Technical Assistance Consultant’s Report

Project Number: 51029-001 June 2020

People’s Republic of China: Hubei Xiangyang Integrated Sustainable Transportation and Logistics Planning and Strategic Study

Prepared by: David Lupton & Associates Ltd.

For the Asian Development Bank and Xiangyang Municipal Transport Bureau

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents.

TA-9547 PRC: Hubei Xiangyang Comprehensive Transportation and Logistics Planning and Strategic Study- 01 (51029-001)

Supplementary Report

June 2020

Prepared for: the Asian Development Bank and Xiangyang Municipal Transport Bureau

David Lupton & Associates Ltd.

TA-9547 PRC: Hubei Xiangyang Comprehensive Transportation and Logistics Planning and Strategic Study- 01 (51029-001)

CURRENCY EQUIVALENT (as of 10 January 2019) Currency unit: USD USD1=7.08 CNY 1 CNY=USD 0.14 WEIGHTS AND MEASURES km2 – square kilometre m3 cubic meter mu: 15 mu=1 hectare NOTES

(i) In this Report, “$” refers to US Dollars (ii) The fiscal year (FY) of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2018 ends on 31 December 2018. (iii) At the 17 January 2019 meeting between the client the XMTB, ADB and the consultant, the client requested that the title for the Project be changed to “Hubei Xiangyang Comprehensive Transportation and Logistics Planning and Strategic Study” in order to reflect the new Han River Economic Development Plan

Consultants Quality Assurance Protocol

Prepared By Robert L. Wallack, David J. Overington, Wu Jianhing

Auditor/Reviewer James P. Rizer Consultant Team Leader

Place Xiangyang Date 12 June 2020

Approved By David Lupton, Principal

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Contents This Report ...... 4 I. Xiangyang South Integrated Transport Interchange ...... 5 A. Introduction ...... 5 1. Purpose of this Report ...... 5 2. Context Setting...... 6 3. The Role of Passenger Transport Interchanges ...... 7 B. Proposal ...... 8 1. Current Bus Interchange Situation in Xiangyang ...... 8 2. About the Southern Bus Interchange ...... 9 3. Connections to and from Other Bus Interchanges ...... 11 C. Economic Analysis ...... 12 1. Benefits from the Proposed Bus Station ...... 12 2. Capital and Operating Costs ...... 13 3. Economic Assessment ...... 13 D. Summary and Conclusions ...... 14 E. References ...... 15 II. Tangbaihe Port ...... 16 A. Background ...... 16 B. Proposed Development ...... 16 C. Role of DF Rail ...... 17 D. Data Centre Subproject ...... 18 1. Purpose ...... 18 2. Data Centre Level ...... 19 3. Construction cost ...... 19 4. Operating Costs ...... 20 5. Selecting a terminal operating software ...... 21 E. International Examples ...... 21 III. Xiangyang -Yichang Expressway Project ...... 24 A. The basic information of the project ...... 24 B. The significance of project construction ...... 24 1. Optimize and improve the layout of the West Hubei Expressway network...... 24

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2. Strengthen the transportation links between the two provincial sub-central cities, i.e between Yiyang and Xiangyang...... 24 3. To improve the layout of Nanzhang County Expressway in XY and enhance the road transport conditions in mountainous areas significantly...... 25 C. The traffic forecast of the project ...... 26 D. Problems and suggestions ...... 26 E. Major references: ...... 26

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This Report 1. The terms of reference for TA 9547 PRC: Hubei Xiangyang Comprehensive Transportation and Logistics Planning and Strategic Study provided for a domestic study tour for fifteen people nominated by the Xiangyang Municipal Transport Bureau (XMTB) to travel to a nominated city within China that demonstrated modern practices in multimodal logistics management. Due to pressure on XMTB staff, the study tour was delayed until early 2020 at which time travel restrictions imposed because of the COVID-19 crisis led to the tour being abandoned completely. At the suggestion of XMTB, ADB agreed to use the study tour budget for a small study to select an appropriate project for the hard loan from ADB. XMTB put forward several possible projects that could be undertaken including a proposed Xiangyang - Yichang expressway, a public transport related project and the proposed multimodal terminal at Tangbaihe Port. 2. Xingyang is undergoing major and rapid changes in addition to the obvious new high- speed passenger rail connections and a new port. The area of the city is basically being quadrupled, government offices are shifting to a new location in a new part of the city, and a new commercial area is being developed. All of these are happening with the long-term addition of a light rail system some years distant and the need to provide cost-effective and efficient transport services in the near term. The rapid pace of change means that priorities for the XMTB are also changing. Two of the projects (the southern bus interchange and the expressway) proposed by XMTB had not been identified as priority projects 18 months ago when the overall project began. 3. The projects proposed by XMTB reflected the recommendations of the expert committee that considered the draft transport plan, which included that more attention should be paid for the port logistics projects, city bus project and expressway projects. In view of the resources available to the Consultant, it was agreed that a public transport study would be undertaken – the focus of the study chosen was the development of a Southern bus interchange. 4. This report includes a preliminary analysis of a South Xiangyang integrated transport interchange. The report investigates the case for terminal for inter-city buses in the south of Xiangyang that will also be served by urban bus routes and eventually the light rail line. The project as currently envisaged is marginally viable with an IERR of 9.9%. 5. Also included in the report are initial findings with respect to the Tangbaihe port and the Xiangyang-Yichang expressway.

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I. Xiangyang South Integrated Transport Interchange A. Introduction 6. The Xiangyang Municipal Transport Bureau (XMTB) in the city of Xiangyang (Hubei Province, People’s Republic of China) is proposing to construct a new multi-user, multi-use passenger transport interchange on the southern outskirts of the city centre. This project is known as the South Integrated Transport Interchange Project. As part of ADB’s engagement with the city (‘TA-9547 PRC’) the XMTB has requested and invited ADB’s comments on the merits of this new transport interchange. 7. The ADB has, in turn, engaged David Lupton and Associates to undertake the required review of the proposed new transport interchange, hence this report. The location of this proposed Interchange is shown in Figure 1. Figure 1: Location of the Proposed South Integrated Transport Interchange

* proposed location identified by the marker pin.

