PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB5904 China: Anhui Shaying River Channel Improvement Project Project Name Public Disclosure Authorized Region EAST ASIA AND PACIFIC Sector Ports, waterways and shipping (100%) Project ID P118647 Borrower(s) MINISTRY OF FINANCE Implementing Agency Anhui Provincial Communications Department 8th Floor, Huayi Mansion No. 95 Shouchun Road Hefei, Anhui Province China Tel: (86-551) 262-9089 Fax: (86-551) 263-0290 Email: [email protected] Public Disclosure Authorized Anhui Provincial Ports & Shipping Construction and Investment Group No.1157, Changjiang East Road Hefei, Anhui Province China Tel: (86-551) 429-9912 Fax: (86-551) 429-9522 Email: [email protected] Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared November 16, 2010 Date of Appraisal August 24, 2010 Authorization

Public Disclosure Authorized Date of Board Approval April 14, 2011

I. Country and Sector Background 1. Inland Waterway Transport Development in China. China has 123,000 km of navigable waterways, of which 61,000 km are officially classified for commercial navigation purposes. Most of the commercial waterways are well positioned to link the prosperous eastern coastal regions, which have increasing demand for raw materials, with the resource-rich but less- developed inland and western regions. This mutually beneficial connection helps to achieve the nation’s central and western development strategies.

2. China’s inland waterway transport (IWT) industry already handles about the same volume of freight as the USA and the EU waterways combined. Accelerated economic growth in China is generating a greater demand for the transport of coal, construction materials and other

Public Disclosure Authorized bulk materials and goods. Accordingly, IWT has been increasing rapidly in recent years with an annual average growth rate of 8.8 percent during the period 2000-2008 (and 13.1 percent p.a. in tonne-kms). 3. Despite the fast growth in the past years, IWT in China is still under-developed compared with other transport modes. Its share in the total freight of all transport modes was only 3.8 percent in tonne-kms in 2008. Currently, the main constraint of IWT is weak infrastructure. A high proportion of the classified waterways have poor navigation infrastructure, which sometimes limit navigation capacity and particularly restricts the ability to reliably handle larger vessels that can deliver much lower unit cost of transport than smaller vessels. Therefore investment in IWT infrastructure is critical to realize the mode’s major development potential.

4. The Government of China (GOC), recognizing the higher energy efficiency, lower greenhouse gas emissions, and lower use of scarce land resources associated with IWT, plans to increase the contribution of IWT to China’s transport needs. In 2007, China adopted the National Inland Waterways and Ports Plan to 2020 (NIWPP2020) that aims to develop a ‘high- class’ waterway network (Class IV to Class I) of around 19,100 km (from the current 15,000 km). This waterway network will extend to twenty provinces and serve a catchment area that contains approximately a quarter of China’s population. An analysis carried out for the NIWPP2020 estimates that the total cargo traffic by IWT in China will increase from 1.16 billion tonnes in 2006 to 1.6 billion tonnes in 2010 and further to 2.35 billion tonnes in 2020.

5. IWT Development in Anhui Province. Anhui Province, with a population of about 65 million and an area of 139,600 square kilometers, is a land-locked province in central China. Anhui is one of the six economically under-developed central provinces supported by GOC’s “Rise of Central China” initiative. Transport is one of the priorities in the provincial development strategy. Over the past decade, the growth of IWT has lagged behind road and rail transport in Anhui though it has a good natural river network. The Province has now decided to pursue a more balanced transport strategy that gives more prominence to IWT, which can supplement road and rail transport by providing competitive services for bulk and low-value cargo.

6. Anhui, despite its land-locked location, is rich in water resources with many rivers running through it, which contribute to three big water systems: the Yangtze River, the Huai River, and the Xin’an River systems. The total length of inland waterway network in Anhui is over 6,500 km with around 1,100 km of high class waterways (Class IV and above); Anhui has the seventh longest provincial network in China. There are 17 main ports in Anhui, in addition to thousands of small local wharves and jetties. Around 30,000 commercial vessels are registered in the Province.

