Document of The World Bank Public Disclosure Authorized Report No. 15358-CHA

STAFF APPRAISAL REPORT

CHINA Public Disclosure Authorized

SECOND BEHAN PROVINCIAL HIGHWAYPROJECT

MAY 1, 1996 Public Disclosure Authorized

Infrastructure Division Public Disclosure Authorized and Mongolia Department East Asia and Pacific Regional Office CURRENCY EQUIVALENTS (As of January 1, 1996)

Currency Name = Renminbi Currency Unit Yuan (Y) I Yuan = 100 fen $1.00 = Y 8.30 Y .00 = $0.12

FISCAL YEAR

January I - December 31

WEIGHTS AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

7FYP - Seventh Five-Year Plan 8FYP - Eighth Five-Year Plan 9FYP - Ninth Five-Year Plan AXE - - Expressway BOT - Build-operate-transfer E&M - Electrical, electronic and mechanical EA - Environmental Assessment EAP - Environmental Action Plan EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return GNP - Gross national product GOVAI - Gross output value of agriculture and industry HPCD - Provincial Communications Department HPHAB - fIenan Provincial Highway Administration Bureau HPHGHCA- Henan Provincial I-ligh-GradeHighway Construction Authority HPHSRI - Henan Provincial Highway Scientific Research Institute HPPSDI - Henan Provincial Planning, Survey and Design Institute HPTC - Henan Provincial Transport College HPTVS - Henan Provincial Transport Vocational School HRI - Highway Research Institute HSDI - Highway Survey and Design Institute ICB - International competitive bidding [iS - Intensive Institutional Strengthening IST - Institutional Strengthening and Training ITC - International Tendering Company JST - Joint Supervision Team LA&R - Land Acquisition and Resettlement LAB - Levying Administration Bureau LGTPA - Leading Group for Transportation for Poverty Alleviation LSE - - Expressway MAAP - Microcomputer Accident Analysis Package MOC - Ministry of Communications MOF - Ministry of Finance mte - Medium truck equivalent mvpd - Motor vehicles per day NTHS - National Trunk Highway System O-D - Origin-Destination pcu - Passenger car unit PSB - Public Security Bureau PTS - Provincial Traffic School PTTS - Provincial Traffic Technical School RAP - Resettlement Action Plan RIPA - Roads Improvement for Poverty Alleviation RMF - Road maintenance fee SAA - State Audit Administration SOE - Statement of Expenditures SPC - State Planning Commission STC - Staff Training Center TCU - Technical Coordination Unit ton-km - Ton-kilometer TRL - Transport Research Laboratory VS - Vocational School WBFPO - World Bank-Financed Projects Office ZLE - -Luoyang Expressway

CHINA

SECOND HENAN PROVINCIAL HIGHWAY PROJECT

LOAN AND PROJECT SUMMARY

Borrower: People's Republic of China

Implementing Agency: Henan Provincial Communications Department

Beneficiaries: Henan Provincial Government

Poverty: Not a poverty-focused operation, but one project component provides rural roads for poor counties.

Amount: $210 million

Terms: 20 years, including 5 years of grace, at the standard interest rate for LIBOR-based US dollar single currency loans.

Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver.

Financing Plan: See para. 3.52.

Economic Rate of Return: 19.2 percent for the project overall

19.0 percent for the Luoyang-Sanmenxia Expressway

13.4 percent for the Yangjia-Baijiazhai Connection

19.6 percent for the first package of the Road Improvements Program for Poverty Alleviation (RIPA)

Project ID Number: CN-PE-40513 I CONTENTS

1. TRANSPORT BOTTLENECKS AND REFORMS ...... 1 A. Background ...... 1 B. Traffic...... C. Transport Reforms...... 2 D. The Highway Subsector ...... 2 E. Bank Group Participation...... 5 F. Lessons From Previous Bank Operations...... 6

2. HENAN PROVINCIAL TRANSPORT SECTOR ...... 8 A. Economic Background...... 8 B. The Transport System ...... 8 C. Traffic...... 10 D. The Trucking Industry ...... 11 E. Highway Safety ...... 12 F. Highway Administration ...... 13 G. Planning, Budgeting and Financing...... 14 H. Engineering, Construction and Maintenance ...... 15 I. Staff Training...... 17 J. Highway Development...... 17

3. THE PROJECT ...... 19 A. Project Formulation and Preparation ...... 19 B. Project Objectives and Rationale for Bank Involvement...... 20 C. Project Scope...... 21 D. Environmental Assessment ...... 32 E. Land Acquisition and Resettlement Issues...... 33 F. Cost Estimates ...... 35 G. Financing ...... 36

This report is based on the findings of an appraisal mission that visited China during November 1995, comprising Messrs./Mmes. Hatim Hajj (Task Manager); Robin Carruthers (Economist); Claude Salem (Institutional Strengthening and Training); Katsunori Suzuki (Environment); Maninder Gill (Resettlement); and Setty V. Pendakur (Consultant, Rural Transport). Messrs. Richard Muskaug and Adriaan Schelling (Consultants, Road Safety Specialists) helped prepare the safety component of the project. Ms. Xin Chen and Ying Du of the Bank's Resident Mission in China also contributed to the preparation of the project. Messrs./Ms. C. Hoban (Sector and Engineering); S. Thomas (Transport Economics) E. Schaengold (Poverty and Resettlement); M. Cohen (Institutional Strengthening and Training); and S. Lundebye (Highway Safety) were the peer reviewers. Mr. Richard Scurfield is the Division Chief and Mr. Nicholas C. Hope is the Department Director. - ii-

H. Implementation ...... 38 I. Procurement ...... 40 J. Disbursements ...... 44 K. Auditing ...... 46 L. Project Supervision, Reporting and Monitoring ...... 46

4. ECONOMIC EVALUATION...... 48 A. Main Benefits And Beneficiaries...... 48 B. Luoyang-Sanmenxia Expressway ...... 49 C. Guanyintang Interchange And Linking Road ...... 55 D. Yangjia-Baijiazhai Connection (YBC) ...... 55 E. Evaluation of RIPA Component...... 56 F. Evaluation of Risks...... 57

5. AGREEMENTS REACHED AND RECOMMENDATION...... 61

TABLES

Table 1.1: Traffic Turnover by Mode, 1980-93.64 Table 1.2: Road Accident Risks in Various Countries, 1993 .65 Table 1.3: China: Bank Group-Financed Transport Projects .66 Table 2.1: Henan Road Network, 1994.68 Table 2.2: Henan: Vehicle Fleet, 1980, 1985-94 .69 Table 2.3a: Henan: Freight Traffic, 1980-94.70 Table 2.3b: Henan: Passenger Traffic, 1980-94.70 Table 2.4: Freight Transported by Road (1985-94) .71 Table 2.5: Traffic Accidents in Henan Province(1988-94).71 Table 2.6: Henan: Highway Revenues and Expenditures (1991-2000) .72 Table 2.7: Henan: Fuel Prices .73 Table 2.8: High-Grade Highways to be Constructed During 1995-2000 .74 Table 3.1: Proposed Improvements to Linking Roads to Luoyang-Sanmenxia Expressway .75 Table 3.2: Institutional Strengthening And Training Component .76 Table 3.3: Summary of Training Program.77 Table 3.4: Project Cost Summary .79 Table 3.5: Estimated Disbursement Schedule.81 Table 4.1: Growth of Traffic on Existing Luoyang-Sanmenxia Highway .82 Table 4.2: Low Traffic Projection.82 Table 4.3: Financial and Economic Unit Costs.83 Table 4.4: Economic Evaluation-Base Case and Sensitivity Test Evaluation Results83 Table 4.5: Sensitivity of Evaluation Results (EIRR %) to Cost and Benefit Variation.84 Table 4.6: Financial Evaluation .84 Table 4.7: Economic Evaluation of the First Package of RIPA.85 - iii -

ANNEXES

Annex 1: Roads Improvement for Poverty Alleviation (RIPA)...... 87 Annex 2: Terms of Reference for Study of Organization, Management and Maintenance of Toll Highways ...... 95 Annex 3: Road Safety Improvement...... 107 Annex 4: Terms of Reference for Study of Factors Contributing to Highway Traffic Accidents ...... 116 Annex 5: Environmental Assessment and Action Plan Summary ...... 123 Annex 6: Land Acquisition and Resettlement Issues ...... 152 Annex 7: Implementation Program...... 159 Annex 8: Supervision Mission Plan ...... 164 Annex 9: Proposed Monitoring Indicators ...... 168 Annex 10: Selected Documents in the Project File.175

CHARTS

Chart 1: Organization of Henan Province Communication Department .179 'Chart 2: Organization of Henan Highway Administration Bureau.180 Chart 3: Organization of Henan High-Grade Highway Administration Bureau.181 Chart 4: Project Execution Management Structure.182 Chart 5: Organization of Henan Scientific Research Institute .183 Chart 6: Organizational Structure of Henan Transport Polytechnic .184 Chart 7: Organization of Henan Provincial Transport Vocation School .185

MAPS

1. China: Major Highway Development Program-National Trunk Highway System (NTHS), IBRD 27488

2. Transport System in Henan Province, IBRD 27489

3. Second Henan Provincial Highway Project, Luoyang-Sanmenxia Expressway, IBRD 27490

1. TRANSPORT BOTTLENECKS AND REFORMS'

A. BACKGROUND

1.1 The transport system in China has grown considerably over the last four decades. Since 1952, the length of the highway system increased by a factor of nine and the length of the railway network more than doubled. Despite this development, the transport network is one of the sparsest in the world compared with the area and population it serves. There is now a gap between transport supply and demand that is manifested by the existence of transport bottlenecks, the administrative rationing of limited transport capacity, the poor quality of services and losses to the economy.

B. TRAFFC

1.2 China had experienced rapid growth of traffic during 1980-89 when the economy grew at an average annual rate of 9.5 percent. Traffic growth declined when the economic growth slowed down during 1989-90, as the supply constraints becarne more conspicuous. However, resumption of high economic growth since 1991 has brought about a corresponding surge in transport demand.

1.3 Traffic Growth. Despite the capacity constraints and related bottlenecks, between 1980 and 1993 the ton-km of freight have grown at 7.4 percent per year and the passenger-kilometers at 11.8 percent per year. Highway freight traffic grew at the highest annual rate of 13.7 percent, compared with 5.8 percent for railway traffic and 8.1 percent for coastal and inland waterway traffic. Despite its rapid growth, intercity passenger travel per capita in China remains very low, at about two thirds of the level for India. This is due primarily to the severe capacity constraints. Civil aviation traffic is rapidly expanding and has grown 20.9 percent per year since 1980, but still represents a small share of total traffic with most long-distance journeys made by rail (Table 1.1).

1.4 Transport Demand and Modal Split Trends. Although the railway's share of traffic has declined over the last decade as the share of road traffic has grown, rail tranwsport still dominates freight and passenger traffic in China. In 1993, 39.2 percent of freight and 44.3 percent of passenger traffic turnover were attributable to rail, with the remainder moved by road, inland waterway, coastal shipping, pipeline, and civil aviation. The movement toward a market economy will increase demand for market-responsive twansport services, favoring a shift to road transport but still leaving a growing market for the relatively low-cost rail transport system.

This chapter is an abstract of the Bank sector report (No. 11819-CHA) China Highway Development and Management Issues, Options and Strategies, February 1994. -2 -

C. TRANSPORT REFORMS

1.5 In the past decade, China's economic reforms have aimed to increase economic efficiency through measures designed to reduce national government intervention in the production and distribution process, reduce the Government's deficits and subsidies to state-owned enterprises, and open the economy by expanding trade and allowing further participation of private and collective enterprises. In the transport sector, several reforms have been undertaken in line with these objectives-many with Bank assistance.

1.6 These initiatives are helping to spur the growth and modernization of the transport system. However, much more needs to be done to bring about the changes required to deal effectively with the emerging issues. To alleviate the transport bottlenecks and rationalize the transport system, the Government will need to take the following measures by the year 2000:

(a) increase the total level of transport investment in relation to GNP, to expand capacity to meet the new traffic demands and to clear up the backlogs caused by past underinvestment;

'b) aim for balanced investments among the major freight transport modes of railways, highways, and waterways in terms of optimal economic cost of transport;

(c) realign further the prices of freight transport services and those of the major commodities, especially coal, to bring them closer to their real costs;

(d) increase further the productivity of existing transport assets through technological modernization and management reforms; and

(e) improve and expand the multimodal transport system, both across and within modes, with particular emphasis on more extensive use of containers.

D. THE HIGHWAY SUBSECTOR

The National Highway Network and its Utilization

1.7 China's road network consists mainly of aging roads with neither the capacity nor strength to carry current and projected future traffic. Many of the roads need upgrading in addition to normal maintenance and rehabilitation. A Bank policy study on road deterioration in developing countries classified China among the countries with an extensive and obsolete road network in need of modernization to meet the rapid growth in road transport demand. Although China has not neglected road maintenance, its outmoded maintenance technology would not be sufficient to arrest the accelerated deterioration of the aging road system network. China needs to mobilize domestic and external resources for modernizing its road system with special emphasis placed on technology transfer, institutional improvement, and development of skills. -3 -

1.8 The rapid growth of highway traffic stems not only from the country's rapid economic growth but also from other factors such as the national policy of shifting short- haul transport from rail to road as well as the expansion of the service sector and rural industries. Furthermore, with the increase in foreign trade, growth in transport demand will be concentrated in transport corridors serving the main ports and their hinterlands and, with containerization of higher-value commodities, most domestic movements of this foreign trade are expected to go by road.

1.9 Growth in the truck and bus fleet has been fairly steady at an average annual rate of 12.3 percent over the last 12 years, with particularly strong growth in small passenger vehicles. Growth in the tractor and motorcycle fleets has increased sharply, with motorcycles showing the strongest growth of all vehicle types. The composition of vehicles using China's roads is diverse, including a variety of motorized and a large number of other (nonmotor) vehicles. The tractor and motorcycle fleets, for example, at 5.4 million and 6.5 million respectively, well exceed the size of the truck and bus fleet. Tractors and motorcycles offer a relatively cheap and basic form of transport, but contribute significantly to traffic congestion and are among the major causes of road accidents.

1.10 The trucking industry consists of publicly-owned trucks operated by trucking companies affiliated with local (provincial or ) highway authorities, and other trucks operated by factories, cooperative organizations and, recently, private individuals. The relaxation of trucking regulations in the early 1980s allowed own-account trucks to haul cargo for other factories and cooperatives and thus promoted competition between public and own-account trucks. While market forces are expected to play a more important role in shaping the industry in the future, it is necessary to understand the current constraints to such development and to identify the measures needed to allow the reshaping of the industry to take place. In order to explore these issues more fully, a Provincial Trucking Study was included as a component of the Bank-assisted Henan Provincial Highway Project and was completed in 1994, and a separate study of the trucking industry was completed by the Bank in 1995.

1.11 Road safety is an important issue in the development of China's road sector, as traffic continues to grow rapidly on all roads and a high-speed, national highway network is developed. The frequency and numbers of people involved in traffic accidents have reached serious proportions in China. The annual fatality rate per 10,000 vehicles in China is 46, as compared with rates of 33 in India, 12 in Indonesia, 5 in Mexico, 9 in Thailand, 18 in Hungary, and 2 in the United States, Canada, and the United Kingdom (Table 1.2). However, the annual fatality rate per 100,000 population in China is the same or less than that for developed countries. This reflects the low motorization rates (vehicles per 1,000 population) in China.. The social and economic costs of these accidents to the Chinese economy reached almost $1 billion annually.2

2 The costs analyzedin this case included lossof life, injury,property damage, reducedproductivity, and medical,funeral, and legal costs. -4-

1.12 Responsibility for highway safety matters was transferred from MOC and the provincial Communications Departments to the Ministry of Public Security and its provincial units in 1988. This decision created transitional administrative problems. Cooperation between the provincial highway administration bureaus and the concerned public security units is still weak. Under the Bank-financed -Zhejiang Highway Project (Loan 3929), a road safety manual and a safety audit system will be developed. The Bank-financed Xinjiang Highway Project (Loan 3787) and the Guangdong Provincial Highway Project (Loan 3530) contain pilot programs that address the traffic accident black spot problem. The Second Conference on Asian Road Safety is scheduled to be held in October 28-31, 1996. The Bank is discussing with GOC the possibility of holding a National Road Safety Seminar in 1997, to be followed by a similar Provincial Road Seminar in 1998.

Highway Administration, Planning and Finance

1.13 Administration of the highway network is the responsibility of the provincial govermnents, through the Highways Bureaus of the Provincial Communications Departments. The central government's MOC provides general policy guidance and support to the provinces through its nationwide policies and regulations, specifying design and construction standards. However, the Provincial Communications Departments are financially independent of MOC and carry out all road planning, construction, maintenance, and operation of roads and waterways in the provinces.

1.14 While the provinces manage the country's highway network, MOC is responsible for planning and investment strategies for the development of the National Highway System. MOC has been evolving a long-term strategy for the systematic upgrading of the national system in key corridors over a 30-year planning horizon. Known as the National Trunk Highway System (NTHS), the system, comprising 12 major roads for the exclusive use of motor vehicles (Map IBRD 27488) would connect all the provincial capitals and cities with populations exceeding 500,000. Development of the NTHS has been accorded highest priority in investment planning for the highway sector. Priority for early construction is being given to two north-south corridors (Beijing- and Tonjiang- ---Shanghai---);two east-west corridors (-Zhengzhou-Xian--Urumqi-Huoergousi and Shanghai-- Jiujiang--) and the three corridors of Beijing-Shanghai, Beijing-Shenyang and -Beihai, and to those routes already identified as congested and hindering economic activity.

1.15 A system for finding highway construction and maintenance is well established, although there are differences between provinces according to local needs and circumstances. The main revenues are generated by the Road Maintenance Fee (RMF), typically levied on the revenue of freight and passenger transport companies and on the capacity of own-account vehicles. The RMF is levied by the provinces who retain the majority of the monies after remitting a portion to Central Government agencies. MOC also directly receives revenues from the Added Vehicle Purchase Fee, a supplementary -5 - earnarked tax on vehicle imports and sales, and uses these funds, which currently reach about Y 2 billion/year, to contribute financing for: (a) the roads included in the national highway network, providing a higher share of financing for the poorer, inland provinces and a lower share for the richer, coastal provinces, and (b) construction or rehabilitation of rural roads located in economically less-developedareas.

E. BANKGROUP PARTICIPATION

1.16 The Bank Group has supported initiatives by the Govermment in the transport sector through loans and credits totaling $5.8 billion for 34 projects (Table 1.3). The dialogue between the Government and the Bank Group on transport sector operations and strategy has been strengthened through long-term strategy studies for railways, highways and ports development, and through project preparation activities and project-financed studies as well as sector studies carried out in collaboration with Chinese authorities. The various studies have, inter alia, emphasized the areas of multimodal transport investrnent and the setting of sectoral priorities based on systemwide economic evaluation techniques.3

Transport Sector Work

1.17 Recent Bank Group reports on the transport sector include China's Railway Strategy (No. 10592-CHA, February 1993), Highway Development and Management: Issues, Options and Strategies (No. 11819-CHA, February 1994), and Strategies for Road Freight Development (No. 12600-CHA, January 1995). In addition, studies on the trucking industry and highway financing have been completed under ongoing projects, a study of the provincial road construction industry is being undertaken under the Fujian Provincial Highway Project, a study of interprovincial traffic facilitation and a highway capacity study are being undertaken under the National Highway Project (Hebei/Henan), a study of intercity passenger transport is being carried out under the Xinjiang Highway Project, and a study of highway maintenance is being included in the Second Provincial Highway Project. In addition, a study for improved prioritization of highway investments and improved highway feasibility study methodology was completed in March 1996. A program for institutional strengthening of MOC is being prepared and will be supported under a technical assistance credit (China Reforn, Institutional Support and Preinvestment Project-CRISPP, Credit 2447-CHA). The Bank Group also conducted a survey of the national water transport system in the mid-1980s, which has reaffirmed the need to further exploit the large potential of the Chinese waterways.

3 Six of the studies have explored multimodal pricing and investment issues in a more comprehensive and more economically oriented analytical framework than was formerly available to China's decisionmakers: the Guangdong Comprehensive Transport Planning Study (GCTPS); the Yangtze Economic Zone Transport Study (YEZTS); the Coal Transport Study (CTS); the Railway Investment Study (RIS); the Southeast Coastal Region Strategic Issues in Ports and Shipping Development Study (SIPS); and the Price Reform Study. -6 -

1.18 On the basis of its project and sector work, the Bank has an opportunity to deepen its involvement and assist the Government in the design and implementation of institutional and sectoral reforms in areas such as strategy formulation, investment planning, pricing, financing, deregulation of transport services, operational efficiency, and transfer of advanced transport-related technology through training and provision of up-to-date equipment. Chinese authorities and the Bank Group are currently preparing a comprehensive transport sector strategy paper that is expected to help guide sector development in a consistent, cohesive policy framnework.

The Bank's Experience and Strategy in Highways

1.19 Of the 15 Bank-assisted highway projects in China, two have so far been completed (the First Highway Project and the Shaanxi Highway Project). The former project achieved its original objectives and demonstrated the benefits of improved accessibility to economically less-developed regions. Economic activity in the area of influence of most project roads surged and income levels increased noticeably. Furthermore, the Bank's involvement facilitated the acceptance of competition in the contracting for road works in preference to force account operations even for smaller civil works contracts, as well as the merits of supervision of construction by specially assigned units.

1.20 The Bank strategy for highway lending in the medium term is detailed in Highway Development and Management. Issues, Options and Strategies. The strategy is to continue supporting institutional development and sectoral reforms aimed at modernizing the highway system and its management, and supporting investments focused on high-priority links of the NTHS and the provincial road networks that feed into it.

1.21 While some institutional development and sectoral reform components will normally be included in every project, specific issues identified during the Bank's dialogue with the government, will be addressed selectively in individual provincial projects. During the next few years, the projects' investment components will continue to focus on high- priority links of the national highway system, to support the development of the provincial road networks, and to provide all-weather access to the poor areas to help alleviate poverty.

F. LESSONS FROM PREvious BANK OPERATIONS

1.22 Previous highway projects in China emphasize the importance of rigorous, early preparation for major civil and traffic engineering works and for procurement processes, where tendering often takes longer than expected. Advance preparation of bidding documentation and independent design reviews have also fostered smooth implementation and have helped reduce variations during the implementation period. The design of traffic engineering facilities (traffic monitoring, telecommunications, tolling and lighting) must be advanced so that these works would be finished shortly after completion of the civil works for high-grade highways. -7 -

1.23 Land acquisition and resettlement of affected people have also led to implementation difficulties, including delays, in Chinese highway projects. A large number of people are typically affected by resettlement in China, particularly along important economic corridors where highways are being upgraded and constructed. The institutional requirements for resettlement of these numbers of people are significant; under the proposed project, resettlement has received considerable attention to ensure institutional capability to provide adequate compensation and to implement Resettlement Action Plans.

1.24 Experience in the environmental area in China has generally been favorable. However, more attention should be paid to environmental supervision during construction, training of environmental personnel, and environmental monitoring during both the construction and operation phases.

1.25 Bank experience emphasizes the importance of adequate construction quality of roads. Poorly constructed roads lower economic benefits and vehicle operating cost savings, and may reduce reliability and/or accessibility of the road. Higher costs also result from premature deterioration, where corrective actions in the form of increased maintenance and/or rehabilitation are required. Construction quality has also been highlighted as a sector issue for Bank highway projects. Effective remedial actions include careful formulation of supervision arrangements, including engagement of foreign experts, training of local supervision staff and equipping the supervision teams with the necessary laboratory equipment, surveying instruments, transportation and telecommunications facilities.

1.26 There is a growing concern that adequate funding for highway maintenance is not now being generated to cover an expanding and more expensive highway system. Previously, this was not an issue-adequate funds were being set aside for this purpose.

1.27 Experience with rural highways in Africa and South Asia and with the Bank's Shaanxi Highway Project in China has shown that provision of basic access through all- weather roads and provision of nonmotorized transport are effective means of reducing poverty in rural areas, especially when combined with programs for socioeconomic development.

1.28 Based on the Bank's experience with institutional and policy aspects of highway projects, the phasing of studies and technical assistance and the intensity of Bank supervision are important for positive, sustainable outcomes. Institutional components that are implemented early in the project period tend to have a greater impact, as compared with free-standing studies carried out in the advanced stages of a project. Systematic supervision and follow-up of the findings of studies and technical assistance components by Bank missions also enhance project outcomes. Ultimately, the success of the road safety component of the project depends upon the Borrower's commitment to the objectives of the component and its ability to ensure effective coordination between the Traffic Police and the Highway Department-the main two agencies involved in the implementation of this component. -8 -

2. HENAN PROVINCIAL TRANSPORT SECTOR

A. ECONOMIC BACKGROUND

2.1 Henan, with about 90 million people, is the country's second most populous province. Landlocked in China's central plain, the divides the province in two, the larger part to the south. The total area is about 167,000 kM2 , representing 1.7 percent of the country; of which about 56 percent is flat areas and 44 percent is rolling and mountainous areas. In addition to the Yellow River, the province has three other main river basins: the Weihe, Hanshui and Hauihe Rivers. Availability of water, a good amount of annual rainfall (785 mm), and a moderate climate, make agriculture the province's main economic sector. Wheat, com, tobacco, and animal husbandry are the main agricultural outputs. The Bank is assisting the development of agriculture through a project that aims to increase crop, livestock and fish production and productivity in Northem and Eastem Henan (Credit 2242-CHA) and is preparing a multipurpose dam project at Xiaolangdi that will further enhance the province's agricultural production. The Yanshi Thermal Power Project (Loan 3433-CHA) will help alleviate acute power shortages in all sectors, including agriculture.

2.2 The province also has a well-developed industrial base, with machinery, textiles and foodstuffs having the highest output values. In 1994, the gross output value of agriculture and industry (GOVAI) reached about $27 billion. Since the start in 1986 of the 7th FYP, the provincial economy has been growing at an average annual rate of 9.7 percent, despite the recession in 1989/90. Between 1991 and 1994, the annual growth rate was even higher (12.5 percent). This is an impressive economic performance, particularly since Henan, as other inland provinces, has not benefited from the "special economic zone" incentives that have propelled growth in several coastal provinces. Despite Henan's high economic growth, its income per capita is still about 36 percent below China's average, and the province has important pockets of poverty areas. In 1993, the Government had classified 34 counties as poor. Nearly 10 percent of China's poor in 1993, 7.6 million, lived in Henan. Lack of transport infrastructure is one of the key factors behind the depressed economic conditions in these areas.

B. THE TRANSPORT SYSTEM

2.3 Henan's strategic location as a crossroads of major north-south (N-S) and east-west (E-W) rail and road corridors attracts large amounts of transit traffic to use such facilities, particularly the railways. The predominant transit cargo is coal, which originates in the neighboring provinces of and Shaanxi. Transport demands have increased substantially over the last five years, due to fast economic growth of the province and of the - 9 -

rest of the country, whose output traverses Henan to and from ports and major population centers.

2.4 Zhengzhou, the province's capital, is at the center of the key land transport facilities. These are the N-S Beijing-Guangzhou railway and national road 107, and the E-W Lanzhou-Lianyungang railway and national road 310. A number of other major railways, as well as local railways and roads, cross the province (Map IBRD 27489). In 1994, the total length of the state-run rail network in the province was 2,086 km, and that of the local rail network was 1,264km. Due to its important transit function, Henan's transport system density is larger than China's average. However, as in the case of the country as a whole, the provincial land transport system is small in relation to the province's area and population, many important rail lines operate at capacity and the key roads have low standards, carry significant amounts of slow-moving traffic, and are congested. River navigation is not a major transport mode because the Yellow River is affected by serious sand deposits in its riverbed. Other rivers also provide limited services. The total length of navigable rivers is about 1,104 km, but most sections allow small boats or ferries only, even under the best seasonal conditions.

2.5 With its high proportion of hilly and mountainous areas, and the several water streams, topography and hydrography pose difficult barriers to the development of land transport infrastructure. The provincial government has made a special effort to integrate the province's areas across the Yellow River; over the last 20 years, it has built four highway bridges at Sanmenxia, Luoyang, Zhengzhou and .

2.6 Henan's highway system extends about 47,704 km, of which about 81 km (0.2 percent) are expressways, 78 km (0.1 percent) are Class 1, 192 km (0.4 percent) are Class II auto only, 4,866 km (10.2 percent) are ordinary Class II, 39,265 km (82.3 percent) are Class III and IV, and the remainder (3,222 km or 6.8 percent) are unclassified (Table 2.1). The administrative classification of the road system in 1994 was as follows:

km %

National 3,526 7.4 Provincial 7,948 16.7 County 11,740 23.6 Village/Township 23,860 50.0 Other 1,130 2.3

Total 47,704 100.0

2.7 As in the rest of the country, most of Henan's highways were built in the 1960s, and their design standards were suitable for the light vehicles and low traffic levels - 10- prevailing in China at the time. About 59 percent of the roads have cement or asphalt pavement, but the pavements are of low bearing capacity for the vehicles that circulate on them. Due to the substantial growth in traffic levels and steady rise in the use of heavy vehicles, these roads increasingly are becoming inadequate to meet the needs. The provincial government is giving high priority to repairing and strengthening these roads.

2.8 In addition to inadequate standards, Henan's road network is small and significant segments of the population cannot reach it. About 8 percent of the administrative villages have no access to roads of any kind, and 7 percent of the counties do not have all-weather roads available to them. During the 7th FYP. the provincial governnent invested Y 40 million in poverty areas for 362 rural road projects. During the 8th FYP, the province allocated Y 420 million for poverty alleviation.

2.9 Henan's vehicle fleet has expanded rapidly (11.7 percent for passenger cars and vans, buses, and trucks) during 1985-94 (Table 2.2). During this period, passenger vehicles (small cars, vans and buses) grew by 18.1 percent per year and trucks by 4.0 percent per year, rellecting the growing prosperity in Henan and the light-vehicle needs of the growing number of enterprises in the economy. Tractors and motorcycles registered extremely high growth rates (29.2 and 22.2 percent, respectively) during 1990- 94. While tractors are mainly used for agricultural purposes, often they travel on the roads, posing significant safety hazard and, due to their low speeds, severely reducing road capacity. This rapid growth poses particular problems to transport planners, in and around the larger cities, especially Zhengzhou and Luoyang.

C. TRAFFIC

2.10 Over the last decade, traffic has been rising strongly in all modes, with annual average growth rates for land transport of 7.1 percent for freight and 9.3 percent for passengers. However, highways and railways are the principal modes. Growth rates on highways are significantly higher than on railways. Highway passenger traffic rose at 19.6 percent annually and freight traffic at 14.1 percent annually during the period 1991-94, and is taking an increasing share of total traffic (Table 2.3).

2.11 The increase in road freight and passenger transport is reflected in the traffic growth on individual roads. On main trunk roads, such as Luoyang-Sanmenxia, the annual rate of traffic growth over the 1991-94 period has ranged between 14 percent and 23 percent, depending on the section.

2.12 Highway traffic includes a high proportion of slow-moving vehicles, mainly tractors of various sizes. Traffic includes also substantial bicycles and other nonmotorized vehicles. In 1994, slow traffic accounted for some 10 to 15 percent of all traffic on the Luoyang- Sanmenxia route. While on the main roads, slow-moving traffic is growing at lower rates than overall traffic, it still is a major factor in road congestion and traffic accidents. To tackle this problem, Henan has started development of access-controlled highways where traffic volumes are sufficiently high to justify them. -11 -

2.13 The high growth of road traffic and its increasing share of total transportstem from the development of the road system, and from increasing volumes of industrial output for which roads are a convenient mode of transport. The steep growth in road traffic shows the strong demand for highway service, since the surge in traffic took place despite severe constraints posed by inadequate road standards, small coverage of the system, high congestion, and poorly developed trucking services. Over the next 5 to 10 years, highway traffic is likely to continue to grow at a high pace, in response to the growth of the national and provincial economies, to changes in economic structure favoring faster door-to-door road services, and to improvements in the national highways in Henan as in the neighboring provinces. Such road improvements will allow more long-distance, interprovincial trade and people to travel by road.

2.14 The surge in highway traffic is also due to the differentials in road-rail tariffs (in favor of rail) and the Railways decision not to accept short-distance freight hauls of less than 200 km. However, the transport price differential diminishes when transshipment costs and travel times are considered. For passengers, the tariffs are much closer between the two modes (Y 0.055/pass-km on road transport, compared to Y 0.038 for railways, for distances of about 100 km). The tariff differential should gradually decrease as the railways continues to adjust its tariffs upwards, and as improvements to the roads and in the efficiency of the trucking industry reduce the costs of road transport.

D. THE TRUCKING INDUSTRY

2.15 As elsewhere in China, public trucking operations in Henan are characterized by low load factors, high operating costs and rates, and poor quality of services. Such services are provided by three categories of transport companies: state-owned, collective and private. Due to the weaknesses of public trucking, most large industrial and commercial companies have bought their own vehicles, making own-account trucking the major road freight carrier. Such companies are estimated to own about 60 percent of the road freight fleet and to do about 40 percent of the ton-km. While own-account trucking is even less efficient than public carrier services, most enterprises have found this approach convenient, and the proportion of own-account trucking has been increasing in the last years (Table 2.4).

2.16 As noted in para. 2.14, road freight tariffs are higher than the railway's. The differential is large, even taking into account that in China (a) road costs are high due to poor road condition, (b) railway operating costs are low due to high traffic densities and efficient operations and (c) many railway tariffs are below cost. Despite the high tariffs for road transport, most of the large trucking companies owned by the cities or prefectures lose money. Collective and private trucking companies appear to do well financially, in part due to better utilization of their equipment and in part due to fewer social obligations than the governnent companies. Government-operated freight information offices throughout the province provide, for a fee, freight information/brokerageservices to shippers and truckers. - 12 -

2.17 Henan authorities are concerned about the low efficiency and poor quality of trucking services and the proliferation of own-account trucking. Recently, restrictions have been placed for enterprises to purchase and operate their own vehicles, and other measures have been taken to improve control of trucking operations. While such measures are expected to generate some improvements, they are not likely to induce the gains in efficiency and quality of services that are required. Under the Henan Provincial Highway Project (Loan 353 1-CHA), a detailed study of trucking in the province (completed in 1994) made a diagnosis of the present situation and recommendations for improvements. Some of these recommendations are already being implemented.

2.18 The ongoing liberalization of the trucking regulations may not be sufficient to address all the existing problems encountered in the trucking market, but some measures have been taken to restructure the market and to promote free flow of traffic and trade between provinces. For example, participation of private operators is permitted and encouraged, the protection of state-owned and collectively-owned trucking or bus companies has been abolished, and one transport permit to move around the country has been introduced. The Bank-financed National Highway Project (Loan 3748-CHA) includes a traffic facilitation study, which aims to identify the bottlenecks to be removed and to recommend measures to ensure freer movements of traffic and trade between provinces. This study is presently being undertaken and is expected to be completed in the first quarter of 1996.

E. HIGHWAY SAFETY

2.19 Road safety is a serious problem in Henan, as elsewhere in China. In 1994 alone, 3,648 people were killed and 10,162 were injured in the 14,147 accidents reported to the police in that year (Table 2.5). International comparisons of the number killed in traffic accidents per 10,000 vehicles show that the rate in Henan is about 40 times higher than that for Western Europe and North America. However, the accident rates, when expressed in fatalities per 100,000 population, are lower than those in the developed countries. It should be recognized that China and Henan are in the early stages of motorization (when traditionally traffic fatalities and injuries are high), traffic is mixed (with a high proportion of slow-moving vehicles, bicycles, animal-drawn carts) and increasing at a fast pace, and the number of pedestrians is high.

2.20 While there is increasing concern about road safety, the Henan Provincial Communications Department (HPCD) has had less scope for action following the reorganization of responsibility for road safety matters in China in 1988. Most responsibility for matters affecting road safety, including that for vehicle testing and inspection, driver training and licensing, propaganda on safety, enforcement of traffic laws (including imposition of fines), operation of traffic signals, highway patrols, and all aspects of accident, reporting, investigation and research, now lies with the Traffic Police of the Public Security Bureau (PSB). However, HPCD retains responsibility for all matters concerning safe highway design and traffic signs and markings. HPCD and the - 13 -

Traffic Police worked together under the project to develop a modest program to address the road safety problem in Henan (para. 3.37).

F. HIGHWAY ADMINISTRATION

2.21 HPCD controls highway and inland river navigation and local railways undertakings in the province, as well as the Zhongyuan Civil Aviation Company (Chart 1). HPCD reports directly to the provincial government and acts as its administrative arm for planning, budgeting and financing of transport in the province. However, HPCD conforns to the general transport policy and technical guidelines issued by MOC. Key agencies under its administration for the management of Henan's highway system are the World Bank-Financed Projects Office (WBFPO); Henan Provincial Planning, Survey and Design Institute (HPPSDI); Henan Provincial Highway Scientific Research Institute (HPHSRI); Henan Provincial Transport College (HPTC); Henan Provincial Transport Vocational School (HPTVS); Henan Provincial Highway Administration Bureau (HPHAB); and Henan Provincial High-Grade Highway Construction Authority (HPHGHCA). Their respective duties are to raise funds internationally; to plan, survey and design roads; conduct highway research; train and replenish technical and management personnel; and construct and manage high-grade highways. Based on the similar arrangements made under the previous two ongoing highway projects financed by the Bank in the province, the proposed project will also help strengthen six of the above institutions (paras. 3.31-3.34).

2.22 HPHAB is responsible for construction, renovation, maintenance and management of the provincial highway network. It receives professional and technical guidance from MOC. With a headquarters staff of about 101, HPHAB executes its responsibilities through the local administrations set up in the various municipalities and prefectures (total number, 17) and counties (193 county-level and district) and 1,353 maintenance gangs of the province (Chart 2). The 17 highway prefectures are in charge of local construction, maintenance and management of the national and provincial highway network in their jurisdiction. Each of the counties has responsibility under the prefecture to construct and maintain the county and rural roads under its jurisdiction. The total staff of HPHAB and the highway departments of the cities, prefectures and counties amounted to 45,278 in 1994, of which about 3,613 are engineering and technical personnel and about 1,077 are finance, economics, and management personnel. The three construction divisions of the Highway Engineering Bureau are responsible for construction of large- and medium-size highway projects. HPHGHCA is in charge of construction and management of high-grade highways, such as expressways.

2.23 HPHGHCA is a department-level institution that reports directly to HPCD. Established in 1990, HPHGHCA's first task, currently underway, is the construction and management of the Kaifeng-Zhengzhou-Luoyang Expressway and the Anyang-Xinxiang Expressway. Also, HPHGHCA would be responsible for the construction and management of the proposed Luoyang-Sanmenxia Expressway. As the network of high- grade highu-ays is expanded and put into operation, HPHGHCA is expected to develop - 14- into the High-Grade Highway Administration, responsible for the maintenance and operation, in addition to the development of that network. The organizational structure of HPHGHCA is shown in Chart 3. The executive officer of HPHGHCA is the deputy director of HPCD, and he is assisted by seven division chiefs representing all agencies that have a bearing on the work of HPHGHCA. The approved number of staff for HPHGHCA is 50, including 32 professional and technical personnel. At present, HPHGHCA's source of finance is the income it derives from managing high-grade highway projects.

2.24 HPCD has established a special office-the World Bank-Financed Projects Office-to be in charge of preparation work, coordination and supervision of all the aspects related to the highway projects financed by the Bank in the province (Chart 4), including the proposed LSE.

G. PLANNING, BUDGETING AND FINANCING

2.25 Planning. HPCD has overall responsibility for planning, funding and maintaining the provincial highway network. However, the highway administration units at the prefecture, county and village levels have considerable autonomy in planning smaller road investments. These smaller investments are subject to the approval of HPCD, largely as a formality. Each administrative group prepares investment plans for the highway network under its jurisdiction and submits them to the planning division of HPCD by September of each year for the next year's plan starting January 1. HPCD approves the next year's plan for each county or local authority concerned. Similarly, using inputs from lower administrative groups, HPCD prepares the five-year road development plan reflecting national or provincial development policy guidelines and objectives for the plan period.

2.26 Budgeting. As is done in all provincial communications departments in China, HPCD follows a balanced budget policy. The proposed highway investment is always balanced against the revenue earmarked for highway development, the funds for investments and maintenance approved for each year are closely related to the amount of funds expected to be available to HPCD for the same year. In October of each year and before HPCD approves the following year's projects, the current year's planned investments are reviewed against actual investments and revenue receipts and adjustments are made where needed.

2.27 Financing. Funding for highway construction and maintenance comes from several sources, but by far the largest source is the road maintenance fee (RMF). Revenue from RMF increased from about Y 754 million in 1991 to about Y 1.36 billion in 1995. Highway revenues and expenditures are summarized in Table 2.6. The RMF is determined and collected by HPCD from all motor vehicles in the province. The province retains about 81.6 percent for its own use. Since 1992, the balance of the revenues from RMF has been generally allocated as follows: 10.4 percent to MOC's Energy and Communications Fund, 5.4 percent to the SPC-controlled Budget Adjustment - 15 -

Fund, and about 2 percent (or an agreed amount) to the Public Security Bureau for their highway patrol and administrative operations.

2.28 The fee rates vaiy depending on the type and size of vehicles, as follows: (a) vehicles owned by state transport companies and by collective carriers are charged 15 percent of their gross revenues; (b) vehicles owned by collective and private operators are charged Y 160 per month per payload ton for trucks and Y 160 per month per 10-passenger seat buses; and (c) passenger cars are charged Y 85 per month.

2.29 Other sources of revenue for highways include: (a) allocations from MOC for construction and reconstruction of national and major provincial roads on a selective basis; (b) local funds raised from tolls; and (c) loans from banks, including the World Bank. Revenues from the MOC allocations rose from Y 84 million in 1991 to Y 750 million in 1995, or a 73 percent annual increase. Toll revenue rose steadily in the province, from Y 42 million in 1991 to Y 970 million in 1995 (Table 2.6).

2.30 Currently, fuel taxes are charged on road users, but they are kept by MOF and are not allocated back to road works. Fuel taxes at present amount to 43 percent of the base price of gasoline and 13 percent of the base price of diesel fuels. Total fuel prices, including taxes, are higher than international market prices and are increasing at a rate higher than the consumer price index (Table 2.7).

H. ENGINEERING, CONSTRUCTION AND MAINTENANCE

2.31 Engineering. Road and bridge projects are designed by the planning and design institutes at the provincial, prefectural and county levels. The Henan Provincial Highway Survey and Design Institute (HPHSDI) is one of the Class I-level design and survey units for highway, bridge and engineering supervision accredited by MOC. It is qualified for Class I roads and expressways and is responsible for all major road, bridge and tunnel projects. HPHSDI is competent and has qualified and experienced personnel, as well as equipment. It has carried out the design and bid documents for LSE, as well as those for the Zhengzhou-Luoyang Expressway-ZLE (Loan 3531-CHA) and the Anyang- Xinxiang Expressway-AXE (Loan 3748-CHA). The design institutes at the municipal and county levels are responsible for lower-grade county and township road design works, including the linking roads to LSE and the roads in the Road Improvements for Poverty Alleviation (RIPA) included under the proposed project. These design institutes are, in general, competent and have experienced personnel for carrying out their respective highway design tasks.

2.32 Construction. Small-scale roads and bridges in the province used to be constructed by the construction units of the highway departments of each city or county, but competition has been introduced under the strong and effective promotion of the Bank. Such competition is gradually being accepted by the localities. The Highways Administration Bureau of HPCD is responsible for the construction of large- and medium-size highways and bridges. HPHGHCA and WBFPO are responsible for the launching, implementation and management of high-standard roads in the province. - 16-

Since SPC has directed that all major civil works have to be awarded through competitive bidding, many of the large construction units or engineering bureaus under MOC, MOF or under HPCD were transformed into financial independent contracting firms or companies and have entered into contracts either individually or as partners in joint ventures on previous Bank-financed highway projects. These construction units can take part in bidding within and outside the province. Contractors for the civil works of ZLE and AXE were selected through prequalification and international competitive bidding (ICB), and contractors for the proposed LSE will also be selected through the same process.

2.33 Maintenance. Highway maintenance is carried out by highway bureaus of the counties and cities. Maintenance is well organized and executed. HPCD estimates that in 1995, about 92 percent of the national and provincial roads were in good condition. The corresponding figure for county and village roads was 80 percent. The main problem has been the poor riding quality of road surfaces stemming from labor-intensive and low- technology methods. Many of the pavements have exceeded their design life and need major overhaul. Also, overloading of trucks and tractors is becoming a problem, which accelerates deterioration of the pavement.

