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Inner Mongolia Sustainable Cross Border Development Investment Program (RRP PRC 51192) SUPPLEMENTARY DOCUMENT to the ECONOMIC ANALYSIS

Inner Mongolia Sustainable Cross Border Development Investment Program (RRP PRC 51192) SUPPLEMENTARY DOCUMENT to the ECONOMIC ANALYSIS

Inner Sustainable Cross Border Development Investment Program (RRP PRC 51192) SUPPLEMENTARY DOCUMENT TO THE ECONOMIC ANALYSIS

1. Introduction and background

1.1 PRC–Mongolia Trade and Cooperation

1. Since the establishment of trade relations between the People’s Republic of (PRC) and Mongolia in 1951, the two countries signed a border trade treaty in 1962. The two countries have conducted in-depth cooperation in economic and trade aspects, and their scope has continued to expand. PRC has become Mongolia's largest trading partner. In 2018, the bilateral trade volume between PRC and Mongolia reached $8.54 billion, of which the PRC’s export volume was $1.99 billion and the import value was $6.54 billion. Autonomous (IMAR) has accounted for 70% of Mongolia’s import trade from PRC, and the IMAR’s import and export trade to Mongolia accounts for more than 40% of PRC-Mongolia trade.

2. According to the statistics of PRC–Mongolia economic and trade cooperation (Table 1), PRC continues to maintain Mongolia's largest trading partner, largest export market and largest import market in 2017. Mongolia's exports to PRC mainly include mineral products, animal fur raw materials and their finished products. Mongolia's imports from PRC mainly include gasoline, diesel, food, machinery and equipment, summarized is Table 1.

Table 1: PRC–Mongolia Economic and Trade Cooperation Data for 2012-2017 Main Indicator 2013 2014 2015 2016 2017 China export ($ billion) 2.450 2.216 1.572 0.988 1.248 China import ($ billion) 3.506 5.093 3.779 3.619 5.118 Source: China Customs Statistical Data.

1.2 IMAR and Mongolia Port and Trade

3. According to the statistics of Inner Mongolia Autonomous Region’s (IMAR) Customs, in 2018, the total import and export volume of IMAR reached CNY103.435 billion, a year-on-year increase of 9.9%. The growth rate of import and export was 0.2 percentage points higher than the national total, and the growth rate ranked 15th in the country. Among them: the cumulative import volume was CNY65.571 billion, a year-on-year increase of 7.5%; the cumulative export volume was CNY37.864 billion, an increase of 14.4%. According to the US dollar, the total import and export value of IMAR was $15.69 billion, up 13.1% year-on-year, of which: the cumulative import value was $ 9.94 billion, up 10.4% year-on-year; the cumulative export value was $ 5.75 billion, up 17.9% year-on-year.

4. IMAR has 18 open ports approved by the State Council, including four airports, namely , Hailar, , Ordos; two land(rail) ports, respectively, and Manzhouli; 12 land (road) ports, they are Manzhouli, Erenhot, Ceke, Ganqi-Maodu, Jungdadabuqi, Mandula, Abdu, Arhashate, Heishantou, Shiwei, , Uliji.

5. On the border line of 4,221 kilometers (km) in IMAR, the borderline between PRCa and Mongolia is 3,103 km. There are 10 ports developed by IMAR for Mongolia: Erenhot Railway Port, Erenhot Highway Port, Ceke Highway Port, Ganqi- Maodu Highway Port, Junggadabuqi Highway Port,Arhashate Highway Port, Mandula Highway Port, Abduge Waterway Port, Arxan Highway Port, Bagemaodu Highway Port. There is an international airport opening to Mongolia: Hohhot 2

Airport. Since the reform and opening up, the opening of ports in IMAR has been greatly developed. Most of the border cities have their own ports as shown in Table 2.

Table 2: Main Port on Border of PRC–Mongolia Approval Corresponding Port Name Mode Location Feature Organization Port Class I Railway State Council Zamyn Uud Connecting Jier Railway Perennial Erenhot PRC–Mongolia border Class I Highway State Council Zamyn Uud Perennial Class I Ceke Highway -cenozoic State Council Shivee Khuren Perennial

Hulun Buir Class II EbudugeJua Waterway IMARG Bayankhoshuu PRC–Mongolia border Perennial Class II Arxan Highway Arxan State Council Cymber Seasonal Class I GanqiMaodu Highway PRC–Mongolia border State Council Gashuun Sukhait Perennial Hulun Buir Class I Arkhashaat Highway State Council Khavirga PRC–Mongolia border Perennial Class I Juangadabuqi Highway State Council Bichigt Dong Wuzhu MuqinQi Perennial Damaoqi County, PRC– Class II Mandula Highway IMARG Khangi Mongolia border Seasonal BageMaodu Highway PRC–Mongolia border IMARG Class II BodonMaodu Source: Inner Mongolia Department of Commerce Website and China Port Statistical Book 6. In 2018, the import and export freight volume of ports in IMAR was 91.336 million tons, an increase of 4.9% year-on-year, and the growth rate dropped by 5.4 percentage points from the previous year. The import freight volume was 66.843 million tons, up 3.2% year-on-year; the export freight volume was 12.5953 million tons, up 22% year-on-year. The passenger traffic volume of import and export in IMAR was 6,212,500, an increase of 4.4% year-on-year; the number of inbound and outbound vehicles was 1,844,400, an increase of 0.5%. The distribution of freight volume in the main ports on the PRC–Mongolian border over the years is shown below.

7. The import and export freight volume of the Mongolian port was 59.335 million tons, a year-on-year increase of 6.4%, of which: the import freight volume was 50,774,400 tons, an increase of 2.7%; the export freight volume was 8,560,900 tons, an increase of 35.5%.

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Figure 1 – Port Freight Volume from 2003 to 2018

8. Considering status quo and demand of the nine ports on the border between PRC (Inner Mongolia) and Mongolia, this multi-tranche financing facility program involves Erenhot Port, Mandula Port, Ganqi-Maodu Port, Arxan Port and Uliji Port. The first tranche of selected projects is located in Erenhot Port and Mandula Port.

1.2.1. Erenhot

9. Erenhot is a border city on the border between China and Mongolia in IMAR. It is 9 km away from Zamyn-Uud, the largest port city in Mongolia. It is the largest road and railway port in PRC. From the analysis of the background data in the first part, the import and export volume of the Erenhot port has basically increased steadily in recent years, accounting for 27.9% of the cargo volume of the IMAR. In June 2014, the State Council officially approved the establishment of the Erenhot Key Development and Open Experimental Zone in IMAR. In August 2014, the two sides agreed to establish a cross-border economic cooperation zone in places such as Zamyn- Uud in Mongolia. PRC and Mongolia signed the Memorandum of Understanding on the Establishment of PRC–Mongolia Economic Cooperation Zone (ECZ), which clarified the objectives, principles, methods, mechanisms and overall planning of the development of cross- border economic cooperation zones and made top-level design at the national level. The Erenhot– Zamyn-Uud ECZ in PRC and Mongolia was officially put on the agenda after 2015. At present, the general regulations and industrial planning drafts have been submitted to relevant departments. At the end of 2018, the city's population was 71,868, with a regional (GDP) of CNY11.79 billion (2016 price). The total import and export volume of the year reached CNY23.798 billion, a year-on-year increase of 14.9%, of which: imports were CNY7.029 billion, up 10.7% year-on-year; exports were CNY6.769 billion, up 27% year-on-year. Among them, the import and export volume of small-scale border trade was CNY6.611 billion, up 17.8% year-on-year, and the import completed CNY5.398 billion, up 16.3% year-on-year. The export volume was CNY1.213 billion, up 25% year-on-year. Small-scale border trade accounted for 27.77% of total import and export, down 0.14 percentage points from the previous year. Imported bulk cargoes are mainly , wood, copper ore, petroleum, and pulp. Export commodities are mainly carbon electrodes, asphalt and steel structures. In 2018, the number of inbound and outbound ports was 2,440,800, a year-on-year increase of 9.27%. Among them, 1,250,500 people 4 entered the country, an increase of 9.16% over the same period of last year; the number of exits was 1,222,000, an increase of 9.39%. The per capita disposable income of all residents was CNY43,750, an increase of CNY1,964 over the previous year, an increase of 4.7% over the same period of last year.

1.2.2. Mandula

10. Mandula Port is the nearest port of Hohhot and to , corresponding to Mongolian Gobi and South Gobi Province. At the beginning of the establishment of the port, Damaoqi County clearly defined the port development as developing and importing Mongolian and even Russian mineral resources in accordance with the working principle of Baotou Steel and Baotou Steel. To this end, Damaoqi included the port project in the eight pillar industries of the whole banner and five key projects to fully cultivate. A working group was set up to develop and import Mongolian mineral resources, build the Baiyun Obo-Mandula Port- Mongolian Zhuen Bayin Railway and the construction of the three major port projects of the Animal Products Processing Zone, and actively introduce large enterprises. Develop large projects, focus on manpower and material resources, do everything possible to advance, and make progress in stages. In February 2009, the State Council agreed that the Mandula Port will be open, and the port nature is the highway passenger and cargo transportation port that is open during the bilateral season. In the same year, the Mandula Port began to temporarily open and import Mongolian mineral products. In April 2015, the State Council approved the opening of the Mandula Highway Port with the letter of the State Council on the approval of the IMAR Mandula Highway Port to Open to the Outside World (2015) Document No. 70. In December 2015, the nature of the port officially became bilateral.

1.2.3. Port Analysis

11. Table 3 presents a comparative analysis of the ports of Mandula Port, Erenhot Port and Ganqi-Maodu Port.

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Table 3: Comparisons between Mandula Port, Erenhot Port and Ganqi-Maodu Port

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2. Demand Analysis

12. Demand analysis establishes the existing and future demand services to be provided by the project and offers a method to estimate the project’s economic benefits. The demand analysis of the project will make reasonable analysis and assumptions based on the existing status and related planning.

13. The investment program will finance four outputs. These outputs are deemed to be best financed by a multitranche financing facility (MFF) to achieve the expected outcomes. There will be 3 tranches spread over a period of 10 years. Tranche 1 (the subject of this analysis) will have 6 subprojects which have civil works, goods and equipment, small- and medium-term (SME) development, and institutional capacity building components. Detailed description of Tranche 1 investments is discussed below.

Output 1 includes: (i) Subproject 1: Inspection Area Construction for the PRC–Mongolian Erenhot– Zamyn-Uud ECZ, including (a) construction of inspection area; (b) establishment of smart port management platform, (c) construction of cross-border economic cooperation center; (d) establishment of fencing, alarming and monitoring system in ECZ; and (e) construction of clean energy heating and pipe network for the ECZ; (ii) Subproject 2: Upgrading the Mandula Port International (Highway) Logistics Park, including (a) expansion of port freight passage roads, (b) construction of service area, and (c) construction of customs supervision center; (iii) Subproject 3: Upgrading medical equipment and facilities for the Erenhot International Traditional Chinese and Mongolian Medicine Hospital (the Hospital), including procurement of 50 sets of medical equipment and facilities.

Output 2 includes: (i) Subproject 4: Ecological Restoration for the PRC–Mongolian Erenhot–Zamyn- Uud ECZ, including (a) ecological protection greenbelt along the central axis, including reclaimed water storage and irrigation facilities, and landscape lighting and (b) ecological protection greenbelt along roadsides, including reclaimed storage and irrigation facilities; (ii) Subproject 5: Waste collection and transfer stations, and sanitation intelligent cloud platform for the ECZ, including (a) construction of one waste collection and transfer sanitation, (b) procurement of supporting facilities, and (c) establishment of sanitation intelligent cloud platform.

Output 3 includes: (i) Subproject 6: Establishment of quarantine station in Mandula Port and expansion of breeding bases, including (a) upgrading stud sheep breeding base; (b) construction of a quarantine station in Mandula Port; (c) upgrading five sheep farming bases; (d) establishment of product traceability and management system; (e) establishment of PAP; (f) construction of sheep slaughtering, processing and logistic park; and (g) project management and monitoring

A. Subproject 1: Inspection Area Construction for the PRC–Mongolian Erenhot– Zamyn-Uud ECZ

14. The cooperation zone is located in the adjacent border area on both sides of the border between PRC and Mongolia, close to the Erenhot and Zamyn-Uud ports, with a planned area of 7

9 km2 for the PRC region and 9 km2 for the Mongolian region, totaling 18 km2. The strategic positioning is the three districts (the leading area of comprehensive strategic cooperation between PRC and Mongolia, the border free trade cooperation experimental zone, the cross-border tourism demonstration zone), the two bases (the international logistics distribution service base and the import and export processing base for China, Mongolia, and European countries), and one hub (an important hub on the PRC-Mongolian economic corridor). The developing targets are planned as followings:

i) By 2020, the main facilities of the cooperation zone will be basically completed, forming a relatively complete and unified infrastructure for roads, water supply and drainage, electricity, heat, natural gas, communications, and purse seine; software and hardware facilities in the start-up area will be further improved, and the results of investment promotion will be remarkable. The industrial cooperation has achieved remarkable results, the policy system for coordinated development has basically taken shape, the cross-border cooperation model has been initially established, and the institutional mechanism innovation capability has continued to increase. The total GDP of the cooperative zone will reach to CNY11 billion, and the total import and export trade will reach to $5 billion. ii) By 2025, the infrastructure of the cooperation zone will be more perfect, the port functions will be more complete, the system of cross-border economic cooperation will become more mature, the role of the international cooperation platform will be highlighted, the cooperation and development will be further promoted, and the spatial structure of sustainable development will basically be formed. The green industry system featuring logistics, processing and manufacturing, cross-border tourism and emerging services has basically been established, and PRC-Mongolia cooperation has reached a new level. The comprehensive economic strength of the region has been significantly enhanced. The GDP of the cooperative zone has reached CNY21.5 billion, with an average annual growth rate of over 15% and a total import and export volume of $8 billion. iii) By 2035, the development and construction of the cooperation zone will be fully completed, forming a cross-border economic cooperation model with high degree of openness, strong innovation capability, and reference for promotion. The green industry system will be complete, industrial scale continuously improved, industrial structure is continuously optimized, and regional economic development is achieved. The quality and efficiency of the cooperation zone will be further improved. The regional production will exceed CNY30.5 billion, and the total import and export volume will reach $10 billion.

15. The subproject will be all served in the PRC–Mongolia ECZ. The demand analysis of the project is based on the development goals of the Cooperation Zone.

16. The subproject includes: (i) construction of inspection area, (ii) establishment of intelligence port management system platform, (iii) construction of regional cooperation center, (iv) establishment of closed fence and alarm monitoring system, and (v) construction of clean energy heating and pipe network for the ECZ. The location of these components are shown in following maps: 8

PRC-Mongolia Cross Border Economic Cooperation Zone

PRC-Mongolia Cooperation Center

Inspection Area Construction Project Intelligence Port Management System Platform Project

Erenhot Downtown

Map 1: Location of inspection area construction for the PRC–Mongolian Erenhot–Zamyn- Uud ECZ Map

17. The construction content of inspection area construction component is mainly the joint inspection building, inspection center, supporting service building, parking lot, etc. At the same time, the intelligent port management system platform component will be built in the inspection area. The inspection area and the construction site of the smart port entered the base of the cross- border economic cooperation zone in Erenhot. The construction project of the ECZ is mainly to build the PRC–Mongolia regional cooperation center. The construction site is on the south side of the cross-border economic cooperation zone, north to the Dongweiqi road, west to the Zhongyangdajie Road, and east to the Jinger Road. The closed fence is around the boundary between the peripheral boundary of the PRC region of the cross-border economic cooperation zone.

