Document of the World Bank

Home , Guangde

Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: PAD1602

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$150 MILLION

Public Disclosure Authorized TO THE

PEOPLE’S REPUBLIC OF CHINA

FOR A

ANHUI ROAD MAINTENANCE INNOVATION AND DEMONSTRATION PROJECT

JANUARY 26, 2017

Public Disclosure Authorized

Transport and ICT Global Practice East Asia and Pacific Region

Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Exchange Rate Effective November 1, 2016

Currency Unit = Renminbi (RMB) RMB 6.62 = US$1 US$0.15 = RMB 1

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AHAB Anhui Highway Administration Bureau AMS Asset Management System APFB Anhui Provincial Finance Bureau CRAMS China Road Asset Management System DA Designated Account EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan FCUO Foreign Capital Utilization Office FM Financial Management FMM Financial Management Manual FSR Feasibility Study Report GDP Gross Domestic Product GHG Greenhouse Gas GRS Grievance Redress Service HDM Highway Design and Management Model ICB International Competitive Bidding IRI International Roughness Index LOS Level of Service MoF Ministry of Finance MoT Ministry of Transport NCB National Competitive Bidding NPV Net Present Value O&M Operations and Maintenance OPRC Output- and Performance-based Road Contracts PBC Performance-based Contracting PDO Project Development Objectives PIE Project Implementing Entity PIU Project Implementation Unit PMO Project Management Office PP Procurement Plan PQI Pavement Quality Index ROW Right-of-Way

RPF Resettlement Policy Framework SA Social Assessment SORT Systematic Operations Risk-Rating Tool

Regional Vice President: Victoria Kwakwa, EAPVP Country Director: Bert Hofman, EACCF Senior Global Practice Director: Jose Luis Irigoyen, GTITR Practice Manager: Binyam Reja, GTI10 Task Team Leader: Xiaoke Zhai, GTI10

CHINA Anhui Road Maintenance Innovation and Demonstration Project

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT ...... 1 A. Country Context ...... 1 B. Sectoral and Institutional Context ...... 2 C. Higher Level Objectives to which the Project Contributes ...... 5

II. PROJECT DEVELOPMENT OBJECTIVES ...... 5 A. PDO...... 5 B. Project Beneficiaries ...... 5 C. PDO Level Results Indicators ...... 6

III. PROJECT DESCRIPTION ...... 6 A. Project Components ...... 6 B. Project Financing ...... 8 C. Lessons Learned and Reflected in the Project Design ...... 9

IV. IMPLEMENTATION ...... 10 A. Institutional and Implementation Arrangements ...... 10 B. Results Monitoring and Evaluation ...... 11 C. Sustainability...... 11

V. KEY RISKS ...... 12 A. Overall Risk Rating and Explanation of Key Risks ...... 12

VI. APPRAISAL SUMMARY ...... 13 A. Economic and Fiscal Analysis ...... 13 B. Technical ...... 14 C. Financial Management ...... 14 D. Procurement ...... 15 E. Social (including Safeguards) ...... 15 F. Environment (including Safeguards) ...... 16 G. World Bank Grievance Redress ...... 17

Annex 1: Results Framework and Monitoring ...... 18

Annex 2: Detailed Project Description ...... 26

Annex 3: Implementation Arrangements ...... 32

Annex 4: Implementation Support Plan ...... 41

Annex 5: Economic and Fiscal Analysis ...... 44

Annex 6: Climate Change Resilience ...... 54

. PAD DATA SHEET

CHINA

Anhui Road Maintenance Innovation and Demonstration Project (P153173)

PROJECT APPRAISAL DOCUMENT

EAST ASIA AND PACIFIC

0000009381

Report No.: PAD1602

. Basic Information Project ID EA Category Team Leader(s) P153173 B - Partial Assessment Xiaoke Zhai Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 31-Mar-2017 31-Dec-2023 Expected Effectiveness Date Expected Closing Date 01-Jul-2017 31-Dec-2023 Joint IFC No Practice Senior Global Practice Country Director Regional Vice President Manager/Manager Director Binyam Reja Jose Luis Irigoyen Bert Hofman Victoria Kwakwa

. Borrower: People's Republic of China Responsible Agency: Anhui Provincial Transport Department Contact: Mr. Jie Luo Title: Director Telephone No.: 8613805696789 Email: [email protected]

. Project Financing Data (in US$, million) [ X ] Loan [ ] IDA Grant [ ] Guarantee [ ] Credit [ ] Grant [ ] Other

Total Project Cost: 291.84 Total Bank Financing: 150.00 Financing Gap: 0.00

. Financing Source Amount Borrower 141.84 International Bank for Reconstruction and 150.00 Development Total 291.84

. Expected Disbursements (in US$, million) Fiscal Year 2018 2019 2020 2021 2022 2023 2024 Annual 5.00 30.00 30.00 30.00 30.00 15.00 10.00 Cumulative 5.00 35.00 65.00 95.00 125.00 140.00 150.00

. Institutional Data Practice Area (Lead) Transport & ICT Contributing Practice Areas

Proposed Development Objective(s) The Project Development Objective (PDO) is to improve highway maintenance delivery and asset management capacity in the participating municipalities and county in Anhui Province.

. Components Component Name Cost (US$, millions) Component A: Road Asset Management System Upgrade 1.31 Component B: Road Maintenance Commercialization 131.71 Component C: Innovative and Preventive Maintenance 111.90 Technologies Component D: Emergency Response Capacity 11.54 Component E: Institutional Capacity Building 0.94

. Systematic Operations Risk- Rating Tool (SORT) Risk Category Rating 1. Political and Governance Low 2. Macroeconomic Moderate 3. Sector Strategies and Policies Moderate 4. Technical Design of Project or Program Substantial 5. Institutional Capacity for Implementation and Sustainability Substantial

6. Fiduciary Substantial 7. Environment and Social Moderate 8. Stakeholders Moderate 9. Other OVERALL Substantial

. Compliance Policy Does the project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects?

. Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ]

. Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X

. Legal Covenants Name Recurrent Due Date Frequency Preparation of midterm review report March 31, 2020 Description of Covenant Project Agreement. Section II.A.2 of the Schedule. Without limitation to the provisions of paragraph A.1 above, the Project Implementing Entity (PIE) shall prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank no later than March 31, 2020, a consolidated midterm review report for the Project, summarizing the results of the monitoring and evaluation activities carried out from the inception of the Project, and setting out the measures recommended to ensure the efficient completion of the Project and to further the objectives thereof. Name Recurrent Due Date Frequency Implementation arrangements

iii

Description of Covenant

Project Agreement. Section I.A.1 of the Schedule. The PIE shall maintain, and cause to be maintained, the Project Management Office (PMO) and the Project Implementation Units (PIUs) with composition, powers, functions, staffing, facilities and other resources satisfactory to the World Bank. Name Recurrent Due Date Frequency Preparation of Annual Work Plan √ Dec. 31 Yearly Project Agreement. Section I.A.2 of the Schedule. The PIE shall, and shall cause the Participating Municipalities and County, to: (a) carry out activities under the Project during each fiscal year in accordance with Annual Work Plans agreed with the Bank; (b) prepare and furnish to the Bank by December 15 in each year (beginning on February 28, 2017, for the calendar year 2017), a draft Annual Work Plan for review and comment, summarizing the implementation progress of the Project for the said year and the Project activities to be undertaken for the following calendar year, including the proposed annual budget for the Project; and (c) taking into account the Bank’s comments, finalize and furnish to the Bank no later than December 31 in each year (except for the 2017 work plan, which should be finalized no later than March 31, 2017), the Annual Work Plan, satisfactory to the Bank.

. Team Composition Bank Staff Name Role Title Specialization Unit Xiaoke Zhai Team Leader Senior Transport. Transport, Task GTI10 (ADM Specialist Team Leader Responsible) Alejandro Alcala Gerez Team Member Senior Counsel Law LEGES Zhuo Yu Team Member Finance Officer Disbursement WFALN Jianjun Guo Procurement Senior Procurement Procurement GGODR Specialist Specialist Yi Geng Financial Senior Financial Financial GGODR Management Management Management Specialist Specialist Anita Shrestha Team Member Transport Analyst Fiscal Analysis, GTI02 M&E Kulwinder Singh Rao Team Member Senior Highway Performance-based GTI07 Engineer Contracting Lei Wu Team Member Program Assistant EACCF Peishen Wang Safeguards Consultant Environment GEN02 Specialist Vellet E. Fernandes Team Member Temporary GTI02 Zhefu Liu Safeguards Senior Social Social GSURR Specialist Development Development Specialist Rodrigo Archondo- Team Member Senior Highway HDM-4 specialist GTI03 Callao Engineer

Shanshan Ye Team Member Team Assistant EACCF Simon Ellis Peer Reviewer Lead Transport Road Asset GTI03 Specialist Management Andreas Schliessler Peer Reviewer Lead Transport Roads and GTI08 Specialist Highways Ben Gericke Peer Reviewer Lead Transport Transport GTI07 Specialist Gregoire Gauthier Peer Reviewer Sr. Transport Roads and GTI04 Engineer Highways Extended Team Name Title Office Phone Location Hongye Fan Transport Consultant Beijing Yuan Shao Transport Consultant Beijing

. Locations Country First Location Planned Actual Comments Administrative Division China Anhui Province Municipalities of x Hefei, Chuzhou, Suzhou, Anqing, and Xuancheng, and Guangde County

. Consultants (Will be disclosed in the Monthly Operational Summary)

Consultants Required? Consultants will be required

I. STRATEGIC CONTEXT

A. Country Context

1. China achieved remarkable economic growth during its economic reform period with roughly 80 percent of global extreme poverty reduction. Between 1981 and 2012, the World Bank estimates that the portion of the population consuming below the poverty line of US$1.25 per day in 2005 purchasing power parity fell from 84.3 percent to 5.2 percent and the absolute number of poor fell from 837.5 million to 70.4 million. Using the new international poverty line of US$1.9 per day in 2011 purchasing power parity, the share of the population living in poverty fell from 66.6 percent in 1990 to 1.9 percent in 2013, while the absolute number of poor people fell from 755.8 million to 25.11 million. However, economic growth has not been spread evenly throughout the country. There are growing disparities between the more prosperous eastern/coastal regions and the western and central provinces. Income per capita in the western and central provinces is less than half the income per capita in some of the coastal provinces.

2. Anhui Province, though located in eastern China, has not been an equal beneficiary of the growth of the last three decades. Compared to its neighbors to the east, Zhejiang and Jiangsu Provinces, Anhui has lagged behind in economic development. Anhui’s gross domestic product (GDP) reached US$5,500 per capita in 2014,1 which was about 47 percent and 42 percent, respectively, of the GDP per capita of the more prosperous Jiangsu and Zhejiang Provinces. There is also a significant disparity in the quality of the transportation network: in 2014, the average Pavement Quality Index (PQI)2 for highways in Anhui Province was 83.6, while for Jiangsu Province, it was 94.6.

3. To reduce development disparities between regions, promote more inclusive growth, and share the benefits of economic development more widely, the Government of China launched the ‘Rise of Central China Plan’ in 2004. The plan aims to accelerate the development of its central regions covering six provinces: Anhui, Shanxi, Henan, Hubei, Hunan, and Jiangxi. In line with the Government’s initiative, the Anhui Provincial Government launched a strategy of ‘Development of the East’, focusing on transport as one of the priorities to expedite the province’s connections with the wealthier regions of the Yangtze River Delta.

4. The May 2015 national development strategy for ‘Belt and Road Initiative’ to establish the New Silk Road Economic Belt, linking China with Europe through central and western Asia, is opening new opportunities for Anhui’s development. The framework of ‘Belt and Road Initiative’ characterizes Anhui Province as an inland region with a vast landmass, rich human resources, and a strong industrial foundation that will prosper with a better transport corridor connecting the eastern, central, and western regions.3

1 National Statistics Bureau, 2015. 2 PQI measures the quality of pavement according to the Chinese National Standards - Highway Technical Condition Evaluation Standard (JTG H20-2007), issued by the Ministry of Transport (MoT). 3 The Silk Road Economic Belt and the 21st Century Maritime Silk Road, May 2015. 1

B. Sectoral and Institutional Context

5. Highway sector in China. The proposed project has been developed in the context of China’s renewed focus on the maintenance of highway assets created during the last two decades, with an emphasis on asset management system (AMS) reform and innovation. This is in line with the Government’s top priorities in the 13th Five-Year Plan (2016–2020) that focuses on continued economic development with an emphasis on reform and innovation, quality over quantity, and fostering urbanization in a sustainable manner.

6. China currently has the second largest road network and the longest expressway network in the world. China’s highway network has expanded greatly since economic reforms began in 1978, increasing from about 900,000 km in 1981 to a total of 4.46 million km in 2014.4 China’s long-term target for total road length is about 5 million km. Future expansion will mostly be limited to completing missing links and extending the network to less-developed regions in the western and central parts of China. The MoT is responsible for the overall administration of the highway sector and the development of national sector plans, strategic programs, policies, and technical standards, while the provincial governments are responsible for developing, financing, and maintaining national and provincial highways in their jurisdictions. The provincial departments of transport are responsible for the overall construction and maintenance of national and provincial highways (trunk highways) in their respective provinces, though some provinces have further decentralized some of these responsibilities to municipalities and counties. Lower-level governments are generally responsible for rural and urban roads in their jurisdictions. China’s expressway network is developed, operated, and maintained by special-purpose expressway companies that are established by each province, which collect tolls to repay capital costs and cover operations and maintenance (O&M) expenditures.

7. Road maintenance in China has been underfunded and is carried out with little commercial sector participation and performance culture. Road maintenance is exposed to challenges such as lack of scientific basis for asset maintenance planning and programming, little modernization, lack of a performance culture and accountability for results, and budgetary allocations for maintenance being well below the required level. According to one study,5 China needs an estimated US$90 billion for the construction and maintenance of non-tolled national and provincial roads and rural roads (US$55 billion for construction and US$35 billion for maintenance) each year from 2010 to 2020 under a ‘business-as-usual’ scenario. However, current annual government road funding for the same period is estimated to be only US$56 billion.

8. Many provinces in China have implemented the China Road Asset Management System (CRAMS), a Chinese version of an AMS built around international practices, which offers several modules relevant to the management of roads and bridges. However, in several provinces, including Anhui, implementation has not been successful due to (a) lack of staff capacity, (b) weak integration with several other computerized systems that hold overlapping data with CRAMS, (c) lack of budgets to maintain and upgrade CRAMS software, and (d) lack of business reforms needed to adopt CRAMS outputs in decision making. Maintenance decisions in many provinces are still based on basic reactive approaches and not on more appropriate preventive asset management

4 http://www.statista.com/statistics/276051/total-length-of-public-roads-in-China/ 5 Financing Road Construction and Maintenance after the Fuel Tax Reform, Asian Development Bank, 2012. 2

approaches. Moreover, the preventive maintenance approach is not integrated into the reconstruction and rehabilitation program.

9. The commercial sector (which includes State Owned Enterprises) is not involved in road maintenance planning or programming for highways and provincial roads. However, it delivers rehabilitation and periodic maintenance works through traditional contracting methods. Routine maintenance works and small-scale reconstruction are mostly delivered by in-house teams (force account). The involvement of the commercial sector in programming has been piloted on a small scale, for instance, through performance-based contracting (PBC) of routine maintenance works to contractors or to micro-enterprises.

