Completion Report

Project Number: 34174 Loan Number: 2181 June 2014

People’s Republic of China: Central Sichuan Roads Development Project

This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – yuan (CNY)

At Appraisal At Project Completion (31 August 2005) (6 February 2013) CNY1.00 = $0.1208 $0.1605 $1.00 = CNY8.2770 CNY6.2287

ABBREVIATIONS

ADB – Asian Development Bank EIA – environmental impact assessment EIRR – economic internal rate of return FIRR – financial internal rate of return GDP – gross domestic product O&M – operation and maintenance PRC – People’s Republic of China SPTD – Sichuan Provincial Transport Department SYECL – Sichuan Yaxi Expressway Company Limited WACC – weighted average cost of capital

WEIGHTS AND MEASURES km – kilometer m2 – square meter mu – Chinese unit of measurement (1 mu = 666.67 m2)

NOTE

In this report, ―$‖ refers to US dollars, unless otherwise stated.

Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Director H. Sharif, Resident Mission in the People’s Republic of China, EARD

Team leader W. Zhang, Senior Project Officer, EARD Team members Z. Niu, Senior Project Officer (Environment), EARD F. Wang, Senior Project Officer (Financial Management), EARD H. Xia, Project Analyst, EARD W. Zhu, Senior Project Officer (Resettlement), EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 7 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 8 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 11 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 14 C. Recommendations 15 APPENDIXES 1. Design and Monitoring Framework 16 2. Chronology of Major Events 21 3. Project Costs and Financing Plan 23 4. Projected and Actual Contract Awards and Disbursements 24 5. Appraisal and Actual Implementation Schedule 25 6. Organization Charts 26 7. Compliance with Loan Covenants 28 8. Project Contract Details 36 9. Economic Reevaluation 39 10. Financial Reevaluation 43 11. Land Acquisition and Resettlement 47 12. Socioeconomic Impact and Poverty Reduction 52 13. Environmental Impact Analysis 58

BASIC DATA

A. Loan Identification

1. Country People’s Republic of China 2. Loan Number 2181 3. Project Title Central Sichuan Roads Development Project 4. Borrower People’s Republic of China 5. Executing Agency Sichuan Provincial Communications Department 6. Amount of Loan $600 million 7. Project Completion Report Number PCR: PRC 1448

B. Loan Data 1. Appraisal – Date Started 14 March 2005 – Date Completed 22 March 2005

2. Loan Negotiations – Date Started 16 August 2005 – Date Completed 18 August 2005

3. Date of Board Approval 22 September 2005

4. Date of Loan Agreement 3 April 2006

5. Date of Loan Effectiveness – In Loan Agreement 2 July 2006 – Actual 12 July 2006 – Number of Extensions 1

6. Closing Date – In Loan Agreement 31 March 2012 – Actual 6 February 2013 – Number of Extensions 1

7. Terms of Loan – Interest Rate ADB’s London interbank offered rate (LIBOR) based lending facility – Maturity 26 years – Grace Period 6 years

8. Terms of Onlending – Interest Rate ADB’s LIBOR-based lending facility – Maturity 26 years – Grace Period 6 years – Second-Step Borrower Sichuan Yaxi Expressway Company Limited

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9. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval

15 September 2006 6 February 2013 76.7 months

Effective Date Original Closing Date Time Interval

12 July 2006 31 March 2012 68.4 months

b. Amount ($) Original Last Revised Amount Net Amount Amount Category Allocation Allocation Canceled Available Disbursed Expressway civil works and local roads 505,900,000 477,699,669 99,600,000 477,699,669 477,699,669 Public transportation centers 1,000,000 1,000,000 0 1,000,000 1,000,000 Consulting services and training 2,100,000 2,015,331 0 2,015,331 2,015,331 Interest during construction and commitment charge 72,100,000 19,685,000 0 19,685,000 19,685,000 Unallocated 18,900,000 0 0 0 0 Total 600,000,000 500,400,000 99,600,000 500,400,000 500,400,000 Source: Asian Development Bank.

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 931.00 500.40 Local Currency Cost 1,146.00 2,602.23 Total 2,077.00 3,102.63

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 1,402.30 2,411.57 ADB Financed 527.90 480.70 Subtotal 1,930.20 2,892.27 IDC Costs Borrower Financed 74.70 190.67 ADB Financed 72.10 19.70 Subtotal 146.80 210.37 Note: Numbers may not sum precisely because of rounding. ADB = Asian Development Bank, IDC = interest during construction and commitment charge. Source: Asian Development Bank.

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3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual A. Base Cost 1. Expressway civil works 1,255.4 2,494.7 2. Equipment 165.3 91.8 3. Land acquisition and resettlement 95.3 190.4 4. Consulting services and training 82.3 42.0 5. Local roads 68.8 68.4 6. Public transport centers 2.5 4.9 Subtotal (A) 1,669.6 2,892.3 B. Contingencies 1. Physical contingencies 126.0 0.0 2. Price contingencies 134.6 0.0 Subtotal (B) 260.6 0.0 C. Interest during Construction and Commitment Charge 146.8 210.4 Total 2,077.0 3,102.6 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

4. Project Schedule Item Appraisal Estimate Actual Completion of Detailed Design December 2007 Date of Contract with Consultants March 2006 February 2007 Civil Works Contract Date of First Award March 2006 March 2007 Completion of Work September 2011 April 2012 Equipment and Supplies Dates First Procurement January 2009 April 2010 Last Procurement June 2011 August 2011 Start of Operations Full Completion and Operation of Expressway September 2011 April 2012 Sources: Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

5. Project Performance Report Ratings Ratings Development Implementation Implementation Period Objectives Progress From 22 September 2005 to 28 February 2006 Satisfactory Satisfactory From 1 March to 31 March 2006 Satisfactory Unsatisfactorya From 1 April 2006 to 31 May 2007 Satisfactory Satisfactory From 1 June to 31 October 2007 Satisfactory Highly Satisfactory From 1 November 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2012 Satisfactory Satisfactory a The unsatisfactory rating was caused by delay of 3 months in loan signing. Source: Asian Development Bank.

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D. Data on Asian Development Bank Missions No. of No. of Specialization of Name of Mission Date Persons Person-Days Membersa Fact-finding 24 January–3 February 2005 9 72 a, b, c, d, e, f, g, h, i Appraisal 14–22 March 2005 4 32 a, b, c, f Inception 17–21 July 2006 2 8 g, n Review 1b 19–24 November 2007 5 25 j, f, h, i, n Review 2 5–11 September 2008 3 18 h, i, n Midterm review 18–25 September 2009 4 28 h, i, m, n Review 3 9–16 August 2010 3 21 h, i, n Review 4 26–30 September 2011 3 12 h, i, n Review 5 24–30 October 2012 2 12 h, n Project completion review 14–22 October 2013 4 29 h, i, m, n a a = project economist, b = counsel, c = financial specialist, d = project specialist (roads), e = social development specialist (environment), f = social development specialist (resettlement), g = transport specialist, h = project officer (transport), i = project officer (resettlement), j = portfolio management specialist, m = project officer (financial management), n = project analyst. b Project administration was transferred to the ADB Resident Mission in the People’s Republic of China on 1 December 2007. Source: Asian Development Bank.

I. PROJECT DESCRIPTION

1. The People’s Republic of China (PRC) has achieved rapid economic development and growth in gross domestic product (GDP) exceeding 7.5% annually since the 1980s. Vehicle ownership in the PRC also has expanded rapidly from 1.69 million vehicles in 1980, to 5.54 million vehicles in 1990, 16.09 million vehicles in 2000, and 109.33 million vehicles in 2012. Sustained economic growth and increased vehicle ownership have resulted in an unprecedented escalation in traffic flow between and within provinces. The economy’s changing structure and increasing diversification have altered the pattern of transport demand. Movement of goods and passengers by road, which is more flexible and responsive to market needs than other modes of transport, is expanding rapidly. By 2012, the volume of road freight transport had increased tenfold from 597.3 billion ton-kilometers in 2000 to 5,953.5 billion ton-kilometers and passenger transport by nearly 28 times from 660.0 billion passenger-kilometers in 2000 to 1,846.8 billion passenger-kilometers. To cope with the dramatic growth in traffic demand, the government initiated a long-term strategy in 1988 to implement a 35,000 kilometer (km) national trunk highway system. By 2004, this strategy had further evolved into a plan for a national expressway network with total length of 85,000 km and which was targeted for completion by 2020. When the national expressway network is finished, all major economic centers and municipalities will be connected by expressways supplemented with local road networks.

2. Asian Development Bank (ADB) assistance in the road sector supports the government’s effort to expand and improve national and local road networks. To meet growing demand for transport infrastructure and services, CNY6,606 billion from the government budget, local funds, and external sources was mobilized to build new roads and improve deteriorated highway networks from 2006 to 2012. At the end of 2012, the road network in the PRC totaled 4,237,500 km and consisted of 96,200 km of expressway, 74,300 km of class I highway, 331,500 km of class II highway, 401,900 km of class III highway, 2,705,800 km of class IV highway, and 627,900 km of underclass highway. The PRC’s road network density is nevertheless just 44.14 km per 100 square kilometers (km2), which is half that of the United States of America. To better serve the economy, the government decided to develop its road sector as reflected in its Twelfth Five-Year Plan for 2011–2015. Planned targets include (i) expansion of the road network to 4.5 million km; (ii) completion of the national expressway network with a total length of 108,000 km, which will link 90% of cities having populations exceeding 200,000; (iii) completion of 650,000 km of roads at class II and above; (iv) achievement of good technical conditions for all national and provincial roads; and (v) completion of 3.9 million km of rural road network.

3. Sichuan Province is situated in a basin and is surrounded by mountains. Most of the population is concentrated on the flat, fertile plain in the central and eastern areas. The province’s landlocked nature has gradually diminished with the ongoing development of transport infrastructure on the Yangtze River, railway lines, and several major highway corridors. Despite considerable investment, the road network remains inadequate and does not provide efficient access to large parts of the province. Limited road links with neighboring provinces and local economic centers currently constrain traffic, and a still-underdeveloped transport network has slowed economic growth in the province. With rapid development during the 1990s and 2000s in the PRC, Sichuan, which ranks seventh lowest among all provinces in terms of GDP per capita, has seen its standing by this measure remain unchanged. GDP per capita was CNY5,376 in 2001 (62% of the national average, ranking 24th among 31 provinces) and CNY29,579 in 2012 (77% of the average but still standing 24th). At appraisal, 273,000 project beneficiaries, or 29% of the total population in the project area, lived at income levels below CNY900 per year.

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4. The project’s principal objective was to develop an integrated road transport system to support sustainable economic development in Sichuan. Local roads complement the expressway by bringing benefits to rural residents. The project has (i) reduced traffic accidents and vehicle operating costs; (ii) improved access between Chengdu and Kunming; (iii) provided additional transport capacity to accommodate growing traffic; (iv) improved access to jobs, markets, and social services; and (v) developed the capacity of local communications bureaus. The project also supported reforms relating to poverty reduction, road safety, vehicle emissions control, and corporate governance. The design and monitoring framework is in Appendix 1.

5. In 2002, Sichuan Provincial Communications Department engaged two national consulting firms to prepare a feasibility study for the project.1 The feasibility study was approved by the National Development and Reform Commission on 29 July 2005. ADB approved project preparatory technical assistance on 18 December 2003 to review and assess the project’s technical feasibility and financial viability, including its environmental and resettlement impacts. ADB loan fact-finding and appraisal missions verified that the project was in line with ADB’s country strategy and sector policy.2 ADB’s Board of Directors approved a loan of $600 million for the project on 22 September 2005. The loan became effective on 12 July 2006 with an original closing date of 31 March 2012. The closing date was extended to 31 December 2012. Appendix 2 provides a chronology of major events.

6. At appraisal, the project comprised (i) construction of a 244 km, four-lane, access- controlled toll expressway from Ya’an to Lugu, including access roads, interchanges with toll stations, tunnels, bridges, administrative stations, and service areas; (ii) upgrading of 678 km of local roads to improve access to poor remote areas, and roadside stations; (iii) construction of four public transport centers; (iv) procurement of equipment for road maintenance, toll collection, surveillance and communications, tunnel operation facilities, vehicle weigh stations, road safety, and office administration; (v) land acquisition and resettlement; (vi) consulting services for construction supervision, road safety audit, monitoring and evaluation, and capacity building; and (vii) developing local communications bureaus’ capacity for maintenance.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

7. ADB’s country strategy at the time of appraisal supported (i) construction of roads connecting major growth centers and linking the hinterland economies; (ii) integration of the network so that the national trunk highway system is supported by a system of local roads, and particularly those providing access to poor areas; (iii) promotion of road safety and reduction of vehicle emissions; (iv) institutional strengthening to increase the commercial orientation and efficiency of expressway organizations; (v) improvement of highway planning and evaluation techniques; (vi) adoption of pricing policies to ensure optimum use of road transport capacity; and (vii) use of alternative methods of investment financing, including private sector participation. ADB road sector assistance targets the less developed central and western provinces, where most of the poor live. The project is consistent with ADB’s country operational strategy. The main features of the project included (i) alleviating congestion and reducing traffic accidents and vehicle operating costs; (ii) improving access between Chengdu and Kunming, two major

1 The Sichuan Provincial Communications Department was renamed as Sichuan Provincial Transport Department on 11 January 2010. 2 ADB. 1997. Country Operational Strategy Study: People’s Republic of China. Manila; ADB. 2001. Country Strategy and Program Update (2002–2004): People’s Republic of China. Manila.

3 centers in the western PRC; and (iii) improving access for poor rural residents in the transport corridor. The project included institutional capacity building for expressway operation and maintenance (O&M).

8. The project is also in line with the government’s development strategy. The government adopted the long-term Western Region Development Strategy, which was the key theme of the Tenth Five-Year Plan (2001–2005) and the Eleventh Five-Year Plan (2006–2010). The strategy aimed to narrow development disparities between the western and coastal regions. The road sector constituted an important part of the strategy, as it would provide a vital link between these two regions. The project supported the strategy by building part of the western region trunk roads in Sichuan Province to improve access to and within the southern part of the province. It was the third road project with ADB financing in Sichuan. The first and second projects have been successfully completed. The government identified the project as a priority investment which would link up with the completed ADB-financed Southern Sichuan Roads Development Project, thereby facilitating completion of the 900 km route connecting Chengdu and Kunming.

B. Project Outputs

1. Expressway

9. The project expressway is one of the most important sections running in parallel to the national highway from Beijing to Kunming and the Western Development Road from Lanzhou, Gansu to Mohan, Yunnan. It starts from Ya’an City; joins the existing Chengdu–Ya’an expressway; passes through Yucheng District of Ya’an, Yingjing County, Hanyuan County, and Shimian County; then ends at Lugu Town of Xichang City, the capital of Liangshan Prefecture. The project expressway’s total length is about 244 km, including a 4 km testing section. The design specifications were for a four-lane, access-controlled toll expressway with 24.5 meters (m) subgrade width, class I design loading, asphalt pavement, and designed speed of 80 km per hour. There are nine interchanges along the alignment and altogether 270 bridges and 26 tunnels, which account for 54.2% of the expressway’s length. The expressway alignment starts from the edge of the Sichuan Basin at the lowest elevation of 630 m above sea level, climbs to high mountains (with the highest elevation being 3,200 m above sea level), then cuts across several vast parallel mountains and deep valleys. The project expressway had unique features of difficult topographic conditions, complicated geotechnical terrain, changeable climate zone, and complicated natural environment. The project expressway is situated in three climate areas, spans three major rivers, passes through 12 seismic fracture zones, and cuts across two high mountains exceeding 3,000 m above sea level. Construction of the project expressway commenced on 26 April 2007. About 90 km of expressway sections were completed and opened to traffic on a trial operation basis in December 2010. The entire 244 km project expressway was completed and opened to traffic on 28 April 2012.

10. The expressway, and particularly the bridges and tunnels, were designed and built with high quality, following prevailing international practices, and were well fitted to the natural terrains. Plantings of grass, shrubs, and trees and measures for environmental protection were integrated with the natural terrain. Interchanges were well constructed and provided convenient linkages with local roads. In addition to three service areas, seven rest and parking areas were built along the expressway for temporary parking and refreshment. A small market was built at each rest area to enable local farmers to sell fruit and local agricultural products to passengers in transit. In addition, the project company outsourced services for keeping the grounds clean and tree planting to rural residents, thus providing them more cash-generating opportunities. For

4 sections with longer and continuous slopes, a climbing lane was provided for fully loaded trucks. A total of 452 culverts and underpasses were built for crossing and farming activities. Tunnels were well constructed and were provided with sufficient LED lighting, traffic signaling, ventilation, and safety facilities. Traffic safety measures—including sign boards, rumbling strips, and vehicle emergency crash relief buffer zones—were constructed and operational. Traffic monitoring and surveillance facilities were installed at tunnels, bridges, entrances, exits, foggy areas, sharp curves, and icy areas along the entire expressway. Traffic safety patrolling is conducted regularly. Special safety measures were arranged for particular sections, including for long tunnels and high-elevated bridges. Guardrails cover the whole length, and additional strengthened guardrails were installed along large structures and higher embankments.

2. Local Roads

11. The local roads for upgrading and improvement total 678 km in length. Of the total length, 23 local roads totaling 158 km were partly financed by ADB and completed as the access route for project expressway construction. The remaining local roads totaling 520 km were financed solely by the government, implemented by county and municipal communications bureaus, and completed in 2012. Upon their completion, such various services and facilities as bus terminals, fuel stations, garages, health clinics, groceries, post offices, police stations, restaurants, and markets were established along these improved local roads. As these roads have enabled local people to easily access markets, employment opportunities, education, health care, and other social amenities, they have contributed greatly to improving the people’s living standards.

3. Equipment

12. Equipment and facilities for the project expressway include traffic engineering packages; landscaping and plantation packages; tunnel ventilation, lighting and safety packages; and packages for traffic monitoring, surveillance, toll collection, building and service facilities. All packages were financed with local funds, and procurement was carried out by national competitive bidding from 2009 to 2011 in accordance with the implementation schedule. All equipment, including weight-based-toll equipment, has been in operation since the opening of the project expressway.

4. Rehabilitation of Public Transport Centers

13. Four public transport centers located in Hanyuan, Shimian, Mianning, and Yingjing were all designed to class II service level and with capacity to dispatch 5,000 passengers per day at each center. These four centers were partly financed by ADB loan ($1 million) and the government provided counterpart funds ($3.9 million). Respective county communications bureaus guided by Sichuan Provincial Transport Department (SPTD) were responsible for implementing rehabilitation of these four public transport centers. Procurement of civil works for rehabilitating the four centers followed ADB’s national competitive bidding procedures. The four transport centers separately commenced construction during the period from 2009 to 2012. All transport centers have been completed and are operational.

