the road maintenance equipment was late in providing some of the
equipment. Instead of imposing liquidated damages, the EA accepted the supplier’s offer to
provide additional spare parts free of charge.

K. Performance of the Borrower and the Executing Agency

49. Due to the delays in payment of counterpart funds, the Contractor stopped working in
July 1999. The EA frequently requested approval to deviate from ADB’s Guidelines for
Procurement. ADB approved a reduction of the bidding period from 90 to 60 days, though this
did not help expedite matters as the EA spent almost 6 months, from June to November 1997,
negotiating the contract.
 11

50. The EA’s and Borrower’s personnel were changed several times during the Project. One
Minister of MOTC was replaced after the President of Kazakhstan visited the construction site
and learned about the pavement defects.

51. The EA’s actions were not always consistent throughout the Project. For example, in
June 2000 the EA presented a claim for $951,570 to the Engineer for defects of the pavement
on the 48 km section between km 596 and km 644 because the EA wanted GOST standards to
be used and felt that Kounrad mine waste stone was unsuitable as it did not meet the
requirements of GOST standards on freeze-thaw testing. However, this claim was withdrawn on
21 September 2003 without any explanation.14 The Contractor wanted to use mine waste rock
because the local government wanted to charge for rock from the quarries identified in the
design documents (the bidding documents did not mention the cost of the rock to be taken from
government-owned quarries, which was confirmed in the prebid meeting in May 1997), and the
EA could not help the Contractor.

52. The fact that some of the EA’s personnel were former employees of the Kazakh partners
of the Contractor’s joint venture further complicated issues and made the international partners
of the joint venture suspicious of the EA’s objectivity. Also, the Engineer was alarmed after
seeing how deputy ministers discussed the civil works contracts with the subcontractors without
disclosing the contents of the discussions to the Engineer.15

53. By an administrative measure of MOF, the PIU was abolished on 1 January 2002
without prior notice to ADB, and that greatly affected the performance of the EA.

54. Problems were caused by the fact that the consultant’s contract did not mention the
taxes payable by the consultants. In August 1999, MOF started demanding that the domestic
consultants pay income tax and stopped processing the withdrawal applications. ADB sent a
letter16 stating that because the consultant’s contract was signed before the new tax code was
approved, the taxes of the domestic consultants should be paid by the Government. According
to FIDIC, only the international consultant and contractor are tax free and the local
subcontractors, subconsultants, and personnel should pay local taxes unless otherwise agreed
in the contracts. In this Project there was no tax exemption for the local companies and
personnel.

55. The Borrower’s and the EA’s performance can be rated satisfactory since the works
were completed and the delays in project completion were largely due to the Contractor. The
EA’s satisfactory performance was largely due to the dedicated work of the few people working
in DOR (COR since 1999). MOTC has stated, in its draft project completion report that it “has
learned from the successful and even unsuccessful experience gained during the Project”.

14
Snowy Mountains Engineering Consultants’ investigation found Kounrad mine spoil suitable on 29 May 2001.
15
Consultant’s letter to ADB dated 12 September 2000.
16
ADB letter dated 12 April 1999 on taxes of the domestic consultants.
12

L. Performance of ADB

56. The selection of the PPTA consultant could have been more rigorous taking into account
the consultant’s experience in cold climatic conditions like the winters in Kazakhstan. The TOR
for the design and supervision consultant should have been more detailed and specific. The
TOR is a generic one with no reference to the harsh continental climatic conditions with arctic
winters and hot and dry summers.

57. ADB took prompt action in conveying its decisions concerning all project management
issues including use of materials from nonmember countries. The use of Russian bitumen was
discussed on several occasions, and ADB advised the use of bitumen from Uzbekistan or any
other member country that met the required specifications. Despite objections by ADB, Russian
bitumen was reportedly used by the contractors on a few occasions.17

58. The bidding documents for road maintenance equipment were prepared by the
Engineer, cleared by the EA, and approved by ADB. However after the bid was opened, the EA
wanted to include in the evaluation criteria a provision that the proposed equipment must meet
performance requirements in Kazakhstan’s harsh climatic conditions. The EA’s preference to
procure road maintenance equipment that it deemed more suitable for operations in such
conditions was not supported by ADB or the Engineer, as the award of contract to a bidder other
than the lowest evaluated and substantially responsive one is not permitted under ADB’s
Guidelines for Procurement. The EA reluctantly agreed to the Engineer’s recommendation to
award the contract to the lowest evaluated and substantially responsive bidder. The road
maintenance equipment subsequently proved to be less than ideal for Kazakhstan’s harsh
conditions. In hindsight, ADB should have advised the EA to ask the Engineer to incorporate in
the bidding documents a provision requiring equipment to meet the performance requirements
in Kazakhstan harsh climatic conditions.

59. ADB did not agree to the EA’s request to use GOST standards for asphalt pavement mix
design and insisted, with the Engineer, on keeping to AASHTO standards. This is because
international contractors are seldom familiar with GOST standards, and equipment referred to
by GOST may not be available outside the former Soviet Union.18

60. ADB fielded four missions during the 1-year preparation of the Project and six missions
during its 6-year implementation period. In 1998 no missions were fielded, although during 1998
the progress of the civil works was very slow and there were many problems between the EA
and the Contractor, which ADB missions could perhaps have alleviated. In 2002 two missions
were fielded. The missions did not provide any organized training to the personnel of the EA. If
training had been offered, it should have been repeated by each mission since the EA’s
personnel were frequently changed. Only the mission of the representative of ADB’s Consulting
Services Division, who attended the contract negotiations with the Engineer, mentions in its
BTOR having given training to the EA personnel and recommends continual training in the use
of consultants and in procurement.

17
Russian bitumen was used in the civil works of the Project at least in 1999 and 2000, according to the August
2000 monthly report of the Engineer.
18
GOST standards are more suitable for operations on a force account basis to ensure efficient utilization of
resources owned by the state; they are not suitable in a market environment.
 13

61. After the initial start-up delays, ADB’s early missions received an optimistic impression
about the work performance and quality of works (which later turned out to be unfounded). This
was mainly because project implementation progressed more smoothly in the earlier part of the
Project, before the capital was moved to Astana. Project implementation suffered as
experienced PIU staff were replaced and the ministry took a new shape in Astana. ADB’s
September 2001 Mission noted that due to the considerable delays in civil works over the first 2
years, the Project had become “at risk”.

62. Only the first loan review mission in October 1997 mentioned the road maintenance
component financed by the government counterpart funds for $12.6 million, stating that the
maintenance works would commence in April/May1998.

63. ADB’s Resident Mission conducted intensive dialogue with the Government on the
delayed payments to the Contractor in 1999, which contributed to solving the problem. ADB’s
performance is rated partly satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

64. The Project is important for Kazakhstan’s transport sector; the most deteriorated section
of the Almaty-Astana road—the most important road in the country—was rehabilitated. It was
the first internationally financed road rehabilitation project in Kazakhstan. With the Project, ICB
has been introduced to the Kazakh road sector, and it will also be applied in domestically
financed road rehabilitation projects in the future. Despite the pavement defects and lack of
institutional impact, the Project is highly relevant.

B. Efficacy in Achievement of Purpose

1. Traffic

65. An assessment made during a feasibility study showed that average daily traffic (ADT)
had declined from about 3,400 vehicles in 1990 to about 2,000 vehicles on the project road in
1994. By July 2002, the ADT had increased to 2,100–2,250 vehicles, or by about 21%. This is
equivalent to an average annual growth rate of about 3% and in line with the 2–4% expected at
appraisal.

