Completion Report

Project Number: 39225-022 Grant Number: 0174 Technical Assistance Number: 7374 June 2019

Bhutan: Road Network Project II

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – ngultrum (Nu)

At Appraisal At Project Completion

(1 October 2009) (30 June 2016) Nu1.00 = $0.02079 $0.01472

$1.00 = Nu48.1050 Nu67.9192

ABBREVIATIONS ADB – Asian Development Bank DMF – design and monitoring framework DOR – Department of Roads EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan km – kilometers NEC – National Environment Commission NLC – National Land Commission PMO – project management office TA – technical assistance TOR – terms of reference VOC – vehicle operating cost

NOTES

(i) The fiscal year (FY) of the government of the Kingdom of Bhutan and its agencies ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2019 ends on 30 June 2019.

(ii) In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Hun Kim, South Asia Department (SARD) Director Ravi Peri, Transport and Communications Division, SARD Team leader Kirsty Rowan Marcus, Transport Specialist, SARD Team members Maria Iris Bombay, Associate Safeguards Officer (Environment), SARD

Johan Thierry Georget, Transport Specialist, SARD Ma. Theresa Prado, Project Officer, SARD

Karma Yangzom, Senior Environment Specialist, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i MAP iv I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1

A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Technical Assistance 5 H. Consultant Recruitment and Procurement 5 I. Safeguards 7 J. Monitoring and Reporting 8

III. EVALUATION OF PERFORMANCE 9

A. Relevance 9 B. Effectiveness 9 C. Efficiency 10 D. Sustainability 11 E. Development Impact 12 F. Performance of the Recipient and the Executing Agency 12 G. Performance of the Asian Development Bank 13 H. Overall Assessment 13

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

A. Issues and Lessons 14 B. Recommendations 14

APPENDIXES

1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 17 3. Project Cost by Financier 18 4. Disbursement of ADB Grant Proceeds 20 5. Implementation Schedule 21 6. Chronology of Main Events 22 7. Organizational Structure for Project Implementation 23 8. Technical Assistance Completion Report 24 9. Contract Awards of ADB Grant Proceeds 27 10. Summary of Contract Packages 28 11. Status of Compliance with Grant Covenants 29 12. Economic Reevaluation 35 13. Summary of Socioeconomic Impacts 46 14. Summary of Environmental Impacts and Monitoring 55 15. Contribution to ADB Results Framework 65

BASIC DATA A. Grant Identification

1. Country Bhutan 2. Grant number and financing source 0174-BHU; Asian Development Fund 3. Project title Road Network Project II 4. Recipient Kingdom of Bhutan 5. Executing agency Department of Roads, Ministry of

Works and Human Settlement 6. Amount of grant $38.76 million 7. Financing modality Project grant

B. Grant Data

1. Appraisal – Date started – Date completed

17 August 2009 20 August 2009

2. Grant negotiations – Date started – Date completed

21 September 2009 22 September 2009

3. Date of Board approval 10 November 2009 4. Date of grant agreement 14 December 2009 5. Date of grant effectiveness – In grant agreement – Actual – Number of extensions

14 March 2010 19 January 2010 None

6. Project completion date – Appraisal – Actual

31 December 2014 2 October 2015

7. Grant closing date – In grant agreement – Actual – Number of extensions

30 June 2015 30 June 2016 1

8. Financial closing date – Actual 9. Disbursements

a. Dates

30 June 2016

Initial Disbursement

15 March 2010

Final Disbursement 23 May 2016

Time Interval 74.3 months

Effective Date

19 January 2010

Actual Closing Date 30 June 2016

Time Interval 77.4 months

b. Amount ($ million)

ii

Category

Original Allocation

(1)

Increased during

Implementation (2)

Cancelled during

Implementation (3)

Last Revised Allocation (4=1+2–3)

Amount Disbursed (5)

Undisbursed Balance (6 = 4–5)

Works 30.040 5.017 35.057 35.057 0

Equipment 1.000 (0.795) 0.205 0.205 0

Consulting services

4.000 (0.502) 3.498 3.498 0

Unallocated 3.720 (3.720)

Total 38.760 5.017 (5.017) 38.760 38.760 0

() = negative number.

C. Project Data

1. Project cost ($ million)

Cost Appraisal Estimate Actual

Foreign exchange cost 30.03 33.46

Local currency cost 24.29 25.70

Total 54.32 59.16

2. Financing plan ($ million)

Cost Appraisal Estimate Actual

Implementation cost

Recipient-financed 15.56 20.40

ADB-financed 38.76 38.76

Total implementation cost 54.32 59.16

3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual

A. Land acquisition and resettlement 1.23 0.73

B. Civil works 42.79 51.55

C. Design consultant 1.50 1.60

D. Supervision consultant 2.50 2.10

E. Capacity building (equipment) 1.00 3.18

F. Contingencies 5.30

Total 54.32 59.16

4. Project schedule

Item Appraisal Estimate Actual

A. Detailed design

1. Selection Q3 2009–Q4 2009 Q4 2009–Q1 2010

2. Detailed design Q4 2009–Q3 2010 Q1 2010–Q3 2010

B. Construction supervision consultants

1. Section Q1 2010–Q3 2010 Q1 2011–Q2 2011

2. Supervision Q4 2010–Q4 2013 Q3 2011–Q2 2015

C. Civil works

1. Procurement Q1 2010–Q3 2010 Q4 2010–Q1 2012

2. Construction Q4 2010–Q4 2013 Q4 2011–Q4 2015

D. Technical assistance

Implementation Q4 2009–Q2 2010 Q2 2011–Q4 2011

Q = quarter.

5. Project performance report ratings

iii

Implementation Period

Ratings

Development Objectives Implementation Progress

From 30 November 2009 to 31 December 2009 Satisfactory Satisfactory

From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory

From 1 January 2011 to 31 March 2011 Satisfactory Satisfactory

From 1 April 2011 to 30 September 2011 Satisfactory Potential problem

Single Project Ratinga

From 1 October 2011 to 31 December 2011 On track

From 1 January 2012 to 31 December 2012 On track

From 1 January 2013 to 31 December 2013 On track

From 1 January2014 to 31 December 2014 On track

From 1 January 2015 to 31 December 2015 On track

From 1 January 2016 to 30 June 2016 On track a Based on new ratings for project performance in the e-Operations.

D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of Members

Fact-finding 22 June–1 July 2009 4 40 t, t, s, a

Appraisal 17–20 August 2009 2 8 t, c

Inceptiona 25–29 January 2010 4 20 t, t, t, a

Review 1a 25 May–1 June 2010 3 24 t, e, a

Review 2a 7–14 October 2010 3 24 t, s, e

Review 3a 6–13 April 2011 1 8 t

Review 4a 24–28 October 2011 3 15 t, e, t

Review 5a 8–15 March 2012 4 32 t, e, s, a

Review 6a 13–14 April 2015 3 6 t, t, d

Review 7a 29–30 June 2015 4 8 t, t, e, s

Review 8a 7–13 October 2015 3 24 t, e, s

Completion review consultationa 9–20 October 2017 4 21 t, e, s, n

Project completion review 8–20 March 2019 3 21 t, e, n a Mission was combined with other projects in the project area. a = analyst, c = counsel, d = country coordination officer, e = environment specialist, s = social specialist, t = transport specialist, n = consultant.

MAP

I. PROJECT DESCRIPTION 1. The Asian Development Bank (ADB) approved the Road Network Project II on 10 November 2009.1 The project aimed to expand the road network in the southern region of Bhutan by providing an alternative to the existing east–west national highway through the northern part of the country. Promoting industrial development in the southern areas of the country and integrating these areas more effectively with their primary markets would increase regional trade, through increased passenger and freight transport within the country and with India. The project was ADB’s second intervention to support highway network expansion in Bhutan in line with the government’s plan to construct the southern east–west highway as a major development priority. 2. The grant agreement for the project was signed on 14 December 2009 and became effective on 19 January 2010. The original estimated project completion date was 31 December 2014, but the implementation period was extended by 10 months until October 2015. The grant was financially closed on 30 June 2016. The Department of Roads (DOR), within the Ministry of Works and Human Settlement, was the executing agency and a dedicated project management office (PMO) implemented the project.

3. At appraisal, the project included upgrading or constructing five critical road sections with a total length of 180 kilometers (km) along the southern east–west corridor: (i) Manitar–Raidak, (ii) Raidak–Lhamoizingkha, (iii) Panbang–Nganglam, (iv) Tsebar–Mikuri–Durung Ri, and (v) Samdrupcholing–Samrang. Road improvement and construction works under the project included longitudinal drainage structures, construction of new bridges and cross-drainage structures including wildlife underpasses, and structures for resettlement and rehabilitation. The project would also provide (i) equipment necessary for the government to enhance sector capacity and (ii) on-the-job training for social and environmental requirements.

4. In conjunction with the project, ADB provided technical assistance (TA) to help build the capacity of the DOR in (i) modern technologies suited for Bhutan in planning, surveying, designing, and constructing mountainous roads and (ii) enhanced analytical skills to use road asset management systems in the Bhutanese context.

II. DESIGN AND IMPLEMENTATION A. Project Design and Formulation 5. Accessibility was a major development constraint in Bhutan. At appraisal, the road network in Bhutan comprised 4,947 km of roads with 1,632 km of national highways, 489 km of district roads, 813 km of feeder roads, 150 km of urban roads, 717 km of farm roads, and 560 km of forest roads. The road network provided inadequate connectivity and coverage. Travel between the east and west regions of Bhutan relied either on a single national highway in the north of the country or on Indian road connections south of the Bhutan–India border for travel between southwest and southeast Bhutan. Road conditions were classified as poor, with narrow roads built into steep hillsides prone to landslides. In the Tenth Five Year Plan, the Government of Bhutan decided that constructing the southern east–west highway was a major development priority.2

1 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development

Fund Grant to the Kingdom of Bhutan: Road Network Project II. Manila. 2 Royal Government of Bhutan. 2009. Tenth Five Year Plan: 2008–2013. Thimphu.

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6. The project was aligned with ADB’s country strategy and program for Bhutan, 2006–2010 as outlined in its objectives: (i) continuing to enhance the main road network, (ii) ensuring adequate maintenance of the existing road network, (iii) improving rural accessibility, (iv) supporting institutional strengthening, (v) promoting private sector participation, (vi) improving road technology and productivity, and (vii) supporting subregional links. 3 The project also supports ADB's South Asia Regional Cooperation Strategy and Program, 2006–2008 which also aimed at improving regional transport connectivity by reducing transportation costs, increasing the region's competitiveness, and facilitating the movement of goods and people, thus promoting economic development.4

7. ADB provided a project preparatory TA to study lessons of previous projects, identify project risks, and propose and incorporate related measures in the project. 5 The TA was satisfactory and enabled the project design and formulation to include the special features of (i) environment consideration and appropriate technologies in design and construction, and (ii) community participation in alignment selection. The financing modality (grant) for the project was appropriate, because it was a stand-alone investment with pre-identified outputs in specific areas which were to be delivered within a standard timeframe for road projects.

8. During and after implementation, the project design was highly relevant and fully aligned to the government’s objectives and policies and ADB’s country strategy and program (para. 40). The minor project scope changes during implementation were made due to ground conditions during construction and to enhance benefits to the project areas (para. 11). A TA was attached to the grant to help develop DOR capacity in the modern road technologies of survey design and construction, environment-friendly road construction, road asset management, and road tunnels in Bhutan. The project design and monitoring framework (DMF) had a clear results chain, and indicators were appropriate, except a few at the impact level. DMF assessment of results is in Appendix 1. B. Project Outputs 9. The project had two outputs: (i) critical sections connected along the southern east–west corridor, and (ii) capacity of the DOR in road engineering technologies and road asset management strengthened. 10. Output 1: Critical sections connected along the southern east–west corridor. At appraisal, the project would upgrade or construct five critical sections (about 180 km) of the southern east–west highway. Upon completion, the project constructed 131.4 km of national highways and 55.0 km of feeder roads, including:

(i) Manitar–Raidak (34.7 km of national highway) in the southwest; (ii) Raidak–Lhamoizingkha (18.1 km of national highway) in the southwest, with two

major modular steel truss bridges, providing access to the border crossing at Lhamoizingkha;

(iii) Panbang–Nganglam (54.7 km of national highway) in the south, providing access to the border crossing at Nganglam;

(iv) Tsebar–Mikuri–Durung Ri (55.0 km of feeder roads);6 and

3 ADB. 2005. Country Strategy and Program: Bhutan, 2006–2010. Manila. 4 ADB. 2005. Regional Cooperation Strategy and Program: South Asia, 2006–2008. Manila. 5 ADB. 2008. Technical Assistance to Bhutan for Preparing the Road Network Project II (Financed by the Japan

Special Fund). Manila. 6 The Tsebar–Mikuri–Durung Ri road has subsequently been upgraded to secondary national highway status.

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(v) Samdrupcholing–Samrang (23.9 km of national highway) in the southeast, providing access to the border crossing at Samdrup Jongkhar.

The civil works also included constructing roadways with drainage structures, installing culverts, and providing structures for resettlement and rehabilitation of project affected people. Road safety measures—such as truck passing zones at appropriate locations, guard rails, and crash barriers at identified accident-prone areas—were integrated into the project design along with engineering measures such as widening on curves and adequate road markings and signs. 11. During implementation, a minor change of scope was required to conduct detailed design for construction of an additional section of the southern east–west national highway between Nganglam and Dewathang (75 km) and the Pasakha access road connecting an industrial area to the Indian border (1 km). There was also a minor change to the Tsebar–Mikuri–Durung Ri road alignment in response to community feedback about the road alignment passing through a watershed catchment area. The DOR completed the revised alignment and surveys. 12. Output 2: Strengthened capacity of road engineering technologies and road asset management. At appraisal, the envisaged project would provide equipment necessary for the government to enhance road sector capacity in quality control, survey and design, and control of overloading and vehicle emissions. During implementation, DOR expanded the scope of equipment to purchase parts—corrugated galvanized steel arches—for four galvanized steel truss bridges. The original planned equipment for capacity development of the DOR was mostly provided by the associated TA (para. 24) and other ADB-financed projects in the country. C. Project Costs and Financing 13. At appraisal, the estimated project cost totaled $54.32 million, comprising the base cost, tax, and contingency. Upon detailed design in 2010, the cost estimates of all contract packages increased by 12.8%, including 8.6% for civil works. This increase primarily resulted from global material price increases and underestimates during the feasibility stage, e.g., rock quantities required for excavation. 14. Most contracts were negotiated and signed in 2011. By then, the successful bid price was higher than the cost estimate by 6.7% for all contracts and 7.3% for civil works contracts. Cost overruns during project implementation also occurred because of the prolonged construction period, price escalation, and quantity increases in civil works. At project completion, the total project cost was Nu3,600.4 million, equivalent to $59.2 million. The actual total project cost increased by 8.9%, including 20.5% for civil works and 217.7% for equipment, while the project costs decreased by 40.9% for land acquisition and resettlement and 15.8% for the supervision consultancy. Project costs at appraisal and completion are in Appendix 2. 15. At appraisal, ADB was to provide a grant of $38.76 million to finance 71.3% of the total project cost. The government was to finance the remaining cost of $15.56 million. During detailed design and implementation, government counterpart funding increased to cover cost overruns; however, the ADB grant amount was unchanged. At completion, project funds included the ADB grant of $38.76 million, covering 65.5% of total project cost, and government counterpart funding of $20.4 million equivalent, covering 34.5%. The detailed comparison of the actual project cost by financier and at appraisal is in Appendix 3.

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D. Disbursements 16. The ADB grant followed ADB’s Loan Disbursement Handbook (2007, as amended from time to time). The DOR established an imprest account in the Royal Monetary Authority. To expedite disbursement, the DOR used statement of expenditure procedures to reimburse, liquidate, or replenish the imprest account for any individual payments under the equivalent of $50,000. The DOR followed direct payment and reimbursement procedures for civil works, consulting services and equipment. Payments to contractors and grant fund account management followed ADB standard procedures. All payments to contractors followed the mode of payment agreed in the contract document. 17. DOR made the first disbursement on 15 March 2010 for the detailed design. The grant disbursement progress was generally satisfactory, peaking in 2013 and 2014 at approximately 50% of the total grant. DOR reallocated the grant proceeds several times according to actual needs during project implementation, mainly to increase the allocation to the works category on 12 November 2015 ($4,756,578.07) and 10 May 2016 ($260,186.58) from the consulting services, equipment, and unallocated amount. ADB approved reallocating the funds. Upon request from the government, the grant closing date was extended by 1 year, from 30 June 2015 to 30 June 2016. The grant account was closed on the extended closing date, with the total grant amount of $38.76 million fully disbursed. The original disbursement projections and annual and cumulative disbursement of the grant proceeds are in Appendix 4. E. Project Schedule 18. At appraisal, the envisaged project would be implemented over 5 years, with a 31 December 2014 completion date. Advance contracting enabled DOR to recruit the detailed design consultant to start in late 2009; the contract agreement was executed on 24 February 2010. The detailed design consultant completed the design work on schedule in September 2010. The construction supervision consultant—selected in May 2011, with contract signing on 20 May 2011—mobilized immediately and completed the work in June 2015. 19. The civil works for the project included seven contract packages: five for national highways and two for feeder roads. The procurement of civil works contracts began in October 2010 as planned. The procurement process took longer than the DOR anticipated, requiring ministerial level sign-off and formation of a ministerial tender committee with five to six members, including the secretary. The contracts for all seven packages were signed between July and November 2011; contracts for three packages started in October and November 2011, and the remaining four started in early 2012. The civil works started almost 1 year later than planned, which further delayed the progress of civil works during implementation. All contracts required the works to be completed within 32 months, regardless of contract value, location, and geotechnical and topographical conditions. This time schedule was not achievable.

20. Contract periods for all civil works were extended by 92–410 days, largely because of physical hindrances, primarily heavy rainfall during monsoon seasons, which ceased all activities on the project for 3–4 months. There were also delays in obtaining permits for machinery import. Because of the extent of the delays, the civil works packages could not be completed by the original grant closing date. ADB approved extending the grant closing date by 1 year. The extension enabled the DOR to fully complete the works and achieve the intended project objectives. The civil works for two of the seven contracts were completed in May and October 2014, while the remainder were completed in May, July, August, and October 2015. All civil works contracts were completed by the extended grant closing date of 30 June 2016. The actual

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implementation schedule compared to the original at appraisal is in Appendix 5 and a chronology of major events is in Appendix 6. F. Implementation Arrangements 21. As agreed at appraisal, the DOR acted as executing agency and retained the PMO established in Gedu to implement the previous ADB-funded road project. The PMO was headed by a full-time project coordinator at executive engineer level with adequate administrative and technical experience and qualifications. The project coordinator was supported by qualified technical and administrative staff, including two deputy project coordinators, three project managers, two assistant engineers, and other administrative staff. The PMO was responsible for (i) overall coordination, management, and monitoring of project implementation; (ii) supervision of the detailed engineering design; (iii) recruitment and procurement; and (iv) financial management, including preparing withdrawal applications. 22. In addition to the PMO, the DOR established three site offices at Gedu, Samdrupcholing, and Nganglam to be responsible for day-to-day implementation of the project and preparation of project progress reports for road sections under their jurisdiction. The PMO was to consolidate these reports and submit them to the DOR and ADB. The project coordinator and all project managers met on a quarterly basis or as required.