5. Consulting Services and Training

14. Sichuan Yaxi Expressway Company Limited (SYECL) engaged an international consulting firm in February 2007 to provide 66 person-months of consulting services financed by ADB loan. The consulting firm was mobilized on 1 March 2007. The team leader acted as the assistant chief supervision engineer in (i) helping the chief supervision engineer certify variation

5 orders, contractors’ monthly payments, and subcontracting documents; and (ii) helping establish a contract management system. Upon project completion, a total of 62.1 person-months of inputs had been provided by international consultants. Reasons for using services totaling 4 person-months less than planned were that (i) the team leader’s inputs were reduced by 2 person-months due to a shortened construction period, and (ii) just 1 person-month of input for benefits monitoring and evaluation was used against the envisaged 3 person-months because of the consultant’s efficient output and SYECL’s capacity building in this field. SYECL engaged 12 national consultants financed by domestic funds to undertake construction supervision and testing. A total of 368 supervision engineers and technicians were fielded, and 75 professionals conducted engineering testing and laboratory assessments. The cumulative inputs of national consulting services in subgrade works, pavement works, facilities, and central laboratories totaled 20,856 person-months against the 5,520 person-months envisaged at appraisal. The massive specialized technical and management inputs for quality control and construction supervision ensured full compliance with national quality standards in all project construction activities. SYECL engaged Southwest Jiaotong University as the external monitor to undertake project benefit, resettlement, and social development monitoring assignments. SYECL engaged Ya’an Municipal Environment Monitoring Station and Liangshan Prefecture Environment Monitoring Station for external monitoring and assessment of environmental impacts during construction. SYECL engaged Sichuan Shu-Water Ecological Environment Construction Limited and Yunnan Rundian Water-Saving Technology Consulting Company to undertake water and soil erosion monitoring and supervision tasks during construction.

15. A human resource development plan was prepared which included 53 person-months of overseas training in expressway commercialization, highway operations and management, tunnel operation and management, intelligent transport systems, financial management, highway maintenance and asset management, advanced tunnel construction and technology, traffic engineering and road safety, construction risk management, road maintenance in winter and hazard control, vehicle emission monitoring, road maintenance, and management of service areas. Training for 15 groups was conducted between 2009 and 2012 totaling 44.6 person-months. Reduced person-months of overseas training resulted from the government’s new regulation limiting the number of participants attending training and the duration of training. Nevertheless, all planned training fields were covered and anticipated objectives achieved. The overseas training groups submitted training reports to ADB as required, and staff reported gaining valuable practical knowledge from the overseas training. The acquired knowledge was disseminated within SPTD and SYECL. SYECL, with assistance from the international consultant, conducted 50 person-months of training through Sichuan Communications and Technology Management College to enhance the local communications bureau staff’s capacity and skills in road maintenance and traffic management. During construction, SYECL conducted on-site training for 5,539 staff.

C. Project Costs

16. The project’s costs totaled CNY19.325 billion, which compares with the appraisal estimate of CNY17.192 billion. 3 The increase by CNY2.133 billion (12.41%) versus that estimated at appraisal can mainly be attributed to the following: (i) major design changes and variations, including costs of changing 8 km of subgrade to bridges and tunnels for the sake of better environmental protection and traffic safety (about CNY635 million increase); (ii) price

3 Because the exchange rate fluctuated between the $1.00 = CNY8.277 used at appraisal and $1.00 = CNY6.2287 at project completion, for comparison purposes, all project costs (including their detailed breakdowns) were converted into local currency.

6 adjustments for materials during the construction period (about CNY1.05 billion increase); (iii) enhanced anti-seismic measures for structures after the Wenchuan earthquake in 2008 (about CNY60 million increase); (iv) increased cost for land acquisition, resettlement, and compensation according to newly issued government regulations (about CNY125 million increase); (v) project administration costs that were higher by CNY90 million; (vi) funds earmarked for research and development on technologies related to project design, construction, and management (about CNY20 million increase); (vii) higher interest costs during construction (about CNY95 million increase); and (viii) building of access roads for expressway construction (about CNY50 million increase).

17. There also were changes in the project financing plan. Under the original financing plan, ADB was to finance 29% of the total project cost, with 13% to be financed by the Ministry of Transport, 32% by Sichuan Provincial Government, and 26% by China Development Bank.4 Upon project completion, financing from ADB was 16.1% of the total project cost.5 Funds from the Ministry of Transport ($362.0 million, 11.7% of total) and Sichuan Provincial Government ($502.9 million, 16.2%) were made available as planned. SYECL’s sole shareholder, Sichuan Provincial Expressway Company, also provided funds to the project ($303.3 million, 9.8%). The balances were financed through loans from China Development Bank ($723.6 million, 23.3%), China Construction Bank ($115.6 million, 3.7%), China Merchants Bank ($32.1 million, 1.0%), and Postal Savings Bank of China ($562.7 million 18.1%). Counterpart funds for the project were made available in accordance with the implementation schedule. The project costs and financing plans at appraisal and completion are in Appendix 3.

D. Disbursements

18. ADB-financed contracts were disbursed over about 77 months from July 2007 to February 2013. Two types of disbursement procedures were followed: reimbursement procedure for civil works and public transportation centers and direct payment for consulting services. SYECL formed a capable team for loan processing and preparation of withdrawal applications in accordance with ADB’s Loan Disbursement Handbook. Overall, SYECL’s disbursement control was satisfactory. Of ADB’s disbursed loan proceeds, $477.7 million were utilized for civil works of the project expressway, $1.0 million for public transport centers, $2.0 million for consulting services, and $19.7 million was capitalized for interest during construction and commitment charges. The loan account was closed on 6 February 2013 with no savings. Projected and actual contract awards and disbursements are in Appendix 4.

E. Project Schedule

19. The project’s implementation was envisaged to occur over about 6 years from April 2006 to September 2011. The local roads component and public transportation centers were anticipated to be implemented concurrently with the expressway construction. Expressway construction began in April 2007, about 12 months later than projected. A few subgrade packages commenced at the end of 2007 due to longer time spent in following prequalification and bidding procedures.6 Due to effective measures being taken, the project expressway was nevertheless completed within the scheduled construction period. To maximize the project outcome and its impacts, about 90 km of project expressway was opened to traffic in December 2010. The remaining 151 km were completed and opened to traffic in April 2012. All local roads

4 The Ministry of Communications was renamed the Ministry of Transport in March 2008. 5 ADB approved a loan cancellation of $99.6 million in December 2007. The total loan proceeds were $500.4 million. 6 Today, generally no road projects use prequalification.

7 and three public transportation centers were completed together with the completion of the project expressway. The loan closing date was extended from 31 March 2012 to 31 December 2012 to implement the capacity building program and to complete one transportation center, the construction of which could not commence until the adjacent urban infrastructure was completed. The appraisal and actual project implementation schedule are in Appendix 5.

F. Implementation Arrangements

20. SPTD was the project executing agency responsible for implementation of the project as a whole. SYECL, designated as the project implementing agency, was responsible for implementing the project expressway and for its O&M. SPTD, through its affiliations at municipality and county level, undertook responsibilities for the components to improve local roads and rehabilitate four public transportation centers. SYECL’s organizational structure was established during implementation to include six administrative departments and four implementation representative offices staffed with about 126 management and technical staff. After completion and opening of the expressway, SYECL shifted its organization into an O&M- oriented structure, which included six departments or offices, three representative offices with 10 toll stations, and three service stations. Currently, SYECL employs 98 administrative staff, 234 toll collectors, and 60 maintenance workers, most of whom are from the project area. In addition, 120 workers from nearby villages and townships are employed for cleaning, planting, and project expressway maintenance. The organizational structures are shown in Appendix 6.

G. Conditions and Covenants

21. No covenants were modified or waived during implementation. All audit reports were submitted on time, and each audit report was issued with an unqualified opinion. All loan covenants were complied with as scheduled, except there was only partial compliance with the following financial covenants: (i) debt–equity ratio not to exceed 55:45, (ii) working ratio of not more than 15% during project expressway operation, and (iii) debt service coverage ratio of not less than 1.2 during expressway operation from the third year of full operation. The reevaluated financial analysis indicated that SYECL would be able to comply with major covenant targets around 2018. Compliance with loan covenants is described in Appendix 7.

H. Related Technical Assistance

22. ADB provided project preparatory technical assistance for preparing the Central Sichuan Roads Development Project.7 The objectives of that assistance were to (i) assist the Sichuan Provincial Communications Department in upgrading the feasibility study and to include an environmental impact assessment and resettlement plan for the proposed project in conformity with ADB’s requirements; and (ii) review the road sector issues and provide the basis for strengthening the ongoing dialogue with the government on the following key areas: the poverty impact of road projects, road safety, vehicle emissions, commercialization, private sector development, pricing policies for road users, and public transport services. The output was to be a project suitable for ADB financing. The technical assistance involved 40 person-months of consulting services, including 17 person-months of international and 23 person-months of national consulting services. That assistance commenced on 2 June 2004, was completed on 10 November 2004, and provided recommendations for the subsequent loan project.

7 ADB. 2003. Technical Assistance to the People’s Republic of China for Preparing the Central Sichuan Roads Development Project. Manila.

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I. Consultant Recruitment and Procurement

23. All ADB-financed procurement followed ADB’s Procurement Guidelines (2007, as amended from time to time) and ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). A national procurement agent was engaged by SYECL to assist with procurement-related matters. In 2007, SYECL recruited an international consultant by the quality- and cost-based selection method. Relevant sections of ADB’s anticorruption policy were incorporated and implemented into the bidding documents and contracts. In addition, national prevailing practices on anticorruption using a separate integrity and anticorruption contract were widely applied in civil works construction during the implementation. ADB approved the government’s request for advance procurement action for civil works on 11 March 2005. Prequalification of subgrade packages began on 31 March 2006, and its evaluation report was approved on 14 August 2006. Bidding started on 28 August 2006, and the bid evaluation report for the first batch of packages was approved on 31 January 2007. Details of the project contract packages are shown in Appendix 8.

24. The project expressway subgrade works were grouped into 27 contract packages to be procured using international competitive bidding in two batches. Bids for the first batch of 21 contracts were opened on 10 October 2006, and bids for the second batch of six contracts were opened on 9 March 2007. Of the 27 contracts, ADB approved 16 contract awards on a no- objection basis on 8 May 2007. Of the remaining 11 contracts, SYECL was required to evaluate using an additional condition of minimum registered capital in accordance with a Chinese regulation limiting contract scale of construction enterprise in deciding on eight contracts even though the minimum capital requirement had not been included into the prequalification and bidding documents. ADB had many rounds of discussions with SPTD and SYECL from March to November 2007 and no consensus was reached. Unable to resolve this deadlock, SYECL, through the Ministry of Finance, informed ADB in November 2007 that it intended to award the contracts to its recommended bidders without seeking ADB’s approval. For three contracts, ADB requested SYECL to seek clarification from the lowest-priced bidder. SYECL subsequently advised ADB that it would not seek further clarifications but would instead award these contracts to its recommended winning bidders without seeking ADB’s approval. Since procurement of these contracts did not follow ADB’s Procurement Guidelines (2007, as amended from time to time), a total of $99.6 million allocated loan funds from project expressway civil works category was therefore cancelled on 7 December 2007.

J. Performance of Consultants, Contractors, and Suppliers

25. The international and national consulting firms engaged to assist in project implementation performed satisfactorily and established good working relationships with SPTD and SYECL. International consultants worked efficiently and effectively to organize the overseas training program and site visits which familiarized SPTD and SYECL with international practices for expressway design, construction, and O&M. The international consultants provided expertise on environmental protection and expressway safety measures, as well as winter O&M, and they assisted to integrate these measures into project implementation. Working with the international consultants, national consultants provided satisfactory services toward project implementation.

26. The national design institute designed the expressway in line with international best practice. Civil works, which involved constructing large bridges, long tunnels, and asphalt pavements, were well implemented. Equipment was supplied, installed, and commissioned according to schedule. Environmental monitoring conducted by national consultants during

9 construction was satisfactory. The overall performance of consultants, contractors, and suppliers was highly satisfactory.

K. Performance of the Borrower and the Executing Agency

27. SPTD implemented the project effectively and efficiently. Project management during the preparation and construction phases was rated highly efficient and effective. The expressway construction and maintenance standards met international best practices. Internal controls were put in place to ensure the effective use of funds. An internal auditing unit was established in SYECL. Counterpart funds were mobilized on time. Withdrawal applications were submitted in a timely manner and contractors were paid on time. The performance of the borrower, SPTD, and SYECL was satisfactory.

L. Performance of the Asian Development Bank

28. ADB conducted regular loan review missions during implementation and provided effective advice to SPTD and SYECL on project implementation, monitoring, and procurement. ADB reviewed and processed procurement documents efficiently. It processed the Borrower’s and SPTD’s requests efficiently and promptly. Withdrawal applications were processed and disbursed on time. ADB’s performance during project implementation was highly satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

29. The project is assessed as highly relevant. Located in the southern part of Sichuan Province, the project was one of the government’s priority projects for the national trunk highway system, the Western Development Strategy, and the national expressway network in Sichuan Province. The project serves an important section consisting of a 900 km transport corridor connecting Chengdu, the provincial capital, with Kunming, the capital of Yunnan Province. The project is in line with ADB’s past and present country strategy and program for the PRC road sector, which includes constructing highways that connect major growth centers and establish links with hinterland communities; building capacity to improve management efficiency and enhance commercial operation; improving highway design; and promoting road safety, private sector participation, and network integration. The project expanded the expressway network in Sichuan Province from 1,501 km in 2003 to 5,046 km in 2013 and interconnected villages and counties in the province with all-weather roads. By the end of 2012, Sichuan had 293,499 km of roads and 100% of townships and 98% of administrative villages were connected with roads. Transport services were also provided to the townships and villages.

B. Effectiveness in Achieving Outcome

30. The project is rated highly effective because it resulted in (i) a completed expressway spanning mountains and rivers to increase transport capacity of the transport corridor, (ii) an improved highway network in the project areas, (iii) significantly reduced travel time and travel distance between Ya’an and Xichang, (iv) improved road safety and reduced vehicle emission level, and (v) strengthening of institutional capacity in SPTD and SYECL to construct and manage expressways and local roads.

31. The project contributed to economic development and improved living standards in the project areas by (i) shortening the travel time and distance between Ya’an and Xichang from 10

10 hours to 3 hours and from 335 km to 244 km, respectively; (ii) increasing economic, social, and cultural exchange in the region; (iii) reducing bus fare and freight charges in 2013 by 9.6% and 6%, respectively, from those in 2007; (iv) reducing road traffic accidents and fatalities in Ya’an from 1,309 accidents with 104 fatalities in 2007 to 323 accidents with 95 fatalities in 2012. Road access was improved from 71% for townships and 17% for villages in 2004 to 100% and 98.29%, respectively, in 2012. Bus services were increased from 76% for townships in 2004 to 100% in Yucheng and Shimian, 97% in Yingjing, 90% in Hanyuan, and 84% in Mianning in 2012. With almost half of the daily traffic originating from non-project areas, the project provided a safer and shorter route for through-traffic between Chengdu and Kunming, thereby bolstering industrial and logistics development. The project made opportunities for skills development more available to farmers and the rural poor, thus improving their employment options in the towns and cities.

C. Efficiency in Achieving Outcome and Outputs

32. The economic and financial reevaluations rated the project efficient.

33. The road network in Sichuan Province has improved significantly since 2000. By the end of 2012, the provincial road network had a total length of 293,499 km, of which 4,334 km were expressway, 3,015 km class I highway, 13,752 km class II highway, 11,674 km class III highway, 201,518 km class IV highway, and 59,206 km underclass roads. Of the entire provincial road network, 53.89% of roads were either asphalt or cement pavement. The road density of Sichuan was 60.52 km per 100 km2 in 2012, which was higher than the national average of 44.14 km. The rural road network also significantly improved, with 267,632 km of rural roads built or improved by the end of 2012. The project expressway was connected with the local road network through interchanges and feeder roads. Along with significant road development, public transport services were expanded to cover all townships and villages connected to roads.

34. The reevaluated economic internal rate of return (EIRR) for the project expressway is 13.3%, which is lower than the 15.2% estimated at appraisal. The lower EIRR was mainly due to increased capital cost, higher periodic maintenance costs due to more bridges and tunnels, and delayed completion. As the reevaluated EIRR is still higher than the cutoff rate of 12.0%, the project was rated economically viable. Sensitivity analysis was carried out to test the impacts of (i) increase in O&M costs, (ii) decrease in benefits, and (iii) both combined. The analysis found that the project would continue to be economically viable under these scenarios. The project EIRR was more sensitive to changes in benefits than to changes in O&M costs. The EIRR would be 12.3% if benefits decreased by 10%. With the worst-case scenario of a 20% increase in O&M costs and a 13% benefits reduction, the EIRR falls just below the 12.0% cutoff rate to 11.98%. The economic reevaluation is in Appendix 9.

35. The financial internal rate of return (FIRR) was recalculated after taxes as 3.8%, which is lower than the appraisal estimate of 5.4%. This is attributed to three factors: (i) higher capital cost due to increase of the project’s total cost, (ii) periodic maintenance expenses that are higher than those assumed at appraisal, and (iii) delayed project completion. The after-tax weighted average cost of capital (WACC) in real terms was calculated as 2.5% when tested on the actual mix of various financing sources. As the project’s recalculated FIRR was higher than the revised WACC, the project is financially viable. A sensitivity analysis conducted to test the impacts of variation in O&M costs and revenues indicates that the project remains financially viable even when O&M costs rise by 20%. The project’s viability falls below the WACC when actual revenues are 15% lower than projected revenues and O&M costs increase by 20%. The financial reevaluation is in Appendix 10.

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D. Preliminary Assessment of Sustainability

36. The project is likely sustainable. Completion of the project expressway and local roads removed one bottleneck in the national expressway network, relieved traffic congestion in the project area, and improved safety and efficiency of road transport services in the 900 km corridor from Chengdu to Kunming. It provided convenient, safer direct road access to poorer remote villages in the project area. Since the opening of the project expressway, a significant amount of traffic has been diverted from national highway 108. The expressway and improved local road network contributed to higher GDP growth in Ya’an Municipality and Liangshan Prefecture and to poverty reduction through robust economic growth and an integrated road network. Continued economic growth in the region will ensure steady income from toll revenues for SYECL, whose ability to manage the expressway will contribute further to positive economic and social development in the project areas.

37. The physical sustainability of the expressway was ensured by the sound engineering technology used in its construction (which conformed to prevailing international standards) and by the well-developed technical capacity of both SPTD and SYECL. During its preparation stage, the project was designated by the Ministry of Transport in 2007 as a so-called showpiece project in two categories (―Project Reconnaissance, Survey and Design‖ and ――Science and Technology Showpiece‖). The project expressway climbed from its lowest point of elevation at 630 m above sea level to its peak elevation 3,200 m above sea level. To cope with various technical difficulties and challenges, SPTD and SYECL launched 32 specific technical studies. Of those, 6 were acknowledged with national level credits and 5 were acknowledged as achievements at provincial and ministry levels. The application of this technical research in the project expressway’s construction generated significant economic benefits by reducing project costs and improving environmental protection.

