PRESS RELEASE

World Bank Approves $388 Million for Highway Project to Improve Trade and Road Safety

July 9, 2009



Belgrade, July 9, 2009 — The World Bank Board of Executive Directors approved a $388 million loan today to Serbia for the Corridor X Highway Project. The project will build three missing links on the Corridor X highway, improve road safety and support better management in the transport sector. This loan is the largest ever World Bank loan to Serbia.

The road network in Serbia represents a major asset for the country, but the condition of the network is far below European standards. In international comparisons, Serbia has scored poorly in terms of the quality of its infrastructure. In terms of road infrastructure more specifically, a recent survey, financed by the World Bank, revealed that whilst one third of the road network is in good condition, primarily the main and regional roads, over half the road network is in poor or very poor condition.

In addition, the level of injuries and fatalities caused by traffic accidents is tragically a growing social and economic cost for the country. The latest available data for 2008 shows a total of 16,651 road accidents on Serbia roads, involving nearly 900 fatalities, and over 22,000 injuries. Serbia’s road safety performance is over five times worse than the best performing EU countries.

This program will make a major difference both to the users of the road, with faster, safer journeys, and the people who live along the roads, removing the danger of high levels of traffic from the center of communities, improving access to essential social services, and increasing employment opportunities.

"The Corridor X Highway Project will reduce the cost of transport for all goods, thereby reducing the cost of imports and will also contribute to making exports more competitive,” said Richard Martin Humphreys, the Task Team Leader for the project. “The project will make a major difference both to the users of the road, providing faster, safer journeys, and the people who live along the roads, removing the danger of high levels of traffic from the center of communities, improving access to essential social services, and providing employment opportunities."

The government recognized the integration of the Serbian transport network with the core regional network as a key policy objective for the economic and social development of the country.

"In these difficult times, the program will make a significant contribution to the Serbian Economy," added Simon Gray, the World Bank country Manager in Serbia. "This investment will support employment, both directly in the construction phase and indirectly through increased capital expenditures in the Serbian economy. It will ensure that Serbian construction companies adversely affected by the international economic crisis have a chance to increase activity and it will indirectly benefit numerous small businesses in Serbia and in the region and more widely."

The Project will consist of four components:

Component 1 - The M-1 road to FYR of Macedonia (E-75) – Corridor Xd. This component involves the construction of two sections of motorway totaling 31.9 km between Grabovnica and Grdelica (5.6km), and between Vladicin Han and Donji Neradovac (26.4km) (Corridor Xd);

Component 2 - The M 1-12 Road to Bulgaria (E-80) – Niš – Dimitrovgrad - Corridor Xc. This component involves the construction of 8.67 km of motorway around Dimitrovgrad;

Component 3 - Road Safety: This component will support the implementation of the new Road Safety Law (passed 29 May) in the establishment of a Lead Agency, the development of a national road safety strategy, and the creation of a road safety performance framework; and

Component 4 - Implementation Assistance and Institutional Support: This component will provide support to implementation, including the supervision of the civil works, the supervision of the environmental and expropriation aspects of the project, and other necessary operational expenses.

With the full agreement of counterparts, this project also introduces the innovative step of two layers of technical audit to ensure the quality of the works – one supported by the loan and one paid directly by the Bank – to ensure that the money from the loan is spent on what it is meant to be. Further technical assistance will be provided to develop a reform action plan for the reform of the Public Enterprise Putevi Srbije, and after Government approval, the necessary support to implement it, to improve the management of the sector.

Corridor X Highway Project Q & AQ: What is the current situation?

Serbia is crossed by the important Pan-European road network Corridor X, and its constituent branches Belgrade-Budapest; Niš-Sofia; and Niš- FYR Macedonia, and which together form part of the South East Europe Transport Observatory (SEETO) ‘core network’. These branches amount to some 792 km in Serbia, and collectively represent the spine of the Serbian road network. However, despite their importance, nationally and internationally, currently not all sections of Corridor X in Serbia are of Motorway Standard. The key missing links on Corridor X on the road network in Serbia:

The construction of the second 2-lane carriageway on 118 km of motorway between Horgoš - Novi Sad (Corridor Xb);

The construction of a motorway on 98 km of the section of corridor between Niš and the border with Bulgaria at Dimitrovgrad (Corridor Xc);

The construction of a motorway on the corridor between Grabovnica and the border with FYR Macedonia (Corridor Xd); and

The completion of Sections 1-6 of Belgrade Bypass, which would form an important section of Corridor X.

