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Technical Assistance Report

Project Number: 40628 December 2007

People’s Republic of : Preparing the – Railway Capacity Enhancement Project

CURRENCY EQUIVALENTS (as of 29 November 2007)

Currency Unit – yuan (CNY) CNY1.00 = $0.1352 $1.00 = CNY7.3969

ABBREVIATIONS

ADB – Asian Development Bank EA – executing agency EIA – environmental impact assessment EMDP – ethnic minority development plan MOR – Ministry of Railways PPTA – project preparatory technical assistance PRC – People’s Republic of China RP – resettlement plan TA – technical assistance

TECHNICAL ASSISTANCE CLASSIFICATION

Targeting Classification – General intervention Sector – Transport and Subsector – Railways Themes – Sustainable economic growth, capacity development Subthemes – Promoting economic efficiency and enabling markets, fostering physical infrastructure development, institutional development

NOTE

In this report, “$” refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations Group 2 Director General H. S. Rao, East Asia Department (EARD) Director N. Rayner, Transport Division, EARD

Team leader M. Parkash, Senior Transport Specialist (Railways), EARD Team members S. Ferguson, Senior Social Development Specialist (Resettlement), EARD A. Maxwell, Environment Specialist, EARD o o 100 00'E M O N G O L I A 120 00'E NANNING-KUNMING RAILWAY

t CAPACITY ENHANCEMENT PROJECT o U r u m IN THE q i PEOPLE'S REPUBLIC OF CHINA (Y Huang He ello w R ive r) Dongsheng Shuoxian Yumen Bazhou Tianjin Bohai North Sea SHENMU-YAN'AN RAILWAY Yulin Yuci Gantang Suide Mucun Shehe Fengteng TAIYUAN-ZHONGWEI RAILWAY 35 o 00'N Tunilu JING-JIU RAILWAY Yan’an North Shijiusuo SHANXI-XIAOLIU RAILWAY Xin Xiang Yanzhou Yellow Sea o Yueshan 35 00'N Houma Zhongjiacun Tongguan Xinfeng Xinyi Xi'an Qingling Tunnel Huaiyuan -XI'AN RAILWAY ZHENGZHOU-XI'AN RAILWAY Shangnan Yangping Yangpingguan Xixia Nanyang Hanan Tongbai ns Xiaolin ai Changfeng Mounta nt Gucheng ou ins M Hefei Xiangfan Huangchuan ie Lishan ab 'an DAXIAN-WANXIAN RAILWAY D Daxian Shanghai Changxing XIZANG (Ya Wanzhou ngtze (Wanxian) River) Lichuan HEFEI- RAILWAY Fuling Huaiyuan YICHANG-WANZHOU RAILWAY Jiujiang Chongqing Scenic Area DALI- RAILWAY Xiangtang Sanjiangcheng Jiang Zhongdian Chang Lijiang GUIZHOU-SHUBAI RAILWAY Ji'an Lanping o Dukuo 25 00'N Henyang Guiding Zhanyi Baiguo GANZHOU- RAILWAY Hongguo Pingzha Baoshan Dali Weishe o Kunming Longyan 25 00'N Chuxiong Luocheng Dingnan Yiliang Sancha Longchuan Kaiyuan Heshan Shiping Mohei Litang Sanshui Changping GUANG-MEI-SHAN RAILWAY Nanning Yaogu Ping Xiang SAR Hepu Hechun Macao Fangcheng MACAO SAR Zhakou VIET NAM National Capital YAOGU-MAOMING RAILWAY LAO PEOPLE'S Provincial Capital DEMOCRATIC Santang City/Town REPUBLIC Yangpu Existing Railway Nada Chahe Planned Railway Shilu Basou Railway Projects Financed by the Asian Development Bank Completed N Under Construction Proposed Sea 0 50 100 150 200 250 River Provincial Boundary Kilometers International Boundary Boundaries are necessarily authoritative.

100 o 00'E 120 o 00'E

07-3954 HR

I. INTRODUCTION

1. The Government of the People’s Republic of China (PRC) requested technical assistance (TA) for preparing the Nanning–Kunming Railway Capacity Enhancement Project for Asian Development Bank (ADB) financing. ADB considered this request, and a fact-finding mission visited the project area in October 2007, carried out an initial poverty and social assessment and a rapid environmental assessment, and discussed technical and socioeconomic issues with representatives of the Government and provincial and local governments and the Ministry of Railways (MOR). This paper is based on the understanding reached by the Government and the mission on the impact, outcome, output, activities, implementation arrangements, cost, financing arrangements, and terms of reference for the TA. The TA is included in ADB’s country assistance program for 2007.1

II. ISSUES

A. Growth in the Railway Transportation Sector

2. From 1978, when market-oriented economic reforms were introduced, through to 2006, the PRC has experienced sustained rapid economic growth, which has resulted in an rapid increase in demand for transportation. Annual growth in passenger transport was 9% and freight transport grew at 7.6% during 1978–2006. Railway is the principal mode of freight transport in the PRC. In 2006, the modal split for freight ton-kilometers (km) was 47.5% for railways followed by 27.9% for inland waterways and seashore shipping, 21.1% for roads, 3.3% for pipelines, and 0.2% for civil aviation. In 2006, road traffic accounted for 52.8% of total passenger-km, followed by railways with 34.5%, civil aviation with 12.3%, and coastal and inland waterways with 0.4%.