10. The MoT has recognized that highway maintenance has lagged behind highway construction and is now encouraging provincial departments of transport to focus their financing and organizational resources toward maintaining the road network. Chinese road authorities are increasingly looking for efficient and effective methods for improving maintenance planning, programming, and delivery.

11. Anhui highway sector. Highway maintenance programming in Anhui Province is guided by Anhui Provincial Highway Maintenance Management, whose objectives are to (a) maintain the PQI of national and provincial highways at 80 percent or higher and keep 90 percent of the roads in good condition; (b) improve management capacity and maintenance; (c) increase the length of roads annually receiving periodic maintenance and rehabilitation from 13 percent to 18 percent; (d) repair at least 97 percent of all road damage from flooding, with less than 3 percent recurrent events; (e) reach 100 percent township administration of rural highway maintenance; (f) complete emergency management systems; (g) apply new technologies for 60 percent of works; and (h) develop a highway maintenance manual. This project is designed to assist Anhui Highway Administration Bureau (AHAB) in meeting a selection of these objectives.

12. The highway network of Anhui Province has more than doubled over the last eight years, from over 71,000 km in 2006 to about 174,000 km6 by the end of 2014.7 The total network of national and provincial trunk roads, which are the focus of this project, now comprises over 13,000 km of paved roads. In 2014, passenger traffic volume accounted for 1.31 billion persons and freight volume accounted for 3.15 billion tons.

13. According to the survey in 2014, only 76 percent of the roads in Anhui Province have a PQI of 80 or higher, leaving 24 percent of the network in fair, poor, or bad condition. As the survey was conducted only on the main corridors, the picture for the whole network may be worse. The roads included in the project have an average PQI of 60, far lower than the provincial average of 83.6.

14. AHAB is responsible for the regulation and guidance of national and provincial trunk highway maintenance, while the transportation authorities of municipalities are responsible for the

6 The total 174,373 km network comprises 5,128 km of national highways, 8,127 km of provincial highways, 24,226 km of county roads, 36,493 km of township roads, 1,002 km of private roads, and 99,397 km of village roads. 7 The draft Feasibility Study Report (FSR) of the project, May 2015. 3

maintenance and supervision of trunk highways, as well as for fundraising to supplement the subsidies provided by the provincial governments.

15. While rehabilitation and periodic maintenance on a project basis are contracted to commercial enterprises using traditional contracts, routine maintenance works on trunk highways are carried out by force account.

16. As part of a decentralization reform in Anhui, municipalities and counties are now responsible for a significant share of the road budget. The provincial finance department provides subsidies (derived from fuel tax and from the central government) to municipalities for periodic and rehabilitation repairs. These subsidies are allocated on a per kilometer basis for specific projects at rates of US$100,000–US$150,000 per km depending on the road class. Municipalities and counties are responsible for the remaining expenses from their general fiscal revenues.

17. Road budgets for maintenance and rehabilitation vary greatly from year to year (in 2010, the budget was about US$170 million, and in 2014, it was about US$320 million), and are far below current estimated needs. The Provincial Highway Bureau estimates the total annual needs for rehabilitation and periodic maintenance to be about US$630 million, that is, about double the 2014 allocation. The allocation for routine maintenance and small-scale reconstruction has been more stable at about US$200 million a year. There is also a financing gap for these works, and local authorities sometimes assist with own funds on an ad hoc basis to close or minimize the gap.

18. Challenges in road maintenance in Anhui. As in many other provinces in China, Anhui’s focus on maintenance is recent, and the capacity for road maintenance is much lower than for road development. There are weaknesses in most asset management–related capabilities; for example, budgeting, systems, governance, and maintenance delivery. The decentralization reform has resulted in some uncertainties about roles, accountability, and coordination between different stakeholders and has also delegated road asset management to administrative levels that are less developed compared to the provincial levels, which had previously assumed these obligations. As a result, road asset management is experiencing significant institutional challenges in planning and design.

19. CRAMS is in place in most of the municipalities, and data for the main roads are collected on a two-year cycle; however, the system output is not fully used in decision making, and business processes have not been reformed to take advantage of the capabilities linked to CRAMS. It is reported that rehabilitation and periodic maintenance works are delivered effectively. However, the data used for their design is very basic, which raises concerns on the efficiency of investments. Moreover, quality problems have been reported. Routine maintenance is applied with low efficiency, which the road authorities find difficult to improve, given that work is done in-house, the work force is ageing, and there are constraints in hiring replacements to retiring staff.

20. National regulations require provinces to maintain emergency maintenance capabilities. The maintenance emergency response centers in Anhui have ageing equipment, are understaffed, and lack skilled personnel. These result in road closures during emergencies that are longer than necessary.

21. To support the recent increased focus on maintenance, recognizing the significant challenges with many of the asset management–related capabilities, and the need for improving performance, Anhui Province has proposed a project focusing on improving road management capacity at lower levels of administration, improving maintenance delivery through commercialization of maintenance, adopting new preventive maintenance technologies, and improving emergency response capabilities.

C. Higher Level Objectives to which the Project Contributes

22. Country Partnership Strategy. The proposed project is aligned with the 2013–2016 World Bank Group’s Country Partnership Strategy (CPS) for China (Report No. 67566-CN), which was discussed by the Board of Executive Directors of the World Bank on November 6, 2012. The project focuses on three main pillars: greener growth, inclusive development, and mutually beneficial relations with the world. The proposed project supports the CPS pillar for inclusive development by lowering transportation costs for more balanced regional development and wider access to transportation, including for the poor. The project is also aligned with China’s 13th Five- Year Plan (2016–2020) that focuses on continued economic development with emphasis on reform and innovation, as well as directly targeting many of the objectives of Anhui Provincial Highway Maintenance Management strategy.

23. Twin goals. The proposed project supports the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity. The participating municipalities and county had a population of about 6.45 million (23 percent of the total 28.06 million population in the five participating municipalities and the participating county8) living in poverty in 2013 (below the US$1.9 per day international poverty line).9 Most of the poor live in rural areas and depend on transportation for employment, business needs, and trips to the market, as do local vulnerable groups. Improved road conditions and the new emergency centers built under this project will bring shared prosperity by providing better road service for the rural poor, which will support better employment, business opportunities, and a competitive market within the province and with neighboring provinces. The project will also help make travel during extreme weather conditions safer, better manage trunk highways, and contribute to the overall economic development of Anhui Province.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

24. The Project Development Objective (PDO) is to improve highway maintenance delivery and asset management capacity in the participating municipalities and county in Anhui Province.

B. Project Beneficiaries

25. The main project beneficiaries are the users of project roads, communities along the roads, and businesses associated with road maintenance. Road users, who accumulate an estimated 2.7 billion vehicle-km annually on the project roads, will benefit from better road conditions, reduced

8 Hefei, Chuzhou, Suzhou, Anqing, and Xuancheng municipalities and Guangde County. 9 The FSR, September 2015. 5

travel times, and better services. Communities along the roads will benefit from improved access to markets and services, while the enhanced maintenance works activities will provide increased business opportunities for contractors as well as people living in the project areas. As most of the project roads are in rural areas, where the poor population lives, the project will, in particular, benefit the poor.

26. The project’s focus on improving road maintenance practices in planning and delivery and response to emergency events will also directly benefit local governments by freeing up fiscal space, which could in turn be used to increase road maintenance standards beyond the project roads or to other programs. In addition, the staff from local governments at all levels that are responsible for road maintenance will benefit from the institutional capacity building activities.

27. Social and gender equality will continue to be promoted throughout project implementation through wide and equal participation of and consultation with workers (in particular women) along the road sections. Equal participation and gender responsiveness will be reflected in project activities, including training and in other capacity-building activities.

C. PDO Level Results Indicators

28. The achievement of the PDO will be measured through the following indicators:

(a) Project roads in good and fair condition (Percentage)

(b) Emergency events under the jurisdiction of the emergency centers responded to within specified time limits (Percentage)

(c) Proposed rehabilitation and periodic maintenance works program based on the recommendations of the asset management system (Percentage)

(d) Highway asset management capacity (Number)

29. Indicators (a) and (b) will measure the ‘service delivery’ aspects of the PDO. Indicators (c) and (d) will measure the ‘asset management capacity’ aspects of the PDO.

III. PROJECT DESCRIPTION

A. Project Components

30. The project will focus its activities in six selected jurisdictions in Anhui Province—the municipalities of Hefei, Chuzhou, Suzhou, Anqing, and Xuancheng and Guangde County.10 The project comprises five components: Component A focuses on providing better systems for decision making and reforming business processes to ensure that these improved systems translate into better decisions; Component B focuses on improving maintenance delivery through better contracting models and improving work quality and value for money; Component C focuses on improving maintenance delivery through better technologies and thus increasing value for money;

10 Although Guangde is a county, it reports directly to the provincial administrative level and hence is not part of the jurisdiction of Xuancheng Municipality, which surrounds Guangde County. 6

Component D focuses on reducing the time taken to respond to emergency events and restoring road service promptly; and Component E focuses on providing relevant training to stakeholders. The project components are described briefly in the following paragraphs; a more detailed description is provided in annex 2.

31. Selection of road sections. Component B focuses on creating contract packages comprising adjacent roads that would require a mixture of maintenance works to be performed over the contract period, which are also attractive to potential bidders. Component C has focused on locating specific road sections needing maintenance that match the criteria for the innovative technologies to be tested.

Component A: Road Asset Management System Upgrade (Total Cost: US$1.31 million, IBRD: US$1.31 million)

32. This component will finance improvements in business processes through, among others, (a) the preparation of analyses and studies, system design, and provision of technical assistance; (b) the development and/or upgrading of computerized AMSs, including road databases, asset management applications, and information publishing systems; (c) systems operation and management; and (d) training related to systems’ operation.

33. The backbone of the system will be based on commercial-off-the-shelf systems; however, two of the modules will adopt bespoke development (project management module and public information system). The systems upgrade will include integration of different management systems as well as features to engage road users in road asset monitoring. Based on lessons learned from similar activities, this component will focus on issues beyond computerized systems and will hence include the development and implementation of a ‘to be’ model,11 that is, of revised work organization and business processes, which will support better decision making for maintenance planning and programming.

Component B: Road Maintenance Commercialization (Total Cost: US$131.71 million; IBRD: US$77.55 million, Counterpart Funds: US$54.16 million)

34. This component will finance (a) rehabilitation, upgrading, and maintenance of selected roads in the participating municipalities/county (such as base reconstruction, resurfacing, paving, and/or asphalt concrete overlaying, as the case may be, including associated shoulders, sidewalks, drainage, masonry, signage, lighting, and ancillary works plus road safety improvements), utilizing a PBC model; and (b) provision of technical assistance, including the carrying out of related studies.

35. Each PBC contract will be of five-year duration and will comprise about 50–150 km of roads, forming contiguous networks. The contracts will include provisions for input- or output- based works, including selected emergency works and implementation of road safety measures.

11 The ‘to be’ model refers to the revised work organization and business processes, which will support a more efficient road asset management. The ‘to be’ model is defined as the ‘model that results from incorporating improvements in the current (as is) model’ (see, for instance, www.businessdictionary.com). 7

Contract performance will be monitored and evaluated through the provision of technical assistance.

Component C: Innovative and Preventive Maintenance Technologies (Total Cost: US$111.90 million; IBRD: US$58.91 million, Counterpart Funds: US$52.99 million)

36. This component will finance (a) application of innovative maintenance technologies for improvement, rehabilitation, and resurfacing works on selected national and provincial roads, using traditional ad-measurement contracting models; and (b) provision of technical assistance, including the carrying out of related studies.

37. Pavement technologies will include technologies already tested on a small scale but not yet incorporated in the Anhui portfolio, as well as technologies not yet tested in Anhui. Roads covered by this component will not be included under the PBC contracts. Studies of the performance of each tested technology will be undertaken to determine which technologies are the most promising for provincial rollout.

Component D: Emergency Response Capacity (Total Cost: US$11.54 million; IBRD: US$10.92 million, Counterpart Funds: US$0.62 million)

38. This component will finance (a) construction of maintenance emergency response centers in Hefei and Chuzhou municipalities; (b) installation of required maintenance emergency equipment in six emergency centers; and (c) development of emergency management systems in the participating municipalities/county and provision of related technical assistance.

Component E: Institutional Capacity Building (Total Cost: US$0.94 million; IBRD: US$0.94 million)

39. This component will finance provision of project implementation support, including technical assistance activities, carrying out of strategic sector studies, monitoring and evaluation, and project management-related training, capacity building, and study tours.

40. Strategic studies will include (a) assessment of funding requirements for the provision of sustainable funding for maintenance in Anhui and (b) strategies for the dissemination of experience on PBC contracts to support potential provincial and national rollout.

B. Project Financing

41. Lending instrument. The proposed lending instrument for this project is Investment Project Financing. The Borrower has selected a U.S. dollar-denominated, commitment-linked variable-spread loan based on six-month LIBOR plus an additional variable spread, as well as all available conversion options, an annuity repayment profile, and a repayment period of 20 years, including a 6-year grace period.

42. Project Cost and Financing. Table 1 presents project costs and World Bank financing by components.

Table 1. Project Cost and Financing Plan (RMB 6.50 = US$1)12

Financing Plan Total Cost Total Cost IBRD Counterpart Project Cost by Component (RMB, (US$, % IBRD (US$, (US$, millions) millions) Financing millions) millions) Component A: Road Asset Management 8.50 1.31 1.31 — 100 System Upgrade Component B: Road Maintenance 856.14 131.71 77.55 54.16 59 Commercialization Component C: Innovative and 727.33 111.90 58.91 52.99 53 Preventive Maintenance Technologies Component D: Emergency Response 75.00 11.54 10.92 0.62 95 Capacity Component E: Institutional Capacity 6.10 0.94 0.94 — 100 Building Other costs* 91.66 14.10 — 14.10 — Total Baseline Cost 1764.72 271.50 149.63 121.87 55 Contingencies 70.13 10.79 — 10.79 — Total Project Costs 1,834.86 282.29 149.63 132.66 53 Interest and Commitment Fee during 59.65 9.18 — 9.18 — Implementation Front-end Fee 2.43 0.37 0.37 — — Total Financing Required 1,896.94 291.84 150.00 141.84 51 Note: *Other costs consist of the overall project costs related to preparation, implementation, management, technical design, procurement, supervision, and so on.

C. Lessons Learned and Reflected in the Project Design

43. The proposed project has been designed based on lessons learned from previous transport projects in Anhui Province (Anhui Highway Rehabilitation and Improvement Project) as well as from similar projects in other countries and from the findings of the Independent Evaluation Group report13 on highway maintenance. Some of the key lessons reflected in this project include the following:

(a) New maintenance technologies. The previous transport project in Anhui implemented a range of new recycling technologies, of which, cold recycling has proven to be cost- effective and has since been adopted in the Anhui maintenance portfolio. The proposed project will continue the practice of piloting new maintenance technologies, focusing on preventive technologies that are not currently used in Anhui or are used only on a limited scale (for example, Nova-surfacing and micro-surfacing).

