JBIC ODA Loan Project Mid-Term Review 2006
Evaluator: Yoichi Hara (Mitsubishi UFJ Research and Consulting)Field Survey: September 2007
Project Title: The Republic of Bulgaria “Sofia Metro Extension Project” (L/A No. BG-P5)[Loan Outline]
Loan Amount / Contract Approved Amount / Disbursed Amount
Loan Agreement
Loan Expiry Date
Executing Agency
Operation and Maintenance Agency
Selection Criteria for Mid-Term Review: 12,894 million yen / 10,188 million yen / 4,685 million yen (as of the end of September 2007): February 2002
: July 2009 (7 years following the effective date of L/A)
: City of Sofia: City of Sofia: Coordination with JICA (dispatch of JICA experts) and other donors (EBRD, EU, etc.)
Special theme (measures for the disabled people)[Project Objective]
The objective of this project is to further streamline the city’s transportation system by constructing a tunnel and stations from the seventh to the ninth station as part of Phase
2 (the segment covering about 11 km from the seventh to the sixteenth station) of the Subway Line Construction Plan (covering about 19 km in total extension, from the firstto the sixteenth station) by using the shield tunneling method, which Bulgaria has no experience, and thereby contribute to the strengthening of urban functions and enhancing
convenience for citizens in Sofia, the capital of Bulgaria.
Consultants: Pacific Consultants International Co., Ltd., PADECO Co., Ltd.
Contractor: Taisei Corporation[Mid-Term Review Result]
Item
Relevance

Ex-ante Evaluation(February 2002)(1) National policy level
At the end of 1999, Bulgaria became a candidate for membership in the
EU. Since then, the government has endeavored to carry out the steps
required by the EU, including structural reform (privatization, tradeliberalization, etc.) and development of laws, before Bulgaria can gain
1

Result of mid-term review and ex-post evaluation results asestimated at time of mid-term review(1) National policy level
Bulgaria joined the EU in January 2007. In order to promote
developments on the social, transportation and environment fronts that
the EU requires of its member nations, the Council of Ministers, thegovernment’s supreme decision-making body (which is equivalent tomembership.
For Bulgaria, which sets EU membership in 2007 as its top priority
goal, developing the urban functions in Sofia, the capital, and supporting
the development of the market economy are extremely significant tonarrow the gap that exists between Bulgaria and Western European
countries on the economic, institutional and infrastructure fronts.
The central government took up this project as a major project to be
implemented in the Sofia area from a list of projects included in the
National Plan for Regional Development (2000–2006), a part of the
National Mid-term Plan.

the Cabinet Council in Japan, and chaired by the Prime Minister),regards the subway extension project in Sofia as one of its top priority
items. The EU, for its side, fully supports the project, for it recognizes
the importance of subway construction as an effective way to alleviatetraffic congestion and protect the environment (that is, a measure toabate air pollution).
To gain membership to the EU, in 2004 Bulgaria began preparing the“Sector Operational Programme: Transport 2007–2013” and submitted
it to the EU in 2006. The importance of subway projects is also pointed
out in this guideline, which stipulates that Bulgaria will develop its
transportation infrastructure in a manner that conforms to the EU’stransportation policy. Thus the high priority placed on this project froma national policy level, which was confirmed at the time of ex-anteevaluation, remains unchanged even today.

(2) Policy level
The city of Sofia (population: about 1.2 million), situated in a basin,
has a high population density. In addition to having very narrow roads, thecity is beset by a host of problems, including increase in the number ofvehicles (doubled over the past 10 years) and the deteriorating conditionof all its mass transportation systems, including streetcars, trolley buses,
buses and subways.
Viewing the reorganization of the city’s transportation system as its
major policy challenge, Sofia has set three goals for modernizing its urban
functions: (i) streamlining the management of the city’s transportation
system, (ii) partial removal of streetcars and other existing routes andrationalization of routes by changing how they are routed, and (iii)
alleviation of traffic congestion and reduction of commuting time byimplementing (i) and (ii). The city is currently working out a plan torealign its transportation system centering on its subways.

