WDP 151 FILECOPY T Jj Public Disclosure Authorized

WDP 151 FILECOPY T jJ Public Disclosure Authorized

151 |=| World Bank Discussion Papers China and Mongolia Department Series Transp ort Public Disclosure Authorized Developnment in Southern China Public Disclosure Authorized

Clell G. Harral, editor Peter Cook and Edward Holland, principal contributors Public Disclosure Authorized Receint World Bank Discussion Papers

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(Continued on the inside back cover.) Transp ort Development in Southern China China and Mongolia Department Series

Patternsof Diret ForeignInvestment in China,Zafar Shah Khan, September 1991 CoalPricing in China:Issues and Refortn Strategies, Yves Albouy, October 1991 ReformingPrices: The Experience of China,Hungary, and Poland,Anand Rajaram, January 1992 DevelopingMongolia, Shahid Yusuf an, ShahidjavedBurki, January 1992 Sino-JapaneseEconomic Relationships: Trade, Direct Investment, and Future Strategy, Shuichi Ono, January1992 The SectoralFoundations of China'sDevelopment. Shahid javed Burki and ShahidYusuf, editors, January 1992 151~- = World Bank Discussion Papers China and Mongolia Department Series Transport Development in Southern China

Clell G. Harral, editor Peter Cook and Edward Holland, principal contributors

The World Bank Washington, D.C. Copyright C 1992 The Intemational Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A.

Discussion Papers present results of country analysisor research that is circulated to encourage discussion and comment within the development community. To present these results with the least possible delay, the typescript of this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibilityfor errors. The findings, interpretations, and conclusions expressedin this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliatedorganizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibilitywhatsoever for any consequence of their use. Any mapc that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates,or its Board or member countries concerning the legal status of any country, territory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. The material in this publication is copyrighted. Requests for permnissionto reproduce portions of it should be sent to the Office of the Publisher at the address shown in the copyright notice above. The World Bank encourages dissemination of its workzand will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, authors, and countries and regions. The latest edition is availablefree of charge from the Distribution Unit, Office of the Publisher, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'1ena, 75116 Paris, France.

ISSN: 0259-21OX

At the time this paper was written, Clel1 G. Harral was principal transport economist in the World Bank's China Department, Asia Regional Office. He is currently senior econominst in the European Bank for Reconstruction and Development. Peter Cook and Edward Holland were consultants to the China Department.

Library of Congress Cataloging-in-Publication Data

Transport development in southern China / Clell G. Harral, editor; Peter Cook and Edward Holland, prinicipal contributors. p. cm.-((World Bank discussionpapers; 151) Includes bibliographical references. ISBN 0-8213-2050-5 1. Transportation-China-Kwa ngtung Province-Forecasting. 2. Kwangtung Province (China)-E]conomic conditions. I. Harral, Clell G. II. Cook, Peter, 1942- . III. Holland, Edward, 1917- IV. Series. HE278.Z7K948 1992 338'.0951'27-dc2O 92-2872 CIP v

Foreword

The World Bank's economic and sector work program in China is a very active one ranging over a wide spectrum of topics from macroeconomicsto health and education. Each year we publish a handful of our formal studies, but thus far most of the background papers and informal reports, many of them containing valuable analysis and information,have remained outside the public domain. Through the China and Mongolia Department Working Paper Series, we hope to make available to a broad readership among the China watchers and developmentcommunities a few of the papers which can contribute to a better understandingof China's modernization.

The study by Messrs. Cook, et. al. offers a detailed examination of Guangdong's transport system in the late eighties, highlightingthe principal constraints,the likely pattern of modal developmentand the investmentpriorities. Guangdong is one of China's most dynamic provinces. Its future economic successeswill depend to a significantextent on the ability to improve infrastructure,especially transportfacilities. We believe that this paper not only identifies the scale of the problem but also indicateshow it might be solved.

Shahid Javed Burki Director China and Mongolia Department Asia Region - vi -

CURRENCY EOUIVALENTS (as of February 1989) Currency name = Renminbi Currency unit = Yuan (Y) = 100 Fen

July 1986 - December 1989

$1.00 = Y 3.71 $0.27 = Y 1.0 $1.0 million = Y 3.7 million $270,270 = Y 1.0 million

From December 1989

$1.00 = Y 4.71 $0.21 = Y 1.00

FISCAL YEAR (FY)

January 1 to December 31

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

AADT Average Annual Daily Traffic CAAC China Civil Aviation Administration CJCAC China Joint Civil Aviation Company COSCo China Overseas Shipping Company DOC Guangdong Department of Communications dwt Deadweight Ton EOZ Economic Open Zone ERR Economic Rate of Return GMS Guangzhou-Meixian-Shantou (Railroad) GNP Gross National Product GPPC Guangdong Provincial Planning Commission GVAIO Gross Value of Agricultural and Industrial Output ICT Institute for Comprehensive Transport LCL less-than-car-load LRIFC Long Run Incremental Financial Cost LRISC Long Run Incremental Social Cost LTL less-than-trailer-load MR Ministry of Railways MT million tons NPV Net Present Value NPV/CC Ratio of Net Present Value to Capital Cost OCC Opportunity Cost of Capital pcu passenger car unit SEZ Special Economic Zone SPC State Planning Commission TEU Twenty-foot Equivalent Unit (container) voc vehicle operating cost - vii -

Preface

This Study on issues of comprehensive transport in Guangdong Prov- ince was, in line with suggestions by the World Bank, approved by the Chinese Government, under the leadership of the State Planning Commission. The Study was conducted jointly by the Institute of Comprehensive Transport of SPC, Guangdong Provincial Planning Commission, and the China Department of the World Bank.

The long-term objective of this Study was set for 2000.

The Study started in April 1986. Based on joint reconnaissance, a conceptual outline including key points and grounding was produced by a Chinese team of experts in September 1986. In November 1986, teams of experts from both sides met in Washington D.C. and exchanged views on the outline. A draft of the Study was written by the Chinese team in February 1987. The draft was discussed and modified by both teams and the Chinese team produced the Study Report with suggestions of proposals for the World Bank lending.

Both teams of experts further exchanged views on the Study Report in September 1988, followed by a field survey for proposed projects in Guangdong Province. Based on analysis of transport long-run marginal financial cost and economic cost, the World Bank produced a final draft of the Study in May 1989. Views were exchanged again in Beijing and Guangzhou by both teams of experts in October 1989, followed by a field trip which was related to proposed projects. The Study has been issued in green cover, and now is presented as a departmental working paper.

This is the fourth edition of the Study. Earlier editions of the report received limited circulation, primarily within Guangdong Province, central government agencies in Beijing, and the World Bank. However, the report has attracted widespread interest, not only for its findings concerning Guangdong Province, but also for its possible relevance to the transportation problems of China more generally. It demonstrates an improved methodology for examining the potential economic role of the different modes of transport and indicates how China might better exploit the full spectrum of modern transport technologies. Consequently, it was decided to publish this new edition--despite many obvious limitations--in order to disseminate the information more broadly to all parties who have an interest in the important role that transport will play in the future development of the Chinese economy and to stimu- late further improvements in comprehensive transport planning throughout China.

This edition updates preceding editions to take account of the major revisions in transport tariffs which occurred in September 1989 for passengers and March 1990 for freight (as reflected particularly in Chapter IV). Improved and updated information on the costs of major investment projects in Guangdong Province is also included (Chapter VI). Price series have been adjusted to March 1990. It has not been possible however, to update much other information, and, in particular, primary information on most traffic flows was not available beyond 1987, and consequently the original traffic projections beyond 1987 have been retained in many instances. - viii -

In order to present the material of the Study in a single volume, this edition includes only one of the technical annexes presented in earlier editions. The tables associatedwith this technical annex are not included but remain available to readers upon request.

The leaders involved in this Study were Wang Derong, former Director of ICT and Liu Liru, current Director of ICT, Liu Yiling, Deputy Director of GPPC and Zheng Fanji, Inspector of GPPC. The Chinese team of experts, including He Tianziang,Wang Yan, Zhou Nan, Fu He, Zhang Haipo, He Zengrong, Go Wenlong and Zhou Lixing, was directed by Chai Bencheng and Huang Yuqing. Yang Hongnie took part in the field trip. Guo Yun took part in the discussion of the final version. Wang Xueling also took the job as an interpreter.

Zhuang Wanlong, Zhang Baoxian, and Lou Yongchu of the Transport Division of GPPC, and Lao Yu, Ma Youliang, Xu Bangda, Tang Guangzheng, Liang Shuwen, Cai Kaiji, Deng Wenbang and Chen Weigiang and Kuang Shaozheng, etc. took part in the field trip, editing, and discussionof the Study.

Ali A. Sabeti, Bernard Montfort and Jose M. Veniard of the World Bank have supported the Study. The World Bank team was directed in the early stages by Jacques Yenny and subsequentlyby Clell G. Harral. David Hawes and James F. Gruver and Li Lufeng provided assistance in the early formulationof the Study. The major burden of analysis in two of the editions fell on Peter Cook with the able assistanceof Surhid Gautam and Liu Zhi. Edward Holland assisted in the formulationais well as writing of Chapter IV, which is a true joint product of Cook, Harral and Holland. Helpful criticisms and advice were received from the Bank's peer review group consistingof Frida Johansen, Thawat Watanatada, Jacques Yenny, and Stephen Stares.

Like earlier versions, this edition is the result of a joint effort by the Guangdong ProvincialPlanning Commission,the Institute of Comprehen- sive Transport of the StateaPlanning Commissionand the China Department of the World Bank, who thereforewould appreciate any criticism and comments. - ix -

Suimmary

The GuangdongEconomy and Its TransportationProblems i. After the economic reforms commencing in 1978 Guangdong Province entered a sustained period of rapid economic growth which is fundamentally altering the economic structure of the province. Over the period 1980-86 the Gross Value of Agriculture and IndustrialOutput (GVAIO) in constant prices increased at an annual rate of 13.5 percent, and in 1987 reportedly surged by an extraordinary27.2 percent. Industry, fueled by an exports boom, provided the primary thrust for the growth (18.4 percent annual growth over 1980-87) while agriculturegrew at a comparativelyslower rate (7.6 percent), and by the end of 1987 industry had increasedto 67 percent of total GVAIO. Light industry in turn constitutes65 percent of industrial output, and this share has remained largely unchanged, as heavy industry, led by a constructionboom, has so far kept pace with light industry. The establishmentof three of China's four Special Economic Zones (at Shenzhen, Zhuhai, and Shantou) in Guangdong and the proximity of the province to the financial and trading center of Hong Kong have facilitatedmajor foreign capital inflows and helped Guangdong displace Shanghai as China's leading exporter. Guangdongmay thus be viewed as the leading edge of China's so far successful coastal development strategy. ii. A number of factorswill, however, increasinglyimpinge upon the Guangdong economy and restrain its future growth. Two critical bottlenecks are the interrelatedshortages of transportand energy. Hydropower development in the province has about reached its full potential, and access to coal, either in northern China or eastern Guangdong, is limited by constraints in railway and ports capacity; as a result existing industrial capacity is already being idled for want of coal to provide power. And transport constraints are an economic problem well beyond their effects on the availability of coal. Light manufacturingand high valued agriculturalexports, which demand flexible,fast, door-to-doorservices to compete in world markets are constrainedby the poor quality of transport services resulting from shortages of equipment, outmoded equipment and substandard,often congested infrastructure. The developmentof mineral based activities in resource rich, densely populated, but otherwise impoverishedeastern Guangdong has been blocked for lack of low cost access, denying both the growth centers access to potentially lower-costresources and the eastern region participationin the economic miracle taking place elsewhere in the province.

iii. The shortages of transport capacity are due partly to underinvestment in the transportationsector: recent economic growth has outstripped expansion of transportationcapacity by a wide margin, and any previous slack in the system has by now largely been absorbed. Shortages of transportation (and energy) are also at least partly due to pricing distortions. Prices apparentlywell below costs for certain services have served to generate noneconomic excess demandswhich clog the transport arteries, distort the choice of modes, and result in less than optimal use of the limited available facilities and services. Measures to help Guangdong Province meet its future transport demands most economicallywill include both massive investmentsto provide new capacities at lower user cost and substantialrevisions in present pricing and/or administrative traffic allocation rules to ensure more efficient use of existing facilities.

The Study

iv. The present study is primarily focused on delineating the nature of the future transport system which would best serve Guangdong's economic requirements and on identifying some of the measures needed to achieve such a system. A central question is the economic role of the different modes of transport: rail, road, water, and air. v. In addressing this question the study seeks to lay a foundation for systematic comparison of the costs (and to a limited extent at this stage the service characteristics) of the different modes for four major traffics: (a) passengers, (b) coal, (c) heavy freight, and (d) less-than-carload shipments. It estimates financial and economic (or social) cost functions for each of the modes on the assumption that, over the longer run, investments in the network (either for renewal or expansion) would employ the best of existing modern technology as appropriate to China's resource endowments. This results in absolute costs and relative costs of the various modes which differ significantly in most cases from the average costs of the present technology mix. When these long-run ccosts are compared with present prices (or transport tariffs), major differences are also found.

Comparative Cost Findings vi. The principal findings of these comparative cost and price analyses may be summarized as follows:

(a) Highway economic costs are likely to fall significantly--possibly by half--as China and Guangdong Province move toward a modern road transport system, if prices and user charges are set for economic efficiency. Railway economic costs maV also fall, but by much less, since the railways are currently much closer to the efficiency frontier;

(b) Recent tariff increases for coal were not sufficient to close the gap between tariffs and economic costs: rail tariffs would have to be increased by another 30 to 50 percent to bring them in line with long-run economic costs;

(c) Recent increases in the costs of coastal shipping appear to have substantially eroded the comparative advantage of that mode in economic terms vis-a-vis all-rail movements of coal (and similar bulk commodities). This tentative conclusion is surprising, and the matter should receLve closer scrutiny--more detailed information is required on the prices of bulk-carrier vessels of different sizes and configurations, on the economic costs of transshipment and port handling, and on the potential economies from technological modernization of vessels and port-handling operations;

(d) Recent tariff increases for rail passengers have eliminated subsidies and should encourage passengers to shift to bus transport, - xi -

which would be more economically efficient at least for short distances;

(e) Airline passenger fares vary markedly (relative to either carriers' financial costs or society's economic costs) across different routes; some routes are subsidized and others would appear to be highly profitable--some economic rationalization would appear desirable; and

(f) Comparisons of carrier's long-run financial costs under the present tax/price regime with society's economic costs show substantial net subsidies (20-45 percent), for all modes except highways and, to a lesser extent, inland waterways. For road transport, carriers' costs exceed society's costs by some 10 to 35 percent, reflecting a tax on road transport beyond the long-run costs of providing improved infrastructure and thereby exacerbating price distortions vis-a-vis the other modes.

Economic Role of the Transport Modes vii. Several conclusions may be drawn from these cost comparisons:

(a) Given the changing structure of the Guangdong economy, highways would be expected to play an increasingly larger role in the future even at present road transport costs, because the fastest growing segments of the Guangdong economy are industries which are typically prepared to pay premium prices for the speed and flexibility of road transport. The magnitude of the potential reduction in highway transport costs would further expand its scope beyond the presently limited usages and extremely short haul distances. The highway could provide more economic services for short to medium distance passenger transport and small lot size or door-to-door freight up to 1,000 km haul distance, thus relieving railways congestion and improving overall transport service quality. Improved interprovincial road haulage is a possible future priority once the intraprovincial road links are upgraded;l/

(b) The railway should concentrate on its most economic transport roles, which include medium distance freight and passengers and high-volume bulk commodities and heavy freight at all distances. The railroad should coordinate with coastal shipping for transport of coal from the north to Guangdong Province;

(c) For coastal shipping, rapidly changing costs and technological inno- vation require more detailed studies, including a reevaluation of

1/ It should be noted that there is not unanimity of views among the co- authors of the report on this conclusion. In particular, the Guangdong Province Planning Commission and the Institute of Comprehensive Transport wish to record their view that constraints on the development of road transport are likely to limit its role to haul distances much below 1,000 km at least up to the year 2000. - xii -

the most efficient vessel sizes and configurations, in order to determine the appropriate economic role for that mode; and

(d) Air transport should expand its long distance and medium distance services and price them in accordance with incremental costs to society. These services are expected to grow rapidly with economic growth and increasing value of time for business travellers in Guangdong Province and the rest of China. Aviation can make an enormous contribution to the economic efficiency of Chinese business and public administration, as well as continuing to earn important foreign exchange from the growing tourism industry.

Investment Priorities viii. Massive investments will be required to approach an economically efficient transport system in Guangdong Province. A total program of Y 24-30 billion over the next five years (1991-95) has been tentatively identified:

billion Yuan Z (1990 prices)

Highways 18-21 70-75 Railways 3-4 12-16 Inland Water Less than 0.5 Less than 3 Seaports 2.5-3 8-10 Airports 0.5-1 1-4 Intermodal Less than 0.5 Less than 3

TOTAL 24-30 100 ix. For the two subsectors--highways and railways--for which available information permitted preliminary benefit-cost analyses, these show quite high economic rates of return (ERR) and net present values (NPV). Present poor conditions and the rapidly expanding role of highway transport result in the highest economic returns in that mode. Just under Y 1 billion of the proposed road investments have ERRs in excess of 100 percent; another Y 4.5 billion have ERRs ranging from 30 to 95 percent, and a further Y 15.5 billion have ERRs between 15 and 30 percent. The highest-yield components are for pavement strengthening on highly-trafficked roads with weak and/or aging pavements. x. In the railways subsector, two segments of the proposed Guangzhou- Meixian-Shantou railway, designed to support expanded mining and cement production in the Lianping-Meixian area, appear to have priority: Huizhou- Xiantangxi (Y 327 million) and Xiantangxi-Meixian (Y 664 million) with ERRs of 34 percent and 39 percent respectively. The third section, Shekeng-Shantou (Y 399 million) would have a somewhat lower ERR of 27 percent. The recently opened double-tracked sections of the main north-south (Guangzhou-Beijing) mainline are currently projected to reach their new capacity (30 million tons each direction) by 1992; however, the conclusions of this study concerning prospective diversion of coal traffic to coastal shipping routes should be fully evaluated before determining what additional improvements may be warranted in the north-south mainline. - xiii - xi. For aviation and water transport available information did not permit similar levels of analysis of prospective investments. Nonetheless, analyses of the comparative costs and service characteristics of the different modes suggest a much larger role for these modes would be highly beneficial in economic terms. In addition, a regional study of shipping service examining hub-and-spoke vs. direct services and alternative sites for load center location (for coal, petroleum products, and containers) is recommended, with explicit analysis of the future role of Hong Kong ports. Further multimodal transport investments to support the recent surge in containerization should also be examined.

The Planning Process xii. The present planning process in Guangdong Province (for transportation as well as other sections) has undergone substantial restructuring to cope with the policy changes favoring decentralized management. More transportation planning must now be done on the local and provincial levels and port planning (except for new ports) is largely in the hands of port managers. This new system, however, places increased demands on provincial and local planners with few resources in terms of trained manpower or data oriented to the needs of decisionmakers, who have little experience in using analytic tools for assessing transportation priorities and policy impacts, especially in the broader context of a partial market economy. xiii. This process has benefited by the experience gained from comprehensive study; however, further steps are needed to reinforce and support provincial, local and modal planners and create a more open and continuous process that involves carriers and user groups to make the planning as responsive as possible to present and future needs. Increased coordination in project identification and evaluation is required to avoid potential misinvestment. Spe- cific areas of improvement in planning approaches and associated data systems are recommended, as well as strategies for improving each transportation subsector and intermodal transport in response to the findings of the analysis. Multimodal transport investments, for example, will require a concerted effort by several agencies and private organizations to ensure a coordinated strat- egye I - xv -

Transport Development in Southern China

Table of Contents

Paae No.

I. GUANGDONG PROVINCE ECONOMIC CHARACTERISTICS AND PERSPECTIVES 1

A. Geographic Setting .. 1 B. Administrative Jurisdictions ...... 1 C. Population and Labor Force ...... 3 D. Economic Activity ...... 4 Income Levels and Growth ...... 4 Economic Geography ...... 6 Light Industry ...... 6 Heavy Industrial Production ...... 7 Agricultural Production ...... a Interprovincial and Foreign Trade ...... 8 E. Present Constraints on Development ...... 10 F. Economic Forecasts ...... 10 G. Location of Future Growth ...... 12

II. TRANSPORT INFRASTRUCTURE. SERVICES AND MANAGEMENT ...... 14

A. Transport Network Overview ...... 14 B. Transportation Infrastructure by Mode ...... 15 Railways ...... 15 Roads ...... 15 Coastal and Marine ...... 16 Inland Waterways ...... 16 Air ...... 17 C. Transportation Services ...... 17 Rail Services ...... 17 Road Services ...... 19 Road Vehicle Fleet ...... 20 Inland Waterway Services ...... 20 Coastal and Ocean Shipping Services ...... 21 Air Services ...... 21 Containerization ...... 22 D. Management of Transport Modes ...... 23 Railways ...... 23 Ports ...... 24 Highways ...... 25 Waterways ...... 26 Aviation ...... 26 Maintenance of Transport Modes ...... 26 E. Transport Investment ...... 27 - xvi -

Page No.

III. PRESENT TRAFFIC AND SERVICE LEVELS ...... 29

A. Overview of Aggsregate Freight and Passenger Traffic Trends 29 B. Present Traffic! by Corridor and Type ...... 31 Corridor F'reight Traffic ...... 32 Total Provincial Freight Traffic ...... 32 Passenger Traffic ...... 33 Geographic Patterns ...... 33 C. Modal Shares of Traffic by Corridor ...... 34 Determinants of Modal Shares ...... 34 Freight Modal Shares ...... 35 Passenger Modal Shares ...... 35 Total Provincial Modal Share Trends ...... 36 D. Assessment of Existing Capacity Constraints ...... 37 E. Assessment of Technology ...... 38

IV. COMPARATIVE ROLES OF THE TRANSPORT MODES ...... 41

A. Comparative Transport Costs and Pricing Among Modes . . 42 B. Comparative Cost Analyses ...... 44 Passenger Transport Costs and Prices ...... 44 Bulk Commodity (Coal) Transport Costs ...... 46 Heavy Freight Transport Costs and Tariffs . . . . . 47 Less-than-Carload General Cargo ...... 48 C. Impacts of Inefficient Conditions ...... 48 D. Conclusions ...... 49

V. FUTURE TRAFFIC AND CAPACITY CONSTRAINTS ...... 52

A. Methods of Traffic Forecasting ...... 52 B. Freight Traffic Forecasts ...... 53 International Freight Traffic ...... 53 Interprovincial Freight ...... 53 Intraprovincial Freight ...... 53 Induced Freight Traffic ...... 54 Network Provincial Total Freight Traffic . . . . . 55 Rail CapaciLty Constraints ...... 56 Freight Haul Distance ...... 57 C. Passenger Traffic Forecasts ...... 57 International Passengers ...... 57 Interproviricial Passengers ...... 58 Intraprovincial Travel ...... 59 D. Vehicle Traffic ...... 61 E. Summary of Corridor Forecasts ...... 61 Freight ...... 61 Passenger Trips ...... 62 F. ImplicatLons for Capacity Constraints ...... 62 - xvii -

Paae No.

VI. POTENTIAL TRANSPORTATION INVESTMENTS ...... 64

Investment Evaluation Techniques ...... 64 Highway Investments ...... 65 Railway Investments ...... 68 Seaports ...... 69 Inland Water Investments ...... 70 Airport Investments ...... 71 Multimodal and Intermodal Investments ...... 71 Total Transport Investments ...... 72 Investment Financing ...... 72

VII. CONCLUSIONS AND RECOMMENDATIONS ...... 74

Economic Role of the Transport Modes ...... 75 Investment Priorities ...... 76 Planning Process ...... 77

LIST OF TABLES IN TEXT

1.1 Provincial GVAIO ...... 4 1.2 Growth in GVAIO by Transport Corridor ...... 7 1.3 Forecast Economic Growth Rates (GVAIO) ...... 12

3.1 Freight Traffic ...... 30 3.2 Passenger Traffic ...... 31 3.3 1987 Corridor Freight Traffic .32 3.4 1987 Total Provincial Freight Traffic ...... 33 3.5 1987 Provincial and Corridor Passenger Flows ...... 34 3.6 1987 Freight Modal Shares in Corridors ...... 36 3.7 1987 Passenger Modal Shares in Corridors ...... 36

4.1 Inefficiency Ratios ...... 49

5.1 International Traffic in Major Corridors ...... 53 5.2 Interprovincial Traffic in Major Corridors ...... 54 5.3 Intraprovincial Freight in Major Corridors ...... 54 5.4 Total Major Corridor Freight Traffic ...... 55 5.5 Network Total Provincial Freight Traffic: Unconstrained . . 56 5.6 Network Provincial Freight Traffic: Constrained ...... 57 5.7 Average Haul Distance ...... 58 5.8 Forecast Growth in Passenger Trips by Transport Corridor: Base Case ...... 59 5.9 Total Provincial Passenger Traffic Forecasts by Mode - Unconstrained ...... 60

6.1 Minimum Traffic Thresholds (AADT) for Typical Road Improvements 67 6.2 Prospective Transport Investment Program ...... 73 - xviii -

Page No.

LIST OF TABLES

1 Guangdong Province - Population and Land Area by Corridor 80 2 Labor Force Employed by Sector ...... 81 3 Production of Selected Major Commodities ...... 82 4 Inflow and Outflow of Commodities in 1987 ...... 83 5 Guangdong Province Foreign Trade with Hong Kong ...... 84 6 Hong Kong Trade with Guangdong by Mode and by Type for 1987 85 7 Counties and Cities with High Growth Potential ...... 86 8 Capital Investment by Sector ...... 87 9 Growth Indicators for Guangdong Province ...... 88 10 Comparison of Corridor Growth for Three Transport Systems - Base Case Forecas: .89 11 Comparison of Corridor Growth for Three Transport Systems - Optimistic Forecast ...... 90 12 Comparison of Corridor Growth for Three Transport Systems - Pessimistic Forecast ...... 91 13 Length of Internal Provincial Transport Routes by Mode--1986 ...... 92 14 Key Railway Section Characteristics ...... 93 15 Length of the Road Network by Class, Surface and Function . 94 16 Density of Road Network by Region, 1986 ...... 95 17 Characteristics of Major Seaports ...... 96 18 Inland Waterway Transport System ...... 97 19 Airports by Class and Aircraft Accommodated in 1987 . . . . 98 20 Rail Passenger Services, 1988 ...... 99 21 Amount of Railway Rolling Stock by Type and Year . . . . . 100 22 Guangdong State-ow;ned, Specialized Road Transport Services 101 23 Motor Vehicle Ownership in Guangdong Province ...... 102 24 Inland Waterway Services, 1986 ...... 103 25 Maritime Shipping Services, 1986 and 1987 ...... 104 26 Water Freight Tonnage by Port in 1985 and 1987 ...... 105 27 Guangdong Air Services, 1986 and 1987 ...... 106 28 Summary of Past Transport Investments in New Fixed Assets . 107 29 Guangdong Provincial Freight Traffic ...... 108 30 Guangdong Provincial Passenger Traffic ...... 109 31 Estimated Total Flow of Commodities by Corridor in Province in 1987 ...... 110 32 Estimated Passenger Traffic for 1987 ...... 111 33 Average Daily Road Traffic ...... 112 34 Modal Capacities by Corridor ...... 113 35 Guangdong Province Comprehensive Transport Study Summary of Key Capacity Constraints ...... 114 36 Passenger Perceivecd Costs by Mode Compared with LRIFC and LRISC ...... 115 37 Coal Shipper's Costs by Mode Compared with LRIFC and LRISC 116 38 Heavy Freight Shipper's Costs by Mode Compared with LRIFC and LRISC ...... 117 39 General Cargo Shipper's Costs by Mode Compared with LRIFC and LRISC ...... 118 40 Freight Traffic Forecasts by Corridor and Mode ...... 119 - xix -

Page No.

41 Potential Induced Freight Forecasts in the East Corridor 120 42 Total Provincial Freight Forecasts by Mode ...... 121-2 43 Northern Corridor Potential Diverted Freight Traffic . . . 123-4 44 Total Corridor Freight Forecasts by Mode ...... 125 45 Forecast Growth in Passenger Trips by Transport Corridor Base Case System .126 46 Total Corridor Passenger Forecasts by Mode ...... 127 47 Total Provincial Passenger Forecasts by Mode ...... 128 48 Northern Corridor Potential Diverted Passenger Trips Passenger Traffic - Base Case System ...... 129 49a Summary of Proposed Investment Projects: Roads ...... 130 49b Summary of Proposed Investment Projects: Railways . . . . 131 49c Summary of Proposed Investment Projects: Riverports . . . 132 49d Summary of Proposed Investment Projects: Inland Waterways 133 49e Summary of Proposed Investment Projects: Seaports . . . . 134 49f Summary of Proposed Investment Projects: Airports . . . . 135 50 Preliminary Project Economic Efficiency Ranking: Roads . 136

LIST OF FIGURES

1 Transportation Organization in Guangdong Province .137 2 Average Daily Road Traffic - Guangdong Province ...... 138 3 Transport Demand Forecasting Task Flow Chart ...... 139 4 Passenger Fare with Distance ...... 140 5 Passenger Cost with Distance - LRISC ...... 141 6 Passenger Trip Cost by Value of Time - Guangzhou - Shantou 142 7 Passenger Trip Cost by Value of Time - Guangzhou - Shanghai 143 8a Coal Transport Cost - UPC .144 8b Coal Transport Cost with Distance - LRISC ...... 145 9a Heavy Freight Transport Cost - UPC ...... 146 9b Heavy Freight Transport Cost - LRISC ...... 147 10a LCL Freight Transport Cost - UPC ...... 148 10b LCL Freight Transport Cost - LRISC ...... 149

TECHNICAL ANNEX

Calculation of Long-Run Incremental Social Costs by Mode . 151-96

I. GUANGDONG PROVINCE ECONOMIC CHARACTERISTICS AND PERSPECTIVES

A. Geographic Setting

1.1 Guangdong Province lies along the South China Sea at the southeas- tern corner of the People's Republic of China (see Map IBRD 20592). This position makes it the point of closest maritime contact between China and Southeast Asia, Africa, and Europe. Its small but important borders with Hong Kong and Macao make Guangdong Province one of the most important gateways between China and the rest of the world.

1.2 The province covers an area of 178,000 km2, excluding Hainan Island I/ and many small islands along the rugged coast (see Map IBRD 20592). More than three-fourths of the total land area of Guangdong Province is mountainous or hilly. The only large areas of flatland are the Pearl River Delta and the region around the port city of Shantou, in the east. Long distance transport is obstructed by the Nanling Mountains in the north of Guangdong, the Yunkaida Mountains in the west, and the Lianhua Mountains in the east. The South China Sea creates a coastline of 4,300 km, the largest of any Chinese province, providing coastal shipping links with the other provinces as well as international trade.

1.3 Guangdong is drained by three main rivers, the Xi Jiang, Bei Jiang, and Dong Jiang, located in the western, northern, and eastern parts of the province, respectively. All three rivers are navigable to some degree. The three rivers unite to form the Pearl River (Zhu Jiang) and its delta, which plays an important geographic and socioeconomic role in the Province. The Pearl River Delta commences at the intersection of the Xi and Bei Rivers, 45 km northwest of Guangzhou (formerly known as Canton). The Delta contains a network of channels and canals stretching 110 km from north to south and 90 km from east to west.

1.4 Most of Guangdong province has a subtropical climate with tropical monsoons. The monsoon climate includes a rainy season from April to Septem- ber, when floods and typhoons frequently disrupt ports and interfere with land transport and coastal shipping activities. No frost or snow occurs except in the highest elevations of northern Guangdong.

B. Administrative Jurisdictions

1.5 Administratively. Guangdong Province is divided into three prefectures and nine prefectural-level municipalities; on the lower level, it contains 76 counties and six county-level municipalities. Guangzhou is the provincial capital, containing 3.36 million inhabitants. It is the largest city in Guangdong and one of the largest cities in China. Guangdong Province also

1/ This study focuses on the mainland, and wherever possible the data presented here exclude Hainan Island. Hainan Island has an area of 33,900 km2 and is located at the southernmost point of the province. Formerly it was an administrative district of Guangdong Province; in 1988 it became a separate province. -2- contains three of China's four special economic zones (SEZs): Shenzhen, Zhuhai, and Shantou (see Map IBRD 20592).

1.6 The Special Economic Zones in Guangdong were established in 1980-82. They were authorized to offer foreign investors preferential terms on land costs, labor, and taxes. Other market-oriented policies were instituted in these zones on an experimental basis. As a result, an enormous amount of investment has poured into the SEZs (Y 17 billion from 1985 to 1987) from both domestic and foreign sources to fuel light industry, commerce, property development, and tourism. The Shenzhen SEZ is especially well placed next to Hong Kong and has grown by far the fastest, with emphasis on the assembly of elec- tronic products and household electrical goods. The population of the Shenzhen zone jumped from about 30,000 in 1978 to 500,000 in 1985 and to 600,000 in 1987 (of which 313,000 is classified as temporary population). Shenzhen's currently most profitable industrial activity is assembly and sub- contracting work for Hong Kong manufacturers, but, aspiring to a larger role, Shenzhen has made high-technology industry a priority. In 1985, it set up its own Science and Technology Industrial Park to encourage further production of more sophisticated products such as quartz crystals and computer disk drives. Nearly all of China's provinces have built their own hotels in Shenzhen. There are now 2,000 domestic investors in the zone, and half as many foreign firms. Because of its proximity to Hong Kong and its relative freedom compared to other parts of China, Shenzhen remains a magnet for both foreign and domestic investment and economic expansion.

1.7 The Zhuhai zone is much smaller. It is managed as part of Zhuhai Municipality, which recently was expanded to include 1,266 km of land area and 145 islands off the co-st (shown in Map IBRD 20592). Zhuhai Municipality, which borders on Macao, is ]ocated 36 nautical miles from Hong Kong. Trans- port services between the two cities are available by hydrofoil, as wel]. as by more conventional modes. Since the SEZ was created in 1980, the Zhuhai zone has changed from a largely undeveloped countryside to a significant industrial and tourist center with a city population of 420,000 (including 180,000 temporary workers). Foreign investment, primarily channeled through Hong Kong, contributed $500 million to 336 joint ventures as of 1987, and agreements for 2,215 more have been reached.with an anticipated investment of $1.5 billion. The foreign investment has been concentrated in light manufacturing (55 percent), commerce (21 percent), and tourism. Major industrial sectors include electronics, clothing, food, and furniture. Infrastructure in the zone has expanded dramatically in the form of new industrial parks, roads, power and utilities, and an improved port and heliport. Due to its "open door" policy and the attractive landscape along Zhuhai's coastline, tourism has developed rapidly. The Zhuhai authorities are considering a variety of development proposals for both island and mainland sites.

1.8 The Shantou SEZ is also relatively small compared to Shenzhen. It is more isolated and less well equipped in infrastructure than Zhuhai, perhaps because it was started two years later. in 1982. Nevertheless, Shantou is located in a highly populated area of the province with an abundant labor force. By January 1988, it had attracted nearly 500 industrial and agribusi- ness enterprises, including 259 foreign joint ventures and 211 domestic ventures, for a total investment of about $250 million. Commitments have been made for another $150 million, and improvements to major ports and other infrastructure are under way. The development to date has focused on aquacul- - 3 - ture and light industry, with textiles, electronics, consumer goods and food processing taking the lead. The goal for the SEZ is to attain a growth rate of over 40 percent per year.

1.9 In addition to the Special Economic Zones, Guangdong Province has established two Economic and Technological Development Zones (Canton and Zhanjiang), and in 1986 it established an Economic Open Zone in the Pearl River (Zhujiang) Delta. These zones also will benefit from special incentives to encourage export-oriented production, and capital investment for infrastructure. The Economic Open Zone (EOZ) is a less structured concept than the SEZ, allowing the market to determine industrial prices as an experiment in price signals but with fewer administrative rules. The Pearl River Delta EOZ had by the end of 1987 designated 242 industrial satellite towns and 1,165 production and processing bases for agricultural exports.

C. Population and Labor Force

1.10 Guangdong Province accounts for 59.7 million, or about 6 percent of China's total population.2/ Guangdong is one of the most densely populated provinces in the country, with an average population density of 295 persons/ km2. (The average population density for all of China is 107 persons/km2.) Population density in Guangdong varies greatly, with the highest density (880 persons/kin2 ) in Shantou prefecture which is located in the extreme east of the province, while Shaoguan prefecture in northernmost Guangdong has the lowest density (144 persons/kmi2 ). In general, the south is more heavily populated than the north and the east is more heavily populated than the west. About one fourth of the provincial inhabitants live in the 20 largest cities of 500,000 or above (see Map IBRD 20592.) Table 1 presents a breakdown of the population in each of the four economic regions of the province.3/

1.11 Guangdong Province has long had more contact with overseas countries than any other Chinese province. The province is estimated to be the ances- tral home of nearly two-thirds of all overseas Chinese. Approximately 12 million persons, or 20 percent of the provincial population, have relatives liv- ing outside of China. These ties have contributed in recent years to external investment of major magnitude and important tourism in the province by overseas Chinese.

1.12 Although the majority of Guangdong's labor force population remains agricultural, there has been a slow (but recently rapidly accelerating) shift in employment away from agriculture to industry over the past 30 years. Agri- culture currently accounts for 58 percent of the work force, but only 20 percent of total production,4/ although the numbers categorized as agriculture

2/ Excluding Hainan Island and the autonomous states.

3/ Tables 1 through 50, which are numbered consecutively throughout the report, appear following page 78. Summary tables appear in the text of each chapter and are prefaced by the Chapter number.

4/ Many of those classified administratively as "agricultural" actually work in factories and other town or city jobs. This has created a need for commuting services from rural homes to work locations. - 4 - may include a large number of people actually employed in small-scale town or village manufacturing enterprises. In 1986, about 340,000 rural laborers in Guangdong Province switched to work in township enterprises, the focal point of light industrial and manufacturing activity. In the same year about 20 percent of the rural labor force was reported to have switched to employment in the main provincial cities of Foshan, Jiangmen, Guangzhou, Shenzhen and Zhuhai. (All of these cities are located in the Pearl River Delta region). Industry is now the second largest employer, accounting for 16 percent of the labor force in Guangdong (Table 2); this percentage would be much higher if all those employed in village enterprises were included. The sector of commerce, trade, and marketing ranks third, with 7 percent of the labor force, and construction ranks fourth with 5 percent. Fourteen percent or less of the provincial labor fcrce is employed in the remaining sectors.

D. Economic Activity

1.13 Income Levels and Growth. Economic activity in Guangdong Province has been growing rapidly in recent years. Between 1980 and 1985 the gross value of agricultural and industrial output (GVAIO) increased by 89 percent, from Y 36.5 to Y 69.1 billion in constant prices, or 13.6 percent per year (Table 1.1 below). In 1987, the rate of growth is tentatively reported to have increased to an extraordinary 27 percent. This acceleration was due primarily to industrial growth. Agricultural output appears to be fluctuat- ing--increasing to 1985, falling in 1986, and picking up again in 1987, as high-value-crop increases compensate for decreases in grain area sown.

Table 1.1: PROVINCIAL GVAIO (Constant 1980 prices)

Average growth Gross value Gross value Year GVAIO per year of industry of agriculture (Y billion) (Z) Y billion z Y billion z

1957 9.3 2.9 6.4 1970 19.1 5.7 10.2 10.2 8.9 2.6 1975 26.1 6.4 15.9 9.3 10.2 2.8 1980 36.5 6.9 24.3 8.9 12.2 3.6 1985 69.1 13.6 46.1 13.7 23.0 13.5 1986 78.2 13.2 59.5 29.1 18.7 -18.7 1987 99.5 27.2/a 79.1 32.9 20.4 9.1

/a Estimated.

Source: Guangdong Province Yearbooks and GPPC for 1987. 1.14 According to sample surveys, the average annual wage of staff and workers in the province in 1986 was Y 1,461 ($409).5/ Total personal income has grown steadily since economic reforms were introduced in 1978, from Y 421 in 1978 to Y 965 in 1986. The average income of employees in state-owned enterprises in Guangdong was Y 1,645 ($460) in 1986; this represented a 204 percent increase over 1980 and a 22 percent increase over 1985. Employees of state-owned enterprises and farmers in Guangdong have incomes about 17- 20 percent above the national average, and these income differentials have been more accentuated in the Special Economic Zones where wages are set by the market. High incomes and rapid economic growth are major contributors to the growth in demand for travel and freight transportation in the province. This growth in demand is expected to continue with increasing economic activity and rising per capita income in the province.

1.:15 Past growth in agricultural output in Guangdong Province is mainly due to growth in certain subsectors: forestry, fish farming, and sideline production, which includes small-scale industrial production by farmers. These subsectors have expanded at the expense of plantation agriculture,6/ where the area sown for grain has decreased to make way for more profitable crops.

1.16 Although agricultural output in Guangdong has been increasing in absolute value, its share of total output value has been declining, from 39 percent in 1958 to 20 percent in 1987. Industrial production dominates the provincial economy, as is evidenced by its 79 percent share of total GVAIO in 1987. Of the industry total, light industry 7/ accounted for 65 percent, and this proportion has remained relatively stable over the last few years. Table 3 depicts the major commodities produced in the province in recent years.

1.17 According to sources both within and outside of the People's Republic of China, Guangdong Province may be fast becoming Asia's "fifth little dragon," alongside Singapore, South Korea, Hong Kong, and Taiwan China. Its easy access to both Hong Kong and Macao and its favorable investment policies have spurred export-oriented production, which reached a value of $5.56 billion in 1987 (30 percent higher than in 1986). This growth was led by

5/l The official exchange rate was devalued in July 1986 from $1 = Y 3.45 to $1 = Y 3.70. For 1986 an average rate of $1 = Y 3.575 has been used. (In December 1989 the exchange rate was again devalued to $1 = Y 4.71.)

6/ Also called "farming", plantation agriculture covers the cultivation of grain crops, cotton, oil-bearing crops, sugar crops, bast-fiber plants, tobacco, vegetables, medicinal herbs, melon and gourd crops, and the cultivation and management of tea plantations, mulberry fields and orchards.

7/ "Light Industry" refers to the production of consumer and intermediate goods, for example, food, textiles, tools, electronics, and chemical pharmaceuticals. "Heavy Industry" refers to the production of primary goods or processes. It consists mainly of mining and lumbering, raw material processing, construction, and manufacturing of cement, fertilizer and heavy equipment. - 6 - foreign and joint-venture enterprises, which experienced a 57 percent increase in output that year. Production is oriented to light industrial manufactured goods with food, textiles, and electronics accounting for 21 percent, 15 percent, and 11 percent of output value, respectively. The fastest growing activity is the manufacture of household electrical appliances.

1.18 Economic Geography. Guangdong Province can be divided into four regions according to shared economic and geographic characteristics: the Pearl River Delta, East Guangdong Corridor, West Guangdong Corridor, and North Guangdong Corridor (see Map IBRD 21438). The Pearl River Delta is the most economically developed region. Its combined industrial and agricultural output accounted for 60 percent of the provincial total in 1985, although it contains only 30 percent of t:he population and 16 percent of the arable land area in the province. The region includes two of the three SEZs: Shenzhen and Zhuhai, and supports more than 5,000 export-producing enterprises. The East Guangdong Corridor accounted for only 13 percent of the total output of the province in 1985, although it contains 33 percent of the total population and 41 percent of the cultivated land area. The corridor includes the resource-rich, but relatively little developed, Meixian Prefecture. The West Guangdong Corridor is primarily agricultural, except for the farthest western Prefecture (Maoming), which contains an oilshale and refinery complex. In 1985 the corridor accounted for 27 percent of provincial agricultural production and 10 percent of industrial production. It contains 30 percent of the population of the province and 34 percent of its cultivated land area. The North Guangdong Corridor is primarily mountainous. It provides a section of the major interprovincial transport corridor linking Guangzhou with Beijing. It is the most sparsely settled part of the province, with 9 percent of the cultivated land area and 12 percent of the population in the province, concentrated in its mining towns (see Table 1). Further description of these corridors is found in Chapter III.

1.19 The four corridors havre experienced different rates of economic growth in recent years, as shown in Table 1.2. The 1985/86 growth pattern may be seen as typical of the period 1980-88, as it is close to the average for this period and reflects the effects of strong investment in the early 1980s in light industry. Also this growth reflects the broader development pattern in the Pearl River Delta outside the SEZs, typical of the late 1980s. These figures demonstrate the uneven growth within the Province and the favored position of the Pearl River Delta with respect to the other regions. Within the Delta the East Bank has the highest growth rate, but the West Bank has the highest share of growth. The Delta has absorbed Y 11 billion in infrastructure investments over the last three years, representing fully 97 percent of the capital investment destined for economic zones. This establishes a stronger base for future growth in the Delta than in other parts of the Province.

1.20 Light Industry was concentrated in Guangzhou in the past with a lesser intensity in other population centers such as Shantou and some of the larger cities in the Delta. Since 1980 light industry has grown rapidly (33 percent in 1987) and became diffused throughout the Pearl River Delta with a special focus in the SEZs. Access to Hong Kong, especially by road or river, appears to be the principal criterion for the location of industry, and rural townshlipsappear to be favored with higher growth in value of industrial output (47 percent in 1987) than cities. - 7 -

Table 1.2: GROWTH IN GVAIO BY TRANSPORT CORRIDOR (Y in constant 1980 prices)

1985/86 1985 1986 Growth share of Corridor GVAIO GVAIO rate (X) growth /a (Z)

Pearl River Delta 3,491 3,939 12.8 52.8 East Guangdong 1,071 1,178 10.0 12.7 West Guangdong 1,325 1,679 19.2 29.8 North Guangdong 441 481 9.0 4.7

Total Province 6,328 7,177 13.4 100.0

/a The share is the difference in GVAIO for the corridor divided by the difference for the Province as a whole.

Source: Guangdong Yearbook, 1987.

1.21 Heavy Industrial Production in Guangdong Province historically has been located in relation to the resource base. Manufacturing has been concentrated in Guangzhou, mining in the northern and eastern areas, and petroleum production from oil shale in Maoming in the West. Heavy industry has kept pace with light industry in recent years, mainly due to the construction boom in the province, which has generated large demands for cement, quarry products, and other building materials. Iron and steel plants are located in Shaoguan and in Guangzhou, the latter is also a center for the production of heavy equipment. Cement plants are spread out across the province, although the greatest production takes place in Guangzhou and the Pearl River Delta (50 percent), and the remaining production is evenly divided among the East, West and Northern Corridors. While most cement plants are overcommitted, the plants in Shantou, Huiyang, and Meixian prefectures in the East operate below capacity due to a shortage of energy and/or transportation constraints. The Maoming refinery complex is the largest industry in the West and is used for processing oilshale and crude oil piped from the port at Zhanjiang. Oil exploration and development in the South China Sea also is becoming significant.

1.22 Coal production is the most important mining activity in the province. Iron ore production is the second most important mining activity. Most of the ore is produced within Shaoguan Prefecture. There are also nonmetal ores, of which ferrous-sulfate is considered to be the most important. Most minierals are produced in the northern part of the province. There are significant reserves of coal and iron in several areas of Guangdong. Other ores are found in the East Corridor, but their relative isolation has limited mining operations (see Map IBRD 21438). Expanding these activities would require costly investments in transportation facilities through difficult terrain. Oil shale production is less significant; shale mined in the west is converted to oil at the nearby Maoming refinery. Mining, petroleum and cement activi- - 8 -

ties generate much of the demand for transport in the Province, particularly for rail and water transport.

1.23 Agricultural Production. Despite the growth of industry in Guangdong Province in recent years, agriculture remains the major emplcyer and land user. Grains accounted for 70 percent of the land under cultivation in 1986, although total grain production fell 16 percent between 1980 and 1986. Cash crop production rose dur:ing this period. For example, sugarcane production increased by more than 140 percent, to 20.7 million tons in 1986. Most of the land under cultivation in Guangdong Province is in small farms, and transport demand is widely dispersed.

1.24 Information on the location of agricultural production according to region or corridor is limited. Nevertheless, several general observations can be made about each one. The Pearl River Delta Corridor is one of the most important farming areas in GuaEngdong. It produced more than half of Guangdong's agricultural exports in 1987. However, this production is decreasing for two major reasons. First, more and more farmers in the Delta are shifting from farming to sideline production and rural industry, so cultivation is less widespread than before. Second, competition from other regions has been increasing rapidly in recent years. For example, the location of mulberry silkworm production has shifted since 1984 from the Delta to Shaoguan, Zhaoqing, and Zhanjiang. The East Guangdong Corridor produces sugarcane, jute, and rubber. Sugarcane is grown primarily on the Cao-Shan plain and jute is grown mainly in the coastal areas of East Guangdong. Rubber production is increasing in East Guangdong, and recently has been supported by international loans. In the West Guangdong Corridor, the Leizhou Peninsula also produces sugarcane, as well as tropical and subtropical fruits: bananas, citrus, lichi and pineapple. Finally, the sparsely populated central and northern hilly lands of the North Guangdong Corridor are known for their production of tea leaves and tree crops.

1.25 Forest products are important to Guangdong and forestry was one of the fastest growing "agricultural" industries between 1980 and 1985. In 1985 it contributed 11 percent to the total value of agricultural output. Wood production increased to 4.3 million cubic meters (Mm3) in 1985, but then declined to 3.4 Mn3 in 1986, due to concerns about deforestation. About 33 percent of wood production comes from the North, 25 percent from the East, 22 percent from the West, and 20 percent from the Delta. The past spurt in forest activities was supported by international lending for forestry development in southeast China which included the upgrading of forest roads. How- ever, production now appears to be stabilizing at past levels and imports are taking up the growth in demand.

1.26 Interprovincial and Foreign Trade. Although Guangdong Province is a significant producer of grain, coal, iron ore, iron and steel, petroleum products and cement, it is still a net importer of these commodities, and more than half of the inflows to the province are made up of these six products. In fact, 80 percent more freight is shipped into the province than out of it, -9- as shown in Table 4. The outflows are much more diverse, and include many of the inflow categories.8/

1.27 The Pearl River Delta is China's largest trade outlet. The new open-door policy of China, the creation of two SEZs in the Delta, and the recently discovered oil reserves of the South China Sea have expanded the horizon for the Delta's development in foreign trade. The strategic location of Hong Kong as a focal point for imports and exports also has reinforced Delta trade.

1.28 In 1986 Guangdong Province became the largest foreign export earner in the country. Between 1980 and 1985, the total value of exports increased by 42 percent. Between 1985 and 1987, it increased by 92 percent, to $5.56 billion, outperforming all other export centers including Shanghai, which previously had been the leader. Textiles accounted for the largest percentage of export value (38 percent), followed by agriculture and special products (33 percent), industrial and mineral products (19 percent), and processed agricultural products (10 percent). In terms of tonnage, sand and gravel were also a major export, reaching over 4 million tons (Mt) in 1987. Total export tonnage is estimated at approximately 18 Mt. The main export markets are the entrepots of Hong Kong and Macao, which absorbed 69 percent of the exports. Direct exports to the US, Japan, Singapore, West Germany, Great Britain, Canada and Australia also are growing in importance. The value of Hong Kong and Macao exports grew by 36 percent between 1985 and 1986, and 46 percent between 1986 and 1987, rapidly increasing their share of the total.

1.29 The major foreign trade flows into Guangdong Province in 1987 included the following commodities: chemical fertilizer, steel products, cement, grain, edible oil, lumber, and paper. Total foreign imports are estimated at about 16 Mt. The volume of foreign imports into Guangdong decreased slightly in 1987, but this trend is expected to reverse. In the future growth in imports is anticipated to be significantly slower than growth in exports.

1.30 Hong Kong is by far the largest foreign trading partner with Guangdong Province; it also serves as a conduit for transshipped goods from other countries. Exports to Hong Kong have grown from 3.7 Mt in 1980 to 10.8 Mt in 1987, at a rate of 16.8 percent per year. This is more than twice the growth of exports to other countries. Imports from Hong Kong were only half the level of exports in 1987 (5.4 Mt) but have been growing at a rate of 43 percent per year from a very small base in 1980 (see Table 5). Imports and exports by commodity group are given in Table 6. The tonnages for exports are dominated by sand and gravel (taken by river barge to Hong Kong), but exports of textiles, food and metal products also are significant, while most imports into Guangdong are manufactured goods. Hong Kong's influence over imports and exports appears to be growing. However, port limitations may reduce future flows through Hong Kong in favor of direct import and export routes.

8/ The reasons for this overlap need to be investigated; it could indicate irrational transport patterns for the commodities involved; however, it more likely reflects (1) transshipment of commodities through Guangdong Province, (2) locational differences within the province or (3) the grouping of heterogeneous products under one classification. - 10 -

E. Present Constraints on Development

1.31 The two greatest bottlenecks to economic expansion of Guangdong Province are the interrelated shortages of energy and transport. Hydropower development in the province has about reached its maximum, and access to coal, either in northern China or in eastern Guangdong, is limited by constraints in transport capacity; both the Guangzhou-Beijing Railway and Huangpu Port, which are major conduits for low-cost coal from Shanxi Province, have been saturated, while eastern Guangdong is served only by costly narrow-gauge railway cum river or road services. Power production in the province soon will be supplemented by a nuclear pLant near Shenzhen, and a major new coal-fired plant in the Pearl River De:Lta recently has been completed with its own berth- ing facilities for coal barges. Hydropower from Guangxi also may be available for Guangdong. Offshore oiL is available but plans for its use in energy production are unclear.