1. Purpose of this Report 8. The purpose of this report is to provide a review of XMTB’s proposed new passenger transport interchange in the southern outskirts of the city of Xiangyang.

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9. This report has been informed by:  Extensive knowledge of the city’s passenger transport (and logistics) issues formed during field work undertaken by the domestic and international consultants in 2019; and,  Additional information relating to this specific new passenger transport interchange provided to the consultants by both the XMTB and the Xiangyang municipal bus operator. 2. Context Setting 10. Through active engagement by the XMTB (and other Government agencies) Xiangyang is generally well served by passenger transport services. To date this has allowed the city to maintain its domestic competitiveness with other similar cities, to the economic benefit of its businesses and of its citizens.  Long distance passenger services are provided by: o air (to and from Beijing, for example); o by rail, with connections to any train station in the PRC, using conventional high- speed passenger trains serving the Xiangyang ‘central’ train station and more recently using the new ultra-high-speed passenger trains serving the new purpose- built station about 20 kms east of the main city centre; and o by bus / coach – generally to places not so accessible by train, using a range of different bus types and standards.  Shorter distance urban passenger services are provided by: o The city’s bus company, using a fleet of modern and clean, mainly electric powered buses; o Traditional taxi services; o ‘Uber’ and other motorised ride share services; and o Shared bicycles 11. With ever-increasing standards of living and greater disposable incomes, the passenger transport sector is changing:-  As has happened in all developing nations, many former public transport users can now able to afford to travel, and do travel, by private vehicle;  This change in transport mode is leading to declining use of formerly heavily used passenger transport services (though many urban and long-distance bus services continue to enjoy high levels of usage – which XMTB and operators alike are keen to encourage);  The increase in private motorisation is placing additional pressure on existing road space, leading to traffic congestion, reduced travel speeds, increased travel times and adverse economic impacts;

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 Urban and long-distance bus / coach services operating through the ever more congested city streets are adversely affected in a number of ways: o Firstly, as a result of declining patronage and revenues due to increased motorisation; o Secondly, as a result of increasing costs as passenger bus / coaches travel slower; o Thirdly, as a result of further declining patronage and revenue as passengers opt for faster alternative travel options. o Fourthly, public transport operators faced with increased operating costs and declining passenger revenue, have little option but to reduce services so as to ‘balance the books’. This reduction in services further encourages passengers to opt for alternative travel options, such as private motor vehicle and / or ride share services.  The above presents a picture of the threat of the ‘downward spiral’ of reducing demand leading to reduced services leading to reduced demand and so on.  It is this ‘downward spiral’ that XMTB and other stakeholders –Government and public transport operator alike – a keen to avoid. 3. The Role of Passenger Transport Interchanges 12. Strategically placed passenger transport interchanges, served and connected with well designed transport services, and designed with high levels of passenger amenity within the interchanges, can play an important role in ‘fighting back’ against the downward spiral of demand, as discussed below. 13. Service frequencies. Service frequency – or indeed perceived frequency - is widely regarded as the single most important driver of public transport use. 14. Without a transport interchange, services typically depart from kerbside bus / coach stops. Almost invariably, there is insufficient kerbside space at any one point for all services to use at once, so a number of different departure points eventuate. Services to common end points, or to common intermediate points, are often fragmented to leaving from different departure points. Therefore, whist in fact a service may be reasonably frequent, the fragmentation will result in potential users only seeing a much less frequent service. And as a result, fewer passenger will use that service. 15. With a transport interchange this can be readily overcome – all services to and through common destinations can depart from a common part of the bus interchange. 16. Inter-connectivity. It is simply not feasible for a schedule passenger transport service to travel to every destination that people along that route might want. 17. Without a transport interchange, the best that the route designer can do is aim to serve a few key destinations so as to meet the travel needs of those travelling to the key / dominant destinations. That of course makes the service of little to no use to those potential users who might want to travel to other less dominant destinations.

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18. The inter-connectivity benefits associated with well-placed termini can be well illustrated by reference to the passenger aviation sector 19. Consider the case of five cities in Asia wanting to connect by plane with five cities in Europe. Without an intermediate ‘hub’ (or interchange) each city pair combination would have to have its own unique service. This would be very resource expensive, would not well match capacity to demand, and would not be a viable option. But with an intermediate ‘hub’ each Asian city only needs to provide services to and from that hub. Services can readily be adjusted to match capacity (cost) to demand (revenue). Similarly, each European city also only needs to provide services to and from that same intermediate hub – and can also readily match capacity to demand. For example pre-Covid, Emirates operated flights to 160 cities. It did that with just over 500 flights a day. To link every city pair with direct flights would require 25,000 flights per day. 20. Other Benefits. Other benefits of a well placed and well designed passenger transport interchange – compared with a number of disparate kerbside bus / coach stops – include: 21. For Passengers:-  Improved passenger safety (indoors, well lit, security, etc);  Improved passenger amenities (seating, weather protection, toilets, food);  Improved passenger information (larger electronic screens, etc);  Improved multimodal connections (taxis, shared ride, etc). 22. For Service Providers:-  Improved driver facilities;  Possibilities for shared servicing and maintenance facilities;  Secure vehicle parking between successive trips. 23. For other road users  reducing on-street bus stops and limiting the operation of buses to one well planned interchange can reduce traffic congestion. This is discussed further below. B. Proposal 1. Current Bus Interchange Situation in Xiangyang 24. Mindful of the pressures facing public transport and also mindful of the potential benefits of introducing well placed bus interchanges, the XMTB (and associated stakeholders) have already introduced a number of bus interchanges in Xiangyang. 25. Our on-site observation of these interchanges, and our use of public transport services to and from these interchanges, in 2019 showed them to be generally well run, with passenger facilities far better than found at even the most heavily used kerbside bus / coach stops. 26. These interchanges are well served by buses / coaches and supporting transport services (taxis, shared ride, shared bicycle) are invariably in close proximity.