66. The largest growth has been in the number of automobiles in the various sections of the
project road, which increased on average by 71% between 1995 and 2002. The number of
buses and minibuses increased by about 61%, but the number of trucks decreased by 43%.
The reduction in truck traffic has largely been in the three- and four-axle category. According to
an origin-destination survey conducted in 1995, about 60% of the trucks had origins or
destinations outside of Kazakhstan, but in July 2002, the share was down to less than 15%.
While the increase in automobiles and buses can be attributed to the relocation of the capital
from Almaty to Astana and the general increase in economic activity in Kazakhstan, the reason
for the reduction in transit traffic is the decreased transport from the Kyrgyz Republic, Tajikistan,
and Uzbekistan to the Russian Federation. The decrease is probably due to the economic
problems in the Russian Federation after the currency crisis in 1998 and the new customs
procedures and value-added tax (VAT) collections at Russian border stations.
14

2. Economic Benefits

67. The economic analysis prepared at appraisal was recalculated while taking into account
the following: (i) economic capital cost of the Project (civil works and consulting services) was
$45.7 million compared with $40.9 million estimated at appraisal, (ii) there was a 3-year delay in
project completion, and (iii) the average normal traffic growth from 2002 to 2020 is 3%
compared with 4% estimated at appraisal. The economic analysis shows an economic internal
rate of return (EIRR) of 14.7%, against the 21.5% estimated at appraisal (Appendix 10). The
reduction in EIRR is due to the lower than predicted growth in truck and transit traffic. If the
increase in the annual maintenance costs ($600,000) due to pavement defects during the first 5
years and the major maintenance works during the sixth year ($20 million) are taken into
account, the EIRR drops to 10.5%. Overall the Project is rated less efficacious.

C. Efficiency in Achievement of Outputs and Purpose

68. The direct benefits of the road rehabilitation works are reductions in vehicle operating
costs along the project road and in travel time from Almaty to Astana, which is presently about
16 hours. In 1996 the travel time was 30–40 hours. About one sixth or 2.5 hours of the reduction
of the travel time from Almaty to Astana is due to the Project as the average operating speed on
the road is 85 km/h. Overall vehicle operating costs fell by about 8% (savings derived by 5-axle
trucks amounted to about 40% of the total savings).

69. The road maintenance manual for the Almaty-Astana road prepared by the Engineer
was not used by the EA, which found it unacceptable. Reasons for the EA’s decision may have
been the frequent changes in EA personnel, resulting in a lack of cooperation between the EA
and the Engineer during the manual’s preparation, and a consequent lack of ownership on the
EA’s side. The Project was rated as less efficient.

D. Preliminary Assessment of Sustainability

70. The rehabilitation works of bridges and drainage structures will last for the designed
service life, 20–30 years, provided that routine maintenance is done as required. According to
the independent technical audit conducted on the works, the rehabilitation of the asphalt
pavement works carried out under the Project can be postponed by 5–6 years if annual repair
works for $600,000 are done (para. 71). After 5 years, i.e., in 2007, the existing asphalt concrete
pavement will have to be recycled and compacted, as an additional base course and a new
wearing course will have to be put in place. The estimated cost of the rehabilitation is
$20 million. The original plan was to have at least a 20-year service life for the pavement.

71. Between the completion of the civil works in August 2001 and August 2003 the road
maintenance costs of the project road section were T27,196,058, equivalent to $185,000 or
$964/km, which is an acceptable sum for a new road without defects. To prevent drastic
deterioration of the road the maintenance funding has to be increased by $600,000 a year, or
$3,000/km.

72. The Road Fund was established in 1995 but ceased to exist in 1998. The Government
needs to find other sources to finance the maintenance of the national road network.
 15

73. The EA in its PCR regretted its failure to insist on the inclusion in the bidding documents
of road maintenance equipment specifications, which could have specifically mentioned the
equipment’s performance requirements for Kazakhstan. The procured equipment is partially
nonfunctioning after 2 years of usage due to severe wear, particularly in the hydraulic systems,
and to lack of spare parts as the manufacturer does not have a local distributor in the country
and this was not taken into account in the bidding documents. The Project was rated as less
likely in terms of sustainability.

E. Environmental, Sociocultural, and Other Impacts

74. The Project has had limited environmental impact, though greater numbers of wildlife are
hit and killed by the traffic. In addition, the number of traffic accidents and human casualties has
risen, caused by vehicles’ greater travel speeds.

75. The Project provided employment for local unskilled labor for 6,000 person-months,
which had a big impact on a population of less than 100,000 along the project road.
Establishment of roadside services has further benefited local people.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

76. The Project remains highly relevant after completion. Because its efficacy, efficiency,
and sustainability are lower than those anticipated at project preparation, and because its
institutional impacts are minimal, the Project is rated only partly successful (Appendix 11).

B. Lessons Learned

77. Better and more project-specific TOR for the consultants (including the PPTA
consultant), closer supervision, and more training in ADB procedures for the PIU and EA, as
well as advice in selection of consultants and contractors, would have reduced the technical
problems during the Project.

78. Many delays in the Project were due to the EA’s and MOF’s reluctance to accept the
international contract conditions, and the failure to honor the Engineer as the Borrower’s
representative in the Project. The Borrower (represented by MOF) would have benefited from
more and continual training in ICB procedures and in application of ADB’s various guidelines.

79. The EA has learned that it should be prepared to actively participate in project
preparation (including PPTA and advisory TA) and to oversee the work of consultants and
contractors to gain strong ownership in all project components and in all decisions made. In this
Project the EA largely ignored the advisory TA and the maintenance assistance during the civil
works.

80. ADB has learned that the EA’s opinion needs to be considered in procurement, even if
the EA does not fully understand the procedures of ADB’s Guidelines for Procurement.
16

C. Recommendations

1. Project Related

81. Future Monitoring. The development of traffic intensity should be monitored to predict
the needs of future rehabilitation measures. Traffic safety should be monitored and improved to
decrease traffic accidents.

82. Covenants. The covenants not complied with in this Project (efficient PIU, sufficient
funding of road sector, modernizing road administration, corporatization and privatization of the
Government’s road maintenance and construction companies) should be made covenants of
subsequent loans.

83. Further Action or Follow-Up. The EA has to follow the performance of the pavement
and take required remedial measures in a timely manner to avoid a complete loss of investment
in the pavement works.

84. Additional Assistance. Forthcoming loans should make a functioning PIU a major
covenant of the loans. The consultants of the loans or advisory TAs should be required to give
training to the personnel in project management and in procurement.

85. Timing of PPAR Preparation. ADB should consider preparing the PPAR in 2004 and
preparing an in-depth evaluation report of the loan together with the Loan 1444-KGZ.
.
2. General

86. During project preparation the following should be taken into account:

(i) The issues and recommendations mentioned in the project framework should be made
covenants of the loan. Otherwise, ADB has no means to make sure that the
recommendations are implemented or observed;
(ii) TORs for the consultants of road rehabilitation projects should take into account the
climatic and geological conditions of the country, and in the selection of the consultants
for TAs and supervision, their experience in similar climatic and geological conditions
should be emphasized;
(iii) A borrower should be encouraged to finance the PIU through the loan if the government
salaries are not competitive with the salaries of the private sector;
(iv) If equipment is procured under a loan, the loan should have a covenant saying how the
equipment will be used and who will use it;
(v) ADB should also monitor use of the counterpart funds, as they are part of the total
project;
(vi) Optimistic schedules should be avoided. They mislead the EA and the borrower and
cause resentment toward ADB when construction seasons are lost due to delays in
procurement procedures; and
(vii) ADB should coordinate the TA assistance with other international finance institutions to
avoid duplication.
 17