1.32 Transport constraints are an economic problem well beyond their effects on the availability of coal. Inadequate transport constrains the development of mineral based activities, particularly in the East Corridor where potential limestone/cement, iron and other minerals, in addition to coal, are located. In other areas inadequate transport constrains the growth of light manufacturing and high valued agricultural exports whose demands for express door-to-door services are being met only partially and at relatively high cost, due to a combination of small, inefficient trucks, generally poor road conditions and increasiLngcongestion on the highway network. An important constraint was temporarily lifted when double tracking of the railway in the Northern Corridor was completed in late 1988, and another will be eased when the divided expressway from Guangzhou to Hong Kong is completed (currently scheduled for 1992). However, transport constraints will remain pervasive throughout most of the province, as expansion of the transport system has lagged far behind the explosive economic growth of recent years.

F. Economic Forecasts

1.33 Before 1980, the economy of Guangdong Province lagged behind that of the rest of the country. S:ince then it has grown faster than the national economy. The accelerated growth in the province is due to many factors, including the national economic reform policy which has made much of Guangdong a special economic incentive zone. Readily available land and labor and close ties to domestic and J-oreign investment sources in more than 20 countries also have contributed to the province's rapid economic growth.

1.34 Three types of growth patterns are emerging: (1) export-oriented, light-industry-led growth; (2) resource-based, heavy-industry growth, partly linked to the construction iLndustry serving (1); and (3) heavy-industry primary processing based on imported capital and resources (e.g., iron and steel plants). The first type depends on access to foreign markets and capital, which for the near future w111 be oriented to Hong Kong. The focus of this growth will clearly be the IPearl River Delta, but the growth could spread to other areas of the Province. The second type is tied to resource locations and accessibility to type 1 growth areas. The North and West will continue to produce metal and nonmetal ores, but the growth for coal mining (for home heating and power generation), iron mining, steel-making and cement plants is expected to be in the Northeast. The third type is dependent on deep-water - 11 - ports combined with a good foreign investment climate. These features can be found in locations such as Zhanjiang or the Zhuhai islands. Managers of new factories of all three types are planning to use modern technology with a relatively high labor content, but they have identifiably different transport needs.

1.35 Official goals for the Province include the quadrupling of GNP between 1980 and 1995 (a compound growth rate of 9.7 percent), and provincial forecasts made in 1985 showed GVAIO increasing at a rate of 9.2 percent up to 1990. Actual growth rates, however, were much higher up till 1989 (GNP growth averaged 14 percent and GVAIO 15 percent from 1980-87), suggesting that future growth could also be higher. Short term growth rates for GVAIO range from 15 percent to the extraordinary 27 percent achieved in 1987. This accelerating trend was fueled by external investment, and the province has obtained agreements for a further $15 billion in foreign investment in the near future. However, efforts by the central government to rein in investment growth nationwide in order to control inflation commencing in late 1988 took hold during 1989, dramatically slowing the growth of income as well as inflation. Inflation now having been brought under control, the government is now acting to resume a high growth pattern.

1.36 In the medium term, energy and transport constraints will slow economic growth in Guangdong Province. The rapid growth has used transport capacity faster than it could be expanded, even with the extraordinary measures being taken by provincial and local authorities (see Chapter III). Recent history shows that sustained growth by rapidly industrializing countries has not exceeded 20 percent over a 5-10 year period, even at their peak, and has generally fallen within 8-15 percent. However, Guangdong Province is better endowed than any of the "four tigers" in both human and natural resources, and it has the additional advantage of overseas investors of Chinese origin who have more than a passing interest in this specific location. Therefore, growth can be expected to be in the higher end of the range.

1.37 Overall, the dramatic growth of the provincial economy of recent years will soon run into major constraints. The present backlog of investment will lead to substantial growth in the near term in any case, but energy shortages, congested transportation corridors, and government policies to curb inflation can be expected to slow growth from the peak rates of 1986-88. Another element of uncertainty is the extent to which world markets will encourage or discourage rising Chinese exports. Recognizing these uncertainties, three possible scenarios of economic performance have been assumed to reflect pessimistic, base case and optimistic growth assumptions, as summarized in Table 1.3.

1.38 The pessimistic scenario assumes a fast drop off in investment due to worldwide recession and resistance to increased Chinese exports combined with major constraints on economic growth. The optimistic scenario assumes sustained growth at rates somewhat slower than in the past, but still higher than those achieved by other countries (including the "four tigers") over a sustained period. The base case represents a balance of optimistic and pessimistic factors, and provides the primary basis for the economic analysis of proposed investments in this report. These three scenarios are a first - 12 -

Table 1.3: FORECAST ECONOMIC GROWTH RATES (GVAIO) (average % per year)

Medium term Long term 1990-95 1995-2000

Pessimistic 6 3 Base Case 9 6 Optimistic 15 12

approximationwhich is designed to cover the range of likely performance for transportplanning purposes.9/

G. Location of Future Growth

1.39 The location of future growth will be influenced by the State and Provincial spatial developmentpolicies as well as by economic market forces. The government'spolicy is to try to balance growth among the regions and to support small city and town growth more than larger city growth. This policy will increase public investment in the least developed eastern and western sections of the province (particularlyMeixian Prefecture),but the extent of private investmentin these areas is conditionedupon the availabilityof transport,which is so far quite limited. Meanwhile a relatively high level of infrastructureand other investmentwill continue to be made in the Pearl River Delta based on initiativesfrom local authoritiesand the SEZs. This implies that high growth areas will continue to grow, and that other regions can expect to increase their growth to the extent that they become more closely integratedwith the expanding markets and investment sources of the Pearl River Delta. Table 7 summarizes the counties and cities with the highest growth potential for industrial development.

1.40 In the future, industrial growth in the province, particularly export-orientedindustry based on electronics,food and textiles, is expected to increase faster than agriculturalgrowth. Light industry investment is expected to acceleratewith the introductionof new technology from Hong Kong and other sources, and may only be constrainedby the development of infrastructureand limits on external financing imposed by the state. The major investmentsneeded to support heavy industry,particularly coal and iron ore mining, cement and steel production are contingent on a number of regional

9/ These approximateforecast rates could be made more detailed in the future by using a dynamic model of the provincial economy based on a light industry-ledgrowth pattern. The implicationsfor different sectors of the economy could also be modeled to better forecast the mix of sectoral growth and the interactionsbetween sectors. Such an analysis would also give a better basis for surplus/deficitforecasts of specific goods which is related to transportationdemand in Chapter V. - 13 - developmentand investmentdecisions which are interrelatedwith transport investmentdecisions.10/

1.41 Agricultureis expected to experiencemuch slower growth; grain productionis actually expected to decrease as the cultivated area is reduced, and certain cash crops, sideline products, and higher value products provide the impetus for growth. Guangdong Province is expected to adopt certain preferentialpolicies to stimulategrain production and fertilizer use. These policies should help to counteractthe decrease in the land area devoted to grains. Emphasis also will be placed on the production of tropical fruits and vegetables,fish farming, and animal husbandry. The net result is expected to be an average growth in total output value of agriculture of approximately 3 percent per year, under all growth scenarios.

1.42 State funding for capital investment in industry has been reduced under the Seventh Five-Year Plan and the available funding concentratedin those industrieswith the greatest potential. More investments are also being made in infrastructure,including transport,power, and communications (see Table 8). However, the percentageof public investment in infrastructurewas significantlylower in 1986/87 than in the Sixth Five-Year Plan period (1981-85). Policy statementsfrom Chinese leaders suggest that transportation and energy are likely to be given higher priority during the Eighth Five-Year Plan (1991-95).

1.43 The populationof Guangdong Province is expected to grow faster than the national average through the year 2000, and some migration into the province is expected from other, slower-growingprovinces. The populations of the fast growing SEZs contain a high proportionof temporaryworkers. This proportion is expected to remain in effect until a government settlementpolicy is adopted to increase the number of permanent inhabitantsof these areas. Meanwhile the population is projected to grow at 1.4 percent for the province as a whole, and internal migration should account for the shifts to the high growth areas. These population shifts are expected to affect the future demand for passenger trips.

1.44 The percentageof growth (see Table 9) that is attracted to each region or transport corridor in the Province is expected to shift, depending on the accessibilityof the regions to Hong Kong. This shift cannot be pre- dicted with much accuracy at present due to the lack of information about how investmentlocation decisions are made in the Province. However, the general direction of the shift can be estimated. Table 10 shows the Base Case forecast growth in GVAIO by Corridor, and the shift in share of growth as the expresswayslinking the Delta to Hong Kong are completed, and the West Bank and Guangzhouareas gain accessibilitysimilar to that of the East Bank. This increasedaccess to Hong Kong is expected to concentratemore growth in the Delta area unless other areas became more accessible. Optimistic and pessimistic scenariosare given in Tables 11 and 12, respectively. In addition to this shift in growth, a net increase in developmentmay take place. The potential for this type of increase is described in Chapter V.

10/ Investmentin these industriesmust be evaluated in conjunctionwith transportinvestments as a combined package for regional development. This is closely related to the calculation of benefits for induced traffic as discussed in Chapter V. - 14 -

II. TRANSPORT INFRASTRUCTURE, SERVICES, AND MANAGEMENT

A. Transport Network Overview

2.1 The transport system of Guangdong Province consists of railways, roads, coastal shipping routes, inland waterways, civil aviation, and a pipeline (Map IBRD 21438). Roads and inland waterways are the principal modes for intraprovincial or short-haul transport. Railways and coastal shipping are the principal modes for interprovincial transport; air movement of passengers is growing rapidly, but is still quite limited, and air freight is almost nonexistent. The length of internal provincial routes is shown in Table 13. Although the density of the road network and inland waterways in Guangdong is higher than average for the country, the province still has a relatively undeveloped transport system. This is because the transport density throughout China still is quite low, compared even to other developing countries such as India and Brazil. However, this situation is beginning to change as the government attempts to expand facilities to meet the demands created by rapid economic growth. Examples of these improvements include more expressways and Class I highways to strengt:hen the road system, linking of the rail system and increasing the capacity of main lines, expanding ports in several locations, and a number of new or expanded airports.

2.2 The spatial distribution of infrastructure in the province varies according to the level of economic development of the different areas. In general, however, the transport routes form four axes centering on Guangzhou. In shape they resemble two wings with a head and tail (Map IBRD 21438). This pattern is influenced by the prevalence of hilly and mountainous areas in between the north and east axes and north and west axes.

2.3 The major handicaps of the Guangdong transport system are its capacity limits, reliance on outmoded technologies, high costs, and geographic sparsity. The existing ini-rastructure is overloaded because transport supply has not kept up with the rapid growth in demand. For example, the actual throughput of the Guangzhou North rail marshalling yard in 1985 exceeded its rated design capacity by 23 percent. Similar overcapacity conditions have been recorded for other ra:Llway facilities and for ports. Roads also are starting to experience significant congestion in the faster-growing areas. Moreover, many rural roads are far below the standards which would be economically indicated by the traiFficwhich they serve. Capacity limits and outmoded transfer and cargo handling technologies create bottlenecks that affect many parts of the transport system.

2.4 Much of the technology used for road, rail, and river transport resembles that used by developed countries in the 1940s and early 1950s. Although new rolling stock and road vehicle technology are being introduced in China, not all of it is weLl planned. For example, the recent introduction of modern heavy trucks is cauSing rapid deterioration of pavements which are too thin to support the heavier loadings. On the positive side, facilities at Huangpu Port and some of the smaller ports in the Pearl River Delta are being equipped with more modern handling equipment. - 15 -

B. Transportation Infrastructure by Mode

2.5 Railways. Compared to many provinces and regions, the length of railways in Guangdong is relatively short (see Table 14). The capacity of stations and yards is also limited relative to the demand, although the recent double-tracking and expansion of rail yards on the Henyang-Guangzhou and Guangzhou-Shenzhen sections will provide some temporary respite. The existing rail infrastructure is composed of five main lines, one junction station with marshalling yards,l/ and other major stations. The five main lines are equipped with semiautomatic block signaling. The railways connect the ports of Huangpu, Guangzhou, and Zhanjiang with the rest of the country, and also serve as an export link to Hong Kong.

2.6 Although Guangdong has nine local rail lines, the only significant one is the Meilong railway in the Eastern Corridor. This railroad was built to serve a coal mine at Shiwangjhang in 1971, but has since expanded its service to take general freight and passengers. It serves as the main link from the coal mine to river transshipment points (Map IBRD 20593).

2.7 Roads. Roads play an important role in Guangdong transportation, although most are of low technical standards, have poor surface conditions, and are often congested (Table 15). The average road density in the province is 29.7 km/100 km although plains areas have a higher density than hilly areas (Table 16). In recent years, however, road capacity has not expanded in line with the dramatic growth of traffic, and congestion has greatly reduced speeds and consequently increased vehicle operating costs. Congestion is particularly high on many road sections which provide entrance and exit to cities and towns. The mixed use of roads by motor vehicles, tractors, bicycles and pedestrians without separation also contributes heavily to congestion when the different types of traffic interfere with each other, which is common where urban buildup has encroached on many roads. At present most trunk roads pass through cities and towns without separation from the streets of built-up areas, forming traffic bottlenecks, particularly in the Pearl River Delta. Outside of the Delta, poor road surface and geometric conditions are mostly responsible for the high transport costs. It is significant that over 2,300 km of existing gravel roads have traffic loadings in excess of 2,000 vehicles per day (vpd). This is at least four times the threshold at which paving becomes economic.

2.8 Ongoing improvements to road infrastructure in Guangdong include the construction of expressways, the upgrading of Class III and IV highways to Class II or Class I standards, and the paving of waterbound macadam roads with bituminous or cement surfaces. The major Guangzhou-Hong Kong expressway project is an innovative arrangement financed by a foreign bank consortium orga-

1/ Jiangchuan marshalling yard in Guangzhou is a newly completed second yard serving the junction, and Pingshikou is the main yard serving Hong Kong traffic. - 16 - nized in Hong Kong. It is to be a six-lane expressway throughout its length where the traffic has already reached 20,000 vpd day on the existing road.2/

2.9 Coastal and Marine. Guangdong's long coastline and favorable conditions for coastal and marine shipping are complemented by 13 seaports, four of which have been traditionally classified as major ports and three other SEZ ports have assumed a significant role in the Province (Table 17). These ports serve intraprovincial, interprovincial and international transport. Except for the deep water port at Zhanjiang and the new port being developed at Yantian (para. 2.11), the capacity of the major seaports is limited by the depth of approach channels (Huangpu and Guangzhou) or the water depth along side berths (Shantou).

2.10 Efforts have been made to improve facilities for handling, loading and unloading at ports. However, these efforts are falling behind the growth of traffic and ships frequently queue up to wait for berths. In Huangpu Port, ships waited an average of 5.8 days in 1986, causing a large compensation cost for demurrage. This problem will be eliminated temporarily when the second World Bank-financed expansion of Huangpu is completed, but growth in cargo flows again will strain capacity in the near future, especially if coal shipping increases.

2.11 Several new ports are being built to expand port capacity for the SEZs. The ports of Shekou, Chiwan and Jiouzhou (Zhuhai) were built over the past few years to satisfy traffic growth in Shenzhen and Zhuhai. Although these ports will satisfy demand in the short term, medium range growth will require further capacity. Funds have also been committed for projects to upgrade Shantou harbor and construct a new port at Yantian (Daqing Bay) near the Shenzhen SEZ and Hong Kong. The port at Yantian could become a major transshipment terminal in the region for coal and containers; Yantian has 6 km of shoreline available for development with depths of 10-14 m. The first phase is being financed by Japanese loans and will include container berths and a capacity of 2.8 million tons (200,000 TEU) per year. It will have a rail connection to Shenzhen and 650 m of sidings. However, the future role of this port should be planned taking account of ongoing port developments in Hong Kong.

2.12 Inland Waterways. Use of the waterway system in Guangdong Province has not grown rapidly, despite the system's 11,000 km of navigable inland waterways, 4,200 km, of which have water depths of more than one meter. Table 18 shows the depth of navigable sections and maximum ship size for each major river, the number of ports and their throughput. Exploitation of the water

2/ The toll level for the expressway on its first leg from Shenzhen to Guangzhou is expected to be set at the price of a rail passenger fare (currently about Y 20) for passenger cars and 2-3 times higher for trucks. This is substantially higher than the bridge tolls (Y 2 per car) in Guangdong and tolls on roads in other countries. However, the faci- lity will undoubtedly attract a major portion of traffic due to congestion and poor conditions on the parallel modes. The committed road improvement projects or projects under construction in 1988 are shown in Map IBRD 21438. - 17 - resource for irrigation in recent years has reduced the length of navigable routes.3/

2.13 Construction and improvement of inland waterway infrastructure has not received priority attention, and the condition of the water channels varies from good to poor, which limits long haul shipping, particularly upstream. However, there is a major project to improve the Xijiang in a critical 395 km stretch which will allow it to accommodate 1,000 dwt barges throughout its 1,200 km length into the center of Guangxi Province; this project is expected to be completed in 1990. Many river ports have not been equipped with modern handling equipment and loading and unloading often is done by manual labor. The technology has been upgraded in certain main river ports in the Pearl River Delta, but has severely limited road to river transshipment elsewhere in the province.

2.14 Air. Airports in the province serve civilian and military uses. Guangzhou (Baiyun), Zhanjiang, Shantou, Shaoguan (Guitou) Xingling and the newly opened Meixian airports are purely for civilian use (see Table 19). Foshan (Shati) and Huiyang airports are used for both military and civilian purposes.4/ In 1987, the Province had 54 intraprovincial, interprovincial, and international air route links. Because of the rapid increase in traffic, most airport terminals are overloaded. The small capacity of provincial airport terminals limits the development of passenger services; the air traffic management system also needs to be modernized. Shenzhen, which has a large potential passenger demand, is seeking a proper site for a new airport.

2.15 Only one pipeline exists in the Province. It is used to transport crude oil from the oil berth of Zhanjiang Port to the refinery at Maoming (114 km). Oil products from the refinery are shipped out by rail and road.

C. Transportation Services

2.16 Rail Services. Railroads provide a variety of services to passengers including express, fast, and slow trains with different types of coach cars: hard sitting coach, hard sleeping car, soft sitting coach, and soft sleeping car. Each train normally contains 13 to 20 coaches, although in the peak season more coaches are added and express trains sometimes pull as many as 25 coaches.5/ The present services are shown in detail in Table 20.

2.17 Fares charged by the Guangzhou-Beijing railroad were maintained at low levels from the 1950s until 1985, when they were increased for short trips (up to 100 km) by 37 percent. In September 1989, railway fares nationally

3/ For example, the navigable length of the Han River in the Shantou Region has decreased from 405 to 338 km, and the low water season is now four months long.

4/ Foshan military airport was opened in 1987 to serve civil domestic and long haul flights.

5/ The number of coaches generally is limited by the length of the platform. To receive better service, many small stations need to extend their plat- forms. - 18 - were increased for short trips by 60.8 percent, and by 120 percent for trips over 100 km for most classes of service; at the same time, the premium paid by foreign nationals was reduced from 101.25 percent to 70 percent over domestic prices.

2.18 Local railways are permitted to charge higher fares to recover capital costs. In the case of the Guangzhou-Shenzhen line, it is currently 50 percent above national fares.

2.19 The Beijing-Guangzhou railway is one of the two most important passenger routes in the country; it carries the heaviest passenger traffic. Dur- ing the holiday season in the spring, passenger trains are overloaded by at least 50 percent. Priority in time scheduling and seat reservation is given to long haul services, and some long haul trains do not serve short haul passengers. The supply of sleeper coaches is far less than the demand, since the Ministry of Railways limits the number of sleeper coaches in order to maximize train capacity. Passenger traffic recently has grown along with the expansion of train sizes, and the double! tracking project completed in 1988 allowed passenger traffic to expand even more.

2.20 The railway provides services for the following kinds of freight:

(a) Large volume freight allocated by the central government and the provincial authorities. This includes coal, oil, grain, iron and steel, ore, and cement.

(b) Freight for foreign trade, through the ports of Guangdong, and freight for trade with Hong Kong.

2.21 There are several types of freight wagons in service: covered, open, plain, tank and freezer. Different freight shipping requirements are met by wagons with capacitiies from 25 to 60 tons and by using containers in three sizes, 1, 5, and 10 tons. Table 21 presents a list of the available rolling stock in Guangdong Province. The table shows an increase of 33 percent in locomotives since 1978, a 55 percent increase in freight wagons, and a more than 100 percent increase in passenger coaches. Wagon utilization (or productivity) has also increased significantly in this period.

2.22 The railway serves predominantly long haul and medium haul traffic and discourages short haul traffic (less than 200 km). However, large or abnormally shaped freight is still handled by the railway even for short hauls. Rail transport has a much longer average haul distance (346 km) than roads and inland waterways. Nationally, several long haul rail routes run parallel to coastal shipping routes, but provide more direct services between inland origins and destinations.

2.23 Because demand exceeds supply on the railway, the system has adopted strict operating rules which allocate wagons to customers with lead times of 20 to 50 days. Rail freight:planners also direct nonpriority (out-of-plan) freight onto more circuitous routes to take advantage of rail capacity on parallel lines. This systermhas increased rail capacity at the expense of - 19 - poor service standards, thereby inhibiting the growth of industries which demand higher transportation service standards.

2.24 Road Services. Guangdong Province has three major types of specialized road transport enterprises: state-owned, collective, and privately- owned. In addition, a large number of nontransport enterprises and institu- tions own vehicle fleets to meet their own needs, and many also offer spare capacity for hire. Diversified passenger and freight services are offered, including day and night transport, nonstop and air-conditioned transport, and combined services with waterway transport. The major bus routes connect Guangzhou with Zhanjiang, Shantou, Meixian, Shenzhen, Zhuhai, Zhaoqing, and the cities and towns of the Pearl River Delta (see Table 22). Intercity bus service to other areas is limited (e.g., no service presently exists between Guangzhou and Shaoguan).

2.25 The supply and quality of passenger services is being improved. For example, in order to avoid daytime congestion on roads, many firms provide nighttime express services. The frequency is determined by the demand; on some high-traffic routes there is a scheduled run every 15 minutes. The state-owned bus companies provide scheduled services to most regions that are accessible by road. The fares of state-owned companies are kept to the minimum required to cover financial costs. Road passenger transport generally is preferred in rural areas where rail service is not available. In parts of the province where there is high mobility, an active market economy, and a high demand for quality, many collective- and privately-owned firms compete with each other to provide passenger services.

2.26 Numerous collective and privately-owned transport enterprises provide road freight shipping services in Guangdong, and their number is increasing, as is also the number of own-account carriers. The state-owned, specialized freight transport companies (which are organized and managed at the provincial, city, and county levels) played a central role in road transportation before the economic reforms in 1978, but since then their market share has steadily declined, amounting to only 5 percent by 1987. There are two main reasons for the decline in state-owned freight transportation. First, many new collective and private firms are entering the market; they have greater pricing freedom and operating flexibility and provide more flexible, reliable, and higher quality services.6/ Second, truck ownership by nontransport enterprises has been increasing rapidly, and part of the freight that was formerly shipped by specialized companies now is transported by the enterprises themselves.

2.27 The development of road services and higher rail tariffs in 1985 shifted short-haul freight away from railways to roads. Now increasing con-

61 All types of freight transport enterprises in Guangdong have pricing flexibility up to a maximum regulated price (currently 23 fen per tkm plus Y 1/ton for normal cargo). Nonstate-owned enterprises sometimes charge more, but that is illegal. The high overhead costs of state-owned firms (including heavy pension obligations) reduces their pricing flexibility, and some experience problems with obtaining rationed gasoline and dealing with limitations on overtime and other operating rules that reduce their available operating hours and increase empty backhauls. - 20 - gestion on roads is increasinglyrestraining traffic growth, especially on national highways. However, road transport is particularly suited to light industry and export agriculturesuch as that of Guangdong, which demand fast delivery,careful loading and unloading, and door-to-doortransport services. Thereforethere is a large and increasingmarket for these road services.

2.28 Tractors equippedlfor local freight haulage and bicycles make up a substantialportion of roacltraffic in rural areas and towns. They can be an efficientmeans for short-distancelocal and farm-to-markettransport, but they do absorb much scarce road capacity. Highway design with allowance for these vehicles is important.on secondary and urban roads.

2.29 Road Vehicle Fleet. In the past, the capacity of the road network was more than enough to meet demand, and the network did not begin to be fully used until vehicle ownership surged with an increase of 150 percent during the 1980-85 period of import liberalization(see Table 23). Over 1986/87, the passenger fleet increasedmore slowly than the truck fleet (9.2 percent compared to 12.4 percent per year). However, both have increased much more slowly than road traffic in the province. This implies that the average annual usage of vehicles is rising at a significantrate. The increase in accessibilitydue to bridge!construction in the Pearl River Delta could be stimulatingfleet growth arndvehicle usage, as some of the highest growth in traffichas occurred in are!asserved by new bridges. The average distance of road freight haulage is increasing,especially for goods arriving from and being shipped to Hong Kong. This distance is expected to increase even more when expresswaysare constructed. In the short term, however, the effects of congestionwill tend to counteract this trend.

2.30 The rate of motorization in Guangdong Province is higher than the average for China or Korea--42 trucks and passenger vehicles per 1,000 residents, compared to 34 and 31 vehicles, respectively. However, it is still much lower than in some other developing countries such as Brazil, or in Japan (84 and 394 vehicles, respectively). The motorization rate for passenger vehicles is low partly because of the use of bicycles for short trips and vans for commuter travel. The motorizationrate for trucks is low because trucks are not used for long distance shipments, and inefficientvehicles and poor roads have made trucking less attractive for short haul loads. In addition, import restrictionsand foreign exchange restrictionshave severely constrained the growth of the road vehicle fleet. A shift toward larger, more efficient trucks and the use of container trucks has been encouraged over the last seven years, but large trucks are still not widespread, due in part to inadequate resourcesto improve road geometric conditions,constraining maneu- verability.

2.31 Inland Waterway Services. Inland river cargo services outside the Pearl River Delta are supplied mainly by small barges (20-110 tons) and passenger vessels for the rural population that lives near the river. Passenger services cover the West River, the Pearl River, parts of the North and East Rivers, and the coastal routes. Due to the slowness of river travel, the market for most routes is limited to low-valuedbulk commodities or passenger trips which are hard to make by other modes, e.g., for passengers carrying large amounts of luggage or goods; available statistics are shown in Table 24. In some areas the river is the only mode of transport available; in other areas the rapid expansionof road services has taken over the market for - 21 - waterway transport. In the Pearl River Delta larger barges (1,000 to 3,000 tons) and barge trains with tugs are used. These services have expanded dra- maticallywith new river ports serving Hong Kong from the West Bank using hydrofoils and containerbarges, as well as traditionalvessels. Approxi- mately one third of inland water services are provided by privately owned and two-thirdsby cooperativeor state-ownedvessels. The proportion of private service is higher in the Delta than other areas and joint venture firms with Hong Kong shipping companies are expanding.

2.32 There are few cases of congestion along the navigable rivers in Guangdong Province. However, inland waterway traffic is impeded by congested, inefficientports. Due to outmoded technology and the limitations of port capacity,state-owned ships achieve a utilization rate only of about 20 percent. Most of these ships have outdated designs and are too slow and small for efficient transport, so they are sidelinedmuch of the time. Some modern barge technologyhas been introduced in the Pearl River Delta, but not yet on the tributaries. (This may change with deepening of the Xijiang channel.)

2.33 The average cost of inland waterway transport increased between 1980 and 1985, as the prices of raw materials and fuel rose. A tariff increase was granted in 1985 but some enterprises,particularly the collective ones, still have suffered heavy losses. Consequently,the inland waterway shipping business has declined outside of the Pearl River Delta, where it appears to be profitable.

2.34 Coastal and Ocean Shipping Services. The major seaports in GuangdongProvince provide different types of freight and passenger services (Table 25). Huangpu and Zhanjiang ports serve both internationaltrade and domestic coastal shipping routes. Huangpu Port, with the largest volume, serves most of Southern China. Zhanjiang Port serves the southwesternprov- inces. GuangzhouPort serves the Guangzhou region and provides transfer services for inland water freight on the tributariesof the Pearl River. The smaller ports mostly handle domestic cargo; their foreign trade generally is transshippedvia the larger ports. According to port statistics (see Table 26), foreign trade accounted for 38 percent of the major port traffic in 1985. Foreign trade dropped to 30 percent in 1987 as domestic cargo grew more rapidly.

2.35 The limited capacity of ports and outmoded vessel designs have pre- vented full exploitationof the good coastal shipping conditions. The problems in freight service are manifested by the long average waiting times for vessels, particularlyin Huangpu (6.8 days in 1986) and Shantou (7.6 days in 1986), and the high congestion costs incurred by shippers. Long travel times and delays also discourage passenger travel by ship, and as incomes have risen, fewer passengershave opted for coastal waterway transport.

2.36 Air Services. There are five internationalair routes through Guangzhou, 44 routes connecting Guangzhouwith other large cities, and three intraprovincialroutes covering Guangzhou-Zhanjiang,Guangzhou-Shantou, and Guangzhou-Meixian. The types of service and equipment used are described in Table 27. Air passenger traffic in the province has increased from an extremely small base at about 20 percent a year since 1978. The large reser- voir of suppresseddemand and continuing growth of internationaltrade and tourism provide a ready market for further expansion of air passenger trans- - 22 - port. Recent efforts to encourage independent airline companies with competing services have not been very successful, although there are prospects for future development. The developments planned could help to expand aviation services in the province and in China as a whole. Air services for freight transport are almost nonexistent in Guangdong Province, as in the rest of China. The present business is limited to special types of freight such as airmail and emergency service.

2.37 Containerization. There are 12 ports and four railway stations handling international standard containers. Container traffic, though still low, has recently begun to grow rapidly. In 1987 it reached 420,000 TEUs, compared with 1,800 TEUs in 1979. 200,000 TEUs of the 1987 container traffic were handled by waterway, 173,000 by highway, and 47,000 by railway. Conl- tainer penetration rates were approximately 6 percent of containerizable freight for waterways and much less for the other modes. The present level of container penetration in China's foreign trade (despite recent rapid growth) is the lowest of any of the world's major trading countries. Such low levels of adoption of containers (or other forms of cargo unitization, such as through pallets) can be explained partly by physical deficiencies in the infrastructure, particularly in railway and highway facilities connecting ports with their hinterlands. Institutional factors are also important, in particular the lack of competition in foreign shipping services, which are dominated by the China Overseas Shipping Corporation (COSCO), essentially a government monopoly, and also by similar circumstances in the railways. Freight stations and container transshipment depots are now established in central cities, and door-to-cloor service is beginning to develop despite the institutional constraints.

2.38 Container vessels used in Guangdong include full container carriers, roll-on, roll-off (Ro-Ro) ships, and container barges. The province has 15 full container carriers for ocean shipping totaling 202,000 dwt, four Ro-Ro ships totaling 54,000 dwt, and more than 50 container barges totaling 30,000 dwt. Guangzhou port now serves regular routes to Japan, Europe and North America. Three quarter-s of the waterborne container traffic of the province is destined to or fr-omHong Kong.

2.39 The Huangpu contairLer terminal of Guangzhou port is one of the largest in the country with two berths and a designed annual capacity of 200,000 TEUs. Second and third generation container carriers can be berthed without lightering. The actual throughput of container traffic was 57,500 TEUs in 1987, representing an approximate container penetration rate of 10 percent of general cargo. The potential for containerization at Huangpu is estimated to be between 40 percent and 60 percent of general cargo, or 4-6 times the present proportion.

2.40 Guangzhou has four rail stations, including Xiayuan, which handle international containers and deliver these boxes to the major cities of China. Of the 47,000 TEUs dispatched or received by rail, Xiayuan station accounted for 40,000 TEUs. However, about 95 percent of the present containers were opened at the station and only 5 percent were transported door-to-door. This is a major obstacle to the growth of intermodal services.

2.41 In 1987, 173,000 TEhUswere shipped on highways in the province. This represented an increase of 10 percent over the previous year. The devel- - 23 - opment of door-to-doorhighway container services has helped relieve congestion at ports and stations caused by intraport strippingand stuffing. It also has created favorableconditions for door-to-doorservice between Guangzhou, Shenzhen and Hong Kong, without passing through a port. These services are now growing fast and can be expected to increase more rapidly than other freight services in the province.

D. Management of Transport Modes

2.42 Transportmodes in Guangdong Province are managed either by the State or by the ProvincialDepartment of Communications(DOC). Infrastructure owned and operated by the State include railways,pipelines, ports, and airports, and these may be operated by an authority at either the national or local level. Modes managed by the Provincial Department of Communications include roads and waterways. The multiplicityof transport enterprises serving these two modes--state-owned,collective, private-owned, and co-owned (mixed public and private)--areregulated by several levels of government. The large state-ownedenterprises and institutionsresponsible for central railways,maritime shipping, and air transportwere formerly managed directly by the correspondingcentral ministries. However, recent reforms have split off the operating enterprisesfrom the governmentministries. These reforms apply to the rail ways and some major ports and are intended to provide more autonomy to the operating enterprise,improve efficiency,and strengthen financial accountability. Local railway and coastal shipping services are organized as licensed local enterprisesunder the jurisdictionof the local authorities. The organizationof both the central and provincial transport agencies in GuangdongProvince is given in Figure 1.

2.43 The financing of infrastructureinvestment and fleet purchase varies from mode to mode. In general, the financial responsibilityfor highway infrastructurerests with the provincial and local governments;limited financial contributionsare made by the central government. Limited subsidies for constructionof local railways and port facilities are provided by the central and Provincial authorities. The constructionof small port facilities by individualenterprises for their own use also is encouraged.

2.44 Railways. The management of the central railways has recently been removed from the central ministry and decentralizedinto 12 administrations. Two of the administrationsoperate in Guangdong Province: Guangzhou and Liuzhou. Guangzhouhandles the Beijing-Guangzhou-Shenzhenline and Liuzhou handles the Litang-Zhanjiangline. The developmentof local railways also is being encouraged,and they are now growing in Guangdong as in other parts of China. The local railways serve primarily as extensions of the existing central railways,rather than as competitors. The latest local rail extension projects--Sanshui-Maomingand Guangzhou-Meixian-Shantou--arebeing organized as :Localrailway companies rather than traditionaladministrations. They are given separate financialmanagement and operating budgets, which are designed, with the consent of the central government,to cover operating costs and allow tariffs to be set high enough to repay capital investment funds borrowed for construction.

2.45 Rail freight is treated in two major groups: in-plan and out-of- plan. In-plan freight is allocated to specific lines by the central Ministry of Railroadswith the help of the Provincial Railway Administrations. Out-of- - 24 - plan freight is treated as optional freight that the railway can attract. by offering its service in competition with other modes. At present most freight is allocated, but the proportion will be decreasing so that most freight except coal is expected to be out-of-plan in the near future. Within the in- plan freight the central government has set the following priorities: (1) Coal and Petroleum Products; (2) Foreign Trade; (3) Material Supporting Agriculture (by season); ancd (4) Perishable Fruits, etc. Out-of-plan freight at this time consists primarily of nonpriority manufactures and sideline agricultural products.

2.46 Provincial rail managers organize traffic by railroad section and allocate their rolling stock,each month to the shippers who have requested service. The managers must first allocate service to coal designated by the central government (about 30 percent of capacity); then they try to meet guideline quotas for total freight, total coal, and passengers. Any capacity that is left over can be used for out-of-plan freight and may be charged at higher prices. Certain managers, such as Guangzhou South Station managers, use computerized freight load planning and actively contact shippers for additional freight when they have excess capacity. Guangzhou South also has opened up subsidiary offices in freight generating centers away from the rail line at Shantou, Zhongshan, Jiangmen, Shende and Zhuhai.

2.47 Provincial rail managers have no control over the general availability of rolling stock; this :iscontrolled at the central level for the trunk rail lines. Rolling stock :Is considered to be rented by day to the operating administration or company, although local railroad companies own their own locomotives and passenger coaches. The wait for freight wagons averages 25 days for in-plan traffic and 3-15 days for out-of-plan traffic, depending on the month. Less-than-carload (LCL) traffic waited longer than carload in-plan traffic, but out-of-plan LCI. traffic (which is fitted into space available) had shorter waiting times than carload lots.

2.48 Ports. As a resu:Lt of the recent reforms, the four major ports in Guangdong--Huangpu, Guangzhou, Zhanjiang, and Shantou--are now managed by their respective municipalities; Huangpu and Guangzhou were in 1988 consoli- dated under one administration. The smaller ports have also been made the responsibility of local authorities, but they are subject to some regulation by the Provincial Department of Communications. The recent reforms are based on the principles that all costs of port operation and maintenance will be covered by operating revenues, that most new capital costs will be financed from revenues, and that ports should compete for cargo by keeping their costs low. Prior to the reforms, the state (through the provincial authorities) set tariffs, allocated all cargo, provided grant financing for major investments, covered any deficits, and received all surpluses generated by the ports.

2.49 Under the reforms, provincial ports operate similarly to railroads in that they are required to first handle in-plan cargo. However, presently about 20 percent of the total cargo is out-of-plan, and tariffs for this cargo are allowed to be set competitively within a narrow range. Profits are now retained by the ports and are subject to taxes. These new arrangements vary in scope from port to port, reflecting a deliberate experimentation with different models. The tax arrangements tend to be ad hoc (usually fixed lump sum payments) and are apparently based on the needs of individual ports to retain surpluses. In the future, the government plans to progressively reduce the - 25 - controlled allocation of traffic, reform tariffs and taxation policies, and eliminate grant financing of investments for ports.

2.50 Port authorities can apply for equipment loans if needed. For port expansion a feasibility study usually is prepared; this study allows the authorities to apply for a combination loan and government subsidy (the subsidy normally applies to the underwater structures). Investments under Y 10 million can be approved by local authorities. Provincial-level approval is required for projects costing from Y 10 to Y 200 million (higher if no other sectors such as energy are involved), and central government approval for projects over Y 200 million.

2.51 The main objectives of the decentralization program are to develop the capability and initiative of local port management, and to increase coordination between port development and the development plans of the region served by a port. Further, it is expected that the need to be financially self-sufficient and to compete for cargo will encourage efficiency in the ports subsector. Comments by Chinese leaders have indicated satisfaction with the program in general and, while it is still too early to evaluate the different models adopted (which favor certain ports), it appears that future policy will tend to be more even-handed and uniform in its treatment of various ports. Key policy elements will relate to taxation, tariffs, and the financing of investments.7/

2.52 Highways. Regulation of the road transport industry is the responsibility of the Provincial DOC, which controls licensing of vehicles and drivers. Bus routes are regulated by DOC for intercity routes and county leve:Lauthorities for local routes. The road freight industry has largely been deregulated, allowing essentially free entry and pricing. However, bus passenger transport is still closely regulated by the local Bureau of Communi- cations or the Provincial Department of Communications (DOC). Licenses are issued by the Commerce Bureau but approval is based on market demand and the technology of the firm, and no firm is allowed to monopolize a service if others are interested in providing it. The vehicle type and mechanical skills of the personnel are examined as part of the firm's technology.

2.53 The provision of highway infrastructure is primarily the responsibility of provincial and local governments. The central Ministry of Communi- cations is responsible only for establishing overall design standards and for making a minor financial contribution for the national highways. In Guangdong Province an itnovation has been introduced through an agreement by foreign financiers to finance 100 percent of the new Guangzhou-Hong Kong Expressway (para. 2.19). Financing costs will be recovered by operating the road as a toll concession. Other toll roads under construction in Guangdong are being financed by the provincial and local governments, and the provincial govern-

7/ In order to develop efficient policies in these areas, information on port operations, cost and finances must be improved. To support the Government's initiatives in this area, the Bank is assisting MOC in con- ducting research on alternative organizational forms employed in other countries and the development of port costing and management information systems. - 26 - ment has constructed five major toll bridges in the province using funding from foreign sources.

2.54 In Dongguan, local authorities are also experimenting with a new measure to raise funds for r-oad construction. The measure involves the creation of an Energy and CommurLicationsCompany empowered to raise money from state, collective, and privelte sources to fund road and power plant construction. The company pays interest on these funds (14 percent per year) and will eventually repay the capital through user fees and tolls. The company in the experiment plans to upgrade 16 principal county roads over the next eight years, and is well on its WELy to collecting the Y 6.33 million in investment funds needed for the road pr-ojects.

2.55 Waterways. Recent. deregulation of the waterway cargo industry by DOC has increased competition in this mode. Apparently, market entry is not difficult, but there are some regulatory requirements that must be met by collectives and the larger private transporters, particularly for safety purposes. Most cooperatives that apply are well-prepared and have no problem with registering their service. Some own-account vessels have entered the industry unofficially but the extent of this practice is not documented.

2.56 The Guangzhou Ocean Shipping Company (a branch of China Overseas Shipping Company (COSCO)) and Guangzhou Maritime Shipping Bureau both operate under the Ministry of Communications. The former is the predominant supplier of ocean shipping services. The latter is the major supplier of coastal shipping services. Foreign shipping companies also serve the ocean ports. Compe- tition among public carriers in the ocean and coastal trade is limited, but enterprises are permitted tcoown and operate their own vessels. Joint venture shipping companies have been established in recent years between Hong Kong shippers and the Special Economic Zone bureaus. Groups of communities can also owin ships as cooperatives and make investments in small port handling equipment.

2.57 Aviation. Most airport infrastructure and aviation services are still integrated under the China Civil Aviation Administration (CAAC), a government monopoly. However, the military is now operating some airports and China United Airlines, a military subsidiary, is operating charter flights from military fields. CAAC is responsible for maintaining civilian airfields and the Air Force for maintaining military fields.

2.58 CAAC as an airline! is highly profitable. Its total after tax profit in 1986 was Y 604 million, 21 percent of operating income. Its profitability is partly due to high fares (see Chapter IV). In 1986 domestic revenues increased by 36 percent a year and international revenues increased by 42 percent. Costs at this time were climbing only slightly faster (48 percent). Even with substantially increased service levels CAAC seems likely to remain profitable because of its monopoly position and high fare levels.

2.59 Maintenance of Transport Modes. Maintenance of infrastructure is treated differently for different modes. Where the mode is both owned and managed by the state, infrastructure maintenance is the responsibility of the operating authority. When the mode serves collective and privately-owned transport, maintenance is handled by the Provincial Department or Local Bureau of Communications. Data on maintenance expenditures by railroads are included - 27 - in general operating data and are difficult to separate out. Data on port maintenance were kept by the Provincial Department of Communications until 1986, when local authorities took over the responsibility for port maintenance in Guangdong Province. Recent data are now kept by the individual port authorities. Road maintenance data are the best known of all infrastructure maintenance data, as budgets are made and research is available for this mode. Waterway maintenance is a much more sporadic activity and is treated as a capital expense.

2.60 The Guangdong Department of Communications spends approximately Y 300 million per year to maintain 18,000 km of national and provincial roads and to finance new road construction. This revenue comes from three sources:

(a) a Highway Maintenance Fee from taxes on road transport services, which, despite its name, 30 percent is applied for new construction, and 70 percent for maintenance;

(b) the Provincial budget for the Department; and

(c) the MOC contribution from motor vehicle tax revenue (purchase surcharge, 10 percent for domestic and 15 percent for imported vehicles).

Some of these funds are passed on to local authorities for the maintenance of local roads. These funds are supplemented by bank loans and foreign sources which together yield another Y 100 million per year. The DOC considers these funds to be adequate for minimum maintenance but not sufficient support for new construction.8/ Local authorities also collect approximately Y 100 million per year for road maintenance and construction from taxes on motorcycles and tractors. In addition, they receive a subsidy from the Provincial budget, which accounts for 80 percent of the local maintenance and construction budget. Road maintenance costs in Guangdong Province are relatively high, especially for waterbound macadam (unclassified) roads which require replenishing of surface materials every year and a major maintenance every two years. This high level of expenditure is due to very high traffic levels; considering also the much larger vehicle operating costs being paid by road users, it would be far more economical to provide higher standard pavements, but delays have occurred in the backlogged paving program.

E. Transport Investment

2.61 The absolute value of transport investment has been increasing in current value in Guangdong Province since 1980, although as a percent of total capital investment the investment has been declining. During the Sixth Five- Year Plan period, transport was accorded 30 percent of total capital investment; this dropped to 19 percent in 1986 and 20 percent in 1987. The decline

8/ Field analysis and sample data on surface condition for Huiyang Region high ways showing that 40-50 percent of these highways have serious defects suggests that periodic "heavy" maintenance such as bituminous overlays are also suffering from insufficient funds, although good maintenance management has limited the defects to a lower level on the highest trafficked roads in this region. - 28 - illustratesthe problem of high growth and its impact on infrastructure,where adjustmentseems to be limited by implementationability as well as budgetary constraints. Investment in road constructionhas headed the list of transport expenditures,but rail and port investmentshave also been important (see Table 28). - 29 -

III. PRESENT TRAFFIC AND SERVICE LEVELS

A. Overview of Aggregate Freight and Passenger Traffic Trends

3.1 Since 1978, freight traffic in the province has grown more slowly than passenger travel (11 percent vs. 16 percent from 1978 to 1985 in terms of freight tons and passenger trips, respectively), but since 1985 freight tonnage appears to be growing at a rate closer to that of passenger trips (18 percent vs. 21 percent). River traffic, primarily low valued bulk commodities, which grew slowly in earlier years, has been growing more rapidly in recent years (see summary Table 3.1 below). Highway freight is growing the fastest and had overtaken rail traffic (in ton-km) in 1987. Longer term trends also seem to favor road traffic due to the increasing proportion of higher valued light manufactures and exports in the Guangdong economy.

3.2 The highest growth rates since 1978 in both freight tonnage and ton- km were experienced by the road and air modes, although rail ton-km also grew dramatically in the period 1985-87 as short distance traffic was replaced by longer distance flows. On the whole freight ton-km in Guangdong Province grew more slowly than freight tonnage (see Table 29) from 1978 to 2985. This was due in the case of road and water transport to shorter haul traffic growing faster than longer haul traffic, due largely to the concentrated growth of freight traffic in the Pearl River Delta where average travel distances are short.

3.3 Passenger traffic for Guangdong Province as a whole is growing very rapidly, as shown in the following summary Table 3.2 (see Table 30 for more detail). Total traffic increased much faster than "social" traffic, which is carried by state and collectively-owned specialized transport companies. The total volume of passenger trips by "social" carriers traffic dropped in recent years as the share of those transporters decreased dramatically.l/

3.4 Contrary to the pattern for freight, total traffic in terms of passenger-km in Guangdong Province has grown even more rapidly than passenger trips. Road pass-km grew fastest in the last two year period, while air pass- km grew the fastest in the period 1978-85, slowing slightly as shorter air routes were inaugurated in recent years. Average passenger trip length for all modes, however, grew up to 1987.

1/ Official (social) figures may underestimate total traffic and traffic growth because traffic statistics are collected for only state-owned and large collective specialized transport enterprises, and traffic by own- account, small collective and privately-owned carriers is only estimated. The privately-owned or collective transport services (both specialized and nonspecialized) appear to be growing far more rapidly than the state- owned and collective sector in road and river transport. Total road and water traffic was estimated based on the judgment of knowledgeable DOC officials and past traffic growth data as well as a 1985 estimate by ICT, which are consistent with vehicle counts on the roads for which data are available. - 30 -

Table 3.1: FREIGHT TRAFFIC /a

Average Annual Growth (Z) 1987 1978-85 1985-87 Total Social/b Total Social Total Social

Freight Tonnage (million)

All Freight /c 713.5 162.5 11 -6 18 9

Rail 40.6 40.6 1 1 8 8 Road 531.3 19.8 14 -20 21 -4 River 100.3 60.9 6 0 9 7 Coastal ship 30.6 30.6 8 8 8 8 Pipeline 10.6 10.6 n.a. n.a. 3 3 Air 0.1 0.1 17 17 29 29

Freight ton-km (billion)

All Freight /c 108.8 86.0 4 1 12 8

Rail 14.0 14.0 6 6 23 23 Road 16.0 0.6 11 -25 29 -2 River /c 19.5 13.1 -6 -10 1 -3 Coastal ship 58.2 58.2 9 9 8 8 Air 0.1 0.1 n.a. n.a. 16 16 n.a. = not available

/a Freight estimates are based on growth rates for vehicle-km in Guangdong and the judgments of DOC officials concerning the market share of state, collective, and privately-owned carriers in both road and water modes. Total freight includes estimated volumes of private specialized transport firms and own-account hauling which are not recorded in the official statistics, but excludes local railways. More data collection is recommended to increase the accuracy of these figures. /b State-owned and collective specialized transport only (i.e., excluding transport by own-account, small collective, and privately-owned carriers). /c Excluding foreign ocean shipping but including transit traffic.

Source: Table 29. - 31 -

Table 3.2: PASSENGER TRAFFIC

Average Annual Growth (Z) 1987 1978-85 1985-87 Total Social/a Total Social/a Total Social/a (Est.) (Est.) (Est.)

Passenger Trips (million)

All passengers 709.3 327.8 16 14 21 -8

Rail 36.1 36.1 5 5 5 5 Road 642.2 266.0 20 17 23 -10 Water 27.8 22.5 1 0 0 -8 Air 3.1 3.1 20 20 48 48

Passenger-km (billion)

All passengers 41.7 26.4 20 18 24 2

Rail 6.0 6.0 16 16 15 15 Road 30.0 15.5 22 19 28 -1 Water 2.7 1.9 6 6 14 -4 Air 3.0 3.0 36 36 21 21 la State-owned and collective specialized transport companies only (i.e., excluding transport by own-account, small collective, and privately-owned carriers).

Source: Table 30.

B. Present Traffic by Corridor and Type

3.5 Information concerning aggregate transportation trends such as that presented above helps provide an overview but is not adequate as a basis for transport planning, which requires information disaggregated by geographic area and by trip purpose. Modern techniques of transport planning normally rely on comprehensive information concerning the origins and destinations (0-D) of trips and shipments in analyzing transportation demand to understand the factors determining choice of mode, routing and hence traffic on individual segments of the transport system. Such a detailed understanding of present traffic patterns lays the basis for rational forecasting of future traffic demands. Unfortunately, only partial O-D information was available for this study, and less satisfactory approaches have had to be devised to provide a rough approximation of demand patterns.

3.6 The principal device employed for this purpose involves grouping of the major categories of traffic into principal corridor flows and local traf- - 32 - fic. Present traffic in Guangdong Province was also grouped into international, interprovincial and intraprovincial traffic for both freight and passengers. Corridor traffic encompasses virtually all international and intraprovincial traffic, but only about 15 percent of intraprovincial traffic; roughly 85 percent of intraprovincial traffic is local traffic outside the principal corridors. Total provincial traffic is the sum of corridor traffic plus local traffic.

3.7 Corridor Freight Traffic. International freight flows, which are concentrated in the South Corridor, include foreign trade flows through ports and road and rail traffic to and from Hong Kong, some of which is also included as transit traffic in the North Corridor. Almost 23 million tons, or 57.5 percent, of international flows are Hong Kong traffic flows. Interpro- vincial flows are concentrated in the North Corridor, including coastal shipping arriving in Guangzhou/Huangpu port, while more than 55 percent of intraprovincial corridor flows are found in the South Corridor (Table 3.3).

Table 3.3: 1987 CORRIDOR FREIGHT TRAFFIC (million tons)

International Interprovincial Intraprovincial Total

North Corridor (5.86)/a 52.55 5.00 63.41 West Corridor 5.44 8.78 25.76 39.98 South Corridor 33.85 /b 53.29 87.14 East Corridor 0.66tc 2.29 12.66 15.61/c

Total 39.95/b 63.62 96.91 200.28/b

/a In order to avoid double counting on the provincial level, the column total excludes transit traffic from the north which also passes through the South Corridor (5.86 million tons). /b Interprovincial flows into Guangzhou/Huangpu port are considered North Corridor flows. /c Some East Corridor traffic exits by road to Hong Kong and therefore is shown only for the South Corridor.

Note: See Table 31 for more detail.

3.8 Total Provincial Freight Traffic. Provincial freight traffic other than corridor flows is intraprovincial traffic composed of local traffic or intercity traffic within the province but not oriented along the main corridors. Therefore total freight flows by type exhibit a much higher proportion of intraprovincial traffic '85 percent) compared with corridor flows (48 percent intraprovincial). TabLe 3.4 illustrates this composition for 1987 traffic.

3.9 When internationa] port traffic is excluded to avoid double counting, the main corridors of (;uangdong Province carry a total of 160 million tons of shipped goods (see Table 31 for details). The Pearl River Delta route, or South Corridor, accommodates the largest amount of freight traffic - 33 -

Table 3.4: 1987 TOTAL PROVINCIAL FREIGHT TRAFFIC (million tons)

International Interprovincial Intraprovincial Total

North (6) 53 39 98 West 5 9 80 94 South 34 /a 400 434/b East 1 2 105 108/b

Total 40 64 624 728/c

/a Interprovincialflows into Guangzhou/Huangpuport are considered North Corridor flows. /b Some East Corridor traffic exits by road to Hong Kong and therefore is shown only for the South Corridor. /c The total excludes transit traffic from the north which also passes through the South Corridor, as well as air and pipeline flows, but includes 31.1 million tons of foreign trade not shown in Table 29.

