Document of The World Bank
Public Disclosure Authorized Report No: 19286-CHA
PROJECT APPRAISAL DOCUMENT
Public Disclosure Authorized ONA
PROPOSED LOAN
IN THE AMOUNT OF US$200 MILLION
TO THE
PEOPLE'S REPUBLIC OF CHINA
FOR A Public Disclosure Authorized SECOND FUJIAN HIGHWAY PROJECT
June 3, 1999
Public Disclosure Authorized Transport SectorUnit East Asia and PacificRegional Office CU:RRENCY EQUIVALENTS
(Exchange Rate Effective June 1999)
Currency Unit = RMB RMB 1.00 = USO.12 US$1.00 = RMB 8.3
FISCAL YEAR
January I - December 31
ABBREVIATIONS AND) ACRONYMS
9FYP - Ninth Five Year Plan (1996-2000) ITIC - International Trade and Investment Corporation IOFYP - Tenth Five Year Plan (2001-2005) LA&R - Land Acquisition and Resettlement ADB - Asian Development Bank MOC - Ministry of Communications AIS - Accident Information System MOF - Ministry of Finance BMS - Bridge Management System MTE - Medium Truck Equivalent BOT - Build-Operate-Transfer NAO - National Audit Office CAS - Country Assistance Strategy NCB - National Competitive Bidding E&M - Electrical, Electronic and Mechanical NH - National Highway EA - Environmental Assessment NPV - Net Present Value EAP - Environmental Action Plan NR - National Road EASES - Enviromnent and Social Development Sector NTHS - National Trunk Highway System Unit EASTR - Transport Sector Unit OECF - Overseas Economic Cooperation Fund (of Japan) EDB - Expressway Data Bank OED - Operations Evaluation Departnent EIA - Environmental Impact Assessment PAD - Project Appraisal Document EIRR - Economic Internal Rate of Return PAP - Project Affected Persons EPB - Environmental Protection Bureau PCU - Passenger Car Unit EPO - Environmental Protection Office PEO - Project Execution Office ERR - Economic Rate of Return PMS - Pavement Management System ES - Executive Summary (Environmental Report) PPI-PSD - Private Participation in Infrastructure Group in Private Sector Development ESW - Economic and Sector Work PRC - People's Republic of China FIAS - Foreign Investment Advisory Services PRO - Project Resettlement Office FH2 - Fujian Highway II Project PSB - Public Security Bureau FIAS - Foreign Investment Advisory Services RAP - Resettlement Action Plan FPECD - Fujian Provincial Expressway Construction RDB - Road Data Bank Directorate FPTD - Fujian Provincial Transport Department RMC - Resident Mission China GNP - Gross National Product RMF - Road Maintenance Fee GOC - Government of China ROC - Regional Operations Committee GOVAI - Gross Output Value of Agriculture and SOE - Statement of Expenditures Industry HDM - Highway Design and Maintenance Model SDPC - State Development Planning Commission ICB - International Competitive Bidding TA - Technical Assistance IFC - International Finance Corporation Y - Yuan RMB IRP - Interconnecting Road Program ZZE - Zhangzhou-Zhao'an Expressway
Regional Vice President: Jean-Michel Severino, EAPVP Country Director: Yukon Huang, EACCF Sector Manager: Jitendra N. Bajpai, EASTR Task Team Leader/Task Manager: Alfred Nickesen, Pr. Transport Specialist, EASTR China Second Fujian HlighwayProject
CONTENTS
Page No.
A. Project Development Objective ...... 2
1. Project development objective and key performance indicators...... 2
B. Strategic Context...... 2
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project ...... 2 2. Main sector issues and Government strategy ...... 2 3. Sector issues to be addressed by the project and strategic choices ...... 4
C. Project Description Summary ...... 5
1. Project components ...... 5 2. Key policy and institutional reforms supported by the project ...... 5 3. Benefits and target population ...... 6 4. Institutional and implementation arrangements ...... 7
D. Project Rationale ...... 9
1. Project alternatives considered and reasons for rejection ...... 9 2. Major related projects financed by the Bank and/or other development agencies ...... 11 3. Lessons learned and reflected in the project design ...... 12 4. Indications of borrower commitment and ownership ...... 13 5. Value added of Bank support in this project ...... 14
E. Summary Project Analysis ...... 14
1. Economic ...... 14 2. Financial ...... 14 3. Technical ...... 15 4. Institutional ...... 15 5. Social ...... 15 6. Environmental assessment ...... 17 7. Participatory approach ...... 19
F. Sustainability and Risks ...... 19
1. Sustainability ...... 19 2. Critical Risks ...... 20 3. Possible Controversial Aspects ...... 21 Page No.
G. Main Loan Conditions ...... 21
1. Effectiveness Conditions .. 21 2. Agreement Reached with the Government ...... 21 3. Agreements Reached with the Beneficiary ...... 21
H. Readiness for Implementation . 23
I. Compliance with Bank Policies . 24
Annexes
Annex 1. Project Design Summary ...... 25 Annex 2. Fujian Highway Sector Revenues and Expenditures, 1996-2005 ...... 33 Annex 3. Project Description ...... 3...... 35 Annex 4. Policy and Institutional Reform Program ...... 38 Annex 5. Road Traffic Safety Program ...... 44 Annex 6. China's Evolving Highway Program and Financing Issues ...... 48 Annex 7. Bank Involvement and Achievements in China's Highway Sector ...... 53 Annex 8. Estimated Project Costs ...... 5...... 57 Annex 9. Financing Plan ...... 58 Annex 10. Procurement and Disbursement Arrangements ...... 59 Annex 10, Table A: Project Costs by Procurement Arrangements ...... 61 Annex 10, Table B: Thresholds for Procurement Methods and Prior Review .62 Annex 10, Table C: Allocation of Loan Proceeds ...... 63 Annex I0, Table C- 1: Estimated Disbursement Schedule ...... 64 Annex 11. Implementation Schedule ...... 6...... 5..655...... Annex 12. Economic and Financial Evaluation ...... 74 Annex 13. Financial Management System ...... 89 Annex 14. Environmental Assessment and Action Plan Summary ...... 94 Annex 15. Resettlement Action Plan Summary ...... 99 Annex 16. Project Processing Budget and Schedule ...... 102 Annex 17. Documents in the Project File ...... 103 Annex 18. Statement of Loans and Credits ...... 105 Annex 19. Country at a Glance ...... 108
Maps
1. CHINA: National Trunk Highway System (NTHS), IBRD 29902 2. Zhangzhou-Zhao'an Expressway, IBRD 29903 China Second Fujian HighwayProject Project Appraisal Document
East Asia and Pacific Regional Office TransportSector Unit
Date: June 3, 1999 Task TeamnLeader/Task Manager: Alfred Nickesen Country Director: Yukon Huang Sector Manager: Jitendra N. Bajpai Project ID: CN-PE-5 1705 Sector: Transportation Program Objective Category: Lending Instrument: SIL Program of Targeted Intervention: []Yes [x] No
Project FinancingData [x] Loan [] Credit [] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount(US$M): 200.0 Proposed terms: [ Multicurrency [X] Single currency, specify US dollars Grace period (years): 5 [] StandardVariable [] Fixed [X] LIBOR-based Years to maturity: 20 Commitmentfee: 0.75% Front-end fee: 1% Financingplan (US$ M): Source Local Foreign Total Central Government 106.0 106.0 Provincial Government 289.6 289.6 IBRD 200.0 200.0 Total 395.6 200.0 595.6 Borrower: People's Republic of China Guarantor: Responsible agency: Fujian Provincial Transport Department Estimated disbursements (Bank FY/US$ M): 2000 2001 2002 2003 2004 Annual 28 63 63 38 8 Cumulative 28 91 154 192 200
Project implementationperiod:5 years 3 months (October 1999-December2004) Expected effectiveness date: October 1999 Expected closing date: June 2005 China: Second Fujian Highway Project Page 2 Project Appraisal Document A: Project Development Objective
1. Project development objective and key performance indicators (see Annex 1):
The aim of the proposed Second Fujian Highway Project (FH2) is to increase economic activity along the Fuzhou-Shenzhen high-priority transport corridor through relieving congestion, facilitating trade and mobility and helping increase efficiency and traffic safety in Southern Fujian.
The proposed project would have the following objectives:
(a) relieve traffic congestion and improve the mobility and integration of inter-provincial trade, commerce and tourism between Fujian and Guangdong Provinces by assisting in the development of a key section of China's National Trunk Highway System (NTHS) in its principal north-south coastal corridor;
(b) strengthen highway institutional capacity at the Fujian Provincial Transport Department (FPTD) and related sector institutions, through policy and institutional reform, provision of training, technical assistance and equipment, in planning, finance, design, construction, operation and maintenance of Fujian's highway network;
(c) develop and sustain a policy dialogue in the key policy area of province-wide highway maintenance management; and
(d) improve the safety of road transport.
B: Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1):
CAS document number: 16321-CHA Date of latest CAS discussion: March 18, 1997 and Progress Report (R98-107), May 28, 1998.
A major objective of the CAS is to alleviate infrastructure bottlenecks. This, among other infrastructure sectors, also applies to China's highway sector and specifically to the construction of the NTHS. By implementing the Zhangzhou-Zhao'an Expressway (ZZE) segment of the NTHS which is part of China's 5,200 km long coastal expressway, the proposed project would help fill a strategic expressway gap between the existing Fuzhou-Xiamen-Zhangzhou expressway corridor in Fujian Province and the equally existing Shantou-Shenzhen-Guangzhou expressway corridor in Guangdong, thus contributing directly to removing infrastructure bottlenecks, promoting long-distance passenger and freight highway traffic, facilitating inter-city and inter-provincial trade and commerce, and generating new exports of agricultural products and new tourism development.
2. Main sector issues and Government strategy:
China's strong economic growth has resulted in high growth in transport demand and a rapid shift toward highway transport. However, China has historically underinvested in transport and its road network ranks among the sparsest in the world relative to geographic area or population and is quite unsafe. Few inter- provincial expressways are in existence and about 20 percent of rural communities have no all-weather vehicular access. Governments at all ievels have therefore embarked on a major highway investment and improvement program. China: Second Fujian Highway Project Page 3 Project Appraisal Document
At the central level, the basic strategy is to develop a National Trunk Highway System (NTHS) for the exclusive use of motorized vehicles, giving priority to two north-south and two east-west corridors and to corridors serving border areas and cross-border trade. The Ministry of Communications (MOC) has been developing the NTHS, consisting of 12 inter-provincial trunk expressways, spanning China and totaling some 35,000 km. The Bank is heavily involved in the construction of substantial sections of the NTHS. At the provincial and local levels, the strategy is to concentrate on road network maintenance and the expansion and improvement of provincial and rural road networks, currently totaling about 1.26 million km, to provide greater mobility and to stimulate socioeconomic development.
On the road transport policy agenda, growing attention is being paid to removing administrative and physical barriers to inter-provincial trade and commerce, and to a redefinition of government's role in transport in light of rapid administrative decentralization and growing non-state sector involvement. MOC needs to be further strengthened to carry out its reform mandate in matters such as finance, and standards of planning, design and operation of the NTHS. Provincial, municipal and county governments are expected to continue to mobilize most investment resources required, including access to private investment and capital markets, and to seek greater expenditure and system efficiency through improved highway planning and investment strategies, as well as to modernize maintenance capacity and improve cost recovery. Local governments are also expected to further the development of the road user services and road construction industry through deregulation and promotion of competition, access to modern technology and better management.
The Bank prepared a report (No. 11819-CHA dated February 1994), "CHINA - Highway Development and Management Issues, Options and Strategies", which provides recommendations for action in the foregoing areas and which have formed the basis for Bank Group assistance in the sector. The Bank, jointly with MOC held a high-level highway policy seminar in Beijing during May 6-7, 1997, to discuss the major highway policy areas to be addressed in the Bank's future lending program to highways. These are: (1) planning and prioritization of the highway network; (2) highway finance comprising public and private sources; (3) maintenance of highways; (4) highway safety; and (5) operation of the highway network with emphasis on high-grade highways. In addition to the Bank and MOC, this seminar was attended by Ministry of Finance (MOF), State Development Planning Commission (SDPC), the China Road Association (for highway safety), selected provinces, the Asian Development Bank (ADB) and the Overseas Economic Cooperation Fund of Japan (OECF), which are also key participants in the highway sector in China. A one-day follow-up seminar was held on May 6, 1998.
Furthermore, the Bank, in cooperation with MOF and MOC is reviewing the effectiveness of past and present World Bank-financed technical assistance in the highway sector with a view to assist the government and the Bank in establishing a new policy and strategy framework for the Bank's future lending in the sector. A workshop to discuss results and future directions is being scheduled for July 8-9, 1999. Also, the Bank's Operations Evaluation Department (OED) has recently completed and published an evaluation of World Bank assistance to the transport sector in China which, inter alia, contains a detailed assessment of the performance of Bank-funded highway projects as well as a well thought-out set of recommendations for the future highway sector policy dialogue. OED's assessment of past and ongoing Bank highway lending and non-lending services is positive and it recommends a reorientation of future lending and non-lending activities towards broader Bank involvement in institutional and policy reform. Also, a recent Regional Operations Committee (ROC) meeting which reviewed China highway sector issues agreed that the China highway team would prepare a China Strategic Highway Framework paper as part of the FY2000 economic and sector work (ESW) program. Annexes 6 and 7 contain China: Second Fujian Highway Project Page 4 Project Appraisal Document pertinent information on China's evolving highway program and financing issues, and Bank involvement and achievements in China's highway sector, respectively.
3. Sector issues to be addressedby theproject and strategicchoices:
The two recent Bank reviews, OED's China transport sector evaluation of World Bank assistance conducted during most of 1997-98 and EASTR's internal review of China highway TA conducted during late 1998 and early 1999, have identified as key sector issues which would also be addressed by the proposed project the following: (a) expansion of highway capacity to remove bottlenecks and expedite socio-economic growth; (b) highway safety; and (c) highway maintenance.
(a) Highway Capacity Expansion. China's 9FYP (1996-2000) emphasizes a reduction in transport bottlenecks that are now being recognized as a growing constraint to rapid economic development. The diversification and structural transformation of the economy, toward more light and agro-industry and more inter-provincial trade, coupled with severe capacity constraints of the railways, are causing an accelerating demand for road transport. This national pattern also applies to Fujian, and in particular to the heavily traveled coastal corridor between Fuzhou and Shen7dhen/HongKong. The proposed project would fill a strategic expressway gap between the existing Fuzhou-Xiamen-Zhangzhou expressway corridor in Fujian Province and the existing Shantou-Shenzhen-Guangzhou expressway corridor in Guangdong Province. The Bank is already heavily involved in the construction of several expressway sections between Fuzhou and Zhangzhou and between Shantou and Shenzhen through the Fujian Provincial Highway Project (Loan 3681-CHA) and the Guangdong Provincial Highway Project (Loan 3530-CHA), respectively. The proposed Second Fujian Highway Project would complement these two ongoing projects and complete expressway investment between Fuzhou and Guangzhou.
(b) Road Safety. Traffic accidents are now a major problem in China, and by most measures it has the world's highest road accident rate. In recent years, the Bank, as well as ADB and other institutions, have become increasingly concerned about growing problems of highway safety. Under the proposed project, the highway safety issue would be addressed through development and implementation of a broad road safety program consisting of, inter-alia, developing safety audit procedures for new highway design; conducting annual traffic safety seminars; and developing manuals for roadwork safety during construction and maintenance of roads. The program would also include a physical road safety component through which the safety problems along a 100 km long road section of the existing national highway running parallel to the proposed ZZE would be addressed.
(c) Highway Maintenance. The present highway system in Fujian Province is rapidly growing in terms of road kilometers and at the same time experiencing a continued growth in vehicle-kilometers driven. During a period of intensive new road construction, with concentration on expressways and other high- grade highways, road maintenance becomes a serious issue to prevent rapidly increasing deterioration and avoid the need of a total rehabilitation of roads. Proper maintenance would increase the life of the road network and reduce future cost of road rehabilitation and reconstruction. The highway maintenance management system in Fujian will be strengthened through the institutional strengthening/training and policy reform components which would include, among other things, a comprehensive study on maintenance organization, financing, contracting and quality control and the purchase of modem equipment for highway maintenance, specifically in terms of upgrading ongoing efforts to strengthen the Road Data Bank (RDB), Pavement Management System (PMS) and Bridge Management System (BMS). China: Second Fujian Highway Project Page 5 Project Appraisal Document
C: Project Description Summary
1. Project components (see Annex 3 for a detailed description and Annex 8 for a detailed cost breakdown):
The proposed project would include:
Cost Incl. Bank- Contingencies financing % of Bank- Component Category (US$M) % of Total (US$M) financing Component1. Constructionof Expresswayand Physical- InterconnectingRoads Institutional 1.1 Constructionof ZZE 493.3 82.8 179.4 36 1.2 Constructionof interconnectingroads 11.3 1.9 2.4 21 1.3 Constructionof other roads 35.0 5.9 6.7 19 1.4Equipment 4.8 0.8 3.7 77 1.5 Constructionsupervision services 16.6 2.8 4.8 29 Component2. InstitutionalStrengthening and Institutional- CapacityBuilding Policy 1.7 0.3 1.0 59 2.1 Studies/technicalassistance in Highway MaintenanceManagement, Toll Rate; and Road Safety 2.2 Staff trainingprograms, covering all aspects of highwayplanning, design, construction,operation, finance and maintenance. Component3. Front-endFee 2.0 0.3 2.0 100 Component4-Land Acquisition and Implementati Resettlement on support 30.9 5.2 0.0 0
Total 595.6 100 200.0 34
2. Key policy and institutional reforms supported by the project:
In line with principal OED recommendations as outlined by its 1999 China highway sector evaluation, the proposed project would focus on key policy and institutional reforms as described below. These have been developed and agreed with FPTD during a series of project missions during 1998-99 which coincided with the timing of the OED review and enabled early OED feedback for incorporation into the FH2 project design. To that effect, OED's staff member who was Task Manager for the China Transport Sector Evaluation served as a peer reviewer for the FH2 project. Also, the FH2 operation is the successor to the ongoing Fujian Provincial Highway Project (Loan 3681-CHA) which has performed well and is nearing completion. However, this earlier project, the Bank's first highway loan to Fujian Province, did not contain substantive policy and institutional reform elements. Annex 4 to the PAD contains the details of the Policy and Institutional Reform Program as agreed with FPTD while Annex 5 contains the details of the Road Traffic Safety Program that has also been agreed during appraisal and loan negotiations.
Institutional and Policy Development Plan: As part of project preparation, the Bank missions for FH2 conducted a comprehensiveinstitutional and policy frameworkanalysis which involved 10 road sector institutionsin Fujian. This work assisted FPTD and the Bank in the identificationof all major areas for highway sector policy reform and institutionalstrengthening to be addressedunder FH2 and has resulted China: Second Fujian Highway Project Page 6 Project Appraisal Document in a draft Development Plan comprising planned institutional development activities such as organizational changes, the development of new systems and the purchase of equipment. The Institutional and Policy Development Plan covers a 5 year period. The main purpose of the plan is to ensure that institutional and policy activities which are related to each other are adequately coordinated and that the role of each organization is properly reflected in the development process. There are three important areas which can be regarded as new competencies where modem thinking and know-how to a great extent are still lacking in Fujian's road administration. These areas are road safety, quality control and environmental protection and they (or their lack) will have a direct effect on the overall quality of the FH2 project. It was agreed during FH2. appraisal and confirmed at negotiations that the Fujian development plan would be updated and reviewed annually with the Bank.
Highway Maintenance Management Framework: Under FH2 a Highway Maintenance Management framework for FPTD will be developed to establish a suitable system (a Policy) for allocation of funds for road maintenance. The first step would be to define the lowest acceptable maintenance standard level for each class of the road network. A cost per kilometer of road should be identified in order to reach the defined minimum level. This would make it possible to optimize the fund distribution on various administrative levels (Provincial, Prefecture and City) considering demands from society's point of view. This TA is closely related to the development of road and traffic information systems which will serve as a basis for maintenance planning, programming and budgeting, as well as for maintenance monitoring and evaluation. This TA would also take advantage of the HDM model which has been developed through initiative of the World Bank.
Road and Traffic Information Systems: The basic prerequisite for all modern management of roads is the information base about the actual status of the road networks, its traffic and its environment. This information is used on a day by day basis both for planning, construction and maintenance activities, and for monitoring and evaluation of works carried out. This information is normally stored in a Computerized Data Bank (Road Data Bank, RDB). Without this easily accessible information it would not be rational to have other management systems such as PMS and BMS developed. Under the FH2 project a study on Highway Maintenance Management will be initiated. This study will also cover the development needs of PMS and BMS. These two systems are directly interrelated with the Road Data Bank as they receive input data from the RDB. Past experience from other countries has clearly shown that it is feasible to build up in a stepwise fashion an Information System based on a Road Data Bank (RDB).
Road Traffic Safety: In Fujian, an initial set of road safety activities would be initiated under FH2. These activities would concentrate on institutional improvements, training, and accident data collection and analysis. The identification and implementation of physical steps under FH2 would be to spread the know-how out into Prefecture and City levels where most of the operational work is carried out and where most of the traffic accidents happen. Further development as regards the road safety area under FH2 concerns the accident information system. The accident information system which is with the Public Security Bureau (the Traffic Police) needs to be further developed and modernized in order to be able to serve the main purposes for road safety work in a broader perspective.
3. Benefits and target population:
The major quantifiable benefits of the project are the reduction in vehicle operating costs and time costs of road users. The expressway will have a shorter length, improved surface conditions and riding comfort, improved geometry, reduced traffic interference, and better safety facilities than the existing roads. Therefore, most of the long-distance traffic and some of the local traffic is expected to divert from China: SecondFujian Highway Project Page 7 Project AppraisalDocument the existing roads to the new expressway,reducing the vehicle operating and time costs for the future expresswayusers. Because many users will take the expressway,there will be a reductionin the current congestion levels on the existing roads. Thus, traffic that continues to use the existing roads will also benefit in the form of time savings due to the resultinghigher travel speeds on the existing roads. Other quantifiedproject benefits are due to the traffic that is generatedas a result of the lowering of transport costs and which previously did not exist on the existing roads. The newly generated traffic includes traffic resulting from increasedindustrial and agriculturalproduction and from new tourism development. Other project benefits that have not been quantifiedare the generatedtraffic on the existingroads due to the reduction of the current congestionlevels, and the positiveeffects on non-motorizedtraffic that uses the existing roads. The total populationin the expresswaycorridor between Fujian and Guangdong in a direct sense is estimated at about 10 million (basedon 1997data) livingin SouthernFujian.
Major indirect benefits of a long-termnature which are expectedto derive from the constructionof ZZE will be the development of new fruit growing areas mainly for export purposes to Guangdong, Hong Kong and Southeast-Asiancountries, due to southernFujian's favorable climatic conditions,as well as increasedtourism development in the coastal areas of southernFujian. Once ZZE will be completedand open to traffic, southern Fujian will have substantiallyimproved access to and from the existing high quality port and airport facilities of Shantou,an important economiccenter in Guangdong Province and the major entry and exit point for trade, commerceand tourism in southeasternChina.
Other benefits would include strengtheningthe policy and institutionalcapabilities of the primary sector agency, FPTD and related institutions which are responsible for the planning, design, supervision, construction, operation, maintenance and finance of highways in the province. Also, the project is expected to result in lower traffic accident rates on the highwaynetwork through the implementationof the traffic safety component. Furthermore, the proposed project should lead to improvements in the quality of construction of highways through the introduction of improved technology and stricter arrangementsfor supervision of construction. The project would also foster improved practices in the areas of environmentalprotection, land acquisitionand resettlementof project affected people (PAPs) and participatoryapproaches to project preparationand implementation.
4. Institutional and implementation arrangements:
Implementation period: 5 years 3 months, from October 1999 to December 2004. (Annex 11)
Executing agencies: Under the Fujian Provincial Transport Department (FPTD), the Fujian Provincial Expressway Construction Directorate (FPECD) has the overall responsibility for project preparation and implementation. The Zhangzhou Municipal ExpresswayConstruction Directorate (ZMECD) would be the executing agency for the proposed Zhangzhou-Zhao'anexpressway and the interconnectingroad program under the Project. The Zhangzhou Municipal Transport Department would be responsible for the other road subprojects. The TA studies and training componentsand the procurementof equipment would be executed by FPECD. The project would be implemented during 1999-2004.
Procurement: The International Tendering Company (ITC) has been retained as the procurement agency for all aspects of civil, electrical and mechanical works of the project requiring ICB and for equipment to be procured from abroad. The supervision of construction of the ZZE would be carried out by a joint foreign/domestic supervision team. As per Bank requirements, a detailed Procurement Capacity Assessment has been conducted by Bank procurement staff in Fujian as part of project preparation and procurement capacity in the province was found to be satisfactory. The province is China: SecondFujian HighwayProject Page 8 Project AppraisalDocument already successfully implementing a first Bank-financedhighway project (Loan 3681-CHA). The ProcurementCapacity Assessment report (dated April 1999) is on file and availableon request.
Project oversight(policy guidance,etc.): Overall directionof the projectat the central level would rest with the Ministry of Communications(MOC) in Beijing. The Bank loan would be given to the PRC (through MOF) which in turn would onlend the proceeds to the province on the same conditionsas the Bank loan. Consequently,there would be a loan agreementwith the PRC and a project agreement with Fujian. Similarto what is being done in ongoinghighway projects in China, all project accounts, special accounts,and all statementsof expenditureswill be auditedby the NationalAudit Office. Financialmanagement: Similar to the situationin on-goingBank-financed highway projects in China, Fujian Province has the systems and staff in place to carry out adequate financial management of the project. The Province will use "The TemporaryRegulations on Financial and AccountingManagement for Projects Financedby the WorldBank" issued by MOF as a basis for book-keepingand preparationof financial statementsand managementreports. The Provincehas ongoing Bank-financedprojects and its ProvincialFinance Bureau is well familiarwith Bank procedures. In accordancewith Bank OPfBP 10.02 and the Guide for Review and Design of Accountingand ReportingSystem for World Bank projects, the task team undertookand completed a Financial ManagementSystem assessment in Fujian province. The results of this assessmentare containedin Annex 13 of the PAD "FinancialManagement". Accounting, financial reporting and auditing arrangements: The Foreign Investment Audit Department of the National Audit Office (NAO) would be responsible for auditing the project expenditures. Actual audits would be carried out for NAO by the Fujian Branch of NAO or the Fujian ProvincialAudit Bureau. In the case of the SOEs, the audit reports would contain a separate opinion by the auditors as to whether the SOEs submitted during the fiscal year, together with the procedures and internal controls involved in their preparation,can be relied upon to supportthe related withdrawals. The Bank Group currentlyaccepts NAO audits for this purpose. Monitoring and evaluation arrangements: The project would be supervisedthrough Bank missions whose frequency would be guided by the progress of the works and the studies/TA. However, on average, a mission at about six to nine-month intervals would be mounted, depending on the stage of project implementation. The initial implementationstage of a China highway project usually requires a higher supervisionintensity than the later stages when expresswayconstruction and study/TA activities are fully underwayor nearing completion. In additionto field missions,staff input would be provided at headquarters for project-related activities comprising, inter alia, supervision reports, procurement documentationand contracts, staff training and equipment, and follow-up and review of the agreed studies and TA activities, as well as for efforts related to coordinationwith the project province. It is estimated that over the implementationperiod of the project, the total time expended on supervision would be in the order of 60 person-weeks.
During implementation, project performance, including the achievement of physical targets and attainmentof policy and institutionalobjectives, will be monitoredby FPTD and the Bank through the use of semi-annualmonitoring reports. The first semi-annualmonitoring report would be submittedby March 31, 2000 and the last by September30, 2005. In addition, FPTD would submit to the Bank monthly reports on works progress for ZZE. Upon completion, the project will be reviewed in an Implementation Completion Report, to be submitted to the Bank not later than six months after the closing date of the loan. China: Second Fujian Highway Project Page 9 Project Appraisal Document
D: Project Rationale
1. Project alternatives considered and reasons for rejection:
The Zhangzhou-Zhao'an Expressway with a length of about 140 km (including its initial 8 km on the Zhangzhou side which, due to severe soft-soil conditions are already under construction but which are formally not part of the Bank-financed FH2 project) is part of China's coastal North-South highway and forms one of the two vertical links in its National Trunk Highway System (NTHS). This major coastal trunk highway is being constructed between Tongjiang, located on the border with the Russian Federation in Heilongjiang province and Sanya on Hainan island, located in the South-China Sea, a distance of about 5,200 km. In Fujian province itself, the length of this coastal expressway will be about 700 km and the link between Fuzhou and the Guangdong border has the highest priority. The Bank is already financing the section Quanzhou-Xiamen (80 km) under Loan 3681-CHA which recently opened to traffic as well as the pavement and E&M works of the Fuzhou-Quanzhou section where construction is ongoing and advancing well. The section between Xiamen and Zhangzhou is already in existence and civil works on the 8 km soft soil section on Zhangzhou-Zhao'an is under construction (locally financed). Accordingly, the Zhangzhou-Zhao'an Expressway (ZZE) section is the last segment in Fujian province between Fuzhou and Shenzhen/Hong Kong and Guangzhou. It will connect in Guangdong with the existing Shantou-Shenzhen-Guangzhou section through a new section which will be open to traffic at the same time as ZZE. The Bank is also financing a 140 km long section between Longgang and Tanxi on the Shantou-Shenzhen section. It is expected that the Fuzhou-Shenzhen-Guangzhou expressway will be fully completed by the year 2003/4.
Considering the existing and future socio-economic development and growth potential in the area of influence of the proposed FH2 project and the existing and future volumes and composition of traffic in the corridor as well as the capacity of the existing main road (NR324), the proposed ZZE was selected as the most economical way of meeting existing and future needs in the Fuzhou-Xiamen-Shantou-Shenzhen- Hong Kong coastal corridor. In the future, this highway would not be able to accommodate the expected large increases in traffic volumes (yearly average growth rate of 13.5% for the last 10 years) along with the rapid economic development in the corridor, if ZZE were not to be built.
The alignment of ZZE was selected after comparison of many alternatives. The upgrading of the existing four lane, class 2, highway (NR324) to expressway standard would not be feasible due to the mix of traffic, crossing of urban areas and poor geometrical characteristics. An alignment close to the NR324 along the whole distance implied more resettlement and had about the same cost. It was mostly rejected because it served the same areas as the existing four lane highway. Accordingly, an alignment closer to the coast, serving other towns and the various new development zones as well as tourist areas was selected. The alignment was selected after comparison of several alternatives, taking into account the topographical and geological difficulties in this mountainous area as well as environment and resettlement conditions. The proposed alternative is the best compromise from technical, economical, environmental and resettlement points of view. At the Fujian/Guangdong border it connects to the Guangdong expressway at Houlin near Zhao'an. This connecting point at the border was selected after comparison of several alternatives involving both provinces. The alignment, toll stations, rest and service areas and interchanges near the border were designed with a good coordination between the two provinces. The proposed alignment will be linked to all important towns, development zones and tourist areas in the corridor through class 2, two lanes, highways. A 350 km road improvement program (RIP) including the upgrading of existing highways in the project corridor will be undertaken by the local China: Second Fujian Highway Project Page 10 Project Appraisal Document authorities as a complementary investment to the Bank-supported ZZE. This RIP is not part of the project but will be implemented simultaneously with FH2.
Private sector development and financing for the Zhangzhou-Zhao'an Expressway, or parts thereof, was considered and discussed in great length with SDPC, MOF, MOC and FPTD over an extended period of time. It was discarded for a number of reasons:
(i) China is still developing an appropriate policy, legal and regulatory framework for the private provision of toll highways. Work in this area has been ongoing for several years, with Bank and IFC support and has led to a provisional BOT law/decree for private infrastructure projects but this law/decree has still not been approved by the State Council. At the recent request of SDPC, the Bank Group is presently in the process of undertaking a new BOT/private infrastructure TA which, inter alia, will review, and recommend improvements, to China's existing BOT framework. The Bank Group team which is coordinated by the China department consists of experts from IFC, FIAS and PPI in PSD;
(ii) An earlier BOT pilot project in the highway sector, the Junshan Yangtze bridge at Wuhan which was proposed to be part of the Bank's Third National Highway Project (Loan 4327-CHA) and which was prepared with Bank support for private financing did not obtain State Council approval for BOT treatment and is now being built with public sector resources;
(iii) There is growing evidence on a worldwide scale that greenfield toll road projects are difficult to develop and finance from private sector sources, due to the risk profile of such projects. Besides the country risk (legal and regulatory) and the commercial risk (traffic demand), there are substantial construction and completion risks which most private toll road developers and their commercial lenders are not prepared to accept. Many private toll road projects around the world (e.g. Dulles Greenway in Virginia; M1/15 Motorways in Hungary, among others) which have been built during the 1990s are failing to generate sufficient revenues to enable timely debt service and therefore need complex restructuring, often connected with substantial government bailouts (e.g. Mexican toll road program where some 52 private sector concessions failed and were taken over by the central government at a cost of US$8 billion);
(vi) The International Trade and Investment Corporation (ITIC) crisis in China will make it more difficult for provincial and municipal governments to obtain foreign loan financing for large-scale infrastructure projects, including toll highways. The Changsha BOT pilot power plant in Hunan which is one of SDPC's original BOT pilot projects is presently unable to reach financial closure with the British developer National Power (who has won the concession) due to the unavailability of sufficient long-term foreign commercial debt financing.
