Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004503 IMPLEMENTATION COMPLETION AND RESULTS REPORT IDA Grant No. H416-TO and Grant No. D091-TO ON A GRANT IN THE AMOUNT OF SDR 4.90 MILLION (US$ 7.44 MILLION EQUIVALENT) Grant No. TF099585 ON A PACIFIC REGIONAL INITIATIVE FUND GRANT IN THE AMOUNT OF US$ 10.30 MILLION EQUIVALENT Credit No. H5730-TO ON A CREDIT IN THE AMOUNT OF SDR 1.50 MILLION (US$ 2.00 MILLION EQUIVALENT) TO THE Kingdom of Tonga FOR THE Tonga Transport Sector Consolidation Project June 24, 2019 Transport Global Practice East Asia And Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2018) Currency Unit = TOP TOP 2.2500 = US$1 US$ 1.3900 = SDR 1 FISCAL YEAR July 1 - June 30 Regional Vice President: Victoria Kwakwa Country Director: Michel Kerf Senior Global Practice Director: Guangzhe Chen Practice Manager: Almud Weitz Task Team Leader(s): Julie Babinard, Pierre Graftieaux ICR Main Contributor: Van Anh Vu Hong ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AF Additional Financing AusAID Former Australian Government Agency responsible for managing Australia’s overseas aid program within the Department of Foreign Affairs and Trade AU$ or AUD Australian Dollar CAD Civil Aviation Division CBA Cost Benefit Analysis COP Conferences of the Parties DFAT Department of Foreign Affairs and Trade in Australia EIRR Economic Internal Rate of Return FY Fiscal Year GOA Government of Australia GOT Government of Tonga ICAO International Civil Aviation Organization IDA International Development Association IFR Interim Financial Report IMO International Maritime Organization IPF Investment Project Financing Km Kilometer LTD Land Transport Division MEIDECC Ministry of Meteorology, Energy, Information, Disaster Management, Environment, Communications and Climate Change MET Tonga Meteorological Services MFAT Ministry of Foreign Affairs and Trade of New Zealand Mi Miles MFNP Ministry of Finance and National Planning MOI Ministry of Infrastructure MOIT Ministry of Infrastructure and Tourism MOT Ministry of Transport MOW Ministry of Public Works MPD Maritime and Port Division M&E Monitoring and Evaluation NEMO National Emergency Management Office NIIP National Infrastructure Investment Plan NPV Net Present Value NZ New Zealand NZCAA New Zealand’s Civil Aviation Authority O&M Operation and Maintenance PAIP Pacific Aviation Investment Program PDO Project Development Objective PRIF Pacific Region Infrastructure Facility PST Project Support Team PUMA Planning and Urban Management Agency RF Results Framework RMF Road Maintenance Fund RP Restructuring Paper RPF Regional Partnership Framework SCD Systematic Country Diagnostic SDR Special Drawing Rights SIL Specific Investment Loan Sq Square US$ or USD US Dollar US$ M Million US Dollar TA Technical Assistance TCAR Transit Concept and Alternatives Review TAL Tonga Airport Limited TCRTP Tonga Climate Resilient Transport Project TOP or TOP$ Tongan Paʻanga (local currency) TSCP Transport Sector Consolidation Project TSDF Tonga Strategic Development Framework (TSDF I is for the 2011-2014 period, and TSDF II is for the 2015-2025 period) TTI Tupou Tertiary Institute VOC Vehicle Operating Cost TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6 A. CONTEXT AT APPRAISAL .........................................................................................................6 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .....................................10 I. OUTCOME .................................................................................................................... 14 A. RELEVANCE OF PDOs ............................................................................................................14 B. ACHIEVEMENT OF PDOs (EFFICACY) ......................................................................................14 C. EFFICIENCY ...........................................................................................................................21 D. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................23 E. OTHER OUTCOMES AND IMPACTS (IF ANY)............................................................................23 II. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 25 A. KEY FACTORS DURING PREPARATION ...................................................................................25 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................25 III. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 27 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................27 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................30 C. BANK PERFORMANCE ...........................................................................................................32 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................33 I. LESSONS AND RECOMMENDATIONS ............................................................................. 35 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 40 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 53 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 55 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 56 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 58 ANNEX 6. CHANGE MANAGEMENT PROCESS STATUS ........................................................... 59 ANNEX 7. MAP AND PROJECT INTERVENTIONS CONSIDERED AT APPRAISAL ......................... 60 ANNEX 8. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 61 List of figures Figure 1. Project theory of change Figure 2. Photo Ahononuo quarry Figure 3. Photos Fua’amotu international airport Figure 4. Photos Vava’u Halaevalu international wharf Figure 5. Photos Ha’apai Taufa’ahau naval wharf Figure 6. Photos Ha’apai road works using Otta seal Figure 7. Sensitivity analysis conducted for different timing of the potential disruption of airport Figure 8. Map and project interventions at project appraisal List of tables Table 1. Restructuring processes Table 2. Changes in subcomponents Table 3. Total project financing over time Table 4. Estimated vs actual costs, by component Table 5. Results of economic analysis Table 6. Indicators and their changes throughout the project Table 7. Results of economic analysis Table 8. Monitoring and evaluation table dedicated to tracking progress on the change management process The World Bank Tonga Transport Sector Consolidation Project (P096931) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P096931 Tonga Transport Sector Consolidation Project Country Financing Instrument Tonga Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency Kingdom of Tonga Ministry of Infrastructure, Tonga Airports Ltd. Project Development Objective (PDO) Original PDO To establish and consolidate the operations of the newly-created Ministry of Transport as a unified transportsector- policy,planning and regulatory ministry and to improve the level of compliance of the civil aviation and maritime subsectorentities withinternational safety and security standards. Revised PDO The objective of the Project is to assist the Recipient to develop its transport sector to have: (i) stronger policy, planning and regulatory institutions and framework; (ii) improved safety and security facilities and compliance with international safety and security standards; and (iii) greater domestic capacity for road rehabilitation and maintenance. Page 1 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 5,440,000 5,440,000 5,255,765 IDA-H4160 10,300,000 10,300,000 10,300,000 TF-99585 2,000,000 2,000,000 2,060,270 IDA-D0910 2,000,000 2,000,000 2,072,666 IDA-57300 Total 19,740,000 19,740,000 19,688,701 Non-World Bank Financing 0 0 0 Borrower/Recipient 2,330,000 3,330,000 3,330,000 Total 2,330,000 3,330,000 3,330,000 Total Project Cost 22,070,000 23,070,000 23,018,702 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 28-Jul-2008 12-Dec-2008 07-Jul-2010 31-Dec-2018 Page 2 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 13-Dec-2010 1.32 Additional Financing Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Change in Financing Plan Change of EA category Change in Procurement 05-Jun-2012 4.57 Change in Disbursements Arrangements Other Change(s) 01-Aug-2013 8.79 Change in Loan Closing Date(s) 15-Feb-2014 10.88 Change in Components and Cost 29-Dec-2015 15.27 Change in Loan Closing Date(s) 22-Jun-2018 18.52 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) Moderately 01 14-May-2009 Moderately Satisfactory .10 Unsatisfactory 02 06-Jan-2010 Satisfactory Satisfactory .22 03 17-Nov-2010 Moderately Satisfactory Moderately Satisfactory 1.32 04 21-Jun-2011 Moderately Satisfactory Moderately Unsatisfactory 2.83 Moderately 05 24-Jan-2012 Moderately Unsatisfactory 4.03 Unsatisfactory Moderately 06 17-Jun-2012 Moderately Satisfactory 4.65 Unsatisfactory 07 06-Dec-2012 Moderately Satisfactory Moderately Satisfactory 6.24 Page 3 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 08 08-Jun-2013 Satisfactory Moderately Satisfactory 7.84 09 30-Dec-2013 Satisfactory Satisfactory 10.59 10 31-May-2014 Satisfactory Satisfactory 11.76 11 30-Nov-2014 Satisfactory Satisfactory 13.23 12 22-Jun-2015 Satisfactory Satisfactory 14.87 13 07-Feb-2016 Satisfactory Satisfactory 15.42 14 20-Oct-2016 Satisfactory Satisfactory 15.87 15 09-May-2017 Satisfactory Satisfactory 16.36 16 15-Nov-2017 Satisfactory Satisfactory 17.22 17 03-Aug-2018 Satisfactory Satisfactory 19.02 SECTORS AND THEMES Sectors Major Sector/Sector (%) Transportation 100 Public Administration - Transportation 43 Ports/Waterways 12 Aviation 45 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Economic Policy 17 Trade 17 Trade Facilitation 17 Private Sector Development 4 Jobs 4 Job Creation 4 Public Sector Management 40 Public Administration 40 Transparency, Accountability and Good 40 Governance Page 4 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Urban and Rural Development 38 Urban Development 21 Urban Infrastructure and Service Delivery 21 Rural Development 17 Rural Infrastructure and service delivery 17 ADM STAFF Role At Approval At ICR Regional Vice President: James W. Adams Victoria Kwakwa Country Director: Nigel Roberts Michel Kerf Senior Global Practice Director: Jamal Saghir Guangzhe Chen Practice Manager: Junhui Wu Almud Weitz Julie Babinard, Pierre Task Team Leader(s): Thakoor Persaud Graftieaux ICR Contributing Author: Van Anh Vu Hong Page 5 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. The Kingdom of Tonga is a Polynesian country and archipelago comprising 169 islands, of which 36 are inhabited. Tonga stretches across approximately 800 kilometers (800 km or 500 mi) in a north south line north east of New Zealand and its total surface area is about 750 square km (290 sq. mi) scattered over 700,000 square km (270,000 sq. mi) of the southern Pacific Ocean. 1 The sovereign state has an estimated population of 107,000 people, of whom 70 percent reside on the main island of Tongatapu. There are two other main islands, Ha’apai and Vava’u. The road network, approximately 870 km consisting of about 640 km of public roads, is almost exclusively low volume roads, with only a few urban roads in the capital Nuku’alofa carrying over 1,000 vehicles per day. Over 90 percent of the public roads are sealed. The network size varies markedly between islands, with the roads on the main island Tongatapu constituting about 60 percent of the total road network. The roads in the outer islands of ‘Eua, Ha’apai, and Niuatoputapu are predominantly gravel and some in Vava’u are also gravel. Tonga has two international airports: one on Tongatapu (Fua’amotu International Airport) and one in Vava’u (Lupepau’u Airport). Six domestic airports across Tonga, at least one per island group, serve the domestic air services market with one national airline carrier. Communities heavily rely on ferry services for travel between the island groups within Tonga. All island groups have a port and most of these offer both ferry and cargo services. 2. With its remote location, small size, dispersed islands setting, and annual tropical cyclone season, Tonga faces serious challenges in developing and maintaining sustainable domestic, regional and international transport and communication linkages, all of which are crucial to the economic development and social well-being of its population. For example, households in Vava'u and Ha'apai respectively spend 8.3 and 9.6 percent of their income on supply chain costs for imports, approximately twice that of Tongatapu (4.7 percent) 2. This reflects the inefficiencies of interisland shipping in Tonga, particularly from the international port of Nuku'alofa in Tongatapu to the Outer Islands. In addition to poor efficiency, Tonga is ranked second in the world for disaster risk 3 using an index combining exposure and vulnerability, with the transport sector one of the most vulnerable elements. A recent World Bank study launched at the COP23 has shown that improved maintenance is the most efficient of several proposed resilient transport policies and can help Tonga avoid 18 percent of well-being and asset losses4 due to extreme weather event, followed by more resilient construction standards. 3. At the time of project appraisal, the Kingdom was also dealing with limited capital resources, asset deterioration, financial and administrative constraints, a fragmented institutional framework for the transport sector, and was just coming out of social and political tensions from the 2005 civil servant strike and 2006 pro-democracy riots. The Tongan transport sector also lacked efficiency and resilience. Due to a variety of structural and fiscal issues, road maintenance - both routine and periodic - effectively halted in the late 2000’s. The Ministry of Works (MOW), nominally responsible for the maintenance of the road network, did not have the resources or equipment to maintain the roads so for about a decade there was effectively no routine or periodic maintenance. In addition, the lack of funding across the sector affected safety of other transport modes, including air and maritime transport. The safety oversight of 1 Figure 8 in Annex 7 shows a map of Tonga with its different groups of islands and the interventions that were considered at project appraisal in 2008. 2 Climate and Disaster Resilient Transport in Small Island Developing States: A Call for Action, 2017, The World Bank 3 World Risk Index, 2015, Integrated Research on Disaster Risk, http://www.irdrinternational.org/2016/03/01/word-risk-index/ Page 6 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) the maritime sector had long been an issue in Tonga, culminating in the 2009 Princess Ashika disaster where 74 persons were lost at sea. 4. The Government of Tonga (GOT), recognizing the critical role that the transport sector plays both economically and socially in the development of the country, requested the assistance of the World Bank to review the country’s transport sector with a view to improving efficiency within the sector, which at the time was managed across a number of different Ministries and agencies. The World Bank supported the 2005 Tonga Transport Sector Review (TTSR- TF052906) which highlighted the need to bring together the responsibility for all modes of transport (air, maritime, road) into one single agency and to separate regulatory from service delivery functions. Many of the recommendations were adopted by the GOT, including the merge of the Ministry of Civil Aviation and the Ministry of Marine and Ports into the Ministry of Transport (MOT) in 2006, as well as the creation of Tonga Airports Ltd. (TAL) in July 2007 as a corporatized airport company, thus separating the regulator from the operator. This commitment was also reflected as policy priority in the 2006-2009 National Strategic Development Plan and the objective to offer safer, more convenient, reliable, accessible and affordable transport services. It appeared as well in the FY06-09 Regional Engagement Framework with the World Bank (Report No: 32261-EAP) which referred to an amount of SDR3.4 million from the IDA14 allocation expected to be made available to Tonga to sustain momentum on the country reform agenda including in the transport sector. Theory of Change (Results Chain) 5. The Tonga Transport Sector Consolidation Project (TSCP or the project) was designed to establish and consolidate the operations of the newly-created MOT as a unified transport sector-policy, planning and regulatory ministry and to improve the level of compliance of the civil aviation and maritime sub-sector entities with international safety and security standards. The TSCP became effective December 12, 2008 with a SDR3.4 million equivalent to US$5.44 million grant from the World Bank (IDA Grant H4160-TO), implemented by the then MOT and TAL. It went through six subsequent restructurings, one of which included major additional finance and expanded the project from one focusing on technical assistance (TA) with some investments to a project with a large road maintenance investment component. 6. The original design included a mix of TA activities and priority investments to advance the transport sector reform agenda, address key safety and security standard requirement issues. The project was financed through a Specific Investment Loan (SIL) supporting the long-term vision of the GOT and its objective of improving transport services and links within Tonga and between Tonga and the outside world, to facilitate the movement of people and goods in safe and sustainable conditions. 7. The project was later expanded to enhance local capacity for effective road maintenance and undertake a road maintenance and safety program, as well as support a reform program including divestiture of non-essential functions of MOT who later became the Ministry of Infrastructure (MOI, in 2012 after the merge between MOT and the Ministry of Works (MOW)) before becoming today’s Ministry of Infrastructure and Tourism (MOIT, in 2015 after the merge with the Ministry of Tourism). Figure 1 illustrates the theory of change with longer-term outcomes the project was expected to contribute to beyond the closing date. It describes the results chain, listing the components, the type of activities that were undertaken to meet the Project Development Objectives (PDOs), and their specific outputs. It also highlights the assumptions that (i) there would be no shift in the engagement from the MOT and GOT to complete the change management process, approve the associated reforms and strategies, and adequately staff the different units; (ii) a critical mass of local contractors interested in road maintenance works and other non-core activities that used to be conducted by the Ministry (e.g. operation of quarries) would be needed to create a domestic industry, as well as Page 7 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) regular business opportunities for them; (iii) the capacity to meet current and future safety and security obligations would be established; and (iv) the technical and financial capacity to do maintenance in all three sub-sectors would be established especially with the replenishment of the Road Maintenance Fund (RMF) in the land transport sub-sector. Project Development Objectives (PDOs) 8. The original PDO, as described in the legal document, was to assist the Recipient to establish and consolidate the operations of the newly-created MOT as a unified transport sector-policy, planning and regulatory ministry, and to improve the level of compliance of the civil aviation and maritime sub-sector entities with international safety and security standards. The project undertook limited investment activities and was mainly focused on policy and technical assistance activities. Key Expected Outcomes and Outcome Indicators 9. At appraisal, the project was expected to advance transport sector reforms and provide support to meet and maintain safety and security standard requirements in a sustainable manner. Four outcome indicators were developed to monitor achievement of the PDO: (i) MOT functioning as a fully-integrated ministry responsible for compliance and safety oversight of land, sea and transport in Tonga in all necessary legal approvals accompanying its new responsibilities, (ii) definition of the new roles of MOT and relevant ministries in respect of land transport, (iii) certification of the Fua’amotu international airport in accordance with the Transit Concept and Alternatives Review (TCAR) Parts 139 and 157 (as at April 22, 2008), and (iv) domestic shipping services operated in line with an approved plan recommended by a study of options to service outer islands. The project also relied on a list of intermediate outcomes