3. The rapid economic growth has resulted in high demand for railway transportation. Between 1978 and 2006, railway freight grew from 535 billion ton-km to 2,172 billion ton-km, equivalent to an annual growth rate of 5.14%; passenger traffic grew at 6.65% annually, increasing from 109 billion passenger-km to 666 billion passenger-km. The average distance for passenger journey in railways increased from 134 km in 1978 to 535 km in 2006, compared with the average distance for passenger journey on roads, which grew from 35 km to 55 km over the same period. For freight, the average railway journey is 770 km compared with 65 km for road in 2006. Despite such growth rates, railway capacity has lagged behind demand because of inadequate transportation capacity in the system. Given the railway’s important role in providing economic transportation, these constraints will continue to affect efficient economic growth adversely if they are not removed. Because of these concerns, the Government has adopted an aggressive plan to improve the railways, and has planned network extensions and construction in the underserved areas.

B. Railway Strategy, Reforms, and Development Plan

4. The Government’s policy on railway development is focused on (i) removing constraints and expanding the capacity of the system, (ii) encouraging the construction of joint venture local railways to promote the development of local economies, (iii) improving the efficiency and safety of the existing system by using new technology and modern management tools in planning and operation, (iv) reducing operating subsidies through appropriate pricing and the commercialization of services, (v) initiating institutional and structural reforms to increase

1 The TA first appeared in ADB Business Opportunities on 26 March 2007.

2 autonomy and accountability, and (vi) encouraging nongovernment investment in infrastructure and related services.

5. The 10th Five-Year Plan (2001–2005) identified transportation, including railway development, as a priority. By the end of 2005, a total investment of CNY308 billion for capital construction was made for constructing 6,458 km of new lines, providing 3,275 km of double lines and electrifying 6,259 km of tracks. In 2004, the State Council approved the new Railway Development Plan covering the period up to 2020. The plan seeks to expand the railway network from 72,000 km to 100,000 km by 2020. Increasing train speed is a major goal. The train speeds will be raised to over 200 km per hour on the trunk network by 2020. Priority will be given to the development of railways in unserved areas and regions that lack transport and have remained less developed. The route network length will increase by 16,000 km in the western region of the PRC to reach a network length of 40,000 km by 2020. To improve operational efficiency, steps will be taken to separate passenger and freight trains on key rail corridors.

6. The 11th Five-Year Plan (2006–2010) continues to emphasize railway development, and seeks to speed up railway construction. The plan envisages (i) constructing 17,000 km of new lines with the network length reaching over 90,000 route-km; and (ii) the length of the double lines and electrified lines reaching 45% of the network length. It seeks to (i) build a dedicated passenger railway network through the construction of passenger dedicated lines; (ii) develop coal transport corridors by increasing the capacity of existing lines; (iii) expand the railway network to 34,000 km in the poor western region; (iv) build international corridors at the in the southwest and northwest; and (v) develop a countrywide intermodal container network. The total estimated investments are CNY1.5 trillion or about $190 billion over the next 5-year period.

C. ADB Strategy and External Assistance

7. ADB’s strategy for the PRC railway sector focuses on (i) expanding the railway system by constructing new lines in unserved areas that are less developed and poor; (ii) promoting energy conservation and environmental sustainability; (iii) modernizing equipment, enhancing safety, and increasing the capacity to improve transport efficiency on key routes of the national railway system; (iv) commercializing railway operations to sustain efficient operations; and (v) increasing railway competitiveness in the transport sector through restructuring and reform. The strategy will continue to focus on railway development in underserved areas in poor interior provinces/region to link lower income regions with growth centers so as to facilitate pro-poor growth—a prerequisite to reducing poverty. Policy issues addressed in the railway sector include institutional development, financial reforms, safety enhancement, development of dedicated passenger lines, corporatization, marketing and business development, and tariff setting with improved cost recovery. ADB has enhanced policy dialogue with MOR and is providing TA support for policy reforms to MOR.2 This consultation will continue to further the reforms in the sector.

8. ADB is the major source of external financing in the PRC railway sector, followed by the World Bank. ADB has focused on the development of railways in less developed inland provinces to promote growth and reduce poverty. It has provided 14 loans totaling about $2.9 billion to finance the construction of about 1,921 km of provincial railways operated by joint ventures with MOR, and 5,541 km of new railway lines under five national railway projects.

2 ADB. 2005. Technical Assistance to the People’s Republic of China for the Railway Passenger and Freight Policy Reform Study. Manila.

3

Since 1984, the World Bank has provided 11 loans totaling over $2.6 billion for (i) 10 national railway projects to expand railway capacity on high priority corridors, modernize system-wide technology, and strengthen institutional capabilities; and (ii) one local railway project. Since 1979, has provided about Y558 billion for 15 railway projects to expand rail transportation capacity.

D. Proposed Project

9. The project involves the construction of 755 km of class I double track electrified railway line, and the construction of 9 new and upgrading of 18 existing railway stations in the hilly and mountainous area in Yunnan and Guizhou provinces, and Guangxi Zhuang Autonomous Region. The railway will link Kunming, the capital of Yunnan Province to Nanning, the capital of Guangxi Zhuang Autonomous Region in southwest PRC. Over 349 km of the railway line will traverse Guangxi Zhuang Autonomous Region, 157 km will be in Guizhou Province, and 249 km will go through Yunnan Province. The project impact area includes 18 counties and cities with a total population of about 7.5 million. The total rural population is about 71.2% (5.34 million) and about 8% live below the poverty line.