2.34 Expenditures for periodic and routine maintenance increased and between 1991 and 1994 averaged about Y 10,000 to Y 15,000 per km for Class I roads, Y 8,000 to Y 10,000 per km for Class II roads, Y 3,000 to Y 5,000 per km for Class III roads, and about Y 3,000 per km for Class IV roads. The expenditures for maintenance (routine and periodic) as a percentage of total expenditures amounted to about 14 percent over the same period. However, the investments in rehabilitation, reconstruction and new construction increased from 63.3 percent to 80.6 percent. During this period, traffic has increased rapidly and the number and size of trucks has also increased.

2.35 While increased expenditures for road maintenance and new construction have offset some of the immediate need for heavy maintenance, HPCD is aware that continuation of this practice would lead to deterioration of the existing network. HPCD intends to increase the percentage of roads in good and excellent condition. To this effect, assurances were obtained at negotiations from HPCD that it would, by April 30 of each year commencing in 1997 and ending in 2003, furnish an annual highway maintenance report for the Bank's review and comments, which would: (a) indicate the length of each class of road by condition (excellent, good, fair and bad); (b) establish targets for the following year, including an estimate of the required physical works (routine maintenance, periodic maintenance, rehabilitation and upgrading) and the costs thereof; and (c) measure the results and the actual expenditures against the targets and the budgetedfunds thereof Under the proposed project, the planning and execution of these physical works would be monitored to ensure that the targets are realized and that the required funds are being allocated. Also, in addition to the maintenance equipment and training provided under the two Bank-financed highway projects in Henan Province, the proposed project provides additional maintenance equipment and training to further improve the planning, management and execution of highway maintenance activities. - 17-

I. STAFF TRAINING

2.36 The staff of HPCD and the prefectural, city and county highway departments are, in general, experienced, but many have not been exposed to new technology and therefore often use outmoded work methods and equipment. HPCD's staff have benefited from the training provided by MOC and its own provincial training institutes, as well as from the training provided under the two ongoing Bank-financed highway projects. The proposed project would support further training efforts of HPCD by: (a) providing training to personnel of the relevant institutes and schools and HPCD in areas of highway planning, design, construction, maintenance, operation, and highway scientific research; and (b) strengthening the entities in charge of implementation of the proposed project through training of their staff and provision of modem equipment.

J. HIGHWAY DEVELOPMENT

2.37 The highway development plans of Henan set goals for three different time horizons: the long term up to the year 2020, the medium term up to 2010 and short term up to the year 2000. The short-term plans for highway development are embodied in the 9FYP (1996-2000) for Henan. This plan will give priority to the road projects falling in the following categories:

(a) construction of the north-south Beijing-to-Zhuhai and the east-west Lianyungang-Huoergousi highways, within the province, to expressway standard;

(b) upgrading and improvement of the existing national and provincial roads that are congested, in order to increase their capacity and safety;

(c) construction of missing links, improvement of interprovincial roads, and upgrading and improvement of roads that serve as entrances and exits to urban areas;

(d) improvement and construction of roads serving poverty areas;

(e) improvement and construction of county and village roads to increase the density and coverage of the road network; and

(f) repair and reconstruction of roads destroyed or severely damaged by floods.

2.38 The Plan (as of the end of April 1996, the plan was not yet officially confirmed by the provincial government) targets some Y 19.49 billion for new road construction and rehabilitation during the 9FYP, or about Y 2.92 billion annually (Table 2.7). This amount, which is 11I percent larger than the allocated investment during the 8FYP, would be applied to carry out the following program: - 18-

(a) new construction of Expressway and Class I roads 600 km

(b) new construction and improvement of Class II roads 1,900 km

(c) upgrading of Class III roads 2,000 km

(d) upgrading/reconstruction of Class IV and substandard roads 3,000 km

Most of the above funds would be used for construction of new roads, especially high- grade highways. Table 2.8 lists the major new high-grade highways to be constructed during 1995-2000, as well as their estimated costs.

2.39 The 9FYP foresees an increase of 135 percent in the amount allocated to maintenance relative to the allocation under the 8FYP. All road construction, rehabilitation and improvement included under the proposed project are part of the province's 9FYP.

2.40 The Province's Master Plan for Poor Areas (8-7 Year Plan for Poverty Alleviation 1994-2000) has set as its goal to provide year-round access to every poor township and 90 percent of the villages in Henan. The transport component of this plan calls for improvement of 40 road systems consisting of 99 road segments (totaling 2,291 km), of which 714 km are Class IV roads (rehabilitation and new construction), 1,404 km to be upgraded from unclassified status to all-weather roads, and 173 km to be upgraded from Class IV to Class III. The total cost of these improvements is about Y 839 million ($101 million) or about 4 percent of the Province's 9FYP highway sector investment.

2.41 The most serious problem for realizing the planned developments by the year 2000 would be availability of the required financial resources. In addition to loans from the Bank and other similar foreign organizations, HPCD plans to borrow heavily from the local/national banks. Generally, these loans are of a short-term nature, with no grace period. Experience to date in Henan has been that construction costs are well controlled and higher-than-normal (as expressed in contingency allowances) cost overruns are not likely. Also, experience in China has shown that availability of counterpart local funds is not a problem on the Bank-financed highway projects and is not expected to adversely affect the proposed project. But, it could affect the remainder of the investment program. However, the revenue projections are predicated on an increase in the size of the vehicle fleet and gross revenues of transport operators, and both sources are likely to grow more slowly than highway use as competition leads to increased vehicle use and more competitive tariffs. Consequently, the proposed highway developments must be considered as ambitious, and probably their implementation would extend beyond the currently planned completion dates. However, there is a danger under these circumstances that maintenance could be sacrificed for new construction. HPCD is aware of this problem and, as discussed in para. 2.35, is considering ways to improve highway investment planning and prioritization and allocating a greater share of financial resources to maintenance. - 19-

3. THE PROJECT

A. PROJECTFORMULATION AND PREPARATION

3.1 The proposed project is part of an increasing effort by the World Bank, in agreement with the Governnent, to provide assistance to inland, lesser developed, provinces. Highway projects, with their institutional and province-wide physical coverage, are particularly apt to contribute to provincial economic and social development including poverty alleviation, and to the strengthening of the administrative, planning and management structures of the sector.

3.2 The support of highway development in Henan is particularly important in light of the province's national strategic transport location, in addition to its own infrastructure development requirements. One of its key transport corridors is the east-west Kaifeng- Zhengzhou-Luoyang-Shaanxi border route. This route is a part of one of the two east- west high-priority corridors in the National Trunk Highway System (NTHS). As discussed in para. 1. 14, the Government of China accords the NTHS the highest priority in investment planning for the highway sector. The Bank's strategy for highway lending has supported the development of this NTHS. The main infrastructure component of the proposed project (the construction of the 136 km four-lane expressway between Luoyang and Sanmenxia) constitutes an important link of the above-mentioned east-west corridor of the NTHS. The Bank is already heavily involved in the construction of substantial sections of this corridor. Under the Henan Provincial Highway Project (Loan 3531- CHA), the section from Zhengzhou to Luoyang (120 km) was completed and open to traffic on December 28, 1995. Under the Xinjiang Highway Project (Loan 3787-CHA), construction of the section between and Urumnqi(176 km) commenced in March 1995 and is scheduled for completion by the end of 1998. Under the proposed Second Shaanxi Provincial Highway Project, which was negotiated in February 1996, the 78 km section between and Tongguan (border with Henan) would be undertaken. Under the proposed Second Xinjiang Highway Project, which is now being prepared, the 262 km section between Urumqi and Kuitun would be constructed.

3.3 It was agreed at the identification stage of the project, that in addition to the expressway component, the proposed project would include a rural road highway program that focuses on poverty alleviation in the poorest counties in Henan (where 10 percent of China's poor live).

3.4 The proposed project was prepared under the directives of HPCD, with the guidance of SPC, MOF, MOC and the People's Bank of China. The feasibility study for the Luoyang-Sanmenxia Expressway (LSE) and the Yangjia-Baijiazhai Connection, contained in the project was prepared by HPPSDI. Following the identification mission - 20 - in March 1995 and the preparation mission in July 1995, the project was appraised in November 1995.

B. PROJECT OBJECTIVES AND RATIONALE FOR BANK INVOLVEMENT

3.5 The proposed project has the following objectives:

(a) support continuing development of road infrastructure to relieve congestion, facilitate mobility and increase the efficiency of road transport in the interest of stimulating economic activity by supporting a key highway link in a high-priority east-west corridor and a slice of the Henan highway investment program in county and village roads during the 9FYP;

(b) assist in the implementation of policies to alleviate poverty in the poor areas of the province;

(c) promote development of institutional capabilities of HPCD, through training and other means, in planning, design, operations and maintenance of Henan's highway network; and

(d) increase the safety of road transport.

3.6 Project Performance Monitoring. The performance of the project in achieving the previously-mentioned objectives (para. 3.5) will be monitored by the Henan Provincial Government and the Henan Provincial Communications Department throughout the life of the project. In addition to progress in the regular aspects of project imnplementation, such as percent complete, procurement and disbursement, project performance for each key objective will be monitored with the use of specific indicators agreed with HPCD and presented in Annex 9. The project's objective related to reduction in congestion and stimulating economic activity in the Luoyang-Sanmenxia Corridor will be monitored using such indicators as average daily traffic, and average vehicle speed along LSE and roads parallel to it as well as the gross output value of agriculture and industry (GOVAI) for the counties along the Luoyang-Sanmenxia Corridor. The project's objective pertaining to helping alleviate poverty in the poor counties of the province will be monitored using such indicators as GOVAI; average daily traffic volumes; and number of days rural roads are closed to traffic. The objective concerning strengthening institutional capabilities will be monitored qualitatively based on such indicators as sharing of new knowledge and exercising new skills by staff trained under the project as well as improvement of performance in specific functions and activities. The traffic safety objective will be monitored through the number of fatalities and injuries on LSE and parallel roads as well as on the whole highway network. Specific criteria for assessing progress in environmental and resettlement aspects will be regularly monitored.

3.7 Rationale for Bank Involvement. The Bank's Country Assistance Strategy (CAS) for China, presented to the Board in June 1995 and reaffirmed in the March 1996 - 21 - progress report, supports China's strategy to reduce poverty and to relieve infrastructure bottlenecks by, inter alia, rapidly modernizing and expanding its highway system. The proposed project furthers both of these goals by helping reduce poverty in Henan through a program of rural highway improvements targeted at the poor counties and implementing the Luoyang-Sanmenxia Expressway segment of the NTHS. Furthermore, Bank assistance to NTHS construction should facilitate interprovincial trade and promote long- distance and transit road traffic, which in turn would help arrest a growing regionalism while furthering the liberalization, facilitation and cost reduction of transport, key requirements for market-oriented reforms to succeed. Bank support is also justified by project assistance to institutional development, through training of staff, strengthening of key agencies of HPCD, and providing equipment for maintenance of the highway network and operation of the LSE. The Bank's assistance is important in improving supervision of construction of highways by facilitating the introduction of joint ventures between foreign and local consulting firms. Bank involvement is also expected to benefit the design and the quality of construction of the roads to be undertaken (this has been problematic in some other projects) as well as the traffic safety on roads. The project would also foster improved practices in the areas of environment and land acquisition and resettlement of affected people.

C. PROJECT SCOPE

3.8 The scope of the project includes:

(a) Construction of the Luoyang-Sanmenxia Expressway, a 136 km, four-lane divided access-controlled highway (74.7 percent of base cost), including supply and installation of electrical, electronic and mechanical equipment for toll collection, telecommunications and lighting facilities, as well as construction of service areas and management and maintenance buildings.

(b) Construction of the Yangjia-Baijiazhai Connection (YBC) (1.2 percent), a 6 km, two-lane expressway to link the Weinan-Tongguan Expressway (WTE) in Shaanxi Province with the existing Highway 310 in Henan Province.

(c) Construction, rehabilitation and upgrading of four linking roads with a total length of about 17 km that would interconnect and feed traffic to the LSE at interchanges (1.2 percent);

(d) Improvement and new construction of about 1,700 km of rural roads in a program to help alleviate poverty (RIPA) in poor counties in Henan (15.9 percent);

(e) Construction supervision of the LSE, the linking roads, and RIPA (3.5 percent);

(f) Provision of equipment (2.4 percent) for: - 22 -

(i) control of construction quality and for monitoring of the environment during the construction of the LSE and linking roads;

(ii) operation and maintenance of the LSE;

(iii) maintenance of the provincial highway network (other than the high-grade highways); and

(iv) support of the institutional strengthening of HPCD and related institutions and the road safety component;

(g) Institutional strengthening and training (IST), including strengthening of HPCD and its related agencies and institutions; training of staff in high- grade highway construction supervision and operations, highway investment planning, maintenance of high-grade highways and other roads, construction and equipping a Science Technology Center for research in the highway areas; and a study of organization, management and maintenance of expressway (0.8 percent); and

(h) A highway safety component to help reduce accidents on Henan's highways (0.3 percent).

3.9 Construction of the Luoyang-Sanmenxia Expressway. The existing road (Highway 310) between Luoyang, the capital of seven ancient dynasties in Chinese history, with a population of about 6 million, and Sanmenxia in the western part of Henan Province, with a population of about 2.5 million, is about 137 km long. It is the only east-west trunk road through the middle part of Henan, and traverses Xinan, Yima, Sanmenxia and Shanxiang urban areas as well as many industrial and mining areas along the route. The existing road is Class II, with a 9 to 15 m wide pavement, which does not allow for separation of the motorized and slow-moving traffic along a significant length of the road. Some of the bridges are narrow (7.0 m) and the alignment has many sharp horizontal curves and steep longitudinal slopes, which result in poor sight distance and limited passing opportunities. Moreover, the pavement structure is generally weak. Consequently, travel speeds are generally low. The existing road carries about 7,000- 9,000 medium truck equivalent (mte) per day (or about 14,000-18,000 passenger car units-pcu-per day). The recent high increases in traffic and the expected future growth cannot be accommodated by the existing road beyond 1998 at an acceptable level of service. The widening of the existing road would not be feasible along most of its length because of the extensive side development, the consequent high numbers of people to be resettled and the related high construction costs.

3.10 For reasons outlined above, the feasibility of the construction of the LSE was investigated along a new alignment as a part of the road between Luoyang and the Henan/ Shaanxi border. A feasibility study for the highway was carried out by HPPSDI and covered the investigation of several alternative routings for a new highway. The recommended alignment is located to the south of the Yellow River and generally parallel - 23 - with the Lianyungang-Urumqi Railway (Map IBRD 27490). Also, it is generally about 3 to 7 km away from the main cities along the existing road, thus reducing the number of people to be resettled and providing space for these cities to expand in the future, and reducing the length of linking roads (to LSE) to be improved or newly constructed..

3.11 The proposed expressway would be about 136 km long, consisting of four paved lanes, each 3.75 m wide, and two paved shoulders each 3.25 m wide, and a 2 to 3 m wide median, in accordance with the national geometric standards for highways. In addition to minimizing the acquisition of land and resettlement of people, the alignment was selected to avoid archeological areas and the coal mining areas. Detailed studies of such areas were conducted as a part of the environmental assessment of the expressway.

3.12 Animals, pedestrians and slow-moving traffic such as tractors and bicycles will not be allowed access to the LSE. Access to the LSE would be provided at seven interchanges located at Luoyang, Xinan, Yima, Mianchi. Guanyintang, Sanmenxia, Dongjiaokou and Sanmenxiaxi (Map IBRD 27490). Special attention was paid to the location and spacing of interchanges (especially in the Luoyang and Sanmenxia areas), as well as to the type and layout of these interchanges, keeping in mind that the LSE would be operated as a toll road and that cities grow in the future. The LSE also includes about 7 very large bridges, 37 large bridges, 3 medium- and small-size bridges, 74 grade separations, 146 underpasses to provide access to adjacent property, and about 148 culverts. Because of the rugged terrain the expressway passes through, and the often narrow areas suitable to locate an expressway, and the restrictions imposed by the existing highway (310) and railway, great efforts were exercised in the design of the LSE, especially the bridges. The pavement structure consists of 16 centimeters (cm) of asphalt concrete wearing course, 20 cm of lime-soil flyash-stabilized macadam base course, and 34 to 40 cm of lime-soil flyash-stabilized soil subbase course. The total pavement thickness is 70 to 76 cm.

3.13 In addition to roadway construction, the LSE includes: (a) construction of one service area that provides facilities for fuel pumping, vehicle repair, restaurants, parking and rest areas, and commercial centers; (b) three facilities for administration and maintenance of the expressway; and (c) electrical, electronic and mechanical installation required for toll collection, traffic monitoring, telecommunications, and lighting of major bridges and interchanges.

3.14 The project proposal was formally approved by SPC in September 1995. The preliminary engineering design of LSE was prepared by HPPSDI for civil works and by the Xian Highway Research Institute for the traffic engineering component (tolling, monitoring, telecommunications and lighting). The preliminary engineering design and bid documents were reviewed in April 1995 by Italian experts under the Italian Trust Fund, and found to be generally satisfactory. The draft detailed engineering designs and bid documents were completed in March 1996 and reviewed in the same month by the same Italian experts who reviewed the preliminary designs and documents. - 24 -

3.15 Construction of the Yangjia-Baijiazhai Connection. Shaanxi Province will construct the Weinan-Tongguan Expressway (WTE) under the proposed Second Shaanxi Provincial Highway Project. The WTE is a part of the east-west high-priority NTHS corridor extending from Lianyungang to Huoergousi (Xinjiang Uygur Autonomous Region). It terminates at the Shaanxi/Henan border. The section from Sanmenxia to the border, with a length of about 98 km, was upgraded to Class II standard under the Bank- financed Henan Provincial Highway Project (Loan 353 1-CHA) and was open to traffic by the end of October 1995. HPCD does not plan to construct the expressway from the west end of the LSE to the border until after the year 2000, when funds are available. Consequently, the last 20 km of the WTE (in Shaanxi) would be underutilized and would not achieve their full socioeconomic benefits if the WTE is not connected to the Class II Sanmenxia-Border Road. This connection (Yangjia-Baijiazhai) lies in Henan Province. HPCD and the Shaanxi Provincial Transport Department (SPTD), with the approval of MOC, SPC and MOF, signed an agreement whereby HPCD would build this connection. The decision to add this connection to the proposed project was made in August 1995.

3.16 The feasibility study of the Yangjia-Baijiazhai Connection was completed at the end of September 1995, discussed during appraisal and revised in December 1995. This Connection is a 6 km long two-lane expressway with provisions for future expansion to a four-lane expressway. It will be operated as a toll road with a toll station at the border with Shaanxi Province. Assurances were obtained at negotiations that HPCD would coordinate closely with the Shaanxi Provincial Transport Department regarding: (a) completion of construction of this Connection by December 31, 1999, simultaneously with the completion of the construction of the WTE in Shaanxi; (b) the location, design and construction of the toll station at the border between Henan and Shaanxi; and (c) the transition from a four-lane cross-section for WTE to a two-lane cross-section for YBC.

3.17 Linking Roads. The opening of the LSE would bring a significant increase in traffic to the roads connecting it to the cities along the existing road and to other transversal provincial roads. Without the proper linking to the cities and towns from interchanges, the LSE would not be effectively used. Based on a comprehensive review of the linking roads at the seven interchanges along the LSE, HPCD selected four roads with a total length of about 17 km for new construction and improvement (Table 3.1).

Supervision of Construction of the LSE and Linking Roads and YBC

3.18 In the last four years, supervision of construction of high-grade highways in Bank-financed highway projects in China was undertaken by a joint international/local teams composed mostly of local staff and few international experts. Generally, the international experts trained the local staff through formal training and on-the-job training and established procedures at all levels of the supervision work, including on-site inspections and laboratory testing. This arrangement represented a big improvement over previous conditions when supervision was practically nonexistent. However, since most of the local staff came from the Employer and its institutes, the independence of the supervision team was limited. Under the proposed project, supervision of the LSE and its - 25 - linking roads as well as the YBC will be carried out through a joint venture of local and international firms, to be selected according to the Bank's guidelines for the use of consultants. This would be the first time in the highway sector that such an approach would be tried. It ensures a much higher degree of independence of supervision and should lead to a higher quality of construction. If successful, it would be adopted in other Bank-financed highway projects. HPCD is committed to making it succeed. The terms of reference, provision of housing, offices, equipment, laboratories, transport and telecommunications, and surveying instruments as well as the likely number of personnel and person-months and budget estimates were agreed during appraisal of the project. A copy of the terms of reference is available in the Project Files.

Roads Improvement for Poverty Alleviation (RIPA)

3.19 Poverty in China and Henan Province. China has an estimated population of 80 million at or below the poverty line (less than Y 300 per year/person in 1993). Nearly all of them are rural poor, concentrated in resource-deficient areas, and comprising entire communities located mostly in the upland sections of the interior provinces of northern (including Henan), northwestern and southwestern China. The eighth seven-year plan for poverty alleviation (1994-2000) has the following priorities: (a) integration of production, education, health, family planning and transport programs into comprehensive local intervention packages; (b) expansion of the Food for Work Program to cover the construction of terraced agricultural lands; and (c) increased support for agricultural extension and training and farmers' marketing systems. Lack of road access to an area raises transport costs so substantially that only high value-to-weight products will be profitable to market. Overall, 16.1 percent of poor county administrative villages and 3 percent of townships lack all-weather road access, and the rural road network is very much in need of rehabilitation and upgrading.

3.20 Henan Province has a total population of 90 million people with 17 prefectures and 152 counties. Most of the population, nearly 76 million (85 percent of total), is still agriculture dependent. The remaining 14 million people (15 percent of total) are involved in nonagricultural activities. Only 42 percent of Henan's GNP in 1993 was attributed to agriculture. Twenty-eight of the counties in the Province have been identified as poor by SPC, and an additional six counties, with a poverty line at

3.21 Road Transport in Poverty Areas. The poor counties in Henan have 21,800 km of roads. Of these, only 40 percent (or 8,720 km) are all-weather roads. Currently, six of the Province's townships and some 11,000 administrative villages do not have all- weather access to highways. Due to financial shortfalls, there is also a shortage of needed bridges and culverts and this contributes to a further deterioration in the existing road - 26 - network from poor drainage and water erosion. HPCD, in cooperation with the Henan Planning Commission (HPC), Henan Poverty Alleviation Office (HPAO) and the Leading Group for Transportation for Poverty Alleviation (LGTPA), developed a program of Roads Improvement for Poverty Alleviation (RIPA) to rehabilitate, upgrade and construct road systems in the province's 50 poor counties in order to provide better access for the rural poor to the main provincial highways.

3.22 RIPA Component. The component will finance some of the road improvement projects that meet agreed economic and social criteria, under procedures similar to the Roads Improvement Program (RIP) components in other provincial projects in China (Henan, Zhejiang and Guangdong). Priority will be given to rural road segments that, through related road systems, are clearly linked to: (a) current (or planned) productive and economically viable development projects; and (b) investments enabling landlocked populations to have easier access to education, health and other social services.

3.23 Selection of RIPA Packages. The criteria, screening and selection process used were agreed with HPCD, and are detailed in Annex 1. As a result, a RIPA program consisting of 30 highway systems in 29 poor counties and with a total length of about 1,667 km was agreed with HPCD. The road segments to be included in each system were considered in the following order of priorities:

(a) upgrade seasonal roads to all-weather unclassified roads, including rehabilitation and upgrading of culverts and bridges as necessary;

(b) built new all-weather roads to those townships that do not have any road connections at present;

(c) upgrade unclassified roads to Class IV roads;

(d) build new Class IV roads; and

(e) rehabilitate and/or build short critical sections of Class III roads.

3.24 First Package of RIPA Systems. On the basis of an initial analysis of aggregate data for poor counties and road systems, and of the cost effectiveness of road systems under the RIPA program, HPCD selected a first package of RIPA systems for further technical, economic and social feasibility analyses. This package covers eight systems with a total length of about 662 km in eight different counties. The planned civil works cover (a) 24 km of new roads construction, and (b) 638 km of rehabilitation. These works also include minor drainage works and bridges, and are estimated at a total cost of about Y 224 million. (see Annex 1).

3.25 Processing of RIPA Packages. The road systems to be financed under this component will be drawn from the pool of RIPA systems mentioned above (para. 3.23) and their submission for approval to the Bank will be effected in manageable packages of projects. The documentation developed as part of the Bank approval process will - 27 -

constitute a Project File including: (a) an Economic and Social Benefit Analysis (as detailed in Annex1) including evidence that each of the proposed systems meets the agreed EIRR criteria; (b) a Technical Analysis, including proposed works, alternative engineering designs, and estimated costs; (c) an Environmental Action Plan for each system and an Environmental Impact Assessment for subprojects that involve new road construction or substantial widening/land acquisition (para. 3.39 and Ann=x.5); and (d) a Resettlement Action Plan for each system (where at least 200 people are affected by land acquisition and/or resettlement). For systems affecting less than 200 persons, specific information related to impacts, cost estimates and the implementation schedule should be provided (para. 3.43 and Annex 6). Each package submitted for approval will also include an Implementation Plan, covering the responsible agencies for design, supervision and physical execution as well as the time schedule for design, preparation of bid documents, bidding and method of procurement, bid evaluation and selection of successful contractors and implementation of works. Also, a plan for monitoring of RIPA would be developed (Annex.9). HPCD would submit a Maintenance Plan describing who (township, county, prefecture) will maintain the system after completion, the organizational structure for maintenance of the RIPA system, the equipment and personnel needed to implement each maintenance plan and the training needs anticipated under this plan over the implementation period, as well as the associated estimated costs and the sources of funds to meet them. Submission of the above-mentioned documents for each RIPA package and their approval by the Bank shall be a condition of disbursement for the RIPA subprojects.

3.26 Supervision of RIPA. The RIPA component will be managed by HPCD's Highway Administration Bureau (HPHAB), which is already working in close coordination with the County and Township road construction, rehabilitation and maintenance agencies. A supervision group will be set up in Zhengzhou to be in charge of the supervision of the whole RIPA system, and branch offices will be set up in the areas of the RIPA subsystems. A separate supervision team would be set up for each system to be improved in each of the poor counties, to have overall responsibility for supervision of construction of roads under the subsystems. An adequate number of qualified personnel would be assigned for the site supervision of the items of works under each subsystem. The supervision groups will be composed of local personnel and are capable of supervising the works. The same arrangement was used in the supervision of the Road Improvement Program contained in the Henan Provincial Highway Project (Loan 353 1-CHA) and was proven to be satisfactory.

Equipment

3.27 The equipment to be provided under the project has been identified by HPCD and reviewed by the Bank. The agreed lists of equipment, together with their estimated costs, would be available in the project files. These lists took into consideration the equipment that was procured or provided under the ongoing two Bank-financed highway projects in Henan. These lists include equipment required for operation and maintenance of the LSE, strengthening the central laboratory, environmental monitoring, maintenance of the - 28 - existing highway network with emphasis on the RIPA roads, institutionalstrengthening of selected institutions, and equipment for highway safety. The preliminary total equipment cost is estimated at about Y 90 million ($10.8 million), of which $6.2 million would be in foreign currencies. The Bank and HPCD agreed that the equipment lists should be looked at as subject to reasonablechange with regard to type and number, and consequently, some flexibility should be exercised during project implementation to properly allow for changing circumstances and needs. 3.28 Equipmentfor the LSE. Althoughthe Central Laboratory was provided with equipment under the Henan ProvincialHighway Project,there is still need for additional equipment and instruments, particularly for soils and asphalt concrete testing, to support the construction supervision activities of the LSE. In the course of drawing up the Environmental Action Plans (EAPs), the equipment and instruments required to implement the environmental protection measures have been identified. For the operation and maintenance of the high-grade highways, equipment requirements have also been identified. This equipmentis in addition to the site laboratoryequipment and surveying instruments to be provided by the contractors for the civil works and the toll collection, traffic monitoring and communication equipment to be provided by the contractorsfor the electricaland mechanical(E&M) works for the LSE.

3.29 Equipment for Maintenance of Roads. This equipment consists of urgently required equipment for routine, periodic maintenance and heavy repair of roads to replenish the equipment fleet of the countymaintenance units. This equipmentwould be used for maintenanceof the existinghighway networkincluding RIPA roads.

3.30 Equipment for Institutional Strengthening. These consist of specialized equipment for support of the HPHSRI, HPTC, HPTVS, HPHAB, HPCD Head Office, HPHGHCA and WBFPO, as well as equipment for the RIPA and Road Safety components. The latter consist of equipment required for enforcement of speed regulations, as well as a computer and related software for treatment of accident data and monitoring of the roads improvement program in poor counties of the province.

Institutional Strengthening and Training

3.31 The purpose of the InstitutionalStrengthening and Training (IST)component is to strengthen HPCD capabilities in the following priority areas: (a) high-grade highway construction supervision and operations; (b) project implementation management; (c) highway planning; and (d) maintenance of high-grade highways and other roads. It is also intended to strengthen HPCD's capabilities in the new areas of investment, specifically in (e) roads improvementfor poverty alleviation and (f) road traffic safety. The IST component builds on what was provided in this area under the two previous Bank-financedhighway projects in Henan. It includes: (i) organizationalstrengthening of HPCD and some of its related institutes; (ii) training of HPCD personnel in China and abroad in high-priority areas; and (iii) strengthening new functional areas such as - 29 - management of high-grade highways, planning and implementation of RIPA and highway traffic safety (Table 3.2).

3.32 Organizational Strengthening. This element will strengthen provincial highway management, research and training organizations through (a) the development of training staff capabilities to deliver training in new areas; (b) bolstering of their hardware and equipment in the performance of new functional capacities; and (c) expansion of the provincial and national functions of the Henan Scientific Research Institute (HSRI). This element covers professional and specialized training for 294 persons (or 309 person- months). Table 3.3 contains a summary of all the training to be provided under the project. Moreover, the project will enable the construction of a Science and Technology Center at the Henan Scientific Research Institute.

3.33 The following HPCD organizations, institutes and centers will be strengthened:

(a) The Henan Scientific Research Institute (Chart 5) is the only comprehensive research organization in the Province, and is a center for testing civil engineering designs, materials and equipment. The Institute has a current capacity for research, development, testing, manufacture and technology consulting. However, to meet the future needs of Henan Province (as well as of other provinces that may require such support), HPCD has decided to establish a Scientific Technology Center within the Institute. The Center will be an advanced and permanent base for testing the main scientific and technological aspects of large highway engineering projects, particularly in the area of highway construction quality control. It will also address vehicle inspection and testing, and the training of HPCD management staff. As a result of a feasibility study on the location, functions and size of the Center, HPCD has decided to house both the Center and the Institute on the site of the new facility. This will improve communications between the Center and the Institute, as well as between both of them and HPCD and provide more effective management of joint resources.

(b) The Henan ProvincialTransport Polytechnic (HTP) (Chart 6) and the Henan ProvincialTransport Vocational School (HTVS) (Chart 7) are the two main training institutions affiliated with HPCD. They provide academic training for future HPCD technicians and skilled workers and operators, as well as short-term professional training courses for current staff. The Polytechnic also provides continuing education training for road transport personnel at prefecture and county levels. Both of these entities received institutional strengthening under the Henan Provincial Highway Project and what is provided under this project strengthens them further. - 30 -

(c) The Henan Provincial High-Grade Highway Administration Bureau (HPHGHAB) (Chart 3) will be in charge of implementation of new high- grade highways including financing, land acquisition and resettlement, construction management, maintenance, operations and management of completed high-grade highways. When fully operational, HPHGHAB would have a staff of 115 at headquarters and 260 at all levels. This number does not include the toll collectors.

(d) The World Bank-Financed Projects Office (WBFPO) (Chart 4), which is responsible for comprehensive management and implementation of construction projects, as well as coordination and monitoring of implementation of all components. WBFPO organizes tenders and evaluation of bids for all components financed by the project and is responsible for procurement of equipment under the proposed project.

3.34 Staff Development. Staff development and awareness training (both within China and abroad) is intended for middle-level and specialized staff in HPCD organizations and other project personnel. Short-term training will be conducted in the areas of Highway Design, High-Grade Highway Operations and Management, Construction Supervision, Project Implementation Management, Traffic Engineering and Traffic Safety, Highway Planning and Analysis, Highway Maintenance, and Financial Management. Overall, this element will involve training for 121 persons for a total of 112.5 person-months (Table 3.3).

3.35 Study of Organization, Management and Maintenance of High-Grade Highways. This study would: (a) identify, analyze and recommend ways to improve the organization, operations and management of expressways; (b) develop the best organizational setup to manage and operate high-grade highway entities in Henan; (c) assess the requirements for an expressway organization to comply with international standards of operational, maintenance and financial management, to ensure that the highway is well operated and maintained and that toll revenues are properly collected and managed and that expenditures (both for investment and for adequate maintenance) are well-planned. Annex 2 presents the outline terms of reference for this study. The study will be conducted by a team of local experts supported by international experts. Assurances were obtained at negotiations that HPCD shall: (i) by November 30, 1996, establish a Leading Group comprising representatives of the concerned provincial agencies and the central government to guide the study on the organization, management and maintenance of high-grade highways and provide comments on the results and recommendations thereof; (i) by September 30, 1998, complete the said study in accordance with terms of reference satisfactory to the Bank; and furnish the study, together with the comments of the Leading Group, to the Bank for review; and (iii) take appropriate steps to implement the recommendations of the said study, taking into consideration the comments thereon of the said Leading Group and the Bank. The results of this study will be beneficial not only to Henan Province but also to the rest of China. - 31 -

Road Safety Program

3.36 Over the 1990-94 period, on the average 16,700 traffic accidents per year occurred on Henan's highways, resulting in 3,500 fatalities and 11,300 injuries. As traffic volumes are expected to increase at a fast rate in the future, the number of accidents is expected to follow suit unless tremendous efforts are exerted to reduce accidents. Anne.3 summarizes the existing road safety situation in Henan and related problems and presents an implementable road safety program, which was discussed and agreed with HPCD and the Traffic Police.

3.37 The design of the LSE included in the project as well as its linking roads was reviewed from a safety point of view by the Italian design review consultants and Danish and Norwegian safety experts. Consequently, those designs have been prepared to a high standard and reflect safety considerations adequately. The road safety program included under the proposed project comprises:

(a) Establishing a Leading Group for Road Safety Coordination to coordinate between HPCD and the Traffic Police (the main agencies involved in highway safety) as well as a Traffic Safety Secretariat to prepare the work for the Leading Group. The Leading Group and the Traffic Safety Secretariat were established in March 1996;

(b) Improving traffic accident reporting forms, reviewing the geographic location (of accidents) coding system, providing improved software for accident data analyses and related training of staff;

(c) Establishing a Road Safety Unit in HPCD to undertake accident black spot identification, design and carry out a pilot program of black spot improvement, and establish safety audit procedures and checks; training of three staff to be assigned to the Unit by a foreign expert for one month and provision of 1.5 person-months of foreign experts for general support of the Unit, review of results of studies and guidance on new activities to be undertaken. HPCD agreed to allocate Y 10 million ($1.2 million) to the Road Safety Unit during 1997-2000 to undertake safety studies/research and to implement on a pilot basis physical improvements to accident black spots. This sum is reflected in the project cost summary (Table 3.4);

(d) A study on accident contributing factors (AnnexA4contains the terms of reference);

(e) Training in first aid will be introduced in the curricula for police training and driver training and training in child psychology of police officers responsible for training of school children in traffic safety; - 32 -

(f) Provision of equipment to support the above-mentioned activities, which includes: two computers, two printers, one plotter, a still camera, a video camera and monitor, and a speed radar; and

(g) Evaluation of the implementation of the Henan Road Safety Program by an independent local expert (1 person-month).

Assurances were obtained at negotiations that Henan would establish and maintain: (a) a Leading Group for traffic safety coordination, policy-making and planning, with functions and responsibilities acceptable to the Bank; (b) a Traffic Safety Secretariat to prepare work for the Leading Group; and (c) a Road Safety Unit within HPCD, with functions and responsibilities acceptable to the Bank to carry out a pilot black spot improvement program and establish safety audit procedures and checks under terms of reference satisfactory to the Bank Also, agreement was reached during negotiations that HPCD would, pursuant to terms of reference acceptable to the Bank: (i) by December 31, 1998, complete a study of the factors contributing to traffic accidents;(ii) by December 31, 2000, complete a black spot identification and improvement program; and (iii) by December 31, 2001, have an expert acceptable to the Bank prepare an evaluation of its Road Safety Program according to indicators acceptable to the Bank.

D. ENVIRONMENTAL ASSESSMENT

3.38 Environmental impact assessments (EIAs) have been carried out for LSE and the link roads, Yangjia-Baijiazhai Connection and the first package of RIPA. Enviromnental Action Plans (EAPs) have been prepared, incorporating Bank comments on earlier drafts, and found satisfactory to the Bank, as were the EIAs. The environmental summary was distributed to the Board on October 12, 1995.

3.39 For the RIPA component of the proposed project, it was agreed that a Sectoral Environmental Assessment approach would be applied. All RIPA subprojects will be classified into two categories. Category I subprojects are those with no new road construction nor substantial widening/land acquisition, etc. Since no major adverse impacts are anticipated, only EAPs will be prepared for this category of subprojects. Category II subprojects are those with new road construction or substantial widening/land acquisition, etc. For these, both EIAs and EAPs will be prepared. EIA reports and EAPs for the first-year package of subprojects were prepared and submitted to the Bank in October 1995. Only three of these systems were classified as Category II subprojects. All project EAPs and ElAs are satisfactory to the Bank.

3.40 Major environmental impacts include noise and air pollution during the construction and operation phases, alteration of hydrological regimes, soil erosion and impacts on local ecology during the construction, impacts on cultural relics, and transportation of construction materials.

3.41 The EAPs specified the appropriate mitigation measures, environmental monitoring plans, institutional arrangements to implement the EAPs, training and - 33 - equipment requirements, and the budget needed for environmental protection. Major mitigation measures include adequate selection of alignment, appropriate design of culverts and overpasses/underpasses to minimize social disruption, reconstruction of irrigation channels where appropriate, water sprinkling to prevent dust during the construction, construction of noise barriers and forest belts, installation of double-glass windows, etc., to minimize noise and air pollution during the operation phase. The engineering design and technical specifications for the highways will incorporate appropriate measures required to be taken for environmental protection. It was ascertained that the proposed highways would not affect ecologically sensitive areas and that their construction and operation should have no adverse impact on the environment through the implementation of EAPs. The summary of the EIAs and EAPs is presented in Annex 5 and copies of the EIAs and EAPs are available in the Project File and the Public Information Center. Assurances were obtained at negotiations from HPCD that: (a) the environmental protection measures stipulated in the EAPs and preparation of EAPs for RIPA systems for subsequent years would be carried out in a manner satisfactory to the Bank, and (b) HPCD would furnish to the Bank an annual environmental monitoring report for LSE and its linking roads during the construction phase andfor each of the first three years following completion of construction..

E. LAND ACQUISITION AND RESETTLEMENT ISSUES

3.42 Land Acquisition and Project Impacts. Construction of the LSE and its linking roads, the YBC and the RIPA component roads (first year's program) will require permanent acquisition of about 1,060 hectares (ha) of land and will affect 11,567 persons. Out of these, 3,548 will need to be relocated. Another 235 ha of land would be required to be leased temporarily during construction, affecting 1,903 persons. The project will also affect two enterprises employing 32 people. Project impacts were identified with the help of a detailed census survey of affected persons and properties carried out by the Henan Communications Planning, Survey and Design Institute (HCPSDI). A baseline socioeconomic survey of the affected persons will be carried out before the initiation of resettlement implementation to determine their existing income levels and standards of living. The total cost of land acquisition and resettlement for the entire project is about Y 207 million ($25 million).

3.43 Resettlement Action Plan (RAP). In order to ensure mitigation of adverse impacts of land acquisition and plan resettlement/rehabilitation activities as a development program for the affected persons, detailed strategies and a framework for implementation of land acquisition and resettlement (LAR) activities has been established by HPHGHCA. The implementation framework is described in the RAPs prepared for the LSE, linking roads, the YBC and the first-year package of RIPA. A summary of these RAPs is presented in Annex 6. A copy of the RAPs will be deposited in the Public Information Center. A separate RAP will be prepared for each system under the RIPA component where 200 or more persons are affected by land acquisition and/or resettlement. For systems affecting less than 200 persons, although there would be no - 34 - need to prepare detailed RAPs, specific information related to project impacts, cost estimates and the implementation schedule will be prepared.

3.44 Resettlement Strategies. The affected persons currently engaged in agriculture and whose lands are acquired due to the project will be provided with alternative agricultural lands through land redistribution within the same production teams, or village. If some of the affected persons cannot be provided agricultural land (due to reduction in per capita landholding below the minimum limit fixed for the affected village), the affected persons will be provided jobs in nonagricultural enterprises. However, no job creation would be necessary under the current project since the residual per capita landholding of all affected persons are substantially above the minimum limit of 0.1O mu for Henan Province. Affected enterprises will be relocated to new sites provided by the villages and paid for by the project. The elderly persons affected by the project will be provided pensions.

3.45 Information Dissemination, Participation and Consultations. The affected people will be informed through newspaper, radio, television, etc. about the project and the proposed land acquisition and resettlement program. The Land Acquisition and Resettlement (LAR) institutions will also disseminate information through meetings, documents and notices. The affected persons will be informed about the compensation standards, the LAR institutions at the various levels, the arrangements for provision of nonagricultural jobs, the provisions for redressal of grievances and the proposed arrangements for internal and external monitoring of the LAR program. This will be done by distributing a Resettlement Information Booklet (RIB) to each affected household. The RIB will be distributed to the affected households two months after the RAP has been approved by the Bank.

3.46 Implementation. Implementation of the RAP will be carried out in a participatory manner, with the involvement of affected people and their representatives. Avenues will be available to the affected persons for redressal of grievances connected to any aspect of land acquisition and resettlement. Implementation of the resettlement and the construction program for LSE, the YBC, linking roads, and first-year package of RIPA will be linked to ensure that all LAR activities are completed before the initiation of construction activities in any section. It is expected that LAR activities for the LSE will be completed in February 1997, whereas LSE construction activities are expected to start in March 1997. A special unit has been created in the Coordination Division of HPHGHCA to coordinate the implementation of the LAR program. The actual implementation will be carried out by the local governments of Luoyang and Sanmenxia prefectures and the respective county, township and village authorities. Funds for RAP implementation will be paid by HPHGHCA. A Resettlement Coordination Group headed by the Deputy Provincial Governor has also been formed at the provincial level for interagency coordination of RAP implementation. Assurances were obtained at negotiations from Henan Provincial Government that all LAR activities with respect to LSE, linking roads, YBC and RIPA subprojects would be completed according to the RAPs in a manner satisfactory to the Bank. - 35 -

3.47 Grievance Redressal and Appeals Process. If any affected person is dissatisfied with any aspect of land acquisition and/or resettlement, he/she can first appeal to the resettlement office/local government office at the township/county level. If the decision of this office is not considered satisfactory, the person can lodge an appeal with the project office or the government office at the city level. Another appeal, if necessary, can be made to the provincial coordination group. In case the affected person is still not satisfied, he/she can also approach the people's court. The decision of this court will be final and binding. These arrangements are considered satisfactory.

3.48 Monitoring and Evaluation. Both internal and external monitoring of RAP implementation will be carried out to ensure implementation in accordance with provisions of the RAP. Internal monitoring will be carried out by the Administrative office of HPHGHCA. An external, independent agency has been engaged to conduct external monitoring and evaluation of RAP implementation. Assurances were obtained at negotiations that HPCD would submit to the Bank. (a) internal monitoring reports every six months, with the first due on September 30, 1996, (b) external monitoring reports every six months, with the first due on December 31, 1996; and (c) a final monitoring and evaluation report after project completion by December 31, 2001. Also, assurances were obtained at negotiations from HPG that the monitoring of the socioeconomic impact of the resettlement activities with respect to the LSE, YBC, linking roads, and RIPA roads would be carried out according to the RAPs in a manner satisfactory to the Bank. Implementation of the RAPs would also be monitored through routine project supervision and project quarterly progress reports.