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Closed Fence

Map 2: Planned Closed Fence Map

Map 3: Proposed Closed Fence (Red Dotted Line) Map

18. Construction of inspection area project. The function and area of the Joint Inspection Building are measured based on the needs of personnel and cargo entering and leaving the cooperation area in the future. According to Master Plan of the zone, by 2030, there will be 60,000 persons working in the PRC Park of the zone and 3 million persons accessing the zone. The capacity of joint inspection center is 12,000 persons*time/day. The construction scale is designed following demand. The joint inspection building includes 5,524 m2 of inspection and quarantine, 5,359 square meters (m2) of border inspection, 5,727 m2 of customs inspection, and 3,390 m2 of entry and exit hall. The west side of the Joint Inspection Building is the inbound and outbound 10 cargo joint inspection area, which has a customs clearance area for trucks, a truck bayonet with 12 in and 12 out, a functional area such as a truck inspection area and related business buildings. On the east side of the Joint Inspection Building is a passenger car entry and exit inspection passage, a social vehicle parking lot, a 6-in and 6-out passenger car bayonet, a taxi parking area, a bus parking lot, and an internal vehicle parking lot. The north and south of the Joint Inspection Building is the evacuation square. The inspection center is a four-story building with a building area of 4,000 m2 and a building height of 15,900 m. The supporting service building is mainly a two-story office building with a building area of 2,000 m2 and a building height of 8,100 m.

19. Establishment of smart port management platform project. The smart port management system platform project mainly includes one application, two centers, three platforms, and five building intelligent systems. One application is the public service window of the smart port. The two centers are the intelligent port monitoring and dispatching center and the cloud computing big data center. The three platforms refer to the passenger intelligent customs clearance platform, vehicle-only customs clearance platform, logistics intelligent supervision platform, and five intelligent buildings. The system includes security monitoring system, multimedia conference room system, information release system, public address system, and intelligent parking lot management system.

20. Construction of cross-border economic cooperation center Project. The project is mainly for administrative office, exhibition and supporting services, and provides services for enterprises in the cooperation zone. The project covers an area of 20,000 m2, including an eight- story business reception center of 6,000 m2, a 1-story exhibition center of 3,500 m2, a five-story medical security center of 3,500 m2, and a five-story supporting service center of 7,000 m2.

21. Establishment of fencing, alarm and monitoring system in the ECZ. It is planned to build a closed fence and alarm monitoring system on the border of the Chinese cooperation zone of 13.5 km. Table 4 presents the indicators.

Table 4: Main Indicator of PRC-Mongolia Regional Cooperation Zone Items Unit 2020 2030 2035 Total GDP of the Zone CNY million 11,000 21,500 30,500 GDP of the Zone, China Park CNY million 3,500 4,500 6,000 Trade value of import and export $ million 5,000 12,000 20,000 Trade value between China and Mongolia $ million 4,000 9,000 12,000 Trade value of e-commerce $ million 1,000 2,000 5,000 Total investment on the Zone $ million 2,500 3,200 4,000 Person accessing the Zone of China Zone million person*time 0.45 0.92 1.39 Freight volume of China Zone million ton 2.27 5.63 13.38 Unit value of freight of China Zone CNY/ton 6,800 7,418 5,667 Import and export value of China Zone CNY million 15,455 41,749 75,803 GDP = gross domestic product. Source: Master Plan of PRC–Mongolia Regional Cooperation Zone and TRTA consultants.

22. Construction of clean energy heating and pipe network for the ECZ. Due to the unique climate and wind resources of Erenhot, the annual average wind speed is about 17 meters per second, and the wind power generation period is 7,980 hectare. Electricity-based clean energy is the best choice as a heat source for cross-border economic cooperation zones. Due to the long heating period in Erenhot, the proportion of cogeneration units in the heating period is large. The operation mode of the heating unit “heat-set” determines that the peak-shaving capability is much lower than that of the conventional thermal power unit. At the same time, the autumn and winter wind resources in the area are abundant, and the wind speed at night is 11 generally high during the heating period. At the same time, the nighttime heating period is also the time for the cogeneration unit to provide a large heat load, but at this time the whole network power load is at a low point. During the period, therefore, the heating period becomes the most prominent period of contradiction between wind power and heating units at night and the resulting wind power abandonment is also the most serious. The electric boiler heat storage system can effectively solve the wind power abandonment problem during the heating period and improve the wind power consumption capacity of the power grid.

23. The heating scope of this project is the core area of the main PRC-Mongolian ECZ (the short-term planned area is 3.0 km2). The first phase of the project mainly includes construction project of inspection area, regional cooperation center of PRC and Mongolia, and construction project of warehousing and logistics center of core area. The total area of the project is 92,400 m2. The second phase of the project is based on the planned area of the core area of the PRC– Mongolia ECZ, with a total area of 300,000 m2. Among them, 92,400 m2 includes 33,328 m2 of inspection area construction project, 20,000 m2 of PRC-Mongolia regional cooperation center, and 39,100 m2 of core area warehousing and logistics center of economic cooperation zone. The maximum thermal load is 8.09 MW according to the heating area, and the average thermal load is 7.41296 megawatt (MW). According to the requirements of the Erenhot Ecological and Environment Bureau, in ECZ only approves -fired boiler houses with a scale of more than 10 tons (i.e., 20 tons), with a heating capacity of 14 MW. Therefore, the first stage heating source in the PRC-Mongolia ECZ should not use coal-fired hot water boilers, that is, the project uses electricity-based clean energy as a heat source and uses electric boiler heat storage systems.

Map 4: Site Position of the Heating Project

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B. Subproject 2: Upgrading the Mandula Port International (Highway) Logistics Park

24. The quantity of customs declarations entering and leaving the Mandula Port in 2018 was 3.09 million tons. Due to the limitation of port capacity, the actual amount of goods passed was 1.547 million tons. Imported goods are transported by Mongolian trucks and exported by Chinese trucks. According to the on-site investigation, Mongolian trucks carried an average of 100 tons, and Chinese trucks carried an average of 35 tons. The road connecting the port and the integrated logistics area is a two-way two-lane road, and the border inspection is in the middle of the road. After the imported goods enter the customs, only the freight passages to be expanded are transported to the integrated logistics area for inspection and storage. Due to inspection and logistics storage constraints, about half of Mongolian trucks need to wait in the logistics park service area, and the remaining half can return on the same day. Since the goods at the Mandula port are mainly coal, and the quantity of exported goods is small, the return journey of Mongolian trucks is empty. In 2018, the average number of Mongolian trucks on the proposed highway is 136, and the average daily number of Chinese trucks is 4. Since the current logistics service area has not been completed, the trucks are temporarily parked on the unhardened site at random, and there are many safety hazards; the driver lives in a simple temporary shed. According to relevant regulations, the temporary shed can only be used for 2 years.

25. According to the overall plan for the development of Mandula Port (2016–2030), the total area of the port construction area is 15.95 km2. The future port will establish a “3+N” industrial system based on port logistics and warehousing as the core, business and tourism, and two-way processing industry. It is estimated that the port cargo volume will reach 15 million tons by 2020.

26. According to the implementation progress and planning of the project, the time for the port cargo volume to reach 15 million tons will be postponed to 2023, and the port cargo volume will be set to grow at an average annual rate of 5% between 2023 and 2030. After 2030, the port cargo volume will grow at an average annual rate of 3%. At the same time, due to the improvement of traffic capacity, customs declaration goods will all enter and exit from Mandula Port.

27. The subproject includes: (i) expansion of port freight passage roads, (ii) construction of service area, and (iii) construction of customs supervision center. Demand analysis will cover three components.

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Map 5: Mandula Port Master Plan Map

28. Expansion of port freight passage roads project. The Mandula freight road connects the Mandula port and the integrated logistics area while serving the area along the route. This project is a dedicated channel for freight transportation, and passenger transportation is undertaken by S211 highway. The red line in the map below is the proposed road. The total length of the road is 6141.84 m, the road pavement is 18.0m wide, the roadbed is 25.0m wide, and the roadway is four lanes. The pavement is made of asphalt concrete pavement. Through comparative analysis, it is proposed to use the two-wide widening mode for reconstruction. 14

Map 6: Plane Figure of Mandula Freight Channel Project.

29. Construction of service area project. In the future, the proposed project will mainly meet the needs of parking and accommodation for trade, transportation companies and drivers from the port. The service area includes a comprehensive service building, an auto repair center, a parking lot and related facilities. The project design has 560 large-scale parking spaces for the Mongolian side, 353 large parking spaces for the PRC side, and 268 parking spaces for small cars. The comprehensive service building design has an average daily reception capacity of 500 15 people and a building area of 8,679.28 m2. One auto repair center with a building area of 1,860.64 m2.

30. Construction of customs supervision center project. The focus of the construction of the supervision zone is to supervise the imported coal. The design content includes a comprehensive office building in the customs supervision area and a fully enclosed storage shed. According to the coal import volume and regulatory requirements, it is proposed to build a three- story comprehensive office building (with a construction area of 4,125.62 m2) and a fully enclosed storage greenhouse (with a construction area of 40,645.03 m2) with a coal storage capacity of 600,000 tons. The demand analysis is given in Table 5.

Table 5: Demand Analysis of Upgrading the Mandula Port International (Highway) Logistics Park Output Of which, Number of Parking Traffic Mongolian Traffic (AADT) Coal Amount Sampled Year Lots truck Vehicle Vehicle PCU unit Tons 2023 1,330 1,292 10,488 776 3,092,059 2030 1,872 1,818 14,760 991 4,750,000 2035 2,170 2,108 17,112 1,163 4,750,000 2040 2,514 2,442 19,824 1,163 4,750,000 2045 2,914 2,832 22,984 1,163 4,750,000 AADT = annual average daily traffic, PCU =Passenger car unit. Note: Since the Mongolian truck has a weight of 100 tons, it is three times that of a Chinese large truck. In terms of conversion to PCU, this factor is considered to be three times factor. Source: feasibility study report.

C. Subproject 3: Upgrading Medical Equipment and Facilities for the Hospital

31. The Hospital covers an area of 120,000 m2, with a construction area of 25,000 m2, 188 beds and 131 open beds. There are 38 departments, 16 clinical departments, 7 medical technology departments, 8 medical auxiliary departments, and 7 administrative departments. There are 241 employees, including 3 masters, 54 undergraduates, and 199 health professional technicians, including 27 associate professors and 49 intermediate titles. The hospital's existing medical equipment includes 64 rows of 128-slice spiral CT machine, 6-slice CT, magnetic resonance imaging system (MRI), digital X-ray machine (DR), color Doppler ultrasound diagnostic equipment, digital gastrointestinal machine, mobile C Arm, mammography machine, automatic biochemical analyzer, chemiluminescence instrument, automatic blood cell analyzer, laparoscope, electronic gastrointestinal mirror, colposcope and so on. In 2014, the hospital established a friendly and cooperative relationship with the hospital in Zamyn-Uud, Mongolia. It accepted the training of medical personnel in Mongolia and implemented the policy of 20% reduction of medical treatment for patients in Mongolia. The foreign patient service department was set up in the lobby of the first floor of the hospital. Two medical staff who are proficient in are responsible for the reception, translation, triage, medical guidance and preferential procedures for Mongolian patients. In 2018, the number of outpatients was about 87,432, an increase of 9.28% over the previous year. The number of inpatients was 2,987, an increase of 5.4% over the previous year. Some 687 cases of various types of surgery were completed, an increase of 15.08% over the previous year. 45.7%, the average hospitalization day was 6.3 days, which was 1.56% lower than the previous year. The business income was CNY36 million, up 14.24% from the previous year. The emergency consultation time was 20907 person- times, the average daily consultation was 57.28 person-times, and the newborn baby was 623 people. In the previous year, the growth rate was 4.0%, and the drug charges were implemented at a price difference of 0%. The number of medical examinations was about 11,700, the medical 16 examination income was about 2 million, the average cost of outpatient services was CNY100.5, and the average hospitalization cost was CNY5,445.15. The hospital has not updated the equipment since 2007, most of which are severely aging, and many large equipment have been used for more than 12 years. The obsolescence of the equipment leads to the inability of inspection and surgery. As a result, in 2018, there were 600 Chinese referrals. As an indicator of the medical emergency, the number of inpatients is assumed as emergency patients normally need to stay for thorough evaluation and treatment. Compared to 2,914 cases requiring more serious attention (i.e., Chinese inpatients), the number of referrals or those who cannot be admitted for treatment, would comprise about 20%.

32. The main project component includes: purchasing of 50 sets of medical facilities and equipment for the Hospital. Appendix C presents the list of medical equipment to be procured for the hospital subproject.

33. According to current status, the hospital’s developing target (bed utilization rate will increase from 46% to 80%) and Feasibility Study Report (FSR), the demand analysis of the hospital is presented in Table 6.

Table 6: Demand Analysis of the Hospital Items 2020 2025 2026 2027 2028 2044 GR of outpatient (without project) 9% 9% 9% 9% 9% 0% GR of outpatient (with project) 9% 0% 0% 0% 0% 0% No. of outpatient (without) 103,878 159,829 174,214 189,893 206,983 206,983 No. of outpatient (with) 131,207 218,758 218,758 218,758 218,758 218,758 GR of emergency outpatients (without) 3% 3% 3% 3% 3% 0% GR of emergency outpatients (with) 3% 4% 4% 4% 4% 0% No. of emergency outpatient (without) 22,180 25,713 26,484 27,279 28,097 28,940 No. of emergency outpatient (with) 22,180 26,986 28,065 29,188 30,355 31,569 Ave days in hospital-without project (days) 6.3 6.3 6.3 6.3 6.3 6.3 Ave days in hospital-with project (days) 6.3 9.8 9.8 9.8 9.8 9.8 Days per year (without) 314 314 314 314 314 314 Days per year (with) 324 365 365 365 365 365 Bed utilization rate (without) 46% Bed utilization rate (with) 50% 80% 80% 80% 80% 80% Total number of beds opened (without) 131 131 131 131 131 131 Total number of beds opened (with) 141 188 188 188 188 188 Inpatient (without) 2,987 2,987 2,987 2,987 2,987 2,987 Inpatient (with) 3,629 5,602 5,602 5,602 5,602 5,602 (Outpatient + Emergency)/inpatient 42 45 45 45 45 45 Ave = average, GR = growth rate. Source: Feasibility study report.

D. Subproject 4: Ecological Restoration for the PRC–Mongolian Erenhot–Zamyn- Uud ECZ

34. Erenhot has strong wind and all year round, and the construction of windbreak forest has always been a key project of urban construction. In 2000, the implementation of the wind and sand source control project, fence protection and other grassland protection construction of 1.43 million mu, through the enclosure and other measures to effectively protect the grassland vegetation, improve the comprehensive coverage of grassland irrigation and grass was commenced. In 2011, we implemented the grassland ecological protection subsidy and reward policy, strictly implemented the grass-animal balance and the grazing prohibition system, controlled the number of livestock heads, and reduced the grassland ecological pressure. In 2013, the implementation of the urban shelterbelt project was carried out, and the windbreak forest and economic forest area of 16.8 km2 were used for three years to effectively improve the regional 17 ecological environment. As of 2016, the green area around the city has reached more than 5 million m2. From 2011 to 2016, Erenhot invested a total of CNY1.3 billion for landscaping and landscape construction, and completed the greening upgrades inside and outside the city. At present, the urban green coverage area reaches 11.38 million m2, the green coverage rate is 42.14%, the park square green space is 2.87 million m2, the residential area and unit affiliated green space is 500,000 m2, the shelter forest green space is 3.59 million m2, and the production green space is 660,000 m2. Road green space of 3.76 million m2, gradually formed the "four horizontal and three vertical, multi-point scattered" urban green space system.

