ASIAN DEVELOPMENT BANK PCR: PRC 30389
PROJECT COMPLETION REPORT
ON THE
CHANGCHUN-HARBIN EXPRESSWAY PROJECT (HASHUANG EXPRESSWAY) (Loan 1641-PRC)
IN THE
PEOPLE'S REPUBLIC OF CHINA
October 2004
CURRENCY EQUIVALENTS Currency Unit – yuan (CNY)
At Appraisal At Project Completion (3 August 1998) (21 August 2004) CNY1.00 = $0.1208 $0.1208 $1.00 = CNY8.28 CNY8.28
ABBREVIATIONS
AADT – average annual daily traffic EA – Executing Agency EIRR – economic internal rate of return HHEC – Heilongjiang Hashuang Expressway Corporation HPCD – Heilongjiang Provincial Communications Department HPG – Heilongjiang provincial government HPSB – Heilongjiang Public Security Bureau ICB – international competitive bidding LCB – local competitive bidding MTE – medium truck equivalent MOC – Ministry of Communications NH – national highway O&M – operation and maintenance PCR – project completion report PIU – project implementation unit PPAR – project performance audit report PPTA – project preparatory technical assistance PRC – People's Republic of China TA – technical assistance VOC – vehicle operating cost VPD – vehicles per day
WEIGHTS AND MEASURES ha – hectare km – kilometer m – meter
NOTE
In this report, "$" refers to US dollars. CONTENTS Page BASIC DATA ii MAPS vii
I. PROJECT DESCRIPTION 1
II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 8 I. Performance of Consultants, Contractors, and Suppliers 8 J. Performance of the Borrower and the Executing Agency 8 K. Performance of the Asian Development Bank 9
III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Efficacy in Achievement of Purpose 9 C. Efficiency in Achievement of Outputs and Purpose 11 D. Preliminary Assessment of Sustainability 12 E. Environmental, Sociocultural, and Other Impacts 12
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons Learned 14 C. Recommendations 15
APPENDIXES 1 Project Framework: Output and Input 16 2 Chronology of Major Events in Project Implementation 18 3 Technical Standards of the Project Facilities 20 4 Project Costs and Financing 22 5 Projected and Actual Disbursements 23 6 Implementation Schedule 24 7 Organization Chart of the Heilongjiang Hashuang Expressway Corporation 25 8 Evaluation of Land Acquisition and Resettlement Activities 26 9 Compliance with Major Loan Covenants 30 10 Contract Packaging: Appraisal vs Actual 34 11 Contract Details for Civil Works, Equipment, and Consultants 35 12 Traffic Forecasts 39 13 Economic Evaluation of Changchun-Harbin Expressway 42 14 Financial Evaluation 46 15 Environmental and Social Impact Analysis 51
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BASIC DATA
A. Loan Identification
1. Country People’s Republic of China 2. Loan Number 1641-PRC 3. Project Title Changchun-Harbin Expressway Project (Hashuang Expressway) 4. Borrower People’s Republic of China 5. Executing Agency Heilongjiang Hashuang Expressway Corp. 6. Amount of Loan $170 million 7. Project Completion Report Number PCR: PRC 855
B. Loan Data
1. Appraisal – Date Started 20 Jul 1998 – Date Completed 3 Aug 1998
2. Loan Negotiations – Date Started 13 Oct 1998 – Date Completed 15 Oct 1998
3. Date of Board Approval 27 Nov 1998
4. Date of Loan Agreement 29 Mar 1999
5. Date of Loan Effectiveness – In Loan Agreement 27 Jun 1999 – Actual 16 Aug 1999 – Number of Extensions 1
6. Closing Date – In Loan Agreement 31 Dec 2002 – Actual 22 Jan 2003 – Number of Extensions None
7. Terms of Loan – Interest Rate Pool-based variable lending rate – Maturity (number of years) 24 – Grace Period (number of years) 4
8. Terms of Relending (if any) – Interest Rate Pool-based variable lending rate – Maturity (number of years) 24 – Grace Period (number of years) 4 – Second-Step Borrowers Heilongjiang Province and Heilongjiang Hashuang Expressway Corporation
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9. Disbursements
a. Dates
Initial Disbursement Final Disbursement Time Interval
15 Nov 1999 25 Nov 2002 36.9 months
Effective Date Original Closing Date Time Interval
16 Aug 1999 31 Dec 2002 41.1 months
b. Amount
Last Category or Original Revised Amount Net Amount Amount Undisbursed Subloan Allocation Allocation Canceled Available Disbursed Balance
Civil Works 113,500,000 113,500,000 0 113,500,000 114,536,099 (1,036,099)
Equipment and Materials 14,400,000 14,400,000 0 14,400,000 12,475,628 1,924,372
Consulting Services and Training 700,000 700,000 0 700,000 532,065 167,935
IDC 25,900,000 25,900,000 0 25,900,000 14,574,476 11,325,524
Unallocated 15,500,000 15,500,000 0 15,500,000 0 15,500,000
Total 170,000,000 170,000,000 0 170,000,000 142,118,268 27,881,732 IDC = interest during construction.
10. Local Costs (Financed by ADB Loan) – Amount ($) 0 – Percent of Local Costs 0 – Percent of Total Cost 0
C. Project Data
1. Project Cost ($ million)
Cost Appraisal Estimate Actual
Foreign Exchange Cost 191.2 162.6
Local Currency Cost 206.3 241.1
Total 397.5 403.7
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2. Financing Plan ($ million)
Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 227.5 220.2 ADB Financed 144.1 127.6 Other External Financing 0.0 0.0 Subtotal 371.6 347.8 Interest During Construction Borrower Financed 0.0 41.3 ADB Financed 25.9 14.6 Other External Financing 0.0 0.0 Subtotal 25.9 55.9 Total 397.5 403.7 ADB = Asian Development Bank.
3. Cost Breakdown by Project Component ($ million)
Component Appraisal Estimate Actual A. Base Cost 1. Civil Works 281.9 287.4 2. Equipment 14.4 13.0 3. Land Acquisition and Resettlement 27.8 32.6 4. Consulting Services and Training 7.7 14.8 Subtotal (A) 331.8 347.8 B. Contingencies 1. Physical 26.5 0.0 2. Price 13.3 0.0 Subtotal (B) 39.8 0.0 C. Interest During Construction and Other Charges 25.9 55.9 Total 397.5 403.7
4. Project Schedule
Item Appraisal Estimate Actual Date of Consultant Contracts: International Mar 1999 29 Sep 1999 Domestic Sep 1998 8 Oct 1998 Completion of Detailed Designs Feb 1999 27 Aug 1998 Date of Civil Works Contracts: Expressway Apr 1999 16 Sep 1999 Buildings Apr 1999 20 Oct 2000 Traffic Engineering Facilities Apr 1999 28 May 2001 Landscaping and Related Works Apr 1999 29 May 2001 Date of Equipment Contracts: Road Maintenance Apr 1999 Aug, Sep 2000 Vehicles Sep 2000 22 May 2000 Supplementary Maintenance Sep 2000 May–Dec 2001 Tolling, Monitoring, and Communications System Apr 1999 18 Mar 2002 v
5. Project Performance Report Ratings
Ratings Development Implementation Implementation Period Objectives Progress From 30 Jun 2002 to 31 Dec 2003 S S From 30 Apr 2002 to 31 May 2002 S PS From 30 Jun 2001 to 31 Mar 2002 S S From 31 Jan 2001 to 11 Jun 2001 S HS From 31 Aug 1999 to 31 Dec 2000 S S From 30 Apr 1999 to 31 Jul 1999 S U From 31 Dec 1998 to 31 Mar 1999 S S HS = highly successful, PS = partly successful, S = successful, U = unsuccessful.
D. Data on Asian Development Bank Missions
No. of No. of Specialization of Name of Mission Date Persons Person-Days Membersa Fact-Findingb 13–29 Apr 1998 5 85 a, b, d, g, h Appraisalb 20 Jul–3 Aug 1998 5 75 a, b, c, d, g Special Loan Administrationb 23–27 Aug 1999 1 5 a Review 1 16–22 May 2000 1 7 a Midterm Review 29 May–2 Jun 2001 3 15 a, b, i Review 2 22–26 Sep 2002 1 5 a Project Completion Reviewc 17–21 Aug 2004 4 38 a, b, d, i a a = engineer, b = financial analyst, c = counsel, d = economist, e = procurement consultant or specialist, f = control officer, g = programs officer, h = environment specialist, i = project analyst. b Fielded concurrently with Loan 1642-PRC: Changchun-Harbin Expressway Project (Changyu Expressway). c The project completion report was prepared by Xiaohong Yang, financial specialist/mission leader, and Teresita S. Capati, assistant project analyst, assisted by a civil engineer (staff consultant), and a transport economist (staff consultant). Scott Ferguson, resettlement specialist, Mr. Wenlong Zhu, project officer (resettlement) provided desk reviews of the report.
I. PROJECT DESCRIPTION
1. The dynamic growth of the economy of the People’s Republic of China (PRC) has led to a rapid increase in the demand for transport services. Despite the Government’s efforts to increase the country’s transport capacity, there are constraints and bottlenecks in all transport modes. Construction of the National Trunk Highway System and removal of the infrastructure bottlenecks have been a cornerstone of the Government’s development strategy since 1988. A series of Asian Development Bank (ADB)-financed road projects, approved from 1991, aimed to alleviate constraints in the transport system by supporting construction of the National Trunk Highway System, institutional development, and resolution of key technical and policy issues in the road sector.
2. The Changchun-Harbin Expressway Project,1 comprising the Heilongjiang component (Hashuang Expressway, the subject of this report) and the Jilin component (the Changyu Expressway)2 was appraised in 1998. It was one of the six ADB loans for expressway sections in the northeastern corridor and was designed to connect the Changchun-Siping (Changping) Expressway3 in Jilin province and the Harbin-Jiamusi (Hatong) Expressway4 in Heilongjiang province (Map 1). Heilongjiang province is landlocked and forms part of the northeastern hinterland of the PRC. At the time of appraisal, the province had lower levels of income, international trade, and foreign direct investment than the eastern coastal area. The provincial road network had limited coverage and was in poor condition.
3. The main objective of the Hashuang Expressway Project was to promote economic and social development in the northeast of the PRC by completing a key section of transport infrastructure. The Project aimed to (i) improve access from Heilongjiang province and parts of Jilin province to the more developed provinces of the east and south, (ii) provide additional transport capacity and reduce transport costs in the project area to enhance business and trade opportunities and attract investment, (iii) alleviate congestion and reduce accidents on existing roads, (iv) improve access for trade between the PRC and the Russian Federation and Mongolia, (v) enhance road safety standards on the Project and related facilities, and (vi) support the corporatization of expressway construction and operations. The Project was classified as an economic growth project. Poverty reduction, though implied, was not listed as a secondary objective. The output and input of the Hashuang Expressway project framework is presented in Appendix 1.5
4. The Hashuang Expressway Project was completed and opened to traffic on 28 September 2001, 6 months ahead of the completion date envisaged at appraisal. Land acquisition and resettlement were completed satisfactorily in June 1999. The loan was closed
1 A single report and recommendation of the President (RRP) was prepared for the Changchun-Harbin Expressway Project, covering two loans (Loan 1641-PRC: Hashuang Expressway Project and Loan 1642-PRC: Changyu Expressway Project). ADB. 1998. Report and Recommendation of the President to the Board of Directors on Proposed Loans to the People's Republic of China for the Changchun-Harbin Expressway Project. Manila. 2 See ADB. 2004. Project Completion Report on the Changchun-Harbin Expressway Project (Changyu Expressway) (Loan 1642-PRC) in the People's Republic of China. Manila. 3 ADB. 1993. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People's Republic of China for Jilin Expressway Project. Manila. 4 ADB. 1994. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People's Republic of China for Heilongjiang Expressway Project. Manila. 5 This was one of the early projects when the Project Framework was not so clear on the baseline indicators and target values on the Purpose level which constrained evaluation. 2 on 22 January 2003, 22 days later than the original loan closing date. Appendix 2 provides a chronology of major events.
II. EVALUATION OF DESIGN AND IMPLEMENTATION
A. Relevance of Design and Formulation
5. The objectives for the road sector of the ADB country assistance strategy for the PRC at appraisal were: (i) construction of expressways and highways connecting major growth centers and promoting linkages with hinterland economies; (ii) institutional strengthening to increase the commercial orientation and managerial efficiency of expressway organizations; (iii) improvement of highway planning, evaluation techniques, and safety standards; (iv) adoption of appropriate pricing policies to ensure optimum utilization of road transport capacity; (v) utilization of alternative methods of investment financing, including private sector participation to meet the huge financing requirements of the highway development program; (vi) promotion of road traffic safety; and (vii) integration of the network so that the National Trunk Highway System is supported by a system of feeder roads that provides access for the local population to the main economic centers. The Changchun-Harbin Expressway Project was highly relevant to ADB’s country assistance strategy and its thematic and sector priorities, and consistent with the Government’s plans and priorities for development of the main road transport corridor in northeastern PRC. The Project was designed to connect two large growth centers in the northeast transport corridor,6 increase the commercial orientation of expressway operations, and promote an integrated approach to road safety.
6. The Changchun-Harbin Expressway Project was formulated under a project preparatory technical assistance (PPTA), 7 which was satisfactorily completed. The PPTA carried out a detailed review of the domestic feasibility studies for the Project, prepared an environmental impact assessment, formulated the resettlement action plan for the Project, and undertook a social impact assessment. Policy dialogue during appraisal covered adopting new highway design standards, developing plans to improve road safety, improving institutional governance by taking steps toward corporatization, and commercializing expressway operations. These were reflected in the project design and were monitored during implementation. The scope of the Project was well defined. The original project objectives and overall design remained unchanged during implementation.
B. Project Outputs
1. Hashuang Expressway Construction, Design, and Maintenance
7. At appraisal, 101 kilometers (km) of four-lane, access-controlled, toll expressway were expected to be constructed from Harbin, the capital of Heilongjiang province to Lalin river, including a major bridge over the river, a section of the Harbin Ring Road, six interchanges, two service areas, and link roads. The actual completed length of expressway is 101.94 km including one section of Harbin Ring Road.8 The contract packaging during implementation followed that envisaged at appraisal. Information on the technical standards of the project facilities and the main work quantities are provided in Appendix 3.
6 Changchun, the capital of Jilin province and Harbin, the capital of Heilongjiang province. 7 ADB. 1997. Technical Assistance to the People’s Republic of China for Changchun-Harbin Expressway Project. Manila. 8 The Harbin Ring Road section (29 km) was constructed as an integral part of the project expressway. 3
8. Prior to 1998, highway design standards used in the PRC were inadequate for the changing vehicle mix and road conditions. In June 1998, new design standards were adopted by the Ministry of Communications (MOC), and were used for the design of the expressway.9 The ADB-supported new design standards were appropriate and beneficial in many aspects, particularly with regard to environmental protection, road safety, and integrated development of highways. In accordance with the Loan Agreement, the pavement design was based on trial sections with the intended purpose of determining an optimum design to reduce pavement cracking. The final pavement structure was designed and implemented on the basis of those trial sections. Numerous cracks had appeared in the Hatong Expressway. MOC; Heilongjiang Hashuang Expressway Corporation (HHEC), the Executing Agency (EA); and ADB learned from this experience. Technical steps taken included better design of the subbase, use of advanced paving machines, asphalt mix especially designed for cold weather, and vertical slicing to ensure clear accountability for contractors. These efforts were successful in that the extent of cracking is minimal given the harsh weather conditions. Maintenance of the cracks is being carried out without difficulty by using crack-sealing machines procured under the Project.
9. The quality of the Hashuang expressway is very good with surface roughness within the international roughness index (IRI for the expressway is 0.62) for a comfortable ride. Safety facilities and equipment in the Project included a continuous median barrier with landscaping or antiglare shields, reflective road signs, emergency telephones, hard shoulder, and overpasses and underpasses to ensure continued intercommunity communication. The expressway and its drainage system are well maintained. The slopes are protected by a combination of reinforced concrete retaining walls, open lattice blocks, netting, concrete spread, anchorage, and grass turfing. Planting and measures for environmental protection are integrated with the natural terrain.
2. Equipment
10. Equipment procured under the Hashuang Expressway Project consisted of road maintenance equipment and traffic engineering facilities. The EA also purchased additional items of equipment funded from its own resources. Details on the equipment procured under the loan and supplemental equipment purchased are provided in Appendix 11. The additional equipment needs, primarily related to road maintenance and safety, were identified during implementation and later assessed by the Project Completion Review Mission to be appropriate and adequate. Toll collection, telecommunications and surveillance system, and vehicle axle load testing equipment10 was also procured under the Project. The telecommunications system included an emergency telephone system, emergency surveillance control systems, and speed control equipment. The toll collection system has been installed in all seven toll stations and is functioning well. All items procured under this component are well maintained and are being used for their intended purpose.
3. Access Roads
11. One project loan covenant11 required Heilongjiang provincial government (HPG) and HHEC to connect the project expressway to the adjacent road network through the construction
9 ADB assisted in the development of new design standards. ADB. 1996. Technical Assistance to the People’s Republic of China for Review of Highway Design Standards. Manila. 10 The weigh-in-motion units were procured with the EA’s own resources after completion of the Project. 11 See loan covenant number 18 in Appendix 9. 4 of appropriate link roads and interchanges to ensure that the economic and social benefits of the Project were adequately extended to those in the project-influenced area. At appraisal12 specific local roads were not identified, however, during project implementation, access roads were upgraded in that area (Map 2). In addition to the 29 km of Harbin Ring Road, a significant portion of the Harbin West Ring Road (36.8 km) was completed by HHEC under non-project financing; it was opened to traffic in September 2004. The expressway from Harbin airport that connects to the project expressway was completed under private sector financing and opened to traffic in 2000.13 An expressway connecting the Hashuang project expressway to Mudanjiang (about 332 km) financed by HPG has been partially completed (28 km). The full length is expected to be finished by 2007. The final link of the Harbin Ring Road, about 25 km, will be completed under build-operate-transfer arrangements and is expected to be completed by 2007.