F. COST ESTIMATES

3.49 The total project is estimated to cost about Y 5.03 billion or about $606 million equivalent, including land acquisition and physical and price contingencies as summarized in the following table and as detailed in the Project Cost Summary (Table 3.4). This estimate does not include taxes (estimated at about Y 134 million). The foreign exchange cost is estimated at about $211 million, or about 35 percent of the total. Base costs are estimated in December 1995 prices. Physical contingencies are calculated at 10 percent of the base cost of civil works and construction supervision. Price contingencies have been calculated for foreign costs, using international annual escalation factors of 3.3 percent in 1996, 2.3 percent in 1997, and 2.5 percent in each of 1998, 1999, 2000 and 2001. Price contingencies for local costs are based on local annual escalation factors of 10.5 percent in 1996, 8.5 percent in 1997, 7.0 percent in 1998, 6.5 percent in 1999, and 6.2 percent in 2000 and 2001.

3.50 The costs of civil works are based on work quantities calculated from preliminary or final engineering designs. The costs were computed on the basis of MOC's standard manuals for labor and equipment productivity, the related annually updated costs and the current market costs of materials. The unit rates were checked against the unit prices provided in recent bids for similar highway works executed under Bank financing. - 36 -

3.51 The estimated cost of equipment is based on prevailing prices and those quoted by manufacturers and suppliers and includes the cost of equipment delivered in Zhengzhou, taxes, spare parts, and related training if needed to operate and maintain the equipment. The estimated cost of consulting services are based on recent contracts for similar services under ongoing highway projects.

PROJECTCOST SUMMARYLa (December 1995 prices: $1.00 = Y 8.3)

Y million | $ million Foreigncost Local Foreign Total Local Foreign Total of total (°/.)

Works LSE-Civil works 1,553.4 1,035.6 2,589.0 187.1 124.8 311.9 40 LSE-Electrical and mechanicalworks 35.7 143.0 178.7 4.3 17.2 21.5 80 Yangjia-Baijiazhai Connection 25.7 17.2 42.9 3.1 2.1 5.2 40 Linking roads 26.2 17.4 43.6 3.2 2.1 5.3 40 RIPA 437.2 145.8 583.0 52.7 17.6 70.3 25 Black spots 10.0 0.0 10.0 1.2 0.0 1.2 0 Researchcenter 13.5 7.5 21.0 1.6 0.9 2.5 36

Subtotal 2,101.7 1,366.5 3,468.2 253.2 164.7 417.9 39

Supervisionof construction 84.2 45.4 129.6 10.1 5.5 15.6 35 Equipment 37.9 52.0 89.9 4.6 6.2 10.8 58 Institutionalstrengthening and training 2.0 6.9 8.9 0.3 0.8 1.1 77 Studies 3.7 4.9 8.6 0.4 0.6 1.0 58

Total BaseCost 2,229.5 1,475.7 3,705.2 268.6 177.8 446.4 40

Physicalcontingency &t 218.6 141.2 359.8 26.3 17.0 43.3 39 Pricecontingency 623.6 132.3 755.9 75.1 15.9 91.0 18

BaseCost with Contingencies 3,071.7 1,749.2 4,820.9 370.0 210.7 580.7 36

Landacquisition andresettlement 206.7 0.0 206.7 24.9 0.0 24.9 0

Total Project Cost 3,278.4 1,749.2 5,027.6 394.9 210.7 605.6 35

/A Excludestaxes of Y 134million ($16.1 million) aswell as commitmentfees and intereston Bank loan during construction. & Ten percentof cost of civil works andsupervision of construction.

G. FINANCING

3.52 The Bank loan of $210 million would finance about 35 percent of the total project cost or 100 percent of the foreign exchange cost. The Central Government (MOC) would provide the equivalent of about $105 million, while Henan Province would provide the equivalent of about $291 million to meet the remaining costs of the project, including contingencies. MOC's funding would be restricted to the construction of the LSE and RIPA. The Bank loan of $210 million would be at the standard interest rate for LIBOR- based US dollar single currency loans. It would be lent to the Ministry of Finance for a maturity of 20 years, including 5 years of grace. The proceeds of the Bank loan would be onlent to Henan Province at the same rate payable to the Bank by the Borrower with 0.75 percent per year commitment fee on the outstanding balance, beginning 60 days - 37 - after loan signing, less any waiver. Agreement was reached with the Borrower at negotiations that it would onlend the proceeds of the loan to HPG on these terms. HPG would bear the foreign exchange risks. The Government of China and Henan Province have selected LIBOR-based US dollar single currency loan terms for the project in order to facilitate management of the foreign exchange risk of their borrowings by more closely matching the currency of their liabilities with that of their net trade flows, about 75 percent of which are US dollar denominated. They selected the LIBOR-based product in order to preserve the full maturity of the loan, compared to the fixed-rate option that would have resulted in a 15-year loan. The Borrower judges that it can manage any interest rate risk. China is eligible for single currency loans under the expanded program. This loan represents 8.5 percent of the fiscal year 1996 IBRD lending program to China, well within the 50 percent volume guideline approved by the Bank The details of project financing are shown in the following table.

FINANCING PLAN ($ million)

Henan Central World Province Government Bank Total

Works Civil works of LSE 102.8 84.3 124.8 311.9 Electrical and mechanical works of LSE 4.3 0.0 17.2 21.5 Yangjia-Baijiazhai Connection 3.1 0.0 2.1 5.2 Link roads 3.2 0.0 2.1 5.3 RIPA 29.6 20.5 20.2 70.3 Black spots 1.2 0.0 0.0 1.2 Research center 1.6 0.0 0.9 2.5

Subtotal 145.8 104.8 167.3 417.9

Construction supervision 10.1 - 5.5 15.6 Equipment 4.6 0.0 6.2 10.8 Institutional strengthening and training 0.3 0.0 0.8 1.1 Studies 0.4 0.0 0.6 1.0 Contingencies 104.7 0.0 29.6 134.3 Land acquisition and resettlement 24.9 0.0 0.0 24.9

Project Total 290.8 104.8 210.0 605.6

Percent of total 48.0 17.3 34.7 100.0 - 38 -

H. IMPLEMENTATION 3.53 Implementing Agencies. The implementation of the project would be the responsibility of HPCD. The Henan High-Grade Highway Construction Authority (HPHGHCA) would be the executing agency for the implementation of the Yangjia- Baijiazhai Connection and the Luoyang-Sanmenxia Expressway, including their construction supervision and equipment to operate and maintain LSE, and for environmental monitoring as well as for the study of organization, management and maintenance of high-grade highways. HPHAB would be the executing agency for the RIPA (construction and supervision), the pilot program for identification and treatment of accident black spots, as well as for the equipment for maintenance of the highway network (other than for the high-grade highways). WBFPO in HPCD would be the coordinating agency for the whole project and for grouping of trainees for overseas training and study tours, and procurement of equipment. WBFPO and the Education Division of HPCD would be responsible for training. Training programs would be coordinated with those in other ongoing Bank-financed highway projects by MOC. Implementation of the road safety component will be the responsibility of HPCD and the Traffic Police in PSB, with the Leading Group for Traffic Safety Coordination providing coordination between them. The CMC International Tendering Company has been retained by HPCD as the procurement agency for all aspects of civil works of the project requiring ICB and for equipment to be procured from abroad. The supervision of construction of the LSE and its link roads and YBC would be carried out by a joint venture of foreign and local firms. Upon completion, it is expected that the LSE and YBC would be operated and maintained by the Henan High-Grade Highway Administration Bureau and the linking roads by HPHAB. Since the LSE is a segment of the NTHS, MOC would also provide general supervision and guidance for execution of the project. 3.54 LSE and YBC. The implementation program for the project as a whole including the LSE and YBC is shown in Annex 7. All civil works for the LSE would be tendered at the same time. The traffic engineering works would be tendered as one contract about the middle of the period for construction of the civil works for the LSE. The invitation for prequalification of contractors for civil works for the LSE was issued in January 1996 and the whole prequalification process would be finished by May 1996. 3.55 The detailed designs and bidding documents for the LSE (eight contract sections) would be completed by May 1996 and for the YBC (one contract section) by February 1997. Acquisition of land and the resettlement process for LSE started in October 1995 and is expected to be completed by the end of February 1997. The installation of electrical and mechanical (E&M) systems for the operation of the LSE would be scheduled to commence around June 1999 and be completed by June 2001. The construction of service facilities along the LSE is expected to start in 1998 and be completed by November 2000. The LSE is expected to be completed by June 2001. Construction of YBC is expected to commence around October 1997 and be completed by November 1999, at or before the completion time for the Weinan-Tongguan Expressway in Shaanxi Province. - 39 -

3.56 Supervision of Construction of the LSE and the YBC. The supervision of the LSE, the YBC and the link roads would be carried out by a joint venture between foreign consultants and local consultants headed by a chief engineer with headquarters in Luoyang. There would be a resident engineer on-site for each of the nine civil works contract sections. About 4,500 person-months of consulting services are needed. Invitations to international short-listed firms will be issued in April 1996, and the selection of the joint venture is expected to be completed by November 1996. The joint venture is expected to mobilize in January/February 1997 and its staff is expected to be engaged in supervision activities in early March 1997. 3.57 Linking Roads. The preliminary designs for all the linking roads were completed and the final engineering designs and the bid documents are under way and are expected to be completed by May 1996. Construction of the linking roads is expected to start in May 1999 and be completed in September 2000. Supervision of the construction of the linking roads will be the responsibility of the joint venture as mentioned above. 3.58 Road Improvements for Poverty Alleviation Program (RIPA). The relevant highway departments at city or prefecture levels are responsible for the preparation of designs and bid documents for the subsystems included in RIPA and these documents would be reviewed and approved by HPHAB. The construction of the subsystems included in the first package is expected to start in March 1997 and to be completed by the end of 1998. The construction of the subsystems to be included in the second and third packages is expected to start in 1998 and 1999, respectively, and to be completed by the end of 1999 and 2000, respectively. For procurement purposes, RIPA subsystems will be divided into several manageable contract (bid) sections. Construction of the RIPA roads will be supervised in accordance with the arrangements summarized in para. 3.26. 3.59 Training. Formal selection procedures for candidates to be trained would be developed by WBFPO, according to the training needs identified and agreed with the Bank. Those to be trained abroad would be given intensive English training, and each trainee would be required to submit a report on training received to his/her parent department or agency. The comprehensive training program would be open to all highway staff and would be administered by HPCD. Moreover, HPCD has indicated that training to be provided under the project would be related to career development and the professional growth of the selected staff. At negotiations, agreement was reached that HPCD shall, by June 30 of each year commencing in 1997, furnish a rolling two-year training implementation schedule to the Bank and shall carry out the training under a program acceptable to the Bank. 3.60 Equipment. The responsibility for procurement of equipment would be divided between HPHGHCA and HPHAB. HPHGHCA would be responsible for the procurement of equipment related to the LSE. HPHAB would administer the procurement of equipment for the maintenance of the highway network (other than the LSE). WBFPO would coordinate the preparation of specifications and their bid documents for equipment as well as bid evaluation and acceptance of their delivery. The - 40 - equipment required for laboratories, environmental monitoring, strengthening of highway network maintenance and institutional strengthening would be procured at an early stage of project implementation (1997/98), while that for the operation and maintenance of the LSE is scheduled to be procured toward the end of construction of the LSE (2000). 3.61 The project as a whole is scheduled to be completed by June 30, 2002, with the loan closing date stipulated as December 31, 2002. The implementation schedule for the project is presented in Annex 7. 3.62 Operations of the LSE and YBC. Henan Province intends to operate the LSE and YBC as toll roads consistent with their design. The High-Grade Highway Administration Bureau will be responsible for operating and maintaining the LSE and YBC following their completion. Tolls would be collected at about eight points (Map IBRD 27490). To ensure that the toll rates would be appropriately structured and that toll levels would not lead to a substantial reduction in the benefits of highway investment, the rationale for setting the level of tolling would be determined based on the findings of a study to be undertaken by the Province, which takes into consideration latest experience with operation of toll roads in Henan Province and the rest of China as well as similar studies done under Bank-financed highway projects in China. Assurances were obtained at negotiations from HPG that HPCD shall undertake, and by March 31, 2000, furnish to the Bankfor its review and comments, an analysis and recommendation for the structure of toll rates on the LSE, taking into consideration the results of the recent studies on toll rates conducted under other Bank-financed highway projects in China and the recent experience with toll rates on major roads in Henan Province and other parts of China.

I. PROCUREMENT 3.63 Procurement under the project would be carried out as shown in the following table. The procurement arrangements for the project have taken into account the Bank's "Guidelines for Procurement under IBRD Loans and IDA Credits, January 1995," and revised in January 1996, as well as the experience gained from previous Bank-financed highway projects. The documentation, for procurement, which covers the prequalification of contractors, ICB and National Competitive Bidding (NCB) for civil works, ICB for goods, and consultant services contracts has been standardized for Chinese conditions in cooperation between the Chinese government and the Bank. Standard documents would be used for all relevant procurement processes under the project. - 41 -

PROCUREMENTARRANGEMENTS ($ million) Procurement method Total Project element ICB NCB OtherLa NBFIL cost

Works Luoyang-Sanmenxia Expressway Civil works 388.0 20.0 3.7 - 411.7 (134.7) (7.0) (1.2) (142.9) E&M supply & installation 26.4 - - - 26.4 (21.1) (21.1) Yangjia-Baijiazhai Connection 6.4 - 0.2 - 6.6 (2.5) (0.1) (2.6) Link roads - 6.7 - - 6.7 (2.7) (2.7) RIPA - 45.0 45.0 - 90.0 (12.3) (12.2) (24.5) Traffic accident black spots - - - 1.2 1.2 Research center - 3.1 - - 3.1 (1.1) (1.1)

Equipment 4.7 - 2.2 5.5 12.4 (4.7) (2.2) (6.9 Consultancies and Training l Supervision of construction - - 20.3 - 20.3 (6.7) (6.7) Studies - - 1.2 - 1.2 (0.7) (0.7) Training - - 1.1 - 1.1 (0.8) (0.8) Land Acquisition and Resettlement - - - 24.9 24.9

Total 425.5 74.8 73.7 31.6 605.6 (163.0) (23.1) (23.9) (0.0) (210.0)

La Other includes force account, direct contracting, intemational shopping, simplified procedures for small works, and consultants and training. l2 NBF: not Bank-financed. L Selection of consultants according to the Bank's Guidelines for the Use of Consultants. Notes: (1) Figures in parentheses represent the amounts financed by the Bank Group. (2) All figures are rounded and include estimated physical and price contingencies but exclude the cost of land acquisition and resettlement, which is shown as a separate component. - 42 -

3.64 Works. The civil works for the LSE would be divided into eight contract sections and those for the YBC would form one contract. Electromechanical works would be grouped into one contract. Administration and maintenance buildings, service areas and toll plazas would be carried out in several small contracts. Contracts for civil works for the YBC and the LSE and for the electromechanical works for the LSE with a total cost of $420.8 million would be procured under ICB procedures. Contracts would be bid on a slice and package basis; qualified firms would be allowed to bid for more than one contract so as to attract international contractors and large Chinese contractors. The contract for electromechanical works would be bid later during the construction of the LSE. All contractors for the nine ICB contracts for civil works would be prequalified. The General Procurement Notice (GPN) for the project was published in the UN Development Business No. 426 on November 16, 1995. This GPN served as a specific procurement notice for the civil works contracts for LSE (each costing more than $10 million). For the remaining large contract for electromechanical works, invitations to bid would be advertised as specific procurement notices in the UN Development Business and/or well-known technical magazines, newspapers, and trade publications of wide international circulation. Domestic contractors competing under ICB would be eligible for a 7.5 percent price preference. Domestic contractors are expected to be competitive for all contracts under this project. 3.65 Other works, including small service facilities (toll plazas, maintenance depots, service and rest areas, administrative buildings, etc., estimated to cost about $20.0 million), link roads (with a cost of $6.7 million), some of the RIPA roads (with a cost of $45.0 million) and the research center (with a cost of $3.1 million) would be awarded following NCB procedures acceptable to the Bank. These works would involve contracts estimated to cost less than $2 million per contract, up to an aggregate amount of about $74.8 million. Since these contracts are small in value and scattered throughout the Province and would be implemented over a four-year period, ICB would therefore be neither justified nor practical, but foreign firms would not be precluded from bidding.

3.66 Based on experience with the Road Improvement Program (RIP) in the ongoing Zhejiang (Loan 3471-CHA), Guangdong (Loan 3530-CHA, and Henan (Loan 3531- C-A) Provincial Highway projects, generally not more than three bids are received for contracts whose value is $2.0 million or less. Moreover, most of the bidders come from the immediate area of the contract works. Larger contractors generally do not wish to mobilize for small contracts. RIPA involves smaller works and lower value contracts than RIP, and the works are spread over a very large geographic area. In recognition of this, and in order to reduce unnecessary administrative overhead and expedite the procurement of these small contracts, but at the same time ensuring sufficient competition, RIPA contracts costing $1.0 million (Y 8.3 million) or less up to $27.0 million in aggregate may be awarded under simplified procurement procedures, whereby a minimum of three bids would be invited from qualified contractors and bids would be opened in public. This has the advantages of time savings in the bidding process as well as creating more job opportunities for the poor during construction. Since employment creation is important in the case of RIPA roads, when the two lowest evaluated bids are - 43 - within 5 percent of each other, the number of local people to be employed by each contractor would be considered in the final award of contract. This will be done by assigning a value of Y 300 per person-month and by deducting the value of employment from the bid price. The bidder with the lowest "adjusted" evaluated bid price would be selected. Because of its innovative nature, the results of this procedure would be subjected to a mid-term review so that its effectiveness at job creation may be evaluated.

3.67 In the case of very small RIPA contracts, and under special conditions to be justified by HPHAB, force account could be used for procurement of civil works with a total estimated cost of 20 percent, about $18.0 million, of the total RIPA component. Force account would also be used for improvement of black spots, with a total estimated value of $1.2 million (not Bank-financed). This is justified on the basis of the small value of the works and their wide geographic distribution. The contracts for power supply, with a total estimated cost of about $4.0 million and involving works scattered along the LSE and the YBC, would be awarded by direct contracting with the local electricity companies, which are monopolies. The total estimated cost of the works to be procured by force account or direct negotiations is $23.2 million.

3.68 Equipment. Generally, all contracts for goods and equipment costing more than $250,000 equivalent would be awarded under ICB. All other items or groups of items covering minor maintenance equipment, laboratories, highway safety, research and environmental protection purposes estimated to cost less than $250,000 per contract package, in an aggregate amount not exceeding $2.2 million would be procured following international shopping procedures on the basis of a comparison of price quotations solicited from at least three suppliers eligible under the Bank Guidelines for Procurement. Domestic manufactures competing under ICB would be eligible for a margin of preference in the comparison of bids of 15 percent for goods, or the prevailing custom duties, whichever is lower.

3.69 Consultants. All consultants required for construction supervision (cost of $20.3 million); staff training (cost of $1.1 million); and studies of organization, management and maintenance of high-grade highways, and highway safety (cost of $1.2 million) would be selected and employed under terms and conditions acceptable to the Bank in accordance with Bank Guidelines on the Use of Consultants. Local expertise available in the various provincial universities and institutes in the highway subsector would be used as much as possible.

3.70 Advance Contracting and Retroactive Financing. HPCD requested advance contracting and retroactive financing in the following areas:

(a) Consultants for supervision of construction of the LSE and the Research Center. This would allow construction of housing, office space and the laboratory for the main office of the supervision joint venture in the vicinity of Mianchi to be completed by the time contractors commence construction of the civil works for the LSE on March 1, 1997; and startup - 44 -

of supervision of the Research Center. The amount subject to retroactive financing is estimated at about $370,000.

(b) Construction of the Research Center. This would allow startup of construction of the Center by July 1996. The amount subject to retroactive financing is estimated at about $230,000.

3.71 Agreement to the above two requests for advance contracting and retroactive financing is recommended, subject to HPCD completing all Bank requirements, including those for procurement, environment and resettlement. The total amount subject to retroactive financing is estimated at about $600,000. All of this amount would apply to expenditures after January 1, 1996.

3.72 Bank Review. Prior review procedures would be used for: (a) civil works contracts with an estimated cost of $2 million (Y 17 million) or more; (b) equipment with an estimated cost of more than $250,000 per contract; and (c) consulting services with an estimated contract cost of more than $100,000 for firms and $50,000 for individuals. In the case of consultancy service contracts, all terms of reference and single-source selections, regardless of the value of the contract, are subject to prior review. Prior review would apply to about 77 percent and 68 percent of the total contract values of works and goods, respectively. For contracts below the above-mentioned limits, post- review procedures would be followed. The nature of equipment (too many items with a relatively low cost), the number of packages, and HPCD being an experienced borrower from the Bank (the proposed project is the third highway project in Henan) justify the relatively low percent of total contracts for goods (68 percent) that are subject to prior review.

J. DISBURSEMENTS

3.73 The proposed Bank loan of $210 million would be disbursed over a period of about six years, as follows: - 45 -

Amount of the Category loan allocated Percent of expenditures to be financed ($ million)

Civil works Construction of LSE 124.8 40% of total expenditures Construction of YBC 2.1 40% of total expenditures Linking roads 2.1 40% of total expenditures RIPA 20.2 28% of total expenditures Research center 0.9 36% of total expenditures

Electrical and Mechanical Works for the LSE 17.2 80% of total expenditures and YBC

Equipment 6.2 100% of foreign expenditures for directly imported equipment or 100% of local expenditures (ex-factory) for locally manufactured equipment or 75% of local expenditures for other items procured locally

Consultant services and training 6.9 100% of foreign expenditures

Unallocated 29.6

Total 210.0

3.74 To facilitate disbursements, a Special Account would be opened with an authorized allocation of $15 million equivalent, the estimated average expenditures for a four-month period. The account would be opened in US dollars in a bank acceptable to the Bank, and managed by the Henan Provincial Finance Bureau. Applications for replenishment of the Special Account would be submitted monthly or whenever the Special Account is drawn down to 50 percent of its initial deposit, whichever comes first. A schedule of estimated disbursements is given in Table 3.5, which takes into consideration the project disbursement profile for transport projects in China and the potential risks of delay in project implementation.

3.75 Disbursements would be made against authorized payment requests for work done under priced contracts for the civil works and for the delivery and installation of the equipment. Interim certification of civil works completed and costed at unit rates in the contracts will be prepared by the contractors, reviewed by the supervision teams/units and payments authorized by HPHGHCA and HPHAB. Retroactive financing of up to $600,000 would be applied to expenditures made after January 1, 1996 to provide for supervision activities for the LSE and the Research Center as well as for startup of construction of the Research Center. Disbursements for staff training in China or abroad would be made from the Special Account against the actual costs of travel, subsistence - 46 - and tuition or training fees. For expenditures relating to contracts for works of $2 million or less; training, force account, contracts for goods, each valued at $250,000 equivalent or less, and contracts for services each valued at $100,000 equivalent or less for firms and $50,000 equivalent or less for individuals, reimbursement would be made on the basis of Statements of Expenditures (SOEs). Documentation supporting SOEs would be retained by the implementing agencies and made available for review by the Bank supervision missions.

K. AUDITING

3.76 The Foreign Investment Audit Bureau of the State Auditing Administration (SAA) would be responsible for auditing of project expenditures. Actual audits would be carried out for SAA by the Henan Branch of SAA or the Henan Provincial Audit Administration. Agreement was reached with HPG during negotiationis that the project accounts and the Special Accounts, including SOEs, would be audited annually by independent auditors acceptable to the Bank and that audit reports would be sent to the Bank for review within six months of the close of each fiscal year. In the case of the SOEs, the audit report would contain a separate opinion by the auditors as to whether the SOEs submitted during the fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. The Bank Group currently accepts SAA audits for this purpose.

L. PROJECT SUPERVISION, REPORTING AND MONITORING

3.77 Supervision. The project would be supervised through Bank missions whose frequency would be guided by the progress of the works. However, on the average, a mission at about nine-month intervals would be mounted; a Supervision Mission Plan is presented in Annex 8. In addition to field missions, staff input would be provided at headquarters for project-related activities such as completion of supervision reports, procurement documentation and contracts, staff training and equipment proposals and follow-up and review of the studies on highway safety and on organization, management and maintenance of high-grade highways. Moreover, the Bank would monitor progress of implementation of all project components through quarterly progress reports to be submitted to the Bank. In addition, WBFPO would submit to the Bank monthly reports on the progress of implementation of the LSE and its linking roads, as well as the YBC. A copy of each of the outline quarterly and monthly progress reports is available in the Project File. It is estimated that over the implementation period of the project the total time expended on supervision would be in the order of 60 person-weeks.

3.78 Monitoring and Reporting. During implementation, project performance, including the achievement of physical targets and attainment of other project objectives will be monitored by WBFPO through the use of performance indicators, reports on the environment and land acquisition and resettlement, progress reports and auditing of project accounts. In addition, upon completion, the project will be reviewed in an Implementation Completion Report, to be submitted to the Bank not later than six months - 47 - after the loan closing date. Annex 9 presents the outline monitoring plan for the project. The plan defines for each of the project components indices that will track annual progress in attaining targets during implementation and impact objectives after the project is completed. The plan specifies how, with what frequency and by whom, the data for the indicators will be collected. Assurances were obtained at negotiations that.

(a) Henan shall maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the project and the achievement of the objectives thereof

(b) Henan shall prepare under terms of reference satisfactory to the Bank and furnish to the Bank a monthly report of the progress of works for LSE and YBC.

(c) Henan shall:

(i) prepare under terms of reference satisfactory to the Bank, and furnish to the Bank a quarterly report, and by March 31 of each year commencing in 1997 and ending three years after completion of the project, an annual report, integrating the results of the monitoring and evaluation activities performed pursuant to (a) above, on the progress achieved in the carrying out of the project during the period preceding the dates of such reports and setting out the measures recommended to ensure the efficient carrying out of the project and the achievement of the objectives thereof during the periodfollowing such dates; and

(ii) review with the Bank, by such subsequent dates as the Bank shall request, the reports referred to above, and, thereafter, take all measures required to ensure the efficient completion of the project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said reports and the Bank's views on the matter. - 48 -

4. ECONOMIC EVALUATION

4.1 The economic evaluation includes assessments of four of the principal components of the proposed project: (a) the Luoyang-Sanmenxia Expressway, including most of its linking roads; (b) the Guanyintang link road, which is not an essential component of the Expressway itself; (c) the Yangjia-Baijiazhai connection between the Weinan-Tongguan Expressway in Shaanxi Province and the existing Highway 310 in Henan; and (d) the roads to be improved as part of RIPA component of the proposed project. Each of the evaluated components has a positive net present value and an economic rate of return in excess of the minimum acceptable. The revenue generating components of the project are expected to be financially viable, and the sensitivity tests all indicate that these conclusions are robust relative to the sensitivity tests carried out.

A. MAIN BENEFITSAND BENEFICIARIES

4.2 The proposed Expressway would form part of the Lianyungang-Huoergousi Trunk Highway, one of the four priority corridors planned as part of the NTHS. It would eventually link the port of Lianyungang with the border of China and Kazakhstan, a distance of just under 5,000 km. The principal objective of constructing the highway would be to improve the accessibility of the inland provinces of Xinjiang, , Shaanxi and Henan to an efficient deep-water port and to the commercial centers of the coastal provinces, as well as improving their land communication with Beijing. Once the highway is completed, a high proportion of the benefits of the Luoyang-Sanrmenxia section would accrue to through traffic between inland and coastal provinces. Through traffic presently represents about 17 percent of traffic in the Luoyang-Sanmenxia corridor.

4.3 At its eastern end, the Expressway will join with the Zhengzhou-Luoyang Expressway (which was opened to traffic on December 28, 1995), while at the western termination, it will join with the existing highway 310, which has been improved under the Henan Provincial Highway Project (Loan 3531-CHA). Under the proposed Second Shaanxi Provincial Highway Project, the Weinan-Tongguan (Henan/Shaanxi Border) Expressway will be completed by the year 2000. When the three sections, together with the link between Sanmenxia and the Tongguan-Weinan Expressway, are completed there will be a high-grade road link of some 400 km between the provincial capitals of Henan (Zhengzhou) and Shaanxi (Xian). Even while the corridor is being completed, a relatively high proportion of the benefits of the Expressway will accrue to through traffic between these capital cities and other industrial and commercial centers along the route.

4.4 The cities of Luoyang and Sanmenxia are already suffering the effects of traffic congestion, even at the present relatively low levels of motorization. This congestion will be relieved of the through traffic that would divert to the proposed Expressway and the - 49 - inter-urban traffic originating and terminating in the cities themselves. The light industry and commercial activities of these two cities will also be principal beneficiaries of the proposed Expressway, as it will be easier, faster and less costly for their products to gain access to expanding regional markets. A revitalization of the Yumi coal field, just to the north of the proposed Expressway, would also benefit from improved access.

4.5 The frequency of accidents and the number of fatalities and injuries on Henan's highways and the existing Luoyang-Sanmenxia Highway is high by intemational standards, partly a consequence of the high proportion of nonmotorized and underpowered agricultural traffic not being segregated from motorized traffic. By segregating a high proportion of the motorized traffic onto the proposed Expressway, the nonmotorized traffic and pedestrians on the existing road will benefit through a greatly reduced accident risk and less congested traffic conditions. Also because of its high design standards, the LSE is inherently safer than the existing parallel highway.

4.6 The RIPA component of the project is designed specifically to benefit residents of counties with average incomes below the poverty level. The project will benefit residents through improved access to health, education and other social services as well as to markets for the sale of their produce and commercial centers so that they can more easily obtain food and other necessities.

4.7 The project is intended to encourage better highway management and maintenance through institutional strengthening of various departments, institutes and training schools of HPCD, the study of organization, management and maintenance of high-grade highways and the provision of modem maintenance equipment. The road safety program can be expected to result in a reduced number of accidents due to the support it gives the Traffic Police and to the demonstration effect of the accident black spot pilot program. The project also is intended to strengthen public works procurement procedures and to upgrade management of construction entities. From these project components, substantial (but unquantified) benefits are expected to accrue to infrastructure users through better planned and maintained highways with associated lower vehicle operating costs, and to Henan Province through more cost-effective use of investment funds.

B. LUOYANG-SANMENXIA EXPRESSWAY

Traffic Levels and Projections

4.8 The existing highway between Luoyang and Sanmenxia is a Class II all-purpose road without access control. Motorized traffic on the road has been increasing at more than 15 percent per year since 1990, while nonmotorized traffic has been growing even faster at almost 16 percent. When measured in vehicle equivalents, between 1 and 3 percent of the traffic on the road is nonmotorized but this comprises a large number of bicycles and barrows that, together with pedestrians, are at high risk from the lack of separate facilities. -50-

4.9 In 1994, the existing highway carried about 7,000 medium-truck equivalents (mte) throughout its length, and this had increased in April 1995 to over 9,000 mte at the eastern end and to 7,200 mte closer to Sannenxia (Table 4.1). These traffic volumes are close to the practical capacity of the road (about 7,000 mte). Even if the growth rate was to fall to 10 percent per year, the projected traffic volume in the year 2000 (between 11,300 and 14,500 mte) would exceed the capacity of the existing road by more than 60 percent.

4.10 Projections of future traffic in the corridor have been made using a conventional growth model, using a demand matrix of 35 traffic zones and with base-year interzonal traffic flows based on an origin-destination survey carried out in April 1995, and independent variables of population and economic growth. Two alternative projections of future road transport demand have been made, each based on a different assumption of economic growth in Luoyang, Sanmenxia and the remainder of Henan. The first is that the economies will grow at about 9.7 percent per year until 2000, at about 8.5 percent from 2000 to 2010 and 4.5 percent per year thereafter, whereas the second, less optimistic projection, is for growth rates of about 7.8 percent, 7.0 percent and 3.5 percent respectively. A regression analysis was used to derive a relationship between economic growth and road transport demand and this indicated a demand elasticity of slightly more than 1.1 for the projected levels of economic growth. Projections of vehicle numbers also took account of a changing vehicle mix and a general increase in the capacity of freight and passenger vehicles within each size category. All economic evaluations have been based on the first of the two demand projections, with sensitivity tests being made with the lower projection.

4.11 The proportion of traffic that is expected to use the new Expressway rather than the present highway was estimated using a diversion equation that used generalized travel cost as the independent variable, with the impact of tolls being determined separately. The total projected traffic for the proposed Expressway also took account of traffic that would be generated by the reduced travel times and costs that would be possible, and for this purpose another elasticity of demand with respect to generalized transport cost was developed. The generated traffic was projected to be about 10 percent of the corridor total in 2000, reducing to 7 percent by the year 2020. Traffic that would be diverted from the parallel railway was also estimated, but found to amount to less than 1 percent of the total.

4.12 The projected traffic level on the new Expressway was estimated at between 7,700 and 12,900 mte in 2000 and at between 20,000 and 43,000 mte in 2020, with the equivalent figures for the more optimistic projection being 7,900 and 19,400 mte in 2000 and at between 26,000 and 55,000 mte in the year 2020. These projections derive from the application of the various demand and route assignment models at the level of individual traffic zones and road links. By the year 2000, more than 26 percent of the projected traffic on the Expressway would be through traffic, with both an origin and a destination outside of the area of influence. - 51 -

4.13 All the above projections assume that the Expressway would be operated as a toll road, with a toll equivalent to Y 0.06 per ton-km until the year 2005, rising to Y 0.08 per ton-km by 2020. The traffic projections for a situation without tolls were about 30 percent higher for the year 2000 and 10 percent higher in the year 2020. The reduced incidence of tolls in the later years would arise because increased congestion costs on the existing road would provide a greater incentive to use the new Expressway. The projected traffic levels (measured in mte) on the four sections of the proposed Expressway and its connecting roads at each end, for the situation with and without tolls, in the years 2000 and 2020, are shown in Table 4.2

4.14 With tolls, the diversion rate to the new Expressway is projected to average 69 percent of the total corridor traffic in 2000 and to increase to 74 percent in 2020, as the existing highway reaches its capacity. Without tolls, the equivalent figures are 83 percent in both cases. These projected rates are considered reasonable and are compatible with those observed on other toll roads in Henan Province. The Xinxiang-Zhengzhou section of the Beijing-Zhuhai National Highway has maintained a diversion rate of more than 80 percent since 1990, while the Kaifeng-Zhengzhou section of the Lianyungang- Huoergousi National Highway has achieved a diversion rate of more than 50 percent in its first year, even though the existing road is not yet near capacity and coal trucks are not allowed to use the highway.

Alternative Alignments and Cross Sections

4.15 Alignment. Alternative alignrnents were considered for four sections of the new Expressway: The alternatives for each section were compared on the basis of costs (construction, maintenance, operation), benefits, land acquisition and resettlement, environmental factors, service to major traffic generators, relationships to existing and future city plans. Also, the affected communities were involved in the formulation and comparison of alternatives, as well as in the selection of the final alignments and number, location and technical standards of interchanges, underpasses and grade separations. Based on experience with completed and ongoing Bank-financed highway projects in China, changes in locations as well as the number and size of underpasses are a main source of delav during implementation. This was addressed by holding consultations with villages and communities along LSE and YBC twice; once at the technoeconomic feasibility study stage and the other at the detailed engineering design stage. Problem locations involved additional consultations.

(a) Luoyang to Xinan Section. An alternative to the north of the selected alignment, slightly shorter (0.07 km) but closer for most trip origins and destinations. It would also involve higher construction costs and result in more resettlement of affected people. This alternative was rejected because the increase in construction costs is not justified by the small increase in travel benefits;

(b) Xinan to Yima Section. An alternative to the south of the selected alignment, but 0.21 km shorter. It would pass slightly closer to trip origins - 52 -

and destinations in Yima but would be more expensive to construct. This alternative was also rejected because the increased construction costs would have a greater impact than the increase in travel benefits;

(c) Mianchi to Sanxian. An alternative slightly north of the existing alignment and passing close to the coal field at Yumi, with a route length 4.13 km shorter than the selected alignment. This alternative was subject to considerable investigation because of its higher benefits to traffic without a trip end in the Yumi area. It was rejected in order to avoid archeological sites (para. 16 of Annex.5) and because of the high probability of cost increases involved in constructing the Expressway through an extensively mined area where the location of mine tunnels is not known and because of the opportunity cost of the lost coal that could not be mined if this alignment were selected;

(d) Zhangmao to Xihezhuang. Although this alternative would also be slightly shorter (0.15 km) than the recommended route, it would also involve higher construction costs. All alignments in this area would involve high costs, as the route must descend from 700 m to 500 m over a short distance, while crossing a river and a railway and passing over unstable geological structures in an area subject to earthquakes. The alternative was rejected because the economic impact of the increase in travel benefits was assessed to be less than that of the increase in construction costs.

4.16 Cross-Section. A minimum of a four-lane divided highway with access control would provide sufficient additional capacity to meet projected demand in the corridor. The lower traffic projection also indicated demand in excess of the capacity of a two-lane Auto Only highway. Since the high traffic projections show that the expressway would be operating at close to its capacity before the end of the evaluation period, some account was taken of the possibility of future expansion of the right-of-way width to accommodate dual three-lanes. However, no allowance was made in the land acquisition or civil works designs for this expansion, as it was considered to be too far into the future and other alternative routes would need to be considered closer to the time the capacity would be needed. The design of link roads and interchanges was determined on the basis of the more optimistic traffic projection, and taking account of projections of local traffic growth. Following a review of the traffic expected to access the Expressway at Luoyang, the interchange location was revised, so that another interchange could be provided when traffic reached an appropriate level.

4.17 The selection of a closed toll system was made to be compatible with other expressways being constructed or planned in Henan and Shaanxi. Toll booths would be provided at each of the access interchanges, and their number at the opening of the LSE was planned to meet the more optimistic demand projection through the year 2010. However, the area of the toll plazas would allow for an increase in the number of booths - 53 - if and when they should be needed. Toll levels were estimated taking account of the revenue needed to maintain and operate the Expressway and service the Bank loan for its construction, as well as compatibility with other tolled highways in Henan province and an objective of constraining the reduction of traffic diverted to the proposed Expressway because of the imposition of the toll, to less than 10 percent in the long term.

Economic Evaluation

4.18 Method. Economic evaluation of the LSE was undertaken by HPCD's Planning Survey and Design Institute, using the standard methodology of the Ministry of Communications, but adapted to meet Bank standards and requirements. The evaluation was based on assessment of the economic cost of construction and maintenance, compared with the traffic benefits of lower vehicle operating costs and time savings through higher speeds. Accident benefits were included in the evaluation, but using average accident rates for all roads in each class in Henan province, rather than those for the present highway. All costs and benefits were expressed in December 1995 values, net of taxes, subsidies and price contingencies, and adjusted to reflect opportunity costs of resources. Separate evaluations were made for four parts of the Expressway, Luoyang- Xinan, Xinan-Mianchi, Mianchi-Guanyintang, and Guanyintang-Sanmenxia. Most of the link roads were considered an integral part of the Expressway with the costs and benefits being included in the basic evaluation, but the link to Guanyintang was evaluated separately.

4.19 Construction costs were estimated using the standard MOC methodology, which relies on frequent market surveys to determine unit prices, which are applied to bills of quantities derived from the engineering drawings. Factors for converting financial to economic prices are based on comparing financial unit costs with border prices plus transport costs. Labor cost shadow prices were not applied.

4.20 For evaluation purposes, the LSE was assumed to be constructed in 4.5 years, opening to traffic in 2000. The economic life of the highway was assumed to be 20 years. In addition to the cost of construction, the costs of periodic maintenance (pavement overlays) every seven years were taken into consideration. Annual costs of routine highway maintenance and toll operations have also been included. The residual value of each highway section at the end of the evaluation period was assumed to be 50 percent of the initial construction cost.

4.21 User benefits were calculated separately for traffic that would continue to use the existing highway, traffic that would divert to the new Expressway and generated traffic. Sensitivity tests were made using the more optimistic traffic projection, excluding accident benefits, with reduced values of time savings, without tolls and with costs and benefits varying between 60 and 140 percent of those of the base evaluation. The latter was used to determine the range of values for which the project would remain economically viable, so that an assessment could be made of the probability of occurrence of these values. An evaluation of alternative opening years for the Expressway was also made, which showed that the earliest possible opening date would - 54 - maximize the net benefit of the project. Table 4.4 shows the base evaluation results together with the sensitivity results in respect of traffic levels, accidents and tolls, while Table 4.5 shows the range of costs and benefits for which the project remains viable.

4.22 The economic evaluation provides estimates of the net present value (NPV) of the project and its economic internal rate of return (EIRR). To help in an assessment of the financial viability of the project from the point of view of Henan Province, a financial evaluation was also made to estimate the project's cash flow and financial rate of return.

4.23 Results. The basic evaluation of the LSE as a whole and by section indicates that the selected alignment is economically viable, and the sensitivity tests with respect to transport demand, absence of tolls, a zero value of time and excluding accident benefits maintain this position. The base case evaluation for the whole route, as shown in Table 4.4, indicates an EIRR of 19.0 percent, while the evaluation by route section shows the highest value (19.3 percent) for the section between Luoyang and Xinan and the lowest value (18.3 percent) for the section between Xinan and Mianchi. The first of these road sections has the lowest unit construction cost, while the second has a number of expensive civil works which give it the highest unit construction cost. In addition, while the first section has the highest traffic level in the early years of the project, contributing to its rather better economic justification, the second section has the highest traffic in the later years, but this is insufficient to offset the higher construction cost. Although the sections have been evaluated separately and all found to have acceptable EIRR values, the route should be considered as a whole as it is designed to deal with a problem of through traffic for the whole region and to provide improved access for the provinces which are further inland.

4.24 As would be expected, assuming an absence of tolls would result in improved economic assessments of 21.6 percent, while eliminating the benefits of time savings from the calculation of EIRR reduces the worth of the project, while still providing an acceptable result of 16.1 percent.

4.25 The analysis of the optimum year for opening of the road showed that delaying the construction for even one year would reduce the economic viability (analyzed by the NPV) of the project, and that the reduction would increase with further delays.

4.26 The sensitivity of the evaluation results to variations in the costs and benefits of the project indicate that the conditions for the project's viability to fall below the minimum acceptable, that is, an NPV of less than zero or an EIRR of less than 12 percent, are unlikely to occur. The benefits would have to fall to less than 50 percent of those in the base case with no change in costs, the costs would have to increase to more than 50 percent of those of the base case, or the costs would have to rise by 30 percent and the benefitsfall by 30 percentat the same time. The unacceptableresults are those shown as shadedin Table 4.5. - 55 -

Financial Evaluation

4.27 Two financial evaluations were made. The first was to determine the rate of return on equity from the point of view of the Highway Agency and Central Government. For this evaluation, the equity of project was taken to be the total investment cost less the debt, the loan from the Bank for the project. The net revenues were determined by subtracting the loan servicing costs and road operating and maintenance costs from the total toll revenue. The return on equity was calculated as the net present value of net revenues expressed as a percentage of the project equity. The second evaluation was of the cash flow of the project, to determine the net present value of cash flows and the financial rate of return.

4.28 The financial evaluation (Table 4.6) shows that with the medium traffic projection, the return on equity would be almost 15 percent and the net cash flow would be positive. However, both these results are very sensitive to the level of toll revenues and the costs of the project. The greatest risk on toll revenue is that during the first five years or so, the diversion from the existing road will not reach the equilibrium level projected. If this should happen, the return on equity would reduce to just over 10 percent and the net cash flow would be negative. Similarly, if the total construction cost of the project should increase by 25 percent, the equity would increase by 43 percent as the debt could not be increased, and the rate of return on equity would fall to a similar level as with the revenue reduction, just over 10 percent. The net cash flow would also be negative. These results indicate the importance from a financial point of view of controlling the costs of construction and of maximizing the project's revenues, particularly in the opening years.

C. GUANYINTANG INTERCHANGE AND LINKING ROAD

4.29 The Guanyintang link of 3.2 km would provide access to the Expressway for trucks from the Yumi coal field, particularly the Guanyintang, Ganhao and Zhijian coal mines, as well as to the town of Guanyintang. The present Class IV road carries only local traffic of about 250 mte per day. If the connection is not built, traffic from the three localities would have the possibility of using the Mianchi interchange, about 12 km west of Guanyintang, or the Sanmenxia interchange, about 26 km east of Guanyintang. About 75 percent of the traffic that would use the interchange would have an origin or destination to the east. The interchange would be a simple design, similar to the other intermediate intersections on the Expressway, and the link road would be built to Class II standards. The cost of the road would be just under $2.0 million and the estimated net present value is $0.8 million and the EIRR 16 percent. These results were found to be robust in that the values exceeded the acceptable minimum, for the same sensitivity tests as were carried out for the Expressway.

