Pakistan: National Trade Corridor Highway Investment Program

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Lessons

Use of the multitranche financing facility (MFF) provides projects with greater flexibility in adapting to changing conditions.

The MFF, of which this project was a part, was only the second to be approved by the Asian Development Bank (ADB) for Pakistan’s transport sector. Processed at a time when ADB was still piloting the modality, it demonstrated how an MFF can provide projects with the necessary flexibility to adjust in scope and schedule, when required by the situation. For example, the two road segments dropped from this tranche 1 project, due to delays in the implementation of the land acquisition and resettlement plans (LARP), were picked up by succeeding tranches and likely to be completed by end-2018; further project scope reduction due to the termination of the planned works in a site plagued by armed conflict, gave way to the inclusion in the MFF of other national transport corridor sections that became part of Pakistan’s regional connectivity agenda. While outside the tranche 1 envelope, this project’s planned outcome and impact thus continue to be likely achievable under the MFF.

Project Cycle Stage:

Preparation

Implementation

Strict enforcement of contracts is crucial to ensuring timely project completion.

At loan signing, the project’s physical investment component was expected to be completed by December 2013. But startup delays and slow construction pushed project road completion to January 2015. Chronic shortage in working capital, lack of head office support, and weak work planning and management largely because of inadequate skilled staff in the project site were cited by the contractor as key constraints. Contractor subletting to unapproved subcontractors with insufficient resources and competence made matters worse for this project and needs to be seriously addressed in future similar undertakings. Overall, ensuring that contract provisions are strictly adhered to will in future support the timely completion of projects.

Project Cycle Stage:

Implementation

Legal and administrative impediments to timely LARP execution should be addressed at early implementation stage.

While generally successful, LARP implementation under this project, was substantially delayed by the unavailability of government funds for the compensation of affected persons and the insufficient capacity of the National Highway Authority (NHA), the executing agency, to implement large-scale LARP. Legal and administrative issues, including land co-sharing, land title disputes, absentee landowners, pending land transfer by deceased landowners to inheritors, mortgages, legal review of offered compensation, and inadequate ownership documentation exacerbated the difficulties in LARP implementation. These issues, largely unforeseen at appraisal, need to be considered in future road and other infrastructure projects in Pakistan. A pragmatic approach to addressing these issues should be explored with government counterparts at early implementation stage, most plausibly, upon issuance of the notice to proceed to the executing agency.

Project Cycle Stage:

Preparation

Implementation

An intensive consultation process to better assess a country’s readiness for change can strengthen the feasibility of institutional and policy reforms.

The institutional strengthening component of this project could have been better designed through a more intensive consultation process that considered the country’s context and readiness for change. There was incomplete understanding of this component’s benefits among stakeholders. Delays and non-approval of the proposed interventions indicated the lack of government ownership as well as incentive for undertaking policy reforms and institutional strengthening. Realization of the need came later, mostly owing to ADB’s relentless engagement and dialogue.

Project Cycle Stage:

Preparation

Implementation

Background

Under Vision 2030, the government of Pakistan plans to raise the ratio of trade to gross domestic product (GDP) to 60% from 30% in 2007. To achieve this target, it launched the National Trade Corridor Improvement Program (NTCIP), which aims to bring about better connectivity and trade facilitation through improved logistics, and consequently enhance export competitiveness and diversification. Focusing on a major north−south transport corridor where Pakistan’s trade flows are concentrated, the NTCIP covers not just roads but also ports, railways, airports, customs clearing procedures, tariffs, and the trucking industry.

The National Trade Corridor Highway Investment Program is a core component of the NTCIP. It was developed by Pakistan’s National Highway Authority (NHA) and supported by the Asian Development Bank (ADB) through a multitranche financing facility (MFF) of up to $900 million, approved in October 2007. Covering the corridor backbone from Peshawar to Karachi and the outlying links that connect to the People’s Republic of China and the Gwadar Port in Baluchistan, the investment program supports not only new road construction but also the

improvement of over 3,500 kilometers (km) of roads, national highways, expressways, and motorways. Envisaged at appraisal to finance 346 km of expressways and motorways over a 10−year MFF period, ADB’s share comprises 16.6% of the total investment requirement.

This report covers tranche 1 of the MFF, initially designed to finance the construction of two expressways with a combined length of 218 km but was requested by government to be decreased to 58.2 km because of security considerations and land acquisition delays. From a $545 million loan, approved in December 2007, the investment component of tranche 1 was thus reduced to $170 million in September 2008. In addition to physical outputs, the tranche was also supposed to finance institutional strengthening through a separate $10 million concessional loan, approved in December 2007, which was cancelled without any disbursement in January 2011.

The final road output under tranche 1 comprised a 6-lane 58.2 km motorway between Faisalabad and Gojra cities in Punjab province, with 3 interchanges, 11 bridges, 19 underpasses, and 30 subways. Already operational since March 2015, the motorway is expected to bring about efficiency gains for road traffic operation along the 184 km Faisalabad–Khanewal section of the national transport corridor and contribute to economic growth in Punjab Province. However, due to still ongoing works on two adjacent segments, tranche 1’s attainment of its intended outcome and impact targets could not be fully measured as of this report’s preparation.

Nevertheless, recent economic trends indicate Punjab’s continuously increasing share in the national GDP. Visible contributions from the tranche 1 project to this sustained growth include reduced travel time, vehicle operating cost savings, and lower road fatalities. Improved access to health and education facilities and enhanced farm−to−market connectivity likewise had a positive impact on the socioeconomic landscape.

NHA was the project executing agency. A project implementation unit, established by the NHA, supervised the physical investment component of the project.

Project Information

Project Name:

National Trade Corridor Highway Investment Program (Tranche 1)

Report Date:

September, 2018

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