12. HPG undertook a program to develop link and feeder roads to the project expressway and other expressways within the province. In Shuangcheng county, 120 km of provincial roads and 20 km of county roads were improved or upgraded: (i) the Acheng-Xiaoling road (40 km) was upgraded from Class IV to Class I; (ii) the 60 km of road between Harbin and Wuchang was upgraded from Class III to Class II and integrated into the network by the improved Class II road between Zhoujia and Shuangcheng (20 km); and (iii) the Shuangcheng-Xiqin Class III county road was rehabilitated. Throughout the province there has been a steady program of improving or upgrading the entire road network, which directly and indirectly provides access to the project expressway. The table shows the length of roads in the province developed from 1998 to 2003.
Table: Heilongjiang Provincial Road Network, 1998–2003 (kilometers)
Year Expressway Class I Class II Class III Class IV 4. Institutional Capacity Building 13. HHEC is responsible for operating Hashuang Expressway and Harbin West Ring Road, a total length of about 137.8 km. Although the operations are adequate, toll-collection methods need to be modernized so as to incorporate a computerized database of specific vehicle types passing the toll stations. The number of staff (752) for expressway operation and maintenance (O&M) seems high. Outsourcing of maintenance operations would probably be financially beneficial and improve efficiency. 14. The training conducted during project implementation (para. 17) gave to staff modern management knowledge of design, construction, environment, and O&M for highways. Most of the staff trained in HHEC in conjunction with the implementation of the Hatong and Hashuang expressway projects have been retained, which contributed to smooth operation of the Project. Some staff trained under the Hatong project have been assigned to Hashuang, and some trained under the Hashuang Expressway Project have been assigned to new tasks. For example, the general manager of HHEC was assigned as the project manager of Harbin West Ring Road. 12 See RRP of Changchun-Harbin Expressway Project. 13 It was funded by the private sector. 5 15. An ADB-financed TA set out a framework for moving toward corporatization, leasing, and securitization in the road sector.14 HHEC has explored ways to attract private funding. However, with current traffic and toll levels, the financial performance of the expressway is too low to attract private funds at this time. HHEC indicated to the Project Completion Review Mission that the technique of securitization of assets is one of their preferred financing modalities to be pursued in the near future. 5. Consultants and Training 16. As anticipated at appraisal, international consultants were engaged to provide advisory services related to road safety, review of pavement design and construction methods, and human resource development. Domestic consultants were engaged for detailed design and construction supervision. Detailed design of the expressway financed by HPG was undertaken by the Heilongjiang Provincial Highway Survey and Design Institute and was carried out from June 1996 to August 1998. Designs for the toll stations and service areas, also financed using HPG’s own resources, were undertaken during 2000–2001. Domestic consultants were engaged for construction supervision and for quality control for all 10 expressway civil works packages as well as the building works, traffic engineering facilities, and landscaping. 17. Overseas training modules under the responsibility of the international consultants focused on expressway design; environmental protection, regulation, and design; road safety; expressway maintenance; and expressway commercial development and business planning. A total of 29 staff from HHEC participated in the overseas training activities. The consultants also set up a detailed training system and schedule for domestic training workshops to be conducted by the staff trained overseas covering the same topics. More than 100 HHEC staff were trained by the international consultants and the staff trained overseas, covering expressway design, road safety, expressway commercial development, and business planning. In addition to the overseas training, HHEC staff also received on-the-job training provided by the international and domestic consultants through day-to-day exposure and workshops. C. Project Costs 18. The actual project cost was $403.7 million, close to the $397.5 million estimated at appraisal. This comprised $162.6 million in foreign exchange cost compared with $191.2 million estimated at appraisal and $241.1 million equivalent in local currency cost compared with $206.3 million estimated at appraisal. Appendix 4 presents a detailed comparison of the project costs at appraisal and at completion. The actual cost of civil works was $287.4 million compared with the appraisal estimate of $281.9 million. The increase was due to contract variations and additional quantities. The actual cost of equipment was $13.0 million compared with the appraisal estimate of $14.4 million. The actual cost of consulting services and training was $14.8 million compared with the appraisal estimate of $7.7 million. This was due to the increase in person-month inputs of both international and domestic consultants. The actual cost of land acquisition and resettlement increased from $27.8 million to $32.6 million, a 17.6% rise, due to (i) more temporary land acquisition (borrow pits) than originally estimated (399 hectares [ha] vs 223 ha); (ii) more demolition of buildings (14,633 square meters vs 5,889 square meters); and (iii) more people resettled (490 people vs150 people). 14 ADB. 1997. Technical Assistance to the People’s Republic of China for Corporatization, Securitization, and Leasing in the PRC Road Sector. Manila. 6 19. The financing plan envisaged at appraisal included $170 million from ADB (42.8% of the total project cost) to finance 88.9% of the estimated foreign exchange costs. The remaining 11.1% of the foreign exchange costs were to be financed by HHEC. The entire local currency requirement of $206.3 million was to be covered by HPG and Heilongjiang Provincial Communications Department (HPCD) ($155.2 million) and grants from MOC ($72.3 million). The actual utilization of the ADB loan was $142.1 million, accounting for 35.2% of the total project cost and 87.4% of the foreign exchange costs. The rest of foreign exchange cost was financed by domestic bank. The actual local currency cost of $241.1 million equivalent was financed by: (i) grants from MOC of $68.8 million; (ii) $61.0 million in grants from HPG and HPCD; and (iii) $111.3 million in loans from domestic banks. The underutilization of the ADB loan was due primarily to a lower requirement for interest during construction than estimated at appraisal and overestimation of the contingency allowance. A comparison of the appraised and actual financing is presented in Appendix 4. D. Disbursements 20. The ADB loan proceeds were re-lent by the Borrower (the PRC Government) to HPG on the same terms and conditions as the ADB loan. HPG then onlent the loan proceeds to HHEC through an onlending loan agreement on the same terms and conditions. Of the $170 million in loan proceeds, $142.1 million was disbursed during 1999–2002 and the undisbursed amount of $27.9 million was canceled on 22 January 2003 and the loan was closed. Appendix 5 shows a comparison of projected and actual disbursements. Disbursements were generally made through reimbursement, commitment letter, and direct payment procedures. In November 2003, the EA substituted a cheaper domestic loan for the expensive ADB pool-based loan and prepaid the principal and interest of the ADB loan. E. Project Schedule 21. To help meet the implementation schedule and the short construction period because of severe winter conditions in the project area, on 19 June 1998 ADB approved advance action for prequalification of contractors who tendered for the civil works and for recruitment of international consultants. Advance action helped enable timely completion of preconstruction activities. 22. The loan was approved on 27 November 1998, signed on 29 March 1999, and became effective on 16 August 1999. The time taken from loan approval to effectiveness (8.5 months) is about the PRC average, which was 8.0 months in 1997. The main civil works, originally set to start in May 1999, actually started in September 1999 due to a 3-month delay in the signing of subsidiary and onlending agreements. Despite the slight start-up delay, the civil works were substantially completed on schedule in September 2001. The lost time was made up by working some second shifts and contractors were instructed to stockpile paving materials during the winter months so that pavement works could be accelerated during the summer months. The control and communications systems were delayed by about 2 years due to complicated and lengthy internal government procedures. A comparison of the actual and appraisal implementation schedules is presented in Appendix 6. F. Implementation Arrangements 23. The executing and implementing agencies for the Project remained as agreed at appraisal throughout implementation. HHEC was the EA and was responsible for constructing and operating Hashuang Expressway. A project implementation unit (PIU) was established and 7 adequately staffed before project appraisal. The PIU, headed by a vice general manager of HHEC, was responsible for overall project coordination and for project implementation, including communication with ADB. The staff assigned to PIU were generally competent and dedicated. The PIU, with the assistance of the consultants, carried out vigorous quality control of construction activities. The general manager of HHEC was appointed project director and was responsible for approval of contracts and payments. The coordination between HHEC, HPCD, and MOC was close, and was as envisaged at appraisal, resulting in the smooth implementation of the Project. 24. HHEC is responsible for the operation of the toll stations and for road maintenance. HHEC’s management of the toll O&M operations has been competent and professional. Appendix 7 provides HHEC’s present organization chart. 25. Government organization with respect to road safety is much the same as at appraisal, with road safety matters for the project expressway under the responsibility of the Heilongjiang Public Safety Bureau. 26. Land acquisition and resettlement activities were carried out in accordance with the Land Acquisition and Resettlement Plan prepared by the PPTA consultants under the responsibility of the land acquisition and resettlement committee formed by the director of HPCD and the vice mayors of Harbin and Shuangcheng municipalities. The committee oversaw the coordination of land acquisition and resettlement activities carried out by the appropriate local agencies and authorities. A total of 689 ha were acquired affecting a population of about 3,516, of whom 490 people (about 100 households) were resettled. Adequate internal monitoring and reporting were carried out by HHEC, but reporting to ADB was limited. For example, ADB was not informed that compensation rates were changed from those in the draft LARP. There was little supervision of resettlement implementation by ADB; only one supervision mission was undertaken by an ADB staff consultant in March 2000. The concerned ADB division did not have a resettlement officer during the period of project implementation.15 The land acquisition and resettlement plan as implemented by the committee reviewed by the ADB staff consultant was found to be satisfactory. Land acquisition and resettlement activities were implemented to the satisfaction of the affected people at a total cost of $32.6 million. Appendix 8 provides an analysis of the activities. G. Conditions and Covenants 27. There were four conditions for loan effectiveness: (i) State Council approval of the Loan Agreement, (ii) signing of subsidiary loan agreements between the Borrower and HPG, (iii) signing of the onlending agreement between HPG and HHEC, and (iv) the Changyu Expressway loan agreement was to have been duly executed and would become fully effective. The loan was declared effective 4.5 months after the Loan Agreement was signed, 1.5 months longer than the specified 90 days after loan signing. The delay was due to lengthy processes in preparing and signing the subsidiary loan and onlending agreements in both Heilongjiang and Jilin provinces. No covenants were modified, suspended, or waived during implementation. Compliance with major loan covenants is presented in Appendix 9. As noted there, all major covenants were generally complied with, particularly those relating to implementation arrangements, reporting, environmental protection, and monitoring and evaluation. However, two financial covenants were not fully complied with in the early years of expressway operations 15 The creation of a national resettlement officer position in ADB Resident Mission in the PRC in 2004 and the mainstreaming of resettlement officers into the regional departments better equip ADB to undertake this task. 8 due to lower than expected traffic and toll charges. Further reporting with respect to some financial covenants is expected. All audited accounts and audited financial statements have been submitted to ADB. The quality of audits is good and audit opinion covered issues relating to internal controls. There were no qualified audit opinions issued during implementation. Although there was internal resettlement monitoring, reporting to ADB was limited and no external agency was contracted for monitoring and evaluation. H. Consultant Recruitment and Procurement 28. International consultants were recruited in accordance with ADB’s Guidelines on the Use of Consultants. The international consulting services included (i) design review of the road safety components, (ii) review of the pavement design and construction methods and quality control procedures, (iii) human resource development including in-country training, (iv) contract management, (v) benefit monitoring and evaluation, (vi) construction supervision, and (vii) overseas training for 29 HHEC staff. The consultants’ contract was signed in September 1999, about 6 months later than envisaged at appraisal. 29. Domestic consultants were engaged following EA procedures acceptable to ADB. The domestic consultants’ primary responsibilities included contract management assistance to HHEC, all aspects of supervising the civil works contractors, and quality control. 30. All procurement funded from loan funds was undertaken in accordance with ADB’s Guidelines for Procurement. HHEC retained the service of one domestic tendering company. No major problems were encountered in the packaging of contracts, preparation of bidding documents, or evaluation of bids. The contract packaging during implementation essentially followed that envisaged at appraisal, as shown in Appendix 10. Details of the actual contract packages are shown in Appendix 11. I. Performance of Consultants, Contractors, and Suppliers 31. The international consultants completed their assigned tasks in line with the agreed schedule. They provided valuable advice on road safety, design and construction of asphalt concrete pavement in cold temperatures, and human resource development. The overseas training component was well received by HHEC staff and was considered useful by the Government. The EA rated the consultants’ performance as satisfactory. Similarly, the performance of the construction materials and equipment suppliers was satisfactory. Materials and equipment were provided in accordance with the terms and conditions of the applicable contracts. 32. The domestic design institute that prepared the preliminary design, feasibility study, and detailed design had appropriate experience in designing similar projects. The documents that it produced were of good quality and project cost estimates were reasonable. The bidding documents and bid evaluation reports prepared by the tendering companies were well prepared. The international competitive bidding documents were prepared in accordance with ADB’s Guidelines for Procurement. The civil works contractors had experience on similar road projects in the PRC, and completed their work on schedule. J. Performance of the Borrower and the Executing Agency 33. The Borrower, represented by the People’s Bank of China, Ministry of Finance, MOC, and the EA, i.e., HHEC, performed satisfactorily. Although there were start-up delays, project 9 activities subsequently picked up pace and all project components were completed as anticipated at appraisal. MOC provided appropriate guidance and financial support to HHEC as envisaged at appraisal. With diligent daily management support and services from HHEC, the Project was completed on schedule and within budget. The staff of the PIU worked diligently and were dedicated to the successful completion of the Project. The project completion report prepared by the HHEC was submitted on time and was satisfactory. K. Performance of the Asian Development Bank 34. The performance of ADB was satisfactory. ADB carried out four review missions to monitor project progress and resolve implementation issues. Through policy dialogue, ADB supported the development of a corporate plan, road safety activities and enhanced institutional capacity for HHEC. ADB should have been more active in monitoring the implementation of the resettlement activities (para 26). However, at that time, the operational departments did not have resettlement specialists.16 III. EVALUATION OF PERFORMANCE A. Relevance 35. The rationale for the Hashuang Expressway Project was sound, taking into account the priority given to development of the northeast transport corridor to improve road transport services and to facilitate efficient access to and from the remote hinterland, major seaports, and bordering countries. Policy reforms in the area of strengthening corporate management, developing road design standards, and enhancing road safety were supported under the Project. Key elements of road sector policies that were further developed with the Project include reducing high accident rates, improvement of pavement design, development of expressway corporate plan, and commercialization of service areas and other businesses. 