I am writing this as I travel from Yerevan, the capital of Armenia, towards Tbilisi. We have completed our appraisal of the proposed Lifeline Road Improvement Project (LRIP) and it has been quite a ride–literally and figuratively. This is a US$ 30 million project to improve about 100 km of rural roads connecting communities to the main interstate road network. Normally, it would take 6+ months to prepare such a project, but we have done it in 5 weeks. A memorable experience, but one I hope not to repeat …
I arrived in Yerevan at 06:00 from Munich, after spending the day in Paris interviewing potential junior staff to join my team. It wasn’t too cold, only -10, but with Armenian Christmas just past, and New Year coming up, Republic Square had an enormous Christmas tree, with the lights ordered in the colours of the Armenian flag. There was also a children’s Christmas ‘carnival’, with rides, donkeys and many, many Santa Clauses. This, of course, was not at 06:00 but later in the day when I emerged for a walk!
Armenia is a country which faces many challenges. Not only is it one of the few completely land-locked countries in the world, but its longest borders are with Turkey and Azerbaijan and these are closed due to the conflict with Azerbaijan dating back to 1989.
With a population of some three million, some 26% live in poverty. After the collapse of the Soviet Union the country suffered economic meltdown and its industrial base has never fully recovered. In cities like Vanadzor, a huge chemical city, I was told that only 10% of the capacity is still in use. Over 20% of its national income is from remittances provided by the Armenian diaspora who left after the 1915 conflicts in Turkey, or the economic meltdown of the early 1990s.
The current financial crisis has hit Armenia very badly. Unemployment, especially in the construction sector–just like the USA–has increased rapidly, and remittances have dropped off precariously. Migrant workers, particularly those working in Russia, are returning. Unemployment is something like 20%, but this apparently excludes people who have farms who are classified as farmers. If the latter were included the rate would be much, much higher.
To assist with stimulating the economy and creating jobs, the World Bank is providing financing to the Government of Armenia and as part of this we were requested in mid-December to begin the urgent preparation of an emergency road project.
Emergency projects are a special ‘beast’ in the World Bank. The normal loan process requires a series of missions (visits to the country), meetings for approvals, detailed economic and financial analyses, etc. Depending on the size of the project, the missions alone would consist of (i) Identification – decide what you will be doing; (ii) Preparation – start the work on the technical, fiduciary, etc. aspects; (iii) Pre-Appraisal – check that everything is going as planned; (iv) Appraisal – final agreement on the project. After appraisal you then have the negotiations of the loan and then implementation. My record time was eight months for a project in China.
For this emergency project we essentially rolled everything into one. We worked on the identification and background to the project in Washington D.C. I arrived here on 10 January and by 20 January we had visited all of our 16 roads-not an easy feat in itself-and completed the appraisal of the project, reaching agreement with the government on the project components and activities. Next week I will drive back to Yerevan for negotiations so it will be about six weeks in total.
We were fortunate insofar as the 100 km of roads had been designed under an earlier project so we knew exactly what the government wanted us to do. After recovering on the 10th–the flight arrived at 06:00–we were met by Gurgen from the Armenian Roads Directorate (ARD) to start our field visits: I needed to visit the roads and better understand the local conditions, as well as confirming the appropriateness of the project and the proposed designs. I was joined by Gibet, who is a junior highway engineer with the Bank, and Satoshi who is an infrastructure specialist, focusing on the social dimension of projects. Satoshi is deep in discussion with ARD in the photo below, with lake Sevan in the background.
The first rule of field visits in Armenia is that one should not do them in winter. During our two days the lowest the temperature reached was -23 C. That is about -10 F. Coupled with the wind it was cold. And this from a Canadian. Satoshi especially suffered: he is from tropical Okinawa. He said that he likes the hot summer much more so we agreed we would cycle from Yerevan to Lake Sevan (a panorama of which is below) during our mid-year mission. Gibet said she would be in for the ride back to Yerevan – which is some 70 km, most of which downhill. Neither is keen to go for a swim as the lake is very cold, so that will be probably left to me!