38. SPTD and local governments were committed to developing and maintaining local roads and rural road networks. In addition to the local roads component under the project which benefited local users and fostered services and farming-related trade at roadside stations, Sichuan Provincial Government issued a rural roads master development plan for the Twelfth Five-Year Plan (2011–2015) in December 2011. According to the master plan, rural road length will grow from 247,000 km in 2010 to 276,000 km in 2015. Bus services will cover 98% of townships in 2015 (versus 94% in 2010) and 80% of villages in 2015 (versus 74% in 2010). With the addition of more achievements laid out in the plan, and with steady fiscal budget support and comprehensive administration by SPTD, county and township governments and other rural stakeholders will continue to maximize the rural road network’s benefit to townships and villages.

E. Impact

1. Land Acquisition and Resettlement

39. Land acquisition and resettlement for the project expressway began in March 2007. Most land acquisition and resettlement were completed in 2009 and the remaining activities in March 2012. A total of 17,647 mu of land was permanently acquired, an increase of 15.7% from the resettlement plan.8 A total of 341,741 m2 of buildings was demolished, which was 64.8% more than in the revised resettlement plan. The affected households due to house demolition numbered 2,252 and the total of affected people was 8,035, an increase of 135.5% from the revised plan. The overall cost of land acquisition was CNY1.186 billion, 15.3% more than the

8 Mu = Chinese unit of measurement (1 mu = 666.67 m2).

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CNY1.029 billion estimated in the revised plan. The main reasons for these changes include (i) increased land use for rehabilitation of local community access roads and affected drainage and irrigation systems, (ii) landslides during construction, (iii) realignment of some sections to avoid burial grounds of Yi communities, (iv) changes in design of the Shimian section, (v) relocation of houses close to the expressway due to safety concerns, (vi) relocation of original households in concentrated resettlement sites, and (vii) underestimation during project design (see Appendix 11). Based on the monitoring reports, compensations were satisfactory; no complaints, grievances or other concerns were noted or reported during implementation; and affected people ended up at least as well off as prior to their physical and/or economic displacement.

2. Socioeconomic Impacts and Ethnic Minority Development

40. Construction and operation of the project expressway have contributed to regional socioeconomic development, particularly in those counties located along the expressway alignment. The total of CNY19.07 billion invested into the project area strongly stimulated local economic development, particularly relating to construction materials, energy, and the service sector. The statistical data show that socioeconomic conditions in the project area have improved rapidly in recent years. From 2007 to 2012, the growth in GDP per capita within project areas ranged from 125.7% to 142.3%. With the rapid socioeconomic growth, the standard of living and income of the local population, and particularly of the poor, have improved significantly. The growth in farmers’ income per capita between 2007 and 2012 ranged from 71.6% to 76.8% in the five counties and districts along the expressway alignment.

41. Construction and operation of the project expressway have contributed greatly to regional social development and poverty reduction in the project area by (i) improving farmers’ incomes through better business opportunities to sell agricultural products; (ii) increasing investments by large enterprises in the project area, and particularly in the industrial zones close to the expressway; (iii) developing tourism since opening of the expressway; and (iv) improving mobility of the local people.

42. The minority population of the project area was 231,068 in 2012, equivalent to 17.39% of the total population. The major minority group, the Yi, accounts for over 86% of the total minority population. An ethnic minority development plan was prepared and implemented to enhance the project benefit to minority people in the project area. According to the project completion report prepared by SYECL, the measures implemented under that plan include (i) special consideration for minority people in implementing land acquisition and resettlement, (ii) improved education conditions, (iii) recruitment of minority people during the expressway construction, (iv) provision of skills training, and (v) HIV/AIDS prevention (refer to Appendix 12).

3. Environmental Safeguards

43. The project was classified as environmental category A. The summary environmental impact assessment was prepared and disclosed in February 2005. During construction, each contractor designated a unit responsible for environmental protection. Ya’an Municipal Environment Monitoring Station and Liangshan Prefecture Environment Monitoring Station were engaged to conduct compliance monitoring, including for noise pollution, ambient air quality, and surface water quality. Yunnan Rundian Water-Saving Technical Extension Consulting Company was engaged to monitor soil erosion. Training on environmental management was conducted for staff from the project’s implementing agency and contractors. A total of nine environmental monitoring reports were prepared and disclosed. SYECL, consultants, and contractors complied with the environmental monitoring requirements and implemented the

13 project’s environmental management plan to mitigate adverse environmental impacts during design and construction. During construction, all the contractors fulfilled their obligations to protect the environment and implement mitigation measures in their construction schemes. The adverse effects of the project construction activities on the surrounding environment were minimized to acceptable levels (see Appendix 13).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

44. The project is assessed as successful. It is evaluated as (i) highly relevant in relation to the government’s development strategy and ADB’s CPS, (ii) highly effective in achieving outcomes, (iii) efficient in achieving outcomes and outputs, and (iv) likely to be sustainable. The project was successfully implemented and achieved its main objectives of accelerating economic development and thereby reducing poverty in Sichuan Province through significant road improvement in the project area. The project was successfully implemented and achieved its principle objective by developing an integrated road transport system to support sustainable economic development in Sichuan. Local roads and improved public transportation centers complement the expressway in bringing benefits to rural residents. The project (i) reduced traffic accidents and vehicle operating costs; (ii) improved access between Chengdu and Kunming; (iii) provided additional transport capacity to accommodate growing traffic; (iv) improved access to jobs, markets, and social services; and (v) developed the capacity of local communications bureaus. The project was implemented in an effective and efficient manner. The project expressway construction, upgrading of local roads, and rehabilitation of four public transport centers were completed with satisfactory quality.

45. The project was identified by the Ministry of Transport as a showpiece project in two categories (para. 37) and included 32 national, provincial, and project level technology research and development projects. The successful completion of the project expressway demonstrated the project’s achievements in these fields and such achievements were awarded national-, provincial-, and ministerial-level certificates or recognition. During the project’s design, implementation, and operation, sound technical solutions and mitigation measures on environment aspects were widely applied to ensure strict compliance with national and local regulations and guidelines. Improved local roads and rural transport services enabled the project to benefit rural and poor areas. Rural bus services were extended and covered 100% of villages and townships in Shimian, 97% in Yingjing, 90% in Hanyuan, and 84% in Mianning counties after the improvement of local roads. Institutional capacity was strengthened through a human resource development plan. Knowledge gained and capable staff resources were shared among other ongoing expressway projects. Substantial direct and indirect employment opportunities were created during implementation and subsequent O&M. During construction, a cumulative 38,000 employment opportunities were provided for local people, including women, ethnic minorities, and unskilled laborers. In 2013, 370 local people were employed for project operation in service areas, gasoline stations, road cleaning, greening and planting, and toll collections. That number included 65 women and 137 ethnic minorities.

46. The traffic level in the early years after the expressway’s opening was lower than the appraisal estimates. It is expected, however, that traffic growth will accelerate. Such growth was confirmed during the last three national holiday seasons in 2012 and 2013, when daily traffic tripled compared with other periods. The project expressway provided a shorter linkage between Chengdu and Liangshan Prefecture and Panzhihua Municipality, as well as to such hinterland areas of the latter. For example, long-distance bus services between Xichang and

14

Chengdu increased by 30 times (40 times at peak season) from the 1 bus per day before the expressway’s opening to 30 buses daily. By developing this integrated expressway and complementary local road network, the project improved access to markets and social services for rural poor residents in the project area.

47. The project reduced transport time from Xichang to Chengdu from the previous more than 12 hours to the current 4 to 5 hours. It also reduced travel costs on that segment while encouraging more investment, creating jobs, and increasing incomes. Tourism in the project influence areas achieved continual and robustly stronger growth in 2012 and 2013. Liangshan Prefecture’s tourism revenue achieved 17.2% growth from the CNY8.046 billion in 2011 to CNY9.426 billion for 2012. The project expressway and local roads have benefited households in poor counties and townships in the project area, providers of rural transport, industrial and agricultural businesses, agriculture-dependent households producing grains and vegetables for local markets, people living in the project area who now have access to long-distance transport, and transport operators and their customers for transit traffic. The project contributed to reduced traffic accidents, vehicle emissions, and traffic noise on the existing parallel roads. From 2007 to 2012, traffic accident injuries and fatalities in Yucheng, Yingjing, and Hanyuan, respectively, were reduced from 982 and 42 to 60 and 22, from 854 and 16 to 170 and 9, and from 876 and 19 to 83 and 17.

B. Lessons

48. The project was formulated to minimize the potential technical, safety, economic, financial, and resettlement risks. The main technical risks were associated with 25 tunnels (41 km in total length) and 270 bridges (91 km in total length). To mitigate the risks, national and international consultants reviewed the project design and construction methods and incorporated solutions based on advanced technologies and international prevailing practices. During construction, monitoring and contract management information systems were set up and implemented to identify technical problems and implement corrective measures on a timely basis. Given the safety hazards associated with large and high bridge works and long and deep tunnels, the contractors were required strictly to enforce working safety rules and measures and SYECL closely supervised all key construction activities through supervision engineers. In term of the lessons leant from resettlement implementation, the adequate budget, recruitment of qualified external monitor, and earlier planning and construction of resettlement sites are deemed essential.

49. One of most complex mountainous expressways in the PRC, the project expressway passes through the most difficult and complicated geo-technical terrain. In coping with various technical difficulties and challenges, SPTD and SYECL initiated 32 technical research and development studies associated with the project’s design, construction, and operation. Application of these technical findings has generated significant social and economic benefits. For example, based on a study of operation safety control technology for expressway spiral and small radius tunnels, the project expressway alignment executed a climb of 350 m in a V- shaped valley 2.9 km long by reducing the longitude slope. The study also optimized the number of ventilation fans compared with the preliminary design, thereby halving the power consumption. This study was awarded a prize by the China Highway Association. Other knowledge achievements and breakthroughs include a key-technology study on deep and super-long tunnel design and construction, a comprehensive technical solution for truss-beam and steel-column concrete for medium-span bridges, as well as design and construction of higher-pier and long-span bridges in serious seismic areas.

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C. Recommendations

1. Project Related

50. Having efficiently completed the construction of a high-quality expressway, SYECL now is focused on efficient and effective expressway operation management and maintenance. It is important for the staff to be regularly trained in these fields in order to keep up with the latest technologies and practices, and, thereby, to improve the overall project performance.

51. Although traffic accidents in the project areas were fewer after project completion, it is necessary to address road safety through all applicable engineering and management measures, including education and law enforcement. SYECL should continue working closely with traffic law enforcement to maintain the highest safety standards and performance for the expressway. It should be prepared to deal with various potential safety issues, and particularly those occurring in difficult terrain or involving high bridges or long tunnels.

52. The project performance evaluation report should be prepared in 2017. By that time the project will have been fully operational for more than 5 years and its traffic, maintenance, and physical condition, as well as the attainment of benefits may be better assessed.

2. General

53. The project expressway has contributed significantly to economic growth and development in the project areas and southern Sichuan. Considering its high construction cost and lower toll revenue during the initial operating period, and in order to mitigate project financial risks, the government may consider allowing the project company to explore more cash-generating sources, such as to develop logistic services and warehousing close to major interchanges or to the expressway alignment that will support the project’s sustainability.

54. The implementation agencies have accumulated sufficient capability to resolve technical challenges in the design, construction, and operation of the expressway and can share these experiences with national and international counterparts. As a consequence, the road sector has reduced need to acquire international consulting services for design and construction. Nevertheless, it still requires professional inputs from international consultants in the fields of environmental protection, socioeconomic analysis, and financial management.

55. Procurement of 11 civil works packages did not follow ADB’s Procurement Guidelines (2007, as amended from time to time) and consequently resulted in a partial loan cancelation of $99.6 million (refer to paragraph 24). To ensure full compliance with ADB’s Procurement Guidelines (2007, as amended from time to time), it is necessary to check applicable local regulations or requirements during future procurement capacity assessment for new projects. Relevant issues pertaining to local regulations shall be identified, addressed and resolved before procurement activity is conducted.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Performance Indicators/Targets Design Monitoring Assumptions Summary At Appraisal At Completion Mechanisms and Risks Impact Assumptions An integrated road GDP in the project Sichuan’s 2012 GDP Statistics office at • Government transport system area increased from growth was 12.6% while the provincial and investment projects supports sustainable 7% to 9% during the national growth was county levels are implemented as economic growth in 2010–2020. 7.8%. planned. Sichuan Province Per capita rural income In 2012, per capital rural PPMS at • Complementary in the project area income (median data) in inception, activities are increased from project areas was completion, and 3 implemented. CNY1,900 in 2004 to CNY6,356 (CNY7,148 years thereafter, CNY3,400 in 2015. for Yucheng district, with emphasis on • The government is CNY6,806 for Yingjing, socioeconomic committed to CNY5,542 for Hanyuan, improvement reducing poverty in CNY5,905 for Shimian, impacts the western region and CNY6,380 for based on the Mianning). Western Development The poverty incidence Poverty incidence was Strategy. in the project area reduced to 8.80% in reduced from 29% in Mianning, 8.86% in 2004 to 10% in 2015. Shimian, and 8.7% in Access to social Yingjing. Access to services, including social services was schools and hospitals, improved, including to improves. add 378 schools, 6,404 teachers, and 620 village clinics.

The road system in By the end of 2012, road Annual reporting • SPCD’s and local Sichuan comprises system in Sichuan was by the SPCD government’s expressways (1,758 293,499 km (class I: investment in the km), class I to class IV 3,015 km; class II: 3,752 road sector is road (74,643 km), and km; class III: 11,674 km; implemented as unclassified (36,642 class IV: 201,518 km; planned. km). The road network and underclass: 59,206 expands by 4% km). In 2012, Sichuan annually. newly completed 1,327 km of expressway, bringing the total to 4,334 km. Outcome Road transport Traffic volume for the From May to December Collection of Assumptions efficiency and safety expressway increases 2012, average daily actual traffic • Assumed economic improved in the project from 10,615 PCU in traffic was 17,832 volume data at growth rates area for the 2011 to 20,495 PCU in vehicles. Average daily the expressway materialize. expressway and local 2021. traffic was 8,055 through its auto- Transport operators roads vehicles. monitoring and drivers realize system by SPCD the benefit of using From January to expressways. September 2013, average daily traffic in both directions was 20,745 vehicles. Average daily traffic at the main line was 10,560 vehicles.

Appendix 1 17

Performance Indicators/Targets Design Monitoring Assumptions Summary At Appraisal At Completion Mechanisms and Risks Travel time for the Travel time from Xichang Traffic counts and • SPCD demonstrates expressway is reduced to Chengdu was reduced travel time survey the capacity to by 6 hours after the from 10 hours to current for the implement the project. Travel distance 3 hours after the project. expressway by project. is reduced by 91 km Travel distance was SPCD after the project. reduced by 91 km.

Bus fare and freight As of 2013, bus fare at Monitoring of • High transport cost charges are reduced project areas was fares and rates by constrains by 10% by 2015. reduced by about 9.6% SPCD economic activities from 2007. Freight and availability of charges were reduced social services. by about 6%.

Road accidents and Road traffic accidents Accident statistics • A better traffic fatalities in the project and fatalities in Ya’an from the Public enforcement and area are reduced by were reduced Security Bureau effective public 20% by 2015. significantly: from 1,309 and hospitals awareness accidents with 104 campaign promotes fatalities in 2007 to 323 road safety. accidents with 95 fatalities in 2012. Risks • The nationwide road safety program may not be implemented effectively.

Road access By 2012, accessibilities Monitoring of • Local improves, from 71% to townships were 100% accessibility by communications with paved road for and 98.29% to villages. local bureaus may not townships and 17% for communications have sufficient villages in 2004, to bureaus budget to 100% and 90%, implement the road respectively, by 2011. development plan.

Bus service will By 2012, bus services Bus service data Assumptions increase, from 76% for covering townships were to be monitored • Rural road townships and 33% for 100% in Yucheng by SPCD infrastructure is villages in 2004, to District and Shimian, improved according 100% and 90%, 97% in Yingjing, 90% in to the government’s respectively, by 2015. Hanyuan, and 84% in plan. Mianning.

An EIRR is maintained The reevaluated EIRR is Reevaluation of • Demand forecast at 15.2%. 13.3%. the EIRR at a materializes and midterm review there is no cost report and a PCR overrun.

Outputs Risk 1. Road infrastructure Road capacity The expressway can PPMS and PCR • Construction of and associated increases to 55,000 now accommodate tunnels may be equipment and PCU per day at 55,000 PCU per day delayed due to its facilities improved opening in 2011 by after opening to traffic in complexity. along the expressway building a 244 km April 2012. between Ya’an and expressway. Lugu Vehicle operating cost Confirmed. Vehicle Direct measures Assumption savings account for operating cost savings of vehicle • Vehicle operating

18 Appendix 1

Performance Indicators/Targets Design Monitoring Assumptions Summary At Appraisal At Completion Mechanisms and Risks 78% of the total account for at least 78% operating costs cost savings are economic benefits. of the total economic by SPCD passed on to road benefits users through a competitive environment among road transport providers.

Safety audits are International and Progress reports Risk implemented during national consultants and PCR • SPCD may not project design and conducted safety audits implement the construction. during project design safety audit and construction. recommendations.

Equipment is procured All equipment was Project Assumptions and installed for road procured and installed. administration • Equipment safety, toll collection, All equipment is now missions, procurement and communications, traffic operational, including progress reports, installation are management, and that for road safety, toll and PCR completed at project vehicle-weighing collection, traffic opening. stations. surveillance, communications, maintenance, and weighing stations.

A land acquisition and A total 17,676 mu of land Regular • Adequate land for resettlement plan is was permanently resettlement new house sites is implemented. About acquired and 341,741 m2 monitoring by an available in villages 1,466 hectares of land of houses and other independent for resettlement. is acquired, adversely buildings were institute engaged affecting about 20,237 demolished. House by SPCD Risk people, of whom about demolition affected • Compensation may 2,634 are resettled. 2,340 households and not be paid 8,035 people. Total according to the compensation for land resettlement plan. acquisition, building relocation, and affected facilities was CNY1.186 billion.

The welfare of those The welfare of affected Regular Assumption resettled is established people has been monitoring by an • Project-affected to at least the same established to at least independent people are able to level as before land the same level as before institute engaged restore their living acquisition. Income is land acquisition. Income by SPCD during standards. restored and is restored and resettlement, at compensation compensation has been completion, and 2 Risk awarded. paid. A resettlement years after • Incomes may not be completion report restored to pre- provides details. project levels.

