Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 34673-CN

PROJECT APPRAISAL DOCUMENT

Public Disclosure Authorized ON A

PROPOSED LOAN

IN THE AMOUNT OF US$200 MILLION

TO THE

PEOPLE’S REPUBLIC OF

FOR A

Public Disclosure Authorized THIRD HIGHWAY PROJECT

May 24,2006

Transport Sector Unit East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the Public Disclosure Authorized performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS

Exchange Rate Effective January 6,2006

Currency Unit = Yuan (Y) Y 1.00 = US$0.124 US$l.OO = Y 8.07

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

AADT = Average Annual Daily Traffic km = Kilometer BOT = Build-Operate-Transfer km2 = Square Kilometer CDIJP = Communications Design Institute of Jiangxi LRIP = Local Roads Improvement Program Province M = Million CNAO = China National Audit Office m = Meter CPS = Country Partnership Strategy m2 = Square Meter CQ = Consultant Qualification MOC = Ministry ofCommunications DA = Designated Account MOF = Ministry ofFinance EA = Environmental Assessment MTE = Medium Truck Equivalents EAP = Environmental Action Plan mu = Chinese measure of land area (1 5 mu/ hectare) EL4 = Environmental Impact Assessment NCB = National Competitive Bidding EIRR = Economic Internal Rate ofReturn NPV = Net Present Value EMP = Environmental Management Plan NTHS = National Trunk Highway System EMDP = Ethnic Minority Development Plan OD = Origin/Destination EPB = Environmental Protection Bureau PCU = Passenger Car Units ETC = Electronic Toll Collection PMO = Project Management Office E&M = Electrical and Mechanical PPIAF = Public-Private Infrastructure Advisory Facility FIRR = Financial Internal Rate of Return PRC = People’s Republic of China FMR = Financial Management Report PRO = Project Resettlement Office FSL = Fixed-Spread Loan QCBS = Quality- and Cost Based Selection GCTAB = City Traffic Administration Bureau RAP = Resettlement Action Plan GFB = Ganzhou Finance Bureau RGE = -Ganzhou Expressway ICB = International Competitive Bidding RIB = Resettlement Information Booklet ICR = Implementation Completion Report RPF = Resettlement Policy Framework IDF = Institutional Development Fund SA = Special Account JHP2 = Second Jiangxi Highway Project SBD = Standard Bidding Documents JHP3 = Third Jiangxi Highway Project SEPA = State Environmental Protection Agency JPCD = Jiangxi Provincial Communications SIA = Social Impact Assessment Department SOE = Statement ofExpenses JPFD = Jiangxi Provincial Finance Department TGE = Taihe-Ganzhou Expressway JPHAB = Jiangxi Provincial Highway Administration TOR = Terms ofReference Bureau voc = Vehicle Operating Cost JPHHAB = Jiangxi Provincial High-class Highway VSL = Variable-Spread Loan Administration Bureau

Acting Regional Vice President: Jeffrey S. Gutman Country ManagerDirector: David R. Dollar Sector Manager: Jitendra N. Bajpai Task Team Leader: Christopher R. Bennett CHINA Third Jiangxi Highway Project

CONTENTS

Page

A . STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and Sector Issues ...... 1 2 . Rationale for Bank Involvement ...... 2 3 . Higher-Level Objectives to Which the Project Contributes ...... 2 B. PROJECT DESCRIPTION ...... 2 1. Lending Instrument ...... 2 2 . Project Development Objective and Key Indicators ...... 2 3 . Project Components ...... 3 4 . Lessons Learned and Reflected in the Project Design...... 4 5 . Alternatives Considered and Reasons for Rejection...... 4 C. IMPLEMENTATION ...... 5 1. Partnership Arrangements...... 5 2 . Institutional and Implementation Arrangements ...... 5 3 Monitoring and Evaluation ofOutcomes/Results ...... 6 . ... 4 . Sustainability ...... 6 5 . Critical Risks and Possible Controversial Aspects ...... 6 6 . Loadcredit Conditions and Covenants ...... 7 D. APPRAISAL SUMMARY ...... 8 1. Economic and Financial Analyses ...... 8 2 . Technical ...... 9 3 . Fiduciary ...... 10 4 . Social...... 10 5 . Environment ...... 11 6 . Safeguard Policies...... 14 7 . Policy Exceptions and Readiness ...... 14 Annex 1: Country and Sector or Program Background...... 15 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 20 Annex 3: Results Framework and Monitoring ...... 22 Annex 4: Detailed Project Description...... 27 Annex 5: Project Costs ...... 33 FOR OFFICIAL USE ONLY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Annex 6: Implementation Arrangements ...... 34 Annex 7: Financial Management and Disbursement Arrangements ...... 36 Annex 8: Procurement Arrangements ...... 43 Annex 9: Economic and Financial Analysis ...... 50 Annex 10: Safeguard Policy Issues ...... 67 Annex 11: Project Preparation and Supervision ...... 81 Annex 12: Documents in the Project File ...... 83 Annex 13: Statement of Loans and Credits ...... 84 Annex 14: Country at a Glance ...... 89 Annex 15: Maps...... 91 IBRD 34204. IBRD 34205. IBRD 34206. January 2006 CHINA

THIRD JIANGXI HIGHWAY PROJECT

PROJECT APPRAISAL DOCUMENT

EAST ASIA AND PACIFIC

EASTR

Date: May 24,2006 Team Leader: Christopher R. Bennett Country Director: David R. Dollar Sectors: Roads and highways (100%) Sector ManagedDirector: Jitendra N. Bajpai Themes: Regional integration (P); Other public sector governance (P); Export development and competitiveness (P); Rural services and infrastructure (S) Project ID: PO93906 Environmental screening category: Full Assessment Lending Instrument: Specific Investment Loan

[XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 200.00 Proposed terms: VSL, 20 years, including 5 years of grace and annuity principal repayment, at six-month LIBOR for US$200 million plus variable spread for Variable-Rate Single Currency Loans

RECONSTRUCTION AND DEVELOPMENT Total: 544.61 166.78 711.39 Borrower: PEOPLE'S REPUBLIC OF CHINA

Responsible Agency: Jiangxi Provincial Communications Department 3'd Floor Fangxin Building No. 508 Hongcheng Road , Jiangxi, 300025 People's Republic of China Tel: 86-791-652-4052 Fax: 86-791-651-6339 FY 2007 2008 2009 2010 2011 Annual 5.00 60.00 70.00 60.00 5.00 Cumulative 5.00 65.00 135.00 195.00 200.00

Project development objective Re$ PAD B.2, Technical Annex 3

The project development objective is to improve east-west passenger and fkeight flows in Jiangxi province by investing in the construction ofan expressway, enhancing local roads, and strengthening highway management.

The objectives will be measured using the following outcome indicators:

0 in the Ruijin-Ganzhou corridor: (a) increased average daily traffic; (b) decreased accidents on the existing road G323; and (c) decreased travel time from Ruijin to Ganzhou;

0 for the road sections ofthe Local Roads Improvement Program: (a) increased average daily traffic; (b) reduced number ofdays closed; (c) reduced travel times; (d) increased bus services; and

0 implementation ofkey recommendations from the institutional strengthening components with regard to tunnel safety, roadside safety, and electronic toll collection.

Project description [one-sentence summary of each component] Re$ PAD B. 3.a, Technical Annex 4

COMPONENT A: RUIJIN-ANZHOU EXPRESSWAY (RGE) The RGE will be a 117 km long section (about US$627 million, or 88 percent ofthe total project cost) ofthe - expressway, which belongs to one ofthe east-west corridors ofthe National Trunk Highway System. COMPONENT B: LOCAL ROADS IMPROVEMENT PROGRAM The Local Roads Improvement Program (LRIP) of approximately US$74 million aims to improve access in poor areas ofthe province by upgrading existing roads in poor condition.

COMPONENT C: INSTITUTIONAL STRENGTHENING The institutional strengthening component of about US$lO million reflects the current needs of the JPCD in key areas. The component includes: (a) traffic safety operations for tunnels; (b) traffic safety improvement for expressways; (c) implementation of electronic toll collection; (d) training; and (e) equipment.

Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10

Environmental Assessment (OP/BP/GP 4.01) Involuntary Resettlement (OP/BP 4.12)

Significant, non-standard conditions, if any, for: Re$ PAD C. 7

Board presentation: None.

Loadcredit effectiveness: The project has no conditions ofeffectiveness.

Covenants applicable to project implementation:

The legal covenants specify the following stipulations:

0 the proceeds ofthe loan will be onlent to Jiangxi Province on the same terms and conditions as the Bank loan, with the province bearing the foreign exchange risk;

0 the Financial Manual Plan, satisfactory to the Bank, will be applied in implementingthe project;

0 the EMP, RAP and RPF, satisfactory to the Bank, will be applied to implement the project; and

0 the EMP and RAP for the expressway section financed through a BOT, satisfactory to the Bank, will be applied while constructing the BOT expressway section and the Bank will be allowed to supervise such works.

The following reports will be submitted to the Bank for its approval and comment:

- For the RGE and BOT Expressways: 0 EIA, EMP and RAP for expressways and related works; and 0 Semiannual reports on the progress ofworks, including resettlement and environmental issues.

- For the LRIP component: 0 Before commencing work on any local road section there will be an economic and technical analysis, EL4 and, if necessary, an EMP; 0 A social impact assessment to determine the necessity ofan EMDP, and if necessary, the EMDP; 0 If land acquisition is required there shall be a RAP prepared in accordance with the principles and procedures set forth in the RPF; 0 Semiannual reports on the progress ofworks and any environmental issues; and 0 Assessment of social impacts ofthe LRIP by December 3 1, 2010.

- For the institutional strengthening component: 0 Final report on traffic safety operations for tunnels by December 3 1, 2007; 0 Final report on traffic safety improvement for expressways by December 3 1, 2008; 0 Final report on implementing ETC for Jiangxi province by December 3 1,2007; and 0 Annual training report;

- Reporting and Monitoring 0 Semiannual progress report on all components using agreed standard format; 0 Semiannual environmental monitoring report; 0 Annual internal and independent monitoring reports ofresettlement activities; and 0 Annual monitoring and evaluation reports ofproj ect implementation.

- Financial 0 Jiangxi province must maintain a financial management system and provide semiannual project consolidated financial statements in accordance with accounting standards acceptable to the Bank and must meet standard annual auditing requirements. A. STRATEGIC CONTEXT AND RATIONALE

1. Country and Sector Issues

The Government of China is committed to developing an efficient multimodal transport system to enhance competitiveness and promote development. At the core of their program is the National Trunk Highway System (NTHS), comprised of 12 major expressway corridors (five vertical and seven horizontal) connecting all provincial capitals and main cities. The initial NTHS backbone has made great progress toward providing the core network connectivity. The development is now shifting toward linking poorer western regions with eastern China, the engine of China’s economic growth.

Jiangxi is a landlocked province in south central China with a population ofover 40 million. It is one of the lagging regions in China by every standard: (a) 32 counties out of a total of 99 counties and cities in Jiangxi province are identified as poor; and (b) 21 of which are classified as national-level poverty counties.

Ganzhou City Prefecture is the largest prefecture and accounts for 24 percent (39,600 km2) of Jiangxi province. Located in the south of Jiangxi, it is a highly mountainous area. Most poor counties of the province are located in Ganzhou City Prefecture. With a population of 8.3 million, the prefecture has agricultural, mineral and manufacturing industries. The citrus industry, already exporting over 350,000 tons annually, is undergoing rapid expansion. There is significant potential for growth in the mining industries due to the high levels of nonferrous and rare earth metals in the area.

The Need for Improved High-Grade Access to Key Facilities. Lack oftransport accessibility is one of the constraints to the social and economic development of these southern landlocked mountainous areas. The Ruijin-Ganzhou Expressway (RGE) is planned to link Ganzhou and the area east to an expressway currently under construction in province. This will provide a high-quality transport link to the coastal port and international airport at Xiamen (Fujian province). In the future, the expressway network will continue to develop westward, eventually connecting with Chengdu ( province) and ( province).

The Need for Improved Local Road Access to Markets and Services. Local roads, Class IV and unclassified roads, account for about 75 percent ofthe total mileage (61,860 km) ofthe road network in the province; and more than half of these roads are unpaved. Ganzhou City Prefecture is poorly served by local roads. Out of the total mileage of 11,544 km, over 77 percent ofroads are Class IV or unclassified, some 2 percent lower than the average technical standard in the province.

The Need for Improved Sector Management. The previous two Bank highway projects have helped the Jiangxi Provincial Communications Department (JPCD) improve their operations in a number of key areas, such as safety and road maintenance; however, more needs to be done. There is a need to further improve planning and safety processes at the JPCD. There is also a need to start the delivery ofanti-HIV/AIDS education in the sector.

1 2. Rationale for Bank Involvement

The east-west linkages of the NTHS are critical for the development of China’s lagging regions and to attain the full benefit of the NTHS network connectivity. The RGE will be a key contributor to the development of the NTHS and will stimulate trade-led growth in a landlocked poor province of China. It will further strengthen regional integration and the competitiveness of Jiangxi province and its neighbors.

The local roads improvement program (LRIP) will address the needs of the poor and disadvantaged people within Ganzhou City Prefecture.

The project will build on the institutional strengthening activities from the Bank’s previous two projects to assist the JPCD to manage the road network effectively. The project will address key areas, including safety, maintenance and operations.

Two additional institutional strengthening activities will be undertaken as separate projects in conjunction with the JHP3 project. An HIVIAIDS education program (financed through an IDF grant) will educate construction workers and local residents on HIV/AIDS, as well as strengthening the JPCD’s ability to execute efficient HIV/AIDS education programs on its projects. In conjunction with Shaanxi province, a study will be done to investigate the viability of using micro-enterprises to maintain local roads, applying techniques used in Latin America and elsewhere. A request for hnding of this activity has been made to the Public-Private Infrastructure Advisory Facility (PPIAF).

3. Higher-Level Objectives to Which the Project Contributes

The project contributes to Pillar 2 of the 2006 Country Partnership Strategy (CPS) ‘Reducing Poverty, Inequality, Social Exclusion’. The enhanced highway sector management and lower transportation costs will expand the economic opportunities for the rural poor.

B. PROJECT DESCRIPTION

1. Lending Instrument

The Bank will finance the project through a specific investment loan. The Borrower has selected the variable-spread loan (VSL) option in which the spread over LIBOR is reset every semester. The Borrower’s main reason for selecting a VSL rather than a fixed-spread loan (FSL) is because FSL charges are slightly higher than VSL charges and the Borrower does not foresee using the conversion options of the FSL. VSL repayment terms are governed by standard country terms.

2. Project Development Objective and Key Indicators

The project development objective is to improve east-west passenger and freight flows in Jiangxi province by investing in the construction of an expressway, enhancing local roads, and strengthening highway management.

The objectives will be measured using the following outcome indicators:

2 0 in the Ruijin-Ganzhou corridor: (a) increased average daily traffic; (b) decreased accidents on the existing road G323; and (c) decreased travel time from Ruijin to Ganzhou; 0 for the road sections of the Local Roads Improvement Program: (a) increased average daily traffic; (b) reduced number of days closed; (c) reduced travel times; (d) increased bus services; and 0 implementation of key recommendations from the institutional strengthening components with regard to tunnel safety, roadside safety, and electronic toll collection.

3. Project Components

COMPONENTA: RUIJIN-GANZHOU EXPRESSWAY(RGE) The RGE will be a 117 km long section (about US$627 million, or 88 percent of the total project cost) of the Xiamen-Chengdu expressway, which belongs to one ofthe east-west corridors ofthe NTHS. With the main north-south corridors now complete, the focus is shifting to providing east-west linkages, thereby completing network connectivity. It will connect Ganzhou City in the west with the - expressway. In the east it will terminate just west of Ruijin City. The project will link with a 31 km expressway section between the RGE and the Fujian provincial border, which will be built using a build-operate-transfer (BOT) scheme with a concession contract signed for a 22-year period. This BOT is considered linked to the RGE project so the Bank’s safeguard policies will apply. With the completion of the expressway, and the link between the Fujian border and Xiamen (under construction), Ganzhou City will have direct high-quality access to the port ofXiamen.

The area crossed by the RGE is a succession of three basins separated by mountains: the Ganzhou, Yudu and Ruijin basins. Between these basins the mountains are high, some exceeding 1,000 meters (m) of altitude. The main river between Huichang and Ganzhou is the Gong. In Ganzhou City, the Gong River becomes the . The Gong River links the Ganzhou basin with the Yudu basin via a narrow valley. The terrain is very challenging and required careful route selection and designs so as to minimize the environmental and social impacts while providing adequate access to local communities.

COMPONENTB: LOCALROADS IMPROVEMENT PROGRAM The Local Roads Improvement Program (LRIP) of approximately US$74 million aims to improve access in poor areas ofthe province. The amount ofthe Bank financing shall be US$lO million.

The LRIP will be implemented in two phases. Phase Iof the program includes upgrading two existing roads: Chuengyi -Fengzhou (Chonfeng) road (48.5 km) and Meicun-Longbu (Meilong) road (34.8 km). The additional road sections for Phase I1 will be identified using the same selection criteria as in Phase I. Ganzhou City Prefecture is the priority area for the LRIP, and is where the expressway component will be built. Currently its road network density is about 0.23 km/km2, about 38percent lower than the average road density (0.37 km/km2) in the province. Among the total mileage of 11,544 km in Ganzhou City Prefecture, 8,901 km of roads are Class IV or unclassified, some 2percent lower than the average technical standard in the province. As one of the poorest prefectures with lowest densities of road network in the province, the LRIP component will support high-priority needs oflocal access.

3 COMPONENTC: INSTITUTIONALSTRENGTHENING The institutional strengthening component of about US$lO million reflects the current needs of the JPCD in key areas. The component includes:

0 Traffic Safety Operations for Tunnels. A provincial tunnel safety management plan will be established to ensure that there are adequate resources and procedures to handle tunnel emergencies. 0 Traffic Safety Improvement for Expressways. This activity will improve traffic safety conditions on expressways by establishing appropriate roadside facility policies. 0 Implementation of Electronic Toll Collection (ETC). An ETC implementation strategy for Jiangxi province will be established based on the national ETC plan. This will especially focus on the institutional and operational issues associated with ETC implementation. 0 Training. Domestic and foreign training activities will cover a range of topics including design, safety, maintenance, management, finance and the environment. 0 Equipment. Equipment will be procured for expressway management and maintenance, and environmental monitoring. These will include weighing stations, quality control sets and road condition monitoring equipment.

The institution will also be strengthened through the HIV/AIDS education and the micro- enterprises for road maintenance projects, which will be financed through grants.

4. Lessons Learned and Reflected in the Project Design

The extensive experience that the Bank has developed based on the numerous highway projects in China and the corresponding lessons learned were incorporated in the project design. Among them are:

0 The development plans of large urban centers should be incorporated early in the project design of national and provincial transportation links. The development plans of Ganzhou and Ruijin cities were incorporated early in the project design to ensure good linkages to the expressway. The location of the alignment and some interchanges were adjusted to better reflect local development plans. The project is consistent with the provincial and national transportation plans.

0 The preparatory activities greatly contribute to the project’s success. Substantial preparatory work, including land acquisition, resettlement, environmental impact and design studies performed during project preparation have contributed to the readiness ofthe project.

0 Ensure client ownership of institutional components. The proposed institutional strengthening component builds on the achievements from the previous two Bank-financed highway projects in Jiangxi Province and the lessons learned in the implementation of institutional components ofother highway projects in China.

5. Alternatives Considered and Reasons for Rejection

Linkage with Fujian Province. There is a 31 km expressway section linking Ruijin with the Fujian border that was not included as part ofthe project. This was excluded by the JPCD since

4 they wanted it completed urgently so as to take advantage of the new link with Fujian Province to supply traffic to Jiangxi’s existing expressways. In September 2005, the JPCD signed a 22- year concession contract with a -based company to build this section using a BOT scheme. The same safeguard policies will be applied to this road section since it is considered linked to the RGE.

Scope of the LRIP. An alternative to expand the scope ofthe LRIP to allow any local road in the province to be eligible was considered. However, it was decided to focus only on road sections located in the Ganzhou City Prefecture. This decision was taken to enhance the potential impact of the expressway component, which is located entirely in the Ganzhou City Prefecture, and to prioritize its impact on the poorest southern area of the province. It was originally planned to include only periodic road maintenance and improvement or rehabilitation in the LRIP. However, the construction of new local road sections will be considered, if these are properly justified.

RGE Alignment Alternatives. The original feasibility study of the RGE considered a southern and a northern alignment. After further work a combination of both alternatives, with some refinements, was selected. The final alignment minimizes the resettlement requirements and limits the negative environmental impacts, while reflecting local development plans. It will provide the best overall benefits to the people living in the project area.

C. IMPLEMENTATION

1. Partnership Arrangements

None.

2. Institutional and Implementation Arrangements

The Borrower is the People’s Republic of China (PRC), which will onlend the loan proceeds through the Ministry of Finance (MOF) to Jiangxi Province on the same conditions as the Bank loan to PRC. The overall direction of the project at the central level will rest with the Ministry of Communications (MOC) located in Beijing.

At the provincial level the Jiangxi Provincial Communications Department (JPCD) is responsible for the overall project implementation in close coordination with the Jiangxi Provincial Finance Department (JPFD) and with support from the National Development and Reform Commission (NDRC), MOF, MOC and the Jiangxi Provincial Planning Commission (JPPC).

The World Bank Loan Project Management Office (PMO), which is part ofthe JPCD, will act as the executing agency. It will carry out the procurement and financial oversight for the project, and will provide support to other project implementation units - such as the LRIP-PMO to be established in Ganzhou City Prefecture for the LRIP component - to fulfill their obligations.

After the RGE construction is completed, it will be operated and maintained by a division under the Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB), which is a specialized agency under the JPCD. JPHHAB has limited administrative, management and legislative authority, and is strictly controlled by the JPCD. Under JPHHAB, there are four

5 expressway management divisions, each in charge of one expressway. The RGE is one ofthese four divisions. JPHHAB and its divisions are responsible for expressway management, maintenance and toll collection. In addition, JPHHAB is also responsible for the administration of all expressways in Jiangxi except for three expressways managed by the Jiangxi Highway Bureau and Ganzhou City. Particular duties of expressway administration include: maintenance planning, road condition inspection, disputes management and compensation. Construction supervision of the RGE will be carried out by a domestic supervision team, assisted by foreign specialists on an as-needed basis.

3. Monitoring and Evaluation of Outcomes/Results

Annex 3 contains the performance indicators adopted for the project. The PMO will monitor and evaluate the data that will be collected by the various project implementation units and will prepare and submit to the Bank semiannual reports using guidelines and standards previously agreed with the Bank. The baseline data and target values were agreed and will be included as part of the monitoring reports. The Ganzhou City Prefecture will monitor and evaluate the LRIP component. Annual independent audits of the special accounts will be carried out, and an implementation completion report (ICR) will be prepared within six months of the closing date ofthe Bank loan.

4. Sustainability

The sustainability of the project is defined by: (a) the current central government’s policy to improve accessibility to the western and central provinces; (b) the provincial government’s commitment to establish a transport corridor with access to an international seaport; and (c) the constantly growing traffic in the corridor, sustained economic growth of the province and rapid development of the cities of Ganzhou and Ruijin. All ofthe above are enhanced by the matured and well-established relationship between the Bank and Jiangxi province through two successful lending operations.

5. Critical Risks and Possible Controversial Aspects

Risk Rating with Risk Mitigation Mitigation To project development objective Expressway does not 1 The assumptions used in the traffic modeling for the feasibility S attract or generate study were independently verified by a consultant sufficient traffic 1 An appropriate toll rate will be adopted for the expressway 1 Local government development plans were integrated with the expressway planning to ensure adequate access 1 Upgrading ofinterconnecting roads started prior to the RGE project identification so will be completed prior to expressway opening. Local roads do not 1 Roads included in the LRIP were carefully selected to ensure that N enhance access to the poor are served with improved access to markets and social markets and services services (see Annex 4) 1 Existing roads connecting to the sections identified for upgrading as part ofthe LRIP have already been upgraded

6 Limited impact from 1 The preparation team worked closely with the JPCD to ensure that M institutional the institutional strengthening activities are of value to the JPCD strengthening

1 Accurate engineering designs available on time, based on sufficient M subsurface investigations 1 Ensuring timely land acquisition and resettlement

1 Selection of competent contractors by thorough prequalification 1 Adequate quality assurance during construction I Poor attention to 1 Proiect will have the EIA, EMP, RAP and RPF completed in a N timely manner and filly disclosed 1 Road alignment was selected to minimize environmental and social impacts 1 Alignment adjusted to avoid cultural relic sites 1 In the unlikely event ethnic minorities are encountered, an EMDP will be prepaied and submitted to the Bank 1 Provide close support to the JPCD to ensure safeguard issues do not M expressway not lead to undue delays I M

Note: High Risk - H, Substantial Risk - S, Modest Risk - M, Low or Negligible Risk - N. Environmental Impact Assessment - EIA, Environmental Management Plan - EMP, Resettlement Action Plan - RAP, Resettlement Policy Framework - RPF, Ethnic Minority Development Plan - EMDP.

6. Loadcredit Conditions and Covenants

The project has no conditions ofeffectiveness.

The legal covenants specify the following stipulations:

0 the proceeds of the loan will be onlent to Jiangxi Province on the same terms and conditions as the Bank loan, with the province bearing the foreign exchange risk; 0 the Financial Manual Plan, satisfactory to the Bank, will be applied in implementing the project; 0 the EMP, RAP and WF, satisfactory to the Bank, will be applied to implement the project; and 0 the EMP and RAP for the BOT, satisfactory to the Bank, will be applied while constructing the BOT highway section and the Bank will be allowed to supervise such works.