23. The supervision consultant assisted the DOR and the site offices with project management and construction supervision. The supervision consultant also established three site offices with two site inspectors each, working closely with the DOR’s site offices. The consultant submitted monthly and quarterly progress reports to the DOR. The DOR ensured that the reports assessed project progress, including safeguards, land acquisition, the resettlement plan, environmental management, safety, and any other activity critical to implementation. An organizational chart for project implementation is in Appendix 7. There were no major changes to the implementation arrangements described above.

G. Technical Assistance 24. TA 7374-BHU: Capacity Building for the Department of Roads was approved together with the grant in the amount of $400,000 and financed on a grant basis from ADB’s Technical Assistance Special Fund-IV.7 The government counterpart in-kind contribution was $100,000. The TA aimed to cover part of the government’s initiatives to strengthen the DOR’s capacity in road technologies and road asset management, particularly knowledge of and skills in survey, design, and construction, especially with environmental considerations. The project appraisal document included terms of reference (TOR) for the TA. The TA completion report is in Appendix 8. H. Consultant Recruitment and Procurement 25. Consultants were recruited following ADB’s Guidelines for the Use of Consultants (2007, as amended from time to time). Per the report and recommendation of the President, DOR recruited two international consulting firms for (i) detailed design and procurement assistance and (ii) construction supervision of civil works. Under advanced contracting, the recruitment of the detailed design consultant started in late 2009 using the single source selection method. DOR

7 ADB. 2009. Report and Recommendation of the President to the Board of Directors on a Proposed Asian

Development Fund Grant to the Kingdom of Bhutan: Road Network Project II. Manila.

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selected an international firm in association with a national firm; they signed the contract in February 2010. The contract with the detailed design consultant was completed in September 2010 upon approval of all design work. During implementation, the government requested to recruit an additional consulting firm to carry out detailed design of a new section of the southern east–west highway (Nganglam–Dewathang) and the Pasakha access road. The recruitment followed the ADB’s quality- and cost-based selection procedure and the contract for the detailed design works was signed in April 2013. 26. Recruitment of the construction supervision consultant followed ADB’s quality- and cost-based selection procedure. An international consulting firm in association with a national firm was selected. The construction supervision consultant started on 20 May 2011 and demobilized on 30 November 2015. Consultancy contract variations included recruiting an international consultant as bridge engineer in lieu of a national bridge engineer. 27. Civil works procurement followed ADB’s Procurement Guidelines (2007, as amended from time to time). As planned at appraisal, DOR procured all civil works contracts through international competitive bidding because all contract values exceeded $1 million. DOR began procurement in October 2010 by inviting tenders and selected five international contractors in association with national contractors. Appendix 9 provides further detail on the contract awards of ADB grant proceeds and Appendix 10 lists the detailed contracts.

28. Overall, the performance of the contractors was satisfactory and as expected in quality management. Progression charts show that the contractors progressed very slowly over the first full year, which critically affected the overall construction schedule. The PMO managed this through: (i) two-stage payment of the mobilization advance, with the second payment made only after mobilization of personnel, equipment, and materials; and (ii) recovery of advance in equal monthly installments rather than by percentage. One contractor, holding three packages under the project, made very slow initial progress because of a shortage of equipment required for the three packages. The contractor was also unfamiliar with working conditions in Bhutan, a disadvantage in the initial phase of project, but made significant progress advancing construction activities to mitigate further schedule slippage over time. 29. The performance of the detailed design consultants was satisfactory. At appraisal, it was anticipated that DOR would recruit an international consulting firm, in association with a national firm, to prepare the detailed design and bidding documents and support the DOR with procurement. DOR procured the selected consultant under single-source selection because the design consultant was familiar with the unique topographic and geotechnical conditions of the project roads. During implementation, the selected consultant worked closely with the DOR on all tasks specified in the TOR, mainly focusing on full surveys, project road design, and contract document preparation. The design complied with national standards for national highways, feeder roads, and bridges. 30. During construction, the contractors and the supervision consultants jointly carried out quality control. The consultants inspected and assessed the works to ensure compliance to the designed standards. ADB project review missions observed that the constructed roads were good quality and that the project provided safety and environment protection facilities along the roads. 31. The performance of the supervision consultant was satisfactory. During implementation, the selected consultants mobilized relevant experts and staff as required and established central and regional offices similar to the PMO. The consultants acted as the project engineer and carried out all tasks specified in the TOR, including construction supervision and quality control,

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overseeing compliance in environmental and social safeguards, assisting with financial accounting, and providing on-site training. Due to overall delays with the civil works contracts, the contract period for the supervision consultants was also extended. There were no major claims or disputes related to construction or consulting contracts. I. Safeguards 32. Environmental impacts. At appraisal, the project was classified A under ADB’s Environment Policy (2002), as some of the road segments fall inside environmentally sensitive areas. A summary environmental impact assessment was prepared and disclosed 120 days prior to Board approval in accordance with the Environment Policy (2002). Anticipated environmental impacts were mainly associated with formation cutting and road opening, and impacts to wildlife and biodiversity, particularly portions that pass through sensitive habitat areas. The latter was addressed through the construction of wildlife underpasses and signage for elephant crossing. Most impacts were short-term, reversible, confined to the construction stage of the project and could be minimized and addressed through mitigation measures included in the engineering design and the environmental management plan (EMP). All necessary mitigation costs were included in the engineering works. 33. During implementation, DOR adopted an environment-friendly approach to road construction that involved controlled blasting, limited use of bulldozers, use of log and boulder barriers to control slipping of blasted or excavated materials instead of an excavator-tipper combination, and incorporation of bioengineering techniques for slope protection. The construction supervision consultant included a part-time environmental engineer. The National Environment Commission and ADB environment specialists conducted independent inspection and monitoring.

34. The contractors carefully implemented all environment safeguards measures as required in the contracts. The PMO worked closely with the construction supervision consultants in monitoring the environment impacts and EMP implementation. The project generally complied with the EMP requirements such as spoil management, occupational health and safety measures, dust and noise control, and laborers’ insurance. ADB regularly monitored environmental compliance through project review missions and special safeguards missions, fielding environment specialists several times to inspect the compliance to ADB safeguards policy. 35. Involuntary resettlement and indigenous people. Five separate short resettlement plans were prepared to mitigate and address all impacts and losses, based on ADB’s Involuntary Resettlement Policy (1995) and the government’s Land Act 1979 (amended in 2007). All resettlement plans were disclosed in 2011. Two social monitoring reports detailing the progress and outcomes of the land acquisition process were disclosed on the ADB website. A total of 412 households were expected to be affected by the acquisition of 243.83 acres of private land. The DOR also anticipated impacts on structures (77), trees and crops, and community structures such as irrigation channels, water pipelines, and religious structures. The entitlement matrix of the resettlement plans detailed the compensation rates for the loss of land, structures, trees and crops, shifting and vulnerability assistances, and other income restoration assistance measures. The project did not impact any indigenous people or community; the resettlement plans made additional provisions for affected peoples belonging to vulnerable groups. The budget estimated for compensation and resettlement assistance was Nu57,917,544 ($852,546). 36. Compensation was paid to affected households for the loss of land, structures, and trees in accordance with ADB’s Involuntary Resettlement Policy (1995) and the Royal Government of

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Bhutan’s Land Act 1979 (amended in 2007). During implementation, a total of 438 affected persons were given the options of land replacement or cash compensations for the loss of land, or a combination of both. Despite the higher number of actual affected persons, the disbursed amount for compensation was lower than the budget estimate at Nu37,371,106.56 because many (170 households) opted for land replacement in the same dungkhag (subdistrict). The project provided 108.99 acres of replacement land and compensated or rehabilitated community structures as outlined in the resettlement plans. A total of Nu940,536 ($13,845) was paid to service and utility providers (e.g., Bhutan Telecom and Bhutan Power Cooperation Limited). In addition, the project reconstructed important community structures such as temples, irrigation channels, and prayer wheels. Overall, the project disbursed Nu38,671,642 ($569,247) in compensation for households and community structures.

37. The project and district administration officials paid compensation, allotted land replacement, and established a grievance redressal committee at the local level. At the time of project completion review missions, some affected individuals received land replacement but not their ownership certificates: all lands were surveyed but the transfer of ownership to the recipients was held up at the National Land Commission (NLC). In May 2019, the DOR advised that all affected persons who opted for land replacement received their ownership certificates.

J. Monitoring and Reporting 38. The executing agency complied with 22 of 27 covenants specified in the grant agreements and partially complied with the remaining covenants. None of the project’s major covenants were modified, suspended, or waived (Appendix 11). Partial compliances included:

(i) Article IV, Section 4.02(a). The DOR submitted all annual audited project financial statements to ADB, but did not always provide key reports on a timely basis.

(ii) Schedule 4, paragraph 5. After project completion, DOR regional divisions carried out road maintenance. However, project review missions noted that some project roads were damaged with minimum repairs in place and urgently needed full restoration. This suggests that the allocated maintenance budget may not be sufficient.

(iii) Schedule 4, paragraph 8. DOR implemented regulations for overloading control but should strengthen them by using weighing equipment.

(iv) Schedule 4, paragraph 20. The DOR established and submitted baselines for performance indicators with the project performance monitoring system report in February 2012, but did not complete annual evaluation surveys.

(v) Schedule 4, paragraph 23. The executing agency did not submit their completion report to ADB within three months of physical completion.

39. The executing agency prepared and submitted project reports, audited accounts, and financial statements to ADB as required, but not always on a timely basis, submitting the project performance monitoring system report and baseline in February 2012, 2 years after the grant effectiveness date. Annual evaluation surveys or an end-of-project survey were not completed as requested in the grant agreement. The executing agency prepared and submitted its final project completion report to ADB in June 2016, 8 months after physical completion.

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III. EVALUATION OF PERFORMANCE A. Relevance 40. The project is rated relevant, as the project was an integral part of Bhutan’s development priorities and ADB’s country strategies both at appraisal and completion. At appraisal, Bhutan’s trunk road network had limited coverage and could not meet the growing demands of larger and heavier vehicles. Limited feeder roads added to the isolation of remote rural areas. To accommodate socioeconomic development and the expansion of vehicular traffic, Bhutan needed new roads constructed and existing road infrastructure to be upgraded and improved. The project design was an appropriate response to development needs for enhancing rural accessibility, facilitating industrial development in the southern areas of Bhutan, and integrating with primary markets in India. The project preparatory TA was appropriate because it enhanced the project’s comprehensive design and incorporated community participation during formulation. The engineering design and alignments ultimately minimized social and environmental impacts. The selected modality was also appropriate for the nature of the project. The DMF was generally well-formulated and targets were clear, although a few proxy indicators were used to measure the achievements under impact. Upon completion, the project continued to be consistent with ADB’s country partnership strategy, 2014–2018, which supported three strategic pillars: inclusive economic growth, environmentally sustainable growth, and regional cooperation and integration. ADB lending operations under this strategy will continue to prioritize energy, finance, transport, and water and other urban infrastructure and services. The project also continued to be relevant at completion to Bhutan’s development priorities as outlined in the Eleventh Five Year Plan.8

41. There were no major deviations in the original project design: all selected roads at appraisal were implemented. The minor project scope changes during implementation responded to the real needs of local communities and enhanced the project impacts; thus, increased the relevance of the project. The capacity building component under the attached TA was also relevant in helping improve the management of the country’s road network and complementing the physical investments. The TA was successfully implemented and addressed lessons learned during the TA delivered under the previous Road Network Project phase 1 by developing a workable road asset management system, toolkits, and field guides.9 B. Effectiveness 42. The project is rated effective in achieving its outcome and outputs. The performance targets and indicators for outcomes and outputs were achieved as planned. At completion, the project constructed 131.4 km of national highways and 55.0 km of feeder roads in the southern regions of Bhutan, exceeding the target of 180 km at appraisal. The new roads are generally within the required roughness targets for the paved and gravel roads.10 The attached TA, which supported capacity building of the executing agency, also contributed to the project’s effectiveness. 43. The national highways and feeder roads constructed by the project have effectively improved connectivity and mobility in the project areas. The national highways under the project

8 Royal Government of Bhutan, Gross National Happiness Commission. 2013. Eleventh Five Year Plan (2013–2018).

Thimphu. 9 ADB. 2013. Project Completion Report Bhutan: Road Network Project. Manila. 10 Actual figures of the road roughness index were not available. The assessment was based on visual observations

during project completion and review mission site visits.

10

have formed part of the east–west national highway corridor. On the all-weather roads, vehicles may now travel at average speeds of 30–40 km per hour and the traveling distances have fallen substantially in comparison to previously existing roads or roads across the border in India. Average travel time savings along the project roads range from 2.6 to 6.7 hours, exceeding the target. While two fatalities were recorded before project completion on the Manitar–Raidak road in 2014–2015, no fatalities were recorded post-implementation on the project roads in 2015–2016, supporting the target of a fatality rate lower than the country’s average.11 44. Environment. The ADB review missions noted satisfactory implementation of the environmental covenants and EMP (paras. 32–34), with minor instances of nonconformance (Appendix 14). As required, the PMO submitted eight semiannual monitoring reports that are disclosed on the ADB website. The Bhutan National Environment Commission (NEC) also carried out annual independent inspection and monitoring.

45. Involuntary resettlement. The project complied with the social safeguards specified in the grant covenants and agreement (paras. 35–37). Affected local people were compensated for the loss of their properties as per the Royal Government of Bhutan’s compensation rates. Compensation was made in the presence of representatives from the government, the DOR, and the affected local people. All compensations were made on time. ADB fielded local social experts to review the resettlement process and consult with affected persons in January 2016; they confirmed fair compensation and replacement land. No complaints were received, and no outstanding grievances were recorded. A grievance redressal committee was established to address any grievances throughout the project. The public commended the project and expressed their gratitude for addressing social issues as a priority. 46. Gender. Measures to promote gender quality and women’s empowerment in the design were properly implemented. Related provisions were made in the bidding documents (Appendix 11). A social specialist was engaged to design and implement the gender awareness program, including road safety. Over 12% of the project’s direct employment went to female workers. The project employed a significant number of women laborers for the civil works (198) and consulting services (6). ADB completion review missions noted that women operated many of the newly-opened roadside businesses. C. Efficiency 47. Overall, the project is efficient in achieving its outcomes and outputs. The economic internal rate of return (EIRR) was recalculated using updated data and a similar approach to that at appraisal.12 The economic benefits were calculated by comparing with-project and without-project cases and included vehicle operating cost savings, travel time savings, and benefits of industrial and agricultural development induced by the project roads. The EIRR at appraisal was 19.9% and the recalculated EIRR is 15.8%. The recalculated EIRR is lower than estimated at appraisal because of higher capital costs and lower-than-projected traffic volumes. The recalculated EIRR remains above the ADB-adopted discount rate at the time of appraisal (12%), indicating that the project continued to be economically viable. The sensitivity analysis results demonstrate that the project continued to have an EIRR above the discount rate for all nine tested

11 The DOR provided the road accident statistics. At the time of writing in June 2019, road accident data was not

available at the project road level for 2017 and 2018. 12 The original spreadsheet and HDM-4 economic analysis models used at appraisal were not available at the time of

reevaluation.

11

scenarios. In the worst-case sensitivity scenario with a 20% maintenance cost increase combined with a 20% benefit reduction, the EIRR was estimated at 12.7% for the whole project. 48. The details of the economic reevaluation are in Appendix 12, including economic reevaluation results for each project road. The recalculated EIRR for each project road remained above the discount rate adopted at the time of appraisal. The implementation delays in procurement and civil works, which prompted the one-year extension (paras. 19–20), affected process efficiency. Nonetheless, all civil works contracts were completed by the extended grant closing date and the extension enabled the DOR to fully complete the works and achieve the intended project objectives. D. Sustainability 49. The project’s sustainability is rated less than likely sustainable considering the following factors. 50. Road quality and maintenance. ADB’s project completion mission observed routine maintenance in place but also locations with substantial potholes, damaged drainage structures, and areas of pavement failure. The roads were damaged by landslides and/or heavy trucks. Portions of the Manitar–Raidak road had severe damage due to landslides, which render the road impassable during monsoon season. In a DOR investigation in 2017, engineers visited the Panbang–Nganglam road and checked the road design, construction quality, and geotechnical conditions of the project road. The investigating team concluded that: (i) the road damage was mainly caused by overloaded trucks carrying cement from Nganglam to hydropower project sites; (ii) the detailed design did not consider such heavily loaded vehicles transporting cement; (iii) geological conditions cause the pavement to remain wet all year round; and (iv) no construction defects were detected. The hydropower project has now concluded and the DOR regional office plans to strengthen and rehabilitate the pavement. A new design has been prepared and the project is planned for implementation next year, subject to budget approvals. 51. The project roads must be maintained to sustain their economic life. Currently, the DOR has nine field divisions responsible for maintaining national highways and feeder roads. Technical staff inspect the road conditions regularly, create an annual road maintenance plan, and manage maintenance activities. The central government allocates funds for periodic maintenance and large rehabilitation, according to the plans proposed by each field division and according to the national norm, increased from Nu570 million in the government’s Tenth Five Year Plan, 2008–2013 to Nu1,422 million in the Eleventh Five Year Plan, 2013–2018. For primary national highways, the budget for routine maintenance is currently set at Nu115,000 per km and for secondary national highway Nu109,000 per km, and Nu44,000 per km for dzongkhag and feeder roads. This amount is fixed for the next 3 years. A separate monsoon restoration budget provides additional funds to repair road damage, clear landslides and reconstruct critical structures.13 52. Though some periodic maintenance was delayed because of budget limitations, the government is committed to allocating the necessary budget to the extent possible to avoid faster deterioration of the roads. Road maintenance is currently completed manually, which can be a challenge because of a labor shortage. The DOR is gradually moving towards mechanizing road maintenance: it plans to purchase road profile measuring equipment and is also considering centralizing labor and equipment in road maintenance centers. They are currently at the concept

13 Total monsoon restoration expenditure for the project roads was Nu15,578,162 in 2017–2018. As of March 2019,

the expenditure for 2018–2019 was Nu10,482,999.

12

stage, and DOR plans to pilot two such centers. The TA established a road asset management system, and the DOR further expanded this system after project completion (Appendix 8). The DOR intends to use the road asset management system to analyze budgets and allocate resources for road maintenance.

53. Overloaded trucks. On sections of Tsebar–Mikuri–Durung Ri and Samdrupcholing–Samrang roads, heavy trucks transport cement, coal, and gypsum. Site visits observed these trucks, some overloaded, causing damage to the road pavement. The DOR uses routine maintenance funds to patch sections of the damaged road pavement along Tsebar–Mikuri–Durung Ri and Samdrupcholing–Samrang roads, but the allocated budget may be insufficient. During project completion consultation site visits, traffic policemen were observed checking paperwork recording truck loads at several locations on the project roads. DOR representatives informed the project completion review mission that no independent weighing equipment is currently in use on the Tsebar–Mikuri–Durung Ri road. Community members also complained of dust generated by heavy vehicles traveling on the Samdrupcholing–Samrang road to the coal mine. The mining company has agreed to use sprinkling to manage dust levels, but this is insufficient during very dry weather periods. E. Development Impact 54. The project’s development impact is rated highly satisfactory. All impact indicators in the DMF achieved their targets. The traffic on the project roads increased by an average of 28% in 2017 over 2016; the total import and export value increased by 9.7% in 2015 and 4.5% in 2016. Most of the foreign trade was with India (86%) and the goods were mostly transported by land; the contribution of the transportation and storage sector took 10.3% of the total gross domestic product in 2016, against 8.5% in 2005. Notable evidence of change includes cash crop production rates, higher vehicle ownership rates, and levels of industrial activity including mining and factories as well as improved access to government services. Examples of additional development impacts enabled by the project and not anticipated at appraisal include operation of forestry check points and anti-poaching units, establishment of dairy cooperatives, and new connections to essential services for remote communities (e.g., electricity and mobile telephone services). The project also helped reduce poverty in Bhutan’s south and supported economic growth. The project had a positive socioeconomic impact and demonstrates evidence of road-induced socioeconomic transformation. A summary of the development impacts is in Appendix 13. 55. Upon completion, the project exceeded its output target of constructing about 180 km of national highways and feeder roads. Traffic volumes in 2016 (the first full year of operation) were lower than estimated at appraisal and fell short of target traffic, but developed rapidly, reaching 21,578 vehicle-km in 2018. The contribution to the ADB results framework with indicators is in Appendix 14. F. Performance of the Recipient and the Executing Agency 56. The overall performance of the grant recipient and executing agency (the DOR) is rated satisfactory. During implementation, an adequate organizational framework was established for efficient and timely project management. The government provided adequate and timely counterpart funds totaling $20.4 million equivalent. Land acquisition and resettlement were completed on time, in accordance with ADB and national policies, and to the satisfaction of affected people.