87. During project implementation the following should be taken into account:

(i) ADB should review the technical performance of the Project and of the attached advisory
TA, in addition to procurement, disbursements, and covenants. In road rehabilitation
projects, it is important that an engineer takes part in all ADB missions;
(ii) To avoid an adverse impact on relations with the borrower, ADB should carefully
consider the EA’s views on procurement, explain ADB’s various guidelines to the EA,
and assist the EA in actively participating in bid evaluation with the consultants to reach
common understanding according to ADB’s Guidelines for Procurement;
(iii) If ADB’s missions or Project Administration Officers recognize problems in
implementation, missions should be fielded more frequently than on an annual basis.
The missions should discuss matters separately with the EA, consultants, and contractor
and try to find indications of problems and bring up the problems in common meetings
and help the parties to see the threats and act proactively to eliminate them. If serious
problems emerge, the projects could be reviewed even several times a year, either
through the fielding of additional, dedicated missions or in connection with other projects
in the country or in neighboring countries;
(iv) EAs and PIUs should be encouraged and trained to use email to discuss the problems
informally. Through proactive involvement of the Project Administration Officers many
problems can be prevented from developing in a project; and
(v) If construction materials are not available in the borrowing country and when material
cost or transport costs from other ADB member countries are high, it should be
considered during the project preparation to request permission from the ADB’s Board of
Directors (3/4 majority is needed) to allow acquisition of bulk materials from nonmember
countries. The origin of materials like fuel, bitumen, stone aggregate, and sand may be
impossible to verify if intermediaries are used, which makes difficult to enforce the
procurement regulations.
 18 Appendix 1

PROJECT FRAMEWORK
Design Summary Project Targets Result Monitoring Risks/
(Verifiable Indicators) Mechanisms Assumptions
Goal
To rehabilitate and 1. Deterioration of about 600 kilometers Rehabilitated Project completion
maintain roads to arrest (km) of road section in Almaty-Akmola review and
the ongoing decline in corridor arrested through rehabilitation subsequent project
the potential for future and maintenance administration (PA)
sustainable missions
development
2. Department of Roads (DOR) capability DOR capability Project midterm Gov’t. will
improved for project management and was somewhat review (MTR) and improve its civil
supervision, contract administration, improved subsequent PA service
and road maintenance missions conditions to
retain its trained
staff
3. Road sector policy environment No policy Project MTR, Gov’t. will
improved for private sector to improvement, subsequent PA, continue to open
participate no privatization and project its economy
processing
missions
Purpose

1. To improve the road 1.1 Economic internal rate of return Economic EIRR assessment
infrastructure through (EIRR) of about 21.5% on the project internal rate of in benefit
rehabilitation and road achieved by 2000 return (EIRR) monitoring and
maintenance for max. 14.7%, evaluation report
efficient movement of probably only
freight and passengers 10.5%
2. To improve Institutional 1.2 International roughness index of the Achieved Road roughness
capacity roads maintained under the Project assessment in
3. To improve the policy measured less than 4 meters per benefit monitoring
support environment kilometer.. and evaluation
report
2.1 The systems (management SRA and ORAs PA missions and Gov’t. will
information, accounting, and project not established progress report of continue to
management ) in State Road Authority the consultants address capacity
(SRA) and selected oblast road development
authorities (ORAs) established issues
recognizing their
importance and
by mobilizing
adequate
resources in
future
2.2 Routine road maintenance Ministry of PA missions and
management system on selected road Transport and progress report of
maintenance depots (RMDs); about Communic- the consultant
six RMDs established ations (MOTC)
did not adopt
the Road
Maintenance
system
developed by
the consultant
2.3 Medium-term human resources No HRD plan HRD plan
development (HRD) plan adopted adopted
 Appendix 1 19

Design Summary Project Targets Result Monitoring Risks/

(Verifiable Indicators) Mechanisms Assumptions
omponents/ Outputs
1.1 Rehabilitation of about 1.1 Rehabilitation of 192 km road section 192 km of road PA missions and Inadequate
192 km section of completed by end-1999 rehabilitated progress reports budget allocation
deteriorated paved for rehabilitation
national road, feasibility and maintenance
study, and detailed in general
design of about 200 km
of other selected road
sections and
maintenance of
selected sections of the
road in Almaty–Akmola
corridor
1.2 Feasibility study and detailed design of Done PA missions and
200 km of roads prepared by end- consultants’
1998 feasibility study
and design reports
1.3 Maintenance of about 600 km of road Almaty-Astana PA missions and
progressing satisfactorily and other road was progress reports
RMDs identified for introduction of the maintained
road maintenance system during 1999-
2001

2.1 Strengthening of DOR 2.1.1 Number of staff under DOR increased No SRA and PA missions
by establishing an SRA ORAs, staff
and 19 ORAs reduced
2.1.2 Qualified staff mobilized under DOR No PA missions
2.1.3 Quality of DOR’s project output No PA missions
improved
2.2 Enhancement of SRA’s 2.2 On-the-job training of counterpart staff Insufficient PA missions and Limited ability of
capability to implement and exposure of domestic consultants training progress reports counterpart staff
projects in project management, supervision, to learn and
and administration by international accept new
consultants for construction ideas and
supervision completed knowledge due
to language
problem
2.3 Enhancement of the 2.3 Road maintenance standards Not adopted by Maintenance Adequate fund
road maintenance prepared, maintenance training MOTC manuals, allocation from
capacities of SRA and conducted, maintenance equipment standards PA Road Fund for
ORAs delivered, and maintenance program missions, and road
successfully implemented and being progress reports maintenance in
expanded to cover more roads general
2.4 Implementation of HRD 2.4.1 Improved institutional structure and No MTR and PA
plan setup implemented improvement missions
2.4.2 Number of staff being trained within No international
MTR and Project
and outside the country increased training completion report
(PCR) missions
3.1 Adoption of Road 3.1.1 Progressively greater responsibility No privatization Advisory TA
Sector Policy Statement and autonomy being given to (ADTA)
(RSPS) functioning of state-owned and private consultants’ final
enterprises report
3.1.2 Committee for Legal Reform formed No ADTA consultants’
by 30 June 1997 final report
3.1.2 Committee for Legal Reform formed No PA review missions
by 30 June 1997 and ADTA
consultants’ report
3.1.3 National Transport Advisory No PA review missions
Committee established by 31 and ADTA
December 1997 consultants’ report
20 Appendix 1

