Provision of a loan of up to USD 157 million (EUR 137.7 million) to the state of Mongolia to finance the expansion of a 202 km road in the north of Mongolia from Ulaanbaatar to Darkhan, the country's second-largest city. The road from Ulaanbaatar to Darkhan is an important artery of the Mongolian road network and also part of the China-Mongolia-Russia economic corridor. The current road is narrow, patchy and does not allow for the necessary traffic throughput. It is also dangerous, with at least 10 accident black spots seeing 20-150 accidents each per annum. In addition, some sections of the road were damaged by flooding in 2018. The new project forms Phase II of the reconstruction works and covers the widening of the road to 4 lanes. Phase I works, funded by a loan from the Asian Development Bank's (ADB), comprises the reconstruction of the existing 2-lane road.
The original loan of up to USD 137 million was approved by the Board on 11 December 2019.
The additional loan of up to USD 20 million to be approved by the Board on 23 February 2022 and is purported to finance the additional costs, stemming from the need to structurally align Phase I and Phase II.
The goal is to increase the road capacity to be able to accomodate demand for both domestic and international journeys. Road safety and climate resilience will be improved substantially.
ETI score: 70
The project will contribute to the "integrated" quality through the improvement of connectivity between regional cities and second-tier towns, which are currently inadequately connected. The investment will improve road conditions and increase road capacity, supporting regional development.
The project will also contribute to the quality "resilient" as it will help the Client develop its asset management capacity through (i) design of a methodology to distribute maintenance funds taking into account socio-economic needs, strategic orientations and Road Asset Management System outputs, (ii) development of performance monitoring and audit procedures, (iii) amendment of the pending secondary legislations required for implementation of Road Fund legislation and (iv) development of human capital to facilitate the sector wide changes.
EBRD Finance Summary
Total Project Cost
The Bank provides long-term financing, which is presently not available from local commercial banks.
Environmental and Social Summary
Categorised A (2014 ESP).
The expansion of an existing 2-lane road by adding two new lanes over the 202 km from Ulaanbaatar to Darkhan requires a comprehensive Environmental and Social Impact Assessment (ESIA), including public consultation and EBRD disclosure 120 days prior to Board approval.
The Project will include: construction of a new 2-lane road, including roundabouts, U-turns and stopping areas; provision of road furniture (barriers, lights, pedestrian crossings, etc.); construction of crossings over eight railways; construction and rehabilitation of bridges and culverts; and rehabilitation of toll booths. The road will be widened both "on-line" and "off-line", with approximately 70 km to be widened adjacent to the existing road (Phase I) and the remaining 132 km to be "off-line" from the existing road (Phase I).
An independent consultant has been engaged to prepare an overall ESIA disclosure package consistent with EBRD requirements, based on the available information and additional studies.
The Project E&S assessment included a detailed review of the national DEIA, a gap analysis of the DEIA and EBRD E&S requirements, supplementary baseline studies, site visits and consultations with various stakeholders. A Road Safety Audit has also been carried out for the entire road and its recommendations are being addressed.
The main potential impacts during construction and operation will be associated with air quality as a result of dust and gaseous emissions, noise and vibration, disturbance and loss of soils, consumption of materials and waste generation, land take and economic displacement, construction and public health and safety, management of the workforce, road and traffic safety and some impacts on cultural heritage.
No protected sites are located in or immediately adjacent to the Project footprint and no rare or endangered flora species. Some wildlife species of concern are present in the road corridor area, including an endangered species of marmot, but the impacts on biodiversity were assessed to be low.
The land required for the road is immediately adjacent to the existing road and therefore no major permanent land use changes as a result of the Project are anticipated. Some areas of pasture land in the vicinity of the existing road will be lost to the expanded road footprint. Some pasture access restrictions are possible during the construction period. The Project activities will result in some economic displacement and loss of structures, for which asset owners have been engaged by Ministry of Road Transportation and Development ("MRTD") in order to agree compensation procedures for relocation of structures. No residential properties will be affected by the Project footprint. A separate Land Acquisition and Resettlement Framework (LARF) has been prepared to manage any land and livelihood impacts, and will be included into the ESIA disclosure package.