10. Most people living in the area work in agriculture, characterized by a low level of productivity. Despite rich natural resources and good tourist potential, people have remained largely poor and cut off from the mainstream development because of lack of transportation. There is no expressway connecting this region, and the capacity of the existing single-line railway is fully saturated. The existing road passes through difficult terrain, has limited passing capacity, and is in poor condition. The proposed railway line will connect with Kunming–Dali, Kunming–Chengdu, and Kunming–Hekou at Kunming; Quijiang–Liupanshui and Liupanshui– Weishe in the north; Nanning–Pingxian, Nanning–Fangcheng, and Nanning–Maoming on its way to Guangzhou; and Nanning–Henyang and Nanning–Huaihua in the north. The proposed railway will also connect with the Nanning–Qinzhou, Nanning–Guilin, Longlin– (ADB- financed), Kunming–Luliang–Quijing, Kunming–Shilin, Shilin–Mengzi, and Kunming– expressways. It provides the shortest link from Nanning to Kunming (755 km compared to 850 km of road and 830 km of existing railway line) and will connect to the proposed Pan-Asian Railway going to Viet Nam, , , , and Singapore. This will provide accessibility to the Greater Subregion through Hekou, Pingxian, and the of Fangcheng and Beihai in the PRC; of in Viet Nam; and to South and . It will help in promoting regional cooperation in the .

11. The project will help develop the railroad network in an unserved area and enhance pro- poor economic growth. It is included as a priority project in MOR’s 11th Five-Year Plan, as well as the railway development plan, and will support the Government’s western region development strategy. The proposed railway will facilitate economic development and integration of the poor western region, and is expected to stimulate industrial and natural resources development as well as tourism and related industries. The railway will, in the construction and operation phase, increase local people’s access to market and social services, and give them an opportunity to improve their standard of living. Completed and ongoing ADB- financed railway projects show that such projects create jobs in construction and loading and unloading operations as well as other income-generating activities (such as material and food supply, and small services around construction sites). The lower transportation costs after project completion will make goods and services available at more economic prices to people living in the area, including the poor, and provide them with opportunities to sell their produce to broader markets. Most people living in the project area have not traveled beyond the nearest town because of high transport fares. The railway will offer them more affordable, reliable, and 4 punctual transport than is currently available. The project will improve local people’s standard of living; and influence all aspects of their daily life, directly or indirectly, in a positive manner. It is consistent with ADB’s country strategy program3 and will support the Government’s strategic policy objective of greater developmental emphasis on poor, interior, and underserved areas of the PRC by improving transportation linkage with growth centers.

12. The project envisages the construction of an electrified double-track railway line with subgrades, bridges, and tunnels. Because of the hilly topography along the Nanning–Kunming railway route, tunnels and bridges will comprise 65% of the route length.

13. It will be undertaken as a joint venture between MOR and Yunnan and Guangxi Zhuang Autonomous Region provincial governments, and will be implemented by MOR. A feasibility study is being prepared, with cost estimates that reflect the current prices of materials and construction and traffic forecasts. MOR advised ADB that the project proposal is expected to be submitted to the National Development Reforms Commission by December 2007. The feasibility study, environmental impact assessment (EIA), and draft resettlement plan will be submitted to ADB by February 2008. Resettlement under the project will be implemented in accordance with national laws and provincial regulations, and ADB’s Involuntary Resettlement Policy (1995).

III. THE TECHNICAL ASSISTANCE

A. Impact and Outcome

14. The TA aims to help develop an efficient, reliable, and affordable railway transport system in Yunnan and Guizhou provinces and Guangxi Zhuang Autonomous Region. It will (i) help the Government in reviewing and strengthening the project feasibility study, EIA, plan for resettlement, and related studies to meet ADB requirements for possible financing; (ii) identify policy measures and institutional development needs that will improve railway operational efficiency and management, and ensure the financial sustainability of operations; and (iii) identify the social dimensions to be incorporated in project design, including preparing an ethnic minority development plan, and recommending measures to enhance social and gender development and reduce poverty in the project area. The outcome will be the design of a project suitable for ADB financing. The TA framework is in Appendix 1.

B. Methodology and Key Activities

15. The work under the TA will comprise the following: (i) reviewing and strengthening the feasibility study to meet ADB requirements for (a) technical aspects related to construction and operation and railway safety; (b) economic and financial analyses, including a review of the traffic forecast and financial performance of operation of the project facilities; and (c) financial management assessment, including a review of budgetary and planning control, financial and management accounting, and internal control and audit systems; (ii) developing a set of measurable performance indicators, including socioeconomic and poverty, and a sustainable mechanism for monitoring during and beyond the construction stage; (iii) recommending policy measures that will improve railway operational efficiency and management, and assessing specific institutional development needs to operate the project facilities commercially and ensure financial sustainability; (iv) reviewing the potential for private sector participation in construction, provision of services, and tourism development; (v) reviewing and updating the EIA report and preparing a summary EIA with appropriate environmental monitoring and

3 ADB. 2006. Country Strategy and Program Update (2007–2008): People’s Republic of China. Manila.

5 management plans; (vi) reviewing and refining the resettlement plan, so that involuntary resettlement will be consistent with ADB policy and guidelines; (vii) reviewing the initial poverty and social assessment; carrying out a detailed poverty and social analysis, including a baseline socioeconomic profile of the population living in the project area; and preparing relevant mitigation and enhancement measures (Appendix 2); (viii) preparing a development plan for ethnic minorities, according to ADB guidelines; and (ix) undertaking a distribution analysis of the project and associated developments on poverty reduction (including poverty impact). The key activities are field surveys; document review; data analysis; and consultations with stakeholders, including government officials, project beneficiaries, and affected persons (including ethnic minority groups, women, and the poor).

