DESCRIPTION The proposed Project 2 of the Program will contribute to establishing a sustainable road system in the Highlands region that will enable maximum use of its natural, mineral, and human resources. It will support the Government's objectives of (i) export-driven economic growth; (ii) rural development, and poverty reduction; (iii) good governance; and (iv) promotion of sustainable agriculture, forestry, fisheries and tourism. Project 2 has three components which include (i) transport infrastructure development, (ii) program support and capacity development, and (iii) program administration. The following outputs will achieve Project 2 components: (i) improvements to 118 km of priority national roads of the HCRN, with design considerations for all road users including pedestrians and public motor vehicles; (ii) maintenance arrangements for 500 km; (iii) improved capacity of the National Road Authority (NRA) to plan and manage long-term road maintenance contracts; (iv) more efficient Department of Works (DOW) capable of delivering road improvements with attention to safeguards capacity, and an established asset management system of the HCRN; and (v) improved road safety capacity of the National Road Safety Council (NRSC). The DOW is the executing agency (EA) and the implementing agency (IA) for the road improvement works. The NRA is the IA for road maintenance. The Highlands Road Management Group (HRMG) is the DOW project implementation unit for the ongoing ADB loans. Based on lessons learned from Project 1 implementation, the unit will be strengthened under Project 2 specifically on safeguards and on-going monitoring and evaluation. HRMG will engage all consulting services and road improvement contracts under the Program. The NRA established a project implementation unit (PIU) consisting of key NRA staff and supported by Program consultants. A program steering committee (PSC) oversees implementation, monitors progress, approves roads for subsequent projects, and provides guidance to the executing and implementing agencies. DOW has completed technical designs of civil works. Initial environmental examinations (IEEs) and resettlement plans (RPs) for all sub-projects have been prepared and cleared by DOW and ADB. The resettlement framework and the environmental frameworks have been updated for Project 2 based on lessons learned from Project 1. DOW has completed technical designs of civil works, as part of advance action. PROJECT RATIONALE AND LINKAGE TO COUNTRY/REGIONAL STRATEGY The periodic financing request (PFR)-2 request is for a loan amount of $109 million to finance Project 2 components which include (i) Transport infrastructure development, (ii) Investment program support and capacity development, and (iii) Program administration. The following outputs will achieve Project 2 components: (i) improvements to 118 km of priority national roads5 of the HCRN, with design considerations for all road users including pedestrians and public motor vehicles; (ii) maintenance arrangements for 500 km, including the 118 km mentioned above, of the HCRN; (iii) improved capacity of the National Road Authority (NRA) to plan and manage long-term road maintenance contracts; (iv) more efficient Department of Works (DOW) capable of delivering road improvements with attention to safeguards capacity, and an established asset management system of the HCRN; and (v) improved road safety capacity of the National Road Safety Council (NRSC). Project-2 has been designed to meet targets set out for the overall program based on lessons learned from the implementation of Project 1, to achieve the sustainable transport goals of making transport more accessible and safe for all users of rural communities, by improving connecting rural roads and provision for public transport services, as outlined in governments recently approved NTS as well as ADBs Sustainable Transport Initiative (STI). The project will adopt STI approach to ensure road rehabilitation investments are sustainable through strengthened support on road maintenance financing. IMPACT The proposed Project 2 of the Program will contribute to establishing a sustainable road system in the Highlands Region that will enable maximum use of its natural, mineral, and human resources

ACCOUNTABILITY MECHANISM OF ADB The Accountability Mechanism is an independent complaint mechanism and fact-finding body for people who believe they are likely to be, or have been, adversely affected by an Asian Development Bank-financed project. If you submit a complaint to the Accountability Mechanism, they may investigate to assess whether the Asian Development Bank is following its own policies and procedures for preventing harm to people or the environment. You can learn more about the Accountability Mechanism and how to file a complaint at: http://www.adb.org/site/accountability-mechanism/main