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Upgrading Lao PDR's Major Artery

Last Updated: March 2007
IDA at Work: Transport - Upgrading Lao PDR's Major Artery

Challenge

Before the project started, Road No. 13, the backbone of the road system in Lao PDR, was in serious need of improvement. Its gravel surface limited travel speeds to around 35 km per hour. Other provincial and district roads were also in a state of disrepair with road maintenance only rarely undertaken across the network.

Approach

Project upgraded a 200-km section of Road 13 and introduced a periodic maintenance program using competitive bidding. It also set out to improve the Government’s capacity to better manage its national road assets.

Results

The upgraded section of Road 13 now provides all-weather access to important agricultural areas in southern Lao PDR. Travel time for transportation of key commodities to markets has decreased from an average of five hours to less than three, which has boosted local economic activity. Through a new cost recovery mechanism the government is now raising close to half the annual funds needed to maintain the road system.

Highlights:
- Through all-weather access, the new roads have increased economic activities in areas that were once hard to reach. Savings in vehicle operating costs have been estimated at US$39 million a year.
- The project has helped create a sustainable framework for road maintenance. Around 23,000 km of road across the country are now subject to periodic maintenance.
- The government embraced a competitive bidding system in the roads sector. At the end of the project, 70 percent of routine maintenance and all periodic maintenance were subject to competitive bidding. The number of private contractors increased from 30 in 1997 to 130 in 2003 (70 of which are well-performing and financially stable) and their capacity to undertake civil works has dramatically increased.
- The project played a key role in strengthening the government’s capacity to maintain and preserve its infrastructure assets. It helped establish the Road Maintenance Fund in 2001 with a road users’ funding mechanism as a sustainable source of income. The Fund’s current estimated revenues of US$8 million in 2006 represent 40 percent of estimated annual need.
- The government has adopted the project’s monitoring approach to oversee all donor-related projects.

Contribution

- US$45.4 out of US$63.7 million.
- Played a catalytic role in reforming the country’s road sector and in improving the institutional capacity.
- Encouraged the development of a long-term solution to funding road maintenance and was instrumental in bringing other donors to the table.
- The road sections supported under the project were included in the government’s long-term maintenance program, partially funded by follow-up support from IDA’s Adaptable Program Loan, the Road Maintenance Program (RMP).

Partners

US$12.6 million co-financing from the government of Lao PDR and US$5.7 from the Swedish International Development Cooperation Agency (SIDA) and the Nordic Development Fund.

Next Steps

Responding to the government’s commitment to adopting a sector-wide approach to road maintenance, IDA is proposing a Transport Sector Project and rallying donor support for the government’s program. The approach has already been endorsed by IDA, the Asian Development Bank and SIDA.

Learn More

Third Highway Improvement Project (1997-2003)
Project documents


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