Design Summary Project Targets Result Monitoring Risks/

(Verifiable Indicators) Mechanisms Assumptions
3.2 Implementation of Road 3.2 Road Fund collected in accordance Road Fund was Budget document Difficulty in
Fund Decree with the Road Fund estimate abolished of DOR collecting Road
Fund
3.3 Adoption of 3.3 Improved cost recovery measures Done The Road Act Gov’t. opposition
recommendations for adopted by 31 December 1997 and to increased tax
rationalized road-user incorporated in the updated Road Act on fuels
cost recovery practices
3.4 Implementation of the 3.4.1 Organizational jurisdictions of sector No PA missions
updated Road Act institutions defined and clarified
3.4.2 Road infrastructure classified No DOR’s road
standards and
specifications
3.4.3 Policies regarding road industry No Freight tariffs and
licensing tariffs, and fares updated passenger fares
3.4.4 Policies regarding motor vehicles No PA missions
registration, licensing, inspection, and
weight and dimension control updated
3.4.5 Policies regarding road-user cost No DOR’s budget and
recovery adopted tax returns of the
items through
which cost
recovery has been
proposed
Activities
1.1 Providing adequate 1.1 Funds allocated from Road Fund Yes DOR budget In case of
counterpart funds for estimate shortage, Gov’t.
the Project will allocate
implementation additional funds
1.2 Recruiting detailed 1.2 Consultant recruited in August 1996 In December Contract
design and construction 1996 documents
1.3 Carrying our survey and 1.3 Survey and detailed designs February 1997 Survey and design
design completed by October 1996 reports
1.4 Awarding of contracts 1.4 Civil works awarded by March 1997 November Progress reports Limited
1997 and PA missions international
competition
1.5 Carrying out road 1.5 Rehabilitation completed by October August 2001 Progress reports
rehabilitation and 1999 and routine road maintenance and PA missions
maintenance of continues to be implemented
selected road sections satisfactorily
1.6 Supervising the 1.6 Construction supervision completed by Consultant ‘s Progress reports
construction and on- October 1999 and DOR, SRA, and contract and PA missions
the-job training of ORA staff trained in construction completed
counterpart staff supervision and contract September MTR, PCR, and
administration 2002, no SRA, future Asian
ORAs Development Bank
(ADB) missions
2.1 Establishing an SRA 2.1 Decree no. 1598 establishing SRA No Completed
and 19 ORAs and ORAs Issued on 27 November
1995
2.2 Recruiting ADTA 2.2 ADTA consultants recruited by mid- December Contract
consultants 1996 1996 documents
2.3 Introducing works 2.3 Systems introduced in DOR from the No PA missions
accounting, financial beginning of 1998
and management
information systems in
SRA and ORAs
2.4 Recruiting detailed 2.4 Consultant recruited by mid-1996 December 1996 Contract
design and construction documents
supervision consultants
2.5 Recruiting road 2.5 Consultant recruited by mid-1996 December 1996 Contract
maintenance documents
assistance consultant
 Appendix 1 21

Design Summary Project Targets Result Monitoring Risks/

(Verifiable Indicators) Mechanisms Assumptions
2.6 Preparing road 2.6 Maintenance manual prepared and April 1998 PA missions and
maintenance standards approved for implementation by the progress reports
and manuals end of 1997
2.7 Training of road 2.7 Training continued until mid-2000 No MTR and PCR
maintenance staff missions and
progress reports
2.8 Procuring road 2.8 Equipment procured by September November 2000 Contract
maintenance equipment 1997 documents and PA
missions
2.9 Reviewing the 2.9 HRD plan prepared; four DOR staff No Consultant’s final
organizational structure, trained abroad report
roles, responsibilities,
and functions of DOR
and properly defining
them and preparing
HRD plan for DOR
3.1 Preparing RSPS and 3.1 Ministry of Transport Communications Yes Completed
adopting it adopted RSPS with effect from 31
March 1996
3.2 Enacting Road Fund 3.2 Road Fund Decree No. 2701 issued Yes Completed
Decree on 27 December 1995
3.3 Carrying out the road- 3.3 Cost recovery proposals reviewed by Yes ADTA consultants’
users cost recovery ADB and Gov’t. and incorporated in report
study by ADTA the Road Act
consultants
3.4 Updating Road Act with 3.4 Road Act reviewed by ADB and the Yes Draft Road Act
the help of ADTA Government; Road Act approved by
consultants Gov’t. by December 1997

Inputs/Resources
Project Costs ($ million)
(including taxes)
Estimate Actual
1. Civil Works 36.2 41.2
2. Road Maintenance, 19.0 22.2
Equipment, Materials, and Human Resources
3. Consulting Services 4.7 4.6
(i) Detailed Design, Construction
Supervision, Maintenance Assistance, and
Benefit Monitoring
(ii) Detailed Design of Selected Roads 0.4 0.9
4. Contingencies 10.5 0.0
5. Interest During Construction 6.2 9.1
Total 77.0 78.0
22 Appendix 2

CHRONOLOGY OF MAJOR EVENTS IN PROJECT

11 Jan 1995 PPTA for the project, TA 2285-KAZ: Preparation of a Road

Rehabilitation Project, for $600,000 was approved.

21 Feb–6 Mar 1996 Loan Fact-Finding Mission.

12 Apr 1996 Management Review Meeting.

25 Apr 1996 MOTC advised that the PIU had been established by the Department of
Roads of MOTC.

30 Apr 1996 ADB approved the shortlist and invitation documents for detailed design
and construction supervision consultant.

24 May 1996 Invitation letters were issued to the seven short-listed firms.

7–17 May 1996 Appraisal Mission.

7 Jun 1996 Staff Review Committee Meeting.

24–26 Jul 1996 Loan negotiations.

25 Jul 1996 Deadline for submission of consultant proposals.

9–11 Aug 1996 Special loan administration mission to assist MOTC in its evaluation of
consultants’ proposals for detailed design and construction supervision.

27 Aug 1996 Loan approval.

18 Oct 1996 Loan Agreement was signed.

31 Oct 1996 ADB approved the first-ranked firm for the design and construction
supervision consultant.

11–14 Nov 1996 Contract negotiations with first-ranked firm for the design and
construction supervision consultant.

22 Nov 1996 Contract signing.

2 Dec 1996 Commencement of services of the detailed design and construction

supervision consultant.

5–9 Dec 1996 Loan Inception Mission.

9 Jan 1997 ADB approved a 2-month extension of loan effectiveness from

16 January 1997 to 16 March 1997.

21 Jan 1997 ADB approved the replacement of consultant’s Project Manager due to
illness.
 Appendix 2 23

27 Feb 1997 ADB approved the replacement of consultant’s Project Manager and
Resident Engineer.

31 Mar 1997 Loan became effective.

22 Apr 1997 ADB received the signed contract of the consultant (JOC/WSA) in the
amount of $3.7 million.

24 Jun 1997 Bid opening for civil works.

7 Jul 1997 ADB approved the reallocation of $6.2 million from IDC to (i) civil works
($1.8 million) to meet local currency cost, (ii) equipment ($3.4 million) for
the procurement of additional road maintenance equipment—foreign
exchange cost, and (iii) unallocated ($1.0 million). The Borrower was
advised that IDC and other charges during construction should be paid
by the Borrower from its own funds.

31 Jul 1997 ADB approved the award of the civil works contract.

7–9 Oct 1997 Loan Review Mission 1.

6 Nov 1997 The civil works contract was signed.

17 Feb 1998 ADB approved the replacement of consultant’s Project Manager.

26 Feb 1998 ADB approved the replacement of consultant’s Resident Engineer.

4 Mar 1998 ADB approved the replacement of consultant’s Soil/Material Engineer.

May 1998 Commencement of civil works.

25 Jun 1998 ADB approved the replacement of consultant’s Resident Engineer

15 Jan 1999 Bid opening for the procurement of road maintenance equipment.

26 Feb 1999 ADB approved the replacement of consultant’s Resident Engineer and
expressed its concern regarding the frequent changes to the
consultant’s personnel.

12–16 Mar 1999 Midterm Review Mission.

4 May 1999 ADB received the BER for road maintenance equipment.

20 May 1999 ADB advised the EA to submit a revised BER for the road maintenance
equipment.

27 May 1999 ADB approved the revised manning schedule, additional site inspector,
and the replacement of consultant’s Maintenance Manager.

7 Jun 1999 ADB received the revised BER for equipment proposing the award of
contract to DaimlerChrysler.
24 Appendix 2

15 Jul 1999 ADB approved the replacement consultant’s as Maintenance Manager

and the appointment of a new Soils/Materials Engineer.

1 Sep 1999 ADB approved the proposed training of four participants (engineers) to
the XXI International Road Congress to be held in Kuala Lumpur,
Malaysia on 3–9 October 1999 in the amount of $10,000.

12 Nov 1999 ADB approved the award of the equipment contract to Nichimen Corp.

19 Nov 1999 ADB received a fax from MOTC providing clarification that it could not
agree to ADB’s decision to award the contract to Nichimen.