The following reports will be submitted to the Bank for its approval and comment:

- For the RGE and BOT Expressways: 0 EIA, EMP and RAP for expressways and related works; 0 Semiannual reports on the progress of works, including resettlement and environmental issues.

7 - For the LRIP component: 0 Before commencing work on any local road section there will be an economic and technical analysis, EIA and, if necessary, an EMP; 0 A social impact assessment to determine the necessity of an EMDP, and if necessary, the EMDP; 0 If land acquisition is required there shall be a RAP prepared in accordance with the principles and procedures set forth in the RPF; 0 Semiannual reports on the progress ofworks and any environmental issues; and 0 Assessment of social impacts ofthe LRIP by December 3 1,2010.

- For the institutional strengthening component: 0 Final report on traffic safety operations for tunnels by December 3 1,2007; 0 Final report on traffic safety improvement for expressways by December 3 1,2008; 0 Final report on implementing ETC for Jiangxi province by December 3 1,2007; and 0 Annual training report;

- Reporting and Monitoring 0 Semiannual progress report on all components using agreed standard format; 0 Semiannual environmental monitoring report; 0 Annual internal and independent monitoring reports ofresettlement activities; and 0 Annual monitoring and evaluation reports ofproj ect implementation.

- Financial 0 Jiangxi province must maintain a financial management system and provide semiannual project consolidated financial statements in accordance with accounting standards acceptable to the Bank and must meet standard annual auditing requirements.

D. APPRAISAL SUMMARY

1. Economic and Financial Analyses

Economic (Cost benefit) EIRR = 14.6, NPV (12%) = US$189.0 million

This economic evaluation covers the two project components that account for 98% of the project’s costs: (a) construction of the 117 km RGE expressway, and (b) the upgrading of two rural roads (83 km) for the first-phase construction under the LRIP. The principal measured benefits of the project are savings in vehicle operating costs (VOC), travel time savings to vehicle occupants, and enhanced road safety. The estimated overall economic internal rate of return (EIRR) for the project is 14.6 percent, with those for the RGE and LRIP being 14.2 and 22.6 percent, respectively. The overall economic net present value (NPV), based on a 12 percent discount rate, is estimated at US$189.0 million, of which the RGE is estimated to contribute US$152.5 million and the LRIP US$36.5 million. The evaluation results and a description of the method used to derive them are provided in Annex 9 and are summarized as follows:

8 EIRR (in Yo) NPV (US$ M, 12%) Ruijin-Ganzhou Expressway (RGE) 14.2 152.5 Local Road Improvement Program (LRP) 22.6 36.5 Total Project 14.6 189.0

Financial FIRR = 0.8, NPV (5.13%) = US$-328.3 million

The construction of the RGE is the main component of the project (the total cost of the RGE constitutes about 88 percent of the total project cost). The JPCD is planning to use the toll revenue from the RGE to cover the amortization charges of the Bank and domestic loans. Although the highway will generate enough total revenue over the loan period to finance operations, maintenance and debt service, with a standard amortization schedule there will be a low profit margin in the early years of operation. A conservative traffic projection combined with high construction costs resulting from the mountainous terrain affects the financial rate of return of the investment, which is expected to be about 0.8 percent. However, based on the proposed toll rate, the RGE may not need any external cash injection over the life ofthe project due to the large sum of depreciation reserves and the flexible principal payment terms on the domestic loan. Unlike the RGE, which is tolled, the LRIP roads will have no revenue. The financial evaluation has confirmed the availability of sufficient counterpart finds and the capacity ofthe JPCD to finance operating expenses of the LRIP. All the indicators show that the financial risks are modest. A detailed assessment is provided in Annex 9.

2. Technical

The detailed project description is in Annex 4. The RGE design and traffic studies were subjected to in-depth technical reviews by the Bank and independent consultants. The expressway standards adopted are justified by the traffic forecasts and the fact that the project belongs to the NTHS system. Safety conditions in tunnels do not allow bidirectional two-lane highways. Highways without expressway standards would have resulted in numerous access points and the presence ofpedestrians, bicycles, animals and slow vehicles, which would not be compatible with the project’s objective of enhancing long-distance traffic through safe and efficient operations. The MOC expressway standards with a design speed of 100 km/h were adopted, taking into consideration the difficult mountainous terrain of the project area. The following issues needed special attention from a technical point ofview:

0 proper consideration of traffic safety and tunnel hazards throughout the design process, especially given the long steep slopes and numerous tunnels;

0 including provision for non-motorized traffic on river bridges where no alternative route was available;

0 sufficient geological investigations on technically challenging locations to minimize the risk of encountering major problems at the construction stage, given the mountainous terrain; and

9 0 fully operational electrical and mechanical (E&M) works at the opening of the highway to traffic, especially those dealing with tunnel safety.

The Communications Design Institute of Jiangxi Province’s (CDIJP) designs were initially reviewed by the MOC Design Institute No. 2 in . The structure and pavement designs were further reviewed by an international consulting firm financed by a Spanish Trust Fund grant. The alignment was reviewed by the Bank appraisal team. The traffic analysis was reviewed by an international consultant.

Cost estimates reflect November 2005 prices and are based on the preliminary design. The prevailing unit rates for civil works were checked against effective rates in similar works under Bank-financed projects in Jiangxi and other provinces in China, recent costs of foreign experts from highway projects and recent price quotations for equipment.

3. Fiduciary

Financial Management. The adequacy of the project financial management system was assessed based on guidelines issued by the Financial Management Sector Board on November 3, 2005 (see Annex 7). The assessment concluded that the project meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02. It was confirmed that the project would have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status ofthe project in the reporting format agreed with the Bank.

Procurement. A procurement capacity assessment of the implementing agencies was carried out during preappraisal (see Annex 8). The assessment concluded that the overall risk of the procurement process is average. The JPCD and the dependent entities involved in the project have allocated adequate resources, including experienced staff, to implement the project. These agencies (except the PMO for the LRIP component) are familiar with Bank procurement procedures and appear adequate for procurement implementation. An action plan to strengthen the procurement capacity of the implementing agencies was discussed with the JPCD and agreed upon. The plan calls for the preparation and dissemination of a project-specific procurement manual, training workshops, along with measures to avoid excessive cost overruns and improve procurement economy and efficiency. The ways in which the Tendering and Bidding Law of China differs from the Bank guidelines were addressed in the assessment, and clarifications for the procedures to be followed for Bank-financed national competitive bidding (NCB) procurement were included in the loan agreement.

4. Social

The RGE and the two road sections under Phase Iof the LRIP will affect 86 villages, largely through land acquisition and house demolition. The project will require acquisition of 15,619 mu of land, out ofwhich 5,333 mu or 34 percent are farmland. A total of 310,463 m2 of houses will be demolished, affecting 1,718 households.

A Resettlement Action Plan (RAP) was prepared by the JPCD with support fiom professors of Wuhan University. This RAP covers the RGE and LRIP components, as well as the BOT

10 section (as an annex). The socioeconomic and inventory surveys were conducted in May 2005. Supplementary surveys were done in July and November 2005 to accommodate the changes to the project alignment. The compensation rates were determined through consultation with the affected people and with a principle of “not lower than the rates applied for Jiangxi Highway I1 and other local projects.” Emphasis was given to the rehabilitation strategy, including construction ofthe new residential area in the same village for relocation of28-48 households.

A Social Impact Assessment (SIA) for both the expressway and the LRIP Phase Iroads was undertaken by Zhongshan University. The SIA focused on improving the project design by identifying the social impacts of the project on the communities in the project area, and consultation with the various stakeholders for improvement of the project design. The SIA confirmed that the project would improve the transportation conditions and the local economy. It also identified the main concerns of the villagers with regard to land acquisition, relocation, road construction and road safety. The SIA was sent to the design institute (CDIJP), PMO and Project Resettlement Office (PRO) so that the comments and suggestions on resettlement issues would be well considered during the process ofRAP preparation.

The resettlement management agencies were established with sufficient and capable staffing at

all administrative levels. Internal and external monitoring systems were ’ established. Wide- ranging consultations were undertaken, with an estimated 80 percent of the affected people having participated. The RAP was disclosed locally and the local government confirmed its agreement and commitment to implement the RAP in accordance with its terms. Comments fi-om the SIA addressed in the RAP included: (a) most of the affected villagers prefer to receive land compensation in cash; (b) some affected farmers were worried about receiving insufficient payments and the potential for misuse of the land compensation; and (c) the affected farmers wanted to open an appropriate channel for grievances and feedback.

The LRIP Phase Iroads were included in the Project RAP. An RPF was prepared for the LRIP component. This will be used for the roads to be included in Phase I1 of the LRIP program. For the Phase I1 roads, a census survey of displaced persons and valuation of assets will be undertaken for an Abbreviated Resettlement Plan; or a socioeconomic studies and baseline census will be undertaken for a Resettlement Plan. The approach to be used will be finalized once the Phase I1roads are identified.

A screening for ethnic minorities was undertaken as part of the SIA process. The analysis showed that the She and Yao people living in community in the project area of Ganzhou are not indigenous and that the Bank policy therefore does not apply.

5. Environment

The RGE consists of a 117 km expressway on a new alignment, and construction of approximately six km of at-grade interconnecting roads on new alignments. The environmental impacts include occupation of fertile agriculture land and barren land; increases in dust, noise and motor vehicle emissions; soil erosion, borrow area excavation, disposal of excess waste material; community severance; resettlement; and safety during construction.

11 A large part of the effort during the early preparation ofthe RGE design was directed toward the selection of an environmentally and socially benign alignment, which was also technically, politically and economically acceptable. The selection of the alignment was carried out as follows:

During the September 2004 feasibility stage, two broad corridors were identified by the design institute and compared. The North Line alignment used the same corridor as the one used by NR 323 and the Ganlong Railway. The South Line scheme was proposed based on fewer crossings of the Gong River, NR 323 and the Ganlong Railway. The selected alignment also met the local government requirements.

In stage two, within the preferred North Line corridor, two segments of the alignment, namely, the Yudu and Jiangkou segments, were further refined. Following comparisons, the Yudu Scheme I1 was selected based on the least land occupation and resettlement, and associated lower disturbance and impacts. The scheme also met with local government approval. In the Jiangkou section, the alternative was selected that gave the least land occupation, least resettlement and least interference with the Ganlong Railway and NR 323.

During the Preliminary Design in September and October 2005, additional alignments were compared (steps 3 and 4), as the design evolved and more geotechnical, cost, environmental and resettlement information became available. After thorough analyses, alternatives were selected based on: (a) lower environmental impacts; (b) lower resettlement and land occupancy; and (c) tradeoffs between lower construction cost and environmental impact against lower resettlement.

In cases where there were no viable alternatives because of the proximity of the RGE to towns, mining easements or railway lines, full consideration was given to mitigate adverse environmental and resettlement impacts arising out of the alignment. This is the case in Section K31-K33.5 where the alignment passes through a flood-prone area. Since the alignment could not be shifted and the construction of the expressway embankment could have worsened the flood levels and the duration of the floods, a viaduct was introduced in this section and its length was increased to minimize the increase in flood levels and to reduce the duration ofthe flood.

The final outcome of the work on the alignment is one with acceptably low environmental and social impacts, a shorter length than originally proposed, and one that avoids unstable geotechnical areas, above ground karst, cultural relic sites and nature reserves.

To mitigate environmental concerns, a standalone EMP was developed. It includes applicable environmental standards, mitigation measures, monitoring plans for the construction and operational phases, environmental training, institutional building and strengthening plan. During construction, the implementation of the EMP will be supervised by the Environmental Office of MOC, the project Supervision Consultants retained by the Jiangxi PMO, and the contractor’s environmental staff. During the operation of the RGE, JPHHAB will be responsible for the monitoring and implementation of any environmental measures. In addition, the State Environmental Protection Agency (SEPA) and the Ganzhou and Ruijin Environmental Protection Bureaus (EPBs) will monitor the implementation ofthe EMP.

12 Three rounds of public consultation were carried out during the preparation of the EA: the first round followed the preparation of EA Terms of Reference (TOR) in December 2004; the second and third rounds during the preparation of the draft EA reports in September and October 2005 respectively. A total of 646 people and families were consulted. The major concerns and feedback centered on adequate and timely compensation for land acquisition, resettlement and relocation; timely rehabilitation and/or restoration of damaged irrigation systems; construction safety; dust and noise pollution; better access to the RGE; and a sufficient number of passageways to cross the RGE. The rural public was concerned about road blockages and access to services during the project, safety, noise and dust. The EA reports were placed in 12 libraries in the affected areas, and in all city libraries and resettlement offices. In addition, the major findings and the summary of the EA reports were published in the local and provincial newspapers.

To address the concerns raised by the project-affected people, the JPCD has responded by: (a) setting up land acquisition and resettlement offices under the PMO to develop, supervise and implement the RAP and restoration of the affected irrigation systems; (b) ensuring that an adequate number of passageways and crossings for pedestrians and farm vehicles (one about every 600m) were included in the design; (c) providing safety barriers at selected locations along the rural roads to provide protection to students, residents and livestock; (d) ensuring that there is provision for installing noise barriers, noise insulation windows and tree planting to minimize noise impact from the RGE and the interconnecting roads; and (e) ensuring that the contractors reclaim and restore borrow areas, camp sites, waste dumps, asphalt plant sites, etc.

The EA/EMP for the BOT section were prepared in a consistent manner to the RGE, following the Bank’s policies. They will be implemented in the same way as the RGE, and supervised by the Bank.

The LRIP roads will mostly follow the existing road alignments, and involve strengthening, minor widening and realignment of the existing low-grade roads to increase their transportation capacity, minimize congestion, increase driving visibility and provide all-season access. The EA investigations did not find any protected areas or cultural relics along the selected alignments or with the LRIP roads.

The LRIP component is located in the remote hilly region of Jiangxi and the construction of the roads will likely be carried out by local contractors who may lack proper managerial and trained staff, Supervision is expected to be weak and the environmental management of the rural road construction may be poor. Therefore, the project provides for the local transport bureau and the contractors to receive environmental management training by specialists from the JPCD and local EPBs. The training will encompass environmental protection during construction, noise and dust control, construction camp management, borrow pits and disposal sites reclamation, construction safety and health, etc. Monitoring will be carried out by local EPBs.

13 6. Safeguard Policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.1 1) [I [XI Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety ofDams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

7. Policy Exceptions and Readiness

The project will comply fully with Bank policies. The project meets regional criteria for implementation.

' By supporting the proposedproject, the Bank does not intend to prejudice thejnal determination of the parties' claims on the disputed areas

14 Annex 1: Country and Sector or Program Background CHINA: Third Jiangxi Highway Project

China and Road Sector Development

During the last decade there were many changes affecting the transport sector in China. Since the early 1990s, the economy has moved from a centrally planned environment to one that is more commercialized and competitive; the degree of openness has increased; patterns of transport demand have changed; passenger and freight traffic have grown rapidly, putting heavy demands on infkastructure; and the role ofthe private sector has substantially increased.

In the past, China underinvested in roads, but since the mid- 1990s, with a rapid increase in the rate ofroad construction, it has become one ofthe fastest countries in building its road network. By the end of 2004 the total road network extended roughly 1,870,661 km, with 34,288 km of expressways and about 600,584 km of Class Ithrough I11 highways (see below). With its complementary railway and waterway networks, China has developed one of the most diverse transportation networks in the world.

China Highway Statistics (2004)

Road Class Length (km) Road Type Length (km) National 129,814 Expressway 34,288 Provincial 227,871 Class I 33,522 County 479,372 Class I1 23 1,715 Township 945,180 Class I11 335,347 Special 88,424 Class IV 880,854 Others 3 54,93 5 Total 1,870,661 Total 1,870,661 Source: Ministry of Communications.

In the late 1990s, governments at all levels embarked on major highway investment programs. At the core was the National Trunk Highway System (NTHS), which is the backbone, and most important element of, the national transportation network. The NTHS was originally to be a 35,OOOkm network composed of 12 major highways. There are five north-south corridors: Beijing-, Beijing-, -, Erlianhaote-Hekou, and Tongjiang- ; and seven east-west corridors: Dandong-Lhasa, Hengyang-Kunming, - Huoerguosi, -, -Chengdu, Shanghai-Ruili, and Suifenhe-Manzhouli. With an estimated cost of US$l50 billion, the NTHS will connect all provincial capitals and cities with populations exceeding 500,000 inhabitants (100 major cities). By the end of 2004, roughly 34,288 km, or 97 percent ofthe total length, was completed.

In December 2004, the Chinese government approved an expanded NTHS, or the “7918 Highway Network.” The plan to build 7 capital radials, 9 north-south major highways and 18 east-west corridors, totaling some 85,000 km of high-grade expressways, is expected to be completed in 2020. The “791 8 Highway Network” was designed to reach more than one billion people in China by connecting all provincial capitals and large urban centers of more than 500,000 inhabitants with cities of more than 200,000 inhabitants. The network location intends

15 to allow people in eastern areas to access an expressway within half an hour, the central provinces within an hour, and the western areas within two hours. In addition, it will improve communications between economically developed areas, such as the and Pearl River Deltas in the east and the midwest and northeast areas. It will also enhance the connections with the west, and will promote the economic growth of central and southeastern provinces, including Jiangxi.

Jiangxi Province

Jiangxi province is about 160,000 km2, has 12 cities and 77 counties with a 2004 population of 43 million. Its neighboring provinces are , and , as well as the coastal provinces of Zhejiang, Fujian, and Guangdong. Jiangxi is famous for its combination of natural landscape and rich cultural heritage. Jiangxi’s plans to rise in the middle of China are based on industrialization and opening to the outside by integrating the province with the Yangtze and Zhujiang river deltas, along with Fujian province. The major cities are Nanchang (capital), , Ganzhou, , Jian, and Ruijin.

Jiangxi’s main transport network is based on highways and waterways that developed around the national highways and the Gan River as the main arteries. The primary network connects the capital Nanchang with main urban cities and the neighboring provinces. The whole network is formed on a “3 vertical, 4 horizontal” expressway skeleton, with Jingdezhen-Yiwu, Jiujiang- Lichuang, and Wuning-Longnan expressways to the north and south, as well as Zhiyuan- , Liyuan-Jinyushi, Guangchang-Lianhua, and Ruijin-Chuengyi expressways to the east and west. Along the expressway skeleton, main lines in the network are clustered around Jiangxi’s major industrial areas that generate the highest passenger and cargo flow in the province. Of Nanchang’s exports, only two percent are exported through Xiamen, which is the closest port. Most of the exports use Shanghai (40 percent), (37 percent) and the remaining through . The lack of a high-quality transport link to Fujian province has constrained Jiangxi’s accessibility to the seaport at Xiamen.

Ganzhou City Prefecture. At the west end of the RGE expressway, and home to the LRIP roads, Ganzhou City Prefecture has under its jurisdiction one prefecture, two cities and 15 counties. It is the largest administrative zone in the province. The area of the entire city prefecture is 39,390 km2, which is about 23.5 percent of the area of the province. The 2003 population of the city was 8.3 million. Its topography is mainly hilly and some basins surrounded by mountains. The average elevation is about 500 m above sea level. There are rivers running south-north and east-west and the Gan River is the most important.

The forest area of Ganzhou is very large and the area is rich in underground minerals with more than 64 kinds of proven solid minerals, most of them nonferrous and rare metals. It is an industrialized city prefecture mainly dedicated to metallurgy, electrical power, coal, chemical machinery, timber industry, building materials, food and textiles. It has unique scenic spots, beautiful landscape, a longstanding history, relics and a cultural heritage that provides the basis for rich natural and cultural resources.

Ruijin City. At the east end ofthe expressway, the city has an area of 2,448 km2 and has under its jurisdiction seven towns, ten townships and 237 village committees with 601,265 inhabitants

16 in 2003. It has 26 kinds ofproven reserves such as gold, tungsten, uranium, rare earth, coal and limestone. Ruijin has a long history, beautiful landscape, many tourism resources and is famous for its revolutionary base as the starting point ofthe in 193 5.

Huichang, Yudu and Gan Counties. Between Ruijin and Ganzhou there are three counties rich in minerals, forest and tourism. with a 2003 populati’on of 433,690 is adjacent to Fujian and Guangdong provinces. , located east of Ganzhou Prefecture, has 902,351 inhabitants (2003) and an area of2,893 km2. Gan County has an area of 2,993 km2 and 557,000 inhabitants (2003). It is located in the upstream area ofthe Gan River.

Highways. In 2003 Jiangxi had 61,233 km of roads, with a road density of 36.7 km/km2. The roads consist of: 1,040 km of expressways; 330 km Class I;7,372 km Class 11; 5,606 km Class 111; and 23,443 km Class IV. Class I1 and above roads account for 14.3 percent ofthe total road length, while Class IV and above roads account for 61.7 percent of the total length. All the counties, and 79.3 percent of administrative villages, have road access.

Recently, Jiangxi has concentrated on expressway construction. The length of expressways in operation increased from 420 km in 2000 to 1,040 km by the end of 2003, a 148 percent increase. During the same period, the national expressway lengths increased by 82 percent from 16,3 14 km to 29,745 km.

Road transportation is the main mode in Jiangxi’s transportation system. In 2003, Jiangxi had 53,000 road transportation business operators, 260,000 people in transportation employment, 110,000 operating vehicles, and 5,065 passenger routes (including 1,25 1 interprovincial lines). This same year, Jiangxi also reached a total passenger volume of 332 million persons, 181.3 million person-km of passenger movement, 210 million tons of cargo volume, and 16.2 billion ton-km of cargo movement.

Railway. The total length of Jiangxi’s railways in operation is 3,044 km (2005) out of the national length of about 75,000 km. Jiangxi has five arterial and 11 secondary lines. The five arterial lines are: Zhegan, Jingjiu, Yingxia, Yuangan, and Wujiu. The main line is Jingjiu railway line (connecting Beijing and Hong Kong), which is the main north-south line that crosses 22 counties and has 715 km. The main east-west line is the Zhegan railway with 564 km that connects middle and southwestern China.

Waterways. In 2003, Jiangxi’s waterways accommodated a total of 3.88 million passengers, 82 million person-km of movement, 18.48 million tons of cargo volume, and five billion ton-km of cargo movement.

The Ganjiang-Poyang drainage system covers most ofthe province and empties into the Yangtze River, which forms part of the province’s northern border. , at 3,583 km2, is China’s largest freshwater lake. The Gan River and Poyang Lake waterways are Jiangxi’s main waterways, which are further connected with 62 navigable rivers, making a total of 5,560 km of waterways in the province. Class waterways amount to 41 percent of the system and are comprised of 156 km Class IV; 214 km Class V; 741 km Class VI; and 1,160 km Class VII.

Jiangxi has 1,188 inland harbor berths (39,679 m in length). There are 55 ports that are capable ofhandling more than 10,000 tons of cargo annually. The port of Jiujiang can handle six million

17 tons of cargo a year, with the ports of Nanchang, , Ji’an, Ganzhou and Boyang all having annual capacities of over one million tons.

By the end of2003, Jiangxi had 4,581 civilian transport vessels that provided 570,000 net tons of capacity and 15,900 passenger spaces. With the development ofvessel capacity, a large number of old-fashioned wooden boats became obsolete and were replaced by steel, large tonnage, multifunctional, and energy-efficient vessels. In terms ofroute development, Jiangxi has started reaching its goals of stabilizing inland waterways, developing Yangtze River transport, extending business toward the coastal areas, and exploring maritime transportation opportunities. With this goal, Jiangxi’s river and ocean fleet has developed from one vessel to 32 vessels; the maritime fleet has developed to five vessels with 320,000 tonnages, covering more than ten countries and regions. This has become the main means of transportation for Jiangxi’s international trade.

Air Transport. The Changbei airport located in Nanchang is the province’s main airport, which is supplemented with airports located in Ganzhou, Jingdezhen, Jiujiang, and Jingangshan. In 2004, the Nanchang airport was designated as an international airport and open to foreign flights. Since then, several international flights were authorized including Nanchang-- , Nanchang-Shanghai-Seoul, and Nanchang-Shanghai-Los Angeles.

Vehicle Fleet. The number of private automobiles in the province reached 300,679 (2002), which included 73,203 buses and 176,499 trucks. During the period 1990-2002 the number of private automobiles increased annually by an average of 8.2 percent and buses by 13.3 percent.

Sector Issues for China and Jiangxi Province

China needs to address the following issues to reduce risks and bottlenecks in its transport sector:

0 Government and Administration. China’s government bodies need to adapt to their new roles as regulators. Because the central government has only limited powers over provinces, and China lacks a single, national ministry responsible for all transport modes, the pace of administrative reform varies from province to province. Furthermore, because government bodies have maintained a strong cultural reluctance to cross jurisdictional boundaries, services that require cooperation across such boundaries have developed slowly.

0 Regional Disparities. Provinces along China’s eastern seaboard have benefited from logistical accessibility and well-developed infrastructure, thereby growing more quickly than their western counterparts. The northeast, the seat of much of China’s early heavy industry and still dominated by state-owned enterprises, is now highly polluted and suffering high unemployment. Current central government efforts aim to narrow the widening wealth and income disparities among regions by attracting more domestic and foreign investment to the interior.

In addition to the national issues, Jiangxi province must address several key issues:

0 The Need for Improved High-Grade Access to Key Facilities. Lack of transport accessibility is one of the constraints to the social and economic development of these

18 southern landlocked mountainous areas. The RGE expressway will link Ganzhou and the area east to an expressway currently under construction in Fujian province. This will provide a high-quality transport link to the coastal port and international airport at Xiamen (Fujian province). In the future, the network will continue to develop westward, eventually connecting with Chengdu (Sichuan province) and Kunming (Yunnan province).