35. According to the Erenhot City Master Plan (2017–2035), the Beijing–Tianjin Sandstorm Source Control and Urban Protection Forest Project will be implemented in depth. The Beijing– Tianjin Sandstorm Source Control Project will seal 70,000 mu of forests for afforestation, 0.02 million mu of artificial afforestation, and enclosure of 150,000 mu of fences.

36. The design scope of this project is to start the “One Heart and One Axis” ecological green belt and the roadside protective green belt in the core area. The “One Heart and One Belt” ecological green belt, with an area of about 20.5 ha, is distributed in strips. The roadside ecological protection green belt has a total area of about 15 ha and is located on both sides of the red line of the road. The “One Heart and One Belt” ecological green belt is shown in green in following map. The roadside ecological protection green belt is shown on the small map in the lower right corner. It is detailed description is as follows:

37. According to the "PRC–Mongolia Erenhot–Zamyn-Uud ECZ (Chinese Park) Master Plan" (2019–2035), the roadside protection green bandwidth belts in the core area are pre-launched in four levels of 15m, 10m, 8m and 5m. The specific green areas are 5.59 ha, 3.57 ha, 1.65 ha and 4.24 ha respectively. The specific design scope is 8m on both sides of Weiyi Road in the core area, 10m on both sides of Weier Road and 5m on both sides of Weisan Road. Five meters on both sides of the three roads, 15m on both sides of the east longitude road, m on the west side of the central west avenue, and 5m on the east side of the central east avenue. Different widths of protective green belts adopt different planting techniques, rationally arrange the lower layer of flowering shrubs and ground cover plants, and highlight the seasonal changes of road space. The main selection of plant varieties are young pioneers, eucalyptus, burdock, maple, apricot, and sand cypress.

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Yellow highlighted area is the ECZ Core Area. Map 7: Project Site of Erenhot PRC–Mongolia Ecological Restoration Project

E. Subproject 5: Waste Collection and Transfer Stations, and Sanitation Intelligent Cloud Platform for the ECZ

38. The subproject includes two parts: garbage transfer station attached water flushing public toilet construction component and garbage collection and transfer engineering supporting facilities and sanitation intelligent cloud platform.

39. The proposed solid waste transfer station serves part of the core area of the cooperation zone. According to the plan, the region serves approximately 8,000 people in 2030. Enterprises within the scope of services will focus on industrial processing and business services. The garbage collection at the refuse transfer station is mainly the domestic garbage generated by the personnel in the cooperation area and the garbage generated by the industrial enterprises. The domestic garbage produced by the personnel is measured by the garbage produced by 1.2 kilogram (kg) per person per day, and the garbage generated by tourists is calculated by 0.25 kg per person per trip. A seasonal factor of 1.4 is considered in calculation.

40. The demand analysis of solid waste generation is given in Table 7.

Table 7: Solid Waste Generation Demand Analysis Item Unit 2020 2025 2026 2027 2028 2029 2030 2035 2044 Residential ‘000 9.31 15.00 17.00 19.00 21.00 23.00 25.00 35.00 35.00 Population served Population of tourist ‘000 398 800 880 960 1,040 1,120 1,200 1,600 1,600 Produced by tourist kg/day Produced by kg/day resident/worker Produced by tourist ton/yr 139 280 308 336 364 392 420 560 560 19

Item Unit 2020 2025 2026 2027 2028 2029 2030 2035 2044 Produced by ton/yr 4,564 7,350 8,330 9,310 10,290 11,270 12,250 17,150 17,150 resident/worker Produced by tourist ton/d 0 1 1 1 1 1 1 2 2 Produced by ton/d 13 21 24 27 29 32 35 49 49 resident/worker Total produced ton/d 13 22 25 28 30 33 36 51 51 Plant design ton/d 22 25 28 30 33 36 51 51 capacity Source: Feasibility study report.

41. According to the demand analysis, the scale of the proposed waste collection and transfer station is set at 60 tons/day.

Proposed Project

Map 8: Site Position of the Project

F. Subproject 6: Establishment of Quarantine Station in Mandula Port and Expansion of Sheep Breeding Bases

42. Since the supply of mutton on the market is far less than the demand, the goal of the enterprise cannot be to fully meet the whole PRC market. Therefore, the analysis of the supply capacity of the enterprise is carried out here. Determine the supply of the project by analyzing the financial strength of the company and the positioning of future development.

43. Supply analysis is prepared according to development target of Xiaoweiyang Company. According to the existing facilities capacity of Xiaoweiyang Company, the development plan of future stores and supermarket, after the implementation of this project, 1.35 million sheep/lamp can be produced. Among them, the Xiaoweiyang currently has a breeding capacity of 100,000 heads. After the project is implemented, it will improve the breeding ability of the Xiaoweiyang Company's mutton sheep, and its capacity will reach 223,380.

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44. The main contents include:(i) improved variety breeding base, including feed trough, silo, dung yard, burnt house, sick sheep isolation, population optimization investment; (ii) animal quarantine station, including sheep house, movable fence, supporting room, supporting facilities, sheep platform, grass shed, road engineering, road hardening, off-site gravel road, fence; (iii) improvement and reconstruction of five breeding bases, including sheep house reconstruction, management house reconstruction, top solar plate reconstruction, maintenance of movable fences, feed trough and walls, sewage pipe network, road reconstruction, main road and auxiliary lane reconstruction, fence reconstruction, water and electricity engineering and greening; (iv) to build one traceability management system, including internet equipment, video monitoring equipment, massive data center, breeding base supporting equipment, processing base supporting equipment, marketing system supporting equipment; (v)one mutton sheep industry poverty alleviation fund; and (vi) to build one slaughtering and processing logistics base in Tuyouqi County, including waiting area, slaughtering and processing workshop, refrigeration house, refrigerator, insulation system, comprehensive research building, debris warehouse, sewage treatment workshop, boiler room, firefighting room, carport, site hardening, sheep slaughtering dividing production line, and mutton finishing production line.

3. Cost-Benefit Analysis Methodology1

45. The estimated costs and benefits of the subprojects were valued at their economic prices using the domestic price numeraire, which adjusts border prices to equivalent domestic values using a shadow exchange rate factor (SERF) of 1.09. As there is high underemployment of unskilled labor in IMAR, shadow wage rate factors (SWRFs) of 0.67 and 1.0 were applied to unskilled and skilled local labor, 2 respectively. For most subprojects, labor is estimated to comprise 25% of the total installed cost of civil works, equipment, and materials. Of the total labor cost, it is assumed that 25% is accounted for by unskilled labor.

46. Capital and recurrent operation and maintenance (O&M) costs expressed in constant 2019 prices and inclusive of physical contingencies were converted into economic costs by excluding all transfer payments, including taxes and duties, and applying the appropriate conversion factors. Capital costs were estimated based on the concept designs contained in the FSR for each subprojects prepared in 2019. Annual and periodic costs and benefits were evaluated over approximately a 25-year period (2020–2044), allowing for a construction period of duration which varies by subprojects starting in 2020, followed by a benefit period of about 25 years.

47. Basic assumptions. The economic analysis covers 25 years. Implementation period is six years, 2019–2024/5. Benefits start to accrue to the subproject when facilities become operational in 2026/27. Economic costs and benefits are expressed in local currency in August 2019 prices. Cost of works and goods and physical contingency are converted from financial costs using shadow pricing. A shadow wage rate factor of 0.67 is applied to unskilled labor which comprises 25% of project labor requirement.3 Tradable items are converted at the shadow exchange rate factor of 1.09,4 and non-tradable items at 1.0.

1 The economic analysis was conducted in accordance with the Asian Development Bank’s (ADB) Guidelines for the Economic Analysis of Projects (2017). 2 Similar to values adopted for the economic analysis of the Ziyang Inclusive Green Development Project (RRP PRC 51189), 2018. 3 Based on recent project implemented for Autonomous Region and in Province. 4 Calculated using ADB guidelines on estimating shadow exchange rate factor. Export and import data are based on ADB 2017 Key Indicators for and the Pacific. 21

48. SERF calculation is as follows: SERF Calculation SERF = X * (1 + S) + M * (1 + T) = 1.09 X = exports ($ million) = 2,263.52 S = rate of export subsidies = 0% M = imports ($ million) = 1,840.98 T = VAT, duties rate = 13%

49. Economic costs. Project capital and O&M costs are distributed into traded and non- traded components and labor. Annual economic capital cost distribution follows the annual financial investment plan and cost disbursement schedule. The financial investment cost, excluding inflation and financing charges, amounts to CNY2,579 million equivalent to CNY2,272 million in economic terms.5 The economic O&M costs for the six subprojects including staff salaries, power and fuel, utilities, maintenance and replacements, average CNY269 million annually. Tables 8 to 13 presents the economic investment cost per subproject, and Table 14 for overall Tranche 1.

Table 8: Economic Investment Cost – Output 1 Subproject 1: Inspection Area Construction for the PRC–Mongolian Erenhot–Zamyn-ud ECZ (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 673.83 67.38 151.61 404.80 73.32 101.58 404.80 579.70 Goods 172.08 17.21 38.72 97.57 18.72 25.94 97.57 142.23 Consulting 6.15 0.61 1.38 3.90 0.67 0.93 3.90 5.50 Base Cost 852.06 85.21 191.71 506.27 92.71 128.45 506.27 727.43 Physical Contingency 68.16 6.82 15.34 40.50 7.42 10.28 40.50 58.19 Land Opportunity Cost 108.81 108.81 108.81 Total Cost 1,029.04 92.02 207.05 546.78 100.13 138.72 655.59 894.44 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) works including joint inspection building component; regional center components including service building, ancillary service room, fencing and heating, (ii) goods including border inspection and information systems, customs inspection and information facilities, 10 one-stop inspection channels for frontier inspection, customs passenger cars, and 5 entry/exit booths; 12 one-stop inspection channels for frontier inspection and customs wagons, and 6 entry/exit booths, (iii) land acquisition fee, (iv) construction unit management, including building agent service fee, engineering supervision, design and pre-construction work fee, labor safety fee, health assessment fee, (v) environmental impact fee, (vi) project management and consultants, and (vii) training. Source: Asian Development Bank estimates.

5 Financial investment cost, excluding land opportunity cost, is CNY2,239 million, equivalent to CNY1,923 million in economic terms. 22

Table 9: Economic Investment Cost – Output 1 Subproject 2: Upgrading the Mandula Port International (Highway) Logistics Park (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 382.78 38.28 86.13 229.95 41.65 57.70 229.95 329.31 Goods 44.36 4.44 9.98 26.65 4.83 6.69 26.65 38.16 Consulting 7.08 0.71 1.59 4.78 0.77 1.07 4.78 6.62 Base Cost 434.22 43.42 97.70 261.38 47.25 65.46 261.38 374.09 Physical 34.74 3.47 7.82 20.91 3.78 5.24 20.91 29.93 Contingency Land Opportunity 117.08 117.08 117.08 Cost Total Cost 586.03 46.90 105.51 282.29 51.03 70.69 399.37 521.09 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) civil engineering and goods purchase and installation for freight channel expansion, international highway logistics park, customs supervision and control zone, (ii) land acquisition fee, (iii) construction unit management, including building agent service fee, engineering supervision, design and pre- construction work fee, labor safety fee, health assessment fee, (iv) environmental impact fee, (v) project management and consultants, and (vi) training. SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

Table 10: Economic Investment Cost – Output 1 Subproject 3: Upgrading Medical Equipment and Facilities for the Hospital (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works Goods 51.32 12.83 32.33 8.60 32.33 40.92 Consulting 0.36 0.09 0.25 0.06 0.25 0.31 Base Cost 51.67 12.92 32.58 8.66 32.58 41.24 Physical Contingency 4.13 1.03 2.61 0.69 2.61 3.30 Land Opportunity Cost Total Cost 55.81 13.95 35.19 9.35 35.19 44.54 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) 51 sets of medical equipment purchase and installation, (ii) comprehensive facilities refurbishing, (iii) construction unit management fee, including building agent service fee, engineering supervision, design and drawing fee, labor safety fee, health assessment fee, (iii) project management and consultants, and (iv) training. SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

Table 11: Economic Investment Cost – Output 2 Subproject 4: Ecological Restoration for the PRC–Mongolian Erenhot–Zamyn-Uud ECZ (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 87.65 8.76 19.72 52.65 9.54 13.21 52.65 75.40 Goods 0.47 0.05 0.11 0.27 0.05 0.07 0.27 0.39 Consulting 0.66 0.07 0.15 0.42 0.07 0.10 0.42 0.59 Base Cost 88.78 8.88 19.98 53.34 9.66 13.38 53.34 76.38 Physical Contingency 7.10 0.71 1.60 4.27 0.77 1.07 4.27 6.11 Land Opportunity Cost 79.99 - - - - - 79.99 79.99 Total Cost 175.87 9.59 21.57 57.61 10.43 14.45 137.60 162.48 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) civil works including irrigation water pipeline, drip-system irrigation, road curbs, drainage and other appurtenances for protective green belts, (ii) purchase and planting of plant varieties including young pioneers, eucalyptus, burdock, maple, apricot, and sand cypress, (iii) land acquisition fee, (iv) construction unit management, including building agent service fee, engineering supervision, design and pre-construction work fee, labor safety fee, health assessment fee, (v) environmental impact fee, (vi) project management and consultants, and (vii) training. 23

SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

Table 12: Economic Investment Cost – Output 2 Subproject 5: Waste Collection and Transfer Stations, and Sanitation Intelligent Cloud Platform for the ECZ (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 1.80 0.18 0.41 1.08 0.20 0.27 1.08 1.55 Goods 3.13 0.31 0.70 1.78 0.34 0.47 1.78 2.59 Consulting 0.09 0.01 0.02 0.06 0.01 0.01 0.06 0.08 Base Cost 5.02 0.50 1.13 2.91 0.55 0.76 2.91 4.22 Physical Contingency 0.40 0.04 0.09 0.23 0.04 0.06 0.23 0.34 Land Opportunity Cost 0.12 - - - - - 0.12 0.12 Total Cost 5.55 0.54 1.22 3.15 0.59 0.82 3.27 4.68 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) civil engineering and goods purchase and installation for garbage transfer station, attached water flushing public toilet construction component and garbage collection and transfer engineering supporting facilities and sanitation intelligent cloud platform, (ii) land acquisition fee, (iii) construction unit management, including building agent service fee, engineering supervision, design and pre-construction work fee, labor safety fee, health assessment fee, (iv) environmental impact fee, (v) project management and consultants, and (vi) training. SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

Table 13: Economic Investment Cost – Output 3 Subproject 6: Establishment of Quarantine Station in Mandula Port and Expansion of Sheep Breeding Bases (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 142.70 14.27 32.11 85.73 15.53 21.51 85.73 122.77 Goods 42.01 4.20 9.45 23.82 4.57 6.33 23.82 34.73 Consulting 456.90 45.69 102.80 289.90 49.71 68.88 289.90 408.50 Base Cost 641.62 64.16 144.36 399.45 69.81 96.72 399.45 565.99 Physical Contingency 51.33 5.13 11.55 31.96 5.58 7.74 31.96 45.28 Land Opportunity Cost 33.30 - - - - 33.30 33.30 Total Cost 726.24 69.29 155.91 431.41 75.40 104.46 464.71 644.57 a Local costs excluding unskilled labor and taxes. Local costs are estimated at 90% of (i) civil engineering and goods purchase and installation for improved variety breeding base, animal quarantine station, improvement and reconstruction of 5 breeding bases, establishment of traceability management system, (ii) establishment of sheep industry poverty alleviation fund, (iii) building of slaughterhouse and processing logistics base (iv) construction unit management fee, including building agent service fee, engineering supervision, design and drawing fee, labor safety fee, health assessment fee, (v) project management and consultants, and (vi) training. SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

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Table 14: Economic Investment Cost Summary (CNY million) Financial Foreign Unskilled Other Foreign Unskilled Economic Other Components Cost Cost Labor Costsa x SERF x SWRF Project Total 10% 25% 1.09 0.67 1.00 Cost Civil Works 1,289 129 290 774 140 194 774 1,109 Goods 313 26 72 182 29 48 182 259 Consulting 471 47 106 299 51 71 299 422 Base Cost 2,073 202 468 1,256 220 313 1,256 1,789 Physical Contingency 166 16 37 100 18 25 100 43 Land Opportunity Cost 339 - - - - - 339 339 Total Cost 2,579 218 505 1,356 238 338 1,696 2,272 a Local costs excluding unskilled labor and taxes. Local costs include 90% of various engineering works and equipment purchase and installation, land acquisition, construction management, environmental impact assessment, consulting services, and training. SERF = shadow exchange rate factor, SWRF = shadow wage rate factor. Source: Asian Development Bank estimates.

