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         Highway Maintenance Project

The Estonia Highway Maintenance Project, supported by Loan 373 I -EE for US$12 million, was approved in FY95. The total project costs were US$26.90 million. The loan was fully disbursed and closed on schedule in June 1997. Cofinancing for the project was provided by Finland, Sweden and Denmark.

The loan's objectives were to assist in preserving the Estonian road network, and to improve the efficiency of Estonia's road maintenance operation in the future. The achievement of these objectives was supported by the following project components to: a) the expand the Estonian Road Administration's (ERA) program of periodic maintenance to permit surface dressings of 2700 km and asphalt overlays of 200 km; b) introduce benefit-cost analysis techniques and new research into ERA's maintenance planning; and c) begin the development of a competitive road construction industry for road maintenance and construction. Grant financing from Finland, Sweden and Denmark supported the technical assistance needed for institutional strengthening and technical upgrading.
      The objectives-realistic, specific, and consistent with the CAS-were achieved. ERA has
significantly improved its capability and standards in administration, planning, project management and
road maintenance. Nearly all new investments in the sector now meet economic criteria or are clearly related to economic and social needs. Engineering standards, quality assurance, and technological innovations are given a high priority. A private construction industry emerged more quickly than anticipated. Institutional and contractor capacity building was successful due to Estonian entrepreneurship and good and sustained relationships with neighboring Scandinavian countries. The twinning relationship with Finland was specially productive. The project's reestimated ERR of 39 percent was substantially higher than the appraisal estimate of 26 percent.

OED agrees with the ICR which rates project outcome as highly satisfactory, sustainability as
likely, institutional development as substantial, and Bank performance as satisfactory.

The main lessons from the project are that with a motivated client quick progress is possible; and that good project supervision, which understands in detail the client's capabilities and needs and can orchestrate strategic cofinancing and intellectual support, is able to fully meet the client's needs as the project evolves.

The ICR is satisfactory.

No audit is planned.

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