We visited six of the road sections over the two days and confirmed that the project was definitely needed. The photos below are a few examples of the roads we saw. There was grinding poverty in the villages–worse than I saw in many places in China–and the roads were often in shocking condition. I could see why an earlier study reported that farmers often could not get their products to market, of if they could, the costs were high and the products were often heavily damaged.
It was apparent that a lot of the problems were due to insufficient drainage. Pavements do not like water and so it necessary to build a good structure, but ensure that water it kept out. This is done by a ensuring good drainage, but also through techniques such as raising the embankment, having shoulders, etc. Maintenance is, of course, essential. The photo below is a somewhat extreme example of the problem. I joked that we should have brought our fishing rods. Except since the surface was frozen we would have needed a saw as well. However, in defence of the Armenians, they have a small population, are not a wealthy nation, and simply do not have the funds to maintain the infrastructure, much of which was financed by the Soviet Union at a time when economic efficiency did not matter.
The other lasting impression was how difficult life must be for so many of the villagers. Or at least that is what they are called here … with over 4,000 people in some of the villages they would be fair sized towns in New Zealand. There is such grinding poverty that I wondered why people stayed. No jobs. No skills. So they stay. It is apparently very common in the Caucasus countries that you are born, live and die in the same place, although less so now.
In some places, we could see long-abandoned houses, churches, and factories. It wasn’t clear if this was caused by the 1989 earthquake, or the post-independence crises. Either way, there is a palpable loss of infrastructure and lack of opportunities in rural Armenia. It is a real tragedy – yet the Armenians are impossible to keep down.
Having been convinced of the value of the project, the next step was to confirm what types of investments were appropriate. Designs had been prepared earlier with the expectation of financing from the US Millennium Challenge Corporation, but an increase in cost of construction and an unfavourable change in the US$-Dram exchange rate meant that there were not enough funds for the road program. We therefore ‘inherited’ designs for 14 of our 16 roads that were done in 2007.
The Armenians are very strong engineers and the designs were basically sound. The only major point of difference was that the national standards followed the old Soviet Union approach and so were calling for very thick pavements to be built, treating roads with 100 veh/day the same as 1,000 veh/day. In most other countries, even those with extreme climates like Armenia, thinner pavements are adopted for these types of roads. I shared with the design institute the approach adopted in Norway, and advised them that we would not accept these types of designs. It was agreed that they would review the European standards and adopt different pavement designs to reflect the expected traffic levels.
We also addressed some of the other considerations: particularly improving drainage and road safety. The Bank has also recently agreed to implement the concept of ‘Universal Design’ so we will look at how bus stops, kerbs, and other features can be made disabled friendly.
Unfortunately, there is a lot of post-industrial pollution in Armenia. I took the photo below which shows some form of chemical deposits in a valley.
However, that does not remove the importance of mitigating the environmental impacts of our projects, even though they are much less severe. To that end we undertake environmental assessments and prepare environmental management plans (EMPs) which describe how on each project the specific environmental risks will be mitigated. We were fortunate insofar as the EMPs were prepared on the previous project so all we had to do was update them, and prepare two new ones. The consultant also prepared an environmental management framework which gave the overarching environmental issues and how they were addressed on the project. Our colleague Darejan from the Tbilisi office joined us towards the end of the mission to work with the client finalizing the environmental documents and to confirm that they were properly disclosed to the public.
The other important issue to consider is the social impact of the project: specifically, are we acquiring anyone’s land or structures. If so, we need to ensure proper compensation. In fact, that was one of the reasons we visited all the roads to confirm that there would be no land acquisition and resettlement. I was fortunate to have Satoshi with me and he addressed this very effectively, confirming that it was not an issue. It helped that we made avoiding resettlement as one of the criteria in selecting the roads. Not only were we minimizing the negative social impact, we were creating a positive one through job creation. Satoshi had detailed discussions with contractors on this and he conservatively estimated that some 7,650 person-months of employment would be created by the project.
Tamara joined us on Wednesday from Tbilisi and she began working on the institutional elements of the project. We had to have an ‘Operational Manual’ which describes all the procedures that will be used to run the project. We also needed an ‘Implementation Agreement’ between the ARD and the Project Implementation Unit, the latter an organization which would handle procurement and financial management issues.
