National Trade Corridor Highway Investment Programme: ADB’s IED rates MFF Tranche 2 as ‘relevant, effective and successful’

ISLAMABAD: The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) has rated “Pakistan: National Trade Corridor Highway Investment Program (Tranche 2)” relevant, effective, and successful.

The IED in its validation report stated ADB approved a multi-tranche financing facility (MFF) for Pakistan for the National Trade Corridor Highway Investment Program in October 2007. Tranche 2 of the programme was approved in April 2014, became effective one month earlier as planned in November 2014, and closed 21 days ahead of December 2017 target.

The loan was financially closed in April 2018.

At appraisal, the total project cost was $238.3 million, of which the ADB was to fund $200.0 million and the balance of $38.3 million was for the government’s counterpart financing. After the Department for International Development (DFID) provided a grant of $82.4 million, ADB reduced its funding to $117.6 million at the government’s request.

At completion, the project cost was $169.08 million, with ADB financing $67.57 million and grant financing of $70.51 million. Unutilized loan proceeds of $50.02 million were cancelled. Loan savings were mainly caused by low bid prices and the devaluation of the rupee vis-à-vis the dollar.

The project was expected to require 77.5 person-months of international and 1,026 person-months of national consulting services at appraisal. Actual consulting services totalled 49.2 person-months for international consultants and 2,438.8 person-months for national consultants. Supervision consultancy services were financed through the ADB loan.

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The project was classified category A for the environment and involuntary resettlement because the environment, land acquisition, and resettlement impacts were expected. It was classified as category C for indigenous peoples. There were no gender elements in tranche 2. The principles of ADB’s Policy on Gender and Development (1998) were paid attention to during the implementation of each project.

The NHA was the executing and the implementing agency for the investment and support components. The report noted that to sustain a high level of economic growth, Pakistan needed to diversify its economy and become more globally competitive by reducing bottlenecks that inhibited trade and by exploiting Pakistan’s strategic location as a land bridge to Central Asia and the hinterlands of the People’s Republic of China. Therefore, improvements to road connectivity and efficiency were essential. Because Pakistan’s domestic trade flows were concentrated in one major north-south transport corridor, improvements to this corridor were expected to make trade more efficient and have a major impact on the performance of the entire transport sector and the economy overall. Part of the north-south transport corridor was the E35 expressway, to which the government accorded a high priority for improving an efficiency of traffic operations.

The E35 expressway was to connect the northern part of the country to the Karakoram Highway and the M1 motorway, and be an alternative to the congested two-lane N35, with quicker and safer access to the built-up areas around Haripur and Abbottabad.

It was to reduce vehicle operating costs (VOCs) and improve trade logistics, thereby reducing the cost of doing business and enhancing export competitiveness. Based on the design and monitoring framework (DMF) in the project completion report (PCR) for tranche 2, the project’s envisaged impact was increased efficiency gain for road traffic operation along the National Trade Corridor. Its planned outcome was improved regional network for the movement of goods and people along E35 expressway.

Tranche 2 had two targeted outputs which were the construction and operationalisation of a 39.6-kilometres (kms) E35 expressway connecting Hassanabdal and Sarai Saleh and an improvement of the National Highways Authority (NHA)’s institutional capacity in social safeguards.

The PCR rated the project highly relevant. The government’s aim was to create a sustainable and efficient road network that would enable Pakistan to enjoy greater mobility and enhance trade at the lowest possible cost. The government viewed trade competitiveness and export diversification as a key strategy for achieving its economic agenda by 2030 and considered transport logistics as a major constraint. These goals were embodied in the government’s Medium Term Development Framework and national road development plans, with which the project was aligned.

The project was also aligned with the ADB’s country assistance plan, 2001–2003 and country partnership strategy for Pakistan, 2009–2013. Therefore, the investment under tranche 2 was relevant to the development priorities of both the government and the ADB.

The PCR rated the project effective. According to the PCR’s DMF, the project outcome was achieved with allowed speed on the expressway of up to 120 kilometers per hour (kph) for light vehicles and 100 kph for heavy passenger and freight vehicles, exceeding the 80 kph target. VOCs were reduced to PRs138.0/km for freight vehicles and PRs15.2/km for passenger vehicles, lower than the targets of PRs156.0/km for freight vehicles and PRs15.7/km for passenger vehicles.

The PCR rated the project efficient. At appraisal, the project yielded an economic internal rate of return (EIRR) of 16.1 per cent. This figure was reduced to 13.7 per cent on reassessment when the project road was expanded from four lanes to six lanes. The EIRR at completion was 14.3 per cent, above the threshold rate of 12 per cent. The reevaluation considered VOC savings, journey time, generated traffic, and road safety as economic benefits.

The PCR rated the project successful. The project was relevant to the national strategy for better logistics through improved north–south corridors and to the ADB’s country partnership strategy for Pakistan, 2009–2013. The design of the project had no innovative features, significant demonstration value for other projects, or transformative effects required for a highly relevant assessment. Therefore, this validation assesses the project relevant. The completion of adjoining projects will lead to sustainable growth and enhance sustainability. Overall, the validation assesses the project successful.

Copyright Business Recorder, 2022