There is no existing or planned railway line parallel to and in competition with the proposed Zhangzhou- Zhao'an Expressway. There is the existing Yingxia Railway line which is a branch line of a total length of 143 km and which passes the project corridor at its northern end through the northern part of Zhangzhou City (see IBRD map 29903). China: Second Fujian Highway Project Page 11 Project Appraisal Document
2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned).* Latest Supervision (Form 590) Ratings Sectorlssues Projects (Bank-financed projects only) Implementation Development Progress Objective (IP) (DO) Bank-financed - Remove Highway Highway Project (completed) 1, 2* S S Capacity Beijing-Tianjin-Tanggu Expressway (completed) 1-6 S S Bottlenecks (1) Sichuan Provincial Highway (completed) 1, 2, 6 S S - Institutional Shaanxi Provincial Highway (completed) 1-3, 6 S S Strengthening/ Jiangxi Provincial Highway (completed) 1, 2, 6 U s Training (2) Shandong Provincial Highway (completed) 1, 2, 4, 6 S S - Rural Roads and Jiangsu Provincial Transport (completed) 1-3, 6 S S Poverty Zhejiang Provincial Highway (ongoing) 1-3, 6 S S Alleviation (3) Guangdong Provincial Highway (ongoing) 1-4, 6 S S - Highway Safety (4) Henan Highway (ongoing) 1-3, 6 S S - Operation and Fujian Highway (ongoing) 1, 2, 3, 6 S S Maintenance of High- National Highway: Hebei/Henan (ongoing) 1, 2, 5, 6 S S Grade Highways (5) Xinjiang Highway (ongoing) 1, 2, 4, 6 S S - Cost Recovery (6) Shanghai-Zhejiang Highway (ongoing) 1, 2, 4, 6 S S Second Shaanxi Provincial Highway (ongoing) 14, 6 S S Second Henan Provincial Highway (ongoing) 1-5, 6 U S Second Xinjiang Highway (ongoing) 1, 2, 6 S S Second Nat'l Hwy: Guangdong/Hunan (ongoing) 1, 2, 4, 5, 6 S S Third Nat'l Hwy (ongoing): Hubei 1, 2, 4, 5, 6 S S Tri-Provincial Highway: GansulNingxia/lnner Mongolia (ongoing) 1, 2, 3, 5, 6 S S Anhui Provincial Highway (ongoing): 1, 2, 5, 6 S S Fourth National Highway: Hubei/Hunan (planned) 1, 2, 4, 5, 6 Second Fujian Highway (planned): 1, 2, 4, 5, 6 Third Henan Provincial Highway (planned): 1, 2, 5, 6 Guangxi Provincial Highway (planned): 1, 2, 5, 6 Asian Development Bank Shenyang-Benxi Highway (completed) Yunnan Expressway (completed) Hunan Expressway (completed) Julin Expressway (completed) Heilongjiang Expressway (ongoing) Yunan Expressway (ongoing) Hebei and Liaoning Expressway (ongoing) Chongqing Expressway (ongoing) Liaoning and Jilin Expressway (ongoing) Hebei Expressway (ongoing) Liaoning Expressway (ongoing) Shenyang-Jinzhou Expressway (ongoing) Hebei Roads Development (ongoing) Chengdu-Nanchong Expressway (ongoing) Changchun-Harbin Expressway (ongoing) Jiangxi Highway Project (ongoing) Southem Yunnan Road Development (planned) Shanxi Expressway (planned) Chongqing-Guizhou Expressway (planned) Guangxi Road (planned) Shanxi and Shaanxi Expressways (planned) Overseas Economic Cooperation Fund of Japan Hainan Development Hefei-Tongling Highway and Tongling Yangtze River Highway Bridge Construction Second Chongqing Yangtze River Bridge Construction I Qiqihar Nenjiang River Highway Bridge Construction
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) China: Second Fujian Highway Project Page 12 Project Appraisal Document
3. Lessons learned and reflected in the project design:
Since 1985, the Bank has financed 21 highway projects in China (of which seven have closed), amounting to more than US$4.0 billion in Bank loans and IDA credits. The Bank has been and remains involved in the construction of some 2,800 km of toll expressways and other high-grade toll highways and in the rehabilitation, upgrading and maintenance of some 13,000 km of lower level (specifically rural) roads. In addition, as revealed during a recent Bank review and assessment of its highway TA, the Bank was and is involved in more than 50 TA tasks, comprising (i) highway planning and prioritization; (ii) highway finance; (iii) highway maintenance; (iv) operation and management of high-grade highways; and (v) traffic safety. Moreover, since mid-1996, the Bank has also given its no-objections to a number of transactions for the securitization of Bank-financed highway assets in China (so-called "asset-based or asset-backed financings"), through the issuance of highway equity of provincial toll road corporations on the Hong Kong and Shenzhen stock exchanges. Annex 6 contains a detailed description of China's evolving highway program and the financing issues it faces while Annex 7 describes Bank involvement and achievements in China's highway sector to date.
The proposed Second Fujian Highway Project would be the successor operation for the ongoing Fujian Provincial Highway Project - Loan 3681-CHA. This project was approved by the Board on December 14, 1993 and became effective on July 21, 1994. The project comprises as major project components: (i) construction of Quanzhou-Xiamen Expressway (82 km); (ii) implementation of a road improvement program (RIP), comprising 260 km of provincial and rural road upgrading and improvement; (iii) procurement of road-related equipment; (iv) a construction industry study; and (v) various institutional strengthening and training measures. Due to substantial loan savings amounting to some 33% of the original loan amount (US$47.5 million of US$140 million IBRD loan), the Board approved on a no-objection basis in June 1998 a new project component to absorb the loan savings. This new component consists of the partial Bank-financing of the now ongoing pavement as well as electrical and mechanical works on Fuzhou-Quanzhou Expressway (154 km). Loan closing was extended by the Board by 2.5 years from June 30, 2000 to December 31, 2002. Implementation of the ongoing project has been and continues to be smooth and the project development objectives are being achieved. Project progress ratings for various components have been either satisfactory or highly satisfactory throughout project implementation. This ongoing project enjoys a very high degree of ownership with FPTD and related project implementation agencies. Lessons learned from the ongoing project have been applied fully in the design and preparation of the proposed Second Fujian Highway Project.
In addition, while the overall performance of the Bank's highway projects is by and large satisfactory, a number of problems have occurred, which have been taken into consideration in the design of the proposed FH2 project. These problems include: inadequate engineering designs and bid documents including costing of civil works; quality control of construction; late commencement of electrical and mechanical facilities component (which has delayed completion of some projects and necessitated the extension of the closing date of several Bank loans), and some lack in the scope and speed of policy and institutional reforms, specifically relating to road maintenance, improved high-grade highway management and operation, and traffic safety.
All engineering designs and technical bid documents including cost estimates for the proposed expressway and related roads, including their E&M facilities, are being reviewed by Japanese engineering consultants under Japanese grant funding. These technical reviews will be completed by August 1999. The quality of project engineering has also benefited from the involvement of a French expressway specialist who participated in all project missions. Quality control of construction, China: Second Fujian Highway Project Page 13 Project Appraisal Document specifically for expressway works will be undertaken by international and domestic supervision consultants, with on average one well trained and experienced supervisor per km of expressway. The matter will also be addressed through increasing the frequency and quality of the Bank's supervision, after adding an experienced Chinese construction engineer to the technical staff at RMC who will also supervise the road works under FH2. Timely completion of the E&M component will be achieved through stricter control and early commencement of the tendering procedures.
The policy dialogue between China and the Bank in the highway sector needs to be further strengthened. Although highway lending is substantial, with on average US$500-600 million per year in new highway loans, resulting in the Bank's considerable impact on the fast expansion in China's road capacity, progress in policy and institutional reforms (including road traffic safety) needs to be accelerated. During preparation of the proposed project substantial efforts were made to engage FPTD in a continuing policy dialogue which started with the identification of the new project and was taken forward throughout the appraisal of FH2. This was successfully achieved by involving a policy and institutional expert from the Swedish Road Administration who joined all Bank preparation missions. While the results of these efforts are encouraging, in that policy and institutional reforms now enjoy a higher degree of visibility and ownership with FPTD, much remains to be done during implementation of the FH2 project so as to make policy and institutional reform components rank on an equal level with road construction and network capacity expansion. The Bank will develop a more aggressive approach in this area by, for example, staffing project preparation and supervision missions more regularly with experienced institutional and policy experts and by advancing the sector policy dialogue more aggressively with MOC through more frequent policy workshops of which the next one is scheduled for July 8 and 9, 1999 in Beijing. More such workshops will be held during FY2000 and FY2001.
There also is a growing concern that adequate funding for highway maintenance is now not being secured to cover an expanding and more expensive highway system. Previously, this was not a real issue in China; adequate funding was set aside for this purpose. The highway maintenance management study that will be carried out under FH2 will address the organizational framework and develop sustainable maintenance policies and systems for Fujian province. The FH2 project would emphasize road maintenance as a core area for the Bank's future policy dialogue in the highway sector with China.
Experience in the area of land acquisition and resettlement has generally been satisfactory in the Bank's highway projects in China. In this area, it is particularly important that the Bank makes its requirements well known to the Chinese agencies at an early stage in the preparation of the project. A Bank resettlement specialist was involved from the beginning in project preparation. The resettlement action plans for the proposed project were reviewed and cleared by EASES and Legal. Experience in the environmental area in China has generally been favorable as well. As in the case of resettlement, a Bank environmental specialist has been involved in project preparation from the beginning. However, more attention needs to be paid to environmental supervision during construction and to the training of environmental personnel by the Chinese side. The proposed project will provide an adequate institutional setup and training for such environmental supervision and training. The quality of the Bank's resettlement and environmental work has also been strengthened recently, as part of the Bank's decentralization efforts. More of this work will in future be shifted to RMC due to increasing resident mission capacity in resettlement and environment.
4. Indications of borrower commitment and ownership:
The mission found that there is very strong support from the various levels of Government. SDPC, MOF, MOC and the Fujian Provincial Government strongly support the project. Also, the various local China: SecondFujian Highway Project Page 14 Project AppraisalDocument governmentsthe mission met with in the project area expressedstrong supportand emphasizedthe need for the project. FPTD has completed all feasibility studies,preliminary engineering designs, EIAs, EAPs and RAPs for the proposed expressway and other roads. However, FPTD will need to increase its understanding of, and commitment to, highway sector policy issues, specifically regarding highway maintenanceand road traffic safety.
5. Value added of Bank support in this project:
The involvementof the Bank would result in much needed additionalfinancial resources to help remove highway bottlenecks and increase traffic capacity in this high priority transport corridor. Bank involvementwould accelerate policy, institutional and manpower development in highway planning, design, supervision,construction, operation, maintenance and finance. Bank involvementwould also be expectedto benefitthe design and the quality of constructionof the roads to be undertaken. Furthermore, the Bank would help the Fujian Provincial Transport Department to emphasize the need for proper maintenanceof the highwaynetwork through introductionof modern maintenanceequipment, training of staff and allocation of adequate maintenancefunds. In addition, it would raise the awareness of the highway safety problem and make improvementsin this regard. Similarly, Bank involvementwould improve the provincial practices in the analyses and implementationof environmental,land acquisition and resettlement,and participatoryaspects of highwayprojects.
E: Summary Project Analysis (Detailedassessments are in the project file, see Annex 17)
1. Economic (supported by Annex 12):
[x] Cost-BenefitAnalysis: NPV=Y4,036 millionat 12% discountrate; EIRR= 19.6%;
The estimated economicinternal rate of retumn(EIRR) is 19.4 percentfor the entire Zhangzhou- Zhao'an expressway corridor. The EIRR of the entire project civil works (98 percent of total project costs), including the interconnectinglink roads and the other roads program is 19.6 percent. The sensitivity analysis indicatesthat if constructioncosts are increasedby 20 percent and user benefits are reduced by 20 percent,the project EIRR is 15.5percent, which indicatesthat even under this pessimisticscenario the project is justified. The switchingvalues analysis indicatesthat constructioncosts have to be multiplied by a factor of 2.0 or user benefits have to be multipliedby a factor of 0.5 to yield a project EIRR of 12.0 percent. The risk analysis indicates that the most likely project EIRR is 16.2 percent, the worst case scenario EIRR is 12.6 percent, the best case scenario EIRR is 19.7 percent, and there is a 7.7 percent probability that the EIRR will be less than 12 percent. Therefore, the project is economically well justified.
2. Financial (see Annex 12): NPV=Y4,021 million at 7.0 % discountrate; FIRR= 12.5%;
The financial evaluationfocuses on the Zhangzhou- Zhao'an expresswaywhich is the main component of the project and the only one that will generate financial income with profit making and repayment capabilities. Tolls will be charged as a function of vehicle type and size and distancetraveled at the same level and structure as the tolls currently being collected on Quanzhou-Xiamenexpressway. The estimated weighted average cost of capital is 7.0 percent,considering that the World Bank will finance around 32 percent of the investment and 25 percent will be financed locally. The expressway financial rate of return is 12.5percent with a net present value of 4,021 million RMB Yuan at 7.0 percent discount rate with an investmentrecovery period of 16 years. If constructioncosts increase by 20 percent while China: SecondFujian HighwayProject Page 15 Project AppraisalDocument revenues decrease by 20 percent, the project financial rate of return is 8.5 percent, which indicatesthat even under the most unfavorablesituation, the financialbenefits are acceptable.
3. Technical:
The technical parameters and estimated costs for constructionof the expressway were established by detailed feasibility,design and engineeringstudies undertakenby the Fujian Provincial Design Institute and are being reviewed by Japanese engineering consultants(for the firm's technical report, see the Project Files) and checked against actual unit costs for the ongoing Fujian Provincial Highway Project. These were reviewedand found to be technicallysound and appropriateto the country's needs. The cost estimate of the project reflects April 1999 prices and is based on the latest available engineeringstudies and prevailing unit rates for civil works, recent costs of foreign experts from other highway projects in China includingFujian Provincial HighwayProject and recent price quotationsfor equipment. The cost estimate includes physicaland price contingencies. Physicalcontingencies are calculatedat 10 percentof the base cost of civil works and constructionsupervision. Price contingenciesare calculated for foreign costs, using US$ annual escalation factors of 2.9% in 2000 and 2.5 percent during 2001-2004. Price contingenciesfor local costs are based on local annual escalationof 5.0% in 1999 and 5.5 percent during 2000-2004.
4. Institutional:
During the supervisionand preparation of the Fujian ProvincialHighway and Second Fujian Highway Projects, frequent Bank missions have worked closely with FPTD to help better understand its existing institutional constraints and deficiencies and to develop a medium-term vision for its institutional development. To that effect, Bank missionshelped FPTD develop draft organizationaland institutional developmentplans covering a 5-year period. This mediumrange developmentplan now forms the basis for agreed policy and institutional reforms, including organizational changes and improvements, manpowertraining, and implementationof reforms in maintenancemanagement, traffic safety and high- grade highway operation and management. FPTD has demonstratedproject management capabilities throughthe successfulimplementation of the ongoingBank-financed Fujian ProvincialHighway Project. The Project Office has competentand sufficientstaff who are now quite experienced in managingBank- financed projects. They will also receive continued assistance from Bank supervision missions and construction supervisionconsultants, both domestic and foreign. All these measures taken together are expectedto enable FPTDto efficientlymanage the proposedproject.
5. Social:
The project requires land acquisitionfor the expressway,linking roads and other roads which will cause readjustmentof agriculturalland in affectedvillages and displacementof affected people. During the feasibility study of the project attentionwas paid to minimizethe impact on agriculturalland and residences.During the preliminary design, studieswere made on 1/2000maps to keep the alignment at a distance from settlements to minimize relocation and adverse impact on affected communities. Resettlement minimization through realignment has continued into the final design through the collaboration of the Project Resettlement Office (PRO) with the Environment Team and the Design Institute. Attention is being paid to keep the alignment from dividing settlements into two, wherever possible. In this respect Bank specialistsworking on highway design,environment and resettlementhave coordinatedtheir work both amongthemselves and with their domesticcounterparts. China: Second Fujian Highway Project Page 16 Project Appraisal Document
Socioeconomic surveys of the affected people and communities were conducted and census of Project Affected Persons (PAPs) and their assets were completed on all the alignments considered for the project. Resettlement Action Plans (RAPs) are in accordance with Bank's Operational Directive 4.30 and have been found satisfactory.
The RAPs establish the basis for land accluisition and resettlement in the project and responds to the general Bank guidelines on involuntary resettlement. Basic objectives of the RAPs are to: (a) minimize resettlement; (b) improve the standards of living of the PAPs or at least to restore them to the pre-project level; (c) consult the affected communities on the project impact, entitlements, and rehabilitation measures; (d) compensate affected villages for land and the PAPs for their lost assets at replacement value without depreciation; (e) provide land to the PAPs whose land is affected by readjusting the village land; (f) provide alternative jobs to the PAPs losing agricultural land if the land endowment of affected villages do not permit readjustment; (g) ensure that PAPs whose jobs are affected through affected enterprises or lands operated by villages are provided with similar employment in new enterprises and operations; (h) compensate and rehabilitate the disrupted infrastructure; (i) establish the time schedule and the budget of the resettlement component of the project; (j) devise a mechanism for grievance and appeals; and (k) devise internal and independent monitoring mechanisms.
A summary of project impacts related to land acquisition and resettlement is given below while more detailed information is contained in Annex :15.
Land Acquisition and Resettlement Impacts of the Highway Components
Highway Sections Land Acquisition Affected HHsI PAPs Affected Enterprises (mlu)
HHs PAPs Enterprises Workers
Main Expressway (ZZE) Component 15,374 7,268 32,744 20 236 and Interconnecting Roads
Chiling-Huxi Highway 272 334 1,440
Zhangzhou Hua'an Road 167 106 461 1 22
Baishui Large Bridge 59 67 248
Total 15,872 7,775 34,893 21 258
The Project Resettlement Office (PRO) of FPTD is responsible for the overall coordination, internal monitoring and implementation of resettlement. Field implementation of resettlement is the responsibility of County Resettlement Offices (COROs) i:n conjunction with the township and village administrations. City Resettlement Offices (CIROs) will liaise between the PRO and the COROs. All levels of Resettlement Offices (ROs) have already been established and trained for the project. Further training for the specific needs of the resettlement network is also planned. RAPs for the highway sections listed in the above table have been prepared through a collaboration of the PRO, Independent Monitoring Organization (IMO), the Design Institute, local CIRO and the PAPs. All the PAPs have been contacted and informed about the prospective resettlement and their concerns have been incorporated in RAPs. All the PAPs will be informed about the exact impact of the project on their households and their entitlements China: Second Fujian Highway Project Page 17 Project Appraisal Document after the official measurement of the impact is completed. Indicators for monitoring have been developed and presented in the RAPs. While internal monitoring will focus on the quantitative aspects of resettlement implementation, independent monitoring will evaluate both its qualitative and quantitative aspects. Internal and independent monitoring reports will be submitted to the Bank annually.
Implementation schedules for resettlement have been established. All resettlement will be completed before the commencement of civil works. Resettlement will be funded out of counterpart funds. Cost estimates include adequate allocation for price and physical contingencies.
Civil works on the first 8 km of the expressway (which are not part of the project) have already begun, and resettlement in this section is already completed. The beneficiary has agreed that the policies developed in the RAP (including compensation rates and other entitlements) will also apply to the first 8 km. PAPs affected in the first 8 km will be rehabilitated to bring resettlement in the Bank-financed and non-Bank-financed sections to an equal standard.
6. Environmental assessment: Environmental Category [X] A []B [] C
Environmental Impact Assessment (EIA), Environmental Action Plan (EAP), and Environmental Assessment (EA) Summary Reports for the main Zhangzhou - Zhao'an Expressway were prepared by the Xian Highway Transportation University (XHTU) and submitted to the Bank at various stages of project preparation beginning May 1998. The reports were reviewed by the Bank missions and discussed extensively with FPTD, XHTU and other interested parties during the various preparation missions. At the end of every mission, the Bank provided detailed written and verbal comments.
The EIA and EAP reports for the Longhai Baishui Bridge, Zhangpu Huxi - Chiling Road and Tankou - Chengguan (Hua'an Section) of the Zhangzhou - Hua'an Highway were prepared by the Research Institute of Highway, Ministry of Communications, Beijing. The first drafts were submitted to the Bank and reviewed by the Bank mission in March 1999. Extensive verbal comments were provided and the main comments were highlighted in the Mission's Aide Memoire of that time. The revised final EIA, EAP and EA Summary reports were submitted in April 1999 and after review were found to be satisfactory to the Bank.
A separate Cultural Relics report by the Fujian Provincial Cultural Relics Administration Commission (March 15, 1999) was also reviewed by the Bank and found to be satisfactory. The findings of the Cultural Relics report are included in the EIA and EAP report for the Zhangzhou - Zhao'an Expressway. The major findings and recommendations in the EIA/EAP reports are summarized below.
Additional information on Environmental Assessment is provided in Annex 14
Potential Impacts: Major impacts associated with the selection of the alignments include: loss of agricultural land, loss of residences and livelihood of affected people, disruption in the day-to-day activities of the communities, etc. The major environmental impacts during the construction of the Expressway and the other roads include noise, soil erosion, and dust. In the case of the Tankou - Chengguan Highway, the potential impact of construction of the road on the Jiulongjiang River is also of concern. Lesser impacts include alteration of hydrological regimes, interference with local residents and traffic and impacts on local ecology and on irrigation systems. The impact of construction materials haul traffic (noise, dust, congestion, safety, etc.) on the existing highways, e.g. NR324 and PR210 is of potential concern. Safe disposal of excess excavated material from the three tunnels will also require China: SecondFujian Highway Project Page 18 Project AppraisalDocument close attention. Trafficnoise, air pollutionfrom vehicle exhaustemission, soil erosion and water pollution from service areas are identified as major adverseimpacts during the operationalperiod.
MitigationMeasures: The EAP reports for the Zhangzhou-Zhao'anExpressway and the other roads specify mitigation measures, environmental monitoring plans, institutional arrangements for their implementation, training and equipment requirements, and budget needs for environmental protection.
In the design phase, emphasis was placed on the selection of an optimum alignment taking into considerationnot only the engineeringissues, cost of building the highways, and local preference, but also the environmentaland resettlementissues. The final Zhangzhou-Zhao'anExpressway alignment was selected by: (i) proper selection of alternative alignments (e.g. between Andou and Xizhang, the inner scheme was chosen to minimize the impacts of fog, and typhoons, and to avoid deep cuts; between Shudong and Lintou, the southern alternative was chosen to minimize deep cuts, impact on farm land and reservoir, even though the southern alternative was more costly), and (ii) judicious shifts in the alignments to minimize the use of agriculture lands, resettlement, noise and other environmental impacts (e.g. the alignments at Xinhe, Neijiafeng, Huxi, Liuban and Zhulin villages were shifted to by-pass the villages thus preventing resettlement, minimizing land acquisition and reducing impact on the residents). In the case of Gaoshan Village, the alignment was shifted 50 m north to minimize resettlement. Noise barriers will be built on both sides of the Expressway to mitigate noise and an underpass will be provided to minimize day-to-day disruption in the movement of people and traffic in Gaoshan.
Mitigation measures during the construction phase will include proper planning of earthworks to reduce damage caused by borrow areas and spoil piles and inclusion of overpasses and underpasses to minimize interference with the movements of local people and traffic. Other measures will include reclamation of marginal agricultural land and drainage where appropriate, use of covered trucks to transport borrow materials, and use of water sprinklers to redluce dust. In noise sensitive areas, night time noise will be minimizedby restrictingconstruction work during the period from 0600 hr to 2200 hr. The client has also agreed to mitigate the impact of construction traffic on the affected people by erecting temporary noise barriers and by controlling dust through regular spraying.
Major mitigation measures during the operational phase will include provision of noise barriers along the Expressway and other project roads to protect sensitive locations from excessive noise, construction of new walls or raising the heights of existing walls around residences to reduce traffic noise, afforestation to improve landscape and to reduce the impact of air pollution.
Engineering design and technical specifications for the Expressway, tunnels and bridges construction will incorporate appropriate measures to protect the environment. Neither the Expressway nor the interconnecting or other roads will affect ecologically sensitive areas and their construction and operation should have no major adverse impacts on the environment if the measures outlined in the EAP are properly implemented. Assurances were obtained at negotiations from Fujian Province that: (a) the environmental protection measures stipulated in the EAP with regard to the Expressway, its interconnecting roads and other roads will be implemented in a manner satisfactory to the Bank; and (b) Fujian Province shall furnish to the Bank, arnual environmental monitoring reports for the Expressway and the other roads during the construction phase and during the first three years of operation following the completion of the project. Although the first 8 km of the Expressway are not being financed by the World Bank and are not formally part of the project, Fujian has agreed to implement all the mitigation measures stated in the EAP for the first 8 kmnsection, as if the section were a part of the Bank financed project. China: Second Fujian Highway Project Page 19 Project Appraisal Document
7. Participatory approach [key stakeholders, how involved, and what they have influenced; if participatory approach not used, describe why not applicable]:
a. Primary beneficiaries and other affected groups: The major beneficiaries would be the communities along the Zhangzhou-Zhao'an corridor as well as intercity traffic between cities in the corridor and beyond. Benefits resulting from improving the existing highway condition would accrue to the population throughout the province. FPTD and its related institutions would also benefit through the institutional strengthening and training contained in the project. b. Other key stakeholders: The affected communities were involved in the formulation and comparison of alternative alignments as well as the location of interchanges, underpasses and grade separations. During the EIA preparation, the local people were intensively consulted through meetings with local government representatives and public opinion questionnaires supplemented by interviews. Special attention was given to the consultation with affected people and their representatives during the preparation of the resettlement action plans. Implementation of the resettlement program is intended to be a highly participatory exercise. A resettlement information booklet, including detailed entitlements of each household, main contents of the RAPs, compensation and entitlement policies and grievance procedures would be distributed to the affected people prior to resettlement implementation. Both internal and external (by independent monitors) monitoring of the resettlement program would be conducted. F: Sustainability and Risks
1. Sustainability:
Traffic volumes on highways in China, particularly on expressways are expected to continue to grow fast. EIRR calculations of completed highway projects in China at the time of loan closing - when expressways and other high-grade highways have been in operation for a few years - frequently show higher EIRRs than at the time of project appraisal. Experience from completed and ongoing Bank-financed highway projects in China shows a great commitment for implementation of the physical components of the project, which account for the majority of the project cost. Generally, the counterpart funds are available on time, but lately some of the provinces have become overextended and in some cases some delays have occurred in the availability of these funds which had a slight adverse effect on the timely implementation of the project. The level of tolls and the need for their regular review and increase are important for the financial viability of the project and the project province's ability to repay the Bank loan on time as well as to provide timely and sufficient maintenance funding. Construction quality has a major impact on future repair and maintenance cost and will be controlled through tight construction supervision. Given that FPTD and the related road sector institutions such as design institutes, training schools, research institutes, and supervision stations have developed a high degree of ownership for the policy and institutional reform components of the proposed Second Fujian Highway Project, it can be expected that sustainability in these project areas can also be achieved. Once the ongoing Fujian Provincial Highway and the new Second Fujian Highway Projects will be completed in 2005, the Province will have worked closely with the Bank and its consultants over a 10 year period. China: Second Fujian Highway Project Page 20 Project Appraisal Document
2. Critical Risks (reflecting assumptions in the fourth column of Annex 1):
Risk Risk Rating Risk Minimization Measure
Annex 1, cell "from Outputs to Objective"
Lower than expected growth rates of traffic volumes N Critical review of feasibility studies and selection of adequate technical standards
Annex 1, cell "from Components to Outputs"
Inadequate quality of construction M (a) Selection of competent contractors will reduce this risk (b) Adequate construction supervision arrangementswill reduce this risk
Delays in land acquisition and resettlement N Proper training in these areas and guidance from the Bank will reduce this risk
Sufficientcounterpart funds, materials and human N (a) Ensure sufficient financial resources resources not available on time are available through analysis of highway revenues and expenditures (b)MOF's, MOC's and the provincial government's strong support and FPTD's strong commitmentto the project will ensure availability (c) Dialogue with the provincial government and MOC
Deficient engineering designs N The engineeringdesigns are being reviewed by Japanese experts
Delays in preparation and implementation M (a) MOC and Bank will follow-up project closely and carefully and provide timely advice and support (b) Project launch workshop will be held after board approval and before start-up of implementation
Training program will not prove successfuland M (a) Well designed and implementable managerswill not apply new skills training program (b) Criteria for selection of trainees are logical and implemented in practice (c) English language training is given to traineesbefore training abroad (d) Reports on effectiveness of training after training is completed are submitted (e) Provide traineeswith opportunity to apply acquired skills and tie promotions/salaryincreases to effective training China: Second Fujian Highway Project Page 21 Project Appraisal Document
Risk RiskRating RiskMinimization Measure
Selectionof incompetentcontractors M Carefulpre-qualification of contractorsin consultationwith the Bankwill reduce this risk
Policyand InstitutionalReforn as wellas Road Safety M (a) Bankhas ensuredthat Policyand Programswill notreceive large ownershipfrom FPTD InstitutionalReform as well as Road and will be unsuccessful SafetyPrograms are well designedand alreadyenjoy large degreeof ownership fromFPTD; (b) Bankwill conductannual progress workshopto ensuresustainable implementationof programs. Overall Risk Rating M RiskRating - H (HighRisk), S (SubstantialRisk), M (ModestRisk), N (Negligibleor LowRisk)
3. Possible Controversial Aspects:
The most likely controversial aspect of project implementation would relate to disagreements among contractors, supervision engineers and the owners regarding construction quality (or lack thereof) of expressway civil works. This makes international construction supervision personnel in a mediating role necessary. Another controversial aspect between Bank supervision missions and FPTD could derive from the extent and speed of implementation of difficult institutional and policy reforms such as organizational changes, creation of new highway entities along commercial lines, increasing road maintenance funding, etc.
G: Main Loan Conditions
1. Effectiveness Conditions:
Issuance of acceptable legal opinions.
2. Agreement Reached with the Government:
The borrower will ensure that the proceeds of the loan are onlent to the Beneficiary (Fujian Province) on the same terms and conditions as the Bank loan, with the Beneficiary bearing the foreign exchange risk.
3. Agreements Reached with the Beneficiary:
Construction Supervision, Toll Rates, and Highway Expenditures
(a) Fujian Province would employ and maintain construction supervision teams on Zhangzhou-Zhao'an expressway (ZZE), as applicable, with qualified staff in adequate numbers to ensure that all works are carried out in accordance with technical specifications and that strict quality controls are exercised on all sites. Construction quality would also be monitored through routine project supervision and monthly and semi-annual progress reports;
(b) Fujian Province shall prepare, under terms of reference satisfactory to the Bank, and provide to the Bank a monthly progress report on the civil works on the Zhangzhou-Zhao'an expressway (ZZE); China: Second Fujian Highway Project Page 22 Project Appraisal Document
(c) Fujian Province shall undertake, complete and furnish to the Bank for its review and comments, an analysis and recommendation for the toll rates on ZZE by June 30, 2002 taking into consideration the results of similar studies on toll rates con,ducted under other Bank-financed highway projects in China and the experience with toll rates on major roads in China;
(d) Fujian Province would, by March 31 of each year commencing in 2000 and ending in 2005, furnish an annual highway expenditure report for the Bank's review and comments for the previous year, which would: (i) show the length of each class of highway by condition (excellent, good, fair and bad) as of December 31 of the previous year; (ii) show the completed physical works and actual expenditures of the previous year against the planned physical targets and budgeted funds of that year, for new construction, upgrading/improvement, rehabilitation, periodic maintenance, and routine maintenance; and (iii) show the targets of the highway program for the following year, including new construction, upgrading/ improvement, rehabilitation, periodic maintenance, and routine maintenance, in terms of planned physical works and planned expenditures.
Policy and Institutional Reform and Road Traffic Safety Programs, and Training
(a) Fujian Province would by December 31 of each year, or such other date as the Bank shall request, hold a workshop together with representatives of the Bank to evaluate the progress in the implementation of its program of institutional and policy development and reforrn, and more specifically in regard to road safety, development of management systems, and road maintenance and fund allocation;
(b) Fujian Province would: (i) by October 1, 2000, complete an institutional development and reform plan for the next 6 years for its respective highway sector, such plan to cover the areas of, inter alia, road safety, organizational development and strengthening, training needs, equipment needs and management systems development; and (ii) furnish said plan to the Bank for its review and comments;
(c) Fujian Province would: on the basis of the institutional development and reform plan referred to in sub-paragraph (b) above, (i) by October 1 of each year, commencing on October 1, 2001, prepare and provide to the Bank for its review and comments an annual program of implementation; and thereafter (ii) take all appropriate actions to implement said annual program, taking into consideration the Bank's view thereon.;
(d) Fujian Province would: (i) carry out the training, in accordance with a training program acceptable to the Bank; and to that end (ii) by June 30 of each year, commencing in June 30, 2000, furnish to the Bank for its prior approval a rolling two-year training program;
(e) Fujian Province would: (i) by December 31, 2001, complete a maintenance management study under terms of reference acceptable to the Bank; (ii) furnish said study to the Bank for its review and comments; and thereafter (iii) implement the recommendations of said study, taking into consideration the Bank's view thereon;
(f) Fujian Province would: (i) by December 31, 2002, complete a study on safety measures regarding maintenance works, under terms of reference acceptable to the Bank; (ii) furnish said study to the Bank for its review and comments; and thereafter (iii) implement the recommendations of said study, taking into consideration the Bank's view thereon; China: Second Fujian Highway Project Page 23 Project Appraisal Document
(g) Fujian Province would: (i) by March 31, 2003, complete the development of a road information system, a quality control system and an accident analysis system, under terms of reference satisfactory to the Bank; and (ii) put into effect said management systems;
(h) Fujian Province would: : (i) by December 31, 2001, prepare under terms of reference acceptable to the Bank and furnish to the Bank for its review and comments, a safety audit schedule and a schedule of black spot identification and improvement; and thereafter (ii) implement said schedules.