C. Cost and Financing

16. The cost of the TA is estimated at $670,000 equivalent, of which the Government requested that ADB finance $500,000 (Appendix 3). The TA will be financed on a grant basis by ADB’s TA funding program. MOR will provide the remaining $170,000 equivalent in local currency cost for counterpart staff members, office facilities, and support services and local communications. The Government and MOR were advised that approval of the TA does not commit ADB to financing any ensuing project.

D. Implementation Arrangements

17. The TA will require about 39 person-months of consulting services (15 international and about 24 national) spread over 5 months, including fieldwork. The consultants will be engaged by ADB in accordance with its Guidelines on the Use of Consultants (2007, as amended from time to time). A consulting firm will be selected and engaged following the quality and cost- based selection method, and simplified technical proposals will be required. The international consultants will have expertise in transport economics, traffic forecasting, railway and operation, institution building, resettlement, and social and poverty analysis. These consultants will also have expertise in financial analysis, financial management, and environmental sciences. Expertise required from national consultants will be in the fields of transport economics, railway engineering and operation, and resettlement and socioeconomics. Environmental engineering will also be an area of expertise. Appendix 4 gives the outline terms of reference for consulting services. The consultants will procure equipment in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time), and will be handed over to the Executing Agency on completion of TA.

18. The TA is expected to begin in May 2008 and be completed by December 2008. MOR, as the Executing Agency, will be responsible for supervising and monitoring TA activities. The Government and MOR agreed to provide the assistance required for implementing the TA. MOR will make available (i) all relevant reports, studies, and information; (ii) suitable office accommodation and appropriate and qualified counterpart staff; (iii) local transport facilities needed to visit the site; and (iv) any other assistance that the consultants may reasonably request, including liaison with the Government and local authorities.

IV. THE PRESIDENT'S DECISION

19. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of $500,000 on a grant basis to the Government of the People’s Republic of China for Preparing the Nanning–Kunming Railway Capacity Enhancement Project, and hereby reports this action to the Board. 6 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Performance Data Sources/Reporting Assumptions Summary Targets/Indicators Mechanisms and Risks Impact Assumptions

An efficient, reliable, and Passenger volumes MOR statistics and • Forecast economic growth affordable railway increased by 5% from operating data before and rates are realistic and transport system is 666.2 million passenger- after the project achievable developed in Yunnan and km in 2006, and freight Guizhou provinces and traffic volumes from Progress reports • Traffic forecasts for the Guangxi Zhuang 2,172 ton-km in 2006; in Nanning–Kunming Railway Autonomous Region. 2015 and in 2025. Project administration are realized missions and project Travel time reduced by completion report • Passengers currently using 30% in 2015 over 2006. other transport modes will divert to the Nanning– Postevaluation surveys and Kunming Railway 20% reduction in cost of reports from EA

travel in 2015 over 2006 • Local governments are Local government statistics committed to local area Number of shops, tourist development. centers, hotels, and businesses established near station areas by 2015 and 2025.

Outcome Assumptions

Project design and Memorandum of Memorandum of • Government willing to feasibility study improved understanding signed by understanding address necessary changes to a level suitable for ADB the Government and ADB in priorities financing and agreed by during appraisal mission • Government obtains the Government and ADB. of March 2009. necessary additional sources of funding

Outputs Assumption

1. Technical assessments Inception report submitted ADB document registration • Effective stakeholder completed to the Government and participation and ownership ADB by June 2008. Government document developed 2. Project design registration requirements Summary EIA, poverty Risks accomplished and social analysis, resettlement plan, and • Restricted availability and ethnic minority access to information and development plan, if government personnel required, submitted to the • Restricted access to Government and ADB by geographical sites July 2008.

Draft final report submitted to the Government and ADB by August 2008.

Appendix 1 7

Activities with Milestones Inputs

1.1 Analyze transport demand in the region (by July 2008) • 15 person-months of 1.2 Assess the adequacy of railway infrastructure (by July 2008) international and 1.3 Review technical aspects related to railway construction and operation (by July 24 person-months of 2008) national consultant services 1.4. Develop a set of verifiable performance indicators, including socioeconomic and • ADB: $500,000 poverty (by August 2008) • Government: $170,000 1.5 Conduct consultations with MOR, World Bank and other donors to recommend policy reform measures and institutional development needs (by August 2008) 1.6 Conduct surveys, discussions, and meetings with private investors to explore opportunities for private sector participation (by July 2008)

2.1 Carry out consultations with stakeholders, including government officials; project beneficiaries; and affected people, including ethnic minority groups and women and the poor (June–August 2008) 2.2 Carry out social and poverty assessment (by July 2008) 2.3 Complete baseline survey (by July 2008) 2.4 Carry out financial and economic analysis (by August 2008) 2.5 Carry out institutional analysis (by August 2008) 2.6 Complete summary environmental impact assessment (by July 2008) 2.7 Prepare resettlement, and ethnic minority development plan (by July 2008) 2.8 Finalize project design and monitoring framework (by August 2008)

ADB = Asian Development Bank, EA = executing agency, EIA = environmental impact assessment, km = kilometer, MOR = Ministry of Railways.