(b) PBC contracts. Because of a less-than-optimal contract duration (two years) and the small size of the contract (covering only two road segments), the pilot PBC experience under the previous transport project in Anhui failed to lower maintenance costs and motivate contractors to make long-term decisions. The focus of the design in this project has been

12 The exchange rate is the same as that in FSR approved by Anhui DRC in May 2016. 13 ‘Improving Institutional Capability and Financial Viability to Sustain Transport’ published by Independent Evaluation Group, March 2013. 9

on developing contract packages that will be attractive to the commercial sector, by selecting suitable adjacent road networks that support a balanced and attractive work program comprising rehabilitation, periodic maintenance, and routine maintenance works throughout a contract period of five years. In designing the contract packages, international best practice has been contextualized based on a dialogue with the commercial sector on their preferences.

(c) Asset management systems. A review of World Bank road asset management projects14 showed that the successful implementation of road management systems comprises a balance between (i) processes, (ii) people, (iii) technologies, and (iv) funding. This has been recognized in the design of the project, which thus focuses on implementing suitable technologies, providing staff training, addressing business process reforms, and determining the operational budgets necessary to embed the acquired capabilities.

(d) Funding for maintenance. According to the Independent Evaluation Group report (Report No. 77092) cited earlier, projects that identify maintenance funding risks are more likely to be sustained in the long run. Non-availability of sufficient counterpart funding has been identified as one of the risks, and detailed fiscal analysis has been conducted to assess the availability of adequate funding for project implementation and for subsequent O&M. The scope of the project has been aligned with the fiscal capacity of the participating municipalities/county. The project also includes strategic studies on the maintenance funding levels necessary to sustain project-financed road assets.

(e) Capacity for project implementation and supervision. To properly implement and manage safeguards the Uganda Transport Sector Development Project “Lessons Learned and Agenda for Action” report recommends: (a) ensuring adequate borrower institutional capacity on environmental and social issues, (b) identifying key environmental and social risks that need to be addressed, and (c) handling complaints from affected individuals or communities. This project reflects these recommendations.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

44. Anhui Provincial Department of Transport will provide strategic guidance and advice during implementation of the proposed project. The Foreign Capital Utilization Office (FCUO) will serve as the provincial Project Management Office (PMO) and will be jointly responsible for day-to-day project implementation together with AHAB. FCUO will provide overall coordination, while AHAB will provide sectoral administration, instructions, and supervision of project activities. The provincial PMO and AHAB will be responsible for project management, procurement, safeguards, monitoring and reporting, and communication with the World Bank. AHAB will be responsible for the implementation of Components A and E (Studies); the provincial PMO will be responsible for the implementation of Component E (Training).

14 McPerson, K., and C. Bennett. 2015. Success Factors for Road Management Systems. Washington, DC: World Bank. 10

45. Highway Bureaus of the respective project municipalities and county will serve as Project Implementation Units (PIUs) and will implement project activities in their jurisdiction under the provincial PMO, and AHAB and will be overseen by the transport authorities in each municipality/county. Each municipality and the county will establish a coordination commission under their Highway Bureaus to provide coordination within their respective jurisdiction.

46. Quarterly progress meetings chaired by the provincial PMO and AHAB will be held with all stakeholders. In addition, meetings will be conducted on an ‘as needed’ basis to share knowledge and learning between the participating municipalities and county and to undertake workshops and training on focused topics.

B. Results Monitoring and Evaluation

47. Project monitoring will involve: (a) the Results Framework provided in annex 1 for monitoring and reporting on outcome and intermediate outcomes of the project, (b) annual work plan prepared by PMO, (c) and mid-term review report jointly conducted by PMO and the World Bank. The PMO will coordinate the collection of the required monitoring data with the PIUs and will report the results as part of project progress reports, mid-term review and completion reports. The PMO will be responsible for measuring results and guiding the PIUs.

C. Sustainability

48. Sustainability of the overall project comes from the nationally endorsed focus on infrastructure maintenance, national encouragement in adopting international best practices, and a recognized need for the provinces to improve asset management as well as replace the force account model. At the component level, sustainability will come from the effectiveness of design, cost savings, institutional arrangements, improved business processes, better operational performance, and greater financial support.

49. As PBC is new to China, the project will facilitate capacity development of the officials of highway bureaus as well as the commercial sector (contractors and consultants). PBC contracts will be designed to institutionalize incentives for improved performance by striking the right balance between the Level of Service (LOS) and related costs, as well as by ensuring an equitable and fair allocation of project risks.

50. The successful implementation of PBC contracts will also lead to cost savings through incentives to the private sector for innovation and higher productivity, reduction in administrative expenses and road agency overheads, and greater flexibility in the private sector to reward performance and react quickly against non-performers. 15 This will free up budget for other purposes and ensure stable financing for the maintenance program over a longer term. A number of road agencies from developed and developing countries reported significant savings of up to 40 percent16 from the successful implementation of PBC contracts. In addition, the project will support AHAB and the participating municipalities and county through systems and strategic studies in analyzing sustainable funding needs for maintenance.

15 The World Bank Transport Note No. TN-27, September 2005. 16 International Road Federation. 11

51. The long-term sustainability of the project relies on the provision of required funding for road maintenance. While this project will not directly assist with road maintenance revenue generation (beyond the injection of the loan), the project will address value for money achieved from the funds available. The project will also help support the dialogue on sustainable funding through strategic studies.

52. The project will include ‘build-back-better’ features: selected drainage structures under Component B will be up-sized, and tests with increased high-modulus additive content in the asphalt overlays will be included under Component C. These initiatives will enable road structures to be better suited to meet future requirements caused by climate change.

V. KEY RISKS

A. Overall Risk Rating and Explanation of Key Risks

53. The overall implementation risk rating for achieving the PDO is Substantial based on risks relating to technical design of the project, institutional capacity for implementation and sustainability, and fiduciary; see Systematic Operations Risk-Rating Tool (SORT) table in the Data Sheet.

54. Technical design of the project. The introduction of PBC on a large scale is new to China. The following measures were taken during project preparation to address this risk:

(a) PBC experts and an individual international consultant with expertise in PBC helped design the PBC packages and organized training workshops on PBC for officials from the participating municipalities/county, as well as for interested consultants and contractors.

(b) Guidance was obtained from contextualized international practice.

(c) Inputs were sought from the commercial sector on PBC design, including contract duration, network length, and risk sharing.

55. Institutional capacity for implementing and sustainability. This risk is mainly due to the recent decentralization of road management and the weak capacity of the lower levels of administration in adopting performance-based maintenance. The project design, therefore, includes a series of training activities to improve the management, administrative, and technical capacity of relevant staff, including safeguards management, at all levels of the Government during implementation. In addition, project institutional arrangements include coordination mechanisms to support cross-municipal/county capacity building, learning, and knowledge sharing. The institutional capacity-building component of the proposed project includes study tours for key officials from the participating municipalities and county to learn the best practices in PBC firsthand.

56. Fiduciary risks relate to the weak procurement and financial management (FM) capacities at municipal/county levels to implement the innovative contracting models that require specific bidding documents and new disbursement methods, as well as to the non-availability of sufficient counterpart funds. The World Bank will provide guidance to the municipalities and county during

the preparation of bidding documents, during procurement, as well as during implementation. A detailed fiscal analysis was carried out to confirm the ability of the participating municipalities and county to provide the necessary counterpart funds and to service the project debt. In addition, the project includes technical assistance for assessing the requirements for the provision of sustainable funding for maintenance.

VI. APPRAISAL SUMMARY

A. Economic and Fiscal Analysis

57. Economic analysis. Economic analysis of the proposed project was carried out in accordance with the World Bank guidelines of Economic Analysis of Investment Operations and Economic Analysis Guidance Note.17 The project will bring substantial economic benefits to the participating municipalities and county mainly through reduction in vehicle operating costs. The project has an economic internal rate of return (EIRR) of 36.3 percent, which is well in excess of the World Bank-recommended economic opportunity cost of capital (6 percent). Sensitivity analysis carried out indicates that the EIRR remains higher than 6 percent even for the worst-case scenario of 20 percent increase in costs and 20 percent reduction in benefits. Annex 5 provides details of the economic analysis.

58. Greenhouse gas (GHG) emission reduction. A GHG (CO2) analysis conducted using the Highway Design and Management Model (HDM-4) indicates that as road preservation works have little impact on vehicle speeds and fuel consumption, the project will result in a very small CO2 emission decrease of 0.025 million tons, as compared with the business-as-usual scenario. Annex 6 provides further details of climate change resilience under the project.

59. Fiscal analysis and counterpart funding. Components B and C, which comprise 83 percent of the total project financing, will contribute to the maintenance of 30 percent of the total national and provincial road network in the participating municipalities and county, that is, the project will replace (or enhance) the corresponding maintenance expenditure of the ‘without project’ scenario. Therefore, the project will not add significantly to the fiscal burden on the participating municipalities and county. The participating municipalities and county plan to use fiscal revenue, including upper-level transfers and subsidies, to meet their counterpart funding requirements. The total requirement for project-related government funding for each municipality and county will be less than 1 percent of total fiscal revenue during the project implementation period. The project will account for about 23 percent, 15 percent, 9 percent, 6 percent, 8 percent, and 14 percent, respectively, of Hefei, Suzhou, Chuzhou, Anqing, Xuancheng, and Guangde’s total maintenance investment during that period.

60. Anhui Province currently allocates about US$320 million per year for maintenance. Annual maintenance needs for these improved roads after project closing are estimated to be about US$40 million, taking into account both routine annual maintenance and resurfacing every eight

17 The World Bank. January 1998. Handbook on Economic Analysis of Investment Operations. Operational Core Services Network, Learning and Leadership Center. The World Bank. April 9, 2013. Guidance Note of Economic Analysis for Investment Project Financing. Operations Policy and Quality. 13

years. This will result in an increase of about 12 percent in the current maintenance allocation. Annex 5 provides further details of the fiscal analysis.

B. Technical

61. The project’s technical design reflects international best practice of AMSs as well as maintenance delivery and seeks to promote increased commercial sector participation in asset management. The integrated approach to the overall design of the project promotes more efficient road asset management in the participating municipalities and county.

62. Road asset management systems. The design of Component A focuses on developing business processes parallel to system upgrading and development. It will support the development and implementation of a ‘to be’ model for reformed business processes as well as the operational costs related to this model. The proposed computerized system is based on a widely adopted road management system in China, which is based on international practice adapted to the local context. The system is technically appropriate and provides a suitable set of modules.

63. Maintenance commercialization. Component B concentrates on networks well suited for this type of intervention. The proposed PBC packages have been tailored to reflect the capacity and interest of potential bidders and take into account international best experience. The contract packages have been designed to balance risk sharing appropriately between local contractors and the municipalities and county. Service levels have been carefully defined to strike a suitable balance between costs and service levels.

64. Innovative maintenance technologies. Anhui already has experience in implementing innovative technologies. Most of the technologies included in the project have been piloted on a small scale in some of the municipalities or have been used with success in neighboring provinces. The set of technologies to be tested has been selected to respond to the types of road damage and climatic conditions prevailing in the province. Manuals will be prepared to support an easy scaling- up of technologies that prove successful.

65. Emergency response centers. The design of emergency response centers and equipment proposed are based on domestic requirements. The project will also assist in the development of a more proactive approach to emergencies, including improvements to management processes and support for the efficient and effective use of enhanced infrastructure.

C. Financial Management

66. The World Bank loan proceeds, including oversight of the Designated Account (DA), will be managed by the Anhui Provincial Finance Bureau (APFB). Funds flow of counterpart funds and World Bank loan proceeds will use the existing fiscal channels and follow general government requirements. The FM assessment for the proposed project identified the following key FM risks: (a) the multiple-level implementation structure may lead to low work efficiency; (b) the innovative contracting model, which differs from traditional contract payment and disbursement arrangements, is new to project staff; and (c) although the local PIUs (except Guangde) have implemented World Bank loan financed highway and rural road construction projects, project staff have been changed in some places.

67. To mitigate these risks, the following actions have been agreed: (a) the provincial PMO, AHAB, and the APFB will jointly lead and guide overall project preparation and implementation and will also closely monitor the management of the innovative contract models in Component B; (b) a Financial Management Manual (FMM) will be prepared by the provincial PMO to standardize project FM work and disbursement procedures; and (c) training and peer learning will be provided to project staff throughout the implementation period to update knowledge and enhance coordination. The World Bank will closely monitor FM implementation to confirm that it is functioning effectively. With the implementation of the proposed actions, the project’s FM arrangements will satisfy the World Bank requirements.

D. Procurement

68. The PMO, with assistance from a procurement agent, will be responsible for project procurement. The participating municipalities and county will sign and execute their respective contracts. The assessment of the procurement capacity of project agencies identified the following key risks: (a) potential delays in the preparation of bidding documents; (b) cost overruns and other variations during contract implementation due to changes in design and quantities, as well as in the master plans of the municipalities and county; and (c) availability of sufficient counterpart funds on time.

69. The PMO will take the following measures to mitigate the above risks: (a) upstream market analysis for PBC, (b) prepare bidding documents based on preliminary designs, (c) ensure that local governments secure annual counterpart funds, and (d) engage qualified and experienced international consultants to participate in the preparation of comprehensive PBC documents. The World Bank will provide guidance to the PMO in the preparation of the procurement strategy and technical specifications for PBC contracts and in handling procurement and contract management issues.

70. The PMO has prepared the Procurement Plan (PP) for the project, which comprises a total of 36 contracts, including 8 PBC contracts (Component B) and 16 innovative technology contracts (Component C). The PP will be updated annually or as required to reflect project implementation needs. Further details on the procurement capacity assessment and on project procurement arrangements are provided in annex 3.

E. Social (including Safeguards)

71. OP 4.12 - Involuntary resettlement. No land acquisition or resettlement is foreseen under the project. However, the World Bank’s OP 4.12 has been triggered to take into account potential unanticipated land acquisition. A Resettlement Policy Framework (RPF), acceptable to the World Bank, has been prepared. The RPF provides details of policies and procedures to avoid or minimize the impacts of land acquisition and housing demolition, as well as potential temporary impacts during construction on land use and unavoidable businesses losses. The Chinese language version of the RPF was disclosed in the offices of the PMO and in the project municipalities and county on March 22, 2016, and the English language version was disclosed in the World Bank’s InfoShop on August 10, 2016.

72. Maintenance staff affected by PBC contracts. The proposed outsourcing of road maintenance works to the commercial sector will affect 281 workers, including 188 permanent staff and 93 contracted staff. This corresponds to about 4.7 percent of the current total workforce of maintenance workers. Affected permanent staff, as well as contracted staff still under contract, either will be offered similar work on other road sections/areas or will be transitioned into new job functions in their current locations. None of the permanent staff will hence experience layoffs. Contracted staff will not be renewed once their current contract expires. Mitigation plans, expected to include provision of training, will be developed for these staff, which will help the contracted staff transition from current jobs into new job functions. Furthermore, contractors who are awarded PBC contracts will be encouraged to engage contracted staff with expiring contracts. Market research has shown that several potential bidders are interested in doing so. The Social Assessment (SA) includes a social management and implementation plan. Provincial policies will be developed to mitigate the social effects of the reform, if rolled out more widely in the province. Except for investments in the mitigation plan, financial implications for AHAB will be marginal, as retained staff will fill currently unfilled (or contracted) positions while work related to positions outsourced to the private sector will still be paid, though indirectly through the performance-linked payments to the contractors.

73. The municipal authorities and the domestic consulting team have obtained the views and preferences of potentially affected workers through focus group discussions and key informant interviews. The municipal highway bureaus will play a key role in implementing the job transfer program and will undertake broader consultations before and during the transfer of job functions. An independent monitoring institute will supervise the activities twice a year and furnish reports to the PMO and the World Bank.

