Armenia : MFF - Sustainable Urban Development Investment Program - Facility Concept

Project Name

MFF - Sustainable Urban Development Investment Program - Facility Concept

Project Number

42417-013

Country / Economy

• Armenia

Project Status

Closed

Project Type / Modality of Assistance

• Loan

Source of Funding / Amount

MFF Facility Concept 0056-ARM: MFF Yerevan Sustainable Urban Transport (Facility Concept)

Source	Amount
Ordinary capital resources	US$ 220.00 million
Asian Development Fund	US$ 180.00 million

Strategic Agendas

• Environmentally sustainable growth
• Inclusive economic growth

Drivers of Change

• Gender Equity and Mainstreaming
• Private sector development

Sector / Subsector

• Transport / Urban Transport

Gender

Some gender elements

Description

The government has requested ADB's assistance via an MFF. The strategic approach for urban renewal is fully consistent with ADB's interim operational strategy for Armenia and in line with ADB's own sustainable transport initiative and Strategy 2020. The existence of a strategy, roadmap, policy framework, investment program, and a financing plan justifies the use of the MFF in this case. The impact of the MFF is improved urban environment and local economic conditions, and greater private sector within urban areas. The outcome is efficient, reliable, and affordable urban infrastructure and services provided in Armenian cities. The outputs are (i) urban infrastructure extended, rehabilitated, and improved in urban areas; (ii) appropriate institutional capacity strengthened in Yerevan and secondary cities; and (iii) establishment of skilled and experienced program implementation units in Yerevan and other cities covered under the MFF. The MFF blends more easily physical investments with institutional change and can also accommodate policy revisions. The modality is thus cost effective and provides a better basis for a longer term partnership in the sector.

Project Rationale and Linkage to Country/Regional Strategy

Armenia has a relatively small population (3.24 million), but is the most urbanized country in the Caucasus. Urban areas, with 2.1 million people or 64% of the total population, already account for most of the country's economic activity and employment. Armenian urban areas fall into four categories (i) Yerevan, the capital city with 1.12 million people; (ii) mid-sized secondary cities such as Gyumri, Kapan, and Vanadzor; (iii) small and medium size cities with important industrial and agro-processing complexes such as Armavir, Artashat, Ashtarak and Ararat; and (iv) cities with high tourism potential such as Dilijan, Jermuk, Sevan, and Tsakhkadzor. These 12 cities account for almost 90% of the nation's gross domestic product, with Yerevan alone accounting for 60%.

Shifting urban landscape. Unbalanced economic growth among regions, posing serious development challenges to planners and policy makers. Some cities are growing fast, others are not. Some house only one industry at best; others struggle to attract one. Even Yerevan has seen change. A gradual collapse of its heavy industry, in the early 1990s, then located in its southern ring, created a rapid shift in the location of commercial and residential centers, and corresponding changes in the demand for metro, tramway, trolleybus and bus network services. These changes have increased motorization, but also led to poor air quality, noise, traffic congestion, loss of green areas, and degraded historical buildings. Many secondary cities have also grown since the 1990s and now share most of Yerevan's problems.

Traffic and road safety concerns. Growth has brought widespread vehicle ownership, which has grown by 40% since 2004. The number of accidents in Yerevan has risen in parallel, from 260 fatalities in 2004 to more than 400 in 2008, with the number of injured more than doubling from 1,500 in 2004 to 3,125 in 2008. This has put road safety on the agenda. Despite improvements in major arteries in the capital, the traffic signal system is outdated and inadequate. Environmental protection is now another priority. Located in Ararat Valley, Yerevan has little natural ventilation, and congestion results in concentration of hazardous substances. Urban transport generated 90% of air pollution in 2009, with carbon dioxide emissions expected to increase by 160% by 2020. The limited number of bridges in Yerevan over the Hrazdan River creates bottlenecks and massive congestion during peak hours. In addition, a city bypass remains uncompleted, disallowing any diversion of passing traffic. Illegal and double parking and poorly enforced traffic laws further constrain mobility. In 2009, traffic exceeded design capacity on more than 20% of the road network, and a further 35% was about to reach its limit. Most of these problems are replicated in other cities.

Inadequate public transport services. The Yerevan public transport system comprises microbuses, buses, trolleybuses, and metro routes. Its public transport infrastructure is aged, and vehicle fleet old and poorly maintained, travelling an average speed of 16 kilometers per hour. The metro network has a single 12.1 km line with 10 stations and a fleet of 70 old carriages. Metro ridership accounts for only 8.2% of total public transport ridership, which stood at 207 million passenger trips in 2009. Today, 85% of the passengers are carried by unsubsidized private microbuses, despite their expensive fares. While minibuses spared Yerevan a severe transport crisis in the 1990s, they now contribute to a chaotic situation that has seen big and medium-sized buses pushed out. Service quality is poor due to overloading and congestion. This shift has severely compromised the financial sustainability of other public transport services and caused investment backlogs for trolleybus and metro, as fares are too low to cover operating and renewal costs. In other Armenian cities, the urban transport issues are similar albeit less dire. They have deteriorating urban road networks with inefficient or nonexistent systems of traffic management and poor public transport that relies far too heavily on microbuses. The transport network needs restructuring, as routes often duplicate others. Service quality is poor and the level of comfort minimal. In tourist centers, urban transport infrastructure is unable to cope with the inflows at peak periods. These limitations are accompanied by rising gaps in the quality of municipal planning, finance and monitoring.