The environment at the The environment at the Environmental Assumptions project site is protected project site was monitoring • Mitigation measures and adverse protected and adverse reports, project are adequate to environmental impacts environmental impacts administration address are minimized by were minimized by memoranda, and environmental mitigation measures mitigation measures PCR impacts. included in the EIA and included in the EIA and • SPCD and the summary EIA. summary EIA. Mitigation contractors are

Appendix 1 19

Performance Indicators/Targets Design Monitoring Assumptions Summary At Appraisal At Completion Mechanisms and Risks Mitigation measures measures were included committed to are included in civil in civil works contracts, implement works contracts. implemented, and mitigation closely monitored by an measures. external monitor. Minority people’s EMDP was implemented Monitoring • Mitigation measures welfare is protected and minority people’s reports of the are adequate to and the project’s welfare was protected. EMDP, project address impacts on adverse impacts are The project’s adverse administration minority minimized by an impacts were minimized. memoranda, and communities. EMDP. PCR • SPCD is committed to implement mitigation measures.

HIV/AIDS and health During construction and Monitoring by the Risk risks for construction operation of the project, Health Bureau • The capacity of the workers and service information about Health Bureau may providers are HIV/AIDS and health not be sufficient to controlled. Indicators risks were widely implement include number of disseminated through mitigation clinics, number of 1,000 notices and measures. patients, number of booklets, and 100 posters, and number of bulletins. During tests. construction, 5 county hospitals and 20 clinics provided health services to the project.

2. Road infrastructure 678 km of local roads All 678 km local roads PPMS and PCR Assumptions and associated are upgraded in the were completed and • SPCD has the facilities improved for project area. were operating in 2012. capacity to the local roads in the coordinate with project area local governments the timely implementation of local roads.

Road capacity is Road capacity increased PPMS and PCR • Quality facilities are increased to 400– to accommodate completed on time. 2,000 PCU per day for maximum average class IV, and to 500– annual daily traffic of Risk 15,000 PCU per day 2,000 PCU for class IV • Adequate transport for class II when the roads and 15,000 PCU services may not be local roads open. for class II roads. available in rural areas.

3. Public transport Four public transport Four public transport Progress reports Assumptions centers rehabilitated in centers are completed, centers were completed and PCR • Demand for bus the project area each having a capacity as class II stations. Each services is of 5,000 passengers can dispatch 220 buses adequate. per day. per day with traffic flow of 3,000–5,000 passengers. 4. Corporate Expressway operations Expressway operations Midterm review • Provincial governance promoted are separated from were separated from missions and government in expressway provincial government government functions PCR approval will be operations in Sichuan functions. and operated given on time.

20 Appendix 1

Performance Indicators/Targets Design Monitoring Assumptions Summary At Appraisal At Completion Mechanisms and Risks commercially.

The concession The concession Midterm review Risk framework agreement framework agreement missions and • SPCD may interfere is signed by 31 was signed on 21 PCR in expressway December 2007 and a December 2007 and a operations. corporate development corporate development plan is prepared by 31 plan was prepared and December 2007. submitted to Asian Development Bank at the same time.

The debt–equity ratio Detailed analysis of Financial Assumptions does not exceed debt-equity ratio, statements of the • The revenue 55:45; the working working ratio and debt expressway, forecast ratio is not more than service ratio was midterm review, materializes as 15%; the debt service presented in Appendix and PCR envisaged, and the coverage ratio is not 10 of this PCR. project is less than 1.2; and the implemented financial internal rate of without cost overrun return is 5.4%. or implementation delays, including approval of project toll rates.

5. SPCD and domestic 53 person-months of Fifteen overseas training A report by • Consultants are consultant capacity international training groups with cumulative international recruited on time strengthened in project will be provided for 119 participants consultants on and provide good management, quality SPCD staff. Survey attended training. Total the capacity training to SPCD. control, road safety, techniques are completed overseas building and monitoring and adopted to assess training was 44.6 component, • Trainees apply in evaluation changes in work person-months. All including their daily work practices and behavior planned training participants, what they have to measure the objectives were subject areas, learned. effectiveness of the achieved. feedback from capacity-building participants, and component. new skills applied by trainees CNY = yuan, GDP = growth domestic product, EIA = environmental impact assessment, EIRR = economic internal rate of return, EMDP = ethnic minorities development plan, km = kilometer, m2 = square meter, PCR = project completion report, PCU = passenger car unit, PPMS = project performance management system, SPCD = Sichuan Provincial Communications Department. Sources: Asian Development Bank, Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

Appendix 2 21

CHRONOLOGY OF MAJOR EVENTS

Date Event 18 December 2003 Project preparatory technical assistance approved 10 November 2004 Project preparatory technical assistance completed 24 January–3 February 2005 Fact-finding mission fielded 11 March 2005 Management review meeting held 11 March 2005 Advance action for procurement of civil works approved 14–22 March 2005 Loan appraisal mission fielded 25 April 2005 Staff review meeting held 29 July 2005 Government approval of feasibility study 16–18 August 2005 Loan negotiations held 1 September 2005 Establishment of Sichuan Yaxi Expressway Company Limited 22 September 2005 Loan approval 20 December 2005 Government approval of environmental impact assessment 3 April 2006 Loan agreement and project agreement signing 29 May 2006 Government approval of preliminary design 12 July 2006 Loan effectiveness 17–21 July 2006 Inception mission fielded 15 September 2006 First loan capitalization of interest and commitment charges 26 April 2007 Commencement of civil works construction 1 November 2007 Partial cancellation of loan proceeds of $99.6 million 19–24 November 2007 Loan review mission fielded 12 December 2007 Project administration transferred to ADB Resident Mission in People’s Republic of China 21 December 2007 Government approval of detailed design for the project expressway 5–11 September 2008 Loan review mission fielded 18–25 September 2009 Midterm review mission fielded 28 December 2009 Hanyuan public transport center completed 9–16 August 2010 Loan review mission fielded 31 December 2010 90 kilometers of expressway sections opened to traffic 14 February 2011 Loan proceeds reallocated and percentage of civil works financing changed 26–30 September 2011 Loan review mission fielded 31 December 2011 Shimian and Mianning public transport centers completed 20 January 2012 Extension of loan closing date from 31 March 2012 to 31 December 2012 approved 31 March 2012 Original loan closing date 28 April 2012 Project expressway opened to traffic

22 Appendix 2

24–30 October 2012 Loan review mission fielded 31 December 2012 Revised loan closing date 31 January 2013 Yingjing public transport center completed 6 February 2013 Final disbursement and actual closing date 14–22 October 2013 Project completion review mission fielded Sources: Asian Development Bank, Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

Appendix 3 23

PROJECT COSTS AND FINANCING PLAN

Table A3.1: Project Costs ($ million)

At Appraisal At Completion Foreign Local Total Foreign Local Total Cost Item Exchange Currency Cost Exchange Currency A. Base Cost 1. Expressway civil works 606.1 649.3 1,255.4 460.2 2,034.5 2,494.7 2. Equipment 108.2 57.1 165.3 0.0 91.8 91.8 3. Land acquisition and resettlement 0.0 95.3 95.3 0.0 190.4 190.4 4. Consulting services and 2.0 40.0 42.0 training 2.1 80.2 82.3 5. Local roads 33.0 35.8 68.8 17.5 50.9 68.4 6. Public transportation 1.0 3.9 4.9 centers 1.2 1.3 2.5

Subtotal (A) 750.6 919.0 1,669.6 480.7 2,411.5 2,892.2

B. Contingencies 1. Physical contingencies 57.6 68.4 126.0 0.0 0.0 0.0 2. Price contingencies 50.7 83.9 134.6 0.0 0.0 0.0 Subtotal (B) 108.3 152.3 260.6 0.0 0.0 0.0 C. Interest and Other Charges during Construction 72.1 74.7 146.8 19.7 190.7 210.4 Total (A+B+C) 931.0 1,146.0 2,077.0 500.4 2,602.2 3,102.6 Notes: 1. Numbers may not sum precisely because of rounding. 2. Data are as of 31 December 2013. Sources: Asian Development Bank, Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

Table A3.2: Financing Plan ($ million)

At Appraisal At Completion Foreign Local Total Foreign Local Total Sources Exchange Currency Cost Exchange Currency Cost Asian Development Bank 600.0 0.0 600.0 500.4 0.0 500.4 Ministry of Communicationsa 0.0 272.4 272.4 0.0 362.0 362.0 Sichuan Provincial Government 331.0 328.7 659.7 0.0 502.9 502.9 China Development Bank 0.0 544.9 544.9 0.0 723.6 723.6 China Construction Bank 0.0 0.0 0.0 0.0 115.6 115.6 China Merchants Bank 0.0 0.0 0.0 0.0 32.1 32.1 Postal Savings Bank of China 0.0 0.0 0.0 0.0 562.7 562.7 Sichuan Provincial Expressway Company 0.0 0.0 0.0 0.0 303.3 303.3 Total 931.0 1,146.0 2,077.0 500.4 2,602.2 3,102.6 Notes: 1. Numbers may not sum precisely because of rounding. 2. Data are as of 31 December 2013. a The Ministry of Communications was renamed the Ministry of Transport in March 2008. Sources: Asian Development Bank, Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

24 Appendix 4

PROJECTED AND ACTUAL CONTRACT AWARDS AND DISBURSEMENTS ($ million)

Contract Awards Disbursement Projected Actual Actual/Projected Projected Actual Actual/Projected Year (%) (%) 2006 0.0 0.0 0.0 0.2 2007 340.0 406.9 119.7 45.0 34.9 77.6 2008 0.0 0.0 95.0 104.2 109.7 2009 0.0 35.7 73.0 90.6 124.1 2010 24.0 37.5 156.3 60.0 98.6 164.3 2011 0.0 0.7 80.0 129.1 161.4 2012 0.0 0.0 92.0 42.5 46.2 2013 0.0 0.0 0.0 0.4 Total 364.0 480.7 132.1 445.0 500.4 112.4 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

APPRAISAL AND ACTUAL IMPLEMENTATION SCHEDULE

2005 2006 2007 2008 2009 2010 2011 2012 Activity II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II A. Loan Processing

1. Appraisal ▒ ▲ 2. Loan negotiation ▒ ▲ 3. Board consideration ▒ ▲ 4. Loan effectiveness ▒ ▲

B. Land Acquisition and Resettlement

C. Civil Works

1. Prequalification and bidding

2. Construction

D. Building Facilities

1. Bidding and contract award

2. Construction

E. Equipment

1. Bidding and contract award

2. Installation and commissioning

F. Consulting Services and Training

1. Recruitment

Appendix 2. Service and training

Planned Actual

5

Sources: Sichuan Provincial Transport Department, Sichuan Yaxi Expressway Company Limited.

25

ORGANIZATION CHARTS 26

Figure A6.1: Organization Chart of Sichuan Yaxi Expressway Company Limited (during Construction) Appendix6

Board of Directors

General Manager

Deputy General Deputy General Deputy General Chief Financial Deputy General

Manager Manager Manager Officer Manager

Technology Safety Engineering Comprehensive Financial Administration Department Department Department Department Department Office

Deputy General Deputy General Deputy Chief Deputy Chief Manager Manager Engineer Engineer

Yingjing Hanyuan Shimian Mianning Representative Representative Representative Representative Office Office Office Office

Source: Sichuan Yaxi Expressway Company Limited.

Figure A6.2: Organization Chart of Sichuan Yaxi Expressway Company Limited (during Operation)

Board of Directors

General Manager Party Secretary

Chairmen of Deputy General Deputy General Deputy General Labor Union Administration Manager Manager Manager Office

Party Affair Financial Road Safety Operation and Labor Department Maintenance Department Management Union Office Department Department

Yingjing Shimian Mianning Representative Representative Representative Office Office Office

Source: Sichuan Yaxi Expressway Company Limited.

Appendix6

27

28 Appendix 7

COMPLIANCE WITH LOAN COVENANTS

Covenant Reference Status of Compliance

Project Executing Agency Loan Agreement Complied with. SPTD will be the Executing Agency responsible for overall (LA), Schedule 6, implementation of the Project. para. 1, Project Agreement (PA), Schedule, para. 1.

Project Implementing Agency LA, Schedule 6, Complied with. The Company shall be the Project Implementing Agency. para. 2. PA SYECL was established in The Company shall be responsible for construction of the Schedule, para 2. September 2005 as the Project Expressway and for the carrying out of the local project implementation road component. The Company shall also be responsible agency. for operation and maintenance, and management of the Project expressway for the period as required and stipulated under the Concession Framework Agreement. The Company shall have sufficient technical expertise for the purposes of the Project, including engineers with experience in implementing internationally financed projects. A project director will be responsible for overall project management, approval of contracts, and payments and a project manager will be responsible for physical implementation activities on a day to day basis and the preparation of progress reports. Concession Framework Agreement PA, Schedule, Complied with. SPG shall cause SPTD to enter into the Concession para. 3. Concession agreement and Framework Agreement with the Company, at the latest by corporate development 31 December 2007, in the form and substance satisfactory plan were submitted to to ADB, to ensure autonomy of operations, encourage the ADB in December 2007. establishment of road facility performance indicators, and facilitate refinancing of road sector assets. SPG (through SPTD) and the Company shall follow the Concession Framework Agreement during the operation and maintenance, and management of the Project expressway. SPG shall not revoke, repeal, suspend or withdraw, or transfer or assign to any third party the rights of the Company pursuant to the Concession Framework Agreement with respect to operation and maintenance, management of Project expressway, and collection of tolls on the Project expressway without ADB’s prior agreement Construction Quality PA, Schedule, Complied with. The Company shall ensure that the Project expressway is para 4. The project expressway constructed in accordance with 2004 technical standards was completed with an of the Ministry of Transport of the Borrower (MOT) for excellent quality rating by highway engineering. SPG, through SPTD, will ensure that the government during its the local roads under the Project are upgraded and preliminary acceptance maintained in accordance with appropriate government mission in 2012. standards. The international consultant to be engaged under the Project who is designated as the team leader

Appendix 7 29

Covenant Reference Status of Compliance and the assistant chief supervision engineer shall review and help the chief supervision engineer certify variations orders and contractors’ monthly payments Counterpart Financing PA, Schedule, Complied with. SPG shall ensure that the Company shall obtain, on a para.5. Counterpart funds were timely basis, all funds and resources necessary for made available to the construction, operation and maintenance, and project on a timely basis. management of the Project expressway and shall ensure, through measures including, among others, investment of additional equity in the Company, that the Company shall comply with Section 2.16 of this Project Agreement. SPG shall take all necessary measures, including the provision of additional funds, to ensure that the Company can successfully construct the Project expressway, and operate and manage it after completion. SPG shall take all necessary measures, including the provision of funds to the relevant prefecture and county communications bureaus, to ensure that the local roads construction and improvements are completed before opening the Project expressway. Change of Ownership PA, Schedule, Complied with. In the event that (a) any change in ownership of the Project para. 6. As of the project facilities, or (b) any sale, transfer, or assignment of SPG’s completion review, no or the Company’s interest in the Project expressway, is imminent ownership anticipated, SPG, through SPTD, and the Company, shall change is expected. SPTD consult ADB at least six months prior to the implementation will consult ADB if there is of such change. SPG, through SPTD and the Company, any possibility on change shall undertake any proposed change in the ownership of of ownership. the Project facilities in a legal and transparent manner and does not affect repayment of the Loan Road Safety PA, Schedule, Complied with. Before Project construction and operations, the Company para. 7. The project expressway shall carry out road safety audits and implement the was regularly patrolled by related recommendations. To ensure safe road facilities, traffic police. Road traffic SPG through SPTD, and the Company shall implement the accidents and fatalities in road safety signage, communication, hazard barriers, Ya’an were reduced traffic monitoring, vehicle weighing, and other design significantly from 1,309 features of the Project facilities. SPG shall ensure that accidents with 104 fatalities SPTD, the Company and the Sichuan Public Security in 2007 to 323 accidents Bureau cooperate closely to implement all road safety with 95 fatalities in 2012. A measures and that the Project expressway is adequately report on emergency patrolled. Prior to opening the Project expressway, SPG response system was shall cause SPTD to submit a report on their emergency submitted to ADB. response system to ADB for review. Tolls PA, Schedule, Partially complied with. The tolls for the Project expressway shall be set by SPG. para. 8. The toll rate of the project In determining the toll level, SPG shall take into expressway passed a consideration the levels sufficient to enable the Company public hearing before to meet the debt service coverage ratio required in Section SPG’s approval. The 2.17 above. Six months prior to official opening of the current toll level cannot Project expressway, ADB’s concurrence for the proposed enable the company to

30 Appendix 7

Covenant Reference Status of Compliance toll structure and levels shall be sought, prior to submission meet the required debt of the application for SPG’s approval. For the first five service ratio. The toll years of operation, SPG shall cause the toll structure and structure report was levels to be reviewed annually and a report submitted to submitted to ADB on 29 ADB. If an adjustment of the toll levels is required in November 2010. SYECL accordance with the above mentioned principle ADB’s confirmed submission of a concurrence on the toll adjustment plan shall be sought, future toll level adjustment prior to finalizing and submitting the plan to SPG for plan to ADB prior to SPG’s approval approval. Axle Loads PA, Schedule, Complied with. SPG, through SPTD, and the Company shall take para. 9. Weight-based tolls have appropriate measures to prevent overloading on the been applied for all toll Project expressway by installing vehicle axle weighing roads in PRC since 2008. equipment at selected entry points and make suitable The plan for operation of arrangements for operation of such equipment. The the vehicle weigh stations, Company shall submit to ADB, before opening the Project including the prescribed expressway, the plan for operation of the vehicle weigh axle load limits and stations, including the prescribed axle load limits and penalties, was submitted to penalties for their infringement. ADB in July 2012. Roadside Stations PA, Schedule, Complied with. Prior to completion of the local roads under the Project, para. 10. Service facilities including SPG through SPTD shall establish roadside stations with markets, parking areas, facilities that include among others, parking areas; bus bus stops, gasoline terminals; gasoline stations; information counters about stations, restaurants, and roads, road safety; tourism and HIV/AIDS; local specialty garages were built along markets; restaurants; and agroprocessing facilities. the completed local roads. A small market was built at each of the project expressway’s rest areas to enable local farmers to sell fruits and agricultural products to passengers in transit. Vehicle Emissions PA, Schedule, Complied with. At least 6 months prior to opening of the Project para. 11. National vehicle emission expressway, SPG shall cause SPTD to provide to ADB the standards were submitted national vehicle emission standards and the penalties for to ADB in September 2011. infringement of such limits. SPG shall ensure that the Vehicle emission control Sichuan Environmental Protection Bureau, SPTD, the was enforced in the project Sichuan Public Security Bureau, and other relevant areas. All vehicles in the agencies enforce the national vehicle emission standards, project areas are subject to and fulfill requirements of the government strategies. annual emission test. Corporate Governance PA, Schedule, Complied with. The Company shall demonstrate that the standard of its para. 12. The corporate development corporate governance, management operation, and plan was submitted on 24 financial reporting satisfies the requirements of investors. December 2007. For that purpose, the Company shall prepare the corporate development plan by 31 December 2007.

