The Road Maintenance & Rehabilitation Project for Poland A proposed Program Based Approach project

1. The Road Maintenance & Rehabilitation Project for Poland A proposed Program Based Approach project • Half-day workshop on SWAp May 18, 2004

2. 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

3. Total length of the road network : 370,000 km. – 2/3 are paved roads

4. Condition of Road Network in 1999

5. Fatality rates per 100,000 population in OECD countries

6. 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%.

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

8. Main features of the proposed project for Poland • WB’s support focusing on road maintenance & rehabilitation works (sub-program financed at 2/3 or 67%); • WB funds (provided through aSIL Loan Agreement) are pooled with 2004 national budget for roads maintenance (see table next slide); • Environmental/Social and Procurement due diligence were carried out to assess and approve country own procedures ( in view of granting a country “certification” for future projects); • Environmental category: Financial Intermediary (FI). Publication of project OM chapter on environment and social was the only pre-requisite for appraisal.

9. Main features of the proposed project for Poland • Implementation within a two-year time period to be followed by “repeater” projects with a wider scope of investment. • Disbursement highly facilitated: chunky advance payment (40%), followed by periodic replenishments (remaining 60% after 6 months). • The entire loan is expected to be disbursed in 12 to 18 months time period, including retroactive financing since January 1st, 2004. • Procurement: essentially using Polish NCB rules with relatively high ICB threshold (€6 million) and “four exceptions” to EU Public Procurement Directives.

10. Pooling of WB funds

11. Main features of the proposed project for PolandProcurement • Prequalification: Not foreseen. • For Works and Goods above € 6 million equivalent: WBICB. • For Works and Goods, up to € 6 million equivalent: NCB with no prior review. • Exception to Polish Public Procurement Law: • -  No domestic preference shall be used; • -  The term “Best (the most advantageous) offer” shall be understood as the lowest evaluated bid selected following evaluation with use of quantifiable factors expressed in terms of money; and • -  No merit points system shall be used to evaluate bids. • Consultant services: World Bank guidelines apply

12. Main features of the proposed project for PolandDisbursement • Financial Monitoring Reports (FMRs): Quarterly report based on monthly budget execution reports. • Special Account open in National Bank of Poland by MoF. • Loan proceeds disbursed to Special Account and then through budget accounts to MoI and GDDKiA. • First disbursementfor retroactive expenditures plus advance covering 6 months financial needs (est. 40%). • Annual external auditby an independent auditor under TOR acceptable to the Bank.

13. Conclusions 1/2 • Previous road projects have helped in the reform of the Polish road sector; • e.g., use of modern Pavement, Bridges and Highway Management systems; • This project is not really a SWAp, but should be better be mentioned as a • Program Based Approach project (PBAp) using SWAp principles; • It aims at filling the gap between Adjustment and Investment lending; • It includes some key innovations to better respond to client’s needs; • Based on reciprocal trust between World Bank and “mature” client countries;

14. Conclusions 2/2 • 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; • e.g., procurement under NCB up to Euro 6 million with no prior review!; • Not tying up huge amount of loan, but fitting Client’s fiscal year budget; and • Before the end of this year, we will know how well it works….. PS. At the end of the December negotiations, the Government has asked informally the World Bank to prepare the next operation (with same approach but including new investments) by November this year…