23 Nov 1999 ADB advised MOTC that if still wished to award the contract to
DaimlerChrysler, ADB would not be able to finance the contract under
the loan and asked the EA to seek other sources of fund.

25 Jan 2000 ADB received advice from MOTC indicating (i) its acceptance of ADB’s
decision to award the contract to Nichimen, and (ii) requesting approval
to negotiate a reduction in contract price with Nichimen since its bid
amount substantially exceeded the amount allocated for equipment
under the loan.

22 Mar 2000 ADB received a copy of EA’s approval of the appointment of a new
Deputy Resident Engineer.

5 Apr 2000 ADB advised MOTC that it could not negotiate with Nichimen a
reduction in its bid price and advised that a reallocation of loan proceeds
could meet the expected shortfall of the equipment category under the
loan.

10–14 Apr 2000 Loan Review Mission 2

19 Apr 2000 ADB approved the modified scope of equipment contract: (i) reduction
in the number of inspection cars and road lining machines;
(ii) cancellation of radio communication system; and (iii) cancellation of
additional tipper trucks and front-mounted snow blowers, which reduced
the contract price from $10.44 million to $9.86 million.

26 Apr 2000 Equipment procurement contract with Nichimen was signed.

28 Apr 2000 ADB approved a reallocation of $3.6 million loan proceeds from the
unallocated category to civil works ($2.0 million) and equipment
($1.6 million) categories.

29 May 2000 ADB received a copy of Modification No. 2 extending the consultant’s
services from 30 November 1999 to 27 June 2000 and increasing the
contract cost from $3.7 million to $4.34 million for ADB’s approval.

31 May 2000 ADB approved the recruitment of a new Maintenance Management

Computer Specialist.

4 Jul 2000 ADB approved Modification No. 2 for: (i) extension of construction
 Appendix 2 25

supervision from 30 November 1999 to 27 June 2000, (ii) extension of

road maintenance consultants from December 1999 to June 2000, and
(iii) increase in contract cost from $3.7 million to $4.34 million.

7 Aug 2000 ADB approved extension of the loan closing date by 12 months from 30
November 2000 to 30 November 2001.

28 Nov 2000 ADB approved Modification No. 3 extending the completion of consulting
services from 28 June 2000 to 30 November 2000 at no increase in
contract amount of $4.34 million.

18 May 2001 Completion of delivery of equipment.

15 Jun 2001 ADB approved Modification No. 4 extending the consulting services to
30 September 2001 and increasing the contract amount to $4.79 million.

14 Aug 2001 The consultant issued the taking-over certificate (effective 14 August
2001) to the contractor for Km 695+800 to Km 664+500 of Gulshad to
Akchetau. The defect liability period also commenced on this date.

29 Aug–5 Sep 2001 Loan Review Mission 3

13 Sep 2001 Ribbon cutting ceremony for the substantial completion of Km 596-Km
787+700.

22 Oct 2001 ADB approved the (i) second extension of the loan closing date by 9
months from 30 November 2001 to 30 September 2002 and
(ii) extension of the consultant’s services for construction supervision by
10.5 months from 30 September 2001 to 15 August 2002 to allow
supervision during the defects liability period.

7 Nov 2001 ADB received a copy of the signed contract with Louis Berger and a
letter from the EA advising that financing of the detailed design would be
financed from government funds.

22–26 Apr 2002 Loan Review Mission 4

27 Aug–6 Sep 2002 Loan Review Mission 5

27 Sep 2002 ADB approved the third extension of the loan closing date by 6 months
from 30 September 2002 to 31 March 2003 to allow for the settlement of
disputes regarding the contractor’s final claim for civil works.

24 Oct 2002 ADB’s comments to the TOR for the independent consultant who would
conduct a technical investigation/audit of civil works were provided to
MOTC.

4 Nov 2002 Commencement of independent technical audit by Finnroad.

11 Dec 2002 Loan closing.

18 Mar 2003 ADB received a copy of the report by Finnroad.

26 Appendix 2

9–16 Jul 2003 Project Completion Review Mission.

ADB = Asian Development Bank, EA = Executing Agency, IDC = interest during construction], JOC = Japan
Oversea Consultants, MOTC = Ministry of Transport and Communications, PIU = project implementation unit, PPTA
= project preparatory technical assistance, TA = technical assistance, TOR = terms of reference, WSA = Wilbur
Smith Associates.
 CONTRACT PACKAGES

Estimated Actual Contract Works Contractor

Contract Description Number Procure- Contract Contract Approved Completed
of ment Value Value
Contracts Method ($ million) ($ million)
A. Road Rehabilitation

Civil Works 1 ICB 36.20 41.17 July 1997 August Balfour Beatty (UK)-Mensel (Turkey)-
2001 Afdan (Kazakhstan)-Zheskazgan
Zholdary (Kazakhstan)

B. Road Maintenance

Maintenance 1 ICB 5.80 9.84 April 2000 November Nichimen (Japan)

Equipment 2001 See Appendix 4

Routine maintenance 13 KAZ 13.20 12.39 1999 2001 See Appendix 5

C. Consulting Services

Detailed Design and

Construction
Supervision, Road 1 ICR 4.70 4.56 November August Japan Overseas Consultants (Japan)
Maintenance 1996 2002 and Wilbur Smith Associates (US)
Assistance, and BME

Detailed Design for Consulting Engineering Services Pty.

Selected Priority Road 1 ICR 0.40 0.66 June 1997 September (India) and Kazdorproekt
Sections. 1998 (Kazakhstan)

Design of Almaty- 1 KAZ 0.00 0.25 October January Louis Berger International (US),
Bishkek road, Loan 2001 2003 ECIL (Pakistan), Kazdorproekt

Appendix 3
1774-KAZ (Kazakhstan), and Kazakh Consult
International (Kazakhstan)
Total 60.30 68.87
BME = benefit monitoring and evaluation, ICB: international competitive bidding, ICR: international competitive recruitment, UK = United Kingdom, US = United
States.

27
KAZ: Direct award according to Kazakh practice
Source: ADB files.
 28 Appendix 4
MAINTENANCE EQUIPMENT PROCURED

Kazakhavtodor

Manual vibrating
Water tank with

Air compressor

Concrete mixer
Sand spreader

Rotary broom

Measurement
Renault truck

Bitumen tank
Snow plough

Snow blower

Road marker
Asphalt saw
branch/oblast

Spare parts
Pneumatic
spreader
Bitumen

hammer
Pickup
Crane

wheel
spray

roller

Total
Jeep
Akmola 9 9 9 5 9 5 1 5 2 2 2 2 4 2 3 69
Aktyubinsk 0
Almaty 10 10 10 2 4 2 1 4 3 3 3 3 6 2 1 5 69
Atyrau 0
East-Kazakhstan 0
Zhambyl 2 2 2 2 2 10
West-Kazakhstan 0
Karaganda 22 22 22 4 6 3 1 6 5 5 5 5 10 2 2 3 123
Kyzylorda 0
Kostanai 0
Mangystau 0
Pavlodar 1 1 1 1 4
North-Kazakhstan 2 2 2 1 1 1 1 1 1 1 2 1 1 17
South-Kazakhstan 0

Road Construction 2 2 2 1 7

Total Number 46 46 46 15 22 11 3 2 17 11 11 11 11 22 6 6 12 1 299

Original value
5.552 0.900 0.452 0.452 0.177 0.213 0.275 0.039 0.498 0.378 0.045 0.104 0.197 0.019 0.092 0.018 0.003 0.167 0.318 9.898
($ million)a

a
The difference between the total sum and the contract sum, $9.84 million, is due to the fact that the supplier provided additional spare parts instead of paying liquidated
damages.
Source: Kazakhavtodor
 ROUTINE MAINTENANCE COMPONENT

