Guangxi Southwestern Cities Development Project (Financed by the Technical Assistance Special Fund)

Home , Beihai, Beilun River, Chongzuo, Fangchenggang, Fangcheng District, Fusui County

Technical Assistance Consultant’s Report

Project Number: 42010 April 2010

People’s Republic of China: Guangxi Southwestern Cities Development Project (Financed by the Technical Assistance Special Fund)

Prepared by NREM International Inc. Beijing, People’s Republic of China

For Guangxi Zhuang Autonomous Region Government

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. Si

TA 7160-PRC: Guangxi Southwestern Cities Development Project

Submittedto: AsianDevelopmentBank FINAL REPORT Submittedby: NREMInternationalInc. ChinaRepresentativeOffice VOLUME ONE OF THREE: 607ASkyPlaza MAIN REPORT AND CORE APPENDICES No.46DongzhimenwaiDajie Beijing,100027,PRChina 1

NREM International Inc. Suite 1150, World Exchange Plaza 25 O’Connor Street Ottawa, Ontario Canada K1P 1A4 Tel : (613) 755-4058; Fax: (613) 237-9145

Suite 607A, Sky Plaza 46 Dongzhimenwai Dajie Beijing 100027 People’s Republic of China Tel: (86)(10) 5129-2269; (86)10) 8453-0051

30 April 2010 www.nreminternational.com

Mr. Fei Yue Principal Urban Development Specialist East Asia Department Asian Development Bank 8 ADB Avenue Mandaluyong City 1550 Metro Manila Philippines

Subject: Final Report for TA No. 7160-PRC, Guangxi Southwestern Cities Development Project

Dear Mr. Fei:

Enclosed please find three copies of the Final Report for TA 7160-PRC: Guangxi Southwestern Cities Development Project. Please be advised that an additional three copies will be sent to the Executing Agency, the Guangxi Development and Reform Commission.

It has been a great pleasure to work with you and your team on this important and interesting project.

Yours faithfully, NREM INTERNATIONAL INC.

Zhizhong Si, PhD Project Director

Encl.: Final Report c.c.: Guangxi Development and Reform Commission

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ACKNOWLEDGEMENT

The PPTA Consultants wish to extend our sincere appreciation to the Governments of Guangxi Zhuang Autonomous Region, Fangchenggang Municipality, Chongzuo Municipality and Baise Municipality for their tremendous support to the successful execution of the PPTA. Special thanks go to the autonomous regional and municipal Project Management Offices and Project Implementing Companies for their able coordination. We are grateful to the technical institutions, who prepared the feasibility study reports, environmental impact assessments, resettlement plans, social and poverty reduction strategy and ethnic minority development plan, for their cooperation in answering our endless questions and information requests and in incorporating our recommendations in the project design documents.

Last but not the least, we wish to thank the ADB project team headed by Mr. Fei Yue, the ADB Mission Leader, for their guidance and support.

CURRENCY EQUIVALENTS (As of 1 September 2009)

Currency Unit – yuan (CNY) CNY1.00 = $0.1467 $1.00 = CNY6.82

WEIGHTS AND MEASURES

km2 – square kilometer m2 – square meter

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.

(ii) In this report, “$” refers to US dollars.

ABBREVIATIONS

ADB – Asian Development Bank ADTA – Advisory technical assistance AP – Affected persons ASEAN – Association of South East Asian Nations BDI – Baise Development Investment Company Limited BGEDZ – Beibu-Gulf Economic Development Zone BMG – Baise Municipal Government CAFTA – China-ASEAN Free Trade Area CUCIC – Chongzuo Urban Construction Investment Company Limited CMG – Chongzuo Municipal Government CNY – Chinese yuan DRB – Development and reform bureau DRC – Development and reform commission EA – Executing agency EIA – Environmental impact assessment EIRR – Economic internal rate of return EMDP – Ethnic minority development plan EMP – Environmental management plan FPDUCIC – Fangchenggang City Port District Urban Construction Investment Company Limited FMG – Fangchenggang Municipal Government FYP – Five-year plan GBGEZ – Guangxi Beibu Gulf Economic Zone GDP – Gross domestic product GMS – Greater Mekong Subregion GPMO – Guangxi Project Management Office GZAR – Guangxi Zhuang Autonomous Region

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GZARG – Guangxi Zhuang Autonomous Region Government HDI – Human Development Index IA – Implementing agency ICB – International competitive bidding IDC – Interest during construction LIBOR – London interbank offered rate MDG – Millennium Development Goal NCB – National competitive bidding O&M – Operation and maintenance PIC – Project Implementing Company PLG – Project leading group PMO – Project management office PPMS – Project Performance Monitoring System PPTA – Project preparatory technical assistance PRC – People’s Republic of China PSB – Public security bureau RIB – Resettlement information brochure RP – Resettlement plan SEIA – Summary environmental impact assessment SOE – Statement of expenditure SPRSS – Summary of poverty reduction and social strategy TA – Technical assistance WF – Women’s federation WTO – World Trade Organization

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CONTENTS

VOLUME ONE: MAIN REPORT AND CORE APPENDICES

LETTER OF SUBMISSION CURRENCY EQUIVALENTS WEIGHTS AND MEASURES ABBREVIATIONS LIST OF TABLES LIST OF CORE AND SUPPLEMENTARY APPENDICES

1. INTRODUCTION 1

1.1 Background 1 1.2 Scope of the TA 1 1.3 Organization of the Report 1

2. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 3

2.1 Performance Indicators and Analysis 3 2.2 Analysis of Key Problems and Opportunities 3

3. THE PROPOSED PROJECT 7

3.1 Impact and Outcome 7 3.2 Outputs 7 3.3 Special Features 8 3.4 Project Investment Plan 8 3.5 Financing Plan 9 3.6 Implementation Arrangements 10

4. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 15

4.1 Benefits and Impacts 15 4.2 Financial Analysis and Financial Management Assessment 15 4.3 Economic Aspects 16 4.4 Social Dimensions 16 4.5 Environmental Aspects 18 4.6 Project Risks and Mitigation Measures 18

5. ASSURANCES 20

CORE APPENDICES

VOLUME TWO: SUPPLEMENTARY APPENDICES VOLUME THREE: PROJECT MAPS

LIST OF TABLES

Table 1: Reporting Schedule ...... 1 Table 2: Project Investment Plan ...... 9 Table 3: Financing Plan ...... 10

LIST OF CORE AND SUPPLEMENTARY APPENDICES

CORE APPENDICES

1. Sector Analysis: Development Context of Guangxi 2. External Assistance 3. Design and Monitoring Framework 4. Financing Plan 5. Flow of Funds and Onlending Arrangements 6. Implementation Arrangements 7. Implementation Schedule 8. Procurement Plan 9. Outline TOR for Consulting Services 10. Summary Financial Analysis 11. Summary Economic Analysis 12. Summary Resettlement Plan 13. Summary Poverty Reduction and Social Strategy 14. Gender Action Plan

SUPPLEMENTARY APPENDICES

A. Sector Analysis – Development Context: Western Development Strategy and GMS Program B. Sector Analysis – Urbanization in China C. Sector Analysis – Regional Cooperation D. Sector Analysis – Urban Transport E. Sector Analysis – Climate Change in Guangxi and Project Cities F. Sector Analysis – Urban Development in Fangchenggang G. Sector Analysis – Urban Development in Baise H. Sector Analysis – Urban Development in Chongzuo I. Technical Analysis of Engineering Feasibilities F. Sector Analysis: Urban Transport Analysis G. Sector Analysis: Climate Change in Guangxi H. Detailed Financial Analysis I. Technical Analysis of Engineering Feasibilities J. Detailed Financial Analysis K. Detailed Financial Management Assessment L. Detailed Economic Analysis M. Institutional Analysis N. Summary Environmental Impact Assessment O. Poverty and Social Assessment

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xv ADB TA 7160-PRC: Guangxi SW Cities Development Project

1. INTRODUCTION

1.1 Background

1. During the country programming review conducted in December 2007, the Government (the Government) of the People’s Republic of China (PRC) requested the Asian Development Bank (ADB) to provide lending support for Guangxi Southwestern Cities Development Project (the Project)1. A project preparatory technical assistance (PPTA) was approved by ADB to help the Government prepare the Project to meet ADB policy, operational, and loan processing requirements. Through the competitive bidding process, NREM International Inc. (Canada) was selected as the PPTA Consultants for the preparation of the Project. The contract negotiations were concluded on 16 April 2009. The Notice to Proceed was received on 4 May 2009.

2. As the Final Report, this document contains a set of project documents, entailing a full set of analyses and designs.

1.2 Scope of the TA

3. The expected outcome of the PPTA is the design of the Project that is agreed upon by the ADB and the Governments of the PRC, the Guangxi Zhuang Autonomous Region, Fangchenggang Municipality, Chongzuo Municipality and Baise Municipality, and is suitable for ADB lending support.

4. The reporting schedule and report submission dates are shown in Table 1.

Table 1: Reporting Schedule Contractual Report Reporting Schedule Submission Date Inception Report 10 June 2009 10 June 2009 Interim Report 11 September 2009 11 September 2009 Draft Final Report 4 November 2009 4 November 2009 Final Report 31 January 2010 30 April 2010

1.3 Organization of the Report

5. This Final Report has three volumes. The first volume contains the main report and core appendices; the second volume the supplementary appendices; and the third volume project maps.

1 The original title was “Guangxi Border Cities Development Project”. During the September 2009 TA Review Mission, it was renamed “Guangxi Southwestern Cities Development Project”.

1 ADB TA 7160-PRC: Guangxi SW Cities Development Project

2. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES

2.1 Performance Indicators and Analysis

6. PRC has made significant progress since its adoption of the policy for reform and economic opening in 1978. Over the past 30 years, the economy has grown at an average rate of more than 9% annually. The country has already reached the Millennium Development Goal (MDG) of cutting the 1990 poverty rate by half, and is on track to reach other MDGs. However, the country’s gross domestic product (GDP) on a per-capita basis is still low. Measured by the new international poverty standard of $1.25 per day (using 2005 Purchasing Power Parity for the PRC), about 254 million people consume less than $1.25 per day, making the PRC home to a significant portion of the world’s total poor. Furthermore, the disparity between the urban and rural areas as well as between the coastal provinces in the east and the interior provinces and autonomous regions in the west has widened. The less developed interior provinces and autonomous regions in western PRC have imposed a great challenge for the Government to create balanced and equitable development within the country. At the same time, the existing disparity has provided a strong incentive and motivation for the people and local governments in these western provinces and autonomous regions to accelerate economic growth. The less developed provinces/autonomous regions turn out to be a new engine for the sustained high growth in the PRC for many years to come.

7. To help the 12 less-developed provinces and autonomous regions in western PRC to accelerate economic development, the Government launched in 1999 the National Strategy for Development of the West (NSDW). By the end of 2007, CNY1.3 trillion (or more than $190 billion at the current exchange rate) had been invested by the Government for development projects in the western PRC under NSDW. Guangxi is one of the 12 less- developed provinces and autonomous regions targeted by the Government for support under NSDW. With support from the Government, Guangxi enjoyed an accelerated economic growth rate of 11.9% from 2001-2008, which is 1.7% higher than the national average over the same period. Despite the global economic crisis, Guangxi maintained a growth rate of 12.8% for 2008, which is 3.8% higher than the national average of 9.0% for the year.

2.2 Analysis of Key Problems and Opportunities

8. Background. In spite of the fast growth achieved, Guangxi remains one of the poorest provinces/autonomous regions in the PRC. On a per capita GDP basis, Guangxi ranked as 25th out of the 31 provinces and autonomous regions in the PRC. Per capita GDP in Guangxi is only at 65.6% of the national average. Out of 72 counties in Guangxi, 49 counties are classified either as national poverty counties (28) or regional poverty counties (21). All the Project Cities are surrounded and dominated by poverty counties. Urban development in the Project Cities is envisaged to play an important role in creating non- agriculture jobs for the rural poor in the poverty counties, and in improving the links of the local economy with national and international markets for greater development opportunities.

9. Guangxi and the Project Cities have unique comparative advantages. Guangxi is the only western province/autonomous region, which has both deepwater sea ports and land ports at the international borders. At the national level, Guangxi serves as the gateway for many land-locked western provinces to the international market. With a decade of intensive investment for construction of transport infrastructure under NSDW, Guangxi has built up a well developed expressway system that directly connects Yunnan and Guizhou, two land- locked and less developed western provinces, with sea ports at the Beibu Gulf and with the land ports at the international border with Viet Nam. All the Project Cities are strategically

3 ADB TA 7160-PRC: Guangxi SW Cities Development Project located at the important intersection of the transport corridors in Guangxi with (i) Fangchenggang City serving as a multimodal transportation hub to connect the expressway and railway with deepwater sea ports, (ii) Chongzuo City serving as a regional logistics center under the Greater Mekong Subregion (GMS) transport corridor to facilitate international trade with GMS countries through the land port at the border with Viet Nam, and (iii) Baise City serving as a transport corridor nodal city in the inter-province highway and expressway system to link Yunnan province and Guizhou province with the transport corridor in Guangxi. Given their strategic locations, Guangxi and the Project Cities are at the center of a number of regional cooperation endeavours including GMS economic cooperation promoted by ADB, and PRC-Association of South East Asian Nations (ASEAN) Free Trade Area which will reduce the tariff to zero for trade of more than 7,000 goods between the PRC and ASEAN countries starting from 2010.

10. Intensified economic integration will require rapid urban development in Guangxi and the Project Cities. Rapid urbanization has taken place at an unprecedented scale in PRC over the past 30 years along with sustained high growth and continued economic transformation throughout the country. The number of cities increased from 176 in 1978 to 655 in 2008. Urban population expanded by 10 million per year during the 1980s. The average growth rate accelerated to 15 million per year in the 1990s. Since 2001, the growth of the urban population hit 20 million per year. Despite the rapid growth of the urban population, the urbanization rate of PRC remains moderate at about 45.7% at the end of 2008, far below the average of the middle-income countries.

11. Urbanization in Guangxi has been below the national average. At the end of 2005, the urbanization rate in Guangxi was 33.6%, compared with the national average of 42%. It is envisaged that the urbanization rate in Guangxi will continue along with the ongoing economic transformation promoted and facilitated by the massive investment for infrastructure under NSDW and economic cooperation and integration through GMS economic cooperation and other regional cooperation initiatives with ASEAN countries. Guangxi has rich natural endowment in terms of deepwater sea ports and mineral resources. Twelve mineral reserves found in Guangxi are ranked as the national largest verified reserves of the country. The rich natural resources together with the sophisticated infrastructure system and its strategic location have provided great potential for development of non-agriculture economy, which is the driving force for continued urbanization. A sector analysis of the development context of Guangxi is in Core Appendix 1.

12. Rationale. The Project is proposed by the Government as part of support provided by the Government for accelerated urbanization and economic development in Guangxi. The Project is consistent with the Country Partnership Strategy for PRC emphasizing the operational focus of ADB on support of urban infrastructure, balanced regional development, urban environmental improvement, and regional integration.

13. The Project is a natural extension of previous ADB lending support for transport projects in Guangxi—Fangcheng Port Project 1 to upgrade the sea port capacity in Fangchenggang City, Guangxi Roads Development Project2 to build an expressway to link the PRC expressway system from Nanning to Viet Nam via Chongzuo City, Guangxi Roads Development II3 to build an expressway link between Nanning—the capital city of Guangxi and the expressway system of Yunnan province at Baise City, and Western Guangxi Roads Development4 to link the expressway systems of Guangxi and Guizhou provinces through Baise City. The Project was developed in parallel to a regional policy and advisory technical

1 Approved in 1996. 2 Approved in 2001. 3 Approved in 2004. 4 Approved in 2007 and ongoing.

4 ADB TA 7160-PRC: Guangxi SW Cities Development Project assistance for Developing Cross-Border Economic Zones between the PRC and Viet Nam5 which will support, among others, the development of a cross-border economic zone between Viet Nam and the PRC in Chongzuo City. The Project will also lead to another urban development project proposed by the Government for Guangxi—Guangxi Beibu Gulf Cities Development Project (PPTA approved in 2009 and ongoing) which will provide continued support for urban development in Fangchenggang City and two other sea port cities in Guangxi. It is envisaged that with urban development of the nodal cities along the transport network established in Guangxi, the Project will help turn the transport corridors built with ADB assistance into economic corridors for both the PRC and GMS countries.

14. Dialogue. During the rapid urbanization process, many cities in the PRC tend to concentrate their public investment first on construction of physical urban infrastructure, while leaving system operation and provision of municipal service for secondary consideration. At the project level, preference to mechanical engineering approach remains dominant in many cities despite the people-centered principle advocated by the Government for development of liveable and environment-friendly cities in the context of sustainable development. Against this general background, during loan processing, ADB and Guangxi Zhuang Autonomous Region Government (GZARG) conducted a continuous and extensive dialogue, particularly on two issues that have long-term implications on urban development in the Project Cities.

15. First, ADB emphasized the importance of developing an integrated and sustainable urban transport system to integrate the fast growing motorized transport with an effective public urban transport system and the non-motorized transport along with continued expansion of the urban road system in the Project Cities. GZARG and the municipal governments of the Project Cities welcome the advice provided and the international best practices introduced by ADB, and have requested ADB to include a special capacity development sub-component under the Project to strengthen their capacity to plan and implement an integrated and sustainable urban transport system in the Project Cities.

16. In determining the design concept of the two environmental improvement components under the Project, ADB introduced the ecosystem rehabilitation concept to replace the original engineering approach proposed for the Project, which relies mainly on construction of concrete protection dykes along the coast or lake banks for environmental protection or improvement. For instance, with the new design concept introduced by ADB, the coastal area under the Project in Fangchenggang City will now be upgraded and protected by a carefully designed buffer zone comprising natural mangrove, protection dyke, and a public park with environmental education facility, which will provide for the Project City not only protection against tidal flooding but also allowance to accommodate potential climate change implications.

17. External Assistance Coordination. As a less-developed autonomous region in the western PRC, Guangxi is a recipient of external assistance provided by many multilateral or bilateral external funding agencies. As in any other provinces/autonomous regions in the PRC, the coordination of external assistance in Guangxi has been coordinated by the Government at the central level through aligning the operation programs of various external funding agencies with the national development strategy set in the Five Year Plan (FYP) taking into account the institutional expertise and advantages of each funding agencies. Within this general operation framework, coordination has been conducted by the resident missions or the concerned project teams among the external funding agencies in the PRC on a frequent and regular basis. A list of the projects funded by the external funding agencies in Guangxi is in Core Appendix 2.

5 Approved in 2009 and ongoing.

5 ADB TA 7160-PRC: Guangxi SW Cities Development Project

18. Lessons Learned. ADB-financed urban development and urban environmental improvement projects in the PRC generally perform well. Urban development requires an integrated and multi-sector approach. In the PRC, urban development activities in a city are guided by a comprehensive city development master plan prepared for a time frame of 15– 20 years, which is updated from time to time as appropriate. Guided by such a city master plan, holistic urban planning and integrated public investment may be effective instruments in strengthening urban sustainability, improving human settlement, and improving urban environment. Continued investment on physical infrastructure for urban development would need, however, to be accompanied by improved capacity of the city government to design, develop, and manage the associated operation or service delivery system as discussed and agreed upon between ADB and GZARG under the Project.

19. Land acquisition and resettlement is a challenge to many urban development projects that may affect loan processing and implementation. Lessons from urban development projects in the PRC indicate that ADB’s resettlement safeguard policy and operational requirements should be introduced as a sample of international good practice to help the concerned municipal government improve its own resettlement safeguard system, rather than as a unilaterally imposed operational requirement. This approach has ensured full cooperation of GZARG and the municipal governments of the Project Cities in preparing the resettlement plans for the Project in line with the “people-centered” principle advocated by the Government and in conformity with ADB's Involuntary Resettlement Policy.

20. ADB evaluation studies have highlighted relevant lessons for loan processing, including the need to (i) encourage broad reforms, (ii) ensure counterpart funding for operation and maintenance, (iii) consult the public and involved community in project design, (iv) address the resettlement issues at the early stage of processing, and (v) avoid start-up delays. These lessons have been considered in policy dialogue with the Government and the GZARG, and are incorporated in the design of the proposed Project.

6 ADB TA 7160-PRC: Guangxi SW Cities Development Project

3. THE PROPOSED PROJECT

3.1 Impact and Outcome

21. The impact of the Project will be improved living conditions in the three Project Cities and their increased ability to participate in and benefit from regional economic cooperation and integration. The outcome of the Project will be upgraded and integrated urban infrastructure and urban environment that will help the Project Cities meet their long-term urban development needs. The Design and Monitoring Framework is presented in Core Appendix 3.

3.2 Outputs

22. The Project will have six investment components and one capacity development component jointly generating the following outputs:

(i) Fangchenggang Road Network and Related Municipal Infrastructure. Under this component, the Project will: (a) build 27.6 kilometers (km) of urban roads including one bridge with a length of 205 meters (m); and (b) related municipal infrastructure, including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping.

(ii) Fangchenggang Coastal Protection and Upgrading. Under this component, the Project will build: (a) 9.15 km of coastal dykes, (b) a 2.5- hectare (ha) mangrove public education square, and (c) related auxiliary facilities.

(iii) Chongzuo Road Network and Related Municipal Infrastructure. Under this component, the Project will build: (a) 13.0 km of urban roads; and (b) related municipal infrastructure, including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping.

(iv) Chongzuo Shuikou Lake Environmental Improvement. Under this component, the Project will: (a) clear the garbage, and fish and duck farming on the lake, (b) dredge the surface area of 78 ha, (c) remove 7.85 km of coffer weirs that block water flow, (d) rehabilitate 2.62 km of lake banks, (e) build 1.57 km of lakeside pedestrian paths, and (f) control pollution for lakeside point and non-point sources.

(v) Baise Road Network and Related Municipal Infrastructure. Under this component, the Project will build: (a) 3.69 km of urban roads; and (b) related municipal infrastructure, including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping.

(vi) Baise Longwang Bridge. Under this component, the Project will build: (a) the Longwang bridge with a length of 563 m; and (b) the related municipal infrastructure, including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping.

7 ADB TA 7160-PRC: Guangxi SW Cities Development Project

technical support including relevant trainings to GZARG and the Project Cities to ensure that the Project will be implemented in full compliance with ADB policy and operational requirements.

3.3 Special Features

23. The Project has three special features. First, the Project Cities are located at strategic positions on the northeast economic corridor under the GMS regional cooperation framework. Rapid development of the urban economy in these corridor cities is the driving force in realizing the conversion from transport corridors under GMS to economic corridors, thus promoting and strengthening the economic integration of Guangxi not only with the neighbouring land-locked provinces of Yunnan and Guizhou, but also with the GMS countries and ASEAN countries. Investment in urban development of these corridor cities will help make the Project Cities better prepared to participate in and benefit from regional economic cooperation.

24. While providing support for construction of physical infrastructure in the Project Cities, the Project also includes one capacity development subcomponent to focus on improving the capacity of GZARG and the Project Cities to carry out a holistic urban development approach to plan and implement an integrated and sustainable transport system and service delivery mechanism. This will include the technical support in the fields of planning and provision of public transport services; planning and development of non- motorized transport (pedestrian and bicycle) facilities; development of a multi-modal transportation system; improvement in traffic management; holistic design arrangement for urban transport covering public transport, non-motorized transport, road safety, parking, traffic control and management, urban utilities, and street environment; and operation and maintenance of the road network.

25. Thirdly, the Project will combine environmental improvement with infrastructure construction by two special interventions: (i) strengthening the protection against tidal wave attacks in Fangchenggang City and (ii) rehabilitating the water quality of Shuikou Lake in Chongzuo City by control of the pollution from the point and non-point sources around the lake and improving the ecosystem to build a man-made urban wetland. Among the two environment-related interventions, the Fangchenggang coastal protection and upgrading component may have a demonstration effect for many coastal cities under similar geographic and climatic conditions, given the innovative design concept adopted that combines the measures for ecosystem rehabilitation, environmental protection, and improvement of public awareness and climate change resilience under one project in a coherent manner.

3.4 Project Investment Plan

26. The total cost of the Project is estimated at $305.63 million, including taxes and duties of $9.64 million. The total cost includes physical and price contingencies, and interest and other charges during implementation. Table 2 below provides the project investment plan for the Project.

8 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table 2: Project Investment Plan ($ million)

Item Amounta A. Base Costb Fangchenggang City Urban Road Network and Related Municipal 88.47 Infrastructure Coastal Protection and Upgrading 26.24 Chongzuo City Urban Road Network and Related Municipal 50.36 Infrastructure Shuikou Lake Environmental Improvement 11.11 Baise City Urban Road Network and Related Municipal Infrastructure 45.12 Longwang Bridge 25.41 Capacity Development 2.80 Subtotal (A) 249.50 B. Contingenciesc 31.84 C. Financing Charges During Implementationd 24.29 Total (A+B+C) 305.63 a Includes taxes and duties of $9.64 million. b In mid-2009 prices. c Physical contingencies computed at 10% of base cost for civil works. Price contingencies computed by expenditure based on annual domestic and foreign price inflation. Foreign exchange fluctuations are estimated using a purchasing power parity model of adjustment. d Includes interest and commitment charges. Interest during construction has been computed at the 5-year forward London inter-bank offered rate plus a spread of 0.2%. Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

3.5 Financing Plan

27. The Government has requested a loan of $150.0 million from ADB’s ordinary capital resources to help finance the Project. The loan will have a 25-year term, including a grace period of 5 years, an interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, and such other terms and conditions set forth in the draft loan and project agreements. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility on the basis of these terms and conditions, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB.

28. The ADB loan will finance 49.08% of the project cost, including the base cost, the financial charges during implementation, and the taxes and duties associated with the project expenditures. The Project Cities and domestic banks (i.e. China Development Bank, China Agriculture Development Bank, and Industrial and Commercial Bank of China) have committed to provide domestic counterpart funds to finance the rest of the project cost. The financing plan for the Project is summarized in Table 3, with details provided in Core Appendix 4.

29. The Borrower of the loan is the PRC. The Government will relend the loan proceeds to GZARG, which will onlend the loan proceeds to the Project Cities in accordance with the financing plan. All the relending and onlending will be arranged on the same terms and conditions as those of the ADB loan. The Project Cities will assume the foreign exchange and interest variation risks of the ADB loan. The chart for relending and onlending arrangements is in Core Appendix 5.

9 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table 3: Financing Plan ($ million)

Source Total % Asian Development Bank 150.00 49.08 Fangchenggang Municipal Government 28.72 9.40 Chongzuo Municipal Government 33.54 10.97 Baise Municipal Government 17.70 5.79 Domestic Banks a 75.68 24.76 Total 305.63 100.00 a Domestic Banks include: China Development Bank, China Agriculture Development Bank, and Industrial and Commercial Bank of China. Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

3.6 Implementation Arrangements

A) Project Management

30. GZARG will be the executing agency (EA) of the Project. GZARG has assigned the deputy governor to provide overall guidance and support for the preparation and implementation of the Project. An inter-departmental project management office at the regional government level (GPMO) has been established in the Guangxi Development and Reform Commission (GDRC) to carry out the day-to-day activities of the Project and provide coordination support for preparation and implementation of the Project across the Project Cities. In addition to GDRC, GPMO has Guangxi Finance Bureau, Guangxi Construction Bureau, Guangxi Environmental Protection Bureau, Guangxi State Land Resources Bureau, and the municipal government of the Project Cities as its members.

31. Fangchenggang municipal government (FMG), Chongzuo municipal government (CMG), and Baise municipal government (BMG) will be the implementing agencies (IAs) of the Project responsible for implementation of the relevant components in each individual Project City. The IA will be the end-user of the loan from ADB, and will be responsible for repayment of the portion of the loan used for the city. At the Project City level, FMG, CMG, and BMG have each established an inter-agency municipal project management office (MPMO) respectively. FMG, CMG, and BMG have each assigned a vice mayor to provide overall guidance and coordination support for the MPMO, which is established in the municipal development and reform commission of each city with the municipal financial bureau, city construction bureau, city state land resources bureau, and the concerned PIC as members. The MPMOs will be responsible for undertaking day-to-day activities of the Project and providing coordination support for preparation and implementation of the relevant components of the Project within their cities.

32. Furthermore, FMG has designated Fangchenggang City Port District Urban Construction and Investment Company (FPDUCIC)—a limited liability company wholly owned by the Port District Government under Fangchenggang City to be the project implementation company (PIC) to implement the two investment components in Fangchenggang City. CMG has designated Chongzuo City Urban Construction and Investment Company (CUCIC)—a limited liability company wholly owned by CMG to be the PIC to implement the two investment components in Chongzuo City. Similarly, BMG has designated Baise City Development Investment Company (BCDIC) to be the PIC to implement the two investment components in Baise City.

10 ADB TA 7160-PRC: Guangxi SW Cities Development Project

33. FMG, CMG, and BMG will each enter into a project implementation agreement with their respective PICs for implementation of the relevant project components in each individual Project City. Those PICs will act as an agent for the concerned municipal government to carry out day-to-day implementation of the relevant components under the Project, including conducting procurement of goods and works and consulting services. The project implementation agreement will include the requirements and obligations stipulated in the Loan and Project Agreements applicable to the IAs and PICs.

34. GPMO will be responsible for implementation of the capacity development component of the Project. A chart showing the implementation arrangement is in Core Appendix 6.

B) Implementation Period

35. The Project will be implemented over a 5-year period from January 2010 to December 2014. The chart showing implementation schedule is in Core Appendix 7.

C) Procurement

36. All procurement to be financed under the ADB loan will be carried out in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Procurement capacity assessment was conducted for GZARG, FMG, CMG, BMG, and PICs during loan processing. As requested by the regulations of the Government1, GZARG has engaged CMC International Tendering Company as its procurement agent to handle the loan-funded procurement activities under the Project. Contracts for goods estimated to exceed $1.0 million and contracts for works estimated to exceed $10.0 million will be procured using international competitive bidding (ICB) procedures. Contracts for goods and for works estimated to cost less than the above ICB threshold values, but more than $100,000, will be procured on the basis of national competitive bidding (NCB) procedures in accordance with the PRC Tendering and Bidding Law (1999), subject to modifications agreed upon with ADB. Contracts for goods and works estimated to cost $100,000 or less will be procured using shopping procedures.

37. For contracts to be procured through ICB procedures, procurement documents including invitation for bids, invitation for prequalification, draft prequalification documents, draft bidding documents, prequalification and bidding evaluation reports are to be submitted to ADB for prior review and approval. For contracts to be procured through NCB procedures, the first English language version of the procurement documents prepared by each of the Project Cities are to be submitted to ADB for prior review and approval regardless of the estimated contract amount. The ADB-approved procurement document should then be used as a model for all the subsequent NCB contracts to be funded by ADB for the component in the concerned Project City under the Project. ADB will review the bid evaluation report and award of contract on a post-review basis. For contracts to be procured through shopping procedures, ADB will review and approve the award of contract on a post-review basis. Detailed procurement plan of the Project is in Core Appendix 8.

D) Consulting Services

38. The Project will provide 26 person-months of international consulting services and 115 person-months of national consulting services to support the capacity development for

1 In the PRC, the project executing agency of an international financial institution funded project is requested to engage a certified international tendering company as its procurement agent to handle the loan-funded procurement operations. The procurement agent is engaged through national competitive procedures. The service is normally financed by domestic funding sources. Qualifications of the certified international tendering companies are subject to the licensing requirements of the Government.

11 ADB TA 7160-PRC: Guangxi SW Cities Development Project

GZARG and the Project Cities. The consulting services will cover two general areas: (i) to provide project management support for GPMO, MPMOs, and PICs to ensure that project implementation will comply with ADB policy and procedural requirements; and (ii) to support the capacity development in GZARG and the Project Cities in the field of planning and implementation of a sustainable and integrated transportation system and service delivery mechanism along the development of urban infrastructure. The consulting services will be recruited in line with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Most of the consulting services will be engaged through a consulting firm using quality-and-cost based selection method at a quality to cost ratio of 80:20 with full technical proposal procedures. To ensure timely implementation of the Project, four person-months of national consulting services in the fields of procurement/project management (two person- months) and resettlement (two person-months) may be engaged in advance on an individual basis separately from the consulting firm. This arrangement will ensure timely provision of technical support for GPMO and MPMOs to facilitate their initial operation during project start-up, and timely updating of the resettlement plans that is one condition prior to awarding civil works contracts. Outline terms of reference for consulting services are in Core Appendix 9. In addition, GZARG has requested that the external monitoring services required by ADB safeguards policy to monitor the implementation of environmental management plans and implementation of resettlement plans be financed under the loan through two separate national consulting service contracts to be recruited following ADB's Guidelines on Use of Consultant.

E) Advance Contracting and Retroactive Financing

39. In order to expedite project implementation, GZARG and the Project Cities have requested for advance contracting and retroactive financing to cover the procurement of a number of works contracts and recruitment of consulting services. As indicated in the attached procurement plan, the works contracts that seek advance contracting include (i) contract for construction of roads #4 and #6, contract for construction of Yuzhouping road, contract for construction of roads #2, #3, and #5, contract for construction of east section of coastal dyke in Fangchenggang City; (ii) contract for construction of sub-grades of Chengnan #9 road and Liancheng road, contract for construction of sub-grades of Beiwei #2 road Zhongyi road, and contract for construction of sub-grades of Shijinglin road in Chongzuo City; and (iii) contract for construction of Chengnan ring road and the contract for construction of Longwang bridge in Baise City. GZARG has also requested that the consulting service be recruited through advance contracting, in accordance with ADB's Guidelines on the Use of Consultant. For contracts procured through advance contracting, GZARG and the Project Cities have requested ADB for retroactive financing.

40. Given the advanced preparation status of the highly prioritized components under the Project, Management approval of advance contracting and retroactive financing will be requested. GZARG and Project Cities have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project. GZARG and the Project Cities have further understood that, subject to ADB approval, the amount to be retroactively financed will not exceed 20% of the loan amount. The expenditures for retroactive financing must have been incurred before loan effectiveness, but not earlier than 12 months before the loan agreement is signed.

F) Anticorruption Policy

41. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the GZARG, Project Cities, GPMO and MPMOs. Consistent with its commitment to good governance, accountability and transparency, ADB will reserve the right to investigate directly any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy

12 ADB TA 7160-PRC: Guangxi SW Cities Development Project will be included in the loan covenants and the procurement documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the GZARG, Project Cities, PICs, and all the contractors, suppliers, consultants, and other service providers as they relate to the Project. For the Project, GZARG and the Project Cities will undertake the following anticorruption actions:

(i) to involve the agencies responsible for oversight of the PICs, such as the municipal development and reform commission and the city construction bureau of the concerned Project City, in bidding and construction to enhance construction quality control and supervise effective work; (ii) to introduce a dual-signing system in which the civil works contract winner also signs an anticorruption contract with the employer; (iii) to periodically inspect the contractor’s activities related to fund withdrawals and settlements; (iv) to engage a project management consultant to support the GPMO and MPMOs to ensure good governance, accountability, and transparency in project implementation; (v) to consult with the concerned central Government agencies to update the local laws and regulations on local and corporate governance and anticorruption measures; and (vi) to disclose the information on contract awards on the project website of the GZARG and in the audit report on the financial statements and project accounts following the relevant laws and regulations of PRC.

G) Disbursement Arrangements

42. ADB loan proceeds will be disbursed in accordance with the procedures set out in ADB’s Loan Disbursement Handbook (2007, as amended from time to time). To facilitate project implementation through timely release of loan proceeds, the GZARG will establish an imprest account promptly after loan effectiveness at a commercial bank acceptable to ADB.2 The Guangxi Finance Bureau will administer the imprest account. The initial amount to be deposited in the imprest account will not exceed the estimated expenditures for the succeeding 6 months to be funded from the imprest account, or 10% of the loan amount, whichever is lower. To expedite flow of funds and simplify the documentation process, the ADB statement-of-expenditure procedure will be used for liquidation and replenishment of the imprest account, and for reimbursement of eligible expenditures not exceeding $100,000 per individual transaction. The payments in excess of the statement-of-expenditure ceiling will be reimbursed, liquidated, or replenished based on full supporting documentation. The civil works contracts under the Project will be paid using direct payment procedures for such expenditures.

H) Accounting, Auditing, and Reporting

43. Project Cities and PICs will keep records to allow the identification of goods and services financed from the loan proceeds, following accounting principles and practices prescribed by the PRC Accounting Law. The law requires financial statements to be prepared following internationally recognized accounting standards. PICs will set up and maintain separate project accounts and records. The financial statements of the project accounts and the annual corporate financial statement for PICs will be subject to external audit by the Guangxi Audit Office and the China National Audit Office. The audit will be carried out in accordance with the audit regulations of the PRC, and will meet ADB requirements. The audit reports should include a separate auditor’s opinion on the use of the

2 The bank charges on the imprest account will be financed from the proceeds of the loan.

13 ADB TA 7160-PRC: Guangxi SW Cities Development Project imprest account and statement of expenditures. PICs' annual audited financial statements and audited project accounts will be submitted to ADB not later than 6 months after the end of the fiscal year throughout the implementation period.

44. The GZARG and Project Cities will submit reports and information to ADB concerning the use of the loan proceeds, project implementation, and performance of PICs. These reports will include (i) quarterly progress reports on project implementation; (ii) annual reports; and (iii) a project completion report, which should be submitted not later than 3 months after the completion of the project facilities. Through the preparation and submission of quarterly progress reports, the project management office (PMO) will report the progress made, problems encountered during the period under review, steps taken or proposed to remedy the problems, the proposed program for the planned project implementation activities, and progress expected in the following quarter.

I) Project Performance Monitoring and Evaluation

45. The project performance monitoring system (PPMS) indicators, their relevance, and monitoring practicalities have been discussed with the GZARG, Project Cities, and PICs during project preparation. The impact indicators, as specified in the design and monitoring framework, will include (i) GDP growth, (ii) per capita income, (iii) urbanization rate, (iv) regional trade, (v) avoided loss and damages of life and property from coastal flooding, and (vi) improvement in environmental quality. At the start of project implementation, the Project Cities and PICs, with support from the project implementation consultant, will develop comprehensive PPMS procedures to generate data systematically on project outcome, inputs and outputs of each component, as well as the agreed-upon employment indicators, environmental monitoring indicators, and resettlement plan implementation indicators. These will be used to measure the project impact, outcome, output, and compliance with ADB safeguard policy requirements. The GPMO will (i) refine the PPMS framework, (ii) establish the baseline, (iii) confirm achievable targets, (iv) finalize the monitoring and recording arrangements, and (v) establish data collection systems and reporting procedures no later than 6 months after loan effectiveness.

J) Project Review

46. ADB and the Government will review project implementation jointly at least once a year. In addition, ADB and the Government will undertake a comprehensive midterm review 2 years after the start of project implementation. This midterm review will include a detailed evaluation of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity-building measures. Feedback from the PPMS activities will be analyzed.

14 ADB TA 7160-PRC: Guangxi SW Cities Development Project

4. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS

4.1 Benefits and Impacts

47. By improving the urban transport and flood control infrastructure services, environmental quality and capabilities in integrated urban planning and transport planning, the Project will contribute to sustained economic growth, coordinated urbanization and industrial growth, creation of job opportunities, enhanced ability to participate in and benefit from regional cooperation, and above all, improved quality of life the beneficiary population.

48. The Project will directly benefit more than 606,000 urban people in the Project Cities through promoting integrated and coordinated development urban infrastructure and improving urban environment. Sustained urban development of these nodal cities of the regional transport network will provide the critical link to the national and international markets for the people in the surrounding poverty counties, and create non-agriculture employment opportunities in the urban areas.

49. The technical assistance under the capacity building and institutional strengthening component will provide the three Project cities with international and national experiences and best practices in integrated urban planning, integrated transport planning, financial management and project management. The project cities will be able to learn from the success and lessons learned world-wide as they embark on a path of rapid industrialization and urbanization from small-sized to medium-sized cities. Through the incorporation of dissemination activities, the knowledge products accumulated world-wide and developed in the three cities will also be of reference to cities in western PRC and throughout the country.

4.2 Financial Analysis and Financial Management Assessment

50. The Project does not have any revenue generating component. Financial analysis has been concentrated on the assessment of the financial impact and management of the municipal government of the Project Cities. Fiscal impact and affordability has been assessed by comparing identified financing sources with the annual funds required for capital expenditures during project implementation, and for operation and maintenance (O&M) and debt service during operation. Projected debt service and incremental O&M costs for the Project Cities have been compared with their relevant annual revenues. The results fall in the range of from 0.1% to 0.5% for Fangchenggang City, 0.4% to 3.0% for Chongzuo City, and 0.2% to 0.8% for Baise City, indicating an acceptable fiscal risk. A summarized financial assessment is in Core Appendix 10.

51. Financial management assessment conducted for the three PICs noted that all the PICs have adequate accounting professionals equipped with computerized financial accounting and reporting system and procedures on flow of accounting, financial, and project physical progress related to their current project activities. All the PICs have clearly defined responsibilities with accountability allocated among different units at different levels of authority within their institutions. According to the audit law of the PRC, the three PICs are currently subject to annual auditing conducted by independent auditors. In general, the financial management assessment has concluded that the current financial management system in the PICs can meet the general requirements of the Government in terms of staffing, accounting, and internal control. The PICs will need technical support to strengthen their capacity to implement the Project in compliance with the policy, operation and procedural requirements of ADB.

15 ADB TA 7160-PRC: Guangxi SW Cities Development Project

4.3 Economic Aspects

52. The economic analysis covers both the Project as a whole, and the investment components located in each individual Project Cities. For the Project as a whole, the analysis covers the macroeconomic context, the sectoral context, the long term development strategies of Guangxi and the Project Cities, and the urban development history and city development master plans of each of Project Cities. For individual investment components, the analysis covers the project rationale, project identification and alternative, least cost analysis, benefits and costs, sensitivity test, and distribution analysis. The economic analysis was conducted in accordance with the Asian Development Bank (ADB) Guidelines for the Economic Analysis of the Projects. It also drew on Technical Note No. 13 for Assessing the Use of Project Distribution and Impact Analysis issued by Economics and Research Department of ADB.

53. Two different approaches have been adopted to conduct economic analysis for the two kinds of investment components: (i) cost and benefit analysis (CBA) for urban roads and related municipal infrastructures, and (ii) land value approach for environmental upgrading/improvement components. Although all basic municipal infrastructure (such as water supply pipelines, drainage system, etc.) will be constructed together with the urban roads under the Project's integrated invention approach,, the economic analysis for the Project has placed its focus on the main function of the infrastructure, i.e. only the function of the urban roads among all the infrastructures to be constructed. This implies that the benefit estimates in the economic analysis tend to underestimate the overall project benefits or the overall EIRR would be higher than those presented in the analysis.

54. For the urban roads to be constructed, economic benefits are calculated in terms of user benefits including reductions in vehicle operating costs, value of travel time, value of accidents, and traffic congestion. Economic costs include the costs for investment and operation and maintenance minus the end value. For the two environmental upgrading/improvement components, land value increases attributable to the relevant investment have been counted as the economic benefits. The baseline results show that economic internal rates of return (EIRR) are 19.5% for Fangchenggang City, 16.1% for Chongzuo City, 15.3% for Baise City, and 17.7% for the Project as a whole.

55. The EIRRs were tested through sensitivity analysis using 25% decrease in economic benefits as the worst case scenario under CBA for the roads components, and a 5-year period of no increase in the land values as the worst case scenario under the land value approach applied for the environmental upgrading/improvement components. Under these very conservative assumptions, the EIRRs are 14.3% for Fangchenggang City, 11.0% for Chongzuo City, 12.4% for Baise City, and 13.0% for the Project as a whole. The Project is considered economically viable. The summary economic analysis is in Core Appendix 11.

4.4 Social Dimensions

A) Land Acquisition and Resettlement

56. Overall the land acquisition and resettlement impact for the project will be significant. The project will acquire 4,550 mu of land permanently, of which 12.38% is classified as farmland. Permanent land acquisition will affect 924 households or 4,474 persons. Temporary acquisition of 586 mu of land will affect 97 households or 349 persons. A total of 508 households will be relocated due to house demolition. Two public institutions and one enterprise with a total of 500 employees and 111 students will be affected. Removal of illegal structures (26,123 square meters [m2]) used for aquaculture will affect the livelihoods of 89

16 ADB TA 7160-PRC: Guangxi SW Cities Development Project households with 725 persons. In addition, associated productive assets, ground attachments, and basic infrastructure facilities will also be affected.

57. ADB requires both internal and external monitoring and evaluation of the implementation of the resettlement plans under the Project. The Project Cities will report implementation progress regularly to GPMO, which in turn will summarize the land acquisition and resettlement progress in the quarterly progress report to ADB. The GPMO will also engage an independent agency to serve as an external monitor who will visit the project sites every 6 months to (i) review resettlement progress and the general welfare of those affected persons, (ii) make recommendations to resolve any issues or problems, and (iii) provide advice to the Project Cities and local officials. The external monitoring will pay special attention to vulnerable groups, including women, the poor, and the ethnic minority groups, to assess whether they have fully regained their standard of living. Monitoring and evaluation reports will be prepared every 6 months during implementation and annually for 2 years after the completion of resettlement. These reports will be submitted simultaneously to ADB, GPMO, and Project Cities, and will be uploaded onto the ADB website. A summary resettlement plan is in Core Appendix 12.

B) Poverty Reduction and Social Benefits

58. Ethnic minorities make up 72.2% of the total population in the direct project area, dominated by Zhuang ethnic group. 81.9% of the ethnic minorities are of the absolute rural poor, 70.2% urban poor, and 47% females. Ethnic minority groups are the primary beneficiaries of the Project. No adverse impacts, other than resettlement, particularly on ethnic minorities have been identified during the poverty and social assessment and consultations. Nonetheless, the Project will have specific actions to ensure that positive benefits and communication are achieved. These include: (i) prioritization of women, vulnerable and ethnic minorities for jobs in the construction and maintenance activities; (ii) use of local languages and graphic signs, where appropriate, for community outreach activities such as those envisioned under the environmental awareness program for the wetland preservation component and; (iii) use of local languages in communication and outreach for the involuntary resettlement consultations and materials. These actions are a part of the Gender Action Plan and resettlement plans, and are included in the assurances. Project performance in these areas will be closely monitored under the PPMS system.

59. The Project will create 10,030 person-years of direct and 26,070 person-years of indirect employment opportunities, with estimated earnings amounting to CNY 104.16 million or $15.52 million from direct employment and CNY 270.82 million or $39.65 million from indirect employment. The EA and IAs have assured that employment priorities will be given to the vulnerable groups including women, poor, and ethnic minorities. A copy of the summary poverty reduction and social strategy is in Core Appendix 13.

C) Gender Benefits

60. The Project is designed to be categorized as Effective Gender Mainstreaming (EGM). Results from the household survey and focus group discussions indicate that women are primarily responsible for cleaning up the interior and exterior of the houses after floods as well as taking care of the sick and old family members, and for households related traveling and socializing activities. Time spent on these activities means less time available for them for other priorities. The Project will have significant benefits for women to reduce the energy, time, and efforts spent by women on these activities, allowing them more actively in income-generating activities, family entertainment or leisure. Women strongly support the Project across all of the components, and they have perceived that the Project will improve their quality of life and create employment and income opportunities for them. The Project has prepared a GAP (Core Appendix 10) which will help to ensure: (i)

17 ADB TA 7160-PRC: Guangxi SW Cities Development Project increasing women’s participation in the Project, including a target for at least 20% employment of women, ethnic minorities and poor; (ii) participation and gender sensitive training in mangrove and wetland protection and environmental awareness programs; (iii) participation in capacity building activities; and (iv) appropriate gender targets, indicators and sex-disaggregated data for project monitoring and evaluation. International and national social safeguard specialists with gender experiences will be provided under the capacity development component to help GPMO ensure that the social safeguard (resettlement) and GAP are implemented.

4.5 Environmental Aspects

61. The Project is classified as environment category A project. Major adverse impacts of the Project include air, water, and acoustic pollution during the construction period. In general, these impacts are temporary and/or localized. An environment impact assessment (EIA) has been prepared for each of the six investment components under the Project in accordance with relevant laws and regulations of the PRC. Mitigations measures have been included in the EIA to prevent, eliminate, or minimize the adverse impacts. EIAs have been approved by the concerned authorities of the PRC, and reviewed by ADB to ensure their compliance with ADB environmental safeguards policy. The summary EIA (SEIA) has been prepared with a detailed environmental management plan (EMP). The SEIA was circulated to the Board in January 2010. The implementation of the EMP will be under both the internal monitoring by the GPMO and MPMOs and the external monitoring provided by an independent environmental monitoring agency.

62. The Project is expected to provide multiple incremental environmental impacts, including the benefits arising from the improved urban roads and the related municipal infrastructure system, the protected and upgraded coastal areas in Fangchenggang City, and the rehabilitated ecosystem of the Shuikou Lake in Chongzuo City. Project performance in these areas will be monitored under the PPMS.

63. GZARG and the Project Cities have further agreed that (i) the urban roads to be constructed under the Project will install energy-saving lights and traffic light system, and (ii) the public education/awareness facilities will be installed at the two environmental upgrading/improvement components in Fangchenggang City and Chongzuo City to raise public awareness in protection of the rehabilitated ecosystem in these two cities.

4.6 Project Risks and Mitigation Measures

64. The Project will adopt conventional engineering technology with proven records. The Project is classified as "A class project" by ADB under the environmental and resettlement safeguards policies, and "B class project" under the indigenous people safeguard policies. Mitigation measures have been developed through preparation of the EIA and the related environmental management plans, and the resettlement plans (which include mitigation measures to address the concerns relating to the ethnic minorities) following ADB safeguards policies.

65. At the regional level, GZARG has been a long-term partner of ADB and is very experienced in implementing ADB-funded projects in Guangxi. At the Project City level, MPMOs and PICs may not be so familiar with ADB policy and procedural requirements. To address this concern, sufficient resources have been allocated under the loan to provide project management support for GPMO, MPMOs, and PICs during implementation of the Project.

18 ADB TA 7160-PRC: Guangxi SW Cities Development Project

66. One particular risk may rest with the projection of economic growth trend in Guangxi and the three Project Cities. Urbanization achievement, thus the full economic benefits of the Project will depend, to a large extent, on whether the Project Cities will be able to achieve the growth projected in their development plans. Up to date, all the Project Cities have always over-performed the growth targets specified in their city development master plans. Despite their persistent and impressive performance, the economic analysis conducted for the Project has adopted a very conservative approach in economic evaluation. Only the urban transport benefits have been included in the cost and benefit analysis, while the costs of all basic municipal infrastructures have been included. Under the sensitivity analysis, at the assumption of 25% decrease in economic benefits from the road construction and a 5- year delay in land value appreciation, the Project will still have an EIRR of 13.0% higher than 12% of the opportunity cost of social capital, indicating an acceptable risk.

19 ADB TA 7160-PRC: Guangxi SW Cities Development Project

5. ASSURANCES

67. In addition to the standard assurances, GZARG and the Project Cities have given the following assurances, which will be incorporated in the legal documents:

(i) Provision of Counterpart Funds. The Government and GZARG will cause the Project Cities to ensure (a) timely provision of counterpart financing necessary for the Project, (b) provision of additional counterpart funding for any shortfall of funds or cost overruns, and (c) adequate funding for operation and maintenance of the project facilities.

(ii) Approval of Project Lands. GZARG and the Project Cities will ensure that the Project can obtain all land use approvals from the concerned authorities in a timely manner to ensure timely implementation of the Project.

(iii) Project Implementation Agreement. GZARG and the Project Cities will ensure that relevant obligations set out in the Loan Agreement and the Project Agreement for the project implementation will be stipulated in the Project Implementation Agreement to be signed between the Project Cities and the concerned PICs, and such obligations should form an integral part of the Project Implementation Agreement.

(iv) Implementation of Resettlement Plans. GZARG and the Project Cities will ensure (a) timely updating of the resettlement plans at the stage of engineering design taking into account the results of detailed measurement surveys, (b) submitting the updated resettlement plans for ADB concurrence prior to award of related civil works contract, (c) disclose the updated resettlement plans in Chinese language to the project-affected persons, and (d) the compensation for lost assets and resettlement allowance be paid to the affected persons and the livelihood rehabilitation arrangements be made in accordance with the updated RP prior to commencement of the related civil works. GZARG and the Project Cities will further ensure that (a) the resettlement plans will be implemented in strict conformity to ADB’s Policy on Resettlement; and (b) an independent agency acceptable to ADB will be contracted to carry out monitoring and evaluation of implementation of resettlement plans, and prepare and submit to ADB monitoring and evaluation report on a semi-annual basis during resettlement implementation and annually for 2 years after the completion of resettlement.

(v) Implementation of the Gender Action Plan. GZARG and the Project Cities will cause the PICs to implement the Gender Action Plan.

(vi) Implementation of Environmental Management Plans. GZARG and the Project Cities will ensure (a) timely elaborating and updating of the mitigation measures included in environmental management plan (EMP) during engineering design; (b) timely implementation of the mitigation measures specified in EMP; and (c) regular environmental monitoring of implementation of EMP to be conducted by an independent agency acceptable to ADB in each Project City, which will prepare and submit to ADB the environmental monitoring report on a semi-annual basis. (vii) Employment and HIV/AIDS Awareness. GZARG and the Project Cities will ensure that at least 20% of employment opportunities created under the Project be accorded to the vulnerable groups including the women, the poor, and the ethnic minorities. The achievement in providing employment for the

20 ADB TA 7160-PRC: Guangxi SW Cities Development Project

vulnerable groups will be closely monitored as part of the DMF and PPMS. All employment and core labour standards as provided in the applicable laws and regulations will be complied with. HIV/AIDS training and sensitization will be provided to the construction workers and included in the contractor bidding documents.

(viii) Development of Integrated and Sustainable Urban Transport System. GZARG and the Project Cities will ensure that equipped with strengthened urban transport planning capacity, the Project Cities will review and update their urban transport master plan before the end of 2014 with an aim to develop a people-oriented and environment-friendly urban transport system in each Project City that integrates the motorized transport with public transport service and non-motorized transport for bicycle and pedestrians.

(ix) Energy Conservation and Road Safety. GZARG and the Project Cities will ensure (a) the urban roads to be constructed under the Project will install energy-saving lights and traffic light system; (b) implementation of a program for the provision of road safety signage, communication, and traffic monitoring and hazard barriers; and (c) implementation of road safety measures in line with the national road transport safety law.

21 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 1

SECTOR ANALYSIS: DEVELOPMENT CONTEXT OF GUANGXI

A. Overview of the Guangxi Zhuang Autonomous Region

1. The Guangxi Zhuang Autonomous Region (Guangxi) is situated in the southwestern part of the People's Republic of China (PRC). To its south lies the Beibu Gulf, to its east Guangdong province, to its northeast Hunan province, to its northwest Guizhou province, to its west Yunnan province and to its southwest Viet Nam. Guangxi covers an area of approximately 236,700 square kilometers (km2), accounting for 2.5% of the national total, and ranking 9th among the 31 provinces and autonomous regions of the PRC.

2. Situated on the southeast fringe of the Yunnan-Guizhou Plateau, Guangxi has a topography dominated by mountains and hills which account for 69.8% of the provincial territory. Only 11% of the total land in Guangxi or 40 million mu (2.67 million ha) is arable, translating into 0.82 mu per capita.

3. Guangxi has 14 prefecture-level municipalities with 109 county-equivalent administrative units. At the end of 2008, Guangxi's population totalled 50.5 million. As one of the five ethnic autonomous regions in the PRC, Guangxi is home to 35 of the 55 ethnic minorities, in addition to the Han. The Han accounts for 61.6% of the total population, while the 35 ethnic minorities for 38.4%. The Zhuang is the largest ethnic minority group in Guangxi, accounting for 35.8% of the total population, and 85.7% for the total ethnic peoples in the autonomous region.

B. Comparative Advantages of Guangxi

4. Guangxi has many comparative advantages. In terms of geographical location, Guangxi is the only province/autonomous region in the western PRC that has deepwater sea ports and land ports at international borders. At the national level, Guangxi serves as the gateway for many land-locked and less developed provinces and autonomous regions in the western PRC to the international market.

5. Guangxi is rich in natural resources. Twelve mineral reserves found in Guangxi are ranked as the national largest verified reserves, including bauxite over one billion tons accounting a half of the verified national reserve for the whole country. Guangxi is also endowed with forest and rich variety of agricultural produces and marine resources.

C. Development Challenges

6. Until recently, Guangxi was not able to turn its comparative advantages into economic advantages for accelerated development. For historical reasons, Guangxi is actually a less-developed autonomous region, partly due to the wars in Viet Nam and partly due to the poor transport infrastructure that had effectively isolated Guangxi from the national and international market. On a per capita gross domestic product (GDP) basis, Guangxi ranked 25th out of the 31 provinces/autonomous regions of the PRC. Per capita GDP in Guangxi was only at 65.6% of the national average. Out of 72 counties in Guangxi, 49 counties are classified either as national poverty counties (28) or regional poverty counties (21). At the end of 2007, about 3.23 million rural people in Guangxi lived under

23 ADB TA 7160-PRC: Guangxi SW Cities Development Project poverty, including 650,000 rural people under absolute poverty (those who cannot meet their basic needs) and 2.58 million as low-income population.1

D. Development Achievements

7. The current economic status of Guangxi would need to be examined from a historic perspective. In the past 60 years since the founding of the PRC, the GDP of Guangxi grew from CNY940.0 million in 1950 to CNY717.2 billion by 2008 or close to 120 times in comparable prices. Per capita GDP increased from approximately CNY340 in 1950 to CNY14,900 by 2008. The total industrial outputs jumped from CNY360 million in 1952 to CNY594.2 billion by 2008 (in constant prices).

8. Significant progress was achieved in the past 30 years since PRC's adoption of the policy for reform and opening-up to the outside world in the late 1970s. Economic growth has been accelerated with the average annual GDP growth at 7.2% between 1951 and 1978, 9.9% between 1979 and 2000, and 11.9% between 2001 and 2008. Despite the global economic crisis, GDP growth in Guangxi has remained high at 12.8% for 2008 and 13.5% for the first half of 2009, compared with the national average of 9.0% and 7.1% for the same period respectively.

9. The accelerated growth is achieved, to a large extent, as a result of the National Strategy for Development of the West (NSDW) which, among others, has provided enormous financial assistance since 1999 for development of the basic infrastructures in the 12 less-developed provinces and autonomous regions in the western PRC with an aim to provide an enabling environment for sustained economic growth in the western PRC including Guangxi. Massive investment in basic infrastructure has improved significantly the connectivity and economic link of Guangxi with national and international market, providing Guangxi with a development opportunity to participate in and benefit from economic cooperation and integration on an international level across the countries through Greater Mekong Subregion (GMS) economic cooperation framework promoted by ADB and the PRC-Association of South East Asia Nations (ASEAN) economic cooperation initiatives, as well as on an inter-province/autonomous region level within the PRC.

E. Guangxi and GMS Economic Cooperation

10. Guangxi, together with Yunnan province, is an active partner of ADB in the GMS economic cooperation framework promoted by ADB. With funding support from ADB, Guangxi has completed construction of a number of important roads as part of the regional transport corridor planned under the GMS framework. These include, among others, the expressway built under the Guangxi Roads Development Project to link the PRC expressway system from Nanning to the land port at the border with Viet Nam; and the expressway link built under the Guangxi Roads Development II Project between Nanning and the highway system in Viet Nam via the expressway system of Yunnan province.

11. Trade between Guangxi and other GMS countries have increased dramatically from $472.9 million in 1997 to $3.42 billion in 2008, indicating a compounded annual growth rate of 19.5%. With support of ADB, PRC is in the process to develop cross-border economic zones with Viet Nam in Guangxi and Yunnan province to further strengthen regional economic cooperation and integration with GMS countries through Viet Nam.

12. Strengthened economic cooperation requires development of the nodal cities in regional transport system to serve as the industrial and service center as well as regional logistic hub to facilitate economic integration—a process which will convert the transport

1 Guangxi Poverty Alleviation Office (2008). Rural Poverty Alleviation and Development in Guangxi. Nanning.

24 ADB TA 7160-PRC: Guangxi SW Cities Development Project corridors into economic corridors. Strengthened economic cooperation requires accelerated urban development in the corridor cities in Guangxi.

F. Guangxi Beibu Gulf Economic Zone

13. In January 2008, the Government gave its approval for the “Development Plan for Guangxi Beibu Gulf Economic Zone” (GBGEZ). Despite its locality, GBGEZ was approved as an important national strategic thrust to further accelerate the development of the less developed southwestern PRC through economic integration with ASEAN countries and the world market through the national gateway of Guangxi.

14. According to the plan, with the comparative advantages of Guangxi, GBGEZ is envisaged to develop into a national industrial center, an international financial and service center, and a regional logistics base for economic cooperation between the PRC and its neighbouring countries through GMS framework and the PRC-ASEAN free trade mechanism.

25 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 2

DEVELOPMENT COORDINATION

A. Major Development Partners: Strategic Foci and Key Activities

1. Urban development often requires a multi-sector invention with components in the sector for water supply and other municipal infrastructure and subsectors for urban transport, water supply and sanitation, and urban sector development as defined by the classification system of the Asian Development Bank (ADB). The projects listed in the table below are those projects included in the programs of external funding agencies that have a specified operation focus in the sector or anyone of the subsectors mentioned above in Guangxi Zhuang Autonomous Region (Guangxi).

Table A2.1: Major Development Partners Sectors and Development Amount Themes Partner Project Name Duration (million) Water and World Bank Guangxi Nanning Programmed $100.0 Sanitation Urban and Rural Environmental Improvement Project Water and World Bank Liuzhou Programmed $150.0 Sanitation Environmental Improvement Project (II) Urban Sector ADB Guangxi Programmed $150.0 Development Southwestern Cities Development Project Urban Sector ADB Guangxi Beibu Programmed $200.0 Development Gulf Cities Development Project Water and KfW Guilin Landfill Programmed €20.0 Sanitation Project Water and Austrian Loan Guilin City Programmed €10.0 Sanitation Wastewater Treatment Project Water and KfW Zhongshan Programmed €15.0 Sanitation County Environmental Improvement Project Source: Guangxi Development and Reform Commission.

B. Institutional Arrangements and Processes for Development Coordination

2. ADB commits itself to sharing sectoral information and experiences in partnership with its developing member countries and other development agencies. In line with ADB's support for the 2005 Paris Declaration and the 2008 Accra Agenda for Action, it has been actively harmonizing its policies, procedures and practices with its key development partners through parallel implementation structures, technical working groups, and joint missions. In

27 ADB TA 7160-PRC: Guangxi SW Cities Development Project addition, ADB has also been supporting global and regional efforts to enhance aid effectiveness.

3. In the People's Republic of China (PRC), development coordination is done mainly by the Government at the central level. All the development partners are requested to align their operations to support the implementation of a national development strategy as set in the Five Year Plan (FYP) for social and economic development approved by the People's Congress. The Resident Mission in the PRC also plays a key role in harnessing lessons learned in project processing and implementation, and in sharing the knowledge and experiences with other development partners in the sector.

C. Achievement and Issues

4. Since 1992, coordination with major development partners are getting stronger to support the FYP of the PRC, strategic master plans, public awareness and education, financial and institutional strengthening, Millennium Development Goals, and other development results in the sector. The project teams of ADB regularly meet with major development partners in the sector of the PRC, such as the World Bank and other bilateral development agencies to share project processing and implementation experiences.

D. Recommendations

5. The close coordination with other development partners will be continued and further strengthened. Strengthening development coordination in the PRC is expected to minimize transaction costs, maximize responsiveness, address policy issues more systematically, provide greater support for reforms and capacity building, and promote increased accountability to achieve greater development impact.

28 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 3

Performance Targets / Data Sources / Reporting Design Summary Indicators Mechanisms Assumptions / Risks Impact By 2017 Assumptions

Improved living The three Project Cities Statistical reports of NSDW remains a conditions in the Project maintain a continued per GZARG and the Project national priority. Cities and enhanced capita GDP growth, from Cities ability of these cities to 2008 baseline of $3,680 for PRC and GZARG participate in and Fangchenggang city,$1,620 remain active partners benefit from the for Chongzuo city, and to promote regional regional cooperation $1,580 for Baise city to cooperation and $5,520, $2,430 and $2,370 integration with other respectively GMS countries and ASEAN countries. Increased urbanization rate Statistical reports of of the Project Cities from GZARG and the Project Project Cities will their 2008 baseline of Cities provide adequate 44.5%% for budget resources for Fangchenggang city, 31.5% maintenance and for Chongzuo city, and operation of the project 31.0%% Baise city to facilities. 60.0%, 40.0%, and 40.0% respectively

Each Project City enjoys a Report of the Commerce 10 % increase in economic Bureau of the Project Cities activities with ASEAN countries from their 2008 base line of $797 million for Fangchenggang city, $1,300 million for Chongzuo city, and $489(?) million for Baise city respectively

Outcome By 2015 Assumptions

Expanded and Increased traffic speed by Report of the Traffic Projections for traffic upgraded urban 5% in the three Project Management Office of the growth made for the infrastructure and urban Cities, compared with the Project Cities Project Cities are environment that will "without the project" reasonably accurate. help the Project Cities scenario based on their to meet their urban 2008 road network baseline. Urban expansion of the expansion needs up to Project Cities will be 2020 Increased coverage of Report of the City implemented following primary underground Construction Bureau of the their city development municipal infrastructure in Project Cities master plans. the direct project areas from zero in 2008 to 100%. All the investment components will be Strengthened protection of Report of the Marine completed in Fangchenggang city from Resources Bureau of accordance with their coastal flooding at once a Fangchenggang City design standards. 20-year risk level Risk Rehabilitated Shuikou Lake Monitoring report of has served as a manmade Environmental Protection Economic growth in the urban wetland to provide Bureau of Chongzuo City. Project Cities may turn eco-service for Chongzuo out to be lower than the City with its water quality at projected level, thus Class II level. affecting development impact of the Project. Urban transport master Approval of the updated Economic analysis has plans for the Project Cities urban transport master plan revealed that economic have been updated with the by municipal government of benefits of the Project

29 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Performance Targets / Data Sources / Reporting Design Summary Indicators Mechanisms Assumptions / Risks strengthened planning the Project Cities will outweigh the risk. capacity, with an aim to Project completion report build an integrated and sustainable urban transport system.

Employment opportunities Contractors' employment of about 10,030 person data (to be disaggregated years to be created over the by sex, income status, age, construction phase with a and ethnicity) target for 20% of the employment to be filled by the poor, women, and ethnic minority peoples respectively

Outputs By 2015 Assumptions

Fangchenggang City Commitment to use ADB Loan and to Constructed urban 27.6 km long urban roads The city government counterpart financing roads and related basic and related basic municipal announcement municipal infrastructures have been Project completion report Project cities obtain on infrastructures in constructed and open for time all the required accordance with the city traffic or operation land use approvals from development master the authorities plan concerned.

Improved and upgraded 9.2 km long coastline has The city government Risk coastal area that is free been upgraded and announcement from tidal wave and completed for public use Project completion report Low institutional coastal erosion and has capacity in terms of a public education The public education facility Project technical, facility for mangrove for protection of mangroves financial and protection is open for public use environmental management Chongzuo City

Constructed urban 13.0 km long urban roads The city government roads and related basic and related basic municipal announcement municipal infrastructure have been Project completion report infrastructures in constructed and are open accordance with the city for traffic or operation development master plan

Improved Shuikou Lake is open for The city government environmental system public use with the designed announcement of Shuikou Lake as a environmental standards Project completion report manmade urban The public awareness wetland for the city with signage is installed and Municipal project public signage for outreach materials are management office of protection of urban distributed. Chongzuo City wetland ecosystem

Baise City

Constructed urban 3.7 km roads and related The city government roads and related basic basic municipal announcement municipal infrastructures have been Project completion report infrastructures in constructed and are open accordance with the city for traffic or operation development master plan

30 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Performance Targets / Data Sources / Reporting Design Summary Indicators Mechanisms Assumptions / Risks Constructed Longwang Longwang Bridge has been The city government Bridge across Zuojiang constructed and is open for announcement River traffic Project completion report

Capacity Development

Strengthened GPMO Smooth implementation of Project progress reports and MPMOs that are the project in compliance Project completion report able to meet all the with ADB requirements. ADB requirements GPMO and each MPMO appoint one gender focal point respectively to manage and coordinate GAP's work

Strengthened capacity About 20 decision makers Evaluation reports for the of the Project Cities to and the concerned technical training programs plan and implement an staff in GZARG and the Project progress reports integrated and Project Cities have been Project completion report sustainable urban trained through especially transport system designed training programs, with a target for 30% women professional participation

Activities and Milestones Inputs

Engineering design for all components (Completed by December 2010) ADB $150 million Land acquisition and resettlement (Completed by December 2011) Municipal Recruitment of consulting services (Completed by June 2010) Government of the Project Cities Procurement of goods and civil works (Completed by December 2011) $79.96 million

Construction of urban road networks (Completed by June 2013) Domestic Banks $75.68 million Upgrading of coastal areas (Completed by December 2013)

Shuikou Lake rehabilitation (Completed by December 2013)

Training for capacity building (Completed by December 2014)

Updating of the city transport master plan (Completed by December 2014)

Project account closing (Completed by June 2015)

ADB = Asian Development Bank; ASEAN = Association of South East Asian Nations; GAP = Gender Action Plan; GDP = gross domestic product; GMS = Greater Mekong Subregion; GPMO = regional government project management office; GZARG = Guangxi Zhuang Autonomous Region Government; IA = implementing agency; km = kilometer; MPMO = municipal project management office; NSDW = National Strategy for Development of the West; PRC = People's Republic of China; Project Cities = Fangchenggang City, Chongzuo City, and Baise City.

31 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 4

COST ESTIMATES AND FINANCING PLAN

Table A4.1: Expenditure Accounts by Currency

CNY Million US$ Million Equivalent % of Total Foreign Local Total Foreign Local Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 600.80 600.80 1,201.61 88.35 88.35 176.71 70.82 2 Survey, Design and Internal Monitoring - 164.68 164.68 - 24.22 24.22 9.71 3 Land Acquisition and Resettlement - 246.79 246.79 - 36.29 36.29 14.55 4 Capacity Developmentb 17.99 - 17.99 2.65 - 2.65 1.06 5 Taxes and Dutiesc 22.06 43.47 65.53 3.24 6.39 9.64 3.86 Subtotal (A) 640.86 1,055.74 1,696.60 94.24 155.26 249.50 100.00

B. Contingencies 1 Physicald 64.09 105.57 169.66 9.42 15.53 24.95 10.00 2 Pricee 18.24 28.60 46.85 2.68 4.21 6.89 2.76 Subtotal (B) 82.33 134.18 216.51 12.11 19.73 31.84 12.76

C. Financing Charges During Implementationf 1 Interest During Implementation 80.47 66.43 146.90 11.83 9.77 21.60 9.78 2 Commitment Charges 3.95 - 3.95 0.58 - 0.58 0.26 Subtotal (C) 84.42 66.43 150.85 12.41 9.77 22.18 10.04

Grand Total (A+B+C) 807.63 1,270.68 2,078.30 118.77 186.86 305.63 122.50 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity development includes project implementation support, capacity strengthening for urban transport planning and external monitoring services. c Taxes and duties are estimated at $9.64 million. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

Table A4.2: ADB Financing by Project Component ($ million)

Interest Base Capacity during Total ADB % of total Item Cost Building Construction Financing ADB Loan 1) Fangchenggang Urban Road Network 48.94 1.01 4.42 54.37 36.25% 2) Fangchenggang Coastal Protection and 14.09 0.29 1.25 15.63 10.42% Upgrading 3) Chongzuo Urban Road Network 31.95 0.66 3.01 35.62 23.74% 4) Shuikou Lake Environmental Improvement 3.93 0.08 0.37 4.38 2.92% 5) Baise Urban Road 19.75 0.41 1.86 22.02 14.68% 6) Baise Longwang Bridge 16.12 0.34 1.52 17.98 11.98%

Total 134.78 2.80 12.42 150.00 100.00% Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

33 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table A4.3: Cost Categories by Financing

($ million) Asian Development Municipal Item BankCofinanciers Government Total $a %b $% $ % $ % A. Basic Costs 1 Civil Works 134.78 73.70 34.04 18.61 14.06 7.69 182.89 59.84 Fangchenggang 63.03 70.75 21.48 24.11 4.57 5.13 89.09 29.15 Chongzuo 35.88 79.09 - - 9.49 20.92 45.36 14.84 Baise 35.88 74.06 12.56 25.94 - - 48.44 15.85 2 Survey and Design - - 7.07 27.60 18.54 72.40 25.61 8.38 3 Land Acquisition and Resettlement - - 22.69 59.39 15.51 40.61 38.20 12.50 4 Capacity Building 2.80 100.00 - - - - 2.80 0.92

Subtotal (A) 137.58 55.14 63.80 25.57 48.12 19.29 249.50 81.63

B. Contingencies 1 Physical Contingency - - - - 24.95 100.00 24.95 8.16 2 Price Contingency - - - - 6.89 100.00 6.89 2.25 Subtotal (B) - - - - 31.84 100.00 31.84 10.42

C. Financial Charges during Construction 12.42 51.11 11.88 48.89 - - 24.29 7.95

Total Project Cost 150.00 49.08 75.68 24.76 79.96 26.16 305.63 100.00

% of Total Project Cost 49.08 24.76 26.16 100.00 a Amount of ADB loan proceeds allocated to the cost category. b The amounts disbursed by ADB for eligible expenditures under a cost category will be subject to the ceiling set by the allocation of loan proceeds for such cost category. The loan disbursement percentage for capacity building and IDC are set as 100%. The percentage of civil works is 71% for Fangchenggang, 79% for Chongzuo and 74% for Baise respectively. Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

34 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 5

FLOW OF FUNDS AND ONLENDING ARRANGEMENTS

ADB = Asian Development Bank, GZARG = Guangxi Zhuang Autonomous Region Government, PRC = People’s Republic of China, FMG = Fangchenggang Municipal Government, CMG = Chongzuo Municipal Government, BMG = Baise Municipal Government. The imprest account will be opened and administered by the Finance Department of GZARG. Source: Asian Development Bank.

35 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 6

IMPLEMENTATION ARRANGEMENTS

37 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 7

IMPLEMENTATION SCHEDULE

39 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 8

PROCUREMENT PLAN

Basic Data Project Name: Guangxi Southwestern Cities Development Project Country: People's Republic of China (PRC) Executing Agency: Guangxi Zhuang Autonomous Region Government Loan Amount: $150,000,000 Loan (Grant) Number: Date of First Procurement Plan : Date of this Procurement Plan:

A. Process Thresholds, Review and 18-Month Procurement Plan

a) Project Procurement Thresholds

1. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold

International Competitive Bidding (ICB) for Works > $10,000,000 International Competitive Bidding for Goods > $ 1,000,000 National Competitive Bidding (NCB) for Works $10,000,000 National Competitive Bidding for Goods $ 1,000,000 Shopping for Works $ 200,000 Shopping for Goods $ 200,000

b) ADB Prior or Post Review

2. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project.

Procurement Method Prior or Post Comments Procurement of Goods and Works ICB Works Prior ICB Goods Prior NCB Works Post Except for the first NCB procurement in each Project City, which will be subject to prior review NCB Goods Post Except for the first NCB procurement in each Project City, which will be subject to prior review Shopping for Works Post Shopping for Goods Post Recruitment of Consulting Firms Quality- and Cost-Based Selection (QCBS) Prior Consultants Qualifications (CQS) Prior Recruitment of Individual Consultants Individual Consultants Prior

41 ADB TA 7160-PRC: Guangxi SW Cities Development Project

c) Goods and Works Contracts Estimated to Cost More Than $1 Million

3. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

Contract Procurement Prequalification Advertisement General Description Value Method of Bidders (y/n) Date Comments A. Fangchenggang A.1 Urban Road Network and Related Municipal Infrastructure Construction of #4 and #6 14,181,962 National -- 1Q/2010 Financed Roads procurement by domestic procedure fund Construction of Yuzhouping, #2, 15,502,694 ICB N 2Q/2010 #3 and #5 Roads Construction of #1 Road 15,972,884 ICB N 3Q/2010 Construction of Anbujiang 10,479,985 ICB N 4Q/2010 Bridge Landscape for All Roads 4,555,857 NCB N 1Q/2010 Street Lights Procurement and 6,035,944 ICB N 1Q/2010 Goods Installation for All Roads Traffic Lights Procurement and 2,019,854 NCB N 1Q/2011 Installation for All Roads A.2 Coastal Protection and Upgrading Construction of Coastal Dyke 16,898,976 ICB N 3Q/2010 Construction of Mangrove 1,144,539 NCB N 4Q/2010 Square

B. Chongzuo B.1 Urban Road Network and Related Municipal Infrastructure Construction of Subgrades of 9,044,562 NCB N 1Q/2010 Chengnan 9th Road and Liancheng Road Construction of Subgrades of 9,619,354 NCB N 2Q/2010 Beiwei 2nd Road and Zhongyi Road Construction of Subgrades of 4,259,817 NCB N 2Q/2010 Shijinglin Road Pavement for All Roads 7,475,216 NCB N 4Q/2010 Landscape of All Roads 1,082,910 NCB N 4Q/2010 Street Lights Procurement and 1,790,770 NCB N 4Q/2010 Installation for All Roads Traffic Lights Procurement and 1,802,829 NCB N 4Q/2010 Installation for All Roads B.2 Shuikou Lake Environmental Improvement Shuikou Lake Rehabilitation 4,578,829 NCB N 4Q/2010 Works

C. Baise C.1 Urban Road Network and Related Municipal Infrastructure Construction of Chengnan Ring 32,256,596 ICB N 1Q/2010 Road Construction of Longwang 18,319,957 ICB N 1Q/2010 Bridge

42 ADB TA 7160-PRC: Guangxi SW Cities Development Project

d) Consulting Services Contracts Estimated to Cost More Than $100,000

4. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

International or Contract Recruitment National General Description Value Method Advertisement Date Assignment Comments Capacity Building and 2,570,000 QCBS (80:20) 1Q/2010 International Institutional Strengthening

e) Consulting Services Contracts Estimated at $100,000 or Less

5. The following table groups consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

International or General Contract Procurement / Advertisement National Description Value Recruitment Method Date Assignment Comments Resettlement External 100,000 Consultant 3Q/2010 National Monitoring Qualifications Selection Environment External 100,000 Consultant 3Q/2010 National Monitoring Qualifications Selection Project Management/ 15,000 Individual Consultant 1Q/2010 National Procurement Specialist Selection Resettlement Specialist 15,000 Individual Consultant 1Q/2010 National Selection

B. Indicative List of Packages Required Under the Project

6. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the project. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the comments section.

General Estimated Value Estimated Number Procurement Domestic Preference Description (cumulative) of Contracts Method Applicable Comments Works 103,040,667 6 ICB n/a 73,982,868 15 NCB n/a General Estimated Value Estimated Number Recruitment Description (cumulative) of Contracts Method Type of Proposal Comments Consulting 2,570,000 1 QCBS Full Services 200,000 2 CQS 30,000 2 ICS

C. National Competitive Bidding

7. The Borrower’s Law of Tendering and Bidding of the People’s Republic of China promulgated by Order No. 21 of the President of the People’s Republic of China on August 30, 1999, are subject to the following clarifications required for compliance with the Guidelines:

(i) All invitations to prequalify or to bid shall be advertised in the national press, or official gazette, or a free and open access website in the Borrower’s

43 ADB TA 7160-PRC: Guangxi SW Cities Development Project

country. Such advertisement shall be made in sufficient time for prospective bidders to obtain prequalification or bidding documents and prepare and submit their responses. In any event, a minimum preparation period of thirty (30) days shall be given. The preparation period shall count (a) from the date of advertisement, or (b) when the documents are available for issue, whichever date is later. The advertisement and the prequalification and bidding documents shall specify the deadline for such submission.

(ii) Qualification requirements of bidders and the method of evaluating the qualification of each bidder shall be specified in detail in the bidding documents, and in the prequalification documents if the bidding is preceded by a prequalification process.

(iii) If bidding is preceded by a prequalification process, all bidders that meet the qualification criteria set out in the prequalification document shall be allowed to bid and there shall be no limit on the number of pre-qualified bidders.

(iv) All bidders shall be required to provide a performance security in an amount sufficient to protect the Borrower/Project Executing Agency in case of breach of contract by the contractor, and the bidding documents shall specify the required form and amount of such performance security.

(v) Bidders shall be allowed to submit bids by mail or by hand.

(vi) All bids shall be opened in public; all bidders shall be afforded an opportunity to be present (either in person or through their representatives) at the time of bid opening, but bidders shall not be required to be present at the bid opening.

(vii) All bid evaluation criteria shall be disclosed in the bidding documents and quantified in monetary terns or expressed in the form of pass/fail requirements.

(viii) No bid may be rejected solely on the basis that the bid price falls outside any standard contract estimate, or margin or bracket of average bids established by the Borrower/Project Executing Agency.

(ix) Each contract shall be awarded to the lowest evaluated responsive bidder, that is, the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (a) to be substantially responsive to the bidding documents and (b) to offer the lowest evaluated cost. The winning bidder shall not be required, as a condition of award, to undertake responsibilities for work not stipulated in the bidding documents or otherwise to modify the bid as originally submitted.

(x) Each contract financed with the proceeds of the Loan shall provide that the suppliers and contractors shall permit ADB, at its request, to inspect their accounts and records relating to the performance of the contract and to have said accounts and records audited by auditors appointed by ADB.

(xi) Government owned enterprises in the Borrower’s country may be permitted to bid if they can establish that they (a) are legally and financially autonomous, (b) operate under commercial law and (c) are not a dependent agency of the Borrower/Project Executing Agency.

44 ADB TA 7160-PRC: Guangxi SW Cities Development Project

(xii) Re-bidding shall not be allowed solely because the number of bids is less than three (3).

45 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 9

OUTLINE TERMS OF REFERENCE FOR CONSULTING SERVICES

A. Project Background

1. Guangxi Zhuang Autonomous Region (Guangxi) is one of the less developed provinces/autonomous regions that are targeted for support under the National Strategy for Development of the West (NSDW) of the Government in the People's Republic of China (PRC). The Guangxi Southwestern Cities Development Project (the Project) is part of the support provided by the Government to accelerate the economic development in Guangxi. The three southwestern cities included under the Project—Fangchenggang City, Chongzuo City, and Baise City (Project Cities) are medium-sized cities located at strategic locations along the regional transportation corridors under the Greater Mekong Subregion (GMS) economic cooperation framework promoted by Asian Development Bank (ADB). All the Project Cities are surrounded and dominated by poverty counties. Urban development in the Project Cities is envisaged to play an important role in creating non-agriculture jobs for the rural poor in the poverty counties, and in improving the links of the local economy with national and international markets for greater development opportunities.

2. The Project has six investment components and one capacity development component as follows:

(ii) Fangchenggang Coastal Protection and Upgrading. Under this component, the Project will build: (a) 9.15 km of coastal dykes, (b) a 2.5-hectare (ha) mangrove public education square, and (c) related auxiliary facilities.

(iv) Chongzuo Shuikou Lake Environmental Improvement. Under this component, the Project will: (a) clear the garbage and fish and duck farming on the lake, (b) dredge the surface area of 78 ha, (c) remove 7.85 km of coffer weirs that block water flow, (d) rehabilitate 2.62 km of lake banks, (e) build 1.57 km of lakeside pedestrian paths, and (f) control pollution for lakeside point and non-point sources.

(vi) Baise Longwang Bridge. Under this component, the Project will build: (a) the Longwang bridge with a length of 563 m; and (b) the related municipal

47 ADB TA 7160-PRC: Guangxi SW Cities Development Project

infrastructure, including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping.

(vii) Capacity Development. Under this component, the Project will: (a) provide technical assistance, including international experiences and best practices, to design and conduct a demand-based capacity development program for GZARG and the Project Cities in the field of planning and implementation of an integrated and sustainable urban transport system; and (b) provide technical support including relevant trainings to GZARG and the Project Cities to ensure that the Project will be implemented in full compliance with ADB policy and operational requirements.

3. The total cost of the Project is estimated at $305.63 million, including taxes and duties of $9.64 million. The Government has requested the ADB to provide a loan of $150 million to finance 49.08% of the project cost. The consulting services to be provided under the capacity development component of the Project will be financed by the loan of ADB.

4. The Guangxi Zhuang Autonomous Region Government (GZARG) will be the Executing Agency of the Project. GZARG has established a project management office (PMO) at the Guangxi Development and Reform Commission to carry out the day-to-day activities of the Project and provide coordination support for preparation and implementation of the Project across the Project Cities.

5. Fangchenggang municipal government (FMG), Chongzuo municipal government (CMG), and Baise municipal government (BMG) will be the implementing agencies (IAs) of the Project responsible for implementation of the relevant components in each individual Project City. The IA will be the end-user of the loan from ADB, and will be responsible for repayment of the portion of the loan used for the city. At the Project City level, FMG, CMG, and BMG have each established an inter-agency municipal project management office (MPMO) respectively. The MPMOs will be responsible for undertaking day-to-day activities of the Project and providing coordination support for preparation and implementation of the relevant components of the Project within their cities.

6. Furthermore, FMG has designated Fangchenggang City Port District Urban Construction and Investment Company (FPDUCIC)—a limited liability company wholly owned by the Port District Government under Fangchenggang City to be the project implementation company (PIC) to implement the two investment components in Fangchenggang City. CMG has designated Chongzuo City Urban Construction and Investment Company (CUCIC)—a limited liability company wholly owned by CMG to be the PIC to implement the two investment components in Chongzuo City. Similarly, BMG has designated Baise City Development Investment Company (BCDIC) to be the PIC to implement the two investment components in Baise City. GPMO will be responsible for implementation of the capacity development component of the Project.

7. The Project will provide consulting services through three different selection methods: quality-and-cost-based selection (QCBS), consultant qualifications selection (CQS), and individual consultant selection (ICS) in accordance with ADB's Guidelines on the Use of Consultant (2007, as amended from time to time).

B. General Requirements of the Consulting Firm for Capacity Development

8. Under the capacity development component, a consulting firm (the Consulting Firm) will be engaged in accordance with ADB's Guidelines on the Use of Consultants (2007, as amended from time to time). The Consulting Firm will be selected through QCBS method at the quality to cost ratio of 80:20 using full technical proposal procedures. The consulting

48 ADB TA 7160-PRC: Guangxi SW Cities Development Project services will be grouped into two sub-components for (i) project implementation support, and (ii) capacity strengthening for holistic planning and implementation of an integrated and sustainable urban transport system.

a) Project Implementation Support

9. Under the project implementation sub-component, the Consulting Firm will provide hands-on training and operational advice for GPMO and MPMOs to ensure that implementation of the Project will meet all the policy and procedural requirements of ADB and the Government. The consulting services under this sub-component will include, but not necessarily be limited to, the following:

(i) Help GPMO and MPMOs set up institutional framework, operation procedure, document filing system, and work plan to guide and facilitate project implementation;

(ii) Help GPMO and MPMOs set up the project performance monitoring system (PPMS) in accordance with ADB policy requirements, including establishing baseline and operation mechanism for data collection, analysis, and reporting;

(iii) Help GPMO and MPMOs develop the format and establish the operation mechanism for preparing and submitting all the operation reports specified in the ADB loan and project agreements, including quarterly progress report, semiannual monitoring report, annual report, etc.;

(iv) Provide assistance to GPMO and MPMOs in preparation and review of the bidding documents in accordance with ADB's Procurement Guidelines (2007, as amended from time to time);

(v) Provide assistance to GPMO and MPMOs in contract management during project implementation, including monitoring construction progress, preparing progress report, reviewing and certifying the contractor’s claims for payments, and coordinating daily operational tasks;

(vi) Conduct technical review of the engineering designs in accordance with the design codes and standards and the best practices;

(vii) Provide assistance to GPMO and MPMOs to develop an effective construction supervision program and provide guidance and technical support for its implementation;

(viii) Conduct construction inspection and supervision on key construction components for quality control;

(ix) Provide assistance and training to GPMO and MPMOs to help establish an efficient and effective financial management system for the project implementation in accordance with ADB policy and procedural requirements;

(x) Provide assistance to GPMO and MPMOs to conduct internal monitoring of the implementation of the environmental management plans and resettlement plans prepared for the Project and prepare periodic report for ADB;

(xi) Provide assistance to GPMO and MPMOs to coordinate with the independent monitoring agencies to ensure timely preparation and submission of the

49 ADB TA 7160-PRC: Guangxi SW Cities Development Project

external monitoring report to ADB on implementation of the environmental management plans and resettlement plans under the Project;

(xii) Provide trainings to GPMO, MPMOs and PICs on the skills needed for construction supervision, project management, and implementation of social and environmental safeguards; and

(xiii) Provide advice and trainings for the contractors, supervision companies, and independent safeguard monitoring agencies on ADB policy and procedural requirements to ensure their full compliance.

b) Capacity Development for Holistic Planning for Development of an Integrated and Sustainable Urban Transport System

10. Under this sub-component, the Consulting Firm will provide advice and specialized training for GZARG and the Project Cities with a focus on improving their capacity to carry out a holistic urban development approach to plan and implement an integrated and sustainable transport system and service delivery mechanism. The consulting service under this sub-component will include, but not necessarily be limited to, the following:

(i) Review the existing urban transport development master plans of the Project Cities and provide advice and recommendation for their improvement;

(ii) Conduct an assessment of the capacity development needs of GZARG and the Project Cities in the field of urban transport planning and develop a tailor- made comprehensive training program for GZARG and the Project Cities;

(iii) Conduct the training program including study tours and training workshops both within the PRC and abroad to provide for GZARG and the Project Cities the exposure to relevant national and international best practices in the fields of planning and implementation of an integrated and sustainable urban transport system;

(iv) Provide guidance and technical support for GZARG and the Project Cities to help them prepare/update their urban transport master plans with an aim to develop a people-oriented and environment-friendly urban transport system for the Project Cities, which will combine the motorized transport with a well- planned public transport service delivery system and non-motorized transport facilities to promote the development of a sustainable and livable city.

C. Inputs Estimate and Composition of the Expertise under the Consulting Firm

11. It is estimated that the capacity development component will require inputs of 26 international consulting services and 111 national consulting services. Requirements for consulting services under the consulting firm are summarized in the table below:

Table A9.1: Summary of Inputs Estimate and Composition of Expertise Expertise Person-Months A. International Consultants 1. Team Leader/Project Management and PPMS Specialist 12 2. Social Safeguards Specialist 6 3. Environmental Safeguards Specialist 6 4. Urban Transport Planning Specialist 1 5. Public Transport Specialist 1 Total International Consulting Services 26

50 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Expertise Person-Months

B. National Consultants 1. Co-Team Leader/Project Management Specialist 56 2. Financial Management Specialist 16 3. Contract Management Specialist 10 4. Social Safeguards Specialist 11 5. Environmental Safeguards Specialist 11 6. Co-Team Leader/Urban Transport Planning Specialist 3 7. Public Transport Specialist 2 8. Transport Management Specialist 2 Total National Consulting Services 111

D. Consulting Services for External Monitoring

12. Specialized national consulting services for external monitoring will be engaged through CQS method under two separate contracts: one for external environmental monitoring (the Environmental Monitoring Service) and the other for external resettlement monitoring (the Resettlement Monitoring Service).

13. The Environmental Monitoring Service will provide external monitoring service for GPMO to ensure implementation of the environmental management plans prepared by the Project Cities for the Project, and prepare regular external monitoring report for the Government and ADB on a semiannual basis.

14. The Resettlement Monitoring Service will provide external monitoring service for GPMO to ensure implementation of the resettlement plans in compliance with ADB resettlement safeguards policy, and prepare regular external monitoring report for the Government and ADB on a semiannual basis.

E. Individual Consulting Services

15. To ensure timely implementation of the Project, 4 person-months of national consulting services in the fields of project management and procurement (2 person-months) and resettlement (2 person-months) will be engaged on an individual consultant basis ahead of the Consulting Firm.

16. The project management and procurement specialist should have civil engineering background and experience in working with multilateral development agency. The main tasks of this specialist include (i) helping GPMO establish its initial operation system in compliance with ADB procedural requirements, and (ii) providing assistance for GPMO in reviewing the bidding documents for civil works contract packages to be procured under advance contracting arrangement in accordance with national engineering standards and ADB procedural requirements.

17. The resettlement specialist should have competence and rich experience in working for ADB or the World Bank as a resettlement safeguard specialist. The main task of the resettlement specialist is to provide the guidance and assistance for GPMO and MPMOs in updating the resettlement plans by incorporating the revisions arising from land survey or introduced during engineering design, in accordance with ADB resettlement safeguards policy requirements.

51 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 10

SUMMARY FINANCIAL ANALYSIS

A. Introduction

1. With the current institutional arrangement, the Guangxi Zhuang Autonomous Region Government (GZARG) will be the project Execution Agency (EA). The three municipal governments will be the implementation agencies (IAs) and the owners and operators of the facilities constructed under the Project will be responsible for debt servicing. The urban construction investment companies in the project cities will be the project implementation companies (PICs). These PICs are all state-owned companies that function as the agents of the governments for the financing, including raising funds from commercial banks, and construction of urban infrastructure projects. They will manage the construction of the respective Project components, including the procurement of goods and services and supervising construction. Thus, the financial analysis reviews the past financial performance of the municipal governments, analyze projections of their future revenue inflows, and assess their ability to provide counterpart funds and to meet debt servicing obligations.

B. Fangchenggang

a) Financial Performance

2. Due to the effort to strengthen fiscal revenue collection and management and the active support of the central and provincial governments for local economic development under the various preferential programs such as the National Strategy for Development of the West, the revenues of Fangchenggang Municipal Government (FMG) have experienced continuous rapid growth. Fangchenggang has ranked first in fiscal revenue growth in the past 3 years (2006–2008) among the 14 prefecture-level municipalities in GZAR. The disposable fiscal revenue has increased at an average of 51% in the past 3 years. Fiscal recurrent expenditures have been well controlled at an annual average growth of 22%. In the first half of 2009, FMG took extraordinary measures to deal with the repercussions of the international financial crisis. The fiscal revenue reached CNY 1.378 billion or increase of 19.6% over the same period of the previous year. Overall, FMG has achieved a good balance of fiscal revenues and expenditures, with a small surplus.

Table A10.1: Summary of Revenues and Expenditures for FMG (CNY million) Items 2005 2006 2007 2008 Fiscal Revenues 1,416 1,907 3,034 4,807 % growth rate 35% 59% 58%

Recurrent Expenditure 860 866 1,151 1,535 % growth rate 1% 33% 33%

Discretionary Expenditures 460 932 1,750 3,014 % growth rate 103% 88% 72%

Existing Debt Total Debt 809 943 1,393 1,554 International debt 92 92 84 84 Domestic debt 717 851 1,309 1,470 % growth rate of total debt 17% 48% 12%

Fiscal Surplus (Deficit) 97 109 133 258

53 ADB TA 7160-PRC: Guangxi SW Cities Development Project

b) Financial Projections

3. Fangchenggang has a well-formulated urban master plan (2008–2025). According to the recent year’s fiscal situation and growing trend, by extensively utilizing seaport advantage for foreign trade, continuously improving urban infrastructure and transportation network, and further adjusting and optimizing industry’s economic structure, it is projected that Fangchenggang will experience long term sustainable development. It is therefore assumed that the fiscal revenues will have an annual increase of 30-40% during the projection period. The recurrent expenditure will be kept at an annual increase of 30%. As a number of major fixed investment projects will enter into service, it is therefore assumed that the annual increase of the discretionary expenditures will be reduced to 35% during the project period. The fiscal revenues, recurrent expenditure and discretionary expenditures during 2009 to 2018 are presented in Table A10.2. The result shows that fiscal surplus will generate significant amounts during the project period, which can be a solid funding source for project counterpart funds, debt service, and operation and maintenance (O&M) budget.

Table A10.2: Projections of Revenues and Expenditures for FMG (CNY million)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 6,250 8,750 11,800 16,600 22,000 30,000 39,000 50,700 65,910 85,683

Recurrent 1,996 2,594 3,373 4,384 5,700 7,410 9,633 12,523 16,279 21,163 Expenditure Discretionary 4,069 5,493 7,415 10,010 13,514 18,244 24,630 33,250 44,887 60,598 Expenditures

Fiscal Surplus 186 663 1,012 2,205 2,786 4,346 4,738 4,928 4,743 3,922 (Deficit)

c) Impact of Equity Contribution and Loan Repayments

4. The analysis further examined the fiscal impact of project equity contribution, debt service for domestic and international loans, and O&M cost on the municipal finance. Overall, the total contribution of the FMG through its fiscal resources will amount to 2.1% of fiscal surplus, including 0.67% for counterpart funds, 1.27% for debt service and 0.17% for O&M budget. The results confirm that all the factors will not place significant impact even to the fiscal surplus. The updated financing plan has also demonstrated that the FMG has already had a firm financing plan for equity contribution, debt service and O&M budget. Therefore, it is concluded that the FMG has sufficient fiscal capacity and experience to implement the two project components.

Table A10.3: Impact of Equity Contribution and Loan Repayments for FMG

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Equity Contribution 36.97 55.52 29.70 37.57 35.55 (CNY million) % of Fiscal Surplus 5.58% 5.49% 1.35% 1.35% 0.82%

Debt Service (CNY 57.93 51.60 75.42 76.17 73.55 36.81 million) % of Fiscal Surplus 2.08% 1.19% 1.59% 1.55% 1.55% 0.94%

Operation Cost 5.41 10.82 10.82 10.82 10.82 (CNY million) % of Fiscal Surplus 0.12% 0.23% 0.22% 0.23% 0.28%

Project 5.58% 5.49% 1.35% 3.43% 2.13% 1.82% 1.77% 1.78% 1.21% Expenditure as % of Fiscal Surplus

54 ADB TA 7160-PRC: Guangxi SW Cities Development Project

C. Chongzuo

a) Financial Performance

5. Chongzuo Municipality was established in 2002. Over the past 4 years (2005–2008), the fiscal revenue of Chongzuo municipal government (CMG) totalled CNY 3.97 billion, with an average annual increase of 18.2%. Its total fiscal expenditure amounted to CNY3.67 billion with an average annual increase of 17.4%. Of the total fiscal expenditures, about 66% was for recurrent expenditure and over 33% was for discretionary expenditure. Overall, it has achieved a balance of fiscal revenue and expenditures with a small surplus. As a new and small border city facing rapid urban development, Chongzuo has also utilized loans from domestic banks and international organizations. Up to the end of 2008, its total debt reached CNY 721 million, including foreign debt of CNY 155 million and domestic debt of CNY 566 million.

Table A10.4: Summary of Revenues and Expenditures for CMG (CNY million) Items 2005 2006 2007 2008 Fiscal Revenues 807 858 971 1,332 % growth rate 6% 13% 37% Recurrent Expenditure 539 498 540 869 % growth rate -8% 9% 61% Discretionary Expenditures 250 261 307 406 % growth rate 5% 18% 32% Existing Debt Total Debt 148 642 552 721 International debt 2 166 166 155 Domestic debt 146 476 386 566 % growth rate of total debt 332% -14% 31%

Fiscal Surplus (Deficit) 18 99 123 57

b) Future Projections

6. Chongzuo has a well-formulated urban master plan (2008–2025). In the short term, CMG has a program to achieve an industrial output value of CNY 30 billion by the end of 2010. This will include CNY 10 billion for each of the three pillar industries, namely, sugar, manganese and building materials. Meantime, CMG will also strengthen assets management for the state-owned enterprises to ensure to maintain and appreciate the values of the state-owned assets. The financial analysis projects that the CMG’s fiscal revenue will increase at 18% annually to reach CNY 1.85 billion in 2010, CNY 2.18 billion in 2011, CNY 2.58 billion in 2012, CNY 3.05 billion in 2013 and CNY 3.60 in 2014. With more stringent measures to control recurrent expenditure and strengthen project expenditure management with project performance evaluation and enhanced supervision, the annual increase of the recurrent expenditure and discretionary expenditures is estimated at 10%. Fiscal surpluses are predicted in Table A10.5. The result shows that fiscal surplus will generate significant amounts during the project period, which can be a solid funding source for project counterpart funds, debt service and O&M budget.

55 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table A10.5: Projections of Revenues and Expenditures for CMG (CNY million)

2009 2010 20112012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 1,571 1,854 2,188 2,582 3,046 3,595 4,242 5,005 5,906 6,969

Recurrent Expenditure 956 1,052 1,157 1,272 1,400 1,540 1,694 1,863 2,049 2,254 Discretionary Expenditures 446 491 540 594 653 718 790 869 956 1,052

Fiscal Surplus (Deficit) 169 312 491 715 993 1,336 1,758 2,273 2,900 3,663

c) Impact of Equity Contribution and Loan Repayments

7. The counterpart fund requirement over the project implementation period of 2010 and 2014 is projected to be CNY 228.06 million, compared to the accumulated fiscal surplus of CNY 3,848 million over the same period. Thus, the total government equity contribution is 5.9% of the accumulated fiscal surplus. The financial analysis has also demonstrated that the project debt service will account for less than 1.27% of fiscal surplus during the peak period. After Project implementation, the CMG will need to allocate CNY 7.62 million per annum for the operation of the two project components, which will account for less than 0.5% of fiscal surplus. Overall, the total contribution of the CMG through its fiscal resources will amount to less than 2.36% of its fiscal surplus. Therefore, Chongzuo has sufficient fiscal capacity to implement the Project.

Table A10.6: Impact of Equity Contribution and Loan Repayments for CMG

2010 2011 2012 2013 2014 2015 2016 2017 2018 Equity Contribution (CNY million) 46.30 65.18 53.30 31.46 31.81 % of Fiscal Surplus 14.85% 13.27% 7.45% 3.17% 2.38%

Debt Service (CNY million) 0.00 0.00 22.38 18.54 18.54 18.54 % of Fiscal Surplus 0.00% 0.00% 1.27% 0.82% 0.64% 0.51%

Operation Cost (CNY million) 3.81 7.62 7.62 7.62 7.62 % of Fiscal Surplus 0.29% 0.43% 0.34% 0.26% 0.21%

Project Expenditure as % of Fiscal 14.85% 13.27% 7.45% 3.17% 2.67% 1.71% 1.15% 0.90% 0.71% Surplus

D. Baise

a) Financial Performance

8. Baise Municipality was established 6 years ago. With support from the central and provincial governments under the a large number of preferential programs, including the NSDW, the Ethnic Minority Development Program, and Border Community Revitalization Program, Baise has witnessed tremendous industrial and economic growth. The pillar industries include aluminum, pulp and paper and building materials. In particular, it is the largest aluminum producer in China. The average annual GDP growth reached 15%, from CNY 23.9 billion in 2005 to CNY 41.6 billion in 2008. The fiscal revenue accelerated from CNY 948 million in 2005 to CNY 2,023 million in 2008, or an average increase of 29%. On the expenditure side, the recurrent expenditures increased gradually. But the discretionary expenditures incurred in the past three years grew dramatically, mainly due to the large number of urban infrastructure projects. Baise does not have international debts. Its domestic debt keeps apace with the implementation of urban infrastructure projects.

56 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table A10.7: Summary of Revenues and Expenditures for BMG (CNY million)

Items 2005 2006 2007 2008 Fiscal Revenues 949 1,144 1,711 2,024 % growth rate 21% 50% 18% Recurrent Expenditure 522 614 690 854 % growth rate 18% 12% 24% Discretionary Expenditures 427 530 1,022 1,170 % growth rate 24% 93% 15% Existing Debt Total Debt 618 644 780 926 International debt - - - - Domestic debt 618 644 780 926 % growth rate of total debt 4% 21% 19% Fiscal Surplus (Deficit) 0 0 0 0

b) Future Projections

9. A close look at the fiscal revenue of the Baise municipal government (BMG) showed that its growth rate is about 3% higher than the rate of GDP growth. As an old revolutionary base with a large ethnic minority poverty population and all counties being national and provincial poverty counties, Baise is eligible for a large number of preferential programs that entail a large amount of transfer payments and subsidies. Therefore, the annual fiscal revenue is projected to increase at 27% conservatively. On the fiscal expenditure side, the recurrent expenditures are relatively stable; and the discretionary expenditures are projected at the same growth rate as the fiscal revenues. The financial analysis shows that Baise will be able to achieve fiscal budget balance with a positive surplus throughout the projection period. A summary of the projected revenues, expenditures and fiscal surpluses are presented in Table A10.8.

Table A10.8: Projections of Revenues and Expenditures for BMG (CNY million)

2009 2010 20112012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 2,570 3,264 4,146 5,265 6,687 8,492 10,785 13,697 17,395 22,092

Recurrent Expenditure 1,021 1,226 1,471 1,765 2,118 2,542 3,050 3,660 4,392 5,271 Discretionary Expenditures 1,407 1,829 2,378 3,092 4,019 5,225 6,793 8,830 11,480 14,923

Fiscal Surplus (Deficit) 142 209 297 408 549 725 942 1,207 1,524 1,898

c) Impact of Equity Contribution and Loan Repayments

10. The financial analysis has shown that the total required contribution of the BMG will amount to less than 5.3% of fiscal surplus. It is therefore concluded that BMG will have sufficient fiscal capacity to implement the two project components. It is noted that the equity contribution will constitute a higher amount in the first couple of years and will decrease in the following years. It is therefore suggested that BMG allocate the investment fund as a priority so as to provide the project funds on a timely basis. When the fiscal capacity is strengthened in the following years, the debt service obligation and operation budget will not place a significant impact to BMG’s fiscal budget.

57 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table A10.9: Impact of Equity Contribution and Loan Repayments for BMG

2010 20112012 2013 2014 2015 2016 2017 2018 Equity Contribution (CNY 25.58 35.02 28.68 15.45 15.61 million) % of Fiscal Surplus 12.23% 11.81% 7.02% 2.81% 2.15%

Debt Service (CNY million) 25.51 30.64 61.21 55.55 53.73 51.91 % of Fiscal Surplus 4.64% 4.22% 6.50% 4.60% 3.53% 2.73%

Operation Cost (CNY million) 1.22 2.44 2.44 2.44 2.44 % of Fiscal Surplus 0.17% 0.26% 0.20% 0.16% 0.13%

Project Expenditure as % of 12.23% 11.81% 7.02% 7.45% 6.54% 6.75% 4.81% 3.69% 2.86% Fiscal Surplus

58 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 11

SUMMARY ECONOMIC ANALYSIS

A. Introduction

1. The economic analysis covers both the Guangxi Southwestern Cities Development Project (the Project) as a whole, and each investment component located in the three cities of the Guangxi Zhuang Autonomous Region (Guangxi) of the People's Republic of China (PRC) under the Project—Fangchenggang City, Chongzuo City, and Baise City (the Project Cities).

2. For the Project as a whole, the analysis covers the macroeconomic context, the sectoral context, the long term development strategies of Guangxi and the Project Cities, and the urban development history and city development master plans of each of Project Cities. For individual investment components, the analysis covers the project rationale, project identification and alternative, least cost analysis, benefits and costs, least cost analysis, sensitivity test, and distribution analysis. The economic analysis was conducted in accordance with the Asian Development Bank (ADB) Guidelines for the Economic Analysis of the Projects. It also drew on Technical Note No. 13 for Assessing the Use of Project Distribution and Impact Analysis issued by Economics and Research Department of ADB.

B. Macroeconomic and Sectoral Context

3. The PRC has made significant progress since its adoption of the policy for reform and economic opening in 1978. However, the country’s gross domestic product (GDP) on a per-capita basis is still low. Furthermore, the disparity between the urban and rural areas as well as between the coastal provinces in the east and the interior provinces and autonomous regions in the west has widened.

4. To help the 12 less-developed provinces and autonomous regions in the western PRC to accelerate economic development, the Government launched in 1999 the National Strategy for Development of the West (NSDW). Guangxi is one of the 12 less-developed provinces and autonomous regions targeted by the Government for support under NSDW. The investment under NSDW has accelerated particularly the infrastructure development in Guangxi through building expressways, airports, power plants, hydropower stations, power transmission grids, and telecommunication facilities. These developments have effectively strengthened the connectivity and economic link between Guangxi and the national and international markets, thus making it possible to foster an accelerated and sustained growth in the urban economy.

5. Guangxi is the only province/autonomous region in the western PRC that has both deepwater sea ports and land ports at international borders. At the national level, Guangxi serves as the gateway for many land-locked and less developed provinces and autonomous regions in the western PRC to the international market. Guangxi is rich in natural resources. Twelve mineral reserves found in Guangxi are ranked as the national largest verified reserves. Guangxi is also endowed with forest and rich variety of agricultural produces and marine resources. These endowments provide Guangxi with unique advantages for economic development. From 2001–2008, Guangxi enjoyed an accelerated economic growth rate of 11.9%, which is 1.7% higher than the national average over the same period. Despite the global economic crisis, Guangxi maintained a growth rate of 12.8% for 2008, which is 3.8% higher than the national average of 9.0% for the year.

59 ADB TA 7160-PRC: Guangxi SW Cities Development Project

6. The long term development strategy of Guangxi as well as those of the Project Cities have been prepared and implemented in accordance with a general vision to develop a market-based and diversified economy with growing employment opportunities in the non- agriculture sectors through strengthened economic cooperation and integration with the neighbouring provinces at sub-national level and with the neighbouring countries of Association of South East Asia Nations (ASEAN) and/or in the Greater Mekong Subregion (GMS).

C. Project Cities

7. All the three Project Cities are less developed and medium-sized cities surrounded by poverty counties. They are strategically located along the newly developed/upgraded transport corridors in Guangxi: Fangchenggang City is a multimodal transportation hub to connect the expressway and railway with deepwater sea ports; Chongzuo City serves as a regional logistics center under the GMS transport framework to facilitate international trade between the PRC and GMS countries through the land port at the border with Viet Nam; and Baise City is a nodal city of the inter-province highway and expressway system to provide the critical link for the land-locked Yunnan province and Guizhou province to the sea ports through the expressway system in Guangxi. Accelerated urban development of these Project Cities is required not only for creating non-agricultural jobs for the poor farmers of the surrounding poverty counties, but also as part of the national development strategy to integrate the less developed southwestern PRC with the international market through the transport corridors in Guangxi.

8. Improved connectivity and increasingly strengthened economic integration has fostered an accelerated economic growth and urban development of the Project Cities. Table A11.1, Table A11.2 and Table A11.3 show the economic growth, the urban population growth, and the urban land expansion, which are experienced or projected for the Project Cities between 2000 and 2025/2020 respectively.

Table A11.1: GDP Growth of the Project Cities

Average Annual Growth Rate 2000–2007 2007–2010 2010–2020 2020–2025 2000–2025 Fangchenggang 16.4% 20.0% 17.5% 15.0% 17.0% Chongzuo 17.6% 13.8% 8.6% 8.6% 11.7% Baise 16.5% 18.3%10.0% 10.0% 12.8% Project Total 16.8% 17.3% 11.8% 11.7% 13.8% Source: Guangxi Development and Reform Commission.

Table A41.2: Population in the Urban Center of the Project Cities

2000 2007 2010 2015 2020 2025 2000–2025 2025–2007 ('000) ('000) ('000) ('000) ('000) ('000) Average Annual Factor Growth (%) Fangchenggang 153 204 281480 693 1,000 7.8% 4.91 Chongzuo 51 217 302389 500 643 10.7% 2.97 Baise 126 185 258359 500 696 7.1% 3.10 Project Total 329 606 841 1,228 1,693 2,340 8.2% 3.63 Source: Guangxi Development and Reform Commission.

60 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Table A11.3 : Land Area of the Urban Center of the Project Cities (Square Kilometer)

2000 2009 2020

Fangchenggang 7.0 25.0 75.0 Chongzuo 5.0 12.0 50.0 Baise 7.5 32.0 50.0 Source: Guangxi Development and Reform Commission.

9. The growth projections for GDP, urban population, and urban land area of the Project Cities are made based on the following grounds.

10. Fangchenggang City. Given the availability of deepwater sea ports at the city and sophisticated transport infrastructure, the Government has approved the proposal to establish a giant iron and steel complex in Fangchenggang City, which has a planned capacity of 10 million ton per year in the first phase with the potential to expand its capacity up to 30 million ton per year in the future. The city is thus envisaged to develop itself into, among others, one of the most important iron and steel industrial centers of the PRC, to be supported by a highly developed service sector and an extended and diversified production chain around the complex.

