Federal Government has prepared a "Highways Rehabilitation Project", which will be completed with the total cost of 361.40 million dollar including foreign exchange component of 300 million dollar.
Official sources, disclosed that World Bank (WB) and International Development Association (IDA) will be provided 150 million dollar each.
Official sources stated that the proposed project development objective is the sustainable delivery of a productive and efficient National Highway System, contributing to lower transportation costs.
The Government of Pakistan is implementing a National Highway Improvement Programme (NHIP) to increase the efficiency of the National Highway Network, through phased improvement of approx. 2700 km of highways.
The programme was initiated during FY02 using GOP's own resources. The Highway Rehabilitation Project is financing a distinct segment of NHIP works (about 856 km of highway improvements along with the national highway N-5) over a five year implementation period, while also supporting essential reforms in the sector and the strengthening of the National Highway Authority (NHA).
In addition, the project will also finance reconstruction and rehabilitation of about 180 km of roads damaged by the earthquake of October 8, 2005.
According to an update project report National Highway Authority (NHA) needs to spend about Rs 3.0 billion annually to simply conserve the network in its present condition. Over the past decade, NHA's maintenance spending averaged less than 6 percent of total expenditures and covered less than 25 percent of stable network needs.
NHA has depended almost exclusively on transfers from the government's recurrent budget to finance its road maintenance expenditures. This has not worked, since these transfers have been grossly inadequate and unpredictable. The persistent bias in favour of capital construction, together with the modal shift from rail to road, and significant increases in vehicle axle loads has caused a rapid and premature deterioration of road sector assets.
The National Highway network has developed a huge maintenance backlog, which now requires an investment of the order of Rs 35 billion, to restore it to acceptable condition. Alternative financing arrangements are needed to ensure that future network maintenance needs are fully funded on a timely and sustainable basis.
A network level analysis indicates that NHA's average network roughness would increase from 5.4 IRI in 2001 to about 11.0 IRI in 2007 if annual maintenance funding remains restricted to recurrent budget allocations alone (between Rs 500 to 1000 million per year). Road user costs would increase by about 32 percent, causing an approximate loss of Rs 280 billion (USD 4.7 billion) to the economy.
Pakistan's primary traffic movements are concentrated along the 1760 km Karachi-Lahore-Peshawar corridor which serves domestic needs, and also links Punjab and the northern parts of the country with international markets through the Southern Karachi area ports which account for 96 percent of all trade.
About 60 percent of the port traffic moves to and from Punjab/the north along this corridor. NHA's main artery along this corridor is the 1760 km long M-9/N-5 highway, which serves over 80 percent of Pakistan's urban population and carries over 55 percent of the country's inter-city traffic.
Other National Highways include N-55 (Indus Highway), N-25, N-65, N-40 (RCD Highway), N-50, N-70, and N-35 (Karakoram Highway). Traffic levels on NHA's network vary over a broad range (20 percent below 1000 ADT, 63 percent between 1000-7000 ADT, and 16 percent above 7000 ADT).
Previous World Bank operations have assisted in upgrading the original two-lane M-9/N-5 to four-lanes through the construction of over 500 Km of additional carriage-way and the rehabilitation of 200 Km of the original carriage-way. The Transport Sector Project - Ln. 3241-PK (closed in June 1998) helped NHA address maintenance backlog reduction and pavement resurfacing over 700 km of the network.
A condition survey of the National Highway Network carried out in 2001 indicated that one half of the network is in poor condition (40 percent good, 11 percent fair and 49 percent poor/very poor). The average network roughness of 5.4 IRI compares to 6.0 IRI in 1995. The slight improvement reflects the considerable investments made in rehabilitation and improvement during the intervening period.
Key challenges facing the National Highway System can broadly be grouped into three areas: (i) investment prioritisation and financing; (ii) maintenance neglect; (iii) reconstruction and rehabilitation of roads damaged by the earthquake of October 8, 2005; and (iv) the institutional capacity and efficiency of NHA.
Pakistan's economic development depends on the improvement and modernisation of key transport systems. Transport contributes about 10 percent to the GDP, and has accounted for 20-25 percent of Federal PSDP in recent years.
At a time when international trends are towards the development of efficient, high quality highway and transportation networks, Pakistan's public transport systems continue to suffer from poorly targeted investments, neglect of essential maintenance, traditional labour and non-commercial practices and obsolete general purpose distribution systems that have led to severe capacity bottlenecks, high transport costs, poor safety standards and low levels of service.