Environment, Land Acquisition and Resettlement
(a) Fujian Province shall carry out the EAPs and RAPs in a manner satisfactory to the Bank and furnish any proposed revision of these plans to the Bank for its approval;
(b) Fujian Province shall maintain policies and procedures adequate to enable them to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank, the carrying out of EAPs and RAPs; and
(c) Fujian Province shall prepare, under terms of reference acceptable to the Bank, and furnish to the Bank: (i) on January 31 of each year, starting in 2000 through 2007, an annual environmental monitoring report; and (ii) on January 31, 2000 and July 31, 2000, and thereafter on each January 31 during the period of project implementation, an internal resettlement report prepared by the appropriate agencies of the Project Province, and an external resettlement report prepared by an independent entity acceptable to the Bank, on the implementation and impact of the resettlement activities during the immediately preceding six months or one year period, as the case may be.
Reporting, Monitoring and Auditing
Fujian Province shall prepare on the basis of guidelines acceptable to the Bank and submit to the Bank:
(a) a monthly progress report on the civil works of ZZE;
(b) a semi-annual progress report on implementation of all components of the project by March 31 and September 30, commencing in 2000;
(c) by March 31 of each year commencing in 2001 and ending in 2006, an annual monitoring report in a form satisfactory to the Bank covering all components of the Project and assessing the extent to which various implementation and development objectives have been obtained in the course of project execution and operation;
(d) within six months of the closing date of the Bank loan to the project, an implementation completion report in a format acceptable to the Bank; and
(e) the audited accounts for the project, statements of expenditures, and special accounts by independent auditors acceptable to the Bank within six months of the close of each fiscal year.
H. Readiness for Implementation
[x] The engineering design documents for the first year's activities are complete and ready for the start of project implementation. [] Not applicable. China: Second Fujian Highway Project Page 24 Project Appraisal Document
[x] The procurement documents for the first year's activities are complete and ready for the start of project implementation.
[x] The Project Implementation Plan has been appraised and found to be realistic and of satisfa'ctory quality.
[ ] The following items are lacking and are discussed under loan conditions (Section G):
I. Compliance with Bank Policies
[X] This project complies with all applicable Bank policies.
[ ] [The following exceptions to Bank policies are recommended for approval: The project complies with all other applicable Bank policies.]
Task Team Leader ask Manager: Alfred Nickesen
Sector Manager: Jitendra N. Bajpai
Coun irwctor; Yu n Huang t., China: Second Fujian Highway Project Page 25 Project Appraisal Document
ANNEX 1: PROJECT DESIGN SUMMARY
Second Fujian Highway Project
Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Sector-related CAS Goal: (Goal to Bank Mission)
Enhance China's economic Agriculture and Industry Country economic reports Continued Government growth through continuing (GOVAI) in affected counties commitment to economic infrastructure development to policies alleviate capacity bottlenecks
Project Development (see Annex 1-1) (Objective to Goal) Objective:
Relieve congestion and help Average travel speed on roads Traffic counts and accident Macroeconomic and political increase efficiency, mobility parallel to the proposed road surveys conditions will remain stable and safety of road traffic in Southern Fujian Province Average daily traffic (ADT) Traffic count reports Government commitment at on existing and proposed central, provincial and local roads Reports on traffic speeds levels along main highways Traffic accident rates No unexpected natural involving fatalities Traffic accident reports from disasters occur (floods, Traffic Police earthquakes) Traffic accident rates on existing roads Provincial annual statistics Foreign exchange will remain stable
Outputs: (Outputs to Objective)
1. Expressway sections 1.1 Number of km of Monthly progress reports by Traffic will grow as projected constructed expressway constructed supervision teams
2. Interconnecting and other 2.1 Number of km of Semi-annual progress reports roads constructed and/or interconnecting and other and annual monitoring reports upgraded roads constructed/upgraded Reports by Bank's supervision missions
3. FPTD institutional capacity 3.1 Number of FPTD staff Disbursement to contractors strengthened trained in financing, management, operation and Project progress and annual construction supervision of monitoring reports expressways
4. Road safety program 4.1 Number of black spots developed and implemented identified and improved
5. Studies on Highway 5.1 Study on Highway Maintenance and Toll Rates Maintenance completed completed 5.2 Study on Toll Rates completed China: Second Fujian Highway Project Page 26 Project Appraisal Document
Narrative Summary Key Performance Indicators Monitoring and Evaluation Critical Assumptions Project Components/Sub-com- Inputs: (budget for each (Components to Outputs) ponents: (see Annex 3 for component) project description)
Component 1. Construction of US$561.0 Project progress reports Sufficient quality of expressway, interconnecting Disbursement reports engineering designs and other roads Quality of construction in 1. I Construction of the accordance with pre- Zhangzhou-Zhao'Amn established criteria Expressway (ZZE) (132 km) No delays in preparation and 1.2 Interconnecting road implementation program, consisting of new construction and upgrading of Material and human recourses existing roads available in timely manner
1.3 Other roads program, Selection of competent consisting of new construction contractors and upgrading of roads and bridges No delays in land acquisition and resettlement 1.4 Equipment for: (i) control of construction quality and monitoring of the environment; (ii) operation and maintenance for ZZE; (iii) maintenance of the provincial road network and RDB and PMS
1.5 Construction supervision services for ZZE, the interconnecting and other roads programs
Component 2. Institutional US$1.7 Training program will prove Strengthening/Capacity successful and managers will Building apply new skills
2.1 Development and Policy and Institutional execution of a provincial road Reform as well as Road Safety maintenance management Programs will receive large study and toll rate study for ownership from FPTD and ZZE and road safety program will be successful
2.2 Staff training programs, covering all aspects of highway planning, design, construction, operation, finance and mainterance
Component 3. Front-end Fee US$2.0
Component 4. Land US$30.9 Acquisition and Resettlement China: Second Fujian Highway Project Page 27 Project Appraisal Document
Annex 1-1 Key Performance Indicators
a) Development Indicators
2003 2005 Attainment of Monitoring 1998 Benchmark 2010 Project Indicators Baseline (1st year of ICR Benchmark Objectives operation) Provide more * ADT on Existing efficient, safer N.R.324 (veh./day) and productive transport services Zhangzhou-Zhangpu section 22400 16100 18500 21800
Zhangpu-Yunxiao section 22500 14700 16600 19000
Yunxiao-Zhao'an section 16400 14100 15400 17600
* Speed on Existing N.R. 324 (km/hr)
Zhangzhou-Zhangpu section 35 55 50 45
Zhangpu-Yunxiao section 40 65 60 55
Yunxiao-Zhao'an section 40 65 60 55 * Accident rates on ZZE (Numberof 1.3 1.1 1.0 accidentsper 100 million vehicles) * Accident rates on existing N.R. 324 5.4 2.7 2.5 2.3 (Number of accidents per 100 million vehicles)
NOTE: (1) Traffic measurement unit: standard passenger cars, buses and trucks. China: Second Fujian Highway Project Page 28 Project Appraisal Document
b) Implementation Indicators
1999 2000 2001 2002 2003 2005
ICR Year % of civil works completed 10 35 35 5 100 on ZZE
% of E&M works completed 60 40 100 on ZZE
% of interconnectingroads 50 50 100 improved/rehabilitated
% of other roads 5 50 45 100 improved/rehabilitated
% of equipment purchased 2 7 91 100
Number of Domestic 140 170 310 person-months of completed Foreign 12 26 24 28 90 training
c) Quality Control Indicators
Subgrade Compaction 0-80 cm 95% 80-150 cm 93% >150cm 90% PavementRoughness 1.2mm/1 uOm per lane for asphalt concrete pavements China: Second Fujian Highway Project Page 29 Project Appraisal Document
INSTITUTIONAL DEVELOPMENT AND ROAD SAFETY MONITORING PLAN IN FUJIAN PROVINCE
COMPONENT NOT 1999 2000 2001 2002 2003 2004 Institutional A Progress report * Progress report * Progress report * Progress report * Progress report * Progress report * Development Plan at the Workshop, at the Workshop, 10/01 at the Workshop, 10/01 at the Workshop, 10/01 at the Workshop, 10/01 at the Workshop, 10/01 10/01/*/World Bank+FPTD Engineering, B Progress report at the Progress report at the Progress report at the Progress report at the Progress report at the Final report at the end of Environmentand yearly workshop yearly workshop yearly workshop yearly workshop yearly workshop the project (lessons Resettlement learned & Coordinating Team recommendations) Quality Control and C Progress report at the Progress report at the Progress report at the Progress report at the Progress report at the Final report at the end of Road Safety Controller yearly workshop yearly workshop yearly workshop yearly workshop yearly workshop the project (lessons Function learned & recommendations) Training and Education D Domestic: 140 Domestic: 150 Domestic:not yet decided Domestic:not yet decided Domestic:not yet decided Final report on training Abroad: 0 Abroad: Study-tour:12 Abroad:T: 14+S:12 Abroad:T: 18+S:6 Abroad:T: 16+S:12 Prog. rep. at the Wrkshp Prog. Rep. at the Wrkshp Prog. Rep. at the Wrkshp Prog. rep. At the Wrkshp Prog. rep. at the Wrkshp Road Information E Progress report at the Progress report at Progress report Progress report Progress report Final report RDB System (RDB) Workshop, 10/01 Workshop 03/01+09/01 and 03/01+09/01 and 03/01+09/01 and implemented and in Final report Phase I presentation at the presentation at the presentation at the operation Phase 2 starts Workshop Workshop Workshop Toll Rate Study F Progress report to be The updated report Progress report on Progress report on Progress report on Final report on presented at the presented at the yearly implementation to be implementation to be implementation to be implementation to be Workshop, 10/01 workshop presented at the presented at the presented at the presented at the Workshop Workshop Workshop Workshop Highway Maintenance G Progress report at the Progress report at the Survey + research, FPTD Long term maintenance Progress report on Progress report on Management Study Workshop Workshop to agree on fund plan to be presented at implementation to be implementation to be allocation policy, the Workshosp presented at Workshop presented at Workshop Workshop Road Traffic Safety H Symposium on safety and Two symposiums on Two symposiums on Two symposiums on Two symposiums on Two symposiums on Seminars progress report at the safety and a progress safety and a progress safety and a progress safety and a progress safety and a progress Workshop report at the Workshop report at the Workshop report at the Workshop report at the Workshop report at the Workshop OtherRoad Safety I Progress report at the Progress report at the Progress report on testing Progress report on Final report on guidelines Summing up workshop Activities Workshop Workshop on developed of products developed at models developed at the and models for the three and plans for further products the Workshop, 10/01/ Workshop, 10/01/ sub components steps on implementation Remedy of Black Spots J Planning for black spot Starting up the inventory Analysis and planning for Implementation, progress Implementation, progress on 100 km of NR324 detection and remedy on of black spots and implementation report at the workshop report at the workshop NR324 progress report at Workshop Workshop China: Second Fujian Highway Project Page 30 Project Appraisal Document
INSTITUTIONALDEVELOPMENT AND ROADSAFETY MONITORING PLAN IN FUJIANROVINCE
Notes on the VariousComponents
InstitutionalDevelopment Plan A. Outputs: -An annualupdated core documentfor the developmentof the highway sector. Outcomes: -Continuingdialogue and developmentprocess over 5 years, which leads to a continuouslyimproved and extendedplan. Indicators: -Annualupdate and progressreport to be presentedat the yearly workshopwith the Bank on institutionaldevelopment and road safety.
Engineering,Environmental and ResettlementCoordinating Team B. Outputs: -Documentationof fndings (goodas well as bad) and experiencesgained from measurestaken. Outcomes: -Improvedcoordination at the right time of the project process. -Cost-savings. -Increasedunderstanding of the importanceof coordination. Indicators: -Progressreport at the yearlyworkshop with the Bank. -Lessonslearned and recommendationreport at the end of project.
Strengtheningof the ProjectManagement with a ControllingFunction as RegardsRoad Safety and Quality Control C. Outputs: -Documentationof findings(good as well as bad) and experiencesgained, e.g. from countermeasurescarried out. Outcomes: - Increasedknow-how on road safetyand quality control. -Increasedfocus on qualityand safety. Indicators: - Progressreport on problems,measures taken, and results presentedat the yearly workshopwith the Bank on institutionaldevelopment and road safety. -Finalreport on lessons learnedand recommendationson how to assure good quality and that safety aspectsare consideredin all developmentphases of the project
Trainingand Education D. Outputs: -Numberof staff that have taken part in the trainingaccording to the program. Outcomes: -Newknow-how in use. Indicators: -Percentageof trained staff who are able to use the new know-howat the daily work. -Progressreport presented at the yearlyworkshop with the Bank on institutional developmentand road safety. -To fulfillits purpose,the trainingprogram shall be revised and extendedevery secondyear.
Road InformationSystem, RDB E. Outputs: -Phase 1, built on the experiencesgained from the EDB development,a detailed programfor developmentand implementationof a Provincialand Prefecture/City RDB shall be developedand documented. -Phase2, distributionand applicationof RDB in each Prefectureand City of the province. Outcomes: -Phase1, an RDB systemconsistent with the MOCrecommendations and adjustedto the initial needsin FujianProvince. -Phase2, integratedwith the PMS and BMSsystems it will lead to an increased efficiencyin planningand maintenanceof roads, which in a longer perspectivewill have a positiveeffect on traffic flow, traffic safety and quality of work carried out. China: Second Fujian Highway Project Page 31 Project Appraisal Document
Indicators: -Phase 1, a reporton Phase 1 shouldbe availablesixth months aftercommencing the study. -Phase2, 18 months afterfinishing Phase 1,the final acceptancefor the implementationof RDB in the whole Provinceshould be made. -The systemshall be in full operation two years thereafter. -Progressreports (Phases 1 and 2) shall be presentedevery 6th monthand at the yearly workshopwith the Bankon institationaldevelopment and road safety.
Toll Rate Study F. Outputs: -A reporton futurerevenues from a toll road system in FujianProvince. Outcomes: -Increasedknow-how about the options. -A basis for decisionsas regardstoll road financing. Indicators: -An updatedreport (from the ongoingproject) to be presentedat the annual workshopwith the Bankon institutionaldevelopment and road safety. -Progressreport on implementationto be presentedat the annualyearly workshop with the Bank.
HighwayMaintenance Study G. Outputs: -A long term activityplan. -A conceptual model for PMS and BMS systemsintegrated with the RDB. -A maintenancecost and fund allocationmodel. Outcomes: -Principleson fund allocation(a policy). -A sustainablesystem for planningand implementationof maintenanceactivities. -Adaptedmaintenance organization on all administrativelevels. -Increasedefficiency by using PMS, BMS and RDB. Indicators: -Principleson fund allocationdecided on 18 monthsafter start of study. -Survey and researchwill last about 10 months fromthe start of study. -Compatibilityand coordinationof PMS and BMS systemswith the RDB, so these three systemswill benefitfrom each other. -A longterm maintenanceactivity plan shouldbe available24 months after commencingthe study. -Progressreports to be presentedat the yearly workshopwith the Bank on institutionaldevelopment and road safetyduring both the study periodand the implementationphase.
RoadTraffic SafetySeminar H. Outputs: -Documentationof presentationsmade at the seminars. Outcomes: -Increasedknow-how about the road safety situationand how to tackle the problems. Indicators: -A symposiumon road safetyto be held every sixth month. -Progressreport on the yearlyworkshop with the Bank on institutionaldevelopment and road safety.
OtherRoad SafetyActivities (Grouped) (safety guidelines,safety audit proceduresand the pilot safetyprogram on black-spots) I. Outputs: -Documentationof good examplesand proceduresaiming at improvedroad safety. Outcomes: -Increasedknow-how and ideas on some simpleroutines to be followedin the daily work,which leads to improvedroad safety. Indicators: -Presentationof the results at the traffic safetysymposium twice a year as well as at the annualworkshop with the Bank on institutionaldevelopment and road safety.
Remedyof Black Spots on 100 km of NR324 J. Outputs: -A plan for remedyof accident-pronelocations on and alongNR324. China: Second Fujian Highway Project Page 32 Project Appraisal Document
Outcomes: -Improvedsafety along the actualstretch of NR324. -Increasedknow-how on problemsand possibilitiesabout the remedy of black spots. Indicators: -Numberof black-spotsremedied in accordancewith the agreedplan. -Numberof accidentsbefore and after. -Progressreport at the yearlyworkshop with the Bank on institutionaldevelopment and road safety. China: Second Fujian Highway Project Page 33 Project Appraisal Document
ANNEX 2: FUJIAN HIGHWAY SECTOR REVENUES AND EXPENDITURES
Second Fujian Highway Project
Introduction
1. The following table contains highway sector revenue and expenditure data for Fujian Province. This table covers the 9th Five Year Plan period (9FYP) from 1996 to 2000 and the l0th Five Year Plan period (10 FYP) from 2001 to 2005. While highway sector revenue and expenditure data is available for 9FYP on an annual basis, planning for the 1OFYP is only at a preliminary stage and data is not yet available for each of the five years.
Revenue Analysis
2. An analysis of the Fujian highway sector revenue data indicates that during the 9FYP period its highway sector revenues amount to US$6.2 billion (equivalent) while anticipated revenues for the 1OFYP are US$8.1 billion. In terms of revenue structure, the Road Maintenance Fee provides 8% of annual revenues while under the Highway Key Construction Fund, the Capital Construction Fund provides 10%; MOC provides about 7% and local governments provide around 31% to FPTD. The contribution of the national aid-poverty subsidy is very small. Domestic and foreign loan funding which includes, inter alia World Bank highway loans amounts to 21% during 9FYP. Around 80% is domestic which is due to accelerated construction of the NTHS and other high-grade highways. Toll financing contributes 23% to the overall revenue picture.
Expenditure Analysis
3. On the expenditure side distinction needs to be made between new road construction, road improvement, and road maintenance, with the latter comprising routine and periodic operations. During the 9FYP Fujian is spending 40% of its highway sector funds on new construction and 29% on road improvement. In addition, Fujian is spending 8% of sector funds on routine and periodic maintenance. These maintenance expenditures should be considered as the minimum necessary to keep the road network operational. Loan servicing requires 23%. The envisaged expenditure structure for the 1OFYP in Fujian is similar to the pattern of 9FYP, with some 50% going to new construction; some 20% to improvement; some 10% to maintenance; and some 20% to loan servicing. While 1OFYP expenditure data is very preliminary, the overall anticipated expenditure pattern confirms that maintenance spending is on the low side.
4. A further distinction can be made for expenditures by road type. During 9FYP, Fujian spends 36% of its sector funds on expressways. This is followed by the spending of 26% of sector funds on national and provincial roads. Finally, rural roads receive 16% of road sector funds (i.e. US$950 million). Loan servicing requires 22%. These calculations include new construction, improvement and maintenance for these three principal road categories. While the anticipated expenditure picture for the 1OFYP follows overall the one for the 9FYP, the details are as follows: About 50% of 1OFYP road sector funds would go to expressways; some 17% to national and provincial roads; some 15% (i.e. US$1.25 billion) to rural roads; and some 19% to repayment of loans. China: Second Fujian Highway Project Page 34 Project Appraisal Document
FUJIAN HIGHWAY REVENUES AND EXPENDITURES, 1996-2005
9FYP Total 1OFYP 1996 1997 1998 1999 2000 REVENUES Road maintenance fee 725 735 759 740 741 3,700 4,480 Transfer to public security 22 22 23 22 22 111 150 Transfer to fee collection sector 30 30 30 30 30 150 180 Remaining road maintenance fee 673 683 706 688 689 3,439 4,150 Highway Key Construction Plan 4,591 5,434 6,896 8,488 10,361 35,770 52,850 Capital construction 770 910 1,040 1,200 1,400 5,320 7,000 Central government (MOC) 687 587 669 650 750 3,343 4,000 Local government 2,245 2,985 3,562 3,603 3,676 16,071 21,700 National aid-poverty road subsidy 32 34 33 35 35 169 150 Foreign and domestic loans 857 918 1,592 3,000 4,500 10,867 20,000 Toll revenues 1,864 2,381 2,682 3,000 2,000 11,927 10,000 Total 7,128 8,498 10,284 12,176 13,050 51,136 67,000
EXPENDITURES New Construction 2,531 3,003 2,807 5,133 7,160 20,634 35,250 Expressway 2,330 2,690 2,350 4,500 6,500 18,370 32,000 National and Provincial roads 45 48 52 55 60 260 250 Rural roads 156 265 405 578 600 2,004 3,000 Improvement 2,833 2,979 4,320 2,281 2,450 14,863 13,670 National and Provincial roads 2,170 2,104 3,264 1,025 1,250 9,813 7,470 Rural roads 663 875 1,056 1,256 1,200 5,050 6,200 Periodic maintenance 53 90 90 99 112 444 518 National and Provincial roads 33 68 64 75 87 327 388 Rural roads 20 22 26 24 25 117 130 Routine maintenance 648 668 714 713 768 3,511 5,149 Expressway 0 0 10 36 80 126 600 National and Provincial roads 502 518 550 537 548 2,655 3,549 Rural roads 146 150 154 140 140 730 1,000 Payment of loans 1,033 1,728 2,323 3,900 2,700 11,684 12,413 Total 7,098 8,468 10,254 12,126 13,190 51,136 67,000
Source: Fujian Provincial Communication Department China: Second Fujian Highway Project Page 35 Project Appraisal Document
ANNEX 3: PROJECT DESCRIPTION
Second Fujian Highway Project
Project Component 1-Construction of Zhangzhou-Zhao'an Expressway, interconnecting and other roads -US561.0 million (total cost of component)
Project Sub-Component1.1-Construction of Zhangzhou-Zhao'anExpressway (ZZE - 132.5 km)
US$493.3million
Zhangzhou-Zhao'anExpressway (ZZE) is a 132.5 km divided, four-lane, access-controlledtoll highway, which would be connected in Zhangzhou with the Zhangzhou-Xiamenexpressway section which is presently under constructionand which in turn is linked with the Quanzhou-Xiamensection which is open to traffic. At the Guangdong border, it would be connected at Houlin to the Zhao'an-Shantou expressway section according to an agreement reached in 1993 between Fujian and Guangdong. According to this agreement, both sections will be constructedat the same time. MOC's expressway standardsfor mountainousterrain with a design speed of 100 km/h will be applied. The project includes several very large bridges and two tunnels of more than 2 km length each. ZZE would also include: (a) constructionof nine interchanges,(b) two service areas providingfacilities for refueling and vehicle repair, restaurants, parking and resting, (c) three additional couples of rest areas providing facilities for refueling, parking and resting, (d) two facilities for expressway administrationand maintenance, and (e) electrical and mechanicalinstallations for toll collection,traffic monitoring,telecommunications and lightingof the tunnels, all interchangesand annexareas.
Project Sub-Component1.2-Improvement of existing and construction of new interconnecting roads
US$11.3 million
The project will include the completion of (i) a class 1, four lane, 5 km long, auto only interconnecting road linking the expressway to several cities and towns and to the development zone and harbor of Gangwei, (ii) a class 2, two lane, 8 km long, interconnectingroad linking the expressway to several towns. With the other existingroads in the corridorand an additionalroad improvementprogram of about 350 km length financed locally (which is not part of the project but a complementaryinvestment), the expressway will be linked properly to the highway network and to the cities, towns, development and tourist zones to be served.
Project Sub-Component1.3-Improvement of existingand constructionof new other roads US$35.0 million
The project will includethree class 2 other road subprojects. The first subproject, 1.8 km long, links the city of Baishui to the expresswayand other towns through a bridge, 490 m long, crossing the Jiulong river. The second subproject links the expressway with a poor area in Chuling with a total length of 8 km. The third subprojectwill complete the remaining41.7 km Tankou-Hua'ansection of the Zhangzhou China: Second Fujian Highway Project Page 36 Project Appraisal Document
- Zhangping highway (with an overall length of 150 km) which will be upgraded from class 4 to class 2 as part of the project. This third road subproject is located along the Jiulong river in a mountainous area and includes a 2.2 km long tunnel.
Project Sub-Component 1.4 - Equipment
US$4.8 million
Equipment for: (i) control of construction quality and monitoring of the enviromnent; (ii) operation and maintenance of ZZE after its completion; (iii) maintenance of the provincial road network and RDB and PMS. Equipment to be provided under the project has been identified by FPTD and agreed by the Bank. The equipment list including cost estimates is available in the project file. Project Sub-Component 1.5-Construction supervision services for ZZE, its interconnecting roads and other roads
US$16.6 million
Based on the experience gained from on-going Bank-financed highway projects in China, a combined team of domestic engineers, technicians and other personnel and international consultants will supervise the above-mentioned main highways as well as the interconnecting and other road programs. The international consultants would be integrated into the supervision organization with operational responsibilities and would help establish procedures at all levels of the supervisory work, including on- site inspections and laboratory testing.
The construction supervision team for ZZE would include four foreign engineers (with a total of 134 person-months), with expertise in projecticontract management, earth and pavement works, bridge and tunnel construction, and mechanical and electrical works. The core team would also include several domestic engineers and would be supported by a central laboratory. For field supervision of 8 ICB civil works contracts and 4 ICB pavement contracts, three resident engineers' offices (REO) would be established staffed with 150 persons. The estimated domestic supervision input would come to 7,200 man-months. Project Component 2-Institutional Strengthening/Capacity Building
US1.7 million (total cost of component)
Project Sub-Component 2.1 - Studies/technical assistance in highway maintenance management, toll rates and road safety, and developing institutional development plan.
US$0.75 million
For detailed information see Annexes 4 and 5.
Project Sub-Component 2.2 - Staff training programs, covering all aspects of highway planning, design, construction, operation, finance agndmaintenance
US$0.97 million
The Training Program under the ongoing Fujian Provincial Highway Project, together with the outcome of the draft Institutional and Policy Development Plan have formed the basis for the training and China: SecondFujian Highway Project Page 37 Project AppraisalDocument
education needs under the FH2 project. Some of the training, as started under the first project will continueunder FH2, e.g. training of supervisors. However,under FH2 there will be an extendedneed of training in the fields of computerizedinformation systems, road safety, and quality control. The new training program for FF12includes the specificneeds of training for the Training Institutes, the Design Institute and the Research Institute with regard to their importantroles in the development of Fujian's highway sector. In a rapidly developing society as at present in China, training and education of personnel on all levels is essential. Therefore,a systematic approachwould be taken on training. This would also build upon the outcomesof the World Bank financedTA presently being undertakenwhich is aiming at analyzinghighway sector trainingactivities both in China and abroad and trying to systematize follow-upand evaluationof training activitiesin the highwaysector.
Project Component 3 - Front-end Fee
US$2.0 million(total cost of component)
Project Component 4 - Land Acquisition and Resettlement
US$30.9million (total cost of component) China: Second Fujian Highway Project Page 38 Project Appraisal Document
ANNEX 4: POLICY AND INSTITUTIONAL REFORM PROGRAM
Second Fujian Highway Project
1. Introduction
1.1 The economic system in China is undergoing major changes towards a market orientation and these changes will involve many reforms in the transport sector. These reforms will put substantial pressure on China's highway organizations and specifically on their manpower. Therefore, there is great need for modem and new thinking which can be achieved through training and education, the use of modem methods and equipment and through policy and institutional development.
1.2 In discussions with FPTD in Fujian, it was agreed that several important project activities would concentrate on Institutional and Policy Reforms. Important areas in the development of modem thinking in infrastructure planning and implementation comprise road traffic safety, environmental issues and quality control. Structural and system consequences of further steps towards a market economy will also need to be analyzed.
1.3 During project preparation it was agreed by the Fujian PTD that the following should serve as the guiding principles for the policy and institutional development process:
Since China's development direction is towards a socialist market economy, sector medium to long term objectives would be:
(i) to stimulate competition in the highway sector;
(ii) to continuously increase the knowledge base of personnel;
(iii) to improve the quality of products and services;
(iv) to pay greater attention to environmental aspects;
(v) to reduce the number of road traffic accidents; and
(vi) to increase efficiency by developing and using modem equipment and management systems.
2. Institutional Reforms
Institutional Development Plan
2.1 To create a framework for the concept of Institutional Development, it was agreed that an Institutional Development Plan for the coming 5 years would be developed. The Plan would serve as an overview of and guideline for the entire process and cover organizational development and strengthening as well as training and education needs, necessary equipment, and management systems. The Plan will cover the proposed second highway project and be coordinated with the ongoing highway project as regards training and other institutional activities, including road safety.
2.1.1 Actions agreed (Institutional Development Plan) China: SecondFujian Highway Project Page 39 Project AppraisalDocument
Outputs: - An annual updated core documentfor the developmentof the highwaysector. Outcomes: - Continuingdialogue and developmentprocess over a period of 5 years, which leads to a continuouslyimproved and extendedplan. Indicators: - Annual update and progress report to be presentedat the yearly workshopwith the Bank on institutionaldevelopment and road safety.
OrganizationDevelopment
Engineering, Environmental and Resettlement Coordinating Team
2.2 During project preparationmissions continuing discussions were held on the need for improving the communicationand coordination between the Resettlement Office, the Design Institute and the EnvironmentTeam which were not as good as this importanttask should be handled so as to ensurethat all aspects of highway projects from an early stage onward are properly managed. As a consequence, environmentaland resettlementissues are often not consideredenough during the project design process. Therefore, instead of carrying out the engineering design first and then considering resettlement and environmental effects, highway design should be carried out considering the environmental and resettlement costs and impactswith the purpose of satisfyingthe goals of resettlementminimization and environmentalprotection. 2.3 As a result FPECD has worked out a draft proposal on an organizationalstructure for specific staff to take care of the problem of coordinatingengineering, environmental protection and resettlement aspects at an early stage of project preparation. After the FH2 project will be completed it was agreed with FPTD that this new team will continue its work on coordinatingthese matters within FPTD. The suggestedarrangement has been reviewed and agreed by the Bank during appraisaland was confirmedat negotiations. 2.3.1 Actions agreed (Engineering,Environmental and ResettlementCoordinating Team)
Outputs: - Documentationof findings(good as well as bad) and experiencesgained from measures taken. Outcomes: - Improvedcoordination at the right time of the projectprocess. - Cost-savings. - Increasedunderstanding of the importanceof coordination. Indicators: - Progressreport at the yearly workshopwith the Bank. - Lessons learnedand recommendationreport at the end of project.
Strengthening of Project Management with Controlling Function for Road Safety and Quality Control
2.4 Quality control and safety aspects are two other componentsof great importancein design and constructionof road projects. There are too many bad examples to be seen with respect to failures in these fields, even among newly constructed roads, as for example the new road to the new Fuzhou airport. Bank mission and representativesfrom FPTD have discussed this matter many times so as to avoid such failures. It was agreed to strengthen Project Management with a "controlling function" consisting of two experienced persons, one on Quality Control and one on Road Safety. These two persons shouldact directly on behalf of Project Managementwithin their fields of specialty. They should follow the project development from the initial design stage until the construction work has been completed. It was agreed that, after the project period is over these staff will continue their work as China: SecondFujian HighwayProject Page 40 Project AppraisalDocument experts within FPTD. The Bank appraisalmission reviewedand approveda draft work program for the quality and safety controllerfunctions.
2.4.1 Actionsagreed (ControllingFunctions on Quality Controland Road Safety)
Outputs: - Documentation of findings (good as well as bad) and experiences gained from countermeasurescarried ouit. Outcomes: - Increasedknow-how on road safety and qualitycontrol. - Increasedfocus on quality and safety. Indicators: - Progress report presented on problems, measures taken, and results at the yearly workshopwith the Bank on institutionaldevelopment and road safety. - Final report on lessons learned and recommendationson how to assure good quality and that safety aspects are consideredin all developmentphases of the project.
Trainingand Education
2.5 The Training Program under the ongoing highway project includes a first attempt of training needs under the proposed second highway project. The agreed Training Program under the ongoing project together with the InstitutionalDevelopment Plan have formed the basis for the training and education needs under the second highway project. Some of the training which has started under the ongoing project will continueunder the second highway project. However, under the proposed second highway project there will be an extended need for training in the field of computerized information systems,road safety and quality control. This is well documentedin the training program for the project. The training program under the second highwayproject has been structured in the same way as the one under the ongoing project. This is to ensure full compatibility and coordination between the two programs. The cost for training is estimated at about US$0.8 million. The initial domestic staff training programcovers a period of two years with 140 people to be trained in 1999 and 150 in 2000.
2.5.1 Actionsagreed (Trainingand Education)
Outputs: - Number of people that have taken part in the training accordingto the program. Outcomes: - New know-how in use. Indicators: - Percentageof trained people who are able to use the new know-howat the daily work. - Progress report presented at the yearly workshop with the Bank on institutional developmentand road safety. - To fulfill its purpose, the 1rainingprogram shall be revised and extended every second year.