(53 million tons) as it links Guangzhou, Shenzhen, and Hong Kong. The North- ern Corridor carries the second largest amount of traffic serving as the main link between Guangdong Province and the rest of China. Coal, ores, iron and steel products, and grain dominate long distance rail and water flows. Break- bulk and higher value cargoes for destinationswithin the province travel by road.

3.1() Passenger Traffic. Less detail is available on passenger traffic by type than on freight flows. Consequentlytotal corridor flows and provincial flows are provided below without the greater detail that is useful for more accurate transport analysis. Estimates of the distributionof these flows by corridor based on traffic levels for passenger vehicles (Table 3.5) and trains shows that the South Corridor accounts for 47 percent of the flows and flows in the other corridorsvary from about 13 percent to 23 percent.

3.11 Geographic Patterns. Passenger and freight traffic along both sides of the Pearl River Delta corridor have risen faster than in the other corridors, and developmentin the Delta is the driving force for traffic in the province. The high mobility of Hong Kong and Macao residents leads to high levels of passenger traffic across the borders; the corridor also serves as an entrance and exit point for a growing number of foreign tourists. The active market economiesof the SEZs and the Zhujiang Economic Open Zone also increase the mobility of residentsaround the Pearl River Delta.2/ Road traffic cur-

2/ Passenger traffic in 1985 accounted for 11 million trips on the Guangzhou-Shenzhenrailway, 1.11 million trips by inland waterways, and 0.12 million air trips between Guangzhou and Hong Kong. Passenger trips on the Guangzhou-Shenzhenhighway were estimated at about 18 million, which suggests that road trips may account for about 60 percent of the trips in the corridor. - 34 -

Table 3.5: 1987 PROVINCIAL AND CORRIDOR PASSENGER FLOWS (million trips)

Corridor Flows Provincial Flows /a

North 30.6 93 West 53.4 160 South 110.5 334 East 40.8 123

Total 235.3 709

/a Due to lack of detailed data, the geographic distribution assumed to be the same as for corridor flows. For details, see Table 32. rently accounts for nearly 60 percent of freight flows on the East Bank and an estimated 70-80 percent of the freight flows on the West Bank, and even higher proportions of passenger flows in the Delta due to the large number of origins and destinations and short distances involved. Road and river transshipment is significant and is increasing.

3.12 The volume of daily vehicle traffic on the road network in Guangdong has fluctuated since 1980. Between 1980 and 1985 it increased by about 20 percent per year on national, provincial and county roads, and even faster (26-31 percent) on rural roads. In 1986 it slowed to 7-10 percent, then in 1987 increased to almost 30 percent on all roads (see Figure 2 and Table 33).

C. Modal Shares of Traffic by Corridor

3.13 Determinants of Modal Shares. In Guangdong Province, as in much of China today, there is such a severe shortage of transport capacity in relation to demand at existing prices that neither goods shippers nor passengers in reality have much choice among modes; they are fortunate if transport by any mode is available. This situation stems partly from underinvestment in transport in the context of a rapidly growing economy, and partly also from an apparently inflexible and distorted price structure for transport which, at least until the tariff increases of September 1989 (passengers) and March 1990 (freight), has served to generate excess demands, particularly for railways. This means that in many cases, particularly longer distance transport, capacity rationing rather than c-ompetitive choice has been the basis for modal traffic allocation decisions.

3.14 The modal split for freight transport for most line-haul movements of major commodities is still determined by administrative allocation at the central government level, just as the prices for most transport services are still centrally administerecd. The role of markets, wherein shippers are free to choose among freely competing suppliers according to price and quality of services offered, is still limited and largely confined to the highways freight mode. Administrative allocations of major commodity movements by mode - 35 - are understood to be governed by two primary factors: availability of existing capacity and the financial prices of alternative modes. No attempt is made to correct for distortions between financial prices and economic costs in the allocation of current traffic to existing capacity, although SPC has introduced economic shadow pricing in the evaluation of proposed investments, which will affect capacity and hence modal shares in the future.

3.15 Passengers are free to choose among alternative modes, but also in a market where severe capacity constraints limit their choices over many routes. Rail services in particular are in short supply, and while earlier passenger fare hikes were designed to provide an incentive for rail passengers to shift to other modes for trips under 300 km, the September 1989 fare raises affected long-distance more than short-distance passengers (see Chapter IV for more discussion on pricing).

3.16 The major safety valve for pent-up demand in this context has been the freedom of the individual enterprise or collective (and more recently private individuals) to provide their own motor vehicle and move their own and others' traffic over the public roads. This is one important factor contributing to the extremely rapid growth of road transport and modest growth of waterway traffic in recent years. Additional factors include the flexibility and other superior service characteristics of road transport, for which shippers and travelers worldwide have been willing to pay premium prices.

3.17 Modal choice by shippers or passengers is normally specific to a particular origin and destination, and varies by trip length (see Chapter IV). Since O-D data were not available, the analyses have focused on the modal share within each major corridor.

3.18 Freight Modal Shares. The North and West Corridors show a heavy rail influence, which will increase for the West when the Yaogu-Maoming link is completed (Table 3.6). The South shows a much higher proportion of road traffic due to the shorter haul distances and the more dispersed pattern of development. The East shows the most river-oriented pattern, due to its relative isolation on the rail and road networks.

3.19 River transport tends to specialize in construction materials and ores outside of the Delta, and serves general cargo primarily for longer trips and in locations where road transport is limited. In the Delta this traffic is more diversified, and containers have gained a foothold as well. Rail traffic focuses on heavy commodities and longer haul traffic, while roads have been relegated to very short haul traffic in the past, that is only recently starting to include longer hauls, especially for light industry products and high value imports.

3.20 Passenger Modal Shares. Road modal share for passengers is significantly higher than road freight shares in all corridors, as shown in Table 3.7. Only the North Corridor has less than 75 percent share by road (although in the West, rail share may increase on completion of the Yaogu-Maoming link). River travel, on the other hand, is much less popular for passengers than for freight. Little is known about passenger modal choice except that road and air travel appear to be increasing faster than other modes and river passenger travel appears to be declining according to the approximate estimates below. - 36 -

Table 3.6: 1987 FREIGHT MODAL SHARES IN CORRIDORS (Z of corridor tonnage)

North West South East

Rail 58.3 45.0/a 16.2 n.a./c Road 16.8 19.6 47.9 49.8 River 2.6 10.2 35.9 37.9 Coastal Ship 22.4/b 25.2 /b 12.3

Total 100.0 100.0 100.0 100.0

/a Litang-Zhanjiang railroad which only covers a small part of the corridor. Ib Interprovincial ship traffic is considered a North Corridor flow. /c Excludes traffic of Ma;ixian-Xipu-Xingning local railway and other local railways.

Note: Air freight traffic and local rail traffic outside the connected system are not included.

Source: Table 31.

Table 3.7: 1987 PASSENGER MODAL SHARES IN CORRIDORS (%)

North West South East

Rail 58.6 6.6 13.3 n.a. Road 34.9 76.4 85.1 75.2 River 6.5 3.7 1.5 - Coastal Ship - 13.1 - 24.5/a Air /b 0.2 0.1 0.3

Total 100.0 100.0 100.0 100.0

/a Service from Guangzhou to Shantou canceled in 1988. /b Data on interprovinciaL flights not available.

Source: Table 32.

3.21 Total Provincial Modal Share Trends. Road and air shares of originating traffic (tons of freight or passenger trips), have been increasing rapidly over the last five years, while the relative shares (but not absolute volumes) of rail and water have been declining. The same is true for ton-km modal shares, except that the rail and water shares are declining more slowly for passenger transport and faster for freight. Road transport now accounts - 37 - for 90 percent of passengers and nearly 75 percent of freight tonnage (excluding foreign trade), but under 75 percent of pass-km and 15 percent of ton-km. The former dominance of the rail transport system is still evident in the case of heavy commodities,but other transport categories are becoming more important in the Province. Coastal water transport seems to be gaining for bulk cargoes, and trucking seems to be gaining for light cargoes where road transport is availableand road conditions are adequate.

3.22 The rapid increase in nonurban passenger traffic by road and air modes is consistentwith rapid growth in business and tourist travel, which requiresmore convenience,flexibility, and speed than other types of travel. For long distance travel, rail transport is still the dominant carrier, but is limited in the amount and quality of service it can provide. The slower and less frequent service characteristicsof coastal ship transport have caused it to lose its long distance travel market to other modes, despite its availability. The same is true for river passenger service in the areas where river travel is substantiallymore time-consumingthan other modes. Short-distance internationalpassenger travel by hydrofoil has gained in importance in the Pearl River Delta due to its speed and convenience,including new passenger terminals.

D. Assessment of Existing Capacity Constraints

3.23 As in other parts of China, transport supply in Guangdong has not kept up with demand. Each corridor has its capacity limits which define the present transport shortage. Table 34 summarizes the modal capacities within each corridor.

3.24 Constructionto expand the railway sections in the Beijing-Guangzhou corridor to a rated capacity of 30 million tons in each direction was completed at the end of 1988. This will temporarilyrelease a severe constraint on demand, which was held to 18 million tons in 1987. The marshalling yard at Jiancun also has been rebuilt and now handles 32 million tons of freight per year. These improvements will allow rail traffic to increase at normal rates, which are forecast at 16-19 percent per year as long as the railroad maintains its share of interprovincialfreight traffic. This means that the capacity of this rail link will again be reached in the 1990s unless a strategy is adopted to shift freight to other modes and/or add still more capacity. The railwaysaccount for 21-33 percent of total freight capacity in the North corridor and 8-11 percent of total passenger capacity. The difference reflects the preference given to freight service over passenger service in allocatingrail capacity.

3.25 The strain on the port system is almost as severe as that on the railroad. For maritime shipping,deep-water berths for vessels in excess of 35,000 dwt are availableonly at Zhanjiang, and the capacity of handling equipment is limited at most ports. This leads to long waiting times for ships--6-7days in Huangpu and Shantou. Shenzhen and Zhuhai ports will pick up some of the additionalcargo but they are limited to 10,000 dwt ships. In addition,there are bottleneckson land connections to ports, especially secondary ports and major river ports.

3.26 In 1987, the total throughputof river ports was 40.2 million tons, or 42 percent of the combined throughput of river ports and seaports. This - 38 - level is down somewhat from the 50 percent recorded for 1985, but the demand is increasing for modern service, especially in the Pearl River Delta, where SEZ ports are increasing their throughput rapidly.

3.27 Traffic on all the trunk roads entering Guangzhou now exceeds rated capacity. Entrances to other large cities also are congested. Some sections carry traffic at very low levels of service, as indicated in Table 34. In addition, many highways pass through highly congested, urban centers, and most highways are carrying a wide range of slow and fast vehicles and pedestrians.

3.28 Civil aviation airports are not designed for their present levels of traffic. For example, GPPC estimates that the Baiyun Airport terminal meets only 50 percent of the demand for air travel to and from Guangzhou. It recently has become the busiest airport in China. The military airport at Foshan has been used to relieve some of the demand. Demand is clearly growing in Shenzhen for both domestic and international flights where airport capacity does not exist except via Guangzhou or Hong Kong.

3.29 The Zhanjiang-Maoming pipeline carries crude oil to the refinery. It has no return capacity for refined products, and this limits the use of coastal shipping.

3.30 Corridor capacity is limited in many cases by specific bottlenecks. Table 35 presents data on each network link that is a potential bottleneck operating at capacity. Railway and port capacities have been greatly exceeded by recent volumes of freight traffic. This implies that the capacity calculations are normative prescriptions related as much to personnel performance standards or to the specific equipment in hand as to actual infrastructure constraints. Better capacity calculations for each link in the Guangdong Province transport network a;re critical for improved project identification and evaluation.

E. Assessment of Technology

3.31 Although there are footholds of modern technology in a few places for every mode, much of the itransport technology used in Guangdong Province dates from an earlier generation. The extremely low levels of containerization and other more modern forms of cargo unitization have already been noted in Chapter II.

3.32 In the railroad subsector the rail grades in the Northern Corridor have been improved with the double-tracking project, but the mountainous terrain still places limits on locomotive capacity. Stations are spaced too close together for high speeds. Signaling systems may need further updating, and the operating information system should be computerized in most locations to increase efficiency. Conmmiunicationstechnology is also still a weak point.

3.33 Technical standards for roads are extremely poor and surface conditions are lower even with more frequent maintenance and high maintenance costs than the national average. There are too few class 1 roads, and class 2 roads and expressways are only now being built on the trunk routes in the Pearl River Delta and many unpaved roads exceed 2,000 vehicles per day. Only 13.4 percent of roads are well surfaced, with cement concrete or asphalt. Pavement design in the past was for very low axle loads, which are now - 39 - increasing dramatically with larger vehicles. Consequently road pavement deterioration has accelerated leading to rapidly increasing maintenance costs. There are many broken-stone roads (which would not meet the normal standards of water-bound macadams) with extremely rough riding characteristics akin to those of cobblestone pavements. Bridge weight limits on rural roads also are often low.

3.34 The trucks owned by specialized, state-owned transportation companies have an average capacity of only 3.7 tons, while the average capacity on state-owned buses is 40.7 seats. New vehicles are entering the nonstate-owned fleet, and there is a large percentage of foreign-made vehicles, especially for passenger traffic and for co-owned enterprises that have entered the Guangdong-Hong Kong road transport business. There is an increasing share of imported pickup and larger trucks (including container trucks) in the road fleets, and both truck and bus fleets will benefit from the planned importa- tion of more fuel efficient engine technology for domestically manufactured vehicles. Due to inadequate pavement and geometric design standards, and the consequent poor condition of the road surfaces, the costs of vehicle ownership and operation are unnecessarily high. The role of highway transport therefore has been more limited than it would be with improved technology and an improved infrastructure.

3.35 Inland river port equipment and outmoded (50-110 ton) barge technologies are not competitive with the increasingly efficient road and future rail systems. This is already changing in the Pearl River Delta where larger barges, barge trains and container barges have increased their services and efficient port handling equipment has been installed in a few locations. The deepening of the Xijiang to handle 1,000-ton barges its whole length will encourage more modern barge technology in the future. The greater use of even larger integrated barge trains using equipment recently imported with up to 5000 horsepower tugboats is starting in other provinces but not yet available in Guangdong Province.

3.36 Major port technology is being upgraded in Huangpu, as well as in the SEZ ports (Shantou, Shekou, Chiwan and Jiouzhou) and other Pearl River Delta Ports. The Huangpu port project is designed to increase port capacity from 17.5 to 22.3 million tons/yr. This will include expansion of coal terminals and general cargo terminals, with rail cornections. However the channel depth limitation to 20,000 dwt vessels is a major constraint on the use of larger vessels for both coastal shipping and foreign trade.

3.37 Coastal shipping technology is also presently limited by shallow port approach channels. As one particularly important example, it should be noted that the coal berths of the new power generation plants in the Delta are only designed for barge depths, with service from the Xi-Ji coal terminal at Huangpu. This raises the question of what feeder ship/barge technology and load center is appropriate for coal service, for petroleum products and containers as well. Recent rapid technological progress in development of shallow draft ocean-going barges in other countries could provide vessels which would avoid the need for transshipmerntaltogether, thus reducing demand for new transshipment hubs. It should also be noted that the high technology Hong Kong ports are gaining cargo, but may be saturated in the 1990s. Conse- quently, the whole regional location and technology mix is a question that must be resolved for each major cargo category. - 40 -

3.38 Finally, air transport technology is relatively modern with jet service, but the airports are not up to standards, and the management of the sector is diffused. Communications technology is not up to the increasing level of demand in this sector. The future role of all airports when Hong Kong is integrated into the system is also important and should be included in ongoing planning for the Shenzhen airport. - 41 -

IV. COMPARATIVE ROLES OF THE TRANSPORT MODES

4.1 In China as a whole, past concentration of development strategy on heavy industry and reliance on coal as the primary source of energy have been coupled with a transportation strategy focused to an unusual degree on the rail mode. There has been relatively limited exploitation of the two most important 20th Century innovations in transportation technology: modern highway and aviation systems. Consequently, the railway has played a dominant role in transportation in China, enjoying a virtual monopoly in many respects but at the same time burdened with much traffic for which it is inherently ill-suited, and the service quality concerns of transportation users have been largely neglected in a situation of chronic shortage of transportation services.

4.2 Guangdong Province suffers like the rest of China from an overall shortage of transportation services and infrastructure, particularly for flows to and from other provinces and fast-growing areas. Until now it has had inadequate and substandard highways and only limited service of railways, pri- mari:Ly through the critical rail linkage to the north in the Guangzhou-Beijing corridor. Including the Yaogu-Maoming line now under construction, the density of the railway network in Guangdong would be just equal to the national average (Table 13) despite the greater than average economic production of the Province. This situation may reflect the fact that the economy of Guangdong Province is concentrated to a much lesser degree on heavy industry than other provinces. In deciding on directions for future development of transportation, it is important to consider the needs of a development pattern that appears to be primarily, but not exclusively, oriented to the growth of light manufacturing and high value agricultural processing with a strong emphasis on foreign trade. This means that service quality concerns, including the requirements of foreign trading partners for fast, flexible transport for light-industry products assume great importance.

4.3 This chapter examines present modal shares, tariff structures, and costs, analyzes what the costs would be under more economically ideal circum stances, and draws some conclusions about the effects of present price distortions and the most economic roles of different modes in the future. For this analysis, a set of long-run cost functions was developed, based on the assumption that future traffic demands would be met with adequate infrastructure and the most efficient vehicles for each mode. In Chapter V, the analysis will be carried further to project future traffic demands and the expansion of different modes that would handle them in an economically efficient manner.

4.4 Unfortunately, rigorous economic analysis of transportation costs and service quality is not yet well developed in China, and firm quantitative evidence is limited. The cost functions developed here are based on a variety of data, not only from Guangdong Province but also from national sources, supplemented by a series of assumptions based on experienced judgment where empirical evidence is lacking. This analytical framework is spelled out in the annex where quantitative cost estimates are also developed in detail. No claim is made as to the precision of the estimates; they are intended rather to delineate a logical framework for examining the issue of the economic roles of the different modes of transport, and to elicit a debate that hopefully will lead to better data and an improved understanding of the options for - 42 - future development of transportation. Nonetheless, the results even at this stage suggest some important practical conclusions which would appear reason- ably robust over a wide range of assumptions. These conclusions, although directed particularly to Guangdong Province, are thought to be generally applicable to much of the rest of China.

A. Comparative Transport Costs and Pricing Among Modes

4.5 Three concepts of cost for transport service are used in the following analysis:

(a) users' (shippers' or passengers') perceived costs,

(b) carriers' long-run, incremental financial costs, and

The users' perceived costs are based on present fares and tariffs and other costs incurred by the user (e.g., time costs, packaging), while the long-run costs (either financial or economic) represent the potential future situation based on the assumption that best existing technologies will be efficiently exploited. Each of these cost concepts is defined below, and detailed calculations for each mode are found in the annex.

4.6 Users' Perceived Costs (UPC) are defined for passengers as total out-of-pocket expenses including fares and other travel costs such as meals and hotels on long bus trips, as well as time costs, and for freight as tariffs, storage, and handling costs.l/ To the perceived costs of the principal mode are added the extra door-to-door costs for rail, water and air modes where truck or bus transport is needed to get from or to the ultimate origin or destination. Costs for unreliable service or infrequent service are not included here for the sake of simplicity (although these may assume great importance in the case of passengers and some high-valued freight services). In past analyses in Guangdong, the value of time was assumed to be the same for all trip purposes for all travelers and was estimated by dividing nonagricultural GNP by nonagricultural work hours.2/ In this analysis, however, costs were calculated for a range of time values, allowing the analyst to consider differences between passenger groups. Senior civil servants and national businessmen, for example, have a greater opportunity cost for their time than unskilled workers, and foreign businessmen and tourists likely use

1/ In addition to the costs included here, a comprehensive approach would also include packaging costs, time costs, and unreliability costs for freight which now result in very large stockpiles of coal and other commodities waiting for transport. Time costs can be critical in certain types of freight services, particularly for manufacturing process industries, where "just-in-time" (JIT) logistics and inventory management techniques have given rise to a whole new standard of transport services in modern industrial countries. A true generalized transport cost would include the costs of excessive inventories associated with poor transport service, as well as packaging for shipment.

2/ This yielded a value of Y 0.488 ($0.14) per hour based on 1985 data. - 43 - an even higher opportunity cost in assessing the options for the mode of travel. In addition the value of time for all groups will increase in the future as their real per capita incomes increase.

4.7 Long-Run Incremental Financial Cost (LRIFC) is defined as the average unit transport cost incurred under long-run conditions 3/ by each carrier (road, rail, water, or air) in order to carry an additional passenger-km per year or an additional freight ton-km per year. It includes variable costs and other operating costs, depreciation of additional rolling stock, vehicles, or vessels (at replacement value) and average incremental overhead costs, where these are borne by the carrier and vary with traffic volumes. These costs are after subsidies and include all taxes and fees charged by the government (on the assumption that the present tax/subsidy regime remains unchanged). Transshipment costs and local pickup and delivery costs are also included in LRIFC for the rail, water and air modes (as for perceived costs above) to compute comparable door-to-door carriers' financial costs for each mode.

4.8 Long-Run Incremental Social Cost (LRISC) is defined as the economic resource cost to the society for an additional ton-km or passenger-km transported. These costs are identical to the LRIFC except for three adjustments. First, the LRISC calculation omits government taxes, fees and subsidies and replaces theinwith the actual incremental costs to the government or enterprise for providing the infrastructure or other capital goods needed to produce the transport service. This includes the opportunity cost of capital that is invested in infrastructure, vehicles, vessels, or rolling stock. Second, financial costs are converted to economic efficiency costs by using conversion factors or shadow prices which represent the costs to the economy of each resource category; this is necessary because financial prices paid in China for many resources do not reflect the actual cost to society in terms of forgone alternative uses ("opportunity costs"). Third, in the case of passengers, the economic value of time in transit is included.

4.9 Four Tests, comparing these costs for different modes and services, are significant for assessing economic problems in the transport system:

Test 1 LRISC vs. UPC: If LRISC is greater, noneconomic excess demand is being encouraged for the transport service; if the UPC is greater, demand is being suppressed below levels which would be economically desirable over the long run;

Test 2 LRIFC vs. UPC (excluding time values): If LRIFC is greater, there is definitely a problem of financial viability of the service. If UPC is greater the service would be financially viable with best existing technology and other conditions assumed under LRIFC; under actual conditions a higher UPC may reflect either high profits for efficient carriers in a market with chronic shortage of supply ("sellers' market") and/or

3/ "Long-run conditions" or "in the long run" means with appropriate expansion of infrastructure, equipment, and facilities to keep an economical balance between demand and capacity. - 44 -

inefficiencies (e.g., poor roads, congestion) which raise present operaLting costs above long-run costs;

Test 3 LRIFC vs. LRISC (excluding time values): If these are unequal, it indicates that the present regime of taxes and subsidies, if applied to long-run costs, would distort the cost structure, thereby creating uneconomic incentives for the carrier; and

Test 4 the ranking of modes by LRISC vs their ranking by UPC: If the rank orders cliffer, users are getting the wrong price signals for their choice of mode.

4.10 It should be noted that while the basic aim of the study is to delineate the potential future situation in the long run, Tests 1, 2, and 4 involve comparisons of the long-run potential costs with actual present prices, while Tests 2, 3, ancd 4 are based on the assumption that the present regime of taxes and subsidies (which enter into the carriers' costs--LRIFC) would be maintained in the future. These tests are intended to give some indication of how the costs of the future transport system might be different from those viewed today, and how current pricing and taxation/subsidy policies, if maintained, might interfere with long-run economic efficiency. It should also be recognized, however, that in a situation with chronic shortage of capacity and attendant congestion, prices at least in the short run should be set above long-run costs both to encourage efficient utilization of existing capacity and to generate revenues to finance capacity expansion. The emphasis here is on long-run planning options, rather than on current pricing policies per se.

B. Comparative Cost Analyses

Passenger Transport Costs and Prices

4.11 The costs according to the three concepts defined above are shown in Table 36 for passenger trips by different modes between selected points. Fig- ures 4 and 5 show, respectively, costs to the passenger (not including the value of time) and economic costs to society (LRISC) as functions of trip distance. In using these graphs, it should be noted that the distance between two points sometimes differs significantly according to the mode used. From Guangzhou to Shantou, for example, Table 36 shows the distance to be 380 km by air, 481 by road, and 543 by ship.

4.12 Examination of the table and graphs permits applying the four tests prescribed above for analyzing potential distortions or maladjustments. Test 1, comparing actual users' cost (UPC) with economic resource cost under improved conditions (LRISC), and Test 2, comparing UPC with financial cost under those conditions (LRIFC), both show trips by road (bus trips) apparently overpriced, even without including any cost for the value of passengers' time. Table 36 shows UPC to be from 3 to 4 times as high as the long-run incremental costs. Test 3 further indicates that bus carriers' financial costs (LRIFC) would exceed society's economic costs (LRISC) by about 7 to 14 percent, reflecting a tax on road transport beyond the long-run costs of providing improved infrastructure and contributing to the distortion vis-a-vis the other modes, which are subsidized. A large part of the apparent overpricing of bus - 45 - fares is probably due to existing poor roads and congestion, which may increase vehicle operating costs 130 to 150 percent above normal. The remain- der represents some unidentified combination of operator and vehicle inefficiencies and possibly (for the more efficient enterprises) significant profits.

4.13 Rail passenger fares are now substantially above either LRISC (Test 1) or LRIFC (Test 2) for all trips, with the margin substantially greater for shorter distances (over 130 percent) than for longer trips (60 to 80 percent). Comparing carriers' costs with social costs (Test 3) indicates that LRIFC is just under 90 percent of LRISC, reflecting primarily lower financial charges than economic costs for amortization of assets (depreciation plus interest) and fuel. This, of course, enhances the substantial financial profits now being made by the railways on passenger services, which can help to meet capital requirements for capacity expansion and assets renewal.

4.14 For aviation, society's economic costs (LRISC) and carriers' costs (LRIFC) are almost identical (Test 3), but when either (Tests 1 and 2) is compared with user costs (UPC) at zero-time values, it appears that some routes are substantially underpriced (e.g., Guangzhou-Shantou, where fares cover only about 55-60 percent of costs), others are approximately break-even (Guangzhou-Shanghai), and still others show a significant profit (about 15 percent for Guangzhou-Beijing). Travel by ship appears to be overpriced for all trip distances relative to either economic costs (Test 1) or carriers' costs (Test 2), and particularly so for longer trips (e.g., for Guangzhou- Dalian, where user costs exceed LRISC and LRIFC by 77 and 155 percent, respectively). Carriers' costs appear to be substantially below society's costs (Test 3) for ship passenger services, especially for longer distances.

4.15 The ranking of modes (Test 4) is affected by the length of the trip. In terms of user cost (i.e., present fares and transfer costs) without allowing for any value of time, Figure 4 shows air travel by far the most costly mode at any distance, with road the cheapest over short distances and rail and ships very close for longer distances. These comparisons are strongly influenced by tax differences for different modes and by arbitrary fare structures. A radically different picture results when the comparison is made in terms of long-run incremental economic cost (LRISC), still omitting time value, as shown in Figure 5. In these terms, travel by bus turns out to be less expensive than by rail or ship at any distance.

4.16 For passengers whose time has a high value, of course, the faster modes are attractive. Figure 6 shows, for a trip from Guangzhou to Shantou (380 to 543 km, depending on the mode), how the traveler's perceived cost (fares plus time cost) and the long-run incremental social cost vary when different time values are included. Even at very low values of time, ship travel loses out to rail and road modes because of their superior speed, for either perceived cost or long-run social cost. For this short distance, air travel becomes competitive at values around Y 12 per hour in perceived costs and at Y 20 per hour for LRISC. A second comparison is made in Figure 7 for the longer trip from Guangzhou to Shanghai, comparing air (1,235 km), rail (1,811 km), and ship (1,689 km). In this case also ship travel is not - 46 - selected at any value of time above zero.4/ Air travel becomes less expensive than rail for passengers with a value of time of Y 7 per hour or more.

4.17 Regardless of time values, the modal choice distortion shown by comparing ranking of modes by LRISC and by user charges (Test 4) appears to be the greatest in terms of bus passenger transport, which in an economically optimum situation in China would be less expensive than rail or any other mode, not only for short to medium distances, but also for longer routes, particularly where road distances are shorter than or equal to rail distances. The air mode would also be much more competitive for long distance passengers with high time value than the comparison of fares alone would indicate.

Bulk Commodity (Coal) Transport Costs

4.18 Table 37 shows the three different costs for shipping coal, China's principal bulk commodity, over various distances by various modes. Figures 8a and 8b show users' cost (UE'C)and the idealized economic cost (LRISC) graphic- ally as functions of distance, which helps to see how the costs of the different modes rank and which one offers the lowest cost at any distance.

4.19 Test 1, comparing LRISC with UPC in Table 37, shows that, relative to economic costs under ideal conditions, transport by road and large barge are overpriced, while rail transport (the most-used mode at present) and long- haul coastal shipping (also extensively used) and short-haul barges are under priced. For the typical long hauls involved, present railway tariffs appear to recover only about 65 to 75 percent of LRISC; for coastal ship (with rail ways bringing the coal to shipping ports) the percentage is about 80 percent for the 30,000 dwt vessel, and even less for the smaller ship. Such severe underpricing of the transportation of coal, a commodity in which transportation is a major component of the delivered price, invites excess demand and uneconomic use of both transportation and energy, two of the scarcest goods in the Chinese economy.

4.20 Test 2, comparing LRIFC with UPC, yields similar results except for the particularly important case of railways, where tariffs paid by shippers are adequate to cover the railways' financial costs, which are less than economic costs (LRISC). Test 3 shows all modes except road transport having financial costs lower than economic costs, indicating some degree and form of subsidy. For road transport, carriers' financial costs (LRIFC) would exceed society's economic costs (1,RISC)by over 40 percent, reflecting a tax on road transport well beyond the long-run costs of providing improved infrastructure; this distortion has less significance in the case of coal than for other traffic, since road transport would not be competitive even in the absence of the tax.

4.21 The modal ranking test (Test 4) may be most easily grasped from the graphs of Figure 8. Either under existing prices or prices based on long-run economic costs (which woulcd mean cutting road transport prices by approximately half), neither road transport nor small barges would be a preferred

4/ Persons traveling for tourist purposes to enjoy the voyage would have negative time costs (e.g., benefits) while very low income persons will still prefer this mode on the basis of lowest fares. - 47 - mode (exceptfor the shortest hauls or for local pickup and delivery services for those origins and destinationsnot directly served by rail or large ships). Rail is preferred under either cost criterion for all but the shortest hauls.

4.22 The finding that rail shipping is more economical than coastal ship ping (plus rail) for long distances conflicts with earlier findings of Chinese authorities,which led to major investmentsin large-scale coal loading facilities in northern China ports and in railways connecting them to the mines. It is also contrary to the results of earlier editions of this study based on prices of 1988 or earlier years. The new findings result from sharply higher cost increasesin the case of coastal shipping than for railways, due primarily to large increases in the prices of ships, reflecting not only recovery of previously depressedworld markets for ships, but also possibly some under- valuation of ship costs assumed in previous analyses. As the issue is an extremely importantone--the huge tonnages involved dominate domestic shipping in China--it requires more detailed investigation. Given the current capacity constraintsin the railways, coastal shipping (the costs of which are not that different from railways)must, in any case, remain a major coal carrier in China for the foreseeablefuture.

Heavy Freight Transport Costs and Tariffs

4.23 The costs for transportof heavy freight, such as iron, steel, and timber, by different modes are presented in Table 38 and Figures 9A and 9B. Relative to long-run economic costs (Test 1), transport by road is greatly overpriced,short-distance barge movements are significantlyunderpriced (particularlyin the West River), and coastal shipping and rail transport are slightly underpriced,at least for longer hauls. In financial terms (Test 2), all modes 5/ except barges over shorter distances appear to cover costs under the long-run assumptions. Comparisons involving rail and water transport are strongly affected by the assumption of transfers by truck at each end of the trip, greatly increasing the cost over what it would be on a siding-to- siding or wharf-to-wharfbasis for shorter hauls. Thus, Test 3 appears to show that economic and financial costs are approximatelyequal for each mode (except for road), because the significantline-haul subsidies are small per- centages of the total delivered cost.

4.24 Test 4, the ranking of modes, shows road transport the best mode for short hauls under either existing users' costs, UPC, or economic costs, LRISC. By either criterion rail would become the preferred mode for longer distances. As Figure 9 shows, the change-overdistance based on present UPC is much shorter than if based on LRISC because of the current relatively high price of truck transport,due in part to bad roads and congestion. In future, with roads designed for modern, large semi-traileror trailer trucks and with adequate capacity for the traffic, road transport can be competitivewith railways for heavy freight, even for haul distances up to 1,100 km. The comparison assumes that freight hauled by rail must be picked up and delivered by truck at both ends of the trip. This conclusionwould be invalid if both

5/ The 25-ton semi-trailertruck assumed in Table 38 would not normally be used over haul distances as short as 50 km; a smaller truck, as normally used, is more economical over such distances. - 48 - shipper and receiver have rail sidings, so that pickup and delivery costs (at least for large shippers) could be lower. In the extreme case where local pickup and delivery costs were essentially nil the rail would always be the least costly mode (in terms of either UPC or LRISC), provided also that railway wagons were available when needed, so that additional costs for extra inventory holdings would nol: be incurred; such inventory costs have not been included in the present calculations. Waterborne transport is not competitive under either cost criterion under the assumptions employed in Table 36, but could be under different circumstances, particularly where both origin and destination lie on the waterways.

Less-than-Carload General Cargo

4.25 As with the other classes of freight, Table 39 and Figure 10 show the variation with distance of each of the three cost concepts for each mode, for shipment of general freight in less than carload lots. Again, Test 1 shows road transport priced far above LRISC, the economic cost under improved future conditions. Rail tariffs are also substantially higher than LRISC, particularly for longer haul. distances, but less so than for trucks. Water- borne transport, on the other hand (both barges and coastal shipping), appears to be priced well below economic costs, thus potentially generating noneconomic demands. Test 2 shows similar results: road and rail priced well above long-run financial costs, while water modes in most cases, particularly barges, are priced below financial costs, suggesting LCL cargo services on those modes would not be financially viable over the longer run.

4.26 Test 3, comparing economic and financial costs in the idealized conditions assumed (LRISC and LRIFC), shows (i) the two costs approximately equal for railways; (ii) road transport overtaxed; and (iii) waterborne modes subsidized. In this case these distortions are of significance, since highway transport should play a larger role.

4.27 The rank order of modes by UPC and by LRISC depends on the haul distance, as seen in Figure 10. By either criterion, road transport is least costly for short hauls, as would be expected when the other modes require pickup and delivery by truck at the ends of the haul. The most efficient and lowest priced land-based mocde for longer trips is the railway, but the distance at which this becomes the preferred mode is much longer (1,150 km) on the basis of LRISC than at present user costs, UPC (400 km), just as it is for heavy freight.

C. Impacts of Inefficient Conditions

4.28 Apart from the for-egoingcomparisons of costs and prices, it is useful to examine any factor-s that are known to raise costs, in order that policies and programs may be designed to deal with such factors. Only by eliminating these factors can the assumed long-run efficient conditions be achieved and costs reduced to the level of LRISC. Some of these efficiency- reducing factors have alreacly been mentioned in passing; others have not. Table 4.1 brings them together and summarizes them for each mode. - 49 -

Table 4.1: INEFFICIENCY FACTORS

Cost Increase Mode Primary Factors Carrier Effects to Society

Road too small vehicles inability to compete up to 90% road capacity constraint congestion reduces up to 100% /a speeds and km/yr poor surface condition reduces speeds and km/yr up to 30% short haul distance reduces annual km up to 20%

Rail too many short hauls limits long hauls up to 20X too many pass. trains limits freight trains noneconomic diversion restrictions on shippers none reduced economic interaction

River too small barge size inability to compete up to 100% too little port capacity fewer travel days, due 60% cost to waiting time /b increase for 2 days increase/trip.

Coastal slow unloading equipment fewer travel days " " Ship too little port capacity fewer travel days " " restrictions on ships none reduced interaction

Air too large aircraft size/c low load factors /c up to 100% overpricing of service lower utilization rates up to 50% restrictions on passengers none reduced interaction and fragmented markets

/a If congestion reduces the number of trips the economic impact is more significant. /b Efficient port waiting time is 1 day or less. Present average is 4-7 days for major ports and less for smaller ports. /c May apply only to trips under 1,000 km.

D. Conclusions

4.29 Comparing actual present prices against potential long-run costs can be helpful in understanding the potential for change in the future, certainly as to the direction of those changes and, to a degree, their expected magni- tudes. These may be summarized: - 50 -

(a) Highway transport costs are likely to fall significantly--possibly by half--as China and Guangdong Province move toward a modern road transport system, if prices and user charges are set for economic efficiency. Railway costs may also fall, but by much less, since the railways are much closer to the efficiency frontier, while railways' tariffs should rise further for such key commodities as coal and heavy freight;

(b) Long distance coal transport by rail is still severely underpriced, even after the tariff increases of March 1990, continuing to encourage excess demand for both energy and rail transport;

(c) Although recent tariff increases were not sufficient to close the previous gap and cover recent cost increases for coal, the gap for heavy freight has been substantially reduced, while passenger tariffs now exceed either financial or social costs by a wide margin for all distances;

(d) Potential long-distance passengers are being uneconomically discour- aged by high rail fares, relative to carriers' economic or financial costs, while air fares appear substantially higher than economic costs for some routes and below costs for other routes;

(e) Recent increases in the costs of coastal shipping appear to have substantially erodedithe comparative advantage of that mode vis-a- vis railways for ,-arrying coal (and similar bulk commodities). Given the importance of this traffic, and the prospects for coastal shipping relieving congested railway corridors, this issue should receive more detailed study; and

(f) Comparison of LRI]TC and LRISC suggests that the present regime of prices and taxes dliscriminatesagainst road transport and to a lesser degree inland water transport, inflating the costs of carriers in those modes relative to other modes.

4.30 Several conclusiorLsconcerning the future roles of the transport modes can be drawn from the above analysis, despite possible uncertainties in the cost data. These are:

(a) Road transport should be made more efficient by expanding the capacity and upgrading the quality of highways and by using modern large buses and heavy semi-trailer trucks for longer hauls. Fares and tariffs over the long run should be brought down accordingly, and service expanded to much more than local delivery, especially in the areas of short to medium distance passenger transport, and LCL freight up to 1,000 km;6/

6/ It should be noted that there is not unanimity of views among the co- authors of the report on this conclusion. In particular, the Guangdong Province Planning Commission and the Institute of Comprehensive Transport wish to record their view that constraints on the development of road transport are likely to limit its role to haul distances much below 1,000 km at least up to the year 2000. - 51 -

(b) Air transport should expand its long distance and medium distance services and price them to attract long distance travelers from the rail system. These services are expected to grow rapidly with economic growth and increasing recognition of the value of time for business travelers.

(c) The railway should concentrate on its most economic transport roles which include medium distance freight and passengers, and, at all distances, coal, other bulk commodities, and heavy freight; and

(d) More detailed studies of the technological options and costs of coastal shipping are needed to better define the comparative advantage of that mode for bulk commodities (particularly coal).

4.31 It should be emphasized that, as explained in para. 4.10, these analyses and conclusions are primarily intended to define the economic role of the modes, delineate long-run planning options, and indicate how future costs would compare with present prices, rather than to define pricing policies. However, the chronic shortages and attendant congestion in the transportation network in Guangdong Province, like China as a whole, suggest that transport prices on average should be raised further to improve efficiency of utilization of existing assets and to generate revenues for expansion. Certainly, for economic efficiency, prices should be increased for those services which are currently priced below even long-run social costs (LRISC). The present "overtaxing" of road transport may be appropriate at least in the short run where road congestion is significant and funding for road improvements is limited. In the long run, supply of road infrastructure should be increased to meet demand, taxes reduced to bring road transport financial costs (LRIFC) in line with social costs (LRISC). For the other modes subsidies should be reduced also in order to bring financial costs in line with social costs. - 52 -

V. FUTURE TRAFFIC AND CAPACITY CONSTRAINTS

A. Methods of Traffic Forecasting

5.1 Traffic forecasting was carried out as part of the transport demand analysis depicted in Figure 3. Forecasts were made for three primary types of traffic: foreign trade flows, domestic freight and passenger flows, and potential induced traffic flows. Foreign trade flows are based on forecasts of foreign trade for each major commodity group and are calculated for both Guangdong Province and for China as a whole. Domestic freight and passenger flows were forecast using economic indicators for regional growth in each transport corridor and subcorridor (see Tables 10, 11 and 12), and using forecasts of interprovincial traffic for each major commodity group originating or ending in Guangdong Province. Potential induced traffic can be found where an industry would not be established or expanded if a specific transport improvement were not made, but could be created if the investment were made. Spe- cific cases of induced traffic were identified in the Eastern Corridor, and more general types of induced traffic were identified in other areas.

5.2 In principle, the traffic volumes associated with each corridor should be forecast by origin and destination (0-D) for each significant commodity group. The choice of mode then should be forecast for each O-D pair using the modal planning for that specific flow or the shipper's modal preference and comparative modal service characteristics for the trip or shipment. However, the absence of traffic data by origin and destination eliminates the possibility of using this method. Instead, a hybrid approach was taken in which commodities with large volumes and limited destinations were forecast independently by origin and destination, and the remaining traffic was forecast using a more general relationship to the growth in each corridor. This growth in commodity flows and income levels starts from the three alternative economic forecasts established in Chapter I and results in three alternative forecasts of total demand for freight and passenger transport initially on the assumption of no capacity constraints. Each of these forecasts reflects normal growth in traffic, without the induced traffic associated with system improvements. The forecasts were then modified to reflect the expected impact of the Pearl River Delta-Hong Kong expressway on traffic volumes in 1995 and 2000, and in a second stage capacity constraints were introduced for the Northern Corridor railway.

5.3 The forecast of future traffic to be carried by each mode and link in the transport system was based on two factors: the allocation of planned commodities to each mode under the state allocation rules, and the choice of mode by user preference for out-of-plan commodities and passengers. The choice for out-of-plan commodities is modified by congestion and price consi- derations as described in Chapters III and IV. The initial result is a base case traffic forecast by mode, at this stage assuming no improvements in the transport system other than ongoing construction (including the Pearl River Expressway System), which is used as a reference point to identify future bottlenecks in the Guangdong transportation system and subsequently to assess the impact on traffic of potential improvements.

5.4 The forecasts carried out using these techniques are clearly a first approximation that must be refined for applications more specific than general - 53 - corridor and area growth rates. However, they can give the general trend and range of likely traffic volumes at a sufficient level of accuracy to identify overall transportationrequirements.

B. Freight Traffic Forecasts

5.5 InternationalFreight Traffic. The internationalcommodity freight forecasts summarized in Table 5.1 reveal substantialdifferences in traffic growth among the four corridors. As expected,the Pearl River Delta exhibits the highest growth. The Eastern Corridor will experience significantgrowth but from a very small base volume.

Table 5.1: INTERNATIONALTRAFFIC IN MAJOR CORRIDORS (million tons)

Pessimistic Base case Optimistic Actual forecast forecast forecast Growth Growth Growth 1987 2000 rate (Z) 2000 rate (%) 2000 rate (Z)

North Corridor ja (5.9) (11.3) 5.2 (11.3) 5.2 (11.3) 5.2 West Corridor 5.4 14.7 7.9 19.2 10.2 38.3 16.2 South Corridor 33.9 115.7 9.9 159.2 12.6 373.5 20.3 East Corridor Lb 0.7 2.0 8.9 2.7 11.3 6.0 186.5

Total la 40.0 132.4 9.6 181.1 12.3 417.8 19.8

/a The total for the province excludes all transit traffic in the North Corridor which is also counted in the South Corridor. /b Some East Corridor traffic exits by road to Hong Kong and therefore is shown only for the South Corridor. If foreign trade expands through the improved port in Shantou the growth could be higher.

Source: Study estimates.

5.6 InterprovincialFreight. Domestic inflows and outflows of Guangdong Province will increase at about the same rate as foreign imports and exports, but here the North Corridor is expected to play the largest role (Table 5.2).

5.7 IntraprovincialFreight. There are two types of intraprovincial freight flows: (i) medium distance intercity flows and (ii) local traffic. The west and south are expected to have the highest growth rates. The South Corridor will continue to handle over 60 percent of intraprovincialflows in the future (Table 5.3).

5.8 Total major corridor freight flows will increase fastest in the South Corridor with the West and North close behind (as summarized in Table 5.4 and given in more detail in Table 40). The average growth in the South is expected to be 9 percent to 21 percent between 1987 and the year 2000, while the slowest growth is forecast for the East Corridor at about 60 percent of - 54 -

Table 5.2: INTERPROVINCIAL TRAFFIC IN MAJOR CORRIDORS (million tons)

Pessimistic Base case Optimistic Actual forecast forecast forecast Growth Growth Growth 1987 2000 rate (Z) 2000 rate (%) 2000 rate (%)

North Corridor 52.6 130.8 7.3 200.1 10.8 476.3 18.5 West Corridor 8.6 L9.0 6.3 27.8 9.5 59.5 16.1 South Corridor /a a n.a. /a n.a. /a n.a. East Corridor 2.3 7.0 8.9 11.4 13.1 29.8 21.8

Total 63.5 156.8 7.2 239.3 10.8 565.6 18.3 n.a. = not applicable

L Interprovincial flows irLto Guangzhou/Huangpu are considered north corridor flows, even if they arrive by ship via the Pearl River Delta, since North China is the dominant source.

Table 5.3: INTRAPROVINCIAL FREIGHT IN MAJOR CORRIDORS (million tons)

Pessimistic Base case Optimistic Actual forecast forecast forecast Growth Growth Growth 1987 2000 rate (%) 2000 rate (%) 2000 rate (Z)

North Corridor 5.00 11.2 6.4 15.0 8.8 29.4 14.6 West Corridor 25.96 74.4 8.4 115.7 12.2 271.8 19.8 South Corridor 53.29 160.2 8.8 273.0 13.4 688.6 21.8 East Corridor 12.66 23.7 4.9 33.9 7.9 66.8 13.7

Total 96.91 269.6 8.2 437.6 12.3 1,056.6 20.2 those rates. Growth in the East Corridor will range from 6 percent to 16 percent; without new resource development (i.e., without new rail service) it will drop from 7.5 percent to 5.5 percent of total flows. The provincial average growth of freight traffic is expected to be between 8 percent and 19 percent from 1987 to 2000, depending on the forecast used.

5.9 Induced Freight Traffic. The reduction in transport costs resulting from the Guangzhou-Meixian-Shantou (GMS) Railway, if realized, would be expected to generate a significant amount of induced freight traffic. Road improvements and better access in all parts of Guangdong have been found to - 55 -

Table 5.4: TOTAL MAJOR CORRIDOR FREIGHT TRAFFIC (million tons)

Pessimistic Base case Optimistic Actual forecast forecast forecast Growth Growth Growth 1987 2000 rate (Z) 2000 rate (%) 2000 rate (Z)

North Corridor 63.5 153.3 7.0 226.4 10.3 517.0 17.5 West Corridor 39.9 108.2 8.0 162.7 11.4 369.7 18.7 South Corridor 87.2 275.9 9.3 432.1 13.1 1,062.1 21.2 East Corridor 15.6 32.7 5.9 48.0 9.0 102.6 15.6

Total /a 200.3 558.8 8.2 857.9 11.8 2,040.1 19.5

/a The total for the province excludes international traffic for the North Corridor (5.9 million tons in 1987 and 11.29 million tons in 2000) which also passes through the South Corridor.

Source: Table 40. increase traffic. However, structural factors in the economy have limited the rate of increase in these transport flows. Nevertheless, specific induced traffic flows can be identified in the East Corridor. There transport cost savings of 50 percent would lead to the development of coal mining, iron mining with pelletization, and cement plants. These induced flows would increase the volume of major freight in the East Corridor by 6.5 million tons, or 150 percent, if the project were built (see Table 41 for details). This induced traffic would add 1 percent to total provincial flows. Normally, a 50 percent reduction in transport costs would generate induced traffic which is less than 50 percent of normal traffic in a given commodity. However, for certain commodities such as mineral resources and perishable fruits and vegetables, induced traffic rates are much higher. This is the case for the East Corridor.

5.10 Network Provincial Total Freight Traffic. Traffic along the four major corridors is presently about 28 percent of all provincial traffic, and this proportion is expected to decline in the future. Local traffic is likely to increase faster than long distance traffic, as the economic structure of the economy shifts toward more light manufacturing and per capita incomes rise. Modal shares would also be expected to alter with water (river, coastal, and ocean shipping) and particularly highways, increasing their shares as railways grow more slowly, even when it is assumed that additional rail capacity is built as needed to accommodate increased demand. Railways and waterways are expected to be more specialized in bulk, long-haul transport, according to their comparative advantage. The unconstrained forecast is summarized in Table 5.5 below and given in more detail at Table 42A.

5.11 The shift to the highway mode can be expected to increase as a result of several factors in both supply and demand: on the supply side, the - 56 -

Table 5.5: NETWOR: TOTAL PROVINCIALFREIGHT TRAFFIC: UNCONSTRAINED (milliontons)

Rail 41 (06) 1.09 (05) 8 164 (04) 11 397 (04) 24 Road 532 (72) 1,815 (77) 10 3,192 (81) 15 8,411 (85) 19 River 100 (14) 253 (11) 7 320 (08) 9 628 (06) 15 Coastal ship /a 30 (04) 62 (03) 6 77 (01) 7 141 (01) 12 Ocean ship /b 32 (04) 106 (05) 10 145 (03) 12 308 (03) 19

Total 735 (100) 2.345 (100) 9 3.898 (100) 12 9,885 (100) 22

La This category does not include internationalshipping. /b Internationalshipping only. Note: Figures in (parentheses)are percent of column totals; air and pipeline are excludedas minor flows. Source: Table 42.

2,000 km of highways already built during the Sixth and Seventh Five-Year Plans, the replacement of many ferries with bridges in the province, the rapid growth of trucks and tractors owned by private enterprises, and the reduction of costs as vehicles and infrastructure are improved, and, on the demand side, the increasing demand for h:Lgh quality, fast, door-to-door service by light manufacturing and export industries, which are expected to be the leading growth sectors.

5.12 Major commodity tonnage shipped by coastal vessels would more than triple by the year 2000 in the base case corridor forecast (although the coastal share of these commodities, such as coal from the north, would decrease from 4 percent to 2 percent of total flows). Ocean shipping would grow even faster and maintain its share of total flows. The share of river traffic is expected to increase, except where parallel rail capacity or road capacity is built. River transport would be used more for bulk commodities such as construction materials, cement, and fertilizer, except in the Pearl River Delta where other commodities would begin to dominate future flows. Rail would grow the slowest of the modes. The lower growth of rail traffic reflects the fact that the types of traffic for which rail is best suited are not expected to grow as rapidly as other traffic better served by other modes, including an increasing share of coal traffic which would move more economically by coastal and inland shipping. Transit traffic through the province is expected to increase at a slower rate than Guangdong traffic, and this will affect primarily the rail mode.

5.13 Rail Capacity Constraints. Capacity constraints will further retard rail traffic growth and the amount of traffic diverted from the railways in the North Corridor (Tables 5.6 and 43) will have a significant impact on the other modes. Under the Base Case forecast the double-track rail from Beijing to Guangzhou in the south bound direction will reach capacity by 1990. North bound trains also will reach capacity by 1995. Without any further increase in rail capacity or any reduction in passenger service, 23 million tons of southbound traffic and 1.7 m:Lllion tons of northbound traffic would be - 57 - diverted to road and coastal shipping by 1995 under the Base Case forecast. More than twice these volumes would be diverted under the high forecast. This diversion will put pressure on port capacity for bulk commodities and road capacity in the North Corridor for interprovincial traffic.

Table 5.6: NETWORK PROVINCIAL FREIGHT TRAFFIC: CONSTRAINED (million tons)

Actual Pessimistic forecast Base case forecast Optimistic forecast Growth Growth Growth 1987 2000 rate (%) 2000 rate (Z) 2000 rate (Z)

Rail 41 (0.06) 82 (0.03) 6 101 (0.03) 9 164 (0.02) 14 Road 532 (0.72) 1,830 (0.78) 11 3,237 (0.83) 16 8,600 (0.87) 26 River 100 (0.14) 253 (0.11) 7 320 (0.08) 10 628 (0.06) 16 Coastal ship /a 30 (0.04) 74 (0.03) 6 95 (0.02) 9 185 (0.02) 15 Ocean ship /b 32 (0.04) 106 (0.05) 10 145 (0.04) 13 308 (0.03) 20

Total 735 (100) 2,345 (100) 10 3.898 (100) 15 9.885 (100) 24 la This category does not include international shipping. /b International shipping only.