36. Without the Hashuang Expressway Project, traffic congestion along the existing corridor would have impeded access between the cities of Changchun and Harbin and would have made access of the northeast ports (Dalian17 and Dandong) to Tongjiang, Japan, Republic of Korea, and Russian Federation, as well as to the southeast, more costly and time consuming.18 Economic development in the corridor would have been stifled and accident incidence and deaths from road accidents would have been higher. The Hashuang Expressway Project is rated highly relevant. B. Efficacy in Achievement of Purpose 37. In connection with the increasing capacity, actual traffic volumes on Hashuang Expressway have increased significantly since it was opened. In 2002, actual traffic in the corridor (the expressway and NH102 combined) has increased with the total actual average annual daily traffic (AADT) in medium truck equivalent (MTE) about 10% more than the actual traffic on NH102 in 2001. The actual traffic on Hashuang Expressway was 4,947 AADT (in MTE) in 2002 and 6,102 AADT (in MTE) in 2003, about 23.3% more than that of 2002 but 23.4% lower than that forecast for 2003. Traffic volumes have declined on the parallel NH102. Up to 16 There are now resettlement specialists in the concerned division and in ADB Resident Mission in the PRC. 17 Dalian is the main commercial port serving northeastern PRC. 18 Contributing to the more efficient movement of freight is the recent upgrading from four lanes to eight lanes of the expressway from the port at Dalian to Shenyang, which links to the project expressway. 10 2003, 58% of the expressway traffic was diverted from NH102, and 42% of the traffic was diverted from other roads or was generated traffic due to improved road conditions. The traffic consisted of many long-distance trucks.19 Appendix 12 provides a detailed discussion of the traffic analysis. 38. The Project not only resolved the road capacity issue but also provides sufficient capacity to meet expected transport demands to 2022. As a result of the increased transport capacity, improved geometric design, and better pavement condition of the project expressway than those for NH102, the primary purposes of the Project have been achieved, such as lower transport costs, enhanced road safety, more efficient movement of goods and passengers, and increased economic activity along the transport corridor. The average journey time for passenger cars from Harbin to Changchun is now around 2.5 to 3 hours, compared with at least 4.5 to 5 hours before the Project. The reduction in travel time was estimated at about 45% once the Changchu-Harbin expressway was built. Average vehicle operating cost savings are around 53%. The supply of road passenger services has increased, especially short- and middle- distance expressway buses offering frequent services. Before the Project there were 14 buses per day operating between Changchun and Harbin on NH102. Now 40 buses are operating daily on the expressway, in addition to nine buses operating on NH102. Freight and passenger charges on NH102 have remained unchanged since appraisal, a decrease in real terms. Agricultural products also benefited through access improvement. The Xinsheng poultry and egg market was built near the expressway interchange in Shuangcheng (Map 2), and has seen fast growth in its size and trading volume. The market is expanding significantly and daily trading volume of eggs is expected to increase to 1,400 tons in the next 2 years from about 800 tons at present. It is projected that this increase will generate 200 average annual daily traffic movements (in MTE) on the expressway by 2006. The trading volume has increased because the poultry and eggs are being transported to many destinations in a timely fashion. A shift to higher-value produce, combined with improved yields for transitional crops, raised the value added of farmer production. 39. Sixty-eight percent of the traffic in the corridor is now using the expressway. This has significantly eased the congestion on NH102, and accidents on that road have fallen since the expressway opened. As part of the benefit monitoring and evaluation system, road accident data have been compiled since 1998. The total number of accidents decreased from 290 on NH102 in 1998 to 164 on the expressway and NH102 combined in 2003, an average annual reduction of more that 10% per year. The accident rate per 100 million vehicle-km has steadily gone down from 155 in 1998 on NH102 to 119 in the corridor (31 on the expressway and 88 on NH102) in 2003. The accident rate is lower on expressways than on secondary and tertiary roads. 40. Heilongjiang Public Security Bureau (HPSB) and HHEC have made concerted efforts to improve road safety. The most significant causes of accidents on the expressway are overloaded trucks, driver fatigue, speeding, and drunk driving. Traffic safety signboards along the expressway provide safety guidance to road users including the use of seat belts and to warn against drunk or dangerous driving. To deal with overloading, two fixed weigh stations are operational, one on the Harbin Ring Road at the start of the expressway, and one near the end of the Harbin Ring Road and the junction of the expressway. Initially, the third weigh station was located at the provincial border near Lalin river. With the completion of the Changyu Expressway, a weigh station has been installed in Jilin province just south of Lalin river, making this third weigh station redundant. Two portable weigh-in-motion units are in use on a random 19 More than 82% of the traffic on the expressway is interprovincial transit traffic. 11 basis. From 22 June 2004, the 2003 Road Safety Law has required overloaded trucks to offload excess freight before proceeding. Before this law was passed, about 80% of trucks on the expressway were overloaded. Now less than 5% are overloaded. This should have a significant effect on the accident rate on the expressway and nationwide. The frequency of patrolling along the expressway is once an hour. Emergency telephones have been installed at 2 km intervals along the expressway to enable drivers to promptly report accidents and vehicle breakdowns to rescue centers and to seek help. An emergency response (rescue) plan has been set up and information on it disseminated to expressway users. Road safety facilities and equipment procured under the Project are appropriate and meet international standards. 41. In summary, against a backdrop in which the Project has (i) increased road transport capacity, lowered transport costs, enhanced road safety, reduced accident rates, and made the movement of goods and passengers more efficient; (ii) enhanced institutional capacity and induced increased economic activity; and (iii) lowered traffic noise and vehicle emissions, the Hashuang Expressway Project is rated efficacious. C. Efficiency in Achievement of Outputs and Purpose 42. The Borrower and the EA were effective in ensuring efficient project implementation as well as timely and adequate availability of counterpart funding. The planned outputs were achieved 6 months ahead of schedule, despite the initial delay. The Hashuang Expressway Project has achieved its primary purpose of improving road transport capacity, reducing transport costs, and enhancing road safety. All the physical project facilities were completed before loan closing and are in operation. Staff from HHEC received training that improved their skills in design, construction, environmental management, O&M, and road safety. 43. Apart from including benefits resulting from generated traffic in the economic internal rate of return (EIRR) calculation, the Project Completion Review Mission’s economic analysis uses the same methodology as used at appraisal and was based on actual data covering operations up to 2003. There are also environmental benefits from reduced vehicle emissions and noise, and indirect economic benefits resulting from the increases in economic growth in the corridor generated by the new road but these have not been included in the analysis for lack of data for evaluation. The EIRR of Changchun-Harbin Expressway was recalculated at 16.3%, compared with 18.9% at appraisal.20 The EIRR calculation was conservative, as the project costs and benefits of improved access roads were not included due to unavailability of evaluation data. The lower project completion review mission reestimated EIRR reflects the lower traffic volumes in the initial years, assumptions used in the valuation of diverted traffic from the railway (since the railway is electrified, no diversion from railway is assumed in the project completion review mission estimate). The EIRR of the Hashuang Expressway was recalculated at 15.3% was about the same as the appraisal estimate of 15.2% mainly due to the earlier than expected Hashuang Expressway completion. 44. Tolls on the expressway are charged on the basis of vehicle type (small passenger car, medium truck, bus, large truck, trailer, or container) and distance traveled. The current toll charges for the different types of vehicles are listed in Appendix 14, para. 2. The same toll charges are also applied to other expressways in Heilongjiang province. About 82% of traffic is long-distance, through traffic in the corridor and is less sensitive to changes in tolls than local traffic on NH102. The toll on NH102 is charged on the basis of vehicle type. The base toll rate 20 The economic analysis was presented in the RRP for the Changchun-Harbin Expressway Project as a whole (both sections together), because it is an integrated project. 12 for tractors or motorcycles is CNY2. Corresponding tolls for other vehicle types are CNY8 for small vehicles, CNY15 for medium vehicles, CNY20 for large vehicles, and CNY35 for extra- large vehicles. The toll on NH102 has remained unchanged since it opened to traffic in 1997, so declining in real terms. 45. The financial internal rate of return for Hashuang Expressway was recalculated using the major assumptions given in Appendix 14. The recalculated rate of return, in constant prices, is 6.8%.21 The recalculated weighted average cost of capital, in constant prices, is 3.2%.22 HHEC completed the Project on time and within budget. The Project Completion Review Mission confirmed that HHEC could provide quality administration of the expressway and provide appropriate maintenance. This reevaluation shows that the Project is financially viable and cost effective. Sensitivity tests with respect to a lower traffic growth rate and higher O&M costs on the new expressway confirm this position. Based on the economic and financial analysis, the Project is rated efficient. D. Preliminary Assessment of Sustainability 46. The technology adopted for the project facilities is technically and commercially sound, and trained personnel are in place to handle operational and technical issues and to carry out the necessary maintenance of the project facilities. There is a strong ownership and commitment by the provincial and local governments to the Project. The necessary traffic management, toll, and maintenance equipment was procured under the Project. The more efficient movement of freight and passengers and increased road capacity will enhance current and planned economic growth and social development in the project area. Appropriate maintenance and operational policies and procedures are in place. 47. Financial sustainability is ensured by setting toll rates aimed to achieve full cost recovery. HHEC also gave its assurance that performance ratios and indicators will be reviewed periodically to assess the financial sustainability of its operations. Strong support from Heilongjiang Provincial Price Bureau and HPCD will help ensure the timely implementation of any necessary revisions to the toll structure. The operation of the two service areas has been leased to private operators. The sustainability of the Hashuang Expressway Project is rated most likely. E. Environmental, Sociocultural, and Other Impacts 48. The recommendations and requirements of the environmental impact assessment were incorporated into the project design and adequate measures were implemented to minimize potential adverse environmental impacts of the construction activities. Environmental impacts are being monitored through annual surveys by the Provincial Research Institute of Environmental Sciences and reports are being prepared on an annual basis. During construction, appropriate environmental monitoring and mitigation measures were undertaken, including (i) slope protection to control soil erosion and reduce dust; (ii) landscaping and planting more than 54,890 trees in the median, adjacent to the expressway, and at service areas and interchanges; (iii) installing sound-barrier walls near schools and villages; and (iv) installing facilities for liquid waste, solid waste, and smog treatment. Borrow and spoil areas and construction campsites were restored to their original condition, resulting in no irreversible 21 The FIRR for the Hashuang Expressway Project calculated at appraisal was 7.1% (before income tax basis in 1998 prices). 22 No weighted average cost of capital information at appraisal was available. 13 environmental impact. About $3.32 million was spent on landscaping and beautification works. In September 2002, an independent environmental review headed by the State Environmental Protection Administration inspected the Project to assess the environmental impact and performance. The inspection concluded that the mitigation of environmental impacts was successful. 49. Positive social impacts under the Project included (i) landscaping along the expressway, at interchanges and service areas and in conjunction with restoration of borrow pits; (ii) employment during construction; (iii) employment for expressway operations (Appendix 15); (iv) rescue center establishment; (v) expansion of the poultry and egg market; (vi) traffic improvement along NH102; and (vii) expanded parking areas for use during snowstorms, although there is some capacity constraint during winter. 50. All resettlement activities and payment of compensation were completed by August 1999. Prior to and during resettlement, proper consultation of affected people was conducted so that that they were well informed about the compensation policies and their preferences in resettlement were taken into consideration. Affected people also participated in the refinement of the alignment, location of overpasses, and detailed measurement surveys. All compensation was paid to the affected collective and individuals in accordance with the new ADB-supported Land Administration Law, effective 1 January 1999. Given that land acquisition started at the end of 1998, affected people were very satisfied with compensation and resettlement. The impact of land loss was insignificant because the average landholding in the project area is relatively large (0.2 ha/capita); consequently, the cash compensation enabled affected farmers to invest in more diversified livelihood activities and thereby improve their income. The compensation standards for housing were also very good, which enabled relocated households to build larger houses and improve their living standards. 51. During the PPTA stage, the social impact assessment analyzed the likely impact of the Project on ethnicity. There are some Manchu people in the project area. However, the assessment did not identify any particular disadvantage associated with ethnicity. The Manchu have a socioeconomic status equal to or exceeding that of the Han. The main adverse social impact caused by the Project was resettlement, but almost all affected people were Han (the Manchu villages were not affected). Consequently, there was no need for special measures. The number of households relocated was quite small, so no communities were significantly affected. The people affected by resettlement were satisfied with compensation and rehabilitation measures. 52. The average annual GDP growth rate for the whole of Heilongjiang province during 2001–2003 was 11%, compared with 12% and 16% in Harbin and Shuangcheng, respectively (Table A15 in Appendix 15). Although this relatively strong growth cannot be fully attributed to the expressway, the Project has had a positive impact on economic development in the province resulting from more efficient movement of freight and passengers and increased road capacity. To enhance the poverty reduction impact of the expressway, associated access roads were constructed (paras. 11–12). Access to markets and social services by residents who live along the expressway has been improved. Overall, the impacts under this heading are rated significant. 14 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 53. The formulation and design of the project facilities were technically sound and highly relevant to the achievement of the project development goals at appraisal and at completion. The Project was well implemented, achieving project outputs in line with the appraisal targets. The expressway has been in operation since September 2001 and there have been no major structural or maintenance problems. Sufficient budget allocations are being made available to cover recurrent costs associated with project O&M. Two interchanges (Tuanjie and Liushulin) were built along the expressway and are used by the poor, and additional interchanges are in the planning or design stage and will be constructed as traffic increases; they will be financed solely by HHEC. These additional interchanges will facilitate agricultural and economic development in the project area, which will indirectly contribute to poverty reduction. The service provided by the rescue center under HHEC provides services to both the expressway and other segments of the road network. The Project has had an impact on developing institutional capacity to promote corporatization and strengthening road safety and construction quality. 54. The Project has achieved its main objectives of improving access from Heilongjiang province and parts of Jilin province to the more developed provinces of the east and south, providing additional transport capacity and reduce transport costs, alleviating congestion and reducing accidents on existing roads, enhancing road safety standards on the Project and related facilities. The Project, overall, is rated successful. B. Lessons Learned 55. Key lessons from the Project are the need for (i) closer supervision by ADB of resettlement issues (para 26), and (ii) including a specific local road component in the project scope. 