ManagementSystems
Road Information System (Road Data Bank)
2.6 The basic prerequisite for modem managementof roads is precise and timely informationabout the actual status of the road networks and the traffic and its envirornent. This informationis used on a day to day basis both for planning, construction and maintenance activities and for monitoring and evaluationof works carried out. This informationis normallystored in a ComputerizedData Bank (Road Data Bank or RDB). Without this easily accessible informationit would not be rational to have other managementsystems such as PMS and BMS since they receive some input data from the RDB. A study China: SecondFujian Highway Project Page 41 Project AppraisalDocument on HighwayMaintenance Management to be executedunder the projectwill cover the need of integration between all these systems.
2.7 Past experiencefrom other countrieshas clearly shownthat it is feasible to build up in a stepwise fashion an Information System based on a Road Data Bank (RDB). The informationcovered in a first phase should includeonly basic data. A limited geographicaltest area should be chosen and all types of data as needed shouldbe collectedand stored from that test area. This makes it possibleto test and adjust the systembefore implementingit in the wholeprovince. In Fujian Provincethe experiencesgained from the development of the ExpresswayData Bank (EDB) could partly serve the same purpose. To develop and implementan RDB system normally takes 3-5 years. However, by using the experiences gained in other provinces of China and from the developmentof the EDB the time could eventually be shortened. As an example Bank missions mentioned Shanxi Provincial CommunicationsDepartment which has successfullydeveloped an RDB system. Revised TOR covering both the initial developmentphase and the final phase including applicationand distributionto all Prefecturesand Cities in the Province have been reviewed and agreed by the Bank.
2.7.1 Actionsagreed (RoadInformation System, RDB)
Outputs: - Phase 1, built on the experiences gained from the EDB development and from other provinces, a detailed program for developmentand implementationof a Provincial and Prefecture/CityRDB shall be developedand documented. - Phase 2, distribution to and application of RDB in each Prefecture and City of the province. Outcomes: - Phase 1, an RDB system consistentwith the MOC recommendationsand adjusted to the initial needs in Fujian Province. - Phase 2, integratedwith the PMS and BMS systemsit will lead to an increasedefficiency in planning and maintenanceof roads, which in a longerperspective will have a positive effect on traffic flow, traffic safety and quality of work carried out. Indicators: - Phase 1, a report on Phase I should be available sixth months after commencing the study. - Phase 2, 18 months after finishingPhase 1, the final acceptancefor the implementation of RDB in the whole Province shouldbe made. - The system shall be in full operationtwo years thereafter. - Progress reports (phases 1 and 2) shall be presented during the yearly workshopwith the Bank on institutionaldevelopment and road safety.
3. Policy Reforms
Road Classification 3.1 The functional classificationof road networks is a rather permanent but also an evolving process for development of the road network. It must be undertakenperiodically, especially when substantial changes have occurred in the location of residences, economic activities, or within geographical area boundaries,when trade routes are recast, when major changes in transport policies occur or when travel patterns have altered.
3.2 Often reclassificationleads to a more efficient road network,one which is consistent either with occurred changes in economic developmentor planned changes. In both cases the updated functional China: Second Fujian Highway Project Page 42 Project Appraisal Document
classification enables better allocation of tight funds for maintenance, rehabilitation/reconstruction, upgrading or new construction to reach the policy objectives.
3.3 FPTD informed the Bank that a reclassification of the road network in Fujian Province has not been initiated since MOC has not so far initiated a review on the national level. However, when such a review will be carried out it will lay a good foundation for the future dialogue on, among other things, the development of maintenance standards in t]heProvince.
Studies
Toll Rate Study/TA
3.4 FPTD undertook, as part of the ongoing Fujian Provincial Highway Project a Toll Systems and Toll Standards Study for Fuzhou-Xiamen-Zhangzhou Expressway, dated November 1998. While there is an ongoing review process and dialogue between FPTD and the Bank on this innovative and comprehensive study under the ongoing Bank-supported operation, FPTD and Bank preparation missions also agreed that this dialogue should continue and be expanded under the new project. It was agreed that expansion of this TA would particularly address issues related to the overall development of toll management systems in Fujian including electronic toll collection (ETC) technology and related issues. As such this TA would have relevance not only for Fujian Province but also for other provinces in China.
3.4.1 Actions agreed (Toll Rate Study)
Outputs: - A report on toll management systems including electronic toll collection (ETC). Outcomes: - Increased know-how about the organizational, institutional and technological options. - A basis for decisions as regards toll management systems. Indicators: - Progress report on development and implementation to be presented at the yearly workshop with the Bank.
Highway Maintenance Management Study
3.5 The present highway system in Fujian Province is rapidly growing in terms of road kilometers and at the same time experiencing a continued growth in vehicle kilometers. During a period of intensive construction of roads, maintenance cannot always keep pace. The result will be a rapidly increasing deterioration causing the need of a total rehabilitation of the roads. On the other hand proper maintenance will increase the lifetime of these roads.
3.6 Fujian Province is presently installing an EDB system as well as PMS and BMS systems and later on an RDB. All of these systems are important tools in maintenance work. However, in order to use these good instruments in an efficient way an overall system is needed. This overall system on maintenance planning and operation could be called a "Maintenance Management System" (MMS) and include the use of EDB, RDB, PMS and BMS. The MMS will ensure that all these systems are adequately coordinated and that the focus is on user demand. The development of an MMS has to be adjusted to the specific conditions in each province and to the other systems and routines used in the province. A Highway Maintenance Management Study has been agreed upon in order to develop the MMS.
3.7 Similar studies are being carried oult in Hunan and Hubei provinces. The study consists of two parts, a development process (learning part) and a documentation part. The first part covers about 80% of China: Second Fujian Highway Project Page 43 Project Appraisal Document the study and is specific for each Province (cannot be transferred) and the remaining part (documentation) depends on the first part. Therefore, each province that is going to use RDB, PMS and BMS as efficiently as possible and avoid "sub-optimization" should carry out such a study. This was also discussed at a World Bank seminar in Beijing on May 6, 1998 and both MOC and MOF agreed in principle that this type of study with a great impact of "learning and adjustment process" has to be carried out by each province. The main purposes are to:
* clarify the over all system for maintenance planning and operation, the organizational framework and to develop a sustainable maintenance policy for Fujian Province, and
* be able to use the modern information system under implementation (EDB, RDB, PMS and BMS) as efficiently as possible.
3.8 It was agreed with FPTD that a foreign consultant with extensive experience in modern maintenance management and in the practical use of PMS, BMS and RDB systems would be engaged to assist in carrying out the study. FPTD and the mission also agreed to use the experiences gained in other provinces, so that through a close cooperation with these, the foreign consultant input could be reduced to 8 months in Fujian Province. TOR were reviewed and agreed by the Bank. The study would also cover maintenance organization development, equipment management and planning, analysis methods, and the integration of PMS and BMS with RDB.
3.8.1 Actions agreed (Highway Maintenance Management Study)
Outputs: - A long term activity plan. - A conceptual model for PMS and BMS systems integrated with the RDB. - A maintenance cost and fund allocation model. Outcomes: - Principles on maintenance cost and fund allocation (a policy) decided on by FPTD. - A sustainable system for planning and implementation of maintenance activities (MMS). - Adapted maintenance organization on all administrative levels. - Increased efficiency by using PMS, BMS and RDB. Indicators: - Principles on fund allocation decided upon 18 months after the start of study. - Survey and research will last about 10 months from the start of study. - Compatibility and coordination of PMS and BMS systems with the RDB so these three systems will benefit from each other. - A long term maintenance activity plan should be available 24 months after commencing the study. - Progress reports to be presented at the yearly workshop with the Bank on institutional development and road safety during both the study period and the implementation phase. China: Second Fujian Highway Project Page 44 Project Appraisal Document
ANNEX 5: ROAD TRAFFIC SAFETY PROGRAM
Second Fujian Highway Project
1. Introduction
1.1 The road traffic accident situation in Fujian Province is at present somewhat worse than on average in other provinces in China. The situation is already serious, and as a result of rapidly increasing motorization and vehicle use, road traffic safety is becoming an even more serious problem which needs to be tackled in a systematicway. Actions to reduce road accidents and their consequencesin terms of injuries and loss of life, damages to property and economiclosses cover many fields. In Fujian Province as well as in other provinces in China, the responsibilityfor road traffic safety rests with the transport sector (FPTD) as well as with the public security sector (TrafficPolice). The coordination lies with the ProvincialGovernment. FPTD retains full responsibilityfor all aspects of road traffic safety in highway design, constructionand maintenance. 1.2 The followingstatistics from Fujian provinceare at present available:
Road accidents Year 1995 Year 1996 Year 1997
No of fatalities 2922 3141 3385
No of injuries 8407 11045 12599
Total number of 13849 16483 17646 accidents
Estimated cost x 62272 87424 100368 1000 RMB
1.3 The number of people in Fujian Province who have died in traffic accidents and the economic loss is higher than the average of other provinces in the country. Thereforethe road safety situation in Fujian Province is a major problemto be tackled.
2. Road Traffic Safety
Development of Accident Information System (AIS)
2.1 The need for an Accident Infornation System (AIS) has been discussed during project preparation. It has been agreed that an AccidentInformation System is a good tool for planning and follow-upof road traffic safety measures. The discussionshave focused on the difficulties surrounding the practical arrangementsfor introducingan AIS in Fujian, caused by the fact that the Public Security Sector is responsiblefor the accident recording and the register, and that the register is not fully "open". The accident informationsystem which is with the Public Security Sector (the Traffic Police) also needs to be further developedand modernizedto become better able to serve the main purposes for road traffic safety work in a broader perspective. However,due to administrativedifficulties, for the time being this questioncannot been tackled in the project. China: SecondFujian HighwayProject Page 45 Project AppraisalDocument
ProvincialRoad Safety Council
2.2 Due to the limitedcoordination and cooperationbetween FPTD and the Traffic Police and since at present there is no effective body for policy making and planning in the field of road traffic safety, a promising approach would be to establish a more formal and organizedform for cooperation,not only involving the traffic police and FPTD but also other organizationsconcerned with road safety matters, e.g. health sector institutions and education sector institutions. Such cooperative forms have been establishedin many countries and are often named Road SafetyCouncil (RSC).
2.3 However, FPTD explained to the Bank that the difficulties in arranging such formalized cooperationat this point in time are too many, due to the very strong administrativeboundaries between the sectors concerned. The Bank and FPTD therefore have agreed, at least for the time being, to wait with the initiationof such an organization. However,the Bank is of the strong opinionthat for the future and within a broader highwaysector reform perspective,such joint and well coordinatedeffort among all concernedorganizations in Fujian is needed, if the continuouslyincreasing number of road accidentsis to be reduced and the road traffic safety situationis to be improvedin a serious manner.
Road Safety Seminars 2.4 To increase the awareness of the serious consequences of the increasing number of road accidents, a series of Road Safety Seminars will be arranged in the province. There will be a lot of important outcomes from these and some of the outcomes would be implemented during the project period. The road safety seminarswill focus on the problemsroad accidentsare causing to society as well as analyzing the causes. Besides the cost of property damage, road casualties are causing a severe economic burden on the community. In addition to loss of human life and personal suffering road accident victims occupy a high proportion of hospital beds, medical staff and medicines, which are otherwise needed for general health service. Consideringthese different negative effects, it is evident that road accidents consume a rapidly growing share of the available resources which are needed for more productivepurposes. 2.5 The basic concept for the seminars would be to create a better understandingand awareness among decision makers and the general public. Experienced experts from China as well as experts from abroad would be invited to participate so as to obtain the best possible informationand ideas on how to tackle the problems.An importantpart is to learn from other countrieswhich are at a later stage of traffic development.
2.5.1 Actions agreed (Road Traffic SafetySeminars)
Outputs: - Documentation of presentations made at the seminars. Outcomes: - Increased know-how about the road safety situation and how to tackle the problems. Indicators: - A symposiumon road safety to be held every sixth month. - Progress report at the yearly workshop with the Bank on institutional development and road safety.
Safety at Road Work Sites
2.6 A typical aspect of road works is that they may take place in all types of road environments. But in each setting they constitute an abnormality, so that the traffic situation encountered by the driver China: Second Fujian Highway Project Page 46 Project Appraisal Document deviates from the situation s/he expects to meet. Thus, there is reason for assuming that road works cause situations which are marred by exceptionally high accident risks.
2.7 It has been agreed that a manual for the safety at road work sites during construction and/or maintenance of roads would be developed. In order to organize road works under tolerable and economically acceptable conditions to road users and workers, a major effort is required to find solutions appropriate for each situation: comprehensive schemes for work zones and temporary traffic operations, technological innovations, monitoring users' behavior and traffic, etc. The aim is to reduce the accident risk at roadwork sites. Different types of roadwork should be examined from mobile and short duration to long duration road works, as well as equipment and accessories used for temporary signing, traffic guidance and the protection of workers.
Safety Audit Procedures
2.8 Fujian Province is at present investing huge sums in the development of its infrastructure. This offers a unique opportunity to create a road and street network that offers the users good mobility and a high degree of traffic safety.
2.9 Foreign experience shows, that by using a few simple principles, land use and traffic network planning can be carried out to ensure good traffic safety, and at the same time a high mobility, now and in the future.
2.10 However, to reach that goal, some basic planning principles must be agreed as soon as possible. Thereby, not all, but a good deal of the traffic safety problems which at present are at hand can be avoided in the future.
2.11 It was agreed to develop a safety audit procedure schedule in order to guide engineers in design work. The safety audit schedule will consist of a series of checklists and guidelines that explain how to check highway designs to ensure good safety standards. Improvement in road safety conditions starts with a good design of expressways, new roads and interconnecting roads.
Pilot Safety Study on "Black-Spots"
2.12 A major problem with road safety actions is to find the hazardous locations and to implement effective measures. It was agreed that in order to develop a method to identify and remedy such " black- spots" a study would be carried out. A good start would be to carry out a pilot safety program on a specific road in the Province. Such a prograimfor black-spot analysis would consist of three stages:
(a) Identification methods of the black-spots, the main objective is to develop a simple model for detecting "black-spots" and to find a sample of good examples on how to remedy these accident prone locations;
(b) A proposal of a program on remedial measures and its implementation; and
(c) Before and after analysis model.
2.13 The above road safety activities (safety at road work sites, safety audit procedures and the pilot safety program) will all be carried out by domestic consultants. These three activities have also been grouped as "other road safety activities" with regard to outputs, outcomes and performance indicators. China: SecondFujian HighwayProject Page 47 Project AppraisalDocument
2.13.1 Actions agreed (OtherRoad SafetyActivities)
Outputs: - Documentationof good examplesand proceduresaiming at improvedroad safety. Outcomes: - Increasedknow-how and ideas on some simpleroutines to be followed in the daily work, which leads to improvedroad safety. Indicators: - Presentationof the results at the traffic safety symposiumstwice a year as well as at the yearly workshopwith the Bank on institutionaldevelopment and road safety. Remedy of Black Spots on 100 km of NR324
2.14 It was agreed that the road safety program would contain a physical road safety component. NR324 (the existingnational road) running in parallel to the proposedZZE would serve this purpose, and a minimum length of 100 km would be identifiedand investigatedwith respect to road safety problems ("black-spots"). Remedy of these black spots would be carried out under the new project. The physical measures shall be implementedunder due considerationof findings from the "safety at road work sites" studyand the "pilot safety study black-spotmodel" shall be used.
2.14.1 Actionsagreed (Remedy of Black Spots on 100km of NR324)
Outputs: - A plan for remedy of accidentprone locationson and along NR324. Outcomes: - Improvedsafety along the actual stretch of NR324. - Increasedknow-how on problemsand possibilitiesabout the remedy of black spots. Indicators: - Numberof black-spotsremedied in accordancewith the agreed plan. - Number of accidents before and after. - Progress report at the yearly workshopwith the Bank on institutionaldevelopment and road safety. China: Second Fujian Highway Project Page 48 Project Appraisal Document
ANNEX 6: CHINA'S EVOLVING HIGHWAY PROGRAM AND FINANCING ISSUES
Second Fujian Highway Project
"Good roads, canals and navigable rivers, b) diminishing the expense of carriage,put the remote parts of the country more nearly upon a level with the neighborhood of towns. They are upon that account the greatest of all improvements." AdamnSmith, An Enquiry into the Nature and Causes of the Wealth of Nations, 1776.
1. Introduction
1.1 China's strong and sustained economic growth over the last 20 years has resulted in transport demand growth faster than the capacity and ability of the system to deal with it. However, China has historically underinvested in transport (less than 1.3% of GDP during 1980s compared to 3% in 1998), and its road network ranks arnong the sparsest in the world relative to geographic area and population. A few inter-provincial expressways have been built to date and about 20% of rural communities have no all- weather vehicular access. In recent years, governments at all levels have embarked on a major highway capital investment and improvement program.
1.2 At the end of 1998, China's road network exceeded 1.26 million km, but only a small part of the system, some 5,500 kmn,consisted of high capacity toll expressways, and another 15,000 km of other toll highways.
1.3 China is confronting a demand for new highway development and financing not presently experienced elsewhere in the world. China is making significant progress in revenue raising and construction funding, but continued progress will likely depend on the implementation of: (i) a well- defined legal and regulatory framework for private investors; (ii) a comprehensive system for raising and allocating highway user fees and other forms of finance; and (iii) a mature relationship between central government and the provinces to guide the financing and implementation of projects.
2. Scope of the Development Program
2.1 The focus of the national highway strategy is to complete the National Trunk Highway System (NTHS) of some 35,000 km of high-grade highways during 1999-2015 at a total cost of US$150 billion. Government attaches high priority to completing two north-south, two east-west corridors, and several corridors serving border areas and cross-border trade. The Ministry of Communications (MOC) has been developing the NTHS, consisting of 12 inter-provincial trunk expressways, spanning China and connecting the countries 100 biggest cities. To date, some 7,500 km of the NTHS has been opened to traffic.
2.2 Operating expressways by year-end 1998 totaled over 5,500 km in length. Present toll rates on China's expressways average in the range of US$0.03-0.05 for passenger cars and US$0.10-0.15 for buses, trucks, and other heavy vehicles. These levels are similar to toll rates in most other developing countries in Asia and Latin America.
2.3. In 1997, China invested US$13 billion in highways, of which US$0.7 billion was in World Bank loans (or about 5%). In 1998, to support the government's economic stimulus program (8% growth rate), highway spending was raised to US$26 billion, a 100% increase from 1997. Some 55% of this China: Second Fujian Highway Project Page 49 Project Appraisal Document investment (or US$14 billion) was allocated to NTHS construction, 30% (or US$8 billion) to provincial road development and the remaining 15% (US$4 billion) to rural road improvement. World Bank lending for highways in 1998 reached US$0.68 billion (or about 2.5% of the total). Annual multi- and bilateral lending to the sector in recent years is about US$1.2-$1.5 billion, with about 45% from the World Bank, 30% from ADB, and the remaining 25% from OECF.
2.4 Most observers agree that unless new sources of revenue are identified, China will experience a 30% funding shortfall in the highway sector over the next 15 years. To address these growing requirements, the country is exploring a variety of innovative financing techniques and sources of capital from both the public and private sectors.
3. Ability to Mobilize Capital
3.1 China faces a difficult challenge in mobilizing sufficient resources to meet future needs for the construction and maintenance of its highway system.
3.2 China's expanding financial markets are providing greater amounts of capital for new highway development, and at the same time, insulating the country from the effects of the Asian financial crisis. China's high personal savings rate has produced a total of over US$600 billion in the banking system in 1999, up 16.7% from last year. The government has targeted nearly US$40 billion in domestic debt issuance this year, of which a large part will be used for infrastructure development.
3.3 The challenges are for China to develop more highway projects which are bankable and can be evaluated on commercial lending criteria by local financial institutions. Many segments of the expanding NTHS are without the initial traffic volumes and near-term toll revenue potential necessary for private developers and commercial lenders to receive an adequate early return on their investment. Thus, the responsibility for much of this expressway construction will continue to rest with central and provincial highway agencies, and public revenues.
3.4 The central government has taken steps in recent months to shore-up the local financial sector in the aftermath of the closure of Guangdong International Trust and Investment Corporation (GITIC) and restructuring of many other ITICs due to their high foreign debt burden. Restrictions have been imposed on unauthorized foreign borrowings by the provinces and to limit the flow of foreign capital out of the country. The pace of highway asset securitization to raise private equity for new construction has also slowed considerably in recent months. The number of highway projects that can be marketed (those with strong traffic revenue potential) to private sector investors are insignificant compared to the sector's resource requirements.
3.5 China's new Highway Law, which was passed in 1997 and became effective in January 1998, provides for a new fuel tax to fund road construction and maintenance. This tax will possibly become effective in 1999, and will replace the current road maintenance fee. Public sector revenues will continue to be raised from passenger and freight surcharges, and various local fees and levies, including the vehicle purchase surcharge. Taken together, these sources produce a modest share of the country's total budget for highway development. Additional contributions from provincial entities, foreign and domestic financial markets, and the private sector will be necessary.
3.6 China's capital markets are undergoing a transition, with relatively undeveloped capacity for long- term infrastructure finance to a more dynamic, liquid supply of funding available on commercial terms for major infrastructure projects. The central government attaches a high priority to the attraction of China: Second Fujian Highway Project Page 50 Project Appraisal Document foreign investment in highway projects, but in most cases, outside the coastal regions, these efforts have not been successful so far. There are few bankable projects which are attractive to private investors as start-up toll roads, and this situation will likely not change in the foreseeable future. Coastal provinces such as Guangdong, Zhejiang, and Jiangsu have benefited from a higher concentration of population and economic activity, and thus, are able to attract private developers with projects having greater traffic and revenue potential.
3.7 New toll road projects pose significant construction and start-up risks for private developers. In addition, there are commercial risks which are related to future traffic volumes which are hard to define. China's BOT policy framework for private investors is still in the formative stage and until finally completed and implemented, new toll road projects with private investment are likely to be very few in number.
3.8 China is encouraging its state banks to make commercial loans to provinces for accelerated highway construction. These funds are available for a term of 5-10 years at rates comparable to the cost of U.S. treasury bonds, approximately 6%-8% presently. This new emphasis by the central government on improved capital flows for highways, among other sectors, is intended to help sustain China's GDP growth at a level of 8% for the foreseeable future and to overcome immediate transport bottlenecks that constrain economic growth.
3.9 Asset securitization is looked upon by the government as a viable technique for leveraging the value of existing highway assets to raise new capital for the construction of additional expressways. Asset securitization and China's approach to refinancing existing roads are intended to attract private investors without the construction and traffic risks normally connected to start-up "greenfield" toll roads.
3.10 Since mid-1996, 12 transactions have been completed in Hong Kong and Shenzhen with the issuance of H and B shares to foreign investors and another three transactions in Shenzhen with A shares for domestic investors. Total capital raised from these listings exceeds US$2 billion.
3.11 Until the onset of the Asian financial crisis in 1997/98, provincial agencies were of the opinion that share appreciation in the Hong Kong and Shenzhen equity markets would be enough to meet investors' demands for 20% plus returns without the payment of sizeable dividends from earnings. Now, with the downturn in the markets and flat, or volatile share prices over the past year, provincial attitudes may change.
3.12 To underline the present weakness of the international markets, three (non-highway) H share issues on the Hong Kong Stock Exchange have failed to materialize in early 1999. Circumstances are somewhat different in China's A-share market, where highway transactions are under consideration in the Beijing-Tianjin corridor and in Guangdong and Fujian, and possibly for other provinces in the near future.
4. Potential for Private Sector Participation
4.1 Since 1995, China's demand for private capital to finance its highway program continued at an unabated pace, triggering the flow of an estimated US$5-6 billion in new highway capital from private sources.
4.2 The bulk of the new capital from the private sector is equity investment. Over the past five years or so, provincial highway agencies have engaged in over 70 cooperative joint venture toll road projects China: Second Fujian Highway Project Page 51 Project Appraisal Document valued at an estimated US$3-4 billion. These projects are almost always existing roads and bridges that are refinanced under 20 to 30-year concessions by Hong Kong developers and mainland partners. The proceeds are used to build or expand additional highways in the province. IFC has recently obtained Board approval for its first investment in China's toll road sector, a US$16.1 million equity investment in Shanghai Midway Corporation.
4.3 China's experience with BOT development of highway projects is still evolving. Although the Junshan Bridge project was designated by the State Development and Planning Commission (SDPC) as one of its four original pilot BOT projects in 1994, this bridge is now under construction as a public sector project to connect the Jingzhu and Hurong expressways as part of the Bank's Third National Highway (NH3) Project. The experience gained from the evaluation of the Junshan Bridge as a BOT candidate is being applied in Hubei Province to an 85-km section of expressway northwest from Wuhan, which as a BOT project or public/private partnership, will be part of a future 650-km expressway system in the central region of the province. The Bank and Hubei Province have agreed to try to mobilize grant funding for a network-level analysis of the system in order to develop an adequate base of capital cost, revenue, and traffic data to discuss the new project with the private sector. Hubei is also considering the possibility of using an outside contractor/investor to provide operations and maintenance services for a large part of the expressway system.
4.4 China is continuing to emphasize the importance of securing long-term debt capital at relatively low interest rates as a key factor in making highway facilities affordable to a large segment of the population. The World Bank, OECF, and the Asian Development Bank are making important contributions in this area, and through continued work on a legal and regulatory framework for BOT investment, China hopes to secure the confidence and support of commercial lenders for long-term private borrowings in the highway sector. The country has already experienced some success in this regard through financial closure of BOT pilot projects in the power and water sectors.
4.5 Although China is making progress with the availability of medium-term debt in its domestic capital markets, foreign commercial banks and the capital markets appear quite reluctant at this stage to support new highway projects in China without access to sovereign guarantees. The solutions are in part institutional and policy, or framework, oriented.
4.6 The Bank is working with central and provincial governments to begin the organization of new toll road authorities at the provincial level with the power to raise and spend toll revenues, and to presumably leverage debt financing for construction and operation and maintenance (O&M) of their emerging expressway and other high-grade highway systems. Bank-financed expressway commercialization and corporatization studies are now underway in Hunan and Hubei provinces under NH2 and NH3, respectively. A new technical assistance initiative intended to develop a model highway shareholding company and provincial toll road authority has been agreed to recently with the Ministry of Finance and Fujian Province.
4.7 In the absence of a BOT policy decree to resolve uncertainties and concerns in the relationship between the central agencies and the provinces, international commercial banks and bond investors are reluctant to accept informal arrangements for setting future tariffs and making available hard currency to meet debt service payments and to repatriate profits to foreign developers.
4.8 China has proposed that the requirements for accessing long-term debt financing in the international markets be considered under a new technical assistance initiative with the Bank Group (IFC/FIAS/PPI- PSD) to revise and improve the existing BOT policy decree which has been pending before State Council China: SecondFujian HighwayProject Page 52 Project AppraisalDocument for more than two years. This review would also include an assessmentof recent pilot BOT projects in the power and water sectors, which unlike toll roads, have established markets and creditworthy offtakers. It may be the case in China that the financialreturns needed for highway investorsrelative to the risks involvedare differentthan the water and power sectors. Until these investors are satisfied with the security and long-term financial viability of their venture, a policy decree will do little to alter the fundamentaleconomics in most toll road projects. Certainly, however,the results of this new TA can give China new conceptsand ideas for a policy, legal, and regulatoryframework for private infrastructure projects and standarddocumentation for concessionsin the highway,power, and water sectors.
5. International Comparison
5.1 A preliminary task team estimate of total private investment in toll roads globally during the period 1991-1998would be in the range of US$20-25billion for projects which have been completed. Private investment here is defined as including equity capital and non-government guaranteed commercial debt. A large part of this private sector capital contributionhas in fact occurred in China where more than 70 brownfieldconcession transactions in the highway sector have been completed until end 1998 mobilizing in the order of US$4 billion. In addition, a dozen highway asset securitization (asset-backedfinancing) transactions have raised additionalUS$2 billion lifting the total private funding of toll highwaysin China duringmost of the 1990sto about US$6 billion.
5.2 On a country-by-countrybasis, to the extent that reliable information is available, private investments in toll roads appear as follows: (i) United States US$0.65 billion; (ii) United Kingdom US$0.9 billion; (iii) China US$6.4 billion; (iv) Hungary US$0.55 billion; (v) Malaysia US$3.5 billion; (vi) Mexico US$5.0 billion; (vii) Argentina US$2.0 billion; (viii) Brazil US$1.0 billion; (ix) Chile US$0.33 billion; (x) Colombia US$0.4 billion; (xi) Indonesia US$0.5 billion; (xii) Thailand US$0.4 billion; and (xiii) PhilippinesUS$0.7 billion. The total of these 13 countries comes to US$22.33billion which would amountto about US$2.8billion per annum for the period 1991-1998.
5.3 It is to be noted that Spain, Italy and France are not included in this preliminary analysis although these three countries operate the largest toll road systemsin Europe. However, much of their systemswas completed in the 1970s and 80s and those toll road projects that are underwaynow seem to be quite limited and mostly in the development stage. Furthermore, it would appear that there was extensive government involvement, and continues to be, in motorway development occurring and planned in these three countries. China: Second Fujian Highway Project Page 53 Project Appraisal Document
ANNEX 7: BANK INVOLVEMENT AND ACHIEVEMENTS IN CHINA'S HIGHWAY SECTOR
Second Fujian Highway Project
1. Introduction
1.1 China has opened some 7,500 km of the National Trunk Highway System (NTHS) to traffic and has established a road network of 1.26 million km. The objective is to complete the NTHS, some 35,000 km of high-grade highways by 2015, and construct 130,000 km of provincial and rural roads by year 2000. The completed road network infrastructure is already contributing to the government's policy of integrating the national economy, removing inter-provincialtrade barriers, and providing an all-weather access road system to low-income rural areas. One of the key objectives of the NTHS is to advance economic development in China's inland provinces, which have historically carried much of the country's poverty burden. A high-grade highway network is essential to the achievement of these goals, and it is in this area where the World Bank is making a significant contribution.
1.2 Despite this progress, China's highway sector faces important issues relating to construction quality, resource mobilization,maintenance, institutionalmanagement and financing, rural roads, and road safety. As China is making substantial progress, the central and provincial agencies are doing more to address issues in a systematic manner and with a higher sense of urgency and commitment. Sustained development of the NTHS is regarded as a critical means of dealing with remaining poverty in the country. The construction of the system provides an immediate economic stimulus and a permanent framework for long-term economic growth. Sectoral issues are being addressed with the Bank through policy dialogue, lending programs, and technical assistance, and in the context of a long-term strategic framework by focusing on key elements of policy and institutional reforms.
2. China's Evolving Elighway Program
2.1 The government in 1998 raised its highway spending to US$26 billion, double the amount of the previous year. China's investment mix for the highway sector is broad-based: about 55% of this allocation was earmarked for the NTHS construction, 30% for the provincial road system, and the remaining 15% for rural road improvement. Public financing remains predominant, with extemal financing amounting to less than 10% of total. China is committed to maintain highway spending at the 1998 level in the foreseeable future, for which the availability of capital has become a serious, continuing challenge and will likely remain a formidable constraintto development.
2.2 The highway sector remains an important component of the Bank's country assistance strategy, among other things, to promote economic growth and alleviate poverty, close infrastructure bottlenecks, reduce regional disparities, and improve rural road systems for the poor. To this end, the Bank is promoting a new partnership between the central government and provinces to find better approaches to financing and managing the highway system. The Bank is also working with these groups to begin organization of new toll road authorities with financial responsibilities. In addition, the Bank is presently supporting studies related to commercialization and corporatizationof expressways,and advising MOF on administrative issues related to a fuel tax. China: Second Fujian Highway Project Page 54 Project Appraisal Document
3. Scope of Bank Participation
3.1 World Bank lending for highways in China in 1998 reached US$0.68 billion (or about 2.5% of the country's US$26 billion programn).In real ternmsand share of total spending, the Bank's contribution is down slightly from 1997, when China invested US$13 billion in highways of which US$0.7 billion was in World Bank loans (or about 5%). Annual multi- and bilateral lending to the sector in recent years is about US$1.2- $1.5 billion, with about 45% from the World Bank, 30% from ADB, and the remaining 25% from OECF.
3.2 Since 1983, the Bank has implemented a total of 21 highway projects with seven projects closed, focusing primarily on the NTHS. Four new highway projects are under active preparation while five more highway projects have been proposed for future Bank loan financing. Bank projects have incorporated institution building features and support both economic growth and poverty reduction objectives.
3.3 By 1998, total lending to China's highway sector exceeded US$4 billion. OED ratings indicate that the seven completed projects had satisfactory outcomes and are likely to sustain their benefits but had only modest institutional development impacts. Recent supervision ratings and the Quality Assurance Group's "projects at risk" report on ongoing projects indicate that all have satisfactory implementationprogress and are likely to achieve their development objectives. The economic rates of return (ERR) for China highway projects range from 16%-39% at completion.