Note: Figures in (parentheses) are percent of column totals; air and pipeline are excluded as minor flows.

Source: Table 42.

5.14 Freight Haul Distance. The average rail freight haul distance has increased slowly in the past, but over the past ten years it has grown by an average of 6 km each year due to a shift of shorter distance traffic to high ways. Road and water freight transport also show an increase in average haul distance, which can be attributed partly to the shift of the railways shorter distance traffic (which is nonetheless much longer than average road distance) 1/ and partly to faster growth in corridor traffic and interprovincial coastal shipping rather than to short distance flows. This trend is assumed to accelerate for rail and road, and continue at present rates for coastal shipping (Table 5.7). For river traffic, the increase in short haul traffic is expected to be about equal to the increase in long haul cargo, due to faster growth in Pearl River Delta traffic. Freight traffic in terms of ton-km therefore will increase faster than total tonnage, as shown in Table 42 for the provincial total and Table 44 for the corridors.

C. Passenger Traffic Forecasts

5.15 International Passengers. International passengers can be classified into three groups for forecasting purposes: tourists, business travellers, and commuters to the SEZs from Hong Kong and Macao. Available statistics do not separate tourists and business travellers, consequently both are

1/ In 1987 the average haul distance by railway in Guangdong was 346 km and by road 30 km. Nationally, it was 662 for rail and 50 for roads. - 58 -

Table 5.7: AVERAGE HAUL DISTANCE (km)

Year Rail Road River Coastal

1987 346 30 1951a 1,900/a 1990 400 35 180 2,000 2000 565 40 170 2,200

L/ Approximate estimate. forecast at the same rate here.2/ Future tourism and business trips are forecast at the recent growth rates of 25 percent per year, although a lower long term rate can be expected as foreign exposure to China becomes less of a novelty. The number of Hong Kong commuter passengers is expected to grow with the growth of the SEZ economies, and the Pearl River Delta. This means short- term growth of 13-17 percent and medium-term to long-term growth of 7-13 percent, depending on the scenaLrio (low or high) and destination.

5.16 Interprovincial Passengers. The demand for interprovincial travel in Guangdong Province in the past has been suppressed by limiting the number of available passenger trains and air flights. The policy behind this limitation is changing, and individuals are taking long trips, as shown by the faster growth in pass-km than in passenger trips. This effect is accentuated by the development of the Special Economic Zones which attract business travellers and temporary workers from other provinces with much higher trip rates per capita than other provincial residents. This means that past travel rates per capita are not a good indicator of future rates, which are likely to increase faster. Now that the double-track line is completed the rail capacity constraint is temporarily released, and pent-up demand for interprovincial passenger travel may bring up interprovincial trip rates to a level 50 percent higher than in 1988 although the effect of the 115 percent average increase in passenger tariffs in September 1989 will dampen this somewhat.3/ If aviation services are also made more available, increases of 30 percent to 50 percent in the use of air travel are foreseen.4/

2/ More data on these passengers should be collected to allow better forecasting in the future.

3/ A careful analysis of the future rail traffic using origin-destination studies is recommended to aid in future forecasts. Also the present trade-off between rail freight and passenger trains is not directly linked to demand, but is a decision of the railway administration that could be changed.

4/ Based on an assumed elasticity of 1.9 with respect to per capita income growth, which is similar to the elasticities observed in other countries for long distance trips. Air travel elasticities with income are expected to be even higher than rail elasticities due to higher values of passenger time. - 59 -

5.17 Intraprovincial Travel. The same level of suppressed demand does not apply to intraprovincial travel; there the rapid spread of new road transport services has already led to increasing travel rates. Growth rates on some roads have no doubt been pushed up to some extent due to capacity limits on the railroad, but they also can be related to increasing incomes. As Guangdong travellers place a high value on time and favor faster, more conve- nient transport in the future, the relative share of water transport in passenger travel is assumed to decline or stagnate. The only exception to this are high speed services such as hydrofoil, which already have increased trip rates between the West Bank of the Delta and Hong Kong. The effects of the SEZs on population movements within the province (e.g., temporary workers) will, moreover, tend to increase local trip rates over and above the income effects. In forecasting passenger travel within the province, the same income elasticities (1.925) as for interprovincial travel were used, although these represent somewhat higher levels than those obtained by the use of regression analysis for past trends. These assumptions produce total trip growth rates which vary by corridor as summarized in Table 5.8 below (and shown in more detail in Table 45).

Table 5.8: FORECAST GROWTH IN PASSENGER TRIPS BY TRANSPORT CORRIDOR: BASE CASE (millions)

Pessimistic Base case Optimistic Actual forecast forecast forecast 1987 2000 Growth 2000 Growth 2000 Growth Trips Trips rate (%) Trips rate (%) Trips rate (%)

North Corridor 30.6 69.4 7 102.2 10 247.7 18

West Corridor 53.4 165.1 9 265.5 13 781.6 23

South Corridor 110.5 473.9 11 797.0 16 2,427.3 27

East Corridor 40.8 97.8 7 158.7 11 407.6 19

Total 235.3 770.2 10 1,343.4 14 3,865.2 24

Source: Table 45.

5.18 Based on 1978-87 data, passenger traffic over the medium term is expected to grow much faster for the road and air modes than for other modes (Table 46). This is true despite the effect of pent-up rail demand for long distance travel, which is expected to expand passenger traffic on the North and South Corridor rail lines after the recent double tracking. The elasticity of passenger trips with respect to income appears, on the basis of avail- - 60 - able data, to be about 1.6. Increasing use of the road and air modes as described in Chapter III indicates a higher elasticity for these modes.5/

5.19 The corresponding (unconstrained) forecasts for province-wide passenger trips (Table 5.9) show annual growth of close to 10 percent in the pessimistic case, 15 percent in the base case forecast, and 25 percent in the optimistic forecast. Total provincial traffic in terms of pass-km is expected to increase slightly faster than total trips (Table 47). This is due to the greater proportion of interprovincial trips which will result from the North Corridor rail capacity expansion (double tracking) completed in 1988, and to a greater proportion of longer trips, particularly by road, taken within the province as a result of changing patterns of employment. However, the growth of traffic (freight and passengers) will soon overtake the 1988 capacity expansion, and it is expected that nearly 6 million passenger trips will be diverted from rail to road in the North Corridor by 1995, and nearly three times that number by the year 2000 if rail capacity is not further expanded (Table 48).

Table 5.9: TOTAL PROVINCIAL PASSENGER TRAFFIC FORECASTS 13YMODE - UNCONSTRAINED

Pessimistic Base case Optimistic Actual forecast forecast forecast 1987 2000 Growth 2000 Growth 2000 Growth Trips Trips rate (%) Trips rate (Z) Trips rate (Z)

Total trips (million) Road 642 2,297 10.3 4,171 15.5 12,556 25.7 Rail 36 94 7.6 133 10.6 293 17.5 Water 28 54 5.2 75 7.9 137 13.1 Air 3 18 14.5 36 20.9 119 32.4

Total 709 2,463 10.1 4,415 15.1 13,105 25.1

Total Pass-km (billion) Road 30 138 12.4 250 17.6 753 28.0 Rail 6 24 11.4 35 14.4 76 21.6 Water 2 4 5.2 6 7.9 11 13.1 Air 3 16 14.5 32 20.9 106 32.4

Total 41 182 12.1 323 17.1 946 27.2

Source: Table 47.

5/ This preference is rela,ted to the relative price of the modes, as discussed in Chapter IV, aLnd also may be influenced by rail capacity constraints. - 61 -

D. Vehicle Traffic

5.20 Passenger trips and freight shipments by road are directly related to vehicle traffic. The total pass-km growth is expected to be the same as growth in bus and passenger car-km. Similarly freight ton-km by road will be converted to truck-km. The rate of growth in vehicle traffic depends, of course, on the future vehicle mix. For example, larger trucks are expected to increase their share of total traffic in ton-km, and therefore truck traffic growth is expected to be slightly slower than growth in road transport ton-km in Guangdong Province as the average loading increases.

E. Summary of Corridor Forecasts

5.21 Freight. The freight forecasts by corridor show a narrow range of growth rates, from 15 percent to 20 percent in the optimistic forecast and 9 percent to 13 percent in the Base Case forecast. However, north-south coastal shipping will be growing faster than the other modes except roads (see Table 40) due to the expected diversion of bulk commodities from rail to ship. Coastal shipping will overtake the Guangzhou-Beijing Railway in total inflow tonnage between 1995 and 2000 in the Base Case forecast and between 1990 and 1995 in the optimistic forecast if there is no further increase in rail capacity. North-south flows will continue to dominate traffic patterns in the province despite relatively high growth in the West Corridor; the North and the South Corridors are expected to maintain about 30 percent and 40 percent, respectively, of total corridor traffic, while the West increases and the East reduces its share of total traffic. Within the Pearl River Delta, the East Bank will grow fastest. This subcorridor must deal with the growth of the Shenzhen economic zone and the increasing demands on transport by light industry. Local road traffic probably will be growing even faster than corridor traffic.

5.22 There are four possible strategies for dealing with capacity constraints in the North Corridor. One is to keep the newly established limit on rail capacity (30 million tons in each direction), expand shipping capacity to absorb the major bulk commodity movements, and expand road capacity to absorb the other commodities. A second strategy would be to increase rail capacity to 50 million tons each way, e.g., through measures to increase train size, electrification, etc. A third strategy would sacrifice passenger train service in favor of more freight trains and increased freight capacity. The selected strategy should be consistent with the conclusions of Chapter IV, that a combined rail-ship movement of coal and other bulk commodities to Guangdong is less costly than the all-rail movement. The forecast assumes that port capacity can be expanded over time as needed so that port congestion will not be a problem and that decisionmakers involved in traffic allocation for these commodities will change their allocations in response to economic costs even if prices are not changed accordingly.6/

6/ The outflow (northbound) from Guangdong by coastal ship in this corridor shows a high growth rate starting from a very low base. This could be facilitated by having ship transport enterprises use marginal-cost pricing (to reflect empty backhauls). Similar pricing policies would encourage better utilization of empty backhauls by rail. - 62 -

5.23 The slow growth of rail transport in the West Corridor is offset by much higher growth in river transport. Rail and river transport do not actually compete in this corridor as rail serves primarily as an entry and exit point for other provinces to the port city of Zhanjiang.7/ The growth of road transport in this corridor will probably be much higher for intraprovincial flows. The planned rLewlocal rail section from Yaogu to Maoming will change this relationshipby adding more rail capacity in this corridor, in competitionwith road and coastal shipping. The new rail section is to be financed by the Asian Development Bank.

5.24 The East Corridcorshows moderately high growth in road traffic, resulting from the developmentof light industry on the periphery of the Hong Kong-led developmentin th,eprovince. This reflects a continuationof the present trends. The growth of the Meixian subcorridoris expected to be the slowest in the Province in the base case forecasts.

5.25 Passenger TriDs. Passenger trip forecastsby corridor show a different pattern from freight forecasts, as the South Corridor accounts for almost half of the passenger trips and is growing faster than the average for the province. The West also is growing rapidly and is expected to expand its share of passenger trips. Passenger traffic in the North Corridor is the smallest and slowest growing of the four. Road traffic there is expected to dominate,but air traffic also will increase if capacity is available. Rail passenger traffic is expected to expand rapidlywith track capacity and there- after remain constrainedin the absence of any further capacity expansion.

F. Imp:Licationsfor CaPacity Constraints

5.26 Capacity constraintsare already evident throughoutmuch of the network. Growth rates in freight and passenger transport demand over the next ten years could result in a 250-500 percent increase in total demand on the transport system. Short term projects to meet demand by increasing road and rail capacity in major corridors are under way, but are not sufficient to accommodatethe amount of growth anticipated. Therefore, the present congestion will certainly get worse. Higher growth for road transport in particular will lead to increasinglysevere and more pervasive congestion throughout the network since most slack capacity already has been absorbed by the rapid growth in recent years.

5.27 The growth rates of total road traffic have been 20-30 percent per year and have been acceleratingthroughout the province since 1980. If the supply of vehicles remains relativelyplentiful and additional road capacity is provided, these extraordinarygrowth rates could continue unabated even if there were substantialincreases in railway capacity. Growth will continue due to three factors: (1) the apparent magnitude of pent-up demand, (2) the greater flexibilityof road transport compared to other modes, and (3) the changing economic structure of Guangdong Province, particularlythe rapid growth of light manufacturing. These factors imply a major need for expanding highway capacity,particularly in high growth areas such as Shenzhen. There a

7/ Completion of the Yaogu-Maomingline will probably increase transit traffic in the future, but this has not been explicitly forecast in this report. - 63 -

25 percent annual average growth rate in road traffic will double demand in just over three years. The effect of this increase on traffic congestion is exacerbated by the mix of different speed vehicles in the traffic flow; extremely high vehicle operating costs are anticipated until more traffic separation is achieved.

5.28 The share of transit traffic by mode will change in the future as provincial rail flows crowd out transit flows from other provinces, particularly those which are not in the natural hinterland of Guangdong Ports unless rail managers consciously increase interprovincial import/export traffic in the face of increasing local demand. This will reduce the share of transit traffic tonnage in rail flows from 15-20 percent at present to 10-15 percent by 1990, and 5-10 percent by the year 2000. Even though the transit flows will increase in terms of absolute tonnage, they will be lower in proportion to the rapidly growing Guangdong import and export flows. Highway transit traffic in the North Corridor will increase from virtually nothing to a significant tonnage even if only part of the excess rail traffic diverts to road. It would increase even faster if an interprovince expressway system were introduced, a prospect which is not envisioned in these forecasts.8/

5.29 International traffic flows are expected to increase, especially for road and river traffic to Hong Kong. Port congestion is expected to be significant, especially since coastal shipping will increase dramatically under all forecasts. This congestion is temporarily being addressed by the construction of small ports in Shenzhen and Zhuhai, but these ports will not be able to cope with major flows of bulk commodities and containers. The role of Hong Kong and other existing and potential ports in the region must be examined as possible international and/or domestic load centers for (1) petroleum products, (2) coal and (3) containers. This may require a major structural change in the economic roles of ports of the South China region.

8/ If the proposals for an interprovincial highway system are accepted by the State, then the modal shares will need to be restructured and further analysis of the consequences for port access and intermodal transfers will be required. - 64 -

VI. POTENTIAL TRANSPORTATION INVESTMENTS

6.1 This chapter broadly identifies investment implicationsof the conclusions of Chapter IV on the future role of the transport modes and Chapter V on transport capacity in comparisonwith future transport demand in Guangdong Province. It also presents conclusionsdrawn from preliminaryeconomic evaluation of those projects or classes of projects--inthe roads sector and for the GMS railway--forwhich more detailed informationwas available and suggests strategiesthat can lead to further clarificationof investment priorities. Although these conclusionswere intended to be comprehensive,certain weaknesses and gaps in the availabledata have led to only partial results and more detailed study of the individual componentswill be required to more definitelyestablish priorities.

InvestmentEvaluation Techn:iques

6.2 In the absence of budget or other constraints,economic rate of return (ERR) and net preseni:value (NPV) are the criteria normally used to establishproject feasibilit:y,while first year benefits (FYB) are frequently used to establish the optimum year for making the investment. However, an extensionof these simple methods is requiredwhere budget and/or other constraints restrict the size or compositionof the investment program from the optimum level or structure.

6.3 The methodologyused should ideally have the capability to recognize both multiple types of constraints (not only financial constraintsbut also physical constraints,e.g., shortagesof material or equipment in the construction industry)and multiple time periods (so as to incorporate allowances in decisions made in the present budget period for the fact that such con- straintswill probably exist.,and may even worsen, in the future). Formal methods for dealingwith multiconstraint,multiperiod transport investment problems have been developed,in the World Bank's Expenditure Budgeting Model (EBM).1/ However, due to data and time constraints it has not been possible to apply such formal methods in the present study.

6.4 Simpler, approximativemethods involving two criteria have been applied here. First, major projects or project classes have been ranked by their ratios of net present va:Lueto capital costs (NPV/CC),since the highest ranking projects under this measure would normally be included in the group which as a whole maximizes NPV within a limited capital budget. However, the ratio NPV/CC is not by itself a sufficient ranking indicator, since particularly in a high growth situationsuch as Guangdong Province, low benefits in the early years of a project may be compensatedby the rapid growth of benefits in the subsequentyears to such an extent that the project yields a high NPV/CC ratio, when nonethelesslow benefits in the initial years indicate that it should be postponed in order to maximize return on the limited investment

1/ Although originally developed as a planning tool for the highways sector, EBM is a general purpose tool applicable to similar constrained-optimiza- tion problems in any sector. See Chapter 8 of Thawat Watanatada, et al., The Highway Design and Maintenance StandardsModel, Vol. I, Description of the HDM-III Model (Johns Hopkins University Press, 1987). - 65 - budget. A second test has therefore also been applied. The second test requires that a project also meet the criterion that its opening year benefits exceed the social rate of discount (assumed to be 10 percent) of the initial investment (i.e. FYB > 10 percent).

Highway Investments

6.5 The role of the highway sector must expand in order to satisfy the burgeoning demand for faster, more flexible transport stemming from the rapid growth of exports and light industry, and associated rising incomes. Also (as shown in Chapter IV) upgrading of the highway system and introduction of the full array of modern vehicles (including very large trucks) could be expected to lower highway transport costs to about half their present levels, so that substantial new traffic would be generated or diverted from other modes to highways. Additional efforts to decongest the railways by diverting traffics more economically served by highways--particularly less-than-carload (LCL) freight and short-distance passengers and freight--will further increase high way demands.

6.6 Meeting these expanding demands will require extension of the network for both trunk highways and local roads as well as upgraded capacity in the existing network. In addition, the introduction in recent years of heavier trucks from abroad (although still well below the upper weight limits of modern vehicle technology employed in other countries) has given rise to greatly accelerated pavement deterioration, for bituminous pavements in Guangdong Province (as elsewhere in China) were not generally designed to withstand the heavier loadings of modern trucks. If timely action is taken, this deterioration can be arrested by pavement strengthening measures for only one-fourth to one-third the cost of the reconstruction which would otherwise be required; in many cases that will be the preferred solution, and provision for a major pavement strengthening program in Guangdong Province should definitely be made. However, in certain segments of the network where existing roads suffer not only from weak pavements but also from poor geometric standards (width, horizontal, and vertical alignment) and congestion due to heavy volumes of slow-moving local traffic (pedestrians, bicycles, and tractors) the preferred solution may be to construct a new road on an entirely new alignment to serve fast-moving, through traffic, and to relegate the existing road to local traffic needs. These and other strategic options could be comprehen- sively evaluated, in a more extensive future study, using tools such as the World Bank's Highway Design and Maintenance Standards Model (HDM-III) in order to establish highway program priorities on a more rigorous basis. While the present study has applied simpler methods, several important conclusions nonetheless have emerged.

6.7 A variety of potential highway improvement projects to meet future transport demand or solve existing bottlenecks were identified by the GPPC and the ICT Interim Report as shown in Table 49a, based on input from several sources. These projects were in some cases identified initially by local authorities or by the Guangzhou Department of Communications, and forwarded to the GPPC, which plays a coordinating role for investment projects in the Prov- ince. The Special Economic Zone offices (now part of the municipalities in Shenzhen, Zhuhai and Shantou) also identified transport projects in their zones. Strategic analysis at the province level identified the need for expressways linking Hong Kong to the Pearl River Delta, and linking the Delta - 66 - to the other Provincial centers of Zhangjiang and Shantou. Other components were jointly identified by the World Bank, ICT, and GPPC.

6.8 Economic benefit-cost analysis shows that many of the proposed high way improvements have a very high ERR and NPV/CC ratio in Guangdong Province (see Table 50). Based on 10 percent as the social rate of discount for dis- counting future benefits and costs, pavement improvements for relatively high traffic volumes rank highest, followed by a variety of capacity improvements and extensions of the road network. This preliminary economic benefit-cost analysis was carried out based on preliminary engineering estimates of construction costs (or where specific cost estimates were not available, general cost functions related to terrain, type and class of road), vehicle operating costs, road maintenance costs and traffic composition and volume.

6.9 These calculations also yield results in terms of economic traffic thresholds 2' for typical improvements as summarized in Table 6.1 below. It must be understood that these thresholds are approximate: they are based upon assumed typical values for t:he costs of the indicated improvements and will vary as actual costs vary. They constitute necessary but not sufficient conditions for economic justification. In particular it must be recognized that given the shortage of transportation today, coupled with current budgetary constraints, the economic opportunity costs of capital in the transportation sector in Guangdong may well exceed 30 percent per annum. While using such high discount rates to establish NPV/CC rankings is not an appropriate method for establishing priorities under budget constraints (see Watanatada et al., 1987), it does give a rough indication of the impact of those constraints. This can be seen by comparing Table 6.1 part A (calculated at 10 percent social rate of discount) with part B (30 percent discount reflecting more the opportunity cost of capital, i.e., the expected rate of return on capital from competing investment opportunities which must be forgone).

6.10 It is clear from the fact that there are roads in the Guangdong Province that can be classified in the top categories of this threshold matrix, that pavements are not now near an optimum configuration, and that a major effort is needed to develop a lower-user-cost and less-maintenance- intensive system.3/ In the short term, a priority ranking of existing road improvements can be established either by calculating NPV/CC as described

2/ Traffic level where vehicle operating cost savings and maintenance cost savings (if any) and induced traffic benefits equal 10 percent of investment costs for the year of opening (FYB > 10 percent). See the annex for an estimate of construction costs, road maintenance costs and vehicle operating costs by terrain type and class of road.

3/ In fact there is a major potential deterioration problem in the province as roads designed for much lighter vehicles are now subjected to traffic by modern larger trucks. This will be exacerbated as more imported trucks with heavier axle loads are used on the roads. Unless the pave- merits of major roads are strengthened (as is happening on some highways with cement pavements), or entirely new roads are constructed to serve the main traffic streams, thus freeing existing roads to serve predominantly lighter local traffics, the potential for a disaster in pavement management is present. * 67 -

Table 6.1: MINIMUM TRAFFIC THRESHOLDS (AADT) FOR TYPICAL ROAD IMPROVEMENTS

Terrain Type Project type From Flat-rolling Hilly Mountainous

A. At 10% (Social Rate of Discount)

Expressway /a Class II 9,700 7,100 3,200 Class I road Class II 7,600 6,600 9,200 Class II road Class III 5,200 5,800 3,900 Class III road Unpaved 470 630 720 Pavement overlay /b Class I 330 330 330 Pavement overlay lb Class II 240 240 240 Pavement overlay /b Class III 200 150 150

B. At 30% (Opportunity Cost of Capital)

Expressway /a Class II 10,600 8,500 n.a./c Class I road Class II 7,600 6,300 n.a. Class II road Class III 16,600 5,800 n.a. Class III road Unpaved 820 1,050 2,690 Pavement overlay /b Class I 640 640 640 Pavement overlay /b Class II 250 470 500 Pavement overlay /b Class III 300 300 300

/a Threshold in this case refers to the part of the traffic potentially divertible to expressway (e.g., 60 percent of motor vehicle traffic on present roads for Guangzhou-Zhangjiang). /b Assuming existing pavement in poor condition (other thresholds assume fair existing condition). Ic Due to capacity restriction-,mountain roads do not achieve positive NPV at 30 percent at values of parameters assumed in these analyses.

Note: Threshold calculations exclude safety benefits to cyclists and pedestrians that would lower the class I and class II threshold which incor- porates bicycle lanes.

above or by calculating the ratios of traffic levels to these thresholds. However, in the medium and longer term, the optimum relationship between road construction and maintenance (pavement management) demands a more comprehensive analysis of alternate strategies that can best be accomplished through a formal modeling process, such as application of HDM-III.

6.11 Further secondary road construction is also required in fast growing areas to provide access for new industries and residential or commercial areas and for commercial agriculture areas. The priority for this type of construction is best determined by local priorities and area planning for future land use with related traffic forecasts. Innovative fund raising for these improvements is already progressing through Special Economic Zones and special authorities to create toll roads. Nevertheless the Road Maintenance Tax - 68 - levels may need to increase to handle the future needs. The role of bicycles and tractors needs to be especially examined in this context as efficient means for local transport.

6.12 Economic priority between highway investments in the major transport corridors and investments in fast growing areas is an issue that still needs to be resolved, as these are interdependent investments. Also the strategic linking of the different regions of the province is an equity issue in addition to an economic efficiency issue, as the Shantou and Meixian areas have not benefitted from economic growth to the same extent as the rest of the province. Provincial decisionmakers could therefore raise the priority of these investments, especially if the potential has been identified for induced economic development, as long as they meet a minimum economic return criterion.

6.13 A further issue that was not resolved in the context of the present provincial-level study is the strategic value of improved interprovincial highway connections. The corridor analysis suggests that there is an increasing capacity constraint in the Northern Corridor which handles a substantial portion of interprovincial traffic, some of which would prefer the flexibility of road transport if good road transport conditions were created. Also the structure of the economy in adjacent regions could change as a result of improved access to Guangdong Province. However, this is a regional issue, and given the high return on other transport investments in Guangdong, it can be addressed in the future when other high priority issues have been resolved.

6.14 Total highway investment that is high priority for the Eighth Five- Year Plan (i.e., with optimum opening year of 1995 or before) could amount to about Y 8.3 billion as shown in Table 50. This includes approximately Y 2.7 billion for paving 5,000 kin of high traffic, broken-stone roads, and Y 1.2 billion for 4,000 km of high priority pavement overlays, and about Y 4.4 billion for main arteries shown by name in Table 50. Another Y 12 billion could be justified for the Ninth Five-Year Plan (1996-2000). Secondary road investments are not included in this total, but could amount to Y 1 billion over the next five years.

Railway Investments

6.15 The main railway investments under consideration by Guangdong Prov- ince (now that double-tracking of the Hunan-Guangzhou-Shenzhen lines is complete and the Yaogu-Maoming Local Railroad is under construction), are the construction of the Guangzhou-Meixian-Shantou Local Railroad, the electrification of the Hunan-Guangzhou-Shenzhen lines, the construction of more passenger stations, and the expansion of the freight yards in the present system (see Table 49b for details). The GMS rail line appears to be capable of generating substantial induced traffic, particularly in iron ore, as discussed in Chapter V. Consequently this line has a relatively high rate of return as shown in Table 50, although not as high as some road improvements, and given its potential contribution to more equal growth in the Province, it can be considered a relatively high social priority, particularly for the first two links between Huizhou and Meixian. Further economic evaluation is needed of practical links to the local economy for the remaining sections of the GMS Railway in order to maximize their economic return. - 69 -

6.16 The priority and timing of the electrification investments which would increase the capacity of the North and South Corridors depends on the prospects for reducing rail transport demand by shifting coal and other bulk freight to coastal shipping, and the development of parallel road and water transport systems. The faster the development of these parallel systems, the later this rail investment need be made. The optimum timing for this investment, therefore should be investigated in a combined analysis of the least- cost development of all these modes in the Corridor. In addition the shortage of electrical power in the province will require some analysis of the opportunity cost of taking power from other uses.

6.17 The freight yard improvements and passenger station investments are at too micro a level to be evaluated in this report. They require some simu- lation planning of rail operations (such as that being developed under the Fourth IBRD Railway Project in the Beijing-Shanghai Corridor) in order to determine the least-cost solutions, including alternate management rules, that would govern the optimum timing and location of these facilities.

6.18 Total railroad investments in Guangdong Province in the next five years will vary considerably, depending on whether or not the electrification projects are included. Without electrification Y 3 to 4 billion would be invested, including GMS, Yaogu-Maoming and Litang-Zhanjiang Railroads. Elec- trification of the Guangzhou-Beijing Line would require an estimated Y 326 million for the portion in Guangdong Province and far larger sums for the sections beyond Guangdong. Less expensive means of increasing capacity would have major benefits if they could be identified.

Seaports

6.19 Seaport development is a major ongoing area of investment, with the development of the SEZ ports and the enlargement of Huangpu port. This development will continue as exports and coastal movements of coal and other bulk commodities continue to grow; this is recognized in the number of port expansion projects foreseen by the GPPC as shown in Table 49d. The relative priority of these projects depends on the amount of congestion and ship waiting time in each port. The development of coordinated linear ports along the Zhujiang (Guangzhou/Huangpu and the Shenzhen ports of Chiwan and the future Mawan) and the other SEZ ports are a means of reducing concentration of freight traffic entering the province. Port management reforms may also help increase capacity with a minimum of investment.

6.20 The World Bank members of the study team suggest that two interrelated issues of great strategic importance for the future are (i) the integra- tion of the Hong Kong and Guangdong port systems and (ii) the selection of the future load center ports for both bulk goods and containers. The port of Hong Kong, one of the largest container handling ports in the world, is now reaching the limits of its capacity and future expansion depends on the availability of alternative sites. Several port expansion possibilities are being discussed in Hong Kong and Guangdong. The construction of the port of Yantian, the expansion of Hong Kong port and the possible construction of a new port for bulk cargoes (coal, ores, grain and oil) in the islands under the Zhuhai SEZ should all be coordinated in order to avoid duplication of capacity and to achieve the economic benefits of specialization. This will require a significant study effort in coordination with the ongoing long term Port and Airport Development Study (PADS) in Hong Kong.

6.21 There is also a question as to the extent to which they very large domestic movements (especialLy coal) should be concentrated in hub and spoke operations or through services. Domestic coal and oil shipments by coastal vessels could be focussed pr:imarily in one deep-water port in order to use larger vessels for the sea voyage and then transshipped to smaller feeder vessels to serve inland ports. The alternate strategy, particularly for coal, would be to introduce modern ocean-going barges which could traverse both the coastal seas and the inland rivers, thus avoiding the need for transshipment altogether. Further study is required to determine which of these alternative strategies would be most economic.

6.22 Total sea port investment needed in the next five years is substantial. A range of Y 2.5-3 billion was estimated for the ports listed in table 49e, dominated by Huangpu, Yantian and perhaps Shantou, although the high cost of dealing with difficult silting conditions there indicate the need for a detailed review. On a risk analysis basis port expansion may be the best type of project, since waiting time costs have major effects on total shipping cost, but the cost per ton of port capacity is relatively small. Conse- quently, port projects have a higher ranking when the expected value of NPV with traffic variation is tak;en into account. The indirect benefits of port projects, especially coal ports, are also high in the present circumstances in Guangdong Province.4/

Inland Water Investments

6.23 Inland water transport investments include port development, channel dredging, and fleet purchase. River port development is now in the hands of local authorities on a self-financed basis, and each port has an expansion plan (see Table 49c). River ports are reputed to have deteriorated in the past as some traffic shifted to other modes (e.g., road) along the tributaries of the Zhujiang. However, in the Pearl River Delta, there are several new ports, and there appears to be joint venture (Hong Kong-Guangdong Province) capital available for river vessels, including container barges and hydrofoil passenger services linking the Delta to Hong Kong. These investments should be encouraged as they seem to fit the specific needs of Delta shippers and passengers and create efficient multimode transfer points. The greater specialization of inland waterways in the transport of bulk commodities and construction materials, rather than general cargo, is also a trend that needs specific recognition in future river port development outside the Pearl River Delta. Care must be taken in, determining the need for port development and related benefits, to separate oiat the growth cargo from the declining cargo types.

6.24 Channel dredging has been identified as a potential investment in several river stretches (see Table 49d), in order to increase the size of vessels using the stretch or to extend the navigation season. In the case of the Xijiang, deepening to allow up to 1,000 dwt barges is in progress. The

4/ This conclusion does not necessarily hold for new port construction with major infrastructure costs in addition to berth construction costs. - 71 - main Pearl River channel to Huangpu Port is also proposed for deepening to allow fully laden 35,000 dwt ships into the port on a regular basis. In other cases (e.g., East River) the season has been shortened by up river dams with water releases uncoordinatedwith transportationneeds. An analysis of the economic advantage of channel dredging (e.g., savings of shipping costs), and relatedmaintenance dredging, is necessary to establish the relative priority of these projects, and this has not yet been carried out. In addition the possibilityof multipurposedam management, as practiced in other countries, may be able to create improvednavigation conditionswithout new investment. Further analysis of this type should be used to establish the relative priority of these investments,5/and the size of the investmentsneeded. Total inland river investments,however, for the next five years should be less than Y 0.5 billion.

Airport Investments

6.25 Six airport projects have been identified in the Province,with one new airport (Shenzhen)and several expansions. It is clear from the traffic forecaststhat long distance air travel and possibly medium distance air travel should grow rapidly. In particular the results of the analysis of the role of the modes in Chapter IV showed that there should be some significant shift of longer distance rail passengers to air both to permit more efficient use of the rail system and to facilitate economic interactionand market inte- gration in China. In turn this will allow larger aircraft and lower cost air travel. Consequentlyairport expansion for passenger travel will have a high prioritywhenever congestionbecomes evident. Air freight will also grow as an adjunct to passenger travel.

6.26 The World Bank members of the study team suggest that the main strategic considerationfor airport developmentin the Province is the future integrationof Hong Kong airports into the provincial system. In particular, some effort is needed to coordinate the planning of the new Shenzhen airport with the developmentof new Hong Kong airports that is now being planned in the PADS program.

6.27 Total airport investmentin the next 5 years could amount to Y 0.5 to 1 billion, of which half is destined for the new Shenzhen airport. High benefitswill accrue to means of expanding capacity without new runway construction.

Multimodal and Intermodal Investments

6.28 Integrated intermodalservices are still in their infancy in Guangdongprovince, but there is already a recognitionof their importance in the export industries,and the growth of light industries is likely to give rise to demand for domestic integrated services in the future. Some organizational investmentis needed to facilitatethe use of single integrated bills of lading for through freight using more than one mode. This may require the developmentof a coordinatedcommunications system; the Ministry of Railways has begun some efforts in this direction and the Guangzhou South Station has

5/ A feasibilitystudy of the Huangpu channel deepening is being undertaken under the ongoing Huangpu Port Project financed by the World Bank. - 72 - developeda system of substationsin cities away from the rail line to coordinate freight shipments. Similar experimentssuch as the multimodal service of the Jiangmen Bureau of Commlnications,and individual freight forwarding companies and SINOTRANShave aLso been made, but there is a long way to go to achieve the ability to ship anywhere in the country with one bill of lading.

6.29 The encouragementof freight general cargo unitization in standard containers,through pallets, or other more recent cargo handling innovations is another aspect of intermodalmanagement which could benefit the province and the country as a whole. China has been slow to introduce cargo unitization compared to other countries and the present extremely low levels of container penetration (6 percent of containerizablecargoes on the waterways and much less in the other modes) is an indicator of savings in door-to-door costs that are not now being realized by shippers in China, and is also a measure of unnecessarybarrier to integrationof China's exportlimportindustries into the world markets. Although partly due to institutionalfactors,6/ it is also partly due to physical deficienciesin infrastructureand equipment, particularly limitationin raiLways and highways connecting ports with their hinterlands. Railways lack the necessary rolling stock and station handling equipment;tunnel and bridge clearancesare also a problem on particular routes. Movement by highways is restrictedmainly to primary routes where road width and alignmentpermit access to the necessarily large vehicles. Design of future infrastructureand services must make provision for a sub- stantiallygreater role for cargo unitizationin the future.

Total Transport Investment

6.30 The total investment in high priority needs for the next five years describedabove, amounts to Y 19-23 billion in 1988 Yuan, composed by mode as shown in Table 6.2. Clearly the majority of investment is needed for road construction,although rail and port needs are also important. The proportion of investmentswould change substantiallyif rail electrificationis included, and this places major import:anceon consideringlower-cost alternativesfor increasingsystem capacity,both on rail and other modes, for interprovincial traffic.

InvestmentFinancing

6.31 At the past levels of transport investment funding (Y 1.2 to 1.4 billion per year according to Table 30) less than 40 percent of high priority needs will be met over the next five years. Part of the additional resource requirementshave already been filled by resorting to toll roads with Hong Kong and other financingsources for expressway construction,which account for an importantpart (Y 3-4 billion) of the highway funding requirements. Private financing from Singaporewill also finance port development at Mawan (aboutY 400 million). This still leaves a financing shortfall of Y 7-12 billion.

6.32 Additional taxes will be needed in Guangdong Province to help finance the priority road program. The present major sources of revenue for

6/ See Chapter II, para. 2.37 for a broader discussion of containerization issues. - 73 -

Table 6.2: PROSPECTIVETRANSPORT INVESTMENT PROGRAM

billion Yuan z

Road /a 18 - 21 70 - 75 Rail /b 3 - 4 12 - 16 Inland Water less than 0.5 less than 3 Seaports 2.5 - 3 8 - 10 Airports 0.5 - 1 1- 4 Intermodal less than 0.5 less than 3

Total 24 - 30 100

/a Not including local roads. /b Not including electrificationof the Guangzhou-Beijing line. highways are the road maintenance fee and the motor vehicle purchase surcharge which raise approximatelyY 300 million per year. However only 30 percent of these funds are available for new construction,amounting to approximately Y 500 million over the next five years or 10 percent of the nontoll road needs. These revenues are increasingwith the vehicle fleet, but will not increase funding to the levels needed for financing the above road program unless the basic tax rates are increased.

6.33 Local railway and port project funding, on the other hand, can be substantiallyself-financing, with private sector and Bank loans supported by user charges. The recent increase in rail tariffs will provide a source of funds for investment,and the rates to be charged by the new Guangdong local railways,as approved by the central government,are designed to recover all costs and pay back capital over 10 years. It is likely that external financing can be raised if these organizationsare set up on a financiallyautono- mous basis. Similarly, seaport and inland port expansion are being carried out on a cost recovery basis with port charges increased to achieve a reason- able payback period. Singapore financing of Mawan Port and the World Bank loan for Huangpu/Guangzhouimprovements are cases in point. These loans will increase the overall funds available for port expansion in the next five years by about Y 1 billion. - 74 -

VII. CONCLUSIONSAND RECOMMENDATIONS

7.1 Several importantand interrelatedproblems confront Guangdong province transportplanners today. The rapid economic growth experienced by the province since 1978 is expected to be slowed and possibly brought to a halt in some locationsby rising congestionon the transport system and associated shortagesof energy and key materials. Investmentin transport infrastructure has not kept pace with inveistmentin industry and commerce in the last five years, despite some substantialinvestments in rail, highway and port improvements. Flows in all corridorshave suffered,but especially North-South flows and secondaryor primary road traffic in fast-growingregions.

7.2 At the same time lpricesfor certain transport services well below short-runor even long-run incrementalsocial costs have served to generate noneconomicexcess demands which clog the transport arteries, and to distort the choice of modes, thus resulting in less than optimal use of the limited availablefacilities and services. The ability of the transport sector to cope with further economic growth in Guangdong will require well thought-out strategieson the part of GPPC and other provincial operating departments,as well as a major effort (includingalso central government planning and price authorities)to coordinate transportinvestment and tariff policy. Without such coordinationexisting assets will not be used in the most efficient manner and badly needed new investmentswill not be placed in the locations and modes that have the highest social priorities.

7.3 The major revisionsof tariffs for freight services in March 1990 constitutea significantimprovement in this respect. The gap between freight tariffs and society's long-run incrementalcosts has been reduced for all the commoditiesexamined here, although a large gap still remains for some, particularlyfor the importantcommodity of coal, as tariff increases were not sufficientto close the large gap that previouslyexisted. Moreover, an additional premium may be needed in the short run to facilitate allocation of limited transport capacitiesto the highest economic uses until increases in transportcapacity over the long run establish an equilibriumwith demand.

7.4 The increases in passenger tariffs of September 1989 appear to place a high premium above long-run costs, particularlyfor the railways, and it remains to be seen whether this will establish a short-run equilibrium;over the long run, economic efficiencycriteria suggest that rail and bus passenger tariffs should be lower. Aviation fares warrant more detailed study, and some restructuringmay be desirable to align them more closely with long-run incremental costs to society, plus a premium for the short run on routes where capacity constraintscannot be quickly overcome.

7.5 Although transportplanning in Guangdong Province by the GPPC in coordinationwith the operating departmentsand authoritiesmust continue to further define the specific priorities and strategiesthat will be most economically efficient,certain general directions and recommendationscan be identifiedat this stage in the process. These concern (i) the role of the modes, (ii) investmentpriorities, and (iii) the planning process. 75 -

Economic Role of the TransportModes

7.6 Several conclusionswere drawn from the analysis in Chapter IV despite possible uncertaintiesin the cost data. These are:

(a) Given the changing structure of the Guangdong economy, highways would be expected to play an increasinglylarge role in the future even at present road transport costs, because the fastest growing segments of the Guangdong economy are industrieswhich are typically prepared to pay premium prices for the speed and flexibility of road transport. The magnitude of the potential reduction in highway transportcosts would further expand its scope beyond the presently limited usages and extremely short haul distances. Highways could provide more economic services for short to medium distance passenger transportand small lot size or door-to-doorfreight up to 1,000 km haul distance,l/thus relieving railways congestion and improvingoverall transport service quality. Improved interprovincial road haulage is a possible future priority once the intraprovincial road links are upgraded;

(b) The railway should concentrateon its most economic transport roles, which include medium distance freight and passengers and high volume bulk commodities,and heavy freight at all distances;

(c) Coastal shipping should coordinatewith the railway for transport of coal from the north to Guangdong Province; although recent cost increases for ships appear to have eroded the economic comparative advantageof the rail-cum-coastalrouting, the costs are not very differentfrom the all-rail option and, at least over the short run, diversionof this traffic to the sea is needed to relieve congestion on the railwaymain-lines;

(d) Coastal shipping should shift from heavy freight and general cargo to coal and other bulk commodities,except in locations where the sea distance is shorter than rail, where long distance coastal shipping is still competitive;and

(e) Air transport should expand its long distance and medium distance services and price them in accordancewith incrementalcosts to society. These services are expected to grow rapidly with economic growth and increasingvalue of time for business travelers in Guangdong Province and the rest of China. Aviation can make an enormous contributionto the economic efficiency of Chinese business and public administration,as well as continuing to earn important foreign exchange from the tourism industry.

1/ In the view of the World Bank members of the study team, based on the assumption that a modern highway system and competitivemarket conditions are developed. - 76 -

InvestmentPriorities

7.7 Total transport investmentin high priority projects should reach Y 24-30 billion in Guangdong Province over the next five years in order to approach an economicallyefficient transport system. The economic return on these projects would averagewell over 20 percent per annum if they were all implementedimmediately, and the returns are growing rapidly each year as congestion increases,and shortagesin capacity remain. Some classes of projects have rates of return over 100 percent and several over 50 percent. These should be given a very high priority.

7.8 Based on economic efficiency analysis and long run social costs, the investmentbalance between modes would shift more in favor of roads, which would receive 60-70 percent of total transport investment on the provincial level in the near future. Paving of macadam roads with high traffic levels, pavement overlays and selected expresswaysand other highway improvementseco- nomicallywarrant immediate implementation. These should include several Class I and II arteries and the Guangzhou-Shenzhenexpressway. Building of the first phase of expresswaysand special roads from Guangzhou to Shantou and Zhanjiangis also economicallyfeasible at this time.

7.9 GMS railway investment to tie the Meixian area into the rest of the province and encouragemining and cement production has an economic return over 30 percent, and also economicallywarrants immediate implementation. Railway electrificationprojects should be deferred while less expensive means to increasecapacity are expLored. The priority and timing of the electrification project investmentswhich would increase the capacity of the North and South Corridors,depend on the possibilitiesfor reducing rail transport demand by shifting coal and other bulk freight to coastal shipping and shifting passengersto road and air, which in turn depend on the development of parallel water, air and road and transport systems. The optimum timing for these investments,therefore depends on a combined analysis of the least-cost developmentof all modes in the Corridor. The expansion of rail container handling facilitiesand integrated intermodal services should also be closely evaluatedas this is a near-term priority for the growing internationaland interprovincialtraffic.

7.10 Seaport developmenitis a major ongoing area of investment,with the developmentof the SEZ ports and the enlargementof Huangpu port. Projects to expand existing seaportswith additional berths should be implementedas soon as waiting times start growing over one day on average, since these projects have major benefits and relatively low risk in terms of transport costs. Port management improvementsto gain capacity without major capital costs would have even greater rates of return. Also, the developmentof coordinated linear ports along the Zhuji.ng and the SEZ ports may be a cost-effective means of reducing port congestion due to the concentrationof freight traffic entering the province. Finally, the developmentof major regional load centers ports for dry bulks and liquid bulks, as well as containers, and associated feeder services,is a high priority that requires serious study in coordinationwith Hong Kong.

7.11 The conclusionsreached concerning investment in the inland water transportsector are particuLarlytentative due to lack of actual cost-benefit data concerningproposed investments. However, it is clear that investment in - 77 -

the Pearl River Delta should continue to expand to meet the demand. Private and local government investmentsshould be encouraged to meet the specific needs of Delta shippers and passengers and create efficient multimode transfer points. The priority of inland river channel dredging is not clear but may be feasible in the context of multipurposedam management in some cases, and in the context of long hauls which do not compete with a railroad.

7.12 The air transport sector has not been examined in depth in this report, but the following observationscan be ventured: (a) a major expansion of air services,including improvementsin airports and air navigation systems for passenger travel, will have a high economic priority for the service of long distance business travelers, tourists and senior government officials; not only would this relieve railways' congestion it would greatly facilitate economic interactionand integrationof markets within China and overseas; (b) an important strategicconsideration for airport development in the Prov- ince is the future integrationof Hong Kong airports into the provincial system. Particular effort is needed to integrate the planning of the new Shenzhen airportwith the developmentof Hong Kong airports, which should be facilitatedby the recent publicationof the Hong Kong Port and Airport Devel- opment Study (PADS);and (c) expansion of air freight services, perhaps continuing in the early stages as an adjunct to passenger travel, would appear to be warranted.

7.13 Investmentsin integratedintermodal services are needed to ensure that transfer of cargo and passengers between modes takes place efficiently. Intermodalfacilities and services should receive far more attention in the design of new or expanded ports and rail stations. This is particularly importantin Guangdongand other coastal provinces where foreign trade is significant,since the competitivenessof Chinese exports in foreign markets will be affected by the speed and quality of transport services. But it is also importantin the domestic markets as well. An experiment to test the feasibilityof through pallets to facilitate intermodal transfers of general cargo in the Hainan Island-GuangzhouCorridor has been proposed, and the results of this pilot service should be carefully evaluated as to its wider applicability.

7.14 In general, projects linking all areas of Guangdong to Hong Kong as the growth pole for the province would have benefits in terms of broadening the growth pattern and reducing the concentrationof light industry growth in the Pearl River Delta, although further links within the Delta will help sus- tain present growth rates. Further secondary road construction in fast- growing areas is also required to provide access to new industries and residential or commercial areas. The priority for this type of project is best determined at the local governmentlevel.

Planning Process

7.15 Although the central government still retains a major voice in large capital projects, the increasinglydecentralized planning process is moving rapidly in GuangdongProvince to reinforce the role of local authorities and SEZs or municipalities,especially with regard to roads and ports. At the same time strategicplanning for railways and expresswaysor arterial roads has devolved increasinglyto the provincial level. These trends are intended to allow faster decisions that are more adapted to local needs, but they also - 78 - require stronger coordination in order to avoid misinvestment in some areas where the national or provincial viewpoint would yield a different allocation of resources than a combination of local decisions. This is clearly the case with respect to new seaport development which requires both provincial coordination with Hong Kong and provincial-level decisions concerning specialized load centers.

7.16 The local authorities have been especially dynamic in conceiving ideas for transport system development, and where there is a potential problem of competing investments among port proposals or between road and rail infrastructure, the capability for evaluating these multiple investments and providing provincially coordinated data for planning at the local level is now needed in the GPPC. The local authorities themselves need enhanced capabilities to carry out project analysis and design.

7.17 A specific analysis framework at the provincial level is needed for all the modes so that critical data for planning decisions are identified in a comprehensive, multimodal context rather than strictly within each mode, as is now the case. This framework should be provided by the GPPC to the modal and local authorities and include (a) data on transport demands that relates to future prices of modal services, (b) expected changes in demand levels, (c) the specific potential induced economic growth effects of transport decisions, and (d) least-transport-cost analyses, in order to enable the authorities and GPPC to arrive at a net cost or benefit to society of each project or strategy.

7.18 Within this comprehensive transportation planning framework each modal planning unit should have the appropriate tools for evaluating projects. In particular, the following transport planning areas need reinforcement:

(a) traffic surveying by origin and destination (b) traffic forecasting (c) benefit-cost ana]ysis (d) network analysis (e) project identification (f) priority planning (g) infrastructure management (h) data base coordination for planning and management.

By expanding these analytic capabilities, more emphasis can be placed on improving the actual transportation services, and less on infrastructure construction by itself.

7.19 In order to implement a comprehensive approach at the provincial level, GPPC should also develop a set of transport strategies that can be articulated clearly. This will allow the local decisionmakers at different levels to support each provincial strategy with local-level decisions, and lead to actions at all levels that are more consistent with the goals and objectives of the GPPC. Examples of such strategies are:

(a) the shifting of bulk coal shipments to coastal ship from rail;

(b) the connection of growth centers by high quality highways as they become economically viable; - 79 -

(d) the developmentof a system of integrated intermodal transport in the Pearl River Delta to promote export industries.

With a careful formulationof strategies and policies consistent with long run social costs GPPC could guide developmentof the necessary transport infra- structurebest suited to support for the continuing development of Guangdong Province. Table 1: GUANGDONG PROVINCE POPULATION AND LAND AREA BY CORRIDOR

Total Urban Total Cultivated Percent of Population Percent Population Percent/a Land Area Land Area Cultivated (ha) (ha) Area

CORRIDOR

Pearl River Delta 17,391,328 28.08 6,648,158 38.23 1,948,650 430,766 15.71

Guangzhou 8,089,963 3.359,183 400,050 97,052 East Bank 1,727,625 1,487,475 522,150 21,940 West Bank 7,573,740 1,801,500 1,026,450 312,774

East Guangdong 25,963,494 43.42 2,938,730 11.32 5,629,270 1,135,081 41.30 1

Coastal Route 16,741,458 2,001,336 1,656,220 263,948 Meixian Route 9,222,036 937,394 3,973,050 871,133

West Guangdong 9,483,784 15.86 1,590,658 16.76 5,921,100 935,560 34.04

Maoming Route 3,420,871 1,396,887 3,691,900 689,213 Yanan Route 6,062,913 193,771 2,229,200 246,347

North Guangdong 6,961,744 11.64 371,955 5.34 3,373,500 246,140 8.96

Total /b 59,800,350 100.00 11,549,501 100.00 16,872,520 2,748,547 100.00

/a Percent of Urban Population in each Corridor. /b Excluding population and land area of Hainan province and autonomous states.

Source: Guangdong Yearbook, 1987. - 81 -

Table 2: LABOR FORCE EMPLOYED BY SECTOR ('000)

Guangdong National Total X Total X

Farm, Forestry, Fish and Water Cons. 18,247 58 313,110 61

Industry 4,942 16 89,800 17

Construction 1,694 5 22,710 4

Transportation, Port & Telecom. 953 3 13,050 3

Commerce, Catering, Trade, Supply & Marketing 2,074 7 24,850 5

Education, Art, Culture, Radio and TV 684 2 13,240 3

Government parties and organizations 581 2 8,730 2

Other 2,229 7 27,330 5

Total 31,404 100 512,820 100

Source: Statistical Yearbook of China, 1987. -82 -

Table 3: P'RODUCTION OF SELECTED MAJOR COMMODITIES IN GUANGDONG PROVINCE (million tons)

Annual Annual growth growth 1978 1985 1986 1987 1988 rate of rate of 1978-85 1985-88

Coal 10.47 8.10 8.57 8.73 9.28 -3.6 4.6 Coke n.a. 0.45 0.46 0.46 n.a. n.a. n.a. Crude Oil a/ - 0.10 0.26 0.45 0.39 n.a. 57.4 Pig iron, steel and rolled steel 0.85* 2.10 2.34 2.67 2.80 13.8 10.1 Cement 3.70 11.20 12.80 14.76 17.46 17.1 16.0 Timber (0.8T/M3) 1.80 3.46 2.80 2.32 n.a. 9.8 n.a. Chemical fertilizer n.a. 0.60 0.64 0.72 n.a. n.a. n.a. Tires n.a. 0.84 1.05 n.a. n.a. n.a. n.a. Sulfuric acid n.a. 0.65 0.73 n.a. n.a. n.a. n.a.

Sugar 0.96 1.44 1.93 1.56 1.23 6.0 -5.1 Paper/paper boards 0.28 0.53 0.58 0.70 0.81 9.5 15.2 Salt n.a. 0.58 0.65 0.82 n.a. n.a. n.a. Beverage n.a. 0.36 0.48 n.a. n.a. n.a. n.a.

Grain

Note: Includes Hainan Island data.