56. ADB should play a more active role in resettlement supervision and monitoring. Although resettlement was implemented smoothly, particularly after additional funding was made available (Appendix 8), the resettlement process could have benefited from closer supervision from ADB and better reporting to ADB, in an attempt to ensure that (i) the resettlement plan would be implemented as agreed between government agencies and ADB, and (ii) actions could be formulated and implemented to address the concerns of the affected people. Also, it is essential to ensure that independent agencies monitor the social impact of the resettlement activities during implementation and evaluate the results for at least 2 years thereafter. Such monitoring would have assisted the EA and ADB to prepare a comprehensive resettlement completion report. 57. While specific access roads were not identified at appraisal, local roads were constructed and upgraded (paras. 11–12). Poverty areas along the expressway benefited from the expressway, with improved accessibility to transport facilities, making it easier for farmers to transport their products to market. ADB has learned the lesson, in subsequent projects, a specific local road component has been consistently included to ensure maximum access to the expressway by the rural population and thus maximize poverty reduction and regional economic development. 15 C. Recommendations 58. The parking areas at the service areas have proved inadequate to accommodate large numbers of vehicles during heavy snowstorms. HHEC should enlarge the parking areas. 59. HPSB and HHEC should continue their efforts to reduce accidents, including introducing and enforcing more stringent road and vehicle safety regulations. A more structured education program should be developed aimed at educating drivers and pedestrians. 60. A full benefit monitoring and evaluation activity report should be submitted to ADB 5 years after the opening of the expressway to evaluate the improvement of social and economic conditions in the project area. A review of the toll structure and levels should be submitted to ADB annually up to 5 years following project completion as required in the Loan Agreement to ensure toll rates are adequate. 61. For Changyu Expressway (footnote 2), a “rumble strip” was incorporated into the hard shoulder to alert drivers who may have inadvertently wandered off of the carriageway. This is a good safety feature. HHEC should incorporate this feature into Hashuang Expressway. 62. HHEC should pursue private sector participation for the Hashuang Expressway at a later stage when traffic growth and financial performance were sufficient to attract the interest of private investors. 63. The project performance audit report should be prepared in 2006 by which time the Project will have been fully operational for more than 4 years and its traffic, maintenance, and physical condition, as well as the attainment of benefits, may be better assessed. 16 Appendix 1 PROJECT FRAMEWORK: OUTPUT AND INPUT HASHUANG EXPRESSWAY Design Summary Appraisal Actual Remarks Output 1. Main Works 101 km of expressway, 6 interchanges, Completion: March 2002 Completion: 28 September 2001 • Opened to 2 service areas, underpasses, Cost: $281.9 million Cost: $287.3 million traffic in Sept overpasses, and link roads (excluding contingencies) 2001 Procurement and installation, safety, Completion: March 2002 Completion: September 2002 • Two (Tuanjie communications, weigh stations, and Cost: $14.4 million Cost: $13 million and emergency and maintenance Liushulin) equipment interchanges Land acquisition and resettlement Completion: not available Completion: June 1999 were built Cost: $27.8 million Cost: 32.6 million along the expressway for the poor. The service provided by the rescue center is not only for the expressway 2. Consulting Services and Training Advisory inputs and training for road • Completion of 8 person-months of • Achieved safety, design, maintenance, business international advisory services and planning and operations, pavement 4,200 person-months of domestic design and construction, consulting services environmental protection, and benefit • Completion of domestic and • 29 staff trained overseas and monitoring and evaluation overseas training programs more than 100 staff attended domestic workshops 3. Corporatization Continued operations by corporate EA • Consolidated accounting for • Being implemented corporate profit and cost centers • Demonstrated financial sustainability • Achieved and creditworthiness of corporate entities • Securitization of existing revenue • Being considered as one of the streams options 4. Environmental Protection— • Mitigation measures identified in • Achieved Implementation of Mitigation and construction and operations plans Monitoring Activities • Monitoring plan agreed • Achieved • Number of trees planted adjacent to • 54,890 trees have been planted project expressway • Air pollution measures, 50 meters • Achieved. 80 meters from from centerline centerline 5. Inputs • Provision of adequate counterpart • April 1998–March 2002 • April 1998–September 2002 funds $227.5 million $261.6 million • Recruiting supervision consultants • International: March 1999 • International: 29 September Domestic: September 1999 1999 • Domestic: 8 October 1998 Appendix 1 17 Design Summary Appraisal Actual Remarks • Carrying our survey and detailed • 1999 • 1996–1998 design • Award of CW contracts • April 1999 • 16 September 1999 • Expressway construction • September 2002 • September 2002 • Construction supervision and • Complete by September 2002 • 15 September 2002 installation • Resettlement and compensation • No information available • Completed: 30 December 2000 • Land acquisition and relocation • Minimized relocation and alignment • Achieved selection and interchange design • Safe operation of expressway and • Lower rate of accidents and severity • Achieved parallel highway • Human resource development • Training complete: June 2002 • Completed: December 2002 • Incorporate appropriate • Adverse environmental impact • Achieved environmental mitigation measures mitigation and environmental in design enhancement measures • Monitoring and evaluation • EA conducts monitoring and • Being implemented evaluation 2002–2010 CW = civil works, EA = Executing Agency, HHEC = Heilongjiang Hashuang Expressway Corporation, HPCD = Heilongjiang Provincial Communications Department, km = kilometer, NH = national highway. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. 18 Appendix 2 CHRONOLOGY OF MAJOR EVENTS IN PROJECT IMPLEMENTATION HASHUANG EXPRESSWAY Year Date Events 1997 22 August Approval of project preparatory technical assistance. 1998 1 April Project brief meeting. 13–29 April Fact-finding mission. 19 June Management review meeting. Approval of advance action for civil works, equipment, and international consulting services. 20 July–3 August Appraisal mission 27 July Circulation of the SEIA to the Board. August Completion of detailed design. 1 September Approval of prequalification documents for ICB civil works. 8 September Issuance of prequalification documents. 24 September Staff review committee meeting. 28 September Contract signing of LCB contracts A1–A3. 13–15 October Loan negotiations. 16 November Deadline for submission of prequalification applications. 27 November Loan approval. 1999 5 February Issuance of bidding documents for ICB civil works. 12 February Approval of prequalification of ICB civil works contractors and shortening of the bidding period from 90 to 60 days. 12 February Approval of bidding documents for ICB civil works. 29 March Loan and Project Agreements were signed. 5 April Deadline for submission of bids and bid opening for ICB civil works. 25 June Extension of loan effectiveness up to 27 September 1999. 2 August Approval of the consultants’ ranking for international consulting services. 16 August Loan effectiveness. 23–27 August Special loan administration mission to review the bids for civil works contracts. 3 September Approval of award for civil works contracts-expressway (B1–B7). 16 September Contract signing for civil works contracts-expressway (B1–B7) and commencement of works. 29 September Signing of the international consultants’ contract. 15 November First disbursement. 2000 28 February Approval of bidding documents for road maintenance equipment. 7 March Issuance of bidding documents for road maintenance equipment. 8 May Deadline for submission of bids and bid opening for road maintenance equipment. 16–22 May Loan review 1. 11 July Approval of contract award for service jeep and road testing buses. 28 July Delivery of four service jeeps and two road testing buses. 24 and 30 August Approval of award for road maintenance equipment. 30–31 August Contract signing of road maintenance equipment. 4 October Approval of award for building works contracts. 2000 20 October Contract signing for building works. Appendix 2 19 Year Date Events 2001 2 January Delivery of three asphalt pavers. 18 January Approval of overseas training in France. 9 February Delivery of crane. 17 February Delivery of eight vibratory rollers. 24 February Delivery of three soil stabilizing machines. 25 February Delivery of two asphalt mixing plants. 6 March Delivery of two loaders. 14 March Delivery of excavator. 6 April Delivery of two milling machines. 23 and 25 May Approval of award for traffic engineering facilities contracts. 25 May Approval of award for afforestation works contracts. 28 May Contract signing for traffic engineering facilities. 29 May Contract signing for afforestation works and related services. 29 May–2 June Midterm review mission. 3 June Delivery of graders. 25 June Delivery of 13 line markers. 31 July Completion of international consulting services. 15 September Completion of all civil works contracts. 26 September Delivery of two emergency ambulances. 28 September Opening of the project expressway. 2 October Delivery of remaining one emergency ambulance. 10 November Delivery of two guardrail cleaning vehicles. 15 November Delivery of two sweeping vehicles. 15 December Delivery of one special purpose vehicle. 2002 23 January Approval of award for tolling, monitoring, and communications system contract. 18 March Contract signing for tolling, monitoring, and communications system. 15 September Completion of installation for tolling, monitoring, and communications system. 15 September Completion of services of all domestic construction supervision consultants. 22–26 September Review mission 2. 25 November Final disbursement. 31 December Scheduled loan closing date. 2003 22 January Loan closing and cancellation of unutilized loan proceeds of $27.9 million. 16 October Repayment of pool-based loan. 14 November Repayment of London interbank offered rate-based loan. 2004 17–21 August Project completion review mission. ICB = international competitive bidding, LCB = local competitive bidding, SEIA = summary environment impact assessment. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. 20 Appendix 3 TECHNICAL STANDARDS OF THE PROJECT FACILITIES HASHUANG EXPRESSWAY 1. Classes and Mileage Expressway: 10 Contracts [101 kilometers (km)] Class I Highway: (40 km) Class II Highway (60 km) Class II County Road (20 km) 2. Expressway Design Speed: 120 kilometers per hour (km/h) Class I Highway Design Speed: 80–100 km/h Class II Highway Design Speed: 60–80 km/h 3. Expressway Typical Section • Subgrade Width: 28 meters (m) • Carriageway Width: 2x2x3.75 m • Hard Shoulder Width: 2x2.5 m • Soft Shoulder Width: 2x0.75 m • Median Width: 3 m • Median Shoulder Width: 0.75 m • Minimum Radius for Horizontal Curves: 650 m • Maximum Gradient: 3% 4. Class I Typical Section • Subgrade Width: 24.5 m • Carriageway Width: 2x2x3.75 m • Hard Shoulder Width:2.5 m • Soft Shoulder Width: 0.75 m • Median Width: 2.00 m • Median Shoulder Width: 0.5 m • Minimum Radius for Horizontal Curves: 250 m • Maximum Gradient: 5% 5. Class II Typical Section • Subgrade Width: 12 m • Carriageway Width: 2x3.75 m • Hard Shoulder Width: 0.75 m • Minimum Radius for Horizontal Curves: 125 m • Maximum Gradient: 6% Appendix 3 21 6. Pavement Structure • 4 cm AC-161 Medium-Granular Asphalt Concrete • 5 cm AC-201 Course-Granular Asphalt Concrete • 6 cm AC-251 Course-Granular Asphalt Concrete • 18 cm Upper Base Course - Two-Ash Crushed Stone (8:17:25), or - 6% Cement-Stabilized Gravel • 30 cm Lower Base Course 5% Cement-Stabilized Gravel • 20 cm Bedding of Natural Gravel Table A3: Main Work Quantities Item Quantity (and Units) Earthworks 13.11 million m³ Asphalt Concrete Pavement 2.38 million m³ Extra Large Bridge (length) 1,504.82 m (2) Large Bridge (length) 818.10 m (3) Medium Bridge (length) 303.62 m (5) Small Bridge (length) 72.50 m (3) Culvert 36 Interchange 6 Grade Separation 41 Underpass 60 m = meter, m3 = cubic meter. Source: Heilongjiang Hashuang Expressway Corporation. 22 Appendix 4 PROJECT COSTS AND FINANCING HASHUANG EXPRESSWAY Table A4.1: Appraised and Actual Project Costs ($ million) Appraised Actual Foreign Local Total Foreign Local Total Components Exchange Currency Cost Exchange Currency Cost A. Base Cost 1. Civil Works 132.5 149.4 281.9 135.0 152.4 287.4 2. Equipment 14.4 0.0 14.4 12.5 0.5 13.0 3. Land Acquisition and Resettlement 0.0 27.8 27.8 0.0 32.6 32.6 4. Consulting Services and Training 0.7 7.0 7.7 0.5 14.3 14.8 Subtotal (A) 147.6 184.2 331.8 148.0 199.8 347.8 B. Contingencies 1. Physical 11.8 14.7 26.5 0.0 0.0 0.0 2. Price 5.9 7.4 13.3 0.0 0.0 0.0 Subtotal (B) 17.7 22.1 39.8 0.0 0.0 0.0 C. IDC and Other Charges 25.9 0.0 25.9 14.6 41.3 55.9 Total Project Cost 191.2 206.3 397.5 162.6 241.1 403.7 IDC = interest during construction. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Table A4.2: Appraised and Actual Financing Appraised Actual Foreign Local Total Foreign Local Total Source Exchange Currency Cost Exchange Currency Cost ADB 170.0 0.0 170.0 142.1 0.0 142.1 Ministry of Communications 0.0 72.3 72.3 0.0 68.8 68.8 Domestic Bank 0.0 0.0 0.0 20.5 111.3 131.8 HPG/HPCD 21.2 134.0 155.2 0.0 61.0 61.0 Total 191.2 206.3 397.5 162.6 241.1 403.7 ADB = Asian Development Bank, HPG = Heilongjiang provincial government, HPCD = Heilongjiang Provincial Communications Department. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Appendix 5 23 PROJECTED AND ACTUAL DISBURSEMENTS HASHUANG EXPRESSWAY Table A5: Projected and Actual Disbursement ($ million) Cumulative Year Appraisal Actual Appraisal Actual 1 1999 36.2 16.4 36.2 16.4 2 2000 60.4 40.1 96.6 56.5 3 2001 36.2 41.1 132.8 97.6 4 2002 37.2 44.6 170.0 142.2 Total 170.0 142.2 Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Figure A5: Cumulative Disbursement 200 150 Appraisal 100 Actual $ million 50 0 1999 2000 2001 2002 Year Source: Asian Dvelopment Bank and Heilongjiang Hashuang Expressway Corporation. IMPLEMENTATION SCHEDULE: HASHUANG EXPRESSWAY 24 1998 1999 2000 2001 2002 2003 II III IV I II III IV I II III IV I II III IV III III IV I II III IV Civil Works Tendering Construction Appendix 6 Appendix a. Pkg. A1, A2, A3 Tendering Construction Tendering Construction B1–B7 Construction C1 and C2 Defects-Liability Period b. Pkg. B1–B7 and C1 & C2 Tendering Construction Construction Construction Defects-Liability Period Equipment Tendering, Award, Supply, and Delivery Warranty ICB Packages: E1-Road Maint. Tendering, Award, Supply, and Delivery E2-Surv. and Com. Warranty E3-Tolling IS Packages Tendering, Award, Supply, and Delivery E5-Vehicles Warranty E6-Lab. Veh. Tendering, Award, Supply, and Delivery Warranty Domestic Consultants a. Detailed Design (started in June 1996 and completed in August 1998) b. Tendering and Contract Award c. Supervision International Consultants a. Consulting Services Pavement Expert Road Safety Expert Training Expert Express. Operation b. Human Resource Dev. Express. Com'l. Dev. and Bus. Plan. (Feb–Mar 2000, 1p-m) Road Safety (Feb–Mar 2001, 1 p-m) Express. Maintenance (Feb–Mar 2001, 1 p-m) Environment Protection, Regulation, and Design (Feb–Mar 2000, 1 p-m) Expressway Design (Nov–Dec 2002, 1 p-m) a. Consulting Services Road Safety Pavement Design ID of Training Needs b. Human Resource Dev. = Actual = Appraisal = Winter - No Construction Bus = business, Com = communication, Con = contract, Com'l = commercial, Dev = development, Express = expressway, ICB = international competitive bidding, ID = identification, Lab = laboratory, Pkg = package, Plan = planning, p-m = person-months, Surv = surveillance, Veh = vehicles. Source: Heilongjiang Hashuang Expressway Corporation. ORGANIZATION CHART OF THE HEILONGJIANG HASHUANG EXPRESSWAY CORPORATION General Manager Audit Division Vice General Chief Vice General Manager Engineer Manager Financial Maintenance Toll Personnel Administration Road Division Division Division Division Office Administration Division Tuanjie Patrol Tuanjie Toll Station Maintenance Center Wapenyao Patrol Chenggaozi Toll Station Lalinhe Patrol Liushulin Toll Station Chaoyang Toll Station Rescue Center Wapenyao Toll Station Overloanding A Control Center 7 ppendix Shuangcheng Toll Station 25 Source: Heilongjiang Hashuang Expressway Corporation Lalinhe Toll Station 26 Appendix 8 EVALUATION OF LAND ACQUISITION AND RESETTLEMENT ACTIVITIES HASHUANG EXPRESSWAY A. Scope of Resettlement 1. In July 1998, a draft Land Acquisition and Resettlement Plan (LARP) was prepared under Asian Development Bank (ADB) technical assistance (TA) 2468-PRC.1 The scope of resettlement impact for Hashuang Expressway Project included land acquisition (permanent and temporary) and building demolition. The land acquisition can be further divided into three parts: the main alignment land acquisition, subsidiary components’ land acquisition (such as interchange, service area, and toll areas), and lands for borrow pit and stock pit (temporary land occupation). Table A8.1 shows the variations of resettlement impacts in different project phases. 