3.4 The Bank's highway lending achievementsin China can be summarized as follows:
(i) Expansion of road capacity to support development of coastal and inland provinces and trade and regional economic integration by adding 2,800 km of expressways;
(ii) Upgrading and improvement of sonme13,000 km of secondary and rural roads to support the rural development and poverty alleviation objectives;
(iii) Institutional capacity building in provinces to sustain road planning and management, construction quality control, road financing, road maintenance, environmental and resettlement requirements, traffic safety, and to develop market-basedpricing for highway services such as the establishment of road tariffs (tolls);
(iv) Support to the road securitization initiatives by permitting the use of partially Bank-funded highway and bridge assets for securitization in the Hong Kong and Shenzhen equity markets by provincial expressway development companies in Guangdong, Sichuan, and Zhejiang. Similar transactions are under consideration in the Beijing-Tianjin corridor and in Guangdong and Fujian, and possibly for other provinces in the near future.
4. Primary Sectoral Issues and Reforms
4.1 The Bank's long-term involvement in China's highway sector has succeeded in addressing a wide spectrum of sector issues. The OED report (1999) recommends continued Bank participation in the sector with emphasis towards broader policy and institutional reforms. Key sector issues and reforms which the Bank intends to pursue in the future are as follows:
(i) Building Sector Institutions: Though in two decades China has taken a major leap from a primitive road system to the fast expanding NTHS, the sustainability of the highway sector greatly depends on the strength of its provincial and local highway institutions to address the growing challenges of road traffic safety, construction quality standards and control, road asset preservation, network expansion, market responsive facility provision, and resource mobilization. China is now placing greater importance on the coordination of agencies in the area of traffic safety improvements. For instance, with some 85 fatalities and 175 injuries per China: Second Fujian Highway Project Page 55 Project Appraisal Document
10,000 vehicles (1997 data), China's roads are among the most unsafe in the world. Any effective solution to the safety issue will require a stronger relationship between the provincial communications departments (PCDs) and the traffic police which is part of the Internal Security Ministry. To support such reforms, sector institutions will require new skills and a better understandingof new practices.
(ii) Improving Construction Quality: Highway construction quality is one of the most serious concerns of the sector. Incidences of bridge and road failings or premature wear and tear of highway pavements occur quite frequently. The problem has both technical and administrative roots. Contractors, mostly domestic, are not always well managed, frequently face irregular payments, and often come under pressure to shorten the construction period. In some cases, quality control suffers due to the lack of authority assigned to the construction supervision agency by the owner vis-A-viscontractors. While the central government appreciates Bank involvement in the sector due to better design reviews, supervision and resulting construction quality of the Bank projects as compared to locally financed projects, there is a definite need to reinforce rigid construction quality standards, control and enforcement in future Bank highway loans.
(iii) Enhancing Accessibility to Remote and Low Income Areas: The geography of China poses enormous demands and difficulties for the provision of basic road access in various parts of the country, particularly in the inner and low-income provinces. Although the role of transport access to integrate the national economy,to stimulate growth in remote areas, and to insure basic mobility needs of the poor has been emphasized, the task is enormous and requires significant public resources. The Bank's provincial highway program in China aims to favorably impact poverty levels, through targeted interventions in low income areas. Provincial and central government agencies often refrain from borrowing for this purpose since no dedicated revenue source for loan repayment is easily identified (unlike for toll roads). While a renewed effort is needed to support road development in low income areas, China's central and provincial highway agencies are generally self-sufficient in this regard. The Bank's future lending and non-lending services for this sector should be focused on the development and long-term maintenance of major infrastructure projects such as expressways .
(iv) Sustaining Road Maintenance: China's highway network is fast expanding in all road categories, with emphasis on high-grade highways. Over time, the demand for routine and periodic maintenance and related resources will substantially increase. Due to the rapid pace of road expansion in many provinces, maintenance funds are diverted to constructionof new roads. The current trend and practice will soon become unsustainable unless a new framework is developed to address future maintenance needs. The Bank and China's highway agencies need to look for methods of funding ongoing road maintenance requirements while also supportingthe construction of new revenue generating high-grade highways. A stronger effort on behalf of the Bank and the relevant Chinese sector institutions is recommended to make road maintenance a more integral and prominent part of future Bank highway projects. PCDs need to be encouraged to develop a sustainable road maintenance policy, refine their road information systems for direct use in maintenance planning and operations, develop sustainable funding mechanisms, and adjust their organizational structures and training programs to devote more resources to maintenance.
5. Priorities in the Future Elighway Program
5.1 The construction emphasis of the Bank's highway program over the last 15 years needs to be expanded to focus more intensively on policy and institutional reforms, where more should be expected. Bank interventions have not always been that successful in the past in dealing with important policy and institutional matters. As time goes on, China and the Bank are developing an understanding which will support a substantive, ongoing effort to address and resolve these issues. For example, traffic safety, road maintenance, and toll road operation and management must be major concerns, and the Bank needs to find new ways of China: Second Fujian Highway Project Page 56 Project Appraisal Document engaging Chinese counterparts more proactively in addressing these issues and taking ownership of reforms and the potential results they can produce.
5.2 Achievement of policy and institutional reforms on a project-by-projectbasis can only be modest at best. Significant progress and lasting reforms will most likely take place over time with several operations supporting the same initiatives. Performance standards and methods for measuring progress toward implementation and tangible outputs need to be agreed and put in place with the central agencies and provinces.
5.3 The Bank should help China in its transition by shifting its lending orientation to areas where the institution has a comparative advantage in China's highway sector: highway management, financing, integrated planning, and the organization of highway administration. Other key reform areas that have not received sufficient Bank attention include institutional change to retain and increase the benefits of decentralization, the question of restructuring the PCDs to enable them to address the complex future issues they will face, resource allocation between functional road classes, and between new construction and maintenance, as well as lessons learned from the West regarding the need for spatial planning concepts in highway development.
5.4 The Bank is already advocating a new partnership between the central government and provinces in identifying better ways of financing and managing the growth of the highway network, specifically as regards the operation and management of toll roads. The Bank is working with central and provincial governments to begin the organization of new toll road authorities at the provincial level with the power to raise and spend toll revenues for construction and operation and maintenance (O&M) of their emerging expressway and other high-grade highway systems. Bank-financed expressway commercialization and corporatization studies are now underway in Hunan and Hubei. A new technical assistance initiative intended to develop a model highway shareholding company, and provincial toll road authority has been agreed recently with the Ministry of Finance (MOF) and Fujian Province.
5.5 The Bank needs to continue its search for new ways of sustaining and reinforcing the sector dialogue with relevant Chinese authorities. The Bank, jointly with the Ministry of Communications (MOC) conducted a construction quality workshop and a high-level highway policy seminar in Beijing in May 1997. These were followed up with a policy workshop in May 1998. In addition, the Bank, in close cooperation with MOC and MOF, is presently undertaking a self-assessmentof the impact of its highway TA. This work is considered as a good vehicle to draw renewed attention to key sector issues and to agree with relevant Chinese authorities on a new strategy for future highway lending and non-lending services. To that effect a new workshop will be held with MOC, MOF, SDPC and selected provinces on May 8-9, 1999 in Beijing. This workshop will also initiate work on a new China Strategic Highway Framework paper which the Bank and China will prepare as part of FY2000 ESW. Several more workshops will be held during FY2000 and FY200 1. China: SecondFujian HighwayProject Page 57 Project Appraisal Document
ANNEX 8: ESTIMATED PROJECT COSTS (US$million) Second Fujian Highway Project ($1.00=Y8.3, April 1999 prices) Local Foreign Total Local Foreign Total Y mill. US$ mill.
Civil and E&M Works Expressway 1,870.49 1,091.12 2,961.61 225.36 131.46 356.82 Annex areas & adm. builds. 73.21 13.94 87.15 8.82 1.68 10.50 E & M Express. 46.48 136.95 183.43 5.60 16.50 22.10 Interconnecting Roads 57.27 16.60 73.87 6.90 2.00 8.90 Other roads 183.26 45.82 229.08 22.08 5.52 27.60 Total Works 2,230.71 1,304.43 3,535.14 268.76 157.16 425.92
Supervision 76.11 32.62 108.73 9.17 3.93 13.10 Expressway 73.79 31.62 105.41 8.89 3.81 12.70 Other roads 2.32 1.00 3.32 0.28 0.12 0.40
Equipment 6.64 24.90 31.54 0.80 3.00 3.80 Expressway 2.49 24.90 27.39 0.30 3.00 3.30 Other roads 4.15 0.00 4.15 0.50 0.00 0.50
Training and Studies 6.72 4.57 11.29 0.81 0.55 1.36 Training 3.32 3.32 6.64 0.40 0.40 0.80 Total Studies/TA 3.40 1.25 4.65 0.41 0.15 0.56 Highway maintenance study 1.25 1.25 2.49 0.15 0.15 0.30 Toll Rates study 0.50 0.00 0.50 0.06 0.00 0.06 Road safety program 1.66 0.00 1.66 0.20 0.00 0.20
Total Base Cost 2,320.18 1,366.51 3,686.69 279.54 164.64 444.18
Physical Contingencies 230.57 133.85 364.42 27.78 16.13 43.91 Price Contingencies 476.02 143.02 619.03 57.35 17.23 74.58
Total Contingencies 706.59 276.86 983.45 85.13 33.36 118.49
Fee (Front-end) 0.00 16.60 16.60 0.00 2.00 2.00
Land Acquisition and Resettlement 256.47 0.00 256.47 30.90 0.00 30.90
Total Project Cost 3,283.24 1,659.97 4,943.21 395.57 200.00 595.57 China: Second Fujian Highway Project Page 58 Project Appraisal Document
ANNEX 9: FINANCING PLAN (US$million) Second Fujian Highway Project ($1.00-Y 8.3, April 1999 prices)
Government Bank Total Foreign Costs Provincial Central % of Total
Component 1. Construction of expressway and interconnecting roads Works Expressway Civil Works 119.4 106.0 131.5 356.8 37 Annex areas & Admin. Bldgs. 8.8 1.7 10.5 16 Expressway E & M Works 5.6 16.5 22.1 75 Interconnecting Roads 6.9 2.0 8.9 22 Other Roads 22.1 5.5 27.6 20 Subtotal Works 162.8 106.0 157.2 425.9 37 Construction Supervision 9.2 3.9 13.1 30 Equipment 0.8 3.0 3.8 79
Component 2. Institutional Strengthening/Capacity Building Training 0.4 0.4 0.8 50 Studies/TA 0.4 0.2 0.6 27 Training and Studies 0.8 0.6 1.4 40
Component 3. Front-end Fee 2.0 2.0 100
Component 4. Land Acquisition and Resettlement 30.9 0.0 30.9 0
Contingencies 85.1 33.4 118.5 28
Project Cost 289.6 106.0 200.0 595.6 34
Percent of Total 49 18 34 100 China: Second Fujian Highway Project Page 59 Project Appraisal Document
ANNEX 10: PROCUREMENT AND DISBURSEMENT ARRANGEMENTS Second Fujian Highway Project
Procurement
Procurement methods (TableA)
1. Procurement under the project would be carried out as shown in Table A. The procurement arrangements for the project have taken into account the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credit" (January 1995, and revised in January, August 1996, September 1997 and January 1999) as well as the experience gained from previous Bank-financed highway projects. The documentation for procurement, which covers the prequalification of contractors, ICB and National Competitive Bidding (NCB) for civil works, and ICB for goods has been standardized for Chinese conditions in cooperation between the Chinese government and the Bank on the basis of model documents which would be used for all relevant procurement processes under the project. Where no model documents exists, relevant Bank standard documents would be used.
2. Works. The civil works for ZZE would be divided into 8 earth works contracts, with an average contract size of about $35 million equivalent and 4 pavement works contracts, with an average contract size of about $23 million equivalent. Electromechanical works would be handled as one contract amounting to about $22 million equivalent. Interconnecting roads, administration and maintenance buildings, service areas and toll plazas would be carried out in several small contracts.
3. The 12 civil works contracts and one electromechanicalworks contract for ZZE with an estimated total cost of about $482 million would be procured following ICB procedures. Contracts would be bid on a slice-and- package basis; qualified contractors would be allowed to bid for more than one contract so as to attract international and large Chinese contractors. The 1 contract for electromechanicalworks would be bid later during the construction of ZZE. All bidders for the 12 civil works contracts would be prequalified. Domestic bidders are expected to be competitive for all contracts under this project.
4. Other works, including interconnectingroads and small service facilities such as toll stations, maintenance depots, service and rest areas, and administrative buildings would be awarded following NCB procedures acceptable to the Bank. These works would involve contracts estimated to cost less than $8 million per contract, up to an aggregate amount not to exceed $60 million. Since these contracts are small in value and scattered along ZZE and would be implemented over a four-year period, ICB would be neither justified nor practical, but international firms would not be precluded from bidding. The Bank's assessment of NCB procedures indicate deviation pertaining, bracketing, Shot bidding period, limitation of number of firms for prequalification. It was agreed with the implementing agency and provincial government that the procedures for NCB will fully comply with the Bank's requirements. The documents for NCB are prepared on this basis.
5. Equipment. Generally, all contracts for goods and equipment costing more than $250,000 equivalent would be awarded under ICB. Domestic manufactures competing under ICB would be eligible for a margin of preference in the comparison of bids of 15 percent for goods, or the prevailing custom duties, whichever is lower. All other items or groups of items covering minor maintenance equipment, equipment for RDB and PMS, laboratories, research and environmental protection purposes estimated to cost less than $250,000 per contract package, in an aggregate amount not exceeding $2.5 million, would be procured following shopping procedures on the basis of comparison of price quotations solicited from at least three suppliers from two countries eligible under the Bank Guidelines for Procurement. China: Second Fujian Highway Project Page 60 Project Appraisal Document
6. Consultants. All consultants required for construction supervision, staff training, technical assistance and studies would be selected and employed under terms and conditions acceptable to the Bank in accordance with Bank Guidelines on the "Selection and Employmentof Consultants by World Bank Borrowers", dated January 1997, revised in July 1997 and January 1999. For Consultant Services the Standard Request for Proposals, dated July 1997 and revised in April 1998 will be used. Selection of consultants for Construction Supervision, Transport and Economic Integration study, Highway Maintenance Management and Expressway Commercialization and Corporatizationstudies, and Expressway Safety Programs will be carried out through Quality and Cost Based Selection (QCBS). Local expertise available from the various provincial universities and institutes would be used as much as possible.
7. Advance Contracting. FPTD has requested advance contracting and retroactive financing in the following areas:
(a) Consultants for Construction Supervision of ZZE. This would allow for training of local staff and start-up of construction supervision by the time contracts are signed with contractors. The amounts subject to retroactivefinancing are estimated at $1 million.
(b) Laboratory Equipment for Joint Local/Foreign Supervision Teams. This would permit effective and timely construction supervision. The amounts subject to retroactive financing are estimated at $0.2 million.
(c) Construction of ZZE Expressway Sections and Interconnecting Roads. Early start of construction of the ZZE sections of expressway and interconnecting roads would help alleviate severe traffic bottlenecks and reduce traffic on the existing corridors. The amount subject to retroactive financing are estimated at $18.8 million.
Prior review thresholds (Table B)
8. Prior review procedures would be used for: (a) civil works contracts with an estimated cost of $ 2 million (Y 17 million) or more; (b) equipment with an estimated cost of more than $ 250,000 per contract; and (c) consulting services with an estimated contract cost of more than $100,000 for firms and $ 50,000 for individuals. In the case of consultant' service contracts, all terms of reference and single-source selections, regardless of the value of the contract, are subject to prior review. For contracts below the above-mentioned limits,post-review procedures would be followed. The sampling ratio for contracts not subject to prior review is 25 % for goods contracts.
Disbursement
Allocation of loan proceeds (Table C): Allocation of loan proceeds is shown in Table C. 1. Use of statements of expenditures (SOEs): Withdrawal from the loan account would be made on the basis of SOEs for expenditures for: (a) civil works under contracts costing less than $2.0 million, (b) goods under contracts costing less than $250,000, (c) services provide by consulting firms under contracts costing less than $100,000, (d) services provided by individual consultants under contracts costing less than $50,000, and (e) training. The Special Account will be replenished monthly, or the account is drawn down to 50% of initial deposit whichever occurs first.
2. Special account: To facilitate disbursements, a Special Account would be opened in Fujian with an authorized allocation of $12 million equivalent,the estimated average expendituresfor a four-month period. China: Second Fujian Highway Project Page 61 Project Appraisal Document
Annex 10, Table A: Project Costs by Procurement Arrangementsl (in US$million equivalent)
Procurement method ICB NCB Other N.B.F. b/ Total Cost Works ExpresswayCivil Works 452.0 452.0 (158.1) (158.1) AnnexAreas & Admin.Bldgs 13.3 13.3 (2.0) (2.0) ExpresswayE & M Works 28.0 28.0 (19.8) (19.8) InterconnectingRoads 11.3 11.3 (2.4) (2.4) OtherRoads 35.0 35.0 (6.6) (6.6) Goods Equipment 2.3 2.5 4.8 (1.7) (1.9) (3.6) Services ConstructionSupervision 16.6 16.6 (4.7) (4.7) Consultantsand Training 1.7 1.7 (0.7) (0.7) Miscellaneous Land Acquisition and Resettlement 30.9 30.9 (0.0) (0.0) Front-endFee 2.0 2.0 (2.0) (2.0)
Total 482.3 59.5 22.8 30.9 595.6 (179.6) (11.1) (9.3) (0.0) (200.0)
(a) Other includesinternational shopping, LIB, and consultantsand training. (b) N.B.F. = Not Bank-financed. (c) Selection of Consultants according to the Bank's Guidelines for Use of Consultants.
Notes: (1) Figures in parenthesesare the amountsto be financedby the Bankloan. (2) All figuresare roundedand includeestimated physical and price contingenciesbut excludethe cost of land acquisitionand resettlementwhich is shown as a separatecomponent.
1 For details on presentation of ProcurementMethods refer to OD11.02, "ProcurementArrangements for Investment Operations." Details on ConsultantServices can be shown more easily in the Table Al format (additionalto Table A, whereapplicable). China: SecondFujian Highway Project Page 62 Project AppraisalDocument
Annex 10, Table B: Thresholdsfor ProcurementMethods and Prior Reviewl
ContractValue Contracts Subject to Prior Review/ (Threshold) Procurement EstimatedTotal Value Subject ExpenditureCategory (US$'000,000) Method to Prior Review(US$ million)
1. Works More than 10.0 ICB 13 Contracts $480.0 million subject to prior review
More than 2.0 NCB 9 Contracts $59.6 million subject to prior review
2. Goods More than 0.25 ICB 1 Contracts $2.3 million subject to prior review Less than 0.25 Shopping
3. Services More than 0.10 QCBS SupervisionContracts $16.6 million, for firms, more training and studies $1.7 million than 0.05 for subject to prior review individuals
Totalvalue of contractssubject to prior review: $560.2 million
Thresholdsgenerally differ by country and project. ConsultOD 11.04 "Review of ProcurementDocumentation" and contactthe RegionalProcurement Adviser for guidance. China: Second Fujian Highway Project Page 63 Project Appraisal Document
Annex 10, Table C: Allocation of Loan Proceeds
($ million)
Amountm US$ ExpenditureCategory million FinancedPercentage
Civilworks Expresswaysection 140.4 44% Annexareas & admin.bldgs. 2.1 35% Interconnectingroads 2.5 35% Otherroads 9.0 37%
Electricaland mechanicalworks 16.5 80%
Constructionsupervision 3.9 100%
Equipment 3.0 100%of foreignexpenditures, 100%of local expenditures(ex-factory cost) and 75% of localexpenditures for other itemsprocured locally
Trainingand Studies 0.6 100%
Front-endFee 2.0
Unallocated 20.0
Total 200.0 China: Second Fujian Highway Project Page 64 Project Appraisal Document
Annex 10, Table C-1: Estimated Disbursement Schedule
($ million)
Disburmentprotile ot transport Bank FY Annually Cumulat. % projects in China
FY 2000 28 28 14 11
FY 2001 63 91 32 27
FY 2002 63 154 32 26
FY 2003 38 192 19 38
FY 2004 8 200 4 100 China: SecondFujian Highway Project Page 65 Project AppraisalDocument ANNEX 11: IMPLEMENTATION SCHEDULE SecondFujian Highway Project
A. Project ImplementationPlans
1. This annex presents the implementationprogram for the various components of the project. Table 1 summarizesthe overall implementationschedule for the projectas a whole. 2. These schedulesshow the estimatedtime requirementsfor constructionactivities as well as for pre-constructionactivities such as preparationof designs and bid documents,pre-qualification process, bidding process,evaluation of bids,negotiations and signingof contracts. China: Second Fujian Highway Project Page 66 Project Appraisal Document
SECOND FUJIAN HIGHWAY PROJECT Page 1 of 8 ImplementationProgram 1999 2000 12001 1 2002 12003 ID Task Name Duration Start Finish H2 Hi H2 Hi H2 Hi H2 Hi H2 |H H2 1 1. Civil Works 1076 days Tue 11/17/98 Tue 12/31/02
2 Expressway Section - Earth Works (ICB) 760 days Tue 11/17/98 Mon 10/15/01
3 Submitting GNP 0 days Tue 11/17/98 Tue 11/17/98 1/f7
4 Publishing GNP in UN Development Business 45 days Tue 11/17/98 Mon 1/18/99
5 The Bank's "no objection" to prequalification documents 30 days Tue 1/19/99 Mon 3/1/99
6 Prequalification docs (PQ) available for sale 60 days Tue 3/2/99 Mon 5/24/99
7 Last date to subtnit PQ documents 0 days Mon 5/24/99 Mon 5/24/99
8 PQ documyientsevaluation report & MOC review 30 days Tue 5/25/99 Mon 7/5/99 5/4
9 Bank review & no obj. to PQ does evaluation rep 25 days Tue 7/6/99 Mon 8/9/99
10 Review bidding documents by MOC 30 days Mon 8/2/99 Fri 9/i0/99
11 Review bidding documents by the Bank 30 days Mon 9/13/99 Fri 10/22/99
12 Sell bidding docs to prequalified contractors 90 days Fii 10/22/99 Thu 2/24/00
13 Last date to receive bid documents 0 days Thu 2/24/00 Thu 2/24/00
14 Bid evaluation report and review by MOC 30 days Fri 2/25/00 Thu 4/6/00
15 Bank review evaluation report and no objection 30 days Fri 4/7/00 Thu 5/18/00
16 Notify successful bidder 0 days Thu 5/18/00 Thu 5/18/00 8
17 Negotiate and sign contracts 20 days F 5/19/00n Thu 6/15/00
18 Construction period 347 days Fri 6/16/00 Mon 10/15/01
19
20
Task Summary Rolled Up Progress
Project: Implementation Program Split Rolled Up Task External Tasks LE= Date: Wed 5/26/99 Progress Rolled Up Split , Project Summafy
Milestone Rolled Up Milestone X China: Second Fujian Highway Project Page 67 Project Appraisal Document
SECONDFUJIAN HIGHWAY PROJECT Page 2 of 8 ImplementationProgram 1999 12000 1 2001 2002 12003 ID Task Name Duration Start Finish H2 | Hi H2 I Hi H2 Hi H2 HI H2 Hi H2 21 Expressway Section - Pavement Works (ICB) 572 days Mon 10/23/00 Tue 12/31/02
22 Submitting GNP 0 days Mon 10/23/00 Mon 10/23/00
23 Publishing GNP in UN Development Business 45 days Mon 10/23/00 Fri 12/22/00
24 The Bank's "no objection" to prequalification documents 30 days Mon 12/25/00 Fri 2/2/01
25 Prequalification docs (PQ) available for sale 60 days Mon 2/5/01 Fri 4/27/01
_ _~ ~~__ _ I 26 Last date to submit PQ documents 0 days Fri 4/27/01 Fri 4/27/01 V. 27 PQ documents evaluation report & MOC review 30 days Mon 4/30/01 Fri 6/8/01
28 Bank review & no obj. to PQ docs evaluation rep 25 days Mon 6/11/01 Fri 7/13/01 ______._ _ _ _ _ .I L._' 29 Review bidding documents by MOC 30 days Wed 1/10/01 Tue 2/20/01
30 Review bidding documents by the Bank 30 days Wed 2/21/01 Tue 4/3/01
31 Sell bidding docs to prequalified contractors 90 days Fri 7/13/01 Thu 11/I5/01
32 Last date to receive bid documents 0 days Thu 11/15/01 Thu I 1/1.5/01 ' .111/i5
33 Bid evaluation report and review by MOC 30 days Fri 11/16/01 Thu 12/27/01
34 Bank review evaluation report and no objection 30 days Fri 12/28/01 Thu 2/7/02
35 Nofify successful bidder 0 days Thu 2/7/02 Thu 2/7/02
36 Negotiate and sign contracts 20 days Fri 2/8/02 Thu 3/7/02
3i7 Construction period 213 days Fri 3/8/02 Tue 12/31/02
38 .
39 Interconnecting Roads (NCB) 761 days Fri 7/30/99 Sun 6/30/02
40 Completing prequalification documents 0 days Fri 7/30/99 Fn 7/30/99
Task Summary RolledUp Progress
Project: Implementaton Program Split , Rolled Up Task E Tasks Date: Wed 5/26/99 Progress Rolied Up Split ,,,,,,, Project Summary _
Milestone Rolled Up Milestone 0 China: Second Fujian Highway Project Page 68 Project Appraisal Document
SECONDFUJIAN HIGHWAY PROJECT Page 3of 8 ImplementationProgram 11999 12000 2001 02 12003 ID Task Name Duration Start Finish H2 HI H2 HI H2 HI H2 I HI H2 HI H2 41 The Bank's "no objection" to prequalification documents 30 days Fri 7/30/99 Thu 9/9/99,
42 Prequalification docs (PQ) availablefor sale 45 days Fri 9/10/99 Thu 11/11/99
43 Last date to submit PQdocumncts Odays Thu 11/11/99 Thu 11/11/99 *
44 PQ documentsevaluation report & MOC review 30 days Wed 3/15/00 Tue 4/25/00
45 Bank review & no obj. to PQ docs evaluation rep 30 days Wed 4/26/00 Tue 6/6/00
46 Review bidding documentsby MOC 30 days Thu 2/3/00 Wed 3/15/00
47 Review bidding documentsby the Bank 30 days Thu 3/16100 Wed 4/26/00
48 Sell bidding docs to prequalified contractors 91 days Wed 6/7/00 Wed l0/1 i.M
49 Last date toreceive bid documents O days Wed 10/11/00 Wed 10/ 1/00 . .i
50 Bid evaluation report and review by MOC 30 days Thu 10/12/00 Wed 11/22/00
51 Bank review evaluation report and no objection 30 days Thu 11/23/00 Wed 1/3/01
52 Notify successfulbidder Odays Wed 1/3/01 Wed 1/3/01 , * ;
53 Negotiate and sign contracts 17 days Thu 1/4/01 Fri 1/26/0i
54 Construction period 197 days Thu 9/27/01 Sun 6/30/02
56 OOtherRoads (NCB) 709 days Wed 4/14/99 Mon 12/31/01
57 Completing prequalification documents 0 days Wed 4/14/99 Wed 4/14/99 I U14 ' 4 58 The Bank's "no objection" to prequalification documents 30 days Wed 4/14/99 Tue5/25/99
59 Prequalification docs (PQ) available for sale 45 days Wed 5/26/99 Tue 7/27/99
60 Last date to submit PQ documents 0 days Tue 7/27/99 Tue 7/27/99 :17127
Task Summary Rolled Up Progress
Project: Implementation Program Split ,,,,, Rolled Up Task Extemal Tasks Date: Wed 5/26/99 Progress Rolled Up Split Project Summary _
Milestone Rolled Up Milestone China: Second Fujian Highway Project Page 69 Project Appraisal Document
SECONDFUJIAN HIGHWAYPROJECT Page4of 8 ImplementationProgram 1999 2000 12001 2002 2003 ID Task Name Duration Start FinishFiHi H H1i | H2 Hi | H2 | H2 Hi l H2 Hi H2 61 PQ documentsevaluation report & MOC review 30 days Wed7/28/99 Tue 9/7/99
62 Bank review& no obj. to PQ docs evaluationrep 30 days Wed 9/8/99 Tue 10/19/99
63 Reviewbidding documents by MOC 30 days Wed 10/20/99 Tue 11/30/99
64 Reviewbidding documents by the Bank 30 days Wed 12/1/99 Tue 1/11/00
65 Sell biddingdocs to prequalifiedcontractors 91 days Wed 1/12/00 Wed 5/17/00
66 Last date to receivebid documents 0 days Wed5/17/00 Wed 5/17/00 7
67 Bid evaluationreport and review by MOC 30 days Thu 5/18/00 Wed 6/28/00
68 Bank reviewevaluation report and no objection 30 days Thu 6/29/00 Wed 8/9/00
69 Notifysuccessful bidder 0 days Wed 8/9/00 Wed 8/9/00
70 Negotiateand sign contracts 17 days Thu 8/10/00 Fri 9/1/00
71 Constructionperiod - Hua'an Highway 346 days Mon 9/4/00 Mon 12/31/01
72 Constructionperiod - Huxi-ChilingHighway 346 days Mon 9/4/00 Mon 12/31/01
73 Constructionperiod - BaishuuiBridge 346 days Mon9/4/00 Mon 12/31/01
74
75 Offices,Toll Stations& ServiceAreas (NCB) 486 days Mon 1122/01 Mon 12/2/02
76 Complete bidding documents 0 days Mon 1/22/01 Mon 1/22/01 1/22
77 Bank review and no objectionof BD 22 days Mon 1/22/01 Tue V20/01 ,
78 Sell bidding documents 45 days Wed 2/21/01 Tue 4/24/01
79 Last date to receive bid documents 0 days Tue 4t24/01 Tue 4t24/01
80 Bid evaluationreport and reviewby MOC 21 days Wed4/25/01 Wed 5/23/01
Task Summary Rolled Up Progress Split ...... Rolled Up Task __ Extemal Tasks Project: Implementation ProgramStl Date: Wed 5/26/99 Progress Rolled Up Spit ,,,,, Project Summary_
Milestone Rolled Up Milestone China: Second Fujian Highway Project Page 70 Project Appraisal Document
SECONDFUJIAN HIGHWAY PROJECT Page 5 of 8 ImplementationProgram 11999 12000 2001 12002 2003 ID Task Name Duration Start Finish H2 HI H2 Hi H2 Hl H2 Hi H2 HI H2 81 Bank review and no objection 23 days Thu 5/24/01 Mon 6/25/01
82 Negotiate and sign contracts 21 days Tue 6/26/01 Tue 7/24/01
83 Construction period 354 days Wed 7/25/01 Mon 12/2/02
84
85 2. Supplying & Installation E&M Works (ICB) 891 days Mon 1/31/00 Mon 6130/03
86 Finalize bid documents & submit to Bank 0 days Mon 1/31/00 Mon 1/31/00
87 No objection to bid documents by Bank 30 days Mon 1/31/00 Fri 3/ 10/00
88 Specific procurem.ent notice (UNDB) 0 days Fri 3/10/00 Fri 3/10/00
89 Issue bid documents 45 days Wed 3/15/00 Tue 5/16/00
90 Last date to receive bids (stage 1) 0 days Thu 6/15/00 Thu 6/15/00
91 Evaluate bid documents 30 days Fri 6/16/00 Thu 7/27/00
92 Contractor prepare financial bids (stage 2) 21 days Fri 9/15/00 Fri 10/13/00
93 Last date to submit financial bids 0 days Sun 10/15/00 Sun 10/15/00 '10/15
94 Bid evaluation report & Govemmentreview 23 days Mon 10/16/00 Wed 11/15/00 .
95 Bank review & no objection to bid evaluation report 30 days Thu 11/16/00 Wed 12/27/00
96 Negotiate and sign contract 31 days Thu 2/1/01 Thu 3/15/01
97 Establish letter of credit 33 days Fri 3/16/01 Tue 5/1/0l
98 Manufacture & delivery of equipment 110days Wed 5/2/01 Tue 10/2/01
99 Transport of equipment to site 76 days Wed 10/3/01 Wed 1/16/02
100 Installation and commissioning and trial-run of systems 60 days Thu 1/17/02 Wed 4/10/02
Task Summary Rolled Up Progress
Project: Implementation Program Split Rolled Up Task External Tasks Date: Wed 5/26/99 Progress Rolled Up Split Project Summary_
Milestone Rolled Up Milestone China: Second Fujian Highway Project Page 71 Project Appraisal Document
SECOND FUJIAN HIGHWAY PROJECT Page60f8 ImplementationProgram |11999 |12000 |12001 |2002 |12003 ID Task Name Duration Start Finish H2 Hi H2 Hi H2 H i H2 H i H2 HI H2 101 Completion 318 days Thu 4/11/02 Mon 6/30/03
102
103 3. Constructionsupervision 1225 days Thu3/25/99 Wed 12/3/03
104 Specific procurement notice (UNDB) 0 days Thu 3/25/99 Thu 3/25/99 3Q5
105 No objection of Bank to TOR, LOI & shortlist 30 days Mon 4/26/99 Fri 6/4/99
106 Issue invitations to consultants 45 days Mon 6/7/99 Fri 8/6/99
107 Last date to receive proposals 0 days Fri 8/6/99 Fri 8/6/99
108 Evaluation of the quality (technical proposals) 30 days Mon 8/9/99 Fri 9/17/99 *
109 Bank review evaluation rpt (tech) & no objection 30 days Mon 9/20/99 Fri 10/29/99
110 Notify consultants on the opening date of the financial proposals 0 days Fri 10/29/99 Fri 10/29/99 , . 1W29
ill Openingof financialproposals 0 days Fri 10/29/99 Fri 10/29/99 [ jIt 029
112 Complete combined quality & cost evaluation 25 days Mon 11/1/99 Fri 12/3/99
113 Bank review proposal evaluation rpt & no objection 30 days Mon 12/6/99 Fri 1/14/00
114 Negotiations with consultant & sign contract 15 days Mon 1/17/00 Fri 2/4/00
115 Prepare training material by consultant 62 days Mon 2/7/00 Tue 5/2/00
116 Train local staff 120 days Tue 5/2/00 Mon 10/16/00
117 Supervision of construction 904 days Fri 6/16/00 Wed 12/3/03
118
119 4. MaintenanceManagement Study 652 days Mon 5/3/99 Tue 10/30/01
120 TOR, short list and LOI approved by the Bank 0 days Mon 5/3/99 Mon 5/3/99 5/3
Task Summary Rolled Up Progress
Project:Implementation Program Split RolledUpTask ExtemalTasks __ Date:Wed 5/26/99 Progress RolledUp Split Project Summary _
Milestone RolledUp Milestone China: Second Fujian Highway Project Page 72 Project Appraisal Document
SECOND FUJIAN HIGHWAY PROJECT Page70fa Implementation Program 1999 12000 12001 2002 2003 ID Task Name Duration Start Finish H2 1Hi I H2 HI H2 HI H2 HilH H2 H2 121 Letterissued to consultants 0 days Tue 6/15/99 Tue 6/15/99
122 Consultantsprepare and submit proposals 45 days Tue 6/15/99 Mon 8/16/99
123 FPTDevaluates Consultant's proposals 22 days Tue 8/17/99 Wed 9/15/99
124 Bankapproves evaluation report 30 days Thu 9/16/99 Wed 10/27/99
125 HPCDnegotiates and awards contract 15 days Thu 10/28/99 Wed 11/17/99
126 Consultantsmobilize 30 days Thu 11/18/99 Wed 12/29/99
127 Executionof Study 479days Thu 12/30/99 Tue 10/30/01 128
129 5. Read Safety Activities 654 days Fri 4/30/99 Wed 10/31/01
130 Establishingleading group 0 days Fri 4/30/99 Fri 4/30/99
131 Mobilizingstudy team 60 days Mon 5/31/99 Fri 8/20/99
132 The Bank approvingworking schedule 30 days Mon 8/23/99 Fri 10/1/99
133 Executionof Study 543 days Mon 10/4/99 Wed 10/31/01 134
135 6. Toll Rate Study 650 days Mon 1/3/00 Fri 6/28/02
136 TORapproved by theBank 21 days Mon 1/3/00 Mon 1/31/00
137 Datacollection and analysis 130days Mon7/3/00 Fri 12/29/00
138 Maintenanceand operationcost data 43 days Wed I 1/1/00 Fri 12/29/00
139 Revisionof study model 65 days Mon 1/1/01 Fri 3/30/01
140 Toll rate and trafficvolume transfer analysis 110 days Mon4/2/01 Fri 8/31/01
Task Summary RolledUp Progress
Project:Implementation Program Split RolledUp Task ExternalTasks Date:Wed 5/26/99 Progress Rolled UpSplit ProjectSummary _
Milestone RolledUp Milestone China: Second Fujian Highway Project Page 73 Project Appraisal Document
SECOND FUJIAN HIGHWAY PROJECT Page8 of 8
Task Summary RlolledUp Progress
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Milestone RolledUp Milestone China: Second Fujian Highway Project Page 74 Project Appraisal Document ANNEX 12: ECONOMIC AND FINANCIAL EVALUATION SecondFiujian Highway Project
1. The economic evaluation focuses on the Zhangzhou - Zhao'an Expressway (ZZE) with a total length of 140.5 km (Note: While ZZE on the whole has a length of 140.5 km, the Bank-financed project comprises 132.5 km. The initial 8 km of ZZE which are located in heavy soft soil area and which are already under construction with domestic financing, are not formally part of the project. For purposes of completeness, the economic and financial evaluation includes the initial 8 km soft soil section, as part of the Beitou Village-Xifeng Ling section of ZZE). ZZE accounts for 92 percent of civil works project costs while two interconnecting roads and three other roads account for 8 percent of civil works project costs. The expressway was subdivided into four homogeneous sections which were analyzed independently and as part of the entire project. The following table presents each section length and construction costs including physical and price contingencies.