7. The Anhui Provincial Government has established ambitious targets for IWT development in the Anhui Inland Waterway Transport Development Plan (2005-2020). During the period 2007 - 2020, the Plan aims to increase the total IWT freight volume in Anhui from 98 million to 395 million tonnes, and the total tonne-km from 45 billion to 158 billion through a total investment of RMB25 billion. The Plan divides navigable inland waterways in Anhui into three levels of importance: national high-class, regional, and local. A “Two-Trunk and Three- Branch” waterway network of national high-class commercial waterways in the Province was laid out. The Shaying River, one of the three branches, is planned to be upgraded to Class IV for year-round navigation of 500 dwt vessels. 8. Shaying River. The Shaying River is the largest tributary of the Huai River in central China. It originates from Henan Province and converges with the Huai River in Anhui Province. The total length of the River is 620 km, of which 206 km flows through Anhui Province. The River’s hinterland has extensive reserves of coal and other minerals and is also a major producer of farming products, cement and fertilizers. The Shaying River provides a continuous waterway link to the prosperous and fast-growing industrial Yangtze Delta area via the Huai River and the Grand Canal. Given the increasing demand for transport in the river basin and the cost- effectiveness of waterway transport, particularly for coal, building materials, chemicals and grains, waterway traffic on the Shaying River has grown at an annual average of 10.6 percent in the period 1995-2008, reaching 5.26 million tonnes by 2008.

9. Nonetheless, future traffic growth is severely constrained by the low capacity of navigation infrastructure along the River. The river section upstream of Fuyang has a mixture of standards and generally only permits navigation of 300 dwt vessels in the low-water season. The section downstream of Fuyang was blocked in the 1980s by the construction of a sluice dam across the River at Fuyang, which resulted in all upstream shipping being diverted to the Cihuaixin River - a man-made canal whose primary purposes are irrigation and supply of drinking water. Waterway traffic often suffers from low water levels when the Cihuaixin River water is needed for these primary purposes. Traffic is further impeded by four small-sized locks which become congested at busy periods. The Cihuaixin route has almost reached its capacity, and due to its primary water resources functions, cannot be upgraded. This restricts further growth of traffic in the upper Shaying River.

10. The traffic capacity of the Shaying River is therefore at a plateau, and without a solution to the constraints described, cannot play a more significant role in the continuing economic development of its hinterland. As noted, both national and provincial governments are committed to improving the transport capacity of the River by eliminating the infrastructure constraints. Anhui and Henan provinces have been working together with the support of MOT to re-open the Shaying River route and raise its navigation standards. In the past three years, the Province has built two new large locks, the Genglou at upstream and the Yingshang at downstream of Fuyang, that allow larger vessels to pass through the existing sluice dams. The third lock at Fuyang is currently under construction with domestic funds, and when completed, will finally re-open the River for through navigation. By then, the waterway traffic downstream of Fuyang will be diverted back to the Shaying River from the current Cihuaixin route. Alongside the throughnavigation, the river channel is to be upgraded to attain Class IV standard according to the national and provincial inland waterway plans. The river channel improvement is the main physical component of the proposed Bank-funded Project.

II. Objectives 11. The development objective of the proposed Project is to contribute to the increased cargo throughput of the Shaying River in Anhui Province through infrastructure improvements and capacity building.

III. Rationale for Bank Involvement 12. In response to a proposal from Anhui Province, GOC has requested the Bank’s financial and technical support for the implementation of a Project to re-open and upgrade the Shaying River to Class IV navigation standards. The improved Shaying route will be capable of handling year-round 500 dwt vessels and even larger vessels outside the dry season. 13. The World Bank has already provided financial and technical support to China’s inland waterway development through lending to six projects in seven provinces over the past fifteen years. In 2009, the Bank also completed a major sector review of IWT in China with the objective of identifying impediments to its sustainable development. The outcomes of the study will underpin Bank support for developing IWT in China. Through its involvement in the strategic review and in lending interventions, the Bank has become the leader among international financial institutions in supporting China’s IWT sector. The Bank’s expertise and experience, both international and national, can contribute to successful project implementation and strengthen the institutional capacities of IWT inAnhui Province. 14. The Bank’s involvement in the Project will support two of the five pillars of the Bank’s FY06-10 China Country Partnership Strategy (CPS). • It addresses the pillar of ‘reducing poverty, inequality, and social exclusion’, by promoting inter-regional transport links, particularly for industries, between the lagging inland provinces of Anhui and Henan with the dynamic coastal regions. • It addresses the pillar of “managing resource scarcity and environmental challenge, through reducing air pollution, conserving water resources, and optimizing energy use”, by facilitating the use of IWT, a transport mode that is more energy efficient, generates lower greenhouse gases and uses less land than other transport alternatives.