(2) Policy level
In the city of Sofia, transportation conditions continue to deteriorate
after the time of the ex-ante evaluation due to population growth andincrease in the number of vehicles owned.

2

Population growth and increase in the number of vehicles in Sofia
1994–1998
1999–2002
2003–2007
1.2 million
1.5 million
Population (estimate)n.a(2001)(2007)
Number of registered350,000
509,000
800,000
vehicles(1998)(2002)(2007)
Rate of increase
28%
31%
36%
Number of vehicle
310
435
533
owners per 1,000(1998)(2002)(2007)
peopleSource: City of Sofia

Given the above situation, as well as the significant impact the
subway development will have on improving transportation efficiency,
including enhancement of convenience for residents of Sofia andalleviation of traffic congestion, the relevance of the subway
development project and its high priority remain unchanged from thetime of the ex-ante evaluation.
With regard to the development of a public means of transportation,
the General Master Plan that the city of Sofia adopted in 2007 cites
promotion of construction of a subway system by 2020 as a matter of
top priority.
At the time of appraisal, the European Bank for Reconstruction andDevelopment (EBRD) was conducting a survey on reorganization of thecity’s transportation system in Sofia, and a reorganization plan did exist.
However, there is no evidence that after the survey the plan was ever
implemented. But regardless whether the reorganization plan was
actually implemented or not, the high priority and relevance of the
subway development project remain unchanged, as described in the
aforementioned master plan.
(3) Planning level
With respect to the Subway Line Construction Plan of the city of Sofia(covering about 19 km in total extension, from the first to the sixteenthstation), construction of the segment from the first to the seventh station
stretching about 8 km was completed in October 2001 (using the open cut
method by self-secured funds). Commercial operations of the said
segment have already started. However, the segment in operation only
links the western residential area and part of the downtown area. In orderto make subways serve as a core of the city’s transportation system, it isnecessary to extend the existing route through the downtown area to as far
as the eastern residential area by constructing the Phase 2 portion of the3(3) Planning level
Since the time of appraisal, neither change nor correction has
occurred in the Subway Line Construction Plan of the city of Sofia
itself. Nor has there been any change in the scope of this project. The
needs and priority of this project remain very high to this day, and nochange has occurred since the time of the ex-ante evaluation.
This project is consistent with Bulgaria’s national policies andmeasures, and since the strong need for subway development has been
confirmed, it is judged that there is a strong need and relevance for thisproject.

Effectiveness (Impact)subway (the segment covering about 11 km, from the seventh to thesixteenth station).
In particular, with regard to construction of the aforesaid segment of thePhase 2 portion covering about 2 km, from the seventh to the ninth
station, requires the use of the shield tunneling method, since Bulgaria
lacks experience in this method, external technical support will be
indispensable.
At the same time, support is also being sought for management reformsof Metropolitan JSC (the city’s wholly owned company) whose businessobjective is, among other things, to operate and maintain subways.
(1) Operation and effect indicators(i) Quantitative effects
At time of ex-ante
Target value
Name of indicatorevaluation (actual (predicted value forvalue in 2001)
2008)(a) Operation indicators
Number of passengers(10,000/day) (0–10
6.9
11.8
stations)
Metropolitan JSC’s
passenger revenue
8.6
14.7(million leva/year)(b) Effect indicator
Metropolitan JSC’s net
earnings from its
0.2
3.7
subway business(million leva/year)(c) Internal rate of return
EIRR (Economic internal rate of return)
8.4%
FIRR (Financial internal rate of return)
2.8%
4(1) Operation and effect indicators(i) Quantitative effects
At time of
ex-anteName of indicatorevaluation(actual value
in 2001)(a) Operation indicators
Number ofpassengers
6.9(10,000/day) (0–10stations)
Metropolitan JSC’s
passenger revenue
7.6(million leva/year)(b) Effect indicator
Metropolitan JSC’s
net earnings from0.002
its subway business(million leva/year)

