Performance Evaluation Report Project Number: PPE : PRC 30389 Loan Numbers: 1641/1642 December 2006 People’s Republic of China: Changchun–Harbin Expressway Project Operations Evaluation Department CURRENCY EQUIVALENTS Currency Unit – yuan (CNY) At Appraisal At Project Completion At Operations Evaluation (July 1998) (August 2004) (December 2006) CNY1.00 = $0.1208 $0.1232 $0.1277 $1.00 = CNY8.28 CNY8.12 CNY7.83 ABBREVIATIONS AADT – annual average daily traffic ADB – Asian Development Bank CDB – China Development Bank DMF – design and monitoring framework EIA – environmental impact assessment EIRR – economic internal rate of return FIRR – financial internal rate of return GDP – gross domestic product ha – hectare HHEC – Heilongjiang Hashuang Expressway Corporation HPCD – Heilongjiang Provincial Communications Department ICB – international competitive bidding JPCD – Jilin Provincial Communications Department JPEC – Jilin Provincial Expressway Corporation MOC – Ministry of Communications NTHS – national trunk highway system O&M – operations and maintenance OEM – Operations Evaluation Mission PCD – provincial communication department PCR – project completion report PPTA – project preparatory technical assistance PRC – People’s Republic of China RRP – report and recommendation of the President TA – technical assistance VOC – vehicle operating cost NOTE In this report, “$” refers to US dollars. Keywords asian development bank, development effectiveness, expressways, people’s republic of china, performance evaluation, heilongjiang province, jilin province, transport Director Ramesh Adhikari, Operations Evaluation Division 2, OED Team leader Marco Gatti, Senior Evaluation Specialist, OED Team members Vivien Buhat-Ramos, Evaluation Officer, OED Anna Silverio, Operations Evaluation Assistant, OED Irene Garganta, Operations Evaluation Assistant, OED Operations Evaluation Department, PE-696 CONTENTS Page BASIC DATA v EXECUTIVE SUMMARY vii MAPS xi I. INTRODUCTION 1 A. Evaluation Purpose and Process 1 B. Expected Results 1 II. DESIGN AND IMPLEMENTATION 3 A. Formulation 3 B. Rationale 3 C. Cost, Financing, and Executing Arrangements 4 D. Procurement, Construction, and Scheduling 6 E. Design Changes 7 F. Outputs 7 G. Consultants 10 H. Loan Covenants 10 I. Policy Setting 11 III. PERFORMANCE ASSESSMENT 13 A. Overall Assessment 13 B. Relevance 13 C. Effectiveness 14 D. Efficiency 14 E. Sustainability 15 IV. OTHER ASSESSMENTS 16 A. Impact 16 B. Asian Development Bank and Borrower Performance 18 V. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 18 A. Issues 18 B. Lessons 20 C. Follow-Up Actions 20 APPENDIXES 1. Summary Design and Monitoring Framework 21 2. Appraisal and Actual Costs and Financing 26 3. Organization Chart of Heilongjiang Hashuang Expressway Corporation 28 4. Organization Chart of Jilin Provincial Transport Agencies 29 5. Chronology of Major Events in the Project’s History 30 6. Financial Evaluation 34 7. Assessment of Overall Performance 42 8. Economic Reevaluation 43 9. Socioeconomic Development in Project Impact Areas 50 In accordance with the guidelines formally adopted by the Operations Evaluation Department (OED) on avoiding conflict of interest in its independent evaluations, the director general of OED did not review this report and delegated approval of this evaluation to the director of Operations Evaluation Division 2. The fieldwork was undertaken by Peter Darjes, Mingxin Shu, and Bingfang Zhong (staff consultants) under the guidance of the mission leader. Mr. Zhong was previously involved in socioeconomic data collection for the project completion report. For this report, OED used his expertise only for updating the socioeconomic data and for some social surveys. He was not involved in the assessment of the Project. To the knowledge of OED management, the individuals preparing, reviewing, or approving this report had no conflict of interest. BASIC DATA Loan 1641-PRC: Changchun–Harbin Expressway (Hashuang Expressway) Project Preparation/Institution Building TA No. TA Name Type Person- Amount Approval Months ($ ‘000) Date TA 2846 Changchun–Harbin Expressway PPTA 30 600 22 Aug 1997 (formerly called Heilongjiang and Jilin Expressway”) As per ADB Key Project Data ($ million) Loan Documents Actual Total Project Cost 397.5 403.7 Foreign Exchange Cost 191.2 162.6 Local Currency Cost 206.3 241.1 ADB Loan Amount/Utilization 170.0 142.1 ADB Loan Amount/Cancellation 27.9 Key Dates Expected Actual Fact-Finding 13–29 Apr 1998 Appraisal 20 Jul–3 Aug 1998 Loan Negotiations 13-15 Oct 1998 Board Approval 27 Nov 1998 Loan Agreement 29 Mar 1999 Loan Effectiveness 27 Jun 1999 16 Aug 1999 First Disbursement 15 Nov 1999 Project Completion 31 Mar 2002 Sep 2001 Loan Closing 31 Dec 2002 22 Jan 2003 Months (effectiveness to completion) 