Industrial and commercial growth and export competitiveness are handicapped by an inadequate and outmoded infrastructure.
Pakistan's inland freight and passenger traffic has been growing at an average annual rate of 10.6 percent and 4.4 percent respectively during the ten year period between 1991 and 2001. However, Pakistan Railways' freight traffic declined (by 2.3 percent/annually), whereas passenger traffic stagnated during this period.
As a result, all the growth was handled by the road sector, which now carries over 95 percent of the inland freight (107 billion ton km) and 90 percent of the passenger traffic (208 billion passenger km). Pakistan has about 4.2 million vehicles on the road, growing at about 8 percent annually. This includes about 250,000 commercial vehicles. The road transport industry is deregulated and pre-dominantly in the private sector.
Pakistan has a total road network of some 250,000 km of which about 60 percent is paved.
This network has grown at about 4.2 percent annually over the past decade. The NHA under the Federal Ministry of Communications (MoC) is responsible for the approximately 8,500 km long National Highway and Motorway system (3 percent of the total) which carries 75 to 80 percent of Pakistan's total commercial traffic.
A total of Rs 207 billion was raised in revenues from the road sector through a combination of general revenue taxes and user charges over the five-year period 1995-2000. National and provincial highway expenditures totalled Rs 118 billion over this period. The balance Rs 89 billion (43 percent) was contributed to the government's general revenue.
Poor project prioritisation and portfolio management: Although NHA has been the recipient of almost 10 percent of Pakistan's PSDP allocations in recent years, its portfolio has suffered from poorly justified investments; a bias towards capital construction over asset conservation, a proliferation of new start-ups without completing ongoing works, and excessive reliance on contractors for implementation.
This has led to very limited economic benefits from the investments, significant deterioration in traffic conditions along some heavily trafficked national highway sections; protracted completion delays and substantial increases in completion costs; reduced head room for new high priority initiatives and a general tendency towards higher unit costs.
The huge NHA project portfolio (Rs 277 billion) has its roots in a very ambitious highway expansion programme launched by GOP during the early 1990s, to rectify past under-investments in this sector. GOP's centralised project review and approval mechanisms (CDWP and ECNEC), which provide institutional checks and balance and determine inter-sectoral priorities, were bypassed through the creation of a parallel structure - the National Highway Council (headed by the Prime Minister) - to enable rapid approval of politically high profile projects.
In addition to dualisation and rehabilitation of existing national highways, the plan included a grandiose but poorly justified motorway programme.
This put considerable strain on Pakistan's limited public sector resources, and delayed higher priority highway investments along the main corridors. Even though there has been some improvement in portfolio management since 2000, much more needs to be done.
Financing of the Capital Program: NHA's capital programme is approved annually by GOP based on an assessment of competing inter-sectoral priorities. Financing is currently provided by GOP in the form of Cash Development Loans (CDL). This mode of financing is very expensive (high interest rates) and unsustainable, since NHA clearly does not have the revenue base to service this debt - which presently stands at around Rs 140 billion.
The report pointed out that the earthquake of October 8, 2005 badly damaged three national highways, namely N-15, N-35, and S-2 that link the rest of Pakistan to the disaster areas. Of the three, N-15 is most badly hit - a 34 km stretch north of Balakot to Mahindri in the Kaghan valley is mostly wiped out and is closed to traffic since the earthquake.
Rescue and relief efforts along this valley are being conducted through helicopters. N-35 and S-2 have been opened to traffic though landslides continue to temporarily block some segments of these highways (so far over 2,000 aftershocks have been registered since the main earthquake).
The earthquake also very badly damaged a highway in Azad Jammu and Kashmir (AJ&K) called Jhelum Valley Road that links Muzaffarabad with Chakothi. Some of its sections are totally wiped out and still close to traffic.
NHA/GOP urgently needs to rehabilitate the three national highways and the Jhelum valley road to ensure un-hindered 24 hours and 7 days movement of earthquake assistance and to restore normalcy of economic activities.
Without rehabilitation of these highways, heavy goods transport will not be able to access some parts of the earthquake hit areas that will adversely affect relief and reconstruction operations and restoration of normal trade and economic activity between these areas and the rest of Pakistan, and leave millions of people substantially cut-off.
The proposed project will be carried out in Azad Jammu and Kashmir, an area over which India and Pakistan have been in dispute since 1947. By financing the proposed loan, IBRD does not intend to make any judgement as to the legal or other status of any disputed territories or to prejudice the final determination of the parties' claims.