Proposed Loan People's Republic of China: Anhui Integrated Transport
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Report and Recommendation of the President to the Board of Directors Project Number: 42018 November 2009 Proposed Loan People’s Republic of China: Anhui Integrated Transport Sector Improvement Project CURRENCY EQUIVALENTS (as of 30 October 2009) Currency Unit – yuan (CNY) CNY1.00 = $0.1465 $1.00 = CNY6.8280 ABBREVIATIONS ACIG – Anhui Communications Investment Group Company Limited ADB – Asian Development Bank AHAB – Anhui Highway Administration Bureau APDOT – Anhui Provincial Department of Transport APG – Anhui Provincial People's Government ATAB – Anhui Transport Administration Bureau CO2 – carbon dioxide EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return ICB – international competitive bidding LIBOR – London interbank offered rate NCB – national competitive bidding NH – national highway O&M – operation and maintenance pcu – passenger car unit PMO – Foreign Fund Project Management Office PRC – People’s Republic of China SDAP – social development action plan TA – technical assistance toe – ton of oil equivalent VOC – vehicle operating cost WACC – weighted average cost of capital XME – Xuzhou–Mingguang Expressway XMEC – Xuming Expressway Management Company Limited NOTES (i) The fiscal year of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 31 December 2009. (ii) In this report, "$" refers to US dollars. Vice-President C. Lawrence Greenwood, Jr., Operations 2 Director General K. Gerhaeusser, East Asia Department (EARD) Director T. Duncan, Transport Division, EARD Team leader X. Yang, Principal Transport Economist, EARD Team members I. Ahsan, Counsel, Office of the General Counsel L. Athukorala, Senior Financial Analysis Specialist, EARD S. Ferguson, Principal Social Development Specialist (Safeguards), EARD R. Hu, Procurement Officer, People’s Republic of China Resident Mission, EARD S. Noda, Transport Specialist, EARD A. Veron, Young Professional (Transport), EARD L. Cuevas-Arce, Senior Administrative Assistant, EARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. CONTENTS Page LOAN AND PROJECT SUMMARY i MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 3 III. THE PROPOSED PROJECT 7 A. Impact and Outcome 7 B. Outputs 7 C. Special Features 8 D. Project Investment Plan 9 E. Financing Plan 9 E. Implementation Arrangements 10 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 14 A. Policy and Institutional Improvements 14 B. Traffic Forecast 14 C. Economic Analysis 14 D. Financial Analysis and Projections 14 E. Social Impact 15 F. Environmental Impact 17 G. Risks 17 V. ASSURANCES AND CONDITIONS 17 A. Specific Assurances 17 B. Condition for Disbursement 20 VI. RECOMMENDATION 20 APPENDIXES 1. Design and Monitoring Framework 21 2. Transport Sector Analysis 23 3. Development Coordination 28 4. Policy Dialogue Matrix 31 5. Project Description 33 6. Sustainable Transport Analysis 38 7. Strategic Vehicle Emission Reduction Plan 42 8. Detailed Cost Estimates and Financing Plan 44 9. Project Organization Chart 46 10. Implementation Schedule 47 11. Contract Packages 48 12. Economic Analysis 50 13. Financial Analysis and Projections 55 14. Summary Poverty Reduction and Social Strategy 60 15. Summary Resettlement Plan 63 SUPPLEMENTARY APPENDIXES (available on request) A. Problems and Constraints Analysis B. Fund Flow Chart C. Procurement Plan D. Outline Terms of Reference for Consulting Services E. Monitoring of Socioeconomic and Poverty Impacts F. Financial Management Assessment G. Social Development Action Plan H. Stakeholder Participation and Consultations LOAN AND PROJECT SUMMARY Borrower People’s Republic of China (PRC) Classification Targeting classification: General intervention Sector (subsector): Transport, and information and communication technology (road transport) Themes (subthemes): Economic growth (promoting economic efficiency and enabling business environment, widening access to markets and economic opportunities); environmental sustainability (urban environmental improvement) Location impact: Rural (high impact), urban (medium impact) Environment Assessment Category A. A summary of the environmental impact assessment was circulated to the Board of Directors of the Asian Development Bank (ADB) and made public through the ADB website on 4 July 2009. Project Description The Project is located in Anhui Province, one of the poorest areas in the PRC. Its per capita gross domestic product was 64% of the national average in 2007; the province ranked 27th among