IV. Description 15. The proposed Project will re-open and upgrade the 205.6 km long Shaying River channel between Changshenggou on the Henan-Anhui border and Mohekou at the confluence of the Shaying River with the Huai River. The improvement works will raise the standard of the channel and associated infrastructure to national standard Class IV that will permit year-round navigation of laden or unladen powered vessels of 500 dwt. The Project consists of three main components, two for construction works and one for technical assistance. 16. Component A – Navigation Infrastructure and Facilities. (Total US$189.81 million, IBRD US$66.23 million). This component includes river channelization and dredging works, river bank strengthening and protection works, and provision of navigation aids and service facilities. • River channelization and dredging works. Improve the 205.6 km long river channel to Class IV standard by dredging and bank cusp-cutting, with the following key technical parameters: channel width of 50m, minimum navigable water depth of 2.8m, minimum bending radius of 330m, and 11 locations of bank cusp-cutting for total earthworks of about 18.36 million m3. • River bank strengthening and protection works. Extend and strengthen the existing river bank protection, and build new bank protection works for the river sections with deep and narrow channel, for a total length of about 43.87 km. • Navigation signals. Install about 213 navigation signals at key sections and locations. • Service facilities. Provide two service areas, six public anchorage areas, a communication and monitoring system, and other navigation aids facilities. 17. Component B – Reconstruction and Relocation of Existing Infrastructure and Facilities. (Total US$70.51 million, IBRD US$27.44 million). This component includes reconstruction of existing cross-river bridges that have insufficient clearance and relocation of other existing cross- river facilities that impede navigation. • Reconstruct four existing bridges including Yumin Bridge and Shaying Bridge in Jieshou City, and Ying River Bridges #1 and #2 in Taihe County. • Relocate or elevate existing cross-river power cables and telephone lines. 18. Component C - Technical Assistance. (Total US$8.64 million, IBRD US$4.60 million). This component includes technical studies and training programs that are designed to build the institutional capacity of the IWT sector to enable sustainable IWT development in Anhui Province. The two technical studies are: (a) Shaying River Waterway Transport Management and Emergency Service System; and (b) Comprehensive Ship Lock Management System. This component also includes purchase and installation of the equipment which are needed for the management systems to be developed by the two TA studies.

V. Financing Source: ($m.) Borrower 192 International Bank for Reconstruction and Development 100 Total 292

VI. Implementation A. Institutional and implementation arrangements 19. Implementing agencies. The Anhui Provincial Transport Department (APTD) will take overall responsibility for the management and coordination of project implementation. APTD has a readily established Project Management Office (APMO) which has satisfactorily implemented three Bank-funded highway and road projects in Anhui Province. APMO will monitor and coordinate project implementation, handle the procurement and process disbursement, and implement training programs under the Project. 20. Anhui Provincial Port & Shipping Construction Investment Group Co. Ltd. (APPSCIG), under the supervision of and in coordination with the APTD, will be the implementing unit for of the physical infrastructure and facilities component, and the TA program on comprehensive ship lock management system. 21. Anhui Provincial Port and Shipping Management Bureau (APPSMB) will implement for the TA program to develop the Shaying River waterway transport management and emergency service system. 22. Institutional coordination. The Project is located in Fuyang City. Successful project implementation will require effective coordination and cooperation between APTD and the local government of Fuyang City. APTD and Fuyang Government have reached a framework agreement stipulating their respective roles and responsibilities for land acquisition and resettlement, as well as counterpart funding contributions for and the reconstruction of the four existing bridges. Detailed agreements on cost-sharing and availability of funds contributed by Jieshou and Taihe Counties of Fuyang will be signed between APPSCIG and the two project counties during implementation. Monitoring and evaluation of outcomes/results B. Monitoring and evaluation of outcomes/results 23. The achievement of the Project’s objectives will be measured by a combination of indicators as shown in the Result Framework (Annex 3). Information for measuring these indicators will be provided by APTD, APPSMB and APPSCIG, who have standard mechanisms and instruments to regularly collect and process the data needed for monitoring and evaluation. The Bank task team and APTD will jointly monitor and evaluate emerging results which will be reflected in project progress reports, and take appropriate corrective actions when needed.