2. At appraisal, LARP envisaged that 689 hectares (ha) of land would be required permanently, 223 ha would be required temporarily, and the total number of affected people would be 3,666. By project completion, the total amount of permanent land acquisition was unchanged but the amount of temporary occupied land increased by 79% from 223 ha to 399 ha, and the amount of demolished buildings increased by 149% from 5,889 m2 to 14,663 m2. As a result, the total population affected by the Project increased by 9.3% from 3,666 to 4,006. Still, the number of people relocated was quite small (490 people or about 100 households). Table A8.1: Resettlement Impacts: Land Acquisition and Resettlement Plan vs Actual Impacts Unit LARP Actual Land Acquisition 912 1,088 Permanent ha 689 689 Temporary ha 223 399 House Demolition sq. m. 5,889 14,663 Population Affected Person 3,666 4,006 By Land Acquisition Person 3,516 3,516 By House Demolition Person 150 490 ha = hectare, LARP = Land Acquisition and Resettlement Plan, sq. m. = square meter. Source: Heilongjiang Hashuang Expressway Corporation. B. Resettlement Compensation 3. The land acquisition and resettlement of the Project was implemented based on the 1998 Land Administration Law2 and rules and regulations of the provincial government (No. 36 and No.148 circulars issued by Heilongjiang Land Administration Bureau (HLAB). The compensation rates for different types of cultivated lands under the Project as compared with the draft LARP and the two circulars are given in Table A8.2. The project-implemented rates were lower3 than the draft LARP, but were much higher than those issued by HLAB. The main reason for this increase is that the Project followed the new Land Administration Law. 1 There was no final Land Acquisition and Resettlement Plan prepared under the Project. The draft Land Acquisition and Resettlement Plan was prepared under TA 2468-PRC (ADB. 1997. Technical Assistance to the People's Republic of China for Changchun-Harbin Expressway Project. Manila.) 2 The ADB-supported Land Administration Law became effective on 1 January 1999. 3 The actual rates were lower but the standards were higher; the reason for the discrepancy was that the project preparatory technical assistance consultant had overestimated the average annual output value of crops. Appendix 8 27 Table A8.2: Land Compensation Rates (CNY/mu) Rates by HLAB Project Items Draft LARP Harbin Shuangcheng Adopted Rates Dry land 7,480 3,735 3,729 6,230 Paddy 10,787 5,6705,670 9,460 Autumn Vegetables 16,181 8,964 5,763 14,941 HLAB = Heilongjiang Land Administration Bureau, LARP = Land Acquisition and Resettlement Plan 1 mu = 666.67 square meters. 4. For the land area occupied temporarily by the Project, the compensation rates were set the same as those acquired permanently. For house compensation, the average compensation rates for different structures of houses in Harbin and Shuangcheng were based on market rates, which were consistent with LARP (Table A8.3). Since the project only affected rural houses, the compensation rates were considered quite good by the affected people. Table A8.3: Building Compensation Rates in Resettlement Plan and Implementation Structures Resettlement Plan Rates Adopted Rates (CNY/m2) Brick-Concrete House Market Price 400 Brick-Timber House Market Price 332 Simple House Market Price 276 m2 = square meter. Source: Heilongjiang Hashuang Expressway Corporation. C. Resettlement Measures and Income Restoration 5. All affected villages were fully aware of the adopted land compensation rates, and were paid compensation as agreed. Unlike the proposed strategy in the resettlement plan, land was not adjusted to spread the losses among the village groups. Instead, for those affected villages in Harbin, 20% of total compensation was kept in the affected village collectives to be used for village-wide production and infrastructure improvement, and 80% of total compensation was paid directly to affected individuals. For those affected villages in Shuangcheng, all land compensation (60% of total compensation) was kept in the affected village collectives for production and infrastructure improvements and all resettlement subsidies (40% of total compensation) were directly paid to the affected individuals. 6. According to a field survey undertaken during the Project Completion Review Mission, affected people preferred direct cash payment instead of land readjustment within village groups. Since the affected villages have relatively high farmland per capita (0.2 mu/capita) even after land acquisition, the narrow strip land acquisition for the Project did not cause significant land loss for most of the affected households. Most households had adequate farmland remaining and the cash compensation enabled them to invest in nonfarm and other income- generating programs. Consequently, their income and living standards were quickly restored and often improved from before the project. 7. For the 100 relocated households, the money for building and attached property compensation was paid directly by the district or township resettlement offices to them. In addition to cash compensation for lost property, they were provided with new housing plots in 28 Appendix 8 the same village at 250 square meters per household, in accordance with municipal regulations. The average house compensation was based on market prices plus additional money for transfer assistance, which allowed for reconstruction of new houses of better quality and larger size. To ensure the compensation was delivered to affected households, the affected people were given certificates of deposit based on the amount to which they were entitled from local commercial banks. 8. According to the final project completion report done by the Executing Agency (EA), an income survey was conducted by the Ministry of Communications (MOC) Highway Resource Institute in August 2002. This revealed that affected households were generally satisfied with resettlement. Also, local officials and village leaders interviewed stated that incomes were restored. A small sample household survey conducted by the Project Completion Review Mission verified the following: 9. Dairy Farmer. From Mr. Jin Dexi, aged 70, 5 mu of land was acquired; the compensation of CNY12,000 was used to buy three cows. He is now one of the best dairy farmers in the village and his family is better off. 10. Bathhouse Owner. From Mr. Fa Xilin, aged 37, 3 mu of land was acquired. He opened a village bathhouse using the compensation fee of about CNY7,500. Because of this business, he has escaped poverty. 11. Village Supermarket Owner. From Mr. Liu Yingcheng, aged 41, used his compensation fee of about CNY10,000 from 4 mu of land to set up a small shop. He owns the biggest shop in the village and has become the most prosperous person in the village. D. Resettlement Cost 12. The total actual cost of the compensation for land acquisition, house relocation, and affected infrastructure facilities was CNY270.3 million ($32.6 million equivalent), 17% higher than the $27.8 million estimated at appraisal. The increased cost resulted from the larger acquisition and resettlement as shown in Table A8.1. The EA made up the financial difference. E. Resettlement Schedule 13. The land acquisition and resettlement for Hashuang Expressway Project began at the end of 1998. The land acquisition and resettlement activities were largely completed by the summer of 1999, before construction. F. Institutional Arrangement 14. The resettlement implementation for Hashuang Expressway was carried out by the Heilongjiang Hashuang Expressway Corporation (HHEC) and local governments. Within HHEC, there is one resettlement division responsible for coordinating resettlement policies and implementation for the whole Project. Actual resettlement was carried out by branches in Harbin and Shuangcheng city, which were staffed from two city communications bureaus, land administration bureaus, forest bureaus, and other relevant city agencies. In each city, a resettlement leading group was established, led by the vice governor of the municipal government. Corresponding working teams were set up at all concerned district governments and town or township governments as well as affected villages to carry out actual land acquisition and resettlement activities. Appendix 8 29 G. Participation and Information Disclosure 15. Before land acquisition and resettlement activities, a series of information disclosure meetings was held in six townships to be affected by the Project. The resettlement policy and compensation rates were disclosed at those meetings. After each meeting, a “land acquisition announcement” was issued in each affected village and a detailed measurement survey on various impacts was conducted. Based on the survey results, a compensation agreement was signed by each affected household. H. Monitoring and Evaluation 16. Adequate internal monitoring and reporting were carried out by HHEC, but reporting to ADB was limited. For example, ADB was not informed that compensation rates were changed from those in the draft LARP. Also, no external monitor was engaged as required in the loan agreement. There was little supervision of resettlement implementation by ADB; only one supervision mission was undertaken by an ADB staff consultant in March 2000. The concerned ADB division did not have a resettlement officer during the period of project implementation. I. Conclusions and Lessons Learned 17. Under this Project, the land compensation policy coincided with a new Land Administration Law of the PRC that became effective on 1 January 1999. It is commendable that the new policy was adopted, since the land acquisition began in 1998, i.e., before the new law came into effect. In general, implementation of the land acquisition and resettlement activities was quite satisfactory for the affected population. This was partly because the affected people have relatively large farms and output value is low, so the impact of land loss was not severe. Also, the number of relocated households was small, so there was no need for reconstructing village infrastructure. 18. The lessons learned related to land acquisition and resettlement are: (i) the resettlement plan prepared at appraisal should be agreed with government entities and implementation measures must be compatible with PRC laws; (ii) formal approval of the resettlement plan by the EA is essential to resolve any differences with county officials and to guide implementation; (iii) regular monitoring and evaluation reports should submitted by the EA to ADB on a timely basis; and (iv) a qualified independent agency should be employed by the EA prior to resettlement implementation, to conduct a baseline survey, monitor implementation, evaluate results, and prepare reports for submission to the EA and ADB; (iv) more regular supervision should be carried out by ADB staff; and (v) a resettlement completion report should be prepared prior to the midterm review to ensure good documentation and to take follow-up action, if required. For transport projects, conducting a resettlement assessment after the loan is closed is very difficult and not very effective. 30 Appendix 9 COMPLIANCE WITH MAJOR LOAN COVENANTS HASHUANG EXPRESSWAY Reference to Covenant Loan Documents Status of Compliance 1. Procurement. All procurement to be Loan Agreement Complied with. subject to the provisions of the Guidelines for (LA), Schedule 4, Procurement under Asian Development Bank para. 2 Loans 2. Counterpart Financing. HHEC will LA, Schedule 6, Complied with. obtain, on a timely basis, all funds and para. 2 resources necessary for project implementation and operation and management of the project facilities 3. Construction Quality. HHEC will ensure LA, Schedule 6, Complied with. that the project expressway and link roads para. 3 are constructed in accordance with MOC's Technical Standards of Highway Engineering. HHEC will also ensure that construction supervision, quality control, and contract management are performed in accordance with internationally accepted practices. 4. Road Safety. To ensure a reduction in LA, Schedule 6, Complied with. The international road accidents and a safe road network in para. 4 consultants reviewed the road safety the project area, HHEC will, in consultation components of expressway design and with ADB, implement the road safety the as-implemented road safety signage, communication, hazard barriers, facilities prior to expressway opening traffic monitoring, and other design features and no deficiencies were identified. of the project facilities recommended by the The emergency response plan has consultant conducting the road design safety been established. audit of the Project. HHEC will submit to ADB for review a report on its emergency response system prior to opening of the project facilities. 5. Human Resource Development and LA, Schedule 6, Complied with. Six overseas training Training. HHEC will develop human para. 5 modules were completed under the resource development plans, including Project with 29 staff receiving training. recruitment and training needs, based on Training workshops have been their future requirements and corporate conducted by the 29 staff trained strategy. overseas. More than 100 staff attended the training workshops. 6. Tolls. The toll for the project expressway LA, Schedule 6, Being complied with. HHEC has will be set at a level sufficient to fully satisfy para. 7 reviewed the toll structure and debt service obligations, operating and submitted a detailed report with their maintenance costs, and depreciation in PCR in March 2003. There has been excess of debt service, and to generate a no adjustment in the toll structure reasonable return on investment as adjusted Appendix 9 31 Reference to Covenant Loan Documents Status of Compliance for inflation from time to time. For the first 5 since opening the expressway. HHEC years of operations, HHEC will review the toll was reminded of its obligation to structure and levels annually and submit a review the structure and level of tolls report to ADB. on an annual basis and submit a report to ADB. 7. Corporate Governance. At the midterm LA, Schedule 6, Complied with. A brief report on review and at project completion, HHEC will para. 8 Strategic Planning and Financial submit to ADB a report on measures taken Planning was submitted to ADB in and a plan of action proposed to strengthen December 2002. Further improvement corporate governance in areas including: of corporate governance should be a board composition, for example, the long-term goal of HHEC. proportion and profile of outside directors, board committees, for example, for audit and executive compensation; the composition of these committees; and the preparation and disclosure of financial and corporate information. 8. Strategic and Financial Planning. At LA, Schedule 6, Complied with. A brief report was the midterm review and project completion, para. 9 submitted to ADB in December 2002. HHEC will submit to ADB a report on HHEC staff received appropriate measures taken and a plan of actions overseas training with respect to proposed to strengthen strategic and expressway operation and financial planning. Such reports will include a management under the Project. set of physical and financial criteria for HHEC Further strengthening of corporate to continually assess its corporate strategic and financial planning is performance. needed. 9. Nongovernment Financing. Six months LA, Schedule 6, Complied with. The operation of the prior to the opening of the project facilities, para. 10 two service areas has been leased to HHEC will analyze the feasibility of attracting private operators. The current financial nongovernment investment funds on the return of the Project is not sufficiently basis of project facilities, and report their high to attract outside investment. conclusions to ADB. Discussions have been held with other companies interested in purchasing all or part of HHEC. 10. Working and Debt Service Ratios. To PA, Sections 2.16 Not yet complied with. The specified ensure financial sustainability of the project (a) and 2.18 (a) working ratio is expected to be facilities, and of themselves, HHEC will achieved by 2005 and the specified maintain a working ratio for the project debt service ratio by 2006. facilities of not more than 15% and a debt service ratio for the project facilities and themselves of not less than 1.2. 11. Audited Accounts. HHEC shall PA, Section 2.09 Complied with. Audited project (i) maintain separate accounts for the Project accounts and audited corporate and its operations; (ii) have such accounts financial statements have been and related financial statements (balance submitted to ADB. The quality of audits sheet, statement of income and expenses, is good and audit opinion covered and related statements) audited annually, in issues relating to internal controls. 32 Appendix 9 Reference to Covenant Loan Documents Status of Compliance accordance with appropriate auditing There were no qualified audit opinions standards; and (iii) furnish to ADB, promptly issued during implementation. after their preparation but in any event not later than 9 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditor. 12. Environment. HHEC will ensure that LA, Schedule 6, Complied with. Adequate measures any adverse environmental impacts arising para. 11 have been taken to minimize any from the construction and operation of the adverse environmental impacts of the project facilities will be minimized by construction activities. Reviews of implementing the mitigation measures, environmental impacts are reported to environmental monitoring program, and other ADB on an annual basis. The State recommendations presented in the EIA. Environmental Protection HHEC will submit annual reports on Administration held its independent mitigation measures undertaken and results review and concluded that all of environmental monitoring program. mitigation measures had been undertaken appropriately. 13. Land Acquisition and Resettlement. LA, Schedule 6, Partly complied with. The first report HHEC will keep ADB informed of the para. 14 was received in July 2000. The second progress of implementation of the report was provided to the midterm resettlement plan through quarterly progress review mission in May 2001. ADB was reports and through two reports on not kept regularly informed of the achievement of resettlement objectives to be resettlement activities. Also, no submitted immediately following completion external monitor was engaged as of the resettlement plan and 1 year required in the LA. ADB did not do thereafter. sufficient supervision in this area. 14. Gender and Development. HPG and LA, Schedule 6, Complied with. Women were employed HHEC will follow the principles of ADB's para. 15 during construction and many have Policy on Gender and Development during been employed in toll collection implementation of the Project. stations and service areas. 15. Health Risks. HPG and HHEC, together LA, Schedule 6, Complied with. Information was with the appropriate authorities, will ensure para. 16 disseminated among the construction that contractors disseminate information on workers on the risk of socially the risks of socially transmitted diseases to transmitted diseases. Similar those employed during project information is disseminated to implementation. HPG and HHEC, together transport operators during operation of with the appropriate authorities, will also the expressway. ensure that similar information is disseminated to transport operators during operation of the expressway. 