At time of
mid-term
review(actual value
in 2006)

Target value(predictedvalue for
2010)

8.0

20.4

12.4

30

1.663

n.a

Note 1: As of 2001, only the first to the seventh station were completed
and in operation. Target values are those set for after the segment from theseventh to the ninth station were completed.
Note 2: Conversion rate: US$1 = 123.94 yen = 2.15 leva (June 2001)

Source: City of Sofia
Note 1: As of 2001 and 2006, only the first to the seventh stations werecompleted and in operation.
Metropolitan JSC’s figures on “passenger revenue” and “net earnings
from its subway business” prepared at the time of the ex-ante evaluation(2001) reflect the changes that the executing agency had offered at thetime the recent field study was conducted. According to the present
Metropolitan JSC’s duly audited financial statements, the correct figures
are 7.6 million leva and 0.002 million leva, respectively.
Meanwhile, due to delays in construction, it is assumed that 2010 (2years after the work is completed) would be the target year (the year the
ex-post evaluation is to be conducted). The premise on which the target
value is set for 2010 is that the segment from the seventh to the ninth
station being constructed under this project as well as the segment fromthe tenth to the thirteenth station currently being constructed with
self-procured funds would be completed by that year. The reason thetarget values show such a large increase is as follows: since the areaaround the thirteenth station, the terminal station, is a residential area, if
the subway route is extended this far, the number of passengers can be
expected to increase sharply.

(ii) Qualitative effects
This project is expected to reduce the city’s financial burden by making
certain that improvements are made in the management of Metropolitan
JSC (self-sustainability in terms of finance and organization), and thereby
support the shift in the public works sector toward a market economy.

5(ii) Qualitative effects
Improvement in the efficiency of transportation, improvement inconvenience, positive impact on the environment (reduction in gas
emission, vibration and noise caused by cars) can be expected as theeffects of this project. (Ref.: It is estimated that by introducing the
subway route currently in operation, gas emission, vibration and noisecaused by automobiles have already been reduced by about 20%.)
With regard to the task of improving the way Metropolitan JSC ismanaged, advice is being provided on rationalizing its financial status

and management as part of the consulting services offered under thisproject. Operating earnings of Metropolitan JSC have steadily
improved. And in addition to the improvement in passenger
convenience as a result of the consultants’ recommendation andMetropolitan JSC’s decision to promote the use of smart cards (prepaid
cards) for paying the subway fare, this project has effectively increased
the company’s revenue from advertisements displayed on billboards instation buildings. In the coming years, the effects of this project are
expected to be expressed in the reduction of the city’s financial burden
and in the support for the shift in the public works sector to a market
economy.
(2) Factors that may influence the effectiveness and impact(i) Environmental procedures
Under the Environmental Protection Law of the Republic of Bulgaria,
all railroad companies in Bulgaria are required to follow the twoprocedures of EIA. For this project, the first EIA report, which has to beapproved before the project can be launched, was approved by the
Ministry of Environment in December 2000.
The second EIA is expected to be implemented as soon as the basic
design of the project is completed, and ended prior to the bidding.

(2) Factors that may influence the effectiveness and impact(i) Environmental procedures
The Ministry of Environment has carried out all of the EIA
procedures; there were no negative influence on the effectiveness or
impact of this project. Additionally, when the second EIA report wasapproved, the Ministry issued an advisory urging, among other things,
the executing agency to conduct an archaeological survey at the eighth
station, and if any relics are found, they should be stored in appropriate
storage. (No relics were discovered either in the seventh or the eighth
station.)(ii) Natural environment / social environment
The area around the seventh station is a cultural heritage preserve. In
this area, the location, shape, and other features of the remains of a walledcity dating back to the Roman Empire have been nearly perfectly
identified.
The executing agency is required to obtain approval from the Cultural
Affairs Agency before starting construction work that may influence
ancient relics. In this project, the survey necessary to obtain the first EIA(ii) Natural environment / social environment
Since there were no relics newly found in the areas around theseventh and the eighth station, it became clear that there was noinfluence on the construction.
The groundwater system has not been adversely affected after theconstruction started. Also, there is no impact of drainage during
construction.
With respect to other environmental consideration, in 2005, it became