74. Gender. The project SA explored women’s expectations and collected ideas and recommendations that have been incorporated in the designs of subprojects. The SA will be enhanced to include a disaggregated gender analysis among those workers who might be transferred to other job functions due to the commercialization of road maintenance. Social and gender equality will continue to be promoted throughout project implementation through wide and equal participation of and consultation with workers along the road sections. Equal participation and gender responsiveness will be reflected in project activities, including training and other capacity-building activities. Information booklets will be provided for potentially affected workers, including women, before project implementation, including their entitlements, pension, and social security.

75. Citizen engagement. The public can upload information to the AMS and alert asset owners of issues that need to be addressed. The project includes a citizen engagement indicator to monitor response to these alerts.

F. Environment (including Safeguards)

76. All maintenance works will be conducted on existing roads within existing rights-of-way (ROWs). Maintenance will be conducted on existing roads in or along the boundary of nine ecologically sensitive sites (a nature reserve, three scenic areas, three forest parks, and two wetland parks). The project will not lead to the degradation or conversion of natural habitat at these sensitive sites. Eight other roads are boundary roads of parks, tourism zones, lakes, and reservoirs,

but as all maintenance works are to be done on existing roads at specific locations and sections within the ROW, little impact is envisaged to these sites.

77. The main environmental impacts will be construction related, such as disturbance of road traffic, nuisance of dust and noise/vibration, management of waste, and worker and community safety, as well as impact on existing green belts along roads. These impacts are site-specific, temporary in nature, and not significant; they can be readily managed by known mitigation measures and good construction management practice. In accordance with the World Bank OP 4.01 - Environmental Assessment, the project is classified as environmental Category B.

78. An Environmental Impact Assessment (EIA) and an Environmental Management Plan (EMP), acceptable to the World Bank, have been prepared for the project. The EIA assessed potential adverse environmental and social impacts, based on which, the EMP specified the following measures: an environmental management setup, with clear responsibilities and capacity requirements; management of contractors and environmental supervision arrangements; environmental mitigation measures; monitoring and reporting plan; capacity training plan; and budget estimates for implementing the EMP. Bidding documents and contracts will include mitigation measures from the EMP, and contractors will prepare site-specific EMPs before subproject implementation.

79. Public consultations were conducted in the participating municipalities and county during Environmental Assessment (EA) preparation through a combination of opinion surveys and public meetings along the selected major roads and emergency response center sites. Information about the project, potential environmental and social impacts, and planned mitigation measures were provided to the public during consultations. The public’s main concerns include traffic disturbance, safety, and nuisance of noise. These concerns have been adequately addressed in the EIA, and necessary mitigation measures are included in the EMP and in the project design. The EIA and the EMP have been disclosed on the websites of participating local governments and were disclosed in the municipalities and county on March 22, 2016 and in InfoShop on August 10, 2016.

G. World Bank Grievance Redress

80. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/GRS. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.

Annex 1: Results Framework and Monitoring

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

Results Framework

. Project Development Objectives . PDO Statement The Project Development Objective (PDO) is to improve highway maintenance delivery and asset management capacity in the participating municipalities and county in Anhui Province. These results are at Project Level Project Development Objective Indicators Cumulative Target Values YR1 YR2 YR3 YR4 YR5 YR6 Indicator Name Baseline (2018) (2019) (2020) (2021) (2022) (2023) 1. Project roads in good and fair condition (Percentage) 60 60 65 75 80 85 90 2. Emergency events under the jurisdiction of the emergency centers responded to within 80 — — 85 90 95 95 specified time limits (Percentage) 3. Proposed rehabilitation and periodic maintenance works program based on the 0 — — — 35 50 75 recommendations of the asset management system (Percentage) 4. Highway asset management capacity (Number) 29 — 40 — 65 — 80 . Intermediate Results Indicators Cumulative Target Values YR1 YR2 YR3 YR4 YR5 YR6 Indicator Name Baseline (2018) (2019) (2020) (2021) (2022) (2023)

Component A: Road Asset Management System Upgrade

1. Road asset management systems are updated (Y/N) N — — Y Y Y Y 2. Decision-making ‘to be’ model developed and operational (Y/N) N — — — Y Y Y Component B: Road Maintenance Commercialization 3. Length of roads improved/maintained by PBC (Percentage) 0 0 50 100 100 100 100 4. Road safety measures implemented as part of the maintenance delivery 0 0 0 40 80 100 100 (% coverage of sections with rehabilitation) Component C: Innovative and Preventive Maintenance Technologies 5. New maintenance technologies and materials applied in project roads (Percentage) 0 0 15 45 70 90 100

6. Manuals covering all technologies prepared and disseminated (Y/N) N — — — — — Y

Component D: Emergency Response Capacity 7. Maintenance emergency response centers are established (Number) 0 0 0 2 2 2 2

8. Number of emergency centers with updated equipment (Number) 0 0 0 6 6 6 6 Component E: Institutional Capacity Building 9. Person-months of staff trained (Number) 0 0 30 50 75 100 110 9(a). Women trained (sub-indicator by gender) (Percentage) 0 0 15 15 15 15 15 Citizen Engagement 10. Public uploads in CRAMS responded to (Percentage) 0 0 0 50 70 80 95 .

Indicator Description . Project Development Objective Indicators Responsibility for Data Indicator Name Description (including indicator definition) Frequency Data Source / Methodology Collection 1. Project roads in good and This indicator measures the ‘service delivery’ Annual This indicator will be AHAB, based on reporting fair condition (Percentage) aspect of the PDO. As delivery improves the measured by PQI based on the from the Monitoring condition of roads will improve. Pavement Management Consultant and the highway System. PQI is a compound of bureaus of the five pavement surface quality, participating municipalities riding quality, rutting, skid and one county. resistance, and pavement strength. It is measured according to Chinese National Standards, Highway Technical Condition Evaluation Standard (JTG H20-2007) issued by the MoT, as a percentage (by road length) of highways with a PQI higher than 80. For this project, the components of the pavement condition index and ride quality index will be used for the estimation of PQI, and will be measured for roads included in the project in the participating municipalities and county.

2. Emergency events under the This indicator measures the ‘service delivery’ Annual Total number of emergency Anhui Highway Bureau, based jurisdiction of the emergency aspect of the PDO. As responses to events in all the five on reporting from the centers, responded to within emergencies become more efficient, road participating municipalities Highway Bureaus of the five specified limits (Percentage) closures will be shortened and service delivery and one county responded to participating municipalities will be improved. within specified limits (two and one county. hours) during the period divided by total number of emergency events. Measured only for those events which are within the jurisdiction of the project centers. 3. Proposed rehabilitation and This indicator measures the ‘asset management Annual (after This will be measured for Anhui Highway Bureau, based periodic maintenance works capacity’ aspect of the PDO. A well-operated the AMS is highways and provincial roads on reporting from the program, based on the AMS will support improved capacity. established) in the participating Highway Bureaus of the five recommendations of the asset municipalities and county. participating municipalities management system The percentage of funds for and one county. (Percentage) rehabilitation and periodic maintenance in the list submitted by AHAB for provincial approval, which is based on the maintenance program derived from the AMS within the given budget envelope.

4. Highway asset management This indicator measures the ‘asset management Baseline year, Measured using the The PMO, based on reporting capacity (Number) capacity’ aspect of the PDO. During the Year 2, Year 4 contextualized New Zealand from Anhui Highway Bureau, training program, implementation of better and Year 6 Treasury Capital Asset Monitoring Consultant, and tools and more efficient maintenance delivery Management capability the Highway Bureaus of the models will improve asset management assessment spreadsheet. five participating capacity. Institutional capacity and municipalities and one county. performance will be measured using a relevant subset of 12 of the 17 aspects of good asset management and evaluated on a scale of 0–100. The responses to each question are combined to arrive at ratings for different asset management themes and for the organization as a whole. The subsets used are questions 1– 5, 7, 9, and 12–16.

Intermediate Results Indicators Responsibility for Data Indicator Name Description (including indicator definition) Frequency Data Source / Methodology Collection 1. Road asset management The project will update and upgrade a range of Annual This indicator will be AHAB systems are updated AMSs into an integrated package. The measured from progress indicator will measure when this has been reports produced by AHAB. completed. Measured as Y/N. The ‘Y’ rating will be assigned only when all systems have been updated by AHAB and supplied to the participating municipalities and county.

2. Decision-making ‘to be’ To embed the updated AMSs in decision Annual This indicator will be AHAB model developed and making, a ‘to be’ model will be developed and measured from progress operational implemented. The ‘to be’ model refers to the reports produced by AHAB. revised work organization and business Measured as Y/N. The ‘Y’ processes, which will support a more efficient rating will be assigned only road asset management. The model will when all the participating describe how business processes will be municipalities and county reformed to take advantage of the improved have adopted the new business business and management models and will processes and have include dedicated units with suitable levels of substantially met staffing staff. requirements. 3. Length of roads Under PBC contracts, rehabilitation works, Annual This indicator will be Anhui Highway Bureau, based improved/maintained by PBC resurfacing works, thin surfacing works, and measured, in percentage of the on reporting from the routine maintenance will be conducted on total planned kilometers Highway Bureaus of the five project roads in the participating municipalities completed, from the progress participating municipalities and county. reports produced by the and one county. contractor and verified by the supervisor. 4. Road safety measures Road safety measures will be included under Annual This indicator will be Anhui Highway Bureau, based implemented as part of the PBC contracts as part of the maintenance measured from progress on reporting from the maintenance delivery (% delivery. Each PBC contract will include an reports produced by the Highway Bureaus of the five coverage of sections with allocation focusing on implementing road contractor and verified by the participating municipalities rehabilitation) safety measures. These measures will be supervisor. and one county. defined based on an International Road The value will be measured as Assessment Programme type of analysis. the accumulated percentage of road sections receiving rehabilitation or reconstruction for which road safety measures have been analyzed and, if applicable, have been substantially implemented.

5. New maintenance The project will support implementation of Annual This indicator will be Anhui Highway Bureau, based technologies and materials innovative maintenance technologies. measured from progress on reporting from the applied in project roads reports produced by the Highway Bureaus of the five contractor and verified by the participating municipalities supervisor. and one county. This indicator will measure (as a percentage of total planned kilometers completed) the accumulated length of rehabilitation and periodic maintenance works applied across entire road sections. 6. Manuals covering all The project will support the development and Annual Measures whether all manuals AHAB and Component C technologies prepared and dissemination of manuals for each innovative have been prepared and consultants. disseminated maintenance technology applied under disseminated to all Component C. municipalities and counties. Recorded as Y/N. The ‘Y’ rating will be assigned only when manuals have been prepared covering all tested technologies. Manuals may include one or more technologies. 7. Maintenance emergency The project will support the construction and Annual This indicator, measured as Anhui Highway Bureau, based response centers are upgrade of emergency centers. the number of centers where on reporting from the established construction and upgrading Highway Bureaus of the five have been completed, will be participating municipalities compiled from progress and one county. reports produced by the contractor and verified by the supervisor. 8. Number of emergency The project will support updating the Annual This indicator, measured as Anhui Highway Bureau, based centers with updated equipment of emergency centers. number of centers where on reports from the Highway equipment equipment updating has been Bureaus of the five completed, will be compiled participating municipalities from progress reports. and one county.

9. Person-months of staff Number of person-months of training Annual Measured as number of PMO trained programs delivered to the PMO, the person-months training participating municipalities and county, and provided. other relevant government agencies. Training will be delivered both in-country and abroad. 9(a). Women trained This indicator measures the number of women Annual Measured as a percentage of PMO trained. the total number of people trained. 10. Public uploads in CRAMS This indicator is used to assess citizen Annual Measured as the percentage of Anhui Highway Bureau, based responded to engagement. reports submitted by the public on reporting from the Public can use the application, developed as to which AHAB has Highway Bureaus of the five part of CRAMS, to report relevant issues responded. participating municipalities related to the road service provided. AHAB and one county. can use the same application to report back to the public on actions taken.

Annex 2: Detailed Project Description

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

1. The project will focus its activities in six selected jurisdictions in Anhui Province: Hefei, Suzhou, Chuzhou, Xuancheng, and Anqing municipalities and Guangde County. The participating municipalities and county have been selected based on their interest, as well as selection criteria such as current maintenance funding levels, contribution to poverty alleviation and accelerated development of underdeveloped municipalities/counties, technical capacity, and financial capacity.

2. The project includes the following five components: Component A: Road Asset Management System Upgrade; Component B: Road Maintenance Commercialization; Component C: Innovative and Preventive Maintenance Technologies; Component D: Emergency Response Capacity; and Component E: Institutional Capacity Building.

Component A: Road Asset Management System Upgrade (Total Cost: US$1.31 million, IBRD: US$1.31 million)

3. This component will finance improvements in business processes through, among others, (a) the preparation of analyses and studies, system design, and provision of technical assistance; (b) development and/or upgrading of computerized AMSs, including road databases, asset management applications, and information publishing systems; (c) systems operation and management; and (d) training related to systems’ operation.

4. Business processes. Current business processes, which are key to successful implementation of this component, will be mapped ‘as is’, and a ‘to be’ model18 will be developed in which the updated systems and decision-making processes can be embedded. The project will help align current staff and their capabilities with needs and will develop job descriptions as part of the ‘to be’ model—that is, of revised work organization and business processes, which will support better decision making for maintenance planning and programming. Data will be collected (financed entirely by AHAB) for streamlining the current outdated and overlapping processes, using more modern technologies. A key feature of this will be the outsourcing of most of the data collection to the commercial sector.

5. AHAB will be responsible for compiling a complete asset management database and will own and maintain the systems to ensure consistency between municipalities. AHAB will also organize the mandate and supply data to the municipalities and county for their use. The maintenance department of each municipality/county will be responsible for operating the systems, developing priority-based maintenance plans and programs, and submitting them to central levels for approval.

18 The ‘as is’ model refers to the current work organization and business processes, while the ‘to be’ model refers to the revised work organization and business processes that will support more efficient road asset management. 26

6. Computerized systems. The backbone of the system will be based on commercial-off-the- shelf systems;19 bespoke development will be adopted for the project management module (which will include features for monitoring contracts under PBC) and for the public information system. The database will provide repositories for data needed for the applications and will include data upload and download features. Data will be structured on the ‘one data, one source’ principle and will be established using an enhanced and improved data collection framework, which relies heavily on outsourcing data collection.

7. AMSs, spanning roads, bridges, and tunnels, will use data to analyze the conditions of assets and traffic, as well as to prepare maintenance plans. They will also include features to support emergency response activities under Component D with real-time data on emergency events. The information publishing system will provide access to data through the intranet or the Internet to public officials and to the public. The system can upload information provided by the public and inform the public on the use of the information provided and actions taken. Activities and responses in this module will be used for the project’s citizen engagement indicator.

Component B: Road Maintenance Commercialization (Total Cost: US$131.71 million; IBRD: US$77.55 million, Counterpart Funds: US$54.16 million)

8. This component will finance (a) rehabilitation, upgrading, and maintenance of about 775 km of selected roads in the participating municipalities and county (such as base reconstruction, resurfacing, paving, and/or asphalt concrete overlaying, as the case may be, including associated shoulders, sidewalks, drainage, masonry, signage, lighting, and ancillary works plus road safety improvements), utilizing a PBC model; and (b) provision of technical assistance, including the carrying out of related studies. The contracts will follow the Output- and Performance-based Road Contracts (OPRC) model, where initial works to bring the road network up to standard will be output-based contracting, while the works related to subsequently maintaining the roads to the specified standards will be performance based. For works that will be paid on an output basis, with a maximum length reimbursable each year, the contractor will have the freedom as to where these works are to occur on the network to meet their contractual obligations.

