Japanese ODA Loan

Ex-Ante Evaluation
1. Name of the ProjectCountry: Georgia
Project: East-West Highway Improvement Project (II)Loan Agreement: March 7, 2016
Loan Amount: 4,410 million Yen
Borrower: Georgia
2. Background and Necessity of the Project(1) Current Development State and Issues of the Transportation and Road
Sector in Georgia
In addition to railways and roads of land transport connecting to neighboring
countries, Georgia’s transportation sector consists of marine transport centeredon the Port of Poti and the Port of Batumi along the Black Sea, and air transport.
Located on the shortest route between Europe and Central Asia, Georgia isplaying an increasingly important role not only as a transit nation for oil and gas
pipelines from the Caspian Sea but also as a base for regional logistics. Amongthe land transport networks, roads play the most significant part in thetransportation system, accounting for 60% of the total freight traffic. Although
domestic road networks (with a total length of approx. 22,000km) had been left
badly damaged due to the lack of funds for road maintenance after Georgia
gained independence in the course of the dissolution of the Soviet Union, theGovernment of Georgia started to raise the budget allocation for roadmaintenance in 2004, facilitating road maintenance and promoting roaddevelopment and improvement projects to support economic activities. ThisProject is intended to upgrade the East-West Highway, a 460km-longinternational corridor connecting the border with Azerbaijan and the coastal
Black Sea area. The traffic volume on the highway has risen by 12% on average
since 2005. In the target area of this Project, the increasing flow of vehicles,
including heavy trucks, has caused bottlenecks in urban traffic. Moreover, therisk of accidents has risen due to frequent reckless overtaking in narrow sections.
Thus, it is urgent to widen and reshape the highway and construct bypass roads
to reduce the flow of traffic into urban areas and improve driving safety.
(2) Development Policies for the Transportation and Road Sector in Georgia
and the Priority of the Project

The Social-economic Development Strategy of Georgia “GEORGIA 2020” puts
special emphasis on road infrastructure development in order to heighten theefficiency of international and domestic logistics, improve the safety of roadtransport networks, increase Georgia’s competitiveness as a transit hub, andpromote regional economies. In this context, the upgrading of the East-West
Highway through this Project has been placed as one of the country’s prioritychallenges.
(3) Japan and JICA’s Policy and Operations in the Transportation and Road
SectorJapan’s Country Assistance Policy for Georgia (set in April 2014) identifies“Improvement of Economic Infrastructures” as a priority area, in which theTransportation Program is to be implemented to improve the aging roadinfrastructure in rural areas. This Project is in line with this assistance policy. Sofar, JICA has implemented the East-West Highway Improvement Project (LoanAgreement signed in 2009 for 17,722 million yen) and the Project for Trunk
Route Rehabilitation (Grant Agreement signed in 2000 for 304 million yen).
(4) Other Donors’ Activity
The World Bank has carried out 17 projects worth US$700 million in total toimprove the East-West Highway (to the east of the target section of JICA) anddevelop secondary and local roads. The Asian Development Bank has
implemented eight projects worth US$1,000 million in total to upgrade theEast-West Highway (coastal sections along the Black Sea) and constructsecondary roads. The European Investment Bank has provided financing of€170 million to improve the East-West Highway (to the west of the target sectionof JICA).
(5) Necessity of the Project
Although the Project was approved and has been implemented since 2009, an
additional loan was requested in April 2015. This was because the project cost
inflated due to larger fluctuation in exchange rate than expected at the appraisalstage, the extra work to stabilize excavated slopes, and the installation of roadlighting to improve traffic safety at night. Since the financial shortage was notable to be fully covered by the Government of Georgia, an additional funding
through Yen Loan is essential in order to ensure the smooth implementation ofthis Project and produce the project outcome as soon as possible. Moreover, asmentioned above, this Project is in line with the development issues and policies
of Georgia as well as the assistance policies of Japan. Therefore, it remains

