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Roads play a vital role in the economy and country integration of Timor-Leste. Roads are the primary mode of transport, carrying about 90% of passengers, and 70% of freight. The core network comprises of 1,426 km of national roads, and 869 km of district roads. The national road network, linking the 13 national districts, comprises northern and southern coastal roads; and five roads traversing north-south, connecting the two coastal roads. The district roads link secondary population centers to the national roads. The core network is supplemented by 716 km of urban roads, most of which are in Dili. Rural roads, about 3,000 km in length, provide access to villages and the more remote areas. Recent surveys indicate that almost the entire core road network is in an un-maintainable condition. Only about 8% of the core road network was assessed to be in fair condition, about 22% in poor condition, and about 70% in very poor condition.

Transport services, for both passengers and goods, are provided by the private sector with minibuses and light trucks but services are constrained by the narrow roads and difficult

terrain in addition to the generally poor condition of the roads. These conditions result in high costs and unreliable services. In 2008, there were 1,656 road accidents or about 15 accidents per 10,000 of the population, with most road accidents not resulting in injuries not reported. Lack of regulation of the sector, lack of road safety awareness, and poor road conditions contribute to the relatively high accident rates. The vehicle fleet (excluding motorcycles) doubled between 2005 and 2009, with a three-fold increase in motorcycles.

Supported by offshore petroleum revenue, the Strategic Development Plan (SDP) 2011-2030 aims to sustain double-digit rates of economic growth and fast track economic development. The vision for 2030 is a modern and diversified economy with high quality infrastructure. The SDP envisages two pillars for development - basic infrastructure and human capital development. Increased public investment on the two pillars over the first five years of SDP is intended to create the conditions necessary to attract private investment and ensure a private sector led economy by 2030. Improvement of land transport is a key factor.

Since the democratic consultation on 30 August 1999, ADB has been the lead evelopment agency in the road transport sector. It has provided six TAs, three project grants, and one sector grant to support the road sector development. ADB's Country Operations Business Plan for 2008-2010 directly tied development outcomes to the goals of the National development Plan, predecessor of the SDP, which emphasized development of transport infrastructure. A new country partnership strategy 2011-2015 is being prepared, under which roads and other key infrastructure will remain a priority.

To improve the performance of road sector, the MOI, assisted by ADB, has developed a medium-term road network development program (MTRNDP), the implementation of which started in 2010 with ADB Grant 0180-TIM: Road Network Development Sector Project. This project is implementing a road maintenance program in the districts served by the ubproject roads.

The proposed Road Network Upgrading Sector Project (the Project) will support upgrading of Timor-Leste's national road network to accommodate rapid economic and social development. The Project will use a sector approach to finance a portion of the MTRNDP, which was prepared under ADB TA 7100-TIM (footnote 1). A sector approach is considered appropriate because (i) MTRNDP is the MOI' road sector development plan; and (ii) MOI, assisted by its Project Management Unit has experience of implementing past ADB projects nd two ongoing sector projects.

The Government of Timor-Leste requested that priority consideration should be given to upgrading of the Dili-Manatuto road (58.3 km). Rehabilitation of the roads from Dili to Liquica (33.5 km) and from Tibar to Gleno (33.3 km) was expected to be carried out under the Road Network Development Sector Project. However, an increase in the estimated cost of other subprojects has meant that funds will be insufficient. These roads will therefore be upgraded under the Project, subject to meeting eligibility criteria. The Manatuto-Baucau road (57.3 km) and the trans-island Manatuto-Natarbora road (80.9 km) are also potential subprojects given their importance for integrated national development. The north coast roads are in generally fair condition but constrain growth because of their narrow width and poor alignment. The Manatuto-Natarbora road is in very poor condition.

Lessons from ADB's previous projects will be incorporated in the project design. The main lessons are: (i) sector approaches have been useful in allowing the government to progressively expand its leadership in the road sector and in providing flexibility; (ii) sustainability requires attention to institutional capacity and long-term road maintenance strategies; and (iii) community participation in road works has been successful in extending the benefit of national road development to roadside communities. The project will respond to a key performance evaluation report observation that past project interventions have not produced significant impacts because the "patch-and-mend" approach did not result in significant improvements. The Project will improve specific routes through appropriately scaled upgrading.