4. Economic Benefits

50. The economic benefits of the project are evaluated by comparing “with-project” scenario to “without-project” scenario to measure the values of the incremental economic costs and benefits of the project, as summarized below. The estimated economic benefits vary by subproject and are detailed below.

I. Output 1: Sustainable infrastructure for cross-border connectivity and health services improved.

Subproject 1: Inspection Area Construction for the PRC-Mongolian Erenhot–Zamyn-Uud ECZ.

51. Economic gains for new ECZ workers. The master plan forecasts job creation at about 18,000 with the realization of the Erenhot–Zamyn-Uud Port. Regional cooperation and integration (RCI) initiatives are also attained as employment will also be open to Mongolians.6 Top job sectors include processing/manufacturing, financial services, logistics/services, and tourism/cultural. Half of the jobs will benefit Chinese nationals, and about 900 of these are linked to Customs inspection area and mutual trade commercial operations. It is assumed future ECZ workers are transferees from other jobs outside the zone, and the transfer is driven by higher wages. Incremental direct economic gains arise from difference in wages paid to Chinese ECZ jobs at CNY62,000 per year and wages outside the port, represented by the minimum wage, at CNY21,000 per year prior to transfer. Average income applied in the analysis is based on the 2017 Statistical Yearbook adjusted to current period using GDP growth rate.

52. In 2027, the start year of full operation, total sector jobs at 900 is multiplied by the average incremental wages at CNY66,058 to get the employment gains benefit.

6 Based on the discussions with IMAR government on the IMAR Master Plan (IMP), between 18,000 and 24,000 new job opportunities will be available when the ECZ becomes fully operational. Note: The IMP, which maps out the ECZ development including expected employment, is undergoing final review and yet to be released. Article 9, Agreement Between the Government of Mongolia and the Government of the People’s Republic of China on Establishing “PRC- Mongolian Erenhot–Zamyn-Uud Economic Cooperation Zone”.

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Particulars Unit Year 8 2027 Total sector port jobs no. 900 Average annual wages of port jobs CNY 99,802 Ave annual wages prior to port jobs CNY 33,744 Ave incremental wages CNY 66,058 Incremental wages from project port CNY mill 59.45

53. Time savings from smart system platform installation. The Customs Integrated Inspection System is installed and in use in the Erenhot Port. Under the project, entry-exit inspection channels will be upgraded with new hardware while systems software will be updated. Inspection activities will be quicker for customs trucks and passenger cars thus shortening overall time spent at the one-stop channels, avoiding long queuing and accommodating more transactions at any given period. The improvements will save time and money when installed. The time spent by drivers and other road users aboard their vehicles while queueing at the channels is aggregated and converted into hours to compare with the standard unit of pay, the hourly wage rate, and estimate the value of time saved per passenger.

54. Time savings benefit is calculated for 2027 as follows: average annual waiting time at 3.04 hours multiplied by 50% of total passengers at 216,409 as wage-earners multiplied by wage per hour at CNY34.65.

Particulars Unit Year 8 2027 Vehicles daily traffic Truck no. 12 Car no. 61 Mini-bus no. 36 Annual increase rate 10% Passengers daily Truck, 3 persons no. 36 Car, 4 persons no. 242 Mini-bus, 25 persons no. 908 Total annual passengers no. 432,817 Waiting time per pass-through min. 1.00 Reduced time per pass-through rate 50% Annual reduced time per pass-through hr 3.04 Wage earners among passengers rate 50% Annual number of wage earners mill 216,409 Average annual wage rate 99,802 Ave. hour wage rate 34.65 Value of time saved at pass-through CNY mill 22.8

55. Increased tourist arrivals and tourist spending with port development. With shorter pass- through and inspection time at the channels, higher volume of goods from PRC traders enter the mutual trade center at the ECZ. More Mongolian and domestic tourists (with 50-50 ratio) can be accommodated especially as more vehicles can then enter the port. Improved access through the port will attract tourists to visit places of interest that promote cultural heritage, experience local food varieties, shop for goods and souvenirs, all leading to longer stays and higher spending.

56. Economic gains from tourist spending is calculated for 2027 as follows: The incremental increase in tourist numbers reaches 21,840 is multiplied by the average spending based on the expected extended stay of 1.5 days at the cost of CNY409/day (CNY300 per day in 2019 adjusted 26 to GDP growth). The CNY300 per day budget includes CNY200 for hotel accommodations, and CNY100 for food, souvenirs, shopping, entertainment, others.

Particulars Unit Year 8 2027 Tourist arrivals without project no. 30,000 Annual growth with project rate 20% Tourist arrivals with project no. 51,840 Incremental tourists with project no. 21,840 Average tourist stay without project day 1.0 Average tourist stay with project day 2.5 Incremental stay with project day 1.5 Average tourist spending (hotels, shopping, dining, etc.) CNY/day 409 Average tourist spending (hotels, shopping, dining, etc.) CNY mill 13.41

57. Reduced cargo sampling time. Customs conduct sampling inspection of trucks carrying coal, iron ore, mineral and other minor products. Current system calls for 100% inspection as the procedure is not aided by electronic equipment. Under this system, trucks spend about 12 days, 2 days for the sampling and 10 days awaiting laboratory results. With the proposed smart system installed at the inspection area, trucks will need only 1 day to complete the process. Benefit is valued by multiplying the 11 saved days by number of trucks by the daily costs to trucks of CNY10 for sampling and storage, and CNY15 for parking. In 2027, 67,707 vehicles multiplied by CNY9 sampling fee plus CNY13 parking multiplied by one minute saved.

58. Reduced dependence on coal for heating facility. The subproject introduces innovative technology with the proposed installation of electric boilers supported by stored energy captured through wind-powered turbines. The new storage equipment, acting as battery, will capture what otherwise be wasted energy surplus (since electricity cannot be stored by the grid through traditional coal-fired plant), thereby reducing annual dependence on coal by 2,008 tons, the amount required to energize the ECZ heating facility. Benefit derives from savings in cost of coal at CNY1,296 per ton (CNY950 per ton in 2019 converted to economic price at CNY811 per ton, and adjusted to current period using GDP growth) multiplied by coal consumption of 2,008 tons. Green-house gases (GHG) produced at 14 tons annually comprise sulfur dioxide and carbon dioxide. The price of GHG will not impact upon benefits calculation.

Subproject 2: Upgrading the Mandula Port International (Highway) Logistics Park.

59. Willingness-to-pay for improved service area facilities and cost savings for vehicle repair. Presently, truck drivers and helpers live under squalid conditions in portable housing due to unavailable alternative accommodations within the port while awaiting to load/unload cargo. Waiting time could take between one and three days, and due to the limited space in temporary housing, some drivers stay overnight in their trucks. Drivers and trucking companies were interviewed during project preparation and given the option to stay in project service facilities that include hotel, diner and sufficient parking at the average bid price of CNY150, the respondents signified high willingness-to-pay. WTP was based on survey conducted by phone interviews with 13 trading companies that operate cargo trucks on 3-4 September 2019. [Refer to respondents list, Appendix A to SD-Economic Analysis].

60. Bid price of CNY150 is based on prevailing average cost of overnight stays in Mandula town as given in FSR. All sampled companies signified agreement with the willingness to pay (WTP) price. In 2027 total vehicles is 1,616 multiplied by WTP price CNY206 (CNY50 adjusted to current GDP rate).

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61. The subproject also offers more efficient and time-saving vehicle repair service for which the drivers are willing to pay as compared to current practice which charges higher repair cost because auto-mechanics need to be brought in from Mandula town one-hour away from port. About 20% of vehicles require regular repair and maintenance. In 2027, benefit is valued as 20% of 1,616 total vehicles multiplied by repair cost at CNY32.61 per hour for 2 hours and 230-day year.

62. Time savings from upgraded loading/unloading at coal storage warehouses. Upgrading from manual to fully-automated system at the coal storage shortens time needed for loading and unloading activities at the coal storage by 9 minutes (from 12 minutes without-project to 3 minutes with-project. At full operation, an average of 30 Chinese (and about 1,000 Mongolian) trucks would queue daily at the warehouses to load/unload cargo. Time savings is measured using average wages of truckers at CNY39/hour multiplied by the total equivalent hours (1,587 in 2027) waiting to load/unload cargo.

63. Time and vehicle operating cost (VOC) savings from road improvement. The road from border crossing to storage area within the port will be widened and improved to accommodate expected growth in vehicular traffic. The road expansion and improvement will cut travel time and vehicle O&M cost, as well as reduce time accorded to traffic incidents as vehicular accidents and breakdown along the route. Available traffic flow and road conditions (i.e., pavement, slope, load, vehicle maintenance parts, crew cost, fuel and oils, overheads, etc.) are fed into the HDM4 road model to estimate time and VOC savings (See Appendix B). Refer to Appendix B for assumptions used in HDM4 model).

64. Cost savings using reclaimed water to irrigate border crossing point (BCP) green zone. The BCP green zone requires bout 41,000 m3 of water for irrigation annually. The existing water supply uses groundwater at the cost of over CNY6.00/m3. Under the project, reclaimed water will be stored in a reservoir and piped to the green zone at a lower price of about CNY1.00/m3 based on prevailing price in the area. Benefit is calculated by multiplying annual water requirement by the price increment between existing water supply at CNY9.19/m3 and reclaimed water at CNY1.42/m3.

Subproject 3: Upgrading Medical Equipment and Facilities for the Hospital.

65. Savings on patient travel costs. Since recently being promoted as regional emergency medical center, Chinese and Mongolian patients have been seeking medical attention in the hospital. In 2018, about 600 PRC cases cannot be admitted because they involved serious ailments (e.g., various cancers, serious injuries due to accidents, kidney disease requiring dialysis, head trauma requiring MRI, etc.) that require special medical attention the existing hospital equipment and facilities cannot provide.7 As a result, these cases had to choose between travelling to Hohhot or to Beijing where hospitals can address their medical condition, or not seek medical attention at all. The Mongolians cases, about 100 from Zamyn-Uud and Dornogovi, just across the border had to travel to Ulaanbaatar or Hohhot to get treatment. These cases spent considerably on travel fare and incidental costs, resources that would be avoided with the expansion project that include specific emergency equipment and facilities in place. Expansion and refurbishing of the international hospital will generate travel cost savings for patients seeking medical attention elsewhere. Benefit comprises the average travel expenditures that can be saved

7 Erenhot City Hospital Annual Progress Report, 2018. 28 by potential cases.8 [Note: Only PRC cases have been considered in the benefits analysis]. In calculating benefits from travel cost savings, 5% of total incremental outpatients will seek treatment in Beijing or Hohhot, and 5% of this number is assumed as inpatients who will also seek treatment in Beijing/Hohhot. Travel costs include transport by train (CNY140 per trip) and travel allowances (CNY50 per day). Inpatient travel involves 3 days, (assuming the patient stay in hospital and not move around, while outpatient’s is 5 days, as the patient requires local travel to and from hospital.

66. Prevention of untimely death/permanent disability from serious ailments and injuries. Of the 600 cases not admitted in 2018, 20% is estimated to be fatal when detected late and without administering emergency medical care. The top five cases of mortality and permanent disability identified included cancers, stroke, coronary heart disease, lung disease and road traffic accidents. Diabetes and hypertension also figure among top debilitating causes. The total incidence per 100,000 population of the diseases is calculated against the catchment population to estimate the number of cases per disease type. With the project in place, 20% of the cases will avoid premature death or permanent disability. The average age at mortality, 55 years without- project, and the average age with-project, 65 years assumed economically-active based on national retirement age, is derived to measure the productive years saved. The labor participation rate at 69% (based on data on IMAR labor data) is applied to determine the proportion of wage earners among the cases. The average wage rate is applied on the number of wage earners to estimate future lifetime earnings.

67. In 2026, benefit is calculated by estimating the number of cases who avoided mortality/permanent disability due to available treatment (196 or 20% of total incidents of the top five diseases at 979 in 2027) and multiplying this by the wage earners (based on 69% labor rate) and the remaining years economically productive (10 years) and the average wage (CNY26,400 per year).

II. Output 2: Ecological environment in key border towns improved.

Subproject 4: Ecological restoration for the PRC–Mongolian Erenhot–Zamyn-Uud ECZ

68. Cost savings on sand clearing activities. To strengthen the existing ecological protection of Erenhot against damaging winds and sandstorms, a greenbelt covering 24.52 ha will be established within the economic zone, while a shelterbelt will be planted to protect the stretch of the Shungang Highway. These additions to the existing 584,000 trees planted since 2015, will help achieve the long-term plan for wider ecological protection of Erenhot. Each year, roads and open areas need to be cleared of 50,000 m3 of sand and debris. About 2,083 trucks, each with 24 m3 load, are required in clearing operations. The O&M cost per truckload is about CNY690 in 2019. With the project in place, the total equivalent of CNY1.5 million annually can be avoided.

69. At full operation in 2027, the avoided cost of sand clearing is derived by multiplying the truck operating cost at CNY1,133 by the number of required trucks at 2,083.