8 Appendix 2

INITIAL POVERTY AND SOCIAL ANALYSIS

Country/Project Title: People’s Republic of China/Nanning–Kunming Railway Capacity Enhancement Project

Lending/Financing Project Loan Department/ East Asia Department/ Modality: Division: Transport Division

I. POVERTY ISSUES A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy Better railway transport will provide an enabling environment for poverty reduction through improved access to markets, employment, advanced education and medical facilities, new knowledge and information, families working or studying in other regions, other social and economic services, and facilitation of economic development and job creation. Improved access to markets opens up opportunities for expansion of locally produced goods and services. Construction and operation of the railway generates additional employment opportunities in local communities, providing an additional source of income for people, including poor households in the project area. This will speed up economic growth in this area, benefiting local residents, including the poor.

B. Targeting Classification 1. Select the targeting classification of the project:

General Intervention Individual or Household (TI-H); Geographic (TI-G); Non-Income MDGs (TI-M1, M2, etc.)

2. Explain the basis for the targeting classification: The project rationale is based on economic development, but some complementary measures can be included in project design and implementation to enhance social inclusion.

C. Poverty Analysis 1. If the project is classified as TI-H, or if it is policy-based, what type of poverty impact analysis is needed?

2. What resources are allocated in the project preparatory technical assistance (PPTA)/due diligence? Social and poverty analysis will be conducted as was done for previous railway projects. Further analysis will be required for this project because many of the local people are ethnic minorities and the poverty incidence is quite high in some counties within the project area.

3. If GI, is there any opportunity for pro-poor design (e.g., social inclusion subcomponents, cross subsidy, pro-poor governance, and pro-poor growth)? Yes, all railway projects have included pro-poor design elements and this project area has both great need and opportunities. The proposed measures will be included in the ethnic minority development plan (EMDP).

II. SOCIAL DEVELOPMENT ISSUES A. Initial Social Analysis Based on existing information: 1. Who are the potential primary beneficiaries of the project? How do the poor and the socially excluded benefit from the project? The primary beneficiaries are people and industries located in the cities and towns along the proposed alignment. However, the existing and future local road networks will ensure that benefits flow to smaller towns and rural areas in the counties the project will pass through. The People’s Republic of China policy for micro-urbanization, whereby rural residents migrate into local towns and cities for nonfarm jobs, will be significantly advanced by the railway project. The railway construction will also generate many temporary jobs for unskilled local laborers, which will help them make the transition to permanent off-farm employment.

2. What are the potential needs of beneficiaries in relation to the proposed project? The local people and industries need modern transport services, which will be provided by the new railway; in particular, stations areas will become hubs for new economic growth. The rural communities will require better local road networks to benefit fully from the railway. The rural poor will need some training and preferential hiring for construction jobs. Special attention will be given to ethnic minorities.

3. What are the potential constraints in accessing the proposed benefits and services, and how will the project address them? Many of the rural villages in the mountainous areas have no transport access. This is the reason for high poverty incidence. The government policy is to encourage people to move to towns and cities, but many ethnic minorities are reluctant to do so.

Appendix 2 9

B. Consultation and Participation 1. Indicate the potential initial stakeholders. Government, urban communities, industries, villages, and residents.

2. What type of consultation and participation (C&P) is required during the PPTA or project processing (e.g., workshops, community mobilization, involvement of nongovernment organizations and community-based organizations, etc.)? Community meetings will be conducted to discuss the station area development plans. Village meetings will be conducted for resettlement planning to ensure good economic rehabilitation measures are formulated.

3. What level of participation is envisaged for project design? Information sharing Consultation Collaborative decision making Empowerment

4. Will a C&P plan be prepared? Yes No Please explain. C&P plans will be prepared for the resettlement plan (RP) and the EMDP.

C. Gender and Development 1. What are the key gender issues in the sector/subsector that are likely to be relevant to this project/program? The improved railway transport will benefit women equally and will enhance their mobility. Employment opportunities for women will occur during and after project completion (e.g., unskilled work during construction, station area development, and induced economic development).

2. Does the proposed project/program have the potential to promote gender equality and/or women’s empowerment by improving women’s access to and use of opportunities, services, resources, assets, and participation in decision making? Yes No Please explain. Women will have improved access to higher quality services in cities along the railway line.