In international comparisons, Serbia has scored poorly in terms of the quality of its infrastructure. One recent report noting that infrastructure is perceived amongst business men to place Serbia at a competitive disadvantage in doing business, compared to selected regional comparators. Serbia ranked 83rd out of 134 countries for the overall quality of infrastructure.

In terms of road infrastructure more specifically, a recent survey, financed by the World Bank, revealed that whilst one third of the road network is in good condition, primarily the main and regional roads, over half the road network is in a poor or very poor condition.

In addition, the level of injuries and fatalities caused by traffic accidents is a growing social and economic cost for the country. In the years 2003-2008, there were 5,232 fatalities and over 100,000 injuries resulting from road traffic crashes on the road network in Serbia. Injury and fatality on this scale makes this an economic and social problem, as well as a human tragedy. The latest available data for 2008 shows a total of 16,651 road accidents on Serbia roads with 22,275 injuries and 897 fatalities.

Q: What is the position of the government?

The Government regards the development of Corridor X as its key priority and wishes to develop and complete the core road infrastructure on Corridor X within the next 4 years. The objective is to facilitate sustainable economic development and ensure that the country capitalizes on its geographical position to continue its development as a key transit country on the Trans-European Network. The National Infrastructure Council prepared an action plan for infrastructure construction period for the completion of the missing links on the road Corridor X in Serbia.

Q: What is the role of the World Bank?

The Government asked the World Bank to act as lead partner amongst the donors in the preparation of the entire program, and contribute in parallel to the financing of the program. The total cost of the Corridor X program is estimated at EUR 1.3 billion, of which the World Bank will be contributing EUR 275.2 million (US$388 million equivalent) in a project co-financed with the Government of Serbia with parallel financing anticipated from the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and the Hellenic Plan for the Economic Reconstruction of the Balkans (HiPERB). The World Bank loan amount represents the largest ever World Bank loan to Serbia.

During project preparation the World Bank led the assessment of the technical and economic viability of the project, the review of the social and environmental aspects of the project, and the review of the proposed design.

Q: What will the World Bank finance?

The World Bank funded project will consist of the four components:

Component 1 - The M-1 road to FYR of Macedonia (E-75) – Corridor Xd. This component involves the construction of two sections of motorway totaling 31.9 km between Grabovnica and Grdelica, and between Vladicin Han and Donji Neradovac (Corridor Xd);

Component 2 - The M 1-12 Road to Bulgaria (E-80) – Niš – Dimitrovgrad - Corridor Xc. This component involves the construction of 8.67 km of motorway on a section of the corridor between Dimitrovgrad and the border with Bulgaria;

Component 3 - Road Safety: This component, inter alia, will support the establishment of a Lead Agency in the form of the National Road Safety Council (NRSC), the development of a national road safety strategy, and the creation of a road safety performance framework; and

Component 4 - Implementation Assistance and Institutional Support: This component will provide assistance to the implementation entity, K10DOO, involving, inter alia, the supervision of the civil works, the supervision of the environmental and expropriation aspects of the project, independent technical audit of the works, and other necessary operational expenses. Further technical assistance will be provided to develop a reform action plan for the reform of PEPS, and after approval, support to implement it.

Q: What this project means for Serbia?

This project represents a substantive first step to the completion of the two missing links on the motorway network on Corridor X in Serbia, and making a significant contribution to the improvement of both road safety and the management of the road network in Serbia.

It will also improve access to essential social services, and employment opportunities for people who live along the corridor. It will reduce the cost of transport for all goods, thereby reducing the cost of imports and contributing to making exports more competitive. The program is likely to lead to more transit traffic, which itself will bring additional benefits to Serbia in toll revenues, and expenditures on associated services for travelers.

The program will also make a substantial contribution to the Serbian Economy in the short run at the time of the global economic crisis. This investment will generate new jobs, both directly in the construction phase and indirectly through the expenditures of the newly employed. It will give the chance to Serbian construction companies to employ their capacities; and it will indirectly benefit numerous small businesses in the region and more widely.

