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The World BankKandy Multimodal Transport Terminal Development Project (P172342)The Recipient shall by no later than three (3) months after the Effective Date (or such other date which theAssociation has confirmed in writing to the Recipient is reasonable and acceptable under the circumstances, asdetermined by the Association in its sole discretion), establish, and thereafter maintain throughout the period ofProject implementation, the Steering Committee within its MUDWSHF and chaired by its Secretary, which shall beresponsible for overall Project oversight and supervision, coordinating with the its MTSM, SLTB, SLR. (FA, Schedule2, Section I.A.1)Sections and DescriptionThe Recipient shall establish and fully staff, by no later than three (3) months after the Effective Date (or such otherdate which the Association has confirmed to the Recipient is reasonable and acceptable under the circumstances,as determined by the Association in its sole discretion), and thereafter maintain, throughout the period of Projectimplementation, a Project Management Unit (“PMU”) located in Kandy within its MUDWSHF, which shall beheaded by a full-time project director and which shall be provided with competent, experienced and qualified staffin sufficient numbers and under terms of reference acceptable to the Association, including an officer secondedfrom the Recipient’s MTSM, to carry out the day-to-day implementation of the Project, including: (i) ensuring thatall activities are planned, financed and implemented as per the Project work program and budget and the ProjectOperations Manual (“POM”); (ii) ensuring that procurement and financial management activities are carried outtimely and in accordance with policies and procedures acceptable to the Association; (iii) ensuring that social andenvironmental safeguard requirements are fully complied with; (iv) monitoring Project activities; and (v) preparingand submitting to the Association Project financial and progress reports. (FA, Schedule 2, Section I.A.2.(a))Sections and DescriptionThe Recipient shall by no later than twelve (12) months after the Effective Date (or such other date which theAssociation has confirmed in writing to the Recipient is reasonable and acceptable under the circumstances, asdetermined by the Association in its sole discretion), ensure that the Project has adequate supervision capacity,through either by (i) hiring, and thereafter maintain throughout the period of Project implementation, a supervisionconsultant whose terms of reference acceptable to the Association; or (ii) building up the technical competencies ofthe PMU (including, but not limited to, ensuring to have an experienced team to handle the complexity of the civilworks and to have sufficient on-site personnel for overseeing the proper execution of works and completion of theProject in a timely manner) to conduct supervision consultant’s roles within the PMU, satisfactory to theAssociation. (FA, Schedule 2, Section I.A.2.(b))Sections and DescriptionThe Recipient shall furnish to the Association for approval as soon as available, but in any case, not later thanNovember 30 of each year during Project implementation, a proposed annual work plan and budget (“Annual WorkPlan and Budget”) for the Project and the updated Procurement Plan for each subsequent Fiscal Year, of such scopeand detail as the Association shall have reasonably requested, except for the annual work plan and budget for thefirst Fiscal Year which shall be furnished prior to the commencement of the relevant activities under the Project.(FA, Schedule 2, Section I.A.3)Sections and DescriptionThe Recipient shall, not later than two (2) months after furnishing each Annual Work Plan and Budget referred to inthe preceding paragraph to the Association, finalize and adopt, and thereafter ensure that the Project is carried outin accordance with, such plan and budget as agreed in writing with the Association. (FA, Schedule 2, Section I.A.4)Page 5 of 56

