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Speeches & Transcripts

Interview of Richard Martin Humphreys, World Bank Program Team Leader of Transport and Artan Guxho, World Bank Project Officer to Monitor Magazine

February 1, 2010

Richard Martin Humphreys Monitor Magazine Albania

Transcript

Q: What is the total amount of the World Bank financing on national roads in Albania?

A: Since 2000, the World Bank has invested close to US$ 170 million in the transport sector in Albania, with  ninety percent of that going to the road sector. It has also leveraged in a further USD 300 million from other donors into project and programs designed by the World Bank, together with country counterparts. We are currently financing, together with the OPEC Fund for International Development (OFID), the construction of the US$ 45 million Milot- Rreshen road, a section of the new highway between Durres and Morine. The following represent the specific interventions in the road sector:

  • Transport Project US$ 18 million, to support the construction of Fushe Kruje - Milot road (Albania North-South Corridor) and construction of 6 bridges (the Albania East-West Corridor)
  • National Roads Project US$ 25 million to construct Milot - Lezhe (Albania North-South Corridor) road and Librazhd- Qukes (the Albania East-West Corridor)
  • Emergency Road Repair Project US$ 14 million to carry out emergency intervention to road sections (mainly in the North) damaged due during/after Kosovo crisis.
  • Trade and Transport facilitation in South East Europe US$12.3 million to support rehabilitation and completion of road and bridge works at Lezhe Connection, Fushe Kruje - Mamurrasi sections (North-South corridor) and Librazhd - Qafe Thane section (East-West Corridor)
  • Road Maintenance Project US$ 30 million to maintain about 500 km of national roads (and 500 km of regional/rural)
  • Transport Project US$ 25 million, co-financed with OFID US$ 15 million, in a US$ 56 million project, to construct the Milot-Rreshen road section.
  • Secondary and Local Road Project - US$ 20 million, co-financed with OFID US$ 15 million, to rehabilitate 110 kms of regional, and some local, roads across Albania.

Q: On what basis does the WB decide to finance a project on national infrastructure?

A: The decision on which project (s) to support starts with the country's own vision of its development goals and needs, which is set out in the National Strategy for Development and Integration, or another similar integrated, country owned and country led strategy.  This leads to the joint development of a Country Assistance, or Country Partnership Strategy, which is prepared in collaboration with the government, civil society, development partners, and other stakeholders.  The objective of this process is to ensure that the Bank's resources and efforts are focused on those areas, where the Bank Group can best assist the respective country to achieve its sustainable development and poverty reduction goals. The role of infrastructure in the attainment of these objectives is irrefutable.

Q: Is the Bank interested to invest on Albania's national roads and why?

A: The World Bank is and will remain interested in providing support to our client countries to help them attain their sustainable development and poverty reduction goals. In Albania's case, there is recognition that the poor state of the infrastructure represents a major constraint to international trade, foreign direct investment, tourism, economic growth, and access to essential social services and employment opportunities for many inhabitants in rural communities.  As two examples: (i) the overall quality of the road network is poor compared to regional comparators, with only 39 percent of the road network paved in Albania, compared to 52 percent in Bosnia and Herzegovina and 62 percent in Macedonia; and (ii) In 2002, only 10 percent of the national road network was found to be in good condition, with an additional 22 percent in fair condition, and the remaining 68 percent in poor condition. However, construction, or reconstruction, of roads is only half the story - the maintenance of the new or reconstructed road and the investment made, is also a priority for the World Bank. The organization responsible for managing the network, and ensuring the maintenance, must have the tools, resources, and autonomy to fulfill its role.

Q: Return rate of the investment is an important criteria. Based on their data of the General Directorate of Roads, says that some of the most important roads under construction in Albania are expected to have a high ratio of return rate, 12%-22%? How do these data compare with the region?

A: The internal rate of return is an important decision criteria, reflecting the discount rate necessary to ensure that the discounted stream of benefits (present value of the benefits) over the life of the asset is exactly equal to the discounted stream of costs (the present value of the costs).  The exact return on any project depends on the scale of benefits, and the scale of the costs - new construction generally costs more, so the returns are generally less than say, rehabilitation. The Internal Rate of return (IRR) for the latter can range from 20-90 percent, depending on the type of intervention, the traffic levels, and the context.  The IRR for new construction tends to be lower for obvious reasons.

Q: What is the WB normal rate of return for the investments it finances?

A: The World Bank uses a twelve percent discount rate in all its investment projects.  Since the discounted stream of benefits (present value of the benefits) over the life of the asset must exceed the discounted stream of costs (the present value of the costs) to get a positive Net Present Value, for a project to be regarded as economically viable, the internal rate of return must, as a minimum, exceed twelve percent for all Bank investment projects in infrastructure. The average IRR to rehabilitation projects supported by the World Bank over the last 10 years, worldwide, has generally been in a range of approximately 20-45 percent.

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