16. Monitoring and Evaluation. HHEC will LA, Schedule 6, Being complied with. HHEC engaged monitor and evaluate project effects to para. 17 two local institutes to conduct project ensure that the project facilities are managed benefit monitoring and evaluation in effectively and the benefits are maximized. line with the monitoring mechanism HHEC will collect data agreed with ADB prior envisaged at appraisal. Benefit to the commencement of project monitoring and evaluation was Appendix 9 33 Reference to Covenant Loan Documents Status of Compliance implementation, at project completion, and reported during construction and at then 5 years later. project completion. The next report is due 5 years after completion (2006). 17. Axle Loads. HHEC will take appropriate LA, Schedule 6, Complied with. Weigh-in-motion measures to prevent overloading on the para. 18 weighing stations, both fixed and project expressway by installing vehicle axle portable, have been established under weighing equipment at stations at selected the Project and are in operation. As of entry points, and by making suitable June 2004, new regulations have been arrangements for their operation in enacted requiring overloaded trucks to conjunction with the provincial public security offload excess freight before entering bureaus. Prior to operation of the project the expressway. This has had the expressway, HHEC will submit to ADB a effect of reducing the incidence of statement indicating legal axle load limits, overloading on the project expressway penalties for their infringement, and the plan from over 80% to less than 5%. for operation of the vehicle weigh stations. 18. Access Roads. To ensure that the LA, Schedule 6, Complied with. About 120 km of economic and social benefits of the Project para. 19 provincial roads and 20 km of county are adequately extended to those in the roads serving the expressway were project-influenced area, the Government will upgraded in 2001 by HPCD. Additional ensure that HPG and HHEC connect the link roads have been constructed and project expressway to the adjacent road the expressway system feeding into network through the construction of Harbin is being built, all of which will appropriate link roads and interchanges. result in expanding the influence of the HPG will ensure that feeder roads in the project expressway. project-influenced area are improved in conjunction with completion of the project expressway. 19. Design Review. HHEC will ensure that LA, Schedule 6, Complied with. A series of measures the project expressway pavement is para. 20 for improving pavement behavior and designed and constructed to withstand for reducing cracking was implemented extreme climatic differences. HHEC will in line with the arrangements agreed (i) submit pavement designs to ADB for upon at appraisal. While cracks have review prior to ADB's approval of bid developed, the extent of cracked documents; (ii) submit a statement of sections and crack width are limited alternative designs for pavement structures and are to be expected. The pavement to be assessed; (iii) based on the will continue to be monitored and assessment, amend the pavement designs appropriate maintenance employed to prior to commencement of pavement works prevent severe deterioration. in 2000; (iv) take into account advice received from the pavement design and construction consultants; and (v) ensure that adequate construction supervision and quality control procedures are in place during project implementation. ADB = Asian Development Bank, EIA = environmental impact assessment, HHEC = Heilongjiang Hashuang Expressway Corporation, HPG = Heilongjiang provincial government, HPCD = Heilongjiang Provincial Communications Department, LA = Loan Agreement, PA = Project Agreement, PCR = project completion report. 34 Appendix 10 CONTRACT PACKAGING: APPRAISAL VS ACTUAL HASHUANG EXPRESSWAY Table A10.1: Contract Packaging at Appraisal Number of Project Component Contracts Method of Procurement Civil Works 3a LCB Roadworks 7 ICB Buildings and Landscaping 2 LCB Equipment Maintenance, Toll 5 ICB Communications, Safety 5 IS Office Equipment and Vehicles 1 DP Consulting Services International 1 ICB Domestic 1a LCB DP = direct purchase, ICB = international competitive bidding, IS = international shopping, LCB = local competitive bidding. a Expected to be financed from the Executing Agency’s own resources. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Table A10.2: Actual Contract Packages Number of Method of Project Component Contracts Procurement Civil Works 3a LCB Roadworks 7 ICB Buildings 6 LCB Landscaping and Related Works 10 LCB Traffic Engineering Facilities 6 ICB Equipment Road Maintenance 12 ICB Vehicles 2 IS Supplementary Maintenance Equipmentb 5a LCB Tolling, Monitoring, and Communications System 1 ICB Consulting Services International 1 ICB Domestic 1a LCB ICB = international competitive bidding, IS = international shopping, LCB = local competitive bidding. a Financed from the Executing Agency’s own resources. b Line marker machines (13), ambulances (3), sweeping vehicles (2), guardrail cleaning vehicles (2), and special- purpose vehicle (1). Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. CONTRACT DETAILS FOR CIVIL WORKS, EQUIPMENT, AND CONSULTANTS HASHUANG EXPRESSWAY Type and Description Mode Contract Completion Name of Contractor/ Final Contract ADB Financing Contract No. of Proc. Signing Date Supplier/Consultant Amount $ Equiv. CNY $ Equiv. Civil Works 1. Subgrade, Pavement, Culvert, and Bridge B1 K00+000–K17+700 ICB 16 Sep 99 15 Sep 01 Heilongjiang Prov. Road 367,503,342 44,346,064 172,726,570 20,842,650 Bridge Cons. Gen. Corp., PRC B2 K20+100–K28+000 ICB 16 Sep 99 15 Sep 01 The 13th Eng. Bu. of MOR, 241,918,414 29,188,287 113,701,655 13,718,495 PRC B3 K30+450–K43+500 ICB 16 Sep 99 15 Sep 01 Heilongjiang Prov. Road 291,288,150 35,150,768 136,905,431 16,520,861 and Bridge Cons. Gen. Corp., PRC B4 K43+500–K58+000 ICB 16 Sep 99 15 Sep 01 Heilongjiang Prov. Road 236,129,617 28,488,598 110,980,919 13,389,641 and Bridge Cons. Gen. Corp., PRC B5 K58+000–K70+000 ICB 16 Sep 99 15 Sep 01 Beijing Urban Cons. Road 267,805,044 32,318,157 125,868,371 15,189,534 and Bridge Corp., PRC B6 K70+000–K83+000 ICB 16 Sep 99 15 Sep 01 Harbin Municipal Highway 182,324,151 21,998,553 85,692,351 10,339,320 Cons. Dept., PRC B7 K83+000–K93+600 ICB 16 Sep 99 15 Sep 01 Harbin Municipal Highway 215,378,534 25,985,543 101,226,500 12,213,035 Cons. Dept., PRC Subtotal 1,802,347,252 217,475,971 847,101,797 102,213,536 2. Building Works Con 1 Dongfeng Toll Station LCB 20 Oct 00 15 Sep 01 Harbin Electric Cons. Eng. 6,740,625 814,372 3,168,094 382,755 Co., PRC Con 2 Hacheng Toll Station LCB 20 Oct 00 15 Sep 01 The 4th Cons. Eng. Co. of 4,343,280 524,738 2,041,341 246,627 Heilongjiang Prov. Agri. Bu., PRC Con 3 Suiman Toll Station LCB 20 Oct 00 15 Sep 01 Harbin Ruixiang Cons. Eng. 4,523,584 546,521 2,126,084 256,865 Co., PRC Con 4 Heida Toll Station LCB 20 Oct 00 15 Sep 01 The 2nd Co. of China Cons 4,933,724 596,072 2,318,850 280,154 lst Eng Bu, PRC Con 5 Shuangcheng Toll LCB 20 Oct 00 15 Sep 01 Harbin Railway Eng. Gen. 6,502,441 785,600 3,056,147 369,232 Station Corp., PRC 11 Appendix Con 6 Lanling Toll Station LCB 20 Oct 00 15 Sep 01 Heilongjiang Prov. 4,397,095 531,238 2,066,635 249,682 HeijianwuCons. Eng. Co., PRC Con 7 Yunliang River LCB 20 Oct 00 15 Sep 01 Heilongjiang Longfei Cons. 37,399,345 4,518,413 17,577,692 2,123,654 Service Area Dev. Ltd., PRC Con 8 Lalin River Park LCB 20 Oct 00 15 Sep 01 China Coal Int'l. Eco. Tech 39,584,771 4,782,441 18,604,842 2,247,747 Toll Station Coop Gen Corp, PRC 35 Subtotal 108,424,865 13,099,396 50,959,685 6,156,716 Continued on next page CONTRACT DETAILS FOR CIVIL WORKS, EQUIPMENT, AND CONSULTANTS—continued 36 Type and Description Mode Contract Completion Name of Contractor/ Final Contract ADB Financing Contract No. of Signing Date Supplier/Consultant Amount $ Equiv. CNY $ Equiv. Proc. 3. Afforestation Works and Related Services Appendix 11 Con 1 K0+000–K20+100 LCB 29 May 01 15 Sep 01 Harbin Boshilv Garden 3,702,095 447,274 1,739,985 210,219 Afforestation Ltd., PRC Con 2 K20+100–K30+450 LCB 29 May 01 15 Sep 01 Harbin Sanchuan 2,233,154 269,802 1,049,582 126,807 Horticulture Ltd., PRC Con 3 K30+450–K43+461 LCB 29 May 01 15 Sep 01 Harbin Leitelvye Garden 3,088,428 373,136 1,451,561 175,374 Afforestation Co., PRC Con 4 K43+500–K58+000 LCB 29 May 01 15 Sep 01 Heilongjiang Dali Garden 2,620,000 316,538 1,231,400 148,773 Eng. Ltd., PRC Con 5 K58+000–K70+000 LCB 29 May 01 15 Sep 01 Changchun Hongda 2,314,425 279,621 1,087,780 131,422 Garden Afforestation Eng. Ltd., PRC Con 6 K70+000–K83+000 LCB 29 May 01 15 Sep 01 Heilongjiang Meihuan 1,940,000 234,383 911,800 110,160 Garden Afforestation Eng. Ltd., PRC Con 7 K83+000–K99+000 LCB 29 May 01 15 Sep 01 Harbin Hahong Afforestation 3,371,198 407,298 1,584,463 191,430 Eng Ltd,PRC Con 8 Hacheng, Suiman LCB 29 May 01 15 Sep 01 Harbin Beifang Garden Seedling 1,596,292 192,860 750,257 90,644 Interchange Area Afforestation Co. PRC Con 9 Heida, Wapenyao LCB 29 May 01 15 Sep 01 Mudanjiang Fengjing 1,287,417 155,540 605,086 73,104 Interchange Area Afforestation Ltd, PRC Con Shuangcheng, Lanling LCB 29 May 01 15 Sep 01 The 3rd Nursery of Harbin 904,016 109,219 424,888 51,333 10 Interch.Area City, PRC Subtotal 23,057,025 2,785,672 10,836,802 1,309,266 4. Traffic Engineering Facilities Lot 1 Steel Guardrail, Delineators and Fences ICB 28 May 01 15 Sep 01 Shenyang Traffic Eng Co, Ltd., 23,724,321 2,866,351 11,150,431 1,347,185 (K0+000–K30+450) PRC Lot 2 -ditto- ICB 28 May 01 15 Sep 01 Beijing Shen Huake Traffic 24,053,427 2,906,115 11,305,111 1,365,874 (K30+450–K70+000) Eng. Co., Ltd., PRC Lot 3 -ditto- ICB 28 May 01 15 Sep 01 Harbin Jiaoyan Traffic Eng. 18,712,687 2,260,849 8,794,963 1,062,599 (K70+450–K99+000) Co., Ltd., PRC Lot 4 Traffic Signs ICB 28 May 01 15 Sep 01 Harbin Bindao Highway 9,626,429 1,163,053 4,524,422 546,635 Facility Proj. Installation Co.Ltd., PRC Lot 5 Traffic Markings ICB 28 May 01 15 Sep 01 Beijing Expressway Traffic 5,195,918 627,768 2,442,081 295,051 Eng. Co., Ltd., PRC Lot 6 Glare Screen and ICB 28 May 01 15 Sep 01 Beijing Hanweida Trans. and 4,213,159 509,015 1,980,185 239,237 Flexible Guardrail Traffic Equip. Co Ltd, PRC Subtotal 85,525,941 10,333,151 40,197,193 4,856,581 Continued on next page CONTRACT DETAILS FOR CIVIL WORKS, EQUIPMENT, AND CONSULTANTS—continued Type and Description Mode Contract Completion Name of Contractor/ Final Contract ADB Financing Contract No. of Proc. Signing Date Supplier/Consultant Amount $ Equiv. CNY $ Equiv. 5. Roadworks financed by EA A1 K17+700–K20+100 LCB 30 Sep 98 15 Sep 01 Liaoning Prov. Road and 125,713,036 15,188,237 0 0 Bridge Cons.Co., PRC A2 K28+000–K30+450 LCB 30 Sep 98 15 Sep 01 Heilongjiang Prov. Hydraulic 89,918,308 10,863,635 0 0 and Elec Eng Corp, PRC A3 K93+600–K99+000 LCB 30 Sep 98 15 Sep 01 Heilongjiang Prov. Road and 144,596,299 17,469,651 0 0 Bridge Cons Gen Corp, PRC Subtotal 360,227,643 43,521,523 0 0 Total Civil Works 2,379,582,726 287,215,713 949,095,477 114,536,099 Equipment 1. Road Maintenance and Vehicles IFB–1 Self-Propelled Single Drum Vibratory Roller, ICB 21 Sep 00 17 Feb 01 Bomag A United Dominion 764,533 764,533 764,533 8 units Co., GER IFB–2 Soil Stabilizing Machine, 3 ICB 30 Aug 00 24 Feb 01 Wisecheer Engineering 928,500 928,500 928,500 units Co.Ltd., HKG IFB–4 Excavator, 1 unit ICB 31 Aug 00 14 Mar 01 Caterpillar China Ltd., PRC 168,000 168,000 168,000 IFB–5 Grader, 2 units ICB 30 Aug 00 3 Jun 01 Caterpillar China Ltd., PRC 302,600 302,600 302,600 IFB–6 Loader, 2 units ICB 31 Aug 00 6 Mar 01 Caterpillar China Ltd., PRC 298,000 298,000 298,000 IFB–7 Crane, 1 unit ICB 21 Sep 00 9 Feb 01 CMIC Heilongjiang Import 136,659 136,659 136,659 and Export Co., PRC IFB–8 Milling Machine, 2 units ICB 21 Sep 00 05 Apr 01 Wirtgen H.K. Ltd., HKG 515,974 515,974 515,974 IFB–10 Asphalt Mixing Plant, ICB 21 Aug 00 25 Feb 01 Long Elegance Investment 2,722,946 2,722,946 2,722,946 2 units Ltd., HKG IFB–11 Asphalt Pavers, 3 units, ICB 30 Aug 00 2 Jan 01 Swire Engineering Ltd.,HKG 947,881 947,881 947,881 Service Jeep, 4 units, IS 22 May 00 28 Jul 00 Wisecheer Eng. Ltd., HKG 375,000 375,000 375,000 and Road Testing Bus, IS 22 May 00 28 Jul 00 Wisecheer Eng. Ltd., HKG 154,000 154,000 154,000 2 units, Line Marker, 13 LCB 15 May 01 25 Jun 01 Beijing Wisecheer Road and 73,170 73,170 0 units Bridge Machine Ltd, PRC Emergency Ambulance, LCB 12 Sep 01 26 Sep 01 (2) Guangdong Yuehai Vehicle 177,850 177,850 0 3 units 2 Oct 01 (1) Ltd. Co.,PRC 0 Sweeping Vehicle, 2 units LCB 15 Nov 01 15 Nov 01 Jiangsu Jiangyang Ship 143,034 143,034 0 Manufacturing Ltd, PRC A Guardrail Cleaning LCB 25 Oct 01 10 Nov 01 Changsha Zhongbiao 89,247 89,247 0 ppendix 11 Vehicle, 2 units Ltd, PRC Special Purpose Vehicle, LCB 15 Dec 01 15 Dec 01 Fushun Crane 28,382 28,382 0 1 unit Manufacturing Co, PRC Subtotal 7,825,776 7,825,776 0 7,314,093 2. Tolling, Monitoring and Communication System ICB 18 Mar 02 15 Sep 02 Guizhou Prov. Bridge Eng. 5,161,535 5,161,535 42,722,616 5,161,535 Corp., PRC 37 Total - Equipment 12,987,311 12,987,311 42,722,616 12,475,628 Continued on next page CONTRACT DETAILS FOR CIVIL WORKS, EQUIPMENT, AND CONSULTANTS—continued 38 Type and Description Mode Contract Completion Name of Contractor/ Final Contract ADB Financing Contract No. of Proc. Signing Date Supplier/Consultant Amount $ Equiv. CNY $ Equiv. Consultant 1. International (financed by ADB) ICB Appendix 11 For pavement design and 29 Sep 99 31 Jul 01 BCEOM French Eng 532,065 532,065 532,065 construction, road safety, Consultants in assoc. and HRD and training with Scetauroute, FRA 2. Domestic (financed by EA) Design LCB 09 Jun 98 Aug 1998 Heilongjiang Prov. Highway Survey 56,592,283 6,834,817 0 0 and Design Institute, PRC Construction Supervision A2 LCB 08 Oct 98 15 Sep 02 Heilongjiang Yuansheng 9,538,146 1,151,950 0 0 Highway Eng Supervision Cons. Ltd., PRC B3, B4 LCB 31 May 99 15 Sep 02 Heilongjiang Yuansheng Highway Eng Supervision Cons Ltd, PRC A3 LCB 08 Oct 98 15 Sep 02 Beijing Yucai Trans. Cons 3,280,884 396,242 0 0 and Mgt. Corp., PRC A1 LCB 08 Oct 98 15 Sep 02 Heilongjiang Prov. Highway Eng. 11,190,277 1,351,483 0 0 Supervision and Cons. Ltd., PRC B1 LCB 16 Jul 99 15 Sep 02 Heilongjiang Prov. Highway Eng. Supervision and Cons. Ltd., PRC B5, B6 LCB 31 May 99 15 Sep 02 Heilongjiang Hualong Highway Eng 3,943,296 476,243 0 0 Supervision and Cons. Ltd. PRC B7 LCB 1 Jun 99 15 Sep 02 China Highway Consulting 2,056,595 248,381 0 0 Corp PRC B2 LCB 30 May 99 15 Sep 02 Northeast Forest University 3,122,454 377,108 0 0 Supervision and Cons. Ltd PRC Traffic Engineering LCB 20 Aug 00 15 Sep 02 Beijing Xingtaong Traffic Eng. 770,000 92,995 0 0 Facilities Supervision Corp, PRC Tolling, Monitoring, and LCB 16 Apr 01 15 Sep 02 Beijing Taike Highway 1,885,000 227,657 0 0 Communication Science Tech Ins, PRC Building Works LCB 12 Jul 00 15 Sep 02 Heilongjiang Prov. 1,175,000 141,908 0 0 Zhengxin Cons. Eng Supervision Corp., Afforestation Works LCB 25 Mar 01 15 Sep 02 Changchun Hongda 800,000 96,618 0 0 Ecology Gardens, PRC Gen Supervision Fee, PRC 23,817,091 2,876,460 0 0 Subtotal 118,171,026 14,271,863 0 0 Total Consultants 14,803,928 532,065 Total Contracts 315,006,952 0 127,543,792 ADB = Asian Development Bank, agri = agricultural, bu = bureau, co = company, comm = communications, cons = construction, corp = corporation, curr = currency, dept = department, dev = development, eco = economic, eng = engineering, equip = equipment, gen = general, ICB = international competitive bidding, int'l. = international, LCB = local competitive bidding, Ltd. = limited, mgt = management, PRC = People’s Republic of China, proj = project, trans = transport. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Appendix 12 39 TRAFFIC FORECASTS HASHUANG EXPRESSWAY A. General 1. The traffic forecasts estimated at appraisal were updated by the Project Completion Review Mission taking into account actual traffic on the project expressway and national highway (NH) 102. The assumptions underlying the traffic forecast made at the time of appraisal were reviewed and updated based on the prevailing economic conditions at the time of the Project Completion Review Mission and information collected from Heilongjiang Hashuang Expressway Corporation (HHEC). B. Traffic Flow, Composition, Growth Rates, and Diversion from NH102 2. At appraisal, average annual daily traffic (AADT) medium truck equivalent (MTE) for Hashuang Expressway was estimated at 7,302 for 2002 and 7966 for 2003, the first 2 years the expressway was expected to be opened to traffic. Traffic was to grow to 14,628 MTE in 2010 and 29,878 MTE in 2022, which represented annual average growth rates of 9.1% during 2003– 2010 and 6.1% during 2011–2022 (Table A12.1). The actual traffic on Hashuang Expressway was 4,947 MTE in 2002 and 6,102 MTE in 2003, about 32.3% lower than forecast for 2002 and 23.4% lower than that forecast for 2003. However, actual traffic has grown rapidly at the rate of 23.3% in 2003 and 14.5% in the first half of 2004 (Table A12.2). Since the opening of the expressway, much traffic has been diverted from the parallel NH102. The combined AADT MTE on NH102 declined from 6,390 in 1998 to 4,834 in 2002 and 2,821 in 2003 (Table A12.3). Total traffic in the corridor was 8,923 MTE in 2003 (expressway and NH102 combined). About 68% of the total traffic in the corridor used the new project expressway in 2003. 3. Based on the data collected from the Executing Agency (EA) and on the Project Completion Review Mission’s assessment, the traffic composition using the expressway has varied from projections at appraisal. At appraisal, it was envisaged that the ratio of freight to passenger traffic on the expressway would be 47:53. The actual ratio was 73:27 on the expressway . Higher than anticipated freight traffic is seen because province-wide through traffic is concentrated on the project expressway, which provides the only major road link between the most developed provinces in the south and east and Dalian port (the main commercial port of the northeastern part of the People’s Republic of China). The mix is expected to change over time with a higher proportion of passenger traffic that will develop in conjunction with further economic development in the northeast. As incomes increase, passenger car ownership will also increase. 