that could be assimilated to the project outputs and that monitored the implementation of regulations, the recruitment of staff, the installation of goods and equipment directly improving safety and security at airports and ports, the development of investment including maintenance plans. Components 10. The project was designed around four components: (A) establishment of a sustainable transport sector policy and institutional and operational framework (US$1.00 million, mainly TA), (B) compliance with mandatory security and safety standards (US$2.73 million, mainly physical investments), (C) support to the transition towards sustainability in the transport sector (US$0.60 million, both TA and physical investments), and (D) project implementation support (US$0.63 million). Each component financed policy and TA activities and/or investments to improve safety and security through works, goods and/or equipment. TSCP had the following components: • Component A: Establishment of a sustainable transport sector policy, and institutional and operational framework. Activities under this component aimed to enable the creation of a sustainable transport sector. • Component B: Compliance with Mandatory Safety and Security Standards. This component provided high priority strategic investments to meet mandatory safety and security standards required under international agreements, treaties and obligations; • Component C: Supporting the Transition towards Sustainability in the Transport Sector. This component provided further investments consistent with the policy/planning frameworks and investment plans developed in Component A for a more sustainable transport sector; and • Component D: Project Implementation Support. This component provided additional funding for project management support during implementation. Page 8 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Figure 1. Project theory of change Page 9 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) 11. While the project was conceived primarily as a sector reform operation it evolved to become an operation that also financed physical infrastructure investment after the GOT received financial support from the Government of Australia (GOA) through the Pacific Region Infrastructure Facility (PRIF, administered by the World Bank) and requested the expansion of TSCP to provide this through an additional financing (AF). Guided by the priorities outlined in the 2009 GOA-GOT Partnership for Development, a total of US$10.3 million was added to finance priority maritime investments, introduce a “sustainable road maintenance program” with the intention to promote local contractors to undertake road maintenance activities, and improve road safety. The project was restructured in November 2010 to reflect the changes, including PDO and outcome targets revisions, environmental category upgrade and extension of the closing date. The project went through five other restructuring processes including another AF process, but there was no further change to the PDO. The following table gives a detailed account of all the restructuring processes. Table 1. Restructuring processes No Restructuring Date of approval Reasons 1 AF and Level 1 November 4, 2010 To introduce the following changes: (i) increase project financing to include US$ restructuring (Board) 10.3 million of GOA funds coordinated through the PRIF; (ii) modify project activities, costs and indicators to target current government strategies and priorities, particularly related to maritime safety and new investments in road maintenance; (iii) revise the PDO to reflect the new activities; (iv) extend the closing date from December 31, 2011 to December 31, 2013; (v) upgrade the project Environmental category from C to B to include larger civil works activity for road maintenance; and (vi) include additional procurement selection methods. 2 Level 2 restructuring June 5, 2012 To harmonize the IDA and PRIF Grant Agreements and respond to evolving (Country Director) organizational structure within the GOT, more specifically: (i) change the implementing ministry’s name from Ministry of Transport to Ministry of Infrastructure; (ii) harmonize the disbursement categories in the Grant Agreements; (iii) include retroactive financing to the PRIF Grant Agreement; and (iv) change reporting requirements. 3 Level 2 restructuring July 18, 2013 To include: (i) an extension of the closing date to December 31, 2015; (ii) (Country Director) reallocation of funds between project components to provide support to the newly created and consolidated Ministry of Infrastructure, and (iii) modification of the results framework to reflect these changes and to include new IDA Core Indicators. 4 Level 2 restructuring February 11, 2014 To broaden the geographic scope of the components so that the project could approved by the finance urgent reconstruction works in Ha’apai following Cyclone Ian. More (Country Director) specifically: (i) modify the project description to allow the financing of reconstruction activities in airport facilities in Ha'apai; (ii) amend the Financing Agreement accordingly. 5 AF and Level 2 September 8, IDA AF of US$ 4.0 million to continue existing project activities with scaling up restructuring 2015 (Board) of the maritime and land transport safety aspects and to increase the effectiveness and extent of the project’s impact. There were (i) changes to the project components; (ii) revisions to the results framework; (iii) application of the most recent procurement guidelines; (iv) an extension of the closing date to June 30, 2018. 6 Level 2 restructuring June 22, 2018 To extend the closing date of the IDA AF from June 30, 2018 to December 31, (Country Director) 2018 because of unexpected delays on one open contract for maritime safety works. Page 10 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Revised PDOs and Outcome Targets 12. The original PDO aimed to address one of the four partnership priorities agreed between the GOA and GOT under the 2009 Pacific Partnership for Development and that is related to the transport sector: “Develop infrastructure to improve everyday lives of the people” with specific targets of: (i) an increase in the proportion of the population with reliable and affordable transport links to markets and services; (ii) increased domestic private sector participation in the provision and operation of infrastructure; and (iii) regular and adequate budgetary provision for infrastructure maintenance. 5 This was a response to the 2008 global financial crisis. The GOA was focused on promoting private sector participation through their aid program. The GOA was particularly interested in road maintenance activities which could promote private sector participation and increase domestic employment in Tonga. 13. The GOA initially announced a provision of AU$5.5 million to support the TSCP. When the GOA-GOT Partnership for Development was effectively negotiated and confirming investments in the infrastructure sector, this was increased to AU$10.5 million, with the additional AU$5.0 million earmarked specifically for road maintenance activities. A further AU$1.0 million was provided towards road safety activities. In total, the GOA contributed AU$11.5 million to the project. 14. In November 2010, the project was restructured to reflect the GOA contribution, taking into account the final amount (and exchange rate at the time) of US$10.3 million added as AF. The PDO was amended to align the existing PDO with the GOA’s development assistance strategy. It became: “to assist the Recipient to develop its transport sector to have: (i) stronger-policy, planning and regulatory institutions and framework, (ii) improved safety and security facilities and compliance with international safety and security standards, and (iii) greater domestic capacity for road rehabilitation and maintenance”. New activities were added (as described in Table 2), outcome targets were revised (as described in Annex 1 and summarized in Table 6). Revised PDO Indicators 15. PDO indicators were revised and the details can be found in Table 6 and Annex 1 on the Results Framework (RF). Revised Components 16. The Components of the project remained the same throughout the entire life cycle of the project while some subcomponents were dropped or added: the table below shows a summary of the changes. Table 2. Changes in subcomponents Component and Subcomponents Change (excluding in terms of US$) Component A. Establishment of a sustainable transport sector policy and institutional and operational framework ●Amount at appraisal is US$1M ●Revised amount at 2015 AF appraisal is US$1.59M ●Actual amount is US$1.71M A1. Formulation of a transport sector national policy and planning framework No change A2. Preparation of an air transport sector strategic plan No change A3. Preparation of an investment plan for Fua'amotu international airport Expanded to include Lupepau'u airport in Vava'u 5 The Partnership for Development Between the Government of Australia and Government of Tonga (August 7, 2009) has four Priority Outcomes: A More Efficient and Effective Public Sector, Improved Health, Improved Technical and Vocational Skills, and Develop Infrastructure to Improve the Everyday Lives of People. Page 11 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) A4. Preparation of a medium-term investment plan for the maritime sector No change A5. Developing and analyzing options for sustainable road maintenance and preparation of a road maintenance No change A6. Training of domestic contractors and consultants in road maintenance Added A7. Road network condition survey Added A8. Planning for sustainable road maintenance investment plan Added Component B. Compliance with mandatory security and safety standards ●Amount at appraisal is US$2.73M ●Revised amount at 2015 AF appraisal is US$7.62M ●Actual amount is US$5.82M B1. Reviewing/analyzing current primary aviation legislation, regulatory framework, and technical No change guidance, and providing recommendations for the strengthening and regulatory oversight of the aviation sector B2. Installation of navigational aids and equipment at airports in the Recipient's territory Expanded to cover B3. Replacement of one or more firefighting tenders at airports in the Recipient's territory more broadly the B4. Replacement of security (x-ray screening) equipment and emergency power equipment at airports Recipient’s territory in the Recipient's territory B5. Works to improve ferry terminals including lighting and navigational equipment No change B6. Road safety audit Added B7. Works and procurement of goods to improve maritime safety Added B8. Construction of one or more rescue fire stations at airports in the Recipient's territory Added B9. Works and procurement of goods to improve safety and security at airports in the Recipient's territory Added B10. Training and procurement of goods to improve environmental management and supervision by the Recipient Added B11. Study to examine the impacts of maritime investments under the project Added B12. Provision and installation of maritime navigation aids Added B13. Provision of maritime safety, maintenance and environmental protection equipment No change (used to be B6) B14. Infrastructure investments to improve wharves and maritime passenger and cargo facilities at Added ports and ferry terminals in the Recipient's territory B15. Design and supervision services for maritime infrastructure investments Added Reforming the motor vehicle registry system Dropped (used to be B7) Component C. Supporting the Transition towards Sustainability in the Transport Sector ●Amount at appraisal is US$0.596M ●Revised amount at 2015 AF appraisal is US$8.82M ●Actual amount is US$7.73M C1. Supporting the preparation of the relevant legislation to implement reforms No change C2. Road maintenance design and supervision Added C3. Procurement of equipment to strengthen the road maintenance capacity Added C4. Road maintenance and improvement works Added C5. Works to improve maritime safety Added C6. Road safety public awareness and education campaigns Added C7. Advisory services for evaluating options and making recommendations for road safety programs Added C8. Advisory services and support for updating safety legislation in the transport sector Added C9. Technical and advisory services and training to strengthen the capacity of the MOIT Added C10. Assessment of the impacts of, and making recommendations for, reforms and change Added management processes in the Recipient's transport sector Resurfacing the inter-island domestic ferry terminal at Nuku'alofa to improve handling and passenger safety, Dropped Installation of solar lighting at ferry terminals, (used to be C2. C3. C4.) Provision of additional safety and security equipment at airports as required Component D. Project implementation support ●Amount at appraisal is US$0.63M ●Revised amount at 2015 AF appraisal is US$1.73M ●Actual amount is US$3.69 Provision of project implementation support and technical and project management training to staff No change Page 12 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Other Changes 17. Co-financing shares. The project received financing from GOA through PRIF and counterpart financing from GOT with total contributions amounting to US$10.30 million from GOA/PRIF and US$3.33 million from GOT, added to the IDA shares of SDR3.4 million and SDR3 million equivalent to a total of US$9.44 million IDA: Table 3. Total project financing over time Total Project Financing Over Time in US$ million Process and associated document and date (as presented in the documents) IDA GOT* GOA/PRIF Total Project approved by the Board on May 21, 2008 for an amount SDR 3.4M of equivalent to US$5.44M 5.44 1.08 NA 6.52 First Additional Financing and project restructuring approved by the Board on November 4, 2010, 5.44 2.33 10.3 18.07 presenting an additional US$9.32M from GOA. It then became effective on July 29, 2011 when the Notification of the changes associated with the 2010 Restructuring and the Letter of amendment was sent by the World Bank to the GOT, confirming in the end an amount of US$10.3M from GOA Additional IDA financing approved by the Board on September 8, 2015 in the amount of SDR 3M 9.44 3.33* 10.3 23.07 equivalent to US$4M. GOT contribution also increased by US$2M including US$1M which are not accounted for because they were contributed in the form of foregone taxes and duties * GOT contribution consisted of RMF replenishment and consumption tax refund, exemption from custom tax and duties, and budget support through MOIT. Rationale for Changes and Their Implication on the Original Theory of Change 18. The significant change for the project was the 2010 AF when GOA provided co-financing to implement a road maintenance program that would promote the participation of the local private sector and for further investments in the maritime sector. This was a fundamental transformation of the project which originally had been primarily around institutional reform and relatively limited investments. This change to the initial design is indicated in Figure 1 (illustration of the theory of change). A second major change was the 2015 AF that scaled up maritime and land transport investments and TA to continue providing support to the MOT in the change management process to transition it to become the MOIT. There was no deviation from the project’s objectives or components but rather an expansion. A couple of activities were then dropped because they were either picked up by other projects or donors (such as the reform of the motor vehicle system under Component B that was supported by New Zealand Aid who was already financing the installation of a computerized driver licensing and vehicle registration system) or merged into broader subcomponents that would include all sorts of improvement activities and revise the prioritization of the investments based on the most up-to-date results and recommendations from the needs assessment (e.g. for some maritime and air transport subcomponents under Component B). In conclusion, the original theory of change was reinforced in terms of security and safety investments in all three subsectors and through the effective implementation of road maintenance mechanisms relying on local technology and capacity and set up thanks to the analytical work initially planned and conducted under Component A. Page 13 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) I. OUTCOME A. RELEVANCE OF PDOs 19. The project had an intended transformational impact on the transport sector. TSCP has been the World Bank- financed flagship project for the MOIT, for the Ministry of Finance and National Planning (MFNP), and for the country in general in the transport sector. It has transformed the sector, supporting institutional reforms and helping establish an integrated MOIT responsible for transport policy and planning. It has developed a culture of road maintenance and established a domestic contracting industry (there was no systematic periodic maintenance during the early 2000s and no routine maintenance between 2008-2012 except for vegetation control by communities and individual property owners). It also provided the foundation for the successful regional Pacific Aviation Investment Program (PAIP), whose regional project management Unit is headquartered in TAL, and the Tonga Climate Resilient Transport Project (TCRTP P161539, approved on November 29, 2018). It helped prepare the Tonga Cyclone Ian Reconstruction and Climate Resilience Project (TCIRCRP, P150113, approved on May 28, 2014) after a devastating cyclone in Ha’apai in January 2014. There is wide acknowledgement within the GOT of the significant improvement in terms of infrastructure and equipment upgrade resulting from TSCP and of the critical investments made with IDA support. 20. The PDO remained well aligned with current national development strategies and with the FY17-21 Regional Partnership Framework (RPF) 6 . The project continues to be relevant today as the GOT and the World Bank are still mutually committed to the objective of “increasing access to basic services and improving connective infrastructure” as part of the Focus Area #4 on “strengthening the enablers of growth opportunities” presented in the current RPF. In particular, improving air connectivity, strengthening planning and maintenance especially in the road and maritime subsectors, ensuring passenger safety, and building capacity are still priorities, as outlined in both the current Tonga Strategic Development Framework 2015-2025 and the National Infrastructure Investment Plan. These priorities also fall (directly or indirectly) under the three other focus areas of the RPF, i.e. Focus Area #1 on “fully exploiting the available economic opportunities” such as tourism, with air and telecommunications connectivity being critical to develop tourism; Focus Area #2 on “Enhancing access to employment opportunities”; and Focus Area #3 on “protecting incomes and livelihoods” particularly from natural disasters and climate change effects by improving knowledge and planning for a road network that is more climate-resilient, better maintained and is accessible for all in all weathers. Assessment of Relevance of PDOs and Rating 21. Based on the above, the relevance of the PDOs is considered High. B. ACHIEVEMENT OF PDOs (EFFICACY) 22. Methodology. There are three distinct objectives in the PDO. The evidence of the achievements is presented below. The option to apply a split rating is discarded because there was no reduction in the project scope. On the contrary the project became overall more ambitious and none of the restructurings requires the derivation of separate efficacy ratings. 6World Bank, 2016 (Report #120479), “Regional Partnership Framework for Kiribati, Republic of Nauru, Republic of The Marshall Islands, Federated States of Micronesia, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu. Page 14 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Assessment of Achievement of Each Objective/Outcome Objective (i) Stronger policy, planning and regulatory institutions and framework (PDO1) 23. The project’s objective of developing stronger policy, planning and regulatory institutions and framework was substantially achieved. This objective was supported by activities designed to enable the creation of a sustainable transport sector, which at the time of project appraisal in 2008 was still fragmented between the MOW and the MOT, with no separation between the policy/regulatory functions and the service delivery/operational functions, and limited planning capacities. PDO1 was measured through indicators that were meant to track the development of policies or legislative work and establishment of core functions or funds. All four PDO level indicators achieved their targets. 