Particulars Year 8 2027 Annual volume of sand, debris for clearing m3 50,000 Clearing truck load capacity m3 24

8 Return travel fares by train and plane for Erenhot-Beijing at $19.50 and $84, respectively; for Erenhot–Hohhot at $17 and $152, respectively. Incidental travel cost is estimated at CNY 50 per person per day. 29

Particulars Year 8 Number of clearing trucks required no. 2,083 Average VOC per truck load CNY 1,133 Avoided sand clearing cost CNY mill 2.36

70. Cost savings from reclaimed water for irrigation use. The innovative drip-irrigation system is utilized in 50% of the total planted protective area, with tankered water supplying the rest. The drip system is supplied from groundwater sources. To supplement the irrigation water requirement, the project will tap reclaimed water from the recycling plant, replacing about 2.88 million m3 of tankered supply. The cost of tankered water is about 6.00CNY/m3. The price of piped reclaimed water is at 1.00CNY/m3 in 2019 resulting in economic cost savings of 5.00CNY per m3.

71. In 2027, benefit is valued by multiplying reclaimed water volume at 2.88 million with CNY7.77 per m3, the price difference (adjusted to current rate) between tankered water CNY 9.18 per m3 and reclaimed water at CNY1.42 per m3.

Particulars Year 8 2027 Recycling capacity of plant m3 mill 2.88 Cost of tankered water for irrigation CNY/m3 9.18 Price of reclaimed water for irrigation CNY/m3 1.42 Incremental price of reclaimed water CNY/m3 7.77 Cost savings on reclaimed water use CNY mill 22.33

72. Willingness-to-pay for windbreak protection. The strong sandstorms cause costly damage to private and public property so that affected households and establishments express willingness to pay for project improvements that would prevent such damage. Based on the social survey results, the willingness to pay for the improvements amounts to CNY10.22 per capital per month. (CNY122.64 per year). In 2027, benefit is valued by the WTP price adjusted to current rate multiplied by population at 93,771. Table 15 presents the WTP results which reflect high willingness of about 70%.

Table 15: Willingness to Pay for Windbreak Construction Male Female Total Essential information No. % No. % No. % Are you willing to Yes 37 88.10% 35 85.37% 72 86.75% contribute to the construction of No 5 11.90% 6 14.63% 11 13.25% windbreakers? 6 4 10.53% 3 8.82% 7 10.45% If yes, for preventing 8 8 21.05% 7 20.59% 15 22.39% wind and sand, 10 10 26.32% 12 35.29% 22 32.84% you are willing to 12 10 26.32% 9 26.47% 19 28.36% pay CNY/month. 14 5 13.16% 4 11.76% 9 13.43% Average amount 10.22 Source: HH Processed and Disaggregated Data Sheets by Gender, Social Survey Report.

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Subproject 5: Waste collection and transfer stations and Sanitation Intelligent Cloud Platform for the ECZ.

73. O&M cost savings from increased waste compression capacity at the transfer station. With the project, the vertical compression process will be built in the waste transfer station, with attached public toilet. The compression equipment can reduce the volume of the waste material by 2.5-3.0 times, creating more load space and less collection trips per vehicle. The proposed project covers the core area of the ECZ, about 3 km2, where 18,000 people generate an average of 1.2 kg of refuse daily, or 21.6 tons per day. To ensure normal operation of the compression transfer station, two sealed dump trucks vehicles will be acquired. The O&M cost without compression is CNY49 per ton; when compressed, this is reduced to CNY20 per ton. Benefits are derived from the O&M cost savings with the compression process. In 2027, the cost savings benefit is calculated by multiplying the waste volume at 47.21 tons by the incremental cost at CNY24.36 (CNY41.15 without compression minus CNY16.80 with compression) and 365 days.

74. Willingness to pay for improved solid waste collection service. The willingness-to-pay survey was conducted in the urban area, outside the ECZ, the project service area. It is expected that 50% of the future 18,000 workers will be Chinese residing in the ECZ urban fringes. This makes the sample household respondents valid proxies of future solid waste service users or project beneficiaries. Based on the social survey, the average willingness-to-pay for improved solid waste services is CNY3.60 per month per capita. The existing solid waste monthly service fee is CNY2.00 per capita, but payment collection rate is only 20%. The current solid waste services cover the urban communities. The proposed project facilities, particularly the decompression equipment will be for the ECZ, although the design capacity is sufficient to include the existing service area. The ECZ is yet to be populated by locators when fully developed. The WTP price is designed for service to such locators. WTP results show high willingness to pay despite the average WTP bid price (CNY3.60) higher than current fee (CNY2.00) they are now paying. The respondents also understand the WTP price is set for 2026/27. Subproject benefit derives from WTP the price increment at CNY1.60 per capita for improved services. The ECZ waste generation is estimated at 21 tons per day. With the plant design capacity at 60,000 tons per day, services can be extended to benefit areas outside the ECZ. Table 16 presents the WTP results.

Table16: Willingness to Pay for Solid Waste Improvements Male Female Total Essential information No. % No. % No. % Are you willing to pay Yes 38 90.48% 32 78.05% 70 84.34% more for improved solid waste collection No 4 9.52% 9 21.95% 13 15.66% services? 2 5 13.16% 3 8.82% 8 11.94% 2.5 6 15.79% 9 26.47% 15 22.39% If yes, you are willing to 3.3 16 42.11% 10 29.41% 26 38.81% pay___ CNY/month 5 7 18.42% 8 23.53% 15 22.39% 6 4 10.53% 2 5.88% 6 8.96% Average amount 3.58 CNY/month Source: HH Processed and Disaggregated Data Sheets by Gender, Social Survey Report.

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III. Output 3–Income-generating opportunities expanded.

Subproject 6: Establishment of Quarantine Station in Mandula Port and Expansion of Sheep Breeding Bases.

75. Economic gains for herders due to improved weight and quality of sheep, and savings on feeds cost. Using improved propagation technologies under the project, the weight per sheep will increase 10-15 kg, while leaner and tastier meat is produced. The resulting higher product weight and quality will bring higher net gain to herders. Lamb, bred and raised using improved facilities and technologies are monitored from birth using tagging system that provides information on birth weight, immunization, feed and forage, etc., and help assuage buyers and mutton consumers about the quality of the company produce. Aside from breeding special stock, the company sells meat products to supermarkets, restaurants, and offers high-quality lamb on the menu of their own outlets. Traceability increases brand value that yields higher demand for company processed mutton. More economical use and preparation of feeds to sustain the sheep breed quality also result in feed cost savings, further increasing net benefit to herders.

76. Direct economic gains to herders and contract raisers from poverty reduction fund (PRF). Under the project supported PRF, individual herders or cooperatives can enter into agreement with the Xiaoweiyang Company and have the option to breed and raise company sheep either on their own and in own certified pasture lands, or use company pastures and facilities, ensuring brand security and product safety standard. Both options result in higher price per lamb, averaging CNY120/head (CNY890 herder price less production, feeds and other costs at CNY700), than market price when sold back to the company.

5. Economic Analysis

77. Economic Internal Rate of Return. The proposed Tranche 1 project investments are economically justified with each output and corresponding subprojects reflecting economic internal rate of return (EIRR) above the economic opportunity cost of capital (EOCC) at 9%. Base case EIRR is between 9.9% and 20.8%, with project overall at 14.3%. Consolidated project economic net present value (ENPV) is equivalent to CNY1,515 million. Sensitivity analysis is carried out per subproject and for project overall. Sensitivity scenarios include possible cost overruns, reduction in benefits, combination of the two, and a one-year delay in project implementation. The analysis results show EIRR remaining robust under the test scenarios and found to be most sensitive to combined cost increase and benefit reduction, resulting in 11.5%, and in implementation delay, 12.3%. Table 17 summarizes the EIRR and sensitivity results by output and for project overall. Tables 18 to 25 present the annual discounted cashflows per subproject and per output, and Table 26 for overall Tranche 1 project.

Table 17: EIRR and Sensitivity Analysis Results Particulars Overall Output 1 Output 2 Output 3 Base Case 14.3% 10.4% 13.3% 20.8% Capital Cost + 10% 13.4% 9.7% 12.3% 19.7% O&M Cost + 10% 13.9% 10.0% 13.2% 20.2% Total Cost + 10% 13.0% 9.3% 12.2% 19.2% Benefits - 10% 12.9% 9.2% 12.1% 19.0% Combined Cost +10%, Benefits - 10% 11.5% 8.2% 11.1% 17.4% Delay Implementation by 1 Year 12.3% 8.7% 11.8% 17.8% O&M = operation and maintenance. Source: Asian Development Bank estimates. 32

Table 18: EIRR Output 1 Subproject 1: Inspection Area Construction for the PRC–Mongolian Erenhot–Zamyn-Uud ECZ (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Total Base Benefit - Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Benefit Case 10% 10% 10% 10% 10% 1-year 2020 - 215.07 215.07 - (215.07) (236.58) (215.07) (236.58) (215.07) (236.58) (215.07) 2021 - 260.73 260.73 - (260.73) (286.80) (260.73) (286.80) (260.73) (286.80) (260.73) 2022 - 174.24 174.24 - (174.24) (191.66) (174.24) (191.66) (174.24) (191.66) (174.24) 2023 - 87.75 87.75 - (87.75) (96.52) (87.75) (96.52) (87.75) (96.52) (87.75) 2024 - 87.75 87.75 - (87.75) (96.52) (87.75) (96.52) (87.75) (96.52) (87.75) 2025 - 34.45 34.45 - (34.45) (37.89) (34.45) (37.89) (34.45) (37.89) (34.45) 2026 - 34.45 34.45 - (34.45) (37.89) (34.45) (37.89) (34.45) (37.89) (34.45) 2027 93.87 80.15 - 80.15 13.71 13.71 5.70 5.70 4.33 (3.69) (80.15) 2028 106.75 81.76 - 81.76 24.99 24.99 16.82 16.82 14.32 6.14 12.11 2029 121.20 83.39 - 83.39 37.81 37.81 29.47 29.47 25.69 17.35 23.36 2030 137.49 85.06 - 85.06 52.43 52.43 43.93 43.93 38.68 30.18 36.14 2031 155.96 86.76 - 86.76 69.20 69.20 60.53 60.53 53.61 44.93 50.73 2032 177.01 88.50 - 88.50 88.51 88.51 79.67 79.67 70.81 61.96 67.47 2033 201.11 90.27 - 90.27 110.84 110.84 101.82 101.82 90.73 81.71 86.74 2034 228.82 92.07 - 92.07 136.75 136.75 127.54 127.54 113.87 104.66 109.04 2035 259.04 93.91 - 93.91 165.13 165.13 155.74 155.74 139.23 129.83 134.91 2036 292.49 95.79 - 95.79 196.70 196.70 187.12 187.12 167.45 157.87 163.25 2037 331.89 97.71 - 97.71 234.18 234.18 224.41 224.41 200.99 191.22 194.78 2038 378.40 99.66 - 99.66 278.74 278.74 268.77 268.77 240.90 230.93 232.23 2039 433.38 101.65 - 101.65 331.73 331.73 321.56 321.56 288.39 278.22 276.75 2040 498.47 103.69 - 103.69 394.79 394.79 384.42 384.42 344.94 334.57 329.70 2041 574.44 105.76 - 105.76 468.68 468.68 458.10 458.10 411.23 400.66 392.71 2042 664.81 107.88 - 107.88 556.93 556.93 546.15 546.15 490.45 479.66 466.56 2043 772.39 110.03 - 110.03 662.35 662.35 651.35 651.35 585.12 574.11 554.78 2044 900.53 112.23 - 112.23 788.30 788.30 777.07 777.07 698.24 687.02 660.15 EIRR 9.9% 9.3% 9.5% 8.9% 8.8% 7.8% 8.1% ENPV 1,253 1,147 710 437 106 35 62 (9) (19) (134) (93) EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

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Table 19: EIRR Output 1 Subproject 2: Upgrading the Mandula Port International (Highway) Logistics Park (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 - 138.49 138.49 - (138.49) (152.34) (138.49) (152.34) (138.49) (152.34) (138.49) 2021 - 144.54 144.54 - (144.54) (159.00) (144.54) (159.00) (144.54) (159.00) (144.54) 2022 - 96.89 96.89 - (96.89) (106.58) (96.89) (106.58) (96.89) (106.58) (96.89) 2023 - 49.23 49.23 - (49.23) (54.16) (49.23) (54.16) (49.23) (54.16) (49.23) 2024 - 49.23 49.23 - (49.23) (54.16) (49.23) (54.16) (49.23) (54.16) (49.23) 2025 - 21.35 21.35 - (21.35) (23.49) (21.35) (23.49) (21.35) (23.49) (21.35) 2026 - 21.35 21.35 - (21.35) (23.49) (21.35) (23.49) (21.35) (23.49) (21.35) 2027 83.95 11.49 - 11.49 72.46 72.46 71.31 71.31 64.07 62.92 (11.49) 2028 88.84 11.88 - 11.88 76.97 76.97 75.78 75.78 68.08 66.89 72.08 2029 93.63 12.27 - 12.27 81.36 81.36 80.13 80.13 72.00 70.77 76.57 2030 98.82 12.69 - 12.69 86.13 86.13 84.86 84.86 76.25 74.98 80.94 2031 102.39 13.12 - 13.12 89.27 89.27 87.95 87.95 79.03 77.71 85.69 2032 106.09 13.58 - 13.58 92.51 92.51 91.15 91.15 81.90 80.54 88.81 2033 110.14 14.05 - 14.05 96.09 96.09 94.68 94.68 85.07 83.67 92.03 2034 114.30 14.55 - 14.55 99.75 99.75 98.29 98.29 88.32 86.86 95.59 2035 118.72 15.07 - 15.07 103.65 103.65 102.14 102.14 91.78 90.27 99.23 2036 122.22 15.61 - 15.61 106.61 106.61 105.04 105.04 94.38 92.82 103.11 2037 125.85 16.18 - 16.18 109.67 109.67 108.05 108.05 97.08 95.46 106.04 2038 129.48 16.78 - 16.78 112.70 112.70 111.03 111.03 99.76 98.08 109.07 2039 133.32 17.40 - 17.40 115.92 115.92 114.18 114.18 102.59 100.85 112.08 2040 137.16 18.05 - 18.05 119.10 119.10 117.30 117.30 105.39 103.58 115.26 2041 140.99 18.74 - 18.74 122.26 122.26 120.38 120.38 108.16 106.29 118.42 2042 144.94 19.45 - 19.45 125.48 125.48 123.54 123.54 110.99 109.04 121.54 2043 148.98 20.21 - 20.21 128.77 128.77 126.75 126.75 113.87 111.85 124.73 2044 153.12 21.00 - 21.00 132.12 132.12 130.02 130.02 116.81 114.71 127.98 EIRR 9.9% 9.1% 9.8% 9.0% 8.9% 7.9% 8.7% ENPV 530 484 415 69 46 5 39 (2) (7) (55) (14) EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