the country’s 31 administrative areas. The Project is designed to promote inclusive growth and balanced development in Anhui, and improve resource efficiency and environmental sustainability. The Project will contribute to an integrated road transport system in Anhui by (i) constructing a 139-kilometer (km) expressway and associated facilities between Xuzhou and Mingguang; (ii) upgrading, rehabilitating, and providing safety measures on 452 km of existing local roads; (iii) improving village bus services in poorer areas; and (iv) providing institutional strengthening and capacity building for the Anhui Provincial Department of Transport (APDOT), its related agencies, and Anhui Communications Investment Group Company Limited (ACIG). Rationale The underdeveloped transport system and associated high transportation costs are major barriers to poverty reduction in Anhui. Rural poverty incidence is high in the project area, particularly in Huaibei Plain in the north and Dabie Mountain area in the south. Lower transportation costs and enhanced transport sector management will promote inter- and intraprovincial trade, encourage investment in the project area, create jobs, and increase competitiveness. The Project will contribute to ADB's country partnership strategy for the PRC (2008–2010). It will help (i) improve connectivity, competitiveness, and balanced development in Anhui; (ii) reduce poverty by expanding affordable access to markets, services, and other job opportunities to the poor; and (iii) manage resource scarcity and environmental challenges by improving transport planning, environmental supervision, and resource optimization. ii The Project reflects ADB’s transport sector strategy, which focuses on (i) financing new roads that connect major growth centers, supported by a system of local roads; (ii) developing and improving urban transport and rural roads; (iii) promoting road safety, (iv) reducing vehicle emissions and increasing energy efficiency; (v) improving the commercial orientation and efficiency of expressway organizations; and (vi) promoting sustainable transport. The Project is accorded priority in the Government's 11th Five- Year Plan, and forms an integral part of the planned network formulated under the Government's central region development strategy. It will strengthen regional integration and competitiveness of Anhui. It is consistent with the PRC’s development priorities to reduce regional disparities between inland and coastal regions, and between rural and urban areas. The Project will enhance transport sector management in Anhui. It will (i) contribute to an integrated transport network across the province; (ii) initiate a comprehensive safety enhancement program to mitigate the accident risks associated with the project road improvement program; (iii) integrate a village bus services demonstration project to foster better, safer, and more responsive bus services in rural areas; (iv) promote resource optimization; and (v) improve environment, health, and safety management by appointing an independent environmental supervision team during implementation. Through the Project, ADB is supporting APDOT in building its capacity for sound public policy choice and implementation. During project preparation, ADB provided advice on the merit of various project alternatives and this helped APDOT to improve the design of the Project. ADB helped APDOT update policies and services to deliver transport in an economically, financially, environmentally, and socially sustainable manner. Impact and Outcome The Project will contribute to an integrated road transport system to support the Central Region Development Strategy. This will be achieved by developing an efficient, affordable, safe, and sustainable transport system to promote inclusive growth and balanced development, and improve resource efficiency and environmental sustainability. Project Investment Plan The investment cost of the Project is estimated at $1,355.0 million, including taxes and duties of $45.7 million. Of the $200.0 million ADB loan, $118.5 million will finance the project expressway component, $80.0 million will finance the local roads, safety, and village bus services demonstration components; and $1.5 million will finance the institutional strengthening component. iii Financing Plan Amount Source ($ million) Asian Development Bank 200.0 Domestic Bank Loans 598.8 Ministry of Transport 119.1 Anhui Communications Investment Group Company Limited 320.9 Anhui Provincial People’s Government 116.2 Total 1,355.0 A loan of