24. There is one integrated transport ministry focusing on policy and planning at project closing in 2018. At project appraisal in 2008, the GOT had already initiated some organizational reforms, including the merger between the Ministry of Civil Aviation and the Ministry of Marine and Ports into the MOT in 2006. The project was instrumental to complete the change management process, with the merger of MOW and MOT in 2012 to form the MOI (then MOIT in 2015), regrouping all the responsibilities of the transport sector under one institution including functions of sector policy, regulations and planning. The project also supported the development of a divestment plan for fifteen non-core activities and the successful transfer of key items such as concessioning dormant state quarry operations to the private sector (Figure 2), hiring out of road construction equipment to contractors, and implementing an IT strategy including an accounting system. These reforms led to Tonga receiving an award from the UK Institute of Asset Management in 2014. Some of the divestment processes are still in progress either because they need more time to complete (such as the outsourcing of vehicle inspection and driver’s license for which Cabinet approved the divestment in October 2016) or because they are not ready yet (such as the transfer of outer island ports to the Ports Authority due to strong political and population resistance over concerns that prices for users would increase) (refer to Annex 6 for complete list and status of each). In total about 20 pieces of legislation to address the regulatory oversight and safety of the transport sector were drafted under the project. Enforcement capacities were strengthened e.g. MOIT successfully enforced the detainment of five unseaworthy vessels in Tonga waters since project approval. Overall, given the extent and scope of the reform process and the main target of one integrated ministry focusing on policy and planning, the achievement was successful. Figure 2. Reopened Ahononuo quarry and production yard that used to be abandoned and is now leased to the private sector. Aggregates used for road and airport runway resurfacing Source: MOIT Transport sector review, Report MOI/AF/-LTD/IC-C02, June 2017 Page 15 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 25. The Ministry developed a transport policy framework as well as sub-sectors policies (civil aviation, maritime, land). MOIT drafted a transport policy framework and a national transport sector strategy, still to be confirmed at ministerial level at the time of project closing. It developed and adopted a Corporate plan in 2015 for the period 2015- 2018. The project also supported the development of an aviation sector policy and strategic plan, a maritime sector strategy, investment plans for all sub-sectors, and the update/development of the following transport bills including several that were approved: Civil Aviation Act (2014), Airport Authority Act (submitted to Cabinet as of November 2018), new Traffic Act and Road Bill, Amendment to Traffic Regulations Act, Amendment to Shipping Act, Amendment to Port Authority Act, Port Management Bill and Amendment to Wharves Bill. 26. The GOT completed the transport change management process and created appropriate transport policy and planning units. The project supported the creation of core divisions within MOIT to focus on policy, planning and regulation of transport sub-sectors: civil aviation, maritime and ports, land transport. MOIT also relies on a dedicated policy and planning unit, corporate services, as well as building and control, and civil engineering units. The project supported the development of a strategic staffing plan, and at project closing about 70 per cent of the positions were filled according to the plan, which is higher than the 50 per cent target set in the RF. There were vacancies and high turnover at senior and management level though throughout project implementation. In terms of capacity building, the project particularly enhanced regulatory and enforcement capabilities (maritime and aviation for instance through the development of manuals and plans and training) and supported the establishment of asset management capabilities (land transport mainly through the Transport Management System and supply of associated computer and electronic hardware as well as training). It also implemented a comprehensive training program for domestic contractors so they could effectively meet the road maintenance program requirements. 27. The GOT set up the RMF in 2013 as a revolving fund replenished through revenues from fuel levy, select fees and fines. This is a major achievement because having such a dedicated fund ensures financing for emergency, routine and periodic works to maintain roads in good conditions and it requires strong commitment from the Government and serious preparatory work and consultation. It supports a sustainable road maintenance program that goes beyond the project, and keeps the local industry in business. The operating procedures described in the associated Treasury circular 7 prescribe that the RMF shall have an account administered by MOIT and under the control of the MFPN into which those revenues will be deposited. Management of the RMF is governed by a Steering Committee with representatives from MFPN, MOIT, the Ministry of Revenue, the Ministry of Internal Affairs and two members of the private sector, and with responsibilities consisting of reviewing the annual road program (expenditures and revenues) and overseeing monitoring of road network conditions, maintenance planning, funding and implementation. The Cabinet Decision and Treasury Circular specifically mandated a staged funding strategy over four years to achieve the required TOP$6.8M/year indicative target to maintain the road network in a stable condition – excluding major rehabilitation works. The approved strategy was to allocate the following revenue sources directly to the fund, solely for road maintenance: (i) all vehicle license fees (from 2014/15 onwards); (ii) progressive increases in the vehicle license fees from 1 January 2015 to 2016/17; (iii) progressive increases in the fuel excise from 1 January 2015 to 2016/17; (iv) GOT contributions in 2013/2014 and 2014/15; and (v) traffic infringements and fines (from 2014/15 onwards). 28. At project closing in 2018, the allocation for 2017-2018 is TOP10.73 million, which corresponds to 43 percent of the estimate required to cover all maintenance needs that year—and much higher than the 20 per cent target just to keep the road network in a stable condition (target which at the time was associated with the indicative TOP$6.8M calculated 7 Treasury Circular No#1/2013-2014 dated October 18, 2013 confirming that the Cabinet approved the RMF to operate under Section 22 of the Public Finance Management Act 2002. Page 16 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) as an average needed per year as the overall annual needs fluctuate). This higher funding permitted the resurfacing of the primary (public) road network, along with the upgrading (earth to gravel) of primary agricultural routes. Nevertheless, to date the operational procedures to replenish the RMF systematically through revenues as previously described are not effective yet, and the fund follows a regular annual budget allocation process with no financing guaranteed. Objective (ii) Improved safety and security facilities and compliance with international safety and security standards (PDO2) 29. The project’s objective of improving safety and security facilities and compliance with international safety and security standards was substantially achieved. This objective was supported by the provision of high priority strategic investments to meet mandatory safety and security standards required under international agreements, treaties and obligations such as with the International Civil Aviation Organization (ICAO) or the International Maritime Organization (IMO). These requirements are a significant challenge for small countries like Tonga who lack the human capital to address all requirements, as well as funding limitations for necessary investments. Without the infrastructure and equipment upgrades supported by the project, some airlines would have halted their services to Tonga as early as 2012 according to TAL (as happened in Vanuatu in 2016). The project achievements in the areas of aviation safety and security were also possible because of the complementarity of the improved security arrangements and compliance with requirements for international air transport under the Tonga Aviation Investment Project (TAIP) (P128939). Many of the aviation investments identified by the transport sector reform study, undertaken by TSCP, were financed under TAIP except for two civil works contracts involving a new fire station and an expansion to the existing terminal building at Fua’amotu International Airport, both of which were underway before TAIP was approved and were completed under the original TSCP grant. For maritime transport, the conditions of ferry terminals at project appraisal in 2008 were poor, with most lights and sea navigation aids missing or in disrepair. In 2009 after the sinking of Princess Ashika, the project became all the more relevant and the GOT used project funds and most of the 2015 AF to address maritime transport safety issues. PDO2 is measured through indicators that tracked those priority investments at the Fua’amotu international airport and on maritime systems. Both PDO level indicators achieved their targets. 30. The GOT made necessary upgrades, updates and training to Fua’amotu international airport to effectively receive ICAO certification. Tonga’s Civil Aviation Rules were adopted from New Zealand. Under the Civil Aviation Act 2014, the technical/regulatory rules required to complete Tonga’s regulatory framework were obtained by adopting some of New Zealand’s Civil Aviation Authority (NZCAA) Rules. Prior to Tonga’s Civil Aviation Act 2014 coming into effect on February 2015, Tonga had identified 39 separate NZCAA Rules which needed to come into effect. The airport was awarded its ICAO certification on August 27, 2010 in accordance with the Transit Concept and Alternatives Review (TCAR) Parts 139 and 157. The project financed the construction of a new fire station, the expansion of the existing terminal building, works and equipment on the transit screen area as well as navigational aids, lights, fenders, safety and protection equipment. It was the first time for a country in the Pacific islands to receive ICAO certification. The airport certification manual is regularly updated, the certification itself (valid for two years) is renewed adequately, and training is undertaken as needed. 31. The GOT made significant investments to address passenger and cargo safety deficiencies in the maritime sector. The project financed a maritime safety needs assessment and provided funds to finance: (i) equipment such as navigational aids, marine safety, maintenance and environmental protection equipment in the outer islands of Eua, Ha’apai, Vava’u and the Niuas; (ii) improvement works to wharves and passenger and cargo facilities in select ports and ferry terminals; and (ii) safety campaigns and capacity building activities. At project closing, the country received 86 navigational lights, 18 buoys, 16 buoy anchors and 6 towers. A safety campaign focused on the users of smaller vessels Page 17 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) for fishing and transportation and ensuring that they comply with the safety standards advised by the Ministry. 32. The GOT also used the project to invest in road safety through a mix of TA/analytical work, road improvement works, and road safety awareness and education campaigns that were rolled out in three phases. The campaigns focused on road use rules, road signs, road safety precautionary measures and traffic regulations. They went in parallel with road safety works in specific areas of the road network in Tongatapu, ‘Eua, Vava’u and Ha’apai. Figure 3. Construction of Fua’amotu international airport fire station and associated access road to runway: before/after Figure 4. Example of port safety improvement works in Vava’u Halaevalu international wharf: before/during/after Page 18 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Figure 5. Example of port safety improvement works in Ha’apai Taufa’ahau naval wharf: before/after Objective (iii) Greater domestic capacity for road rehabilitation and maintenance (PDO3) 33. The project’s objective of creating greater domestic capacity for road rehabilitation and maintenance was substantially achieved This objective was supported by the provision of TA, training and capacity building activities especially towards local contractors and consultants on how to successfully execute road maintenance. At the onset of the project, there was no local contracting capacity for road maintenance, and very limited capacity for design and supervision. Through its co-financing, GOA’s development priority was to create local employment opportunities through road maintenance and have domestic contractors. To support PDO3 the project also financed two full years of maintenance works before the RMF kicked in, as well as the purchase of heavy/specialized equipment for road maintenance so that the Ministry could make that equipment available for hire to contractors (generating a source of revenues and enabling the creation of a domestic industry until the local contractors can afford to purchase it). PDO3 is measured through indicators that tracked the effectiveness of the local contractors training program and promotion and the volume of roads successfully and regularly maintained. It is also measured through the IDA transport core indicators. 34. There is now an institutional framework to support the planning and financing road maintenance activities. Today, the Land Transport Department (LTD) within MOI has the business processes and trained staff needed to manage the maintenance of the main road network. It can assess road network conditions, prepare and manage annual routine maintenance contracts, and prepare a periodic maintenance program and manage resealing and minor rehabilitation works contracts. LTD also has the necessary road asset management processes in place to prepare the Annual Road Program. These include road inventory and condition databases, planning tools, technical standards, and procurement and contract administration procedures established with the assistance of TSCP. Page 19 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 35. There is now a Tonga-based road contracting sector comprising approximately eight companies with enough equipment and technical personnel to carry out all routine and periodic maintenance and minor rehabilitation work. Several of these contractors can upgrade roads (surface treatment or Otta seal) and construct new roads. An off-shore contractor with asphalt plant and paver would be required for major rehabilitation works. Out of the 640 km of classified public roads, 77km were designed, supervised and maintained by Tongan companies (which is slightly higher than the 75km target). This is the result of a comprehensive action plan that was designed after the recommendations from the analysis of potential institutional arrangements and funding options for sustainable road maintenance in Tonga (financed under Component A). It required an assessment of the local industry and a comprehensive training program for the contractors and consultants to have the administrative/management skills, technical and financial capacities to do the job and to bid, etc. It also came with a deep analysis of the local context and need for quality materials to be available to reduce the costs and make the business more affordable, sustainable and environmentally sound. Finally, it required financing and ensuring the GOT is committed to outsource most of road maintenance activities and has the financial resources and mechanisms to secure the funding. 36. The project succeeded in providing contract maintenance across Tonga using output-based methods on the full road network of Tongatapu (462km of roads). This is an important achievement because prior to the project there were several years of limited or no road maintenance (whether for periodic and routine road maintenance). Prior to TSCP, routine maintenance was completed on an ad hoc approach by the MOW, using in house labor and equipment under force account. Most of the investments were focused on the main island group of Tongatapu, despite the Ministry’s mandate to maintain the network on all the island groups. Limited financial capacity and the logistical challenges of servicing roads in the sparsely populated outer islands meant it was not viable to sustain domestic contractors for maintenance works. With no domestic contracting industry and limited resources and capacity within the MOW, the GOT relied heavily on foreign aid and foreign contractors intermittently to address its periodic road maintenance needs. A consequence of donor led activities was the absence of national technical standards in Tonga; foreign contractors would default to using standards which they were most familiar with, usually those from their own country’s practice. As a result, different standards and types of construction were seen across the road network in Tonga. Almost no routine maintenance was carried out. Consequently, instead of the normative approach where a road asset is regularly maintained to preserve it, in Tonga international contractors would mobilize and rehabilitate main roads periodically, with little or no on-going maintenance in the interim. This pattern of interventions may have addressed one part of road maintenance requirements in Tonga, but it was unsustainable and costly and large portions of the secondary network suffered major deterioration. The project financed the analytical studies that were used as direct inputs to design the road maintenance program co-financed by GOA. The project also helped build up a management system of the road network asset (inventory) and needs assessment (from condition surveys) to help identify and quantify maintenance requirements, estimate works costs and together with realistic performance assessment can help to make bidding and negotiating for funding with stakeholders more successful. Page 20 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Figure 6. Example of road rehabilitation using Otta seal in Ha’apai: before/during/after Justification of Overall Efficacy Rating 37. Overall efficacy rating is substantial, based on all the achievement described above. C. EFFICIENCY 38. The efficiency of project implementation was uneven. There was time overrun, particularly with the last extension, and slow progress implementation at the beginning. The project was implemented over a period of ten years, with strong TA during the first phase (2008-2010), then significant investments primarily dedicated to the road maintenance program (2010-2015), and finally a mix of activities to scale up safety and security improvement activities (2015-2018). The project had successful achievements, with an implementation efficiency that differed from a phase to another. All three phases experienced different challenges and implementation paces. 