Year Contract Contractor From To Contract Amount

($'000)
Maintenance Contracts
1999 Almaty-Astana Road Maintenance Kazakhavtodor 1 Jan 1999 31 Dec 1999 2,679.56
2000 Almaty-Astana Road Maintenance Kazakhavtodor 1 Jan 2000 31 Mar 2000 163.00
Almaty-Astana Road Maintenance Kazakhavtodor 1 Apr 2000 31 Dec 2000 187.16
Almaty-Astana Road Maintenance Dorozhnik 1 Apr 2000 31 Dec 2000 488.38
Almaty-Astana Road Maintenance Dauletdorstroi 1 Apr 2000 31 Dec 2000 263.16
Almaty-Astana Road Maintenance DRSU 1 Apr 2000 31 Dec 2000 55.61
Almaty-Astana Road Maintenance Zhetysu Zholdary 1 Apr 2000 31 Dec 2000 77.50
Almaty-Astana Road Maintenance Karaganda Zholdary 1 Apr 2000 31 Dec 2000 1,132.85
2001 Almaty-Astana Road Maintenance Kazakhavtodor 12 Nov 2001 20 Dec 2002 787.90
2002 Almaty-Astana Road Maintenance Kazakhavtodor 644.19
Total Maintenance Cost 6,479.31

Procurement of Road Maintenance Evrazia 8 Feb 2001 16 Jun 2002 1,662.00

Equipment

Repair of Buildings
Repair of Buildings Kazakhavtodor 1 Jan 2001 31 Dec 2001 1,182.78
Repair of Buildings Spetsdorstroi 20 Apr 2001 3 Oct 2001 3,065.94
Total Building Repair Cost 4,248.72

Total Cost 12,390.03

Appendix 5
29
 COST AND FINANCING
($ million)

30 Appendix 6a
Appraisal Actual
Components ADB Government Total ADB Government Total
Foreign Local Total Foreign Local Total Foreign Local Total Foreign Local Total Foreign Local Total Foreign Local Total

1. Civil Works (Gulshad-

a
Akchetau Road) 19.50 7.50 27.00 — 9.20 9.20 19.50 16.70 36.20 22.24 7.12 29.36 — 11.81 11.81 22.24 18.93 41.17

2. Road Maintenance 5.50 — 5.50 — 13.50 13.50 5.50 13.50 19.00 9.84 — 9.84 — 12.39 12.39 9.84 12.39 22.23
9.84
a. Equipment 5.50 — 5.50 — 0.30 0.30 5.50 0.30 5.80 9.84 — — 1.66 1.66 9.84 1.66 11.50
b. Materials — — — — 9.30 9.30 — 9.30 9.30 — — — — 10.73 10.73 — 10.73 10.73
b. Human Resources — — — — 3.90 3.90 — 3.90 3.90 — — — — — — — — —

3. Consulting Services 3.70 1.10 4.80 - 0.30 0.30 3.70 1.40 5.10 4.56 — 4.56 0.52 0.39 0.91 5.08 0.39 5.47
a. Detailed Design and
Construction
Supervision of Road
Rehabilitation,
Road Maintenance
Assistance, and
Benefit Monitoring and
Evaluation 3.40 1.00 4.40 — 0.30 0.30 3.40 1.30 4.70 4.56 — 4.56 — — — 4.56 — 4.56

b. Detailed Design of Other

Selected
b
Priority Road Sections 0.30 0.10 0.40 — — — 0.30 0.10 0.40 — — — 0.52 0.39 0.91 0.52 0.39 0.91

4. Contingencies 5.10 1.40 6.50 — 4.00 4.00 5.10 5.40 10.50 — — — — — — — — —

a. Physical 2.87 0.85 3.72 — 2.30 2.30 2.87 3.15 6.02 — — — — — — — — —
b. Price 2.23 0.55 2.78 — 1.70 1.70 2.23 2.25 4.48 — — — — — — — — —

Subtotal 33.80 10.00 43.80 — 27.00 27.00 33.80 37.00 70.80 36.65 7.12 43.77 0.52 24.59 25.11 37.17 31.71 68.87

5. Interest and Other Charges 6.20 — 6.20 — — — 6.20 — 6.20 — — — 9.12 — 9.12 9.12 — 9.12
During Construction

Total 40.00 10.00 50.00 — 27.00 27.00 40.00 37.00 77.00 36.65 7.12 43.77 9.64 24.59 34.23 46.29 31.71 78.00
% 100.0 27.0 64.90 0.0 73.0 35.1 51.9 48.1 79.2 22.5 56.1 20.8 77.5 43.9 59.3 40.7

a
$41,169,622.24 paid against the contract as of 1 Nov 2002. Contractor is still claiming an additional $3,318,887.67 (reference: Borrower's PCR, p. 5)
b
Detailed design for Loan 1774-KAZ: Almaty-Bishkek Regional Road Rehabilitation Project.
 Appendix 6b 31

Appraisal Actual
% to % to
Foreign Local Total Total Foreign Local Total total
ADB 40.00 10.00 50.00 64.9 36.65 7.12 43.77 56.1
Government 0.00 27.00 27.00 35.1 9.64 24.59 34.23 43.9
Total 40.00 37.00 77.00 100.0 46.29 31.71 78.00 100.0
32 Appendix 7

CUMULATIVE DISBURSEMENTS

100
Disbursement %

80

60

40

20

0
1997 1998 1999 2000 2001 2002

Source: ADB files

 IMPLEMENTATION SCHEDULE
Item 1996 1997 1998 1999 2000 2001 2002
J F MAM J J A S OND J F MA M J J A SOND J F MAM J J A SON D J F MA M J J A S O N DJ F MA M J J A S O N DJ F MA M J J A S O N DJ F MA M J J A S O N D

A. Road Rehabilitation Prequalification

and Tendering MobilizeConstructio Winter Construction Winter Construction
Civil Works x xx xx x
Prequalification and TenderingMobilization Construction Defects Liability Period
x x xx xx xx x x x xx x xx
B. Road Maintenance
Tendering Supply Implementation
Road Maintenance Equipment x xx xx x
Tendering Supply
X X X X X XX X X X X X X X X XX XX x
C. Consulting Services

Detailed Design and Detailed Design and

Construction Supervision, Recruitment Tendering Services Winter Services Winter Services
Road Maintenance Assistance xxxx
and Benefit Monitoring Services Recruitment Services
xxxxxxxx

RecruitmenServices
Detailed Design of Selected xx xxxx
Road Sections Recruitment Services
x x xx xxxxx x x x x x x
D. Technical Assistance
Institutional Strengthening of Recruitment Fieldwork
Road Sector (TA 2631-KAZ) xxxx
Recruitmen Fieldwork
xxxxx

Feasibility Study of Selected Recruitment Fieldwork

Road Sections (TA 2632-KAZ) xxxxxx
Recruit Fieldwork
xxxx

Projected

Actual

Appendix 8
33
34 Appendix 9

COMPLIANCE WITH LOAN COVENANTS

Reference to
Covenants Agreements Status of Compliance
A. Implementation Arrangements

1. The project implementation unit (PIU) established LA, Schedule Partly complied with. The PIU
within the Committee of Roads (COR) shall be 6, para. 1(a). was abolished with effect from
responsible for the day-to-day implementation of the 1 January 2002 and its
Project and provide the necessary contact between function was undertaken by
COR, the contractors, the suppliers, and ADB. A the Division of Investment
project manager appointed by COR shall serve as Projects of COR. The division
the head of the PIU and shall at all times be was not properly staffed.
supported by a sufficient number of qualified road
engineers, a materials and soil engineer, a bridge
engineer, and supporting financial and clerical staff.