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Table 20: EIRR Output 1 Subproject 3: Upgrading Medical Equipment and Facilities for the Hospital (CNY million) Benefits Costs Net Inflow (Outflow) Travel Avoided Capital O&M Total Benefits - Implementation Year Total Base Benefit - Cost Premature Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Benefit Case 10% Saving Death 10% 10% 10% 10% 1-year 2020 - - - 13.33 13.33 - (13.33) (14.66) (13.33) (14.66) (13.33) (14.66) (13.33) 2021 - - - 8.91 8.91 - (8.91) (9.80) (8.91) (9.80) (8.91) (9.80) (8.91) 2022 - - - 8.91 8.91 - (8.91) (9.80) (8.91) (9.80) (8.91) (9.80) (8.91) 2023 - - - 8.91 8.91 - (8.91) (9.80) (8.91) (9.80) (8.91) (9.80) (8.91) 2024 - - - 2.27 2.27 - (2.27) (2.50) (2.27) (2.50) (2.27) (2.50) (2.27) 2025 - - - 2.21 2.21 - (2.21) (2.43) (2.21) (2.43) (2.21) (2.43) (2.21) 2026 40.86 4.30 36.56 19.49 - 19.49 21.37 21.37 19.42 19.42 17.28 15.33 (19.49) 2027 40.86 4.30 36.56 18.79 - 18.79 22.07 22.07 20.19 20.19 17.98 16.10 22.07 2028 40.86 4.30 36.56 18.01 - 18.01 22.85 22.85 21.05 21.05 18.76 16.96 22.85 2029 40.86 4.30 36.56 17.15 - 17.15 23.71 23.71 21.99 21.99 19.62 17.91 23.71 2030 40.86 4.30 36.56 17.40 - 17.40 23.46 23.46 21.72 21.72 19.38 17.64 23.46 2031 40.86 4.30 36.56 17.63 - 17.63 23.24 23.24 21.47 21.47 19.15 17.39 23.24 2032 40.86 4.30 36.56 17.86 - 17.86 23.00 23.00 21.22 21.22 18.92 17.13 23.00 2033 40.86 4.30 36.56 18.10 - 18.10 22.76 22.76 20.95 20.95 18.68 16.87 22.76 2034 40.86 4.30 36.56 18.35 - 18.35 22.51 22.51 20.68 20.68 18.43 16.59 22.51 2035 40.86 4.30 36.56 18.60 - 18.60 22.26 22.26 20.40 20.40 18.17 16.31 22.26 2036 40.86 4.30 36.56 18.87 - 18.87 21.99 21.99 20.11 20.11 17.91 16.02 21.99 2037 40.86 4.30 36.56 19.14 - 19.14 21.72 21.72 19.81 19.81 17.64 15.72 21.72 2038 40.86 4.30 36.56 19.42 - 19.42 21.44 21.44 19.50 19.50 17.36 15.42 21.44 2039 40.86 4.30 36.56 19.70 - 19.70 21.16 21.16 19.19 19.19 17.07 15.10 21.16 2040 40.86 4.30 36.56 20.00 - 20.00 20.86 20.86 18.86 18.86 16.77 14.77 20.86 2041 40.86 4.30 36.56 20.31 - 20.31 20.56 20.56 18.52 18.52 16.47 14.44 20.56 2042 40.86 4.30 36.56 20.62 - 20.62 20.24 20.24 18.18 18.18 16.15 14.09 20.24 2043 40.86 4.30 36.56 20.94 - 20.94 19.92 19.92 17.82 17.82 15.83 13.74 19.92 2044 40.86 4.30 36.56 21.28 - 21.28 19.58 19.58 17.46 17.46 15.50 13.37 19.58 EIRR 23.4% 22.0% 22.2% 20.9% 20.6% 18.0% 18.6% ENPV 218 23 195 135 36 100 83 79 73 69 61 47 60 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

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Table 21: EIRR Output 1 Summary (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 - 366.89 366.89 - (366.89) (403.58) (366.89) (403.58) (366.89) (403.58) (366.89) 2021 - 414.18 414.18 - (414.18) (455.60) (414.18) (455.60) (414.18) (455.60) (414.18) 2022 - 280.03 280.03 - (280.03) (308.04) (280.03) (308.04) (280.03) (308.04) (280.03) 2023 - 145.89 145.89 - (145.89) (160.48) (145.89) (160.48) (145.89) (160.48) (145.89) 2024 - 139.26 139.26 - (139.26) (153.18) (139.26) (153.18) (139.26) (153.18) (139.26) 2025 - 58.01 58.01 - (58.01) (63.81) (58.01) (63.81) (58.01) (63.81) (58.01) 2026 40.86 75.29 55.80 19.49 (34.43) (40.01) (36.38) (41.96) (38.52) (46.05) (75.29) 2027 218.68 110.44 - 110.44 108.24 108.24 97.20 97.20 86.38 75.33 (69.58) 2028 236.45 111.65 - 111.65 124.81 124.81 113.64 113.64 101.16 90.00 107.04 2029 255.69 112.82 - 112.82 142.87 142.87 131.59 131.59 117.30 106.02 123.63 2030 277.17 115.15 - 115.15 162.02 162.02 150.51 150.51 134.31 122.79 140.55 2031 299.21 117.51 - 117.51 181.70 181.70 169.95 169.95 151.78 140.03 159.66 2032 323.96 119.93 - 119.93 204.03 204.03 192.03 192.03 171.63 159.64 179.28 2033 352.11 122.42 - 122.42 229.69 229.69 217.45 217.45 194.48 182.24 201.54 2034 383.98 124.97 - 124.97 259.01 259.01 246.52 246.52 220.61 208.12 227.14 2035 418.62 127.58 - 127.58 291.04 291.04 278.28 278.28 249.18 236.42 256.40 2036 455.56 130.27 - 130.27 325.30 325.30 312.27 312.27 279.74 266.71 288.36 2037 498.60 133.02 - 133.02 365.57 365.57 352.27 352.27 315.71 302.41 322.54 2038 548.74 135.85 - 135.85 412.89 412.89 399.30 399.30 358.01 344.43 362.75 2039 607.56 138.76 - 138.76 468.80 468.80 454.93 454.93 408.05 394.17 409.98 2040 676.49 141.74 - 141.74 534.75 534.75 520.58 520.58 467.10 452.93 465.82 2041 756.29 144.80 - 144.80 611.49 611.49 597.01 597.01 535.86 521.38 531.69 2042 850.61 147.95 - 147.95 702.66 702.66 687.86 687.86 617.59 602.80 608.34 2043 962.23 151.18 - 151.18 811.04 811.04 795.92 795.92 714.82 699.70 699.42 2044 1,094.51 154.51 - 154.51 940.00 940.00 924.55 924.55 830.55 815.10 807.72 EIRR 10.4% 9.7% 10.0% 9.3% 9.2% 8.2% 8.7% ENPV 2,000.8 1,766.0 1,160.42 605.59 234.83 118.79 174.27 58.23 34.75 (141.9) (46.8) EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

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Table 22: EIRR Output 2 Subproject 4: Ecological Restoration for the PRC–Mongolian Erenhot–Zamyn-Uud ECZ (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 - 53.36 53.36 - (53.36) (58.69) (53.36) (58.69) (53.36) (58.69) (53.36) 2021 - 40.85 40.85 - (40.85) (44.93) (40.85) (44.93) (40.85) (44.93) (40.85) 2022 - 27.30 27.30 - (27.30) (30.03) (27.30) (30.03) (27.30) (30.03) (27.30) 2023 - 13.75 13.75 - (13.75) (15.13) (13.75) (15.13) (13.75) (15.13) (13.75) 2024 - 13.75 13.75 - (13.75) (15.13) (13.75) (15.13) (13.75) (15.13) (13.75) 2025 - 6.74 6.74 - (6.74) (7.41) (6.74) (7.41) (6.74) (7.41) (6.74) 2026 - 6.74 6.74 - (6.74) (7.41) (6.74) (7.41) (6.74) (7.41) (6.74) 2027 42.99 2.96 - 2.96 40.03 40.03 39.73 39.73 35.73 35.43 (2.96) 2028 43.54 2.96 - 2.96 40.58 40.58 40.28 40.28 36.23 35.93 40.03 2029 44.11 2.96 - 2.96 41.15 41.15 40.85 40.85 36.74 36.44 40.58 2030 44.70 2.96 - 2.96 41.73 41.73 41.44 41.44 37.26 36.97 41.15 2031 45.30 7.37 - 7.37 37.93 37.93 37.19 37.19 33.40 32.66 37.33 2032 45.92 2.96 - 2.96 42.95 42.95 42.66 42.66 38.36 38.07 42.33 2033 46.56 2.96 - 2.96 43.59 43.59 43.30 43.30 38.94 38.64 42.95 2034 47.22 2.96 - 2.96 44.25 44.25 43.96 43.96 39.53 39.23 43.59 2035 47.89 2.96 - 2.96 44.93 44.93 44.63 44.63 40.14 39.84 44.25 2036 48.36 2.96 - 2.96 45.40 45.40 45.10 45.10 40.56 40.26 44.93 2037 48.83 2.96 - 2.96 45.87 45.87 45.57 45.57 40.99 40.69 45.40 2038 49.32 2.96 - 2.96 46.35 46.35 46.06 46.06 41.42 41.13 45.87 2039 49.81 2.96 - 2.96 46.85 46.85 46.55 46.55 41.87 41.57 46.35 2040 50.32 2.96 - 2.96 47.35 47.35 47.06 47.06 42.32 42.02 46.85 2041 50.83 7.37 - 7.37 43.46 43.46 42.72 42.72 38.38 37.64 42.95 2042 51.35 2.96 - 2.96 48.39 48.39 48.09 48.09 43.26 42.96 47.87 2043 51.89 2.96 - 2.96 48.93 48.93 48.63 48.63 43.74 43.44 48.39 2044 52.43 2.96 - 2.96 49.47 49.47 49.17 49.17 44.23 43.93 48.93 EIRR 13.3% 12.4% 13.3% 12.3% 12.2% 11.2% 11.9% ENPV 223 147 131 16 76 63 74 61 54 39 52 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

37

Table 23: EIRR Output 2 Subproject 5: Waste Collection and Transfer Stations, and Sanitation Intelligent Cloud Platform for the ECZ (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 0.00 1.25 1.25 0.00 (1.25) (1.37) (1.25) (1.37) (1.25) (1.37) (1.25) 2021 0.00 1.39 1.39 0.00 (1.39) (1.53) (1.39) (1.53) (1.39) (1.53) (1.39) 2022 0.00 0.93 0.93 0.00 (0.93) (1.02) (0.93) (1.02) (0.93) (1.02) (0.93) 2023 0.00 0.47 0.47 0.00 (0.47) (0.52) (0.47) (0.52) (0.47) (0.52) (0.47) 2024 0.00 0.47 0.47 0.00 (0.47) (0.52) (0.47) (0.52) (0.47) (0.52) (0.47) 2025 0.00 0.08 0.08 0.00 (0.08) (0.09) (0.08) (0.09) (0.08) (0.09) (0.08) 2026 0.00 0.08 0.08 0.00 (0.08) (0.09) (0.08) (0.09) (0.08) (0.09) (0.08) 2027 1.10 0.56 0.00 0.56 0.54 0.54 0.48 0.48 0.43 0.37 (0.56) 2028 1.19 0.56 0.00 0.56 0.63 0.63 0.58 0.58 0.51 0.46 0.54 2029 1.29 0.56 0.00 0.56 0.73 0.73 0.67 0.67 0.60 0.54 0.63 2030 1.39 0.56 0.00 0.56 0.83 0.83 0.77 0.77 0.69 0.63 0.73 2031 1.47 0.98 0.00 0.98 0.49 0.49 0.40 0.40 0.35 0.25 0.41 2032 1.55 0.56 0.00 0.56 0.99 0.99 0.93 0.93 0.83 0.78 0.91 2033 1.63 0.56 0.00 0.56 1.07 1.07 1.02 1.02 0.91 0.85 0.99 2034 1.72 0.56 0.00 0.56 1.15 1.15 1.10 1.10 0.98 0.93 1.07 2035 1.80 0.56 0.00 0.56 1.24 1.24 1.18 1.18 1.06 1.00 1.15 2036 1.80 0.56 0.00 0.56 1.24 1.24 1.19 1.19 1.06 1.01 1.24 2037 1.81 0.56 0.00 0.56 1.25 1.25 1.19 1.19 1.07 1.01 1.24 2038 1.81 0.56 0.00 0.56 1.25 1.25 1.20 1.20 1.07 1.01 1.25 2039 1.82 0.56 0.00 0.56 1.26 1.26 1.20 1.20 1.08 1.02 1.25 2040 1.83 0.56 0.00 0.56 1.26 1.26 1.21 1.21 1.08 1.02 1.26 2041 1.83 0.98 0.00 0.98 0.85 0.85 0.76 0.76 0.67 0.57 0.85 2042 1.84 0.56 0.00 0.56 1.27 1.27 1.22 1.22 1.09 1.03 1.27 2043 1.84 0.56 0.00 0.56 1.28 1.28 1.22 1.22 1.10 1.04 1.27 2044 1.85 0.56 0.00 0.56 1.29 1.29 1.23 1.23 1.10 1.04 1.28 EIRR 10.5% 9.6% 9.9% 9.1% 8.9% 7.5% 8.8% ENPV 7.38 6.67 3.77 2.90 0.71 0.33 0.42 0.04 (0.03) (0.70) (0.10) EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates. 38

Table 24: EIRR Output 2 Summary (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Total Base Benefit - Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Benefit Case 10% 10% 10% 10% 10% 1-year 2020 0.00 54.60 54.60 - (54.60) (60.06) (54.60) (60.06) (54.60) (60.06) (54.60) 2021 0.00 42.24 42.24 - (42.24) (46.46) (42.24) (46.46) (42.24) (46.46) (42.24) 2022 0.00 28.23 28.23 - (28.23) (31.05) (28.23) (31.05) (28.23) (31.05) (28.23) 2023 0.00 14.23 14.23 - (14.23) (15.65) (14.23) (15.65) (14.23) (15.65) (14.23) 2024 0.00 14.23 14.23 - (14.23) (15.65) (14.23) (15.65) (14.23) (15.65) (14.23) 2025 0.00 6.82 6.82 - (6.82) (7.50) (6.82) (7.50) (6.82) (7.50) (6.82) 2026 0.00 6.82 6.82 - (6.82) (7.50) (6.82) (7.50) (6.82) (7.50) (6.82) 2027 44.09 3.53 - 3.53 40.57 40.57 40.21 40.21 36.16 35.80 (3.53) 2028 44.74 3.53 - 3.53 41.21 41.21 40.86 40.86 36.74 36.38 40.57 2029 45.40 3.53 - 3.53 41.88 41.88 41.52 41.52 37.33 36.98 41.21 2030 46.08 3.53 - 3.53 42.56 42.56 42.21 42.21 37.95 37.60 41.88 2031 46.77 8.35 - 8.35 38.42 38.42 37.59 37.59 33.75 32.91 37.74 2032 47.47 3.53 - 3.53 43.94 43.94 43.59 43.59 39.20 38.85 43.24 2033 48.19 3.53 - 3.53 44.67 44.67 44.31 44.31 39.85 39.49 43.94 2034 48.93 3.53 - 3.53 45.41 45.41 45.05 45.05 40.51 40.16 44.67 2035 49.69 3.53 - 3.53 46.17 46.17 45.81 45.81 41.20 40.85 45.41 2036 50.16 3.53 - 3.53 46.64 46.64 46.28 46.28 41.62 41.27 46.17 2037 50.64 3.53 - 3.53 47.12 47.12 46.76 46.76 42.05 41.70 46.64 2038 51.13 3.53 - 3.53 47.61 47.61 47.25 47.25 42.49 42.14 47.12 2039 51.63 3.53 - 3.53 48.11 48.11 47.75 47.75 42.94 42.59 47.61 2040 52.14 3.53 - 3.53 48.62 48.62 48.26 48.26 43.40 43.05 48.11 2041 52.66 8.35 - 8.35 44.31 44.31 43.48 43.48 39.05 38.21 43.80 2042 53.19 3.53 - 3.53 49.66 49.66 49.31 49.31 44.35 43.99 49.13 2043 53.73 3.53 - 3.53 50.21 50.21 49.85 49.85 44.83 44.48 49.66 2044 54.28 3.53 - 3.53 50.76 50.76 50.40 50.40 45.33 44.98 50.21 EIRR 13.3% 12.3% 13.2% 12.2% 12.1% 11.1% 11.8% ENPV 230.59 153.89 134.56 19.33 76.70 63.25 74.77 61.31 53.64 38.25 51.89 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Appendix A 39