39. Cost-benefit analysis approach on the physical investment activities. The project covered investments in three distinct subsectors: land, maritime, aviation. The efficiency analysis and impact quantification exercise for the project is based on a cost-benefit analysis (CBA) approach. Estimated and actual costs by component are compared in Table 4 below. Component B and C constitutes the investment expenses in the three subsectors, where the actual expenses are lower than estimated costs. The data and key assumptions for calculating the EIRR and NPV can be found in Annex 4 on Efficiency Analysis. Page 21 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Table 4: Estimated vs actual costs, by component Estimated Actual Cost Cost (US$m) (US$m) Component A. Establishment of a sustainable transport sector policy and institutional 1.59 1.71 and operational framework Component B. Compliance with mandatory security and safety standards 7.62 5.82 Component C. Supporting the Transition towards sustainability in Transport Sector 8.82 7.73 Component D. Project implementation support 1.73 3.69 40. The results from CBA of each of the subs-sector are shown below: i) In the land transport/road sub-sector, the project financed activities for road maintenance, road safety, improving the capacity for materials testing, the setting up of the RMF, a road asset management system, and improving the information management systems and policy environment. The project achieved the expected efficiency from the improved vehicle operating cost (VOC), reduced accidents, and avoided emergency reconstruction due to improved climate resiliency. The economic internal rate of return (EIRR) for the road sub- sector at completion is estimated at 12.4% with net present value (NPV) of approximately US$6.79 million. ii) In the maritime sub-sector, the project financed investments in installation of navigational aids to ensure safety in the sea lanes and ports, assistance to maritime training, maritime infrastructure improvement and policy reforms. The project achieved the expected efficiency from the improved port infrastructure which allows port operator to enhance their operations, both for passenger vessels and cargo handling. Raising awareness on safety and compliance issues, and close coordination with the private sector (e.g. ship operators) through the project also contributed to improved operations. The EIRR for the maritime sub-sector at completion is estimated at 15.9% with NPV of approximately US$6.27 million. iii) In the aviation sub-sector, the project financed investments at select airports including Fua’amotu international airport to ensure compliance with international standards for safety and security, and supported policy reforms. The project achieved the expected efficiency from ensuring compliance with ICAO standards and improving safety and security at Fua’amotu airport. This would avoid the potential disruption of flights, which could happen as soon as 2012 at Fua’amotu international airport (calculations are based on a conservative 2015 date). The EIRR for the aviation sub-sector at completion is estimated at 19.9% with NPV of approximately US$1.32 million. Iv) Overall, the Project achieved the expected efficiency from all three sub-sectors. The Project’s EIRR is at 14.3% and NPV of US$14.38 million. Table 5. Results of economic analysis Land/Road Maritime Aviation Total Project EIRR (%) 12.4% 15.9% 19.9% 14.3% NPV (US$ million) 6.79 6.27 1.32 14.38 41. These results do not consider the impacts of the strengthening of the regulatory framework through the project. Page 22 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) In a qualitative way, those impacts are positive and supportive of the efficiency of the project, leaving the transport sector with policies, strategies, investment plans, action plans, reform programs, etc. including some that got approved during project implementation. The project design with integrated implementation under the Ministry of Transport also contributed to the implementation efficiency. Importantly, the project helped Tonga to meet its international commitments for both the maritime and aviation sectors. Finally, the project trained Government officials to be able to initiate and carry out the same type of upgrades on similar facilities e.g. other airports, other port facilities, other ferry terminals, other road sections, etc.—and created a cadre of local contractors to implement such works. Assessment of Efficiency and Rating 42. Efficiency is rated Substantial, considering the above analysis. D. JUSTIFICATION OF OVERALL OUTCOME RATING 43. Overall outcome rating is Satisfactory. Based on the combined ratings of Relevance as High, Efficacy as Substantial and Efficiency as Substantial. E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 44. At the time of project preparation gender was not a specific focus. However, the female-male ratio found in the Government teams involved in the project (Project Support Team (PST), Civil Aviation Division (CAD), Marine and Port Division (MPD), Land and Transport Division (LTD), and TAL) was generally 50-50 or 40-60 with the same ratio at senior level. On the contractor side, for the road maintenance works and the civil works, men are dominant in construction activities (between 70-85%) and women usually work in offices including at senior level positions. Throughout the change management process and the implementation of project activities, the World Bank always urged to conduct inclusive consultations and encouraged the promotion of equal access to job opportunities. One notable activity that was entirely led by women is the road safety campaign, with a major emphasis on children and interventions in schools. Towards the end of the project implementation period and corresponding to the period of World Bank policy updates related to gender and their progressive application, there was the opportunity to start raising awareness amongst project stakeholders in the areas of gender gaps, potential unequal access to jobs, and gender-based violence issues, and attract the commitment from the transport sector in Tonga to prevent and/or mitigate these issues moving forward. This is now formally reflected in the FY17-21 RPF. 45. Project beneficiaries: Beyond the users of the transport services (road, air, maritime) and the Government officials and contractors who received some training through the project, the beneficiaries are particularly the most vulnerable groups such as the elderly and the children who in pedestrian and ferry accidents are the main victims (e.g. more than 50 per cent of the Princess Ashika sinking in 2009 were female and children). Institutional Strengthening 46. Transformation of the transport sector. The project was designed to accompany and complete the restructuring process the GOT started in 2005 and address the policy and regulatory reforms and critical gaps to meet the security and safety obligations in a safe, secure and sustainable way. It played a fundamental role in the transformation of the sector Page 23 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) and associated institutional strengthening. MOIT’s core functions today are policy development and regulation, its dependency on daily paid workers is reduced, the offices are unified in one location, there is an active strategy to train and retain professionals, and there are methodologies and tools in place (technical, financial, administrative, planning, and decision-making). 47. Support from TAL for the regional Pacific Aviation Investment Program. TAL provided key technical support in the preparation and implementation of the US$ 232 million IDA financed Pacific Aviation Investment Program (PAIP) improving aviation safety and security in Kiribati, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. During the development of the program, TAL senior staff supported World Bank missions in Kiribati and Tuvalu, helping to identify activities to be done under the projects. After PAIP commenced, TAL provided ‘on the job’ training for staff from the other PAIP countries to gain experience. Separately, TAL housed the regional PAIP management unit whose consultants provided technical, fiduciary and procurement services to the PAIP program through service agreements which each country signed with TAL. Mobilizing Private Sector Financing 48. Mobilization of the local private sector. Prior to the project, there was almost no private sector involvement in transport sector civil works activities, which were all done by the MOW. By supporting the separation of the policy and regulatory functions of Government from the service delivery and operational functions, the project opened opportunities for the local private sector with the objective to increase the quality and efficiency of the sector. For instance, the project successfully supported the GOT to develop and sign a privately-operated concession in 2013 to reopen and manage a then abandoned state quarry, the only source of quality aggregate for chip sealing and asphalt concrete works in Tongatapu (see Figure 2). This quarry was a key supplier to the World Bank financed overlay of Fua’amotu airport under the Tonga Aviation Investment Program (P128939). The project also directly promoted private sector participation in the provision and operation of infrastructure, which was a priority of the 2009 GOT-GOA Partnership. For instance, the project successfully supported the GOT to establish a road maintenance industry, starting with assessing local contractor interest and providing tailored training to gradually build local capacity and eventually a very competitive and performing industry of eight domestic companies as well as design and supervision consultants. The project also worked towards privatization of materials testing, but this did not eventuate in the life of the project. Poverty Reduction and Shared Prosperity 49. Access to safer and more reliable transport services for the poor segments of the population. Traveling by ferry/boat is the only means of transportation between the islands for the poor segments of the population. All the safety measures introduced by the project in the maritime sector raise the standard with the objective to provide safer and more reliable services. In the same way, the road safety investments are aimed at reducing road trauma, which disproportionally impact the most vulnerable users. 50. Reliance on a more resilient road network for the poor and bottom 40. Natural disasters and adverse climate events tend to hit the poorest and vulnerable harder. By improving and maintaining the road network in good conditions all year-round, the project contributes to reducing the disturbances caused to road users by potential road closures/deviations which usually have a direct impact on their incomes. Page 24 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Other Unintended Outcomes and Impacts 51. Awareness raising on safety and compliance issues. Prior to this project, awareness of safety issues was in general very low. The project brought a change of mindset within GOT officials, public and private operators of transport services, communities, and had direct impacts on people. In the maritime sector after the sinking of Princess Ashika in 2009 and a few other similar accidents in the Pacific islands, the realization of the consequences of non-compliance with basic safety guidelines was very strong and the use of funding under the project became all the more relevant and critical. One of the main reasons for the 2015 AF was to allow for all maritime investments identified under the original project to be completed to further improve safety. The installation of aids to navigation contributed to improving maritime safety, as well as the institutional strengthening activities at MPD e.g. reinforcing surveyors’ capacity and standards and encouraging systematic coordination with ship operators and other relevant stakeholders. A systematic approach was adopted for road safety which saw: (i) a road safety audit conducted of the entire network to identify risks; (ii) the adoption of appropriate traffic signs and road safety manuals by MOIT; and, (iii) the use of private contractors to construct road safety interventions, install and maintain traffic signs. This is now part of MOIT’s general business. 52. Leading by example. Tonga was the second country in the Pacific island region to effectively go through a major change management process in the transport sector, supported by the World Bank (Samoa was the first one in the early 2000s). Tonga is now the first country in the Pacific island region to obtain ICAO certification. Furthermore, TAL plays a central role in the implementation of the regional Pacific Aviation Investment Program (as highlighted in Paragraph 47). 53. Support for Ha’apai after Cyclone Ian. The TSCP project through its PST provided support in the aftermath of Cyclone Ian by supporting the Post Disaster Needs Assessment, and the subsequent project preparation for the World Bank financed TCIRCRP recovery project. It continued to provide support once the TCIRCRP project commenced until a standalone project management unit could be established. This support helped accelerate the reconstruction and recovery program. II. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 54. Appropriate selection of activities and of stakeholders. The operation was originally designed mainly based on the results from the World Bank financed 2005 Tonga Transport Sector Review. The GOT had adopted many recommendations including the merge of the Ministry of Marine and Ports and the Ministry of Civil Aviation into the MOT in 2006, as well as the creation of TAL in 2007 as a corporatized airport company thus separating the regulator from the operator. The idea for the project was to continue providing support to the change management process, with select priority investments primarily to comply with aviation international standards. The objectives were realistic, the original project design was straightforward with a reasonable balance between TA activities and investments, the involvement from both the Ministry and TAL as implementing agencies was decided based on the new configuration at the time, the roadmap and list of activities were well defined as well as the RF that provided details on the progress points to monitor. The preparation of the subsequent AF activities was based on needs identified during Project implementation. B. KEY FACTORS DURING IMPLEMENTATION 55. The key factors during implementation can be categorized in the following three phases: Page 25 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) a) Phase 1 (2008-2010) covered the original scope of the project and was relatively slow moving: implementation progress was rated between Moderately Satisfactory and Satisfactory, disbursement rate was significantly behind the targets (24 per cent instead of 55 per cent at the end of FY10). MOT was not adequately staffed yet. TAL was not entirely familiar yet with World Bank policies and procedures and misprocured (without cancellation) a contract for large equipment for the airport worth approximately US$1M (detailed description in Section IV.C). These factors significantly affected implementation efficiency at the start of the project. b) Phase 2 (2011-2015) is mainly associated with the road maintenance program funded by the GOA: implementation progress was initially rated Moderately Unsatisfactory, and then Satisfactory during the last two years. At first, even though the restructuring was approved in November 2010, (i) GOA funds were only made available to GOT through PRIF in July 2011, which required the addition of a retroactive financing clause in the Financing Agreement to allow reimbursement of eligible expenses starting in November 2010; (ii) as a result of (i), there was no progress reflecting effective implementation of the road maintenance program except for some training to local contractors. Seeing no results on the ground on the roads yet, the GOA withheld US$2M of the funding until satisfactory performance in road maintenance showed. That year (2011) many studies turned into action/investment plans and by the end of 2012, disbursement rates were at 16 per cent for GOA/PRIF and 85 per cent for IDA. In March 2013 the GOA released the funds and by mid-2013 disbursement rates increased to respectively 30 and 88 per cent, then to 77 and 88 per cent by end of 2014 and to 98 and 88 per cent by mid-2015. It was during this period that the GOT merged the MOW and MOT to create the MOIT, and the project actively facilitated that integration through the implementation of the change management process. c) Phase 3 (2015-2018) is mainly associated with the IDA AF to scale up maritime and land safety and security measures: implementation progress was rated Satisfactory until project closing. Except for the final extension of closing date that was requested during this phase to allow completion of safety improvement works at Vava’u and Ha’apai due to delayed shipping of supplies, there is no major delay to report. TA activities including training, capacity building activities, development and deployment of the transport management system, and drafting of additional legislative pieces, were also carried out during this final phase. 56. Factors subject to Government and/or implementing entities control. The project started at a time when GOT was also introducing reforms to reorganize at a larger scale the public service and consolidate and amalgamate responsibilities. The implication of these parallel reforms including a voluntary redundancy program to cut down the size of the public service was that a significant portion of experienced and qualified staff left, and the recruitment or replacement of lead positions within MOIT’s units was slow and directly hampered project progress implementation. For instance, the absence or interrupted services of technical directors, such as the Head of the Land Transport Division was a major challenge for the strategic and effective implementation of the road components. This occurred in spite of the legal covenants of the Financing Agreements that were introduced as mitigation measures against such risks. On the reform initiative side, the project went through two rounds of parliamentary elections in 2009 and 2013, which delayed or jeopardized the validation processes for some of the transport acts/bills. The leadership of the Ministry also changed during project implementation when MOT became MOI. 57. Just a year after project approval, the sinking of the Princess Ashika ferry triggered an alarm in the country, highlighting the safety issues and raising awareness on the need to improve standards and enforcement. The GOT used the project to carefully review the safety issues and port/ferry conditions, prepare norms and reforms, provide capacity building and training activities, and requested most of the 2015 AF be dedicated to finance the safety equipment and Page 26 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) improvement work. 58. Factors subject to World Bank control. Task team support was adequate and closely monitored project progress. ISRs were detailed and provided constructive and detailed feedback on the change management process and policy reforms. Project technical assistance was regularly evaluated, and technical support provided by consultancies was assessed in order to redirect any identified challenges or needs identified. 59. Factors outside the control of Government and/or implementing entities. The two natural events that hit the country during project implementation are the following; (i) the tsunami which struck the Niuas island group in September 2009 (which did not directly impact the project); (ii) Tropical Cyclone Ian in January 2014 which had a significant destructive impact in Ha’apai. As noted earlier, the project provided critical support to the GOT during the preparation and initial stages of the TCRTP, and was also restructured in 2014 to broaden the geographic scope of the project from select airports of intervention to all Tonga airports, with the intention to include at least Ha’apai. III. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 60. To track progress against the PDOs, a total of 12 indicators (including 3 core indicators) as well as 3 intermediate results indicators were selected. The project supported a theory of change clearly articulated around a set of components and TA activities and investments in goods and works that would strengthen the transport sector and its organizational structure as well as its policy and planning responsibilities, improve safety and security in all sub-sectors, and improve road maintenance and rehabilitation especially with participation of the local contractors. The RF was result-oriented and designed jointly with the GOT to monitor progress specifically towards these 3 PDOs (see right columns of Table 6 below) with M&E arrangements relying on different mechanisms and tools: (i) a general follow up by MOIT through the PST with continuous collection and periodic consolidation of the information provided by the different subsectors on the basis of a planned work program and disbursement schedule, (ii) the improvement of systems for data collection and gathering, (iii) in terms of strategic monitoring, a Steering committee was created under the project to provide guidance to MOIT on project implementation and strategy and facilitate the resolution of implementation issues, (iv) the World Bank and GOT conducted joint supervision missions twice a year and had annual review meetings (MFPN, MOIT and World Bank) to monitor progress and schedule and if needed take required actions to meet project goals. M&E Implementation 61. The RF was adjusted over the course of project implementation, mainly to capture the results from the two AFs as well the IDA corporate indicators. The final version is the one that was approved in 2015 with the second AF. Some indicators were added or adjusted/consolidated and moved to PDO level (instead of intermediate level), some others were dropped. The table below gives an overview of the changes that were done proactively every time there was an adjustment in the project activities and design. Page 27 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Table 6. Indicators and their changes throughout the project 2008 at project appraisal 2010 First restructuring with GOA AF 2015 Fifth restructuring with IDA AF PDO level indicator 1. MOT operations established and 1. MOT functioning as a fully integrated 1. MOT integrated ministry focusing on policy and consolidated to improve the level ministry responsible for compliance and planning of compliance of the civil aviation safety oversight of land, sea and air transport 2. Transport policy framework developed and and maritime sub sector entities subsector policies defined PDO1 with international safety and 3. Change management process and creation of security standards appropriate transport policy and planning units 4. RMF created and operational 2. ICAO certification for Fua'amotu 5. ICAO certification for Fua'amotu airport PDO2 3. Proper systems in place for safe maritime travels 6. Safe maritime systems 4. Consultants as well as small and medium 7. Consultants/contractors capacity (consultants as domestic contractors with capacity for well as small and medium domestic contractors with implementing effective road maintenance capacity for implementing effective road maintenance) 8. Number of km of roads under regular maintenance PDO3 5. Number of rural roads rehabilitated 9. Number of rural roads rehabilitated 10. Number of non-rural roads rehabilitated 11. Roads in good and fair condition as share of total classified roads 12. Improved road safety management systems Intermediate results indicators 1. Improved level of compliance of 1. Component A - Regulations in place with 1. Component A - Appropriately skilled staff recruited the civil aviation and maritime sub improved monitoring, enforcement and by MOI and equipped to fulfill their respective sector entities with international compliance mechanisms mandate safety and security standards 2. Component A - Appropriately skilled staff 2. (i) Regulations in place with recruited by MOT and equipped to fulfill their improved monitoring, respective mandate enforcement and compliance 3. Component A - Completion of aviation, mechanisms; (ii) Appropriately land transport, and maritime sector skilled staff recruited and investment plans equipped to fulfill their respective mandate. 3. Improved security 4. Component B - Improved security 2. Component B - Maritime aids to navigation installed arrangements and compliance arrangements and compliance with in outer islands with requirements for requirements for international air transport international air transport 5. Component B - Installation of maritime 4. Safer inter-island transport for safety equipment completed passengers and cargo 6. Component B - Road safety audit completed for Tongatapu 5. Greater sustainability of 7. Component C - Number of domestic operations of responsible consulting firms with full capability to design transport sector agencies (land, and supervise road maintenance sea and air) with clearer 8. Component C - Number of domestic small assessment of medium term and medium contractors trained and capital and operations and participating in bidding maintenance expenditure 9. Component C - SOE established for requirements providing specialized equipment for 6. Reduced maintenance backlog, contractors Page 28 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) improved safety and accessibility for all users of the upgraded facilities 3. Percent of grievance related to project benefit resolved 62. M&E data were collected and analyzed as planned principally through quarterly reports explaining the progress of activities and the financial status of the project. These reports were submitted both to the MFNP and to the World Bank in a timely manner. The RF was the main instrument for tracking data and information and was methodologically updated for each mission and attached to the Aide-mémoire. Prior to each mission the status of activities/contracts was updated in detail which also contributed to efficient M&E. The Steering Committee met at least twice a year and was composed of the following permanent members: CEO of MFNP, CEO of MOIT, CEO of Public Enterprises, and CEO of Environment and Climate Change. While TAL was involved in project implementation (responsible for its respective part of the project and according to a separate Project Agreement with the World Bank) it was not part of the Steering Committee which could have been beneficial to the project. M&E Utilization 63. M&E data on performance and results progress including detailed reviews of work plans, updates to the RF and disbursement schedule, were effectively used to inform project management and decision-making. Through the indicators selected for the project it was possible for the PST and the World Bank task team to assess the level of progress towards achieving the targets and PDO and to detect the areas that needed most implementation support. They also showed to some extent the different levels of performance from the different subsectors within MOIT: marine and ports division, land transport division, civil aviation division, policy and planning unit. 64. For instance, project implementation was hampered due to the lack or high turnover of personnel at senior/management level. This challenge was captured through the first intermediate results indicator on the effective recruitment and appropriateness of staff at MOIT, especially at senior position level and as full-time personnel. The risk was also mitigated through the legal covenant of the Financing Agreement specifically addressing the need for a Land Transport Director, which took seven years to be appointed. At project closing half of the senior positions are still vacant. 65. The PST and the World Bank task team also used a separate monitoring table dedicated to tracking the status of the different recommendations from the main report supporting the change management process. This table particularly focused on the proposed divestment of non-core functions with detailed documentation of the current status and pending actions. It is presented as Table 8 in Annex 6. 66. The 70 percent target for the core indicator on roads in good and fair condition as a share of total classified roads was never revised after it was introduced in 2013, with a baseline which was assumed to be 10 percent at the time. At project closing MOIT did its own data collection and confirmed a total of 270km of roads in good and fair condition, which is 42 percent of the total classified public road network of 640km. Given that the road maintenance program financed under the project stopped in 2013 (a year after which there was insufficient or no funds in the RMF until 2017) the indicator in 2013 could have shown a 72 percent result, which corresponds to 462km of roads benefiting from maintenance contracts. However, with no follow up activities between 2014 and 2018 and with a more robust and detailed database on the road network condition established thanks to the road condition survey, road asset management tools and associated training for the Ministry technical staff financed by the project, a total of only 270km of roads could be classified as being in good and fair conditions. Page 29 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 67. Finally, there were several reviews and technical audits conducted by the GOT, the World Bank and the GOA as co-financier during project implementation, which would provide constant ground for readjustment and a basis for potential extension/expansion of activities. The GOT in 2016 through project funds ordered a Transport Sector Review to assess the achievements in the road sector from the reform process and the investments done and get recommendations to further support the project and most importantly MOIT’s objectives and long-term outcome. The review included the development of a policy note on contracting out road maintenance. The World Bank in 2014 conducted an evaluation to assess implementation progress of the project, vis-à-vis the PDO and the physical and financial performance, which would inform and justify the 2015 AF. It also conducted that same year a Tonga Transport Sector Safety Review to identify areas where GOT could take actions to improve transport safety. On the GOA side, two years after the approval of the World Bank Board of Directors to add GOA/PRIF funds to the project, AusAID (former Australian Government Agency responsible for managing Australia’s overseas aid program within DFAT, Department of Foreign Affairs and Trade) launched an Independent Review (2012) to assess the project Road maintenance components which would support decision-making regarding management of commitments to the project at that time and responses to any additional requests for road sector. In 2014, DFAT commissioned a Technical Audit of Select Tonga Transport Sector Consolidation Project (General Routine and Periodic Maintenance Contract Works) to assess contract compliance of a select package of contracts to evaluate the effectiveness of the contractors in complying with contract specifications, as well as the effectiveness of project supervision processes and supervision teams in assuring contractor compliance to contract specifications. Justification of Overall Rating of Quality of M&E 68. M&E quality is Substantial based on the previous analysis that showed moderate shortcomings in the M&E system design, implementation and utilization. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 69. In terms of environmental performance, the project did well and followed World Bank policies and procedures: there was no incident or accident to report. The relevant items that stood out from the evaluation are the following: a. The project category in 2010 was upgraded from C to B to include the civil works activity for road maintenance (road repairs with no land acquisition). All the required and appropriate environmental safeguard documents were developed, published and applied duly. b. The training of domestic contractors in road maintenance works included environmental safeguards modules that benefitted from the assistance from the Ministry of Environment. c. Heterogeneous environmental standards were found in the operation of quarries during site visits conducted in 2017 as part of a joint supervision mission: following that assessment MOIT made sure the same safety and environmental standards that the World Bank helped enforce in Ahononou quarry, were applied elsewhere, liaising with the other relevant line ministries such as the Ministry of Labor, the Ministry of Land, Surveys and Natural Resources. 70. In terms of social performance, the project did well and followed World Bank policies and procedures. There was no activity that required land acquisition or involuntary resettlement, so the risks were limited. The few relevant items that stood out from the evaluation are the following: a. The project highlighted strong, effective and inclusive communication/consultation processes: the achievement of the institutional reform work (e.g. Civil Aviation Act, Airport Authority Act) was accompanied by consultation Page 30 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) processes to get all stakeholders on board. Other bills that did not go through such as the Port Authority Act proposing to delegate the outer islands port facilities operation to the Port Authority instead of MPD were because the consultations showed that there was a major disagreement with that transfer (outside the scope of the project but same consultation mechanisms used). The maritime safety campaign concluded with an open day display by the maritime industry for the public and schools to mark the international maritime day. The road safety campaigns were successfully conducted throughout the country covering all the outer islands and focusing on visits communities and schools. Both maritime and road safety campaigns used leaflets, billboards, community consultations, school presentations, video clips and talkback-shows to convey the messages. It turned out they had a direct positive impact since the incidences of “lost at sea” was reduced and the death toll on the roads was reduced from 18 to 6 after one year of campaign. b. The project had no formal Grievance Redress Mechanism (GRM) beyond an Excel workbook for recording complaints. Complaints were sent to the general email addresses of MOIT and of the World Bank that could receive questions or complaints at any time from anyone. There was one complaint record received and filed in October 2016 by MOIT (and the World Bank) from a landowner related to royalty payments from the Government for the Ahononou Quarry (Fua’amotu), which was not directly related to the project except for the project’s role in supporting the original concessioning of the quarry. It was resolved after going to the Tonga Court of Appeal in March 2017 and after the case was withdrawn by written consent of all parties. Fiduciary compliance 71. Misprocurement on a US$1.0 million contract for airport equipment signed by TAL in Year 2 of implementation. On June 29, 2010, after a detailed review of the situation and following a complaint initially received on October 26, 2009 from the plaintiff bidder, IDA advised the GOT of the misprocurement by TAL of the Doppler VHF Omni-directional Radio Range (DVOR) aviation equipment signed for an amount of AU$1,142,892. It turned out that the bid that TAL declared as the winning bid contained a material commercial deviation to the terms and conditions of the contract, which was inconsistent with the bidding documents and not mentioned in the Bid Evaluation Report and set of documents submitted to the World Bank for no objection back then. IDA concluded that this oversight by TAL during the bid evaluation process was genuinely as a result of limited procurement capacity at the time and with no willful breach of the procurement policies and procedures governing the project. It was therefore agreed, on an exceptional basis as per Paragraph 22 of BP11.00, that the funds would not be cancelled and, considering the significant investment needs at the airport, that they would be reallocated to provide Fua’amotu international airport with a rescue fire station, transit screening point and terminal expansion. TAL honored the signed contract with its own resources. 72. In terms of procurement approaches, there was significant proactivity and creativity to include appropriate selection methods that would smooth project implementation (e.g. addition of force account and single source selections in the 2010 restructuring to react faster in case of emergency or remote works needed) and promote participation of the local private sector (e.g. combination of national competitive bidding and shopping methods to carry out the road maintenance activities). This was of great benefit when the TSCP PST had to take on a support role after Cyclone Ian until a new project management unit could be established. 73. Financial management. The compliance with the financial management policies and procedures was generally satisfactory. A review of the financial management arrangements in 2012 highlighted the need for better monitoring of contract payments and for a system and accounting software to monitor financial commitments against disbursements and contract payments. The project financed an asset register system that improved that monitoring, as well as a procurement administration system for planning, monitoring and reporting. There were no outstanding Interim Financial Page 31 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Reports (IFRs) throughout project implementation, and audits were always presented on time. However, during the last year of implementation it was identified and raised to the attention of the PST and GOT that monthly bank reconciliations were not independently signed off, minutes from the project Steering Committee meetings were not signed, and timesheets were not signed by the project accountant to verify their accuracy. C. BANK PERFORMANCE Quality at Entry 74. High strategic relevance and approach. The PDO was highly relevant and aligned with both GOT and World Bank objectives, timing and approach were highly appropriate considering the results of the previous TA and urgency for GOT to upgrade some of the infrastructure and comply with international safety standards. 75. Adequate appraisal of activities. The technical, financial and economic aspects were adequately addressed at project design, with reliance on a qualitative assessment of the costs/benefits of the project components (because of their nature) and post life-cycle least-cost analysis on the small works, and on a choice of technology governed by national technical standards and international requirements where applicable. The environmental and social potential impacts were carefully screened to guide the development of environmental and/or social management plans for all activities (construction, equipment, etc. that required a category upgrade in 2010 with additional activities after the AF) and to demand associated monitoring plan and arrangements, costs and communication around the issues. 76. Institutional set up and adapted implementation arrangements. Considering the recent establishment of TAL (at the time of project preparation) as the operator in the aviation sector and the nature of the investments in the air subsector, it was decided to have two implementing agencies: the then MOT and TAL with one PST within MOT serving both. The absence of TAL from the project Steering Committee was an oversight and communications between MOIT and TAL were not as effective as they could have been. 77. Comprehensive risk assessment. A list of critical risks and possible controversial aspects was identified and reduced through appropriate mitigation measures, resulting in an overall low to moderate risk. That rating was upgraded to Substantial in 2015 (2nd AF) because of the political and governance context (changes and delays) and institutional capacity for implementation and sustainability (lack of leadership and continuity). 78. Responsive World Bank inputs and processes. The World Bank supported the GOT in the design of the project based on solid TA and an informed selection of priority investments. The flexibility of World Bank processes was tested and proved positive when US$10.3 million additional financing from GOA were made available to the GOT. The World Bank accepted to add them into the ongoing project instead of designing another operation which would have required additional inputs, appraisal and assessments. Quality of Supervision 79. Strong presence and diligent supervision. Supervision and technical missions were regularly conducted, at least twice a year, with high appreciation from the counterparts on the availability of World Bank team in general, the inputs and recommendations, the field visits, the focus on development impacts, the support and proactivity. World Bank’s visits and focus on project results was the “stable part of the project” (in the word of a GOT official) despite the changes of Task Team Leaders that they found challenging (four in total) and the multiple changes within the Government. They praised Page 32 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) the relationship with the World Bank and the fluid communication with World Bank team who is responsive, candid but also flexible and pragmatic. 80. Team evaluation of project achievements. The supervising task team provided candid evaluation of performance ratings throughout the implementation of the project and was very proactive in improving the ratings as necessary whenever ratings were unsatisfactory. Likewise, overall reporting in ISRs and Aide Memoires was candid throughout. 