2. The Borrower shall, by 31 March 1997, establish an LA, Schedule Complied with.
adequately staffed maintenance implementation unit 6, para. 1(b).
(MIU), headed by a maintenance manager to
implement the maintenance operations under the
Project and assist the PIU in the day-to-day
implementation of the Project.

3. The Borrower shall ensure that the PIU and MIU LA, Schedule Partly not complied with. There
remain adequately staffed at all times throughout the 6, para. 1(c). have been frequent changes in
Project implementation period, and shall be assisted the staffing of PIU during
by the consultants for detailed design, construction project implementation and at
supervision and road maintenance assistance. present, the PIU is
inadequately staffed.

4. The project steering committee (PSC), established LA, Schedule Partly complied with. The PSC
by Ministry of Transport, Communications, and 6, para. 2. ceased to exist from 1 January
Tourism, shall be maintained for the duration of the 2002 and its functions are
project implementation period and shall (i) oversee currently undertaken by the
and coordinate all project activities, including contact Department of State
among the agencies involved in project Borrowing.
implementation, and sector reforms agreed with
ADB; (ii) review the status of the project
implementation; (iii) monitor the progress achieved
and resolve difficulties encountered; and (iv) serve
as a forum for discussions on, and review of, the
Project’s impact on regional development. The PSC
shall be chaired by the Minister of Transport and
Communications, or his representative, and its
members shall include the Director of COR, the
project manager, and representatives from the
Committee for Utilization of Foreign Capital) and
Ministry of Economy. The PSC shall meet at least
twice a year, and more often if required.

B. Cost Recovery

5. The Borrower shall, by 30 June 1998, taking into LA, Schedule The recommendations were
account the recommendations of the advisory TA, 6, para. 3. implemented in 1998; this
 Appendix 9 35

Reference to
Covenants Agreements Status of Compliance
adopt appropriate measures to improve cost included reducing the
recovery from road users. enterprise tax (the main
source for the Road Fund but
not related to the road user
charges) from 0.5% of
turnover to 0.2% and by
moving the point of collection
of the fuel tax from the retail
level to the refinery/import
level. However, the Road Fund
was subsequently abolished in
1998, and all road
development maintenance
funds are appropriated from
the state budget.
C. Benefit Monitoring and Evaluation

6. The Borrower shall, with the assistance of the LA, Schedule Complied with. Final report
consultants engaged under the Project, (i) establish 6, para. 4. was submitted to ADB in
a benefit monitoring and evaluation system for August 2002.
recording the baseline data, including the traffic
data, and collecting the statistical data for monitoring
the project benefits, and (ii) cause COR to evaluate
the project benefits, and monitor and report on
physical, financial, economic and social aspects of
the Project during the course of project
implementation.

D. Environmental Considerations

7. The Borrower shall (i) ensure that appropriate LA, Schedule Complied with.
environmental protection and safety devices are 6, para. 6.
incorporated in the design of the Project and
(ii) implement the Project, and operate and maintain
the project facilities, in accordance with the initial
environmental examination prepared under ADB-
financed TA 2285-KAZ: Preparation of a Road
Rehabilitation Program, and ADB’s Environmental
Guidelines for Selected Infrastructure Projects.

E. Policy Issues

8. Regulatory Reforms. The Borrower shall, by 30 LA, Schedule Partly complied

June 1997, establish a Committee for Transport 6, para. 7.
Sector Legal Reforms (CTSLR) which shall, with the
assistance of the advisory TA consultants, (i) update
the Borrower’s existing Road Act and present it for
the consideration of Parliament, (ii) issue regulations
consistent with the existing Road Sector Policy
Statement (RSPS), and (iii) undertake a
comprehensive review of the existing legislation in
the transport and road sector and make any
amendments required to ensure consistency with
36 Appendix 9

Reference to
Covenants Agreements Status of Compliance
the revised Road Act and the RSPS.

9. CTSLR shall be chaired by the Minister of Transport LA, Schedule Partly complied with.
and Communications, or his representative, and its 6, para. 8.
members shall include the representatives of the
Ministry of Justice, Auto Transport Department
(ATD) of MOTC, COR, and one member from the
Parliamentary Standing Committee on Transport
and Communications.

10. Sector Reforms. The Borrower shall, by 31 LA, Schedule Partly complied with.
December 1997, cause MOTC to establish the 6, para. 9.
National Transport Advisory Committee consisting of
the representatives of MOE, COR, ATD, state
transport enterprises, and the private sector.

F. Other Matters

11. Retroactive Financing. Withdrawals from the loan LA, Schedule

account may be made for reimbursement of 3, para. 8.
reasonable expenditure incurred under the Project
before the effective date, but not earlier than 1 July
1996, in connection with the selection and
recruitment of consultants, subject to a maximum
amount of $1.5 million.

12. The Borrower shall cause the Project to be carried LA, Section Complied with.
out with due diligence and efficiency and in 4.01.
conformity with sound administrative, financial,
engineering, environmental and road practices.

13. The Borrower shall make available the counterpart LA, Section Complied with.
funds, facilities and services, for carrying out of 4.02.
the Project.

14. The Borrower shall cause competent and qualified LA, Section Partly complied with.
consultants and contractors to be employed. 4.03.

15. The Borrower shall ensure that the activities of its LA, Section Complied with.
departments and agencies are conducted and 4.04.
coordinated in accordance with sound administrative
policies and practices.

16. Insurance. The Borrower shall make arrangements LA, Section Complied with.
for insurance of the project facilities. 4.05.

17. Records and accounts. The Borrower shall LA, Section Complied with.
maintain project accounts. 4.06(a).

18. Audited Project Accounts. The Borrower shall LA, Section Complied with.
(i) maintain separate accounts for the Project, 4.06(b).
(ii) have such accounts and related financial
statements audited annually, in accordance with
 Appendix 9 37

Reference to
Covenants Agreements Status of Compliance
appropriate auditing standards, and (iii) furnish to
ADB not later than 9 months after the end of each
related fiscal year, certified copies of such audited
accounts and financial statements and the reports of
the auditors, including the auditor’s opinion on the
use of the loan proceeds and compliance with the
loan covenants, all in the English language.

19. The Borrower shall furnish ADB all such reports LA, Section Complied with.
and information as ADB may reasonably request 4.07.
concerning the Loan, goods and services financed
under the Loan, the Project, DOR, financial and
economic conditions in the territory of the Borrower,
and any other matters relating to the purposes of the
Loan.
20. Borrower’s Project Completion Report. Promptly LA, Section Complied with. The report was
after physical completion of the Project, but in any 4.07(c). received on 5 February 2003.
event not later than 3 months or such later date as
may be agreed between the Borrower and ADB, the
Borrower shall prepare and furnish to ADB a report
on the execution and initial operation of the Project,
including its cost, the performance by the Borrower
of its obligations under the Loan Agreement, and the
accomplishment of the purposes of the loan.
21. Inspections. The Borrower shall enable ADB’s LA, Section Complied with.
representatives to inspect the Project, the goods 4.08.
financed out of the proceeds of the Loan, and any
relevant records and documents.
22. The Borrower shall ensure that the Project facilities LA, Section
are operated and maintained in accordance with 4.09.
sound administrative, financial, engineering,
environmental,road, and maintenance and
operational practices.
38 Appendix 10

ECONOMIC REEVALUATION

A. Economic Analysis at Appraisal

1 The benefit and cost analysis at the time of appraisal was based on the Highway Design
and Maintenance model version 3 (HDM-3), adjusted for specific conditions in the project area.
The economic evaluation was made by comparing the with-project and the without-project
cases.