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27. Figure 2 shows the location of the four existing bus interchanges (numbers 2 to 5 on the map and key) and, for completeness, the location of the proposed Southern Bus Interchange (number 1 on the map and key). As can be seen in Figure 2, the existing bus interchanges are in the western, northern and eastern parts of the city outskirts and in the city centre itself, but with no interchange currently in the southern area. It is in this southern area that the proposed Southern Bus Interchange would be constructed. 28. The proposed Southern Bus Interchange can be regarded as being the addition of a ‘missing’ node in the city’s bus network.

Figure 1 Location of Existing and Proposed Bus Interchanges

2. About the Southern Bus Interchange Overview 29. The Southern Bus Interchange will be located near the intersection of the G 207 national road and Huancheng Road. The total site area is around 36,000m2 of which around 11,000m2 will be for used for the main station building for passengers (and cafes’ restaurants, waiting area and the like) and around 4,000m2 will be set aside for bus maintenance. This will leave around 20,000m2 for bus access, egress, manoeuvring, loading and unloading and other day to day bus

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operations (e.g. recharging / refuelling). These areas are subject to refinement as part of any subsequent detailed design phase. 30. Initially the interchange will be served by 10 existing urban bus routes and 10 existing long distance passenger coach routes. These routes will comprise some 200 urban bus service arrivals per day and some 150 long distance passenger coach service arrivals per day – plus the same number of service departures. At an assumed figure of 20 persons per bus service arrival this would account for around 7,500 passenger arrivals per day – and the same number of departures. In other words, a total of around 15,000 passenger movements per day, plus ‘meeters and greeters’. Currently only some 700 of these passengers travel through to the central bus interchange. 31. The amount of land area will, with proper design, provide sufficient capacity to meet both vehicle and personal space demands. Care will be needed to not expand excessively into ‘spare’ space: doing so could result in excessively long pedestrian travel within the interchange, which will in turn make the interchange less attractive to potential users. 32. Features that will be provided for passengers include:  Frequent and direct connections to and from other key destinations – including other transport interchanges;  Passenger information for urban and tourist services;  Muliti-modal transport options – taxi, shared ride, shared bicycle;  Cafes, restaurants, toilets;  Comfortable undercover and inside waiting area(s) 33. Features that will be provided for passenger transport operators include:  Driver and staff facilities;  Bus parking (between services);  Minor maintenance;  Recharging for electric buses, and probably fuelling for diesel buses;  Room for bus, coach, taxi and shared ride modes to co-exist. Costs and Revenues 34. XMTB advise that the Southern Bus Station will be built at a cost of around 100M CNY (USD 14 million) at mid 2020 currency exchange rates, and will generate revenues of around 12 M CNY p.a. from a range of sources, including vehicle maintenance, commercial rentals and transport operator user charges. Putting capital cost interest charges to one side, that would result in a pay-back period of around eight years – well within the typical economic life of this type of construction. 35. However in undertaking this review we have not had access to the cost and revenue calculations. With regard to the revenues, it may well be important to establish that tariffs

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TA-9547 PRC: Hubei Xiangyang Comprehensive Transportation and Logistics Planning and Strategic Study- 01 (51029-001) proposed are reasonable and do not place a greater burden on those paying those tariffs than the benefit that they receive from using the facility. 3. Connections to and from Other Bus Interchanges 36. The provision of high-quality passenger transport connections to and from other bus interchanges in Xiangyang is seen as being critical to the success of this Southern Bus Interchange project (and indeed the concept of services departing from / terminating at bus interchanges at the city outskirts). 37. It is understood that XMTB and the city’s bus operator do intend to connect this South Station Interchange with the other 4 bus interchanges in Xiangyang. 38. Figure 3 presents a concept-only depiction of how these interchanges could all be linked. The actual interchange-linking services will a) need to be frequent to allow for low passenger transfer waiting times and b) will need to have bus priority – especially through the most congested parts of the city. It is assumed that these services will be achieved by re-scheduling some existing (electrically operated) urban bus services.

Figure 2 : Inter-Interchange Connectivity Concept

39. Consideration should also be given to the concept of ‘through-running’ where a high frequency high demand bus route arriving inbound from further afield continues through the South

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Bus Interchange to finally terminate at one of the other interchanges (and similarly for services arriving via other city interchanges). In that way, part of the required inter-interchange connection may be established and fewer people will need to transfer, than would otherwise be the case. Note that some of these inter-interchange connections could be provided in due course by the city’s proposed LRT system, as and when that becomes operational. 40. XMTB should give consideration to having a discrete set of arrival and departure platforms for connecting services to and from the other complimentary bus interchanges. 41. XMTB should also ensure that it has sufficient budget to procure / fund these important inter-interchange connecting services and also to arrange any necessary and additional bus priority measures through congested areas. C. Economic Analysis 1. Benefits from the Proposed Bus Station 42. The proposed interchange will be used by some 200 urban buses and 150 long distance coach services per day. The long-distance services will terminate at the station. These services currently proceed through the central urban area to the Xiangyang central bus station with passengers for the southern city areas dropped off on the way. The urban services will call at the station to transfer passengers but will not terminate there. For passengers to the central business district there will be the disbenefit of an additional transfer but this will be offset by more convenient transfers to local services for other passengers. 43. For the bus companies, the interchange will result in a saving of approximately 18 kilometres in distance and one hour travelling time. On some bus routes it will also be possible to improve bus utilisation and thus reduce the number of buses required. Fuel costs are 1.33 CNY /km and these typically represent 30% of bus operating costs. Bus crew costs (including allowances) are estimated to be 40 yuan /hour while a one hour saving in travel time should enable the bus fleet to be reduced by approximately 5%. Based on a capital cost of 560.000 CNY this would be 1,250 CNY per day. 44. For other road users, there will be a reduction in road congestion. Based on an analysis of mobile phone network data, the average travel time for trips in the urban area varied from 39 minutes between 1am and 2 am to 65 minutes between 6am and 7am. The average travel time was over one hour for most of the day. The average congestion elasticity is 1.2 – ie the marginal vehicle imposes a congestion cost of 1.2 x the vehicles own travel time. One bus is normally assumed to be equivalent to two cars (2 pcu or “passenger car units”). Thus reducing the number of bus trips by 150 arrivals and 150 departures will result in a congestion cost reduction of 720 hours per day.