Q: What the World Bank is responsible for?

Under implementation, the Bank will be formally responsible only for the supervision of those sections where it is contributing to the financing, but at the request of the Government, harmonized bidding documents, and World Bank Procurement Guidelines, will be followed by all the IFIs.

In addition, the other IFIs agreed to harmonize financial management requirements, reporting requirements, and safeguard policies and procedures with those of the Bank for their respective parallel financed sections.

Q: What alternatives were considered in the design of the new sections of the highway?

Alternatives considered and reasons for rejection:

1. A half motorway was considered and rejected. At feasibility stage, the prospect of transverse phasing, either only constructing half a motorway, or constructing half structures, and normal profile road way, was investigated. One section of Corridor X between Horgoš and Novi Sad was constructed in this manner and so there was country experience. However, both options were rejected, as the incremental discounted net benefits were found to be modest. In addition, greater knowledge about the safety implications for a half motorway vis-à-vis a full motorway in Serbia and elsewhere, means that this option was rightly rejected.

2. A reduced profile cross-section was considered. The relatively modest traffic volumes the Corridor X suggested that the appropriate technical solution might be a four lane motorway for low traffic volume (defined as less than 10,000 vehicles per day), proposed in the French Motorway Standards. The actual lane width provisionally proposed was 3.75m in the two outer lanes, 3 meters in the two overtaking lanes, with a 1 meter paved shoulder and a median of 4 meters. This options was provisionally estimated to reduce the costs by between fifteen and seventeen percent. However, this option was rejected for two reasons: (i) strong Borrower preference for the full profile despite greater cost and slightly reduced economic viability; and (ii) the proposed narrow inner lane is currently incompatible with Serbian law.

3. The original technical alignment for the E-80 was rejected at public consultation stage. The original alignment for the E-80 along 28 km in Pirot area, and along 7 km in Dimitrovgrad area, was rejected during consultation for the Spatial Plan. The following changes were proposed, accepted, and finally adopted in 2006: (i) instead of constructing the motorway along the existing road along Nisava river in Pirot, a new alignment in the mountains to the south was selected – although the Government is currently considering reopening discussions on the alignment; (ii) instead of constructing the motorway to the south of Dimitrovgrad, a new alignment was selected to the north of the town. These changes reflected the concern of affected municipalities, who based on the information presented, felt that their water supply might be affected by the proposed alignment. As a result, a new alignment was identified through difficult terrain, with unstable slopes, raising costs markedly. Several other revisions of the proposed alignment were made to reduce environmental and social impacts, for example creating a new alignment adjacent to the Sicevo Gorge Nature Park, rather than following the existing road which passes through the Park.

Q: How the Corridor X Highway Project will affect road safety?

This program will make a major difference to the safety of road users, and the safety of people who currently live in communities along the existing road.

With Euro 2.1 million (US$ 2.9 million), the project will help (i) road safety capacity building to support the establishment of the National Road Safety Council; (ii) creation of road safety performance framework; (iii) developing and launching a national road safety strategy; (iv) preparation and piloting of two multi-sectoral road safety pilots; and (v) the procurement and establishment of road safety database and other road safety equipment.

Q: How the environment will be affected by the Corridor X Highway and how it will be protected?

The environment along the proposed road alignment along the section of the corridor towards Bulgarian border is not classified as sensitive or particularly valuable in terms of biodiversity and ecological significance, except within the vicinity of Sicevo George, the Jelasnica Gorge and the Grdelica Canyon (not a protected area but with ecological and biodiversity significance as a refuge for tertiary vegetation where significant populations of some endangered plant and animal species are known or likely to be found).