2. The scope of the Project at appraisal included rehabilitation of 192 kilometers (km) of
road, about half of which had an International Roughness Index (IRI) of more than 6.5. The civil
works were contained within the original right-of-way with minor changes to vertical and
horizontal alignment. The Project included the construction of cross- and side-drainage
structures and failed embankments, stabilizing shoulders, and rehabilitation of the pavement
structure. The pavement and geometric design standards used correspond to the forecast
traffic on the improved road and international norms.

3. The analysis at appraisal considered the economic cost of improving the road and the
pursuant direct economic benefits arising from future savings in road maintenance costs and
vehicle operating costs (VOCs). The analysis assumed that the Project would be completed by
1999 and, consequently, benefits were evaluated for a period up to and inclusive of through
2019, providing an economic benefit period of 20 years. The project road was divided into two
sections and benefits and cost estimates were prepared for each section in the with- and
without project cases. VOC savings were computed for each section on the basis of volume
estimates for seven vehicle categories: cars, buses, and minibuses, and four types of trucks
classified according to the number of axles.

4. The estimated savings in future maintenance costs were based on forecasts of future
routine and periodic maintenance costs for “with-project and without- project” cases. Routine
maintenance on the improved road (the “with-project” case) included, crack sealing, snow
removal, repair of traffic signs and safety devices, cleaning of culverts and drainage ditches,
and landscaping. For the “without-project” case, in addition to the above-mentioned works, the
cost of repairs to potholes, roadside furniture, and hydraulic structures was included. Periodic
maintenance for the “with-project” case included overlays every seven years. In the without-
project case, periodic maintenance consisted of chip seals every second and third year, to
replace the inevitable loss of material induced by traffic and snow removal. The need for
application of overlays on the reconstructed sections was determined by the pavement
deterioration model in HDM-3, which predicts pavement conditions based on information on
climate, soil conditions, forecast traffic, and the specific pavement design.

5. The economic analysis at appraisal indicated that the Project would have an economic
internal rate of return (EIRR) of 21.5%. The sensitivity analysis tested four alternative scenarios:
(i) a 10% increase in cost, (ii) a 10% decrease in benefits, (iii) a 1-year delay in completion, and
(iv) a combination of the first three scenarios. In all cases, the EIRR was above 12.0% (ranging
from 15.8% to 19.5%).

B. Economic Analysis at Project Completion

6. The ex-post economic analysis at project completion was undertaken by recalculating

project costs and benefits estimated at appraisal, taking into account some changes that took
place during implementation. Compared with expectations at appraisal, two differences were
 Appendix 10 39

observed: (i) the total economic cost of civil works increased from $40.9 million to $45.7 million,
and (ii) project implementation was significantly delayed and the road was only fully open to
traffic in August 2001, about 2 years later than planned. Additionally, it was assumed that the
average annual traffic growth rate from 2003 to 2019 will would be 3% as opposed to 4% used
at appraisal..

7. Traffic counts made in 2002 as part of benefit monitoring and evaluation (BME)
confirmed that road usage by automobiles and buses had increased substantially. The number
of automobiles in the various sections of the Project road increased on the average by 71%
between 1995 and 2002. The number of buses and mini-buses increased by about 61%, but
the number of trucks decreased by 43%. The reduction in truck traffic has largely been in the
three- and four-axle category. According to the an origin-destination survey conducted in 1995,
about 60% of the trucks had origins or destinations outside of Kazakhstan, but in July 2002, the
share was less than 15%.

8. The expectation at appraisal, of an average IRI of 3.4 was higher than the 2.5 observed
in July 2002. However, the higher value was used in the economic recalculations in order to
retain the unit VOCs at the same level as those computed at appraisal.

9. Total VOC savings of approximately $334 million over the 20- year period foreseen at
appraisal were unlikely to be realized due to the lower than expected growth in truck traffic.
The recalculated savings are likely to be in the order of about $156 million of which about 40%
would accrue to 5-axle trucks and 26% to automobiles. This estimate is also based on the
assumption of a 3% annual average growth rate for all classes of traffic. The VOC savings to
international transit traffic were excluded from the computations to be consistent with the
assumptions made at appraisal.

10. As shown in Table A10, the results from the economic analysis, taking into account
the differences noted above, indicate that the Project as implemented will generate an
estimated EIRR of 14.7%, against 21.5% at appraisal. The lower than expected EIRR is largely
attributable to the reduction in truck traffic, delayed project completion, and the slightly lower
overall traffic growth rate used. The EIRR drops to 10.5% when the annual maintenance cost is
increased by $600,000 during the first five 5 years and major rehabilitation for $20 million is
done during the sixth year (due to defective civil works). However, if traffic grows at 6% per
annum, the EIRR will remain at 14.7%, despite the added maintenance costs.

11. The appraisal did not provide analysis of the likely distribution of project benefits, nor
has such analysis been performed at a later stage. It is suggested that future traffic counts be
supplemented with socioeconomic interviews of road users on a stratified sample basis, to
assess the distribution of transport related benefits over social-, economic-, travel purpose-, and
modal strata.
40 Appendix 10

Table A10.1: Economic Reevaluation

without Additional Maintenance Cost Due to the Pavement Defects

Costs Benefits
Year Capital Routine Periodic Total VOC Without Project Total
Costs Maint. Maint. Costs Savings Routine Periodic Benefits
Maint. Maint.

1996 0.12 0.12 0.00

1997 0.84 0.84 0.00
1998 9.47 9.47 0.00
1999 10.00 10.00 0.00
2000 14.94 14.94 0.00
2001 7.49 7.49 2.19 2.19
2002 0.66 0.66 6.58 6.58
2003 0.50 0.00 0.50 6.78 1.02 0.00 7.80
2004 0.50 0.00 0.50 6.98 1.02 1.39 9.39
2005 0.50 0.00 0.50 7.19 1.02 1.39 9.60
2006 0.50 0.00 0.50 7.40 1.02 0.00 8.42
2007 0.50 0.00 0.50 7.63 1.02 1.39 10.04
2008 0.50 3.00 3.50 7.85 1.02 1.39 10.26
2009 0.50 3.41 3.91 8.09 1.02 0.00 9.11
2010 0.50 0.00 0.50 8.33 1.02 1.39 10.74
2011 0.50 0.00 0.50 8.58 1.02 1.39 10.99
2012 0.50 0.00 0.50 8.84 1.02 0.00 9.86
2013 0.50 0.00 0.50 9.11 1.02 1.39 11.52
2014 0.50 0.00 0.50 9.38 1.02 1.39 11.79
2015 0.50 3.00 3.50 9.66 1.02 0.00 10.68
2016 0.50 3.41 3.91 9.95 1.02 1.39 12.36
2017 0.50 0.00 0.50 10.25 1.02 1.39 12.66
2018 0.50 0.00 0.50 10.56 1.02 0.00 11.58
2019 0.50 0.00 0.50 10.87 1.02 1.39 13.28

Economic internal rate of return = 14.7 %.

VOC = vehicle operating cost.
Source: ADB staff calculations.
 Appendix 11 41

RATING OF THE PROJECT

Criterion Weight Rating Description Rating Value Score Total Rating

Relevance 0.20 Highly relevant 3 0.60

Efficacy 0.25 Less efficacious 1 0.25
Efficiency 0.20 Less efficient 2 0.20 0.4
Sustainability 0.20 Less likely 1 0.20
Institutional Impacts 0.15 None 1 0.00 0.15
Overall Weighted Average 1.25 Partly Successful
Source: ADB Staff estimates. 1.60