necessary and relevant for JICA to implement this Project.
3. Project Description(1) Project Objective
This project is to enhance the transportation capacity of Georgia byconstructing and improving the road section between Zestafoni, Kutaisi andSamtredia on the East-West Highway, thereby contributing to the regional
economic development of the country.
(2) Project Site/Target Area
Imereti Province(3) Project Components
1) Road construction: Kutaisi Bypass Road (construction of a new two-laneroad (17.3km)); Kutaisi-Samtredia section (construction of a new two-laneroad (24.0km)); Zestafoni-Kutaisi section (reconstruction and widening ofthe existing two-lane road into a four-lane road(15.2km))2) Road safety measures (reinforcement of slopes and installation of roadlighting)3) Consulting services (including detailed design, bidding assistance,construction supervision, etc.)(4) Project Cost
31,182 million yen (Loan Amount: 4,410 million yen)
(5) Project Implementation Schedule/Cooperation PeriodDecember 2009 – March 2018 (100 months in total). The project completionis defined as the commencement of the road facility services.
(6) Project Implementation Structure1) Borrower: Georgia
2) Roads Department, Ministry of Regional Development and Infrastructure3) Operation/Maintenance and Management System: Private contractor will
be responsible for maintenance and management works under thesupervision of the Road Administration Division of Roads Department,Ministry of Regional Development and Infrastructure.
(7) Environmental and Social Considerations/Poverty Reduction/SocialDevelopment
1) Environmental and Social Considerations(i) Category: A(ii) Reason for Categorization: This project corresponds to the road sector
specified in the JICA Guidelines for Confirmation of Environmental andSocial Considerations (established in April 2002).
(iii) Environmental Permit: Georgian laws require that an Environmental
Impact Assessment (EIA) report be prepared. EIA reports were madeseparately for individual construction sections. The reports for theKutaisi Bypass Road, the Kutaisi-Samtredia section, and theZestafoni-Kutaisi section were approved by the Ministry of Environment
and Natural Resources Protection in May 2011, May 2012, andDecember 2012, respectively. If additional construction requires an EIA
report to be submitted to and approved by the Ministry of Environment
and Natural Resources Protection, the Roads Department of the Ministryof Regional Development and Infrastructure will take necessary steps toobtain the approval.
(iv) Anti-Pollution Measures: The construction contractors are required totake appropriate measures to mitigate the environmental impact ofconstruction operations in accordance with the environmental monitoring
plan, such as constructing a stilling basin to prevent erosion andmaintaining construction equipment. After the commencement of theservices, the Roads Department of the Ministry of Regional
Development and Infrastructure will consider taking measures tomitigate air pollution, noise, and vibration, such as planting trees andinstalling noise barriers where necessary.
(v) Natural Environment: The regions covered by the project are not inregions with national parks, etc., or neighboring regions that would bevulnerable to any impact, and any negative impact on the naturalenvironment is expected to be minimal.
(vi) Social Environment: This Project will require land acquisition of
1,643,372m2 (excluding 16,806,727m2 of publicly owned land) andinvoluntary resettlement of 16 households. Resettlement Action Plans(hereinafter referred to as “RAPs”) have been formulated separately for
individual construction sections. The RAPs specify that the Governmentof Georgia will provide affected persons with compensation for lost
assets at full replacement cost and support for loss of earnings,
regardless of whether or not they have legal title. The land acquisition
and resident resettlement process has been completed for an area of
1,609,139m2, and it is confirmed that the compensation procedures arebeing followed in accordance with the RAPs. If this Project requires

additional land acquisition and involuntary resettlement, an Addendum
RAP will be developed.
(vii) Other/Monitoring: In this Project, the quality of air and the levels of noiseand vibration will be monitored, in accordance with the monitoring plan,by contractors under the supervision of the Roads Department of theMinistry of Regional Development and Infrastructure during construction
and by the Roads Department of the Ministry of Regional Developmentand Infrastructure and other relevant ministries after the commencementof the services. The land acquisition and resettlement process is being
monitored by the Roads Department of the Ministry of Regional
Development and Infrastructure.
2) Promotion of Poverty Reduction: None
3) Promotion of Social Development: It is confirmed that special
compensation is to be provided to households with female householders
and poor households in the land acquisition and resettlement process.
(8) Collaboration with Other Donors
The
East-West
Highway
Improvement
Projectisco-financed(parallel-financed) with the World Bank, the Asian Development Bank, and theEuropean Investment Bank. All of these development partners have started
construction in their respective sections.
4. Targeted Outcomes(1) Quantitative Effects
1) Outcomes (Operation and effect indicators)
Baseline(Actual value in2008)

Target (2019)[two years afterproject completion]

Annual average daily traffic
volume (vehicles/day)

8,588

18,843Time required(minutes/vehicle)

63

35

Driving speed (km/hour)

80

100

Impassable days in sections
with reinforced slopes(days/year)-1

Indicators (draft)

(JICA’s project target area only)(2) Qualitative EffectsVitalization of regional economies by improving the efficiency of logistics;
improvements in road traffic safety and comfort(3) Internal Rate of Return (IRR)
Based on the conditions below, the economic internal rate of return (EIRR)of this project was calculated as 19.6%. 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: Project cost (excluding tax) and operation and maintenance expenses
Benefit: Reduction in total travel time for car users and reduction in fuelconsumption
Project Life: 25 years after the commencement of operation
5. External Risk Factors and Control
There will be no major natural disasters that can delay the construction.
6. Lessons Learned from Past Projects(1) Findings of Similar Projects
The results of the ex-post evaluation of the Pak Kret Bridge and Connecting
Road Construction Project in Thailand pointed out that more attention shouldhave been given to the disruption to communities due to the construction of thetrunk road (the road became more difficult to cross, and the distances between
crossing points became longer) and suggested that the project plan should haveincluded the installation of crossing structures (e.g., overpasses andunderpasses) at suitable intervals.
(2) Lessons Learned to the ProjectIn this Project, new roads will be constructed in farm and pasture land.
Therefore, the project plan includes the installation of the necessary number ofsuitable underpasses based on needs surveys in the local communities. The
Project is also designed to be able to install additional underpasses according to
the needs arising from local communities at the construction stage.
7. Plans for Future Evaluation(1) Indicators for Future Evaluation

1) Annual average daily traffic volume (vehicles/day)2) Time required (minutes/vehicle)
3) Driving speed (km/hour)4) Impassable days in sections with reinforced slopes (days/year)(2) Timing of Next Evaluation
2 years after project completion