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45000 1.2 40000 1 35000 30000 0.8 25000 0.6 20000 15000 0.4 travel travel time (hours) 10000 Number of trips surveyed 0.2 5000 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Time (hour)

Figure 3 Number of sample trips and travel times

45. The long-distance buses are all diesel powered. The reduction in bus travel will result in a reduction in particulates, oxides of nitrogen, sulphur and carbon. While all are of concern, carbon

dioxide is the most significant, a typical bus producing 0.77 kg CO2 per kilometre. China does not currently have a carbon price but internationally prices range up to $30. If we will assume a price of 140 CNY this gives a GHG cost of 0.11 CNY/kilometre or 300 CNY per day. 2. Capital and Operating Costs 46. The estimated capital cost for the interchange is 100M CNY. Typical operations and maintenance costs will be around 3% of the initial capital cost. Passenger handling costs will transfer from the existing termini, but supervision costs will increase. We have allowed a full-time staff of five supervisors at an estimated cost (including overheads, etc) of 250,000 CNY per year. 3. Economic Assessment 47. An assessment of the costs and benefits is included as Table 1. Note this is a preliminary assessment using financial costs. No attempt has been made to identify tax components, shadow prices etc. Such adjustments will normally increase the economic return, The analysis suggests that the project is potentially viable with a return that just meets the ADB target.

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Table 1 Economic Assessment

Capital maintenance Supervision Bus Congestion Greenhouse Net operating benefit 2021 50.000 -50.000 2022 50.000 -50.000 2023 3.500 0.260 4.928 7.091 0.108 8.367 2024 3.500 0.269 5.100 7.340 0.112 8.783 2025 3.500 0.279 5.278 7.597 0.116 9.213 2026 3.500 0.288 5.463 7.862 0.120 9.658 2027 3.500 0.298 5.654 8.138 0.124 10.118 2028 3.500 0.309 5.852 8.422 0.129 10.595 2029 3.500 0.320 6.057 8.717 0.133 11.088 2030 3.500 0.331 6.269 9.022 0.138 11.599 2031 3.500 0.342 6.489 9.338 0.143 12.127 2032 3.500 0.354 6.716 9.665 0.148 12.674 2033 3.500 0.367 6.951 10.003 0.153 13.240 2034 3.500 0.380 7.194 10.353 0.158 13.826 2035 3.500 0.393 7.446 10.716 0.164 14.432 2036 3.500 0.407 7.706 11.091 0.170 15.060 2037 3.500 0.421 7.976 11.479 0.175 15.710 2038 3.500 0.436 8.255 11.881 0.182 16.382 2039 3.500 0.451 8.544 12.296 0.188 17.078 2040 3.500 0.467 8.843 12.727 0.195 17.798 2041 3.500 0.483 9.153 13.172 0.201 18.543 2042 3.500 0.500 9.473 13.633 0.208 19.315 2043 3.500 0.517 9.805 14.110 0.216 20.113 2044 3.500 0.535 10.148 14.604 0.223 20.940 NPV 7.701 EIRR 9.9%

D. Summary and Conclusions 48. The purpose of this report is to provide a review of XMTB’s proposed new passenger transport interchange in the southern outskirts of the city of Xiangyang in Hubei Province of the People’s Republic of China. It has been prepared for and at the request of the ADB by David Lupton & Associates Limited. 49. This report finds that the proposed South Integrated Transport Interchange may be regarded as the ‘missing’ part of the city’s bus interchange network. The interchange will connect long distance buses with urban bus services and (eventually) the light rail network, The addition of this interchange – with associated inter-interchange connecting services – would increase passenger travel opportunities, for both existing users and for potential new users.

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50. By increasing passenger travel opportunities, the number of people using public transport can be expected to increase, thus reversing the recent decline in public transport use. Consequential service reductions that might otherwise have occurred are less likely to occur. 51. In other words, a coherent network of strategically placed and connected bus interchanges, of which the South Integrated Transport Interchange is a key component, is likely to play an important role in XMTB’s desire to avert the downward spiral of public transport use and levels of services provided. 52. For these reasons, there is considerable scope to support the establishment of the proposed interchange. The economic analysis, although not conclusive, appears to support the case for a new interchange. The EIRR for the project is 9.9%. 53. We recommend that the interchange be considered for inclusion in the ADB program. We suggest XMTB carefully review the project in the light of this report to identify possible cost savings and additional benefits. We consider that public transport services connecting the various bus interchanges in Xiangyang will play a key role in the success of city’s bus interchange strategy. It is therefore considered that the city government should put further work into the design and costings of such connector services as part of this project. E. References 54. The following presents a shortlist of key references that may be of assistance to XMTB and other stakeholders in developing final interchange designs and / or passenger transport service designs relating to the Southern Bus Interchange Project:- Re co-ordinating public transport: https://www.audit.vic.gov.au/report/coordinating-public-transport?section=31275&show- sections=1