11. Chongzuo City. Despite its origin as "Xiangjun" (the elephant prefecture) set by the First Emperor in the ancient China, Chongzuo City is the "youngest" among the cities in the PRC, officially established in 2003. This newly established city is planned as a regional logistics center to support and facilitate the operation of the land port at Youyiguan Pass (the Friendship Pass) between the PRC and Viet Nam, one of the most important land ports in the western PRC. The trade between the PRC and the ASEAN/GMS countries through this land port has increased dramatically from $584 million in 2003 to $1,599 million in 2008. Despite the global economic crisis, the trade through the land port for the first half of 2009 hit $909 million. Moreover, Chongzuo City is particularly rich in manganese resources with a proven reserve of about 138 million tons or 19.4% of the national total. It also has well- developed sugarcane farming in its vicinity, and will be developed as the largest cane sugar producer of the PRC with a processing capacity to account for about 20% of the national output. Manganese mining and processing and agro-processing including cane sugar processing are becoming the pillar industries of the city. Chongzuo City will also be developed as an important center for education and human resources development of Guangxi to support the ongoing economic transformation and regional economic integration. A number of colleges and technical and vocational schools have been planned or established in the city, including the Guangxi Ethnic Minority Teachers College and Guangxi Urban College for Vocational Education both starting enrolment in 2009.

12. Baise City. In the past, economic development of Baise City was constrained by lack of access to market and capital due to its remoteness, its mountainous topographic condition which had isolated Baise from other economic centers, and its poor infrastructure. Most of these major constraints have been removed by recent investment under NSDW. Apart from its role as a critical nodal city in the inter-province transport system of the GMS transport framework, Baise City has become an emerging "aluminum capital" of the country equipped with a proven bauxite reserve of 780 million ton or more than one third of the national total. Based on its unique bauxite reserves, Baise City is planned to develop itself into the most important aluminum industry center of the PRC with a fully developed production chain comprising bauxite mining, electrolytic aluminum, and downstream aluminum processing.

13. The projections for growth in GDP, population, and urban expansion of the Project

61 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Cities are impressive, but not unusual in the rapid urbanization context of the PRC. Over the past 3 decades, numerous cities in the Yangtze River Delta and Pearl River Delta of the PRC have developed at an unprecedented scale, once their local economies have been connected to the national or international markets. Many of these cities did not have the natural resources, basic infrastructures, and financial resources that are already available at the Project Cities.

D. Project Context and Project Economic Analysis

14. Investment components under the Project fall in two general categories: (i) urban roads and related municipal infrastructures including water supply pipeline, drainage system, sewerage pipeline, lighting, traffic light system, and landscaping; and (ii) environmental upgrading and/or improvement. The urban roads and related municipal infrastructures are proposed and constructed to support and facilitate the Project Cities to expand into new areas. All the components in any of the Project Cities are proposed as part of an overall city development program guided by a well-prepared city development master plan of that individual Project City. Apart from the components proposed for ADB financing under the Project, the Project Cities have also been working on the other part of the city development program in accordance with their relevant city development master plans.

15. The integrated construction of urban roads and basic municipal infrastructures is considered the least-cost approach in support of urban development, compared to the "problem shooting approach" that builds one piece of the most needed infrastructure at a time with unavoidable interruption of the municipal service of the built infrastructure at each time to install the other municipal infrastructures in the future. Different urban road development options were compared between the alternatives of building the urban roads with the planned width at one time, or with only half of the planned width at the initial stage to be followed by a road widening project in the future along with traffic growth. It was concluded that the proposed option to build the full scale roads at one time is the least-cost arrangement, given the integrated construction nature of the planned interventions.

16. Two different approaches have been adopted to conduct economic analysis for the two kinds of investment components: (i) cost and benefit analysis (CBA) for urban roads and related municipal infrastructures, and (ii) land value approach for environmental upgrading/improvement components.

17. One clarification should be provided, however, to allow for a better understanding of the evaluation result: although all the basic municipal infrastructure will be constructed together with the urban roads under the Project's integrated invention approach to be applied the Project, the economic analysis for the Project has placed its focus only on the main function of the infrastructure, i.e. only the function of the urban roads among all the infrastructures to be constructed. This implies that the benefit estimates in this analysis tend to underestimate the overall project benefits or the overall EIRR would be higher than those presented in the analysis. With this clarification, the economic analysis for this category of investment components under the Project will be simply referred to as CBA for the roads components.

18. CBA for roads components is conducted using TransCAD model. Traffic, vehicle speeds and distance traveled in the new urban areas are forecasted under with or without the project scenarios for each road component proposed for different Project Cities. Economic benefits are calculated in terms of the reduction in vehicle operating costs, value of travel time, value of accidents, and traffic congestion. Economic costs include the costs for investment and operation and maintenance minus the end value.

19. Under the land value approach applied for the environmental upgrading/improvement

62 ADB TA 7160-PRC: Guangxi SW Cities Development Project components under the Project, land value increases attributable to the relevant investment component have been counted as the economic benefits of the concerned investment. This approach allows for direct allocation of benefits to the concerned component. In the case of the coastal protection and upgrading component in Fangchenggang City, land value benefits are derived for the 10% of the administrative areas that are currently subject to coastal tidal flooding. At the present, the land values in these areas are only 20% of the values of the lands in nearby flood-free areas. The land value approach assumes that after the completion of the investment component, the values of the relevant lands will increase up to 50% of the nearby flood-free lands, entirely due to the flood control effect brought by the Project. It should be noted that this is a conservative assumption, as observed in the cases of either the national project or the international project, flood control interventions normally increase the land values by a factor of four. Similar approach is conducted for the Shuikou Lake environmental improvement component in Chongzuo City, based on the assumption that only 10% of land value increase in the nearby new urban center will be attributable to the improved amenity.

20. Based on the above, economic net present values computed using a discount rate of 12% are all positive, and economic internal rates of return (EIRR) were computed with the following results: 19.5% for Fangchenggang City, 16.1% for Chongzuo City, 15.3% for Baise City, and 17.7% for the Project as a whole. The EIRRs were tested through sensitivity analysis using 25% decrease in economic benefits as the worst case scenario under CBA for the roads components, and a 5-year period of no increase in the land values as the worst case scenario under the land value approach applied for the environmental upgrading/improvement components. Under these very conservative assumptions, the EIRRs are 14.3% for Fangchenggang City, 11.0% for Chongzuo City, 12.4% for Baise City, and 13.0% for the Project as a whole. The Project is considered economically viable. Major results of the economic evaluation are summarized in Table A11.4 below.

Table A11.4: Summary of Economic Evaluation

Economic Net Investment Present EIRR EIRR Economic Price Value Base Case Worst Case CNY (million) CNY (million) (%) (%) Fangchenggang 921 744 19.5 14.3 Roads 729 96 13.3a 10.7 Coastal Protection and Upgrading 192 649 43.1 27.9 Chongzuo 435 195 16.1 11.0 Roads 356 45 13.3 a 10.2 Shuikou Lake Environmental 80 150 28.6 14.5 Improvement Baise 438 145 15.3 12.4 Road and Bridge 438 145 15.3 a 12.4 Project 1,795 1,085 17.7 13.0 a Land value approach has also been tried for the road components, yielding EIRRs higher than those if using CBA.

E. Distribution Analysis

21. At a discount rate of 12%, the overall economy will gain CNY 2,035 million through the Project. Labourers will gain CNY 45 million through wages paid in excess of the economic opportunity cost of labour. The consumers will gain CNY 4,426 million because they can avail of more convenient transportation and improved living conditions. The difference will be paid by the Government and will presumably be recouped from taxes. The results of the distributional analysis are presented in Table A11.5.

63 ADB TA 7160-PRC: Guangxi SW Cities Development Project

22. The share of net economic benefits of the Project accruing to the poor is 26.7%. Since the ratio is higher than the ratio of poverty population estimated at 15.6% for the whole Project area, the analysis concludes that the Project will support pro-poor economic growth.

Table A11.5: Distribution of Net Economic Benefits and Poverty Impact Ratio (CNY million) Financial Economic Distribution of Project Benefits Present Conversion Present Minus Project Values Factor Values Financial Gov. Labour Users Total Benefits ADB Loan 1,020 1.08 1,102 82 82 82 Local Loans 479 1.00 479 0 0 0 Revenue 0 1.00 0 0 0 0 Consumer 0 1.00 4,426 4,426 4,426 4,426 Surplus Total Benefits 1,499 6,007 4,508 Costs Foreign 147 1.08 170 23 (23) (23) Investment Local Investment 1,325 1.00 1,529 204 (204) (204) Labor 151 0.70 106 -45 45 45 Other Operating 604 1.00 698 93 (93) (93) Costs ADB Loan 938 1.08 1,013 75 (75) (75) Payments Other Loan 458 1.00 458 0 0 0 Payments Tax 48 0.00 0 (48) 48 48 Total Costs 3,671 3,973 301 0 Net Benefits (2,172) 2,035 4,207 (2,172) (2,172) Gains and Losses (2,437) 45 4,426 2,035

Proportion of the Benefits Accrued to the Poor 25.0% 100.0% 25.0% 26.7% Benefits to Poor 543 Poverty Impact Ratio 26.7%

64 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 12

SUMMARY RESETTLEMENT PLAN

A. Land Acquisition and Resettlement Issues

d) Introduction

1. The Guangxi Southwestern Cities Development Project (the Project) comprises six components in the cities of Fangchenggang, Chongzuo and Baise in Guangxi Zhuang Autonomous Region (GZAR). The physical construction of the Project will have significant land acquisition and resettlement (LAR) impacts. The implementing agencies (IAs) have prepared three full resettlement plans (RPs), one full RP with due diligence, and one short RP. The primary objective of the RPs is to ensure that the affected persons (APs) will improve their standards of living, or at least not be made worse off because of the subproject investments.

e) Overview of Land Acquisition and Resettlement

2. Based on the resettlement impacts identified, construction of the Project will affect 13 rural villages, two resident communities, two townships and three street administrations, and three districts. About 4,550 mu of land will be permanently acquired by the Project, of which 12.38% is classified as farmland. Permanent land acquisition will affect 924 households or 4,474 people. The Project will also require the temporary acquisition of 586 mu of land, of which 20.83% is farmland and affect 97 households or 349 persons. A total of 508 households or 2,113 people will be relocated and about 60,876 square meters (m2) of residential houses will be demolished. Two public institutions and one enterprise with a total of 611 employees and students (500 employees and 111 students) will be affected and 7,763 m2 of non-residential structures will be dismantled, also 26,123 m2 illegal structures for aquaculture and facilities and net cages of 89 households (725 persons) will be removed. In addition, associated productive assets, ground attachments, and basic infrastructure and facilities will also be affected. Of the total affected population, 635 households and 2,305 persons are minority households (629 Zhuang households or 2,281 persons, 3 Yao households or 13 persons, 2 Miao households or 7 persons, and 1 Jing household or 4 persons), and 85 households or 320 persons are vulnerable groups, including 42 households living under minimum living guarantee (MLG), and 22 households with “Five Guarantees,” 15 women-headed households, and six disabled households. The affected 5,611 people include urban and rural residents, and legal and non-legal owners of structures. The RPs will be updated based on detailed measurement survey and submitted to ADB for review and approval prior to award of civil works contract.

f) Principles of Compensation

3. The compensation of the permanent land loss is based on the Land Administration Law of PRC (amended 2004) and the State Council Decision to Deepen Reform and Strictly Enforce Land Administration (Document 28, November 2004). Compensation for house demolition is based on the State, GZAR, and Municipal Urban Housing Demolishment Administration Regulations. Based on consultations with local governments and those affected, and general practice in GZAR and the three cities of Fangchenggang, Chongzuo and Baise, a set of compensation standards was adopted by the respective city project management offices (PMOs) and IA. The resettlement principles established for the Project are: (i) Land acquisition and involuntary resettlement should be avoided or minimized where feasible by developing and comparing a series of design alternatives; (ii) All people residing,

65 ADB TA 7160-PRC: Guangxi SW Cities Development Project cultivating or making a living within the areas acquired for a subproject prior to a formally recognized cut-off date should be considered as affected people. They should receive compensation for all losses, including assets and livelihoods regardless of land tenure and property right status, and should be entitled to rehabilitation assistance; (iii) Compensation and entitlements provided are based on market value or replacement value and must be adequate to allow those affected to at least maintain their pre-project standard of living, with the prospect of improvement; (iv) Per capita landholding after land acquisition should be sufficient to maintain the previous livelihood standard. Where land allocation per capita is not sufficient to maintain the previous livelihood standards, other income-generating activities will be provided; (v) A preferential policy will be provided to vulnerable groups in such things as compensation, MLG, employment and assistance in relocation; (vi) All APs are adequately informed on eligibility for compensation, compensation standards, livelihood and income restoration plans, and project timing; (vii) Timely payment of compensation to APs; (viii) No land acquisition, demolishment or dispossession of assets will take place prior to satisfactory compensation of APs; (ix) Resettlement costs will be included as part of Project costs; and (x) Close monitoring and timely actions will be carried out to identify and resolve any problems.

4. The APs will be notified about the key elements of the RPs prior to ADB loan appraisal. On various occasions during meetings, interviews, focus group discussions, public consultation workshops, and community consultation meetings, local representatives have participated in the planning and concerns have been integrated into the RPs. The resettlement information booklets (RIBs) will be distributed to APs prior to loan appraisal. The Fangchenggang Municipal Government (FMG), Chongzuo Municipal Government (CMG), Baise Municipal Government (BMG), and concerned district/township governments will implement ADB’s full disclosure policy for resettlement activities, including: (i) distribution of the RIBs to the APs and village offices and resident community; and (ii) posting of the RPs in Chinese at village offices and resident community, and on the ADB website in English and Chinese before appraisal. The Project IA will establish project resettlement units for supervising implementation, continuing public consultation, monitoring resettlement progress, and responding to grievances. The grievance address procedures are well established and explanations are included in the RPs and RIBs.

g) Resettlement Support Activities

5. For land acquisition, land compensation and resettlement subsidy and standing crops will be paid in cash to the affected villages/communities or to the APs, and compensation for standing crops will be paid in cash to the APs. The compensation payment will be used for the development of tertiary industry. For residential houses and non-residential (institutions and enterprises) houses to be demolished, compensation will be paid to owners, including those without structure certificates. The payment will be made in cash according to the appraised value of the property. The households, institutions, and enterprises that have to relocate will also receive a relocation allowance. Compensation for standing crops, auxiliaries, and other assets will also be paid directly to the APs. Income losses resulting from reduced production sales and wages caused by the Project will be compensated in cash.

6. The resettlement strategy encompasses (i) the replacement of housing, and (ii) the restoration of livelihoods and income. For people losing land in rural areas, there are two resettlement options: (i) cash or cash plus reconstruction land for tertiary industry development in the resettlement sites. For people losing housing, they will receive cash compensation or reconstruction house land in the resettlement sites. Assistance will be provided to enable APs to construct new houses or find available housing close to their original homes, if that is their preference. The respective city PMOs, IAs and local

66 ADB TA 7160-PRC: Guangxi SW Cities Development Project governments will provide necessary assistance for house construction and relocation during resettlement implementation.

7. The measures for economic rehabilitation include: (i) provision of employment opportunities during the project construction and operational phases; (ii) provision of social insurance; (iii) non-agricultural production, including development of self-employed tertiary businesses (i.e. clothing, grocery, transportation, cargo, community service, home electronics repair, hairdressing salon, beauty salon, dry-cleaning house, entertainment, catering and hotel services); (iv) development of reconstruction land for tertiary industry to earn dividends, and (v) provision of technical training to the APs to increase their skills to be employed in other institutions, enterprises and businesses. Relocated institutions and enterprises will be provided with the options of compensation and resettlement. The same institutions and enterprises will reemploy the affected employees, and no job loss is expected. For vulnerable groups, attention and assistance will be given to their special needs and expectations. The PMO and IA will supervise implementation to ensure these vulnerable persons receive adequate compensation, housing arrangement, special fund and MLG, and assistance to restore their living conditions and incomes.

8. PMO and IA will have at least eight and 15 full-time staff responsible for land acquisition and resettlement, respectively. The staff from each component resettlement unit will take the lead responsibility for coordinating the planning, implementation, financing, and monitoring of land acquisition and resettlement by working closely with relevant village and resident officials, land resources bureau and house demolishment administration office, and other organizations involved in the implementation of the resettlement programs, and will be responsible for supervision and monitoring of resettlement (e.g., delivery of entitlements, selection of new houses, restoration of incomes, provision of economic rehabilitation measures). A training program will be organized for the resettlement officers by the resettlement monitor engaged by the PMO.

h) Preliminary Cost Estimates

9. The preliminary cost estimate for the LAR program is about CNY 319.40 million, equivalent to $46.77 million in 2009 prices, including contingencies. The estimated costs include compensation for permanent land acquisition, demolishment of residential and non- residential houses and auxiliaries, relocation allowance, basic infrastructure and special facilities, other costs, land-related taxes, and contingencies. Of the total LAR costs, the Baise City Urban Road Network and Related Municipal Infrastructure Component account for the largest proportion (39.49%). The LAR costs are included in the Project cost estimates and will be financed by FMG, CMG and BMG, respectively. Land acquisition and resettlement will be implemented between 2010 and 2012.

i) Monitoring and Supervision

10. RP implementation will be monitored internally and externally. Monitoring methodologies are specified in the RPs. Internal supervision and monitoring will be done by the IA to ensure compliance with the provisions of the RPs. The PMO and IA have agreed to a set of supervision milestones with ADB, to ensure timely and effective implementation of resettlement activities. An independent monitoring agency under contract to the PMO will carry out external monitoring and evaluation. External monitoring reports will be prepared every 6 months during implementation and annually for 2 years after completion of resettlement. These reports will be submitted to ADB, the PMO, and the IAs, and will be uploaded to the ADB website.

67 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 13

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: People's Republic of China (PRC)/Guangxi Southwestern Cities Development Project

Lending/Financing Department/ East Asia Department, Project Loan Modality: Division: EARD/EASS

I. POVERTY ANALYSIS AND STRATEGY A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy

The three southwestern cities of Fangchenggang, Chongzuo, and Baise are less-developed medium-sized cities of Guangxi Zhuang Autonomous Region (Guangxi) in western PRC, which has been targeted by the Government for support under the National Strategy for Development of the West (NSDW) and regional cooperation initiatives with countries of the Association of South East Asian Nations (ASEAN) and Greater Mekong Subregion (GMS). The cities have higher poverty rates than Guangxi overall and the national average but have strong development opportunities, and are at a critical stage of urban development and for participation in sub-national and subregional cooperation programs. Inadequate infrastructure services for the three southwestern cities constrain their participation in the sub-national and sub-regional cooperation programs and prevent them from deriving the maximum benefits from these programs. The Project will promote sustained economic and urban development and help these strategically located cities to contribute to and benefit from regional cooperation, and improve the quality of life for 606,000 residents of the Project Cities directly and 7.06 million residents in their surrounding rural counties indirectly.

The Project is consistent with the Asian Development Bank's (ADB) country partnership strategy (CPS) 2008– 2010 for the PRC, which specifies that ADB will directly support sound and sustainable urban development with a focus on relatively underdeveloped western and northeastern regions. It also aims to make markets work more efficiently through (i) urban infrastructure development, (ii) promotion of environmental sustainability, and (iii) pro- poor equitable and inclusive growth. The Project will provide an enabling environment in the border cities for poverty reduction directly and indirectly by:

(i) Improving roads and related infrastructure to promote and facilitate development of the city and regional networks and the regional economic corridor, thus creating new jobs and income generating opportunities; (ii) Addressing critical environmental issues such as reducing coastal flooding and threats to lives, assets and livelihood, reducing coastal erosion and retreat, protecting mangroves and wetland, and providing a buffer zone for future climate change; (iii) Raising public environmental awareness on these issues; (iv) Promoting ecotourism development by providing the residents of Fangchenggang and Chongzuo and tourists with a coastal park and wetland park respectively for sightseeing and recreation; (v) Increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; (vi) Improving mobility and access for local populations to key basic services and destinations; (vii) Reducing traffic congestion, saving travel time, reducing vehicle operation costs, improving road safety and reducing traffic accidents; (viii) Increasing the land and property values for local residents in the Project areas; (ix) Increasing volume of trade with GMS and ASEAN countries; and (x) Improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable groups.

B. Poverty Analysis Targeting Classification: Targeted Intervention-Geographic Focus

1. Key Issues

The three Project Cities are strategically located in the southwest area of Guangxi allowing them to integrate their economies with PRC’s regional cooperation programs that are the sub-national Pan Pearl River Delta provinces and the sub-regional southeast Asian countries. The benefits of this strategic positioning can be captured if the connectivity and linkages of the Project cities to the sub-regional and sub-national cooperation programs is enhanced with the development of free, speedy flow of goods and services. These, in turn, rely in part on the adequacy of the cities’ urban infrastructure. However, the infrastructure services are inadequate to meet the requirements of their potential strategic roles in sub-regional and sub-national programs. This is particularly true for urban road networks and urban environmental protection facilities for flood control and ecosystem rehabilitation. These infrastructure bottlenecks constrain the development and full participation of these cities in

69 ADB TA 7160-PRC: Guangxi SW Cities Development Project the sub-national and sub-regional cooperation programs, prevent them from deriving the maximum benefits from these programs, and could eventually impede the full realization of these programs.

The Project will benefit 606,000 residents (211,334 urban and 394,666 rural) in the direct project areas of Fangchenggang, Chongzuo, and Baise cities, of which 20.31% or are poor living under the rural poverty line of less than CNY 1,196 per capita per year and 8.48% urban poor living under the minimum living guarantee (MLG) at CNY 200 per capita per month for Fangchenggang and Baise cities and CNY 180 per capita per month for Chongzuo city. Rural poverty is mainly due to the harsh natural environment and lack of land resources, lack of rural roads and infrastructure, and low education. The urban poor mostly consist of people with sickness, disabled family members, elderly, and low education levels. The social analysis showed that these poor are mainly living in the areas which are more isolated from the urban center with poor infrastructure and community services. Their housing and living environments are inadequate. Residents often suffer from the loss of human life and property damage from floods and other environmental disasters and associated economic losses as well as environmental pollution. The insufficient road network and the resulting limited access to community services and facilities, adds to isolation from urban development opportunities and their overall poverty situation.

Under the National Strategy for Development of the West (NSDW), the Government has increasingly made substantial investments in transport and urban infrastructure development in the three border cities. The aim of these investments is to strengthen the connectivity of the border cities with sub-national and sub-regional programs. The three cities are at a critical stage to benefit from and contribute to the development opportunities of regional cooperation. To achieve this development objective, the three cities need to address the constraints of infrastructure services to ensure sustained urban development, which will benefit not only the residents of the three cities but the overall poverty reduction strategy for GZAR and the neighbouring western provinces supported under the NSDW.

2. Design Features

Under the coastal protection and upgrading component in Fangchenggang, a major feature of the component design is the incorporation of a mangrove public awareness intervention that consists of a public education square and a series of mangrove observation points. The design of the mangrove square and the observation points blends well with nature. In addition to being functional and attractive, it is also in line with the concept of awareness and knowledge through close contact. Under the component, an information booth will be established at the mangrove square. Information posts, signs, and placards will be erected at the mangrove square and observation points. Volunteers will be posted in the square and observation points on weekends. Day camps will be organized for primary and secondary school students. Similar public awareness activities will be undertaken under the Chongzuo Shuikou Lake environmental improvement component.

Under the capacity development component, the Project will help the Project cities to build their capacity in such areas of integrated urban planning and integrated transport planning and management. Consulting services will also be provided to strengthen the public environmental awareness for mangrove protection and conservation.

II. SOCIAL ANALYSIS AND STRATEGY

A. Findings of Social Analysis

The Project will directly benefit more than 606,000 local residents (211,334 urban and 394,666 rural). Of the total direct beneficiary populations, approximately 47% are women, 20.31% are poor living under the rural poverty line of less than CNY 1,196 per capita per year and 8.48% living under the urban minimum living guarantee (MLG) at CNY 200 per capita per month for Fangchenggang and Baise cities and CNY 180 per capita per month for Chongzuo city, and 72.58% are ethnic minorities scattered in the city.

Employment Benefits: The Project will create 10,030 person-years of direct short-term employment during the Project construction phase, and 1,220 direct long-term employment opportunities during the operation phase. In addition, many short-to-medium term new jobs will be created by the development of iron and steel industry in Fangchenggang, sugar and manganese industry in Chongzuo, and aluminum and hydropower industry in Baise and related primary, secondary and tertiary industries as a result of the improved urban infrastructure and environment. Follow-on multiplier effect jobs are also anticipated to be created. FMG, CMG and BMG have agreed that priority in filling jobs should be given to vulnerable groups including the poor, ethnic minorities, and women. Under this arrangement, a target of at least 20% has been agreed for women, ethnic minorities, and the poor. This indicates total earnings of CNY 72.91 million. The same arrangement will be adopted for the long-term jobs during the operation phase, representing a total earning of CNY 18.7 million. The loan assurances specifically address employment of the poor, women and ethnic minorities. ADB and FMG, CMG, and BMG have agreed that ensuring jobs for the vulnerable groups will be included in the project design and monitoring framework (DMF) and closely monitored under the project performance monitoring system (PPMS).

Improvement of Living Standards: The proposed road network component in the border cities will increase urban road capacities so that congestion is reduced, productivity is raised, and more urban growth can occur in

70 ADB TA 7160-PRC: Guangxi SW Cities Development Project business activities from the industrial parks linking with rural value chains. The urban road networks and municipal improvements will ultimately connect the cities to their corridors and seaports en route to regional economic growth within and across national borders. The proposed component interventions will improve urban infrastructure services to meet the increasing demands of urban development and regional cooperation. In addition, the road network will facilitate mobility and access for local populations to key basic serviced and destinations, and remove related constraint for urban development. The proposed coastal protection and flood control component in Fangchenggang will reinforce coastal dykes, reduce the risk of coastal flooding, reduce coastal erosion and retreat, protect the lives and properties of the local people along the coast, and provide the residents of Fangchenggang and tourists with a coastal park for sightseeing and recreation. The proposed environmental improvement component for Shuikou Lake in Chongzuo will reduce water pollution, increase protection and conservation of the wetland and ecosystem, which in turn will increase the development of recreation and tourism. The local people and tourists will enjoy the amenity of the improved environment. All these will contribute to the improved living standards of the local residents.

Support Gender Inclusion: Social analysis shows that women are primary responsible for cleaning up the interior and exterior of the houses after floods as well as taking care of the sick, elders, and for households related traveling and socializing activities. The Project will address these burdens. The Project has prepared a Gender Action Plan (GAP) in Appendix 12 which will help to ensure: (i) increasing women’s participation in the Project, including a target for at least 20% employment of women, ethnic minorities, and poor; (ii) participation and gender sensitive training in mangrove and wetland protection and environmental awareness programs; (iii) participation in capacity building activities; and (iv) appropriate gender targets, indicators and sex-disaggregated data for project monitoring and evaluation. International and national social safeguard specialists with gender experiences will be provided under the capacity development component to help GPMO ensure that the social safeguard (resettlement) and GAP are properly implemented.

Ethnic Minorities: Ethnic minority account for 72.58% of the three cities. The social analysis determined that they are socially and economically integrated with the Han population, and the potential impacts of the Project on ethnic minority people will be the same as its impacts on the Han population. Negative impacts are anticipated to be limited to resettlement and appropriate mitigation has been assured in the resettlement plans. Adequate outreach will be assured in the environmental awareness program through the use of appropriate languages in materials produced.

B. Consultation and Participation

1. The Project was formulated using various participatory methods and approaches for the poverty and social impact assessment including 800 respondents random sampling socioeconomic survey in the project areas, stakeholder consultation workshops, meetings, seminars, focus group discussions, and key informant interviews on issues related to urban road network and related municipal infrastructure, environmental improvement, and flood control components. The development of the environmental impact assessment (EIA) and environmental management plan (EMP) involved two rounds of public consultation. The formulation of five resettlement plans (RPs) involved separate socioeconomic surveys, community meetings, opinion surveys, and specific impact studies. The EMP and RPs have set out detailed ongoing public participation plans.

2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment

3. Was a C&P plan prepared? Yes No

Public disclosure of all project documents at the PMO and on the ADB website including the project information document (PID), design and monitoring framework, RPs, Summary Environmental Impact Assessment, Report and Recommendation of the President (RRP), public sector legal agreement, project administration memorandum (PAM), and social and environmental monitoring reports. A PID has been prepared for each subproject. Resettlement Information Booklets (RIBs) outlining the RPs will be distributed to each affected household and disclosure meetings will be held. Copies of the RIBs will be made available at the PMO office, and each affected village office. To enhance the mangrove and wetland protection and environmental benefits of the Project, mangrove and wetland protection and environmental awareness in communities will be carried out by the IA in close coordination with other stakeholders, through posters, brochures, media, community announcements, households, and schools during the implementation of the Project.

71 ADB TA 7160-PRC: Guangxi SW Cities Development Project

C. Gender and Development

1. Key Issues:

The Project is designed to be categorized as Effective Gender Mainstreaming (EGM). Results from the household survey and focus group discussions indicate that women are primarily responsible for cleaning up the interior and exterior of the houses after floods as well as taking care of the sick and old family members, and for households related traveling and socializing activities. Time spent on these activities means less time available for them for other priorities. The Project will have significant benefits for women to reduce the energy, time, and efforts spent by women on these activities, allowing them more actively in income-generating activities, family entertainment or leisure. Women strongly support the Project across all of the components, and they have perceived that the Project will improve their quality of life and create employment and income opportunities for them.

2. Key Actions. Gender plan Other actions/measures No action/measure

The Project has prepared a GAP in Appendix 12 which will help to ensure women's participation, awareness building, capacity development and appropriate gender targets, indicators and sex-disaggregated data for project monitoring and evaluation.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS Issue Significant/Limited/ Strategy to Address Issue Plan or Other Measures No Impact Included in Design Involuntary Significant Four full RP and one short RP Full Plan Resettlement have been prepared in Short Plan accordance with the PRC Land Resettlement Administration Law and ADB Framework Policy on Involuntary No Action Resettlement. Indigenous Peoples No Impact Ethnic minorities account for Plan 72.58% of the three cities. The Other Action social analysis determined that Indigenous Peoples they are socially and Framework economically integrated with No Action the Han population and no negative impacts other than resettlement have been identified. Special actions have been proposed for the ethnic minorities: (i) prioritization of ethnic minorities for jobs in the construction and maintenance activities; (ii) use of local languages and graphic signage, where appropriate, for community outreach activities such as those envisioned under the environmental awareness program for the wetland and mangrove preservation components; and (iii) use of local language in communication and outreach for the involuntary resettlement consultations and materials. Labour Significant The project will provide 10,030 Plan Employment full-time jobs during the Other Action opportunities construction phase and 1,220 No Action Labour retrenchment full-time jobs during operation Core labour standards phases. Many short-to-medium term new jobs will be created by the development of CNY 4 Trillion Economic Stimulus Package in PRC, including the development of iron and steel industry in Fangchenggang,

72 ADB TA 7160-PRC: Guangxi SW Cities Development Project

sugar and manganese industry in Chongzuo, and aluminum and hydropower industry in Baise and related primary, secondary and tertiary industries as a result of the improved urban infrastructure and environment. Project assurance will ensure that all employment and core labour standards as provided in the applicable laws and regulations are complied with. Affordability Limited No issue. Action Other Action No Action Other Risks and/or No Impact The majority of the Project Plan Vulnerabilities construction workers will be Other Action HIV/AIDS engaged locally. HIV/AIDS No Action Human trafficking training and sensitization will be Others (conflict, political provided to the contractors, as instability, etc), please ensured in the loan assurances specify and will be monitored as part of PPMS.

Special attention to the border port.

IV. MONITORING AND EVALUATION Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No

Indicators include but not limited to (i) GDP growth; (ii) satisfaction with urban transportation systems, environmental improvement and flood control; (iii) number of employment opportunities; and (iv) environmental awareness materials.

73 ADB TA 7160-PRC: Guangxi SW Cities Development Project

APPENDIX 14

GENDER ACTION PLAN

Activity Indicators and Targets Organizations Involved Time (year) 1. Urban Road Network and Related Municipal Infrastructures Components in Fangchenggang, Chongzuo and Baise Cities Ensure female representation and Records of participants in Respective City PMO, Jan 2010 – participation during public public meetings on road and IA, WF, PAO, CAB, Jun. 2013 participation and consultations, municipal infrastructures EMAO, RC, VC, and decision-making, and local decision- interventions (sex Implementation making bodies and structures disaggregated data) Consultant (Reporting Promote the creation of job Target at least 20% of jobs indicators should be opportunities for women during and created in subprojects for reflected in ADB's after project implementation, and women, ethnic minorities and project performance provide appropriate training the poor report system) Ensure that women leaders and Records of seminars, representatives are included as workshops, and meetings participating members in seminars, (sex disaggregated data) workshops, and meetings conducted to discuss road and municipal infrastructures interventions HIV/AIDS awareness training is Training records (to be provided to women and men disaggregated by sex) construction workers

2. Fangchenggang City Coastal Protection and Upgrading Component Ensure that urban and rural women Number of group members Fangchenggang City Apr. 2010 – Dec. leaders, poor women, and for coastal protection and PMO, IA, WF, PAO, 2013 households headed by women are mangrove protection and CAB, EMAO, RC, VC, included as participating members in environmental awareness and Implementation coastal protection and mangrove raising group (sex Consultant (Reporting protection groups formed in disaggregated data) indicators should be subproject area reflected in ADB's Ensure there is female representation Records of participants in project performance and participation during public public meetings on road and report system) participation and consultations, in municipal infrastructures decision-making , and in local interventions (sex decision-making bodies and disaggregated data) structures Promote the creation of job Target at least 20% of jobs opportunities for women created in subprojects for women, ethnic minorities and the poor Ensure the collection of gender- Gender disaggregated disaggregated baseline and end-line baseline and end-line information monitor trends; information in coastal protection and upgrading subproject area is available; Ensure that women leaders and Records of seminars, representatives are included as workshops, and meetings participating members in seminars, (sex disaggregated data) workshops, and meetings conducted to discuss coastal protection, and mangrove protection and environmental awareness raising programs of the project area HIV/AIDS awareness training is Training records (sex provided to construction workers disaggregated data) Ensure the use of gender sensitive Awareness training records, awareness materials and use of local materials languages in environmental outreach activities 3. Chongzuo City Shuikou Lake Environmental Improvement Component Ensure that urban and rural women Number of group members Chongzuo City PMO, IA, Oct. 2010 – Dec. leaders, poor women, and for wetland protection and WF, PAO, CAB, EMAO, 2013 households headed by women are environmental awareness RC, VC, Implementation included as participating members in raising group (sex- Consultant (Reporting environmental improvement disaggregated data) indicators should be interventions and wetland protection reflected in ADB's

75 ADB TA 7160-PRC: Guangxi SW Cities Development Project

Activity Indicators and Targets Organizations Involved Time (year) and environmental awareness raising project performance in subproject area report system) Ensure women's representation and Records of participants in participation during public public meetings on the lake participation and consultations, in environmental improvement decision-making processes, and in intervention (sex any local decision-making bodies and disaggregated data) structures Promote the creation of job Target at least 20% of jobs opportunities for women during and created in subprojects for after project implementation, and women, ethnic minorities and provide appropriate training the poor Ensure the collection of gender- Gender disaggregated disaggregated baseline and end-line baseline and end-line information in all subproject areas information in lake and monitor and evaluate the trends environmental improvement subproject area is available; Ensure that women are included as Records of seminars, participatnts in seminars, workshops, workshops, and meetings and meetings conducted to discuss (sex disaggregated data) environmental improvement interventions, and wetland protection programs of the project area HIV/AIDS awareness training is Training records (sex provided to construction workers disaggregated data) Ensure the use of gender sensitive Awareness training records, awareness materials and use of local materials languages in environmental outreach activities 4. Capacity Development EA and IAs assign one gender focal One GFP from EA and IAs, GPMO, respective city Jan. 2010 – Dec. point (GFP) to manage and respectively, for managing PMO, IAs, and 2014 coordinate GAP. The GFP will be and coordinating GAP’s work Implementation trained on safeguard and gender Consultant (GPMO and impacts by the Consultant. Consultant shall submit EA and IAs recruit consultants to One international and one monitoring report to monitoring the GAP’s implementation domestic social development ADB annually.) specialists to be responsible for the GAP monitoring to ensure social safeguards and gender mainstreaming are properly done. CAB = Civil Affairs Bureau; EA = Executing Agency; EMAO = Ethnic Minority Affairs Office; GAD = Gender and Development; GAP = Gender Action Plan; GPMO = Guangxi Project Management Office; IA = Implementation Agency; PAO = Poverty Alleviation Office; PMO = Project Management Office; RC = Resident Committee; VC = Village Committee; WF = Women’s Federation.

76 Si

TA 7160-PRC: Guangxi Southwestern Cities Development Project

Submittedto: AsianDevelopmentBank FINAL REPORT Submittedby: NREMInternationalInc. ChinaRepresentativeOffice VOLUME TWO OF THREE: 607ASkyPlaza SUPPLEMENTARY APPENDICES No.46DongzhimenwaiDajie Beijing,100027,PRChina VOLUME TWO:SUPPLEMENTARY APPENDICES

Sector Analysis –– Development Context: Western Development Strategy and GMS Program TABLE OF CONTENTS

1. History of Western Development Strategy ...... 1

2. Policies and Programs ...... 2

3. Complementary Policies and Programs ...... 3

4. External Assistance ...... 4

5. Performance of the Western Development Strategy ...... 5

6. Future Directions of the Western Development Strategy...... 6

7. Guangxi and Western Development Strategy ...... 7

8. Guangxi and GMS Program...... 14 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Supplementary Appendix A:

Sector Analysis – Development Context: Western Development Strategy and GMS Program

1. History of Western Development Strategy

Under the paramount leadership of Deng Xiaoping, the People's Republic of China began to reform its economy in 1978 by changing from a command economy to a market economy. The coastal regions of eastern China benefited greatly from these reforms, and their economies quickly raced ahead. The western half of China, however, lagged behind severely. The Western Development Strategy (WDS for short) was launched in 1999, with the aim to help the western China catch up with the eastern provinces. A Leadership Group for Western Development, headed by the Premier, was established by the State Council in January 2000.

The WDS covers six provinces (Gansu, Guizhou, Qinghai, Shaanxi, Sichuan, and Yunnan), five provincial-level ethnic minority autonomous regions (Guangxi Zhuang AR, Inner Mongolia AR, Ningxia Hui AR, Tibet AR, and Xinjiang Uygur AR), and one municipality of provincial status directly administered by the central government (Chongqing) (see Figure 1). This region contains 71.4% of mainland China's area, but only 28.8% of its population (at the end of 2002), and 16.8% of its total economic output (2003).

Figure 1: Map of 12 Western Provinces under the Western Development Strategy

SA-A-1 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

2. Policies and Programs

Since 2003, the central government has released and implemented a series of preferential supporting policies to the WDS. These policies cover, among other things: i) direct financial support to capital construction projects; ii) increased shares of IFI loans; iii) promotion of foreign and domestic direct investments; iv) priority consideration in location of large-scale state-invested water conservancy, transportation and energy projects; v) increase in transfer payments in the form of regular transfer payments and specialized subsidy and funding programs; vi) increase in lending by domestic development banks (e.g., China Development Bank) to infrastructure development, especially railways, primary highways, urban development, power, petroleum and natural gas projects; vii) reduction of corporate income taxes, value-added taxes, land taxes and import duties up to 100%; and viii) subsidies and tax breaks for natural resource industries such as mining, hydropower, coal, oil and gas.

The economic integration of the western region with the well-developed eastern provinces for a complementary and mutually beneficial relationship is an essential part of the WDS. The eastern provinces have technologies, capital and talent but their development is constrained by the lack of natural resources. In contract, the western provinces have rich natural resources yet lack technologies, capital and human resources to turn the natural resource advantages into socioeconomic benefits. While natural resource development is largely left to market forces, the central government has provided needed financial assistance that has targeted at the critical sectors such as infrastructure (e.g., energy, transportation, telecommunications) and social development (e.g., health, education and human resources development).

The main components of the strategy include the development of infrastructure (transport, hydropower plants, energy, and telecommunications), enticement of foreign investment, increased efforts on ecological protection (such as reforestation), promotion of education, and retention of talent flowing to richer provinces. As of 2006, a total of 1 trillion yuan has been spent building infrastructure in western China.

Investments in the western region by the central government have witnessed a marked increase. By the end of 2007, 92 key development programs and projects were started in the western region, with a total investment of more than CNY 1.3 trillion. According to statistical information from the Office of the Leading Group for Western Development, in the period of five years from 2003 to 2008, the central government financed 56 key programs and projects, with the investments totalling CNY 660 billion. Moreover, the fiscal payments from the central government, in the forms of transfer payments and special funds, amounted to CNY 1,200 billion. The construction fund program and the state bonds program channeled an additional CNY 300 billion. Meanwhile, the western provinces have actively sought outside investments through the Western Region Trade Fair, Western Region Expo and China-ASEAN Expo. Since 2005, more than 100,000 enterprises from the eastern provinces invested a total of CNY 700 billion in the western provinces, doubling the amount between 2000 and 2004. Realized foreign direct investment amounted to $10 billion.

SA-A-2 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

3. Complementary Policies and Programs

Ethnic Transfer Payment Program: A special transfer payment program for the ethnic autonomous regions and the ethnic prefectures in non-ethnic provinces was launched in 2000 at the beginning of the WDS1. Information from the Ministry of Finance showed that between 2000 and 2007, the regular transfer payments2 from the central government to the ethnic minority regions totaled CNY 210 billion. For the same period, the specialized transfer payments to the ethnic minority regions increased year by year, to a cumulative of CNY 600 billion3. In 2007, transfer payments to the western and central provinces accounted for 87% of the total transfer payments from the central government. If the average per-capita fiscal spending by local governments in the eastern provinces is assumed to be an index of 100, the regular transfers from the central government have topped up the per-capita fiscal spending of the local governments in the western provinces from 34 to 69, apparently narrowing the east-west gap4.

Ethnic Minority Development Fund: The EMDF was set up in 1992 to assist with the socioeconomic development of the ethnic minority regions. The funding priorities cover infrastructure services (related to rural drinking water supply, power, roads, bridges and energy), housing improvements, skills training, technological extension, cultural and language protection, and support to local cultivation, aquaculture, processing, handicrafts and tourism of comparative advantage. The funds are channeled through the Ministry of Civil Affairs and the Ministry of Finance. According to statistics5, the EMDF disbursed a total of more than CNY 3 billion between 1978 and 2005.

Border Community Revitalization Program: The BCRP was formulated in 1999 in response to the long-term neglect due to border conflicts and remoteness, as a complementary program of the Western Development Strategy. The 11th FYP for BCRP, released in 2007, emphasizes on infrastructure, poverty reduction and income generation, border trade and subregional economic cooperation, and social development and livelihood. The BCRP covers 135 border counties, including 107 ethnic counties, in nine border provinces. Between 2000 and 2005, a total of CNY 15 billion from various levels of governments were invested in the BCRP6.

1 Study of the Central Policies on Transfer Payments under the Western Development Strategy, undated, http://www.wodwod.com/show.asp?id=168571. 2 Regular transfer payments refer to those that are not earmarked. Specialized transfer payments are those that are tied to special programs. There are more than 210 specialized transfer payment programs. 3 On an annual basis, the specialized transfer payments increased from CNY 2.6 billon in 2000, to CNY 3.3 billion in 2001, CNY 3.9 billion in 2002, CNY 5.5 billion in 2003 and 7.69 billion in 2004. 4 “Central financial support by the central government assists the socioeconomic development of ethnic regions”, China News Agency, 1 May 2008, http://finance.people.com.cn/GB/7188098.html. Priority areas cover, among other things, infrastructure, basic health, basic education, basic housing, skills training, employment creation, livelihood restoration, cultural protection, environmental protection and ecological restoration. 5 “Ethnic Development Fund”, China Ethnicity, Issue of November 2008, http://www.56-china.com.cn. 6 “State invests CNY 15 billion in Border Community Revitalization Program”, 12 September 2005, http://www.china.com.cn.

SA-A-3 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Figure 2: Nine Provinces under the Border Community Revitalization Program

Heilongjiang

Inner Jilin Xinjiang Mongolia Liaoning Gansu

Tibet

Yunnan Guangxi

4. External Assistance

In addition to mobilizing domestic funds, the PRC Government has also been directing international development assistance (bilateral and multilateral) in support of the western development region. ADB started its lending program in 1987. Between 1987 and 1998, ADB provided $1,324.6 million of lending to the western provinces. Between 1999 and 2008, this figure increased to $5,750.0 million. Percentage-wise, the volume of ADB loans to the western development region accounted for 16.4% of the total ADB lending to the PRC for the ten year of 1987 to 1998, and jumped to 46.5% for the following ten years of 1999 to 2008.

Figure 3: ADB Lending to PRC by Region Figure 4: Regional Distribution of ADB Lending by before and after the WDS ($ million) Percentage Share before and after the WDS

Source: Asian Development Bank. Data as of 31 December 2008. The national category includes country-wide and multi-provincial loans.

SA-A-4 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Similarly for the World Bank, higher percentage shares of its lending portfolio target the western development region. For example, the Government has approved the World Bank’s lending plan of $5.44 billion in 44 projects for the three years of 2009 to 2011. About 72% of the loans in volume will be provided to the western provinces7.

5. Performance of the Western Development Strategy

The implementation of the programs and projects under the WDS in the past ten years has yielded desirable results. According to a most recent study released on 11 July 20098, this has accelerated the economic growth of the western provinces by lifting the total GDP for the 12 provinces of the western region in the past ten years from CNY 1,464.7 billion in 1998 to CNY 5,926.7 billion by 2008, with an average annual growth rate of 11.42% or 1.78 percentage points higher than the national average of 9.64% for the same period. The average annual growth rate for fixed assets investment reached 26.8%; and the average annual growth rate for local fiscal revenues 20.1%. For the first half of 2009, the GDP growth rate for the west region reached 22.8% compared to the national average of 7.1%9.

Examples of key infrastructure projects, critical to the development of the western region, completed since the WDS include: i) Qinghai-Tibet railway (operational on 1 July 2006); ii) west-to-east natural gas transmission project (operational on 30 December 2004); and iii) more than a dozen large-scale hydropower projects, including the Baise Hydropower Project. By the end of 2007, about 14,101 km of eight inter-provincial highways in the western region were built; they accounted for 80.8% of the planned highway mileages for the whole country for the same period. Most rail lines and railway stations have been upgraded. A large number of programs such as the western telecommunication corridor, digital cities, and broadband and telephone connections are proceeding smoothly.

The western provinces have also formulated and implemented development strategies and programs on structural adjustments and the development of “dragon-head” industries and enterprises, in the sectors of their comparative advantages including energy and petrochemical, mining and processing, agriculture and animal husbandry, manufacturing, high-tech and tourism. For example, Baise has developed into an aluminum industrial center; Chongzuo has become to be known as a cement-producing center and Fangchenggang as a port hub and will become one of the largest iron and steel producing bases.

Most recently, the State Council Western Development Office released a list of 10 major programs and projects to be launched in 2008, with a combined budget of CNY 436 billion. They include a number of new railway lines, airport expansions, hydropower stations, coal mines, gas and oil transmission lines and other public infrastructure projects in western

7 “Government clears 5.44 billion USD World Bank loan”, 27 July 2008, China Daily. 8 Chinese Academy of Social Sciences (2008). Western Development Bluebook: China Western Region Economic Development Report (2009). Beijing, China Social Sciences Press. 9 “Interpretation of China’s economic indicators for the first half of 2009”, China News Agency, 16 July 2009; “Wen Jiabao: New policies are being formulated to further promote western development”, People’s Daily, 17 October 2009.

SA-A-5 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program region. These programs and projects, together with other preferential policies, will further stimulate the economic growth of the western and central provinces.

6. Future Directions of the Western Development Strategy

At the opening ceremony of the 11th Western China International Economic and Trade Fair and 2nd Western China Forum on International Cooperation held in Chengdu on 16 October 2009, Premier Wen Jiabao affirmed that “the determination of the Chinese government to implement the Western Development Strategy will not change, the policies will not change and the strength will not change”. Premier Wen elaborated that the Chinese government will elevate the expansion of the western development and opening up to a more prominent strategic position, striving to make the western region a “new economic growth pole” by constructing it into a homebase for modern industries, demonstration area for coordinated urban and rural reform and development and a pioneer for ecological protection. Further expansion of cooperation with neighbouring countries will be promoted.

In 2008, the PRC government announced an economic stimulus package of CNY 4 trillion. No statistics yet are available on the geographical allocation of the investment, but the western region has been accorded priority consideration10. On the other hand, there is a notable trend to shift infrastructure to social development, livelihood and environmental protection (Table 1), as the infrastructure bottlenecks gradually loosen.

Table 1: Sector Allocation of the CNY 4 Trillion Economic Stimulus Package Nov 2008 Mar 2009 Jul 2009 Transportation and energy 45.0% 37.5% 22.9%

Public housing 7.0% 10.0% Rural development and infrastructure 9.3% 9.3% 42.3% 48.1% 52.4% Healthcare and education 1.0% 3.8% Post-earthquake reconstruction 25.0% 25.0%

Technology and innovation 4.0% 9.3% 12.8% 14.5% 24.7% Environment 8.8% 5.3% Source: “China’s response to the crisis: economic restructuring and the new strategy”, presented at the China-ASEAN Strategic Dialogue, Zhang Xiaojing, Institute of Economics, Chinese Academy of Social Sciences, 17 October 2009

A State Council “Circular on Maintaining Fast and Steady Economic Development of the Western Region in Response to International Financial Crisis” was approved at the 20 August 2009 Meeting of the Western Development Leading Group chaired by Premier Wen Jiabao11, and subsequently released on 31 September 2009 by the General Office of the State Council. The circular calls for the priorities and actions as shown in Table 2. While infrastructure still stands on the top of priority list, structural change, economic reform, social development, environmental protection and subnational and subregional cooperation have taken prominence.

10 Personal communication with Professor Zhang Xiaojing, Institute of Economics, Chinese Academy of Social Sciences, during the China-ASEAN Strategic Dialogue, Nanning, 17 October 2009. 11 State Council Document No. (2009) 55.

SA-A-6 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Table 2: New Directions for Western Development Strategy Priorities Program ofAction 1. Strengthening the construction Upgrading the railway network, waterways, airways, urban of infrastructure for sustaining transport, subregional transportation corridors, energy and long-term development water infrastructure, urban wastewater treatment and solid waste management

2. Protecting the environment for Ecological rehabilitation, rural energy, watershed building “resource-efficient and management, water pollution control, soil erosion control environment-friendly society” and desertification control

3. Promoting structural change for Developing specialty agriculture, new and high-tech reforming the mode of industries, service industry, dragon-head enterprises, economic development comprehensive resource utilization and orderly transfer of capital, technology, human resources and management expertise from the east to the west

4. Improving livelihood for Urban low-income housing, rural infrastructure facilities, promoting social harmony rural drinking water supply, rural small hydro and biogas, village roads, development-oriented poverty reduction (especially for old revolutionary bases, ethnic minority areas, border areas), market access and rural employment

5. Enhancing social development Basic education, bilingual education for ethnic minorities, and basic public services post-secondary education, rural schools, basic health, disease control, maternal and child health, cooperative health insurance, cultural development, human resources development, employment and social security.

6. Promoting coordinated regional Promoting accelerated development of key economic areas development and fostering new (including the Beibu Gulf Economic Area), resource-rich growth poles areas, old revolutionary bases and ethnic minority areas

7. Guangxi and Western Development Strategy

7.1 Overview of Guangxi

The Guangxi Zhuang Autonomous Region is situated in south-western PRC (Figure 5). To its south lies the Beibu Gulf, to its east Guangdong Province, to its northeast Hunan Province, to its northwest Guizhou Province, to its west Yunnan Province and to its southwest the Socialist Republic of Vietnam. Guangxi covers an area of approximately 236,700 km2, accounting for 2.5% of the national total and ranking the 9th among the 31 provinces.

Situated on the southeast fringe of the Yunnan-Guizhou Plateau, Guangxi has a topography dominated by mountains and hills which account for 69.8% of the provincial territory. Only 11% of the land mass or 40 million mu (2.67 million ha) is arable, translating into 0.82 mu per capita. The coastline within the provincial territory from the border with Guangdong Province to the border with Vietnam totals 1,500 km.

Guangxi belongs to the subtropical monsoon climate, characterized by a long, hot, wet summer season and short, cool, dry winter season. The yearly average temperature is

SA-A-7 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

21.10C. The highest temperature occurs in July with a monthly average temperature of 230C ~ 290C; and lowest temperature occurs in January with a monthly average temperature of 60C ~ 140C. The average annual precipitation stands at 1,900 mm.

Figure 5: Map of Guangxi Zhuang Autonomous Region

Guangxi administers 14 prefecture-level municipalities with 109 county-equivalent administrative units that include 34 urban districts, 7 county-level cities, 56 counties and 12 autonomous (ethnic) counties. At the end of 2008, Guangxi’s population totalled 50.5 million, and the natural growth rate stood at 8.7‰. As one of the five autonomous ethnic regions, Guangxi is home to 35 of the 55 ethnic minorities, in addition to the Han. The Han accounts for 61.6% of the total population, and the 35 ethnic minorities for 38.4%. The Zhuang, as the largest ethnic minority in Guangxi, accounts for about 35.8% of the total population and 85.7% of the total ethnic population in the province.

7.2 Comparative Advantages

Guangxi has many comparative advantages. In terms of geographical location, Guangxi is the only western province that has both coastal lines and international borders. Moreover, it is situated at the juncture of three major economic zones: South China Economic Zone,

SA-A-8 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Southwest Economic Zone and ASEAN Economic Zone. Having the most convenient seaports, Guangxi is an important gateway and corridor to the neighbouring ASEAN countries. Second, Guangxi is rich in natural resources. It is among China’s top ten production bases for non-ferrous metals. The province ranks first in the country for the reserves of twelve minerals, of which bauxite amounts to more than one billion tons or 1/2 of the national total. The exportable hydropower potential in Guangxi is estimated at 17,000 MW, making it one of the major producing regions for the country’s “West-to-East Power Transmission Program”. With a subtropical climate, abundant rainfall and long coastlines, Guangxi is also endowed with rich forest, agricultural and marine resources.

However, until recently, Guangxi was not able to turn these resource advantages into economic advantages. The per-capita GDP in 2008 accounted for 65.6% of the national average, ranking 25th out of the 31 provinces. The province is home to 49 poverty counties, accounting for 68.1% of the 72 rural counties and county-level cities for the whole province. These poverty counties include 28 national poverty counties, accounting for 4.7% of the national total number of poverty counties at 59212, and 21 provincial poverty counties. At the end of 2007, about 3.23 million rural residents still lived under poverty, including 650,000 rural people under absolute poverty (those who cannot meet their basic needs); and 2.58 million as low-income population13. The composite Human Development Index (HDI) for 2005 stood at 0.771, ranking 22nd amongst the 31 provinces, compared to the national average of 0.777, that of Shanghai of 0.911 as the highest and that of Tibet of 0.616 as the lowest14.

Yet, the economic status of today’s Guangxi must be interpreted from a historical and developmental perspective. In the past 60 years since the founding of the PRC, the gross domestic product (GDP) of the province grew from CNY 940.0 million in 1950 to CNY 717.2 billion by 2008 or close to 120 times in comparable prices. On a per-capita basis, the GDP increased from approximately CNY 340 in 1950 to CNY 14,900 by 2008. The total industrial output jumped from CNY 360 million in 1952 (constant price) to CNY 594.2 billion by 2008.

The socioeconomic progress that Guangxi has achieved in past 30 years since the economic reform and opening-up to the outside world in the late 1970s is especially impressive. The average annual GDP growth rate was 7.2% between 1951 and 1978, and accelerated to 9.9% between 1979 and 2000 and further to 11.9% between 2001 and 2008 which is 1.7 percentage points higher than the national average of 10.2% for the same period. The GDP growth rate hit the highest in 2007 at 15.1%. Although slowing down because of the impact of the global economic crisis, it still maintained at 12.8% for 2008 or 3.8 percentage higher than the national average of 9.0 (Figure 6). The growth of industrial output value also displayed a similar pattern (Figure 7) 15. For the first half of 2009, the GDP growth rate recovered to

12 The latest list of 592 national poverty counties was determined in 1994 by the State Council Poverty Alleviation Office, on the basis of percentage of poor people over the county’s total population, average per-capita net income, average per-capita GDP and average per-capita fiscal revenue. 13 Guangxi Poverty Alleviation Office (2008). Rural Poverty Alleviation and Development in Guangxi. Nanning. 14 UNDP China (2008). China Human Development Report 2007/2008: Basic Public Services Benefiting 1.3 Billion People. Beijing: China Translation and Publishing Corporation. 15 Guangxi Statistical Bureau (2009). 2008 Guangxi Economic and Social Development Statistical Report. Nanning.

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13.5%, compared to the national average of 7.1%; the growth rate of industrial value-added for large enterprises reached 16.6%, compared to 7.0% for the country as a whole16.

Figure 6: GDP Volume (Left, in CNY 100 million) and Figure 7: Industrial Output Value (Left in Growth Rate (Right) between 2001 and 2008 CNY 100 million) and Growth Rate (Right) between 2001 and 200817

The faster than the national average growth has to a great extent benefited from the preferential policies granted to the central government and from the economic stimulation strategies that provincial and local governments have adopted. These policies and strategies cover, among other things, the Western Development Strategy, policies for promoting the economic development of ethnic minority regions, and urbanization and industrialization strategies.

7.3 11th Five-Year Plan

The 11th FYP for GZAR has established a series of socioeconomic targets, including 10% of the average annual rate of GDP growth (compared to 10.6% for the 10th FYP) and 40% of urbanization rate by the end of 2010. One of the supporting measures is to accelerate infrastructure development. The objective for the transportation sector is to build an integrated, fast, efficient and safe network of highways, railways, coastal ports, inland waterways and airports that further improve the inter- and intra-provincial connectivity. On the urbanization front, the objective is to promote coordinated urban and rural development. The Guangxi Beibu Gulf Economic Zone will be developed into “dragon-head” and urban centers into new growth poles, supported by county-level economic growth, with a view to establish a new region-wide economic development pattern, entailing interconnected economy of coastal areas-urban centers-counties. Urbanization will be promoted around “four clusters and four belts”, including the Nanning-Beihai-Qinzhou-Fangchenggang coastal urban cluster connected by coastal highways and railways, the Youjiang River corridor urban belt with Baise and Pingguo as the axle, and the southwestern urban belt with Chongzuo, Pingxiang and Ningming as the axle (Figure 8).

16 Government of Guangxi, 2009, http://www.gxzf.gov.cn; Government of China, 2009, http://www.stats. gov.cn. 17 Refer to all state-owned enterprises and those non-state-owned enterprises that have a sales volume above CNY 5 million.

SA-A-10 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Figure 8: Four Clusters and Four Belts of Urbanization in GZAR

Source: GZAR Urbanization Plan for the 11th FYP, GZAR Government, Nanning.

SA-A-11 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Considering the lowest GDP annual growth rate at 12.8% for 2008 because of the international financial crisis and the recovery to 13.5% for the first half of 2009, there should not be any difficulty for GZAR to achieve the average GDP annual growth target of 10% for the 11th FYP. The urbanization rate grew by 2.0% to 38.2% at the end of 2008 from 36.2% at the end of 2007 and by 1.6% from 34.6% at the end of 2006. Achieving the FYP target of 40% within the remaining two years will require only an average growth rate of 0.9%.

7.4 Guangxi’s Taxation Benefits from Western Development Strategy

Since the implementation of the Western Development Strategy in 2000, Guangxi, as part of the western development region, has enjoyed all of the preferential policies granted by the central government to the 12 western provinces. One of such policies is taxation whereby western enterprises receive tax exemptions or cuts. According to statistical information18, a total of 4,681 enterprises in Guangxi were approved to enjoy preferential tax policies. These enterprises involve such sectors as agriculture, forestry, coal, power, petroleum, natural gas, highway, information industry, iron and steel, non-ferrous metals, petrochemical, building materials, pharmaceutical, machinery, light industry, urban infrastructure, real estate, environment, resource recovery and service industry that are promoted by the government. The total tax reductions in the past eight years amounted to approximately CNY 8 billion, or 8% of the local revenues for the same period.

The preferential tax policies as part of the Western Development Strategy have helped the growth of the sectors of comparative advantage, including sugar making (Chongzuo), refinery, power (Baise), iron and steel (Fangchenggang), non-ferrous metals (Baise), building materials (cement for Chongzuo), machinery and tourism (Fangchenggang, Chongzuo and Baise). This has contributed to the attraction of outside investment, competitiveness, economic vitality, enterprise development, structural adjustment and upgrading, local development and narrowing the gap between Guangxi and eastern provinces.

No statistics are available on the funds received by the three project municipalities from the central government under the transfer payment program, ethnic minority development program and border community revitalization programs. But a few snapshots of the assistance under the border community revitalization program can illustrate the development benefits of the programs to the project cities. In 2008, Fangchenggang Municipal Government received CNY103 million to invest in border communities on roads, ports, custom facilities, markets, power, water supply and housing for border communities19. Chongzuo Municipal Government received CNY 541 million for over 20,000 projects on roads, power, water supply, housing, biogas, land leveling and so on; CNY 710 million were planned for the two years of 2009 and 201020. Baise Municipal Government has raised CNY 274 million on

18 “Guangxi: cut of CNY 8 billion in the past eight years thanks to Western Development Strategy”, State Administration of Taxation, 30 April 2009, http://www.chinatax.gov.cn/n480462/n503252/n551655/n551715/ 9008173.html. 19 “Fangchenggang strives to build infrastructure facilities to revitalize border communities”, 27 November 2008, http://www.fcgs.gov.cn. 20 “Chongzuo accelerates border community revitalization program”, 7 September 2009, Zuojiang Daily; “Construction of BCRP projects speeds up”, 23 September 2009, Zuojiang Daily.

SA-A-12 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program border community development projects for the 2009 and 2010 fiscal year.

7.5 Guangxi Beibu Gulf Economic Zone

In January 2008, the “Development Plan for Guangxi Beibu Gulf Economic Zone” was approved by the central government, reinforcing the importance of the Guangxi Beibu Gulf Economic Zone (GBGEZ) in the Western Development Strategy and the China-ASEAN Free Trade Area. The purpose is to transform the GBGEZ into China’s gateway to ASEAN through the development of logistics, trade and commerce, processing and manufacturing and information industries.

Located in China’ southwestern coast, the GBGEZ is composed of four municipalities of Nanning, Beihai, Qinzhou and Fangchenggang in Guangxi, with a total land mass of 42,500 km2 and a total population of approximately 13 million (Figure 9).

Figure 9: Guangxi Beibu Gulf Economic Development Zone

Land area: 425,000 km2 Marine area: 130,000 km2 Coastline: 1,595 km Nanning Total population: 12.55 million Municipality Note: end of 2006

GUANGXI ZHUANG AUTONOMOUS REGION

Qinzhou Municipality

Fangchenggang Municipality Beihai Guangxi Beibu Gulf Municipality VIETNAM GUANGDONG Economic PROVINCE Development Zone

The strategic position of the GBGEZ is defined as an important international regional economic cooperation zone. It will serve as a gateway to Southeast Asia for the southwestern, southern and central-southern provinces, thus supporting the achievement of the Western Development Strategy and the development of the GBGEZ into an economic growth area in China’s southwestern coast.

According to the plan, the GBGEZ is divided into five “functional clusters” which cover two of the three project municipalities. The Qinzhou-Fangchenggang cluster will cover the urban centres of the two municipalities, the industrial zones along the coast and related areas. The priorities will be to take advantage of the deep and large seaports, construct tariff-free bonded zones at the ports, and develop heavy industries and port-based logistics industries along the coast. The Dongxing-Pingxiang cluster entails the Dongxing City of Fangchenggang,

SA-A-13 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Pingxiang City of Chongzuo, economic zones along the China-Vietnam border and surrounding areas. As a gateway of the coastal corridor to ASEAN countries, this cluster will have the priorities of export processing, trade and commerce and cross-border tourism. A comprehensive tariff-free bonded zone will be established in Pingxiang City.

The central government has granted several preferential policies for the GBGEZ. The central support includes, among other things: i) planning and location of key programs and projects, as well as expeditious review, approval and registration; ii) establishment of tariff-free bonded areas and logistics zones; iii) establishment of local banks and sector investment funds, and expand enterprise bond program; and iv) promotion of GBGEZ subnational cooperation under the China-ASEAN cooperation framework. Although it is too early for the GBDEZ program to show results, its contribution to the future socioeconomic development of Guangxi is assured.

8. Guangxi and GMS Program

8.1 ADB Assistance to Guangxi

Guangxi is one of the western provinces that ADB supports. Since 1988, ADB has approved seven loans with a total lending portfolio of $951.6 million (Table 3), accounting for about 5% of ADB’s cumulative lending to the PRC. Although it is much lower than Yunnan ($1,287.0 million, western province), this figure compares favourably with other neighbouring provinces of Guizhou ($340 million, western province), Hunan ($910.5 million, central province) and Guangdong ($557.5).

Table 3: ADB Lending to Guangxi since 1988 Loan Amount Year of Loan ($ million) Approval Status Completed and Ongoing Hexian Pulp Mill 49.60 1988 Closed Fangcheng Port 52.00 1996 Closed Guangxi Roads Development 150.00 2001 Closed Guangxi Roads Development II 200.00 2004 Closed Guangxi Nanning Urban Env Upgrading 100.00 2006 Ongoing Western Guangxi Roads Development 300.00 2007 Ongoing Guangxi Wuzhou Urban Development 100.00 2008 Ongoing Total (Completed and Ongoing) 951.60

Proposed Guangxi Southwestern Cities Development 150.00 2010 Proposed Guangxi Beibu Gulf Cities Development 200.00 2011 Proposed Total (Proposed) 350.00

Grand Total (1988-2011) 1,301.60 Source: Asian Development Bank.

A closer look at Table 3 can reveal the following trends. First, ADB investments in Guangxi in the first ten years before the WDS was only slightly more than $100 million or approximately

SA-A-14 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

11% of ADB’s cumulative lending but grew to a total $850 million for the ten years following the WDS.

Second, the increase is particularly notable for the past five years (between 2004 and 2008) when Guangxi received four loans totalling $700 million. There are two additional proposed loans: i) the Guangxi Southwestern Cities Development Project (i.e. this Project, proposed for 2010 at the amount of $150 million; and ii) Guangxi Beibu Gulf Cities Development Project, proposed for 2011 at the amount of $200 million.

Third, the dominant shares of the ADB lending target the two sectors of transport and urban development (Figure 10). In particular, three loans (Guangxi Roads Development, Guangxi Roads Development II and Western Guangxi Roads Development) have targeted provincial truck expressways (Nanning-Baise, Nanning-Chongzuo-Pingxiang and Baise-Longlin) and associated local highways.

Figure 10: ADB Investments in Guangxi

Fourth, as the inter- and intra-provincial connectivity has improved, ADB is now paying increasing attention to the sustainable development of urban-cum-industrial centers (through

SA-A-15 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program the Nanning Urban Environmental Upgrading, Wuzhou Urban Development, SW Cities Development and Beibu Gulf Cities Development) which, being the bases for production, consumption and logistics, are the engines of future economic growth as urbanization accelerates. This is, by design, an essential step towards turning the GMS, subnational and local transport corridors into economic corridors.

8.2 Link to GMS Strategy

In 2001, the six GMS countries of Cambodia, China, Laos, Myanmar, Thailand and Vietnam formulated the 10-year strategic framework for the GMS Program, with the vision to achieve enhanced connectivity, increased competitiveness, and a greater sense of community in the GMS. The 13th GMS Ministerial Conference (Vientiane, Lao PDR; 14-16 December 2004) produced its first Plan of Action (POA) to guide the GMS Program’s activities in the medium term. The POA was reviewed and endorsed by the second GMS Leaders Summit (Kunming, July 2005). A significant amount of resources has been mobilized for the GMS Program. For the 41 GMS projects with a total investment of $11 billion as of 31 December 2008, GMS governments have provided about $3.3 million; ADB has extended loans amounting to $3.8 billion; and ADB has also generated $3.9 billion in co-financing for these investment projects. A total of U$208 million of grant resources have been mobilized, of which $94 million have been provided by ADB, to finance technical assistance focusing on human resource development, tourism, environment, trade and investment.

Transport is the primary sector for ADB investment. Of the total ADB contribution, through its lending program of $3.8 billion between 1992 and 2008 to the nine priority sectors of the GMS Program21, $3.5 billion or more than 91% was on transport projects in Vietnam, Laos, Cambodia and China (Yunnan and Guangxi). Owing to the transport infrastructure investments, all mainland Southeast Asian countries will by 2012 be interconnected with each other, by a series of all-weather roads or "corridors." The GMS Program has built and envisaged a well-connected sub region (Figure 11, Figure 12, Figure 13 and Figure 14). Together with improvements in power and telecommunications, these roads will play a key role in increasing the connectivity of the GMS countries and thereby promote closer economic cooperation. Increased connectivity will lead to greater economic opportunities, which will assist reduce poverty.

ADB investments in Guangxi are closely linked to the GMS Program. The roads and the marine port projects in Guangxi are part of the Northern and Eastern Transport Corridors that support the North-South Economic Corridor (Figure 11 below and Map 13, Map 14 and Map 15 at the end of Volume One of this report).

21 The nine sectors cover transport, energy, telecommunications, environment, human resources development, tourism, trade and investment. Source: Asian Development Bank.

SA-A-16 Supplementary Appendix A: Sector Analysis – Development Context: Western Development Strategy and GMS Program

Figure 11: GMS Road Transport Corridors (2009) Showing Project Cities

SA-A-17 Supplementary Appendix B:

Sector Analysis –– Urbanization in China Supplementary Appendix B: Sector Analysis – Urbanization in China

Supplementary Appendix B:

Sector Analysis –– Urbanization in China

1. Scale and Pace of Urbanization in PRC

1. In the early 1950’s the urban population of China was estimated at some 77 million and 13% of the total PRC population. In the period of 1953 – 2007, urban population growth has averaged 3.8% in comparison with the total 1.5% PRC population growth rate in the same period. The urbanization rate has been fairly steady throughout this period with dips in the rate of 1964-1982 and 2000-2007. It is estimated that some 80% of urban population growth has been through rural-urban migration. Table 1 summarizes the PRC total population and urban population census results and additional data for 2007.

Table 1: PRC Population Census Data, Plus 2007 (1000) 1953 1964 1982 1990 2000 2007 53-07 Total (million) 594.3 694.6 1,008..2 1,133.7 1,265,.8 1,321.3 1.5% pa

Urban (000) 77,260 127,100 210,820 299,710 458,440 593,790 3.8% pa % Urban 13.3% 18.3% 20.9% 26.4% 36.2% 44.9% % Growth pa 4.6% 2.9% 4.5% 4.3% 3.8%

Average annual inter-censal increase urban (000) Total 4,531 4,651 11,111 15,873 19,336 3.4% pa Migrants 3,499 2,633 6,265 12,379 11,526 2.8% pa Note: Excluding Hong Kong, Macau and Taiwan. Migrants are calculated by subtracting natural urban growth estimated from growth in the total population.

2. By the end of the 1940s, China had 69 cities. In 2007, it had 670 cities and it is estimated that by 2025 China will have 221 cities with one million–plus inhabitants and 23 cities with more than five million. This compares with 35 cities with over one million in Europe currently. The scale and pace of China's urbanization continues and if current trends hold, China's urban population will reach one billion in about 2030. In 20 years, China's cities will have added 350 million people, more than the entire population of the United States today.

2. Current Coping Strategies

3. China’s high rate of urbanization requires strategies to cope with rapid urban industrial development which is and will be the principal source of growth for the national economy: urbanization is a driver of the structural transformation and high economic growth in China. China’s cities and towns generate more than 60% of the country’s GDP.

4. Strategies that have helped manage Chinese urbanization to date include1:

(i) The hukou, or household registration system to control migration and to try to channel migrants to small or medium-sized cities, increasingly, however, larger cities are relaxing the hukou rules, and there is an ongoing debate about the future role of this system and what it portends for migrants’ access to urban services;

1 China Urbanizes: Consequences, Strategies and Policies, World Bank , edited by Shahid Yusuf and Tony Saich, 2009

SA-B-1 Supplementary Appendix B: Sector Analysis – Urbanization in China

(ii) With the rapid growth of the Chinese economy, urban poverty has been contained. It is estimated at between 4 and 6 percent of the population. Urban unemployment is also low, in the 3 to 4 percent range;

(iii) Another key element of China’s successful urbanization is the devolution of public services and many administrative functions to city governments. In 2005, Chinese citizens’ degree of satisfaction with local governments rose to 72 percent—considerably higher than in many other countries, including the United States;

(iv) China has also been frugal about its use of land space for urban development—cities now occupy about 4.4 percent of the total land area.

5. All these features have contributed to successful urbanization. On the downside the income gap between villages and cities is very wide, urban air and water pollution is a serious problem, and services to migrants as well as safety nets for the poor and elderly have yet to be adequately tackled.

3. Rural-Urban Migration

6. Past economic growth in China has been heavily reliant on the availability of a rural population willing and able to move to the cities. This movement of some 10 to 12 million people a year has equalized incomes and promoted exports and growth. As a result, overall urban population growth has been almost 4% pa as shown above. There was a reversal in 2008 as a result of the international financial crisis and an official report in 2009 suggested that 14 million rural migrants had returned home. Whether and how soon they will return is uncertain but it can be expected that the large ongoing investments, particularly in infrastructure, will act as an attraction.

7. This migration fuelled growth is an average of all areas classified as urban. Some urban areas have grown faster than others, accepting more rural migrants. In the past, larger cities have grown faster than other cities accepting more rural migrants. National Development and Reform Commission (NDRC) is now concerned at the growth of these larger cities and is asking that smaller cities should take more of the role receiving migrants. These cities have been encouraged to develop master plans which will allow them to do so.

8. Of the slightly more than 350 million people that China will add to its urban population by 2025, more than 240 million will be migrants. This growth will imply major pressure points for many cities including the challenge of managing these expanding populations, securing sufficient public funding for the provision of social services, and dealing with demand and supply pressures on land, energy, water, and the environment.

3. Future Coping Strategies

9. The World Bank research also notes that while China has coped more effectively than many countries with the demands of urbanization, a number of issues need to be tackled urgently.

(i) Between now and 2025, it’s likely that another 200 to 250 million people will migrate to China’s cities, adding to an existing mobile population of about 155 million. Providing jobs and infrastructure for this anticipated inflow of people poses major challenges. Rapid economic growth will remain critical, with further deepening of the capital markets needed to help finance urbanization;

SA-B-2 Supplementary Appendix B: Sector Analysis – Urbanization in China

(ii) Urban residents use 3.6 times as much energy as rural residents; suggesting that energy use is far from its peak. Also, energy intensity (consumption of energy per unit of GDP) is 7 times that of Japan and 3.5 times that of the United States;

(iii) While the government has identified motor vehicles as an important sub- sector, the country needs to weigh the pros and cons of further motorization, which leads to urban sprawl, higher energy consumption, and pollution;

(iv) Urban sprawl also needs to be contained because it will be important to have enough arable land in China for agriculture, given high commodity prices and rising consumption;

(v) China suffers from water scarcity, with just over 2,100 cubic meters of water available per person—one-third of the world average. The situation is more precarious in the northern part of the country, where climate change may worsen arid conditions;

(vi) Climate change will affect heavily populated low-lying areas. There are likely to be major infrastructure requirements to protect these areas from sea-level rise and flooding.

10. The World Bank led research goes on to suggest that concentrated urban growth scenarios could produce 20 percent higher per capita GDP than that yielded by China's current urbanization path, would have higher energy consumption but also higher energy efficiency, and would contain the loss of arable land. Concentrated urbanization would also have the advantage of clustering the most skilled workers in urban centers that would be engines of economic growth, enabling China to move more rapidly to higher-value-added activities.

11. Recent research undertaken by McKinsey Global Institute2 suggests that an urgent shift in focus from solely driving GDP growth to an agenda of boosting urban productivity, achieving the same or better economic results with fewer resources, is not only an opportunity but a necessity. By moving in this direction, China would cut its public spending requirement by 2.5 percent of GDP or 1.5 trillion CNY a year, reduce emissions, halve its water pollution, and deliver private-sector savings equivalent to 1.7 percent of GDP in 2025 mainly through reduced consumption of natural resources. The analysis suggests that China could tailor policies that would shift urbanization toward a more concentrated shape of urbanization. This pattern of urbanization could produce 15 super-cities with average populations of 25 million people, or spur the further development of 11 urban clusters of cities each with strong economic networks and combined populations of 60-plus million.

12. The 11 FYP has promoted the development of smaller cities to: (i) provide higher living standards to migrants without exacerbating infrastructure capacity and problems afflicting large cities, (ii) increase productivity, and (iii) narrow the income gap, thereby contributing to social stability. It proposes coordinated development of big, medium and small cities and identifies urban agglomerations as the main model for future urbanization. The 11 FYP proposes strengthening physical and economic linkages between major cities in metropolitan areas or major development corridors and smaller settlements at their periphery – contributing to the urban cluster approach and in terms of development corridors, reinforcing the role of, say, smaller cities in development corridors linked with increased regional cooperation.

2 Preparing for China’s Urban Billion, McKinsey Global Institute, February 2009.

SA-B-3 Supplementary Appendix B: Sector Analysis – Urbanization in China

13. Smaller cities represent an underutilized resource in the PRC urban system. The average combined annual growth rate of the secondary and tertiary sectors in large and medium-sized cities was 14.2% during 2001–2005, compared with 5.4% in small cities and towns. During 1988–2002, the gap between public investment per capita in large and medium-sized cities versus small cities and towns grew at an average rate of 2.8%, contributing to a gap in gross domestic product (GDP) growth, which grew at 3.1% annually. Through the development of physical and social infrastructure, small cities and towns can attract investment and in-migration from rural areas, thereby playing a more significant role in the PRC’s drive to urbanize, increase economic productivity, and distribute the benefits of economic growth more equitably.

4. Urbanization in the Western Region

14. Urbanization in the western region has been unable to catch up with the demands of development. 3 Since the initiation of China's western development strategy, the total production value of the region has increased from CNY 1.6 trillion to CNY 3.8 trillion, with an annual growth rate of 10.8 percent. As the industrialization process speeds up and strategic adjustments are made in the agricultural sector, urbanization also develops faster. The urbanization rate in the western region increased from 28.7 percent in 2000 to 35 percent in 2006.

15. The relatively low rate of urbanization in the western region is reported to be apparent in several areas: (i) the number of cities in the region is relatively small and population in these cities is not very large; (ii) the ecological environment in the west is poor and water resources are scarce, which means there is no way to fully guarantee the well- being of the people in the region; (iii) the urbanization system is still underdeveloped and no large cities have emerged in the region; (iv) the development of small and mid-sized cities has just started and can only absorb a small amount of the surplus labor.

16. In China’s Western Region, accelerated urbanization growth is expected to come primarily from the expansion of medium-sized cities. Improving the investment climate of the secondary cities and attracting companies operating nationally and internationally requires: (i) new urban development areas; (ii) developing inner city transport and road networks; (iii) complementary investment to tackle environmental challenges such as water pollution; (iv) and improving the environment and livability of the cities – all initiatives reflected in the approach of the proposed Guangxi Southwestern Cities Development Project.

5. External Assistance

17. The World Bank is contributing to urbanization management in the western region, notably in its support for the development of medium-sized secondary cities in Sichuan, requiring them to grow quickly and adjust their urban infrastructure base rapidly. Four cities selected and targeted for World Bank assistance under the Sichuan Urban Development Project are key, fast expanding medium-sized cities in the province. These cities are also faced with the common problems of high population density, land scarcity, inadequate transport systems, environmental deterioration, and a lack of municipal capacity to enhance city functions and urban planning.

18. The project supports key infrastructure investments that are integral parts of the urban development plans of the four project cities. The funding will be used to build local roads and associated bridges, river embankments, wastewater collection systems and sewerage, drainage infrastructure and landscaping. The World Bank will also provide technical assistance to support institutional development and capacity building of the project

3 Leading Group for Western Region Development of the State Council: 2007 China West Urbanization Forum.

SA-B-4 Supplementary Appendix B: Sector Analysis – Urbanization in China cities. It will help the municipalities improve their urban planning and capacities for spatial planning, land management, transport planning and utility and asset management through the use of management information systems (MIS) and geographical information systems (GIS).

19. Two other agencies within the World Bank Group, the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), are also working with the project cities to help enhance their competitiveness by promoting development and industrial linkages, and by improving their investment climate. It is considered that the Sichuan project is significant because in the relatively underdeveloped Western Region the cities are taking a pro-active role in managing the rapid urbanization process. IFC promotes private sector development by providing private enterprises with long-term loans, guarantees and advisory services, while MIGA helps encourage foreign investment by providing guarantees to foreign investors against losses caused by non-commercial risks.

20. The ADB has also contributed to the management of urbanization in the western region and continues to do so with an expanding support program. Urbanization continues to be a key thrust of the PRC government's development objectives in the 11th Five-Year Program (FYP, 2006-2010) with an emphasis on balancing regional development between the coastal and inland provinces, through coordinating the development or large, medium, and small cities and statutory towns; and strengthening development of urban settlements around metropolitan areas. ADB's strategic objective in the PRC is aligned with this 11th FYP strategy of promoting growth with equity.

21. The TA on Town-Based Urbanization Strategy Study, 2004-2005, is also relevant. Drawing on urbanization case studies carried out in northern provinces, the study sets out an integrated strategy for promoting the development of towns in the context of the larger urban system. The study reveals that cities and towns both have important roles to play in the urbanization process. Many smaller cities and towns located within metropolitan areas or development corridors play important roles as manufacturing centers, tourist destinations, and agro-processing sites. In some metropolitan areas, towns serve as bedroom communities for center-city workers or transportation hubs for passengers or freight.

22. Both the 11th FYP and the Town-Based Urbanization Strategy Study have highlighted that the PRC could develop towns by facilitating the development of larger urban agglomerations made up of different types of urban settlements; metropolitan areas, industrial corridors, agro-processing areas, tourism zones, employment generation and economic growth. The project is aimed to help promote balanced urbanization, narrow the urban-rural gap, enhance environmental protection and management, improve production and living conditions in small cities and townships, strengthen growth momentum in the rural area, coordinate township economic growth and accelerate the development of socialist new countryside in three project provinces. The project focused on supporting the development of selected small cities and towns in three provinces that could have a demonstrative effect to other small cities and towns in the three provinces and throughout the country.

23. The project supports the provincial and local governments in selecting small cities and towns with employment generation and economic growth potential and providing technical and financial assistance to these cities and towns for urban infrastructure development, environmental management, urban management and financial management, and social services development. The project supports investment in urban infrastructure to develop productive, environmentally-sustainable and well-managed small cities and towns and this will be accompanied by efforts to strengthen urban governance, strengthen provision of essential social services, diversify investment funding options, and promote the financial sustainability of local governments. Developing markets and creating jobs through

SA-B-5 Supplementary Appendix B: Sector Analysis – Urbanization in China supporting urbanization and protecting the environment in small cities and towns are all aligned with ADB's strategic objective of promoting growth with equity in the PRC.

24. Urban population growth characteristics, including rural-urban migration and increasing recognition of the role of smaller cities, the strong and continuing support for preferential development policy in the western region of PRC, the active promotion of Guangxi Beibu Gulf Economic Development Zone (GBGEDZ) with Guangxi Zhuang Autonomous Region (GZAR) at its center, the associated policy and investment support facilitated by the ADB-Greater Mekong Sub-region initiative and GZAR’s own significant development potential combine to make a powerful argument for support to key urban centers in GZAR. However at present, the level of urban and industrial development in GZAR key growth cities and at the border gateways to ASEAN on the Eastern sub-corridor and including the Project cities, is well below the PRC’s more developed eastern and coastal regions as well as lower than developed country standards.

25. The three GZAR cities which have been selected by government to participate in the proposed Guangxi Southwestern Cities Development Project are designated growth areas or nodal points to the development of ADB’s GMS Eastern sub-corridor of the North-South Economic Corridor (NSEC) from Nanning-Hanoi via the Youyi Pass or from Fangchenggang- Dongxing-Mong Cai-Hanoi as well as the construction of corridor routes from Baise to Nanning and from Baise-Longlin and from Baise to Longbang-Vietnam to the Greater Mekong Subregion. The cities were selected for their potential for poverty reduction, economic growth, and regional cooperation through the improvement of urban infrastructure and associated capacity building.

26. GZAR has one of the clearest indications of the strategy of urbanization based on smaller cities along development corridors. The first intervention was the Guangxi, Nanning Urban Infrastructure Development Project demonstrating ADB’s commitment to the objectives of poverty alleviation and improving living conditions as well as fulfilling the Millennium Development Goals. Continuing urban development projects supported by ADB in GZAR include: (i) Guangxi Nanning Urban Environmental Improvement Project (2007, $100 million); (ii) Guangxi Wuzhou Urban Development Project (2008, $100 million); (iii) Guangxi Southwest Cities Development Project (Fangchenggang, Chongzuo, Baise) (proposed for 2010, $150 million); and (iv) Beibu Gulf Cities Development Project (Fangchenggang, Beibu, Qinzhou) (proposed for 2011, $200 million).

SA-B-6 Supplementary Appendix C:

Sector Analysis –– Regional Cooperation

Longbang-Chaling Border Baise-Longlin Baise-Nanning and Zone Cooperation Expressway Baise-Longbang Agreement, 2007 Expressways Supplementary Appendix C: Sector Analysis – Regional Cooperation

Supplementary Appendix C:

Sector Analysis –– Regional Cooperation

I. Introduction

1. Regional economic cooperation programs are necessary to accelerate urban and industrial development. Regional economic cooperation initiatives are highlighted in the urban development master plan of Guangxi Zhuang Autonomous Region (GZAR) and in the urban planning of the southwest border cities of Fangchenggang, Chongzuo and Baise. The basis for regional cooperation is formed by constructing modern urban infrastructure of roads and municipal improvements for the required linkages from rural to urban to regional economic growth opportunities. These urban infrastructure improvements are located in growth centers along economic corridors.

2. The People’s Republic of China (PRC) and the Asian Development Bank (ADB) started a number of sub-national and sub-regional strategies and programs for improving regional cooperation along major economic corridors. The sub-regional strategies are the ADB’s Greater Mekong Sub-regional (GMS) economic corridors and the PRC’s maritime Pan-Beibu Gulf Economic Cooperation Area (PBGECA) and both of these sub-regional organizations constitute the “two wings” of the “axis” formed by the Nanning-Singapore Economic Corridor. The Pan Pearl River Delta Economic Cooperation Area (PPRDECA) is the sub-national organization of the PRC. The ASEAN plus China Free Trade Area (FTA) is another institutional framework dedicated to improving infrastructure, trade logistics and lowering tariffs for the growing trade and investment flows in the region. There are numerous programs and projects at the local, regional and bilateral levels to implement the objectives of these regional cooperation organizations. Finally, there is the overarching program of the Western Development Strategy that directs central government support for the region.

3. The Greater Mekong Sub-region program began under ADB leadership in 1992 and upholds four strategic pillars.1 In 1998, ADB instituted the economic corridor approach to increase economic development among the six sub-regional countries of the PRC, Vietnam, Thailand, Cambodia, Lao People’s Democratic Republic and Myanmar. There are three priority projects under the economic corridor approach. The first is the development of the North-South Economic Corridor (NSEC) which involves Guangxi with the Eastern Sub- corridor from Nanning-Hanoi, Vietnam via Chongzuo to the Youyi Pass at the Vietnam border or from Nanning- Fangchenggang-Dongxing-Mong Cai, Vietnam-Haiphong to Hanoi.2 The aim is to transform the transport corridors into economic corridors by promoting growth cities and towns along the corridors as well as on border crossings gateways that will be connecting less developed rural areas by urban road networks and in effect attract more investments for more trade and regional integration.

4. Guangxi is in a central location in the maritime “wing” of the Pan-Beibu Gulf Economic Cooperation Area (PBGECA) to link the South China Economic Cooperation Rim

1 (i) strengthening connectivity and facilitating cross-border movement and tourism; (ii) integrating national markets to promote economic efficiency and private sector development; (iii) addressing health and other social, economic and capacity-building issues associated with sub-regional links; and (iv) managing the environment and shared natural resources to help ensure sustainable development and conservation of natural resources. 2 NSEC has a Central sub-corridor linking Kunming, Yunnan-Hekou-Hanoi-Haiphong and a Western sub-corridor linking Kunming-Myanmar-Lao-Thailand. The other two corridors are East-West and Southern Economic Corridors.

SA-C-1 Supplementary Appendix C: Sector Analysis – Regional Cooperation and Southwest China Economic Cooperation Rim markets to those of the ASEAN Economic Cooperation Rim in sub-regional cooperation. The objective of the PBGECA is to assist in accelerating construction of infrastructure in transport, environmental protection, information technology and tourism for greater ASEAN-PRC economic integration. The PRC government began the PBGECA in 2006 and is allocating US $3.2 billion in loans for rail, road and port networks.

5. The PBGEC Forum gathers leaders from China and ASEAN to discuss cooperation in building the new economic growth pole of China and ASEAN with PBGEC serving as the intergovernmental cooperation mechanism. In January, 2008, the Ministry of Commerce of China and Guangxi’s People’s Government started a Chinese Expert Group on PBGEC to correspond with the Greater Mekong Sub-regional Economic Cooperation or the other “wing” of the “2 wings-one axis” of Nanning-Singapore Economic Corridor or the China-ASEAN Free Trade Area.

6. The Nanning-Singapore Corridor will bolster regional cooperation since the overland road and rail routes will connect the two cities in 1 or 2 days by a linear distance of only 2, 500 kilometers via Vietnam, Laos, Thailand and Malaysia. Markets will be linked from South China to ASEAN countries and Indochina including Cambodia once the railways and roads become fully operational. This axis of economic development will be flanked by the overland and maritime regional cooperation programs of the GMS and PBG, respectively.

7. The PPRDECA meets each year since 2006 in a forum and trade fair to discuss major issues and sign contracts for infrastructure and trade for joint development. The 9 + 2 regional organization is comprised of the following provinces: Guangxi, Yunnan, Guizhou, Sichuan, Hainan, Guangdong, Fujian, Jiangxi and Hunan as well as Hong Kong and Macao special administrative regions. The 5th PPRD Forum and Fair in Nanning in June, 2009 discussed: PPRD and ASEAN cooperation to accelerate the construction of a trans-regional and international traffic networks of roads, railways, waterways and air routes and negotiate to establish a multi-functional information network.

8. Guangxi is a pivotal participant in the PPRDECA, especially with multimodal significance, for the planning and construction of expressways connecting Vietnam, Guangdong and Yunnan; the port of Fangchenggang, Qinzhou, Beihai and Shibuling; inland waterways of the Youjiang in Baise to Guangdong and Hong Kong and for the Zuojiang in Chongzuo; railways new and renovated to Vietnam, Guangdong, Hunan, Yunnan and airports for domestic and southeast Asia routes. The 5th PPRD Forum resulted in cooperation for over 600 contracts worth US $32 billion (226 billion CNY) in manufacturing industry, agriculture, and trade & logistics services. Since the first PPRD forum there were 14,000 projects worth US $234 billion. Finally, the PPRDECA is instrumental in furthering the central governments preferential policies of western development for Guangxi and 11 other less developed provinces as well as the policies on coastal open door; open door and minority self-government.

9. The Association of Southeast Asian Nations (ASEAN) is the major force in Guangxi’s regional economic cooperation as indicated by the PRC trade increasing (Table 1) as tariffs are reduced to zero by 2010, especially for unprocessed agriculture products for Brunei, Indonesia, Myanmar, Malaysia, Philippines, Singapore and Thailand with China and by 2015 for Vietnam, Cambodia and Lao PDR with China under the ASEAN-PRC Free Trade Area.

10. However, Guangxi’s port of Fangchenggang indicated that infrastructure construction of roads and railways will be needed to handle increasing trade flows through Guangxi. At present, goods are held in port storage (many in uncovered areas) beyond the

SA-C-2 Supplementary Appendix C: Sector Analysis – Regional Cooperation port’s capacity since road and rail capacities are not adequate. As a result, enterprises are limited in their reliance on the port’s services to meet their growing trade and can not increase their production until the port expands and the port can not expand until more roads are constructed. Fangchenggang, Beihai and Qinzhou ports are addressing the capacity issue and related ports’ services by merging to form a group and built an industrial park in Nanning with refrigerated capacity that is now lacking in Fanchenggang for perishable goods.

Table 1: China-ASEAN Import/Export Trade 1994-2007 Year I/E Value Export Value Import Value Difference 1994 $13.2 billion $6.379 billion $6.830 billion $0.451 billion 1995 20.369 10.474 9.8 0.366 1996 21.159 10.310 10.849 0.997 1997 25.156 12.700 12.456 0.301 1998 23.644 11.035 12.609 1.640 1999 27.202 12.275 14.927 2.701 2000 35.922 17.341 22.181 4.840 2001 41.615 18.385 23.229 4.844 2002 54.766 23.568 31.195 7.629 2003 78.25 30.93 47.33 16.4 2004 105.88 42.90 62.98 20.08 2005 130.37 55.37 75.00 19.63 2006 160.84 71.31 89.53 18.22 2007 202.54 94.179 108.369 14.190 Source: China-ASEAN Yearbook 2008, Guangxi Social Sciences Institute, pg. 159.

11. Regional cooperation is not limited to the “two wings-one axis”, the PPRD or the ASEAN-China FTA frameworks. There is also emphasis on speeding-up Sino-Vietnam cooperation in transport for Nanning-Hanoi-Ho Chi Minh highways and Indochina Peninsula Railway lines. The framework is: “Two Corridors and One Ring:” Kunming-Lao Cai-Hanoi- Haiphong and Nanning-Lang Son-Hanoi-Haiphong corridors with the Guangxi Beibu Gulf Ring.

12. Guangxi is and will continue to be China’s primary beneficiary of the ASEAN-PRC FTA. Guangxi’s participation in the ASEAN coupled with ADB’s assistance to construct the 179.2 kilometer expressway from Nanning to the Pingxiang-Vietnam border (Youyiguan) via Chongzuo provides measurable regional economic cooperation opportunities along the corridor. There are border traders and processing industries importing raw materials for finished products of traditional Chinese medicine and mahogany furniture targeted for ASEAN markets. The border town of Puzhai, north of Vietnam in Pingxiang, has a resident population of only 3,000, yet attracts thousands of business persons each day from all over China. In 2007, trade volume was US $510 million, a 27 percent increase over 2006. ASEAN is the biggest trade partner for Guangxi with 2007 trade volume of US $2.9 billion or more than one-third of Guangxi’s total foreign trade.3 Guangxi joined the GMS in 1994 and the new expressway of 2005 increased total traffic volume 24 percent to 5.1 million in 2007 and 18 percent to 6.2 million in 2008 for regional traffic flows of passengers, cargo and tourists and the national highway serves villages and towns between Nanning and the border.4

3 “Riding on both Sides for Success,” Qian Yanfeng and Huo Yan, China Daily, December 11, 2008, p.7. 4 “Gateway to the South,” North South Economic Corridor, Guangxi, Corridor Chronicles, Profiles of Cross Border Activities in the Greater Mekong Subregion, ADB, December, 2008, p. 8.

SA-C-3 Supplementary Appendix C: Sector Analysis – Regional Cooperation

Table 2: Guangxi-ASEAN Trade

Source: China Daily, December 11, 2008 /Guangxi government)

Table 3: Border Trade of Pingxiang Farmers 1992 2001 2002 2003 2004 2005 2006 2007 Trade $94.1 $182.3 $269.5 $275.4 $287.7 $477.9 $589.7 $839.7 Per Capita $62 $238 $270 $275 $288 $293 $317 $458 Source: China Daily, December 11, 2008/Guangxi government, trade: US$ millions, 6.8CY

13. Other notable development achievements from Guangxi’s involvement in ASEAN, GMS and PBGEC are:

- China-ASEAN Free Trade Area Pingxiang Logistics Park-to handle 10 million tons per year to be completed in 3 phases by 2010.

- Dongxing Frontier Cooperative Zone and since 1994 the annual China- Vietnam Frontier Commodity Fair for buyers worldwide.

- Baise-China, Longbang-Vietnam, Chaling; Sino-Vietnam Border Economic Cooperation Agreement, 2007 (Appendix A)

- Guangxi Beibu Gulf International Port Group to integrate port assets of Fangchenggang, Qinzhou, Beihai and Guangxi Railway Holdings as of February, 2007 to reach total handling capacity of 100 million tons by 2010 and 300 million tons by 2015. Also instituted the Guangxi Beibu Gulf Development Investment Co.,Ltd. to construct basic infrastructure in the coastal area into a new PRC growth pole.

- Since 2008, when the Guangxi Beibu Gulf Economic Zone began, gross domestic product increased over 16 percent for three straight years. BGEZ accounts for less than one-fifth of Guangxi’s total area and less than one- fourth of Guangxi’s population, while its GDP accounts for one-third of the total.

- Implementation of key industrial projects in the Guangxi Beibu Gulf Economic Zone Development Scheme: three thermal power plants; Qinzhou oil refinery;

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Qinzhou pulp & paper; Beihai Industrial Park; Fangchenggang iron & steel project of 10 million tons capacity and a nuclear power project.

- Key infrastructure projects to better connect the Guangxi to ASEAN: Nanning-Guangzhou railway; Hunan-Guangxi railway; Nanning-Qinzhou railway; Chongzuo-Qinzhou expressway; Qinzhou Free Trade Port Area; Nanning International Logistics Base.

II. Guangxi and Regional Cooperation

14. Guangxi is the only western province with both land and sea corridors to southeast Asia markets and more importantly is less developed than China’s other coastal areas. Guangxi’s strategic location and involvement in regional cooperation programs is on the level of national importance of the PRC’s other growth poles of the Pan Pearl River Delta, the Yangtze River Delta and the Bohai Rim. The State Council of China raised the importance of Guangxi to the region by defining the Guangxi Beibu Gulf Economic Development Zone (GBGEDZ) in the 11th Five-Year Plan and in January, 2008 approved a Master Plan of 2006-2010. GBGEDZ has a population of 12.4 million across 42,500 square kilometers of land and 130,000 square kilometers of sea and a coast line of 1,595 square kilometers. Development strategies by the national, provincial and border cities all depend on the accelerated development of the GBGEDZ.

15. The neighboring southwest provinces of Guizhou and Yunnan are landlocked and depend on reliable transport infrastructure connecting their economic output to PRC intra- regional and to regional international markets of southeast Asia. Guangxi’s construction of railway and road networks is supported by the regional cooperation programs of the ASEAN- PRC FTA, the GBGEDZ and the GMS. Presently, Fangchenggang port and its evolving infrastructure of connecting rail and road networks to the southwest provinces are vital to Guizhou and Yunnan. Fanchenggang has two weekly trains from Guizhou and Yunnan laden with mining resources and these trains return to these two provinces with chemicals.

16. The Guangxi Beibu Gulf Economic Development Plan of January, 2008 outlines goals to upgrade the urban, rural, industrial and agricultural areas of Guangxi to those of the national average over the next few years. The goals will be achieved by promoting Guangxi’s numerous economic development zones at the borders, seaports, and inland for greater commercial activities. Also, there is emphasis on promoting the productive capacities of rice, livestock, sugar cane, subtropical fruits in the rural areas as well as industrial development of border export processing and by connecting markets with modern transport and logistics systems.

17. The urban development master plans of Guangxi and of the city governments stress the strategic and operational importance of achieving higher levels of urbanization, industrialization and transport network integration (roads, railways, ports, waterways, corridors) in order to fully participate and benefit from the regional economic cooperation programs. The master plans and strategies of the governments and regional cooperation organizations are in the early stages of articulation. However, clear foundations are illustrated in all the plans in order to handle the growing economic activities and to cope with the stresses placed on the inadequate infrastructure and systems.

18. Fangchenggang, Chongzuo and Baise each have pillar primary industries with upstream and downstream secondary and tertiary (service) industries to fully integrate their economies into regional economic cooperation. The plans are based on improved urban infrastructures of roads and municipal projects and outline the stages of higher levels of urbanization that will absorb labor populations for the growing urban and rural industries over

SA-C-5 Supplementary Appendix C: Sector Analysis – Regional Cooperation the next five and ten years. Iron and steel is Fangchenggang’s primary industry and grain, oil (food), chemicals and energy are also prominent to industrial and urban development. Sugar cane and agriculture processing are lead industries in Chongzuo that will be the catalyst to greater regional economic cooperation. The aluminum industry supported by abundant bauxite resources is a pillar industry in Baise with many opportunities for secondary and tertiary industrial development in the near term. Each city plans or already constructed industrial parks with coordinated road networks to national highways and expressways to accommodate the industrial and residential urban growth and each city has very detailed plans to participate in tourism (tertiary) activities to the benefit of regional economic cooperation. In addition, the border agreements for cooperation and construction of facilities are also structured to fully integrate Guangxi’s borders with Vietnam and ASEAN markets in a staged and well paced approach as international trade increases.

III. ADB Support for Regional Cooperation in Guangxi

19. The GMS Framework is a ten year plan endorsed by the six GMS leaders at the first summit in 2002. The framework’s objective is to achieve the central focus of ADB’s purpose of reducing poverty by developing the economies without damaging the environment. The objective is implemented around the framework’s strategic components of: (i) strengthening infrastructure connectivity and facilitating cross-border movement and tourism; (ii) integrating national markets to promote economic efficiency and private sector development to improve competitiveness; (iii) develop human resources and skill competencies; (iv) protect the environment and promote sustainable use of the subregion’s shared natural resources. 5 These components are consistent with ADB’s Regional Cooperation and Integration Strategy, especially pillar 1: regional and subregional economic cooperation programs (cross-border infrastructure and related software) of lending programs (physical infrastructure) and pillar 2: trade and investment cooperation and integration of non-lending programs (trade facilitation).6

20. Regional cooperation and integration is possible by connecting the infrastructure for a seamless flow of goods, people and capital across borders and within the GMS region. ADB project lending interventions have contributed to integration of markets by the construction of transport corridors. As shown in Table 4, ADB as early as 1996 began to connect Guangxi’s trade activities to the region by building Fanchenggang port terminals and linking landside road networks.

21. In addition, the GMS Transport Sector Strategy, 2006-2015 of March, 2007 and the August, 2008, 12th Meeting of Sub-regional Transport Forum, expressed the following priority transport project interventions:

- Baise-Debao-Longbang Expressway (Vietnam border) and to be in coordination with the 2007 Sino-Vietnam agreement for the Longbang-Chaling border economic cooperation zones - Baise-Hechi Expressway - Western Yunnan Roads Development Project II - Hanoi-Lang Son Expressway Project (connects to Guangxi, Pingxiang) - Ha Long-Mong Cai Expressway Project (connects to Guangxi, Dongxing).

5 Regional Cooperation Operations Business Planning, Greater Mekong Subregion 2009-2011, ADB, September, 2008. 6 Regional Cooperation and Integration Strategy, ADB, July, 2006. The other 2 pillars are: monetary and financial cooperation and integration and cooperation in regional public goods. (“clearing the red tape at the country borders would generate approximately twice as much GDP than tariff liberalization would”, p. 13), pgs 11-17.

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Table 4: ADB Transport Corridor Projects Project Name Date Amount Description Fangchenggang Port 9/2002 $52 One berth container terminal; one berth bulk terminal; 20 Development million km. highway to the port- Objectives: development of the hinterland provinces’ economies (Guangxi, Guizhou and Yunnan)

Guangxi Roads 12/2006 $150 Expressway-Nanning-Youyiguan-179.2 km, 4 lane; link Development million roads to 7 counties-64 km; local roads improvements- 977.2 km. Objectives: part of national trunk highway system connects to National Route 1 in Vietnam and will facilitate regional cooperation. Link roads facilitated 3 new Guangxi- ASEAN industrial zones: Chongzuo, Fusui, Pingxiang

Guangxi Roads 12/2007 $200 Expressway-Baise-Nanning-188 km; Class II connecting Development Project II million road-25 km; 12 interchanges; upgrade intercity roads- Baise-Napo/Vietnam border-250 km; and minority village roads-500 km. Objectives: better access to markets, jobs, activity centers

Western Guangxi Roads 8/2007 $300 Expressway-Longlin-Baise-177 km; upgrade border and Development Project million rural roads-1,060 km; 50 township bus stations Objectives: regional transport system to promote trade and reduce barriers with Vietnam.

22. The physical infrastructure connectivity in the region of expressways to national highways and urban-rural road networks is the foundation to accelerate industrialization and urbanization and improve regional economic growth as stated in the Guangxi and city government master plans. However, day to day business operations are constrained by border delays which are costly and prevent the transport corridors from becoming economic corridors unless there are further project interventions. ADB has instituted a number of trade facilitation programs to transform the transport corridors to operational economic corridors and to overcome the barriers to trade and investment.

23. The Cross Border Transport Agreement (CBTA) of 2004 and the Economic Corridors Forum (ECF) of 2008 are GMS institutional mechanisms to organize strategies and implement project interventions in order to overcome the non-physical barriers to regional trade and shift from constructing transport to economic corridors. The North-South Economic Corridor, the East-West Economic Corridor and the Southern Economic Corridors are the main organizational frameworks to identify major cities and towns along the corridors that will generate business opportunities and spread regional economic growth to the outlying areas. Some of these major cities or nodal points along the corridors are the cross border towns where there needs to be harmonization of procedures and improved information technology systems to smooth the flows of trade and tourism.

24. In 2009, ADB approved the regional policy and advisory technical assistance project for Developing Cross-Border Economic Zones (CBEZ) between the PRC and Vietnam which will support the North-South Economic Corridor. The border crossing points of Hekou, Yunnan-Lao Cai and Pingxiang, Guangxi-Dong Dang need to become stronger links in the supply or value chain for the growing border business activities and to ease the flow of goods between the PRC and ASEAN markets. The CBTA, the ECF and the CBEZ programs involve more private sector participation so that the corridors can become centers of economic activities unhindered by cross border barriers to regional economic cooperation.

25. The Asian Development Bank lending and non-lending programs are shifting from constructing road corridors and power transmission projects to projects related to urban development, trade facilitation and logistics. These projects include urban roads, flood and drought risk management and mitigation, biodiversity, water supply and sanitation

SA-C-7 Supplementary Appendix C: Sector Analysis – Regional Cooperation improvements in towns along the GMS corridors as outlined in the September, 2008 Regional Cooperation Operations Business Plan. The shift is gradual, but there is more focus on improving living conditions for populations along corridors and their connected communities for long term impact on regional economic development.

26. The priorities of the remaining years of the GMS Strategic Framework (2002-2012) are towards: (i) transforming the GMS transport corridors into economic corridors-the corridors must be inclusive in nature, and the potential negative social and environmental effects must be mitigated; (ii) accelerating the implementation of the CBTA and other trade and transport facilitation initiatives; (iii) reducing environmental risks to local livelihoods and GMS development plans.7

27. Guangxi has one of the clearest indications of the ADB-GMS theme of urban development along the corridors. The first intervention was the Guangxi, Nanning Urban Infrastructure Development Project demonstrating ADB’s commitment to the objectives of poverty alleviation and improving living conditions as well as fulfilling the Millennium Development Goals. The following Table 5 shows the continuing urban development projects in Guangxi:

Table 5: Urban Development Projects in Guangxi Project Name Date Amount Description Nanning Urban 11/2004 $100 Flood control; environmental & ecological improvements Infrastructure Development million Objectives: basic sanitation and safe water to drink Project

Wuzhou Urban 8/2007 $100 Urban road network & bridge to safer areas -36.2 km; Development Project million geohazards system. Objectives: Improve urban infrastructure to support regional multimodal hub and 6 domestically funded projects: 3 expressways, 2 railways, 1 river

Southwest Urban 1/2008 $300 Urban roads & networks; lake rehabilitation; coastal Development Project million protection and connecting bridge for Baise Objectives: (Fangchenggang, Accelerate development of urban & industrial areas and to Chongzuo, Baise) benefit from & promote regional economic cooperation

Beibu Gulf Cities 10/2009 $400 Urban roads & bridge-70 km; municipal infrastructure for Development Project million water treatment. Objectives: Support planned industrial (Fangchenggang, Beihai, growth, encourage private investment, and tourism Qinzhou) facilities, stimulate regional economies & trade (ASEAN/GMS)

IV. Detailed Analysis on the Development of Economic Corridors

28. In 1998, the Eighth GMS Ministerial Meeting in Manila instituted the economic approach policy to accelerate the pace of subregional economic cooperation. Its main objectives are: (i) provide a spatial focus to GMS activities, with the backbone, growth centers, and nodal points serving as catalysts to the development of surrounding localities; (ii) open up many opportunities for various types of investments from within and outside the subregion; and (iii) promote synergy and enhance the impact of subregional activities through the clustering of projects.8

29. Transport corridors become economic corridors when there is the smooth operations of the businesses to move and store goods within Guangxi and China and across

7 Joint Ministerial Statement, paragraph 13, Greater Mekong Subregion Economic Cooperation Program, 15th Ministerial Meeting, 19 June, 2009, Cha-Am Petchburi, Thailand. 8 “Toward Sustainable and Balanced Development: A Strategy and Action Plan for the GMS North-South Economic Corridor,” ADB, Discussion Draft, February 4, 2009, p. 1, paragraph 2.

SA-C-8 Supplementary Appendix C: Sector Analysis – Regional Cooperation borders with lower costs and less time to travel as well as to move people and vehicles along the corridors for tourism opportunities. The main cities along the corridors are catalysts to improving corridor performance, yet are not the sole beneficiaries of the new expressways that form the main corridors. The test of transforming transport corridors into economic corridors involves attracting investment and economic development to smaller towns and rural areas in the surrounding counties of the main corridors through the linked road networks that are part of the transport corridor projects funded by ADB.

30. The pre-conditions for economic corridors are the construction of modern expressways, national highways, urban road networks and municipal improvements, and upgrading of rural road networks to connect to the main transport corridors. These basic regional infrastructures are in place and being constructed. However, there are weaknesses in physical infrastructures and processes at the border crossings. There are also problems in generating more broad-based and balanced growth by urban areas integrating rural economies and populations with national, subregional and global markets through rural- urban-subregional linkages. Strengthening of the linkages results from effective urban and corridor development strategies since 90 percent of the poor live in the rural areas.

31. The policy framework of the Eastern subcorridor of the GMS North-South Economic Corridor flagship program is well established from ADB and Guangxi projects completed and planned. The Nanning-Youyiguan-Hanoi and the Nanning-Dongxing-Hanoi transport corridors are resulting in improved business opportunities to those using the new expressways and their linked roads by reducing time to travel and lower vehicle operating costs.9 Moreover, Baise is emerging as a new third section on the Eastern subcorridor of the NSEC program.

32. ADB projects in Baise are constructing expressways and linked roads to the hinterland for connectivity and regional economic cooperation and for urban development, yet Baise is not defined in the NSEC framework. The remoteness, uneven development and numerous rural counties of Baise coupled with the sequences of project interventions (Baise- Nanning; Baise-Longlin; Baise-Longbang; Baise-Hechi expressways and the Southwest Urban Development) compared to the two Nanning Eastern subcorridors warrant Baise to be included in the NSEC framework. Moreover, Baise strengthened its transport corridor function by starting to implement the 2007 Longbang-Chaling border agreement with Vietnam to construct a bilateral economic cooperation zone and strive for a free trade zone in order to capitalize on border trade, processing and tourism growth opportunities.

33. The next stage of developing the transport corridors into economic corridors is for harmonizing logistics processes and services for traders such as Customs, information exchanges, warehousing, and trucking. The NSEC policy framework with the CBTA and ECF institutional arrangements are needed to make corridor improvements within and across borders. Trade flows will increase and capacity to handle shipments on the corridors will be constrained without logistics corridors taking shape. The transformation to logistics corridors will be hastened by the full opening of the ASEAN-PRC FTA in 2010. Traders will

9 The expressway has cut travel time from Nanning to Youyiguan from more than 5 hours to less than 2 hours, and travel distance by 45 km. It has also relieved traffic congestion and bottlenecks on the parallel NH322. With the expressway, traders from Pingxiang can now do business in Nanning and be back home on the same day, instead of a day or so later. The link roads and local roads enable the poor living in the project area to seek employment elsewhere and allow easier access to market and public services. The link roads provide good access to the three new Guangxi-ASEAN industrial zones (one each in Chongzuo, Fusui, and Pingxiang) and the Wantong Logistic Center, and have attracted new industry into the project area. The Project has stimulated the local economy and enhanced border trade. Bus fares have gone down by an average of 15% since the completion of the Project. Similarly, freight charges per ton km have gone down by the same margin as a result of better roads and lower vehicle operating costs despite the rise in fuel costs. Project Completion Report Guangxi Roads Development Project, People’s Republic of China, Loan 1851-PRC, ADB, August 11, 2008, paragraphs 34, 49.