33 25 Internal Rates of Return (%) Appraisal PCR PPER Economic Internal Rate of Return 15.2 15.3 14.8 Financial Internal Rate of Return 7.1 6.8 11.1 Borrower People’s Republic of China Executing Agency Heilongjiang Hashuang Expressway Corporation Mission Data Type of Mission No. of Missions No. of Person-Days Fact-Finding 1 85 Appraisal 1 75 Project Administration Special Loan Administration 1 5 Review 3 27 Project Completion 1 38 Operations Evaluation 1 56 PPTA = project preparatory technical assistance, TA = technical assistance BASIC DATA Loan 1642-PRC: Changchun–Harbin Expressway (Changyu Expressway) Project Preparation/Institution Building TA No. TA Name Type Person- Amount Approval Months ($ ‘000) Date TA 2846 Changchun–Harbin Expressway PPTA 30 600 22 Aug 1997 (formerly called Heilongjiang and Jilin Expressway”) As per ADB Key Project Data ($ million) Loan Documents Actual Total Project Cost 540.4 470.0 Foreign Exchange Cost 230.0 184.5 Local Currency Cost 310.4 285.5 ADB Loan Amount/Utilization 220.0 91.2 ADB Loan Amount/Cancellation 128.8 Key Dates Expected Actual Fact-Finding 13–29 April 1998 Appraisal 20 Jul–3 Aug 1998 Loan Negotiations 13-15 Oct 1998 Board Approval 27 Nov 1998 Loan Agreement 14 Jan 1999 Loan Effectiveness 13 Apr 1999 16 Aug 1999 First Disbursement 15 Nov 1999 Project Completion 30 Sep 2002 Sep 2002 Loan Closing 31 Dec 2002 5 Mar 2003 Months (effectiveness to completion) 42 38 Economic Internal Rates of Return (%) Appraisal PCR PPER Economic Internal Rate of Return 21.5 17.1 18.0 Financial Internal Rate of Return 7.6 7.5 12.4 Borrower People’s Republic of China Executing Agency Jilin Provincial Expressway Corporation Mission Data Type of Mission No. of Missions No. of Person-Days Fact-Finding 1 85 Appraisal 1 75 Project Administration Special Loan Administration 1 5 Review 3 21 Project Completion 1 40 Operations Evaluation 1 56 PPTA = project preparatory technical assistance, TA = technical assistance EXECUTIVE SUMMARY This report presents the findings of an evaluation of the Changchun–Harbin Expressway Project in Heilongjiang and Jilin provinces in the People’s Republic of China (PRC). In November 1998, the Asian Development Bank (ADB) approved two loans for the construction of the Changchun–Harbin Expressway Project (262 kilometers [km]). The first loan of $170 million was to finance the 102 km Hashuang Expressway, the Heilongjiang portion of the expressway; the second loan for $220 million was to finance the 160 km Changyu Expressway, the Jilin portion of the expressway. The Project included the procurement of equipment for traffic management and road maintenance, and consulting services for project supervision and training. The cost of the entire expressway covering the two sections was estimated at $937.9 million, of which 45% was the foreign exchange cost. The executing agencies were the Heilongjiang Hashuang Expressway Corporation (HHEC) for the Hashuang Expressway and Jilin Provincial Expressway Corporation (JPEC) for the Changyu Expressway. The Changchun–Harbin Expressway was one of the priority sections of the PRC’s national trunk highway system. The expressway was to complete a 262 km missing link between existing expressways in the northeast corridor section, and to complement and enhance previous investments. The Project was expected to stimulate domestic employment, production, specialization, and trade through infrastructure investment and transport cost reductions. The Project aimed at promoting economic growth in northeastern PRC, and was in line with ADB’s overall strategic objective of promoting growth and reducing poverty. The Project outcome was road transport efficiency and improved safety in the project impact area of the expressway. The policy dialogue with the Government during project formulation focused on mobilizing nongovernment resources for the highway subsector, supporting corporatization and commercialization, improving highway design standards and road safety, and introducing appropriate pricing policies. Expected beneficiaries were vehicle owners, transport operators, and bus passengers who would use the expressway. The Project was formulated using domestic feasibility studies supported by a project preparatory technical assistance grant that refined and augmented the feasibility studies. The TA carried out a detailed review of the studies, prepared an environmental impact assessment, formulated resettlement action plans, and undertook social impact assessments. The TA was completed satisfactorily. The two executing agencies, HHEC and JPEC, were established as separate companies for the construction, operation, and maintenance of their respective expressways. During implementation, HHEC and JPEC liaised with the municipalities, counties, and districts along