Sources: Statistical Year Book of China, 1986, 1987. Statistical Year Blook of Guangdong, 1987, 1989. Guangdong Provincial planning Commission. - 83 -

Table 4: INFLOW AND OUTFLOW OF COMMODITIES IN 1987 FOR GUANGDONG PROVINCE (million tons)

Inflow Outflow Commodity Amount % Amount Z

Coal 13.19 14.1 3.32 4.9

Metal. Ores 2.66 2.8 3.87 5.8

Nonmetal Ores and Sand 2.60 2.8 1.61 2.4

Grain 3.98 4.3 1.90 2.8

Cement 2.60 2.8 0.48 0.7

Iron and Steel 2.33 2.5 2.97 4.4

Crude Oil 9.07 9.7 0.32 0.5

Petroleum Products 7.76 8.3 2.92 4.4

Fertilizer 1.68 1.8 3.51 5.2

Timber 0.40 0.4 1.84 2.7

Others /a 47.27 50.5 44.36 66.1

Total 93.54 100.0 67.10 100.0

la Other category includes 20.74 million tons of outflow and 19.85 million tons of inflow traffic by road and river for which the commodity breakdown is unknown.

Note: Estimate based on 1987 total tonnage by mode and 1985 detailed break down by commodity.

Source: Study estimates. - 84 -

Table 5: GUANGDONG PROVINCE FOREIGN TRADE WITH HONG KONG

Imports from Growth Exports to Growth Year Hong Kong rate Hong Kong rate ('000 tons) (Z) ('000 tons) (Z)

1980 423 3,649 -

1981 723 70.9 4,188 14.8

1982 982 35.8 4,633 10.6

1983 1,703 73.4 5,660 22.2

1984 2,397 40.8 6,237 10.2

1985 3,486 45.4 7,597 21.8

1986 3,988 14.4 9,840 29.5

1987 5,406 35.6 10,792 9.7

Note: These figures excludle any trade with Guangdong by ocean, but include river traffic.

Source: Study on Rail Freight Development, Technical Paper No. 1, Mott, Hay and Anderson/Wilbur Smith Associates for the Hong Kong Government Secretariat Transport Branch, September. 5, 1988. - 85 -

Table 6: HONG KONG TRADE WITH GUANGDONG BY MODE AND BY TYPE FOR 1987

------Mode ------('000 Tons) OUTBOUND Rail Road River Total I Share

Commodity group

Textiles, Clothing & Fibers 499.6 740.0 1,239.6 11.4% Food & Beverages 484.5 456.0 940.5 8.7% Metal Products 256.1 291.0 547.1 5.1% Chemicals 99.2 99.2 0.9% Petroleum Products 92.4 75.0 167.4 1.5% Paper Products 80.0 73.0 153.0 1.4% Chemicals & Pharmaculets 35.1 35.1 0.3% Mineral Ores 26.4 26.4 0.2% Machinery & Equipment 27.5 399.0 426.5 3.9% Timber & Wood Products 26.8 36.0 62.8 0.6% Household Appliances 12.8 12.8 0.1% Live Animals 195.8 195.8 1.8% Fertilizers 2.4 2.4 0.0% Sand & Gravel 4,628.8 4,628.8 42.7% Miscellaneous 239.2 897.0 1.157.2 2.293.4 21.2%

Total : 2,077.8 2,967.0 5,786.0 10,830.8 100% Modal Shares : 19.18% 27.39% 53.42%

INBOUND

Textiles, Clothing & Fibers 87.8 596.0 683.8 12.7% Food & Beverages 17.7 38.0 55.7 1.0% Metal Products 36.7 367.0 403.7 7.5% Chemicals 22.3 22.3 0.4% Petroleum Products 23.1 154.0 177.1 3.3% Paper Products 14.5 209.0 223.5 4.1% Mineral Construction Materials 7.8 7.8 0.1% Mineral Ores 1.1 1.1 0.02% Machinery & Equipment 33.6 381.0 414.6 7.7% Timber & Wood Products 9.2 66.0 75.2 1.4% Household Appliances 12.5 12.5 0.2% Miscellaneous 108.8 629.0 2.581.0 3.318.8 61.5%

Total : 375.1 2,440.0 2,581.0 5,396.1 100% Modal Shares : 6.95% 45.22% 47.83%

Source: Technical Paper No. 1, Study on Rail Freight Development, Hong Kong Government Secretariat Transport Branch, 5/9/88 - 86 -

Table 7: COUNTIES AND CITIES WITH HIGH GROWTHPOTENTIAL IN GUANGDONGPROVINCE

------Growth Indicators ------Recent Access to Special growth Hong Kong Economic Resource Names Rate (hours) Zone Potential Bao'an 39.25% 02 3 Shenzhen 31.85% 02 1 Dongguan 34.64% 02 to 4 3 Huizhou 45.04% 04 to 06 4 Goasming 46.22% 04 to 8 3 Shansui 36.69% 04 to 8 3 Xinhui 29.87% 04 to 8 3 Zhongshan 29.38% 04 to 8 3 Heshan 21.78% 04 to 8 3 Doumen 18.84% 04 to 8 3 Fengyu (Panpu) 12.81% 04 to 8 3 Nanhai 10.54% 04 to 8 3 Zhuhai 10.20% 04 to 8 1 Shunde 9.33% 04 to 8 3 Fushan 8.23% 04 to 8 3 Jiangmen 8.19% 04 to 8 3 Zhenchang 14.45% 06 to 8 4 Guangzhou 3.92% 06*to 8 2 Hua xian -9.70% 06 to 8 4 Lianping 6.96% 16 to 24 4 H Enping 33.37% 24 to 32 4 Guanging 22.93% 24 to 32 4 Shihui 21.75% 24 to 32 4 Gaouao 20.85% 24 to 32 4 Shantou 19.16% 24 to 32 1 Biqing 18.70% 24 to 32 4 Nan'ao 18.13% 24 to 32 4 Shaoguan 12.81% 24 to 32 4 H Meixian 11.22% 24 to 32 4 H Dapu 7.98% 24 to 32 4 H Wuhua 4.85% 24 to 32 4 H Xinging 1.38% 24 to 32 4 H Fengshun -0.53% 24 to 32 4 H Longchuan -6.67% 24 to 32 4 H Xinxing 26.51% 32 to 48 4 Liajiang 25.83% 32 to 48 4 Yangjiang 25.15% 32 to 48 4 Zhanjiang 23.53% 32 to 48 2 Luoding 22.43% 32 to 48 4 Xinyi 21.64% 32 to 48 4 Deging 21.38% 32 to 48 4 Fengkai 20.73% 32 to 48 4 Yunan 20.72% 32 to 48 4 Wuchuan 20.63% 32 to 48 4 Dianbai 19.51% 32 to 48 4 Huazhou 19.33% 32 to 48 4 Huaiji 19.27% 32 to 48 4 Gaozhou 16.34% 32 to 48 4 H MaominK 15.90% 32 to 48 4 H Notes: High Growth areas selected as having good access to Hong Kong, or high past growth (>18%), or having resourcepotential, or Special Economic Status. SpecialEconomic Status: 1 - Special EconomicZones. 2 - Economic & TechnologicalDevelopment Zone. 3 - EconomicOpen Zone. 4 - No special status ResourcePotential H - High Source:Guangdong Yearbook, 1987, GPPC and interview Table 8: CAPITAL INVESTMENT BY SECTOR (Y million)

6FYP (1981-85) 1986 1987 1988 Total (1981-88) Current 1980 Current 1980 Current 1980 Current 1980 Current 1980 Prices Prices Prices Prices Prices Prices Prices Prices Prices Prices

Total 14,350 10,920 6,344 3,433 6,950 5,194 9,077 5,960 36,721 25,507

Industry 7,407 5,637 4,467 2,417 5,019 3,751 6,001 3,940 22,894 15,745 Metallurgy 360 274 87 47 87 65 151 99 685 485 Electric Power 1,541 1,173 2,178 1,178 2,508 1,874 1,970 1,293 8,197 5,518 Coal 823 626 42 23 38 28 31 20 934 697 Petroleum 599 456 117 63 318 238 650 427 1,684 1,184 Chemical 594 452 187 101 265 198 967 635 2,013 1,386 Machinery 815 620 434 235 362 271 738 485 2,349 1,611 Construction Materials 542 412 409 221 444 332 517 339 1,912 1,304 1 Forest Industry 89 68 58 31 64 48 116 76 327 223 x Food 1,213 923 346 187 369 276 246 162 2,174 1,548 Textile 639 486 386 209 294 220 285 187 1,614 1,002 Paper 75 57 23 12 31 23 21 14 150 106

Construction and Geology 318 242 153 83 160 120 12 8 643 453

Agriculture, Forest, Water Resources and Weather 2,324 1,768 499 270 392 293 623 409 3,838 2,740

Transport and Telecom- munications 4,301 3,273 1,225 663 1,382 1,033 2,441 1,603 9,349 6,572 Z Transport Telecom. 30.0 30.0 19.3 19.3 19.9 19.9 26.9 26.9 25.5 25.5

Notes: (1) Including Hainan Island which represented 1-2 percent of the total. (2) 1980 prices calculated using average GVAIO deflator for China.

Sources: Guangdong Provincial Planning Commission; Guangdong Statistical Yearbook, 1989. - 88 -

Table 9: GROWTH INDICATORS FOR GUANGOONG PROVINCE BY SECTOR BY CORRIDOR

-- GVAIO Growth ------AgricuLture ------ALL Industry ------Light Industry

Pessi- Base Opti- Pessi- Base Opti- Pessi- Base Opti- Pessi- Base Opti- mistic Case mistic mistic Case mistic mistic Case mistic mistic Case mistic

ProvinceTotaL 6.6% 9.6% 15.3% 3.0% 3.0% 3.0% 7.3% 10.7% 16.9% 7.2% 12.5% 19.7%

Pearl River Delta 6.8% 9.9% 15.8% 3.0% 3.0% 3.0% 7.0% 10.3% 16.4% 6.7% 11.8% 18.8%

Guangzhou 3.1% 5.1% 9.5% 3.0% 3.0% 3.0% 3.1% 5.2% 9.7% -6.2% 2.2% 8.4% East Bank 10.3% 14.1% 20.7% 3.0% 3.0% 3.0% 11.0% 14.9% 21.7% 11.7% 16.1% 23.2% West Bank 7.9% 11.4% 17.1% 3.0% 3.0% 3.0% 8.4% 12.1% 18.6% 9.0% 1..0% 21.3%

East Corridor 5.1% 7.6% 12.6% 3.0% 3.0% 3.0% 6.1% 9.3% 15.3% 5.3% 10.0% 16.7%

Coastalsubcorridor 5.9% 8.7% 14.0% 3.0% 3.0% 3.0% 7.0% 10.3% 16.4% 6.7% 11.3% 18.0% Meixian subcorridor 3.2% 5.0% 8.9% 3.0% 3.0% 3.0% 3.3% 6.3% 11.9% 0.0% 5.7% 12.4%

West Corridor 7.6% 10.7% 16.6% 3.0% 3.0% 3.0% 9.5% 13.3% 20.0% 11.4% 17.4% 25.2%

Maomnongsubcorridor 7.5% 10.6% 16.4% 3.0% 3.0% 3.0% 9.1% 12.8% 19.4% 11.0% 17.4% 25.3% Yunan subcorridor 7.9% 11.1% 17.0% 3.0% 3.0% 3.0% 10.6% 14.7% 21.6% 12.2% 17.5% 25.1%

North Corridor 4.8% 7.1% 12.0% 3.0% 3.0% 3.0% 5.6% 8.7% 14.6% 2.0% 10.1% 17.9%

Source: Annex Tables 2.1, 2.2 and 2.3 Table 10: COMPARISION OF CORRIDOR GROWTH FOR THREE TRANSPORT SYSTEMS - BASE CASE FORECAST

Without With With induced growth Hong Kong Expressway Shantou Expressway Growth Growth Growth 1986 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

CORRIDOR

Pearl River Delta 39,391 67,744 137,857 9.4Z 67,744 147,507 9.9% 67,744 133,548 9.1Z

Guangzhou 16,746 20,349 29,257 4.1Z 20,349 33,643 5.1Z 20,349 30,984 4.5Z East bank 6,425 16,693 42,086 14.4Z 16,693 40,622 14.1Z 16,693 33,311 12.5% West bank 16,220 30,702 66,513 10.6Z 30,702 73,242 11.4% 30,702 69,254 10.9Z

35,416 8.2% 18,587 32,678 7.6% 18,587 48,498 10.6% East Guandong 11,782 18,587 0:0

Coastal route 7,700 13,200 26,801 9.3Z 13,200 24,633 8.7% 13,200 34,471 11.3% Meixian route 4,081 5,387 8,615 5.5% 5,387 8,045 5.0Z 5,387 14,028 9.2Z

West Guangdong 15,789 31,876 71,657 11.4Z 31,876 65,642 10.7% 31,876 64,047 10.5%

Maoming route 11,279 22,459 50,106 11.2% 22,459 45,989 10.6% 22,459 44,926 10.4Z Yunan route 4,510 9,417 21,551 11.8-Z 9,417 19,653 11.1% 9,417 19,121 10.9%

North Guangdong 4,810 7,323 13,538 7.7Z 7,323 12,641 7.1% 7,323 12,375 7.0%

TOTAL 71,772 125,529 -258,468 9.6% 125,529 258,468 9.6Z 125,529 258,468 9.6Z

Note: Growth rate average from 1986 to 2000. Table 11: COMPARISION OF CORRIDOR GROWTH FOR THREE TRANSPORT SYSTEMS - OPTIMISTIC FORECAST

Without With With induced growth Hong Kong Expressway Shantou Expressway Growth Growth Growth 1986 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

CORRIDOR

Pearl River Delta 39,391 80,030 271,842 14.8% 80,030 307,261 15.8% 80,030 267,496 14.7%

Guangzhou 16,746 21,910 47,288 7.7Z 21,910 59,782 9.5Z 21,910 52,207 8.5% East bank 6,425 21,143 87,930 20.5% 21,143 89,312 20.72 21,143 68,483 18.4% West bank 16,220 36,978 136,624 16.4% 36,978 158,167 17.7% 36,978 146,806 17.0%

East Guandong 11,782 21,536 71,261 13.7Z 21,536 61,680 12.6% 21,536 106,748 17.0%

Coastal route 7,700 15,584 54,330 15.0% 15,584 48,154 14.0% 15,584 76,179 17.8Z Meixian route 4,081 5,952 16,931 10.7% 5,952 13,527 8.9% 5,952 30,569 15.5%

West Guangdong 15,789 38,847 150,621 17.5% 38,847 135,042 16.6% 38,847 130,497 16.3%

Maoming route 11,279 27,304 106,065 17.4% 27,304 94,337 16.4% 27,304 91,307 16.1% Yunan route 4,510 11,543 44,556 17.8% 11,543 40,705 17.0% 11,543 39,190 16.7%

North Guangdong 4,810 8,412 26,119 12.8% 8,412 23,561 12.0% 8,412 22,804 11.8%

TOTAL 71,772 148,826 527,544 15.3% 148,826 527,544 15.3% 148,826 527,544 15.3X

Note: Growth rate average from 1986 to 2000. Table 12: COMPARISION OF CORRIDOR GROWTH FOR THREE TRANSPORT SYSTEMS - PESSIMISTIC FORECAST

Without With With induced growth Hong Kong Expressway Shantou Expressway Growth Growth Growth 1986 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

CORRIDOR

Pearl River Delta 39,391 61,101 93,942 6.4Z 61,101 98,462 6.8Z 61,101 91,924 6.2Z

Guangzhou 16,746 19,505 23,677 2.52 19,505 25,732 3.1Z 19,505 24,486 2.8Z East bank 6,425 14,287 26,182 10.6Z 14,287 25,496 10.3Z 14,287 22,071 9.2Z West bank 16,220 27,309 44,083 7.42 27,309 47,235 7.9Z 27,309 45,367 7.6Z

East Guandong 11,782 16,993 24,875 5.52 16,993 23,593 5.1% 16,993 31,003 7.2%

Coastal route 7,700 11,912 18,282 6.4Z 11,912 17,267 5.9Z 11,912 21,875 7.7% Meixian route 4,081 5,081 6,593 3.5Z 5,081 6,326 3.2Z 5,081 9,128 5.9Z

West Guangdong 15,789 28,107 46,741 8.1Z 28,107 43,923 7.6Z 28,107 43,176 7.4Z

Maoming route 11,279 19,840 32,790 7.9Z 19,840 30,861 7.5Z 19,840 30,363 7.3Z Yunan route 4,510 8,267 13,951 8.42 8,267 13,062 7.9Z 8,267 12,813 7.7Z

North Guangdong 4,810 6,734 9,645 5.1Z 6,734 9,225 4.8Z 6,734 9,100 4.7Z

TOTAL 71,772 112,934 175,203 6.6Z 112,934 175,203 6.6Z 112,934 175,203 6.6Z

Note: Growth rate average from 1986 to 2000. Table 13: LENGTH OF INTERNAL PROVINCIAL TRANSPORT ROUTES BY MODE - 1986 (including that of Hainan Island)

Local Inland Coastal Civil Itemr Total Rail rail waterways shipping Road aviation Pipeline

Length (km) 81,373 1,128 449 10,793 1,810/a 53,820 1,300/a 182 Z 1.13 0.57 13.65 2.22 80.60 1.60 0.22

Route Density (km/km2) Guangdong 0.0043 0.0022 0.0520 n.a. 0.3095 0.006 0.001 National 0.0054 0.0003 0.0114 n.a. 0.0982 n.a. n.a.

/a 1987 data. 1

Notes: (1) Civil aviation includes Guangzhou-Shantou, Guangzhou-Zhanjiang and Guangzhou-Haikou. When interprovincial and international routes are added the total is 64,059 km. Hainan island routes represent 40 percent of the provincial total.

(2) Coastal shipping includes Guangzhou-Shantou, Guangzhou-Zhanjiang, Guangzhou-Haikou and Zhanjiang-Haikou. Hainan island routes represent 40 percent of the total.

n.a. = not applicable

Source: 1987 Guangdong Statistics Yearbook, 1989. Guangdong Yearbook, China Yearbook, 1987 and Map of Guangdong Province. - 93 -

Table 14: KEY RAILWAY SECTION CHARACTERISTICS

No. of Type of Maximum Gross trail- Type of Section Class Length tracks signaling grade ing tonnage locomotive (km) (Z) (tons)

State-Level Railways (rail gauge 1.435 m)

2,200/ Pingshi-Guangzhou II 336.2 double /a Semiautoma- 9.1/11.6 /b 2,500 Dongfeng 4 tic block 2,200/ Guangzhou-Shenzhen II 146.5 double /a Semiautoma- 7.5/8.0 /b 2,500 Dongfeng 4 tic block

Guangzhou-Sanshui III 48.7 Single Semiautoma- 7.8/6.2 1,600 Dongfeng 3 tic block

Hechun-Zhanjiang II 82.3 Single Semiautoma- 6.0 3,000 Qianjin tic block

Hechun-Maoming II 61.0 Single Semiautoma- 6.0 3,000 Qianjin tic block

Total State-Level 674.7

Local Railways

Name Gauge (mm) Length (km) Endpoints

Nanlin 1,055 92.5 Pingshi-Muchong Quren 1,055 27.5 Huanggang-Chunding Meilong 702 172.5 Meixian-Xipu-Xingning Rulian 702 59.5 Loujiatong-Wanbei Yingde 702 47.0 Dongguapu-Jintan Longhe 702 7.0 Hetou-Chachang Yunfu 702 16.2 Yuncheng-Luidu Maan 702 12.0 Maan-Xijiangan Dalishan 702 32.0 Dalishan-Binglongpu

Total Local 466.2

La The double-track project was completed in 1988. /b Grade should be lower due to double tracking project.

Source: ICT Interim Report, May 1987, and Guangdong Province Planning Commission. - 94 -

Table 15: LENGTH OF T'HE ROAD NETWORK BY CLASS, SURFACE AND FUNCTION

Length (km) Percent By Class 1985 1987 1988 1985 1987 1988

Class I 0 7.3 32 0.0 0.01 0.06 Class II 538 835.1 1,245 0.8 1.6 2.3 Class III 2,197 1,985.3 2,694 3.4 3.7 5.0 Class IV 36,224 31,359.2 31,255 56.5 58.9 58.1 Substandard (out of class) 25,111 19,031.5 18,594 39.2 35.8 34.5

By Surface Type Cement 1,272 1,986.2 1.9 3.7 Bituminous 7,291 6,675.4 11.5 12.5 Gravel 12,621 38,416.1 19.7 68.4 Gravel (low quality) 26,562 } 41.5 } Nonpaved 16,324 8,141.7 25.5 15.3

By Function Trunk (primary) 7,439 n.a. 11.6 n.a. (of which: national roads) (4,537) 4,067.1/a (7.1) (7.6) Trunk (secondary) 8,179 8,582.7/b 12.8 16.1 County road 17,635 14,799.1 27.5 27.8 Rural road 30,481/c 25,670.5 47.6 48.2 Special functioned 336 99.0 0.5 0.2

/a National roads. /b Provincial roads. /c In ICT Report (Chinese Version), p. 123, this number is 30,750.

Notes: (1) Trunk (primary) consists of national roads and provincial trunk roads.

(2) Number of bridges: 10,503 of which: dangerous bridges 519 total length (m): 296,001 total length (m) 17,514

Of the total permanent bridges 10,412 length 292,697 m semi-permanent bridges 66 length 2,269 m temporary bridges 25 length 1,035 m

Data provided by Provincial Bureau of Highways.

Sources: ICT Report, May 1987, Chinese version, p. 123; Department of Communi- cations, Bureau of Highway Administration for 1987 data; Guangdong Statistics Yearboolk, 1989. - 95 -

Table 16: DENSITY OF ROAD NETWORK BY REGION, 1986

Area Length of roads Density of road (km2) (km) (km/100 km2)

Provincial total Ia 177,890 52,785 29.7

Guangzhou 16,200 5,897 36.4

Shantou 10,345 3,657 35.4

Foshan 5,476 2,056 37.5

Jiangmen 17,039 4,978 29.2

Shaoguan 30,740 7,653 24.9

Zhanjiang 12,102 7,653 24.9

Maoming 11,323 3,895 34.4

Shenzhen 1,863 870 43.5

Zhuhai 1,365 353 25.9

Meixian 15,843 3,090 19.5

Huiyang 31,855 9,167 28.8

Zhaoqing 22,619 5,851 25.9

la Hainan Island is excluded.

Source: Guangdong Yearbook, 1987. - 96 _

Table 17: CHARACTERISTICS OF MAJOR SEAPORTS IN GUANGDONG PROVINCE

Number of berths for Actual ship size of Maximum Total throughput Total 10,000 tolns ship size capacity in 1987 Port berths or more ('000 dwt) (mln tons) (mln tons) Type of freight

Huangpu /a 45 19 35/b 17.51 26.21 Coal, oil, ores, containers, general cargo

Zhanjiang 31 15 50/b 12.70 14.14 Oil, coal, ores, general cargo

Guangzhou /a 102 0 10 8.31 6.93 Dry-bulk, general cargo

Shantou 9 0 5 1.50 2.51 Dry-bulk, general cargo

Shekou and 41 4 10 3.01 5.08 Dry-bulk, Chiwan general cargo

Jiouzhou 13 2 10/b 1.50 0.80 Dry-bulk, general cargo

Total 241 40 44.53 55.67

/a Huangpu and Guangzhou are now operated as one port. lb Accessible with high tide orLly.

Note: The definition of capacity for ports used in the Province clearly understates actual capacity.

Source: ICT Interim Report and GPPC. - 97 -

Table 18: INLAND WATERWAY TRANSPORT SYSTEM

A. Port Throughput by River (1987)

Number of ports Throughput (mln tons)

West river (Xijiang) 11 5.43 North river (Beijiang) 20 2.71 East river (Dongjiang) 15 2.52 Han river 14 1.43 The Pearl River Delta 37 20.47 Others 29 7.66

Total 126 40.22

B. Major Navigable Sections

Maximum ship River Section Length (km) Depth (m) size (dwt)

West river Fengkai-Sixianjiao 209 2.0 - 2.5 1,000 Sixianjiao-Daweijiao 68 2.0 300

North river Nanxiong-Shaoguan 123 <0.5 10-20 Shaoguan-Lianjiangkou 124 0.8 50 Lianjiangkou-Sanshui 134 1.0 100

East river Cuhe-Fenshu dam 32 0.4 <15 Fengshu dam-Heyuan 155 0.6 30 Heyuan-Shilong 200 0.8 50 Shilong-Dongjiangkou 42 1.5 50-100 Shilong-Niwei 42 1.5 50-100

Han river 310 <1.0 <50

The Pearl River Network >1.0 >100

Source: ICT Interim Report, May 1987 and GPPC. - 98 -

Table 19: AIRPORTS BY CLASS AND AIRCRAFT ACCOMMODATED IN 1987 (Civil passenger airports)

Aircraft Manager Class /a accommodated

Baiyun (Guangzhou) CAAC I Boeing 747

Zhanjiang CAAC II Boeing 737

Foshan /b CJCAC /c II Boeing 737

Shantou CAAC II Boeing 737

Meixian CAAC II Boeing 737

Huiyuan CJCAC II Boeing 737

Zhuhai CAAC Helicopter (Heliport)

/a Class I = International Class II = Domestic

lb Foshan airport was opened in March 1987 to civilian traffic. It serves the Pearl River Delta area.

/c China Joint Civil Aviation Company, a military subsidiary company.

Source: ICT Interim Report and GPPC. Table 20: RAIL PASSENGER SERVICES, 1988

Beijing-Guangzhou Guangzhou-Shenzhen Litong-Zhanjiang Item Express Fast Slow Fast Slow Fast Slow

hard seat hard seat hard seat air-conditioned hard seat hard seat hard seat Type of coach hard sleeper hard sleeper hard sleepter hard seat hard sleeper hard sleeper soft sleeper soft sleeper soft seat soft sleeper

Number of coaches 20 24 maximum 13-20 12-20 13-20 13-20 13-20 per train Frequency 3 11 2 14 3 n.a. n.a. (pairs/day)

Fare prices /a 0.022 0.018 0.014 0.027 0.021 0.018 0.014 (Yuan/person-kn) e

/a Prices for hard seat only. Premium for soft seat is 0.4 fen/pkm, hard sleeper 1.3 fen, soft sleeper 3.3 fen, and express 0.8 fen.

Source: Guangzhou Railway Administration. Table 21: AMOUNT OF RAILWAY ROLLING STOCK BY TYPE AND YEAR

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

Locomotives

Diesel 108 121 122 125 119 122 146 184 189 197

Steam 56 44 22 22 22 18 18 20 22 21

Freight wagons 300 299 299 299 339 359 409 454 462 462

Passenger coaches 489 557 579 530 539 562 645 708 817 983 1

Avg. daily operating O freight wagons on line 2,566 2,603 2,672 2,659 2,631 2,837 3,029 3,459 3,72i 4,010

Note: Hainan excluded.

Source: Guangzhou Railway Administration. Table 22: STATE-OW'IED,SPECIALIZiED ROAD TRANSPORT SERVICES

1986 1987

n.a. Number of service offices 1,563

Passenger services: (nonurban) 3,390 Number of routes 2,996 Areas served: - All counties and cities of the province - 95.74Z of all districts; (about the same as 1986) - 60.39Z of all rural units (Xiang)

11,512 Frequency (vehicle trips/day) 11,898 297 Total passengers (millions/day) 330 14.0 Total pass-km (billions) /a 14.1 ° Freight services: (total) 95 number of trunk routes lb 93 37,186 operating trunk length (km) /b 32,896 Areas served - All parts of Guangdong - Hunan, Guangxi, Fujien, Jiangxi, (same as 1986) Henan, Jiangsu, Hubei, Zhejiang, Shanghai 19.8 Total tonnage (millions) /a 20.5 595 Total ton-km (millions) Ia 596

enterprises accounted for /a Including collectives. The passengers carried by state-owned specialized additional 15.7 percent in 42.6 percent of the total passenger traffic, collectives accounted for an 1986. routes. lb Provincial road transport companies only, does not include county or city

Sources: Guangdong Yearbook, 1987, and GPPC. - 102 -

Table 23: MOTOR VEHICLE OWNERSHIP

Special Total Trucks Passenger Vehicles vehicles Year Number Number Capacity Number Capacity Number ('000) ('000) ('000 tons) ('000) ('000 seats) ('000)

1980 96 71 n.a. 24 n.a. 0.6

1985 240 144 533 91 1,109 5

1986 267 162 545 100 1,303 5

1987 296 182 662 109 1,590 5

1988 325 197 684 123 1,694 5

Average annual growth (Z) 1980-85 20.1 ].5.2 n.a. 30.5 n.a. 53.5 1985-88 11.1 11.0 8.7 10.6 15.2 0.0

Note: Calculated from growth rates in ICT Interim Report.

Source: Guangdong Yearbook, 1987 and Statistical Yearbook of China 1987. Table 24: INLAND WATERWAY SERVICES, 1986

State-owned Collective Specialized Specialized

Number of vessels 1,350 15,584 Total capacity (dwt) 223,757 554,115 (seats) 36,969 6,802

Type of Vessels Average Age (year) enterprises 17 - Steel-hull vessels 24 State-owned enterprises 260 - Oil tanker vessels 24 Collective - Small passenger & freightvessel 24 - Barges 18 - Wood and cement-hull vessels 10

Average distance of service n.a. n.a.

Number of passenger routes 82 n.a.

Number of freight routes n.a. n.a.

Tonnage carried (ton) 11.65 million 54.71 million

Passengers carried (trips) 18.33 million 4.87 million

and Macau. Note: In addition, there are a few joint venture enterprisesproviding services to Hong Kong

Source: Department of Communications,Waterway AdministrationBureau, Guangdong Province. - 104 -

Table 25: MARITIME SHIPPING SERVICES, 1986 and 1987

Coastal shipping (state-owned) /a 1986 1987

Number of vessels 129 freight vessels 127 passenger vessels 14

Total capacity (dwt) 1.627 million 1.844 million (seat) 8,899 7,619

Average age of vessels (yr) 11.9 n.a.

Average distance of service n.a. 1,350 nm

Number of passenger n.a. n.a. service routes

Freight service routes n.a. 6 (Guangzhou-Haikou, Shanghia, Dalian, Sanya, Shantou, Xiamen)

Tonnage carried 22.47 million 25.13 million lb

Passengers carried n.a. 1.25 million

Maritime shipping

Number of vessels 149 150

Total capacity (dwt) 1.526 million 1.547 million

Number of ports connected 683 n.a.

Number of countries and regions connected 111 n.a.

Average age of vessels (yr) n.a. n.a.

Tonnage carried 9.66 million 10.01 million tons

/a Coastal shipping shipping services are mainly provided by Guangzhou Maritime Transport Bureau. Ocean shipping services are provided by the Guangzhou Ocean Shipping company under the jurisdiction of Ministry of Communications. /b Guangzhou Ocean Shipping, Bureau only.

Sources: Guangdong Yearbook, 1987. Guangzhou Yearbook, 1987. - 105 -

Table 26: WATER FREIGHT TONNAGE BY PORT IN 1985 AND 1987 (Million metric tons)

Total Foreign trade Outflow Inflow through- Through- % of Total Foreign Total Foreign Port Year put put total outflow trade inflow trade

Huangpu 1985 17.72 7.88 44.5 4.47 1.06 13.25 6.82 1987 26.21 10.02 38.2 8.54 1.61 17.67 8.41

Zhanjiang 1985 12.31 4.85 39.4 3.52 1.96 8.79 2.89 1987 14.14 5.44 38.5 4.49 2.56 9.65 2.88

Guangzhou 1985 5.55 1.30 23.4 2.74 0.61 2.81 0.69 1987 6.93 1.90 27.4 3.20 0.91 3.73 0.99

Shantou 1985 2.02 0.37 18.4 0.57 0.12 1.45 0.25 1987 2.51 0.66 26.3 0.76 0.11 1.75 0.55

Shekou 1985 1.30 0.56 43.1 0.34 n.a. 0.96 n.a. 1987 /a n.a n.a. n.a. n.a. n.a. n.a.

Chiwan 1985 0.65 n.a. n.a. 0.15 n.a. 0.50 n.a. 1987 /a n.a. n.a. n.a. n.a. n.a. n.a.

Jiouzhou 1985 0.23 n.a. n.a. n.a. n.a. n.a. n.a. 1987 0.80 n.a. n.a. n.a. n.a. n.a. n.a.

Total 1985 37.60 14.40 38.3 11.30 3.75 26.30 10.65 Major 1987 49.79 18.07 36.2 16.99 5.19 32.80 12.83 Ports/b

/a 5.08 for both Chiwan and Shekou in 1987.

/b Huangpu, Zhanjiang, Guangzhou and Shantou.

Note: Throughput of other small ports in 1985 (million metric tons): Shanwei 0.40; Aotou n.a.; Haian n.a.; Taiping 0.60; Shuidong 0.13.

Sources: ICT Interim Report and GPPC. - 106 -

Table 27: AIR SERVICES, 1986 and 1987

1986 1987

Number of aircraft: 44 n.a. of which: Boeing 737-200 } 19 Trident } Helicopters 14 Freight aircraft:of median size 1 11 Freight aircraft of small size } Service routes 43 53 of which: Domestic 39 44 Regional (Hong lKong/Kowloon,Macao) 3 4 International 1 5

Total service length (krn) 41,599 67,000

Total Passenger Trips 5.7 million

Airports: Baiyun, Shantou, 2Zhanjiang,Mexian, Foshan (military and civil), Zhuhai (helicopter), Huizhou (military and civil) and Shaognan (military and civil)

Areas connected: Most of the major cities of China, Manila, Bankgkok, Singapore, Sydney, Hong Kong, Macao.

Throughput of Baiyun Airport: 3.894 million passengers 1986 5.05 million passengers 1987

Comment: All services are provided by a state-owned company (CAAC). The throughput of Baiyun airport places it first among all airports in China. n.a. = not available

Sources: Guangdong Yearbook, 1987 and GPPC. - 107 -

Table 28: SUMMARY OF PAST TRANSPORT INVESTMENTS IN NEW FIXED ASSETS (million yuan)

Ports and Year Railways Roads Waterways Airports Communications

1978 14.49 n.a. n.a. n.a. n.a.

1979 21.45 n.a. n.a. n.a. n.a.

1980 18.93 n.a. n.a. n.a. 126

1981 1.09 n.a. n.a. n.a. 381

1982 4.49 n.a. n.a. n.a. 442

1983 29.73 n.a. n.a. n.a. 745

1984 52.47 n.a. n.a. n.a. 1,400

1985 65.07 n.a. n.a. n.a. n.a.

1986 232.29 262 612 109 1,262

1987 847.72 525 571 n.a. n.a.

1988

Total 1,287.73 n.a. n.a. n.a. n.a.

Source: GPPC, DOC Statistical Yearbook of China, 1983, 1984, 1985 and 1987 and Guangzhou Railway Administration. Table 29: PROVINCIALTOTAL FREIGHT TRAFFIC (Excludingforeign trade)

Total Roads Waterways/a Incl. (excl.ocean) RaiIwaysb Total Social Total Social coastal OceanLf Pipeline Air

Amount

Tonnage 1978 255.41 35.92 145.73 104.81 73.75 70.09 15.62 n.a. n.a. 0.01 (million) 1985 525.82 38.49 375.20 22.32 112.10 80.17 27.08 9.35 n.a. 0.03 1986 619.79 42.69 446.49 20.49 121.13 81.18 28.79 9.66 9.44 0.04 1987LS 738.09 44.93 550.69 20.47 131.78 92.43 31.49 10.01 10.64 0.05 1987/i 713.46 40.55T 531.32 19.75 130.90 91.55 30.61 10.01 10.64 0.05 Annual growth 1978-85 10.9 1.0 14.5 -19.8 6.2 1.9 8.2 n.a. n.a. 17.0 rate (%) 1985-87Ld 18.5 8.0 21.1 -4.2 8.4 7.4 7.8 3.5 n.a. 29.1

Turnover

Ton-km 1978 68.33 7.02 4.72 4.72 56.59 56.00 28.90 n.a. n.a. n.a. (billion) 1985 89.44 10.23 10.00 0.64 69.17 64.06 51.18 53.09 n.a. 0.04 1986 95.41 13.00 10.78 0.60 70.98 64.59 54.56 92.29 0.60 0.05 1987Lc 111.56 15.53 16.58 0.62 78.32 72.02 59.83 90.81 1.08 0.05 1987/d 108.78 14.02 15.99 0.59 77.63 71.34 58.16 90.81 1.08 0.05 Annual growth 1978-85 3.9 5.5 11.3 -24.8 2.9 1.9 8.5 n.a. n.a. n.a. rate (%) 198S-87/c 11.7 23.2 28.7 -1.9 6.4 6.0 8.1 30.8 n.a. 16.2 C) Average Trip Distance

km 1978 299.3 195.5 32.4 45.0 767.3 799.0 1,850.0TA n.a. n.a. n.a. 1987Ld 330.9 345.7 30.1 30.1 594.3 779.2 1,900.0LS 9,071.9 101.5 1,080.0

Growth rate (%) 1978-87/d 1.1 6.5 -0.8 -4.4 -2.8 -0.3 0.3 n.a. n.a. n.a.

/a Inland and coastal freight. /b ExcludingLitang-Zhanjiang Railway /c IncludingHainan Island. Ld ExcludingHainan Island /e More detailed statisticsfrom GuangzhouRailroad show a total of 54.16 million tons includingLitang-Zhanjiang Rail; numbers are slightlyhigher (42.16) for the sum Guangzhou-Beijingand Guangzhou-ShenzhenRailways. /f Excludingcargo shipped by foreign-ownedvessels. /g Rough estimatesto be verified. Source: ICT InterimReport, GPPC and estimatesof private transportbased on interviewson interviewswith GuangdongDept. of CommunicationsOfficials. - 109 -

Table 30: PROVINCIAL TOTAL PASSSENGER TRAFFIC

Roads Waterways Total Railways Total Social Total Social Air

Amount

Trips (million) 1978 173.97 25.29 121.94 121.94 26.31 26.31 0.43 1985 497.34 36.21 431.49 367.83 28.06 26.72 1.58 1986 594.71 37.42 526.42 330.35 27.95 24.63 2.92 1987/a 728.01 40.29 656.44 296.67 27.83 22.51 3.45 1987/b 709.28 36.13 642.23 266.04 27.83 22.51 3.09

Annual growth 1978-85 16.2 5.3 19.8 17.1 0.9 0.2 20.4 rate (Z) 1985-87/a 21.0 5.5 23.3 -10.2 -0.4 -8.2 47.8

Turnover

Billion pass-km 1978 8.10 1.78 4.72 4.72 1.36 1.36 0.24 1985 28.23 5.04 18.99 16.19 2.10 2.00 2.10 1986 33.32 5.67 22.75 14.12 2.20 1.79 2.70 1987/a 43.40 6.63 30.98 15.95 2.71 1.86 3.07 1987/b 41.70 5.96 30.05 15.47 2.71 1.86 2.98

Annual growth 1978-85 19.5 16.0 22.0 19.3 6.4 5.7 36.3 rate (Z) 1985-87/a 24.0 14.7 27.7 -0.7 13.6 -3.6 20.9

Average Trip Distance

km 1978 46.6 70.5 38.7 38.7 51.6 51.6 558.1 1987/b 59.1 164.6 47.2 47.2 82.6 82.6 889.9

Growth rate (Z) 1978-87/d 2.7 9.9 2.2 2.2 5.4 5.4 5.3

/a Including Hainan Island. /b Excluding Hainan Island.

Source: ICT Interim Report, GPPC and estimates of private transport based on interviews with Guangdong Dept. of Communications Officials. - 110 -

Table 31: ESTIMATED TOTAL FLOW OF COMMODITIESBY CORRIDOR IN 1987 (excluding Marine Foreign Trade) (million tons)

Toward Away F-om Guangzhou Ouangzhou Total

North Corridor North Corridor Railroad Southbound 20.67 Railroad Northbound 12.86 33.53 Hunan Road Southbound 5.92 Hunan Road Northbound 0.24 6.16 Other North Road Southbound 1.54 Other North Road Northbound 1.96 3.50 North River 1.00 North River 0.50 1.50 Coastal Shipping - Inter 9.97 Coastal Shipping - Inter 2.89 12.86

Corridor Total /a 39.10 Corridor Total /a 18.45 57.55 West Corridor West Corridor Litong - Zhanjiang RR 8.21 Litong - Zhanjiang RR 7.35 15.56 Zhanjiang Port Inbound - Inter 5.60 Zhanjiang Port Outbound - Inter 0.48 6.08

Subcorridor Total 13.81 Subcorridor Total 7.83 21.64

Xijiang River Eastbound 2.34 Xijang River Westbound 1.17 3.51 Cuangxi Road Eastbounid 1.30 Guangxi Road Westbound 0.38 1.68 Yunan Road Eastbound 1.40 Yunan Road Westbound 0.98 2.38

Subcorridor Total 5.04 Subcorridor Total 2.53 7.57 Coastal Road Eastbound 1.35 Coastal Road Westbound 1.3.5 2.70 Coastal Shipping Eastbound - Intra 1.17 Coastal Shipping Westbound - Intra 1.46 2.63 Subcorridor Total 2.52 Subcorridor Total 2.81 5.33 Corridor Total 21.37 Corridor Total 13.17 34.54 South Corridor South Corridor Huangpu Port Inbound /c 1.19 Huangpu Port Inbound jc 4.88 6.07 Cuangzhou Port Inbound /c 0.83 Guangzhou Port Inboundj7/ 1.45 2.28 Other Pearl Delta Ports 7.91 Other Pearl Delta Ports 2.89 10.80 Subcorridor Total 9.93 Subcorridor Total 9.22 19.15 Hong Kong Road Northbound 2.44 Hong Kong Road Southbound 2.97 5.41 Shenzhen Rail Northbound 2.42 Shenzhen Rail Southbound Ab 6.21 8.63 Shenzhen Road Northbound 6.00 Shenzhen Road Southbound 6.00 12.00 Subcorridor Total 10.86 Subcorridor Total 15.18 26.04 West Bank Road Northbound 4.05 West Bank Road Southbound 4.05 8.10 Subcorridor Total 4.05 Subcorridor Total 4.05 8.10 Corridor Total 24.85 Corridor Total 28.45 53.29 East Corridor East Corridor Neixian-Shantou Road Northbound 0.48 Meinian-Shantou Road Northbound 0.96 1.44 Han River Upstream (Northbound) 1.92 Han River Downstream (Southbound) 1.20 3.12 Shantou Port Inbound - Inter 0.68 Shantou Port Outbound - Inter 0.17 0.85 Subcorridor Total 3.08 Subcorridor Total 2.33 5.41 Meixian-Fujian Road Westbound 0.48 Meinian-Fujian Road Eastbound 0.32 0.80 Me;ixan Road Westbound 0.80 Meinian Road Eastbound 1.20 2.00 East River - Westbound 1.35 East River - Eastbound 1.20 2.55 Subcorridor Total 2.63 Subcorridor Total 2.72 5.35

Shantou Road Westbound 0.96 Shantou Road Eastbound 1.60 2.56 Shantou-Fujian Road Westbound 0.32 Shantou-Fujian Road Eastbound 0.32 0.64 Coastal Shipping Westbound - Intra 0.51 Coastal Shipping Eastbound - Intra 0.48 0.99 Subcorridor Total 1.79 Subcorridor Total 2.40 4.19 Corridor Total 7.50 Corridor Total 7.45 14.95 TOTAL 82.85 TOTAL 67.52 160.33

/a Excluding diverted traffic passing over Hunan Road which also travels on other North Road. N Including Hong Kong Rail Freight. /c Intrapro-incial flows only as other flows included in North Corridor Source: ICT Interim Report. - ill -

Table 32: ESTIMATED PASSENGER TRAFFIC BY CORRIDOR IN 1987 (million trips)

North Corridor Railroad (Guangzhou-Beijing) 17.94 North Beijing River 2.00 /a Hunan Road 7.70 Other North Road 3.00

Corridor Total /b 30.64

West Corridor Litong-ZhanjiangRR 2.71 Xijiang River 2.00 /a Guangxi Road 5.40 Yunan Road 23.10 Subtotal 30.50 ZhanjiangAir 0.10 Coastal Road 12.30 Coastal Ship 7.00 /a Train (round about route) 0.80 /a Subtotal 20.20

Corridor Total 53.41 South Corridor Pearl River 1.60 Shenzhen Rail 14.68 Hong Kong Air 0.20 Shenzhen Road 64.70 Subtotal 79.58

West Bank Road 29.30

Corridor Total 110.48 East Corridor Meixian-ShantouRoad 3.00 Guangzhou-MeixianRoad 9.20 Guangzhou-ShantouRoad 18.50 Shantou Air 0.10 /a Coastal Ship 10.00 7a Subtotal 28.60

Corridor Total 40.80 TOTAL 235.33

/ Estimated. Data on interprovincialair transport are not available. Sources: (a) ICT Interim Report; (b) Number of trains from Guangzhou Railway Administration and number of vehicles from Department of Communication. - 112 -

Table 33: AVERAGE DAILY ROAD TRAFFIC

National Provincial County Rural

Total Vehicles

1980 1,566 696 343 181

1981 1,855 812 359 129

1982 2,088 1,024 408 121

1983 2,259 1,063 451 161

1984 2,985 1,288 586 233

1985 3,809 1,684 725 330

1986 3,991 1,891 855 330

1987 5,087 2,397 1,105 424

Average annual growth rate (%) 18.3 19.8 20.6 21.9

Motor Vehicles

1981 1,482 540 193 55

1982 1,923 686 229 57

1983 1,829 741 255 67

1984 2,396 894 334 113

1985 2,968 1,158 404 163

1986 3,188 1,341 502 173

1987 4,148 1,720 689 223

Average annual growth rate (Z) 18.7 21.3 23.6 26.3

Notes: (1) Total vehicles include motor vehicles, motorcycles and tractors. (2) Growth rate (1981-87).

Source: ICT Interim Report,,May 1987 and Guangdong Department of Communica- tions. - 113 -

Table 34: MODAL CAPACITIESBY CORRIDOR

Present Capacity Milliontons Millionpassengers

NorthCorridor Rail 80 30 X Road (ClassIII) 29-68 80-120 River (60 ton barges) 4-8 2-3 Coastal ports 18-20 n.a. Air n.a. n.a.

TotalCorridor 111-144 112-153 West Corridor 79h'njiley-0uangx!Subcorridor600 Road (ClassIII) 29-68 80-120 Subtotal 89-118 110-160 YunanSubcorridor River (100ton barges) 8-12 4-8 Road (ClassIII) 29-58 80-120 Subtotal 37-70 84-126 CoastalSubcorridor Road (ClassIII) 29-68 80-120 Coastal Ship/a 7-8 - Subtotal 36-86 80-120 TotalCorridor 182-254 274-396 SouthCorridor We-Jo6-rP-TobE9lb 18-20 - ShenzhenRal 60 so ShenzhenRoad (ClassII) 38-72 100-160 PearlRiver /c 17-20 8-10 West Bank (ClassII) 38-72 100-150 TotalCorridor 157-234 238-330 East Corridor 9hsntou-MexianSubcorridor River(50 ton barges) 4-6 2-a Road (Class III) 29-58 80-120 Subtotal 33-64 82-123 Guangzhou-MexianSubcorridor River (100 ton barge) 8-12 4-8 Road (ClassIII) 29-58 80-120 Subtotal 37-70 84-126 Shenzhen-ShantouSubcorridor Road (Class III) 29-58 80-120 Coastal Ship /d 3-6 - Subtotal 32-83 80-120 TotalCorridor 102-197 248-3e9

TotalAll Corridors/e b14-809 870-1248

a Port limitationat Zhanjiang- 12.7 milliontons less40 percentforeign trade. 26.8 million tons capacitywith 30 percent foreign trade. c Capacitycould be much largerwith littleinvestment. Port capacity1.5 milliontons at Shantou(some ship pd via Xiamen). L! ExcludingSouth Corridor ports also countedin NorthCorridor. Note: Capacityfor rivercalculated at twicepresent river port throughput.Class III Road capacity is based on 20 percent tractorsand total average yearly volume of 22,600 equivalent passengercar units (PCUs)per day of which55 percentare truckswith an averageload of 3.6 tons (today)or 7 tons (improvedcapacity trucks) and 10-15 passengersper vehicle; Class II increasescapacity by 25 percent. - 114 -

TabIj 3,: QUANWcNaPROVINCE COMPRBIS4SIVE TRANSPORT STUDY SIWARY OF KEY CAPACITYCONSTRAINTS

(1967) Actual Traffic Potentia1 Link or Node Capacity Traffic Growth Rate Technolog Demnd Major Problem (ala ton) (1985-87)

Pinghehi- 15.00 min ton 1980. depressad capacity atorage Ouangshou (aingla-track) aI demand Railway 30.00 aln ton 33.53 15% (double-track) a

Cuangzhou- 11.00 wIn ton 1970a Sh-nzh-n ( i ng Ia-track) Railway 25.00 win ton 8.63 (doub I -track)

Marshalling Yard 3,216 3,699 1970a 5,084 wagons of Guangzhou Wagon- Wagons (in 1990) North Station

Signaling and outdated technology replacement Switching eqpt. of 1950- 104 atationa along Henyang-Ouangzhou Railway

Trunk road. of 20% 1950. (1) niexd function as town the province annually 1960c atreeta & bypass roads (2) surface quality

West River maa. sizx of ships 3.51 811 low (1) natural obetaclee on or barges 300 dat, channela 68 km 1,000 dwt, (2) poor cond. of ports 209 km

North River 10 dwt, 123 km low (1) natural obatacles on 50 dat, 124 km 1.5 channel. 100 dat, 134 km (2) poor cond. of porta

Ebat River <13 dat, 32 km low (1) natural obstacles on 30 dwt, 155 km 2.55 channels 50-100 dwt, 84 km (2) poor cond. of ports

Han River <50 dat, 310 km 3.12 low (1) natural obstacles on channel a (2) poor cond. of port-

Terminal Bldg of 700 pereon/peak hr 1,500-2,000 1970- Saiyun Airport per/peak hr

Huangpu port coal 10.67 mt 5.93 S.8% natural obstacles on container 1.10 mt 0.48 (1984/85) channel dry bulk 6.02 at 9.36 wet bulk 3.5 mt s.75 gnrl cargo 3.14 at 4.87 26.21 21.6%

Zhanjisng port cowl 2.00 at 0.73 capecity Constraint of dry bulk 4.35 mt 3.70 railway for the forwarding wet bulk 6.08 mt 7.00 of freight gnrl cargo 2.15 at 0.71 14.14 7.2%

Ouangzhou port 6.80 at 6.93 11.7% water dapth of channel water

Shantou 3.20 mt 2.61 11.51 depth of port & channel

A Peak direction, excluding passenger traine.

Source: ICr Interim Report, and Table 11. Table 38: PASSENGERPERCEIVED COSTS BY MODE/a COWAREDWITH LRIFC AND LRISC

Mode Guangzhou-Shenzh-n Guangzhou-Shaoguan Guangzhou-Shantou Guangzhou-Shanghai Guangzhou-Beijing Valu, of Time Value of Time Value of Time Value of Time Value of Time Y O Y.5 Y Y O. Y SY Y Y O.5 Y 5 Y O Y O.S Y Y O Y O.S Y S

Air Distance (km)/time (hrs) 380/3 1,235/6 1,966/7 Passenger Cost/trip 122 123 137 393 396 423 629 632 884 Passenger Cost/1,000 km 321 326 359 318 320 342 320 321 338 LRIFC/1,000km 588 331 279 LRISC/1,O00 km 549 563 588 320 322 344 274 276 292

Road Distance (km)/time (hra) 163/4 309/10 464/13 1,860/38 /c 2,600/61 Le Passenger Cost/trip 17/k 19 37 16 26 61 47 63 112 n.a. n.a. na. n.a. n.a. n.a. Passenger Cost/1,000 km 104 117 287 67 85 255 101 114 236 na. n.a. na. nna. n. n.a. LRIFC/1,000 km /d 30 25 24 19 17 LRISC/1,000 km /d 28 43 163 23 41 211 21 34 158 18 28 121 17 27 119

Ship Distance (km)/time (hrs) 867/33 Haikok 1,889/32 Shanghai 2,494/126 Dalian Passenger Cost/trip 47 64 212 78 118 488 116 179 741 Possenger Cost/1,000 km 71 97 321 46 70 289 48 71 298 LRIFC/1,000 km 5S 24 18 tn LRISC/1,000 km 86 91 313 33 67 276 26 51 277

National Rail Distance (km)/time (hra) 1,811/36 2,313/36 Passenger Cost/trip 86 98 266 100 117 276 Passenger Cost/1,000 km 47 59 114 43 SO 119 LRIFC/1,000 km 26 23 LRISC/1,000 km 28 38 125 26 34 102

GuanadonaRail Distance (km)/time (hrs) 147/4 220/6 Passenger Cost/trip 19/d 19 37 18 21 48 Passenger Cost/1,000 km 129 142 266 82 96 218 LRIFC/1,000 km 47 29 LRISC/1,000 km S3 67 189 41 56 177

/a Out-of-pocket costs plus value of time door-to-door. Fares include a Y 2 (up to 300 km) or Y 7.6 transfer long distance. /b Air-conditioned minibus (private). /c No road service exists at present. Future travel time estimated using 50 kph average speed. /d LRISC and LRIFC assum better road conditions and speed (80 kph). /? Shenzh-n fare for hard seat express service plus transfer cost. Note: Figures are for 1988 conditions for door-to-door transport as specified in the annex.