0 The Need for Improved Local Road Access to Markets and Services. The Ganzhou City Prefecture is poorly served by local roads. Local roads, Class IV and unclassified roads, account for about 77percent of the total mileage (8,901 km) of the road network in the Ganzhou City Prefecture; and more than halfof these roads are unpaved.

0 The Need for Improved Sector Management. The previous two Bank highway projects have helped the JPCD improve their operations in a number ofkey areas, such as safety and road maintenance; however, more needs to be done. There is a need to further improve planning and safety processes at the JPCD, as well as to assist them in implementing better quality assurance. There is also a need to start the delivery of HIV/AIDS education in the sector.

19 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CHINA: Third Jiangxi Highway Project

Latest Supervision (ISR) Ratings' (Bank-financed projects only) Sector Issue Project' Development Implementation Objective Progress (IP) PO) Bank-financed Completed Projects

0 Remove Highway Capacity China Highway Project (1-3) Bottlenecks (1) 0 Institutional Beijing--Tanggu Expressway (2-4) Strengthening/Training (2)

0 Rural Roads and Poverty Sichuan Provincial Highway (1-5) Alleviation (3)

0 Highway Safety (4) Shaanxi Provincial Highway (1-4, 6) 0 Operation and Maintenance of Jiangxi Provincial Highway (1 -3) High-Grade Highways (5) 0 Cost Recovery (6)

The values in parenthesis 1 through 6 correspond to the sector issues addressed in each project. The IPiDO Ratings are: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

20 ~ Other Development Agencies Lsian Development Bank ONGOING PROJECTS

Hebei and Liaoning Expressways Liaoning and Jilin Expressways Hebei Roads Development Chengdu-Nanchong Expressway - Expressway Shanxi Roads Development Southern Yunnan Road Development Chongqing-Guizhou Roads Development Ganlong Railway Project (GanzhodJiangxi - LongyadFujian)

PLANNED PROJECTS

Shanxi Expressway Chongqing-Guizhou Expressway Guangxi Highway Development Shanxi and Shaanxi Roads Western Yunnan Road Development Southern Sichuan Roads Development

Japan Bank for International ONGOING PROJECTS Cooperation (formerly Overseas Economic Hainan Development Cooperation Fund of Japan) Qingdao Development Guiyan-Xinzhai Highway -Quzhou Expressway Wanxian-Liangping Highway Liangping-Changshou Highway Hainan East Expressway Xinxiang- Highway

21 Annex 3: Results Framework and Monitoring CHINA: Third Jiangxi Highway Project Results Framework PROJECT DEVELOPMENT OUTCOME INDICATORS USE OF RESULTS OBJECTIVE INFORMATION Improve east-west passenger and freight flows in Jiangxi province by investing in the construction ofan expressway, enhancing local roads, and strengthening highway management

[A] Supporting trade-led growth in [A] In the Ganzhou-Ruijin [A] The development plans ofthe Jiangxi province through improved Corridor: local govemments are integrated highway access to prosperous eastern A. 1 Increased average daily with the national and provincial region and export outlets traffic transportation links and the A.2 Decreased accidents on the highway access to Xiamen in existing road G323 Fujian A.3 Decreased travel time

[B] Reducing poverty by improving [B] On the road sections ofthe [B] The selection ofthe local road access to markets and services for Local Roads Improvement sections maximizes the benefits poorer areas ofGanzhou City Prefecture Program: for the low-income population in B1. Increased average daily the Ganzhou City Prefecture traffic B.2 Reduced number of days closed B.3 Reduced travel time B.4 Increased daily bus service

[C] Improving highway sector [C] Implementation of key [C] The policy-related studies, management in Jiangxi province recommendations from the training and technical assistance institutional strengthening are relevant and have an overall components positive impact. INTERMEDIATE RESULTS RESULTS INDICATORS USE OF OUTCOME MONITORING [A] Approximately 117 km ofthe [A] Completion of 117 km of Monitoring ofimplementation Ruijin- Ganzhou Expressway (RGE) the Ruijin-Ganzhou progress and action plan to Expressway address possible delays

[B] Local roads in the direct areas of [B] Successful improvement of influence ofthe project in Ganzhou City local roads in the Ganzhou City Prefecture Prefecture: Phase I= 83.3 km & Phase I1to be determined

[C] Staff ofJPCD and related agencies [C] Successful completion of with improved technical and the institutional strengthening management capacity in the road sector. studies and staff trained

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swl 3 g g g Annex 4: Detailed Project Description CHINA: Third Jiangxi Highway Project

COMPONENTA: RUIJIN-GANZHOUEXPRESSWAY (RGE)

The RGE will be a 117 km long section (about US$627 million) of the Xiamen-Chengdu expressway, which is one of the east-west corridors of the NTHS. With the main north-south corridors now complete, the focus is shifting to providing east-west linkages, thereby completing network connectivity. The RGE will start in Ruijin City, at a point located about 31 km west of the FujiadJiangxi border. It will end near Ganzhou City, at the starting point of an existing expressway linking Ganzhou City to the Guangdong-Nanchang expressway.

A 3 1 km expressway section between Ruijin and the Fujian provincial border will be built using a BOT scheme defined on a concession contract already signed for a 22-year period (this BOT is considered linked to the RGE project so the Bank’s safeguard policies will apply). This BOT section will be opened to traffic before the RGE. A new expressway in Fujian, due to be open to traffic in late 2006, will connect the BOT with the Fujian expressway network. Jiangxi province has made a commitment that the BOT section will be completed prior to the RGE. They are using the BOT rather than including this section in the RGE so that their expressway network can be connected to Fujian province at the earliest opportunity.

In the west near Ganzhou City the expressway will connect with an expressway section already completed and connected to the World Bank-financed Second Jiangxi Highway project. With the completion of these expressways, Ganzhou will have direct, high-quality road access to Xiamen and Jiangxi province will have a cross-provincial link with its two north-south expressways.

The area crossed by the RGE is mountainous with rivers. The terrain is very challenging and required careful route selection and designs so as to minimize the environmental and social impacts while providing adequate access to local communities.

Main Characteristics

This is a list of the main characteristics of RGE as reflected in the preliminary engineering design:

0 length: 116.8 km;

0 design speed: 100 km/h;

0 cost estimate: Y 5.06 billion, or USS627 million (average cost ofUS$5.4 milliodkm);

19.1 km of bridges, with 76 bridges in total, four super-long (the longest one is 1.4 km long, the longest span is 70 m), 44 long, 25 medium, and three small. All bridges are simple bridges (precast beams or box girders);

27 0 9.6 km of tunnels, with seven tunnels in total, one super-long (4.16 km), two long, one medium and three short;

0 11.8 millionm3 of earthworks and 11.7 million m3of stoneworks;

0 six interchanges connecting to cities, counties and important towns;

0 two service areas, three parking lots, six toll stations, one main operation center and various subcenters; and

0 about six km ofinterconnecting roads on new alignments.

The preliminary designs were completed during the fourth quarter of2005, and the final designs were completed in the second quarter of2006.

Location

The project area lies in Ganzhou City Prefecture. The expressway runs roughly parallel to the existing NR 323.

The RGE is one section of Xiacheng expressway, an expressway planned between Xiamen in Fujian province and Chengdu in Sichuan province. Xiacheng is 2,63 1 km long and successively crosses Fujian, Jiangxi, Hunan, Guizhou, Chongqing and Sichuan. In Jiangxi province, Xiacheng is about 245 km long and includes four sections:

Section A between Fujian border and the west of Ruijin is about 31 km and crosses Ruijin county;

Section B (the RGE) between the west of Ruijin and the west of Ganzhou is about 117 km long and is the main component ofthe Third Jiangxi Highway Project (JHP3);

Section C west of Ganzhou connects the RGE and the Taihe-Ganzhou expressway (TGE is the main component ofthe Second Jiangxi Highway project-JHP2) and is 11 km long. This is already built and is presently used as an interconnecting road linking TGE to Ganzhou City; and

Section D is planned between the west of TGE and the Hunan border and will be about 88 km long and located in a mountainous area, although the technical studies have not as yet started.

An agreement was reached between Fujian and Jiangxi on the alignment of the Xiacheng expressway at the border crossing. On the Fujian side, the section of the Xiacheng near the border with Jiangxi is already under construction. Works started in September 2004 and are expected to be completed by the end of 2006. The border between Fujian and Jiangxi is located in the 1.4 km long Ailing tunnel (800 m in Fujian and 600 m in Jiangxi). The contractors ofthe Fujian side will end their work at the border. The contractors selected by Jiangxi will have to complete the Ailing tunnel to the border with Fujian. An agreement between both the provinces

28 on the Ailing tunnel operation and maintenance activities, including interventions in case of fire, remains to be reached.

Cities and Counties Crossed by RGE

The BOT (Section A) is fully located in Ruijin County. The RGE (Section B) crosses five counties or cities: Ruijin City, Huichang County, Yudu County, Gan County, and Ganzhou District of Ganzhou City Prefecture. All the area crossed by sections A and B is within Ganzhou Prefecture, which comprises two cities (Ganzhou and Ruijin) and 15 counties.

Land Area Statistics 2003 Population km2 Ruijin City 601,300 2,448 Huichang County 434,000 2,722 Yudu County 902,400 2,893 Ganxian County 556,700 2,993 Ganzhou District 455,700 426 Total Project Area 2,950,100 11,482 Ganzhou City Prefecture 8,312,000 39,390 Jiangxi Province 42,542,300 166,900

There are almost three million inhabitants along the route, which accounts for 35 percent of the total population in Ganzhou City Prefecture and seven percent of the province. It is also 30 percent ofthe total area of Ganzhou City Prefecture and seven percent ofthe entire province.

The recommended alignment totals 116.8 km in length and was designed to serve Huichang, Yudu and Ganzhou and to be in accordance with the development plans of these cities or counties.

General Description of Area

The area crossed by the RGE is a succession of three basins separated by mountains: the Ruijin basin (200 m high), the Yudu basin (200 m high) and the Ganzhou basin (100 m high). Between these basins the mountains are high, some exceeding 1,000 m of altitude. The main river between Huichang and Ganzhou is the Gong. In Ganzhou, the Gong River becomes the Gan River. The Gong River links the Yudu basin with the Ganzhou basin via a narrow valley.

The geology ofthe area includes mudstone, which may be not stable, limestone with presence of karst holes, red sandstone and metamorphic rock, which do not raise major problems. Various nonactive faults can be detected. The geology at the entrance and exits oftwo long tunnels raise important difficulties.

Existing Roads and Railways

The existing NR 323 links Ruijin and Ganzhou cities. It was realigned and upgraded to Class I1 (12 m wide) in recent years so the condition is good. It is located in the Gong river valley

29 between Ganzhou and the east of Yudu, including a passage through a narrow valley. Then it uses secondary valleys with a low pass and a long detour before joining the Ruijin basin. It crosses various towns like Jiangkou (Gan County), Yudu (Yudu County), Xiaomi and Xijiang (Huichang county). NR 323 is the only east-west road parallel to the expressway. The feasibility study indicates a traffic volume of 7,000-1 2,000 passenger car units (PCU)/day in 2005. The traffic volumes are low in rural areas and increase in urbanized areas.

The current distance fkom Ruijin to Ganzhou on NR 323 is about 150 km and takes about 2.5 hours. This will be significantly reduced to about 120 km, with a travel time of about 1.25 hours, after the expressway is constructed.

Further to the east, NR 323 is the key road section that connects Ruijin with Linchang. It starts in Ruijin and ends in Xiaomeiguan in . Its standard and passing capacity is very poor. The road section that runs along the river is fkequently flooded and the traffic is interrupted. In addition, pedestrians, bicycles and rickshaws mix together and result in crowded carriageways with very dangerous driving conditions. There are also a large proportion ofheavy vehicles and most trucks are overloaded.

Ruijin is bypassed by a good Class I1road. The NR 3 19 links Ruijin to the border with Fujian in the east. It also links Ruijin with Ningxin County in the North. This is a good Class I1road.

NR 206 crosses Jiangxi province from the Anhui border in the north to the Guangdong border in the south and crosses Ruijin.

A two-track railway from Beijing to Guangzhou passes by Ganzhou and Jiangkou. A new one- track railway from Ganzhou to Longyan in Fujian province opened to traffic in May 2005 for freight and in October 2005 for passengers. It crosses the Jiangxi/Fujian border at the same location as the Ailing tunnel but through another tunnel located about 40 m above where the Ailing tunnel is being built. Most ofthe time, this new railway alignment follows the corridor of NR 323.

The section of Ganlong railway in Jiangxi is about 170 km long. It begins in Ganzhou and crosses Gan County, Yudu and Ruijin and ends in Longyan in Fujian province. Its construction was recently completed (2004) and it is presently in operation.

The route of the RGE intersects with: (a) NR 323 twice and with NR 105 once; (b) several provincial highways; (c) the Ganlong railway line twice; (d) the Gong River twice and the Gan River once.

COMPONENTB: LOCALROADS IMPROVEMENT PROGRAM

The Local Roads Improvement Program (LRIP) of approximately US74 million aims to improve access in poor areas of the province. The LRIP will be implemented in two phases. The Phase Iprogram includes the Chuengyi - Fengzhou (48.5 km) and Meicun - Longbu roads (34.8 km). These existing roads will have upgraded pavement, improved alignment and will be widened. The existing sections on either side of both LRIP roads have already been upgraded. Designs for the works were completed in late 2005, with a planned construction date at the beginning ofthe second quarter 2006.

30 Ganzhou City Prefecture, which is the largest prefecture in the province, is the priority area for the LRIP, and is where the expressway component will be built. Currently its road network density is about 0.23 km/km2, about 38 percent lower than the average road density (0.37 kml km2) in the province. Of the total mileage of 11,544 km in Ganzhou City Prefecture, 8,901 km ofroads are Class IV or unclassified, some 2 percent lower than the average for the province. As one of the poorest prefectures with the lowest densities of road network in the province, the LRIP component will support high-priority needs of local access.

The LRIP component aims at improving the highway network in poor areas of the province in order to promote economic and social development and contribute to poverty alleviation. The Bank and the JPCD agreed that the size of the LRIP should be about ten percent of the total project cost and the amount of the Bank financing shall be US$lO million. Since construction will commence prior to the signing of the Loan Agreement, retroactive financing will need to be applied.

The LRIP roads are part of the five-year highway improvement program of Ganzhou City Prefecture. The following criteria were adopted in Phase Ito select the roads (the additional road sections for Phase I1will be identified using these same selection criteria):

0 expected positive impact of the project on population access to education, health and other production and/or commercialization oflocal products; 0 strong support by local government and residents; 0 the technical standard after construction for upgrading for the major part of the program should be Class I11 or Class IV roads; 0 current minimum daily traffic volumes of 400 medium truck equivalent (MTE) for Class IV and 500 MTE for Class I11 roads; 0 the contribution to the Jiangxi provincial plan to improve the functional responsiveness ofthe highway network with good traffic growth potential; and 0 expected EIRR higher than 12 percent

COMPONENTC: INSTITUTIONAL STRENGTHENING

As the third highway project in Jiangxi, the institutional strengthening component was developed after reviewing the outcomes from the previous activities. Where these earlier activities were supply driven (as opposed to demand-driven) they could not be sustained. Consequently, in establishing the institutional strengthening activities for JHP3, the focus was on ensuring that they met the specific needs of the JPCD. This led to the following institutional strengthening component ofabout US$10 million:

0 Traffic Safety Operations for Tunnels. A tunnel safety management plan will be established to ensure that there are adequate resources and procedures to handle tunnel emergencies. This plan will consider both technical and operational factors so as to ensure that all parties responding to a tunnel emergency are clear in their roles, have appropriate equipment, and correct operating procedures to respond in a timely manner. The study, to be completed by 2007, will produce a series ofrecommendations that will form the basis for the JPCD to implement a province-wide tunnel safety policy.

31 0 Traffic Safety Improvement for Expressways. This activity, to be completed by 2008, will improve traffic safety conditions on expressways. Detailed accident records will be analyzed to identify countermeasures for roadside facility-related accidents. It will result in a decision-making support system for roadside facility planning, design and operations. It will contribute toward establishing appropriate roadside safety technical policies for the JPCD.

0 Implementation of Electronic Toll Collection. The current five-year plan calls for the implementation of electronic toll collection (ETC) on expressways in China. This will be done through a dual-use integrated circuit (IC) card system, which can be manually swiped or automatically recorded through a transponder. With the technology selected, the implementation of ETC in Jiangxi is not so much a technological issue but primarily a business process issue. This activity will identify what actions are required in order to successfully implement province-wide ETC on expressways. By 2007 it will prepare recommendations on changes to business process, financial flows, as well as any technology issues. The outcome will be a strategy that can be adopted by the JPCD to implement ETC.

0 Training. Domestic and foreign training activities will cover a range of topics including design, safety, maintenance, management, finance and the environment.

0 Equipment. Equipment will be procured for expressway management and maintenance, and environmental monitoring. These will include weighing stations, quality control sets and road condition monitoring equipment.

Two separate projects funded by grants to further strengthen the JPCD’s institutional capacities will be undertaken at the same time as the JHP3:

0 HIV/AIDS. The JPCD will develop the ability to execute effective anti-HIV/AIDS activities for its staff, as well as those of contractors, other workers and local residents where construction projects are under way. An anti-HIV/AIDS education program will be conducted for JPCD staff, workers on the JHP3 construction sites and local residents. This activity will be funded by an IDF Grant.

0 Micro-Enterprises for Road Maintenance. In conjunction with Fujian province, a study will be done to investigate the viability of using micro-enterprises to maintain local roads, applying techniques used in Latin America and elsewhere. This study will include pilot testing of micro-enterprises on paved and unpaved roads in both provinces. An application has been made to PPIAF to fund this project.

32 Annex 5: Project Costs CHINA: Third Jiangxi Highway Project

Taxes 23.44 Project Cost Net ofTaxes 687.45 Overall Tax Impact 96.6%

33 Annex 6: Implementation Arrangements CHINA: Third Jiangxi Highway Project

The project will be implemented by the Jiangxi Provincial Communications Department (JPCD) and the agencies at the cityldistrict level responsible for road management in Jiangxi Province. The Ruijin-Ganzhou Expressway (RGE) Project Management Office (PMO) under the JPCD has coordinated the project preparation and will remain the Bank’s main counterpart during implementation. Similar arrangements were made on the two previous Bank-financed highway projects in Jiangxi and have proved very effective.

The Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB) will operate and maintain the RGE after it is opened to traffic. The PMO has appointed the Communications Design Institute of Jiangxi Province (CDIJP) and No. 2 Survey and Design Institute under MOC to carry out design studies for the project. The PMO will manage construction works as the “Client” with the assistance of a domestic supervision organization. Foreign supervision consultants will be used on an as-needed basis.

With respect to resettlement, the Project Resettlement Office (PRO) under the PMO has prepared the Resettlement Action Plan (RAP). The PRO will lead the resettlement operations under the oversight of the key PMO of Jiangxi Province. This is led by the Vice-Governor and manages multilevel resettlement offices established along the alignment in counties (citieddistrict) and towns. Other relevant government agencies responsible for planning, financing, communications and land administration will be involved at different levels. The PRO has been staffed with experienced experts and their responsibilities have been specified in the RAP. The RAP includes a detailed training program for the capacity building ofthe PRO.

The PMO will issue a specific regulation for the approval and use of resettlement funds. The payment process to beneficiaries will be streamlined to avoid possible fund deductions during the disbursement, and each affected village will have a specific account in local banks. The designated banks will report daily on the use ofresettlement fund items to the PMO for internal monitoring. The PMO will also strengthen the capacity of town-level and county-level staff to manage the resettlement funds.

For the environment, the PMO has prepared an Environmental Management Plan (EMP) for the RGE, which includes practical and cost-effective measures necessary to mitigate the environmental impacts of the project by incorporating them in the design and by implementing them during the construction and operation phases. The EMP also specifies the appropriate monitoring plans, training, institutional arrangements, implementation schedule, budget needs, etc. necessary to implement the mitigation measures and strengthen the borrower’s capacity. Since the project is the third World Bank-financed project in Jiangxi Province, the JPCD has developed ample internal capacity in its environment unit to implement, supervise and monitor the EMP.

With respect to the Local Roads Improvement Program (LRIP), the Ganzhou City Traffic Administration Bureau (GCTAB) under the Ganzhou City Government of Jiangxi Province has identified and prepared two local roads to be included in Phase I. The Gannan Survey and Design Institute of Jiangxi Province and the Traffic Planning and Design Institute of Jiangxi

34 Province have designed the LRIP roads; Hongtai Investment Company Ltd. under GCTAB will handle procurement; resettlement and environment will be under the oversight of the PMO; and works will be managed with the assistance of domestic firms for supervision. The implementation of the EMPs prepared for each road section will be supervised by the PMO.

Finally, the PMO is preparing the institutional strengthening and policy development component and will coordinate the implementation of activities. Depending on activities, other units from the JPCD will contribute.

The PMO will be responsible for procurement on the project. The PMO staff have experience in procurement from the previous two World Bank-financed projects in Jiangxi; thus they are familiar with the Bank’s procurement principles and procedures.

The procurement will be done by an experienced procurement company.

35 Annex 7: Financial Management and Disbursement Arrangements CHINA: Third Jiangxi Highway Project

The Bank’s financial management assessment, based on guidelines issued by the Financial Management Sector Board on November 3, 2005, has concluded that the project: (a) meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02; and (b) will have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of the project in the reporting format agreed for the project and as required by the Bank.

Funding sources for the project include the Bank loan and counterpart funds. The Bank loan proceeds will flow from the Bank into the project Designated Account (DA) to be set up at and managed by the Jiangxi Provincial Finance Department (JPFD), to the project implementing agencies, and finally to contractors or suppliers. The Bank loan will be signed between the Bank and the People’s Republic of China through its Ministry of Finance (MOF), and onlending agreements for the Bank loan will be signed between MOF and the Jiangxi Provincial Government through its JPFD, and then between JPFD and the Jiangxi Provincial Communications Department (JPCD), and Ganzhou Prefecture through its Ganzhou Finance Bureau (GFB).

The constitution of counterpart funds will be appropriations from central, provincial and municipal governments and commercial debt.

No outstanding audits or audit issues exist with any ofthe implementing agencies involved in the project. However, the Bank will continue to be attentive to financial management matters during project supervision.

Audit Arrangement

The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank-financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People’s Republic of China. The Jiangxi Provincial Audit Office was identified as auditors for the project. Annual audit reports will be issued by above audit office and subject to reviews by the China National Audit Office (CNAO). The Bank currently accepts audit reports issued by CNAO or provincial/regional audit bureaus/offices for which CNAO is ultimately responsible.

The annual audit report of the project consolidated financial statements will be due to the Bank within six months after the end of each calendar year. This requirement is stipulated in the Loan and Project agreements. Consolidated project financial statements shall be submitted by the PMO by June 30 each year.

Funds Flow and Disbursement Arrangements

Funds flow for the Bank loan will follow Bank and MOF requirements. One DA will be established and managed by JPFD. The funds flow will be as follows:

36 The World Designated PMO Suppliers and Bank Account (RGE) contractors - managed - by JPFD GFB LRIP -b (LRIP) * PMO

Counterpart funds will be appropriations from central, provincial and local governments, and commercial debt. The appropriations will be provided to the implementing agencies through finance bureaus. Commercial debt will be provided to the PMO through the JPCD and to the LRIP-PMO through the Ganzhou Hongtai Investment Company, Ltd.

The Bank loan proceeds will be disbursed against eligible expenditures as given in Table A7.1

Table A7.1: Loan Disbursement Table

Amount Of the Loan Percentage of Expenditures Category Allocated to be financed (in US$ M) (1) Civil Works A1 (RGE) 182.4 48% B (LRIP) 10.0 25% (2) Goods 5.7 100% (3) Consultants Services, 1.4 100% training and technical assistance studies (4) Front-end Fee 0.5 Amount due under the Loan Agreement Total 200.0

The four disbursement methods, reimbursement, advance, direct payment and special commitment are all available for the project. The statement-of-expenses (SOE) limits will be set up in line with procurement post-review threshold, as given in Table A7.2.

Table A7.2: SOE Limits

Expenditure Category Contracts Equivalent or Less than Civil Works US$4,000,000 Goods US$500,000 Firm Consultant us$200,000 Individual Consultant US$50,000 Training All eligible

37 One DA will be established in JPFD. The authorized allocation of the DA is proposed to not exceed US$13 million. From the DA in JPFD, the Bank funds would be disbursed to the project implementing agencies and finally to suppliers and contractors.

JPFD will be directly responsible for the management, monitoring, maintenance and reconciliation of the DA activities of the project. Supporting documents required for Bank disbursements will be prepared and submitted by project implementing agencies to JPFD for final verification and consolidation before sending to the Bank for further disbursement processing. The flow ofthe withdrawal application is as follows:

I Approval World 1 PMo by JPFD Bank

Financial Management and Reporting Requirement

Risk Analysis and Conditions

The risks with corresponding mitigating measures were identified during assessment and are given in Table A7.3. On the basis of this, the overall financial management risk-rating of this project at the appraisal stage is modest. The Financial Management Specialist will monitor the project financial management risk during project implementation.

Table A7.3: Project Financial Risks and Mitigating Measures

Conditions of Risk Incorporated Risk Risk Negotiations, Board or Rating Mitigating Measures Effectiveness Inherent Risk Countrylevel Modest See the following mitigating measures utilized in the project. * Entity Level Modest Some of the PMO staff are new to Bank- financed projects, and it is the first time for the Ganzhou LRIP-PMO to implement a Bank-financed project. Therefore, well- designed financial management and disbursement training will be arranged by the PMO and JPFD.