3. Could the proposed project have an adverse impact on women and/or girls or to widen gender inequality? Yes No Please explain The project will cause adverse impacts because of land acquisition and resettlement, which will be addressed in the RP, and increased risk of communicable diseases, which will be addressed in the EMDP. Livelihood opportunities and training requirements will be included in the RP.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Significant/Limited/ Plan or Other Action Issue Nature of Social Issue No Impact/Not Known Required About 15,000 people Full Plan Involuntary Resettlement will be displaced and Significant Short Plan 75,000 will have partial Resettlement Framework loss of farmland. No Action Uncertain There are many ethnic Indigenous Peoples minorities along the Significant Plan proposed alignment, Other Action both in Yunnan (Miao, Indigenous Peoples Yi) and in Guangxi Framework (mainly Zhuang). No Action Uncertain Railway construction Labor and induced economic Significant Plan Employment Opportunities growth will generate (direct and indirect) Other Action Labor Retrenchment employment. No Action Core Labor Standards Uncertain Railway fares will be Affordability less than bus fares. Positive impact Action No Action Uncertain

Other Risks and/or There will be increased Limited after mitigation Plan Vulnerabilities risk of communicable Other Action HIV/AIDS diseases, which No Action Human Trafficking requires mitigation. Uncertain Others (conflict, political instability, etc.), please specify

10 Appendix 2

IV. PPTA/DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the terms of references for the PPTA (or other due diligence) include poverty, social, and gender analysis and the relevant specialist/s? Yes No If no, please explain why. Social specialists will be responsible for poverty, social, and gender analysis; and preparation of the EMDP.

2. Are resources (consultants, survey budget, and workshop) allocated for conducting poverty, social and/or gender analysis, and C&P during the PPTA/? Yes No If no, please explain why.

Appendix 3 11

COST ESTIMATES AND FINANCING PLAN ($ '000)

Total Item Cost A. Asian Development Bank (ADB) Financinga 1. Consultants a. Remuneration and Per Diem i. International Consultants 280.0 ii. National Consultants 84.0 b. International and Local Travel 33.0 c. Reports and Communications 7.0 2. Equipmentb 8.0 3. Training, Seminars, and Conferences 2.0 4. Surveys 25.0 5. Miscellaneous Administration and Support Costs 2.0 6. Representative for Contract Negotiations 6.0 7. Contingencies 53.0 Subtotal (A) 500.0

B. Government Financing 1. Office Accommodation and Transport 60.0 2. Remuneration and Per Diem of Counterpart Staff 70.0 3. Others 40.0 Subtotal (B) 170.0

Total 670.0 a Financed by ADB’s technical assistance funding program. b Including computer hardware and software, photocopier, facsimile machine, and other equipment to be procured under the consultant’s contract, in accordance with procedures acceptable to ADB, and whose ownership will be transferred to the Government. Source: ADB estimates.

12 Appendix 4 OUTLINE TERMS OF REFERENCE FOR CONSULTANTS

A. Scope of Services

1. The scope of the technical assistance (TA) includes (i) railway engineering and operations; (ii) economic and financial analyses; (iii) policy measures to improve operational efficiency and management; (iv) environmental impact assessment (EIA) report with appropriate environmental monitoring and management plans; (v) a resettlement plan; and (vi) poverty and social analysis, including an ethnic minority development plan if necessary.

B. Terms of Reference

2. The tasks under the TA will include, but will not necessarily be limited to, the following:

3. Railway Engineering and Operations. The consultant will have the following tasks:

(i) Review the Government’s planning for development of a transportation network and other infrastructure in the project area—including building the Nanning– Kunming Railway complementary road network, constructing link and access roads to the hinterland, other infrastructure, and social development programs. Document details of projects and/or programs—giving estimated cost, funding source, implementing agencies, schedules, and benefits envisaged. (ii) Analyze project and alignment alternatives to determine if the least-cost solution is proposed while minimizing environmental impact and involuntary resettlement. Review the capacity of connecting railway lines, identify network constraints that may affect traffic to and from the Nanning–Kunming Railway, and review plans for their mitigation. (iii) Assess how the project will enhance regional cooperation with Greater Mekong Subregion countries. Evaluate the regional benefits of the proposed railway and suggest options (including intermodal and facilitation measures) to maximize the traffic potential within the People’s Republic of China (PRC) and with the Greater Mekong Subregion. (iv) Review all technical aspects presented in the feasibility study and preliminary designs, including safety aspects during construction and operation and maintainability of the new railway line after its completion. Review and update the cost estimates on the basis of current prices of goods and services, including the costs of environmental mitigation measures and monitoring, land acquisition, and resettlement. Revised base cost estimates should be provided to the financial analyst for computation of price contingencies and interest and other charges during construction. Prepare a list of contract packages (with justification and estimated contract amount) for Asian Development Bank (ADB) financing that may be procured using international competitive bidding procedures, in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). (v) Review the implementation arrangements and the organizational setup for project management and maintaining project accounts, and make recommendations for any required changes. Prepare an implementation schedule and a schedule for disbursement of loan funds and counterpart funds. (vi) Review the requirements for tourism development, including provision of facilities and operational arrangements. Assess which of these could be offered to the public and/or private sector on a profit-sharing basis to facilitate tourism development in the project area.

Appendix 4 13 (vii) Prepare a design and monitoring framework that outlines the impact, outcome, outputs, and activities and inputs under the project, in accordance with staff instructions on the use of logical frameworks for ADB-assisted loans and TA.

