Evaluation of ADB's Assistance for Roads and Railways In
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Evaluation Study Reference Number: SAP: PRC 2007-04 Sector Assistance Program Evaluation April 2007 Sector Assistance Program Evaluation of Asian Development Bank Assistance for Roads and Railways in the People’s Republic of China Operations Evaluation Department Asian Development Bank CURRENCY EQUIVALENTS Currency Unit – yuan (CNY) At Country Operational At Country Strategy At Operations Strategy and Program Evaluation (April 1997) (October 2003) (September 2006) CNY1.00 = $0.1210 $0.1208 $0.1258 $1.00 = CNY8.2965 CNY8.2766 CNY7.9468 ABBREVIATIONS ADB – Asian Development Bank ADTA – advisory technical assistance COS – country operational strategy CSP – country strategy and program PRC – People’s Republic of China BTOR – back-to-office report EARD – East Asia Department EATC – East Asia Transport and Communications Division EFYP – Eleventh Five-Year Plan, 2006-2010 EIRR – economic internal rate of return EPRS – enhanced poverty reduction strategy FIDIC – Fédération Internationale des Ingénieurs Conseils FIRR – financial internal rate of return GDP – gross domestic product ICAC – Independent Contracts Against Corruption ICB – international competitive bidding LCB – local competitive bidding LJVR – local joint venture railway LPP – Local People’s Procuratorate MCD – municipalities communication department MOC – Ministry of Communications MOF – Ministry of Finance MOR – Ministry of Railways NDRC – National Development and Reform Commission NFYP – Ninth Five-Year Plan, 1996-2000 NTHS – National Trunk Highway System OED – Operations Evaluation Department PCD – provincial communications department PCR – project completion report PPER – project performance evaluation report PPR – project performance report PPTA – project preparatory technical assistance PRS – poverty reduction strategy RRA – regional railway administration RRP – report and recommendation of the President SAPE – sector assistance program evaluation SPC – Supreme People’s Court SPP – Supreme People’s Procuratorate TA – technical assistance TCR – technical assistance completion report TFYP – Tenth Five-Year Plan, 2000-2005 TOR – terms of reference WTO – World Trade Organization NOTE In this report “$” refers to US dollars. KEY WORDS asian development bank, development effectiveness, people’s republic of china, sector assistance program evaluation, railway, road, transport, sector strategy, value added Director R.B. Adhikari, Operations Evaluation Division 2, Operations Evaluation Department (OED) Team Leader T. Duncan, Principal Evaluation Specialist, Operations Evaluation Division 2, OED Team Members R. Lumain, Senior Evaluation Officer, Operations Evaluation Division 2, OED C. Roldan, Senior Operations Evaluation Assistant, Operations Evaluation Division 2, OED Operations Evaluation Department, SE-6 CONTENTS Page EXECUTIVE SUMMARY iii MAPS xii I. INTRODUCTION AND BACKGROUND 1 A. Introduction 1 B. Background 1 C. Scope and Objectives 2 D. Evaluation Methodology 3 E. Organization of the Report 4 II. RETROSPECTIVE SECTOR ANALYSIS 4 A. Introduction 4 B. Road Subsector 6 C. Railway Subsector 7 III. ADB STRATEGY FOR SUPPORTING ROADS AND RAILWAYS 9 A. Positioning within ADB Country Strategy and Program 9 B. ADB Sector Strategy and Program 10 C. Comparison with other Donor Support 20 IV. PERFORMANCE OF PROJECTS AND TECHNICAL ASSISTANCE 20 A. Introduction 20 B. Projects 21 C. Technical Assistance 29 V. VALUE ADDED BY ADB OPERATIONS 32 A. Introduction 32 B. Value Added by ADB Projects 32 The guidelines formally adopted by the Operations Evaluation Department (OED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. As the Director General of OED managed ADB’s operations in the People’s Republic of China from 1995 to 2004, he took no part in preparation or review of the evaluation.Approval of this report was delegated to Director, Operations Evaluation Division 2. The consultants who assisted in the preparation of the report were Stein Hansen, Clell Harral, Guangbin Zhao, Hu Fangfang, Wu Guobao, and T. F. Jones, III. Although with the exception of T.F. Jones III, each had previous involvement in ADB-assisted transport projects in the People’s Republic of China, none took part in the evaluation of projects they had been connected with. To the knowledge of the management of OED, there were no conflicts of interest among the persons preparing, reviewing, or approving this report. VI. OVERALL ASSESSMENT, CONCLUSIONS, LESSONS, 41 AND RECOMMENDATIONS A. Overall Assessment 41 B. Conclusions 45 C. Key Lessons 46 D. Recommendations 46 APPENDIXES 1. ADB Loans to the People’s Republic of China for Roads and Railways, 48 Approved in 1997–2005 2. ADB Technical Assistance to the People’s