Appendix 7 31

Covenant Reference Status of Compliance

Capacity Building PA, Schedule, Complied with. The Company shall, in consultation with SPG, through para. 13. The human resource SPTD, prepare a human resource development plan based development plan was on the Company’s future requirements and corporate submitted on 17 December strategy. International training will be provided for selected 2009. International staff related to project activities. Prior to undertaking the trainings for 15 groups international training financed under the Loan, the were conducted with total Company shall prepare for the concurrence of ADB a completed training of 44.6 training plan, a program of workshops, and, separately, a person-months. Knowledge list of candidates nominated for international training acquired was shared among SPTD and SYECL. Private Sector Development PA, Schedule, Complied with. Six months prior to the opening of the Project facilities, para. 14. A feasibility report on SPG, through SPTD, and the Company shall analyze the attracting private sector feasibility of attracting private sector investment funds for funds was submitted to future road sector investment, including private sector ADB in 2012. SYECL is participation in the operation, maintenance, and exploring the possibility to management of the Project expressway, and report its outsource service area conclusions to ADB. operations to a private investor. Environment PA, Schedule, Complied with. SPG, through SPTD, and the Company shall ensure that para. 15. The project expressway the Project expressway is designed, constructed and was designed, constructed, operated in accordance with national and local government and operated in environmental procedures, rules and regulations of ADB’s accordance with national Policy on Environment (2002). and local environmental requirements. An external SPG, through SPTD, and the Company shall ensure that PA, Schedule, monitor was engaged any adverse environmental impacts arising from para. 16. during construction. construction and operation of the Project expressway will Eleven monitoring reports be minimized by implementing the mitigation measures, were submitted to ADB. A environmental monitoring program, and other project environmental recommendations presented in the Environmental Impact acceptance mission is Assessment and submit a semiannual report to ADB. The expected to be completed mitigation measures shall be incorporated in the bidding in 2015. documents and civil works contracts. Land Acquisition and Resettlement PA, Schedule, Complied with. SPG, through SPTD, shall (i) implement the Resettlement para. 17––21. Implementation of land Plan in accordance with its terms, (ii) ensure that all land acquisition and and rights–of–way required by the Project are made resettlement cost available in a timely manner, (iii) ensure that the provisions CNY1.186 billion. In of the Resettlement Plan, including compensation and accordance with the project entitlements for affected persons, will be implemented in implementation schedule, accordance with all applicable government laws and SPTD and SYECL regulations and ADB’s Policy on Involuntary Resettlement proactively provided (1995), (iv) ensure compensation and resettlement counterpart funds for land assistance are given to the affected persons prior to acquisition and dispossession and displacement, (v) ensure the timely resettlement, and they paid provision of counterpart funds for land acquisition and compensation on a timely resettlement activities, (vi) meet any obligations in excess basis prior to dispossession of the Resettlement Plan budget estimate, and (vii) ensure and displacement. The that the affected persons will be at least as well off as they external monitor conducted

32 Appendix 7

Covenant Reference Status of Compliance would have been in the absence of the Project. an income survey which showed that the income of SPG, through SPTD, shall also ensure that (i) adequate staff affected households and resources are committed to supervising and monitoring increased by 94%from the implementation of the Resettlement Plan, and providing 2008 to 2012. to ADB quarterly reports on implementation and a . Southwest Jiaotong resettlement completion report, (ii) an independent agency University was engaged as acceptable to ADB is engaged by the Company to monitor the external monitor. Eight progress semiannually and to evaluate results through monitoring and evaluation annual survey updates during two years after the completion reports were submitted of resettlement, and forward reports to the Company and from 2008 to 2012. ADB, (iii) data are disaggregated by gender, and monitoring focuses on gender impacts and vulnerable groups are incorporated, and (iv) a summary of audits of resettlement The updated resettlement disbursements and expenditures to affected villages and plan was submitted to ADB affected people is provided to ADB. on 31 December 2007. The resettlement information SPG, through SPTD, shall ensure that the Company database was developed in updates the Resettlement Plan and submit to ADB for March 2010. The updated approval the amendment to the Resettlement Plan, for resettlement plan was both the Project expressway and local roads components, disclosed to affected (i) upon completion of preliminary design, including people before submitting to rehabilitation plans for seriously affected villages, and prior ADB. to commencement of land acquisition, (ii) upon the completion of the detailed measurement survey, and prior SYECL closely supervised to the commencement of civil works to ADB for its all contractors to ensure concurrence, and (iii) as necessary when there is any compliance with the significant material changes in Project scope or other resettlement plan and causes. With respect to any updated Resettlement Plan, entitlements. Temporary SPG, through SPTD, shall ensure that the Company roads for construction use discloses such updated Resettlement Plan to affected were later upgraded and persons prior to submission to ADB. handed over to local villages at their request SPG, through SPTD, shall cause the Company to (i) upon project completion. ensure that civil works contracts include requirements to From 2007 to 2011, a comply with the Resettlement Plan and entitlements for cumulative 11,051 local permanent and temporary impacts to affected persons, (ii) laborers were employed in supervise the contractors to ensure compliance with project construction, requirements of the Resettlement Plan, applicable laws including 1,530 women. and regulations, and ADB’s Policy on Involuntary Resettlement, and (iii) ensure that civil works contractors will maximize employment for the affected persons with equal access to women. SPG, through SPTD, shall ensure that (i) any land SPTD administered local acquisition carried out by county communications units for roads improvement through the local roads component of the Project will also be county communications implemented in accordance with the Resettlement Plan, bureaus. Requirements on and (ii) adequate resettlement compensation funds are land acquisition and available and properly utilized. compensations were followed.

Appendix 7 33

Covenant Reference Status of Compliance

Poverty Reduction PA, Schedule, Complied with. The Company shall cause the contractors to maximize the paras. 22-23 According to the employment of local poor persons at Project construction, socioeconomic monitoring subject to poor workers meeting the job and efficiency report prepared by requirements for construction of the Project roads. Such Southwest Jiaotong workers shall be provided on the job training. SPG, through University, during the peak the Poverty Alleviation Office, in consultation with the construction period in Company shall monitor the impacts on poverty with the 2010, 5,572 local laborers assistance of a designated local institute acceptable to were directly employed at ADB and provide annual monitoring reports to ADB. expressway construction, SPG will implement the social development action plan of which 893 were women, (SDAP) in a timely manner. SPG shall extend the coverage 1,210 from minority and quality of public utilities, basic health, and basic households, and 3,827 education in the Project area to enhance the poverty poor. reduction impacts. Gender and Development PA, Schedule, Complied with. SPG, through SPTD, and the Company shall follow ADB’s para. 24. Employment opportunities Policy on Gender and Development (1998) during in expressway construction implementation of the Project, and shall take all necessary and equal payment actions to encourage women living in the Project area to enabled local women to participate in planning and implementing the Project, gain cash income and including construction work. SPG, through SPTD, shall enhance social status. A ensure the effective implementation of measures aimed at total of 893 women worked increasing Project benefits and impacts on women in the directly in expressway Project area, which are included in the Ethnic Minority construction and 65 women Development Plan and Social Development Action Plan. were working in the SPG, through SPTD, will monitor effects on women during expressway’s operation. Project implementation, through gender disaggregated data collected pursuant to the terms of the Resettlement Plan and through the monitoring and evaluation system. Health Risks PA, Schedule, Complied with. SPG, through Department of Health, and the Company, para. 25. During construction and together with the appropriate authorities, shall ensure that operation of the project, civil works contractors disseminate information on the risks information about HIV/AIDS of HIV/AIDS and sexually transmitted diseases to those and health risks were employed during Project implementation. SPG, through widely disseminated Department of Health and SPTD, and the Company shall through 1,000 notices and also ensure that similar information is disseminated to booklets, as well as 100 transport operators and local communities such as ethnic bulletins. During minorities, women, and other high risk groups living in the construction, 5 county Project area during Project operation, at roadside stations hospitals and 20 clinics and other suitable facilities. SPG, through SPTD, and the provided health service to Company will cause contractors to monitor health risks the project. control according to the Implementation Methods of Epidemic Prevention Law of PRC 1991. Labor Standards PA, Schedule, Complied with. SPG, through SPTD, and the Company shall ensure that para. 26. PRC’s Labor Law was civil works contractors comply with all applicable labor abided by. No child labor legislation. The Company shall include a specific clause in was used in project bidding documents and civil works contracts requiring that construction and operation. the civil works contractors not employ child labor in the Men and women were paid

34 Appendix 7

Covenant Reference Status of Compliance construction and maintenance activities, men and women equally for work of equal receive equal pay for work of equal value, and workers be value on a monthly basis. paid in a timely manner on a monthly basis, and shall SYECL closely monitored monitor compliance with such clause. each contractor’s payment to workers. Ethnic Minorities PA, Schedule, Complied with. SPG, through SPTD and local government, shall para. 27. Southwest Jiaotong implement the Ethnic Minority Development Plan to ensure University was engaged as that ethnic minorities benefit from the Project in at least an external monitor of the equitable manner and in accordance with ADB’s Policy on ethnic minorities Indigenous Peoples (1998). SPG shall ensure that the development plan. The Ethnic Minorities Development Plan is monitored and agreed actions were evaluated by an independent agency. implemented effectively. During project construction, a total of 1,210 minority laborers were employed. During project operation, 137 minority laborers were employed. Monitoring and Evaluation PA, Schedule, Complied with. SPG, through SPTD, and the Company shall monitor and para. 28. Southwest Jiaotong evaluate Project impacts through a project performance University was engaged as management system to ensure that the Project facilities external monitor for are managed effectively and the benefits, in accordance monitoring and evaluation. with the Borrower’s regulations, are maximized. SPG, Baseline data was through SPTD and the Company, shall collect data agreed collected in March 2008. with ADB prior to implementation of the Project, at The data was updated in completion of the Project, and three years subsequent to October 2012. Reports Project completion. The data may include (i) economic were submitted to ADB. development and poverty indicators for the project area, (ii) industrial and agricultural outputs, (iii) transport costs and time, (iv) transport services and charges, (v) accident rates, (vi) accessibility by roads and buses in the project area, and (vii) jobs created in construction and maintenance. Employment indicators will include information about unskilled laborers, poor laborers, and women laborers. Mid Term Review PA, Schedule, Complied with. During 2008, SPG, through SPTD, and the Company shall para. 29. The midterm review was carry out a mid-term review of the Project with ADB. Such conducted in 2009. mid-term review shall: (i) focus on institutional, administrative, organizational, technical, environmental, social, poverty reduction, economic, financial and other relevant aspects impacting on Project performance and viability; and (ii) examine progress in implementation of sector reforms, policy development, resettlement activities and compliance with the terms of the Loan Agreement and this Project Agreement. Anticorruption Measures PA, Schedule, Complied with. During Project implementation, SPG, through SPTD, and para. 30. Relevant sections of ADB’s the Company shall follow ADB’s and the Borrower’s anticorruption policy were

Appendix 7 35

Covenant Reference Status of Compliance anticorruption policies. SPG, through SPTD, and the incorporated into the Company shall ensure, in accordance with the Borrower’s bidding documents. regulations and requirements, that during Project National prevailing implementation (i) officials from the Discipline and practices on anticorruption Inspection Bureau are resident in the Project offices for using a separate integrity bidding, construction, and operations; (ii) an internal audit and anticorruption contract unit is established in the Company; (iii) a two contract were widely applied in civil system is adopted where the winner of a civil works works construction. contract must also sign an anticorruption contract with the employer; and (iv) periodic inspections of contractors are undertaken to ensure procedures related to fund withdrawals and settlements are being followed. SPG, through SPTD, shall also initiate liaison meetings with the Prosecutor’s Office, on a needed basis, where warnings about or information on corrupt practices can be discussed. Financial Reporting PA, Section 2.09 Complied with. (a) SPG and the Company shall, (i) maintain separate All due audit reports were accounts, for the Project expressway and for its overall submitted on time during operations; (ii) have such accounts and related financial each past year, and each statements (Project accounts, balance sheet, statement of report was issued with an income and expenses, cash flow statements and related unqualified opinion. statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement), all in the English language. The Company shall, furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. ADB = Asian Development Bank, LA = loan agreement, PA = project agreement, para. = paragraph, PRC = People’s Republic of China, SPG = Sichuan Provincial Government, SPTD = Sichuan Provincial Transport Department, SYECL = Sichuan Yaxi Expressway Company Limited. Source: Asian Development Bank.

36 Appendix 8

PROJECT CONTRACT DETAILS

Table A8.1: Works Contracts for Expressway and Local Roads

Mode of Contract Amount PCSS Procure- Total ADB- No. Contractor ment Contract Date (CNY) Financing ($) Changsha Central South Construction 0002 ICB 8 March 2007 362,239,685.60 21,923,520.00 Engineering Group Corp. Sichuan Road and Bridge (Group) 0003 ICB 8 March 2007 559,205,647.00 35,424,348.00 Corp. 0004 Sichuan Road & Bridge Co., Ltd. ICB 8 March 2007 223,810,817.00 14,383,584.00 No. 3 Engineering Co., Ltd. of China 0005 ICB 8 March 2007 321,764,337.80 20,433,465.00 Railway Nuclear Industry South China 0006 ICB 8 March 2007 339,991,948.00 25,911,970.00 Construction Engineering Co., Ltd. Sichuan Road & Waterway 0007 ICB 8 March 2007 243,554,539.92 16,070,187.00 Construction Co., Ltd. 1st Engineering Co., Ltd. of China 0008 ICB 8 March 2007 395,934,233.30 24,207,135.00 Railway Sichuan Chuanjiao Road & Bridge 0009 ICB 8 March 2007 461,400,674.00 27,683,887.00 Communication Co., Ltd. Sichuan Chuanjiao Road & Bridge 0010 ICB 8 March 2007 451,653,662.00 27,339,083.00 Communication Co., Ltd. Jiangxi Road & Bridge Engineering 0011 ICB 8 March 2007 271,143,391.00 17,820,182.00 Co., Ltd. Nuclear Northwest Engineering & 0012 ICB 8 March 2007 210,242,978.88 14,012,486.00 Construction Corp. China Railway 12th Bureau Group 0013 ICB 22 June 2007 561,118,453.00 39,618,582.00 Co., Ltd. The Fifth Engineering Co., Ltd. of 0014 ICB 22 June 2007 406,022,000.00 25,255,526.00 FHEC of CCCC China Railway 23rd Bureau Group 0015 ICB 22 June 2007 424,923,536.00 27,619,372.00 Co., Ltd. 0016 The Road & Harbor Group Co., Ltd. ICB 9 July 2007 508,278,445.63 34,856,247.00 0017 China Railway Tunnel Stock Co., Ltd. ICB 19 October 2007 450,590,462.68 32,288,140.00 China Railway No.5 Engineering 0019 ICB 28 November 2009 183,985,784.56 16,130,740.00 Group Co., Ltd. Sichuan Panfeng Road & Bridge 0020 ICB 20 November 2009 126,250,232.42 8,525,048.00 Construction Co., Ltd. Jiangxi Traffic Engineering Group 0021 ICB 25 November 2009 148,434,325.81 10,695,249.00 Co., Ltd. Shangdong Highway & Bridge 0022 ICB 10 December 2009 196,016,241.36 18,843,205.00 Construction Co., Ltd. Zhejiang Zhengfang Traffic 0023 ICB 1 December 2009 189,843,457.00 18,657,710.00 Construction Co., Ltd. ADB = Asian Development Bank, CNY = yuan, ICB = international competitive bidding, PCSS = procurement contract summary sheet. Source: Sichuan Yaxi Expressway Company Limited.

Appendix 8 37

Table A8.2: Civil Works Contracts for Public Transport Centers

Mode of Contract Amount Procure- Total ADB-Financing PCSS No. Contractor ment Contract Date (CNY) ($) Ya’an Hongda Building 0018 NCB 17 April 2009 6,997,875.44 319,984.00 Engineering Co. Sichuan Jianlian Construction 0024 NCB 13 March 2011 13,595,392.00 557,767.00 Co., Ltd. Sichuan Dianshang 0025 NCB 22 August 2011 1,251,018.00 122,249.00 Construction Refitting Co., Ltd. Sichuan Jianlian Construction a 0026 NCB 8 September 2011 8,635,345.00 0.00 Co., Ltd. ADB = Asian Development Bank, CNY = yuan, NCB = ADB’s national competitive bidding procedures, PCSS = procurement contract summary sheet. a Total allocation of loan proceeds for this category was $1 million, which amount already had been exhausted by 3 contracts awarded earlier. The government provided counterpart funds for all 4 contracts. Source: Sichuan Yaxi Expressway Company Limited.

Table A8.3: Local Roads Financed by Asian Development Bank

Original Standard Location Start End Length Standard or after Year of (County) (Town/Village) (Town/Village) (km) Status Upgrading Completion Yucheng Zishi Zishi 0.2 Impassable Class II 2010 Yingjing Yingjing 0.4 Impassable Class II 2010 Shize Shize 2.6 Impassable Class II 2012 Yingjing Wanjiashan Wanjiashan 4.0 Impassable Class II 2008 Huiguan Caodaping 8.0 Impassable Class II 2009 Yingjing Fengyixiang 25.8 Unclassified Class III 2008 Jiuxiang Jiuxiang 6.5 Impassable Class II 2012 Hanyuan Hanyuan 1.9 Impassable Class II 2010 Fenghuocun Fenghoucun 3.0 Impassable Class IV 2008 Hanyuan Fuyuancun Fuyuancun 5.0 Impassable Class IV 2009 Tangjiawan Tangjiawan 4.5 Impassable Class IV 2008 Shipucun Shipucun 2.6 Impassable Class IV 2008 Jiuzhai Sunjiagou 10.0 Unclassified Class III 2008 Shimian Shimian 2.0 Impassable Class II 2012 Liziping Liziping 3.0 Impassable Class II 2012 Qianbaima Shangnancun 2.6 Impassable Class III 2009 Shimian Tieyuanzi Tieyuanzi 3.4 Impassable Class IV 2008 Shimian Daanlegou 36.0 Unclassified Class III 2009 Liziping Wadaoping 7.4 Unclassified Class III 2008 Mianning Mianning 4.0 Impassable Class II 2010 Mianning Shadaogou Shadaogou 1.8 Impassable Class IV 2008 Shilong Tangniba 23.4 Unclassified Class IV 2009 Total 158.1 km = kilometer. Source: Sichuan Yaxi Expressway Company Limited.