SA-C-9 Supplementary Appendix C: Sector Analysis – Regional Cooperation demand more services and reliability as opportunities unfold on and in the vicinity of the new transport corridors.

Table 6: Corridor Development Level10 Stage Corridor Definition Level 1 Transport Corridor Corridor that physically links an area or region

Level 2 Multimodal transport Corridor that physically links an area or region through the integration of various modes of transport

Level 3 Logistics corridor Corridor that not only physically links an area or a region, but also harmonizes the corridor institutional framework to facilitate the efficient movement and storage of freight, people and related information

Level 4 Economic corridor Corridor that is able to attract investment and generate economic activities along the less-developed area or region ; physical links and logistics facilitation must first be in place

34. Full implementation of the CBTA annexes (16) and protocols (3) is critical in the next stage of the corridor transformation. Delays will compound at the borders from trucks trans-loading all goods from Chinese to Vietnamese trucks and vice versa as trade increases and will worsen further without modern information technologies. Hence, the key steps to implementation into logistics corridors require:

- Intergovernmental agreements to enable trucks and drivers to cross into each others territories to designated areas such as inland depots, cargo transfer terminals or dry ports (rural and urban) for transloading, consolidating and distribution of cargo. The ECF provides the institutional arrangement to bring together the public and private sectors and the local, provincial and central governments with the National Transport Facilitation Committee of the PRC. (protocol 1 and the GMS Road Transport Permit)

- Intergovernmental agreements to exchange data across borders. The PRC e- Port system (used in Youyiguan/Pingxiang), electronic date interchange and pre-clearance Customs formalities are needed. The CBTA is implementing a public private partnership to accelerate the cross border movement of goods, vehicles and containers through the GMS Customs Transit System (CTS)

- Cross border pilot projects under CBTA for best practices shared with other border crossings as models of corridor development (Youyiguan & Dongxing).

35. Urban development by ADB project interventions of strategically located cities on the regional transport corridors will generate regional economic growth by attracting investments for economic activities to those cities. There is already evidence of economic growth from urban development project interventions. Chongzuo and Fusui are linked to the Nanning-Youyiguan new expressway which improves their new ASEAN industrial park opportunities. Recently, there are proposed project interventions of a local urban road network and reduction of the pollution in the Shuikou Lake of Chongzuo which will improve business and living standards and attract businesses and tourists. However, the promotion of just a few cities along the corridors will not be sufficient to achieve the GMS Strategic Framework vision of: enhanced connectivity, increased competitiveness and greater sense of community.

10 “Logistics Development in the North-South Economic Corridor of the Greater Mekong Subregion, Banomyong, Ruth, Journal of Greater Mekong Subregion Development Studies, ADB, Volume 4, December 2008, p.46.

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36. Rural-urban-subregional interdependencies need to be fully considered in view of the transformation of the transport corridors into economic corridors so that broad based economic growth can occur to reduce poverty evenly in Guangxi and across the borders. The interventions need to go beyond urban development and transport corridor construction and include more sequencing and coordination to fully integrate all of the region’s inhabitants and their productive potential into the economic corridors.

37. Major implications of the expanded interconnectedness and accompanying transformation are that (i) the growth and welfare of urban centers and their rural hinterlands are no longer affected only by internal factors, but are also influenced by forces far beyond national borders; (ii) cities and towns are increasingly placed in a competitive framework of subregional intercity networks; and (iii) economic corridors create significant opportunities to strengthen the rural-urban-subregional linkages in the poorer sections of the Mekong region, and present considerable planning and management challenges for the urban areas to meet the new demands of the integration process. Understanding of the forces of subregional integration as well as the prominent roles that urban areas are playing and will play in the subregional integration process is vital to devising and implementing appropriate strategies that will unleash the potential of urban areas to exploit the new opportunities for the benefit of the region’s poor.11

38. Congestion will occur along the corridors and at the borders and presents opportunities to inland and rural areas which can function as agriculture and minerals processing plants and inland distribution and cargo transfer centers in the context of value chains of business activities. For example, distribution headquarters in cities on the corridor and at the borders could cooperate with rural areas to serve as distribution branches and perform Customs clearance inland (in bond) and with modern information systems. There are numerous stages of economic activities between, for example, the extraction of minerals and the harvesting of agriculture products to the delivery of intermediate and finished products to customers that would involve the coordinated integration of urban and rural businesses and require supporting infrastructures. Development of economic corridors needs interventions to integrate the urban-rural-subregional linkages. The goals of the interventions will be to prevent overburdening of urban resources (water, sanitation, roads) by balancing the labor pools and economic activities between rural and urban areas.

39. It is the goal of the growth centers along the GMS Eastern subcorridor comprised of Nanning, Chongzuo, Baise and Fangchenggang to attract investment to their industrial parks for business development. The project interventions of better urban road networks and improved environmental conditions serve to accommodate enterprise development around the industrial zones. However, manufacturers and distributors in the parks will need low costs and access to global markets by efficient transport from and to their businesses, across the borders, or by ocean or both. As more economic activities occur along the subcorridor, the performance of the subcorridor and their competitiveness will determine long term local and regional economic growth. Moreover, the tourist industry’s buses need to share with the cargo transport and the public transport the same local and regional infrastructures of urban road networks, expressways, highways and border crossings. Current increases in trade, tourism and passenger car ownership in Guangxi will be constrained and undermine growth unless the logistics stage of corridor development is implemented.

40. Several ADB and Guangxi border initiatives will provide the foundation to ease the flows of inbound and outbound transport for the key urban growth centers along the subcorridor. The CBTA is the primary program with its pilot project for trade facilitation at

11 “Technical Assistance for Rural, Urban and Subregional Linkages in the Greater Mekong: A Holistic Approach to Development and Poverty Reduction,” Cezayirli, G., ADB, September, 2003, paragraph 7.

SA-C-11 Supplementary Appendix C: Sector Analysis – Regional Cooperation border crossings of Hekou in Yunnan and Pingxiang in Guangxi. The China-ASEAN Free Trade Area Pingxiang Logistics Park near the Nanning-Friendship Gate expressway to Vietnam is constructing the storage, Customs, processing and logistics functions to accommodate increasing trade and tourism along the subcorridor. There will also be a joint economic zone of 17 square kilometers evenly divided between Pingxiang and Dong Dang, Vietnam and all facilities are scheduled to be completed by 2012. Dongxing and Baise- Longbang are also planning and building facilities at the borders in cooperation with Mong Cai and Chaling, Vietnam, respectively in order to lower the physical and non-physical barriers to trade and tourism. Finally, ADB is instituting a program to construct cross border economic zones (CBEZ) after the People’s Republic of China and Vietnam reached consensus to jointly establish CBEZs in Yunnan, Hekou-Lao Cai and in Guangxi, Pingxiang- Dong Dang. The ADB initiative will address the joint development, management and private sector participation of the CBEZs and coordinate linkages to the key urban growth cities along the subcorridor.

41. The link between the key growth cities on the subcorridor and border crossings will be raised to developed country standards with multimodalism, information systems and by organized corridor management. Road transport is only one mode to sustainably develop economic corridors. Guangxi has rail, inland waterways with Youjiang, Zuojiang and Xijiang flowing with Vietnam and the Pearl River as well as seaport access and air transport to consider. The next stage of corridor development will involve a process change of moving general cargo by the use of overloaded trucks to the use of forty and twenty foot equivalent unit shipping containers (FEU, TEU) on truck chassis which are loaded from ocean vessels and can be moved by rail and on river barges. The intermodalism function of transport can ease congestion, lower costs and improve reliability to shippers while lowering environmental hazards. Also, information systems will be important to not only organizing and processing shipments in a single electronic window computer system across the subcorridor, but for developing websites to inform all government agencies and the private sector about the Eastern subcorridor’s progress.

42. Finally, stakeholders within Guangxi and across the region need to organize to better coordinate and manage government and business interests in the subcorridor development by forming a subcorridor committee under the guidance of the ECF. The stakeholders include: local, provincial and national representatives from sector agencies in transport, trade, urban, investment and the private sector. The subcorridor committee will be responsible for providing a voice to all the interests in attracting investments and monitoring and measuring the performance (time, cost, reliability) of the subcorridor and the link between the key growth cities and the borders to ensure an unhindered flow of goods, people and information. The subcorridor committee or coalition can analyze the changes and determine where improvements and expansions are required as the corridor matures from the transport to the logistics to the economic corridor stages.

43. Guangxi’s regional cooperation strategy is based on geographical advantages of the province as a transport and logistics hub for the southwest China region connecting to domestic and international regional markets. The strategy recognizes that cooperation is possible only by linking roads, railways and waterways throughout the region and by access to seaports. The strategy realizes that benefits and contributions cannot occur without higher levels of industrialization and urbanization in key urban areas along the corridors.

44. The central government raised the importance of Guangxi’s regional development status in March, 2006 by forming the Guangxi Beibu Gulf Economic Zone (GBGEZ) and only recently, in January, 2008 introduced the Development Scheme to 2020. The high national status of the GBGEZ will provide national preferential policies and funding to accelerate the industrialization and urbanization process which at present lags far behind more developed regions in the eastern and coastal areas as well as in the western areas. However, the

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Development Scheme of 2008 only focuses on Nanning and the coastal cities of Beihai, Qinzhou and Fangchenggang with Yulin and Chongzuo added in the May, 2009 report by the Office of Planning, Development and Administration Commission of Guangxi Beibu Gulf Economic Zone for the August, 2009 Forum in Nanning. Baise requires equal significance to the Development Scheme since their road networks, industrialization and urbanization are progressing as part of the transformation from transport to economic corridors along the Eastern subcorridor.

45. The approach by Guangxi to regional cooperation is comprehensive and appropriate for an early stage development scheme. In general, the strategy includes the Beibu Gulf, the provinces of the southwest, South and Central China and connects to ASEAN and East China. The plan divides the GBGEZ into 9 percent cities for urbanization and industrialization; 56 percent countryside for agriculture; and 35 percent eco-zone for nature resources. Industrial planning by clustering is appropriate, yet only targets industrial or functional zones in the Beihai, Qinzhou and Fangchenggang and coastal ports, and includes Nanning and the borders of Dongxing and Pingxiang zones. However, the infrastructure planning includes expressways and railway routes constructed for connecting Guangxi’s inland cities and neighboring provinces, but no mention of the inland waterways for regional economic development. Improvements to the GBGEZ strategy and the approach will require a plan that is shorter in term and in more detail. Such as, a strategy from 2010- 2015 and from 2015-2020 with a more detailed or separate sectoral focus for transport (all modes and multimodal), border-corridor, trade and investment, industrial (manufacturing & tourism) and agriculture.

46. However, the Guangxi Eleventh Five-Year Urbanization Development Planning, 2006-2010 does show strategies to evenly develop the whole province for regional economic cooperation. The “Four Industrial Clusters and Four Town Belts of Urbanization,” has economic corridor implications. They are: Youjiang Valley corridor with Baise and Pingguo as the axis; Guizhou-Guangxi corridor with Hechi and Yizhou as the axis; Guangxi Southwest corridor with Nanyou and Chongzuo-Qinzhou highways to link Nanning to Fanchenggang; and the Northeast cities and towns belt with Hezhou as the axis. The industrial clusters and parks are planned to maximize radiation effects and create linkages to the cities and towns.

47. In addition, Baise has a research plan for regional cooperation with the southwest that in detail describes infrastructure connectivity with Yunnan and Guizhou, industrial development of leading sectors in each of the three provinces as well as tourism development, border development with Vietnam (Red River Basin) and ASEAN cooperation. In short, Baise is described as the hub at the junction of the three provinces to access the sea and pivotal to East, West, Central and North and South. The GBGEZ strategy needs to improve on the strategic geographic coverage of cities and rural regions in Guangxi that are developing in regional cooperation. The need for an even development and inclusive approach throughout Guangxi is more significant for Guangxi’s regional cooperation with Vietnam and other developing member countries of ADB.

48. Vietnam’s level of economic development is behind Guangxi’s by a number of years and will become a hindrance to regional economic growth for Guangxi, if policies and infrastructure are not evenly developed across the borders. There is a need for harmonizing the cross-border infrastructure of facilities and roads as well as policies for truck permits crossing into national territories and data exchange agreements between the two countries. Presently, there are meetings between Guangxi and Vietnam striving to evenly develop the corridors across the borders in order to synchronize planning, implementation, and construction with the same standards, especially for the four border highways of: Nanning- Youyiguan-Dong Dang; Dongxing-Mongcai as well as the Baise-Jingxi-Langbang-Gaoping

SA-C-13 Supplementary Appendix C: Sector Analysis – Regional Cooperation and Chongzuo-Shuikou crossings. The port management office of July, 2008 was formed to improve PRC-Vietnam communications.

49. Improvements to the GBGEZ strategy and implementation will accelerate with ADB interventions for not only the CBTA pilot projects at Pingxiang and Dongxing ,but for additional border infrastructure assistance in cooperation with the PRC National Transport Facilitation Committee. The projects can include border bridges (Beilunhe bridge Number 2 and Shuikou Bridge Number 2) for trade and economic development. Finally, ADB’s GMS Corridor Towns Development Project (CTDP) for the Government of the Socialist Republic of Vietnam can be coordinated with the Guangxi Southwest Urban Development Project (Fangchenggang, Chongzuo, Baise) since the CTDP involves Dong Dang Town, Lang Son province across from Pingxiang, Guangxi on the Eastern subcorridor of the NSEC for investments in urban roads, water supply, sanitation and dry-port reloading facilities.

Photograph 1: Pingxiang Border Crossing Congestion Photograph 2: Vietnam Road from Mong Cai-Hanoi

Table 7: Baise Border Trade Small Border Trade ($ million) Commodity Border Trade ($ million) Year Exports Imports Exports Imports 1996 $997.85 1997 844.74 1998 1618.78 41.11 1999 1201.79 63.1 2000 1092.58 306.51 2001 1801.97 191.74 2002 4757.31 2889.37 2003 5749.48 4292.66 4004 1233.5 2004 1990.25 11479.08 3637.7 1581.7 2005 3012.68 8601.61 6083.8 717 2006 5495.27 20221.2 1371 192.5 2007 5672.39 25206.7 1152.6 1669 2008 16738.48 9656.12 526 1028 2009 forecast 12000 2000 735 1323.5 2010 forecast 15000 2500 808.8 1397 2011 forecast 16000 2800 882 1470 Source: Baise Development and Reform Commission (US$)

SA-C-14 Supplementary Appendix C: Sector Analysis – Regional Cooperation

Table 8: Dongxing Border Trade Year Exports (million) Imports (million) 2005 $175.2 $385.6 2006 $218.7 $690.1 2007 $342.4 $762.2 2008 $572.1 $782.3 2009 (Jan-May) $188.0 $349.1 Source: Fangchenggang Foreign Affairs Office

V. ADB Planned Urban Development Interventions in Guangxi and Regional Cooperation

50. The border cities of Fangchenggang, Chongzuo and Baise are less developed small and medium-sized cities with poverty higher than Guangxi’s and the national averages. The proposed ADB project with the Guangxi Zhuang Autonomous Region Government (GZARG), Southwest Urban Development Project, is to improve the urban roads and environmental systems so that traffic congestion and flooding are not disrupting commercial activities and to better connect the cities to the transport corridors of the region. Fangchenggang is a port city with sea and land importance to not only Guangxi, but to the entire southwest of the PRC to southeast Asia and world markets. Chongzuo city is located along the road and rail trade corridor that links Guangxi from Nanning capital city across to Vietnam markets and other southeast Asia markets. Baise city is more remote than the other two project cities, yet has significance to link Yunnan and Guizhou by expressways and national highways 323 and 324 to domestic markets and to connect to the seaports of Guangxi and regional corridors as well as border trade with Vietnam. These three cities share a borderline of 1,020 kilometers (km) with Vietnam and Guangxi has a shoreline that is 1,595 km. long. The Project cities are designated growth areas or nodal points to the development of ADB’s Eastern subcorridor of the North-South Economic Corridor (NSEC) from Nanning-Hanoi via the Youyi Pass or from Fangchenggang-Dongxing-Mong Cai-Hanoi as well as the construction of corridor routes from Baise to Nanning and from Baise-Longlin and from Baise to Longbang-Vietnam to the Greater Mekong Subregion.

51. The Project components in each city will increase urban road capacities so that congestion is reduced, productivity is raised and more urban growth can occur in business activities from the industrial parks linking with rural value chains and are also for the expansion of the land areas of the cities so that the inhabitants can travel from residences to workplaces. The Project components will also improve environmental conditions by reducing incidences of flooding and the damages resulting from flooding and to make the cities more attractive for the inhabitants and tourists. The urban road networks and municipal improvements will ultimately connect the cities to their corridors and seaports en route to regional economic growth within and across national borders. The proposed Project interventions will improve urban infrastructure services to meet the increasing demands of urban development and regional cooperation.

52. Each project city has unique contributions and benefits with regional cooperation for both Guangxi and the PRC and for the GMS based on their geographic locations on the Eastern subcorridor of the NSEC. Fangchenggang serves as a local industrial center of regional trade for primarily, iron and steel and as a transit gateway for much of China to and from ASEAN markets by sea and across the border to Vietnam. The port transport function of Fangchenggang places stress on the urban infrastructures in the port area which requires capacity improvements. The lack of urban road capacity with the port and its terminals hinders port expansion plans which in turn limits area businesses from increasing their production and in effect impedes regional economic growth.

SA-C-15 Supplementary Appendix C: Sector Analysis – Regional Cooperation

Table 9: Key Indicators of Guangxi Southwest Urban Development Project (2008) Fangchenggang Chongzuo Baise Target Sectors Iron & steel Sugar cane Aluminum

Transport Modes Ocean, Road, Rail Road, Rail, Zuojiang Road, Rail, Youjiang

Trade Corridors Land: Nanning- Nanning-Youyiguan-Hanoi Nanning; Longlin; Dongxing-Hanoi Longbang-Hanoi Sea: SE Asia

International Trade $1.459 billion (2007) $1.598 billion(2008) $439 million-‘07 *CAGR 24.48% 2003-2007 34% 2000-2008 35% over 2006 GDP $3.120 billion $3.894 billion $6.294 billion CAGR 18.7% 2003-2008 14% 2000-2008 16% 2003-2008 Per Capita $2,636 (2007) $1,341 (2007) $1,221 (2007) Land Area (sq.km.) 6,173 17,345 36,252 Sources: Statistics Yearbooks of Project Cities and www.chinaknowledge.com/Business/City (2007) *CAGR: compound annual growth rate. US $

Fangchenggang

53. Fangchenggang urban development master plans are consistent with Guangxi urban planning of expanding urban areas and cultivating industrial clusters in stages over the next ten years. The low level of industrial development hinders urban development plans. The port is the center of the City’s growth targets with expansion plans to increase cargo handling of 60 million tons per year by 2012 and 300 million tons by 2020. Industrial clustering is centered on the iron and steel industry with the first stage factory output of 10 million tons of steel per year and the third stage of 30 million tons per year. The clustering will involve 50 upstream and 200 downstream projects to support iron and steel and for business development in regional economic growth. These industrial activities will occur in Qisha and Gongche Industrial Parks near the port and are central to the Project’s urban road networks. Population growth targets are in two stages from 2007 of 203,000 to 2015 or 280,000 to 2020 of 1 million with an urbanization level of 69 percent by 2015 and 78 percent by 2025.

Table 10: Gongche Industrial Park Businesses Company Name Product Fangcheng Tianmu Chemicals, Ltd. Inorganic Acid Fangchenggang Yuezhong Concrete Invst Cement Products Fangchenggang Rongxing Mining Co.,Ltd. Iron Ore Guangxi Fanya Iron & Steel Processing Steel processing Guangxi Fangchenggang Huachen Mining Reduced ilmenite Guangxi Fangchenggang Haiyuan Wine & Chemicals Co., Ltd. Producing Alcohol Shenglong Metallurgy Co. Ltd. Producing Iron & Steel Fangchenggang Zhongyi Heavy Industry Producing Steel Structures Fangchenggang Yongda Processing & Distribution Factory Producing Steel Structures Source: Fangchenggang Port Group Co., Ltd., 2009. Registered capital of over US $735,300.

54. Industrialization of agriculture and forestry resources is also planned in cooperation with rural and ASEAN suppliers of vegetables, fruits and timber for processing, preserving and branding into value added goods for trade within China and to external markets in southeast Asia. The services sector will expand to become the largest proportion of Fangchenggang’s economic output over the primary and secondary sectors. The port will also become a logistics hub for value added services and essential to the tourism industry for cruise ships. Cross-border tourism with Vietnam and financial services will be targeted for regional economic integration as well.

55. Fangchenggang’s city development plans and meeting targets for growth will depend on external forces of the GBGEZ, ASEAN, Western Development national

SA-C-16 Supplementary Appendix C: Sector Analysis – Regional Cooperation government assistance, as well as ADB project interventions in order to accelerate industrial and urban plans. Fangchenggang’s growth rate in 2007 was 20 percent over 2006 for a total output of US $23.4 million, yet still much lower than Nanning’s economic output of US $156.1 million; Beihai’s, US $35.8 million and lower than other PRC major port cities of Tianjin, US $727.9; Ningbo, US $504.8 and Shanghai, US $1.76 billion (Fangchenggang Master Plan). Urban growth targets will not be met without foreign trade growth and the related promotion of regional economic cooperation programs.

56. The transport infrastructure development is critical to regional economic growth and integration. Fangchenggang’s urban development goals will rely on the Fangchenggang- Nanning expressway; the Qinzhou-Chongzuo expressway and the Fangchenggang- Dongxing secondary roads. These infrastructure connections will strengthen regional integration along with the Project urban road network supporting the Qisha and Gongche Industrial Parks with their seaport connections. The road networks will also have the capacity to transport inhabitants to and from residential areas for the industrial parks.

Chongzuo

57. Chongzuo is strategically located on the Eastern subcorridor of the NSEC along the Youyiguan expressway between Nanning and Pingxiang which borders Vietnam at Huu Nghi and Lang Son en route to Hanoi and Haiphong seaport. The urban development plans and goals are to expand the urban area to the north (Chengbei) and south (Chengnan) for industrial zone and residential development, respectively, away from the old city near the Zuojiang river. Urban development plans to contribute and benefit with regional cooperation by road and rail connections to Qinzhou and Fanchenggang ports in the southeast for ASEAN markets and to Baise in the northwest. Chongzuo plans to make optimal use of the Zuojiang river for cargo ship transport through the Xijiang river to the Pearl river network to Guangdong and Hong Kong for regional economic integration. There are plans to upgrade the river to navigate larger vessels in a staged approach over the next ten years.

58. Since 2003, tremendous growth occurred in Chongzuo when the PRC State Council re-established Chongzuo county as an independent city. The gross domestic product (GDP) of the city grew from US $1.532 billion to US $3.894 billion between 2003 and 2008 for an annual growth rate of 21%. In 2008, foreign trade was US $1.598 billion for an increase of 48% over 2007. Improving economic conditions are lifting incomes as the urban per capita disposable income increased 15% in 2008 over 2007 to US $1,872 and rural income increased by 14% to US $552.

59. Sugar cane and agriculture processing is the primary industrial development structure with logistics functions such as storage areas and the tourism industry development to also contribute to economic growth. Chongzuo’s sugar cane industry contributes one-third of the region’s total sugar cane output and is known as “sugar city” and as the “green treasure house” based on the ideal subtropical monsoon climate. Rice, corn, cassava, bananas and pineapples dominate the landscape of the 228.35 thousand hectares of cultivated land. Industrial development will also involve minerals of manganese, coal, uranium and tungsten iron. Finally, tourism is taking more of a share of the city’s economy and contributed US $253, 088,235 in 2008 or 6.5% of the total GDP. The Project’s flood control dykes will serve to protect the cultural and natural attractions as more people from the region come to appreciate the world’s largest border waterfalls, the cliff murals and nature reserves.

60. The Project’s urban road network will serve to improve traffic flows within the City for the industrial zones and to rural area traffic flows. The goal is to expand the City from 32 square kilometers to 50 square kilometers by 2020 to accommodate the industry in the north,

SA-C-17 Supplementary Appendix C: Sector Analysis – Regional Cooperation the west for tourism and in the southeast as a logistics hub for ASEAN markets. The Chongzuo government forecasts the population to grow from 130,000 to 500, 000 by 2020.

Baise

61. Baise is evolving into a critical node on the Eastern subcorridor of the NSEC. Expressways connect Baise to Nanning to the southeast for regional cooperation as well as to national highways 323 and 324 to connect with Guizhou and Yunnan provinces to the north and to the south to Guangdong. New expressways from Baise will connect to Longlin in the northwest for regional cooperation with Guizhou and Yunnan which includes growth to the tourist industry from popular natural and cultural attractions as well as expressway connections to Longbang in the south for Vietnam border-crossing en route to GMS regional economic integration.

62. At present, the old City area is densely populated and will shift industrial activities to the new city area in the east in the new urban development plan. The master plans of Baise urban development are to strengthen the weak urban road networks and increase regional connections. The Nanning-Kunming trunk line connects to Beihai, Qinzhou and Fanchenggang ports in the south for southwest China and ASEAN markets. All townships are connected by roads and there is access to every village. The construction of the expressway to Longbang will open up bilateral border trade opportunities with Vietnam to GMS markets but, the border port needs infrastructure development.

63. Urban master plans aim to bring Baise to a new level of development in the aluminum industry and tourism and to bring full benefit from regional cooperation programs of the China-ASEAN Free Trade (CAFTA), PPRD, GBGEZ and bilateral agreements with Vietnam. Baise is targeting the aluminum industry to further bolster economic development in which it has reserves of 780 million tons of bauxite which is a necessary input to producing aluminum. Some other major mineral reserves are of coal, natural gas, antimony and copper. Agriculture products are of mango, tea, bamboo and fennel oil. The GDP grew from US $2.457 billion in 2003 to US $6.291 billion in 2008 for an annual average growth rate of 16%. The City forecasts the population to grow from 250,000 in 2009 to 280,000 in 2015 and 500,000 in 2020. In 2008, urban per capita disposable income was US $1937 and US $415 in rural areas.

64. The City will construct an integrated transport system for road, rail and the inland waterways in the Youjiang Valley Economic Area. Industrial and agricultural development are not the only targets for economic growth in Baise. Tourism will be developed in stages in cooperation with Guizhou and Yunnan in regional economic integration. Five major tourism zones will be improved: Central, Youjiang district; South, Jingxi (near the border along the Longbang expressway); North, karst; East, Pingguo; West, Longlin. From 2004- 2009, there were 143,000 overseas tour groups and 3.6 million domestic tourists for revenues of US $31 million and US $220.5 million, respectively. Target growth from 2010- 2020 will be met by improving the urban infrastructure and transport networks in Baise for 280,000 overseas groups for US $70 million in revenues and 5.8 million domestic tourists for US $419 million in revenues (Baise Master Plan).

Inland Waterways

65. The regional economic growth in Guangxi will increase by the implementation of the “Golden Waterway Plan of 2008-2020.” The Xijiang river is part of the Pearl River and navigable from the border with Vietnam to Yunnan and Guizhou to Guangdong, Hong Kong, and Macau. The target is for navigation of the 1, 621 km. of the 3,101 km long river which includes 429 km Youjiang and 322 km Zuojiang rivers. The urban master plan requires the

SA-C-18 Supplementary Appendix C: Sector Analysis – Regional Cooperation design of class II channel navigation for 3,000 ton ships for industrial transport of coal, cement, aluminum, manganese, iron, containers and for tourism traffic. The Xijiang river system encompasses an area populated by 44.8 million which accounts for 92 percent of the whole district area.

66. The Youjiang and Zuojiang rivers coursing through Baise and Chongzuo, respectively are alternatives for transport to the road and railway modes. The Youjiang traverses to Nanning to the West River (Xijiang) through Guigang to the Pearl River to Wuzhou and down to Guangdong province. Zuojiang is the largest river in Chongzuo and is a tributary of the Yujiang river of the Xijiang water system in the Pearl River Basin. The Zuojiang flows from the southwest to Chongzuo to the northeast. Inland waterways can add to the Project cities’ multimodal network while reducing road congestions, costs and environmental problems. GZARG’s goal is for 37% of all shipments to move by inland waterways.12 The short term plan is to construct the Xijiang river from Nanning to Guigang. The long term plan is for the Xijiang river channel expansion and for the Zuojiang (not as navigable) and the Youjiang channel construction from 2010-2020 for regional river shipping. World Bank has several waterway projects in Guangxi such as the Nagi dam in Baise to Nanning to improve navigation for 500 ton ships (class IV-III) and a Guigang dam to improve water level from Nanning to Guangzhou for 1000 ton (class II) ships.

Table 11: Guangxi Navigation Freight Volumes (10,000 tons) Navigation Routes 2008 2010 (forecast) Autonomous Region-total 6285 7000

Xijiang main navigation routes 5215 6100 Liuzhou-Guizhou river 582 1160 Hongshui river 125 630

Youjiang river 131 660 Nanpan river 29 40 Duliu river 33 60 Rong river 80 100

Zuojiang river 192 300 Gui river 11 100 Xiu river 213 300 Hejiang river 50

Guangxi Inland Port Throughput Status and Forecast Table (10,000 tons) Port 2008 2010 (forecast) Inland Port Total 4675.5 7200 Nanning port 233.3 870 Guigang port 3112.1 3660 Wuzhou port 836.4 1500 Liuzhou port 192.6 610 Baise port 12 550 Laibin port 205.8 870 Chongzuo port 72.4 230 Guilin port 6.3 40 Hezhou port 4.6 50 Hechi port 80 Yulin port 50 Source: Guangxi Communications Department, Nanning, 2009

12 Ms. Zhang Xuelian, Deputy Chief, Guangxi Communications Department, Foreign Capital Utilization Division, meeting in Nanning June 12, 2009.

SA-C-19 Supplementary Appendix C: Sector Analysis – Regional Cooperation

Assessment of City Development Strategies and the Role of the Proposed Project

67. The existing infrastructures in Fangchenggang are not adequate to handle the rising demands from regional trade, tourism and public traffic. The city development strategy outlines the seaport and border-crossing gateway advantages of Fangchenggang for regional economic integration of southwest China with ASEAN and Indochina markets. Higher levels of urbanization and industrialization will be achieved by the construction of the Project’s seven road segments that total 27.6 km. for added capacity needed in the port area of Gongche and Qisha industrial parks. The coastal protection component will also improve living conditions which is instrumental in attracting investments for expanding the city and more industrial development. The Project urban road network will access the expressways to the East for Beihai and Qinzhou ports and to the North to Nanning as well as improve value chain linkages with the neighboring counties and to the Dongxing border-crossing en route to Vietnam.

68. Fangchenggang is a critical sea and land node in transforming the transport corridor to an economic corridor. The intermediate stage of corridor development is to construct a logistics corridor. The port City’s logistics planning will need to keep pace with the demands on the urban infrastructures and services both in the port area and at the borders as tariffs are reduced in 2010 for the ASEAN regional trading partners. Future stages of development will require adding more capacity to the urban roads for Qisha and Gongche industrial areas as well as from Fangchenggang to Dongxing. Traffic congestion in the port areas will be compounded with the integration of the rail bulk and container traffic coupled with the iron and steel industrial development even in view of the separate dedicated rail line for iron and steel. Current estimates are for port capacity to increase from 40-60 million tons to 125 million tons by 2020.

69. Chongzuo’s urban development strategy indicated urban road capacity constraints to support expansion of the South (Chengnan) city area for residential and administrative functions and for the North (Chengbei) area for industrial development. The initial stages of development require industrial areas in the North for sugar cane processing; manufacturing and trading; building materials near the Zuojiang river and in the South for high-technology and non-polluting industry. The later stages of urban planning to 2020 will require more multimodal functions by constructing a rail freight station and inland waterways as well as more highways to connect city traffic for cargo, residents and tourists to external traffic. The ADB Project intervention of two roads in the North and three roads in the Southeast totaling 13 kilometers will improve traffic flows, especially in the new South city where no roads exist. The Shuikou Lake rehabilitation is consistent with the urban plan for the tourist industry to become a major portion of economic growth in the services sector.

70. The urban and industrial expansion planning are in coordination with the promotion of regional economic integration. The city is 110 km south of Nanning and a pivotal node on the new transport corridor of the Youyiguan expressway to Pingxiang at the South border and to Baise in the northwest and for a new expressway to Qinzhou in the southeast port area of Guangxi. Intermediate and later stages of urban development will require logistics corridor enhancements for storage, information systems to Pingxiang and other inland terminals, multimodalism, and more value added functions as trade demands increase from the region. Road congestion will be a problem in the City and along the corridor as trade, local and area residents and tourist traffic grows. The urban master plans need to have clearer phases of urban and industrial growth in five year terms in order to coordinate urban and regional infrastructure projects as the transport corridor transitions to a logistics corridor and to a full fledged economic corridor that attracts more investments.

71. Baise is requiring new urban roads to expand the city into new urban and industrial areas away from the congested areas. The urban expansion plans are faced with not only

SA-C-20 Supplementary Appendix C: Sector Analysis – Regional Cooperation local traffic, but the regional traffic from the 323 national highway through the old urban area. The urban strategy outlines a cross highway network with fast external links from Baise to strengthen the Youjiang urban area status as a regional center. More roads through the whole city will improve the level of external road networks and connect to area cities and towns for their natural resources to be used for processing to regional markets. The urban plan also requires the dredging of the Youjiang for navigation and to construct modern railways to position the Youjiang Valley as a regional transport hub.

72. The Project components of a 4.25 km South Ring Road and Longwang bridge of six lanes will have a dual function. The road will improve traffic flows for the city and for the regional cargo and tourist traffic between Yunnan and Guizhou to Nanning. The city’s short term plan and long term plan is to develop the industrial areas from the old city area, Hexi to the new city areas, Henan, for residential, and Hedong for trade, logistics and industrial uses.

73. Baise is also an important nodal point on the transport corridor of the Eastern subcorridor of the GMS NSEC. The Project’s South Ring Road and Longwang bridge over the Youjiang (navigation to class III 1000 ton vessels) will improve conditions for the City to construct long distance bus stations in the new Longjing district which is important to developing the tourist industry. The City strategy for tourism development has the next stage from 2011-2020 for building the five major tourist zones: Youjiang Valley; Jingxi; North-karst scenery; Pingguo; and Longlin. “Although the scope of economic development in GMS economic corridors is broadly inclusive, tourism has been identified as a flagship program offering significant opportunities for priming economic growth in the corridors.”13

VI. Conclusions and Recommendations

74. The Guangxi Southwest Urban Development Project proposed interventions will provide the infrastructure linkages to support higher levels of urbanization, industrialization and regional economic cooperation. Fangchenggang, Chongzuo and Baise are experiencing rapid trade growth within China and with external markets in southeast Asia. The GBGEZ, the CAFTA and the PPRDECA policies are furthering Guangxi’s geographic significance to regional economic cooperation. The Project urban roads and environmental improvements will increase infrastructure capacities for industrial zone and related traffic and strengthen the cycle of more trade and attracting more investments to lead to higher levels of urbanization and industrialization. However, regional economic cooperation is hindered without improvements to urban development linkages to rural areas and at the borders.

75. The Project cities are growth poles on the Eastern subcorridor of the GMS NSEC. The Project is one part of a series of interventions needed to transform the transport corridor into an economic corridor. The construction of expressways and urban-rural road connections are another critical part of regional economic cooperation. The intermediate stage over the next few years is of constructing a logistics corridor essential to lowering the barriers to trade and tourism development. The following recommendations and action items are a summary of issues involving the transformation of the transport-logistics corridor to an economic corridor:

- Include Baise on the Eastern subcorridor of the GMS NSEC

- Transform the transport corridor to a logistics corridor by accelerating full implementation of the CBTA to reduce border delays and by ECF active and regular meetings to include the local governments and in cooperation with the private sector. In particular:

13 “Developing Tourism in the Greater Mekong Subregion’s Economic Corridors,” Alampay and Rieder, Journal of Greater Mekong Subregion Development Studies, Volume 4, December, 2008, p. 65.

SA-C-21 Supplementary Appendix C: Sector Analysis – Regional Cooperation

- Intergovernmental agreement for truck crossings - Intergovernmental agreement for data exchanges - Pilot cross-border projects (Youyi & Dongxing apply to Longbang).

- Technical assistance interventions to enhance rural-urban-subregional value chain linkages

- Training to understand the best practices of multimodal, information systems and organized corridor management (all stakeholders from public and private sectors)

- Revising the GBGEZ Development Scheme of January, 2008 to include inland waterways; 2010-2015 and 2015-2020 periods; and details by sector: transport (all modes), corridor-border, trade and investment, industry (manufacturing & tourism), and agriculture

- Project assistance by ADB for infrastructure border bridges: Beilunhe bridge Number 2 and Shuikou bridge Number 2

- Coordination of the Guangxi Southwest Urban Development Project with the Vietnam Corridor Towns Development Project in ADB

- Interventions to assist in the physical infrastructures and institutional improvements for the China, Longbang-Vietnam Chaling Port, Sino-Vietnam Border Economic Cooperation Agreement (see Appendix A)

SA-C-22 Supplementary Appendix C: Sector Analysis – Regional Cooperation

ANNEX A

China Longbang-Vietnam Chaling Port Sino-Vietnam Border Economic Cooperation Agreement

76. To carry out the strategy of “long-term stability, facing the future, good-neighborly relations, comprehensive cooperation”, improve economic development of border region, and achieve the goal of border friendship and , the Baise municipal government and Gaoping provincial government will meet the agreement on the basis of equality and mutual benefit, with friendly negotiation, to build up the economic cooperation area between Longbang and Chaling port. The cooperation agreement includes the following terms:

1. The total area of the economic cooperation region is 16 square kilometres.(8 square kilometres for each side separately).

2. The function of this economic cooperation region would be: border trading and transit trading; integrating processing of mineral, agricultural products and herbal medicine material; establishment of the bonded area.

3. Giving priority for developing the follow industries in the economic cooperation region: the processing industry of mineral, agricultural products and herbal medicine material, logistics industry, tourist industry and Mechatronics assembling industry. Those industry and infrastructure should be improved for the two sides, as well as the compensation trading.

4. The cooperation mechanism in the region would be: it will be implemented by two steps, for the short term, the construction of the economic area would be conducted by each side separately; for the long term, Baise city and Gaoping Province would work together to improve the construction of economic cooperation area since 2011.

5. The management mechanism in the region would be: the “2+1” module will be used to set up the management institution. For each party, establish their own management committee, to accelerate the construction and execute their administration management rights. Meanwhile, a associated coordinating organization will be set up to deal with coordinating works.

6. According to the law, regulations and international convention from the two sides, the construction should be accomplished by the two sides together. And endeavor to accomplish the application procedure of Sino-Vietnam border economic cooperation area by Chinese central government, prepare the primary construction work.

7. Responsibility and obligation from government of the two sides:

7.1 Each side should provide convenience and preferential policies for investors according to related laws and regulations, and protect the legitimate rights for investors.

7.2 Regular commission should be conducted for entrepreneurs from each party, to exchange experience. Provide more communication opportunities for investors from The two sides.

8. Preferential policy for investors: according to the laws and regulations, preferential policies should be established to encourage investment, including favorable land using, water and electric tariff and tax policies. Meanwhile, the economic cooperation region will be managed by referring to the border economic management module, to

SA-C-23 Supplementary Appendix C: Sector Analysis – Regional Cooperation

enjoy the border economic policies.

9. For the inspection of the export products in this area, “one stop-clear customs” inspection strategy would be carried out. Which means export products would be inspected only once by the two sides together.

10. Entrepreneurs who can do business within this area include not only the natural person or legal person from the both sides, but also those from the third parties or regions.

Overall Cooperation Structure Agreement between Baise Municipal Government and Gaoping Provincial People’s Committee

77. To strengthen the regional cooperation and make it be involved into the Pan Beibu Gulf of Economic Zone, speedy improve the construction and economic development, the two sides, include Baise Municipal Government and Gaoping Provincial People’s Committee, will meet the cooperation structure agreement on the basis of mutual benefits, friendly and equal cooperation, as following:

Term 1 78. By overall strengthening the cooperation of economy, trading and investment, the trading volume is expected to reach US$ 100 million in 2010, import and export cargo will reach 500,000 ton, the total number of entry-exit people will reach 100,000.

Term 2 79. The two sides agree to promote the cooperation in the fields of trading, tourism, transportation, agriculture, culture, education and hygiene. Negotiation will be conducted in each field soon, cooperation agreement will be signed as well. Great improvement is expected to make in these fields in the next five years.

Part I: Investment cooperation on international transportation and road construction

Term 3 80. After the port upgraded and opened, the two sides should promote to put the transportation roads into use.

Term 4 81. The management organization should be the international transportation management department, the management measures would be exchanged each other.

Term 5 The two sides should accelerate the road construction to the port according to their own plan.

Part II: Port construction and economic cooperation

Term 6 82. The two sides agree that an upgraded and opening port is important to improve economic development and external trading. Therefore, the two sides should submit the upgrading application from national competent departments. The two sides should also prepare the port upgrading work.

Term 7 83. To strengthen the communication of enterprises and local people from the two sides, the governments from the two sides should encourage its enterprises to build up

SA-C-24 Supplementary Appendix C: Sector Analysis – Regional Cooperation representative office in the other country. And convenient policies should be provided by both sides.

Term 8 84. The two sides should promote a convenient trading environment, according to the agreement of Shuikou Port-Tuolong Port signed between Guangxi Provincial Government and Gaoping Provincial People’s Committee.

Term 9 85. The two sides should promote the construction of Longbang-Chaling Port border economic cooperation region. The two sides should make effort on the planning and application work of border port economic cooperation region.

Term 10 86. The two sides agree to conduct exchange visits twice in a year. It will be held in Gaoping City in Vietnam in the first half year. And the exchange visit in the second half year will be held in Baise City in China.

Part III: Tourism development and cooperation

Term 11 87. The two sides should promote transnational tourism together, and design the travelling route as early as possible.

Term 12 88. The two sides agree to accelerate the tourism projects development, including, river rafting project, such as, Napo Bainan River (in China)-Jingjiang River in Baole County(in Vietnam) travelling route. And transnational river rafting project, such as Nantan river in Jingxi County(in China)-Guichun river in Chongqing County(in Vietnam) travelling route.

Term 13 89. The two sides should strengthen tourism cooperation, develop border travelling project. Promote the Baise-Gaoping border tourist project to the Sino-Vietnam tourist product.

Part IV: Agriculture development and cooperation

Term 14 90. The two sides agree to increase border cooperation in the area of cultivation, processing and trading agricultural products, including sugarcane, ginger, tobacco and mulberry, to alleviate poverty.

Term 15 91. The two sides should strengthen the cooperation in the area of epidemic prevention of poultry and animal Infectious Disease.

Term 16 92. The two sides should increase the cooperation in the field of control and prevention of agriculture, forest disease and fest.

Part V: Investment

Term 17 93. The Baise City in China and Gaoping Province in Vietnam have meet the agreement that enterprises from its own country are encouraged to invest in the other

SA-C-25 Supplementary Appendix C: Sector Analysis – Regional Cooperation country in the fields of roads construction, mineral processing, tourism, trading and service industry

Term 18 94. The two sides agree that investors’ legitimate rights and interests from its own country should be protected in the other country.

Part VI: Culture, Education and Hygiene

Term 19 95. An artistic team should be selected from its own country to play performance in the other country during the important trading activities.

Term 20 The two sides agree to increase cooperation in education, held teaching experience exchange to improve the education quality.

Term 21 The two sides agree to strengthen cooperation and communication in education training, select students from its own country to study in the other country, provide convenient environmental for language and technology training.

Term 22 The two sides agree to strengthen cooperation in hygiene field, work together on prevention of infectious diseases.

SA-C-26 Supplementary Appendix D:

Sector Analysis –– Urban Transport Supplementary Appendix D: Sector Analysis – Urban Transport

Supplementary Appendix D:

Sector Analysis –– Urban Transport

A. Policy Framework

Guangxi Expressway Network Planning (2006~2020) was formulated by Guangxi Zhuang Autonomous Region (GZAR) Government in 2006. As noted in the plan, a total of 5,590km of expressway was proposed to accomplish a fully developed transport network in GZAR. By the year 2008, 2181km had been completed and opened to traffic. Four expressways are proposed to connect to the major ports of Longbang, Shuikou, Youyiguan and Dongxing. Of these, Nanning to Youyiguan has been completed, Fangchenggang to Dongxing and Baise to Longbang via the Jingxi expressway, are currently under construction. The other is under preparation.

On inter-city connectivity, it is planned that the three prefecture level cities of Fangchenggang, Chongzuo and Baise will all be connected through expressways. Fangchenggang to Chongzuo via Qingzhou, and Chongzuo to Baise via Jingxi are being planned. Presently, they are connected with class II or higher class highways. Also in line with the GZAR Transport Eleventh Five Year Plan, all the border counties will be linked with Class II highways by the year 2010. The three project cities will greatly benefit from the ongoing transport and other infrastructure projects.

Figure 1: Guangxi Expressway Network Plan (2006-2020)

The three southwest cities hold a strategic position in the regional economic development.

SA-D-1 Supplementary Appendix D: Sector Analysis – Urban Transport

According to the Plan, the region is strategically divided into three clusters characterized by their geological locations and industry features.

Dongxing Pingxiang Cluster includes Dongxing under Fangchenggang jurisdiction, Pingxiang under Chongzuo jurisdiction and related border economic cooperation and development areas. To facilitate its location as a gateway to Vietnam and ASEAN, trade, logistics and tourism are the major industries in this area. Pingxiang Free Trade Zone was established to further strengthen economic cooperation through border trade.

Qinzhou Fangcheng Cluster comprises Qinzhou, Fangchenggang and their seaport related industrial areas. Full potential of a deep water port will need to be realized in the near future. A free-trade port zone is now under rapid development. Resource processing such as steel manufacturing and trade logistics are specified as pillar industries.

Baise Cluster Baise is located at the junction of Yunan, Guizhou Provinces and GZAR. Due to its geographical location, Baise is one of the most important gateway cities of the southwestern region of the PRC to connect Guangxi and surrounding provinces with the national and international markets.

11th Five-Year Guangxi Transport Plan (2006-2010) set the target to facilitate an international corridor for free flow of goods and services linking Guangxi with ASEAN. During the eleventh FYP period, this would be achieved through the following seven key strategies-(i) to build a high class road framework connecting South China, Southwest China and ASEAN member countries; (ii) promote regional development based on an expressway network and nodal cities; (iii) to strengthen road network upgrading and rehabilitation; (iv) to improve accessibility in rural area through rural road and rural bus passenger terminal construction; (v) to promote land transportation, improve road passenger transport capacity and public transit interchange construction; (vi) raise the competitiveness of the seaport in Guangxi by establishing a large-scale specialized deep-water port in south China; (vii) focus on navigation route construction, develop navigation and hydropower complex, raise navigation capacities for major inland waterways.

By the end of 11th FYP period, the total length of highway in GZAR will reach 80,000km, of which 3000km, is expressway, 12,000km is Class II roads and higher standard highways would count for 20% of total highway coverage. There will be 45 high class roads connecting neighboring provinces and countries.

In addition, the total number of highway transport terminals in GZAR will reach 916 by the end of 11th FYP period. Seaport renovation and construction is the key strategy during 11th FYP. There will be a total of 34 port berths with 10,000 ton capacity. Total length of class II navigable waterways will reach 291km; class III navigable waterways will reach 700km. Overall port handling capacity will reach 58 million ton.

11th Five-Year Guangxi City and Township Development Plan was formulated to guide city and township development in GZAR. By the end of the Tenth FYP period, urbanization had increased to 33.6% at an annual rate of 1.09% in GZAR. It is aimed to achieve 40% urbanization by the end of eleventh FYP period. The plan stressed the importance of urban transport and related municipal infrastructure development during this period in supporting urbanization and industrialization in the region.

The key strategy of the development plan is to promote urbanization in medium and small cities in Guangxi, to integrate social and economic factors with land use and transport development in these cities. It also ensures that infrastructure development is balanced across the region.

SA-D-2 Supplementary Appendix D: Sector Analysis – Urban Transport

According to the Development Plan, during the Eleventh FYP period, Fangchenggang City, is to develop a port-industrial area in Gongche and Qisha; to speed up the construction of Gongche Industrial Zone and Qisha Industrial area, to upgrade the port-related industries and to expand the scale of economy. As for Chongzuo City, the main objectives are to build an ecological border city; to further develop the sugar industry, the agricultural product processing industry and to promote border trade and tourism. The urban expansion will be towards the south of the city. North of the city will be built into an industrial area. As for Baise City: the target is to develop a rich-historical and revolutionary, ecological border city; to further develop the aluminum industry and to improve the overall transport infrastructure. During the Eleventh FYP, it is planned to expand the urban area towards south and east of the existing urban area.

Comprehensive Urban Transport Plan is generally based on thorough traffic surveys and public consultation, and it covers urban transport development strategies, public transport system, transport modal integration etc. Cities in China have been relying too much on building new roads to solve current traffic congestion problems. As the nature of urban transport is becoming more complicated, a comprehensive urban transport plan becomes very critical for the cities’ transport development at this stage.

It is understood that currently only large cities in China have made comprehensive transport plans available. Many medium and small cities have not started to prepare their plans. Cities’ governments have realized the importance of developing a sustainable comprehensive urban transport system, as motor-vehicle driven road construction will not be sustainable in the long term, especially for cities in China. It is noted that this is already on the three cities’ agenda to complete and implement such a plan in the next FYP. Baise and Fangchenggang Cities’ Urban Public Transport Plan under the comprehensive transport plan are near completion and waiting for approval. PPTA Consultants has exchanged views with the cities’ authorities and related agencies. It is viewed as a good opportunity for the cities to strengthen their capacity for making transport strategies and planning with the assistance from the ADB expertise and loan.

B. Overview of Regional Transport Context

Guangxi Zhuang Autonomous Region (GZAR) borders with Guangdong Province in the east, and borders Beibu Gulf at the south, shares a border with Vietnam in the southwest. GZAR is the only region in China sharing the border with Vietnam. The total length of the border is 637km long. It is situated along the strategic corridor linking southwest China with Southeast Asia. It is also the trade corridor connecting domestic markets with international markets in Southeast Asia.

Three major trade corridors in Guangxi are identified including the southeast corridor to significant seaport cities of Fangchenggang, Qinzhou and Beihai; the east corridor leads to the Pearl River Delta region covering Guangdong, Hong Kong, Macau; the southwest corridor leads to Sino-Vietnam Youyiguan (Friendship Gate) passing through city of Chongzuo.

By the year of 2007, the total length of highway in GZAR had reached 94,202km, including expressway 1879km, class I roads -734km, class II road 7,326km. The total length of railway had reached 3,116km; length of inland waterway had reached 94,202km. In 2007, sea ports handled 68.53million tons of cargo; inland waterway cargo handled 37.6 million tons; total passenger ridership reached 617 million; total highway freight handled was 502 million tons. It witnessed an average annual growth of 11.73% and 15.24% for ridership and freight respectively since 1980.

Fangchenggang: Highway Fangchenggang is 153km away from Nanning Municipality, and

SA-D-3 Supplementary Appendix D: Sector Analysis – Urban Transport has 582km of coastline and shares a 212km long border with Vietnam. Fangchenggang City is incorporated into the highway network through the Nanning to Fangchenggang Expressway - a north-south arterial road, and Fangchengguang to Beihai Highway - an east-west arterial road. In addition, connecting Fangchenggang to Dongxing (a county level city in the west), an expressway will be completed in the near future. Railway Nanning to Fangchenggang Railway, with a total length of 173km extends to the Gangkou Port directly. Through Nan-Fang railway, Fangchenggang is linked by the national railway network, to Yunnan, Guizhou Province etc. The Nanning to Fangchenggang railway was designed with an annual cargo handling capacity of 17.5million ton. Preparation of a parallel line is ongoing with a designed capacity of 40million ton. Port Fangchengguang is one of the 24 major coastal ports in China, and one of the 3 major ports in southwest China. Cargo handled at Fangchenggang Port in 2006 reached 25.06 million tons. Annual turnover of iron ore exceeds 10million ton. Fangcheng Port is the biggest port for importing iron ore in the southwest. Steel manufacturing will be one of the pillar industries for Fangchenggang.

Chongzuo: Highway Chongzuo is 114km away from Nanning Municipality. Nanning to Youyiguan Expressway is located south of Chongzuo city. It is the major trade and transport corridor linking Nanning to Youyiguan (Lang Son at Vietnamese side) at the Vietnamese border. Chongzuo is the gateway to Vietnam along the corridor. Napo to Fangchenggang Class II Highway is the existing provincial road leading west to Napo within GZAR. It also serves as an outer ring road in the Chongzuo urban area. In addition, G322 national highway, which lies further south of Nan-You Expressway, is the alternative route for the expressway. Chongzuo to Qinzhou Expressway is under preparation and will be built in the near future. Railway Chongzuo is located on the trunk line of The Moscow-Beijing-Hanoi Railway passing through Pingxiang, a China-Vietnam border city administrated by Chongzuo. The railway links the two of the largest markets of China and ASEAN. During the 11th FYP period, Fangchenggang-Chongzuo-Shuikou Railway line has been listed as top priority and under preparation. Waterway Chongzuo is rich in water resources. During 11th FYP period, integrated navigation and hydro-power development will be strengthened. Zuojiang River navigation route will be renovated. Zuojiang Hydro-power Station will be built. The first phase of Chongzuo Xinhuan Passenger/cargo Port will be built.

Baise: Highway Baise is 246km away from Nanning municipality. Baise is located at the junction linking Guangxi with Yunnan and Guizhou province. G323, 324 national highways connect Baise to Yunnan and Guizhou. In addition, Nanning to Kunming Expressway is aligned south of Baise City proper. The section in Guangxi has been completed. Railway Nanning-Kunming Railway opened to traffic in 1997. Baise is the major junction along the railway line. Baise railway station will be renovated to increase passenger and cargo capacity in the near future. Waterway Baise is rich in water resources and with easy connections of inland waterways. However, cargo handled at Baise inland waterways has decreased since 2004. To rectify this, the municipal government plans to build a large handling area in Baise consisting of a port with 500 ton berth capacity. Also, Youjiang River will be dredged to improve the navigation conditions.

C. Special Challenges for Urban Transport Development in the Three Cities

1. Overview of Transport Conditions in Project Cities

This project supports the development of the urban transport systems in the cities of Fangchenggang, Chongzuo and Baise. Basic data for the cities involved is shown in Table 1. The total population in the three prefectures is around 7 million people, while the three cities involved in the project have a total of 1.18 million urban inhabitants. Total GDP for the three prefectures reached Y 741 billion in 2007.

SA-D-4 Supplementary Appendix D: Sector Analysis – Urban Transport

Table 1: Project City Demographics 2007 Population 2007 GDP 2007 GDP Total Urban (Y 109) Per Capita (Y) Fangchenggang 830,000 490,000 (Fangcheng District, Gangkou District) 159 19,119 Chongzuo 2,270,000 350,000 (Jiangzhou District) 232 9,079 Baise 3,900,000 340,000 (Youjiang District) 350 9,788

In line with ADB guidelines, broader issues for transport projects will be fully addressed with regard to public transport, traffic safety and traffic management, operation and maintenance etc. In order to better assess the overall transport conditions in the project cities, PPTA Consultant requested the information and held discussions with the cities’ related agencies. Key problems were identified; challenges and opportunities were also outlined at city level.

2. Public Transport

Below Table 2 presents basic data reflecting current level of bus service in terms of passenger ridership, annual extensiveness of bus service and bus service network density. These will be the performance indicators for monitoring improvement on public transport during construction/after completion of the project. It is expected a steady increase of public transport coverage, and improved bus service after the completion of the project roads, along with other locally financed roads in the new urban area.

Table 2: Project City: Level of Bus Service Annual veh-km of Bus Number of Bus Revenue Service Bus Service Network Passengers (10,000) (million) Density (km/sq km) Fangchenggang 1419 7.7 15.78 Chongzuo 239 16 3.38 Baise 685 7.1 4.96

In Fangchenggang: there are four bus companies currently operating on a total of 20 bus routes, 216 buses. One is SOE, and other three are franchised private companies. There is no information for related public transport plans in the project area so far. Targets will need to be confirmed in the ongoing public transport plan.

In Chongzuo, there are a total of 33 bus routes and a total of 173 buses in operation. There are nine bus companies, of which only one is operating in the urban area. Others are operating in the counties. Due to the currently very small urban core of Chongzuo, many of the bus routes are operated on highways linking the urban core with the countryside. It is projected, by the year of 2020, that public transport will count for 30% of total trips. The total number of buses will be increased to 330 and bus routes increased to 50. The rural area with be better integrated with the urban area. Chongzuo has not prepared their public transport plan.

In Baise, two bus companies are operating a total of 11 bus routes, and 106 buses. The Baise Bus Company is operating 10 bus routes and 98 buses, while a small tourism bus company is operating one tourism bus route. It is planned to increase the number of bus routes to 26. Other targets will need to be confirmed in the ongoing Public transport plan.

Table 3: Project City: Level of Bus Service Current Number of Current Number Planned Number of Planned Number of Bus Routes of Buses Bus Routes by 2020 Bus by 2020 Fangchenggang 20 216 TBD TBD Chongzuo 33 173 50 330 Baise 11 106 TBD TBD

As can be seen from Table 4, walking, cycling and bus riding account for around 60 percent

SA-D-5 Supplementary Appendix D: Sector Analysis – Urban Transport of daily trips in all cities. However, bus riders only represent a minor part of people traveling within the cities.

Table 4: Project Cities: Modal Splits (Percent) Model Split (2008) Fangchenggang Chongzuo Baise Walk 21.5 21.2 35 Bicycle 30.2 45.9 8 Bus 6.3 2.5 12 Others 42 30.4 45

Public transport in the project cities is generally at a basic level and in need of development. There are a number of common characteristics relating to services, operators and industry reform. First, service network density is low and bus routes are not extensive due to the incomplete road network. Second, service quality appears to be poor. Frequency is low, even in peak times. There is a lack of modern management tools to improve service quality. Third, bus service in the project cities is largely operated by a monopoly of SOEs. Certain bus routes are subcontracted to the private sector in the form of franchises. These firms are not well-regulated and there is no sustained policy and set service standard. This makes public transport less attractive and competitive. Fourth, depots and other support facilities are not well provided and in many cases are below basic minimum quality.

Due to the pressure of urban expansion and lack of appropriate public transport planning, public transport in the three cities has been largely lagging behind. If this situation persists, the problems will only become more serious with more roads being constructed over the coming years. It is noted that Fangchenggang and Baise are currently preparing a Public Transport Plan under the Urban Comprehensive Transport Plan. It is expected such a plan will be reviewed and approved in the next year. Chongzuo will also need to prepare such a plan, though a timeline for it is unclear to date. The plan based on a thorough traffic survey, would address the above mentioned existing constraints in the public transport sector.

3. Traffic Safety and Traffic Management

Fatality rates for project cities in 2008 are around national average. But the fatality rate in china at present is still higher than the world city average and much higher than they are in the western developed countries. More than 73,480 people died from traffic accidents in China in 2008. There is room for improvement.

China entered a phase of rapid motor-vehicle ownership growth along with the expedited urbanization. By the year of 2008, total number of motor-vehicle has reached 185 million, 42% increase compared to the year of 2005. Road infrastructure has entered an unprecedented phase of expansion. By 2008, total length of highway had reached 3.73 million km, expressway reached 60,300 km. This trend will be sustained until 2020. This has and will impose enormous pressure to road safety, especially for medium and small cities where transport conditions and management means remain poor.

Fatality rate has been improving since 2002 as a result of effective measures taken. Local RSC set up target, (usually 10% decrease of previous year) year on year and monitor the performance. However, due to rapid urban population and motor-vehicle growth, traffic accident and fatality would not be expected to drop significantly. For a mid-term objective at national level, overall fatality rate is expected to decrease 12% year on year, it would meet a level of average of developed country by 2020. Total fatalities would need to be controlled below 50,000.

In recent decades, the focus on increasing efficiency for motor vehicles at the expense of pedestrians and cyclists has also resulted in poor safety outcomes. Only in the past few years,

SA-D-6 Supplementary Appendix D: Sector Analysis – Urban Transport central government and local governments have begun to shift greater attention to road safety issues. It is a normal procedure for cities to set up a municipal Road Safety Committee (RSC) to review traffic safety conditions and report to a higher level for review. Targets are set up and preventive measures are designed accordingly, and these targets are subjected to annual adjustment in order to improve performance. The fatality rate is an important indicator to reflect annual traffic safety conditions.

It is noted that a municipal Road Safety Committee (RSC) has been established in each project city in response to the National Road Safety Law. The RSCs take the lead of all the relevant city agencies and are responsible for ensuring higher traffic safety levels and appropriate traffic management strategies for each city. These committees are headed in each city by the Vice-Mayor in charge of public security in each city. These committees meet regularly (quarterly) to review issues related to traffic safety and have the authority to recommend and implement changes in traffic management and other related measures, if such changes are needed to improve road safety. RSCs will also report to GZAR regularly (six monthly) for review and guidance.

Motor vehicle ownership is growing significantly in all of the cities, but the motor vehicle rate per 1000 inhabitants ( including motor vehicles) for the three cities remains low (see Table 4). Motorcycles ownership is not restricted in the project cities and is a significant factor in the transport system.

Table 5: Project Cities’ Motor-Vehicle Ownership (Motorcycle Included) Fangchenggang Chongzuo Baise MV / 1000 persons (2008) 22 13 10 Annual MV growth (2002 2008) 15. 53% 10.42% 15.9% Total growth 2002 -2008 105% 73% 92% Note: Urban Area is defined as: Fangchenggang, Fangcheng and Gangkou District; Chongzuo: Jiangzhou District; Baise: Youjiang District

Table 6: 2006~2008 No. of Traffic Accidents and Fatalities Fangchenggang Chongzuo Baise 2006 No. of Traffic Accidents 544 454 220 No. of Fatalities 62 121 47 2007 No. of Traffic Accidents 463 354 166 No. of Fatalities 58 108 39 2008 No. of Traffic Accidents 438 266 72 No. of Fatalities 57 92 34

The sustained motor vehicle growth in recent years has resulted in severe safety issues, especially for the vulnerable road users: pedestrians and cyclists. In recent years, the RSCs in all the project cities have been aggressively promoting the education of all road users with regard to traffic behavior and the related penalties for traffic violations. This effort appears to be quite successful.

Table 6: 2008 Fatality Rate Fangchenggang Chongzuo Baise Fatalities/10,000motor vehicles 3.9 3.73 5.3

Key Problems: i) Motorcycles take a large share in the traffic composition, and motorcycle users are more vulnerable to traffic accidents; ii) mixed traffic on the main streets with no physical separations between MV/NMV lanes; iii) traffic accidents caused by driving against traffic regulations such as speeding, drunk driving etc. iv) parking facilities is very limited; parking on sidewalks or MV lanes is common; v) traffic control and management equipment remain at a low level. None of the cities has an ITS system or traffic command center.

SA-D-7 Supplementary Appendix D: Sector Analysis – Urban Transport

Measures to be taken: i) All project cities will need additional signs, markings and signals to enhance the safety measures of traffic management. ii) Major intersections will benefit from redesign and channelization. Much more will be done to provide effective separation between MV and NMV along major arterials; iii) due to lack of a clear parking policy, parking has become a serious problem. A combination of measures should be adopted including the provisions of additional legal parking places and stricter enforcement standards; iv) there is also a need to complement investments in traffic control with modern technology of ITS and establish modern traffic command center.

4. Road Maintenance

The three project cities exhibit the maintenance issues found in other cities in China: due to lack of adequate funds much of the road network in old urban area is in poor condition and low productivity of maintenance works. PPTA Consultant is engaged with cities to raise awareness of the importance of road maintenance.

The road network in existing urban road networks in cities is in poor condition. On average the project cities budget about 50% of the amount necessary to keep their network in an acceptable condition. With rapid urban expansion and more roads being built, the maintenance issues are becoming more acute. Table 7 compares the budget allocations with actual maintenance needs during the past three years. Most cities especially Fangchenggang and Baise City invest insufficiently in road maintenance. There is a huge deficit resulting in the existing urban road network being under-maintained.

Table 7: 2006-2008 Road Maintenance Plan (million yuan) Allocation Demand Deficit Fangchenggang 3 18 15 Chongzuo 8.7 9.08 0.38 Baise 8 22.3 14.3

Routine maintenance works are largely carried out by municipal maintenance companies under the administration of government agencies. Competitive bidding procedures have been adopted for awarding civil work (including maintenance) contracts whose contract values exceed a certain amount. Government has instructed cities to improve productivity through separation of ownership and management authorities, but it is still at an early stage. Table 8 presents aggregated costs for typical maintenance works. The cost effectiveness of the implementation of road maintenance works varies considerably. These prices are higher compared to similar works in other cities.

Table 8: Unit Costs for Typical Road Maintenance Works Fangchenggang Chongzuo Baise Current average cost (CNY per cubic meter) 930 1,000 865 Compilation for the following maintenance works: Overlays and Mill & Replace over the thickness of 70mm. (total contract prices/work quantities in the past two years)

The project cities are in the midst of reforms and they are expected to combine more commercial SOE management and competition among civil work maintenance providers will result in significant productivity gains and cost reductions.

As can be seen in Table 9 below, construction funding has been high and increasing significantly year on year, especially this year and next year. It shows the municipal government’s strong engagement for the new urban area development.

Table 9: 2007~2010 Urban Road Construction Budget (million yuan) 2007 20082009 2010 (Planned) Fangchenggang 156 195 300 500

SA-D-8 Supplementary Appendix D: Sector Analysis – Urban Transport

Chongzuo 150 80 250 1200 Baise 9.72 19.38 255.15 562.5

D. Development Potential Assessment

With rapid development over the past decades, GZAR has established a good foundation for a regional transport network. The expressway network planning is very extensive, and has been programmed hierarchically in relation to the size of the city. At present, fast links have been established connecting big cities with medium and small cities. The next stage is to establish a quick linkage among medium and small cities. This goal is planned to be achieved by 2020. However, it faces major challenges while forming the transport network, especially the lack of connection with neighboring provinces; lack of integrated multimodal transportation systems, different modes of transport do not have smooth transfers; relatively low capacity of transport corridors to international markets. These problems have been realized and aim to be resolved in the near future.

The three project cites are envisaged to have a relatively rapid growth of industrial sectors particularly in the fields of port-related industries in Fangchenggang, sugar industry in Chongzuo and aluminum industry in Baise. This analysis has confirmed the potential of sustained new urban development of the cities. In view of the ongoing transportation infrastructure projects and the location of the cities in the regional context of a number of important national expressways and railways, the cities are expected to develop into an important multimodal regional transportation center upon completion of these projects.

Compared with the regional highway network, urban transport is relatively under developed. Based on the broad urban transport sector analysis, the most acute constraints faced in urban transport development are identified- relatively low road densities cannot meet the needs of increasing mobility. There is also a significant lack of secondary/branch roads in the road network. The bus service is still at the basic level and in need of improvement. Poor traffic management has exposed high traffic safety risks. Urban road maintenance has been under-financed for a long time and has suffered inadequate management.

In the urban transport context, due to rapid motor vehicle growth, it has been a common dilemma that traffic congestion has been worsening even though more roads have been built; the accident rate is high; motor vehicle emissions have resulted in serious environment degradation. This model of growth cannot be sustained in the long run. Lessons have been learned from other Asian cities, a people-focused strategy that promotes accessibility instead of mobility is the key to reducing traffic congestion that paralyzes many Asian Cities. Nowadays people’s awareness has increased so that a public transport system oriented to urban development is the right approach especially at the current stage of development in China. However, due to insufficient funding over a long period and weak institutional capacity, public transport and other related municipal facilities and services have been largely neglected in China compared with more concentrated funding on road construction.

Based on the above, the assessment it is recommended that development activities envisaged under the Master Plan should be prioritised. First priority should be accorded to improve the transport infrastructure to support the new urban/industrial area development – namely Chengnan and Chengbei Districts in Chongzuo, Jiangnan District in Baise, and Gongche Industrial Park in Fangchenggang. In addition, broader transport sector issues will be appropriately addressed with the aim of strengthening institutional capacities of the project cities. The assistance will enhance the efficiency of planning, programming and policy formulation in the sector. This will guide the public transport service and traffic safety plan and implementation on the new roads and new urban area at large. Cities shall bear in mind a sustainable integrated urban transport system instead of only new road construction. From

SA-D-9 Supplementary Appendix D: Sector Analysis – Urban Transport past experience, cities in China generally have a strong capacity on road engineering design. However, there is weakness for soft issues such as service plan on how to incorporate all road users into the transport system.

Cities have all expressed their interest in gaining international bank finance and knowledge input to improve the public transport and traffic management. In this connection, it is recommended for cities, under institutional capacity building component, to learn from best international and national practices. Study tours and seminars will be arranged with assistance from the ADB. Second, there is a need to have expertise to review and advise the comprehensive transport plans. Third, it is aimed to strengthen cities’ capacities to plan, manage, implement such a plan and project management in general.

In line with the urban strategic analysis, the Project is proposed to help the three cities address the most acute development constraint of the cities – their underdeveloped urban transport infrastructure. A general approach is adopted to address the problem through carefully programmed urban activities and integrated public investment in order to achieve a combined goal of urban expansion and integrated urban transport. This project will serve as a basis for future transport and new urban development. Apart from financial support for construction of physical infrastructures, the Project will finance a capacity development component for the municipal governments to improve its overall urban sustainable transport development with emphasis on public transport driven development and traffic safety management.

E. Objectives and Key Performance Indicators

The overall objectives of the road component is to support sustainable new urban development in the three cities ( as they expand to include outlying urban area) by providing strategic transport infrastructure and by strengthening the cities’ support system on transport planning and management.

The project supports urban development in Gongche Industrial Park in Fangchenggang, Chengnan and Chengbei Districts in Chongzuo, Jiangnan District in Baise with (a) investments in transport access in new urban area and (b) TA that would help the cities to strengthen the manner in which the development is planned (to encourage development patterns that promote public transport and traffic safety in the planning process), and the manner in which the development is implemented (to improve urban design, and to increase cities’ capacity to phase and stage development in a market environment while increasing the quality and competitiveness of public transport)

Key outcome indicators are indicators measuring the urban activity in the new urban areas (population and size of manufacturing industry), the reduction in travel times between the location of new urban areas and the existing urban area, and the adoption of the recommendations of the TA leading to outcomes, such as more effective transit-oriented development and more effective public transport service. Key output indicators are implementation of selected priority investments and successful completion of the Loan.

SA-D-10 Supplementary Appendix E:

Sector Analysis –– Climate Change in Guangxi and Project Cities Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Supplementary Appendix E:

Sector Analysis – Climate Change in Guangxi and Project Cities

Part I: Climate Change in Guangxi

1. Introduction

1.1 Overview

1 The latest research results showed that global average surface temperature of the last century (1906~2005) has increased by 0.740C. China's climate warming trends are in accordance with the Global warming general trend. Since the last century (1908~2007) average surface air temperature has increased 1.10C. From 1986 on, China has experienced 21 warm winters.

2 Climate change has also taken place over the past century in Guangxi. The climate change trend in Guangxi is consistent with the overall trend of climate change in China and globally. Since the last century (1909~2008), Guangxi average temperature rose by 0.4 0C, and the warmest period occurred in 1940s. The temperature increased dramatically after the middle of 1980s. The year of 2007 had been the warmest year since meteorological observation records became available in 1951. In the past 50 years, warming has gone up most significantly in winter. Guangxi has experienced 15 warm winters since 1986. From the last century, precipitation decreased 104 mm; precipitation was in the high side during 1910s~1920s and 1940s; and average annual precipitation reached its maximum in 1940s. Precipitation had decreased continuously since 1950s. There was no significant overall trend of precipitation, but Inter-decadal fluctuation was considerably obvious. The annual precipitation has shown a trend of slight increase since the last 50 years. Seasonal precipitation has also shown increasing fluctuation in summer and winter, and a decrease in autumn and spring.

3 The upward trend of coastal sea level started from the last century in Guangxi. Sea level was up by 150 mm during 1890~1989, with a rate of 1.5 mm/year. The speed of coastal sea level rise has been significantly faster since 1990, which was 3.3 mm/year, higher than the average rate (2.5 mm/year) of the average coastal sea level in China.

4 The frequency and the intensity of extreme weather and climate events changed in different levels in the past 50 years in Guangxi. It caused more serious losses by rainstorm floods, tropical cyclones and other weather disasters.

2. Changes in Temperature

2.1 Changes in Temperature of Latest Century

2.1.1 Inter-decadal Changes in Annual Average Temperature

5 The average annual temperature was 20.30C during 1909~2008 in Guangxi. The highest average annual temperature was (21.50C) in 1946. The lowest average annual temperature was (19.40C) in 1984 (Figure 1).

SA-E-1 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

˄ć˅

Figure 1: Sequence of Changes in Temperature in Guangxi (1909~2008)

6 The annual average temperature was significantly lower during 1910s~1920s in Guangxi, and followed during 1950~1980. The lowest annual average temperature was occurred in 1910s, and became lower by 0.330C than ordinary years. The highest temperature occurred in 1940s, and followed during 2001~2008, it up by 0.30C~0.350C than ordinary years. The annual average temperature in 1940s was 0.680C higher than that in 1910s. The annual average temperature in 1940s was 0.660C higher than that in 1920s (Table 1).

Table 1: Decades Average Temperature and Temperature Variation in Guangxi (0C) 1910s 1920s 1930s1940s 1950s 1960s 1970s 1980s 1990s 2000s Average Temperature 19.97 19.99 20.34 20.65 20.19 20.18 20.15 20.22 20.42 20.60 Temperature Variation -0.33 -0.31 0.04 0.35 -0.11 -0.12 -0.15 -0.08 0.12 0.30 Note: The standard temperature variation calculated the average rate during 1909~2008, rate of 1910s was for the period of 1911~1920 year, analogy.

2.1.2 Changes in Average Yearly Temperature

7 Guangxi experienced 4 general stages of climate change from colder to warmer to colder and to warmer from 1909. Of these, 1909~1936 was colder period; it experienced constantly fluctuation in temperature in that 28 years; 1937~1954 year was warmer period, warmest temperature mainly occurred in 1940s; and 1946 was the warmest year, 1941 ranked at 2nd. The period of 1955~1985 was relatively colder period, and the average temperature in these 31 years decreased by 0.490C compared to 1937~1954. There was another warmer period after 1986, and the average temperature increased by 0.370C compared to 1955 ~1985 (Table 2).

8 The average temperature has been rising up by 0.40C over the last century. It increased by 0.040C in every 10 years. It is significant of overall warming trend.

SA-E-2 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Table 2: Variation of Annual Average Temperature during Last Century in Guangxi Average Serial No Years Duration Features Temperature 1 1909-1936 28 20.00 Colder 2 1937-1954 18 20.61 Warmer 3 1955-1985 31 20.12 Colder 4 1986-2008 23 20.49 Warmer

2.1.3 Changes in Temperature of the Last 50 Years

9 Observation data indicated that annual average temperature increased by 0.550C in Guangxi in the past 50 years (1959-2008). The rate of temperature rise was 0.110C/10 years. Warming mainly started from the late 1980s, and it’s more significant after 1990s (Figure 2). From the seasonal variation, the seasonal temperature rose significantly in Guangxi, the obvious warming appeared in winter, and then in autumn; slightly warming in spring and summer. The average temperature increased by 1.10C in winter of the last 50 years, the rate of temperature rise was 0.210C/10 years. During the 23 years between 1986 and 2008, Guangxi experienced 15 warm winters, especially after 2000, there were 6 in 8 years with warm winters; the average temperature increased by 0.750C in autumn, temperature rise was 0.150C/10 years, lower than in winter; the average temperature increased by 0.40C and 0.350C individually in spring and summer, with the rate of temperature rise being 0.080C /10 years and 0.070C /10 years respectively.

0C 1.5˄ ˅

0.5

0 -0.5

-1

Figure 2: Changes in Temperature during 1909~2008 in Guangxi

10 In the last 50 years, the trend of climate change was a rise in the maximum and minimum annual average temperatures in Guangxi. The rate of temperature rise was 0.10C /10 years and 0.190C /10 year respectively. The annual average minimum temperature rose significantly; diurnal temperature range decreased.

2. Changes in Precipitation

2.1 Changes in Precipitation during Last Century

2.1.1 Decadal Changes in Annual Average Precipitation

11 The annual average precipitation was 1,497 mm during the latest century (1909~2008) in Guangxi. The maximum precipitation of 1,987 mm was recorded in 1923. The minimum precipitation of 1,123 mm was recorded in 1963. The maximum annual precipitation

SA-E-3 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

was 1.77 times of the minimum annual precipitation (Figure 3). The percentage between seasonal precipitation and annual precipitation were: 28.46% in spring, 47.78% in summer, 15.64% in autumn and 8.12% in winter.

Annual Precipitation (mm) 2200 2000 1800 1600 1400 1200 1000 1909 1918 1927 1936 1945 1954 1963 1972 1981 1990 1999 2008

Figure 3: in Precipitation in Guangxi between 1909 and 2008

12 Higher than precipitation mainly occurred during 1910s~1920s and 1940s. The maximum precipitation appeared in 1940s; the precipitation decreased after 1930s and 1950s. The minimum annual precipitation of 198 mm was recorded in 1950s.

13 There are some discrepancies between the seasonal precipitation inter-decadal change and annual precipitation change.

14 Precipitation in spring increased in 1910s, 1940s~1950s, and it decreased after 1980s. Precipitation in summer decreased during 1950s~1980s, it increased in other years. Precipitation in autumn decreased in 1920s, 1960s~1970s and 1990s, it increased in other years. Precipitation in winter decreased in 1910s, 1940s, and 1960s~1970s, it increased during 1920s~1930s, and after 1980s (Table 3)

Table 3: Decadal Changes in Precipitation in Guangxi (Unit: mm) 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s Precipitation 1571.0 1550.1 1423.81621.4 1299.9 1430.4 1482.6 1425.0 1478.8 1490.9 Variation 73.6 52.7 -73.6124 -197.5-67 -14.8 -72.4 -21.6 -6.5 Spring precipitation 432.7 419.5 382.8 453.4 458.6 400.5 468.0 410.9 410.6 397.7 Variation 6.5 -6.7 -43.427.2 32.4 -25.741.8 -15.3 -15.6 -28.5 Summer 755.3 772.9 735.0 813.3 658.8 685.9 684.8 577.9 742.8 760.9 precipitation Variation 39.9 57.5 19.6 97.9 -56.6 -29.5-30.6 -137.5 27.4 45.5 Autumn 267.2 223.0 242.6 253.1 237.6 232.8 218.4 267.8 192.7 199.7 precipitation Variation 33 -11.2 8.4 18.9 3.4 -1.4 -15.8 33.6 -41.5 -34.6 Winter precipitation 115.8 134.8 123.5 101.7 121.2 111.2 111.4 139.3 129.7 132.4 Variation -5.8 13.2 1.9 -19.9 -0.4 -10.4-10.2 17.7 8.1 8.1 Note: The standard precipitation variations calculated the average rate during 1909~2008, rate of 1910s was for the period of 1911~1920 year, analogy.

2.1.2 Decadal Changes in Precipitation

18 It alternately occurred five dry periods and four pluvial periods, now is in its fifth dry

SA-E-4 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities period. There were no obvious features of dry period during 1924~1940 and pluvial period during 1968~1983; average precipitation was close to centurial average precipitation; Every dry period unequally lasted 9 years~17 years, pluvial period lasted for 10 years~16 years (Table 4).

Table 4: Sequence of Decadal Changes in Precipitation in Guangxi No. Years Duration Average Precipitation (mm) Characteristics 1 1909-1917 9 1,462.2 Dry period 2 1918-1927 10 1,647.2 Pluvial period 3 1928-1940 13 1,463.2 Dry period 4 1941-1953 13 1,634.4 Pluvial period 5 1954-1967 14 1,389.6 Dry period 6 1968-1983 16 1,507.1 Pluvial period 7 1984-1992 9 1,338.2 Dry period 8 1993-2002 10 1,571.0 Pluvial period 9 2003-2008 6 1,411.7 Dry period

19 The decadal changes of seasonal precipitation were obvious; spring precipitation experienced 3 pluvial periods and 3 dry periods, of which, dry periods lasted for 24 years~25 years during 1922~1945 and 1984; summer precipitation experienced 2 pluvial periods and 2 dry periods, of which pluvial periods was during 1913~1952 and dry periods lasted for 40 years~41 years during 1953~1993; autumn precipitation experienced 3 pluvial periods and 3 dry periods, of which dry periods lasted for 27 years during 1954~1980; winter precipitation experienced 2 pluvial periods and 1 dry period, of which dry period lasted for 52 years during 1937~1988.

20 In the last century, annual precipitation decreased by 104 millimeters in Guangxi, or 10.4 millimeters in every 10 years. The overall trend was not obvious; spring and winter precipitation slightly increased, summer and autumn precipitation slightly decreased (Table 5).

Table 5: Seasonal and Annual Average Precipitation and Variations in Guangxi (1909~2008) (Unit: mm) Items Year Spring Summer Autumn Winter Average Value 1497.4 426.2 715.3 234.2 121.7 Change Rate -10.4/10years 0.2/10years -7.2/10years -4.6/10years 1.2/10years

2.2 Changes in Precipitation in the Last 50 Years

21 In the last 50 years, there has been a slight increase in precipitation in Guangxi. On average it increased by 3.4 mm in every 10 years, and the overall trend was not obvious. In 1994, the precipitation was 479 mm more than the average precipitation of ordinary years; it was 385 mm more than the precipitation of 2008 (Figure 4). There was a decreasing trend in spring and autumn, and the rate of change was -6.5 mm/10years and -10.4 mm/10 years respectively. There was increasing trend in summer and winter, changing rates was 15.5 mm/10 years and 4.8 mm/10 years individually.

SA-E-5 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

1959-2008ᒤᒣ൷٬ শᒤ٬ 2500

2000

1500 mm)

˄ 1000

500

Figure 4: Changes in Precipitation during 1959 and 2008 in Guangxi

2.3. Changes in Sea Level

22 In general, coastal sea level had been rising since last century in Guangxi. The sea level rose up by 150 mm with the rising rate of 1.5 mm/a during 1890 and 1989. Coastal sea level rose faster, with the rate of 3.3 mm/year after 1990 in Guangxi. It was higher than average rising rate of the whole country’s coastal area at 2.5 mm/year. Till 2007, Guangxi coastal area sea level rose up by 81 mm higher than the past 30 years. In 2007, sea level rose up by 27 mm higher than the average rate of previous years (1975~1986). In 2008, sea level was 34 mm higher than 2007, and 60 mm higher than average rate of previous years (1975~1993).

(Unit: mm) Monthly Average Sea Level of Normal Years

Figure 5: Changes in Sea Level in the Last 2 Years of Guangxi

4. Extreme Weather and Climate Events

23 In the context of climate warming, extreme weather and climate events in Guangxi, such as rainstorm and flood, tropical cyclones drought and highest temperature etc., increased in frequency or intensity.

4.1 Heavy Rainfall and Frequent Flood

24 In Guangxi, heavy rainfall (24 hours precipitation 10mm) mainly concentrated from April to September, during which rainfall accounted for 78% of the total annual precipitation. The annual average rainstorm (24 hours precipitation 50mm) lasted for 3 days~15 days, which is on average 6 days in each county or city (it’s up to 9 days in 1994); of which, in the

SA-E-6 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities most areas, annual average rainstorm (24 hours precipitation 50mm) lasted for 1 days~5 days, on average 1 day per county or city, the rainstorm frequency increased by 26 times on average in every 10 years in the last 50 years in Guangxi, of which, heavy rainstorm frequency increased by 9 times on average in every 10 years, especially in 1990s. The heavy rainstorm occurred frequently, which is the most frequency of annual average heavy rainstorm in each decade. With the increase of heavy rainstorm, flood also frequently occurred, particularly in late 1980s. The serious flood significantly increased. In late 1990s, Guangxi suffered from several times of rainstorm and flood disasters, which are most serious and caused significant loss during the last 50 years.

25 Broad in scope and long duration of precipitation was the major cause of flood, flood season (from April to September), In Guangxi, the sequence was from east to west, from north to south, and frequently occurred in June. There are two kinds of regions with frequent flood: 1st, the region with more frequent rainstorm and rainfall, 2nd region was large and medium size rivers coastal cities, counties, especially valley plain zones which are located in the middle of the river, downstream and intersection of the sea In Guangxi. Most of areas of coastal cities such as Beihai, Qinzhou, Fangchenggang and north east areas are often subject to flood, and the flood frequency is over 80%. Flood occurred less frequently in north and southern west part of Baise city, Jiangzhou district, Ningming town, Guanyang town and Wuxuan town of Chongzuo City, where flood frequency was only about 30%~50%, and 50%~80% in the other cities and counties.

Distribution of Flood Frequency (%)

Figure 6: Distribution of Flood Frequency in Guangxi (%)

26 In Guangxi, rainstorm and floods are main meteorological disasters, which are most seriously caused direct damage to the economy. Floods spread in wide scale, ferocious, devastating, not only flooded houses but also swept away goods (including foods); flooded farmland, destroyed crops, caused reduction of crops. Floods also damaged factory buildings, destructed communications, construction, electric power facilities, destroyed reservoirs, dikes, dams and other water conservancy projects, destroyed roads, railway transport facilities. Rainstorm and flood-induced landslides, debris flows and other geological disasters destructed transport infrastructure, even result in casualties; flood disaster also led to

SA-E-7 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities ecological environment changes, caused disease outbreaks.

27 In the 18 years between 1991 and 2008, there were 95 counties (cities, districts) experienced floods in different levels in Guangxi. Of these, 59 counties (cities, districts) occurred more than 12 times. In total, 181.47 million people were affected, including 2,561 deaths. Affected crops area were 11.19 million hectares, destroyed crops area of 1.68 million hectares, grains were reduced by 354.95 million tons. The direct economic losses amounted to CNY 131.58 billion, including the losses over CNY1.3 billion after 1994. The annual direct economic losses more than CNY 11.6 billion in 1994, 1996, 1998 and 2002. In 1994, the loss went up to CNY 36.26 billion.

4.2 Tropical Cyclone Frequency and Intensity Reduced but Disasters Impact Serious

28 On average there are 5 tropical cyclones affecting Guangxi every year. A maximum of 9 tropical cyclones occurred during 1952~1974. About 41% of the tropical cyclones affected land area of Guangxi. On average there were 2 tropical cyclones each year. A maximum of 5 tropical cyclones occurred in 1995. Tropical cyclones mostly occurred between May and December, majority of them occurred between July and September (accounting for 73% of the tropical cyclones in a year). There had been significant inter-decadal changes of tropical cyclones in Guangxi in the last 50 years, tropical cyclones mainly occurred during 1950s to1970s, of which, tropical cyclones occurred most frequently in 1970s; and less frequently after 1980s, especially during 2001~2008. During the 18 years of 1991 and 2008, the year of 1994 witnesses the highest frequency of 8 tropical cyclones, and then in 1995 with 7 tropical cyclones. There was no tropical cyclones in 2004. During 1993~1996 and 2006, there were 13 tropical cyclones more than ordinary years. In 2001 and 2003, the numbers remained the same as with ordinary years. Fewer tropical cyclones occurred in other years. In the last 50 years, the tropical cyclones decreased with the rate of 0.6/10 years in Guangxi, the tropical cyclones decreased with the rate of 0.06/10 years in continental Guangxi. Maximum intensity of tropical cyclones affected Guangxi has decreased since the last 50 years.

29 Tropical cyclones have advantages and disadvantages: on one hand, rainfall brought by tropical cyclones helps to solve or ease the drought in arid regions in wide ranges and benefit the production and construction, and also had cooling affect which helps to relieve hot weather in summer and autumn. On the other hand, wind waves and torrential rain caused tropical cyclones could lead the vessel sank, even would cause serious losses to maritime shipping, fishing and oil development, etc; tropical cyclones which occurred in land cause the destruction of houses, broke the trees, destroyed the communications, interrupt the transmission lines and telecommunications, destruct the bridges, vehicles, etc., also caused traffic congestion, serious human and animal casualties and property losses; windstorm also could blow the large billboards, and other debris to the air to make the outdoor environment become very dangerous. Heavy rainfall caused by tropical cyclones could wash out the embankment reservoirs of coastal inland areas, destroyed the houses and trees. In mountain area, they cause floods, mudslides and landslides. Wind and rain caused by tropical cyclones could cause damage to aquaculture and agriculture, leading to food shortages. Waves caused by tropical cyclones will result in sea water intrusion into the land and damage crops and other properties.

30 In the last 50 years, tropical cyclone frequency and intensity declined. The impact of disasters became serious in Guangxi. According to incomplete statistics, from 1991 to 2008, in total of 112.24 million people were affected by tropical cyclone in Guangxi, and 541 people died; 6.26 million ha of crop land were affected, including 1.43 million ha with serious damage and 130,000 ha of complete destruction. A total of 628.62 million kilograms of grains were lost. The total direct economic losses were up to CNY 73 billion. Tropical cyclones caused

SA-E-8 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities direct economic loss of CNY 16.95 billion in 1996 and then CNY 15.96 billion in 2001. During 2001~2006, the direct economic losses amounted CNY 4.3 billion from tropical cyclones, storm surges, large waves and other marine disasters. Disaster affected areas including dozens of coastal villages and towns in Beihai city, Qinzhou City, and Fangchenggang City.

5. Climate Change Trend in 21st Century Guangxi

5.1 Changes Trend of Temperature and Precipitation

31 The National Climate Center of the China Meteorological Administration adopted the 22 global climate models used for the IPCC Fourth Assessment Report, in simulation analysis of changes in temperature and precipitation trends in Guangxi for the 21st century. The results have shown that compared with the 20-year average between 1980 and 1999, significant changes in temperature and precipitation are projected.

5.1.1 Change in Annual Temperature

32 Under the three emission scenarios of SRESA1B, SRESA2, and SRESB1 which are established by the IPCC, simulation showed the increasing trend of temperature in Guangxi. Increasing trend of temperature will be also different under the different scenarios around 2050. Annual temperature will increase by 1.20C during 2031-2050, temperature will increase by 2.90C, 3.20C, 1.90C individually during 2081~2099, 21st century (Figure 7).

Figure 7: Simulated Temperature Changes under Different Scenarios in Guangxi during 21st Century

5.1.2 Annual Changes in Precipitation

33 Under the different SRES scenarios, precipitation trend decreased in the early 21st century in Guangxi, but it will increase later 21st century, the precipitation will change significantly under the SRESA2 scenario, the precipitation will increase by 2%, 0%, and 1% individually under all of the three scenarios during 2031~2050. The precipitation trend would increase obviously during 2081-2099 in GZAR, and the increase rate will be 6%. It will decrease in only a few years individual (Figure 8).

SA-E-9 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Figure 8: Simulated Precipitation Changes under Different Scenarios in 21st Century Guangxi

5.1.3 Yearly Changes in Temperature and Precipitation

34 Table 6 shows the average changes in temperature and precipitation of different periods in the 21st century of GZAR. The range of temperature rise is between 0.70C during 2011-2030; temperature rise will be 1.30C, 1.10C and 1.10C under SRESA1B, SRESA2 and SRESB1 Scenarios from 2031 to 2050. Temperature rise will be 2.90C, 3.20C and 1.90C under SRESA1B, SRESA2 and SRESB1 Scenarios during 2081~2099 of the 21st century.

Table 6: SRES Scenario, Decadal Average Temperature and Precipitation Trends in the 21st Century of Guangxi (Unit: 0C/%) 2011-2020 2021-2030 2031-2050 2081-2099 SRESA1B 0.4/-0 0.7/-0 1.3/2 2.9/6 SRESA2 0.5/-2 0.7/-2 1.1/-0 3.2/6 SRESB1 0.5/0 0.7/1 1.1/1 1.9/4

5.2 Trend of Sea Level Change

35 Chinese oceanographers forecasted sea-level changes according to China's coastal sea-level change forecast model. The results showed that compared to the height of sea level in 1980, the sea level will rise by 11 cm~14 cm around 2030 in Guangxi, with the best estimation being 13 cm. Sea level will rise by 18 cm~24 cm around 2050, with the best estimation being 21 cm. Coastal sea level will rise by 51 cm~72 cm around 2100, with the best estimation being 63 cm (Figure 9).

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Figure 9: Changing Tend Forecast of Coastal Sea Level in Guangxi

SA-E-11 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Part II: Climate Changes and Future Trend in Fangchenggang

1. Climate Changes

36 Fangchenggang city is situated in the northern part of the Beibu Gulf coast, which belongs to subtropical monsoon climate zone. During the winter months (October ~ March), it is influenced by the northern cold air masses, with dry climate less precipitation. During the summer months (April ~ September), it is influenced by the hot and humid air masses from the Southern Ocean, with rainy and wet weather. The winter is short and summer is long. Monsoon is a significant factor.

1.1 Changes in Temperature and Precipitation

37 Temperature: Annual average temperature is around 22.60C in Fangchenggang city. The monthly average temperature from January to December is between 14.20C ~ 28.30C. The minimum temperature occurs in January; the maximum temperature occurs in July. The extreme highest temperature is 37.40C and extreme lowest temperature is 2.80C. In spring, summer, autumn and winter season’s temperatures are 22.10C, 28.10C, 24.10C and 15.3 0C respectively.

38 Within the 17 years between 1992 and 2008, annual average temperature has decreased 0.060C, but the trend is not significant.

39 Precipitation: The annual average rainfall is approximately 2,486 mm. The monthly average rainfall is about 36~580 mm. Precipitation reaches its maximum in July and minimum in December. Summer (from April to September) is rainy season (flood season) which accounts for 84% of annual precipitation. The main flood season starts from June to August, which is the most concentrated period of precipitation; heavy rainfall frequently occurs with high incidence of floods in this season. Winter (October ~ March) is the dry season; precipitation accounts for only 16% of the annual precipitation, and it is drought-prone.

40 Within the 17 years period of 1992~2008, annual average precipitation has decreased by an average of 3.9 mm per year.

1.2 Sea Level Rise and Impact

41 In Fangchenggang, the yearly average sea level is about 2.27 meters during 1977~1989. Within the year, monthly sea level from June to November is significantly higher than the period from December to May. The highest sea level occurs in October, and the lowest sea-level in February.

Coastal sea-level fluctuation has also been increasing since the last 30 years in Guangxi. Sea levels average rising rate is 3.3 mm / year. In the past 10 years, the mangrove forests area has been reduced by 10% as a result of the rising sea levels and man-made destruction. It exacerbated the coastal erosion as the reduction of mangrove area, reduced the capacity of coastal resist to storm surges, tsunamis, waves and other disasters. At the same time,

SA-E-12 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities sea-level rise has also led to shoreline retreat and severe erosion.

42 Shaluoliao Village and Lanchong village are two fishing villages mainly on marine fishing and aquaculture in Guangpo town, Fangchenggang. It has a coastline of 12.6 km. Due to the mangrove forests disappearing and sea-level rising, large tracts of land and forests have constantly been eroded by sea water since 1960s. The coastline continues to move toward inland. Coastal erosion in Shaluoliao Village reached a rate of 10 m/year; submerged land area amounted to 4.2 square kilometers during 1980~2005; 390 villagers and more than 100 households were relocated. Shaluoliao Village needs to construct protection embankment at least 3,000 meters. The part of the seawalls constructed in the 1980s, had already collapsed; new constructed protection embankments didn’t meet the required standard. Tropical cyclones or big tide would result in submerged coastline; 4,200 mu of arable land, 1,300 mu of breeding ponds and 700 mu of salinas would be in danger of being swallowed by waves and storm surge in Shaluoliao village and Lanchong village, production and livelihood of more than 4,000 villagers is also in danger.

Trees Subject To Wave Damage

Some Parts of the Collapsed Seawalls Constructed in 1980s

1.3 Changes and Impacts of Extreme Weather and Climate Events

43 Fangchenggang suffers from extreme weather and climate events such as heavy rainfall, floods, tropical cyclones, strong winds, drought, lightning, fog, etc. Serious impacts are caused by rainstorm, flood, and tropical cyclones.

1.3.1 Heavy Rainfall and Flood

44 The meteorological department defines heavy rainfall as 25 mm within 24 hours. Extremely heavy rainfall in Fangchenggang is mainly caused by the tropical cyclones, Southwest vortex, low-level jet and high-altitude slot.

SA-E-13 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

45 Fangchenggang has an average of 153 days of rainy days. Monthly average rainy days between January and December are 6 days~16 days; the maximum is in August and minimum in December. Between 1992 and 2008, the average days of heavy rain are 28 days/year, including rainstorm (24 hours precipitation 50mm) for 14 days/year, heavy rainstorm (24 hours rainfall 100mm) 5 days/year, extremely heavy rainfall (24 hours rainfall 250mm) for 0.3 days/year (Figure 1). Fangchenggang ranks as the 2nd city with annual average precipitation days in GZAR. From 1992 to 2008, Annual rainfall days increased by a rate of -1.7 days / 10 years, i.e. every 10 years with decrease of 1.7 days. Annual rainstorm days decreased by a rate of -1.3 days / 10 years, i.e., with decrease of 1.3 days in every 10 years. Annual heavy rainstorm days increased by a rate of 0.15 days/10 years. Extreme rainstorm days increased by 0.02 days in every 10 years.

45 40 35 1 Rainfall བྷ䴘 ˅

ཙ 30 2 Rainstorms

˄ ᳤䴘

ᮠ 25 3Heavy Rainstorms ᰕ 20 བྷ᳤䴘

䴘 4ExtremeHeavyRainstorm

䱽 15 ⢩བྷ᳤䴘 10 5 0 ᒤ 1992 1994 1996 1998 2000 2002 2004 2006 2008

Figure 1: Changes of Heavy Rainfall Days in Fangchenggang during 1992-2008

46 Maximum amount rainfall in one day reflects the rainfall intensity. During 1992~2008, Fangchenggang maximum precipitation in one year has slightly increased, annual average increase was 5.4 mm; heavy rainstorm occurred in 1994, 2001, 2005 and 2007. On 26th September, 2007, the daily maximum precipitation was 367 mm, the highest record with from start of meteorological records in Fangchenggang (Figure 2).

Daily Maximum Precipitation (mm)

аᰕᴰབྷ䱽䴘䟿˄∛㊣˅

ᒤ

Figure 2: Distribution of Daily Maximum Precipitation in Fangchenggang during 199~2008

47 Floods caused hazards to the socio-economy, people's livelihood and property, meanwhile heavy rainfall or continuous precipitation over urban drainage capacity so that the

SA-E-14 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities urban water generated within the city caused water logging. Between 6 and 11June 2005, because of the northern Gulf depression, Fangchenggang experienced heavy rainfall; the total rainfall amounted to 645.2 mm. Heavy rainstorm (daily rainfall 338.5 mm) and heavy rainfall (daily rainfall 138.5 mm) followed for 7-8 June 2005. Owing to continuous heavy rainfall caused floods triggered by torrential rain, 21,000 people were affected, crops were flooded, dykes broke, irrigation dikes and sluices destroyed, fisheries and aquaculture suffered losses, 8.5 kilometers and highways of roads were destroyed, communications lines of 10 km damaged. The direct economic loss amounted to CNY 31.4 million, including CNY 24.1 million of agricultural loss.

2. Tropical Cyclones

48 The average frequency of tropical cyclones in Guangxi (including Fangchenggang) are 5.3/year. Tropical cyclones enter into the interior of Guangxi on average of 2/year; tropical cyclones with a maximum of 9/year. Tropical cyclones occur from May to December each year. During this period, July to September accounted for 73% of the total. The earliest occurrence of tropical cyclones begins at the end of May and early June, and lasts as late as middle October. Negative impacts of tropical cyclones include heavy rains, storm surges and strong wind disasters. Fangchenggang has tropical cyclone winds on average of four times per year. The wind is generally from class 6 to class 8, the strongest up to class 10. It triggers heavy rains for the average 3 times per year. Fangchenggang is one of the cities subject to great harm of tropical cyclones.

49 Heavy rainfall caused by tropical cyclones is very serious. Out of the five torrential rainfalls in the 17 years of 1992~2008 in Fangchenggang, three were caused by tropical cyclones. Between 24 and 26 September 2007, the No. 0714 tropical storm ("Francisco”) assaulted Fangchenggang; heavy rainfall occurred on 26 September with a rainfall of 367 mm, the highest ever recorded since the establishment of the local meteorological station. Meanwhile, class 8 strong wind occurred for two consecutive days of 26 and 27 September. The direct economic loss caused by heavy rains totaled CNY 5 million, of which transport-related economic loss was CNY 1.1 million.

SA-E-15 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

50 Tropical cyclone caused strong winds blew down trees on the streets on 25 August, 2003 in Fangchenggang.

51 Most of the tropical cyclone will cause storm surges. Each storm surge will trigger varying degrees of abnormal movements of water level along the coast harbor. During 1936~1949, 5 serious storm surges were caused by tropical cyclones. From 1949 to 1995, 17 tropical cyclones caused tide rises. In the past 20 years, the worst storm surges was caused by Typhoon No. 9 in 1986. The typhoon resulted in strongest tide along the coast of Guangxi ever recorded. Strong tides occurred from July 21 to 29 July in Fangchenggang, a maximum tide up to 5.54 meters, above average tide 3.52 meters, resulted into the collapse of almost all the seawalls, the loss was very serious.

52 Tropical cyclones cause strong winds ( 6 level) on an average of about 4 days/year in Fangchenggang. During 25 and 28 August 2003, the No. 0312 typhoon "Krovanh" caused a large rainstorm on 25 and 26 accompanied by strong windy weather and strong wind with a speed of 36.0 m/s (class12). It was the strongest tropical cyclone ever recorded in Fangchenggang.

3. Climate Change Forecasts for the 21st Century

3.1 Changes in Temperature and Precipitation

53 The National Climate Center of the China Meteorological Administration participated in the development of and adopted the 22 global climate models of IPCC Fourth Assessment Report, for simulation analysis of changes in temperature and precipitation trends for the 21st century of Guangxi. The results shows that compared with the 20 years average between 1980 and 1999, obvious changes in temperature and precipitation will take place.

Table1: SRES Scenario, Average Temperature and Precipitation Trends in Different Periods in the 21st Century of Fangchenggang (Unit: 0C/%) 2011-2020 2021-2030 2031-2050 2081-2099 SRESA1B 0.4/-1 0.8/-1 1.2/2 2.6~2.8/6 SRESA2 0.4~0.5/-3 0.6-0.7/-1~-2 1.1/-0 3.0~3.2/5~6 SRESB1 0.4~0.5/0 0.6-0.7/0 0.8~1.0/1 1.8/4

54 Table 1 shows the average changes in temperature and precipitation of different periods in the 21st century of Fangchenggang. The range of temperature rise is between 0.40C~0.80C during 2011-2030; Temperature rise will be 1.20C, 1.10C and 0.80C~1.00C under SRESA1B, SRESA2 and SRESB1 Scenarios from 2031 to 2050. Temperature rise will be

SA-E-16 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

2.6~2.80C, 3.0~3.20C and 1.80C under SRESA1B, SRESA2 and SRESB1 Scenarios during 2081 and 2099 at the end of the 21st century.

55 There will be a trend of decrease in the annual average precipitation during 2011 and 2020 and 2021 and 2030. Increase in precipitation will be 4%~6% in three types of scenarios during 2081 and 2099 at the end of the 21st century.

3.2 Sea Level Changes

56 Future sea-level changes in Fangchenggang are consistent with the overall trend of coastal areas of Guangxi. The rise in sea level will generally be 11 cm ~ 14 cm by 2030 relative to that of 1980, with the most likely estimation being 13 cm. The sea level will rise by 18 cm ~ 24 cm by 2050, with the best estimation being 21 cm. The sea level will rise by 51 cm ~ 72 cm by 2100, with the best estimation being 63 cm (Table 2).

Table 2: Sea-level Rise Forecast in Different Periods in 21st Century of Fangchenggang (Units: cm)

2030 2050 2100 Rise Range Best Estimation Rise range Best Estimation Rise Range Best Estimation 11~14 13 18~24 21 52~72 63

3.3 Extreme Weather and Climate Events

3.3.1 Rainfall Days and Heavy Rainfall Days

57 Regional climate model simulation results indicate that during 2071~2099, the annual precipitation will increase by 4%~10%, and an increase of 24% for the summer months. However, there is no significant increase in the number of precipitation days, while the number of days with heavy rainfall will decrease by 3 days/year, which means an increase of rainfall intensity.

3.3.2 Tropical Cyclones

58 Regional climate model simulation results show that due to global warming, there will be a larger increase for the number of tropical cyclones landing in Chin.At the same time the moving path of tropical cyclones will also change. According to IPCC 992 forecast, global temperature will continue to rise, which will lead to an increase 0.93~1.4 times of tropical cyclones landing in China by 2030. The number of tropical cyclones affecting Guangxi will also increase.

3.3.3 Flood

59 Situated in low-lying coastal areas of Guangxi, Fangchenggang is subject to high incidence of heavy rainfall and frequent floods. With heavy rains in the next few decades and the increase of precipitation days an increase in the number of tropical cyclones as well as sea-level rise, urban flooding and waterlogging hazard will increase.

SA-E-17 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Part III: Climate Changes and Future Trends in Chongzuo

1. Climate Changes

60 Chongzuo is located in the southwest of Guangxi. Chongzuo belongs to subtropical humid monsoon climate zone, with short winters and long summers, hot and rainy in summer, warm and dry in winter. The wet and rainy, frost-free period lasts up to 364 days.

1.1 Changes in Temperature and Precipitation

61 Temperature: Chongzuo’s yearly average temperature is 22.70C. The monthly average temperature is between 13.90C ~ 28.70C from January to December, in which the lowest average temperature is in January. The highest average temperature occurs in July. The annual average high-temperature days total 4, ranked the second city with average annual number of days with high temperature in Guangxi. The extreme maximum temperature is 41.20C, extreme minimum temperature is -1.9 0C. The average temperature for spring, summer, autumn and winter is 23.10C, 28.40C, 23.40C and 15.00C respectively.

62 During the 52 years between 1957 and 2008, the increase in average temperature was 0.780C, with the rate being 0.150C / 10 years.

63 Precipitation: The annual average rainfall is 1,190 mm. Chongzuo is one of the 7 dry cities in Guangxi. The monthly average precipitation is 19 mm ~ 225 mm, with the maximum in July and minimum in December. The summer (April ~ September) is the rainy season (flood season), during which rainfall accounted for 82% of the annual total. June to August is the main flood season, which is the period with highest concentration of rainfall within the year. Heavy rainfall and flood occur frequently. The winter (October ~ March) is the dry season; with precipitation accounting for only 18% of annual precipitation, and it is drought prone.

64 During the 52 years of 1957~2008, the annual average precipitation decreased by 10.9 mm in Chongzuo, with the rate of change being -0.21 mm/10 years.

1.2 Changes and Impacts of Extreme Weather and Climate Events

65 Extreme weather and climate events include heavy rainfall, tropical cyclones, droughts, severe convective weather, etc. in Chongzuo. Flooding is most serious and it is caused by heavy rainfalls or tropical cyclones.

1.2.1 Heavy Rainfall and Flood

67 the average precipitation days in Chongzuo are 146 days/year. The monthly average precipitation days are 5 days~17 days from January to December, with maximum in July and minimum in December. Over the years of 1957~2008, the average number of heavy rain days are 13, including 4 days of heavy rainfall (24-hours precipitation 50mm), 0.4 days of heavier rainfall (24-hours rainfall 100mm). In the past 52 years, there had been no extremely heavy rainfall in Chongzuo (24-hours rainfall 250mm) (Figure 1). From 1957 to 2008, the heavy rainfall days did not show an obvious trend of change. The rate of change in the number of heavy rain days was -2.1 days / 10 years, i.e., a decrease of 2.1 days in 10 years. The number of days of extreme heavy rain increased 0.05 days for every 10 years; the trend of change was not obvious.

SA-E-18 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Heavy Rainfall Heavyབྷ䴘 Rainstorm᳤䴘 བྷ᳤䴘 Extreme Heavy Rainstorm

Daily Maximum Precipitation (mm)

䱽䴘ᰕᮠ˄ཙ˅

ᒤ

Figure 1: Heavy Rainfall Days during 1957~2008 of Chongzuo

68 The daily maximum rainfall reflects the maximum rainfall intensity. There was no obvious trend of change in the daily maximum rainfall during 1957~2008. The maximum daily precipitation occurred in 1988 (216 mm) (Figure 2).

аᰕᴰབྷ䱽≤䟿˄∛㊣˅

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Figure 2: Distribution of Daily Maximum Precipitation In Chongzuo during 1957~2008

69 With a low-lying topography, heavy precipitation often results in flooding in Chongzuo. Flooding mainly happened from May to September. Flood frequency was 40% (4 times/10 years). The frequency of heavy flooding was 5%, i.e., with an occurrence of once in every 20 years, making Chongzuo an area of low flood frequency in Guangxi.

1.2.2 Tropical Cyclones

70 The frequency of tropical cyclones affecting Guangxi (including Chongzuo) is 5.3/year. An average of 2 tropical cyclones enters the interior of Guangxi per year. Chongzuo has an average of 0.9 days of tropical storm per year, i.e. 9 times in every 10 years. No tropical cyclone winds occurred in the past 10 years in Chongzuo. Heavy rainfall caused by tropical cyclones is a major weather system that triggers floods in Chongzuo. Even though

SA-E-19 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Chongzuo is one of the cities with less annual rainfall in Guangxi, it is vulnerable to the effects of tropical cyclones floods from July to September because of the special topography. Chongzuo is one of the cities prone to tropical cyclone hazards in Guangxi. Tropical cyclones in Chongzuo trigger flash floods, mudslides, landslides and other geological disasters, or rural waterlogging. As a low-lying city, Chongzuo is prone to waterlogging.

71 During 24-29 September 2008, Guangxi suffered the most strong typhoon "Hagupit" attack in the past 37 years, causing serious flooding. "Hagupit" brought about strong winds and heavy rainfall, and an once in 20 year flood occurred in Zuojiang Basin. The peak water level of 107.66 meter was recorded at 4 pm on the 8th at Chongzuo station in Zuojiang, 6.46 meters higher than the warning level. It caused the shutdown of the 202 Highway and direct economic loss of CNY 400 million; 7 in 8 streets were flooded in centertown of Chongzuo, and tens of thousands of people became victims.

2. Forecast of Climate Change in the 21st Century

2.1 Changes in Temperature and Precipitation

72 Simulation results with IPCC models show that compared with the 20-year average between 1980 and 1999, there are obvious changes in temperature and precipitation.

Table1: SRES Scenario, the Average Temperature and Precipitation Trends in Different Periods in the 21st Century of Chongzuo (Unit: 0C/%) 2011~2020 2021~2030 2031~2050 2081~2099 SRESA1B 0.4/-0 0.7/-1 1.3/1 2.9/6 SRESA2 0.5/-2~-3 0.7/-1 1.1/-0 3.2/6 SRESB1 0.5/0 0.7/1 1.1/1 1.9/4

73 Table 1 shows the projected average changes in temperature and precipitation for different periods in the 21st century in Chongzuo. The range of temperature rise is between 0.40C~0.70C for 2011~2030. Temperature rise is projected to be 1.30C, 1.10C and 1.10C under SRESA1B, SRESA2 and SRESB1 scenarios from 2031 to 2050. Temperature rise will be 2.90C, 3.20C and 1.90C under SRESA1B, SRESA2 and SRESB1 scenarios for 2081-2099.

74 Annual average precipitation shows a trend of slight decrease during 2011~2020, and 2021~2030. Precipitation will rise by 1% under SRESA1B and SRESB1 scenarios for 2031-2050. Precipitation will increase by 4%~6% under the three scenarios for 2081~2099.

2.2 Extreme Weather and Climate Events

2.2.1 Rainfall Days and Heavy Rainfall Days

SA-E-20 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

75 Simulation results with regional climate models indicate that during 2081~2099, the annual precipitation will increase by 4%~8%, and 28% in the summer. However, there is no significant increase in the number of precipitation days, while the number of days of heavy rainfall will decrease by 1 day-2 days/year, indicating an increase of rainfall intensity. In the next few decades, heavier rainfalls will trigger more serious floods.

2.2.2 Tropical Cyclones

76 Simulation with regional climate models shows that due to global warming, the number of tropical cyclones landing in China may experience a large increase. At the same time, the moving path of tropical cyclones will also change. According to IPCC992 forecast, global temperatures will continue to rise. As a result, the number of tropical cyclones landing in China by 2030 will increase by 0.93~1.4 times. The number of tropical cyclones affecting Guangxi will also increase. Chongzuo is situated in an area prone to tropical cyclone disasters. The number of tropical cyclones landing in Guangxi will grow. Heavy rainfall and flood from tropical cyclones will trigger more serious geological disasters and waterlogging.