Source: ICT Interim Report for time and distance data, and the annex for LRIFC and LRISC. - 116 -

Table 37: COAL SHIPPER'S COSTS BY MODE (a) COMPARED WITH LRIFC AND LRISC (1990 Y per 1000 tkm)

Mode 50 100 500 1000 1500 2000 3000 Distance (km)

1. Road

Shippers' Cost (b) 240 240 240 240 n.a. n.a. n.a. Carriers' Cost (LRIFC) (c) 219 173 136 132 n.a. n.a. n.a. Social Cost (LRISC) (c) 136 118 103 103 n.a. n.a. n.a.

2. Rail

Shippers' Cost (d) 138 69 27 22 20 19 18 Carriers' Cost (LRIFC) (d) 94 55 24 20 19 18 17 Social Cost (LRISC) (d) 103 63 31 27 26 25 24

3. Barge (110 dwt/1000 dwt)

Shippers' Cost (e) 122/95 84/63 65/n.a. n.a. n.a. n.a. n.a. Carriers' Cost(LRIFC) 174/131 113/80 64/30 58/30 56/34 n.a. n.a. Social Cost(LRISC) 153/153 106/99 68/55 64/49 62/48 n.a. n.a.

4. Coastal Ship + Rail (630 1la) (10,000 dwt/30,000 dwt)

Shippers' Cost ni.a. n.a. n.a. 46 33 28 20 Carriers' Cost(LRIFC) Tl.a. n.a. n.a. 55/49 43/36 35/29 28/22 Social Cost(LRISC) ii.a. n.a. n.a. 83/63 61/43 50/34 39/25

(a) Freight tariffs with no transfer cost, assuming delivery at site except that port charges are irLcludedfor coastal shipping. (b) Transport costs are for a trucking company using 25 ton Semi-trailer trucks, (c) LRISC and LRIFC assume better road conditions and speed (60 kph). (d) If the destination is not at siding a delivery cost by truck must be added. (e) Barge tariffs are for tbhelower reaches of the North River (110 dwt) & West River (1,000 dwt) barge.

Note: Figures are for 1990 conditions assuming delivery at site/siding

Source: China Water Transport Sector study, MR and Guangdong Province Planning Commission for tariff data, Annex 3 Tables 3.18 and 3.22 LRIFC and LRISC. - 117 -

Table 38: HEAVY FREIGHT SHIPPER'S COSTS BY MODE (a) COMPARED WITH LRIFC AND LRISC (1990 Y per 1000 tkm)

Distance (km) Mode 50 100 500 1000 1500 2000 2500

1. Road. (25 ton semi-trailer truck)

Shippers' Cost (b) 308 263 229 224 222 222 222 Carriers' Cost (LRIFC) (c) 312 219 145 136 133 132 131 Social Cost (LRISC) (c) 229 164 112 106 104 103 102

2. Rail

Shippers' Cost 2222 1111 236 128 92 73 60 Carriers' Cost (LRIFC) 2181 1099 233 124 88 70 59 Social Cost (LRISC) 2190 1106 240 131 95 77 66

3. Barge (110 dwt/1000 dwt)

Shippers' Cost (d) 2208/1886 1127/986 276/266 n.a. n.a. n.a. n.a. Carriers' Cost (LRIFC) 2261/2217 1156/1124 272/249 162/140 125/103 n.a. n.a. Social Cost (LRISC) 2239/2240 1149/1142 277/264 168/154 132/117 n.a. n.a.

4. Coastal Ship (10,000 dwt/30,000 dwt)

Shippers' Cost (e) n.a. n.a. 326 169 118 90 74 Carriers' Cost (LRIFC) n.a. n.a. 338/334 176/170 121/115 94/88 78/72 Social Cost (LRISC) n.a. n.a. 372/344 195/175 136/119 107/119 89/74

(a) Freight tariffs plus local transfer costs to storage, at origin & destination. per (Y52/ton for rail and barge, Y75/ton for ship and Y2 for road at each end). (b) 22 fen per ton-km plus Y2 per ton transfer charge. (c) LRISC and LRIFC assume better road conditions and speed (60 kph). (d) Barge tariffs are for the lower reaches of the North River (110 ton barge) & West River (1,000 dwt). (e) Guangzhou Shipping Administration tariff plus Y75 local transfer and delivery cost ton shipped at each end.

Note: Figures are for 1990 conditions for door-to-door transport. n.a. - not applicable. Source: China Water Transport Sector Study, MR and Guangdong Province Planning Commission for tariff data, Annex 3 Tables 3.19 and 3.23 for LRIFC and LRISC. - 118 -

Table 39: GENERAL CARGO (LCL) SHIPPER'S COSTS BY MODE (a) COMPARED WITH LRIFC AND LRISC (1990 Y per 1000 tkm)

Distance (km) Mode 50 100 500 1000 1500 2000 2500

I. Road

Shippers' Cost (b) 980 680 368 334 323 317 314 Carriers' Cost(LRIFC) 915 521 206 166 153 147 143 Social Cost(LRISC) (c) 832 465 191 140 125 118 114

2. Rail

Shippers' Cost (d) 2500 1250 286 172 128 108 96 Carriers' Cost(LRIFC) 2261 1145 253 141 104 85 74 Social Cost(LRISC) 2236 1175 253 143 107 88 77

3. Barge (110 dwt/1000 dwt)

Shippers' Cost (e) 1961/19-33 1011/988 266/213 n.a. n.a. n.a. n.a. Carriers' Cost(LRIFC) 2316/2459 1192/1273 293/324 180/205 143/165 n.a. n.a. Social Cost(LRISC) 2276/2310 1175/1187 293/288 183/176 147/139 n.a. n.a.

4. Coastal Ship (5000 dwt)

Shippers' Cost (f) n.a. n.a. 342 162 108 86 70 Carriers' Cost (LRIFC) n.a. n.a. 325 167 114 88 72 Social Cost (LRISC) n.a. n.a. 362 198 143 116 100

(a) Freight tariffs plus local pickup and delivery costs. (b) 30 fen per ton-km plus an average transfer charge of Y17 per ton for local delivery on smaller shipments (LTL) on each end. (c) LRISC and LRIFC assume better road conditions and speed (60 kph). (d) LCL freight rates plus Y52 local transfer and delivery charge. (e) Barge tariffs are for the lower reaches of the North River (110 dwt) & West River (1,000 dwt), and include Y52 transfer and delivery cost per ton shipped. (f) Guangzhou Shipping Administration tariff plus Y75 local transfer and delivery cost per ton shipped. Notes: (1) Figures are for 1990 conditions for door-to-door transport. (2) n.a.- not applicable.

Sources: MR, Water Transport Sector Study and GPPC for fare data, Annex 3, Tables 3.20 and 3.24 for LRIFC and LRISC. - 119 -

Table 40: FREIGHT TRAFFIC FORECASTS BY CORRIDOR AND MOOE (Excluding Marine Foreign Trade Flows) (million tons)

------Forecasts ------Average Growth Actual - Pessimistic - -- Base Case - - Optimistic - 1987 to 2000 1987 1990 2000 1990 2000 1990 2000 Pess. Base Opti. North Corridor Rail 33.53 47.69 87.22 52.01 123.71 59.34 293.36 7.6% 10.6% 18.2% Road 9.66 14.87 28.52 16.44 45.45 19.24 115.42 8.7% 12.7% 21.0% River 1.50 2.06 3.77 2.21 5.32 2.49 11.13 7.3%- 10.2% 16.7% Coastal Shipping (a) 12.88 17.80 31.33 19.15 40.62 21.58 85.77 7.1% 9.2% 15.7% Corridor TotaL 57.57 82.42 150.84 89.81 215.10 102.65 505.68 7.7% 10.7% 18.2% West Corridor Zhanjiang-Guangxi subcorridor Rail 15.56 22.07 39.72 24.02 56.61 27.19 132.48 7.5% 10.4% 17.9% Coastal Ship (a) 6.10 8.11 11.56 8.56 15.61 9.51 28.39 5.0% 7.5% 12.6% Subtotal 21.66 30.18 51.28 32.58 72.22 36.70 160.87 6.9% 9.7% 16.7% Yunan subcorridor River 3.51 4.76 8.58 5.13 11.13 5.77 24.67 7.1% 9.3% 16.2% Road 4.06 7.72 16.44 9.00 29.11 11.17 75.72 11.4% 16.4% 25.2% SubtotaL 7.57 12.48 25.02 14.13 40.24 16.94 100.39 9.6% 13.7% 22.0% Coastal subcorridor Road 2.70 6.12 12.80 7.41 23.79 9.70 62.62 12.7% 18.2% 27.4% Coastal Shipping (b) 2.62 5.67 7.17 5.71 7.29 5.78 7.58 8.1% 8.2% 8.5% Subtotal 5.32 11.79 19.97 13.12 31.08 15.48 70.20 10.7% 14.5% 22.0% Corridor Total 34.55 54.45 96.27 59.83 143.54 69.12 331.46 8.2% 11.6% 19.0% South Corridor Central subcorridor Coastal Ship (a) .8.34 9.89 15.92 10.16 18.01 10.55 26.25 5.1% 6.1% 9.2% Pearl River 10.80 14.00 24.43 14.72 28.46 16.09 52.81. 6.5% 7.7% 13.0% Subtotal 19.14 23.89 40.35 24.88 46.47 26.64 79.06 5.9% 7.1% 11.5% East bank Rail 8.63 14.50 28.68 16.94 53.59 20.83 139.06 9.7% .15.1% 23.8% Road 17.41 31.97 67.80 37.12 123.71 45.77 337.88 11.0% 16.3% 25.6% Subtotal 26.04 46.47 96.48 54.06 177.30 66.60 476.94 10.6% 15.9% 25.1% West bank Road 8.10 12.94 26.50 14.85 49.15 17.97 132.61 9.5% 14.9% 24.0% Corridor Total 53.28 83.30 163.33 93.79 272.92 111.21 688.61 9.0% 13.4% 21.8% East Corridor Shantou-Meixian subcorridor Road 1.44 1.64 2.21 1.69 2.59 1.77 3.92 3.3% 4.6% 8.0%

Han River 3.12 3.76 5.43 3.93 6.95 4.25 12.27 4.4% 6.4% 11.1% Coastal Ship (a) 0.85 1.22 2.21 1.33 3.25 1.52 7.83 7.6% 10.9% 18.6% Subtotal 5.41 6.62 9.85 6.95 12.79 7.54 24.02 4.7% 6.8% 12.1% Meixian subcorridor Road 2.80 3.65 5.86 3.90 8.33 4.31 18.27 5.8% 8.7% 15.5% River 2.55 3.44 4.90 3.81 7.68 4.43 15.93 5.2% 8.9% 15.1% Subtotal 5.35 7.09 10.76 7.71 16.01 8.74 34.20 5.5% 8.8% 15.3% Coastal subcorridor Road 3.20 4.91 8.45 5.59 14.38 6.69 34.80 7.8% 12.3% 20.2% Coastal Shipping (b) 1.00 1.87 1.85 1.96 2.11 2.13 3.57 4.8% 5.9% 10.3% Subtotal 4.20 6.78 10.30 7.55 16.49 8.82 38.37 7.1% 11.1% 18.6% Total 14.96 20.49 30.91 22.21 45.29 25.10 96.59 5.7% 8.9% 15.4% TOTALFREIGHT 160.36 240.66 441.35 265.64 676.85 308.08 1622.34 8.1% 11.7% 19.5%

(a) interprovincial traffic only, (b) intra provincial traffic only. Source: Annex 5. - 120 -

Table 41: POTENTIAL INDUCED FREIGHT FORECASTS IN THE EAST CORRIDOR (million tons per year)

Expected Present Shipped Shipped out induced Selected commodities production out 1987 with project traffic

Iron Ore Mining Lianping /a 0.45 0.45 3.20 2.75 Shiwangfeng 0.83 0.65 1.70 1.05

Cement Plants 1.45 0.80 1.20 0.40

Limestone Quarrying 1.50 0.20 0.30 0.10

Coal Mining 2.20 0.68 1.90 1.22

Other Mining 0.47 0.26 0.39 0.13

Construction Materials and Timber 0.25 0.13 0.20 0.07

Porcelain Ware 0.24 0.16 0.20 0.04

Fruits 0.36 0.20 1.30 1.10

Others 0.30 0.20 0.30 0.10

Total 8.05 3.73 10.69 6.96

/a Dading mine only. - 121 -

Table 42: TOTAL PROVINCIAL FREIGHT FORECASTS BY MODE

A. Unconstrained

Actual --- Pessimistic ------Base Case ------Optimistic- Growth Growth Growth Mode 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate l.Tons Loaded (million tons)

Road 531.6 902.5 1815.1 9.9% 1033.6 3192.5 14.8% 1255.6 8411.5 23.5% Rail 40.6 59.2 109.3 7.9% 65.3 164.4 11.4% 75.4 396.9 19.2% River 99.9 150.6 253.2 7.4% 160.1 320.0 9.4% 177.5 627.7 15.2% Ocean (Coastal) 30.6 39.3 61.8 5.6% 41.4 76.7 7.3% 45.1 140.7 12.4% Ocean 32.0 50.1 105.9 9.7% 53.8 144.8 12.3% 58.3 307.8 19.0% (Foreign Trade) * Total (2) 734.7 1201.7 2345.3 9.3% 1354.3 3898.3 13.7% 1612.0 9884.6 22.1% Total (3) (713) (1,165) (2,258) 9.3% (1,314) (3,772) 13.7% (1,567) (9,596) 22.1%

2. Turnover (bil ton-I=)

Road 16.0 31.6 72.6 12.3% 36.2 127.7 17.3% 43.9 336.5 26.4% Rail 14.0 23.7 61.8 12.1% 26.1 92.9 15.7% 30.2 224.3 23.8% River 19.5 27.1 43.0 6.3% 28.8 54.4 8.2% 31.9 106.7 14.0% Coastal 58.2 -78.7 136.0 6.8% 82.7 168.7 8.5% 90.2 309.5 13.7%

Total (2) 107.7 161.1 313.4 8.6% 173.8 443.7 11.5% 196.2 977.0 18.5%

3. Average Haul Distance (km) I

Growth Growth Growth 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

Road 30 35 40 2.2% 35 40 2.2% 35 40 2.2% Rail 346 400 565 3.9% 400 565 3.9% 400 565 3.9% River 195 180 170 -1.0% 180 170 -1.0% 180 170 -1.0% Coastal 1900 2000 2200 1.1% 2000 2200 1.1% 2000 2200 1.1%

Notes: :L)Growth rate is average annual growth from 1987 to 2000. 2) Excludes air and pipeline which are minor tonnages. 3) Including air and pipeline but excluding marine foreign trade.

* 80% of internationalforeign trade from Annex 5, Table 5.12.

Sources: Table 44 and Annexes 4 and 5. - 122 -

Table 42: TOTAL PROVINCIAL FREIGHT FORECASTS BY MODE

B. Rail Constrained

Actual --- Pessimistic ------Base Case ------Optimistic - Growth Growth Growth Mode 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

l.Tons Loaded (million tons)

Road 531.6 902.4 1829.6 10.0% 1034.8 3237.3 14.9% 1259.4 8600.3 23.9% Rail 40.6 59.5 82.1 5.6% 62.9 100.6 7.2% 68.1 163.6 11.3% River 99.9 150.6 253.2 7.4% 160.1 320.0 9.4% 177.5 627.7 15.2% Ocean (Coastal) 30.6 39.2 74.5 7.1% 42.6 95.6 9.2% 48.6 185.0 14.8% Ocean 32.0 50.1 105.9 9.7% 53.8 144.8 12.3% 58.3 307.8 19.0% (Foreign Trade) * Total (2) 734.7 1201.73 2345.3 9.3% 1354.3 3898.3 13.7% 1612.0 9884.7 22.1% Total (3) (713) (1165) (2,258) 9.3% (1,314) (3,772) 13.7% (1,567) (9596) 22.1%

2. Turnover (bil ton-km)

Road 16.0 31.6 74.3 12.5% 36.3 133.1 17.7% 44.4 359.2 27.0% Rail 14.0 23.8 46.4 9.6% 25.2 56.9 11.4% 27.4 92.4 15.6% River 19.5 27.1 43.0 6.3% 28.8 54.4 8.2% 31.9 106.7 14.0% Coastal 58.2 78.4 164.0 8.3% 85.2 210.4 10.4% 97.2 406.9 16.1%

Total (2) 107.7 160.8 327.8 8.9% 175.6 454.7 11.7% 201.0 965.2 18.4%

3. Average Haul Distance (km)

4,' Growth Growth Growth 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

Road 30 35 41 2.3% 35 41 2.4% 35 42 2.6% Rail 346 400 565 3.9% 400 565 3.9% 400 565 3.9% River 195 180 170 -1.0% 180 170 -1.0% 180 170 -1.0% Coastal 1900 2000 2200 1.1% 2000 2200 1.1% 2000 2200 1.1%

Notes: 1) Growth rate is average annual growth from 1987 to 2000. 2) Excludes air and pipeli.newhich are minor tonnages. 3) Including air and pipeline but excluding marine foreign trade.

* 80% of international foreign trade from Annex 5, Table 5.12.

Sources: Table 44 and Annexes 4 and 5. - 123 -

Table 43: NORTHERN CORRIDOR POTENTIAL DIVERTED FREIGHT TRAFFIC

PESSIMISTICFORECAST - BASE CASE SYSTEM

------Inflow ------Outflow ------1990 1995 2000 1990 1995 2000 Rail 0.27 -11.88 -26.04 0.00 4.83 -1.18 Road -0.13 6.47 13.49 0.00 -4.11 1.01 Ship * -0.14 5.41 12.55 0.00 -0.72 0.17

BASE CASE FORECAST - BASE CASE SYSTEM

------Inflow ------Outflow ------1990 1995 2000 1990 1995 2000 Rail -2.47 -23.44 -47.65 0.00 -1.71 -16.06 Road 1.22 13.49 30.29 0.00 1.51 14.48 Ship * 1.25 9.95 17.36 0.00 0.20 1.58

OPTIMISTIC FORECAST - BASE CASE SYSTEM

------Inflow ------Outflow ------1990 1995 2000 1990 1995 2000 Rail -7.35 -57.06 -152.76 0.00 -21.76 -80.60 Road 3.81 36.86 111.78 0.00 20.18 77.30 Ship * 3.54 20.20 40.98 0.00 1.58 3.30

* Heavy and bulk comioditiesonly.

Note: Rail diversion assumes maximum capacity of 30mt. tons each direction ports are capable of handling the additional tonnage.

Source: Annex 5. - 124 -

Table _44: TOTAL CORRIDOR FREIGHT FORECASTSBY MODE

A. Unconstrained

Actual --- Pessimistic ------Base Case ------Optimistic ---- Growth Growth Growth Mode 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

1. Tons Loaded (million tons)

Road 49.37 83.82 168.58 9.9% 96.00 296.51 14.8% 116.62 781.24 23.7% Rail 57.72 84.26 155.62 7.9% 92.97 233.91 11.4% 107.36 564.90 19.2% River 18.59 28.02 47.11 7.4% 29.80 59.54 9.4% 33.03 116.81 15.2% Ocean (Coastal) 34.68 44.56 70.04 5.6% 46.87 86.89 7.3% 51.07 159.39 12.4% Ocean 31.96 50.09 105.89 9.7% 53.84 144.82 12.3% 58.31 307.85 19.0% (ForeignTrade) * Total 192.32 290.75 547.24 8.4% 319.48 821.67 11.8% 366.39 1930.19 19.4%

2. Turnover (bil ton-ki)

Road 5.92 10.06 20.23 9.9% 11.52 35.58 14.8% 13.99 93.754 23.7% Rail 17.78 31.60 87.93 13.1% 34.86 132.16 16.7% 40.26 319.17 24.9% River 3.63 5.04 8.01 6.3% 5.36 10.12 8.2% 5.95 19.86 14.0% Coastal 6-5.89 89.12 154.09 6.8% 93.74 191.16 8.5% 102.14 350.66 13.7%

Total 93.22 135.62 270.25 8.5% 145.49 369.02 11.2% 162.34 783.43 17.8%

3. Average Haul Distance (km)

Growth Growth Growth 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

Road 120 120 120 0.0% 120 120 0.0% 120 120 0.0% Rail 308 375 565 4.8% 375 565 4.8% 375 565 4.8% River 195 180 170 -1.0% 180 170 -1.0% 180 170 -1.0% Coastal Ship 1900 2000 2200 1.1% 2000 2200 1.1% 2000 2200 1.1%

Notes: 1) Growth rate is average annual growth from 1987 to 2000. 2) Excludes air and pipelinewhich are minor tonnages.

* 80% of internationalforeign trade from Annex 5, Table 5.12.

Sources:Annexes 4 and 5. - 125 -

Table 44: TOTAL CORRIDOR FREIGHT FORECASTS BY MODE

B. Rail Constrained

Actual --- Pessimistic ------Base Case ------Optimistic ---- Growth Growth Growtn Mode 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

1. Tons Loaded (million tons)

Road 49.37 83.69 183.08 10.6% 97.22 341.28 16.0% 120.43 970.32 25.7% Rail 57.72 84.53 128.40 6.3% 90.50 170.20 8.7% 100.01 331.54 14.4% River 18.59 28.02 47.11 7.4% 29.80 59.54 9.4% 33.03 116.81 15.2% Ocean (Coastal) 34.68 44.42 82.76 6.9% 48.12 105.83 9.0% 54.61 203.67 14.6% Ocean 31.96 50.09 105.89 9.7% 53.84 144.82 12.3% 58.31 307.85 19.0% (Foreign Trade) * Total 192.32 290.75 547.24 8.4% 319.48 821.67 11.8% 366.39 1930.19 19.4%

2. Turnover (bil ton-kI)

Road 5.92 10.04 21.97 10.6% 11.67 40.95 16.0% 14.45 116.44 25.7% Rail 17.78 31.70 72.55 11.4% 33.94 96.16 13.9% 37.50 187.32 19.9% River 3.63 5.04 8.01 6.3% 5.36 10.12 8.2% 5.95 19.86 14.0% Coastal 65.89 88.84 182.07 8.1% 96.23 232.83 10.2% 109.22 448.08 15.9%

Total 93.22 135.62 284.59 9.0% 147.20 380.06 11.4% 167.12 771.70 17.7%

3. Average Haul Distance (km)

Growth Growth Growth 1987 1990 2000 Rate 1990 2000 Rate 1990 2000 Rate

Road 120 120 120 0.0% 120 120 0.0% 120 .120 0.0% Rail 308 375 565 4.8% 375 565 4.8% 375 565 4.8% River 195 180 170 -1.0% 180 170 -1.0% 180 170 -1.0% Coastal Ship 1900 2000 2200 1.1% 2000 2200 1.1% 2000 2200 1.1%

Notes: 1) Growth rate is average annual growth from 1987 to 2000. 2) Excludes air and pipeline which are minor tonnages.

* 80% of internationalforeign trade from Annex 5, Table 5.12.

Sources: Annexes 4 and 5. - 126 -

Table 45: FORECAST GROWTH IN PASSENGER TRIPS BY TRANSPORT CORRIDOR BASE CASE SYSTEM WITH NORTH CORRIDOR RAIL CONSTRAINTS (millions)

Pessimistic Base case Optimistic Actual forecast forecast forecast 1987 2000 Growth 2000 Growth 2000 Growth Trips Trips rate (Z) Trips rate (Z) Trips rate (Z)

North Corridor 30.6 69.4 6.5 102.2 9.7 247.7 17.5

West Corridor 53.4 165.1 9.1 285.6 13.8 781.6 22.9

Maoming Route 33.2 108.9 9.6 191.4 14.4 553.8 24.2

Yunan Route 20.2 56.2 8.2 94.2 12.6 227.8 20.5

South Corridor 110.5 437.9 11.2 797.0 16.4 2,427.3 26.8

Pearl River 1.6 3.8 6.9 5.6 10.1 9.5 14.7

East Bank 79.6 331.4 11.6 602.0 16.8 1,834.6 27.3

West Bank 29.3 102.7 10.1 189.4 15.4 583.2 25.9

East Corridor 40.8 97.8 7.0 158.7 11.0 407.6 19.4

Coastal Route 28.6 70.3 7.2 114.7 11.3 292.2 19.6

Meixian Route 12.2 27.5 6.5 44.0 10.4 115.4 18.9

Total 235.3 770.2 9.6 1,343.4 14.3 3,864.2 24.0 Table 46: TOTAL CORRIDOR PASSENGER FORECASTS BY MODE FOR GUANGDONG PROVINCE

Forecasts Actual Pessimistic Base case Optimistic Growth Growth Growth Mode 1987 1990 2000 rate (Z) 1990 2000 rate (Z) 1990 2000 rate (Z)

Traffic (mln trips) Road 176.20 302.36 630.17 10.30 340.15 1,144.28 15.48 403.16 3,444.84 25.70 Rail 36.13 62.57 94.11 7.64 67.19 133.47 10.57 84.22 292.35 17.45 Water 22.60 29.78 43.56 5.18 31.81 60.92 7.93 33.50 111.55 13.07 Air 0.40 0.90 2.32 14.48 1.05 4.69 20.85 1.31 15.43 32.44

Total 235.33 395.61 770.17 9.55 440.20 1,343.36 14.34 522.19 3,864.18 24.02

Turnover (bln pass-km) Road 21.14 36.28 75.62 10.30 40.82 137.31 15.48 48.38 413.38 25.70 Rail 5.96 12.04 24.28 11.41 12.93 34.44 14.44 16.20 75.43 21.56 Water 1.87 2.46 3.60 5.18 2.63 5.03 7.93 2.77 9.22 13.07 Air 0.36 0.80 2.06 14.48 0.94 4.18 20.85 .1.16 13.73 32.44

Total 29.33 51.5 105.57 10.35 57.31 180.96 15.02 68.51 511.76 24.60

Average Trip Distance (km) Road 120.0 120.0 120.0 0.0 120.0 120.0 0.0 120.0 120.0 0.0 Rail 165.0 192.4 258.0 3.5 192.4 258.0 3.5 192.4 258.0 3.5 Water 82.6 82.6 82.6 0.0 82.6 82.6 0.0 82.6 82.6 0.0 Air 890.0 890.0 890.0 0.0 890.0 890.0 0.0 890.0 890.0 0.0 Table 47: TOTALPROVINCIAL PASSENGER FORECASTS BY MODEFOR GUANGDONGPROVINCE

Forecasts Actual Pessimistic Base case Optimistic Growth Growth Growth Mode 1987 1990 2000 rate (X) 1990 2000 rate (%) 1990 2000 rate (%)

Traffic (min trips) Road 642.23 1,102.07 2,296.91 10.30 1,239.79 4,170.76 16.48 1,469.48 12,566.07 25.70

Raii 30.13 62.61 94.11 1.64 87.19 133.47 10.b7 84.22 292.35 17.45 Water 27.83 36.88 53.64 6.18 39.17 75.02 7.93 41.26 137.37 13.07

Air 3.09 6.93 17.92 14.48 8.14 36.24 20.85 10.10 119.21 32.44

Total 709.28 1.208.25 2,482.69 10.06 1,364.30 4,416.60 16.10 1.606.06 13,105.00 26.16 Turnover (bIn pass-km)

Road 30.31 66.10 137.81 12.36 61.99 2S0.25 17.64 73.47 753.36 28.04 Rail 6.96 12.04 24.28 11.41 12.93 34.44 14.44 16.20 76.43 21.66 Water 2.30 3.03 4.43 5.18 3.24 6.20 7.93 3.41 11.36 13.07 Air 2.76 6.17 16.94 14.48 7.24 32.26 20.86 8.99 106.10 32.44

Total 41.32 76.34 182.46 12.10 85.40 323.14 17.14 102.07 946.24 27.23

Averase Trip Distance (km)

Road 47.2 60.0 60.0 0.0 50.0 60.0 0.0 60.0 60.0 0.0

Rail 166.0 192.4 268.0 3.6 192.4 268.0 3.5 192.4 258.0 3.6

Water 82.6 82.6 82.6 0.0 82.8 82.8 0.0 82.6 82.6 0.0

Air 890.0 890.0 890.0 0.0 890.0 890.0 0.0 890.0 890.0 0.0

Source: Table 46. - 129 -

Table 48: NORTHERN CORRIDOR POTENTIAL DIVERTED PASSENGER TRIPS PASSENGER TRAFFIC - BASE CASE SYSTEM (million trips)

1990 1995 2000

Pessimistic Forecast: Rail 0.00 0.00 3.62

Road 0.00 0.00 3.62

Base Case Forecast : Rail 0.00 -5.93 -17.57

Road 0.00 5.93 17.57

Optimistic Forecast : Rail -2.00 -31.88 -79.41

Road 2.00 31.88 79.41 - 130 -

Table 4± : SUMARY OF PROPOSEDINVESTMEr PROJECTS ROADS

financial coat rang. 1987 E.tiated Target of Langth (in 1988 yuan) traffic leaal traffic growth RR Road Saction projact (ha) (million) (nah./day) (1985-92) (X) (5)

Earl River Delta Ouangzhou-Shenzhan-Zhuhai Ouangchcu-Shanzhan a Eupraaaaay 120 2 399 9 033 21 Ouangzhcu-Zhuhai Lk Expraaaaay 182(7) 3,331 11,205 18 Ouangzhou-Foshan Exproaxay 23 155-160 32,000 16.0 73 4 lanaa Ouangghou-Zhuhai Ch-nchuwn-Zhuhai Ranog 68 135-137 11,000 5.0 17

Foshan-Zhongalhn Hehan-J;angmen Upgrading. 30 86-88 6,900 21 Clan I Jiangan-Zhongahan upgrading, 37 110-120 4,200 16 Clan0 I

Ouangzhou-Zhuhai Upgrading, 126 365-370 Clan I Ouangzhou Exit. Kachun-Luo.i NO.: Clasn I 4 11-12 10.956 Zhongchuan-Chanchuan NMa Clan II 10 28-30 12,855 Jidag-DO hadi Upgrading, 11 30-32 8,999 Clanss

E-at Corridor Shanzhan-Shantou Shanzhan-Huidong-Shantou I Clan I Motorway 295 2,500-2.940 7,752 14.0 21-25 Danahui-Huidong Clan I LS 35 100-103 4,100 18 Ouangzhou-FPnahuiguan Ouangzhou-Shantou Upgrading, 439 1,180-1,190 Clans II Of which: Intar- 43 95 4,307 * aactionea4 Shantou-FPngahuiguan Upgrading, 62 165-170 9,300 Clan II Or upgrading. 62 70-75 9,300 34 Claaa III Guanqghcu-Nai ian Meixian-Longchuan Upgrading, 100(?) 260-280 2,709 11.0 30 clans II LOngchuan-Xingzhoutang Upgrading, 195 525-527 5.300 30 Clans II Of which: Hayuan-Maixian a Clan II 180 120 1,987 Ouandu-Shantou Shantou-Chao'an Upgrading, 43 85-87 Clans II Chao'an-Xingl ing Upgrading, 157 310-315 Clans II Nuizhou-Shenzhan Hu;zhou-Yantian az Clan I Motorway 64 487 2,193 Pingyuan-Shantou Pingyuanl.. n;ian ax Cla- II 108 10 2,118 Ouangzhou-Huidong Ouangzhou-Huidong LI Clan II 180 1,370 7,338

Woot Corridor Ouangzhou-Zhanjilang Fohan-Heaahn EXpram-wy 17,200 19.2 (41. 210) Hlahan-Kaiping a Exprassay 106 2,200 9,900 11.8 19 (2.789) Kaiping-Shuini fL Expranway 354 3,923 8,200- 11.8-13.4 11-14 10,200 Ouangzhou-Fangkai Shaoqing-Fangkai az Upgrading, 160 130 3,314 Clan II Guangzhou-Zhaoqing Sanahui-Zhaoqing Lk Motorway 69.5 451 13,818 Cuanghbou-Zhanj;ang Heahan Section ax Upgrading, 70 130 8,838 Clan II Ouangzhou-Haian Ouangzhou-Zhaoqing Upgrading. 93 250-282 30 Clan II North Corridor Ouangzbou-Shaoguan Cuanghzou-Huaxian a Clan I Motor-ay 22.6 190 11,832 Oungzhu-Pwgang La Upgra.dln7. 66 180 3,461 Fogang-Oankou Upgrad;ng, 80 95-97 4,500 26 Clan0 III Cusngzhou-Jianghua Ouangahou-QingyuSn Upgrading, 66 170-183 9,000 34

Ouangahou-Xiaotong Qingyuan-Xiaotang Upgrading, 279 750-760 Clans It a Proposd for Eighth Fina-YearPlan. Proposed for Ninth FPi.-Year Plan. If apaeial road (potoray) ia built, than clan II. - 131 -

LL249 SUMA4RYOF PROPOSWEDIhVESTT PROJBS: RAILWAYS

t E£tisted 1967 EstimtiedLa Op i_I Thrg.t af Length cost ring. traffic traffic Capacity ER Opining Reilay or ect in project (k.) (in 1988 Yuan) 1*mu growth (t) (min ton.) (%) Yoar million 1990-95

B*.jing-Quangshou Electrificition 310 3.3 bIn 33.53 /b 3 50 nM.. n.* un ton.

0uangzihou-ShmnsFn Electriofsetion 148 326 in 8.03 2b 15 50 ni. 1997 min tons

Litmng-Thinjling Technical 315 1,000 wIn 15.55 Lk 10 24 n.- n.i. Reno.ation min tons (Doubling)

Cuangzhou-Snshui upgradingfroa SS 120 sin nM. ni. 15 n.i. by 1990 Lk class IV to clues I

Ynogu-Maosi ng Ni. Construction 233 640 na. n.a. 8-10 na. by 1990 Lk wIn tons 238 900 9 /b i1n tons 4P (233) (670) 8-10 win tons Ounn9zho-Mawixian-Shuntou Now Construction 427 1.4 bin na. 6.0 7-8 /b 468 2 bin min tons (a) Hulzhou-Xiantvngxi 34 1990 (b) Xlengtingxi-;Mi;ian 39 1990 (c) Shokang-Shantou 27 1995

Oungszhou Northern Expansion na. n.i. 4,246 6.1 1990 harshalling Yafd wagon,

Jiangchuan Mirshaiting Me. Construction is 100 mIn M.S n.i. n.i. n.a. ni. Yard

Second Railway Station of ouangzhou NMwConstruction na.n na. M.S. na. na. ni. 1995 Lk

Jlianbchun-XiqYu.n By-Pi. Ni Construction nM.. n... n.. a... n.S, ..a. 1995n Rail road 2000 Lb

Henyong/OGungxhou Ei-etrifi ation 3B0 552 33.52 na. 60

OuangzhouStation II 15,000 100

La Should be repli ed by date of 1990-93. L Plus pesaungir train, 20-30 pairs por day for mili line, and 10-1S pairs par,day for local lins.

Sourci: ICT tnteris Report, Table 117. - 132

Tabil 4: SUJtARY OP PROPOSEDINVfiTMENT PROJECTS: RIVRRPORTS (now berth construction and channal Improvement In major rivarports)

Actual and Maximum Estimated Location eti mated Totxl Ship size coat range Optiali (county throughput capacity accommodated (in 1986 yuan) opening Port or city) Stage. (min tons) (mIn tons) (dwt) (million) ERR year

Shiqiao Panyu 1985/z 1.79 nMa. n.a. nM.. n.a. n.a. 1 1990 1.97 2.00 500 na. n.a. n.a. II 2000 2.44 2.50 500 na. n.s. n.a. foehan Fuahan 1985 0.94 n.a. n.a. I 1990 1.10 1.10 500 39.57 94.94 1989 It 2000 1.40 1.40 1,000

Xlaotang Nauhai 1985 n.. nMa. n.a. n.a. n.a. a.D. I 1990 n.a. 0.46 500 n.a. n.m. n.a. II 2000 n.a. 1.80 1,000 n.a. n.S. n.a.

Rongql Shunde 1965 na. n.. 1.000 n.a. n.. n.a. I 1990 2.25 2.40 1,000 n.a. n.S. n.a. II 2000 2.68 3.00 1,000 n.a. n.m. na.

Zhong.hon Zashn 1985 0.90 n.a. 5,000 n.a. I 1990 1.08 1.19 S000 26.39 n.m. 1990 U1 2000 1.43 1.83 5,000 n.S.

Qi.nShan Zhuhai 1985 0.47 0.47 150 n.S. 1 1990 0.87 0.87 SO 20.00 n.s. 1990 II 2000 0.80 nM.. 500 n.a.

Onoona Jiangmen 1985 170 teu n.s. 1,000 n.a. 1990 20,000Otu 20,000 tau 1,000 11.13 47.32 1989 2000 80,000 tu 80.000 tau 3,000 19.10 Tian"n Xinghu; 1985 0.23 n.a. 500 n.S. 1990 0.50 0.54 8,000 34.72 na. 1990 2000 2.00 2.00 5,000 130.00 Sanrong Zhaoqing 1 1990 0.20 n.S. 1,000 n.s. n.m. n.a. tI 2000 0.50 o.8o 1,000 n.M. n.S. n.S.

Ji*yang Shantou 1985 0.58 n.S. <150 n.m. n.m. n.m. 1I 1990 0.65 nMa. SOO n.. n.M. n.a.

Lit 1985's dJet should be replaced by 1988's data.

Source: ICT Interim Report. - 133 -

T ki 4l: SUMMARYOF PROPOSEDINVeSTMT PROJETS: INLANDWAT1WAYS (198S-2000)

boti anted

water dit Length (in 1968 yuan) -R opening Rb'er Channel depth (i) (tons) (km) Rehabilition million) () yor west Rlver PIengki-SInimnjlo >2.5 1,000 n.m. na, n.e. SinionJio-Moudaomen 139 Cla". III 31.0 n.m. n.m.

Pearl River hetwork Dongplng 2,5 1,000 n.a. n.m. Chtnchun 2.0 1,000 n.s. n .. Thnjlene 3,0 1,000 nA.. na Llmnsharong 2.5 1,000 87 Class III 11.0 nM.. n.s. (LI nhumahen-Nenhum) Qiionshn 2.5 500 28 Cie" IV 19.0 n.m. n,. (Li n,hlilwon-ShU imo*hu;) Sh1,eio 2.5 500 eh.ni I's 100 Lower reach of East River n.m. 100 0uengghou Southern Webermey 4.5 5,000 Liji;n 4.5 5,000 Yemen entrance 3B Clas. III 92.0 n.m. nM.. (Yanan-Hehu Iland) Futiaoen 43 Class IV 26.0 n.m. n .. (Ymnggumn-ei zh.ntou) Jisangon 25 CIw.. IV 57.0 n.m. n.s. (Beijekou-Xionghmikou) Shi lan 45 Class III 26.0 n.m. n.s. (YIngk.zhui-Nenhum)

North Rir Limnji.nehok-Sanmh,u 1.2 100

Hen River Down from Chaozhoru n.,. nM..

Ron0 Riv., Down fro. Jieymng nM.. n.S.

Source: ICT Interie Report. - 134 -

TabIe 49s: StUMARYOF PROPOSEDINVSTBMET PROJECTS: SEAPORTS

Actual or estimated Estimated Stags throughput Number Capacity cost range ERR Port (year) (mSI tons) Project of berths (Cal ton) (in 1988 Yuar) (#) lhjangpu 1988 /L 32.91 43 15.29 1-1.2 billior 24lb 1990 26.25 construction of new berths 43.11 27.39 2000 37.00 nae berths 43.11.5 37.80 100-200 million n.a.

Zhanjiang 1988 15.31 22 15.50 - n.a. 1990 15.10 nec barth 22.1 15.75 20- 30 million n.s. 2000 24.40 nec b-rth 22.1.7 24.15 20- 30 million n.S.

Ouan.gzhu 1987 8.93 98 21.01 - n.a. 1990 8.85 channel improvement. neo berths 98.7 26.73 n.s. n.a. 2000 8.05 ne. berth 98.7.20 31.81 20- 30 million n.e.

Shantou 1988 2.86 8 3.60 - 1990 2.70 nec berths 8.1 7.10 500-800 million n.N. 2000 n.e. nec b-rtha 8.1.8 8.40 60-100 million n.N.

Shou 1987 16 1.40 - na. 1990 2.15 berths under constructior 16.5 2.20 40- 60 million n .. 2000 2.85 nec berthe 1685.9 13.15 40- 60 million n.a.

Chi.an 1987 L is 2.69 - n.a. 1990 1.75 nec berth 15.1 3.44 20- 40 million n.N. 2000 2.35 ncc berth. 15.1.1 4.12 40- 60 million n.e.

Macan 1987 0.0 0 0 - n.e. 1990 1.2 ne. berths 2 0.715 400-500 million n.e. 2000 2.2 nec berths 2.2 1.42 40- 60 million n.e.

Yantian 1990-2000 nca port 3 0.80 2000 1.2 3.3 2.80 600-900 million n.a. 3.3.1 12.80 SOOmillion n.e.

Jiouuhou 1987 M.a. 11 0.80 - n.e. 1990 0.75 en. berths 11-5 1.50 200-400 million n.a. 2000 2.20 nee berth. 11.5.7 2.90 300-600 million n.e.

La Shekou plus Chican totalled 5.09 million tons in 1987.

Lk In 1988.

Soure,: ICT Interim Report. - 135 -

Table 49f: SU4MARYOF PROPOSEDINVESTMEW PROJECTS: AIRPORTS

1988d Estimated Estimated Traffic traffic growth co.t rngo ERR Optimum A;rporb Project lenl (1o-95) (in 1988 Yu-n) (8) openin ear million

Ba;yun new terminal building 5 illion nWe n a before 1990

conetruction of two fr-ight district. na na n.e. before 1990

Shenzh.n airport construction n.D. n.a. SOO n.e. feinian airport construction n n.a. nM.. n..

Zhanij;ng expansion n.a. n.e. n.e. n..

Shantou *epna;ion n.e. n.e. n.e. n..

So-rce ICT Interim R.porb. - 136 -

Table SO: PRELIMINARY PROJECT ECONOMICEFFICIENCY RANKING

Cost/km Total Dist. Optimum Year to cap. 1988 Dist. (Y'OO0) cost sac. ERR NPV/km opening if open in No. Project type AADT (km) (1990 p) (Y min) (%) (Y'000) NPV/CC year base year

1 Pvmt. overlay on flat-roll C III >1,500/ 500 218 109 0 94.8 3,843 17.63 Now >2008

2 Pumt. overlay on flat-roll C II >2, SOOjj 1,500 327 491 0 103.6 5,555 16.99 Now 2006 3 Paving macadam roads (hi lly) >2,000/r, 3,000 538 1,614 10 77.4 8,451 15.71 Now 2002

4 Pvmt. overlay on hilly C III >1,500/x 500 218 109 0 94.4 2,604 11.94 Now 2003

5 Pvmt overlay on hilly C Il >2,500/r 1,500 327 491 0 102.9 3,134 9.58 Now 2000 6 Paving macadam roads (hilly) >1,000/a. 2,000 538 1,076 10 45.8 4,059 7.54 Now 2006

7 Pingyuan-Meixian-Jieyang C II 2,450 218 1,342 293 20 33.9 6,570 4.90 Now 2007

8 Ruyuamn-GuanrgKlborder C III 2,250 251 835 210 10 53.8 3,868 4.63 Now >2008 9 Xiantanmgi-Meixian RR NA 118 5,637 664 NA 39.0 28,400 4.51 Now >2008

10 Zhaoqing-Fengkai C II 2,133 201 1,156 232 5 31.0 4,947 4.28 Now 2002 11 Huizhou-Xiantagnxi RR NA 31 10,494 327 NA 34.0 39,400 3.75 Now >2008 12 Heyuan-Meixian C II 3,116 124 1,231 153 5 27.0 4,409 3.58 Now >2008 13 Ouangzhou-Zhaoqing MW 9,582 101 8,500 859 15 30.8 28,015 3.30 1990 2000 14 Danshui-Baiyun SSSR/MW 4,617 33 5,808 192 28 23,5 15,605 2.69 1991 2007 18 Shekeng-Shantou RR NA 42 9,473 399 NA 27,0 24,100 2.54 Now >2008

16 Longgeng-Danshui SSSR/Exp. 4,283 23 8,902 208 26 22.2 20,703 2.33 1994 2007 17 Hesan-Jiangmen NW 5,912 15 8,100 122 15 22.0 16,526 2.04 1994 2004

18 Ouangzhou-Zengcheng MW 5,842 60 8,600 516 15 20.8 15,200 1.77 1994 2005 19 lHaimen-Dahoc SSSR/Eap. 3,567 16 8,940 143 15 18.9 14,142 1.58 1996 2008 20 Bomei-Maimen SSSR/MW 3,833 100 5,808 581 9 18,3 8,643 1.49 1996 2008

21 Heshan-Kaiping MW 4,458 53 8,650 461 14 18.5 11,902 1.38 1996 2005 22 Kaiping-Yangjiang MW 4,090 150 8,650 1,298 15 18.4 11,854 1.37 1996 2005 23 Zengcheng-Baiyun MW 4,500 140 8,000 1,120 15 18.0 10,660 1.33 1996 2007 24 Heshan-Jiangnen C I 7,390 15 10,532 158 5 20.4 13,199 1.25 1994 2002 25 Yangjiang-Zhanjiang MW 3,700 220 8,650 1,903 15 17.1 9,768 1.13 1997 2006 26 Foshan-Heshan Exp. 7,583 53 15,925 846 2 18.0 17,158 1.08 1995 2006 27 Guangzhou-Shaouguan NW 3,125 250 8,500 2,125 15 17.1 9,005 1.06 1997 2002 28 Ksiping-Yangjiang Exp. 4,090 150 11,450 1,718 15 16.5 11,807 1.03 1997, >2008 29 Baiyun-Lufeng SSSR/MW 4,233 32 8,318 266 14 16.5 8,443 1.02 1997 2007

30 Lufeng-Bomei SSSR/MW 4,233 79 8,318 6S7 14 16.5 8,443 1.02 1997 2007 31 Yangjiang-Zhangjiang Exp. 3,700 220 11,450 2,519 15 15.2 9,199 0.80 1998 >2008

32 Shantou-Fens,huiguan C I 5,570 70 10,532 737 5 17.9 7,904 0.75 1993 2004

/a 1989 AADT.

Notes: (1) ERR = Economic Rate of Return, NPV = Net Present Value at 10 percent social rate of discount, NPV/CC = Net Present Value per Yuan of Capital Cost, Exp. = Expressnay, C I = Class I, C II = Class II, C III = Class III, SSSR = Section of Shenzhen-Shantou Special Road, RR = Railroad, MW = Motorway, which in the content of this table is defined to be a single two-lane carriageway, representing the first stage of a full expressway.

(2) There are several port and airport p'ojects that should also be included in this high-priority list but for which data were not ccci lab ls. (3) Base-year AADT of Eup. or MWor SSSR/MW exclude tracto's.

Sources: Growth rates from Table 5.15 and AADT f,rom traffic counts by Guangdong DOC. - 137 - Figure 1 TRANSPORTATIONORGANIZATION IN GUANGDONG PRovNCE

Ter MmNsW Mnsh Chino CMw of RCIKVC" Corminicaflonll ~~~~~~~~~~~~~~~~~~~Aviation~ < t | ConomunWbr4 | ~~~~~~~~~~~~~~~~Admnratinon|

-CluOrgCu Ocecn ShIPOW C4ftVCyV - BAtyra1pcn Guanr mmne sippng eu - 9lafntcu Airport -No.4 Ha EnginesmVOeogn Wstft - Mn Akpat -No, 4 Hobo Engnentna ZhonliovV Atp .I -ulIarvgQer NoAgafn Admnistraflon E Zhuhl H.ilcopter Akat &Jrm ThePlNot Tearn _ _ | w -~~~~~~~TheHOWcMocy POnt NanbongCcntoir. StexvowngnoCarp2ny

_aiways1?ay _ n t

.~~~~~pr ChWoni ChWm a

=uwoA _ _dm~a4,~an_ Oer GU-gemConl ic n __ t

u -ino Ec~~~~~~~~~~~~~~~T.cen -lghwaylTccn$ft Ttryv?~u- Na~iga.lnnAs ng - ,lpt flpo

^,, O K LRLt Lt Polt~~~~~~~~~~H-g M a*cn Port

TheCau~~~ty ~~~aiDMean T. Cloy mnic. W Aota & 8wdom I Dt t dat Tmnt g | G u DbN 9M=tW SwkCU~~~~~~~~Pe~~~Fat Jboh>OMu n l ~ ~ ~ * ~ ~ zR ~ ~ ~ ~ ~ at ~ ~~~~. rnaaX att1ana

2. THion an || kohlpda Nsvad |ia y | I SugI wM V |_ | t |l|t|iOnO or || haemus I el noL -~bof I Ad|lMfe CO>%at"f | | C4cV Naviatio Consmjflan~ ~~ ~ ~ ~ ~ ~~~~Corfriaro ITs lel_C Cerr Lyte IT cit a . How" dt ccrlmu- N-ticn |Ano-ing & aigto

I~~~~~~~~~~~~pf L;io IP> Tm*r

Hth~~~~~~~ppw pn | rr>oTWW% & L~~~~~~~~~~~~~~~~~~~~~~Tik Tow

No*.: t. NWb d pXLiC 1 bWt onnt C now rnr agc and Qtrwdy zcd rjt 2.F,o~0an rnrHuLrchu0 aWabudftotrrriltVly pCNof NrnhcnuXrthc C47 a.tCIow rOCti DY Air fon and CM AiMn Ackt

Souet ICT Intetm PpRt' IUP-1-by Trmn:lpot CMsdon dtPr WWC Bwes- 4352i Figure 2 AVERAGE DAILY ROAD TRAFFIC Guangdong Province

_- National Roads ...... Provincial Roads County Roads 5 -i - Rural Roads

E. 4

0 Ca 0 I0 . z 2

Ca ~~~~~~~~~Yer..... Source:Guangdongof CommunicationsDepartment ksr~~~~~~~~~~~~~~~w......

198019821981 1983 1984 1985 1986 1987~~~~~~~~~ksrw4419 - 139 -

Figure3: Transport DemandForecasting Task Flow Chart

Anajyis of Socio-EcoromicGrowth Trends Guangdow& Courhzy

Fore of Inventoryof IdkionIden. f |Foig Tmde 4 Ba Year Forecast A of Development ForeignTradeROMPyr&jndaj PadGrwt Prjedsand Growthin bCo"Areas wih byC;orrior GVAIOby byCouty Near-Term aIGuangdorngCm" coMAIManCbaI Component Developmervto

AnalyaWow ~~~~~Allocationof Forecastof TOsGrowth FutureGrowtiI Flows, Bewe Gmt andCountwies andTranspor TranstFlows andFlows by Unae by andTransport Commodity indst Unkages Gr.p 9as Ca Location

ForecastofAiayso Intemational Forecast Aranlrt o andTrast Danetic ow Tansport ______onDevelopment

Bam Cm GrOup Traftc BarnCawe - 140 -

FIGURE 4 PASSENGERPERCEIVED COST WITH DISTANCE VALUEOF TIMEZERO 700 -

600

500

400

300

200

100

140 320 520 720 920 1120 1320 1520 1700 1880 2060 2260 2460 Trip distance (km) 0 Alr + Road O Ship a Roil

Source: Table 36 - 141 -

FIGURE 5 PASE0E COSTWITH DISTANCE

260 j 240 lr

220 i 200 ir

180

620

605 40 20

Annex 3 Tabl A3.27 Sourc-e- Table 36 and - 142 -

FIGURE 6 PASSENGERTRIP COST BY VALUE OF TIME

800 G~~~~~~UANGZHIOU-SHANTOU

700

C 600

CL 500 0I 0

20 1 00A i UP

a.~ ~~ ~ ~ ~ ~~~cu fTre2

SoreL Tbe3 - 143 - FIGURE 7 PASSENGER TRIP COST By VALUE OF TIME I.8 T - r- r . -- GUANGZHOU- SHANGHAJ

17, 1.4.

1.3

0 C ~~~~~~~~~~~~~~~~~~~~~~P 00

0. 0

0.2 0.I1

00 1 2 4. 7 8 9 ~1 21 4 51 71 92

VaIlueof rm

Source: Table 36 - 144 -

FIGURE 8A

COAL TRANSPORT COST - UPC

120-

110

100

90-

b 70- 2 60

50 - Coastl ship

0 40

20 -

z ( l OO Odwt)

50 100 500 1000 1500 2000 3000 Haul Distance

Source: Table 37 - 145 - FIGURE 8B COAL TRANSPORTCOST - LRISC (with distance) 150 - X , . - 140 - Road Lg Earge 130 ~~~~~~~~~~~~~Sm.arg

120- 110 ,100 s0 Bo

a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ri . C. Ship 25050 50

40 30 20 10

50 500 1000 1500 2000 2500 3000

Distance in Km.