13

57. The PMO as the implementing agency was proactive in carrying out all tasks of project implementation, including procurement, financial management, quality control, and social and environment safeguard monitoring. The DOR satisfactorily monitored project preparation and implementation according to the revised implementation schedule, kept ADB informed of any significant deviation, and actively resolved any implementation delays. The PMO was responsible for day-to-day project management and facilitated successful project implementation. With assistance from the consultants, the PMO prepared the required monthly and quarterly progress reports. The DOR and the PMO facilitated well and fully supported all ADB review missions during implementation and at completion. G. Performance of the Asian Development Bank 58. ADB’s performance is rated satisfactory. ADB administered and supervised the project from ADB headquarters. The project received quality and timely support and adequate supervision during implementation, with a total of nine missions. ADB provided substantial guidance to the government and the PMO in all aspects, such as preparing documents and evaluation reports, engaging consultants and contractors, and commenting on safeguards and technical issues. ADB conducted regular missions and was closely involved in identifying potential problems and critical activities, as well as in resolving implementation issues (especially on environmental and social safeguard issues). ADB agreed to extend the grant closing date for a year. The role of the ADB missions in providing timely advice on project implementation and technical issues was well recognized by the government. H. Overall Assessment 59. Overall, the project is rated successful. Its project design was deemed relevant to meeting the development objective of constructing critical sections of the southern east–west highway in order to facilitate industrial development and integrate the southern areas of Bhutan more effectively with primary markets in India. The project is rated effective in achieving the envisaged major outcome, contributing significantly to the east–west highway corridor. The use of the project roads substantially improved connectivity and mobility, and the project has supported and promoted rapid development. The project has notable socioeconomic impacts upon the local people, especially the poor. The economic reevaluation has shown the project to be economically viable and the project is rated efficient. The project is rated as less than likely sustainable as a funding gap for maintenance remains.

Overall Ratings

Criteria Rating

Relevance Relevant Effectiveness Effective Efficiency Efficient Sustainability Less than likely sustainable Overall Assessment Successful Development impact Highly satisfactory Recipient and executing agency Satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.

14

IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 60. Implementation delays and cost overruns. The project implementation was marked by cost overruns and implementation delays. The detailed design estimated the cost of all contracts at 12.8% higher than at appraisal. During implementation, the actual cost for the civil works rose by about 32.9% more than the contract price, mainly because of price escalation and additional works. Civil works contract periods were set at 32 months regardless of the contract value, location, and site conditions (topographical and geotechnical). A key learning for future road projects in Bhutan is that the contract duration should consider rock excavation quantities, steepness of terrain, whether the civil works are greenfields or brownfields, and impacts of the monsoon season. 61. Road maintenance. The design and formulation of the project focused mainly on road construction. Road maintenance should be well considered and incorporated in the project design and formulation, especially in ADB-financed projects. In Bhutan, road maintenance is constrained by budget, equipment, and labor. Without adequate and timely maintenance, road projects are not sustainable. Key considerations for future projects may include: (i) survey strengthening, (ii) road pavement selection, (iii) implementation scheduling (new road or existing road), and (iv) performance-based maintenance contracts. In two locations on the Manitar–Raidak road, contractors were observed taking aggregates from landslide material and using the material to widen these road sections. According to DOR representatives, this arrangement has been adopted for other similar situations in Bhutan, a win-win solution for issues with unstable geology. 62. Environment. To monitor wildlife movement, monitoring cameras were installed in select wildlife underpasses. The monitoring report prepared by an ADB staff consultant in February 2017 revealed that human presence and obstructions near the underpasses reduced use by target species. The project noted the importance of government support facilities such as immigration and forestry check posts, and anti-poaching camps and patrol, especially near the border, to help address wildlife and security concerns. ADB allocated resources to replace lost and damaged cameras and engaged a consultant to continue monitoring the underpasses to provide important information on wildlife use of underpasses in South Asia, where such information is currently lacking. The importance of incorporating climate impacts in road design was also apparent. Lessons learned from this project greatly contributed to the climate resilience guidelines drafted by the DOR to mainstream climate adaptation in road projects. B. Recommendations 63. Monitoring and evaluation system. At appraisal, a DMF was designed as part of the project document, with planned annual evaluation surveys. However, the monitoring program was not well implemented: some impacts were monitored and described in the project progress reports, but not by the indicators specified in the DMF. Road projects in Bhutan have significant impacts in terms of socioeconomic development. Capturing these impacts is very important to assess the achievement of project objectives. A country-wide socioeconomic impact study of the road projects financed by ADB could be designed and implemented, which may provide further evidence of road project achievements. 64. Covenants. The loan covenants should be maintained for future similar projects.

15

65. Road maintenance funds. Funds for routine maintenance (currently Nu109,000–115,000 per km per year for national highways) should be increased. The government should ensure adequate funding to maintain the project roads, including programming for resealing the bituminous surface, to refurbish the surface treatment and extend the service life of the roads. 66. Immediate works. In some locations, the project roads are damaged and urgently require full restoration. On the Panbang–Nganglam road, damp sections of pavement and pavement failure were noted during site visits. Although the DOR has installed additional cross-drainage and protection walls, pavement strengthening and rehabilitation works should proceed as soon as practical. Project road sections with slope stability issues along the Panbang–Nganglam and Manitar–Raidak roads should be closely monitored to ensure that the entire roads will remain passable even during the monsoon season. The DOR should continue its regular clearing program in these locations while longer term solutions are investigated. Dust pollution is also a growing concern in some areas, e.g. Samdrupcholing. The ongoing program of blacktopping through settlement areas should be prioritized to manage dust levels. Sections of the Tsebar–Mikuri–During Ri road have already been blacktopped under the Eleventh Five Year Plan, and the remaining sections are planned to be blacktopped under the Twelfth Five Year Plan.

67. Overloading control. Regulations for overloading control need to be further strengthened by using weighing equipment. The DOR should continue dialogue with the Road Safety and Transport Authority (within the Ministry of Information and Communications), which currently monitors truck loads. This is to ensure that independent weighing equipment is used on the project roads. Mobile weighbridges should be used, and overloading penalties should also be enforced. On the Panbang–Nganglam road, the DOR in consultation with Road Safety and Transit Authority, has already agreed to set up a weighbridge to check the loads of heavy vehicles.

68. Wildlife crossings. Oversized culverts and wildlife crossings such as the Khurul West underpass on the Raidak–Lhamoizingkha road should be improved to ensure that target species are able to cross safely, minimizing the barrier effect of the road and human–wildlife conflicts. Simpler, smaller signage located further away from the actual elephant crossing points should be installed on Panbang–Nganglam road.

69. Land ownership certificates. For future projects, the DOR, in coordination with the National Land Commission (NLC), should ensure that affected landowners receive their ownership certificates in a timely manner and provide a timeline showing the necessary steps to secure ownership certificates. The DOR and NLC should arrange a focal person at the NLC for the project affected persons and provide contact information to the project affected persons. 70. Timing of the project performance evaluation report. The project performance evaluation should be carried out in mid-2020. By then, the project roads will have operated for more than 5 years and the project impacts can be better assessed, considering traffic volumes, road accident reports on the project roads, maintenance arrangements, and social impacts. The project performance evaluation should also: (i) reconfirm that ownership certificates have been provided to the affected landowners opting for replacement land, and (ii) review recent road accident records for the project roads.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and

Targets Project Achievements

Impact Industrial development promoted in the southern economic hubs and increased regional trade through increased passenger and freight transport on the country's road network and regional transport and distribution system

• Traffic volume along the project corridor increased by 20% more than the country's average traffic growth rate

• Volume of cross-bordera

traffic increased by 50% more than the country's average traffic growth rate

• Industrial activitiesb (the number of industries) in project-influenced dzongkhags (districts) increased by 10% more than the country's average traffic growth rate

• Contribution of road transport sector to gross domestic product (11.3% in 2007) increased by 10%

• Exceeded target. The compound annual growth rate for traffic on the project roads was 70% between 2016 and 2018. This significantly exceeds the average growth rate in the number of registered vehicles [proxy] across the same period (8.6%)d

• Achieved. The total import and export value [proxy] increased by 9.7% in 2015 and 4.5% in 2016. Most of the foreign trade was with India (86%) and the goods were mostly transported by land.e

• Achieved. Industry has developed rapidly, taking advantage of the access provided by the project roads.

• Achieved. The contribution of the transportation and storage sector [proxy] took 10.3% of the total gross domestic product in 2016, against 8.5% in 2007.c

Outcome Expanded road transport capacity in the southern region, facilitating efficient and safe transport in the southern region of the country and with India and through India to Bangladesh and Nepal

• Average travel time along project roads reduced by at least 50% (from more than 3 hours)

• Fatality rate along the project corridor not exceeding the country's average fatality rate (5 per 10,000 vehicles)

• Exceeded target. All project roads are newly constructed roads. The estimated average travel time savings on the project roads range from 2.6 to 6.7 hours.f

• Partially achieved. There were two reported fatalities along Manitar–Raidak road during project implementation and no reported fatalities in 2015/16 on the project roads after project completion.g

Outputs 1. Critical sections connected

along the southern east–west corridor

2. Strengthened capacity of

road engineering technologies and road asset management

• 180 km completed by 2014

• Project roads maintained with international roughness index below 5 (for paved roads) and at an all-weather standard (gravel roads)

• Exceeded target. Upon project completion a total 186.4 km of new roads were constructed along the southern east–west corridor, including 131.4 km of national highways and 55.0 km of feeder roads.h

• Partially achieved. Routine maintenance is in place. The roads were generally within the required roughness for the paved roads and at an all-weather standard for gravel roads.i Some sections of the project roads were damaged by landslides and overloading.

ADB = Asian Development Bank. a Volume of cross-border traffic was not available. Total import and export values were used as a proxy indicator. b No available statistics or surveys of industrial activity in project-influenced dzongkhags (districts) were available. The

project achievement commentary is based on ADB’s observations made during project completion consultation and review missions.

c According to ADB’s Key Indicators for Asia and the Pacific 2018, the contribution of the transportation and storage sector to Bhutan’s total gross domestic product in 2007 was 8.5%, not 11.3%.

d Royal Government of Bhutan, Road Safety and Transport Authority. 2018. Annual Report for Financial Year (2017–2018). Thimphu. Growth in registered vehicles was used as a proxy indicator for the country’s average traffic growth rate.

e Asian Development Bank. 2018. Key Indicators for Asia and the Pacific 2018. Manila. f Travel time savings were estimated during the Economic Reevaluation presented in Appendix 12. g Road accident statistics were provided by DOR. At the time of writing road accident data was not available at the

project road level for 2017 and 2018. h Output data sourced from the Department of Roads Project Completion Report. i Actual figures for the roughness index were not available. The assessment is based on visual observations during

project completion and review mission site visits. Source: Asian Development Bank project completion consultation and review missions.

Appendix 2 17

PROJECT COST AT APPRAISAL AND ACTUAL

Table A2.1: Project Cost ($ million)

Appraisal Estimate Actual

Item Foreign

Exchange Local

Currency Total Cost

Foreign Exchange

Local Currency

Total Cost

A. Land acquisition and resettlement

0.00 1.23 1.23 0.00 0.73 0.73

B. Civil works

1. Manitar–Raidak 3.86 1.64 5.49 6.28 2.61 8.89

2. Raidak–Lhamoizingkha 6.88 2.92 9.79 5.12 3.98 9.10

3. Panbang–Nganglam 8.94 3.79 12.74 10.25 7.23 17.48

4. Tsebar–Mikuri–Durung Ri 7.23 3.07 10.29 7.80 3.97 11.77

5. Samdrupcholing–Samrang

3.14 1.33 4.47

3.12 1.19 4.31

Subtotal (B) 30.04 12.75 42.79 32.57 18.99 51.55 C. Consulting services 1. Design consultant 1.50 0.00 1.50 1.60 0.00 1.60 2. Supervision consultant 2.50 0.00 2.50 2.10 0.00 2.10 Subtotal (C) 4.00 0.00 4.00 3.70 0.00 3.70 D. Capacity building (Equipment) 1.00 0.00 1.00 2.49 0.69 3.18 E. Contingencies 1. Physical contingency 1.55 0.66 2.20 2. Price contingency 2.17 0.92 3.10 Total (A+B+C+D+E)

38.76 15.56 54.32 38.76 20.40 59.16

Note: Numbers may not sum precisely because of rounding. Source: Department of Roads, Asian Development Bank estimates.

18 Appendix 3

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier ($ million)

Item ADB Financing

Government Financing

Total Cost

Amount % of Cost Category Amount

% of Cost Category

Amount

A Investment costs

1. Land acquisition 0.00 0.00% 1.23 100.00% 1.23

2. Civil works

a. Manitar–Raidak 3.86 70.31% 1.64 29.87% 5.49

b. Raidak–Lhamoizingkha 6.88 70.28% 2.92 29.83% 9.79

c. Panbang–Nganglam 8.94 70.17% 3.79 29.75% 12.74

d. Tsebar–Mikuri–Durung Ri 7.23 70.26% 3.07 29.83% 10.29

e. Samdrupcholing–Samrang 3.14 70.25% 1.33 29.75% 4.47

3. Consultants

a. Design 1.50 100.00% 0.00 0.00% 1.50

b. Supervision 2.50 100.00% 0.00 0.00% 2.50

c. Capacity development 1.00 100.00% 0.00 0.00% 1.00

Subtotal (A) 35.04 71.50% 13.98 28.52% 49.01

B Contingencies

1. Physical 1.55 70.45% 0.66 30.00% 2.20

2. Price contingency 2.17 70.00% 0.92 29.68% 3.10

Total Project Cost (A+B) 38.76

15.56

54.32

% Total Project Cost 71.35% 28.65% 100.00%

Note: Numbers may not sum precisely because of rounding. Sources: Department of Roads, ADB financial information system.

Appendix 3 19

Table A3.2: Project Cost at Completion by Financier ($ million)

Item

ADB Financing Government Financing Total Cost

Amount % of Cost Category

Amount % of Cost Category

Amount

A Investment costs

1. Land acquisition 0.00 0.00% 0.73 100.00% 0.73

2. Civil works

a. Manitar–Raidak 6.28 70.64% 2.61 29.36% 8.89

b. Raidak–Lhamoizingkha 5.12 56.26% 3.98 43.74% 9.10

c. Panbang–Nganglam 10.25 58.64% 7.23 41.36% 17.48

d. Tsebar–Mikuri–Durung Ri 7.80 66.27% 3.97 33.73% 11.77

e. Samdrupcholing–Samrang 3.12 72.39% 1.19 27.61% 4.31

3. Consultants

a. Design 1.60 100.00% 0.00 0.00% 1.60

b. Supervision 2.10 100.00% 0.00 0.00% 2.10

c. Capacity development 2.49 78.30% 0.69 21.70% 3.18

Subtotal (A) 38.76 65.52% 20.4 34.48% 59.16

B Contingencies

1. Physical

2. Price contingency

Total Project Cost (A+B) 38.76

20.4

59.16

% Total Project Cost 65.52% 34.48% 100.00%

Note: Numbers may not sum precisely because of rounding. Sources: Department of Roads, ADB financial information system.

20 Appendix 4

DISBURSEMENT OF ADB GRANT PROCEEDS

Table A4.1: Annual and Cumulative Disbursement of ADB Grant Proceeds

Annual Disbursement Cumulative Disbursement

Year Amount ($ million)

% of Total Amount ($ million)

% of Total

2010 0.92 2.37 0.92 2.37

2011 5.15 13.29 6.08 15.69

2012 6.52 16.82 12.60 32.51

2013 8.67 22.37 21.27 54.88

2014 10.67 27.53 31.94 82.40

2015 6.59 17.00 38.52 99.38

2016 0.24 0.62 38.76 100.00

Total 38.76 100.00%

ADB = Asian Development Bank. Source: Asian Development Bank.

Figure A4.1: Cumulative Projection and Disbursement of ADB Grant Proceeds ($ million)

ADB = Asian Development Bank. Source: ADB financial system.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2010 2011 2012 2013 2014 2015 2016

Actual Cumulative Disbursement

Cumulative Disbursement Projection

Appendix 5 21

IMPLEMENTATION SCHEDULE Source: Department of Roads; Asian Development Bank project completion review mission.

Q = quarter

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

A. Detailed Design

Technical Assistance Program

At appraisal At actual Defect liability period

B. Construction Supervision Consultants

1. Selection

2014 2016

1. Selection

2. Detailed design

2015

Item

2009 2010 2011 2012 2013

2. Supervision

1. Procurement

2. Construction

Implementation

C. Civil Works

22 Appendix 6

CHRONOLOGY OF MAIN EVENTS Date Event

2008 7–14 February 14 December 2009 22 June–1 July 23 July 17–20 August 21–22 September 10 November 14 December 2010 19 January 25–29 January 24 February 15 March 25 May–1 June 30 September 7–14 October 2011 6–13 April 20 May 14 July 14 July 24–28 October 23 November 22 December 2012 8–15 March 2013 2014 31 May 20 October 2015 13–14 April 3 May 22 May 29–30 June 30 June 15 July 15 August 2 October 7–13 October 2016 23 May 30 June 2017 9–20 October

ADB project consultation mission ADB approval on the advance contracting and retroactive financing Fact-finding mission ADB management review meeting ADB appraisal mission Grant negotiation ADB board approval of the grant Signing of the grant agreement Effectiveness of the grant Inception mission Contract signing with the selected detailed design consultants Initial disbursement of the grant proceeds ADB project review mission Completion of detailed design ADB project review mission ADB project review mission Contract signing with the supervision consultants Contract signing with the civil works contractors (packages NH-02 and NH-05) Contract signing with the equipment suppliers ADB project review mission Contract signing with the civil works contractors of packages NH-01, NH-03, NH-04, FR-01, and FR-02 Completion of the associated TA ADB project review mission ADB approval of minor changes in scope, reallocation of grant proceeds and sectional clearances for contractors. Completion of the civil works contract of package NH-05 Completion of the civil works contract of package FR-01 ADB project review mission Completion of the civil works contract of package NH-04 Completion of the civil works contract of package NH-01 ADB project review mission Original grant closing date Completion of the civil works contract of package NH-02 Completion of the civil works contract of package FR-02 Completion of the civil works contract of package NH-03 ADB project review mission Final disbursement of the grant proceeds Actual grant closing date ADB project completion consultation mission

2019 8–20 March 2018 ADB project completion review mission

ADB = Asian Development Bank, TA = technical assistance. Source: Asian Development Bank.