SA-E-21 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

Part IV: Climate Changes and Future Changing Trends in Baise

1. Climate Changes

77 Baise is surrounded by mountains, interwoven with relatively flat terrains in the Youjiang Valley. It is typical small basin city. Baise has a subtropical monsoon climate, with a long summer and a short winter.

1.1 Changes in Temperature and Precipitation

78 Temperature: Baise’s yearly average temperature is 22.10C. The monthly average temperature is between 13.40C~28.40C from January to December, with the lowest average temperature occurring in January, and the highest average temperature in July. The number of high temperature days totals 5, making Baise the No. 1 city with the most number of high temperature days in Guangxi. The yearly extreme maximum temperature is 42.50C. Extreme minimum temperature is -2.00C. Temperatures in spring, summer, autumn and winter are 23.00C, 28.10C, 22.40C and 14.40C respectively.

79 During the 58 years of 1951~2008, the average temperature decreased by 0.170C, showing no obvious trend of change.

80 Precipitation: The yearly average rainfall is 1,095 mm, making Baise the 3rd dry city in Guangxi. The monthly average precipitation is 12 mm~205 mm, mostly in July and minimum in December. Summer (April ~ September) is the rainy season (flood season), which accounts for 80% of the total annual precipitation. June to August is the main flood season; it is the period with highest concentration of rainfall within a year, with frequent heavy rainfall and flood. Winter (October ~ March) is the dry season; precipitation only accounts for 20% of annual precipitation, and it is drought-prone.

81 During the 58 years of 1951~2008, the average precipitation increase was 5.8 mm in Baise, with the rate if change being 1 mm/10 years.

1.2 Changes and Impacts of Extreme Weather and Climate Events

82 Extreme weather and climate events include heavy rainfall, tropical cyclones, droughts, severe convective weather, etc. in Baise, heavy rainfall or tropical cyclone rainfall cause serious flooding.

1.2.1 Heavy Rainfall and Flooding

84 The yearly average precipitation days are 127 for Baise. The monthly average precipitation days are 5 ~ 16 from January to December, with maximum in August and minimum in December. Over the years of 1951~2008, the average days of heavy rain totals 12, including 4 days of heavy rainfall (24 hours precipitation 50mm), 0.6 days of heavier rainfall (24 hours rainfall 100mm). In the past 58 years, there had been no extremely heavy rainfall in Baise (24 hours rainfall 250mm) (Figure 1). From 1951 to 2008, the days with heavy rainfall change by a rate of 0.03 days / 10 years, i.e., an increase of 0.03 days for every 10 years. Heavy rain days increased by 0.18 days / 10 years; extremely heavy rain days increased by 0.03 days / 10 years. There were no discernible trend of change for both.

SA-E-22 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

བྷ䴘 ᳤䴘 བྷ᳤䴘 Heavy Rainfall Rainstorm Heavy Rainstorm

ᕪ䱽䴘ᰕᮠ˄ཙ˅

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Figure 1: Heavy Rainfall Days during 1951~2008 in Baise

85 Daily Maximum rainfall reflects the maximum intensity. During 1951~2008, obscures trends of daily maximum rainfall in years of Baise. The maximum precipitation appeared in 1953 (177 mm), the 2nd precipitation appeared in 1977 (170 mm) (Figure 2).

Distribution of Daily Maximum Precipitation (mm)

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Figure 2: Distribution of Daily Maximum Precipitation in Baise during 1951~2008

86 Floods affected Baise mainly from May to October, while June ~ August has the flood peak. The flood frequency in Baise is 50% (floods occur 5 times in every 10 years), and the frequency of heavy floods is only 2.5%, making Baise one of the less affected areas in Guangxi. Despite the relatively low annual rainfall and less flood frequently in Baise, the heavy rainfall continues to cause flooding and floods could easily trigger landslides, mud-rock flow and other geological disasters because of the complex topography.

87 From 1:00 am to 12:00 on 12 June 2008, Baise City, heavy rain (precipitation 166.3 mm) and flash floods in Yaozu Township and Youjiang District washed away most of the 13 resettlement villages in Yaozu Township, Wangdian County. Flood disasters victimized 21,013 people; landslides destroyed rural roads, crops, irrigation, housing and so on.

SA-E-23 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

1.2.2 Tropical Cyclones

88 The frequency of tropical cyclones in Guangxi (including Fangchenggang) is 5.3 / year. Tropical cyclones enter into the interior of Guangxi average twice a year, with a maximum of 9/year. It has the potential to appear tropical cyclones from May to December each year. Mainly happened from July to September accounted for 73% of the total. More serious disasters caused by tropical cyclones, earlier occurred at the end of May and early June, later took place in middle of October. Baise tropical cyclone on average 0.4 times per year, i.e. 2 times of tropical cyclone storm occurred in every 5 years. Over the last decade, there have been no strong winds caused by tropical cyclones in Baise.

89 Baise is subject to the disaster of tropical cyclones. Heavy rainfalls from tropical cyclones cause flash floods, mudslides, landslides and other geological disasters, or rural waterlogging. On 4 August 2006, typhoon No. 6, "Prapiroon" brought about heavy rainfall in the southern part of urban Baise. Heavy flooding and geological disasters occurred in low-lying valley. Disasters affected 159 villages in nine townships, victimizing 130,700 people; destroyed 14.3 hectares of fish ponds. Direct loss was CNY 13.49 million.

SA-E-24 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

No. 0606 Typhoon "Prapiroon" Triggered Heavy Rainfall and Caused Landslides

2. Forecasts of Climate Change in the 21st Century

2.1 Changes in Temperature and Precipitation

90 Simulation result shows that compared with the 20 years average result from 1980 to 1999, obvious changes in temperature and precipitation will take place.

Table1: SRES Scenario, the Average Temperature and Precipitation Trends in Different Periods in the 21st Century of Baise (Unit: 0C/%) 2011~2020 2021~2030 2031~2050 2081~2099 SRESA1B 0.4/-0 0.7/-0 1.3/1 2.9/6 SRESA2 0.5/-1~-2 0.7/-1~-2 1.1/-0 3.2/6 SRESB1 0.5/0 0.7/1 1.1/1 1.9/2~3

91 Table 1 shows the projected average changes in temperature and precipitation in Baise for different periods in the 21st century. The range of temperature rise is between 0.4~0.70C during 2011~2030. Temperature rise will be 1.30C, 1.10C and 1.10C under SRESA1B, SRESA2 and SRESB1 scenarios from 2031 to 2050. Temperature rise will be 2.90C, 3.20C and 1.90C under SRESA1B, SRESA2 and SRESB1 scenarios during 2081~2099.

92 Annual average precipitation trend was slightly decreasing during 2011~2020, 2021~2030. Increase in precipitation will be 1% under SERSA1B and SRESB1 scenarios during 2031~2051. Increase in precipitation will be 4%~6% under three kinds of scenarios during 2081~2099, the 21st century.

SA-E-25 Supplementary Appendix E: Sector Analysis – Climate Change in Guangxi and Project Cities

2.2 Extreme Weather and Climate Events

2.3 Rainfall Days and Heavy Rainfall Days

93 Simulation with regional climate models shows that during 2071~2099, the annual precipitation is projected to increase by 4%~8%, and 21% in the summer. However, there is no significant increase in the number of precipitation days, while the number of days of heavy rainfall will decrease by 3 days/year. This will mean an increase of rainfall intensity in the future. In the next few decades, heavier rains will lead to flooding, landslides, mud-rock flows and other geological disasters.

2.3.1 Tropical Cyclones

94 Simulation with regional climate models shows that global warming will lead to higher number of tropical cyclones landing in China, and at the same time the moving path of tropical cyclones will also change. The IPCC992 forecasts show a continuous rise in global temperature. This will lead to an increase in the number of tropical cyclones landing in China by 2003 by 0.93~1.4 times. The number of tropical cyclones affecting Guangxi will also increase. More frequent tropical cyclones will bring heavy rainfall and geological disasters in Baise.

SA-E-26 Supplementary Appendix F:

Sector Analysis –– Urban Development in Fangchenggang Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

Supplementary Appendix F:

Sector Analysis –– Urban Development in Fangchenggang

1. Overview

1 Fangchenggang is situated in the Southern part of the Guangxi Zhuang Autonomous Region (GZAR). Jurisdiction land area is 6,181 km2, and sea area is 40,000 km2. The mainland coastline is 584 kilometres and the border line is over 200 kilometres. It borders the Nanning Municipality in the north, Chongzuo city in the west, Beibu Gulf in the south and Vietnam in the southwest.

2 Topography basically is divided into the mountain, hilly ground and coastal beach. The topography is dominated by hilly ground which account for 80% of the territory. Lower-mountains, hilly ground, terrace and alluvial terrains are intertwined in the southeast area.

3 Fangchenggang belongs to the humid subtropical monsoon climate zone, with abundant sunshine and warm temperature. The yearly average temperature is 220C. The average relative humidity is 81%; the average annual precipitation is 2,822 mm. The wet season overlaps with the hot summer months.

4 Fangchenggang Municipality administers two urban districts (Gangkou and Fangcheng), one city (Dongxing) and one town (Shangsi). Fangchenggang Municipality has a total population of approximately 833,200. Six ethnic minorities, including the Zhuang, Yao, Miao, Jing, Dong, Li, Yilao and Man, make up 52% of the population. The agricultural population accounts for 587,100 (or 70.46% of the total population). Non-agricultural population accounts for 246,100 (or 29.61% of the total population). According to Fangchenggang City 2007 Statist Report, the city's urban population is 281,000, accounting for 33.7% of the total population.

2. Development Advantages1

2.1 Natural Resources

5 It is rich in forest resources, mainly on pine and broad-leaved trees with the forest area 254.84 acres, coverage rate up to 61%. Include 195 subjects, 35 genera and 1458 kinds of various types of plants. 428 kinds of wild medicinal plants, in total more than 260 kinds of

1 Other development advantages such as the Western Development Strategy, Ethnic Development Fund, Pan-Beibu Gulf Economic Cooperation Area and China ASEAN Free Trade Agreement Area will be discussed separately.

SA-F-1 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang animals, of which there are 35 kinds of national primary and secondary protecting animals: François monkey, small claws otters, golden cat, big civet, tiger, forest musk deer and white pheasant, jungle fowl etc. Important mineral resources include manganese, titanium, tin, aluminum, zinc, phosphorus, mica, quartz, fluorite, antimony, soft jade, quartz sand, monazite, Granite, coal, oil and other 30 kinds, with industrial value. Over 20 kinds of mineral resources have not been developed and utilized.

2.2 Tourism Resources

6 Fangchenggang is characterized with a long history, beautiful mountains, and colourful ethnic culture. With lots of places of interets such as: Shiwandashan National Nature Reserve; the largest urban mangrove forest of China; Fangcheng Camellia National Nature Reserve; Beilun Mouth National Nature Reserve; Jingdao autonomous region-level scenic spots; Jiangshan Peninsula autonomous region Holiday Resort; West Bay National Scenic Area; Port Cultural Tourism Zone; Qisha Industrial Ecological Tourism Zone; Sino-Vietnamese border rafting tourist area, Fangchenggang is becoming new and emerging tourist city after Guilin and Beihai in Guangxi. And generated revenue of tourism during 2001~2005 as the following table.

Table 1: Economic Benefit of Tourism from 2001 to 2005. Content \ Year 2001 2002 2003 2004 2005 Tourists (10,000 Person-Time) 134.0 145.0 113.6 156.0 178.0 Tourism Income (CNY100 Million) 3.5 5.0 3.3 5.3 5.7 Overseas Tourists(10,000 Person-Time) 3.3 3.6 1.8 3.2 3.5 Foreign Exchange Income ($10,000) 665.0 547.0 291.0 485.0 510.0 Border Tourists Number (10,000 Person-Time) 41.7 42.0 28.3 34.9 2.3

2.3 Geographical Advantages

7 Fangchenggang is China's main coastal port city for for regional and international seaside resort, and an important industrial base. It is also part of the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBGEDA). These will provide Fangchenggang with market opportunities for the industrial development. Regional Cooperation: Chongzuo is part of the GMS, the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBGEDA). Being one of the major land-based trading ports in south-western PRC, it has benefited from the regional cooperation programs.

2.4 Western Development Strategy2

8 Located in western China and as an ethnic minority region, Fangchenggang has enjoyed preferential policies under the Western Development Strategy that was initiated in 1999 and other related development programs. The central government has funded a series of large-scale development programs targeted at accelerating the socioeconomic development of the western provinces. WDS have included the development programs directly targeting Fangchenggang, among other things, the Fangchenggang logistics distribution hub, border export, and steel and iron production base, Qisha industrial park, tropical agricultural demonstration. Fangchenggang is also a beneficiary of the Border Community Revitalization Program and the Ethnic Minority Development Fund, both of which are part of the WDS.

2 Detailed discussions on the Western Development Strategy and related programs can be found in the “Sector Analysis: Western Development Strategy”.

SA-F-2 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

9 Fangchenggang has more than 150 deep-water berths. East port can be built on 50,000 tons to 100,000 tons berths. Qisha waters also have natural condition to build 100,000 ton ~ 300,000 ton berths.

10 About 200,000 tonnage of Fangchenggang terminal can chip on both sides of ports. Ports can be disposed of 200,000 ton ship. In 2006, the terminal set up to unload 195,000 tons of super-large ships. There is special port for shipping Parathion in Fangchenggang. In 2006, load and unload of sulfur is ranked first in China. According to "National coastal port layout planning", Fangchenggang is explicitly one of major ports in 24 the national coastal ports, one of the 13 ports in import of iron ore, and one of 19 container ports.

2.5 Regional Cooperation

11 The city's foreign trade maintained rapid growth, the annual total import and export has reached $1.459 billion with an increase of 41.8%, in which the export is $195 million with an increase of 68.2% and the imports is $1.264 billion with an increase of 38.5%. Total exports of three major market shares such as ASEAN, the United States, Japan is 91.3%, of which ASEAN exports is $160 million, accounting for 82.1% of total exports. ASEAN countries have become major markets of foreign trade for Fangchenggang City. The annual trade turnover is CNY 7.512 billion with an increase of 21.5%, of which export is CNY 2.329 billion and import is CNY 5.183 billion and increased by 56.6% and 10.5%, individually. Fangchenggang is part of the GMS, the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBGEDA). Being one of the major land-based trading ports in south-western PRC, it has benefited from the regional cooperation programs. The volume of foreign trade increased from $50.94 million in 2001, to $425.90 million in 2004, $1,332.38 million in 2007, $1,593.38 million in 2008. On 1st January, 2010, the CAFTA will come into effect and 90% or 7,000 goods will enjoy zero tariff. This will provide market opportunities for trade, industrial development and urban development for Fangchenggang.

SA-F-3 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

3. Economic Development

12 The takeoff of Fangchenggang’s economy started with the economic reform and open-up in the late 1970s. Between 2000 and 2007, the GDP grew from CNY 5.5 billion to CNY 15.9 billion with an increase of 20.3%. In 2007, the primary industry added value is CNY 2.875 billion and an increase of 6.3%, secondary industry is CNY 7.691 billion with an increase of 28.2%, tertiary industry is CNY 5.361 billion with an increase of 19.1%. Per capita GDP is CNY 19,329. Urban residents’ per capita disposable income is CNY 12,159 with an increase of 33.4%; rural per capita net income is CNY 3791 and an increase of 19.5%.

13 In 2007, the city's fiscal revenue has exceeded CNY 1.5 billion and achieved CNY 1.576 billion and an increase of 48.8% which is first increase rank in the region. The annual total fixed asset investment has reached CNY 10.353 billion and an increase of 50.1%. Total retail sales of social consumer goods are CNY 3.084 billion and an increase of 18.4%. Total import and export volume has reached CNY 1.459 billion and an increase of 41.8%.

14 From the 11th FYP on, the economic development of Fangchenggang City has entered a period of rapid growth, GDP growth rate has increased to above 20% with forefront of growth in the region. In 2007, the city per capita GDP value is CNY 19,329, which is higher than average level of Guangxi CNY 12,408 / person. The major socioeconomic indicators of Fangchenggang are as bellow (Table 2).

Table 2: The Major Socioeconomic Indicators of Fangchenggang Population GDP Fixed Assets Industrial Output Value Year (‘000) (CNY Million) (CNY Million) (CNY Million) 1993 718 1,749 856 969 1994 726 2,544 1,041 1,727 1995 738 3,110 1,312 2,460 1996 748 3,850 1,139 2,899 1997 755 4,699 1,188 3,600 1998 761 5,197 1,442 3,708 1999 763 5,462 1,469 3,851 2000 771 5,503 1,523 3,967 2001 778 6,003 1,753 4,340 2002 783 6,653 1,600 6,103 2003 789 7,253 1,970 8,071

SA-F-4 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

2004 798 8,332 2,046 9,978 2005 798 9,477 3,035 11,098 2006 822 11,961 6,900 15,241 2007 833 15,928 10,400 22,884 2008 843 21,218 10,211 27,718 2009(Jan-July) 850 16,300 11,868 20,370 Growth Forecast 2015 1,300 68,500 1,210 185,600 2025 2,100 277,000 16,680 1,149,000

4. Industrial Strategy

15 In 2007, Fangchenggang City has continued to adjust and optimize the industry's economic structure and has improved the quality and efficiency of economic growth. The proportion of adjusted three industries is 18.05:48.29:33.66. Secondary industry has become increasingly important position.

16 In Fangchenggang, the economic development has been propelled largely by industrial growth. For example, With the acceleration of industrial development of Fangchenggang Port City, a large number of major projects have been set up. In 2007, the city to maintain a rapid growth of industrial production has completed CNY 22.757 billion of industrial output value with an increase of 49.31%; the whole completion of industrial added value is CNY 6.79 billion with an increase of 31.2%. In 1993, the proportion of industrial GDP is accounted for only 17.15%. In 2007, it rose to 42.63% in an average annual and an increase of 1.82%, the industrial share of GDP is accounted for accelerating upward trend.

17 In 2007, Fangchenggang City has completed CNY 6.79 billion of industrial added value with an increase of 31.2%, accounting for 42.63% of the city's total production. Of which added value of large-scale industrial is CNY 5.32 billion with an increase of 37.5%. The total industrial production has exceeded CNY 20 billion to CNY 22.757 billion with an increase of 49.3%, of which total industrial output value is CNY 18.495 billion with an increase of 61.3% and ranked first in the whole region. Above-scale industrial enterprises has realized CNY16.727 billion of income and an increase of 65.8%, CNY 1.363 billion in profits and taxes with an increase of 49.5%. The comprehensive index of economic efficiency is 319.64% and ranked first in the region. The economic growth rate has reached 56.0% which is contributed by industry. It has stimulated 11.3% of economic growth. Public infrastructure construction enhanced the pillars of the status of the industry. Industry has become the city's main driving force of economic growth and has become a major financial revenue source.

18 With million-ton steel plant with the presence, the construction of a large number of port industries will greatly enrich in the Fangchenggang City. The overall industrial strength, speed up the rapid development of urban industries with the economic development of the city into a strong driving force. With the middle and lower reaches of the iron and steel-related industries is including heavy machinery, ship repair, steel products, and external support industry. A comprehensive industry and some non-professional repair, maintenance, spare parts production is a positive development. Leading iron and steel for the steel industry is gradually building a cluster.

5. Urban Planning

19 Fangchenggang has a well-formulated urban master plan (2008-2025). The urban master plan was prepared by the renowned Guangzhou Urban Planning and Design Institute, in partnership with the Construction and Planning Bureau, under the leadership and guidance of the relevant agencies of the Baise Municipal Government, particularly Development and

SA-F-5 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

Reform Commission, Economic and Trade Commission, Finance Bureau, Land Resources Bureau and Transportation Bureau.

20 According to the urban master plan, the total population for the whole municipality is projected to reach 1.3 million and an urbanization rate of 69% by 2015; and 2.1 million with an urbanization rate of 78% by 2025.

21 The cities will be developed around seven industrial parks axial clusters that radiate from Fangchenggang City. The axial urban clusters will be integrated with two harbors. Center City is the city's political, economic and cultural center. Urban area is located in the southwestern city, the industrial base and urban infrastructure is well-located with the most powerful economy. Dongxing city is Sino-Vietnamese and sea border important exit channel for export processing, trade, tourism-oriented industries, with sub-tropical character of the coastal port cities. Shangsi County is processing resources in forestry and agriculture industries is supporting the Beibu Gulf of heavy industry raw materials supply and production base with a positive development of the southwest Guangxi regional ecology, and ethnic characteristics of tourism. Qisha Town, in order to support Qisha industrial zone of vice living in central cities, it is mainly in real estate development and tourism. Other towns will develope agriculture; forestry development, tourism, border and internal trade, the development of private economy enhance the comprehensive economic strength of cities and towns for the town lay a good foundation for further development.

22 Industrial parks form the backbone of the city’s economy. Industrial Park of Fangchenggang City is currently advancing the work of Qisha, Gon gche, Hexi and Maoling, west of Shangsi County and Dongxing border economic cooperation zones and the development and construction of seven industries (Park) District in Dongxing Pingjiang industries (Park) District.

23 Qisha Industrial Park mainly on the development of metallurgy, petrochemical, building materials, heavy chemical industry and the matching energy, machine building, ship repair, port, ore processing industry and seafood and sea processing industry.

24 Gongche Industrial Park is located the layout of the iron and steel plants and large

SA-F-6 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang industrial energy matching upstream and downstream industries, such as warehousing and logistics industry, heavy chemical industry development, machinery manufacturing, phosphating and other industrial products and minerals.

25 Hexi Industrial Park mainly on the developing of sugar refining, pharmaceuticals, rosin, spices, construction materials, pearls, minerals, seafood, processing characteristics of farm production.

26 Maoling Industrial Park is developing mainly on pulp, steel, building materials, minerals, liquefied petroleum gas and other industries.

27 Shangsi Industrial Park is mainly on the development of sugar refining, forest products, food, coal, electricity, water, building materials, and other processing industries.

28 Dongxing Border Economic Cooperation Zones well developed in transport, ports and other infrastructure facilities, investment and business tourism. It’s mainly on the development of low-pollution or pollution-free electronics, textile, building materials, machinery manufacturing, bio-pharmaceuticals, plastic products, agricultural products processing industry imports and exports.

29 Jiangping Industry Park mainly on the development of mechanical, electronic, textile, plastic products, marine bio-pharmaceutical, agricultural and special products, such as border import and export processing industry.

Phosphorus Chemical Industrial Park Qisha 30 million t/a Iron and Steel Base

6. Urban Population

30 A series of models were used to forecast urban populations for different planning periods. The models took into account natural growth, rural-urban migration and urban expansion. The projections of urban population for the different periods are as follows: 281,000 in 2007 accounts for 33.73%, 900,000 in 2015 accounts for 69%, and 1.65 million in 2025 accounts for 78%. With the use of the PRC urban planning standard of 120 m2 ~ 150 m2 per person, the corresponding built-up city center areas is 24.57 km2 in 2007, and it will expand to 140.63 km2 in 2025.

SA-F-7 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

Figure 2: Population of Fangchenggang

7. Transportation Networks

31 There are Fangchenggang to Qinzhou expressway, Chongzuo to Shangsi expressway, Shangsi to Qinzhou road, Qinzhou and Nanning to Fangcheng expressways and Napo to Dongxing expressway. The intra-city transportation networks in Fangchenggang entail a web of railways, expressways, highways, and inland waterways. The Nanning-Fangchenggang railway, now undergoing upgrading, in 2006 the Southern Railway Company Limited conducts a new round of anti-transformation of the railway, the railway through capacity is 21.5 million tons. Fangchenggang is well-connected to other cities and regions, through the Maoling-Qisha Railway, Xinggang Avenue, Dongxing Avenue etc. 6 vertical 4 horizontal trunk roads network. Planning to construct Yuwan and Qisha West two ports with in total of 8 operation area. The planning through capacity is from 5 million tons to 80 million tons. The improved transportation network will allow the expeditious flows of people and goods.

32 Fangchenggang City has 99 existing berths, of which more than 10,000-ton berths are 22; million-ton berths for more than 21, other 14 berths; small and medium-sized of berths are 67. They form an important entry point for import and export between China and ASEAN.

33 Fangchenggang with 65 countries and regions have a 165 trade ports and opened in Thailand, Singapore and Hongkong container transit routes all over the world. In 2007, the city completed a total throughput of 50.53 million tons, of which Fangchenggang has completed by 30.32 million tons with increase up to 21%; throughput of small and medium-sized port has completed 20.21 million tons with an increase of 1.3 times.

34 The urban master plan also contains a comprehensive urban transport plan. The goal is to develop an integrated, advanced, efficient, low-pollution, multi-modal urban transport system. The guiding principles entail: i) giving priority consideration to artery roads; ii) balancing employment and residential locations; iii) promoting the development of transportation enterprises and related service industries; iv) promoting urban public transport; v) providing space for cyclists and pedestrians; and vi) advancing development of road networks and related infrastructure facilities for planned large residential and industrial areas.

SA-F-8 Supplementary Appendix F: Sector Analysis – Urban Development in Fangchenggang

Xinggang Avenue West Bay Bridge Qinzhou-Fangchenggang Expressway

35 Fangchenggang City in 2025, The total length of highway is 4492 kilometers, of which 138 kilometers expressway is 3.1 times in 2007; first level road with 196 kilometers is 2.7 times in 2007; 358 kilometers of secondary level roads is 2.7 times in 2007; third level road with 800 kilometers is 3.1 times in 2007; forth level and below road with 3,000 km is 1.4 times in 2007; road network density is 72.7 kilometers / 100 km2.

36 The road networks will be structured around the framework of express ring roads and urban primary roads. “Circular and radial” road network will be adopted for the urban center, and grid road networks will be adopted for other areas. The urban center will be connected to the industrial zones in the east by an urban expressway and three artery roads. The plan for inter-city and intra-city road networks can be found in Fangchenggang transport plan map.

37 Fangchenggang Municipal Government is also taking action on institutional reform to strengthen urban public transport management. The municipal institutional committee reallocated to the municipal transport authority from the urban infrastructure management authority the overall responsibility for urban passenger transport (buses and taxis) management. The urban public transport management section has been newly set up in the road transport management division of the transport bureau. The municipal public security bureau has been assigned the responsibility for the planning, construction and maintenance of urban road signs. It will also participate in the planning and implementation of urban road networks.

8 Human Development

38 Northern Gulf News 23rd October, 2009, according to daily Fangchenggang news, in the last three quarters, all levels of financial investment of people's livelihood expenditures nearly up to CNY800 million as a new record of Fangchenggang. These people's livelihood expenditures include: First, to implement preferential agricultural policies supporting agriculture; secondly, to implement the urban and rural minimum living security system; thirdly, to support the development of education; fourth, to support the development of health.

SA-F-9 Supplementary Appendix G:

Sector Analysis –– Urban Development in Chongzuo Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

Supplementary Appendix G:

Sector Analysis –– Urban Development in Chongzuo

1. Overview

1. Chongzuo Municipality is located in southwestern Guangxi Zhuang Autonomous Region. It borders Nanning Municipality in the east, Baise Municipality in the north, Fangchenggang Municipality in the south and Vietnam in the west. Chongzuo’s comparative advantages include its long international border lines and railways, close proximity to the provincial capital of Nanning and to the ASEAN Economic and Trade Free Zone, and Pan-Pearl River Delta. The length of the border with Vietnam is 533 km which is the longest border among Guangxi cities with a total of 11 various types of trading ports.

2. The topography for Chongzuo is characterized by light undulating plains with isolated limestone outcrops and flat to rolling and hilly, with some limestone outcrops. Chongzuo has a total of 14 rivers. The Zuojiang River is the largest river and is a tributary of Youjiang River of the Xijiang water system in the Pearl River Basin. Zuojiang River flows across from the southwest to the northeast and divides urban Chongzuo into Jiangnan (river south) and Jiangbei (river north).

3. Chongzuo has a subtropical climatic zone that experiences a subtropical monsoon climate and high temperatures all year around. Annual average temperature is between 20.80C and 22.40C. The annual average rainfall of 1,170 to 1,414 mm is concentrated in April to September, with 82% of the annual amount falling during this time. Chongzuo has rich biodiversity with more than 4,000 species of plants and more than 450 kinds of animals. There are more than 30 rare and protected animals including white headed and Indo-Chinese black langurs, crested striped hornbills, pangolins, and clouded leopards. About 1/4 of China’s wild animal species can be found in Chongzuo. Many species of fish are an important food source for communities along the river systems. Important mineral resources include manganese, gold, ferberite, coal, barite, bentonite, uranium, and vanadium.

4. Chongzuo Municipality administers the Jiangzhou District, Pingxiang City (county-level city) and five counties that include Fusui, Daxin, Tiandeng, Ningming and Longzhou (Figure 1). It has a total population of 2.33 million, with 88.6% being ethnic minorities, mainly the Zhuang.

SA-G-1 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

Figure 1: Administrative Map of Chongzuo

SA-G-2 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

2. Development Advantages

5. Natural Resources: Chongzuo is very rich in mineral resources. There are 46 kinds of minerals, 228,400 ha of cultivated land, and 7,190 km2 of forest area. Chongzuo is the world's biggest producer of bentonite, China’s biggest manganese producer and major producer of sugar and sub-tropical fruit. There are 1.15 billion cubic meters of surface water, outside water 17.4 billion m3, 190 million m3 of groundwater. The hydropower potential totals 40,390 kilowatts.

6. Tourism Resources: Chongzuo is characterized with beautiful mountains, and colourful ethnic culture. There are dozens of cultural heritage and scenic tourist attractions, such as: Guilong tower, ancient city walls, stone forest, water falls, Shuikou Lake, and Nanjin furuwatari. Border lines with Vietnam and the Friendship Pass are also tourist attractions. In 2008, 4.22 million tourists visited Chongzuo, and generated a revenue of CNY 1.72 billion.

7. Geographical Advantages: Chongzuo is situated in the Guangxi Southwest Urban Belt. It is also part of the Pan-Pearl River Delta Economic Zone, the Pan-Beibu Gulf Economic Development Area (PBGEDA) and the China-ASEAN Free Trade Area (CAFTA). Connected to Vietnam, it is a gateway to Vietnam and the Greater Mekong Subregion.

Railway Expressway Chinese ports Vietnamese ports Baise Major cities Highway Border highway

VIET

NAM Fangchenggang Beihai

SA-G-3 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

8. Western Development Strategy1: Located in western China and as an ethnic minority region, Chongzuo has enjoyed preferential policies under the Western Development Strategy that was initiated in 1999 and other related development programs. The central government has funded a series of large-scale development programs targeted at accelerating the socioeconomic development of the western provinces. Development programs directly targeting Chongzuo under the WDS have included, among other things, the Chongzuo manganese and sugar production base, north industrial park, multi-purpose hydropower project, tropical agricultural demonstration and “red tourism”. Chongzuo is also a beneficiary of the Border Community Revitalization Program and the Ethnic Minority Development Fund, both of which are part of the WDS.

Sugar Factory Manganese Plant Tropical Fruit Red Tourism

9. Regional Cooperation: Chongzuo is part of the GMS, the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBGEDA). Being one of the major land-based trading ports in south-western PRC, it has benefited from the regional cooperation programs. The volume of foreign trade increased from $584 million in 2003, to $666 million in 2006, $928 million in 2007, $1,599 million in 2008 (increase of 72.55%, ranking first among all municipalities in Guangxi) and $909 million for the first half of 2009. For 2006, the volume of goods traded through the ports amounted to 3 million tons, of which 90% was with Vietnam and other ASEAN countries. In 2008, the volume of border trade grew by 45.61% over the previous year to CNY 1,050 million. On 1 January 2010, the CAFTA will come into effect and 90% or 7,000 goods will enjoy zero tariff. This will provide market opportunities for trade, industrial development and urban development for Chongzuo.

3. Economic Development

10. In the past few years, the economic growth in Chongzuo has reached a new height, especially after the establishment of the municipality in 2002. Between 2004 and 2007, the GDP annual growth rate has hovered above 15%. In spite of the international financial crisis, the GDP annual growth rate for 2008 still reached 11.8%, one percentage point below that of

1 Detailed discussions on the Western Development Strategy and related programs can be found in the “Sector Analysis: Western Development Strategy”.

SA-G-4 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

Guangxi but 2.8 percentage points higher than the national average.

11. In 2006, Jiangzhou district achieved the target of GDP of CNY4.19 billion, with an increase of 18.2%, per capita GDP of CNY12,314; fiscal revenue CNY 402 million, with an increase of 43.4%, per fiscal Revenue CNY 1,182. Investment in fixed assets CNY 1.38 billion with an increase of 54.8%; total retail sales of consumer goods CNY 630 million, with an increase of 14.3%; disposable income of urban residents CNY 8,762, with an increase of 18.2%; and farmers per capita net income CNY3,203 with an increase of 27.1%. The major socioeconomic indicators of Chongzuo are as follows.

Population GDP Fixed Assets Industrial Output Value Year (‘000) (CNY Million) (CNY Million) (CNY Million) 2000 2,182 7,935 1,576 3,813 2001 2213 8,944 2,095 4,203 2002 2237 9,683 2,297 4,921 2003 2,279 10,421 3,249 5,240 2004 2,297 12,554 4,073 7,471 2005 2,307 15,112 5,281 9,585 2006 2,332 19,403 7,105 14,597 2007 2,369 23,187 11,515 16,973 2008 2,387 26,480 12,849 20609 2009 (Jan-June) 2,395 11,243 9,255 11,239 Growth Forecast , 2010 2,297 24,600 13,000 30,000 2020 2,417 50,000 26,000 60,000

4. Industrial Strategy

12. Chongzuo is an important production base for sugar, manganese and tropical fruit products, and a national key port for border trade (with Vietnam). China’s largest sugar factory is located in Chongzuo.

13. In Chongzuo, the economic development has been propelled largely by industrial growth. In 2008, the industrial sector contributed 30.9% of the GDP; the industrial share of GDP is accounted for accelerating upward trend. In Chongzuo, pillar industries include sucrose, manganese, yeast, cassava starch processing, hydropower, construction materials, machinery, border trade and agro-processing.

Angel Yeast Plant Industrial Park (Taiping Town) Export Goods to ASEAN Countries (Friendship Pass, Pingxiang)

SA-G-5 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

14. Chongzuo’s industrial strategy (2002-2020) set the target for industrial structure index by adjusting the ratio of primary, secondary and tertiary industries from 43.8:19.6:36.6 in 2000 to 35:25:40 in 2020. The growth will be achieved by further expanding the pillar industries led by sucrose, manganese, starch and agro-processing in industrial zones.

15. In 2008, the output value of manganese up to CNY 4.94 billion of enterprises above designated size (i.e. all stated-owned enterprises and those non- stated owned enterprises with an annual sales income over CNY 5 million); cement output value up to CNY 1.14 billion. The first half of 2009, the output value of urban industrial enterprises designated size was CNY 11.24 billion. The added value of industrial enterprises above designated size was CNY 4.05 billion, up by 3.7%. For the agro-processing industry such agricultural products as sugar, starch, tea, dried bamboo shoots, processed fruits, fruit juices and spices. Sugarcane material up to 17.95 million tons, squeezed 2.33 million tons of sugar production from 2008 to 2009. Total manganese output value will be CNY 1.80 billion between January and June 2009.

Longzhou Sucrose Factory Sugarcane Field

16. In the meantime, the CMG is paying increasing attention to environmental protection. According to statistics, "Eleventh Five-Year" period, the city completed construction of 33 emission reduction projects; the cumulative invested CNY 301 million. By the end of 2008, the city's 15 sugar enterprises have built and put into operation biological wastewater treatment facilities. At the same time, the city's 15 starch production enterprises, ethanol plants and four wastewater treatment facilities have reduced COD discharges to allowable limits. As cleaner production demonstration pilot enterprises of the East Asia Group, five sugar companies have been certified by the ISO 9000 Management System. Tuolu East Asia Sugar Co., Ltd. became one of the first five "Cleaner Production Demonstration Enterprises" in Guangxi.

6. Population

17. By the end of 2006, Jiangzhou District administered 7 towns, 2 townships, 2 overseas Chinese economic management zones, 98 villagers committee and 16 communities. With the total population of 340ˈ000 people, area of 2951 square kilometers.

18. Several scenarios were formulated and analyzed for the preparation of the urban master plan. A series of models were used to project urban populations for different planning periods in Jiangzhou District. The models took into account natural growth, physical, rural-urban migration and urban expansion. The projections of urban populations for the different periods are as follows: 355,000 for 2010, 574,000 for 2020. With the use of the PRC urban planning standard of 100 ~ 120 m2 per person, the corresponding built-up areas will be 32 km2 for 2010; 50 km2 for 2020, 35 km2 for 2015 and 50 km2 for 2020.

SA-G-6 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

5. Urban Planning

19. Chongzuo has an urban master plan covering 2002 and 2020. The urban master plan was done by one of the most prestigious in China, the Shanghai Tongji Urban Planning and Design Institute. According to the master plan, the urban system in Chongzuo will be developed around two axial clusters that radiate from Chongzuo City. The axial urban clusters will be integrated with three economic zones. The first-level axis is Nanning-Chongzuo City Center-Pingxiang, linked by the Nanning-Youyiguan (Friendship Pass with Vietnam) Expressway. The second-level axis is Chongzuo City Center-Daxin-Tiandeng, for the development of second-level cities and towns, starting from Chongzuo City Center, passing through Tiandeng and Daxin, then reaching Baise, for promoting the development of poor areas.

20. The urban master plan also includes the establishment of three economic zones in eastern, central and southern Chongzuo. The eastern economic zone covers Fusui County. Its major development orientations are the sugar industry, sisal products, building materials and agricultural and food processing.

21. The central economic zone entails the urban areas of Chongzuo, and the county seats of Daxin and Tiandeng, with the major development orientations of middle-stream and downstream sugar industries, tropical fruit, value-added processing, commerce and trade and export, supplemented by specialty agriculture, tourism and transportation.

22. The southern economic zone includes the county seats of Longzhou and Ningming located at the Sino-Vietnamese border as Pingxiang. With rich tourism resources, the development of this zone will be led by export processing, cross-border trade and tourism, to promote the regional urban and rural development.

7. Transportation Networks

23. The intra-city transportation network in Chongzuo entails a web of railways, expressways, highways, and inland waterways. The city 9th Road South, Beiwei 2nd Road, Shijinglin Road, Liancheng Road and Zhongyi Road2 will be artery linking internal road network.

2 Six sections are financed by ADB loan.

SA-G-7 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo

Chongzuo International Passenger Transport Center Nanning-Youyiguan (Vietnam Border) Expressway (Fusui Section)

24. The urban master plan also contains a comprehensive urban transport plan for the Jiangzhou District. The goal is to develop an integrated, advanced, efficient, low-pollution, multi-modal urban transport system. The guiding principles entail: i) giving priority consideration to artery roads; ii) balancing employment and residential locations; iii) promoting the development of transportation enterprises and related service industries; iv) promoting urban public transport; v) providing space for cyclists and pedestrians; and vi) advancing development of road networks and related infrastructure facilities for planned large residential and industrial areas.

25. The Chongzuo Municipal Government is also taking action on institutional reform to strengthen urban public transport management. The municipal institutional committee reallocated to the municipal transport authority from the urban infrastructure management authority the overall responsibility for urban passenger transport (buses and taxis) management. The urban public transport management section has been newly set up in the road transport management division of the transport bureau. The municipal public security

SA-G-8 Supplementary Appendix G: Sector Analysis – Urban Development in Chongzuo bureau has been assigned the responsibility for the planning, construction and maintenance of urban road signs. It will also participate in the planning and implementation of urban road networks.

8. Human Development

26. In the course of promoting economic growth, the Chongzuo Municipal Government has also placed great emphasis on human-centered development. Chongzuo was known to be a poverty region, with five out of seven counties being designated as the provincial poverty counties and two as provincial poverty counties. CMG has benefited from various national and provincial funds that target the western development region, ethnic minorities, poverty counties and border communities. In 2007, a total of CNY 370 million was invested in infrastructure improvement in Dashi Mountain-Tiandeng County poverty area. In 2008, more than CNY 210 million was invested in infrastructure facilities in border communities under the National Border Community Revitalization Program. Between 2002 and 2008, 143,200 person-times of skills training was provided to poverty communities.

27. At the end of 2002, Chongzuo had a total rural poverty population of 0.74 million; by the end of 2008, this figure was reduced to 0.59 million; poverty incidence rate declined from 38.38% to 29.79% for the same period. The poverty reduction effort has been supplemented by a series of development programs, including, among others: i) rural water supply; ii) household-based biogas; iii) “villages accessibility” – all villages are connected by paved roads; iv) “village connectivity” – all villages are connected to power supply, telephone, radio and television; v) low-income housing; and vi) school and hospital improvements. Chongzuo is home to a number of colleges and professional schools, including the Guangxi Ethnic Minority Teachers College and Guangxi Urban Professional College. The Jiangnan Wastewater Treatment Plant (Phase I) came into operation in June 2009, which brings the centralized wastewater treatment rate for urban Chongzuo to 40%. The landfill with a processing capacity of 200 t/d will also become operational in 2009. Wastewater treatment plants and landfills are also under construction at the county level.

SA-G-9 Supplementary Appendix G:

Sector Analysis –– Urban Development in Baise Supplementary Appendix H: Sector Analysis – Urban Development in Baise

Supplementary Appendix G:

Sector Analysis –– Urban Development in Baise

1. Overview

1. Baise is situated in the western part of the Guangxi Zhuang Autonomous Region (GZAR). Covering a land mass of 36,300 km2, it is the largest municipality in the autonomous region in terms of area. It borders the Nanning Municipality in the east, Yunnan Province in the west, Guizhou in the north and Vietnam in the south.

2. Baise extends 320 km from east to the west and 230 km from south to the north. The topography is dominated by mountains which account for 95.4% of the territory. Mountains, hills, and alluvial terrains are intertwined in the Youjiang River Valley.

3. Baise belongs to the subtropical climatic zone, with abundant sunshine and warm temperature. The yearly average temperature is between 19.00C and 22.10C, with the highest being between 36.00C and 42.50C and the lowest being between -2.00C and -5.00C. The average annual precipitation is 1,115 mm. The wet season overlaps with the hot summer months.

4. Baise Municipality was established in 2002. It now administers one urban district (Youjiang) and eleven counties (Pinguo, Tiandong, Tianyang, Tianlin, Debao, Jingxi, Napo, Lingyun, Leye, Longlin and Xilin). Ten of eleven counties are classified as “state-level (national) poor counties”. Baise Municipality has a total population of approximately 3.8 million. Six ethnic minorities, including the Zhuang, Yao, Miao, Yi, Yilao and Hui (Muslim), make up 87% of the population. The rural poverty population accounts for 716,000 (or 18.8% of the total population), of which 160,000 are under extreme poverty. The municipality has a labour force of more than 2.3 million, including 314,000 of urban labour force and 2.0 million of rural labour force (of which 2.0 million are transferrable to urban).

2. Development Advantages

5. Natural Resources: It is very rich in mineral resources. There have been 57 kinds of minerals, of which bauxite has more than 1 billion ton of long-term reserves and 780 million tons of proven reserves, accounting for more than one-third of the proven reserves in PRC and. Manganese reserves amount to 32 million tons. There are 820 million tons of coal reserves, 100 million tons of proved oil reserves, 3,000 million m3 of natural gas reserves, and 6,000 MW of hydropower potential. Reserves of antimony, copper, oil, coal, gold, crystal and other more than 10 kinds of mineral resources are ranked highest in Guangxi. The forest cover for Baise Municipality is 56%, with a total standing stock of 55.8 million m3 and numerous wildlife species. With a suitable climate, Baise is a major producing area for tropical fruits and vegetables that are sold to more than 300 cities across the country and to Russia and ASEAN countries.

SA-H-3 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

6. Tourism Resources: Baise is characterized with a long history, beautiful mountains, and colourful ethnic culture. As early as 1729 in the Qing Dynasty, Baise became the seat for the county government; the town of Baise was established by the Qing Dynasty government in the following year. As the site of communist uprising in 1929 led by late paramount leader Deng Xiaoping, Baise was designated as the “Red Tourism Base”. Well-known historical and natural sites include the Baise Uprising Museum, Chengbi Lake, Buliu River, and numerous karst caves and tiankeng. With four national 4A scenic areas, Baise is becoming new and emerging tourist city after Guilin and Beihai in Guangxi. In 2007, it was awarded the title of "Outstanding Tourist City of China".

7. Geographical Advantages: Baise is situated in the center of the Nanning-Guiyang-Kunming Economic Zone. It is also part of the Pan-Pearl River Delta Economic Zone. Connected to Vietnam, it is part of the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBGEDA). These will provide Baise with market opportunities for the industrial development. Baise is well-connected to other cities and regions, through the Nanning-Kunming Railway, the Nanning-Kunming Expressway now under construction. The expansions and upgrading to the two airports, one civil and the other military, have been completed recently. When the cascade water conservancy projects are completed, water-based navigation with a capacity of 1,000 tons will be able to reach Guangzhou. The improved transportation network will allow the expeditious flows of people and goods.

8. Western Development Strategy1: Located in western China and as a revolutionary base and an ethnic minority region, Baise has enjoyed preferential policies under the Western Development Strategy that was initiated in 1999 and other related development programs. The central government has funded a series of large-scale development programs targeted at accelerating the socioeconomic development of the western provinces. Development programs directly targeting Baise under the WDS have included the Baise aluminum production base program, Baise multipurpose hydropower development program2, Baise tropical agriculture demonstration program, Baise agricultural science and technology park program, Baise “red tourism” program and Baise karst tiankeng museum. Baise is also a beneficiary of other western development programs such as the southwestern (Nanning-Guiyang-Kunming) economic area, Nanning-Kunming expressway (that passes through Baise), west-to-east power transmission program, western (transportation, telecommunication and television) connectivity program. As an ethnic minority and poverty region, Baise has also benefited from the National Ethnic Minority Development Fund and the National “Eight-Seven” Poverty Alleviation Program3.

9. Regional Cooperation: Baise is evolving into a critical node on the Eastern subcorridor of the NSEC. Expressways connect Baise to Nanning to the southeast for regional cooperation as well as to national highways 323 and 324 to connect with Guizhou and Yunnan provinces to the north and to the south to Guangdong. New expressways from Baise will connect to Longlin in the northwest for regional cooperation with Guizhou and Yunnan which includes growth to the tourist industry from popular natural and cultural attractions as well as expressway connections to Longbang in the south for Vietnam border-crossing en route to GMS regional economic integration. The Nanning-Kunming trunk

1 Detailed discussions on the Western Development Strategy and Ethnic Development Fund can be found in the “Sector Analysis: Western Development Strategy”. 2 Eleven water resources development programs in Guangxi, covering hydropower, irrigation and water use efficiency improvement, water supply, flood control, dam rehabilitation, soil erosion control and coastal protection were financed under the WDS. The Baise multipurpose hydropower development project, with a reservoir capacity of 5.6 billion m3 and an investment of CNY five billion was on top of the list. 3 The goal of the National “Eight-Seven” Poverty Alleviation Program was to reduce the poverty population by 80 million with a seven year period (1994-2000). Ten of the twelve counties in Baise Municipality were included in the 592 priority counties for poverty reduction under the program.

SA-H-4 Supplementary Appendix H: Sector Analysis – Urban Development in Baise line connects to Beihai, Qinzhou and Fanchenggang ports in the south for southwest China and ASEAN markets. All townships are connected by roads and there is access to every village. The construction of the expressway to Longbang will open up bilateral border trade opportunities with Vietnam to GMS markets but, the border port needs infrastructure development. Urban master plans aim to bring Baise to a new level of development in the aluminum industry and tourism and to bring full benefit from regional cooperation programs of the China-ASEAN Free Trade (CAFTA), PPRD, GBGEZ and bilateral agreements with Vietnam.

3. Economic Development

10. The takeoff of Baise’s economy started with the economic reform and open-up in the late 1970s. It particularly benefited from the launch of the WDS. Between 2002 and 2008, the GDP grew from CNY 14.4 billion to CNY 41.6 billion, translating into an annual growth rate of 15%. In 2008, the total industrial output value amounted to CNY 46.4 billion (an increase of 29.6% over 2007). The industrial value added totalled CNY 18.9 billion (an increase of 22.3% over 2007), including CNY 7.0 billion from non-ferrous metal metallurgy and related industries (an increase of 47.0% over 2007), CNY 2.1 billion from power and power supply industries (an increase of 14.4% over 2007) and CNY 1.1 billion from the agricultural and food processing industries (an increase of 43.8% over 2007).

11. The 11th FYP set the target of the GDP average annual growth rate for 2006-2010 at 15%. The urban master plan (2004-2020) set the target of the GDP average annual growth rate for 2011-2020 to 15%.

SA-H-5 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

12. In spite of the global economic recession, the GDP for the first half of 2009 grew by 12.3%, compared with the first half of 2008; this is 5.2 percentage points higher than the national average. The target for total fixed assets investments for the second half of 2009 is CNY 35.8 billion or an increase of 66.7% over the same period of 2008. Of the investments, the industrial sector will account for CNY 13.3 billion, transportation CNY 4.3 billion and urban construction CNY 5.8 billion. If the economic trend continues, Baise will be on its way to achieving the 11th FYP target of the 15% annual GDP growth rate.

13. Youjiang District is the seat to the Baise Municipal Government. Prior to 2005, the district administered four towns and eight townships. In June 2005, Baise Town was renamed Baicheng Street Committee; Nabi Township was renamed Longjing Street Committee; and six townships were merged into two towns and one township. Today, there are two street committees and seven towns and townships within the jurisdiction of Youjiang District. The major socioeconomic indicators of Youjiang District are as follows.

Major Socioeconomic Indicators Agricultural Output Year Population GDP Industrial Output Value Value (‘000) (CNY Million) (CNY Million) (CNY Million) 1990 290.3 496 372 199 1992 293.9 516 430 211 1992 298.9 618 557 230 1993 301.9 711 721 257 1994 304.4 827 858 295 1995 307.3 1,057 824 346 1996 311.0 1,300 834 442 1997 315.2 1,511 753 475 1998 319.7 1,257 1,142 550 1999 322.1 1,397 1,220 602 2000 324.8 2,500 1,698 841 2001 326.2 2,739 1,917 881 2002 327.0 2,986 1,921 925 2003 328.2 3,400 1,863 1,055 2004 333.2 4,044 2,331 1,257 2005 332.4 5,061 3,279 1,373

1990-1995 1.14% 16.34% 17.24% 17.95% Growth Rate 1995-2000 1.11% 18.79% 15.56% 19.44% 2000-2005 0.46% 15.15% 14.01% 10.30%

4. Industrial Strategy

14. In Baise, the economic development has been propelled largely by industrial growth. For example, the industrial sector contributed 40% of the GDP growth for the 10th FYP period (2000-2005) and the figure rose to 72.8% for 2008. Baise’s pillar industries include aluminum, pulp and paper, sugar, construction materials, petrochemical, pharmaceutical, power,

SA-H-6 Supplementary Appendix H: Sector Analysis – Urban Development in Baise machinery and agro-processing.

15. Baise’s industrial strategy (2006-2010) set the target for industrial growth at 31.6% by raising the industrial output value of CNY 20.3 billion in 2005 to CNY 80.0 billion by 2010 and by adjusting the ration of primary, secondary and tertiary industries from 27:44:29 in 2005 to 16:62:22. The growth will be achieved by further expanding the pillar industries led by aluminum, pulp and paper and agro-processing in four industrial zones.

16. For the aluminum industry, the target capacity by the end of 2010 is 5 million t/a of alumina, 1 million t/a of electrolytic aluminum, and 700,000 t/a of downstream aluminum processing, by the end of 2010. The total output value for the aluminum industry is expected to reach CNY 100 billion. For the pulp and paper industry, the production capacity by 2010 will amount to 500,000 t/a of paper, 600,000 t/a of pulp and 300,000 t/a of medium-density fiber board. For the agro-processing industry, the target output will reach 800,00 t/a of such agricultural products as sugar, starch, tea, dried bamboo shoots, processed fruits, fruit juices and spices.

17. The targets set in the 2006-2010 industrial strategy for the aluminum industry have been exceeded. The production capacity for alumina at the end of 2008 reached 5.0 million t/a (accounting for 1/4 of the national total), electrolytic aluminum 600,000 t/a and aluminum processing 300,000 t/a. With a number of large-scale new and expansion plants coming into production in 2009 and 2010, the production capacity is expected to reach 5.8 million t/a of alumina, 2.0 million t/a of electrolytic aluminum and 1.0 million t/a of aluminum processing. Together with direct supporting industries, the total output value of the aluminum industry is expected reach CNY 100 million.

Production Capacity (‘000 t/a) Output (‘000 t/a)

18. During the first half of 2009, the output of alumina amounted to 1.94 million tons or an increase of 184% over the first half of 2008; the output of electrolytic aluminum 171,300 tons or a decrease of 23.2%; and the output of aluminum products grew by 33.4%. Taken together, the total output value of the aluminum industry grew by 33.4%, and the value-added of the aluminum industry grew by 79.7%. The aluminum industry has thus become a major contributing factor to the economic recovery.

5. Population

Several scenarios were formulated and analyzed for the preparation of the urban master plan. The recommended option calls for two areas: i) main area, consisting of Baicheng Street Committee (nicknamed E’cheng), Longjing Street Committee (Nabi Township prior to 2005) and Shoushan subdistrict; and ii) industrial area, consisting of Liutang, Wutang and Sitang industrial zones (see map).

SA-H-7 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

19. A series of models were used to project urban populations for different planning periods. The models took into account natural growth, physical, rural-urban migration and urban expansion. The projections of urban populations for the different periods are as follows: 165,000 for 2005, 215,000 for 2010, 350,000 for 2015 and 500,000 for 2020. With the use of the PRC urban planning standard of 100 ~ 120 m2 per person, the corresponding built-up areas will be 17 km2 for 2005, 22 km2 for 2010, 35 km2 for 2015 and 50 km2 for 2020.

6. Urban Planning

20. Baise has a well-formulated urban master plan (2004-2020). The urban master plan was prepared by the renowned Guangzhou Academy of Urban Planning and Design, in partnership with the Construction and Planning Bureau, under the leadership and guidance of the relevant agencies of the Baise Municipal Government, particularly Development and Reform Commission, Economic and Trade Commission, Finance Bureau, Land Resources Bureau and Transportation Bureau.

21. According to the urban master plan, the total population for the whole municipality is projected to reach 3.84 million and an urbanization rate of 29.3% by 2010, and 4.1 million and 52% by 2020.

22. The urban master plan projects, by 2020, one large-sized city (Baise City) with a population of 500,000, three medium-sized cities with the populations ranging from 200,000 to 500,000, five small-sized cities with the populations ranging from 50,000 to 200,000, and 47 towns with populations below 50,000. By absorbing Sitang town, Baise City will become the administrative, economic and cultural centre for the municipality.

23. The cities will be developed around four axial clusters that radiate from Baise City. The axial urban clusters will be integrated with three economic zones. The Youjiang Valley Economic Zone runs from Baise City to the Pingguo County Seat, with middle-stream and downstream aluminum industries as the primary engines of economic growth, supported by specialty agriculture, tourism and transportation. The South Economic Zone covers Jingxi, Dabao and Napo counties, with Xinjing town (county seat of Jingxi) as its centre and with upstream aluminum industries as the primary engines of economic growth, supported by border trade (with Vietnam), tourism and agriculture. The North Economic Zone covers five counties with urban Longlin and Leye as its centers and with forestry, agriculture and

SA-H-8 Supplementary Appendix H: Sector Analysis – Urban Development in Baise hydropower as its primary engines of economic growth, supported by tourism.

24. Like in many cities across the PRC, industrial parks form the backbone of the city’s economy. In 2002, the Baise Industrial Park was established. In July 2006, it became one of the ten provincial-level industrial parks in Guangxi with an annual output target of CNY 10 billion. In the past eight years, the Baise Industrial Park has attracted 31 enterprises4 with more than 6,000 employees. In 2007, the industrial output value amounted CNY 5.1 billion or an increase of 88.7% over 2006; industrial value-added reached CNY 1.9 billion or an increase of 92.4%.

25. Beginning in the first year of the 11th FYP, about 100,000 surplus rural labour receives skills training for transfer to urban areas as part of the government’s deliberate urbanization strategy. Coupled with rapid industrial growth, the urban unemployment rate has been kept below 4%5.

Baise (City East) Industrial Park Yinhai Aluminum Industries Baise Hydropower Station

4 The primary function of the Baise Industrial Park is (downstream) processing / manufacturing of the mineral industry, such as aluminum, copper, magnesium, titanium and other rare metals. Well-known enterprises include: Yinhai (Silver Ocean) Aluminum Industries Co., Rongda Copper Industries Co., Guangda Magnesium Industries Co. and China Bluestar Titanium Co. 5 “Fifty years of Baise”, Baise Broadcasting and TV Network, www.gxbstv.com, 17 November 2008.

SA-H-9 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

7. Transportation Networks

26. The central government has invested over CNY 10 billion in the past few years to build Baise into one of the four transportation hubs for southwestern China as a gateway to ASEAN. Statistics show a daily inter-city traffic of 15,000 vehicles 6 . The intra-city transportation networks in Baise entail a web of railways, expressways, highways, airports and inland waterways. The Nanning-Kunming railway, now undergoing upgrading, passes through Baise. Nanning-Kunming expressway7 is another artery linking Baise to the two provincial capitals. Baotou (Inner Mongolia Autonomous Region)-Youyiguang (Friendship Gate with Vietnam) expressway, Guiyang-Longbang-Vietnam border expressway and Shantou (Guangdong Province)-Kunming expressway are also under construction. A few more are planned. The artery expressways are connected by highways linking Baise to the counties and towns in the municipality. Baise airport has been upgraded and now has regular flights to Guangzhou, Guilin and Kunming. The navigational capacity of the Youjiang River will be upgraded to 1,000 tons, serving as an extension to the Nanning-Kunming waterway.

27. With a 360-km borderline with Vietnam, Baise is home to one national first-class trading port (Longbang), two national second-class trading ports (Pingmeng and Yueyu) and six border trading posts. They form an important entry point for import and export between China and ASEAN. The Longbang port alone had a trade volume of more than CNY 180 million in 2007.

28. The urban master plan also contains a comprehensive urban transport plan for the Youjiang District. The goal is to develop an integrated, advanced, efficient, low-pollution, multi-modal urban transport system. The guiding principles entail: i) giving priority consideration to artery roads; ii) balancing employment and residential locations; iii) promoting the development of transportation enterprises and related service industries; iv) promoting urban public transport; v) providing space for cyclists and pedestrians; and vi) advancing development of road networks and related infrastructure facilities for planned large residential and industrial areas.

Pedestrian-Cyclist-Friendly Traffic Safety (City South) Landscaping (Railway Station Green Belt (Nabi Blvd) Design (Main Blvd) Front Road)

Drainage (Chengbei 1st Rd Flood Control Culvert Landscaping (Chengbei 2nd Rd Traffic Sign (Xinxing Rd Upgrading) (Chengbei 2nd Rd Upgrading) Upgrading) Upgrading)

6 For the year of 2007, Baise Transportation Bureau. 7 Nanning-Baise section was financed by ADB loan.

SA-H-10 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

29. The planning targets for urban road networks are set as follows: by 2020, urban expressways will reach a density of 0.4 km/km2, urban artery roads 1.0 km/km2, primary roads 3.0 km/km2, secondary roads 1.4 km/km2, and branch roads 4.0 km/km2.

30. In accordance with the distributional patterns of “grape clusters”, the road networks will be structured around the framework of express ring roads and urban primary roads. “Circular + radial” road networks will be adopted for the urban center, and grid road networks will be adopted for other areas. The urban center will be connected to the industrial zones in the east by an urban expressway and three artery roads. The plan for inter- and intra-city road networks can be found in the Baise transport plan map.

31. The Baise Municipal Government is also taking action on institutional reform to strengthen urban public transport management. In June 2009, the municipal institutional committee reallocated to the municipal transport authority from the urban infrastructure management authority the overall responsibility for urban passenger transport (buses and taxis) management. The urban public transport management section has been newly set up in the road transport management division of the transport bureau. The municipal public security bureau has been assigned the responsibility for the planning, construction and maintenance of urban road signs. It will also participate in the planning and implementation of urban road networks.

32. The Baise Municipal Government is also paying attention to integrated transport management. In May 2008, the BMG invited a nationally renowned transport management expert from Shanghai Tongji University to advise the BMG on the integrated transport management and traffic safety. There is a transportation professional training center located in Baise City which can be used as a focal point for capacity building on integrated transport management under the project.

8. Human Development

33. In the course of promoting economic growth, the Baise Municipal Government has also placed great emphasis on human-centered development. Baise was known to be a poverty region, with 10 out of 12 counties being designated as the national poverty counties and two as provincial poverty counties. Between 2000 and 2007, a total of CNY 2 billion was invested in poverty reduction8. At the end of 2001, Baise had a total rural poverty population of 1.39 million; by the end of 2008, this figure was reduced to 0.71 million. Poverty incidence rate declined from 10% in 2000 to 6% by 2007. The poverty reduction effort has been supplemented by a series of development programs, including, among others: i) rural water supply; ii) household-based biogas; iii) “villages accessibility” – all villages are connected by paved roads; and iv) “village connectivity” – all villages are connected to power supply, telephone, radio and television. More than 85.9% of the rural population is covered by the cooperative health program. One hundred percent (100%) of the urban population is covered by the minimum living guarantee (MLG) program. The nine-year education in Baise has met the national standards. Baise is home to five colleges and 29 post-secondary professional schools9. The construction of twelve sewage treatment plants and eight landfills began in 2009; when completed in two years, they will bring the rate of centralized sewage treatment to above 60% and the rate municipal solid waste sanitary disposal to above 80%.

8 The funding consisted of CNY 780 million from government budget, CNY 820 million from “food for work” program, CNY 240 million from charity organizations and CNY 160 million from subsidized loans (including microcredit). Source: “Ten years of poverty reduction in Baise”, Baise News Network, www.gxnews.com.cn, 17 September 2009. 9 “Celebrating 50 years of the founding of the Guangxi Zhuang Autonomous Region: Baise”, State Ethnic Affairs Committee, www.seac.gov.cn, 4 December 2008.

SA-H-11 Supplementary Appendix H: Sector Analysis – Urban Development in Baise

Baise Youjiang Ethnic Medical College Baise People’s Hospital

Satellite Dish for Rural Ethnic Family Improving Rural Accessibility Improving Rural Water Supply

SA-H-12 Supplementary Appendix I:

Technical Analysis of Engineering Feasibilities Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

Supplementary Appendix I:

Technical Analysis of Engineering Feasibility Studies

1. Fangchenggang Road Network and Related Municipal Infrastructures

1.1 Urban Master Plan Perspective

1. Fangchenggang is 153 km away from Nanning Municipality, and it has 582 km of coastline and 212 km of border with Vietnam. Fangchenggang is one of the 14 major costal port hubs in China. It has established navigation and trade with more than 70 countries and 220 ports. Fangchenggang City is incorporated into highway network through Nanning to Fangchenggang Expressway, a north-south arterial road, and Fangchengguang-Beihai Highway, an east-west arterial road.

2. In 2003, Fangchenggang Municipal Government formulated the urban master plan (2003 -2020). With the approval by the State Council of the Guangxi Beibu Gulf Economic Zone Development Plan in 2008, the regional development of south-west GZAR has been designated as being of national strategic importance. Fangchenggang has been experiencing a great leap forward in development, since large-scale steel plants and energy bases have started construction and operation. It appears that the social and economic development of Fangchenggang is largely beyond what was envisaged in the master plan. There is a need to upgrade the master plan. In 2008, Guangxi City and Township Planning and Design Institute was commissioned to upgrade the master plan under the leadership and guidance of Fangchenggang Municipal Government.

3. In accordance with the new Urban Master Plan and complemented by Beibu Gulf Economic Zone Development Plan, Fangchenggang as a gateway to ASEAN, will be developed into an iron and steel, trade, resource processing and manufacturing base, as well as a seaside tourist destination. It is also the important cargo transfer base for iron ore, coal, cement and grain, carrying major loads between southwest China and Southeast Asia. However, owing to the relatively short history of the city, Fangchenggang still only has low status as a small border city. The urban infrastructure services are inadequate to meet the requirements of their potential strategic roles in the sub-regional and sub-national programs.

1.2 Transportation Master Plan Perspective

4. Fangchenggang’s Eleventh Five Year Plan (FYP) 2006-2010 set the target of developing greater port industries, supported by a comprehensive transport system. During the Eleventh FYP period, the total length of classified roads in Fangchenggang would reach 2,000 km, of which high class roads would be a total of 200 km, expressway total of 87 km. The road network density would be increased from 24 km/square km to 38 km/square km. It is also intended to further enhance transport connectivity of counties by building extensive rural roads. Total investment in communication infrastructure during 11th FYP will reach CNY 13 billion, of which highway investment will be CNY 5.5 billion; port infrastructure investment will be CNY 7.5 billion.

5. As part of the 11th FYP strategy, construction of transport infrastructure will be expedited to support the development of Qisha Industrial Park during this period. Qisha Industrial Park is planned to be developed into an important large-scale steel and energy base. Gongche Industrial Park, neighboring Qisha Industrial Park, will be part of the development. Fangcheng to Shangsi Class I Road and Dongwan Bridge etc. are listed in the Eleventh FYP as the important transport link in this area.

SA-I-3 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

6. In addition, Fangchenggang to Dongxing (a county level city in the west) Expressway will be completed in the coming years. In the near term, with the construction of Dongwan Bridge crossing Dongwan Bay, the seaport area will be better connected with the industrial area.

1.3 Description of Project Setting

7. Fangchengguang Prefecture has Fangcheng District, Gangkou (Port) District, Dongxing City (county level) and Shangsi County under its jurisdiction. Proposed project roads are located in Gongche Township in Gangkou District where the prefectural government seat is. The Gongche area is bounded by Shaqi (Shatan to Qisha) Class I road to the north and east. Through the highway, Gongche further connects with outer highways to the cities of Nanning, Qinzhou, Beihai etc. The Project location and the layout of proposed roads can be found in the maps appendix.

8. Gongche Industrial Park: Covering a land area of 73.5 km2, the Gongche Industrial Park is located on the southern coast in Gongche Township of Fangchenggang City. Gongche Industrial Park is the new developing area proposed for port-related and processing industries. It is expected to accommodate 300 medium and small sized enterprises. Total annual revenue is estimated at CNY 10 billion and would create 60,000 jobs.

9. At present, a large scale iron and steel plant and an ethanol factory have been established in Gongche Industrial Park. To the south, Gongche Industrial Park neighbors Qisha seaport and Industrial Zone. A steel plant with a 10 million output capacity is located in Qisha, it will reach its full capacity of 30 million tons in the future. The construction and operation of these factories will bring upstream and downstream industries into the industrial park. The lack of infrastructure such as roads, drainage system and lighting has limited industrial development potential for the Gongche Area.

1.4 Road Component Description and Analysis

10. The FSR has been based on key planning documents of Fangchenggang Urban Master Plan (2006-2020), Fangchenggang Social and Economic Development Eleventh Five Year Plan, Fangchenggang Port Industrial Park Detailed Planning etc. The planning and design standards apply to the Gongche road network are presented in Table 1.1. It can be concluded that the proposed road network has met the planning and design criteria set forth for the industrial area.

Table 1.1: Proposed Roads in Gongche Industrial Zone Paved no. of Length Width of Road MV Design No. Road (km) Design Standard ROW (m) width Lane Speed 1 I road 6.34 Trunk 50 34 6 50 2 II road 1.73 Secondary 50 27 4 40 3 III road 1.45 Secondary/branch 15-30 9-20 4~2 30 4 IV road 2.60 Secondary 34 25 4 40 5 V road 1.08 Secondary 40 20 4 40 6 VI road 4.55 Secondary 40 24 4 40 7 Yuzhouping 9.88 Secondary/branch 15-30 4~2 20

Total 27.63

11. I Road, II Road and VI Road are the north-south roads in the road network. These roads would start from the north, connecting to the existing Qisha Class I Road, an outer arterial road. Qisha Road connects to Qisha Port in the south, and links to the highways leading to north to Nanning, and north then east direction to Qinzhou and Beihai.

SA-I-4 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

12. I Road: At the south end of the I Road, the road would connect to Shugang Road through an interchange. Shugang Road is a proposed trunk road, running parallel to an existing low class road. It would serve mainly for freight transport linking to the sea port directly further south. It is noted that Shugang Road south section are currently under construction, the interchange connecting with the I Road is under preparation, and the north section construction is on schedule in the near future.

13. III, IV and V Road are the west-east secondary/branch roads in the road network. III Roads are two parallel roads that would intersect II Road. IV Road would intersect I Road and VI Road, V Road would intersect I Road and II Road.

14. Yuzhouping Branch Roads Network: A number of branch roads are proposed for improving connectivity of this area. Located at the south of the Gongche industrial Park, Yuzhouping is a residential area serving the industries. There are residents living in the area at present, and more residents would move there with the development of the industrial park.

15. Anfujiang Bridge: A 240 m bridge was proposed to cross Anfujiang River as part of I Road at the south section. Three alternatives, simple-supported continuous-beam bridge, arch bridge and cable stayed bridge, were compared. The cable stayed bridge is recommended in the FSR for the reasons that it provides better visual appearance and has the advantage of promoting the city’s image. The cost estimates appear to be high and a review is recommended during the preliminary phase. In addition, the Anfujiang Bridge is proposed as a 4 MV lanes bridge, while the approach road is 6 MV lanes. It is critical to build all the facilities with consistent technical standard and cross section. It is understood that this will also be taken into account at preliminary design stage.

16. Lane Configuration: The figures below are the typical cross sections for the proposed roads. These configurations are generally considered adequate. It is recommended to establish physical separation by a median strip to separate MV of dual ways for II road and IV Road. The separation can be in a form of green belt or steel guardrail. Green belt is the preferred option for it provides better visual appearance. Steel guardrails can be implemented where right of way width is constrained to accommodate needs for all road users.

I Road Cross Section Profile

SA-I-5 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

II Road Cross Section Profile

IV Road Cross Section Profile

V and VI Roads Cross Section Profile

17. Road Pavement: A comparison has been made of cement concrete and asphalt concrete surface pavement. Cement concrete surface pavement is recommended in consideration of longer design life, better performance when carrying heavy vehicle loads. This is considered suitable for the roads featured in the industrial park.

SA-I-6 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

2. Fangchenggang Coastal Protection and Upgrading

2.1 Scope of the Component

18. The proposed coastal protection and upgrading component is located in the Gangkou (Port) District. It starts from the Hongshulin (Mangrove) Hotel in Yuzhouping, and ends in the Gongche industrial area.

19. The component includes two primary activities: i) coastal dykes with a total length of 9.15 km; and ii) a 2.5-ha mangrove square. The section from Yuzhouping Hotel to Anbujiang Bridge with a length of 3.87 km will be dyke only; the section from Anbujiang to Gongche with a length of 5.28 km will be combined dyke and road. Eight drainage sluices, together with a supervision station, will be built along the two sections. The 2.5-ha mangrove square is situated in front of the Gangkou (Port) District Government office building.

2.2 Flood Control Function

A) Key Technical Features

20. Key urban and suburban areas of Fangchenggang City are subject to periodic inundation due to overbank flows from flood swollen rivers and sea tide intrusion. Additionally, the construction of dikes also causes the unsmooth drainage of accumulated water in some places near the dike. The prepared designs have been based on key technical design standards and guidelines currently in force in the People’s Republic of China.

B) Special Considerations for Proposed Works

21. The principal focus has been on how to provide protection to the flood prone areas of Fangchenggang City from both regular river floods and tide intrusion, especially when the rivers (Shatanjiang River, Fangchengjiang River) are at a high stage (flood flows). Some special problems with the component are the water lever rising induced by tide intrusion which makes the flood control situation much more complicated compared with usual inland river flows. Fortunately, the component area is located in a small catchments area which is little connection with other river basin. Any flood protection measure taken by local administrative agency can be implemented solely. Therefore, the effective flood management requires for development and operation of a fully effective integrated flood management system that connects all the concerned sectors in Fangchenggang City.

22. The following key flood protection measures principally aim to keep the flood inundation far away from developed urban and suburban areas, and to drain the accumulated water in urban area as quickly and effectively as possible. The primary means for fulfilling these needs are to construct dikes along the low lying river banks and coastline and to construct necessary drainage evacuation capacity – sluice gates or pumping stations at appropriate pints. Other means include the dredging of some river reaches to increase flow and consequently compensate the lost flow and lower the risen water level due to flood passing reaches restricted by dikes.

C) Alternatives

23. The City is also limited in choosing between alternatives because of the existing development, and the potentially high costs that arise in relation to land acquisition and resettlement of the directly affected peoples and businesses. Within the integrated river basin planning for flood management, the Fangchenggang Water Resources bureau is responsible for all decisions that directly affect the management of the water resources and disaster reduction. Consequently, they must consider the likely broader impacts of any development

SA-I-7 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities activities at one location of the urban area against the possible effect it may have at other locations, whether upstream or downstream, left bank (LB) or right bank (RB) of a river system.

24. The component is principally made up of object structural works ---- dikes, drainage sluices, and drainage evacuation facilities (to drain the local discharged runoff in the designed standard drainage period). All the structure works located in a low land area with some parts are even lower than the sea level. That a case will make the drainage system is not so effective, especially in flood season with high water level in river channel.

D) Hydrological and Hydraulic Analysis

25. Fangchenggang City is located at the lower reaches of Fangchengjiang River and Shatanjiang River, facing the South Sea in south with coastline 584 km. The protected areas are surrounded by eroded low mountains and hills, the central part is the wide, low and flat covered corroded depression formed by erosion of Fangchengjiang River, and Shatanjiang River, with the elevation of 0~200m. On the project position, there are the Grade I terraces with different deposition layers, mainly dividing as filled earth layer, strong weathered sandstone layer, middle weathered sandstone layer. The floods in Fangchengjiang River and Shatanjiang River are principally caused by storms and tide intrusion, which regularly rise and fall and last for short time.

26. Fangchenggang City urban area belongs to the sub-tropic monsoon climate area with mild air temperature and sufficient rainfall with rainfalls centralized in Spring and Summer and dry in Autumn and Winter. There two meteorological stations, Fangcheng Station and Qianzhou Station, near the project position but the Fangcheng station starts its observation lately from 1982. So this designing mainly depends on the data of Qianzhou which has a data series from 1952 to present. According to statistical analysis of the data of Fangcheng Meteorology Station, from 1961 to 1990, multi-year average rainfall is 2,135.1 mm, the annual average rainfall from July to August accounts for 38.7%; annual average evaporation is 1,708.2 mm, multi-year average relative humidity is 81%, annual average temperature of many years is 22.00C, Max and Min temperature of many years is 37.50C and –1.80C respectively.

27. Tidal characteristics are the key factor for the structure designing. The tide properties of Fangchenggang City originate from Pacific Ocean and transfers to Beihai Bay via South Sea. The smallest Tide difference occurs in March and the largest in December. Wave height of the tide depends on the composition of wind wave and surge, especially wind wave playing an important role. According to the field observation data stat. of rainstorm in Fangchenggang Station, the rainstorms in Fangchenggang City happen usually in April ~ October, especially in April~ August, the probability of annual max 24-hr rainfall is 85.2%, and that of maximum daily storm is 84.3%. Moreover, the maximum daily rainfall reached 295.3 mm (on August 13, 1999).

28. The rainfall data of Qianzhou Meteorological station are presented in Table 2.1, and the tide elevation data of the four concerned stations are presented in Table 2.2.

Table 2.1: Annual Rainfall Data Series Annual Rainfalls Annual Max. 24h Rainfalls Recorded by (Year) (Year) Qianzhou Meteorological station 1961 – 1990 1961 – 1990

SA-I-8 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

Table 2.2: Tide Elevation Data Series Tide Station Annual Max. Flow of Flood Peak (Year) Beihai Tide Station 1949 – 1998 Longmen Station 1966-1987 Fangcheng Station 1984-1986 Bailong Station 1969-1997

29. Although the Fangcheng Station is the nearest one from the project position but the data series is too short to be used for engineering designing. So project designing mainly depends on the data of Baihai, Longmen and Bailong. Based on the data, a statistical analysis has been made to get the design tide elevation as shown in Table 2.3. The figures of Yuzhouping in Table 2-3 refer directly to the data of Baihai Station.

Table 2.3: Design Tide Elevation (m) Station Name 1 in 50 Year 1 in 20 Year 1 in 10 Year 1 in 5 Year 1 in 2 Year Baihai station 3.82 3.63 3.48 3.32 3.09 Longmen station 3.83 3.63 3.48 3.32 3.08 Bailong Station 3.66 3.51 3.39 3.25 3.01 Yuzhouping Station 3.83 3.63 3.48 3.32 3.08

D) Geology and Geotechnical Analysis

30. Topography: Fangchenggang City is located at the lower reaches of Fangchengjiang River and Shatanjiang River. The two rivers flow through the urban area and directly get into Beihai Sea. The project area is surrounded by the denudated low hills and coastline of Beihai Sea. The urban area is divided by the 2 rivers mentioned above into three protection circles.

31. Seismic Intensity: According to Seismic Zoning Map of China with Earthquake Parameters, the seismic intensity in the project area is classified as below VI degree.

32. Geological Survey: According to the FSR offered by DHLC, a geological drilling had been carried and some samples had been analyzed. The geological survey was undertaken along the project direction. The total quantities of the geological survey are shown in Table 2.4.

Table 2.4: Geological Survey Quantities Field Survey Labouratory Test Item Survey content Unit Quantity Item Survey content Unit Quantity 1 Drilling hole number point 180 1 Property test group 24 2 Total drilling depth m 1080 2 Pressure test group 24 3 Measuring point test point 180 3 Stress test group 24 4 Standard Penetration test group 61 4 Water quality test sample 2 5 Dynamic survey m 9 5 Pressure resist test group 8 6 Original earth sample group 24 6 Particle size group 9 analysis 7 Disturbed earth sample group 9 7 Test reports piece 10 8 Rock sample group 8

F) Feasibility Design

33. Design Standard: Based on the Guangxi Fangchenggang City Urban Flood Control Project Planning Report (2002) and the conclusions reached from a review of this report, the development design year is confirmed as 2015, when the total population for the City is projected to be 250,000. According to the Flood Control Standard (GB50201-94) and Design Standard of the Flood Control Works in City, the flood protection standard in this design is against a 1 in 50 year return frequency flood event, and the major structures (dikes and sluice gates) will comply with the Chinese standard classification Grade 3. The local drainage design standard is for the evacuation of runoff from a 1 in 10-year, 24-hour storm in 24 hours.

SA-I-9 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

2.2 Mangrove Protection

A) Mangrove Forests in Guangxi

34. The mangrove forests in Guangxi are situated in the middle of the Hainan-Guangdong-Guangxi-Beibu Gulf mangrove forest zone and the transition from the tropical to the subtropical climatic zones. They represent the northern tropical mangrove forests in the PRC. The coastal lines and associated mudflats in Guangxi are the main mangrove habitats in the PRC, with the mangroves in the Shankouzhen mangrove nature reserve in Hepu County and the Beilun Estuary mangrove nature reserve in Fangchenggang counting for 47% of the national total. Having the largest track and best grown mangroves in all of PRC, the Beilun Estuary nature reserve has been designated as the first international mangrove protection demonstration area by the Global Environmental Facility (GEF). The coastlines from east end of the Pearl Bay to the west end of the Beilun Estuary unique and rare bay-type mangrove forests, including these in Jiaodong, Shijiao and Malanji that live below the sea level throughout the year (nicknamed “undersea forests”) with great scientific value.

35. Mangroves are buffer to coastal erosion, storm surges, tidal waves and tsunamis. Since the disastrous December 26 tsunami in 2004 in the Indian Ocean, China has strengthened protection of seashore mangrove forests. Six national nature reserves have been established to protect mangrove forests across the country.

Location of Mangrove Forests and Component Alignment

B) Mangrove Forests in Fangchenggang

36. Fangchenggang City occupies a central place in the Greater Mekong Suregion (GMS), China-ASEAN Free Trade Area (CAFTA) and Pan-Beibu Gulf Economic Cooperation Area (PBGECA). According to the urban master plan and the marine functional zoning plan, the Dongwan (East Bay) within the territory of Fangchenggang City has been designated as coastal protection area.

37. Fangchenggang Municipality has a total coastline of 584 km along which 23,295 mu (1,553 ha) of mangroves can be found today. These mangrove forests are distributed mainly in four areas, the Beilun Estuary, Dongwan (East Bay), Xiwan (West Bay) and Maoling-Hongsha. Situated near the border with Vietnam, the Beilun Estuary mangrove forests with an area of 1,131 ha were placed under state protection under the name of Guangxi Beilun Estuary National Nature Reserve (GBENNR), and were admitted on 2 February 2008 to the List of Wetlands of International Importance, or Ramsar site1. The GBENNR is the largest mangrove forest habitat in the PRC.

1 Ramsar Convention on Wetlands of International Significance.

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38. The mangrove forests in Maoling-Hongsha, Xiwan and Dongwan cover a respective area of 61 ha, 151 ha and 210 ha. Of the mangrove forests in Dongwan, 95% is distributed in the Yuzhouping coast.

39. Historically, approximately 10,000 mu (670 ha) of primary mangrove forests could be found in the Dongwan (East Bay) and the neighbouring Xiwan (West Bay). The coastal line of Yuzhouping in the Dongwan Bay alone was home to some 6,000 mu of mangroves. Due to coastal reclamation for port and industrial expansion in recent years, only slightly more than half (3,154 mu or 210 ha) still remain today.

C) Regulatory Context

40. Although there are no laws and regulations as yet in the PRC specifically on the protection of mangrove forests, a number of laws and regulations have provisions on coastal and mangrove protection. Article 26 of the Law on the Protection of the Marine Environment requires that effective measures should be taken to safeguard the protected wild flora and fauna and their habitats. Article 76 of the law further stipulates that any activity that causes damage to such marine ecosystems as coral reefs and mangroves, marine resources and protected marine areas shall be ordered to ratify with effective mitigation measures within a specified period of time; those responsible will be fined and prosecuted.

41. As early as 1994, the GZAR proclaimed a management guideline to protect the mangrove ecosystem in the Beilun Estuary 2 . In 1998, the GZAR released another management guideline on the protection of the mangrove ecosystem nature reserve in Shankou, which was amended in 2004 through a government ordinance3. In 2004, the Forest Bureau commissioned a survey of mangrove forest resources and the formulation of a series of action plans for protecting marine wetlands and marine resources, including the mangrove forests4. The release of the Wetland Protection Plan in 2005 signified another milestone in the GZAR effort to preserve the wetland ecosystems. A provincial ordinance on wetland protection is under active preparation and is expected to be released soon, which will further strengthen the regulatory framework for the protection of mangrove forest ecosystems in the autonomous region.

D) Responses of Fangchenggang Municipal Government

42. In October 2008, the Fangchenggang Government initiated the mangrove forest protection plan of action, as part of the Guangxi Beibu Gulf economic zone development plan. The plan aims to establish a “mangrove forest ecological protection demonstration program” that encourages active public participation.

43. The GEF international demonstration for mangrove protection has received support from the Ministry of Finance, China Oceans Administration, and the Governments of GZAR and Fangchenggang. The Fangchenggang Municipal Government provided 30 mu of land free of charge for the construction of a visitor center. In 1999, The FMG revised its urban master plan to prevent more than 1,000 mu of mangroves from industrial uses. Since 2004, the FMG has also strengthened law enforcement by dismantling illegal fish cages, nets and coffer weirs on 1,860 ha of mangrove forests. In January 2008, the FMG made further

2 Government of Guangxi Zhuang Autonomous Region, 1994, Guideline on the Management of the Beilun Estuary Marine Nature Reserve, Nanning. 3 Government of Guangxi Autonomous Region, 1998, Guideline on the Management of the Shankou Mangrove Ecosystem Nature Reserve, Nanning, amended in 2004. 4 For example, Mangrove Forest Protection and Development Plan, Coastal Wetlands Protection and Rehabilitation Plan, Water Resource Protection Plan, Marine Functional Zoning Plan, and Aquaculture Plan.

SA-I-11 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities revisions to its urban master plan for the establishment of a 5,000-mu mangrove marine ecological park. In May 2008, the Civil Affairs Bureau of the FCG approved the establishment of a number of civil society organizations and volunteer organizations devoted to mangrove protection. Since then, various environmental grassroots groups, college environmental associations and green unions have organized many public awareness building activities.

E) Rationale

44. In the past few decades, Fangchenggang has experienced rapid economic growth, industrialization and urbanization. The demand for land to fuel port expansion has been especially strong. The Yuzhouping coastal lines, located in the Dongwan Bay at the city center, were particularly affected. The total area of the primary mangrove forests in Yuzhouping has declined from the more than 6,000 mu to 3,153 mu. Meanwhile, pollution from land-based sources served to reduce the biodiversity in the mangrove ecosystems.

45. In spite of the effort of the FCG, the mangrove forests in Fangchenggang are under increasing pressures from human activities: i) direct destruction from urban, port and industrial expansions; ii) aquaculture; iii) sewage and industrial wastewater; and iv) non-point sources (urban and agricultural runoff). The mangrove forests have been reduced as a result of port expansion and industrial development in the port district, fishery and aquaculture. Moreover, they are destroyed and degraded by shoreline collapses, wastes brought in with surface runoff, and the direct dumping of solid and liquid wastes onto the shorelines which eventually end up in the mangrove forests.

46. At the same time, Guangxi has witnessed a gradual increase in sea level rise, retreat of the coastal lines and marine environmental disasters. This results partly from global climate change, and partly from the lack of effective coastal protection structures. The existing coastal dykes, which were built decades ago without proper maintenance, can no

SA-I-12 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities longer protect the coastal areas from storm surges and tidal waves. On the other hand, they have become detrimental to the growth of mangroves and a contributing factor to the degradation of the coastal mangrove forests. According to field surveys, the coastal lines in the Dongwan Bay are presently unprotected. Tidal erosion has resulted in steep slopes, leading to shoreline subsidence and earth collapse that damages mangrove habitats and ecosystems, and people’s lives and properties, especially in times of tropical rainstorms and hurricanes.

47. The implementation of the coastal protection and upgrading component will: i) reinforce the ability of the coastal dykes; ii) reduce the risk of coastal flooding; iii) reduce coastal erosion and retreat; iv) protect the lives and properties along the coast; v) protect the mangrove habitat and ecosystems in the Dongwan Bay; vi) provide a buffer zone to allow for future climate change; vii) provide a platform for public awareness about importance of mangrove ecosystems and mangrove protection; and viii) provide the residents of Fangchenggang and tourists with a coastal park for sightseeing and recreation. A another important contribution of the component is the deterrence to further industrial and urban occupation of the mangrove habitat by making the dyke-protected area as a “coastal protection control zone” where development activities will be prohibited.

F) Design Features

48. The selection of the dykes has taken into consideration several factors, including, first and foremost, longest possible buffer from the mangroves, as well as sea level rise and the need for future urban expansion. Dyke construction will not occupy any mangrove forests permanently or temporarily. The cross-sectional design of the dykes has adopted the integrated style of biological bank protection inside the dyke and green space outside the dyke. The biological protection measures for the inner bank include grass-brick grids, grasses on bagged earth and concrete slabs with grass chambers. Whenever possibly, the slope of the inner bank will be reduced to buffer the tidal waves and allow for maximum scenic views. Semi-mangrove species, Pongamia pinnata, Hibiscus tiliaceus, T. populnea (L.) Soland, Cerbera manghas and Heritiera littoralis, will be selected for landscaping in the inner green space.

49. The outer green space will be planted with local windbreak species, such as Casuarina equisetifolia, Cocos nucifera, and Smanea saman, and semi-mangrove species such as Pongamia pinnata, Hibiscus tiliaceus, T. populnea (L.) Soland, Cerbera manghas and Heritiera littoralis.

50. The design of the mangrove square and the observation points blends well with nature. In addition to being functional and attractive, it is also in line with the concept of awareness and knowledge through close contact.

51. The EIA report has also proposed measures to minimize any adverse impacts during the construction phase, such as use of weirs to contain wastewater, settlement ponds to treat sewage from construction activities and camps, and timely collection and safe disposal of solid wastes. Measures to properly maintain the dykes, mangrove square and associated structures have also been recommended. A program to monitor the health of the mangrove habitat and ecosystem has also been proposed.

G) Special Design Feature

52. A major feature of the component design that is worth highlighting is the incorporation of a mangrove public awareness intervention that consists of a public education square and a series of mangrove observation points. An information booth will be established at the mangrove square. Information posts, signs and placards will be erected at the

SA-I-13 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities mangrove square and observation points. Volunteers will be posted in the square and observation points on the weekends. Day camps will be organized for primary and secondary school students.

3. Chongzuo Road Network and Related Municipal Infrastructures

3.1 Urban Master Plan Perspective

53. Commissioned by Chongzuo Municipal Government, Shanghai Tongji City Planning and Design Institute conducted Chongzuo Urban Master Plan (2002-2020) in 2004. Based on the Master Plan, Chongzuo Chengnan (south city) District Detailed Planning and Chengbei (north city) Industrial area Planning were carried out in 2006. Chongzuo Chengbei Industrial Area Road and Utility System Plan were also completed in 2007. These plans are the basis for the project proposal and the FSR.

54. Chongzuo is 114 km away from Nanning Municipality. It is the gateway to Vietnam along the southwest corridor. Chongzuo prefecture has Jiangzhou District and five counties under its jurisdiction. Project roads are located in outlying Jiangzhou District in the north and south. The geography of Chongzuo is characterized by river and hills. Zuojiang River meanders through the urban area from southwest to northeast. Hills range along the river. Land use for future development is constrained by these factors. Currently, urbanization and industrialization have being expedited in West China including Chongzuo as southwest border city in GZAR. Owing to geographical constraints, the old urban area, which is densely developed along the Zuojiang River, cannot meet city expansion needs. New development has shifted to the north and south of the outlying urban areas.

3.2 Transportation Master Plan Perspective

55. Chongzuo is included in the regional highway network through Nanning to Youyiguan Expressway, located south of Chongzuo city; Napo to Fangchenggang Class II Highway is the existing provincial road leading west to Napo within GZAR. In addition, G322 national highway lies further south of Nanning-Youyi Expressway and is the alternative route for the expressway. Chongzuo to Qinzhou Expressway is under preparation and will be built in the next few years.

56. According to the Chongzuo 11th Five Year Plan, the key transport strategies are to build an integrated transport system to support economic growth and urban development. By the year 2010, the total length of expressway will reach 207.6 km; class II highway 1104.8 km; class III highway 1,483 km. The rural road network will be further strengthened, 35% villages will have hard-surfaced roads. Moreover, 259 rural roads will be built with a total length of 2,421 km.

57. From a railway perspective, Chongzuo is situated on the trunk line of the Moscow-Beijing-Hanoi Railway passing through Pingxiang, a border town linking the two largest markets of China and ASEAN. During 11th FYP period, Fangchenggang-Chongzuo- Shuikou (a border city) Railway line has been under preparation and listed as a top priority. From a waterway perspective, Chongzuo is rich in water resources. During 11th FYP, integrated navigation and hydro-power development will be strengthened. Zuojiang River navigation route will be renovated. Zuojiang hydro-power station will be built. The first phase of Chongzuo Xinhuan passenger/cargo Port will be built.

3.3 Description of Project Setting

58. As noted in the Master Plan, Chengnan (City South) and Chengbei (City North) areas will be the key focus for the city’s urban development. Chengnan District, with a total area of

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12.85 square km, is located 3.5 km southeast of the old urban center. It is planned for a population of 100,000 by 2020. The area is earmarked for a new government administrative center, and also residential, financial and education development. The rapid urban expansion creates needs for a better road network. This area has been under rapid infrastructure construction since 2006. Most of the roads in the network in this area already exist or are under construction. The proposed roads of Liancheng 9th Road, Chengnan Road South Section and Shijinglin Road are the important links in forming the road network. The Project roads and their relationship to the urban master plan can be found in the maps appendix.

59. Chengbei Industrial Area is located around 7 km north of the existing urban center. As a new industrial area, the area will accommodate industries such as mineral and sugar and starch processing. The proposed Beiwei 2nd road and Zhongyi Road are situated in this area and they will form the backbone for the road network in Chengbei District. Currently two roads- Qingbei road and Zhongyang road are existing roads in this area. The industrial area will be the new economic growth engine for Chongzuo.

3.4 Road Component Description and Analysis

60. The FSR has been based on the key planning documents of Chongzuo Urban Master Plan (2002-2020), Chongzuo Chengnan District detailed Plan and Chongzuo Chengbei Industrial Area Road and Utility Comprehensive Planning. These documents have been reviewed and considered adequate. A summary of the design standards and parameters for the proposed roads is presented below. They are generally in line with national standards and specifications.

Table 3.1: Proposed Roads in Chengnan and Chengbei Areas Width of Paved Length Design ROW Road No. of Design No. Road (km) Standards (m) Width (m) MV Lane Speed 1 Chengnan 9th Rd 1.58 Secondary 32 23.5 4 40 2 Beiwei 2nd Rd 4.21 Trunk 30 20 4 50 3 Shijinglin Rd Western 3.11 Trunk 15 12.5 2 30 Extension 4 Liancheng Rd South 2.81 Secondary 32 23.5 4 40 Section 5 Zhongyi Road 1.81 Secondary 30 21.5 4 40

Total 13.52

61. Shijinglin Road Western Extension is an extension of Shijinglin Road, which is the trunk road in the new urban area and has been nearly completed to a trunk road standard. The proposed section would cut through the Shijinglin Scenic Area. It was planned to build an urban trunk road, 60m wide. However, in view of the low traffic volume projected in the near future and in order to minimize the impact to the Shjinglin Scenic Area, with phased construction, the road width of 15 m will be implemented at this stage, and will be upgraded to trunk road standard when traffic volume picks. However, whether road upgrading is needed is subject to a vigorous analysis with regard to environmental impact to the scenic area. In addition, a 10 m x 13 m bridge is proposed to cross Shuikou Lake, 17 m width of right of way. The bridge design is considered adequate.

62. Beiwei 2nd Road is the major east-west road located in the center of Chengbei (city north) industrial area. It will be linked to Na-Fang Highway (outer ring road in urban proper) at the south end.

63. Chengnan 9th Road and Liancheng Road South Section are both urban secondary

SA-I-15 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities roads, 32 m wide. The roads are proposed as major roads in the new development area. Liancheng Road South Section will connect to Na-Fang Highway at the south. Chengnan 9th Road will connect to Liancheng South Road at the west, and an existing road at the eastern end.

64. To cross Moshui Stream, 3 m x 20 m, 3 m x 35 m bridges are proposed on Chengnan 9th Road and Liancheng Road South Section respectively. The bridge design is considered adequate.

65. Zhongyi Road is located in the center of Chengbei (city north) industrial area. It is the major north-south road in this area. It will be linked to Na-Fang Highway (outer ring road in urban proper) at the southern end.

66. Lane Configuration: the figures below show typical cross sections for the proposed roads. Separations at median and between MV/NMV have been adequately addressed. Phased construction for Shijinglin Road West Extension has been fully considered in lane configuration.

Cross Section Profile for Chengnan 9# Road and Liancheng Road South Section

Cross Section Profile for Beiwei 2nd Road

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Cross Section Profile for Shijinglin Road West Extension

67. Road Pavement: Alternative comparison is made between asphalt concrete and cement concrete for road pavement design. Asphalt concrete surface pavement is recommended for the proposed roads. Pavement designs are specified for various classes of roads and construction specifications are outlined for road base, sub-grade construction and ground treatment. This is considered adequate with sufficient level of detail.

4. Chongzuo Shuikou Lake Environmental Improvement

68. The Shuikou Lake planning area is located in south-west of Chongzuo urban proper, against the Longxia Mountain in the north, and adjacent to the Nanning-(Sino-Vietnam) Friendship Gate Expressway in the south. The South 6th Road lies in its immediate north; the south section of the planned Ring Road in its immediate south; the Longxia West Road in its immediate east; and the Ningming Highway and Railway. A tourist road cuts through the planning area from east to west.

69. The land uses are characterized by hills, slopes, farmland, forested land, stone forest, lake surface, ditches and culverts and fish ponds that interweave one another. The vegetation includes sugarcane fields, paddies, lotus root fields, grassland, forests and orchards, as well as sparsely distributed residential houses, factories, schools, roads and other facilities. Field surveys did not reveal any historical relics.

70. The present water surface of the lake is estimated to be 37.2 ha. A total of 61 ponds of various sizes can be found outside the lake shores, with a total surface area of 40.8 ha. They include 57 fish ponds, with a total area of 36.6 ha, and 4 lotus ponds mostly situated in the upper part of the lake, with a total area of 4.2 ha.

4.1 Proposed Interventions

71. The engineering features of the component are provided in Table 4.1.

Table 4.1: Interventions under the Lake Ecosystem Rehabilitation Component No. Activity Unit Quantity 1 Cleaner production and pollution control factory 1 2 Sewage treatment unit 2 3 Surface clearing and dredging ha 78 4 In-lake coffer weirs dismantling Km 7.85 5 Lake bank rehabilitation km 2.62 6 In-lake weir dismantling km 7.85 7 Artificial wetland ha 11 8 Lakeside pedestrian path km 1.57 9 Capacity building (technical support and environmental monitoring set 1

SA-I-17 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

B) Lake Ecosystem Rehabilitation

72. Point Pollution Sources: At present, there are three enterprises near the lake: i) Xianfeng Cement Factory; ii) Wuwei Cement Factory; and iii) Honghua Starch Factory. The wastewater from the industrial processes and living quarters of the three factories is discharged directly into the lake. The air emission and wastewater discharges of the three factories are provided in Table 4.2.

Table 4.2: Air Emissions and Wastewater Discharges of the Lake-Side Enterprises Air Emissions Wastewater Discharges Total Volume (million Major Amount Total Volume Major Amount Enterprise m3/a) Pollutant (t/a) (t/a) Pollutant (t/a) Dust 5.8 COD 4,875 Honghua Starch 59.92 SO 43.6 975,000 BOD 2,925 Factory 2 CO 39.9 TSS 1,950 Dust 298.3 / / Wuwei Cement / 569.24 SO -- / / Factory 2 CO 9634 / / / Dust 265.6 / / Xianfeng Cement / 432.01 SO 45.0 / / Factory 2 CO 1534 / / /

73. In the vicinities of the lake, there are the dormitories of the Wuwei Cement Factory, and two villages. The Wuwei workers’ dormitories have a distance of 50 to 300 m. The sewage from the dormitories is discharged into the lake through septic tanks. The Naqu Village is located at the upper reaches of the lake; and the Shuikou Village is situated in the middle reaches of the lake. Each household has an outdoor toilet. The nightsoil in the outdoor toilet is used as organic fertilizers. But the sewage from daily living (kitchen and washing) is directly discharged into the lake through the many ditches and outlets.

74. The lake-side population totals 2,810, including 210 workers at the Wuwei Cement Factory, and 2,600 residents at the Naqu and Shuikou Villages. The estimated total volume of sewage discharges amounts to 228 m3/d. The pollution loadings into the lake are estimated to be 26,791 kg/a for COD, 2,609 kg/a for NH3-N, and 153 kg/a for TP.

75. Non-Point Pollution Sources: There are a total of 43 fish farmers, with the number of netcages totaling 280 and the surface area covering 8,160 m2. Of these, 192 netcages, covering an area of 5,942 m2, are cultivated with artificial feeds, and 88 netcages, covering an area of 3,118 m2, are cultivated naturally.

76. Aquaculture is a significant pollution source for the Shuikou Lake. According to estimates by experts, the waste from the cultivation of one ton of fish is equivalent to that from raising 20 hogs. The waste directly retains in the lake, causing pollution and eutrophication. Moreover, the residuals of drugs used to control fish diseases are also a major source of pollution for the lake. The commonly used drugs include highly toxic pyrethrins, organophosphorus, chlorinates, heavy metals, antibiotics, growth hormones, and so on. These chemicals have caused the deterioration of water quality in the lake, to Class II or below in concentrated cultivation zones.

77. Survey and monitoring data have revealed that the release coefficient for nitrogen in the fish cultivation zones amounts to 13.6 kg/mu and that for phosphorus is 2.0 kg/mu. Thus the total COD generated from fish farming for the lake as a whole is estimated at 5,509 tons per annum.

78. There are 61 coffers within the lake for the cultivation of fish and lotus, covering a surface area of 42.8 ha. Since the coffers forms enclosed water bodies within the lake, they

SA-I-18 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities serve to prevent the mixing and flowing of water. In recent years, livestock and poultry breeding on the lake and lake-side has grown. This has resulted in large volumes of animal wastes directly discharged into the lake, causing heavy water pollution.

79. According to field surveys, there are 12 livestock and poultry farmers, with 19,420 ducks, and 364 hogs. The estimated waste discharges into the lake are provided in Table 4.3.

Table 4.3: Estimated Waste Discharges into the Lake from Livestock and Poultry Total Pollutant Emission Factor Amount Entering Entering the Lake (kg/duck/a) the Lake (t/duck/a) Ducks (kg/a) COD 1.17 8.6 6,238 NH3-N 0.13 4.15 620 335 TP 0.015 2.3 21.4

C) Engineering Design

80. Wastewater Treatment for Starch Factory: The production process generates about 10,000 m3/d of wastewater. The average COD concentration of the mixed effluent is 12,000 mg/l and the pH value is 3-5.

81. Five alternative technologies have been compared. The “UASB + aerobic fluidized bed + oxidation pond” technology is chosen for its suitability to the local climate and the nature of the wastewater and for its cost-effectiveness. The treated effluent will meet the Level I of the PRC Comprehensive Wastewater Discharge Standards (GB8978-96).

82. The treatment process is shown as follows:

pH Adjustment Methane Agent Collection

Wastewater Sedimentation Adjustment UASB Oxidization Pond Pond Reactor Pond

Treated Effluent

83. Wastewater Treatment for Cement Factory: There are three types of wastewater from the cement production process: i) cooling water; ii) wastewater from the waste heat utilization workshop; and iii) wastewater from laboratory and sewage from living quarters.

84. The cooling water can be reused and zero discharge can be realized. The wastewater from the heat recovery workshop can also be reused with zero discharge.

85. The underground wastewater treatment facility will be installed for the treatment of laboratory wastewater and sewage. The treated effluent will meet the Level I of the PRC Comprehensive Wastewater Discharge Standards (GB8978-96).

86. An integrated system is recommended for treating the sewage from the two villages. The flowchart is as flows. The effluent will meet the Level II of the PRC National Wastewater Discharge Standards (GB8978-1996). The sludge will be used as organic fertilizers.

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Pump Pump

Pump Sewage Effluent Adjustment Aeration First Oxidation Second Pond Settlement Settlement Pond Pond Pond Pond

Recycled Sludge Sludge (Used as Organic Fertilizers)

87. Dredging: The planned dredging area covers 78 ha of lake surface. The top layer of the lake bed will be dredged for 20 ~ 30 cm, for a total dredged sludge of 195,000 m3. The dredged sludge will be transported to the processing site of 6 ha near the lake shore whereby the sludge will be dewatered and used as fertilizers for landscaping purposes for the city.

Dredger

Transmission Pipeline

Processing Site

Dried Fertilizers for urban Sludge landscaping purposes

E) Dismantling of Coffer Weirs

88. According to field surveys, the width of the coffer weirs ranges from 0.8 m to 5.5 m, with the average being 1.6 m. The height of the coffer weirs ranges from 103.6 m to 108.2 m, with the average being 104.5 m. The total length of the coffer weirs amounts to 7.85 km. Taken as a whole, the coffer weirs are estimated to occupy approximately 25,000 m3 of storage capacity of the lake. Most of the coffer weirs are made from earth; a few are made from stones and bricks. For coffer weirs wider than 2 m, the use of a bulldozer is recommended. For coffer weirs less than 2 m in width, the use of human labour is recommended.

F) Soil Erosion Control and Shoreline Protection

89. The lake shores are characterized by denuded low hills that are prone to soil erosion and risks of landslides. Integrated biological and engineering measures are proposed to control soil erosion and in the meantime create recreational opportunities for local residents.

SA-I-20 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

In the outer fringes of the lake, a ring road in the form of a pedestrian path is proposed. For sections closer to the water bodies, the ring road will be a combination of “dyke + road” for flood control and walking path. The distance between the shoreline and the ring road ranges from 0 to 132 m. The shoreline-ring road zone will be protected with grasses and shrubs. Vegetative Cover Shoreline Protection Vegetative Cover Shoreline Protection Pedestrian Path Pedestrian Path Lakeside Lakeside Lake Surface

Design Water Level

Cross-Sectional Profile of the Shuikou Lake

90. Pedestrian Paths and Recreational Facilities: The functions of the lake are determined to be an urban water body for environmental purification (“kidney”), micro-climatic improvement and a recreational site for local residents. The latter will be made possible through the construction of the lake-side pedestrian path, with a total length of 1.57 km. The engineering works also include three pedestrian bridges of 6 m in width. Squares, benches, BBQ sites will be established.

91. Ecosystem Rehabilitation: In-lake ecosystem rehabilitation will be achieved through the establishment and enhancement of artificial wetlands. The wetlands will serve to purify water and also as habitat for fish and birds.

92. Establishment of Environmental Monitoring and Supervision System: Automated water quality monitoring points will be set up in the mouth of the lake, within the lake and at the outlet of the lake. Monitoring equipment will be purchased for the municipal environmental monitoring station. The water quality monitoring data will be fed into the municipal environmental management system, which will also include a component for water quality forecasting and early warning. Public education signs and bulletin boards will be set up in the lakeside.

5. Baise Road Network and Related Municipal Infrastructures

5.1 Urban Planning Perspective

93. Baise is 246 km from Nanning municipality and is located at the junction linking Guangxi, Yunnan and Guizhou Province. Existing G323, G324 national highways connect Baise to Yunnan and Guizhou. Given the existing geographic and geological conditions, Baise needs to be developed in the form of clusters. The Master Plan envisaged the future urban development to form an overall Baise comprising “one center, two axles, two zones, and multiple clusters.” “Two axles” refers to a social and scenic axel from north to south, and an urban development axel from west to east. “Two zones” consists of an urban zone along the Youjiang River and an industrial zone in the east.

94. The urban area is formed by three clusters of Echeng (old city center, west side of river), Longjing Cluster (project area, south side of river) and Shoushan Cluster (east side of river). The industrial zone located further east, consists of Liutang, Wutang and Sitang Clusters. This is intended to make use of the lands available on the east and south-east sides of the city that are close to the existing traditional city proper and to deploy the urban infrastructures in a cost-effective manner.

SA-I-21 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

95. The general direction of the long term urban expansion in Baise is towards the south and east under the established land use principle. The priority is given to the development of new urban areas in Longjing Cluster (Henan New District) and the industrial area in the east. Land use in the new district is classified as residential, commercial, education and research area. In order to realize this urban development concept, the transportation connections among major clusters need to be constructed accordingly. South city ring road under the project is among the important transport links. The related Project maps can be found in the maps appendix.

5.2 Transportation Master Plan Perspective

96. According to the Baise Eleventh Five Year Transport Plan, for highways, there will be an 84 km class II road in which 33 km are to be built, 51 km to be rehabilitated, 136 km class III and 975 km class IV rural road to be renovated during the 11th FYP. For urban transport, there are a great number of urban roads to be built in the near term to complete the urban road network in Youjiang District, especially for Longjing Cluster. These roads include Jiangbin Road, Huandao Road which are the link roads with the Project road. The street in front of the railway station, as part of the ring road, will be rehabilitated. As for the bridge, Layu Bridge connecting Henan and Hedong district will be built. Three bridges crossing Youjiang River will be renovated including Bailin Bridge.

97. From an inland waterway perspective, Youjiang River will be dredged to improve navigation conditions, and a handling yard with 500-ton berth capacity at Baise Port will be constructed. As for railways, Baise Railway Station will be renovated. The passenger line will be separated from cargo lines and overall capacity will be improved. These ongoing infrastructure projects are interrelated and complement each other. The transportation strategy emphasises integration of road transport with other transport modes.

98. Urban ring road construction as a whole will serve the existing railway station and two long-haul bus terminals along the road. It is noted that a new long-haul bus terminal is planned to be built in the south along the proposed road. Hence, the construction of the ring road has great importance and it will serve as the backbone to meet the traffic demand, anticipated for the new urban area development.

5.3 Description of Project Setting

99. Baise consists of Youjiang District and 11 counties under its jurisdiction. Youjiang District is the urban area of the prefectural government seat. In Yongjiang District, Youjiang River naturally divides the urban area into three sub-districts including Hexi (west of river), Hedong (east of river) and Henan (south of river). These sub-districts correspond to the three clusters-Echeng, Longjing and Shoushan respectively.

100. The proposed South City Ring Road is located at Longjing Cluster, which covers a land area of 11.66 square km with a planned population of 150,000 by 2020. At present, the area is dominated by agricultural farmland. It is envisaged to be developed into the new administrative, financial and cultural center of the city. The project site is characterized by a hilly area. Echeng Cluster, the old urban area, covering a land area of 7.5 square km and planned population of 120,000, would be an education and research center. Shoushan Cluster where the railway station is situated, covering a land area of 13.6 square km and planned population of 130,000, is envisaged as a trade logistics and public service center.

5.4 Road Component Description and Analysis

101. Baise road FSR was commissioned to Guangxi Communications Survey and Design

SA-I-22 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

Institute. The implementing agency is Baise Urban Construction and Investment Co, Ltd. Preliminary cost estimates of total investment for this component are CNY 396 million. The proposed road will connect the existing urban areas in the west with industrial areas in the east, as well as carry part of through traffic along the corridor. The total length is 3.69 km and it is proposed to build the road to a 6-lane urban trunk road standard.

5.5 Design Basis and Standards

102. The FSR has been based on the key planning documents of Baise Urban Master Plan (2004-2020), Baise Henan New Area Detailed Plan, Baise Eleventh Five Year Transport Development Plan (2006-2010), Baise Youjiang District Government annual Report (2007). These documents have been well formulated. The technical work in the FSR covers road engineering and related infrastructures such as traffic engineering, lighting, landscaping and drainage and sewage network design. A summary of the design standards for the road is presented below. The design parameters are generally in compliance with national standards and specifications for an urban trunk road.

Table 5.1: Proposed South City Ring Road No. of Design Length Width of Paved Road MV Speed Road (km) Design Standard ROW (m) Width (m) Lane (km/h) South City 3.69 Urban Trunk Road 50 23.5 6 60 Ring Rd Grade I

103. The proposed road will start at existing Chengbei Road in the west and end at Longwang Bridge in the east on a new alignment bisecting 10 existing and planned urban roads. It would also cross the Youjiang River twice at Bailin Bridge in the west and Longwang Bridge in the east. Existing Bailin Bridge would need to be upgraded. The work will not be included in the ADB loan project, and will be financed locally. Proposed Longwang Bridge in the east will be financed under this project.

104. South City Ring Road is designed as an urban trunk road. It is the southern section of the named ‘ring road’ and will connect the existing roads in the north, the east and the west. Other sections of the ring road exist and are under renovation. The beginning section of the proposed road will connect Chengbei (north city) Road, and take the alignment of the existing Chengxi (west city) Road. Existing Chengxi Road would be upgraded to 6 lanes in the same phase as the proposed road, and it will be improved by implementing physical MV/NMV separations to ensure traffic safety.

105. The proposed road ends at Longwang Bridge. Two ramp roads are proposed to connect with Huandao Road proposed along the river. It is understood that an extension road will be built to connect the east end of the project road to Nan-Kun Expressway. There are seven planned roads bisecting the proposed road. Two of the trunk roads will be built in the near term.

106. This road is aligned 700~800 meters north of the existing Nanning to Kunming expressway (section in Guangxi completed). It is noted that functions of the roads are different. The tolled expressway provides a fast link for longer distance travel. Proposed urban roads would serve for connecting urban clusters and mainly serving local traffic.

107. Projected through-traffic on the proposed road has been studied in the FSR. Through traffic can be classified into three categories –– at provincial level linking to Yunnan and Guizhou Province, the proposed road serving as a section of national highway G323; inter-city traffic linking Baise with Nanning, Chongzuo, Hechi City etc; intra-city traffic linking

SA-I-23 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities the counties with urban area within Baise. It is estimated in the FSR that through traffic counts for 40% of all the traffic. According to traffic count data at Luocunkou Toll Station on the existing expressway, current average daily traffic is 12,000 per day. It is expected that generated traffic from the new urban growth and industrial development will be the main source of traffic.