The World BankKandy Multimodal Transport Terminal Development Project (P172342)Sections and DescriptionThe Recipient shall, not later than twelve (12) months after the Effective Date (or such other date which theAssociation has confirmed in writing to the Recipient is reasonable and acceptable under the circumstances, asdetermined by the Association in its sole discretion), form a committee whose terms of reference acceptable to theAssociation to explore different options to manage the KMTT in a more collaborative and sustainable manner. (FA,Schedule 2, Section I.A.5)Sections and DescriptionBy no later than six (6) months after the Effective Date, the Recipient shall prepare and adopt a manual for theimplementation the Project (the “Project Operations Manual”) and ensure that it is, in form and substance,acceptable to the Association. (FA, Schedule 2, Section I.C.1)Sections and DescriptionThe Recipient shall furnish to the Association each Project Report not later than one month after the end of eachcalendar quarter, covering the calendar quarter. (FA, Schedule 2, Section II.A)Sections and DescriptionThe Recipient shall: (a) on or about December 5, 2022, prepare and furnish to the Association a mid-term report, insuch detail as the Association shall reasonably request, documenting progress achieved in the carrying out of theProject during the period preceding the date of such report, taking into account the monitoring and evaluationactivities performed pursuant to Part A above, and setting out the measures recommended to ensure thecontinued efficient implementation of the Project and the achievement of its objectives during the period followingsuch date; and (b) review with the Association such mid-term report, on or about the date forty-five (45) days afterits submission, and thereafter take all measures required to ensure the continued efficient implementation of theProject and the achievement of its objectives, based on the conclusions and recommendations of the mid-termreport and the Association’s views on the matter. (FA, Schedule 2, Section II.B)ConditionsPage 6 of 56

The World BankKandy Multimodal Transport Terminal Development Project (P172342)I. STRATEGIC CONTEXTA. Country Context1.Sri Lanka has shown steady growth over the last decade although key macroeconomicchallenges persist. Sri Lanka is an upper-middle-income country with a gross domestic product (GDP) percapita of US 4,102 (2018) and a total population of 21.7 million. Following 30 years of civil war that endedin 2009, Sri Lanka’s economy grew at an average of 5.6 percent during 2010–2018, reflecting a peacedividend and a determined policy thrust toward reconstruction and growth. However, economic growthwitnessed a slowdown in the last few years.2.Social indicators rank among the highest in South Asia and compare favorably with those inmiddle-income countries. Economic growth has translated into shared prosperity with the nationalpoverty headcount ratio declining from 15.3 percent in 2006/07 to 4.1 percent in 2016. Extreme povertyis rare and concentrated in some geographical pockets. However, a relatively large share of the populationsubsists on slightly more than the poverty line. Female labor force participation at 34.9 percent was lessthan half of men (73.4 percent) by 2019 and needs to increase to facilitate sustained economic growth.13.Macroeconomic vulnerabilities remain high due to weak fiscal buffers, high indebtedness, andlarge refinancing needs. The outbreak of COVID-192 is expected to dampen growth significantly throughreduced export earnings, private consumption, and investment in the short run. Reforms to improvecompetitiveness will be important to enhance growth potential.B. Sectoral and Institutional Context4.The COVID-19 pandemic has taken a significant human and economic toll throughout the world,and Sri Lanka is no exception. This project will be implemented during the pandemic recovery. In theshort term, it will generate significant employment opportunities, aiding the country in the COVID-19economic recovery. In the medium term, the project will support increased travel, commuter, and tourismneeds of Kandy city in the post-pandemic period.5.Kandy, a city of strategic importance, is in central Sri Lanka. The Kandy city region is known forboth its natural and cultural attractions and its strategic geographic location. The city has a population of173,121 (2011)3 spread across a land area of approximately 28.53 km2. Kandy is the capital city of theCentral Province of Sri Lanka, which is the second-biggest contributor to the country’s economy with ashare of 10.7 percent4 of the GDP. The city’s central location, with road access to all other regions of theisland, positions it with the potential to become a residential and commercial hub. Kandy was identifiedas a World Heritage Site by the United Nations Educational, Scientific, and Cultural Organization in 1988and is a major tourist attraction in the country. Thus, the city region stands to benefit significantly from a1Department of Census and Statistics, Sri Lanka, port.pdf.Coronavirus Disease - 20193 Public Transport Design & Operations Management Plan & Strategic Traffic Demand Management & Design Plan for Kandy.4 Central Bank of Sri Lanka, Annual Report 2019.2Page 7 of 56