Component Length Cost (kIn) (M Yuan) BeitouVillage - XifengLing Expressway 14.2 626 Xifeng Ling - WutianExpressway 65.4 2438 Wutian- ZhugangExpressway 24.8 899 Zhugang- HoulingExpressway 36.1 1232 Subtotal 140.5 5195 Two Link Roads 12.0 140 Three Other Roads 52.6 299 Subtotal 64.6 439 Total 205.1 5634
A. Expressway Economic Evaluation
2. Benefits and Beneficiaries. The proposed Zhangzhou - Zhao'an Expressway is the last section of the coastal arterial highway in the south of Fujian Province to be built and the main exit of Fujian Province to Guangdong Province. The problems with the existing main highway are as follow: (a) heavily mixed traffic; (b) densely populated villages and towns, through which the route goes; (c) poor road conditions and low design standards; and (d) frequent traffic accidents. The project will satisfy the need for accelerating economic clevelopment, improve the investment environment, and will meet the requirements for expected rapid traffic growth in Fujian Province.
3. The major quantifiable project benefits are vehicle operating costs, travel time, and road accidents savings. Compared with the existing road parallel to the expressway, the expressway will have shorter length, improved surface conditions and riding comfort, and reduced traffic interference since there would be no pedestrians, bicycles and non-motorized vehicles. Therefore, most of the long distance traffic and some of the local traffic is expected to diverge from the existing road to the expressway reducing vehicle operating and time costs for the expressway users. Because many users will take the expressway, there will also be a reduction in the current congestion levels on the existing road. Thus, users who continue using the existing road will also benefit in the form of time savings due to the resulting higher travel speeds. Other quantified project benefits are due to the generated traffic as a result of the lowering of transport costs and increased industrial and agricultural production. For a conservative evaluation, other project benefits not quantified in this study are the generated traffic on the existing China: Second Fujian Highway Project Page 75 Project Appraisal Document roads due to the reduction of the current congestion level and positive effects on the non-motorized traffic using the existing roads.
4. The 11DM Model. Project benefits were estimated using the 1995 version of the Highways Design and Maintenance Standards Model (HDM) developed by the World Bank. The HDM model predicts vehicle operating costs and travel time costs on a given road as a function of vehicle characteristics, road geometry, road surface condition, and congestion level. The model computes free- flow vehicle speeds and actual speeds as a function of the congestion level. The computed actual speeds are then used to estimate the physical quantities of resource consumption (for example: liters per km of fuel consumption or hours of delay) that are multiplied by unit costs to obtain road user costs.
5. Data Collection. Data describing the existing road characteristics and current traffic was collected in the field and two to three alignment alternatives were compared for all expressway sections based on economic, engineering, resettlement, environment, and network systems considerations. The chosen alignment was then subdivided into four homogeneous sections, for the economic evaluation, taking into account different traffic levels, design standards and construction costs (see Table 12.1). The expressway sections will be constructed to 2x2 lanes, with an average financial construction cost of 38 million Yuan per km, economic costs being 83 percent of financial costs by eliminating taxes, customs duties, price contingencies, and interest payments during construction. The expressway was designed according to MOC's expressway standards with access restricted to normal motor traffic; agricultural tractor and non-motorized traffic would be excluded. There will be an average distance savings of 9 percent compared with the existing parallel road NR324, a class 2 highway which has been widened to 4 lanes in 1995 between Zhangzhou and the Guangdong border and which is taken as the main passage in existing highways of south-north direction that passes roughly 60 towns and villages and has a street- level highway section in an average interval of 3 km.
6. Data was collected on vehicle fleet characteristics, utilization and unit costs which are given in Table 12.2. The average number of passengers for buses is 23 and the average payload for medium trucks is 4.8 tons and for heavy trucks is 7.5 tons. The number of kilometers driven per year is 30,000 for cars and 60,000 for buses and trucks. The economic costs were derived from financial costs; and the value of time was estimated to be 2.0 Yuan/hour calculated on the basis of annual income for the region and assuming that 75 percent of passengers are traveling on work/business purposes and the value of non- working time is 20 percent of the average income. Based on local data, accident benefits were computed assuming that the accident rate on the existing roads is 200 accidents per 100 million vehicle-km, and there will be a 50 percent reduction in accidents on the expressway, with a cost per accident of Y6,500. On NR324, the estimated rates in 1996 for accidents, injuries, and fatalities are 200, 100, and 40 per 100 million vehicle-km, respectively.
7. Projected Traffic. Origin-destination (OD) surveys were conducted, covering nine influence areas that provided a good basis for estimating the diverted and the generated traffic. The survey revealed the following: (a) average daily traffic (ADT) was around 9,100 vehicles per day in 1996; (b) trucks constitute about 67 percent of ADT; (c) medium trucks represent about 29 percent of ADT and heavy trucks represent 14 percent of ADT; (d) current car speeds during the most congested hour are about 40 km/hour on NR324, (e) current car speeds at night are about 60 km/hour on NR324; (f) expected car speeds on the expressway are 80 km/hour; and (g) the traffic in the peak hour is about 7 percent of the average daily traffic. The following table presents for each section the motorized traffic on the existing road in 1999 and 2003, and the expected diverted and generated traffic on the expressway in 2003. China: Second Fujian Highway Project Page 76 Project Appraisal Document
NR324 in NR324 in Divertedto Generatedon 1999 2003 Expresswayin Expresswayin 2003 2003 Beitou Village- XifengLing 11598 17797 8006 2668 Xifeng Ling - Wutian 12006 18639 8992 2536 Wutian- Zhugang 10204 15576 7034 1544 Zhugang- Houling 10983 16816 7817 1380
8. On the basis of the OD surveys and considering that the expressway will be tolled at the same levels as currently is being charged on other expressways in the region, the diversion of traffic from the existing road was estimated to be on average 45 percent and the generated traffic to be on average 12 percent of the traffic on the existing road. Taking into consideration the economic development and traffic growth in the past and based on the expected economic growth in the project area of influence in the future, the traffic is projected to increase on average at the following annual rates: (a) for the period 1999 - 2003, 13 percent for cars and 11 percent for commercial vehicles; (b) for the period 2004 - 2013, 9 percent for cars and 7 percent for commercial vehicles; and (c) for the period 2014 - 2022, 6 percent for cars and 4 percent for commercial vehicles. From 1990 to 1997, NR324 had on average a 13.5 percent annual traffic growth rate and the traffic volumes were in 1997 in the range of 8,600 to 10,400 vehicles per day.
9. Methodology. For each expressway section, unit road user costs, in Yuan per vehicle-km, were estimated using the HDM model for vehicles traveling on the expressway and on NR324 based on the road data shown in Table 12.1 and vehicle data shown in Table 12.2. A sample of these unit road user costs is given in Table 12.3. Road user costs are a function of the congestion level of a road, therefore, they were computed for a series of traffic levels and a relationship between road user costs and traffic was established for each road. This relationship was then introduced into a customized economic evaluation model created on a Excel spreadsheet.
10. The Excel model estimates benefits due to diverted and generated traffic on the expressway and the remaining traffic on the existing road. For diverted traffic, benefits were taken to be the reduction on total transport costs; and for generated traffic, benefits were taken to be one-half of the unit benefits of the diverted traffic assuming traffic would have developed in proportion to the reduction in transport costs. The Excel model takes as inputs the unit road user costs given by HDM for the "with" and "without" project cases, the length of the expressway and the existing road, the construction and maintenance costs, and the traffic assumptions; and gives as outputs the rate of return and the net present value, at a discount rate of 12 percent, of the proposed project. The expressway is assumed to be constructed in 4 years, opening to traffic in 2003 with an economic life of 20 years and a residual value equal to 50 percent of the initial construction cost. Table 12.4 shows, as an example, the resulting outputs for the Beitou Village - Xifeng Ling section.
11. Results. The following table presents the resulting economic internal rate of return (EIRR) and net present value (NPV), at 12 percent discount rate in million Yuan, obtained for each expressway section and the entire expressway. The entire expressway EIRR is 19.4 percent and none of the sections has an EIRR below 12.0 percent. The expressway section with lower EIRR is the Beitou Village - Xifeng Ling section which has the highest construction costs due to the presence of soft soils. The section with higher EIRR is the Xifeng Ling - Wutian which has the highest traffic. China: SecondFujian HighwayProject Page 77 Project AppraisalDocument Economic Net Section Internal Present Rate of Return Value (%) (M Yuan at 12 %) Beitou Village - Xifeng Ling 16.9 271 Xifeng Ling - Wutian 20.0 1862 Wutian - Zhugang 19.5 649 Zhugang- Houling 19.3 861 Entire Expressway 19.4 3644
B. Link Roads and Other RoadsEconomic Evaluation
12. Link Roads and Other Roads. To connect the Zhangznou-Zhao'anExpressway rationally with other roads in the area, two interconnectinglink roads are part of the project, which are Dongyuan - Fugong and Zhao Jia Bao - Foutan link roads. Also three other roads are part of the project, which are Huxi - Chiling road, Tankou - Hua'an road, and Baishui road and bridge. The table below presents the main characteristicsof each link and other road.
Component Length Road Traffic New alignment Costs (kin) Class 2002 or upgrading (M Yuan) Dongyuan- Fugong 4.8 1 3267 New alignment 105 Zhao Jia Bao - Foutan 7.8 2 1892 Upgrading 35 Huxi - Chiling 9.1 2 2801 Upgrading 21 Tankou - Hua'an 41.7 2 2778 Upgrading 244 Baishui 1.8 2 1104 New alignment 35
13. Results.The followingtable presentsthe resulting EIRR and NPV (at 12 percent discount rate in million Yuan) obtainedfor each road followingthe same methodologyapplied to the expressway.That is, computingthe net benefits of vehicle operatingcosts and travel time savings,and comparingthe with and without project scenario based on available data on the existing roads characteristics, the proposed projects, and the forecastedtraffic.
Component EconomicInternal Net PresentValue Rate of Return (%) (M Yuan) Dongyuan - Fugong 16.6 46 Zhao Jia Bao - Foutan 17.0 13 Huxi - Chiling 32.5 46 Tankou- Hua'an 23.2 232 Baishui 26.9 55
C. OverallProject Economic Evaluation 14. The overall project, which includes the expresswaysections, the link roads, and the other roads, yields a NPV of 4,036 million Yuan and an EIRR of 19.6 percent.The modified EIRR is 15.5 percent China: SecondFujian HighwayProject Page 78 Project AppraisalDocument assuminga 12 percent financingand reinvestmentrate. The sensitivityanalysis, the switchingvalues, and the risk analysis indicate that the project economicjustification is quite robust with a most likely EIRR of 16.2 percent and a zero percent chance that the EIRR will be less than 12 percent. The following table presents a summary of the results and the net benefits distributionwhich shows that cars will receive 39 percent of the projectnet benefits, buses 9 percent,and trucks 52 percent.
Net Modified Likely Benefits EIRR EIRR EIRR (M Yuan) (%/e) (%/6) (%/0) Society 4036 19.6% 15.5% 16.2 Road Agency -3984 Road Users 8019 _
Net Net Benefits Benefits Percent Cars Buses Trucks Total Cars Buses Trucks Total (M Yuan) (%/.)(M Yuan) (M Yuan) (M Yuan) (M Yuan) (%) (%/o) (°) (%) Road User 8019 100% 3148 714 4154 8019 39% 9% 52% 100% ExpresswayDiverted traffic 5394 67% 1979 504 2911 5394 37% 9% 54% 100% ExpresswayGenerated traffic 586 7% 227 53 306 586 39% 9% 52% 100% ExistingRoads 2007 25% 935 155 917 2007 47% 8% 46% 100% Safety 1 32 0% 6 2 24 321 18% 7% 75% 100%
15. Sensitivity Analysis. Table 12.5 presents detailed results of sensitivity tests which are summarizedin the table below. The results show: (a) if constructioncosts increase by 20 percent and user benefits reduce by 20 percent, the project EIRR is 15.5 percent, which indicates that even under this pessimistic scenario the project is justified; (b) if the traffic diversion reduces by 20 percent and 50 percent, the project EIRR reduces to 17.7 percent and 13.7 percent respectively;(c) if accident benefits reduce by 20 percent, there is a negligible reduction on the project EIRR; (d) if time savings are eliminatedthe project EIRR reduces to 17.4; (e) if generatedtraffic benefits are eliminated, the project EIRR reduces to 18.6;(f) the constructioncosts and divertedtraffic have almostthe same sensitivity;and (g) a 6 year constructionperiod decreasesthe projectEIRR to 16.6 percent.
Case Scenario Entire Project EIRR(%) 0 Base case 19.6 1 Constructioncosts increasedby 20% 17.4 2 User benefits reducedby 20% 17.5 3 Combinationof 1 and 2 15.5 4 No time savings 17.4 5 Accidentbenefits reducedby 20% 19.5 6a Generatedtraffic reduced by 20% 19.4 6b No generatedtraffic 18.6 7a Diverted traffic reducedby 20% 17.7 7b Diverted traffic reducedby 50% 13.7 8 Traffic growth rate reduced by 20% 16.5 9 5 year constructionperiod 18.1 10 6 year constructionperiod 16.6 China: Second Fujian Highway Project Page 79 Project Appraisal Document
16. Switching Values Analysis. Table 12.5 presents the results of the switching values analysis. The table shows that, for the entire project, construction costs have to be multiplied by a factor of 2.00 or user benefits have to be multiplied by a factor of 0.49 to yield a project EIRR of 12.0 percent. For each expressway section, the construction costs multiplier factor varies from 1.69 to 2.11 and the net user benefits multiplier factor varies from 0.47 to 0.64. The analysis shows that there is a good allowance for possible construction cost increases or reduction of net benefits. One can state that to yield a project EIRR of 12.0 percent, construction costs would have to be multiplied by around 2 or net benefits divided by around 2.
17. Risk Analysis. A risk analysis was done using the @RISK software that adds risk analysis capabilities to an Excel spreadsheet following the methodology that is explained briefly in Table 12.6. The uncertainty for the following inputs was defined using a triangle distribution: (a) construction costs, (b) existing traffic on the existing road, (c) diverted traffic to the expressway, (d) generated traffic, and (e) traffic growth rate. Considering possible sampling errors associated with measured data, model uncertainty, and uncertainties due to forecasting by judgment (e.g., optimistic and pessimistic scenarios of economic growth), it was defined that: (a) there is an equal probability that the construction costs and existing traffic on NR324 will be lower or higher than the estimated values and (b) there is a higher probability that diverted traffic, generated traffic, and traffic growth rate will be lower rather than higher than the estimated values.
18. For construction costs and existing traffic, the most likely value was set to the estimated value, the minimum possible value was set to 80 percent of the estimated value, and the maximum possible value was set to 120 percent of the estimated value. These assumptions indicate that there is a 50 percent probability that the actual values will be lower or higher than the estimated value and there is 74 percent probability that the actual values will be between 90 and 110 percent of the estimated value. For the diverted traffic, generated traffic and traffic growth rate inputs, the most likely value was set to the estimated value, the minimum possible value was set to 50 percent of the estimated value, and the maximum possible value was set to 110 percent of the estimated value. These assumptions indicate that there is an 83 percent probability that the actual values will be lower than the estimated value, 17 percent probability that they will be higher than the estimated value, and 62 percent probability that they will be between the estimated value and 75 percent of the estimated value. Table 12.7 shows the frequency distributions adopted in the study.
19. With this information, the @RISK software evaluated 400 what-if scenarios, varying the inputs described above accordingly to the defined input probability distributions, yielding an estimated EIRR for each what-if scenario. The resulting frequency histogram graph and cumulative frequency distribution graph are given in Table 12.7 for the entire project. Table 12.5 presents the resulting mean EIRR, the EIRR standard deviation, the probability (in percent) that the EIRR will be lower than 12.0 percent, and an assessment of a worst scenario, most likely scenario, and best scenario for all sections. In this study, the worst scenario EIRR is defined as one which has a 10 percent probability that the actual EIRR will be lower than it (10% percentile), the best case scenario EIRR is defined as one which has a 90 percent probability that the actual EIRR will be lower than it (90% percentile), and the most likely scenario is defined as one which has a 50 percent probability that the actual EIRR will be lower than it (50% percentile). The results are summarized in the table below. The risk analysis shows that all sections and the entire project have an EIRR greater than 12.0 percent for the most likely scenario. The entire project EIRR is 12.6 percent for the worst scenario, 16.2 percent for the most likely scenario, and 19.7 percent for the best scenario. China: Second Fujian Highway Project Page 80 Project Appraisal Document
EIRR EIRR Probability Component Mean Standard. EIRR < (%) Deviation 12% (%) (%) Beitou Village - Xifeng Ling 13.7 2.6 26.1 Xifeng Ling - Wutian 16.5 2.8 8.0 Wutian - Zhugang 16.0 2.8 8.8 Zhugang - Houling 158 2.9 10.3 Dongyuan- Fugong 13.5 2.6 30.8 Zhao Jia Bao - Foutan 14.4 2.2 12.8 Huxi - Chiling 28.9 3.3 0.0 Tankou - Hua'an 20.4 2.5 0.0 Baishui 23.4 2.7 0.0 Entire Project 16.2 2.8 7.7
EIRR EIRR EIRR Component Worst Most Likely. Best Scenario Scenario Scenario (%) (%) (%) Beitou Village - Xifeng Ling 10.3 13.8 17.0 Xifeng Ling - Wutian 12.9 16.6 20.1 Wutian - Zhugang 12.3 16.0 19.6 Zhugang - Houling 12.0 15.8 19.5 Dongyuan- Fugong 9.9 13.5 17.0 Zhao Jia Bao - Foutan 11.7 14.4 17.2 Huxi - Chiling 24.6 28.9 33.2 Tankou - Hua'an 17.2 20.4 23.6 Baishui 19.8 23.5 26.8 Entire Project 12.6 16.2 19.7
20. Conclusion. The single point estimation and sensitivity analysis indicates that the EIRRs are greater than 12.0 percent for all sections and for the entire project. The risk analysis indicates that the most likely EIRRs are also greater that 12.0 percent for all sections and for the entire project and that the probability that the entire project EIRR will be lower than 12.0 percent is 7.7 percent. Therefore, the project is economically well-justified.
D. Expressway Financial Evaluation
21. The financial evaluation focuses on the Zhangzhou - Zhao'an expressway, which is the main component of the project and the only one that will generate financial income with profit-making and repayment capabilities. The toll revenue is the only mayor financial income from operation of the expressway. Tolls will be charged as a function of vehicle type and size and distance traveled at the same level and structure as the tolls currently being collected on Quanzhou-Xiamen expressway. The tables below present the current tolls on the Quanzhou-Xiamen expressway and an estimate of the current tolls on NR324 based on the fact that vehicles pay tolls per toll station and the average distance between toll stations is 39 km. Tolls on NR324 being around 50 percent the expressway tolls indicate that the expressway tolls are reasonable considering the much higher level of service provided by the expressways. China: Second Fujian Highway Project Page 81 Project Appraisal Document
Vehicle Trucks Cars & Buses Quan-Xia Expressway Tolls Class (tons) (seats) (Yuan/vehicle-km) 1 < 2.5 < 6 0.35 2 2.5-7.0 7-19 0.70 3 7.0-15.0 20-45 1.05 4 15.0-20.0 >46 1.40 5 >20.0 2.10
Vehicle Trucks Cars & Buses Highway 324 Tolls Highway 324 Tolls Class (tons) (seats) (Yuan/toll) (Yuan/vehicle-km) 1 <1.5 <12 6.00 0.15 2 1.5-3.0 13-24 15.00 0.38 3 3.0-7.0 > 25 26.00 0.66 4 7.0-15.0 40.00 1.02 5 > 15.0 55.00 1.40
22. The financial evaluation was undertaken assuming that: (a) tolls are expected to increase about every three years to take account of inflation, expected to be around 5 percent annually; (b) maintenance costs and operation costs are also expected to increase at around 5 percent annually to take account of inflation; (c) financial costs include interest on investment during the construction phase and costs during the operational phase including maintenance costs, toll plaza management costs, administration costs, and taxes of 3 percent of toll income; and (d) considering that some special vehicles such as: police, ambulance, and military vehicles, will not be charged. The tolled traffic volume is 90 percent of the predicted traffic. Considering that around 32 percent of the investment will be financed by the World Bank with at 7.0 percent interest rate, 25 percent of the investment will be financed locally with a 10.35 percent interest rate, and the opportunity cost of capital is 5 percent, the weighted average cost of capital is 7.0 percent. The table below summarizes the financial evaluation.