Appendix 7 23

ORGANIZATIONAL STRUCTURE FOR PROJECT IMPLEMENTATION

PMO = project management office, TA = technical assistance. Source: Department of Roads Project Management Office.

PMO

Department of Roads

Project Coordinator

Construction Supervision Consultants

Financial Management

Civil Works Contractors

Dy. Project Coordinator-I

Office Secretary

Dy. Project Coordinator-II

Technical Assistance

TA 7374-BHU

Detailed Design Consultants

Gedu Office

Samdrupcholing Office

Account Assistant II

Assistant Engineer-I Assistant Engineer-II

Nganglam Office

Equipment Supplier

Administration Assistant

24 Appendix 8

TECHNICAL ASSISTANCE COMPLETION REPORT

TA Number, Country, and Name: Amount Approved: $400,000.00

TA 7374-BHU: Capacity Building of the Department of Roads Revised Amount: N/A

Executing Agency: Department of Roads

Source of Funding: Technical Assistance Special Fund-IV

Amount Undisbursed: $11,260.69

Amount Utilized: $388,739.31

TA Approval Date: 10 Nov 2009

TA Signing Date: 27 Jan 2010

Fielding of First Consultants: Feb 2010

TA Completion Date Original: 31 Jul 2010

Actual: 30 Dec 2011

Account Closing Date Original: 31 Jul 2010

Actual: 13 Dec 2012

Description The TA was expected to enhance overall sector management capacity of DOR by (i) providing equipment necessary for the Royal Government of Bhutan to enhance sector capacity in areas such as quality survey, design, construction, and road safety; (ii) enhancing knowledge of and skills in modern road technologies, especially with environmental considerations; and (iii) enhancing and optimizing the road asset management systems. A fourth component which focused on developing guidelines for road tunnels in Bhutan was added through a change in scope in September 2011.

Expected Impact, Outcome, and Outputs

The main objective of the TA was to equip DOR officials with knowledge of and skills in the road technologies of survey, design, and construction, especially with environmental considerations. The TA was also intended to support enhanced analytical skills to utilize road asset management systems and apply computerized systems to applicable roads in an optimal manner in the Bhutan context. The TA is rated relevant in its design and formulation and remained relevant to Bhutan’s priorities and ADB’s strategies both at appraisal and completion.

Delivery of Inputs and Conduct of Activities

As planned under the TA, an international consulting firm was recruited in accordance with ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). The first round of recruitment failed due to non-responsive bidders. A second round of recruitment concluded in April 2011. The contract was signed on 12 April 2011 and the consultants met with the director general, chief engineers, and executive engineers of the DOR on 12 May 2011. The consultant team worked closely with the DOR staff in headquarters and site offices and focused on the tasks of modern road technologies, environment protection, and road asset management. The TA completion date was extended to December 2011 to ensure completion of the TA outputs. Delays in recruitment caused the TA to be extended twice, from an original planned completion date of 31 July 2010 to 31 December 2011.

During implementation the international consulting team:

(i) provided examples of international best practices for mountainous roads development in survey, design, and construction with environmental considerations;

(ii) reviewed, discussed, and proposed enhancements to existing standards and methods of survey, design, and construction, in comparison with international best practice, considering the Bhutanese conditions;

(iii) developed a toolkit or handbook of international best practices applicable to Bhutan for DOR engineers to use in planning survey, design, and construction, submitted on 25 November 2011;

(iv) provided training for DOR engineers on selected modern road technologies, including environmental considerations, in survey, design, and construction, with workshops held for disseminating the concept and the method;

(v) recommended a training program for DOR engineers for updating knowledge and skills in road technologies; (vi) reviewed environment-related practices, including bio-engineering techniques, from Road Network Project

(RNP) and conducted workshops and training to transfer lessons learned from RNP I to RNP II to construction supervision consultants, contractors, and DOR staff; and

(vii) reviewed existing regulations, guidelines, manuals, etc. on environment-friendly road construction in Bhutan, and integrated the findings with additional international best practices applicable to Bhutan. Based on this, the consulting team produced a field handbook and manual on road construction using environment-friendly sustainable techniques, which was submitted on 15 September 2011.

The consultant team submitted the inception report on 23 May 2011, interim report on 20 July 2011, Bhutan road asset management system (BRAMS) documents in June, July, and November 2011and a final report on 22 December 2011. The final report covered all aspects of the TA and provided main findings and recommendations. In order to complete the additional tunnel related work and ensure successful completion of the TA, the completion date was further extended.

Appendix 8 25

A short-term individual consultant specializing in road maintenance was also hired to develop a performance-based contract management system for routine and periodic maintenance, as part of enhancing DOR’s knowledge and skills in modern road technologies. The consultant contract was completed in June 2010, with a final report submitted to ADB and DOR. The consultant reviewed contract documents and specifications, conducted field inspections and held four workshops to introduce road maintenance contracting principles to DOR’s headquarters and field division staff. The consultant also prepared technical specifications, contract documents and bidding documents as well as a road maintenance contract administration manual.

The performance of the international and individual consultants was rated satisfactory. The TA was fully completed by December 2011 with significant time extensions. On this basis the TA is rated as less than efficient. The performance of the EA is rated satisfactory. Despite the time extensions, fund utilization is high at 97% and appropriate actions were taken to deliver the intended outcome and outputs within budget.

Evaluation of Outputs and Achievement of Outcome

The final TA report was delivered after comments were incorporated from ADB and the DOR. In the final report, substantial constructive comments and suggestions were provided for improving and enhancing the DOR’s capacity in road development and management. The TA team supported the Government of Bhutan in improving the sector management performance through capacity building for the DOR. The TA established a pilot database for the road asset management system covering 273 kilometers of the east–west highway. Examples of international best practices for mountainous roads in survey, design, and construction were provided in a toolkit applicable to Bhutan. DOR engineers can use the toolkit in planning, survey, design, and construction. An environmental best practice document was produced, which is a field manual for road construction using environmentally sustainable techniques. Workshops were conducted with DOR engineers, consultants, and contractors. A consultant tunneling specialist supported DOR in assessing the technical and economic feasibility of four road tunnels in Bhutan. Site visits were undertaken, and alternative tunnel alignments were examined. The consultants also provided DOR and ADB with progress reports on achievements, problems, and recommendations. The TA is rated effective in achieving the intended outcomes and outputs.

The TA is considered likely sustainable. Significant work was completed to set up a pilot road asset management system, produce field guides/manuals for contractors, carry out a tunneling prefeasibility study, and update DOR’s equipment. The project completion review mission confirmed that the pilot road asset management system, field guides and manuals are all in use. DOR has now also prepared separate Climate Resilience Guidelines to supplement the field guides produced under the TA. The pilot road asset management system is now the responsibility of DOR’s maintenance division and has been further expanded since the conclusion of the TA. DOR is currently completing the third year of data collection and the next stage is to use the system for budget analysis. This will serve as a strong basis for preparing the road maintenance budget for submission to the Ministry of Finance. DOR envisages that the road asset management system will help rationalize and ultimately increase the allocation of funds for maintenance, as DOR will have a concrete basis for its maintenance budget requests to central government. Overall Assessment and Rating

The TA is rated relevant. The capacity building component was extremely relevant in terms of its contribution to improving the management of the country’s road network and complemented the physical investments. The TA was successfully implemented and addressed lessons learned during the TA delivered under the previous Road Network Project by developing a workable road asset management system, toolkits and field guides. The TA is rated effective, since it contributed to the effectiveness of the overall project and realized the objective of strengthening the capacity of DOR in road technologies related to survey, design, and construction, road tunneling and road asset management systems. The TA is rated less than efficient given that implementation delays reduced the TA’s efficiency. As the outputs generated in the TA are being used and updated, the TA is rated likely sustainable. Overall, the TA is rated successful. The TA implemented all the tasks specified in the TOR and the achievements are well recognized by the government.

Major Lessons

The major lessons learned from the TA implementation include: (i) Government and ADB should work together to enhance consultant recruitment activities and management; (ii) the road asset management system required close coordination between the consultant and government technical staff to ensure adoption and maintenance of the pilot road asset management system database, a critical output of this TA.

Recommendations and Follow-Up Actions

The capacity of DOR needs to be strengthened in road asset management. With an increasing road maintenance and rehabilitation burden, a well-developed road asset management and maintenance system will increase the sustainability of the road network, including the new roads delivered under the project. It is recommended that future

26 Appendix 8

ADB TA programs in Bhutan provide more technical support to further develop and ensure utilization of the road asset management system delivered under this TA.

ADB = Asian Development Bank, BRAMS = Bhutan Road Asset Management System, DOR = Department of Roads, RNP = Road Network Project, TA = technical assistance, TOR = terms of reference. Prepared by: Kirsty Rowan Marcus Designation and Division: Transport Specialist, SATC

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Appendix 9 27

CONTRACT AWARDS OF ADB GRANT PROCEEDS

Table A9.1: Annual and Cumulative Contract Awards of ADB Grant Proceeds

Annual Contract Awards Cumulative Contract Awards

Year Amount ($ million) % of Total

Amount ($ million) % of Total

2010 1.39 3.58 1.39 3.58

2011 37.16 95.88 38.55 99.45

2012 0.00 0.00 38.55 99.45

2013 0.21 0.55 38.76 100.00

Total 38.76 100.00

ADB = Asian Development Bank. Source: Asian Development Bank.

Figure A9.1: Cumulative Contract Awards of ADB Grant Proceeds ($ million)

ADB = Asian Development Bank. Source: ADB financial system.

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

2010 2011 2012 2013 2014 2015 2016

Actual Cumulative Contract Awards

Cumulative Contract Awards Projection

28 Appendix 10

SUMMARY OF CONTRACT PACKAGES

ICB = international competitive bidding, NCB = national competitive bidding, QCBS = quality- and cost-based selection, SSS = single source selection.

Source: Department of Roads; Asian Development Bank loan and grant information system, and project completion missions.

NH-01 M/s Nima&Abhyudaya Joint venture Manitar-Raidak (Km 0+00-35+18) ICB 23/12/2011 Nu 446,874,029 548,235,218 6,282,313

NH-02M/s Bhutan Builders & M K Gupta JV Raidak-Lamoizhingkha (Km

35+18–53+18) ICB 14/07/2011 Nu 425,414,244 558,349,558 5,115,922

NH-03Marushin Shitaka Construction

Company Inc. Japan.

Panbang-Nganglam (Km 0+00-25+00) ICB 23/12/2011 Nu 352,182,955 582,627,953 5,271,009

NH-04M/s Marushin Shitaka Construction

Company Inc. Japan.

Panbang-Nganglam (Km 25+00-55+60) ICB 23/12/2011 Nu 352,015,230 516,922,618 4,976,002

NH-05M/s Construction Development

Corporation Ltd.

Samdrupcholing-Samrang (Km

0+00–23+82) ICB 14/07/2011 Nu 333,747,415 258,996,827 3,118,906

FR-01M/s Rigsar Kalika Joint Venture Tsebar-Mikuri-Durungri Feeder Road

(Km 0+00-20+60)ICB 23/12/2011 Nu 211,020,972 291,254,953 3,547,387

FR-02M/s Marushin Shitaka Construction

Company Inc. Japan.

Tsebar-Mikuri-Durungri Feeder Road

(Km 20+600-55+76) ICB 23/12/2011 Nu 276,810,130 430,343,048 4,255,004

CS-01

Sheladia Associates Inc., USA, in

association with Sherpa Consultancy

Services

Detailed design & procurement

assistance consultancy services SSS 24/02/2010 Nu 69,092,243 63,232,166 1,386,404

CS-02

Sheladia consultancy US, in

collaboration with Gyeltshen

Consultancy firm Bhutan

Construction supervision consultancy QCBS 20/05/2011 Nu 118,777,200 123,116,267 2,104,700

CS-03 Kyingkhor Consultancy ServiceDetailed design of SASEC road

connectivity projectQCBS/NS 01/04/2013 Nu 12,952,104 12,592,104 212,132

Proc-01 M/s Durga Enterprise, Thimhu Procurement of Parts for Galvanized

steel truss Bridge

NCB and

shopping14/07/2011 Nu 136,382,400 137,760,000 1,995,505

Proc-02M/s Armtec Limited Partnership,

Canada.

Supply of Corrugated Galvanized Steel

arches

NCB and

shopping14/07/2011 Nu 32,248,365 37,213,206 494,717

Actual AmountContract Amount

Total Amount

(Nu)

ADB

Financing

($)

Equipment

Currency Amount

Consulting Services

Contract

No.Contractor/ Consultant Description/Nature of Works

Procurement

Method

Contract

Date

Civil Works

Appendix 11 29

STATUS OF COMPLIANCE WITH GRANT COVENANTS

Covenant

Reference in Grant

Agreement

Status of Compliance

Particular Covenants

In the carrying out of the Project and operation of the Project Facilities, the Recipient shall perform, or cause to be performed, all obligations set out in Section 4 to this Grant Agreement.

Article IV, Section 4.01

Partially complied with. Status of compliance against each item in Schedule 4 is detailed below.

The Recipient shall (i) maintain, or cause to be maintained, separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by interdependent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event no later than 9 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Article IV, Section 4.02(a)

Partially complied with. All annual APFS from effective date to closing (FY2011, 2012, 2013, 2014, 2015 and 2016) have been received. The project accounts and financial statements were audited annually by the government auditor acceptable to ADB. However, key reports were not always provided on a timely basis. APFS submission in some instances was delayed by as much as 7 months. Audit opinions were mostly unqualified. However, audit opinions for FY 2012 and FY2013 were qualified due to some deficiencies and lapses. These audit findings were settled in view of replies and related supporting documents and evidences furnished subsequently. No significant issues were issued by the auditor on use of fund and compliance.

The Recipient shall enable ADB, upon ADB’s request, to discuss the Recipient’s financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by the Recipient and shall authorize and require any representative of such auditors to participate in any discussions required by ADB, provided that any such discussion shall be conducted only in the presence of authorized officer of the Recipient unless the Recipient shall otherwise agree.

Article IV, Section 4.02(b)

Complied with. Where required, the DOR enabled or authorized ADB to discuss financial statements and affairs for the Project with the auditors appointed.

The Recipient shall furnish, or cause to be furnished, to ADB quarterly reports on the carrying out of the Project and on the operation and management of the Project facilities.

Article IV, Section 4.03

Complied with. The DOR prepared and provided ADB with project quarterly progress reports as required.

The Recipient shall enable ADB’s representatives to inspect the Project, the goods financed out of the proceeds of the Grand and any relevant records and documents.

Article IV, Section 4.04

Complied with. ADB fielded many project review and project completion missions. The DOR and the PMO well facilitated and fully supported all ADB review missions during implementation and at completion. DOR also provided relevant records, documents and data as requested by ADB.

Implementation Arrangement

DOR shall be the Executing Agency for the Project, responsible for overall implementation and carrying out of the Project.

Sch 4, para. 1

Complied with. During implementation, the DOR acted as the executing agency for the project.

Project Management Office (PMO)

The PMO will be established and headed by a full-time project coordinator at the executive engineer level and

Sch 4, para. 2

Complied with. The PMO established for a previous ADB-

30 Appendix 11

Covenant

Reference in Grant

Agreement

Status of Compliance

shall be responsible for (i) overall coordination, management and monitoring of the Project, (ii) supervising detailed engineering design, and (iii) procurement. The DOR may, as required, organize meetings of related agencies of the Recipient to facilitate swift resolution of any implementation-related issues requiring coordination amongst various departments.

funded road project was retained, which was headed by a full-time project coordinator at executive engineer level. The PMO coordinated, managed and monitored project implementation including supervision, recruitment, procurement and financial management. The DOR and PMO also resolved any coordination issues during implementation swiftly.

In addition to the PMO, two site offices shall be established to be responsible for monitoring day-to-day implementation of the Project and preparation of project progress reports, each to be headed by a project manager at the assistant engineer level.

Sch 4, para. 3

Complied with. Three site offices were established at Gedu, Samdrupcholing, and Nganglam to be responsible for day-to-day implementation of the project and preparation of project progress reports for road sections under their jurisdiction.

The Project coordinator shall be responsible to (i) prepare withdrawal application, and (ii) consolidate the reports received from the site offices and submit them to DOR and ADB. The Project coordinator shall ensure timely processing of payment requests from the contractors and will ensure that the PMO processes and forwards each payment request within 5 working days of receipt of such requests to the Ministry of Finance for release of funds. The project coordinator and project managers shall meet on a quarterly basis or as required.

Sch 4, para. 4

Complied with. The PMO prepared timely withdrawal applications for the grant and consolidated the project progress reports and submitted them to the DOR and ADB. The project coordinator and all project managers met on a quarterly basis or as required.

Road Maintenance Financing

The Recipient shall provide sufficient and timely budget for routine and periodic maintenance of the entire road network every year throughout Project implementation.

Sch 4, para. 5

Partially complied with. Funds for routine maintenance are allocated from the central government generally in a timely manner according to the national norm. The total budget was increased from Nu570 million in the Tenth Five Year Plan to Nu1,422 million in the Eleventh Five Year Plan. However, maintenance of the project roads needs to be improved. Minimum repairs were in place in some locations and full restoration is urgently needed, suggesting that the budget for maintenance may not be sufficient.

Counterpart Funds

The Recipient shall ensure the timely and adequate provision of all counterpart funds for the Project. DOR shall make timely and necessary requests to the Recipient to ensure that the counterpart funds are allocated for the Project in the relevant yearly budgets of the Recipient.

Sch 4, para. 6

Complied with The government provided adequate and timely counterpart funds during project implementation, totaling the equivalent of $20.4 million.

Road Safety

The Recipient shall ensure that road safety measures are implemented taking into account findings and recommendations of the Project Preparatory Technical Assistance (TA7128-BHU: Preparing the Road Network Project II) and design and supervision consultants.

Sch 4, para. 7

Complied with. Substantial road safety measures were incorporated in the project design and implementation. Truck passing zones at appropriate locations, guard rails, crash barriers at identified accident-prone areas were integrated into the project design

Appendix 11 31

Covenant

Reference in Grant

Agreement

Status of Compliance

along with engineering measures such as widening on curves and adequate provision of road markings and sign.

Overloading

The Recipient shall ensure that all prevailing regulations on overloading control, including penalties, will be effectively implemented, including by further installing overweigh bridges.

Sch 4, para. 8

Partially complied with. Regulations for overloading control have been implemented but need to be strengthened by using weighing equipment.

Health

The Recipient and DOR shall ensure that contractors provide adequately for the health and safety of construction workers and further ensure that bidding documents include measures on how contractors will address this, including an information and awareness raising campaign for construction workers on sexually transmitted diseases, HIV/AIDS, and human trafficking.

Sch 4, para. 9

Complied with. The contractors were familiar with the awareness practices needed to combat HIV/AIDS and implemented an appropriate program during construction. No case of human trafficking was reported.

Labor

The Recipient and DOR shall ensure that (i) civil works contractors comply with all applicable labor laws and regulations, do not employ child labor for construction and maintenance activities, and provide appropriate facilities for women and children in construction campsites; (ii) people directly affected by the Project are given priority to be employed by the Project; (iii) contractors do not differentiate wages between men and women for work of equal value; and (iv) specific clauses ensuring these will be included in bidding documents. DOR shall cooperate with the Department of Labor of the Recipient to monitor the implementation of this clause.

Sch 4, para. 10

Complied with. The contractors complied with all applicable labor laws and regulations. No cases of child labor for construction and maintenance activities was reported. Contractors provided appropriate facilities for women and children in construction campsites, and people directly affected by the project were given priority to be employed by the project. Contractors did not differentiate wages between men and women for work of equal value.