9. Contractors will be responsible for all road works, including rehabilitation, periodic maintenance, and routine maintenance,20 as well as selected emergency maintenance, and would be required to ensure that the selected road networks are kept at defined LOSs for the duration of the contracts. The PBC will also include road safety measures for road users (such as road signs and shoulders) and for pedestrians (such as sidewalks, shoulders and crossings), as well as measures for improving the climate resilience of the assets (see annex 6).

10. Some of the main features of PBC are risk sharing, contract duration, and contract type and size. Risk sharing will be further elaborated during detailed design and will distribute risks to be borne by the municipalities and county and those to be borne by the contractor as well as risks that are shared between both parties.21 The duration of the contracts will be five years, which is

19 The Highway Asset Management System developed by the National Engineering Research Centre of Road Maintenance Technologies, which is the de facto standard in China. 20 Routine maintenance will cover not only roads, but also tunnels and bridges. 21 An example of risks that are shared is traffic growth, where the contractor would carry the risks up to a certain level after which the risk falls to the client. 27

considered long enough to hold contractors liable for the quality of their work, but short enough for the contractors to manage the risks. Each contract will, based on market research, comprise about 50–150 km of roads, forming adjacent networks. Packages with an overweight of rehabilitation works will comprise smaller networks compared to those that are dominated by periodic maintenance works. Although individual road sections in each package and the main works in those sections have been identified in the FSR, further adjustments may be introduced during the detailed design of individual packages.

11. This component will also support the road agency in defining a clear and objective LOS to avoid premature deterioration of road assets in general and to assure that the LOS is balanced between the needs of road users and appropriate sustainable levels of funding. Suitable LOSs set across administrative jurisdictions will assist in reducing road condition segmentation within and between municipalities. According to the national standard,22 pavement standards are measured by a range of indices covering functional as well as structural pavement conditions and furniture. These individual indices are combined into a single index (the Maintenance Quality Indicator). For national and provincial roads, the standard is set to 80 for each of the indices, as well as for the combined index. The standard for this project will be 85 for national roads and 80 for provincial roads and will need to be met for each kilometer throughout the contract period.

12. Road safety. The PBC contracts will include the implementation of road safety measures, which will be developed using data collected by AHAB for about 5,000 km of roads. Data will be used to identify the accident-prone sections, and the measures will help reduce the risk of accidents. The method resembles the International Road Assessment Programme, 23 which is already in use in China. In 2013, 7,482 traffic accidents were reported in the project areas, accounting for about 43 percent of total accidents in Anhui Province. In those accidents, 1,232 people were killed, 8,350 people were injured, and US$6.7 million was lost.

13. The contracts will include provisions for input- or output-based works covering selected emergency works24 and the implementation of road safety measures. The emergency centers will undertake all other emergency works.

Component C: Innovative and Preventive Maintenance Technologies (Total Cost: US$111.90 million; IBRD: US$58.91 million, Counterpart Funds: US$52.99 million)

14. This component will finance (a) application of innovative maintenance technologies for improvement, rehabilitation, and resurfacing works on about 447 km of selected national and provincial roads, using traditional ad-measurement contracting models; and (b) provision of technical assistance, including the carrying out of related studies. These roads will not be included under the PBC contracts.

15. Pavement technologies will include fog sealing, hot as well as cold in-situ recycling, blacktopping concrete pavements, high-modulus asphalt courses, composite rigid-flexible

22 Highway Technical Condition Standard (JTG H20-2007), MoT, 2007. 23 See, for instance, http://www.irap.net/en/. 24 The main emergency works to be addressed by the PBC contractors are cleaning of small landslides and restoration of road assets after severe accidents. 28 pavements, micro surfacing (sealing), and thin-layer asphalt surfacing. As good experience with hot recycling already exists in Anhui, this project will focus on cold recycling.

16. Interventions to be tested are designed to address the main distresses found in the road network in Anhui, which include transverse and longitudinal cracks, potholes, depressions, and rutting (and patching). Measures for improving the climate resilience of technologies applied will also be tested (see annex 6). A total of 13 technologies will be tested. For each of the technologies to be tested, application conditions have been developed, which address the traffic and pavement conditions for which the technology is suitable. Based on these criteria, relevant road sections have been identified. The list of technologies, as well as the road sections to which they are to be applied, is included in the FSR. To manage the risks of complexity, each implementing agency will test one to four types of innovative technologies.

17. The outcome of the piloted technologies will be assessed for cost-effectiveness, quality, service life, applicability, and other factors. Successful technologies (defined as performing economically and/or technically better than the current options) will be detailed in maintenance manuals, which will then be disseminated to all other municipalities and counties for adoption in their maintenance works portfolio.

Component D: Emergency Response Capacity (Total Cost: US$11.54 million; IBRD: US$10.92 million, Counterpart Funds: US$0.62 million)

18. This component will finance (a) construction of maintenance emergency response centers in Hefei and Chuzhou municipalities; (b) installation of required maintenance emergency equipment in six emergency centers; and (c) development of emergency management systems in the participating municipalities and county and provision of related technical assistance.

19. Anhui is affected by a number of emergencies to which the highway bureaus are required to respond within 2 hours and are required to clear within 24 hours. The main emergency events in the participating municipalities and county are winter maintenance related to ice and snow removal (46 percent), followed by landslides (31 percent). Other typical events are floods, typhoons, and traffic accidents.25

20. Maintenance emergency response centers. The project will provide financing for the construction of each maintenance emergency response center in Hefei and Chuzhou municipalities. The other participating municipalities and the county have already built emergency response centers using their own funds. Each emergency center covers an area with the radius of 150 km in the case of municipalities and 100 km in the case of counties. These centers will occupy about 1.5 ha and 0.8 ha26 for municipal- and county-level centers, respectively, and the structures will have floorplans of about 2,500 m2 and 900 m2 respectively.

21. Equipment. The project will finance the procurement and installation of excavators, dumpers, loaders, cranes, rollers, small-sized pavers, and winter maintenance equipment, as well as the procurement of inspection vehicles for six emergency response centers in the participating municipalities and county. Equipment supported under this project will be used for emergency

25 Requiring involvement of the emergency centers (that is, where road assets have been damaged). 26 20–25 mu for municipal levels and 10–15 mu for county levels. 29

events, for routine maintenance, and for small-scale reconstruction of roads; they will not be loaned or leased for commercial activities.

22. Emergency management systems. This subcomponent will help enhance emergency systems and processes through the effective deployment of equipment in case of emergencies and enhance regional coordination through better data collection on emergency events. It will also use the emergency management functionalities of the highway AMS established under Component A.

Component E: Institutional Capacity Building (Total Cost: US$0.94 million; IBRD: US$0.94 million)

23. This component will finance provision of project implementation support, including technical assistance activities, carrying out of strategic sector studies, monitoring and evaluation, and project management-related training, capacity building, and study tours. Training will include domestic as well as international training and is estimated to cover about 910 staff and 116 staff- months.

24. A contextualized version of the New Zealand Treasury Capital Asset Management capability assessment spreadsheet27 will be used to regularly measure institutional capacity and performance. It will indicate organizational performance levels for a range of indicators; it goes beyond staff capabilities, addresses issues such as policies and tools, and communicates in easily understandable bar charts.

25. Strategic studies will include (a) assessment of the requirements for the provision of sustainable funding for maintenance in Anhui and (b) dissemination of experience on PBC to support potential provincial and national rollout.

Table 2.1. Detailed Project Costs and Financing Plan (RMB 6.50 = US$1)28 Costs Costs IBRD Counterpart % Financing Project Cost by Component (RMB, (US$, Financing Funds by IBRD millions) millions) Component A: Road Asset 8.50 1.31 1.31 — 100 Management System Upgrade Goods 7.46 1.15 1.15 — 100 Consulting and training service 1.04 0.16 0.16 — 100 Component B: Road Maintenance 856.14 131.71 77.55 54.16 59 Commercialization Civil works 824.14 126.79 77.55 49.24 61 Consultant service 32.00 4.92 — 4.92 — Component C: Innovative and 727.33 111.90 58.91 52.99 53 Preventive Maintenance Technologies Civil works 725.83 111.67 58.68 52.99 53 Consultant service 1.50 0.23 0.23 — 100

27 Developed by GHD using the 2011 International Infrastructure Management Manual Asset Management Maturity Table and adapted for use in the New Zealand Tertiary Education Sector. 28 The exchange rate is the same as that in FSR approved by Anhui DRC in May 2016. 30

Costs Costs IBRD Counterpart % Financing Project Cost by Component (RMB, (US$, Financing Funds by IBRD millions) millions) Component D: Emergency 75.00 11.54 10.92 0.62 95 Response Capacity Civil works 4.00 0.62 — 0.62 — Equipment 71.00 10.92 10.92 — 100 Component E: Institutional 6.10 0.94 0.94 — 100 Capacity Building Technical Assistances 0.80 0.12 0.12 — 100 Trainings and Study Tours 5.30 0.82 0.82 — 100 Other Project Costs* 91.66 14.10 — 14.10 — Total Baseline Cost 1764.72 271.50 149.63 121.87 55 Contingencies 70.13 10.79 — 10.79 — Total Project Cost 1,834.86 282.29 149.63 132.66 53 Interests and Commitment Fee 59.65 9.18 — 9.18 — during Implementation Front-end Fee 2.43 0.37 0.37 — 100 Total Financing Required 1,896.94 291.84 150.00 141.84 51 Note: *Other costs consist of the overall project costs related to preparation, implementation, management, technical design, procurement, supervision, and so on.

Annex 3: Implementation Arrangements

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

Project Institutional and Implementation Arrangements

1. Anhui Provincial Department of Transport will continue to provide strategic guidance and advice during implementation of the proposed project. The FCUO will serve as the provincial PMO and will be jointly responsible for day-to-day project implementation together with AHAB. The FCUO will provide overall coordination, while AHAB will provide sectoral administration, instructions, and supervision of project activities. The provincial PMO and AHAB will be responsible for project management, procurement, safeguards, monitoring and reporting, and communication with the World Bank. AHAB will be responsible for implementation of Components A and E (studies); and the provincial PMO will be responsible for implementation of Component E (training). The PMO will be the primary coordinating body responsible for communications with the World Bank.

2. Highway Bureaus of the respective project municipalities and the county will serve as PIUs and will implement project activities in their jurisdiction under the provincial PMO and AHAB; they will be overseen by the transport authorities in each municipality/county. Each municipality and county will establish a coordination commission under their Highway Bureaus to provide coordination within their respective jurisdiction.

3. Liaison mechanisms have been established to ensure that the project is implemented as ‘one project in several municipalities and a county.’ Quarterly progress meetings will be held with all stakeholders. In addition, regular meetings will provide a mechanism to share knowledge and learning between the participating municipalities and county, as well as undertake workshops and training on focused topics. Figure 3.1 provides the implementation arrangements for the project.

Figure 3.1. Institutional and Implementation Arrangements for the Project

Financial Management, Disbursements and Procurement

Financial Management

4. World Bank loan proceeds, including oversight of the DA, will be managed by the APFB which has considerable experience of World Bank operations. Funds flow of project funds will use the existing fiscal and sectoral payment system.

5. The FM assessment identified the following risks: (a) the multiple-level implementation structure may lead to low work efficiency; (b) the innovative contracting model, which differs from traditional contract payment and disbursement arrangements, is new to project staff; and (c) although the local PIUs (except Guangde) have implemented World Bank loan-financed highway and rural road construction projects, project staff have been changed in some places. To mitigate these risks, the following actions have been agreed upon: (a) the provincial PMO, AHAB, and APFB will jointly lead and guide overall project preparation and implementation and closely monitor the management of innovative contract models in Component B; (b) the provincial PMO will prepare an FMM to standardize project FM work and disbursement procedures; and (c) training and peer learning will be provided to project staff throughout the implementation period to update knowledge and enhance coordination. The World Bank will closely monitor the PIU’s implementation during the initial stage to ensure that the FM arrangements are functioning effectively. The FM assessment concluded that with the implementation of the proposed actions, the project’s FM arrangements will satisfy the World Bank’s requirements under OP/BP 10.00.

6. Funding sources for the project include the World Bank loan and counterpart funds. The World Bank Loan Agreement will be signed by the World Bank and the Ministry of Finance (MoF), and a Subsidiary Loan Agreement will be entered into by the MoF with the Anhui Provincial Government, which will further onlend to the five project municipal governments (Anqing, Chuzhou, Hefei, Suzhou, and Xuancheng) and the county government of Guangde. The Anhui Transportation Department will provide subsidies and project municipal/county governments will provide the necessary counterpart funds.

7. Budgeting. Each PIU will prepare an annual project construction and financing plan, which will be reviewed and approved by the respective Highway Administration Bureaus and Finance Bureaus. The Highway Administration Bureaus will allocate subsidies to the project and Finance Bureaus will appropriate fiscal income to meet remaining funding needs. Counterpart funds will be appropriated to the project through general fiscal channels and the sectoral payment system. Budget execution will be closely monitored and necessary actions will be taken to address budget variances.

8. Accounting and financial reporting. The project’s administration, accounting, and reporting will be established in accordance with Circular #13: ‘Accounting Regulations for World Bank-financed Projects’ issued by the MoF in January 2000. The provincial PMO, AHAB, and local PIUs will manage, monitor, and maintain project accounting records for project activities for which they are responsible. They will also prepare individual financial statements for components implemented by them. The PMO will prepare consolidated annual project financial statements, as well as unaudited semiannual project financial statements. The latter will be provided to the World Bank as part of the semiannual progress reports, no later than 60 days following each semester.

9. Internal controls. The general accounting policy, procedures, and regulations have been issued by the MoF and will be followed by the project. Each PIU will also utilize existing internal controls procedures, including segregation of duties, review, approval, and accounting/reporting procedures, as well as the safeguarding of assets. The project FMM specifies the roles and responsibilities of the PMO, the PIUs, and the finance bureaus in project FM, as well as detailed working procedures and document flows. The innovative model is mainly on the procurement part and contract measurement; the financial staff needs to follow contract term in processing payment. Relevant sections are presented in the FMM.

10. Audit. The Anhui Provincial Audit Office has been identified as the auditor for the project. The annual audit report of the project financial statements issued by this office will be due to the World Bank within six months after the end of each calendar year (that is, by June 30 of each year). The audit report and audited financial statements will be publicly available on the websites of the World Bank and Anhui Provincial Audit Office.

11. Funds flow. The DA of the World Bank loan will be opened and managed by the APFB. For components implemented by the PMO and AHAB, payment requests will be prepared either by the PMO or AHAB and submitted to the APFB. World Bank loan proceeds will be transferred from the DA to contractors directly for large payments or through the PMO. For components implemented by the PIUs, payment requests will be prepared by the PIUs, reviewed by respective Finance Bureaus, and then consolidated by the PMO before their submission to the APFB. World Bank loan proceeds will be transferred from the DA to contractors directly for large payments or

34 through the local Finance Bureaus and PIUs. The detailed disbursement application and funds flow arrangements are described in the project’s FMM.