D. YANGJIA-BAIJIAZHAI CONNECTION (YBC)

4.30 This connecting road would be a separate part of the project and would not be linked directly to the Luoyang-Sanmenxia Expressway, but would link the part of - 56 -

National Highway 310 that joins the Expressway at Sanmenxia with the Weinan- Tongguan Expressway to be constructed as part of the Second Shaanxi Provincial Highway Project. Construction of this connecting road would be necessary for realization of the full benefits of the Weinan- Tongguan Expressway.

4.31 An evaluation of the YBC has been made from the point of view of Henan Province, taking account only of the benefits to traffic on the connecting road itself. The evaluation also took account of different standards of provision of the connecting road, since it would connect a four-lane divided highway in Shaanxi with a two-lane, two-way highway in Henan, at least until the Henan section of National Highway 310 was upgraded to Expressway standard, expected to be about the year 2010. The method of analysis and derivation of input parameters to the evaluation were the same as for the Luoyang-Sanmenxia Expressway.

4.32 The traffic volume between the two roads to be joined by the YBC is projected to be about 5,700 mte/day in 2000, the opening year, increasing to 19,500 by 2020. The results of the economic evaluation indicate that the best way to construct the YBC for these volumes of traffic would be the staged construction of a four-lane Expressway, with the first stage being a two-lane Expressway, built to the design standards appropriate to a half section of a four-lane Expressway. This preferred construction phasing gives an EIRR of 13.4 percent, whereas constructing to a full four-lane standard from the opening date gives an estimated EIRR of only 9.6 percent. However, since both results only take account of the benefits to traffic on the YBC itself, and there are large additional benefits to the same traffic when it is on the Weinan-Tongguan Expressway, it should be remembered that they significantly underestimate the full economic benefit of the road. The additional benefits in the WTE would be the same for either method of constructing the connecting road, so do not influence the preferred construction phasing.

E. EVALUATION OF RIPA COMPONENT

4.33 The RIPA component of the project is aimed at rehabilitating and upgrading basic-access roads in low-income counties of the province, with a view to increasing accessibility to basic health, social and education services as well as to markets to increase the social sustainability of these areas. It is expected that in the long term, the program will stimulate increased economic activity and employment and significantly contribute to a reduction of rural poverty.

4.34 The nature of the expected benefits of the component precludes many of them from a quantified analysis, and many others can only be estimated approximately, so the expressed economic rates of return must be considered as minimal and as representing only part of the value of this project component. For the first year subprojects of this component, the quantified benefits include only reductions in vehicle operating costs, reduced accident costs, and time savings to vehicle occupants. Unquantified benefits include improved health, higher education achievement, increased social relations, and increased output and incomes. For second and subsequent year subprojects, the quantified benefits will take account of generated trips for health, social, education, - 57 - employment and commercial purposes. The total population that will benefit from this component is the total population in the area of influence of the proposed highway systems in the selected counties with a low income. The counties for inclusion in the subproject were selected using a mix of economic and social indicators. A total of eight road systems with a length of 662 km were chosen for rehabilitation, upgrading or new construction in the first year's package. The total number of people who are expected to benefit from this package is about 1.2 million. Only those components identified for inclusion in the first year of the project have been evaluated. The estimated economic rate of return for these eight systems varied from 14.2 to 31.6 percent with an average of 19.6 percent (Table 4.7).

F. EVALUATION OF RISKS

4.35 The principal risks that the net benefits from the project might not be realized arise from two factors relating to the construction cost and three to the traffic benefits. The road is to be constructed mostly on embankment and has an unusually high number of large structures. There is some risk that attempts to build the road too quickly will result in an inadequate compaction of the earthworks for the high embankments, with a risk of further settlement after the road is open and a need for an earlier than planned reconstruction. To some extent this risk will be mitigated by providing only a light pavement in the initial construction on the sections with high embankments and those built on soft soils, so that any additional cost from reconstruction will be minimized. The full strength pavement will be added as an overlay after a few years of operation of the road when no further sign of settlement is seen. The large and relatively difficult structures, long and high bridges, in some cases to built at difficult angles to the natural features of the terrain, will require careful supervision of construction if later expensive remedial works are to be avoided.

4.36 This risk has already been reduced by making major modifications to the alignment that have reduced the need for large structures and the associated risk of cost overruns or need for remedial work. The possibility of a cost increase was evaluated as a sensitivity test, which showed that an increase of more than 50 percent would be needed before the EIRR becomes unacceptable level. It is considered that the risk of this degree of cost overrun is unlikely, given previous experience with Expressway construction in Henan province and the stringent supervision methods agreed with the provincial government, which will involve higher-than-usual foreign expert participation and responsibility for the quality of the works (rather than an advisory role as in previous projects). The provincial government of Henan has demonstrated its ability and capacity to manage large road projects, which when taken together with the additional supervision measures to be taken, significantly reduces the risk of cost overruns.

4.37 The traffic benefit risks relate to projected traffic growth and diversion of traffic to the new Expressway. The projection of traffic was made on the assumption of a continued strong growth of the local economy and there is a possibility that this will not occur. However, the consequences of providing capacity in advance of its need is - 58 - considered a more acceptable and less costly risk than that that of not providing capacity when it is needed. The assessment of the optimum opening date indicates a significant reduction in project benefits if congestion is allowed to increase before the road is open, a consequence similar to that of a higher than planned growth of traffic occurring. Experience with earlier highway projects in China revealed the high costs of providing too little capacity or providing it too late, while a review of a recent project has indicated the lesser costs of overprojecting traffic. Providing too little capacity has consequences that affect the daily lives of all who use the existing road or depend on the services that it provides, whereas the consequences of providing capacity too soon are only financial, and road users in any case receive the benefits of a new road.

4.38 There is a further risk that the volume of traffic that will divert to the new road will be less than that estimated. There is only a short history of the operation of toll roads in China on which to build expectations of how users will react to the imposition of tolls. The diversion rate to the new road once the existing road is operating at capacity is not so questionable, as the only alternative to suffering congestion on the old road or not making the trip, is to use the new road. So the period of doubt about for considering diversion to the new road is that until traffic on the existing road is building up to its capacity limit. Experience with other tolls roads in China and elsewhere is that the diversion to a new tolled road can take up to four or five years to build up to the estimated level. This is probably because of the time needed for road users to become aware of the potential benefits of using the new road and to change their travel behavior to take the new road into account.

4.39 When the existing road is already nearing congestion, as in this case, the time for the diversion rate to reach its estimated level will probably be shorter than the average. If the diversion rate starts at 50 percent and increases to the estimated 67 percent over three years, the net present value of benefits will be reduced by about 20 percent, and as shown in Table 4.5, this would have to be combined with a cost overrun of 40 percent or more for it to result in an unacceptable outcome. Additional measures that can be taken to encourage a rapid buildup to the estimated diversion rate include giving a toll-free period at the opening of the road so that users can quickly become aware of its advantages, and providing other incentives for using the road (many of which would be innovative in the context of China, but which are used elsewhere, such as free accident insurance, provision of food and mechanical repair facilities at the access toll stations, prizes for "lucky" toll ticket numbers, etc.).

Risk and Actions

4.40 Based on experience with the ongoing highway projects, potential risks center on delays in implementation, particularly for the LSE due to the difficulty of construction, especially of bridges caused by the rugged topography and limited space in some areas; design changes, the long time required to handle variation orders during construction as well as the late start in the traffic engineering component; objections raised by people living along the right-of-way caused by insufficient consultation, and unexpected - 59 - archeological finds. However, preparation of this project has benefited significantly from the Bank's experience in similar highway projects in China, as well as from the active involvement of MOC and the review of the design and bid documents for the LSE by qualified international experts. Moreover, the design of the traffic engineering component has already started and more attention is being given to the resettlement and land acquisition problem, including more consultation with the local people affected by the LSE. Extensive archeological surveys were conducted to reduce the probability of unexpected finds. Also, the relatively large value of contracts (average of $40 million) for construction of the LSE and the possibility to bid on two or more contracts at the same time would attract the larger and more capable contractors and would ensure successful completion with little or no delays.

4.41 According to the project financing plan, Henan Province would have to contribute $291 million or 48 percent of the total cost. This is a large amount, and considering the investment requirements of other projects in Henan Province, the timely availability of counterpart local funds in the proper amounts could delay completion of the project as well as its total cost. However, based on experience with the two ongoing Bank-financed highway projects in Henan, this has not been a major problem.

4.42 Uneven and sometimes substandard quality of works as well as cost overruns are another risk that should be addressed. This problem is generally caused by laxity of construction. For the first time in the highway sector in China a joint venture between international and local firms/entities, where the international experts are not only advisors but executors responsible for the quality of the works, will be in charge of construction supervision.

4.43 Sustainability. In view of the relatively fast expansion of the NTHS and other high-grade highways and their related high construction costs, there is growing danger that not enough resources will be devoted to the maintenance of nonhigh-grade highways, including roads contained in the RIPA component under the project. As pointed out in para. 2.35, HPCD has agreed to allocate sufficient resources to highway maintenance during the 9FYP and continue to monitor the condition of existing roads. The proposed project includes a study of organization, management and maintenance of the LSE and other high-grade highways in Henan Province, training of staff in highway maintenance, and provision of equipment for highway maintenance.

4.44 Recent experience suggests that once the high-grade highways are in operation, operational and safety risks will need to be addressed. The traffic component of the project will be reviewed by qualified technical experts. Also, the proposed project includes a study of the operation anid maintenance of the LSE as well as equipment and training of staff for its operation and maintenance.

4.45 The success of the highway safety component also depends on good cooperation between HPCD and the Traffic Police, which has in the past been difficult. However, under the proposed project a Leading Group for Road Safety Coordination was created, and consideration is being given to holding a highway safety seminar in China in 1997 to - 60 - help raise awarenessof the safety problemand to increasethe level of supportat various governmentallevels to this very important issue. This seminar could be followed by a similar one at the provinciallevel (in 1998). However,the possibilityof holding a small workshop on safety in 1997 to initiate planning of the provincial seminar would be explored. - 61 -

5. AGREEMENTS REACHED AND RECOMMENDATION

5.1 Agreement was reached with the Central Government at negotiations that it would onlend the proceeds of the loan to Henan Provincial Government (HPG) on the same terms as those of the Bank loan to it: 20 years, including 5 years of grace, at the same rate payable to the Bank by the Borrower, with 0.75 percent per year commitment fee on the outstanding balance, beginning 60 days after signing, less any waiver (para. 3.52). 5.2 During negotiations, assurances were obtained from Henan Province that: (a) HPCD shall, by April 30 of each year commencing in 1997 and ending in 2003, furnish an annual highway maintenance report for the Bank's review and comments, which would: (a) indicate the length and condition of each class of road; (b) establish realistic targets for the following year, including an estimate of the required physical works by class of road and the costs thereof; and (c) measure the results and the actual expenditures of the past year against the targets and budgeted funds thereof (para. 2.35); (b) HPCD shall coordinate closely with the Shaanxi Provincial Transport Department regarding (i) completion of construction of the Yangjia- Baijiazhai Connection (YBC) by December 31, 1999, simultaneously with completion of the construction of the Weinan-Tongguan Expressway (WTE) in Shaanxi; (ii) the location, design and construction of the toll station at the border between Henan and Shaanxi; and (iii) transition from a four-lane cross-section for WTE to a two-lane cross-section for YBC (para. 3.16); (c) HPCD would (i) by November 30, 1996, establish a Leading Group to guide the study on the organization, management and maintenance of high-grade highways and provide comments on the results and recommendations thereof; (ii) by September 30, 1998, complete the said study in accordance with terms of reference satisfactory to the Bank and furnish the study together with the comments of the said Leading Group to the Bank for review; and (iii) take appropriate steps to implement the said study's recommendations, taking into consideration the comments thereon of the said Leading Group and the Bank (para. 3.35); (d) HPG shall maintain: (i) a Leading Group for traffic safety coordination, policy making and planning, with functions and responsibilities acceptable to the Bank; (ii) a Traffic Safety Secretariat to prepare the work for the Leading Group; and (iii) a Road Safety Unit within HPCD, with functions and responsibilities acceptable to the Bank, to carry out a pilot black spot - 62 -

improvement program and establish safety audit procedures and checks under terms of reference acceptable to the Bank (para. 3.37); (e) Henan shall, pursuant to terms of reference acceptable to the Bank: (i) by December 31, 1998, complete a study of the factors contributing to traffic accidents; (ii) by December 31, 2000, complete a black spot identification and improvement program; and (iii) by December 31, 2001, have an expert acceptable to the Bank prepare an evaluation of its Road Safety program according to indicators acceptable to the Bank (para. 3.37); (f) the environmental protection measures stipulated in the EAPs, with respect to the Luoyang-Sanmenxia Expressway, the Yangjia-Baijiazhai Connection, linking roads and the RIPA roads included in the first year package would be carried out in a manner satisfactory to the Bank. Also, RAPs and EAPs for RIPA systems for subsequent years would be prepared in accordance with principles acceptable to the Bank and their environmental protection measures would be implemented in a manner satisfactory to the Bank (paras. 3.41 and 3.46); (g) HPCD shall furnish to the Bank an annual environmental monitoring report for the Luoyang-Sanmenxia Expressway and its linking roads during the construction phase and for each of the first three years following completion of construction (para. 3.41); (h) all land acquisition and resettlement activities with respect to the Luoyang-Sanmenxia Expressway, Yangjia-Baijiazhai Connection, linking roads and the RIPA roads would be completed according to the RAPs in a manner satisfactory to the Bank (para.3.46); (i) the monitoring of the effectiveness and socioeconomic impact of the resettlement process for the LSE, YBC, linking roads and the RIPA roads would be carried out according to the RAPs in a manner satisfactory to the Bank (para. 3.48); (j) HPCD shall, for the LSE and YBC, furnish to the Bank: (i) by March 31 and September 30 of each year starting September 30, 1996, internal monitoring reports prepared by appropriate agencies of Henan, and (ii) by June 30 and December 31 of each year starting December 31, 1996, external monitoring reports prepared by an independent agency acceptable to the Bank, regarding the implementation and impact of the resettlement activities during the previous six months (para. 3.48); (k) HPG shall, by June 30 of each year commencing in 1997, furnish the rolling two-year training implementation schedule to the Bank and shall carry out the training under a program acceptable to the Bank (para. 3.59); (l) HPCD shall undertake and, by March 31, 2000, complete and furnish to the Bank for its review and comments, an analysis and recommendation - 63 -

for the structure of toll rates on the Luoyang-Sanmenxia Expressway, taking into consideration the results of the recent studies on toll rates conducted under other Bank-financed highway projects in China and the experience with toll rates on major roads in Henan Province and other parts of China (para. 3.62); (m) the project accounts and the Special Accounts, including SOEs, would be audited by independent auditors acceptable to the Bank and that audit reports would be sent to the Bank for review within six months of the close of each fiscal year (para. 3.76); and (n) (i) Henan shall maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of the project and the achievement of the objectives thereof; (ii) Henan shall prepare under terns of reference satisfactory to the Bank and furnish to the Bank a monthly report of the progress of works for LSE and YBC; and (iii) Henan shall: (1) prepare under terms of reference satisfactory to the Bank, and furnish to the Bank a quarterly report, and by March 31 of each year commencing in 1997 and ending three years after completion of the project, an annual report, integrating the results of the monitoring and evaluation activities performed pursuant to (i) above, on the progress achieved in the carrying out of the project during the period preceding the dates of such reports and setting out the measures recommended to ensure the efficient carrying out of the project and the achievement of the objectives thereof during the period following such dates; and (2) review with the Bank, by such subsequent dates as the Bank shall request, the reports referred to above, and, thereafter, take all measures required to ensure the efficient completion of the project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said reports and the Bank's views on the matter (para. 3.78). 5.3 Submission of the following for each RIPA package, to the satisfaction of the Bank, shall be a condition of disbursement for RIPA subprojects: (a) economic and social benefit analysis using indicators acceptable to the Bank; (b) environmental action plan for all subprojects and an environmental impact assessment for subprojects that involve new road construction or substantial widening/land acquisition; (c) a RAP for each system; (d) plan for supervision of construction; (e) an implementation schedule; and (f) a maintenance plan (para. 3.25). 5.4 Subject to the foregoing, the proposed project would be suitable for a US Dollar Single Currency Bank Loan of $210 million to the People's Republic of China. The loan would be for a term of 20 years, including a grace period of 5 years, at the Bank's standard variable interest rate for LIBOR-based US dollar-denominated single currency loans. -64 -

TABLE 1.1: TRAFFIC TURNOVERBY MODE, 1980-93

TURNOVERVOLUME OF FREIGHT TRAFFIC (billion ton-km)

Petroleum Civil and gas Year Total Railway Highway Waterway aviation pipelines

1980 1,202.60 571.69 76.40 505.28 0.14 49.10 1990 2,620.70 1,062.24 335.81 1,159.19 0.82 62.70 1993 3,051.00 1,195.46 407.05 1,386.08 1.66 60.80

Compound annual 7.42 5.84 13.73 8.07 20.89 1.66 growth rate, 1980-93 (%)

Compound annual 5.20 4.02 6.62 6.14 26.53 -1.02 growth rate, 1990-93 (%)

TURNOVERVOLUME OF PASSENGERTRAFFIC (billion passenger-km)

Civil Year Total Railway Highway Waterway aviation

1980 228.10 138.32 72.95 12.91 3.96 1990 562.80 261.26 262.03 16.49 23.05 1993 785.80 348.33 370.07 19.65 47.76

Compoundannual 9.98 7.36 13.31 3.28 21.12 growth rate, 1980-93 (%)

Compound annual 11.77 10.06 12.20 6.01 27.49 growth rate, 1990-93 (%) - 65 -

TABLE1.2: ROADACC[DENT RISKS IN VARIOUSCOUNTRIES, 1993

Number of Vehicles per Number of Fatalities per Fatalities per Population Vehicles 1,000 Fstalities 10,000 100,000 Country ('000) La ('000) Lb Population (Person)z Vehicles Population

CHINA 1,185,170 13,823 12 63,551 46.0 5.4 Henan (1994) 90,300 452 5 3,648 80.7 4.0 Shaanxi (1994) 34,800 214 6 1,604 75.0 4.6 Brazil 153,900 13,469 88 5,500 4.1 3.6 Canada Ld 27,400 20,632 753 3,485 1.7 12.7 Costa Rica 3,200 396 124 235 5.9 7.3 Denmark 5,200 1,991 383 573 2.9 11.0 Egypt/A 54,700 1,986 36 4,315 21.7 7.9 France 57,400 32,440 565 9,052 2.8 15.8 Germany Ld 80,600 43,826 544 10,643 2.4 13.2 Hungary Ld 10,300 2,510 244 4,577 18.2 44.4 India L 883,600 16,479 19 54,058 32.8 6.1 Indonesia /e 184,300 8,889 48 10,887 12.2 5.9 Japan 124,500 79,761 641 10,942 1.4 8.8 Mexico La 85,000 11,368 134 5,252 4.6 6.2 Norway 4,300 2,981 693 281 0.9 6.5 Pakistan 119,300 2,279 19 6,299 27.6 5.3 Poland 38,400 9,247 241 6,341 6.9 16.5 Korea 43,700 8,210 188 10,402 12.7 23.8 Spain La 39,100 19,128 489 6,014 3.1 15.4 Thailand 58,000 10,243 177 9,496 9.3 16.4 Turkey 58,500 5,648 97 6,444 11.4 11.0 UK 57,800 25,448 440 4,229 1.7 7.3 USA La 255,400 195,706 766 39,235 2.0 15.4 Zimbabwe La 10,400 377 36 1,021 27.1 9.8

La Mid -1992 population;World DevelopmentReport, 1994,pp. 162-3. L Analysisof accidentrates may be limitedby the fct that numberof vehiclessometimes includes only motorvehicles. However,figures for vehicleshave been adjustedto includenonmotorized vehicles where da wa available. Provincialdata on the incidenceof accidentsis basedon motorvehicles plus tractors and motorcycles;however, dos not indude bicyclesor other vehiclesthat may contributeto the rate of accidents. & World Road statistics1989-1993, International Road Federation. La Data for 1992. La Data for 1990. Loan/ Loan amount, (credit) Board Date Closing $ million (SAR) Project name number date effective date Bank IDA Status

RAILWAYS Railway Project 2394 03/27/84 07/10/84 12/31/90 220.00 Closed > Second Railway 2540 05/14/85 11/22/85 06/30/94 235.00 Closed Third Railway 2678/(1680) 04/15/86 01/13/87 06/30/93 160.00 70.00 Ongoing Fourth Railway 2968 06/23/88 03/27/89 12/31/93 200.00 Ongoiiig Local Railway 3060/(2014) 05/12/89 01/03/90 12/31/96 70.00 80.(0 Oligoing Fifth Railway 3406 09/24/91 01/09/92 12/31/198 350.00 Ongoing Sixth Railway 3581 03/25/93 07/14/93 12/31/99 420.00 Ongoing Seventh Railway 3897 06/01/95 12/31/2002 400.00 Ongoiig 7

Subtotal 2,055.00 150.00

Total Loan and Credit Amount 2,205.00

IIICIIWAYS lighwaayProject 2539/(1594) 05/14/85 12/04/85 06/30/91 42.60 30.00 Closcd

eijine-lialjitt-IangnIli IXprcssway 2811/(1792) 05/12/87 12/08/87 12/31/92 25.00 125.00 Onigoilig ' Sichtia Provincial Highway 2951/(1917) 06/09/88 05/31/89 12/31/94 75.U0 50.00 Ongoing ShaainxiProvincial Hlighway 2952 06/09/88 05/31/89 12/31/94 50.00 Closed JiangxiProvincial llighway (1984) 02/07/89 05/31/89 12/31/95 61.00 Ongoing ShlandonigProvincial Highway 3073/(2025) 05/25/89 12/11/89 06/30/95 60.00 50.00 Ongohig ZIicji.uigProvincial Ilhighway 3471 05/19/92 09/02/91 12/31/96 220.00 Ongoinlg GuangdongProvincial ltighway 3530 11/17/92 04/16/93 06/30/99 240.00 Ongoing flenan Highway 3531 11/17/92 04/16/93 06/30/98 120.00 Ongoing Fujian Highway 3681 12/14/93 07/24/94 06/30/2000 140.00 Ongoing ch National Highway 3748 06/07/94 10/24/94 06/30/2000 380.00 Ongoing o Xinjiang Highway 3787 08/30/94 02/09/95 12/31/2000 150.00 Ongoing Shanghai-ZhejiangHlighway 3929 08/01/95 06/30/2001 260.00 Ongoilig SecondShaanxi Ilighway 3986 03/21/96 12/31/2001 210.00 Onigoilng 0 0 C-. Subtotal 1,972.60 316.001

Total Loan and Credit Amount 2,288.60 Loan/ Loanamouitt, (credit) Board Date Closing Smillion (SAR) Projectname number date etl'eclive date Bank IDA Status

PORTS AND WATERWAYS ThreePorts 2207 11/02/82 02/02/83 06/30/88 124.00 Closed Port 2689 05/06/86 03/20/87 12/31/92 130.00 Ongoing lluangpuPort 2877/(1845) 10/06/87 10/03/88 12/31/93 63.00 25.00 Ongoing DalianPort 2907/(1975) 02109/88 10/03/88 12/31/93 71.00 25(00 Ongoing Ningboand Shanghai Ports 3006 12/13/88 05/09/89 12/31/93 76.40 Ongoing XiarnenPort 3007 12/13/88 01/09/90 03/31/94 36.00 Oligoinig Ship WasteDisposal 2391 06/17/92 12/12/92 06/30/96 15.001),Ogoinig ShanghaiPort Restrucluriigand Development 3552 12/22/92 05/13/93 06/30/99 150.00 Oingoilig InlandWaterways 3910 06/20/95 06/30/2001 210.00 Ongoing

Subtotal 860.40 65.00

Total Loanand CreditAmount 925.40

MULTIMODAL JiangsulrovincialT'Iransport 3316/(2226) 04/09/91 09/06/91 06/30/96 100.00 53.60 Ongoing

-4 Total Loanand CreditAmount 153.60

URBANTRANSPORT ShalnghaiMetropolitan Transport (2296) 09/10/91 09/10/91 06/30/98 60.00 Ongoing SecondShanghai Metropolitan Transport 3652 10/14/93 150.00 Ongoing

Total Loanand Credit Amount 210.00

GRAND TOTAL 5,782.60

Source:Conpilcd by ihcmission. - 68 -

TABLE 2.1: HENAN ROAD NETWORK, 1994 (km)

Express- Class Class Class Class Unclas- way I 11 III IV sified Total

By Administration National 81 78 1,750 1,309 238 70 3,526 Provincial - - 2,633 3,732 1,303 280 7,948 Special accommoda- - - 101 348 681 - 1,130 tion road County and town- - - 574 5,671 25,983 2,872 35,100 ship level

Total 81 78 5,058 11,060 28,205 3,222 47,704

Sand & Asphalt Cement gravel Clay soil Total

Pavement type 26,798 1,142 12,810 6,954 47,704

Source: HPCD. Special- Carsand Small Large purpose Special Sub- Motor- vansla Buses trucks trucks vehicesL trucksLd total Tractors cycles Total

1980 10.9 4.3 0.3 64.5 4.3 .. 84.8 4.0 7.3 96.1

1985 29.5 9.3 11.2 107.6 9.3 .. 166.9 186.5 48.4 401.8 t 1986 33.0 11.1 11.2 119.6 9.4 .. 184.3 160.1 59.5 403.9 r 1987 43.0 13.4 19.2 129.8 10.6 .. 216.0 149.6 125.6 491.2 !4 1988 51.2 14.5 26.8 146.0 14.5 6.1 259.1 130.0 148.0 537.1 1989 58.2 15.9 35.3 162.8 15.5 7.2 294.9 162.8 171.4 629.1 1990 66.4 15.8 42.3 168.6 17.0 7.7 317.8 289.0 207.8 814.6 1991 76.1 17.4 51.1 173.2 19.0 9.1 344.9 356.3 281.7 983.9 P 1992 88.9 18.2 57.0 176.6 20.0 9.7 370.4 497.7 312.5 1,180.6 384.0 532.7 377.9 1,294.6 1993 110.7 20.7 63.7 169.2 11.1 8.6 tEl 1994 144.8 20.5 78.5 186.7 12.4 9.3 452.2 805.5 463.9 1,721.6 0%

% p.a.growth 1980-85 22.0 16.7 106.2 10.8 14.1 14.5 115.6 46.0 33.3 1985-90 17.6 11.2 30.4 9.4 12.8 13.7 9.2 33.8 15.1 El 1990-94 21.5 6.7 16.7 2.6 (7.6) 4.8 9.2 29.2 22.2 20.6 m 1985-94 19.3 9.2 24.2 6.3 3.2 11.7 17.7 28.5 17.5 la 20 seatsor less. O. Lb 2.S tonsor less. L Includespolice cars, fire engines,and emergency vehicles. /d Includescontaincrs and refrigerator trucks.

Source: HPCD. - 70 -

TABLE 2.3A: HENAN: FREIGHT TRAFFIC, 1980-94

Annual growth (%) 1980 1985 1989 1990 1991 1992 1993 1994 (1985-94)

TonsTransported (millions) Railways 67.58 81.01 90.89 90.38 91.93 93.43 98.11 99.74 2.3 Highways 101.83 273.40 288.11 280.18 293.19 344.04 371.82 404.28 4.4 Civil avialion ------.- Inland waterway 1.06 2.01 3.45 2.55 2.44 2.71 3.54 3.95 7.8 Total 170.47 356.42 382.45 381.11 387.56 440.18 473.47 509.88 4.1

Ton-Kilometers (billions) Railways 52.53 72.82 96.71 100.18 102.22 108.52 109.96 116.44 5.4 Highways 2.10 10.57 15.41 16.07 17.00 20.90 22.74 25.84 10.4 Civil aviation------Inland waterway 0.13 0.43 0.79 0.70 0.71 0.79 1.01 0.96 9.3 Total 54.76 83.82 12.91 116.95 119.93 130.21 133.71 143.24 6.1 AverageHaul Distance Ln(km) Railways 777.3 894.0 1,069.1 1,108.4 1,111.9 1,161.54 1,120.8 1,167.1 3.0 Highways 20.6 38.7 53.5 55.7 58.0 60.8 61.2 63.9 5.7 Civil aviation------Inlandwaterway 125.5 211.4 230.1 274.1 291.4 300.0 285.9 293.0 3.7 All modes 308.2 235.2 295.2 306.9 309.5 252.9 282.4 280.9 2.0

Za Average haul distance ton-kilometers/tons transported.

TABLE 2.3B: HENAN: PASSENGERTRAFFIC, 1980-94

Annual growth(%) 1980 1985 1989 1990 1991 1992 1993 1994 (1985-94)

Passengers Transported (millions) Railways 48.60 57.23 54.76 44.29 42.23 42.71 46.03 45.63 (2.5) Highways 101.51 307.29 466.34 489.77 481.71 537.03 565.11 579.46 7.3 Civil aviation - - 0.07 0.11 0.10 0.16 0.26 0.46 Inland waterway 0.81 1.21 2.11 1.50 1.19 1.06 1.46 0.81 (4.4) Total 150.92 365.76 523.28 535.67 525.23 580.96 612.16 626.86 6.2 Passenger-Kilometers (billions) Railways 12.24 20.97 28.00 22.99 24.95 27.55 27.54 30.54 4.3 Highways 4.14 11.34 20.82 19.31 20.96 23.56 23.56 26.07 9.7 Civilaviation ------Inland waterway 0.02 0.04 0.04 0.05 0.04 0.04 0.05 0.02

Total 16.40 32.35 48.86 42.35 45.95 51.15 53.85 56.63 6.4 Average Travel Distance La Railways 428.1 366.5 511.3 519.0 590.9 644.9 642.8 669.2 6.9 Highways 40.7 36.9 44.6 39.4 43.6 43.7 42.9 45.0 2.2 Civil aviation------Inland waterway 28.4 30.6 19.0 30.7 31.1 35.8 30.8 24.7 (2.2) All modes 108.7 88.4 93.4 79.1 87.5 88.0 78.9 90.3 0.2

La Average travel distance = passenger-kilometers/passengers transported.

Source: HPCD. - 71 -

TABLE 2.4: FREIGHT TRANSPORTED BY ROAD (1985-94)

Million tons Billion ton-km Ave%&chaul distance(bn) Social Public PrSocial ocial Public Private v Year truck la truck lb truck la Total truck truck truck Total truck truck truck Total 1985 120.0 37.4 116.0 273.4 3.7 1.9 5.0 10.6 31 51 43 39 1986 130.6 37.7 109.7 278.0 4.0 2.0 4.0 10.0 31 52 36 36 1987 141.8 37.9 127.0 306.7 6.5 2.2 4.7 13.4 46 58 37 44 1988 147.7 39.1 106.0 292.8 7.0 2.5 4.4 13.9 47 64 42 47 1989 158.2 37.1 92.8 288.1 9.1 2.4 3.9 15.4 58 65 42 53 1990 162.5 37.2 88.5 288.2 10.1 2.0 4.0 16.1 62 54 45 58 1991 164.6 34.4 94.2 293.2 10.5 2.0 4.4 16.9 64 58 47 58 1992 200.1 32.7 111.2 344.0 13.9 2.1 4.9 20.9 69 64 44 61 1993 200.6 30.6 140.6 371.8 14.4 1.8 6.5 22.9 72 59 46 61 1994 225.8 23.9 154.5 404.2 16.8 1.8 7.2 25.8 74 75 47 64 Percentannual growth rate 1985-94 1 7.3 (4.8) 3.2 4.4 18.3 (0.6) 4.1 9.0 10.2 4.4 1.0 5.7

La Own-accounttrucking, including govemment andcollective enterprises. Lb Public carrier, including all govemmenttransport sector. Privately owned.

Source: HPCD.

TABLE 2.5: TRAFFIC ACCIDENTS IN HENAN PROVINCE(1988-94)

Number of accidents Number of fatalities Number of persons injured 1988 19,401 3,411 12,325 1989 18,813 3,264 11,864 1990 17,200 3,085 11,053 1991 18,330 3,183 12,039 1992 18,788 3,891 12,201 1993 14,997 3,630 10,947 1994 14,147 3,648 10,162

Source: HPCD. (Y million)

Actual Estimate Eighth Five-Year Plan (1991-95) Ninth Five-Year Plan (1996-2000) 1991 1992 1993 1994 1995 8FYP 1996 1997 1998 1999 2000 9FYP Total Total

Revenues Road maintenance fee 754 788 1,170 1,250 1,360 5,322 1,470 1,600 1,740 1,880 2,050 8,740 Grants from MOC 84 81 146 321 750 1,382 580 650 700 600 750 3,280 Grants from the Province 31 36 40 44 0 151 0 0 0 0 0 0 Baiik loans 28 65 181 802 842 1,918 1,172 1,287 1,406 1,304 716 5,885 Toll revenues 42 46 295 617 970 1,970 1,183 1,345 1,585 1,709 1,834 7,656 >

Total 939 1,016 1,832 3,034 3,922 10,743 4,405 4,882 5,431 5,493 5,350 25,561

lAxpeniiliiuliesc Io central governmilent 94 114 120 130 80 538 84 90 97 104 112 487 TopublicsecLlrity /a 10 10 10 10 10 50 10 10 10 10 10 50 9 New road conistiriction & imnpovement 528 521 1,216 2,414 3,010 7,689 3,380 3,470 3,720 3,560 3,500 17,630 V Overhaul (10-15 years) 53 66 95 105 309 628 330 351 372 393 414 1,860 t Inteiiiediate maintenanice (7-8 years) 26 33 49 57 145 310 148 151 155 158 161 773 Routine maintenance 61 71 120 126 137 515 148 153 162 164 167 794 Management, research, training 103 115 130 143 164 655 173 198 217 237 255 1,080 Repayment of loans 64 86 92 49 67 358 132 459 698 867 731 2,887

Total 939 1,016 1,832 3,034 3,922 10,743 4,405 4,882 5,431 5,493 5,350 25,561

/a As approved by the Provincial Government, from 1989 onward, HPCD gives the Public Security Bureau Y 10.0 million aninially.

Souurce: IIPCD. (Yuan per liter)

Before March 1984 After March 1984 March 1992 March 1994 Price Price Market Price Price Market Priice Price Markei Market Internalional I IA 212 price I A 2lb price I la 2/Lb price price price

Gasoline1 (70oct) 0.53 0.70 .... 0.53 0.70 0.95 0.70 1.17 1.76 2.14 0.87 Index 100 132 .... 100 132 179 132 221 332 404 w

Gasoline (80 oct) 0.56 0.73 .... 0.56 0.73 0.98 0.77 1.22 1.84 2.22 0.99 Index 100 130 .... 100 130 175 138 218 329 396

Diesel luel 0.46 0.68 .... 0.46 0.68 0.96 0.65 1.14 1.70 2.13 0.82 Index 100 148 .... 100 148 209 141 248 370 461 >

Consunmer price ...... I ...... I0...... 129 ...... 189...... 125.23r index -

/a Plannedallocation prices. /b Negotiatedabove quota. 1&Prices of gasoline include an aggregateof 43 percentcentral government fuel taxes. id Pricesof diesel include a 13percent central governmentfuel tax.

Sources: IIPCD; I'laid's Oilgrum Price Repporl,McGraw-Ilill linc.,New York, UJSA,Vol. 71, No. 128,p. 5. - 74 -

TABLE 2.8: HIGH-GRADE HIGHWAYS TO BE CONSTRUCTED DURING 1996-2000 (Y million)

Class after Length Estimated cost Construction Highway improvement (km) Total 1996-2000 period

Kaifeng-Luoyang Expressway 201 3,100 300 1995-96 - Expressway 46 840 370 1995-96 Anyang-Xinxiang Expressway 125 2,100 1,000 1995-98 Xuchang- Expressway 46 1,010 1,010 1998-2000 Luohe- Expressway 203 4,900 3,520 2000-04 -Kaifeng Expressway 203 3,800 3,800 1996-2000 Luoyang-Sanmenxia Expressway 141 4,080 4,080 1996-2001

Total 965 19,830 14,080

Source: HPCD. ExIsing cMmitMaM Poposedimpovement

A.ADT F AADr _ APupad NlE - ab. M_.d ( w . C.*- -a_Sec. c I D Lt> I Eit Y- Y_ Y- C_ _ i waft ShI _ ha sd ~ 1 t s M..iT ds C_ k U) -bob ( .) O.W Ym _ I NI. NIS (km) Wa (al ih( Pled (YMl

LlYmg S 4.9 11,34 13,39 H (4.9) 4 15 21.5 1995-96 (12.50) 7 n 4 15 21.5 2.0 Good 199 863 1,366 16,22 16.95 w CO

Xmi S ) uaclaifihd 3.0 poor 199 730 1,159 6,367 6,684 tn 3.0 4 15 200.5 1997-98 22.13

N 6.3 Por 199 730 1,153 1,944 2,U9 n 6.3 2 9 21.5 1997-98 tl"

Yitt S ID 2 6 20.75 3.1 Poor 199 611 969 65356 7,161 n 3.1 4 14.5 200.5 1997-91 9.51

Mi;_ji S li 2 6 20.75 2.0 Por 19 496 737 7,577 9.129 11 2.0 4 14.5 7'.7 I97.95 4.39

Gmyia s m 2 6 20.75 30.0 Good 199 160 317 1,020 2,016 lb- hb-0

N 111 2 6 200.75 3.5 row 199 160 317 3.911 5.449 n 2.6 2 9 201.5 1997-91 7.55 0

Xi_a N 4.3 1n (4.35) 4 2.8 2-0.75 'n4m (40.70) - 0

a 4 15 2*0.5 3.0 Cood 199 6749 9,916 14,60 t9,26

Tod o Xi._, YiWa, M luma 17.9 43.53

ini .: i . .IhuueIi Training Equipment& Other Total Cost In China Abroad Share Share Share Share In In S share _ N P/M N P/M in Y'000 in $'000 in Y'000 in $'000 YS'000)'000 As % ollTotail N (hi (000)

ORGANIZATIONAL STRENGTHENING Training and Equipmeni Officesin HPCD 20.0 20.0 4.0 6.0 124.5 54.0 1,709.8 515.0 6,557.0 790.0 72 569.0 0 World Bank-FinancedProject Execution Office - - 4.0 6.0 0.0 54.0 590.1 177.8 2,513.8 302.9 77 231.8 z ExpresswayAdminisiration Bureau 150.0 150.0 12.0 18.0 933.8 162.0 1,259.9 379.5 6,688.0 805.8 67 541.5 > TransportPolytechnic School 7.0 7.0 3.0 4.5 43.6 40.5 1,274.5 383.9 4,840.5 583.2 73 424.4 TransportVocational School 10.0 10.0 3.0 4.5 62.2 40.5 1,195.2 360.0 4,581.6 552.0 73 400.5 ScientificResearch Center 9.0 9.0 4.0 6.0 56.0 54.0 2,448.5 737.5 9,074.0 1,093.2 72 791.5 Links to OtherComponcnts Z Ilighway Sali:ty 5.0 5.0 - - 31.2 0.0 62.5 18.8 249.8 30.1 62 18.8 ) RIPA 20.0 20.0 124.5 0.0 0.0 57.0 597.6 72.0 79 57.0 °ON EnvironmnentalProtection 43.0 43.0 267.7 0.0 0.0 267.7 32.2 Civil Works 3 ScientificTechnolgy Center of HSRIl4 0.0 900.0 29,000.0 3,494.0 26 900.0 2 C.) STAFF DEVELOPIENT & TOURS SpecializedTraining 70.0 70.0 21.0 27.5 435.8 247.5 0.0 0.0 2,490.0 300.0 82 247.5 3 AwarenessTours - - 30.0 15.0 0.0 165.0 0.0 0.0 1,369.5 165.0 100 165.0

STUDIES ExpresswayOrganization, Management & 1,680.0 618.0 6,809.4 820.4 75 618.0 Z Maintenance C) TOTAl. 334.0 334.0 81.0 87.5 2,079.4 817.5 10,220.5 4,147.4 75,038.8 9,040.8 55 4,964.9 r) 0

/a Equipmentfor STC is includcdunder procurement for theHSSRI. 0 Z Trining in Chian Traing Abroad TOTAL Subjectof Training Ag-ey ConrtenOf Training N P/M Y'0O0 Conentof Trairtng N P/M $000 in YO000 in S1000

INTENSIVESTRENGTHENING Pr,oj.ectlplenenautionNtanagerat WBFPO MInnanemnofinrnationalonutacringo(nifc sagr-g 30 45 405 3362 405 projqect,anwd orumnagaaent and costconuol, negoatimg us of etra fundsand Lind rasing

HPTC Planing &adSuaistic. ue of rcoputm andsafiwre in IO O 0 62 6 2 0 7 collcsu and aalysis of dawa prepaati on peridic repos to World BDnk

HPTVS Planing andStati e ofconpute ad aiwe ar 2 0 2 0 12 5 12 tI S cejikclin andanalysis of dan, prepatauonof perodic repor soWorld Dank

Itihghy Pav,emrt Cone utn tKillAII Counrucutsipesvira FlD)ICprocacs, peaces. 21.0 260u 161a Q ruy ruuotughlwh-y -u.-1i- -pircuJ.. pl...pt l Itt 0 S tJSI 273 9 J30 quihty conuol,tbriry nd praruceof voonnoa designof pavanio ai p- r

HSFI Pavaemnteguaeug pa et structuretesunag by 2 0 3 0 27 0 224 1 2700 baoer deleckmaer, appicatuinand ntune a of rerote infruedappmau .-

HPTC Oa4-bejobtiuiuaignmnoncbanidcenattnionuad 20 20 125 Mhecamudconructio n qualityteatie to0 to 13to 1246 t$0 bigbwaydanip

Hqbbtr' Higway Lban_ HGHAB On-dbe-jobmin_g in cmauaten ._nagea: 24 0 24 0 1494 Manmgevneammetdns, qualty coonuoland FIDIC 3 0 4 5 405 4836 53S -nort o - race pcedarer;

I way(peatm & lainene tIIIIAB O(-ik-jobmaingi n r e y bitw S70 570 3541 Advancrulidir andtcwc-cs al tpx iupcatns 50 7 5 07 5 9151 11012C Flac sm oaiaia ad ma_moace pla_), i _kmama ( g. mod tlraimaatr nangatit 0 mitanaI sblae. nin kw apwaina maammaeand -

HFTC Trainng ai mi isp ps mrarag s 2 0 2 0 12S Advancdtubtods andtechnques of tranapmroperion I 0 I 5 135 1246 ISO systm 1 _vumyim. ' bwi y m-ausknce ad NWnagement mmanagnmotmenA&

HlPTVS Priuipl nandneur bgwn yh ea 20 2 0 123 125 I S appn ad ne ellgy in higway aiuaenanc

Equip AppLia Maag t HS7U On-ile-job forFa errnd ad .anan rapireoar 60 60 374 374 45 o andSerav fared ynv dev-, dynmc mein yIn far pale fouamm acmuin-ecolled hydaidk ucaiveruls mn macne; ag overbamilingrning tunalgy am emobdequWiny wnar4y; ao n appiaen of ksANca CAD

IIPTC M onmcfadt unio . i ad 4-wl epopi,aonNo.# tO 1t0 62 OfprvAiMad nceoad o itingppkean t0 1 5 1I5 III3 142 andd-nvict

II'VS Traaungoftiasni usmsanngmaeaadn aswaont cof 40 40 24Y9 Achbwhofaupoaoa ndaiaiaumntol 1i1611cInstia tn J0 405 4-t5 3d 1 43S nrvacas and ac eqwapmeui Machinery bghwaySvy andDig HGH/AB Paem s -cedeigaw afxblekandrgidpvana 200 200 1243 Mateias abndming stady applicaon of quity of IphatO IS 135 2366 235 anddning. aitit. deip ofaunatyped mataeral,advaced mth or em asphalta co e nch-P Tr_auiq 'a Chm Trenog Abroad TOTAL SLiJ,.ndTraaiTg Al-Cy Ca ofTrmag N 4 Y'000 ContentofTrnug N i/I S'0O0 inY000 'aS000 1245 Is0 Couptrr (bad-w. A setwe) IWCD4IQ Offic iimsdomm_mmmiam piamiq cimer 20.0 200 1245 _ md

HSIU f ,-Jb vam"fa _atr _pm netwt wihaim mad 30 3.0 15.7 Admiced comuwr (chaokyWa k btr MNtDBsTn 20 30 270 2428 293 oPaUm, sdfwupglcadia at alckmAm em_ur- (arudwat sumhvapow fracuocal ,drval, Au vidro d i mary, am" .edmoogyd CD-T3R4 IS 13.5 1111 133 Eigth TmIg6m WRFPO SwummmraiuiasokiaapoangoAacomma I0 a:pg u Madthar -wagin k aedji -d fia- pttr

60 540 4482 54o0 Td _eadcmiomawoeks IIICIIQ E rosandmd Piaclatin ulccmcal 40 eag 1mima-WwmaauW md aqwip

e2 0 a TwvaicEa^_a.i 3WTC O-lba-jb Wm" fat ra_uac WA _rm ct of 10 1.0 62

\S 13$ 1991 239 Fira bl_MmmH ImiOOAB h a amacat doladwcKm 14.0 140 n72 Adtacad amad _dtatackmas of a1eiaa conIol. I0 mmaq. 5_f alo-aiiM d uag_ ath uagaid pNWrma

HITVS Trai ofarama dmatamp - aia gbodjao 1.0 10 6.2 62 07 MceuaPq_a9atm of co,pu-. _me dwory of fia.ca ,y - 161 202 Pcaned & Libar Aiauuaaiu IIGIAB A _naal,l of mqowa, capisL_icadpauoad 90 90 560 10 1S 135 am cepimatal hohayer

IlPTVS Taaigfga qlicair mtapena 1.0 10 6.2 NWdblabr _Aaa. Phy-ul op_d Ofm 4,81.G 55Z.6 Sab11ma 3,.8 1%.6 1.220.1 30.00 45.40 4ff.

