The World Bank has said that due to National Highway Authority's (NHA) poor project prioritisation and financing, neglected roads maintenance and bad institutional capacity and efficiency, very limited economic benefits reached to the people.
The Bank in its updated information document 'Pakistan-Highway Rehabilitation Project' says that although the 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 parasitical 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, it said.
The huge NHA project portfolio (Rs 277 billion) has its roots in a very ambitious highway expansion program launched by Government of Pakistan (GoP) during the early 1990s to rectify past under-investments in this sector. The GoP's centralized 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 dualization and rehabilitation of existing national highways, the plan included a grandiose but poorly justified motorway program.
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.
About the NHA's financing of the capital program, which is approved annually by the government, based on an assessment of competing inter-sectoral priorities and provided by Pakistan in the form of cash development loans (CDL).
This mode of financing is very expensive (high interest rates) and unsustainable, since the NHA clearly does not have the revenue base to service this debt - which, at present, stands at around Rs 140 billion.
The World Bank also says the NHA needs to spend about Rs 3 billion annually to simply conserve the network in its present condition. Over the past decade, NHA's maintenance spending averaged less than six percent of total expenditures and covered less than 25 percent of stable network needs.
Further pointing out, the Authority's shortcoming, it said the 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 in 2007 if annual maintenance funding remains restricted to recurrent budget allocations alone [between Rs 500 million to 1,000 million per year]. Road user costs would increase by about 32 percent, causing an approximate loss of Rs 280 billion ($4.7 billion) to the economy.
As it continues to evolve in response to emerging sectoral demands, the NHA needs to significantly realign its staffing levels, skills mix and businesses processes to prepare it for progressive commercialization. The Authority must overcome a number of internal constraints, as it shifts focus on a network operator/service-provider role.
The World Bank also says about financial management and controls that previously the Bank-assisted project had helped introduce a modern double entry, accrual based computerized accounting system and independent commercial audits within NHA during 1995-97.
However, progress at internalizing these improved financial management systems and controls stalled, after the project closed. The NHA did not produce any audited agency level financial statements after 1996. It also did not make much headway, until very recently, in implementing a remedial plan to address the financial control issues raised in the 1996 commercial auditor's report.
About axle load management and road safety, it says that overloading of trucks and extreme axles loading have caused extensive damage to the highway network. Such extreme axle loading, coupled with high summer time temperatures have rendered commonly accepted international pavement designs, technical specifications and material testing standards inappropriate for Pakistani conditions.