Re ‘hub and spoke’ transport operations: https://transportgeography.org/?page_id=653

Re making urban public transport generally more attractive: https://www.c40knowledgehub.org/s/article/How-to-make-public-transport-an-attractive- option-in-your-city?language=en_US

Re bus interchange design and space considerations: http://onlinepubs.trb.org/onlinepubs/tcrp/tcrp_webdoc_6-d.pdf https://www.slideshare.net/IndrajitKoner/toa-ii?next_slideshow=1

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II. Tangbaihe Port A. Background 55. The Tangbai River, a tributary of the Han River, is currently navigable mainly by cargo ships and ships traveling down the Han River. Most of them are below 500 (dead weight ton) DWT vessels. The lack of all year navigation of the river is a major constraint to modernization of Xianyang logistics, economic development and of realizing the support of the Xiangyang High- Tech Development Zones’ 3,000 companies with $45 billion of operating income and with companies from 20 countries. Table 2 Classes of Inland Waterway Channels

Item I II III IV V VI VII Maximum vessel 3,000 2,000 1,000 500 300 100 50 tonnage limit (dwt) Water depth (m) 3.5–4.0 2.6–3.0 2.0–2.4 1.6–1.9 1.3–1.6 1.0–1.2 0.7-0.9 dwt = deadweight ton, m = meter. Source: Ministry of Transport of the People’s Republic of China.

56. At present, the navigation of vessels on the Tangbaihe is not competitive for business use. The Hanjiang channel upgrade project will enable 1000 DWT, Class III cargo vessels for the Tangbaihe Port to handle specialized markets with value added services, logistics parks, route development and increase multimodal functions for loading, unloading and storage with trucks and rail connections. Proper river information systems and technologies will be needed for navigation of vessels and for logistics functions. Navigational aids are for ship sway, wave, draught, water level. Logistics systems are for berth and yard efficiency from terminal operation software (TOS) used for scheduling and stowage areas for loading and unloading freight of all kinds. Table 3 The Current Status of Existing Freight Ships in the Tangbaihe Section of the Hanjiang Tributary

Ship Type Ship Scale (length x width x draft) (m) Power (KW) 200t class cargo ship (38 ～ 42) × 7.6 × (0.9 ～ 1.2) 100 300t class cargo ship (52 ~ 56) × 8.6 × (1.1 ~ 1.4) 150 500t class cargo ship (62 ~ 68) × 10.8 × (1.5 ~ 1.6) 110-180 x 2 (source: Feasibility Study Report of the Comprehensive Wharf Project of the Wupo Operations Area of Tanbaihe Port Area of Xiangyang Port, Chapter 2, Necessity of Construction, October 2019, Table 2-11, pg. 70)

57. At present, only 190.75 kilometers are navigable waters on the Han River in Xiangyang city of a total coastline of 422.5 kilometers. There are 288 illegal terminals in Xiangyang city that are closed or banned. After ending the illegal terminals, the productive port facilities on the Xiangyang Port (all ports) shoreline is only 915 meters. B. Proposed Development 58. The Han river channel upgrade and the construction of the Tangbaihe port will support more business from the High-Tech Zone and from other area production sources. At present, there is an 18.27 percent compounded growth rate of cargo from 2005 to 2017 of all the Xiangyang Ports. The transport demand will flow from the pillar industries. These are

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automobiles, automobile parts, agriculture products, equipment manufacturing, electronics, medicine, chemicals, and new energy. The long-term goal is for water transport to carry 10 percent of all cargo transport demand by 22 million tons. By 2025, Xiangyang will become one of 150 national logistics hubs in the PRC with the Yangluo Express Container Lines operating with 64-100 TEU container ships. Construction of the Tangbaihe Port is to begin in 2020 and operational in 24 months. 59. The full benefits of the channel upgrade and construction of the Tangbaihe Port are realized by the connectivity to road and rail for full multimodal shipments. There will also be a transition from trailer to container shipments based on international standard equipment. At present, only 20 percent of PRC freight volume is multimodal. This project will relieve transportation bottlenecks for waterborne transport to reach 12,000 kilometers of waterways, 40,000 kilometers of railways and 2 million kilometers of highways. Intermodal connections from the waterway ports, roads, railways and air transport will implement the “Global 123 Express Freight Circle” of domestic delivery within one day, two days delivery to neighboring countries, and three days delivery to major cities worldwide. 60. This project is in Wupo on the right bank of the Taibai river, 4 kilometers from the Tangbai bridge on national highway 316, 3.2 kilometers from Handan railway bridge and 8.2 kilometers from Liulanghe bridge and 2.8 kilometers from the mouth of the Han in Tangbai river. Total project investment is $2.8 billion with a $22 million project cost. 61. The annual forecast for the new Tangbaihe Port is for total throughput of 1,535,000 tons for 500,000 tons of general cargo (consumer goods, breakbulk), 96,000 twenty equivalent units (TEU) of containers, and 50,000 commercial vehicles, roll on roll off (ro/ro)) across four berths (#1, #2,#3, multi-purpose, #4 for general cargo) capable of vessels navigating 1000 DWT. The total length planned for the 4 berths is for 1150 meters. Hanjiang Heavy Industry requirements are for 1500 DWT vessels to ship steel raw materials from Wuhan suppliers to their factory in Xiangyang which are now shipped by trucks. 62. Regarding potential port projects, Tangbaihe port should be highlighted, which includes:  port area construction,  dedicated railway line,  connecting roads construction, and  related logistics park C. Role of DF Rail 63. DF Rail joined the Hubei Railway Investment Company to lead the entire Xiangyang logistics industry. DF Rail serves the automobile industry’s 5 Nissan factories from when their production began in 2003 and is positioned to serve the 100 companies in the Hubei FTZ with multimodal plans and cold chain logistics with refrigerated containers. E-commerce is also targeted for growth served by DF Rail for customers such as Alibaba, JD.com, SF Express, Jiefukai (French) in the FTZ. Since the 2016 enforcement of the overweight truck law, volumes increased to lessen dependence on subsidies and increase the shift from 2PL to 3PL services.