38 Appendix 8

Table A8.4: Local Roads Financed by the Government

Original Location Start End Length Standard or Standard after Year of (County) (Town/Village) (Town/Village) (km) Status Upgrading Completion Yingtian Datianba 1.0 Unclassified Class IV 2008 Leitai Longgang 6.8 Impassable Substandard 2009 Wuxian Rexigou 4.2 Impassable Substandard 2009 Yingjing Baofeng Xingjiacun 6.0 Impassable Substandard 2008 Tianfeng Jianshecun 3.5 Impassable Substandard 2009 Liuhe Baojicun 8.0 Impassable Substandard 2008 Dashuzhen Shajingxiang 12.1 Class IV Class III 2009 Shaijingxiang Henanxiang 11.4 Class IV Class III 2008 Anlexiang Maliexiang 12.0 Class IV Class III 2009 Guixianxiang Pianmaxiang 15.8 Unclassified Class IV 2010 Fulizhen Anlexiang 18.0 Class IV Class III 2008 Pianmaxiang Ranmocun 15.0 Impassable Substandard 2007 Pianmaxiang Dayingcun 21.0 Impassable Substandard 2009 Dalinxiang Shanglicun 20.0 Impassable Substandard 2010 Hanyuan Hexixiang Yangshancun 18.0 Impassable Substandard 2010 Fuchunxiang Zhaiyecun 16.9 Impassable Substandard 2009 Yidongzhen Xinshicun 15.0 Impassable Substandard 2009 Yidongzhen Qunancun 25.0 Impassable Substandard 2009 Yidongzhen Guanhuacun 10.5 Impassable Substandard 2009 Yidongzhen Yinancun 10.0 Impassable Substandard 2009 Henanxiang Shunpingcun 14.0 Impassable Substandard 2009 Henanxiang Zhushancun 10.0 Impassable Substandard 2009 Shirongxiang Taipingcun 21.0 Unclassified Class IV 2009 Xianfengxiang Xinminxiang 15.5 Class IV Class III 2010 Xianfengxiang Xieluoxiang 15.5 Class IV Class III 2009 Xieluoxiang Ezucun 13.0 Impassable Substandard 2009 Shimian Xieluoxiang Dapingcun 15.0 Unclassified Class IV 2009 Xianfengxiang Baitacun 22.4 Unclassified Class IV 2010 Xinminxiang Zufucun 12.8 Impassable Substandard 2010 Zaoluocun Haiyangcun 15.7 Unclassified Class IV 2010 Lizhuangxiang Lawoxiang 37.0 Unclassified Class IV 2007 Tuomalu Shayema 20.0 Impassable Substandard 2011 Chengxiangzhen Jiaguer 10.0 Unclassified Class IV 2007 Mianning Hahaxiang Haha 15.0 Unclassified Class IV 2008 Houshanxianggaoyao Geli 10.0 Unclassified Class IV 2008 Houshanxiangfuqiang Maan 15.0 Unclassified Class IV 2006 Tiechangxiang Gaolou 8.0 Unclassified Class IV 2009 Total 520.0

Source: Sichuan Provincial Transport Department.

Appendix 9 39

ECONOMIC REEVALUATION

A. General

1. The Central Sichuan Roads Development Project comprises 240 kilometers (km) of four- lane, access-controlled toll expressway from Ya’an to Lugu and upgrading of about 678 km of local roads. The economic reevaluation was conducted for the expressway component using with- and without-project scenarios in accordance with Asian Development Bank guidelines.1 Without the project, corridor traffic would use the existing roads, which would be more congested. This would result in higher vehicle operating costs (VOC), longer travel time, and more road accidents. With the project, the corridor transport capacity was increased, allowing the vehicles on the project expressway to drive shorter distances, at faster speeds, and with lower VOC. Congestion on the existing roads was ameliorated, resulting in a shorter travel time, lower VOC, and reduced accident rate. More traffic was generated due to better transport conditions and lower operating costs in the corridor. The evaluation period covered the implementation period from 2007 to 2013 and the operation period from 2013 to 2031. The analysis was carried out using 2013 constant prices.

2. The economic costs were derived from financial costs by excluding taxes, duties, and financing charges; applying the shadow wage rate factor of 0.67 on unskilled labor as utilized at appraisal; and converting border prices to domestic economic prices using a shadow exchange rate factor of 1.013.

B. Revised Traffic Forecast

3. The project expressway traverses the southern part of Sichuan Province. It is the final section of the Chengdu–Panzhihua expressway, one of the eight Western Development Corridors approved by the Government of the People’s Republic of China in 2001. It provides Sichuan Province an important access to Yunnan Province in the south. By the time of the project’s completion, the Chengdu–Panzhihua expressway was fully completed and opened to traffic. The project expressway connects the two main economic centers of Sichuan Province and provides a high-capacity route in the transport corridor. A section of about 90 km was opened to traffic on a trial operation basis in December 2010, and the entire project expressway was completed and opened to traffic on 28 April 2012.

4. The traffic forecast was based on actual traffic data from April 2012 to September 2013 provided by Sichuan Yaxi Expressway Company Limited (SYECL). Actual traffic figures indicated an annual increase of 13% and some sections reported gains of 40%–152%. The impact of other expressways which were connected to the project expressway was taken into consideration, as was that of railways in the region. Socioeconomic data, such as projected gross domestic product (GDP), planned industrial construction, tourism development, and travel behavior changes resulting from higher incomes, were also incorporated into the forecasts.

5. The project expressway, the national highway 108 (G108), and provincial roads constitute the main transport corridor in the project area. Before the expressway was opened to traffic, these national and provincial highways were congested and road accidents were rampant due to the difficult mountainous terrain and poor road conditions. When the expressway was opened, the annual average daily traffic on G108 fell from 7,000–13,000 passenger car units (varying by sections) in 2011 to about 3,000–9,000 passenger car units in

1 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila.

40 Appendix 9

2013. That overall decrease was nearly 30%. The actual traffic on the project expressway reached 10,234 passenger car units in 2013, which was close to the projections at appraisal. The vehicle fleet composition differed from that originally estimated, as increased incomes had resulted in a higher proportion of passenger vehicles as compared with freight vehicles and a higher proportion of small passenger cars. Table A9.1 compares the traffic forecast at appraisal with the actual and projected traffic at project completion.

Table A9.1: Updated Traffic Forecast (average annual daily traffic, in passenger car units) Year At Appraisal At Completion 2013 10,615a 10,234 2021 20,495 21,261 2030 34,043 30,267 a This figure is the estimate for 2011 from ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for the Central Sichuan Roads Development Project. Manila. Sources: ADB, Sichuan Yaxi Expressway Company Limited.

C. Benefits

6. The economic benefits that were quantified at appraisal included (i) savings in VOC resulting from the reduced travel distance and improved road conditions, (ii) the value of time savings for passengers and freight travel, (iii) savings resulting from lower accident and fatality rates, (iv) benefits to generated traffic, and (v) savings in capital and operation and maintenance (O&M) costs for the alternative route via G108. These benefits were reevaluated using updated information. In the case of benefits related to changes in road accidents, there was insufficient data for accident rates on the expressway and G108 before and after opening of the expressway. Savings in capital and O&M costs for G108 were not considered in the reevaluation, because there have been a stronger commitment from the government, additional inputs, and enhanced O&M practices to improve the condition of non-toll roads during the period since project implementation.

7. Economic benefits included savings in VOC. Unit VOC savings for each type of vehicle under different road and traffic conditions were calculated based on fuel and lubricating oil consumption, tires and spare parts, vehicle maintenance labor costs, vehicle crew wages, vehicle depreciation, and average travel speed as a function of the geometry and condition of the road. Unit VOC savings were estimated to be CNY0.30–CNY1.54 per vehicle-km for the expressway traffic, differing by vehicle type. Savings in VOC from the reduced travel distance were also calculated. The VOC on G108 were also reduced as a result of the reduced congestion. The unit VOC savings for G108 traffic come to CNY0.15–CNY0.20 per vehicle-km.

8. Passenger travel time savings were estimated for different types of passenger vehicles. The average passenger time value was derived from the per capita GDP of Sichuan Province in 2012, and this was assumed to increase by 5% to 10% annually during 2013–2032. Other factors considered in calculating travel time savings included average vehicle load, percentage of work-related trips, travel distance, and speeds for with- and without-project scenarios. Time savings for freight traffic were incorporated only for fresh agriculture produce and livestock. Vehicles carrying these cargos were exempted from toll charges, and they constitute an increasing proportion of the freight traffic on the project expressway. Farm gate prices for agricultural produce used to be low due to lack of accessibility and the long time required for transport. Opening of the expressway significantly improved the situation and resulted in both

Appendix 9 41 higher prices and greater volumes of local agricultural produce. For example, the price of cherries rose threefold to CNY30 per kilogram after the expressway opened to traffic.

9. The local road component comprised upgrading 678 km of roads in three counties. As envisaged at appraisal, the principal benefits of the local road improvements were reduced VOC due to improved road condition. These were confirmed at completion, but the benefits cannot be quantified as there was no systematic traffic counting on these local roads. The local road component also had a positive effect on poverty reduction and contributed to the rapid growth of per capita income, as improved local roads allow farmers to go directly to markets to sell their produce at higher prices. Social welfare is enhanced, too, because the local roads reduced the time and cost for accessing schools, hospitals, and other public services. Although significant, these benefits cannot be quantified and therefore are not included in the reevaluation.

D. Economic Internal Rate of Return Reevaluation

10. The reevaluated economic internal rate of return (EIRR) for the project expressway is 13.3%, which is lower than the appraisal estimate of 15.1%. The lower EIRR was mainly due to the increased capital cost, higher periodic maintenance costs, and delayed completion. The reevaluated EIRR is higher than the cutoff rate of 12%, and the project is considered economically viable. The outcome of the economic reevaluation is provided in Table A9.2.

Table A9.2: Economic Reevaluation of the Project (CNY million)

Costs Benefits Net VOC Time Generated Benefits Year Capital O&M Total Savings Savings Traffic Total 2007 853.5 0.0 853.5 0.0 0.0 0.0 0.0 (853.5) 2008 1,463.2 0.0 1,463.2 0.0 0.0 0.0 0.0 (1,463.2) 2009 4,531.9 0.0 4,531.9 0.0 0.0 0.0 0.0 (4,531.9) 2010 4,554.9 0.0 4,554.9 0.0 0.0 0.0 0.0 (4,554.9) 2011 4,516.4 0.0 4,516.4 0.0 0.0 0.0 0.0 (4,516.4) 2012 1,576.4 36.4 1,612.8 323.0 500.8 82.4 906.2 (706.6) 2013 278.6 37.5 316.1 484.5 751.3 123.6 1,359.4 1,043.3 2014 0.0 38.7 38.7 552.4 856.4 140.9 1,549.7 1,511.0 2015 0.0 39.8 39.8 661.2 1,054.4 171.6 1,887.2 1,847.4 2016 0.0 41.0 41.0 791.4 1,218.5 201.0 2,210.9 2,169.9 2017 0.0 42.3 42.3 889.2 1,408.1 229.7 2,527.0 2,484.8 2018 0.0 43.5 43.5 999.0 1,627.2 262.6 2,888.8 2,845.3 2019 0.0 44.8 44.8 1,122.4 1,828.2 295.1 3,245.6 3,200.8 2020 0.0 46.2 46.2 1,261.0 2,054.0 331.5 3,646.4 3,600.2 2021 445.2 47.6 492.8 1,416.7 2,242.9 366.0 4,025.6 3,532.8 2022 445.2 49.0 494.2 1,547.0 2,449.3 399.6 4,395.9 3,901.7 2023 445.2 50.5 495.7 1,689.4 2,674.6 436.4 4,800.4 4,304.7 2024 0.0 52.0 52.0 1,844.8 2,920.7 476.5 5,242.0 5,190.0 2025 0.0 53.5 53.5 2,014.5 3,189.4 520.4 5,724.3 5,670.7 2026 0.0 55.1 55.1 2,199.8 3,482.8 568.3 6,250.9 6,195.8 2027 0.0 56.8 56.8 2,402.2 3,803.2 620.5 6,826.0 6,769.2 2028 0.0 58.5 58.5 2,623.2 4,153.1 677.6 7,454.0 7,395.5 2029 0.0 60.2 60.2 2,864.6 4,535.2 740.0 8,139.7 8,079.5 2030 0.0 62.0 62.0 3,128.1 4,762.0 789.0 8,679.1 8,617.0 2031 (8,887.4) 63.9 (8,823.5) 3,415.9 4,762.0 817.8 8,995.6 17,819.1 Economic Net Present Value = 1,726 EIRR = 13.3% EIRR = economic internal rate of return, O&M = operation and maintenance, VOC = vehicle operating costs. Source: Asian Development Bank estimates.

42 Appendix 9

11. A sensitivity analysis was carried out to test the impacts of (i) increase in O&M costs, (ii) decrease in benefits, and (iii) a combination of these two scenarios. This analysis indicated that the EIRR would fall below the cutoff rate if the benefit level were to decrease by more than 13%. The results of the sensitivity analysis are presented in Table A9.3.

Table A9.3: Sensitivity Analysis

Change in O&M Cost Benefits EIRR Base Case 13.3% Change(+/-) 20% 13.3% (10%) 12.3% (13%) 12.0% 20% (13%) 12.0% () = negative, EIRR = economic internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates.

Appendix 10 43

FINANCIAL EVALUATION

A. Introduction

1. The financial reevaluation was undertaken in accordance with Asian Development Bank (ADB) guidelines.1 The Central Sichuan Roads Development Project had both revenue and nonrevenue components. The 240-kilometer (km), four-lane expressway from Ya’an to Lugu is the revenue-generating component, and the financial reevaluation took in only that component. The reevaluation covers the 2007–2013 implementation and 2013–2031 operation periods.

B. Basic Assumptions

2. To calculate the financial internal rate of return (FIRR), the capital cost was based on actual expenditures incurred for the expressway, excluding the cost for interest during construction. The actual capital cost denominated in local currency was about 13.33% higher than the appraisal estimates. The expressway operation and maintenance (O&M) expenses were estimated on the basis of the project expressway’s actual O&M expenses in the past 2 years, provided by Sichuan Yaxi Expressway Company Limited (SYECL). The expressway maintenance cost comprised CNY98,400 per km for routine maintenance and CNY3.5 million per km for periodic maintenance and was estimated according to the average expenditure level for expressway maintenance in Sichuan Province. The operation cost was estimated based on the average salaries and number of employees for expressway administration and operation. It was assumed that the operation and routine maintenance cost would increase by 3.00% in real terms annually to ensure the good working condition of the expressway facilities. Depreciation was calculated using an average annual depreciation rate of 5.00%, and depreciation expenses were excluded from the FIRR calculation.

Table A10.1: Toll Rates for Project Expressway

Vehicle Standards Toll Rates Passenger (CNY per vehicle- Vehicle Type Freight Vehicle Vehicle kilometer) Type 1 M≤2 t N≤7 0.76 Type 2 2 t40 3.03 Type 5 M>15 t 3.79 CNY = yuan, M = standard freight vehicle load (ton), N = standard passenger vehicle seats, t = ton. Source: Sichuan Yaxi Expressway Company Limited.

3. The project expressway will generate financial benefits by collecting tolls. The actual toll revenues from April 2012 to 2013 were included, and the future toll revenues will rise in accordance with traffic growth. Current toll rates, with a base toll level of CNY0.50 for a passenger car unit per km, have been applied since April 2012. In addition, extra fees are charged for extra-large tunnels and bridges. Total fees for the entire line come to CNY62 per passenger car unit. Combining the basic tariff and extra fees, the average tariff is CNY0.76 per passenger car unit. That represents a significant increase as compared with the appraisal estimate of CNY0.35 per passenger car unit. The overall toll level (Table A10.1) is higher than the appraisal estimates. No increase in toll level in real terms was assumed. Toll revenues are

1 ADB. 2005. Financial Management and Analysis of Projects. Manila.

44 Appendix 10 subject to business tax and other associated taxes at a level of 3.36%. SYECL is subject to a corporate income tax of 25.00% to be paid on income after deducting business taxes, depreciation and interest charges, operating expenses, and any prior year losses carried forward. All revenues and expenses were expressed in 2013 prices for the FIRR calculation. The residual value of fixed assets was based on the economic life of the expressway facilities.

C. Financial Internal Rate of Return

4. The weighted average cost of capital (WACC) in real terms, was calculated using the actual capital mix and cost of various financing sources. The revised WACC is 2.5% (Table A10.2). This is lower than the appraisal estimate of 3.9%, mainly due to lower interest rates for the ADB and domestic loans. The FIRR was recalculated as 3.9% before corporate income tax and 3.8% after corporate income tax (Table A10.3). These rates are lower than the appraisal estimates of 6.1% and 5.4%, respectively. The decrease was mainly due to higher capital cost, greater periodic maintenance expenses, and delayed completion. The project’s recalculated FIRR was higher than the revised WACC, and the project was considered financially viable.

Table A10.2: Weighted Average Cost of Capital

Financing Component ADB Domestic Loan Equity A. Amount (CNY million) 3,116.8 10,821.2 5,387.3 B. Weighting 16% 56% 28% C. Nominal cost 3.00% 6.60% 8.00% D. Income tax rate 25% 25% 0 E. Tax-adjusted nominal cost [D x (1 − E)] 2.25% 4.95% 8.00% F. Inflation rate 1.6% 3% 3% G. Real cost [(1 + F) / (1 + G) − 1] 0.01 0.02 0.05 H. Weighted component of WACC (G x B) 0.10% 1.06% 1.35% Weighted average cost of capital 2.5% ADB = Asian Development Bank, CNY = yuan, WACC = weighted average cost of capital. Source: Asian Development Bank estimates.

5. A sensitivity analysis was conducted to test the impacts of variations in O&M costs and revenues. The project’s FIRR will fall below the WACC if the revenues will be more than 18% less than the base case estimates or in the combined case of more than 15% decrease in revenues and 20% increase in O&M costs. The results of the sensitivity analysis are shown in Table A10.4.

