Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: Georgia
Project: East-West Highway Improvement Project
Loan Agreement: December 16, 2009
Loan Amount: 17,722 million Yen
Borrower: Georgia
2. Background and Necessity of the Project(1) Current State and Issues of the Transportation Sector in Georgia
In addition to railways, roads and other forms of land transport, Georgia’s transportation
sector consists of marine transport centered on the Port of Poti, the Port of Batumi and the Portof Supsa along the Black Sea, and air transport, with two airports. Land transport forms the coreof Georgia’s transportation system, and is expected to steadily expand in the future.
However, the supply of funding from the central government of the former Soviet Union
came to a halt with its collapse, and Georgia has found it difficult to raise its own money tofinance roads. This has meant that its roads have been left with almost no maintenance work
performed. In particular, the East-West Highway is part of the crucial internationaltransportation network linking the Black Sea and the Caspian Sea, as well as Europe and Asia.
The highway covers ground that is a vital part of the transportation network for the Silk Road,
but the poor state of infrastructure hinders the transport of both goods and people throughout
the region. The World Bank and other organizations have already provided assistance in thecapital of Tbilisi, but there are unimproved areas due to the overall capital shortage, and thehighway is unable to adequately fulfill its function as a part of the international corridor.
Moreover, infrastructure in Georgia was destroyed during the armed clash with Russia thaterupted in South Ossetia in August 2008, and devastation in the area around the conflict regionworsened. Repairing and upgrading the trunk roads is also urgent in terms of post-war
rehabilitation of these regions.
(2) Development Policies for the Transportation Sector in Georgia and the Priority of the Project
The medium-term development plan, “The Basic Data and Directions 2008-2011” (BDD),
established by Georgia’s government emphasizes nation-building in Georgia in a way thatmaximizes the potential of its geopolitical advantages.
(3) Japan and JICA’s Policy and Operations in the Transportation Sector
Japan has expressed its intention of working to improve the investment environment, forexample by improving the transportation of goods in the GUAM region (Georgia, Ukraine,Azerbaijan and Moldova). Furthermore, at the Georgia Donors’ Conference held in Brussels inOctober 2008 after the conflict, Japan announced it would provide up to 200 million US dollars
for Georgia, including Japanese ODA loan for the improvement of infrastructure in Georgia.
This project is in response to the Japanese government’s aforementioned policies.

Under the Japanese government’s policies, JICA has designated improvement of infrastructure
as one of its aid policies. Transportation sector is a particularly key area in addressing the globaland regional issues. Accordingly, this project is consistent with these policies.
(4) Other Donors’ Activity
As described below, the World Bank and other organizations have provided assistance forrepairs of the East-West Highway.
World Bank’s East-West Highway Improvement ProjectFirst Phase (Agaiani- Igoeti section)
Second Phase (Igoeti-Sveneti section)
Third Phase (Sveneti-Ruisi section)
Asian Development Bank’s Road Corridor Investment Program (Ajara Bypass)(5) Necessity of the ProjectThis project would upgrade the major sections of the East-West Highway, which is one of themost highly prioritized issues in Georgia’s medium-term development plan, BDD, and is very
necessary.
Moreover, to assist with post-war rehabilitation, this project is also extremely necessary
because there is a great need for repairs to the East-West Highway linking major hubs within
Georgia.
3. Project Description(1) Project Objective(s)The East-West Highway Improvement Project will contribute to the economic development
and post-war rehabilitation of Georgia by strengthening the transportation capacity with theconstruction and repair of roads and bridges between Zestafoni and Samtredia on the East-WestHighway.
(2) Project Site/Target Area
Section between Zestafoni, Kutaisi and Samtredia(3) Project Component(s)1) Civil engineering work
New roads will be built and existing roads repaired along the section of road between
Zestafoni, Kutaisi and Samtredia, which makes up the main section of the East-West
Highway.
a) Nakhshirghele-Chognari (repairs to existing two-lane road, approximately 5.2km inlength)b) Kutaisi bypass (construction of new bypass approximately 2.4km in length, includingbridges)c) Kutaisi-Samtredia (construction of new two-lane road, including bridges)2) Consulting services
Basic design, bidding assistance, detailed design assistance, supervision of works, human resource
development, preparation of resettlement assistance program (RAP), monitoring support, etc.