Environment Consideration

The Recipient shall implement all mitigation measures included in the EIA reports in accordance with the Royal Bhutan Environmental Policy as well as ADB’s Environment Policy. DOR shall consult on a continuing basis with the park managers of national parks on the locations for construction campsites, hot mix and crushing plants, and disposal and handling of spoiled materials. DOR shall incorporate the EIA reports including EMP in bidding documents and civil works contracts, update them if necessary, in course of Project implementation with prior approval of ADB, and ensure that contractors implement the required mitigation measures and EMP as described in the reports. DOR shall ensure that all conditions attached to the clearances will be implemented and monitored. DOR shall promptly mitigate and minimize any adverse impact on the environment that may arise from the Project implementation in accordance with the EMP. DOR shall undertake environmental monitoring plan and submit semiannual reports to ADB and relevant agencies on the implementation

Sch 4, para. 11

Complied with. The overall compliance performance of RNP II, defined as the percentage of specific EMP items complied for each road package, ranges from 83% to 97%. Continuous discussions were made by the DOR through its Project Management Office and contractors have maintained close communication particularly with the Khaling Wildlife Sanctuary and to a lesser extent the Manas National Park managers. Concurrence from the Forest Department were secured on all bio-engineering activities and locating of wildlife crossings. Records of wildlife sightings were shared on a regular basis. The Bhutan National Environment Commission (NEC) carried out annual independent inspection and monitoring. ADB fielded environment specialists several times to inspect the compliance of ADB safeguard policy. The ADB review missions noted satisfactory implementation of the environmental loan covenants and environmental management plan, albeit with minor instances of nonconformance

32 Appendix 11

Covenant

Reference in Grant

Agreement

Status of Compliance

of EMP as part of the progress report on Project implementation. The Recipient shall report to ADB any change on alignment or Project component after the environmental assessment report was approved to allow a consideration on whether additional environmental assessment study is required.

related to delays in securing environmental clearances, camp hygiene, camp demobilization, delays in bioengineering restoration, and inadequate personal protective equipment. Compliance to the provisions of the environmental clearance are integral part of the monthly, and semi-annual inspections and monitoring reports. Damages to public infrastructure incurred during the early stage of project construction were immediately and effectively addressed. All required semi-annual reports were timely submitted to ADB for review and disclosure. All realignments were communicated to ADB and reflected in the disclosed monitoring reports. For facilitating and monitoring wildlife movement, elephant underpasses have been provided by the project and some cameras were installed.

Land Acquisition and Resettlement

The Recipient shall (i) implement the Project in accordance with the Resettlement Plans (RPs) prepared, ADB’s Policy on Involuntary Resettlement (1995), Policy on Indigenous Peoples (1998) and applicable national laws and regulations; (ii) in case of any design changes in project roads, ensure that the resettlement plans are updated on the basis of the final alignment and submitted to ADB for review and approval prior to awarding of civil works contracts; and (iii) provide semiannual progress reports on the implementation of the resettlement plans.

Sch 4, para. 12

Complied with. Land acquisition was carried out prior to the commencement of the construction activities. The compensation and land replacement were carried out by the project and the respective district administration involving all stakeholders and affected people. The affected people were either paid cash compensation or provided land for land substitution as per the Royal Government of Bhutan rules and regulation for acquisition of properties for developmental activities. The fruit trees/commercial trees and cash crops were also compensated as per the prevailing rates. The services and utilities along the alignment were also compensated with cash or reinstated/relocated. A grievance redressal committee was constituted. No issues arose regarding compensation and the affected people were fully satisfied with the compensation. The social monitoring reports were prepared and posted on the ADB website.

Condition for Award of Contracts

The Recipient shall not award civil works contract unless the following requirements have been met: (i) during the detailed design phase of the Project, DOR shall update the resettlement plans and the EMP, as required. If the scope of the Project is substantially changed, the resettlement plans shall be revised accordingly and submitted to ADB for approval before award of any civil works contract.

Sch 4, para. 13

Complied with. The detailed design, the resettlement plan and the EMP were updated, which were approved by ADB. The DOR obtained the environmental clearance from NEC for the purposes of the contract. The DOR has consistently maintained annual environmental clearances from the NEC

Appendix 11 33

Covenant

Reference in Grant

Agreement

Status of Compliance

Any changes to the EMP shall be reviewed, recorded, and submitted to the National Environment Commission as well as to ADB for review and concurrence as required prior to awarding of civil works contracts; and (ii) DOR shall have obtained the environmental clearance from the National Environment Commission for the purposes of the contract.

for each road package. An innovative approach adopted by the project was the introduction of specific environmental management plans (SEMP), based on a general (EMP) approved by the ADB. These SEMPs are updated by the Contractor to apply to active construction fronts and specific construction activities and subject to review and approval by the construction supervision consultant (CSC).

Condition for Commencement of Civil Works

The EA shall not commence civil works unless it has acquired, paid compensation for, and made available the land and rights in land free from any encumbrances, and cleared any obstruction from the related section, required to be handed over to the contractor for commencement of construction in accordance with the work schedule under the related civil works contract.

Sch 4, para. 14

Complied with. Land acquisition along the road alignments was carried out prior to the commencement of the construction activities as required by the project.

Anti-corruption and Transparency

The Recipient and DOR shall comply with ADB's Anticorruption Policy (1998, as amended to date), and cooperate fully with any investigation by ADB and extend all necessary assistance, including providing access to all relevant books and records for the satisfactory completion of such investigation.

Sch 4, para. 15

Complied with. The government and DOR complied with ADB's Anticorruption Policy (1998, as amended to date).

The Recipient and DOR shall (i) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of DOR, and all contractors, suppliers, consultants, and other service providers as they relate to the Project; and periodically inspect contractors' activities, particularly fund withdrawals and resettlements.

Sch 4, para. 16

Complied with. The project accounts and financial statements were audited annually by the government auditor acceptable to ADB, and the audit reports were submitted to ADB as required in the grant agreement.

The DOR shall ensure that all relevant information and documents, including procurement procedures and contract awards, which are required to be made public under ADB's Public Communication Policy are made readily available to any member of public from the PMO and its website.

Sch 4, para. 17

Complied with. All relevant information and documents, which are required to be made public under ADB's Public Communication Policy, were made readily available to any member of public via the PMO and its website. From March 2012 to August 2015 a total of 8 semi-annual monitoring reports were publicly disclosed.

The Recipient and DOR shall ensure that within 90 days of the Effective Date, grievance redress mechanism with defined functions acceptable to ADB is established to redress any Project-related concerns raised by Project beneficiaries and communities in the Project sites.

Sch 4, para. 18

Complied with. The grievance redress mechanism was established as required.

34 Appendix 11

Covenant

Reference in Grant

Agreement

Status of Compliance

Project Reports and Review

The DOR shall, within three (3) months of the Effective Date, develop a systematic Project Performance Monitoring System (PPMS), in a form and substance acceptable to ADB, for use throughout the life of the Project.

Sch 4, para. 19

Complied with. A PPMS was developed in compliance with the Project Administration Manual. PPMS report was provided in February 2012, 2 years after the grant effectiveness date.

The DOR shall establish, within three (3) months of the Effective Date, a baseline for performance indicators to be used for monitoring implementation of each road segment, and thereafter conduct evaluation surveys annually under each road segment, in accordance with the PPMS to evaluate the scope, implementation arrangements, progress and achievements of objectives of the Project.

Sch 4, para. 20

Partially complied with. Baselines for performance indicators were established and submitted with PPMS report in February 2012, 2 years after the Effective Date. Annual evaluation surveys were not completed as requested in the grant agreement.

ADB and DOR shall meet regularly as required to review the progress of the Project and any changes to implementation arrangements or remedial measures required to be undertaken towards achieving the objectives of the subprojects and the Project. Mid-term review of the Project shall be undertaken by ADB and DOR in 2012, which shall focus on issues related to implementation arrangements, and agree on changes, if needed, to achieve the objectives of the Project.

Sch 4, para. 21

Complied with. During implementation, ADB fielded many project review missions to review the progress of the project and any changes in implementation arrangements or remedial measures required to be undertaken towards achieving the objectives of the project.

The DOR shall prepare and provide ADB with Project quarterly reports on progress made during the period of review, changes if any on implementation schedule, problems or difficulties encountered and remedial actions taken, anticipated problems and the proposed remedial measures, and work to be undertaken in the following period. The DOR shall submit the quarterly progress reports to ADB within 45 days from close of each quarter. These reports shall also include a summary financial account for each subproject, expenditures to date, report on performance monitoring, and the results of monitoring of the social and environmental impacts.

Sch 4, para. 22

Complied with. The DOR prepared and provided ADB with project quarterly progress reports as required.

DOR shall prepare and provide ADB with a road completion report within 3 months of physical completion of each individual road and a Project completion report within 3 months of completion of transactions under the Project. These reports will cover a detailed evaluation of each road project and the overall project, respectively, covering the design, costs, contractors’ and consultants’ performance, social and economic impact, economic rate of return, and other details relating to the Project as may be requested by ADB.

Sch 4, para. 23

Partially complied with. The DOR prepared the EA’s project completion report and submitted it to ADB in June 2016, which was not within three months of physical completion. The EA’s final PCR was prepared and submitted to ADB 8 months after physical completion.

ADB = Asian Development Bank, APFS = Audited Project Financial Statements, CSC = construction supervision consultant, DOR = Department of Roads, EA = executing agency, EIA = environmental impact assessment, EMP = environment management plan, FY = financial year, NEC = National Environment Commission PMO = project management office, PCR = project completion report, PPMS = project performance monitoring system, RP = resettlement plan, SEMP = specific environmental management plan. Source: Asian Development Bank.

Appendix 12 35

ECONOMIC REEVALUATION A. Background

1. Accessibility is a major development constraint in Bhutan. A large segment of the rural population has limited access to markets and modern services because of the harsh geography and limited reach of the transport system. The trunk road network relies on an east–west highway running only through the northern part of Bhutan, while the southern areas of the country lack a similar highway. This has constrained travel and development opportunities in the south and limited potential integration with primary trade markets in India. 2. The Asian Development Bank (ADB) approved the Road Network Project II on 10 November 2009.1 The project aimed to expand the road network in the southern region of Bhutan, to provide people in rural areas with better access to services and for farm produce delivery to markets. Improving passenger and freight transport within the country and with India would also encourage development in the south of the country, a remote area with a high poverty incidence but high agricultural and industrial development potential. The project was the ADB’s second intervention to support highway network expansion in Bhutan in line with the government’s plan to construct the southern east–west highway as a major development priority. Upon completion, 131.4 kilometers (km) of national highways and 55.0 km of feeder roads were newly constructed, including: (i) Manitar–Raidak–Lhamoizingkha (52.9 km of national highway) in the south-west, with two major modular steel truss bridges, providing access to the border crossing at Lhamoizingkha; (ii) Panbang–Nganglam (54.7 km of national highway) in the south, providing access to the border crossing at Nganglam; (iii) Tsebar–Mikuri–Durung Ri (55.0 km of feeder roads); and (iv) Samdrupcholing–Samrang (23.9 km of national highway) in the south–east, providing access to the border crossing at Samdrup Jongkhar. 3. The ADB project completion consultation and review missions conducted an economic reevaluation of the project using similar methodology as at appraisal and with updated data.2 In the without-project case, it was assumed that the original state would be retained (i.e., walking path in forest). In the with-project case, new roads were constructed. The project roads enable much shorter travel distances than in the without-project case, which required the use of roads in India. The new roads also reduce travel times for local farmers to access nearby towns and markets to sell their agriculture products and enable the community to access a variety of social services. Traffic analysis compared the actual traffic counts on the project roads with those estimated at appraisal. The traffic forecast for future years was also revised accordingly. Economic benefits were calculated by comparing the with-project and without-project cases. The economic internal rate of return (EIRR) was recalculated and sensitivities were tested for the project.

4. Key assumptions and data sources. Due to unavailability of data, some assumptions were used based on observations during site visits, discussions with Department of Roads (DOR) staff and the local community, as well as experience on similar road projects in Bhutan:

• Traffic forecasts. Future traffic growth rates at appraisal were adjusted jointly by the project completion missions and DOR staff according to actual traffic growth rates based on traffic surveys and traffic demand generated by rapid industrial and agriculture

1 ADB. 2009. Report and Recommendation of the President to the Board of Directors on a Proposed Asian

Development Fund Grant to the Kingdom of Bhutan: Road Network Project II. Manila. 2 The original spreadsheet model and HDM-4 model used at appraisal were not available for use at the time of

reevaluation.

36 Appendix 12

developments in the project areas observed during site visits.

• Maintenance costs. The national norms for road maintenance costs in the country were used, including routine maintenance costs of Nu115,000 per km-year for national highways and Nu109,000 per km-year for feeder roads. In line with general road maintenance practices and the road conditions, routine maintenance costs were assumed to increase by 3% per year along with road deterioration. A further 20% was added to the routine maintenance cost to reflect the cost for repairing monsoon damages. The periodic maintenance was assumed to take place every 8 years mainly to repave the project roads at a cost of Nu3 million per km for blacktopped roads and Nu1 million per km for gravel roads.

• Economic cost. The financial capital and maintenance costs were converted to economic costs by using the same conversion factor of 0.94 applied at appraisal.3

• Travel distances. Before the project, most vehicles used roads in India to travel between towns, at a much greater distance. With the project roads, the vehicle traveling distances and times have substantially reduced. The travel distance reductions calculated were 78.1 km for Manitar–Raidak road, 181.3 km for Panbang–Nganglam road, 38 to 42 km for Samdrupcholing–Samrang road, and 168.0 km Tsebar–Mikuri–Durung Ri road.

• Unit vehicle operating cost (VOC). The VOC savings were calculated using average unit VOC data for the India and Bhutan highways, which is, per vehicle-km, Nu1.50 for two-wheelers, Nu6.02 for car/light vehicles, Nu16.67 for bus and Nu16.98 for freight truck.4

• Passenger time cost. Half of the gross domestic product per capita in 2018 was used to calculate the basic time cost for passengers. It was also assumed that the car and two-wheeler passengers have higher time cost at 3 and 1.5 times of the basic time cost (Nu50.54 per hour).

• Benefits of industrial and agricultural development. For the Panbang–Nganglam road, it was assumed that there were 1,000 trucks per year transporting oranges with 4 tons per truck, among which half was due to improved transport conditions. For the Samdrupcholing–Samrang road, about 10 trucks per day were assumed transporting coal with 20 tons per truck, among which at least 30% was due to the project roads. These assumptions were conservative and agreed with DOR staff during the project completion consultation and review missions. The estimated benefits associated with industrial and agricultural development were included in the project benefits.

• Discount rate. ADB’s discount rate adopted at the time of appraisal and for the economic reevaluation was 12%.5

B. Traffic Analysis

5. At appraisal, traffic on the project roads was estimated for 2012 using traffic on similar roads in the country. The traffic forecast was based mainly on the population and trip generation in the project area. Diverted and induced traffic were also considered. However, the traffic forecasts at appraisal were too optimistic, averaging 317 vehicles per day in 2012 with average annual growth rates of 9.8% for passenger vehicles and 8.1% for goods vehicles across the period 2012–2017. During project completion consultation and review missions, classified traffic counts on the project roads for 2016, 2017 and 2018 were provided by DOR. Comparing against the traffic volumes at

3 Detailed costs by inputs were not available at appraisal. 4 Unit VOCs for Bhutan are the same as applied in the project completion reports for Road Network Project (L2187),

and the same as applied in India for National Highway Sector II Project (L2154). 5 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila.

Appendix 12 37

appraisal, the actual surveyed traffic volumes in 2016 (first full year of operation) was only an annual average daily traffic of 40 vehicles across all project roads, which was much lower than estimated. However, the traffic in 2017 and 2018 sharply increased with an average growth rate of about 70% per year. Table A12.1 presents the surveyed traffic on the project roads.

Table A12.1: Surveyed Traffic on the Project Roads (Vehicle, AADT)

Road Section

Length (km)

Year Two-

Wheelers Car Bus Truck Total

NH Manitar-Raidak-Lhamoizingkha

52.90 2016 10 8 1 10 28 2017 6 230 12 15 263

2018 4 123 7 7 141

NH Panbang– Nganglam

54.60 2016 5 11 0 70 86 2017 16 446 17 208 687

2018

14 45 12 36 107

FR Tsebar–Mikuri–Durung Ri

55.76 2016 3 8 1 10 22 2017 3 18 3 4 28

2018

9 28 5 13 55

NH Samdrupcholing–Samrang

23.86 2016 5 10 1 7 23 2017 13 81 25 30 149

2018

14 87 27 32 160

CAGR 2016-2018 for all traffic 70.1%

AADT = annual average daily traffic, NH = national highway, FR = feeder road, CAGR = compound annual growth rate. Source: Department of Roads.

6. In 2018, traffic on the Manitar–Raidak–Lhamoizingkha and Panbang– Nganglam roads decreased sharply mainly due to: (i) major road projects initiated in the Eleventh Plan were almost complete, meaning that transportation of construction materials such as cement and steel tapered off, (ii) change in government slowed the release of the capital budget, indirectly slowing construction activities, (iii) two major hydropower projects were nearing completion while other projects were delayed, and (iv) increases in fuel prices. Such unusual traffic demand was smoothened in the analysis. 7. In the economic reevaluation, the actual traffic volumes were used as the basis for traffic analysis and forecasts. Future traffic growth rates at appraisal were adjusted jointly by the project completion consultation mission and DOR staff according to actual traffic growth rates and traffic demand generated by rapid industrial and agricultural development in the project areas. This industrial and agricultural development was also observed during the project completion consultation and review missions. It was estimated that the average traffic growth rates on the project roads would be 7.7% in 2019–2023, 5.8% in 2024–2028, and 4.9% in 2029 and onwards. Comparing against the growth rates for traffic assumed at appraisal, the revised traffic growth rates for future years are slightly higher. C. Project Costs

8. The project costs comprised capital and maintenance costs. Comparing with the cost estimation at appraisal, the actual project cost was 38% higher. The actual annual investment costs for the project were used in the economic reevaluation. Table A12.2 provides the actual annual project costs including the costs for land acquisition, civil works, engineering design, construction supervision and equipment.

38 Appendix 12

Table A12.2. Actual Annual Project Costs (Nu million)

Road Section 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 Total

1. Manitar–Raidak 12.99 53.46 101.22 211.83 219.39 20.51 619.40

2. Raidak–-Lhamoizingkha 12.74 127.58 79.90 101.64 201.65 107.31 630.83

3. Panbang–Nganglam 25.12 52.17 182.05 428.49 299.08 255.37 1,242.28

4. Tsebar–Mikuri–Durung Ri 16.55 95.53 160.61 254.96 210.29 77.33 815.26

5. Samdrupcholing–Samrang 6.11 62.93 55.32 70.50 97.67 0.08 292.62

Source: Department of Roads.