Appendix 10 45

Table A10.3: Financial Internal Rate of Return (CNY million)

Capital O&M Business Income Net Cash Year Cost Cost Subtotal Revenue Tax Tax Flow 2007 864.6 864.6 (864.6) 2008 1,482.2 1,482.2 (1,482.2) 2009 4,590.8 4,590.8 (4,590.8) 2010 4,614.1 4,614.1 0.0 (4,614.1) 2011 4,575.1 4,575.1 0.0 (4,575.1) 2012 1,596.9 36.9 1,633.8 413.2 13.9 (1,275.8) 2013 282.2 38.0 320.2 650.0 21.8 308.0 2014 39.2 39.2 741.0 24.9 676.9 2015 40.3 40.3 844.7 28.4 776.0 2016 41.6 41.6 963.0 32.4 889.1 2017 42.8 42.8 1,030.4 34.6 953.0 2018 44.1 44.1 1,102.5 37.0 1,021.4 2019 45.4 45.4 1,179.7 39.6 1,094.7 2020 46.8 46.8 1,262.3 42.4 1,173.1 2021 451.0 48.2 499.2 1,350.7 45.4 806.1 2022 451.0 49.6 500.6 1,404.7 47.2 856.9 2023 451.0 51.1 502.1 1,460.9 49.1 909.7 2024 52.6 52.6 1,519.3 51.0 1,415.6 2025 54.2 54.2 1,580.1 53.1 1,472.8 2026 55.8 55.8 1,643.3 55.2 1,532.2 2027 57.5 57.5 1,709.0 57.4 73.83 1,520.2 2028 59.2 59.2 1,777.4 59.7 98.88 1,559.5 2029 61.0 61.0 1,848.5 62.1 124.53 1,600.8 2030 62.9 62.9 1,922.4 64.6 150.80 1,644.2 2031 (9,002.9) 64.7 (8,938.2) 1,999.3 67.2 177.72 10,692.6 FIRR before income tax = 3.9%

FIRR after income tax = 3.8% WACC = 2.5%

() = negative, CNY = yuan, FIRR = financial internal rate of return, O&M = operation and maintenance, WACC = weighted average cost of capital. Source: Asian Development Bank estimates.

Table A10.4: Sensitivity Analysis

Scenario FIRR Base Case 3.8% Revenues decrease by 10% 3.2% Revenues decrease by 15% 2.8% O&M costs increase by 20% 3.7% 20% increase in O&M costs, 15% decrease in revenues 2.7% FIRR = financial internal rate of return, O&M = operations and maintenance. Source: Asian Development Bank estimates.

46 Appendix 10

D. Financial Performance of Project Company

6. SYECL is responsible for construction, operation, and maintenance of the project expressway. It is entitled to collect tolls and retain toll revenue, and it has assumed responsibility for debt repayment. As covenanted in the project agreement, the project expressway should maintain (i) a debt-to-equity ratio of not more than 55:45 from the third year of operation, (ii) a working ratio (defined as annual O&M cost exclusive of periodic maintenance cost divided by revenue) of not more than 15%, and (iii) a debt service coverage ratio of not less than 1.2 from the third year of full operation. Based on SYECL’s actual performance during 2012–2013 and projections of its financial performance, these ratios for the period 2012–2032 are presented in Table A10.5.

Table A10.5: Financial Performance of the Project Company

Financial Ratios 2013 2015 2018 2020 2022 Debt-to-equity ratio 70% 63% 52% 44% 37% Working ratio 6% 5% 4% 4% 4% Debt service coverage ratio 0.4 0.5 0.8 1.0 1.2 Source: Asian Development Bank estimates.

7. Under the original financing plan, the equity input accounted for 45% and debt 55% of the total capital cost. According to SYECL, the actual debt-to-equity ratio at completion was 74:26. Equity contributions from the Ministry of Transport were provided as planned while the committed counterpart funds from Sichuan Provincial Government were less than estimated at appraisal. Moreover, the cost increases due to design variances and price changes have been financed by loans from domestic banks, which caused the debt ratio to increase significantly. This resulted in a situation wherein SYECL will not be able to comply with the debt-to-equity ratio and the debt service coverage ratio requirement for a considerable period of time. The debt-to-equity ratio requirement will be complied with from 2018 and the debt service coverage ratio will be less than 1.0 until 2020 and reach 1.2 only in 2022. Although the O&M cost is relatively high due to maintaining the super-long tunnels and bridges, as well as the preventative measures to ensure transport safety in view of the long slopes and curves, the working ratio requirement can still be complied with during the operational period.

Appendix 11 47

LAND ACQUISITION AND RESETTLEMENT

A. Background

1. The Asian Development Bank (ADB) approved a resettlement plan for the expressway during loan processing, and an updated resettlement plan on the basis of detailed design was prepared and submitted to ADB in December 2007. The updated resettlement plan detailed the resulting losses of land, houses, and other assets.1 A total 15,254 mu (1,017 hectares [ha]) of land would be acquired permanently by the expressway. Overall, some 32,000 households would be partially affected by permanent land acquisition. A total of 207,312 square meters (m2) of houses or buildings would be demolished, and this would cause the relocation of 929 households (3,412 persons). In addition, the project would acquire about 5,214 mu of land temporarily for construction purposes. The resettlement cost estimate of CNY1.029 billion was included into the project cost under the updated resettlement plan.

B. Scope of Land Acquisition and Resettlement

2. According to the project completion report prepared by Sichuan Yaxi Expressway Company Limited (SYECL), a total 17,647 mu of land was permanently acquired for the expressway. That was 15.7% more than estimated in the updated plan. In total, 341,741 m2 of buildings and houses were demolished, which was 64.8% more than estimated in the revised plan. The number of households affected due to house demolition was 2,252 and the number of affected persons was 8,035, an increase by 135.5% over that in the updated plan. The total actual cost of compensation for land acquisition, building relocation, and affected facilities was CNY1.186 billion. That was 15.3% greater than the CNY1.029 billion estimated in the updated plan. The major reasons for variation in the actual project impacts include (i) greater land use to rehabilitate local community access roads and affected drainage and irrigation systems, (ii) landslides during construction, (iii) realignment of some sections to avoid burial grounds of Yi communities, (iv) design changes in the Shimian section, (v) relocation of houses close to the expressway to address safety concerns, (vi) relocation of original households in concentrated resettlement sites, and (vii) underestimation during project design. The local roads component had no land acquisition or resettlement impacts due to upgrading within the right-of-way. Table A11.1 presents the actual project impacts versus those estimated in the updated plan.

Table A11.1: Project Land Acquisition and Resettlement Impacts

Impacts Variation Item Unit Original Plan Updated Plan Actual Quantity Percentage 1. Land acquisition Permanent mu 21,991 15,254 17,647 2,393 15.7 of which, farmland mu 12,913 6,587 11,158 4,571 69.4 Temporary mu 5,214 5,214 5,144 (70) (1.3) 2. Building demolition m2 94,800 207,312 341,741 134,429 64.8 3. Households affected by land acquisition person 20,237 32,000 71,380 39,380 123.1 by building demolition person 2,634 3,412 8,035 4,623 135.5 () = negative, m2 = square meter, 1 mu = 666.67 m2. Sources: Updated resettlement plan (December 2007), project completion report prepared by Sichuan Yaxi Expressway Company Limited.

1 ADB’s original report and recommendation of the President estimated 21,991 mu of permanent land acquisition affecting 5,711 households, 94,800 m2 of house demolition with 790 affected households, and resettlement costs of CNY907.4 million.

48 Appendix 11

C. Resettlement Policy and Compensation Rates

3. Land acquisition and resettlement were implemented based on the Land Administration Law (1998) of the People’s Republic of China (PRC), ADB’s Involuntary Resettlement Policy (1995), ADB’s Policy on Indigenous Peoples (1998), and the resettlement plan approved during project preparation. During project implementation, Sichuan Provincial Government also approved incremental compensation rates for the expressway proposed by local governments in 2008. As shown in Table A11. 2 and Table A11.3, the implemented compensation rates for land acquisition and house relocation relating to the expressway construction were the same as those in the updated plan but higher than those in the original resettlement plan.

Table A11.2: Compensation Rates for Permanent Land Acquisition

Land Type Unit Original Plan Updated Plan Actual A. Permanent Land Acquisition

Cultivated land CNY/mu 20,000–32,000 17,500–49,770 17,500–49,770 Forest land CNY/mu 10,000 11,067–24,885 11,067–24,885 Other types of land CNY/mu 10,000–32,000 11,067–24,885 11,067–24,885 B. Temporary Land Use

Cultivated land CNY/mu/2 years 2,000–3,200 2,000–3,200 2,000–3,200 Forest land CNY/mu/2 years 1,000 1,000 1,000 Other types of land CNY/mu/2 years 1,000 1,000 1,000 CNY = yuan, 1 mu = 666.67 m2. Note: Rates include land compensation and resettlement subsidy. Sources: Original resettlement plan (February 2005), updated resettlement plan (December 2007), external resettlement monitoring reports.

Table A11.3: Compensation Rates for Houses and Structures (CNY/m2)

Items Original RP Updated RP Actual Concrete structure 600 ... 660–740 Brick and concrete 350–450 386–556 506–656 Brick and wood 280–320 260–393 400–493 Earth and wood 260 220–338 320–438 Simple 100–150 80–140 150–240 ... = not available, CNY = yuan, m2 = square meter. Sources: Original resettlement plan (February 2005), updated resettlement plan (December 2007), external resettlement monitoring reports.

D. Rehabilitation and Income Restoration

4. Rehabilitation and income restoration have been challenging for affected households, particularly for those seriously affected. Income variation of affected households and the rehabilitation measures adopted by local governments and SYECL were monitored by the external monitoring consultants. The adopted measures include the following: (i) land adjustment within a group or village on the basis of consultation through village meetings so that affected households obtained a piece of land in those villages or groups with adequate farmlands after land acquisition; (ii) rehabilitation or improvement of community facilities, such as access roads to the rural roads network, improved irrigation systems, and stable power supply; (iii) prioritized recruitment of affected people in unskilled work and procurement of local construction materials during project construction; (iv) providing skills training on the likes of

Appendix 11 49 agriculture, animal husbandry, housekeeping, cooking, and computer use, as well as assisting affected people to work as migrant labors in other cities or provinces; (v) a social insurance program to cover land loss by farmers; and (vi) development of fruit and vegetable growing as well as tourism by taking advantage of the improved transport condition. The external monitors conducted an income survey by revisiting 46 sample households in 2012. The comparative analysis shows that the income of affected households was increased as compared with the baseline survey in 2008. Table A11.4 presents the details.

Table A11.4: Income Restoration of Affected Sample Households

Per Capita Income 2008 2012 (CNY/year) Households Percentage Households Percentage ﹤1,500 9 20 0 0 1,500–2,500 11 24 6 13 2,500–4,500 21 46 12 26 4,500–6,000 4 9 10 22 >=6,000 1 2 18 39 Total 46 100 46 100 Source: External resettlement monitoring reports.

5. Shortage of residential lands and delayed selection and construction of resettlement sites brought slow progress in house demolition and reconstruction. With continuous requests by ADB review missions, SYECL and local governments made great efforts in assisting the affected households to obtain the residential lands for building new houses, mobilizing additional resources for construction of public facilities, leveling for concentrated resettlement sites, as well as constructing new houses. The last resettlement site was completed in March 2012, and all affected households were resettled by the middle of 2012. The project completion review mission visited the largest resettlement site in Shimian County and observed that the affected households were fully satisfied with resettlement policies, compensation rates, and their new apartments constructed by the local government. Table A11.5 provides the details of 17 concentrated resettlement sites along the alignment. The other 4,721 affected people were relocated by moving to scattered plots in villages, which presented fewer challenges.

Table A11.5: Concentrated Resettlement Sites

County/District Concentrated Resettlement Sites Households Persons Completion Date Yucheng Babu Resettlement Site 101 388 31 October 2010 Yingjing No. 1 Resettlement Site 36 157 31 December 2009 No. 3 Resettlement Site 30 122 31 August 2010 Hanyuan Shangyan Resettlement Site 72 258 28 February 2010 Zaolin Resettlement Site 10 37 31 October 2010 Fuchun Resettlement Site 19 82 31 January 2009 Wujiashan Resettlement Site 14 65 31 July 2009 Wenwupo Resettlement Site 46 195 31 December 2009 Xiaoguan Resettlement Site 21 88 31 August 2009 Danong Resettlement Site 10 35 31 October 2011 Shirong Resettlement Site 28 96 30 November 2009 Shimian Chuanxindian Resettlement Site 507 1,220 31 October 2011 Caobapai Resettlement Site 102 331 31 October 2011 Group 5, Laojie Street 44 119 31 October 2011 Group 6, Laojie Street 21 74 31 March 2012 Group 5, Xinjie Street 6 19 31 March 2012 Group 4, Yanzi 6 28 31 March 2012 Total 17 sites 1,073 3,314 Source: Project completion report prepared by Sichuan Yaxi Expressway Company Limited.

50 Appendix 11

E. Resettlement Cost

6. The cost of CNY1.186 billion for implementing land acquisition and resettlement represented an increase of 15.3% over the CNY1.029 billion in the updated resettlement plan. The higher land acquisition and resettlement costs mainly were due to the greater amount of land acquisition and house demolition as well as higher compensation rates. See Table A11.6.

Table A11.6: Land Acquisition and Resettlement Costs: Updated Resettlement Plan vs. Actual (CNY 10,000)

Updated Item Actual Resettlement Plan A. Compensation for land acquisition 46,545.89 62,773.92 A.1 Compensation for cultivated land 18,221.98 33,259.50 A.2 Compensation for garden plots 5,521.81 5,615.67 A.3 Compensation for forest land and forestry 16,015.60 8,070.48 A.4 Compensation for other types of land 3,726.67 11,512.77 A.5 Compensation for young crops 799.83 1,003.19 A.6 Compensation for temporary occupation of land 2,260.00 3,312.31 B. Compensation for relocation of housing and appendages 11,427.36 25,699.22 B.1 Compensation for housing 6,906.51 19,000.16 B.2 Relocation and transition expenses 1,403.19 3,711.13 B.3 Compensation for auxiliaries 3,117.66 2,987.93 C. Rehabilitation expenses for special facilities 20,250.00 13,696.92 D. Rehabilitation plan at village level 650.00 11,393.68 E. Monitoring, survey, and administration expenses 3,416.80 5,060.28 E.1. Internal and external monitoring and evaluation 250.00 123.11 E.2.Survey costs for land, mine, and culture relics 2,413.35

E.3. Administration expenses for resettlement work 3,166.80 2,523.83 F. Land reclamation fees 8,711.25 - Total resettlement expenses (A+B+C+D+E+F) 91,001.30 118,624.02 G. Contingency funds

G.1 Basic contingency funds 7,100.00 - G.2 Price difference contingency funds 4,800.00 - Total expenses (A+B+C+D+E+F+G) 102,901.30 118,624.02 Note: Numbers may not sum precisely because of rounding. Sources: Updated resettlement plan (December 2007), project completion report prepared by Sichuan Yaxi Expressway Company Limited.

F. Information Disclosure, Consultation, and Grievance Redress Mechanism

7. The counties’ resettlement management offices for the expressway project made public announcements on the detailed policies of land acquisition and resettlement prior to the implementation of land acquisition and house relocation. The announcement was not only to disclose publicly the scope of land acquisition and house demolition, resettlement policies, and detailed compensation standards, but also to let the affected people know the specific amount of land acquisition and house relocation, as well as the amount of compensation for each affected household. SYECL worked with county resettlement management offices to

Appendix 11 51 communicate with affected people through public announcements, television programs, posters, newspapers, bulletins, village message boards, and resettlement information booklets. A complaint-handling mechanism was established at project level to enable affected people to appeal to local officials, contractors, or resettlement management offices when they encountered problems. Detailed measures to collect opinions or complaints included a special hotline in the land and resources bureau, close contact with township and village heads, meetings with village representatives, and door-to-door consultation.

G. Monitoring and Evaluation

8. Southwest Jiaotong University was engaged for external monitoring and evaluation (M&E) of land acquisition and resettlement implementation in late 2007 to replace the previous external monitor, which lacked experience on land acquisition and resettlement. A baseline survey and eight external M&E reports for land acquisition and resettlement implementation were submitted to ADB from 2008 to 2012. The last external M&E report concluded that income restoration of affected households had been achieved.

H. Lessons

9. After the Wenchuan earthquake on 12 May 2008, large-scale reconstruction programs resulted in shortage of and higher prices for house construction materials. In a timely manner, Sichuan Provincial Government approved higher house compensation rates to ensure updated replacement prices. The lessons leant from the project may include that (i) a qualified monitor is essential for administration of land acquisition and resettlement implementation, which means that the experience and qualifications of potential external resettlement monitors should be seriously evaluated during the recruitment process;2 and (ii) the resettlement sites should be determined and preparation started as early as possible, and their costs should be included into the overall project budget in the project design stage.

2 Initially, a local nongovernment organization with poverty reduction experience was engaged, but it was unable to cope with the complexities of resettlement.

52 Appendix 12

SOCIAL IMPACT AND POVERTY REDUCTION

A. Introduction

1. A social and poverty analysis was conducted during project preparation. According to the analysis, the project would contribute to regional development and poverty reduction through (i) improved linkage to markets; (ii) improved access to external jobs and social services for the poor; (iii) lower transport costs for agricultural inputs and products; (iv) better access to and interaction with other regions; and (v) jobs during construction and after completion, owing to increased economic activities. Specifically, the project’s local road component of 678 kilometers (km) would help local people to break the transport bottleneck and therefore add economic value to their fruit, vegetable, and animal production that had been supported by various poverty reduction, minority redevelopment, and agricultural development programs. Given the limited farmland but rich mineral and forestry resources in this remote and poor area, the expressway—and especially interchange areas—and local roads will speed up the development of mineral and tourism resources and facilitate the expansion of local growth centers that will have greater impact on poverty reduction. In addition, given that a segment of the project expressway is located in an ethnic minority area, an ethnic minority development plan was prepared to extend the project benefits to local minority groups in a culturally appropriate way.

B. Socioeconomic Growth in the Project Area

2. Construction of the project expressway commenced in 2007, and it was officially opened to traffic in April 2012. A total of CNY19.07 billion was invested in expressway construction. The income, employment, and business opportunities thusly generated, along with the potential to attract external investment, have contributed significantly to regional socioeconomic growth in the project area and in Sichuan Province as a whole. For the period from 2007 to 2012, the per capita gross domestic product (GDP) growth in the project areas ranged from 126% to 142%. That was higher than the 102% average for Sichuan Province (Table A12.1).

Table A12.1: Growth of Per Capita GDP in the Project Area (CNY/person)

County or Annual Growth Prefecture or City District 2007 2012 Growth Rate Ya’an Yucheng 12,002 28,731 139% 19.1% Yingjing 12,680 28,670 126% 17.7%

Hanyuan 5,231 12,674 142% 19.4%

Shimian 16,380 38,967 138% 18.9%

Liangshan/Xichang Mianning 7,795 17,599 126% 17.7% Sichuan Province 12,963 26,133 102% 15.1%

CNY = yuan, GDP = gross domestic product. Sources: 2007, 2012 statistical yearbooks of project counties and Sichuan Province.

3. Construction of the expressway facilitated external investments and contributed to local industrial development along the expressway corridor. According to the project completion report prepared by SYECL, Yingjing County attracted external investments of CNY2.5 billion in 2012, an increase of 111% from the CNY1.21 billion in 2011. Xichang Prefecture, meanwhile, attracted external investments of CNY44.4 billion in 2012, a gain of 40% from that in 2011. New

Appendix 12 53

industrial parks have been constructed close to the expressway, and more and more enterprises are beginning operations along the corridor. The booming industrial development also plays an important role in employing surplus rural laborers in the project areas.