4. The average traffic growth rates for Hashuang Expressway are now estimated at 13.7% for 2004–2009, 7.9% for 2010–2015, and 6.0% for 2016–2022. The growth rates are higher than forecast at appraisal in earlier years. The revised traffic forecasts for the project expressway are 14,265 MTE for 2010 and 31,273 MTE for 2022, which are marginally higher than the forecasts for 2022 at appraisal due to the accelerated economic development in Harbin and Shuangchang, a satellite city of Harbin. Statistical data released recently show that gross domestic product (GDP) of Harbin and Shuangcheng grew at 10%–15% and 13–17%, respectively, during 2001–2003 (Appendix 15). There is more car traffic on Hashuang Expressway than Changyu Expressway due to the rapid economic growth and more work trips between Harbin and the satellite city of Shuangcheng. 40 Appendix 12 5. A poultry and egg wholesale market facility was established near Shuangchang in 2000 while the expressway was under construction. Traffic generated by this facility was not included in the new traffic forecasts until 2006. The market will generate 200 AADT (in MTE) on the expressway by 2006. Traffic for the Harbin ring road section from Tuanjie to Wapenyao is 26.8% of the main section from Wapenyao to Lalinhe; this will reach 70% in 2008 after the remaining ring road sections are opened to traffic by the end of 2007, and is expected to reach 100% in 2014. Table A12.1: Traffic Forecasts at Appraisal for Hashuang Expressway (average annual daily traffic in medium truck equivalent) Freight Passengers Total Growth Rate Parallel NH102 Year (MTE) (MTE) (MTE) (%) (MTE) 1995 4,775 2002 3,432 3,870 7,302 2,226 2005 4,453 5,002 9,455 9.0 2,179 2010 7,095 7,533 14,628 9.1 2,100 2015 9,553 10,144 19,697 6.1 2,265 2020 12,865 13,660 26,525 6.1 2,430 2022 14,939 14,939 29,878 6.1 2,679 MTE = medium truck equivalent, NH = national highway. Source: Asian Development Bank and Heilongjiang Hashuang Expressway Corporation. Table A12.2: Actual and Revised Traffic Forecasts for Hashuang Expressway (average annual daily traffic in medium truck equivalent) Freight Passengers (MTE) (MTE) Small Medium Large AADT Year Truck Truck Truck Trailer Total Car Bus Total (MTE) 2002 820 1,477 1,291 38 3,626 950 371 1,321 4,947 2003 1,011 1,821 1,593 47 4,472 1,172 458 1,630 6,102 2005 1,372 2,488 2,213 89 6,162 1,627 638 2,265 8,427 2010 2,123 3,987 3,857 339 10,306 2,823 1,137 3,960 14,265 2015 2,826 5,495 5,782 713 14,815 4,213 1,741 5,954 20,769 2020 3,461 6,968 7,975 1,180 19,585 5,785 2,454 8,239 27,824 2022 3,753 7,662 9,069 1,407 21,891 6,567 2,815 9,382 31,273 AADT = average annual daily traffic, MTE = medium truck equivalent. Note: Conversion factor: 1 MTE = 2 passenger car units; 1 trailer =1.5 MTE. Source: National Highway Traffic Counting Manual (1995–2003), Ministry of Communications, and Asian Development Bank estimates. Appendix 12 41 Table A12.3: Actual Traffic on NH102 (Harbin-Lalinhe Section) Freight (MTE) Passengers (MTE) Small Medium Large AADT Year Truck Truck Truck Trailer Total Car Bus Total (MTE) 1995 624 993 977 513 3,107 554 357 911 4,018 1996 675 1,220 824 548 3,267 422 395 817 4,084 1997 839 1,633 1,332 845 4,649 862 695 1,557 6,206 1998 823 1,227 2,033 664 4,746 1,153 491 1,644 6,390 1999 806 820 2,734 483 4,843 1,444 287 1,731 6,574 2000 650 823 2,531 452 4,456 1,322 256 1,578 6,034 2001 514 714 1,898 335 3,461 1,008 197 1,205 4,665 2002 534 753 1,954 365 3,606 1,027 201 1,228 4,834 2003 341 512 488 263 1,604 845 373 1,218 2,821 2005 476 678 623 311 2,088 1,081 494 1,575 3,663 2010 744 1,102 772 524 3,141 1,598 772 2,370 5,511 2015 1,072 1,582 954 503 4,110 1,904 1,059 2,963 7,073 2020 1,406 2,067 1,075 331 4,878 2,067 1,323 3,390 8,268 2022 1,552 2,271 1,105 276 5,205 2,131 1,434 3,565 8,770 AADT = average annual daily traffic, MTE = medium truck equivalent. Note: Conversion factor: 1 MTE = 2 passenger car units; 1 trailer =1.5 MTE. Source: National Highway Traffic Counting Manual (1995–2003), Ministry of Communications, and Asian Development Bank estimates. 42 Appendix 13 ECONOMIC EVALUATION OF CHANGCHUN-HARBIN EXPRESSWAY A. Project Costs and Benefits 1. The economic evaluation of Changchun-Harbin Expressway followed the methodology used at appraisal, which compares the with-project and without-project situations.1 Without the Project, traffic in the project area will continue to use the existing national highway (NH) 102. The without-project case consists of minimum improvements to the existing parallel road to maintain a volume-to-capacity ratio of 1.0. The economic analysis covers 24 years, 1998–2022, comprising 4 years of construction and 20 years of expressway operations. 2. The project costs include capital, and operation and maintenance (O&M) costs. Based on the actual traffic performance, between 50% and 60% of NH102 traffic has been diverted to the expressway. Traffic is now lower on NH102, reducing congestion and vehicle operating costs (VOCs). The reduced transport costs with the Project have stimulated investment and agro-processing production in the project area, and some additional travel by passengers. For example, there is now significantly more traffic between Harbin and Shuangcheng, a satellite city of Harbin. The recent construction of the Dacheng corn processing facility in Dehui will generate some additional traffic along the project expressway. The diversion of freight and passengers from rail services in the transport corridor was not realized though, as the recent electrification of the railway has increased the capacity and quality of service of the railway. 3. As envisaged at appraisal, the Harbin ring road section of the Project acts as a bypass for the city, between the main alignments of the project expressway and Hatong expressway. The ring road does not carry much intracity traffic because it is 13 km from the city center and the whole ring road is yet to be completed. The ring road will attract some intracity traffic after 2007 when the whole ring road is completed and as the city grows. The two ring road sections for Changchun serve a bypass function for through traffic and carry intracity traffic that prefers speed to distance. The resulting benefits from reduced congestion and accidents for both cities have not been included in the economic analysis. B. Value of Costs and Benefits 4. Financial costs were converted into economic costs by applying shadow prices for each input item. Project costs and benefits were evaluated based on constant 2003 economic prices expressed in yuan. The overall economic cost is about 95% of the financial cost. The total economic cost of the Project at the end of project implementation in constant 2003 prices was 5% less than estimated at appraisal. 5. Benefits derived from the Project include (i) VOC savings for both diverted and generated traffic on the expressway, (ii) VOC savings on the remaining vehicles using NH102 due to reduced traffic congestion, (iii) avoided maintenance and investment expenditure on NH102, (iv) savings in passenger time costs on the expressway, (v) savings in time costs for the remaining passengers using NH102, and (v) avoided accident costs on the expressway and NH102 (Table A13.1). 1 At appraisal, the economic evaluation of Changchun-Harbin Expressway was presented as a whole (both sections together) because it is an integrated project. Appendix 13 43 Table A13.1: Type of Benefit as Proportion of Total Benefits Type of Benefit % of Total Benefits VOC Savings 64.7 Travel Time Savings 29.2 Accident Savings 1.9 Benefit from Generated Traffic 2.4 Savings in Capital and O&M Costs for NH102 1.8 Total 100.0 NH = national highway, O&M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank estimates. 6. The calculation of VOCs and time costs was based on discussions with transport engineers and data available in Heilongjiang and Jilin provinces. Major VOC savings are due to improved road conditions and vehicle speeds. VOC savings applied in the calculation are shown in Table A13.2. Passenger time savings have been realized from higher vehicle speeds for different types of vehicles. The time value for nonwork-related trips is 10% of that for work- related trips in 2003, 15% in 2010, 20% in 2020, and 25% in 2022. There is considerable evidence that passengers now pay more attention to time saving and treasure leisure time as quality of life improves. Table A13.2: Value of Vehicle Operating Costs and Average Speed VOC Value (CNY/km) Item Car Bus Light Heavy Trailer NH102 1.13 1.761.55 2.04 2.84 Expressway 0.92 1.631.28 1.73 2.63 Average Speed (km/h) Car Bus Light Heavy Trailer NH102 50 40 40 30 30 Expressway 100 80 80 70 70 km/h = kilometers per hour, NH = national highway, VOC = vehicle operating cost. Source: Asian Development Bank estimates. 7. Reducing in the number of traffic accidents is an important social objective. In terms of benefits, though, it accounts for less than 2% of the total. This is because only direct property damages are considered. The project expressway will reduce accidents in the corridor over the Project’s life, and this will have a substantial positive social impact. C. Economic Internal Rate of Return 8. The recalculated economic internal rate of return (EIRR) of the Changchun-Harbin Project Expressway was 16.3% (Table A13.4), compared with 18.9% at appraisal, due mainly to lower traffic in the first few years that the expressway is open to traffic (Appendix 13, para. 1). The recalculated EIRR for Hashuang Expressway was 15.3% compared with 15.2% estimated at appraisal (Table A13.5). The EIRR calculation was conservative, as the project costs and benefits of improved access roads were not included due to unavailability of evaluation data. 2 The EIRR estimated at appraisal was 21.5% for Changyu Expressway and 15.2% for Hashuang Expressway. 44 Appendix 13 The calculated EIRR is higher than the social discount rate of 12%; the Project can be considered economically viable. 9. A sensitivity analysis to assess the risk level is shown in Table A13.3. The Project is more sensitive to a change in benefits than in costs. The results of the sensitivity test show that a decrease in benefits by 30% is needed before the Project reaches an EIRR of 12%. The analysis indicates that the combination of circumstances to make the Project economically unviable is unlikely. Table A13.3: Sensitivity Analysis Change EIRR NPV Switching Value Item (%) (%) (CNY million) (%) 1. Base Case 16.3 2,731 2. Operation and Maintenance Cost 10 16.3 2,706 1,087 3. Benefits (10) 15.0 1,760 32 4. Combination of 2 and 3 14.9 1,734 31 EIRR = economic internal rate of return, NPV = net present value. Source: Asian Development Bank estimates. Table A13.4: Economic Internal Rate of Return 1998–2022 Changchun-Harbin Expressway (constant 2003 prices, domestic price numeraire, CNY million) Project Costs Project Benefits Project VOC Time Accident Generated Total Net Year Capital O&M Total Savings Savings Savings Traffic Benefits Benefit 1998 276.5 0.0 276.5 0.0 0.0 0.0 0.0 0.0 (276.5) 1999 1,507.4 0.0 1,507.4 0.0 0.0 0.0 0.0 0.0 (1,507.4) 2000 1,512.0 0.0 1,512.0 0.0 0.0 0.0 0.0 0.0 (1,512.0) 2001 1,506.8 5.8 1,512.6 0.0 0.0 0.0 0.0 0.0 (1,512.6 2002 1,602.0 28.5 1,630.5 115.1 97.8 10.2 3.4 226.5 (1,404.0) 2003 (10.7) 47.8 37.2 192.9 112.5 14.2 4.1 323.7 286.5 2004 (55.7) 50.4 (5.3) 258.1 133.1 16.3 5.4 412.8 418.1 2005 18.3 51.7 70.0 344.0 158.3 18.7 14.4 535.3 465.3 2006 20.3 53.5 73.8 486.7 184.4 20.7 19.0 710.8 637.0 2007 23.4 55.9 79.3 661.5 214.0 23.1 23.9 922.4 843.1 2008 (13.7) 58.2 44.5 910.9 267.8 27.6 31.2 1,237.6 1,193.1 2009 (13.7) 58.4 44.7 1,181.5 326.3 30.7 37.8 1,576.4 1,531.6 2010 (127.9) 59.2 (68.7) 1,471.0 373.5 33.1 68.6 1,946.2 2,014.9 2011 (18.3) 59.3 41.0 1,575.8 446.6 35.6 69.4 2,127.5 2,086.5 2012 498.5 59.8 558.3 1,691.2 531.2 38.5 70.4 2,331.2 1,773.0 2013 (18.3) 60.2 42.0 1,815.2 632.4 41.5 71.4 2,560.5 2,518.5 2014 (18.3) 60.7 42.4 2,005.4 770.2 47.4 74.6 2,897.5 2,855.1 2015 (18.3) 61.2 42.9 2,118.6 904.3 50.2 75.3 3,148.4 3,105.5 2016 (18.3) 61.6 43.3 2,236.1 1,068.6 52.9 77.4 3,435.0 3,391.7 2017 (18.3) 62.1 43.9 2,362.7 1,256.3 55.9 79.7 3,754.5 3,710.7 2018 (18.3) 62.5 44.2 2,496.5 1,476.2 59.0 82.8 4,114.5 4,070.2 2019 (18.3) 63.1 44.8 2,638.0 1,739.0 62.2 86.4 4,525.5 4,480.7 2020 (132.4) 63.6 (68.8) 2,787.5 1,860.2 65.5 87.1 4,800.4 4,869.2 2021 (22.8) 64.1 41.3 3,113.1 2,220.3 68.9 95.8 5,498.2 5,456.9 2022 (3,229.2) 64.8 (3,164.4) 3,468.1 2,831.8 68.3 108.3 6,476.5 9,640.9 Net Present Value at 12% 2,731.2 Economic Internal Rate of Return 16.3% O&M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank Estimates. Appendix 13 45 Table A13.5: Economic Internal Rate of Return, 1998–2022 Hashuang Expressway (Constant 2003 economic prices, domestic price numeraire, CNY million) Project Economic Benefits Project Project Economic Cost VOC Time Accident Generated Total Net Year Capital O&M Total Savings Savings Savings Traffic Benefits Benefits 1998 69.1 69.1 (69.1) 1999 585.2 585.2 (585.2) 2000 709.2 709.2 (709.2) 2001 799.6 5.8 805.4 (805.4) 2002 557.2 23.0 580.2 44.6 20.1 4.5 3.4 72.5 (507.7) 2003 (3.4) 25.9 22.5 55.5 26.7 4.2 4.1 90.4 67.9 2004 (27.4) 27.6 0.2 80.0 34.8 5.2 5.4 125.4 125.2 2005 (4.3) 27.7 23.3 108.3 44.5 6.1 6.9 165.8 142.4 2006 (4.3) 27.8 23.5 157.9 55.2 6.8 9.1 229.0 205.5 2007 (4.3) 28.0 23.7 219.6 68.5 7.7 11.7 307.5 283.8 2008 (4.3) 28.1 23.8 332.5 94.7 10.6 16.6 454.4 430.6 2009 (4.3) 28.2 23.9 438.6 120.2 11.9 20.7 591.5 567.6 2010 (40.3) 28.5 (11.8) 550.9 135.9 12.9 24.3 724.1 735.9 2011 (5.8) 28.6 22.8 592.1 166.3 14.0 25.1 797.5 774.6 2012 178.9 28.8 207.7 636.4 203.6 15.2 26.0 881.1 673.4 2013 (5.8) 29.0 23.2 684.0 249.2 16.4 27.0 976.6 953.4 2014 (5.8) 29.2 23.4 792.4 321.6 20.5 30.1 1,164.6 1,141.2 2015 (5.8) 29.4 23.6 834.6 385.7 21.7 30.9 1,272.8 1,249.2 2016 (5.8) 29.5 23.7 879.1 462.5 23.0 32.8 1,397.5 1,373.8 2017 (5.8) 29.7 24.0 926.1 554.8 24.4 35.1 1,540.3 1,516.4 2018 (5.8) 29.8 24.8 975.6 687.7 25.8 38.2 1,727.3 1,703.3 2019 (5.8) 30.1 24.4 1,027.8 852.1 27.4 41.7 1,948.9 1,924.6 2020 (41.8) 30.3 (11.5) 1,082.8 889.7 29.0 42.4 2,043.9 2,055.4 2021 (7.2) 30.5 23.3 1,206.8 1,116.0 30.7 48.4 2,401.8 2,378.5 2022 (1.0) 30.9 (1,332.8) 1,341.7 1,541.1 32.5 58.1 2,973.3 4,306.1 Net Present Value @ 12 percent 880.0 Economic Internal Rate of Return 15.3% O&M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank Estimates. 46 Appendix 14 FINANCIAL EVALUATION HASHUANG EXPRESSWAY A. General 1. The projected financial statements of the Hashuang Expressway Project were prepared in current terms for the period 1998–2022.1 Construction was completed in 2001, and the first full year of operation was 2002. The assumed local inflation rates are 3.0% for 2004–2022. The original exchange rate between US dollar and CNY was CNY8.28 per dollar at appraisal and the same rate was used in the project completion report evaluation. B. Financial Projections 2. Operating revenues from tolls are projected based on revised traffic projection and a base toll rate of CNY0.45 per passenger car per kilometer. Corresponding tolls for other vehicle types are CNY0.45 for a small truck, CNY0.85 for a bus or a medium truck, CNY1.10 for a large truck, and CNY1.20 for a trailer. The toll charges are assumed to increase in current terms once every 5 years to keep up with about two thirds of inflation (10% increase in 5 years).2 There would be no real increase in project tolls over the Project’s life span. 3. Annual incremental operation and maintenance (O&M) costs are calculated based on 2003 prices as follows: (i) salaries and other benefit costs of CNY10 million in 2003; (ii) materials, utilities, and other administration costs at an average cost of CNY11 million per year; and (iii) routine and spot maintenance costs estimated at CNY50,000 and CNY30,000 per km per year, respectively. Operating costs are projected to increase annually in line with domestic inflation. The maintenance costs are assumed to increase at 5% annually, faster than projected domestic inflation to reflect additional road maintenance needed as traffic grows. In current prices, the annual O&M costs are projected to rise from CNY30.1 million in 2004 to CNY39.9 million in 2012 and CNY57.2 million in 2022. In addition, periodic maintenance would be required after 10 years of operation at a unit cost of CNY1.95 million per km in 2003 prices and CNY2.54 million in 2012 prices. 4. Depreciation is calculated on a declining balance depreciation method with an average life of about 40 years of the main expressway component, 20 years of pavement component, and 10 years for equipment. 5. Two types of taxes are considered in the financial evaluation: business taxes of 5.5% on gross revenue and corporate income tax at 33% of net profit. 6. The Project was funded 32% by equity or grants, and 68% by long-term loans. In October 2003, Heilongjiang Hashuang Expressway Corporation (HHEC) prepaid the principal and interest of the ADB loan. At present, two outstanding loans come from the China Development Bank (CDB), including a US dollar loan borrowed for prepayment of the ADB loan and CNY1,088 million capital construction cost borrowed during construction. The local currency loans from CDB consisted of a term loan of 25-year maturity, including a 5-year grace period at a fixed interest rate of 5.93% repayable from 2003. In 2003, an additional $142 million term loan was obtained from CDB, repayable over 20 years from 2003, based on the 6-month London interbank offered rate and a fixed spread of 1% per annum. The two CDB loans are included in the financial statement shown in Table A14.2 (pages 49–50). 1 A full set of financial statements (1998–2022) for the Hashuang Expressway was prepared and is available upon request. 