COlIPREIIENSIVE TRlAINING 945 1.09S7 132.0 Iiphway Opomom *a Ma iosas 50.0 50.0 3113 7.0 105 0 72 5976 72 Moaj _d EvaluiII 0 8 S10 7968 960 TtaTic EmVmwuwq&Umaqmi 20.0 200 124.5 60 90 1,4".. 300.6 Sabi" 72.6 72.6 43&8 21.6 27.5 24753

AWAREN8SSTOURS Openaaw.&MaiamamaceofHGWiays 60 30 330 2739 330 Machaica,. amA MuM o b4od .mymiaueaace 60 10 33.0 2719 330 Fmbilay and appraisalm ad 6 0 3 0 330 2739 330 Ex-posmeW u elpoaiak.aarishods 60 30 330 2739 330 W dhof fd remainghr biwu yimrlaeau 60 30 330 2719 33 0

36.6 Is.0 140.6 41,34.5 I3S.6 Saia..A *.6 6.6 6.6

OTIILE TRAINING 313 )3 Higway Seafy 30 30 311 124.5 ISO WIPA 200 20.0 1245 00 26 0 123 Ea^i.unenal Prroc 43 0 430 2680 423.6 51.6 Subhaa 423.6 e.0 8864.4 1".9 TOTAL 334.0 334.0 2,679.4 51.4 47.5 S17.5 - 79 -

TABLE3.4: PROJECTCOST SUMMARYla (December 1995 prices: $1.00 = Y 8.30)

Y million S million Foreign Local Foreign Total Local Foreign Total costs (%)

A. Works

LSE Civil Works 1,553.4 1,035.6 2,589.0 187.16 124.77 311.93 40 Traffic Engineering lb 35.7 143.0 178.7 4.30 17.23 21.53 80 Yangjia-Baijiazhai Connection 25.7 17.2 42.9 3.10 2.07 5.17 40 Link Roads la 26.2 17.4 43.6 3.15 2.10 5.25 40 RIPA 437.2 145.8 583.0 52.67 17.57 70.24 25 Black Spots 10.0 0.0 10.0 1.20 0.00 1.20 0 Research Center 13.5 7.5 21.0 1.63 0.90 2.53 36

Subtotal 2,101.7 1,366.5 3,468.2 253.11 164.64 417.85 39

B. Construction Supervision

LSE, Link Roads and YBC 75.7 45.4 121.1 9.12 5.47 14.59 37 RIPA and Research Center 8.5 0.0 8.5 1.02 0.00 1.02 0

Subtotal 84.2 45.4 129.6 10.14 5.47 15.61 35

C. Equipment Id

LSE Operation & Maintenance 37.1 20.3 57.4 4.47 2.44 6.91 35 Highway Network Maintenance 0.2 10.0 10.3 0.03 1.20 1.23 98 Environmental Monitoring 0.0 0.3 0.3 0.00 0.04 0.04 100 Institutional Strengthening/Training 0.5 21.2 21.7 0.06 2.56 2.62 98 Highway Safety 0.1 0.2 0.3 0.01 0.02 0.03 67

Subtotal 37.9 52.0 89.9 4.57 6.26 10.83 58

D. Staff Training

Comprehensive Training 0.4 2.1 2.5 0.05 0.25 0.30 84 Institutional Strengthening & Training 1.2 3.4 4.6 0.15 0.41 0.56 73 Other Training 0.4 1.4 1.8 0.05 0.17 0.22 77

Subtotal 2.0 6.9 8.9 0.25 0.83 1.08 77

E. Studies

Expressway Organization, 2.2 3.4 5.6 0.26 0.41 0.67 61 Management & Maintenance HighwayTrafficAccidents 1.5 1.5 3.0 0,19 0.18 0.37 49

Subtotal 3.7 4.9 8.6 0.45 0.59 1.04 58

Total Base Cost 2,229.5 1,475.7 3,705.2 268.62 177.79 446.41 40 - 80 -

Y million S million Foreign Local Foreign Total Local Foreign Total costs (%/0)

Contingencies PhysicalContingencies 218.6 141.2 359.8 26.33 17.01 43.34 39 Price Contingencies 623.6 132.3 755.9 75.13 15.93 91.06 18

Subtotal 842.2 273.5 1,115.7 101.46 32.94 134.40 25 land AcquIsition & Resettlement LSE 182.9 0.0 182.9 22.04 0.00 22.04 0 Link Roads 2.8 0.0 2.8 0.34 0.00 0.34 0 YBC 6.5 0.0 6.5 0.78 0.00 0.78 0 RIPA 14.5 0.0 14.5 1.75 0.00 1.75 0

Subtotal 206.7 0.0 206.7 24.91 0.00 24.91 0

Total 3,278.4 1,749.2 5,027.6 394.99 210.73 605.72 35 lA Cost estimate does not include Y 90 million in taxes. lb Cost estimate does not include Y 22 million in taxes and duties. lS Cost estimate does not include Y 2 million in taxes. Ld Cost estimate does not include Y 20 million in taxes and duties. - 81 -

TABLE 3.5: ESTIMATEDDISBURSEMENT SCHEDULE ($ million)

Disbursement profile Bank fiscal year Estimated disbursements of transport projects and semester Semester Cumulative % in China (%) da

1997 December 31, 1996 10 10 5 June 30, 19971 10 20 10 3

1998 December 31, 1997 18 38 18 10 June 30, 1998 17 55 26 18

1999 December31, 1998 23 78 37 26 June30, 1999 22 100 48 34

2000 December 31, 1999 25 125 60 46 June 30, 2000 25 150 71 58

2001 December 31, 2000 23 173 82 70 June 30, 2001 22 195 93 78

2002 December 31, 2001 10 205 98 86 June 30, 2002 5 210 100 94 la Based on most recent disbursement profile available (August 1995). Lb Includes initial payments into Special Accounts and advance payments to contractors.

Notes: (1) Project Completion Date: June 2002. (2) Loan Closing Date: December 2002.

Source: Mission estimates. - 82 -

TABLE4.1: GROWTHOF TRAFFIC ON EXISTINGLUOYANG-SANMENXIA HIGHWAY (AADT measured in mte)

Location Xinan Mianchi Guanyintang Lingbao

1990 Motorized 3,992 2,860 2,662 2,527 Other 452 1,074 449 739

Total 4,444 3,934 3,111 3,266

1995 Motorized 8,589 7,245 6,935 2,839 Other 649 769 257 887

Total 9,238 8,014 7,192 3,726

Annual Growth (%) 1987-90 11 12 15 5 1991-95 16 15 18 3 1987-95 14 14 17 4

TABLE4.2: Low TRAFFICPROJECTION (AADT measured in mte)

2000 2020 Section of road Without With Total Without With Total tolls tolls corridor tolls tolls corridor

East - Luoyang 10,658 7,720 21,274 19,636 Luoyang-Xinan 17,578 12,847 18,620 42,209 38,980 53,020 Xinan-Mianchi 15,901 11,616 16,323 44,293 40,876 50,002 Mianchi- Guanyintang 14,886 10,866 17,907 43,838 40,466 48,988 Guanyintang-Sanmenxia 16,445 12,003 17,420 41,141 42,652 51,308 Sanmenxia-West 10,085 8,782 14,467 33,975 31,343 43,108

Note: Corridor total is the sum of traffic (mte) on the proposed LSE and traffic on the existing highway. - 83 -

TABLE 4.3: FINANCIAL AND ECONOMIC UNIT COSTS

Economic/ Cost component Units Financial Cost Economic Cost financial cost (Y) (Y) (0/%)

Construction Costs Timber tons 1,680 1,306 77.7 Cement tons 313 238 76.0 Asphalt tons 1,938 1,589 82.0 Steel tons 3,970 2,625 66.1 High-tensile steel tons 7,844 5,869 74.8

Vehicle Operations Fuel '000 ton-km 92.61 78.02 84.2 Maintenance 110.21 107.60 97.6 Time 30.76 30.76 100.0 Other 136.01 123.64 90.9

Total 369.59 340.02 92.0

TABLE 4.4: EcONOMic EVALUATION-BASE CASE AND SENSITIVITYTEST EVALUATION RESULTS

Economic Rate of Return (EIRR), %

Base case (whole route) 19.0 Luoyang-Xinan 19.3 Xinan-Mianchi 18.3 Mianchi-Guanyintang 18.9 Guanyintang-Sammenxia 18.8 Guanyintang Connection 16.0 Without tolls 21.6 Zero value of time 17.5 Lower traffic projection 18.5 Cost level for minimum acceptable evaluation result (%) 150 Benefit level for minimum acceptable evaluation result (%) 55 - 84 -

TABLE4.5: SENSITIVITYOF EVALUATIONRESULTS (EIRR %) TO COST ANDBENEFIT VARIATION

Variation Variation in Benefits in costs 50% 60% 70% 80% 90% 1000/a 110% 1200/o 130% 140% 150%

500/a 19.01 21.40 23.57 25.57 27.44 29.20 30.86 32.45 33.96 35.42 36.82 60% 16.82 19.01 21.01 22.86 24.59 26.20 27.74 29.20 30.60 31.92 33.22 700/o 15.09 17.15 19.01 20.74 22.35 23.86 25.29 26.65 27.94 29.20 30.40 80% 13.69 15.63 17.40 19.01 20.54 21.95 23.31 24.59 25.81 26.97 28.11 900/a 12.52 14.36 16.02 17.58 19.01 20.38 21.65 2286 24.02 25.13 26.20 1000/a 11,51 13.27 14.87 16.36 17.73 19.01 20.24 21.40 22.51 23.57 24.59 110% 10.64 12.33 13.87 15.29 16.61 17.85 19.01 20.13 21.19 22.21 23.18 1200/a 917 1.51 12.98 14.36 15.63 16.82 17.94 19.01 20.03 21.01 21.95 130% 9.20 10.78 12.21 13.53 14.76 15.90 16.99 18.02 19.01 19.96 20.87 140% 8.60 10.11 11.51 12.79 13.96 15.09 16.14 17.15 18.10 19.01 19.89 150% 8.04 9.54 10.87 12.11 13.27 14.36 15.38 16.36 17.28 18.16 19.01

TABLE4.6: FINANCIALEVALUATION4

Value Input data Total project cost Y 4,133 million Debt Y 1.743 million Equity Y 2.390 million Period of loan 20 years Loan interest rate 6.5% Commitment fee 0.75% of balance Grace period 5 years

Basic Lower toll Higher con- Results evaluation revenue struction cost a. Rate of return on equity 14.80% 10.21% 10.35% b. Net Present Value Y 555 million Y -281 million Y -369 million c. Financial rate of return 4.36% 2.47% 2.33% - 85 -

TABLE 4.7: ECONOMIC EVALUATIONOF THE FIRST PACKAGEOF RIPA

AADT traffic volume (mte) Length in km Estimated Influenced Current Estimated System Class Class Unclassi- Subtotal cost population traffic traffc EIRR no. III IV fied (Y'000) ('000) (1994) (2011) (%/.)

4 - 52 42 94 4,468 202 1,791 10,576 16.0 5 - - 6S 6S 1,651 92 739 6,526 14.2 7 35 - - 35 2,150 107 462 4,551 17.0 8 - - 143 143 4,469 216 495 5,365 15.1 9 - 44 56 100 4,010 150 1,051 5,704 21.2 10 - 66 45 111 4,316 180 523 7,952 23.4 11 - - 68 68 1,670 115 120 1,075 28.0 12 - - 43 43 1,075 155 175 6,761 31.6

Total 662 23,809 1,217 19.6 Average

- 87 - ANNEX 1

ANNEX 1: ROADS IMPROVEMENT FOR POVERTY ALLEVIATION (RIPA)

1. A three-stage screening process was agreed: (a) an initial screening, designed to select "priority counties," counties whose composite ranking on selected demographic, economic and social criteria, identifies them as the most in need of improved road transport as an element in alleviating their "poverty" situation; (b) a second screening focusing on the cost effectiveness of each roads improvement system per population served; and (c) a detailed economic and social analysis of those RIPA systems that successfully meet the criteria of the first two screening procedures.

First-Stage Screening

2. Identification and Definition of Poor Counties. In 1993, the Henan Provincial Government (HPG) used the following criteria for defining poor counties: (a) counties that received poverty alleviation funds from SPC and HPG during 1986-93, and whose per capita annual income in 1993 was

3. Ranking and Selection of Poor Counties for RIPA. Henan's counties were ranked according to a composite score taking into account the following indicators:

(a) Income Ranking: to assess the extent of poverty; this ranking is based on the counties' average per capita income, and the counties with the lowest incomes were ranked the highest for RIPA selection. The average per capita income in 1993 varied from Y 200 to Y 450, and was allocated 5 points in the ranking system. Counties with the lowest incomes were given the highest ranking. The counties with per capita average incomes of Y 200-249 were given 5 points, Y 250-299 with 4 points, Y 300-349 with 3 points, Y 350-399 with 2 points and Y 2400 with only I point.

(b) Poverty Ranking: This indicator is intended to identify the "very poor" counties, those with an annual per capita income

percentage of the very poor were given the highest rank. The counties with the very poor population being 50 to 59 percent were given 5 points, 40 to 49 percent with 4 points, 30 to 39 percent with 3 points, 20 to 29 percent with 2 points and less than 20 percent given 1 point.

(c) Value of Agricultural Production: was measured through the importance of agriculture andforestry as the economic base and source of income. Total land area in agriculture and forestry as a percentage of total county land area was used as a surrogate index and was allocated 5 points. This varied from 30 percent to 70 percent. When this index was in the highest range of 60 to 70 percent, 5 points were allocated, 4 points for 50 to 59 percent, 3 points for 40 to 49 percent, 2 points for 30 to 39 percent and 1 point for less than 30 percent;

(d) Value of Mineral Production: in 1993 was another indicator with S maximum points and varied from Y 2 million to Y 130 million. When the value of annual mineral production was >Y 100 million, that county was given 5 points, Y 70-100 million 4 points, Y 40-70 million 3 points, Y 10-40 million with 2 points and

(e) Social Development Indicators: based on 1993 data, were allocated 5 points as follows: (i) population without clean drinking water varied from 5 to 77 percent of total county population. When this was >=41 percent, that county was allocated 1 point. Other counties were allocated zero points; (ii) the number of health workers per 10,000 persons was used as an indicator of access to health services and was allocated 1 point. It varied from 12 to 40. Counties with lower access (S25 health workers per 10,000 persons) were given 1 point. All other counties with higher degree of health access were given zero points; (iii) percent of people who cannot read or write (number of persons per 10,000 population) was used as an educational indicator. This varied from 0.29 to 15.33. Counties with the higher illiteracy (27.7 persons per 10,000 population) were allocated 1 point. All other counties with higher literacy were allocated zero points; (iv) Food for Work Program (FWP) expenditures in each county varied from zero to Y 1.2 million per year. They were used as a surrogate to unemployment and were allocated 2 points. Counties in the bottom one-third range of FWP annual expenditures (Y 800,000) given 2 points. -89 - ANNEX 1

4. On the basis of the above, the ranking of 34 poor counties varied from a low of 7 to a high of 20, out of maximum possible rank of 25 (the higher the score the more is the county in need of road improvements). Twenty-one counties had a ranking of >10 and all of these were included in RIPA.. In the 34 poor counties, 26 administrative townships currently have only seasonal roads. These townships are in mountainous areas: Dabai mountains, Tong Bai mountains, Fu Niu mountains, and Xiao Han mountains. Some of these townships are in four counties with ratings of <10 (Xi Chuan, Xin Xian, Shang Cheng, and Gushi). However, the highest priority of RIPA is to provide all-weather access to these townships and therefore, it was agreed during preparation to include these four counties in RIPA.

5. It was also agreed to include Xin Yang county (rating of 9) and Luo Shan county (rating of 10) within RIPA because of the importance of efficiently connecting the "poor county" road systems to the National Railway Network. Another important priority is proper all-weather connectivity between counties themselves. Considering this, Bei Yang county was included (rating of 9). The Nanjing-Xian Railway is currently under construction and is to be completed in 1998-99. It was considered important to connect the two poor counties of Luan Chuan and Lushi to this railway in Xi Xia county, even though Xi Xia is not one of the poor counties. Based upon these considerations, 28 of the 34 poor counties are included in the first screening of RIPA. In addition, Xi Xia , which is not a poor county, will be included in RIPA. This makes the total number of counties selected for inclusion in the Bank-financed component of RIPA to be 29.

Second Stage Screening of Poor Counties

6. The purpose of the second screening was to select an initial basket of road systems from which a RIPA component for the Project could be identified. The criteria below were applied to the full basket of road segments proposed by Henan Province for the counties selected in the first screening stage. It was agreed that these criteria would be used in descending order of priority:

- Upgrade seasonal roads to all-weather unclassified roads, including rehabilitation and upgrading of culverts and bridges as necessary;

. Build new all-weather roads to those townships that do not have any road connections;

* Upgrade unclassified roads to Class IV roads;

* Build new Class IV roads; and

* Rehabilitate and or build short critical sections of Class III roads.

As a result, the initial RIPA basket covers 29 counties with 40 highway systems (consisting of 98 segments) totaling 2,291 km, with an estimated total cost of Y 839 million. - 90 - ANNEX 1

Initial Basket of RIPA Road Systems

7. The road segments in the poorest counties, which are to be constructed and rehabilitated as part of Henan's Provincial RIPA program, is described in Table 1 below. Over 88 percent of the total cost of these roads are for Class IV and Unclassified road segments.

Table 1. INITIAL BASKET OF 40 RIPA ROAD SYSTEMS

Road Classification Length in km Estimated Cost Estimated Cost as (Y million) % of RIPA

Unclassified 1,404 355 42.32 Class IV 714 387 46.16 Class III 173 97 11.52

Total 2,291 839 100.00

Screening of RIPA Initial Basket for Implementation

8. The System Cost Ratio (SCR) or the cost of each system divided by the population in the influence area, was used for screening the initial RIPA systems basket. Based on this criterion, the most cost-effective systems would have the highest priority for implementation. However, it was recognized that simple cost factors build inequity, especially when costs are higher and population densities are lower in mountainous areas, when compared to lower road construction costs in rolling or flat terrain. Therefore, it was agreed that the SCR for systems in mountainous areas would be adjusted by a cost factor of 0.66 (SCR will be multiplied by 0.66). It was also agreed that the Class III roads included in RIPA will not be subject to the SCR screening as their economic intemal rate of return (EIRR) will have to be equal or >12 percent. Where a system consists of Class III and lower class roads, HPCD can, for the purposes of the feasibility analysis, use the combined system (Class III and access roads ) or separate the Class III road as a system by itself. However, if the Class III roads are combined with the access roads for analysis, then the EIRR must be that for Class III roads (i.e., = or >12 percent ). If they are analyzed separately, then the EIRR will vary according to their classification.

RIPA Implementation Basket

9. Based upon above considerations and subject to a total budget of Y 650 million (Y 583 million without contingencies), the RIPA Implementation Basket was developed by HPCD and reviewed by the Bank. This implementation basket includes the road systems that will be subject to the Third-Stage economic and social analysis, and to the required minimum EIRR (para. 12 of this Annex). -91- ANNEX I

Table 2. RIPA IMPLEMENTATION BASKET

Road Classification Total Cost (Y million) Total cost as % of RIPA

Grade III 97 16.6 Grade IV 216 37.1 Unclassified 270 46. 3

Total 583 100.0

RIPA Implementation Plan under the Project

10. Based upon the preceding considerations, and the practicality of implementation, a plan for the execution of RIPA systems financed under the proposed project, was developed by HPCD and reviewed by the Bank. This plan is shown as Table 3.

Table 3. RIPA IMPLEMENTATION PLAN La

Implementation Year 1997 1998 1999 Total

Systems to be Implemented #12, #14, #18, #2, #5, #6, #7, #10, #13, #1, #9, #25, #21, #22, #23, #16, #20, #28, #31, #34, #26, #33, #40 #24, #27 &2 #35, #36, #37, #38, #39 Number of systems 8 systems 16 systems 6 systems 30 systems Total length (kin) 662 746 259 1,667 Estimated Cost (Y million) 224 245 114 583 % of total cost 38% 42% 20%/e 100% la 1995 and 1996 are project preparation years ( feasibility analysis, engineering, bid and contract process). Lk Refers to number assigned by HPCD to road systems in RIPA Transport Plan.

Third-Stage Screening of RIPA Systems

11. The third-stage screening consists of an analysis of the economic and social benefits of each of the roads systems proposed for consideration in the RIPA Implementation Plan at the end of the Second-Stage screening. The following criteria were used in this stage:

Analysis as Groups of Small Systems. The road segments were analyzed as groups of small systems rather than on a segment by segment basis. RIPA roads need not be paved roads but must provide all-weather access, and thus the proposed systems include "unclassified Nonmotorized Transport (NMT)" (e.g., bicycles, animal-drawn carts, tractors, and jeeps) roads, "unclassified" -92 - ANNEX I

all-weather roads, i.e., below "Class IV," and "classified roads-Class IV and Class III."

* Use of Motorization Data to Identify NMT Requirements. Data on the number of motor vehicles (in different classifications such as cars, trucks, motorcycles, tractors ) in the counties to be connected by the proposed RIPA systems is required for this analysis. This information was reviewed in the context of recent high growth of motorization. The primary purpose of the review was to confirm that the type of road systems proposed (classified, motorized, nonmotorized) fits with the trends in the motor vehicle population and their use.

* Variations in Expected Minimum Economic Internal Rate of Return (EIRR). This depends upon the types of roads within each proposed system. The system classification for analysis of EIRR is based upon the dominant class of road within the system. For example, if the dominant part (>50 percent of length in km) is unclassified, then the EIRR expected is that for unclassified roads (both new and rehabilitated). If the dominant part of the system is Class IV, the expected EIRR is that for the Class IV roads (new, upgraded and rehabilitated).

12. The expected EIRR varies as follows:

(a) Unclassified Roads: Expected Minimum EIRR of 8-10 percent.

(i) All new roads for Nonmotorized Transport (bicycles and animal carts) and farmers' vehicles (tractors and jeeps) that may not necessarily be designed for trucks but primarily to provide access to farmers and their local economic activities; and

(ii) New and rehabilitated all- weather unclassified roads.

The expected EIRR for primary access roads (unclassified roads) is lower than the other classes of roads. Therefore, the EIRR, in this case, must be supported by higher social benefits (population getting new access, population getting better access and improvement in the social indicators included in the county ranking system (outlined below).

(b) Class IV Roads: Expected Minimum EIRR 10-12 percent

These roads include upgrading of unclassified roads to Class IV, rehabilitation of existing Class IV roads, and new Class IV roads. If the EIRR is low, then social benefits (as discussed below) should be high. - 93 - ANNEX 1

(c) Class III Roads: Expected Minimum EIRR 12 percent

These roads include new and rehabilitated Class III roads, and roads upgraded from Unclassified or Class IV to Class IlI.

13. Social benefits are defined as increases in access to health services (clinics and hospitals), availability of potable water, access to educational services (reduced educational dropout rates and adult literacy) and improved access to employment (reduced dependence on FWP expenditures). These rates were not calculated for the first- year package, but for subsequent years will be calculated by extrapolation with the existing situation in nearby comparator counties with greater access to roads. The proportion of the total population getting new and better all-weather access (through improved connectivity and reduction of travel time and cost) will also stand as an indicator of social benefits. These social benefits will be calculated for each subsequent RIPA system to be evaluated prior to its inclusion into an implementation package for Bank approval.

14. As influence areas and beneficiary populations change over time, the system cost ratio, SCR (cost of the proposed system per person in the influence area, adjusted for mountain terrain) might change accordingly. In order for such systems to continue to be included in the RIPA Implementation plan, the SCR should be Y 189, HPCD can further amend the system or delete it from implementation altogether. In the event of a system being so deleted, then HPCD must select the next most cost- effective system from the list of systems agreed upon with the Bank. However, the systems to be added (chosen initially on the basis of lowest SCR) will also be subjected to social and economic analysis and must meet the agreed upon EIRR criteria.

15. Should any of the systems still not yield the required EIRR, it was agreed that: (a) for all Class III roads, HPCD can either amend the proposed system or delete the systems and substitute it by either Class III or lower class road systems; these new systems must be economically feasible and must meet the EIRR considerations; (b) for all Class IV and Unclassified roads, HPCD must use the list of priorities based upon modified SCR as discussed in this Annex.

16. HPCD will conduct a feasibility analysis for each of the subsequent systems before inclusion in packages for Bank approval. HPCD will send to the Bank documentation as follows:

(a) For the second package of RIPA systems:

(i) one selected feasibility analysis;

(ii) a summary of feasibility analyses for all the systems in this package. - 94 - ANNEX I

(b) The summary report of feasibility analysiswill include the following:

(i) brief description of the RIPA system including its location, influence area, major related highways;

(ii) system details including segment lengths, estimated costs, system cost ratio;

(iii) traffic data including current traffic volumes, assumed growth factors, traffic growth projections; and

(iv) economic evaluation table showing net present value, cost benefit ratio, economic internal rate of return, economic pay back period. - 95 - ANNEX2

ANNEX 2: TERMS OF REFERENCE FOR STUDY OF ORGANIZATION, MANAGEMENT AND MAINTENANCE OF TOLL HIGHWAYS

A. INTRODUCTION

1. The Bank's experience worldwide, including China, has shown that the establishment of toll road corporations often comes late in the period of highway or expressway construction. As a result, some toll road corporations are not well organized or vested with the authority they need to manage a modem road enterprise. High-grade highway entities that are well-organized and managed are a critical requisite, both for management of a rapidly expanding expressway network-one that is run efficiently from technical, financial and safety perspectives-and in order to provide confidence to potential investors. The development of an implementation plan focusing on the technical and managerial aspects of expressway operation should therefore come much earlier in the expressway development process.

2. High-Grade Highways in Henan Province. Henan Province has an area of 167,000 square kilometers and a population of 90 million people. It is an inland province that is strategically located at the center of the most inhabited part of China. Most of the strategic transport links (road and rail) running north-south and east-west cross in the Province. The Central Government is requiring Henan to implement in the shortest time the sections of those links located in the Province and to manage them with high efficiency as they are critical to the nation. Henan has already made substantial investment in implementing sections of the north-south trunk highway (107) extending from Beijing to Zhuhai (Guangdong Province) and the east-west trunk highway (310 and 312) extending from the Port of Lianyungang on the East China Sea (Jiangsu Province) to Huoergousi (Xinjiang Uygur Autonomous Region) at the border of China with Kazakhstan. A four-lane Class I Highway exists between Zhengzhou and Xinxiang (69 km). Efforts to provide full-access control to this highway are under way. Also, the 201 km four-lane expressway between Kaifeng, Zhengzhou and Luoyang has been open to traffic. The 48 km four-lane expressway from Zhengzhou to Xinzheng is almost complete and its southward extension to Xuchang (46 km) is under construction and is expected to be completed by the end of 1996. The 124 km four-lane expressway between Xinxiang and Anyang and the Hebei border in the north is under implementation and is expected to be completed by the end of 1997. Under the proposed Second Henan Provincial Highway Project, the 136 km four-lane expressway between Luoyang and Sanmenxia will be constructed during 1997-2000. Moreover, depending on availability of financing, Henan Province plans to construct the Kaifeng-Shangqiu Expressway (203 km) during 1997-2000, the Xuchang-Luohe (46 km four-lane) expressway during 1998- 2000 and its southward extension to Xinyang (203 km) during 2000-04. All of these - 96 - ANNEX2

expressways are or will be operated as toll roads. The tolls are expected to at least cover the operation and maintenance costs and the debt servicing.

3. Existing and Future Organization. Presently, the construction of the expressways and the operation and maintenance of the completed sections are under the responsibility of the Henan High-Grade Highway Construction Authority (HGHCA), which is part of the Henan Provincial Communication Department (HPCD). HGHCA was originally set up to construct, operate and manage the provincial high-grade highway network. HPCD is in the process of studying and proposing for official approval to the Provincial Authorities the establishment of a High-Grade Highway Administration Bureau (HGHAB), which will be the Public Bureau responsible for the construction, operation and maintenance of the expressway network. However, China is increasingly introducing the market mechanism into the Chinese economy. Toll roads are believed to be one of the areas where more efficiency, accountability and responsiveness to the users could be achieved through other arrangements besides a public bureau.

4. Operation and maintenance of toll expressways in China are often reduced to the maintenance aspects:

(a) Preliminary concepts like level of service for toll collection (toward the user of the expressway) or toward safety (minimum rescue delays, protection of endangered drivers and passengers), provision of facilities (properly equipped and maintained rest and service areas), dynamic traffic management in congested sections, etc., are still to be fully grasped.

(b) Secondary concepts, such as fraud control, proper return on investment, maximization of revenues are still considered as external to Toll Expressway Operation and Maintenance.

(c) Finally, tertiary concepts, such as independent state control of performance, subcontracting of some activities, private sector involvement, etc., are still considered as not feasible in China.

5. At this stage in the development of Henan's highway sector, it is necessary to address issues of Organization, Management and Maintenance of an effective structure that is suited to the specific needs of expressways in Henan, and by extension to China as a whole.

B. OBJECTIVES OF THE STUDY

6. The objectives of the proposed study are to:

(a) draw on internationally recognized experience as well as on experience in Henan and other provinces and China in the field of toll expressway network management to recommend appropriate organizational structures (that are suitable to Chinese conditions) to efficiently and safely manage - 97 - ANNEX2

the high-gradehighways in Henan Province, and balance the benefits to the users with the toll authority's financial needs, and the returns to the national economy;

(b) propose strategies to the provincial authorities to bring the proposed toll organization to international standards with special attention to maintenance aspects of management including planning and budgeting, financial systems, personnel and training, operational aspects such as tolling,construction, communications, traffic surveillance,lists of required equipment and inspection and maintenanceprocedures, traffic including accident and incidentmanagement, marketing and public relations,etc.

C. SCOPEOF THESTUDY

The study shall include,but not necessarilybe limitedto the followingtasks: 7. International Models. The study should include the review and analysis of a limited number of internationalmodels of toll expresswaymanagement such as in Europe (France, Italy, Spain),Japan, North America(United States) and Latin America (Mexico, Argentina). This review should concentrate,not only on the actual situation, with an emphasison the points listed below,but also on the varioussteps taken to reach the actual situation together, wheneverpossible, with an analysis of the pros and cons of each step. The objective of this step in the study is to identify leading criteria that will be used in selecting the most appropriateOrganization, Management and Tools for the Henan toll expresswaysystem. 8. For each internationalmodel, the study shall list the main elements, such as, but not limited to the:

(a) respectivemaster plans; (b) network in operationand at variousstages of construction; (c) various steps for implementation(choice of the route, land acquisition, design and construction,issue of permit to operate,etc.);

(d) actors (State, Local Authorities, Public Sector, Private Sector) and their respectiveroles; (e) various organizations, their respective responsibilities, structures and means, as well as the criteriaused for their settingup and evolution;and (f) various managementtools (e.g., policies, personnel, procedure and fixed and mobileequipment). 9. The study shall analyze the way institutionalaspects are handled in the various countries, in order to outline critical factors for evaluation(such as, but not limited to, - 98 - ANNEX2 management control, fulfillment of standards, identification of responsibility of each party, vested authority, financing of toll roads, etc.).

10. The study shall analyze the basis on which organizations dedicated to the construction, operation and maintenance of the toll expressways are established in the various countries, outline the pro and cons, in order to select leading criteria (such as administrative led organizations, geographically oriented organizations, financially led organization, centralized/decentralized organizations, etc.). Because of the expected large size of the high-grade highways in Henan and the rest of China, and the consequent huge financial burdens to build these roads, special attention should be paid to the financing of toll roads.

11. The study shall analyze the way Management Tools are established in the various countries, outline the pros and cons, in order to select leading criteria (such as integrated tools, level of subcontracting, etc.). The end-result of the above activities is the identification of leading criteria, together with their respective weight, to be used in comparing the various international models.

12. Existing Toll Organizational Structures in Henan and China. The study shall identify the existing institutional setup for toll organizations in Henan Province and elsewhere in China with particular emphasis on: (a) the Central Government and the Ministry of Communications (MOC); (b) the Henan Provincial System; and (c) developments already occurring in other provinces in China. The study shall place special emphasis on the legal and regulatory framework that affects the construction, financing, operation and maintenance of toll roads. The study shall present an overview of the National Trunk Highway System, with key milestones and the detailed planning of the Henan portion. The existing traffic volumes as well as future traffic volumes for the Henan toll expressways shall be estimated, mainly from existing traffic volume counts and available prefeasibility and technoeconomic feasibility study reports.

13. The study shall show the following financial data for each of the toll expressways in Henan: (a) construction costs split into land acquisition/resettlement, civil works, buildings and equipment; (b) operating and maintenance costs (both existing and expected future costs); and (c existing and future toll fees and revenues. The study shall also identify existing standards applicable to expressway inspection and maintenance.

14. Risk Analysis for Operation of Toll Highways. The study shall analyze the various risks involved in operating a toll expressway, in order to stress the value of proper organization and management tools for the operation and maintenance of the toll expressways. The risk analysis shall be illustrated with examples, in order to strengthen the value of the study. These risks relate to: (a) investment related risks and their potential effects on the overall financial soundness of a project; (b) institutional risks resulting from improper institutional arrangements (lack of state control, nonexistent standards); (c) organizational risks related to improper organization; (d) management risks related to improper management tools (lack of procedures, unqualified personnel, - 99 - ANNEX2 under performing equipment); (e) traffic and safety risks related to traffic and safety (such as cost of accident, loss of revenue); and (f) maintenance (short- and long-term) risks related to maintenance, with respect to either the infrastructure or its users and in the short term (localized inefficiency) and in the long term (integrity of the infrastructure).

15. Proposed Level of Services. The objective of this task is to propose a set of indicators of level of services, which shall be applicable to Henan and China in the short term, with possible future improvement. The study should refer to international experience in this respect. This task includes: (a) Classification of Expressways: to identify whether a new expressway classification, with reference to various level of services, geometry, and urban or interurban situation is required and applicable in China; (b) Toll Collection: the study shall propose indicator(s) for the level of service for toll collection, as well s range(s) of values(s) (if applicable) for such items as waiting time at the toll station, transaction time, and the reliability of the toll auditing systems; (c) Safety: the study shall propose indicator(s) for the level of service for safety, as well as range(s) of value(s) (if applicable) for such items as incident intervention time on the expressway, repair of crash barriers and accident/incident monitoring indicators; (d) Routine Maintenance: the study shall propose indicator(s) for the level of service for routine maintenance, as well as range(s) of value(s) (if applicable) for such items as litter picking, pavement cleaning, grass cutting; and (e) Heavy Maintenance: the study shall propose indicator(s) for the level of service for heavy maintenance, as well as range(s) of value(s) for such items as skid resistance, roughness, etc.

16. Proposed Improved Organization. The study shall propose up to three alternative improved organizational structures for improving management of high-grade highways in Henan. The proposals shall be based on the: international experience; local Chinese and Henan situation; evolution towards a market oriented economy; criteria defined in para. 14; and level of services defined in para. 15. The proposals shall cover:

(a) The Organization(s): This shall cover the: state and provincial institutional functions (such as, but not limited to HPCD, the Traffic Police); local authorities; existing and planned network of toll expressways in Henan; cross-border links and the liaison with the neighboring provinces; construction, in broad terms, although the study is dedicated to the operation and maintenance of the toll expressways.

(b) State and Provincial Levels: The study shall detail the overall functions, responsibilities and communication channels of the concerned entities.

(c) Legal Issues: The selection of the appropriate organizational structure for Henan high-grade highways should consider legal changes that would be required to realize the proposed organizational structure. Also, the powers that the proposed organization should have should be clearly stated. For example, a provincial toll authority organized as an independent legal person would be able to: - 100 - ANNEX2

(i) operate independently and be responsible for its own profits and losses;

(ii) possess and dispose of its assets;

(iii) enter into contracts in its own name with third parties; and

(iv) sue or be sued as an independent legal person and be responsible for its own civil liability.

(d) Financial Issues: Major financial issues facing the selected organizational structure should be clearly identified and the powers it should have to meet its objectives should be defined. For example, in the case of an independent legal entity, it might have to be able to:

(i) obtain certain tax benefits with respect to its income from the operation of its highways;

(ii) have the authority to issue debt in the international capital markets (as well as in domestic ones) to finance its highway projects;

(iii) have a mechanism whereby income in Yuan Renminbi can be readily exchanged into hard currencies; and

(iv) have limited liability.

(e) Organization Models for Operations: The study shall detail the overall functions, the vested responsibilities as well as communication channels with the outside parties. This shall cover:

(i) The "Administrative" Divisions: The study shall detail the overall functions, responsibilities and communication channels with the other divisions and entities. The "administrative" divisions are in charge of activities such as but not limited to General Administration, Personnel Management, Financial Management, Internal Auditing, Insurance, marketing, Public Relations, Central Planning, Toll Auditing, etc.

(ii) The "Operational" Divisions: The study shall detail the overall functions, responsibilities and communication channels with the over divisions and entities. The operational divisions are in charge of activities such as, but not limited to Toll Collection, Traffic Management and Traffic Surveillance, Routine Maintenance, etc.

17. Proposed Management Tools. These tools cover the fixed equipment, the standards and procedures and personnel. The proposed management tools will be based -101- ANNEX2 on the same information as for the Proposed Improved Organizations (para. 16). The proposals shall cover:

(a) The Fixed Operating Equipment: The study shall describe the requirements for an operation and maintenance policy to be defined before the fixed operating equipment are designed and procured, analyze the need for the integration of the fixed operating equipment and propose guidelines following the standard Chinese classification: (i) toll collection equipment; (ii) communication equipment; and (iii) traffic surveillance and management equipment.

(b) The Procedures: The study shall describe the requirements for operational and maintenance procedures, in accordance with the Policy, and draw a tentative and preliminary list of procedures, such as, but not limited to: (i) liaison procedures; (ii) emergency plan; (iii) toll collection procedures; and (iv) safety procedures.

(c) The Personnel: The study shall summarize the requirement of trained personnel, outline the on-the-job training Policy and draw a tentative preliminary list of qualification of personnel classified into: (i) rank and file; (ii) lower management; (iii) technicians; and (iv) executives.

(d) The Other Equipment: The study shall list the main equipment (other than the fixed operating equipment) required to properly operate and maintain an expressway.

18. Cost Estimates: The study shall provide preliminary cost estimates, for representative sections, related to: (a) management costs; (b) operation costs; and (c) maintenance costs.

D. REPoRTs

19. The Study Team shall prepare and submit the following reports to the Bank and HPCD:

(a) Inception Report (2 copies in English and 10 in Chinese). Shall outline the detailed implementation schedule of the study; the detailed tasks assigned to the experts and to the research team; the fonnat of the progress reports; and the format of the following reports.

(b) Interim Reports (5 copies in English and 15 in Chinese): Interim report (no. 1) shall present the results of the international and Chinese survey; and interim report (no. 2) shall present the results of the risk analysis and the proposed level of services. - 102 - ANNEX2

(c) Final Reports: A draft final report (2 copies in English and 10 in Chinese) shall be submitted presenting the recommendations of the study team regarding the Organization, the Management and the Costs. Following review of this report by the Bank and the Leading Group, the report shall be finalized and 20 copies in English and 50 copies in Chinese shall be printed.

E. TIME SCHEDULE

20. The study is expected to be completed in 18 months. In the first 12 months, the Study Team shall complete all technical aspects of the study. The following three months shall be used to prepare the final recommendations, discuss them with HPCD, and prepare the draft final report. The final report will be reviewed by the Bank and the Leading Group within two months of its receipt. The revised final report will be submitted within one month of the receipt of comments from the Bank and the Leading Group.

21. The key milestones are:

(a) Completion of the Inception Report within three months of the start of the study.

(b) Completion of the study on international models and Chinese situation and preparation of Interim Report 1 within six months of the start of the study.

(c) Completion of the analysis of the risks and the proposed level of services and preparation of Interim Report 2 within nine months of the start of the study.

(d) Preparation of the recommendations of the proposed organization and management tools as well as the preparation of the draft final report within 15 months of the start of the study.

(e) Submittal of the revised final report within 18 months of the start of the study.

F. ORGANIZATION OF THE STUDY AND STUDY TEAM

22. Leading Group. The study shall be guided and supervised by a Leading Group that shall comprise representatives of HPCD and other concerned departments of Henan as well as the Ministry of Communication. The Leading Group will guide the study and review its output and recommendations as well as provide policy input when needed, and organize one or two seminars to ensure the dissemination of the results of the study. -103 - ANNEX2

23. Study Team. The study will be carried out by a team composed of three parts: a research team from the Henan Provincial Communications Scientific Research Institute (HPCSRI), Chinese experts, and international experts.

24. The HPCSRI Research Team. The team will:

(a) provide home support and logistics for the study such as, but not limited to, office and secretarial facilities, transport facilities, transport and accommodation arrangements, translation of documents from English to Chinese and from Chinese to English;

(b) collect and analyze all documentation and data as required by the Study Tearn; and

(c) carry out all surveys as required by the Study Team.

25. The Chinese Experts Team. The team will bring expertise available in China in fields such as Road Transport Management, Law, Finance, Transport Economics and Highway Engineering. The team will consist of:

(a) A Road Transport Management Expert with 10 years experience in the field. He/she shall:

(i) with the assistance of the international Toll Expressway Expert, lead the Study Team;

(ii) lead the team of Chinese Experts;

(iii) take responsibility on all matters related to Operation Policy, Standards, Legal Aspects, etc., in China;

(iv) manage the Research Team; and

(v) advise the Study Team on the adequacy of the proposals related to the local situation;

(b) A Legal Expert with 10 years experience in the field. He/she shall:

(i) be responsible for all legal aspects of the study; and

(ii) define, organize and review the works to be done by HPCSRI research team in the field.

(c) A Financial Expert with 10 years experience in the field. He/she shall:

(i) take responsibility of all aspects related to financial issues; and -104 - ANNEX2

(ii) define, organize and review the work to be done by HPCSRI research team in the field.

(d) A Transport Economics Expert with 10 years experience in the field. He/she shall:

(i) take responsibility of all aspects related to Transport Economics; and

(ii) define, organize and review the work to be done by HPCSRI research team in the field (documentation and data collection and analysis);

(e) A Highway Engineering Expert with 12 years experience in the field. He/she shall:

(i) take responsibility on all matters related to Highway Engineering in the study; and

(ii) define, organize and review the work to be done by HPCSRI research team in the field (documentation and data collection and analysis).

26. The International Experts. They will bring to the team the international expertise in fields such as Operation and Management, Law, Maintenance and Finance. The team will include:

(a) A Toll Expressway Operation and Management Expert with 10 years experience in the field. He/she shall:

(i) co-lead the Study Team;

(ii) lead the team of international experts;

(iii) take responsibility for all aspects of the study related to organizational and management aspects, and operation policies, whether related to international experience or proposed Organizations and Management; and

(iv) define, organize and review the works to be done by HPCSRI research team in this field (data collection, surveys, etc.).