SOURCE: Table 37 and Annex 3 Table A3.22 - 146 -

FIGURE 9A

HEAVY FREIGHTTRANSPORT COST - UPC 600

Soo -/

400-

Roa, / CL° 300-2 0

Barge = d _0 10 0 I

0 50 100 500 1 000 1 500 2000 2500

Haul Distance

SOURCE: Table 38 - 147 -

FIGURE 9B HEAVY FREIGHT TRANSPORTCOST - LRISC (WITH DISTANCE) 320

280- 260- 240 - Lg 220 - C. h 200 -

1 80 s z X | U W | w F W U | -r | F Rail 160

a140 120- Srn. BargeI 100 T

50 40 20

50 500 1000 1500 2000 2500 3000 Haul Distance(kin)

SOURCE: Table 38 and Annex 3 Table A3.23 - 148 -

FIGURE 10A

LCL CARGO TRANSPORT COST - UPC

0.79

0.8

0.7

u I

0.2

-50 100 500 1000 1500 2000 3000 HaoulDistance

SOURCE: Table 39 - 149 - FIGURE lOB

LCL FREIGHT TRANSPORTCOST - LRISC (WITHDISTANCE)

320-

2.80-

23 200C 220- a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ri 60-.

140

120 I 00

50 SOO I 000 1500 2000 2500 3000

Haul Oistance (km)

.SOURCE:Table 39 and Annex 3 Table A3.24

- 151 - ANNEX

Calculationof Long-Run IncrementalCosts by Mode

A. Introduction

1. Three different concepts of transport cost are used in Chapters IV and V to analyze fare structures,price policies, and the ideal roles for each mode of transportin an expanded transport system in the future. The concepts are:

(a) costs as perceived by transport users, based on present actual fares and tariffs (UPC),

(b) carriers' long-run incrementalfinancial costs (LRIFC), and

The first of these is adequately explained in Chapter IV. The other two are defined more fully in this Annex, which also describes how they were quanti- fied and presents the results.

2. Both LRIFC and LRISC are based on the assumption that expansion of the transport system starts from existing conditions and is carried out in such a way as to approach an economicallyefficient end result. Additional traffic is assumed to be carried with the most efficient existing transport technology appropriateto China's resource endowments. Infrastructureis assumed to be built when and where needed to achieve an efficient balance between capacitiesand traffic flows (utilizingexcess capacities first if they are available). Since both LRIFC and LRISC are incrementalcosts, they exclude those costs which do not vary with increased output ("fixed costs").

3. Long-run incrementalfinancial cost (LRIFC) is defined as the cost incurred by the transportoperator or carrier for transportingan additional ton-km or passenger-kmper year under long-run conditions defined in para. 2 on a particularmode. It includes the variable operating and maintenance costs borne by the carrier, valued at existing prices, including all taxes (e.g., road maintenance taxes, vehicle duties and license fees) and user charges for infrastructureprovided by the government or other entities, and reflecting subsidies,if any. Where additional investmentsare required to carry additional traffic, these costs (includingdepreciation and interest) are included in LRIFC, but only to the extent that they are paid directly by the carrier. Costs for transshipmentand local delivery are added for rail, water, and air shipmentswhere road transport is needed to reach ultimate origins and destinations.

4. Long-run incrementalsocial cost (LRISC) is defined as the economic supply cost involved in transportingan additional ton-km or passenger-km on a particularmode under long-run conditions. It includes:

(a) incrementalvehicle, vessel, or train operating cost;

(b) incrementalinfrastructure maintenance cost (routine and periodic);

(d) transshipmentand local pickup or delivery costs for rail, water, and air modes, where appropriate;and

(e) for passenger travel, the value of time.

This annex, however, deals only with the physical cost components, leaving time costs to be added in Chapter IV. In calculatingLRISC, unit costs used for inputs are economic costs, not including taxes, subsidies, or other mone- tary transfers;where appropriate,conversion factors have been applied to correct for distortionsin financial prices where needed to reflect economic opportunitycosts.l/ An economic interest rate (or social rate of discount) of 10 percent per annum has been adopted, in accordance with practice of the State Planning Commission.

5. The components that make up long-run incremental financial cost are shown in the form of equations in the first part of Table 1. The equations differ for differentmodes of transport because, being costs from the carriers' point of view, it makes a differencewhether the infrastructureis provided and maintained by the government (as with highways) or by the carrier (as with railways). The second part of Table 1 shows the composition of long- run incrementalsocial cost. This equation is the same for all modes because social cost is the total economic cost regardless of who pays for it. Note that capital recovery charges always include 10 percent interest on capital at charge in the case of LRISC, but interest is included in LRIFC only where, and in the amount, actually paid by the carrier.

6. Incrementalcosts correspondingto both concepts are specified in detail and estimated for each of five transport modes (road, rail, inland water, coastal shipping, and air) in the following sections of this annex. The cost estimates given in these sections are relatively speculative in nature due to the limitationsof the data collection effort in the field. However, these calculationsreflect the knowledge of the Institute for Compre- hensive Transport (ICT) and of the World Bank (IBRD) as contained in various IBRD Project Appraisal Reports for highway, rail and port projects in China. In addition,these calculationsdraw upon the operating cost relationships containedin the IBRD's HDM.-IIIVehicle Operating Cost Submodel (as modified below) and the IBRD Ship Cost Model, as well as data from experience in other countriesfor certain estimates. These cost estimates are designed to elicit comments and modificationsas a result of further discussions and the acquisition of additionaldata.

B. Highway Transport Costs

7. Incrementalfinancial costs for highway transport are the carriers' vehicle operatingcosts, includingtaxes and user charges. Incremental social costs are the economic costs of vehicle operation (not including taxes or users' charges) plus the costs of incrementalroutine and periodic road main-

1/ See Adrian Wood, "EconomicEvaluation of Investment Projects: Possibili- ties and Problems of Applying Western Methods in China," World Bank Staff Working Paper No. 631 (1984); also Peter Dittus, "EconomicPrices for Project Evaluation in China," unpublishedstaff paper, China Department, World Bank (June 1988), henceforth cited as EPPEC. - 153 - ANNEX tenance and the costs of expanding highway capacity. The procedures and sources for estimating each of these costs follow.

Vehicle Operating Costs

8. The road vehicle operating cost (VOC) calculations were based on an adaptation of the IBRD's Highway Design and Maintenance Model (HDM-III),2/ using data from a recent IBRD highway project appraisal report,3/ which analyzed operating costs for eight vehicle types. The basic data and assumed operating conditions are given in Table 2, together with results for this component of costs.4/ The data correspond to free flow operation in rolling to hilly terrain on a bituminous surface that is maintained--on average--in fair condition. While social costs for most components have been assumed equal to financial costs, the social costs of vehicles and tires are somewhat reduced, as the prices charged by the suppliers are higher than the border prices of equivalent imports, most conspicuously for passenger cars, the import of which is now prohibited.5/

9. The data of Table 2 were used to develop factors for adjusting the HDM model's Brazil-based costs of various components--such as fuel consumption, maintenance parts, tire wear, etc.--to reflect Chinese vehicle fleet composition and operating conditions. The factors, which are presented in Table 3, were applied to the coefficients of the HDM vehicle operating cost submodel. These adjustments lowered fuel consumption, tire wear,6/ and spare parts cost, compared to Brazil, and raised vehicle depreciation costs because shorter haul distance reduced vehicle utilization. On balance the vehicle operating costs thus estimated for China were lower than would have been estimated from the unadjusted Brazil equations.

10. The VOC submodel thus modified was run for a variety of conditions, including three types of terrain (flat-rolling, hilly, and mountainous) with different gradients, curvatures, and elevations, and for two pavement types:

2/ See T. Watanatada, et al., The Highway Design and Maintenance Standards Model, vol. 1, one of a series published for the World Bank by the Johns Hopkins University Press, 1987.

3/ Shaanxi Provincial Highway Project--May 12, 1988.

4/ These data are based on 1988 cost data from an updated version of a VOC analysis carried out in China for the Beijing-Tanggu Expressway Appraisal Report, To a large extent, they are based on the standard VOC analysis of the Ministry of Communications. Some adjustments were made to reflect the projected changes in vehicle types--e.g., use of 25-ton semi-trailer trucks.

5/ Economic costs should be derived from the c.i.f. prices in Yuan for imported vehicles and tires. multiplied on a conversion factor to adjust the exchange rate to its shadow price.

6/ Except for the passenger car, where tire wear appears to be higher than in Brazil. - 154 - ANNEX paved (with bitumen or concrete) and unpaved (macadam or gravel), using the following parameter values:

Bituminous Macadam or Concrete or Gravel Parameter Surface Surface

1. Gradient (road rise and fall) (Z) flat-rolling 2.5 2.5 hilly 4.5 4.5 mountainous 6.0 6.0

2. Curvature (degrees per kin) flat-rolling 100 100 hilly 500 500 mountainous 800 800

3. Elevation (m) flat-rolling 100 100 hilly 500 500 mountainous 1,000 1,000

4. Surface Condition (roughness in m/km) good 2.5 7.0 fair 4.5 10.0 poor 8.0 14.0

11. The resulting vehicle operating costs per kilometer are shown in Tables 4 and 5, respectively, for financial costs and economic costs-- costs to the carrier and economic costs to society, as explained in the introduction. The costs for rolling and hilly terrain were averaged and used in Tables 9 and 10 (Section A) as a component of LRIFC and LRISC, respectively.

Road Maintenance Costs

12. Road maintenance is not part of the direct financial cost borne by the carrier (although taxes and user charges may be intended--among other things--to help finance it). Maintenance is, however, a component of the social cost of vehicle operation as it represents the cost the vehicle causes by wearing down the road surface.

13. Routine and periodic road maintenance costs (updated to Mlarch 1990) in Guangdong Province were provided by the Provincial Department of Communica- tions (DOC), Highway Administration Bureau, and are shown in Table 6 as ranges of costs and ranges of traffic for different road surfaces.7/ According to

7/ According to DOC officials, these costs represent the desirable levels of maintenance that would keep well-designed roads in good condition with the design volume of traffic. The MOC presently budgets maintenance at - 155 - ANNEX these data, the costs for both medium and heavy periodic road maintenance in GuangdongProvince are much more significantthan routine maintenance costs. The frequencyof maintenance is also high compared to that in other countries, probably due to much higher actual traffic volumes and axle loads than original designs anticipatedand to the aging of much of the network; poor quality materials and constructionmethods may also be contributing factors. In any case, the periodic maintenance cost is here attributed fully to traffic wear and tear and assumed to be directly proportionalto traffic volume with the adjustmentfor axle load described below. From the ranges of cost and traffic, formulaewere estimated for each category of maintenance and three types of pavement, giving annual cost as a function of traffic volume. These are shown in Table 6 and were used in deriving the numbers used in Table 10.

14. In applying the data of Table 6 to get incrementalcosts per ton-km for various types of vehicle, account was taken of the differences in axle load among vehicle types. Research in other countries 8/ has related pavement destructionand the consequent replacement requirementsto the axle loads of vehicles, particularlyfor bituminous pavements. To account for this effect, an equivalent standard axle load factor was assigned to each type of vehicle (shown in Table 10, item G) and the unit costs from the formulae of Table 6 were multiplied by the axle load factor for each type. Incremental periodic maintenancecost per ton-km or passenger-kmwas calculated according to the followingequation:

(mc/L,)A, CM = ------v_ A

where: CMV is the road maintenancecost per tkm or pkm for vehicle v mc = incrementalmaintenance cost per vehicle-km Lv = average load for vehicle v Av = average standard axle equivalent load for vehicle v A = weighted average equivalent standard axle load per vehicle for all traffic

Since these periodic maintenance costs are incurred at intervals of several years, the values thus calculatedwere multiplied by a capital recovery factor distributingthe expenditureover the number of years involved, taking into

these levels but cannot achieve good condition because traffic is heavier than design volumes, and because, in some cases. defective materials are used in road construction(e.g., bituminousmaterials with high paraffin content).

8/ For example, by the American Association of State Highway and Transport Officials (AASHTO)in the United States, IBRD and GEIPOT in Brazil, and the Transport and Road Research Laboratory (TRRL) in the United Kingdom. For a review of the literature,see W.D.O. Paterson, Road Deterioration and MaintenanceEffects, one of the HDM series published for the World Bank by the Johns Hopkins University Press, 1987. - 156 - ANNEX account the opportunityvalue of the expenditure.9/ The periodic maintenance costs, adjusted for axLe load and annualized at 10 percent interest were divided by traffic levels to arrive at the long-run incremental social cost for periodic maintenance,for each type of vehicle, as shown in Table 10, item G.

IncrementalCapacity Costs

15. Long-run incrementalcosts were defined above (para. 2) in terms of a transportnetwork that would be expanded to accommodate increased traffic, keeping congestiondown to an efficient level. The cost of expanding the network is not an explicit part of the carrier's financial cost (LRIFC), although taxes and user charges paid by carriers (and hence included in LRIFS) may go partly or totally to pay for road infrastructurecosts. The increinen- tal social cost (LRISC) excludes taxes and user charges and includes the cost of expanding road capacity where necessary to carry the traffic. For intercity roads the expansion is primarily a matter of constructingadditional highways in corridors that would otherwise be excessivelycongested. The following paragraphs describe the sources and methods used for calculating the constructioncost per kilometer and then converting to per-ton-km and per- passenger-kmbasis.

16. The basic data for the analysis were taken from engineering cost estimatesfor highways presently under constructionin China or planned in GuangdongProvince. These irLcluded,within Guangdong, the Foshan-Henan and Henan-Kaipingsections of the Guangzhou-ZhangjiangExpressway, the Shenzhen- Shantou Special Road, the Guangzhou-ZhuhaiClass 1 Highway, and, in other provinces,the Beijing-Tianjin-TangguExpressway, the Xian-Sanyuan National Road, and the Fucheng-YuquanHighway. These data were supplementedwith estimatesof cost per kilometer for different types of road constructionmade by the Department of Communicationsin Guangdong Province.

17. The variation of average constructioncosts by type of terrain was estimatedusing the following factors, based on ranges given in volume 1 of the Highway Design and Maintenance StandardsModel and on discussionswith engineersfamiliar with Chinese constructionstandards and conditions:

9/ Assuming that periodic maintenance is done at a total cost M in the initial year and is effective over a period of t years. the equivalent annual payment, P, based on a rate of interest of i percent per year is:

.J x i P = ------1 - 1/(1 + i)t - 157 - ANNEX

ConstructionCategory Flat-rolling Hilly Mountainous

Land acquisition 1.0 0.8 0.5 Earthworks 1.0 2.0 4.4 Drainage /a 1.0 1.2 1.5 Pavement 1.0 1.0 1.0

/a Excluding large bridges.

18. To provide a basis for applying different adjustment factors to the costs of labor, materials, and equipment, these inputs were assumed to be distributedin the followingproportions among the different construction categories:

Constructioncategory Labor Equipment Fuel & Cement /b Bitumen Lub. - (for bituminous roads) --

Earthworks 33% 33% 33% 0% 0% Drainage /a 33Z 15X 15% 80% 0% Pavement /b 33% 52% 52% 20% 100%

/a Excluding large bridges. /b Other materials are assumed not to vary with terrain.

It was found that the variation in total average cost by type of terrain is insensitiveto minor variations in these proportions.

19. Until this point road constructioncost has been calculated in financialterms, but as a component of long-run incremental social cost it must be converted to economic cost. The financial costs were based on con- structionby a state enterprise,which pays its skilled labor less than its market value, pays unskilled labor more than its market value, and pays conce- ssional prices for cement, steel, and domesticallymanufactured equipment. To correct the financialcosts to economic costs, taxes were excluded and the followingcon version factors (from a March 1990 updating of EPPEC) were applied: - 158 - ANNEX

Skilled labor 2.0 Bitumen 1.0 Unskilled labor 0.8 Other materials 1.0 Cement 3.0 Domestic equipment 1.6 Timber 0.8 Foreign equipment 1.0 Steel 1.9

20. Applying the factors in each of the three sections above to the basic financial construction cost data yielded values for the resource cost per kilometer of construction of each class of road in different terrains (Table 7). For two of the road classes (1 and 2) and an average of rolling and hilly terrain, these costs were converted to cost per passenger-car-unit- kilometer (pcu-km) of added capacity as shown in Table 8. This, being an investment cost, was converted to an equivalent annual payment using a 10 percent interest rate and the same calculation described above for periodic maintenance. (See footnote to para. 14.) Since some parts of the network may initially have some excess capacity, it may not be necessary to expand capacity by the full amount of the traffic growth. How much increase in capacity is needed to accommodate particular trips will vary from one part of the net work to another, and the analysis does not identify which specific roads will carry the added traffic. Therefore three alternative assumptions were made, that 20 percent, 50 percent, or 100 percent of the network would need to be expanded to handle the increased traffic. With each of these alternatives, the annualized cost of road construction per tkm or pkm, CC., was determinied according to the following equation, separately for each vehicle type v:

CCv = p.ec i nv/NiLv

where: ec. = annual capital recovery payment per kilometer for capacity expansion for improvement i N. = annual capacity in passenger car units (pcus) for improvement i Lv = average load for vehicle v p = percent of network expansion required nv = numaberof pcus per vehicle v

The construction-related component of social cost per ton-km and per passenger-km resulting from these calculations is shown as Item H in Table 10. As may be seen, the total LRISC, is not highly sensitive to the assumption about initial excess capacity and the related percent increase in capacity required.

Overall Long-Run Incremental Costs

21. The incremental vehicle operating costs per kilometer for different vehicle types, given in Table 4 in financial terms, including taxes, tolls, etc., were divided by the average load for each vehicle to obtain the long-run incremental financial cost (LRIFC) per ton-km and per passenger-km, shown in Table 9.

22. The VOC components of long-run incremental social cost were similarly derived from the social costs per kilometer given in Table 5 and used in - 159 - ANNEX

Table 10, where they were combined with the long-run incremental social costs of maintenance and of capacity expansion to get total long-run incremental social cost (LRISC) for highway transport for each type of vehicle, shown in Table 10.

C. Railway Incremental Costs

23. Railway incremental costs are composed of variable railway operating and maintenance costs, rail, tie, and ballast replacement costs (periodic maintenance), and incremental capacity costs. The procedures and sources for estimating each of these costs are given below.

Railway Operating and Maintenance Costs

24. The variable railway operations and maintenance costs were estimated starting from the 1988 financial costs of the national rail system as reported by the Ministry of Railways (MR) and published in the Statistical Yearbook of China by cost category. Part of the labor involved in operations and part of the labor in maintenance were assumed to increase in proportion to traffic levels. The materials costs in the MR accounts were assumed to be entirely for routine maintenance and repairs of the infrastructure and equipment used by the railroad.l0/ The energy costs were assumed almost entirely propor- tional to traffic in the long run.ll/ The following proportion of each category was thus estimated as variable with the level of traffic.

Labor 65% Materials 80% Energy 95X

This variable cost estimate excludes nonoperational expenditures, deductions from the depreciation fund for rolling stock maintenance and depreciation, and a relatively small "other cost" category. These costs were updated to March 1990 and divided by the total number of ton-km and pass-km to estimate the variable unit cost in 1990 Yuan.

25. In order to include the long-run incremental costs associated with rolling stock repairs and heavy maintenance, a direct estimate of these costs was made based on MR cost data supplied to the IBRD as part of the preparation of the Fourth Railway Project Appraisal (June 2, 1988), focusing on diesel locomotives, which are used in Guangdong. These data were as follows:

10/ Some of these materials are probably not variable in the long run with traffic levels, but the fixed value associated with maintenance of infrastructure that is not variable is assumed to be small.

11/ Although some energy costs would be for lighting buildings and yards which may not expand with traffic. this is assumed to be a small amount of the total. - 160 - ANNEX

Minor maintenance Major maintenanze Cost Years Cost Years

Locomotive (diesel) 299,000 2 897,000 4 Freight car 3,100 2 6,200 10 Passenger coach 15,000 3 65,000 12

These costs were annualized 12/ with interest at 10 percent and divided by the average annual productivzity from the IBRD's Fourth Railway Project Staff Appraisal Report [97.8 mill.ion.converted traffic-km (assuming 1 freight tkm = 1 pkm) for locomotives, 13.06 million pkm for coaches, and 2.9 million tkm for freight cars) to calculate tWhe cost per tkm or pkm.

26. Similarly, rolling stock depreciation was calculated in terms of replacement costs using figures provided by the Institute of Comprehensive Transport as follows:

Cost Life

Locomotive (diesel) 1,900,000 20 years Freight car 55,000 20 years Passenger coach 216,000 20 years

These costs were also annual.ized and divided by the annual productivity to determine costs per tkm or pkm.

27. Periodic maintenan.ce of the track was assumed to be entirely due to wear and tear resulting from traffic and was therefore related directly to the ton-km of average use over the life of rail and sleeper replacements. The cost per kilometer of these replacements was estimated as follows, based on cost estimates for the Inner Mongolia Local Railway (updated to March 1990):

Cost Life (per kin)

Rail (50 kg) Y 185,000 15 years Fasteners 36,000 20 years Sleepers (concrete) 70,000 50 years

12/ As explained for road maintenance in para. 14 and footnote 9. - 161 - ANNEX

The annualized costs per km in this case were divided between passenger and freight trains in the ratio of 20129 for the mainline, and then divided by an average traffic density of 15 million tons per year for freight trains or by an average load of 1,250 times the number of passenger trains per year for passengers.

28. Finally, incremental capacity costs were calculated as the costs of a mix of rail capacity improvements from the IBRD Second Railway Project, including double tracking, signalization and electrification as shown in Table 11. The average cost of additional capacity realized from these investments was Y 50 per 1,000 ton-km in 1988 Yuan as calculated in the Fourth Rail way Project Appraisal Report, adjusted to Y 58.5 to reflect March 1990 prices (actual price inflation may have been substantially greater for railway capacity costs, but specific price indices were not available). This amount was treated as a capital expenditure with a life of 20 years, and annualized at a 10 percent opportunity cost of capital, as previously explained.

29. Table 12A combines all the foregoing cost estimates (which are in financial terms) and converts them to costs per ton-km and per pass-km, for the national system and for Guangdong Province, leading to overall totals for the long-run incremental financial cost (LRIFC) of rail transport. The difference between the national costs and those for Guangdong Province results from the use of all diesel locomotives in Guangdong, rather than a mixture of steam, diesel, and electric locomotives.

30. in Table 12B are given the conversion factors used to convert financial costs to social costs, and the results of the conversion. The principal difference between the factors applied to the national system and those for Guangdong Province is in the unskilled labor category. It is assumed that wages are at market price (hence at economic resource cost) both in the source data and in the projected future situation in Guangdong Province--hence a factor of 1.0--but that wages nationwide will be higher than the resource cost and will require deflating by a factor of 0.8. Also, small differences are assumed in the transport costs for providing certain materials. The net effect is that social costs in general are significantly (22-26 percent) higher than financial costs, and Guangdong social costs are slightly lower than national social costs.

31. A second set of LRISC's were calculated for new rail systems where more rail infrastructure would have to be built and more new personnel hired in order to establish operations than in the case of an addition to an existing rail line. The incremental cost then includes 100 percent of labor plus the additional amount of fixed infrastructure that would be needed in addition to the capacity costs that apply to existing lines. This was estimated at 200 percent of capacity costs for national rail and 600 percent for local rail companies which would need a completely new organizational structure. These estimates, shown in part B of Table 11. were based on data for the proposed GMS Local Railroad in Guangdong Province. Other adjustments were also made in the rolling stock productivity figures to account for shorter haul distances on local rail lines, and these affected costs associated with rolling stock. The overall results for new lines are shown in the four right-hand columns of Table 12B. - 162 - ANNEX

D. Inland Water IncrementalCosts

32. Inland water transportersuse self-propelledbarges or tug and barge combinationsfor cargo transport. ConsequentlyLRIFC is composed of barge or tug operatingcosts and port fees. LRISC also includes river channel maintenance costs and actual port costs rather than fees.

Vessel OperatingCosts

33. Tug and barge operating costs were calculated for four self-pro- pelled barges (common to Guangdong Rivers) and three tug and barge combinations based on Yangtze River data. The basic operating data and cost data for the tug and barge combinations were obtained by a survey presented in a Shanghai Jiaotong University graduate theses by Shi Gang entitled "Analysis of Inland Water Transport Costs by Cargo Type in the Shanghai-Nanjing Corridor" (December 1985), with prices updated to March 1990. These data were supplemented by Guangdong Province Planning Commission for the smaller three self- propelledbarges, and by irLternationalsuppliers for the modern 1,000 dwt barge. Estimates based on field data in similar countries for fuel consuinp- tion were used where no survey data were available.

34. The vessel operating costs shown in Table 13 summarize the results of cost analysis for the seven tug and barge combinations. The fuel consumption for small barges was calculated on the basis of 0.22 kg per horsepower hour for small barges and 0.17 kg per horsepower hour for modern 1,000- ton barges, with an average of 16 hours of operation per navigation-day. The operating days per year and crew costs per person were assumed to be the same for Guangdong as for Shanghai. The economic life similarly was estimated at 18 years for steel hull barges.13/ The materials costs and repair costs for the smaller barges were estimated from an average of barge and tug costs adjusted for size and horsepower. The purchase prices and crew size were obtained from survey data or for the smaller barges, from Guangdong Province officials.

35. Total costs per year were calculated as shown in Table 13 and divided by an average number of ton-km hauled per year. The number of ton-km per year was estimated by assuming an average speed of 3.7 knots for 170 16- hour days per year, yielding a total distance traveled of about 18,000 km per year. With a 60 percent load factor this comes very close to the 11,000 ton- km per year per ton of capacity which was reported in the China Water Trans- port Sector Study (February 1987). The result is the estimated vessel operating cost per ton-km for inland water transport given in Table 13. The financial costs shown in Table 13, Part A, are also converted to social costs in Part B by (i) using diesel fuel economic prices for small barges and 20 percent less for larger barges, and (ii) using a capital recovery factor with an opportunity cost of 10 percent instead of straight-line deprecia-

13/ There are also wooden barges operating in the Pearl River and Yangtze systems with 10-15 years life but lower capital costs. - 163 - ANNEX tion.141 Other cost items such as labor are assumed to be valued at economic prices and do not need adjustment.

Inland Waterway MaintenanceCost

36. There are no data available on the maintenance of inland waterways in Guangdong Province. However the majority of the river transport tonnage moves in the Pearl River Delta with relatively deep channels, and only minor navigation aids or other maintenance. Therefore this cost is considered neg- ligible overall (althoughit may be important for particular river stretches).

Inland Port Operations,Maintenance and Capacity Costs

37. Port operations,maintenance, and expansion costs are now supposed to be covered by the port charges in each port in Guangdong Province. Conse- quently, for inland waterways, they are estimated to be equal to the present port charges per ton. These charges average about Y 3 per ton at each end of the trip for traffic using public ports rather than other private or informal landing facilities. An average haul distance of 195 km for inland water transport in Guangdong Province gives an average cost of Y 0.03 per ton-km for this category. This amount is under 20 percent of small barge costs, but rises to 50 percent of the cost per ton-km in the largest barge trains with very low costs per ton-km.

38. The various cost components are summed as shown in Table 13 (Part A for financialcosts and Part B for economic or social costs) to arrive at total long-run incrementalcosts. Costs vary widely with vessel size, ranging from about Y 131 per thousand ton-km (for 25-ton barges) down to Y 31 (for 10- barge flotillas) in financialterms. In economic or social cost terms, the range is Y 153 to 36. The higher social costs reflect the higher economic costs of vessels, fuel and repairs.

E. Coastal Shipping IncrementalCosts

39. Coastal shipping in China involves a variety of vessels from 500 dwt to 50,000 dwt. The variable cost of operating these vessels, including their maintenanceand the taxes and port fees charged to them, constitute the financial cost to the carrier. The main additional components of LRISC are port maintenanceand capacity costs while taxes and port fees are excluded.

Vessel Operating Costs

40. All vessel operating costs are considered part of the long-run incrementalcosts of coastal shipping. These were estimated using data and relationshipsstored in the IBRD Ship Cost Model for internationaloperations and adjustingthese data to reflect coastal domestic operations. The vessel data from the model includes the replacementcost of the vessel (converted from US dollars under 1986 market conditions and updated to March 1990 prices), the fuel consumption,the crew size (using the largest available Indian standard),ship repair and maintenance costs. Crew wages including

141 Apparently no interest is paid by operators on equipment purchase according to survey data for barge operators in Shanghai. - 164 - ANNEX benefits were estimated to be approximately halfway between international standards and inland waterway standards, with a seaman's level similar to a skilled worker's wages, and benefits between 100 percent and 150 percent of wages. Provisions were estimated at very low levels (Y 7/person-day) compared with international standards. The resulting costs are dominated by the depreciation cost which amounts to 50-75 percent of total vessel operating costs, as expected.

41. The ships were grouped into smaller vessels and larger vessels. with the smaller vessels assumed to be involved in shorter distance coastal trade, and the larger vessels in the long distance trade. This implied fewer annual kilometers per ship for the smaller vessels due to a higher percentage of port waiting time. An annual kilometrage of 24,000 was assumed for the smaller vessels and 36,000 for the larger vessels, with a 50 percent load factor for both, which reflects the imnbalance of the coastal cargo flows. The cost per ton-km varies by ship size and type of ship as shown in Table 1.

42. The financial costs were converted into social costs in a manner similar to that used for ot:hermodes. For fuel, the international price of $94 per ton was taken as the economic cost. However, most other costs were considered to be at economic prices and therefore there is little difference between financial and social costs except for the use of a capital recovery factor that includes a 10 percent opportunity cost instead of straight-line depreciation, as in the case of inland water transport. Although port fees are excluded from social cost of operation, they are in effect reintroduced as a proxy for port maintenance costs (below).

Port Maintenance and Capacity Costs

43. As in the case of inland ports, seaport operations, maintenance, and expansion costs are now supposed to be covered by the port charges (which were raised by 28.2 percent in March 1990 for domestic cargoes) in each port in Guangdong Province. For economic costs, the capacity costs were estimated independently as shown in Table 15, giving an amount per ton of annual capacity for three types of berth: bulk, general cargo, and container. This amount when treated as a capital cost, amortized over berth life, and averaged over the much longer haul distances of coastal shipping turns out to be a very small fraction of the total. Consequently the port charges were assumed to be roughly equivalent to maintenance costs alone. These charges (from March 1990 revised tariffs) are Y 2.98 per ton plus vessel fees (estimated at Y 0.5/ton) at each end of the trip for traffic using the major ports. An average haul distance of 1,900 km for coastal shipping to and from Guangdong Province gives an average cost of Y 0.0021 for larger vessels and a shorter 600 km haul distance gives a cost of Y 0.0073 for smaller vessels per ton-km. This amount is between 6 percent and 11 percent of smaller vessel costs. but can be as much as 20 percent of the cost per ton-km in the largest vessels with very low costs per ton-km as shown in Table 15.

44. Passenger LRISC for passengers on freight vessels is very difficult to calculate as most costs are related to freight, and passenger transport can be considered a secondary product of the voyage. This means that the only costs attributable to passenger transport on a freight vessel are those crew members who are assigned to passenger services, and the part of depreciation related to passenger quarters and facilities. Deck passengers in particular - 165 - ANNEX incur only marginal costs. For purposes of calculating an average cost to be used in intermodalcomparisons, a range of 5 percent to 20 percent of ship costs are allocated to passengers. The passenger capacity of a 5,000 dwt freighter is assumed to be 500.

F. Air Transport IncrementalCosts

45. Air transport LRIFC is made up of operating costs of the aircraft, includingdirect and indirect costs and depreciation. LRISC differs only in that depreciationis computed differentlyand in that airport maintenance and capacity costs are included instead of airport fees. The airport costs or fees are small relative to aircraft operating costs. Even less data is available concerningaviation costs in China than on coastal shipping. However, rough costs can be estimated for typical aircraft based on international technical data and relationshipsfrom the CAAC reported in the StatisticalYear- book of China.

Aircraft Operating Costs

46. Two main types of aircraft are used to serve Guangdong Province for passengers: jet aircraft for longer distances (either Boeing 737-200 or 757- 200) and a turbo-propaircraft (Fokker 50 assumed here) serving shorter trips. The turbo-propaircraft serves the provincialroutes while the 737 serves the interprovincialtraffic. The operating costs for these aircraft are summarized in Table 16. These were calculated from technical data from ITA (Institutede TransportAerien) and the Guangzhou Aviation Administration, adjusted for Chinese labor costs and indirect cost ratios as shown in Table 16). Chinese costs are in general substantiallyless than international averages. As with other modes, depreciationwas taken on a straight-line basis for financialcost but on a capital-recoverybasis with 10 percent opportunitycost for social cost.

Airport Maintenanceand Capacity Costs

47. Little informationis availableon this subject, but a certain amount is charged by the CAAC for airport service fees. This amount was related to direct operatingcosts in Table 16. It was assumed to cover airport operations and maintenance,but not expansion. An arbitrary amount of 100 percent of service fees was used as a first approximationof airport capacity costs in the LRISC calculation.

G. Variation of IncrementalCosts with Distance

48. The calculationsof LRIFC and LRISC described above and presented in Tables 2-16 are based on an average haul distance for each mode. To ascertain the sensitivityof results to changes in this distance, the variation of LRIFC and LRISC with haul distance was analyzed for selected vehicles of each mode, as follows: - 166 - ANNEX

Freight Passenger

Road transport semi-trailer truck (25 ton) minibus (28 seat) Rail transport Guangdong rail costs Guangdong rail costs Inland water 110 dwt barge n.a. 1,000 dwt barge Coastal ship 10,000 dwt vessel 5,000 dwt freighter 30,000 dwt bulk vessel Air transport n.a. Boeing 737-200

49. The variation of unit cost with distance is related to the fixed and variable components of cost, in particular the proportion of cost associated with the ends of the trip vs. the cost of operation en route. For each of the selected vehicles the proportion of cost that is independent of distance was distinguished from the proportion that varies with distance, on the following basis:

(a) All fuel, maintenance and tire costs were assumed to be totally variable with distance (except for ships and barges, where none of the maintenance and only the part of the fuel consumed at sea or on the river is assumed to be variable with distance);

(b) Depreciation and crew costs were assumed to be partly variable with distance and partly fixed. The percentage of fixed depreciation and crew costs was calculated by determining the optimum time in transit for each mode as a proportion of total time in the year, and multi- plying one minus this proportion by the proportion of depreciation and crew cost in total costs;

(d) Loading, unloading and local transfer costs were added separately to the primary carrier cost to calculate total cost. These are, of course, fixed with distance.

50. The variation of cost with haul distance was computed according to the following formulae:

total cost per ton or Cd = (cr-cf)d + Cf + T + L and Cf = cf dr passenger

unit cost Cf dr + T + L per ton-km Cd = Cr-Cf + --- = c r + cf (dr-1) + T + L or pass-km d d d - 167 - ANNEX

where Cd = cost per ton at distance d Cd = cost per ton-km at distance d Cr = reference cost per ton (at distance dr) d = actual distance dr = average haul distance for reference cost Cf = fixed cost per ton (not varying with distance) Cf = fixed cost per ton-km at distance dr T = transfer cost per ton or passenger L = local delivery cost per ton or passenger

The proportion of cost determined to be fixed for the reference cost calculations was based on the following data concerning percent depreciation and crew cost, the average haul distance, and percent time in transit:

Depreciation Average & Crew Cost Haul % of Time in Transit Mode Type LRIFC LRISC Distance Present Maximum Optimum (Z) (X) (km) /b /b Ic

Road trailer truck 21 23 50 10 67 39 small bus 19 22 30 20 67 44

Rail freight 20 23 660 50 75 63 passengers 33 32 350 50 75 63

River 110 dwt 33 43 195 31 67 49 Barge 1,000 dwt 47 56 195 31 67 49

Coastal 5,000 dwt 18 68 550 38 71 55 Ship 10,000 dwt (bulk) 12 61 550 45 75 60 30,000 dwt (bulk) 40 61 1,900 55 75 65

Air B737 (passengers) 56 61 1,800 29 50 40

/a With efficient operation under present demand structure. /b With optimum haul distance. Ic Average of maximum and present, representing an adjustment of modal demand to optimize the role of each mode within the overall demand structure.

These data were combined with the percent overhead cost to estimate total fixed costs for the primary carrier. as shown below. All secondary carrier costs (transfer and local delivery) are fixed with respect to primary carrier haul distance. - 168 - ANNEX

Primary Carrier XFixed Cost with Distance Secondary Proportion of Carrier overheadand Fixed part of X fixed terminalcosts depreciation Total cost with in costs A crew cost/b X fixed costs distance Mode Type LRIFCLp LRISC LRIFC LRISC LRIFC LRISC (all costs) -_____-.______(X) ------

Road trailer truck 33 9 13 14 42 27 100 small bus 23 9 11 12 34 23 100

Rail freight 14 8 13 13 27 21 100 passengers 12 15 21 21 33 38 100

River 110 dwt 22 12 18 27 38 29 100 Barge 1000 dwt 23 10 23 29 48 39 100 Coastal 6,000 dwt 49 4 9 37 58 41 100 Ship 10,000 dwt (bulk) 27 6 7 37 34 43 100 30,000 dwt (bulk) 28 5 26 40 54 S9 100

Air 8737 (passengers) 18 12 22 24 40 38 100

La Including interestand taxes for all modes and maintenancematerials for ships and barges. /b (100X - optimum % time In transit)times (% depreciationand crew cost).

51. Secondary carrier costs at each end of the trip were estimated as follows:

Cost per trip Primary Passengers Cost per ton Mode Short dist. Long dist. Coal Heavy freight LCL Cargo ------(Yuan) ------

Road 1.2 1.5 0 0 174 Rail 3.0 8.7 0 52 52 Barge - - 0 52 52 Ship 17.4 17.4 9.7 75 75 Air 17.4 17.4 -

From these values, the reference costs per kilometer in Tables 9-11, 13, and 15-16, the percent fixed cost: in the reference costs, and the equation above, Tables 17-20 were calculated for LRIFC and Tables 21-24 for LRISC, showing the variation of these costs with distance for each of the selected vehicles. - 169 - ANNEX

Table 1: DEFINITION OF COMPONENTS OF INCREMENTAL COSTS

1. LRIFC (carrier cost) Secondary Primary carrier Carrier (cost per tkm or pkm) (cost per ton or per pass)

Road transport LRIFC = vc/L + mVJLVKv + oc/L.K. + uc/LvKv H + D + tC/KY + T/PT

Railroad LRIFC = vc/L. + mV/LVKV + oc/L.K.+ tc/Kv H + D + T/PT + mc/ALY + mI/ALY

Inland and LRIFC = vc/L oc/L.K. + uc/LLK. H + D Coastal shipping + tc 7Kv + T/PT

Air transport LRIFC = vc/L + oc/LvKv + uc/LVKV H + D + tclKv + T/PT where: vc = variable cost per vehicle operation per kilometer oc = annual incremental vehicle ownership cost (capital recovery payment for vehicle replacement) uc = user charges per vehicle per year tc = traffic, terminal or transfer cost per ton or per passenger T = taxes per year mc = incremental routine infrastructure maintenance cost per year per maintenance mv = annual capital recovery payment for periodic vehicle maintenance mI = annual capital recovery payment for periodic infrastructure maintenance or replacement due to wear and tear per kilometer Lv = average load per vehicle KY = annual productivity in km per vehicle PT = total organization productivity in tkm or pkm per year A = annual traffic in vehicle/trains per year H = handling cost D = local delivery cost

2. LRISC (all modes)

LRISC = Sv vc/L + S cIKL + S mcIAL + S mv/KL tc Vc ml v C/V m where: ec = annual capital recovery payment for capacity expansion per kilometer N = annual capacity in vehicles or trains S = conversion factor for financial to economic costs - 170 - ANNEX

Table 2: DATA FOR VEHICLE OPERATING COSTS

Vehicle Medium Large Trailer Small Medium Large Characteristics Car Pickup truck truck truck bus bus bus

1. Size 1500 cc <2 tons 4.5 tons 8 tons 25 tons 28 pass 40 pass 60 pass 2. Average load carried 2 1.1 tons 2.3 tons 6 tons 12 tons 28 40 50 3. Number of tires 4 4 4 6 14 4 6 10 4. Km per year 30,000 50,000 50,000 75,000 75,000 65,000 65,000 65,000 5. Life 15 12.5 12.5 9 9 10 10 10 6. Type of fuel gasoline gasoline gasoline diesel diesel gasoline gasoline diesel 7. Avg. fuel consumption * (1/10OOkm) 91 198 270 322 423 198 270 322 8. Tire life (km) * 44,000 25,000 23,000 31,000 35,000 25,000 35,000 40,000 l

Financial Costs (1990 Yuan)

1. Vehicle 211,500 :35,240 58,770 126,350 297,570 90,880 218,390 221,290 2. Tire 700 930 1,040 1,160 1,280 930 1,040 1,160 3. Fuel/liter ** 0.66 0.66 0.66 0.55 0.55 0.66 0.66 0.55 4. Road Maint. veh/km 0.00 0.04 0.13 0.15 0.46 0.06 0.09 0.13 5. Insurance/year 214 243 325 325 394 243 267 348 6. Crew wages/month 180 18o 180 232 348 180 232 232

Social Costs (1990 Yuan)

1. Vehicle 211,550 a 28,100 40,600 94,800 168,900 71,500 141,300 170,200 2. Tire 60 400 520 650 800 400 360 720 3. Fuel/liter *** 0.83 0.83 0.83 0.73 0.73 0.83 0.83 0.73 4. Road Maint. veh-km 0.00 0.04 0.13 0.15 0.46 0.06 0.09 0.13 5. Insurance/year 214 243 325 325 394 243 267 348 6. Crew wages/month 180 180 180 232 348 180 232 232

* rolling-hilly paved roads in good condition

** Financial fuel price of diesel: 702 at Y 540/tonne & 30Z at Y 900 negotiating price gasoline: 70% at Y 725/tonne & 30Z at Y 1300 negotiating price

*** Economic price of fuel diesel: @ US$0.14/liter plus 1O0 delivery cost gasoline: Q US$0.16/liter plus 1OZ delivery cost

(a) Passenger cars are tradable but trade restrictions prohibit import of small cars, as a result this is treated as non-traded.

Source: Memorandum by Ms. Frida Johansen February 12, 1988, Annex 2, modified for vehicle life & km per year - March 1990 prices. - 171 - ANNEX

Table 3: MODIFICATION TO HDM-III VOC COEFFICIENTS FOR CHINA

Small Small Medium Large Trailer Small Medium Large car truck truck truck truck bus bus bus

Fuel Adj. Factor default 1.16 1.15 1.15 1.15 1.15 1.15 1.15 1.15 future 0.99 0.50 0.9Z 1.02 0.81 0.50 0.92 1.02 present 0.99 0.60 1.12 1.12 0.88 0.60 1.12 1.12

Maint. Parts Coefficient (CPO) default 32.49 1.49 1.49 8.61 13.94 1.49 1.49 8.01 new 13.00 1.24 1.24 5.38 8.25 1.24 1.24 5.38

Tire Wear Constant default NT=4 0.16 0.16 0.16 0.16 0.16 0.16 0.16 new NT=4 0.07 0.16 0.13 0.16 0.07 0.16 0.13

Tire wear coefficient default - 12.78 12.78 12.78 12.78 12.78 12.78 12.78 new - 7.00 12.78 10.00 12.78 7.00 12.78 10.00

Crew Time Cost (Salary per mo/176) 1.02 1.02 1.02 1.32 1.98 1.02 1.32 1.32

Utilization Factor default 0.60 0.85 0.85 0.85 0.85 0.75 0.75 0.75 new 0.55 0.75 0.75 0.75 0.75 0.75 0.75 0.75

hours/yr 1,500 1,500 1,500 1,500 2,000 2,000 2,000 2,000 annual km on flat 30,000 50,000 50,000 50,000 65,000 65,000 65,000 65,000

Notes:

Default = Data from Brazil version of HDM-III VOC submodel. New = Coefficients calculated to match Chinese field data as reported by Ms. Frida Johansen (Annex 3 of memo to S. Teravaninthorn of February 12, 1988) Present = Coefficients derived from Chinese research in early 1980's on Jiefeng vehicles. Future = Assumptions based on more fuel efficient vehicles now being introduced. NT = Number of tires in HDM-III input. Note = Bus consumption data are the same as truck data, as they are built presently on same chassis.

Source: The Highway Design and Maintenance Standards Model, Volume 2, IBRD. - 172 - ANNEX

Table 4: FINANCIAL VEHICLE OPERATING COSTS BY TYPE OF VEHICLE & ROAD TYPE (1990 Y per km) a. PAVED

----- GOOD ------FAIR ------POOR ------Flat Flat Flat Roll Hill Mount. Roll Hill Mount. Roll Hill Mount. Vehicle Type

Small car 0.94 0.98 1.00 1.05 1.09 1.12 1.37 1.41 1.43 Small bus 0.55 0.157 0.78 0.66 0.79 0.91 0.88 1.01 1.13 Medium bus 1.03 1.21 1.37 1.30 1.48 1.65 1.78 1.97 2.15 Large bus 1.13 1.:36 1.57 1.30 1.54 1.76 1.62 1.87 2.10 Small truck 0.37 0.49 0.59 0.42 0.54 0.65 0.52 0.65 0.76 Medium truck 0.51 0.66 0.81 0.59 0.74 0.90 0.73 0.90 1.06 Large Truck 0.85 1.07 1.27 0.96 1.18 1.39 1.15 1.39 1.61 Tractor-trailer 1.72 2.22 2.66 1.90 2.41 2.85 2.28 2.77 3.23

b. UNPAVED =--- GOOD ------FAIR ------POOR ------Flat Flat Flat Roll Hill Mount. Roll Hill Mount. Roll Hill Mount. Vehicle Type

Small car 1.27 1.32 1.35 1.67 1.71 1.73 2.28 2.31 2.33 Small bus 0.82 0.97 1.09 1.01 1.87 1.29 1.28 1.44 1.57 Medium bus 1.65 1.87 2.05 2.08 2.30 2.48 2.67 2.89 3.08 Large bus 1.54 1.81 2.03 1.83 2.10 2.33 2.23 2.51 2.74 Small truck 0.49 0.63 0.74 0.58 0.72 0.84 0.70 0.83 0.99 Mediunm truck 0.69 0.87 1.03 0.82 1.01 1.17 1.00 1.20 1.38 Large Truck 0.87 1.10 1.30 0.97 1.21 1.42 1.17 1.42 1.63 Tractor-trailer 1.85 2.33 2.73 2.02 2.51 2.93 2.35 2.85 3.29

Source: Modified HDM VOC Coefficients as given in Table 3 and VOC input tables. - 173 - ANNEX

Table 5: SOCIAL VEHICLE OPERATING COSTS BY TYPE OF VEHICLE & ROAD TYPE (1990 Y per km) a. PAVED ---- GOOD ------FAIR ------POOR ------Flat Flat Flat Roll Hill Mount. Roll Hill Mount. Roll Hill Mount. Vehicle Type

Small car 0.91 0.95 0.98 1.02 1.06 1.09 1.32 1.36 1.39 Small bus 0.59 0.70 0.79 0.68 0.79 0.88 0.87 0.97 1.06 Medium bus 0.93 1.08 1.21 1.10 1.26 1.39 1.45 1.59 1.72 Large bus 1.23 1.50 1.74 1.37 1.65 1.88 1.66 1.93 2.16 Small truck 0.32 0.40 0.46 0.36 0.44 0.50 0.44 0.51 0.58 Medium truck 0.43 0.53 0.63 0.48 0.59 0.69 0.58 0.69 0.80 Large Truck 0.71 0.87 1.03 0.79 0.96 1.11 0.94 1.11 1.27 Tractor-trailer 1.16 1.53 1.85 1.26 1.64 1.96 1.50 1.86 2.19

b. UNPAVED -=--- GOOD ------FAIR ------POOR ------Flat Flat Flat Roll Hill Mount. Roll Hill Mount. Roll Hill Mount. Vehicle Type

Small car 1.23 1.28 1.31 1.61 1.66 1.68 2.20 2.24 2.26 Small bus 0.82 0.96 1.05 1.00 1.13 1.21 1.26 1.37 1.45 Medium bus 1.37 1.56 1.69 1.68 1.86 1.98 2.14 2.29 2.41 Large bus 1.61 1.93 2.15 1.88 2.18 2.40 2.28 2.56 2.78 Small truck 0.42 0.51 0.58 0.49 0.58 0.65 0.60 0.69 0.76 Medium truck 0.55 0.68 1.03 0.64 0.77 1.17 0.78 0.91 1.38 Large Truck 0.72 0.90 1.05 0.80 0.98 1.14 0.95 1.13 1.29 Tractor-trailer 1.25 1.60 1.90 1.35 1.71 2.01 1.55 1.91 2.22

Note: Bus and car social cost includes passenger time cost.

Source: Modified HDM VOC Coefficients as given in Table 3 and VOC input tables. - 174 - ANNEX

Table 6: PROVINCIAL ROADS MAINTENANCE COSTS IN RELATION TO TRAFFIC (1990 Prices)

A. Routine Maintenance Cost (Y per year per km)

Cost Typical Financial Cost Range Traffic Range Routine Maintenance (AADT) Unpaved 4,500 - 5,000 300 - 1,000 4,290 + 0.714 T (Macadam) Asphalt 4,000 - 4,500 1,000 - 15,000 3,960 + 0.036 T Cement 3,000 - 3,300 2,000 - 20,000 2,970 + 0.017 T

B. Periodic Maintenance Cost (lY per year per km) Financial Cost of Medium Heavy Periodic Maintenance* Maintenance Maintenance Avg. Amount Yrs. Amount Yrs Traffic Medium Heavy

Unpaved 8,000 -12,000 1 20,000 - 25,000 2 500 22.00 T 25.93 T (Macadam) Asphalt 80,000 5 150,000 -200,000 8 2,000 10.55 T 16.40 T Cement 80,000 8 250,000 -300,000 20 4,000 3.75 T 8.08 T

C. Social Cost of Road Maintenance (Y per year per km)

Conversion Routine Maintenance Financial Costs Factor Social Costs

Macadam 4,290 + 0.714 T 1.1 4,700 + 0.786 T Asphalt 3,960 + 0.036 T 1.1 4,400 + 0.039 T Cement 2,970 + 0.017 T 3.0 8,900 + 0.050 T

Periodic Maintenance

Macadam 22.00 T 25.93 T 1.1 24.2 T 3.57 T Asphalt 10.55 T 16.40 T 1.1 11.6 T 18.04 T Cement 3.75 T 8.08 T 3.0 11.2 T 24.23 T T = Traffic in average annual vehicles per day (AADT)

* Computed as an annual capital recovery cost with a 10% opportunity cost of capital, divided by average traffic per day. This average number should be weighted by the equivalent standard axle load for each vehicle type.

Note: Financial Costs of routine maintenance calculated in "Preliminary Technical and Economic Analysis of Various Highway Pavements" by a Chinese University for South-Central China were: Macadam: 840 + 2.40 T Asphalt: 870 + 0.58 T. This is somewhat more sensitive traffic than the calculations above. However the effects of routine maintenance are small under either formulation compared with the impact of periodic maintenance.

Source: Cost ranges given by Guangdong Province Department of Communication. - 175 ANNEX

Table 7: UNIT CONSTRUCTION COSTS FOR HIGHWAY INFRASTRUCTURE IN GUANGDONG PROVINCE

B. Highway Construction Costs by Terrain Type (1990 '000 Yuan/km)

------Financial ------Social ------Conv. Road Class Surface Flat-Roll Hilly Mount. Flat-Roll Hilly Mount. Factor (a) Expressway asphalt 8,600-11,800 13,000 17,700 9,600-13,200 14,600 19,800 1.12

Class 1 cement 3,200- 3,900 4,700 6,500 4,100- 5,000 6,100 8,400 1.29 Class 1 bitumen 2,700- 3,400 4,000 5,500 3,000- 3,800 4,400 6,100 1.11

Class 2 cement 2,300- 2,800 3,600 4,800 2,900- 3,600 4,600 6,100 1.11 Class 2 bitumen 1,800- 2,300 3,100 4,300 2,000- 2,600 3,400 4,800 1.11 -

Class 3 bitumen 800- 1,000 1,400 1,900 890- 1,100 1,550 2,110 1.11

Class 4 bitumen 400- 600 800 1,000 440- 670 890 1,110 1.11

Rural Road gravel 220- 270 310 390 240- 300 340 430 1.11

Pavement on cement 600- 800 800 800 880- 1,180 1,180 1,180 1.47 gravel road bitumen 300- 400 400 400 330- 440 440 440 1.11

Notes: (a) Social cost/financial cost calculated according to shadow costs of each commodity. (b) Costs updated by using the domestic inflation factor.

Sources: Project Appraisal Reports for the IBRD projects listed above and Guangdong DOC. - 176 - ANNEX

Table 8: INCREMENTAL HIGHWAY CAPACITY COSTS

Class 1 (4 lanes - asphalt)

a) Annual capacity - 4 lanes x 2000 pcullane-hour x 14.5 = 116,000 pcu daily capacity* 116,000 x 365 = 42.3 million pcu/year.

b) Construction cost - average between flat-rolling and hilly = Y 3.03 mill:Lon/km

c) Unit cost - Capital cost per km = 3.03 Capital Recovery Factor at 10% for 20 year life"* .1175

Annual cost = .3559 Annualized Investment cost per pcu .3559 ' 42.3 = .0084

Class 2 (2 lanes - asphalt)

a) Annual capacity - 2800 pculhour x 14.5 = 40,600 pcu daily capacity* 40,600 x 365 = 14.8 million pcu/year b) Construction cost - average between flat-rolling and hilly = 2.23 million Yuan/km c) Unit cost - Capital cost per km 2.225 Capital Recovery Factor at 10% for 20 year life*" .1175

Annual cost = .2613 Annualized Investment cost per pcu .2613 . 14.8 = .0177

Average Annualized Investment cost per pcu (.0084 + .0177) * 2 = .0130

* A ratio of 24 hour to 14.5 peak hour traffic levels is assumed. (14-15 is typical for major roads in uncongested conditions in Guangdong Province.) ** Capital Recovery Factor is defined as the annual payment which would recover the capital cost plus 10% interest on outstanding balance over a 20 year period.