The new highway alignment passes some 300 m away from the border of the Nature Park, through the Jelasnica gorge (following the existing regional road) and through the Grdelica Gorge. Appropriate measures will be taken to avoid possible negative impacts during the construction and operation phase based on requirements identified by the Institute for Nature Protection and the results of further site investigations to be undertaken as part of detailed design. Soil pollution and degradation in the project area is not considered as major problem during the construction phase and adequate protection measures have been included in the Framework Environmental Management Plan (EMP) and will be elaborated further in the site-specific EMPs. Locations of the possible borrow-pits will be determined by the contractor implementation plan and standard engineering measures will be used to close, restate and re-cultivate those areas after decommissioning. The analysis of noise levels show that during the project operation the prescribed noise levels will be exceeded outside the highway corridor at certain places. For those areas the installation of approximately 4738 kilometers of roadside noise-proof structures will be installed together with passive measures (e.g. sound proof windows) where necessary. There are no potential large scale negative impacts on water quality, as the project includes engineering measures to prevent temporary pollution from the road construction (by dust, physical damage to river banks and accidental spills) and during operation through collection of run-off and retention areas in sensitive locations.

The only potentially significant negative impact on fauna would relate to the prevention of migration due to construction of a fenced highway. This will be mitigated by the introduction of designated box culverts and piped underpasses to serve as especially designed crossings for animals in areas where the larger animal groups exist, as well as along the already observed routes. OP 4.11 is not triggered because; in accordance with Serbian law the alignment was selected to avoid negative impacts on known cultural heritage sites. In the vicinity of the new highway, there are over 30 objects that belong to category of cultural monument. Additional site investigations will be carried out and mitigation measures will be included in the site-specific EMPs as needed to ensure there are no negative indirect impacts on these sites. In addition, a set of preventive protection measures has been designed to apply to chance finds. Those measures include immediate stop of all works in progress around the new finds, adequate fencing to prevent unauthorized access and immediate notification of the Serbian Institute for Protection of Cultural Monuments.

The borrower prepared two corridor level Environmental Impact Assessments, which can be found at: www.koridor10.rs. 

Q: How resettlement issues will be addressed on the sections financed by the World Bank?

While the Serbian law regulating resettlement is considered to be among the best in the region, there are still gaps pertaining to the international best practice and the World Bank standards. In order to address these gaps, Serbia has developed Resettlement Policy Framework (RPF) for the Corridor X, including the sections financed by the World Bank. The formal responsibilities of the World Bank in this respect only apply to the sections that it is financing in the whole or in the part.

The RPF describes the policies, procedures and processes that will be followed throughout the program and the project in the course of compensation/resettlement of persons affected, with and without legal title, whose land/properties or businesses are acquired for the execution of the program and the project. The full text of the RPF can be found at www.koridor10.rs.

The main designs for all the road sections on Corridor X financed by the World Bank, as part of the broader IFI parallel financed program, are not yet finalized. As a result, the exact amount of land required, the actual number of project affected persons, both with and without legal title and the extent of losses for each project affected individual/household were not known at the time of the preparation of the RPF. In the absence of such information, it was only possible to prepare a generic policy framework that lays down the resettlement policies, procedures and institutional arrangements that must be followed for all expropriation in the project. As detailed engineering plans become available on a section by section basis, detailed section specific Resettlement Action Plans (RAP) will be prepared on the basis of the RPF and the applicable WB safeguards policies.

Q: How the expropriation issues will be addressed on the sections of the Corridor X Highway financed by the World Bank?

All persons affected by the project (private and public, individual and businesses) entitled to be compensated for land acquired, losses, structures or damages will receive their full entitlement at the time of the acquisition of the land, or their grievance registered in accordance with the Resettlement Policy Framework, before any works or construction activities are allowed to commence on the land plots in question.

In the case of any disagreement over ownership and/or compensation amounts, Public Enterprise of Roads Serbia, on behalf of Corridor X Company, should transfer the sum corresponding to the assessed fair compensation, which must also be satisfactory to the World Bank, to either the account of the relevant local authorities, or to a court account, or arrange a bank guarantee with a commercial bank in the name of the project affected person, while the case is pending, prior to starting any construction activities on the affected land plots.

Q: What kind of the World Bank loan will finance Corridor 10 Highway Project?

The lending instrument is a Specific Investment Loan (SIL) in the amount of EUR 275.2 million (US$388 million equivalent). The Borrower selected an IBRD Flexible Loan at 6 month LIBOR for Euro, plus variable spread with twenty (20) years of maturity including eight (8) years of grace period.

Media Contacts
In Belgrade
Vesna Kostic
Tel : (+381) 30 23 723
vkostic@worldbank.org



PRESS RELEASE NO:
2009/07/09/RS

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