The World BankKandy Multimodal Transport Terminal Development Project (P172342)well-planned urban transport network that could enhance accessibility to and from the city, efficientmobility within the city region, and its attractiveness as a tourist destination.6.Traffic congestion poses a major constraint to the city’s development potential. The Kandy cityregion attracts many commuters for employment, shopping, education, services, cultural, andentertainment purposes. Under the World Bank’s Strategic Cities Development Project (SCDP), acomprehensive traffic analysis was conducted within the Kandy city region to identify major bottlenecksfor transport and passenger commuting.5 The study found that nearly 389,000 commuters enter the cityon a typical weekday through different transport modes for various purposes (27 percent for employmentand 19 percent for education). Around 58 percent of these commuters use public transport to enter thecity, around 15 percent use private vehicles, and 8 percent use paratransit (mostly three-wheelers/tuktuks) modes. The share of passengers using nonmotorized transport (NMT) such as bicycles is insignificant(0.03 percent); tourist vans, school vans, and other transport modes like tractors make up the rest of thepassenger transport. The high volumes of vehicle and passenger flows into the city region have resultedin significant levels of congestion in the heart of the city during peak hours, leading to inefficiency, loss ofproductivity, and air pollution.7.Lack of adequate transport infrastructure has aggravated traffic congestion in the city. The mainmode of public transport in Kandy is buses, with 500–600 buses operated by the state-owned Sri LankaTransport Board (SLTB) and around 1,900 buses operated by private bus operators. The city center has alarge bus terminal—the Goods Shed—and two smaller-scale bus stations—Clock Tower and Torrington—(collectively referred to herein as the terminals), which are used by both public and private bus operatorsfor both inter- and intra-provincial services. They attract nearly 80 percent (165,000) of the 209,000 buscommuters entering the city daily through approximately 5,000 bus trips. With an equal number ofoutbound bus travelers, a total of nearly 330,000 passengers (served by 10,000 bus trips) use the threeterminals on a daily basis. The Goods Shed terminal is the largest terminal, and, given its proximity toKandy railway station, attracts the majority of the passenger flow. Nearly all bus trips (97.4 percent of the5,000 trips) to the Kandy city region terminate at these three terminals (with 69 percent of the 5,000 tripsterminating at the Goods Shed), with only 2.6 percent of inter-provincial trips bypassing or passingthrough the city for onward journey (touch-and-go [TnG]).8.The terminals lack critical infrastructure—such as adequately planned bus bays, parking areas forbuses, waiting and queuing areas for passengers, adequate sanitation facilities, and centralizedticket/information counters—to accommodate the high volume of bus and passenger traffic. Passengerqueues can most often be seen spilling over to the road due to the lack of adequate space. The lack ofsegregation of bus and pedestrian movement around the area poses significant safety risks for thepedestrians. The large number of bus trips terminating at the three terminals has led to an abnormallyhigh requirement of dispatch and parking bays, spillover parking on the road around the terminals, longlayovers, and congestion around the three terminals. Facilities provided in the three existing terminalsand in the parking places in the surrounding areas are not sufficient to meet current bus parkingrequirements. Organized off-street bus parking is available only at two venues—Bogambara and KandySouth Depot—for 70 and 30 buses, respectively, and are far fewer than required. Furthermore, the high5Public Transport Design and Operations Management Plan and Strategic Traffic Demand Management and Design Plan forKandy: Integrated Strategic Public Transport Plan (ISPTP) and Strategic Traffic Management and Traffic Circulation Plan Reportfor Kandy Central Business District (CBD).Page 8 of 56