6approval has already been conducted, and based on the second EIA, theexecuting agency plans to file an application for permission to go ahead
with the construction.
Since construction within the preservation area entails digging sevenmeters or deeper underground using a shield machine, this project will beable to avoid adversely impacting relics and other artifacts of cultural
heritage (all relics including its foundation are confirmed to be no deeper
than four meters underground).
Also, with regard to the impact on the underground water system andthe impact of drainage during construction, no particular problem isenvisaged, and a more detailed study is expected to be made in the second
EIA.

necessary to cut down some trees in the park near the eighth station, but
an NGO opposed this. In response, the city of Sofia presented a solution
whereby it would transplant the trees to a different location and replant
trees in their original locations when the construction work wascompleted. As a result, the issue has now been solved.
No impact has appeared that was not anticipated at the time of theex-ante evaluation.
The monitoring of the EIA procedures and measures for protecting
the environment are being implemented appropriately by the
consultants in close cooperation with the contractor.

(iii) Resident relocation and land acquisition
This project will not require resident relocation or land acquisition.

(iii) Resident relocation and land acquisition
This project has not required resident relocation or land acquisition.

(iv) Coordination with grant aid / technical cooperation
Dispatch of JICA experts and utilization of skill-training programs arebeing considered as a way to coordinate with technical cooperation forimproving the management of Metropolitan JSC.

(iv) Coordination with grant aid / technical cooperation
Efforts are being made to establish appropriate coordination with the
JICA scheme. Three JICA experts were dispatched, and one from the
Bulgarian side took part in the skill-training program JICA provides inJapan. The details are as follows:
1) Dispatch of JICA experts
Three technical personnel were dispatched to the city of Sofia as
short-term JICA experts. One was dispatched as a transportation system
advisor (for 3 months); the second, as a public sector finance advisor(for 6 months), and the third, as an advisor in promoting thestreamlining and use of the transportation system (for 7 months).
2) Utilization of JICA skill-training program
One economist from Metropolitan JSC took part in the “railway
management course” held in Tokyo between January to February 2007.
The economist received training centering on subway management,

7

operation and maintenance.
(v) Coordination with other donors
At the request of the city of Sofia, the EBRD is currently conducting apreliminary survey on the Sofia Transport Investment Program. This
project aims to cooperate closely with the EBRD by striving to ensure
consistency with the program.

(v) Coordination with other donors
With regard to the Sofia Transport Investment Program financed byfunds provided by the EBRD, at the time of the ex-ante evaluation, theoriginal plan called for the overhaul of the institutional and managerial
aspects of the public transportation sector as a whole. However, in
actuality, only the bus procurement, streetcar rehabilitation and new
construction projects have been implemented. Thus, there has not been
any direct coordination between JBIC and ERBD. As for coordination
with EU, in this project, there is no track record of such coordination.
However, at present, the city of Sofia is making preparations forconstructing the segment from the fifth to the eleventh station on Line 2
by the funds provided by the EU. Consequently, in the future, it may bepossible to generate a synergistic effect for enhancing transportation
efficiency in conjunction with the project funded by Japanese ODA
loans.

(vi) Measures for the disabled people
It is planned to design station premises free of barriers. A discountticket system for elderly and disabled persons will be introduced.

(vi) Measures for the disabled people
It is planned to install elevators especially designed for use bypassengers in wheel chairs and facilities for sight-impaired passengers(handrails, bright colored guidance lines and signs, etc.) in stationbuildings. Discount tickets will be introduced for the elderly, thedisabled, and children.