Table 5.2: Project Road Intersections Road No Chainage Road Standard Type Width Zhongshan road and Dongsun road At-grade 40m, 25m 1 K0+000 Trunk δnot included in the projectε Intersection Planned No.1 Roadδimplement at At-grade 25m 2 K0+373.151 Branch later stageε Intersection Simple diamond 40m, 25m 3 K0+695.018 Chengxiang Road Trunk interchange Simple diamond 26m 4 K0+860.213 Jiangbin Road Branch interchange Huandao roadδnot included in the diamond 50m 5 K1+364.222 Trunk projectε interchange 6 K1+946.050 Planned No 2 Road Secondary Grade separation 30m Planned No 3 Roadδimplement at Free flow 50m 7 K3+282.871 Trunk later stageε interchange Planned No 4 Roadδimplement at At grade 40m 8 K4+259.838 Trunk later stageε intersection At grade 16m 9 K4+639.715 Connect with A.B ramp road Branch intersection Clover-leaf 40m 10 K4+861.006 Huandao Road Trunk interchange

108. The above table shows that there are 6 no. of grade separations designed along the 3.69 km urban road. Although phased construction has been considered for these interchanges, this density is considered high. The possibility of reducing the numbers of grade separations was recommended to avoid over-investment and to allow local traffic easy access. In addition, phased construction for the Chengxiang interchange was also recommended. There is one full interchange designed for intersections with planned No 3 road. It is recommended that other types of interchange designs with lower costs should be considered, for example four clover leaf loops.

109. Based on the routes laid out in the detailed plan, the alignment has been optimized in considerations of minimizing resettlement. Alternative comparisons were made for three sections of the alignment. First section, after the route cross over Chengxiang Road and Jiangbin Road, at k0+760~k0+860 the alignment was shifted 7m south to avoid a residential compound. Second, after the alignment crosses over Youjiang River at Bailin Bridge and Huandao Road, the route was originally aligned through a residential area of Baikuang (mining), a factory and a watch house. To avoid the considerable resettlement of the residential buildings, the alignment was shifted further north to go through factory buildings, which will need to be resettled to an industrial park in the future. Third section, near the end of the route, the approach bridge of Longwang Bridge was originally aligned through two villages. That would require a great deal of resettlement. The alignment was shifted slightly south to minimize the resettlement.

110. The figure below illustrates typical cross section profiles for the project road. Lane configuration for the road is considered adequate. Median separation of the green belt is proposed to separate two directions of MV lanes. The main road and side road are also separated by green belt. Widths of MV, NMV lane and sidewalk are in line with national design standard.

SA-I-24 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

111. Alternative comparison is made between asphalt concrete and cement concrete for road pavement design. Asphalt concrete surface pavement is recommended for its advantage of higher level of comfort for driving, low noise and ease of maintenance. During the preliminary phase, pavement design will need to be further elaborated with regard to the local climate and material availability. The percentage of cement stabilized will need to be specified and controlled to minimize surface cracks during operation. Construction specifications will need to be provided.

Thickness (cm) Road Pavement MV Lane Side Road Cycle Lane AC-13C Asphalt concrete surface 4 4 / AC-16C Asphalt concrete surface 5 / / AC-20C Asphalt concrete surface 6 6 6 Modified emulsified bitumen fluid seal 0.6 0.6 0.6 Cement stabilized crushed stone 20 18 16 Cement stabilized crushed stone 20 18 16 Aggregated crushed stone 18 18 18 Total 73.6 64.6 56.6

6. Longwang Bridge

6.1 Hydrogeology

112. The proposed Longwang Bridge located at southern section of the urban surrounding expressway, will connecting south river new area and east river industry area, across Youjiang River to improve the urban road network. the Project will build a 573 m long, 43~48 m width dual three lane new urban bridge include main span length of 323 m and approach span length of 250 m. The bridge is an important infrastructure of the urban road network of Beise city, and further connecting to the Tan-Bai Expressway by interchanges then easy access to the provincial expressway network.

113. Each bridge crosses the River, the waterways which are subject to flooding event; the MOC Highway Standard requires a 1-in-100 year return interval storm event as the design criteria for the large bridges:

SA-I-25 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

- The bridges are above the estimated flood levels and can therefore remain in service; - The bridges have adequate structural strength to withstand the hydraulic loading of the required flood event; and - There is sufficient natural bank and river bed stability and scour protection provided to ensure the bridge stability.

114. Youjiang River is a mountainous area seasonal river will carry significant flood flow in the rainfall season on May to October. There are four hydrology stations on the Youjiang River, based on continuous flood data records of the nearest Baise hydrology station, the flood events of the flood flow, flood quantities and flood water level has been calculated as shown in the table below, it is fully acceptable.

Frequency 0.2% 1% 2% 5% 10% 50% Flood Quantities 10,029 9,144 3,087 3,087 3,087 2,425 Flood Elevation 124.48 116.48

2. Navigation Channel Requirement

115. Based on navigation channel required, it is understood that supply at least a minimum clearance height of 10 m and clearance span length of 110 m for dual single lane in order to meet the navigation channel requirement of Class III sea-route. The performance of the clearance dimensions of the proposed bridge compare with the navigation standard above has been satisfactory, The clearance span length final adopted 128.50 m since about 500 m ahead the sea-route will have sharp turn left, it is also reasonable.

116. It is recommended that class of sea-route and parameters of the clearance spans and heights should be submitted to MOC navigation department for approval during the design phase.

6.3 Geotechnical Investigations

117. General specifications of the geological layer condition are provided in the feasibility study report. After discussion with design engineer, it is understood that seven drilling investigative boreholes at the bridge site have been completed.

118. In the design stage, a number geotechnical drilling investigation at the bridge location should be conducted in line with the standard requirement. For a large bridge like this one, the drilling of between 3 and 5 test boreholes at bridge site is adequate. The standard requires an increase to 7 bore locations if the preliminary holes indicate complex geological conditions. Laboratory testing of the cores has provided indicative strengths of the groundwork. From this data, the geotechnical investigation report and geological layer drawing will be developed, these at least involve:

- Geological specifications; - Geological histogram drawings.

6.4 Bridge Structural Schemes

119. Bridge heights and span length not only governed by navigation channel requirement but also governed by the flooding events. The MOC Highway Standard requires a 1-in-100 year return interval storm event as the design criteria for the large bridges.

120. In the FSR clearance span length adopted 128.50 m and clearance height adopted 10 m to meet the class III navigation channel standard requirement. The water level

SA-I-26 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

(elevation) of 1 in 100 year return interval storm event equal to 124.48 m as shown in the table above, and the maximum navigation sea-route water level will be the 1 in 10 year return interval storm event equal 116.48 m, plus 10 m clearance height equal to 126.48 m. Final minimum bridge elevation governed by the navigation channel requirement of 126.86 m.

126.86, governed by navigation requirement

1% storm event of 124.48

10% storm event of 116.86 for max. navigation elevation 10 m

128.50 m

Bridge Elevation Design

121. It is understood that a three main spans of variable depth continuous pre-stressed concrete box girder with spans of 99+145+99m and both approach of pre-stressed concrete constant continuous box girders with spans of 4×30 m and 3×30 m for both banks were adopted, the total length were be 563m. Sketch drawing and typical section as shown in below:

SA-I-27 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

122. Two alternative structure forms have been considered, these are: i) A reinforced concrete combined steel box arch bridge with main spans of 54+175+54 m and both approaches of pre-stressed concrete continuous box girders with spans of 5×30 m and 4×30 m for both banks were adopted. Total bridge length equal to 563 m. See sketch drawing and typical section below:

ii) A three main spans lower tower cable stayed bridge with spans of 99+145+99=323 m and both approach of pre-stressed concrete continuous box girders with spans of 4×30m and 3×30m for both banks were adopted. Total bridge length equal to 563 m. See sketch drawing and typical section below:

SA-I-28 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

6.5 Sub-structures

123. he form of the sub-structures and footings was indicated in the FSR drawings and design document for this large bridge, the sub-structures of main span structure including high level 4.0 m height spread footing foundations and a group of 2.0 m diameters rolling piles solution have been adopted.

124. The sub-structures of both approaches piers use twin post which is to be supported on a reinforced concrete spread footing with four drilling 1.50m diameter piles for each pier, the circular piles are proposed to be drilled up to depth as much as required against the loading from superstructure.

125. Drilling big diameter pile method is a well developed technique in China and Internationally. It should not present difficulties on this project.

It is recommended that the pile diameter and quantities and drilling deep should have more detail design after more geological investigation has been carried out, especial for the main piers foundations.

6.6 Earthquake

126. The China Earthquake Parameter Map (GB18306-2001) nominates that the Bridge is in Seismic Zone of earthquake peak acceleration equal 0.10g and seismic response spectrum characteristic period equal 0.35s. It corresponding design loads is equal degree VII.

127. The MOC Earthquake Code defines Quasi-Static design loads for bridges located in Zones equal and higher VII to IX, the seismic design will be needed and seismic design load should be increase one degree as it is degree VIII for this large bridge is reasonable.

SA-I-29 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

NANNING

Baise Chongzuo Fangchenggang

6.7 Construction Methodology

128. General description of construction methodology statement and sketch drawing has been shown on the FSR design documents. For proposed main spans, balanced cantilever concrete box construction method is proposed and for both approach, cast in place on formwork in the bridge location is also proposed. It is generally acceptable since it is commonly adopted in China.

129. For pile foundations, drilling pile of big diameter of 2.0 m for main spans and 1.50 m diameter for approach pile has been adopted, because of geological report have not been prepared, so that the piles diameter dimensions and drill deeps should more carefully analyzed at next design stage based on detailed field investigation and strength testing program.

130. Balanced cantilever construction method for superstructures and drilling big diameter pile for substructures are well developed technique in China. It should not present difficulties on this bridge structure, only concern is should be provided the construction is managed by a team experienced in this technique, also the construction assembly and construction control design should be designed at the same time with structural design.

131. The construction schedule briefly shown on the FSR has been reviewed, the total construction period of 24 months and construction steps of 4 stages for main span structures and 4 stages for approach as table below are reasonable and acceptable.

6.8 Safety Design Issues

132. The bridge concepts examined in this review should comply with MOC Technical Standards for Highway Engineering (JTJ001 – 97), “Urban Road Design Standard (CJJ37-90)” and “Urban Bridge Design Technical Standard (CJJ11-93)”. The key parameters required for this class of road are listed in table below

SA-I-30 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

Table 6.1: Bridge Functional Design Parameters Design Parameter Standard Parameters Flooding Event 1 /100 1 / 100 Design Speed (km / h) 60 60 Minimum Carriageway of One Lane (m) 3.75 3.75 3.50 Minimum Central Median (m) 1.50 Separate Width of Minimum Right Marginal Strip Carriageway to Barrier (m) 0.50 0.50 Width of Minimum Left Marginal Strip Carriageway to Barrier (m) 0.50 0.50 Minimum Pedestrian Width (m) 3.00 3.50 Non-motor Vehicle Lane Width (m) 1 m each 3.00 Maximum Vertical Grade 5.0% 2.5%

133. Based on the standard required of design speed equal or more than 60 (km/h), one lane carriageway width should be 3.75 m, the preferred minimum width between barriers of single carriageway should be 3.75×3+0.50×2=12.25 m, compare with drawing adopted of 3.75+3.50×2+0.5×2=11.75 m, it seems insufficient. After discussion with design engineer, it is understood that the carriageway of 11.75 m will uniformly with the connecting urban surrounding expressway. It is remind of the carriageway width should be considered unitary with “road” and “bridge” in the next design stage.

134. Given that with an absolute minimum margin strip width only of 0.5 m, and bridge length longer than 500 m, there are not considered emergency lane or emergency stopping bay. It is recommended that install a segment of moveable barriers should be considered in middle of the bridge length, in order to open it when traffic accident happened use non motor way of 3.50 m as release road.

135. On the southern river bank, there are an intersection by ramp A and ramp B connecting from bridge to island surrounding road, also there are left and right turning lanes between the ramps and island surrounding road (see sketch drawing shown on below). For the exist and entry ramps of the bridge main lanes, the following issues should be examined carefully in the design phase:

- The weaving distances must be carefully considered based on entering and exiting traffic volume on the ramps, to ensure that traffic capacity on bridge main fast lanes; - The minimum horizontal curve have adequate radius; - The right marginal strip must be widening at curved ramp; the current conceptual designs do not have adequate right marginal strip, and, - Based on the available concept design on the ramp A and B roads of the entering and exiting driveway accesses will normally be restricted by left-turn, it should be carefully designed based on traffic volume distribution at the intersection.

136. It is recommended that road safety audit program will be considered in the design phase, the main reason for conducting road safety audits is to prevent road crashes by identifying potential safety problems for corrective action consideration especially for this project of roads and bridge designed by different design teams.

SA-I-31 Supplementary Appendix I: Technical Analysis of Engineering Feasibilities

City South Ring Road Ramp A

Ramp B

Island Road

Longwang Bridge

6.9 Design Standards and Specifications

137. The FSR documents indicate that the design was based on the following Chinese design standards. These design standards have been used successful throughout the nation.

- Urban Bridge Design Technical Standard (CJJ11-93) - Urban Bridge Design Loading Standard (CJJ77-98) - Urban Road Design Standard (CJJ37-90) - Technical Standards for Highway Engineering (JTJ001 – 97) - Design Standard of Highway Bridge and Culvert (JTG D60-2004) - Design Standard of Reinforced and Pre-stressed Concrete Highway Bridge (JTG D62-2004) - Standard of Highway Bridge Foundation Design (JTJ D63-2007) - Standard of Highway Steel and Bridge Design (JTJ 025-86) - Highway Bridge Resist Wind Design Standard (JTG/T D60-01-2004) - Highway Engineering Earthquake Design (JTJ004-89) - Standard of Highway Bridge Construction (JTJ 041-2000) - Navigation Standard of the River way (GB50139-2004).

SA-I-32 Supplementary Appendix J:

Detailed Financial Analysis Supplementary Appendix J: Detailed Financial Analysis

Table of Contents

1. Cost Estimates ...... 1

1.1 Base Costs ...... 1 1.2 Contingencies ...... 2 1.3 Financial Charges during Implementation ...... 2

2. Financing Plan...... 6

3. Financial Projections and Detailed Financial Evaluation ...... 10

3.1 Project Implementing Companies ...... 10 3.2 Cash Flow Analysis ...... 12

4. Fiscal Capacity Analysis ...... 13

4.1 Fiscal Capacity Analysis for Fangchenggang ...... 13 4.2 Fiscal Capacity Analysis for Chongzuo ...... 15 4.3 Fiscal Capacity Analysis for Baise ...... 17 Supplementary Appendix J: Detailed Financial Analysis

Supplementary Appendix J:

Detailed Financial Analysis

1. Cost Estimates

1. The updated cost estimates and financing plans were provided by the Design Institutes (DI)s in September 2009. Cost estimates are prepared in Excel worksheets in the ADB required format, in mid 2009 prices, with summary tables to meet the requirements of the Detailed Cost Tables for inclusion in the Report and Recommendation of the President (RRP) to the Board of Directors. Project cost estimates and contract packages have been reviewed following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008. The purpose of this is to ensure the adequacy of cost structures and soundness of targeted unit outputs and unit cost assumptions.

1.1 Base Costs

2. Base costs are prepared on the basis of a detailed estimate of project inputs for each component and subcomponent by expenditure category. For each component and expenditure category (e.g. civil works, equipment, land acquisition, consulting services, recurrent costs, etc.), the base costs are allocated to each year over the project implementation period. The project implementation schedule is assumed as in the following Table SA-J-1. The project will be implemented over a period of three to four years. It is assumed that the payments will be completed in five years. The schedule also considered possible retroactive financing and the local preparation, review and approval procedures.

Table SA-J-1. Project Implementation Schedule Items 1st 2nd 3rd 4th 5th 1. Fangchenggang 1.1 Urban Road Network and Related Municipal Infrastructures Civil Works 20% 20% 20% 20% Land Acquisition and Resettlement 40% 60% Other Costs 10% 30% 20% 20% 20% 1.2 Coastal Protection and Upgrading Civil Works 10% 25% 25% 25% 15% Other Costs 10% 30% 20% 20% 20%

2. Chongzuo 2.1 Urban Road Network and Related Municipal Infrastructures Civil Works 20% 20% 20% 20% 20% Land Acquisition and Resettlement 30% 40% 30% Other Costs 10% 30% 20% 20% 20% 2.2 Shuikou Lake Environmental Improvement Civil Works 20% 20% 20% 20% 20% Land Acquisition and Resettlement 30% 40% 30% Other Costs 10% 30% 20% 20% 20%

3. Baise 3.1 Urban Road Network and Related Municipal Infrastructures Civil Works 20% 20% 20% 20% 20% Land Acquisition and Resettlement 30% 40% 30% Other Costs 10% 30% 20% 20% 20% 3.2 Baise Longwang Bridge Civil Works 20% 20% 20% 20% 20% Land Acquisition and Resettlement 30% 40% 30%

4. Other Costs 10% 30% 20% 20% 20%

3. The base costs are then split into foreign exchange and local currency components as per ADB requirements. Taxes and duties are then estimated as a separate item from the base cost. Please note that ADB now finances taxes and duties, where appropriate.

SA-J-1 Supplementary Appendix J: Detailed Financial Analysis

1.2 Contingencies

4. The physical contingency is calculated as a percentage of the base cost for each component, subcomponent, and expenditure category. As for base costs, physical contingencies are estimated separately for foreign exchange and local currency costs, where applicable.

5. The price contingency is a provision for potential inflationary increases in costs over the implementation period of the project. The price contingency is composed of a foreign and domestic component. Domestic and international inflation rates are provided by the ADB. Adjustments have been made for potential exchange rate fluctuations, which was incorporated into price contingencies.

1.3 Financial Charges during Implementation

6. Financial charges such as interest during construction (IDC) and commitment fees (CF) are calculated based on the rates of the proposed ADB loan and domestic loans. It is assumed that the ADB loan will be passed through the Government of Guangxi Zhuang Autonomous Region (GZAR) on the same terms and condition as that to the PRC Government from the ADB, whereas the Fangchenggang, Chongzuo and Baise Municipal Governments will bear any foreign exchange risks. In computing the IDC, the current applicable 5-year fixed swap rate at 3.31% is adopted following the payment schedule. The CF is computed at a flat rate of 0.15% on undisbursed loan balances. Presently, ADB waives any front end fee (FEF).

7. The total cost of the Project is estimated at $271.26 million (equivalent to CNY 1,844.58 million). Table SA-J-2 to Table SA-J-9 show the detailed costs breakdowns. The PPTA Consultants will revise and finalize these based on the results of the loan appraisal for the PPTA final report.

Table SA-J-2: Expenditure Accounts by Currency for Whole Project CNY Million US$ Million Equivalent Foreign Local Total Foreign Local Total % of Total Item Exchange Currency Cost ExchangeCurrency Cost Base Cost A. Investment Costa 1 Civil Works 517.92 517.92 1,035.83 76.16 76.16 152.33 68.95 2 Survey and Design - 117.67 117.67 - 17.30 17.30 7.83 3 Land Acquisition and Resettlement - 272.32 272.32 - 40.05 40.05 18.13 4 Capacity Buildingb 17.99 - 17.99 2.65 - 2.65 1.20 5 Taxes and Dutiesc 19.17 39.30 58.46 2.82 5.78 8.60 3.89 Subtotal (A) 555.07 947.20 1,502.28 81.63 139.29 220.92 100.00

B. Contingencies 1 Physicald 55.51 94.72 150.23 8.16 13.93 22.09 10.00 2 Pricee 15.81 25.41 41.23 2.33 3.74 6.06 2.74 Subtotal (B) 71.32 120.13 191.46 10.49 17.67 28.16 12.74

Grand Total (A+B+C) 710.81 1,133.77 1,844.58 104.53 166.73 271.26 122.79 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 2.8 million. c Taxes and duties of $8.6 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

SA-J-2 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-3: Expenditure Accounts by Currency for Fangchenggang Urban Road Network and Related Municipal Infrastructures CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 185.51 185.51 371.02 27.28 27.28 54.56 70.38 2 Survey and Design - 35.06 35.06 - 5.16 5.16 6.65 3 Land Acquisition and Resettlement - 94.43 94.43 13.89 13.89 17.91 4 Capacity Buildingb 6.31 - 6.31 0.93 0.931.20 5 Taxes and Dutiesc 6.86 13.50 20.36 1.01 1.99 2.993.86 Subtotal (A) 198.67 328.50 527.18 29.22 48.31 77.53 100.00

B. Contingencies 1 Physicald 19.87 32.85 52.72 2.92 4.83 7.7510.00 2 Pricee 5.62 8.55 14.17 0.83 1.26 2.082.69 Subtotal (B) 25.49 41.40 66.89 3.75 6.09 9.84 12.69

C. Financing Charges During Implementationf 1 Interest During Implementation 27.59 34.69 62.27 4.06 5.10 9.16 11.81 2 Commitment Charges 1.38 - 1.38 0.20 - 0.20 0.26 Subtotal (C) 28.96 34.69 63.65 4.26 5.10 9.36 12.07

Grand Total (A+B+C) 253.13 404.59 657.72 37.22 59.50 96.72 124.76 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.98 million with tax. c Taxes and duties of $2.99 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

Table SA-J-4: Expenditure Accounts by Currency for Fangchenggang Coastal Protection and Upgrading CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 62.21 62.21 124.42 9.15 9.15 18.30 75.61 2 Survey and Design - 31.73 31.73 - 4.67 4.67 19.28 3 Land Acquisition and Resettlement ------4 Capacity Buildingb 2.09 - 2.09 0.31 -0.31 1.27 5 Taxes and Dutiesc 2.30 4.02 6.32 0.34 0.59 0.933.84 Subtotal (A) 66.60 97.97 164.56 9.79 14.41 24.20 100.00

B. Contingencies 1 Physicald 6.66 9.80 16.46 0.98 1.44 2.4210.00 2 Pricee 1.99 2.94 4.94 0.29 0.43 0.733.00 Subtotal (B) 8.65 12.74 21.39 1.27 1.87 3.15 13.00

C. Financing Charges During Implementationf 1 Interest During Implementation 9.04 - 9.04 1.33 - 1.33 5.49 2 Commitment Charges 0.48 - 0.48 0.07 - 0.07 0.29 Subtotal (C) 9.52 - 9.52 1.40 - 1.40 5.78

Grand Total (A+B+C) 84.76 110.71 195.47 12.47 16.28 28.75 118.78 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.32 million with tax. c Taxes and duties of $0.93 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

SA-J-3 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-5: Expenditure Accounts by Currency for Chongzuo Urban Road Network and Related Municipal Infrastructures CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 114.50 114.50 229.01 16.84 16.84 33.68 75.07 2 Survey and Design - 20.48 20.48 - 3.01 3.01 6.71 3 Land Acquisition and Resettlement - 40.17 40.17 - 5.91 5.91 13.17 4 Capacity Buildingb 3.86 - 3.86 0.57 -0.57 1.27 5 Taxes and Dutiesc 4.23 7.31 11.54 0.62 1.08 1.703.78 Subtotal (A) 122.60 182.46 305.06 18.03 26.83 44.86 100.00

B. Contingencies 1 Physicald 12.26 18.25 30.51 1.80 2.68 4.4910.00 2 Pricee 3.47 5.00 8.47 0.51 0.74 1.252.78 Subtotal (B) 15.73 23.25 38.98 2.31 3.42 5.73 12.78

C. Financing Charges During Implementationf 1 Interest During Implementation 19.28 8.23 27.51 2.84 1.21 4.05 9.02 2 Commitment Charges 0.92 - 0.92 0.14 - 0.14 0.30 Subtotal (C) 20.20 8.23 28.43 2.97 1.21 4.18 9.32

Grand Total (A+B+C) 158.53 213.94 372.47 23.31 31.46 54.77 122.10 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.60 million with tax. c Taxes and duties of $1.70 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

Table SA-J-6: Expenditure Accounts by Currency for Chongzuo Shuikou Lake Environmental Improvement CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 15.47 15.47 30.93 2.27 2.27 4.55 42.65 2 Survey and Design - 1.08 1.08 - 0.16 0.16 1.49 3 Land Acquisition and Resettlement - 36.45 36.45 - 5.36 5.36 50.27 4 Capacity Buildingb 0.94 - 0.94 0.14 -0.14 1.29 5 Taxes and Dutiesc 0.60 2.52 3.12 0.09 0.37 0.464.30 Subtotal (A) 17.00 55.52 72.52 2.50 8.17 10.67 100.00

B. Contingencies 1 Physicald 1.70 5.55 7.25 0.25 0.82 1.0710.00 2 Pricee 0.48 1.38 1.86 0.07 0.20 0.272.57 Subtotal (B) 2.18 6.93 9.11 0.32 1.02 1.34 12.57

C. Financing Charges During Implementationf 1 Interest During Implementation 2.64 3.60 6.24 0.39 0.53 0.92 8.60 2 Commitment Charges 0.13 - 0.13 0.02 - 0.02 0.17 Subtotal (C) 2.77 3.60 6.36 0.41 0.53 0.94 8.78

Grand Total (A+B+C) 21.95 66.05 88.00 3.23 9.71 12.94 121.34 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.15 million with tax. c Taxes and duties of $0.46 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

SA-J-4 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-7: Expenditure Accounts by Currency for Baise Urban Road Network and Related Municipal Infrastructures CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 82.79 82.79 165.58 12.17 12.17 24.35 56.48 2 Survey and Design - 13.68 13.68 - 2.01 2.01 4.67 3 Land Acquisition and Resettlement - 98.87 98.87 - 14.54 14.54 33.72 4 Capacity Buildingb 3.07 - 3.07 0.45 0.451.05 5 Taxes and Dutiesc 3.07 8.90 11.97 0.45 1.31 1.764.08 Subtotal (A) 88.93 204.23 293.17 13.08 30.03 43.11 100.00

B. Contingencies 1 Physicald 8.89 20.42 29.32 1.31 3.00 4.3110.00 2 Pricee 2.52 5.29 7.80 0.37 0.78 1.152.66 Subtotal (B) 11.41 25.71 37.12 1.68 3.78 5.46 12.66

C. Financing Charges During Implementationf 1 Interest During Implementation 12.96 16.04 29.01 1.91 2.36 4.27 9.89 2 Commitment Charges 0.62 - 0.62 0.09 - 0.09 0.21 Subtotal (C) 13.58 16.04 29.63 2.00 2.36 4.36 10.11

Grand Total (A+B+C) 113.93 245.99 359.91 36.17 52.93 122.77 36.17 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.48 million with tax. c Taxes and duties of $1.76 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

Table SA-J-8: Expenditure Accounts by Currency for Baise Longwang Bridge CNY Million US$ Million Equivalent % of Foreign Local Total Foreign Local Total Total Base Item Exchange Currency Cost ExchangeCurrency Cost Cost A. Investment Costa 1 Civil Works 57.44 57.44 114.88 8.45 8.45 16.89 82.18 2 Survey and Design - 15.64 15.64 - 2.30 2.30 11.18 3 Land Acquisition and Resettlement - 2.40 2.40 - 0.35 0.35 1.71 4 Capacity Buildingb 1.73 - 1.73 0.25 0.251.24 5 Taxes and Dutiesc 2.11 3.05 5.16 0.31 0.45 0.763.69 Subtotal (A) 61.27 78.51 139.79 9.01 11.55 20.56 100.00

B. Contingencies 1 Physicald 6.13 7.85 13.98 0.90 1.15 2.0610.00 2 Pricee 1.73 2.25 3.98 0.25 0.33 0.592.85 Subtotal (B) 7.86 10.10 17.96 1.16 1.49 2.64 12.85

C. Financing Charges During Implementationf 1 Interest During Implementation 8.96 3.87 12.83 1.32 0.57 1.89 9.18 2 Commitment Charges 0.43 - 0.43 0.06 - 0.06 0.31 Subtotal (C) 9.39 3.87 13.26 1.38 0.57 1.95 9.48

Grand Total (A+B+C) 78.52 92.49 171.01 11.55 13.60 25.15 122.33 a In July 2009 prices, with an exchange rate of CNY 6.8 to US$1.0. b Capacity building and institutional strengthening includes project implementation supervision, research and design, environmental monitoring, project management, and capacity development. The costs were estimated at US$ 0.27 million with tax. c Taxes and duties of $0.76 million will be financed by the Government. d Physical contingencies are computed at 10% of base cost. e Price contingencies are computed by expenditure based on annual domestic and foreign price inflation. Exchange rate fluctuations are estimated using a purchasing power parity model of adjustment. f Includes interest during construction and commitment charges. Interest during construction for ADB loan is computed at the 5-year forward London interbank offered rate (LIBOR) plus a spread of 0.2%. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

SA-J-5 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-9: Cost Estimates by Component Item $ (million) A. Base Costa 1. Fangchenggang 1.1 Urban Road Network and Related Municipal Infrastructures 76.54 1.2 Coastal Protection and Upgrading 23.88 2. Chongzuo 2.1 Urban Road Network and Related Municipal Infrastructures 44.26 2.2 Shuikou Lake Environmental Improvement 10.52 3. Baise 3.1 Urban Road Network and Related Municipal Infrastructures 42.63 3.2 Longwang Bridge 20.29 Subtotal (A) 218.12

B. Capacity Building and Institutional Strengthening 2.80

C. Contingencies 1. Physical 22.09 2. Price 6.06 Subtotal (C) 28.16

D. Financing Charges During Implementation 22.18

Total (A+B+C+D) 271.26 a Base cost are tax inclusive.

8. The project components’ annual cost estimates and financial cash flows are converted into real terms by removing the impacts of inflation and potential currency fluctuations, and further adjusted by removing IDC. They are then used as the inputs for both the financial viability analysis (calculation of FIRR) and economic analysis (Least Cost Analysis and calculation of EIRR).

2. Financing Plan

9. The financing plan is presented in detail and based on the project cost estimates for both a project component and expenditure category basis. It is presented in both a local currency basis as well as their US$ equivalents. It is decided at this stage that the total project investment cost will be $ 271.26 million (CNY 1,844.58 million). The total ADB loan will be at $150 million. It is tentatively assumed that the disbursement percentage for capacity building and interest during construction is 100%. The disbursement percentage for civil works is 84% for Fangchenggang components, 91% for Chongzuo components and 84% for Baise components. It is also assumed that the Municipal Finance Bureaus in the three cities will contribute a minimum of 25% in counterpart funds as owner’s equity injection. This is in response to the Notice Guo Fa (2009) No. 27 from State Council on the Adjustment of Capital Equity Proportion for the Fixed Assets Investment Projects. The remaining fund will be borrowed from the commercial bank loans. The interest rate and commitment fee of the ADB loan are at 3.31% and 0.15%, respectively. The loan period of the ADB loan is 25 years with a grace period of five years. The interest rate of the commercial loan is 5.94% and the repayment period is 10 years with a grace period of three years. The summary financing plan is provided in Table SA-J-10. Cost categories by financier for the whole Project are provided in Table SA-J-11. Detailed cost estimates by financer for project components are presented in the Table SA-J-12 through Table SA-J-17. The breakdown of ADB financing is presented in Table SA-J-18.

SA-J-6 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-10: Financing Plan Source $ (million) % Asian Development Bank 150.00 51.12 Domestic Banks 58.76 21.66 Fangchenggang Municipal Government 26.06 9.61 Chongzuo Municipal Government 16.92 6.24 Baise Municipal Government 19.52 7.20

Total 271.26 100.00 Note: Numbers may not add up due to rounding. Source: Asian Development Bank estimates.

Table SA-J-11: Cost Categories by Financier for Whole Project ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 157.66 134.79 85.49 19.76 12.54 3.11 1.97 2 Survey and Design 18.31 - - 6.78 37.04 11.53 62.96 3 Land Acquisition and Resettlement 42.15 - - 22.44 53.24 19.71 46.76 4 Capacity Building 2.80 2.80 100.00 - - - - Subtotal (A) 220.92 137.59 62.28 48.99 22.18 34.35 15.55

B. Contingencies 28.16 - - - - 28.16 100.00

C. Financing Charges During Implementation 22.18 12.41 55.96 9.77 44.04 - -

Total Project Costs 271.26 150.00 55.30 58.76 21.66 62.50 23.04

% Total Project Costs 100% 55.30 21.66 23.04 a Amount of ADB loan proceeds allocated to the cost category. b The amounts disbursed by ADB for eligible expenditures under a cost category will be subject to the ceiling set by the allocation of loan proceeds for such cost category. The loan disbursement percentage for capacity building and IDC are set as 100%. The percentage of civil works is 84% for Fangchenggang, 91% for Chongzuo and 84% for Baise respectively. The percentages may also be set depending on discussions and agreement with the ADB. Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

Table SA-J-12: Cost Categories by Financier for Fangchenggang Road Network and Related Municipal Infrastructures ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 56.47 47.20 83.59 9.27 16.41 - - 2 Survey and Design 5.46 - - 0.43 7.82 5.03 92.18 3 Land Acquisition and Resettlement 14.62 - - 14.62 100.00 - - 4 Capacity Building 0.98 0.98 100.00 - - - - Subtotal (A) 77.53 48.19 62.15 24.31 31.36 5.03 6.49

B. Contingencies 9.84 ----9.84 100.00

C. Financing Charges During Implementation 9.36 4.26 45.50 5.10 54.50 - -

Total Project Costs 96.72 52.44 54.22 29.41 30.41 14.87 15.37

% Total Project Costs 100 - 54.22 - 30.41 - 15.37

SA-J-7 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-13: Cost Categories by Financier for Fangchenggang Coastal Protection and Upgrading ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 18.94 15.83 83.59 - - 3.11 16.41 2 Survey and Design 4.94 - - - - 4.94 100.00 3 Land Acquisition and Resettlement ------4 Capacity Building 0.32 0.32 100.00 - - - - Subtotal (A) 24.20 16.15 66.75 -- 8.05 33.25

B. Contingencies 3.15 ----3.15 100.00

C. Financing Charges During Implementation 1.40 1.40 100.00 - - - -

Total Project Costs 28.75 17.55 61.07 -- 11.19 38.93

% Total Project Costs 100 - 61.07 -- -38.93

Table SA-J-14: Cost Categories by Financier for Chongzuo Road Network and Related Municipal Infrastructures ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 34.86 31.61 90.68 3.25 9.32 - - 2 Survey and Design 3.19 - - 3.19 100.00 - - 3 Land Acquisition and Resettlement 6.22 - - 0.34 5.55 5.87 94.45 4 Capacity Building 0.60 0.60 100.00 - - - - Subtotal (A) 44.86 32.21 71.79 6.78 15.11 5.87 13.09

B. Contingencies 5.73 ----5.73 100.00

C. Financing Charges During Implementation 4.18 2.97 71.06 1.21 28.94 - -

Total Project Costs 54.77 35.18 64.23 7.99 14.59 11.60 21.19

% Total Project Costs 100% - 64.23 - 14.59 - 21.19

Table SA-J-15: Cost Categories by Financier for Chongzuo Shuikou Lake Environmental Improvement ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 4.71 4.27 90.68 0.44 9.32 - - 2 Survey and Design 0.17 - - 0.17 100.00 - - 3 Land Acquisition and Resettlement 5.64 - - 1.66 29.47 3.98 70.53 4 Capacity Building 0.15 0.15 100.00 - - - - Subtotal (A) 10.67 4.41 41.40 2.27 21.29 3.98 37.32

B. Contingencies 1.34 ----1.34 100.00

C. Financing Charges During Implementation 0.94 0.41 43.48 0.53 56.52 - -

Total Project Costs 12.94 4.82 37.26 2.80 21.63 5.32 41.11

% Total Project Costs 100% - 37.26 - 21.63 - 41.11

SA-J-8 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-16: Cost Categories by Financier for Baise Road Network and Related Municipal Infrastructures ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 25.20 21.18 84.05 4.02 15.95 - - 2 Survey and Design 2.13 - - 2.13 100.00 - - 3 Land Acquisition and Resettlement 15.30 - - 5.82 38.01 9.49 61.99 4 Capacity Building 0.48 0.48 100.00 - - - - Subtotal (A) 43.11 21.66 50.24 11.97 27.76 9.49 22.01

B. Contingencies 5.46 ----5.46 100.00

C. Financing Charges During Implementation 4.36 2.00 45.85 2.36 54.15 - -

Total Project Costs 52.93 23.66 44.69 14.33 27.07 14.95 28.24

% Total Project Costs 100% - 44.69 - 27.07 - 28.24

Table SA-J-17: Cost Categories by Financier for Baise Longwang Bridge ($ million) ADB Other Cofinanciers Government % of Cost % of Cost % of Cost Item Total $a Categoryb $ Category $ Category A. Investment Costs 1 Civil Works 17.48 14.70 84.05 2.79 15.95 - - 2 Survey and Design 2.43 - - 0.87 35.85 1.56 64.15 3 Land Acquisition and Resettlement 0.37 - - - - 0.37 100.00 4 Capacity Building 0.27 0.27 100.00 - - - - Subtotal (A) 20.56 14.96 72.79 3.66 17.81 1.93 9.40

B. Contingencies 2.64 ----2.64 100.00

C. Financing Charges During Implementation 4.36 2.00 45.85 2.36 54.15 - -

Total Project Costs 25.15 16.34 64.99 4.23 16.82 4.57 18.18

% Total Project Costs 100% - 64.99 - 16.82 - 18.18

Table SA-J-18: ADB Financing by Project Component ($ million) Capacity Interest during Total ADB % of total Item Base Cost Building Construction Financing ADB Loan 1) Fangchenggang Urban Road Network 47.20 0.98 4.26 52.44 34.96% 2) Fangchenggang Coastal Protection and Upgrading 15.83 0.32 1.40 17.55 11.70% 3) Chongzuo Urban Road Network 31.61 0.60 2.97 35.18 23.45% 4) Shuikou Lake Environmental Improvement 4.27 0.15 0.41 4.82 3.21% 5) Baise Urban Road 21.18 0.48 2.00 23.66 15.77% 6) Baise Longwang Bridge 14.70 0.27 1.38 16.34 10.90%

Total 134.79 2.80 12.41 150.00 100.00% Sources: Based on DI’s FSR and following Preparation and Presentation of Cost Estimates for Projects Financed by the ADB in April 2008.

SA-J-9 Supplementary Appendix J: Detailed Financial Analysis

10. Counterpart funding needs to be put into effect during the construction period. Therefore, the provision of related counterpart funds should be confirmed by securing commitment letters. At this stage, Fangchenggang has provided a relatively firmed financing plan in term of counterpart fund arrangement, debt service arrangement, and operation budget arrangement. Chongzuo and Baise only have preliminary ideas for financing arrangements. Therefore, the PPTA Consultants urge the project companies closely work with the Finance Bureaus and the commercial banks to explore the best financing plan options and finalize financing plans. The related commitment letters should be provided to the PMO and the consultants to review before the loan appraisal.

3. Financial Projections and Detailed Financial Evaluation

3.1 Project Implementing Companies

11. With the current institutional arrangement, the Guangxi Zhuang Autonomous Region Government (GZARG) will be the project Execution Agency (EA). The three municipal governments will be the implementation agencies (IAs) and the owners and operators of the facilities constructed under the Project and will be responsible for debt servicing. The urban construction/development investment companies in the project cities will be the Project Implementation Companies (PICs). The PICs are all state-owned companies that function as the agents of the governments for the financing, including raising funds from commercial banks, and construction of urban infrastructure projects. They will manage the construction of the respect Project components, including the procuring goods and services and supervising construction. Thus, the financial analysis reviews the past financial performance of the municipal governments, analyze projections of their future revenue inflows and assess their ability to provide counterpart funds and to meet debt servicing obligations.

i) Fangchenggang Port District Urban Construction Investment Co.

12. The Fangchenggang Port District Urban Construction Investment Company Limited (FPDUCI) is a state-owned enterprise. The Fangchenggang Port District Government is its sole shareholder. It is set up to provide fund raising, investment, infrastructure construction, real estate development and other comprehensive services in the Fangchenggang Port District. It also has been conducting public urban infrastructure projects, such as the road network in Fangchenggang iron and steel base, residential development in Fangchenggang iron and steel base north port permanent resettlement area, road network in Fangchenggang City Dalong permanent resettlement area, road network in Gongche Industrial Zone, and road network in Qisha Industrial Zone. Under the Project, it will implement the Fangchenggang Urban Road Network and Related Infrastructures Component and the Fangchenggang Coastal Protection and Upgrading Component.

ii) Chongzuo Urban Construction Investment Co.

13. Chongzuo Urban Construction Investment Company Limited (CUCIC) was incorporated in February 2004 as a state-owned enterprise directly under the municipal government. It serves as the municipal government's investment and financing platform. It is responsible for investment and financing of the urban public infrastructure projects, investment and operation of municipal roads, bridges, water supply and drainage, sewage treatment, garbage disposal, gas pipelines, powerless pipeline, outdoor advertising and other urban infrastructure projects. Chongzuo UCIC has registered capital of CNY 293.62 million. At present, it has 45 staff that consists of five divisions and two offices –– such as chief engineer’s office, administration office, engineering department, quality supervision and engineering measurement department, project finance department, advertising department, and finance department.

SA-J-10 Supplementary Appendix J: Detailed Financial Analysis

14. In recent years, CUCIC has been implemented a large number of urban infrastructure construction projects, as well as a serious work to improve and actively promote Chongzuo gradually to be a new pattern of regional economic cooperation center. Its major construction projects include: Long Xiashan Area, Shilin District, Shilin Avenue Extension, road network in South District, City Plaza, the Jiangnan wastewater treatment plant, municipal landfill etc. over 20 projects. The total investment costs amounted to over CNY 1.2 billion. Among the implemented projects, the entire road network project has put into service. Long Xiashan District, Shilin District, City Plaza, the Jiangnan wastewater treatment plant projects are completed one after another and handed over for use. In addition to the proposed two ADB components, Chongzuo UCIC will also construct Chongzuo City Culture Square Landscape Project, and Chongzuo City, China-ASEAN International Cross-Cultural Marketing.

15. Under the Project, it will implement Chongzuo Urban Road Network and Related Infrastructures Component and the Shuikou Lake Environmental Improvement Component.

iii) Baise Development Investment Co.

16. Baise Development Investment Company Limited (BDIC) was approved by the Baise Municipal Government in July 2003 as a wholly state-owned enterprise directly under municipalities. Its business covers land development, urban improvement, urban infrastructure construction, real estate development, which as an integrated investment management company. Its registered capital is of CNY 147.8 million with assets of CNY 4.428 billion. It is the sole urban infrastructure investment and financing platform for the Baise Municipal People's Government. The BDIC consists of nine operating departments including an integrated office and Engineering Division, etc. There are more than 60 employees. Its business scope includes asset management, capital operation, municipal infrastructure construction, real estate development. It has completed many urban infrastructure projects in Baise.

17. As of 31 December 2008, BDIC has total assets of CNY 1.87 billion, which was 36.37% more than that in the previous year. Liabilities amounted to CNY 842.54 million, which was 16.15% more than that in the previous year. Owner's equity amounted to CNY 1.03 billion, which was 59.13% more than that in the previous year. Its asset to liability ratio is of 45%, which is at a relatively reasonable level.

18. By looking into the asset structure at the end of 2008, the current assets valued at CNY 214.19 million, of which currency funds are at CNY 192.56 million; The fixed assets amounted to CNY 1.44991 billion, of which construction in progress amounted to CNY 1.21 billion; intangible assets are at CNY 182.79 million; long-term investment are at CNY 21.3 million. The monetary funds are mainly sourced from infrastructure grants and bank loans. As of the end of 2008, it has received the cumulative allocation of CNY 728.51 million from Finance Bureau for various infrastructure projects. Total amount of loans of CNY 9.2 billion are in place, of which CNY 130 million are loan proceeds from Baise Youjiang Rural Cooperative Bank, the remaining CNY 790 million are loan proceeds from China Development Bank.

19. By reviewing the Income Statement, over the years, Baise CDIC has been mainly responsible for financing infrastructure projects and construction management. Its main revenue is from management fees for the construction implementation. The management fees are calculated based on the completed investment amount and the rate of management fee. By the end of 2008, Baise CDIC has accumulated completed investment of CNY 1.20 billion. It is eligible to recognize operating revenue at CNY 9.20 million. Moreover, according to the instructions of Municipal Government, it is eligible to accrue for a financing cost for project preparation based on 0.5% of total loan proceeds acquired and in place. By the end of

SA-J-11 Supplementary Appendix J: Detailed Financial Analysis

2008, the cumulative loan proceeds in account amounted to CNY 920 million, which should be eligible to accrue a total of CNY 4.6 million as financial cost for project preparation. Up to now, it has accrued for CNY 1.35 million as financial cost for project preparation. The remaining CNY 3.25 million was accounted as project financing cost. Meantime, it was accounted as business revenue. By the end of 2008, annual profit was CNY 3.83 million, of which CNY 3.80 was from project construction and other profit at CNY 0.02 million.

20. The net cash flow was CNY 40.86 million, of which the net cash flow generated from operating activities was CNY 0.20 million, net fund flow from investment activities was CNY -423.48 million, and net fund flow from financing was CNY 464.32 million. It is very obvious that Baise ‘s cash flow was generated mainly from fund-raising activities, e.g. bank loans and project counterpart funds, which has been linked with the Baise CDIC’s nature of business with investment and financing functions. Therefore, fund-raising, investment financing activities are the main source of cash inflows while cash outflows from investment activities is the company's main direction. Inflows was much more than outflows by CNY 40 million, indicating Baise CDIC 's cash flow is still relatively abundant, and solvency are also guaranteed.

21. Under the Project, the BDIC will implement the Baise Urban Road and Related Municipal Infrastructures Component and the Baise Longwang Bridge Component.

3.2 Cash Flow Analysis

22. To successfully implement the Project, a healthy cash flow arrangement should be well prepared. The PICs should raise adequate fund for project implementation. In addition to the ADB loan proceeds, it is expected that the counterpart fund will be in place in a timely manner. After the construction, the fixed assets will be transferred to the related government agencies for operation and generate social and economic benefit to the public. The debts should be served. It will be the IAs’ responsibility to provide counterpart fund, repay the loan principal and interest and provide operating budget to the related service entities. Thus, the detailed financial projection is conducted covering the whole project cycle and major business activities.

23. Provided in Table SA-J-19 through Table SA-J-21 are the cash flow projections for the project components in the three cities. The O&M cost estimated are based on the feasibility study reports. When the O&M costs are not provided by the feasibility study report, they are estimated by the PPTA Consultants.

Table SA-J-19: Cash Flow Analysis for Fangchenggang Components (CNY million) Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Operation Activities Cash Subtotal for Operations Activities 0 0 0 0 0.00 -5.41 -10.82 -10.82 -10.82 -10.82

Investment Activities Project Investment 154.69 226.72 157.61 162.63 151.54 0 0 0 0 0 Cash Subtotal for Investment Activities -154.69 -226.72 -157.61 -162.63 -151.54 0 0 0 0 0

Financing Activities PIC’s Equity Infusions 0 0 0 0 0 0 0 0 0 0 Long-term Loans Borrowing 126.17 174.66 130.83 125.81 118.51 0 0 0 0 0 Loan Interest Repayment 0 0 0 0 0 19.29 20.80 18.49 16.15 13.80 Loan Principal Repayment 0 0 0 52.90 46.57 47.15 47.75 48.37 19.91 20.56 Cash Subtotal for Financing Activities 126.17 174.66 130.83 72.92 71.93 -66.44 -68.55 -66.85 -36.06 -34.36

Net Cash Changes -28.52 -52.05 -26.77 -89.72 -79.61 -66.44 -68.55 -66.85 -36.06 -34.36

Government Support 28.52 52.05 26.77 89.72 79.61 66.44 68.55 66.85 36.06 34.36

SA-J-12 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-20: Cash Flow Analysis for Chongzuo Components (CNY million) Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Operation Activities Cash Subtotal from Operations Activities 0 0 0 0 0.00 -3.81 -7.62 -7.62 -7.62 -7.62

Investment Activities ct Investment 91.37 110.76 101.90 77.18 79.27 0 0 0 0 0 Cash Subtotal from Investment Activities -91.37 -110.76 -101.90 -77.18 -79.27 0 0 0 0 0

Financing Activities Equity Infusions 0 0 0 0 0 0 0 0 0 0 -term Loans Borrowing 65.70 74.86 72.72 65.04 67.06 0 0 0 0 0 Interest Repayment 0 0 0 0 0 11.64 10.78 9.81 8.83 7.85 Principal Repayment 0 0 0 9.17 10.70 24.30 20.69 21.02 21.36 21.71 Cash Subtotal from Financing Activities 65.70 74.86 72.72 55.87 56.36 -35.94 -31.46 -30.83 -30.19 -29.56

Net Cash Changes -25.66 -35.90 -29.18 -21.32 -22.91 -35.94 -31.46 -30.83 -30.19 -29.56

Government Support 25.66 35.90 29.18 21.32 22.91 35.94 31.46 30.83 30.19 29.56

Table SA-J-21: Cash Flow Analysis for Baise Components (CNY million) Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Operation Activities Cash Subtotal from Operations Activities 0 0 0 0 0 -1.22 -2.44 -2.44 -2.44 -2.44

Investment Activities Project Investment 105.927 131.008 119.195 86.299 88.495 0 0 0 0 0 Cash Subtotal from Investment Activities -105.93 -131.01 -119.19 -86.30 -88.49 0 0 0 0 0

Financing Activities PIC’s Equity Infusions 0 000000 0 0 0 Long-term Loans Borrowing 75.56 89.20 85.72 72.85 74.87 0 0 0 0 0 Loan Interest Repayment 0 0 0 0 0 13.70 12.38 10.96 9.52 8.08 Loan Principal Repayment 0 0 0 15.60 18.43 32.03 28.42 28.75 29.09 29.44 Cash Subtotal from Financing Activities 75.56 89.20 85.72 57.25 56.44 -45.74 -40.80 -39.71 -38.61 -37.52

Net Cash Changes -30.37 -41.81 -33.48 -29.05 -32.06 -45.74 -40.80 -39.71 -38.61 -37.52

Government Support 30.37 41.81 33.48 29.05 32.06 45.74 40.80 39.71 38.61 37.52

24. The cash flow forecast for operation activities cover O&M costs for the proposed components when the facilities enter into service. It is also assumed that the major mid scale repair and replacement will occur every five years and big scale repair and replacement will occur every ten years. As the component implementation period will be in five years, the facilities will be in the service in the sixth year. Thus, the first major repair and replacement will occur in the 9th year. However, the repair cost will be accrued equally during the operating period.

25. The investment activities will be limited to the project component asset purchase and construction cost. It agrees with the cost estimate of the project component. The financing activities will associate with the project fund raising and debt service, including ADB loan and domestic loans.

26. The cash flow is then summarized from operation, investment and financial activities. It revealed a negative cash flow throughout the project period, which confirms that timely government counterpart fund support, O&M budget, and debt service will be critical for project implementation.

4. Fiscal Capacity Analysis

4.1 Fiscal Capacity Analysis for Fangchenggang

27. Fangchenggang City was built and named in accordance with geographic location.

SA-J-13 Supplementary Appendix J: Detailed Financial Analysis

The fiscal revenue has improved significantly. It has strived to achieve various fiscal financial tasks and doubled fiscal revenue in only four years. In the past three years (2006 to 2008), Fangchenggang has ranked No. 1 in fiscal revenue growth among the 14 prefecture-level municipalities in Guangxi. In the first half of 2009, the fiscal revenue reached CNY 1.378 billion or an increase of 19.6% over the same period of last year, in spite of the international financial crisis. The detailed fiscal revenue, expenditure and debt situations are presented in the following Table SA-J-22.

Table SA-J-22: Current Fiscal Situation in Fangchenggang (CNY million) Items 2005 2006 2007 2008 Fiscal Revenues 1,416 1,907 3,034 4,807 % growth rate 35% 59% 58%

Recurrent Expenditure 860 866 1,151 1,535 % growth rate 1% 33% 33%

Discretionary Expenditures 460 932 1,750 3,014 % growth rate 103% 88% 72%

Existing Debt Total Debt 809 943 1,393 1,554 International debt 92 92 84 84 Domestic debt 717 851 1,309 1,470 % growth rate of total debt 17% 48% 12%

Fiscal Surplus (Deficit) 97 109 133 258

28. Due to effectively strengthening fiscal revenue collection and management and the active support to local economic development from the central and provincial governments, Fangchenggang’s fiscal revenue has experienced continuous rapid increase. The disposable fiscal revenue has increased extensively at an average of 51% in the past three years. Fiscal recurrent expenditures have been well controlled at an annual average growth of 22%. In order to create a sound economic development environment for taxation and add additions to the potential for future economic development, Fangchenggang has opened up more financial resources. One is to actively make efforts for obtaining the Government Bonds and funds for infrastructure projects. Those funds are primarily to support transportation infrastructure construction and Fangchenggang 200,000-ton berths and other major projects. Second is to raise funds for providing the full support to the construction of major industrial projects, including Fangchenggang iron and steel base project, nuclear projects, Wan Xi Iron and Steel Company, Hongyuan pulp and paper plants, power plants. Most of the major industrial projects have been put into operation. The ongoing project includes construction of industrial parks in Qisha, Yuzhouping, Jiangping, Maoling; construction the urban district administration center building, etc. Therefore, annual fiscal expenditures have also increase rapidly at 80%. The total amount spending in the key projects and urban construction in recently years is more than ten times of those spent in the first 10 years. The review of the existing debt shows that the amount of international debt has gradually reduced while the amount of domestic debt has increased significantly. Overall, it will realize fiscal revenues that are slightly more than the fiscal expenditure (Table SA-J-23).

SA-J-14 Supplementary Appendix J: Detailed Financial Analysis

Table SA-J-23: Summary of Fiscal Capacity Analysis for Fangchenggang (CNY million) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 6,250 8,750 11,800 16,600 22,000 30,000 39,000 50,700 65,910 85,683 Recurrent Expenditure 1,996 2,594 3,373 4,384 5,700 7,410 9,633 12,523 16,279 21,163 Discretionary Expenditures 4,069 5,493 7,415 10,010 13,514 18,244 24,630 33,250 44,887 60,598 Fiscal Surplus 186 663 1,012 2,205 2,786 4,346 4,738 4,928 4,743 3,922

Equity Contribution 28.52 52.05 26.77 36.82 33.04 % of Fiscal Surplus 4.3% 5.1% 1.2% 1.3% 0.8%

Debt Service 52.90 46.57 66.44 68.55 66.85 36.06 % of Fiscal Surplus 1.9% 1.1% 1.4% 1.4% 1.4% 0.9%

Operation Cost 5.41 10.82 10.82 10.82 10.82 % of Fiscal Surplus 0.00% 0.12% 0.23% 0.22% 0.23% 0.28%

Project Expenditure as % 4.3% 5.1% 1.2% 3.2% 2.0% 1.6% 1.6% 1.6% 1.2% of Fiscal Surplus

29. Fangchenggang has a well-formulated urban master plan (2008-2025). Details are presented in section Sector Analysis – Urban Development in Fangchenggang. According to the recent year’s fiscal situation and growing trend, by extensively utilizing seaport advantage for foreign trade, continuously improving urban infrastructure and transportation network, and further adjusting and optimizing industry’s economic structure, it is project that Fangchenggang will experience a long term sustainable development. It is therefore assumed that the fiscal revenues will have an annual increase of 30-40% during the projection period. The recurrent expenditure has already been under the control. It is suggested that more prudent cost monitoring work be conducted. The recurrent expenditure will be kept at an annual increase of 30%. As major fixed investment projects are enter into service, it is therefore assumed that the annual increase of the discretionary expenditures will reduce to 35% during the project period. The analysis further exams the fiscal impacts of project equity contribution, debt service for domestic and international loans, and O&M cost budget after the project enter into service. Overall, the total contribution of the Fangchenggang Municipal Government through the fiscal source will amount to less than 1.9% of fiscal surplus. The results confirm that all the factors will not place significant impact even to the fiscal surplus. The updated financing plan also demonstrated that Fangchenggang has already had a firm financing plan for equity contribution, debt service and O&M budget. Therefore, it is concluded that the Fangchenggang has sufficient fiscal capacity and experience to implement the proposed Fangchenggang Urban Road Network and Related Municipal infrastructures Component and the Coastal Protection and Upgrading Component.

4.2 Fiscal Capacity Analysis for Chongzuo

30. Chongzuo Municipality was established in 2002. The "Eleventh Five-Year Plan" set the goal to seize the opportunity of open up and development. Based on the local regional advantages, Chongzuo focuses on the three areas. The first key area is to support sugar industry development. It has achieved the “three-increase target” –– “sugarcane farmers increase income; enterprises increase business efficiency; and the municipal finance increases tax income. The second focus is to assure benefit policy to the manganese industry and develop a chain manganese processing industry. Thus, manganese industry production structure has been optimized. The third area is to strengthen urban infrastructure construction and enhance invitation for business investment, which utilize the advantage of corridor economy to develop sustainable financial resources in the following years. Over the past four years of 2005 to 2008, Chongzuo’s fiscal revenue (i.e., the actual available financial) totaled CNY 3.97 billion, with an average annual increase of 18.2%. Its total fiscal expenditure amounts to CNY 3.67 billion with an average annual increase of 17.4%. Of the total fiscal expenditure, around 66% is for recurrent expenditure and over 33% is for

SA-J-15 Supplementary Appendix J: Detailed Financial Analysis discretionary expenditures. Overall, it has achieved balance of fiscal revenue and expenditures with a small surplus. As a new and small border city facing rapid urban development, Chongzuo has also utilized loans from domestic banks and international organizations. Up to the end of 2008, its total debt reached CNY 721 million, including foreign debt of CNY 155 million and domestic debt of CNY 566 million. The detailed information on fiscal revenue, expenditure and debt is presented in Table SA-J6-24.

Table SA-J-24: Current Fiscal Situation in Chongzuo (CNY million) Items 2005 2006 2007 2008 Fiscal Revenues 807 858 971 1,332 % growth rate 6% 13% 37%

Recurrent Expenditure 539 498 540 869 % growth rate -8% 9% 61%

Discretionary Expenditures 250 261 307 406 % growth rate 5% 18% 32%

Existing Debt Total Debt 148 642 552 721 International debt 2 166 166 155 Domestic debt 146 476 386 566 % growth rate of total debt 332% -14% 31%

Fiscal Surplus (Deficit) 18 99 123 57

31. Looking forward, Chongzuo is confident to keep up the paces of the sustainable development with the support of Central Government and the Guangxi Zhuang Autonomous Region Government’s policies to further expand domestic demand and promote economic development, implement the Western Development Strategy, and develop regional cooperation under the GMS, ASEAN and Pan-Beibu Gulf initiatives. It will promote the development strategy of "accelerate industrial development and build a strong industrial base”. By the end of 2010, it is targeted to implement a CNY 30 billion program, which will include CNY 10 billion for each of the three pillar industries, namely, sugar, manganese and building materials. Chongzuo’s fiscal finance will be growing more solid. With the development of the industrial park, Chongzuo will continue to increase investment attraction and project construction efforts in accelerating the industrialization of fiscal capacity construction. Additionally, it will speed up the central city’s construction, improve the urban functions, and promote trade and commerce, service industry development. Thus, expanding consumption will be achieved and the fiscal financial strength will be enhanced.

32. Meantime, Chongzuo will also strengthen assets management to the state-owned enterprises. It is to ensure to maintain and appreciate the values of the state-owned assets. As 2/3 of fiscal expenditure is for recurrent expenditure, Chongzuo identified the importance to enhance the level of budget management. With the above practical strategies, Chongzuo will increase savings and promote economic development. It is projected that Chongzuo’s fiscal capacity will continue to grow and further strengthened. According to the financial analysis, it is projected that Chongzuo’s fiscal revenues will increase at an annual rate of 18% to reach CNY 1.85 billion in 2010, CNY 2.18 billion in 2011, CNY 2.58 billion in 2012, CNY 3.05 billion in 2013 and CNY 3.60 in 2014. Meanwhile, with countermeasures of tight fiscal budget, Chongzuo will implement more stringent spending measures to control recurrent expenditures, strengthen project expenditure management with project performance evaluation and enhanced supervision. It is assumed that the annual increase of the recurrent expenditure and discretionary expenditures will be at 10%. Thus, the annual fiscal surplus will increase and be ready to be utilized as the project counterpart fund. The accumulated fiscal surplus over the project period of 2010 to 2014 will be CNY 2,512 million while the counterpart fund requirement for the project is only CNY 92 million during the same period.

SA-J-16 Supplementary Appendix J: Detailed Financial Analysis

Thus, the total Chongzuo government equity counterpart fund is only 3.7% of the accumulated fiscal surplus. The analysis also demonstrated that the fiscal debt service capacity is also strengthened over the project period. The project debt service will account for less than 2.3% of fiscal surplus during the peak period to service the debts. For operation of the two Project components, the Chongzuo Municipal Government will need allocate CNY 7.62 million budget per annum, which will account for less than 0.5% of fiscal surplus. Overall, the total contribution of the Chongzuo Municipal Government through the fiscal source will amount to less than 2.06% of fiscal surplus. Therefore, Chongzuo has sufficient fiscal capacity for the project implementation. The detailed analysis is presented in Table SA-J-24.

Table SA-J-24: Summary of Fiscal Capacity Analysis for Chongzuo (CNY million) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 1,571 1,854 2,188 2,582 3,046 3,595 4,242 5,005 5,906 6,969 Recurrent Expenditure 956 1,052 1,157 1,272 1,400 1,540 1,694 1,863 2,049 2,254 Discretionary Expenditures 446 491 540 594 653 718 790 869 956 1,052 Fiscal Surplus 169 312 491 715 993 1,336 1,758 2,273 2,900 3,663

Equity Contribution 25.66 35.90 29.18 12.14 12.21 % of Fiscal Surplus 8.2% 7.3% 4.1% 1.2% 0.9%

Debt Service 9.17 10.70 35.94 31.46 30.83 30.19 % of Fiscal Surplus 0.9% 0.8% 2.0% 1.4% 1.1% 0.8%

Operation Cost 3.81 7.62 7.62 7.62 7.62 % of Fiscal Surplus 0.0% 0.3% 0.4% 0.3% 0.3% 0.2%

Project Expenditure as % 8.2% 7.3% 4.1% 2.1% 2.0% 2.5% 1.7% 1.3% 1.0% of Fiscal Surplus

4.3 Fiscal Capacity Analysis for Baise

33. Baise was originally considered as an old revolutionary base area that was extremely poor with a lot of ethnic minority and located on the boarder. After establishment of the Baise Municipality six years ago, it has experienced overall improvement in social and economic development. Average annual GDP increase reached 15%, from CNY 23.9 billion in 2005 to CNY 41.6 billion in 2008. The Fiscal Revenue has increased even quicker from CNY 948 million in 2005 to CNY 2,023 million in 2008 at an average increase of 29%. On the expenditure side, the recurrent expenditures actually increased gradually. But the discretionary expenditures incurred in the past three years changed dramatically. It is mainly due to the large-scale investments in urban infrastructure projects, with support from the central and provincial governments under the various support programs such as the Western Development Strategy, Ethnic Minority Development, Border Communities Revitalization and “Red Tourism”. Baise does not have international debt. Its domestic debt keeps the paces with the urban infrastructure progress. The detailed fiscal information for Baise is provided in Table SA-J-25.

Table SA-J-24: Current Fiscal Situation in Baise (CNY million) Items 2005 2006 2007 2008 Fiscal Revenues 949 1,144 1,711 2,024 % growth rate 21% 50% 18%

Recurrent Expenditure 522 614 690 854 % growth rate 18% 12% 24%

Discretionary Expenditures 427 530 1,022 1,170 % growth rate 24% 93% 15%

Existing Debt Total Debt 618 644 780 926

SA-J-17 Supplementary Appendix J: Detailed Financial Analysis

International debt - - - - Domestic debt 618 644 780 926 % growth rate of total debt 4% 21% 19%

Fiscal Surplus (Deficit) 0 0 0 0

34. Looking forward, in order to fully support the equity for the investment, Baise needs continuously strengthen its fiscal capacity. By closely looking into the fiscal revenue, it was found out that its growth rates of the fiscal revenues are usually 3% more than the GDP growth rate. In addition, Baise is eligible to obtain more and more amount of budget transfers from the central and provincial governments under the various support programs. Moreover, Baise will benefit greatly from the regional cooperation under the GMS, China-ASEAN Free Trade Agreement and Pan-Beibu Gulf initiatives.

35. At present, Baise has also gradually developed an aluminum industrial base and some industries that were moved from other provinces. Therefore, it is assumed that the annual Fiscal Revenue increase can achieve 27% conservatively. On the fiscal expenditure side, the recurrent expenditures are relatively stable. It is assumed that it will keep the same paces during the project period. Of course, local economic booming needs a lot of investment and projects. A well designed city development plan and fiscal budget plan is crucial and in high priority. Thus, the discretionary expenditures are tentatively assumed with the same growth rate as the fiscal revenues. The summary results are presented in Table SA-J-26.

Table SA-J-26: Summary of Fiscal Capacity Analysis for Baise (CNY million) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Fiscal Revenues 2,570 3,264 4,146 5,265 6,687 8,492 10,785 13,697 17,395 22,092 Recurrent Expenditure 1,021 1,226 1,471 1,765 2,118 2,542 3,050 3,660 4,392 5,271 Discretionary Expenditures 1,407 1,829 2,378 3,092 4,019 5,225 6,793 8,830 11,480 14,923 Fiscal Surplus 142 209 297 408 549 725 942 1,207 1,524 1,898

Equity Contribution 30.37 41.81 33.48 13.45 13.63 % of Fiscal Surplus 14.5% 14.1% 8.2% 2.4% 1.9%

Debt Service 15.60 18.43 45.74 40.80 39.71 38.61 % of Fiscal Surplus 2.8% 2.5% 4.9% 3.4% 2.6% 2.0%

Operation Cost 1.22 2.44 2.44 2.44 2.44 % of Fiscal Surplus 0.00% 0.17% 0.26% 0.20% 0.16% 0.13%

Project Expenditure as % 14.5% 14.1% 8.2% 5.3% 4.6% 5.1% 3.6% 2.8% 2.2% of Fiscal Surplus

36. The financial analysis shows that Baise will be able to achieve Fiscal budget balance with a positive surplus throughout the projection period. With a well designed city master plan and budget plan, more and more surplus will be generated during the project period. The Equity contribution will constitute higher amount in the first couple of years and it will reduce in the following years. It is therefore suggest the Baise Municipal Government allocate the investment fund as priority, and support the project fund on a timely basis. When the fiscal capacity is strengthened in the following years, the debt service obligation and operation budget will not place a significant impact to Baise’s fiscal budget. Overall, the total contribution of the Baise Municipal Government through the Fiscal source will amount to less than 4.4% of fiscal surplus. Therefore, it is concluded that Baise has sufficient fiscal capacity to implement the proposed Baise Urban road Network and Municipal Infrastructure Component, and Baise Longwang Bridge Component.

SA-J-18 Supplementary Appendix K:

Financial Management Assessment Table of Contents

A. Introduction ...... 1

B. Staffing ...... 1

C. Accounting and Reporting ...... 2

D. Project Auditing ...... 2

E. Financial Management System ...... 2

F. Procurement Capacity Assessment ...... 3

F. Capacity Building and Institutional Strengthening ...... 3 Supplementary Appendix K: Financial Management Assessment

Supplementary Appendix K:

Financial Management Assessment

A. Introduction

1. The implementation of the Project components will be carried out by the Project Implementing Companies (PICs). Financial management assessments (FMA) of the PICs have therefore been undertaken to assess their abilities to undertake and fulfill ADB’s requirements for implementing the project components. The assessments were carried out in accordance with ADB guidelines 1 , including the use of the financial management assessment questionnaire and field interviews. This supplementary appendix summarizes the main findings of the financial management assessment.

B. Staffing

i) Fangchenggang City Port District Urban Construction Investment Co.

2. The Fangchenggang City Port District Urban Construction Investment Company Limited (FCPDUCIC) is the Project Implementing Company (PIC) for the two Project components in Fangchenggang: i) urban road network and related municipal infrastructures; and ii) coastal protection and upgrading. The FCPDUCIC has a financial department with three staff, including the manager, accountant and cashier. The accountant and cashier have the certificates of assistant accountants issued by the local government. During the implementation of the Project, the Financial Department will be responsible for the financial management for the two Project components.

ii) Chongzuo Urban Construction Investment Co.

3. The Chongzuo City Urban Construction Investment Company Limited (CCUCIC) is the PIC for the two Project components in Chongzuo: i) urban road network; and ii) Shuikou Lake environmental improvement. The CCUCIC has a financial department with five staff. Three of them are permanent staff and the other two are contractual. The accountants have the certificates of assistant accountants issued by the local government. During the implementation of the Project, the Financial Department will be responsible for the financial management of the two Project components.

iii) Baise City Development Investment Co.

4. The Baise City Development Investment Company Limited (BCDIC) is the PIC for the two Project components in Baise: i) urban road network; and ii) Longwang bridge. The BCDIC has a Financial Department with five staff. The Manager of Financial Department has economics background and he has the overall role of management and coordination. One of its deputy managers holds the certificate of accountant issued by the local government and she is in charge of the technical work of accounting and reporting. The Financial Department has two cashiers. One is for the cash management of administration and the other is for investment projects. One of them has the certificate of assistant accountant issued by the local government. During the implementation of the Project, the Financial Department will be responsible for the financial management of the two Project components.

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

SA-K-1 Supplementary Appendix K: Financial Management Assessment

C. Accounting and Reporting

5. The PICs have adequate computerised financial accounting and reporting systems and procedures on the flow of accounting, financial, and project physical progress related to its current project activities.

6. Responsibilities and duties within the PICs are clearly defined and the following functions and duties are fulfilled by different units or positions: approval, executing, and recording of transactions; ordering and receiving, paying, and accounting for goods and services purchased; approval of payment and bank reconciliation; approval of budget and variations from the budget. The PICs maintain up to date record of receipts and payments. Collection, timely deposit and recording of receipts are properly controlled. The cash balance and cashbook is verified monthly to ensure control and accuracy. The bank accounts are reconciled at the end of each month after the closing of each month. The outstanding items of bank reconciliation are reviewed and appropriate action is taken within reasonable time.

7. Financial statements are prepared with the use of a computerised financial management system on a monthly, quarterly, half yearly and yearly basis and then submitted to senior managers, board members, and other key stakeholders such as finance bureaus. Current reporting system has the capacity to link the financial information with a project’s physical progress. Financial reports compare actual expenditures with budgeted and planned allocations. Also there is regular review for budget utilization along with physical progress by management.

8. The PICs are using the Accounting System for Enterprises which was issued by the Ministry of Finance. In addition, the Accounting System for State-Owned Construction Units is used for investment projects. However, according to the instruction given by the Ministry of Finance, the PICs will use the Accounting Method for World Bank-financed projects to make their bookkeeping and prepare their accounting reports for this Project. During the implementation of the Project components, the PICs will set up project accounts that are separated from their existing company accounts. The accounting reports of the Project components will be submitted to the GPMO of the EA for consolidation. The accounting reports will be prepared twice a year and the yearly report will be audited.

D. Project Auditing

9. The PICs are now subject to yearly independent auditing executed by qualified auditing firm. The audit report is generally issued in the first quarter of each year. There are no significant issues raised in auditing reports of the past three years. All issues and recommendations in the auditing reports of past three years have been actioned.

10. The audit for this Project will be carried by the Audit Office of Guangxi Zhuang Autonomous Region according to the authorization given by the National Audit Office. The audit will be conducted following the Chinese Government Auditing Standards. The auditors will express their opinions for the entire proposed Project. The auditors’ report will be sent to the GPMO of the EA for submission to ADB before 30 June of each year.

E. Financial Management System

11. The current financial management systems in the PICs can meet the basic requirements by the government in terms of staffing, accounting, and internal control. However, none of them has experience in preparing and implementing foreign-financed projects. Each PIC has small but experienced teams in the implementation of domestic projects, but will need to be strengthened especially in the areas of project management,

SA-K-2 Supplementary Appendix K: Financial Management Assessment

ADB procurement and disbursement procedures, environment protection, and resettlement in order to facilitate the smooth and successful implementation of the two Project components.

F. Procurement Capacity Assessment

12. A procurement capacity assessment (PCA) was undertaken to assess the PICs’ ability to undertake project procurement following ADB’s procurement guidelines. The assessment was based on the procurement capacity assessment questionnaire and field interviews.

13. According to Chinese procurement laws and regulations, the PICs have to find procurement agents to procure works and equipment. The technical specifications of the bidding document are prepared by the design institutes, and the commercial parts of the bidding document are prepared by the procurement agent. The bidding proposals are evaluated by an evaluation committee that include members randomly selected from the local expert pool that is administered by the government tendering office. The national evaluation methods consist of comprehensive evaluation, comprehensive lowest evaluated price, reasonable lowest bid price, comprehensive assessment, and two-stage evaluation. The method of lowest evaluation price is seldom used to avoid a low bid that may not guarantee the successful implementation of project. The comprehensive evaluation methods are the commonly used. They are different from the requirements by ADB procurement guidelines. The PICs have agreed to use ADB procurement guidelines for the Project.

14. Since the PICs are state-owned enterprises administered under the respective municipal governments, they will follow the procedures for government procurement described above. None of the PICs has experience in procurement under IFI-financed projects, but they all have undertaken many public infrastructure projects and therefore have gained rich experience in organizing and coordinating government procurement. They will play a similar organizing and coordinating role for this Project, and will be supported by the design institutes and the certified national procurement agent. This combined capacity will be able to meet the requirements for procurement under this Project, although training on ADB procurement policies and procedures, to be offered by the loan implementation consultants, will be helpful to facilitate and expedite the procurement process.

F. Capacity Building and Institutional Strengthening

It is recommended that at least one additional staff with appropriate qualifications be recruited to strengthen each PIC. This new staff will be assigned the overall responsibility for the accounting and reporting for the Project. The loan implementation consulting services will cover training and support in the areas of financial management, procurement and disbursement, and financial reporting. As a consequence of these initiatives, the proposed project financial management arrangements are considered satisfactory.

SA-K-3 Supplementary Appendix L:

Detailed Economic Analysis TABLE OF CONTENTS

1. INTRODUCTION ...... 1

2. DEVELOPMENT CONTEXT ...... 1

3. PROJECT RATIONALE ...... 4

4. PROJECT COSTS AND BENEFITS ...... 5

4.1 Road Traffic Forecasting ...... 5 4.2 Travel Cost Models for Road Investment Analysis...... 5 4.3 Road Investment Proposals ...... 7 4.4 Coastal Protection and Upgrading ...... 7 4.5 Environment ...... 7

5. PROJECT ECONOMIC ANALYSIS ...... 8

5.1 Project Benefits ...... 8 5.2 Land Value Background ...... 8 5.3 Land Value Estimated EIRRs ...... 9 5.4 Urban Development and EIRRs ...... 10 5.5 Project Costs ...... 11 5.6 Least Cost Analysis ...... 11

6. URBAN ROAD NETWORK COMPONENTS ...... 12

6.1 Fangchenggang Road Network and Related Municipal Infrastructures ...... 12 6.3 Fangchenggang Coastal Protection and Upgrading ...... 14 6.4 Chongzuo Road Network and Related Municipal Infrastructures ...... 14 6.5 Chongzuo Shuikou Lake Environmental Improvement ...... 16 6.6 Baise Road Network and Related Municipal Infrastructures ...... 16 6.7 Summary ...... 17

7. SENSITIVITY ANALYSIS ...... 18

8. DISTRIBUTION ANALYSIS ...... 18

iii Supplementary Appendix L: Detailed Economic Analysis

ABBREVATIONS

ADB - Asian Development Bank AIFC - Average Incremental Financial Cost CM - Choice Modelling CNY - Chinese Yuan CVM - Contingent Valuation Method DCF - Discounted Cash Flow DI - Design Institute DFR - Draft Final Report EIRR - Economic Internal Rate of Return ENPV - Economic Net Present Value EOCC - Economic Opportunity Cost of Capital FSR - Feasibility Study Report GZARG - Guangxi Zhuang Autonomous Region Government IA - Implementing Agency LCA - Least Cost Analysis PDA - Property Damage Avoided PIR - Poverty Impact Ratio PRC - People’s Republic of China SERF - Shadow Exchange Rate Factor SI - Sensitivity Indicator SV - Switching Value SWR - Shadow Wage Rate TA - Technical Assistance TEC - Total Economic Value VOA - Value of Accidents VOC - Vehicle Operating Costs VOT - Value of Time WACC - Weighted Average Cost of Capital WTP - Willingness to Pay WTA - Willingness to Accept Supplementary Appendix L: Detailed Economic Analysis

1. Introduction

1. The purpose of the proposed Project is to improve the quality of life for the residents of Fangchenggang, Chongzuo and Baise, three southwestern border cities in Guangxi Zhuang Autonomous Region (GZAR), by promoting sustainable economic and urban development and enhancing their ability to participate in and benefit from regional cooperation. The scope of the Project entails six engineering components and a technical assistance on capacity building and institutional strengthening. The six engineering components entail three general categories of interventions: i) an urban road network and related municipal infrastructures for each city, and a bridge in Baise that is connected to the Project road network; ii) coastal protection and upgrading in Fangchenggang, including tidal flood control, mangrove forest protection and coastal environmental improvement; and iii) Shuikou Lake environmental improvement in Chongzuo.

2. The economic analysis entails the rationale, Project costs and benefits, least-cost analysis, calculation of economic internal rate of return (EIRR), sensitivity analysis and distributional analysis, for both the Project as a whole and the individual components. The economic analysis was undertaken in accordance with Guidelines for the Economic Analysis of Projects; Guidelines for the Economic Analysis of Water Supply Projects; Bank Criteria for Subsidies; and Economic Evaluation of Environmental Impacts: A Workbook. It also drew on ERD Technical Note No 13, Assessing the Use of Project Distribution and Impact Analysis at the ADB and Cost Benefit Analysis and the Environment – Recent Developments, David Pearce, Giles Atkinson and Susan Mourato, OECD, December 2006. In consideration of the proposed Project interventions being an integral part of the urban expansion guided by the urban master plans, two approaches are used in the analysis: (a) land value approach; and (b) economic growth approach. The land value approach calculates the incremental land values increases from the Project investments. The economic growth approach treats the city’s urban development as a system and calculates the net return measured by incremental GDP minus labour costs and incremental O&M. Data on land values were obtained from the cities’ land resources bureau. They reflect most recent open sales of land, through competitive tendering, within or in the closest vicinities of the Project areas. Furthermore, a comparison between the two approaches and the more traditional cost benefit methodology normally used by the ADB has been done. The traditional cost-benefit methodology estimates the willingness-to-pay from user benefits, on a with-and-without-the- Project basis. For roads, they are changes in user costs, including vehicle operating cost (VOC), value of time (VOT) and value of accidents (VOA). For the coastal protection and upgrading component, they are decreases in direct damages.

2. Development Context

2.1 Development Advantages

3. The three Project cities have two major comparative advantages. First, they are rich in natural resources1. As a coastal city, Fangchenggang possesses one of the best seaports in the PRC with a throughput capacity of more than 25 million tons. Chongzuo’s manganese reserve accounts for more than 1/4 of the national total and sugar production close to 1/5 of the national total. Baise ranks second in the country in term of bauxite reserve totalling more than one billion tons, and its hydropower potential amounts to 5,150 MW. Second, they are located in the conjuncture of several subnational development and subregional cooperation initiatives, including the Western Development Strategy, Pan-Pearl River Delta Economic Cooperation, Pan-Beibu Gulf Economic Cooperation, Greater Mekong Subregion (GMS) and

1 See PPTA Draft Final Report for detailed analyses of the Western Development Strategy, regional cooperation, and urban development in the Project cities.

SA-L-1 Supplementary Appendix L: Detailed Economic Analysis

China-ASEAN Free Trade Agreement (CAFTA). All three cities share borders with Vietnam, with fast growing border trade. As PRC’s gateways to ASEAN, the three Project cities are expected to benefit greatly from trade, as the CAFTA comes into effect on 1 January 2010 that will reduce the tariffs to zero for some 7,000 types of goods.

2.2 Regional Cooperation

4. The three Project cities have been a lending priority for ADB under the GMS Program to build the subregion’s transport and economic corridors. ADB provided: i) $52- million loan to Fangcheng to upgrade its port and local highways (completed in 2000); ii) $150-million loan to build the Nannning-Youyiguan (completed in 2005); iii) $200-million loan (Board approval in 2004) and $300 million loan (Board approval in 2007) to build the Nanning-Baise-Longlin expressway and local highways. The Nanning-Youyiguang 2 Expressway forms part of the GMS Eastern Transport Corridor, and the other expressways form part of the GMS Northern Transport Corridor.

5. Connectivity is apparently critical in facilitating the flow of goods and services. This connectivity is not only determined by inter-city transport infrastructure but also by the urban centers as nodes in the web of transport corridors. These nodes are bases of production, distribution and consumption of goods and services. The infrastructure services within the nodes, being them road networks or environmental amenities, can serve to facilitate or constrain the transport corridors to become economic corridors. This is the case for the three Project cities.

6. While inter-city connectivity has improved considerably, the urban infrastructure services in the three Project cities are becoming saturated with rapid urbanization from industrialization and rural-urban migration. With increasing attention from the Government to expand the WDS and subregional cooperation with the GMS and ASEAN countries, the economic growth in the three Project cities is expected to further accelerate as they enter the 12th five-year plan period (2010-2015). There is an urgent need to upgrade the urban transport networks and environmental protection to solve the existing transport bottlenecks on the one hand and on the other hand, to support future industrial and urban expansion. The proposed Project is intended to improve the intra-city transport and environmental infrastructure in the three nodal cities in the economic corridors.

2.3 Economic Growth

7. Until very recently, the Project cities had not been able to turn the resource and locational advantages into economic benefits. Of the 23 county-equivalent units under the administration of the three cities, all except for two are national and provincial poverty counties. In 2000, the per-capita GDP was about 50% of the national average for Chongzuo and Baise although it was slightly higher for Fangchenggang. With more than CNY 1 trillion of investment as of today, the Western Development Strategy (WDS) launched in the late 1990s has greatly benefited the Project cities through a series of economic stimulation packages such as transfer payments, direct investment, subsidies and tax cuts, and utilization of foreign investment including international development assistance.

8. One of the priorities of the WDS is to improve connectivity and access to the market by the western PRC by construction of transport infrastructure. The national and international investments in the transport sector have improved the connectivity of the Project cities by rail, expressways and inland and marine waterways to the national and international markets, especially those in the well-developed Pearl River Delta and the GMS

2 Youyiguang means “Friendship Pass”. It is the major border crossing between the PRC and Vietnam.

SA-L-2 Supplementary Appendix L: Detailed Economic Analysis and ASEAN countries. This has spurred rapid urbanization, industrialization and economic growth in the western provinces. For Fangchenggang, the port capacity has expanded and the city has been chosen to be the home of the second largest iron and steel plant in the PRC with a near-term and long-term capacity of 10 and 30 million tons respectively. The industry-led growth prompted the GDP growth rate to jump from 17.1% in 2006, 20.3% for 2007 and 20.1% for 2008. Chongzuo has developed its “dragon-head” industries around manganese and sugar. For the sugar industry alone, the annual production grew from 1.85 million tons in 2005 to 2.53 million tons in 2008. The annual rate of GDP growth reached 20% in 2005, 17.0% in 2006, 16.8% in 2007 and 11.8% in 2008. In 15 years, Baise has become the “aluminum capital” with an annual production reaching about 6 million tons in 2008 (about 1/4 of the national total) from 400,000 tons in 1995. Its GDP growth rate in the past 3 years averaged about 15%.

Table 1: Project City GDP Growth and Forecasts Annual Rate of GDP Growth During Period 10th FYP (2000-05)a 11th FYP (2006-10) 2010- 2020- 2000- Actual Targetb Actual (2006-08) 2020e 2025e 2025f Fangchenggang 11.5% 20.0% 26.3%c 17.5% 15.0% 17.6% Chongzuo 11.8% 12.0% 15.3%c 8.6% 8.6% 10.2% Baise 12.8% 15.0% 14.6%c 10.0% 10.0% 11.9%

Guangxi 10.8% 10% 13.7%d PRC 9.5% 7.5% 10.3%d Note: a) Compiled from the national, provincial and city statistical yearbooks; b) Compiled from the national, provincial and city 11th Five-Year Plan (FYP); c) Compiled from the national, provincial and city statistical yearbooks; d) Data covers 2006 up to the end of the 3rd quarter of 2009; 2006-2008 data is compiled from national, provincial and city statistical yearbooks, and data for the first three quarters of 2009 was compiled from National and Guangxi Bureaus of Statistics; e) Compiled from Project cities’ urban master plans; and f) pro-rated over the different periods; for 2000-2005, actual growth rates are used; for 2006-2010, actual 2006-2008 rates are assumed; and for 2020-2025, the 2010-2020 rates are assumed.

2.4 Population Growth

9. Past economic growth in China has been heavily reliant on the availability of a rural population willing and able to move to the cities. This movement of some 10 to 12 million people a year has equalized incomes and promoted exports and growth. As a result, overall urban population growth has been some 4% pa. There was a reversal in 2008 as a result of the international financial crisis and an official report in March 2009 said that 14 million rural migrants had returned home. That was some 10% of total rural migrants. Whether and how soon they will return is uncertain but it can be expected that the large ongoing investments, particularly in infrastructure, will act as an attraction.

10. This growth is an average of all areas classified as urban. Obviously some urban areas have grown faster than others, accepting more rural migrants. In the past this has been the larger cities. The Government is now concerned at the growth of these larger cities and is asking that smaller cities should take more of the role receiving migrants. Urban areal and population expansion is also achieved by redefining the urban boundary to combine towns and communities. These cities have been encouraged to develop master plans which would allow them to do so.

SA-L-3 Supplementary Appendix L: Detailed Economic Analysis

Table 1: Project City and City Centre Population Forecasts (‘000) Population (‘000) Municipality Area (km2) 2000 2007 2010 2015 2020 2025 2025/07 Fangchenggang 6,181 763 833 984 1,300 1,652 2,100 2.52 Chongzuo 17,351 2,182 2,369 2,297 2,356 2,417 2,436 1.03 Baise 36,204 3,6363,859 3,838 3,910 4,050 4,126 1.07 Project Total 59,736 6,581 7,061 7,119 7,566 8,119 8,662 1.23

City Centers 2000 2009 2020 Fangchenggang 7 25 75 153 204 281 480 693 1,000 4.91 Chongzuo 5 15 50 51 217 302 389 500 643 2.97 Baise 7.5 30 50 126 185 258 359 500 696 3.10

Project Total 329 606 841 1,228 1,693 2,340 3.63

3. Project Rationale

11. In response to the need for urban expansion to accommodate the rapid industrial and population growth spurred by the Western Development Strategy and the fast-growing volumes of trade particularly with GMS and ASEAN countries, all three Project cities have prepared their urban master plans3. With the construction being started in the past three to five years, the new urban centers for all three cities have taken shape. The proposed Project interventions are part of the urban expansion guided by the urban master plans.

12. Fangchenggang: The road network includes six roads that will provide access from the west of the city to Gongche, a now developing industrial park planned for the new iron and steel plant and upstream and downstream industries, as well as port related industries. The coastal protection and upgrading component is intended to control the tidal floods that have resulted in damage and loss to the properties and lives presently residing there and threaten the assets and people that will be located there in the future as part of the industrial and port expansion. Pollution and disorderly development activities have also threatened the mangrove forests in the coastal mudflats.

13. Chongzuo: The urban road network is in two separate parts of the city. The roads in the Chengbei (city north) subdistrict will form a backbone for the road network in the industrial park for processing industries for the ASEAN market. The roads in the Chengnan (city south) subdistrict will serve critical links for existing and planned roads in the area that is rapidly developing into a new center, as well as a second truck link to the urban ring road expressway. Nicknamed the kidney of Chongzuo, the Shuikou Lake is the largest water body on the margins of the city that forms part of the stone forest-lake scenic area, and the water quality has been declining because in-lake aquaculture and lakeside waste discharges. The proposed intervention will improve the lake as a recreational and leisure site for local residents and tourists.

14. Baise: The road and the bridge are connected and they form the southern quarter of a new ring road. At present, inter-city traffic goes through the city center, causing congestion and accidents. As the city expands into the west, the connection needs to be improved between the existing city center in the east and the fast-developing industrial zones in the west for aluminium processing and manufacturing, pharmaceutical and agro-processing.

3 The Fangchenggang urban master plan (2008-2025) was prepared by the Guangxi Urban and Rural Planning and Design Institute. The Chongzuo urban master plan (2002-2020) was prepared by the Shanghai Tongji Urban Planning and Design Institute. The Baise urban master plan (2004-2020) was prepared by the Guangzhou Urban Planning and Design Institute.

SA-L-4 Supplementary Appendix L: Detailed Economic Analysis

4. Project Costs and Benefits

15. The economic evaluation uses base 2009 prices unadjusted for inflation. Taxes are excluded. The domestic numeraire has been used. The financial exchange rate assumed is $1 = CNY 6.83. A shadow exchange rate factor (SERF) of 1.08, proposed by the Government, has been used to convert border prices to domestic economic prices. All local cost items are valued at domestic prices less taxes with the exception of unskilled labour, valued at a shadow wage rate (SWR) of around 70% of the estimated wage rate on the project. The economic opportunity cost of capital used is the social discount rate for the economic evaluation, i.e., 12% per annum, the Bank’s hurdle rate.

16. Project benefits are evaluated mainly by the extent to which they contribute to urban growth. This has been done in two ways. First, the forecast growth in GDP has been allocated to Project components according to their share of investment. This “system approach" regards the investment under the Project as an integral component of that growth. It also implies that the return to all such integral components in a city development program will be the same. The second urban growth approach takes the land value increases attributable to the Project component as the benefit. This allows more direct allocation of benefits to components. It does increase subjectivity but the use of both local and international data can help to control that. In the case of Fangchenggang coastal protection and upgrading component, both imply that alleviating flooding entirely will increase land values by a factor of four. A factor of 2.3 in Fangchenggang gives a return similar to that calculated from GDP increases and so is all that has been assumed.

4.1 Road Traffic Forecasting

17. As with other economic work, the demand forecast is basic to detailed road project evaluation. In the case of roads, this starts with traffic forecasts and in many circumstances these start with counts of traffic on specific roads. When roads are new and the city is planned to grow considerably, this technique is not practicable and a traffic model must be used. There are several such models and the PRC now uses TransCAD. This is a GIS based model developed and sold by Caliper Corporation, who since November 2008 have also been contracted to support the software in the PRC. The model can be used for an individual city and also for inter-city and expressway flows. The standard four part traffic forecasting model is one option in TransCAD and is used by the DIs. The model starts with an origin and destination (OD) survey. It then derives (a) trip generation/attraction within and between zones; used to give (b) trip distribution between zones; and (c) modal split (road/rail/river): finally (d) assignment to road links based on zonal population forecasts. These should depend on and be related to the overall city population growth given in the master plan.

4.2 Travel Cost Models for Road Investment Analysis

18. A full travel cost savings model to evaluate road investments should allow for the effects of traffic and road conditions on vehicle speeds. It should also allow for the effects of that speed on vehicle operating costs (VOC), time (VOT) and accidents (VOA). For some forty years, the World Bank has been working with other agencies to design and calibrate such a model called HDM. It is not easy to use since the developers decided to incorporate several other aspects of road planning, budgeting and management, in addition to project appraisal. It is also not designed for urban roads. As before, the model is calibrated using international data which may not be appropriate for any particular country. Indonesia, for example, has developed its own formulae and calibrations. With World Bank approval, these were used to write a single road model used on many projects in the 1990s.

SA-L-5 Supplementary Appendix L: Detailed Economic Analysis

19. A model prepared for China with UK funding in 1993/94 was calibrated with Brazilian data, one of the HDM-3 options, but was not approved by MOC. Around 1995, the World Bank funded a study for China by Rust PPK. Their 19 March 1996 Feasibility Study Methodology report says that they produced an Excel file model which was less complicated than HDM-4 and used Chinese data for calibration. That model cannot be located, even by those who worked on the study. The background data given in the report appendices show that it would not be simple to replicate the model. In 2004/5, the ADB said that they would fund a study to improve road project planning but again the output cannot be located. HDM-4 has been used on at least one ADB funded road PPTA. Others used a simplified model in which vehicle speeds and VOC are not calculated but are simply input. This may be acceptable for expressways but not for urban areas where congestion effects are significant.

20. At least some PRC DIs, use a model in between these two alternatives. Speeds are forecast from traffic volumes (with the relationship shown below) and costs are forecast from speeds (ditto). Unlike HDM etc, the model does not use individual vehicle types but passenger car units. It is not known if these models are approved by the MOC since the DI report only up to the autonomous region. They may be acceptable alternatives but each town has its own characteristics and so a model which allowed for individual, and changing, traffic profiles would be better. The situation for project road FSRs is discussed below.

Table 3: Baise/Chongzuo Road Cost Formulae and Assumptions Item Formula Vehicle Speed V V = Design speed / (1+0.15 x (q/C)4), where q = traffic volume and C is traffic capacity Cost Per Vehicle Km at VOC = (679.4557-11.7191×Vˇ0.10496×V2)×0.00389 Speed V Costs increasing at a 4% per year. Congestion Reducing VOC savings for traffic on other related roads. Time said not to be Benefits included. Unit costs increasing at 4% p.a. Time Saving Benefit VOT = 0.5bTnQnp, where b= CNY 13.77, T is total traveller time saved and Q is proportion of travellers productive. Unit savings increasing at 8.2% pa to 2020 and 6.5% thereafter. Accident Benefits Per (19+0.0015*T) x unit accident cost (CNY 55,640), where T is traffic Billion Vehicle Km volume in pcu/day. Note that the cost depends on pcu/day and vehicle km not on road type. Unit costs increasing at 4% p.a. Source: Shanghai Municipal Engineering Design Institute and Baise FSR Design Institute.

21. Results derived from the speed and VOC formulae given are shown below.

Table 4: Speed and VOC Formula Results Traffic Volume/ Design Speed Speed Design Speed Speed Speed VOC/CNY Capacity Kph kph Kph Kph kph pcu/km 0.5 50 49.5 30 29.7 10 2.23 0.6 50 49.0 30 29.4 20 1.89 0.7 50 48.3 30 29.0 30 1.64 0.8 50 47.1 30 28.3 40 1.47 0.9 50 45.5 30 27.3 50 1.38 1.0 50 43.5 30 26.1 60 1.38 1.1 50 41.0 30 24.6 70 1.45 1.2 50 38.1 30 22.9 80 1.61 1.3 50 35.0 30 21.0 90 1.85 1.4 50 31.7 30 19.0 100 2.17 1.5 50 28.4 30 17.1 110 2.57 1.3 50 35.0 30 21.0 120 3.05

SA-L-6 Supplementary Appendix L: Detailed Economic Analysis

4.3 Road Investment Proposals

22. PRC national guideline requires to plan trunk and distributor roads with capacity for 20 and 15 year demand respectively. Since demand depends firstly on population, which means that how fast the city is assumed to develop will affect design needs and project costs. The economic analysis given here presents the standard reduced travel costs analyses. Each project is evaluated qualitatively for internal consistency and purpose, within the framework of the city’s urban development plan. Quantified results are estimated separately using two different but inter-related techniques. The first uses the GDP forecast by the urban development plan and allocates a share of this to the road project. The second uses forecast land value increases.

4.4 Coastal Protection and Upgrading

23. As with roads, it is possible to estimate flood damage costs directly. Unlike roads, however, the costs are totally location specific and information on which to base them is frequently not available. More basically, damage based analyses for flood control cannot capture the misery and so the full willingness of people to pay to avoid flooding. A damage based model has been prepared for the Fangchenggang coastal protection and upgrading component and it is discussed below. As with roads, however, two alternative methods are used to quantify the economic benefits: (a) land value increases; and (b) share of urban GDP increases.

4.5 Environment

24. All project components will affect the environment, but the only when where environmental benefits will be paramount is the Shuikou Lake in Chongzuo. The component will renovate, clean and beautify a now run-down lake area within the new central city area. As the city expands, such a recreational area will have much value. Detailed contingent valuation surveys would be needed to quantify that benefit. The results of previous studies recorded in Economic Evaluation of Environmental Impacts: A Workbook, ADB 1996, are shown below. These might be used as basis for Benefit Transfer Analysis but it is thought better to rely on the two alternatives discussed above, i.e.: (a) land value increases; and (b) share of urban GDP increases.

Table 4: Water Beautification Project Benefits Water WTP Place Source Wetland recreation $70.87/visitor USA Costanza et al (1989) Wetland multiple uses NPV $1500/ha Trinidad Dixon (1989) River quality $306/HH/year USA Greenley et al (1981) Fishable to swimmable $104/User HH/Year USA Desvouages et al (1987; 1983) Fishable to swimmable $66/Non User HH/Year USA Desvouages et al (1987; 1983)

Recreation Existence Poor-fair $46/HH/yr $55/HH/yr USA Lant and Roberts (1990) Fair-good $62/HH/yr $71/HH/yr USA Lant and Roberts (1990) Good-excellent $63/HH/yr $68/HH/yr USA Lant and Roberts (1990) Freshwater $101/HH/year USA Sutherland and Walsh (1985)

SA-L-7 Supplementary Appendix L: Detailed Economic Analysis

5. Project Economic Analysis

5.1 Project Benefits

25. It is proposed that project components should be evaluated mainly by the extent to which they contribute to assumed urban growth. That has been done in two ways. First the forecast growth in GDP has been allocated to projects according to their share on investment. This implies that the project is indeed an integral component of that growth. It also means that the return to all such integral components in any city will be the same. The second urban growth approach takes the land value increases expected to be attributable to the project component as the benefit. This allows more direct allocation of benefits to components. It does increase subjectivity but the use of both local and international data can help to control that.

26. A comparison has been made between urban growth approaches and the more traditional cost benefit methodologies normally used by the ADB. These estimate willingness to pay from user benefits, with and without the project. For roads they are changes in user costs (VOC, VOT and VOA). For flood control they are decreases in direct damages. There is an acceptance in the literature that these might underestimate full willingness to pay. The question that remains is whether this underestimation increases so much in periods of rapid growth as to make the traditional CBA approaches irrelevant.

5.2 Land Value Background

27. Hedonic pricing is a revealed preference technique using observed housing, property or labour market conditions to infer values for environmental quality changes. Environmentalists tend to concentrate on environmental attributes such as air and water pollution. Theory and practice, however, understand that there are many factors which will determine land prices and so the word environmental becomes, as it often should, an inclusive attribute. Land value theory itself, in fact, has concentrated on commuting transport, while at the same time acknowledging the importance of social and status factors. A study of land values in Beijing showed that a one-minute decease in commuting time would lead to a 0.6% increase in property values. That is consistent with the increases assumed here based on local land value variations. Another study has shown that every 250 m a property is closer to a railway station increases its value by 2.3%, Other studies have shown that the benefits from transit exceed those from transit use. Of course, transport to work is not the only benefit of new roads. Local roads allow better access to services for whole communities. Again, increases assumed are based on a comparison of values in areas with different road availability.

28. Averting flooding is even more obviously important as an environmental or personal benefit. Fortunately, estimation of the effect does not require sophisticated statistical analysis; a simple land value map is sufficient evidence. An official map for Semarang in Indonesia demonstrated clearly that the land values of areas regularly subject to flooding were a quarter of those nearby. Similarly, the 2009 North Dakota Flood Plain map on the web shows that land values vary from $470 per acre in the neck of the river to $2,100 some distance away, a factor of 4.5. Similar results must be available elsewhere but it was thought better to obtain local information. Land price data in Fangchenggang imply that alleviating flooding entirely will increase land values by a factor of four. A factor of 2.3 gives a return similar to that calculated from GDP increases and has been assumed.

SA-L-8 Supplementary Appendix L: Detailed Economic Analysis

5.3 Land Value Estimated EIRRs

29. Contingent valuation techniques were considered for road network, flooding and the Shuikou Lake component. Given the early stages of planned population growth, however, it would have been difficult finding a sample with sufficient knowledge of the components to provide useful answers. For this reason, changes expected have had to be based on analysis of experience elsewhere (Benefits Transfer) and/or values in areas in each city with different characteristics. Results and assumptions are shown below.

Table 5: Land Price Data and Forecasts, With and Without (CNY 000/mu) Low High AreasMu Without With Fangchenggang Road Component Commercial 800 1,000Res West 59,760 300 330 Undeveloped 400 600South 24,000 400 600 Industry 112 200Gongche West 6,000 200 300 Gongche 112 300Gongche East 24,000 200 300 Resettlement 250 300 Total/Average 113,760 295 379

Dyke Areas Flood Component 10% Flooded 40 50Yuzhouping 2,100 50 175 Commercial 250 300Gongche 11,175 40 135 Industrial 112 200Total/Average 13,275 42 137

Chongzuo Road Component Old Town Centre 250 Old Town Centre SE New Town Centre 500 700 SE New Town Centre 15,000 500 625 NE New Town Centre 500 700 NW Industry 17,475 200 275 NW Industry 200 Total/Average 32,475 339 437

Shuikou Lake Area Lake Component SW New Town Centre 500 New Town Centre 30,000 500 650 NE New Town Centre 500 West of Lake 15,000 200 225 West of Lake 200 Other 15,000 250 300 Total/Average 60,000 363 431

Baise Road Component Old Town Centre 800 1,000 Old Town Centre 11,250 800 1,000 New Town Centre 700 800 New Town Centre 17,400 700 750 Other Central 500 600 Other Central 20,400 500 550 East Industry 300 500 East Industry 25,950 300 400 Total/Average 75,000 522 612 There are 15 mu to a ha.

30. As noted above, land prices are the result of many factors. It also takes time for the effects of any change to be realised. Therefore it is also necessary to include estimates for these factors. These are shown with resulting economic forecasts below.

Table 6: Land Value Based Economic Benefits Land Value Project Delay Econ. Inv. O&M NPV Increase Share Years CNY M 7.5% CNY M EIRR Fangchenggang Road Network 29% 25% 5.0 729 55 563 19.8% Dyke SW 250% 100% 3.0 42 3 131 41.1% Dyke NE 225% 100% 3.0 150 11 518 43.6% Dyke 230% 100%3.0 19214 649 43.1%

SA-L-9 Supplementary Appendix L: Detailed Economic Analysis

Chongzuo Chengbei NW Road 38% 30% 3.0 183 14 38 14.6% SE NCC Roads 25% 30% 5.0 173 13 129 19.6% All Roads 29% 30% 4.4 356 27 158 16.9% Shuikou Lake 18% 10% 5.0 80 6 150 28.6%

Baise Ring Road 17% 21% 5.0 438 33 336 19.7%

Project 23% 32% 4.2 1,795 135 1,393 18.4%

31. Base and sensitivity economic results by component and for the project as a whole are shown below. In accordance with ADB’s economic guidelines, sensitivity analysis should be applied to project items for which there is considerable uncertainty. In the case of the Project, the uncertainty for land values is the speed with which future development will be realised. For this reason, while the base case analysis assumes a steady growth in land values as a result of the project components, as shown and over the number of year given in the table, the sensitivity analysis assumes that there will be no increase for those years. Switching values (SV) are discussed below.

Table 7: Sensitivity of Land Value Based Economic Results Base Base Delay NPV SVTowards NPV EIRRYears CNY M EIRR NPV EIRR Fangchenggang Road Network 563 19.8% 5.0 89 13.0% 11.9% -0.2% Dyke 649 43.1%3.0 455 27.9% 33.5% 20.4%

Chongzuo Roads 158 16.9%4.4 (51) 10.7%7.6% 7.9% Shuikou Lake 150 28.6% 5.0 27 14.5% 12.1% 11.8%

Baise Ring Road 336 19.7% 5.0 52 12.9% 11.8% 11.4%

Project 1,393 18.4% 4.1 571 14.5% 16.9% 16.5%

5.4 Urban Development and EIRRs

32. Consistent with Government’s policy for smaller towns to take over the role of absorbing excess rural population, the effects of the very large increases in urban development required by the PRC may not easily be captured by standard economic evaluation techniques. It has been agreed that an urban development project in a growing city might require a systems rather than a component-based approach. It would necessitate to consider the situation with and without the planned urban expansion. Project benefits would not be the whole of increased GDP but could be estimated as a share. Relatedly, the consultants were aware that the recent state of the world economy has increased the importance of the level of investment in the economy. The PRC State Statistical Bureau estimates that in the first half of 2009, investment contributed 6.2% to annualized GDP growth and domestic consumption 3.8%. Growth in the share of exports was a negative 2.9%, so that net growth was 7.1%. This heightens relationship between investment and GDP growth for the use of city GDP growth as a basis for the analysis.

33. Basing project returns on projected growth requires an estimate of project investment as a share of the total investment necessary to produce the forecast GDP growth. It has been assumed that the 2007 project shares of investment will continue as a base case.

SA-L-10 Supplementary Appendix L: Detailed Economic Analysis

These shares, and master plan forecast growth in GDP, imply the following EIRR for infrastructural investments to support that growth. Sensitivity analyses results with lower GDP growths are shown, as well as the rates of GDP growth necessary to give return on investment of 12%, the ADB cut-off rate.

Table 8: Project EIRR with GDP Share City Master Plan 50% Master Plan GDP Growth Fixed Growth Implied Growth Implied To Give Assets GDP EIRR GDP EIRR 12% EIRR Fangchenggang 5.1% 17.5% 41.5% 8.8% 18.2% 6.7% Chongzuo 2.6% 8.6% 22.3% 4.0% 6.9% 5.6% Baise 0.9% 10.0% 17.7% 5.4% 3.0% 6.2%

Project 2.2% 11.8% 32.3% 5.9% 13.1% 5.8%

5.5 Project Costs

34. Economic costs are 2009 base prices with no inflation. Taxes are excluded. The domestic numeraire has been used. The financial exchange rate assumed is $1 = CNY 6.83. A shadow exchange rate factor (SERF) of 1.08 has been used to convert border prices to domestic economic prices. It is the latest rate proposed by the Government. All local cost items are valued at domestic prices less taxes with the exception of unskilled labor, valued at a shadow wage rate (SWR) of around 70%. Land values are varied to reflect the opportunity cost of land. Depending on the land price used in the financial evaluation, this can mean either an increase or a decrease to obtain the economic cost. The economic opportunity cost of capital is the social discount rate for the economic evaluation, i.e. 12% per annum, the Bank’s hurdle rate. Note that NPVs estimated in the FSR’s use the 8% per annum rate given in the PRC Guidelines and so their NPVs differ from those given here even if the EIRRs are the same.

5.6 Least Cost Analysis

35. Fangchenggang: For the road both components, one possible alternative would be to locate the iron and steel plant in another district, but the movement of materials and finished products from and into the port would still have to go through the Project area which would not only result in heavier traffic but may also be less economical. For the coastal protection and upgrading, the without-Project scenario would leave the existing residents, properties and mangrove forests unprotected, in addition to the forgone opportunity to rehabilitate the degraded coastal area into a recreational and leisure site for local residents and tourists.

36. Chongzuo: One possible alternative for the Project roads in the industrial park in the Chengbei subdistrict would be to use the existing roads but they are of poor quality and cannot meet the needs of the industrial development, and on the other hand it reduces the cost-effectiveness as the volume of goods increases. Several key sections of the well planned road grid in the Chengnan subdistrict as the new city center have been completed. The without-Project-roads scenario would mean divert large volumes of traffic to the exiting truck road east of the Project roads which would result in increased costs and decreased traffic safety; the existing and planned development as the new city center may not materialize.

37. Baise: Because of the river and mountains surrounding the city, the available land suitable for industrial and urban development is limited. Without the Project road and bridge, the ring road would not be able to function as intended. Moreover, there would not be

SA-L-11 Supplementary Appendix L: Detailed Economic Analysis expeditious connection between the existing city center in the east and the industrial parks in the west. The continuous use of the inner city streets for inter-city traffic would aggravate the traffic congestion and accidents in the city center as industrialization and urbanization intensifies.

6. Urban Road Network Components

6.1 Fangchenggang Road Network and Related Municipal Infrastructures

38. The roads total 27.6 km including 5 roads and a bridge. The roads will provide access from the west of the city to the Gongche Industrial Park, which will include the new mega iron/steel processing factory (see above). Agreement to finance roads from the east to serve the park has been reached with two local banks. In addition to allowing access from the south west of the city, a spur to the northwest will be provided access to an existing resettlement area. Data on population, GDP and vehicle ownership in Fangchenggang City are shown below, followed by 2008 traffic surveys on four roads in the city centre.

Table 9: Present Fangchenggang Population and Vehicles Port Fangcheng Dongxing Shangsi Fangchenggang Item Area District City Town City Population (1,000) 115.9 382.6 116.5 218.2 833.2 Motorized vehicle ownership 7661 5238 4321 2524 19744 Vehicles/000 People 66.1 13.7 37.1 11.6 23.6

Table 10: Fangchenggang Traffic Counts in 2008 (Vehicles/Day) Shaqi Xingang Dongxing Gongche Vehicle types 1st Class Road Road Road Road < 8 seats; < 2 ton truck 1,054 3,320 825 375 8~20 seats; 2t~5t truck 209 463 381 245 20~40 seats; 5t~10t truck 64 788 1037 112 40 seats; 10t~15t truck; 20 foot 32 736 356 137 15t~30t truck; 40 foot 64 1015 873 34 >30t truck 7 327 142 21

Total 1,430 6,649 2,714 924

39. As now normal in China, traffic was forecast based on the location of future population and employment, rather than past traffic counts. The forecasts used specified relationships and previous user equilibrium forecasts rather than TransCAD. Populations were forecasts in 64 zones, 46 of which were in the project road network area – others were mainly larger areas. Results are summarized below, where they are compared to city centre population totals derived directly from the master plan.

Table 11: Fangchenggang Road Area Population Forecasts (000) Area Zones 2014 2020 2028 2033 % pa North of Gongche 2 28.8 37.4 47.8 53.0 3.3% Gongche West 11 13.6 18.2 23.7 26.4 3.5% Gongche East 8 25.5 34.3 44.8 50.0 3.6% South of Gongche 4 12.4 16.8 22.0 24.6 3.7% West of Project Road 18 53.4 70.8 91.7 102.2 3.5% South Project Road 3 11.7 15.5 20.2 22.5 3.5%

Total Road 46 145.5 193.0 250.1 278.7 3.5% Other Areas 28 526.5 698.0 903.8 1,006.7 3.5% Road Study City Centre 64 672.0 891.0 1,153.9 1,285.4 3.5% Master Plan City Centre 431.2 692.8 1,246.3 1,798.9 7.8%

SA-L-12 Supplementary Appendix L: Detailed Economic Analysis

40. Estimates for the required road characteristics and use of capacity were as follows. Road VII is a small network, each road with its own characteristics.

Table 2: Fangchenggang Road (pcu/day) Road 2014 2015 2020 2025 2030 2033 Factor % pa I 50 m 8,374 9,363 16,358 23,166 31,842 37,516 4.48 8.2%

2014 2015 2020 2025 2028 II 50 m 6,122 6,833 11,838 16,657 20,446 3.34 7.8% IIIa 15 m 2,819 3,131 5,289 7,303 8,862 3.14 7.4% IIIb 18 m 2,137 2,394 4,220 6,016 7,443 3.48 8.1% IIIc 18 m 2,206 2,475 4,402 6,318 7,847 3.56 8.3% IIId 30 m 4,321 4,807 8,188 11,377 13,859 3.21 7.6% IIIe 30 m 4,305 4,839 8,684 12,547 15,647 3.63 8.4% IV 34 m 7,540 8,491 15,374 22,364 28,003 3.71 8.5% V 40 m 6,496 7,328 13,392 19,614 24,660 3.80 8.7% VI 40 m 6,284 7,102 13,099 19,318 24,389 3.88 8.8% Bridge 8,374 9,363 16,358 23,166 31,842 37,516 4.48 8.2%

Table 13: Fangchenggang Network Road Characteristics Total Width Road Width Design Speed Lanes Length Capacity Capacity Road (m) (m) (kph) (no.) (m) (pcu/day) (use) I 50 24.5 50 6 6,334 31,110 77% II 50 17 40 4 1,730 17,250 75% IIIa 15 9 30 2 295. 8,300 65% IIIb 18 12 30 2 600 7,020 64% IIIc 18 12 30 2 7,470 64% IIId 30 18 30 4 559 13,380 63% IIIe 30 18 30 4 14,130 67% IV 34 16 40 4 2,595 22,990 74% V 40 17 40 4 1,078 22,780 65% VI 40 17 20-30 2-4 4,550 20,760 71% VII 12-30 17 20-30 2-4 9,900 NA NA Anbujiang 25 50 4 240 33,690 0.71 Bridge

Total 27,881

Table 14: Fangchenggang Road Network VOC (CNY/000 pcu/km) Road 2014 2015 2020 2025 2030 2033 I 1,617 1,618 1,629 1,652 1,708 1,768

2014 2015 2020 2025 2028 II 1,711 1,714 1,744 1,797 1,863 IIIa 1,843 1,847 1,886 1,949 2,021 IIIb 1,836 1,839 1,863 1,905 1,955 IIIc 1,837 1,839 1,867 1,915 1,972 IIId 1,865 1,875 1,987 2,199 2,483 IIIe 1,865 1,876 2,012 2,316 2,792 IV 1,717 1,722 1,780 1,907 2,092 V 1,713 1,716 1,758 1,846 1,971 VI 1,712 1,715 1,755 1,840 1,962

41. The three EIRR estimates for the Fangchenggang Road Network component can be compared as follows. Best and worst EIRRs are given assuming 20% changes in costs and benefits. Worst estimates for land values assume no increases for specified numbers of years. Worst EIRR for Urban Growth assume that only 50% of planned city GDP growth will be realized. In the case of Fangchenggang, very high GDP growth is forecast as a result of the new iron and steel plant to be installed in Gongche. It will be served by the project road network.

