Designing Bank Operations to Support Program-Based and Sectorwide Approaches

1. Designing Bank Operations to Support Program-Based and Sectorwide Approaches

2. POLAND Road Maintenance & Rehabilitation I & II “Program-based” approach projects

3. Poland at a glance… • Population: 39 million inhabitants • GNP/Capita US4,570 • Upper Middle Income Countries: US$5,040 • Motorization rate is increasing fast: • 9 million cars in 1990 • 14 million today • Poland compares poorly with EU neighboring countries both in terms of condition of the road network and safety • Road improvement: a CAS high priority

4. National road network: 18,000 km. – Maintenance backlog estimated to US$1 billion…

5. Brief Historical reminder… • In late 2003, Government (MoF) clearly preferred to use “Adjustment-type” rather than “Specific-Investment” lending instruments. • WHY?: Found easier, i.e., shorter preparation time and faster disbursement. • Initially the Roads III project was supposed to be a Programmatic SAL, actually the first of a series of 2-3 projects for a total Bank support of US$400 million during the next 4-5 years… • BUT finally we agreed to use an innovative “program-based” approach which allowed to preserve the above “Adjustment” benefits through a Specific Investment Loan….

6. Main features of the RM&R project • Project amount: US$175 million, of which the World Bank finances 72%; • WB’s support focusing on road maintenance & rehabilitation works (sub-program financed at 2/3 or 67%); • WB funds were pooled with 2004 national budget for roads maintenance (see table next slide); • Environmental/Social andProcurement due diligence were carried out during project preparation to assess and to approve country own procedures (in view to grant country “certification” for future projects); • Environmental category: Financial Intermediary (FI). Publication of project Operational Manual chapter on environment and social was the only pre-requisite for appraisal.

7. Poland RM&R project is a new kind of “hybrid” This component is financed under a pooling of funds scheme All the other components are using standard WB rules The loan amount (Euro 100 million equivalent US$126 ) was requested by the borrower to match with its budget planning and to minimize the loan’s fees (Front-end and commitment fees)…. [1] This amount corresponds to the national budget allocation 2004 for maintenance and reparation works for the national road network (Detailed figures in annex 5). [2] Corresponds to a financing ratio of 67%. [3] Identifiable taxes and duties are US$m0, and the total project cost, net of taxes, is US$m199.9. Therefore, the share of project cost net of taxes is 0%.

8. Fast track preparation: • Concept review meeting April 2003 (Programmatic SAL); • ROS meeting Nov. 2003 (PSAL was not an option anymore!) • Pre-appraisal in Dec. 2003 (OK with a SIL) • Safeguard consultation meeting: January 12, 2004 • Quality Enhancement Review meeting: January 13, 2004 • 2nd Project decision meeting: January 26, 2004 • Appraisal/negotiations: mid February 2004 • Board presentation: March 30, 2004 • “…congratulations to the project team!” 3 Months

10. Fast track implementation: • Board presentation: March 30, 2004 • Loan signature: April 7, 2004 • Loan effectiveness: June 15, 2004 • Project launching: June 15, 2004 • First supervision September/October 2004 • Disbursed as end of October: US$113 million • About 90% of the total loan proceeds • 164 contracts procured under NCB (see following table) • For a total of US$163.6 million of which 43.8% invoiced 4.5 Months

12. Implementation by component (Feb. 2005)[WB disbursement %] • A – GDDKiA Modernization Action Plan (MAP)[25.0%] • Independent technical audit of the GDDKiA completed by December 2004 – Revised MAP under preparation: • B – Road Maintenance & Rehabilitation Program[100.0%] • Completed by end of October • C – Road Safety Improvement Program[10%] • Will continue until completion of Roads II (June 2006) • D – Promotion of PPP in the road sector[5.0%] • Selection of consultant under Spanish CTF on-going. Final report available by September 2005.

15. Conclusions 1/2 • Our Polish client clearly likes this new form of partnership; • A “repeater” US$130.5 million RM&R II project has just been negotiated for 2005 (through video conference in less than two hours); • Previous projects – especially RM&R I project -- have helped for new “repeater “ project preparation; • Fundamentals: • Based on reciprocal trust between World Bank and “mature” client countries; • Shifting from an”ex-ante” to “ex-post” control system; • Report-based, faster disbursement against % of total program expenditures; • Maximized use of existing administrative procedures, with a few exceptions; • Not tying up huge amount of loan, but fitting Client’s fiscal year budget

16. Conclusions 2/2 • Main changes in the “repeater” RM&M II project: • Same €100 million Specific Investment Loan for year 2005 but with: • increased scope of works allowed, i.e., significant changes in the road geometry within the right of way, using national environmental/social requirements as acceptable to the World Bank; • launching of procurement process before project approval; • further simplification in reporting requirements, e.g., suppression of the quarterly consolidation report; • Further proposal for simplification, i.e., single category of expenditure not yet approved!

17. The Road Maintenance & Rehabilitation I & II Projects for Poland “Program-based” Approach projects Thank you! • SWAp Session in Open eXchanges February 24, 2005