4. Economic Analysis. The consultant will have the following tasks:

(i) Include in the economic analysis (a) an economic analysis of the project as further described in this section; (b) an economic analysis of the program for development of associated transport infrastructure, such as roads and other infrastructure that would help maximize poverty reduction; (c) an economic analysis taking into account items (a) and (b) combined; (d) a distribution analysis, including poverty impact ratios for items (a) and (b) taken separately and combined; and (e) an alternative analysis to identify the least-cost solution. All economic analyses should be done in accordance with ADB’s Guidelines on Economic Analysis of Projects, Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects, and Handbook on Poverty and Social Analysis.1 (ii) Review the project rationale based on a problem diagnosis and provide a basis for ADB involvement. Assess the relevance and priority of the project to the transport sector strategy and ADB’s and the Government’s developmental strategies and the millennium development goals. (iii) Assess service differentiation with road transportation in terms of types of transport services demanded, bus and truck service complementariness, and competition. Review the demand for transport of goods by the railway based on origin-destination data and traffic forecast by commodity. Review the demand for passenger traffic based on an origin-destination survey. Develop a passenger profile for the railway. The forecast of freight and passengers should be subdivided into categories, to show the source of the traffic and to enable the benefits of the railway and modal competition to be estimated. The forecast should be subdivided into traffic diverted from roads, traffic diverted from other modes, and traffic generated. The traffic forecast should cover a period of 20 years from the start of project operation, under two scenarios: (a) a base-case scenario; and (b) a low scenario that takes consideration of the experience gained and lessons learned with similar projects in the past, in which the actual traffic was less than the forecasts because of delays in the implementation of envisaged developmental projects that were expected to provide traffic for the project and/or any other reasons. (iv) Identify all project costs and benefits, comparing with- and without-project situations. Estimate the economic internal rate of return on the basis of non- incremental and incremental economic benefits and economic costs (including economic capital, operation, and maintenance costs) in constant economic prices. In an economic analysis, evaluate the environmental aspects and analyze poverty reduction benefits envisaged under the project. During project operation, include in the economic analysis the effects on poverty reduction through the provision of goods at affordable prices because of more economic and cheaper rail transportation, increased prices of goods received by rural producers at markets in urban areas, and less costly personal travel. Also include the incremental benefits related to the project. (v) Undertake a sensitivity analysis to assess the effects of adverse changes in key assumptions that underline the economic analysis, including but not limited to

1 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila; ADB. 2001. Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects. Manila; and ADB. 2001. Handbook on Poverty and Social Analysis. Manila.

14 Appendix 4 project costs, traffic, and implementation delays. Express the results as a sensitivity indicator and a switching value. If the project is sensitive to the value of a key variable, recommend measures to minimize the risk. Carry out a quantitative risk analysis in accordance with ADB’s Handbook for Integrating Risk Analysis in the Economic Analysis of Projects.2 (vi) Develop for project monitoring, together with item (i), a set of verifiable and monitored performance indicators, including operational, financial, environmental, socioeconomic, and poverty reduction parameters. Specify baseline targets for the socioeconomic and poverty indicators, and a sustainable mechanism for monitoring during and beyond the construction stage. Assess the developmental impact of the project, focusing on generated economic activities. Draw up a project performance management system.

5. Financial and Institutional. The consultant will have the following tasks:

(i) Undertake a financial analysis of the project in accordance with ADB’s Guidelines for the Financial Governance and Management of Investment Projects Financed by ADB,3 including a financial return at constant prices and financial projections over 10 years at current prices. Calculate the financial internal rate of return and the weighted average cost of capital for comparison with the financial internal rate of return. Conduct a sensitivity analysis, including the effects of a change in the exchange rate. Prepare the financial projections of the existing railway administration in the project area on a pro forma basis. (ii) Undertake a sustainability analysis looking at both financial implications and implementation capacity. This should discuss any policy instruments to be installed to ensure the project’s sustainability, including tariffs, maintenance, etc. (iii) Review the status of private sector participation in the railway sector. Assess the potential for private sector participation in the construction of project facilities and provision of services for operation and tourism development, and assess the financial impact. (iv) Review the status of reforms in the railway sector (since 1985). Document the status of their implementation, achievements and lessons learned, and impact of reforms on the operational efficiency and profitability of the national railway and the project. Review the 11th Five-Year Plan and the reforms that are proposed to be implemented in the future, together with their likely impacts. Prepare a sector note or an appendix on railway reforms and reflect the status in a matrix, together with supporting background and description. (v) Review and recommend additional areas for reform in the railway sector in general and the project in particular that may be pursued under the project. Review the organizational structure for the proposed project and identify specific areas where support is required for institutional development.

6. Environmental. The consultant will have the following tasks

(i) The Ministry of Railways (MOR) has contracted the Second Survey and Design Institute to carry out investigations and prepare the draft EIA report prior to commencement of the TA. The TA consultant will (a) review the draft EIA to ensure it conforms to ADB’s Environment Policy (2002) and Environmental Assessment Guidelines;4 (b) assist the Executing Agency (EA) in carrying out

2 ADB. 2002. Handbook for Integrating Risk Analysis in the Economic Analysis of Projects. Manila. 3 ADB. 2002. Guidelines for the Financial Governance and Management of Investment Projects Financed by Asian Development Bank. Manila. 4 ADB. 2003. Environmental Assessment Guidelines. Manila.

Appendix 4 15 further investigations and analyses, as required, and in finalizing the environmental impact statement, management plan, and monitoring plan by incorporating the comments from ADB and the provincial environmental protection bureaus; and (c) prepare the summary EIA, an environment management plan, and supplement to the EIA, if required. (ii) The major issues to be assessed in the EIA, based on a preliminary environment scoping, include impacts on (a) ecological resources, (b) cultural heritage sites and tourism (c) soil erosion, (d) noise and air quality, (e) spills of hazardous or toxic chemicals, and (f) local community disturbances from construction activity. The EIA will include detailed plans for (a) protection of sensitive ecological areas, (b) protection or enhancement of environmental resources that promote tourism, and (c) mitigation of environmental impacts from construction activities. (iii) The consultant will (a) determine costs of the proposed environmental measures, (b) appraise the level of cost against expected environmental benefits, (c) assist the EA in incorporating appropriate mitigating measures into the project design, (d) prepare contractor specifications for environmental management and monitoring, and (e) prepare terms of reference and budget for independent environment monitoring and evaluation. The consultant will assist the EA with public consultation and EIA preparation.