Sector strategy, roadmap, and institutional reform. The national government and Yerevan municipality have invested more than $185 million during 2005-2010 in upgrading urban infrastructure. But these investments are only patching up immediate problems. More investments are needed to make the system viable. Secondary cities are in a similar situation. A strategic framework for urban renewal has been agreed to correct this, and to adopt a systematic approach. This is backed by a roadmap, policy framework and investment plan split into shorter (immediate), medium (2011-2016) and long term (2017-2025) interventions, covering both physical and non physical requirements. The overall investment runs into $960 million for the period 2011 to 2025 -an average capital and recurrent expenditure outlay of around $70 million a year.

Impact

Improved urban environment, local economy and enhanced private sector within urban areas.

Project Outcome

Description of Outcome

Efficient, reliable and affordable urban infrastructures and services provided in Armenian cities.

Progress Toward Outcome

23 kilometers of road links, including two footbridges, five multiple level intersections, and sidewalks for increased road safety have been constructed or rehabilitated in the capital city. Two civil works contracts are still ongoing under Tranche 2. Upon completion, the western bypass of Yerevan city will be operational and will relieve the city from traffic congestions, diverting regional transport of people and goods away from the city center to benefit the economy and livability of the capital.

Implementation Progress

Description of Project Outputs

Appropriate institutional capacity strengthened in Yerevan and secondary cities.

Establishment of skilled and experienced program implementation unit in Yerevan and other cities covered under the MFF.

Urban infrastructure extended, rehabilitated and improved in urban areas.

Status of Implementation Progress (Outputs, Activities, and Issues)

The $120 million program is improving mobility in Yerevan, including through the construction of the city's western bypass, the design of the bus network, and the provision of capacity building for program management within the implementation unit and for transport management within the Yerevan Municipality. Under its two tranches, the program will not benefit secondary cities, per government decision. Secondary cities will benefit from a separate loan.

Geographical Location

Summary of Environmental and Social Aspects

Environmental Aspects

Category B

Involuntary Resettlement

Category A

Indigenous Peoples

Category C

Stakeholder Communication, Participation, and Consultation

During Project Design

Consultations were carried out with all the stakeholders during program preparation and will continue throughout the project cycle. Stakeholder consultations have been held with local residents and civil society at the municipality and in the affected neighborhoods. Stakeholders were informed about the project, and the stream of information will continue during the implementation of the project. Consultations were also held at various levels of government offices such as the Ministry of Economy, Ministry of Finance, Ministry of Environment, Ministry of Culture, municipality, districts, universities, NGOs as well as the donor community (World Bank, EBRD, IEB, Millennium Development Corporation, KFW, Dutch Fund).

During Project Implementation

Local communities were consulted throughout the preparation process to minimize impact, ensure social acceptance, and increase equitability. The process will continue during the implementation of the project. Views and concerns of all stakeholders will be taken into consideration and addressed.

Business Opportunities

Consulting Services

Contracting arrangements will be continuously reviewed, refined and revised to achieve maximum efficiency and cost effectiveness. Under Tranche 1 six consulting service contracts out of eight planned were awarded during 2012-2018. Of the six consulting service packages awarded, three have been completed and three are ongoing. The other two consulting packages are dropped. Under Tranche 2 three of 10 consulting service contracts planned were awarded during 2015-2019. These are for construction supervision, audit, and independent monitoringand are ongoing. The other planned consulting services are dropped.

Procurement

Contracting arrangements will be continuously reviewed, refined and revised to achieve maximum efficiency and cost effectiveness. Key features include: (i) Civil Works for Tranches 1 and 2: Under Tranche 1 two civil works contracts out of four planned were awarded and completed. The two civil works packages not awarded were canceled, as deemed no longer a priority. Under Tranche 2 all the three planned civil works contracts awarded, the contract for constructing the DavtashenAshtarak road link was completed as scheduled, while the other two are ongoing. There are no contracts under Tranche 3, which was initially programmed for approval in 2016, however the government postponed the decision to pursue the tranche due to fiscal consolidation, and the tranche was dropped in 2018 because it was deemed too late to implement it within the MFF availability period. (ii) Goods: under Tranche 1 one contract was planned and awarded.

Contact

Responsible ADB Officer

Karapetyan, Vardan

Responsible ADB Department

Central and West Asia Department

Responsible ADB Division

Armenia Resident Mission (ARRM)

Timetable

Concept Clearance

08 Mar 2010

Fact Finding

09 Mar 2010 to 31 Mar 2010

MRM

14 May 2010

Approval

19 Apr 2011

Last Review Mission

-

PDS Creation Date

06 Jan 2010

Last PDS Update

26 Feb 2022

Funding

MFF Facility Concept 0056-ARM