Disbursements

12. Four disbursement methods are available for the project: (a) advance; (b) reimbursement; (c) direct payment; and (d) special commitment. The primary World Bank disbursement method will be advances to a segregated U.S. dollar DA opened at a commercial bank acceptable to the World Bank. The DA will be opened and managed by the APFB. Withdrawal Applications will be prepared to request World Bank disbursements and to document the use of World Bank financing. Withdrawal Applications will include supporting documents in the form of Statement of Expenditures and source documents identified in the Disbursement Letter issued by the World Bank. Supporting documents required for World Bank disbursement under different disbursement methods are specified in the Disbursement Letter issued by the World Bank. The World Bank loan will disburse against eligible expenditures (taxes inclusive), as indicated in table 3.1.

Table 3.1. Eligible Expenditures Amount of the Loan Percentage of Expenditures to be Category Allocated Financed (US$) (inclusive of Taxes) (1) Goods, nonconsulting services, 13,400,000 100 consultant services, training and workshops, and incremental operating costs under the project (2) Works under Component B 77,550,000 70 (3) Works under Component C 58,675,000 60 (4) Front-end fee 375,000 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (5) Interest rate cap or interest rate 0 Amount due pursuant to Section 2.08(c) of collar premium this Agreement TOTAL AMOUNT 150,000,000

13. World Bank loan proceeds will finance infrastructures, including civil works, goods, nonconsulting services, consulting services, training, and workshops, technical assistance, and incremental operating costs. Counterpart funds will finance part of the cost of civil works under Components B, C, and D and general expenses, including resettlement, design fee, investigation, project management, and so on.

14. Retroactive financing. Withdrawals up to an aggregate amount not to exceed US$30,000,000 equivalent may be made for payments made before the Loan Agreement signing date, but on or after January 1, 2017, for eligible expenditures.

Procurement

15. Procurement capacity and risk assessment. The PMO, with assistance from a procurement agent, will be responsible for project procurement. The participating municipalities/county will sign and execute their respective contracts. The assessment of the procurement capacity of project agencies identified the following key risks: (a) potential delays in

the preparation of bidding documents; (b) cost overruns and other variations during contract implementation because of changes in design and quantities, as well as in the master plans of the municipalities and county; and (c) availability of sufficient counterpart funds on time.

16. The PMO will take the following measures to mitigate the above risks: (a) prepare upstream market analysis for PBC; (b) prepare bidding documents based on preliminary designs; (c) ensure that local governments secure annual counterpart funds; and (d) engage qualified and experienced international consultants to participate in the preparation of comprehensive PBC documents. The World Bank will provide guidance to the PMO in the preparation of the procurement strategy and technical specifications for PBC contracts, and in handling any other procurement and contract management issues. The overall procurement risk is rated Low.

17. Applicable guidelines. Procurement will be carried out in accordance with ‘Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ dated January 2011 and revised in July 2014; ‘Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers’ dated January 2011 and revised in July 2014; and the provisions stipulated in the Loan Agreement and the Project Agreement.

18. Procurement of works and supply and installation of plant and equipment. Works procured under the project will include maintenance of selected roads using OPRC, maintenance of selected roads applying agreed innovative preventive maintenance technologies, and construction or upgrading of emergency response centers in the selected municipalities and county. Plant and equipment to be supplied and installed include road AMSs and facilities and equipment required by road emergency response centers. Procurement will be conducted using the World Bank’s Standard Bidding Documents for all International Competitive Bidding (ICB) and model bidding documents for all National Competitive Bidding (NCB).

19. Procurement of goods. Goods procured under this project will include goods and equipment required by road emergency response centers. Procurement will be conducted using the World Bank’s Standard Bidding Documents for all ICB and model bidding documents for all NCB.

20. Direct contracting. Procurement of an AMS is proposed in Component A. The system is currently used by 20 provinces on expressways management and by 25 provinces on trunk highways management in China. Currently, there is only one developer in China for such a system, which is in wide commercial use in the sector. The proprietary rights for the AMS, which is specially developed for use in China, is held by the National Engineering Research Centre of Road Maintenance Technologies. In the interest of effective integration, cost-effective technical support, reduced development costs, and reduced retraining and staffing cost, the AMS estimated to cost US$1.31 million will be procured through Direct Contracting. The PMO should furnish to the World Bank for its review, the scope of the proposed contract, the specifications, the draft contract, and a detailed cost breakdown together with evidence that the proposed cost does not exceed the price charged to other purchasers by the supplier.

21. Selection of consultants. Consulting services will include assignments for capacity building and institutional strengthening. The World Bank’s Standard Request for Proposals will

be used for consultancy services costing more than US$300,000 equivalent. Simplified Requests for Proposals will be used for services costing less than US$300,000.

22. Procurement Plan. The PMO has prepared the PP for the project, which comprises 36 contracts: 1 for Component A; 10 for Component B; 17 for Component C; and 8 for Component D. The PP will be made available on the World Bank’s external website. The PP will be updated annually or as required to reflect project implementation needs and improvements in institutional capacity.

23. Thresholds for procurement methods and prior review. The indicative thresholds are shown in table 3.2.

Table 3.2. Thresholds for Procurement Methods and Prior Review Contract Value Prior Review Expenditure Category Threshold Procurement/Selection Method Threshold (US$) a (US$) 1. Works and Supply and — ICB ≥ 20,000,000 Installation of Plant and < 40,000,000 NCB ≥ 20,000,000 Equipment < 500,000 Shopping — Direct Contracting 2. Goods and — ICB ≥ 6,000,000 Nonconsulting Services < 10,000,000 NCB ≥ 6,000,000 < 200,000 Shopping — Direct Contracting 3. Consultants Services — QCBS/QBS/FBS/LCS ≥ 4,000,000 < 300,000 CQS ≥ 500,000 — Individual Consultant — Single-Source Selection (firm) — Single-Source Selection (individual) Note: a. A contract whose cost estimate was below the World Bank prior review threshold is subject to prior review if the price of the lowest evaluated responsive bid (or, in the case of consulting services, the financial offer of the selected firm) exceeds such threshold at the bid/proposal evaluation stage. Terms of reference for all firm and individual consultants shall be prior reviewed by the World Bank. b The threshold for short-listing comprising only national consultants: US$500,000. QCBS = Quality- and Cost-Based Selection; QBS = Quality-Based Selection; FBS = Selection under a Fixed Budget; LCS = Least-Cost Selection; CQS = Selection based on Consultants’ Qualifications;

24. Advance contracting. The PP lists contracts which will be procured in advance of loan signing, together with the relevant World Bank review procedures.

Environmental and Social (including safeguards)

Environmental

25. All project activities will be on existing roads and within the existing ROW. Maintenance will be conducted on existing roads in/or along the boundary of nine ecological sensitive sites (a nature reserve, three scenic areas, three forest parks, and two wetland parks). One road is located in the experimental zone of a Yangtze alligator nature reserve; however, the location is outside the core zone and buffer zone of the reserve, and project activities will not lead to degradation or conversion of natural habitat. Eight other roads are boundary roads of parks, tourism zones, lakes

and reservoirs, but as all maintenance works are to be done on existing roads for specific locations or by specific sections within ROW, little impacts are envisaged to these sites. The six emergency centers will be built on the state-owned land converted from collective land about 10 to 5 years ago. While only little impacts are envisaged the World Bank OP/BP 4.04 (Natural Habitats) is triggered.

26. The main environmental and social impacts will be construction-related, such as disturbance of road traffic, nuisance of dust and noise/vibration, management of wastes, and worker and community safety, and impact on existing green belts along roads. Maintenance materials (for example, aggregate, sand, cement, and asphalt) will be purchased from market suppliers, and no new quarry sites or new borrow pits will be required. The EIA concludes that the potential environmental impacts of the project will be site-specific, temporary in nature, and are not significant. These impacts can be readily managed by known mitigation measures and good construction management practice. In accordance with World Bank OP 4.01 - Environmental Assessment, the project is classified as environmental Category B.

27. An EMP has been developed and specifies environmental management arrangements with clear responsibilities and capacity requirements, management of contractors and environmental supervision arrangements, environmental mitigation measures, a monitoring and reporting plan, a capacity training plan, and budget estimates. Mitigation measures have been developed to address environmental and social issues related to road maintenance and construction activities, including traffic disturbance, community and occupational health and safety, utility disruption, noise, dust, wastewater and solid waste management, water conservation, and erosion control. Mitigation measures also include measures to minimize any effect on the natural habitat, including location selections for storage sites, site traffic management, and contractor education. These measures will be incorporated in bidding documents and construction contracts.

28. All project maintenance roads have been identified and appraised; however, one or more sections under Component C: Innovative and Preventive Maintenance Technologies may be adjusted during implementation. Therefore, the EMP also includes a framework to guide the screening and the preparation of any follow-up EAs for such changes, to exclude any road sections in environmentally and/or socially sensitive areas.

29. The PMO will be responsible for the overall management of safeguards implementation as well as monitoring and reporting, with dedicated liaison staff for environmental management. The PIUs will be responsible for direct supervision of the performance of contractors within their jurisdiction. Environmental management units are in place within the PIUs, with dedicated staff. Environmental supervision is also incorporated in the contracts of project supervision companies to ensure daily on-site supervision.

30. Public consultations were conducted in the participating municipalities and county during EA preparation through a combination of opinion surveys and public meetings along the selected major roads and emergency response center sites. Information about the project, potential environmental and social impacts, and planned mitigation measures were provided to the public during the consultations. The public’s main concerns include traffic disturbance, safety, and the nuisance of noise. These concerns have been adequately addressed in the EIA, and necessary mitigation measures are included in the EMP and project design. The EIA and the EMP have been

disclosed on the websites of participating local governments and will be disclosed in the municipalities and county on March 22, 2016 and in the InfoShop on August 10, 2016.

Social

31. The project will enhance local citizens’ and farmers’ livelihoods by improving road infrastructure. No land acquisition or resettlement is foreseen under the project. However, the World Bank’s OP 4.12 has been triggered to take account of potential unanticipated land acquisition. An RPF has been prepared and provides details of policies and procedures to avoid or minimize the impacts of land acquisition and housing demolition and potential temporary impacts during construction on land use and unavoidable businesses losses.

32. Maintenance staff affected by PBC contracts. The SA shows that 281 workers (188 permanent staff and 93 contracted staff) will be affected by the outsourcing of road maintenance works to the commercial sector. According to Chinese labor law, and as confirmed through interviews with the local governments, the affected permanent workers as well as contracted staff still under contract will be offered either similar work on other road sections/areas, or will be transitioned into new job functions in their current locations. Those with expiring contracts will not be offered transition into new functions; however, contractors who are awarded PBC contracts will be encouraged to engage these staff. Market research has shown that several potential bidders are interested in doing so. Contracted staff with expiring contracts will, furthermore, be offered training opportunities to help them transition into new jobs. An experienced national consulting team will be contracted to serve as the independent monitoring agency for the worker transfer program and its social effects.

33. Due diligence review. A due diligence review was conducted to determine whether there are any links between World Bank-financed subprojects and other construction activities in project locations. No new proposals for civil works linked to the World Bank-supported projects are anticipated. The due diligence review will be repeated regularly during project implementation. Due diligence reviews conducted by the national consulting team confirmed that state-owned land was converted from collective land about five to ten years ago for the six emergency centers that will be built under the project. This conversion was carried out by the local government consistent with national and provincial land regulations.

34. Gender. The SA explored women’s expectations and collected ideas and recommendations that have been incorporated in the designs of subprojects. The SA will be enhanced to include a disaggregated gender analysis among those workers who might be transferred to other job functions as a result of the PBC contracts. Social and gender equality will continue to be promoted through wide and equal participation of and consultation with workers along the road sections throughout project implementation. Equal participation and gender responsiveness will be reflected in project activities such as training and in other capacity-building activities. Gender participation in management or supervisory roles will also be adopted as one of the performance measures under the PBC contracts. Information booklets will be provided for potentially affected workers before project implementation, including their entitlements, pension, and social security.

35. Citizen engagement. The public can upload information to the AMS and alert asset owners of issues that need to be addressed. The project includes a citizen engagement indicator to monitor response to these alerts.

Annex 4: Implementation Support Plan

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

Strategy and Approach for Implementation Support

1. The strategy and approach for implementation support are based on the nature of the project and key aspects of its risk profile, as identified through the SORT. The following risk categories have been rated as Substantial: technical design, institutional capacity, and fiduciary. Implementation support will focus on these risk categories as well as implementation of agreed measures to ensure compliance with World Bank safeguard policies.

2. Technical design of the project. During project preparation, the World Bank conducted workshops on PBC for officials from the participating municipalities and county and provided guidance to the PMO to hire an international PBC expert. The institutional capacity-building component of the proposed project supports study tours for key officials from the participating municipalities and county to learn PBC best practices firsthand. During project implementation, the World Bank will work closely with the PMO, PIUs, and related agencies to continue to facilitate the adoption of best practices and to effectively implement the project in diverse sites.

3. Implementation support will focus on the innovative contracting model, technical aspects of works, and institutional strengthening and reforms, as discussed below:

(a) Contract models. The World Bank will provide intensive support during the start-up phase of PBC, focusing on developing suitable packages, melding the local context with international best practice. The World Bank will help address concerns and uncertainties as they emerge during implementation.

(b) Technical aspects of works. The World Bank will review planned road works from the design phase until completion of works. It will provide engineering inputs on designs to ensure the adoption of proper technical specifications and appropriate consideration of road safety. World Bank reviews will ensure that the technical aspects of bids are assessed properly. During construction and commissioning, technical supervision will be provided to ensure that contractual obligations are met on technical, environmental, and social aspects. World Bank engineers will conduct site visits on a semiannual basis throughout project implementation and will likely visit two to four municipalities during each mission.

(c) Institutional strengthening and reforms. The World Bank will support project agencies in developing the institutional strengthening program, as well as the reforms through which the innovative solutions will be embedded.

4. Institutional capacity for implementing and sustainability. The World Bank will support the project’s comprehensive capacity-building program through (a) training for PMO and PIU staff on technical, procurement, FM, and safeguards; (b) workshops to discuss preliminary experience with PBC, development of modern network management systems, and pilot maintenance technologies; and (c) support for capacity building in the areas measured by the New Zealand Treasury Capital Asset Management capability assessment spreadsheet.

5. Fiduciary. The World Bank’s designated procurement specialist will provide implementation support through strengthened upstream capacity building at the project level, a fit- for-purpose tailored procurement strategy based on market analysis for complex procurements (for example, OPRC), hands-on support as needed, risk-based prior reviews, systematic post review in collaboration with local audit offices, streamlined procurement management, and contract management support for selected contracts.

6. FM implementation support will be aligned with the FM risk rating, which will be evaluated on a regular basis by the FMS. FM reviews will focus on confirming that the project’s accounting system can capture and record all project transactions on time and accurately, as well as generate the required financial reporting; counterpart funds are delivered as planned; and World Bank loan disbursement and fund flow arrangements function appropriately.

7. Environmental and social safeguards. The World Bank will closely monitor the implementation of the project through monitoring reports, discussions with the PMO, PIUs, and their safeguards staff, and periodic site visits. The World Bank will ensure that relevant project staff are provided adequate training on safeguards and that adequate resources are allocated for implementation of the EMP (and RPF, if the land acquisition, although unanticipated, takes place). The World Bank will seek to resolve any issues of significant noncompliance through discussions with senior leaders.