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64. The DF Rail, Feng Shen Logistics (FSL) is a lead logistics firm for the automobile industry with modern logistics practices. Xiangyang logistics industry could benefit from FSL practices in the need to consolidate the numerous unprofitable logistics enterprises and the “road market” firms. DF Rail and the FTZ have data centers that could be linked and upgraded for modern logistics practices such as EDI connection to Wuhan to better serve customers needing shipment visibility across all modes of transport. Wuhan Yangluo Port is the biggest multimodal operation in Hubei. 65. Phase One construction is prepared to begin for the Tangbaihe Port project. This will be an important multimodal connection of the DF Rail Gaoying station of the Jiaolin Railway heading north 1.8 kilometers to the bonded FTZ. Phase Two will continue to extend along the Hanshi Expressway by 14 kilometers to the Tangbai river for the large enterprises and near the Liuji Airport. The road for the port area depends on the Shugang Road and 316 national highway network. In the future, the water and rail will connect to the national railway network. These transport infrastructures will open Xiangyang as radiating belts of the Yangtze river to hinterlands of markets in the Shanghai corridor, Chongqing and the BRI. D. Data Centre Subproject 1. Purpose 66. This port project presents many subprojects and funding challenges to make the Port a modern operation based on international standards. The following are an outline of those subprojects. The “Feasibility Study Report of the Comprehensive Wharf Project of the Wupo Operations Area of Tanbaihe Port Area of Xiangyang Port” describes the importance of Port computer management systems to achieve real-time management of all efficient port operations. These are for planning, dispatch, terminal load and unload with equipment management, operations and yard management, warehousing, financial settlements and customer service management. This will require Internet access, hardware, software from terminal operating systems (TOS) with wide area network (WAN) and local area network (LAN) infrastructure. 67. The data center is an important subproject in Tangbaihe Port complex that is vital to the success of the Port intermodal logistics operations. A data center hosts the computer servers for the software applications balancing full cargo loads for outbound and inbound traffic as well as for hosting the servers for the navigation river information systems. The Guangcai logistics park information center transformation to a data center is one logistics improvement project. The DF Rail and FTZ also have data centers that are planning to connect. Xinfadi Peanut logistics park also has a cloud data center in operations across the whole country. The Tangbaihe Port project could build a data center as well or participate in a colocation data center which rents out rack space to third parties for their servers or other equipment. 68. Data center investment delivers access to cloud computing services and accelerates innovations in small and medium enterprises to provide access to artificial intelligence (AI) hubs, which are machine learning and are coupled with Internet of Things (IoT). AI and IoT are important to Xiangyang in that they foster partnerships, digital skilling and will improve forecasting

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and demand driven warehouses and distribution centers1 in logistics parks to achieve the customer required delivery dates. Data centers are centralized locations where computing and networking equipment is concentrated for the purposes of collecting, storing, processing, distributing or allowing access to large amounts of data. 69. Data centers construction are of different types and is as important as the selection of the computer servers to run the Web hosting. Xiangyang will advance its navigation and logistics planning in the Tangbaihe port and in the region by selecting one of the four tiers of data centers solutions. The Global Data Center Authority’s “Uptime Institute” is responsible for the proprietary “Tier Standard System.” Uptime is the most critical metric when regarding web hosting, though not the only one. The rating system defines a benchmark for the data center industry. The four- tier system of data centers have metrics such as redundant electrical path for power, uptime guarantee, cooling capacity, and concurrent maintainability. This is especially important for running applications in achieving on time deliveries (OTD) that are vital to Xiangyang supply chain stakeholders. 2. Data Centre Level 70. Data centers are rated Tier I, II, III or IV according to the level of built-in redundancy and expected availability. Tier I provide a single path for power and cooling distribution, no redundant components and 99.671 percent availability or 28.8 hours of downtown per year. Tiers II, III, and IV offer increasing of redundancy and uptime. At the high end, Tier IV provides multiple, active power and cooling paths, redundant components, fault tolerance and 99.995 percent availability or less than a half hour of annual downtime. 3. Construction cost 71. Availability comes at a price. Tier IV infrastructure costs more than twice as much as Tier I. The Uptime Institute suggests analysis of costs of constructing a data center from both a fixed cost and operating cost perspective. The cost analysis for the data center design is a matter of specifying the number of racks or cabinets, power capacity/density per rack, and the Tier level rather than the square meters. The rack quantity will be based on the number of servers and other IT equipment needing to host. Typically, power density is 5 to 10 kilowatts (kW) per rack. 72. Data center build costs include:  Engineering design, permitting, and installation labor  HVAC systems  Power distribution units and switch gear  UPS (N+1)  Backup generator

1 “Microsoft Plans to Open First Data Center in Italy,” New York Times, May 9, 2020 and “Microsoft Announces $1.5 billion Investment Plan to Accelerate Digital Transformation in Italy, Including It’s first Cloud Datacenter Region,” Microsoft News Center Europe, May 8, 2020.