A number of health, safety and security risks and impacts for both the contractor's employees and the public need to be considered during construction. It is assumed that the contractor selected will have sufficient workforce and equipment to deliver the Project and will also be required to develop management arrangements and procedures to remove hazards or to reduce risks to workforce health and safety.
Realisation of the Project will bring a number of positive national, regional and local economic and employment benefits, including improved road and community safety, lighting and signage, strengthened and rehabilitated bridges and flood protection structures etc.
A comprehensive Environmental and Social Action Plan (ESAP) for the Project has been developed and agreed upon to ensure the Project is structured to meet EBRD PRs. Some elements of the ESAP (mainly related to road safety, development of E&S management systems, stakeholder engagement and monitoring during construction stage) will be also addressed through Technical Cooperation activities supporting the Project. The ESAP includes, inter alia: development and implementation of a robust Environmental, Social and Health and Safety Management System, supply chain and contractor management, improvements to safety practices, prevention and control of pollution, development of a Livelihood Restoration Plan (LRP), development of the formal HR policy and grievance mechanisms for both workers and other stakeholders, community health and safety, traffic and road safety, conservation of biodiversity and protection of cultural heritage.
To manage all the environmental and social impacts during construction and as part of the ESIA, a detailed Environmental and Social Management and Monitoring Plan (ESMMP) has been developed.
Based on this, the Contractor produced a Construction Environmental & Social Management Plan (CESMP) to address these requirements as part of good construction practice, implementation of which will be monitored by a Project Implementation Unit (PIU) and Project Coordinator engaged by the EBRD.
The Project Implementation Support Consultant has been mobilized and supporting PIU in ensuring that the Project is implemented in line with the requirements set forth by the ESAP, as well as by other relevant environmental and social documents including EBRD's procedures and policies.
Further details on environmental and social issues are included in the Non-Technical Summary of the Project, which was disclosed to the public alongside the SEP and LARF on the MRTD's website (www.mrtd.gov.mn/) on 24 July 2019 and is also available at the following link: http://www.ebrd.com/work-with-us/projects/esia/ulaanbaatar-darkhan-road-project.html
The Bank will closely monitor implementation of the project through annual E&S reporting, ESAP implementation progress and monitoring visits to the Project, if necessary.
Technical Cooperation and Grant Financing
The Project is expected to benefit from the following Technical Co-operation assignments:
Pre Loan Signing
TC1: ESIA gap analysis and disclosure pack to include identification of any gaps between the existing documentation and processes and the EBRD's requirements, development of a work plan to close these gaps before and post disclosure, preparation of ESAP, SEP and NTS. The assignment's cost is estimated at EUR 300,000, funded by the Infrastructure Project Preparation Facility ("IPPF").
TC2: Support in the implementation of Environmental & Social Management Systems to facilitate the timely and effective implementation of the Project by providing short-term assistance to the Client in implementing priority measures under ESAP, required prior to the start of the construction works and ensure compliance with EBRD Environmental and Social Policy (ESP) requirements.
The assignment's cost is estimated at EUR 55,535, to be funded by the Shareholder Special Fund ("SSF").
TC3: Project Coordinator to support the Client with Project management and acting as a focal point for coordination between the Bank, MRTD and other relevant stakeholders. The assignment's cost is estimated at EUR 74,530, to be funded by the SSF.
Post Loan Signing
TC4: Project Implementation Support at the MRTD to support tenders and ensure appropriate contracting, plus implementation of an Environmental and Social Action Plan ("ESAP"). The assignment's cost is estimated at up to EUR 600,000, funded by the SSF.
TC5: Institutional Support TC. To provide legal and institutional support to improve road maintenance operations in the country. The components will include (i) designing a methodology to distribute funds for maintenance operations taking into account socio-economic needs, (ii) developing an audit function for the RFB and associated performance criteria, (iii) drafting the secondary legislation required for efficient implementation of Road Fund legislation, and (iv) developing MRTD's human capital. The assignment's cost is estimated up to EUR 499,178, funded by the SSF.
Company Contact Information
MINISTRY OF ROADS AND TRANSPORT DEVELOPMENT Government Building 13, Chinggis Avenue 11, Sukhbaatar District 8, Ulaanbaatar , 14251, Mongolia
PSD last updated
23 Feb 2022
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Independent Project Accountability Mechanism (IPAM)
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