VII. Sustainability 24. The Bank’s Transport Business Strategy1 defines sustainability in transport systems as having financial, economic, operational, environmental and social dimensions. 25. Financial sustainability of this Project is to be assured by the direct funding of APTD the provincial fiscal budget. APTD will use part of the IWT budget to cover the costs of maintenance and operation of the navigation infrastructure for which the Province is responsible, including the costs of maintaining the upgraded Shaying River. Resources of the IWT budget consist mainly of a share of the national fuel tax, vessel registration charges, profit from related activities (such as hydropower generation at dams), and some lock charges. 26. The Project’s economic sustainability depends on attaining the overall economic benefits of the Project. In this regard, the economic viability has been evaluated to be positive and its economic sustainability will tend to increase over time. Firstly, the transport cost saving versus other modes is likely to increase over time because productivity in the barging industry is likely to grow faster than that in competing rail and road transport which are already well-developed. Secondly, the economic value of external benefits, such as reduced greenhouse gas emissions is expected to increase in the future. The surplus of economic benefits over pure financial return will therefore tend to widen. 27. There are no obvious risks to the operational sustainability of the Project. APTD has the experience and technical expertise in managing a large provincial waterway system, including advanced IWT infrastructure in the Province. In terms of the three major new ship locks required to facilitate through-navigation, two have been completed and the third is under construction. In terms of ports capacity, the Fuyang Ports Plan (described in Annex 1) aims to progressively deliver up to 52 new 500 dwt vessel berths over the next fifteen years, which will be sufficient to meet the traffic projections for the Shaying River. The major IWT transport users, the coal mining and building materials industries, already own and/or operate most IWT terminals and have strong commercial incentives to upgrade terminals to handle the increased traffic and larger vessels. 28. The environmental sustainability of China’s transport system is one of the key motivations for GOC to support this and other projects in NIWPP2020. The expanded use of the

3 World Bank Group Transport Business Strategy: Safe, Clean and Affordable Transport for Development, 2008 Shaying River for transport will, compared to other modes, help minimize the loss of agricultural land, reduce congestion on roads, reduce road accident costs, reduce the average energy consumption of freight transport, and reduce the greenhouse gases (GHG) that contribute to climate change. In regard to the environmental performance of the shipping industry itself, the Project will provide special environmental service areas for vessel waste disposal, and will also develop and adopt a waterway transport management and emergency service system on the Shaying River. 29. The social sustainability of the Project’s benefits will largely depend on the affordability of the transport services that it offers to the users. The capacity to handle larger vessels more reliably will reduce the average operating costs of barges that will use the Shaying River. Because the barging industry itself is a very competitive and mainly privately-owned industry, these cost savings are likely to be passed on through competitively-priced freight tariffs. The development of the IWT system will also help support the traditional livelihoods of the many independent and family/owned barge operators. 30. In addition, the Project has some technical features that improve the adaptability to potential impacts of climate change, e.g., extremely low water levels or flooding.

VIII. Lessons Learned from Past Operations in the Country/Sector 31. The design of the Project reflects the following lessons learned from the previous Bank- funded inland waterway projects in China. • Institutional coordination. It is important to establish coordination and information exchange among the various agencies involved to maximize the benefits of water resources utilization. In addition, close coordination with and support from the local governments on land acquisition and resettlement is also critical to smooth project implementation. • Market demand and traffic projection. A thorough assessment of market demand and a careful evaluation of traffic projections are essential for inland waterway projects. Traffic projections have been based on regional economic forecasts with a derived total volume of cargo categorized into major commodity types. • Work variations. Previous projects had a great number of work variations during the construction phase, which were mainly attributed to insufficient geotechnical investigation, and changes to primary design parameters. The task team has given specific attention to the quality of engineering design, in particular the comprehensiveness of the geotechnical and hydrological investigations and engineering optimization. • Procurement delay. Previous projects experienced delays in processing civil works procurement contracts, which resulted in delayed commencement and late achievement of project benefits. This has been addressed by developing a realistic procurement plan and strengthening the procurement capacity of APMO.

IX. Safeguard Policies (including public consultation)

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [] [ ] Natural Habitats (OP/BP 4.04) [] [ ] Pest Management (OP 4.09) [ ] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [] Physical Cultural Resources (OP/BP 4.11) [ ] [] Involuntary Resettlement (OP/BP 4.12) [] [ ] Forests (OP/BP 4.36) [ ] [] Safety of Dams (OP/BP 4.37) [ ] [] Projects on International Waterways (OP/BP 7.50) [ ] [] Projects in Disputed Areas (OP/BP 7.60)* [ ] []

X. List of Factual Technical Documents • Preliminary Design of Anhui Shaying River Channel Improvement Project • Geological Investigation Report of Anhui Shaying River Channel Improvement Project

XI. Contact point Contact: Wenlai Zhang Title: Sr Transport. Spec. Tel: 5788+7737 Fax: +86-10-5861 7800 Email: [email protected] Location: Beijing, China (IBRD)

XII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop

* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties’ claims on the disputed areas