Table 25: EIRR Output 3 Subproject 6: Establishment of Quarantine Station in Mandula Port and Expansion of Sheep Breeding Bases (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 0.0 310.1 310.1 0.0 (310.1) (341.1) (310.1) (341.1) (310.1) (341.1) (310.1) 2021 0.0 142.3 142.3 0.0 (142.3) (156.5) (142.3) (156.5) (142.3) (156.5) (142.3) 2022 0.0 140.2 140.2 0.0 (140.2) (154.2) (140.2) (154.2) (140.2) (154.2) (140.2) 2023 0.0 28.1 28.1 0.0 (28.1) (30.9) (28.1) (30.9) (28.1) (30.9) (28.1) 2024 0.0 14.0 14.0 0.0 (14.0) (15.4) (14.0) (15.4) (14.0) (15.4) (14.0) 2025 0.0 5.0 5.0 0.0 (5.0) (5.5) (5.0) (5.5) (5.0) (5.5) (5.0) 2026 0.0 5.0 5.0 0.0 (5.0) (5.5) (5.0) (5.5) (5.0) (5.5) (5.0) 2027 528.3 157.5 0.0 157.5 370.8 370.8 355.1 355.1 318.0 302.2 (157.5) 2028 528.3 157.7 0.0 157.7 370.6 370.6 354.8 354.8 317.8 302.0 370.6 2029 528.30 157.9 - 157.95 370.4 370.4 354.6 354.6 317.5 301.7 370.4 2030 528.30 188.0 - 187.97 340.3 340.3 321.5 321.5 287.5 268.7 340.3 2031 528.30 158.4 - 158.42 369.9 369.9 354.0 354.0 317.0 301.2 369.9 2032 528.30 158.7 - 158.67 369.6 369.6 353.8 353.8 316.8 300.9 369.6 2033 528.30 158.9 - 158.92 369.4 369.4 353.5 353.5 316.6 300.7 369.4 2034 528.30 159.2 - 159.17 369.1 369.1 353.2 353.2 316.3 300.4 369.1 2035 528.30 159.4 - 159.43 368.9 368.9 352.9 352.9 316.0 300.1 368.9 2036 528.30 159.7 - 159.69 368.6 368.6 352.6 352.6 315.8 299.8 368.6 2037 528.30 160.0 - 159.96 368.3 368.3 352.3 352.3 315.5 299.5 368.3 2038 528.30 160.2 - 160.24 368.1 368.1 352.0 352.0 315.2 299.2 368.1 2039 528.30 160.5 - 160.52 367.8 367.8 351.7 351.7 314.9 298.9 367.8 2040 528.30 197.1 - 197.13 331.2 331.2 311.5 311.5 278.3 258.6 331.2 2041 528.30 161.1 - 161.10 367.2 367.2 351.1 351.1 314.4 298.3 367.2 2042 528.30 161.4 - 161.40 366.9 366.9 350.8 350.8 314.1 297.9 366.9 2043 528.30 161.7 - 161.70 366.6 366.6 350.4 350.4 313.8 297.6 366.6 2044 528.30 162.0 - 162.01 366.3 366.3 350.1 350.1 313.5 297.3 366.3 EIRR 20.8% 19.7% 20.2% 19.2% 19.0% 17.4% 17.8% ENPV 2,530.35 1,326.40 547.15 779.25 1,203.95 1,149.24 1,126.03 1,071.31 950.92 818.28 938.82 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

40

Table 26: EIRR Overall Project (CNY million) Benefits Costs Net Inflow (Outflow) Capital O&M Total Benefits - Implementation Year Base Benefit - Total Benefit Total Capital O&M Cost + Cost + Cost + Total Cost + Delay by Case 10% 10% 10% 10% 10% 1-year 2020 0.0 731.5 731.5 0.0 (731.5) (804.7) (731.5) (804.7) (731.5) (804.7) (731.5) 2021 0.0 598.7 598.7 0.0 (598.7) (658.5) (598.7) (658.5) (598.7) (658.5) (598.7) 2022 0.0 448.5 448.5 0.0 (448.5) (493.3) (448.5) (493.3) (448.5) (493.3) (448.5) 2023 0.0 188.2 188.2 0.0 (188.2) (207.0) (188.2) (207.0) (188.2) (207.0) (188.2) 2024 0.0 167.5 167.5 0.0 (167.5) (184.3) (167.5) (184.3) (167.5) (184.3) (167.5) 2025 0.0 69.8 69.8 0.0 (69.8) (76.8) (69.8) (76.8) (69.8) (76.8) (69.8) 2026 40.9 87.1 67.6 19.5 (46.2) (53.0) (48.2) (54.9) (50.3) (59.0) (87.1) 2027 791.1 271.5 0.0 271.5 519.6 519.6 492.5 492.5 440.5 413.4 (230.6) 2028 809.5 272.9 0.0 272.9 536.6 536.6 509.3 509.3 455.7 428.4 518.2 2029 829.4 274.3 0.0 274.3 555.1 555.1 527.7 527.7 472.2 444.7 535.2 2030 851.6 306.6 0.0 306.6 544.9 544.9 514.2 514.2 459.7 429.1 522.7 2031 874.3 284.3 0.0 284.3 590.0 590.0 561.6 561.6 502.6 474.1 567.3 2032 899.7 282.1 0.0 282.1 617.6 617.6 589.4 589.4 527.6 499.4 592.2 2033 928.6 284.9 0.0 284.9 643.7 643.7 615.3 615.3 550.9 522.4 614.9 2034 961.2 287.7 0.0 287.7 673.5 673.5 644.8 644.8 577.4 548.7 640.9 2035 996.6 290.5 0.0 290.5 706.1 706.1 677.0 677.0 606.4 577.4 670.7 2036 1,034.0 293.5 0.0 293.5 740.5 740.5 711.2 711.2 637.1 607.8 703.1 2037 1,077.5 296.5 0.0 296.5 781.0 781.0 751.4 751.4 673.3 643.6 737.5 2038 1,128.2 299.6 0.0 299.6 828.6 828.6 798.6 798.6 715.7 685.8 777.9 2039 1,187.5 302.8 0.0 302.8 884.7 884.7 854.4 854.4 765.9 735.7 825.4 2040 1,256.9 342.4 0.0 342.4 914.5 914.5 880.3 880.3 788.8 754.6 845.1 2041 1,337.3 314.3 0.0 314.3 1,023.0 1,023.0 991.6 991.6 889.3 857.9 942.7 2042 1,432.1 312.9 0.0 312.9 1,119.2 1,119.2 1,087.9 1,087.9 976.0 944.7 1,024.4 2043 1,544.3 316.4 0.0 316.4 1,227.8 1,227.8 1,196.2 1,196.2 1,073.4 1,041.8 1,115.7 2044 1,677.1 320.0 0.0 320.0 1,357.0 1,357.0 1,325.0 1,325.0 1,189.3 1,157.3 1,224.2 EIRR 14.3% 13.4% 13.9% 13.0% 12.9% 11.5% 12.3% ENPV 4,762 3,246 1,842 1,404 1,515 1,331 1,375 1,191 1,039 715 944 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

41

78. RCI spillover benefits. The six Tranche 1 subprojects are located in the border municipalities of Erenhot and Mandula. The combined investments in the four project outputs will strengthen ties between China and Mongolia in terms of trade facilitation and cross-border connectivity, improved environment and health and living conditions, promotion of businesses and SMEs that contributes to poverty alleviation, and facilitation of policy dialogues between Mongolia and PRC and knowledge interchange through strategic trainings in agriculture and trade. Direct and indirect benefits have been identified from infrastructure and smart systems and innovative technologies introduced in the subprojects that contribute to the spread of RCI with border towns as portals to beyond.

79. Under Output 1, Mongolians are given equal opportunity to work in the Erenhot ECZ, with inter-government agreement allocating 50% of vacancies to Mongolians. About 900 project related port jobs at the same pay scale as Chinese will result in economic gains to Mongolians who will be hired. The net present value (NPV) of the subproject spillover benefit is estimated at CNY369 million. Likewise, the demand for quality coal from Mongolia will result in new jobs at the Mongolian mine pits and for truck drivers. By 2030, with project storage turnover capacity able to handle 15 million tons, over 12,000 jobs will generate spillover benefits with estimated NPV at CNY4,550 million. Improved health services through the hospital subproject would result in cost savings to Chinese and Mongolian emergency patients as most cases cannot be accommodated due to the lack of appropriate medical equipment to provide the needed aid. With the expansion project, Mongolian patients who sought medical care in Hohhot, Beijing or Ulaanbaatar will save on travel costs otherwise incurred without the project. Further benefits will arise from avoided premature death and permanent disability. The impact of the hospital subproject will have estimated NPV at CNY10 million. Total Output 1 RCI benefits to Mongolians amount to CNY4,928 million.

80. Output 3 will have spillover benefits from the Mandula quarantine subproject as the Xiaoweiyang Co. imports 300,000 sheep annually from Mongolia that will undergo product safety check at the facility. Xiaoweiyang Co. will apply embryo technology that improves weight and mutton quality and introduce the traceability system that ensures brand quality. As the demand for Xiaoweiyang sheep increases with proliferation technology and assurance of brand quality, there will be direct economic gains to Mongolian herders in terms of higher mutton prices. The NPV of spillover benefits is estimated at CNY832 million.

81. Total RCI direct benefits amount to CNY5,760 million, resulting in project overall EIRR to 26.9%, and ENPV at CNY7,190 million. Tables 27 to 31 present the discounted cash flows reflecting cross-border RCI contribution. 42

Table 27: EIRR Output 1 ECZ Inspection Area Construction with RCI Benefits: Incremental Wages for ECZ Mongolian Workers and New Employment Opportunities at Mongolian Mines (CNY million) Year Benefits Costs Total Regular RCI Total Base Capital O&M Total Benefits - Implemtn Benefits PRC Mongolia Costs Case Cost + Cost + Cost + Benefit - Total Cost + Delay by 10% 10% 10% 10% 10% 1-year 2020 - - 215 (215) (237) (215) (237) (215) (237) (215) 2021 - - 261 (261) (287) (261) (287) (261) (287) (261) 2022 - - 174 (174) (192) (174) (192) (174) (192) (174) 2023 - - - 88 (88) (97) (88) (97) (88) (97) (88) 2024 - - - 88 (88) (97) (88) (97) (88) (97) (88) 2025 - - - 34 (34) (38) (34) (38) (34) (38) (34) 2026 - - - 34 (34) (38) (34) (38) (34) (38) (34) 2027 153 94 59 80 73 73 65 65 58 50 (80) 2028 166 107 59 82 84 84 76 76 68 60 72 2029 181 121 59 83 97 97 89 89 79 71 83 2030 197 137 59 85 112 112 103 103 92 84 96 2031 215 156 59 87 129 129 120 120 107 98 110 2032 236 177 59 88 148 148 139 139 124 115 127 2033 261 201 59 90 170 170 161 161 144 135 146 2034 288 229 59 92 196 196 187 187 167 158 168 2035 318 259 59 94 225 225 215 215 193 183 194 2036 352 292 59 96 256 256 247 247 221 211 223 2037 391 332 59 98 294 294 284 284 255 245 254 2038 438 378 59 100 338 338 328 328 294 284 292 2039 493 433 59 102 391 391 381 381 342 332 336 2040 558 498 59 104 454 454 444 444 398 388 389 2041 634 574 59 106 528 528 518 518 465 454 452 2042 724 665 59 108 616 616 606 606 544 533 526 2043 832 772 59 110 722 722 711 711 639 628 614 2044 960 901 59 112 848 848 837 837 752 741 720 EIRR 12.2% 11.5% 11.9% 11.2% 11.1% 10.0% 10.4% ENPV 1,537 1,253 369 1,147 391 320 347 276 237 122 162 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Appendix A 43

Table 28: EIRR Output 2 Upgrading the Mandula Port International (Highway) Logistics Park with RCI Benefits: Incremental Wages for Mongolian Miners (CNY million) Year Benefits Costs Total Regular RCI Total Base Capital O&M Total Benefits - Implemtn Benefits PRC Mongolia Costs Case Cost + Cost + Cost + Benefit - Total Cost + Delay by 10% 10% 10% 10% 10% 1-year 2020 - - - 138 (138) (152) (138) (152) (138) (152) (138) 2021 - - - 145 (145) (159) (145) (159) (145) (159) (145) 2022 - - - 97 (97) (107) (97) (107) (97) (107) (97) 2023 - - - 49 (49) (54) (49) (54) (49) (54) (49) 2024 - - - 49 (49) (54) (49) (54) (49) (54) (49) 2025 232 - 232 21 211 208 211 208 187 185 (21) 2026 412 - 412 21 391 389 391 389 350 348 211 2027 698 84 614 11 686 686 685 685 616 615 401 2028 832 89 743 12 820 820 819 819 737 735 686 2029 976 94 882 12 964 964 963 963 866 865 819 2030 1,028 99 929 13 1,015 1,015 1,014 1,014 912 911 963 2031 1,031 102 929 13 1,018 1,018 1,017 1,017 915 914 1,015 2032 1,035 106 929 14 1,022 1,022 1,020 1,020 918 917 1,018 2033 1,039 110 929 14 1,025 1,025 1,024 1,024 921 920 1,021 2034 1,043 114 929 15 1,029 1,029 1,027 1,027 924 923 1,025 2035 1,048 119 929 15 1,033 1,033 1,031 1,031 928 926 1,028 2036 1,051 122 929 16 1,036 1,036 1,034 1,034 931 929 1,032 2037 1,055 126 929 16 1,039 1,039 1,037 1,037 933 932 1,035 2038 1,059 129 929 17 1,042 1,042 1,040 1,040 936 934 1,038 2039 1,062 133 929 17 1,045 1,045 1,043 1,043 939 937 1,041 2040 1,066 137 929 18 1,048 1,048 1,046 1,046 942 940 1,044 2041 1,070 141 929 19 1,051 1,051 1,049 1,049 944 942 1,047 2042 1,074 145 929 19 1,055 1,055 1,053 1,053 947 945 1,051 2043 1,078 149 929 20 1,058 1,058 1,056 1,056 950 948 1,054 2044 1,082 153 929 21 1,061 1,061 1,059 1,059 953 951 1,057 EIRR 43.1% 41.3% 43.1% 41.3% 41.1% 39.3% 37.2% ENPV 5,080 530 4,550 484 4,596 4,555 4,589 4,548 4,088 4,040 4,061 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