9. The national norms for road maintenance costs in the country were used, including routine maintenance costs of Nu115,000 per km-year for national highways and Nu109,000 per km-year for feeder roads. In line with general road maintenance practices and the road conditions, it was assumed that the routine maintenance cost would increase by 3% per year along with road deterioration. A further 20% was added to the routine maintenance cost to reflect the cost for repairing monsoon damage. The periodic maintenance was assumed to take place every 8 years mainly to repave the project roads at a cost of Nu3 million per km for blacktopped roads and Nu1 million per km for gravel roads. 10. The financial capital and maintenance costs were converted to economic costs using the same conversion factor of 0.94 as applied at appraisal. D. Project Benefit Estimation

11. Using a methodology similar to that at appraisal, the main source of economic benefits for the project roads are (i) savings in vehicle operating cost (VOC) due to reduced traveling distance and improved road conditions, (ii) savings in passenger travel time costs in comparison to walking, and (iii) other benefits from industrial and agricultural development induced by the project roads. Benefit calculations were mainly for diverted traffic (80% of the total traffic). Half benefits were considered for induced traffic (the remainder of traffic on the project roads), generated due to better transport conditions.

12. The project constructed new roads located in southern Bhutan and mostly along the Bhutan–India border. Before the project, most vehicles used roads in India to travel between towns, at a much longer distance. With the project roads, the vehicle traveling distance has substantially reduced. The travel distance reductions estimated were 78.1 km for Manitar–Raidak road, 181.3 km for Panbang–Nganglam road, 38–42 km for Samdrupcholing–Samrang road, and 168.0 km for Tsebar–Mikuri–Durung Ri road. The VOC savings were estimated using average unit VOC data per vehicle-kilometer for the India and Bhutan highways: Nu1.50 for two-wheelers, Nu6.02 for car/light vehicles, Nu16.67 for bus and Nu16.98 for freight vehicles. Reduced travel distances have led to substantial VOC savings.

13. Without the project roads, vehicles used roads in India resulting in much longer travel times. Average vehicle speeds were 25–40 km per hour in the “with-project” case, allowing for travel using a combination of both India and Bhutan roads. The vehicle travel time savings per trip were calculated accordingly based on reduced distance and average vehicle speed. The average passenger time cost was estimated at Nu50.54 per hour, derived from the national average gross domestic product per capita. The passenger travel time cost savings were estimated for different types of passenger vehicles (two-wheelers, car, and bus). Other factors considered in estimating

Appendix 12 39

passenger time cost savings included average vehicle loads by vehicle types (2 persons for two-wheelers, 5 persons for small passenger vehicles, and 20 persons for bus), percentage of work-related trips (60% for two-wheelers, 80% for passenger car, and 70% for bus), and time costs for different road users.

14. The project roads have significantly promoted and facilitated agriculture, industrial, and commercial development in the project areas.6 For example, along the Panbang–Nganglam road orange production is booming. The project completion consultation mission was told that the production volume was approximately 4,000 tons in 2017. Before, the project farmers could only carry the oranges on their shoulders and walk via footpaths to nearby markets. With the project road 1,000 trucks transported the oranges to the markets further away, securing a higher price for the produce. It was assumed that at least 50% of the orange production was induced by the project road. Near Dalim, a coal mine opened generating approximately 10–20 trucks per day on the Samdrupcholing–Samrang road transporting coal. Without the project road, transportation of coal was previously impossible. For the Panbang–Nganglam road, it was assumed that there were 1,000 trucks per year transporting oranges with 4 tons per truck, among which about half was due to improved transport conditions. For the Samdrupcholing–Samrang road, there is about 10 trucks per day transporting coal with 20 tons per truck, of which at least 30% was due to the project roads. Such benefits were estimated and included in the project benefits. During review and consultation missions, it was also noted that a substantial number of shops, restaurants, hotels, and garages were opened by the villagers along the project roads to provide services to the drivers, passengers, and vehicles. Due to lack of available data, the benefits of commercial development were not quantified and captured in the economic reevaluation.7 E. Economic Reevaluation and Sensitivity Analysis

15. Based on updated data and the estimates for the economic costs and benefits, the economic internal rate of return (EIRR) was calculated for the entire project and for each project road, considering 6 years for construction and 20 years for operation. The EIRR was recalculated at 15.8% for the whole project, which is lower than that estimated at appraisal (19.9%).8 The difference is mainly due to higher capital costs and lower traffic volumes than anticipated. The recalculated EIRR exceeds the ADB minimum required EIRR at the time of appraisal (12%), indicating that the project is continuously considered economically viable. The cash flows of the EIRR calculations for the project are in Table A12.4. The EIRRs for each project road are attached in Table 12.5 to Table 12.8. 16. The EIRR was subjected to sensitivity analysis to test different scenarios of costs and benefits. The sensitivity analysis results demonstrate that the project continued to have an EIRR above the appraisal discount rate (12%) in all nine tested scenarios. In the worst-case sensitivity scenario with a 20% maintenance cost increase combined with a 20% benefit reduction, the EIRR was estimated at 12.8% for the whole project. The sensitivity analysis also showed that the project’s EIRR was more sensitive to changes in benefits. Therefore, more attention should be focused on the road condition, facilitation of traffic demand, promotion of socioeconomic development, and increasing incomes of rural road users. The results of the sensitivity analysis are summarized in Table A12.3.

6 The economic benefits to agricultural development was also included in the project benefit estimation at appraisal. 7 Impact data was collected through site visits, consultation meeting with DOR and discussions with local residents

along the roads. 8 EIRRs for each road were re-estimated as 12.6% for the Manitar–Raidak, 15.6% for the Panbang–Amshingwoong

(Nganglam), 30.2% for the Samdrupcholing–Samrang, and 13.5% for the Tsebar–Mikuri–Durung Ri (feeder road).

40 Appendix 12

Table A12.3: Sensitivity Analysis

Scenarios

EIRR (%)

ENPV (@12%, Nu million)

Base Case 15.8 2,242.70

Sensitivity Tests

1 Maintenance cost increased by 10% 15.7 2,182.98

2 Maintenance cost increased by 20% 15.6 2,123.26

3 Maintenance cost increased by 100% 14.8 1,645.49

4 Benefits reduced by 10% 17.1 3,122.36

5 Benefits reduced by 20% 18.4 4,002.02

6 Benefits reduced by 10% 14.4 1,363.04

7 Benefits reduced by 20% 12.9 483.38

8 Maintenance cost increased by 10% higher and benefits reduced by 10% 14.3 1,303.32

9 Maintenance cost increased by 20% higher and benefits reduced by 20% 12.7 363.94

EIRR = economic internal rate of return, ENPV = economic net present value. Source: ADB project completion consultation and review missions.

Appendix 12 41

Table A12.4: Economic Reevaluation for Entire Project (Nu million)

Cost Benefit Net

Benefit

Net Present Value Year Capital Maint. Total VOC Time Others Total

2011 69.10

69.10 (69.10) (171.09)

2012 368.17

368.17 (368.17) (813.91)

2013 544.36

544.36 (544.36) (1,074.46)

2014 1003.38

1,003.38 (1,003.38) (1,768.30)

2015 966.39 2.44 968.84 (968.84) (1,524.49)

2016 432.96 19.78 452.74 97.68 33.76 225.83 357.27 (95.47) (134.12)

2017

20.37 20.37 115.76 137.12 232.61 485.49 465.11 583.44

2018

20.98 20.98 135.28 210.99 239.59 585.86 564.87 632.66

2019

21.61 21.61 145.59 229.22 246.77 621.58 599.97 599.97

2020

22.26 22.26 156.76 249.23 254.18 660.17 637.91 569.56

2021

22.93 22.93 168.87 271.21 261.80 701.89 678.96 541.26

2022 22.43 23.06 45.49 182.01 295.38 269.66 747.05 701.56 499.36

2023 355.02 19.78 374.80 196.27 321.97 277.75 795.99 421.19 267.68

2024

20.37 20.37 207.20 341.98 286.08 835.26 814.88 462.39

2025

20.98 20.98 218.78 363.31 294.66 876.75 855.77 433.56

2026

21.61 21.61 231.05 386.07 303.50 920.62 899.00 406.66

2027

22.26 22.26 244.04 410.35 312.60 967.00 944.74 381.56

2028

22.93 22.93 257.82 436.26 321.98 1,016.07 993.14 358.13

2029

23.62 23.62 269.44 455.28 331.64 1,056.36 1,032.74 332.51

2030 22.43 23.68 46.10 281.60 475.18 341.59 1,098.38 1,052.27 302.50

2031 355.02 19.78 374.80 294.35 496.01 351.84 1,142.21 767.41 196.98

2032

20.37 20.37 307.71 517.82 362.39 1,187.93 1,167.55 267.57

2033

20.98 20.98 321.71 540.65 373.27 1,235.63 1,214.64 248.54

2034

21.61 21.61 336.39 564.55 384.46 1,285.40 1,263.78 230.89

2035

22.26 22.26 351.76 589.57 396.00 1,337.33 1,315.07 214.52

2036

22.93 22.93 367.88 615.78 407.88 1,391.53 1,368.60 199.33 Economic Net Present Value (ENPV): 2,242.70

Economic Internal Rate of Return (EIRR):

15.80%

ADB adopted minimum EIRR at appraisal: 12.00%

EIRR = economic internal rate of return, ENPV = economic net present value, VOC = vehicle operating cost. Source: ADB project completion consultation and review missions.

42 Appendix 12

Table A12.5: Economic Reevaluation – Manitar–Raidak road

(Nu million)

Cost Benefit Net

Benefit

Net Present Value Year Capital Maint. Total VOC Time Others Total

2011 24.18

24.18 (24.18) (59.88)

2012 170.19

170.19 (170.19) (376.23)

2013 170.25

170.25 (170.25) (336.05)

2014 294.67

294.67 (294.67) (519.30)

2015 395.77

395.77 (395.77) (622.76)

2016 120.15 5.72 125.87 6.31 5.23 49.34 60.88 (64.99) (91.31)

2017

5.89 5.89 15.75 36.79 50.82 103.35 97.46 122.26

2018

6.07 6.07 25.19 68.34 52.34 145.87 139.81 156.58

2019

6.25 6.25 28.16 77.00 53.91 159.06 152.82 152.82

2020

6.44 6.44 31.49 86.76 55.53 173.77 167.34 149.41

2021

6.63 6.63 35.22 97.77 57.19 190.18 183.55 146.33

2022

6.83 6.83 39.40 110.20 58.91 208.51 201.68 143.55

2023 149.18 5.72 154.90 44.11 124.21 60.68 229.00 74.10 47.09

2024

5.89 5.89 47.45 134.02 62.50 243.97 238.08 135.09

2025

6.07 6.07 51.06 144.60 64.37 260.02 253.96 128.66

2026

6.25 6.25 54.93 156.01 66.30 277.25 271.00 122.59

2027

6.44 6.44 59.11 168.34 68.29 295.74 289.30 116.85

2028

6.63 6.63 63.61 181.64 70.34 315.59 308.96 111.41

2029

6.83 6.83 66.10 188.90 72.45 327.45 320.62 103.23

2030

7.03 7.03 68.68 196.46 74.62 339.76 332.73 95.65

2031 149.18 5.72 154.90 71.36 204.31 76.86 352.54 197.64 50.73

2032

5.89 5.89 74.15 212.49 79.17 365.81 359.92 82.48

2033

6.07 6.07 77.05 220.99 81.54 379.58 373.51 76.43

2034

6.25 6.25 80.06 229.83 83.99 393.88 387.63 70.82

2035

6.44 6.44 83.19 239.02 86.51 408.72 402.29 65.62

2036

6.63 6.63 86.45 248.58 89.10 424.13 417.50 60.81 Economic Net Present Value (ENPV): 132.88

Economic Internal Rate of Return (EIRR): 12.60% ADB adopted minimum EIRR at appraisal: 12.00%

EIRR = economic internal rate of return, ENPV = economic net present value, VOC = vehicle operating cost. Source: ADB project completion consultation and review missions.

Appendix 12 43

Table A12.6: Economic Reevaluation – Panbang–Nganglam (Nu million)

Cost Benefit Net

Benefit

Net Present Value Year Capital Maint. Total VOC Time Others Total

2011 23.62

23.62 (23.62) (58.47)

2012 49.04

49.04 (49.04) (108.40)

2013 171.13

171.13 (171.13) (337.78)

2014 402.78

402.78 (402.78) (709.84)

2015 281.14

281.14 (281.14) (442.38)

2016 240.04 5.91 245.95 76.18 11.67 65.42 153.26 (92.69) (130.22)

2017

6.09 6.09 70.95 33.42 67.39 171.76 165.67 207.82

2018

6.27 6.27 65.72 55.18 69.41 190.31 184.04 206.12

2019

6.46 6.46 70.26 59.34 71.49 201.09 194.63 194.63

2020

6.65 6.65 75.12 63.80 73.63 212.56 205.91 183.85

2021

6.85 6.85 80.32 68.61 75.84 224.77 217.92 173.73

2022

7.06 7.06 85.89 73.77 78.12 237.78 230.72 164.23

2023 154.14 5.91 160.05 91.84 79.33 80.46 251.63 91.58 58.20

2024

6.09 6.09 96.68 83.92 82.88 263.48 257.39 146.05

2025

6.27 6.27 101.79 88.77 85.36 275.92 269.65 136.61

2026

6.46 6.46 107.16 93.91 87.92 288.99 282.53 127.80

2027

6.65 6.65 112.82 99.34 90.56 302.72 296.07 119.58

2028

6.85 6.85 118.78 105.09 93.28 317.14 310.29 111.89

2029

7.06 7.06 124.89 110.76 96.08 331.72 324.66 104.53

2030

7.27 7.27 131.31 116.73 98.96 347.00 339.73 97.66

2031 154.14 5.91 160.05 138.07 123.03 101.93 363.02 202.97 52.10

2032

6.09 6.09 145.17 129.67 104.98 379.82 373.73 85.65

2033

6.27 6.27 152.64 136.66 108.13 397.43 391.16 80.04

2034

6.46 6.46 160.49 144.04 111.38 415.90 409.45 74.80

2035

6.65 6.65 168.75 151.81 114.72 435.28 428.63 69.92

2036

6.85 6.85 177.43 160.00 118.16 455.59 448.74 65.36 Economic Net Present Value (ENPV): 673.49 Economic Internal Rate of Return (EIRR): 15.60%

ADB adopted minimum EIRR at appraisal: 12.00%

EIRR = economic internal rate of return, ENPV = economic net present value, VOC = vehicle operating cost. Source: ADB project completion consultation and review missions.

44 Appendix 12

Table A12.7: Economic Reevaluation – Samdrupcholing–Samrang road (Nu million)

Cost Benefit Net

Benefit

Net Present Value Year Capital Maint. Total VOC Time Others Total

2011 5.74 5.74 (5.74) (14.22)

2012 59.15 59.15 (59.15) (130.77)

2013 52.00 52.00 (52.00) (102.64)

2014 66.27 66.27 (66.27) (116.79)

2015 91.81 2.44 94.26 (94.26) (148.32)

2016 0.08 2.52 2.60 2.00 3.99 72.11 78.09 75.50 106.07

2017 2.59 2.59 16.33 37.52 74.27 128.12 125.53 157.46

2018 2.67 2.67 17.54 40.36 76.50 134.40 131.73 147.54

2019 2.75 2.75 18.45 42.20 78.79 139.45 136.69 136.69

2020 2.83 2.83 19.41 44.13 81.15 144.69 141.86 126.66

2021 2.92 2.92 20.42 46.15 83.59 150.15 147.23 117.37

2022 22.43 2.44 24.87 21.48 48.26 86.10 155.84 130.96 93.22

2023 2.52 2.52 22.60 50.48 88.68 161.75 159.24 101.20

2024 2.59 2.59 23.31 52.12 91.34 166.77 164.17 93.16

2025 2.67 2.67 24.03 53.82 94.08 171.94 169.27 85.76

2026 2.75 2.75 24.79 55.58 96.90 177.27 174.52 78.94

2027 2.83 2.83 25.57 57.40 99.81 182.77 179.94 72.67

2028 2.92 2.92 26.37 59.27 102.80 188.45 185.53 66.90

2029 3.01 3.01 26.84 60.46 105.89 193.19 190.18 61.23

2030 22.43 2.44 24.87 27.32 61.67 109.07 198.06 173.18 49.79

2031 2.52 2.52 27.81 62.90 112.34 203.05 200.53 51.47

2032 2.59 2.59 28.31 64.16 115.71 208.18 205.58 47.11

2033 2.67 2.67 28.82 65.44 119.18 213.44 210.77 43.13

2034 2.75 2.75 29.33 66.75 122.75 218.84 216.09 39.48

2035 2.83 2.83 29.86 68.09 126.44 224.38 221.55 36.14

2036 2.92 2.92 30.40 69.45 130.23 230.08 227.16 33.08 Economic Net Present Value (ENPV): 1,232.34 Economic Internal Rate of Return (EIRR): 30.20% ADB adopted minimum EIRR at appraisal: 12.00%

EIRR = economic internal rate of return, ENPV = economic net present value, VOC = vehicle operating cost. Source: ADB project completion consultation and review missions.

Appendix 12 45

Table A12.8: Economic Reevaluation – Tsebar–Mikuri–Durung Ri road (feeder road)9

(Nu million)

Cost Benefit Net Benefit

Net Present Value Year Capital Maint. Total VOC Time Others Total

2011 15.56 15.56 (15.56) (38.52)

2012 89.80 89.80 (89.80) (198.52)

2013 150.97 150.97 (150.97) (297.99)

2014 239.66 239.66 (239.66) (422.37)

2015 197.67 197.67 (197.67) (311.04)

2016 72.69 5.64 78.32 13.20 12.87 38.97 65.04 (13.28) (18.66)

2017 5.80 5.80 12.74 29.39 40.14 82.26 76.46 95.91

2018 5.98 5.98 26.83 47.10 41.34 115.27 109.30 122.41

2019 6.16 6.16 28.72 50.68 42.58 121.99 115.83 115.83

2020 6.34 6.34 30.75 54.54 43.86 129.14 122.80 109.64

2021 6.53 6.53 32.92 58.68 45.18 136.78 130.24 103.83

2022 6.73 6.73 35.24 63.15 46.53 144.92 138.19 98.36

2023 51.70 5.64 57.33 37.73 67.95 47.93 153.61 96.27 61.18

2024 5.80 5.80 39.76 71.92 49.37 161.05 155.24 88.09

2025 5.98 5.98 41.90 76.12 50.85 168.87 162.90 82.53

2026 6.16 6.16 44.16 80.57 52.37 177.11 170.95 77.33

2027 6.34 6.34 46.55 85.28 53.94 185.77 179.43 72.47

2028 6.53 6.53 49.06 90.27 55.56 194.89 188.36 67.92

2029 6.73 6.73 51.61 95.16 57.23 204.00 197.27 63.52

2030 6.93 6.93 54.29 100.33 58.95 213.56 206.63 59.40

2031 51.70 5.64 57.33 57.12 105.77 60.71 223.60 166.26 42.68

2032 5.80 5.80 60.09 111.51 62.54 234.13 228.32 52.33

2033 5.98 5.98 63.21 117.56 64.41 245.18 239.20 48.95

2034 6.16 6.16 66.50 123.93 66.34 256.78 250.62 45.79

2035 6.34 6.34 69.96 130.66 68.33 268.95 262.61 42.84

2036 6.53 6.53 73.60 137.75 70.38 281.73 275.20 40.08 Economic Net Present Value (ENPV): 203.98

Economic Internal Rate of Return (EIRR): 13.50% ADB adopted minimum EIRR at appraisal: 12.00%

EIRR = economic internal rate of return, ENPV = economic net present value, VOC = vehicle operating cost. Source: ADB project completion consultation and review missions.