Implementation Support Plan

8. The World Bank will conduct two implementation support missions per year on average. These will be supplemented by desk reviews, training, and field visits to follow up on project implementation. The World Bank team will include technical, FM, procurement, social, and environmental specialists. Detailed inputs from the World Bank team are outlined in tables 4.1 and 4.2.

Table 4.1. Main Focus of Implementation Support Resource Estimate Time Main Focus Skills Needed (Staff Week) First  Design of PBC contracts  PBC 5–7 staff; 1–2 trips twelve  Design and implementation of  Pavement engineering each months AMSs  Procurement  Design and procurement of  Safeguards innovative technologies  Project management skills  Procurement of equipment and  Road safety design and procurement of  AMSs emergency center  FM 12–48  Procurement of PBC contracts  PBC 5–6 staff; 1–2 trips months  Supervision of civil works  Pavement engineering each  Implementation of training  Procurement program  Safeguards  Project management skills  FM

Table 4.2. Skills Mix Required Number of Staff Weeks per Number of Trips Skills Needed Year per year Task Team Leader 6 2 AMSs Specialist 4 2 Pavement Engineer 4 2 Financial Specialist 2 1 PBC Specialist 4 2 Procurement Specialist 4 1 (2 in the first year) Environmental Management Specialist 2 1 Social Development Specialist 3 1

9. The midterm review of the project is expected to be carried out by June 30, 2020. The appropriateness of project objectives and project design (including project components and the remaining implementation period) will be assessed during the midterm review and agreements will be reached with the Government on restructuring the project, if required.

Annex 5: Economic and Fiscal Analysis

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

Economic Analysis

1. This annex summarizes the economic analysis undertaken to determine the project’s economic viability as well as CO2 emission changes accruing from the project. It is based primarily on the road works components, Components B and C, for which costs and benefits can be readily quantified and assessed and which account for the bulk of the project financing costs.

2. The evaluation was done using HDM-4, which assessed the streams of changes on road user costs, road works costs, and CO2 emissions (as compared to a business-as-usual scenario) over an evaluation period. Road user costs consist of vehicle operating costs and travel time costs of passengers and freight. The basic parameters of the model, including existing pavement conditions, traffic volumes, and unit costs of vehicle operation, were obtained mostly through field surveys and desk reviews.

3. The basic input vehicle fleet economic costs and basic characteristics used are as shown in table 5.1. The social cost of CO2 emissions was estimated to be US$30 per ton increasing at 3 percent per year. Traffic growth is primarily driven by economic development and the corresponding increases in vehicle ownership and vehicle usage. The International Monetary Fund’s forecast of China’s GDP growth to 2020 has been used to forecast normal traffic growth, adopting an elasticity of 1.2 for passenger vehicles until 2022 with 1.0 thereafter, and 1.0 for goods vehicles throughout the evaluation period. Accordingly, traffic for passenger vehicles was estimated to grow at 7.4 percent per year from 2017 to 2022 and at 6.2 percent per year thereafter. Traffic of goods vehicles was estimated to grow at 6.2 percent per year throughout the evaluation period. No generated traffic was included in the analysis, considering that preservation road works have very little impact on travel times.

Table 5.1. Vehicle Fleet Characteristics Truck Truck Bus - Truck - Car Van - - Large Medium Heavy Trailer Economic Costs New vehicle price (US$) 30,769 153,846 23,077 30,769 55,385 61,538 Replacement tire (US$) 231 385 123 385 385 385 Fuel/liter (US$) 0.97 0.85 0.91 0.91 0.85 0.85 Lubricant/liter (US$) 7.62 4.54 3.08 2.75 2.75 2.75 Maintenance labor costs (US$/hour) 4.00 4.92 4.00 4.92 4.92 4.92 Crew costs (US$/hour) 4.92 8.92 4.92 8.92 8.92 8.92 Annual overhead (US$) 692 4,310 615 769 3,077 3,077 Annual interest (%) 6 6 6 6 6 6 Passenger working time (US$/hour) 1.08 0.77 0.77 0.77 0.77 0.77 Passenger nonworking time (US$/hour) 0.36 0.25 0.25 0.25 0.25 0.25 Cargo delay time (US$/hour) 0.00 0.00 0.55 0.55 0.55 0.55 Basic Characteristics Annual vehicle utilization (km) 20,000 70,000 40,000 50,000 60,000 75,000 Annual working hours (hours) 850 1,750 1,300 1,750 1,750 2,050

Truck Truck Bus - Truck - Car Van - - Large Medium Heavy Trailer Economic Costs Vehicle life (years) 12 12 6 10 14 8 Passengers (number) 2 45 2 0 0 0 Gross vehicle weight (ton) 0.5 4.1 2.0 6.0 10.0 25.0 ESA loading factor (number) 0.0 0.7 0.0 1.3 2.3 4.6 Typical traffic composition (%) 67 5 13 6 4 5

4. Estimated unit road user costs for different roughness levels are presented in table 5.2:

Table 5.2. Unit Road User Costs (US$ per vehicle-km) Roughness Bus - Truck - Truck - Truck - Car Van (IRI, m/km) Large Medium Heavy Trailer 2 0.31 1.07 0.32 0.49 0.79 0.99 3 0.31 1.07 0.32 0.50 0.79 1.00 4 0.32 1.12 0.33 0.51 0.82 1.04 5 0.33 1.17 0.34 0.52 0.85 1.06 6 0.34 1.23 0.35 0.54 0.87 1.09 7 0.35 1.29 0.36 0.55 0.89 1.11 8 0.36 1.36 0.38 0.57 0.92 1.14 Note: IRI = International Roughness Index.

5. Typical financial unit costs of road preservation works are presented in table 5.3:

Table 5.3. Typical Financial Unit Costs of Preservation Road Works Work Type Road Surface Typical Activity Costs (US$ per m2) Asphalt pavement 12 cm asphalt reconstruction 43.08 Rehabilitation Cement pavement 12 cm asphalt reconstruction 46.15 Asphalt pavement 4 cm asphalt overlay 13.85 Resurfacing Cement pavement Cement concrete panels 41.54 Asphalt pavement 3 cm asphalt overlay 10.00 Thin Surfacing Cement pavement Sand fog seal 4.00

6. Component B: Road Maintenance Commercialization. This component covers road sections totaling 775.8 km for which routine maintenance, periodic maintenance, or rehabilitation works are planned over the contract period. The road sections have been grouped into eight contracts with an average length of 98 km. The total length and average characteristics of the eight contracts are presented in table 5.4. The road sections are on average in fair condition with an average roughness of 3.7 IRI and carry 5,902 vehicles per day on average, of which 29 percent are trucks.

Table 5.4. Average Road Characteristics Average Total Average Average Number of Traffic Contract City Package Length Terrain Roughness Truck Lanes (Vehicles (km) (IRI) (%) per Day) 1 Hefei 1 156.6 Rolling 2.1 4–10 6,687 12 2 Suzhou 1 81.9 Rolling 5.3 2 2,623 31 3 Chuzhou 1 114.7 Rolling 4.4 4–6 6,988 30

Average Total Average Average Number of Traffic Contract City Package Length Terrain Roughness Truck Lanes (Vehicles (km) (IRI) (%) per Day) 4 Anqing 1 92.2 Flat 3.2 2–4 7,251 36 5 Anqing 2 99.9 Flat 3.7 2 4,373 34 6 Xuancheng 1 88.5 Hilly 3.4 2–4 4,154 41 7 Xuancheng 2 48.5 Hilly 4.8 2/4 5,192 41 8 Guangde 1 93.5 Hilly 4.2 4 8,452 21 Total 775.8 3.7 1 5,902 29

7. Economic analysis was conducted for road sections totaling 588.8 km, where periodic maintenance or rehabilitation works (capital works) are planned over the contract period, in addition to routine maintenance. The remaining road sections require only routine maintenance over the contract period. The following two scenarios were simulated: (a) Project Scenario - periodic maintenance or rehabilitation of the road and routine maintenance for the entire evaluation period, including additional periodic maintenance when roughness is over 4 IRI; and (b) Business- As-Usual Scenario - reconstruction when roughness reaches 6 IRI and routine maintenance during the entire period. Length of road works and estimated financial costs per contract are presented in table 5.5. Capital works comprise thin surfacing, resurfacing, and rehabilitation works.

Table 5.5. Road Works Length and Estimated Financial Costs Length (km) Estimated Financial Costs (US$, millions) Capital Routine Capital Contract Total Total Routine Road Maintenance Road Other* Contract Contract Maintenance Works Only Works 1 156.6 91.3 65.3 19.6 8.3 9.5 1.8 2 81.9 76.7 5.2 24.4 21.2 2.3 0.9 3 114.7 71.6 43.1 20.5 12.3 6.9 1.3 4 92.2 67.3 24.9 14.2 7.7 5.4 1.1 5 99.9 72.9 27.0 12.4 8.4 2.9 1.1 6 88.5 88.5 0.0 18.7 12.8 4.9 1.0 7 48.5 48.5 0.0 10.2 7.0 2.7 0.6 8 93.5 72.1 21.4 15.7 9.2 5.4 1.1 Total 775.8 588.8 187.0 135.8 87.0 39.9 8.9 Note: * Other includes emergency works, safety measures, and monitoring.

8. Net benefits of the project are estimated as a reduction in the costs of road works, road user costs, and CO2 emissions as compared to the business-as-usual scenario. The net present value (NPV) at a 6 percent and a 12 percent discount rate as well as the EIRR of the investments are given in table 5.6. Component B has an EIRR of 43.2 percent and an NPV of US$200.2 million at a 6 percent discount rate.

Table 5.6. Component B Economic Evaluation Results NPV at 6% (US$, NPV at 12% (US$, Contract EIRR (%) Benefit-Cost Ratio at 6% millions) millions) 1 17.7 7.0 20.1 3.5 2 7.2 2.9 17.6 1.4 3 44.8 29.1 73.0 5.3 4 27.1 17.3 42.5 5.1

NPV at 6% (US$, NPV at 12% (US$, Contract EIRR (%) Benefit-Cost Ratio at 6% millions) millions) 5 10.7 6.9 31.6 2.5 6 20.2 12.0 28.3 2.9 7 27.5 18.2 75.4 5.6 8 45.0 29.3 89.1 6.8 Total 200.2 122.7 43.2 3.7

9. A sensitivity analysis has been undertaken to investigate whether the project remains viable when key variables are changed (increase in investment costs and reduction in projected benefits by 20 percent each). The results of sensitivity analysis tests are presented in table 5.7. Component B maintains economic viability in all test scenarios explored.

Table 5.7. Component B Sensitivity Analysis

EIRR (%) Base case 43.2 20% increase in investment costs 35.7 20% reduction in projected benefits 36.4 20% increase in costs and 20% reduction in benefits 29.6

10. Component C: Innovative and Preventive Maintenance Technologies. This component covers 31 road sections totaling 446.9 km for which thin surfacing, resurfacing, or rehabilitation works are planned over the contract period. For the economic analysis, the road sections were grouped into five classes of road works based on the proposed road work type and number of lanes of the road sections. Table 5.8 indicates the lengths and average characteristics of the resulting five classes of road works. The road sections are on average in fair condition with an average roughness of 4.3 IRI and carry 6,206 vehicles per day on average, of which 32 percent are trucks.

Table 5.8. Average Road Characteristics per Road Work Class Average Road Total Average Average Number of Traffic Work Road Work Type Length Terrain Roughness Truck Lanes (Vehicles Class (km) (IRI) (%) per Day) A Thin Surfacing 2 137.3 Rolling 3.3 6,163 30 B Thin Surfacing 4 65.6 Rolling 2.6 6,694 29 C Resurfacing 4 15.3 Rolling 4.2 8,684 30 D Rehabilitation 2 191.3 Rolling 5.2 5,172 35 E Rehabilitation 4 37.4 Rolling 5.7 9,788 24 Total 446.9 4.3 6,206 32

11. Economic analysis was conducted for the five road work classes, using the same methodology as for Component B. The estimated financial costs for each road work class are presented in table 5.9.

Table 5.9. Financial Road Work Costs Road Work Number of Financial Cost Financial Cost per km Road Work Type Class Lanes (US$, millions) (US$, million) A Thin Surfacing 2 5.96 0.043 B Thin Surfacing 4 5.60 0.085

Road Work Number of Financial Cost Financial Cost per km Road Work Type Class Lanes (US$, millions) (US$, million) C Resurfacing 4 5.05 0.331 D Rehabilitation 2 78.19 0.409 E Rehabilitation 4 23.61 0.632 Total 118.40 0.265

12. The NPV at discount rates of 6 percent and 12 percent and the EIRR of the investments are given in table 5.10. Component C has an EIRR of 30.0 percent and an NPV of US$130.6 million at a 6 percent discount rate.

Table 5.10. Component C Economic Evaluation Results NPV at 6% NPV at 12% EIRR Road Work Class Benefit-Cost Ratio at 6% (US$, millions) (US$, millions) (%) A 37.9 27.5 78.3 8.5 B 14.3 7.2 25.5 4.0 C 8.2 4.5 37.9 2.9 D 51.3 22.9 21.8 1.8 E 18.9 11.2 30.8 1.9 Total 130.6 73.4 30.0 2.3

13. The results of sensitivity analysis tests are presented in table 5.11. Component C maintains economic viability in all test scenarios.

Table 5.11. Component C Sensitivity Analysis EIRR (%) Original 30.0 20% increase in costs 23.0 20% reduction in benefits 23.6 20% increase in costs and 20% reduction in benefits 17.5

14. Overall Project Benefits. Table 5.12 indicates the NPV at 6 percent and 12 percent discount rates as well as the EIRR of overall project investments (including CO2 social costs). The overall project has an EIRR of 36.3 percent and an NPV of US$330.8 million at a 6 percent discount rate.

Table 5.12. Results of Overall Project Economic Evaluations NPV at 6% NPV at 12% EIRR Benefit-Cost Ratio at Project Component (US$, millions) (US$, millions) (%) 6% B 200.2 122.7 43.2 3.7 C 130.6 73.4 30.0 2.3 Overall Project 330.8 196.1 36.3 2.9

15. Public financing and World Bank value added. The use of public-private partnerships for funding road preservation works is presently not the policy of the Government of China. Public investment is presently the option chosen by the Government for road preservation works. World Bank financing is justified because of the economic benefits of the project and the value add it brings beyond financing in areas such as sustainability of road maintenance, transport planning, safeguards, procurement, and FM.

16. CO2 emission analysis. A GHG accounting evaluation was conducted to assess the impact of the project on CO2 emissions. Vehicle emissions were assessed by HDM-4 simulation, by calculating CO2 emission through the following steps: (a) estimation of average vehicle speeds based on road conditions, traffic levels, and vehicle characteristics; (b) estimation of fuel consumption based on vehicle speeds and engine power; and (c) estimation of CO2 emissions based on fuel consumption. Total CO2 emissions under the project and under the business-as-usual scenarios are 37.613 million tons and 37.588 million tons, respectively, over 20 years, resulting in a very small CO2 emission decrease of 0.025 million tons, because road preservation works have little impact on vehicle speeds and fuel consumption.