Financial Net Internal Present Rate of Return Value (%) (M Yuan at 7.5 %) Beitou Village - Xifeng Ling 11.0 330 Xifeng Ling - Wutian 13.8 2485 Wutian - Zhugang 10.7 424 Zhugang - Houling 11.7 783 Entire Expressway 12.5 4021
23. The entire expressway financial rate of return is 12.5 percent with a net present value of 4,021 million Yuan at 7.0 discount rate and an investment recovery period of 16 years. Three cases were considered in the sensitivity analysis: construction costs increase by 20 percent, revenues decrease by 20 percent, and construction costs increase by 20 percent meanwhile revenues decrease by 20 percent. The corresponding project financial rates of return of 10.7 percent, 10.2 percent, and 8.5 percent indicate that even under the most unfavorable situation, the financial benefits are acceptable with a financial rate of return over the weighted average cost of capital of 7.0 percent. China: Second Fujian Highway Project Page 82 Project Appraisal Document
Table 12.1 - Expressway Sections Data
Expressway Expressway Expressway Expressway
Expresswaysection name: BeitouVillage- XifengLing - Wutian- Zhugang- XifengLing Wutian Zhugang Houling
Expresswayfinancial construction cost (millionYuan): 626 2438 899 1232 Expresswayeconomic construction cost (millionYuan): 520 2024 746 1022
Expresswaylength (km): 14.2 65.4 24.8 36.1 Expresswaysubgrade width (m): 26.0 26.0 26.0 26.0 Expresswayaverage gradients (%): 1.8 0.1 0.8 1.0 Expresswayaverage roughness (IRI): 3.0 3.0 3.0 3.0
Existingroad length (km): 15.0 66.0 31.5 40.0 Existingroad subgrade width (m): 23.0 23.0 23.0 23.0 Existingroad average gradients (%): 3.0 3.0 3.0 3.0 Existingroad average roughness (IRI): 6.0 6.0 6.0 6.0
Motorizedtraffic on existingroads in 1999 (ADT): 11598 12006 10204 10983 Motorizedtraffic on existingroads in 2003,before (ADT): 17797 18639 15576 16816 Motorizedtraffic on existingroads in 2003,after (ADT): 9791 9647 8542 8999
Divertedmotorzed traffic on expresswayin 2003 (ADT): 8006 8992 7034 7817 Generatedmotorized traffic on expresswayin 2003 (ADT): 2668 2536 1544 1380 Total motorizedtraffic on expresswayin 2003(ADT): 10674 11528 8578 9197 Totalmotorized traffic on expresswayin 2022 (ADT): 31161 35461 24675 26697
Percentof cars: 20% 35% 18% 18% Percentof small buses: 7% 8% 6% 8% Percentof mediumbuses: 6% 6% 8% 7% Percentof lighttrucks (gross weight 3.0 to 6.5t): 21% 12% 22% 22% Percentof mediumtrucks (gross weight 5.0 to 16.0t): 27% 21% 30% 29% Percentof heavytrucks (gross weight 6.0 to 22.0t): 16% 16% 13% 14% Percentof articulatedtrucks (grossweight 13.0 to 45.0 t): 3% 2% 3% 2%
Growthrate for carsfor period1999-2003 (%): 13% 13% 13% 13% Growthrate forcars for period2004-2008 (%): 10% 10% 10% 10% Growthrate for carsfor period2009-2013 (/6): 8% 8% 8% 8% Growthrate for carsfcr period2014-2022 (%): 6% 6% 6% 6% Growthrate for commercialvehicles for period1999-2003 (%): 11% 11% 11% 11% Growthrate for commercialvehicles for period2004-2008 (%): 8% 8% 8% 8% Growthrate for commercialvehides for period2009-2013 (%): 6% 6% 6% 6% Growthrate for commercialvehicles for period2014-2022 (%): 4% 4% 4% 4% Carsspeeds on existingroads on mostcongested hour (kmlhr): 40 40 40 40 Cars speedson existingroads at night(km/hr): 60 60 60 60 Med.trucks speedson existingroads on mostcongested hour (km/hr) 40 40 40 40 Med. trucksspeeds on existingroads at night(kmlhr): 50 50 50 50 Predictedpassenger cars speeds on newexpressway (km/hr): 80 80 80 80 Predictedmedium trucks speeds on new expressway(km/hr): 70 70 70 70 Constructioncost per km (millionYuan): 44 37 36 34 Distancesavings (%): -5% -1% -21% -10% Divertedtraffic as percentof normaltraffic, in 2003 (%): 45% 45% 45% 45% Generatedtraffic as percentof normaltraffic, in 2003 (%): 15% 14% 10% 8%
1-'JZ-I BWAUSXL 5/5l99~ China: Second Fujian Highway Project Page 83 Project Appraisal Document
Table 12.2 -Vehicle Fleet Characterstics
Small Light Medium Heavy Articulated Cars Buses Buses Trucks Trucks Trucks Trucks
Grossvehicle weight of fully loadedaverage vehicle (tons) 2.00 3.00 13.00 7.50 17.00 24.00 40.00 Payloadof fully loadedaverage vehide (tons) 1.00 1.25 6.00 2.00 6.00 11.00 27.00
Grossvehicle weight of averagevehicle (tons) 1.50 2.50 8.00 2.50 8.00 17.00 28.00 Payloadof averagevehicle (tons) 0.24 0.48 1.80 0.85 4.80 7.50 11.00
Numberof passengers(#) 3 15 23 0 0 0 0 Servicelife (years) 14 14 12 12 12 12 12 Kilometersdriven per year (km) 30000 30000 60000 60000 60000 60000 60000 Hoursdriven per year(hours) 750 750 1500 1500 1500 1500 1500
EconomicCosts Newvehicle price (Yuan) 112500 60000 90000 37500 82500 260000 340000 Onenewtireprice(Yuan) 300 300 700 700 700 1100 1100 Maintenancelabor cost for vehiclerepairs (Yuan/hour) 15.0 5.0 5.0 5.0 5.0 5.0 5.0 Driverwages (Yuan/hour) 9.0 9.0 9,0 9.0 9.0 9.0 9.0 Cargocosts (Yuan/hour) 0.0 0.0 0.0 4.0 4.0 4.0 4.0 Time costs(Yuan/hour) 2.0 2.0 2.0 0.0 0.0 0.0 0.0 Gas/Petrolprice (Yuan/liter) 2.0 Dieselprice (Yuan/iter) 2.0 Lubricantsprice (YuanAiter) 10.0
Income Income Working Nonworking Yuan/ Yuan/ %traveling time time Year Hour work/business value value Yuan/hr
6000 2.5 75% 100% 20% 2.0
Real(without inflation) interest chargeon the purchaseof a newvehide: 10 ArticulatedTrucks HeavyTrucks 2% Cars TypicalVehicle Composition 14% 18%
SmallBuses 6%
Bses MediumTrucks 7% 29%
22%
FJ2- I BI2.XLS b15/99 China: SecondFujian HighwayProject Page 84 Project AppraisalDocument
Table 12.3- TypicalRoad User Costs
Small Light Medium Heavy rticulated Cars Buses Buses Trucks Trucks Trucks Trucks TypicalRoad UserCosts (Vehicle Operatingand Time Costs) Yuan pervehicle-kilometer
NewExpressway 1.10 1.09 1.61 0.71 1.14 2.31 2.81
ExistingClass2Road(1250ADT) 1.53 1.62 226 1.01 1.56 3.31 4.08 ExistingClass 2 Road(5000 ADT) 1.54 1.65 2.29 1.02 1.57 3.32 4.09 ExistingClass 2 Road(10000 ADT) 1.59 1.71 2.39 1.05 1.59 3.34 4.12 ExistingClass2Road(20000ADTY) 1.82 2.04 2.84 1.19 1.78 3.54 4.35 ExistingClass2Road(30000AADI) 2.24 2.70 3.76 1.47 2.14 3.95 4.82
ExistingRoad
C6.oo * Car
. 5.00 + * SmallBus
1E4.00+ + + + I ~ ~ ~~~~~~~~IABus 0 3.00 I a' A n KMedium ' 2.00 A A A Truck
~~~~~~~~.oa1.00 e~~~~~~~~~Heavy~~~~~~~~~~~~~~~~~Truck 0 ix 0.00 I I I+ Arficulated 0 5000 10000 15000 20000 25000 30000 35000 Truck AverageDaily Traffic (vpd)
TypicalRoad User Costs Composition VehicleOperating Costs Fuel and Lubricants 0.27 0.22 0.55 0.22 0.58 0.97 1.05 Tires 0.03 0.07 0.15 0.23 0.13 0.40 0.49 MaintenanceLabor and Parts 0.52 0.23 0.17 0.20 0.36 1.05 1.39 Crew 0.18 0.20 0.20 0.20 0.21 0.22 0.25 Depreciationand Interest 0.42 0.23 0.19 0.08 0.18 0.57 0.80
TimeCosts 0.12 0.67 1.01 0.09 0.09 0.10 0.11
Total 1.53 1.62 2.26 1.01 1.56 3.31 4.08 r .- UUXLWN China: SecondFujian HighwayProject Page 85 Project AppraisalDocument
Table 12.4 - Excel Economic Evaluation Model Sample
Daily Ilraftic (ADI) inancial Net koonombc benetits (M Yuan) Sensltivlty Analysis New lstgKoad: Constr. uons maintel New xpressway kxis iil 1/) Incr. 2tfo Doecr tJombmed wnh wibor1 Cosb ts ction nance west erat Road Safety Construct. User (a) & (b) Year Divelte Generatedi Project Project MYuan Costs Costs Traffic Traffic Traffic Benefis Costs (a) Benefits (b)
1999 11598 11598 125.3 -102.7 0 0 0 0 0 -103 -123 -103 -123 2000 12905 12905 187.9 -154.1 0 0 0 0 0 -154 -185 -154 -185 2001 14362 14362 187.9 -154.1 0 0 0 0 0 -154 -185 -154 -185 2002 15986 15986 125.3 -102.7 0 0 0 0 0 -103 -123 -103 -123 2003 8006 2668 9791 17797 0.0 0.0 -1.3 33 5 10 1 48 47 38 38 2004 8678 2892 10623 19300 0.0 0.0 -1.3 38 6 14 1 57 57 45 45 2005 9407 3135 11526 20933 0.0 -1.3 44 7 18 1 69 6t 54 54 2006 10198 3399 12508 22707 0.0 -1.3 52 9 22 1 83 82 65 65 2007 11058 3685 13575 24633 0.0 -1.3 61 10 28 1 99 98 78 78 2008 11772 3923 14466 26238 0.0 -1.3 69 12 33 1 114 113 90 90 2009 12535 4177 15416 27951 0.0 -1.3 78 13 39 1 130 129 103 103 2010 13348 4448 16430 29778 0.0 -1.3 89 15 46 1 149 148 118 118 2011 14215 4737 17513 31728 0.0 -1.3 100 17 52 1 169 168 134 134 2012 15140 5045 18669 33809 0.0 -1.3 112 19 59 1 190 189 151 151 2013 15808 5268 19505 35313 0.0 -1.3 122 20 64 1 205 204 163 163 2014 16507 5501 20379 36885 0.0 -1.3 131 22 68 1 221 219 175 175 2015 17237 5744 21293 38530 0.0 -1.3 140 23 72 1 236 234 187 187 2016 18000 5999 22249 40250 0.0 -1.3 150 25 74 1 250 248 198 198 2017 18799 6265 23250 42049 0.0 -94.0 159 27 76 1 169 168 115 19t 2018 19633 6543 24297 43930 0.0 -1.3 168 28 76 1 271 270 216 216 2019 20506 6834 25392 45839 0.0 -1.3 175 29 73 2 271 276 220 220 2020 21419 7138 26538 47958 0.0 -1.3 180 30 66 2 277 275 220 220 2021 22374 7456 27738 50112 0.0 -1.3 183 31 56 2 270 268 214 214 2022 23372 7789 28993 52365 256.8 -1.3 191 32 50 2 531 581 475 526
44.1 17.1%1 15.1% 14.6% 12.8% 278 189 131 48 China: SecondFujian Highway Project Page 86 Project AppraisalDocument
Table 12.5 - Eaottomic Evaluation ResuIts
SenidvityAalyss
Ecemic InmtaelRates ofRdwn (EMIR) Case I Case 2 Case3 Cse 4 C se5 Cse 6 Cse 7 C3se Cuse 9 Case to
20% nca. 20%.Decr. Combliod Eliminate Elimaate Elirnaa 20%Deer. 20% Decr. 5 Year 6 Yer, Base CegSuucL Usr (1) & (2) Valueof Accidert Generated Diested Traffic Contrub, Comtu ProjectComepesot Case Costs Bestt Tiae Bendits Traffic Trffic Grwth Peeod Perid
BeitaVlllage-Xieng Ling 16.9% 15.0% 15.0%. 13.1% 15.2% 16.9%' 15.7% 15.2% 14.0% 15.7% 14.5% XlfnggLing-Wurian 20.0% 17.8% 17.9% 15.8'Y. 17.7% 19.9% IS.8Y. 1.1% 16.9Y. 18.5% 17.1% Wali-sug n 19.5% 17.4% 17.4% 15.5'Y. 17.7% 19.4% 1S.5% 17.6% 16.2% I.1% 16.3% Zbuhnag-Heallag 19.3% 17.2% 17.3% 15.3% 17.3% 19.2% 11.5% 17.5% 16.0% 17.9% 16.4% Deaawa- -Fugeog 16.6% 14.8% 15.3% 13.6'Y. 15.5% 16.6'% 16.6% 15.3% 13.0Y. 15.5% 13.0% Zhta iaBao-F-oatan 17.0% 14.8% 15.1% 13.1% 14.1% 16.9Y. 17.0% 15.1% 14.7% 15.4% 13.9% Hrd-dChling 32.5% 29.1% 30.0%Y 26.8% 27.7%. 32.3% 32.5% 30.0% 29.3% 28.S% 25.7% Tankn -Huos'n 23.2% 20.4% 20.8%. 1I.2Y. 19.7Y 23.1% 23.2Y% 20.8% 21.3% 20.7% 1S5% Baishr 26.9% 24.1% 23.9% 21.2%Y. 24.9% 26.9% 26.9% 23.8% 24.5% 23.9% 21.1% EntreProject 19.6% 17.4% 17.5% 15.5%Y. 17.4% 19.3% 11.6% 17.7% 16.5% 18.1% 16.6%
SwitcsdegVabec Analysis RiskAnalysis Ceautctus Net Uaer Mema Standard Probabiity 'erecatfle Costs Benefits EIER Deviation Oa EItR loY. 50% 90% Maetpelier Multiplier EIRR <12% Worst Likely Best Factorto Factorto Scenrio Scetarlo Sceasei Yield12% Yield12% EIRR EIRR EHIR
BeltouVillage.XifengLing 1.69 0.64 13.7% 2.6% 26.1% 10.3% 13.S. 17.0%. XiftegLiag-Wtslaa 2.11 0.47 16.5% 2.8Y. S.0% 12.9% 16.6% 20.1% Wutaia-Zlghen 2.06 0.49 16.0Y. 2.8% 8.1. 12.3% 16.0%. 19.6% Zhegsg-lmti.g 2.03 0.49 15.0% 2.9% 10.3% 12.0% 15.8Y. 19.5% Doppgoaa-Pugeng 1.64 0.60 13.5% 2.6% 30.8% 9.9%' 13.5% 17.0% ZhaolJs Bo-PFouta 1.56 0.64 14.4% 2.2% 12.S% 11.7Y. 14.4% 17.2% Htoi . Chiling 4.29 0.23 28.9%. 3.3% 0.OY. 24.6% 28.9% 33.2% Taakouea-Ha 2.40 0.41 20.4% 2.5% 0.0% 17.2% 20.4% 23.6% Bfidhui 3.35 0.29 23.4% 2.7% 0.0% 19.S'% 23.5% 26.8Y. EntireProjet 2.00 0.49 16.2% 21S% 7.7% 12.6% 16.2% 19.7Y. kJ2-1035.XLS '5N/99 China: Second Fujian Highway Project Page 87 Project Appraisal Document
Table 12.6 - Risk Analysis Methodology
Standard spreadsheet models analyses combine single "poinf' estimates of the model's input variables to predict a single result. Estimates of the input variables are used because the actual values are not known with certainty. For example:
Revenues = 100 Costs = 90 => Profits = 10
In reality, however, things don't always tum out as planned because too conservative or optimistic estimates may have been adopted. The combined errors in each input variable estimate could lead to real-life result that is different from the estimated result. With risk analysis, one can explicidy include the uncertainty present in the estimates to generate results that show all possible outcomes. For example, consider a simple case where there is uncertainty in both input variables:
Revenues = 100 or 120 Costs = 90 or 80
Possible Profits = > 100-90 = 10 100-80 = 20 120-90 = 30 120-80 = 40
In a risk analysis, one includes the estimate of an input variable and some measure of the likelihood of occurrence for that variable. The risk analysis will then use this information to analyze every possible outcome, executing hundreds of what-if scenarios adopting in each case random inputs accordingly to the input probability distribution. For example, consider this more complex case:
Revenues Estimated most likely value = 100 (triangle distribution) Estimated minimum possible value = 90 Estimated maximum possible value = 130
Costs Estimated mean value = 90 (normal distribution) Estimated standard deviation = 20
Results: Scenario I Revenues = 105.9 Costs = 116.8 Profits = -10.9 Scenario 2 Revenues= 119.5 Costs = 87.2 Profits = 32.3
Scenario 300 Revenues = 103.4 Costs = 86.6 Profits = 16.8
In this case, the results are presented as probability distributions and statistics that give the decision-maker a complete picture of all possible outcomes. For example, for the case above we have the following results:
Mean Profits = 16.7 Standard Deviation of Profits = 22.4
Probability that profits will be lower Sb than zero =24.1 pereent ai
Prof2tT Fi2-1IBUt.XLS 515/99 China: Second Fujian Highway Project Page 88 Project Appraisal Document Table12.7 - Risk AnalysisResults
Frequencydistribution for -Constructioncosts - Existing traffic '
0) ED MultiplierFactor Frequencydistribution for 0) - DivertedtrafficI - Generatedtraffic - Trafficgrowth -
LA Il( 1.11l
MultiplierFactor
Frequencydistribution for entireproject EIRR entirafi growethEIR)
entire @projectEIRR ae 80ultipier%acto
40%
>~~C80%)0% 6 >N F , ,l
,,0 60%- MostLikealy E reqencyScenad b for
5 0% --Worst Scenario | | . ] +.
EconomicInternal Rate of Return(%)
FJ2-TB07.XLS515/99 China: SecondFujian Highway Project Page 89 Project AppraisalDocument ANNEX 13: FINANCIAL MANAGEMENT SYSTEM SecondFujian Highway Project
FINANCIAL MANAGEMENT SYSTEM
Preamble
The objectivesof the Project are as follows:
* Relieve traffic congestion and improve the mobility and integration of interprovincial trade, commerce and tourism between Fujian and GuangdongProvinces by assisting in the developmentof a key section of China's NationalTrunk HighwaySystem (NTHS) in the principal coastal corridor;
* Strengthenhighway institutionalcapacity at the Fujian Provincial TransportDepartment and related sector institutions,through provision of training, technical assistance and equipment, in planning, design, construction,operation and maintenanceof Fujian's highwaynetwork;
* Develop and sustain a policy dialogue in the key policy area of province-wide maintenance management;and
* Improve the safety of road transport.
The main componentsof the Project include:
Component1. Constructionof expresswayand interconnectingroads
1.1 Constructionof the Zhangzhou-Zhao'anExpressway (ZZE) (132 km);
1.2 Interconnectingroad program, consistingof new constructionand upgradingof roads;
1.3 Other Roads program,consisting of new constructionand upgradingof existingroads and bridges; 1.4 Equipment for: (i) control of constructionquality and monitoringof the environment; (ii) operation and maintenancefor ZZE; (iii) maintenanceof the provincialroad network and RDB and PMS;
1.5 Constructionsupervision services for ZZE, the interconnectingand other roads programs;
Component2. InstitutionalStrengthening/Capacity Building
Studies/technical assistance in highway maintenance management, organizational reform and developmentplan, and road safety; and
Staff training programs, covering all aspects of highway planning, design, construction, operation, financeand maintenance.
Project Component 3 - Front-end Fee;
Project Component4 - Land Acquisitionand Resettlement. Total estimatedProject cost is US$595.6million, includingan IBRD loan of US$200.0million. China: Second Fujian Highway Project Page 90 Project Appraisal Document
I. Background
This report is the result of a financial management review and analysis of the Second Fujian Highway Project (the "Project") as conducted by Tony Shen, Financial Management Specialist, EACCF, to determine whether the Project.has in place an adequate financial management system as required by Bank OP/BP 10.02. The review was performed in accordance with the following:
* The Guide for Review and Design o:f Accounting and Reporting System for World Bank Financed Projects (Central Operational Services Unit, East Asia and Pacific Region, December 1997)
* Review of Financial Management System (Annex II, LACI Handbook)
* Project Financial Management Manual (Loan Department, The World Bank)
The review consequently included procedures as were considered necessary and appropriate to the Project's circumstances, including site visit, discussion and observation. As a result, the task team has discussed and reviewed with Fujian Provincial Finance Bureau (FPFB) and proposed project management office of the Project plans, procedures and guidelines for establishing a sound financial management system, including staff/training, accounting, internal controls, reporting requirements, auditing and budgeting.
II. Organization of project financial management
1. Structure of project management
Fujian Provincial Expressway Construction Directorate (FPECD) will assume overall responsibility of implementing and monitoring the Project while Zhangzhou Municipal Expressway Construction Directorate (ZMECD), the proposed project management office (PMO), is responsible for direct implementation and fund management. The task team noted that FPECD was responsible for direct implementation and monitoring of the First Fujian Highway Project, another Bank-financed project.
2. Loan disbursement arrangements
The Project will be disbursing based on the traditional disbursement techniques and will not be using PMR-based disbursements, in accordance with the agreement between the Bank and MOF.
Special Account will be managed by and maintained at Fujian Provincial Finance Bureau (FPFB). Fund disbursement will flow from the Bank to ]FPFB,FPECD, ZMECD and contractors/suppliers through loan and on-lend arrangement.
As ZMECD is new to Bank's projects, it should work closely with FPFB in setting up policies and procedures for the Project to ensure efficient and accurate fund management and timely disbursement. Per review of draft Project Financial Management Manual (discussed in detail in section III) prepared by the Project, the task team noted that detailed policies and procedures have been provided for the Project to ensure efficient and accurate fund management and timely withdrawal applications. In addition, the Bank will provide as and when needed training and assistance in preparation of withdrawal applications.
ZMECD will be in charge of verifying the accuracy and validity of expenses submitted and progress reported. The application for reimbursements prepared by ZMECD will be further reviewed and approved by FPECD and FPFB before submitting by FPFB to the Bank for reimbursement. China: Second Fujian Highway Project Page 91 Project Appraisal Document
FPFB to date has managed 24 Bank/ADB financed projects and therefore has accumulated extensive experience with Bank's requirements and procedures in preparation and processing of withdrawal application and disbursement of funds. In addition, the Bank will provide as and when needed training and assistance in preparation of withdrawal applications.
HI. Staff and training
Though it is expected that experience gained by staff from the first highway project will be passed on to the new Project and some of the personnel from the earlier project will also be seconded to assist Project management, adequate number of qualified financial/accounting staff should be recruited before commencement of the Project. The chief accountant to be hired for the Project should have adequate experience and credentials in financial and accounting management. In addition, he/she should be able to maintain books of accounts, exercise adequate internal controls, safeguard Project's assets, monitor progress of the Project and produce financial and monitoring reports required by the Bank and MOF on a timely basis.
An accountant with an accounting major from a local university and adequate work experience has been identified for the Project. The task team noted that the accountant is suitable for the position, based on her educational background and prior work experience as an accountant for about a year for another expressway located in Fujian province.
As the project management office of the Project has no prior experience with Bank projects, well designed and focused training should be provided as and when needed (by MOF, FPFB and in particular FPECD) for the office to ensure personnel of quality commensurate with job responsibilities. The Bank plans to re-address in detail some of the major aspects of project financial management and reporting requirements during the Project's launch workshop.
In addition, well-defined role, job description and operation procedures should be documented and made easily accessible to all staff involved to guide in accounting practices and financial information preparation and reporting. The task team has received a draft Project Financial Management Manual (the "Manual") prepared by ZMECD for the Project. Per review of the Manual, the task team noted that procedures and guidelines have been provided for major areas of operation of the Project and included the following:
* General guidelines for project financial management and staffing requirements
* Project accounting and reporting requirements
* Cash management
* Asset management
* Withdrawal applications and disbursements procedures
* Bidding management
* Project fund management
* Budgeting
* Auditing arrangement China: Second Fujian Highway Project Page 92 Project Appraisal Document
Final version of the Manual will be ready for use before commencement.
IV. Financial and accounting system
The Project will use "Temporary Regulations on Financial and Accounting Management for Projects Financed by the World Bank" (i.e. Circular#127, 1993) issued by MOF as a basis for book-keeping and preparation of project financial statements and management reports. This set of regulations was modeled after the Accounting Standards Applicable to State-operated Construction Projects issued in 1986 by MOF and further revised in 1998 and is geared towards infrastructure oriented projects. The regulations also dictate chart of account and related account instructions that would therefore affect project accounting and reporting requirements.
Accrual accounting and double entry basis will be adopted for the Project. Ledgers, journal vouchers and original-supporting documents will be maintained at ZMECD.
V. Internal controls
A well designed internal control system (both administrative and accounting) should be in place before commencement of the Project. Per review of draft Manual mentioned above, the task team noted that sufficient control procedures have been built into the system for all major areas of concern and have the following features:
* A system of authorization, verification, reconciliation, record procedures and project reporting adequate to provide reasonable control over project costs, security of assets, schedules and technical performance
* Delegation and segregation of duties
* Timely and accurate financial reporting
In addition, ZMECD has agreed that controls designed by FPECD for the first highway project will also be adopted and further refined and integrated into the new Project.
VI. Reporting requirements
The format and content of the following reports have been discussed and agreed with the proposed project management office - ZMECD. These reports are required to be submitted on bi-annual basis to the Bank within 3 months (i.e. before October 1 and April 1) after the end of each reporting period:
Financial statements (bi-annual basis)
* Balance sheet
* Statement of sources and uses of fund by project activity
* Statement of implementation of loan agreement
* Statement of special account China: Second Fujian Highway Project Page 93 Project Appraisal Document
The above project financial statements represent the standard project financial reporting package recently agreed to between the Bank and MOF and will apply to all FY 99 projects.
Project monitoring report (bi-annual basis)
* Statement of project progress
Procurement management reports (bi-annual basis)
* Contract expenditure report - goods & works, consultants
* Procurement management reports - ICB & NCB
VII. Auditing requirements
The Bank requires the Project to have its financial statements audited in accordance with standards acceptable to the Bank. In line with other Bank financed projects in China, the Project will be audited in accordance with Government Auditing Standards of the People's Republic of China (1997 edition). Fujian Provincial Audit Bureau has been identified as auditors for the Project. Audit report on annual project financial statements will be due to the Bank within 6 months after the end of each reporting year, with separate opinion on statement of expenses and special account.
VIII. Budgeting
Chapter 8 of draft Manual focuses on budgeting. Policies and procedures have been documented to guide in budgeting process. Annual budget will be prepared by respective construction sections of the Project and submitted to ZMECD and FPECD for further consolidation, review and approval. Comparison of budget versus actual will be performed on a semi-annual basis and any subsequent major changes to the original plan has to be reviewed, evaluated and approved by the Bank.
IX. Conclusion
Based on above analysis, the task team has determined that the Project will satisfy the Bank's minimum financial management requirements as stipulated in OP/BP 10.02. In the team's opinion, the Project will have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of the Project in the reporting format agreed with the proposed project management office and as required by the Bank. China: Second Fujian Highway Project Page 94 Project Appraisal Document ANNEX 14: ENVIRONM]ENTAL ASSESSMENT AND ACTION PLAN SUMMARY SecondFujian Highway Project
1. Background. The Environmental Impact Assessment (EIA) and Environmental Action Plan (EAP) for the Zhangzhou - Zhao'an Expressway and its interconnecting roads were prepared by the Xian Highway Transportation University (XHTU). The EIA and EAP for the Longhai Baishui Bridge, Zhangpu Huxi - Chiling Road and Tankou - Chengguan Highway were prepared by the Highways Research Institute of MOC. The EA Summary for the project was compiled by XHTU. The EIA, EAP and the EA Summary reports were prepared as per the policy and administrative requirements for environmental assessment of development projects in China and the Bank's OD 4.01 on Environmental Assessment. The development and review of these documents involved inputs from various Provincial units, the local and State Environmental Protection Bureaus, research institutions and the affected groups along the proposed highway. These documents were reviewed by the Bank and discussed with FPTD during the various project preparation missions in May and November 1998 and in January and March 1999. The final revised EIA, EAP and EA Summary reports covering the Expressway, it's interconnecting roads and the Longhai Baishui Bridge, Zhangpu Huxi - Chiling Road and Tankou - Chengguan Highway were submitted to the Bank in April 1999 and were found to be satisfactory. Copies of the environmental reports are available in the project files.
2. Brief Project Description. The main civil components of the Expressway consist of the construction of a four-lane, 120 km/h speed, 140 km long Expressway between Zhangzhou and Zhao'an; 9 interchanges; 5 km of Dongyuan-Fugong, Class 1 and 8 km of Huxi-Fuotan, Class 2 link roads; 1.8 km long Longhai Baishui Bridge and approach roads; 9 km long Zhangpu Huxi - Chiling, Class 2, road; and 42 km long Tankou - Chengguan, Class 2, Highway. Other components include institutional strengthening, training programs, highway safety and construction supervision.
3. Baseline Environmental Description. The proposed alignment of the Expressway lies in the southern tip of Fujian Province. The terrain rises from southeast to northwest. Section K8-K23 lies in dense rolling area; section K74-K90 lies on hilly slope and the remainder of the alignment is located in light rolling plain. The Expressway section contains two, 2+ km long tunnels and 17 large and extra large bridges. The 42 km long Tankou - Chengguan Highway lies north-northwest of Zhangzhou City. For most of the way, the alignment follows the west bank of the Jiulongjiang River crossing onto the east bank of river before Hua'an. The realignment of the road will result in the construction of two tunnels, one of which is expected to be over 2 km long. The land form along the highway is dominated by hills and valleys. Based on the soil erosion information provided by the Water and Soil Conservation Committee of the Zhangzhou City, the average soil erosion in the area of the proposed roads is between 402.5-484.2 t/km2/y.
4. The Expressway runs through an economically developed region with intense human activities. Population density along the proposed Expressway alignment is 34 percent higher than the provincial average. Because of past development, dense settlement and intense cultivation, there are no virgin forests and the original vegetation has been replaced by paddy fields, sugar cane, mushrooms, peanuts, tobacco leaf, jute, tea, etc. The area along the proposed alignment grows a large variety of fruits and vegetables and accounts for about 70 percent of the provincial production of bananas, pineapples and litchis. The proposed Expressway is expected to occupy about 11,580 mu of cultivated land and 4,602 mu of uncultivated land. In addition, 3,100 mu of temporary land will also be required. It is expected that the China: SecondFujian Highway Project Page 95 Project AppraisalDocument construction of the Expressway will result in the demolition of about 70,100 m2 of housing. The rehabilitation and constructionof Tankou - Chengguanroad will require only 167.5 mu of additional land; most of which will be non farm land.
5. There are no natural reserves along the proposed expresswayand other road alignment.No rare or endangeredanimal or plant species were found within the 500m zone on either side of the proposed expressway and other roads. Along the proposed expresswayalignment, lead concentrationin the soil ranged between 24.5 mg/kg and 34.6 mg/kg, significantlylower than the 300 mg/kg value recommended by the ChineseMinistry of Agricultureas the acceptablecriteria for acid soil.
6. The project area is rich in history and culture.According to the investigationreport filed by the ArchaeologicalInvestigation Team of the Fujian Provincial Cultural and Historical Relics Management Committee five cultural relics sites were identified near or within the project right-of-way. Of the five sites, four are located along the expressway,one is a buried ancient kiln site (LuowanjingKiln), two are buried ancient building sites (Xidong and Nanshan ruins), and one is an above ground ancient building site (Shabgabianruins). The fifth relic is an above ground FenglinweiHui Temple, about 15 m from the embankmentof the Dongyuan-Fugonglink road.
7. Ambient air quality monitoring data of the past years and the monitoring at 4 sites along the proposed expressway alignment show that NOx, TSP and CO concentrationsat all locations meet the Chinese EnvironmentalAir Quality, Class II standards. Day time and night time noise levels were monitored at 13 locations along the expressway. Of these, Beitou at the starting point of the Xiamen - Zhangzhou expressway and Changmaolin, near the existing National Road 324, exceeded Class 2 standard. Along the expressway alignment, the Neixi and Houdai Primary Schools exceeded Class 1 standard. The remaining locations were below the noise standards. Along the other roads, the ambient noise quality met the existing standards. Water quality monitoring results for major rivers and the YiangmeiReservoir indicateacceptable water quality.
8. Potential Environmental Impacts and Their Mitigation Measures. The major potential environmental impacts of the Zhangzhou - Zhao'an Expressway, the two link roads and the Longhai Baishui Bridge, Zhangpu Huxi - Chiling Road and Tankou - Chengguan Highway and their mitigation measures are given in the respective Environmental Action Plans (EAP). The EAPs stipulate how the environmental impacts identified in the EIA will be incorporated in the design, and implemented in the construction and operation phases of the project and what institutional arrangements have been made to ensure effective implementation of the mitigation measures during the three phases. The key elements of the EAP are summarized below.
9. Design Phase. Three main alternative alignments and a number of sub alignments were considered in the project feasibility and design phases of the Zhangzhou- Zhao'an Expressway. The final alignment was selected to: minimize land acquisition and resettlement costs; minimize potential environmental impacts of the project on farmland, residences, schools, cultural relics, flood control systems and separation of communities; maximize economic returns; and avoid areas with poor geographical and geological conditions. Between the starting point and Jiuzhen, the middle alternative was selected based on favorable engineering, economic and resettlement criteria. Between Andou and Xizhang, inner (inland) and outer (coastal) alternatives were compared. The choice was more difficult, but based on potential detrimental impact of fog, typhoons, deep cuts, etc. on the Expressway, the inner alignment was chosen. Between Wutian and Dapu, the Dabushan tunnel alternative was chosen over the Baita alternative. Between Shudong and Lintou, the Southern alternative was chosen over the Northern alternative, to minimize deep cuts, impact on farm land and reservoir, even though the cost estimate of China: Second Fujian Highway Project Page 96 Project Appraisal Document the Southern alternative was higher. Between Zhongzai and Houlin, the Southern alternative was chosen although it is 1.1 km longer. This alternative is cheaper, is supported by the local authorities, does not hinder the development of the City and does not interfere with the planned expansion of the railway. Similarly in the Tankou - Chengguan section, the Hongqishan tunnel alternative was chosen to provide a better and shorter road.
10. The design of the expressway includes 292 underpasses and 79 grade separators to facilitate the crossing of the expressway by local people, animals and vehicles. To reduce soil erosion, the central strip, exposed side slopes, and road side areas will be planted with grass, shrubs, bushes, etc. Additional measures such as subgrade drainage systems are integrated in the project design and temporary and permanent drainage systems will be provided to minimize soil erosion and alteration of hydrological regimes. Particular attention will be paid to balance cuts and fills, to locate suitable borrow areas in waste lands, to minimize the use of arable lands and to minimize dust and noise problems. The materials from the excavation of the tunnels will be utilized to reclaim wastelands and the excess will be disposed of to minimize environmental problems. Similar measures will be applied to the link roads and the other roads.
11. The EIA identified 65 villages, 14 schools and one hospital would be impacted by the noise from the Zhangzhou - Zhao'an Expressway. Along the link roads, Dongyuan Middle School will be most seriously impacted by the noise. By the year 2005, noise levels at the first row of houses in Huangzao and Xinyu will exceed the standard. To mitigate the short and medium term (years 2000 -2010) noise problems, a combination of measures such as resettlement, installation of noise barriers, insulated windows, and other acoustic reduction measures such as afforestation, etc. will be undertaken. Before the operation of the expressway, 27 villages and 2 schools will be relocated and approximately 4,200 m long, 2.5 m high noise barriers will be built at strategic locations along the expressway to protect 20 schools and other sensitive locations. Other impacted places will be protected by raising the height of the walls surrounding the houses, by planting forest belts, etc. In the long-term (year 2020), noise monitoring will be continued and appropriate mitigation measures will be taken when the noise monitoring results exceed the standards. Construction of houses, schools and hospitals will not be allowed within 150m of the Zhangzhou- Zhao'an Expressway.
12. Air quality forecasts indicate that there will be an increase in the concentration of CO and NOx along the expressway and the associated roads, but the increases are predicted to be within the standards. However, the air quality concentration along the highway will be monitored regularly and any deterioration in the air quality due to vehicle exhaust gases will have to be dealt with by improving vehicle emission controls and strengthening vehicle emissions inspection at the State level.
13. For the 3 burial spots of underground historical relics located during the archeological field investigation, and the two above ground relics, an archeological protection, preservation and salvage plan will be developed by the Archaeological Investigation Team of the Fujian Provincial Cultural and Historical Relics Management Committee. The plan will be approved at the State level and integrated in the Second Fujian Highway Project. All excavation, salvage and subsequent related activities will be carried out before the start of construction at those locations.
14. Additional design measures include provision for adequate drainage, wastewater treatment facilities at the service areas, toll stations and the management centers; strengthening of crash barriers at pollution sensitive sites, and provision for adequate bridge and culvert design to minimize flooding.
15. Construction Phase. To minimize dust during construction, road surfaces, excavation areas, material stockpiles, storage areas, and construction sites will be sprayed with water specially near towns and villages and near sensitive locations. Asphalt and lime stone mixing plants will be equipped with dust China: Second Fujian Highway Project Page 97 Project Appraisal Document collectors and will be located at least 300 m from residential areas on the leeward side. Additional precautions will include covering of haul trucks and material storage piles, control of exhaust gas, etc. Construction activities within 200 m from residences will be suspended between 10:00 p.m. and 6:00 a.m., except under exceptional circumstances when a prior written approval of the local government and the environmental protection bureau will be required.
16. Where ever possible, borrow areas will be restricted to non forest and non arable lands, and topsoil will be saved and returned to the land. Spoil disposal sites will be carefully selected to minimize disruption to the farmlands. Damage to irrigation systems will be minimized by construction of temporary channels and conduits and measures will be taken to prevent direct discharge of polluted waters and silt from construction activities into rivers and irrigation channels. Construction camp wastes and sewage will be collected and treated and disposed of in an environmentally sound manner. Trees and grass will be planted on side slopes, and along the roadside, particularly on sections with high fills and deep cuts.
17. During construction, effective safety and warning measures will be adopted to reduce accidents. This will include minimization of traffic jams, provision of efficient lighting equipment and safety signs, restriction on blasting time and implementation of stringent controls at quarries, development of a materials transport plan, etc.
18. Operational Phase. During the operation phase, emphasis will be placed on better vehicle maintenance and management to promote safety and to minimize vehicle emissions. Low-speed, badly maintained old vehicles will be prevented from using the expressway and a minimum 60 km/hr speed limit will be enforced. Periodic campaigns will be undertaken to educate drivers about the unnecessary use of horns, reduction in night time speed, safe transport of hazardous materials, etc. A small fire brigade with 2 fire engines and 12 fire fighters will be established to deal with emergencies. To avoid future noise and air pollution problems, construction of residential buildings and schools/hospitals will be prohibited within 150 m of the Expressway.
19. Environmental Monitoring. During the construction and operation of the Zhangzhou-Zhao'an Expressways, and the connecting roads, environmental monitoring will be carried out to verify the actual impacts of the highway on the environment, to identify unexpected environmental problems at an early stage, and to adjust environmental protection measures as appropriate. The local Environmental Protection Monitoring Stations will be responsible for all environmental monitoring of the Expressway and its connecting roads during the construction and operation phases. The supervising engineers will be responsible for noise monitoring during the construction phase, while the environmental protection section of the Expressway Company will be responsible for the operational phase.
20. The major items to be monitored during the construction and operation phases will include air quality (TSP, CO, NOx), noise and water quality (pH, SS, COD, and Oil). The detailed monitoring plan is presented in the EAP.
21. Institutional Arrangements. The EPOs of the Fujian Provincial Expressway Construction Directory Office and the Zhangzhou - Zhao'an Expressway Construction Directory Office will be responsible for the overall environmental protection, management and monitoring of the highways. During construction and operation, day-to-day monitoring will be contracted out to the Environmental Monitoring Stations of Fujian Province and Zhangzhou City. The staff in the EPOs will be assisted by at least 18 environmental engineers - one in each contract section who will be responsible for the environmental aspects of the project during the construction phase. Proper environmental training will be provided to the environmental staff at all levels. About 140 staff week of training is included in the project design. The detailed staffing and training plans are presented in the EAP. China: Second Fujian Highway Project Page 98 Project Appraisal Document
22. Public Participation. About 338 families participated in the public survey carried out in October 1997 to seek out environmental and other concerns related to the construction of the expressway and other roads. In addition, public hearings were carried out at 19 sensitive spots where 195 people participated. The hearings held to discuss the environmental impacts of the project on the residents living on or along the alignment. All impacted people expected to be resettled in their own village. Although there was strong support for the construction of the expressway and other roads, about 60 percent of the participants believed that the construction and operation of the expressway would result in adverse environmental impacts to the nearby residents. Land acquisition, proper compensation and resettlements topped the issues. Although the public was generally in favor of the project, it also voiced the opinion that the mitigation measures would not be properly implemented. As a result of the consultation, the service center, originally planned near the Yangmei Reservoir was shifted to Heken about 5 km away from the reservoir. Similarly the alignment at about 10 sensitive locations were shifted to either prevent or to minimize the impact of the expressway on the villages and it's residents. China: SecondFujian HighwayProject Page 99 Project AppraisalDocument ANNEX 15: RESETTLEMENTACTION PLAN SUMMARY Second Fujian HighwayProject
1. Land acquisitionwill take place in all the road componentsof the project. PAPs will be affected mainly through the loss of agriculturalland. Most of the resettlementof agricultural populationwill be land based. Only 827 surplus laborerswill be transferredto enterpriseemployment.