The World BankKandy Multimodal Transport Terminal Development Project (P172342)level of passenger flows around the terminals, coupled with pedestrians within the city, results in heavypedestrian movement around the city area. Lack of safe walking paths and pedestrian-friendlyinfrastructure has added to the traffic congestion in the city and has created safety risks for pedestrians.9.The existing terminals are inadequate to safely maintain full or partial passenger operationsduring pandemics. Given frequent crowding and insufficient space during peak hours, adequate socialdistancing is not practical. Existing sanitary facilities are insufficient and do not allow for effective sanitarypractices before and after bus trips. Given the number of passengers who use public transport in Kandy,the terminal is a potential hot spot for pandemic virus transmissions, unless the risks are effectivelymitigated.10.The existing terminals do not provide adequate facilities to ensure the personal safety ofcommuters or public transport workers. The Goods Shed terminal and the other existing bus stands donot have adequate lighting, passenger waiting areas, adequate segregation of bus and pedestrianmovement, security surveillance, personnel to handle safety concerns, or signage with necessaryinstructions. This has led to these areas being particularly unsafe for female commuters as well as femaleworkers and has created an environment where women are subjected to sexual harassment. Theterminals also lack other female-friendly facilities such as breastfeeding areas and adequate sanitationfacilities. Lack of such facilities and safety of women has also been identified as a key reason for the lowengagement of women in bus operations such as timekeeping and bus crews. This has led to a large gendergap in employment in bus transport operations, where only 3 percent are women. A recent study by theWorld Bank has identified security concerns and inadequate or unsafe transportation networks as a keyconstraint in increasing female employment6 in Sri Lanka.7 A United Nations Population Fund (UNFPA)study at the national level found that at least 90 percent of the women surveyed have been subjected tosexual harassment when using public transport.8 Sexual harassment and the resulting environment ofinsecurity, as well as the lack of other facilities in public transport, can limit women’s full participation inpublic life, employment, and education, especially for women from lower socioeconomic background whodepend on public transport.9 Studies also reflect low rates of women seeking support from lawenforcement and knowledge of services that were available to report harassment.11.Kandy is among cities with the highest number of road accidents in the country. The totalnumber of road accidents in Kandy in 2016 was 2,221, and 105 of these incidents were fatal10 (3.5 percentof the total fatalities recorded in the country). While reliable data on road safety in Kandy are not6Sri Lanka’s female labor force participation remains low with only 34.9 percent of the labor force being women as comparedto 73.4 percent of men (Source: Department of Census and Statistics, Sri 19Q1report.pdf).7 Solotaroff, J. L., G. Joseph, and A. Kuriakose. 2018. Getting to Work: Unlocking Women’s Potential in Sri Lanka’s Labour Force.Washington, DC: World Bank.8 UNFPA. 2015. Sexual Harassment on Public Buses and Trains in Sri Lanka. pdf/FINAL%20POLICY%20BRIEF%20-%20ENGLISH 0.pdf.9 Asian Development Bank. 2014. Rapid Assessment of Sexual Harassment In Public Transport and Connected Spaces in Karachi.Technical Assistance Consultant’s Report. cument/152881/44067-012-tacr19.pdf; UNFPA. 2015. Sexual Harassment on Public Trains and Buses, Sri Lanka.10 NTC. 2017. “National Transport Statistics.”Page 9 of 56

The World BankKandy Multimodal Transport Terminal Development Project (P172342)available, data at the national level show around 37 percent of lives lost are pedestrians and cyclists,11with motorcycle-pedestrian crashes accounting for about 40 percent of pedestrian fatalities.12.A fragmented institutional structure has made transport planning and integration difficult bothat the national and provincial levels. The complex institutional structure distributes urban transportresponsibilities across multiple ministries, with no lead institution or coordinating body for the sector.Urban transport responsibilities fall under three cabinet-level ministries: The Ministry of TransportServices Management (MTSM) focuses on railways and buses; the Ministry of

Kandy Multimodal Transport Terminal Development Project (P172342) Page 5 of 56 The Recipient shall by no later than three (3) months after the Effective Date (or such other date which the Association has confirmed in writing to the Recipient