4. The expressway’s operation directly heightens the competition among local forwarders and wholesalers, and that benefits poor farmers through fairer pricing. Liangshan Prefecture is one of the largest onion-growing bases, with an annual planted area of around 80,000 mu (53.33 million m2). Due to high transportation cost and long transportation time, a large amount of onions was spoiled each year and the price was low. After the expressway opened to traffic in April 2012, the transportation time was remarkably reduced from 2 days to 9 hours. That means fresh vegetables could reach the Chengdu vegetable market in a single day. In addition, the expressway’s free toll policy for fresh agricultural products significantly reduced the transport costs. That, in return, promotes agricultural development in the project areas and increases the income of local farmers, and particularly for the poor.

5. Operation of the expressway and improvement of local roads also promoted tourism development. Local governments have taken measures to develop tourism resources to take advantage of expressway transportation. According to an official from Liangshan Prefectural Tourism Bureau, tourist numbers were booming immediately after opening of the expressway. During the national holiday in 2012, for example, 26.8 million tourists visited Liangshan. That marked a gain of 21.95% as compared to the 22.01 million tourists in 2011. Consequently, tourism revenues reached CNY9.4 billion for the 2012 national holiday, an increase by 17% from the CNY8.0 billion in 2011. There are many scenic spots and tourism resources in the project area, but most of these are not well-known due to their difficult access. The opening of the expressway will attract more tourists from Chengdu to the project areas, and particularly Liangshan Prefecture. More tourism has boosted local employment both directly and indirectly.

C. Poverty Reduction

6. With the socioeconomic growth in the project area and increased fiscal revenue of the local governments, living standards and the incomes of local people—and particularly the poor—have improved. Statistics show that from 2007 to 2012 the per capita rural income in the project areas grew in a range from 72% to 77%, which is slightly higher than the 73% average for Sichuan Province (Table A12.2).

Table A12.2: Growth of Per Capita Income of Farmers in the Project Area (CNY/person)

Annual Growth Prefecture or City County or District 2007 2012 Growth Rate Ya’an Yucheng 4,043 7,148 77% 12.1% Yingjing 3,966 6,806 72% 11.4%

Hanyuan 3,182 5,542 74% 11.7%

Shimian 3,421 5,905 73% 11.5%

Liangshan/Xichang Mianning 3,668 6,380 74% 11.7% Sichuan Province 3,547 6,129 73% 11.6%

CNY = yuan. Sources: 2007, 2012 statistical yearbooks of project counties and Sichuan Province.

54 Appendix 12

7. Poverty incidence has been reduced significantly in the project area. From 2007 to 2012, the absolute poverty incidence decreased from 7.86% to 0.3% in Yingjing County, from 3.91% to 0.42% in Shimian County, and from 3.95% to 0.26% in Mianning County (Table A12.3).

Table A12.3: Poverty Incidence in Project Area

Absolute Poverty Prefecture or County or Absolute Poor Incidence Reduction City District 2007 2012 2007 2012 Poor Incidence Ya’an Yucheng 1,579 ... 0.45% ...... Yingjing 11,645 454 7.86% 0.30% 11,191 7.6%

Hanyuan 3,523 ... 1.10% ......

Shimian 4,550 520 3.91% 0.42% 4,030 3.5%

Liangshan/ Mianning 13,420 985 3.95% 0.26% 12,435 3.7% Xichang ... = not available. Note: The absolute poverty line is equal to or less than CNY693 per person. Source: Project completion report prepared by Sichuan Yaxi Expressway Company Limited.

D. Labor and Employment

8. During the peak of construction in 2010, according to the socioeconomic monitoring report prepared by Southwest Jiaotong University, around 5,572 local laborers were directly employed in expressway construction along the alignment. Of these, 893 were women, 1,210 from minority households, and 3,827 were poor. In addition, locally procured construction materials and supplies—including steel, cement, timber, sand, and stone—also provided a large number of employment opportunities in the project area. See Table A12.4.

Table A12.4: Employment Generated by Procurement of Local Materials during Expressway Construction (persons)

County or District Year Unskilled labor Women Minority Poor Yingjing 2007 2,162 388 33 765 2008 2,764 422 38 955

2009 3,284 463 44 1,229

2010 2,961 430 35 1,082

2011 1,989 355 22 564

Hanyuan 2007 35 45 20 30 2008 64 75 40 180

2009 150 120 150 280

2010 174 130 160 360

2011 171 134 180 368

Shimian 2007 500 120 400 100 2008 400 150 430 100

2009 1,000 300 700 200

2010 400 240 580 200

2011 500 170 320 100

Source: Project completion report prepared by Sichuan Yaxi Expressway Company Limited.

9. The operation of the expressway also provides employment opportunities for the local people, particularly in the likes of rest areas, service stations, and gas stations. During 2012, for

Appendix 12 55

example, a total of 1,000 unskilled laborers were hired in Shimian County and another 500 in 2013. Recruitment of women was also encouraged. In 2013, for example, 65 women were recruited in Hanyuan County, which marks an increase of 44.4% from the 45 women in 2012. In addition, 65 minority people were recruited to work in expressway operation during 2013. That represented a significant increase from 25 in 2012. Most of the local people recruited were from poor families in surrounding areas.

E. Faster and Safe Mobility

10. Operation of the expressway and improvement of local roads promoted transport development for both passengers and cargo. The travel time by bus from Xichang to Chengdu, the capital of Sichuan Province, was significantly reduced, from 10 hours to 5 hours. According to the director of Liangshan Prefectural Transport Administration Division, there was only one bus a day from Xichang to Chengdu before opening of expressway, and now 20 buses run daily from 7:00 am to 17:00 pm. Likewise, the number of buses and cars within each county increased along the expressway alignment. This led to a deferred increase in transport ticket prices due to heightened competition, and that benefits local communities.

11. Opening of the expressway also provides safe mobility for migrant laborers. The regional economy long lagged behind those of other regions in the PRC. A large number of surplus rural laborers worked outside the region, particularly in coastal areas. Although some migrant laborers were recruited by local enterprises in recent years, a large proportion of surplus rural laborers nevertheless working outside the area. In the case of Liangshan Prefecture, it is estimated that approximately 800,000 laborers work outside the prefecture. Most of them return home during the spring festival each year, and, prior to opening of the expressway, some of those would be injured or even killed in car accidents on the bumpy mountain roads. In Hanyuan County from 2007 to 2012, for example, the number of injuries from car accidents significantly decreased by 90% from 876 to 83.

F. Health Care and Control of HIV/AIDS/STIs

12. SYECL and contractors along the expressway corridor provided health care for construction workers and took measures to control inflection of HIV/AIDS and sexually transmitted infections. These efforts included the following: (i) professional doctors were invited to provide training on HIV/AIDS prevention; (ii) awareness of HIV/AIDS and sexually transmitted infections was promoted, including by disseminating brochures and condoms; (iii) voluntary self- examination and knowledge-sharing was encouraged, and particularly for pregnant women along the expressway alignment. In addition, the contractors organized annual physical examinations for all workers in cooperation with Chengdu hospital or the resident hospital on site. In general, SYECL and all contractors devoted great attention to health screening and the prevention of infectious disease, venereal disease, and HIV/AIDS for all construction workers. Despite the large workforce, there were no reported cases of HIV/AIDS during project construction.

G. Gender Development

13. The operation of the expressway and improved local roads promoted gender development in the project area. The improved road conditions have enabled local women to obtain access to medical services, and particularly those women who live in remote mountainous areas. It has been observed in recent years that more pregnant women delivered their babies in hospitals, and both the maternal mortality rate and infant mortality rate declined

56 Appendix 12 significantly in the project area after road conditions were improved (Table A12.5). Engaging in expressway construction at equal pay for equal work allowed local women to gain income and win respect. A total of 893 women worked directly for expressway construction, and 65 women were hired for expressway operation. Female family members played more and more important roles in decision making during implementation of land acquisition and resettlement. Local governments provided training to improve skills among local women, such as in cooking and sewing. Improved transport conditions gradually changed the mindset of local women, who became more actively involved in such cash-income activities as providing unskilled labor, and working in small businesses in transport, restaurants, and tourism.

Table A12.5: Maternal Mortality Rate and Infant Mortality Rate (‰)

County or Maternal Mortality Rate Infant Mortality Rate Prefecture or City District 2007 2012 Variation 2007 2012 Variation Ya’an Yucheng 67.75 0.37 (99%) 7.84 5.70 (27%) Yingjing ... 0.95 ... 12.50 7.60 (39%)

Hanyuan 0.85 ...... 0.20 ...

Shimian 0.57 0.20 (65%) 21.02 0.15 (99%)

Liangshan/Xichang Mianning 1.20 0.30 (75%) 30.71 2.40 (92%) ... = not available, () = negative. Source: Project completion report prepared by Sichuan Yaxi Expressway Company Limited.

H. Ethnic Minority Development

14. During project preparation, an ethnic minority development plan was prepared to ensure equitable sharing of project benefits and to agree on mitigation measures for adverse impacts on minority communities in the project area. According to statistics from 2012, the total minority population numbered 231,068 in the five counties and districts along the expressway. The ethnic minority development plan primarily targets the affected minority population of Yi, which accounts for about 86% of the total minority population. Yi are especially prevalent in Mianning County. The following measures in the plan were implemented during expressway construction: (i) protecting minority communities from construction disturbances, including to prohibit nighttime construction, build access roads and crossings, and rehabilitate damaged community facilities; (ii) controlling HIV/AIDS and sexually transmitted infections through medical care and prevention education; (iii) engaging minority women in consultation and participation in project activities, (iv) giving special consideration to minority communities while implementing land acquisition and resettlement (for example, the expressway was realigned in order to avoid the burial ground of a Yi community in Mianning County); (v) recruiting unskilled minority laborers to work for expressway construction and operation (a total of 1,210 minority laborers were engaged in construction and 137 minority laborers were working for operation); and (vi) adopting other enhancement measures, such as to provide technical training on agriculture and animal husbandry, enhanced education, and local roads improvement.

I. Monitoring and Evaluation

15. Southwest Jiaotong University was engaged as the external agency to conduct monitoring and evaluation of social impacts and ethnic minority development. Eight social monitoring reports were prepared and submitted from 2008 to 2012. Those reports concluded that the construction and operation of the project expressway have contributed to regional

Appendix 12 57

socioeconomic development, poverty reduction, gender development, as well as ethnic minority development.

J. Conclusions

16. The project has contributed to significant improvements in regional social development and poverty reduction in the project area, including by (i) significantly increasing GDP and farmers’ incomes per capita; (ii) significantly decreasing poverty; (iii) increasing employment opportunities and income for the poor during construction and operation of the project, as well as indirect and induced employment opportunities due to faster economic growth; (iv) promoting awareness of HIV/AIDS prevention; (v) providing fast and safe transport services; and (iv) promoting gender development.

Appendix 13 58

ENVIRONMENTAL IMPACT ANALYSIS

A. Introduction

1. The Central Sichuan Roads Development Project constructed 244 km of four-lane expressway from Ya’an to Lugu, Sichuan Province. It also upgraded 678 km of local roads. The alignment included 9 interchanges and 25 tunnels with a total length of 83.7 km, as well as 90.9 km of bridges and viaducts. The project also constructed four public transportation centers.

2. The project was classified as Asian Development Bank (ADB) environment category A. A summary environmental impact assessment (EIA) was prepared based on the domestic EIA and soil erosion protection plan. The summary EIA was disclosed in February 2005. The domestic EIA report was approved by the State Environmental Protection Administration in December 2005. The plan was approved by the Ministry of Water Resources in November 2005.

3. The summary EIA concluded that the project would cause no serious environmental effects if the measures defined in the environmental management plan and monitoring plan would be carried out on time and properly. The project provided certain environmental benefits by reducing air pollution emissions due to reduced travel times and traffic congestion, significantly controlling soil erosion through revegetation and slope-stabilization measures, as well as heightening environmental awareness and improving environmental technical skills at the operating levels.

B. Environmental Protection and Management

4. During construction, Sichuan Yaxi Expressway Company Limited (SYECL) coordinated implementation of the project’s environmental management plan (EMP). Each contractor had a responsible unit or office looking after environmental protection. An environmental supervision firm was contracted to supervise environmental protection works at the construction sites. Sichuan Shu-Water Ecological Environment Construction Limited was engaged to supervise the soil erosion protection plan’s implementation. Training on environmental management was provided for project management staff, contractors, and engineers. Two special studies were conducted to provide technical solutions for (i) wetlands conservation, gully erosion control, restoration of granite excavation areas, and revegetation; and (ii) ecological sound barriers. The project also utilized LCD lighting systems and solar panels to power signals in several tunnels.

5. During operation, environmental management mainly involves maintaining protective structures; treating and handling wastewater and solid wastes from the expressway administration office, toll gates, services stations, and public transportation centers; and environment monitoring. These tasks are coordinated by SYECL on a regular basis in accordance with the project EMP.

6. It was estimated at appraisal that the total cost of environmental protection and mitigation measures would be about CNY22.3 million. According to SYECL’s completion report, the actual total investment for environmental protection was CNY107.37 million, which included costs for mitigation measures, erosion control, replanting, and environmental monitoring.

C. Environmental Monitoring

7. Environment monitoring was conducted adequately and according to the monitoring program as stipulated in the project EIA. That monitoring was undertaken at two levels: (i)

Appendix 13 59 regular monitoring of on-site project impacts by contractors and construction supervision companies; and (ii) periodic environmental compliance monitoring by external monitors, who took samples for analysis in accordance with relevant environment standards and technical codes.

8. During implementation, Ya’an Municipal Environment Monitoring Station and Liangshan Prefecture Environment Monitoring Station were engaged to monitor compliance with regulations of the People Republic of China, including those for noise pollution, ambient air quality, and surface water quality along the alignment. Yunnan Rundian Water-Saving Technical Extension Consulting Company was engaged to monitor soil erosion. Nine EMP monitoring reports were prepared and disclosed on ADB’s website. During operation, the Environmental Evaluation and Assessment Center of the Ministry of Environment Protection is engaged in monitoring ambient air quality along the expressway in accordance with the summary EIA, and particularly at sensitive receptors including schools, hospitals, and residential sites.

D. Environmental Impacts and Mitigation Measures

a. Topography, Geology, and Soil

9. During construction, the project employed 44 materials extraction and/or storage sites along the alignment. The total excavated earthwork was 44.99 million cubic meters (m3). The project produced 16.69 million m3 of solid wastes and spoils, which were disposed of at 71 disposal or spoil sites. The borrow pits and disposal sites have been restored and rehabilitated through retaining structure, drainage systems, and vegetative measures. The design specifications for highway environmental projection guidelines and technical standards for highway projects were well followed during construction. During subgrade construction, asbestos tailings were utilized as an ingredient of aggregate sources. Protective measures were undertaken, and no asbestos contamination was found in water of the Pubugou Hydropower Station reservoir. No specific adverse impacts are expected during operation. Regular monitoring is conducted to determine the adequacy of those measures implemented and the need for additional measures.

b. Surface and Ground Water

10. During construction, adverse impacts on surface water were mainly from bridge and tunnel construction, runoff and soil erosion, vehicles and equipment, and sewage from construction camps. All proposed mitigation measures were implemented according to the project EMP and prevented surface water from being polluted by wastewater from construction. Erosion-control measures were undertaken effectively according to the project’s soil erosion protection plan. Monitoring results showed that water quality of the Jinghe, Liusha, Dadu, Nanya, Caogu, and Anning rivers were all held at Class III in compliance with the national surface water standard (GB3838-2002). During operation, adverse impacts are mainly caused by direct storm water runoff from road surfaces and effluent from wastewater treatment facilities at service centers and toll gates. Runoff water is diverted to grassed and pervious areas to retain oil and soil before discharging to water bodies. Erosion-control works are inspected regularly to make sure they are functioning. Wastewater treatment facilities have been built to collect and treat wastewater and ensure that discharge complies with national standards.

c. Ambient Air Quality

11. During construction, short impacts on air quality were caused mainly by (i) dust from

60 Appendix 13 aggregate preparation, concrete mixing, transport of borrow materials, and excavation spoils; (ii) odor emissions from the bitumen plant(s); and (iii) vehicle emissions from truck traffic and heavy equipment operation. These impacts were controlled effectively through implementing mitigation measures as established in the EMP. During operation, the main air pollution sources are nitrogen dioxide (NO2) and carbon monoxide (CO) from vehicle emissions. According to monitoring reports, NO2 and CO have met Class II of the Ambient Air Quality Standard (GB3095-1996) as requested in the EMP. To control the vehicle emissions, Sichuan Provincial Government issued an action plan in 2010 for ambient air quality control and improvement. This also includes a motor vehicle emission control program. Regular monitoring is conducted to confirm the modeling results and potential adaptation of identified impacts as needed.

d. Noise

12. During construction, noise impacts were mainly from construction and transportation activities. The impacts were temporary and limited due to the remote locations of major construction activities. Noise from blasting and earthmoving equipment was mitigated by using low-noise equipment and respecting designated working hours. Rock crushing and concrete mixing plants were located at the requested distance (i.e., 1 km) from sensitive areas. The monitoring results showed that noise levels from construction were well controlled in terms of national noise standards for construction sites (GB12523–90). During operation, noise levels are within acceptable levels according to the monitoring results except at 40 noise-sensitive sites where sound abatement walls were installed. Trees and shrubs planted on both sides help ease remaining noise impacts along the alignment. In addition, the project built ecological sound barriers with a cumulative length of 536 meters at three sites where the project alignment is close to residential areas. This was intended to showcase integrated solutions to alleviate residual noise impacts along the road corridor.

e. Ecological Environment

13. The expressway passes the experimental zone of Liziping Nature Reserve. Approval from Sichuan Forestry Bureau was obtained in July 2005 to confirm that the alignment across the nature reserve meets the government’s nature reserve regulations. During construction, activities were arranged according to the project EMP to minimize disturbance to the area. No spoil sites or borrow pits were placed in the area. Traffic signs prohibiting the use of horns in the area have been installed. In addition, elevated viaducts were built between kilometers 139.4 and 147.7 and between kilometers 169.0 and 172.5 to ensure free movement of wildlife.

E. Conclusions

14. During construction, all the contractors fulfilled their obligation to protect the environment and to implement mitigation measures in their construction schemes. The adverse effects of the project construction on the surrounding environment were thus minimized. The project introduced environmentally friendly measures recommended by technical studies to minimize adverse impacts on natural ecosystems such as revegetation and elevated viaducts for wildlife movement. Energy-saving and renewable energy facilities, including solar panel-powered traffic signaling, were also utilized along the alignment. During operation, the impacts on the ambient environment are minor. With its operation, the project will produce environment benefits in the forms of reduced vehicle emission levels that result from shortened travel times and less congestion and of erosion control.