9 Tsebar–Mikuri–Durung Ri road has subsequently been upgraded to a secondary national highway.

46 Appendix 13

SUMMARY OF SOCIOECONOMIC IMPACTS 1. Poverty and social assessment of the project was carried out during project appraisal. The assessment indicated that the construction of critical sections of the country's trunk road network would enhance rural accessibility in the southern area as well as provide an alternate east–west link. This would reduce poverty incidence and improve the quality of life in the remote southern areas. It would also integrate these areas with the national and subregional economies through reduced travel time, accidents, overloading, and vehicle emissions. During the ADB’s project completion review (PCR) mission, supplementary information on the social impacts was collected. The following is a summary of the socioeconomic impacts of project implementation and the project roads.

2. Connectivity and mobility improvement. Upon completion, a total 131.4 kilometers (km) of national highways and 55.0 km of feeder roads were constructed, including the roads of (i) Manitar–Raidak–Lhamoizingkha (52.9 km national highway), providing access to the border crossing at Lhamoizingkha; (ii) Panbang–Nganglam (54.7 km national highway), providing access to the border crossing at Nganglam; (iii) Tsebar–Mikuri–Durung Ri (55.0 km feeder roads); and (iv) Samdrupcholing–Samrang (23.9 km national highway), providing access to the border crossing at Samdrup Jongkhar. The Manitar–Raidak–Lhamoizingkha and Panbang–Nganglam roads are blacktopped with a design speed of 50 km/hour. The Samdrupcholing–Samrang and Tsebar–Mikuri–Durung Ri roads are gravel paved with a design speed of 25 km/hour. 3. Before the project, people could only walk on paths near towns and villages as there were no roads. The walking speed was at most 4 km/hour. The villagers of Lingshing Borang, near the Panbang–Nganglam road explained that before the project they walked for 6–8 hours to carry their farm products by shoulders to a nearby town. There were also substantial disturbances during the monsoon season. Human-wildlife conflict was also a common concern as villagers, especially schoolchildren, had to walk through the forest to get to their intended destinations. Now, using vehicles, the villagers can transport their farm products to nearby market towns within 40 minutes. For most towns located along the border with India, there were no roads connecting to each other. Most vehicles used roads in India, which required much longer distances. Vehicles travelling along the project roads are estimated to have reduced the traveling distances by about 80–180 km between towns served by the project roads. Near the Samdrupcholing–Samrang road, a coal mine was recently opened with 10–20 trucks per day using the road to transport coal. 4. The opening of the project roads has significantly improved the connectivity and accessibility in the project areas. Transport costs have been substantially reduced and agriculture and industrial development has been promoted. The project roads have facilitated access to a variety of social services and more working opportunities for the local population.

Appendix 13 47

Head of group of villages, Dungmaed. Ugyen Tshering is the Dungmaed Gup, or head of the gewog (group

of villages). The gewog is remote and located along the Tsebar–Mikuri–Durung Ri road. Ugyen described the transformative socioeconomic impacts of the project road for his gewog. Previously, the gewog did not

have electricity and was not connected to the mobile telephone network. These services were provided after

construction of the project road. A Basic Health Unit and school have also now been established (photo by ADB (South Asia Department)).

5. Involuntary resettlement and indigenous people. At appraisal, a census survey based on preliminary road designs was undertaken from February to April 2009 to assess the project resettlement impacts. Five separate short resettlement plans were prepared to mitigate and address all impacts and losses, based on ADB’s Involuntary Resettlement Policy (1995), and government’s Land Act 1979 (amended in 2007). According to the information contained in the resettlement plans, a total of 412 households were expected to be affected by the project. A total of 243.82 acres of private land (235.55 acres of dry land and 8.27 acres of wet land) were expected to be required for the civil works and 77 structures expected to be affected: half of them were residential and commercial structures, and the rest were cowsheds, water tanks and water taps. In addition, community structures, such as irrigation channels, water pipelines, and religious structures would have to be relocated or rebuild. The details of compensation rates for the loss of land and structures, shifting assistance, and other income restoration assistance measures were provided in the entitlement matrix of the resettlement plans. Additional provisions for affected people belonging to vulnerable groups were included in the resettlement plans. No impact on indigenous people was envisaged. 6. During implementation, a total of 438 households were affected by the project. A total of Nu37,371,106.56 were paid to the affected households for the loss of land, structures and trees and 108.99 acres were provided in replacement land. Affected persons were given the options of land replacement or cash compensations for the loss of land, or a combination of both. Many of the households (170 households) opted for land replacement in the same dungkhag (subdistrict). Compensation payments and land replacement allotments were carried out by the project and district administration officials and grievance redressal committees at the local level were constituted. The table below shows the road-specific details on the number of affected households and amounts paid for the compensation of land and other assets. As anticipated during the planning phase, no indigenous people or community was affected during implementation.

48 Appendix 13

Table A13.1: Road-Specific Details: Number of Compensated Households and Amounts Paid

Road Name Road No.

Replacement Land

Provided (acres)

No. Households Given Compensations

Amount Paid (Nu)

Land for Land

Cash for Land and Other

Assets

Combination of and for Land and Cash for

Other Assets

Tsebar–Durung Ri

FR-01 & FR-02

15.97 16 118 11 20,881,626.19

Manitar–Raidak NH-01 3.07 3 21 5 1,600,088.36 Raidak–Lhamoizingkha

NH-02 3.57 12 19 5 967,656.72

Panbang side NH-03 3.61 8 29 0 1,940,792.43 Nganglam side NH-04 71.13 104 71 61 11,858,703.47 Samdrupcholing–Samrang

NH-05 11.64 27 10 5 482,239.39

Total 108.99 170 268 82 37,731,106.56

Source: Department of Roads.

7. During project completion and review missions, one pending issue in relation to land replacement was that some affected persons who opted for replacement land had not received their land ownership titles. While all concerned individuals had received their allotted plot and have been using the land as they wish (i.e. to build residences or for agricultural and farming purposes), some were waiting for their land ownership certificates (lag thram). The Department of Roads (DOR) was asked to provide assistance to these affected landowners by arranging with the National Land Commission (NLC) to have a focal person for addressing their concerns and providing a timeline showing the steps required for the processing of the ownership certificates. At the time of finalizing this report, DOR advised that all affected persons who opted for replacement land had received their land ownership titles. 8. The project compensated or rehabilitated community structures as outlined in the resettlement plans. A total of Nu940,536 was paid to service and utility providers (e.g., Bhutan Telecom and Bhutan Power Cooperation Limited). In addition, the project reconstructed important community structures such as temples, irrigation channels and prayer wheel. The table below provides the details.

Appendix 13 49

Table A13.2: Compensation and Reconstruction of Community Structures

No. Road Name Road No.

Affected Community Structure

Amount paid (Nu)

Additional in-kind reconstruction support provided through

Contractor

1 Tsebar–Durung Ri FR 01 & FR 02

6 electric poles 209,330.00

2 Manitar–Raidak NH 01 50,000.00 Construction of prayer wheel at Sili Construction of bench Construction of dustbin and compost Construction of Tank in Manitar Reconstruction of temple at Kemalakha Reconstruction of rice mill at Kesari Reconstruction of water supply pipeline to Alay, Kesari, Kemalakha

3 Raidak–Lhamoizingkha

NH 02

4-A Panbang side NH 03 2 telephone poles shifting

3700.00

10 electric poles

362,593.00

4-B Nganglam side NH 04 1 structure1 395,667.69 4 electric poles 128,366.00

5 Samdrupcholing– Samrang

NH 05 Restoration of irrigation channel

Total 940,536.02

Source: Social Monitoring Report January 2015.

9. Overall, a total of Nu38,671,642 was disbursed by the project for the compensation of households and community structures. 10. Two social monitoring reports detailing the progress and outcomes of the land acquisition process are disclosed on the ADB website. 2 ADB fielded local social experts to review the resettlement process and conduct consultations with affected persons in January 2016. A total of 33 affected persons were consulted. They confirmed fair compensation and replacement land. No complaints were received. Details can be found in the Assessment of Social Safeguard and Resettlement Activities Report.

11. Employment opportunities generated. During design and construction, a large amount of labor was used. According to the contractors’ records, a total of 1,620 person-months of labor were used by the civil works contractors and the design and supervision consultants. More than 50% was classed as unskilled labor and most of the unskilled laborers were from local poor families. There were also a significant number of women laborers employed. The laborers were paid at least the government requested minimum rate. Table A13.3 is the summary of the labor during project implementation. In addition, the project also made use of substantial local construction materials, farm products, and transport means (machine and horse). The implementation of the project provided substantial employment opportunities to the local people, which helped to improve livelihoods.3

1 Communication and Information Center for Nganglam Gewog. 2 https://www.adb.org/sites/default/files/project-document/79264/39225-022-bhu-smr-01.pdf https://www.adb.org/sites/default/files/project-document/158009/39225-022-smr-02.pdf 3 ADB (South Asia Department). 2019. Project Completion Review Mission to Bhutan: Road Network Project II. Back-

to-office report. 25 March (internal).

50 Appendix 13

Table A13.3: Labor Used during Project Implementation (person-month)

Package Unskilled Semi-skilled Skilled Tech Support

Total

Total Male Female

Manitar–Raidak 145 35 58 8 50 296 235 61

Raidak–Lhamoizingkha 170 44 28 10 30 282 257 25

Panbang–Nganglam (1) 140 25 34 14 40 253 238 15

Panbang–Nganglam (2) 138 23 30 10 30 231 208 23

Samdrupcholing–Samrang

78 20 28 16 28 170 147 23

Tsebar–Mikuri–Durung Ri (1)

89 18 24 14 27 172 144 28

Tsebar–Mikuri–Durung Ri (2)

95 19 26 12 18 170 147 23

Civil Works total 855 184 228 84 223 1,574 1,376 198

Detail design and procurement assistance

4 6 6 12 4 32 29 3

Construction supervision

12 2 14 11 3

Consultant total 4 6 6 24 6 46 40 6

Total 859 190 234 108 229 1,620 1,416 204

Source: Department of Roads, Project Management Office.

Road maintenance crews. DOR employs 25-person maintenance crews for each of the project roads, providing employment opportunities for local villages and particularly women with 30-50% ratio of female to male workers (photo by ADB (South Asia Department)).

71. Substantial shops, restaurants, hotels, and garages were opened to provide variety of services to the drivers, passengers, and vehicles. Most of these businesses were opened by local families and operated by women. These businesses and services are presenting a growing trend along with the increasing traffic volumes. Such road-side businesses provide substantial working opportunities to local people, contribute greatly to livelihood improvement, and assist in poverty reduction in the project areas (footnote 3).

Appendix 13 51

Shop owner in Mikuri. Pema Zangmo lives in Mikuri with her husband and six children. She relocated her shop to Mikuri after completion of the Tsebar–Mikuri–Durung Ri road. Pema also provides lodging facilities for people travelling along the road. She reported that her livelihood increased from Nu1,500 per day to over Nu5,000 per day. Pema also highlighted improved access to health services for her family. The ambulance can now come to the house and it is easy to transport her children to the hospital by car. Previously, ill community members were carried by foot on a stretcher to Nganglam, which took two days (photo by ADB (South Asia Department)).

Business owner in Panbang. Kelzang Choden was encouraged to start her own business after completion of the Panbang–Nganglam road. She runs a hardware and electrical store in Sonamthang, Panbang. Neighboring villages rely on Kelzang’s store. She is able to regularly travel to India to buy supplies for her store (photo by ADB (South Asia Department)).

12. Economic development and livelihood improvement. The opening of the project roads has brought immeasurable benefits and drastically improved the living standard and livelihoods of the community along the project area. The people can now harvest forest produce and have

52 Appendix 13

also started cultivating cash crops and orchards. For example, the areas along the Panbang–Nganglam road produced more than 4,000 tons of oranges in 2017. The oranges were transported by more than 1,000 trucks to nearby towns, Thimphu and India. A coal mine near the Samdrupcholing–Samrang road was opened by taking advantage of the project road. Without the project road, transportation of the coal is impossible. The cement factory near Nganglam and the gypsum mine near the Tsebar–Mikuri–Durung Ri road now use the project roads for transporting their products with much lower traveling distance and vehicle operating costs, which has effectively supported the fast economic development. 13. Milk processing units have been established in project areas by the Department of Livestock. Extension agents are supporting local farmer cooperatives in the use of modern technology, new livestock breeds, cheese and butter production, and marketing of products in Thimphu and Panbang. The Sanam Tshongkhang government program has also been set up to provide subsidized food and supplies for farmers (footnote 3).

New dairy enterprises. A milk processing unit along the Panbang–Nganglam road. The unit has been operating for two years and was only formed after transport access was provided by the project roads. The unit collects milk from 75 members (local farmers) and produces 700 liters per day, as well as local cheese and butter (photo by ADB (South Asia Department)).

14. Many residents constructed houses using new materials, replacing the old traditional bamboo houses in the project areas, a sign of livelihood improvement. Without the project road, transporting construction materials is almost impossible. In Dalim town, near the Samdrupcholing–Samrang road, about 80% of the households now own motorized vehicles, which has facilitated access to markets, working opportunities and social services. The project roads have also helped government officials to provide better public services in a short period of time, reaching the previously unreached for delivery of services. The project roads specially provide better opportunity through easy access and connectivity. 15. Better livelihood opportunities have also eased the demand on forest resources and lessened illegal activities such as poaching. Better access to forest reserves and critical habitats has encouraged regular patrolling by forest rangers, check posts and anti-poaching camps.

Appendix 13 53

New construction activity. An example of construction activity using new materials along the Panbang–Nganglam road (photo by ADB (South Asia Department)).

Construction of new hotel. Nir Karkhal Chhetri (inset) opened her shop as soon as formation cutting began near the starting point of the Manitar–Raidak road. Now, her income has tripled, and she is constructing a hotel to cater to motorists and tourists (photo by ADB (South Asia Department)).

16. Health and education. Provision of adequate health and safety is a contract requirement that is also underpinned by legal regulation as set out in the Ministry of Labor and Human Resources – “General Rules and Regulations on Occupational Health and Safety in Construction, Manufacturing and Service Industries–2006.” The regulations, inspection and enforcement procedures set out useful lists of required personal protective equipment for various types of working activities. The document specifically covers workers’ welfare issues (such as provision of washing/toilet facilities, living quarters, safe water supply, etc.). Worker’s compensation has also

54 Appendix 13

been incorporated with an insurance scheme which is mandatory for contractors and payment is included in the bill of quantities as provisional sum and actual payment made on availing insurance scheme for personal injury or death. 17. With the project roads, villagers can easily access the health care facilities in nearby towns. Local government officials reported that all women can now go to nearby towns by road for medical care and maternity services. Prior to the road construction, villagers had to carry the sick or pregnant women by foot to reach health centers, which sometimes led to fatalities. In Manitar–Raidak road, the villagers particularly expressed that a key benefit from the road is improved access to health facilities. Students may now go to schools by walking on the project roads (at most 1.5 hours) or by vehicle in a few minutes. However, public transport is still not well developed. Providing public transport will substantially increase mobility and facilitate access to further markets and social services, especially for the poor.

18. Road safety. Road safety remains a challenge in Bhutan. During project implementation, road safety provisions were provided on the project roads mainly in the form of crash barriers, road markings, and traffic signs. The crash barriers were installed on steep and rocky areas which effectively guide and impede the vehicle from going off the road. Appropriate road signs were erected on bends, zigs, and settlement areas to guide drivers. Road markings using hot-applied thermoplastic materials with glass fiber were provided as centerline and side marking on both sides to guide the traffic, particularly important during foggy conditions and for night driving. Due to low traffic volumes and low vehicle speeds, most accidents on the project roads are not significant. Table A13.4 presents the available road accident statistics on the project roads.4 Road safety is still an important priority for the road construction and management authorities in the country. Proper measures should be implemented, including in road design, construction, and operation. Necessary training and education campaigns should also be conducted among road users and residents.

Table A13.4: Accident Statistics on the Project Roads

Road Sections

2014/2015 2015/2016

Number Fatality Injured

Number Fatality Injured

1. Manitar–Raidak 1 2 0 0 0 0

2. Raidak–Lhamoizingkha 1 0 1 0 0 0

3. Panbang–Nganglam 0 0 0 0 0 0

4. Tsebar–Mikuri–Durung Ri 0 0 0 1 0 1

5. Samdrupcholing–Samrang 1 0 1 0 0 0

Source: Department of Roads.

4 Road accident statistics for 2017 and 2018 are not yet available at the project road level, only by district.

Appendix 14 55

SUMMARY OF ENVIRONMENTAL IMPACTS AND MONITORING A. Project Classification and Preparation 1. An environmental impact assessment (EIA) for the Road Network Project II was prepared in 2009. The conduct of the EIA took place during the transition period from the ADB’s Environmental Policy (2002) to the Safeguard Policy Statement (2009). As such, it was still the Environment Policy (2002) that the project was required to comply with. A consolidated EIA report was prepared from individual environmental EIAs conducted for each road section. As required, the summary EIA report covering all road segments was disclosed 120 days before Board approval in accordance with the Environment Policy (2002). Two cornerstones that defined the EIA were the environment friendly road construction (EFRC) design and practices to avoid or minimize the impacts typical from road construction, and the impacts associated with the roads’ intrusion into the Khaling Wildlife Sanctuary and buffer zone of the Royal Manas National Park, and key wildlife habitats along Raidak–Lhamoizingkha road. 2. Compliance with national and local environmental requirements. To establish the extent of Samdrupcholing–Samrang road’s incursion in the Khaling Wildlife Reserve, a joint inspection on the possible route was made with the Wildlife and Forestry officials in consultations with the Dasho Dzongda (administrative head of district), Dzongkhag Administration (district administration), and Samdrupjongkhar Dzongkhag. A prior permission was obtained by the Department of Roads (DOR) from the Nature Conservation Division (NCD) of the Department of Forests (DOF) to carry out studies inside the Khaling Wildlife Sanctuary. Substantial efforts were also expended during the EIA preparation to ensure extensive and meaningful consultations with communities and local authorities considering the time it took to reach some villages (2–3 days on foot). A wildlife study to determine the locations of underpasses was also conducted for Raidak–Lhamoizingkha road. 3. Prior to project construction, the DOR has secured environmental clearances from the NEC for the Manitar–Raidak (NH-01), Raidak–Lhamoizingkha (NH-02), Samdrupcholing–Samrang (NH-05), Tsebar–Mikuri (FR-01), Durung Ri–Mikuri (FR-02), and Panbang–Nganglam National Highway (NH-03 & NH-04). These environmental clearances were updated annually. Separate environment clearances covering the operation of fixed rock crushers were also secured. Forest and explosive clearances were obtained from appropriate agencies before road clearing and proper handling and use of blasting materials were closely monitored. Disposal sites for spoils and clearing from slides were identified prior to construction and were permitted by the jurisdictional dzongkhag. 4. Institutional arrangement. The project’s environmental management institution was tasked to ensure compliance to the ADB safeguard policies, and domestic rules and regulations operated effectively during project implementation. The project coordinator was assisted by a fulltime environment specialist under the construction supervision consultants (CSC) while the contractors appointed their own environment focal person. Induction trainings were conducted by the environment specialist on environmental management and monitoring plans, EFRC, and brokered regular meetings with the DOF on the bioengineering and health offices on hygiene and HIV. Monthly environmental management/monitoring plans (EMP) were prepared and updated as needed during construction. The EMPs served as the basis for monthly inspections by the environment specialist and biweekly inspection of the project managers. After a year of project implementation, the project introduced a proforma monitoring report that helped expedite the preparation of summary reports.