44

Table 29: EIRR Output 1 Subproject 3: Erenhot Upgrading Medical Equipment with RCI Benefits: Travel Cost Savings and Untimely Death and Permanent Disability Prevention (CNY million) Year Benefits Costs Total Regular RCI Total Base Capital O&M Total Benefits - Implemtn Benefits PRC Mongolia Costs Case Cost + Cost + Cost + Benefit - Total Cost + Delay by 10% 10% 10% 10% 10% 1-year 2020 - - 13 (13) (15) (13) (15) (13) (15) (13) 2021 - - 9 (9) (10) (9) (10) (9) (10) (9) 2022 1 - 1 9 (8) (9) (8) (9) (8) (9) (9) 2023 1 - 1 9 (8) (9) (8) (9) (8) (9) (8) 2024 1 - 1 2 (1) (2) (1) (2) (2) (2) (2) 2025 1 - 1 2 (1) (2) (1) (2) (1) (2) (1) 2026 42 41 1 19 22 22 20 20 18 16 (19) 2027 42 41 1 19 23 23 21 21 19 17 23 2028 42 41 1 18 24 24 22 22 20 18 24 2029 42 41 1 17 25 25 23 23 20 19 25 2030 42 41 1 17 24 24 23 23 20 19 24 2031 42 41 1 18 24 24 23 23 20 18 24 2032 42 41 1 18 24 24 22 22 20 18 24 2033 42 41 1 18 24 24 22 22 20 18 24 2034 42 41 1 18 24 24 22 22 19 18 24 2035 42 41 1 19 23 23 22 22 19 17 23 2036 42 41 1 19 23 23 21 21 19 17 23 2037 42 41 1 19 23 23 21 21 19 17 23 2038 42 41 1 19 23 23 21 21 19 17 23 2039 42 41 1 20 23 23 21 21 18 16 22 2040 42 41 1 20 22 22 20 20 18 16 22 2041 42 41 1 20 22 22 20 20 18 16 22 2042 42 41 2 21 22 22 20 20 18 15 22 2043 42 41 2 21 21 21 19 19 17 15 21 2044 42 41 2 21 21 21 19 19 17 15 21 EIRR 24.7% 23.3% 23.5% 22.1% 21.9% 19.2% 19.6% ENPV 228 218 10 135 91 87 81 77 68 55 68 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Appendix A 45

Table 30: EIRR Output 3 Subproject 6: Mandula Port Quarantine and Sheep Breeding Expansion with RCI Benefits: Incremental Earnings for Mongolian Herders (CNY million) Year Benefits Costs Total Regular RCI Total Base Capital O&M Total Benefits - Implemtn Benefits PRC Mongolia Costs Case Cost + Cost + Cost + Benefit - Total Cost + Delay by 10% 10% 10% 10% 10% 1-year 2020 - - - 310 (310) (341) (310) (341) (310) (341) (310) 2021 - - - 142 (142) (156) (142) (156) (142) (156) (142) 2022 - - - 140 (140) (154) (140) (154) (140) (154) (140) 2023 - - - 28 (28) (31) (28) (31) (28) (31) (28) 2024 - - - 14 (14) (15) (14) (15) (14) (15) (14) 2025 140 - 140 5 135 135 135 135 121 121 (5) 2026 140 - 140 5 135 135 135 135 121 121 135 2027 669 528 140 157 511 511 495 495 444 428 (17) 2028 669 528 140 158 511 511 495 495 444 428 511 2029 669 528 140 158 511 511 495 495 444 428 511 2030 669 528 140 188 481 481 462 462 414 395 481 2031 669 528 140 158 510 510 494 494 443 427 510 2032 669 528 140 159 510 510 494 494 443 427 510 2033 669 528 140 159 510 510 494 494 443 427 510 2034 669 528 140 159 509 509 493 493 443 427 509 2035 669 528 140 159 509 509 493 493 442 426 509 2036 669 528 140 160 509 509 493 493 442 426 509 2037 669 528 140 160 509 509 493 493 442 426 509 2038 669 528 140 160 508 508 492 492 441 425 508 2039 669 528 140 161 508 508 492 492 441 425 508 2040 669 528 140 197 471 471 452 452 405 385 471 2041 669 528 140 161 507 507 491 491 441 424 507 2042 669 528 140 161 507 507 491 491 440 424 507 2043 669 528 140 162 507 507 491 491 440 424 507 2044 669 528 140 162 507 507 490 490 440 423 507 EIRR 26.6% 25.3% 26.2% 24.9% 24.8% 23.1% 22.9% ENPV 3,362 2,530 832 1,326 2,036 1,981 1,958 1,903 1,700 1,567 1,687 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates.

46

Table 31: Overall EIRR with Cross-border RCI Benefits (CNY million) Year Benefits Costs Total Regular RCI Total Base Capital O&M Total Benefits - Implemtn Benefits PRC Mongolia Costs Case Cost + Cost + Cost + Benefit - Total Cost + Delay by 10% 10% 10% 10% 10% 1-year 2020 - - - 732 (732) (805) (732) (805) (732) (805) (732) 2021 - - - 599 (599) (659) (599) (659) (599) (659) (599) 2022 1 - 1 448 (448) (493) (448) (493) (448) (493) (448) 2023 1 - 1 188 (187) (206) (187) (206) (187) (206) (187) 2024 1 - 1 168 (167) (183) (167) (183) (167) (184) (167) 2025 373 - 373 70 303 296 303 296 266 259 (69) 2026 594 41 553 87 507 500 505 499 448 439 286 2027 1,605 791 814 271 1,334 1,334 1,307 1,307 1,173 1,146 323 2028 1,753 809 943 273 1,480 1,480 1,453 1,453 1,305 1,277 1,332 2029 1,912 829 1,083 274 1,638 1,638 1,611 1,611 1,447 1,419 1,479 2030 1,981 852 1,130 307 1,675 1,675 1,644 1,644 1,477 1,446 1,606 2031 2,004 874 1,130 284 1,720 1,720 1,691 1,691 1,519 1,491 1,697 2032 2,030 900 1,130 282 1,747 1,747 1,719 1,719 1,544 1,516 1,722 2033 2,058 929 1,130 285 1,774 1,774 1,745 1,745 1,568 1,539 1,745 2034 2,091 961 1,130 288 1,803 1,803 1,775 1,775 1,594 1,566 1,771 2035 2,127 997 1,130 291 1,836 1,836 1,807 1,807 1,623 1,594 1,801 2036 2,164 1,034 1,130 293 1,871 1,871 1,841 1,841 1,654 1,625 1,833 2037 2,208 1,078 1,130 297 1,911 1,911 1,881 1,881 1,690 1,661 1,868 2038 2,258 1,128 1,130 300 1,959 1,959 1,929 1,929 1,733 1,703 1,908 2039 2,318 1,187 1,130 303 2,015 2,015 1,985 1,985 1,783 1,753 1,955 2040 2,387 1,257 1,130 342 2,045 2,045 2,010 2,010 1,806 1,772 1,975 2041 2,467 1,337 1,130 314 2,153 2,153 2,122 2,122 1,906 1,875 2,073 2042 2,562 1,432 1,130 313 2,250 2,250 2,218 2,218 1,993 1,962 2,155 2043 2,675 1,544 1,130 316 2,358 2,358 2,327 2,327 2,091 2,059 2,246 2044 2,807 1,677 1,130 320 2,487 2,487 2,455 2,455 2,207 2,175 2,355 EIRR 26.9% 25.6% 26.7% 25.4% 25.2% 23.7% 23.5% ENPV 10,522 4,762 5,760 3,246 7,190 7,006 7,050 6,866 6,147 5,822 6,030 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Asian Development Bank estimates. 47 Appendix A

APPENDIX A: Company Surveyed in Mandula Port No. Company Name 1 二连浩特市铭洋商贸有限责任公司 Erenhot Mingyang Trading Co., Ltd. 2 包头市鸿鹭国际货运代理有限公司 Baotou Honglu International Freight Forwarding Co., Ltd. 3 包头鼎力通国际货物运输代理有限公司 Baotou Dinglitong International Freight Forwarding Co., Ltd. 4 达茂旗金锐恒基能源有限公司 Damao Qijin Ruiheng Energy Co., Ltd. 5 达茂旗凯丰报关有限责任公司 Damaoqi Customs Co., Ltd. 6 内蒙古岱钦能源有限公司 Inner Mongolia Daiqin Energy Co., Ltd. 7 包头市博锋进出口贸易有限责任公司 Baotou Bofeng Import and Export Trade Co., Ltd. 8 二连市福瑞茂商贸有限责任公司 Erenhot Furui Mao Trading Co., Ltd. 9 包头市同创国际贸易有限公司 Baotou Tongchuang International Trade Co., Ltd. 10 包头市颐力奇能源有限公司 Baotou City Liliqi Energy Co., Ltd. 11 包头市盈通贸易有限公司 Baotou Yingtong Trading Co., Ltd. 12 包头市华远通运国际货运代理有限公司 Baotou Huayuan Tongyun International Freight Forwarding Co., Ltd. 13 内蒙古丝路创业发展有限公司 Inner Mongolia Venture Development Co., Ltd.

48 Appendix B

APPENDIX B: VEHICLE OPERATING COST ASSUMPTIONS (HDM4)

1. The basic consumption selected in this model is the consumption under the baseline conditions of road surface roughness (IRI) of 2, average longitudinal slope ≤ 2%, and driving speed of 50 kilometers per hour (km/h). The basic consumption and basic costs of variable costs in the cost of transportation of vehicles, such as fuels, lubricants, tires and auto repair materials and labor costs are listed in excel.

2. The formula of the vehicle speed model is as follows, which consider the impact of different road conditions and different traffic conditions on the main factors of automobile transportation cost, and calculate the impact of vehicle speed on variable transportation costs under different traffic conditions for each characteristic year. Adjust the transportation cost of each model. The formula is as follows:

Class I Four lanes road 2 8    v       v    b   b1      c    v/c≤m    c    v/c>m S = a  exp  S = a1  exp          Class II road

v/c≤m  v v/c>m S = a1 + b1    c

of which:S ― speed(km/hr); V ― Standard vehicle hour traffic (veh/lane/hour); C ― Stand vehicle hour capacity (veh/lane/hour); m ― the defined value of the congestion degree; a, a1, b, b1 are regression parameters, which values are shown in following table.

Traffic Volume and Vehicle Speed Model Coefficient for Adjustment Topographic coefficient Vehicle Plat area Heavy hills/Mountains a b m a1 b1 a b m a1 b1 CT 68.31 -0.06 0.8 70.956 -0.455 68.31 -0.06 0.8 70.956 -0.455 Class I MT 65 -0.15 0.8 62.375 -0.327 65 -0.15 0.8 62.375 -0.327 CT 56.7 -0.86 0.75 80 -60 46.7 -0.97 0.75 65.1 -50.8 Class II MT 58.4 -0.91 0.75 80 -60 48.4 -1.04 0.75 65.1 -50.8 CT-PRC Truck, MT-Mongolia Truck. Source: HDM 4 model.

Impact of highway and traffic conditions on vehicle transportation costs Highway condition Traffic condition Vehicle Cost Average longitudinal IRI Speed (km/h) V/C slope(G%) Fuel 0.990+0.0048*IRI 0.209+31.04/s+0.000068s2 1+0.14*(v/c) Lubricating 0.903+0.0487*IRI 0.973+0.27/s+0.0000088s2 Oil Tire 0.943+0.0286*IRI 0.6867*s^0.0918 1+0.51*(v/c) Maintenance 0.909*exp(0.0916*IRI)- 0.861*exp(0.129*G)- CT 0.178+41.11/s labor 0.091 0.045 0.85*exp(0.1789*IRI)- Repair Parts 0.178+41.11/s 0.215 0.85*exp(0.1789*IRI)- Discount 0.178+41.11/s 0.215 Fuel 0.978+0.0109*IRI 0.524+16.81/s+0.000056s2 1+0.14*(v/c) Lubricating 0.811*exp(0.1525*G) – MT 0.908+0.0458*IRI 1 Oil 0.019 Tire 0.942+0.0288*IRI 0.8266*s^0.051-0.009 1+0.51*(v/c) Appendix B 49

Highway condition Traffic condition Vehicle Cost Average longitudinal IRI Speed (km/h) V/C slope(G%) Maintenance 0.961*exp(0.0704*IRI)-

labor 0.106 0.429+26.78/s+0.000014s2 0.847*exp(0.1367*IRI)- Repair Parts 0.113 0.429+26.78/s+0.000014s2 0.847*exp(0.1367*IRI)- Discount 0.113 0.429+26.78/s+0.000014s2 CT = PRC Truck, MT = Mongolia Truck. Source: HDM 4 model.

3. According to the formulas listed in the above two tables, the relevant correction coefficient is obtained, and the following consumption type calculation formulas are added to amend the various cost.

(1) Fuel cost adjustment

4. Fuel consumption is affected by vehicle conditions and road traffic conditions. The main influencing factors of highway traffic conditions are: slope, road surface roughness and .

Fuel economy cost = fuel shadow price × basic fuel consumption × flatness correction coefficient × slope correction coefficient × vehicle speed correction coefficient × congestion degree correction coefficient.

(2) Lubricant cost adjustment

5. The consumption of lubricating oil is affected by road flatness and speed.

Lubricant economic cost = lubricating oil shadow price × lubricating oil basic consumption × flatness correction coefficient × vehicle speed correction coefficient

(3) Tyre cost

6. Tyre consumption is affected by road roughness, speed and traffic congestion.

Tyre economic cost = tyre basic economic cost × flatness correction coefficient × vehicle speed correction coefficient × congestion degree correction coefficient

(4) Repair parts cost adjustment

7. According to the survey of various vehicle maintenance cost characteristics, obtain the economic cost of maintenance under the basic conditions, and then adjust the traffic level according to the road conditions of the project to obtain the economic cost of the repair parts of the project.

Economic cost of maintenance parts = basic economic cost of maintenance parts × flatness correction coefficient × vehicle speed correction factor

(5) Maintenance labour cost adjustment

8. According to the basic conditions of maintenance labor under the basic conditions of the investigation, the actual cost of the project will be adjusted to adjust the labor cost of the project.

50 Appendix B

Maintenance labor cost = maintenance manual basic economic cost × flatness correction coefficient × vehicle speed correction coefficient

(6) Transportation distance depreciation cost adjustment

9. The basic transportation depreciation expense is calculated based on 60% depreciation of the economic price of the new car.

Actual transportation distance depreciation expense cost = transportation distance depreciation fee basic economic cost × flatness correction coefficient × vehicle speed correction coefficient

(7) Time-related depreciation expense adjustment

10. Assuming that the vehicle's annual usage hours are constant, the increase in vehicle speed will increase the mileage, and the depreciation cost per 100 km will be reduced. The basic depreciation expense will be calculated based on 40% of the economic cost of the new car.

Actual time depreciation expense cost = time depreciation expense basic economic cost × basic speed / actual speed Appendix C 51

APPENDIX C: HOSPITAL MEDICAL EQUIPMENT REQUIREMENT Medical Equipment Division Items Number Amount Percentage RADIOLOGY 4 5 1550 34.37% Surgery/ Anesthesiology 8 22 1134.8 25.16% Laboritory 8 12 585 12.97% Ophthalmology 8 8 325 7.21% Internal Medicine 2 52 206 4.57% Disinfecting supply room 5 4 180 3.99% First Aid Center 1 4 150 3.33% Otolaryngology 6 9 144 3.19% Pediatrics 5 36 125 2.77% Function Section 1 1 110 2.44% Dental 3 3 0.6 0.01% 51 156 4510.4 100.00%