(3) Factors influencing sustainability(i) Operation and maintenance system
In Sofia, the transportation system is managed under a system whereby
the city (i.e., the transportation bureau headed by the deputy mayor in
charge of transportation) makes the relevant policy decisions. After that,in the case of the subway, Metropolitan JSC., and in the case of other(3) Factors influencing sustainability(i) Operation and maintenance system
There are no changes in the management system of the city’stransportation system and the operation and maintenance system of the
subway business. Metropolitan JSC, which is in charge of operation andmaintenance of subways, has a total of 620 employees. Of this number,8means of transportation such as buses and streetcars, the respective
administrative authorities implement the policy decisions.
The city of Sofia is the executing agency of this project, but
Metropolitan JSC will be in charge of the business management, technicaladministration, and operation and maintenance of subways. Metropolitan
JSC, the city’s wholly owned company, is entrusted by the city to run the
subway business exclusively.

380 are engineers and technical experts engaged in the operation andmaintenance work of subway lines. Metropolitan JSC has begun hiring
new workers to be added to the staff that is engaged in the operationand maintenance of the segment of the subway currently being
constructed with a Japanese ODA loan, and is operating the subway
with plenty of leeway. Thus it can be said that those with the experienceand technical expertise necessary for the scale of the business are being
assigned to their respective posts in an appropriate manner.

(ii) Technical capacity in operation and maintenance
Since the city of Sofia and Metropolitan JSC have the experience ofconstructing and operating the segment from the first to the seventh
station with self-procured funds, basically, there is no doubt that both arecapable of implementing and operating this project. However, theconstruction technique they used in constructing the said segment was the
open-cut method, not the shield tunneling method that this project wasscheduled to use. Consequently, they lack experience using the shieldtunneling method.
Additionally, the management consultants hired for this project arescheduled to identify the managerial and financial problems besetting
Metropolitan JSC, formulate remedial measures to be used in the future,and implement those measures for the purpose of consolidating amanagement structure that will reduce the financial burden that both thecity of Sofia and the government bear.

(ii) Technical capacity in operation and maintenanceWith regard to the shield tunneling method, at present, efforts arebeing made to transfer technology to ensure smooth implementation.
(Until now, contrary to previous expectations, among other things, thelocal contractors showed little interest in the method, so the training hadvery little effect. Consequently, the contractor side endeavored topromote transfer of technology to local Bulgarian contractors by
resorting to hiring engineers who had experience using the shieldtunneling method in constructing subways in Bangkok or Singapore andassigning them to the construction site in Sofia.)
Also, the management consultant hired for this project is advising
Metropolitan JSC on the subject of management reform. (Contents of
the advice being made include suggestions for analysis andimprovement of the Metropolitan JSC’s management, financial status
and organizational structure.)(iii) Financial status in operation and maintenance
It is assumed that Metropolitan JSC will cover the cost of operation andmaintenance of this project with self-procured funds. The company
recorded profit in its FY2000 earnings statement.
However, Metropolitan JSC is not able to accurately ascertain thenumber of passengers it transports. (Commuter passes are sold by the(iii) Financial status in operation and maintenanceAs the changes in Metropolitan JSC’s financial data presented below
demonstrate, the company’s operating earnings are steadily increasing.

9municipal traffic corporation under a ticket system it shares with othermodes of transportation such as buses and streetcars. The profit isdistributed among the various administrative authorities.)(Unit: 1,000 leva)
2005
2006

2001
2002
2003
2004
Operating
7,626
7,962
9,381
9,844
10,897
12,412
earnings
Operating
7,624
7,805
8,850
8,965
9,810
10,749cost
Profit
2
157
531
879
1,087
1,663
Source: Based on Metropolitan JSC’s response to a questionnaire
Note: The above figures do not include the effect of the costdepreciation related to the property such as the station buildings whose
control was transferred to Metropolitan JSC by the city of Sofia in
2003. (If the effect of this cost were taken into consideration, from 2003
to 2006, Metropolitan JSC’s operating profit would be in the red.)Since it is now possible to count the number of passengers with
automatic ticket gates, Metropolitan JSC is today able to accurately
count the number of passengers it transports. So now profit can be
accurately determined.
Thus, while overhaul of the accounting standard may seem necessary,
since the operating revenue is increasing, it can be concluded that there
is no doubt about Metropolitan JSC’s financial capability to operate andmaintain the subways.