SA-L-13 Supplementary Appendix L: Detailed Economic Analysis

Table 15: Alternative Results for Fangchenggang Road Network Economics ENPVEIRR Sensitivity EIRR Switching Source CNY M @12% Base Best Worst Value Invest. Ec. Prices 729 Cost Benefit Approach 96 13.0% 17.3% 10.7% 32.1% Land Values 563 19.8% 13.0% -0.2% Urban Growth 41.5% 18.2% 17.8%

6.3 Fangchenggang Coastal Protection and Upgrading

42. The inability of damage based CBA for flood control to capture all potential benefits is recognised. The two alternative methods used here are: (a) land value increases; and (b) share of urban GDP increases. Land value benefits are derived for the 10% of the corresponding administrative area which is now subject to flooding. At present, land values in those areas are only a fifth of those in nearby non-flooded commercial areas. It is assumed that they will increase to 50%, with all of the increase attributable to the lack of flooding. The increase assumed in flooded land values is less than the fourfold increase observed elsewhere, as noted in 0 above.

43. The three EIRR sets of estimates for the Fangchenggang coastal protection and upgrading component can be compared as follows. Best and worst EIRRs are given assuming 20% changes in costs and benefits. Worst estimates for land values assume no increases for specified numbers of years. Worst EIRR for Urban Growth assume that only 50% of planned city GDP growth will be realized. In the case of Fangchenggang, very high GDP growth is forecast as a result of the new iron and steel plant planned in Gongche. It will be served by the Project coastal protection system and might well not be installed if flooding was not controlled.

Table 16: Alternative Results for Fangchenggang Coastal Protection Economics ENPV EIRR Sensitivity EIRR Switching Source CNY M @12% Base Best Worst Value Invest. Ec. Prices 192 Cost Benefit Approach -3 11.8% 18.8% 6.6% 19.8% Land Values 649 43.1% 27.9% 20.4% Urban Growth 41.5% 18.2% 17.8%

6.4 Chongzuo Road Network and Related Municipal Infrastructures

44. The urban road network is in two main parts of the city. The first art covers three sections in the southwest of the city. This will be an urban primary trunk road and will connect the south and north processing zones. These zones are developing along the existing road north of the city centre but the area through which the project road will run is still basically rural and so access to the road alignment is limited. The second part covers two sections in the northern industrial park.

45. A household survey of 372 resident households (1156 people) was conducted. The survey found that 12.2% made no daily trips while nearly 40% made two and 36% four trips. The proportion of trips by mode is shown below. Coaches are normally provided by the employer. Given the recent preponderance of battery powered cycles, there must be some uncertainty as to the division between cycle and motor cycle.

SA-L-14 Supplementary Appendix L: Detailed Economic Analysis

Table 17: Chongzuo Survey Trip Mode Walk Cycle Motorcycle Coach Small Bus Taxi Car Big Bus 21.20% 45.90% 9.30% 4.80% 10.00% 0.80% 5.50% 2.50%

46. Flows by hour of days are given graphically below.

47. The standard TransCAD traffic forecasting methodology based on a combination of trip generation and trip attraction. Fourteen zones were used with a total 2,030 population of 107,190. Available details of the roads are shown below.

Table 18: Chongzuo Road Network Characteristics Total Width Road Width Lanes Length Design Speed Road (m) (m) (no.) (m) (kph) Beiwei 2nd 40 30 4 4,207 50 Shijinglin (lake) 25 15 2 3,103 30 Chengnan 9 48 32 4 1,581 40 Liangcheng Lu 50 32 4 2,307 40 Chongyi 36 30 4 1,813 40

Total 13,011

Table 19: Chongzuo Road Network Traffic and Capacity Peak (pcu/hour) One way 2010 2015 2020 2025 2030 Capacity Beiwei 2nd 540 754 999 1,142 1,264 1,460 Shijinglin (lake) 360 480 742 N/A 744 Chengnan 9 596 913 1,116 1,297 1,506 Liangcheng Lu 590 901 1,072 1,281 1,506 Chongyi 437 808 1,402 1,860 1,717

Table 3: Chongzuo Road Network (pcu per day) 2010 2015 2020 2025 2030 Beiwei 2nd 9,450 13,572 17,982 19,985 21,741 Shijinglin (lake) 6,192 8,256 12,762 21,208 27,279 Chengnan 9 10,668 16,069 19,418 21,919 Liangcheng Lu 10,207 15,317 19,290 22,289 Chongyi 3,969 7,346 12,749 16,906

SA-L-15 Supplementary Appendix L: Detailed Economic Analysis

48. EIRR calculations have been prepared separately for: (a) the new roads in the NW Chongbei industrial area (Beiwei 2nd and Chongyi); (b) the three other new roads in the new city centre area. The three EIRR estimates for those sub-components of the Chongzuo Road Network are compared below. Best and worst DI EIRRs are given assuming 20% changes in costs and benefits. Worst estimates for land values assume no increases for specified numbers of years. Worst EIRR for urban growth assumes that only 50% of planned city GDP growth will be realized.

Table 21: Alternative Results for Chongzuo Road Network Economics ENPV Sensitivity EIRR Switching Source CNY M @12% EIRR Best Worst Value Invest. Ec. Prices 356 Cost Benefit Approach 356 45 16.1% 18.4% 11.0% 28.4%

Land Values 356 158 16.9% 10.7% 7.9%

Urban Growth 22.3% 6.9% 14.4%

6.5 Chongzuo Shuikou Lake Environmental Improvement

49. The lake is given in the Master Plan as a major part of the Zuojiang River scenery belt. The lake itself runs north south with several spurs etc. It is fed by a river to the south and the lake when full over-runs into the main Zuojiang River, which then runs through the city centre. The level of water in the lake could be controlled by controlling this over-run.

50. Major developments are planned nearby. In particular, government office buildings are already nearing completion in what will be the new major urban area to the east of the lake. This new city centre is several km south east of the existing city centre.

51. The analysis has been done though land values and GDP growth. Estimates are summarised below. Worst estimates for land values assume no increases for specified numbers of years. Worst EIRR for Urban Growth assume that only 50% of planned city GDP growth will be realized.

Table 22: Alternative Results for Chongzuo Shouikou Lake Economics NPV EIRR Sensitivity Switching Source CNY M @12% Base Worst Value Invest. Ec. Prices 80 Design Institute NA NA NA NA Land Values 150 28.6% 14.5% 11.8% Urban Growth 22.3% 6.9% 14.4%

6.6 Baise Road Network and Related Municipal Infrastructures

52. Only one component is included for Baise, although it is split into two: a 3.7 km long 50 m wide urban primary road running into a 323 m long bridge plus 250 m approach road over the river Xijiang. The road will have a 95 meter ROW which will include 35 m for 4-W drive vehicles, 12 m for 2 WD and 7.5m for pedestrians. Its aim is to provide: (a) a route through the city for inter-city transport between Nanning and places north; (b) an inner city route for traffic between the existing city centre in the west and new industrial areas in the east. It is marked in red on the map below, lying between the two southern ends of the river’s loop. Traffic in the existing west city centre is congested, as it is where practically all of the present city centre population lives.

SA-L-16 Supplementary Appendix L: Detailed Economic Analysis

53. A traffic survey in 2008 sampled 3.5% of the population, 6,441 residents plus 394 transients. The survey used the traffic analysis zones shown below as the basis for ODs. This, naturally, encompasses the existing city centre and the existing other occupied areas. It also includes the now all but unoccupied new city centre. There are 56 traffic analysis zones and 11district zone aggregations. The survey found that residents’ trips were 3.54 per day and transients 4.90. It gave the breakdown of traffic and vehicles shown below.

Table 23: Baise Traffic Survey, 2008 Travel Mode Share Trips Vehicle Share Vehicles Bus 3.42% Bus 4.6% Big employer bus 1.41% Big coach 2.2% Employer ar 3.69% Small car 29.0% Private car 5.13% Cab/taxi 25.2% Cab/taxi 3.70% Big truck 4.8% Motorcycle 31.41% Small truck 6.7% Trolley 7.40% Motorcycle 27.5% Bike 7.17% Walk 35.12% Other 1.55%

54. The base EIRR for the project roads is calculated to be 15.4% and the Longwang Bridge 15.5%, so the difference is correctly minimal since both are required to give benefits to the other.

55. Physical output data are summarized below.

Table 4: Baise Ring Road Traffic Results South Ring Road Other Related Roads Traffic Speed (kph) Distance (km) Traffic Speed (kph) Distance (km) Year pcu/day Without With Without With pcu/day Without With Without With 2011 10,801 40.55 42.18 7.15 6.6 55,823 40.41 40.97 6.25 6.13 2015 15,764 39.84 41.53 7.74 7.05 80,372 39.41 39.86 6.92 6.76 2020 19,577 37.46 40.41 8.49 7.57 103,656 37.88 38.45 7.84 7.56 2025 24,810 34.80 39.21 8.89 8.14 127,943 35.61 36.57 8.56 8.07 2030 31,921 32.78 36.92 9.19 8.63 157,921 33.40 34.89 9.01 8.58

56. The three EIRR estimates for the Baise Ring Road component are shown below. Best and worst EIRRs are given assuming 20% changes in costs and benefits. Worst estimates for land values assume no increases for specified numbers of years (see Table ). Worst EIRR for Urban Growth assume that only 50% of planned city GDP growth will be realized.

Table 5: Alternative Results for Baise Ring Road and Bridge Economics ENPV Sensitivity EIRR Switching Source CNY M @12% EIRR Best Worst Value Invest. Ec. Prices 438 Cost Benefit Approach 145 15.3% 20.1% 12.4% 34.9% Land Values 336 19.7% 12.9% 11.4% Urban Growth 17.7% 3.0% 12.0%

6.7 Summary

57. A summary of the results for each Project component is given below.

SA-L-17 Supplementary Appendix L: Detailed Economic Analysis

Table 6: Alternative Results for Base Project Economics Economic Land Land GDP Investment CBA Values CBA Values Growth Project Component CNY M ENPV ENPV EIRR EIRR EIRR Fangchenggang Road Network 729 96 563 13.3% 19.8% Fangchenggang Coastal Protection 192 649 43.1% 43.1% Fangchenggang Total 921 744 19.5% 24.6% 41.5%

Chongzuo Road Network 356 45 158 16.1% 16.9% Chongzuo Shuikou Lake 80 150 28.6% 28.6% Chongzuo Total 435 195 16.1% 19.0% 22.3%

Baise Ring Road Network 438 145 336 15.3% 19.7% 17.7%

Project 1,795 1,393 17.7% 18.4% 33.3%

7. Sensitivity Analysis

58. In addition to the base case, the table below shows the results of various sensitivity analyses. Best and worst EIRRs are given assuming 20% changes in costs and benefits. Worst estimates for land values assume no increases for specified numbers of years. Worst EIRR for Urban Growth assume that only 50% of planned city GDP growth will be realized.

59. The results of the sensitivity analysis can be summarized in sensitivity indicators (SI) and in switching values (SV). A sensitivity indicator compares the percentage change in a variable with the percentage change in the NPV or EIRR. A switching value identifies the percentage change in a variable for the project to become sub-optimal and the project decision to change. Since the SI is merely the inverse of the SV, and the SV is more intuitive, only the SV is given. It is given against the EIRR.

Table 7: Sensitivity Tests on Component and Project EIRR Cost Benefit Approach Land Values GDP Growth Project Component Best Worst SV Worst SV 50% SV Fangchenggang Road Network 17.3% 9.1% 32.1% 13.0% -0.2% Coastal Protection 18.8% 6.6% 19.8% 27.9% 20.4% Subtotal 17.6% 8.6% 28.6% 18.2% 17.8%

Chongzuo Road Network 18.4% 9.0% 28.4% 10.7% 7.9% Shuikou Lake 14.5% 11.8% Subtotal 18.4% 9.0% 28.4% 6.9% 14.4%

Baise Road Network 20.1% 11.3% 34.9% 12.9% 11.4% 3.0% 12.0%

Project 18.4% 9.3% 30.1% 14.5% 16.5% 13.1% 16.5%

8. Distribution Analysis

60. The analysis starts by discounting financial and economic flows at the economic 12% discount rate. The difference, Economic minus Financial, is then allocated to stakeholders to show gainers and losers. At a discount rate of 12 percent, the overall economy will gain CNY 2,035 million. Laborers will gain CNY 45 million because the project pays wages in excess of the economic opportunity cost of labor. The consumers will gain CNY 4,426 million because they can avail of more convenient transportation and better living environment. The difference will be paid by government and will presumably be recouped from taxes.

SA-L-18 Supplementary Appendix L: Detailed Economic Analysis

61. The share of net economic benefits of the Project accruing to the poor is 26.7%. Since the ratio is higher than the ratio of poverty population estimated at 15.6% of the Project area, the analysis concludes that the project will support pro-poor economic growth.

Table 8: Distribution of Net Economic Benefits (CNY Million) and PIR Financial Economic Distribution of Project Benefits CNY Million Present Conv. Present minus Project PV @ 12% Values Factor Values Fin. Gov. Labour Users Total Benefits ADB Loans 1,020 1.08 1,102 82 82 82 Local Loans 479 1.00 479 0 0 0 Revenue 0 1.000 0 0 0 Consumer Surplus 0 1.00 4,426 4,426 4,426 4,426 Total Benefits 1,499 6,007 4,508 Costs Foreign Inv 147 1.08 170 23 -23 -23 Local Inv. 1,325 1.00 1,529 204 -204 -204 Labour 151 0.70106 -45 45 45 Other Op. Costs 604 1.00 698 93 -93 -93 ADB Loan Payments 938 1.08 1,013 75 -75 -75 Other Loan Payments 458 1.00 458 0 0 0 Tax 48 0.000 -48 48 48 Total Costs 3,671 3,973 301 0 Net Benefits -2,172 2,035 4,207 -2,172 -2,172 Gains and Losses -2,437 45 4,426 2,035

Poor Proportion 25.0% 100.0% 25.0% 26.7% Benefits to Poor CNY PV 543 Poverty Impact Ratio 26.7%

SA-L-19 Supplementary Appendix M:

Institutional Analysis TABLE OF CONTENTS

1. Introduction ...... 1

2. Project Implementation Arrangements ...... 1

3. Hierarchy of Government in PRC ...... 8

4. Capacity Building ...... 11

5. Private Sector Participation ...... 15

6. Accounting, Auditing, and Reporting ...... 16

7. Project Review, Performance Monitoring and Evaluation ...... 17 Supplementary Appendix M: Institutional Analysis

Supplementary Appendix M:

Institutional Analysis

1. Introduction

1. This supplementary appendix deals with the institutional analysis for implementation of the Guangxi Southwestern Cities Development Project.

2. The description of the institutional setup identifies the mandates, scope and relevant powers of the agencies, and indicates their working relationships in relation to the construction and management of the project works. In regard to this project, relationships with the project fall into two main categories, namely: (i) those having functions relevant to the construction and operation & maintenance of the project; and (ii) those having related regulatory roles in regard to Project construction and operation & maintenance.

3. The institutional aspects covered in this chapter are those that deal directly with implementation of the Project. Other institutional issues are covered elsewhere in this report under the respective headings of:

- Financial analysis, including flow of funds; - Environmental analysis; and, - Land acquisition and resettlement.

2. Project Implementation Arrangements

2.1 Project Management Structure

4. The Executing Agency for the Loan Project is the Guangxi Zhuang Autonomous Region Government (GZARG). A Project Leading Group (PLG) has been formed, and it is headed by the Vice Governor and draws representations from agencies with the mandates over development planning, finance, land resources, environmental protection agencies. The functions of the PLG are to provide policy guidance to and supervision over the preparation and implementation of the Loan Project, and ensure institutional coordination at city, provincial and central government levels. The GZARG has designated the Guangxi Development and Reform Commission (GDRC) as the lead agency that will oversee the preparation and implementation processes. Co-located in GDRC and represented by other relevant agencies, the Project Management Office (PMO) has been established to provide inter-agency coordination and support for the preparation and implementation of the Loan Project.

5. A similar institutional structure for the preparation and implementation of the Loan Project has been set up. The institutional setup includes a PLG that is headed by the Vice Mayor and represented by deputy directors of the development and reform, finance, urban planning, land resources, environmental protection and water resources bureaus, and the urban construction investment company. The Municipal PMO is located in the municipal development and reform bureau.

6. The local implementation arrangements are shown in Figure 1.

SA-M-1 Supplementary Appendix M: Institutional Analysis

Guangxi Zhuang Autonomous Region Government (As Executing Agency)

Guangxi PMO Director: GDRC Members: GFD, GLRD, GEPD

Fangchenggang Municipal Chongzuo Municipal Baise Government Government Municipal Government (IA) (IA) (IA)

Fangchenggang Port District Chongzuo City Urban Baise City Development Urban Construction Investment Construction Investment Co. Investment Co. Ltd. Co. Ltd. Ltd. (PIC for Urban Road (PIC for Urban Road Network (PIC for Urban Road Network and Longwang and Coastal Protection and Network and Shuikou Lake Bridge) Upgrading) Environmental Improvement)

Abbreviations: GDRC = Guangxi Development & Reform Commission GLRD = Guangxi Land Resources Department GEPD = Guangxi Environmental Protection Department IA = Implementing Agency GFD = Guangxi Finance Department PIC = Project Implementing Company PMO = Project Management Office

Figure 1: Project Management Structure

SA-M-2 Supplementary Appendix M: Institutional Analysis

7. During Project implementation, the GPMO will have overall responsibility for the day-to-day operations, coordination and management, supervision and monitoring of contracts, maintenance of project records, supervising the implementing of mitigation measures and submission of progress reports to the Bank. More specifically, the GPMO will have the following responsibilities:

- Overall project coordination, macro-level project management and monitoring; - Progress reporting to the Government and the Bank; - Supervising the implementation of mitigation; - Inter-agency coordination and procurement support; and, - Sectoral training facilitation.

2.2 Project Implementing Companies

8. A list of Project Implementing Companies (PICs) corresponding to the proposed subprojects is provided in Table 1. Analyses of the IAs are provided in the following sections.

Table 1: Project Implementing Companies Project Component PIC Fangchenggang 1.1 Urban Road Network and Related Municipal Fangchenggang City Port District Urban Construction Infrastructures Investment Co. Ltd.

1.2 Coastal Protection and Upgrading Fangchenggang City Port District Urban Construction Investment Co. Ltd.

Chongzuo 2.1 Urban Road Network and Related Municipal Guangxi Chongzuo City Urban Construction Investment Co. Infrastructures Ltd.

2.2 Shuikou Lake Environmental Improvement Guangxi Chongzuo City Urban Construction Investment Co. Ltd. Baise 3.1 Urban Road Network and Related Municipal Baise City Development Investment Co. Ltd. Infrastructures

3.2 Longwang Bridge Baise City Development Investment Co. Ltd. Note: Flood control component in Chongzuo was replaced by adding roads under the urban road network and related municipal infrastructures component. This change was made a few days prior to the submission of the Interim Report.

2.3 Project Implementing Company in Fangchenggang

9. The Fangchenggang City Port District Urban Construction Investment Co. Ltd. (FCPDUCIC) is the PIC for the two components in the city: i) Urban Road Network and Related Municipal Infrastructures; and ii) Coastal Protection and Upgrading.

A) Overview

10. The FCPDUCIC was established on 2 November 2006, as a wholly state-owned enterprise belonging to the Government of the Port District, Fangchenggang City. The registered capital is CNY 10 million. The office address is as follows: 6th Floor, Office Building of the Human Resources, Labour and Social Welfare Bureau, Port District, Fangchenggang City.

SA-M-3 Supplementary Appendix M: Institutional Analysis

B) Main Lines of Business

11. The main lines of business covers: financing for the construction of urban and rural development, urban roads and municipal infrastructure; and sales of building materials, hardware and home appliances.

12. The investment value of construction projects completed to date totalled CNY 200 million. There are eight on-going projects.

C) Internal Organization and Staffing

13. Currently, the PIC has twenty staff, including four in the administrative department, three in the finance department, two in the planning department and nine in the engineering department.

D) Corporate Management

14. The company has formal financial management guidelines and human resources management policy and the rules of conduct for corporate meetings and decisions.

15. The PIC has descriptions of roles and responsibilities for each department. For example, the Planning Department is charged with the responsibility the preparation of corporate development strategy, preparation of annual business plans, corporate assets operation, and arranging for project financing. The Finance Department is responsible for financial management, fund allocation and corporate assets management. The Engineering Department is responsible for project proposal, tendering, contract management, organization for project construction, project completion acceptance audit and project budgeting and settlement. The Human Resources Department is responsible for human resources planning, staff performance records, and recruitments.

E) Corporate Governance

16. The PIC has a company charter that has been approved by the industry and commerce authority. The Board of Directors include the Director and two Vice Directors. The Board appointments have a term of three years which is renewable. There is also a Board of Supervisors, consisting of five members representing audit, inspection and finance agencies. The company has full autonomy in corporate operations.

17. The FCPDUCIC conducts internal audit once a year. The last internal audit was done in January 2009. The FCPDUCIC is also audited once a year by an external audit agency assigned by the district government. The scope of the internal and external audits covers financial and engineering aspects.

18. The company does not yet have a website, but plans to establish one in 2010.

F) Project Management

19. The PIC has set up a Project Implementation Unit (PIU) within the company. The PIU is composed of seven members, including five dedicated full-time. There are two adjunct appointments, with the Deputy General Manager of the company being the Director of the PIU and the Manager of the Finance Department being the Vice Director. They are also cross-appointed as Deputy Directors of the Fangchenggang City PMO.

20. The company does not have international project experience.

SA-M-4 Supplementary Appendix M: Institutional Analysis

G) Training Needs

21. According to results of a questionnaire survey, the PIC has indicated the need for training on financial analysis (costing and budgeting).

2.4 Project Implementing Company in Chongzuo

22. The Chongzuo City Urban Construction Investment Co. Ltd. (CCUCIC) is the PIC for both components in the city: i) Chongzuo Road Network; and ii) Shuikou Lake Environmental Improvement.

A) Overview

23. The CCUCIC was established on 4 May 2004, as a wholly state-owned enterprise belonging to the Government of the Chongzuo City. The registered capital is CNY 293.62 million. The office address is as follows: 96 Chengxi Lu, Chongzuo City.

B) Main Lines of Business

24. The main lines of business covers: financing and investment for urban infrastructure and public facilities, real estate investment, consulting services, sales of construction materials and outdoor advertising.

25. Since its establishment, the company has completed many projects, including roads, municipal square, Shilin residential development, Longxiashan residential development, municipal wastewater treatment plant and related facilities, and municipal landfill.

C) Internal Organization and Staffing

26. Currently, the PIC has forty-four staff, including one general manager, two deputy general managers.

27. The PIC has seven departments as follows:

Table 2: Internal Organization and Staffing of CUCIC Department No. of Staff Office of Administration 8 Office of Chief Engineer 2 Financing Department 2 Financial Management Department 4 Engineering Department 14 QA/QC and Performance Assessment Department 4 Advertizing Operations Department 4

28. The PIC also has three subsidiary companies: i) Chongzuo City Jiahua Real Estate Development Co. Ltd., with a registered capital of CNY 1.50 million; ii) Chongzuo City Jienhua Wastewater Treatment Co. Ltd., with a registered capital of CNY 500,000; and iii) Chongzuo City Jienjie Environmental Protection Co. Ltd., with a registered capital of CNY 100,000.

SA-M-5 Supplementary Appendix M: Institutional Analysis

D) Corporate Management

29. The company has formal financial management guidelines and human resources management policy and the rules of conduct for corporate meetings and decisions. The PIC has descriptions of roles and responsibilities for each department.

30. There is no planning department within the PIC. But the planning function is performed by the Office of Administration.

E) Corporate Governance

31. The PIC has a company charter that has been approved by the industry and commerce authority. The Board of Directors include the Director and four members. The Board appointments have a term of three years which is renewable. There is also a Board of Supervisors, consisting of a representative from the City State Assets Management Commission and the City Audit Bureau. The company has full autonomy in corporate operations.

32. The CCUCIC conducts internal audit once a year. The last internal audit was done in January 2008. The CCUCIC is also audited once a year by an external audit agency which is selected through invited tendering. The last external audit was done in July 2009. The scope of the internal and external audits covers financial aspects.

33. The company does not yet have a website, nor a plan to establish one.

F) Project Management

34. The PIC has set up a Project Implementing Unit (PIU). The PIU is headed by the General Manager and comprises of the heads of the line departments.

35. The company does not have experience with international projects.

G) Training Needs

36. According to results of a questionnaire survey, the IA did not indicate any training need.

2.5 Project Implementing Company in Baise

37. The Baise City Development Investment Co. Ltd. (BCDIC) is the PIC for the two components in the city: i) Urban Road Network and Related Municipal Infrastructures; and ii) Longwang Bridge.

A) Overview

38. The BCDIC was established July 2005, as a wholly state-owned enterprise belonging to the Government of Baise City. The registered capital is CNY 147.85 million. The office address is as follows: 58 Xinjie Lane, Taiping Street, Baise City.

B) Main Lines of Business

39. The main lines of business covers: assets operation, assets management, municipal facility construction, real estate development and property management.

SA-M-6 Supplementary Appendix M: Institutional Analysis

40. As of April 2009, the value of company assets totalled CNY 4.43 billion. By 28 May 2009, the company has successfully raised financing valued at CNY 3.77 billion from financing institutions. It has successfully completed the following major municipal infrastructure projects: i) Jiangnan District infrastructure project; ii) Xiangmi Lake resettlement project; iii) Chnegbei Road Hydropower resettlement project; iv) wastewater treatment project; v) Layu bridge project; vi) Jincheng boulevard road project; vii) Zhanqian boulevard road project; and viii) Huandao No. 1 road project.

C) Internal Organization and Staffing

41. Currently, the IA has sixty-eight staff. The internal organization of the company is as follows:

Table 3: Internal Organization and Staffing of BDIC Department No. of Staff Office of Administration 12 Finance Department 8 Financing Department 3 Operations Department 6 Engineering Department I 9 Engineering Department II 9 Engineering Department III 5 Project Management Department 7 Land Acquisition and Resettlement Coordination Department 4

42. There is a subsidiary company under the name of Baise Baijia Real Estate Development Co. Ltd., for which the IA is the majority stockholder. The subsidiary has not yet started business operations.

D) Corporate Management

43. The company has formal financial management guidelines and human resources management policy and the rules of conduct for corporate meetings and decisions.

44. The PIC has descriptions of roles and responsibilities for each department. For example, the planning function is vested in the Office of Administration which also has the responsibilities for: i) daily organization and management of corporate affairs; ii) formulate corporate management rules; iii) administrative matters such as secretarial support, meetings, file management, archives management; iv) promotion of corporate culture; v) logistic support. The Finance Department is charged with the responsibilities for: i) corporate budgetary planning and analysis; ii) review and settlement of project accounts; iii) project financial forecasts and assessments; iv) management of working capital; v) profit allocation; and vi) accounting. The engineering departments are responsible for: i) life-circle management of construction projects; ii) project QA/QC and safety management; and iii) project completion audits and account settlements. The Human Resources

E) Corporate Governance

45. The PIC has a company charter that has been approved by the industry and commerce authority. But there is neither Board of Directors nor Board of Supervisors. The company has full autonomy in corporate operations.

46. The BDIC does not conduct internal audit. But it is audited once a year by an external audit agency assigned by the government. The scope of the external audits covers

SA-M-7 Supplementary Appendix M: Institutional Analysis assets and debt ratio, profit and profit allocation, cash flow tables and financial tables. The last audit was conducted in February 2009.

47. The company does not yet have a website.

F) Project Management

48. The BDIC has set up a Project Implementation Unit within the company. The PIU is composed of nineteen members. The General Manager of the company acts as the Director of the PIU; and two Deputy General Managers and the Assistant to the General Manager act as Deputy Director of the PIU. Other members include: three staff for land acquisition and resettlement, two staff for contract management, three staff for engineering; three staff for financing, and three staff for administrative and logistic support.

49. The company does not have international project experience.

G) Training Needs

50. According to results of a questionnaire survey, the PIC has indicated the need for training on: i) road and bridge construction management; and ii) land acquisition and resettlement.

2.6 Loan Repayment

51. The city finance bureaus will be responsible for the loan repayment to the ADB on behalf of the city governments.

52. Summary of Project Implementation Arrangements: The agencies responsible for project implementation are listed in Table 4 below.

Table 4: Summary Implementation Arrangements Loan Component PIC Repayment Fangchenggang 1.1 Urban Road Network and Related Municipal Infrastructures FCPDUCIC FFB 1.2 Coastal Protection and Upgrading FCPDUCIC FFB

Chongzuo 2.1 Urban Road Network and Related Municipal Infrastructures CCUCIC CFB 2.2 Shuikou Lake Environmental Improvement CCUCIC CFB

Baise 3.1 Urban Road Network BCDIC BFB 3.2 Longwang Bridge BCDIC BFB Abbreviations: PIC = Project Implementing Company; FCPDUCIC = Fangchenggang Port District Urban Construction Investment Co. Ltd.; FFB = Fangchenggang City Finance Bureau; CCUCIC = Chongzuo City Urban Construction Investment Co. Ltd.; CFB = Chongzuo City Finance Bureau; BCDIC = Baise City Development Investment Co. Ltd.

3. Hierarchy of Government in PRC

53. The general structure of government in PRC is an important element in understanding the processes involved to obtain various approvals required to commence and implement the project. The government hierarchy in PRC is composed of five levels: the

SA-M-8 Supplementary Appendix M: Institutional Analysis central (state) government, provincial government, municipal government, county/district government, and township government.

54. Each administrative level is composed of a government body and administrative agencies in the form of ministries (central level only), commissions and bureaus, as well as technical institutes which have technical development and design functions but may also have technical review and certification or approval functions. The level of approval for a specific project depends on national laws and regulations.

55. The agencies at various levels of government involved in the review and approval for this Project are described in the following sections.

3.1 Central Government

56. The central government agencies play a role in relation to municipal land improvement in regard to:

- State Council to approve the acquisition by a government body of any land area greater than 70 hectares; - State Council to approve the acquisition by a government body of any agriculture land area greater than 35 hectares; - Approval of infrastructure projects which are of a scale that requires approval at national level (State Development and Reform commission); - Approval of projects for which international investment is sought (Ministry of Finance); - Development of policies, standards and guidelines, which must be followed at all other levels various ministries); - National accreditation of facilities; - Ministry of Environmental Protection (MEP) approval of EIA report for large and important projects; and - Ministry of Construction (MC) issues the standards of construction.

57. The total investment required to implement the project, combined with the request for funds from the ADB, requires the project to obtain approval at the central level. Furthermore, the approval of the ADB loan will require negotiations with the Ministry of Finance (MOF) and National Development and Reform Commission (NDRC). Therefore, all guidelines of MOF and NDRC must be followed in the design and implementation of the project.

3.2 Autonomous Region Government

58. Autonomous Region Government directly gives command to the municipal governments within Autonomous Region. The bureaux at city level will indirectly report to the bureaux at provincial level. The city government reports directly to the Government of Guangxi Zhuang Autonomous Region.

59. The administrative structure of the Autonomous Region is provided in the appendices. The structure also illustrates the relationship of commissions and bureaus at different levels. Each level of government bureaucracy has a similar structure.

60. Autonomous Region Development and Reform Commission: Approval of FSRs for major projects; approval of tariffs for infrastructure facilities (price proposal developed by the city government). Proposals for projects for which international financing is involved are submitted to the NDRC. The NDRC can delegate the approval authority to the Autonomous Region DRC.

SA-M-9 Supplementary Appendix M: Institutional Analysis

61. Autonomous Region Construction Bureau: Approval of project technical design. Its role is to check and authorize the technical details of the proposal. There is no need to send to central level at the detailed design stage.

3.3 City Government

62. The city governments are responsible to the Autonomous Region government in matters that require reference to a higher level, and in turn to the central (State) level. The initial role of the city government was to identify the project and approve its preparation. The city government is supported by agencies in the form of bureaus, commissions, institutes and companies which perform various functions.

63. City Development and Reform Commission: The Development and Reform Commission (DRC) in each city is the administrative department for investment planning in municipal infrastructure services. The DRC organizes the preparation of and approves the overall socioeconomic development plan for the city, as well as all public infrastructure development proposals. Each city DRC has implemented many domestic capital Investment projects for the urban development.

64. City Finance Bureau: The Finance Bureau (FB) in each city performs all financial functions for the city, including infrastructure investments, and is responsible for on-lending the ADB loan to the IA and repayment loan to the ADB. The other responsibilities of the finance bureau includes: (1) formulating and implementing strategies, policies and guidelines, medium-and-long-term development plan; (2) preparing the draft annual budget of the city government and its final accounts, organizing budget implementation; (3) administering the city Government expenditures, supervising the city government expenditures for economic development..

65. City Environmental Protection Bureau: The Environmental Protection Bureau (EPB) in each city consists of sections that cover the functions of EIA, pollution control and planning, regulatory affairs and public education, and general administration. There are also three institutions that include the environmental monitoring station (fully funded by the government), inspection and enforcement brigade (fully funded by the government) and the environmental science research institute (partially funded by the government). The environmental science research institute for each city has a Class B EIA certificate issued by the Ministry of Environmental Protection Administration (MEP).

66. City Land Resources Bureau: The Land Resources Bureau (LRB) in each city contains functional sections that cover planning and land protection, finance, land registration, land utilization management, mine development management, geological environment, mapping, regulatory affairs, human resources and general administration. The two institutes are the inspection and enforcement brigade and the land reserve management centre.

67. City Urban Infrastructure Management Bureau: The main responsibilities of the Urban Infrastructure Bureau (UIMB) include: (1) road network and bridge management in urban area; (2) fuel gas management; (3) roads light management; (4) urban facilities management; (5) urban appearance management; (6) real estate management; (7) landscape management; (8) park management, etc. The sections cover general office, urban facilities management, public utilities management, urban appearance management, real estate management, park management, regulation affairs, and planning and finance. There are also institutions under direction of UIMB. Two sections and one institute are very important for the proposed project components which are urban facilities management, public utilities management and the urban facilities engineering management.

SA-M-10 Supplementary Appendix M: Institutional Analysis

3.4 Design Institutes

68. Design institutes can be found in the various levels. They usually have professional certifications of different grades/classes, and are retained on a contractual basis for the preparation of feasibility studies and engineering design, including mechanical and electrical engineering, civil engineering, geology, resettlement planning; bidding and procurement.

4. Capacity Building

69. An assessment undertake during the PPTA indicates that GPMO and City PMOs have adequate technical and institutional capacities for project implementation. Administratively, the PICs have limited or no experience in implementing ADB financed projects. The other city PMOs and PICs in Guangxi have rich experience of implementing the ADB- and/or World Bank-financed projects. It is proposed that the GPMO and the PICs can make arrangement to learn from these PMOs and PICs. There is a need to strengthen the capacity of the various organisations involved, especially the PICs. A preliminary assessment indicates that the capacity building needs may include: corporate governance, business planning, financial and human resource management, project organization and management, tendering and procurement, monitoring and evaluation, environmental and social safeguards and reporting.

70. The management of the construction of civil works requires well-trained personnel, conversant with the necessary range of activities to be maintained through the project implementation and through future long term operations. Several improved technical and procedural measures will be introduced in parallel with the physical construction of the civil works. Workshop training and on-the job training should be offered to the key operational and managerial staff to upgrade their knowledge and skills. As the project is commissioned and moves into an operational phase, operators and managers will need to be trained for operations and maintenance. It is appropriate that on-the job training is implemented by domestic trainers, who will adopt an approach to strengthen the local personnel capacity. Where foreseen as beneficial, some key management staff may undertake additional domestic or overseas training to enhance their understanding of best international practices and overall managerial capability.

71. A preliminary assessment of capacity building needs has been conducted and the results are presented in Table 5 for project implementation, in Table 6 for environmental safeguards, and in Table 7 for social safeguards. A questionnaire for capacity building needs assessment will be developed and administered. The results will be used to develop a more detailed capacity building plan.

SA-M-11 Supplementary Appendix M: Institutional Analysis

Table 5: Preliminary Assessment of Capacity Building Needs Area of Training Participants Method of Delivery

Project Implementation Related Training Project management PMOs, PICs, PIUs Domestic training Project planning and control courses/ workshops in Financial control of projects Guangxi + domestic ADB procurement procedures study tours ADB reporting procedures Standard contract documents for ICB and LCB Civil works Construction supervision (general) Site records and control Site safety Quality control in construction Evaluation of contract claims Monitoring and evaluation (PPMS) Environmental monitoring and reporting Social safeguards monitoring and reporting

Corporate Governance and Management Training Corporate management structure (general) PMOs, PICs, PIUs Domestic training Infrastructure management (general) courses/workshops in Strategic planning Guangxi + domestic Business/corporate planning study tours + overseas Capital investment planning & appraisal study tours Training needs assessment Information management (MIS) Performance measurement Personal management skills development Computer and IT skills training Other (to be specified)

Financial Training Financial accounting PMOs, PICs, PIUs Domestic training Cost & management accounting courses/workshops in Capital project accounting and cost control Guangxi + domestic Financial planning study tours Internal auditing Computerized financial management systems (including the use of accounting software, etc.) Income collection Other (please specify needs)

Operation Training Asset recording procedures (including GIS) Staff of engineering and Domestic training Asset maintenance and maintenance planning project management courses/workshops + Health & safety: working in confined spaces department, PICs, PIUs, domestic study tours Health & safety: electrical PMOs Health & safety: other Preparation of operational procedures and standards) Energy conservation and management Quality assurance and ISO 9000 systems Materials management Other (please specify needs)

SA-M-12 Supplementary Appendix M: Institutional Analysis

Table 6: Capacity Building on Environmental Management Activities Target Agencies Contents Timing Strengthening Institutional GPMO, PMOs, - Defining institutional arrangements for environmental During project Strengthening PICs, PIUs, EPBs, management, monitoring, supervision preparation GEPD - Defining positions and responsibilities - Appointing and recruiting personnel

EMCs - Recruiting and contracting EMCs for internal Prior to project environmental management consultancy and monitoring implementation

IEM - Recruiting and contracting an IEM for the overall Project, Prior to project through international competitive bidding, for implementation environmental management consultancy and independent external monitoring

Environmental Tendering Agency, - Developing environmental management clauses and During project Management PMOs, PICs, PIUs, incorporating them into construction and operational preparation Clauses and EMCs contracts Protocols - Developing/refining environmental monitoring protocols - Developing environmental emergency response procedures

Training Environmental GPMOs, PMOs, - Environmental laws and regulations Prior to project Laws, PICs, PIUs, - Environmental policies and plans implementation Regulations and Contractors - Basic Environmental management Policies - Environmental emergence response

EMP GPMO, PMOs, - Responsibility and duties for project construction, Prior to and during Implementation EMCs, PICs, PIUs, management and environmental protection project Contractors - Tasks of environmental protection in the project implementation construction - Key environmental protection contents in project construction - EMP improvement and corrective actions

Environmental PMOs, PICs, PIUs, - Monitoring and inspection methods, data collection and Prior and during Monitoring, EMCs, Contractors processing, interpretation of data, reporting system project Inspection and - Environmental reporting requirements implementation Reporting Abbreviations: EMC = Environmental Management Company / Consultant EMP = Environmental Management Plan EPB = (City) Environmental Protection Bureau GEPD = Guangxi Env. Protection Dept. GPMO = Guangxi Project Management Office IEM = Independent Environmental Monitoring PIC = Project Implementing Company PIU = Project Implementing Unit PMO = (City) Project Management Office

SA-M-13 Supplementary Appendix M: Institutional Analysis

Table 10-7: Capacity Building on Social Safeguards Activities Target Agencies Contents Timing Strengthening Institutional GPMO, PMOs, PICs, - Defining institutional arrangements for social During project Strengthening PIUs, Resettlement safeguards management, monitoring, supervision preparation Office, Women - Defining positions and responsibilities Federation, Poverty - Appointing and recruiting personnel Alleviation Office Ethnic Minority Affairs Office, Public Security Bureau, Disease Control Center Resettlement Monitoring - Recruiting and contracting Resettlement Prior to project Agency Monitoring Agencies for internal resettlement implementation monitoring

Loan Implementation - Recruiting and contracting a Loan Implementation Prior to project Consultants Consultancy for the overall Project, through implementation international competitive bidding, to provide project management support and institutional strengthening, and assist with monitoring and reporting, including social safeguards

Social Safeguard Tendering Agencies, - Developing social safeguards clauses and Prior to project Clauses and PMOs, PICs, PIUs incorporating them into construction and implementation Protocols operational contracts - Developing/refining social safeguards monitoring protocols - Developing feedback and adjustment procedures

Training Related Laws, PMOs, PICs, PIUs, - Sensitization Prior to project Regulations and Contractors, Loan - National safeguards laws and regulations implementation Policies Implementation - ADB safeguards policies and requirements Consultants - Monitoring and reporting requirements - Feedback and adjustment mechanisms

EMDP and RP GPMO, PMOs, PICs, - Responsibility and duties for project construction, Prior to and during Implementation PIUs, Contractors management and social protection project - Tasks of social safeguards in the project implementation construction - Key social safeguards contents in project construction - Feedback mechanism and corrective actions

Monitoring, GPMO, PMOs, PICs, - Monitoring and inspection methods, data Prior and during Inspection and PIUs, Contractors, collection and processing, interpretation of data, project Reporting Resettlement Monitoring reporting system implementation Agency - Social safeguards reporting requirements

Abbreviations: EMDP = Ethnic Minority Development Plan GPMO = Guangxi Project Management Office PIC = Project Implementing Company PIU = Project Management Unit PMO = (City) Project Management Offices

SA-M-14 Supplementary Appendix M: Institutional Analysis

5. Private Sector Participation

72. On 19 February 2005, the State Government issued document No. (2005)-3 which encouraged private sector participation on infrastructure investment, construction and operation. For having standardization transferring behaviour condition, it is also allowed that the assets ownership or operation rights can be transferred to private sector.

73. Private sector participation (PSP) is a trend throughout the world which commenced in earnest in the 1980s. Private sector participation in the context of this report means the undertaking of public utility functions by a fully private enterprise or company. Government-owned companies do not qualify as private participants according to PSP. Reasons for encouraging PSP include:

- Expected improvement in efficiencies by private operators with attendant lower costs of providing services; - Shift of responsibility for obtaining investment funds from the public to the private sector, and - Improved capacity to modernize and introduce new technology.

74. ADB policy is to encourage public utilities to consider the potential for PSP in their operations and service delivery. There can be varying degrees of private involvement in the functions of a public utility.

75. There is a range of strategies and initiatives that involve the private sector and only the more relevant options are discussion below:

- Service contracts – Government provides the finance and concentrate on the priorities, service standards and results, but makes use of the innovation and commercial skills of the private sector to provide specific services which may be a design-construction package, or operation and maintenance of a water/wastewater facility over a specified period of time (2-5 years). Government may choose this option provided it has established that this approach is more cost-effective, it does not create a staff redundancy problem after contracting out, there is enough competitive and competent service providers in the market and the contract is professionally prepared.

- Lease contracts – Under this option a concession is awarded by the government to a private sector organization to manage and operate a water/wastewater facility for a definite period (say, 15 years). The assets remain in public ownership, and the operator has to give an undertaking to carry out capital improvements during the life of the contract to deliver agreed standards of service within a long-term pricing model. Such a contract has to be very carefully structured and a rigorous tender exercise should be conducted to select an appropriate contractor.

- Build-Operate-Transfer (BOT) contracts – In China this option is often considered to overcome the problem of investment capital shortage. The contractor finances the construction and operation of the water/wastewater facility, but he will be paid for his service rendered over the operation years (say, 20 years), normally funded from water/wastewater charges collected from customers.

76. For the BOT option to be successful, it is vitally important that the following conditions are met:

SA-M-15 Supplementary Appendix M: Institutional Analysis

- Full cost recovery achieved (probably over time) from infrastructure facility user charges to ensure financial sustainability of BOT contracts; - Government should be sufficiently guided on the procurement procedures and the model contract forms that are appropriate to BOT; - Contract provisions sufficiently robust to guard against financial risks in contracts of such long duration; - Contract provisions sufficiently comprehensive to safeguard performance standards; - A strong regulatory structure to monitor tariff levels and service standards; - Sufficient market interest for competitive bidding and transparent bidding process, because value for money could be a concern if contracts entered into are awarded on a negotiated basis; - Contract documentation based on high quality information; - Access to capital market to finance public infrastructure – An advantage of establishing enterprise companies to manage public infrastructure service is, among others, the potential access to capital markets (such as corporate bond issues) to finance new infrastructures. However, urban utilities have not been among successful applicants for bond issues in the PRC. In this connection it will be important for comfort of both regulators and the investor markets that the first such bond issues are able to demonstrate professional management, transparent financial reporting, high credit ratings from international agencies with operations in the PRC; and utility revenue bond structuring in line with international standards. - The ability to attract private sector partners in PRC urban utility sectors will depend on the future prospects for cost recovery including a reasonable return on capital investment. The ADB Mission will discuss and assess PSP opportunities for the Project during the Loan Fact Finding Mission.

6. Accounting, Auditing, and Reporting

77. The IAs will keep records to allow the identification of goods and services financed from the loan proceeds, following accounting principles and practices prescribed by the PRC Accounting Law, which requires that the financial statements should be prepared following the internationally recognized accounting standards. The IAs will set up and maintain separate project accounts and records. The financial statements of the project accounts and the annual corporate financial statement for the IAs will be subject to external audits by the city audit bureau, the Guangxi Audit Bureau, and the State Audit Administration. The audits will be carried out in accordance with the audit regulations of the PRC, and will meet ADB requirements. The audit reports should include a separate auditor’s opinion on the use of the imprest account and SOE. The IA’s annual audited financial statements and audited project accounts will be submitted to ADB no later than 6 months after the end of the fiscal year for the entire implementation period.

78. The GZARG and the IAs will submit reports and information to ADB concerning the use of the loan proceeds, project implementation, and IA performance. These reports will include (i) semi-annual progress reports on project implementation; (ii) annual reports; and (iii) a project completion report, not later than 3 months after the completion of the project facilities. Through preparing and submitting semi-annual progress reports, the PMO will report the progress made, problems encountered during the period under review, steps taken or proposed to remedy the problems, the proposed program for the planned project implementation activities, and progress expected in the next 6 months.

SA-M-16 Supplementary Appendix M: Institutional Analysis

7. Project Review, Performance Monitoring and Evaluation

79. ADB and the Government will review project implementation jointly at least once a year. In addition, ADB and the Government will undertake a comprehensive midterm review 2 years after the start of project implementation. This midterm review will include a detailed evaluation of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity-building measures. Feedback from the PPMS activities will be analyzed.

80. The project performance monitoring system (PPMS) indicators, their relevance, and monitoring practicalities have been discussed with GZARG, city governments and the IAs during project preparation. The impact indicators, as specified in the DMF, will include, among other things: (i) GDP growth, (ii) urban population and per capita income, (iii) flood damages, and (iv) environmental quality. At the start of implementation of the Project, PMOs and IAs, with support from the project implementation consultants, will develop comprehensive PPMS procedures to generate data systematically on project outcome, inputs and outputs of each component, as well as the agreed-upon employment indicators, environmental monitoring indicators, and social/ethnic and resettlement implementation indicators to be used to measure the project impact, outcomes, outputs, and project compliance with ADB safeguard policy requirements. The GPMO, with support from the project implementation consultants, will (i) refine the PPMS framework; (ii) establish baseline; (iii) confirm achievable targets; (iv) finalize the monitoring and recording arrangements; and (v) establish data collection systems and reporting procedures, no later than 6 months after loan effectiveness.

SA-M-17 Supplementary Appendix N:

Summary Environmental Impact Assessment Environmental Assessment Report

Summary Environmental Impact Assessment Project Number: 42010 February 2010

People’s Republic of China: Guangxi Southwestern Cities Development Project

Prepared by the Guangxi Zhuang Autonomous Region Government for the Asian Development Bank (ADB).

This summary environmental impact assessment is a document of the borrower. The views expressed herein do not necessarily represent those of ADB’s Board of Directors, Management, or staff, and may be preliminary in nature. CURRENCY EQUIVALENTS (As of 24 February 2010)

Currency Unit – yuan (CNY) CNY1.00 = $0.1465 $1.00 = CNY6.8277

ABBREVIATIONS

ADB – Asian Development Bank COD – chemical oxygen demand dB(A) – A-weighted decibel EIA – environmental impact assessment EIRR – economic internal rate of return EMC – environmental management company and/or consultant EMP – environmental management plan EMS – environmental monitoring station EMU – environmental management unit EPB – environmental protection bureau GDP – gross domestic product GEPD – Guangxi Environmental Protection Department GPMO – GZAR Project Management Office GZAR – Guangxi Zhuang Autonomous Region GZARG – Guangxi Zhuang Autonomous Region government IEM – independent environmental monitor MEP – Ministry of Environmental Protection NO2 – nitrogen dioxide PIC – project implementing company PLG – project leading group PM10 – particulate matter smaller than 10 micrometers PMO – project management office POC – project operating company PPMS – project performance management system PRC – People’s Republic of China SEIA – summary environmental impact assessment SO2 – sulphur dioxide TA – technical assistance TSS – total suspended solids

WEIGHTS AND MEASURES

ha – hectare km – kilometer m – meter m/s – meters/second m2 – square meter m3 – cubic meter mg/m3 – milligrams per cubic meter mu – unit of land area equal to 1/15 ha or 667 m2 NOTE

In the report, “$” refers to US dollars.

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 MAP I. INTRODUCTION 1 II. DESCRIPTION OF THE PROJECT 1 III. DESCRIPTION OF ENVIRONMENT 3 A. Physical Environment 3 B. Environmental Quality 5 C. Socioeconomic Development 6 IV. ANALYSIS OF ALTERNATIVES 8 A. Environmental Considerations 8 B. With-Project and Without-Project Scenarios 8 C. Alternative Designs 9 V. ANTICIPATED ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES 10 A. Incremental Environmental and Social Benefits 10 B. Design Considerations 11 C. Potential Adverse Impact and Mitigation Measures for Road Networks and Related Infrastructure 11 D. Potential Adverse Impact and Mitigation Measures for Longwang Bridge 15 E. Potential Adverse Impact and Mitigation Measures for Coastal Protection and Upgrading Component 16 F. Potential Adverse Impact and Mitigation Measures for Shuikou Lake Environmental Improvement Component 18 G. Land Acquisition and Resettlement 20 H. Cultural Relics 20 VI. ECONOMIC ASSESSMENT 20 A. Environmental Protection Investments 20 B. Environmental Benefits 20 C. Economic Internal Rate of Return for Environmental Management 21 VII. ENVIRONMENTAL MANAGEMENT PLAN 21 A. Objectives 21 B. Mitigation Measures 21 C. Organizational Structure for Environmental Management 21 D. Inspection, Monitoring, and Reporting 22 E. Mechanism for Feedback and Adjustment 23 VIII. INFORMATION DISCLOSURE AND PUBLIC CONSULTATIONS 23 A. Information Disclosure and Public Consultations to Date 23 B. Consultation Results 23 C. Future Information Disclosure and Public Consultation Program 24 IX. CONCLUSION 24 A. Project Benefits 24 B. Environmental Safeguard Assurances 25 C. Overall Conclusion 25 APPENDIXES

1. Environmental Management Plan 2. Project Sites 106 o 00'E 111o 00'E

GUANGXI SOUTHWESTERN CITIES DEVELOPMENT PROJECT H U N A N IN THE PEOPLE'S REPUBLIC OF CHINA

26 o 00'N G U I Z H O U 26 o 00'N

Guilin

Hechi Yishan Lipu Liuzhou Guijiang River

Baise Y U N N A N G U A N G X I Xunjiang R. Wuzhou

Litang Xijiang River N Guiyang Nanning G U A N G D O N G 0 25 50 75 100 125 Fusui Yulin Chongzuo Kilometers

Project City Ping Xiang Provincial Capital Minning Qinzhou Fangchenggang City/Town o Dongxing o 22 00'N National Road 22 00'N Provincial Road VIET NAM Beihai Railway River Provincial Boundary International Boundary S o u t h C h i n a S e a Boundaries are not necessarily authoritative. 10-0561d HR G u l f o f T o n k i n

106 o 00'E 111o 00'E I. INTRODUCTION

1. The purpose of this report is to summarize the results of the environmental impact assessment (EIA) of the Guangxi Southwestern Cities Development Project. It is prepared in accordance with the requirements of the Environment Policy (2002) and Environmental Assessment Guidelines (2003)1 of the Asian Development Bank (ADB) on the basis of domestic EIA reports that meet the requirements of the People’s Republic of China (PRC) EIA Law (2003)2 and associated regulations.

2. The domestic EIA reports have been prepared by qualified local institutes using methodologies and standards consistent with relevant guidelines established by the PRC Ministry of Environmental Protection. The approval authority for the domestic EIAs is the respective city environmental protection bureau (EPB). The project preparatory technical assistance (TA) consultants assisted in the finalization of the EIA reports, particularly in preparing the environmental management plans (EMPs).

3. Soil erosion prevention plans have also been prepared for the project components in accordance with the PRC Law on Soil Erosion Prevention Control (1991). The soil erosion prevention plans have been reviewed and approved by the respective city water resources bureau.

4. Domestic feasibility studies and resettlement plans have also been prepared under the guidance of the TA consultants. The findings of these studies have been incorporated into the summary environmental impact assessment (SEIA).

II. DESCRIPTION OF THE PROJECT

5. The Guangxi Zhuang Autonomous Region (GZAR) is located in the southwestern PRC, and is one of 12 less-developed provinces and autonomous regions targeted by the PRC government’s strategy of promoting development in the western part of the country. GZAR occupies a central position in one subnational and two subregional economic cooperation areas, namely, the Pan-Pearl River Delta Economic Cooperation Area, the Greater Mekong Subregion and the Pan-Beibu Gulf Economic Cooperation Area.

6. The GZAR Eleventh Five-Year Urbanization Development Plan (2007) supports the consolidation of key development corridors within the Beibu Gulf economic zone. These include the following key corridors: Nanning–Fangchenggang, Nanning–Qinzhou, Nanning–Beihai, Nanning–Chongzuo (which leads to the PRC–Viet Nam border) and Nanning–Baise.

7. The Guangxi Southwestern Cities Development Project is intended to improve living conditions in the three border cities of Fangchenggang, Chongzuo, and Baise in the GZAR, and enhance their ability to promote and benefit from regional cooperation. The proposed project comprises six components in the three cities: (i) Fangchenggang urban road network and related municipal infrastructure, (ii) Fangchenggang coastal protection and upgrading, (iii) Chongzuo urban road network and related municipal infrastructure, (iv) Chongzuo Shuikou Lake environmental improvement, (v) Baise urban road network and related municipal infrastructure, and (vi) Baise Longwang bridge. There is also a capacity-building component that is designed to strengthen the institutional capacity of the project implementation companies (PICs) and

1 ADB. 2003. Environmental Assessment Guidelines. Manila. 2 PRC. 2003. EIA Law of the People’s Republic of China. Beijing: People’s Congress. 2 relevant agencies to promote comprehensive transport planning and manage project implementation and the environment.

8. The location of three project cities is shown in the Map. The sites and alignments of the project components are provided in Appendix 2 (Figure A2.1 through Figure A2.3). Narrative descriptions of the components are provided in Table 1.

Table 1: Descriptions of Components

Component Description ofOutput A. Fangchenggang City 1. Urban road network (i) Urban roads constricted (27.61 km) and related municipal (ii) Anfujiang bridge constructed (205 m in length) infrastructure (iii) Related municipal infrastructures constructed, including traffic signals, culverts, drainage, lighting, and landscaping

2. Coastal protection and (i) Coastal dike constructed (9.15 km) upgrading (ii) Public education mangrove park constructed (2.5 ha) (iii) Related auxiliary facilities constructed

B. Chongzuo City 1. Urban road network (i) Urban roads constructed (14.1 km) and related municipal (ii) Related municipal infrastructures constructed, including traffic signals, infrastructure culverts, drainage, lighting, and landscaping

2. Shuikou Lake (i) Lake surface cleared (78 ha) environmental (ii) Coffer weirs removed (7.85 km) improvement (iii) Lake bank rehabilitated (2.62 km) (iv) Pedestrian path constructed (1.57 km) (v) Dredging carried out (vi) Lakeside point and non-point pollution sources controlled

C. Baise City 1. Urban road network (i) Urban roads constructed (3.69 km) and related (ii) Related municipal infrastructures constructed, including traffic infrastructure signals, culverts, drainage, lighting, and landscaping

2. Longwang bridge (i) Bridge constructed (563 m in length) (ii) Related municipal infrastructures constructed, including traffic signals, culverts, drainage, lighting, and landscaping ha = hectare, km = kilometer, m = meter. Source: ADB. Preparing the Guangxi Southwestern Cities Development Project. Manila (draft final report).

9. The project is estimated to cost a total of approximately $293.41 million, of which $150 million will be financed by a loan from ADB and the rest from city government budgets and domestic commercial loans. The project will be implemented over 5 years, between 2011 and 2015.

10. The government of GZAR has designated the GZAR Development and Reform Commission as the executing agency. The city government will serve as the implementing agency for the project components in each respective city. The Fangchenggang City Port District Urban Construction Investment Company Limited will be the PIC for the two components in Fangchenggang City. The Chongzuo City Urban Construction Investment Company Limited 3 will be the PIC for the two components in Chongzuo City. The Baise City Development Investment Company Limited will be the PIC for the two components in Baise City. The PICs are state-owned enterprises under the respective city and district governments.

III. DESCRIPTION OF ENVIRONMENT

A. Physical Environment

1. Overview of Guangxi

11. Guangxi is a mountainous region. The Nanling Mountains are on the northeast border, with the Yuecheng Mountains and Haiyang Mountains making up the shorter branching ridges. The Dayao Mountains and Daming Mountains are closer to the center of the region. The Duyao Mountains and Fenghuang Mountains are located to the north, while the Yunkai Mountains are on the southeast border. The highest point is the 2,141 meters (m) Mount Mao'er, located in the Yuecheng Mountains. Valleys have been cut through the mountains by a number of rivers, most of which form tributary basins of the Xijiang River. Guangxi has a short coastline on the Gulf of Tonkin, and important seaports include Beihai, Qinzhou, and Fangchenggang. Guangxi has a subtropical climate. Summers are generally long and hot. Average annual temperature is 17°C to 23°C, while average annual precipitation is 1,250 millimeters (mm) to 1,750 mm. Guangxi has a rich and diverse ecosystem, in part because of its subtropical climate and topography, and supports over 6,000 plant species and a variety of wild animals.

2. Fangchenggang

a. Location

12. Fangchenggang is a coastal city in southern Guangxi. In the south it borders the Beibu Gulf; in the east Qinzhou City; in the west Viet Nam; and in the north Nanning Municipality. The city has a coastline of 584 kilometers (km) and a border (with Viet Nam) of 212 km. It is located 153 km from Nanning, the capital city of GZAR, 60 km from Qinzhou City, and 160 km from Beihai City. The project area is located in the Port (Guangkou) District.

b. Topography

13. Fangchenggang is characterized by coast, plains and hills. Weathering of the limestone has resulted in a karst (limestone) topography, which has impacted the prevailing geo- morphological processes and hydrology. Silurian sandstones, shale, and siltstones are also widely distributed in the area. The port and approach channel are sheltered on three sides: by the mainland to the north and hilly peninsulas to the west and south.

c. Climate

14. Fangchenggang has a subtropical climate, with the highest monthly temperature on record of 28°C and the lowest monthly temperature on record of 2.8°C, which is characterized by an early spring, hot summer, and drizzly autumn and winter. The area is also subject to typhoons, with an average of one typhoon per year. The average annual temperature is about 17°C, with a high of 30°C, and a low of 1°C. The mean average rainfall is 2,350 mm, of which 85% occurs between May and September; the average annual relative humidity is 81%. The wind is predominantly from the north in winter, the south during the summer months, and 4 variable in spring and autumn. The annual average wind speed is about 5 meters per second (m/s), and reaches a maximum of about 18 m/s.

d. Flora and Fauna

15. Fangchenggang's forests contain more than 500 families of plants, 25 species of mammals, and many species of insects, reptiles, amphibians, and birds. The natural vegetation is tropical monsoon evergreen broadleaf forest. Fangchenggang has 15 mangrove species in its 1,553 hectares (ha) of mangrove forests; 1,131 ha of mangrove forest are under national protection in the Beilun River Estuary National Nature Reserve, which is located about 20 km from the proposed project area. The mangrove forests provide a variety of ecological services, and help to reduce the impact of natural disasters, purify water, protect endangered mangrove species, and increase the ecological security of local communities, who engage in pearl farming and near-shore fishing. Extensive stands of mangrove, covering an area of approximately 21 ha, can be found in the Fangcheng Port area and Anbujiang River estuaries where the proposed road network and coastal protection and upgrading components are located.

3. Chongzuo

a. Location

16. Chongzuo is located in southwestern Guangxi Province. It borders Nanning in the east, Baise in the north, Fangchenggang in the south and Viet Nam in the west. Chongzuo’s comparative advantages include its long international border lines and railways, close proximity to the provincial capital of Nanning and to the Pan-Pearl River Delta, and being part of the China-ASEAN Free trade Area.

b. Topography

17. Chongzuo is composed of a lightly undulating plain with isolated limestone outcrops. Chongzuo has a total of 14 rivers. The Zuojiang River, which is the largest river, is a tributary of the Youjiang River, which is part of the Xijiang water system in the Pearl River Basin. The Zuojiang River flows from the southwest to the northeast and divides urban Chongzuo into two cities: Chengnan (to the south) and Chengbei (to the north).

c. Climate

18. Chongzuo is located in a subtropical climatic zone, with a subtropical monsoon climate characterized by high temperatures throughout the year. The annual average temperature is 20.8°C to 22.4°C. The rainfall ranges from 1,170 mm to 1,414 mm per year, and is concentrated between April and September (82% of annual precipitation occurs during this period). The typhoon season is May to December; flooding may occur during this period, and has resulted in crop damage in riverine areas, closure of low-lying roads, and damage to bridges and culverts.

d. Flora and Fauna

19. Biodiversity is high in Chongzuo, with more than 4,000 species of plants and more than 450 species of animals. There are more than 30 species of rare and protected animals, including white headed and Indo-Chinese black langurs, crested striped hornbills, pangolins, and clouded leopards. About one fourth of the PRC’s wild animal species can be found in 5

Chongzuo. Many fish species are important as a food source for communities located along the river systems.

4. Baise

a. Location

20. Baise is located in western Guangxi, bordering Guizhou in the north, Yunnan in the west and Nanning in the east, and Viet Nam in the south. The 11 counties under the jurisdiction of Baise are Pingguo, Tiandong, Tianyang, Tianlin, Debao, Jingxi, Napo, Lingyun, Leye, Longlin, and Xilin, with 10 of these classified as state-level poor counties.

b. Topography

21. Baise is characterized by mountainous karst, with most of the territory located 90 m to 200 m above sea level. The Youjiang River Valley is made up of low hills, karst hills, mountains and alluvial terrain; soil types include clay and sandy clay, while the bedrock is mainly mudstone, conglomerate, shale, and sandstone.

c. Climate

22. Baise has a subtropical wet climate, with long hot summers and mild winters. Temperatures range from an extreme low of 1°C to a high in summer of 42.5°C, with an annual average of about 18°C. Annual average precipitation is 1,200 mm to 1,400 mm, most (73%– 77%) of which falls in April–September.

d. Flora and Fauna

23. Large mammals can be found in the mountains that border both sides of the Youjiang River. The average forest cover in the project area is 35.8%; in the upper mountain area, coverage can reach 70%–80%. There are no natural reserves or other protected area in the project region. Freshwater fishery resources in the rivers and creeks include carp, grass fish, and chub. Two of the fish species are on the national protection list (salamander and mountain terrapin) and one on the provincial protection list. However, the field studies have shown that these protected species are not in the rivers directly affected by the project.

B. Environmental Quality

1. Fangchenggang

24. In 2007 the environmental quality in Fangchenggang was rated good to excellent;3 all ambient air, water and noise parameters and noise levels met the national ambient environmental standards. Specially, air quality met the requirements of class II of the national air quality standards: the annual average concentration of total suspended particulate matter 3 smaller than 10 micrometers (PM10) was 0.061 milligrams per cubic meter (mg/m ), as 3 compared to the class II threshold of 0.10 mg/m ; the level of nitrogen dioxide (NO2) was 0.018 3 3 3 mg/m , vs. the threshold of 0.04 mg/m ; and the level of sulphur dioxide (SO2) was 0.017 mg/m vs. the threshold of 0.06 mg/m3. The average urban noise level was 49.6 A-weighted decibels

3 Fangchenggang Municipal Environmental Protection Bureau. 2007. State of the Environment Report. Fangchenggang City. 6

(dB[A]). Water quality parameters in the monitored river sections met all applicable national surface water quality standards with the exception of standards for dissolved oxygen, chemical oxygen demand (COD) and oil, which were exceeded during the low-flow season.

2. Chongzuo

25. In 2007 the environmental quality in Chongzuo was rated excellent with respect to ambient air quality and good with regard to noise and surface water quality.4 Specially, air quality met the requirements of class II of the national air quality standards; the annual average 3 3 concentration of PM10 was 0.067 mg/m , as compared to the class II threshold of 0.10 mg/m ; 3 3 3 NO2 was 0.015 mg/m , vs. a threshold of 0.04 mg/m and SO2 was 0.011 mg/m , vs. the threshold of 0.06 mg/m3. The average urban noise level was 52.6 dB(A). For the monitored river sections, the water quality parameters met the applicable national surface water quality standards, with the exception of standards for dissolved oxygen, COD, and oil, which were exceeded during the low-flow season.

3. Baise

26. In 2007 the environmental quality in Fangchenggang was also rated as good to excellent.5 All national ambient air and noise environmental quality standards were met, and most surface water bodies also met the corresponding standards. Specially, air quality met the requirements of class II of the national air quality standards: the annual average concentration of total suspended particulates was 0.20 mg/m3 (meeting the class II threshold of 0.20 mg/m3); 3 3 the NO2 level was 0.03 mg/m , below the threshold of 0.04 mg/m ; and the SO2 level of 0.06 mg/m3 was also equal to the threshold of 0.06 mg/m3. The average urban noise level was 48.6 dB(A). For the monitored river sections, the water quality parameters met the applicable national surface water quality standards, except for the dissolved oxygen, COD, and oil standards, which were exceeded during the low-flow season.

C. Socioeconomic Development

1. Fangchenggang

27. Fangchenggang Municipality administers two urban districts, namely Gangkou (Port) District and Fangcheng District, one county (Shangsi County), and one county-level city (Dongxing City). Fangchenggang is home to 20 minority ethnic groups in addition to the Han— including the Zhuang, Yao, Jing, Dong, Miao, Mulao, Maonan, Hui, Shui, Gelao, Man, Korean, Tibetan, Li, Dai, and Uygur groups—which collectively account for almost half (48%) of the population. The primary industries are food and agricultural product processing, iron and steel, metallurgy, petrochemicals, energy, building materials, electronic products, pharmaceuticals and ports. In 2008, the gross domestic product (GDP) totalled CNY21.2 billion, an increase of 20.1% over 2007. The rate of municipality’s GDP growth was 7.4 percentage points higher than that of the GZAR, and 4.6 percentage points higher than the Guangxi Beibu Gulf Economic Area. The total industrial output value amounted to CNY32.8 billion (an increase of 43.9% over 2007), including CNY13.0 billion from the agricultural processing industry and CNY3.0 billion from the iron and steel industry. The industrial sector contributed more than 45.7% of the economic growth. Export value grew to more than $2.2 billion, an increase of 50.3% over 2007. Urban per capita disposable income grew by 18.1% to CNY14,364, while rural per capita net

4 Chongzuo Municipal Environmental Protection Bureau, 2007.State of the Environment Report. Chongzuo City. 5 Baise Municipal Environmental Protection Bureau, 2007.State of the Environment Report. Baise City. 7 income increased by 18.0% to CNY4,474. The urban unemployment rate stood at 2.9% or 0.3% lower than in 2007. The rural population that was living in poverty was reduced from 172,900 at the end of 2000 to 125,600 by the end of 2008. Increased public spending produced improvements in public health, education, social safety, low-income housing, water supply, wastewater treatment, solid waste management and ecological conservation.

2. Chongzuo

28. Chongzuo Municipality administers the Jiangzhou District, Pingxiang City (a county-level city) and six counties, including Fusui, Daxin, Tiandeng, Ningming and Longzhou. It has a total population of 2.33 million, which is comprised mainly (88.6%) of ethnic minorities, mainly the Zhuang. The border is 533 km long, making it the longest border of Guangxi cities, and has 11 various types of border port. Chongzuo Municipality is the PRC’s biggest manganese producer and the world's biggest producer of bentonite. Other industries include export infrastructure, paper, forest products such as timber and turpentine, building materials, pharmaceuticals, and electronics manufacturing. Forestry and agriculture are significant to Chongzuo’s economy. Oranges, rice, beans, corn, cassava, cinnamon, bananas, vegetables, durian, pineapples, longan, and tea are all major crops, but sugarcane is the dominant agricultural crop in Chongzuo. Farm-raised animals include beef and dairy cattle, sheep, ducks, chickens, geese, and bees. Chinese medicinal herbs are picked from the wild and also grown. Important mineral resources include manganese, gold, ferberite, coal, barite, bentonite, uranium, and vanadium. In 2008, GDP totalled CNY26.5 billion, an increase of 11.8% over 2007. Fiscal revenues amounted to CNY3.2 billion, an increase of 19% over 2007. The export value reached $1.60 billion, an increase of 72.6% over 2007. The primary industries include sugar, magnesium and building materials. Urban per capita disposable income reached CNY12,752, an increase of 15.0% over 2007; the rural per capita net income reached CNY3,754, an increase of 14.1% over 2007. The urban unemployment rate was brought below 5%. Between 2002 and 2008, a total of CNY705 million was spent on rural development and poverty reduction programs, and by the end of 2008, the population living in poverty was reduced to 585,500, from 736,800 in 2002. These programs were supplemented by social and livelihood improvement programs that addressed public health, education, social safety net, skills training, low-income housing and environmental improvement as well as rural water supply, roads, and communication.

3. Baise

29. Baise Municipality administers one urban district (Youjiang) and 11 counties (Pinguo, Tiandong, Tianyang, Tianlin, Debao, Jingxi, Napo, Lingyun, Leye, Longlin, and Xilin). It is extremely rich in mineral resources, with 57 kinds of minerals; these include bauxite, with 780 million tons of proven reserves, accounting for more than one-third of the reserves in the PRC, and more than 1 billion tons of long-term reserves. There are also more than 820 million tons of coal reserves, a preliminary 100 million tons of proven oil reserves, 3,000 million cubic meters (m3) of natural gas reserves and 3,000 MW of hydropower potential. The levels of reserves of antimony, copper, oil, coal, gold, crystal and more than 10 other types of mineral resources are the highest in Guangxi. Baise also has rich tourism resources, including red (revolutionary) tourism, and valleys, forests and other resources with four national AAAA scenic areas,6 and is a new and emerging tourist city, second only to Guilin and Beihai in Guangxi (Baise was awarded Outstanding Tourist City of China in 2007). In 2008, the GDP totalled CNY41.6 billion, an increase of 13.4% over 2007. The total industrial output value amounted to CNY46.4 billion,

6 Chinese scenic areas are classified into 5 classes from A (lowest) to AAAAA (highest), based on 44 environmental quality, scenic and/or historical value and service quality indicators. 8 an increase of 29.6% over 2007. The industrial value added totalled CNY18.9 billion, an increase of 22.3% over 2007, including CNY7.0 billion from non-ferrous metal metallurgy and related industries (an increase of 47.0% over 2007), CNY2.1 billion from power and power supply industries (an increase of 14.4% over 2007) and CNY1.1 billion from the agricultural and food processing industries (an increase of 43.8% over 2007). The industrial sector contributed 72.8% of the economic growth. The urban per capita disposable income reached CNY13,169 (an increase of 15.5% over 2007); the rural per capita net income was CNY2,820, an increase of 14.5% over 2007. At the end of 2001, Baise had a total rural poverty population of 1.39 million; by the end of 2008, this figure was reduced to 0.71 million. The poverty incidence rate declined from 10% in 2000 to 6% by 2007. The poverty reduction effort has been supplemented by a series of development programs, including, among others, programs that focussed on (i) rural water supply; (ii) household-based biogas; (iii) “village accessibility” (all villages are connected by paved roads); and (iv) “village connectivity” (all villages are connected to power supply, telephone, radio, and television).

IV. ANALYSIS OF ALTERNATIVES

A. Environmental Considerations

30. During development of the project, various alternatives were proposed and screened against technical, economic, social, energy efficiency and environmental criteria. The primary objective with respect to the environmental criteria was to identify and recommend those alternatives with the least adverse environmental impacts and maximum environmental benefits. The following key environmental factors were used in comparing the alternatives: (i) the amount of earthwork (related to vegetation disturbance, soil erosion, etc.); (ii) land occupation, particularly occupation of basic farmland and woodland; (iii) emission reduction; (iv) minimization of community disturbance; and (v) resettlement.

B. With-Project and Without-Project Scenarios

1. Urban Road Networks and Related Municipal Infrastructure

31. Not undertaking the project (the without-project scenario) would result in a shortage of urban infrastructure in the three cities compared to the with-project scenario. In addition, environmental quality may continue to deteriorate, while the impact of the lack of infrastructure will gradually increase as a result of pressures associated with a growing population, urbanization, and economic development. The without-project-scenario will reduce the competitiveness of the cities and their attractiveness to outside investment, and inhibit further improvement of the standard of living of the inhabitants. The resulting infrastructure bottlenecks will constrain the full participation of the border cities in subnational and subregional cooperation programs, thereby preventing the cities from deriving the maximum benefits from the programs, and interfering with full realization of the programs.

2. Coastal Protection and Upgrading

32. At present, no dikes exist in the project area, and frequent flooding occurs. Without the new coastal dike, the coastal region of Yuzhouping in Fangchenggang City would continue to experience flooding, resulting in the loss of life and properties. The dikes will provide protection from 50-year floods (of a height expected once every 50 years), compared with the current complete absence of protection. Under the without-project scenario, the mangrove forest in the project area would continue to deteriorate from land-based liquid and solid waste pollution. The 9 proposed intervention, coupled with the establishment of sewerage networks and wastewater treatment facilities, will protect the mangrove forest habitat and ecosystems. With coastal parks and a 2.5-ha mangrove protection education square with a public information booth, the component will also provide the opportunity for public recreation, and enhance public knowledge of the importance of mangroves and action on mangrove protection.

3. Shuikou Lake Environmental Improvement

33. The water quality of the lake presently meets the Class III of the National Surface Water Quality Standards (GB 3838-2002). However, under the without-project scenario, water pollution in the lake is expected to increase due to wastewater discharge from factories, lakeside human settlements and aquaculture undertaken in the lake. With the project, the pollution sources will be reduced; and the water quality in the lake will be upgraded and maintained at Class II of the National Surface Water Quality Standards (GB 3838-2002).

C. Alternative Designs

1. Urban Road Networks and Related Municipal Infrastructures

34. Consideration was given to the alignments of roads to ensure they would improve connectivity to new and existing transportation networks. The alignments were assessed against the following design criteria:

(i) connectivity to the national expressway network in Guangxi; (ii) easy access to and from other roads in the region; (iii) facilitation of the operation of the overall road networks of the city; (iv) projected future regional traffic distribution; (v) easy access without going through downtown areas in order to avoid traffic jams; (vi) minimizing civil works and avoiding sections with unfavourable geological conditions or difficult engineering works such as deep cuts or high fills; (vii) minimizing construction costs; (viii) minimizing environmental impact along the routes; (ix) minimizing land acquisition and resettlement; (x) reducing hauling distance for construction materials; (xi) minimizing disturbing existing roads and utilities; and (xii) incorporating the views of local people in selecting the location of proposed interchanges and the arrangement of pedestrian bridges and underpasses, and in designing the revegetation plan.

2. Coastal Protection and Upgrading

35. The most important environmental consideration for the project design is to ensure adequate protection of the coastal mangrove forest. The dikes have been carefully designed to protect the wetland and mangrove forest ecosystems and minimize any potential impact from construction activities and operations. Another important design feature is the incorporation of climate resilience by enlarging the zone between the coastline and the dike to buffer sea-level rise. The buffer zone will be used as a coastal park for local residents. In addition, public education facilities will be established in the coastal park to raise awareness about mangrove protection. Lastly, biological measures with trees and grasses for bank reinforcement have been adopted. 10

3. Shuikou Lake Environmental Improvement

36. Lake rehabilitation will be achieved through the control of lakeside and in-lake pollution sources and the establishment and enhancement of artificial wetlands. The wetlands will purify water and serve as fish and bird habitat. The use of biological measures with trees and grasses for lakeshore protection will be maximized.

37. Two options have been considered for the sediment dredging and transportation at Shuikou Lake: (i) pumping out the water and then excavating the sediment, and (ii) excavating with dredging machines. The first option would simplify dredging and transportation operations, but damage and reduce aquatic and wetland ecological system functions. The second option would result in the need for the disposal of a large volume of dredged sediment with high water content. Furthermore, the generation of leachate at the dewatering site could potentially cause secondary pollution. The advantages of mechanical dredging would include a reduction in the construction period due to the use of multiple dredging sites. To protect the lake’s wetland ecological functions and maximize cost effectiveness, mechanical dredging is recommended.

38. The dredged sediment, if disposed of improperly, would constitute a pollution risk. The original plan was to truck it to and dispose of it at the municipal landfill. This option would cause adverse impacts along the trucking routes, as well as on and around the disposal site. An alternative plan has been adopted that calls for reusing the dredged sediment as fertilizer for urban landscaping.

V. ANTICIPATED ENVIRONMENTAL IMPACTS AND MITIGATION MEASURES

A. Incremental Environmental and Social Benefits

39. The project is expected to generate multiple incremental environmental and social benefits. The incremental environmental benefits from the road networks and related infrastructure components include improvement in vehicular energy efficiency and reduced air emissions from improved road conditions and increased vehicle speed. The coastal protection and upgrading component will prevent further degradation of coastal wetlands and mangrove forests and create beautiful coastal areas for public recreation and environmental education. The Shuikou Lake environmental improvement component will reduce pollution and improve water quality (from Class III to Class II of the National Surface Water Quality Standards, GB 3838-2002).

40. The primary social benefits include improved road networks and related infrastructure for urban development, increased connectivity for promotion of regional cooperation, increased traffic safety and an improved standard of living for local residents. The project will also serve to improve infrastructure services in the three project cities, which will help to attract outside investment and promote economic growth and industrial development. Economic benefits will include higher transportation efficiency from and to local and outside markets. More tangible and immediate benefits will be the increased employment opportunities directly related to construction and operation. Most of the unskilled labor during project implementation (estimated at more than 120,360 person-months) will be sourced from local communities. Indirect employment from related services will generate additional local income during the construction period. During the operational stage, an estimated 1,220 permanent jobs related to road maintenance will be created, with additional indirect employment in the region resulting from increased tourism and economic expansion. 11

B. Design Considerations

41. The project will not affect important historical and cultural sites or rare and endangered species. Construction areas, road routes and coastal dike routes are not located in forests and grasslands of ecological significance, natural reserves, or scenic areas. The following considerations have been and will continue to be incorporated in the preparation of the EIA and feasibility study reports and the ensuing preliminary design phase:

(i) All the project sites are carefully selected to avoid or minimize potential adverse impacts on the environment and surrounding communities. (ii) All facilities are located and designed to minimize resettlement impacts. (iii) The technical design and scheduling of construction activities for the components will ensure compliance with government regulations and international best practices with respect to safety, sanitation, and environmental protection. (iv) The Fangchenggang coastal protection and upgrading component will be designed to provide maximum protection of the mangrove forest ecosystems. (v) The Shuikou Lake environmental improvement component will be designed to restore and maintain the lake’s aquatic ecological functions. (vi) All components have undergone the EIA process under the laws and regulations of the PRC. The EIA documents were prepared by qualified EIA institutes, reviewed by expert panels, and approved by the GZAR Environmental Protection Department or the respective municipal EPBs. (vii) Appropriate environmental mitigation and monitoring measures are included in the EMPs. The proposed environmental mitigation measures will form part of the design documents for the components, and be included in the contracts for procurement of goods and services. All contractors and subcontractors will be required to comply with the EMPs. (viii) The environmental monitoring program has also been incorporated into the overall project design to ensure that environmental impacts are closely monitored and the construction and operating activities are closely supervised against the approved EMPs.

C. Potential Adverse Impact and Mitigation Measures for Road Networks and Related Infrastructure

1. Environmental Baseline

42. The areas serviced by the road networks are classified as mixed commercial, commercial–residential, logistics, and recreational, for which class II of the Ambient Noise Standards for Urban Areas (GB3096-93) apply. The environmental noise baseline monitoring was carried out along the proposed road alignments. The monitoring results, along with regulatory thresholds, are shown in Table 2.

Table 2: Baseline Noise (dB(A), A-weighted decibels) Monitoring Location Day Standard % of Night Standard % of Violation Violation Fangchenggang urban 37.8-65.8 60 3.2 39.4-60.5 50 4.1 road alignment Chongzuo urban road 49.3-63.4 60 3.1 44.9-61.6 50 9.4 alignment 12

Monitoring Location Day Standard % of Night Standard % of Violation Violation Baise urban road 43.2-71.6 60 5.2 43.2-64.2 50 6.6 alignment Sources: Domestic environmental impact assessment reports.

43. Air quality baseline monitoring was carried out for the proposed three urban road alignments. The present air quality meets the applicable standards (Table 3).

Table 3: Baseline Air Quality

NO2 CO PM10 Monitoring Concentration % of Concentration % of Concentration % of Location (mg/m3) Violation (mg/m3) Violation (mg/m3) Violation Regulatory 0.15 (hourly 10.0 0.15 (daily threshold average) (hourly average) average) Fangchenggang 0.002-0.019 0.0 0.25-1.32 0.0 0.023-0.069 0.0 urban road alignment Chongzuo 0.005-0.050 0.0 0.30-1.26 0.0 0.011-0.193 0.9 urban road alignment Baise urban 0.021-0.028 0.0 0.70-1.20 0.0 0.097-0.141 0.0 road alignment 3 CO = carbon monoxide, mg/m = milligram per cubic meter, NO2 = nitrogen dioxide, PM10 = particulate matter smaller than 10 micrometers. Sources: Domestic environmental impact assessment reports.

2. Construction Phase

44. Anticipated sources of air pollution from construction activities in all component sites include (i) dust generated from earth excavation, loading, hauling, and unloading; (ii) dust generated by the movement of vehicles and heavy machinery on unpaved access and haul roads; (iii) dust from aggregate preparation, concrete-mixing, and haulage activities; (iv) odour from asphalt melting, mixing, and spreading; and (v) exhaust and noise from vehicles and equipment. To limit dust generation during construction, water trucks will be used to wet the construction roads, according to a daily schedule and taking into consideration weather conditions. When construction takes places during dry and windy days, water will be sprayed on earth piles and exposed surfaces to suppress dust. Aggregate preparation and storage areas and concrete-mixing plants will be located more than 300 m from the nearest residential area, downwind (according to the prevailing wind), while asphalt plants will be located more than 500 m downwind. Dust suppression equipment will be installed in concrete-batching plants. Proper maintenance of vehicles and diesel equipment, and avoidance of unnecessary running of vehicle and equipment engines, will reduce emissions and noise. No vehicle that emits black smoke will be allowed to operate onsite. Ambient air quality will be measured quarterly during construction at the sensitive sites where baseline monitoring was carried out during the EIA. Additional monitoring will be undertaken when necessary (e.g., if complaints are made by local communities). Local EPBs will undertake compliance monitoring during the construction period. Fines will be imposed and the cost of remedial action charged to the contractor if failure to implement the air pollution measures contained in the EMP is confirmed. 13

45. A significant increase in noise is expected during construction, due to various construction and transport activities. Construction activities will involve bulldozers, graders, stabilizers, concrete-mixing plants, drills, stone-crushing and screening plants, rollers, and other heavy machinery. While noise levels may be severe, they will be temporary and localized. It is estimated that noise intensity from these activities will be in the range of 85–100 dB(A). In such cases, they will still meet the PRC standard up to 40 m away from the sources during the day and 200 m away from the sources at night. In addition, large amounts of borrow and waste materials will frequently be transported to and from the construction sites during the approximately 12-hour to 13-hour workday; this will occur throughout the 300-day construction season, over a 3-year period. As a result, villages that have haul roads passing through or adjacent to them will frequently experience noise at approximately 70 dB(A) to 80 dB(A). Activities with intensive noise levels will impact the residents and may also cause injury to construction workers operating the equipment. Therefore, the following mitigation measures are essential in order for construction activities to meet the PRC construction site noise limits and to protect sensitive receptors:

(i) The first priority will be to use equipment that generates low levels of noise, and all machinery will be properly maintained to minimize noise. Noise reduction devices or methods will be applied where piling equipment is operating within 500 m of sensitive sites such as schools. (ii) Concrete-mixing plants and similar activities will be located at least 1 km away from sensitive areas such as residences, schools, and hospitals. (iii) To reduce noise at night, the operation of machinery generating high levels of noise, such as piling, will be restricted to between 6:00 a.m. and 10:00 p.m. in accordance with PRC regulations. The movement of heavy vehicles along urban and village roads will also be restricted to between 6:00 a.m. and 10:00 p.m. (iv) If schools are located nearby, the construction unit will reach an agreement with the schools regarding heavy machinery work to avoid any unnecessary disturbances. If there are construction activities that must be undertaken day and night, the construction unit will reach an agreement with nearby residents and may compensate the most severely affected residents. (v) Construction sites near sensitive areas will be monitored (regularly and irregularly) by local environmental authorities or a contracted environmental monitoring agency. If noise standards are exceeded, equipment and construction conditions will be checked, and mitigation measures will be implemented to rectify the situation. (vi) A unit for dealing with complaints from nearby residents will be set up to facilitate communication with residents and to solve any conflicts between the construction unit and residents. (vii) Suitable measures will be taken to protect workers operating heavy equipment according to the worker health protection law of the PRC.

3. Operational Phase

46. The principal air quality impacts during operation will come from emissions of vehicles on the road networks. According to the PRC regulations on vehicular emissions, all vehicles must now pass the Euro-III equivalent test as part of the annual vehicle safety and environmental protection inspection. Random spot checks are conducted in the three cities, and non-compliance will result in a fine and a deadline for repairs to meet the emissions standard. 14

47. The concentrations of air pollutants were predicted for distances of 10 m, 20 m, 30 m, 40 m, 50 m, 60 m, 80 m, and 100 m from the road center using the Gausian dispersion model. Under no-wind (worst-case scenario) and regular wind conditions, the concentrations of NO2, CO, and PM10 will meet the applicable standards.

48. During the operational period, noise will be generated by passing vehicles. Traffic noise forecasts for both sides of the expressway have been carried out based on traffic volumes predicted in the EIA studies. A total of 35 noise-sensitive locations have been identified by the EIA studies, including nine along the Fangchenggang urban road network, seven along the Chongzuo urban road network, and 19 along the Baise urban road network (Table 4). The following noise attenuation measures specified in Design Specification for Highway Environmental Protection7 will be examined and implemented as needed:

(i) Noise barriers or noise insulation windows will be constructed where noise levels are predicted to exceed the PRC standards by more than 3 dB(A). (ii) Low-noise pavement will be used when possible. Use of asphalt concrete road payment will be encouraged to reduce roadside noise levels. (iii) Ambient noise monitoring will be mandated to determine whether mitigation measures will be required for locations where noise levels are predicted to exceed the standards by less than 3 dB(A) or where standards are expected to be exceeded by more than 3 dB(A) in the medium and long term. Monitoring will be conducted twice annually, for 2 days on each occasion. Mitigation measures will be implemented if infringement of the PRC standards is observed. (iv) Trees and shrubs will be planted as soon as possible after construction in any construction zone and within the 50 m-wide right-of-way.

Table 4: Noise-Sensitive Locations

Fangchenggang Urban Road Chongzuo Urban Baise Urban Road Item Network Road Network Network School 2 05 Village 3 56 Residential quarter 1 1 6 Office block 3 1 2 A. B.

Total No. of Sensitive Locations 9 7 19

No. of sensitive locations that meet the 5 0 7 applicable standard No. of locations with maximum 3 3 1 exceeding value<5 dB(A) No. of locations with maximum 1 4 11 exceeding value>5 dB(A) Sources: Domestic feasibility study reports.

7 Ministry of Communication. 1992. Design Specification for Highway Environmental Protection. Beijing, People’s Republic of China. 15

D. Potential Adverse Impact and Mitigation Measures for Longwang Bridge

1. Environmental Baseline

49. Environmental baseline noise monitoring and surface water baseline monitoring were carried out within the component area. The monitoring results are shown in Tables 5 and 6. The present acoustic environmental quality and surface water quality can meet the applicable standards.

Table 5: Baseline Acoustic Environmental Quality for Longwang Bridge

Monitoring % of Night- % of Location Day-Time Standard Violation Time Standard Violation Dawan Village 51.0 55 0.0 44.1 45 0.0 49.6 55 0.0 44.2 45 0.0 East Bank 47.5 55 0.0 44.8 45 0.0 50.3 55 0.0 44.9 45 0.0 Sources: Domestic environmental impact assessment reports.

Table 6: Baseline Surface Water Quality at Longwang Bridge

Monitoring COD NH3-N BOD DO Petroleum Location pH (mg/l) (mg/l) (mg/l) (mg/l) (mg/l) Regulatory threshold 6.0-9.0 20 1.0 4 5 0.05 Upstream 100 m 7.7-8.0 1.8-2.6 0.09-0.12 0.022- 7.10-7.28 0.01-0.02 0.028 Downstream 500 m 7.9-8.0 1.5-2.4 0.05-0.10 0.018- 7.12-7.35 0.01-0.02 0.023 BOD = biological oxygen demand, COD = chemical oxygen demand, DO = dissolved oxygen, m = meter, mg/l = milligram per liter, NH3-N = ammonia nitrogen. Sources: Domestic environmental impact assessment reports.

2. Construction Phase

50. During bridge construction, disturbance of the benthic environment and an increase in total suspended solids (TSS) in the river are expected, primarily from building the bridge foundations. The cutting wastes, including drilling wastes, will be transmitted to shore and used as landscaping materials. Increased TSS may disturb fish populations, but the impact is expected to cease soon after construction ends. Environmental management provisions will be included in the construction contracts with regard to the storage of construction materials and the collection and safe disposal of construction wastes. Water quality in the Youjiang River will be monitored during construction for TSS, COD, and oils and grease, and corrective actions will be taken if abnormalities are discovered.

3. Operational Phase

51. The operation of the bridge is not expected to generate any significant environmental impact. There is however a risk of traffic accidents involving vehicles carrying toxic or hazardous substances. Warning signs to drivers and emergency numbers will be posted along the bridge. The Regulation on Road Transport of Hazardous Materials (2005), issued by the PRC Ministry of Communications, provides for enterprise registration and permitting, driver licensing and route designation. The effective enforcement of the regulation will minimize the occurrence of accidental spills of hazardous substances. There is an environmental emergency response plan 16 for Baise and a special unit in the city’s EPB. Spillage must be immediately reported to the environmental emergency unit in the environmental protection bureau, and relevant instructions followed. The project will promote compliance through awareness building and education for relevant transport enterprises and drivers, thus further reducing the risk of accidental spills.

E. Potential Adverse Impact and Mitigation Measures for Coastal Protection and Upgrading Component

1. Environmental Baseline

52. The mangrove forest along the proposed coastal dike alignment is located in the Dongwan (East Bay) tidal area. The direct distance to the Beilun Estuary provincial-level mangrove nature reserve is about 20 km. The mangrove forest in the Dongwan tidal area covers an area of 210 ha. The dominant species in Dongwan include: Bruguirra gymnorrhiza, Kandelia candel, Aegiceras corniculatum and Avicennia marina, similar to the Beilun Estuary provincial-level nature reserve. The mangrove forest in Dongwan has been naturally separated by the tidal stream into more than 10 patches and distributed from south to north. Among these patches, five are situated near the Yuzhouping coastal area where the proposed coastal protection and upgrading component is located.

53. The environmental function of the Dongwan tidal area is classified as industrial, shoreline landscape and tourism, and class III of the Marine Water Quality Standards (GB 3097- 1997) is applicable. Coastal water quality baseline monitoring was carried out within the Dongwan tidal area. The monitoring results and the related standard limits for sea water are shown in Table 7. The present marine water quality meets the applicable standards.

Table 7: Baseline Marine Water Quality

Inorganic Active SS COD Nitrogen Phosphate Petroleum Item pH (%) (mg/l) (mg/l) (mg/l) (mg/l) Regulatory 6.8-8.8 Increase 4 0.40 0.030 0.30 threshold 100% # 1 7.5-7.65 14-16 1.5-1.7 0.165-0.180 0.022-0.028 0.03-0.04 # 2 7.77-7.92 11-13 1.5-1.8 0.133-0.142 0.018-0.023 0.03-0.04 # 3 7.82-7.85 13-17 1.8-2.2 0.185-0.197 0.021-0.026 0.02-0.04 COD = chemical oxygen demand, mg/l = milligram per liter, pH = a unit of acidity, SS = suspended solids. Note: (1) monitoring site: public education square, (2) monitoring site: Anfujiang Bridge, and (3) monitoring site: Anfujiang River estuaries. Source: Domestic environmental impact assessment reports.

54. The baseline monitoring for acoustic environmental quality and air quality was carried out within and nearby the project area. The results showed that the acoustic and air environmental quality can meet the applicable standards.

2. Construction Phase

55. The layout of the proposed 9.15 km-long coastal protection dike and associated infrastructure––including drainage systems, public parks and the 2.5 ha public education square––will not occupy the mangrove forest wetland. The proposed dike and square will be constructed in the buffer zone. A proposed bridge across the Anfujiang River is designed to allow the passage of fresh water, along with sedimentary nutrients, to the mangrove ecosystem 17 in the tidal wetlands. A field survey indicates that the closest distance between the dike and the border of the mangrove forest will be approximately 100 m.

56. The results of the EIA study for the Beilun mangrove forest have been used as an analogue for this study to identify the adverse effects and to formulate mitigation measures. The major adverse affects are predicted to include: (i) pollution from leakage of oil and grease into the mangrove forest that would damage the mangrove leaves and further harm mangrove respiration; (ii) soil erosion and inappropriate disposal of construction wastes in the mangrove wetlands along the dike alignment, resulting in subsequent degradation or even death of mangrove trees; and (iii) noise pollution that may disturb the wild birds.

57. The following measures have been proposed to mitigate the impact from construction activities: (i) the machines and equipment will be required to be maintained in good condition to prevent the leakage of oils and lubricants, (ii) the machines and equipment will be located as far as possible from the mangrove forest wetlands, (iii) coffer weirs and settlement ponds with oil separators will be established to contain accidental release of oils and lubricants, and (iv) construction wastes will be collected and transported to the municipal landfill. Where the proposed alignment passes through an area that is prone to soil erosion, a drainage system will be constructed to minimize erosion of deposited materials. Slope protection works and grass and tree planting in the right-of-way in each erosion-prone section will be undertaken. Temporary construction camps will be set up farther inland. Rock crushing, concrete mixing and asphalt hot-mixing workshops and storage yards will be located at least 300 m from the border of the mangrove forest wetlands to minimize noise and water pollution.

3. Operational Phase

58. During operation of the project components, possible sources of soil erosion include neglected maintenance of the soil erosion control structures in erosion-prone areas, or the failure to maintain landscaping along the coastal dike alignment. To minimize these impacts, regular inspections will be undertaken to ensure that the drainage structures and re-vegetated areas are maintained in accordance with the requirements of the soil erosion prevention plan. Maintenance of dike slopes, cuts, and embankments—through stabilizing and replanting, if necessary—will be carried out regularly during dike operation. Maintenance of such areas will be budgeted as part of the regular flood control infrastructure maintenance programs. The local water resource bureau, ocean administrative bureau and environmental monitoring station will undertake regular monitoring of erosion prevention and control measures during the operational phase.

59. During the operating period, solid wastes and wastewater will be generated by the people who visit the mangrove protection education square as well as any auxiliary facilities. About 1,000 visitors per day are projected. About one ton of garbage per day will be generated. Garbage bins will be placed in the square, collected daily and sent to the municipal landfill. Wastewater will be directed to the municipal sewerage network and then to the municipal wastewater treatment plant. 18

F. Potential Adverse Impact and Mitigation Measures for Shuikou Lake Environmental Improvement Component

1. Environmental Baseline

60. Shuikou Lake is situated in the eastern suburb of Chongzuo City. The land uses surrounding the lake are characterized by forests and small farm plots. Existing beneficial uses of the lake include (i) the lake’s scenic and ecological attributes, and (ii) for aquaculture and domestic water supplies. The major sources of point pollution impacting the lake include residential sewage from the lakeside villages and industrial wastewater from a starch factory and cement factory.8 The non-point pollution sources include in-lake aquaculture, poultry raising and runoff from the forested land, farm plots and villages. There are no known sources of toxic substances discharged. The environmental function of the Shuikou Lake is classified as common domestic water use, aquaculture, swimming and tourism, for which class III of the National Surface Water Standards (GB 3838-2002) is applicable. In addition, the lake serves an ecological function of replenishing groundwater aquifers and maintaining the local microclimate.

61. Surface water baseline monitoring was carried out for Shuikou Lake. The monitoring results and related standard limited value are shown in Table 8. The present surface water quality meets the applicable standards.

Table 8: Baseline Water Quality at Shuikou Lake

Parameter Measurements Standard % of Violation pH 7.41-7.52 6-90 DO (mg/l) 6.1-6.2 ı 5 0 Permanganate index 1.7-2.1 6 0 Fluoride (mg/l) 0.10-0.11 1.0 0 COD (mg/l) 5.0-6.0 20 0 NH3-N (mg/l) 0.098-0.107 1.0 0 TP (mg/l) 0.02-0.03 0.2 0 BOD (mg/l) 2-2 4 0 Sulfide (mg/l) 0.005-0.005 0.02 0 Petroleum (mg/l) 0.01-0.01 0.05 0 Volatile phenol (mg/l) 0.002-0.002 0.005 0 BOD = biological oxygen demand, COD = chemical oxygen demand, DO = dissolved oxygen, mg/l = milligram per liter, NH3-N = ammonia nitrogen, pH = a unit of acidity, TP = total phosphorus. Sources: Domestic environmental impact assessment studies.

62. Air quality baseline monitoring was carried out within the project area. The air quality 3 monitoring results are: SO2 concentration in the range of 0.005-0.017 mg/m ; NO2 3 3 concentrations of 0-0.012 mg/m ; and PM10 concentrations of 0.017-0.103 mg/m . These meet the class II National Ambient Air Quality Standards (GB3095-1996).

2. Construction Phase

63. The dredging will cover 78 ha of lake area. The dredged depth ranges from 20 centimeters (cm) to 30 cm. It is estimated that the dredging will generate approximately 195,000 m3 of sediment. Given a water content of 95%, the sediment after drying is estimated to have a volume of 9,750 m3. The dredging activities are expected to last for 60 weeks. The dredging

8 The two factories will be relocated to the industrial parks located in the northern part of the city within the next 2 years. 19 activity will result in noise being generated. The amount of noise perceived by the nearest sensitive receptors depends on the amount of noise emitted by the dredging machinery and the gradual attenuation of the original noise level by factors such as the distance from the source. Given that the nearest village is more than 1 km from the construction site, the impact of noise from the dredging activities is considered to be negligible.

64. The dredged sediment will be used for urban landscaping purposes. Prior to the start of dredging, sediment samples will be tested at six monitoring points that will be evenly distributed in the dredged area. Sediment samples should be evaluated for their physical, chemical, biological and engineering properties to help in determining whether the dredged sediment will be reused or disposed of. A tiered approach to testing is typically used, in which the physical properties are first assessed, followed by the chemical properties, and then the biological properties. Testing of physical properties will include: (i) grain size analysis and percent solids (dry matter) for cohesiveness, settling velocity and re-suspension potential, or potential for contaminant accumulation; (ii) density or specific gravity as this indicates consolidation of placed material, volume in situ and after deposit; and (iii) organic matter (as total organic carbon) as this indicates potential accumulation of organic associated contaminants. Testing of chemical properties will include determination of the following trace metals in all cases: cadmium, chromium, copper, lead, mercury, nickel and zinc, along with organic and/or organo- metallic compounds. Since there are no known significant sources (point or diffuse) of contamination or historic inputs, polychlorinated biphenyl congeners, polycyclic aromatic hydrocarbons, tri-butyl tin compounds and arsenic will not be tested. Depending on local sources of contamination (point or non-point and/or diffuse sources) or historic inputs, other chemical parameters may be analyzed. It has been confirmed with the Chongzuo Urban Sanitation Bureau that in case the dredged sediment is not suitable for urban landscaping purposes, the dredged sediments will be disposed of in landfills with adequate capacity, entailing, among others, adequate discharge loading rate.

65. It is important to select excavation and dredging methods to minimize suspension of sediments, minimize disturbance of the lake ecosystem, and maintain the density of the dredged sediment, especially if contaminated areas are found. If some areas are found through sampling to be uncontaminated, then the volume of dredged sediment slated for disposal in a landfill (if this option is chosen) may be minimized, allowing for reuse of the "clean" sediment. Depending on the depth of the sediment and environmental concerns such as the need to minimize sediment suspension, common dredging methods will be evaluated and the most suitable method(s) will be adopted.

66. The dredging activities will disturb the sediment. This is expected to lead to a short-term increase in concentrations of suspended solids (SS) in the lake, especially immediately around the dredging spots. The contractor will be required to have sound environmental management programs that address proper maintenance of dredging machinery, solid waste collection and disposal and wastewater handling. Water quality in Shuikou Lake will be monitored during construction for SS, COD, and oils and grease to confirm the result of the impact assessment and effectiveness of mitigation measures adopted. If the monitoring reveals any significant impact, new mitigation measures will be formulated and implemented.

67. The process of dredging, sediment dewatering, and transportation could increase risk of foul odour, which could affect residents along the transportation routes. The dredging activities will be located at the open lake surface, and there is adequate distance between the dredged areas and adjacent human communities to minimize any adverse effects. The dewatered 20 sediment will be transported, in covered and sealed trucks, to a drying and processing site located in an open field, at a safe distance from human settlements.

3. Operational Phase

68. The operation of the project facilities is not expected to generate any major impacts. A key mitigation measure is to properly maintain all vegetation cover, and inspect all lakeshore stabilization sites. If signs of failure are discovered, a repair program will implemented immediately.

69. As environmental quality improves, the number of visitors will increase. The risk of solid waste pollution will be minimized through the use of signs warning against littering in the area, provision of garbage bins, and timely garbage collection. The public toilets in lakeside public areas will be fitted with underground septic tanks to capture the small quantities of liquid waste they generate. Effluent from the septic tanks will be transmitted to the biological “islands” in the center of the lake for further purification. The impact on water quality is anticipated to be minor.

G. Land Acquisition and Resettlement

70. The implementation of the project components will require permanent acquisition of 4,550 mu (303.3 ha) of land, and temporary acquisition of 586 mu (39.1 ha) of land. A total of 2,113 people in 508 households will be relocated. Land acquisition and resettlement impacts have been identified, and resettlement plans prepared in accordance with the PRC laws and regulations and ADB’s Involuntary Resettlement Policy (1995). The resettlement plans provide a socioeconomic profile of affected persons and scope of impacts, and they address issues related to compensation entitlement, the legal framework, public consultations, grievance procedures, environmental protection, rehabilitation measures, and budget and implementation milestones. Resettlement requirements have been carefully considered and incorporated into the project design.

H. Cultural Relics

71. No cultural relics have been identified within the direct impact areas of the proposed project.

VI. ECONOMIC ASSESSMENT

A. Environmental Protection Investments

72. The total investment costs for the whole project are estimated to be $271.26 million, including $150 million from ADB. The total incremental environmental investment is estimated at CNY17,230,000 (or $2,533,820), which will cover the cost of: (i) preparing the EIAs, (ii) implementing the EMPs, (iii) sampling and testing of dredged sediment from Chongzuo Lake, (iv) site mitigation and inspection, (v) environmental management training, and (vi) environmental supervision and monitoring. Environmental costs have been included in the project costs.

B. Environmental Benefits

73. Environmental benefits or forgone environmental losses resulting from the implementation of the EMP are anticipated to include: (i) reduced soil erosion, (ii) reduced air pollution, (iii) reduced water pollution, (iv) reduced noise pollution, (v) reduced impact on 21 mangrove forests, (vi) reduced impact on aquatic species, (vii) reduced coastal flooding, and (viii) associated health and social health benefits. The economic benefits of the environmental benefits or forgone environmental costs are estimated at $3,804,700. More detail about the environmental benefit estimation can be found in the economic analysis section of the draft final report.9

C. Economic Internal Rate of Return for Environmental Management

74. The economic internal rate of return (EIRR) is calculated for each component and for the entire project. The economic analysis used two approaches: (i) land value approach, and (ii) economic growth approach. The land value approach yielded an EIRR of 18.4% for the project as a whole, and the economic growth approach an EIRR of 33.3% for the project as a whole. The EIRRs are higher than the 12% economic opportunity cost of capital, under various sensitivity analyses, including an increase in costs and decrease in benefits, and a delay in implementation. The economic rationale for the project is therefore solid. The input data and assumptions were reviewed by the TA consultants and found to be appropriate. The EIRR calculation takes into account only the main benefits of different components but includes all project-related costs. If non-quantifiable environmental benefits could be added, the EIRR would increase considerably.

VII. ENVIRONMENTAL MANAGEMENT PLAN

A. Objectives

75. The objective of establishing an EMP is to propose appropriate mitigation measures and to recommend establishment of institutions or mechanisms to monitor and ensure compliance with environmental regulations and implementation of the proposed mitigation measures. Such institutions and mechanisms will seek to ensure continuous improvement of environmental protection activities during preconstruction, construction, and operation in order to prevent, reduce, or mitigate adverse impacts. The EMP draws on the individual EIA reports and on the TA discussions and agreements with the relevant government agencies.

76. The EMP for the project is presented in Appendix 1. The EMP will be reviewed and updated after the detailed design is prepared in order to ensure consistency with the final detailed design.

B. Mitigation Measures

77. The EMP contains measures to mitigate the potential environmental impacts. The responsibility for implementing and supervising these measures is assigned to different agencies. Details of the mitigation measures can be found in Appendix 1.

C. Organizational Structure for Environmental Management

78. The GZAR Project Management Office (GPMO) will be responsible for setting up the environmental management system, consisting of inspection, monitoring, reporting, and initiating corrective actions or measures. In the design stage, GPMO and PICs will pass the EMP to the design institutes to incorporate mitigation measures into the detailed designs. The EMP will be updated at the end of the detailed design phase, and then passed to the

9 ADB. Preparing the Guangxi Border Cities Development Project. Manila (draft final report). 22 construction contractors. To ensure that the contractors comply with the EMP’s provisions, the GPMO and PICs will prepare and provide the following specification clauses for incorporation into the bidding procedures: (i) a list of environmental management requirements to be budgeted by the bidders in their proposals; (ii) environmental clauses for contractual terms and conditions; and (iii) full EIAs and SEIA. GPMO and city PMOs will each nominate dedicated, trained, and qualified environment specialists or establish environmental management units to undertake environmental management activities and ensure effective EMP implementation, and environmental supervision companies contracted by the PICs will be responsible for inspection, monitoring, and evaluating implementation of mitigation measures.

79. Environmental training will be essential for PICs and contractors to implement the EMP. GPMO will be responsible for organizing training programs, which will cover: (i) environmental laws, regulations, and policies; (ii) implementation of mitigation measures; (iii) environmental technologies and procurement; (iv) operation and maintenance of environmental facilities; (v) environmental monitoring and supervision; and (vi) documentation and reporting.

D. Inspection, Monitoring, and Reporting

80. The GPMO will recruit one or more environmental management companies and/or consultants (EMCs) to conduct internal environmental monitoring and inspections, to advise the PICs, and to supervise the contractors to ensure that environmental mitigation measures are properly implemented. Inspections or audits will mainly cover construction activities, but these will also review the affected environment. The inspections or audit activities will generally be conducted weekly during the construction period. Inspections or audit activities and observations will be well documented, and the contractors and ADB will be informed of the outcomes.

81. Compliance monitoring will be carried out by the environmental monitoring station in each city. The environmental monitoring station will conduct regular and random environmental monitoring activities before, during, and after construction, as well as in the event of emergencies.

82. Quarterly inspection and monitoring reports will be prepared by the EMCs and submitted to GPMO and the Guangxi Environmental Protection Department (GEPD) during construction. The results of the environmental inspection and monitoring activities will be used to assess: (i) the extent and severity of actual environmental impacts against the predicted impacts, (ii) performance or effectiveness of the environmental protection measures or compliance with pertinent rules and regulations, (iii) trends in impacts, (iv) overall effectiveness of the project EMPs, and (v) the need for additional mitigation measures.

83. To help ADB monitor the proper and timely implementation of the EMP and adherence to agreed environmental covenants, GPMO will submit to ADB semiannual reports based on the monitoring and audits. Moreover, within 3 months after completion of each component, or no later than 1 year with permission of the city EPB, environmental acceptance monitoring and audit reports for each completed component will be: (i) prepared by a licensed environmental monitoring institute in accordance with the PRC Regulation on Project Completion Environmental Audit (Ministry of Environmental Protection, 2001); (ii) reviewed for approval by environmental authorities prior to the official commencement of operation of an individual component; and (iii) reported to ADB. The environmental acceptance reports for component completion will indicate the timing, extent, and effectiveness of completed mitigation and 23 maintenance, and address the need for additional mitigation measures and monitoring during operations.

E. Mechanism for Feedback and Adjustment

84. Based on the inspection and monitoring reports, environmental authorities will decide whether: (i) further mitigation measures are required as corrective action, or (ii) improvement is required to environmental management practices. If the monitoring and inspection activities reveal substantial deviation from the EMP or changes to any components that could cause substantial adverse environmental impacts or a significant increase in the number of affected people, the GPMO should consult with the GEPD and ADB immediately and form an EIA team to conduct additional environmental assessment and, if necessary, further public consultation. The revised EIA reports should be submitted to environmental authorities for review and approval and to ADB.

VIII. INFORMATION DISCLOSURE AND PUBLIC CONSULTATIONS

A. Information Disclosure and Public Consultations to Date

85. Several rounds of public consultations with various groups of stakeholders were conducted during the course of EIA and SEIA preparation. The consultations included: (i) a public opinion survey, (ii) an expert panel review, (iii) questionnaire surveys, (iv) visits to communities and households in the project areas, and (v) a wider stakeholder meeting attended by representatives of the affected public and other stakeholders concerned. Those affected by land acquisition and resettlement were consulted throughout the process of resettlement planning and social and poverty impact studies, using a variety of public consultation techniques including questionnaire surveys, community meetings, focus group discussions, key informant interviews, and household visits that were carried out by local design institutes, the TA consultants, and ADB missions.