81. Misprocurement issue. In 2009-2010 it took five months for the World Bank to conduct its analysis on the plaintiff complaint (from the day it received the complaint on October 26, 2009 to end of March 2010 when it could meet with the different stakeholders and receive complete information from TAL). It then took another three months to officially declare misprocurement through a notification to the GOT. Considering the due process to follow and the exceptional request not to cancel the US$990,000 amount from the project (corresponding to the misprocured contract) the World Bank had to defend to the World Bank Regional Vice President, the time reaction can be considered as reasonable. However, to the eyes of the GOT and TAL especially, it looked like it took eight months with an initial period of five months with uncertain conclusions. It was problematic for TAL who required this equipment urgently for aviation safety. This created some tension as early as Year 2 of implementation. However, it also accelerated the learning curve of the implementing agencies and generated needs for more training and stronger attention towards World Bank policy and procedure compliance. 82. Coordination with counterparts and donors. There was strong coordination with the different units involved in project implementation and at higher level with MFNP. With the provision of AF, the GOA was actively involved, joining missions and conducting their own review of the project activities. The coordination with the Asian Development Bank (ADB) and the Ministry of Foreign Affairs and Trade of New Zealand (MFAT) was close, to ensure the complementary nature of the various activities and avoid their duplication. For example, the reform on motor vehicle registration was dropped because of this process (in the first project restructuring) and the Government of New Zealand financed it through their bi-lateral aid. At a larger scale and covering more than the project, the ADB and World Bank conducted a joint portfolio review in 2017. The World Bank task team would regularly touch base with the partners during missions. Justification of Overall Rating of Bank Performance 83. World Bank performance is rated as Satisfactory, considering the above and considering there were minor shortcomings in quality at entry and during supervision. D. RISK TO DEVELOPMENT OUTCOME 84. The project has achieved its development objectives. Nonetheless, there are residual risks to the sustainability of the outcome. 85. The share of road maintenance works outsourced to the private sector remains dependent on continued commitment from the GOT. The project successfully trained and established a domestic industry for road maintenance works but the business can only be sustained if the MOIT continues to outsource those works, instead of carrying them out in-house using its own equipment, as it did prior to TSCP. The project encouraged to the extent possible the participation of the private sector and the reduction of the share of works done through force account by MOIT, but the definition of this share can vary and depends entirely on the MOIT and the strategy it is adopting (outsourcing vs carrying out works in-house). Today, force account is used for emergency works and for remote areas where the private sector is not interested in going. MOIT is working towards outsourcing emergency works to contractors, testing multi-year area- Page 33 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) maintenance performance-based contracts (e.g. supported by the World Bank financed TCRTP). Considering MOIT’s current priorities to acquire more equipment and undertake works on community roads, it is not clear what the Ministry’s vision and commitment is vis-à-vis outsourcing of maintenance works. This also means it needs to think about an efficient way to manage and maintain its heavy equipment fleet, which historically has been an issue. 86. Capacity and coordination within MOIT still need strengthening. MOIT relies today on a limited number of technical staff with inconsistent supervision/management with half of the senior positions that are still vacant, which may jeopardize the project outcomes. The LTD has a small number of engineers and trained technical staff 8 and needs to ensure that many essential technical positions can be filled. Despite the upskilling support received from the TSCP, LTD’s capacity could be compromised by the retirement or resignation of a few senior staff. MOIT needs to develop a pro-active human resource development program to determine its requirements, recruit and train employees for core road management activities and contract Tonga consulting companies for non-core activities that can be outsourced, such as data collection and contract supervision. In addition, the vacant positions in all MOIT units need to be filled. The capacity of MOIT to supervise the works contracts especially the road maintenance contracts needs to be adequately strengthened and increased in number, with effective transfer of knowledge from the technical advisors and trained officials to the incoming generation of technical staff. Alternatively, they should consider outsourcing these activities to local consultants who now have the capacity to do this work. There is still high reliance on foreign technical and financial support, with to some extent timid ownership by MOIT of the results and recommendations from the studies. Yet, such long-term reform processes require strong ownership and leadership from the Ministry in charge, with clear decision- making processes and appropriate technical support in place to implement subsectors’ policies. This is also essential to ensure full cohesion and coordination within MOIT including with TAL. 87. There is still insufficient appropriate plant equipment in Tonga to adequately undertake effective and efficient routine and periodic road maintenance operations. The specialist plant/equipment necessary for undertaking work activities including aggregate extraction (quarry operations) for road pavements, chip sealing, bituminous asphalt sealing and ancillary items for facilitating compaction of materials, materials handling, etc. would require significant capital investments and related operational and maintenance funds. It is therefore recommended for a private sector operator to procure such plant/equipment for delivering road maintenance works contracts and be responsible for the maintenance and operations of the plant equipment. Several contractors have invested in specialized plant for road maintenance such as bitumen sprayers, aggregate spreaders and rubber-tyred rollers based on the MOIT’s plans to outsource road maintenance works. They have expressed concerns that the government will not continue with this commitment; other contractors have held back in investing in specialized plant for the same reason. Already as part of the change management process under TSCP, it has been recommended to establish a separate, self-accounting equipment pool (with workshops) that is run as a commercial operation and provides leasing and other services to the MOIT units and private sector parties. This had progressed quite successfully until recently when funds were diverted for other purposes rather than using some of the revenue to maintain the equipment. Recommendations must be made on how to sustain LTD’s maintenance budget in order to fix the equipment and sustain any costs that may be incurred through having an equipment pool. 88. Road maintenance requires annual government appropriations. While the RMF was successfully created through a Treasury note, to date its operating procedures have not been consistent. The current funding of the RMF is below the target established for the annual road maintenance program, which is below the overall maintenance needs. Instead of being a sustainable source of financing for Tonga road maintenance programs follows a regular annual budget allocation process and its Steering Committee only met a couple of times since its creation in 2013. As a result, road maintenance 8 LTD road staff include 1 Director (engineer), 3 Engineering Officers (diploma engineers), 4 Road Technicians, 12 Supervisors, Foremen and Assistance Foremen. Page 34 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) was underfunded from 2013 to 2015 (after the two previous years of maintenance funded by the project) and in 2016- 2017. In 2015-2016 there was no annual road maintenance budget because MOIT reverted to ad-hoc force account to replace the contracting system. At project closing though and with continuous dialogue between the GOT and the World Bank on the criticality of the replenishment of the Fund, the allocation for 2017-2018 is found to be substantial (about TOP10.73 million) and should ensure adequate funding for sustainable road maintenance. 89. There is still a conflict of interest for the maritime subsector. The change management process that would have separated regulating and operating responsibilities for the maritime sub-sector department was not completed. As a result, the Maritime and Port Division is still operating the domestic ports while also regulating their activities. 90. The cohesion with tourism since the merge in 2015 remains weak. The project successfully completed the consolidation and integration of all transport responsibilities within one ministry, but since 2015 the MOI also merged with Tourism. Three years later the integration is not effective and may be a missed opportunity for a ministry that could promote economic growth through the combined drivers of transport and tourism, especially as TAL’s Master Plan and business plan are based on arrivals forecasts and tourism potential. 91. Some legislatives pieces remain in draft. Extensive work was completed on the legislative side, most of which led to key transport bills that were approved. Part of that work remains in draft though: it needs to be picked up, translated and internalized by the GOT. That work may not be useful anymore, outdated and/or inaccurately interpreted, if the efforts are dropped now. Similarly, the project supported the development of a national transport policy framework and strategy, but these documents still need to be finalized and confirmed at ministerial level. I. LESSONS AND RECOMMENDATIONS 92. The project provides several important lessons for the sector and for similar economies around four main focus areas: (i) undertaking sector reforms and establishing sub-sector responsibilities; (ii) the capacity and governance structure of road maintenance activities; (iii) specific challenges of low capacity and fragile environments; and (iv) establishing an analytical foundation for future investments needs. (i) Undertaking sector reforms and establishing sub-sector responsibilities 93. There are political and governance risks in policy reform that require continuous government support and leadership. The project directly supported the ambitious reform agenda and public service restructuring undertaken by the GOT since 2005. It focused on the transformation of the transport sector which was carefully analyzed and proposed based on a detailed review of the sector and the objective to improve its efficiency. However, it was also implemented at a time when the reduction of the overall number of ministries had started and the reorganization of the public service had resulted in the transfer of functions from one ministry to another without the staffing and budgetary resources and in the depletion of experienced and qualified staff leaving the public service as part of the voluntary redundancy program. There was not enough anticipation and no detailed review of the staffing situation to ensure that all new structures are adequately staffed, and no prioritization or sequencing of the recruitment of senior management personnel. This highly affected the efforts to consolidate functions and resources and build capacity within MOT during the first years of project implementation. MOT was not able to attract or retain the staff, it had to rely on its limited number of existing staff who had to temporarily take on the responsibilities of more than one job. Many of these issues were addressed by TSCP consultants. It also had an impact on the implementation of the physical investments because it was challenging for the GOT to keep up with the TA work and internalize the results and make subsequent decisions, especially without CEO level influence and constant strategic direction from the MOIT throughout project implementation. Page 35 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 94. Broad ranging reforms take time and can slow project implementation. Divestment activities under the project have been broad, ranging from hiring out of road construction equipment to contractors, ensuring the contracting of quarry operations, to seeking the contracting out of vehicle inspection processes, and implementing an IT strategy, including an accounting system. The expansion of the change management initiatives into areas outside of the original scope of activities (such as outer island ports, ship surveys, development of the National Maritime Strategy, full establishment of sustainable funding mechanisms such as a RMF) has resulted in some lesser achievement in the other areas and slowed implementation. The impact and use of all the studies under the project are not clear. Some TA studies funded by the project covered common ground and therefore produced similar recommendations, or they were not implemented or of limited value to the GOT. However, specific requests from the GOT to assess the project impacts and efficiency of proposed reforms during project implementation helped anchor the policy reforms developed under the project and supported effective implementation of international best practices in road asset management. For instance, as part of the 2017 Tonga Sector Review 9 a review of “Tonga’s Governance Structure of Road Maintenance Activities” and a “Note on Road Maintenance Contracts and Road Assets Management” were produced and helped support the implementation of key reform policy directions and provided benchmarking information and evidence of positive road maintenance experience worldwide through contracting and force account modalities. 95. Significant legal support is needed to support the change management process and policy reforms undertaken. Both international and domestic legal support was needed to provide legal advice and support the delivery of specific legal requirements related to the project’s objective of improving operational safety and oversight of maritime and road transport infrastructure. Numerous legal steps were needed to support effective implementation of MOI’s reform program according to the change management process, including those related to: (i) Traffic Act: The act establishes terms and aspects related to speed, vehicle registration and licensing. Legal support was needed to draft necessary amendments to the Act following advice from Vehicle and Registration; a Licensing Advisor’s expertise was also needed on aspects related to delegation of licensing authority and issuance of driver’s license; (ii) Road Act: The act establishes the RMF and associated Steering Committee. MOIT completed the internal consultations on the draft of the Act. Another step included stakeholders’ consultations before submission to Crown Law; and (iii) Administration of the outer island ports and maritime investments: Cabinet Decision No.1110 of 21 October 2016 approved that MOIT could proceed with the works to improve safety in the outer island ports under TSCP and to introduce the appropriate legal and institutional arrangements that should be in place before the transfer of the outer island ports to the Ports Authority. The Legal Specialist recruited through TSCP drafted the amendments to the relevant legislations for Cabinet consideration and associated consultation processes. A target date for the transfer to occur was also required. For the three activities (driver and vehicle licensing, vehicle inspections, and outer island ports) completion of relevant Cabinet Decisions and/or legislative changes were also necessary, an addition to amendments to the Traffic Act, the Port Authority Act, Ports Management Act and the Wharves Act. (ii) Capacity and governance structure of road maintenance activities 96. A gradual transition to more maintenance work under longer term contracts and use of performance-based items should be encouraged along with the development of an appropriate road asset management system. There is an opportunity to develop the contract maintenance further in Tonga with the aim of progressing towards a performance- based maintenance contract over time. This could be implemented in a staged approach so that contractors and the Ministry have time to develop the appropriate skill set and understand the level of risk to successfully bid and undertake this form of maintenance delivery. The possibility of a multi‐year contracting modality for future road maintenance contracts can facilitate the preparation and sustainability of future road maintenance contracts by the local contracting 9 Report MOI/AF/-LTD/IC-C02, June 2017 cf reference #8 in Annex 8. Page 36 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) industry. The progression towards performance-based maintenance contract will be dependent on the skill and development of the Ministry’ staff as well as the contractors undertaking these works. 97. The contracting methods and organizational structure need to be adapted to the logistical challenges of servicing roads in sparsely populated islands and for sustaining domestic contractors for maintenance works. Because the domestic road construction and maintenance market is small, it is in Tonga’s interest to provide a steady supply of work opportunities that Tongan companies can compete for. The risk is that the industry could shrink to an oligopoly of 2 or 3 foreign owned companies. It would be expected that MOIT continues to consolidate all road maintenance works in one operational division of MOIT and give a level of autonomy and decentralized management to units in the outer islands. There is an extensive network of unclassified community and agricultural roads that are gravel or were sealed many years ago. Conditions vary widely but the roads carry relatively low traffic. The roads in the outer islands receive infrequent maintenance (mostly grading) through force account, or none at all. Because of the small scale of road construction activities on the outer islands, contractors will continue to rely on the Transport Pool for heavy equipment. But the existing set-up has many inefficiencies and the Transport Pool needs to be transformed into a sustainable, efficient business unit. While all maintenance should be under the LTD using external contractors, it may be the case that on some of the remote islands (where little competition, little traffic and little work coexist) force account may still be the most cost-effective method. 