38 Conditions of Risk Incorporated Risk Risk Negotiations, Board or Rating Mitigating Measures Effectiveness Project Level Modest The project will be implemented by PMO and LRIP-PMO, while the financial management and disbursement will be managed and supervised by JPFD. Previous experience has shown that clear communica- tion and well-planned coordination among these implementing agencies is critical to successful project implementation. Close monitoring and extensive guidance by the task team from initial preparation stage throughout the whole implementation process is also necessary to ensure the multi- implementing agencies will cooperate well and efficiently work for this project. I I The Financial Management Specialist will work with the PMO and implementing entities at all levels to improve their budgeting execution and monitoring. Accounting Low Accounting policies and procedures are already in place. Checking by the task team at the initial implementation stage to ensure the information system was correctly set up. This should be followed up by regular supervision missions. Internal Control Modest See below. Also, no internal audit arrange- ment for the project. However, disbursement documents will be reviewed by JPFD to secure compliance. The task team will ensure that a mechanism is in place to confirm that the Bank loan and counterpart funds are released to the ultimate beneficiaries on a timely basis, and avoid bottlenecks in disbursements. Financial Low The format offinancial statements is Reporting stipulated by MOF and all the implementing agencies will use this format for project

Auditing Audit Office, has extensive experience with

Strengths and Weaknesses

Strengths. JPFD has managed two Bank-financed projects and has accumulated extensive experience in project financial management and disbursement, which will benefit the implementation of this project. Additionally, the PMO is currently implementing the Second .Jiangxi Highway Project (JHP2) and will share its experience and train the Ganzhou LRIP-PMO. Weaknesses and Action Plan. As shown below, only one significant weakness was identified. The accompanying action plan shows how this was addressed.

39 Responsible Significant Action Plan to Remedy Mitigating Measures Weaknesses Person Ganzhou prefecture The Ganzhou municipal Ganzhou The Ganzhou Government has issued an is poor and its government should provide Municipality official commitment letter to confirm they finance bureau is the necessary funding to will be providing sufficient counterpart short offunds. support project funds and implementing the project in construction. comtdiance with Bank’s reauirements.

Implementing Entities

JPCD has issued authorization to establish the PMO to implement the project. Most of the PMO staff worked on the proceeding JHP2, and so already have experience with Bank-financed projects. The LRIP-PMO was set up by Ganzhou Hongtai Investment Company Ltd., a wholly owned subsidiary of Ganzhou Prefecture Government, to implement the LRIP component. The PMO will provide technical support to the LRIP-PMO as well as supervise project implementation.

Budgeting

Although the cost table was prepared for the project, and the project will prepare its annual implementing plan, from experience the budgeting system within projects is usually not well maintained or monitored. The Financial Management Specialist will work with the related agencies to improve their budgeting system during project implemenation.

Accounting

The administration, accounting and reporting of the project will be set up in accordance with Circular #13: “Accounting Regulations for World Bank Financed Projects” issued in January 2000 by MOF. The circular provides in-depth instructions for accounting treatment of project activities and covers the following:

0 Chart of account; 0 Detailed accounting instructions for each project account; 0 Standard set ofproject financial statements; and 0 Instructions on the preparation ofproject financial statements.

The standard set of project financial statements mentioned above was agreed to between the Bank and MOF and applies to all Bank projects appraised after July 1, 1998 and includes the following:

0 Balance Sheet; 0 Summary of Sources and Uses ofFunds by Project Component; 0 Statement of Implementation of Loan Agreement;

0 Designated Account Statement; and 0 Notes to the Financial Statements.

40 Each of the implementing agencies will be managing, monitoring and maintaining respective project accounting records. The original supporting documents for project activities will be retained by the originating implementing agencies.

Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform is one of the factors critical to the successful implementation of project financial management. Based on discussions, observations and review of the educational background and work experience of the staff identified for financial and accounting positions in implementing agencies, the task team had reservations that some ofthe staff were appropriate for the work they are expected to assume.

To strengthen the financial management capacity and achieve a consistent quality of accounting work, a project financial management manual (the Manual) was prepared. The Manual provides detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management and withdrawal application procedures. The Bank reviewed the Manual and found to be acceptable.

As some of the financial staff are new to World Bank projects, a well-designed and focused training program in project financial management and disbursement will be provided by JPFD prior to project effectiveness to all financial and accounting staff to ensure a good understanding and knowledge ofthe following:

0 The Bank’s financial management policy and disbursement procedures; 0 Fund/asset/contract management; 0 Format and content ofproject financial statements; 0 Audit requirement; and 0 Onlending and repayment management.

The implementing agencies will use the computerized financial management system Golden Butterfly (Jin Die), a well-established Chinese accounting software package approved by MOF, for the project. The task team will monitor the processing ofaccounting work closely, especially in the initial stages to ensure complete and accurate financial information will be provided in a timely manner.

Internal Control and Internal Auditing

The related accounting policy, procedures and regulations were issued by MOF and the project will follow these documents. The funds flow will be arranged and monitored through the channel ofthe finance bureau and will be based on an expenditure reimbursement basis.

There is no formal independent internal audit department for the project. However, this will not impact on the project’s financial management as JPFD management, monitoring and annual external audits will serve as the mechanism to ensure that financial management controls are functioning appropriately.

41 Financial Reporting

The format and content ofthe project financial statements represent the standard project financial reporting package agreed to between the Bank and MOF, and was discussed and agreed to with all parties concerned. In line with the Financial Monitoring Report (FMR) guidelines, the unaudited project consolidated financial statements will be submitted as part of the FMR to the Bank on a semiannual basis (prior to August 15 and February 15 of the following year), and will include the following four statements:

0 Balance Sheet; 0 Summary of Sources and Uses ofFunds by Project Component; 0 Statement ofImplementation of Loan Agreement; and 0 Designated Account Statement.

Both the PMO and LRIP-PMO will prepare financial statements on their implemented components, which will then be used by the PMO for preparing the consolidated project financial statements and submitted to the Bank for review and comment on a regular basis.

Financial Covenants

No additional financial covenants were proposed by the Financial Management Specialist other than the standard financial covenants, (e.g., maintaining project accounts in accordance with sound accounting practices, audit requirement and SOE), as described in the legal document.

Supervision Plan

A detailed supervision plan for this project was included as part of the China Audit Strategy document. This document takes into consideration of the size of project and the financial management risk rating ofthis project.

42 Annex 8: Procurement Arrangements CHINA: Third Jiangxi Highway Project

A. General

Procurement for the project will be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004, and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreement. The general description of various items under each category is described below.

For each contract to be financed by the Loan, the different procurement methods, consultant selection methods, the need for prequalification, estimated costs, prior review requirements and time frame are agreed to in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement of Works. Works procured under this project for the expressway component (the RGE) will include: (a) 16 subgrade works contracts with an average size of about US$25 million and four pavement works contracts of about US$15 million; (b) two contracts for electrical and mechanical works (E&M works); (c) and other ancillary contracts for the RGE’s traffic engineering works, greening works, construction of buildings on a slice-and-package basis. There will be two phases of the LRIP contracts. In the first phase, seven contracts with an average size of about US$5.1 million were identified and the second phase will be determined later.

The E&M works, greening works, and building construction works will not be financed by the Bank and will be procured using national competitive bidding (NCB) procedures. Other works estimated to cost at or more than US$12 million equivalent per contract will be procured under the international competitive bidding (ICB) procedures, and works estimated to cost less than US$12 million equivalent per contract under the NCB procedures. The procurement will be done using the Bank’s current Standard Bidding Documents (SBD) for all ICB contracts and the Bank-approved Chinese Model Bidding Document (MBD) (dated May 1997 and issued by MOF) for all NCB contracts. In case of adopting MBDs, all new revisions to the Bank SBD since 1997 will be incorporated.

Procurement of Goods. Goods procured under this project will include contracts for equipment for expressway management and maintenance and the environment. The total estimated cost for the contracts is about US$8.8 million. International competitive bidding, NCB and Shopping procedures will be applied where applicable. Goods estimated to cost at or more than US$0.5 million per contract shall be procured under the ICB procedures, those estimated to cost less than US$0.5 million equivalent per contract under the NCB procedures, and those estimated per contract to cost less than US$O.l million equivalent under the Shopping procedures. The procurement will be done using the Bank’s current SBD for all ICB and the Bank-approved MBD for all NCB contracts. In case of adopting MBDs, all new revisions to the Bank SBD since 1997 will be incorporated.

43 Selection of Consultants and Training. The domestic supervision consultants (estimated cost ofUSS12.1 million for Parts A and B) will be procured using domestic procedures. The foreign supervision consultants (estimated cost of US$0.4 million) will be procured as individuals or firms, on an as-needed basis. Services for firms estimated to cost at or more than US$0.2 million, if any, will be procured under QCBS procedures, and for firms estimated to cost less than USSO.2 million equivalent per contract, under consultant qualification (CQ) procedures in accordance with the provisions of paragraphs 3.7 through 3.8 of the Consultant Guidelines. Services for individuals will be procured in accordance with the provisions of paragraphs 5.1 through 5.4 ofthe Consultant Guidelines.

A program for domestic and overseas training activities with a total budget of USS1.06 million will be included in the project. Firms will be engaged to manage this process using the same criteria as listed above for consulting services.

The Standard Request for Proposals (May 2004) may be used. Short lists of consultants for services estimated to cost less than US$0.3 million equivalent per contract may be composed entirely of national consultants in accordance with the provisions ofparagraphs 2.6, 2.7 and 2.8 of the Consultant Guidelines.

Table A8.1 summarizes the thresholds for the procurement methods and prior review.

Table A8.1: Thresholds for Procurement Methods and Prior Review

Expenditure Contract Value Threshold Procurement Contracts Subject to Prior Review Category (US$ M) Method (US$ M) 1. Works Equal to or Above US$12 M ICB All contracts (US$455.65 M) Less than US$12 M NCB All contracts equal to or above US$4 M (US$34.41 M)

2. Goods Equal to or Above USS0.5 M ICB All contracts (US$5.75 M) Less than US$0.5 M NCB First contract Less than US$O.l M Shopping First contract

3. Services Equal to or above US$0.2 M QCBS, QBS All contracts equal to and above UStS0.2 M (firms) CQ All contracts equal to and above US$0.2 M Less than US$0.2 M (fms) IC All contracts equal to or above US$0.05 M Individual Total value of contracts subject to prior review: US$495.51 M Overall Procurement Risk Assessment: Average Frequency of procurement supervision missions One every six months proposed: (includes special procurement supervision for post- reviewiaudits)

Retroactive Financing. Retroactive financing will be required for the LRIP component as construction is expected to commence in April 2006, approximately three months prior to loan signing. There is also a need to start early construction of some access roads to the RGE site. It was agreed that any civil works expenditures incurred after March 1, 2006 would be eligible for reimbursement from the loan, as long as the procurement was consistent with the Bank’s

44 guidelines. The amount available for retroactive financing of eligible expenditures for all civil works is US$5 million.

B. Assessment of the Agency’s Capacity to Implement Procurement

Procurement activities will be carried out by the World Bank Loan Project Management Office of the Jiangxi Provincial Communications Department (PMO). It is comprised of eight departments led by one PMO director and four vice directors. Most ofthe staff were transferred from the former PMOS of previous World Bank- and Asian Development Bank-financed projects. The key staff for procurement appear to be adequate, given the position they were assigned. The LRIP-PMO including about 16 persons was established in Ganzhou for the LRIP component. This agency and its staff are new to Bank projects and therefore inexperienced in the Bank’s procurement rules and guidelines. The PMO will assist them with training and other advice. As a supplementary resource to the capacity ofthe PMO, the China National Machinery Import & Export Corporation (CMC) was engaged as the procurement agent, and two qualified design institutes were recruited. All have worked previously on Bank-financed highway projects.

An assessment of the capacity of the Implementing Agency to implement procurement actions for the project was carried out by the Procurement Specialist during project preparation. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement and the JPCD’s relevant central unit for administration and finance. Most ofthe issuedrisks concerning the procurement component for implementation ofthe project were identified and include:

0 The capability of the LRIP-PMO for the LRIP component and its staffs lack of knowledge and experience in the Bank’s procurement policies and procedures; and 0 The Bank’s latest procurement policies and procedures, especially new features of electronic bidding and publishing contract award information, and the Bank’s latest versions of standard procurement documents are new to the PMO.

The corrective measures that were agreed are: (a) the PMO shall take full responsibility for handling all ofthe LRIP’s procurement, instead ofthe LRIP-PMO; (b) the Bank’s latest standard documents related to the project shall be reviewed by the PMO and its procurement agent and design institutes in advance; and (c) the PMO shall complete the selection of a procurement agent as soon as possible.

The overall project risk for procurement is Average.

C. Procurement Plan

The Borrower, at appraisal, developed a Procurement Plan for project implementation that provides the basis for the procurement methods. This plan was agreed between the Borrower and the Project Team on January 6, 2006 and is available at the PMO’s office in Nanchang (Attachment 1). The status ofboth the RGE and LRIP designs at appraisal gave confidence that this plan was realistic.

45 The Procurement Plan will be available in the Project’s database and posted to the Bank’s external website after loan approval. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Table A8.2 shows the project costs by procurement arrangement as embodied in the procurement plan.

Table A8.2: Project Costs by Procurement Arrangements (US$ M)

Procurement Method’ Expenditure Total Cost Category ICB NCB Other2 NBF3 1. Works 455.65 70.35 0.00 46.11 572.1 1 (166.63) (25.72) ( 192.35) 2. Goods 5.75 0.00 0.00 3.01 8.76 (5.75) (5.75) 3. Services 0.00 0.00 14.29 0.00 14.21 (1.40) (1.40) 4. Miscellaneous 0.00 0.00 115.89 0.00 115.89 (0.00) 5 .Front-end fee 0.00 0.00 0.50 0.00 0.50 (0.50) (0.50) Total 461.40 73.36 130.60 46.1 1 711.47 (1 72.38) (25.72) (1.90) (0.00) (200.00)

Figures in parentheses are the amounts to be financed by the loan. All costs include contingencies. Includes civil works and goods to be procured through national shopping, consulting services, training and technical assistance services. Not Bank-financed.

D. Frequency of Procurement Supervision

In addition to the prior-review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended supervision missions at six-month intervals to visit the field to carry out post-review of procurement actions when some procurement activities have been carried out, or when some post-review contracts have been signed and implemented during the review period.

46 Attachment 1

Project Procurement Plan I I I Estimated I I Prioror I I

Ost yade works 10/05/06 I 10/05/09 1 AS 1 K31+000-K42+000,1 lkm 24.23 ICB/Works Prior 2 AS2 K42+000-K5 1+100,9. lkm 23.17 ICB/Works Prior 3 AS3 K51+100-K60+300,9.2km 26.96 ICBiWorks Prior 4 AS4 K60+300-K65+700,5.4km 23.17 ICBiWorks Prior 5 AS 5 K65+700-K69+100,3.4km 23.17 ICB/Works Prior 6 AS6 K69+10O-K73+720,4,62km 24.23 ICBiWorks Prior 7 AS 7 K73+720-K80+700,6.98km 18.96 ICB/Works Prior 8 AS 8 K80+700-K86+500,5.8km 27.39 ICBiWorks Prior 9 AS9 K86+500-K94+600,8. lkm 25.28 ICBIWorks Prior 10 AS10 K94+600-K103+000,8.4km 26.33 ICBiWorks Prior 11 AS11 K103+000-K107+300,4.3km 25.28 ICBiWorks Prior 12 AS12 K107+300-K114+200,6.9km 25.28 ICBiWorks Prior 13 AS13 K114+200-K120+900,6.7km 26.33 ICBiWorks Prior 14 AS14 K120+900-K130+500,9.6km 25.28 ICBiWorks Prior 15 AS15 K130+500-K137+100,6.6km 26.33 ICBiWorks Prior 16 AS16 K137+100-K148+053, 10.95km 25.28 ICBiWorks Prior Subtotal 16 contracts (2) Pavement works 10/05/06 I 10/05/09 17 AP1 K31+000-K65+700,34.7km 16.85 ICB/Works Prior 18 AP2 K65+700-K94+600,28.9km 14.75 ICBiWorks Prior 19 AP3 K94+600-K120+900,26.3km 13.69 ICBiWorks Prior 20 AP4 K120+900-K148+053,27.2km 13.69 ICB/Works Prior Subtotal 4 contracts 58.98 (3) Traffic safety facilities works 01/22/08 10/05/09 21 JT 1 K3 1+000-K65+700,34.7km 2.76 NCBiWorks Prior 22 JT2 K65+700-K94+600,28.9km 2.56 NCBiWorks Post 23 JT3 K94+600-K120+900,26.3km 2.20 NCB/Works Post 24 JT4 K120+900-K148+053,27.2km 2.25 NCB/Works Post Subtotal 4 contracts 9.77 (4) Greening works 01/22/08 10/05/09 25 LH1 K31+000-K65+700,34.7km 4.09 NBF/LCP 26 LH2 K65+700-K94+600,28.9km 3.79 NBF/LCP 27 LH3 K94+600-K120+900,26.3km 3.26 NBFiLCP 28 LH4 K120+900-K148+053,27.2km 3.33 NBF/LCP Subtotal 4 contracts 14.47 (5) M&E Works 01/22/08 10/05/09 Tolling system, telecommunication system, surveillance system 29 JD1 (K31+000 - K147+800) 9.94 NBFiLCP Ventilation, lighting, fire-fighting, 30 JD2 power-supplying for tunnels 7.76 NBF/LCP Subtotal 2 contracts 17.70

47 Subtotal 7 contracts 35.58 (2) Second phase contracts 0 1/01/07 1015109 To be identified later 25.00 NCBNorks (8) Supervision Consultant 04/17/06 I 1015109 50 SC3 Domestic supervision consultant 0.80 NBFILCP Total of LRIP 61.38

... Continued

48 Notes: CQ = Selection Based on Consultant’s Qualifications IC = Individual Consultant Selection ICB = International Competitive Bidding LCP = Local Competitive Procedures NBF = Not Bank-Financed NCB = National Competitive Bidding SOE = Statement of Expenditures

49 Annex 9: Economic and Financial Analysis CHINA: Third Jiangxi Highway Project

A. Preface

The economic evaluation ofthe project covers the following two main project components:

0 construction of a 117 km expressway between Ruijin and Ganzhou (RGE); and 0 upgrading and improvement of the two local roads (about 83 km) under the Local Roads Improvement Program (LRIP).

The analysis is based on the actual and forecast data on traffic volume, vehicle operating cost (VOC), user’s time cost savings, reductions in accident costs and economic project cost. The main inputs for the evaluation are:

0 capital investment and maintenance costs, reflecting December 2005 prices; 0 the benefit stream, also reflecting December 2005 prices, that is comprised ofsavings in VOC, travel time savings, and reduction in accident costs; 0 a capital investment period of2006-201 0 and an evaluation ofbenefits period of20 years; and 0 the full benefit starting to accrue in July 2009 for the RGE and January 2008 or after, depending on the road, for the LRIP.

This Annex contains: (a) the economic evaluation of the RGE, the LRIP and the overall economic evaluation of the project, including probabilistic risk analysis; (b) a financial analysis ofthe RGE and LRIP components; and, (c) a financial analysis ofthe JPCD.

B. Economic Analysis

Expressway Component (RGE)

For purpose of evaluation, the RGE was divided into three sections:

Length of the Length of the new existing road (km) highway (km) Ruijin - Ganzhou Expressway Section 1: Ruijin- Yudu 72.0 58.6 Section 2: Yudu - Ganxian 50.0 39.3 Section 3: Ganxian - Ganzhou 18.0 19.1 TOTAL 140.0 117.0

Sources: JPCD and Bank staff.

Overview. Jiangxi province is located in the south center of China. The nearest seaport for this landlocked rovince is over 675 km away. The total land area of Jiangxi province is about 166,900 kmP or 68 percent of the size of the United Kingdom. Jiangxi is an important inland transport hub of China serving the north-south transport corridor and linking the central and western provinces to the coastal areas in the east. The northern part ofthe province is a basin that

50 has the largest freshwater lake in China (Poyang Lake), which links with the Yangtze River. Much of southern Jiangxi is covered by hilly and mountainous terrain. All the main cities and manufacturing centers of the province surround the lake and its tributaries. The capital of the province is Nanchang, which is located at the center of the province in the north. All the major long-distance transport modes (railways, highways, inland waterway and air transport) converge at the city. Compared to coastal regions, Jiangxi is not an advanced province and most of the development is concentrated in the northern part. Economic development in southern Jiangxi lags behind the rest of the province. Many local prefectures in southern Jiangxi are classified by the State as the poorest areas in China.

Highway Development Plan: Justification for Investment. In China, the rapid economic growth in recent years has caused income and development disparities between the coastal provinces and the inland provinces. To reduce the imbalanced development, the government embarked on the National Trunk Highway System (NTHS). One ofthe highways is to horizontally connect Xiamen (the largest seaport of Fujian province in eastern China) to four southern inland provinces (Jiangxi, Hunan, Guizhou and Sichuan). This highway will start in Xiamen and end in Chengdu (the capital of Sichuan). The total length of the highway will be about 2,631 km. The total length ofthe highway in Jiangxi is about 250 km, which will pass through seven major cities in southern Jiangxi. The RGE (117 km) is the eastern section ofthe highway in Jiangxi and will be able to provide the shortest land transport from Nanchang to Xiamen port (625 km), compared to Shanghai port (873km), Ningbo port (770 km, Zhejiang province) and Shenzhen port (675 km, Guangdong province). The construction ofthe highway in Fujian province (260 km) is expected to be completed in 2006. The RGE is the only missing section of the Nanchang-Xiamen Corridor. Completion ofthe RGE will improve accessibility for this remote hilly and mountainous region, as well as help balance the income and economic development within the province. Given the important role ofthe RGE for the province and for the State, the project has the highest priority in Jiangxi’s highway development plan.

Current Condition of the RGE Corridor (without the project). There are several local roads in the highway corridor, but only two roads (NR 323 and NR 319) would be significantly affected by the RGE. The current pavement conditions of these two roads are good/ fair. The alignments result in low speeds and high safety risks. For the NR 323 road as an example, the estimated motorized traffic for 2005 was about 7,000-12,000 passenger car units (PCU) per day throughout its length. The non-motorized and other traffic (bicycles, animal carts, small farm tractors and motorcycles, etc.) are substantial in the urban areas.

Highway NR 323 and RGE Comparisons

Section 1 Section 2 Section3 Ruijin-Yudu Yudu-Ganxian Ganxian-Ganzhou Road Class (old road I new road) I1I Expressway I1I Expressway I1I Expressway Road Condition (old road I new road) Fair I Good Fair I Good Fair I Good Terrain Mountainous Hilly Flat Capacity (AADTIday) (old road I new road) 10,000145,000 10,000 1545,000 10,000 145,000 Motorized Traffic-2005 (AADTIday) 6,380 7,450 8,900 Proposed Opening Year 2009 2009 2009 Note: AADT = Average annual daily traffic. Source: JPCD.

51 The Estimated Traffic Growth on the RGE Corridor. The JPCD’s estimates of traffic in the RGE corridor were made on the basis of routine traffic counts and a comprehensive origin and destination (O/D) survey that took place in August 2004 (updated in September 2005). The projections of normal, generated and diverted traffic were made for 41 zones on the basis of a conventional growth model. The traffic on the RGE includes diversion from the existing roads. The forecasts were further assessed and confirmed by an independent transport consultant hired by the Bank. Given the historical gross domestic product growth of Jiangxi was 11.7 percent during 1995-2003 and the current forecasts in coming years (about 7-8 percent), the projected traffic growth rates in the project corridor are estimated to be 7.9 percent per year in 2005-10, 5.8 percent per year in 2010-20, and 3.8 percent per year in 2020-30. The overall traffic growth rates are summarized as follows:

Annual Traffic Growth Rate (percent)

Car Bus & Truck Average Current: 1995-2005 24.8 11.6 17.3 Projection: 2005-2010 8.1 7.5 7.9 2010-2020 6.1 5.2 5.8 2020-2030 4.2 3.2 3.8 Source: JPCD.

Alignment Alternatives. The RGE feasibility study considered and compared three main alternative route alignments between Ruijin and Ganzhou on the basis of local economic development, the shortest traveling route, the lowest engineering cost and coordination with the entire highway networks. The other major criteria for selection of an alternative were to seek an alignment that would: (a) avoid areas that have complex conditions geologically, (b) avoid possible engineering difficulties, and (c) coordinate comments from the local governments and peoples. The preferred alignment was selected because of better coordination with the local economic development plan and local/national transport networks. Details are available in the feasibility study reports.

Traffic on the Highway (with the project). The RGE is planned to become operational in July 2009. Diversion ratios of the corridor traffic on the RGE are based on information provided by the O/D survey and the traffic studies. They were calculated by using financial VOC for the road users, with the impacts of the level of proposed tolls on the new highway, travel distance and experience from other recently Bank-financed highways in China. The results of the analysis indicate that between 55 and 59 percent of motorized vehicles in 2010, depending on the road section, may be diverted to the new highway. The traffic diversion is expected to increase linearly in the first ten years to reach 59-65 percent by the year 2020 and stabilize thereafter.