2. The PRO, with the collaboration of the IMO, Design Institute and local ROs has conducted census and socioeconomic surveys of the PAPs and their assets on all components of the project beginning in the Summer of 1998. Exact impact of the project has been identified and resettlement entitlementpolicies for each categoryhave been established;a summaryof which is presented below:
Categories of Impact Unit of entitlement EntitlementPolicy
Agriculturalland PAPs;affected production Compensationfor land; resettlement teams and villages subsidy;redistribution of agriculturalland; technicalinput to improveagricultural productivity;provision of alternativejobs for surpluslabor due to limitedagricultural land.
Affected houses PAPs Cash compensationat replacementcost of the house; house plot; cost of levelingthe house plot; accessroad to new site; provisionof all affected servicessuch as water, electricity and other utilities; transfer allowance;transition allowance.
Affected enterprises AffectedUnits Compensationequivalent to replacement cost; compensationfor loss of income during move and reconstruction.
Other affectedassets Owners Compensationat replacementcost.
Affected infrastructure Affected company/community Replacementof infrastructureup to the same standardor replacementcost.
Affectedjobs PAPs Replacementof employmenton the same or improvedterms.
3. Extensivework was carriedout at various stagesof the project to keep the alignmentat a distance from settlements and to reduce house relocation. Realignment and resettlement minimization will continue throughout the final design. During the consideration of alternative designs the PRO, EnvironmentTeam and local administrationscollaborated with the Design Institute. China: Second Fujian Highway Project Page 100 Project Appraisal Document
4. Surveys show that the project would need to acquire 15,374 mu in the main expressway section and 498 mu in the additional sections. Temporary land acquisition will reach 2968 mu in the main expressway section and 61 mu in the additional sections. Land acquisition will directly impact 7268 households (32,744 persons) in the main expressway section; and 507 households (2,149 persons) in the additional sections. Among the total impact, 2,056 persons in 473 households in the expressway section will be affected through relocation of private residential houses (172 persons in 33 households in the additional sections).
5. Compensation for affected assets will be paid at their replacement cost. Compensation for affected private structures and crops will be paid to the affected households. In addition to the replacement value of affected house, sites and services will also be provided to restore the living standards of the PAPs. Resettlement sites will be leveled and prepared for building new houses, access roads to the new sites will be built and all the services available to in the old houses will be provided in the new sites. Compensation for affected land and resettlement subsidy to finance economic rehabilitation of the affected households will be paid to Village Administrations to be used according to Village Investment Plans (VIPs) to be prepared and reviewed before the disbursement of compensation funds. To ensure that the benefits accrue to the PAPs, COROs and the PRO will monitor the use of land compensation funds based on the VIPs. Affected enterprises will be compensated for the loss of their structures, provided with alternative land and also compensated for losses incurred during the transition period. Community infrastructure will be fully replaced by the project, or in certain cases, cash compensation will be paid to the agencies responsible for the affected infrastructure.
6. The project will acquire about 5.9 % of the arable land of villages in the main component (1.94 % in the additional sections). Most of the PAPs (excepting for the 827 surplus laborers) in the main component will continue their agricultural activities after readjustment of land. There will be no surplus laborers in the additional components. Land compensation funds will be adequate to rehabilitate the incomes of PAPs.
7. In areas with limited land resources, when adequate size of land cannot be assigned to agricultural laborers through readjustment, the affected community will be offered jobs in village enterprises. Volunteering PAPs may then choose to change their employment from agriculture to enterprise. Investment of compensation funds that resettlement enterprises receive (for the employment of surplus labor) will be monitored together with the VIPs to ensure that living standards of the surplus laborers will be enhanced or maintained at the pre-project levels.
8. The RAP was prepared with the collaboration of the PRO, the Design Institute, the IMO and local ROs. Special Resettlement Offices established for the project at the County level will carry out implementation of the RAP. Leading Groups for resettlement has been established at the Province, City and County levels, with representatives from the Department of Communications, the Bureau of Land Administration and other concerned agencies.
9. Cost associated with implementation of the RAPs will be a part of the project costs. The total cost of implementing the resettlement program is estimated to be RMB 307.36 million for the main expressway component (10.53 million for the additional sections) including price and physical contingencies.
10. The RAP includes detailed implementation schedule that will be completed before the commencement of civil works. Implementation of the resettlement program will be a participatory exercise, along the same lines as the process adopted for preparation of the RAPs. To encourage participation and ensure participatory monitoring, each affected household will be provided with a China: SecondFujian Highway Project Page 101 Project AppraisalDocument ResettlementInformation Booklet (RIB), summarizingkey features of the project and the resettlement program. Detailedentitlements of each householdwill also be includedin this booklet. Implementationof the resettlement program will be aided by a grievance redress procedure within the project structure. However, if the PAPs remain dissatisfied after exhaustingthe channels of grievanceredress outlined in the RAP, recourseto civil courts is availableas a last resort.
11. Internal and Independentmonitoring of the resettlement program will be carried out. Internal monitoring will focus on issues relating to compliance with the quantitative targets mentioned in the RAP, independentmonitoring will evaluate both the qualitativeimpacts of the resettlementprogram and investigatethe impact on the standardsof livingof the PAPs. Indicatorsfor both internal and independent monitoring have been includedin the RAP. The Fujian Academy of Social Sciences has been appointed by the FPECD as the IMO. The PRO is required to submit periodic reports on internal and independent monitoringto the Bank by January 31 of each year. During 2000, resettlementimplementation reporting will be every six months. Thereafter, the IMO will continue to report on the standards of living of the PAPs annually. China: SecondFujian Highway Project Page 102 Project AppraisalDocument ANNEX 16: PROJECT PROCESSING BUDGET AND SCHEDULE Second Fujian HighwayProject
Planned Actual (At final PCD stage)
A. Project Budget (US$'000) 244.5 175.4
B. Project Schedule
Time taken to prepare the project (months) 26 20 First Bank mission (identification) 12/1997 11/1997 Appraisalmission departure 6/1999 4/1999 Negotiations 9/1999 5/1999 PlannedDate of Effectiveness 1/2000 10/1999
Preparedby: Fujian ProvincialTransport Department
Preparation assistance:Engineering design review for ZZE is being undertakenby Japanese consultants through Japanesetrust funding.
Bank staff who worked on the projectincluded: Name Specialty
AlfredNickesen Task Team Leader Alla Weinstein Operations Jean-MarieBraun Engineering Dick Jonsson InstitutionalStrengthening/Training Mitchel Stanfield Private Infrastructure Rodrigo Archondo-Callao TransportEconomics Anil Somani Environment Tosun Aricanli Resettlement Hoi-ChanNguyen Legal R. I. Gopalkrishnan Procurement Tony Shen FinancialManagement Yang Dawei ProcurementAssessment Liu E. Highway Specialist Maria Luisa Juico Task Assistant
Peer Reviewers: Antti Talvitie OEDST Stein Lundebye SASIN Joris Van Der Ven EASTR Jose Luis Irigoyen LCSFP China: Second Fujian Highway Project Page 103 Project Appraisal Document ANNEX 17: DOCUMENTS IN THE PROJECT FILE* SecondFujian HighwayProject
A. Project ImplementationPlan, April, 1999
B. Engineering
1. Engineering Feasibility Study Report for Zhanghzou--Zhao'an Expressway (August 1998);
2. Engineering Feasibility Study Report for Zhanghzou--Hua'an Highway (March 1999);
3. Engineering Feasibility Study Report for Huxi--Chiling Highway (February 1999);
4. Engineering Feasibility Study Report for Baishui Bridge (February 1999);
C. Environment (EIA, EAP, Summaries)
1. "Environmental Assessment Summary" Zhangzhou - Zhaoan Expressway and Other Road Projects. By Fujian Provincial Communications Department. April 1999;
2. "Environmental Impact Statement for Zhangzhou - Zhaoan Expressway in Fujian Province" by Xian Highway Transportation University. April 1999;
3. "Environmental Protection Action Plan for the Zhangzhou - Zhaoan Expressway" by Fujian Provincial Communication Department. April 1999;
4. "Statement of the Environmental Impact Assessment" for the Longhai Baishui Bridge, by Research Institute of Highway, Ministry of Communications. April 1999;
5. "Environmental Action Plan" for the Longhai Baishui Bridge, by Fujian Provincial Communications Department, Fuzhou. April 1999;
6. "Statement of the Environmental Impact Assessment" for the Zhangpu Huxi - Chiling Road, by Research Institute of Highway, Ministry of Communications. April 1999;
7. "Environmental Action Plan" for the Zhangpu Huxi - Chiling Road, by Fujian Provincial Communications Department, Fuzhou. April 1999;
8. "Statement of the Environmental Impact Assessment" for the Tankou - Chengguan (Hua'an Section) Road, by Research Institute of Highway, Ministry of Communications. April 1999;
9. "Environmental Action Plan" for the Tankou - Chengguan (Hua'an Section) Road, by Fujian Provincial Communications Department, Fuzhou. April 1999; China: Second Fujian Highway Project Page 104 Project Appraisal Document
10. "Report on the Survey and Reconnaissance of Cultural Relics for the Zhangzhou - Zhao'an Expressway" by Archeological Study Team of Fujian Provincial Cultural Relics Administration Commission. March 15, 1999;
D. Resettlement
1. Resettlement Action Plan for Zhangzhou--Zhao'an Expressway Project (February 1999);
2. Resettlement Action Plan for Baishui Bridge (March 1999);
3. Resettlement Action Plan for Huxi--Chiling Highway (March 1999);
4. Resettlement Action Plan for Zhangzhou--Hua'an Highway (March 1999);
E. Institutional Strengthening and Training
1. Institutional Development Plan, March 1999
2. Training Program, March 1999
F. Economic and Financial Report
1. Report of Economic/Financial Evaluation and Evaluation of the Project, December 1998
2. Further Information on Economic Evaluation, March 1999
3. Revised Traffic Projections, March 1999
G. Equipment Procurement Reports, March 1999.
H. Request for Proposals for Consultant's Services for Supervision of Construction
1. Request for Proposals for Consultant's Services for Supervision of Construction of ZZE, January 1999
I. Prequalification Document for Civil Works
1. Prequalification Document for Civil Works, January 1999
J. Procurement Capacity Assessment Report, April 19999
K. Draft Report on Engineering Design Review, EXTEC, Tokyo, Japan, June 1999
*Including electronic files. Page 105 China: Second Fujian Highway Project Project Appraisal Document
ANNEX 18: STATEMENT OF LOANS AND CREDITS SecondFujian Highway Project
Statusof Bank Group Operationsin China OperationsPortfolio As of 31-May-99
Difference Between expected Original Amount in US$ Millions and actual disbursements a/ Fiscal Project ID Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd
Number of Closed Projects: 106
Active Projects 71.00 0.00 0.00 71.00 0.00 0.00 CN-PE-3653 1999 PEOPLE'S REPUBLIC OF CHIN CONTAINER TRANSPORT 10.00 50.00 0.00 60.00 0.00 0.00 CN-PE-36953 1999 PRC HEALTH IX 150.00 0.00 0.00 150.00 0.00 0.00 CN-PE-41890 1999 PEOPLE'S REPUBLIC OF CHIN LIAONING URB TRANSP 10.00 35.00 0.00 45.00 0.00 0.00 CN-PE-42299 1999 GOC TEC COOP CREDIT IV 20.00 50.00 0.00 70.00 0.00 0.00 CN-PE-46051 1999 PRC HIGHER EDUC. REFORM 90.00 30.00 0.00 119.00 3.60 0.00 CN-PE-49665 1999 PRC ANNING VALLEY AG.DEV 200.00 0.00 0.00 200.00 9.94 0.00 CN-PE-50036 1999 PEOPLE'S REPUBLIC OF CHIN ANHUI PROVINCIAL HWY 27.40 5.61 0.00 32.96 2.04 0.00 CN-PE-51856 1999 MINISTRY OF FINANCE ACCNTG REFORM & DEV 80.00 20.00 0.00 100.00 0.00 0.00 CN-PE-51888 1999 PRC GUANZHONG IRRIGATION 150.00 50.00 0.00 200.00 0.00 0.00 CN-PE-56216 1999 PRC LOESS PLATEAU II 40.00 40.00 0.00 79.16 3.34 0.00 CN-PE-63123 1999 PRC YANGTZE FLOOD ENERGY 100.00 0.00 0.00 96.00 .17 0.00 CN-PE-3539 1998 PRC SUST COAST RES DEV 0.00 85.00 0.00 81.04 -. 20 0.00 CN-PE-3566 1998 BASIC HEALTH 300.00 0.00 0.00 300.00 12.00 0.00 CN-PE-35698 1998 PRC HUNAN POWER DEVELOP. 150.00 0.00 0.00 102.59 -30.24 0.00 CN-PE-3591 1998 PRC STATE FARMS COMMERCI 63.00 0.00 0.00 63.00 3.18 0.001 CN-PE-3606 1998 GOC ENERGY CONSERVATION 200.00 0.00 0.00 192.00 7.12 0.00 CN-PE-3614 1998 PEOPLE'S REPUBLIC OF CHIN GUANGZ. CITY CRT.TRP 123.00 0.00 0.00 123.00 20.00 0.00 CN-PE-3619 1998 MINISTRY OF FINANCE 2ND INLAND WATERWAYS 72.00 20.00 0.00 88.81 -1.03 0.00 CN-PE-36414 1998 CHINA GUANGXI URBAN ENV. 250.00 0.00 0.00 234.96 6.63 0.00 CN-PE-36949 1998 PEOPLES REPUBLIC OF CHINA NAT.HWY 3-HUBEI 95.00 0.00 0.00 92.00 23.80 0.00 CN-PE-40185 1998 PRC SHANDONG ENVIRONMENT 230.00 0.00 0.00 230.00 43.54 0.00 CN-PE-45788 1998 PEOPLE'S REPUBLIC OF CHIN TRI-PROVINCIAL HWY 90.00 60.00 0.00 140.69 6.80 0.00 CN-PE-46563 1998 PRC TARIM BASIN II 100.00 100.00 0.00 200.68 9.17 18.34 CN-PE-46952 1998 PRC FOREST. DEV. POOR AR 300.00 0.00 0.00 280.00 7.30 0.00 CN-PE-49700 1998 PRC IAIL-2 250.00 0.00 0.00 250.00 102.64 0.00 CN-PE-51736 1998 GOC E. CHINA/JIANGSU PWR 0.00 28.40 0.00 5.66 -13.33 0.00 CN-PE-56491 1998 PRC HEBEI EARTHQUAKE 430.00 0.00 0.00 323.36 92.85 0.00 CN-PE-34081 1997 PRC XIAOLANGDI MULTI. II 30.00 150.00 0.00 148.20 27.18 0.00 CN-PE-3590 1997 PRC QINBA MTS. POVTY RED 10.00 20.00 0.00 11.98 -1.22 0.00 CN-PE-3635 1997 PRC VOC. ED. REFORM PROJ 0.00 70.00 0.00 62.02 11.81 0.00 CN-PE-3637 1997 PRC NATL RUR WATER III 400.00 0.00 0.00 320.09 13.42 0.00 CN-PE-36405 1997 PRC WANJIAZHAI WATER TRA 300.00 0.00 0.00 230.72 62.72 0.00 CN-PE-3643 1997 PRC XINJIANG HIGHWAYS II China: Second Fujian Highway Project Page 106 Project Appraisal Document
Difference Between expected Original Amount in US$ Millions and actual Fiscal disbursements a/ Project ID Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd CN-PE-3650 1997 GOC TUOKETUO POWER/INNER 400.00 0.00 0.00 391.00 144.78 3.51 CN-PE-3654 1997 PRC HUNAN/GUANG HWY2-NH2 400.00 0.00 0.00 321.24 81.22 0.00 CN-PE-36952 1997 PRC BASIC ED. IV 0.00 85.00 0.00 41.32 -24.85 0.00 CN-PE-38988 1997 PRC HEILONGJIANG ADP 120.00 0.00 0.00 93.02 10.70 0.00 CN-PE-44485 1997 SHANGHAI WAIGAOQIAO 400.00 0.00 0.00 382.70 35.94 0.00 CN-PE-34618 1996 PRC LABOR MARKET DEV. 10.00 20.00 0.00 23.99 22.66 0.00 CN-PE-3507 1996 GOC ERTAN HYDRO II 400.00 0.00 0.00 23.48 -21.26 0.00 CN-PE-3563 1996 PRC ANIMAL FEED 150.00 0.00 0.00 138.78 113.97 22.13 CN-PE-3569 1996 P.R.C. SHANGHAI-ZHEJIANG HI 260.00 0.00 7.75 106.81 32.91 23.25 CN-PE-3589 1996 PRC DISEASE PREVENTION 0.00 100.00 0.00 68.97 59.63 0.00 CN-PE-3594 1996 PRC GANSU HEXI CORRIDOR 60.00 90.00 0.00 125.49 27.79 0.00 CN-PE-3599 1996 YUNNAN PROV. GOV. YUNNAN ENVIRONMENT 125.00 25.00 0.00 139.11 20.95 0.00 CN-PE-3602 1996 PRC HUBEI URBAN ENV. PRO 125.00 25.00 0.00 123.98 78.98 0.00 CN-PE-3638 1996 PRC SEEDS SECTOR COMMER. 80.00 20.00 0.00 73.11 22.34 0.00 CN-PE-3646 1996 PRC CHONGQING IND POL CT 170.00 0.00 77.99 91.22 106.20 0.00 CN-PE-3648 1996 SHANGHAI MUN. GOVT SECOND SHANGHAI SEWE 250.00 0.00 0.00 148.15 72.54 0.00 CN-PE-3649 1996 CHINA SHANXI POVERTY ALLEV 0.00 100.00 0.00 34.51 -5.88 0.00 CN-PE-3652 1996 PRC 2ND SHAANXI PROV HWY 210.00 0.00 0.00 139.29 56.62 0.00 CN-PE-36950 1996 PRC BASIC ED. POOR III 0.00 100.00 0.00 9.05 -21.13 0.00 CN-PE-40513 1996 PRC 2ND HENAN PROV HWY 210.00 0.00 0.00 175.14 55.81 0.00 CN-PE-3493 1995 PRC INLAND WATERWAYS 420.00 0.00 0.00 270.62 -10.79 0.00 CN-PE-3571 1995 PRC RAILWAYS VII 400.00 0.00 29.00 344.67 209.66 1.51 CN-PE-3585 1995 GOC SHENYANG IND. REFORM 175.00 0.00 0.00 97.54 52.68 0.00 CN-PE-3596 1995 PRC YANGTZE BASIN WATER 100.00 110.00 0.00 27.75 -16.90 0.00 CN-PE-3598 1995 LIAONING ENVIRONMENT 110.00 0.00 0.00 64.96 54.88 0.00 CN-PE-3600 1995 PRC TECHNOLOGY DEVELOPME 200.00 0.00 0.00 123.15 45.73 0.00 CN-PE-3603 1995 PRC ENT. HOUSING SOC. SE 275.00 75.00 20.00 196.98 156.61 9.26 CN-PE-36041 1995 MOF FISCAL & TAX REF. & 50.00 25.00 0.00 66.29 41.78 0.00 CN-PE-3612 1995 PRC XINJIANG HIGHWAY I 150.00 0.00 0.00 41.95 33.63 0.00 CN-PE-3634 1995 PRC MATERNAL CHILD HEALT 0.00 90.00 0.00 18.40 9.92 0.00 CN-PE-3636 1995 PRC BASIC EDUC IN POOR & 0.00 100.00 0.00 3.38 -. 63 0.00 CN-PE-3639 1995 PRC SOUTHWEST POV. REDUC 95.00 200.00 0.00 135.27 28.38 0.00 CN-PE-3642 1995 ZHEJIANG POWER DEVT 400.00 0.00 0.00 129.95 -44.08 0.00 CN-PE-3647 1995 PRC ECONOMIC LAW REFORM 0.00 10.00 0.00 5.51 5.72 0.00 CN-PE-36947 1995 GOC SICHUAN TRANSMISSION 270.00 0.00 0.00 132.50 120.94 84.43 CN-PE-37156 1995 PRC IODINE DEF. DISORDER 7.00 20.00 7.00 1.77 11.44 -. 32 CN-PE-3502 1994 MON RUR HEALTH MANPOWER 0.00 110.00 0.00 27.28 21.76 0.00 CN-PE-3504 1994 PRC HEBEI/HENAN NATIONAL 380.00 0.00 0.00 39.36 11.01 0.00 CN-PE-3540 1994 PRC LOESS PLATEAU 0.00 150.00 0.00 27.92 -21.54 0.00 CN-PE-3557 1994 PRC FOREST RESOURCE DEV 0.00 200.00 0.00 40.42 14.68 -30.70 CN-PE-3562 1994 PRC XIAOLANGDI MULTIPURPOSE 460.00 0.00 0.00 .48 .48 0.00 CN-PE-3586 1994 PRC SHANGHAI ENVIRONMENT 160.00 0.00 0.00 58.50 53.61 0.00 CN-PE-3593 1994 PRC SONGLIAO PLAIN ADP 0.00 205.00 0.00 24.64 -11.85 0.00 CN-PE-3595 1994 PRC RED SOILS II DEVELOP 0.00 150.00 0.00 40.31 17.62 0.00 CN-PE-3609 1994 GOC SICHUAN GAS DEV & CONSERVATION 255.00 0.00 0.00 121.72 72.23 0.00 CN-PE-3622 1994 SHANGHAI MUNICIPAL GOVT SHANGHAI MTP II 150.00 0.00 0.00 7.36 7.37 0.00 CN-PE-3626 1994 GOC FUJIAN PROV HIGHWAY 140.00 0.00 0.00 58.63 39.29 11.14 CN-PE-3633 1994 GOVERNMENT OF PRC TELECOMMUNICATIONS 250.00 0.00 30.00 14.55 44.55 -3.05 CN-PE-3641 1994 PRC YANGZHOU THERMAL POW 350.00 0.00 0.00 73.39 58.82 0.00 CN-PE-3644 1994 PRC XIAOLANGDI RESETTLEMENT 0.00 110.00 0.00 25.53 10.12 0.00 CN-PE-3473 1993 P.R.C. ZHEJIANG MULTICITIES 0.00 110.00 0.00 19.77 19.19 0.00 CN-PE-3512 1993 GOVT OF PEOPLES REP. OF C SHANGHAI PORT REST. 150.00 0.00 25.74 3.88 29.27 3.20 CN-PE-3518 1993 PRC GUANGDONG PROV. TRANSPORT 240.00 0.00 0.00 2.08 .06 0.00 CN-PE-3533 1993 TIANJIN IND. II 150.00 0.00 40.35 13.59 44.93 9.60 China: Second Fujian Highway Project Page 107 Project Appraisal Document
Difference Between expected Original Amount in US$ Millions and actual a/ Fiscal disbursements Project ID Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd 0.00 CN-PE-3559 1993 PRC AGRIC. SUPPORT SERVI 0.00 115.00 0.00 10.40 -1.16 0.00 0.00 CN-PE-3561 1993 PRC SICHUAN ADP 0.00 147.00 0.00 5.48 4.70 CN-PE-3567 1993 PRC EFFECTIVE TEACHING S 0.00 100.00 0.00 6.25 4.64 CN-PE-3570 1993 PRC RAILWAY VI 420.00 0.00 0.00 93.77 93.12 0.00 0.00 CN-PE-3580 1993 PRC SO.JIANGSU ENVIRON. PROTECT. 250.00 0.00 0.00 4.15 .48 0.00 CN-PE-3581 1993 PRC HENAN PROV. TRANSPORT 120.00 0.00 0.00 8.92 8.93 0.00 CN-PE-3592 1993 PRC REF. INST'L.& PREINV 0.00 50.00 0.00 18.45 18.48 CN-PE-3597 1993 PRC TAIHU BASIN FLOOD CO 100.00 100.00 0.00 47.43 43.08 0.00 0.00 CN-PE-3616 1993 PRC TIANHUANGPING HYDRO 300.00 0.00 0.00 65.95 50.41 0.00 CN-PE-3623 1993 PRC FINANCIAL SECTOR T.A 0.00 60.00 0.00 18.53 16.33 94.30 CN-PE-3627 1993 PRC GRAIN DISTRIBUTION P 325.00 165.00 0.00 316.84 314.96 .22 CN-PE-3632 1993 ROC ENVIRONMENT TECH ASS 0.00 50.00 0.00 10.70 11.06 CN-PE-3503 1992 ZOUXIAN THERMAL POWE 310.00 0.00 0.00 7.63 7.64 0.00 CN-PE-3534 1992 PRC ZHEJIANG PROV TRANSP 220.00 0.00 0.00 19.91 19.92 14.52 CN-PE-3564 1992 BEIJING MUNICIPALITY BEIJING ENVIRONMENT 45.00 80.00 0.00 25.28 20.02 12.22 -. 08 0.00 CN-PE-3565 1992 SHANGHAI METRO TRANS 0.00 60.00 1.69 1.32 -5.32 CN-PE-3568 1992 R.O.C. TIANJIN URB DEV & EN 0.00 100.00 0.00 15.49 12.42 CN-PE-3624 1992 MIN. OF PUBL.HEALTH INFECTIOUS DISEASES 0.00 129.60 0.00 31.45 26.83 26.79
Total 15,138.40 4,200.61 239.52 10,322.33 3,050.80 299.73
Active Projects Closed Projects Total Total Disbursed (IBRD and IDA): 8,723.74 12,531.17 21,254.91 of which has been repaid: 73.75 2,539.74 2,613.49 Total now held by IBRD and IDA: 19,025.68 9,624.01 28,649.69 Amount sold : 0.00 0.00 0.00 Of which repaid : 0.00 0.00 0.00 Total Undisbursed : 10,322.33 20.27 10,342.60
a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.
Note: Disbursement data is updated at the end of the first week of the month and is currently as of 30-Apr-99. China: Second Fujian Highway Project Page 108 Project Appraisal Document
Annex 19: Country at a Glance
China at a glance 4127199
: f ~~~~~~~~~~~~Eaus:Lower.;i f POVERTY and SOCIAL ASIa & middler China Pacific income Developnent diamond' 1997 Population, mid-year (millons) 1,227.2 1751 2,283 Life expectancy GNP per capita (Atlas melhoLdJUS$) 880 970 1,230 GNP (Atlas method, USS h/iIons) 1n05.4 1 .700 2,83 Average annual growth, 1992-98 Population(%) :1. 13 1.2 Laborforce(X 1.1 1.6 15 GNP Gross per primary Most recent estimate (laest yar available, 19924-8) capita enrollment Poverty (% of populatbon beow national poverty line) 7 Urban population (% oftota/lpopuiatWoe) 33 33 42 Life expectancy at birth (years) 70 69 69 Infantmorta:0lper t1000ive births) 32 37 36 Child malnuitition(% ofchtdknundferS) : 18 20 17 Access to safe water Access to safe water (%of populafton) 90 77 78 iliteracy (% ofpoputaton age 15+) : 19 186 :: 16:: Gross primary enrollment (% ofschooalage population) 120 118 114 Chlna Male 121 120 : 116 Lower-middle-income group Female 120 119 114
KEY ECONOMIC RATIOSand LONG-TERM TRENDS 1977 1987 1t97 198ss Econonmicratiose GOP (USS billiorrs) 172.3 2682 902.0 956,1 Gross domestic investmentVGOP 28.5 36.1 38.2 39.0 Trade Exports of goods and serviceslGOP 4.8 13.8 23.0 21.7 Gross domestic savings/GDP 29.0 36.2 42.71 43.6 Gross national savingslGDP 29.0 36.2 394 417 Current account balance/GDP 0.3 0.1 2.9 2.7 Domestic Investment Interest payments/GDP .. 0.4 0.7 Savin s Total debWGDP :. 13.2 16.3 16.7 Total debt service/exports . 9.56 8.7 9,9 Present value of debtlGDP .. . 14.9 Present value of debttexports .. .1 63.9 Indebtedness 197747 1988-9S 1997 1008 1009-3 (average annual gro wth) GDP 9.8 10.3 8.8 7.8 7.0 China GNP per capita 8.5 8.8 7.4 6,5 8.1 Lower-middle-income group Exports of goods and services 18.4 14.6 23.1 4.6 4.2
STRUCTURE of the ECONOMY 1977 1987 1997 1998 Growth rates of output and investmrent X) (% of GDP) Agriculture 29.4 26.8 18.7 17.6 Industry 47.1 43.9 49.2 49.3 20 Manufacturing 31.1 34.4 37.3 37.0 10 Services 23.4 29.3 32.1 33.1 Privateconsumption 63.4 51.3 45.7 43.7 93 94 95 90 97 98 General govemment ronsumption 7.5 12.5 11.6 12.8 1GD1 GDP Imports of goods and services 4.2 13.5 18.5 17.1
197747 1988-98 1997 1998 Growth rates of exports and Imports (%) (averageannual growth) Agriculture 6.4 4.4 3.5 3.5 40 Industry 10.9 14.1 10.8 8.8 .30 Manufarturing 11.4 13.4 9.9 7.8 20 Services 12.7 8.6 8.3 8.5 Private consumption 9.7 8.6 6.2 5.1 General govemment consumption 9.0 9.9 8.2 7.8 o Gross domestc investment 10.7 11.7 5.6 10.0 93 D4 ss 9s 97 98 Imports of goods and services 19.2 12.5 12.7 1.5 - Exports lmparts Gross national product 10.0 10.0 8.5 7.5
Note: 1998 data are preliminary estimates. This table was produced from the Development Economics central database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond vill be incomplete. China: SecondFujian HighwayProject Page 109 Project AppraisalDocument
China
PRICESand GOVERNMENTFINANCE 1977 1987 1997 1998 Inflation (%) Domestic prices 3 (% change) 30 Consumerprices .. 7.3 7.9 -0.8 20 Implicit GDPdeflator 1.6 5.1 1.2 -1.8 10
Govemment finance 0 (%of GDP,indudes cuffent grants) 93 94 95 9s 97 9s Currentrevenue .. 21.5 12.0 13.1 -10 Current budgetbalance - 4.2 0.6 -2.2 - GDPdetator -CPI Overallsurplus/deficit .. -2.1 -1.5 -4.0
TRADE (US$Millions) 1977 1987 1997 1998 Exportand import levels (USSmillions) Total exports (fob) .. 39,437 182,670 183,610 2C0000 Food .. 4,781 11,054 9,960 Fuel .. 4,544 6,987 2,914 150,0000 sL Manufactures .. 26,206 158,767 161,935 Total imports (cif) .. 43,216 142,361 140,226 1t00000" " I , Food .. 3,055 6,308 6,119 s0000013 Fuel and energy .. 539 10,306 9,275 Capital goods .. 21,110 57,930 58,515 0 92 92 94 95 90 97 90 Export priceindex (1995=100) . 75 95 91 Import price index (1995=100) . 75 89 87 a Exports a Imports Termsoftrade(1995=100) .. 99 107 105
BALANCE of PAYMENTS (UJS$millions) 1977 1987 1997 1998 Currentaccount balanceto GDPratio (%) Exports of goodsand services 8,550 39,120 207,253 207,140 4 Importsof goodsand services 8,148 38,880 166,755 163,266 Resourcebalance 402 240 40,498 43,874 2 Net income 82 -164 -15,900 -19,842 fl U ,- II Netcurrenttransfers 0 249 1,832 2,163 0 93 92594 95 90 97 go Current accountbalance 484 325 26,430 26,195 2 Financingitems (net) -390 4,458 9,427 -22,662 Changesin net reserves -94 -4,783 -35,857 -3,533 _ Memo: Reservesincluding gold (USSmillions) .. .. 143,363 Conversionrate (DEC,locaWUS:) 1.9 4.5 8.3 8.3
EXTERNAL DEBT and RESOURCEFLOWS 1977 1987 1996 1997 (US$millions) Compostion of total debt, 1997(USS millions) Total debt outstandingand disbursed .. 35,340 128,817 146,697 IBRD .. 1,427 7,616 8,239 A: 8,239 IDA .. 1,330 7,579 7,830 0:31,484 B:7,830 Total debt service .. 3,852 15,756 18,445 4 D: 2,904 IBRD .. 208 840 858 IDA .. 12 73 81 - E20,782 Compositionof net resourceflows Officialgrants .. 209 249 228 Officialcreditors .. 626 4,401 4,315 I\ Private creditors .. 5,462 6,454 8,134 Foreign directinvestment .. 2,314 40,180 44,236 Portfolioequity .. 0 3,466 8,457 F:75,478 World Bank program Commitments .. 1,306 1,900 2,425 A- IBRD E- Bilateral Disbursements .. 702 2,097 2,275 B - IDA D - Othermultetateral F - Pnate Principalrepayments 97 364 377 c- IMF G - Shorttern Net flows .. 605 1,734 1,898 Interest paymrents .. 124 549 562 Net transfers .. 482 1,185 1,335
Note: This table was producedfrom the DevelopmentEconomics central database. 4127199 __ _ D~~~~~~~~~IRD29902 l ~~ ~ ~~70 01 '110 I2 0
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