86. During the preparation of domestic EIA reports, 600 questionnaires were distributed to people living in the project areas. The EIA institutes conducted informal interviews with local residents, totalling more than 60 for each component. The TA consultants conducted consultations with relevant government agencies, particularly those responsible for macroeconomic planning, environmental protection, soil erosion control, marine resource management, land resource management, and urban construction and planning of the three border cities. Information about the project, the anticipated environmental impacts, and proposed mitigation measures were disseminated through a variety of formats, including overhead presentations, prefaces in the questionnaires, and the internet. Wider stakeholder meetings were held in May, June, and September 2009, drawing over 300 participants from key municipal government agencies of the three project cities, district government agencies, and local communities. Summaries of the domestic EIA reports were also disclosed on the internet. The purpose of these wider stakeholder consultations was to present the preliminary findings of the EIA process to the general public, and solicit their comments and suggestions for reviewing the potential impacts and mitigation measures, and refining the EMP.

B. Consultation Results

87. The consultations revealed that 98%–100% of those members of the public who were consulted support the project, with the rest unsure. The expected benefits include promotion of sustained urban development, protection of people from the threat of flooding, better access to 24 urban transportation infrastructure, better prospects for regional cooperation, better prospects for outside investment, and better prospects for socioeconomic development. The anticipated negative impacts include possible noise pollution, air pollution from vehicles, and land acquisition and resettlement. Members of the public made several suggestions for mitigating the potential adverse environmental and social impacts: (i) construction activities close to residential areas should stop between 10:00 pm and 7:00 am, (ii) heavy construction equipment located in close proximity to schools and residential areas should be fitted with noise suppression apparatus, (iii) dust-generating construction vehicles should be covered and dusty construction areas sprayed with water, (iv) green sound barriers should be planted along the proposed roads, and (v) affected people should be properly compensated in accordance with the PRC land compensation policies. Most of these suggestions have been incorporated in the EIA reports and SEIA. Concerns that are beyond the scope of the EIA, such as a resettlement plan and protection of existing infrastructure during construction, have been conveyed to relevant authorities.

88. All of the consulted relevant government agencies of the three project cities expressed strong support for the project and willingness to undertake their corresponding responsibilities with respect to the proposed environmental administration for each component.

C. Future Information Disclosure and Public Consultation Program

89. Information disclosure and public consultations to safeguard the environment and local communities from undue impacts will continue throughout construction and into the operational phase. During construction, consultations will be undertaken regularly in the form of formal questionnaire surveys and informal interviews by the on-site environmental engineers of the construction contractors, the EMCs, and the independent environmental monitor of the local residents living in the project areas, especially those around the construction sites. The consultations will focus on public complaints about community annoyances from construction activities, such as construction noise and dust, as well as public concerns about the environment and resettlement. Immediate adjustments will be undertaken to address any public complaints and concerns.

90. During the first 3 years of operation, the EMC will continue its regular public consultation program. Thereafter, public complaints and concerns will be channelled through the city EPB hotlines.

IX. CONCLUSION

A. Project Benefits

91. The current infrastructure services of the border cities are inadequate to meet the requirements of the cities’ potential strategic roles in subregional and subnational programs. This is particularly true for urban road networks and urban environmental protection facilities. These infrastructure bottlenecks constrain the full participation of these border cities in the subnational and subregional cooperation programs, and prevent them from deriving the maximum benefits from these programs. In this context, the loan project is intended to improve living conditions in the three border cities in GZAR and enhance the ability of these cities to promote and benefit from regional cooperation. More specifically, the direct benefits of the project include: (i) improved urban road networks and related municipal infrastructure and improved capacity for transportation planning, (ii) reduced risk of loss of life and property and improved conditions for industrial investment, and (iii) improved urban environmental quality. 25

B. Environmental Safeguard Assurances

92. An EMP with a detailed environmental monitoring program and institutional strengthening and training program was developed as part of the SEIA, on the basis of the domestic EIAs. The EMP proposes appropriate mitigation measures through the duration of the project cycle, and establishes mechanisms to monitor and ensure compliance with environmental regulations and implementation of the proposed mitigation measures. It seeks to ensure that environmental protection activities continuously improve. This mechanism is carefully designed to fit into the PRC’s existing environmental management system.

93. The main project risk relates to the low institutional capacity of the PICs, including their lack of experience in working with international financing institutions, limited awareness of ADB requirements, and lack of environmental management staff. The following measures are proposed to mitigate these risks: (i) specific assurances from the Guangxi Zhuang Autonomous Region government (GZARG) to implement the mitigation measures in the EMPs; (ii) capacity building for PICs, including staffing and training; (iii) appointment of project implementation and monitoring consultants, including environmental management companies and an independent environmental monitor; (iv) clear definition of roles and responsibilities for EMP implementation, performance monitoring, and mechanisms for feedback and adjustment; (v) environmental inspection and supervision by city EPBs and GEPD; and (vi) project reviews and monitoring by ADB.

94. Assurances and covenants related to the environmental aspects of the project are required as follows:

(i) The GZARG will ensure the PICs and project operating companies build, operate, maintain, and monitor the project facilities in strict conformity with: (a) all applicable laws and regulations, including national and local regulations and standards for environmental protection, health, labour, and occupational safety; and (b) ADB’s Environment Policy (2002); and the environmental mitigation and monitoring measures detailed in the approved EIAs and EMPs, and the EMP in the SEIA. (ii) The GPMO will ensure that the capacity-building program described in the EMP is provided properly and on time to the PICs and the contractors. (iii) The GZARG will ensure that the PICs will provide quarterly environmental monitoring reports to the GPMO, which will prepare and submit to ADB, until loan closure, semiannual environmental reports in a format acceptable to ADB.

C. Overall Conclusion

95. The project will generate significant socioeconomic benefits by promoting sustainable urban development and regional cooperation. The overall findings of the domestic EIAs and the SEIA are that negative impacts on air, water, and acoustic environment are expected, especially during construction. In general, these impacts will be temporary and localized. The proposed mitigation measures are detailed in the domestic EIA reports, and described conceptually in the SEIA. These measures will be updated in the detailed EMPs during the design stage and continuously refined during construction. The EMPs will be implemented by the PICs and contractors; monitored and supervised by professional environmental management agencies and city environmental monitoring stations; and regularly reported to the GPMO, city EPBs, and ADB. 26

96. Any adverse environmental impacts associated with the project will be prevented, eliminated, or reduced to an acceptable level if the EMP proposed under the EIAs and SEIA is effectively implemented, particularly through the mechanism for the continued refinement and effective implementation of the environmental mitigation measures. Appendix 1 27

ENVIRONMENTAL MANAGEMENT PLAN

A. Objectives

1. The objective of establishing an environmental management plan (EMP) is to propose appropriate mitigation measures and recommend establishment of institutions or mechanisms to monitor and ensure (i) compliance with environmental regulations, and (ii) implementation of the proposed mitigation measures. Such institutions and mechanisms are intended to ensure continuous improvement of environmental protection activities during project preparation, construction, and operation in order to prevent, reduce, or eliminate adverse impacts.

2. The following are addressed or included in the EMP: (i) objectives, (ii) a summary of impacts and mitigation measures, (iii) environmental monitoring and inspection, (iv) public consultations, (v) responsibilities and authorities for implementation, (vi) institutional strengthening and training, (vii) reporting and supervision, (viii) a work plan, (ix) cost estimates, and (x) a mechanism for feedback and adjustment. The EMP will be reviewed and updated at the end of the detailed design phase in order to be consistent with the final detailed design.

B. Summary of Potential Impacts and Mitigation Measures

3. Potential environmental issues and impacts during the pre-construction, construction and operational phases, as identified by the individual environmental impact assessments (EIAs), as well as corresponding mitigation measures designed to minimize these impacts, are summarized in Table A1.1. The mitigation measures will be incorporated in the tendering documents (where appropriate), construction contracts and operational management plans, and will be undertaken by contractors and the project implementing companies (PICs), under the supervision of the Guangxi Zhuang Autonomous Region (GZAR) Project Management Office (GPMO), the city environmental protection bureau (EPB), and the Guangxi Environmental Protection Department (GEPD) when necessary. The effectiveness of these measures will be evaluated based on the results of the environmental monitoring to determine whether they should be continued or improvements should be made. Improvements will need to be confirmed through stipulated environmental management procedures.

4. Resettlement plans have been prepared to ensure that the affected persons will be made better off, or at minimum not worse off, as a result of the project. Details of the required actions are given in the individual resettlement plans for the individual components.

Table A1.1: Summary of Potential Impacts and Mitigation Measures

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency A. Pre-Construction 1. EIA and Site and The recommended sites and Design GPMO, feasibility study alignment routes for the individual institutes and EPBs stage selections components were selected from EIA institutes, various alternatives to minimize PICs adverse impacts on the environment and land resources. 28 Appendix 1

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency Engineering Engineering and technological Design GPMO, and alternatives were evaluated based institutes, EIA EPBs technological on predefined environmental and institutes, alternatives economic criteria. PICs

Sector The project designed and strategy suggested a new urban development strategy that feeds into the update of city urban master plans with the goal of safe and sustainable urban development, with full access to environmental amenities.

Public Several rounds of broad public EIA institutes, GPMO, consultations consultations have been TA EPBs conducted on environmental consultants, issues, poverty, and resettlement PICs during the course of feasibility studies and EIA and SEIA preparations.

2. Design stage EMP updates Mitigation measures defined in Design GPMO, each individual EMP will be institutes, EPBs reviewed, updated, and PICs incorporated into the detailed design to minimize adverse environmental impacts.

3. Biding and Bidding Environmental provisions as cited PICs, EMCs GPMO, construction documents in the EMP of the SEIA will be contracted by EPBs preparation and included in the Requests for PICs contractors’ Proposals. qualifications An environmental section will be included in the TOR for bidders.

Environmental clauses for contractors in reference to the implementation of the EMP and monitoring plan will be included in the construction and supply contracts.

Environmental Contractors will be required to Contractors PICs, operation and prepare an environmental GPMO, supervision operation and supervision EPBs manual manual, for approval by the PIC.

Complaint A complaint and information office Contractors, GPMO, and will be established or a PICs EPBs information responsible person appointed office or before construction begins. Appendix 1 29

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency appointed person Office staff will be well trained to handle conflicts with residents resulting from environmental impacts.

Environmental Environment specialists and/or GPMO GPLG protection officials from GEPD will be invited training to provide training to relevant persons (and especially construction engineers and managers) on implementation and supervision of environmental mitigation measures.

Taking of land A resettlement office comprising PICs GPMO and property local government officials will be established to manage the resettlement process.

Information dissemination and community consultation programs will be conducted in accordance with the PRC Land Administration Law and ADB's Involuntary Resettlement Policy (1995).

All resettlement activities will be reasonably completed before construction starts on any component.

Engagement Prior to starting construction, an GPMO GPLG of EMC environmental management company will be engaged.

Engagement Prior to starting construction, an GPMO GPLG, ADB of IEM IEM (as part of the loan implementation consultancy) will be engaged through QCBS.

B. Construction Phase 1. Soil erosion Excavation Excavation activities will not be Contractors PICs, OEE, undertaken on days with IEM, rainstorms. GPMO, WRB Topsoil will be striped and stockpiled and retaining walls built where necessary before dumping.

Temporary detention ponds or containment to control silt runoff 30 Appendix 1

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency will be provided.

Intercepting ditches and chutes will be constructed to prevent outside runoff from entering disposal sites, and to divert runoff from sites to existing drainage or ponds.

Transport and All soils will be used as onsite Contractors PICs, OEE, disposal of refill and landscaping materials. IEM, soils GPMO, Settling ponds will be built in WRB construction sites. Soils in settling ponds will be cleared for use as refill materials.

Soil loss from Straw or cloth will be laid at the Contractors PICs, OEE, construction entry and exist of each IEM, vehicles construction site. GPMO, WRB The tires of construction vehicles will be regularly cleaned of soil.

Exposed Re-vegetation with trees and Contractors PICs, OEE, surfaces grass will be undertaken as soon IEM, as refill and land levelling is GPMO, complete. WRB

2. Water quality Siltation in Siltation in water bodies will be Contractors PICs, OEE, water bodies minimized through effective IEM, implementation of recommended GPMO, mitigation measures. WRB

Wastewater All construction camps are located Contractors PICs, OEE, from in the urban area, and therefore IEM, construction wastewater from construction GPMO, camps camps will be diverted to PEB municipal sewers.

Unauthorized dumping of wastewater will be prohibited.

Handling of A construction materials handling Contractors PICs, OEE, chemicals protocol (e.g., storage away from IEM, watercourses and provision of GPMO, retention areas to contain EPBs accidental spills of such toxic, hazardous, and harmful construction materials such as caustic and acidic substances, oil and petroleum products, and asphalt materials) will be prepared Appendix 1 31

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency and applied to prevent soil and surface and ground water pollution.

Workers (and especially painters) will be trained on safe and diligent handling of chemicals to avoid accidental spills, and on emergency response should a spill occur.

A prevention and emergency response plan will be developed and implemented.

Increased Dredging methods will be Contractors PIC, OEE, suspended evaluated and the most suitable IEM, solids from method(s) will be adopted. GPMO, dredging at EPB Shuikou Lake

Solid wastes Dumping of construction solid Contractors PICs, OEE, waste and garbage into water IEM, bodies will be prohibited. GPMO, EPBs Household Prior to demolition, houses will be Contractors PICs, OEE, chemicals searched and cleared of IEM, household chemicals and any GPMO, other toxic substances; these will EPBs be sent to the municipal toxic wastes depository for safe disposal.

3. Air quality Dust from Vehicles delivering granular Contractors PICs, OEE, material and/or fine materials to the sites IEM, delivery and must be covered. GPMO, construction EPBs vehicles

Dust from Materials storage sites must be Contractors PICs, OEE, construction 300 m from residential areas and IEM, sites covered or sprayed with water. GPMO, EPBs Extra care will be taken during dry days with strong winds, by more frequent spraying of water and covering of dust sources.

Water will be sprayed on construction sites twice per day.

Upon completion of civil works, all construction sites will be required 32 Appendix 1

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency to be re-vegetated with trees and grass.

Dust from All roads and pavement used by Contractors PICs, OEE, construction contractors’ or suppliers’ vehicles IEM, roads will be kept clean and clear of all GPMO, dust, mud, or extraneous EPBs materials dropped by these vehicles. Such cleaning will be undertaken on a regular basis.

Water will be sprayed on access roads twice per day.

Emissions Vehicle emissions will comply with Contractors PICs, OEE, from vehicles GB18352-2005, GB17691-2005, IEM, and GB 11340-2005, GB3847-2005, GPMO, equipment and GB18285-2005. EPBs

Equipment and machinery emissions must comply with GB16297-1996.

A regular inspection and certification system will be initiated.

4. Noise Noise from Noise from equipment and Contractors PICs, OEE, equipment machinery will comply with IEM, and vehicles GB12523-1990. GPMO, EPBs An adequate route must be provided to keep large trucks away from residential areas.

At construction sites within 500 m of the nearest habitation, noisy construction work will stop between 10 p.m. and 6 a.m.

Demolition House demolition at construction Contractors PICs, OEE, sites will be required to stop IEM, between 10 p.m. and 6:30 a.m. GPMO, EPBs Community Interviews with residents living Contractors PICs, OEE, complaints adjacent to construction sites will IEM, about noise be conducted on a weekly basis GPMO, to identify community complaints EPBs about noise, and seek suggestions from community members to reduce noise-related annoyance. Appendix 1 33

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency Community suggestions will be used to adjust the work hours of noise-generating machinery.

5. Solid waste Domestic Multi-compartment collection bins Contractors PICs, OEE, waste from will be provided to facilitate reuse, IEM, construction recycling and composting of solid GPMO, camps waste. EPBs

Waste will be stored away from water bodies and will be regularly collected by the city sanitation bureau and hauled to the municipal sanitary landfill.

Dredged Dredged sediment will be Contractors PICs, OEE, sediment at processed in a manner not IEM, Shuikou Lake causing nuisance and used for GPMO, urban landscaping. The dredged EPBs sediments will be contained in geotubes that will be placed in a storage site lined with geo-textile membrane to prevent leakage into ground water. The storage site will be thoroughly cleaned after the sediments are used up.

Construction Professional demolition Contractors PICs, OEE, solid wastes companies will be contracted to IEM, carry out housing demolition. GPMO, Reusable and recyclable EPBs materials (such as bricks, windows and doors, and steel bars) will be collected for reuse and recycle. The remaining construction wastes will be transported to the municipal landfill.

6. Impact on flora Vegetation Existing vegetation will be Contractors PICs, OEE, preserved where no construction IEM, activity is planned; where activity GPMO, is planned for a later date EPBs vegetation will be temporarily preserved.

Disposal and borrow sites will be rehabilitated into grassland, woodland, or farmland after closing.

7. Social and Resettlement All affected persons will be PICs, City GPLG, cultural compensated and resettled in a Resettlement CITY PLG, 34 Appendix 1

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency considerations timely and adequate manner, in Office GPMO accordance with the resettlement plans.

Traffic jam or Interim roads will be built where Contractors, OEE, IEM, block needed. PICs GPMO, City Traffic Transport routes will be selected Bureau to reduce disturbance to regular traffic.

Traffic will be diverted at peak traffic hours, and areas reinstated to their original condition on completion of construction.

Cultural Cultural heritage sites will be Contractors, OEE, IEM, heritage preserved where identified. In PICs GPMO, city accordance with PRC regulations, and/or no person shall destroy, damage, provincial deface, conceal, or otherwise cultural interfere with a relic. heritage bureau If an important site is unearthed, work should be stopped immediately and the matter promptly referred to the county, municipal, provincial, or state- level agencies for evaluation and a decision regarding appropriate actions.

C. Operational Phase 1. Soil erosion Rehabilitated Regular inspections will be POCs IEM, sites undertaken to ensure proper GPMO, maintenance of drainage WRB, EPBs structures and re-vegetated areas in accordance with the requirements of the soil erosion prevention plan.

Maintenance of road slopes, cuts and embankments—such as watering, fertilizing, pest control and re-planting—will be carried out regularly during road operation.

Maintenance will be budgeted as part of regular infrastructure maintenance programs. Appendix 1 35

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency Regular monitoring of erosion prevention and control measures will be undertaken by WRB and EPBs.

2. Water quality Wastewater Wastewater from management POCs IEM, from offices will be directly discharged GPMO, management to municipal sewers that will go to EPBs office the municipal WWTP.

In cases where a connection with a municipal sewer is not possible, a septic tank or an onsite wastewater treatment facility will be installed for treating wastewater before it is discharged into receiving water bodies.

3. Air quality Vehicles for All vehicles must pass the Euro-III Road network City traffic road network equivalent test as part of the POCs bureau, annual vehicle safety and EPBs, environmental protection GPMO, IEM inspection.

Random spot checks will be conducted and noncompliance will result in a fine and a deadline for repairs to meet vehicular emissions standards.

4. Noise Noise from Nearby residential Road network EPBs, road network neighbourhoods will be monitored POCs, GPMO, IEM for annoyance associated with developers noise from the road network.

Future urban development will be planned to abide by the noise- safe distances. In cases where complying with the minimum setback distance is not possible, mitigation measures—such as sound barriers, soundproof windows, sound-breaking tree lines and traffic controls—will be adopted.

5. Solid wastes Garbage from Garbage bins and containers will Road network EPBs, operation of be placed along the road network. POCs GPMO, IEM road network Road cleaning will be undertaken on a regular basis. 36 Appendix 1

Potential Project Impact Factor/ Impacts Implementing Supervising Stage and/or Issues Mitigation Measures Company Agency 6. Flora Vegetation All vegetation cover will be POCs EPBs, properly maintained. GPMO, IEM

All slope stabilization sites will be inspected regularly.

If signs of failure are discovered, repair will be initiated immediately.

7. Environmental Transport of Transport of hazardous, toxic, and Road IEM, risks chemicals dangerous goods will be Network GPMO, prohibited on the project roads POCs EPBs which are inner city roads.

An emergency environmental number will be posted on roadsides.

Awareness-building and educational activities will be carried out to promote compliance with relevant regulations regarding the road transport of hazardous substances.

Insufficient Training for environmental POCs EPBs, environmental management will be conducted. GPMO, IEM management capacity

ADB = Asian Development Bank, EIA = environmental impact assessment, EMC = environmental management company and/or consultant, EMP = environmental management plan, EPB = environmental protection bureau at the city level, GB = Guo Biao (National Standards), GEPD = Guangxi Environmental Protection Department, GPLG = Guangxi Project Leading Group, GPMO = Guangxi Project Management Office, IEM = independent environmental monitor (as part of the implementation consultancy), m = meter, OEE = onsite environmental engineer, PIC = project implementing company, POC = project operating company, PRC = People’s Republic of China, QCBS = quality- and cost-based selection, SEIA = summary environmental impact assessment, TA = technical assistance, TOR = terms of reference, WRB = water resources bureau at the city level, WWTP = wastewater treatment plant. Sources: Domestic EIA reports, and consultations with city EPBs.

C. Environmental Monitoring and Inspection

5. An environmental monitoring program is presented in Table A1.2. This program considers the scope of monitoring, environmental media, monitoring parameters, the time and frequency of monitoring, and implementing and supervising agencies. The monitoring will follow the methodology provided in the national standard methods for monitoring pollutants. Other associated standards are national environmental quality standards and pollutant discharge and emission standards.

6. Internal monitoring and inspection. During construction, PICs, with supervision from GPMO, will recruit environmental supervision companies (EMCs) to conduct internal environmental monitoring and inspections to ensure that environmental mitigation measures are Appendix 1 37 properly implemented. Inspections or audits will mainly cover construction activities, but these will also review the affected environment. The inspections or audit activities will be conducted weekly. Monitoring results will be well-documented, and the contractors and PICs will be informed of the outcomes. During the operational period, PICs and/or project operating companies (POCs) will be responsible for internal monitoring and reporting to GPMO, the EPBs, and GEPD.

7. Compliance monitoring and inspection. The environmental monitoring station (EMS) at the city level will be responsible for undertaking regular and random compliance monitoring and inspection before, during, and after construction, as well as in the event of emergencies. If abnormalities are found, the EPBs will impose a fine and issue a notice of rectification with a specific deadline.

8. Environmental acceptance monitoring and audit. Within 3 months after completion of each component, or no later than 1 year after completion with permission from the responsible environmental authorities, environmental acceptance monitoring and audit reports will be (i) prepared by a qualified environmental institute in accordance with the Ministry of Environmental Protection (MEP) Guidelines on Project Completion Environmental Audit (2001); (ii) reviewed for approval by environmental authorities that have approved to the same individual EIA, and (iii) submitted to the Asian Development Bank (ADB).

9. Independent environmental monitoring. An independent consulting firm will be engaged through international competitive bidding to advise on and supervise loan implementation. The consulting firm will include environmental safeguard specialists to conduct independent environmental monitoring. The results of the environmental monitoring will form part of the semiannual progress report that will be submitted to ADB and the GZAR Development and Reform Commission.

10. Environmental monitoring, including environmental benefits monitoring, will be incorporated into the project performance management system (PPMS). The GPMO, with assistance from the PICs and POCs, will be responsible for analyzing and consolidating the data through their management information system. The PPMS will be designed to allow adequate flexibility to adopt remedial actions regarding project design, schedules, activities, and development impacts. At the beginning of the project, the GPMO, the PICs, and the consultants will develop comprehensive PPMS procedures to systematically generate data on project component inputs and outputs and agree on environmental and related social economic indicators to be used to measure project impacts. The GPMO, the PICs, and the POC will refine the PPMS framework, confirm achievable goals, firm up monitoring and recording arrangements, and establish systems and procedures no later than 6 months after loan effectiveness.

11. The monitoring results will be used to evaluate: (i) the extent and severity of environmental impacts compared with the predicted impacts, (ii) performance of the environmental protection measures or compliance with related rules and regulations, (iii) impact trends, and (iv) the overall effectiveness of the EMPs. The effectiveness of the mitigation measures and monitoring plans will be evaluated through a feedback reporting system. The measures required by the EMPs will be modified if necessary. The GPMO and EPBs have a critical role to play in providing feedback and enabling adjustment, as shown in Figure A1. 38 Appendix 1

12. The environmental monitoring program is included in Table A1.2. The cost estimates for the environmental monitoring program are shown in Table A1.7. Before implementing the monitoring plan, the responsible agencies will provide more accurate estimates of the costs and present a further detailed breakdown of the cost estimates. During project implementation, the costs will be adjusted based on actual requirements.

Table A1.2: Environmental Monitoring Program

Time and Implementing Supervising Item Parameters Location Frequency Agency Agency A. Construction (Internal Monitoring)

1. Surface pH, NH3-N, For each 3 samples each EMSs, OEE GPMO, IEM, water TN, TP, BOD, component, a time, at beginning GEPD COD, oils minimum of 2 of construction and locations on the quarterly thereafter river upstream and downstream of the construction site

2. Air TSP, PM10 2 monitoring 3 samples at each EMSs, OEE GPMO, IEM, locations for location each time, EPBs each semiannually construction site

3. Noise Leq (dB(A)) 1 location at the Twice (during both EMSs, OEE GPMO, IEM, border with day and night each EPBs settlements time) monthly within 200 m of during peak construction site construction, quarterly otherwise

4. Soil and Removal of All sites Visual inspection OEE GPMO, vegetation vegetation weekly WRB, IEM and exposed surface

5. Dredged Dredging Shuikou Lake Sediment sampling OEE GPMO, IEM sediment and testing will be conducted at 6 evenly distributed monitoring points once prior to commencement of dredging. Testing parameters will include: grain size, % solids, density or specific gravity, total organic carbon, Cd, Cr, Cu, Pb, Hg, Ni, Zn and organic and Appendix 1 39

Time and Implementing Supervising Item Parameters Location Frequency Agency Agency organo-metallic compounds.

Visual inspection and measurement, weekly

B. Project Completion Environmental Audit 1. Air quality TSP 2 locations for Once upon Licensed EPBs each completion, 3 environmental component samples per day institute for 3 consecutive days at each location

2. Noise Leq (dB(A)) Minimum of 4 2 samples for 1 Licensed EPBs locations for day at each environmental each location institute component at boundary and sensitive receptors

3. Soil and Re- All component Visual inspection Licensed EPBs vegetation vegetation, sites environmental landscaping Institute

4. Dredged Reuse of Shuikou Lake Visual inspection Licensed EPBs, sediment sediment for environmental GPMO, IEM urban Institute landscaping

C. Operation (Compliance Monitoring)

1. Air quality TSP, PM10 1 location for Semiannually, 3 EMC EPBs, each samples per day GPMO, IEM component 2. Noise Leq (dB(A)) 4 locations for Bimonthly, 2 EMC EPBs, each samples each time GPMO, IEM component (2 samples during around the day and 2 at boundary and night each time) sensitive receptors

3. Soil and Vegetation, All sites Visual inspections, EMC EPBs, vegetation landscaping once a year GPMO, IEM

4. Dredged Reuse of Shuikou Lake Visual inspections, EMC EPBs, sediment sediment for monthly until GPMO, IEM urban sediment is fully landscaping used 40 Appendix 1

Time and Implementing Supervising Item Parameters Location Frequency Agency Agency 6. Flooding Flood level Coastal area in Monthly during WRB WRB, IEM monitoring Fangchenggang flood season

BOD = biochemical oxygen demand, Cd = cadmium, COD = chemical oxygen demand, Cr = chromium, Cu = copper, dB(A) = A-weighted decibel, EMC = environmental management company and/or consultant, EMS = environmental monitoring station at the city level, EPB = environmental protection bureau at the city level, GEPD = GZAR Environmental Protection Department, GPMO = GZAR Project Management Office, Hg = mercury, IEM = independent environmental monitor (as part of the implementation consultancy), Leq = equivalent continuous noise level, m = meter, NH3-N = ammonia nitrogen, Ni = nickel, OEE = onsite environmental engineer, Pb = lead, pH = measure of acidity and alkalinity, PM10 = particulate matter smaller than 10 micrometers, TN = total nitrogen, TP = total phosphor, TSP = total suspended particulates, WRB = water resources bureau at the city level, Zn = zinc. Sources: Domestic EIAs, and consultations with GPMO, EPBs, PICs, and local EPBs.

D. Public Consultation and Information Disclosure

1. During Project Preparation

13. Various public consultations were conducted in the course of the preparation of the feasibility study reports and EIAs. During the feasibility study reports, the respective municipal governments were consulted to assist in site and process selections. During EIAs and project preparatory technical assistance, public consultations with various groups of stakeholders were conducted. The main focus of public consultations was to assess the environmental impacts of the proposed components on nearby residents and mitigation measures, as well as resettlement issues. These activities were carried out in accordance with MEP Interim Guidelines on Public Participation in Environmental Impact Assessment (2006), and the ADB requirements. Details of the information disclosure and consultation activities are described in Section A, Chapter VIII.

2. During Project Implementation

14. Future plans for public involvement during the design, construction, and operational phases were developed during project preparation. These plans include public participation in (i) monitoring impacts and mitigation measures during the construction and operational stages, (ii) evaluating environmental and economic benefits and social impacts, and (iii) interviewing the public after the project is completed. They include several types of consultations, e.g., site visits, workshops, investigation of specific issues, interviews, and public hearings (Table A1.3).

15. Public participation plans are part of the project implementation and management plan. The PICs are responsible for public participation during project implementation. The PICs will also establish an environmental management unit for supervising implementation, continuing public consultation, monitoring progress, and responding to grievances. The staff at the offices will be well trained to handle crisis situations or conflicts with residents due to distress from environmental impacts. Costs for public participation activities during project construction are included in the project funding. The costs are estimated as CNY3,000 for each expert workshop, CNY20,000 for each public investigation on a particular issue, CNY10,000 for each resettlement survey, CNY5,000 for each public workshop, and CNY6,000 for each press conference. Costs for public participation activities during operation will be covered by the PIC. In addition, the established feedback mechanisms (Figure A1) will ensure timely feedback and measures to address any concerns raised by the project-affected communities. Appendix 1 41

Table A1.3: Public Consultation Program

Organizer Approach/Times Subjects Participants A. Project Preparation GPMO, PICs, EIA public opinion surveys: once Priority, design, GPMO, PICs, design institutes, for each component environmental benefits design institutes, EIA institutes, and impacts, social EIA institutes, resettlement plan Expert panel review: once for benefits and impacts, EPBs, other institutes, EPBs each component mitigation measures, provincial and attitudes toward project municipal Socioeconomic and AP surveys component, and government suggestions stakeholders, Public consultation meeting and community questionnaire: once for overall representatives project

Site visits: multiple times

B. Construction GPMO, PICs, Public consultation and site visits: Adjusting mitigation Residents within EMC, IEM at least once per year measures if necessary, construction construction impacts, area comments and suggestions

For dredging at Shuikou Lake, Collecting public Lakeside residents lakeside residents will be comments and consulted through community suggestions and visits on a monthly basis adjusting mitigation measures accordingly

Expert workshop or press Comments and Experts from conference: at least once suggestions on mitigation various sectors, measures, public media opinions; adjusting mitigation measures accordingly

Public information session: at Adjusting mitigation Representatives of least once per year measures if necessary, residents and construction impacts, social sectors comments and suggestions

Survey on resettlement: as Comments and People affected by required per resettlement plans suggestions land acquisition and resettlement C. Test Operation GPMO, PICs, Questionnaire survey: at least Comments and Local residents POCs, EMC, IEM once during test operation suggestions on and social sectors, operational impacts, EPBs Site visits: multiple, depending on public suggestions on results of project completion corrective actions environmental audit 42 Appendix 1

Organizer Approach/Times Subjects Participants D. Operation GPMO, POCs, Public opinion survey: once per Effects of mitigation Residents IEM year in the first 5 years of measures, impacts of adjacent to plant operation operation, comments, and suggestions for corrective actions

Site visits: once every 6 months Plant operational Plant managers by IEM and GPMO performance, informal and workers, local interviews with local residents adjacent residents to plant

Public workshop: as needed Public comments and Representatives of based on public opinion survey suggestions on corrective residents and and public complaints received measures social sectors

Expert workshop or press Expert comments and Experts from conference: as needed based on suggestions on corrective residents, social public consultation and workshop measures sectors, media

AP = affected person, EIA = environmental impact assessment, EMC = environmental management company and/or consultant, EPB = environmental protection bureau, IEM = independent environmental monitor (as part of the implementation consultancy), GPMO = GZAR Project Management Office, PIC = project implementing company, POC = project operating company. Sources: Domestic EIA reports, and consultations with GPMO, GEPD, EPBs, and PICs.

E. Responsibilities and Authorities for Implementation

16. The Guangxi Zhuang Autonomous Region government (GZARG) is the executing agency and has established a project leading group (PLG) headed by the vice governor of the Autonomous Region, and a project management office (PMO) or GPMO. The GPMO is co- located in the GZAR Development and Reform Commission (GDRC), and is headed by the director general of GDRC. GPMO draws its members from GDRC, GZAR Finance Department, GEPD, and GZAR Land Resources Bureau. Delegated by the GZARG, the GPMO will have overall responsibility for supervising the implementation of mitigation measures and reporting to ADB.

17. The GPMO, PICs, POCs, and contractors will each nominate dedicated, trained, and qualified environmental specialists to undertake environmental management activities and ensure effective EMP implementation. The independent environmental monitor (IEM) (as part of the loan implementation consultancy engaged through international competitive bidding) will assist the GZARG, GPMO, PICs, and POCs in preparing semiannual EMP progress reports and carrying out training programs. Table A1.4 shows the environmental responsibilities in different phases of the project.

Table A1.4: Environmental Responsibility Matrix

Phase Agencies Environmental Responsibilities Preparation Design institutes Review and select alternatives (technological, design, siting, etc.)

EIA institutes Prepare EIAs and EMPs for components, including public Appendix 1 43

Phase Agencies Environmental Responsibilities consultations

GEPB Review and approve EIAs, including the EMPs, for the road network

TA consultant Prepare SEIA, including public consultations

GPMO Coordinate and supervise EIA, SEIA, and public consultations

Project city Review and endorse SEIA, including the EMP, for posting government on ADB’s website

Design Design institutes Update the EMPs in cooperation with EIA institutes, and incorporate mitigation measures in engineering detail designs, bid documents and contracts for civil works

GPMO, PICs Review and approve environmental measures

Tendering and GPMO, PICs, IEM Incorporate EMP clauses in the SEIA into RFPs and contracting contracts

Construction PICs Ensure implementation of mitigation measures, and public consultations

Contractors Implement mitigation measures as contained in the EMP of the SEIA, conduct sediment sampling and test samples as prescribed in the EMP of the SEIA. Identify the most appropriate dredging method to minimize suspension of sediments

GPMO, EPBs Advise and supervise implementation of mitigation measures

EMC contracted by Conduct internal monitoring and inspection, and public PICs consultations

IEM Conduct independent monitoring (including public consultations), and prepare periodic monitoring reports to ADB and GZARG

EMSs Conduct compliance monitoring

Test operation PICs, EMC Training and awareness building as cited in the EMP of the SEIA

Conduct project completion environmental audit, including sampling and lab tests, and prepare project completion environmental audit report

EPBs Review and approve project completion environmental audit report, and order corrective actions if necessary 44 Appendix 1

Phase Agencies Environmental Responsibilities EMC, IEM Participate in environmental audit and prepare progress reports to ADB and EA

Operation POCs Ensure proper operation of component facilities according to design standards, and implementation of mitigation measures and public consultations

EMC contracted by Conduct internal environmental monitoring and POCs inspection, supervise implementation of EMPs, and conduct public consultations

IEM Conduct independent monitoring (including public consultations), and prepare periodic monitoring reports to ADB and GZARG

EMSs on behalf of the Conduct regular and unannounced environmental EPBs compliance monitoring and inspection

ADB = Asian Development Bank, EA = executing agency, EIA = environmental impact assessment, EMC = environmental management company and/or consultant, EMP = environmental management plan, EPB = environmental protection bureau, IEM = independent environmental monitor (as part of the implementation consultancy), EMS = environmental monitoring station at the city level, GEPD = Guangxi Environmental Protection Department, GPMO = Guangxi Project Management Office, PIC = project implementing company, POC = project operating company, RFP = request for proposal, SEIA = summary environmental impact assessment, TA = technical assistance. Sources: Domestic EIA reports, and consultations with GPMO, GEPD, EPBs, and PICs.

18. The PICs and POCs will be largely responsible for environmental management and implementation of mitigation measures. They will ensure that the EMPs are carried out and will engage design institutes and professional consultants to help with environmental management at the preparation, design, construction, and operational phases. The PICs and POCs will be responsible for arranging environmental monitoring reviews and responding to any adverse impacts beyond those foreseen in the EIAs. The PICs and POCs will also attend to EPB and ADB requests for mitigation measures.

19. Construction contractors will be responsible for implementing mitigation measures during construction, while the PICs will be responsible for implementing such measures during operation.

20. In accordance with the EMPs, each PIC and POC will set up an environmental monitoring unit (EMU) that will generally require two employees. The EMUs will be responsible for: (i) implementing the EMPs and developing further implementation details; (ii) supervising contractors’ implementation of mitigation measures during construction; (iii) implementing training programs for contractors; (iv) incorporating environmental management, monitoring, and mitigation measures into construction and operation management plans; (v) developing and implementing internal routine environmental monitoring; and (vi) reporting to GPMO and responsible agencies on EMP performance. The EMUs will be supported and supervised by the EMC, IEM, and the EPBs.

21. The EPBs at the city level, delegated by GEPD, will ensure the compliance with the PRC and local environmental regulations through regular and random environmental compliance monitoring and inspection during construction and operation. The EMS at the city level will Appendix 1 45 conduct the actual environmental compliance monitoring and inspection. On the basis of the environmental compliance monitoring and inspection, the EPBs will impose fines and order corrective actions, if necessary.

22. The city governments will provide the PICs and POCs with financial and management authority to operate the project facilities. The PICs and POCs will be strengthened by environmental management training provided under the project, as summarized in Table A1.5. They will incorporate environmental management activities into construction management plans.

F. Institutional Strengthening and Training

23. An assessment undertaken during the project preparatory technical assistance indicates that GPMO has adequate technical and institutional capacity for project implementation. However, the PICs and POCs have weak capacity in environmental management and monitoring. For proper implementation of the EMPs, it is necessary to strengthen the capacity of the PICs and POCs. The proposed training is shown in Table A1.5.

24. It is considered that the three-tier implementation arrangement—PLG, PMO, and PICs and POCs—provides a reasonable framework for project management and control. The definition of roles, responsibilities and relationships between the PLG, PMO, PICs and POCs, and other relevant agencies (e.g., GEPD, EPBs) is adequate to ensure the effective implementation of the project.

25. Environmental specialists in the GPMO, PICs and POCs, and contractors will receive training in environmental management, environmental monitoring and supervision, mitigation planning, emergency response, environmental policymaking, and other environmental management techniques. Funding for this training will be included in the project budget and in the operation and maintenance budget in the operational phase.

Table A1.5: Institutional Strengthening and Training

Target Agencies/ Activity Attendees Contents Timing Strengthening Institutional GPMO, PICs, Defining institutional arrangements for During project strengthening POCs, GEPD, environmental management, monitoring, and preparation EPBs supervision

Defining positions and responsibilities

Appointing and recruiting personnel

EMC Recruiting and contracting EMC for internal Prior to project environmental management consultancy and implementation monitoring

IEM Recruiting and contracting an IEM for the overall Prior to project project, through international competitive implementation bidding, for the environmental management consultancy and independent external monitoring 46 Appendix 1

Target Agencies/ Activity Attendees Contents Timing Environmental PICs, POCs, EMC Developing environmental management clauses During project management and incorporating them into construction and preparation clauses and operational contracts protocols Developing and refining environmental monitoring protocols

Developing environmental emergency response procedures

Training Environmental GPMO, PICs, Environmental laws and regulations Prior to project laws, POCs, contractors implementation regulations, Environmental policies and plans and policies Basic environmental management

Environmental emergency response

EMP GPMO, EMC, Responsibility and duties for project Prior to and during implementation PICs, POCs, construction, management and environmental project contractors protection implementation

Environmental protection tasks in project construction

Key environmental protection measures during construction

EMP improvement and corrective actions

Environmental PICs, POCs, Monitoring and inspection methods, data Prior to and during monitoring, EMC, contractors collection and processing, interpretation of project inspection, data, reporting system implementation and reporting Environmental reporting requirements

Awareness Road network Awareness building and educational activities building POCs will be carried out to promote compliance with relevant regulations regarding the road transport of toxic and hazardous substances

EMC = environmental management company and/or consultant, EMP = environmental management plan, EPB = environmental protection bureau at the city level, GEPD = Guangxi Environmental Protection Department, GPMO = Guangxi Project Management Office, IEM = independent environmental monitor (as part of the implementation consultancy), PIC = project implementing company, POC = project operating company. Sources: Domestic EIAs, and consultations with GPMO, GEPD, EPBs, and PICs.

G. Reporting and Supervision

26. Internal monitoring reports. During the construction period, results from the internal monitoring by EMC contracted by the PICs, POCs and/or GPMO will be reflected in the weekly construction reports. The reports will summarize: (i) environmental issues during construction; (ii) Appendix 1 47 mitigation measures taken, if any; and (iii) consequences of the impacts on the environment and/or surrounding communities.

27. The contractors will be trained to take immediate actions to remedy unexpected adverse impacts or ineffective or inefficient mitigation measures, as required by the EMPs. The PICs will also respond to these reports in order to ensure that contractors have taken appropriate and timely action. Additional measures may be taken, if needed, to ensure that all issues raised by the reports are appropriately addressed.

28. Results from the detailed internal environmental monitoring program and mitigation actions for the construction phase will be submitted monthly to the PICs and/or POCs, quarterly to GPMO, and bi-annually to GEPD and the EPBs. GEPD and the EPBs may request that further environmental mitigation actions be taken, as they deem necessary, and may determine further mitigation measures for different stages, if necessary.

29. Compliance monitoring reports. The municipal environmental monitoring stations, authorized by GEPD and the municipal EPBs, will be responsible for environmental compliance monitoring and inspection according to the PRC environmental regulations during construction and operation. The compliance monitoring reports will include: (i) project background, (ii) construction and operation activities, (iii) environmental conditions, (iv) the location and result of measurement or sampling during auditing, (v) analytical results, (vi) interpretation and implication of the monitoring results, (vii) determination of the compliance status with regard to applicable regulations and standards, and (viii) recommendations for improvement. These reports will be submitted to GEPD and the EPBs by the EMSs, with a copy to the GPMO.

30. Project completion environmental audit reports. The project completion environmental audit report for the completion of each component will be prepared in accordance with the MEP Ministerial Guideline on Project Completion Environmental Audit (2001) within 3 months after completion. The report will focus on project compliance with environmental performance regulations when the component is put into operation. The report will be sent to environmental authorities for their review and approval. If the project component is not in compliance, the project will be asked to be improved to the requirements before operation officially commencement of the operation.

31. Independent environmental monitoring reports. The GZARG is responsible for monitoring and assessing overall project activities under the project design and monitoring framework, and will be accountable to ADB for ensuring effective implementation of the EMPs. The GPMO will be assisted by the IEM, as part of the loan implementation consultancy recruited through international competitive bidding, to fulfil its environmental supervision, monitoring and reporting obligations to ADB. The environmental monitoring reports will be submitted to ADB and GPMO on a semiannual basis. The reports will emphasize: (i) progress made in implementing the EMPs, (ii) implementation of mitigation measures, (iii) environmental compliance, (iv) institutional strengthening and training, (v) public consultations, and (vi) problems experienced and resultant corrective actions. ADB may request that further environmental mitigation actions be taken, as it deems necessary, and may determine further mitigation measures for different stages, if necessary.

32. The environmental reporting plan is presented in Table A1.6. 48 Appendix 1

Table A1.6: Environmental Reporting Plan

Reports From ToFrequency Construction Phase Internal Internal monitoring report Contractors EMC, PICs, Monthly monitoring POCs Internal monitoring report EMC GPMO, PICs, Quarterly POCs, IEM Compliance Compliance monitoring EMSs GEPD, EPBs As per the PRC monitoring report regulation

External External monitoring report IEM ADB, GPMO, Semiannual monitoring PICs, POCs

Test Operation Project Project completion EMSs GEPD, EPBs, Once within 3 months of completion environmental audit report GPMO project completion environmental audit

Operational Phase Internal Internal monitoring report EMC GPMO, PICs, Quarterly for the first 3 monitoring POCs, IEM years of operation

Compliance Compliance monitoring EMSs GEPD, EPBs As per the PRC monitoring report regulation

External External monitoring report IEM ADB, GPMO, Semiannual for the first 3 monitoring PICs, POCs years of operation

ADB = Asian Development Bank, EMC = environmental management company and/or consultant, EMS = environmental monitoring station at the city level, EPB = environmental protection bureau at the city level, GEPD = Guangxi Environmental Protection Department, GPMO = Guangxi Project Management Office, IEM = independent environmental monitor (as part of the implementation consultancy), PIC = project implementing company, POC = project operating company, PRC = People’s Republic of China. Sources: Domestic EIAs, and consultations with GPMO, GEPD, EPBs, and PICs.

H. Work Plan

33. Before construction begins, the GPMO and the PICs will develop detailed responsibilities and requirements for contractors and will provide detailed cost estimates of mitigation measures and environmental monitoring in the construction contracts. The GPMO and the PICs will also detail the responsibilities of their environmental management offices and prepare their work schedules.

34. Before the operational phase begins, the PICs and POCs will develop detailed work plans for environmental management and monitoring during operations, based on the EMP. These work plans will be submitted to the EPBs and GEPD, to help them supervise implementation. Appendix 1 49

I. Cost Estimates for Environmental Management

35. The PICs, with help from the GPMO, will develop detailed plans for procurement of equipment and materials and civil works to use in implementing mitigation measures and monitoring plans. These plans will be incorporated into project contracts. Procurement will be also be made environmentally responsive through incorporation of environmental considerations.

36. Cost estimates for mitigation measures, environmental monitoring, public consultations, and capacity building are summarized in Table A1.7. The compliance monitoring costs will be borne by the PICs and POCs as part of their implementation functions. Internal monitoring costs will be borne by the contractors and PICs and POCs. Independent monitoring costs will be from the loan implementation consultancy budget. Before implementing a monitoring plan, responsible agencies will present a more detailed breakdown of the estimated budget. During project implementation, the budgets will be adjusted based on actual requirements. Contractors will bear the costs of all mitigation measures during construction, which will be included in the tender and contract documents. The PICs will bear the costs related to mitigation measures during operation. Costs related to environmental supervision during construction and operation will be borne by the PICs and POCs. Costs for capacity building will be borne by the project as a whole. During the operational phase, the training costs will be included in the operation and maintenance budget.

Table A1.7: Cost Estimates for the Environmental Management Plan (CNY’000)

Item Incremental Investment Environmental mitigation 10,320 Dredged sediment quality monitoring for Chongzuo Lake 30 Internal environmental monitoring 2,580 Public consultations 860 EIA and environmental management consultancy 1200 Independent environmental monitoring 1,720 Environmental management training 520

Total 17,230 EIA = environmental impact assessment. Sources: Domestic feasibility study reports; domestic EIAs; and consultations with Guangxi PMO, Guangxi Environmental Protection Department, municipal environmental protection bureaus and Project Implementing Companies.

J. Mechanism for Feedback and Adjustment

37. Based on the inspection and monitoring reports, environmental authorities will decide whether: (i) further mitigation measures are required as corrective action, or (ii) some improvement is required to environmental management practices. If it is found during inspection that there has been substantial deviation from the EMPs, or any changes have been made to the project or any of its components that may cause substantial adverse environmental impacts or increase the number of affected people, the GPMO should consult with environmental authorities and ADB immediately and form an environmental assessment team to conduct additional environmental assessment and, if necessary, further public consultation. The revised EIA reports (including EMPs) should be submitted to the environmental authorities for approval, and to ADB. The revised EMPs will be given to the contractor(s) and PICs and POCs for implementation. 50 Appendix 1

Figure A1: Mechanism for Feedback and Adjustment

GPLG ADB

EPB/GEPD GPMO

Consultants (DIs/EMCs) PIC/POC

IEM

EMS Contractors (During Construction)

Implementation of Mitigation Measures, Monitoring Program and Public Consultation Plan

Reporting Supervision

Documentation of EMP Implementation and Performance/Information Flow

Action

ADB = Asian Development Bank, DI = design institute, EMC = environmental management company/consultant, EMP = environmental management plan, EPB = environmental protection bureau at the city level, EMS = environmental monitoring station at the city level, GEPD = Guangxi Environmental Protection Department, GPLG = Guangxi Project Leading Group, GPMO = Guangxi Project Management Office, IEM = independent environmental monitor, PIC = project implementing company, POC = project operating company. Sources: Feasibility study reports; domestic EIAs; and consultations with GPMO, GEPD, EPBs, and PICs. Figure A2.1: Project Sites in Fangchenggang

Mangrove Forest Roads Proposed for ADB Lending Support Coastal Dyke Proposed for ADB Lending Support Railway Station

Gongche Township

Railway Station

Xiwan Bay

N Dongwan Bay

10-0561a HR Qisha Township Figure A2.2: Project Sites in Chongzuo

Road Proposed for ADB Lending Support

Shuikou Lake Environmental Improvement Proposed for ADB Lending Support

Industrial Park

Zuojian River

I n d u s t r i a l P a r k

Old Town Urban Center Ring Road Exressway

Zuojian River

New Shuikou Lake Town Center

Nanning--Friendship Gate (Vietnamese Border) Expressway

10-0561b HR Youjiang River

Ring Road Railway Station Longwang Bridge Ring Road South Proposed for ADB Lending Support Longwang Bridge Proposed for ADB Lending Support Baise City

Figure A2.3: Project Sites in Baise

River Youjiang Youjiang

Ring Road N

10-0561c HR Supplementary Appendix O:

Poverty and Social Impact Assessment TABLE OF CONTENTS

1. RATIONALE OF POVERTY AND SOCIAL ANALYSIS ...... 1 2 OBJECTIVE, SCOPE AND METHODOLOGY ...... 3 3 SOCIOECONOMIC PROFILE OF THE PROJECT CITIES ...... 4 3.1 Socioeconomic Profile of Fangchenggang City ...... 4 3.2 Socioeconomic Profile of Chongzuo City ...... 5 3.3 Socioeconomic Profile of Baise City ...... 7 4. URBAN AND RURAL POVERTY PROFILE IN PRC, GZAR AND PROJECT AREAS ...... 13 4.1 Rural Poverty Profile of in PRC and GZAR ...... 13 4.2 Urban Poverty Profile of in PRC and GZAR ...... 15 4.3. Rural Poverty Profile of in the Project Direct and Indirect Areas...... 16 4.4 Urban Poverty Profile in the Project Direct and Indirect Areas ...... 18 4.5 Socioeconomic Profiles of Direct Project Area ...... 18 5. NEEDS ASSESSMENT ...... 19 5.1 Urban Road Network and Related Municipal Infrastructures, and Longwang Bridge ...... 19 5.2 Fangchenggang City Coastal Protection and Upgrading Component ...... 23 5.3 Chongzuo City Shuikou Lake Environmental Improvement Component ...... 25 6. PROJECT BENEFICIARIES AND BENEFITS ...... 27 6.1 Project Beneficiary Area and Populations ...... 27 6.2 Project Benefits ...... 28 7. MAXIMIZING GENDER ISSUES IN THE PROJECT ...... 37 8. SOCIAL SAFEGUARD ISSUES AND MITIGATION MEASURES ...... 38 8.1 Involuntary Resettlement ...... 38 8.2 Transmissible Diseases and HIV/AIDs ...... 39 8.3 Drugs and Human Trafficking...... 41 8.4 Community Construction Disturbances and Protection ...... 42 8.5 Labor Issues ...... 42 8.6 Ethnic Minorities ...... 43 8.7 Other Social Risks ...... 44 9. PARTICIPATION STRATEGY ...... 44 9.1 Stakeholder Analysis during the PPTA Stage ...... 44 9.2 Participation Strategy during Implementation and Operation ...... 44 10. MONITORING AND EVALUATION PLAN ...... 45 11. SUMMARY OF POVERTY AND SOCIAL IMPACT ASSESSMENT ...... 45 CURRENCY EQUIVALENTS (As of 1 September 2009)

Currency Unit – yuan (CNY) CNY1.00 = $0.1467 $1.00 = CNY6.82

WEIGHTS AND MEASURES

km2 – square kilometer m2 – square meter

NOTES

(i) The fiscal year (FY) of the Government ends on 31 December.

(ii) In this report, “$” refers to US dollars.

ABBREVIATIONS

ADB – Asian Development Bank APs – Affected persons ASEAN – Association of South East Asian Nations BGEDZ – Beibu-Gulf Economic Development Zone CAFTA – China-ASEAN Free Trade Area CDC – Center of Disease Control CNY – Chinese yuan DIs – Design Institutes DPAs – Direct ProjectAreas EA – Executing agency EIA – Environmental impact assessment EMDP – Ethnic minority development plan FMG – Fangchenggang Municipal Government FYP – Five-year plan GDP – Gross domestic product GMS – Greater Mekong Subregion GZAR – Guangxi Zhuang Autonomous Region GZARG – Guangxi Zhuang Autonomous Region Government HIV/AIDs – Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome IA – Implementing agency IPA – Indirect Project Area MLG – Minimum Living Guarantee MPMOs – Municipal Project Management Offices PBG – Pan-Beibu Gulf Economic Cooperation Area PIC – Project Implementing Company PMO – Project management office PPMS – Project Performance Monitoring System PPRD – Pan-Pearl River Delta Economic Cooperation Area PRC – People’s Republic of China PYs – Person-Years RP – Resettlement plan STI – Sexually Transmitted Infection TI – Targeted Intervention WDS – Western Development Strategy WF – Women’s federation – Supplementary Appendix O: Poverty and Social Impact Assessment

Supplementary Appendix O:

Poverty and Social Impact Assessment

1. Rationale of Poverty and Social Analysis

1. The proposed Project targets three border cities in Guangxi Zhuang Autonomous Region (GZAR). GZAR is one of 12 less developed provinces and autonomous regions targeted by the Government’s Western Development Strategy (WDS) to promote development in the under-developed western part of the country. Meanwhile, GZAR occupies a central position in several subnational and subregional economic cooperation areas, namely, the Pan-Pearl River Delta Economic Cooperation Area (PPRD), the Greater Mekong Subregion (GMS) and the Pan-Beibu Gulf Economic Cooperation Area (PBG).

2. The achievement of the national development and regional cooperation objective of transforming transport corridors into economic corridors under the various subnational and subregional programs depend on both inter-regional connectivity and the infrastructure services of the urban centers within the corridors. These urban centers serve as critical nodal links for inter-regional flow of goods and services, as well as bases for production, distribution and consumption. The latter function is probably more important in increasing trade, as trade is a response to demand from consumption. In this respect, continued urban population growth, through the intertwined process of industrialization and rural-urban migration, and infrastructure improvement provides a vital link for the transport-economic corridor transformation.

3. With investments in expressways and highways by the ADB and the Government under the WDS and the GMS program, inter-city connectivity of the Project cities has improved considerably. Yet, the expansion of the intra-city urban road network has neither caught up with the pace of urbanization nor can accommodate future growth. The existing infrastructures in the Project cities have become inadequate to handle the rising demands from regional trade, tourism and public traffic. Meanwhile, outdated environmental infrastructure can no longer protect the economic and social assets. The urban infrastructure constraints in the Project cities are discounting their efforts in achieving the economic development targets and improving the standards of living for the local residents, and preventing the cities from fully participating in regional cooperation as contributors and beneficiaries.

4. Being a port city with sea and land importance to not only GZAR but also to the entire southwest of the PRC as well as to Southeast Asia and world markets, Fanchenggang is a critical sea and land node in transforming the transport corridor to an economic corridor. It has been chosen for the mega iron and steel plant with an annual capacity of 10 million tons for the near-term, 20 million tons for the medium-term and 30 million tons for the long- term18. Preparatory works, including railways, power and water supply and roads, have either been completed or under construction. The mega plant, together with the planned large- scale upstream and downstream industries and the expansion of the port and regional cooperation, will necessitate considerable improvement to the current road network and related municipal infrastructures, as well as improvement to the coastal dykes to protect the

18 For comparison, the total iron and steel production in the PRC was about 500 million tons for 2008. The Shanghai Baosteel Plant, the largest in the PRC, produced about 25 million tons in 2008.

SA-O-1 Supplementary Appendix O: Poverty and Social Impact Assessment existing and future investments and enhance the coastal environment for attracting investments and providing for recreation and environmental education for local residents.

5. Chongzuo city is located along the road and rail trade corridor that links Guangxi from Nanning, its capital city, across to Vietnam and other Southeast Asia markets. The old urban center is situated within the U-shaped area confined by the Zuojiang River. According to the urban master plan, the city will expand to two new areas. The Chengnan (city south) subdistrict will develop into the new city center that will accommodate government offices, financial and commercial establishments, cultural and educational institutions, and commercial housing. One of the two planned south-north truck roads has been completed. Several branch roads have also been put into use. But the second truck road and a number of branch roads, which are proposed for financing under the Project, are needed for the road network to function to its full capacity. The Chengbei (city north) subdistrict has been designated as the industrial area where two major industrial parks are located. As a priority development for ASEAN-oriented processing industries, the largest central industrial park needs two trunk roads, which are proposed for financing under this Project, to serve as the backbone for the inner road grid and as connections to the inter-city expressways via the urban ring road. Moreover, the Shuikou Lake, nicknamed the kidney of Chongzuo, is the largest water body on the margins of the city that forms part of the stone forest-lake scenic area, and the water quality, albeit much better than most water bodies in the industrialized eastern counterparts, has been declining because in-lake aquaculture and lakeside waste discharges. It can no longer meet the increasing demand for recreational and leisure for local residents and tourists.

6. Baise city is more remote than the other two project cities, yet has significance to link Yunnan and Guizhou by expressways and national highways 323 and 324 to domestic markets and to connect to the seaports of GZAR and regional corridors as well as border trade with Vietnam. At present, the inter-city traffic goes through the city center because of the lack of an outer urban ring road. This has resulted in congestion, pollution and accidents, especially from passing-by large trucks. Sections of the urban ring road are operational, except for the northern section and a bridge across the Youjiang River which are proposed for financing under this Project. The urban master plan has designated the existing urban area in the west to continue to serve as the city center, while major industrial developments will expand toward the east within the confines of the topographic contours. A number of large-scale sugar manufacturing, aluminum processing and manufacturing, pharmaceutical and petrochemical enterprises are presently situated in the series of planned industrial parks, and more enterprises are expected. There is a need to build speedy links between the western city center and the eastern industrial zones to facilitate the flow of goods, services and people.

7. The proposed Project interventions respond to the need for improving urban transport and environmental infrastructure services to meet the increasing demands of urban development and regional cooperation. The proposed components on urban road networks and related municipal infrastructures will respond to the need for increased urban transport capacities so that congestion is reduced, productivity is raised and more urban growth can occur in business activities from the industrial parks linking with rural value chains and are also for the expansion of the land areas of the cities so that the inhabitants can travel from residences to workplaces. They will ultimately connect the cities to their corridors and seaports en route to regional economic growth within and across national borders. The proposed component on coastal protection and upgrading will improve the environmental quality of the ocean front and raising the environmental resilience by reducing incidences of flooding and the damages resulting from flooding and to make the cities more attractive for the inhabitants, investors and tourists. The proposed component for Shuikou Lake will upgrade the quality of the water body as an important environmental and social asset for the people of Chongzuo.

SA-O-2 Supplementary Appendix O: Poverty and Social Impact Assessment

8. The Project will improve the road network and urban infrastructure for Fangchenggang City, Chongzuo City and Baise City through: i) providing an urban road network and related municipal infrastructures for each city, and a bridge in Baise that is connected to the Project road network and bridges to meet urban development needs of the three border cities; ii) establishing coastal protection and upgrading in Fangchenggang City, including tidal flood control, mangrove forest protection and coastal environmental improvement; and iii) Shuikou Lake environmental improvement in Chongzuo. In turn, the Project will improve the quality of life for the residents of Fangchenggang, Chongzuo and Baise, by promoting sustainable economic and urban development and enhancing their ability to participate in and benefit from regional cooperation. The Project will benefit about 606 thousand urban and rural residents in the direct Project areas, of which 20.31% are poor, in the three border cities and help reduce poverty through the primary benefits: i) improved access as the result of road components in each of the three Project cities; ii) improved urban living as a result of environmental improvement to a lake and a mangrove forest; iii) reduced damages to lives and properties and associated economic losses as a result of flood protection; iv) increased land value resulting from each of the above; (v) the similar effects on urban growth and the ability of the cities to take in rural migrants.

9. Benefits of the Project will be felt especially by the poor who often suffer from the loss of human life, property damage and associated economic losses, environmental pollution and the insufficient road networks with limited access to community services and facilities adds to their isolation from urban development opportunities and their overall poverty situation. Vulnerable populations and women will be particularly targeted for employment and training opportunities generated by the Project investments. As such, the Project will supplement the poverty reduction efforts in the Project area and PRC.

2 Objective, Scope and Methodology

10. The objectives of this Poverty and Social Impact Assessment are to identify, predict and assess the potential positive and negative impacts of the Project on local population as a whole, and to optimize the Project design through social considerations in order to produce maximum social benefits, particularly benefits to the local people, including the poor, women, ethnic minorities and other socially disadvantaged groups, and to ensure the social dimensions are fully incorporated into the Project final design. The scope of the assessment covers the project direct and indirect areas. The poverty and social impact analysis has paid particular attention to the ADB’s over-arching objective of poverty alleviation and identified other ways in which the project can improve the quality of life and health conditions of the local residents in the Project areas over both the short- and long- term. The assessment aims to: i) predict the contribution of the Project to PRC poverty reduction effort; ii) perform a poverty analysis of the Project; iii) estimate the household benefits of flood disaster prevention and control, road network, bridge construction, and lake wetland rehabilitation; iv) estimate public support for the Project components; v) conduct an affordability analysis; vi) conduct a poverty and social analysis and recommend a participatory process; vii) incorporate gender and development issues; and viii) incorporate social safeguard issues, such as involuntary resettlement, ethnic minorities, labour, and other risks/vulnerability.

11. To gain a better understanding of the socioeconomic situation of the Project area and to assess the poverty and social impacts resulting from the Project, a random sampling of 800 household socio-economic surveys covering the flood control dykes, road networks, bridge, and lake wetland rehabilitation components were carried out by the respective

SA-O-3 Supplementary Appendix O: Poverty and Social Impact Assessment

Survey Team of each Project city between July and August 200919. Table O-1 provides the sample size of socio-economic survey. In addition, various participatory approaches and methodologies have been used throughout the whole process of the impact assessment study during the PPTA. Data collection methods include the following: i) stakeholder consultation workshops, meetings and seminars, ii) key informant interviews; iii) field observations, iv) discussion with other PPTA team members, EA, IAs and DIs; and v) collection of secondary data/information, such as statistical data and existing reports. The various data collection methods have been used to gather both qualitative and quantitative data from different sources. In this assessment, every attempt has been made to quantify the potential poverty and social impacts when appropriate and feasible.

Table O-1: Sample Size of Socio-Economic Survey Sample Size Project City Subproject (Households) Fangchenggang Flood Control Dyke 100 Urban Road Network 100 Chongzuo Flood Control Dyke* 100 Urban Road Network 100 Shuikou Lake Wetland Rehabilitation 200 Baise Urban RoadNetwork 100 Longwang Bridge 100

TOTAL 800 Note: The survey has been conducted for the Flood Control Dyke in Chongzuo City, but it has been cancelled from the Project. As a result, the analysis for Poverty and Social Impact Assessment excluded the survey result for the component.

3 Socioeconomic Profile of the Project Cities

3.1 Socioeconomic Profile of Fangchenggang City

12. Fangchenggang City, an important harbour city of GZAR, is located in the southwest end of the coastal line of PRC and borders with important city Guangning of Vietnam. The north latitude is 21 o36 ' ~ 22 o22 ' and east longitude is 107 o28 '~ 108 o36 '. Two rivers (the Fangchengjang River and Shatanjiang River) flow through the city. Fangchenggang City has 584 km of coastline and 212 km of border line. It administers two districts, one county and one county-level city, namely Fangcheng District, Gangkou District, Shangsi County and Dongxing City (county-level city). The total area of the City is 6,181 km2. The population density is 135 persons per square kilometers.

13. By the end of 2007, the population of Fangchenggang City reached 833 thousand. Of the total population, 586.9 thousand or 70.46% was agricultural population and 246.1 thousand or 29.54% non-agricultural population. The birth rate was 15.05‰ and the death rate 4.5‰, giving a natural growth rate of 10.55‰. Of the total population, females account for 45.32%, which was slightly lower than that of males at 54.68%. Fangchenggang is home to 20 minority ethnic groups in addition to the Han, including Zhuang, Yao, Jing, Dong, Miao, Mulao, Maonan, Hui, Shui, Gelao, Man, Korean, Tibetan, Li, Dai and Uygur. They account for about 48% of the total population.

19 For statistically-significant and pro-rated households, originally it has planned that a survey of 1,000 Project beneficiary households to be randomly sampled would be conducted in the Project areas. However, due to the drop-out of the Qisha Wastewater Treatment Plant in Fangchenggang City with a sample size of 200 households, the actual sample size of the final Socio-Economic Survey has become 800 households.

SA-O-4 Supplementary Appendix O: Poverty and Social Impact Assessment

14. The pillar industries are food and agricultural product processing, iron and steel, metallurgy, petrochemical, energy, building material, electronic products, pharmaceuticals and ports. In 2008, the GDP totaled CNY 21.2 billion or an increase of 20.1% over 2007. It was 7.4 percentage points higher than that of the GZAR, and 4.6 percentage points higher than the Guangxi Beibu Gulf Economic Area. The total industrial output value amounted to CNY 32.8 billion (an increase of 43.9% over 2007), including CNY 13.0 billion from the agricultural processing industry and CNY 3.0 billion from the iron and steel industry. The industrial sector contributed more than 45.7% of the economic growth. Export value grew to more than US$2.2 billion or an increase of 50.3% over 2007.

15. Fangchenggang City is characterized with a long history, beautiful mountains, and colorful ethnic culture. The major tourism spots include: Shiwandashan National Nature Reserve; the largest mangrove forest in urban area of PRC; Camellia National Nature Reserve; Beilunkou National Nature Reserve; Jingdao scenic spots; Jiangshan Peninsula Holiday Resort; West Bay National Scenic Area; Port Cultural Tourism Zone; Qisha Industrial Ecological Tourism Zone; Sino-Vietnamese border rafting tourist area. Fangchenggang is becoming new and emerging tourist city after Guilin and Beihai in Guangxi. In 2008, the city hosted 1.28 million tourists, an increase of 9.66%, the total tourism income accounted for CNY 373 million, an increase of 5.37%, the foreign exchange earnings from tourism accounted for CNY 6.58 million U.S. dollars, an increase of 6.3% over 2007.

16. The urban per-capita disposable income grew by 18.1% to CNY 14,364; rural per- capita net income by 18.0% to CNY 4,474. Urban employment stood at 113 thousands persons. The registered unemployment rate was 3.6%. Rural poverty population was reduced from 172,900 at the end of 2000 to 125,600 by the end of 2008. Increased public spending produced improvements in public health, education, social safety, low-income housing, water supply, wastewater treatment, solid waste management and ecological conservation.

17. The number of students in primary, secondary and professional schools in 2008 reached 85,637, 45,736 and 2,436, respectively. The city has 182 medical institutions, with the average number of medical bed per 10,000 persons of 0.1397, and average number of medical personnel per 10,000 persons of 0.2184.

3.2 Socioeconomic Profile of Chongzuo City

18. Chongzuo City, is the centre of politics, economics and transportation, located in the southwest of GZAR, bordering with the Socialist Republic of Vietnam with the longest border line in GZAR totaling at 533 kilometers and a total of 11 various types of border ports. It has a long history and beautiful landscape in the south of the Zuojiang River between north latitude 21°36’ to 23 °22’ and east longitude 106°33’ to 108°6’ (north latitude 22°23’ and east longitude 107°24’ of geographical coordinates). Chongzuo is mountainous and hilly area with numerous karst formations similar to Guilin and northern Vietnam’s Ha Long Bay. The distance from central urban area of Chongzuo City to Nanning, the capital city of GZAR is 110 km, and 129 km to Friendship Border and 250 km to Hanoi, the capital city of Vietnam. The territory of Chongzuo City has convenient transportation-Xiang-Gui Railway through East to West, Nanyou Highway through South to East and with the Vietnam railway and No. 1 Road which have formed the most convenient access from PRC to ASEAN countries.

19. Chongzuo City administers Jiangzhou District, Fusui County, Daxin County, Tiandeng County, Ningming County, Longzhou County and Pingxiang City with administrative area of 17,345 km2, of which the urban area is 2,951 km2 (14.5 km2 built-up area) and forested area 7,190 km2. The population density is 136 people per km². At the end of 2007, there were 2.37 million people, including 351 thousand people living in urban districts. Of the total population, 1.97 million or 83% was agricultural population and 465

SA-O-5 Supplementary Appendix O: Poverty and Social Impact Assessment thousand or 17% was non-agricultural population. The birth rate was 14.5‰ and the death rate 5.75‰, giving a natural growth rate of 8.75‰. Of the total population, females account for 47%, which was slightly lower than that of males at 53%. Of the total population in Chongzuo City, a total of 2.17 million people are Zhuang, Yao, Miao, Dong, Jing, and other ethnic minorities, consisting of 89.69% ethnic minorities, mainly Zhuang.

20. According to "Chongzuo City Urban Master Plan" (2002-2020), the city will become the regional transport hub for SW Guangxi, tourism as a “dragonhead” industry, deepening the resource processing industries, and striving to foster scientific research and industries with local characteristics. The development objectives of the city are to construct the inland corridors of China - ASEAN Free Trade Zone as the central city of the southwest in GZAR, with orientation of sub-tropical agriculture, border industry, international trade, border tourism and scenic gardening.

21. Since the formal establishment of Chongzuo City in August 2003, the socioeconomic development has steadily increased. The pace of urban construction continues to accelerate. In 2008, the GDP of the city reached CNY 26.48 billion, an increase of 11.8%; fiscal revenues was CNY 3.207 billion, an increase of 19%; the total imports and exports totaled at US$ 1.599 billion dollars, an increase of 72.6% over 2007. For the urban districts, the GDP reached CNY 4.951 billion with average GDP per capita at CNY 16,900 in 2007, of which value added primary industry was CNY 1.381 billion, value added secondary industry CNY 1.668 billion, value added tertiary industry CNY 1.602 billion.

22. By the end of 2007, a total of 1.49 million people were employed in Chongzuo City, with an increase of 5.7% over last year. The registered unemployment rate in 2008 was 3.75%. The per capita disposable income of urban residents was CNY 12,732, an increase of 15%; per capita net income of the farmers was CNY 3,754, an increase of 14.1% over last year in 2007. The average expenditure of urban residents was CNY 6,179 and rural residents CNY 2,730, with an increase of 11.9% and 15.5%, respectively. The Engel’s coefficient for urban residents and rural residents was 47.04% and 43.45%, respectively.

23. The average living area of the urban resident was 17 m2 and rural residents 31.18 m2 in 2007. The city owns 177 kindergartens with 44,300 students, one (1) special education school with 126 disabled students, 794 primary schools with 146,804 students, 96 middle schools with 71,912 students, 13 professional technical schools with 15,875 students, and 14 higher education schools with 22,899 students. The entrance rate of primary school was 99.89%, junior middle school 98.08%. There are 452 medical and health institutions, 3,885 medical beds, and 5,613 health technicians. The medical insurance and unemployment insurance systems have been improved. In 2007, of the total population, 108,700 persons in the urban districts were covered by medical insurance and 82,100 persons by unemployment insurance.

24. Forestry and agriculture are two of Chongzuo’s leading industries. Oranges, rice, beans, corn, cassava, cinnamon, bananas, vegetables, durian, pineapples, longan, and tea are the major crops. Sugarcane is ranked first among the crops. Chongzuo is the national commodity sugar production base and sub-tropical fruit production base. Farm-raised animals include beef and dairy cattle, sheep, ducks, chickens, geese, and bees. Aquaculture is advanced and the fish accounts for the biggest proportion. The city is abundant with natural grown Chinese herb medicines. The Chinese medicinal herbs are picked from the wild and also grown.

25. Important mineral resources include manganese, gold, ferberite, coal, barite, bentonite, uranium, and vanadium. Chongzuo is China’s largest manganese producer and the world's largest producer of bentonite. The proven reserves of manganese ore are 149 million tons, bentonite reserves 640 million tons, and proven iron ore reserves hundred

SA-O-6 Supplementary Appendix O: Poverty and Social Impact Assessment million tons. Other industries include export facilities, paper, forest products such as timber and turpentine, building materials, pharmaceuticals, and electronics manufacturing.

26. Chongzuo city is rich in tourism resources. The main tourist spots include Zhuang ancestors' cultural sites - Ningming Huashan Mural Painting, Asia's largest transnational waterfall-Daxin Detian Waterfall between China and Vietnam, the world's rarest white head monkey habitated Chongzuo Ecological Park, Pingxiang Friendship Border Gate, Fusui Dinosaur Fossil Heritage Site, Longzhou Red Tourist Area, Longzhou Xiaoliancheng, Zuojiang Leaning Tower, Chongzuo Stone Forest, etc. The tourists reached 3.7215 million persons-times in 2007.

3.3 Socioeconomic Profile of Baise City

27. Baise City is located in the west of GZAR, the largest city in GZAR. With the location at east longitude 104 ° 28'-107 ° 54 ' and north latitude 22 ° 51'-25 ° 07'. The city connects in the west with Yunnan, adjacent in the north with Guizhou, in the east next to the capital city of Nanning, and in the south borders with Vietnam, the border line is 365 km long. It is the joint of Yunnan, Guizhou and Guangxi provinces as central urban area. It is the southwest access of China to the sea of the Pacific region as the "golden corridor". The distance from central urban area of Baise City to Nanning, the capital city of Guangxi Zhuang Autonomous Region is 260 km. Connected to Vietnam, it is part of the China-ASEAN Free Trade Area (CAFTA) and the Pan-Beibu Gulf Economic Development Area (PBG). These will provide Baise with market opportunities for the industrial development.

28. Baise City administers one urban district (Youjiang) and 11 counties (Pingguo, Tiandong, Tianyang, Tianlin, Debao, Jingxi, Napo, Lingyun, Leye, Longlin and Xilin), of which 10 counties were classified as national-designated poor counties; 135 townships and communities, 2 sub-district offices, 1,803 village committees, and 78 street committees. The total area is 36,300 km2,. Of the total land area, the mountainous areas account for 90.88%, plateaus and plans 5.8%, and farmland 12.5%. The urban area of Baise City is about 33 square kilometers.

29. At the end of 1997, the total population was 3.152 million, grew to 3.641 million by the end of 2000, to 3.788 million by the end of 2006, and to 3.859 million in 2008, with females accounting for 47%. The birth rate was 12.99‰ and the death rate 5.15‰, giving a natural growth rate of 7.84‰. The ethnic minorities, including the Zhuang, Yao and others, make up 80.29% of the total population.

30. In recent years, Baise’s economy has developed rapidly. In 2008, the GDP totaled CNY 41.6 billion (5.8% of GZAR total) or an increase of 13.4% over 2007. The total industrial output value amounted to CNY 46.4 billion (an increase of 29.6% over 2007). The industrial value added totaled CNY 18.9 billion (an increase of 22.3% over 2007), including CNY 7.0 billion from non-ferrous metal metallurgy and related industries (an increase of 47.0% over 2007), CNY 2.1 billion from power and power supply industries (an increase of 14.4% over 2007) and CNY 1.1 billion from the agricultural and food processing industries (an increase of 43.8% over 2007). The industrial sector contributed 72.8% of the economic growth. The urbanization rate reached to 31%. The urban per-capita disposable income reached CNY 13,169 or an increase of 15.5% over 2007; the rural per-capita net income CNY 2,820 or an increase of 14.5% over 2007. The newly added urban employment was 19,900 persons. The minimum wage in 2009 is CNY 580 for Baise City and Youjiang District, and CNY 460 for other counties/district. The registered unemployment rate in 2009 was 3.1%.

31. The average living area of urban resident was 34.24 m2. The city owns 1,640 primary schools with 321,200 students, 232 middle schools with 199,100 students, three (3) high schools with 9,651 students. The entrance rate of primary school was 97.84%, and

SA-O-7 Supplementary Appendix O: Poverty and Social Impact Assessment junior middle school 58.07%. There are 690 medical and health institutions, 7,219 medical beds, and 3,997 health technicians. In 2006, of the total population, 143,746 persons in the urban districts were covered by medical insurance, and 117,107 persons by unemployment insurance.

32. Baise City is extremely rich in mineral resources with 57 kinds of minerals. It is one of the top ten non-ferrous metal mining areas, of which bauxite has proved reserves of 780 million tons, more than 1 billion ton of long-term reserves, accounting for more than one-third of the reserves in PRC. The city is striving to become important aluminium industrial based in PRC and even Asia by taking the advantage of local resources. Coal reserves are more than 820 million tons, which has become a major coal-producing base in Guangxi. There are preliminary 100 million tons of proved oil reserves and 3,000 million cubic meters of natural gas. Antimony, copper, oil, coal, gold, crystal and other more than 10 kinds of mineral resources are ranked highest in GZAR.

33. Baise is also rich hydropower resources. Its hydropower potential is estimated at 6 million kilowatts, of which more than 4.50 million kilowatts have been developed. The established major power stations include: Tianshengqiaoyi, Class II hydropower station with installed capacity of 2.52 million kilowatts, Baise hydro junction with installed capacity of 540,000 kilowatts, Pingban hydropower station with installed capacity of 405,000 kilowatts, and Tianyang Thermal Power Plant and Tiandong Thermal Power Plant with installed capacity by 0.27 million kilowatts.

34. Baise is rich in forest resources. The city's forest land use area is 2.2 million hectares, the forest area 2.0 million hectares, and timber stock more than 44 million cubic meters. It is an important timber base in GZAR. The forest coverage rate reached 58.6%. It is rich in wood oil, tea oil, star anise, Badu bamboo shoots, pekoe tea, tobacco, etc. It is main production based for star anise and wood oil. The forest and sideline products are ranked the top positions of GZAR. Youjiang Valley is a famous base of sub-tropical fruits and vegetables production base, and is the base for vegetable transferred from south to north and the "Mango Township", “Tea Township”, “Badu Bamboo Township”, and “Fennel Oil Township”.

35. Baise has a long history, beautiful mountains and rivers, cultural landscapes and colorful ethnic customs, and great potential of tourism resources. It is characterized by red (revolutionary) tourism, valleys, forests and other resources with four national 4A scenic areas, and is a very new and emerging tourist city after Guilin and Beihai in Guangxi. Baise is one of the China’s 12 key red tourism scenic spots and was awarded "Outstanding Tourist City of China" title in 2007. There are state-level scenic spot - Baise Rebellion Memorial Hall; and world unique of Jingxi Tonglin Great Canyon Valley and “Tiankeng” (heaven pit), Chengbi River, etc.

4. Socioeconomic Profiles of Direct Project Area 36. Information on the general characteristics of the beneficiary population in each Direct Project Areas (DPA) was collected by means of the household questionnaire in the respective DPA.

4.1 Demographic Profile

37. For the Fangchenggang City, of the total surveyed 200 households who will benefit from the Project, females account for lower proportion at 47% than males at 53%. The average family size is 3.9 persons. The average age of the surveyed beneficiaries is 39.1; for Chongzuo City, of the total surveyed 300 households who will benefit from the Project, females account for lower proportion at 48.12% than males at 51.88%. The average family

SA-O-8 Supplementary Appendix O: Poverty and Social Impact Assessment size is 3.1 persons. The average age of he surveyed beneficiaries is 33.95; and for Baise City, of the total surveyed 300 households who will benefit from the Project, females account for lower proportion at 46.62% than males at 53.38%. The average family size is 3.8 persons. The average age of he surveyed beneficiaries is 32.61. Table O-2 provides the family population, size and age group by gender.

Table O-2: Demographic Profile by Subproject and Gender Family Population Family Average Age Project Component Number % Size Male Female Total Male Female Total(No.) Male Female Total Fangchenggang City Urban Road Network 433 420 853 50.00 49.00 100.00 4.27 43.24 43.37 43.31 Coastal Protection 197 181 378 52.00 48.00 100.00 3.53 32.91 34.81 34.36 Total 630 601 1,231 53.00 47.00 100.00 3.90 38.40 39.86 39.10 Chongzuo City Urban Road Network 290 261 551 52.63 47.37 100.00 2.76 30.40 33.60 32.00 Shuikou Lake 192 186 378 50.79 49.21 100.00 3.78 35.51 36.30 35.90 Total 482 447 929 51.88 48.12 100.00 3.10 32.76 34.95 33.95 Baise City Urban Road Network 185 185 370 50.00 50.00 100.00 3.70 36.69 36.36 36.52 Longwang Bridge 423 346 769 55.00 45.00 100.00 3.85 30.14 31.43 30.72 Total 608 531 1,13953.38 46.62 100.00 3.80 32.13 33.15 32.61 Source: Socioeconomic Household Survey between July and August, 2009

4.2 Education

38. In the DPA of Fangchenggang City, those whose education is primary or less accounted for 23.59%, junior high school for 49.43%, senior high school for 16.10%, technical college for 5.04%, university incomplete for 2.11%, and university complete for 3.74%. In general, women have lower proportion for different education levels, except women have slightly higher education levels for university (incomplete) and elementary school or below, and not finished university. Women have same education level with men for graduate from university.

39. In the DPA of Chongzuo City, those whose education is primary or less accounted for 20.78%, junior high school for 25.51%, senior high school for 16.58%, technical college for 8.5%, university incomplete for 2.69%, and university complete for 25.94%. In general, women have lower proportion for different education levels, except women have slightly higher education levels for junior high school and elementary school or below.

40. In the DPA of Baise City, those whose education is primary or less accounted for 29.5%, junior high school for 53.03%, senior high school for 11.68%, technical college for 2.11%, university incomplete for 1.23%, and university complete for 2.46%. Women have lower proportion for different education levels (see Table N-3 for education attainment by component and gender).

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Table O-3: Level of Education by Component and Gender (%) Elementary Junior High Senior High Technical Not Finish Graduate from Project School or Total School School college University University Component below M F M F M F M F M F M F Fangchenggang City Urban Road 12.70 11.76 20.67 20.43 9.26 10.33 4.39 2.49 1.31 1.54 2.50 2.61 100.00 Network Coastal 9.81 11.94 35.28 33.16 6.10 2.12 0.80 0.00 0.00 0.27 0.27 0.27 100.00 Protection Average 11.79 11.80 25.12 24.31 8.29 7.81 3.33 1.71 0.89 1.22 1.87 1.87 100.00 Chongzuo City Urban Road 9.26 7.44 6.17 9.62 8.71 8.53 5.26 4.54 2.00 0.91 21.23 16.33 100.00 Network Shuikou Lake 10.58 16.14 22.22 17.46 8.47 7.14 3.44 3.18 1.32 1.06 4.76 4.23 100.00 Average 9.80 10.98 12.70 12.81 8.61 7.97 4.52 3.98 1.72 0.97 14.53 11.41 100.00 Baise City Urban Road 12.97 16.76 23.51 23.24 6.76 5.14 1.35 1.35 1.89 1.08 3.51 2.43 100.00 Network Longwang 16.13 13.26 29.26 26.79 7.41 4.16 1.17 0.65 0.26 0.13 0.39 0.39 100.00 Bridge Average 15.10 14.40 27.39 25.64 7.20 4.48 1.23 0.88 0.79 0.44 1.41 1.05 100.00 Source: Socioeconomic Household Survey between July and August, 2009

4.3 Occupation

41. In Fangchenggang City, the major occupation in DPA for the component of Urban Road Network include unemployed, state-owned enterprise employees, students, government employees, private-owned enterprise employees, special staff, private business owners, street vendor, retired, disabled, others. Table N-4 presents the employment situation by gender in DPA of Urban Road Network. It shows that women have higher number of people than men engaged in special staff, private business owners, care givers, house keepers, retired, farmers, and handicapped due to women’s major responsibility for household duties and earlier retirement rates in comparison with men. The major occupation of local residents in DPA for Coastal Prevention and Upgrading component is government employees, street vendors, students, special staff, state-owned enterprise employees, private-owned enterprise employees, private business owners, and others. The result of the survey shows that women have higher number of people engaged as street vendors, care givers, house keepers, students and handicapped due to women’s less accessibility to formal employment position and major responsibility for household duties in comparison with men.

42. In Chongzuo City, the major occupation in DPA for the component of Urban Road Network is special staff, government employees, students, private-owned enterprise employees, state-owned employees, retired, temporary labor, unemployed, and house- keepers. The survey result shows that women have higher number of people than men engaged in special staff, private-owned enterprise employees, temporary labor, house- keepers, unemployed, and retired. The major occupation in DPA for the component of Shuikou Lake include farmers, students, private-owned enterprise employees, special staff, house keepers, temporary labor, private business owners, unemployed and others, state- owned enterprises, and street vendors (see Table N-4). It shows that women have higher number of people than men engaged in private-owned enterprises and house keepers.

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43. In Baise City, the major occupation in DPA for the component of both Urban Road Network and Longwang Bridge is farmers, students, private-owned enterprise employees, state-owned enterprise employees, private-business owners, temporary labor, special staffs, government employees, retired, disabled, street vendors, and house-keepers (see Table O- 4). Women have higher number of people than men engaged in private-business owners, farmers, street vendors, and disabled.

Table O-4: Employment Situation by Gender (%) Percentage Gender Total SOE POE GOV SPE PBO FAR SL SV CG HK RET STU UNE HDC OTH NSW Fangchenggang City Urban Road Network Male 17.33 9.85 13.73 6.24 4.85 0.28 1.10 5.13 0.97 0.00 0.97 12.2 20.39 3.33 0.83 2.77 100.0 Female 13.35 9.52 8.81 10.51 5.11 0.43 0.85 3.55 1.56 0.71 7.00 13.35 18.03 3.69 0.71 2.84 100.0 Coastal Protection Male 6.8 8.4 33.2 10.0 8.0 0.8 0.4 20.0 2.4 0.4 6.8 1.6 0.0 0.8 0.4 0.0 100.0 Female 4.4 5.2 16.8 6.0 4.8 0.4 0.0 36.0 4.0 2.8 1.6 15.6 0.0 2.4 0.0 0.0 100.0 Chongzuo City Urban Road Network Male 9.66 2.41 21.03 14.48 8.97 1.38 3.45 0.00 0.00 0.69 6.90 18.97 2.07 0.34 9.66 0.00 100.0 Female 7.28 3.83 10.3423.37 11.11 3.07 8.81 0.00 0.38 4.21 8.05 11.88 3.07 0.38 4.21 0.00 100.0 Shuikou Lake Male 1.04 12.50 1.0410.42 2.60 45.313.65 0.52 0.00 2.08 0.52 17.19 2.08 0.00 1.04 1.04100.0 Female 1.08 13.98 0.00 8.06 2.69 39.553.76 1.08 0.00 8.60 0.00 17.74 1.61 0.00 2.69 1.08 100.0 Baise City Urban Road Network and Longwang Bridge Male 3.78 5.10 1.15 1.81 2.47 65.46 2.30 0.16 0.00 0.33 1.32 12.34 0.33 0.16 3.45 0.00 100.0 Female 2.07 4.74 0.70 1.70 2.82 71.00 1.88 0.56 0.00 0.18 0.18 0.55 0.18 0.94 1.69 0.00 100.0 Source: Socioeconomic household survey between July and August, 2098. Note: CG = Care Guarding; FAR = Farmer; GOV = Government Employee; HDC = Handicapped; HK = House Keepers; OTH = Others; PBO = Private Business Owners; POE = Private Owned Enterprise Employees; RET = Retired; SL = Temporary Labor; SOE = State Owned Enterprise Employee; SPE = Special Staff; STU = Student; SV =Street Vender; UNE = Unemployment; NSW = No Second Work.

4.4 Housing

44. In the DPA of the Fangchenggang City, the average housing area per family is 153.91 m2. The majority residents are living in single houses, and the rest are living in detached houses, regular apartments without elevators, apartment with elevator, and rented room or rooms. The majority residents (87.2%) own their houses.

45. In the DPA of the Chongzuo City, the average housing area per family is 145.92 m2. The majority residents are living in single houses, and the rest are living in apartment with no elevator, detached flat houses, and rented room or rooms. The majority residents (72.33%) own their houses.

46. In the DPA of the Baise City, the average housing area per family is 131.43 m2. The majority residents are living in rented rooms or rooms, and the rest living in apartment without elevator, single houses, and detached flat houses. The majority residents (97.67) own their houses. Table O-5 provides the type of housing in which the local residents lived.

Table O-5: Area, Property and the Floor of Housing Average Number of Style of House Average Living Area (m2)/HH Own (%) Rent (%) Rooms/HH Fangchenggang City Apartment – no elevator 2.82 140.59 3.4 0.0

SA-O-11 Supplementary Appendix O: Poverty and Social Impact Assessment

Apartment – with elevator 3.00 124.80 0.2 0.0 Detached flat house 4.20 129.20 1.0 0.0 Rented room or rooms 2.04 186.81 1.8 12.4 Single house 5.34 87.48 80.8 0.4 Total 4.77 153.91 87.2 12.8 Chongzuo City Apartment – no elevator 3.50 126.60 29.52 7.67 Apartment – with elevator 0.00 121.60 0.00 0.00 Detached flat house 2.78 130.20 2.67 5.00 Single house 3.57 175.20 12.00 0.33 Rented room or rooms 2.06 74.33 3.33 14.67 Total 3.19 145.92 72.33 27.67 Baise City Apartment – no elevator 3.57 112.00 4.67 0.00 Apartment – with elevator 0.00 127.35 0.00 0.00 Detached flat house 2.43 119.43 1.67 0.67 Single house 3.23 174.44 28.33 0.33 Rented room or rooms 6.08 78.41 21.00 1.33 Total 5.09 131.43 97.67 2.33 Source: Socioeconomic Household Survey between July and August, 2009

4.5 Income and Expenditure

47. In the indirect project area (IPA), according to the Statistical Yearbooks of Fangchenggang City, Chongzuo City and Baise City in 2008, the average disposable income for the urban beneficiaries is CNY 12,159 per capita per year, CNY 11,070 per capita per year, and CNY 12,197 per capita per year in Fangchenggang City, Chongzuo City and Baise City, respectively; and the average expenditures for the urban beneficiaries is CNY 7,357 per capita per year, CNY 6,179 per capita per year, and CNY 7,016 per capita per year in Fangchenggang City, Chongzuo City and Baise City, respectively.

48. The average income of the rural beneficiaries is CNY 3,791 per capita per year, CNY 3,290 per capita per year, and CNY 2,464 per capita per year in Fangchenggang City, Chongzuo City, and Baise City, respectively; and the average expenditures for the rural beneficiaries is CNY 2,544 per capita per year, CNY 2,730 per capita per year, and CNY 2,398 per capita per year in Fangchenggang City, Chongzuo City and Baise City, respectively. Table O-6 provides the average income and expenditures for urban and rural beneficiaries.

Table O-6: Average Income and Expenditures for Urban and Rural Beneficiaries Urban Beneficiaries Rural Beneficiaries Average Disposable Average Average City Average Net Income Income Expenditure Expenditure (CNY/Capita/Yr.) (CNY/Capita/Yr.) (CNY/Capita/Yr.) (CNY/Capita/Yr.) Fangchenggang 12,159 7,357 3,791 2,544 Chongzuo 11,070 6,179 3,290 2,730 Baise 12,197 7,016 2,464 2,398 Source: Statistical yearbooks of Project cities.

According to the household surveys, the average monthly per-capita income for the beneficiary area in Fangchenggang amounts to CNY 524. The average monthly per-capita income for the beneficiary area in Chongzuo is CNY 470. The average monthly per-capita income for the beneficiary area in Baise is CNY 501. The results of the surveys are presented in Table O-7.

SA-O-12 Supplementary Appendix O: Poverty and Social Impact Assessment

Table N-O: Monthly Per-Capita Income for Project Cities Range % of the Total Household Level of Income (CNY) Average (CNY) Fangchenggang Chongzuo Baise Lowest Level < 100 100 3.6 7.1 4.6 101 - 200 150 5.9 10.3 9.5 Low Level 201 - 300 250 9.3 9.8 10.4 301 - 400 350 16.2 22.0 19.8 Medium-Low Level 400 - 500 450 25.2 18.0 20.7 501 - 600 550 18.2 14.5 14.8 Medium Level 601 - 800 700 9.1 8.2 9.4 801 - 1000 900 7.1 6.7 5.6 Medium-high Level 1001 – 1500 1,250 3.2 1.1 2.1 1501 - 2000 1,750 0.9 0.7 1.0 High Level 2001 - 2500 2,250 0.3 0.5 1.1 2501 - 3000 2,750 0.8 1.0 0.9 Highest Level >3000 3,000 0.2 0.1 0.1 Source: Socio-economic surveys.

According to the household surveys, the average monthly per-capita expenditure for the beneficiary area in Fangchenggang is CNY 443. The average monthly per-capita expenditure for the beneficiary area in Chongzuo is CNY 427. The average monthly per- capita expenditure for the beneficiary area in Baise is CNY 420. The results of the surveys are presented in Table O-8.

Table O-8: Monthly Per-Capita Expenditure for Project Cities Range % of the Total Household (CNY) Average (CNY) Fangchenggang Chongzuo Baise < 100 100 4.5 5.7 4.9 101 - 200 150 8.2 5.5 6.2 201 - 300 250 11.3 12.3 12.8 301 - 400 350 18.9 19.0 20.4 401 - 450 425 17.4 18.8 16.3 451 - 500 475 11.7 14.2 17.2 501 – 550 520 8.1 8.4 6.9 551 - 600 575 4.5 5.1 4.1 601 - 700 650 5.2 4.0 5.1 701 - 800 750 4.5 3.1 3.4 801 – 900 850 3.2 2.4 1.3 901 – 1000 950 0.8 0.8 0.6 1001 – 2000 1,500 1.1 0.7 0.8 2001 – 3000 2,500 0.5 0.3 0.2 < 3000 3,000 0.1 0.0 0.1 Source: Socioeconomic Household Survey between July and August, 2009

5. Urban and Rural Poverty Profile in PRC, GZAR and Project Areas

5.1 Rural Poverty Profile of in PRC and GZAR

49. In PRC, the rural poverty population has been defined into two categories between 2007 and 2008: i) people living under the absolute poverty line at CNY 785 net income per capita per year; and ii) people living between the net income range of CNY 786 to CNY 1,067 per capita per year. By this definition, approximately 14.79 million (2%) persons lived under the rural absolute poverty line and 28.41 million (3.9%) persons lived under the low- income poverty line in 2007. According to the “PRC Domestic Economy and Social

SA-O-13 Supplementary Appendix O: Poverty and Social Impact Assessment

Development Statistics Bulletin in 2008” issued by the State Statistics Bureau, there were 40.07 million (5.5%) rural poverty populations living under the rural poverty line.

50. The definition of rural poverty has been subjected the adjustment over the past years. In 1985 the absolute poverty line in PRC was CNY 206/capita/year, CNY 213/capita/year in 1986, CNY 227/capita/year in 1987. Ten years later in 2007 and in 2008, the absolute poverty line in PRC was CNY 785/capita/year and CNY 1,067/capita/year is as low-income group’s standard.

51. In 2008, the Poverty Alleviation Office of State Council announced that the standards of absolute poverty and relative poverty would be combined to use the low-income poverty line as new rural poverty reduction standard at CNY 1,067/capita/year. This new poverty line at CNY 1,067 is based on the price index adjustment of poverty-stricken areas. In 2009, the rural poverty line is changed to CNY 1,196/capita/year.

52. In PRC, there were 592 poverty counties (including county-level administration units, i.e., county-level cities and county-level urban districts such as Fangcheng and Gangkou Districts in Fangchenggang Municipality, Youjiang District in Baise Municipality, and Jiangzhou District in Chongzuo Municipality) across the country. In 2008, there are 369 county-level cities, 1,635 counties and 858 county-level urban districts, totaling 2,862 county- level administration units. Figure O-1 provides the distribution of national and provincial poverty counties in GZAR.

Figure O-1: National and Provincial Poverty Counties Distribution in PRC

53. In the past few years, the PRC Government has put great efforts for poverty alleviation activities. Each year the central government contributes a proportion of financing as poverty alleviation funds. In 1986, PRC selected 331 counties with annual net income of farmers less than CNY 150 as state-designated poverty-stricken counties. After adjustments

SA-O-14 Supplementary Appendix O: Poverty and Social Impact Assessment in 1996, 592 counties with farmers’ per capita net income of less than CNY 400 were chosen as state-designated poverty-stricken counties.

54. The absolute poverty population in rural PRC decreased from 250 million in 1978 to 14.79 million at the end of 2007, with decrease from 30.7% to 1.68% of the total rural population, respectively.

55. Over the last 20 years, although the absolute poverty line accounting for the proportion of farmers' per capita net income has decreased, and the absolute poverty line in 2007 accounted for one-fifth of farmers' per capita net income in PRC (In comparison with 1985, the ratio was 50%), this fact has caused the situation that the real purchasing power of the rural population living in absolute poverty was falling instead of rising.

56. In recent years poverty alleviation funds from central government has been increased annually. In 2008, the central government invested CNY 16.7 billion for poverty alleviation development projects.

57. In 2004, of 81 counties in GZAR, 49 counties are either designated as national or provincial poverty-stricken counties. In 2008, there were 4,060 poverty villages in GZAR. Since the pilot implementation of rural MLG system in GZAR in 2007, there are 109 counties (city and district) established rural MLG system. Up to August 2009, 1.93 million people have been covered by rural MLG system, accounting for 4.6% of the total rural population in GZAR, with average subsidy of CNY 42.2/capita. In 2008, a total of 1.8 million rural poor was living under rural MLG with average net income of CNY 683/capita/year, and in 2009, there are 1.93 million rural poor living under the rural MLG with net income of CNY 980/capita/year in GZAR.

5.2 Urban Poverty Profile of in PRC and GZAR

58. Urban poverty was not an issue for the PRC government till middle 1990, because urban residents were covered by a wide range of welfare programs from the government or state owned enterprises. Thus, the PRC government has treated poverty exclusively as a rural problem. To date the government has released no official poverty lines or poverty counts for urban populations. State guarantees of jobs, pensions, housing, and health care for all urban workers under socialism, along with a strict residence permit system, created a large urban-rural income gap that has not been reversed by market reforms. Early estimates of urban poverty by the World Bank (1992) found insignificant poverty incidence through 1990. However, since the mid-1990s, restructuring of state-owned enterprises and substantial layoffs of workers has created significant dislocation for many workers. Growing urban poverty thus has become a very real prospect that will demand monitoring and policy response from government.

59. Unlike the rural poverty definition, there is no uniform standard for the urban poverty line in the PRC. In general, people under the minimum living guarantee (MLG) are defined as urban poor. The urban poverty in GZAR – like in other parts of China – is mainly attributed to loss of physical infirmity (handicap, ill health, old age, no or low capability to work, and so on) and lack of financial resources (no legal support, and unemployed). People under the MLG will receive the MLG fund from local Civil Affairs Bureau. In 2009, the urban MLG regulated by GZAR can not be less than CNY150/capita/month, which is applied to the whole autonomous region. However, during the actual implementation, CNY 219/capita/month is the urban MLG for GZAR, CNY 200/capita/month for county/district in Fangchenggang City, CNY 180 to CNY 250/capita/month for county/district in Baise City and CNY 200/capita/month for Chongzuo City, respectively.

SA-O-15 Supplementary Appendix O: Poverty and Social Impact Assessment

5.3. Rural Poverty Profile of in the Project Direct and Indirect Areas

60. The Project will support the achievement of WDS for promoting economic development in the western PRC. From Figure O-1 above, it indicates that in the three border cities of the Project, 2 out of the 4 counties in Fangchenggang City are provincial poverty counties, namely Shangsi County and Fangcheng District; all 7 counties in Chongzuo City are poverty counties (including 2 national and 5 provincial), and all 12 counties in Baise City are poverty counties (including 10 national and 2 provincial). For the Project affected areas, all three districts with larger proportion of rural populations (Youjiang District for Baise City, Jiangzhou District for Chongzuo City and Fangcheng District for Fangchenggang City) are provincial-level poverty districts.

61. Under the rural poverty line of less than CNY 1,196 per capita per year and the absolute poverty line of less than CNY 786 net income per capita per year, in the indirect Project areas (IPAs), of the total 7.06 million indirect beneficiary population, 25.82% or 1.56 million persons are poor, and 4.41% or 49,130 persons are absolute poverty population in total rural population. Ethnic minorities make up 83.34% of the total population in the IPAs, of whom 86.75% are of the absolute rural poor.

62. Of the 606 thousand residents to benefit from the Project, 20.31% or 86,160 persons are poor, and 4.06% or 8,780 persons are absolute poverty population in total rural population. Ethnic minorities make up 72.58% of the total population in the DPAs, of whom 81.88% are of the absolute rural poor. Table O-9 is the rural poverty profile in the DPAs and IPAs.

63. The major causes of rural poverty are mainly due to the harsh natural environment and lack of land resources, lack of rural roads and infrastructures, and low education. These poor are mainly living in the areas which are more isolated from the urban center with poor infrastructures and community services. Their housing and living environment is poor. They often suffer from the loss of human life and property damage and associated economic losses as well as environmental pollution. The insufficient road network and the resulting limited access to community services and facilities, adds to their isolation from urban development opportunities and their overall poverty situation. The poor people rely on public investment to help free them from the poverty and improve their living conditions.

64. Each year, a large amount of government financing is invested in the activities to alleviate poverty. In 2008, CNY 115.1805 million were invested for poverty alleviation in Fangchenggang City, with 30% of the financing from central government, 60% from GZARG, and 10% from municipal government; CNY 227.57 million in Chongzuo City, with 50% financing from the central government and 50% from municipal and county governments; and CNY 120 million in Baise City, with 70% from central government and 30% from GZARG.

65. In Chongzuo City, between 2002 and 2008, a total of CNY 705 million was spent on rural development and poverty reduction programs. By the end of 2008, the poverty population was reduced to 585,500 from 736,800 in 2002. These programs were supplemented by social and livelihood improvement programs, including public health, education, social safety net, skills training, low-income housing and environmental improvement as well as rural water supply, roads and communication.

66. In Baise City, the poverty reduction effort has been supplemented by a series of development programs, including, among others: i) rural water supply; ii) household-based biogas; iii) “villages accessibility” – all villages are connected by paved roads; and iv) “village connectivity” – all villages are connected to power supply, telephone, radio and television.

SA-O-16 Supplementary Appendix O: Poverty and Social Impact Assessment

Table O-9: Rural Poverty Profile in the Project Areas (2008) % of Absolute Ethnic Absolute Poor Ethnic Non- Total Ethnic Rural Minority Poverty Total Agricultural Total Rural Minority as City / IPA Agricultural Minority Poverty Poor as a % Population Population Population Poor a % of Total Population Poor Ratio (%) of Total in Total Absolute Rural Poor Rural Poor Population IPA of Fangchenggang City 833,000 246,100 586,900 125,600 109,600 21.40% 87.26% 3.27% 63.00% IPA of Chongzuo City 2,369,000 403,000 1,966,000 610000 549,000 31.03% 90.00% 3.97% 92.00% IPA of Baise City 3,859,000 465,000 3,394,000 800,000 696,774 23.69% 87.10% 4.92% 86.00% Total Project Cities 7,061,000 1,114,100 5,946,900 1,535,600 1,355,374 25.82% 88.26% 4.41% 86.75%

DPA of Fangchenggang City 204,000 97,688 106,312 3,057 1,031 2.88% 33.73% 3.21% 73.5% DPA of Chongzuo City 217,000 43,378 173,622 33,700 29,319 19.41% 87.00% 3.88% 86.9% DPA of Baise City 185,000 70,268 114,732 43,400 34,000 37.83% 78.34% 5.11% 81.0% Total IPA 606,000 211,334 394,666 80,157 64,350 20.31% 80.28% 4.06% 81.88% Source: Statistical Yearbooks; Household Socio-Economic Survey; Poverty Alleviation Office; Minority Affairs Office, and calculation of the PPTA Consultants.

SA-O-17 Supplementary Appendix O: Poverty and Social Impact Assessment

5.4 Urban Poverty Profile in the Project Direct and Indirect Areas

67. Under the urban poverty line in the indirect Project areas (IPAs), of the total 7.06 million indirect beneficiary population, 7.94% or 115,780 persons are poor living under the minimum living guarantee (MLG) (Those who are living MLG at CNY 200 per capita per month for Fangchenggang and Chongzuo cities and CNY 250 per capita per month for Baise city). Ethnic minorities make up 68.05% of the total urban poor population in the IPAs.

68. Of the 606 thousand residents to benefit from the Project, 8.48% or 53,980 urban poor living under the minimum living guarantee. Ethnic minorities make up 70.15% of the total urban poor population in the DPAs. Table O-10 is the urban poverty profile in the DPAs and IPAs.

69. In the three Project cities, although there is no official statistical documentation on the “floating population”, the number is expected to be low as less people come in from other areas outside of the city, mainly caused by the isolation due to lack of transportation system. The “floating population” in the city is mainly consisted by the migrant labors from rural areas of the Municipality of Fangchenggang, Chongzuo and Baise. They have lower income earnings and they are living in poor housing conditions and in the communities with poor access to transportation services and other social services. It is estimated that the incidence rate of poverty for them is much higher than the local residents.

70. The urban poor mostly consist of people with sickness, disabled family members, elderly, and low education levels. Each year, the government at different levels invests a large amount of fund as MLG to provide living subsidy to the urban poor. Although the MLG regulated by GZARG is CNY150/capita/month, the actual implementation of the MLG standard for the counties (cities and districts) of the three border cities are higher than the one of GZAR, ranging from CNY180/capita/month at lowest to CNY250/capita/month at highest. In Fangchenggang City, an accumulated MLG fund of CNY 28.042 million was disbursed to the urban poor. The MLG fund comes from the central government and GZARG accounting for 70% and the county/district government 30%. In Chongzuo City, in 2008, an accumulated MLG fund of CNY 44.846 million was disbursed to the urban poor. The MLG fund comes from the central government and GZARG accounting for 50%, municipal government 30% and county government 20%. In Baise City, from January to August of 2009, an accumulated fund of CNY58.3147 million was disbursed to the urban poor. The MLG fund comes from the central government and GZARG accounting for 80% and county/district government 20%.

Table O-10: Urban Poverty Profile in the Project Areas (2008) Ethnic Minority Poor Total Urban Total Ethnic Minority Urban City / IPA as a % of Total Urban Poor Poor Poverty Ratio (%) Poor IPA of Fangchenggang 53,600 23,048 6.20% 43.00% IPA of Baise 30180 26256 9.89% 88.20% IPA of Chongzuo 32000 28800 9.00% 91.00% Total Project Cities 115,780 78,104 7.94% 68.05%

DPA of Fangchenggang 18,999 1,326 6.98% 36.45% DPA of Chongzuo 30,180 26,256 9.89% 88.20% DPA of Baise 4,800 4,350 5.50% 90.00% Total IPA 53,979 31,932 8.48% 70.15% Source: Statistical Yearbooks; Household Socio-Economic Survey; Poverty Alleviation Office; Minority Affairs Office, and calculation of the PPTA Consultants.

SA-O-18 Supplementary Appendix O: Poverty and Social Impact Assessment

5.5 Poverty Profile and Analysis

71. The Project is classified as Targeted Intervention (TI-G). It will support the achievement of the objectives of the WDS for promoting economic development in the western PRC. Of the 606 thousand residents to benefit from the Project, 134,140 persons or 15.6% are the poor living in the direct Project areas; they include 80,160 persons or 20.3% of rural poor, and 31,930 persons or 8.5% of urban poor. In the indirect Project area, a total of 1.65 million people or 24.6% of the total population in the Project cities will also benefit from the Project, including 1.54 million or 25.8% of rural poor, and 78,100 or 7.9% of urban poor. In the direct Project area, the ethnic minority poor accounts for 80.3% of the total rural poor and 81.9% of the total absolute rural poor, and 68.1% of the total urban poor, and in the indirect Project area, the ethnic minority poor accounts for 25.8% of the total rural poor and 86.8% of the total absolute poor, and 68.1% of the total urban poor. According to the economic analysis20, the ratio of the Project benefits accruing to the poor is estimated at 26.7%, compared to the ratio of the poverty population at 15.6%. The Project is therefore pro-poor.

72. As the Project areas are underdeveloped in road networks and infrastructures, this will adversely impact on economic, cultural and other activities and hence directly affect the living standards of local people. The construction of the Project will promote sustained economic and urban development and enhance the strategically located cities to contribute to and benefit from regional cooperation, and improve the quality of life for the local people.

73. The public investment made under the Project will put in place an enabling environment for attracting public and/or private investors for further development and promote regional cooperation in the Project areas, thus providing employment opportunities for both skilled and unskilled workers during the project construction and operation phases of the Project. The poor will particularly benefit from the targeted employment opportunities provided to them and this will be ensured through the loan assurances and project monitoring. Currently the poor who are living in the areas with insufficient road network and infrastructures and under environmental pollution and risks of flooding, and are limited to access to community services and facilitates and economic development activities and are least capable to cope with the environmental pollution and flooding disasters. The poor beneficiaries will particularly gain the socioeconomic and environmental benefits from the Project. The provision of safer and better living standards for the poor and low-income households will help reduce poverty in the project area. Overall the Project will complement the three border cities and PRC’s poverty alleviation efforts.

6. Needs Assessment

6.1 Urban Road Network and Related Municipal Infrastructures, and Longwang Bridge Component

Insufficient Road Network and Related Municipal Infrastructures 74. Owing to the geographical location, the three border cities of Fangchenggang, Chongzuo and Baise occupy strategic positions in subnational and subregional programs. Currently, Fangchenggang, Chongzuo and Baise are putting their great efforts to attract investment to their industrial parks for business development and promote trading activities. The road network and infrastructure services for the border cities are inadequate to meet the requirements of their potential strategic roles to promote economic development. Better urban road networks and improved environmental conditions serve as very important

20 See the economic analysis supplementary appendix to this report.

SA-O-19 Supplementary Appendix O: Poverty and Social Impact Assessment function to accommodate enterprise development around the industrial zones and trading business.

75. Fangchenggang is a port city that provides convenient sea access for industrial and agricultural enterprises between the southwestern provinces of China and the countries that comprise the Association of Southeast Asian Nations (ASEAN) and over land border access to Vietnam and south-east Asian markets. However, with rapid economic and social development, the transport infrastructure is relatively backward in Fangchenggang City and the problem is becoming increasingly apparent that it restricts the healthy and stable development of economy. Owing to its short history and weak economy, the road area ratio, road density and road area per capita are well below those similar cities in the developed coastal province. Covering a total area of 1,022 km2, the Gongche Industrial Park is located in the eastern coast of Fangchenggang City. It is planned for port-related and processing industries. The Fangchenggang Thermal Power Plant and the Yuetai Feed Factory have found their home in this industrial park. The GZAR Government has recently signed agreement with Wuhan Iron and Steel Group to build a mega iron and steel factory here (10 million tons for the near-term, 20 million tons for the medium-term and 30 million tons for the long-term). The construction and operation of the iron and steel factory will bring about numerous upstream and downstream industries in the industrial park. Currently, the Industrial Park is lack of road network. The road network in the industrial park has been considered as one of the top priorities for the planned expansion of the industries.

76. Chongzuo City is strategically located on the main trade corridor between Nanning and Pingxiang which borders Vietnam at Huu Nghi and Lang Son en route to Hanoi and Hai Phong seaport. Chongzuo’s industrial structure is rooted in agriculture and sugar cane plantations, yet other growth industries include: mining, export processing at the border and tourism. At present, the urbanization and industrialization of Chongzuo City are facing accelerated development. According to Chongzuo Urban Master Plan, Chengnan District as the new administrative center of city is located in the south of the city, and Chengbei resources processing zone is located in the north of Chongzuo City. According to the urban industrial district planning to determine the city's function zone, Chengbei Resources Processing Zone is developed as industrial park for deep-processing of mineral resources, re-processing industry of sugar and bagasse, molasses, and filter mud, and deep processing industry of cassava starch. The construction and development of the two districts will be a new driving force for the economic development of Chongzuo City. Presently, the basic infrastructures of both districts are still weak and there is certain gap to reach to well- functioned city infrastructures. It has constrained the fast development of Chongzuo City. Also in recent years, tourism industry is developed rapidly in Chongzuo City. The number of tourists is also increasing gradually. In fact, tourism is taking a larger share of the City’s economy and contributed $253,088,235 in 2008 or 6.5% of total GDP. According to the statistics, passengers used road transport accounted for the vast majority of visitors. With the increasing number of tourists year by year, pressure on traffic and transportation in Chongzuo City is increasing. Under this background, it is urgent to construct the Project to strengthen the urban infrastructures, improve the function of the city, improve the investment and living environment, and to promote the economic development of the city.