Traffic generated by the new expressway is assumed to be ten percent of the normal traffic. This assumption is consistent with experience on other recent highway projects in China. No diversion of traffic from the railway to the new highway was assumed. This is because the much higher highway tariff does not encourage traffic diversion from the railway (highway tariff is about Y 0.20-0.25 per ton-km compared with Y 0.04-0.06 per ton-km for railway). The highway corridor traffic forecast, by sections, is summarized as follows:

52 Normal Traffic, by Sections (AADT)

Section 1 Section 2 Section3 Ruijin- Yudu Yudu - Ganxian Ganxian - Ganzhou Traffic on the existing corridor: 1995 2,299 2,849 3,227 2000 3,819 5,205 5,941 2001 5,937 7,105 7,977 2002 8,611 9,250 10,264 2003 10,206 11,223 13,953 2004 11,298 12,345 13,699 2005 12,507 13,578 15,067 Traffic without the project: 2010 17,400 19,700 22,900 2020 28,000 34,600 42,600 2030 37,100 50,200 65,800 Traffic with the project: a. Traffic on the existing roads 2010 7,100 8,000 10,300 2020 10,000 12,300 17,400 2030 13,300 17,900 26,900 b. Traffic on the new RGE 2010 10,300 11,700 12,600 2020 17,900 22,300 25,200 2030 23,800 32,300 39,000 c. Traffic diversion (in %) 2010 59.2% 59.4% 55.0% 2020 I 63.9% I 64.5% I 59.2% I 2030 64.2% 64.3% 59.3%

Economic Costs. Investment costs were converted to economic costs by the elimination ofprice contingency, taxes, custom duty on imported materials and by the application of shadow price factors. The resulting overall economic cost is about 90 percent ofthe financial cost.

Economic Benefits. The economic analysis includes the benefits derived from: (a) VOC savings on the new highway for normal and generated traffic, (b) time savings through relieved congestion on the existing road, and (c) lower accident costs. The benefits resulting fi-om the lower level ofcongestion were quantified. The value ofpassenger time savings was estimated at Y 1.50 per passenger-hour, on the basis of updated values from a report on feasibility study methodology for highways in China. The same sources were used for vehicle accident rates on different classes ofroads. The values used in this analysis are summarized as follows:

Economic Vehicle Operating Costs

Costs in Y/km (December 2005 prices) With the project Without the project Section 1 Section 2 Section 3 Section 1 Section 2 Section 3 Car 0.978 0.948 0.908 1.097 1.067 1.027 Medium bus 1.925 1.718 1.479 2.322 2.105 1.838 Large bus 4.582 3.950 3.239 5.157 4.526 3.758 Small truck 2.108 1.833 1.466 2.215 1.949 1.595 Medium truck 2.992 2.517 2.042 3.449 2.949 2.399 Large truck 4.337 3.663 2.989 4.896 4.234 3.484 Trac torhailer 6.255 5.173 3.922 7.014 5.869 4.509 Source: PCD.

53 Economic Evaluation. Total costs and benefits streams, Economic Internal Rate of Return (EIRR) and Net Present Value (NPV) for each section of the expressway were calculated using the VOC model. The overall EIRR for the RGE is estimated at 14.2 percent, with the following results for each road section:

Economic Evaluation of RGE

Yudu-Ganxian 869.4 Ganxian-Ganzhou (173.7)

Source: Bank evaluation.

The distribution ofthe estimated benefits shows that:

0 road users on this highway corridor are the main beneficiaries; 0 cars will receive 61.5 percent ofthe project benefits, while trucks will receive 32.9 percent; 0 bus passengers will receive 5.2 percent. These benefits are more likely to accrue to lower- income people; 0 these proportions are approximately the same as the proportion oftraffic; and 0 about 50 percent oftotal benefits will accrue to the long-distance traffic.

The breakdown ofbenefits is as follows:

Distribution of the Net Benefits (Y million)

Road user Road agencv Societv Total benefits 5,439.1 (4,219.3)' 1,2 19.8 By vehicles: Truck- Buses Trailers Total 3,347.0 28 1.3 1,792.0 5,439.1 61.5% 5.2% 32.9% 0.3% 100.0% Road agency is negative because it bears the investment cost.

Source: Bank evaluation.

Sensitivity Analysis. The basic evaluation of the project, by section and on the whole, shows that the selected alignment is economically viable, and the sensitivity tests with respect to a one- and-a-half-year delay in project completion, zero value of time, no generated traffic and the lower traffic projection on the new highway confirm this result (see below):

54 Sensitivity Tests on the Economic Evaluation of RGE

EIRR (Oh) NPV (12%, Y million) Delay the completion to December 20 10 13.2 971.6 (a) Higher capital cost (+lo%) 13.1 617.9 (b) Lower benefits (-10%) 13.0 495.9 Combine (a) and (b) 12.0 6.0 Zero value ofpassenger time 13.8 1,004.8 Zero generated traffic 13.7 890.0 Lower traffic projection (-20%) 12.9 433.6 Switching values % increase Cost increase to reduce EIRR to 12% 125% Benefit reduction to reduce EIRR to 12% 80% burce: Bank evaluation.

The results of sensitivity tests (EIRR inpercent) to cost and benefit variation are summarized below:

Sensitivity of Evaluation Results (EIRR in %) to Cost and Benefit Variation

-10% 8.7% 10.3% 11.7% 13.0% 14.2% 15.3% 16.4% 17.4% 0% 7.8% 9.4% 10.7% 12.0% 13.1% 14.2% 15.2% 16.2%

Economic Analysis-Local Road Improvement Project Component

Selection of Highways and Its Traffic. The first phase of the LRIP (upgrading of Chuengyi - Fengzhou Road and Meicun-Longbu Road) was identified during preparation and is evaluated in this annex. Further phases of the LRIP will be finalized during project implementation. The aim of the component is to upgrade low-grade busy roads to Class I1 or Class I11 with all-weather accessibility. The total length of the two roads is 83.3 km. The main characteristics are listed below:

Details of LRIP Phase I Roads

Length Traffic Road class (Km) (AADT 2005) Terrain (old/ new) 1. Chuengyi -Fengzhou Road 48.5 1,299 Mount. IV I I11 2. Meicun-Longbu Road 34.8 664 Mount. IV / I1 Total 83.3 Source: JPCD.

55 The current traffic level is in the range of 660 to 1,300 vehicles per day. Since the two roads are located in the same district, the local economic development and traffic patterns are quite similar. The two roads pass through less developed areas and traffic growth rates were conservatively estimated to be 4.0 percent from 2005 to 2010, reduced by 0.5 percent for each ofthe five years from 2005 to 2030. There is no generated traffic assumed.

Economic Costs and Benefits. Financial costs were converted to economic costs using the same method and factors as for the RGE, with the following results:

Financial and Economic Cost For LRIP (Y million)

Financial Economic Construction period 1. Chuengyi -Fengzhou Road 188.32 169.82 2006 - 2008 2. Meicun-Longbu Road 170.96 154.16 2006 - 2008 Total 359.28 323.98 Source: JPCD.

Similar to the RGE, the VOC equations were used to quantify the economic costs and analyze benefits of the two roads. The main evaluated benefits would be reduced VOCs through the provision ofa better road surface, and the associated upgrading ofroad class would also result in higher traffic speeds and improvement of the road roughness index ensured by all-weather conditions.

Economic Evaluation and Sensitivity Analysis. The best estimates of EIRRs for the two roads range from 16.2 to 28.7 percent. The overall EIRR and NPV (12 percent) for the LRIP are 22.6 percent and Y 291.7 million, respectively.

EIRR and NPV Summary for LRIP

EIRR (in YO) NPV (12Y0, Y million) 1. Chuengyi -Fengzhou Road 16.2 54.8 2. Meicun-Longbu Road 28.7 236.9 Total 22.6 291.7 Source: Bank evaluation.

The risks considered in the economic evaluation are:

0 slower-than-projected growth oftraffic; 0 higher-than-projected cost of civil works; and 0 lower-than-expected VOC savings.

All these risks were analyzed through sensitivity tests and the evaluation results were found to be robust for all of them. For the project component to be unacceptable (i.e,, an EIRR lower than 12 percent or a nil NPV at 12 percent discount rate), the benefits would have to fall to less than 49.5 percent ofthose in the base case with no change in costs, or the costs would have to increase to

56 more than 2.03 times those of the base costs, or the costs would have to increase by 1.34 times and the benefits fall to 66 percent at the same time.

Additional benefits not included in the EIRR calculations but expected from the project are: increased income of rural farmers who live in the poor areas because of better access to town markets and jobs, and increased accessibility to schools and hospitals. The quantifiable beneficiaries are estimated at: (a) about 2,070 extra children attending school (about ten percent of20,752 children in the directly served areas), and (b) about 3,710 extra people attending health services (1 percent of 370,900). Benefits for each are as follows:

The Extra Benefits for LRIP

Extra children Extra people attending attending health Minority school/ year services/ year population 1. Chuengyi -Fengzhou Road 740 1,860 6,517 2. Meicun-Longbu Road 1,330 1,850 6,540 Total 2,070 3,710 13,057 Source: JPCD.

Overall Economic Evaluation

Overall EIRR. The overall EIRR of the project (including RGE and LRIP) is 14.6 percent and the NPV (12 percent) is Y 1,511.5 million. They are summarized as follows:

Summary of Economic Evaluation Results

EIRR (in YO) NPV (Y Won, 12%) Ruijin- Ganzhou Expressway (RGE): 14.2 1,219.8 Local Road Improvement Program (LRIP) 22.6 291.7 Total Project 14.6 1,511.5 Source: Bank evaluation.

Project Risks. All sections ofthe RGE and LRIP show acceptable economic returns. The JPCD has extensive experience in the construction and operation ofhigh-grade highways and rural road projects, thereby minimizing the technical risks associated with the implementation of the project. The main tangible risk is that of prolonged delays affecting the construction schedule. The impact ofuncertainty was tested through the probabilistic risk analysis.

Probabilistic Risk Analysis. To determine the degree of uncertainty for the project, a probabilistic risk analysis using Monte Carlo techniques was carried out. In a Monte Carlo analysis, each uncertainty factor is allowed to vary at random between set limits and all uncertainty factors are allowed to change simultaneously. Monte Carlo simulation provides probability distributions ofthe potential outcomes ofdecisions. By analyzing these distributions, we can assess the risk associated with making various decisions. The product ofthe analysis is a judgment on the possible range of the decision variable, and on the likelihood of each value within this range.

57 The uncertainty factors associated with the economic evaluation ofthe project were identified as: (a) traffic growth rate, (b) traffic diversion ratio to the new expressway, (c) value of VOC, (d) changes in capital investment, and (e) one-year delay ofopening. The results ofthe probabilistic risk analysis show that the EIRR for the most likely scenario is 13.1 percent, the low scenario is 6.9 percent and the high scenario is 19.7 percent. The standard error ofthe mean is 0.4 percent. The detailed results of the Monte Carlo test and probabilistic risk analyses are summarized as follows:

Summary of Probabilistic Risk Analyses (percent)

Most likely Standard error Range of EIRR EIRR of the mean Ruijin- Ganzhou Expressway (RGE): 6.1 - 19.7 12.8 0.4 Local Road Improvement Program (LRIP) 20.8 - 21.8 21.2 0.0 Total Project 6.9 - 19.7 13.1 0.4 Source: Bank evaluation.

C. Financial Analysis

Preface

The financial evaluation of the project is comprised of three sections:

0 an assessment of the revenue-earning entity (RGE), focusing on consolidated financial statement; 0 an assessment of the nonrevenue-earning entity (LRIP), focusing on financial risk in terms of construction, operation and maintenance; and 0 an assessment ofthe financial capacity of the JPCD to sustain highway activities, focusing on the adequacy offunding allocations in the overall road development plan.

The financial cost of capital for the RGE is assumed to be 5.13 percent for the project (27.2 percent from the Bank at 4 percent, 36.2 percent from the local bank at 6.12 percent and 36.6 percent from the grants at 5 percent).

Financial Evaluation of RGE Component

The RGE will be operated from its opening for traffic (July 2009) by a financially independent entity, responsible for the day-to-day management, operation and maintenance of the expressway. The main income of the RGE would be derived from tolls charged to road users. The Jiangxi govemment will set the toll rates.

The Financial Objective. The JPCD has indicated that the financial purpose oftoll collection on the RGE is to repay the project’s Bank and domestic loans, cover operating and nonoperating expenses and cover routine maintenance. The toll charges are assumed to increase once every five years (20 percent or an average of 3.7 percent per year).

58 Financial Forecast

Tolls. The toll will be charged on the basis of vehicle size (small passenger cars, large buses, small trucks, medium trucks, large trucks and trailers) and distance traveled. The same toll is used on all expressways in Jiangxi. The RGE will be operated as an open toll road. Some traffic may not pay a toll, including the toll-exempted vehicles (police, ambulance and military), which are estimated to account for ten percent oftotal traffic. The proposed toll rate for the RGE is as follows:

Toll Charges (Y/vehicle-km)

M;;; M;;; ~ 1 vehicle;;; vehicle vehicle7; vehicle;:

Source: JPCD.

Operations. The operating costs of the RGE can be broken down between the working costs (wage and benefits, maintenance, operating materials and supplies, administration, others) and depreciation. All other expenses, including interest payments on the loans, are also taken into account in the calculation ofthe RGE profitability.

Profitability. It is estimated that the RGE will generate enough revenue over the loan period to achieve the above-mentioned financial objective. However, low profitability will take place in the early years with the repayment of the Bank and domestic loans. The total interest payment alone in 2012 (Y 173.97 million), for example, is about 94.9 percent of the total operating costs (Y 183.3 1 million), or consuming 51.8 percent ofthe total revenue (Y 335.8 million) in that year. Because ofthe low toll growth assumptions, the profitability ofRGE is predicted to be low until 2015 (see the Income statement, page 1 of3, Attachment 1).

Cash Flow. Despite the low profitability and the financial pressure ofthe loan repayments, the RGE’s cash flow should be sufficient to meet all project needs because of the large sum of depreciation reserve, which allows the RGE to meet cash outflows in the early years of operations. In 2012, for example, the total annual depreciation reserve (Y 151.1 million) will represent about 4.7 times the total annual working cost (Y 32.23 million), thereby generating strong internal cash flow and providing sufficient funds for the RGE’s operations, maintenance expenses and loan repayments. It is estimated that the RGE will not require any external cash injection and will be able to maintain cash available at least Y 100 million every year for the life of the project (for the sources and applications of funds, see page 2 of 4, Attachment 1).

Leverage and Liquidity. The low profitability and high proportion ofborrowings will dilute the equity of the RGE and cause a debtlequity ratio and debtlcapital ratio (the financial leverage ofthe company) above 50 percent until 2020. However, this will not affect the liquidity ofthe RGE, as its liquidity is ensured by the strong cash flow status. The current ratio will be in the sound range of 1.1 and higher, which should be at least 1.O to avoid short-term solvency problems (balance sheet, page 3 of 4, Attachment 1). In addition, the JPCD has reiterated its full commitment to the RGE, guaranteeing its financial viability, releasing an official document to the Bank confirming its full

59 financial support. The major assumptions and results ofthe financial evaluation are shown in page 4 of4, Attachment 1.

Financial Internal Rate of Return (FIRR). The low profit margin will impact the FIRR on the capital investment. The financial evaluation shows that the best-estimate FIRR is expected to be 0.8 percent with NPV of Y -2,626 million, at the discount rate of 5.13 percent. Because of the low profitability in early years, the FIRR and NPV will not change much if completion is delayed by one year (0.6 percent).

Financial Probabilistic Risk Analysis. To determine the degree offinancial uncertainty for the project, a probabilistic risk analysis using Monte Carlo techniques was carried out. The six most uncertain factors that may affect the financial evaluation were identified: (a) traffic growth rate, (b) the basic toll level, (c) toll charges growth rate, (d) total working costs, (e) capital investment, and (f) delay in opening the highway to December 2010. The risk analysis reveals that the most likely FIRR would be 0.8 percent, while the worst and the best FIRR would, respectively, be -0.6 percent and 1.9 percent. Details are summarized as follows.

Summary of Financial Sensitivity and Probabilistic Risk Analysis

Financial Sensitivity Tests Financial Simulation and Risk Analysis Open in Open in Range of Most Likely Std. Error of July 2009 Dec 20 10 FIRR / NPV FIRR / NPV The Mean FIRR (in %) 0.8 0.6 - 0.6 - 1.9 0.8 0.1 NPV (5.13%, Y million) - 2,626 - 2,734 - 3,246 - 2,045 - 2,623 32.7 Source: Bank evaluation.

Financial Evaluation of the LRIP Component

The preparation team has some concerns about the availability of counterpart funds for the LRIP from Ganzhou city prefecture (see Annex 7). The financial evaluation of the LRIP components therefore focused on the JPCD’s capacity to minimize financial risks; i.e., their ability to respond to any lack of counterpart funds for the construction, including the future maintenance expenditure ofthe LRIP roads.

JPCD budget forecasts show that the investment and maintenance/operation of the LRIP would constitute only a small fraction ofthe JPCD’s fund flows. Based on the JPCD’s plan, the capital investment of the LRIP will require less than 0.6 percent of the projected annual total JPCD revenue. In addition, the required maintenance and operation expenditure of the LRIP is less than 0.13 percent of the total maintenance expenditure of the JPCD. These low ratios indicate that the project presents a modest financial risk as regards the availability of counterpart funds for the construction and maintenance of the project roads. The details are shown in Attachment 2 and summarized as follows:

60 JPCD: Investments, Revenue and Maintenance Expenditures (Y million)

2006 2007 2008 2009 2010 Investments and Revenue: LRIP Investments (a) 71.85 143.71 143.72 Total JPCD Revenue (b) 24,186 25,472 26,742 29,286 31,058 Ratios (a)/(b) 0.30% 0.56% 0.54% Maintenance Expenditures: LRIP (c) 0.76 0.78 Total JPCD Maintenance Expenditure (d) 527.0 545.0 564.0 582.0 601.0 Ratios (c)/(d) 0.13% 0.13% Sources: JPCD and Bank evaluation.

D. Financial Evaluation of the JPCD

The JPCD provided its financing plan forecasts for total revenue and expenditure during the Tenth Five-Year Plan (loth FYP, 2001-05) and Eleventh Five-Year Plan (llthFYP, 2006-10). Based on the available information, the financing plan has two features: (a) lesser portion of revenue is invested in new construction, and (b) less dependency on grants from the government.

Based on the JPCD's plan, the total budget for new construction for the1 lthFYP will be about 78.4 percent of total revenue, compared with 85.5 percent of the total revenue for the loth FYP. The lower percentage on new construction will allow the JPCD to allocate more financial resources to maintenance during 2006-10. The average unit maintenance budget has increased from Y 7,340h-n for the loth FYP to about Y 8,87O/km in the llthFYP. The emphasis on maintenance will reduce deterioration of the existing road network, causing lower rehabilitation expenditures in the long run.

Although the JPCD budgets for a grant from MOC every year, a moderate self-financing ratio (total internal cash generation against total revenues) for the 1lth FYP (27.6 percent) will ensure the implementation of the development plan even without a grant from MOC. This ratio has improved since the loth FYP (21.5 percent). The detailed sources of highway revenue and expenditures for 200 1- 10 are shown in Attachment 2.

With regard to the long-term sustainability of road maintenance with the allocated resources, the average yearly increase in maintenance expenditures during the 1Oth FYP (5.5 percent) exceeded the growth of the road network (0.8 percent), which means a net increase in the average maintenance expenditure per kilometer. The trend should continue during the llthFYP with percentages at 2.9 percent and 0.6 percent, respectively.

JPCD: Average Increase in the Road Network and Road Maintenance Expenditures (in YO)

10" FYP 11"FYP (2001-05) (2006-10) Average annual increase in the road network 0.8 0.6 Average annual increase in maintenance expenditures 5.5 2.9 Sources: JPCD and the Bank evaluation.

. 61 Attachment 1 Page 1 of 4 Third Jiangxi Highway Project INCOMESTATEMENT - RGE Cy million, year ending December 31)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Traffic (million veh-km)’ 209.41 523.52 556.53 591.58 628.89 668.58 710.85 755.81 803.66 854.59

Revenue Tolls 119.00 297.50 316.26 335.79 356.59 378.69 482.02 512.51 544.30 578.15 Others Total -119.00 -297.50 -316.26 -335.79 -356.59 -378.69 -482.02 -512.51 -544.30 -578.15

ODerating Taxes Business tax 5.95 14.88 15.81 16.79 17.83 18.93 24.10 25.63 27.22 28.91 City tax 0.42 1.04 1.11 1.18 1.25 1.33 1.69 1.79 1.91 2.02 Education levy 0.18 0.45 0.47 0.50 0.53 0.57 0.72 0.77 0.82 0.87 Total -6.55 16.37 17.39 18.47 19.61 20.83 26.51 28.19 29.95 31.80 Net Revenue -112.45 -281.13 -298.87 -317.32 -336.98 -357.86 -455.51 -484.32 -514.35 -546.35 ODerating Costs Wages and benefits 3.00 7.50 7.73 7.96 8.20 8.45 8.70 8.96 9.23 9.51 Maintenance 6.08 15.21 15.67 16.13 16.61 17.11 17.63 18.16 18.70 19.27 Materials and supplies 1.59 3.98 4.10 4.22 4.35 4.48 4.61 4.75 4.89 5.04 Administration 1.20 3.00 3.09 3.18 3.28 3.38 3.48 3.58 3.69 3.80 Others 0.28 0.70 0.72 0.74 0.77 0.79 0.81 0.84 0.86 0.89 Total working costs 12.15 30.39 31.31 32.23 33.21 34.21 35.23 36.29 37.37 38.51 Depreciation - 151.08 151.08 151.09 151.09 151.21 151.33 151.45 151.58 Total operating costs -12.15 -30.39 -182.39 -183.31 -184.30 -185.30 -186.44 -187.62 -188.82 190.09 Operating Profit -100.30 -250.74 -116.48 -134.01 -152.68 -172.56 -269.07 -296.70 -325.53 356.26

Financial IBRD - 60.87 57.78 54.55 51.19 47.70 44.07 40.30 charges: Local Bank - 119.22 119.22 113.10 106.98 100.86 97.80 91.68 79.44 67.20 Other income (expenses) Profit Before Taxes --100.30 131.52 (2.74) (39.96) (12.08) 17.15 120.08 157.32 202.02 248.76

Income tax2 - 27.21 51.92 66.67 82.09 Net Profit After Taxes --100.30 131.52 (2.74) (39.96’) 112.08) 17.15 92.87 105.40 135.35 166.67

Working ratio 11 11 10 10 10 10 8 7 7 I Operating ratio 11 11 61 58 55 52 41 39 37 35

The highway will be opened to traffic in July 2009. No income tax during the trial period (2009- 10) and netted from the tax credit after 20 10.

62 Attachment 1 Page 2 of 4

Third Jiangxi Highway Project SOURCES AND APPLICATIONS OF FUNDS - RGE Cy million, year ending December 31) + 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: Net profits - 100.30 131.52 (2.74) (39.96) (12.08) 17.15 92.87 105.40 135.35 166.67 Depreciation - 151.08 151.08 151.09 151.09 151.21 151.33 151.45 151.58 State contribution 117.00 175.50 175.50 117.00 JPCD contribution 297.54 446.31 446.31 297.54 Borrowing: IBRD 308.18 462.27 462.27 308.18 Local 409.60 614.40 614.40 409.60 Others Total 1.132.32 1.698.48 1.698.48 1232.62 131.52 148.34 111.12 139.01 168.24 244.08 256.73 286.80 318.25

Amlications: Capital expenditure 1,132.32 1,698.48 1,698.48 1,132.32 5.85 6.03 6.21 6.39 6.58 6.78 6.99 7.19 7.41 Other expenditure Loan repayment: IBRD - 76.73 79.82 83.05 86.41 89.90 93.53 97.30 Local - 100.00 100.00 100.00 100.00 50.00 100.00 200.00 200.00 200.00 Change wl capital - (18.93) (28.42) (2.99) (3.11) (3.31) (3.52) (16.44) (4.86) (5.06) (5.38)

Total 1.132.32 1,698.48 1.698.48 1,113.39 77.43 103.04 179.83 182.90 136.11 176.75 292.03 295.66 299.33

Net Funds Flow - 119.23 54.09 45.30 l68.71) (43.89) 32.13 67.33 (35.30) 18.92 Open balance - 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 Closing balance - 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 180.24

D/S Cover _- __ __ -- 1.14 1.22 0.81 0.88 1.12 1.17 0.92 0.98 1.05

63 Attachment 1 Page 3 of 4 Jiangxi Highway Project BALANCESHEET - RGE Cy million, year ending December 31)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Assets: Fixed Assets At cost 4,530.50 4,532.32 4,532.41 4,532.51 4,532.60 4,532.70 4,536.23 4,539.86 4,543.60 4,547.45 Less: Depreciation - 151.08 302.16 453.25 604.34 755.55 906.88 1,058.33 1,209.91 Net fixed assets 4.530.50 4.532.32 4,381.33 4,230.35 4.079.35 3.928.36 3.780.68 3,632.98 3.485.27 3,337.54

Current Assets Inventory 0.60 1.49 1.58 1.68 1.78 1.89 2.41 2.56 2.72 2.89 Receivable 0.30 0.74 0.79 0.84 0.89 0.95 1.21 1.28 1.36 1.45 Cash 119.23 173.32 218.62 149.91 106.02 138.15 205.48 170.18 161.32 180.24 Subtotal ---__------120.13 175.55 220.99 152.43 108.69 140.99 209.10 174.02 165.40 184.58

Other Assets

Total Assets ~-4.650.63 4.707.87 4.602.32 4.382.78 4.188.04 4.069.35 UEL7.8 3.8o7.00

Liabilities & Euuitv State funds- Equity 1,041.90 1,069.39 1,060.71 1,014.64 996.26 1,056.93 1,096.55 1,098.59 1,230.49 1,393.60

L/T loans: IBRD 1,540.90 1,540.90 1,540.90 1,464.17 1,384.35 1,301.30 1,214.89 1,124.99 1,031.46 934.16 Local 2,048.00 2,048.00 1,948.00 1,848.00 1,748.00 1,648.00 1,598.00 1,498.00 1,298.00 1,098.00 Subtotal 3,588.90 3.588.90 3.488.90 3,312.17 3,132.35 2,949.30 2.812.89 2,622.99 2,329.46 2.032.16

Current Liabilities 19.83 49.58 52.71 55.97 59.43 63.12 80.34 85.42 90.72 96.36

Other Liabilities

Total Liabilities & Equity 4.650.63 4.707.87 4.602.32 4.382.78 4.188.04 4.069.35 3.989.78 3.807.00 3.650.67 3.522.12

Debt/ equity ratio 18/22 77123 17/23 71123 76124 74126 73121 11129 66134 60140 Current ratio 6.1 3.5 4.2 2.7 1.8 2.2 2.6 2.0 1.8 1.9

64 Attachment 1 Page 4 of 4 Third Jiangxi Highway Project Assumptions for Financial Forecasts- RGE

1. Normal Traffic (AADT): Small Medium Large Small Medium Large Tractor Car bus bus truck truck truck -Trailer Total Section I: Ruijin - Yudu 2010 5,787 133 258 385 802 2,925 1 10,291 2020 10,216 215 414 616 1,289 5,174 1 17,925 2030 13,730 262 505 75 1 1,571 6,953 1 23,773 Section 11: Yudu - Ganxian 2010 7,050 249 482 1,028 863 1,988 61 11,721 2020 13,680 442 853 1,811 1,527 3,865 109 22,287 2030 20,250 594 1,147 2,434 2,052 5,721 146 32,344 Section 111: Ganxian - Ganzhou 2010 7,619 278 540 1,147 936 1,987 71 12,578 2020 16,340 497 96 1 2,034 1,668 3,559 116 25,175 2030 26,616 668 1,292 2,734 2,241 5,268 156 38,975

2. Toll Rates (Yiveh-km): Increase 20% every five years

Small Medium Large Small Medium Large Tractor Car bus bus truck truck truck -Trailer 2010 0.40 0.80 1.15 0.40 0.80 1.15 1.50

3. Operating Taxes: a. Business Tax 5% of total revenue. b. City Tax 7% of business tax. c. Education levy 3% of business tax.