Fiscal Analysis

17. The US$150 million IBRD loan will be onlent by the MoF to Anhui Provincial Government and by the provincial government to the six participating municipalities and county on the same lending terms: Hefei, Chuzhou, Suzhou, Anqing, Xuancheng, and Guangde. The Governments of each municipality and the county will be responsible for counterpart funding and debt service. Financial assessments of the participating municipalities and county were carried out to assess (a) the fiscal impact of the proposed project, (b) availability of the required counterpart funds during project implementation, (c) debt-service capacity, and (d) ability to finance O&M. Financial assessments for AHAB and the PMO were not carried out as their borrowings represent a very small portion of the IBRD loan.

18. The sources of counterpart funding will take into account the Budget Law, which limits local governments’ ability to borrow from commercial banks to finance a large part of their counterpart obligations.

A. Socioeconomic Development

19. The participating municipalities and county enjoyed strong economic growth during the last seven years. GDP in Hefei municipality grew from RMB 166 billion in 2008 to RMB 516 billion in 2014, at an average annual growth rate of 21 percent. Chuzhou, Suzhou, Anqing, and Xuancheng municipalities and Guangde County had an annual average GDP growth rate of 15 percent during the same period. Table 5.13 presents the main indicators of socioeconomic development of the participating municipalities and county in 2014, as well as the forecast growth rate for the 2016–2022 period.

Table 5.13. Main Socioeconomic Development Indicators Hefei Chuzhou Suzhou Anqing Xuancheng Guangde Indicator Growth Growth Growth Growth Growth Growth 2014 2014 2014 2014 2014 2014 % * % * % * % * % * % * Population 770 1 450 −0.03 642 5 621 0.16 280 0.1 51 0.05 (10,000) GDP (RMB, 516 10 118 9 113 16 154 8.5 91 7.4 17 8.5 billions) Source: The FSR, PMO. Note: * Annual growth rate from 2016 to 2022.

B. Government Fiscal Status

20. Sources of local fiscal revenue can be classified into two categories: (a) fiscal revenue, including tax and nontax revenue; and (b) non-fiscal revenue, including land-use rights and other non-fiscal revenue. Local fiscal revenue of each municipality and the county increased substantially from 2008 to 2014, at an average annual growth rate of 29 percent, 39 percent, 29 percent, 27 percent, 33 percent, and 34 percent in Hefei, Chuzhou, Suzhou, Anqing, and Xuancheng municipalities and Guangde County, respectively. Local fiscal revenues of the participating municipalities and the county are expected to increase by about 9 percent to 34 percent per year during 2016 to 2022.

21. An important source of disposable funds for each municipality and the county is upper- level transfers and subsidies. Each municipality and the county receives earmarked, general, and other transfers to meet the needs of infrastructure development and operating expenses. All the participating municipalities and the county generally received upper-level transfers at increasing growth rates during 2008–2012. However, they started receiving upper-level transfers at a decreasing rate from 2013. Nevertheless, total upper-level transfers still accounted for 15 percent to 43 percent of the total fiscal revenues of the participating municipalities and county in 2014. The participating municipalities and county expect total transfers and subsidies to increase by an average of 9 percent to 22 percent per year during 2016–2022.

22. Local fiscal expenditures of the participating municipalities and county have increased significantly in the last seven years, at an average annual rate between 22 percent and 29 percent. Xuancheng municipality invested RMB 3.58 billion in road construction in 2014 (which accounted for 10 percent of its total fiscal expenditure) and RMB 310 million in road maintenance (which accounted for 0.9 percent of its total fiscal expenditures in the same year). The other municipalities and the county spent 0.1 percent to 1.1 percent of total fiscal expenditures in road maintenance in 2014. It is expected that local fiscal expenditures in the participating municipalities and county will increase by about 21 percent to 30 percent per year during 2016–2022. Table 5.14 presents a summary of government fiscal revenues and expenditures in the six municipalities/county for 2014 and the forecast average growth rate from 2016 to 2022.

Table 5.14. Government Fiscal Revenues and Expenditures of Participating Municipalities/County in 2014 and Growth Projections for 2016–2022 Hefei Chuzhou Suzhou Anqing Xuancheng Guangde 2014 2014 2014 2014 2014 2014

(RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth billions %* billions %* billions %* billions %* billions %* billions %* ) ) ) ) ) ) Total fiscal 141.0 26 42.2 10 41.1 28 43.4 9 37.9 7 4.3 21 revenue Local fiscal 107.4 29 25.6 34 13.8 29 22.5 9 23.8 30 2.6 24 revenue Upper-level 20.5 22 13.9 16 16.4 18 18.8 9 9.4 15 1.5 18 transfers and subsidies

Hefei Chuzhou Suzhou Anqing Xuancheng Guangde 2014 2014 2014 2014 2014 2014

(RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth (RMB, Growth billions %* billions %* billions %* billions %* billions %* billions %* ) ) ) ) ) ) Other revenue 13.1 3 2.7 7 — 0 2.0 0 4.7 18 0.2 79 Total fiscal 135.1 29 42.0 24 38.8 30 43.2 22 34.8 25 4.3 21 expenditure General 69.9 24 26.9 5 24.7 21 29.9 17 22.2 5 3.6 23 budgetary expenditure Road 0.9 10 0.4 23 1.0 20 0.3 43 3.6 6 0.1 20 construction Road 0.2 10 0.2 21 0.2 11 0.2 32 0.3 5 0.05 23 maintenance Fund 59.8 45 14.4 45 14.1 83 12.5 5 12.6 37 0.8 23 budgetary expenditure Source: Finance bureaus of the participating municipalities and county. Note: * Annual growth rate from 2016 to 2022.

C. Government Debt

23. Project governments have borrowed to finance rapid urban and rural development in the last several years. However, the World Bank loan does not significantly affect the participating municipalities’ and county’s financial positions. The loan represents a small portion of the respective municipality’s/county’s outstanding debt in 2014. Table 5.15 provides the summary details.

Table 5.15. Debt Profile of the Participating Municipalities/County in 2014 Unit Hefei Chuzhou Suzhou Anqing Xuancheng Guangde Accumulated debt at the end RMB, 123.66 11.59 32.11 53.55 61.95 7.70 of 2014 billions IBRD loan compared to the municipality’s outstanding % 0.17 1.70 0.56 0.3940 0.15 0.90 debt at the end of year Source: Finance bureaus of the participating municipalities and county.

D. Counterpart Fund Requirements

24. Project funding requirements were calculated based on the investment plan. These requirements were then compared to the expected fiscal revenues and total construction and maintenance investments during 2017–2022 (Table 5.16). The total requirement for government funding in each municipality and the county will be relatively small—less than 1 percent of total fiscal revenue during the project implementation period. The project will account for about 23 percent, 15 percent, 9 percent, 6 percent, 8 percent, and 14 percent of total maintenance investments during that period, respectively, for Hefei, Suzhou, Chuzhou, Anqing, Xuancheng,

51 and Guangde. The participating municipalities and county have committed that investments under the proposed project will be given priority in their overall investment programs and will include the yearly funding requirements in their respective fiscal budgets during the six-year construction period.

25. Components B and C, which comprise 83 percent of the total project financing, will contribute to the maintenance of 30 percent of the total national and provincial road network in the participating municipalities and county, that is, the project will replace (or enhance) the corresponding maintenance expenditure of the ‘without project’ scenario. Therefore, the project will not add significantly to the fiscal burden on the participating municipalities and county. The participating municipalities and county plan to use fiscal revenue, including upper-level transfers and subsidies, to meet their funding requirements.

Table 5.16. Project Funding Requirements to Expected Fiscal Revenue, Road Construction, and Maintenance Expenditures (2017–2022) Unit Hefei Suzhou Chuzhou Anqing Xuancheng Guangde Total Project RMB, 419 382 350 416 184 135 1,884 investment millions RMB, IBRD loan 215 197 180 214 94 69 969 millions Counterpart RMB, 2073 186 170 202 89 66 916 fund millions Total fiscal RMB, 3,482.40 1,046.79 433.32 411.42 331.71 78.38 5,784.02 revenue billions Total road RMB, construction 18.74 16.47 8.69 13.41 29.74 1.82 88.87 billions investment Total RMB, maintenance 1.82 2.49 3.90 7.24 2.44 0.95 18.85 billions investment Project investment/total % 0.01 0.04 0.08 0.10 0.06 0.17 0.03 fiscal revenue Total project investment/total road % 2 2 4 3 1 7 2.12 construction investment Total project investment/total % 23 15 9 6 8 14 10 maintenance investment Portion of road network % 40 27 25 28 24 86 30 included in the project

E. Funding for Maintenance

26. Government expenditure for maintaining the assets after project closing was also analyzed. The project will improve about 1,222 km of roads, accounting for about 12 percent of the national

52 and provincial road network in Anhui. Annual maintenance needs for these improved roads after the project closing are estimated to be about US$40 million, taking into account both routine maintenance and resurfacing once in every eight years. Anhui Province currently allocates about US$320 million per year for maintenance. Optimal funding for rehabilitation of project infrastructure will be an increase of about 12 percent of the current level.

Annex 6: Climate Change Resilience

CHINA: Anhui Road Maintenance Innovation and Demonstration Project

1. Globally, the impact of climate change on infrastructure is becoming better understood and the need to build more resilient infrastructure is now a given. For this project, the focus is to best retrofit existing assets to meet the new and future challenges.

Climate Change in Anhui

2. Figures 6.1–6.5 demonstrate the aspects of climate change prevalent in Anhui:

 Increase in temperature in each season, with increase in temperature being the fastest in winter

 An increase in the number of extreme heat (heatwave) days in each year

 Rainfall being more concentrated, with the total number of days with rain decreasing. In particular, there is an increase in rain during winter, with a decrease during the rest of the year.

Figure 6.1. Change in Anhui Average Annual Temperature between 1961 and 2010

Figure 6.2. Change in Mean Rainfall (Percent) per Decade

Figure 6.3. China Weather Trends

Figure 6.4. Change in Extreme Rainfall Events

3. These trends are likely to continue (or worsen) over the coming decades with little indication that it will substantially decrease in the foreseeable future to restore weather patterns to what they once were.

4. Drainage facilities in Anhui are designed for a 1:100-year rain event for expressways and Grade 1 roads and 1:50-year event for Grade 2 roads. Recent suggestions are that return events going forward could be some four times those currently observed. As such, it is likely that design flood frequency for expressways and Grade 1 roads will be increased in the future. The Changzhou City (to the east of Anhui) rainfall design chart in figure 6.5 would suggest that an increase in precipitation of 20–30 percent should be catered for to account for climate change. Where side drains are restored or rehabilitated, they will hence be designed to meet this increase in precipitation.

Figure 6.5. Changzhou Rainfall Intensity Design Chart

Impact of Climate Change on Highway Infrastructure

5. The impact of the observed changes to climate on highway infrastructure include the following:

 There is a need to modify asphalt mixes that are more suitable to warmer climate (including heatwave events) and that will not be susceptible to rutting or other deformation from softening of materials.

 Roads will need to be built higher to ensure that they are above flood plains, while at the same time ensuring that the road does not become an obstacle to the flow path of flood waters.

 Drainage structures (side drains, culverts, and so on.) will need to have higher capacities to adequately handle more intense rainfall events. At the same time, there is an increasing likelihood of scouring of unprotected road shoulders and earth drains.

 Protection of earth embankments and cuttings will need to be enhanced not only to avoid scouring during the rainfall events, but also to avoid failure through the greater variation in moisture content throughout the year (wetter winter, drier summer).

Building Back a Better and More Resilient Highway Infrastructure

6. The above climate changes and infrastructure challenges can be readily incorporated when designing and constructing new infrastructure. However, for existing infrastructure, there is a need to retrofit, which owing to cost will typically be carried out in an incremental manner in association with normal maintenance and renewal activities.

7. To enable Anhui to meet the current and future challenges of climate change, the concept of ‘build back better’ is appropriate, with two key initiatives identified for inclusion in the project:

 Drainage facilities. As part of Component B, drainage facilities will be modified to cope with the anticipated higher-intensity rainfall projections.

 Asphalt mixes. Rehabilitation works under Component C will pilot a range of asphalt mixes that offer potentially better resistance to deformation as temperatures increase.

8. The incremental cost of these two initiatives (over and above the cost estimates for Components B and C based on current design standards) is summarized in table 6.1:

Table 6.1 Incremental Cost of the Two Key Initiatives Maximum Incremental Component Description of Climate Resilience Project Cost Estimate (US$) Upsizing of critical cross-drainage assets in conjunction with road 32,000 rehabilitation projects to handle 30% higher flows Upsizing of critical longitudinal-drainage assets (excluding side B drains) in conjunction with road rehabilitation projects to handle 160,000 30% higher flows Upgrading of earth side drains to handle 30% higher flows 350,000 10 km of asphalt with 0.2% high-modulus additive 200,000 C 10 km of asphalt with 0.3% high-modulus additive 300,000 Total Cost 1,042,000

Estimation of Project Adaptation Cobenefits

9. Beyond the activities listed above, which directly address climate resilience, introduction of a good and suitable road maintenance regime will support enhanced climate resilience in the road network, as climate impacts such as rains, frost/thaw, and radiation are major contributors to pavement deterioration. Therefore, much of the investment in maintenance will contribute to climate adaptation cobenefits. The following considerations have been applied in this project:

 Routine maintenance will predominantly be applied to ensure that climate impacts are not accelerating deterioration. Hence, this is counted as a climate adaptation cobenefit with a 40 percent contribution of costs.29

 Periodic maintenance, which does not include enhancements to bearing capacity,30 is also a non-negligible measure to address deterioration from climate impacts or, when applied on time, to ensure climate impacts are not accelerating pavement deterioration. Hence, nonstructural overlays are counted as climate adaptation cobenefits, though only with a 40 percent contribution of the costs (that is, the same contribution as under routine maintenance).

 Rehabilitation is carried out if pavements deteriorate beyond periodic maintenance repair. As rehabilitation (and reconstruction) restores pavement structure, this in itself

29 A study in Europe found ‘For road transport infrastructures, weather stresses represent from 30 percent to 50 percent of current road maintenance costs in Europe”; Impacts of Climate Change on Transport: A Focus on Road and Rail Transport Infrastructures, European Commission, 2012. 30 In this project, this includes micro-surfacing, seals, nova surfacing, high-modulus asphalt surfaces, overlays with SAMI, and surface recycling. 58

does not contribute to cobenefits, if the design is not enhanced to be more resilient to climate impacts. Beyond what is mentioned previously, this is not envisaged in this project, and hence, rehabilitation costs are not included in climate cobenefits.

 Emergency repairs are often directly caused by climate impacts, such as flooding and landslides. Data from Anhui suggest that about 96 percent of emergency works address damage caused by climate impacts. This percentage has been used to derive climate c-benefits from investments in emergency works.

10. Based on the estimated investments, each component will contribute to climate cobenefits as shown in table 6.2. The project’s climate adaptation cobenefit share is estimated to be 13 percent.

Table 6.2 Climate Cobenefits Contribution by Component Climate Total Investment Component Cobenefit (US$, (US$, millions) millions) A - Road Asset Management System Upgrade 1.31 — B - Road Market Commercialization a 131.71 11.9 C - Innovative and Preventive Maintenance Technologies 111.90 12.8 D - Emergency Response Capacity 11.54 12.9 E - Institutional Capacity Building 0.94 — Note: a For Component B, ‘resurfacing’ includes both structural and nonstructural works, though no breakdown is known. Hence, a breakdown of 28 percent (as in Component C) is used.