(b) A Legal Expert with 10 years experience in the field. He/she shall:

(i) be responsible for all legal aspects of the study; and -105 - ANNEX2

(ii) define, organize and review the works to be done by Chinese experts and HPCSRI research team in this field.

(c) An Expressway Financial Expert with 10 years experience in expressway financial management. He/she shall:

(i) take responsibility for all financially related aspects of the study; and

(ii) define, organize and review the works to be done by HPCSRI research team in this field (data collection, surveys, etc.).

(d) A Toll Expressway Maintenance Expert with at least 10 years experience in the field (Civil Works). He/she shall:

(i) take responsibility for all aspects in the study related to maintenance;

(ii) define, organize and review the works to be done by HPCSRI research team in this field (data collection, surveys, etc.); and

(iii) review with the Chinese experts the existing Chinese standards and jointly prepare guidelines for improvement, if any.

27. The team shall be led by the Chinese expert on Road Transport Management who will be assisted by the international expert in Operation and Management. They will jointly: (a) prepare the detailed planning of the study; (b) allocate the works to the other experts and to the Research Team; (c) monitor the work progress; (d) submit the study reports; and (e) attend the Leading Group meetings (with, from time to time, other team members, as needed.

28. The international experts will be selected on the basis of competition among a short list of international firms (to be cleared by the Bank), on terms approved by the Bank. The successful firm, after negotiation with HPCD, will then enter into contract(s) with HPCD. The Chinese experts will be selected by HPCD and will enter into contract(s) with HPCD, on terms approved by the Bank. The Research Team will be proposed by HPCSRI and contracted by HPCD.

29. Person-Months. The overall person-months required for the study are estimated as follows:

(a) Henan Provincial Communications Scientific Research Institute Team. The total input by this team is estimated at about 135 person- months.

(b) Chinese Experts Team. The total input is estimated at about 23 person- months divided into 8 person-months for the Road Transport Management -106- ANNEX2

Expert, 2 person-months for the Legal Expert, 4 person-months for the Financial Expert, 3 person-months for the Transport Economist, and 6 person-months for the Highway Engineering Expert.

(c) International Experts Team. The total input is estimated at about 11 person-months of which 6 person-months (5 in China and I in home office) are for the Operation and Management Expert, I person-month (0.5 in China and 0.5 in home office) is for the Legal Expert, 1.5 person- months (I in China and 0.5 in home office) are for the Financial Expert, and 2.5 person-months (2 in China and 0.5 in home office) are for the Maintenance Expert.

G. BUDGET COST ESTIMATE

30. The total cost for carrying out the study is estimated at about $410,000 and Y 2.19 million ($264,000) or a total of about $674,000 as detailed below:

Cost Item Foreign Cost Local Cost Total Cost ($'000) (Y'000) ($'000)

Fees of international experts (11 pm) Za 210 - 210 Living costs for international experts 50 - 50 Travel for international experts (13 trips) 65 - 65 Fees for Chinese experts (23 pm) - 230 28 Fees for local Research Team (135 pm) - 540 65 Local Transport - 210 25 Office Costs - 260 31 Communication Costs for Int'l Experts 21 - 21 Survey Costs - 50 6 Printing Costs 150 18 Seminar Costs - 300 36 Leading Group 10 250 40 Office Equipment (2 desk top computers and 2 15 - 15 printers) Total 371 1,990 610

Contingencies (10%) 39 200 64

Total Cost 410 2,190 674

La pm means person-month. -107 - ANNEX3

ANNEX 3: ROAD SAFETY IMPROVEMENT

General

1. The traffic accident situation in Henan (as in other provinces in China) is serious. During 1990-94, annually about 16,700 accidents took place, resulting in about 3500 fatalities and about 11,300 injuries. The number of accidents is not high, but this may reflect a low degree of reporting of accidents, especially in rural areas. However, the number killed is relatively high, and the rate of 93 killed per 10,000 motor vehicles (or 29 killed per 10,000 vehicles if motorcycles and tractors are included) is high and is about 40 times higher than that for Western European and North American countries. But, the number killed per 100,000 population (3.9) is less than that in those same countries. Also, the severity rate (24 percent) defined as the number killed divided by the total number killed and injured is high.

2. Due to this situation, the Bank engaged the services of two separate experts-one a Danish and the other a Norwegian safety expert under Danish and Norwegian Trust Funds respectively, to study the topic, identify the problems, develop a generalized program for tackling the road safety problem and define a component for inclusion in the proposed project. The Danish expert visited Henan in March 1995 (identification! preparation) and July 1995 (preappraisal of the project) and submitted their final reports in May and August 1995 respectively. These reports form the basis for the contents of this annex.

Institutions Involved

3. Roadway safety is a complex subject involving many issues (driver, vehicle, road, environment, engineering, education, enforcement, attitudes and behavior, etc.) and many entities. The Traffic Police Tearn of Henan Public Security Bureau (PSB) has the major role. It is responsible for vehicle testing and licensing, driver training and testing, traffic law enforcement, information and education, and collection and treatment of accident data. In each prefecture, there is a Traffic Police Branch and in each county, there is a Traffic Police Brigade. Each brigade has one or more Traffic Police Squadrons, which are responsible for the management of traffic as well as propaganda. The Henan Provincial Communications Department (HPCD) is responsible for design, construction and maintenance of highways, as well as installation and maintenance of road traffic signs and markings. Also, the Henan Communication Scientific Research Institute, when asked by Public Security, undertakes vehicle testing and studies of accidents. Hospitals treat accident victims and ambulance services transport victims. -108 - ANNEX3

Existing Situation

4. There is a variety of traffic safety activities taking place in Henan province. These activities do, however, seem to be relatively isolated activities. Even though most of the activities are managed by HPCD and PSB, and there are reasonable relations between the two, there seems to be limited coordination. The most important deficiency does seem to be the total lack of long-term planning within the field of traffic safety. Another important problem is that there is little development work going on within this field. The main objectives of the traffic safety component will therefore logically be to strengthen the capacity for policy-making and planning, and to initiate some pilot development work. This should hopefully start a lasting process consisting of the development of regular traffic safety planning and coordination, which is a prerequisite for efficient comprehensive traffic safety work. It is further believed that the pilot work on black spot improvement will start a lasting process, as this way of working has proven to be one of the most efficient activities within traffic safety work. Also, the work on accident statistics will hopefully give birth to future research on the relationship between accidents and accident contributing factors.

5. It was observed that the existing accident data collection system is adequate, even if there is room for improvement. This system was elaborated a few years ago and is used in all provinces, and hence it is not subject to local modifications for the time being.

6. It should be noted that in general, both in HPCD and PSB, there is an agreement as to the description of the accident situation as unsatisfactory. When it comes to monitoring and improvements, however, it is sometimes difficult to get a positive response. There is a general reluctance in considering possible improvements. The present situation and present procedures are to a certain degree considered as sacred, and improvements are not looked for.

7. The agreements presented on the following pages are based on the discussions between the mission, HPCD and PSB. The implementation of some elements will be subject to approval by the Provincial Government.

Traffic Safety Policy And Planning

8. Leading Group For Traffic Safety Planning. It was agreed to establish a Leading Group for traffic safety coordination, policy-making and planning. The Leading Group will be chaired by the Vice Governor, and it will have two representatives from each of HPCD and PSB. The Deputy Directors of HPCD and PSB respectively will act as Vice Chairmen. The main functions of the Leading Group will be to monitor the accident situation and to propose strategies and policies as well as comprehensive traffic safety plans to the Provincial Government. Such plans should include all aspects of traffic safety work, also those parts which are outside the responsibility of HPCD and PSB. The analyses of the situation should be done on a yearly basis. Short-term action plans should also be developed on a yearly basis and objectives and longer-term plans should equally be revised at regular intervals. The Leading Group will be a permanent -109 - ANNEX3 group, and its activities will go on after the termination of the project. The Leading Group will act as a board for the Traffic Safety Secretariat (see below). It is anticipated that the Leading Group will meet a few times per year. The Leading Group was established in March 1996. The first tentative policy and action plan shall be presented by the end of 1997.

9. A Traffic Safety Secretariat. It was agreed to establish a Traffic Safety Secretariat (TSS) in order to prepare the work for the Leading Group. The Secretariat was established in March 1996. It will be staffed by one specially qualified person from each of HPCD and PSB. It is suggested that TSS be administratively situated in HPCD.

10. The main tasks of TSS will be to carry out analyses of the traffic accident situation, and on the basis of such analyses it will prepare traffic safety objectives, strategies and short- and long-term traffic safety plans. These objectives, strategies and plans will be presented to the Leading Group, which will discuss them in an annual conference on traffic safety. When adopted by the Leading Group they will be presented to the Provincial Government. TSS will monitor the situation and suggest new actions to be taken and new studies to be undertaken. TSS will also act as a resource group for the authorities. In carrying out their duties, TSS should have the possibility to get professional assistance from the staff in HPCD and PSB when needed.

11. TSS was established in March 1996. Shortly after its creation, the two members of TSS will be offered one-month training. The training will be offered in Henan province and it will be given by a foreign consultant. The training will focus on accident monitoring, on the elaboration of traffic safety objectives and the development of traffic safety policies and plans, and also on the necessity to undertake regular traffic safety development work and research. A total of two person-months consultancy, including preparation and training, will be required. TSS will be provided with a computer, a printer and a plotter.

Safety Audit Procedures

12. It has been seen in industrialized countries that despite detailed road design manuals, new road plans do not meet all the requirements for safety. Many countries are now introducing what is called safety audits of new road plans. This work consists of the development of a number of check lists and guidelines that explain how to check road design to ensure that the roads do not contribute to the occurrence of accidents.

13. It was agreed that such safety audit procedures shall be developed by TSS during the project period. In this regard, Henan Province should avail itself of the safety audit work to be carried out under the Bank-financed Shanghai-Zhejiang Highway Project (Loan 3569-CHA). -1I10 - ANNEX3

Improved Computer Software

14. The existing accident data collection form provides a large amount of data on each accident. This makes it possible to analyze the accident data in many ways that are useful for traffic safety planning and traffic safety work. However, the current software only allows a few such analyses to be carried out, which seriously hampers the exploitation of the accident data.

15. It was agreed that PSB shall provide a computer software that is capable of making a number of meaningful analyses of accident data. Such a software is available in the Shaanxi province and probably in other provinces. It was agreed that PSB would approach one of these provinces in order to acquire the software. It is also anticipated that there is a need for one person-month training by an expert from the selected province.

Pilot Black Spot Work

16. Traffic safety work in industrialized countries has shown that the improvement of traffic accident black spots is one of the most efficient traffic safety measures. Black spot improvement work consists of the following steps:

(a) Identification of black spots

(b) Analyses of the accident situation

(c) Selection of improvement measures

(d) Implementation

(e) Monitoring

17. It was agreed that pilot black spot work be carried out as part of the project during the first three years of the project period (1997-2000). For this purpose, a black spot group will be established. The group will consist of three persons from the Road Maintenance Section and the Road Management Section of the Highway Administration Bureau. During the three-year period, these sections will be strengthened by two people.

18. The study shall be carried out as an experiment with control site. Some 20-30 black spots will be identified. Out of these, some 10-15 are selected at random for treatment. The rest will constitute the control sites. It will be tried to select half of the black spots at grade intersections (X-crossings and Y-crossings) and half of them at road sections. Some should be near urban areas and some in rural areas.

19. It is reported that black spots can be identified with the existing accident data analyses program. The data forms will be made available by the police at the prefecture level, where they are stored. The accident reports and sketches from the accidents at the -111- ANNEX3 black spots will be made available to the black spot group by the police at the county level.

20. For the analyses of the black spots and their traffic, the group will be provided with a photo camera, a video camera and a speed radar, and for office work it will be provided with a computer and a printer.

21. The group will initially be trained by a foreign consultant for one month. After approximately six months, the consultant will come back for one month to assist and supervise the analysis work, and after another 12 months he will come back for two weeks to supervise the process of proposing solutions. In total there is a need for 2.5 person-months of consultancy, divided on three trips to Henan.

22. Subsequent to the analyses, HPCD will implement the proposed improvements. A special budget of Y 10 million will be established by HPCD for this purpose. One million yuan will be allocated the first year, and then two, three and four million in the following years. This special budget will also cover all specific costs related to the black spot analyses.

23. The black spot work is expected to be initiated by January 1997 and go on for a three-year period. After termination of the pilot black spot work, the black spot work will be transferred to the Maintenance Section at the prefecture level on a permanent basis. The personnel who participated in the pilot black spot work would be responsible for the training of the relevant personnel at the prefecture level.

Storage of Accident Files

24. In order to carry out black spot work, it is necessary to get hold of complete data concerning the accidents at the black spots. The identification of the black spots will identify the place of the black spot and the number of accidents at the black spot, and it will provide serial numbers of the accidents that have occurred.

25. The definition of a black spot is a place where many accidents have happened during a certain period of time. It is obvious that one has to consider a period covering a number of years. At present, it is required to keep the accident data for at least three years, and current practice in the Henan province is to destroy the files after three years. It is obvious that this can seriously hamper the possibility for carrying out black spot work. It was therefore agreed that this practice will be changed, and that accident files will be kept at the county level for five years in the future.

Accident Analyses

26. The knowledge about accidents and their contributing factors is extremely limited today. The police identifies what they consider to be the "cause" of the accident. Thereby they can determine the percentage of the accidents which is caused by for example "reckless driving." This is, however a legal consideration, and it is seldom -112- ANNEX3 fruitful for initiating traffic safety actions. It is widely accepted today that an accident is a multifactoral event, meaning that it is a combination of many factors, which in a certain combination leads to an accident. This implies that the accident can be avoided by influencing any of the present factors. An important step in traffic safety work is therefore to identify factors that are overrepresented in accidents.

27. It was agreed that the Henan Communication Scientific Research Institute would undertake statistical work to describe the accidents according to all the contributing factors that are available on the accident form currently in use. This could, for example, be used to determine the number of accidents per type of vehicle. When compared with the vehicle population, this will give an idea about the relative risk between the different types of vehicles.

First Aid Training

28. The first people who arrive at the scene of an accident will be other drivers and/or the police. If there are injured people, these two categories of people (drivers and the police) are therefore the first who are capable of helping. The problem is, however, that none of these have any special training in first aid, and in many cases that may lead to more harm than help. It was agreed to introduce first aid into the curriculum for driver training of all categories of drivers, and it was agreed to introduce first aid into the curriculum for the basic training of traffic police.

Training of the Police

29. The police is responsible for training of children at school. Only in Zhengzhou as many as 20 police officers are involved in this activity. None of these have, however, received any training related to the training of children. It was agreed to offer a one-week course/seminar to a group of police officers who are involved in this activity. The seminar should treat items like child psychology and the child's capability to learn about, and to cope with traffic at different ages. The seminar should be held by a Chinese expert in training of children, and if possible with competence in traffic matters. A two-week consultancy will be required including preparation and seminar.

Evaluation of the Traffic Safety Component

30. The objective of the traffic safety component is, first of all, to initiate activities that will start processes leading to improved traffic safety in a longer perspective. In order to reach the objective, it is important that all activities are carried out and that there is a reasonable follow-up. If this is not the case, correcting actions should be taken. It has therefore been agreed that by the end of the fifth year, a qualified Chinese consultant for 1 person-month shall carry out an evaluation of the highway safety component. -113 - ANNEX3

Costs

31. Institutional Strengthening. Based on the above agreements with HPCD and PSB, institutional strengthening would require:

(a) 2 people for the Traffic Safety Secretariat for five years for a total of 10 person-years

(b) 2 people for the Highway Administration Bureau for 3 years for a total of 6 person-years

(c) Total institutional strengthening required is 16 person-years

(d) Total costs are 16 person-years at Y 10,000 = Y 160,000 = $18,823

The costs of this component shall be covered by HPCD.

32. Foreign Experts. Consist of:

(a) I consultant for 2 months for the Traffic Safety Secretariat for a total of 2 person-months

(b) I consultant for 2.5 months for black spot work for a total of 2.5 person- months

(c) Total input from foreign experts is 4.5 person-months

Cost element Unit cost (Y) Cost (Y)

4.5 person-months 130,000 = 585,000 4 trips from abroad to Henan 33,000 = 132,000 3.5 months hotel and subsistence 33,000 = 115,500

Total 832,500 (or $97,900) -114- ANNEX3

33. Chinese Experts.

Cost element Costs (Y)

I person-month for expert on software for the police 10,000 0,5 person-month for expert for training the police 5,000 1 person-month consultant for evaluation of the whole safety component 15,000 Hotel and subsistence (including travel) - 2.5 months 10,000

Total 40,00Ola (or $4,700)

La Of these costs, some Y 21,000 will be covered by PSB.

34. Implementation Budget. HPCD will establish a special budget for black spot analyses and black spot improvement. This budget will be of Y 10 million ($1,180,000) over a four-year period (Y 1.0 million in the first year, Y 2.0 million in the second year, Y 3.0 million in the third year, and Y 4.0 million in the fourth year).

35. Equipment. The required equipment and their cost estimate is shown below,

Cost element Costs (Y)

2 computers 80,000 2 printers 16,000 1 plotter 10,000 I speed radar 20,000 1 still camera 4,000 Video equipment 30,000

Total 160,000 (or $18,800) -115 - ANNEX3

36. Summary of Cost.

Cost element Cost in Y Cost in $

Institutional strengthening 160,000 18,800 Foreign experts 832,500 97,900 Chinese assistance 40,000 4,700 Implementation budget 10,000,000 1,176,200 Equipment 160,000 18,800

Total 11,192,500 1,316,400

Of these total costs, some Y 10,160,000 will be covered by HPCD and some Y 21,000 will be covered by PSB.

37. Distribution of Cost by Year of Implementation.

Cost in Y Year 1 2 3 4 5 Total Institutional strengthening 40,000 40,000 40,000 20,000 20,000 160,000 Foreign experts 718,000 114,500 - - - 832,500 Chinese assistance 21,000 - - - 21,000 40,000 Implement. budget 1,000,000 2,000,000 3,000,000 4,000,000 - 10,000,000 Equipment 160,000 - - - - 160,000

Total 1,939,000 2,154,500 3,040,000 4,020,000 39,000 11,192,500

Implementation Schedule

38. The agreed implementation schedule is shown below. Year 1 2 3 4 5 Establishment of Leading Group x Establishment of Secretariat x Development of traffic safety policy xxxxxx First tentative traffic safety plan x Dev. of safety audit procedures xxxxxx xxxxxx xxxxxx Procurement of software xxxxxx Black spot analyses xxxx xxxxxx xxxxxx Physical black spot improvement xxxx xxxxxx xxxxxx In-depth accident analyses xxxxxx Introduce first aid training x Training of police x Procurement of equipment xxxxxx I I I -116 - ANNEX4

ANNEX 4: TERMS OF REFERENCE FOR STUDY OF FACTORS CONTRIBUTING TO HIGHWAY TRAFFIC ACCIDENTS

A. BACKGROUND

1. Henan, a land-locked province, located in China's central plain, has an area of 167,000 km2 and a population of about 90 million. Its Gross Output Value of Agriculture and Industry has grown at about 12 percent per year since 1990. This has been accompanied by high traffic growth, particularly around the capital Zhengzhou, with a population of about 5.0 million. In 1993, highways accounted for 44 percent of the passenger-kilometers, and 17 percent of the ton-kilometers carried in Henan. The road network comprises about 47,700 km, of which 44,500 are classified (Classes I to IV). The civilian vehicle fleet included 286,900 trucks and 165,300 passenger cars and buses. Unfortunately, this growth in traffic was accompanied by growth in highway traffic accidents. Over the 1990-94 period, on the average about 3,500 fatalities and 11,300 injuries per year occurred on Henan roads. The rate of 93 killed per 10,000 motor vehicles is high and is about 40 times higher than that for Western Europe and North American countries. But, the number killed per 100,000 population (3.9) is less than that in those same countries.

2. To address the highway safety problem, the Henan Provincial Communications Department (HPCD) and the Traffic Police in the Henan Public Security Bureau developed a highway safety program for implementation under the Second Henan Provincial Highway Project during 1977-2000. A Leading Group for Road Safety Coordination as well as a Traffic Secretariat to prepare the work for the Leading Group were established in March 1996. Among many other items, the safety program calls for a study of the factors contributing to highway traffic accidents. This Annex presents the terms of reference for this study as well as the team to carry out the study, the implementation schedule and the estimated budget. It should be pointed out that the study of traffic accidents is still in the early stages of development in Henan Province as elsewhere in China. The proposed study is to be carried out under the auspices of the Leading Group for Traffic Safety Coordination and its Traffic Safety Secretariat (TSS).

B. OBJECTIVES OF THE STUDY

3. The objectives of the study are to:

(a) collect accident data on highways in Henan by class of road; -117 - ANNEX4

(b) investigate the factors contributing to accidents on highways including the vehicle, the driver, the road, and the environment;

(c) determine the relative importance of the various factors contributing to accidents; and

(d) make practical proposals to reduce accidents on Henan's highways including the identification of future studies to be carried out.

C. SCOPEOF THE STUDY

The study shall include, but not necessarily be limited to the following tasks:

4. Data Collection. This includes, but is not limited to:

(a) Traffic Accident Data. The Traffic Police collects traffic accident data on special forms, codes the data, stores it, analyzes it and publishes summary results. However, little is currently being done with these data. It is essential that the Study Team gets the accident records for a period of 3-5 years from the Traffic Police.

(b) Road Condition Data. HPCD is responsible for intercity roads whereas the Municipalities are responsible for roads in urban areas. Data on road conditions; class, length, width, number of lanes, shoulders, horizontal and vertical alignment; bridges/culverts, condition of pavement including roughness/evenness, speed, traffic volumes (vehicles, tractors, motorcycles, animal-drawn carriages, bicycles, pedestrians), intersections, traffic control devices (signals, signs, pavement markings) etc. are available from these agencies. HPCD is developing a Road Data Bank and a pavement Management System.

(c) Vehicle Condition Data. These data relate to the mechanical and visual conditions of the vehicles and are collected by the Vehicle Inspection Stations run by the Traffic Police. The purpose of this inspection is to ensure that vehicles are roadworthy. Henan has many of these stations spread around the Province and has specific rules and regulations as to the frequency of inspection and what is inspected.

(d) Driver Data. Operators of all types of vehicles have to be licensed in Henan Province. Drivers have to take a prescribed Driver Training Program and to pass examinations and road tests. There are also regulations on age, vision, hearing, health, etc. that have to be met. These data are available from the Traffic Police.

5. Surveys. It is envisioned that most of the required data for this study is already available. However, data need to be assembled and organized to fit the software that will -118 - ANNEX4 be used in the analyses of the factors contributing to highway traffic accidents. Some survey work will be required to ascertain the accuracy of the accident records available from the Traffic Police and to complete missing entries. Limited survey may need to be conducted on road width, friction factors, pavement evenness, alignment of the road, traffic control devices, intersections and other locations where there are frequent accidents (black spots). Metereological records (weather; temperature, wind, fog, snow, rain; darkness, night, light, dusk, etc.) might also have to be consulted. Geographic location of accidents will probably need some checking, and a system to identify locations should be developed. Collection of data in the field should be kept to a minimum.

6. Software and Hardware. The study team will investigate the software and hardware available in Henan and China to determine their suitability for analyses of traffic accident records. It is less costly and less time consuming to use or modify existing software than to develop a new software. Should it be found that the Chinese software is not adequate, internationally available software would be compared and the one most suitable for Chinese conditions should be determined. The required hardware should be identified and arrangements for procurement of hardware and software should be made so that they are available when needed.

7. Data Analyses. Summaries of accident data will be developed by such factors as class of road, road alignment, road grade, intersection type, type of pavement, traffic volume, speed, weather, time of day time of year, condition of vehicle, overloading of vehicles, age of driver, use of seat belts, driving under the influence of drugs or alcohol, etc. Statistical analyses would be used to find the relationships, if any, between the number and severity of traffic accidents and the various contributing factors. These factors could be broken into four major categories: those relating to the driver, the vehicle, the road, and the environment. The environment refers to such factors as: weather-related factors; time-of-day and of year factors, prevailing land uses, urban/ suburban/rural conditions, frequency of intersections and driveways, etc.

8. Recommendations. On the basis of the results of the analyses of the factors contributing to accidents, recommendations would be made on the most significant factors affecting traffic accidents and the priorities to be attached to them as well as on proposals and strategies to reduce traffic accidents. As this study is the first serious attempt to analyze accidents in Henan Province, it is expected that it will not answer all reasonable questions regarding traffic accidents. Accidents are complex occurrences and generally several factors simultaneously contribute to them. Hence, one of the outputs of the study would be the identification of future studies to be undertaken including their relative order of priority, outline terms of reference, approximate cost, and indicative implementation schedule. Also, the study should propose an appropriate and sustainable institutional structure to conduct the recommended studies, ensure continuity of traffic accident research work and to keep the research focused and pragmatic. -119- ANNEX4

D. REPORTS

9. The Study Tearn shall prepare and submit the following reports to the Bank, the HPCD and the TSS:

(a) Inception Report (2 copies in English and 10 in Chinese): Shall outline the detailed implementation schedule of the study; the detailed tasks assigned to the experts and to the research team; the format of the progress reports; and the format of the following reports.

(b) Interim Reports (3 copies in English and 15 in Chinese): Interim report (no. 1) shall present the results of the data collection; and interim report (no. 2) shall present the results of the analysis of the factors contributing to accidents.

(c) Final Reports: A draft final report (2 copies in English and 10 in Chinese) shall be submitted presenting a summary of the data collection and analyses as well as the recommendations for reducing accidents and for future research work. Following review of this report by the Bank, HPCD, and TSS, the report shall be finalized and 10 copies in English and 50 copies in Chinese shall be printed.

E. TIME SCHEDULE

10. The study is expected to be completed in 15 months. In the first eight months, the Study Team shall complete all technical aspects of the study. The following four months shall be used to prepare the final recommnendations,discuss them with HPCD and TSS and prepare the draft final report. The final report will be reviewed by the Bank, HPCD, and TSS within two months of its receipt. The revised final report will be submitted within one month of the receipt of comments from the Bank, HPCD, and TSS. The key milestones are:

(a) Completion of the Inception Report within 2 months of the start of the study.

(b) Completion of the study phase on data collection and preparation of the first Interim Report within 4 months of the start of the study.

(c) Completion of the analysis of the factors contributing to accidents as well as preliminary recommendations and preparation of the second Interim Report within 8 months of the start of the study,

(d) Preparation of the recommendations of the study as well as the preparation of the draft final report within 12 months of the start of the study. -120- ANNEX4

(e) Submittal of the revised final report within 15 months of the start of the study.

F. ORGANIZATION OF THE STUDY AND STUDY TEAM

11. The study shall be guided and supervised by the Traffic Safety Secretariat. The study will be carried out by a team composed of three parts: a research team from Henan Province with mot of its members from the Henan Provincial Communications Scientific Research Institute (HPCRSI) and few from the Traffic Police of the Public Security Bureau; Chinese experts; and international experts.

12. Henan Team. Will consist of about four research staff from HPCDSI and one or two from the Traffic Police. This team will:

(a) collect and analyze all documentation and data as required by the Study Team;

(b) carry out all surveys as required by the Study Team;

(c) participate in analyses of accident data and development of recommendations; and

(d) provide home support and logistics for the study such as, but not limited to, office and secretarial facilities, transport facilities, transport and accommodation arrangements, translation of documents from English to Chinese and from Chinese to English.

13. The Chinese Experts Team. Will consist of three reputable Chinese experts (in the fields of highway safety) from recognized institutes. The team will consist of:

(a) A Highway Safety Expert with 10 years experience in the field and with at least a college degree in a field related to highway safety. He/she shall: (i) with the assistance of the International Highway Safety Specialist, lead the Study Team; (ii) lead the team of Chinese Experts; (iii) take responsibility on all aspects of the study; and (iv) advise the Study Team on the adequacy of the proposed recommendations related to the local situation.

(b) Traffic Engineer with 10 years experience in the field and with a college degree in Traffic engineering. He/she shall: (i) take responsibility of all aspects of the study related to traffic engineering and to analyze highway traffic accidents and their relationships to road conditions, driver, vehicle, and environmental factors; (ii) play a major role in the preparation of the interim report on analyses of traffic accidents and in the development of recommendations for the final report; and (iii) define, organize and review -121- ANNEX4

the work to be done by the Henan Team in the area of analyses of traffic accidents.

(c) Computer Specialist/Traffic Accident Statistician with 10 years experience in the field and with a college degree in computer science and a good knowledge of statistics He/she shall: (i) take responsibility of all aspects of the study related to collection of data; (ii) investigate the required hardware, and available software for analysis of traffic accident data; (iii) work with the international expert on modifying the software, if needed, to study relationships between accident data and contributing factors; (iv) play a major role in the preparation of the interim report on collection of data; and (v) define, organize and review the work to be done by the Henan Team in the area of data collection and computerized analyses of accident relationships to contributing factors.

14. The International Experts. They will bring to the team the international expertise in highway traffic safety, traffic engineering and highway engineering.

(a) A Highway Safety Specialist with 15 years experience in the field. He/she shall: (i) co-lead the study team; (ii) lead the team of international experts; (iii) take responsibility for all aspects of the study related to analyses of factors contributing to traffic accidents on highways as well as the recommendations of the study; and (iv) help prepare the reports of the study with special emphasis on the final report.

(b) Traffic Accident Statistician/Computer Specialist with 10 years experience in the field(s). He/she shall: (i) take responsibility for all aspects of the study related to collection of data and its analyses; (ii) specify the software and hardware required for the study and modify, if needed, the software for analyses of accident data; and (iii) help prepare the study reports with emphasis on the two interim reports.

15. The team shall be led by the Chinese Traffic Safety Expert who will be assisted by the International Traffic Safety Specialist. They will jointly: (a) prepare the detailed planning of the study; (b) allocate the work to the other experts and to the Henan Team; (c) monitor the work progress; (d) submit the study reports; and (e) attend the meetings with the Traffic Safety Secretariat and with HPCD as needed.

16. The international experts will be selected on the basis of competition among a short list of international firmns(to be cleared by the Bank), on terms approved by the Bank. The successful firm after negotiation with HPCD, will then enter into contract with HPCD. The Chinese experts will be selected by HPCD and will enter into contract with HPCD, on terns approved by the Bank. The Research Team will be proposed by HPCSRI and the Traffic Police and contracted by HPCD. -122 - ANNEX4

17. Person-Months. The overall person-months required for the study are estimated at about 84 person-months as follows:

(a) Henan Team. The total input by this team is estimated at about 60 person-months.

(b) Chinese Experts Team. The total input is estimated at about 18 person- months divided into 7 person-months for the Traffic Safety Expert, 6 person-months for the Traffic Engineer and 5 person-months for the Computer Specialist/Traffic Accident Statistician.

(c) International Experts Team. The total input is estimated at about 6 person-months of which 3.5 person-months are for the Traffic Safety Specialist and 2.5 person-months are for the Traffic Accident Statistician/ Computer Specialist.

G. BUDGETCOST ESTIMATE

18. The total cost for carrying out the study is estimated at about $180,000 and about Y 1.58 million ($191,000) or a total of about $371,000 as detailed in the following.

Foreign Local Total Cost Item Cost Cost Cost

Fees of international experts (6 pm) la 90 - 90 Living costs for international experts 27 - 27 Travel for international experts (6 trips) 30 - 30 Fees for Chinese experts (18 pm) - 180 22 Living expenses for Chinese experts - 200 24 Fees for Henan Team (60 pm) - 300 36 Travel for Chinese experts (9 trips) - 30 4 Local transport - 50 6 Data collection/surveys - 440 53 Office costs/secretaries and interpreters - 200 24 Training cost/meetings - 80 10 Printing costs/communications costs - 100 112 Office equipment costs (2 desktop computers, 1 printer, 33 1 scanner, I UPS)

Total 180 1,580 371 la pm means person-month. -123 - ANNEX5

ANNEX 5: ENVIRONMENTAL ASSESSMENT AND ACTION PLAN SUMMARY

A. BACKGROUND

1. Environmental impact assessment (EIA) of LSE and its linking roads were carried out by the Henan Provincial Environmental Protection Institute. The EIA reports and the Environmental Action Plans (EAPs) were submitted to the Bank in May 1995 and reviewed by the Bank during the preparation mission in July 1995. Based on the comments by the Bank, the revised EIA reports, EAPs and the Environmental Assessment Summary (EA Summary) covering both LSE and its linking roads were submitted to the Bank in September 1995 for review. A sectoral environmental assessment (EA) approach was applied to the RIPA component, and the Initial Environmental Evaluation (IEE) report, the EIA reports and EAPs for the first package of projects under the RIPA component were submitted to the Bank in September 1995 for review. The EIA report and an EAP for the Yangjia-Baijiazhai Connection were submitted to the Bank in October 1995. All of these EIA-related documents were further reviewed by the Bank during the appraisal mission in November 1995 and the final EIA reports, EAPs and EA Summary were submitted to the Bank by January 1996, and were found to be satisfactory.

2. The process of environmental review involved inputs from various units in the province, including environmental protection bureaus, research institutions and universities. The affected groups and NGOs along the highways, and the people subject to resettlement and land acquisition in particular, have been intensively consulted.

3. The policy and administrative requirements for environmental assessment of development projects in China were followed during preparation and evaluation of the EIA, as well as the Bank's OD 4.01 on Environmental Assessment. Major laws and regulations applied to the EIA for the Second Henan Highway Project are presented below. The major environmental standards applied in the EIA are listed in Appendix 1 of this Annex.

(a) Environmental Protection Law of People's Republic of China (PRC);

(b) Atmospheric Pollution Control Law of PRC;

(c) Environmental Noise Control Law of PRC;

(d) Water Pollution Control Law of PRC;

(e) Cultural Relics Protection Law of PRC; -124 - ANNEX 5

(f) Land Management Law of PRC;

(g) Management Guidelines on Environmental Protection of Construction Project, Number 003 (86), issued by the National Environmental Protection Agency (NEPA);

(h) Measures for Environmental Protection Management of Transport Construction Projects, Number 17 (90), issued by Ministry of Communications (MOC); and

(i) Procedure for Environmental Protection of Construction Projects in Henan Province.

4. The scope of and the criteria for the EIA are presented below.

(a) The investigations for eco-environmental setting including wildlife, and air pollution sources cover 1,000 m from both sides of the proposed roads. Scope of the predictions for noise, atmospheric environmental impacts and cultural relics covers areas within 200 m from both sides of the roads.

(b) The following standards are applied as the criteria for the EIA:

(i) Air pollution: Class 2 air quality standard (GB 3095-82);

(ii) Noise: Class 4 standard [70 dB(A) in daytime and 55 dB(A) at night: GB 3096-93] within 100 m from the roadsides and Class 2 noise standard [60 dB(A) in daytime and 50 dB(A) at night] between 100 m and 200 m from the roadsides.

(c) Considering the project features and construction cycle, the base years for the EIA were decided to be 1997-2000 (construction period), 2000 for initial stage prediction, 2010 for mid-term prediction and 2020 for long- term prediction.

B. BRIEF PROJECT DESCRIPTION

5. The Second Henan Provincial Highway Project includes:

(a) Construction of 136 km four-lane expressway between Luoyang and Sanmenxia (LSE);

(b) Improvement and new construction of four linking roads to LSE;

(i) New construction of 9.3 km Class 2 (mountainous and heavy-hilly area) Xinan Linking Road (3.0 km from Xinan Interchange to the south to Jiangzhuang and 6.3 km to the north to Baiqiang); -125 - ANNEX5

(ii) Widening and upgrading of 3.1 km Class 2 (mountainous and heavy-hilly area) Yima Linking Road (from Yima Interchange to the south to connect National Highway 310);

(iii) New construction of 2.0 km Class 2 (mountainous and heavy-hilly area) Mianchi Linking Road (from Mianchi to the south to Donghuancheng); and

(iv) New construction of 2.6 km Class 2 (plain and slightly-hilly area) Guanyintang Linking Road (from Guanyintang Interchange to the north to connect National Highway 310).

(c) Improvement and new construction of 6.1 km of two-lane expressway between Yangjia and Baijiazhai (YBC);

(d) Improvement and new construction of about 1,700 km of a rural road improvement program to help alleviate poverty (RIPA), including 76 road segments under 30 systems in 29 poor counties in Henan;

(e) A highway safety component to reduce accidents on highways in Henan Province;

(f) Procurement of equipment for operation and maintenance of LSE, maintenance of the highway network, environmental monitoring, highway safety, and institutional strengthening;

(g) Institutional strengthening and training component which will supplement what is being provided under the ongoing Bank-financed highway projects; and

(h) Supervision of construction of LSE, linking roads, YBC and RIPA.

C. BASELINEENVIRONMENTAL DESCRIPTION

6. Geology and Topography. The proposed alignment of LSE lies in loess deeply incised loess gullies. Passing through Mount Xiaoshan, the section from Xinan to Sanmenxia (approximately 90 km) is located in extensive hillyland with developed gullies and rolling terrain. The section from Sanmenxia to the end point (approximately 40 km) is located in and deeply incised gullies. There are many coal fields including a large coal area with subsidence problems to the north of Guanyintang township. The area that LSE traverses has many major faults, where earthquakes occurred. The basic seismic intensity is 6 degrees to the east of Mianchi, 7 degrees from Mianchi to Guanyintang, and 8 degrees to the west of Guanyintang.

7. Climate and Hydrology. The project area belongs to the warm semi-arid continental monsoon climate zone, with distinct four seasons. The mean annual -126 - ANNEX5 temperatures range 12.6-13.9°C). The maximum depth of frozen ground is 20-30 cm. The mean annual precipitation is 467-543 mm, 60-80 percent of which is concentrated from June to September. Deflected south wind prevails in summers while deflected north wind prevails in winters. The project area belongs to the Yellow River basin and the rivers are rainfed seasonal ones except Jianhe, Qinglonghe and Canglonghe Rivers. Groundwater is phreatic water lying 60-80 m under the ground except in floodland.

8. Socioeconomic Situation. The proposed alignment of LSE goes through Mengjin County under Luoyang City, Sanmenxia City, Yima City, Mianchi and Shanxian Counties under Sanmenxia City. There are rich mineral resources, mainly coal, bauxite, iron, molybdenum, gold, lead, etc., which are easy to mine. In 1993, Luoyang and Sanmenxia, including counties, cities and districts directly thereunder, had a total population of 7.96 million, accounting for 8.9 percent of the population of Henan Province. The population density was 300 persons/km 2 which is lower than that for the province as a whole. As important industrial and mining base of the province, Luoyang had gross output value of agriculture and industry (GOVAI) of Y 34.55 billion in 1993, i.e., 11 percent of the provincial total. In the same year, the economic growth rate was 13 percent, which was higher than the provincial average. Sanmenxia had a GOVAI of Y 8.83 billion, i.e., 3 percent of the provincial total. The project area is rich in tourism resources, including famous scenic spots like Longmen Grottos, , Guandi Temple, Baiyunshan Natural Reserve, Yanshao Cultural Site. All of these are located 5-10 km away from the proposed alignment.

9. Land Use. Luoyang and Sanmenxia constitute 15.4 percent of the total provincial land area, including farmland which is about 8 percent of the provincial total. Luoyang has more than 40 rich and large mineral deposits, mainly coal, aluminum, molybdenum and iron. Molybdenum and aluminum are proven to rank the first in the country. In Sanmenxia, 57 deposits have been discovered, mainly coal, gold, aluminum, and lead. The farmland in the project area produce two crops a year with winter wheat playing the leading role. The annual grain yield is 600 kg/mu (9.0 tons per ha) on the average. As a result of frequent natural disasters, mainly droughts, agricultural development is considerably limited. However, forestry and fruit production have developed at a faster pace in recent years.

10. Ecological Setting. The project area is located in the warm temperature deciduous and broad-leafed forest zone. As a result of a long history of forest destruction for reclamation, the natural vegetation has changed to a great extent. Because of varying tectonics in hillylands, gullies, loess hills, ridges and loess plateaus, distribution of local vegetation varies from place to place. There are more than 100 common species of plants, including 14 species of crops, 27 species of vegetables, 19 species of green and ornamental plants. There are no rare or endangered species within the 1,000 m from the proposed alignment.

11. According to zoogeographic zoning of China, the project area falls in the Mount Xiaoshan and loess hilly and plain areas in North China zone. North China fauna of -127 - ANNEX5 paratactic realm predominate, and some south and north species are also found. There are some species of oriental realm, but the population is small. The number of species is comparatively small, and there are few large and middle-sized forest animals. There are relatively large populations of small-sized rodents in fields, waste slopes, shrubs, loess gullies etc.. Also, there are various types and large numbers of insects, fowl and livestock in the project area. No rare and endangered species were found within 1,000 m from the proposed alignment.

12. Cultural Relics. The project area is in an important ancient route (Yaohan Route) connecting Guanzhong and Huabei plains, and thus a battlefield of different periods. According to the field surveys by the Henan Provincial Archaeological Institute, there are 18 archaeological sites along the proposed LSE alignment which would be affected by the project. Ranks of the cultural relics preservation of these sites are city- level protection (4 sites), county-level protection (6 sites) and unclassified (8 sites). None of them are of national or provincial-level protection.

13. Air Quality. There are five major industrial air pollution sources in the project area, namely Quarry of Luoyang Cement Factory, Sanmenxia Cement Factory, Yuxi Cement Factory, Sanmenxia Aluminum Power Plant, and Sanmenxia Pulp Mill. There are many small township and private factories and coal mines which are contributing a large discharge of CO and other pollutants. Atmospheric baseline monitoring (TSP, CO and NOJ) was carried out at six sites along the proposed LSE alignment in January 1995 for five consecutive days, and supplemented at three additional sites in November 1995 due to the significant change of the alignment. According to the monitoring results, NO, concentrations were much lower than the ambient air quality standard in both maximum and daily average values. At all monitoring sites, maximum TSP concentrations were below the standard. At four sites, daily average TSP concentrations were above the standard, but they did not exceed the standard value significantly. Maximum CO concentrations were below the standard at all monitoring sites, but daily average CO concentrations significantly exceeded the standard at five monitoring sites. The major reasons are that (a) there are many coal mines which contribute significant CO emissions, (b) there are many township and private coking plants using primitive coking methods, and (c) incomplete coal combustion was carried out by local residents for heating purposes in winter.

14. Noise. Baseline noise monitoring was carried out at six sites in January 1995, supplemented at three additional sites in November 1995 due to the significant change of the alignment. The monitoring results suggest that at all sites except Hejiazhuang and Leijiawan, the noise levels (Leq) in both daytime and at night are below the noise standards which are adopted as assessment criteria, and at most sites the noise level is fairly low compared with the Class 2 standards. The noise levels at Hejiazhuang and Leijiawan slightly exceed the standard at night time because of the Long-Hai Railway and National Highway 310. -128 - ANNEX5

15. Water and Soil Loss. The local soil category is cinnamon soil which includes six kinds of soil. The local soil has a pH value of 7.0-8.8 and is generally fertile. According to the local topography, geomorphology, soil and vegetation, the project area is divided into deeply incised gullies, loess plateau and loess rolling hills. Water and soil loss vary to a great extent in different areas. Generally, the erosion module is 1,500 to 2,000 t/km2 in deeply incised gullies, 500 to 2,000 t/kmn in loess plateaus, 1,000 to 2,000 t/km2 in highland and hillyland areas, and 500 to 1,000 t/km in low loess hills. Recently, more attention has been paid by local government to water and soil conservation. Water conservation measures practiced in the local area include reforesting farmland and increasing vegetation coverage. Lead in soil at seven sites ranges between 15.37 and 39.98 mg/kg, which is not only lower than the national and provincial averages but also significantly lower than the value of 300 mg/kg, which is recommended by the Ministry of Agriculture as the criterion for soil with a pH value of 6.5.

D. POTENTIAL ENVIRONMENTAL IMPACTS AND THEIR MITIGATION MEASURES

16. Major potential impacts and their mitigation measures regarding LSE and its linking roads are summarized below and incorporated in the Environmental Action Plans (EAPs)of LSE and its linking roads. The EAPs stipulate how the environmental impacts identified in the EIA will be dealt with in the design, construction and operation phases, and what institutional arrangements have been made for the implementation of the EAPs during the three distinct phases. The key elements of the EAPs are summarized as Appendix 2 of this Annex..