2 To reflect the actual situation in the country, it is assumed that the toll rate increase will be lower than projected inflation. Appendix 14 47 7. The main conclusions from the financial statement are as follows: (i) the forecast revenues under the base assumptions are sufficient to cover annual recurrent costs, depreciation, and debt servicing, and to generate reasonable profits from the expressway operations; (ii) the working ratio is assumed to be less than 15% from 2005; (iii) the debt service coverage ratio is expected to remain above 1.2 from the fifth year of the expressway opening to traffic (2006); and (iv) the debt-to-equity ratio decreases steadily from 68:32 in 2003 to 61:39 by 2009, indicating an acceptable financial position for the expressway under the proposed financing plan and toll structure. C. Financial Analysis 8. The financial internal rate of return (FIRR) was evaluated using a with- and without- project comparison. The major assumptions used for calculation of the FIRR are: (i) all projections were expressed in constant 2003 prices and covered the period 1998–2022; (ii) capital costs reflected the actual capital expenditures incurred during 1998–2002 but excluded interest during construction; (iii) O&M was based on annual incremental expenses up to 2003 (from 2004, all incremental O&M costs are adjusted to 2003 prices); (iv) operating revenues beyond 2003 were based on the revised traffic forecast and adjusted to 2003 prices, while toll rates were assumed to decline in real terms (para. 2); and (v) the residual value of the expressway was estimated based on a weighted depreciation of 3.46% per year. 9. The estimated weighted average cost of capital (WACC), after tax, in real terms was calculated using the actual capital mix and costs of funds. Costs have been considered as follows: (i) the applicable 10-year fixed swap rate plus a provision for CDB’s spread of 1% is used for US dollar debt; (ii) the estimated fixed interest costs of 5.93% per annum are used for the domestic loan funds; and (iii) the cost of equity is assumed to be 8%. The cost of debt is also adjusted to reflect the impact of income tax of 33%. The nominal cost of debt is converted to the real cost of debt by applying the domestic average inflation rate for domestic currency- denominated debt. 10. The recalculated FIRR in 2003 constant prices, computed on a before-tax basis, is 9% (Table A14.3), compared with 7.1% at the time of appraisal, due mainly to higher toll rates than estimated at appraisal. The FIRR calculated on an after-tax basis at project completion review is 6.8%, which also compares favorably with real WACC, also computed on an after-tax basis, of 3.2% (Table A14.3). The Project is considered both financially viable and sustainable. Sensitivity tests indicate that the conditions causing the Project's viability to fall below WACC are unlikely to occur. The sensitivity of the Project's financial indicators to cost and revenue variations is shown in Table A14.4. 48 Appendix 14 Table A14.3: Financial Internal Rate of Return (CNY million) Capital Project Total O&M Total Income and Net Cash Flow Year Investment Revenues Costs Business Tax After Tax 1998 (73.0) 0.0 0.0 0.0 (73.0) 1999 (617.9) 0.0 0.0 0.0 (617.9) 2000 (748.9) 0.0 0.0 0.0 (748.9) 2001 (847.9) 23.3 (2.1) 0.0 (826.7) 2002 (591.9) 117.8 (27.3) 0.0 (501.5) 2003 0.0 145.3 (29.1) 0.0 116.2 2004 0.0 165.1 (29.2) 0.0 135.9 2005 0.0 184.6 (29.4) 0.0 155.2 2006 0.0 221.6 (29.6) (11.8) 180.3 2007 0.0 242.0 (29.7) (24.2) 188.1 2008 0.0 302.7 (29.8) (52.0) 220.8 2009 0.0 329.1 (30.1) (66.4) 232.7 2010 0.0 346.5 (30.2) (77.0) 239.2 2011 0.0 402.6 (30.4) (103.1) 269.1 2012 (196.8) 425.7 (30.6) (114.5) 83.8 2013 0.0 448.0 (30.8) (120.4) 296.8 2014 0.0 517.6 (31.0) (150.8) 335.8 2015 0.0 533.6 (31.1) (160.3) 342.2 2016 0.0 607.4 (31.4) (192.2) 383.8 2017 0.0 627.5 (31.5) (202.7) 393.3 2018 0.0 646.8 (31.8) (211.9) 403.2 2019 0.0 666.7 (32.0) (182.2) 452.6 2020 0.0 687.4 (32.2) (232.0) 423.2 2021 0.0 785.9 (32.4) (273.1) 480.4 2022 1,423.9 885.0 (32.6) (314.1) 1,962.2 FIRR (before corporate tax) 9.0% FIRR (after corporate tax) 6.8% WACC 3.2% FIRR = financial internal rate of return, O&M = operation and maintenance, WACC = weighted average cost of capital. Source: Asian Development Bank estimates. Table A14.4: Sensitivity Analysis Minimum WACC FIRR Minimum Average Annual Item (%) (%) DSCRa Net Income Cash Flow Base Case 3.2 6.8 0.8 299 10 1. Revenues Decrease by 10% 3.2 6.1 0.7 254 (18) 2. O&M Increase by 10% 3.2 6.7 0.8 296 4 3. Worst Scenario (1+2) 3.2 6.1 0.7 252 (21) a Minimum debt service coverage ratio after 2003. DSCR = debt service coverage ratio, O&M = operation and maintenance, WACC = weighted average cost of capital. Source: Asian Development Bank estimates. Table A14.2: Financial Statements for the Year Ending 31 December 1998 through 31 December 2009 (CNY million) Item 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 A. Projected Income Statement Operating Revenues Toll Revenues 23.3 117.8 145.3 208.8 243.2 276.7 309.9 347.0 454.4 Less Business Taxes 0.7 3.5 4.4 11.5 13.4 15.2 17.0 19.1 25.0 Net Operating Revenue 22.6 114.3 140.9 197.3 229.8 261.5 292.9 327.9 429.4 Operating Expenses Operation and Maintenance 2.1 29.8 31.6 32.5 33.5 34.5 38.4 39.5 40.7 Major Maintenance-Capitalized Total Operating Expenses 2.1 29.8 31.6 32.5 33.5 34.5 38.4 39.5 40.7 Operating EBDIT 20.5 84.4 109.3 164.8 196.3 227.0 254.5 288.4 388.7 Less Depreciation 0.0 0.0 110.0 106.4 102.9 99.5 96.2 93.0 90.0 Operating EBIT 20.5 84.4 (0.7) 58.4 93.4 127.5 158.3 195.4 298.7 Less Interest Expense-ADB 0.0 0.0 63.1 61.1 59.1 57.0 54.8 52.4 49.9 Interest Expense-Local 0.0 0.0 62.2 58.9 55.6 52.4 49.2 46.0 42.7 Operating EBT 20.5 84.4 (126.0)(61.6) (21.3) 18.1 54.3 97.0 206.1 Income Taxes 6.0 17.9 32.0 68.0 Net Income 20.5 84.4 (126.0) (61.6) (21.3) 12.1 36.4 65.0 138.1 B. Projected Cash Flow Statement Cash Flows from Operating Activities Net Income 20.5 84.4 (126.0)(61.6) (21.3) 12.1 36.4 65.0 138.1 Add (deduct) Items Not Requiring Cash: Depreciation 110.0 106.4 102.9 99.5 96.2 93.0 90.0 Amortization of Deferred Assets Noncash Charges (credits) to Income 20.5 84.4 (16.0) 44.8 81.6 111.6 132.6 158.0 228.1 Changes in Accounts Payable & Receivables (116.5) 82.8 227.9 (532.8) 406.3 (63.0) 0.2 0.1 0.2 0.6 0.1 0.2 Net Cash Provided by Operating Activities (116.5) 82.8 227.9 (512.3) 490.7 (79.0) 45.0 81.7 111.8 133.2 158.1 228.3 Cash Flow from Investing Activities Construction Costs (84.7) (717.3) (869.3) (984.3) (687.1) Net Cash Provided by Investment Activities (84.7) (717.3) (869.3) (984.3) (687.1) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cash Flows from Financing Activities Proceeds from MOC Grant 50.0 100.0 350.0 70.0 Proceeds from Provincial Grant 75.0 200.0 230.0 0.0 Proceeds from Domestic Bank Loan 304.4 764.9 253.7 342.2 0.0 Proceeds from Withdrawals of ADB Loan 49.8 403.8 341.9 383.8 A Total Cash Inflow 304.4 939.7 957.5 1,264.1 453.8 14 ppendix Payment of Long-Term Debt-ADB 34.0 35.6 37.2 38.9 42.2 43.9 46.4 Payment of Long-Term Debt-Domestic Banks (576.8)27.3 27.3 27.3 27.3 27.3 54.6 54.6 Total Cash Outflow (576.8) 61.3 62.9 64.5 66.2 69.5 98.5 101.0 Net Cash Flow from Financing Activities 304.4 939.7 957.5 1,264.1 (123.0) (61.3) (62.9) (64.5) (66.2) (69.5) (98.5) (101.0) Net Increase (decrease) in Cash 103.2 305.2 316.1 (232.5) (319.3) (140.3) (17.9) 17.2 45.6 63.7 59.6 127.3 Cash at the Beginning of the Year 0.0 103.2 408.4 724.5 492.0 172.7 32.4 14.5 31.7 77.3 141.0 200.6 49 Cash at the End of Year 103.2 408.4 724.5 492.0 172.7 32.4 14.5 31.7 77.3 141.0 200.6 327.9 Continued on next page 50 Table A14.2—continued Item 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Appendix 14 C. Projected Balance Sheet Current Assets Cash 103.2 408.4 724.5 492.0 175.2 47.1 14.3 9.9 45.5 99.8 179.5 266.8 Accounts Receivable 122.5 98.2 15.1 502.2 25.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Others 3.9 5.3 5.4 69.4 Total Current Assets 225.7 506.6 739.6 994.2 200.4 47.1 14.3 9.9 45.5 99.8 179.5 266.8 Long-Term Assets Fixed Assets 3,342.7 3,342.7 3,342.7 3,342.7 3,342.7 3,342.7 3,342.7 Less Accumulated Depreciation 115.7 227.4 335.2 439.3 539.8 636.8 730.4 Net Fixed Assets 3,227.0 3,115.3 3,007.5 2,903.4 2,802.9 2,705.9 2,612.3 Work in Progress 84.7 802.0 1,671.3 2,655.6 3,342.7 Deferred Assets Total Assets 310.4 1,308.6 2,410.9 3,649.8 3,543.1 3,274.1 3,129.6 3,017.4 2,948.9 2,902.7 2,885.4 2,879.1 Current Liabilities Accounts Payable 6.0 64.5 209.3 163.6 92.9 4.4 4.5 4.7 4.8 5.0 5.2 5.4 Wages/Welfare Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Current Portion of ADB Loan 35.6 37.2 38.9 42.2 43.9 46.4 48.8 Current Portion of Domestic Loan 17.3 17.3 27.3 27.3 54.6 74.6 74.6 Total Current Liabilities 6.0 64.5 209.3 163.6 92.9 57.3 59.0 70.9 74.3 103.5 126.2 128.8 Long-Term Liabilities Long-Term Loans Domestic Bank Loans 304.4 1,069.3 1,323.0 1,665.2 1,088.4 1,053.8 1,036.5 1,009.2 981.9 927.3 842.7 778.1 ADB Loan 0.0 49.8 453.6 795.5 1,179.3 1,109.7 1,072.5 1,033.6 991.4 947.5 901.1 852.3 Total Long-Term Liabilities 304.4 1,119.1 1,776.6 2,460.7 2,267.7 2,163.5 2,109.0 2,042.8 1,973.3 1,874.8 1,753.8 1,630.4 Shareholders' Equity Paid-In Capital 0.0 125.0 425.0 1,005.0 1,075.0 1,075.0 1,075.0 1,075.0 1,075.0 1,075.0 1,075.0 1,075.0 Retained Earnings 0.0 0.0 0.0 20.5 107.4 (21.7) (113.4) (171.3) (173.7) (150.6) (69.6) 44.9 Total Shareholders' Equity 0.0 125.0 425.0 1,025.5 1,182.4 1,053.3 961.6 903.7 901.3 924.4 1,005.4 1,119.9 Total Liabilities and Shareholders' Equity 310.4 1,308.6 2,410.9 3,649.8 3,543.1 3,274.1 3,129.6 3,017.4 2,948.9 2,902.7 2,885.4 2,879.1 D. Ratios Working Ratio (%) 0.0 0.0 0.0 9.0 23.0 20.0 17.0 15.0 13.0 12.0 9.0 9.0 Debt-to-Equity Ratio 100.0 90.0 82.0 72.0 67.0 68.0 69.0 70.0 69.0 68.0 65.0 61.0 Debt Service Coverage Ratio 0.0 0.0 0.0 0.0 0.0 0.6 0.8 1.0 1.2 1.4 1.6 1.7 ADB = Asian Development Bank, EBDIT = earnings before debt, interest, and tax, EBIT = earnings before interest and tax, EBT = earnings before tax, MOC = Ministry of Communications. Source: Asian Development Bank estimates. Appendix 15 51 ENVIRONMENTAL AND SOCIAL IMPACT ANALYSIS HASHUANG EXPRESSWAY A. Environmental Impacts 1. Seven impact areas were identified during feasibility study and the preparation of the environmental impact assessment (EIA): (i) destruction of ground vegetation; (ii) land acquisition and resettlement; (iii) erosion; (iv) noise and vibration; (v) dust pollution; (vi) sewage from construction camps and service areas; and (vii) separation of communities by the expressway. 2. Actions and measures, in accordance with the EIA and national and local environmental protection laws and regulations, taken to protect the environment and mitigate adverse impacts included: (i) education of construction workers on environmental protection; (ii) a well-designed drainage system; (iii) landscaping along the expressway and borrow sites; (iv) systematic selection of borrow areas and control of excavation depth; (v) restoration of borrow sites and temporarily land acquisition for cropping; (vi) use of coal ash from power plants to replace soil for roadbed establishment; (vii) appropriate numbers of crossings and culverts on the expressway; (viii) noise warning signs and control of night operations at sensitive locations; (ix) supervision of the resettlement plan by local people’s congress and people’s political consultation conference; and (x) provision of employment to affected people during expressway construction. 3. Environmental protection measures and their effects were considered highly satisfactory by the final independent review of the State Environmental Protection Administration in September 2002. Well-maintained trees, grass, crossings, and culverts were noted by the Project Completion Review Mission. B. Social Impacts 1. Land Acquisition and Resettlement 4. About 1,088 hectares (ha) of land were acquisitioned and 490 people were resettled, representing 19% and 149% increases, respectively, over the resettlement plan figures. Consequently, the affected population increased by 9% from 3,666 to 4,006. 5. The implementation of the resettlement plan was highly satisfactory to the affected population because the relatively large compensation enabled them to invest in alternative and better income-generating activities. 6. A recent survey, conducted by Xinxing township of Shuangcheng municipality during May–June 2004, indirectly proved that the land acquisition and resettlement of the Project did not have any negative impacts on affected households. The township conducted a thorough consultation, combined with a questionnaire survey, of all households with respect to their attitudes toward land acquisition and resettlement. Survey results indicated that over 95% of the households are positive. 2. Employment During Construction 7. The Project Completion Review Mission visit to a contractor working on the Harbin ring road expressway indicated that the unskilled labor requirement for expressway construction is 52 Appendix 15 significant. It is estimated that the construction of Hashuang Expressway provided 17,500 person-months of employment for unskilled laborers. The contractor also advised that only 50% of the unskilled labor employment went to the local population because the population near Hashuang Expressway were highly involved in off-farm or urban employment during the construction (70% of households). 8. The Project Completion Review Mission learned that about 50% of households from Xinxing township of Shuangcheng municipality were employed during Hashuang expressway construction. Each household received employment of about 6–12 person-months during expressway construction. This resulted in about CNY2,700–5,400 income for each household, or 25–50% of a normal household’s annual income at that time. 3. Employment for Operations 9. About 752 people are formally employed in Heilongjiang Hashuang Expressway Corporation (HHEC) in its headquarters, nine toll stations, maintenance center, and rescue center but they are underrepresented in senior positions. 10. The two service areas employ about 250 people, most of whom are from the rural communities of Shuangcheng and the average work duration for each individual is about 1 year. In the case of Xinmin village, 15 girls with middle school education are working in the nearby service area with a salary of CNY4,800 per person per annum, twice of the average per capita annual income of rural Shuangcheng. 11. Overall, the operation of the expressway has provided some 1,000 positions or 10 positions per kilometer. Rural people hold only about one quarter of total positions, with most positions filled from the urban population of Harbin. 4. Area-Wide Service Provision by the Rescue Center 12. The rescue center of HHEC, with advanced modern facilities, has a good reputation in the province. It provides assistance whenever severe accidents occur. The center provides an average of 10 rescue services each year with minimum charges. 5. Commercialization of Service Areas 13. HHEC has leased out the service and parking areas to private operators, so that these areas are fully commercialized. 6. Poultry and Egg Market Expansion 14. Shuangcheng municipality has the second-largest poultry and egg wholesale market in the People’s Republic of China (PRC). The market was established in 2001 and it has been continuously expanding partly due to the opening of the expressway. The daily trading volume of the market is about 800 tons of eggs, which involves about 780 vehicles for transportation of eggs from farmers to the market. In addition, the feed production and supply industries involve more than 2,000 vehicles of various types. The influence area of the market, a radius of 240 km, covers Hashuang and Changyu expressways. About 320 tons of eggs are delivered to various destinations in the PRC by the expressway to various destinations outside the province. The impact of this market on traffic growth to the project expressway was not considered originally since most of the products were moved by rail. The market is expanding and daily output is Appendix 15 53 expected to increase to 1,400 tons of eggs in the next 2 years. It is projected that this increase will generate average annual daily traffic (AADT) in medium truck equivalent (MTE) of 200 on the expressway by 2006. 7. Traffic Improvement of Parallel Highway NH102 15. Observations of the expressway and the parallel NH102 revealed that about 90% of the through traffic, especially heavy trucks, are now using the expressway, which will significantly ease the congestion on NH102. It is also reported that accidents on NH102 are less since the expressway opened. 8. Insufficient Parking Area for Snowy Days 16. Heilongjiang is within the northern or cold temperate zone with long winters (late October to early April) and frequent snows. The two service and parking areas have insufficient parking area to accommodate the large numbers of vehicles wanting to get off the expressway on snowy days. 9. Conclusions 17. Environmental issues were well managed during expressway construction and established facilities are being well maintained. Protection and mitigation measures are in accordance with the EIA, as well as with national and local environmental protection laws and regulations. 18. Positive growth in the project area is already significant as evidenced by the large increase in gross domestic product per capita during the period 1998–2003 (Table 15.1). There are very positive social impacts in employment, facilitation of expansion of the market, and industrial development. The participatory approach for resettlement plan formulation and implementation was satisfactory and the local government has innovatively adopted it. 10. Recommendations 19. The design of service areas needs to be carefully considered for future expressways to include larger parking areas, so as to better accommodate drivers during periods of bad weather. 20. For future Asian Development Bank (ADB) projects, it is important that social impact analysis is monitored by executing agency and ADB supervision missions. 54 Appendix 15 Table A15: Socioeconomic Indicators of the Project Area and Heilongjiang Indicator Year Harbin Shuangcheng Heilongjiang 1998 9,218 791 37,730 2000 9,413 799 38,070 Population ('000s) 2001 9,411 803 38,110 2002 9,483 805 38,130 2003 9,543 806 38,150 1998 81,620 5,705 283,280 2000 100,273 6,873 325,300 GDP (CNY million) 2001 112,011 7,796 356,100 2002 123,212 8,992 388,220 2003 141,480 10,549 443,000 1998 8,505 7,246 7,508 2000 10,563 8,602 8,562 GDP per capita (CNY) 2001 11,842 9,707 9,349 2002 12,993 11,170 10,184 2003 14,872 13,099 11,615 1998 25,010 1,237 150,680 2000 28,806 1,560 166,440 Industrial Output (CNY million) 2001 31,839 1,842 176,780 2002 34,711 2,184 191,610 2003 42,100 3,119 224,860 1998 17,300 2,448 46,310 2000 17,667 2,260 35,700 Agricultural Output (CNY million) 2001 18,610 2,605 40,930 2002 19,958 2,943 44,700 2003 22,200 3,509 50,080 1998 4,985 4,268 4,269 2000 5,662 4,922 4,922 Urban Income (CNY/capita) 2001 6,444 5,440 5,440 2002 7,268 6,334 6,334 2003 8,139 6,968 6,968 1998 4,500 2,677 2,253 2000 4,098 2,359 2,148 Rural Net Income (CNY/capita) 2001 4,291 2,500 2,280 2002 4,457 2,807 2,405 2003 4,686 3,217 2,509 GDP = gross domestic product. Source: Heilongjiang Statistical Yearbooks.