7. Poverty and Social Analysis. The consultant will have the following tasks:

(i) Prepare socioeconomic and poverty profiles for the areas (counties and townships) to be served by the railway and local roads. Collect data through statistical records, necessary field surveys, key informant interviews (e.g., officials of local governments, women’s federation, business associations, community groups, and others) and participatory community appraisal techniques. Conduct surveys to develop a profile of transport services and costs that are currently available in the project areas and assess whether accessibility is affordable for low-income groups. This information will also serve as a baseline for performance monitoring. (ii) Conduct, based on the initial poverty and social assessment, a poverty and social analysis in accordance with ADB’s Handbook for Integrating Poverty Impact Assessment in the Economic Analysis of Projects and Handbook on Poverty and Social Analysis (footnote 1) and Assess how the proposed construction of the railway will help improve people’s incomes and livelihoods. In collaboration with the economist and resettlement specialist, estimate (a) the number of project beneficiaries by area, occupation, and income level (poor, low, medium, and high); and (b) the number of adversely affected people by type of impact. Recommend measures to enhance benefits and minimize adverse impacts, particularly for the poor and ethnic minorities. (iii) Assess other social issues, including those related to ethnic minorities and gender and vulnerable groups, and recommend appropriate measures to address impacts and promote development opportunities during construction and operation and maintenance of the railway. Prepare an ethnic minority development plan, as set out in ADB’s Policy on Indigenous Peoples (1998). Carry out a detailed gender assessment of the project area. If the project is gender-sensitive, formulate strategies and an action plan to enhance project benefits and improve the gender balance. (iv) Assist MOR in establishing consultation and participatory processes that will continue throughout project design, construction, and operation. Identify stakeholders and representatives to be consulted to incorporate their needs and demands into the project. Prepare a public participation and consultation status

16 Appendix 4 report and plan for project implementation. This consultation plan could be combined with the environment and resettlement aspects. (v) Review local government policies, strategies, and programs for poverty reduction and regional economic development, as these pertain to the project areas. Analyze how the proposed railway development project will complement government development programs. Consult with local governments to identify development initiatives that could complement the railway project, particularly those targeted at the poor and ethnic minorities, and identify possible sources of funding for these initiatives. (vi) Develop, together with the economist, a set of verifiable and easily monitored socioeconomic and poverty indicators. Specify baseline targets and assist with the preparation of the performance monitoring and evaluation systems, including a reporting format and how to measure indicators during and beyond the construction stage.

8. Resettlement. The consultant will have the following tasks:

(i) Review the draft resettlement plan (RP) and prepare modifications as required to comply with ADB’s Involuntary Resettlement Policy (1995) and Operations Manual F2 on Involuntary Resettlement (2003). Conduct resettlement household surveys to ensure adequate understanding of social impacts. The RP must include a village-level impact assessment of project affected people, land, assets, and occupations. Prepare gender-disaggregated socioeconomic data on affected persons, identify and discuss specific socioeconomic impacts to women, and provide recommendations on how to mitigate them. (ii) Define categories for impact and compensation eligibility of affected people, and prepare an entitlements matrix covering compensation and other assistance for all types of impacts, to achieve full replacement for lost assets, income, and livelihoods. (iii) Prepare, for seriously affected villages, village economic rehabilitation plans that will restore the incomes of affected people and host people. Identify specific measures for severely affected people, poor people, ethnic minorities, affected women, or other vulnerable households. (iv) Assist the EA and relevant local government officials in initiating and expanding consultation with affected communities, local leaders, local proponents, and local stakeholders who may be opposed to the project. Prepare a consultation plan for the EA and a format for documenting consultation with affected people. Assist the EA in preparing a resettlement information booklet, and distribute this to all affected villages and households. (v) Assess and justify that (a) the compensation standards are based on replacement value, and (b) the overall resettlement budget is sufficient to acquire the land and implement the resettlement plan based on the proposed entitlements and rehabilitation plans. (vi) Review the organizational structure and capacity for resettlement implementation, and recommend improvements and actions required before the start of land acquisition. Assist MOR in preparing a detailed resettlement implementation schedule and a plan for external and internal monitoring and evaluation.

C. Schedule and Reporting Requirements

9. Submit (i) an inception report (within 3 weeks) and a preliminary social analysis (within 6 weeks of starting work); (ii) a brief progress report (each month); (iii) a draft summary EIA,

Appendix 4 17 together with the EIA and a supplement to the EIA, a draft resettlement plan, a draft ethnic minorities development plan; and poverty and social analysis (within 3 months of starting work); and (iv) the draft final report (within 4 months of starting work), which will be discussed at a tripartite meeting involving the Government, ADB, and the consultant; and (v) the final report (within 2 weeks of the tripartite meeting). All reports will be submitted to ADB in the English language (three copies) and to the Government and MOR in the English and the Chinese languages (three copies of each).