Republic of China for Roads 50 and Railways, Approved in 1997–2005 3. Retrospective Analysis of Road Sector, 1997–2005 52 4. Retrospective Analysis of Railway Sector, 1997–2005 62 5. Comparator Assessment 73 6. Evaluation Findings at Project Completion and Postevaluation 76 7. Assessment of How ADB Projects Addressed Poverty Reduction 88 8. Findings from Studies of Poverty Impacts of Road Projects 93 9. Poverty Reduction Contribution of Local Roads Attached to Projects 102 10. Anticorruption System for Infrastructure Construction 110 11. ADB Performance and Client Orientation 115 12. Assessment of Ongoing ADB-Financed Road and Railway Projects 122 13. Performance of Technical Assistance 129 14. Approach to Comparison of Projects With and Without ADB Support 137 15. Performance Assessment and Rating 140 SUPPLEMENTARY APPENDIX (available on request) Poverty Impact of Shenmu-Yanan Railway Project EXECUTIVE SUMMARY Background This sector assistance program evaluation (SAPE) examines the performance of Asian Development Bank (ADB) assistance for roads and railways development in the People’s Republic of China (the PRC) over the period 1997-2005. It covers the entire period of the 1997 country operational strategy (COS) that ran from 1997 to 2003, together with the first 2 years of the 2003 country strategy and program (CSP) that covers ADB support from 2004 to 2006. During this time, the PRC was ADB’s largest client in terms of lending and technical assistance (TA). Much of the ADB support was for the transport sector, and most of this was for roads and railways. An evaluation of this involvement is, therefore, of strategic relevance not only for future ADB support to roads and railways in the PRC but also for ADB’s country strategy and overall ADB operations. The timing of the SAPE was intended to enable its findings and lessons to influence preparation of the new ADB country partnership strategy (CPS) and program for the PRC in 2007—both as a self-standing evaluation and as an input toward a country assistance program evaluation (CAPE) for the PRC. In 1992, the PRC had the lowest road density in the world relative to area or population and a railway network experiencing severe capacity bottlenecks. Over the past two decades, the PRC implemented huge programs to expand and improve its road and railway transportation systems. Between 1997 and 2005, the road network was expanded from 1.2 million kilometers (km) to 1.9 million km, including construction on the National Trunk Highway System (NTHS), a 35,000 km arterial road network mostly comprised of expressways. The rail network was expanded from 65,970 km to 75,438 km, with capacity augmented by double-tracking and electrification. In both the road and rail subsectors, a feature of the investment programs was the introduction of modern technologies and project management methods. Investment was accompanied by a process of gradual but sustained reform of subsector policies and institutional arrangements, including greater commercial orientation and new approaches to cost recovery. Roads and railways accounted for 27 of the 58 ADB loans to the PRC approved from 1997 to 2005, contributing $6.8 billion (66%) of the total of $10 billion of new ADB lending to the PRC. Some 41 of the 246 TAs approved over the period were for roads and railways. These comprised 15 advisory technical assistance (ADTA) grants and 26 project preparatory technical assistance (PPTA) grants, equivalent to 15% of total TA approvals by value. The share of roads and railways within total ADB support to the PRC also increased over the period. By 2005 in value terms, it accounted for about 82% of new ADB lending and 21% of new TA approvals for the PRC. ADB support for roads was larger than for railways. On average, ADB provided about two loans and three TAs per annum for roads, and about one loan and two TAs for railways. ADB Strategy for Supporting Roads and Railways Positioning within ADB Country Strategy and Program. Over the study period, ADB support to roads and railways was of central importance to its overall objectives and country support strategies to the PRC. Of four major challenges identified by the 1997 COS, two depended significantly upon improving the efficiency and connectivity of transportation. These were identified as priority areas in the Ninth Five-Year Plan (NFYP) and reflected in two of the three overall objectives under the COS: (i) improve economic efficiency, and (ii) promote economic growth to reduce poverty in inland provinces. On the basis that infrastructure bottlenecks impede efficient growth, the COS allocated between half and two-thirds of ADB lending to the PRC in any year to infrastructure in particular for road and rail investments. In all sectors, including transport, the COS emphasized use of