56 Appendix 14

5. The implementation of the Bhutan Road Network Project II did not result to significant adverse environmental impacts. The anticipated significant impacts of the road construction and operation to the wildlife movement and habitat were adequately avoided through road realignment and mitigated through the construction of wildlife underpasses. The anticipated impacts on biodiversity primarily pertains to the Asian elephant (Elephas maximus) inside the protected area of Khaling Wildlife Sanctuary of the Samdrupcholing–Samrang road section, the buffer zone of the Royal Manas National Park of the Panbang–Nganglam road section, and the key wildlife habitats along Raidak–Lhamoizingkha road where five underpasses were built. B. Environmental Management 6. During project implementation, eight semi-annual monitoring reports from March 2012 to August 2015 were submitted by the DOR and disclosed in compliance with ADB environmental requirements for category A projects. The DOR fielded an independent review of the environmental safeguard compliance for four consecutive years from 2012 to 2015 to validate monitoring reports, ensure all significant environmental impacts are identified and mitigated, and conduct consultations to assess the overall compliance of the project. In addition to these special review missions, the ADB’s South Asia Transport and Communication Division conducted eight review missions from 2010 to 2015, of which four missions included environmental safeguard evaluation. 7. Comparable findings were registered between the disclosed semi-annual environmental monitoring reports and the annual independent reviews. Overall, there was very good compliance to the environmental management plans including the environmental provisions of the loan covenants. 8. The effectivity of the EFRC in avoiding and minimizing impacts of road building was demonstrated by the project. Cutting of mountain slopes were minimized, construction of retaining wall on geologically fragile sections, minimization of box cuts to minimize soil disturbance, non-use of dozers and reliance on excavators and tippers allowed the immediate segregation of materials for re-use or disposal in approved sites. Use of log and rock barriers were effective in catching falling debris, stabilizing dump sites, and protecting the vegetation on the valley side which also helped prevent erosion. Controlled blasting was strictly implemented across all roads which minimized the destabilization of slopes including nearby areas. Close coordination with the local village officials also helped prevent accidents, such as in the case of a village along Durung Ri–Mikuri road where an entire village located below the road alignment was temporarily shifted. 9. Monthly EMPs effectively guided construction supervisors and facilitated effective supervision and monitoring. Introduced by the CSC-Environment Specialist, all contractors were required to submit monthly EMPs commensurate to the active construction front, required activities, and specific mitigation measures. This helped the contractors clearly understand what are required from them which facilitated compliance monitoring. Minor environmental impacts in varying degrees, such as incomplete personal protective equipment for laborers, inadequate dust control, and poor labor and camp site management were observed in all road sections. As manifested in the DOR’s semi-annual environmental monitoring report corroborated by the annual reviews, the environmental performance among the contractors widely varied. Contractors of NH-01 and FR-01 sustained an excellent environmental compliance record throughout the project construction stage while the NH-02 contractor and, during the good part of the construction period, the FR-02 contractor struggled with compliance, particularly on camp site management and occupational health and safety.

Appendix 14 57

10. Unanticipated impacts on the social infrastructure was prevalent during the initial years of the project implementation. Formation cutting has resulted to damaged domestic water supply in NH-01 and irrigation canals in NH-04 and NH-05, and siltation of private agricultural lands in NH-02. The anticipated impacts on the wildlife were identified and assessed during the project preparation and design stages. Roads NH-02, NH-03 & 04 and NH-05 cross habitats of the Asian elephant. During project construction, numerous sightings of elephants crossing the roads and hoof marks along the proposed bridge sites were documented confirming the EIA findings. However, contrary to the EIA findings, not a single identified vulnerable or threatened species, e.g., tiger (Panthera tigris), clouded leopard (Panthera pardus), pygmy hog (Sus salvanius/Porcula salvania), and Himalayan black bear (Selenarctos thibetanus) were encountered. The observed absence of these species in the immediate vicinity was confirmed by the Panbang Range Officer who has jurisdiction over the buffer zone and conducts regular monitoring using camera traps. The discrepancy between the EIA report and actual field observations indicated, among others, the insufficiency of available information during the feasibility stage. C. Significant Environmental Impacts and Mitigation Measures 11. Changes made during detailed engineering design and construction stages to avoid anticipated adverse environmental impacts. Realignment made in NH-02 and FR-01, and revision of the feeder road design to have lined toe drains avoided anticipated impacts identified during the environmental assessment. The realignment of the NH-02 from the original uphill and almost encircling Oyster Lake to downhill avoided the threat of contaminating water quality from surface flow, sedimentation, and siltation.1 Oyster lake is a two-hectare perched aquifer extending above ground, considered the “only one of its kind in Bhutan2”, provides habitat for oysters, watering hole of elephants, and considered as sacred by local residents. In FR-01, the realignment of the initial three kilometers from the Tsebar starting point avoided the previously identified risk of contamination to the water springs of Tsebar and Zordung villages that provided domestic water to 28 houses. This realignment coupled with the construction of a tunnel also avoided the risks of erosion, impacts to stability, and damage to perimeter walls to Tshebar Nangri Chorten along the first saddle towards Dungmin. Savings from the project bidding, defined as the difference between the DOR civil works estimate against contractor bids, allowed the DOR to improve feeder road design and upgrade it to have L-drains and improve the integrity of the road against erosion. It also facilitated the upgrading of the completed road by the dzongkhags that immediately provided bitumen sealing of FR-01. During project construction, several realignments were made to minimize cut and fill and avoid costly erosion control measures;3 construction of additional steel arch to minimize the disturbance of the Kezari slide, reduction in blasting and rock activities;4 and minimize zigzags and soil disturbances.5

1 Feasibility study alignment pegged this section on the hillside of the lake or “150 meters to the north” pp.4-24 Vol. 2

RNP II DPTA Final Report 2 Bhutan Road Network Project II Consolidated Environmental Impact Assessment, pp. 14 and 63 3 Before Kezari (NH-01) between, 14+310 to 14+420 kms. Road was realigned to follow the contour and existing road

alignment, contrary to detailed engineering design and avoid huge fill requirement to construct a 30-meter embankment.

4 NH-01, Alay between 28+270 to 28+750 and Raidak, Chainage 33+650 to 34+950. 5 NH-02, Romphu between chainage 5+500 to 6+100.

58 Appendix 14

12. Strict adherence to the EFRC practice. The DOR has continuously emphasized the strict observance of EFRC practices. Contractors were regularly reminded to immediately start the stabilization of slopes after formation cutting through bioengineering and civil works like stone pitching and gabions at the foot of the slope, and proper disposal of debris on approved sites. Generally, the effort was successful as majority of the slopes and disposal sites are covered with lush vegetation during the project completion review mission. The project can provide lessons and serve as good practice in constructing mountain roads which can be replicated by ADB on similar projects. However, EFRC was put to its limits particularly in NH-01’s steep slopes and great distances between approved disposal sites. Even after the completion of the road section prior to project handover, a section of NH-01 in between the Kesari and Sonam slides suffered from “ravine development”. NH-02’s friable soil structure like the Tintalay formation where bioengineering and civil works interventions are ineffective to permanently control erosion now requires regular maintenance works to maintain open access. 13. Effectivity of arch bridges as animal underpasses. During the impact assessment, Asian elephant crossings or underpasses along NH-02 and NH-05 roads were identified. These crossings followed water streams that immediately led to thickly vegetated section coming from the relatively flat lands of bordering India. To facilitate wildlife crossing, more particularly elephants, the project introduced the construction of multiple corrugated galvanized steel arch bridges with sufficient openness ratio to allow elephant passage along streams and rivers. The project monitored the movement of elephants before, during, and immediately after the construction of these arch bridges on three points: at Pagli, Khurul east and Khurul west in NH-02. Based on photographs of elephant hoof marks imprinted in the riverbed under the arch bridges compiled by the contractors and validated during the independent review missions, elephants were able to retrace movements along the river proving that the arch bridge is an effective

Tunnel and overpass structure on Tsebar-Mikuri road. Tunnel and overpass structure on FR-01 which avoided impacts to adjacent water source and stuppa (e.g. noise, visual impact), while maintaining community access to the religious site (photo by ADB (South Asia Department)).

.

Appendix 14 59

underpass design. Later on, the underpass on NH-05 along the Neuli river was also monitored using an infrared camera trap for roughly a year starting January 2015 to February 2017. The table below provides a summary of the elephant monitoring records at three underpasses along the Raidak-Lhamoizingkha road segment of NH-02.

Table A14.1: Asian Elephant Monitoring Records

UP = underpass. Note: By total records at each UP and calculated as records/month. Source: Asian Development Bank.

D. Unanticipated Impacts, Issues, and Lessons Learned

14. Increase in human activities and lack of maintenance have disturbed the elephant and other wildlife movement along the underpasses. The camera traps that initially documented the success of the arch bridges as wildlife underpasses also captured the increasing human activities that were not expected and the dwindling of wildlife traffic. The variety of human activity also increased from simple passage to cow herding and recreational bathing and picnicking in and around the underpass area. 6 These activities also extended during nighttime, with these picnickers playing loud music according to some locals. The survey has shown human presence at the underpasses increased tenfold from just 45 people in 2015 to 477 people in 2016 (Fig. A14.1). Further, camera records from January 2017 alone showed that 329 people congregated at the underpasses, the highest of any month. The same human activities, albeit on a lesser degree, were observed in Kali Khola. Anecdotal evidences suggest that elephant movement across the road has shifted away from Neuli riverbed towards the flat lands near the Samrang river which is also an established elephant corridor.

6 As of March 2019, it has been confirmed that the cow shed has been abandoned and cow herders from

Samdrupcholing no longer bring their cows near Neuli underpass.

Underpass Months of monitoring

Total elephants recorded Elephants recorded/month

Groups Individuals Groups Individuals

UP #1 12 20 44 1.7 3.7

UP #2 6 11 29 1.8 4.8

UP #3 15 39 72 2.6 4.8

Mean 11 23.3 48.3 2.0 4.4

60 Appendix 14

Note: Number of humans recorded each month during monitoring of the UP along the Samdrupcholing– Samrang road (NH-05) segment. Source: Asian Development Bank.

15. Repair and improvement of crossing structures. Serious scouring of the Khurul riverbed beneath the arch bridge has created a steep drop making elephant crossing impossible. The deterioration of the Khurul riverbed immediately under the arch bridge will require civil works like filling of rocks and boulders to temper it to a gentler slope allowing elephant movement. Wildlife signs (i.e. droppings and hoof and pug marks) in other oversized culverts also suggest the importance of maintaining and upgrading these structures to maintain habitat connectivity across the road in critical habitat sections. Currently, the design of these culverts (i.e. height of the steps) is not suitable for less limber, larger mammals such as deer and gaurs. The Samrang Bridge in NH-05 may also be a potential underpass for elephants, especially with the increasing human presence in the Neuli underpass. However, the downstream slope at the base of the bridge is being damaged perennially due to torrential flows during monsoon season. Discussions with the DOR indicated that these are beyond the scope of the contractor’s post-construction liability and the agency will provide funding as part of regular road maintenance and other budget sources.

0

50

100

150

200

250

300

350

F M A M J J A S O N D J F M A M J J A S O N D J

No

. of

hu

man

s re

cord

ed

Month

2015 (45 people in 11 months)

2016 (477 people in 12 months)

2017 (329 people in 1 month)

Figure A14.1: Number of humans recorded each month, 2015−2017

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16. Support mechanisms. The disturbance of wildlife movement revealed the inadequacy of civil works intervention alone as mitigation measure to ensure safe wildlife movement across the road without enforcement and community participation. Camera traps indicated that wildlife continued to use the arch bridge underpasses after construction but before contractors handed

Khurul West Underpass. Scouring of the Khurul West Underpass creating a steep drop, making it impossible for elephants and other large mammals to cross (photo by ADB (South Asia Department)).

Oversized culverts on Raidak-Lhamoizingkha Road. Damaged steps in one of the oversized culverts in Raidak–Lhamoizingkha Road showing the need for both repair and upgrading due to current unsuitable design as wildlife underpass (photo by ADB (South Asia Department)).

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the roads to the DOR because of the latter’s enforcement presence to secure the structures from possible vandalism and in effect restricted human activities. To address this, the DOR is now coordinating with the park rangers in the case of Neuli River which is located within the Khaling Wildlife Sanctuary and the communities surrounding Kali Khola and Khurul Rivers, to limit human activities during daytime only and allow the passage of wildlife at night. 17. The importance of support mechanisms to control human encroachment and illegal activities such as poaching as a result of increased access to wildlife habitats was highlighted in this project. The government has exerted commendable effort in establishing immigration and forestry check posts in critical points, particularly near the border. At the time of writing (June 2019), an immigration cum police and forestry check post is being constructed, almost ready for turnover, near the site of the abandoned check post in Samdrupcholing which fell into disuse decades ago due to security concerns. This is the point of entry for Samdrupcholing where visitors from India enter for recreation near the underpass at Neuli and the Samrang Bridge and is envisaged to contribute greatly to reducing human activities in these critical areas once it starts operating. A forestry check post in Durung Ri, an anti-poaching camp along Panbang–Nganglam road, and an integrated check post in Raidak have been established and are all operational. Based on the experience with this project, support mechanisms such as integrated check post (forest, immigration, and police) should be studied, designed and developed under road projects, particularly for those located near international borders.

18. Study on the use of wildlife crossings. ADB is funding a study on the wildlife underpasses which will run for two years. 7 This study will cover all underpasses and will include oversized culverts to determine the effectivity of these structures as wildlife crossings. Camera traps will be set up to observe wildlife movements across these structures. This study will be a valuable contribution to the knowledge on the use of underpasses in road projects in South Asia where information is currently lacking.

7 The study will be funded under TA 9461 REG: Protecting and Investing in Natural Capital in Asia and Pacific.

Example check post. Integrated check post at the approach to Raidak Bridge (photo by ADB (South Asia Department)).

Appendix 14 63

19. Climate change impacts. Several portions of the road were damaged due to varied reasons such as the innate geology of the sites and overloading of trucks. However, several drainage structures were damaged due to flows exceeding their designed capacity, particularly during monsoon season. Admittedly, climate change factors were not incorporated in the design. This highlights the importance of the climate resilience guidelines drafted by the DOR which is intended to be mainstreamed into all road designs. According to the department, lessons learned from this project greatly contributed to the drafting of this instrument. E. Grievances and Redress 20. Several grievances were registered against the project construction that caused damages to domestic water pipelines,8 irrigation canals,9 and siltation of adjoining agricultural lands.10 These damages took place during the initial formation cutting in NH-01 and NH-05 and were immediately and effectively resolved.11 Another set of complaints was lodged by the Bhutan Power Corporation concerning the structural integrity and safety of their transmission towers bordering the project roads.12 Coordination between the contractor, PMO, and Bhutan Power Corporation enabled the effective design and construction of retaining walls and bioengineering to stabilize the foundations and install traffic signs to warn motorists of the impending structures. The grievance mechanism followed the established approach of formally registering with the contractor and jurisdictional gewogs or dzongkhag administrators who then summons the contractors and PMO representative to discuss the extent of damage and agree on restitution and timeline. The same administrator also serves as the final arbiter on the effectivity of mitigation measures taken by the project. F. Conclusion 21. During construction, DOR fulfilled their obligation to protect the environment and implemented mitigation measures that minimized adverse impacts as required in the environmental assessment. All necessary permits and clearances were secured in a timely manner, including annual renewals. Damages to public infrastructures were immediately restored. Potential adverse impacts related to road construction on mountainous terrain were largely avoided or mitigated through EFRC. Changes in the road alignment during project construction stage avoided a number of significant adverse impacts. However, the need to incorporate climate

8 As referred in the April-September 2012 Semi-annual monitoring reports, three complaints were received on NH-01.

Local people and the village headman reported to the Dasho Dzongrab (Deputy District Administrator) of Chhukha Dzongkhag to immediately restore damaged sections water pipelines from 10+400km - 15+600km due to blasting operations from January 12, 2012 to mid-July by Nima Construction Company Private, Ltd. Water tankers were provided to supply water to the villagers while the damaged pipelines were being replaced. Water supply was restored on September 2012 as agreed with the Tsokpas or village representatives.

9 Community members through its village headman filed a complaint to the Lhamoizingkha Dungkhag (Local Administrative Office) against Gyeldron Venture handling Raidak – Lhamoizingkha (NH-02) road section regarding damaged irrigation canals. A meeting was conducted on August 27, 2012 at Dasho Dungpa (Block Administrator), involving government officials, village headman, project affected people, DOR representatives, CSC representative, and Contractor. During the meeting the contractor was compelled to immediately repair damaged irrigation which as completed by end of September 2012.

10 On 17 September 2015, Gewog Administrator informed the DOR of the damages to nearby agricultural lands due to runoff from the road, on 19 October 2015 a follow up letter was sent recognizing the effective efforts made by the DOR.

11 RNP-II has performed well in the expedient mitigation of complaints with NH-01 taking 64 days from the date of violation detection/reporting to final resolution, while NH-02 took 29 days from date the canal damages were reported to its final restoration.

12 NH-03 & 04 chainage 44+680 km and 43+990 km, where road cutting is near the transmission tower foundation.

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change factors into the design was highlighted in this project due to the damages caused by unanticipated volume of flows to the drainage structures. 22. No significant adverse impacts were observed on the protected wildlife of the Royal Manas National Park. The use of steel arch bridges as wildlife crossing was found effective but initial successes are being eroded due to the increase in human activities and scouring. Coordination with the Khaling Wildlife Sanctuary authorities are underway to minimize human intrusion and disturbance along the Neuli River and with communities surrounding Kali Khola and Khurul Rivers. The DOR, as part of regular road maintenance, will continue to ensure the underpasses are free from blockage to allow wildlife passage. Additional budget will also be sought to upgrade the oversized culverts to a more suitable design for wildlife crossing.

23. Support mechanisms have been found to be very important in road projects as learned from the impacts observed in this project and the government’s effort in providing support structures such as integrated check posts (forest, immigration, and police) in key points on the road, especially for those located near or leading to the international border. The effectiveness of these efforts and the wildlife underpass structures will be determined through a camera trap survey funded by ADB.

Appendix 15 65

CONTRIBUTION TO ADB RESULTS FRAMEWORK

No. Level 2 Result Framework

Indicator Target

Revised Target

Aggregate Output

Methods/Comments

Transport 1 Use of roads built or

upgraded (average daily vehicle-kilometers (km) in the first full year of operation)

80,461 vehicle-km per day in 2016

7,457 vehicle-km per day in 2016 and 21,578 vehicle-km in 2018.

During ADB project completion consultation and review missions, surveyed traffic counts on the project roads were provided by the Department of Roads. The average daily traffic in 2016 was 28 vehicles on Manitar–Raidak–Lhamoizingkha road, 86 vehicles on Panbang–Nganglam road, 22 vehicles on Tsebar–Mikuri–Durung Ri feeder road, and 23 vehicles on Samdrupcholing–Samrang road. The actual traffic in 2016, 2017 and 2018 was much lower than estimated at appraisal, however there was a rapid increase in traffic in 2017 and 2018.

2 Roads built or upgraded - Expressways and national highways (km)

About 180 km of national highway would be upgraded or constructed

Total 186.4 km of national highway and feeder roads were constructed.

131.4 km of national highways and 55.0 km of feeder roads were newly constructed under the project, including the roads of (i) Manitar–Raidak–Lhamoizingkha (52.9 km national highway), providing access to the border crossing at Lhamoizingkha; (ii) Panbang–Nganglam (54.7 km national highway), providing access to the border crossing at Nganglam; (iii) Tsebar–Mikuri–Durung Ri (55.0 km feeder roads); and (iv) Samdrupcholing–Samrang (23.9 km national highway), providing access to the border crossing at Samdrup Jongkhar.

Source: ADB project completion consultation and review missions.