4. Operating Cost: Increase 5 % pa. a. Wages and benefits: Y 25,0001 staff /year, 50 staffs/ station, six stations. b. Maintenance (Y millionhn):

Routine Major Maintenance (annual) Maintenance (/lo years) RGE 0.13 1.30

c. Operating materials and supplies Y 0.034 million per km. d. Administration 40% ofwage and benefits. e. Others Y 0.006 million per km. f. Depreciation 30 years straight-line method. 5. Incometax 33.0% 6. Borrowing: TheIBRD 4.00% on 20 year maturities, LIBOR US$ based single currency including five years grace period. The local Bank 6.12% flexible principal payment.

65 Attachment 2

Jiangxi Highway Revenue and Expenditure During its lofhand llthFYP (Y million)

The 10Ih Five Year Plan The 11" Five Year Plan 2001 2002 2003 2004 2005 Total 2006 2007 2008 2009 2010 Total

Revenue 1. Road users' fee 1,408 1.485 1,650 1,853 2,002 8,398 2,162 2,335 2,521 2,723 2,941 12,682 2. MOC subsidy 812 1,055 2,486 2.713 2,100 9,166 2,205 2.300 2,415 2,500 2,625 12,045 3. Toll revenue 450 737 1,709 2,578 2,785 8,259 3,340 3.975 4,583 6,236 6,966 25.100 4. Business sales income 100 506 1,000 28 270 1,904 291 315 340 367 397 1,710 5. Local financing 200 425 200 260 200 1,285 216 233 252 272 294 1,267 6. Bonds 189 770 544 510 429 2,442 463 391 332 349 366 1,901 7. Bankloan 2,970 5,302 4,981 8,711 9,676 3 1,640 10,865 11,108 11,297 11,638 12,051 56,959 8. Fund-raised by local 942 726 2,685 1,486 3,107 8,946 3,356 3,464 3,582 3,708 3,845 17,955 9. External capital 59 1,186 1,487 1,483 1,193 5,408 1,288 1,351 1,420 1,493 1,573 7,125

Total 7.130 12.192 16.742 19,622 21,762 24.186 25;?22 26,742 29,286 31.058 136,744

Exmnditure: I. Administration 209 182 268 290 313 1,262 332 338 343 349 355 1,717 2. Major trunk road 3,232 8,025 9,025 9,066 9,590 38,938 10,478 10,839 11,299 13,346 13,944 59,906 3. General main road 2,199 2,321 2,670 2,392 3,970 13,552 4,176 4,457 4,673 4,887 5,119 23,312 4. Rural road 650 699 3,411 4,755 4,240 13,755 4,364 4,564 4,799 5,023 5,257 24,007 5. Road transport depot 47 65 76 94 70 352 182 197 213 230 248 1,070 6. Major maintenance 153 164 174 188 196 875 205 212 219 226 234 1,096 I. Medium maintenance 131 140 149 161 168 749 176 182 188 194 200 940 8. Routine maintenance 109 117 124 134 140 624 146 151 157 162 167 783 9. Managementhearc h 44 47 50 54 56 251 59 61 63 65 61 315 10. Repayment of interest and principle 356 432 795 2,488 3,019 7,090 4,068 4,471 4,788 4,804 5,467 23,598

Total 7.130 12,192 16,742 19.622 21,762 24.186 25,472 26,742 29.286 31,058 136,744

Total Road Network (km) -(a) 60,292 60,696 61,233 61,860 62,307 306,388 62,732 63,144 63,538 63,905 64,322 317,641 Average annual increase -- 0.7% 0.9% 1.0% 0.7% 0.8% 0.7% 0.7% 0.6% 0.6% 0.7% 0.6% Total road maintenance expenditure (million Y)-(b) ' 393 421 447 483 504 2,248 527 545 564 582 601 2,819 Average unit maintenance expenditure (Y'OO0h)- (b)/(a) 6.52 6.94 7.30 7.81 8.09 7.34 8.40 8.63 8.88 9.11 9.34 8.87 Average annual increase -- 6.4% 5.2% 7.0% 3.6% 5.5% 3.6% 2.7% 2.8% 2.6% 2.6% 2.9%

' Sum of major, medium and routine maintenance. Actual: 200 1-04.

66 Annex 10: Safeguard Policy Issues CHINA: Third Jiangxi Highway Project

I. ENVIRONMENTAL SAFEGUARD ISSUES

A. Background

Table A10.1 shows the key components ofthe project. The RGE will be constructed entirely on a new alignment, while the interconnecting roads will be mostly constructed new alignments. As mentioned earlier, the LRIP roads will mostly follow the exiting road alignments, but would involve strengthening, minor widening and realignment of the existing low-grade roads to increase their transportation capacity, minimize congestion, increase driving visibility and provide all-season access. The construction of the RGE is scheduled to commence in October 2006, although some site access roads may be built earlier, and is expected to be completed in 2009; the LRIP road construction will commence in April 2006 (Phase I),and Phase I1 will be completed in 2009.

Table A1O.l Major Project Components

LRIP Roads (Phase I) RGE Interconnecting Items Chuengyi Expressway Roads Meicun-Longbu - Fengzhou - Road classification Expressway Grade I1 Grade I11 Grade I1 Total length (km) 116.8 -6 48.5 34.8 Design speed (kmih) 100 80 40 40 Alignment New Partially new Partially New Partially New

In December 2004 the Communications Design Institute of Jiangxi Province (CDIJP) engaged the Research Institute ofHighways (RIOH) of the Ministry of Communications to undertake the preparation ofthe environmental impact assessment for the RGE project and they completed the Environmental Assessment (EA). The Terms of Reference (TOR) for the EA were prepared in December 2004. They were reviewed, revised and approved in early 2005 by the Bank. The first draft Environmental Impact Assessment (EIA) report was prepared and submitted (in Chinese) to the Bank in May 2005, followed by a second draft (EIA and Environmental Management Plan-EMP-in English) in September 2005. The final revised draft reports (EIA, EMP and EA summary), incorporating a late five km change in the alignment to accommodate the Ruijin Granneng power plant and the comments by the Bank were submitted to the Bank and the State Environmental Protection Agency (SEPA) in December 2005. The reports were approved by SEPA prior to negotiations.

The LRIP Phase I EA and EMP were prepared by the Nanchang-based Jiangxi Provincial Environmental Protection Scientific Research Institute. The first draft was submitted for review at the time of the preappraisal mission. The Phase I1roads will have an EIA and EMP prepared in a similar manner.

The project is classified as a Category A project since it involves major expressway construction on new alignment, at-grade interconnecting roads to be upgraded on new alignments, increase in

67 noise and motor vehicle air emission, occupation offertile and barren land, excess waste material disposal, community severance, soil erosion, resettlement, etc.

B. Basis of the EA

The preparation of the EA followed the regulatory and policy requirements for environmental assessment of development projects in China and the World Bank’s Safeguard policies. Of the ten Bank Safeguard policies applied to the project, the project triggered Environmental Assessment (OP/BP/GP4.01) and Involuntary Resettlement (OD4.30). The Public Disclosure (BP 17.50) policy also applies. The EA investigations did not find any protected areas or cultural relics along the selected alignment or with the LRIP roads. Relevant international environmental agreements in which China is a signatory were also consulted where appropriate.

C. Baseline Environment

The RGE alignment passes through the low-lying, rolling areas of south-central Jiangxi Province. The topographic relief is low in the east and high in the west, with hilly and mountainous terrain, running generally in a northeast-southwest direction. The project area lies in the mid-subtropical, monsoon zone, with monsoon rains in summer and winter. The area is characterized by four distinct seasons; mild climate, hot summers with high rainfall, short extreme winters, and long nonfrost periods.

Field investigations along the RGE alignment identified about 57 villages/townships and nine schools located about 30 to 150 m fiom the expressway center line. These will be vulnerable to increased noise, dust, etc., due to construction activity. The expressway will also cross three rivers but, fortunately, it will not pass through or near any nature reserves or protected areas or disturb any cultural relic sites. The upgrading of the interconnecting roads impacts on one administrative village and no schools. For the local roads, six townships and 20 villages will be impacted. No schools will be impacted.

Baseline air quality monitoring, conducted in MarcWApril 2005, showed average daily nitrogen dioxide (NO$ concentrations between 0.006 and 0.0 13 milligrams/cubic meter (mg/m3), well below the Class I1 Air Quality Standard of 0.12 mg/m3. The average daily total suspended particulate matter (TSP) concentrations varied between 0.03 to 0.06 mg/m3 against 0.30 mg/m3 Class I1regulatory requirement. The results indicate good existing ambient air quality along the expressway alignment. Only air quality monitoring will be conducted for the LRIP component during construction, and not during operation.

The day and nighttime noise monitoring results for 28 sensitive locations along the expressway show that all villages meet Class I1 [60 dB (A) day and 50 dB (A) night] requirements and some villages can meet Class I[55 dB (A) day and 45 dB (A) night] requirements. Of the schools, only the Yanba Primary School can meet the Class Irequirements. As a comparison, noise along NR 323, which parallels the expressway, exceeds Class I1 criteria within 120 m ofthe road.

The results of the surface water quality monitoring of rivers and reservoirs show that for all monitored parameters (pH, oil, suspended solids and permanganate) the results were within their respective Class I1standard.

68 The average soil erosion intensity along the main expressway area is 1,640 tons/km2/year. The allowable erosion intensity is 500 tons/km2/year, requiring extensive erosion control during construction and operation.

Archeological and Cultural Relic surveys, carried out during the alignment selection and optimization (May and October 2005), covered the main alignment corridors, alternatives, interchanges, interconnecting roads, borrow and disposal areas, etc., and did not identify any threats to any archeological or cultural relics as a result of the construction of the Expressway. The nearest identified relics (He Huanwen Tomb, Martyr Tomb, 1942) is a City-level relic about 350 m from the RGE alignment. No cultural relics were identified in the LRIP project area.

Neither the RGE nor BOT sections pass through or anywhere near natural habitats or protected forests, All vegetation in the area is tertiary or younger. The same applies for the Phase ILRIP roads.

D. Environmental Impacts

According to the modeling results, the soil erosion intensity during construction will reach about 1,706 tons/km2/year, and if no protection measures are taken during the construction period, the total soil lost will be considerably higher than the “no project” scenario. The erosion will continue during construction and the early part of the operational phase, until such time as the “greening” mitigation measures take effect. Soil erosion for the rural road construction is also expected to increase.

The project will permanently occupy 12,525 mu of land including 55 percent of forest and woodland, and about 31 percent of cultivated land. In addition, the project will occupy about 240 mu of temporary land for 12 borrow pits. Twenty-four excess material disposal areas will also be required, but these will be rehabilitated. The construction of the rural and interconnecting roads will require additional land, but as most ofthese roads are upgrading ofthe existing roads, any permanent occupation of additional land will be limited.

During construction, farm crops, trees and other vegetation on the occupied farmland and woodland will be lost to the project. However, the impact ofthe loss ofvegetation cover will be of short duration as the slopes, interchanges, borrow pits, disposal sites and other temporarily occupied areas will be landscaped and rehabilitated with grass, trees, shrubs, bushes and other vegetation. The landscaping program is expected to result in an increase in the vegetation cover along the Expressway.

The primary impact on the water environment during the construction phase includes discharge of sanitary sewage from the approximately 12 construction camps, and surface runoff from bridge construction, storage areas, mixing plants, etc. The camps are expected to generate about 2-3 tons of sanitary sewage per day, which will be treated using septic tanks to minimize the impact on the receiving streams. All construction packages will include a typical design of a septic tank system. Bridge construction could result in the resuspension of river sediments and creates the risk of oil contamination from leaks and spills. Solid wastes from camps, service areas, storage areas, if not handled properly, could also create pollution problems.

69 Wastewater from the operational phase will include sanitary sewage from service stations and parking lots, car-washing effluents and pavement runoff. Wastewater from point sources will be treated to the applicable standards before discharge to the receiving streams. Surface runoff will be smaller compared to the receiving river flows and its impact, based on modeling, is expected to be insignificant.

Traffic accidents on the bridges involving the transportation ofhazardous materials could result in spills and pose a risk of water contamination. Analysis of accident data and prediction indicate that there exists a slight probability of water contamination from such accidents. However, the consequence could be severe and the spills may impact water quality, aquatic life and ecosystem, and health and safety ofthe people living downstream ofthe spills. The designs will ensure that there is no direct discharge to water from structures.

Noise from multiple construction machines and equipment will not exceed the applicable daytime noise standards at 55 m from the machinery, and will meet the nighttime standards at about 250 m. Since there are only a few residents who live within 55 m from the construction sites, the daytime noise impacts will be limited. Nighttime activities are not envisaged.

Modeling ofthe noise levels in the 55 villages and seven schools located near the RGE show that all 62 locations would be subject to excess noise to differing degrees. During the construction stage, seven locations (four schools and three villages) will experience higher noise levels. During the operational stage, in the short term (2009), three schools and 21 villages will exceed the noise level by up to 15 dB (A). In the medium term, an additional 26 locations will require protection as the noise levels increase with increases in traffic. For the rural road upgrading, with lower but closer traffic, the noise levels will increase but are expected to fall between Class I11 and Class IV standards.

Fugitive dust from unpaved access roads, disposal areas, materials storage areas, crushers and mixing plants, asphalt plants, materials transport, etc., will be the primary air contaminant during the construction phase. Depending on the terrain and climatic conditions, the impact area can range from 50 m from the source ofdust to 300 m in the case ofasphalt plants.

The “with and without” project scenarios predict an increase in N02, but lower carbon monoxide (CO) and total hydrocarbons (THC) emissions during project operation due to increased vehicle traffic and speed. Motor vehicle emissions and air modeling predicts NO2 concentrations below the standards under normal weather conditions but exceeding the standards under unfavorable weather conditions.

The expressway will be fully fenced with controlled access and will separate farmland and rural communities from one another. To minimize the impact on the communities and farmers, 203 underpasses will be constructed for use by the local communities.

The expressway will improve accessibility to the project areas including a potential increase in tourists. The nearest tourist attraction is the Tongtianyan Grotto, located about 1.5 km from the expressway.

70 E. Analysis of Alternatives

The analysis and selection of the alignment was carried out in four stages. During the September 2004 feasibility stage, two broad corridors were compared and the South Line scheme was selected based on fewer crossing of the Gong River, NR 323 and the Ganlong Railway. The selected alignment also met local government requirements. In stage two, within the preferred corridor, two segments of the alignment, namely, the Yudu and Jiangkou sections were further refined. Of the three comparative schemes in the Yudu section, Yudu Scheme I1 was selected based on the least land occupied and lowest resettlement, and associated lower disturbance and impacts. The scheme also met with local government approval. In the Jiangkou section, Scheme Iwas selected based on the least land occupation, least resettlement and least interference with the Ganlong Railway and NR 323.

During the preliminary design stages in September and October 2005, additional alignments were compared as the design evolved and more geotechnical, cost, environmental and resettlement information became available. After thorough analyses, some alternatives were selected based on lower environmental impacts (e.g. Scheme I1 of Yuyang-Hefeng section for shorter tunnel length and fewer noise-sensitive locations; Scheme Iof the Gong River section for lower impact on the river, etc.), some were selected based on lower resettlement and land occupancy (e.g. Scheme I1 of Yudu Tunnel) and some selections involved tradeoffs between lower construction costs and environmental impact against lower resettlement (Scheme I1 of Sanmen). In the cases where alternative alignments were not viable, because of the proximity to towns or mining easements or railway, full consideration was given to mitigate adverse environmental and resettlement impacts arising out of the alignment. This was the case for Section K31-K33.5 where the alignment passes through a flood-prone area. Since the alignment could not be shifted and the construction of the expressway embankment would have worsened the flood levels and the duration of the floods, the length of the viaduct was increased to minimize the increase in flood levels.

F. Mitigation Measures

Design Phase

To control soil erosion, the design includes concrete and stone pitching on steep slopes, interception ditches and landscaping. The stone pitching will have an immediate beneficial effect on soil erosion. The borrow pits will be rehabilitated through the conversion of the pits into ponds or landscaping. Erosion from the construction waste disposal sites will be controlled by constructing retaining walls and waste stockpiles will be covered with soil and landscaped.

To control noise, the design includes measures such as noise barriers, soundproof windows, tree planting, etc. to minimize noise impact on schools and villages. Twenty-nine noise barriers, soundproof windows at 22 locations and six plantation belts (total cost of Y 24.5 million) are included in the mitigation measures. At other locations where the predicted noise levels are below the applicable standards, noise monitoring will be undertaken and, if necessary, mitigation measures will be implemented to control noise.

71 The design also includes wastewater treatment facilities to treat contaminated water from service areas, car-washing operations, repair shops, etc. Community severance is mitigated through the inclusion of 203 underpasses, 43 grade separation bridges and numerous culverts and some dedicated footbridges, capable of accommodating vehicular and pedestrian traffic.

Construction Phase

The construction workspace will be minimized to reduce the impact of land occupation. Areas that must be occupied will be revegetated after completion of the project. Workers will be sensitized to protect trees and wild animals. To minimize soil erosion in disturbed areas, temporary protection measures, such as grass mats, will be applied in places where permanent protection cannot be completed in time for the rainy season.

Large and noisy construction activities will be kept at least 50 m away from populated areas. Operation of noisy construction machinery and activities will be restricted to the daytime and banned at night in sensitive areas. Seven noise barriers are planned to mitigate excessive noise impact during construction. At other places, temporary noise barriers will be constructed to protect the sensitive receptors from the impact ofthe construction noise.

The project will use cofferdam in bridge construction to isolate work areas to minimize the impact on surface water. Where possible, the construction will be scheduled during the low-flow periods. Construction camps will be located to minimize disturbance to the nearby communities. Solid wastes will be stored with proper protection and removed from the sites regularly by qualified vendors for proper disposal. The camps will be maintained in sanitary, hygienic and orderly conditions with good housekeeping to minimize health hazards to the workers and adverse impacts to the surrounding environment. Sewage from the camps will be treated in septic tanks to meet the irrigation discharge standards. All construction packages will include a typical design ofa septic tank system.

To suppress airborne dust, unpaved access roads and Construction sites will be water sprayed at least twice a day. Mixing stations and hot-mix plants will be located at least 300 m on the leeward side of the nearest village to minimize dust and smoke impacts. Trucks carrying dust- generating materials, and materials stockpiles will be covered with canvas.

The EMP will be incorporated into the bid documents and its implementation will be a contractual obligation. Training will be provided to all winning contractors and construction supervision staff on environmental policies and regulations, potential impacts, mitigation measures, daily monitoring and reporting, emergency handling, etc.

The LRIP component is located in the remote hilly region of Jiangxi and the construction of the roads will likely be carried out by local contractors who may lack proper managerial and trained staff. Supervision is expected to be weak and the environmental management of the rural roads construction may be poor. Therefore, the project provides for the local transport bureau and the winning contractors to receive environmental management training by specialists from the JPCD and local Environmental Protection Bureaus (EPBs). The training will encompass environmental protection during construction, noise and dust control, construction camp management, borrow

72 pit and disposal site reclamation, construction safety and health, etc. The monitoring will be carried out by the local EPBs.

Operation Phase

To minimize the impact from noise, the EMP recommends that in future, no new school, hospital or other sensitive facilities should be built within 3 10 m from the central line ofthe Expressway or 30 to 50 m from the central line ofthe interconnecting roads. Traffic management and motor vehicle safety and emissions control will be enforced to minimize air and noise pollution. Location and types of noise mitigation measures to be implemented are also included for the mid-term period.

G. Environmental Management Plan

A standalone Environmental Management Plan (EMP) was developed and includes applicable environmental standards, environmental management system, mitigation measures and monitoring plans for the construction and operation phases. The implementation of the EMP will be supervised by the Environmental Office of the JPCD, the PMO, and the Jiangxi Provincial High-class Highway Administration Bureau (JPHHAB), which will be responsible for the Expressway operation. In addition, the local EPBs in the project area will monitor it.

The EMP includes environmental monitoring programs for construction and operation phases. The parameters to be monitored include noise, dust, water quality, etc. During the construction phase, environmental monitoring will be conducted on a daily and routine basis using mainly visual observations and portable equipment such as hand-held noise meters, while periodic monitoring will be carried out by accredited institutes using standard methods. Monitoring reports will be compiled at regular intervals and submitted to the PMO, the relevant Provincial agencies and the World Bank. During the operational phase, noise levels will be monitored once quarterly, while air and water quality will be monitored twice a year. To ensure proper environmental performance of the project, the EMP emphasizes institutional building and strengthening and includes detailed programs for training of technical personnel from the governments, project proponent and operational units, environmental institutions and the contractors.

Environmental training for contractors and construction supervisors will be held prior to commencement of construction. Each contractor and construction supervision unit will have full-time, on-site, staff for environmental supervision on a daily basis. The training will cover basic knowledge of environmental protection and pollution control, the outcome of the EIA and requirements of the EMP, environmental management and monitoring, reporting requirements etc. Training for the JPCD, PMO, the Expressway Administration, and environmental institutions will cover environmental management, regulatory framework, applicable environmental standards, mitigation planning, environmental decision-making and pollution control technologies.

The cost of environmental management and mitigation measures is estimated at about Y 44 million.

73 H. Public Consultation and Information Disclosure

Two rounds of public consultation were carried out during the preparation of the EA: the first round followed the preparation of EA Terms of Reference (TOR) in MarcWApril 2005 and the second round followed the preparation of the draft EA reports in September 2005. The consultations involved 646 households and individuals whose opinions were sought through questionnaires, public meetings in villages and with local people’s representatives, and interviews with the affected groups and individuals.

Among the people surveyed, some 84 percent felt that the expressway and the interconnecting roads were necessary and wished to see the construction start as soon as possible. On the environment, 56 percent of the people surveyed cited noise and 53 percent cited dust as the major concerns during construction. Most of the affected people (67 percent) would like to see landscaping and tree planting as measures to mitigate adverse impacts ofthe project.

The main public concerns included adequate compensation for land acquisition, resettlement and relocation, timely rehabilitation or restoration ofdamaged irrigation systems, construction safety, noise at schools, better access to and exits from the expressway, and sufficient numbers of passageways to cross the expressway. For the rural roads, the public was also concerned about roadblocks and access to services during the road upgrading, student safety, and convenient links with and access to the expressway.

The project has responded to the public concerns by: (a) setting up land acquisition and resettlement offices under the JPCD to implement the RAP; (b) developing plans for irrigation system restoration; (c) providing for passageways and crossings for pedestrians and farm vehicles at about every 600 m to mitigate community severance impacts; and (d) providing for noise barriers, noise insulation windows and tree planting to minimize the impacts ofnoise from the Expressway and interconnecting roads.

In compliance with the EIA process requirements of the government of China and the World Bank, the draft EIA and EMP reports (RGE, BOT and LRIP) and parts ofthe public consultation records were disclosed in public places in libraries and social centers along the project corridor. The project information and availability of the reports were advertised in the Gannan Daily, the province-wide newspaper. The public consultation and information disclosure are summarized in the tables below. Additional disclosures were carried out in December 2005 and January 2006.

Table A10.2 Public Consultation

Activity By whom, with whom When Where Draft EA TOR, meetings, By EA team with affected December 2004 Villages, schools and interviews and people and local agencies interviews along the questionnaires expressway route

meetings and interviews residents and local agencies 2005,- individuals September 2005

74 Table A10.3 Information Disclosure

Document Date of disclosure Location Draft EA Reports September 2005 12 townships Draft Final EA Reports November 20-22 All county (cityidistrict) libraries in 2005 the affected areas. Resettlement Offices Newspaper Advertising November 22, Gannan Daily

I. BOT Section

The BOT section connecting the east end ofthe RGE to the Fujian border is considered link d to the RGE. The EA and EMP for the BOT section are consistent with those of the RGE. The EA and EMP were disclosed. The contract with the concessionaire states that: “This project (A section) [i.e. the Boa will link with the WB financed RGE, therefore the principles and procedures of EIA and EMP of A section will be the same as that of B section [i.e. the RGE]. The environment will be monitored during construction phase and operation phase and reported to the Bank periodically.” The JPCD will therefore ensure that appropriate supervision and monitoring is conducted throughout the construction phase. The BOT monitoring results will be included in the environmental reports submitted to the Bank covering the RGE. The Bank’s missions will supervise the BOT environment at the same time as the RGE supervision.