Design Phase

17. Alternative Alignments. Quite a few comparative alignments schemes were considered in the project design phase. In this alignment scheme, the section from west of Mianchi to Hongtuao of Shaanxi has a relatively unfavorable configuration and an alternative alignment was proposed to go from Mianchi through Xiamatou, Zhuchengcum, Suzhaicum, Beigou, Yinnhao and reach Zhangcun Road. After leaving the railway for the coal mine at Houying, it goes west to pass by Beigetiao, Lishupo and deflects southwest to pass through Tuling and Langwo. This alternative alignment is relatively smooth and 4 km shorter, but as passing through extensive coal mine settlement areas, it poses difficulties for subgrade treatment. Another consideration was given to Guanyintang section from Mianchi to Sanmenxia. Two alternatives were proposed for this section. One goes to the south of Guanyintang to avoid the coal mine with subsidence problems, and the other goes to the north of Guanyintang which has caves with subsidence problems. The south scheme was adopted with due consideration to avoid unfavorable geological conditions, coal mines and archaeological sites as well as to minimize land acquisition, as well as impacts of air pollution and noise on residential areas. - 129 - ANNEX5

18. Social Disruption. In order to minimize problems of community separation and isolation due to the project construction, adequate numbers of overpasses, passageways and bridges were incorporated into the project design.

19. Soil Erosion. High embankment slopes will be stabilized with grout, concrete grids, shotcrete and grass. Deep cut slopes will be protected with grout, concrete grids, shotcrete or sprayed grass seeds in line with the geology, ramp height and slope. Water sumps will be provided as appropriate, to lead natural slope water to ditches or other drainage facilities. Planting of trees and grass in the median divider and along the roadside was included in the design where appropriate. Temporary and permanent drainage systems were designed to minimize soil crosion and alteration of hydrological regimes.

20. Earthworks. Since the land undulates to a considerable extent, large quantities of excavation and backfill works are required in many sections, which will cause significant impacts on ground stability and ecological setting as well as dust and noise problems during the construction stage. Particular attention was paid to balance the cuts and fills along LSE so that spoil from excavation works are best used for embankment works and impacts of borrow/spoil operations on farmland are minimized. Quarries and borrow sites were selected, in such a way as to minimize the dust and other problems at environmentally sensitive locations such as residential areas.

21. Noise. Most of the villages within 200 m from the roadsides are small and sparsely populated. Altogether, 16 environmentally sensitive sites were selected for special attention. According to the traffic noise prediction during the operation phase (2000, 2010 and 2020), the noise level at four sites will significantly exceed the assessment criteria in 2000. In later years, the noise will increase and the noise level will exceed the assessment criteria by more than 10 dB(A) in five sensitive sites in 2020. To avoid such noise problems, the following measures have been identified and integrated into the designs of LSE, considering predicted noise levels and local situations. For the linking roads, fences on the side facing the proposed roads will be raised and double glass windows will be furnished for the first row of houses where appropriate.

(a) Noise barriers at the sensitive sites (1,700 m at two sites by 2000, 285 m at one additional site by 2010);

(b) Heightened fences besides the first row of residences facing the road (three sites by 2000 and one additional site by 2010);

(c) Double glass windows for the first three rows of residences (three sites by 2000 and two additional sites by 2010);

(d) Forest belts with a width of more than 30 m (one site by 2000 and two additional sites by 2020); and -130 - ANNEX5

(e) Resettlement of houses near the roadsides (within 24 to 55 m from the roadsides, depending on the local situation-12 sites by 2000).

22. Air Pollution. In the initial operation stage (2000), maximum CO concentrations at all 16 sensitive sites will be within the assessment criteria while maximum NO, concentrations at 6 sites will exceed the assessment criteria. In the mid-operation stage (2010), maximum CO concentrations will slightly exceed the assessment criteria at eight sites mainly due to high background concentrations, and maximum NO, concentrations will exceed the assessment criteria at 11 sites with the maximum 2.2 times higher than the criteria. In the late operation stage (2020), the maximum CO concentrations at nine sites will exceed the assessment criteria, and maximum NOX concentrations at all sites will exceed the assessment criteria, with a maximum value 3.3 times higher than the assessment criteria. Such conditions will happen during the peak traffic volume and when the meteorological conditions are worst. However, such incidents do not occur frequently. This problem will be dealt with by improving vehicle emission controls to reduce NOX and other vehicle exhaust emissions, strengthening vehicle emissions inspection and planting trees at sensitive sites. Construction of residences, schools, hospitals and other sensitive buildings will not be allowed within 200 m from both sides of LSE.

23. Water Pollution. Adequate permanent and temporary drainage systems were incorporated in the project design to minimize surface water pollution and disturbance to irrigation channels and existing drainage systems. Wastewater treatment facilities as well as boilers equipped with precipitators were included in the design of service area facilities in order to prevent direct discharge of wastewater to public water bodies.

24. Cultural Relics. An archaeological field survey was carried out during December 1994 through February 1995 by the Henan Provincial Archaeological Institute, following the relevant rules and regulations in China to identify cultural relics to be affected by LSE. Altogether, 18 archaeological sites were identified to be protected along LSE. Ranks of the cultural relics preservation of these sites are city-level protection (4 sites), county-level protection (6 sites) and unclassified (8 sites). None of them are of national or provincial-level protection. An archaeological salvage and protection plan was developed and integrated as a part of the Second Henan Provincial Highway Project. All the salvage activities will be carried out after land acquisition and prior to project commencement.

25. Flooding. All bridges, culverts and roadside drainage systems were adequately designed to meet requirements for safe discharge of floods (300 year design floods for super-large bridges and 100 year floods design for other bridges and culverts).

26. Landscape. Afforestation will be undertaken to improve landscape at median dividers, slopes and ditches as well as beyond the right-of-way. Also, landscaping and other aesthetic effects were considered during the design of bridges (without endangering safety of the structures), service areas and interchanges. - 131 - ANNEX5

Construction Phase

27. Fugitive Dust and Other Air Pollution. Quarries, material borrow sites, waste disposal sites and transportation routes to construction sites were identified as the major areas that create dust and other air pollution. Road surfaces, excavation areas and construction sites will be sprayed with water and kept moist particularly near towns, water sources and other sensitive locations. Access roads will be upgraded, widened and paved where necessary, and sprayed regularly to minimize fugitive dust. Stockpiles and storage areas will be either covered or sprayed. Construction materials will be covered during hauling to prevent undue dust or debris on roads. Asphalt and lime stone mixing equipment will have dust collectors and will be located at least 200 m from residential areas on the leeside of the wind directions. Construction machines will be equipped with exhaust gas control units.

28. Noise. Since operations of machinery associated with excavation and road construction may cause hearing damage in the event of prolonged exposure, hearing protection will be provided for construction workers. Construction machinery and trucks will be equipped with proper noise control devices and will be properly operated and maintained. Construction activities will be suspended between 10:00 p.m. and 6:00 am near residential areas. Transportation of construction materials will be undertaken with careful consideration to minimizing noise impacts on residents along the roadside. Traffic management, including dissemination of traffic rules and setting up of speed limits will be strengthened.

29. Protection of Land Resources. Forests will not be used for material borrow sites. Reforestation will be undertaken for any previous forests upon completion of construction activities. Afforestation will be carried out on previous wasteland used for borrow or spoil sites. Arable land will be avoided as material borrow sites where possible. If excavation has to be done in arable land, top soil layer will be saved and returned after construction works is completed to minimize impacts on ecosystems and agriculture. Education of construction workers will be strengthened to protect natural resources, wild plants and animals. Poaching will be strictly prohibited.

30. Soil Erosion and Water Pollution. Trees and grass will be planted on side slopes, and along the roadside, where appropriate. Appropriate measures, either rehabilitation or reconstruction, will be taken if the existing irrigation or drainage systems are damaged. All necessary measures will be taken to prevent earth and stones from silting up rivers, water channels or existing irrigation and drainage systems. Construction camps will be located far away from Yanghe and Qinglonglian Rivers, which are used for drinking water sources. Temporary channels or conduits will be constructed for irrigation and drainage during the construction of permanent drainage systems. All reasonable measures will be taken to prevent direct discharge of polluted water from construction activities into rivers and irrigation channels. -132 - ANNEX5

31. Construction Camps. Septic tanks will be installed at construction camp sites to prevent direct discharge of sanitary sewage to public water bodies. Sludge in sewer treatment pits will be disposed of regularly. Garbage will be collected in garbage cans at fixed locations and disposed of regularly. Drinking water at construction sites will meet China's national drinking water standards.

32. Cultural Relics. Construction works will be stopped immediately if any cultural relics are discovered as a result of road construction or excavation activities. The local cultural relics authorities will be informed and a field survey of the site will be undertaken. Excavation will not be resumed until authorized institutions identify the importance and necessary preservation measures of the discovered cultural relics.

33. Traffic Management. Local resources will be used to the extent possible to avoid long distance transportation of construction materials. Adequate traffic control measures will be implemented in consultation with the Communications Department and Public Security Bureau to prevent or minimize traffic jarns during the construction period. Where sections of existing roads are used for transportation of construction materials, temporary service roads will be constructed as appropriate to alleviate congestion of existing roads. A construction material transportation plan will be developed to avoid hauling activities during peak hours especially on existing roads. In order to guarantee safety, efficient lighting equipment and safety signs will be installed on temporary roads during the construction, and adequate traffic regulations will be adopted and implemented for temporary roads.

Operation Phase

34. Noise and Air Pollution. Unnecessary use of horns will be strictly restricted at night. Noise barriers or other appropriate noise protection measures will be taken at locations where noise exceeds standards, based on the results of monitoring.

35. Vehicle Management. Better vehicle maintenance and management will be enhanced to keep vehicles in good conditions. Vehicle noise and emission inspection will be strengthened and vehicles which do not meet noise and exhaust emission standards will not be allowed to use LSE and other roads in the province. Random vehicle emission inspections will be undertaken at the entrance of the interchanges. Public awareness campaigns and education will be undertaken to familiarize people with air and noise pollution regulations. In order to avoid future noise and air pollution problems, development of residential areas and construction of sensitive buildings such as schools and hospitals will be prohibited within 200 m from the roadside of LSE.

36. Risk of Hazardous Material Spill. Any vehicle transporting hazardous materials will be required to obtain permissions from the Public Security Bureau (PSB), the Communications Department and the Fire Protection Department. -133 - ANNEX 5

E. ENVIRONMENTALMONITORING

37. During the construction and operation of LSE and its linking roads, environmental monitoring will be carried out to verify the actual impacts on the environment, identify unexpected environmental problems at an early stage, and adjust environmental protection measures as appropriate. The High-Grade Highway Environmental Monitoring Center under the Henan Provincial High-Grade Highway Construction Authority (to be called Henan Provincial Communications Environmental Monitoring Center: HPCEMC) will be mainly responsible for environmental monitoring during the construction and operation phases. However, noise, vibration and fugitive dust will be monitored by the environmental supervisor at each construction contract section. The enviromnental monitoring for the linking roads during both construction and operation phases will be undertaken by local environmental monitoring stations. An annual environmental monitoring report would be furnished to the Bank during the construction phase and for each of the first three years following completion of construction.

38. The major items to be monitored during the construction phase will include air quality, noise and vibration, and water quality. Air quality, noise and water quality will be monitored during the operation phase. In addition, vehicle exhaust and noise will be inspected during the operation phase. The detailed monitoring plan is presented below.

39. Air Quality. Items to be monitored will include fugitive dust (by environmental supervisors) and total suspended particulates (TSP) during the construction phase and nitrogen oxides (NOJ), CO, TSP and hydrocarbons (HC) during the operation phase. During the construction phase, TSP will be monitored 4 times a year for 3 consecutive days each time and fugitive dust once a week. Monitoring sites will be construction sites, quarries and material borrow sites, and major roads used for hauling construction materials. According to the EAP, fugitive dust will be monitored at least 6 places around construction sites. During the operation phase, NO,, CO, TSP and HC will be monitored three times a year, each time for 5 consecutive days and 4 times a day at 9 monitoring sites along LSE. NO,, CO and TSP will be monitored during the operation period at 5 monitoring sites along the linking roads.

40. Noise and Vibration. During the construction phase, vibration (for LSE only) and noise monitoring will be carried out by environmental supervisors in each contract section in daytime and at night on a weekly basis at construction sites, quarries, material borrow sites and major construction materials hauling roads. Ad hoc monitoring will also be undertaken. During the operation phase, noise monitoring will be carried out 4 times a year, in daytime and at night at 9 sites along LSE and 5 sites along the linking roads (as identified in the EAPs). Ad hoc monitoring will also be undertaken.

41. Water Quality. During the construction phase, pH, dissolved oxygen (DO), biochemical oxygen demands (BOD), chemical oxygen demands (COD), suspended solids (SS), oil and lead will be monitored once a week at 100 m both upstream and -134 - ANNEX5 downstream of the Qinglonghe Bridge. During the operation phase, the same items will be monitored at the same sites 3 times per year.

42. Vehicle Exhaust and Noise Inspection. Vehicle exhaust gasses and noise (CO and HC in gasoline-powered vehicles, and smoke density and noise in diesel-powered vehicles) will be randomly inspected at the entrance of interchanges.

F. ENVIRONMENTAL ASPECTS OF RIPA COMPONENT

43. The Rural Roads Improvement Program to help alleviate poverty (RIPA) under the Second Henan Provincial Highway Project includes 76 road segments under 30 systems (a set of road segments) in 29 poor counties of Henan Province. Since the road segments under the RIPA are large in number, and most of the RIPA projects are upgrading of the existing roads and small in the size of construction works, it was agreed that a Sectoral Environmental Assessment (EA) approach would be applied to the RIPA project.

44. The Sectoral EA approach is summarized as follows:

(a) Initial Environmental Evaluation (IEE): All the RIPA subprojects will be classified into two categories, Category I and Category II. IEE was carried out only for the first package of RIPA project because of lack of necessary information for the rest of sub-projects. Therefore, classification of the rest of sub-project needs to be done at a later stage when the subsequent packages of RIPA project are prepared.

(i) Category I projects are those which are not expected to have significant environmental impacts. This category of projects include upgrading of existing roads without substantial widening and land acquisition.

(ii) Category II projects are those which may have potentially significant environmental impacts. This category of projects includes new road construction, upgrading of existing roads with substantial widening and land acquisition, and other road upgrading projects passing through enviromnentally special areas such as national parks, nature reserves, and important cultural heritage sites.

(b) Preparation/review of EIA reports and EAPs

For Category I projects, only Environmental Action Plans (EAPs) are required to determine various environmental protection measures to be implemented, based on the principles on environmental protection measures. For Category II projects, both EIAs and EAPs are required. All -135 - ANNEX5

EIA reports and EAPs will be submitted to the Bank and reviewed by the Bank together with the application of a package of subprojects.

45. Regarding the first package of RIPA subprojects, only three road segments will be newly constructed, while the remaining 20 road segments will be upgraded. The major upgrading works include:

(a) improvement/construction of culverts;

(b) widening of roads in a small number of road segments; and

(c) upgrading of road conditions to all-weather gravel-earth surface.

46. Major Environmental Protection Measures for the RIPA Projects: Major environmental protection measures to be commonly implemented for most RIPA projects are summarized below and listed in Appendix 2.

Environmental Protection Measures during the Design Stage

(a) Soil Erosion. Engineering and biological measures will be taken to stabilize slope and protect soil erosion. Temporary and permanent drainage systems will be constructed to minimize soil erosion and alteration of hydrological regimes, including impacts on irrigation channels. Trees and grass will be planted to minimize soil erosion, air pollution and enhance good landscape along the proposed road.

(b) Subgrade Soil Works. Borrow areas will be identified in the land acquisition areas where possible to minimize farmland and forest destruction.

(c) Afforestation. Trees will be planted alongside the sides of the road to improve aesthetics and grass will be planted alongside slopes to protect the embankments against erosion.

Environmental Protection Measures during the Construction Stage

(a) Dust/Air Pollution. All reasonable steps, including watering, will be taken to minimize dust pollution by construction works, and transportation of construction materials, particularly in places near towns, water sources etc. Stockpiles and storage areas will be covered or watered to prevent dust pollution. Trucks to transport construction materials will be covered to minimize spills. Lime mixing and tar heating sites will be located far away from residential areas, at least 200 m of the lee side of the wind direction.

(b) Soil Erosion/Water Pollution. Spoil will not be stored on riverbeds, farmland, forests and cultivated fields to protect water sources and natural -136 - ANNEX5

ecology, and prevent interruption of rivers and flooding. Rivers and water sources will be cleaned up as appropriate if they are interrupted by soil and spoil. All reasonable measurers will be taken to prevent direct discharge of polluted water from construction activities into rivers and irrigation channels.

(c) Construction Camps. Adequate measures will be taken to prevent water pollution by waste water from construction camp sites. Drinking water will meet the China national drinking water standards. Garbage will be collected in garbage cans on fixed places and disposed of regularly. Clean hygienic conditions will be strictly maintained.

(d) Noise. Where residences are located near the construction sites, noisy construction works will be undertaken during the daytime (6:00-22:00). Maintenance of machines and trucks will be strengthened to keep them with low noise

(e) Conservation of Land Resources. Arable land, especially good farmland, will not be selected as material borrow sites as much as possible. Afforestation will be undertaken for the land used for temporary use of construction. Education of construction workers will be strengthened to protect natural resources, wild plants and animals. Poaching will be strictly prohibited.

(f) Construction Safety. Management regulations will be established to ensure safe construction activities. Warning limits will be clearly decided and people should be evacuated prior to any blasting operations. Temporary roads will be provided with lightening facilities and traffic marks to prevent from possible traffic accidents.

(g) Cultural Relics. If fossils, coins, artifacts of value or antiquity, structures and other remains of geological or archaeological interest are found, the local cultural authority will be immediately informed of such discovery, and excavation shall be stopped until identification of cultural relics by the authorized institution of preservation is completed

Environmental Protection Measures during the Operation Stage

(a) Noise/Air Pollution. At roads adjacent to villages, use of horns will be minimized or prohibited during night time. Vehicle speed will be restricted along villages. Macadam road segments close to villages will be often watered . In dry seasons, watering will be carried out at least two times a day. Roads will be maintained in a good conditions to minimize traffic noise. Noise will be monitored periodically to take appropriate measures where needed. -137 - ANNEX5

(b) Transportation of Hazardous Materials. Trucks transporting hazardous materials will obtain permits from the Public Security Bureau and Transportation and Fire Fighting Departments.

(c) Others. During and after the construction of RIPA roads, new permanent buildings will not be allowed to be constructed within 10 m from the roadsides. new hospitals, schools and large residential areas will not be built within 200 m from the roadsides. Traffic regulations will be strictly enforced and education to comply with traffic regulations will be provided to residents in the vicinity of the roads.

47. Environmental Monitoring for the RIPA Projects. The environmental monitoring will be carried out by local environmental monitoring centers through contracts with the county transportation bureaus. The monitoring results will be submitted to the higher levels of transportation and environmental bureaus for their review. Dust, TSP, asphalt smoke, noise and river water quality will be monitored during the construction phase and TSP, NO,, CO, noise and river water quality during the operation phase. Water quality monitoring both in the construction and operation phases will also be undertaken for Category II projects.

G. ENVIRONMENTAL ASPECTS OF YANGJIA-BAIJIAZHAI CONNECTION

48. Basic Environmental Description. The project area is located in the floodland on the south bank of the Yellow River which is less covered by vegetation. There are some gullies along the proposed alignment, but the area is generally flat and located in loess land. As investigated, there are two environmentally sensitive sites, namely Nanchengzi and Yangjia. Through investigation, there are no rare or endangered species in the project area and no cultural relics along the proposed alignment. To collect baseline monitoring data, air quality (TSP, CO and NOJ) and noise were monitored at two sites in October 1995. The monitoring results indicate that the project area is calm and air quality is fairly good.

49. Potential Environmental Impacts and their Mitigation Measures. Major potential impacts and their mitigation measures are almost the same as those for LSE and its linking roads. The noise level will not be significant in the initial operation stage (2000) but will exceed the standard from 2010. The first two rows of houses in the north part of Nanchengzi and Yangjia will be furnished with double glass windows by 2010. In addition, considering that the southern half of the proposed road will be constructed during the period of 2000-2010, the northern half will handle one way traffic and driving speeds will be limited where necessary along the sensitive areas during this period, to avoid possible interference of construction and operation of the proposed road. Air quality at the sensitive sites will not exceed the standard significantly. -138 - ANNEX5

H. INSTITUTIONALARRANGEMENTS

50. During the construction phase, the following institutional arrangements for environmental protection will be undertaken for LSE.

(a) The Environmental Management Agency of the Henan Provincial High- Grade Highway Construction Authority has five staff, two of whom will work on the Second Henan Provincial Highway Project. The functions of the agency will include:

(i) to ensure compliance with environmental protection policies, laws and regulations of the Governments both at central and provincial levels, to work out environmental management procedures in line with those policies, laws, regulations and local situations;

(ii) to develop environmental work plans and to be in charge of implementation of surveillance and routine management of environmental protection measures of high-grade highways during the construction phase;

(iii) to organize and coordinate environmental monitoring, research and information work for both construction and operation phases of high-grade highways, to collect and interpret environmental monitoring and research data, and to disseminate environmental protection experiences on and technologies for high-grade highways;

(iv) to investigate and deal with any traffic pollution events on high- grade highways;

(b) An Environmental Protection Section will be established at each of the Luoyang and Sanmenxia Project Offices with two well trained, full-time environmental staff respectively to be responsible for the routine environmental work during the construction phase.

(c) One or two part-time environmental staff will be assigned to each of the eight contract sections for LSE, on part-time basis, to carry out regular monitoring of fugitive dust, noise, vibration, and supervise implementation of environmental protection measures stipulated in the EAP and the bid documents.

(d) The High-Grade Highway Environmental Monitoring Center under the Henan Provincial High-Grade Highway Construction Authority (to be called Henan Provincial Communications Environmental Monitoring Center: HPCEMC), with staff of 24 experts (2 senior engineers, 10 engineers and 12 assistant engineers), and expected to have additional 6 -139 - ANNEX5

staff in the future, will carry out the environmental monitoring works of LSE both during construction and operation phases, except fugitive dust, noise and vibration. Approximately 10 monitoring staff of HPCEMC will work for the Second Henan Provincial Highway Project.

51. Upon completion of LSE, Luoyang and Sanmenxia Project Offices will come under the Henan Provincial High-Grade Highway Management Authority (HPHGHMA). The Environmental Protection Sections and their staff of Luoyang and Sanmenxia Project Offices will remain the same under HPHGHMA. Menjin, Xinan, Yima, Mianchi and Shanxian will set up their separate expressway management subagencies. Menjin, Xinan and Yima subagencies will have one full-time environmental manager respectively, and Mianchi and Shanxian subagencies will have two environmental managers respectively. During the operation period, these environmental managers will be responsible for regular environmental management of LSE under the guidance of the Environmental Management Agency of HPHGHMA.

52. For linking roads, the following institutional arrangements will be undertaken.

(a) Each of the relevant cities and counties has established its own project office staffed with one full-time environmental inspector. Each contractor will provide a part-time environmental staff to assist the environmental inspector in fulfilling his/her environmental responsibilities.

(b) Upon completion of the project, the environmental responsibilities will be handed over to the environmental protection sections under the local communications bureaus. Each of the environmental protection sections will have one to two full-time staff to work for environmental protection/ management of all the highways under its jurisdiction.

(c) Environmental monitoring during both construction and operation phases will be undertaken by local environmental monitoring stations through contract with the relevant agencies. Environmental monitoring data in the construction phase will be submitted to the relevant project offices and local environmental protection bureaus (EPBs). During the operation phase, such data will be submitted to the environmental protection sections under the local communications bureaus and local EPBs.

53. The institutional arrangements for environmental protection of RIPA projects are presented below.

(a) During the construction stage, Henan Provincial Highway Administration Bureau (HPHAB) and its subsidiary bodies at city/prefecture and county/township levels will be responsible for the environmental management of RIPA projects. Three environmental staff are currently assigned in HPHAB for the RIPA projects. -140 - ANNEX5

(b) For the first package of RIPA projects, each of the 4 communications bureaus at city/prefecture level will have separate environmental protection sections with 3-4 full time staff. Each of the eight county communications bureaus will have a communications environmental protection section with 1-2 full time staff. Each contractor will assign one environmental management staff for the implementation of environmental protection measures addressed in the EAP and the bid documents. Environmental monitoring will be carried out by local environmental monitoring stations through contract with HPHAB.

(c) During the operation period, an environmental management network under the leadership of the Environmental Protection Division of HPCD will be formed to conduct environmental management of RIPA projects.

54. For the Yangjia-Baijiazhai Connection, environmental management during both construction and operation stages will be carried out by the environmental protection section of Expressway Construction Authority of Sanmenxia with two full time staff. The environmental protection section with one full time staff under Linbao Communications Bureau will be directly responsible for the implementation of the environmental protection works under the proposed highway project. During the construction stage, a part-time environmental manager will be assigned to assist the environmental staff under the Linbao Communications Bureau. The environmental monitoring during both construction and operation stages will be carried out by Linbao Environmental Monitoring Station through contract with Linbao Communications Bureau.

55. The following environmental training will be undertaken to provide adequate training for environmental staff at the Environmental Protection Agency at the Headquarters in Zhengzhou, the Environmental Protection Sections at the Project Offices, environmental supervisors at the contract sections and monitoring staff of HPCEMC. All the training will be provided locally and no environmental training in other parts of China or abroad will be undertaken under the Second Henan Provincial Highway Project.

(a) Two new environmental staff of the Environmental Management Agency and four environmental experts of the Environmental Protection Sections in Luoyang and Sanmenxia project offices will have training on environmental management of transportation projects, for a month or two in Zhengzhou.

(b) An environmental training course for about a month will be undertaken in Zhengzhou to provide training on environmental supervision and on noise, vibration and dust monitoring. Approximately five environmental supervisors out of eight contract sections will need the training, while others are supposed to have sufficient expertise from the previous projects. -141- ANNEX5

(c) The staff of HPCEMC, particularly new staff, will have training on monitoring technology, data management, processing and quality control for about two months. The Henan Provincial Environmental Monitoring Center and HPCEMC will organize training on monitoring items, analysis methods and principles, work process and data processing for all the personnel to be engaged in the environmental monitoring of the Second Henan Provincial Highway Project.

56. The following environmental equipment will be procured under the Second Henan Provincial Highway Project.

Eouipmen Numtber

TSP Monitor 1 NOx Monitor 1 Psophometer 2 Analytical balance 4 Spectrophotometer 2 Atomic Absorption Spectrophotometer 2 Computer 2 Refrigerator 2 Bake oven 2 Monitoring car I -142- ANNEX5

APPENDIX 1 OF ANNEX 5: ENVIRONMENTAL STANDARDS

MAJORENVIRONMENTAL STANDARDS APPLIED tN ENVIRONMENTALASSESSMENT

Standards Number

Ambient Air Quality Standards GB3095-82 Ambient Noise Standard for Urban Areas GB3096-93 Environmental Quality Standards of Surface Water GB3838-88 Standard for Pollutant Emission from Asphalt Industry GB4916-85 EnvironmnentalVibration Standards in City Regions GB10070-88 Noise Criteria for Construction Sites GB12523-91

Two standards, namely ambient air quality standards and ambient noise standards for urban areas, most relevant to the EIA of this project, are presented below.

AMBIENT NOISE STANDARD FOR URBAN AREAS (GB3096-93)

Category Day Night Type of land use dB(A) dB(A)

0 50 40 Residential, cultural and educational areas 1 55 45 Class I mixed area 2 60 50 Class II mixed area 3 65 55 Industrial zone 4 70 55 Sides of traffic artery -143 - ANNEX5

AMBIENT AIR QUALITY STANDARD (GB3095-82)

Items Concentration Limits (mg/m3) Class I Class II Class III standards standards standards

Suspended Particulate Daily average 0.15 0.30 0.50 Matter (SPM) Spot sample La 0.30 1.00 1.50

Dust Daily average 0.05 0.15 0.25 Spot sample 0.15 0.50 0.70

SO2 Annual average L2 0.02 0.06 0.10 Daily average 0.05 0.15 0.25 Spot sample 0.15 0.50 0.70

NOX Daily average 0.05 0.10 0.15 Spot sample 0.10 0.15 0.30

CO Daily average 4.00 4.00 6.00 Spot sample 10.00 10.00 20.00

Ozone Average over one 0.12 0.16 0.20 hour

Lead lZ Maximum 0.0015 0.0015 0.0015 la Spot sample means concentration at any time. Lb Annual average means the annual average of daily average concentrations. LQBasedonGB9137-88.

Note: Class I standards are to ensure that the ecology and people's health are not damaged over a long period of time due to air quality.

Class II standards are to protect people's health and the growth of plants and animals both in cities and in the countryside from any damage over a short or long period of time due to air quality.

Class III standards are to ensure the normal growth of plants and animals and protect them from chronic and acute poisoning. -144 - ANNEX5

APPENDIX 2-1 OF ANNEX 5: KEY ELEMENTS OF THE EAP FOR THE LUOYANG-SANMENXIA EXPRESSWAY AND THE YANGJIA-BAIJIAZHAI CONNECTION

Environmentalissues Actiontaken/to be taken Responsibility

A. D12Ehase

1. Routc Selection The alignmentwas selectedfrom two alternativeswith due con- HPHSDI siderationto minimizeland acquisition, impacts of air pollu- tion and noise on residentialareas, and to avoid unfavorable geologicalconditions, coal mines and archaeologicalsites.

2. Social Disruption Adequatenumbers of overpasses,passageways and bridges HPHSDI were designedto meet the requirementsfor crossingof local people,animals and vehicles.

3. Soil Erosion Plantingof trees and grass on mediandivider, sideslopes, and HPHSDI along the roadside,was includedin the design whereappropri- ate. Slope protection,such as grout, concretegrids, etc., were incorporatedin the design.

Temporaryand permanentdrainage systems were designedto HPHSDI minimizesoil erosionand alterationof hydrologicalregimes, includingimpacts on irrigationchannels.

4. Earthworks In view of huge quantitiesof earthworks,due considerationwas HPHSDI given to properlyallocate roadbed earthworks. Quarries and borrow sites were selected,taking into accountthe dust and other problemsat environmentallysensitive locations such as residentialareas.

5. WaterPollution Wastewater treatment facilities as well as boilersequipped with HPHSDI precipitatorswere designed for serviceareas.

6. Noise Adequatemeasures such as noisebarriers, brick walls and HPHSDI double-glasswindows were identifiedand integratedin the designand bid documents.

7. Flooding All of super-large,large, mediumand smallbridges and HPHSDI culvertswere adequatelysized to meet requirementsfor safe dischargeof designflood (300 yearsfor super-largebridges, 100 years for otherbridges).

S. Culbual Relics Culturalrelics survey was carriedout and an archeological HPICRA/ salvageplan was developed. HPHSDI

9. Afforestation Afforestationplan was developedto reduceair pollutionprob- HPHSDI lems and enhancebetter landscape. -145 - ANNEXS

Environmentalissues Actiontaken/to be taken Responsibility

10. Landscape Afforestationplan paid due attentionto aestheticeffect of HPHSDI medians,side slopes,etc.. Bridgedesign also included considerationon aestheticeffect.

B. Constructin Pham

1. Protectionof Land Resources Forestswill not be used for materialborrow sites. Reforesta- Contrators tion will be undertakenfor any previousforests used for tempo- rary purposesupon completionof constructionactivities. Afforestationwill be carriedout on previouswasteland used for borrowor spoil sites upon completionof constructionactivities.

Arableland will be avoidedas materialborrow sites wherevr possible. If excavationhas to be done in arable land, top soil layer will be savedand retumedafter constructionwork is com- pleted, so as to minimizeimpacts on ecosystemand agriculture.

Educationof constructionworkers will be strengthenedto protectnatural resources, wild plants and animals. Poaching will be strictly prohibited.

2. Soil Erosion/WaterPollution Trees and grasseswill be plantedon side slope, and alongthe Contradors roadside,where appropriate.Appropriate measures, either rehabilitationor reconstruction,will be taken,if the existing irrigationor drainagesystems are damaged.

All necessarymeasures will be takento preventearth and stonesfrom siltingup rivers,water channels, or existingirri- gation and drainagesystems. Constructioncamps will be locatedfar awayfrom Yanghe and Qinglonglianrivers, which are used for drinkingwater sources.

Temporarychannel or conduit will be constructedfor irrigation and drainage,during the constructionof permanentdrainage systems.

All reasonablemeasurers will be taken to preventdirect dis- chargeof pollutedwater from constructionactivities into rivers and irrigationchannels.

3. ConstructionCamps Septic tankswill be installedat the constructioncamp sites. Contractors Sludge in sewagetreatment pits will be disposedof regularly. Drinkingwater will niect the China nationaldrinking water standards.

Garbagewill be collectedin garbagecans at fixed locationsand disposedof regularly. -146 - ANNEX5

Environmentalissues Actiontaken/to be taken Responsibility

4. Dust/AirPollution All reasonablesteps, includingwatering, will be taken to mini- Contractors mize dust pollutionduring construction, particularly in places near towns.

Stockpiles and storage areas will not be located within 100 m from residential areas on the lee side of the wind direction. Stockpiles and storage areas will be covered or watered to pre- ventdust pollution. Trucksto transportconstruction materials will be coveredto minimizespills.

Asphalt mixing and lime-soil mixing will be carried out cen- trally to the extent possible. Asphalt mixing and lime-soil mix- ing sites will be located at least 200 m from residential areas on the lee side of the wind direction. Asphalt mixers will be equipped with adequate dust collectors. Necessary protection measures will be taken for asphalt plant operators to protect their health.

5. TransportationManagement Haulingroute of constructionmaterials will be selectedin a Contractors carefulmanner to minimizeinterference with existingcommu- nications facilities, and dust and noise.

Adequateactions to directtraffic will be taken in consultation with communicationsand public securitydepartments, to pre- vent or minimizetraffic jans duringthe constructionperiod.

6. Noise Noisy constructionworks will not be undertakenduring the Contractors night time (22:00- 6:00). Maintenanceof machinesand trucks will be improvedto minimizenoise.

7. CulturalRelics Excavationwill be stoppedimmediately if any culturalrelics Contractors/ are found, and the local cultural authority will be informed of HPICRA such discovery. Excavation will not be resumed until identifi- cation of cultural relics by the authorized institution is com- pleted and necessarypreservation measures identified.

8. TransportationSafety In orderto guaranteesafety, efficient lighting equipment and Contractors safety signs will be installed on temporary roads during the construction, and adequate traffic regulations will be adopted and implemented for temporary roads.

C. 0ionPas

1. Noise and Air Pollution Unnecessaryuse of hornswill be strictly restrictedat night. HPHGHMA

Noise barriers or another appropriate noise protection measures HPHGHMA will be taken at locations where noise exceeds standard, based on the resultsof monitoring. - 147 - ANNEX 5

Environmentalissues Actiontaken/to be taken Responsibility

2. VehicleManagement Bettervehicle maintenance/management will be enhancedto HPPSD/HPCD keep vehiclesin good conditions.Vehicle noise and emissions inspectionwill be strengthened. If a vehicledoes not comply with the noiseand/or emissions standards, the vehiclewill not pass inspectionon roads till the problemis rectified. Periodical and random exhaustgas emissionsinspection will be under- taken at interchanges.

Publicawareness and educationwill be promotedto familiarize HPEPB/HPCD peoplewith the problemsof air pollutionand noisefrom vehi- cles and with relatedregulations.

3. HazardousMaterials Spills Any vehicletransporting hazardous materials will be required HPPSD/HPCD/ to obtain permissionsfrom public security,communications, HPFD and fire departments.

4. Others Constructionof permanentbuildings including schools and HPCD hospitalswill not be allowedwithin 200 m from the roadside.

Three emergencyfire brigadeswill be establishedand equipped HPHGHMA with ambulancesand fire engines,and trained staff will be pro- videdto cope with any abrupt event. In case of any explosion and fire, fire departmentswill be promptlyinformed and the relevantroad sectionwill be closeduntil appropriatemeasures are taken.

D. EnvironmentalMonitoring

1. Air Quality (I) Constructionperiod: (a) Monitoringitem: TSP, dust and asphaltsmoke (b) Monitoringfrequency: 4 times a year, 5 consecutivedays, 4 timesa day (TSP,smoke), once a week(dust) (c) Monitoringpoints: construction sites, quarries, material borrowsites, majorhauling roadsand asphaltmixing sites

(2) Operationperiod: (a) Monitoringitems: NO,, CO, HC and TSP (b) Monitoringfrequency: 4 times a year, 5 consecutivedays, 4 times a day (c) Monitoringpoints: identified in the EAPs

(3) Monitoringtechnical criteria: PresentAtmosphere Monitoring Standard Methods issued by NationalEnvironmental Protection Agency (NEPA)

2. Noise and Vibration (1) Monitoringfrequency: (a) Constructionperiod: once a week, 2-3 times a day. Ad hoc monitoringwill be undertakenas appropriate. (b) Operationperiod: 4 times a year, 3 consecutivedays, once each in daytimeand at night. Ad hoc monitoringwill be undertaken. -148- ANNEX5

Environmentalissues Actiontaken/to be taken Responsibility

2. Noise and Vibration (cont'd) (2) Monitoring points: (a) Constructionperiod: same as air quality monitoring (b) Operationperiod: identifiedin the EAPs

(3) Monitoring technical criteria: Present Noise Standard Method issued by NEPA

3. Water quality (I) Monitoring items: BOD or COD, SS, oil, temperature, pH, DO etc.

(2) Monitoring frequency: (a) Constructionperiod: once a week (b) Operationperiod: 3 times a year

(3) Monitoring points: (a) Construction period: one site each at 100 m upstream and downstream of the Qinglonghe River Bridge (b) Operation period: same as above

(4) Monitoring technical criteria: WaterQuality Standard issued by NEPA

4. Vehicle Exhaust and Noise (I) Inspection items: CO and HC (gasoline-powered vehicles), Inspection particulate matter (diesel-powered vehicles) (2) Inspection frequency: periodical and random check (3) Inspection site: interchanges

Abbreviations

HPHSDI: HenanProvincial Highway Survey and DesignInstitute HPICRA: HenanProvincial Institute of CulturalRelics and Archaeology HPHGHMA:Henan Provincial High-Grade Highway Management Authority HPCD: Henan Provincial Communications Department HPPSD: Henan Provincial Public Security Department HPFD: Henan Provincial Fire Department HPEPB: Henan Provincial Environmental Protection Bureau -149 - ANNEX5

APPENDIX 2-2 OF ANNEX 5: KEY ELEMENTS OF THE EAP FOR RIPA COMPONENTS

Environmental issues Action taken/to be taken Responsibility

A. Design Phase 1. Soil Erosion Engineering and biological measures will be taken to stabilize Local Commu- slopes and reduce soil erosion. nications Bureaus (CBs), Temporary and permanent drainage systems will be constructed EPBs, design to minimize soil erosion and alteration of hydrological regimes, institutes (Dls including impacts on irrigation channels. Trees and grass will be planted to minimize soil erosion, air pollution and enhance good landscape along the proposed roads. 2. Subgrade Soil Works Borrow areas will be identified in the land acquisition areas Local CBs, where possible to minimize farmland and forest destruction. EPBs, DIs 3. Afforestation Afforestation scheme was improved for slopes and side ditches, Local CBs, and to incorporate aesthetic effect into the afforestation designs. EPBs, Dls

B. Construction Phase 1. Dust/Air Pollution All reasonable steps, including watering, will be taken to mini- Contractors mize dust pollution by construction works, and transportation of construction materials, particularly in places near towns, water sources etc. Stockpiles and storage areas will be covered or watered to pre- vent dust pollution. Trucks to transport construction materials will be covered to minimize spills. Lime mixing and tar heating sites will be located far away from residential areas, at least 200 m of the lee side of the wind direction. 2. Soil Erosion/Water Pollution Spoil will not be stored on riverbeds, farmland, forests and cul- Contractors tivated fields to protect water sources and natural ecology, and prevent interruption of rivers and flooding. Rivers and water sources will be cleaned up as appropriate if they are interrupted by soil and spoil. All reasonable measurers will be taken to prevent direct dis- charge of polluted water from construction activities into rivers and irrigation channels. 3. Construction Camps Adequate measures will be taken to prevent water pollution by Contractors waste water from construction camp sites. Drinking water will meet the China national drinking water standards. Garbage will be collected in garbage cans at fixed places and disposed of regularly. Clean hygienic conditions will be strictly maintained. -150 - ANNEX5

Environmental issues Action taken/to be taken Responsibility

4. Noise Where residences are located near the construction sites, noisy Contractors construction works will be undertaken during the daytime (6:00-22:00). Maintenance of machines and trucks will be strengthened to keep them with low noise. 5. Conservation of Land Arable land, especially good farmland, will not be selected as Contractors Resources material borrow sites as much as possible. Afforestation will be undertaken for the land used for temporary use of construction. Education of construction workers will be strengthened to protect natural resources, wild plants and animals. Poaching will be strictly prohibited. 6. Construction Safety Management regulations will be established to ensure safe con- Contractors struction activities. Affected areas will be clearly established and people should be evacuated prior to any blasting opera- tions. Temporary roads will be provided with lighting facilities and traffic markings to reduce traffic accidents. 7. Cultural Relics If fossils, coins, artifacts of value or antiquity, structures and Contractors, other remains of geological or archaeological interest are found, Local the local cultural authority will be immediately informed of Archeological such discovery, and excavation shall be stopped until identifi- Bureaus cationof cultural relics by the authorized institution of preservation is completed C. Operation Phase 1. Noise/Air Pollution At roads adjacent to villages, use of horns will be minimized or Local CBs prohibited during night time. Vehicle speed will be restricted along villages. Macadam road segments close to villages will be often watered . In dry seasons, watering will be carried out at least two times a day. Roads will be maintained in a good condition to minimize traffic noise. Noise will be monitored periodically to take appropriate measures where needed. 2. Transportation of Hazardous Trucks transporting hazardous materials will obtain permits PSB, HPCD, Materials from the Public Security Bureau, and the Transportation and Fire Fighting Fire Fighting Departments. Dept. 3. Others During and after the construction of RIPA roads, new perma- Local CBs nent buildings will not be allowed to be constructed within 10 m from the roadsides. new hospitals, schools and large resi- dential areas will not be built within 200 m from the roadsides. Traffic regulations will be strictly enforced and education to comply with traffic regulations will be provided to the residents in the vicinity of the roads. D. Environmental Monitoring 1. Air Quality (1) Construction period: (a) Monitoring item: TSP, dust and asphalt smoke (b) Monitoring frequency: 4 times a year, 5 consecutive days, 4 times a day (TSP, smoke), once a week (dust) (c) Monitoring points: construction sites, quarries, material borrow sites, major hauling roads and asphalt mixing sites -151- ANNEX5

Environmental issues Action taken/to be taken Responsibility

1. Air Quality (cont'd) (2) Operation period: (a) Monitoring items: NOx, CO and TSP (b) Monitoring frequency: 4 times a year, 5 consecutive days, 4 times a day (c) Monitoring points: identified in the EAPs (3) Monitoring technical criteria: Present Atmosphere Monitoring Standard Methods issued by National Environmental Protection Agency (NEPA) 2. Noise and Vibration (1) Monitoring frequency: (a) Construction period: 6 times a year, 2-3 times a day. Ad hoc monitoring will be undertaken as appropriate. (b) Operation period: 4 times a year, 3 consecutive days, once each in daytime and at night. Ad hoc monitoring will be undertaken. (2) Monitoring points: (a) Construction period: same as air quality monitoring (b) Operation period: identified in the EAPs (3) Monitoring technical criteria: Present Noise Standard Method issued by NEPA 3. Water quality (1) Monitoring items: BOD, COD, SS, pH, DO, oil, volatile phenol, lead. (2) Monitoring frequency: (a) Construction period: 3 times a year during the bridge construction (b) Operation period: 3 times a year (3) Monitoring points: (a) Construction period: to be determined adequately (b) Operation period: same as above (4) Monitoring technical criteria: Water Quality Standard issued by NEPA

Abbreviations

EPB: Environmental Protection Bureau HPCD: Henan Provincial Communications Department NEPA: National Environmental Protection Agency PSB: Public Security Bureau -152 - ANNEX6

ANNEX 6: LAND ACQUISITION AND RESETTLEMENT ISSUES

1. Context. This annex describes the land acquisition and resettlement impacts under the Second Henan Provincial Highway Project and the framework for implementation of resettlement established during project preparation. The annex is divided into two main sections: (a) impacts of land acquisition and resettlement under the project; and (b) framework for implementation of land acquisition and resettlement. All information related to the RIPA component of the project relates only to the first year's package under RIPA.