77. Baise city is less developed than the other Project cities and equally important to regional cooperation. The City’s recent border agreement with Gao Ping province, Vietnam will lead to more regional cooperation and infrastructure connectivity of existing highways with Yunnan and Guizhou, China to southeast Asia markets and to South China. With the fast increase of industrialization and population, the lack of urban infrastructures such as roads and bridges has constrained the inter-city and inter-region traffic flow and trade activities. The past few years have witnessed a marked increase in the local traffic, as car ownership grows, and inter-city traffic due to the rapid formation of the Pan-Pearl River Delta Development Area. It is expected that the road network to be built will relieve the traffic

SA-O-20 Supplementary Appendix O: Poverty and Social Impact Assessment congestion in the east and south districts of the city, and support projected urban development and inter-regional trade.

Demand of Mobility Increase 78. Based on the result of socio-economic household surveys, it indicates that the major travel destinations of local residents each week in the three Project cities are short distance travels to urban areas within their respective city. They mainly go to urban centers where the major commercial businesses are located. The average distance traveling within the city ranges at 4.1 km for the residents of Fangchenggang City, 5.56 km for the residents of Chongzuo City, and 3.52 km for the residents of Baise City. The time spent on road is 0.43 hour for the residents of Fangchenggang City, 1 hour for the residents of Chongzuo City, and 0.37 hour for the residents of Baise City. The monthly mobility is from 1 times/person to 30 times/person for the residents of Fangchenggang City, 1 times/person to 11 times/person for the residents of Chongzuo City, and 2 times/person to 43 times/persons for the residents of Baise City. Except the traveling within the same city, the local residents also visit GZAR and other provinces. Men travel more times/person than women.

79. Based on the focus group discussion, the current principal transport mode of local residents used is bus, and approximately 65% of visits rely on bus and the rest 35% travel by motorcycle, bicycle, private car, and by foot in Fangchenggang City; 52% of visits rely on bus and the rest 48% travel by motorcycle, bicycle, private car, and by foot in Chongzuo City; and 68% of visits rely on bus and the rest 32% travel by motorcycle, bicycle, private car, and by foot in Baise City. The majority of the people increased frequencies of mobility in the last 2 years. Income increase, affairs increase and transport improvements are three principal causes of changes. The traveling purposes of the local residents within the same city are for shopping, working, business trip, visits to relatives or friends, and tour. The major traveling purposes of the local residents to other cities or counties in GZAR and other provinces area are for business trip, sightseeing or touring, and visits to relatives. The income increase was one cause of mobility increase. This showed that increase of income made residents increase the frequencies of shopping, traveling and visits.

80. However, with rapid increase of urban development in the three Project cities and the increase of people’s mobility, the present urban road network and services in each Project city cannot meet the increasing traffic demand. The incomplete road network, low infrastructure standard, low flow capacity at surface intersections, and slow vehicle speed all contribute to traffic accidents in the Project areas.

Satisfaction with Current Road Network 81. In Fangchenggang City, according to the result of the total surveyed 100 households, approximately 38% of the total beneficiary households are not satisfied with the current local roads, and 59% are partially satisfied, and 3% are fully satisfied. In Chongzuo City, according to the result of the total surveyed 100 households, approximately 5% of the total beneficiary households are not satisfied with the current local roads, and 86% are partially satisfied, and 9% are fully satisfied. In Baise City, according to the result of the total surveyed 200 households for the Project areas of urban road network and Longwang Bridge components, approximately 18% of the total beneficiary households are not satisfied with the current local roads, and 74% are partially satisfied, and 8% are fully satisfied. Table O-11 presents the degree of satisfaction with current road network and Longwang bridge by the surveyed households in the DPAs. The reason why they are not satisfied are due to: i) lack of the road network; ii) holes and bumps of roads; iii) narrow road and frequent traffic jam; iv) wastewater overflow, unsanitary conditions; v) mixed traffic without division of pavement, cycle-way, slow vehicle lane, and fast-vehicle lane; vi) flooding in rainy days; and vii) frequently occurred traffic accident (see Table O-12).

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Table O-11: Satisfaction with Current Local Roads to Meet Needs No. % Fangchenggang City Fully satisfied 3 3.0 Partially satisfied 59 59.0 Not satisfied at all 38 38.0 Total 100 100.0 Chongzuo City Fully satisfied 5 5.0 Partially satisfied 86 86.0 Not satisfied at all 9 9.0 Total 100 100.0 Baise City (Urban Road Network & Longwang Bridge) Fully satisfied 16 8.0 Partially satisfied 148 74.0 Not satisfied at all 36 18.0 Total 200 100.0 Source: Socioeconomic Household Survey between July and August, 2009

Table O-12: Reasons of Dissatisfaction with Current Local Roads % Fangchenggang City Lack of road network 81.0 Narrow road and frequent traffic jam 38. 0 Holes and bumps 77. 0 Flooding in rainy days 51. 0 Wastewater overflows, unsanitary conditions 64. 0 Mixed traffic (no division of pavement, cycle-way, slow vehicle lane, and fast-vehicle lane) 53. 0 Frequently occurred traffic accident 19. 0 Chongzuo City Lack of road network 26.0 Narrow road and frequent traffic jam 49.0 Holes and bumps 65.0 Flooding in rainy days 23.0 Wastewater overflows, unsanitary conditions 24.0 Mixed traffic (no division of pavement, cycle-way, slow vehicle lane, and fast-vehicle lane) 61.0 Frequently occurred traffic accident 22.0 Baise City Lack of road network 61.0 Narrow road and frequent traffic jam 78.0 Holes and bumps 64.0 Flooding in rainy days 45.0 Wastewater overflows, unsanitary conditions 46.0 Mixed traffic (no division of pavement, cycle-way, slow vehicle lane, and fast-vehicle lane) 53.0 Frequently occurred traffic accident 13.0 Source: Socioeconomic Household Survey between July and August, 2009

Priority Ranking of Road Network and Bridge Components 82. The result of the public general attitudes for the priority ranking of urban road network and Longwang Bridge components indicates that the majority (about 67%) consider it as highest priority and high priority. Table O-13 provides the priority ranking of urban road networks and Longwang Bridge components among government services.

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Table O-13: Priority Ranking of Urban Road Network and Longwang Bridge Highest High Middle Low Lowest Don’t Total priority priority priority priority priority know No. % No. % No. % No. % No. % No. % No. % Urban Road Network Fangchenggang 40 40.2 34 34.2 3 2.6 3 2.8 1 1.4 19 18.8 100 100.0 Chongzuo 201 67.0 90 30.0 7 2.3 2 0.7 200 100.0 Baise 92 92.0 7 7.0 1 1.0 100100.0 Longwang Bridge Baise 197 98.5 2 1.0 1 0.5 200 200.0 Source: Socioeconomic Household Survey between July and August, 2009

6.2 Fangchenggang City Coastal Protection and Upgrading Component

Tidal Flooding along the Coast 83. Fangchenggang City is influenced by the warm ocean currents and the effects of tropical cyclones. The City is rainstorm concentrated area. Throughout the year, rainstorm might occur every month, but mainly between the months of May and September, and mostly occur between June and August. Due to the lack of dyke facilities, about 4 million cubic meters of waste, garbage, mud and sand are washed into the sea by rain, not only causes pollution of the coastal shoreline. In addition, as the area does not have flood (tidal) embankment, when the storm surge hits, the shoreline collapses and the land and buildings are often flooded. Factories and enterprises and people's lives and properties are at threat. Moreover, along the coastal shoreline, the mangrove trees are buried by the waste and mud and sand washed into the sea, which has caused the great risks to the mangrove tree and aquatic ecological system. The mangrove forests in Fangchenggang are under increasing pressures and have been reduced as a result of port expansion and industrial development in the port district, fishery and aquaculture, sewerage and industrial wastewater, and non- point sources. All these have seriously impacts on the urban construction development and economic development.

Major Living Problems along Coastal Dyke Area 84. Based on the socioeconomic survey result, it indicates that the damages caused by tidal flooding could result in fully destroy houses / facilities, partial destroy houses / facilities, damage of household properties, destroys of roads, interrupt power supply, interrupt water supply, damage to public sanitary facilities, interrupt telecommunications, interrupt business, interrupt schooling, interrupt working, injuries of people, death of people, spoil of food supplies, spoil clothing and other goods, must leave the house during flooding, and other damages. Each flooding causes huge economic losses, lost of working days and school days as well as human suffering. Table O-14 presents the damages caused by tidal flooding in the coastal dyke area, and Table O-15 the average losses from tidal flooding in the past five years.

Table O-14: Major Damages of Flooding Encountered by the Local People (%) Major Minor Not a problem Total problem problem Totally destroy houses / facilities 32 18 50 100 Partial destroy houses / facilities 35 22 43 100 Damage of household properties 33 21 46 100 Destroys of roads 32 29 39 100 Interrupt power supply 36 21 43 100 Interrupt water supply 34 23 43 100 Damage to public sanitary facilities (i.e. 18 39 43 100 toilets, septic tanks, sewer pipelines) Interrupt telecommunications 19 24 57 100 Interrupt business 15 18 67 100

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Interrupt schooling 15 17 68 100 Interrupt working 15 19 66 100 Injuries of people 15 14 71 100 Death of people 14 15 71 100 Spoil of food supplies 36 23 41 100 Spoil clothing and other goods 39 23 38 100 Must leave the house during flooding 31 25 44 100 Other damages 92 3 5 100 Source: Socioeconomic Household Survey between July and August, 2009

Table O-15: Average Losses of Household from Tidal Flooding in Past Five Years Total Average (per household) Damage to house / cost of house repair (CNY) 456.23 Damage to furniture / cost of furniture replacement (CNY) 35.89 Damage to cars / cost of car repairs (CNY) 1,865.76 Loss due to business closure (CNY) 25,783.73 Medical costs of water-related diseases to family members (CNY) 290.78 Total lost working days, including days to clean up mud and debris, etc. (No.) 0.87 Lost school days for kids (No.) 0.93 No. of people in family who suffered injuries (No.) 0.23 Deaths (No. of deaths) 0.01 Source: Socioeconomic Household Survey between July and August, 2009

Satisfaction with Flood Prevention and Control 85. Of the total surveyed 100 households, approximately 26% of the total beneficiary households are unsatisfied and very unsatisfied with the current tidal flooding prevention and upgrading. Table O-16 presents the degree of the satisfaction. The reason is mainly due to the shortage of capital, which caused the problems of the above mentioned damages not been controlled yet. To safeguard the lives and properties of the local people, it is necessary to construct the Fangchenggang Coastal Protection and Upgrading Component.

Table O-16: Satisfaction with Tidal Flooding Flood Control (%) Very Very Satisfied Indifferent Unsatisfied Total satisfied unsatisfied In your community 11.6 45.3 7.6 35.1 0.4 100.0 Whole city 2.0 50.8 13. 1 33.8 0.3 100.0 Source: Socioeconomic Household Survey between July and August, 2009

Priority to Coastal Flood Prevention and Control 86. The result of the public general attitudes for the priority ranking of Coastal Protection and Upgrading Component indicates that the majority (about 76%) consider as highest priority and high priority. Table O-17 provides the priority ranking of Fangchenggang City Coastal Protection and Upgrading among government services.

Table O-17: Priority Ranking of Coastal Protection and Upgrading (%) Highest High Middle Low Lowest Component Don’t know Total priority priority priority priority priority Coastal Protection & 29% 47% 4% 4% 9% 7% 100% Upgrading Source: Socioeconomic Household Survey between July and August, 2009

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6.3 Chongzuo City Shuikou Lake Environmental Improvement Component

Pollution Problems in Shuikou Lake 87. Chongzuo has rich tourism resources that include tens of cultural relic and scenic sites, including the Shuikou Lake. The Shuikou Lake is the largest lake in Chongzuo City. The stone forests in the lake are known to be “rare in China and No. 1 in Guangxi”. The Shuikou Lake wetlands-stone forests are an important recreational site for the locals, and tourists from nearby Nanning (approximately one-hour driving distance) and as far as Guangdong, Hong Kong and Macau. The lake is also a water supply source for lake-side communities. However, due to the lack of effective rehabilitation and management, in recent years, Shuikou Lake and its surrounding area are suffering from pollution caused by intensive aquaculture, animal farming, water and soil erosion, and garbage dumping. All these have resulted in shrinking of the lake area. On the other hand, the surrounding industrial and agricultural production pollutants are discharged into the lake, and the overload cultivation has gradually exceeded the capacity of the natural purification for the water quality of the lake. All these have caused the environmental deterioration of the Shuikou Lake. According to the relevant information provided by Chongzuo Environmental Protection Bureau, water quality in Shuikou Lake has been deteriorating from Class I, to Class II and Class III in the past few years. The water quality will further deteriorate if effective management measures are not taken. Further environment degradation would destroy the beauty of Shuikou lake-Longxiashan forest park-Shijingling stone forest protection area. In this sense, it would impact on the tourism development of Chongzuo City.

Netcage Aquaculture at Downstream Coffer Weir Fish Pond

Major Living Problems in the Communities around the Lake 88. The socioeconomic survey result indicates that the local residents consider the following major living problems exist in their communities around the lake: lake of road access; ii) lack of power and telecommunication facilities; iii) damaged land embankment with serious water and soil erosion; iv) loss of vegetation and forest; v) lack of recreation facilities; vi) serious water pollution of the lake; vii) frequent flooding, viii) lack of ecological and wetland protection. The majority (99%) of local people are strongly and somewhat support of the Project. Only 1% of the local residents are not support due to the concerns that their coffer weir fish pond and netcage aquaculture will be removed by the construction of the Shuikou Lake Environmental Improvement Component. Table O-18 presents the major living problems for the communities around the Shuikou Lake, and Table O-19 the percentage of support of local community people to the Shuikou Lake Environmental Improvement Component.

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Table O-18: Major Living Problems in the Communities Major problem Minor problem Not a problem No. % No. % No. % Lack of road access 70 35.0 106 53.0 24 12.0 Lack of power & telecommunication facilities 26 13.0 112 56.0 62 31.0 Damaged lake embankment with serious water and soil 116 58.0 74 37.0 10 5.0 erosion Loss of vegetation and forest 48 24.0 122 61.0 30 15.0 Lack of recreation facilities 90 45.0 88 44.0 22 11.0 Serious water pollution of the lake 128 64.0 68 34.0 4 2.0 Frequent flooding 38 19.0 144 72.0 18 9.0 Lack of ecological & wetland protection 124 62.0 74 37.0 2 1.0 No problem 2 1.0 4 2.0 2 1.0 Source: Socioeconomic Household Survey between July and August, 2009

Table O-19: Support to the Shuikou Lake Component % Strongly support 64 Somewhat support 35 Do not support 1 Source: Socioeconomic Household Survey between July and August, 2009

89. The local community people perceived that the Shuikou Lake Environmental Improvement could bring them in the following benefits: i) promote tourism development; ii) improve aesthetics; iii) attract more investment; iv) reduce the pollution of the lake and improve surrounding environment and health status; v) increase of income and living standards; vi) increase job opportunities; vii) increase recreation facilities; viii) increase the value of land and house; ix) protect wetland; x) reduce frequency of flooding; xi) reduce traffic jam; xii) increase vegetation and forest; and xiii) reduce the number of accidents. Table O-20 presents the benefits perceived by the community people living around the lake area. Meanwhile, the local people also perceived some undesirable impacts which may be caused by the Shuikou Lake Environmental Improvement, including: i) increase the prices of land; ii) increase financial burden on the government; iii) Damage original natural aesthetics; iv) have to pay more tax; v) create more traffic jams; vi) increase of water and soil erosion; vii) Increase crimes and social evils; viii) Increase the number of vehicle accidents, Create serious environmental pollution, and Damage of vegetation and forest. Table O-21 presents the undesirable impacts perceived by the local people.

Table O-20: Benefits Perceived by the Local Community People % Increase of income and living standards 75.0 Reduce frequency of flooding 33.0 Improve surrounding environment and health status 76.0 Increase the value of house 57.0 Increase the value of land 59.0 Increase job opportunities 62.0 Attract more investments 77.0 Promote tourism development 86.0 Increase recreation facilities 62.0 Protect wetlands 52.0 Reduce pollution of the lake 76.0 Reduce traffic jam 29.0 Reduce the number of accidents 22.0 Increase vegetation and forest 28.0 Improve aesthetics 83.0 Source: Socioeconomic Household Survey between July and August, 2009

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Table O-21: Undesirable Impacts Caused by Shuikou Lake Environmental Improvement Component Perceived Undesirable Impacts % Create more traffic jams 12.0 Increase the prices of land 42.0 Have to pay more taxes 12.0 Increase financial burden on government 17.0 Damage wetlands 3.0 Create serious environmental pollution 2.0 Damage original natural aesthetics 16.0 Damage of vegetation and forest 2.0 Increase water and soil erosion 8.0 Increase the number of vehicle accidents 2.0 Increase crimes and social evils 5.0 Source: Socioeconomic Household Survey between July and August, 2009

Satisfaction with the Environment of the Lake 90. Of the total surveyed 100 households, approximately 36% of the total beneficiary households are unsatisfied and very unsatisfied with the current lake pollution. Table O-22 presents the degree of satisfaction with the environment of the lake. It is an urgent need that the government should take action to rehabilitate the ecosystem of the lake and improve the living environment for the people around the lake area.

Table O-22: Satisfaction with the Environment of the Shuikou Lake (%) Very Very Satisfied Indifferent Unsatisfied Total satisfied unsatisfied In your community 11.6 45.3 7.6 35.1 0.5 100. 0 Source: Socioeconomic Household Survey between July and August, 2009

Service Priority to the Shuikou Lake Environmental Improvement 91. The result of the public general attitudes for the priority ranking of the Shuikou Lake Environmental Improvement Component indicates that the majority (about 82.3%) consider as highest priority and high priority, and 14.4% as middle priority. Table O-23 provides the priority ranking of the Shuikou Lake Environmental Improvement among government services.

Table O-23: Priority Ranking of Shuikou Lake Component Highest High Middle Low Lowest Don’t know Total Component priority priority priority priority priority No. % No. % No. % No. % No. % No. % No. % Shuikou Lake 144 48.0 103 34.3 43 14.4 10 3.3 300 100 Source: Socioeconomic Household Survey between July and August, 2009

7. Project Beneficiaries and Benefits

7.1 Project Beneficiary Area and Populations

92. The Project beneficiaries include direct and indirect areas. The Direct Project Area (DPA) is defined based on the total population of the urban center of the Project who will benefit from the improved urban road networks and related municipal infrastructures, environmental improvement, and flood control components. The total area of direct

SA-O-27 Supplementary Appendix O: Poverty and Social Impact Assessment beneficiary area is 65 km2. The indirect Project area (IDPA) is defined as area outside of the Project areas, but is likely benefit from the improved urban road networks and related municipal infrastructures, environmental improvement, and flood control in terms of the increased rural-urban migration, and economic growth as a result of regional cooperation. As a result, the whole municipality of Fangchenggang, Chongzuo, and Baise is IPAs, with a total area of 59,736 km2.

93. Based on the defined Project beneficiary area, for the Project as a whole, the total direct beneficiary population in the three Project cities is estimated at 606,000 once the Project facilities become operational, 1.69 million by the year 2020 and 2.34 million by the year 2025. Within the IDPA, the total indirect beneficiary population in the three Project cities is estimated at 7.06 million once the Project facilities become operational, 8.12 million by the year 2020 and 8.66 million by the year 2025. Table O-24 provides the summary of the Project beneficiary area and populations.

Table O-24: Summary of the Project Beneficiary Area and Populations (2007) Total Non-Agri. Total Agri. Total Population Area % of % of Popu. (1,000 Popu. (1,000 (1,000 persons) (km2) Female Male persons) persons) IPA of Fangchenggang 833,000 246,100 586,900 6,181 45% 55% IPA of Chongzuo 2,369,000 403,000 1,966,000 17,351 47% 53% IPA of Baise 3,859,000 465,000 3,394,000 36,204 48% 52% Project Cities 7,061,000 1,114,100 5,946,900 59,736 47% 53%

DPA of Fangchenggang 204,000 97,688 106,312 25 47% 53% DPA of Chongzuo 185,000 70,268 114,732 15 48% 52% DPA of Baise 217,000 43,378 173,622 20 46% 54% Project Area 606,000 211,334 394,666 60 47% 53% Source: GZAR Yearbook 2008; Minority Affairs Office; and Poverty Alleviation Office; The numbers and % of female and male for Baise City and Youjiang District and JIangzhou District are from internet search.

7.2 Project Benefits

94. The construction of the Project will result in direct and indirect benefits to the local population. By improving the urban transportation and flood control infrastructure services, environmental quality and capabilities in integrated urban planning and transport planning, the Project will contribute to sustained economic growth, coordinated urbanization and industrial growth, creation of job opportunities, enhanced ability to participate in and benefit from regional cooperation, and above all, improved quality of life the beneficiary population. The detailed impact matrix of the Project is provided in the Appendix O-1. The major benefits are summarized as follows under three general categories of interventions:

7.2.1 Urban Road Network and Related Municipal Infrastructures for Each City and Bridge in Baise City

Urban Road Network and Relocated Municipal Infrastructures

95. Direct Impacts:

Providing road networks, better road conditions and related infrastructures to promote and facilitate urban development;

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Providing roads and related infrastructures to support the development and operation of the cities as regional economic corridor, thus creating new jobs and income generating opportunities; Facilitating urban and industrial development and directly contributing to linking the city to regional network; Increasing mobility and access for local populations to key basic services and destinations; Reducing traffic congestion, saving travel time, reducing vehicle operation costs, improving road safety and reducing traffic accidents; Increasing the land and property values for local residents in the Project areas; Promoting tourism development; Increasing volume of trade with GMS and ASEAN countries; increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; and, Improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable.

96. Indirect Impacts:

Increasing values of land and properties; Increasing economic development; Increasing greening space; Improving living environment and quality of life for local residents; Increasing economic development and GDP growth; and, Reducing incidence rate of poverty.

Longwang Bridge

97. Direct Impacts:

Improving connection and communication between Henan New District, Chengdong District; Increasing mobility between Henan New District, Chengdong District, Chengxi District, and Industrial Zone; Providing transport networks, better connection and related infrastructures to promote and facilitate urban development; Providing transport networks and related infrastructures to support the development and operation of the cities as regional economic corridor, thus creating new jobs and income generating opportunities; Facilitating urban and industrial development and directly contributing to linking the city to regional network; Increasing mobility and access for local populations to for inter-city communication, key basic services and destinations; Reducing traffic congestion, saving travel time, reducing vehicle operation costs, improving road safety and reducing traffic accidents; Increasing the land and property values for local residents in the Project areas; Promoting tourism development; Increasing volume of trade with GMS and ASEAN countries; increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; and,

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Improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable.

98. Indirect Impacts:

Increasing convenience of traveling; Increasing development and values of land and properties; Improving investment and business opportunities to create new jobs and income generating opportunities; Stimulating the economic development of Baise City through connecting Henan New District and Chengdong District; and, Increased economic development and GDP growth in Baise City and regional cooperation.

7.2.2 Coastal Protection and Upgrading in Fangchenggang City

99. Direct Impacts:

Reducing coastal flooding threat on lives and properties and associated economic losses; Reducing coastal erosion and retreat; Protecting the mangrove trees; Providing a platform for public awareness about importance of mangrove ecosystems and protection; Providing the residents of Fangchenggang and tourists with a coastal park for sightseeing and recreation; Providing a buffer zone to allow for future climate change; Reducing sediment to navigation caused by mud and sand and garbage; Reducing slides and collapse of sea slope; Improving drainage system in the Project area; Increasing aesthetic greening space; Reducing risk to human health from water-borne diseases, particularly to the poor, women, children and elderly; Increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; Facilitating urban and industrial development; Increasing the land and property values for local residents in the Project areas; and, Improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable.

Indirect Impacts:

Reduced economic costs of property replacement or repair; Reduced human suffering from flooding; Increased safety of life; Reduced medical costs and human suffering from reduced water-borne diseases; Increased convenience of mobility for the locals; and, Reduced incidence rate of poverty.

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7.2.3 Shuikou Environmental Improvement in Chongzuo City

100. Direct Impacts:

Reducing water pollution of the lake; Protecting the wetland and ecology of the lake; Providing a platform for public awareness about importance of wetland ecosystems and protection; Providing the residents of Chongzuo and tourists with a wetland park for sightseeing and recreation; Reducing loss of vegetation and forest, and water and soil erosion; Reducing risks of flooding threat on lives and properties and associated economic losses; Increasing aesthetic greening space; Increasing pedestrian and recreation road for the local communities; Increasing power and telecommunication facilities for the local communities; Increasing development of recreation and tourism; Increasing the land and property values for local residents in the Project areas; Reducing risk to human health from water-borne diseases, particularly to the poor, women, children and elderly, and associated medical costs; Increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; Facilitating urban development; and, Improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable.

101. Indirect Impacts:

Increased land value and properties; Reduced economic costs of property replacement or repair; Reduced human suffering from flooding; Increased safety of the local community people; Reduced medical costs and human suffering from reduced water-borne diseases; Increased convenience of mobility for the locals; Reduced incidence rate of poverty; and, Improved housing and living environment and quality of life for local residents.

7.2.4 Employment and Income Benefits Generated by the Project

102. The construction and operation of the Project will create a large number of employment opportunities to the local communities. It is estimated that the Project will create about 10,030 person-years of direct employment opportunities and 26,070 person-years of indirect employment opportunities, with estimated total earnings amounting to CNY 104.16 million or US$15.25 million and CNY 270.82 million or US$ 39.65 million respectively, during the construction phase. The jobs are mainly semi-skilled and unskilled, such as the positions of manual laborers for excavation, materials handling, vehicle operation, food provision, landscaping, etc. The operation of the Project will create 1,220 direct long-term employment opportunities of direct and 3,180 indirect employment opportunities, with wages totaling CNY 26.71 million and 69.45 million, respectively. The jobs mainly include positions of security guard, driver, maintenance and repair, sweeping, cleaning, gardening, etc.. The detailed calculation of the employment and income benefits is presented in Appendix O-2.

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103. In addition, approximately hundreds and thousands of short-, medium- and long- term associated upstream and downstream new jobs will be created upon the completion of the road network and related municipal infrastructures, environmental improvement and flood control components of the Project. In Fangchenggang City, the improved road network and urban infrastructures will facilitate the building of mega iron and steel projects and clustering related primary, secondary and tertiary industries to anchor a new industrial structure and transform the City’s economy to higher level of development. It is expected that the clustering will involve 50 upstream and 200 downstream projects in the Project area to support iron and steel and for business development in regional economic growth. In Chongzuo City, with improvement of road network and urban environment, it will stimulate the development of manganese, sugar and tourism industries. Baise is targeting the aluminum industry to further bolster economic development in which it has reserves of 780 million tons of bauxite which is a necessary input to producing aluminum. The improved road connection and transport system will promote the development of bauxite and tourism industries in the city. The follow-on multiplier effect jobs are anticipated to be created by the Project. Based on discussion with the IA, priorities will be given to the local community people, in particular the vulnerable groups including the poor, women and minorities. Under this arrangement, it is estimated that about 70% of the short-term employment opportunities will be taken by the vulnerable groups including women for about 20% and poor and ethnic minorities for about 50%. Those temporarily employed in construction will benefit from the training and experience gained under the Project, thus enhancing their opportunities for employment in other infrastructure projects. The Project assurance will ensure that all employment and core labor standards as provided in the applicable laws and regulations are complied with. The loan assurances specifically address core labor standards and prioritize local labor and particularly target women, the poor and ethnic minorities for basic training and skill promotion. These actions will be monitored by contractors and the social action plans.

104. To ensure that the poor, women and minorities will derive the maximum benefit from the Project construction and operations, a number of measures will be instituted by the IA. First, when hiring construction contractors, preferential consideration will be given to local firms. Second, the selected firms will be sensitized to the issue of maximum benefits for the poor, minority and gender equality. Third, the firms will be required to adopt proactive measures, such as a quota systems and training programs for the poor, minority, women, and affected persons (APs) for construction activities. With the provision of the preferential policies to the poor, women and minorities, they will benefit significantly from the employment and income generation of the Project.

7.2.5 Improving Living Standards of the Local Residents

105. The proposed road network components in the three border cities will increase urban road capacities so that congestion is reduced, productivity is raised and more urban growth can occur in business activities from the industrial parks linking with rural value chains. The urban road networks and municipal improvements will ultimately connect the cities to their corridors and seaports en route to regional economic growth within and across national borders. The proposed component interventions will improve urban infrastructure services to meet the increasing demands of urban development and regional cooperation. In addition, the road network will facilitate mobility and access for local populations to key basic services and destinations, and remove related constraints for urban development. It will save travel time, reduce vehicle operation costs, improve road safety and reduce traffic accident. The provision of the designed features for the road network, including pedestrian access with sidewalks, safe crossing zones, appropriate road safety signage, particular attention to safety issues for children at school areas, non-motorized transport lanes, location of bus

SA-O-32 Supplementary Appendix O: Poverty and Social Impact Assessment stops, lighting or bus stops covers, provision of affordable and reliable public transportation, etc. will contribute to comfortable life for the local residents.

106. The proposed coastal protection and flood control component in Fangchenggang will reinforce coastal dykes, reduce the risk of coastal flooding, reduce coastal erosion and retreat, protect the lives and properties of the local people along the coast, provide the residents of Fangchenggang and tourists with a coastal park for sightseeing and recreation.

107. The Chongzuo City Shuikou Lake Environmental Improvement Project aims to ensure a permanent good water quality and good environment for the Shuikou Lake through the comprehensive rehabilitation to control the pollution sources from the industry, agriculture, daily living, livestock breeding in the Shuikou Lake and its surrounding areas to enter into the lake, and to rehabilitate the polluted water body and damaged aquatic ecological system. The Project will take some measures to achieve environmental improvement, coffer weir clearing, lake dredging, ecological restoration, dyke protection engineering works, and pedestrian road path around the lake to construct the Shuikou Lake, named “Chongzuo’s kidney” as an ecological wetland park, and make full advantage of ecological and socioeconomic benefits of the wetland to build the Shuikou Lake area into an ecological wetland city with blue sky, green mountains and clean river. Thus, the Shuikou Lake Environmental Improvement Component in Chongzuo will reduce water pollution, increase protection and conservation of the wetland and ecosystem, which in turn will increase the development of recreation and tourism. The local people and tourists will enjoy the amenity of the improved environment. All these will contribute the improved living standards of the local residents.

7.2.6 Public Environment Awareness and Education Program

108. Fangchenggang City has a total coastline of 584 km along which 1,553 ha of mangroves can be found today. These mangrove forests are distributed mainly in four areas, the Beilun Estuary, Dongwan (East Bay), Xiwan (West Bay) and Maoling-Hongsha. Mangroves are buffer to coastal erosion, storm surges, tidal waves and tsunamis. It plays an important role for water conservation, sea water purification, and maintenance of biological diversities. Mangrove ecosystems have strong ecological functions to purify the air and sewage, meanwhile it has greening functions for urban environment. The mangrove forests in Maoling-Hongsha, Xiwan and Dongwan cover a respective area of 61 ha, 151 ha and 210 ha. Of the mangrove forests in Dongwan, 95% is distributed in the Yuzhouping coast. Historically, approximately 670 ha of primary mangrove forests could be found in the Dongwan (East Bay) and the neighbouring Xiwan (West Bay). In the past few decades, Fangchenggang has experienced rapid economic growth, industrialization and urbanization. The demand for land to fuel port expansion has been especially strong. The Yuzhouping coastal lines, located in the Dongwan Bay at the city center, were particularly affected. The total area of the primary mangrove forests in Yuzhouping has declined from the more than 400 ha to 210 ha, only slightly more than half still remained today. Meanwhile, pollution from land-based sources served to reduce the biodiversity in the mangrove ecosystems.

109. The mangrove forests in Fangchenggang are under increasing pressures and have been reduced from the following human activities as a result of port expansion and industrial development in the port district, fishery and aquaculture in spite of the effort of the Fangchenggang Municipal Government (FMG): i) direct destruction from urban, port and industrial expansions; ii) aquaculture; iii) sewage and industrial wastewater; and iv) non-point sources (urban and agricultural runoff). Moreover, the mangrove forests are destroyed and degraded by shoreline collapses, wastes brought in with surface runoff, and the direct dumping of solid and liquid wastes onto the shorelines which eventually end up in the mangrove forests.

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110. At the same time, GZAR has witnessed a gradual increase in sea level rise, retreat of the coastal lines and marine environmental disasters. This results partly from global climate change, and partly from the lack of effective coastal protection structures. The existing coastal dykes, which were built decades ago without proper maintenance, can no longer protect the coastal areas from storm surges and tidal waves. On the other hand, they have become detrimental to the growth of mangroves and a contributing factor to the degradation of the coastal mangrove forests. According to field surveys, the coastal lines in the Dongwan Bay are presently unprotected. Tidal erosion has resulted in steep slopes, leading to shoreline subsidence and earth collapse that damages mangrove habitats and ecosystems, and people’s lives and properties, especially in times of tropical rainstorms and hurricanes.

111. The implementation of the coastal protection and upgrading subcomponent will: i) reinforce the ability of the coastal dykes; ii) reduce the risk of coastal flooding; iii) reduce coastal erosion and retreat; iv) protect the lives and properties along the coast; v) protect the mangrove habitat and ecosystems in the Dongwan Bay; vi) provide a buffer zone to allow for future climate change; vii) provide a platform for public awareness about importance of mangrove ecosystems and mangrove protection; and viii) provide the residents of Fangchenggang and tourists with a coastal park for sightseeing and recreation. An another important contribution of the subcomponent is the deterrence to further industrial and urban occupation of the mangrove habitat by making the dyke-protected area as a “coastal protection control zone” where development activities will be prohibited.

112. In response to the above problems and government programs, two major features have been integrated into the design of the Project. One is the incorporation of a mangrove public awareness intervention that consists of a public education square and a series of mangrove observation points. The design of the mangrove square and the observation points blends well with nature. In addition to being functional and attractive, it is also in line with the concept of awareness and knowledge through close contact. Under the component, an information booth will be established at the mangrove square. Information posts, signs and placards will be erected at the mangrove square and observation points. Volunteers will be posted in the square and observation points on the weekends. Day camps will be organized for primary and secondary school students. Similar public awareness activities will be undertaken under the Chongzuo Shuikou Lake environmental improvement component.

113. To enhance the benefits of the public awareness and education program, the city PMOs and PICs will ensure that close coordination will be carried out for the mangrove protection and conservation of Fangchenggang coastal protection and upgrading component and the Chongzuo Shuikou Lake environmental improvement component respectively with the existing public environmental awareness education (mangrove and wetland protection) program of the municipal tourism bureaus, environmental protection bureaus, ocean bureaus and local communities. Appropriate public awareness campaigns will be implemented with the use of posters, brochures, media, community announcements, households, and schools to increase their awareness with issues related to mangrove and wetland protection. In addition, consulting services during the Project loan implementation will also be provided to strengthen the public environmental awareness for mangrove protection and conservation.

114. The EIA report has also proposed measures to minimize adverse impacts during the construction phase, such as use of weirs to contain wastewater, settlement ponds to treat sewage from construction activities and camps, and timely collection and safe disposal of solid wastes. Measures to properly maintain the dykes, mangrove square and associated structures have also been recommended. A program to monitor the health of the mangrove habitat and ecosystem has also been proposed.

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7.2.7 Climate Change Benefits

115. Since the mid-20th century, due to a large number of land developments and the intensification of human activities, it has resulted in global warming year by year, glaciers melting to accelerate the expansion of sea water, thereby causing sea level rising. According to "2008 Marine Environment Quality Gazette of China," the sea level of China in 2008 in comparison with 2007 increased 14 mm. According to the "Global Climate Change and Marine Ecosystem" experts’ prediction that by 2030 the sea level along coastal lines of China will rise by 10 cm – 40 cm, and 2050 30 cm – 60 cm.

116. In recent years, sea level in GZAR has risen at average annual rate of 3.3 mm. According to predictions, the sea level of Guangxi coastal lines will rise 11.6 cm - 15.3 cm in 2030 and 19.2 cm - 25.5 cm in 2050. As the rising of sea-level, it will result in recede of coastal lines in Guangxi, serious soil erosion, and intensified marine environmental disasters.

117. Guangxi is one of China's natural disaster-prone areas. For various natural disasters, meteorological disasters accounted for more than 70%. Since the 90s of 20th century, global warming has become more obvious. With the rapid economic growth, the impacts of disaster on socioeconomic development of GZAR have been increasingly aggregated. Of the meteorological disasters in GZAR, the most serious are storm rain, flooding and drainage. According to the statistics, the storm rain, flooding and drainage between 1991 and 1993 caused a direct economic loss of CNY 220 to 500 million; the direct economic losses were average at more than CNY 1.3 billion after 1994; and over CNY 11.6 billion in the year of 1994, 1996, 1998 and 2002, respectively. Fangchenggang City is an important port city in GZAR, storm rain and flooding disasters are relatively frequent. The length of existing embankment in the city is just 2.1 km, the flood control standards is only equivalent to once in two years, the embankment for flood control is poor without access of vehicles behind of the embankment. As Fangchenggang City coastal line embankment construction has lagged behind, the flood prevention and control standards are low, whenever the storm surge hits, it often causes the structures on land flooded, serious economic losses of the city, and factories and enterprises and people's lives and property in great threats. According to the statistics, the Gangkou District of Fangchenggang City has suffered from the attacks of typhoon and storm rain almost every year since 1982. The typhoon "Hagupit" in 2008 affected a total of 22,220 people in the whole Gangkou district, with direct economic losses up to CNY 6.26 million.

118. According to the survey, up to 2005, only the Shalo Village, Guangpo Township, Gangkou District of Fangchenggang City, the rising sea levels have caused 4.2 km2 if land flooded, more than 100 rural families relocated, regional harbour ports and dock normal operation seriously affected. At the same time, the distribution of the mangrove area has also been gradually reduced over the past 10 years due to the rising of sea-level, human destruction and other reasons. About 10% of mangroves have disappeared, which has exacerbated coastal line erosion, reduced the capacity of the resistance of coastal storm surges, tsunamis, waves and other marine disasters.

119. After the implementation of the Fangchenggang City Mangrove Protection and Improvement Project, it can reduce the hazard level of waves, storm surges, tsunamis and other natural disasters caused by the sea level rising, and on the other hand, it can effectively control the sea water to occupy the land, restore and protect the mangrove area through the construction of ecological dykes and mangrove buffer zone by using scientific and reasonable prevention and defense standards. Most important, the construction of the Project could ensure the safety of the lives and properties of the residents along the Dongwan coastal line in Fangchenggang City. According to the estimates, about 51.3 ha of land would be flooded when Fangchenggang City is hit by a 20-years flood without the Project.

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7.2.8 Benefits of Tourism Development

120. Fangchenggang City is characterized with a long history, beautiful mountains, and colorful ethnic culture. The major tourism spots include: Shiwandashan National Nature Reserve; the largest mangrove forest in urban area of PRC; Camellia National Nature Reserve; Beilunkou National Nature Reserve; Jingdao scenic spots; Jiangshan Peninsula Holiday Resort; West Bay National Scenic Area; Port Cultural Tourism Zone; Qisha Industrial Ecological Tourism Zone; Sino-Vietnamese border rafting tourist area. Fangchenggang is becoming new and emerging tourist city after Guilin and Beihai in Guangxi. In 2008, the city hosted 1.28 million tourists, an increase of 9.66%; the total tourism income accounted for CNY 373 million, an increase of 5.37%; and the foreign exchange earnings from tourism accounted for US$6.58 million, an increase of 6.3% over 2007.

121. Chongzuo City is characterized by beautiful mountains and colorful ethnic culture. It is rich in tourism. There are dozens of cultural heritage and scenic tourist attractions, such as: Zhuang ancestors' cultural sites - Ningming Huashan Mural Painting, Asia's largest transnational waterfall-Daxin Detian Waterfall between China and Vietnam, the world's rarest white head monkey habitated Chongzuo Ecological Park, Pingxiang Friendship Border Gate, Fusui Dinosaur Fossil Heritage Site, Longzhou Red Tourist Area, Longzhou Xiaoliancheng, Zuojiang Leaning Tower, Chongzuo Stone Forest, Guilong tower, Shuikou Lake, and Nanjin furuwatari. Border lines with Vietnam and the Friendship Pass are also tourist attractions. In 2207, 3.72 million tourists visited Chongzuo City. In 2008, the tourists reached 4.22 million, and generated a revenue of CNY 1.72 billion. In fact, tourism is taking a larger share of the City’s economy and contributes to 6.5% of total GDP.

122. Baise City has a long history, beautiful mountains and rivers, cultural landscapes and colorful ethnic customs, and great potential of tourism resources. It is characterized by red (revolutionary) tourism, valleys, forests and other resources with four national 4A scenic areas, and is a very new and emerging tourist city after Guilin and Beihai in Guangxi. Baise is one of the China’s 12 key red tourism scenic spots and was awarded "Outstanding Tourist City of China" title in 2007. There are state-level scenic spot - Baise Rebellion Memorial Hall; and world unique of Jingxi Tonglin Great Canyon Valley and “Tiankeng” (heaven pit), Chengbi River, etc.. In 2007, Baise city hosted a total of 19,000 person-times of international tourists and 5.62 million person-times of domestic tourists, and the revenue generated from international and domestic tourists accounted for US$ 6.7 million and CNY 1,158.56 million, respectively. Table O-25 below provides the summary of tourism situation in the three border cities of the Project.

Table O-25: Summary of Tourism Situation in the Three Border Cities in 2007 Item Fangchenggang Chongzuo Baise Total No. of International Tourists (10,000 person- 5.52 15.85 1.90 23.27 times) Revenue Generated from International 915.00 3,300.47 670.00 4885.47 Tourists (US$ 10,000) No. of Domestic Tourists (10,000 person- 193.81 356.30 561.50 1111.61 times) Revenue Generated from Domestic Tourists 67,619.00 115,856.00 234,400.00 417,875.00 (CNY 10,000) Source: Statistical Yearbook of respective city, 2008.

123. With the improved road network and urban environment, it is expected that there are more flow of tourists will come to visit the scenic spots of the three Project cities. It is predicted that the tourism will increase at 8% to 12% in the next 15 years. For example, it is

SA-O-36 Supplementary Appendix O: Poverty and Social Impact Assessment predicted that the tourists will reach to 3 million person-times in 2010 with revenue generation of CNY 1,000 million in Fangchenggang City. The local community will greatly benefit from the tourism development, in particular the poor and women consist of the majority of small vendors to sale tourists’ souvenir products and serve as tourist guides.

8. Maximizing Gender Issues in the Project

124. The results of the socioeconomic household surveys and focus group discussions indicate that women are primarily responsible for cleaning up the interior and exterior of the houses after floods as well as taking care of the sick, elders, and for households related traveling and socializing activities. Overall women have lower overall education levels than men and less representation in decision-making in public affairs. They have less access to resources, credit or loans, and types of jobs and technical know-how than men. The share of their income in household’s total income ranges from 9% to 50%, with average at close to 40%. In rural areas, they are primarily engaged in agriculture and some of them also go out for migrant workers as domestic servants. As more males tend to travel out for migrant labor opportunities, women are left behind with a high percentage of households headed by women. In urban area, women have higher proportion than men as private-owned enterprise employees, private-business owners, street vendors, house keepers, and care givers.

125. While working outside the families, women are also primarily responsible for cleaning up the interior and exterior of the houses after floods and caring for the sick, children and elder, and for household related traveling and socializing activities. Time and effort spent on these activities means less time for income-generating activities or family entertainment or leisure time. The impacts of transport facility insufficiency, flood risks and environmental pollution contribute to gender inequality in terms of women’s income generating opportunities and general socioeconomic status. In addition to loss of wages, the lack of inadequate road network and the damages induced by flood and environmental pollution contribute to gender inequities in the burden of household work and access to services.

126. To overcome the barriers which women encounter and maximize the project benefits to them, women should be provided with necessary assistance and they should be given priority for the employment and training opportunities generated from the Project construction and operation phases. Their needs and interests should be represented in the project design and implementation. A proactive employment programs for the women has been proposed by the IA. Project assurances prioritize women for employment and skills training. GZARG shall cause the IAs to: (i) take necessary steps to encourage women living in the Project area to participate in the planning and implementing the Project, including causing the contractors to maximize their employment of women in connection with the Project; (ii) employ 20% of women for operation and maintenance of the Project; and (iii) monitor the Project’s effects on women during Project implementation. At the beginning of their employment, job training will be provided to them. The same percentage will apply for jobs during the operation phase. Loan assurances will help to ensure the participation of women throughout the Project.

127. The Project will help reduce the energy, time, and efforts spent by women on these activities, allowing them more actively in income-generating activities, family entertainment or leisure. The poverty and social assessment indicates that women strongly support the Project across all of the components. Women have perceived that the Project will improve their quality of life and create employment and income opportunities for them. The community based public environmental and education awareness program will directly address women’s needs and risks from environmental degradation.

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9. Social Safeguard Issues and Mitigation Measures

128. The construction of the Project will also cause negative impacts through land acquisition and resettlement to local residents and potential increase of HIV/AIDs and drug and human trafficking due to increased regional cooperation and flow of population. This is particularly to the vulnerable groups, including the poor, women and children, and ethnic minorities. Based on the impact assessment, mechanisms have been identified to maximize benefits and minimize/mitigate negative impacts to the local population, in particular the poor, women and children, and the ethnic minorities.

9.1 Involuntary Resettlement

129. Based on the resettlement impacts identified, the construction of the Project will affect 13 rural village, two urban resident communities, two townships and three street administrations, and three districts. About 4,550 mu of land will be permanently acquired by the Project, of which 12.38% is classified as farmland. Permanent land acquisition will affect 924 households or 4,474 people. The Project will also occupy 586 mu of land temporarily, of which 20.83% is farmland, with 97 households or 349 persons to be affected. A total of 508 households or 2,113 people will be relocated and about 60,876 m2 of residential houses will be demolished. Two public institutions and one enterprise with a total of 611 employees and students (500 employees and 111 students) will be affected and 7,763 m2 of non-residential structures will be dismantled, also 26,123 m2 illegal structures for aquaculture and facilities and netcages of 89 households (725 persons) will be removed. In addition, associated productive assets, ground attachments, and basic infrastructures and facilities will also be affected. Of the total affected population, 635 households and 2,305 persons are minority households (629 Zhuang households or 2,281 persons, 3 Yao households or 13 persons, 2 Miao households or 7 persons, and 1 Jing household or 4 persons), and 85 households or 320 persons are vulnerable groups, including 42 households living under minimum living guarantee (MLG), and 22 households with “Five Guarantees”, 15 women-headed households, and 6 disabled households.

130. To mitigate the impacts of land acquisition and resettlement, three full RPs, one full RP with due diligence, and one short RP have been prepared in accordance with the PRC laws, regulations and standards and ADB’s Involuntary Resettlement Policy to ensure the affected persons will be better-off, or at least will not be made worse-off, as a result of the Project. Adequate compensation will be provided to the APs and affected resident communities and village for the losses. Economic and income rehabilitation measures will be implemented, including: (i) provision of employment opportunities during the project construction and operational phases; (ii) provision of social insurance; (iii) non-agricultural production, including development of self-employed tertiary businesses (i.e. clothing, grocery, transportation, cargo, community service, home electronics repair, hairdressing salon, beauty salon, dry-cleaning house, entertainment, catering and hotel services, and tourism); (iv) development of reconstruction land for tertiary industry to earn dividends, and (v) provision of technical training to the APs to increase their skills to be employed in other institutions, enterprises and businesses. Relocated institutions and enterprises will be provided with the options of compensation and resettlement. Relocated institutions and enterprises will be provided with the options of compensation and resettlement. The same institutions and enterprises will reemploy the affected employees, and no job loss is expected. For the 383 vulnerable households identified, the local Governments, PMO and IA will pay attention and provide assistance to meet their special needs and expectations, and also will supervise implementation to ensure these vulnerable persons receive adequate compensation, housing assignment, social security plan, special fund and MLG, and assistance to restore their living conditions and incomes. With adequate compensation and

SA-O-38 Supplementary Appendix O: Poverty and Social Impact Assessment effective implementation of the rehabilitation measures, it is believed that the negative impacts of land acquisition and resettlement will be fully mitigated.

9.2 Transmissible Diseases and HIV/AIDs

131. GZAR ranks the third nationwide for the number of HIV/AIDS cases with 8,625 new HIV/AIDS cases reported in 200521, the total of 20,604 persons was infected, more than 50% increase over the year of 2004. At the end of September of 2006, it was reported that the total accumulated number of HIV/AIDs reached to 25,529 cases, of which 2,388 cases were AIDs and 298 deaths. In November of 2008, the accumulated number of HIV/AIDs reached to 43,046 cases, of which 9,174 cases were AIDs. There is serious under reporting and the true figure may be as high as 80,000 people. About 70% of GZAR’s HIV/AIDS cases result from injecting drug use (IDU). Co-infection of HIV/AIDS and hepatitis C is also high in GZAR with 95% of HIV-positive and 70% of HIV-negative IDU also showing positive for hepatitis C.

132. The average growth rate of HIV/AIDS cases is as high as 30% each year in GZAR. The HIV/AIDS rate of infection is speeding up in GZAR, and is spreading from high risk groups to ordinary groups. In the region, 110 counties, cities, and districts have reported the cases of HIV/AIDS infection. Currently, GZAR has established 28 monitoring stations for HIV/AIDS, which covers most of cities and counties, including the project cities. The high incidence areas where the cases in each are over 500 include: Nanning, Liuzhou, Hezhou, Baise, and Pingxiang; the latter two cities share borders with Vietnam.

133. According to the surveys by GZAR against HIV/AIDS Committee in 2006, 86% of infected people are among the age of 20-49, and the majority of them are rural people, especially those migration people. The main reasons of HIV/AIDS include: exchange of needles by drug users, less use of condom, lack of HIV/AIDS related knowledge, high infection rate of STD, unbalanced regional development, and poverty. To solve this problem, GZARG issued the Guidelines on HIV/AIDS Prevention and Treatment in 2005, and appointed 15 city hospitals and 80 county hospitals as the focal centers for treatment of HIV/AIDS. Various international programs are also being implemented in GZAR, such as the World Bank loan program and the AusAID technical assistance program, and the USAID program.

134. In 2006, Guangxi government launched a program on “Information Dissemination and Education on HIV/AIDS Prevention and Control Targeting Migration Laborers.” This program involves 10 different line agencies: Health Bureau, Agricultural Bureau, Construction Bureau, Communications Bureau (GCD), Labor Bureau, Family Planning Commission, Commercial Bureau, Labor Cooperative, Women’s Federation, and Industry and Commerce Association. The main objectives of this program include: (1) incorporate the HIV/AIDS education program into the routine jobs of each line agency; (2) identify the cities and counties where migrant laborers are over 5% of local residents; (3) implement various education and information dissemination activities which are suitable for migrant laborers; and (4) increase the knowledge rate on HIV/AIDS among migrant laborers, to 65% in 2006, and 85% in 2010. The World Labor Organization also has a new program in the PRC targeted at providing HIV/AIDS awareness to migrant laborers.

135. Of the three Project cities, HIV/AIDs infection in Fangchenggang City in 2006 accumulated to 379 cases, of which 71 cases were AIDs and 26 deaths since the first case identified in 1997. In Chongzuo City, the accumulated number of HIV/AIDs reached to 2,963 cases (1.27ă infection rate) in 2008, of which 1,948 cases were AIDs and 587 deaths. Within Baise, the accumulated number of HIV/AIDs in 2008 was 1,885 cases, of which 229 cases were AIDs and 144 deaths.

21 GZAR Health Department.

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136. The incidence rate of other transmissible diseases in the Project area is also high. The main transmissible diseases include typhoid, encephalitis, malaria, tuberculosis and hepatitis C. Recent experience with construction projects clearly shows that the mobilization of people may cause outbreaks of transmissible diseases. In 2000, at the construction site of Fuluhe Lake Hydrodynamic Station in Nabi Township of Youjiang District, there was an outbreak of typhoid among construction workers. During 2002-2003, there was an outbreak of malaria among construction workers and local communities at a construction site for the Baise to Luochunkou expressway. In 2004, during the construction of Baise Water Resource Facility Project, there were cases of malaria among construction workers. Fortunately, each of these cases were quickly identified and brought control through proper quarantine and treatment.

137. Construction activities associated with the Project may affect the spread of HIV/AIDS/STI and HVC. Construction workers will be stationed at construction sites in camp. These workers will be predominantly young, sexually active people and many of these may be poor migrant workers. The communities bordering the construction sites and interacting with the construction workers will be vulnerable to HIV/AIDS/STI and HVC. Experience in GZAR indicates that the local sex trade increases in construction areas and along with the inflow of construction workers, sex workers from outside the area will move to the construction sites. The survey in Baise revealed that the knowledge of HIV/ADIS is low. Of sexual prostitutes, only 59.5% use condoms, and only 59.1% of migrant workers are aware of HIV/AIDs, and 8.16% of them have had sexual experiences with the sex traders and 10.27% have had sexual relation with temporary partner.

138. There is a risk that the Project will increase infections from transmissible diseases. These include HIV/AIDS, sexually transmitted infections (STI), hepatitis C, typhoid, encephalitis, malaria, and tuberculosis. To address the risks of spreading HIV/AIDS and other transmissible diseases, implementation of the following measures is recommended: (i) health screening of contract and migrant workers and locally hired workers for HIV/AIDS and other transmissible diseases, such as malaria and tuberculosis, (ii) awareness programs for construction workers and local communities, (iii) monitoring of workers and possible cases during construction; and (iv) a targeted awareness campaign during construction and after operation of the Project. Information will be also provided in public places, service areas, and border crossings. The monitoring will be implemented by the Center for Disease Control in respective Project City. Each year, Guangxi Health Department allocates additional funds to the Project cities to address their increasing needs. Health, awareness, screening, and treatment requirements are stipulated in the standard contract bidding document, and compliance will be monitored regularly. The regional technical assistance, Fighting HIV/AIDS in Asia and the Pacific, will assist in developing and implementing effective measures for HIV/AIDS prevention in the three Project cities and GZAR. It is proposed that HIV/AIDs awareness and education program will be carried out by the respective PMO and IA with cooperation with the local Centre for Disease Control (CDC) which would take the leading role to plan, coordinate and monitor activities in each Project city. Respective CDC has demonstrated strong support for this action plan and has prepared proposals for undertaking the actions. The action plan includes both a component for the control of HIV/AIDS/STI and a component to control outbreaks of typhoid, encephalitis, malaria and hepatitis C during construction activities. Actions for the control of HIV/AIDS/STI include: i) baseline surveys; ii) advocacy, information and education campaigns; iii) provision of HIV/AIDs and STI testing clinics at construction sites; and iv) monitoring of contractor compliance.

139. Each contractor engaged by IA should be responsible for: (i) provision of screening, diagnosis and counseling for their staff and laborers and families, (ii) conducting an awareness program for their staff, hired laborers, family members, sub-contractors and local communities, and (iii) provision of condoms to staff and laborers, as required. Each main

SA-O-40 Supplementary Appendix O: Poverty and Social Impact Assessment contractor will prepare and submit a disease prevention and awareness plan (to comply with the above requirements) to respective municipal CDC, and PMO and IA for their approval and follow-up monitoring. Contractors will bear the associated costs within their contracts, including the engagement of an experienced health facilitator (alternatively, they can pay the local CDC for this service). The costs to be borne by respective municipal CDC include the baseline surveys and monitoring of compliance. Each municipal CDC will submit annual monitoring reports to IA, PMO and ADB. The IA supervision engineer(s) will also monitor to ensure contractors comply with the ADB/FIDIC contract conditions and report any issues in progress reports. Implementation of the activities to control HIV/AIDS/STI will begin 3 months prior to the mobilization of civil works contractors and continue until the contractors are demobilized.

9.3 Drugs and Human Trafficking

140. The drug and human trafficking in the Project area is not considered serious. As a border cities, Fangchenggang, Chongzuo and Baise, are between PRC and Vietnam and next to “Golden Triangle”, one of the world’s three major sources of drugs. The cities are becoming a new drug trafficking access from Myanmar and Laos, and passing through the north of Vietnam, and then transport to all the places of PRC, or to Taiwan, HK, and other countries. As a result, the border cities have become the major channel of drug trafficking, and are facing an extremely serious challenge for drug penetration. Currently, in Fangchenggang City, there are 2,072 persons are registered drug addiction, accounting for 0.24% of the total population. Since 2005, Fangchenggang City like whole PRC has carried out three years anti-drug battle. Within the three years, the city has cracked down 71 important, special and big drug cases, 238 general drug cases, and arrested 345 drug criminal suspects, seized 20.98 kg of heroin, 610.77 g of ecstasy, 2,781.45 g of K power. With the traditional drugs of Heroin entering into PRC, there are new types of drugs, such as icenarcotics, K power, ecstasy are also trafficked into the Fangchenggang City and southeast Asian market. In 2006, the city has cracked down 114 drug trafficking cases, seized 9,172.77 g of heroin, 52.17 g of ecstasy, 0.45 g of K power; in 2007, 108 drug trafficking cases, 8,218.05 g of heroin, 558.6 g of ecstasy, 2,781 g of K power; and during February and May of 2009, the 22 drug trafficking cases, 6,407.524 g of heroin and 501.15 g of K power. In Baise City, since 2005, the city has cracked down 104 drug trafficking cases, with 69 important and big cases, 35 general cases, 17 kg heroin and other crimes (including drug and human trafficking). The statistical data show that the number of drugs has been increased gradually by year and the types of the drugs become more and more.

141. The human trafficking situation is also increasing in the three border cities. In Fangchenggang City, since 2006, 90 international crimes have been involved and investigated, of which 23 cases are abducting and trafficking of women and children. Most of the cases involve Vietnamese Women who are cheated by the criminal suspects to cross border to get into GZAR in the name of working to make earning, then was forced to prostitute or sold to other people illegally forced with most cities reporting only several ten cases per year. In Chongzuo City, 45 international criminal cases have been involved for this year, including 6 cases of women trafficking and 3 forced prostitution. In Baise City, only at the border gates of Napo and Longlin, 74 cases of women and children trafficking were seized. Vietnamese official statistics show that about 700 Vietnamese women were trafficked across the border with China in 2007. Although it is not expected that the Project will impact on trafficking numbers, it is possible that the long term improvement of border crossings (not included under this Project) could influence drug and human traffickers to shift their transport routes to this border crossings.

142. To ensure appropriate information in the risk of drug and human trafficking is provided to the communities in the Project areas, special attention will be paid to the border area and the impact of the Project on drug and human trafficking will be monitored. Some of

SA-O-41 Supplementary Appendix O: Poverty and Social Impact Assessment these activities can be monitored with the awareness of transmissible diseases. MPMOs and IAs will implement awareness measures through cooperation with the Public Security Bureaus in each Project City. Measures to provide awareness and prevent trafficking are being undertaken currently by Public Security Bureaus with support from the Women’s Federations (WF). MPMOs and IAs will seek an agreement with local Public Security Bureau and WF to ensure that awareness and prevention activities are undertaken in the Project area with particular attention for the border areas of Dongxi in Fangchenggang City, Pingxiang in Chongzuo City, and Jingxi in Baise City. MPMOs and IAs will also cooperate with these agencies to access monitoring information on drug and human trafficking to assess and ensure the Project does not negatively impact on drug and human trafficking.

9.4 Community Construction Disturbances and Protection

143. Some disturbances might occur during project implementation that will upset community life. For example, damage to local infrastructure (roads, electricity, water supply, irrigation and drainage systems) and pollution of surface drinking water caused by construction. In addition, villagers stated that construction teams often left damage and debris behind and that night time construction creates excessive noise for people living close to construction sites.

144. The IAs will ensure that construction contracts contain clauses to prohibit night time construction, ensure the restoration of damaged to local infrastructure caused by construction activity and the building of pedestrian over/under passes and culverts. The IAs will ensure that construction contracts contain penalty clauses for contractors that pollute surface drinking water or leave damage or debris behind. The IAs will undertake community consultations to ensure that appropriate measures have been taken with regard to damage and pedestrian access. The IAs will consult with communities to determine the best locations for pedestrian and tractor road under/over passes and other roads required to restore access due to construction. The supervision engineers will monitor conditions and report any pending issues.

9.5 Labor Issues

145. To protect the interests and rights of workers, Labor Protection Regulations are implemented throughout PRC, which include labor safety and health, social insurance, occupation safety insurance, social welfare, minimum wages, working hours, etc. The regulations are also well implemented in the project areas.

146. In Fangchenggang, Chongzuo and Baise, the minimum salary is CNY 580 per month or CNY 4.4 per hour for urban districts. The Project IA will provide higher minimum wage than the standard of the Project city to their employees. For the social insurance covering old-age pension, health care, disability compensation, work-related unemployment and maternity benefits, both individuals and enterprises are required to contribute a proportion of their salary based on the local standards. The implementation of labor protection for the enterprises and businesses is periodically monitored by the local Social Safety and Security Bureau.

147. Under the close supervision and monitoring of respective Municipal Labor and Social Security Bureau, the implementation of Labor Protection Regulations has been well carried out. In order to protect the labor rights of women and children, Article 46 of the Labor Act of PRC guarantees distribution of wages according to the principle of equal pay for equal work for men and women. The government has also formulated the Regulation of Forbidding Employment of Child Labor, and strict policies exist to punish employers breaching these regulations. Workers’ Union services to protect workers’ interests and rights.

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148. Safety training will be provided to all newly recruited workers and maintenance workers so that they are able to: 1) recognize the importance of safety at work and assign sufficient resources to handle it; 2) give proper consideration to safety during placing of the maintenance activities; 3) avoid unsafe performance; 4) avoid creating unsafe conditions; and 5) identify unsafe acts and ask for rectification.

149. There is no labor retrenchment involved in the project. The construction and operation of the Project will generate numerous employment opportunities to the local beneficiaries.

150. The international and national core labor standards will be strictly carried out during the construction and implementation of the Project. There are laws and regulations for the Project-financed procurement of goods and services, contractors, subcontractors to supervise the implementation. As to the consultants and relative workers, according to the laws and regulations of labor protection, proper salary, safety working conditions and social security will be offered. Core labor standards HIV/AIDS and drug and human trafficking awareness training and education will be included for all contractors in the loan assurances.

151. The Government, GZARG and the governments of project cities will cause the PICs and contractors to ensure that all employment and labour standards provided in the applicable laws and regulations of the PRC are complied with, and in particular, that all civil works contractors engaged under the project: (i) provide timely payment of wages on at least a monthly basis and safe working conditions to all workers including male and female workers, with such requirements being included in the civil works contracts and monitored by the construction supervision consultants; (ii) provide employment opportunity to women and ethnic minorities, where appropriate, and pay equal wages to male and female employees for equivalent works; and (iii) not employ child labour in the project works.

9.6 Ethnic Minorities

152. Guangxi Zhuang Autonomous Region is one of three provinces and five minority autonomous regions in which the autonomous minority prefectures and counties established by the People’s Republic of China (PRC) Government. Of the total 7.1 million urban and rural beneficiary residents in the three border cities of the Project, about 5.93 million or 83.34% are ethnic minority populations, including 410,380 persons or 48.28% in Fangchenggang City, 2.16 million persons or 89.69% in Chongzuo City, and 3.36 million persons 0r 87% in Baise City. In total, there are 21, 19 and 13 nationalities (including Han) in Fangchenggang, Chongzuo and Baise, respectively. In Fangchenggang City, there are 3 native groups of Zhuang, Yao and Jing, 3 native groups of Zhuang, Han, and Yao in Chongzuo City, and 6 native groups of Zhuang, Yao, Miao, Yi, Gelao and Hui in Baise City. Of the total minority population, 5.53 million persons or 77.72% of the total population in the three Project cities are Zhuang minority, and 181,660 persons or 2.55% are Yao minority, and 123,920 persons or 1.7% are Miao minority. The distribution of the minorities in the three Project cities can be found in the EMDP.

153. In total, there are 440 thousand minorities or 72.58% of the beneficiary population living in the direct project area (DPA), including 77 thousand minority people or 18.9% in DPA of Fangchenggang, 214 thousand minority people or 98.70% in DPA of Chongzuo, and or 149 thousand minority people or 80.29% in DPA of Baise. While different ethnic groups have retained their own culture and livelihoods, the livelihood patterns of Han and the minority are similar. The minorities, like the Han population, they will be the major beneficiaries of the Project. An Ethnic Minority Development Plan (EMDP) has been prepared for the Project in accordance with the ADB’s Indigenous People Development Plan to ensure that ethnic minority people are able to benefit equally from the Project, and that any negative impacts that might affect them are either reduced or mitigated.

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9.7 Other Social Risks

154. No other social risks and/or vulnerability are anticipated as a result of the Project. The Project construction workers will be engaged locally. Prevention and control of transmissible diseases and HIV/AIDS, and community disturbance training and sensitization will be provided to the contractors, as well as drug and human trafficking education will be provided the local communities, ensured in the loan assurances and monitored in the social action plans.

10. Participation Strategy

10.1 Stakeholder Analysis during the PPTA Stage

155. Stakeholder analysis has been conducted throughout project preparation through public participation and consultation with key stakeholders such as government organizations, beneficiaries, APs, business communities, and civil society organizations. In addition to the socioeconomic surveys, stakeholder consultation and focus group discussions, interviews with key informants have been conducted with 345 persons in the Project areas. The issues discussed include qualitative and quantitative aspects of poverty, gender, problems and needs of road network and urban infrastructures, environmental improvement and flood control, and benefits of the Project to the poor and women, impact of land acquisition, suggestions for improvement of public services, and satisfaction to public services.

10.2 Participation Strategy during Implementation and Operation

156. A participatory approach has been part of the project design and will be continued during project implementation, monitoring and evaluation. During project preparation, consultation meetings on each Project city regarding urban road network and related municipal infrastructures and bridge, environmental improvement and flood control as well as government policies and efforts to develop the public services were held in the Project areas. Further public consultations will be held during project implementation to discuss and get feedback from beneficiaries and other key stakeholders, particularly the poor.

157. Two public consultations in the Project areas were carried out in preparing the environmental impact assessment (EIA). The purpose of public consultations and disclosure was to: i) introduce the project components to the stakeholders; ii) solicit ideas, suggestions, comments, concerns and critiques on the potential environmental implications of the Project; and iii) present the findings of the EIA, summarizing potential environmental impacts and mitigation measures, and provide answers raised by the workshop participants.

158. Public consultation and disclosure of resettlement plans have been conducted on various occasions during measurement surveys, socioeconomic surveys of APs, village meetings, interviews, and workshops. Results of these meetings and concerns of the APs have been integrated into the resettlement plans. In order to address the problems and needs of the APs properly, regarding land acquisition and resettlement, further consultation, disclosure and grievance mechanisms will continue through the land acquisition and resettlement process so that all issues will be addressed prior to the project implementation.

159. To enhance the mangrove and wetland protection and environmental benefits of the Project, mangrove and wetland protection and environmental awareness in communities will be carried out by the IA in close coordination with other stakeholders, through posters,

SA-O-44 Supplementary Appendix O: Poverty and Social Impact Assessment brochures, media, community announcements, households, and schools during the implementation of the Project.

160. The public participation and consultation register can be found in the Appendix N-3.

11. Monitoring and Evaluation Plan

161. In accordance with the ADB’s Project Performance Management Systems (PPMS) requirement, a monitoring and evaluation plan of poverty and social poverty impacts of the Project will be developed during the implementation. A number of key indicators are proposed for monitoring the poverty and social aspects of the Project. Most of these have been incorporated into the project design and monitoring framework (DMF), which includes among other things: (i) GDP growth; (ii) urbanization rate; (iii) satisfaction with urban transportation systems, environmental improvement and flood control; (iv) number of people and business’s participation in regional cooperation; (v) employment opportunities; vi) per capita income; vii) loss and damage of life and property; and viii) overall quality of life of the beneficiary cities.

162. Except internal monitoring by the IA, an external monitoring organization, such as a qualified consulting company or a research institute will be engaged in the analysis on socioeconomic and poverty impacts and monitoring and evaluation. The monitoring will be undertaken every six months and a comprehensive socioeconomic baseline questionnaire survey before and after the completion of the construction of the Project. The survey will cover a sample size of 800 beneficiary households.

12. Summary of Poverty and Social Impact Assessment

163. The three southwestern cities of Fangchenggang, Chongzuo and Baise are less developed small and medium-sized cities of Guangxi Zhuang Autonomous Region (GZAR) in western PRC, which targeted by the Government for support under the Western Development Strategy (WDS) and regional cooperation initiatives, i.e., ASEAN and GMS. The cities have higher poverty rate than GZAR and the national average but have strong development opportunities, are at a critical stage for urban development and participation of subnational and subregional cooperation programs. However, the current inadequate infrastructure services for the three southwestern cities constrain their full participation in the subnational and subregional cooperation programs and prevent them from deriving the maximum benefits from these programs. The Project will promote sustained economic and urban development and enhance the strategically located cities to contribute to and benefit from regional cooperation, and improve the quality of life for 606 thousand residents directly and 7.06 million residents indirectly in Fangchenggang, Chongzuo and Baise Cities.

164. The Project is consistent with the Asian Development Bank (ADB) country partnership strategy (CPS) 2008–2010 for the PRC, which specifies that ADB will directly support sound and sustainable urban development with a focus on relatively underdeveloped western and northeastern regions. It also aims to make markets work more efficiently through (i) urban infrastructure development, (ii) promotion of environmental sustainability, and (iii) pro-poor equitable and inclusive growth. The Project will provide an enabling environment in the border cities for poverty reduction directly and indirectly by:

i) providing roads and related infrastructures to promote and facilitate urban development; ii) providing roads and related infrastructures to support the development and operation

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of the cities as regional economic corridor, thus creating new jobs and income generating opportunities; iii) reducing coastal flooding threat on lives and properties and associated economic losses; iv) reducing coastal erosion and retreat; v) protecting the mangrove trees and wetlands; vi) providing a platform for public awareness about importance of mangrove and wetland ecosystems and protection; vii) providing the residents of Fangchenggang and Chongzuo and tourists with a coastal park and wetland park respectively for sightseeing and recreation; viii) providing a buffer zone to allow for future climate change; ix) increasing employment and income-generation opportunities from temporary job creation during the construction phase and permanent job creation during the operational phase; x) facilitating urban and industrial development and directly contributing to linking the city to regional network; xi) increasing mobility and access for local populations to key basic services and destinations; xii) reducing traffic congestion, saving travel time, reducing vehicle operation costs, improving road safety and reducing traffic accidents; xiii) increasing the land and property values for local residents in the Project areas; xiv) promoting tourism development; xv) increasing volume of trade with GMS and ASEAN countries; and, xvi) improving the living environment and quality of life for local residents, particularly for the poor, women, and other vulnerable.

165. Both socioeconomic and environmental benefits will accrue to the local populations in the three border cities, thus enhancing their quality of life of the local residents and increase the ability of these cities to promote and benefit from regional cooperation. Benefits will be felt especially by the poor who are who are poor mostly due to the insufficient road network and the resulting limited access to community services and facilities, and living in the area with flooding threats and poor urban environments. Vulnerable populations and women will be particularly targeted for employment opportunities generated by the Project investments. The Project will complement the PRC’s efforts to ensure environmental sustainability and reduce urban poverty.

SA-O-46 Supplementary Appendix O: Poverty and Social Impact Assessment

Appendix O-1: Impact Matrix

General Direct Benefits Indirect Benefits With or Without the Project Component Primary Secondary Primary Secondary With the Project Without the Project Urban Road Improved road Reduced time of Increased values Expansion of Improved road networks and Poor road condition; Network networks, better traveling; of land and local service better road conditions; Lack of road network; road conditions Increased convenience properties; sector from local Improved frequency and level of Low mobility; and related of traveling; Increased procurement; transport services; Low accessibility to infrastructures to Better and quicker economic Increased Speed up transport; markets, employment promote and access to markets, development; employment Reduced vehicle operation costs; and income generation facilitate urban employment and income Increased greening opportunities Reduced traffic congestion; opportunities, and social development; generation opportunities, space; induced by the Reduced time of traveling; services; Improved roads as well as social Improved living procurement of Comfortable ride; Traffic congestion; and related services; environment and local materials; Improved road safety and Increased vehicle infrastructures to Increased short-term quality of life for Increased reduced accidents; emission; support the employment local residents; development and Better access to markets and Increased traffic development and opportunities and and, value of real economic opportunities; accidents; operation of the earnings for locals during Reduced incidence estate; Reduced vehicle emission; Higher transport costs; cities as regional Project construction; rate of poverty. Increased foreign Increased greening space; Inconvenience and time economic Increased long-term and domestic Increased development and value consuming of traveling; corridor, thus employment investments of real estate; Lack of inter- and intra- creating new jobs opportunities and resulting from Accelerated economic regional contacts and and income earnings for locals during improved living development, in particular tourism trade; generating Project operations; environment; development; and, Local economy and opportunities; Improved investment and and, Facilitating the economic regional cooperation will Facilitating urban business opportunities to Reduced vehicle development and promoting be restrained; and, and industrial create new jobs and emission. regional cooperation. High poverty incidence development and income generating rate due to lack of directly opportunities; accessibility to contributing to Increased tourism employment linking the city to development; and, opportunities. regional network; Increased economic Increased mobility development and GDP and access for growth. local populations to key basic services and destinations;

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General Direct Benefits Indirect Benefits With or Without the Project Component Primary Secondary Primary Secondary With the Project Without the Project Reduced traffic congestion, saved travel time, reduced vehicle operation costs, improved road safety and reduced traffic accidents; and, Improved living environment for local residents. Baise Longwang Improved Reduced time of Improved Expansion of Improved connection and Lack of connection and Bridge connection and traveling; accessibility local service communication Henan New communication between communication Increased convenience between the two sector from local District, Chengdong District; Henan New District, between Henan of traveling; banks of the procurement; Increased mobility between Chengdong District; New District, Better and quicker bridge; Increased Henan New District, Chengdong People in Baise City have Chengdong access to inter-city, Increased employment District, Chengxi District, and to use other existing District; markets, employment economic opportunities Industrial Zone; bridges with detour to Increased mobility and income generation development; induced by the Improved frequency and level of travel to inter-city; between Henan opportunities, as well as Improved living procurement of transport services; Low mobility; New District, social services; environment and local materials; Reduced vehicle operation costs; Low accessibility to Chengdong Increased short-term quality of life for Increased Reduced traffic congestion; downtown, markets, District, Chengxi employment local residents; development and Reduced time of traveling; employment and income District, and opportunities and Increased values value of real Better access to inter-city, generation opportunities, Industrial Zone; earnings for locals during of land and estate; markets and economic and social services; Saved travel time; Project construction; properties; and, Increased foreign opportunities; Traffic congestion; Reduced traffic Increased long-term Reduced incidence and domestic Reduced vehicle emission; Increased vehicle congestion; and, employment rate of poverty. investments Increased development and value emission; Reduced vehicle opportunities and resulting from of real estate; Higher transport costs; operation costs; earnings for locals during improved living Accelerated economic Inconvenience and time Increased Project operations; environment; development; and, consuming of traveling; development and Improved investment and and, Facilitating the economic Lack of inter-regional and values of land and business opportunities to Reduced vehicle development of Baise City and inter-city contacts and properties; and, create new jobs and emission. promoting regional development. trade; Stimulating the income generating Local economy and economic opportunities; regional cooperation will

SA-O-48 Supplementary Appendix O: Poverty and Social Impact Assessment

General Direct Benefits Indirect Benefits With or Without the Project Component Primary Secondary Primary Secondary With the Project Without the Project development of Increased tourism be restrained; and, Baise City development; and, High poverty incidence through Increased economic rate due to lack of connecting Henan development and GDP accessibility to New District and growth in Baise City and employment Chengdong regional cooperation. opportunities. District. Fangchenggang Reduced risks of Reduced damages of Value-added Expansion of Reduced risks of flooding; Increased tidal flooding Coastal Protection coastal flooding tidal flooding disaster benefits relating to local service Reduced landslides and collapse; frequency; and Upgrading disaster; and economic losses, local procurement; sector from local Reduced sea tide and soil Increased loss of Protected including loss of human Reduced economic procurement; erosion; mangrove trees and mangrove trees lives and properties; costs of property Increased Increased protection of mangrove damage to marine and improved Reduced economic loss replacement or employment trees and improved rehabilitation ecosystem; rehabilitation of of production and repair; opportunities of marine ecosystem; Increased and expanded aquatic ecological business; Reduced human induced by the Improved drainage; landslide and collapse; environment; Increased short-term suffering from procurement of Reduced damages of flooding Increased sea tide and Reduced tidal employment flooding; local materials; and economic loss of human lives soil erosion; flooding and soil opportunities and Increased safety of Increased and properties; Increased losses of erosion; earnings for locals during life; aesthetic value; Reduced incidence and mortality human lives and Reduced land Project construction; Reduced medical and, rates of water-borne diseases; properties; slides and Increased long-term costs and human Increased Increase convenience of mobility Increased incidence of collapse of sea employment suffering from business for local communities; water-borne diseases; slope; opportunities and reduced water- development in Increased employment Barriers for economic Improved earnings for locals borne diseases; the city. opportunities; growth; and, drainage; generated by future Increased Reduced workload for families, in Unachievable objectives Increased economic development convenience of particular for women to repair or of the master plans in aesthetic activities; mobility for the clean-up flood damages; Fangchenggan for the greening space; Increased tourism locals; and, Improved housing and living prevention and control of Reduced risk to development; Reduced incidence environment of local people; and, flooding disaster and human health Increased land value and rate of poverty Facilitating implementation of regional cooperation. from water-borne properties; and, master plans of Fangchenggang diseases, Improved housing and City, and promoting regional particularly to the living environment and cooperation. poor, women, quality of life for local children and residents. elderly; and, Improved living

SA-O-49 Supplementary Appendix O: Poverty and Social Impact Assessment

General Direct Benefits Indirect Benefits With or Without the Project Component Primary Secondary Primary Secondary With the Project Without the Project environment for local residents. Shuikou Lake Reduced water Reduced damages of Value-added Expansion of Reduced water pollution of the Increased water pollution Environmental pollution of the flooding and economic benefits relating to local service lake; of the lake; Improvement lake; losses, including loss of local procurement; sector from local Increased protection of the Increased loss of wetland Increased private properties, and Reduced medical procurement; wetland and ecology of the lake; and damage to ecologic protection of the production and business; costs and human Increased Reduced loss of vegetation and system of the lake; wetland and Reduced water-related suffering from employment forest; Increased loss of ecology of the disease and associated reduced water- opportunities Reduced water and soil erosion; vegetation and forest; lake; medical costs; borne diseases; induced by the Reduced incidence and mortality Increased water and soil Reduced loss of Increased short-term Increased procurement of rates of water-borne diseases erosion; vegetation and employment convenience of local materials; and associated costs; Increased economic forest; opportunities and mobility for the Increased Increase convenience of mobility losses of private Reduced water earnings for locals; locals; and, aesthetic value; for local community people; properties, production and soil erosion; Increased long-term Reduced incidence and, Increased employment and business; Increased employment rate of poverty Increased opportunities; Increased incidence of transport opportunities and business Reduced workload for families, in water-borne diseases infrastructure; earnings for locals development in particular for women to repair or and the medical costs; Increased generated by future the city. clean-up the damages of flood Barriers for economic aesthetic economic development disaster; growth; and, greening space; activities; Improved housing and living Local economy and Reduced risk to Increased land value and environment of local community regional cooperation will human health properties; people; and, be restrained; and, from water-borne Increased development Facilitating implementation of High poverty incidence diseases, of recreation and master plans of Chongzuo City, rate due to lack of particularly to the tourism; and, and promoting regional accessibility to poor, women, Improved housing and cooperation employment and children and living environment and decreased ecological elderly; and, quality of life for local and environmental Improved living residents. system. environment of the residents.

SA-O-50 Supplementary Appendix O: Poverty and Social Impact Assessment

Appendix O-2: Employment and Income Earnings during Project Construction and Operation

Table F2-1: Short-term Employment and Earnings by Subproject from Project Construction Total Direct Employment and Earnings Indirect & Induced Project Construc- Technical & Managerial Skilled Labor Un-Skilled Labor Subtotal Component tion Phase Employment Earnings Employment Earnings (PYs) (CNY 1,000) Employment Earnings Employment Earnings Employment Earnings Employment Earnings (PYs) (CNY 1,000) (PYs) (CNY 1,000) (PYs) (CNY 1,000) (PYs) (CNY 1,000) (PYs) (CNY1,000) Fangchenggang Year 1 2,376 20,736 60 2,160 300 36,002 300 3,600 660 5,760 1,716 14,976 City Urban Road Year 2 3,600 30,240 100 3,600 500 60,002 400 4,800 1,000 8,400 2,600 21,840 Network and Related Municipal Year 3 3,168 27,648 80 2,880 400 48,002 400 4,800 880 7,680 2,288 19,968 Infrastructures Year 4 3,168 27,648 80 2,880 400 48,002 400 4,800 880 7,680 2,288 19,968 Subtotal 12,312 106,272 320 11,520 1,600 192,008 1,500 18,000 3,420 29,520 8,892 76,752 Fangchenggang Year 1 2,376 20,736 60 2,160 300 36,002 300 3,600 660 5,760 1,716 14,976 City Coastal Year 2 3,600 30,240 100 3,600 500 60,002 400 4,800 1,000 8,400 2,600 21,840 Protection and Upgrading Year 3 3,168 27,648 80 2,880 400 48,002 400 4,800 880 7,680 2,288 19,968 Subtotal 9,144 78,624 240 8,640 1,200 144,002 1,100 13,200 2,540 21,840 6,604 56,784 Chongzuo City Year 1 2,376 20,736 60 2,160 300 36,002 300 3,600 660 5,760 1,716 14,976 Urban Road Year 2 3,600 30,240 100 3,600 500 60,002 400 4,800 1,000 8,400 2,600 21,840 Network and Related Municipal Year 3 3,168 27,648 80 2,880 400 48,002 400 4,800 880 7,680 2,288 19,968 Infrastructures Subtotal 9,144 78,624 240 8,640 1,200 144,002 1,100 13,200 2,540 21,840 6,604 56,784 Chongzuo City Year 1 864 16,416 20 720 100 2,400 120 1,440 240 4,560 624 11,856 Shuikou Lake Year 2 864 16,416 20 720 100 2,400 120 1,440 240 4,560 624 11,856 Environmental Improvement Year 3 441 8,532 13 450 50 1,200 60 720 123 2,370 319 6,162 Subtotal 2,169 41,364 53 1,890 250 6,000 300 3,600 603 11,490 1,567 29,874 Baise City Urban Year 1 792 17,064 50 1,500 100 2,400 70 840 220 4,740 572 12,324 Road Network & Year 2 864 18,576 60 1,800 100 2,400 80 960 240 5,160 624 13,416 Related Municipal Infrastructures Subtotal 1,656 35,640 110 3,300 200 4,800 150 1,800 460 9,900 1,196 25,740

Baise City Year 1 810 16,740 35 1,050 110 2,640 80 960 225 4,650 585 12,090 Longwang Bridge Year 2 864 17,712 40 1,200 110 2,640 90 1,080 240 4,920 624 12,792 Subtotal 1,674 34,452 75 2,250 220 5,280 170 2,040 465 9,570 1,209 24,882

TOTAL 36,099 374,9761,038 36,240 4,670 496,092 4,32051,840 10,028 104,160 26,072 270,816 Note: PYs = Person-Years

SA-O-51 Supplementary Appendix O: Poverty and Social Impact Assessment

The monthly salary in Fangchenggang City and Chongzuo City is CNY 3,000 for the “Technical & Managerial” positions, CNY 2,000 for “Skill Labor”, and CNY 1,000 for “Un-skilled Labor”. The monthly salary in Baise City is CNY 2,500 for the “Technical & Managerial” positions, CNY 2,000 for “Skill Labor”, and CNY 1,500 for “Un-skilled Labor”

SA-O-52 Supplementary Appendix O: Poverty and Social Impact Assessment

Table F2-2: Annual Employment and Earnings by Subproject from Project Operations Direct Indirect & Project Component TOTAL Subtotal Managerial Technical Skilled Unskilled Induced

Employment (persons/year) Fangchenggang City Urban Road Network and Related Municipal Infrastructures 231 27 37 100 67 601 832 Fangchenggang City Coastal Protection and Upgrading 315 45 30 120 120 819 1,134 Chongzuo City Urban Road Network and Related Municipal Infrastructures 172 6 12 89 65 447 619 Chongzuo City Shuikou Lake Environmental Improvement 275 9 6 110 150 715 990 Baise City Urban Road Network and Related Municipal Infrastructures 100 20 20 30 30 260 360 Baise City Longwang Bridge 130 20 20 60 30 338 468 TOTAL 1,223 127125 509 462 3,180 4,403

Earnings (CNY 1,000/year) Fangchenggang City Urban Road Network and Related Municipal Infrastructures 5,508 972 1,332 2,400 804 14,321 19,829 Fangchenggang City Coastal Protection and Upgrading 7,020 1,620 1,080 2,880 1,440 18,252 25,272 Chongzuo City Urban Road Network and Related Municipal Infrastructures 3,564 216 432 2,136 780 9,266 12,830 Chongzuo City Shuikou Lake Environmental Improvement 4,980 324 216 2,640 1,800 12,948 17,928 Baise City Urban Road Network and Related Municipal Infrastructures 2,460 600 600 720 540 6,396 8,856 Baise City Longwang Bridge 3,180 600 600 1,440 540 8,268 11,448 TOTAL 26,712 4,332 4,260 12,216 5,904 69,451 96,163 Note: PYs = Person-Years The monthly salary in Fangchenggang City and Chongzuo City is CNY 3,000 for the “Technical & Managerial” positions, CNY 2,000 for “Skill Labor”, and CNY 1,000 for “Un-skilled Labor”. The monthly salary in Baise City is CNY 2,500 for the “Technical & Managerial” positions, CNY 2,000 for “Skill Labor”, and CNY 1,500 for “Un-skilled Labor”

SA-O-53 Supplementary Appendix O: Poverty and Social Impact Assessment

Appendix N-3: Public Consultation Activities Details for Guangxi Southwestern Cities Development Project

Cities Time Participants Means No. Ethnic Minority Main Topics Participants Fangchenggang City 6 July, 2009 Affected household and IA Resettlement survey 22 17 Introduce Project background, purpose and content of the Project; Minimize the impact on the local residents. Poverty Alleviation Office, Civil Meeting discussion 5 1 Solicit the view of local government on the Affairs Bureau, and Minority Project; Affairs Office Learn the projects being implemented by the government departments, especially for poverty group; Solicit the suggestions on the projects from local governments. 7 July, 2009 Representatives of township Community interview 6 5 Solicit the view of the ethnic minority on the government, and villagers Project impacts; Learn the view and wishes of ethnic minority to the Project; Learn the projects impact on females; Solicit the suggestions on the Project from township/ town government. Business and industrial Community interview 3 3 Learn project impact on business and industrial representatives development; Communicate about measures to mitigate negative impact and to enhance positive benefits; Solicit suggestions on the Project from business and industry group. 8 July, 2009 Residents in non-project area Community interview 8 5 Discuss project impact on the residents in non- project area; Solicit the views and opinions of the residents in non-project area on the Project. Baise City 9 July, 2009 Affected households and IA Resettlement 29 20 Introduce the background, purpose and content survey of the Project; Minimize the impacts of the Project on the local residents; Minimize farmland acquisition due to the Project construction. Ethnic Minority Affairs Office, Meeting discussion 5 2 Solicit the view of local government on the Civil Affairs Bureau, and other Project;

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departments Solicit the view of local government on the Project; Learn the projects being implemented by the government departments, especially for poverty group; Solicit the suggestions on the projects from local governments. 10 July, 2009 Development and Reform Meeting discussion 6 3 Solicit suggestions of street committee on the Commission, Longjing Street Project; Committee, and IA Discuss measures proposed by IA to affected households. Representatives of government Community discussion 7 6 Discuss the project impact on ethnic minority; agencies and villagers Solicit the views and opinions of ethnic minorities 11 July, 2009 Representatives of villagers Community discussion 8 6 on the Project; Discuss the Project impacts on females. Residents in non-project area community discussion 14 10 Discuss the project impacts on the residents in non-project area; Solicit the views and opinions of the residents in non-project area. Chongzuo City 13 July, 2009 Municipal Development and Meeting discussion 5 - Learn the latest progress of the Project; Reform Commission Discuss possible social impacts due to the Project construction. Municipal Civil Affairs Bureau Meeting discussion 5 2 Solicit the view of local government on the and Ethnic Affairs Office Project; Learn the projects being implemented by the government organizations, especially for poor people; Solicit the suggestions for the Project from local government organizations. 14 July, 2009 IA, fishmen of Yi minority, and Household interviews 27 27 Discuss the Project impacts on ethnic minorities; Zhuang Solicit the views and opinions of ethnic minority on the Project. 14 July, 2009 Yanshan Resident Committee Meeting discussion 3 2 Solicit the view of the Resident Committee on the Project; Solicit the suggestion of the Resident Committee on the Project. Residents in the project area Community group 7 1 Discuss the Project impacts on ethnic minorities; discussion Solicit the view and opinions of ethnic minority on

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Residents in the project area Community group 8 6 the Project; discussion Discuss the Project impacts on females; Solicit suggestions and recommendations of the Project impacts on the poverty group. 15 July, 2009 IA, Fishery Administration Household interviews 10 8 Learn livelihood patterns and modes of life of Station, Zhuang aquaculture ethnic minorities; households, and user of the Discuss the impacts of Shuikou Lake Shuikou Lake Environmental Improvement Poject the on ethnic minorities; Solicit the view and opinions of ethnic minority to the Project. Male residents Community group 8 8 Discuss the impacts of the Shuikou Lake Project discussion on ethnic minorities; Solicit the views and opinions of ethnic minority on the Projects. Business and industrial Community group 5 3 Discuss the two projects on business and representatives in the Project discussion industry; area Communicate about measures to mitigate negative impact and to enhance benefits by the IA; Solicit suggestion on the projects. 16 July, 2009 Resettlers in resettlement sites Resettlement 12 10 Learn living conditions of resettlers; survey Discuss the impacts of resettlement by the Projects; Discuss the remaining issues of previous road network projects; Solicit the views and opinions of resettlers on the projects. Resettlement village leaders Meeting discussion 15 9 Discuss the road network project impacts on village development; Learn the experience of successful implementation of other projects. Village Secretary General and Community group 13 13 Discuss the Shuikou Lake Project impacts on villagers in Shuikou Village discussion ethnic minorities; Villagers in Shuikou Village Community group 10 9 Solicit the views and opinions of ethnic minorities discussion on the Project; Village Secretary General and Community group 12 10 Learn the livelihood pattern of local people; villagers in Naqu Village discussion Solicit suggestions of the villagers on the Project. 17 July, 2009 Leader and residents in non- Community group 6 - Discuss the Project impacts on the residents in

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project area discussion non-project area; Solicit the views and opinions of the residents in non-projects area. TOTAL 159 186 Note: The consultation activities were conducted for the Chongzuo Flood Control Component, however it was removed from the Projects list. As a result, the above document record did not include the activities done for the Project component.

SA-O-57 Si

TA 7160-PRC: Guangxi Southwestern Cities Development Project

Submittedto: AsianDevelopmentBank FINAL REPORT Submittedby: NREMInternationalInc. ChinaRepresentativeOffice VOLUME THREE OF THREE: 607ASkyPlaza PROJECT MAPS No.46DongzhimenwaiDajie Beijing,100027,PRChina CONTENTS

Map 1: Location of Project Cities in Guangxi Map 2: Guangxi in Western China Map 3: Poverty Cities in Guangxi Map 4: Location of Project Cities in Guangxi Economic Development Zoning Plan Map 5: Guangxi Urbanization Plan Map 6: Transportation Network of Guangxi Beibu Gulf Economic Area Map 7: Location of Project Cities in China and SE Asia Map 8: Project Cities in Subregional and Subnational Cooperation Programs Map 9: One Axis and Two Wings in ASEAN Map 10: Project Cities in GMS Transport Corridors (2009) Map 11: Project Cities in GMS Road Transport Network (2015) Map 12: Project Cities in GMS Economic Corridors Map 13: GMS Road Transport Network in 1992 Map 14: GMS Road Transport Network in 2006 Map 15: GMS Road Transport Network by 2015 Map 16: ADB-Financed Projects in Guangxi Map 17: Fangchenggang – Project Components in Urban Master Plan Map 18: Fangchenggang – Urban Road Network Component Layout Map Map 19: Fangchenggang – Coastal Protection and Upgrading Component Layout Map Map 20: Fangchenggang – Coastal Protection and Upgrading Component – Protected Area in Youzhouping Map 21: Fangchenggang – Coastal Protection and Upgrading Component – Protected Area in Gongche Map 22: Fangchenggang – Coastal Protection and Upgrading Component – Entire Protected Area Map 23: Fangchenggang – Illustration of Mangrove Public Education Square Map 24: Fangchenggang – Mangrove Square Detailed Design Map 25: Fangchenggang – Coastal Protection and Upgrading Component – Dyke Only Section Map 26: Fangchenggang – Coastal Protection and Upgrading Component – Dyke-Mountain Road Section Map 27: Fangchenggang – Coastal Protection and Upgrading Component – Dyke-Road Section Map 28: Fangchenggang – Coastal Protection and Upgrading Component – Public Education Point Map 29: Fangchenggang – Coastal Protection and Upgrading Component – Cross-Sectional Profile (1) Map 30: Fangchenggang – Coastal Protection and Upgrading Component – Cross-Sectional Profile (2) Map 31: Fangchenggang – Mangrove Distribution Map 32: Fangchenggang – Mangrove Distribution in Dongwan Bay Map 33: Chongzuo – Administrative Map Map 34: Chongzuo – Present Status of Urbanization Map 35: Chongzuo – Urban Planning Boundary Map 36: Chongzuo – Urban Development Plan Map 37: Chongzuo – Project Components in Near-Term Urban Development Plan Map 38: Chongzuo – Project Components in Planned Urban Road Network Map 39: Chongzuo – Project Components in Planned Urban Transit System Map 40: Chongzuo – Shuikou Lake before Project Map 41: Chongzuo – Shuikou Lake after Project Map 42: Baise in ASEAN Free Trade Zone Map 43: Baise – Project Road and Bridge in Urban Master Plan Map 44: Baise – Project Road and Bridge in Urban transport Plan Map 1: Location of Project Cities in Guangxi

M-1 Map 2: Guangxi in Western China

Mongolia

Xinjiang Inner

BEIJING Gansu

Ningxia Qinghai Shaanxi

Tibet

Sichuan Chongqing

Guizhou Guangxi Yunnan Baise Chongzuo Project City Fangchenggang VIET NAM

M-2 Map 3: Poverty Counties in Guangxi

National Poverty County

Provincial Poverty County

Leye County Longlin Ge Ethnic

Autonomous County BAISE Tianlin County Lingyun Xilin County County

Youjiang Baise City Tiandong District County Pinguo Tianyang County County Dabao County MUNICIPALITY Tiandeng Napo Jingxi County County County Daxin Nanning County CHONGZUO Jiangzhou District

Municipal Boundary Longzhou Fusui County

County Chongzuo City Shangsi County Boundary MUNICIPALITY County

Pingxiang FANGCHENGGANG City Ningming County MUNICIPALITY

Fangcheng District Fangchenggang Dongxing City City

M-3 Map 4: Location of Project Cities in Guangxi Economic Development Zoning Plan

乍ⳂᏖ೼ᑓ㽓㒣⌢ऎߦЁⱘഄԡ Location of Project Cities in Guangxi Economic Development Zoning Plan

Guilin

Hechi Liuzhou Hezhou

BAISE Wuzhou Nanning Guigang

Yunlin

CHONGZUO Qinzhou

VIETNAM Beihai FANGCHENGGANG PROJECT CITY

National Highway W Guangxi Economic Zone Highway S Guangxi Economic Zone Provincial Boundary N Guangxi Economic Zone Prefectural Boundary Central Guangxi Econ Zone Prefecture-Level Municipality Urban Development Axle E Guangxi Economic Zone

M-4 Map 5: Guangxi Urbanization Plan

“Four Clusters and Four Belts” of Urbanization in GZAR Guangxi N Urban Group HUNAN Xing’an Lingchuan GUIZHOU GUILIN Nandan Yongfu Huanjiang Fuchuan Liucheng Yangshuo

Pingle Zhongshan Guangxi-Guizhou Corridor Hechi Lipu Yizhou LIUZHOU Tianlin Urban Belt HEZHOU

Guangxi NE BAISE Guangxi Central Urban Belt Tianyang Urban Group YUNNAN Heshan Tiandong WUZHOU Laibin Pingnan Tengxian Youjiang R. Corridor Guangxi SE GUANGDONG Urban Belt Urban Group Pingguo Cangwu NANNING GUIGANG

Guangxi SW Rongxian Qinxi Urban Belt Major Industrial Park Xingye Priority Industrial Clusters for 11th FYP Beiliu YULIN Iron and Steel Industry Cluster CHONGZUO Machinery Industry Cluster Bobai Luchuan Silk Industry Cluster Pingxiang Ningming QINZHOU Forest Industry Cluster HEPU Aluminum Industry Cluster

Magnesium Industry Cluster Dongxing Automobile Industry Cluster VIETNAM FANGCHENGGANG BEIHAI Sugar Industry Cluster

Coastal Petroleum Industry Cluster PROJECT CITY Nanning-Beihai-Qinzhou- Fangchenggang Urban Group Pharmaceutical Industry Cluster

M-5 Map 6: Transportation Network of Guangxi Beibu Gulf Economic Area

Guangxi Beibu Gulf Economic Area – Transportation Network

BAISE LAIBIN

GUIGANG NANNING

YULIN

Nanning Intl Transportation Hub CHONGZUO

QINZHOU

FANGCHENGGANG MAOMING VIETNAM

BEIHAI

ZHANJIANG

BEIBU GULF

Figure 2-5: Transportation Network in Guangxi Beibu Gulf Economic Area

M-6 Map 7: Location of Project Cities in China and SE Asia

BAISE CHONGZUO

FANGCHENGGANG

National Capital Major Cities Project Cities

M-7 Map 8: Location of Project Cities in Subregional and Subnational Cooperation Programs

M-8 Map 9: One Axis and Two Wings in ASEAN

Ⰼ⼄

PEOPLE’S REPUBLIC OF CHINA EAST CHINA SEA

BAISE

Guangxi FANGCHENGGANG

CHONGZUO

㘆⮊ VIET MYANMAR NAM LAOS Hanoi G M S Vientiane PAN-BEIBU THAILAND

GULF Manila PHILIPPINES Bangkok VIET ECONOMIC CAMBODIA NAM

COOPERATION Phnom Penh

NANNING- AREA SINGAPORE ECONOMIC COORDINOR

MALAYSIA MALAYSIA

Kuala Lumpur

SINGAPORE

M-9 Map 10: Project Cities in GMS Transport Corridors (2009)

M-10 Map 11: Project Cities in GMS Road Transport Network (2009)

M-11 Map 12: Project Cities in GMS Economic Corridors

M-12 Map 13: GMS Road Transport Network in 1992

M-13 Map 14: GMS Road Transport Network in 2006

M-14 Map 15: GMS Road Transport Network by 2015

M-15 Map 16: ADB-Financed Projects in Guangxi

Western Guangxi Roads Development Project ADB-FINANCED PROJECTS IN GUANGXI ($300 m, 2007, Completed)

Guangxi Road Development II Project ($200 m, 2004, Completed)

Guangxi Wuzhou Urban Development Project ($100 m, 2008, Ongoing)

Guangxi Nanning Urban Env Improvement Project ($100 m, 2007, Ongoing)

Guangxi Roads Development Project ($150 m, 2001, Completed)

Fangcheng Port Project ($52 m, 1996, Completed) Guangxi SW Cities Development Project ($150 m, 2010, Proposed) Guangxi Beibu Gulf Cities Development Project ($200 m, 2011, Proposed)

M-16 Map 17: Fangchenggang – Project Components in Urban Master Plan

To Nanning City CENTERTOWN LAND USE MAP To Nanning City

To Nanning City LEGEND

To Shangsi City Reserved for Future Residential Fangchenggang-Shangsi Intercity Hwy Industrial Development Government Reserved for Future Industrial Development Office Commercial Fangchenggang-Dongxing Intercity Rail Cultural and Recreational Medical Fangchenggang-Dongxing Intercity Expressway To Qinzhou City Reserved for Future Sports Residential Development FANGCHENG Colleges and Research Coastal Expressway Secondary School TOWNSHIP Industrial Warehouse and Logistics Reserved for Future Residential Development Port Reserved for Future Residential Development Reserved for Future Public Green Space Industrial Development Reserved for Future Reserved for Future Industrial Development Residential Development Ecological Green Space Forest Plantation Tourism and Recreational Special Use GONGCHE Municipal Facilities Wastewater Treatment Plant TOWNSHIP CHENGZHOU Water Supply Plant Transformer Station Reserved for Port Development Thermal Power Plant YUZHOUPING BAY XIWAN Wind Power Station STREET Landfill COMMITTEE Reserved for Future DONGWAN Recycling Depot Residential Development Funeral House Reserved for Future Parking Residential Development BAY Bus Station Reserved for Future BAISHA Industrial Development Transportation Facilities Fangchenggang-Dongxing Intercity Road and Square

STREET Sea Tunnel To Dongxing City BAY Rail Terminal PEARL Navigation COMMITTEE Tourist Resort Zone Ferry Mangrove

Reserved for Reserved for Future Use GULF Future Development Water Surface Planned Port Reclamation Area 30 Million t/a Iron and Steel Plant Reserved for Port Development

Reserved for FANGCHENGGANG CITY GOVERNMENT Port Development DECEMBER 2008

BEIBU GULF LAYOUT MAP OF FANGCHENGGANG COASTAL PROTECTION AND UPGRADING

M-17 Map 18: Fangchenggang – Urban Road Network Component Layout Map

Section III Section IV Section II

Section V

Anbujiang Section VI Bridge

Section I LAYOUT MAP OF Section VII FANGCHENGGANG ROAD NETWORK

M-18 Map 19: Fangchenggang – Coastal Protection and Upgrading Component Layout Map

Dyke-Road Section

Dyke-Mountain Road Section

Dyke Section

Mangrove Square

M-19 Map 20: Fangchenggang – Coastal Protection and Upgrading Component – Protected Area in Yuzhouping

Shaded Area = Flooded Area for Tide of Once Every 20 Years (Yuzhouping Section), 1.5 km2

M-20 Map 21: Fangchenggang – Coastal Protection and Upgrading Component – Protected Area in Gongche

Shaded Area = Flooded Area for Tide of Once Every 20 Years (Gongche Section), 7.3 km2

M-21 Map 22: Fangchenggang – Coastal Protection and Upgrading Component – Entire Protected Area

FANGCHENG DISTRICT

GONGCHE TOWNSHIP Shaded Area = Flooded Area for Tide of Once Every 20 Years (Gongche Section), 7.3 km2 GUANGKOU

YUZHOUPING Shaded Area = STREET Flooded Area for Tide of Once Every 20 Years COMMITTEE (Yuzhouping Section), 1.5 km2 DISTRICT

M-19 Map 23: Fangchenggang – Illustration of Mangrove Public Education Square

Цವ࿉෍ڜ೮ॿ܃ ILLUSTRATION OF MANGROVE PUBLIC EDUCATION SQUARE

M-23 Map 24: Fangchenggang -- Mangrove Square Detailed Design

YUZHOU

JIANZHENG ROAD

ROAD

DESIGN OF MANGROVE SQUARE Mangrove Sculpture Snacks n Drinks Seaview Dock Seaview Dock Mangrove Path Sculpture Square Parking Visitor Path Fountain Sea Lookout Reception Museum Forest Square Green Path

M-24 Map 25: Fangchenggang – Coastal Protection and Upgrading – Dyke Only Section

՟ोֽϏԍাխವ࿉෍ ILLUSTRATION OF DYKE ONLY SECTION

M-25 Map 26: Fangchenggang – Coastal Protection and Upgrading Component – Dyke-Mountain Road Section

া-ֽϏԍাխವ࿉෍ౖ ILLUSTRATION OF DYKE-MOUNTAIN ROAD SECTION

M-26 Map 27: Fangchenggang – Coastal Protection and Upgrading Component – Dyke-Road Section

াխವ࿉෍ۦԁা-ֽϏԍࠒ ILLUSTRATION OF DYKE-ROAD SECTION

M-27 Map 28: Fangchenggang – Coastal Protection and Upgrading Component – Public Education Point

PUBLIC EDUCATION POINT

M-28 Map 29: Fangchenggang -- Coastal Protection and Upgrading Component – Cross-Sectional Profile (1)

Bush and Vegetated Planned Dyke and Pedestrian Shore Trees and Grass Trees and Grass Grass CROSS-SECTIONAL Road Path Non-Motorized Road Path Protection Mangrove PROFILE OF DYKE ONLY SECTION

M-29 Map 30: Fangchenggang -- Coastal Protection and Upgrading Component – Cross-Sectional Profile (2)

Vegetated Bank Planned Road Vegetated Shore Wooden Walkway Mangrove Protection Protection

Trees and Planned Trees and Grass Path Mountain Wooden Mangrove Grass Road Walkway

ILLUSTRATION OF CROSS-SECTIONAL PROFILES OF DYKE-ROAD AND DYKE-MOUNTAIN ROAD SECTIONS

M-30 Map 31: Fangchenggang – Mangrove Distribution

Coastal Dyke Alignment (ADB) Expressway LEGEND City-Protected Mangrove State-Protected Mangrove Government Office Bldg

Xiwan Bay

Dongwan Bay Fangchenggang City

Pearl Bay

M-31 Map 32: Fangchenggang – Mangrove Distribution in Dongwan Bay

Government N OfficeᏖᬓЁ Building ᖗ 9

10 8

Xiwan㽓⑒ Bay

3 Dongwanϰ⑒ Bay 4 2

Fangchenggang䰆ජ␃Ꮦ LEGEND City 䆘Ӌ㣗ೈݙⱘ㑶ᷥᵫߚᏗ೒ Coastal䏃෸ Dyke Ꮉ⿟.shp Alignment 催䗳Highway ݀䏃.shp

Mangrove䆘Ӌ 㣗ೈݙ ⱘ㑶 ᷥᵫÖ 傕 ቯቓIsland.shp

M-30 Map 33: Chongzuo – Administrative Map

TIANDENG COUNTY

DAXIN COUNTY

LONGZHOU COUNTY FUSUI COUNTY

CHONGZUO CITY (JIANGZHOU DISTRICT)

PINGXINAG CITY

NINGMING COUNTY CITY CENTER

M-33 Map 34: Chongzuo – Present Status of Urbanization

Present Status of Urbanization in Chongzuo City

Pingguo

Debao ೑䘧 National Hwy ⳕ䘧 Provincial Hwy 䪕䏃 Railway ഄ㑻Ꮦ Prefectural City ও/ও㑻Ꮦ County or City Tiandeng ᮙ␌⚍ Tourist Site Ꮦ⬠ City Boundary ও⬠ County Boundary

Daxing

Fusui

Chongzuo Longzhou (Jiangzhou District)

Ningming Shangsi

Pingxiang Total population (10,000) Non-agricultural population (10,000) Urbanization rate (%) Area (km2) Population Density (person/km2) Fixed assets investment (CNY 10,000) GDP (CNY) Per-capita GDP (CNY)

Viet Nam

M-34 Map 35: Chongzuo – Urban Planning Boundary

CHONGZUO URBAN MASTER PLAN Planning Boundary for Urban Chongzuo (2020)

City Center Key Town Regular Town City Boundary Town Boundary Planned Urban Land Use Water Nalong Town Planned Urban Boundary

Zuozhou Town

Yulu Town

Xinhe Town

Sutuan Town Chongzuo Taiping Town

Jiangzhou Town Luobai Town

Banli Town

M-35 Map 36: Chongzuo – Centertown Development Plan

Chongzuo City Urban Development Plan (2020)

2020 Population: 50,000: Secondary Urban Dev Axis Orientation: administrative National Hwy Mining as pillar industry Provincial Hwy Key industries: metallurgy, building materials, Highway pharmaceutical and Railway agroprocessing 2020 Population: 50,000: Central City Central Town Orientation: tourism Key Town Mine processing and sugar as pillar Tiandeng Regular Town industry Resource processing border town Tourist Site City Boundary County Boundary CENTRAL Primary Urban Dev Axis

2020 Population: 80,000: Daxin Orientation: administrative ECONOMIC Sugar as pillar industry EAST Agroprocessing as key industry Key border town with historical Features Fusui ZONE

SOUTH ECONOMIC

CCChhhooonnngggzzzuuuooo

ZONE Longzhou 2020 Population: 80,000: ECONOMIC Orientation: administrative Mining as pillar industry Key industries: building materials, textile, food and agroprocessing Pingxiang Ningming

VIETNAM ZONE 2020 Population: 500,000:

Primary Urban Dev Axis Orientation: land-based gateway to CAFTA Subtropical agriculture, border industries, international 2020 Population: 150,000: 2020 Population: 150,000: trade and commerce, border tourism Orientation: industrial Orientation: comprehensive Featuring Zhuang ethnic minority culture and Secondary urban center mountain-water parks Advantageous location for Special zone for export and border trade trade Primary urban center for southwestern Guangxi Tourism resources Border trade, export Resource extraction processing and tourism

M-36 Map 37: Chongzuo – Project Components in Near-Term Urban Development Plan

CHONGZUO URBAN MASTER PLAN Chongzuo City Near-Term (2010) Urban Dev Plan

Residential Sports Warehouse Inter-City Transport Water Pump Stn Secondary School Medical Public Green Space Public Parking WWTP Government Higher Edu. + S&T Green Belt Road + Square Landfill Commercial + Fin. Municipal Facilities Mountain Forest Railway Recycling Center Hotel Class I Industrial Protected Area Wharf Waste Transfer Stn Market Class II Industrial Special Power Transmission Fire Station Cultural + Recreational Class III Industrial Water Plant Industrial Urban Road Network Park ADB-Financed Park

Industrial

Urban Ring Road Expway

Mountain

Shuikou Lake Environmental Improvement Shuikou Lake (ADB-Financed)

Urban Road Network (ADB-Financed)

Nanning-Friendship Gate (Vietnamese Border) Expwy

M-37 Map 38: Chongzuo – Project Components in Planned Urban Road Network

CHONGZUO URBAN MASTER PLAN Planned Urban Road Network for Urban Chongzuo (2020)

Industrial ADB-Financed Park

Park

Industrial

Urban Ring Road Expway

Shuikou Lake Environmental Improvement (ADB-Financed)

Mountain Residential

Expressway Water Secondary Hwy Rail Station/Yard Commercial & Urban Truck Rd Long Dist. Bus Financial Urban Primary Rd Wharf Shuikou Lake Tourist Road Public Parking Government Highway Turn Pike Railway

ADB-Financed

Nanning-Friendship Gate (Vietnamese Border) Expwy

M-38 Map 39: Project Road Network in Planned Public Transit System

CHONGZUO URBAN MASTER PLAN Public Transit Routes

Public Transit Route

ADB-Financed

Urban Ring Road Expway

ADB-Financed

Nanning-Friendship Gate (Vietnamese Border) Expwy

M-39 Map 40: Chongzuo – Shuikou Lake before Project

Overflow Weir

Railway

WATER SURFACE AFTER REHABILITATION Vocational College

Jiangnan No. 2 High School

Shuikou Village

Design Boundary

Wuwei Cement Factory Hwy Dormitory

Railway Highway Water Boundary Design Boundary Naqu Bldg Demolition Village Present Island Present Fish Pond

M-40 Map 41: Chongzuo – Shuikou Lake after Project

Overflow Weir

Railway

WATER SURFACE AFTER REHABILITATION Vocational College

Jiangnan No. 2 High School

Shuikou Village

Shijinglin Road

Wuwei Cement Factory Dormitory Hwy

Lakeside Pedestrian Path

Railway Highway Water Surface WWTP Design Boundary Planning Limit Lakeside Pedestrian Bldg Demolition Naqu Island Village Artificial Wetland Present Wetland Sludge Storage Site

M-41 Map 42: Baise – Location in China-ASEAN Free Trade Area

BAISE GUANGXI ZHUANG

MUNICIPALITY

AUTONOMOUS REGION

BAISE

Baise City

MUNICIPALITY

M-42 Map 43: Baise – Project Road and Bridge in Urban Master Plan

M-43 Map 44: Baise – Project Road and Bridge in Urban Master Plan

TRANSPORT NETWORK PLAN

M-44