98. Procurements rules must be aligned with institutional arrangements to ensure performance of a road maintenance fund. Tonga’s RMF was established in 2013 to support the planning and financing of road maintenance activities. The RMF was designed to allocate road and land transport revenue sources and support a sustainable funding strategy for planning road maintenance budget needs. The RMF helped in organizing and channeling sources of revenues; the application of funds; the development of an annual expenditure program; setting target fund allocations; and meeting administration, reporting and audit requirements. The percentage range identified for each category of road maintenance (routine, periodic, community roads, road safety, etc.) reflect the current needs of Tonga’s road network. Limits are placed on upgrading and rehabilitation to ensure enough funds are provided for preventive maintenance. This is consistent with international practice whereby new road construction, improvements or major rehabilitation are treated as investments and not funded by road maintenance funds. The Operating Procedures in the case of Tonga prescribe that the RMF shall have an account under the control of MFPN into which vehicle, driver and other fees and a fuel excise tax will be deposited, thus providing a stable source of sustainable funding that will keep pace with increasing traffic and road maintenance workload. There is provision to increase the level of fees and charges if required. The RMF accounts are to be administered by MOIT. Despite establishing a clear governance structure and operating procedures on percentage allocations to be given to the maintenance needs of the road network, road maintenance has remained underfunded and below the established annual target. One significant consequence and resulting constraint in the operations was a mismatch between the procurement process and the quantity of funding available to the RMF each year for works. In the case of Tonga works can reasonably be completed in 4-6 months by the contracting industry. This therefore means that in a typical year the process involves 4 months of procurement, 4 months of delivery and 4 months of waiting for the next budget allocation. The procurement rules will apply regardless of which institutional framework governs Tonga’s road maintenance program but there are ways of reducing the delays experienced. Two of them are (i) to permit contracts to be extended for a second or third year if the contractors perform well; or (ii) for the RMF to receive funds at regular intervals permitting contracts to be awarded at any time during the year. The latter arrangement would stagger invitations for bids over the year which has several advantages: it would even out the procurement workload and it would tend to spread the work among more contractors and minimize the risk of any one contractor becoming over- extended with too much work. 99. Considering the distances and accessibility challenges between the groups of islands, all goods contracts should Page 37 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) include shipping and possibly full installation in situ, or be followed immediately by those services. In some instances, e.g. navigational lights for ports, the equipment was purchased but the full installation with shipment and actual installation in the outer islands was disconnected from the goods contract. There is then a risk of ending up with incomplete or no installation of the equipment, because of availability of budget or not to ship or at least store and protect the equipment from vandalism. In the case of the navigational lights, MDP managed to store them for a while before they were able to plan and secure the budget and time to organize the shipping. (iii) Specific challenges of low capacity and fragile environments 100. Allow for audits and technical studies to be used as a mechanism to tailor and adjust project’s reforms and investments. One criticism in the early phases of TSCP were around the impact of foreign advisors and technical studies funded through the project. While the project helped build in-country capacity, it also included a high dependency and reliance on foreign advisors and a PST assisting the MOIT with the implementation of investment projects. In addition, the project funded several studies which covered common ground and therefore produced similar recommendations. International consulting firms were recruited to provide services MOIT did not offer at the time, such as the road condition survey. The impact and use of the survey and other studies was not necessarily clear in the early phase of the project and several TA studies supported by the project were not implemented or of limited value to the Government. However, as the project progressed and with GOT specifically requesting to reflect on the progress and assess the impacts and efficiency of proposed reforms, the use of audits and technical studies allowed to better anchor the analytical work done into the project and the implementation of international best practices. One such example is the Transport Sector Review conducted in 2017 which reviewed the effectiveness of the transport sector reforms undertaken by TSCP. It included a policy section with recommendations to address areas where additional steps could be taken to improve the cost effectiveness of road maintenance. In addition, GOT requested a new section be prepared to consider whether or not a Land Transport Authority (LTA) to plan and manage road maintenance activities was an appropriate solution for Tonga. The section included a review of the experience of neighboring countries such as Fiji and Samoa which have a LTA. Two specific options were considered in the analysis: (1) Continue with current institutional arrangements in particular with LTD and full implementation of the RMF and its operating procedures; or (2) Create a LTA structure for Tonga. The final recommendations supported the first option, consisting of strengthening the mechanisms established under TSCP to align with the technical capacity, institutional arrangements and road network requirements for Tonga. 101. There need to be accompanying policies for managing local resources and ensuring the sustainability of road maintenance investments. The project made it a priority to use and promote local resources: domestic industry for road maintenance 10 and quarry operation, adapted tools e.g. a simple and practical road asset management system for Tonga, and local materials e.g. the introducing otta seals which were most appropriate given local aggregate supplies. This created employment and business opportunities, affordability of road maintenance, and improvement in accountability, transparency, environmental and social safeguards considerations. The decision to maintain the quarry operations under private sector and extend the lease was beneficial to the project. However, there should be a policy to better manage this resource. For example, the use of high-quality material should be restricted for use in asphalt concrete, cement concrete for buildings and structures, while using Otta seals more extensively. A long-term approach will require to analyze and guide MOIT’s approach to aggregate use and chipseals and the use of better-quality aggregate now in production. Tonga will require an independent construction material testing capability and therefore it is recommended that the test laboratory remain in MOIT while continuing to charge for its services. There will likely be donor-funded road projects that are expected to require more extensive materials testing that will provide an opportunity for upgrading the equipment and up-skilling MOIT technical staff. MOIT should seek to add this work as a sub-component of one of these 10 Existing paper “From Nothing to Something… Creating a Road Maintenance Culture for Tonga”: see reference #9 in Annex 8. Page 38 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) projects. An alternative may be to establish a partnering agreement with a certified laboratory in a neighboring country, Fiji or New Zealand being closest, which may have the advantage of being more sustainable. Both alternatives should be assessed. 102. The Bank ‘Immediate Response Mechanism - Contingent Emergency Response’ would have been helpful under the project. The Bank’s mechanism for allowing Governments to request the World Bank to reallocate project funds to support emergency response following an eligible crisis or emergency would have been helpful under TSCP. This relatively new mechanism was not yet available during implementation of the project. The mechanism would have allowed GOT to draw from the uncommitted resources from the project to cover emergency response. Instead, following the devastation of Tropical Cyclone Ian, which struck the island group of Ha’apai on January 11, 2014, the project’s legal agreements were amended through a Level 2 restructuring to broaden the geographical scope of the aviation investments in response to the cyclone. While this presented immediate benefits to the country, implementation of the project was further delayed. 103. Incorporate climate resilience in civil works and maintenance of roads. Although not noted as one of the objectives of the project when it was prepared, given the climate risks Tonga faces, mitigation/adaptation measures should be considered to ensure the planning and sustainability of civil works and maintenance services in the long term. (iv) Establishing an analytical foundation for future investment needs 104. Urban street/road maintenance requires a different asset management approach than rural roads. Most road investments under the project focused on rural roads but with increasing urban traffic and population expansion, there is a need to focus on planning and maintenance of urban roads. One area where more work is likely needed is physical investments for pedestrian mobility, including sidewalks and safe crossings with many co-benefits linked to climate change, disability and health; and regarding the drainage of roads in urban areas. Surface flooding (including over footpaths) because of blocked drainage is an issue. This area of work would require clear division of roles and responsibilities between the central level and the municipality level. 105. The project, especially through its analytical work, provided the foundation for the GOT to prioritize and decide on the focus of its next investments. The design and content of the TCRTP come in majority from TSCP and benefited from incommensurable support from the PST. Furthermore, TCRTP as a follow-up operation to TSCP and with a project implementing unit housed in MOIT, also safeguards the achievements and progress made under TSCP and strengthens . the sustainability of long-term outcomes. Page 39 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: PDO1 Stronger policy, planning and regulatory institutions and framework Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 1 - MOT integrated Text No unified transport (a) MOT functioning as One transport ministry Achieved Ministry focusing on policy sector policy planning a fully integrated responsible for and planning and regulatory ministry responsible transport planning ministry for compliance and safety oversight of land, sea and air transport in Tonga with all necessary legal approvals accompanying its new responsibilities; (b) Definition of the new roles of MOT and relevant ministries in respect of land transport. 28-Jul-2008 31-Dec-2011 31-Dec-2018 12-Nov-2018 Page 40 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Comments (achievements against targets): MOIT functioning as one integrated ministry responsible for compliance and safety oversight of land, sea and air transport in Tonga with all necessary legal approvals accompanying its new responsibilities Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 2 - Transport policy Text No transport policy Transport policy Transport policy Achieved framework developed and framework and sub- framework developed framework developed sub-sector policies defined. sector policies and subsector policies and subsector policies defined defined 28-Jul-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Transport Sector Policy and Planning Framework, National Transport Sector Strategy and Implementation Plan drafted; TAL core functions and responsibilities developed and Airports’ Authority Act submitted to Cabinet; Investment plans drafted in all three sub-sectors and for two airports; Aviation and Maritime Sector Strategic Development Plans drafted. Civil Aviation Act effective. Amendment bills and regulations drafted: port management bill, road bill, traffic bill, amendment to port authority bill, amendment to wharves bill traffic regulations amendment. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 3 - Change Text No institutional core At least 50% of staff At least 50% of staff Achieved (surpassed, management process and functions for sectoral positions filled positions filled at 70% vs target of creation of appropriate policy, planning and according to strategic according to strategic 50%) transport policy and planning regulation activities. staffing plan staffing plan units 28-Jul-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): About 70 percent of vacancies have been filled according to the strategic staffing plan associated Page 41 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) with the change management process. Core MOIT divisions created for Maritime and Ports, Civil Aviation, Land Transport, Policy and Planning, Building, Corporate Services. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 4 - Road Text No funds to finance 20% of overall road 20% of overall road Achieved (surpassed, maintenance fund created emergency, routine maintenance activities maintenance activities at over 40% vs target and operational and periodic financed by RMF financed by RMF of 20%) maintenance road works. 28-Jul-2008 30-Jun-2018 31-Dec-2018 27-Oct-2017 Comments (achievements against targets): The GoT has replenished the RMF with TOP$10.73M for the year 2017/18, a significant increase on prior year funding, representing 43 percent of the overall road maintenance activities for that year. This is higher than the 20 percent target and than the initial estimate of TOP$6.8M/year that was determined as a requirement to be able to maintain the network in a stable condition. This higher level of funding permitted the ongoing resurfacing of the primary (public) road network, along with the upgrading (earth to gravel) of primary agricultural routes. Objective/Outcome: PDO2 Improved safety and security facilities and compliance with international standards Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 5 - ICAO Text (i) Fua'amotu airport Certification of the Certification continues Achieved certification for Fua'amotu ICAO compliance: Fua'amotu to be effective, ACM Security 48%; Fire & International Airport updated, and training Safety 53%;Air traffic in accordance with undertaken as management 56% TCAR Parts 139 and needed. reliable; Operation Page 42 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 50%; 157 (22 April 2008) 30-Apr-2008 31-Dec-2011 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 6 - Safe Maritime Text Sea navigation aids Maritime safety aids 80% of maritime Achieved (surpassed, systems missing or in disrepair identified as priorities infrastructure under at 100% vs target of and ferry terminals in in 2010 needs TSCP AF has safety 80%) poor condition and assessment installed measures completed without lights and operational 30-Apr-2008 31-Dec-2013 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): 100 percent of maritime infrastructure under TSCP AF has safety measures completed Objective/Outcome: PDO3 Greater domestic capacity for road rehabilitation and maintenance Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 7 - Text Road maintenance 75 km of roads 75 km of roads Achieved (surpassed, Consultant/contractors done by international designed, supervised designed, supervised at 77km vs target of capacity contractors or public and maintained by and maintained by 75km) sector (Ministry of Tongan companies Tongan companies Works) 30-Apr-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Page 43 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Comments (achievements against targets): 77 km of roads have been designed, supervised and maintained by Tongan companies Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Indicator 8 - Number of Number 0.00 462.00 462.00 488.00 kilometers of roads under regular maintenance 30-Apr-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Achieved (surpassed, at 488 vs target of 462) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehabilitated, Rural Kilometers 0.00 75.00 35.00 40.00 30-Apr-2008 31-Dec-2013 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): 15km in year 1 and 25km in year 2. Reason for the revision of the target over the course of implementation of the project: in 2010 with the AF and the addition of the road maintenance program, the core indicator "Number of km of rural roads maintained” was added with a target at 75km. In 2013 during the third restructuring, the core indicator was updated (following changes made at the corporate level on core indicators) to “Roads rehabilitated, rural” and it was considered that 35km could be targeted for "rehabilitation" per say at the end of the project (different from the 75km initially targeted for "maintenance" works). Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads rehabilitated, Non- Kilometers 0.00 5.00 5.00 5.00 Page 44 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) rural 30-Apr-2008 31-Dec-2013 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Achieved Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Roads in good and fair Percentage 10.00 70.00 70.00 42.00 condition as a share of total classified roads 30-Apr-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Size of the total classified Kilometers 640.00 640.00 640.00 640.00 network 30-Apr-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): This estimate is equivalent to 270km of roads that were found in good and fair condition at project closing. Tonga has 640km of total classified public roads so that makes a percentage of 42. Baseline was assumed and never confirmed, and the target of 70 percent was actually achieved after the two active years of the road maintenance program funded by the project (76 percent). Road maintenance was then underfunded from 2013 to 2016 which affected the conditions of the road network and despite the pick up of activities in 2017, at project closing in 2018 the percentage was not back on track. MOIT though has now the capacity to monitor the condition of the road network and prioritize interventions based on an effective road asset management. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Improved road safety Text 0.00 Two road safety Two road safety Achieved management systems campaigns completed campaigns completed and improvement in and improvement in compliance compliance Page 45 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) (%) of seat belt usage (%) of seat belt usage rate in Safe Corridor rate in Safe Corridor demonstration demonstration program program 30-Apr-2008 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Target is considered achieved because three road safety campaigns were completed, a road asset management system is in place and able to point at priority interventions that relate to road safety. The second target related to seat belt usage was not clearly formulated, especially because there is no definition of Safe corridor demonstration program. The legislation on seat belt requirement though is validated at ministerial level and effectively submitted to Cabinet at project closing. A.2 Intermediate Results Indicators Component: Component A - Establishment of a sustainable transport sector policy and institutional and operational framework Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Appropriately skilled staff Text MOI insufficiently All senior positions at Senior positions at Partially achieved recruited by MoI and staffed to fulfill its MOT filled with MoI filled with equipped to fulfill their obligations qualified staff qualitied staff and respective mandate. number of day workers as a percent of total MoI workforce not more than 5%. 04-Nov-2010 31-Dec-2013 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Half of senior position vacancies are filled, including the Director position for Land Transport Division Page 46 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) (legal covenant). 28 percent of total MOIT staff are daily paid staff at project closing. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Percent of grievances related Percentage 0.00 100.00 100.00 100.00 to project benefits resolved. 12-Aug-2015 30-Jun-2018 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Achieved Component: Component B - Compliance with mandatory security and safety standards Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Maritime aids to navigation Text Sea navigation aids (a) Ferry terminal Following aids Achieved (surpassed) installed in outer islands. missing or in disrepair lights installed and installed: 17 units of and ferry terminals in operating during navigational aids; 3 poor condition and embarkation and navigation buoys; 3 without lights disembarkation at navigation towers; ferry terminals; (b) and 3 navigation Access ramps and lights. other ferry terminal improvements upgraded to permit unhindered entry and exit; (c) Maritime navigation aids Page 47 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) acquired, installed and operational. 28-Jul-2008 31-Dec-2011 31-Dec-2018 12-Nov-2018 Comments (achievements against targets): Installation of navigational aids in all five island groups (‘Eua, Tongatapu, Ha’apai, Vava’u and Niuas) and completion of safety works at the ferry terminals: 86 navigational lights, 18 buoys, 16 buoy anchors, 6 towers. Page 48 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) A. KEY OUTPUTS BY COMPONENT Objective/Outcome 1 Stronger policy, planning and regulatory institutions and framework 1. MOT integrated ministry focusing on policy and planning. 