(4) Estimated Project Cost (Loan Amount)
21,911 million Yen（Loan Amount: 17,722 million Yen）
(5) ScheduleDecember 2009 – September 2013 (total of 46 months); project will be deemed complete
when the facilities begin providing services (September 2013).
(6) Project Implementation Structure1) Borrower: Georgia
2) Executing Agency: Roads Department of the Ministry of Regional Development andInfrastructure of Georgia
3) Operation and Maintenance System: Roads Department of the Ministry of RegionalDevelopment and Infrastructure of Georgia(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Considerationa) Category: Ab) Reason for Categorization: This project corresponds to the road sector specified in theJICA Guidelines for Confirmation of Environmental and Social Considerations(established in April 2002), so it corresponds to Category A.
c) Environmental Permit: Georgian laws require that an Environmental Impact Assessment(EIA) report be prepared and the Ministry of Environment Protection and Natural
Resources give permit on environmental impact after the completion of detailed design.
A draft EIA was completed and the Roads Department has done public hearing andinformation disclosure.
d) Anti-Pollution Measures: Measures to air pollution and noise, such as planting grass anderecting sound barriers as necessary, will be considered. Appropriate mitigation measures
will be carried out during construction, in accordance with the environmental monitoring
plan.
e) Natural Environment: The regions covered by the project are not in regions with nationalparks, etc., or neighboring regions that would be vulnerable to any impact, and anynegative impact on the natural environment is expected to be minimal.
f) Social Environment: The project is expected to require acquisition of 197,172m2 of land,
and five households to relocate. A Resettlement Policy Framework (RPF) has been
prepared, and the Resettlement Action plan (RAP) will be prepared during detailed design
stage. The RPF stipulates that, without regard to legal status of property, Georgia’s
government will offer compensation for loss of assets and income.
g) Other / Monitoring: Air pollution and noise will be monitored in this project inaccordance with the environmental monitoring plan under the supervision of the Roads
Department during construction and operations.
2) Promotion of Poverty Reduction: Poverty is a serious problem in outlying regions in
Georgia, but this project is expected to reduce poverty by improving the roads to increase accessfrom outlying regions to the capital or foreign countries.

3) Promotion of Social Development (e.g. Gender Perspective、Measure for Infectious
Diseases Including HIV/AIDS、 Participatory Development、Consideration for thePerson with Disability etc.): None in particular(8) Collaboration with Other Donors: The World Bank provides assistance to improve the roadbetween Agaiani - Igoeti (complete), Igoeti - Sveneti (in progress) and Sveneti - Ruisi (inprogress). Asian Development Bank is providing assistance to the bypass from Poti to Sarpi
along the Black Sea coast, and that project is in the form of parallel cofinancing with theEast-West Highway Improvement Project of JICA.
(9) Other Important Issues: None in particular
4. Targeted Outcomes(1) Performance Indicators (Operation and Effect Indicator)
Indicator

Baseline

Target (2015)（Actual Value in 2008）【Expected value 2 years after
project completion】

Annual average daily traffic
volume (vehicles/day)

7,862

14,346Time required (minutes/vehicle)

41.2

33.3

Travel costs (US dollars/year)

18.45 million dollars

15.55 million dollars(2) Internal Rate of Return
Based on the conditions indicated below, this project’s Economic Internal Rate of Return(EIRR) is 15.9%. The Financial Internal Rate of Return (FIRR) is not calculated as the project
does not generate financial revenue such as revenue from fees.
【EIRR】
Cost: Business costs (excluding taxes), operation and maintenance costs
Benefit: Reduction in total travel time for car users and reduction in fuel consumption
Project Life: 25 years
5. External Factors and Risk Control
None in particular
6. Lessons Learned from Past Projects
There have been cases in road projects in other countries in which delays in construction of thesections out of the target area of Japanese ODA loan have impeded the realization of theproject’s effect. In cases in which external conditions determine whether the project will beeffective or not, studies and reviews should be adequately carried out in advance, and theproject’s substance should be considered in light of the feasibility of its implementation. As
described above, the World Bank and Asian Development Bank are currently working on
sections of the East-West Highway, and JICA plan to share information regarding project
implementation with the World Bank and Asian Development Bank.

7. Plan for Future Evaluation(1) Indicators to be Used
1) Annual average daily traffic volume (vehicles/day)
2) Reduction in time required (minutes/vehicle)
3) Savings in travel costs (US dollars/year)4) EIRR(2) Timing
Two years after project completion