Land Acquisition and Resettlement Impacts

2. Construction of the various components of the project will require 1,060.42 hectares (ha) of permanent land acquisition and will affect about 11,567 persons. Land acquisition will be necessary for the expressway, the linking roads, the Yangjia- Baijiazhai Connection (YBC) and the roads under the RIPA component. Persons whose houses or the enterprises where they are working are affected as a result of construction will need to be resettled and/or rehabilitated. It was agreed that the project impacts would be identified through two types of surveys. These are: (a) a census survey of affected people and properties to determine the physical impact of the project; and (b) a baseline socioeconomic survey of the affected persons to determine their existing income levels and standards of living.

(a) Census survey. The land acquisition and resettlement impacts of the project were determined as a result of the census survey carried out by the Henan Planning Survey and Design Institute (HPSDI). The survey was carried out between November 1994 to May 1995. This survey was based on the preliminary engineering designs of the expressway and the interchanges. The survey of the RIPA component roads to be constructed during the first year of implementation and the YBC and linking roads was carried out in July 1995. The census surveys were carried out with the participation of affected persons and their local representatives. The survey indicated that 1,060.42 ha of land would need to be acquired and 11,567 persons will be affected. Out of the 11,567 persons affected, 3,548 would need to be relocated. Most of the persons affected by land acquisition will be rehabilitated through land redistribution. Thirty-two persons affected by relocation of two enterprises will resume employment in the reconstructed enterprises. Another 235.26 ha of land would need to be leased temporarily during project construction, affecting 1,903 persons. -153 - ANNEX6

(b) Socioeconomic Survey. In order to establish the baseline of incomes and standards of living of the affected persons, a detailed socioeconomic survey will be carried out by the Legal Institute of the Zhengzhou University before the initiation of resettlement implementation. The baseline survey is expected to be completed by March 31, 1996.

Framework for Implementation of Land Acquisition and Resettlement

3. In order to mitigate the impacts of land acquisition and resettlement under the project, a comprehensive framework of implementation of land acquisition and resettlement activities has been established. This framework consists of the following:

(a) legal framework and resettlement policies

(b) institutional arrangements

(c) costs and budgets

(d) implementation framework and schedule

(e) participation of affected persons

(f) redress of grievances of affected persons

(g) monitoring of implementation

These elements of the implementation framework are discussed below.

4. The Objective And Principles Of Resettlement. The main objective of the resettlement program under the project is to ensure that all categories of affected persons are able to at least restore, if not improve, their standard of living after resettlement. Both national and provincial governments have established principles that help ensure that the above objective of resettlement implementation is achieved. These principles aim to: (a) minimize land acquisition and resettlement in order to reduce adverse impacts of the project; (b) restore or improve the area and standards of housing; (c) consult the affected persons regarding their relocation and rehabilitation choices, and rates of compensation offered; (d) provide alternative farmland to affected persons through land redistribution; (e) in cases where land redistribution is not possible, provide jobs in enterprises to the affected persons; and (f) ensure resettlement is satisfactorily completed before initiation of construction activities.

5. Legal Framework And Resettlement Policies. The legal framework for implementation of land acquisition and resettlement has been established based on the following laws/regulations:

(a) Land Management Law of the People's Republic of China-1986 -154 - ANNEX6

(b) The implementation methods of land management in Henan Province- 1987

(c) The notice on the revised standards/rates of compensation for attachments on the ground taken by construction projects in Henan province-1989

(d) The circular on compensation/subsidiary for attachments to the ground taken by construction projects in Henan province-1 993

(e) The Circular on Compensation for the attachments to the ground taken by construction projects in Sanmenxia-1993

(f) The circular on Implementation of the tentative regulations on utilization tax on cultivated land in Henan-1 989.

The Resettlement Action Plans (RAPs) for the project were prepared based on the above regulations. Implementation of the land acquisition and resettlement activities under the project will be carried out on the basis of specific provisions of the RAP.

6. Based on the census survey carried out by HPSDI, the following categories of project impacts were identified. The compensation/resettlement policies for each of these categories of impacts is as follows:

(a) Houses And Other Structures Affected By The Project. All affected houses and structures will be compensated on the basis of replacement value of the affected assets. Depreciation will not be taken into account while calculating the total compensation payable and no deduction will be made for the value of salvageable materials. Inflation factors from the year 1993 (when the compensation rates were fixed) until the time of payment of compensation will be used to calculate the actual compensation payable.

(b) Agricultural Land Affected. Two types of compensation will be paid for land affected under the project: (i) land compensation; and (ii) resettlement subsidy. Land compensation will be paid at the rate of 4-6 times (depending on the location of the land) the average annual output value of affected land. Resettlement subsidy will be paid at the rate of 3-10 times the average output value of affected land depending on the per capita land holding of affected farmers. The details regarding the multiplier to be used in specific cases are given in the RAPs.

(c) Enterprises Affected By The Project. Affected enterprises will be rebuilt in the vicinity on land to be provided by the local villages. The cost of land will be paid by the project. The affected workers will continue their employment in the reconstructed enterprises. They will be -155 - ANNEX6

paid an allowance equivalent to their wages for the period when production will be disrupted.

(d) Persons Losing Agricultural Land. Most of the affected persons losing agricultural land will be given alternative land through land redistribution in the affected village. The minimum average per capita land holding is 0.1 mu. If, as a result of land acquisition, the average per capita land holding of the village falls below this level, some of the affected persons would need to be provided nonagricultural jobs in order to restore the average land holding of the affected village to the minimum standard of 0.1 mu. However, in the Second Henan Provincial Highway Project, there is no need to provide enterprise jobs since the residual per capita landholdings are substantially higher than 0.1 mu (in most cases above 0.75 mu).

(e) Persons Affected By Temporary Acquisition Of Land. Land to be leased temporarily, during the construction period, will be compensated for the duration of the lease. The project will provide compensation for the land leased, the loss of crops on the land, and the cost of restoration of land after use. The compensation for the land leased, equivalent to its annual production value, will be paid to the affected persons.

(f) Affected Infrastructure. Affected civic infrastructure will be reconstructed at the new sites. Private infrastructure facilities will be compensated at replacement rates. All basic facilities, such as, schools, health centers, etc. will be provided by the project at the new sites.

(g) Affected Access to Underpasses. Affected access to underpasses will be provided at regular intervals in order to restore access of the affected persons to their lands, markets and other facilities. The number, location and design features of the underpasses in each village have been decided after extensive consultations with the affected people.

7. Institutional Framework. The administration office within HGHCA will be responsible for coordination of land acquisition and resettlement activities. Implementation of resettlement will be carried out by the local county/township and village govermments. HGHCA will pay the local governments the necessary funds for this purpose.

8. Coordination. A special resettlement coordination group (RCG), headed by the Deputy Provincial Governor, has been established by the provincial government for coordinating the implementation of land acquisition and resettlement under the project. The RCG consists of representatives of all departments concerned with resettlement implementation and also from the affected local governments. -156- ANNEX6

9. Costs and Budget. The costs associated with implementation of the RAP will be a part of the project budget and will be included in the investment plan for the project. The total cost of land acquisition and resettlement is estimated at Y 196.2 million. This does not include the cost of RIPA component roads following the first year of implementation. The cost estimate for the various activities associated with land acquisition and resettlement for the LSE component is given in Table 1.

Table 1. LAND ACQUISITION AND RESETTLEMENT COMPENSATION COST FOR LSE

Resettlement Compensation Y million

House Relocation 28.89 Ground Attachment 19.52 Power Supply & Communications 16.56

Subtotal (A) 64.97

Crop Compensation 3.82 Land Compensation & Resettlement Subsidy 78.08 Land Lease for temporary Use 8.64

Subtotal (B) 90.54

Farmland Use Tax (C) 14.18 Overhead Charge (A+B,3%) 4.66 Contingencies (A+B+C,5%) 8.48

Grand Total 182.85

Provision has been made for covering the increase in costs due to inflation. Inflation will be factored into the cost estimates at the rate of 5 percent per year for the period between RAP preparation and implementation.

10. Linkage Of Resettlement And Construction Schedule. The RAPs contain a detailed schedule of implementation of all land acquisition and resettlement related activities. All land acquisition and resettlement activities relating to the LSE, linking roads, the Yangjia-Baijiazhai Connection and the first year package of RIPA will be completed at least one month before the initiation of construction activities on the site. It is expected that the LAR activities for the LSE will be completed in February 1997, whereas construction activities are expected to start in March 1997. The month-wise implementation schedule of land acquisition and resettlement activities is given in Table 2. -157- ANNEX6

Table 2. LAND ACQUISITION AND RESETrLEMENT SCHEDULE FOR THE LSE

Activi Description

1. Preliminary Design Jan-Mar 1995 2. Identification of ROW Oct-Dec 1995 3. Construction Drawings & Resettlement Agency Establishment Jul 1995-Mar 1996 4. Pegging out Road Boundary, Land Measurement & Detailed Mar-May 1996 Census Survey 5. Detailed Calculation & Disbursement of Compensations May-Jul 1996 6. Redistribution of Land & Arrangement of New Residential Jul-Sep 1996 Plots 7. Compensation Payment & House Relocation Sep-Nov 1996 8. Clearing of Ground Attachments within Road Boundary Nov 1996-Jan 1997 9. Start of Construction Mar 1997

11. Participation and Consultations. The project has been designed with the participation of representatives of the affected persons in townships and village governments. The census of project-affected persons (PAPs) was carried out with the involvement of affected persons and their representatives. The PAPs will also build their houses themselves at the resettlement sites with the compensation amount provided to them. The project agencies have constantly informed the affected people about the project and the details of RAP implementation and will continue to do so during implementation. The PAPs will receive a Resettlement Information Booklet (RIB) to provide them with detailed information about the land acquisition and resettlement policies under the project and their own specific resettlement entitlements. The RIB will be distributed to the PAPs after the RAP has been approved by the Bank.

12. Grievance Redressal. The affected persons will have ample opportunity for redressal of their grievances regarding any aspect of land acquisition and/or resettlement implementation. If any PAP is dissatisfied with any aspect of land acquisition and/or resettlement, he/she can first appeal to the resettlement office/local government office at the township/county level. If the decision of this office is not considered satisfactory by the PAP an appeal can be lodged with the project office or the government office at the city level. Another appeal, if necessary, can be made to the provincial coordination group. In case the affected person is still not satisfied, he/she can also approach the People's court.

13. Monitoring and Evaluation. The resettlement implementation framework as described in detail in the RAPs provides for monitoring and evaluation of RAP implementation. Monitoring will be of two types: (a) internal; and (b) external. Internal monitoring will be carried out by a unit especially designated for the purpose in the administrative office of HGHCA. The main indicators to be monitored are: (i) payment -158- ANNEX6

of compensation; (ii) construction of houses at the resettlement sites; (iii) reconstruction of affected enterprises; and (iv) payment of allowances according to eligibility. HGHCA will submit internal monitoring reports to the Bank every six months. The first monitoring report will be submitted by September 30, 1996. Detailed formats for quantitative internal monitoring have been annexed to the RAP.

14. External monitoring will be carried out by the Legal Institute of Zhengzhou University. Apart from verification of the information submitted on the basis of internal monitoring, the following indicators will be monitored through external monitoring: (a) the adequacy of compensation paid to PAPs for affected houses; (b) the quality of houses constructed at resettlement sites; (c) payment of wages to affected workers during the period when the enterprises are stopped; (d) restoration of income levels and standards of living of the affected persons. The external monitoring agency will submit its report every six months. The first external monitoring report will be submitted to the Bank by December 31, 1996. A final monitoring and evaluation report will also be prepared after project completion and submitted to the Bank by December 31, 2001. -159- ANNEX7

ANNEX 7: IMPLEMENTATION PROGRAM

This annex presents the implementation program for the various components of the project. Table 1 summarizes the overall implementation schedule for the project as a whole. Table 2 shows the detailed implementation schedule for the eight civil works contract sections of the Luoyang-Sanmenxia Expressway (LSE) to be constructed by ICB; administration and maintenance buildings, and service areas and electrical and mechanical works for LSE. Tables 3, 4, 5 and 6 summarize the implementation schedules for the Yangjia-Baijiazhai Connection (YBC), link roads to LSE, the RIPA first-year package, and the new Scientific Research Center respectively. Table 7 depicts the detailed implementation schedule for the supervision of construction of LSE and its link roads. These schedules show the estimated time requirements for construction activities as well as for preconstruction activities such as preparation of designs and bid documents, prequalification process, bidding process, evaluation of bids, negotiations and signing of contracts. Table 1. IMPLEMENTATION SCHEDULE

1995 1996 1997 1998 1999 2000 2001 2002

L. Luoyang-SanmenxiaExpressway ------2. Linking Roadsto LSE 3. Yangjia-BaijiazhaiConnection 4. RI PA First-yearpackage Second-ycarpackagc rlhird-yca package 5. Scientificrescarch center . . __ 6. Roadaccident black spots

Supsrvisionof Construction: LSE and Link Roads -

Procurecmntol Elquipmcnt_ II..l.i:.C C'einrallaboratory and environmentalmonitoring ...... Opcrationiand mnaintenance 2. Highway network- RIPA

Train_n_

Study of Mainenanceand Operation of lligh-GradeIliihwavs

Legend: Prequalification/preparationof bidding docunients/TOR Bidding process/competitionamong consultants Construction/supervision/delivery/executionof studies Defectsliability period Training/technicalassistance/roadway safety -161- ANNEX7

Table 2. IMPLEMENTATIONSCHEDULE FOR CONSTRUCTIONOF LSE

A. Civil Works (ICB) Prequalification stage General Procurement Notice is published by the Bank November 16, 1995 Preparation of Prequalification (PQ) Document December 15, 1995 Bank clears PQ documents January 10, 1996 PQ Advertisement in China January 15, 1996 Last date to submit PQ applications March 15, 1996 PQ applications evaluation report and Government review April 15, 1996 Bank review and no objection to PQ evaluation report May 15, 1996 Bidding and Evaluation Stage Prepare bid documents January 31, 1996 Italian consultants review bid documents March 31, 1996 Bank review and no objection to bid documents April 30, 1996 Sell bid documents to prequalified contractors May 22, 1996 Last date to receive bids from prequalified contractors August 20, 1996 Bid evaluation report and Government review October 1, 1996 Bank review bid evaluation report and no objection October 31, 1996 Negotiate and sign contracts January 15, 1997 Start construction March 1, 1997 Complete construction December 31, 2000 B. Administration and Maintenance Buildings, Service Areas. Toll Plazas (NCB) Complete preparation of bid draft documents January 1998 Bank review of bid documents (for prior review only) March 1998 Revise bid documents April 1998 Invite bids May 1998 Last date to receive bids July 1998 Bid evaluation report and Government review August 1998 Bank review bid evaluation report and no objection (prior review) September 1998 Negotiate and sign contracts October 1998 Start construction November 1998 Complete construction November 2000 C. Electrical and Mechanical Works (aCB) Complete draft design and bid documents June 1998 Review of designs and bid documents by foreign experts November 1998 Bank review bid documents and no objection December 1998 Invite bids January 1999 Last date to receive bids Apnl 1999 Prepare bid evaluation report and government review July 1999 Review bid evaluation report by Bank and no objection August 1999 Negotiate and sign contract September 1999 Start implementation October 1999 Detailed design by contractor December 1999 Manufacture and purchase of equipment June 2000 Transport of equipment to site August 2000 Installation and debugging of equipment February 2001 Test running of systems May 2001 Complete implementation June 2001 -162 - ANNEX7

Table 3. IMPLEMENTATIONSCHEDULE FOR CONSTRUCTIONOF YANGJIA-BAIJIAZHAI CONNECTION (ICB)

Prequalification Stage Prepare prequalification (PQ) document September 30, 1996 Bank review PQ document and no objection October 31, 1996 Publish and issue PQ notice November 1, 1996 Last date to receive PQ applications December 31, 1996 Prepare PQ evaluation report and clearance by Government January 31, 1997 Review PQ evaluation report by Bank and no objection March 31, 1997

Bidding and Evaluation Stage Complete draft bid documents February 28, 1997 Bank review bidding documents and no objection March 31, 1997 Sell bid documents to prequalified contractors April 1, 1997 Last date to receive bids May 31, 1997 Bid evaluation report and Government review June 30, 1997 Bank review bid evaluation report and no objection July 31, 1997 Negotiate and sign contract August 21, 1997 Start construction October 15, 1997 Complete construction November 30, 1999

Table 4. IMPLEMENTATIONSCHEDULE FOR LINK ROADS (NCB) la

Complete draft bid documents June 1998 Review of design and bid documents by Bank and no objection July 1998 (prior review only) Revise bid documents August 1998 Advertise the notice for bidding September 1998 Last date to submit bids November 1998 Prepare bid evaluation report and clearance by Government January 1999 Review bid evaluation report by Bank and no objection February 1999 Negotiate and sign contract March 1999 Start construction May 1999 Complete construction September 2000 la It is possible to advance the completion of these linking roads by about two years should the local governments desire so to meet local traffic requirements. -163 - ANNEX7

Table 5. IMPLEMENTATION SCHEDULE FOR RIPA FIRST-YEAR PACKAGE (NCB/FORCE ACCOUNT) lA

Complete bid doLuments July 1996 Advertise the notice for bidding August 1996 Last date to submit bids October 1996 Prepare bid evaluation report and clearance by Government November 1996 Review bid evaluation report by Bank and no objection December 1996 Negotiate and sign contract January 1997 Start construction March 1997 Complete construction December 1998

/a It is possible to advance the completion of these linking roads by about two years should the local governments desire so to meet local traffic requirements.

TABLE 6. IMPLEMENTATION SCHEDULE FOR SCIENTIFIC RESEARCH CENTER (NCB)

Prepare draft bid documents Bank review bid documents and no objection February 15, 1996 Revise bid documents March 15, 1996 Sell bidding documents to contractors March 20, 1996 Last date to receive bids April 30, 1996 Bid evaluation report and Government Review May 25, 1996 Bank review bid evaluation report and no objection June 25, 1996 Negotiate and sign contract July 10, 1996 Start construction July 31, 1996 Complete construction July 31, 1998

Table 7. IMPLEMENTATION SCHEDULE FOR CONSULTING SERVICES FOR SUPERVISION OF CONSTRUCTION OF LSE AND ITS LINK ROADS

Prepare Terms of Reference and Letter of Invitation February 15, 1996 Bank review TOR and LOI and no objection March 28, 1996 Send TOR and LOI to shortlisted consultants April 1, 1996 Last date to submit proposals July 31, 1996 Prepare proposal evaluation report and Government review August 31, 1996 Bank review proposal evaluation report and no objection September 30, 1996 Negotiate and sign contract October 31, 1996 Train local supervision staff February 15, 1997 Start supervision of construction March 1, 1997 Complete supervision of construction June 2001 -164 - ANNEXS

ANNEX 8: SUPERVISION MISSION PLAN

Timing MainActivities Skill Requirements Staff- weeks

10/96 ProjectILaunh Review of all key proceduresfor interactionsbetween HighwayEngineering 4 the Bankand project executingagencies, including Road Safety procurement,disbursement, and projectreporting HighwayEconomics requirements. Overallproject implementationschedule InstitutionalStrengthening/ will be reviewed,including early stage activitiesfor Training environmentalprotection and resettlement. Procurement Disbursement Resettlement Special emphasis on: -Resettlementand environmentalmeasures and monitoring -Contractorsand Supervisionconsultants for LSE -RIPA first-yearpackage -Establishmentof LeadingGroup for Traffic Safety Coordinationand TrafficSafety Secretariat -Trainingproposals for 1997 -Studyof expresswaymanagement -Procurement

4/97 General Supervision (i) review progressfor each projectcomponent, HighwayEngineering 2 identifypending issues, and agree on follow-upactions; Procurement

(ii) reach agreementon resettlementmonitoring arrangements;

(iii) review proposalsfor maintenanceof highway network;and

(iv) review sources and uses of highwayfunds.

Special emphasis on: -Procurementof laboratory,research, environmental, and road safety-relatedequipment. -RIPAsecond-year package -Monitoringof maintenanceof highwaynetwork -Constructionof high bridges. -165 - ANNEX 8

Timing Main Activities Skill Requirements Staff- weeks

10/97 Major Supervision In-depth review of implementation status with Highway Engineering 3 particular emphasis on: Road Safety (i) contractor's perfornance; Procurement Environment/Resettlement (ii) effectiveness of supervision;

(iii) adequacy of environmental protection measures and environmental monitoring;

(iv) monitoring of resettlement;

(v) review proposal for equipment procurement for the operation and maintenance of the highway network; and

(vi) review activities on design/bid documents for E&M supply and installation contract for the Expressway.

Special emphasis on: -Road Safety Program - black spots. -Training proposals for 1998 and 1999. -Procurement of equipment for institutional strengthening.

6/98 General Supervision (i) review overall progress for each component, identify Highway Engineering 2 pending issues, and agree on follow-up actions; Procurement

(ii) review proposal for procurement of equipment for operation and maintenance of Expressway; and

(iii) review annual highway maintenance report and sources and uses of highway funds.

Special emphasis on: -Monitoring of maintenance of highway network -Environmental protection measures. -RIPA third-year package. -Review final report for study of operations and maintenance of high-grade highways. -166- ANNEX8

Timing Main Activities Skill Requirements Staff- weeks

4/99 Major Supervision In-depth review of implementation status with Highway Engineering/ 4 particular emphasis on: Maintenance (i) contractor's performance; Procurement Training (ii) effectiveness of supervision Environment/Resettlement

(iii) adequacy of environmental protection measures;

(iv) staff training programs; and

(v) annual maintenance report and sources and uses of highway funds.

Special emphasis on: -Expressway construction, quality and supervision. -Training proposals for 1999 and 2000. -Electrical and Mechanical Works: procurement. -Monitoring of maintenance of highway network.

10/99 General Supervision Review overall progress for each component and Highway Engineering 2 identifying pending issues and agreeing on follow-up actions.

Special emphasis on: -Review of project resettlement actions and final monitoring report. -Training proposals for 2000 and 2001

6/2000 Major Supervision In-depth review of implementation status with Highway Engineering 3 particular emphasis on: Transport Economics (i) contractor's performance; Road Safety Environment (ii) effectiveness of supervision;

(iii) adequacy of environmental protection measures;

(iv) staff training program; and

(v) review annual maintenance report and sources and uses of highway funds

Special emphasis on: -Progress on E&M contracts. -Toll arrangements for SLE. -Monitoring of maintenance of highway network. -167 - ANNEX 8

Tining Main Activities Skill Requirements Staff- weeks

4/2001 General Supervision Reviewing overall progress for each component and Highway Engineering 2 identifying pending issues and agreeing on follow-up actions. Preliminary arrangements for preparation of the Implementation Completion Report will be discussed.

Reviewing annual maintenance report and sources and uses of highway funds.

3/2002 Implementation Completion Report Mission A consolidated review of project implementation. Highway Engineering/ 4 Maintenance Transport Economics Environment Resettlement Implementation Review Preparation of Project Implementation Completion Report.

Toial 26 -168 - ANNEX9

ANNEX 9: PROPOSED MONITORING INDICATORS

1. From the start of project implementation through completion, progress will be monitored against the project objectives. To facilitate this process and provide objective means of evaluation of how well the project is meeting its objectives, a limited number of indicators are developed for each objective. For each indicator, the baseline level should be stated and the target values for various years in the future (such as mid-term year, implementation completion review (ICR) year and full impact year) should be estimated.

2. Table I lists the project objectives, the indicators for each objective, the baseline level, and the target values for each indicator for the years 1999 (mid-term), 2001 (ICR year) and 2003 (full impact year). This table also depicts the source of information for estimating the value of each performance indicator. The values for these indicators are to be estimated by HPCD and to be submitted to the Bank by the end of 1996. The project's objective related to reduction of congestion on the Luoyang-Sanmenxia Highway (LSH) will be monitored using the average daily traffic volume as well as the average vehicle speed on the existing highway (LSH) and the proposed expressway (LSE). The objective relating to stimulation of economic activity in the Luoyang-Sanmenxia corridor will be monitored using the gross output value of agriculture and industry (GOVAI) for the affected counties along the corridor. The indicators for the objectives relating to helping alleviate poverty in the poor counties consist of GOVAI of affected counties, average daily traffic and thc number of days the road is closed to traffic. Strengthening of institutional capabilities will be monitored through qualitative evaluation of sharing of new knowledge and exercising new/improved skills by staff trained under the project as well as by improvement of performance of specific functions and activities. The indicators for the increase in roadway safety comprise the number of fatalities and injuries on LSH and LSE and for the Henan highway network as a whole.

3. The monitoring of outputs during implementation of the project will be based on the monitoring of procurement processes, percent completed of civil works, consultants engaged to prepare studies, number of person-months of training achieved, disbursements, compliance with loan covenants, audit reports, etc. Table 2 presents the key performance indicators during implementation of the various components of the project as well as the source of information for estimation of the various indicators. HPCD will, by the end of 1996, complete the missing information in this table and revise the values of the indicators for the various years of the implementation period of the project. Implementtairn Comnpletion BaselineValue hlid-tenM Value ReviewYen Proect Key Perfoenmnce Road (19495) (1999) (2001) Value Value in 2003 Sourceof Infomatio Objectives lodcaoa Section Extumg rposed toitng Proposed isting ropoDsed olxing rro osed nd Remarks RoadRoad Road Roadd Roa Roa Road Ra

Raduciot of - Avase DaidyTraffic Lsasya -Xinan - Routineperiodic traffic countsconducted Congsson on (mWDty) Xi -incki -by HPCD Lusy aw_ inh intng Hignaray nm x x -uawy - Luoyaag-Suaanenxia -- Withtedc "a=c ofADnT oa sliuv sectarss Luoy""SNnanxpmhal stdie bn c.AD sKsctd onr CxistingaW nd newras fansmall paissenger cars buse, andsracks separately - Aveesa,.Which Speed L"°uoYaasj-Xinast - Aveaagcspeed is the wvitIeda veaof Mianchi-Csanyintang -ee tye

Lwy angS uneiia - - eightedaverage of speedon abovesctions Stimulateeconomic - Caoss ra vale of Lyang-Sanmeni - - Routineeconomic data nd udis conducted activity in Luoyang- A arlAe ndIusty Ceeidor bl theprefectures and counmies affected by S=nmen-a corridor (GOVAI) is affiected LoE ceusoes HeIp alleviae - GOVAI of ftected First Package Routineeconomic data and studies povery in poor cute SecondPackage------I conductedby theaffected counties Values> Third Packae ------for eachpactage should be the weighied t coumies valuesfre sheconstituent road comnponentsr Total RIPAprogram ------W hied averageof COVAI far the lclpaekegrs

- Aveese Daily Traffic Firs Package ------Routineperiodic counts and special counts (mieffly) SecondPackage to be conductedby the Hliwoy Thild Package AdministrationBur-m avluekfe each ThindPackage ------pac~~~~~~~~~~~~~~~~~~~~~gkageshouldbe the weightedvalues for UeConstituentroad Components. tonstita PAtpeas".<

- Nmber of days roodis Firt Pk ------Avilable datafm county-levelI ligh"wy -- Administration Weatherbureau etc - closedso toaffic Secondl Package t CkGcd W uafrbc ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~egte- -t-dc aue o tecasiieatra Third Packag - -- Valuesfor eawipackage should li the weigham vaus fo0W osttetra Total RIUA program giliZ rAte of Itas far the

Suengiaieungof - Qualitaive ealuation Seedetailed monitoing pan foe institutional bistutional eleu igarig ofsew SItengtheningtrminig(T abl 3). capabilities kw e and exercisis nevwskills by starutrained underthe projectu well as smpov n dof 7erforwsancein specific

Increaseroadway - Aswau nmaber of Numberof faulitin pen Accidentrecords rnsm the Traffic Police. sfety fasabtesand ioj-mss on sear. --- antd traffic volumedats fronsthe I lighway exisungLSH and Faiities per 100mil AdministrationBueru proposedLSE vehicle-kilometrs Numbef ioisjse Imwes pnIrwmvehcl I --

- Anmil mbnerof Numiberof frualites faxlites AM' on p oear rhe M$ohbhv "uy N"umbenof 9n)uric pnf netv AkIn Ie=n year< Pissobcef d

Valuesas be peosided by IPCDbefute theendof 19ff96, Project Component PerformanceIndicator 1996 1997 1998 1999 200 2001 Sourceof informationand Remrks

* Luoyang-SanmenxiaExpressway (LSE) - Civil works Cumulativepercent complete - 15 45 73 100 - Monthly progressrenorts to be preparedby tihe - Electrical and mechanicalworks Cumulativepercent complete - - 5 15 80 100 I joint venturefor supervisiontofconstruc-ion of . - Supervisionof construction Cumulativepercent complete - - * - - - LSE,linking roadsand YB3Cand the peJject quarterlyprogress reports to be preparedby > HPCD. r

* Linking Roads Cumulativepercent complete * - 5 45 [100 D * Yangjia-BaijiazhaiConnection (YBC) Cumulativepercent complete - 15 55 100 - -

* RIPA - First Package Cumulativepercent complete - 40 100 - Reportson eachpackage to be submittedby - SccondPackage Cumulativepercent complete - 10 60 100 - - ) HenanHighway Administration Duresu - Third Package Cumulativepercent complete - * 10 60 100 X (HAB) for eachpackage as well as project I quarterlyprogress reports to be preparedby %HPCD/lIAlt. FJ Total - 22 62 88 Io0 - IC_

* Equipment Cumulativepercent delivered to - 10 35 60 100 - Projectquarterly progress reports to be subiniited > Henan by HiPCD. -

* Institutional Strengtheningand Training(IST) * Training Cumulativeperson-months - 50 184 324 394 - Two-yearrolling training programsand project o o quarterlyprogress reports. Fl - Equipmentfor IST Cumulativepeaent deliveredto - 20 90 100 - - Quartedyprogress reports to be submittedby Henan IIPCD. h - Scientific TechnologyCenter of IISRI Cumulativepercent complete 15 65 100 - - - Projectquarterly progress reports and imionthly 0 progressreport to be subiitted by supervisionm

- Projectquarterly repons and reports to be > - Study of Organization.management and Cumulativepercent complete - 40 100 - - maintenanceof toll roads submittedby the studyteam. * RoadwaySafty Fi - Traffic accidentblack spots Numberof spotstreated * 2 4 6 3 - I Specialconcept report to be preparedby Road I SafetyUnit at startof black spotwork; project quartedyprogress reports to be submittedby t i HPCD;two-year rolling training program. - Developmentof rafric safety policv Percentcomplete - 100 - * - - * Developmentof safetyaudit procedures Cumulativepercent complete - * 40 100 I >-H - Training of police Person-months - 3 2 1 1 - X - Procurementof softwarefor nalvsesof accidents Percentdelivered to Henan - t100 o - - Procurementof equipmentfortratffic safety Percentcomplete - t100 o - - - - Studyof factorscontributing to highwayuaffic Cumulativepercent complee - 35 100 - - - acti ts S

'C -171- ANNEX9

TABLE 3: MONITORING PLAN FOR INSTITUTIONAL STRENGTHENING

Compoest Implemsentation Indicators Impact Idleators Remarks & Fless Proces Completion Shor-term Long-term Comments

iNDICATOR INDICATOR Completion INDICATOR INDICATOR Improvement BaselinePerfommance in Numberof Staff of training plinned under Staff trined areshlring new of performancein specific sectorfunctions sre Developmentprogram Staff developmentpmgrams kwwledge wa functionsand activities specified in Training Needs Intensiveinstitutionl candidatesselected and sent SOURCE: exercisingnew skills rgetedby staff Profiles which are kept on atrengthmingprogrnms at for taining * Mid-tenmTraining SOURCE developmentprgnm file in Prioje Execution SOURCE Report Reportsof workshops SOURCE. Ofrice Sampleof these tntmive institutional Annual rining Plan * Project Implementation held by retuming trainees ImplementationCompletion Training NeedsProfiles ue strengtheningprognrnt at TOREfor StudyAbroad CompletionReport n Supervisioninterviews Review provided as pan of Annual the Supportand Reerch * TORI for Investigation andtheir reportson trainees I Assessmentof Training Plansubmission units Study Tours INDICATOR Equipment performunce institutional performancein procuredin opertion Acivities identifiedat stan Additional baselinedatai re Intensiveinstitutional INDICATOR Equipment SOURCE INDICATOR Equipmentused of projectas requiring included in strengtheningprograms at procuredwithin time und * EquipmentStatus succeafully for purpoo Tradningand other TORs for Study Abroad the Schoolsand Training budgetallowed reports intended institutional strengthening and inmtitutions SOURCE SOURCE: meaures TORs for I Annual * Reporteduse of Investigstion/Study ProcurementPlan equipment Abroad. Both of these ar included as part of annual ubmir ion of a 2-veu rol n,TIuinm,Plan

imluima INDICATOR INDICATOR Training INDICATOR. Trinee INDICATOR: Critical Performanceon critical Trining In Henan Wof Traineesselected and programscompleted in assignedto jobs wherenew Functionand ativities (for functionsand activities ent for timely training in timely manner(as per skills are effectively utilized which training was saseed throughinterviews Training in OtherChina China andabroad . periodic Plansprovided by identified askey fatoor) with Supervisors of Units HPCD) dmnonsrateimproved which requestedtraining SOURCE: SOURCE. perforrnance e g type of analyses Short-TarmTraining Abroad * Annual Training Report SOURCE a Reportsfrom interviews SOURCE. undetken, successful * Annual Trining Plan * Mid-tenmRepon of fomer trainees Assesmentof institutional completionof certin tasks, Invetigation StudyTour Implementaion * Reportsfrom former perfomance (asabove) opertion of cenain kind of CompletionReport trainees'supervisors equipment.etc. (informnationincluded as part of Training NeedsProfiles Interviews ar conductedas pan of assesmentof institutionalperfomaLnce for Function (activitie) identified atstatn of project as requiring Trining and other insotiutional strengtheningmeasure.

MNeawlMma1NDICATOR INDICATOR Systemsin INDICATOR Colleacd Date INDICATOR imuihtu Trining of stffEquipment placeand operting usedas pat of Projec procured properly execution,to guide I- Data collecion and RIPA Monitoring SOURCE implementation reportingcontinued after Training Report projectcompletion Semiannual SOURCE SOURCE: HighwiLysnd Traffic Safety implementatimreports Pesiodic Summariesprovided 2- Data usd s pat of covering (consuuction, Data specifiedin to HPCD and PEO Direcko continuing systemof supervision,ma.' tenance) monitoringplans are monitoring, supervisionof Environmental ,onitoring collectedand periodic new inveatmentuin HPCD and Suprvision INDICATOR report for each romponent Propoteddata-collection produced. systemsdaigned arn data Rasdtnent Monioring and collected * ProjectImplementation Supervision SOURCE: Report AnnussMonitoring Summarien -172 - ANNEX9

MONITORINGINDICATORS FOR ENVIRONMENT

Construction Period

4. Environmental Supervision: One of the environmental supervisors in each contract section will be assigned or nominated to carry out the supervision of the environmental protection measures addressed in the Environmental Action Plans (EAP) and integrated in the bid documents. The results will be included in the engineering supervision reports and reported periodically to the environmental protection staff at the district level. The results of environmental supervision will be annually reported to the Bank in the annual report. The monitoring items will include:

(a) brief description on environmental protection measures supervised/ inspected during the reporting period; and

(b) brief description of problems regarding environmental protection measures and their reasons and possible solutions.

5. Environmental Monitoring: Environmental monitoring items, methods, frequencies, monitoring sites have been clearly decided in the EAP (Annex 5). Environmental monitoring will be carried out by an environmental monitoring group in the Central Supervision Laboratory except noise and dust, which will be conducted by environmental supervisors at respective contract sections. The results will be reported to the environmental protection staff at the district level. The results of environmental monitoring will also be annually reported to the Bank through the annual report.

6. Environmental monitoring items during the construction period would include: air quality (TSP and dust); noise/vibration; and water quality (BOD/COD, suspended solids (SS), oil).

Operation Period

7. Environmental Monitoring: Environmental monitoring items, methods, frequencies, monitoring sites have been clearly decided in the EAP (Annex5). Environmental monitoring will be carried out by an environmental monitoring group in the Environmental Protection Office of HPCD. Based on the monitoring results, environmental protection measures (to be carried out during the operation period) will be adjusted as appropriate.

8. Environmental monitoring items during the operation period would include: air quality (CO, NO., TSP); noise/vibration; water quality (BOD/COD, SS, oil); vehicle exhaust inspection (CO, Hydrocarbons: gasoline-fueled vehicles, particulate matter: diesel-fueled vehicles); and lead in soil and crops. -173 - ANNEX9

MONITORINGOF LANDACQUISITION AND RESETTLEMENT

9. The monitoring and evaluationof the ResettlementAction Plans (RAP) agreed betweenthe Bank and HPCD will be carriedout both internallyand extenally (Annex6). Internalmonitoring will be carriedout by a unit in HPHGHCAregarding LSE and the Land Acquisition and Resettlement Department of HPHAB regarding RIPA. An intemal monitoringreport will be submittedto the Bank every six months,with the first one due on September30, 1996 and the last one on the completion of the land acquisition and resettlement activities. The Legal Institute of Zhengzhou University will conduct the external monitoringof resettlementand will submit a monitoringreport every six months, with the first one to be submittedby December31, 1996and the last one at the completion of the project (December 31, 2000). A final monitoring report and evaluation report will also be preparedafter projectcompletion and submittedto the Bank by December31, 2001.

10. The main indicators of land acquisitionand resettlementmonitoring have been identified and are included in the RAPs. They are: (a) T imely payment of compensationto affected entities of various categories according to the levels described in the RAP; (b) Progress of constructionof new houses and quality of construction,also distancefrom old houses

(c) Progressin land redistribution; (d) The type of productiveuse to which compensationamounts have been put by the local (townshipand village)governments; (e) Restoration of production/ business activities of affected enterprises. Paymentof all types of compensation(in accordancewith RAP) to affected enterprisesand workers; (f) Propose linkage of resettlementactivities with the project implementation schedule (resettlementto be completedat least one month before start of construction); (g) Restorationof civic infrastructureat the new sites; (h) Levelsof satisfactionof the affectedpersons;

(i) Incomelevels and standardsof livingafter resettlement.

-175 - ANNEX10

ANNEX 10: SELECTED DOCUMENTS IN THE PROJECT FILE

ECONOMIC AND ENGINEERING DOCUMENTS

1. Engineering Feasibility Study of the Luoyang-Sanmenxia Expressway, prepared by Henan Communication Planning Survey and Design Institute consisting of: main report and three volumes of Technical Report, December 1995

2. Engineering Feasibility Study of the Shan Yu Connection (Yangjia-Bayiazhai Connection), prepared by the Henan Communications Planning Survey and Design Institute, December 1995

3. Feasibility Study of the Link Road between and LSE, Highway Administration Bureau of Sanmenxia City, April 1995

4. Feasibility Study Report of the Road Connecting Guanyintang and LSE, Highway Administration Bureau of Sanmenxia City, September 1995

5. The Economic and Social Benefit Analysis of RIPA Roads: (a) Road System No. 14, Sanmenxia City Communications Bureau, August 1995; (b) Road System No. 22, Communications Bureau of , August 1995

6. Road Improvement Program for Poverty Alleviation (RIPA) package, Highway Administration Bureau, consisting of:

(a) Summary Report of Feasibility Studies of first package of RIPA, September 1995

(b) Maps of RIPA System

(c) Implementation Plan of RIPA

(d) Bid (Contract) Section Cost analyses for RIPA

(e) Maintenance Plan of RIPA, August 1995

7. Review of Engineering Design, Phase 1 Final Report, ItalConsult, May 1995

8. Introduction of Engineering Design of the Luoyang-Sanmenxia Expressway, Henan Communications Planning Survey and Design Institute, July 1995 -176 - ANNEX 10

9. Traffic Capacity analysis of the Link Roads to LSE and the At-Grade Intersections, Henan Communications Scientific Research Institute, September 1995

10. The Outline for Preliminary Design for the Traffic Engineering for LSE, Henan Communications Planning Survey and Design Institute, December 1995

11. Prequalificatiohi Document for LSE, CMC International Tendering Company, January 1996

12. Letter of Invitation, and Terms of Reference for Consulting Services for Supervision of Construction of LSE, its Linking Road and the Yangia-Bayiazhai Connection as well as the Scientific Research Center, Henan Provincial Communications Department, January 1996

13. Henan Provincial Communications Science and Technology Center, HPCD, November 1995

(a) Feasibility Study

(b) Environmental Protection

(c) Management Enforcement Scheme

14. Implementation Schedules for the Second Henan Highway Project, HPCD, December 1995

15. Monitoring Report for the Second Henan Provincial Highway Project, HPCD, December 1995

EQUIPMENT

1. Equipment Procurement Report for the Second Henan Provincial Highway Project, December 1995

INSTITUTIONAL STRENGTHENING/TRAINING

1. Institutional Strengthening/Training Package for the Second Henan Provincial Highway Project, May 1995, consisting of:

(a) Institutional Strengthening and Training Report (December 1995)

(b) Staff and Planning Development Report

(c) Management Over IST

(d) Cost of IST -177 - ANNEX 10

(e) Implementation Plan of IST

STUDIES

1. Terms of Reference for the Study of the Organization, Management and Maintenance of Toll Highways, Transroute International, February 14, 1996

2 Terms of Reference for the Highway Traffic Accident Study, Terms of Reference, Henan Communications Science Research Institute, December 1995

SAFETY

1. Report from the World Bank Project Preparation Mission for the Henan 2 Highway Project, Road Safety Component, Danish Road Directorate, Road Safety and Environment Department, May 1995

ENVIRONMENTALDOCUMENTS

1. Executive Summary of Environmental Impact Assessment - National Trunk Road from Lianyungang to Huoergousi, Luoyang-Sanmenxia Expressway and its Linking Roads, Henan Provincial Communications Department, December 1995

2. Environmental Impact Assessment-National Trunk Road from Lianyungang to Huoergousi, Luoyang-Sanmenxia Expressway, Henan Provincial Environmental Protection Institute, December 1995

3. Environmental Action Plan-National Trunk Road from Lianyungang to Huoergousi, Luoyang-Sanmenxia Expressway, Henan Provincial Communications Department, December 1995

4. Environmental Impact Assessment-Luoyang-Sanmenxia Expressway Linking Road Projects, Henan Provincial Environmental Protection Institute, November 1995

5. Environmental Action Plan-Luoyang-Sanmenxia Expressway Linking Road Projects, Henan Provincial Environmental Protection Institute, November 1995

6. Environmental Impact Assessment-National Trunk Road from Lianyungang to Huoergousi Shaanxi-Henan Connection Road, Henan Provincial Environmental Protection Institute, December 1995

7. Environmental Action Plan-National Trunk Road from Lianyungang to Huoergousi, Shaanxi-Henan Connection Road, December 1995

8. Initial Environmental Evaluation-Road Improvement Program for Poverty Alleviation (RIPA), Henan Provincial Environmental Protection Institute, November 1995 -178- ANNEX 10

9. Environmental Action Plan, The First Package of RIPA Projects, Category I Projects (Including 20 Road Segments in 8 Systems), November 1995

10. Environmental Impact Assessment, The First Package of RIPA Projects, Category II Projects, (Including 3 Road Segments in 2 System), Henan Provincial Environmental Protection Institute, November 1995

11. Environmental Action Plan-The First Package of RIPA Projects, Category II Projects, (Including 3 Road Segments in 2 Systems), November 1995

12. Archaeological Survey Report for the Proposed Luoyang-Sanmenxia Expressway, August 1995

RESETTLEMENT DOCUMENTS

1. Luoyang-Sanmenxia Expressway Resettlement Action Plan (Final Revision) December 1995

2. The Land Acquisition and Resettlement Plan for the Linking Highway of Luoyang-Sanmenxia Expressway under Henan Provincial Highway Project II, December 1995

3. Yang/ia Baijiazhai Connection Road Resettlement Action Program (Revision), December 1995

4. The Land Acquisition and Resettlement Plan for Road Improvement Program for Poverty Alleviation (RIPA) under Henan Provincial Highway Project II (first package), December 1995 tienan ProvincialGovemnment HPCDDir-ector -l 3 ¢

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Report No: 15358 CHA Type: SAR