NATIONAL ROADS IMPROVEMENT AND MANAGEMENT PROGRAM (NRIMP) GAC LESSONS & CASE STUDY Siele Silue Senior Transport Specialist GAC Workshop, 11/30 – 12/1

Philippines Transport Sector  Transport critical in an archipelago such as the Philippines  Transport system based largely on roads and inter-island shipping  Access relatively high than compared with other developing Asian countries… 2 Road Density CountryKm/1,000 people Km/1,000 sq. km Philippines Indonesia Malaysia Thailand Vietnam Source: World Development Indicators, 2007

Philippines Road Sector  ….but low quality of services emerged as a key constraint to competitiveness and growth 3 Note: 1=lowes, 7=highest quality. Rankings are shown for developing East Asian economies (darker bars), and advanced East Asian economies (lighter bars). Vertical line is the average for all 125 surveyed countries, both within and outside of East Asia. Country% Philippines21 Indonesia58 Malaysia78 Thailand99 Vietnam25 World Competitiveness Report % of Total Roads Paved Source: World Development Indicators, 2007

Philippines Road Sector  Inefficient resource utilization  Weak institutional, policy and governance framework  Investment in upgrading and expansion of network has been low  Public spending for roads <1% of GDP; fast growing economies in the region invest over 2.5% of their GDP for expansion alone  Private sector investment low due to poor investment climate and inability to come up with necessary financing 4

National Roads Improvement & Management Program (NRIMP)  Adaptable Program Loan (APL), launched in 2000, 3 phases,10 years  Project objective:  Establishment of road management arrangements which ensure the upgrading and preservation of the National Road System (NRS) in an environmentally, socially and financially sustainable manner  3 phases total US$680 million 5

Problems in NRIMP – I  TTL found in 2003 indications of collusion in the bidding of two large packages and rejected award of contracts.  Two further rounds of bidding in 2004 and 2006 revealed similar signs and also rejected.  INT were asked to investigate by TTL in Both of the packages were rebid three times and eventually cancelled. No contracts signed, no funds lost. 6

Problems in NRIMP – I  INT concluded investigation in 2007, cartel of contractors engaged in corrupt and collusive practices in all three rounds of bidding  INT found evidence that competition in roads construction was undermined and prices inflated by up to 30 %  Possible that several large international firms will be debarred by WBG as a result 7

Case Study  Brainstorm GAC risks the sector may be facing using the information you just learned and the case study provided  Identify potential risks and vulnerabilities for the sector – key decisions and value-added points where things could go wrong  Brainstorm GAC risks the project may be facing using the information you just learned and the case study provided  Each table will appoint a presenter and a notetaker 8

Sector Governance Risk Assessment – Value Chain 9

Lessons Learned  In Phase II, special provisions in an Anti-Corruption Strategy were set out to address:  Collusion  Price Rigging & Kickbacks  Evaluation Processes  Implementation Quality & Audit  Financial Management, Internal Controls & Audits 10

Lessons Learned – Actions Taken  Collusion:  Eliminated pre-qualification to enhance competition  Deterrence through a National Investigation into NRIMP  Detection via complaints hotline, Civil Society Observers  Price Rigging:  Improved cost estimation reliability  Bid ceiling pilot  Strong supervision  Evaluation Process:  An Independent Procurement Evaluation was formed to be a parallel evaluation of bids, build gov’t capacity, and increase transparency for bidders 11