As I mentioned earlier, road safety is a key aspect of the project. I was fortunate to have David Silcock helping out. He worked with the client and helped to design the activities that we would do on the project, specifically how we would implement activities for safety at road works sites.
Two other key positions were filled by Alex and Arman. Alex is the project’s procurement specialist and he has the sharp eye that good procurement specialists are famous for. He found numerous errors not only in my work, but also in that of the rest of the team, including the lawyer. Arman is the money man: handling the financial management aspects of the project. He did an excellent review of the Project Implementation Unit (PIU) and was able to confirm that they were able to handle the money flows in an effective manner. Our World Bank Armenian team was filled out with Ani and Arthur who provided invaluable assistance, particularly when it came to understanding the implications of certain options in the Armenian context.
The project would not have been come together at all were it not for the support of the PIU and its great director Alex. He worked tirelessly to help us to resolve key issues and to get government support. In appreciation, the team got him an original 1882 Russian Trans-Caucasian Railway Bond – originally worth 125 Gold Rubles. I figured that it was a suitable gift given that we were doing our first loan together. I’m looking forward to working with Alex and his team implementing the project.
We worked very hard on designing all aspects of the project so that it would be done very effectively. This included activities such as how the construction would be supervised–we decided to use an international consultant for supervising the works supplemented by an independent technical auditor; ‘Technical Assistance’ – the hiring of a consultant to advise on pavement design options and increasing job-creation through civil works; and training.
Yerevan is +9h ahead of Washington D.C. and we were very fortunate to have our colleague Elizabeth helping out there. This meant that we would work on the design from our end, and as our day ended (generally after 22:00) she was able to take over and continue working. It was also invaluable having her in D.C. to follow up on the many bureaucratic issues. The World Bank is one HUGE bureaucracy…
By Friday we had the basic concept of the project completed and we sent it out for review. We got some excellent feedback, which unfortunately led to even more work, but after a marathon session on Sunday we were at the point where all the key issues were resolved.
Monday it was time to finalize things with the government so I met with the Minister of Finance, then the Minister of Economy–who particularly appreciated the emphasis on low cost designs, and finally the Minister of Transport. With their agreement in hand we were ready to negotiate.
The PIU and ARD took the team out for dinner to celebrate the end of the mission. Unfortunately, Satoshi and Gibet were looking at one of the roads and so had left that morning for Georgia. It was a fun dinner, although it was tempered by a numbness of exhaustion. After dinner a couple of more hours of work until I wrapped up at 23:00 and went to the hotel to pack for the 08:00 departure the next morning. Was I ever thankful it was over. You can see this from my smile taken by the side of the road on our way to Georgia.
And what a beautiful drive it was!
We still had to review three roads so the trip took longer than usual. Especially when Gurgen stopped for one of his “10 minute” lunches. It was closer to an hour, but as always we enjoyed the Armenian food and hospitality, especially the great bread and cheeses. I was glad when we reached the end of the last road and were able bid farewell-that is Gurgen on my left, a local contractor and another from the ARD on my right.
We drove to the border where we joined the queue waiting for passport control. While waiting a fellow came up selling needles. I felt very sorry for him and asked Tamara how much they were in Russian since she didn’t speak Armenian. He didn’t understand so I gave him 1000 dram – about $3.50. I’m sure it is the best sale he ever made, but at least I knew he would be eating that night. What a tragedy to try and sell needles.
My heart is heavy for the people here in the South Caucasus who are trying to survive. As Tamara said, if you do not have family elsewhere to send you money it is an impossible life. She pointed out to us that a good way of quickly assessing how poor people are is by looking for smoke coming out of their chimneys when it is well below freezing. She was very astute, as there were hardly any people with fires going. I’m very grateful to have the opportunity to help in a small way to create work and improve the livelihood for these friendly and proud people. They truly are survivors.
I received a few enquiries about Armenian roads. If you are interested, the following are links to ‘movies’ which are essentially a series of digital photos taken as we drove the roads. The files are large so be patient.
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