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ADB to offer $7.5m technical assistance loan

ISLAMABAD - The Asian Development Bank (ADB) has decided to offer a technical assistance loan worth $7.5 million to help prepare Lahore Rapid Mass Transit system (RMTS).

The technical assistance will help the Punjab Planning and Development Board to prepare a structured design for the project aimed at improving the urban rapid mass transport network in Lahore. The $7.5 million technical assistance includes foreign exchange costs of $6.0 million and local currency cost of $1.5 million equivalent.

The government had asked ADB for the assistance to develop a RMTS for the city of Lahore, as part of ADB's growing engagement in urban infrastructure and services sector. The provincial government has undertaken extensive preparatory work to assess the feasibility of the proposed system, utilising a public-private partnership (PPP) approach, which envisages a long-term plan to finance, construct, and operate four mass rail lines interconnected to multimodal transport.

The options analysis study team recommended a PPP structure in which the government and a private concessionaire enter into two related contracts: a design-build contract for civil works, and (ii) a build-operate-transfer contract for the remainder of the system. Both contracts would be with the same private firm. The recommended PPP option optimises the risks shared between the public and private sector.

A project steering committee for the RMTS, chaired by the Chairman, Planning and Development, Punjab government, has already been formed to provide policy support, oversees project progress and letting and supervision of contracts, facilitates coordination and cooperation among agencies concerned, and supervises the formulation and implementation of the transport integration strategy.

In support of project development, ADB retained a team of consultants to independently analyse the economic and financial feasibility of the Lahore RMTS, and to identify and analyse various PPP arrangements to develop this system. The results from the options analysis study confirm that the Lahore RMTS is economically viable according to ADB standards, at an economic internal rate of return of 11.40 per cent, with a number of unquantified benefits.

The economic internal rate of return is estimated to increase to 12.34 per cent if the green line is developed with an alternative tunnelling technique, and with a few other less significant changes. The study also found that the green line would require a subsidy with a present value of $1.6 billion in order to be financially viable, with a total cost of $2.4 billion.

The project document prepared by ADB says Lahore, the second largest city in the country with population, just under 9 million, was growing at a rate of about 3.32 per cent per year.

The number of vehicles has phenomenally increased in recent years, resulting in heavy congestion, slower traffic, increasing road accidents, waste of fuel and person-hours, and environmental degradation. Despite a number of initiatives, such as introducing fleets of buses, the growing problems of gridlock and congestion now constrain growth, curtail investment, and reduce the city's competitiveness, it says.

Based on feasibility studies and other analysis, the Lahore RMTS has strong potential to provide an attractive and efficient option for public transportation, an alternative to private vehicles, and a cleaner technology than existing bus and other transport technologies. In sum, the proposed RMTS will help reduce constraints on growth, investment, and city competitiveness currently imposed by the state of Lahore's transport system, says the project document.