2. Transport policy framework developed and subsector policies defined. Outcome Indicators 3. Change management process implemented and creation of appropriate transport policy and planning units. 4. RMF created and operational. 1. Appropriately skilled staff recruited by MOIT and equipped to fulfill their respective mandate. Intermediate Results Indicators 2. Percent of grievance related to project benefit resolved. Component A 1. MOIT functioning as one integrated ministry responsible for compliance and safety oversight of land, sea and air transport in Tonga with all necessary legal approvals accompanying its new responsibilities. Offices unified in one location. Quarry operation divested. Material testing laboratory upgraded and partnership discussion initiated for a joint operation with Tupou Tertiary Institute (TTI). Heavy plan for road works established as a business unit within MOIT. Vehicle inspection and driver’s license business received Cabinet approval in October 2016 to be outsourced. Planning and Urban Management Agency, Tonga Meteorological Services, and the National Emergency Management Office out of MOIT and merged into other ministries. Key Outputs by Component 2. Transport Sector Policy and Planning Framework, National Transport Sector Strategy and (linked to the achievement of the Implementation Plan drafted. TAL core functions and responsibilities developed and Airports’ Authority Act Objective/Outcome 1) submitted to Cabinet. Investment plans drafted in all three sub-sectors and for two airports. Aviation and Maritime Sector Strategic Development Plans drafted. Civil Aviation Act effective. Amendment bills and regulations drafted: port management bill, road bill, traffic bill, amendment to port authority bill, amendment to wharves bill traffic regulations amendment. 3. About 70% of vacancies have been filled according to the strategic staffing plan associated with the change management process. About 50% of MOIT senior position vacancies are filled including the Direction position for LTD (legal covenant). Core MOIT divisions created for Maritime and Ports, Civil Aviation, Land Transport, Policy and Planning, Building, Corporate Services. 4. Study proposing institutional arrangements and funding options for sustainable road maintenance. Page 49 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Component B 5. Aviation sector legislation and regulatory framework review. 6. Support provided by training management advisor. Component C 7. RMF created and replenished with around TOP 10.73 million for the last year of project implementation (2017-2018) corresponding to 43% of maintenance needs (and beyond the 20% target). 8. Support to the development of an adapted road asset management system. 9. Transport sector review. 10. Support provided by relevant experts and advisors for the preparation of the relevant legislation to implement reforms. Component D 11. General and specific support provided to build capacity (e.g. through Maritime advisors, Technical advisors on roads, etc.) and enhance accountability and transparency (e.g. through audits). Objective/Outcome 2 Improved safety and security facilities and compliance with international standards 1. ICAO certification for Fua'amotu airport. Outcome Indicators 2. Safe maritime systems in place for maritime travel. Intermediate Results Indicators 1. Maritime aids to navigation installed in outer islands. Component A 1. Investment plans drafted for Fua’amotu airport and for the maritime sector, contributing to the identification and prioritization of needs to meet the international standards. Key Outputs by Component (linked to the achievement of the Component B Objective/Outcome 2) 2. Aviation sector legislation and regulatory framework review and strengthening of the regulatory oversight of the aviation sector. 3. TA and works supporting obtention of ICAO certification for Fua'amotu airport, which continues to be effective, with regular updates of the Airport certification manual and training undertaken as needed. Page 50 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) 4. Installation of navigational aids and safety equipment at airports in Tongatapu and Ha’apai; Construction of a new fire station at Fua’amotu airport and rehabilitation of the access road, expansion of terminal building and screening area with replacement of security screening equipment and installation of new emergency power generator. 5. Maritime policy frameworks reviewed to ensure strong compliance with IMO regulations, assessment of maritime safety (including of passenger vessels specifically) and detailed design for safety works and maritime safety works. 6. Installation of navigational aids in all five island groups (‘Eua, Tongatapu, Ha’apai, Vava’u and Niuas) and completion of safety works at the ferry terminals: 86 navigational lights, 18 buoys, 16 buoy anchors, 6 towers, in addition to pavement and capping beam works, concrete slab construction. 7. Equipment for the Tonga Maritime Polytechnical Institute and one working boat for the Niuas delivered. 8. Development and provision of a coastal radio watch system with associated training. 9. Operations manuals developed for MPD and CAD. 10. Safety training delivered including with firefighting training equipment, fire hoses, etc. 11. Road safety audits and works completed on the Airport Nuku’alofa main road 12. Safety campaigns completed in the road sector and the maritime sector. 13. Legislation on seat belt requirement submitted to Cabinet. Compo C 14. Road materials testing laboratory received some equipment, hardware, upgrades and training. 15. Traffic counts completed. 16. TA from road safety advisors and media consultants. Objective/Outcome 3 Greater domestic capacity for road rehabilitation and maintenance 1. Consultants/contractors capacity: consultants as well as small and medium domestic contractors with capacity for implementing effective road maintenance. 2. Number of km of roads under regular maintenance. Outcome Indicators 3. Number of rural roads rehabilitated (core). 4. Number of non-rural roads rehabilitated (core). 5. Roads in good and fair condition as share of total classified roads (core). 6. Improved road safety management systems. Page 51 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Intermediate Results Indicators N/A. Component A 1. Study proposing institutional arrangements and funding options for sustainable road maintenance. 2. Domestic contractors and consultants trained in road maintenance techniques, business management, bidding knowledge, etc. Otta seal method introduced as an effective low-cost treatment for low-volume roads, using aggregates available from quarries in Tongatapu and the outer islands. Eight active companies bidding on road maintenance works. 3. Road network condition survey completed. 4. Sustainable road maintenance planning and investment plan drafted. Key Outputs by Component (linked to the achievement of the Component C Objective/Outcome 2) 5. 77 km of roads have been designed, supervised and maintained by Tongan companies. 6. 488 km of roads are under regular maintenance. 7. 40 km of rural roads rehabilitated under the project, 5 km on non-rural roads rehabilitated. 8. 42% of total classified roads in good and fair condition (corresponding to 270km out of 640km classified public roads). 9. To support these outputs TSCP financed at least 11 Otta seal contracts involved over two years (for a total of more than TOP 4.0 million), 14 routine maintenance contracts involved over two years (for a total or more than TOP 2.7 million) 10. Three road safety campaigns completed. Page 52 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Julie Babinard, Pierre Graftieaux Task Team Leader(s) Cristiano Costa e Silva Nunes Procurement Specialist(s) Stephen Paul Hartung Financial Management Specialist Robert J. Gilfoyle Financial Management Specialist Christopher R. Bennett Team Member Penelope Ruth Ferguson Environmental Specialist Ian Douglas Greenwood Team Member Ross James Butler Social Specialist Nicholas John Valentine Environmental Specialist Sam William Johnson Team Member Caroline Ruth Holo Team Member Page 53 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) A. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY07 1.777 20,235.34 FY08 15.133 259,577.88 FY09 0 -1,117.12 Total 16.91 278,696.10 Supervision/ICR FY08 0 15.00 FY09 2.900 163,196.63 FY10 7.225 116,955.54 FY11 34.488 198,683.94 FY12 35.439 226,995.71 FY13 25.855 214,455.74 FY14 31.073 204,911.29 FY15 22.971 107,038.88 FY16 10.870 67,374.26 FY17 16.835 105,009.35 FY18 17.338 145,168.25 FY19 9.687 55,685.63 Total 214.68 1,605,490.22 Page 54 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 3. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (per cent) A - Establishment of a sustainable transport policy, 1.00 1.71 171 percent and institutional and operational framework B - Provision of high priority strategic investments required to meet with mandatory safety and 2.73 5.82 213 percent security standards required under in international agreements, treaties and obligations. C - Further investments consistent with the policy/planning frameworks and investment plans 0.60 7.73 1,297 percent developed in Component A for a more sust ainable transport sector D - Provision of Project 0.63 3.69 586 percent implementation support Unallocated 0.49 .74 149 percent Total 5.45 19.69 355 percent Page 55 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 4. EFFICIENCY ANALYSIS 1. Cost-benefit analysis approach on the physical investment activities. The project covered investments in the three transport sub-sectors: land, maritime and aviation. The efficiency analysis and impact quantification exercise for the ICR of the project is based on a cost-benefit analysis (CBA), which follows the conceptual framework outlined in the PAD. However, because there was no explicit CBA conducted at appraisal stage, there are no comparators for the EIRR and NPV. For the ICR, the analysis covers the time horizon of 20 years (2009-2028), assuming the discount rate of 3.2% and standard conversion factor of 0.90. 11 2. In the land transport/road sub-sector, the project achieved the expected efficiency from the improved vehicle operating cost (VOC), reduced accidents, and avoided emergency reconstruction due to improved climate resiliency. Key assumptions include the average daily traffic survey done in 2017 for the Tonga Climate Resilient Transport Project (TCRTP) assuming annual growth rate of 1.5%; VOC improvement of 2 US cents per vehicle-kilometer, based on estimation from HDM-4 model; the estimation of cost of road injuries and fatalities based on estimations from International Road Assessment Program (iRAP); and the avoided reconstruction works of US$ 2 million which is assumed to happen in 2020 in without-project scenario. The investment started in 2013 with the stream of benefits starting from 2017 when the works completed. The economic internal rate of return (EIRR) for the road sub-sector at completion is estimated to be 12.4% with net present value (NPV) of approximately US$6.79 million. 3. In the maritime sub-sector, the project achieved the expected efficiency from the improved port infrastructure which allows port operator to enhance their operations, both for passenger vessels and cargo handling. Key assumptions include the volume of passengers and cargos based on 2014-16 statistics on maritime traffic on domestic ports, assuming population growth rate (of 0.8% per year) for passengers, and ½ of Tonga’s trade growth rate (which is 3.8%) to be conservative in the longer run; and the estimated total value of cargo (US$674 per freight ton) is based on general shipment statistics collected by the U.S. Department of Transportation. The investment started in 2013 with the stream of benefits starting from 2016 when the first works completed. Raising awareness on safety and compliance issues, and close coordination with the private sector (e.g. ship operators) through the project also contributed to improved operations. The EIRR for the maritime sub-sector at completion is estimated to be 15.9% with NPV of approximately US$6.27 million. 4. In the aviation sub-sector, the project achieved the expected efficiency from ensuring compliance with ICAO standards and improving safety and security at Fua’amotu International Airport. This would avoid the potential disruption of flights, which could happen as soon as 2015. It is assumed that the flight disruption, if happens, will shave off the passenger and cargo volumes by 10 percent. Passenger and cargo volumes were obtained from the Airport Authority’s statistics for 2015-17. The EIRR for the aviation sub-sector at completion is estimated to be 19.9% with NPV of approximately US$1.32 million. A sensitivity analysis was also conducted for different timing of the potential disruption, as well as the size of disruption (i.e. percentage of demand loss), to test the robustness of the result (See Figure 7 below). 11 Following World Bank’s Guidance Note on Discounting Costs and Benefits in Economic Analysis of World Bank Projects (May 2016) Page 56 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) Figure 7. Sensitivity analysis conducted for different timing of the potential disruption Aviation EIRR Sensitivity 22.0% Year of 20.0% disruption 2015 Year of Disruption 18.0% 2017 16.0% 2019 2021 14.0% 2023 12.0% 10.0% 8.0% 0.0% 5.0% 10.0% 15.0% % of Disruption Avoided 5. Overall, the project achieved the expected efficiency from all three sub-sectors. The project’s EIRR is at 14.3% and NPV of US$14.38 million. The overall project’s EIRR is a summation of cost and benefit streams from the three sub- sectors. Table 7. Results of economic analysis Road Maritime Aviation Total Project EIRR (%) 12.4% 15.9% 19.9% 14.3% NPV (US$ million) 6.79 6.27 1.32 14.38 6. These results did not consider the impacts of the strengthening of the regulatory framework through the project. In a qualitative way, those impacts are positive and supportive of the efficiency of the project, leaving the transport sector with policies, strategies, investment plans, action plans, reform programs, etc. including some that got approved during project implementation. furthermore, the project trained Government officials to be able to initiate and carry out the same type of upgrades on similar facilities e.g. other airports, other port facilities, other ferry terminals, other road sections, etc. 7. Considering the achievements above, the overall efficiency for this project is rated Substantial. Page 57 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS Page 58 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 6. CHANGE MANAGEMENT PROCESS STATUS Table 8. Monitoring and evaluation table dedicated to tracking progress on the change management process Function to be No Status divested 1 Quarry Completed. Outsourced Partially completed. Still operated by LTD at MOIT with a partnership with Tupou Tertiary Institute (TTI) that has not materialize yet. Only independent laboratory in Tonga with recognized certification, able to 2 Testing laboratory perform basic tests of aggregates and concrete that are sufficient for regular operations. Will be further upgraded through TCRTP to conduct more advanced materials tests. 3 Heavy plant Completed. Established as a business unit within MOIT Partially completed. Cabinet approved in October 2016 the outsourcing 4 Vehicle inspection of vehicle inspection Partially completed. Cabinet approved in October 2016 the outsourcing 5 Driver’s license of driver’s license 6 Outer island pilots Not completed. Tender unsuccessful. Fees to be revised Small boat harbor 7 Not completed. Tender unsuccessful. Fees to be revised Vava’u Maintenance of 8 Not completed. Tender unsuccessful. Fees to be revised navigational aids 9 Ship survey Not completed. Tender unsuccessful. Fees to be revised Partially completed. Cabinet approved in October 2016 that the transfer 10 Outer island ports of the outer island ports to Ports Authority be deferred Lease of service Partially completed. Cabinet of previous Government approved the 11 station and vehicle outsourcing. Manual to be designed and tender to be undertaken. repairs Planning and Urban Completed. Moved out of MOIT to join the Ministry of Land, Surveys and 12 Management Natural Resources Agency (PUMA) Tonga Completed. Merged into the Ministry of Meteorology, Energy, 13 Meteorological Information, Disaster Management, Environment, Communications and Services (MET) Climate Change (MEIDECC) National Emergency 14 Management Office Completed. Merged into MEIDECC (NEMO) Completed. Transition from performing design work to performing 15 Building design compliance work Page 59 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 7. MAP AND PROJECT INTERVENTIONS CONSIDERED AT APPRAISAL Figure 8. Project interventions considered at appraisal Elements on distances and accessibility. Tonga consists of five groups of islands in total: Tongatapu, Ha’apai and Vava’u (the three main ones) and Eua and the Niuas. For reference and as elements of comparison, Tonga is located about two-thirds of the way from Hawaii to New Zealand and the combined surface area is four times the size of Washington, DC, USA. 12 The distance between Tongatapu and the Niuas, its furthest group of islands, is about 600km. Vava’u is half way and Ha’apai a fourth of the way. Except for the Niuas, there are boat trips from an island to another twice a week and flights from Tongatapu to the other groups of islands every day, but companies do not guarantee dates and times because of the weather forecast. For the Niuas there is only one boat trip per month and it takes about two days to get there through Vava’u and Ha’apai. There are approximately one to three flights per month to the Niuas and it takes about three hours with a stop through Vava’u. 12 CIA World Factbook data Page 60 of 61 The World Bank Tonga Transport Sector Consolidation Project (P096931) ANNEX 8. SUPPORTING DOCUMENTS (IF ANY) 1. TSCP 2008 Project Appraisal Document, 2010 Restructuring Paper, 2012 Restructuring Paper, 2013 Restructuring Paper, 2014 Restructuring Paper, 2015 Additional Financing, 2018 Restructuring Paper, and associated Financing and Project Agreements and amendments, available at https://hubs.worldbank.org/docs/imagebank/ (type P096931) 2. TSCP Aide-Memoires and Implementation Status Results Reports from 2008 to 2018, available at https://hubs.worldbank.org/docs/imagebank/ for the ISRs (type P096931) 3. 2000 Pacific Regional Strategy, Report No. 20370-EAP; FY06-09 Regional Engagement Framework with the World Bank, Report No: 32261-EAP, FY11-14 Country Assistance Strategy for the Kingdom of Tonga, Report No. 56630-TO; FY17-21 Regional Partnership Framework, Report No. 100997-EAP; Systematic Country Diagnostic (SCD) 2016, Report No. 102803-EAP 4. Tonga 2009 National Strategic Planning Framework; Tonga 2006-2009 National Strategic Development Plan (SDP8); National Infrastructure Investment Plan 2013-2023 5. Tonga Strategic Development Framework 2011-2014 (TSDF I); Tonga Strategic Development Framework 2015-2025 (TSDF II); Tonga 3rd MDG 2015 Report; all available on the Ministry of Finance website at http://www.finance.gov.to/strategiesandplans 6. MOI Corporate Plan 2015-2018; TSCP PST quarterly reports 7. 2009 GOA-GOT Partnership for Development available at https://dfat.gov.au/about- us/publications/Documents/austongdevstrategy2009.pdf 8. Transport sector review, Report MOI/AF/-LTD/IC-C02, June 2017; Assessment of maritime safety conditions of ports and wharves, MOI/AF-MPD/IC-B02, April 2017; Change management process reports (baseline assessment, To Be report, final report MOT/IC/C11) 9. TSCP Evaluation Review, World Bank, 2014; Tonga Transport Sector Safety Review, World Bank, 2014; Paper “From Nothing to Something… Creating a Road Maintenance Culture for Tonga”, Scholtjes, Bennett, Faiz, Visser, Greenwood, World Bank, 2014 (submitted to the 9th International Conference on Managing Pavement Assets (ICMPA9) in Washington, DC metropolitan area, May 18-21, 2015, available at https://vtechworks.lib.vt.edu/handle/10919/56434 10. AusAID Independent Review of TSCP, 2012; Technical Audit of Select Tonga Transport Sector Consolidation Project (General Routine and Periodic Maintenance Contract Works), DFAT, 2014 11. Joint ADB and World Bank Portfolio Review, 2017 12. TCRTP Project Appraisal Document (P161539); Tonga Cyclone Ian Construction and Climate Resilience Project Document Appraisal (P150113); available at https://hubs.worldbank.org/docs/imagebank/ 13. Borrower’s Evaluation Report, Transport Sector Consolidation Project, 2008-2018, Ministry of Infrastructure, April 2019 Page 61 of 61