11. SOCIAL SAFEGUARD ISSUES

A. Resettlement Planning

The Project Resettlement Office (PRO) contracted CDIJP and Resettlement Research Center of Wuhan University to assist in the planning process. The census, inventory and socioeconomic surveys were conducted on the expressway and local roads in May 2005 and two more supplementary surveys in July and November 2005. The Anthropology Department of Zhongshan University conducted a social impact assessment for the project in May 2005 to assess the social impact ofthe entire project.

The resettlement planning activities provided a detailed record of project adverse impacts, including land, housing, enterprises, schools and the number of people affected. The socioeconomic survey and ,social impact assessment were conducted through questionnaires, interviews and focus group discussions. They provided a baseline socioeconomic living standard and facilitated the consultation process with key stakeholders in the resettlement planning process. Their feedback was incorporated in the development ofthe RAP.

The RAP contains three components: (a) the RGE; (b) the LRIP; and (c) the BOT section, which is considered linked to the project.

B. Project Impacts

The RGE and LRIP impacts are summarized in Table A10.4.

75 Table A10.4: Summary of Project Resettlement Impacts

Items RGE LRIP Total Land acquisition (mu) 12,535 3,094 15.629 Farmland included (mu) 4,521 819 5,340 House demolition (m’) 274,370 41,617 315,987 Number of households relocated 1,541 191 1,732 Number of enterprises affected 5 0 5 Number of schools affected 1 0 1 Number of villages affected by land acquisition 66 20 86 Total number ofpeople affected by land acquisition and resettlement 7,826 2,785 10,611 Total resettlement cost (Y million) 216.93 42.61 259.54

The impact analysis indicates that, given the linear nature of the project and the efforts at selecting the optimum alignment, the project impacts are quite scattered along the roads. Among the 66 affected villages along the expressway, only two villages will lose more than ten percent of their farmland, and 31 villages will lose less than five percent of their farmland. All the 20 villages along the local roads will lose less than five percent oftheir farmland. In conclusion, the loss of farmland along the expressway is 4.85 percent, while the farmland loss ofthe local roads is 4.12 percent. The socioeconomic survey indicates that the income structures of the affected farmers are quite diverse and on-farm income is only one oftheir many sources ofincome, so the project will not unduly impact on the farmers.

C. Legal Framework

The RAP was prepared in line with relevant Chinese laws, regulations and World Bank Operational Policy 4.12 on Involuntary Resettlement. The most important laws and regulations include:

0 Land Administrative Law ofthe People’s Republic ofChina; and 0 Details for Implementation of the “Land Administrative Law of the PRC” in Jiangxi Province

Taking into consideration the Bank’s policy on resettlement, the following principles were adopted for resettlement planning and implementation:

0 compensation will be paid at replacement cost without depreciation; 0 land compensation will be paid before acquisition; 0 house compensation will be paid before construction ofthe new houses; 0 relocation will be started after completion ofthe new houses; 0 compensation rates must be finalized through consultation; 0 lack oflegal title will not bar a displaced person from his or her entitlements; and 0 the objective of resettlement is to enable the displaced people to improve or at least restore their living standards.

76 D. Rehabilitation Strategy and Action Plan

With the development of a market economy in the country, more opportunities are opening for the rural population. Through intensive consultation with the affected farmers, those who lose less than ten percent oftheir total farmland prefer to receive land compensation in cash and make use of the money to generate further cash income from secondary and tertiary industries. Farmers in the two villages whose land losses will be more than ten percent will firstly receive a piece of land through land redistribution in the village, and then use the land compensation collectively for construction of a village road, paying part of medical insurance, participation in technical training, completion of the irrigation systems for orange orchards or increase of the irrigated land, and opening ofnew cultivated land, etc.

About 1,541 households will have to move for construction of the expressway, among which nine villages will have more than 50 households to be relocated. Deducting the households who do not need to rebuild and do not want to move collectively into the residential area, 28 to 48 households in each village will resettle into newly built residential areas, ranging from nine to 18 households in each village group. The residential areas will be built in the same villages of the relocatees. The costs for land leveling ofthe house plots, water and power supply, road access in the new area will be paid from the resettlement budget. All the affected households will move out ofthe old houses after completion ofthe new ones.

Five enterprises are partly affected. Production will be restored shortly with the cash compensation. One primary school will be rebuilt in the same village and the relocation will be undertaken during the school vacation.

E. Management Organization

A multilevel organization was established for implementation of the RAP. This organization includes the Resettlement Offices at the province level, Ganzhou City, the five county/city/ districts, and the levels below. All the offices have been established, staffed and equipped. An independent monitor, the Resettlement Research Center of Wuhan University, was selected to monitor the resettlement implementation. The RAP contains a detailed staffing list and their detailed responsibilities. A training program is also proposed for the resettlement staff.

F. Public Consultation and Participation

Public consultation and participation have played a key role in formulating the RAP. The affected farmers, village leaders and local governments participated in the census and inventory and they were widely consulted through the socioeconomic survey and social impact assessment on the project alignment to discuss compensation rates, livelihood rehabilitation strategy and relocation sites. Their feedback was incorporated in the RAP.

Public consultations and participation will continue during the RAP implementation. Affected farmers will play a key role in determining the usage of land compensation funds and the selection ofrelocation sites. Project information will be provided to the affected farmers through television, radio broadcast, newspapers, bulletins and posters. The RAP will be summarized into a resettlement information booklet (RIB) and distributed to every affected household prior to the project commencing. It will include the detailed status of the affected households, the

77 resettlement policy and compensation rates applied in the project, the project implementation progress, the procedures for complaint resolution and any other materials that may be appropriate. A sample RIB is in the RAP and the final RIB will be reviewed by the Bank prior to distribution.

Regular consultation meetings will be held in the villages. The RAP was available for review in the PMOS and the local libraries of all counties/cities/districts in November 2005. The availability of these reports was advertised in the Gannan Daily on November 20, 2005. The RAP was placed in the Bank InfoShop in December 2005.

G. Grievance Redress Mechanism

A mechanism was designed for grievance redress under the project. All grievances can be filed in both written and verbal form. The redress channel lies within the project management systems at village, township, county, city and project resettlement offices. Recording requirements and timefi-ames were established for grievance resolution. This mechanism will be disclosed as part ofthe RIB.

H. Resettlement Implementation Monitoring

Internal and external monitoring was designed as part of the project. The PROs will carry out internal monitoring of the resettlement implementation. The monitoring procedures, content, staffing, responsibility, timeframe and reporting are detailed in the RAP. An external monitor was contracted for independent monitoring ofthe RAP implementation. A monitoring guideline was developed and attached to the RAP. Independent monitoring will cover physical progress of the RAP implementation, including compensation payment, allocation of residential sites, rehabilitation activities and restoration of infiastructure. The independent monitor will also review the public consultation process, operation of the PROs, grievance redress mechanisms and restoration oflivelihood for the affected farmers. Independent monitoring will be conducted twice a year during the project implementation period.

I. Compensation and Resettlement Budget

The RAP contains compensation rates for various impacts. Land compensation rates include land compensation and resettlement subsidy. Different rates were developed for different types of land in line with the “Land Administration Law.” The RAP contains detailed calculation tables and the different compensation rates for structures. Unit rate analysis was conducted for the replacement cost of different types of houses. The compensation budget was finalized through negotiation with the affected persons or units and with the management agencies concerned.

The RAP contains a detailed resettlement budget that covers all basic resettlement costs, management costs, contingencies and taxes. The basic resettlement cost includes compensation for land, houses, other structures, standing crops and trees, the cost of land leveling and infrastructure development at new sites, reconstruction of affected infrastructure and relocation subsidies. Management costs, including independent monitoring, are included in the budget as well. A total contingency often percent is provided in the budget. The total resettlement budget

78 is estimated as Y 259.54 million, four percent ofthe total project cost for the expressway. Fund disbursement procedures and monitoring mechanism are designed and documented in the RAP.

J. Linkage

The construction ofthe 3 1 km BOT expressway fiom the Fujian border at Ailing to Ruijin at the east end ofthe RGE will be started mid-2006 by a Hong Kong Company. The preparation team determined that this BOT section is linked to the RGE component of the project, which means that the Bank’s safeguard policies will be applied. This is embodied in the contract with the concessionaire, which states: “Since this project (A section) [i.e. the BOT] will link with the World Bank financed Ruijin-Ganzhou Expressway, the principles, procedures and compensation rates of resettlement will be the same as that of the B section [ie. the RGE]. The resettlement activities will be monitored both internally and externally and reported to the Bank periodically.”

For the construction ofthe BOT, 3,061 mu ofland will be expropriated and 47,511 m2 of houses will be demolished. The Ruijin City Government will execute the resettlement implementation with the same compensation policies and rehabilitation strategies as those set forth in the RAP for the RGE. The same monitoring system, internal and external, will apply. An abbreviated Resettlement Plan was prepared and attached to the project RAP as Annex 2.

The legal agreement for the project contains a covenant obliging JPCD to implement the EA, EMP and RAP for the BOT section.

The Huangjin Interchange at the west end of the RGE was put into operation in 2004. All the resettlement activities were completed satisfactorily in August 2003. The resettlement policies and compensation rates were consistent with those set forth in the World Bank-financed Second Jiangxi Highway Project RAP. No issues remain.

K. Resettlement Policy Framework

Two roads were selected for Phase Iof the LRIP component. Their resettlement is included in the project RAP. In Phase I1 additional roads will be selected. For this purpose, a Resettlement Policy Framework (RPF) was prepared by the JPCD and submitted to the Bank in November 2005. An Abbreviated Resettlement Plan will be required with the Phase I1roads.

L. Indigenous Peoples

Jiangxi Province has 112,800 ethnic minorities, constituting 0.27 percent of the total population.

A census survey was undertaken with the social impact assessment (SIA) by the Anthropology Department of Zhongshan University in May 2005. The total population in the project area is about three million, among which 15,770 are ethnic minorities of She, Miao, Tibetan, Zhuang, Man, Hui, Tong, (0.5 percent ofthe total population).

The ethnic minorities are scattered in the urban areas, and concentrated in three ofthe 63 villages or six ofthe 211 village groups in the rural areas. In the six village groups, more than 30 percent of the people are ethnic minorities and most of them are She. The used to be Han until 1987 when they were informed that if their forefathers were She, they could also be She.

79 The Yao were moved by the government from Guangdong Province in the 1950s. They live in a village in Quannan County, about 300 km from the RGE project area. All the ethnic minorities were harmonized with the Han. The She do not have a different language from the Han.

On the basis of the SIA and due to the levels of integration and lack of distinctive culture, no Indigenous Peoples Action Plan is required.

M. Social Impact Assessment

The RGE SIA focused on social impacts of the project on the communities in the project area and on consultation with the various stakeholders for improvement of the project design. Particular attention was paid to vulnerable groups, such as the poor, sick, disabled and children with parents working out oftown.

The SIA showed that the project would benefit local people and promote the local economy. Ganzhou City Prefecture is a poor area in Jiangxi Province, and the income of the rural population in the project area is about 50 percent lower than the average income ofGanzhou City Prefecture. The SIA showed that people are poor due to a low level of education, to poor health and to their traditional closed societies. It was for this reason-improving the economic level of poor communities-that the LRIP selection criteria included the “expected positive impact ofthe project on population access to education, health and other production and/or commercialization oflocal products.”

The SIA confirmed that this project would improve the transportation conditions and improve the local economy. In particular, it would be helpful for children to be cared for while their parents are working out of town. It reflects the major concerns of the villagers for land acquisition, relocation, road construction and road safety. The SIA was sent to the design institutes, PMO and PRO. Comments and suggestions on resettlement issues were well incorporated during the process ofRAP preparation.

An SIA was done for the Phase I LRIP roads. For the Phase I1 roads, a census survey of displaced persons and valuation of assets will be undertaken for an Abbreviated Resettlement Plan; or a socioeconomic study and baseline census will be undertaken for a Resettlement Plan. These are described in paragraphs 8 and 9 ofthe LRIP RPF.

80 Annex 11: Project Preparation and Supervision CHINA: Third Jiangxi Highway Project

I Start Negotiations 1 05/16/06 1 Board Presentation 06/27/06 Signing ofLoan Agreement 07/27/06 Loan Effective 09/27/06

Key institutions responsible for preparation ofthe project:

0 The World Bank Loan Project Office (or The World Bank Loan Project Management Office) of Jiangxi Provincial Communications Department-the client ofthe project; 0 Jiangxi Provincial Communications Design Institute-the designer ofthe project; 0 The Highway Science and Research Institute ofMOC-consultant for environment; 0 The Involuntary Resettlement Research Center of Wuhan University-consultant for resettlement; 0 Zhongshan University-consultant for preparing the Social Impact Assessment; 0 Wuhan Zhongjiao Engineering Consulting Co., Ltd under the 2nd Highway Survey & Design Research Institute ofMOC-domestic design consultant; 0 TYPSA Consulting Engineers & Architects, Spain-foreign design review consultant; 0 Jiangxi Provincial Communications Scientific Research Institute-consultant for studies on roadside safety and tunnel safety; 0 Jiangxi Provincial Center for Disease Prevention and Control-consultant for HIV/AIDS education; and 0 Ganzhou Hongtai Investment Co. Ltd.-client ofthe LRIP.

81 Bank staff and consultants who worked on the project included:

Gao Boping Roads Engineer Beij ing Jean-Marie Braun Highway Engineer/Institutional (Consultant) Paris Carlos Escudero Country Lawyer Beijing Yi Genn Financial Mananement/Disbursements Beii inn

82 Annex 12: Documents in the Project File CHINA: Third Jiangxi Highway Project

0 Evaluation Report on Cultural Relics Resource - Ruijin-Ganzhou Expressway, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute, October 20, 2005 0 Evaluation Report on Cultural Relics Resource - Chuengyi -Fengzhou Section, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute, November 26,2005 0 Evaluation Report on Cultural Relics Resource - Meicun-Longbu Section, by the Jiangxi Provincial Cultural Relics and Archeology Research Institute, November 26,2005 0 Environmental Impact Assessment - Chuengyi County-Fengzhou Highway, by the Jiangxi Provincial Environmental Protection Scientific Research Institute, October 2005 0 Environmental Impact Assessment - Meicun-Longbu Highway, by the Jiangxi Provincial Environmental Protection Scientific Research Institute, November 2005 0 Environmental Impact Assessment - RGE (Fifth Version), Research Institute of Highways, Ministry of Communications, January 20 0 6 0 Environmental Impact Assessment - BOT (First Version), Research Institute of Highways, Ministry ofCommunications, September 2005 0 Environmental Management Plan - RGE (Fifth Version), by the Jiangxi Provincial Communications Department, January 2006 0 Environmental Management Plan - BOT (First Version), Research Institute of Highways, Ministry of Communications, September 2005 0 Environmental Summary - RGE, Jiangxi Provincial Expressways Administration, February 2006 0 Feasibility Study Report - Chuengyi -Fengzhou Road 0 Feasibility Study Report - Meicun-Longbu Road 0 Feasibility Study Report - RGE 0 Preliminary Design Review Report, MOC Design Institute #2, September 2005 0 Preliminary Design Review Report, TYPSA Consultants, November 2005 0 Phase I1Design Review Report, TYPSA Consultants, May 2006 0 Resettlement Action Plan, November 2005 0 Resettlement Policy Framework, November 2005 0 Response ofJPCD to Preliminary Design Report from TYPSA Consultants, December 2005 0 Review of Traffic Forecasts, Parsons Consultants, August 2005 0 Social Impact Assessment by Zhongshan University, May 2005 0 Terms ofReference - Tunnel Safety Study, January 2006 0 Terms ofReference - Roadside Safety Study, January 2006 0 Terms ofReference - Electronic Toll Collection Study, January 2006

83 Annex 13: Statement of Loans and Credits CHINA: Third Jiangxi Highway Project

Difference between Original Amount in US$ Millions expected and actual Project FY Purpbse disbursements ID IBRD SF Cancel. Undisb. Frm' IDA GEF Orig. Rev'd PO75732 2006 CN-Shanghai Urban AF'L2 180.00 0.00 0.00 0.00 0.00 180.00 8.33 0.00 PO70519 2006 CN-Fuzhou Nantai Island Pen-UrbanDev 100.00 0.00 0.00 0.00 0.00 100.00 1.33 0.00 PO84742 2006 CN-IAIL I11 200.00 0.00 0.00 0.00 0.00 179.50 2.98 0.00 PO85124 2006 CN-Ecnomic Reform Implementation 20.00 0.00 0.00 0.00 0.00 20.00 0.00 0.00 PO85333 2006 CN-Fifth Inland Waterways 100.00 0.00 0.00 0.00 0.00 99.75 7.15 0.00 PO86629 2006 CN-Heilongjiang Dairy 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 PO94388 2006 CN-HFC-23 Emissions Reduction 0.00 0.00 0.00 0.00 0.00 991.62 0.00 0.00 PO96158 2006 CN-Renewable Energy I1 (CRESP 11) 86.33 0.00 0.00 0.00 0.00 86.33 0.00 0.00 PO67828 2005 CN-Renewable Energy Scale-up Program 87.00 0.00 0.00 0.00 0.00 86.57 21.75 0.00 PO68752 2005 CN-Inner Mongolia Highway &Trade Comd 100.00 0.00 0.00 0.00 0.00 89.46 1.96 0.00 PO67625 2005 CK-GEF-RenewableEnergy Scale-up 0.00 0.00 0.00 40.22 0.00 38.22 -0.35 0.00 Program PO69862 2005 CN - Agricultural Technology Transfer 100.00 0.00 0.00 0.00 0.00 94.50 8.13 0.00 PO71094 2005 CN - Poor Rural Communities Development 100.00 0.00 0.00 0.00 0.00 99.66 23.86 0.00 PO57933 2005 CN-TAI BASK URBAK ENVMT 61.00 0.00 0.00 0.00 0.00 46.00 4.93 0.00 PO72721 2005 CN-GEF-Heat Reform & Bldg Egy Eff. 0.00 0.00 0.00 18.00 0.00 16.20 1.52 0.00 PO75730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 165.14 10.14 0.00 PO81346 2005 CN-LIUZHOU ENVIROKMENT MGMT 100.00 0.00 0.00 0.00 0.00 96.50 0.75 0.00 PO81161 2005 CN-CHONGQING SMALL CITIES 180.00 0.00 0.00 0.00 0.00 179.10 4.52 0.00 PO86505 2005 CN-NINGBO WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 120.46 -6.21 0.00 PO81749 2004 CN-Hubei Shiman Highway 200.00 0.00 0.00 0.00 1.00 136.14 47.14 0.00 PO65035 2004 CN-Gansu & Xinjiang Pastoral Development 66.27 0.00 0.00 0.00 0.00 43.48 11.90 0.00 PO65463 2004 CN-Jiangxi Integrated Agric. Modern. 100.00 0.00 0.00 0.00 0.00 90.50 29.18 0.00 PO66955 2004 CN-ZHEJIANG URBAN ENVMT 133.00 0.00 0.00 0.00 0.00 108.59 1.03 0.00 PO75728 2004 CN-GUANGDONG/PRD UR EKVMT 128.00 0.00 0.00 0.00 0.64 103.13 -7.43 0.00 PO84003 2004 CN-GEF GUANGDONG PRD URB ENV 0.00 0.00 0.00 10.00 0.00 10.00 1.48 0.00 PO69852 2004 CN-Wuhan Urban Transport 200.00 0.00 0.00 0.00 1.00 170.79 156.49 0.00 PO75602 2004 CN-2nd National Railways (Zhe-Gan Line) 200.00 0.00 0.00 0.00 1.00 87.58 -39.75 -40.75 PO75035 2004 CN - GEF-Hai Basin Integr. Wat. Env.Man. 0.00 0.00 0.00 17.00 0.00 14.00 5.65 0.00 PO77137 2004 CN-4th Inland Waterways 91.00 0.00 0.00 0.00 0.46 77.14 2.76 2.26 PO73002 2004 CN-Basic Education in Western Areas 100.00 0.00 0.00 0.00 0.00 64.31 47.32 0.00 PO77615 2004 CN-GEF-Gansu & Xinjiang Pastoral Develop 0.00 0.00 0.00 10.50 0.00 8.32 5.47 0.00 PO67337 2003 CN-2nd GEF Energy Conservation 0.00 0.00 0.00 26.00 0.00 827 25.43 0.00 PO76714 2003 CN-2nd Anhui Hwy 250.00 0.00 0.00 0.00 0.00 146.81 37.91 0.00 PO68058 2003 CN-Yixing Pumped Storage Project 145.00 0.00 0.00 0.00 0.00 120.59 37.69 0.00 PO58847 2003 CN-3rd Xinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 57.22 32.22 0.00 PO40599 2003 CN-TIANJIN URB DEV I1 150.00 0.00 0.00 0.00 0.00 134.80 29.60 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT AF'Ll 200.00 0.00 0.00 0.00 0.00 145.88 32.75 0.00 PO70441 2003 CN-Hubei Xiaogan Xiangfan Hwy 250.00 0.00 0.00 0.00 0.00 41.71 8.38 0.00 PO68049 2002 CN-Hubei Hydropower Dev in Poor Areas 105.00 0.00 0.00 0.00 0.00 26.84 11.17 0.00 PO71147 2002 CN-TuberculosisControl Project 104.00 0.00 0.00 0.00 0.00 57.43 24.82 0.00

84 PO58846 2002 CN-Natl Railway Project 160.00 0.00 0.00 0.00 0.00 22.98 22.15 0.00 PO60029 2002 CN-GEF-Sustain. Forestry Dev 0.00 0.00 0.00 16.00 0.00 8.99 12.07 0.00 PO70459 2002 CN-Inner Mongolia Hwy Project 100.00 0.00 0.00 0.00 0.00 33.51 2.51 0.00 PO64729 2002 CN-Sustainable Forestry Development 93.90 0.00 0.00 0.00 0.00 36.74 15.42 0.00 PO58845 2001 CN-Jiangxi I1 Hwy 200.00 0.00 0.00 0.00 54.77 26.50 7 1.27 0.00 PO56596 2001 CN- Urban Transport 100.00 0.00 0.00 0.00 0.00 62.14 62.14 0.00 PO56516 2001 CN-Water Conservation 74.00 0.00 0.00 0.00 0.00 4.86 3.45 0.00 PO56199 2001 CN-3rd Inland Waterways 100.00 0.00 0.00 0.00 0.00 34.94 14.11 0.00 PO51859 2001 CN-LIAO RIVER BASIN 100.00 0.00 0.00 0.00 0.00 32.71 28.11 0.00 PO47345 2001 CN-HUAI RIVER POLLUTION CONTROL 105.50 0.00 0.00 0.00 0.00 50.08 50.08 0.00 PO45915 2001 CN-Ummqi Urban Transport 100.00 0.00 0.00 0.00 0.00 33.14 33.14 0.00 PO42109 2000 CN-BEUING ENVIRONMENT I1 349.00 0.00 0.00 25.00 0.00 240.10 226.15 0.00 PO45910 2000 CN-HEBEI URBANENVIRONMENT 150.00 0.00 0.00 0.00 0.00 51.80 38.80 0.00 PO49436 2000 CN-CHONGQING URBAN ENVMT 200.00 0.00 0.00 0.00 3.70 113.68 103.71 0.00 PO56424 2000 CN-Tongbai Pumped Storage 320.00 0.00 0.00 0.00 100.00 41.78 133.28 0.00 PO58843 2000 CN-Guangxi Highway 200.00 0.00 0.00 0.00 19.70 12.54 29.91 5.21 PO64924 2000 CN-GEF-BELTING ENVMT I1 0.00 0.00 0.00 25.00 0.00 21.69 24.25 20.06 PO64730 2000 CN-Yangtze Dike Strengthening 210.00 0.00 0.00 0.00 0.00 76.67 76.67 76.67 PO58844 2000 CN-Henan Provincial Hwy 3 150.00 0.00 0.00 0.00 0.00 25.64 24.91 0.00 PO36953 1999 CN-HEALTH IX 10.00 50.00 0.00 0.00 0.40 20.05 18.92 12.14 PO42299 1999 CN-Tec Coop Credit N 10.00 35.00 0.00 0.00 0.00 20.86 19.02 0.00 PO43933 1999 CN-SICHUAN URBAN ENVMT 150.00 2.00 0.00 0.00 0.00 61.34 59.35 59.53 PO57352 1999 CN-RURAL WATER N 16.00 30.00 0.00 0.00 0.00 3.85 4.34 0.63 PO46564 1999 CN- Gansu & Inner Mongolia Poverty Red. 60.00 100.00 0.00 0.00 13.30 3.59 17.43 -7.98 PO46829 1999 CN-Renewable Energy Development 100.00 0.00 0.00 0.00 0.00 2.62 2.62 2.62 PO41268 1999 CN-Nat Hwy4/Hubei-Hunan 350.00 0.00 0.00 0.00 0.00 33.11 33.11 0.00 PO49665 1999 CN-Anning Valley Agric. Development 90.00 30.00 0.00 0.00 0.00 1.18 2.32 -1.02 PO51705 1999 CN-Fujian I1 Highway 200.00 0.00 0.00 0.00 0.00 24.82 24.82 4.17 PO51856 1999 CN-Accounting Reform & Development 27.40 5.60 0.00 0.00 0.00 9.65 9.59 0.23 PO51888 1999 CN-Guanzhong Irrigation 80.00 20.00 0.00 0.00 0.00 7.42 7.80 0.00 PO38121 1999 CN-GEF-RENEWABLE ENERGY 0.00 0.00 0.00 35.00 0.00 15.68 34.77 22.41 DEVELOPMENT PO03614 1998 CN-Guangzhou City Transport 200.00 0.00 0.00 0.00 20.00 80.09 100.09 50.75 PO03619 1998 CN-2nd Inland Waterways 123.00 0.00 0.00 0.00 37.00 7.09 44.09 7.09 PO03606 1998 ENERGY CONSERVATION 63.00 0.00 0.00 22.00 0.00 10.13 11.00 0.00 PO03566 1998 CN-BASIC HEALTH (HLTH8) 0.00 85.00 0.00 0.00 0.00 14.07 9.80 0.00 PO36414 1998 CN-GUANGXI URBAN ENVMT 72.00 20.00 0.00 0.00 13.48 33.48 46.38 7.95 PO03539 1998 CN-Sustainable Coastal Resources Dev. 100.00 0.00 0.00 0.00 2.06 30.56 32.62 17.91 PO45788 1998 CN-Tri-Provincial Hwy 230.00 0.00 0.00 0.00 5.04 0.97 6.01 0.00 PO03637 1997 CN-NAT'L RURAL WATER 3 0.00 70.00 0.00 0.00 0.00 0.22 3.44 3.02 PO36405 1997 CN-Wanjiazhai Water 400.00 0.00 0.00 0.00 75.00 4.51 79.51 4.51 PO44485 1997 SHANGHAI WAIGAOQIAO 400.00 0.00 0.00 0.00 0.00 44.63 44.63 44.63 PO03594 1996 CN-Gansu Hexi Comdor 60.00 90.00 0.00 0.00 0.00 41.97 45.12 18.61 Total: 9,842.40 537.60 0.00 244.72 348.55 5,844.92 2,220.97 311.25