Note: Expressway is more expensive per pcu-km. Therefore, the average of Class 1 and Class 2 is assumed representative.

Sources: Table 7 and the Highway Capacity Manual (U.S. Transportation Research Board Special Report No. 209). - 177 - ANNEX

Table 9: LONG RUN INCREMENTAL FINANCIAL COSTS OF ROAD TRANSPORT

Road Type : Bituminous Road Surface Condition: Good Financial Costs (1990 Yuan) Terrain : Rolling-Hilly Pick- Medium Large Semi- Small Medium Large Cost Category Car up Truck Truck Trailer Bus Bus Bus

A. Vehicle Operating Costs per 1000 veh.-km 1. Fuel 63 139 179 179 238 139 179 179 2. Tires 44 145 175 214 477 145 175 267 3. Crew Wages 16 18 18 25 38 18 23 25 4. Maintenance Labor 1 4 4 5 12 4 4 5 5. Maintenance Parts 118 28 94 212 539 148 307 367 6. Depreciation 378 22 75 232 469 110 266 279 7. Interest 218 12 41 184 200 47 114 72 8. Taxes and Fees* 1 42 125 147 460 60 851 128 Total Vehicle Operating Costs 839 410 .711 1200 2433 671 1153 1322

B. Organization Overhead Costs (1OZ)** 0 37 59 105 197 61 107 119

C. Total Road Transport Operating Costs 839 447 770 1305 2630 732 1260 1441 (avg load - passengers or tons) 3.0 1.1 2.3 6 12 28 40 50

D. Total Operating Costs per tkm or pkm 279.6 406.8 334.9 217.5 219.2 26.1 31.5 28.8

Average Speed 90.0 70.0 75.0 75.0 80.0 70.0 80.0 70.0 (freeflow conditions)

E. Total Long Run Incremental Costs 279.6 406.8 334.9 217.5 219.2 26.1 31.5 28.8

* License and inspection fees and road maintenance fees (Y115 per ton of capacity or per 10 seats per month). ** Calculated on costs exclusive of taxes.

Sources: Tables 3-8, based on data from Guangdong Department of Communications and IBRD Highway Project Appraisal reports. - 178 - ANNEX

Table 10: LONG RUN INCREMENTAL SOCIAL COSTS OF ROAD TRANSPORT

Road Type : Bituminous Road Surface Condition: Good Social Costs (1990 Yuan) Terrain : Rolling-Hilly Pick- Medium Large Semi- Small Medium Large Cost Category Car up Truck Truck Trailer Bus Bus Bus A. Vehicle Operating Costs per 1000 veh.-km 1. Fuel 80 174 225 238 315 174 225 238 2. Tires 4 62 87 120 298 62 60 166 3. Crew Wages 16 18 18 25 37 18 23 25 4. Maintenance Labor 1 4 4 5 12 4 4 5 5. Maintenance Parts 237 45 65 159 306 117 231 282 6. Depreciation (incl. OCC) 378 36 52 174 243 86 172 214 Total Vehicle Operating Costs 716 339 451 721 1211 461 715 930 B. Organization Overhead Costs (10Z) 0 34 45 72 121 46 72 93 C. Total Road Transport Operating Costs 716 373 496 793 1332 507 787 1023 (avg load - passengers or tons) 3.0 1.1 2.3 6 12 28 40 50 D. Total Operating Costs per 1000 tkm or pkm 238.7 339.1 215.7 132.2 111.0 18.1 19.7 20.5 E. Average Speed (freeflow conditions) 90.0 70.0 75.0 75.0 80.0 70.0 80.0 70.0 F. Routine Road Maintenance 0.4 1.0 0.5 0.2 0.1 0.0 0.0 0.0 (traffic related)/1000 tkm or pkm (av. Y 800/yr/km for 2000 ADT) G. Periodic Road Maintenance (Wear and Tear) per 1000 tkm or pkm 1. Medium Maintenance 6.9 18.9 18.0 8.6 6.9 0.7 0.8 0.8 2. Heavy Maintenance 10.8 29.3 28.1 13.4 10.8 1.2 1.2 1.3 Total Wear and Tear Costs* 17.7 48.2 46.1 22.0 17.7 1.9 2.0 2.1 on Infrastructure Standard Axle Load* wt. av.= 1.53 1.0 1.0 2.0 2.5 4.0 1.0 1.5 2.0 H. Incremental Capacity Costs** per 1000 tkm or pkm 20Z 0.9 4.1 3.1 1.7 1.4 0.1 0.2 0.2 50Z 2.2 10.4 7.8 4.3 3.5 0.3 0.4 0.5 lOOZ 4.3 20.7 15.6 8.7 7.1 0.6 0.9 1.0 Average PCU/vehicle 1.0 1.8 2.8 4.0 6.5 1.3 2.8 4.0 I. Total Long Run Incremental Costs per 1000 tkm or pkm (time costs not included) 2OZ cap. 257.7 392.4 265.4 156.1 130.2 20.1 21.9 22.8 50Z cap. 259.0 398.7 270.1 158.7 132.3 20.3 22.1 23.1 100Z cap. 261.1 409.0 277.9 163.1 135.9 20.6 22.6 23.6

NOTES: OCC = Opportunity Cost of Capital * Periodic maintenance costs vary exponentially with axle load. In the absence of field data, standard axle loads per vehicle were assumed as noted above by vehicle type. ** For expansion of highway width for average of paved road classes, assuming indicated percentage of road length is congested, at a capital cost of Y 0.10 per pcu-km of annual capacity, discounted at lOZ with 20-year life.

See Tables 4 & 5 for vehicle operating costs in other conditions. The average haul distance is 47 km for passengers and 30 km for freight. Average load and passenger car equivalents from Beijing-Tanggu Expressway Appraisal Report, modified for large trucks for optimum future models.

Sources: Tables 3-8, and Guangdong Department of Communications, and IBRD Highway Project Appraisal Reports. - 179 - ANNEX

Table 11: UNIT CONSTRUCTIONCOSTS FOR'RAILROAD INFRASTRUCTURE IN GUANGDONG PROVINCE

A. Railroad ConstructionCosts by Terrain Type ('000 1990 Yuan)lkm)

-- Financial ------Social------Conv. Rail Type Flat-Roll Hilly Mount. Flat-Roll Hilly Mount. Factor (a) National Railroad (medium density) (b) 2,700 - 3,400 4,800 8,300 3,000 -3,700 5,300 9,100 1.10

Regional Railroad (low labor costs) 1,700 - 2,200 3,000 c 5,600 c 1,800 -2,300 3,200 5,900 1.05 (very low labor costs) (d) 900 - 1,100 1,500 2,700 900 -1,000 1,400 2,600 0.95

Second Track (high density) (e) 2,400 - 3,000 5,100 9,000 2,600 -3,300 5,600 9,900 1.10

------__--__------

Notes:

(a) social cost/financialcost calculated according to shadow costs of each commodity. (b) based on Xinxiang-Heze Railroad. (c) cost estimate from Xianping-Meixian-ShantouRailroad. (d) based on Inner Mongolia Railroad Project (e) based on Hunan-Gunagzhoudouble tracking project. (f) all costs updated to 1990 by using the domestic price inflation factor (Office Memorandum from Shahid Yusuf - January 19, 1990)

Sources: Project Appraisal Reports for the IBRD projects listed above and Guangdong DOC. - 180 - ANNEX

Table 12: LONG RUN INCREMENTAL COSTS OF RAIL TRANSPORT

A. FINANCIAL COSTS National 1988 Traffic Level: 1,449 mil. tons 988 bil. tkm Guangdong 1,226 mil. pass. 328 bil. pkm National Rail System Province % of Total '88 Avg Avg Avg Avg Cost Category cost Cost/Yr Cost/ Cost/ Cost/ Cost/ item (mil.Y) 1000 1000 1000 1000 A. Operating Costs tkm pkm tkm pkm 1. Payroll (50%)* Salaries 20% 399.2 0.2 0.8 0.2 0.8 Wages 80% 1597.0 0.6 3.1 0.6 3.1 2. Materials (80%)** Steel 41% 888.9 0.6 0.6 0.5 0.6 Wood 37% 820.0 0.6 0.6 0.5 0.5 Cement 16% 276.6 0.2 0.2 0.2 0.2 Other 6% 103.3 0.1 0.1 0.1 0.1 3. Energy (95%) Diesel 30% 1001.8 0.8 0.8 1.7 1.7 Steam coal 30% 1001.8 0.8 0.8 Electricity 40% 1335.7 1.0 1.0 4. Taxes 1479.8 1.1 1.1 1.1 1.1 Total Variable Operating Costs 8503.2 5.8 8.9 4.9 8.0 (excluding profit, depreciation and provision for major maintenance) B. Maintenance (Major & Minor) Locomotives (diesel) 4.6 4.5 4.6 4.6 Wagons 0.9 0.9 Coaches 1.0 1.0 Total Major Maintenance 5.3 5.4 5.3 5.4 C. Rolling Stock Replacement Life Cost 1. Locomotives (diesel) 2C0 2.202 mil. 1.77 1.77 1.77 1.77 2. Wagons 60t 20 0.064 mil. 1.78 1.76 3. Coaches 120 seats 20 0.251 mil. 1.54 1.54 Total Rolling Stock 3.53 3.31 3.63 3.31 D. Infrastructure Wear and Tear*** Life Cost/km. 1. Rail (60 kg) 15 0.185 mil. 0.50 0.57 0.60 0.57 2. Fasteners 20 0.036 mil. 0.08 0.09 0.08 0.09 3. Sleepers (concrete) so 0.070 mil. 0.11 0.12 0.11 0.12 Total Wear and Tear Costs 0.89 0.78 0.89 0.78 on Infrastructure E. Incremental Capacity Costs 4.70 3.80 4.70 3.80 Incremental Costs: off-peak direction 18.26 20.48 17.36 19.68 Incremental Costs: peak direction 21.79 23.98 20.89 23.08 Average Incremental Costs 20.03 22.23 19.13 21.33

* 50% of total labor costs, 8ox of materials costs and 95X of energy costs are assumed to be variable with traffic volume. ** For buildings, track and infrastructure maintenance. *** Assuming an average traffic density of 15 million ton-km per route-km/yr (29 freight trains/day) and 20 pairs of passenger trains per day.

Sources: Operating costs for 1986 and unit rolling stock prices and major maintenance costs from the Fourth Railway Project Appraisal Report. Costs of track infrastructure from Inner Mongolia RR Project Appraisal Report, and Table 11. National Conversion Factors are from "Economic Prices for Project Evaluation in China". - 181 - ANNEX

Table 12: LONG RUN INCREMENTALCOSTS OF RAIL TRANSPORT

B. SOCIAL COSTS National1988 Traffic Level: Existing Lines New Lines 1,449 mil. tons 988 bil. tkm National Guangdong National Guangdong 1,228 mil. pass. 328 bil. pkm Rail System Province Rail System Province Conversion Avg Avg Avg Avg Avg Avg Avg Avg Cost Category Factor Cost/ Cost/ Cost/ Cost/ Cost/ Cost/ Cost/ Cost/ Nati- Guan- 1000 1000 1000 1000 1000 1000 1000 1000 A. OperatingCosts onal gdong tkm pkm tkm pkm tkm pkm tkm pkm 1. Payroll (60%)* Salaries 2.00 2.00 0.4 1.8 0.4 1.6 0.7 2.7 0.7 2.7 Wages 0.80 1.00 0.5 2.6 0.6 3.1 0.8 4.2 1.0 6.2 2. Materials (80%)** Steel 1.90 1.78 1.0 1.0 0.9 0.9 1.0 1.0 0.9 0.9 Wood 0.80 0.98 0.4 0.4 0.5 0.6 0.4 0.4 0.6 0.5 Cement 3.00 1.32 0.6 0.6 0.3 0.3 0.8 0.8 0.3 0.3 Other 0.90 0.70 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 3. Energy (96X) Diesel 1.10 1.80 0.9 0.9 3.1 3.1 0.9 0.9 3.1 3.1 Steam coal 1.40 1.90 1.1 1.1 0.0 0.0 1.1 1.1 0.0 0.0 Electricity 3.70 3.70 3.7 3.7 0.0 0.0 3.7 3.7 0.0 0.0 4. Taxes 0.00 0.00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Total Variable OperatingCosts 8.7 11.9 5.9 9.6 9.3 14.7 8.6 12.8 (excluding profit, depreciation and provision for major maintenance) B. Maintenance (Major & Minor) Locomotives (diesel) 1.50 1.60 4.6 4.8 4.8 4.8 4.8 4.8 4.6 4.8 Wagons 1.60 1.50 1.0 1.0 1.0 1.0 Coaches 1.60 1.60 1.2 1.2 1.2 1.2 Total Major Maintenance 6.6 6.8 5.5 s.8 6.5 5.8 6.6 6.8 C. Rolling Stock Replacement Life 1. Locomotives(diesel) 20 1.60 1.50 2.60 2.80 2.60 2.60 2.80 2.80 2.80 2.80 2. Wagons60t 20 1.60 1.60 2.68 2.68 2.58 2.68 3. Coaches 120 seats 20 1.50 1.60 2.30 2.30 2.30 2.30 Total Rolling Stock 5.18 4.90 6.18 4.90 5.18 4.90 5.18 4.90 D. InfrastructureWear and Tear#** Life 1. Rail (60 kg) 1S 1.90 1.90 0.e8 0.77 0.68 0.77 0.68 0.77 0.e8 0.77 2. Fasteners 20 1.90 1.90 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 3. Sleepers (concrete) 50 3.00 3.00 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 Total Wear and Tear Costs 0.70 0.79 0.70 0.79 0.70 0.79 0.70 0.79 on Infrastructure E. Incremental Capacity Costs 0.90 1.10 6.2 5.0 7.6 8.3 10.9 8.7 14.2 11.4 Incremental Costs: off-peak direction 24.2 28.2 22.8 27.3 29.6 32.7 30.1 33.6 Incremental Costs: peak direction 28.6 30.6 27.0 31.5 33.8 37.0 34.4 37.7 Average Incremental Costs 26.3 28.3 24.9 29.4 31.6 34.9 32.2 36.6

* 60% of total laborcosts, 80% of materialscosts and 96% of energy costs are assumed to be variable with traffic volume. ** For buildings,track and infrastructuremaintenance. *** Assumingan average traffic density of 15 million ton-km per route-km/yr(29 freight trains/day) and 20 pairs of passengertrains per day.

Sources: Operating costs for 1986 and unit rolling stock prices and major maintenance costs from the Fourth Railway Project Appraisal Report. Costs of track infrastructure from Inner Mongolia RR Project Appraisal Report, and Table 11. NationalConversion Factors are from "Economic Prices for Project Evaluation in China". - 182 - ANNEX

Table 13: LONG RUN INCREMENTALCOSTS FOR INLAND WATERWAYS TRANSPORT

A. FINANCIAL COSTS (LRIFC)

A. Vessel OperatingCost 20 ton 50 ton 110 ton 1000 ton 108HP tug 148HP tug 200HP tug Cost Catogory Barge Barge Barge Barge +12 barges +12 barges +10 barges (20 hp) (40 hp) (50 hp) (150 hp) (12x80t) (12x1OOt) (1Ox200t) 1. Technical Characteristics a. Fuel consumption (kg/nav.day) (a) 70 141 176 408 464 578 720 b. Crew - tug 0 0 0 0 13 14 14 - per barge 6 7 8 17 4.3 4.3 4.5 c. Purchase Price - tug na. n.s. n.a. n.s. 104,100 107,900 139,600 - per barge 106,500 243,400 324,800 3,167,600 33,400 53,900 116,900 d. Economic Life - tug n.a. n.a. n.e. n.a. 26 25 25 - barge 18 18 18 18 18 18 18 e Navigation days por year (b) 170 170 170 170 170 170 170 2. Unit Costs a. Fuel Price Y/kg 0.55 0.55 0.55 0.55 0.55 0.55 0.5O b. Materials Cost per year - tug n.a. n.a. n.a. n.e. 880 AeO 880 - per barge 700 1,180 1,S10 3,480 700 790 810 c. Crew costs per person-year(c) 1,260 1,260 1,250 1,250 1,260 1,250 1,260 d. Repair funds per year - tug n.e. n.s. n.a. n.e. 18,740 17,350 22,440 - per barge 3,940 8,810 8,580 26,500 4,410 7,120 16,300 e. Other direct costs per year - tug n.a. n.s. n.s. n.a. 380 380 380 - per barge 380 800 760 4,640 SOO 600 420 f. Overhead cost per year (%) 14% 14% 14% 14X 14% 14X 14X 3. Standard OperatingCosts per year a. Fuel and lubricants(d) 8,045 18,091 20,114 48,627 61,884 e6,066 82,283 b. MaintenanceMaterials 700 1,180 1,510 3,480 9,280 10,340 8,980 C. Crew Wages 8,250 8,760 10,000 21,260 80,760 82,000 73,760 d. Major repair funds 3,940 6,610 8,680 136,066 89,880 102,790 176,440 e. Other direct costs 380 8o0 760 4,640 7,660 7,580 4,650 f. Capital recoverycost 9,025 20,822 27,768 270,112 46,980 88,488 136,999 g. Overhead 3,965 7,585 9,821 67,383 37,2S3 47,213 67,342 h. Port Fees and Taxes 1,985 4,288 9,369 85,145 61,304 102,195 170,357 4. Total OperatingCosts per year 33,985 85,258 88,383 821,838 3S5,987 472,198 894,834

Average ton-km per year (000) (b) 260 5o0 1,230 11,180 8,050 13,420 22,370 S. Total Cost per 1,000 ton-km 130.7 116.5 70.2 65.8 44.2 35.2 31.1

C. Total IncrementalCosts 381,985 65,268 88,383 621,638 366,987 472,196 894,634 - per 1000 ton-km 130.7 11.e' 70.2 65.6 44.2 35.2 31.1

Notes: (a) 0.22kg per horsepower-hourfor 18 hours for small barges, 0.17kg per HP-hour for modern 1000 ton barges, 0.24kg per HP-hour for large barges. (b) Assuming 8OX load factor (70% for 20t barge), average speed 3-4 knots A 18,000 km per year. This is consistentwith 11,000 tkm per ton capacity from the IBRD China Water Transport Sector Study, 1987. (c) includingretirement benefits, insurance and bonuses. (d) 203 added to reflect local movements in ports and 2% added to account for lubricantcost.

Sources:*Analysis of Inland Water TransportCosts by Type in the Shanghai-NanjingCorridor", Jisotong University, for tug-barge combinationsand GuangdongProvincial Planning Commission for elements of self-propelledbarge data. - 183 - ANNEX

Table 13: LONG RUN INCREMENTALCOSTS FOR INLAND WATERWAYS TRANSPORT

B. SOCIAL COSTS (LRISC)

Conversion A. Vessel Operating Cost Foctor 20 ton 50 ton 110 ton 1000 ton 108HP tug 148HP tug 200HP tug Cost Category Barge Barge Barge Barge .12 barges .12 barges +10 barges (20 hp) (40 hp) (60 hp) (150 hp) (12x40t) (12x100t) (lOx200t) 1. Technical Characteristics a. Fuel consumption (kg/nav.day) 70 141 176 408 454 578 720 b. Crew - tug 0 0 0 0 13 14 14 - per barge 5 7 8 17 4.3 4.3 4.5 c. Purchase Price - tug 1.5 n.a. n.a. ns. n.. 166,160 161,860 209,400 - per barge 1.6 158,250 366,100 488,900 4,736,250 50,100 80,860 173,850 d. Economic Lif- - tug n.s. n.n. n.s. n.*. 26 26 26 - barge 18 18 18 18 18 18 18 e Navigation days per year 170 170 170 170 170 170 170 2. Unit Costa a. Fuel Price Y/kg 0.66 0.88 0.66 0.68 0.86 0.66 0.66 b. Materials Cost per year - tug 1.0 n.a. n.o. n.a. n.a. 860 88o 880 - per barge 1.0 700 1,160 1,510 3,480 700 790 810 c. Crew costs per person-year(a) 1.0 1,260 1,250 1,260 1,250 1,260 1,250 1,250 d. Repair funds per year - tug 1.0 n.s. n.a. n.n n.n. 16,740 17,360 22,440 - per barge 1.0 3,940 6,610 8,580 25,500 4,410 7,120 15,300 e. Other direct coats per year - tug 1.0 na.u n.a. n.s. n.o 360 360 36o - per barge 1.0 360 600 750 4640 600 6oo 420 f. Overhend cost per year (%) 1.0 14% 14% 14% 14% 14% 14% 14% 3. Standord OperatingCosts per year a. Fuel and lubricants(b) 1.0 8,045 16,091 20,114 46,627 61,884 66,066 82,283 b. MaintenanceMaterials 1.0 700 1,160 1,610 3,480 9,260 10,340 8,980 c. Crew Wages 1.0 6,260 8,760 10,000 21,260 80,750 82,000 73,760 d. Major repair funds 1.5 5,910 9,916 12,870 202,S84 104,490 154,186 263,180 a. Other direct costs 1.0 360 6o0 760 4,640 7,660 7,680 4,660 f. Capital recovery cost n.a. 12,864 29,678 39,679 384,996 60,338 90,752 166,697 g. Overhead 1.0 3,965 7,686 9,621 67,363 37,263 47,213 67,342 4. Total OperatingCosts per year 38,094 73,769 94,444 730,939 351,536 468,106 8656,772 Averageton-km per year (000) (c) 260 60o 1,230 11,180 8,060 13,420 22,370

B. Totol Cost per 1,000 ton-km 146.5 131.7 76.8 66.4 43.7 34.1 29.4

C. Port Handling Costs (d) 1,700 3,660 8,040 73,110 52,640 87,760 146,280 - per 1000 ton-km 6.5 6.5 6.5 6 6.5 6.5 6.5

D. Total IncrementalCosts 39,794 77,419 102,484 804,049 404,175 545,866 803,052 - per 1000 ton-km 163.0 138.2 83.3 71.9 60.2 40.8 36.9

Notes: (a) includingrotirement benefits, insuranceand bonuses. (b)20% added to reflect local movement in ports and 2% added to account lubricantcost. (c) Assuming 60% load factor (70% for 20 ton barge), average speed 3-4 knots and 18,000 km per year. This is consistentwith 11,000 tkm per ton capacity from I8RD China Water TransportDoctor Study 1987. (d) assumed to be an amount equal to port fees.

Sources:'Analysis of Inland Water Transport Costs by Type in the Shongha;-NanjingCorridorff, Jisotong University, for tug-bargecombinations and GuangdongProvinciol Planning Commissionfor elements of self-propelledbarge data. - 184 - ANNEX

Table 14: INCREMENTAL PORT CAPACITY COSTS (1990 Yuan)

Bulk General Cargo Container

A. Construction Costs

1 berth + equipment (a) 12-17 mil. 8-12 mil. 17-23 mil. median 14.5 mil. 9.9 mil. 20.3 mil.

B. Capacity/year (tons) at optimum utilization (b) 2,000,000 300,000 1,200,000

C. Capital Cost per ton of Annual Capacity (Y) 6.3 28.3 14.6 a) including storage and support buildings, but not channel dredging or harbor facilities. b) assuming the following economic maximum berth utilization (unscheduled use): Bulk 45Z, General Cargo 65%, Containers 50Z. c) all costs updated by using the domestic price inflation factor to 1990. (Office Memorandum by Shahid Yusuf - January 19, 1990)

Note: Containers are assumed to average 12 tons per TEU

Source: IBRD Port Appraisal Reports for China. - 185 - ANNEX

TableI: LONGRUN INCRee4TAL COSTSFOR COASTALSHIPPING

A. FINANCIAL COSTS

A. Vessel Operating Co-st 500 dwt 1000 dwt 5000 d-t 10,000 dat 50 TEU 250 TEU 10,000 d-t 20,000 dat 30,000 dwt 50,000 dat Cost Category Can. Cargo Can. Cargo Can. Cargo Can. Cargo Container Container Bulk Carrier Bulk Carrier Bulk Carrier Bulk Carrier Vessel Vessel Vessel Vassal Vessel Vessel Vessel Vessel Vessel Vessel 1. Technical Characteristics a. Fuel consumption per day - at sea, loaded 3.5 6.9 14.2 28.9 5.9 12.2 24.9 34.3 41.8 125.6 - in port 0.8 1.0 1.4 18 0.9 1.8 1.8 1.8 2.3 2.5 b. Cree - officers 3 11 11 12 3 11 11 12 12 12 - ratings 5 17 17 21 3 17 20 21 21 21 c. Purchase Price in '000 1.681 2,087 7,475 12,768 2,388 0 11,592 48,718 102,010 115,920 d. Economic Life (years) 24 24 24 24 15 15 20 20 20 20 e. Navigation days per year (a) 185 188 165 200 200 235 200 200 200 200 f. Loaded Speed (knots) 10 14 14 18 18 14 15 15 15 18

2. Unit Coats a. Fuel Price Y/tonne (b) 509 509 509 509 509 509 509 509 509 509 b. MaterialsCoet/year '000 72 161 304 716 95 245 661 853 1,439 2,435 c. Cre- costs/person '000 (c) -officers 11 11 11 1111 11 it1 -ratings 8 a 8 8 8 8 8 8 8 8 d Repair funds per year '000 24 29 105 179 33 0 1$2 854 1,428 1,823 a. Other direct costs/year '000 20 25 90 153 29 0 139 Sol 1,224 1,391 f. Overhed cost/year '000 4 5 12 20 5 2 18 87 145 184

3. Standard Opersting Costs per year '000 a. Fuel coat - at see, loaded 294 579 1,192 2,940 600 1,458 2,533 3,490 4.253 12,778 - in port 67 84 118 119 6o 87 119 119 152 165 b. Matarialsacoat 72 161 304 716 95 245 681 853 1,439 2,435 c. Cres Wages 74 259 259 303 57 259 284 303 303 303 d. Repair funds (a) 24 29 105 179 33 0 162 854 1,428 1.623 a. Other direct costs 20 25 90 153 29 0 139 561 1,224 1,391 f. Capital rcovery coat 122 151 542 925 230 0 930 3,749 8,186 9,302 g. Ovrhead 4 5 12 20 5 2 18 67 145 164 h. Port Fees and Ta.es 400 1,100 1.900 S,300 300 1.600 5,000 2,900 4,300 8,100 4. Total Opersting Costs per year 1,077 2,393 4.521 10,655 1,409 3.652 9,846 12,695 21,430 38,282

Average ton-kt per yeer (000) (d) 14,870 41,070 205,350 568,930 34,140 175,480 533,380 1,086,750 1,600,130 2,844,870 8. Totbl Vessl Cost Per 1000 ton-km 73.4 58.3 22.0 18.7 41.3 20.8 185 11.9 13.4 12.7 C. Port Maintenance Costs -per 1000 tkh (Port Maintenance and capacity costs are assuned to be covered by port fees) 0. Port Capacity Costs -per 1000 tkh E. Total Incremental Costs per year 1,077 2,393 4,521 10,655 1,409 3,652 9,846 12,69S 21,430 36,262 -per 1000 thk 73.4 58.3 22.0 18.7 41.3 20.8 18.5 11.9 13.4 12.7 Total Long Run (peak direction) 2,227 4,844 9,065 21,328 2,858 7,325 19,711 25,402 42,873 72,536 Incremental Costs (off-peak d;rect;on 2,105 4,693 8,523 20,403 2,628 7,325 18,781 21,653 34,687 83,234 - 186 - ANNEX

TwWIa ltjj LOW RUN INCRE4ENTALCOSTS FOR COASTALSHIPPING

B. SOCIAL COSTS Conner. k. Vessel Operating Costs Factor 800 dat 1OO dot 3000 dot 10,000 dat 30 TED 250 TBJ 10,000 dot 20,000 dat 30,000 dwt 50,000 d-t -oatCategory Can. Cargo Can, Caro aCen. Cargo Can. Cargo Container Container Bulk Carrier Bulk Carrier Bulk Carrier Bulk Carriar Yessel Veaoel Vessel Vessal Vs sIa Vassal Vassal Vessel VessaI Vessel L. Technical Characteristica a. Fual consuaption per day - at see, Ioaded 3.5 6.9 14.2 28.9 3.9 12.2 24.9 34.3 41.8 125.6 - in port 0.8 1.0 1.4 1.8 0.9 1.8 1.8 1.8 2.3 2.5 k. Crew - officers 3 it 11 12 3 11 11 12 12 12 - ratings 5 17 17 21 3 17 20 21 21 21 c. Purchase Prics in '000 6,430 12,220 30,720 91,840 16,080 64,550 56,730 82,800 103,300 136,500 d. Econceic Lifa (years) 24 24 24 24 13 1S 20 20 20 20 a. Navigation days per year 163 18s 165 200 200 235 200 200 200 200 f. Loaded Speed (knots) 10 14 14 16 16 14 1S 1S 1S 16

i. Unit Costs a. Fuel Prica Y/tonna (a) 443 443 443 443 443 443 443 443 443 443 b. Materials Coat per year 1.0 72 161 304 716 95 243 861 853 1,439 2,435 c. Cree costs/person '000 (b) - officers 1.0 11 11 11 11 11 11 11 11 11 -ratings 1.0 8 8 8 8 8 8 8 8 8 8 d. Repair fundo/year '000 l.O 90 171 710 1.283 223 904 795 1,159 1,446 1.911 a. Other direct costs/year '000 1.0 77 147 609 1,100 193 775 681 994 1,240 1,638 f. Overhead cost/year '000 1.0 11 19 73 130 24 92 81 118 147 193

3. Standard Operating Costs/year ('000) a. Fuel cast -at sea, loaded 256 504 1,037 2,559 522 1,269 2,205 3,037 3,701 11,122 - in port s8 73 102 104 52 76 104 104 132 144 b. MateriasI coats 1.0 72 181 304 716 9S 245 661 853 1,439 2.435 c. Cree WVegs 1.0 74 259 259 303 57 259 284 303 303 303 d. R.pai, funds (d) 1.0 90 171 710 1,283 225 904 795 1,159 1,446 1.911 *. Othe, direct costs 1.0 77 147 609 1,100 193 775 681 994 1,240 1.638 f. C.pit.a r-ecovry cost n.e. 716 1,360 S.645 10,200 2,114 8,487 6,666 9,726 12,134 16.033 g. Ov-rhd 1.0 11 19 73 130 24 92 81 118 147 193

S Total Operating Coats per year 1,354 2,694 8,740 16,394 3,282 12,108 11,477 16,293 20,543 33,779

Aver-ae ton-k per year (000) (c) 14,670 41,070 203,330 568,930 34,140 175,480 533,380 1,066,750 1.600,130 2,844,670 6. Total Vessal Cost par 1000 ton-kh 92.3 65.6 42.6 28.8 96.1 69.0 21.5 15.3 12.8 11.9 Port Maintenance Costs (a) 0.40 1.10 1.90 5.30 0.30 1.60 5.00 2.90 A.30 8.10 -par 1000 tke 27.27 26.78 9.25 9.32 8.79 9.12 9.37 2.72 2.69 2.85 ). Port Capacity Costs 18.0 18.0 6.4 6.4 3.3 3.3 1.4 0.4 0.4 0.4 -per 1000 tkh _. Total Increantal Costs per year 1,355 2,895 8,741 16,400 3,282 12,109 11,482 16,296 20,547 33,787 -p., 1000 tkh 137.5 110.3 58.2 44.3 108.2 81.4 32.2 18.4 15.9 15.1 IrtelLong Run (p*ek direction) 2,846 3,SOO 17,539 32,838 6,673 24,298 22,990 32,608 41,106 67,581 Incremental Costs (off-peak direction) 2.130 4,140 11,894 22,638 4,559 15,811 16,324 22,882 28,972 51.348 - 187 - ANNEX

Notes and Source for Table 15 (A. Financial Cost)

Notes: (a) out of 330 operating days, 24 hours per day. (b) fuel price of $108/tonne. (c) incld. retirementbenefits, insurance & bonuses. (d) assuming 60% load factor for general cargo and container ships and 50% for bulk vessels, 80% of loaded speed for average speed. This yields 48,000-67,000km per year for small vessels, 80,000-110,000km per year for large vessels and 110,000-130,000km per year for container ships. These operations assume efficientports with an average of 1 waiting day which gives more than twice the present annual voyage time and distance. (e) repair & maintenance cost from IBRD Ship Cost model.

Sources: IBRD Ship Cost Model with October 1986 cost data for vessels, maximum crew size and estimatedChinese wages.

Notes and Source for Table 15 (B. Social Cost)

Notes: (a) fuel price of $94/tonne (b) including retirementbenefits, insuranceand bonuses. (c) assuming 60% load factor for general cargo and container ships and 50% for bulk vessels, 80% of loaded speed for average speed. This yields 60,000-90,000km per year for small vessels, 110,000-130,000km per year and 100,000-110,000km per year for container ships. These operationsassume efficientports with an average of 1 waiting day which gives more than twice the present annual voyage time and distance. (e) assumed equivalent to port fees of Y 2.7 per ton at each end of voyage.

Sources: IBRD Ship Cost Model with October 1986 cost data for vessels, maximum crew size and estimated Chinese wages. - 188 - ANNEX

Tuble 16: AIR TRANSPORTLONG RUN INCREMENTALCOSTS (LRIFC and LRISC)

FinoncialCosts Social Costs (1990 Yuan) Conver. (1990 Yuan) A. AircraftOperoting Costs Boeing TurbopropFactor Booing Turboprop 787-200 (a) 787-200 (a) 1. OperatingCharacteristics a. Number of seats 100 s0 1.00 100 SO b. Cruising Speed (knots) 440 275 1.00 440 276 c. Block Hour* per yr 2,600 2,000 1.00 2,500 2,000 d. Average Flight Dist. km. 1,800 400 1.00 1,800 400 *. Average Load Factor 70X 70% 1.00 70% 70% f. Aircroft PurchasoPrice in million 169.90 94.37 n.a. 122.30 94.37 g. MaintenanceLabor Houra/year 6,910 2,360 1.00 6,910 2,360 2. Unit Costs a. Fuol (Y/kg) (b) 0.98 0.98 1.00 0.98 0o98 b. Average Crew Cost (Y/month)(c) 166,528 3,478 1.00 166,528 3,478 c. Averogo MochanicCost/month (c) 2,782 1.00 2,782 8. Direct Oporating Costs mil. Y/yeoir a. Fuel Cost (d) 4.81 1.20 1.00 4.81 1.20 b. Crew Cost 2.00 0.20 1.00 2.00 0.20 c. MaintonanceLabor Costs 0.70 0.04 1.00 0.70 0.04 d. Spare Parts 5.44 8.90 1.00 3.91 8.90 *. Airport Foes (8% other DOC) 1.04 0.83 0.00 0.00 0.00 4. IndirectOperating Costs a. Insurance (a) 1.70 0.94 1.00 1.70 0.94 b. Other Costs (22% of DOC) 2.85 2.27 1.00 2.85 2.27 5. Capital recoverycost (f) 19.17 10.85 na. 19.95 11.08 6. Total AircraftOperating Costs 37.70 26.08 35.92 24.83 7. Avorage Cost per 1000 pass-km 386.3 892.9 320.4 878e8 (millionY per yoar) B. Airport Operationand MaintenanceCosts 1.04 0.83 -per 1000 pkm 9.8 29.6 C. Airport IncrementalCapacity Costs (g) 1.04 0.83 -per 1000 pkm 9.3 29.6 D. Total Coats per 1000 pass-km 38.00 26.29 -por 1000 pkm 336.3 892.9 389.0 938.0

Notes: Exchange rate of USSI = Y 4.71. (a) Assumed similar to a Fokker 60 with turbopropengines. (b) Fuol cost is estimated at US190/ton plus 10X deliverychargo on avorage. (c) Including*al social bonefits. (d) Assuming80X of block time is flight time, and fuel consumptionis 185+1.92d for the smaller aircroftand 828+4.72d (calculatosfuel consumption/flight)for the larger aircraft. (o) Estimatedat 1X of alircraftvalue per year. (f) For deprociationa life of 12 years Is assumed,with a 20% salvage value. This Is calculatedas an annuity at 6% discount rate for financialcosts and at 10X for social costs. (g) Assumed to be approximatelythe same level as operstionand maintenancecosts. (h) All costs updated by using the domestic prico inflationfakctor for domestic input and by by foreign exchange componontInflation for importedgoocs (OfficeMemorandum by Shahid Yusuf - January 19, 1990) Source: Technicalrelationships and purchaseprice from the Institutede Transport Aerioe in Paris, as roported In the ComeroornTransport Study, Louis Berger International, 1986, and China Yoarbook for airport costs and operatingcost ratios. - 189 - ANNEX

Table 17: VARIATION OF LRIFC WITH DISTANCE BY MODE FOR PASSENGER TRAFFIC (1990 Y per 1000 pkm)

Distance Road Rail Air Coastal Ship (km) sm. bus B737 5,000 dwt

50 69 144 * 3292 740 100 43 79 * 1747 372 200 30 47 * 974 187 300 26 36 * 717 126 400 24 64 588 95 500 22 54 511 77 600 21 47 459 64 700 21 43 422 55 800 20 39 395 49 900 20 36 373 44 1000 20 34 356 40 1100 20 32 342 36 1200 19 31 331 34 1300 19 30 321 31 1400 19 28 312 29 1500 19 28 305 27 1600 19 27 298 26 1700 19 26 293 24 1800 19 25 288 23 1900 19 25 283 22 2000 18 24 279 21 2100 18 24 275 20 2200 18 23 272 20 2300 18 23 269 19 2400 18 23 266 18 2500 18 22 264 18 2600 18 22 261 17 2700 18 22 259 16 2800 18 21 257 16 2900 18 21 255 15 3000 18 21 253 15

Notes: The above calculations are based on the following data:

Road sm. Rail Air Coastal Ship bus (a) (b) B737 5,000 dwt ** Av. Haul distance(km) 30 350 890 550 Transfer Cost (Y) (c) 1.2 8.7 17.4 17.4 Av. Transport Cost(d) 26 21 336 7 Z Transport Cost 34% 33Z 40% 58Z fixed with distance * transfer cost assumed to be Y 2 at each end. ** financial purchase price not available (a) small bus with 28 seat capacity. (b) passenger cost is for average of peak and off-peak directions. (c) secondary bus local connection on each end. (d) cost per 1000 pkm at the average trip distance without time cost. Ship passengers are assumed to cost 15Z of total costs, at 500 capacity, primarily for depreciation of quarters and equipment.

Source: Tables 9, 12, 13, 15, and 16. - 190 - ANNEX

Table 18: VAR:IATION OF LRIFC WITH DISTANCE BY MODE FOR COAL TRAFFIC (1990 Y per 1000 tkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck 110dwt 1000dwt 10,000 30,000 dwt dwt 50 219 94 174 131 645 654 100 173 55 113 80 329 330 200 150 36 82 55 171 168 300 142 29 72 47 118 114 400 139 26 67 43 92 87 500 136 24 64 40 76 71 600 135 23 62 39 65 60 700 134 22 60 37 58 52 800 133 21 59 37 52 46 900 132 20 58 36 48 42 1000 132 20 58 35 44 38 1100 131 20 57 35 41 35 1200 131 19 57 34 39 33 1300 131 19 56 34 37 31 1400 130 19 56 34 35 29 1500 130 19 56 34 34 27 1600 130 19 55 33 32 26 1700 130 18 55 33 31 25 1800 130 18 55 33 30 24 1900 129 18 55 33 29 23 2000 129 18 55 33 28 22 2100 129 18 54 33 28 21 2200 129 18 54 33 27 21 2300 129 18 54 32 26 20 2400 129 18 54 32 26 19 2500 129 18 54 32 25 19 2600 129 18 54 32 25 18 2700 129 18 54 32 24 18 2800 129 17 54 32 24 17 2900 129 17 54 32 23 17 3000 129 17 54 32 23 17

Notes: The above calculations are based on the following data: Coastal Ship Road tr. Rail Barge 10,000 30,000 truck (a) (b) llOdwt 1000dwt dwt dwt

Av. Haul distanceC(km) 50 660 195 195 1900 1900 Transfer Cost (Y) (c) 0 0 0 0 9.68 9.68 Av. Transport Cost(d) 219 22 83 56 19 13 % Transport Cost 42% 277% 38% 46% 34% 54% fixed with distance (a) Semi-trailer truck with 25 ton capacity. (b) freight cost in peak direction. (c) Y 6 train cost to port plus Y 2.35 transfer charge for coastal ship, otherwise direct delivery by each mode. (d) cost per 1000 tkm in 1990 Yuan at the average haul distance.

Source: Tables 9, 12, 13 and 15. - 191 - ANNEX

Table 19: VARIATION OF LRIFC WITH DISTANCE BY MODE FOR HEAVY FREIGHT TRAFFIC (1990 Y per 1000 pkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck 110dwt 1000dwt 10,000 30,000 dwt dwt 50 312 2181 2261 2217 3272 3287 100 219 1099 1156 1124 1642 1646 200 173 557 604 577 827 826 300 158 377 420 395 556 553 400 150 287 328 304 420 416 500 145 233 272 249 338 334 600 142 196 236 212 284 279 700 140 171 209 186 245 240 800 139 151 190 167 216 211 900 137 136 174 152 194 188 1000 136 124 162 140 176 170 1100 135 114 152 130 161 155 1200 135 106 144 121 148 143 1300 134 99 136 114 138 132 1400 134 93 130 108 129 123 1500 133 88 125 103 121 115 1600 133 84 121 99 114 109 1700 132 80 116 95 108 102 1800 132 76 113 91 103 97 1900 132 73 110 88 98 92 2000 132 70 107 85 94 88 2100 131 68 104 82 90 84 2200 131 65 102 80 87 81 2300 131 63 99 78 83 77 2400 131 61 97 76 80 74 2500 131 59 96 74 78 72 2600 131 58 94 72 75 69 2700 130 56 92 71 73 67 2800 130 55 91 69 71 65 2900 130 53 90 68 69 63 3000 130 52 88 67 67 61

Notes: The above calculations are based on the following data:

Road Rail Barge Coastal Ship tr. truck 110dwt 1000dwt 10,000 30,000 (a) (b) dwt dwt Av. Haul distance(km) 50 660 195 195 1900 1900 Transfer Cost (Y) (c) 2 52 52 52 75 75 Av. Transport Cost(d) 219 22 83 56 19 13 Z Transport Cost 42% 27% 38% 46% 34Z 54% fixed with distance

(a) Semi-trailer truck with 25 ton capacity. (b) freight cost in peak direction. (c) secondary carrier cost plus unloading at each end. (d) cost per 1000 tkm in 1990 Yuan at the average haul distance.

Source: Tables 9, 12, 13 and 15. - 192 - ANNEX

Table 20: VARIATION OF LRIFC WITH DISTANCE BY MODE FOR LESS THAN CARLOAD (LCL) TRAFFIC (1990 Y per 1000 tkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck llOdwt lOOOdwt 5,000 dwt

50 91.5 2261 2316 2459 3164 100 521 1145 1192 1273 1586 200 324 587 630 679 798 300 258 401 443 482 535 400 22:5 308 349 383 404 500 206 253 293 324 325 600 193 216 255 284 272 700 183 189 228 256 235 800 176 169 208 235 206 900 171 154 193 218 184 1000 166 141 180 205 167 1100 163 131 170 194 153 1200 160 123 161 185 141 1300 157 115 154 177 131 1400 155 109 148 171 122 1500 153 104 143 165 114 1600 152 99 138 160 108 1700 150 95 134 156 102 1800 149 92 130 152 97 1900 148 88 127 149 92 2000 147 85 124 146 88 2100 146 83 121 143 84 2200 145 80 119 140 81 2300 144 78 117 138 78 2400 14.3 76 115 136 75 2500 14:3 74 113 134 72 2600 142 72 ill 132 70 2700 142 71 109 130 68 2800 14:L 69 108 129 66 2900 141 68 107 127 64 3000 140 67 105 126 62

Notes: The above calcu:Lationsare based on the following data:

Road Rail Barge Coastal Ship tr. truck llOdwt lOOOdwt 5,000 dwt (L) (b) dwt Av. Haul distance(km) 50 660 195 195 550 Transfer Cost (Y) (c) 17 52 52 52 75 Av. Transport Cost(d) 219 41 109 160 22 2 Transport Cost 42% 27Z 381 46% 58Z fixed with distance (a) Semi-trailer truck with 25 ton capacity. (b) freight cost in peak direction. (c) secondary carrier cost plus transfer charge on each end. (d) cost per 1000 tkm in 1990 Yuan at the average haul distance. Rail and barge costs have been increased to reflect more handling and low load factors.

Source: Tables 9, 12, 13 and 15. - 193 - ANNEX

Table 21: VARIATION OF LRISC WITH DISTANCE BY MODE FOR PASSENGER TRAFFIC (1990 Y per 1000 pkm)

Distance Road Rail Air Coastal Ship (km) sm. bus B737 5,000 dwt dwt 50 65 163 * 2954 785 100 41 90 * 1579 397 200 28 53 * 892 204 300 24 41 * 663 139 400 22 69 549 107 500 21 58 480 88 600 20 51 434 75 700 20 46 401 66 800 19 43 377 59 900 19 40 358 53 1000 19 37 342 49 1100 18 36 330 45 1200 18 34 320 43 1300 18 33 311 40 1400 18 32 303 38 1500 18 31 297 36 1600 18 30 291 34 1700 18 29 286 33 1800 18 28 281 32 1900 17 28 277 31 2000 17 27 274 30 2100 17 27 270 29 2200 17 26 268 28 2300 17 26 265 27 2400 17 25 262 26 2500 17 25 260 26 2600 17 25 258 25 2700 17 24 256 25 2800 17 24 254 24 2900 17 24 252 24 3000 17 24 251 23

Notes: The above calculations are based on the following data:

Road Rail Air Coastal Ship sm. bus B737 5,000 dwt (a) (b) dwt Av. Haul distance(km) 30 350 890 550 Transfer Cost (Y) (c) 1.2 8.7 17.4 17.4 (e) Av. Transport Cost(d) 21 26 320 17 % Transport Cost 23Z 36% 36Z 41% fixed with distance * transfer cost assumed to be Y 2 at each end (a) small bus with 28 seat capacity. (b) passenger cost is for average of peak and off-peak directions. (c) secondary bus local connection on each end. (d) cost per 1000 pkm in 1990 Yuan at the average trip distance. (e) Ship passengers are assumed to cost 15% of total costs, at 500 capacity, primarily for depreciation of quarters and equipment.

Source: Tables 10, 12, 13, 15 and 16. - 194 - ANNEX

Table 22: VARIATION OF LRISC WITH DISTANCE BY MODE FOR COAL TRAFFIC (1990 Y per 1000 tkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck lodwt 1000dwt 10,000 30,000 dwt dwt 50 136 103 153 153 928 752 100 118 63 106 99 473 380 200 108 43 82 71 246 193 300 105 36 75 62 170 131 400 104 33 71 58 132 100 500 103 31 68 55 109 81 600 102 30 67 53 94 69 700 102 29 66 5Z 83 60 800 102 28 65 51 75 53 900 101 27 64 50 69 48 1000 101 27 64 49 64 44 1100 101 27 63 49 60 40 1200 101 26 63 48 56 38 1300 101 26 63 48 53 35 1400 101 26 62 48 51 33 1500 101 26 62 48 49 31 1600 10') 25 62 47 47 30 1700 1010 25 62 47 45 28 1800 100) 25 62 47 44 27 1900 100 25 61 47 42 26 2000 10( 25 61 47 41 25 2100 100 25 61 47 40 Z4 2200 100 25 61 46 39 24 2300 10( 25 61 46 38 23 2400 10( 25 61 46 37 22 2500 10( 25 61 46 36 21 2600 100 24 61 46 36 21 2700 100 24 61 46 35 20 2800 100 24 61 46 34 20 2900 100 24 61 46 34 19 3000 100C 24 60 46 33 19

Notes: The above calculations are based on the following data:

Road tr. Rail Barge Coastal Ship truck (a) (b) 110dwt 1000dwt 10,000 30,000 dwt dwt Av. Haul distance(km) 5C 660 195 195 1900 1900 Transfer Cost (Y) (c) 0 0 0 0 9.68 9.68 Av. Transport Cost(d) 136 29 83 72 32 16 z Transport Cost 27Z 21% 29% 39% 43Z 59% fixed with distance

(a) Semi-trailer truck with 25 ton capacity. (b) freight cost in peak direction. (c) Y 6 train cost to port plus Y 2.35 transfer charge for coastal ship, otherwise direct delivery by each mode. (d) cost per 1000 tkm in 1990 Yuan at the average haul distance.

Source: Tables 10, 12, 13 and 15. - 195 - ANNEX

Table 23: VARIATION OF LRISC WITH DISTANCE BY MODE FOR HEAVY FREIGHT TRAFFIC (1990 Y per 1000 tkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck 110dwt 1000dwt 10,000 30,000 dwt dwt 50 229 2190 2239 2240 3555 3379 100 164 1106 1149 1142 1787 1693 200 132 565 604 593 902 850 300 121 384 422 410 608 569 400 115 294 331 318 460 428 500 112 240 277 264 372 344 600 110 203 241 227 313 288 700 109 178 215 201 271 247 800 107 158 195 181 239 217 900 106 143 180 166 215 194 1000 106 131 168 154 195 175 1100 105 121 158 144 179 160 1200 105 113 150 135 166 147 1300 104 106 143 128 154 136 1400 104 100 137 122 145 127 1500 104 95 132 117 136 119 1600 103 91 127 113 129 112 1700 103 87 123 109 122 106 1800 103 83 119 105 116 100 1900 103 80 116 102 111 95 2000 103 77 113 99 107 91 2100 102 75 111 96 102 87 2200 102 72 108 94 99 83 2300 102 70 106 92 95 80 2400 102 68 104 90 92 77 2500 102 66 103 88 89 74 2600 102 65 101 86 86 71 2700 102 63 99 85 84 69 2800 102 62 98 83 81 67 2900 102 60 97 82 79 65 3000 101 59 95 81 77 63

Notes: The above calculations are based on the following data:

Road tr. Rail Barge Coastal Ship truck (a) (b) 110dwt 1000dwt 10,000 30,000 dwt dwt Av. Haul distance(km) 50 660 195 195 1900 1900 Transfer Cost (Y) (c) 2 52 52 52 75 75 Av. Transport Cost(d) 136 29 83 72 32 16 Z Transport Cost 27Z 21% 291 39% 43% 59% fixed with distance

Source: Tables 10, 12, 13 and 15. - 196 - ANNEX

Table 24: VARIATION OF LRISC WITH DISTANCE BY MODE FOR LESS THAN CARLOAD (LCL) TRAFFIC (1990 Y per 1000 tkm)

Distance Road Rail Barge Coastal Ship (km) tr. truck llOdwt lOOOdwt 5,000 dwt 50 832 2236 2276 2310 3310 100 465 1134 1175 1187 1672 200 282 584 624 625 853 300 221 400 440 438 580 400 191 308 348 345 444 500 173 253. 293 288 362 600 160 217 257 251 307 700 152 190 230 224 268 800 145 171 211 204 239 900 140 155 195 189 216 1000 136 143 183 176 198 1100 133 133 173 166 183 1200 130 125 165 157 171 1300 127 118 158 150 160 1400 125 112 152 144 151 1500 124 107 147 139 143 1600 122 102 142 134 137 1700 121 98 138 130 131 1800 120 94 134 126 125 1900 119 91 131 123 120 2000 118 88 128 120 116 2100 1:17 86 126 117 112 2200 1:16 83 123 115 109 2300 115 81 121 113 105 2400 1:15 79 119 111 102 2500 1:14 77 117 109 100 2600 1:13 75 115 107 97 2700 1:L3 74 114 105 95 2800 1:12 72 112 104 93 2900 112 71 111 103 91 3000 111 70 110 101 89

Notes: The above calculations are based on the following data:

Road tr. Rail Barge Coastal Ship truck (a) (b) llOdwt lOOOdwt 5,000 dwt Av. Haul distance(km) 50 660 195 195 550 Transfer Cost (Y) (c) 1.7 52 52 52 75 Av. Transport Cost(d) 136 42 103 105 58 Z Transport Cost 27Z 21X 29Z 39% 41Z fixed with distance

(a) Semi-trailer truck with 25 ton capacity. (b) freight cost in peak direction. (c) secondary carrier cost plus transfer charge on each end. (d) cost per 1000 tkm in 1990 Yuan at the average haul distance. Rail and barge costs have been increased to reflect more handling and low load factors.

Source: Tables 10, 12, 13 and 15. Distributors of World Bank Publications

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