(iv) External risk factors
External risk factors include: the possibility that the political andeconomic climate in Bulgaria and in the region surrounding this project’s
target area deteriorate; changes in the demographic scale/movement in thesaid region; electric power supply shortages triggered by the tight electric
supply and demand; and natural disasters such as earthquakes and floods.
Information forreference
10(iv) External risk factor
External risk factors cited in the left column have not appeared, sothey have not affected the effectiveness and impact of this project.

Efficiency(1) Outputs(a) Civil engineering work(i) Construction of a tunnel in the segment covering about 2.1 km, fromthe seventh to the ninth station(ii) Construction of station buildings of the eighth and the ninth station(iii) Construction of turn-back facilities(1) Outputs(a) Civil engineering work
There was no change in scope.

(b) Consulting services (construction monitoring / supervision andmanagement)(i) Engineering consultant
・ Review of bidding documents and bidding assistance・ Design of shield tunneling method and monitoring and supervisionof construction
・ Environmental measures (guidance and advice concerning impacts
on the environment during construction)(ii) Management consultant
・ Establishment of a system for managing the revenue and cost of
Metropolitan JSC
・ Support for the organizational reform of Metropolitan JSC
・ Training, etc. for the staff
The total assumed consulting services M/M is 343 M/M (including
foreign and local consultants).

(b) Consulting services
There was no change in TOR.
In December 2006, the number of man-hours required increased 212
M/M due to the additional construction work generated by the change inthe location of the access shaft construction in the area around theseventh station.

(2) Project period
February 2002–September 2006 (56 months)(2) Project period
February 2002–December 2008 (83 months)
The project period was extended due to delays in procurement and civilengineering work. In the case of civil engineering work, at this moment,
only about half of the overall work has been completed. The main
reasons include (i) the change in the location of construction at theseventh station; and (ii) the longer than expected time required to11transfer technology (the shield tunneling method) to local Bulgarian
contractors. In addition, since 34 of the 36 months of contract periodthat the executing agency has with the local contractors have alreadyelapsed, the contract needs to be extended.
Lessons Learned andRecommendations[Lessons learned]
・ Regarding coordination with the JICA scheme, one employee of Metropolitan JSC took advantage of the skill-training program that JICA offers
in Japan. In this program, the employee absorbed advanced knowledge in the field of railway management. Since returning to Bulgaria, he has
been contributing to the better management of Metropolitan JSC. It is believed that coordinating with the JICA scheme is useful for enhancing
the effectiveness of similar projects in Bulgaria and elsewhere (those involving the transportation sector and management of public
corporations).
[Recommendations]・ The executing agency has suggested a change in operation and effect indicators. In the future, it is advisable that JBIC and the executing agency
take the occasion of the completion of construction work to discuss new target values and reach an agreement.
・ With regard to delays in construction, at this moment, December 2008 is the executing agency’s target date for completion, but according to theevaluator’s opinion, there is a strong possibility that the work would be further delayed. Thus it will be necessary to carefully monitor the
progress of the construction work going forward.
・ This subway project continues to be an important project that the citizens of Sofia long for. While delays may not be avoided, fast and sloppy
implementation must not be allowed to undermine the safety of the project at any cost. Construction work should be executed in such a way thatsafety is never compromised.

Indicators set for use attime of ex-post
evaluation

Indicators set at the time of the ex-ante evaluation(1) Number of passengers (10,000/day)(2) Metropolitan JSC’s passenger revenue (million leva/year)(3) Metropolitan JSC’s net earnings from its subway business (million
leva/year)(4) Internal rate of return (FIRR, EIRR) (%)

12・ No changes were made in the items used as evaluation indicators at
the time of the ex-ante evaluation, but a need arose to change thetarget year and target values.
・ There are no problems with the evaluation system (indicator value
measurement capacity) adopted by the executing agency.