85 CHINA STATEMENT OF IFC’s Held and Disbursed Portfolio (US$ M)

Committed Disbursed

FY Approval Company IFC IFC Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 2005 BCCB 0.00 59.20 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 11.89 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.04 0.00 0.00 0.00 8.04 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 Babei Necktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00 2005 BioChina 0.00 3.00 0.00 0.00 0.00 0.15 0.00 0.00 2002 CDH China Fund 0.00 2.12 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 18.00 0.00 0.00 0.00 4.60 0.00 0.00 2003 CSMC 0.00 7.17 0.00 0.00 0.00 7.17 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 11.47 0.00 0.00 0.00 0.94 0.00 0.00 2005 Changyu Group 0.00 18.09 0.00 0.00 0.00 18.07 0.00 0.00 1998 Chengdu Huarong 4.04 3.20 0.00 3.91 4.04 3.20 0.00 3.91 2004 China Green Ener 20.00 0.00 0.00 0.00 11.50 0.00 0.00 0.00 2004 China Re Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 0.00 0.00 2004 Colony China 0.00 16.07 0.00 0.00 0.00 4.68 0.00 0.00 2004 Colony China GP 0.00 0.84 0.00 0.00 0.00 0.22 0.00 0.00 2006 Conch 80.51 40.43 0.00 0.00 80.51 0.00 0.00 0.00 2002 Darong 10.00 1.50 0.00 8.00 6.67 1.50 0.00 5.33 2006 Deqingyuan 0.00 2.82 0.00 0.00 0.00 0.00 0.00 0.00 1994 Dynamic Fund 0.00 5.43 0.00 0.00 0.00 3.17 0.00 0.00 2005 FangXin SHMT 7.20 0.00 0.00 4.80 7.20 0.00 0.00 1.42 2005 Fang Xin Limited 0.00 4.67 0.00 0.00 0.00 4.67 0.00 0.00 2005 Fang Xin SHDX 1.80 0.00 0.00 1.20 0.60 0.00 0.00 0.12 2005 Fang Xin SZFX 1.20 0.00 0.00 0.80 1.20 0.00 0.00 0.24 2004 Fenglin 19.00 0.00 6.00 14.00 14.77 0.00 6.00 13.79 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.23 0.00 0.00 0.00 50.23 0.00 0.00 0.00 2003 Great Infotech 0.00 1.73 0.00 0.00 0.00 1.03 0.00 0.00 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 Jiangxi Chenming 50.00 12.90 0.00 40.00 40.00 12.90 0.00 20.00 2006 Launch Tech 0.00 8.35 0.00 0.00 0.00 0.00 0.00 0.00 2001 Maanshan Carbon 6.00 2.00 0.00 0.00 6.00 2.00 0.00 0.00 2005 Maanshan Carbon 11.00 1.oo 0.00 0.00 5.00 1.oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 Minsheng Bank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 I996 Kudo 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 Nanjing Kudo 34.00 2.23 0.00 0.00 34.00 2.23 0.00 0.00 200 1 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 1995 Newbridge Inv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00 2005 North Andre 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1997 Orient Finance 0.00 0.00 2.86 3.57 0.00 0.00 2.86 3.57 2003 PSAM 0.00 1.98 0.00 0.00 0.00 0.00 0.00 0.00 RAK China 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 SAC 3 .OO 1.60 0.00 0.00 0.00 0.00 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2000 SEAF SSIF 0.00 3.82 0.00 0.00 0.00 2.14 0.00 0.00 2004 SHCT 40.00 0.00 0.00 30.00 30.86 0.00 0.00 23.14 2004 SIBFI 0.00 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 Shanghai Krupp 21.00 0.00 0.00 41.99 21.00 0.00 0.00 41.99 2006 Shanshui Group 0.00 5.50 0.00 0.00 0.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 2002 Sino Gold 0.00 2.40 0.00 0.00 0.00 2.40 0.00 0.00 2005 Stora Enso 50.00 0.00 0.00 25.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1.oo 0.00 0.00 0.00 1.oo 0.00 0.00 Wanjie High-Tech 12.19 0.00 0.00 0.00 12.19 0.00 0.00 0.00 2004 Wumart 0.00 3.24 0.00 0.00 0.00 3.24 0.00 0.00 2003 XACB 0.00 19.74 0.00 0.00 0.00 2.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2003 Zhengye- ADC 15.00 0.00 0.00 7.00 11.59 0.00 0.00 5.41 2002 Zhong Chen 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 Total portfolio: 552.57 443.40 127.75 186.27 416.95 324.85 8.86 123.80

87 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2004 SIBFI 0.00 0.00 0.00 0.00 2004 CCB-MS NPL 0.00 0.00 0.00 0.00 2002 Zhong Chen 0.00 0.00 0.00 0.03 2004 China Green 0.00 0.00 0.01 0.00 2006 Launch Tech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2002 Sin0 Mining 0.01 0.00 0.00 0.01 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 Total pending commitment: 0.02 0.02 0.03 0.04

88 Annex 14: Country at a Glance CHINA: Third Jiangxi Highway Project

East Lower- POVERTY and SOCIAL Asia & middle- 3eveiopment diamond' Chlna Pacific income 2004 Population, mid-year (miliions) 1296.5 1,870 2,430 GNipercapita (Atlasmethod, US$) 1290 1,280 1,580 Life expectancy GNI (Atlas method, US$ biliions) 1672.5 2,389 3,847 - Average annual growth, 1998.04 Popuiation (%) 0.7 0.9 10 GNI Gross Laborforce (%) 0.8 11 0.7 per primary M ost recent estimate (latest year available, 1998-04) capita nrollment Po vert y (%of populatio n belo w natio nal POverty line) 5 Urban population (%of totalpopulation) 40 41 49 Life expectancyat birth (pars) 71 70 70 I Infant mortality (per IOOOIive births) 30 32 33 Chiid malnutrition (%ofchildren under 5) n 15 11 ' Access to improved watersource Access to an improvedwatersource (%ofpopulation) 77 78 81 Literacy (%ofpopulation age IS? 91 90 90 Gross primaryenrollment (%of school-age population) 115 1u 114 Male 125 10 115 Female 115 1Q 1u

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios' GDP (US$ biilions) 256.1 542.5 1.418.3 1.653.8 Gross capital fonnationiGDP 34.4 412 43.8 45.2 Exports of goods and servicesiGDP 113 25.3 34.2 39.7 Trade Gross domestic savingsiGDP 34.5 42.7 42.5 44.9 Gross national savingsIGDP 35.3 42.7 43.2 46.1 4.2 Current account balanceiGDP 0.7 19 3.2 Domestic Capital interest paymentsiGDP 0.4 0.9 0.5 0.4 savings formation Total debtiGDP 4.7 18.5 13.6 n.7 Total debt serviceiexports 7.3 7.7 7.2 3.6 Present value of debtiGDP 0.3 Present value of debtiexports 36.4 Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual gro wth) GDP 9.4 8.3 9.3 9.5 8.0 -China GDP percapita 7.9 7.4 8.6 8.9 7.3 lo wer-middie-income urouo Exports of goods and services 8.1 7.3 26.8 28.4 14.4

STRUCTURE of the ECONOMY 1984 1994 2003 2004 (%of GDP) Agnculture 32.0 20.2 14.6 15.2 Industry 43.3 47.8 52.2 52.9 Manufacturing 35.5 34.4 36.7 37.3 Services 24.7 319 33.2 319 Househoidfinal consumption expenditure 512 44.5 44.9 43.1 General gov't finai consumption expenditure 14.2 P.8 12.6 20 Imports of goods and services 114 23.4 327 36.7

1984-94 1994-04 2003 2004 Growth of exports and imports (Oh) (average annual gro wth) Agriculture 4.0 3.3 2.5 6.3 I Industry 2.3 n.0 P.7 11.1 Manufacturing 117 n.1 14.9 0.2 Services 9.8 8.2 7.3 8.3 Household finai consumption expenditure 8.1 7.9 6.1 7.9 General gov't finai consumption expenditure 9.4 8.6 4.8 6.8 1 99 00 01 02 03 Gross capital formation 9.1 9.5 18.9 u.0 ---Exports -Imports Imports of goods and services 9.9 5.5 24.8 22.5

Note: 2004 data are preliminaryestimates 'Thediamonds showfourkeyindicators inthecountry(in bo1d)comparedwth its income-groupaverage. Ndataaremissing,thediamondwill be incomplete.

89 China

PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 1 Inflation Domesfic prices 110 - (% change) I Consumer prices 8.3 24.1 1.2 3.9 15 Implicit GDP deflator 4.9 ’ 19.9 2.1 6.5 Government finance (% of GDP, includes current grants) Current revenue 22.9 11.9 18.7 19.4 Current budget balance .. 1.0 1.3 1.9 -GDP deflator *CPI Overall SurDlusldeficit -0.8 -1.2 -2.8 -1.7

TRADE 1984 1994 2003 2004 Export and import levels (US$ mill.) (US$ millions) Total exports (fob) 26,139 121,006 438,228 593,369 Food 3,232 10,015 17,533 18,870 Fuel 6,027 4,069 11,110 14,476 ‘600 000 Manufactures 14,205 101,298 403,560 552,818 400,000 Total imports (cif) 27,410 115,614 412,760 561,423 Food 2,331 3,137 5,959 9,156 200,000 Fuel and energy 139 4,035 29,214 48,003 Capital Qoods 7,245 51,467 192,869 252,624 88 88 00 01 02 03 04 Export price index (2000=100) 50 103 96 102 Import price index (2000=100) 74 96 102 112 Exports Imports Terms of trade (2000=100) 68 107 95 91

BALANCE of PAYMENTS 1984 1994 2003 2004 Current account balance to GDP (“A) (US$ millions) Exports of goods and services 29,039 137,378 485,003 655,827 Imports of goods and services 29,183 127,210 448,924 606,543 l5 Resource balance -144 10,168 36,079 49,284 Net income 1,534 -1,036 -7,838 -3,523 Net current transfers 442 1,337 17,634 22,898 Current account balance 1,832 10,469 45,875 68,659 Financing items (net) -2,363 20,058 71,148 137,705 Changes in net reserves 531 -30,527 -1 17,023 -206,364 86 88 00 01 02 03 04 Memo: Reserves including gold (US$ millions) .. 57,770 416,208 622,945 Conversion rate (DEC, /oca//US$) 2.8 8.6 8.3 8.3

EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 composition of 2004 debt (US$ mill.) (US$ mi//ionsj Total debt outstanding and disbursed 12,082 100,457 193,567 177,709 IBRD 73 5,933 10,657 11,035 A: 11,035 IDA 181 6,097 10,314 10,670 Total debt service 2,285 11,135 37,073 24,498 iBRD 6 679 2,690 1,124 IDA 4 50 219 262 Composition of net resource flows Official grants 112 337 Official creditors 831 3,117 -3,092 -2,485 Private creditors 240 6,691 -1,778 -13,373 Foreign direct investment (net inflows) 1,419 33,787 55,507 60,906 Portfolio equity (net inflows) 0 3,915 7,729 10,923 I F: 55,772 World Bank program Commitments 959 4,035 1,250 1,250 , A - IBRD E - Bilateral Disbursements 197 2,060 1,616 1,246 B - IDA D ~ Other multilateral F - Private Principal repayments 0 323 2,459 999 IC-IMF G -Short-term Net flows 197 1,737 -843 247 Interest payments 9 406 450 387 Net transfers 187 1,331 -1,293 -140

Development Economics 9/8/05

90 IBRD 34204

CHINA Hanjiayuan Gulian Heilong Jiang THIRD JIANGXI CHINA RUSSIAN FEDERATION

HIGHWAY PROJECT Heibaoshan

Aihun Jagdagi Yitulihe Heihe

Wuyiling KAZAKHSTAN Nenjiang Tongjiang Manzhouli Tonjiang ManzhouliHailaer Yakeshi Qianjin Boketu Beian Hegang

JiamusiNancha Yierxie Dongfanghong Fuyu HEILONGJIANGSuihua Jiamusi Qiqihar Altay Yierxie Ranghulu Fuyun Jixi 44° HARBIN

Ulanhot Yumin Daan Suifenhe UZBEKISTAN Karamay Mudanjiang Alataw Shankou MONGOLIA Baicheng HuochengSailimu Huolinhe Baiyinhushuo Suifenhe Jilin Huoerguosi Wusu JILIN Kuitun Taipingchuan Dahuangshan CHANGCHUN Tumen JILIN KYRGYZ Tongliao Hefong URUMQI Dahuangshan Baishan Baihe REPUBLIC N E I M O N G O L Siping Xilinhot Baluntai Erlianhaote LIAONING 40° Kuqa Turpan Turugart Aksu Yuanbaoshan Hami Pingdingshan TA Liaoyang J Korla IK Sea of IS Kashi DEM. T Turkeshitan Bachu Bayun Obo Jinzhou A Ejin Qi Baiyinchagan N Yinkou PEOPLE'S Japan XINJIANG Jining Dandong Jining REP. OF Laoyemiao DandongYingkou Fengzhen Fuxin KOREA Huang Qinhuangdao BEIJING Qingshuihe BEIJING Ruoqiang Dongsheng Guag TIANJIN Bo Hai 36° Jiayaguan Baoding TIANJIN Zhangye Shenmubei Tanggu REP. OF Cangzhou HEBEI SHIJIAZHUANG Weihai KOREA YINCHUAN Yantai Guyaozi Yulin Dezhou Wuwei Yanchi T Liulin Gantang Wanquanliang Zhongwei Hui'anpu JAPAN Jeipaicun Qingdao Tongxin SHANXI NATIONAL HIGHWAY SYSTEM: Xingren Golmud Xujiamo Yan'anbei Anyang Rizhao Yellow NATIONAL TRUNK HIGHWAY SYSTEM: Zhonghe NINGXIA SHANDONG NATIONAL Huang EXPRESSWAYS ROADS Fu Xian Xinxiang EXISTING QINGHAI Huang Liugouhe Linyi Sea Huangling Xinxiang Kaifeng Lianyuang 32° UNDER CONSTRUCTION Tongchuan Pi Xian GANSU LuoyangLuoyang Kaifeng Lianyuang Sanyuan Fenglingdu PLANNED Baoji Sanmexia ZHENGZHOU WeinaBaoji Famensin Xuzhou Terra Cotta Warrior's MuseumSanmenxia OTHER EXISTING NATIONAL ROADS Lantian Tongtian Tangyu TongguaHENANn XIZANG XI'AN Xiaoshangyuan Haian WORLD BANK PROJECT: SHAANXIShangluo Bengbu Manchuangan Fuyang Zhumadian ONGOING OR COMPLETED Gyegu Nanyang NANJING Nantong Huangchuan Shiyan Ankang Yuxikou UNDER PREPARATION OR PROPOSED Ankang Xiangfan Wuxi SHANGHAI Xinyang ANHUI WuhuWuhuChangxing SHANGHAI Huzhou HUBEI Tongling Jingmen Shaoxing Xiaogan HANGZHOU Ningbo 28° Chang Jiang WUHAN Anqing T NATIONAL RAILWAY SYSTEM: SICHUAN Xiaoshan East Daxian Tangkou Lancang Ningbo LHASA Jinsha CHENGDU Huangshi EXISTING DOUBLE TRACK Nu Jingsha T Zhicheng Jiujiang ZHEJIANG NEPAL Enshi Jiujiang Jinhua China EXISTING SINGLE TRACK Jinhua CHONGQING UNDER CONSTRUCTION SINGLE TRACK CHONGQING Sea WORLD BANK URBAN TRANSPORT PROJECTS: T Chenglingji NANCHANG ELECTRIFICATION: ONGOING OR COMPLETED Yiyang EXISTING T UNDER PREPARATION OR PROPOSED Xiangtan Yibin Loudi FOR DETAIL, NEW Zhouzhou JIANGXI T URBAN DEVELOPMENT PROJECT UNDER PREPARATION OR Xichang Huaihua SEE IBRD 34205 Wushishan PROPOSED WITH A LARGE TRANSPORT COMPONENT HUNAN Laizhou WORLD BANK PROJECT: GUIZHOU Hengyang Chaling Taihe Lanping FUZHOU 24° ONGOING OR COMPLETED Leiyang FUJIAN Yongzhou Hengyang Ruijin CONTAINER TRANSPORT SYSTEM: Panshihua UNDER PREPARATION OR PROPOSED Jinsha Ganzhou FOR DETAIL, MAJOR CONTAINER HANDLING STATIONS Dali Longyan SEE IBRD 34206 STATIONS HANDLING 40-FT. CONTAINERS Guilin Pingshi Xiamen NATIONAL WATERWAYS SYSTEM: Baoshan KUNMING Gantang Xiamen WORLD BANK PROJECT INLAND CONTAINER DEPOTS GUANGXI MAJOR NAVIGABLE WATERWAYS Shuiren TAIWAN Zhao'an Nu Hechi Ruili MAJOR RIVERS LiuzhouGuxian YUNNANYuxi Xinxu GUANGDONG POPULATION: Guping Wuzhou GUANGZHOU Shantou OTHER RIVERS Guxian Wuzhou Hekou

BEIJING or SHANGHAI > 1 MILLION Lancang RIVER PORTS NANNING Xun SHENZHEN Liaoyang or HEFEI 500,000 - 1 MILLION 20° SEA PORTS Yulin Zhuhai KOWLOON Simao Foshan Shiyan or Taihe < 500,000 Foshan MACAO HONG KONG WORLD BANK PROJECT: Qinzhou Fangcheng SEA PORTS Beihai This map was produced by ADMINISTRATION: Shangyong VIETNAM Zhanjiang the Map Design Unit of The CHANNEL IMPROVEMENTS Beihai World Bank. The boundaries, SELECTED CITIES Zhanjiang WATERWAYS INTERVENTIONS (DAMS, SHIPLOCKS) colors, denominations and

MYANMAR any other information shown PROVINCE CAPITALS LAO PEOPLE'S 0 100 200 300 Kilometers on this map do not imply, on the part of The World Bank NATIONAL CAPITAL AVIATION SYSTEM: DEM. REP. Group, any judgment on the Basuo legal status of any territory, PROVINCE BOUNDARIES 0 100 200 300 Miles INTERNATIONAL AIRPORTS o r a n y e n d o r s e m e n t o r THAILAND HAINAN PHILIPPINES a c c e p t a n c e o f s u c h INTERNATIONAL BOUNDARIES OTHER AIRPORTS 108° 112° 116° 120° 124° boundaries. Sanya

JANUARY 2006 CHINA THIRD JIANGXI HIGHWAY PROJECT

SEAT OF TOWN GOVERNMENT THIRD JIANGXI HIGHWAY PROJECT: PROVINCE HIGHWAYS SEAT OF COUNTY GOVERNMENT PROPOSED RUIJIN CITY - GANZHOU EXPRESSWAY NATIONAL HIGHWAYS SEAT OF LOCAL GOVERNMENT LOCAL ROAD IMPROVEMENT PROGRAM EXISTING EXPRESSWAYS SEAT OF PROVINCE GOVERNMENT INTERCONNECTING ROAD RAILROADS COUNTYBOUNDARIES Yudu CITIES AFFECTED BY THE PROJECT INTERNATIONAL AIRPORT PREFECTURE BOUNDARIES PROJECT PREFECTURE OTHER AIRPORTS PROVINCE BOUNDARIES

114° 118° Daye 30° Huangmei Dongzhi ANHUI 30° HUBEI G105 Pengze Qimen

Hukou Jiujiang Xiuning Ruichang Tongshan Shilibu Longgongdong Jiujiang G206

Xingxi Fujiang Tongcheng G316 Dean Duchang Jingdezhen Wuyuan Wuning ZHEJIANG Xiushui Aicheng First Jiangxi Poyang Kaihua Yongxiu Hu Boyang Highway Project GZ20 G105 Ro Dexing a H Jing'an NANCHANG e Ruihong Pingjiang Fengxin Jiao Qiao Yugan GZ65 Xinjian Yushan Tonggu Junshanhu Wannian G320 X i G206 Nanchang n G320 J ia To the north Yifeng Gaoan n Yiyang Guangfeng g Hengfeng of Hunan province Jinxian Shangrao Liuyang Shanggao G105 G320 G320 Dongxiang Qianshan GZ65 Yujiang Fengcheng G319 Wanzai GZ20 28 Zhangshu Linchuan Shangli Fenyi 28°

Yichun g Jinxi n i a Chongren G206 J n GZ65 a Xin'gan G316 G320 Luxi G Wuyishan Zixi Pingxiang Xiajiang Guangze G319 Yinhuang Nancheng Lean

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G319 Tainin G319 Shangu Guangchang Taihe Hantou Ninggang Jianning FUJIAN To the southwest of Hunan province G105 G319 Lingxian Jinggangshan Wan'an Ningdu

Suichuan Xingguo Shicheng G319 0 255075 For detail, Ninghua See IBRD 34206 G319 KILOMETERS Guidong 26°° G206 Yudu Second Jiangxi This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Highway Project Ganzhou G323 Ruijin To Longyan, Xiamen °26° Shangyou shown on this map do not imply, on the part of The World Bank Ganxian and Zhangzhou Group, any judgment on the legal status of any territory, or any G319 Meicun endorsement or acceptance of such boundaries. Chongyi Changting Fengzhou Nankang G206 Rucheng Panggushang Huichang RUSSIAN FEDERATION G323 Longbu KAZAKHSTAN HEILONGJIANG Xinfeng Sea MONGOLIA JILIN of KYRGYZ Nanxiang REP. LIAONING D.P.R. OF Japan XINJIANG KOREA Anyuan BEIJING G105 Wuping NEI MONGOLBEIJING TIANJIN JAPAN HEBEI REP. OF KOREA Xunwu SHANDONG Yellow Longnan QINGHAI Shixing SHANXI Sea NINGXIA JIANGSU G206 GANSU Dingnan SHAANXI HENAN ANHUI SHANGHAI East XIZANG HUBEI Quannan SICHUAN ZHEJIANG China

Sea CHONGQING HUNAN FUJIAN GUIZHOU JIANGXI JANUARY 2006 GUANGDONG National Capital TAIWAN IBRD 34205 YUNNAN GUANGXI GUANGDONG Province Boundaries Philippine HONG KONG Wengyuan MACAO Sea To Meizhou, Shantou International Boundaries VIETNAM To Guangzhou, Heyuan Bay of LAO and Chaozhou 116 P.D.R. 118HAINAN and Shenzhen Bengal PHILIPPINES IBRD 34206 ANHUI HUBEI CHINA Jiujiang THIRD JIANGXI HIGHWAY PROJECT Jingdezhen

PROPOSED RUIJIN CITY - GANZHOU EXPRESSWAY NANCHANG Shangrao ZHEJIANG HUNAN Yingtan THIRD JIANGXI HIGHWAY PROJECT: EXISTING HIGHWAYS SELECTED TOWNS Yichun Linchuan PROPOSED RUIJIN CITY - GANZHOU EXPRESSWAY Xinyu SELECTED MAIN ROADS SEAT OF COUNTY GOVERNMENT Pingxiang LOCAL ROAD IMPROVEMENT PROGRAM RAILROADS SEAT OF LOCAL GOVERNMENT INTERCONNECTING ROADS Ji'an BRIDGES RIVERS FUJIAN COUNTY BOUNDARIES TUNNELS Area of Map VIADUCTS PROVINCE BOUNDARIES Ruijin INTERCHANGES Ganzhou SERVICE AREAS PROVINCE CAPITAL This map was produced by the Map Design Unit of The World Bank. PROVINCE PARKING ZONES The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank BOUNDARIES Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. GUANGDONG

115° 116°

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0 5 10 15 20 Huichang KILOMETERS 115° Longbu 116° JANUARY 2006