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 Fire suppression systems  Building floor space 73. Costs to build a small Tier I data center with 5 to 10 racks will be:

 Building Space = 250 - 500 square feet at 20 per square foot per year = $416 to $833 per month  Cooling = $150,000 to $250,000 depreciated over 10 years = $1250 to $2083 per month  UPS = $85,000 to $100,000 depreciated over 7 years (you will have to replace the batteries in 3 to 5 years too) = $1012 to $1190 per month  Generator = $100,000 to $150,000 depreciated over 10 years = $833 to $1250 per month  Fire Suppression = $50,000 to $75,000 depreciated over 10 years = $416 to $625 per month  Security = $10,000 depreciated over 7 years = $119 per month

74. Total Fixed costs before Maintenance = $4046 - $6100 per month 4. Operating Costs 75. Data center operating costs include:  Utility electricity  Facility and system maintenance  IT staff a) Maintenance Costs

 Cooling (power and maintenance) = $400 to $750 per month  UPS = $400 to $750 per month  Generator = $300 to $500 per month  Power = $200 to $250 per rack = $1000 to $2500 per month

76. Total Ongoing Maintenance = $2100 - $4500 per month b) Soft Costs (Labor)

 Build Labor (about 1000 hours of management time) over 10 years = $625 per month  20 to 40 hours per month = $1500 to $3000 per month

77. Total per month costs for 5 to 10 rack data center = $8271 to $14,225 or $1,654 to $1,422 a rack2

2 Uptime Institute, Data Center Sales and Marketing Institute

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78. These costs will be much lower in the PRC assuming a completed building in the PRC costs 3,196 RMB (US$456) per square meter in 2018 (statista.com) from 1795 RMB (US$256) in 2008 at a compounded annual growth rate of 5.93 percent. Lower costs could be from selecting a colocation (Guangcai, DF Rail, FTZ), or data center service provider, especially important for their use of solar power in data centers. 79. Another option for Xiangyang is for the Portable Modular Data Center (PMDC) built into a standard 20, 40, or 53-foot intermodal container. These are produced by IBM since 2007 and cost 30 percent less to design and build than traditional data centers with cooling equipment. ( IBM PMDC)

5. Selecting a terminal operating software 80. Selecting a terminal operating software (TOS) to run on the servers in the data center will be necessary for Tangbaihe Port efficiencies. Software as a service (SaaS) TOS company can be sourced. There are TOS suitable for river port terminals with less than 100,000 TEUs per year for small container operations and mixed cargo for river transportation. Advantages of SaaS are to modernize terminal operations without expensive IT teams. These solutions are data driven, user friendly, reduce costs, increased terminal productivity, real-time EDI and have easy to use interface from any device.3 E. International Examples 81. The following examples are of ADB logistics interventions for information systems:  “Mongolia regional improvement of border services”. Although this project is targeted at the border, there are lessons for Xiangyang to design and install a platform encompassing all the departments for the benefit of the business users. The project entails single window platform for information sharing. The process is to review the current documentary requirements for all agencies to harmonize them into an agreed set of documents needed to clear cargo. The World Customs Organization (WCO) is used as guidance for the data model. 82. An important component of this project for Xiangyang purposes is to agree on a lead agency to manage the IT systems and the financial obligations to manage and upgrade the system. The interagency nature of the single window, or any IT project, requires coordination of stakeholders from the public and private sectors. Preparatory work is required to build trust and

3 Octopi by Navis

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understanding between agencies and establish the legal framework before launching the single window system or in the case of the Xiangyang river port, Tangbaihe project. A project Steering Committee is set up for quarterly meetings on budgets, plans, implementing progress, coordination between ministries and agencies. The project implementing unit (PIU) handles day to day work. See PPD, Institutional Reform in “Logistics Improvement Plan” from international consultant. 83. This IT project has hardware, operating systems, infrastructure and single window applications: e-license, e-signature, e-logistics, (information system platform, develop transportation registration, point-point monitoring, event management visibility and tracking), e- payment and reporting functionality.4 84. An IT platform project implemented in Xiangyang at Tangbaihe Port will encourage port and shipping companies to promote port resource integration and joint operations. This will also promote construction of port collection and distribution channels and accelerate development of multimodal transportation of railway to water and highway to water.  “Guangxi Regional Cooperation and Integration Promotion Investment Program, Multi- tranche Financing Facility.” One component is for a cross-border e-commerce platform. The development of a smart port for Longbang border economic zone (BEZ) to build a cross border e-commerce and logistics service platform with real-time electronic exchange of trade logistics data and business process reengineering ($27.30 million). Another component is for border economic zone infrastructure and service improvement for the expansion of Pingxiang border trade service center including expansion of the border trade market, cold storage facility, warehouses, and customs and sanitary and phytosanitary inspection space and facilities ($6.90 million).5 85. The following example is from the World Bank for Vietnam waterway projects:  These proposed project interventions are to improve the supply chain product flows among the water ways corridors of Haiphong, Hanoi, Red River delta and Mekong delta. Similar projects could be proposed and financed on the Han River. Upgrade the waterway corridor over four years from Class IV to Class III and II, $150-$200 million.  Introduce extended gateway facility in Taibaihe to serve Wuhan-Shanghai markets. This will include cargo handling facility to serve mostly import/export container flows between major international shipping nodes (Shanghai, Wuhan) one-year project, $10 million  Introduce user charges to fund waterway maintenance. Imposition of user charges on IWT vessel operators to cover the existing waterway maintenance financing gap. Ongoing project, estimated costs (MSA did not provide requested cost data) are based on US$0.0003 (Vietnam Dong 6) per ton-km.

4 “Proposed Loan, Mongolia: Regional Improvement of Border Services Project,” ADB, April 2016, pgs. 3, 5. 5 “Proposed Multi-tranche Financing Facility Guangxi Regional Cooperation and Integration Promotion Investment Program, PRC, ADB, November,2016, pg. 5.

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 Promote engine and fleet modernization in IWT. Provision of public subsidies (with private sector matching) for engine improvement, one year, $20 million  Showcase IWT as an enabler of efficient logistics. Promotion campaign on the use of inland water transport and demonstration projects to illustrate its attractiveness, over 10 years, $30 million.6 86. The economic and environmental benefits of these project interventions are measurable over time in terms of transport cost savings, emission reduction, safety inputs. Also, there are IWT modal share gains by 2030 as outlined as targets in this Xiangyang Logistics Improvement Plan report. Investments in waterways can deliver attractive economic returns and depend on expected intensity of future traffic.

6 “Facilitating Trade through Competitive Low-Carbon Transport, The Case for Vietnam’s Inland and Coastal Waterways,” Luis C. Blancas, M. Baher El-Hifnawi, World Bank, 2014, page 3, Table 0.1.

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III. Xiangyang -Yichang Expressway Project 87. Regarding potential expressway projects, the focus is the Xiangyang - Yichang expressway, which directly connects Xiangyang with Shanghai - Chengdu expressway, and directly connects the two sub central cities of Xiangyang and Yichang in Hubei province. Xiangyang has signed a cooperation agreement with Yichang municipal government to jointly promote the project. A. The basic information of the project 88. The Xiangyang-Yichang Expressway starts at Fangjiaji of Jiuji Town of Nanzhang County in Xiangyang City , passes through Guanmiaoji, Xiaoyan Town, and Xiaozhang River to Yuan'an County of Yichang City, and then passes east of Yuan'an County, and Maochangping Town to the south of Guanzhuang Reservoir in Yiling District of Yichang City and intersects with the Shanghai-Rongdong Expressway, and finally arrives the Yichang North Toll Station. 89. With a length of 141.4 kilometers and a two-way four-lane design, the total investment of the project is about 25.3 billion CNY, and the average cost per kilometer is about 142 million yuan. Among them, the Xiangyang section is 55.6 kilometers, the investment is about 9.95 billion yuan, and the Yichang section is 85.8 kilometers. 90. At present, the Hubei Provincial Department of Transportation has agreed to carry out the project feasibility work. Yichang City has completed the bidding work of the feasibility study for the Yichang section in May, 2019. While that for the Xiangyang section will start soon. B. The significance of project construction 1. Optimize and improve the layout of the West Hubei Expressway network. 91. The transport location conditions of Xiangyang City and Yichang City are extremely convenient. Fuyin Expressway, Erguang Expressway, Ma'an Expressway and other national high- speed networks meet in Xiangyang City; Hurong Expressway, Shanghai-Chongqing Expressway, Hubei Expressway and other national high-speed networks meet in Yichang City. This project can be used as a connecting link between these national highways to further optimize and improve the layout of the highway network. 2. Strengthen the transportation links between the two provincial sub-central cities, i.e between Yiyang and Xiangyang.

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Table 4 Travel condition from Xiangyang to Yichang with/without the project

Travel Categrate Via Route(s) Km time Note (hr)

Er-Guang Expressway There will XY-Yichang + Hu-Rong 225 2.8 also be big Without the Expressway difference for the project Ma-An Expressway + Nanzhang- travel Bao-Yichang 178.9 2.3 Yuanan condition of Expressway the south Xiang-Nan+XY- area of XY-Yichang 158.2 1.6 Yichang Expressway Nanzhang county and the east With the area of Ma-An project Nanzhang- Yuanan Expressway+XY- 95.6 1 Yuanan county Yichang Expressway with/without the project

92. Table 4 shows that the route distance from XY to Yichang will be reduced by 46km while the travel time will be saved by 1.2 hour/trip in average with the project. So this project will shorten the spatial and temporal distance between Xiangyang and Yichang, promote the economic and social exchanges between the two provincial sub-central cities in the province, promote the formation of a good situation of resource sharing, complementary advantages, and mutual benefit and win-win situation for the two cities. Tourism and the construction of the Yangtze River Economic Belt play a leading supporting role. Provide strong transportation advantage for the economic and social development of the two cities. 3. To improve the layout of Nanzhang County Expressway in XY and enhance the road transport conditions in mountainous areas significantly. 93. Both Nanzhang County in Xiangyang City and Yuan'an County in Yichang City are poor counties located in continuous mountainous areas, and the transportation infrastructure is weak. At present, they are only connected by the provincial No.251 road (S251）with lower technical road conditions in terms of road safety, speed and capacity.

94. After the completion of this project，the route distance from Nanzhang County to Yuan'an County will be reduced by 63 km while the travel time will be saved by 1.3 hour/trip in average

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with the project. So it will significantly improve the road capacity in the southern mountainous area of Nanzhang County and serve local economic development for the poverty alleviation. C. The traffic forecast of the project 95. Take the year 2022 as the first year of construction and suppose the project will be finished in year of 2025. Based on the social and economic development of XY and Yichang and by using the methodology of the 4 phase traffic forecast and assignment, The traffic forecast for the project has been listed in the following table.

Table 5 The traffic forecast for the project （pcu/d）

Year 2025 2030 2035 2040

Daily average traffic flow 7070 11355 16450 21950

D. Problems and suggestions 96. The total investment of this project in Xiangyang is nearly 10 billion yuan. The investment scale is large and it also occupies a lot of land. Considering that there are still 5 highway projects under construction in the city during the "13th Five-Year Plan" period, the Xiangyang-Nanzhang Expressway has not been started. The implementation of this project will bring greater financial, land, and relocation pressure to Nanzhang County. It is recommended that the preliminary work be carried out first. After the Xiangyang-Nanzhang Expressway is completed, the project will be launched during the "14th Five-Year Plan" period. E. Major references: 1. “Report on XY Yichang expressway.pptx”,supplied by the planning section of XYMTB; 2. “Report on XY Yichang expressway.doc”,supplied by the planning section of XYMTB; 3. “XMTB Comments fr 1”,supplied by the planning section of XYMTB; 4. The Location Map of XY Yichang expressway,supplied by the planning section of XYMTB.

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